<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 26, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 0-22480
DM MANAGEMENT COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 04-2973769
(STATE OR OTHER JURISDICTION OF (I.R.S.EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
25 RECREATION PARK DRIVE
HINGHAM, MA 02043
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
Registrant's telephone number, including area code: (781) 740-2718
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
TITLE OF EACH CLASS
-------------------
Common Stock, $0.01 par value
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes/X/ No /_/
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. /X/
As of March 12, 1999, the aggregate market value of common stock held by
non-affiliates of the Registrant was $154,354,600 based on the closing price
($ 16 5/8 per share) for the common stock as reported on The Nasdaq Stock
Market on March 12, 1999.
Shares outstanding of the Registrant's common stock at March 12, 1999:
9,707,740
DOCUMENTS INCORPORATED BY REFERENCE
Certain portions of the Proxy Statement for the Annual Meeting of
Stockholders of DM Management Company to be held on May 25, 1999, which will be
filed with the Securities and Exchange Commission within 120 days after December
26, 1998, are incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.
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DM MANAGEMENT COMPANY
INDEX TO ANNUAL REPORT ON FORM 10-K
FOR THE FISCAL YEAR ENDED DECEMBER 26, 1998
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Page
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Part I
Item 1. Business................................................ 3
Item 2. Properties.............................................. 9
Item 3. Legal Proceedings....................................... 9
Item 4. Submission of Matters to a Vote of Security Holders..... 9
Part II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters................................ 10
Item 6. Selected Consolidated Financial Data.................... 11
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations................ 12
Item 7A. Quantitative and Qualitative Disclosures About Market
Risk............................................... 17
Item 8. Consolidated Financial Statements and Supplementary
Data............................................... 18
Item 9. Changes in and Disagreements with Accountants on
Accounting and Consolidated Financial Disclosure... 39
Part III
Item 10. Directors and Executive Officers of the Registrant...... 39
Item 11. Executive Compensation.................................. 39
Item 12. Security Ownership of Certain Beneficial Owners and
Management......................................... 39
Item 13. Certain Relationships and Related Transactions.......... 39
Part IV
Item 14. Exhibits, Consolidated Financial Statement Schedules,
and Reports on Form 8-K............................ 40
Signatures.................................................................. 44
</TABLE>
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PART I
ITEM 1. BUSINESS
THE COMPANY
DM Management Company ("DM Management" or the "Company") is a specialty
direct marketer of high quality women's apparel, accessories, shoes and gifts.
In 1998 the Company also began featuring bed and bath items. The Company
currently markets its products through two discrete catalog concepts, J. JILL
and NICOLE SUMMERS. These concepts are designed to appeal to active, affluent
women age 35 and older, with each concept aimed at a distinct lifestyle segment
within this demographic group. The Company seeks to distinguish its catalogs and
reinforce the brand identity of the J. JILL and NICOLE SUMMERS names through
exclusive private label merchandise offerings, a broad assortment of extended
sizes, "total look" wardrobing and editorial lifestyle photography.
THE CATALOGS
J. JILL is characterized by the simple, comfortable style of its apparel
offerings, which range from relaxed career wear to weekend wear. These apparel
offerings are predominantly private label, with emphasis on natural fibers and
creative details. J. JILL'S target customers are active, affluent women age 35
to 55. During the twelve months ended December 26, 1998 ("fiscal 1998"), J. JILL
net sales accounted for approximately 75% of the Company's total net sales, up
from approximately 54% for the twelve months ended December 27, 1997 ("fiscal
1997"). The Company believes that this growth is being driven by J. JILL'S
distinctive merchandising, marketing and creative strategies, as well as the
emerging market for more casual apparel, particularly for the workplace, and the
need active, working women have for comfortable, versatile clothing. The Company
also believes that this market has not been well served by other direct
marketers or retailers.
NICOLE SUMMERS is characterized by its edited assortment of updated classic
apparel. Its target customers are affluent women age 45 and older who have an
active but formal lifestyle and, most importantly, are younger in their outlook
than their peers in previous generations. NICOLE SUMMERS operates in a mature
marketplace and is currently experiencing negative growth. In an effort to
respond to this mature marketplace and focus on potential opportunities in this
market the Company hired a new Vice President of Merchandising for NICOLE
SUMMERS with experience in product development, planning and women's apparel
merchandising.
BUSINESS STRATEGY
DM Management's objective is to be a fashion authority for its target
market. The Company seeks to combine the personal experience of shopping at an
upscale specialty retailer with the ease and convenience of shopping at home by
offering an edited assortment of high quality products in vibrant, easy-to-read
catalogs. The key elements of the Company's business strategy are set forth
below:
BRAND BUILDING. The Company believes that it has a significant opportunity
to build the brand identity of each of its catalog concepts within its target
market. The Company seeks to enhance brand identity by developing strong
relationships with its customers that foster loyalty and increase repeat
purchases. The consistent application of unique creative and merchandising
techniques tailored to create a signature style for each catalog concept is a
central element of this effort, as is an emphasis on superior customer service.
WELL DIFFERENTIATED MERCHANDISE OFFERINGS. The Company believes that its
distinctive approach to merchandising enhances its position as a fashion
authority to its target customers. Key components of the Company's merchandising
strategy include:
- PRIVATE LABEL PROGRAM. A substantial portion of the merchandise
offered through the Company's catalogs is private label merchandise (i.e.,
merchandise sold under the DM Management catalog's brand name). All of the
Company's private label offerings, particularly under the J. JILL concept,
are designed by the Company and are not available in other catalogs or
retail stores. In fiscal 1998 private label merchandise represented
approximately 91% and 34% of the apparel styles offered in the J. JILL and
NICOLE SUMMERS catalogs, respectively. All private label merchandise is
exclusive to DM Management. The Company believes that its exclusive private
label merchandise offerings reinforce its role as a fashion authority to
its target customers and enhance the brand identity of the J. JILL and
NICOLE SUMMERS names.
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- EXTENDED SIZES. In addition to offering regular sizes from 4 to 20,
the Company offers a broad assortment of apparel in petite and large sizes
in the same styles as its regular size offerings. Management believes that
the Company has particular expertise in scaling fashionable regular size
merchandise to be attractively worn by extended size customers, and that
these hard to fit customers currently have few attractive catalog or retail
shopping alternatives. In fiscal 1998 extended size apparel offerings
accounted for 44% of total merchandise offerings.
- "TOTAL LOOK" WARDROBING. The Company's "total look" wardrobing
approach seeks to satisfy the lifestyle needs of the Company's target
customers by offering a coordinated selection of apparel, accessories and
shoes to outfit them from head to toe. Management believes that this
approach builds brand identity while increasing the Company's potential
share of household spending dollars.
DISTINCTIVE CREATIVE PRESENTATION. The Company's catalogs are its primary
vehicles for communicating with its customers. The creative presentation of each
catalog is a crucial factor in attracting customer attention, stimulating
purchases, projecting differentiation in the marketplace and building brand
identity. The signature style of each catalog is enhanced by the use of
editorial lifestyle photography that presents merchandise in settings in which
the Company's target customers might find or imagine themselves and by other
distinctive catalog design elements such as thematic merchandise spreads
highlighting particular colors or fabrics.
INVESTMENT IN MANAGEMENT AND INFRASTRUCTURE. The Company is committed to
investments in management and operational infrastructure in order to support its
anticipated future growth, serve its customers, improve operating efficiencies
and respond to strategic opportunities. In fiscal 1998 DM Management completed
the construction of a new operations and fulfillment center and the
implementation of two major operating systems - a new order taking system and a
new warehouse management system.
NEW OPPORTUNITIES. In 1999 the Company intends to mail four separate 48
page J. JILL catalogs featuring an assortment of bed, bath and accessory
items entitled "peopleplacesthings." Additionally, in an effort to continue
to capitalize on the strength of the J. JILL brand, the Company is expanding
its channels of distribution to include retail stores and the Internet.
Currently, the Company plans to open five to ten specialty retail stores by
the end of 2000. The Company also plans to have a fully-transactional website
in operation in time for the 1999 holiday season. The Company may incur costs
in excess of revenues generated by these new opportunities during the initial
phases of their development. There can be no assurance that these new
opportunities will be successful.
CREATIVE PRESENTATION AND CATALOG PRODUCTION
The objective of the Company's creative approach for each of its catalogs
is to present merchandise in a vibrant, easy-to-read format with a visual style
appropriate for the sophistication of the merchandise and the expectations of
the target customers. Management believes that the use of distinctive catalog
design techniques such as editorial lifestyle photography and thematic
merchandise spreads highlighting particular colors or fabrics helps to create
the signature style of its catalog concepts and establish their position as
fashion authorities for their target customers. The Company's catalogs showcase
merchandise in settings in which their customers might find or imagine
themselves, in order to heighten the customers' identification with the concept
and affinity for its merchandise offerings. The Company's catalogs are also
designed to enhance customer convenience through easy-to-read layouts,
coordinated merchandise placement and the Company's "total look" wardrobing
approach. Management believes that the Company's strategy of presenting
merchandise in real life settings also helps to differentiate it from
store-front retailers.
The Company devotes substantial resources to the design and production of
each edition of its catalogs. After an initial conceptualization meeting, the
creative and merchandising teams work closely together on catalog design,
merchandise selection and presentation and catalog print production. The
materials and direction necessary to produce each catalog are then delivered to
the Company's production team approximately eight weeks before the initial
mailing date of the catalog. The production team creates the electronic files
used to print the catalog and plans and manages the printing and catalog
distribution processes. The production team ensures that photographs appearing
in the Company's catalogs accurately depict merchandise characteristics such as
color and texture. Catalog production takes place in-house using desktop
publishing systems. As a result, the Company can adjust catalog layout until
approximately two weeks before the planned initial mailing date, allowing the
Company to react to current market and sales trends by adjusting content and
presentation of catalogs while they are in production. All of the Company's
catalogs are printed commercially under the Company's supervision.
4
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MARKETING AND CUSTOMER DATABASE MANAGEMENT
At December 26, 1998, the Company's customer database contained
approximately 3.3 million individual customer names, including approximately
1,022,000 individuals who had made a purchase within the previous 12 months.
The Company estimates that approximately two-thirds of these active customers
have made multiple purchases from the Company. DM Management stores detailed
information on each of its customers, including demographic data and purchase
history. The database is updated on a weekly basis. To determine which of its
customers will receive a particular catalog mailing, the Company analyzes
this information using sophisticated statistical modeling techniques. The
Company's customer database is maintained off-site by a service bureau which
sorts and processes the information in accordance with instructions from the
Company. The Company's agreement with the service bureau requires the service
bureau to safeguard the confidentiality of the Company's database.
Additionally, the Company uses customer research techniques such as focus
groups and quantitative surveys to assess customer perceptions of its catalog
concepts and their competitors, in order to help set distinctive marketing,
merchandising and creative strategies appropriate for each catalog concept.
The Company acquires lists of prospective customers by rental or
exchange and from a database cooperative and other sources. The Company also
purchases lists of prospective customers. The most productive prospects tend
to come from the customer lists of other women's apparel catalogs, including
direct competitors. The Company rents its list of customers to and exchanges
it with others, including direct competitors. To determine which prospective
customers will receive a particular catalog mailing, the Company analyzes
available information concerning such prospects using the same types of
sophisticated statistical modeling techniques used to target mailings to the
Company's own customers.
As part of its customer retention program and brand building strategy, DM
Management offers its own private label credit card. The Company believes that
this credit card reinforces the Company's relationship with existing customers
and promotes additional purchases by these customers. In fiscal 1998
approximately 7% of net sales were attributable to purchases made using the
Company's private label credit card. At December 26, 1998 there were
approximately 91,000 holders of the Company's private label credit card. The
credit card program is currently administered by a fee-based outside vendor who
bears the credit risk associated with the credit card without recourse to the
Company.
MERCHANDISING
The Company provides an edited assortment of high quality merchandise
designed to meet the tastes and serve the lifestyle needs of its target
customers. Each of the Company's catalog concepts has its own merchandise
selection staff. In addition to apparel, shoes and accessories, the Company's
catalogs also offer a selection of seasonal items, gifts and other products
selected with the specific lifestyle profiles of J. JILL and NICOLE SUMMERS
target customers in mind.
The Company's catalogs offer both brand name and private label merchandise.
In fiscal 1998 approximately 91% of the apparel styles offered through J. JILL
catalogs were private label. During the same period, approximately 34% of the
apparel styles offered through NICOLE SUMMERS catalogs were private label.
Private label merchandise is manufactured to the Company's detailed
specifications by foreign and domestic vendors. The foreign vendors are
primarily located in Hong Kong, Singapore and Israel. Brand name products are
selected from the regular offerings of the Company's vendors.
Both the J. JILL and NICOLE SUMMERS catalogs offer a wide assortment of
merchandise in petite and large sizes, in the same styles as their regular sized
offerings. In fiscal 1998 extended size apparel offerings accounted for 44% of
total merchandise offerings.
DM Management's catalogs feature a "total look" wardrobing approach which
presents a coordinated selection of apparel and related items including
sportswear, dresses, suits, coats, swimwear, shoes and accessories intended to
outfit the customer from head to toe. Management believes that this approach
builds brand identity while increasing the Company's potential share of
household spending dollars.
INVENTORY MANAGEMENT AND PURCHASING
The Company's inventory management systems are designed to maintain
inventory levels that provide optimum in-stock positions and maximum inventory
turnover rates while minimizing the amount of unsold merchandise at the end of
each selling season. To achieve this goal, the Company seeks to schedule
merchandise deliveries and inventory amounts to conform to expected sales
levels.
5
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The Company follows an interdepartmental approach to the inventory planning
process. Conceptual planning for each principal catalog edition begins
approximately nine months in advance of its initial mailing. Early in the
process the Company's inventory control, marketing, creative and merchandising
teams meet to present key strategies and opportunities for specific catalog
editions and merchandise items. The inventory control group then applies
inventory coverage models to plan opening inventory levels for each stock
keeping unit ("sku"), taking into account projected sales, the cost of being out
of stock and ease of reordering. Preliminary commitments with the Company's
private label merchandise vendors typically are made five to seven months in
advance of each principal catalog edition's initial mailing date. To the extent
feasible, the Company seeks to retain flexibility in these commitments in order
to be able to react to market and sales trends. Initial merchandise commitments
for branded merchandise typically are made three to five months before the
edition's initial mailing date. Initial deliveries generally are scheduled to be
received one to three weeks before the edition's initial mailing date.
The inventory control group utilizes a forecasting system which analyzes
sales and returns by sku throughout the selling season to permit purchasing
adjustments based on forecasted sales and returns. The Company attempts to
minimize overstocks through a variety of promotional efforts, including
telemarketing to customers at the time they place orders for other merchandise
and circulation of seasonal clearance catalogs. The Company also sells excess
inventory through its four outlet stores and to "jobbers." The Company plans to
open three new outlet stores in 1999. The Company's outlet stores are run solely
for the purpose of liquidating overstocks.
The Company sells both domestically produced and imported merchandise,
which it purchases in the open market. In fiscal 1998 the Company purchased
merchandise from approximately 750 vendors. In fiscal 1998 the Company purchased
approximately 21% of its merchandise directly from foreign vendors, and the
Company expects that it will continue to purchase merchandise from foreign
suppliers in the future. In addition, goods purchased by the Company from
domestic vendors may be sourced abroad by such vendors. The Company seeks to
establish long-term relationships with its merchandise vendors and works closely
with them to ensure high standards of merchandise quality.
CONTACT CENTER
DM Management believes that an emphasis on superior customer service is
important to its ability to expand its customer base and build customer
loyalty. At December 26, 1998, the Company employed approximately 340 contact
center representatives. Customer orders are taken 24 hours a day, 365 days a
year, primarily by the Company's contact center representatives at its
operations center. The operations center in Meredith, New Hampshire was
replaced by a new operations center in Tilton, New Hampshire in February
1999. The Company also accepts orders by mail or facsimile. All orders are
input directly into the Company's on-line data processing system, which
provides, among other things, customer historical information, merchandise
availability, product specifications, available substitutes and accessories
and expected shipment date. The Company trains its contact center
representatives to be knowledgeable in merchandise specifications and
features. These representatives have ready access to samples of the current
season's merchandise assortment, which enables them to answer detailed
merchandise inquiries from customers on-line.
DM Management offers an unconditional merchandise guarantee. If a customer
is not completely satisfied with any item for any reason, the customer may
return it for an exchange or a full refund. To simplify the return process, the
Company includes a self-addressed return label with every shipment, which
customers can use to return any item to the Company through the United States
Postal Service without paying postage fees in advance. Management believes that
the Company's return rates are consistent with industry standards for comparable
merchandise. Returns experience is closely monitored to identify any product
quality or fit issues. Returned merchandise is inspected carefully and, unless
damaged, is cleaned, pressed and returned to inventory. Approximately 96% of
returned merchandise is recycled into inventory.
FULFILLMENT
DM Management believes that the prompt delivery of merchandise promotes
customer loyalty and repeat buying. To achieve this goal, the Company uses an
integrated picking, packing and shipping system. The system monitors the
in-stock status of each item ordered, processes the order and generates all
related packing and shipping materials, taking into account the location of
items within the fulfillment center. The Company's customers normally receive
their orders within three to five business days after shipping, although
customers may request overnight delivery for an extra charge.
The Company's significant growth over the past two fiscal years and the
corresponding operating infrastructure investment required to support this
growth has resulted in the construction of a new 400,000 square foot,
state-of-the-art operations and fulfillment center in Tilton, New Hampshire (the
"Tilton facility"). Approximately 370,000 square feet of
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the new Tilton facility is fulfillment operations. Currently all merchandise is
shipped from the Company's new facility in Tilton, New Hampshire.
In fiscal 1998 the Company operated out of three distribution facilities
while awaiting the completion of the Tilton facility. In connection with the
Company's transition to the Tilton facility, the Company has vacated its
Meredith, New Hampshire operations and fulfillment center, its Laconia, New
Hampshire interim fulfillment center and its Laconia, New Hampshire interim
returns processing and storage facility. The Company is actively marketing its
operations and fulfillment center in Meredith, New Hampshire for sale or lease
and is actively seeking a sub-lessor for its interim fulfillment center in
Laconia, New Hampshire. The Company has terminated the lease on its interim
returns processing and storage facility effective December 31, 1998. The Company
incurred no penalties as a result of this early termination.
INFORMATION SYSTEMS AND TECHNOLOGY
The Company is committed to making ongoing investments in its information
systems to increase operating efficiency, provide superior customer service and
support its anticipated growth. The Company believes that the ability to capture
and analyze operational and financial data and relevant information about its
customers and their purchasing history is critical to its success.
The Company has made, and continues to make, significant investments in
systems to support order taking and customer service, fulfillment, marketing,
merchandising, inventory control, financial control and reporting and
forecasting. During fiscal 1998 DM Management implemented a new automated
warehouse management system which will more efficiently support its warehouse
processes and provide additional flexibility to support the Company's growth
plans. The Company also implemented a new order management system in fiscal 1998
which provides significant processing enhancements and flexibility as compared
to the Company's old system.
In addition to its in-house data processing and information systems
resources, the Company also uses several outside vendors for key services such
as list processing and credit card administration and approval.
COMPETITION
The market for the Company's merchandise is highly competitive. The Company
competes with other direct marketers, specialty apparel and accessory retailers
and traditional department store retailers. There are few barriers to entry in
the women's specialty apparel and accessory market. Moreover, the Company
believes that its recent success, as well as the sales growth in the direct
marketing industry, has or will encourage many new competitors. In particular,
the Company believes that J. JILL serves an emerging market niche in which
competition is limited currently but is likely to increase in the future. Many
of the Company's competitors are larger and have substantially greater
financial, marketing and other resources than the Company. DM Management
believes that it competes principally on the basis of its "total look"
wardrobing approach, extended size offerings, private label product offerings,
creatively distinctive catalogs and superior customer service.
EMPLOYEES
As of March 6, 1999, the Company employed 935 individuals, of whom 849 were
full-time (those employees scheduled to work 30 hours or more per week). None of
the Company's employees is represented by a union. The Company considers its
employee relations to be good.
TRADEMARKS AND SERVICE MARKS
The Company has registered various trademarks and service marks with the
United States Patent and Trademark Office, including J. JILL and NICOLE SUMMERS.
GOVERNMENT REGULATION
The catalog sales business conducted by the Company is subject to the Mail
or Telephone Order Merchandise Rule and related regulations promulgated by the
Federal Trade Commission, which prohibit unfair methods of competition and
unfair or deceptive acts or practices in connection with mail and telephone
order sales and require sellers of mail and telephone order merchandise to
conform to certain rules of conduct with respect to shipping dates and shipping
delays. The Company believes it is in compliance with the Rule and such
regulations.
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The Company currently collects sales taxes only on sales to its
Massachusetts and Pennsylvania customers. Many states have attempted to
require that out-of-state direct marketers collect use taxes on sales of
products shipped to their residents. In 1992, the United States Supreme Court
held unconstitutional a state's imposition of use tax collection obligations
on an out-of-state mail order company whose only significant contacts with
the state were the distribution of catalogs and other advertising materials
through the mail and subsequent delivery of purchased goods by mail or common
carriers, but stated that Congress could enact legislation authorizing the
states to impose such obligations. In 1995, however, the United States
Supreme Court let stand a decision of New York's highest state court
requiring an out-of-state catalog company to collect use tax (including a
retroactive assessment and penalties) on its mail order sales in the state,
where the catalog company's reported contact with New York included a limited
number of visits by sales force employees. If Congress enacts legislation
permitting states to impose use tax collection obligations on out-of-state
mail order businesses, or if the Company otherwise is required to collect
additional sales or use taxes, such tax collection obligations would make it
more expensive to purchase the Company's products and increase the Company's
administrative costs, and therefore could have a material adverse effect on
the Company's financial condition and results of operations.
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ITEM 2. PROPERTIES
The following table sets forth certain information relating to the
Company's facilities as of December 26, 1998:
<TABLE>
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Square Type of Lease
Location Footage Function Interest Termination
- ---------------------------------- ------- --------------------------------- -------- -----------
<S> <C> <C> <C> <C>
Tilton, NH (approx. 360 acres).... 400,000 Operations and Fulfillment Center Owned(1) --
Laconia, NH....................... 112,900 Interim Fulfillment Center Leased 09/14/99
Meredith, NH (approx. 25 acres)... 93,120 Operations and Fulfillment Center Owned --
Laconia, NH....................... 37,800 Interim Returns Processing and Leased 12/31/98
Storage Facility
Hingham, MA....................... 19,642 Corporate Offices Leased 03/31/00
Hingham, MA....................... 1,935 Corporate Offices Leased 12/31/03
Bedford, MA....................... 5,255 Outlet Store Leased 04/30/00
Meredith, NH...................... 3,600 Outlet Store Leased 07/01/99
Reading, PA....................... 3,059 Outlet Store Leased 08/31/03
North Conway, NH.................. 2,567 Outlet Store Leased 02/28/02
</TABLE>
(1) Subsequent to December 26, 1998, the Company contributed its new operations
and fulfillment center in Tilton, New Hampshire to Birch Pond Realty
Corporation, a wholly owned subsidiary of the Company, in exchange for all
of the outstanding shares of Birch Pond Realty Corporation. (See Note D to
the accompanying consolidated financial statements.)
In connection with the Company's transition to the new Tilton, New
Hampshire operations and fulfillment center, the Company has vacated its
Meredith, New Hampshire operations and fulfillment center, its Laconia, New
Hampshire interim fulfillment center and its Laconia, New Hampshire interim
returns processing and storage facility. The Company is actively marketing its
operations and fulfillment center in Meredith, New Hampshire for sale or lease
and is actively seeking a sub-lessor for its interim fulfillment center in
Laconia, New Hampshire. The Company has terminated the lease on its interim
returns processing and storage facility effective December 31, 1998. The Company
incurred no penalties as a result of this early termination.
During fiscal 1998, the Company entered into lease agreements for two
additional J. JILL catalog outlet stores. The leases on these two stores are due
to commence in 1999. The term of the first lease is five years, commencing on
the earlier of opening the store or April 1999, and includes 2,780 square feet
of retail space located in Lancaster, Pennsylvania. The term of the second lease
is three years, commencing on the earlier of opening the store or December 1999
and includes 3,500 square feet of retail space located in Wrentham,
Massachusetts.
Also during fiscal 1998, the Company entered into a lease agreement for
60,500 square feet of office space intended to house its new corporate
headquarters in Quincy, Massachusetts. The original term of the lease is ten
years commencing on the date on which the premises are ready for occupancy. The
current estimated completion date is in September 1999.
The operations and fulfillment centers in Tilton, New Hampshire and
Meredith, New Hampshire are subject to certain encumbrances. (See Note D to the
accompanying consolidated financial statements.)
ITEM 3. LEGAL PROCEEDINGS
The Company is not a party to any material legal proceedings and did not
settle any material legal proceedings during the quarter ended December 26,
1998.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's common stock trades on The Nasdaq Stock Market under the
symbol "DMMC." As of March 12, 1999, the approximate number of holders of record
of common stock of the Company was 350. The Company believes that the
approximate number of beneficial holders of common stock of the Company is
approximately 2,600.
On May 29, 1998, the Company announced a three-for-two stock split to be
effected in the form of a stock dividend payable on June 30, 1998 to
shareholders of record on June 12, 1998.
The following table sets forth, for the periods indicated, the high and low
sales prices for the Company's common stock as reported on The Nasdaq Stock
Market. All sales price information below has been restated to reflect the
effects of the three-for-two stock split.
<TABLE>
<CAPTION>
High Low
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<S> <C> <C>
FISCAL 1998
Quarter ended December 26, 1998 ...... $ 17 3/4 $ 5 7/8
Quarter ended September 26, 1998 ..... 27 5/8 7 1/8
Quarter ended June 27, 1998 .......... 23 1/2 12 5/64
Quarter ended March 28, 1998 ......... 15 3/4 10 21/64
FISCAL 1997
Quarter ended December 27, 1997 ...... 12 11/64 7 43/64
Quarter ended September 27, 1997 ..... 9 1/2 6 1/2
Quarter ended June 28, 1997 .......... 7 1/2 4 1/2
Quarter ended March 29, 1997 ......... $5 27/64 $ 2 27/64
</TABLE>
The Company has never declared or paid any cash dividends on its common
stock. The Company currently intends to retain any earnings for use in the
operation and expansion of its business and therefore does not anticipate paying
any cash dividends in the foreseeable future.
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ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data of DM Management Company (the
"Company") set forth below has been derived from the Company's consolidated
financial statements for the periods indicated and should be read in conjunction
with the discussion under "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the Company's consolidated financial
statements and footnotes.
The Company's fiscal year ends on the last Saturday in December. Prior to
December 28, 1996, the Company's fiscal year had ended on the last Saturday in
June. The Company's change in fiscal year end resulted in a six-month transition
period ended December 28, 1996 (the "transition period"). Financial information
for the twelve months ended December 28, 1996 has been presented for comparative
purposes and is unaudited. On May 29, 1998, the Company announced a
three-for-two stock split to be effected in the form of a stock dividend payable
on June 30, 1998 to shareholders of record on June 12, 1998. All share and per
share information below has been restated to reflect the effects of the
three-for-two stock split.
<TABLE>
<CAPTION>
Transition
Period
Twelve Months Ended Ended Twelve Months Ended
-------------------------------- ------- --------------------------------
Dec. 26, Dec. 27, Dec. 28, Dec. 28, June 29, June 24, June 25,
1998 1997 1996(2)(1) 1996 (2) 1996 (1) 1995 (1) 1994
-------- -------- -------- -------- -------- -------- --------
(unaudited)
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Consolidated Statement of Operations Data:
Net sales ...................................... $218,730 $135,533 $ 84,642 $ 43,324 $ 80,585 $ 72,691 $ 63,337
Income from continuing operations
before income taxes ........................ 13,774 6,392 1,956 1,072 261 851 3,604
Income from continuing operations .............. 8,402 3,899 12,358 11,563 235 765 3,269
Net income (loss) .............................. 8,402 3,899 3,371 11,563 (9,350) 773 3,269
Income from continuing operations
per share (diluted) ........................ 0.81 0.48 1.76 1.63 0.04 0.11 0.53
Net income (loss) per share (diluted) .......... $ 0.81 $ 0.48 $ 0.48 $ 1.63 $ (1.40) $ 0.11 $ 0.53
Weighted average shares outstanding (diluted) .. 10,378 8,073 7,019 7,105 6,661 6,914 6,115
Consolidated Balance Sheet Data:
Total assets ................................... $115,492 $ 75,381 $ 38,109 $ 38,109 $ 27,069 $ 31,612 $ 26,923
Working capital ................................ 10,191 32,835 10,662 10,662 6,988 6,315 9,305
Long-term debt, less current portion ........... 9,900 8,346 4,540 4,540 4,380 3,634 248
Stockholders' equity ........................... $ 53,596 $ 43,142 $ 21,223 $ 21,223 $ 9,480 $ 18,851 $ 17,861
Selected Operating Data:
Catalog circulation (3) ........................ 73,800 50,500 37,900 18,400 41,600 40,300 32,400
Total twelve-month buyers (4) .................. 1,022 681 455 455 498 479 415
</TABLE>
(1) In December 1994 the Company purchased certain assets and assumed certain
liabilities of Carroll Reed, Inc. and Carroll Reed International Limited.
In connection with the purchase, the Company paid $5,031,000 and
established accruals totaling $1,180,000. On May 20, 1996, the Company
announced its plan to divest its CARROLL REED segment and recorded a charge
of $8,511,000 for the loss on disposal of discontinued operations. The
results of the CARROLL REED operations through May 20, 1996 have been
classified as income (loss) from discontinued operations. See Note B to the
accompanying consolidated financial statements.
(2) During the six-month and twelve-month periods ended December 28, 1996, the
Company recognized a deferred tax benefit of $10,598,000. See Note H to the
accompanying consolidated financial statements.
(3) In order to more closely match net sales to catalog circulation, the
Company calculates catalog circulation on a percentage of completion basis.
This calculation takes into account the total number of catalogs mailed
during all periods and the Company's estimate of the expected sales life of
each catalog edition. As used throughout this Form 10-K, the term "catalog
circulation" refers to circulation of the Company's catalogs calculated in
such fashion.
(4) As used throughout this Form 10-K, the term "twelve-month buyers" means
customers who have made a purchase from the Company within the previous 12
months.
11
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
THE FOLLOWING DISCUSSION CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE
MEANING OF SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED,
WHICH INVOLVE RISKS AND UNCERTAINTIES. FOR THIS PURPOSE, ANY STATEMENTS
CONTAINED HEREIN OR INCORPORATED HEREIN THAT ARE NOT STATEMENTS OF HISTORICAL
FACT MAY BE DEEMED TO BE FORWARD-LOOKING STATEMENTS. WITHOUT LIMITING THE
GENERALITY OF THE FOREGOING, THE WORDS "ANTICIPATES," "PLANS," "EXPECTS" AND
SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS. THE
COMPANY'S ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS MAY DIFFER
SIGNIFICANTLY FROM THE RESULTS DISCUSSED IN OR IMPLIED BY THE FORWARD-LOOKING
STATEMENTS. FACTORS THAT MIGHT CAUSE SUCH A DIFFERENCE INCLUDE, BUT ARE NOT
LIMITED TO THE FOLLOWING: THE SUCCESS OR FAILURE OF THE J.JILL RETAIL STORE
INITIATIVE; DIFFICULTIES IN MANAGING THE TRANSITION OF OPERATIONS TO THE NEW
TILTON, NEW HAMPSHIRE OPERATIONS AND FULFILLMENT CENTER; SIGNIFICANT CHANGES
IN CUSTOMER RESPONSE RATES; CHANGE IN COMPETITION IN THE APPAREL INDUSTRY;
GENERAL ECONOMIC AND BUSINESS CONDITIONS; SUCCESS OR FAILURE OF OPERATING
INITIATIVES; THE ABILITY OF THE COMPANY TO EFFECTIVELY LIQUIDATE ITS
OVERSTOCKED MERCHANDISE; CHANGES IN CONSUMER SPENDING AND CONSUMER
PREFERENCES; FAILURE OF THE COMPANY OR ITS SIGNIFICANT VENDORS OR SUPPLIERS
TO BECOME YEAR 2000 COMPLIANT; CHANGES IN BUSINESS STRATEGY; POSSIBLE FUTURE
INCREASES IN EXPENSES; THE EXISTENCE OR ABSENCE OF BRAND AWARENESS; THE
EXISTENCE OR ABSENCE OF PUBLICITY, ADVERTISING AND PROMOTIONAL EFFORTS;
AVAILABILITY, TERMS AND DEPLOYMENT OF CAPITAL; QUALITY OF MANAGEMENT;
BUSINESS ABILITIES AND JUDGMENT OF PERSONNEL; AVAILABILITY OF QUALIFIED
PERSONNEL; LABOR AND EMPLOYEE BENEFIT COSTS; CHANGES IN, OR THE FAILURE TO
COMPLY WITH, GOVERNMENT REGULATIONS, AND OTHER FACTORS.
RESULTS OF OPERATIONS
In January 1997 the Company changed its fiscal year end from the last
Saturday in June to the last Saturday in December. References to fiscal 1998 and
fiscal 1997 mean the Company's fiscal years ended December 26, 1998 and December
27, 1997, respectively. References to the transition period mean the six-month
transition period ended December 28, 1996. The following table sets forth, for
the fiscal periods indicated, certain items from the Company's consolidated
statements of operations expressed as a percentage of net sales:
<TABLE>
<CAPTION>
Transition Twelve
Period Months
Twelve Months Ended Ended Ended
---------------------------- ---------- --------
Dec. 26, Dec. 27, Dec. 28, Dec. 28, June 29,
1998 1997 1996 1996 1996
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net sales ............................... 100.0% 100.0% 100.0% 100.0% 100.0%
Costs and expenses:
Product ............................ 44.8 44.1 44.0 44.9 43.5
Operations ......................... 20.0 18.9 16.5 15.9 17.3
Selling ............................ 22.3 24.7 28.0 27.1 30.3
General and administrative ......... 6.8 7.6 8.8 9.3 8.2
Interest, net ...................... (0.2) -- 0.4 0.3 0.4
----- ----- ----- ----- -----
Income from continuing operations
before income taxes ................ 6.3 4.7 2.3 2.5 0.3
Provision (benefit) for income taxes .... 2.5 1.8 (12.3) (24.2) --
----- ----- ----- ----- -----
Income from continuing operations ....... 3.8 2.9 14.6 26.7 0.3
Loss from discontinued operations ....... -- -- (10.6) -- (11.9)
----- ----- ----- ----- -----
Net income (loss) ....................... 3.8% 2.9% 4.0% 26.7% (11.6)%
===== ===== ===== ===== =====
</TABLE>
12
<PAGE>
COMPARISON OF FISCAL 1998 TO FISCAL 1997
NET SALES
In fiscal 1998 net sales increased by 61.4%, or $83.2 million, to $218.7
million from $135.5 million in fiscal 1997. The increase in net sales was
attributable to significant sales volume increases from J. JILL. In fiscal 1998
J. JILL net sales and circulation increased by 123.7% and 101.5%, respectively,
as compared to fiscal 1997. J. JILL net sales growth was attributable to the
aforementioned circulation growth, as well as improved response rates and
increased units per order. Although the Company plans to continue its aggressive
customer acquisition strategy at J. JILL, it does not expect the same year over
year percentage increase in circulation that it experienced in fiscal 1998 to
continue. In fiscal 1998 net sales and circulation for NICOLE SUMMERS decreased
by 12.9% and 17.8%, respectively, as compared to fiscal 1997. The Company
expects slight decreases in net sales and circulation at NICOLE SUMMERS in 1999
as compared to fiscal 1998. Total Company catalog circulation increased by 46.1%
to 73.8 million in fiscal 1998 from 50.5 million in fiscal 1997. The number of
twelve-month buyers grew to 1,022,000 at December 26, 1998 from 681,000 at
December 27, 1997, an increase of 50.1%.
PRODUCT
Product costs consist primarily of merchandise acquisition costs (net of
term discounts and advertising allowances), including freight-in costs, and
provisions for markdowns. In fiscal 1998 product costs increased by $38.1
million, or 63.7%, to $97.9 million from $59.8 million in fiscal 1997. As a
percentage of net sales, product costs increased to 44.8% in fiscal 1998 from
44.1% in fiscal 1997. Increased use of strategically designed promotional
pricing in fiscal 1998 combined with increased markdown charges associated with
NICOLE SUMMERS resulted in increased product costs as a percentage of net sales
over the prior year. This increase in costs as a percentage of net sales was
almost entirely offset by the shift in the mix of the business toward J. JILL,
which experiences lower product costs as a percentage of net sales than NICOLE
SUMMERS due to its higher concentration of private label merchandise. The
Company does not expect product costs as a percentage of net sales to improve
significantly in the near future.
OPERATIONS
Operating expenses consist primarily of order processing costs, such as
telemarketing, customer service, fulfillment, shipping, warehousing and credit
card processing costs, and merchandising costs. In fiscal 1998 operating
expenses increased by $18.2 million, or 71.2%, to $43.8 million from $25.6
million in fiscal 1997. As a percentage of net sales, operating expenses
increased to 20.0% in fiscal 1998 from 18.9% in fiscal 1997. The Company's
significant growth over the past two fiscal years and the corresponding
operating infrastructure investment required to support this growth has resulted
in operational inefficiencies. In fiscal 1998 the Company operated out of three
distribution facilities while awaiting the completion of the new
state-of-the-art, 400,000 square foot operations and fulfillment facility in
Tilton, New Hampshire (the "Tilton facility"). Reduced productivity from
operating out of these multiple facilities, inefficiencies attributable to
implementing new order taking and warehouse management systems, increased costs
associated with third party call center usage and growth in the product
development division of merchandising all contributed to the increase in
operating expenses as a percentage of net sales in fiscal 1998. The Company
currently expects the ratio of operating expenses to net sales to improve in the
second half of 1999 with further improvement in 2000.
SELLING
Selling expenses consist primarily of the cost to produce, print and
distribute catalogs. In fiscal 1998 selling expenses increased by $15.4 million,
or 45.8%, to $48.9 million from $33.5 million in fiscal 1997. As a percentage of
net sales, selling expenses decreased to 22.3% in fiscal 1998 from 24.7% in
fiscal 1997. This decrease was primarily a result of improved catalog
productivity, offset by an increase in paper costs, in fiscal 1998 as compared
to fiscal 1997. The Company expects the ratio of selling expenses to net sales
to increase slightly in 1999 as a result of increased postage rates.
GENERAL AND ADMINISTRATIVE
General and administrative expenses consist primarily of executive,
marketing, information systems and finance expenses. In fiscal 1998 general and
administrative expenses increased by $4.7 million, or 45.5%, to $14.9 million
from $10.2 million in fiscal 1997. This increase is primarily attributable to
increased salaries and performance bonuses and increased depreciation. As a
percentage of net sales, general and administrative expenses decreased to 6.8%
in fiscal 1998 from 7.6% in fiscal 1997.
INTEREST, NET
Interest income increased to $1.1 million in fiscal 1998 from $0.5 million
in fiscal 1997, primarily due to higher cash and cash equivalent balances in
fiscal 1998 due to proceeds from the Company's fiscal 1997 public offering.
Interest expense increased to $0.6 million in fiscal 1998 as compared to $0.5
million in fiscal 1997 primarily as a result of increased use of the Company's
credit facilities. Interest expense does not include capitalized interest of
$1.0 million and $0.1 million in
13
<PAGE>
fiscal 1998 and fiscal 1997, respectively. The Company expects a decrease in
interest income and an increase in interest expense in 1999 as a result of using
cash and cash equivalents and new borrowings to finance the Tilton facility.
COMPARISON OF FISCAL 1997 TO THE TWELVE MONTHS ENDED DECEMBER 28, 1996
NET SALES
In fiscal 1997 net sales increased by 60.1%, or $50.9 million, to $135.5
million from $84.6 million during the twelve months ended December 28, 1996. The
increase in net sales was attributable to significant sales volume increases
from J. JILL. In fiscal 1997 J. JILL net sales and circulation increased by
225.5% and 147.3%, respectively, as compared to the twelve months ended December
28, 1996. J. JILL net sales growth was attributable to the aforementioned
circulation growth, as well as improved response rates and increased units per
order. In fiscal 1997 net sales and circulation for NICOLE SUMMERS decreased by
0.3% and 12.9%, respectively, as compared to the twelve months ended December
28, 1996. Total Company catalog circulation increased by 33.2% to 50.5 million
in fiscal 1997 from 37.9 million during the twelve months ended December 28,
1996. The number of twelve-month buyers grew to 681,000 at December 27, 1997
from 455,000 at December 28, 1996, an increase of 49.7%.
PRODUCT
In fiscal 1997 product costs increased by $22.6 million, or 60.7%, to $59.8
million from $37.2 million during the twelve months ended December 28, 1996. As
a percentage of net sales, product costs increased to 44.1% in fiscal 1997 from
44.0% during the twelve months ended December 28, 1996. The slight increase in
product costs as a percentage of net sales in fiscal 1997 was primarily
attributable to increased promotional activity and was offset in part by lower
markdown charges in fiscal 1997 as compared to the prior year.
OPERATIONS
In fiscal 1997 operating expenses increased by $11.6 million, or 82.9%, to
$25.6 million from $14.0 million during the twelve months ended December 28,
1996. As a percentage of net sales, operating expenses increased to 18.9% in
fiscal 1997 from 16.5% during the twelve months ended December 28, 1996. The
Company's dramatic growth in fiscal 1997 resulted in operational inefficiencies
and capacity issues. Higher than anticipated call volume resulted in increased
costs from greater use of the Company's third party call center. The need for
more fulfillment capacity required the Company to lease two interim satellite
facilities. This arrangement generated operational inefficiencies, as well as
increased costs. Also during the second half of fiscal 1997, the Company
experienced higher shipping costs due to the expiration of its contract with
Airborne Express, which had favorable pricing terms, and its subsequent shift to
the U.S. Postal Service for customer package delivery.
SELLING
In fiscal 1997 selling expenses increased by $9.8 million, or 41.2%, to
$33.5 million from $23.7 million during the twelve months ended December 28,
1996. As a percentage of net sales, selling expenses decreased to 24.7% in
fiscal 1997 from 28.0% during the twelve months ended December 28, 1996.
Increased catalog productivity as well as lower paper prices resulted in this
decline in selling expenses as a percentage of net sales.
GENERAL AND ADMINISTRATIVE
In fiscal 1997 general and administrative expenses increased by $2.8
million, or 37.5%, to $10.2 million from $7.4 million during the twelve months
ended December 28, 1996. This increase was primarily attributable to increased
management infrastructure, increased outside consulting fees related to various
systems and facilities projects and increased depreciation and occupancy costs.
As a percentage of net sales, general and administrative expenses decreased to
7.6% in fiscal 1997 from 8.8% during the twelve months ended December 28, 1996.
INTEREST, NET
Interest income increased to $0.5 million in fiscal 1997 from $0.2
million during the twelve months ended December 28, 1996 primarily due to
earnings on the proceeds from the Company's public offering in October 1997.
Interest expense was $0.5 million in fiscal 1997 unchanged from the twelve
months ended December 28, 1996. Interest expense does not include capitalized
interest of $0.1 million in fiscal 1997.
INCOME TAXES
The Company provides for income taxes at an effective tax rate that
includes the full federal and state statutory tax rates. Prior to December 1996,
the Company reduced the income tax provision recorded in its financial
statements by recording a tax benefit associated with its net deferred tax
assets, primarily net operating loss ("NOL") carryforwards. Because of the
14
<PAGE>
uncertainty surrounding the realizability of these assets, the Company placed a
valuation allowance against the entire balance of its net deferred tax assets.
As a result, the associated tax benefit was recognized as income was earned,
resulting in a significantly lower effective tax rate for all periods reported
prior to December 1996.
In December 1996, the Company performed a detailed analysis of the future
taxable income levels required for the Company to fully realize the benefit of
its net deferred tax assets. Based on this analysis, the Company determined that
it was more likely than not that the Company would earn sufficient book and
taxable income to fully realize the benefit of its net deferred tax assets. This
determination required the Company to remove the valuation allowance and
recognize the deferred tax benefit of $10.6 million at December 28, 1996 in its
entirety. No assurance can be given, however, that the Company will achieve
taxable income sufficient to realize the full benefit of its net deferred tax
assets.
Because, for financial statement purposes, the benefit associated with the
Company's deferred tax assets has been fully realized, the Company's effective
tax rate can no longer be reduced by the recognition of this tax benefit over
future periods of income generation. As a result, the Company's effective tax
rate is substantially larger in fiscal 1998 and fiscal 1997 than in prior
periods. Cash payments for income taxes continue to be reduced by available NOL
carryforwards. See Note H to the accompanying consolidated financial statements.
DISCONTINUED OPERATIONS
On May 20, 1996, the Company announced its plan to divest its CARROLL REED
segment due to the incompatibility of the customer base and product line of this
segment with those of its other segment. Accordingly, the CARROLL REED segment
has been accounted for as a discontinued operation, and all assets, liabilities,
results of operations and cash flows associated with the CARROLL REED segment
have been segregated from those associated with continuing operations. In
connection with this divestiture, the Company recorded a charge of $8.5 million
in fiscal 1996 for the loss on disposal of discontinued operations, consisting
of $5.3 million related to the write-off of the remaining unamortized intangible
assets and $3.2 million for expected losses during the phase-out period. The
results of the CARROLL REED operations through May 20, 1996 have been classified
as loss from discontinued operations. Since May 20, 1996, the results
of this discontinued operation have been charged to the liability for expected
losses established in connection with the divestiture and have had no impact on
the Company's operating results. As of December 26, 1998, the Company had
completed the phase-out of its CARROLL REED segment and had utilized its reserve
for expected losses, including the recognition of certain tax benefits.
LIQUIDITY AND CAPITAL RESOURCES
DM Management's principal working capital needs arise from the need to
support costs incurred in advance of revenue generation, primarily inventory
acquisition and catalog development, production and mailing costs incurred prior
to the beginning of each selling season. The Company has two selling seasons
which correspond to the fashion seasons. The Fall season begins in July and ends
in January. The Spring season begins in January and ends in July. Capital needs
arise from capital expenditures related to expansions and improvements to the
Company's operating infrastructure. In fiscal 1998 these capital expenditures
included costs related to the construction of the Tilton facility and the
implementation of two major operating systems - a new order taking system and a
new warehouse management system (the "new operating systems"). In fiscal 1998
the Company funded its operating and capital needs through its bank credit
facilities, cash generated from operations, proceeds from its fiscal 1997 public
offering and proceeds from the sale of its marketable securities.
The Company's operating activities provided net cash of $7.7 million and
$5.7 million in fiscal 1998 and fiscal 1997, respectively. Net cash provided by
operations in fiscal 1998 and fiscal 1997 was primarily the result of the
significant net sales growth during these periods. This sales growth resulted
in corresponding increases in net income and accrued customer returns. In
order to support this sales growth and the projected future growth in the
business, the Company used cash from operations to increase inventory levels.
Inventory levels at December 26, 1998 were 30.5% higher than at December 27,
1997. Fiscal 1997 operating cash flows were also affected by an increase in
prepaid catalog expenses which resulted from increased catalog circulation
and page counts and higher paper inventory balances.
The Company's investing activities used net cash of $31.4 million and $8.5
million in fiscal 1998 and fiscal 1997, respectively. In fiscal 1998 and fiscal
1997 the use of cash in investing activities was primarily attributable to costs
related to the construction of the new Tilton facility. Construction of the
Tilton facility began in fiscal 1997 and was completed as of December 26, 1998.
The estimated total cost of this facility including land, construction,
equipment and furniture is approximately $41.0 million, of which approximately
$37.2 million had been spent as of December 26, 1998. In fiscal 1998 the Company
sold its marketable securities and generated cash from investing activities of
approximately $3.8 million. This cash was used to fund construction of the
Tilton facility.
15
<PAGE>
DM Management's financing activities provided net cash of $24.4 million and
$21.6 million in fiscal 1998 and fiscal 1997, respectively. Cash provided by
financing activities in fiscal 1998 was primarily the result of borrowings used
to finance the Tilton facility construction. In fiscal 1998 cash provided from
financing activities also included $1.9 million in cash provided from stock
transactions, primarily the exercise of stock options. Cash provided by
financing activities in fiscal 1997 was primarily due to proceeds received from
the Company's $17.5 million fiscal 1997 public offering.
During the twelve months ended December 28, 1996 net cash provided by
operating activities was affected by two significant events - the recognition of
a $10.6 million reduction in the Company's valuation allowance on its deferred
tax assets and the write off of its discontinued CARROLL REED segment. Net cash
used in investing and financing activities included additions to property and
equipment and payments made related to the CARROLL REED purchase and certain
debt borrowings.
The Company's credit facilities at December 26, 1998 consisted of (i) a
$1.7 million real estate loan (the "Real Estate Loan"); (ii) a $3.6 million term
loan (the "Term Loan"); (iii) a $9.5 million equipment loan (the "Equipment
Loan"); (iv) a $15.9 million revolving line of credit (the "Revolver"); (v) a
$17.0 million line of credit (the "Line of Credit"); and (vi) a $4.3 million
short-term note (the "Short-Term Note"). The Equipment Loan was collateralized
by substantially all of the Company's materials handling equipment. The
remaining credit facilities were collateralized by substantially all of the
Company's remaining assets. All of these credit facilities contain various
lending conditions and covenants, including restrictions on permitted liens and
required compliance with certain debt coverage ratios.
The Real Estate Loan requires monthly payments, based on a 15-year
amortization, with the balance payable on July 30, 2002. Interest on the Real
Estate Loan is fixed at 6.81% per annum until August 31, 1999, at which time the
Company may select from several interest rate options. The Term Loan requires
quarterly payments through its maturity on June 1, 2002 and provides for several
interest rate options (6.78% per annum at December 26, 1998). The Equipment Loan
requires monthly payments through its maturity on December 1, 2005 with the
interest rate fixed at 7.5% per annum. The Revolver is available for borrowings
and for letters of credit. At December 26, 1998 there were no borrowings
outstanding and $11.6 million of outstanding letters of credit under the
Revolver. At December 26, 1998 the Revolver bore interest at 7.75% per annum.
The outstanding letters of credit do not bear interest. The Revolver matures
June 1, 1999. The Company is required to pay a commitment fee of 1/8th of 1% per
annum on the unused portion of the Revolver. The Line of Credit bears interest
at LIBOR plus 125 basis points repriced monthly (6.81% per annum at December 26,
1998), expires on March 31, 1999 and does not require a commitment fee. The
Short-Term Note bears interest at 7.06% per annum and matures on March 31, 1999.
Subsequent to December 26, 1998, the Company obtained long-term financing
for the Tilton facility. In connection with the long-term financing, the Company
contributed the new Tilton facility to Birch Pond Realty Corporation ("Birch
Pond"), a wholly owned subsidiary of the Company, in exchange for all the
outstanding shares of Birch Pond. On March 1, 1999, Birch Pond entered into a
$12.0 million loan (the "Loan") with a financial institution and granted a
mortgage lien on the Tilton facility to the financial institution. Cash received
from the Loan, cash from the Company's fiscal 1997 public offering and cash from
operations were used to pay off the Short-Term Note and the Line of Credit and
to release the existing mortgage on the Tilton facility.
Also during fiscal 1998, the Company entered into a lease agreement for
office space intended to house its new corporate headquarters. The original term
of the lease is ten years commencing on the date on which the premises are ready
for occupancy. The current estimated completion date is in September 1999.
Minimum annual lease payments due under the lease range from $1.6 million to
$1.8 million. In October 1998 the Company placed $1.3 million on deposit to
secure this lease.
The Company expects that its cash and cash equivalents, existing credit
facilities, anticipated new credit facilities and cash flows from operations
will be sufficient to support the Company's capital and operating needs for the
foreseeable future.
FUTURE CONSIDERATIONS
In 1999 the Company intends to mail four separate 48-page J. JILL
catalogs featuring an assortment of bed, bath and accessory items entitled
"peopleplacesthings." Additionally, in an effort to continue to capitalize on
the strength of the J. JILL brand, the Company is expanding its channels of
distribution to include retail stores and the Internet. Currently, the
Company plans to open five to ten specialty retail stores by the end of 2000.
The Company also plans to have a fully-transactional website in operation in
time for the 1999 holiday season. The Company may incur costs in excess of
revenues generated by these new opportunities during the initial phases of
their development. There can be no assurance that these new opportunities
will be successful.
16
<PAGE>
YEAR 2000 READINESS DISCLOSURE
The Year 2000 issue affects most companies that rely on computer systems
and involves the computer software and hardware changes necessary to handle the
transition from the year 1999 to the Year 2000. During 1997, the Company
formulated a plan to address the Year 2000 issue. The Company has assessed its
status regarding its Year 2000 compliance in three components: internal
information technology (IT) systems, internal non-information technology
(non-IT) systems, and external Year 2000 issues related to the Company's
vendors, suppliers and service providers ("third party providers").
As part of the Company's strategic business plan, the Company's major
internal IT and non-IT systems have been replaced or upgraded. The Company has
received assurances from the vendors of all of the Company's major internal IT
and non-IT systems indicating the new systems and upgrades are designed to be
Year 2000 compliant. Because these system improvements were primarily motivated
by the Company's growth and technology needs, they are not considered to be
costs directly attributable to the Year 2000 issue. Certain minor internal IT
and non-IT systems have also been upgraded or are planned to be upgraded by June
1999. The Company has received assurances from the vendors of these upgrades
indicating that the upgrades are designed to be Year 2000 compliant. These
upgrades are part of the Company's continuing maintenance plans and are not
considered to be costs directly attributable to the Year 2000 issue. Beginning
in the Spring of 1999, the Company plans to run tests focused on verifying the
assurances given by the vendors of its internal IT and non-IT systems. At this
time there can be no assurance that all of the Company's internal IT and non-IT
systems will be Year 2000 compliant. The total historical and estimated future
costs to address the Year 2000 issue with respect to internal IT and non-IT
systems is currently estimated to be less than $500,000.
As part of the Company's plan to address the Year 2000 issue, the Company
has begun contacting and receiving letters from its significant third party
providers either certifying that their company is currently Year 2000 compliant
or indicating a date that a compliance certificate is expected. The Company has
begun to develop contingency plans to deal with possible non-compliance by the
Company's significant third party providers. These plans include the possible
replacement of the noncomplying third party providers. The current estimated
impact to the Company for these replacements is approximately $200,000. At this
time there can be no assurance that all of the Company's third party providers
will be Year 2000 compliant. The Company intends to further develop its
contingency plans beginning in the first half of 1999.
The estimates mentioned above may change materially in the future as
further information is obtained. Any failure of the Company or its significant
third party providers to become Year 2000 compliant could have a material
adverse effect on the Company's financial condition, results of operations, or
cash flows.
RECENT ACCOUNTING STANDARDS
The Company reports segment information in accordance with Financial
Accounting Standards Board issued Statement No. 131, "DISCLOSURES ABOUT SEGMENTS
OF AN ENTERPRISE AND RELATED INFORMATION." This statement, which is based on the
management approach to segment reporting establishes new standards for the way
public companies report information about operating segments and requires
companies to report selected segment information quarterly to stockholders. The
Company holds assets and reports sales in one operating segment.
In April 1998 the American Institute of Certified Public Accountants issued
Statement of Position No. 98-5, "REPORTING ON THE COSTS OF START-UP ACTIVITIES,"
which provides guidance on the financial reporting of start-up costs and
organization costs. It requires costs of start-up activities and organization
costs to be expensed as incurred. The Company adopted this statement in fiscal
1998. The adoption of this statement was immaterial to the accompanying
consolidated financial statements.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's objective in managing its exposure to interest rate changes
and foreign currency rate changes is to limit the material impact of the changes
on cash flows and earnings and to lower its overall borrowing costs. To achieve
its objectives, the Company identifies these risks and manages them through its
regular operating and financing activities, including periodic refinancing of
debt obligations to lower financing costs and adjust fixed and variable rate
debt positions. The Company does not currently use derivative financial
instruments or enter into foreign currency denominated contracts. Management has
calculated the effect of a 10% change in interest rates over a month and
determined the effect to be immaterial. Management does not foresee or expect
any significant changes in the management of foreign currency or interest rate
exposures or in the strategies it employs to manage such exposures in the near
future.
17
<PAGE>
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
DM MANAGEMENT COMPANY
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Accountants ......................................... 19
Consolidated Balance Sheets at December 26, 1998 and December 27, 1997 .... 20
Consolidated Statements of Operations for the twelve months ended
December 26, 1998, December 27, 1997 and December 28, 1996 (unaudited),
the six months ended December 28, 1996 and the twelve months ended
June 29, 1996 ........................................................... 21
Consolidated Statements of Changes in Stockholders' Equity for the twelve
months ended December 26, 1998 and December 27, 1997, the six months ended
December 28, 1996 and the twelve months ended June 29, 1996 ....... 22
Consolidated Statements of Cash Flows for the twelve months ended
December 26, 1998, December 27, 1997 and December 28, 1996 (unaudited),
the six months ended December 28, 1996 and the twelve months ended
June 29, 1996 ........................................................... 23
Notes to Consolidated Financial Statements ................................ 24
</TABLE>
18
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
DM Management Company:
In our opinion, the accompanying consolidated balance sheets and
the related consolidated statements of operations, stockholders' equity and
cash flows present fairly, in all material respects, the financial position
of DM Management Company and its subsidiary at December 26, 1998 and December
27, 1997, and the results of their operations and their cash flows for each
of the two years in the period ended December 26, 1998 and for the six month
period ended December 28, 1996 and the twelve month period ended June 29,
1996, in conformity with generally accepted accounting principles. These
financial statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements in
accordance with generally accepted auditing standards, which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
February 5, 1999, except for Note D,
as to which the date is
March 1, 1999
19
<PAGE>
DM MANAGEMENT COMPANY
CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
December 26, 1998 December 27, 1997
----------------- -----------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ......................................... $ 19,996 $ 19,260
Marketable securities, net of unrealized loss ..................... -- 3,890
Inventory ......................................................... 26,847 20,579
Prepaid catalog expenses .......................................... 5,254 6,475
Deferred income taxes ............................................. 6,934 5,295
Other current assets .............................................. 3,156 1,229
--------- ---------
Total current assets ............................................ 62,187 56,728
Property and equipment, net ......................................... 47,485 14,174
Deferred income taxes ............................................... 4,520 4,479
Other non-current assets ............................................ 1,300 --
--------- ---------
Total assets .................................................... $ 115,492 $ 75,381
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable .................................................. $ 12,057 $ 14,116
Accrued expenses .................................................. 8,571 4,161
Accrued customer returns .......................................... 8,333 4,779
Short-term borrowings ............................................. 21,300 --
Current portion of long-term debt ................................. 1,735 837
--------- ---------
Total current liabilities ....................................... 51,996 23,893
Long-term debt, less current portion ................................ 9,900 8,346
Commitments
Stockholders' equity:
Special preferred stock (par value $0.01)1,000,000 shares
authorized ...................................................... -- --
Common stock (par value $0.01) 15,000,000 shares authorized,
9,631,401 and 6,098,480 shares issued and outstanding as of
December 26, 1998 and December 27, 1997, respectively ........ 96 61
Additional paid-in capital ........................................ 59,953 58,041
Unrealized loss on marketable securities .......................... -- (105)
Accumulated deficit ............................................... (6,453) (14,855)
--------- ---------
Total stockholders' equity ...................................... 53,596 43,142
--------- ---------
Total liabilities and stockholders' equity ...................... $ 115,492 $ 75,381
========= =========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
20
<PAGE>
DM MANAGEMENT COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
<TABLE>
<CAPTION>
Transition Twelve
Period Months
Twelve Months Ended Ended Ended
-------------------------------------------- ---------- ----------
Dec. 26, Dec. 27, Dec. 28, Dec. 28, June 29,
1998 1997 1996 1996 1996
(52 weeks) (52 weeks) (52 weeks) (26 weeks) (53 weeks)
---------- ---------- ---------- ----------- ----------
(unaudited)
<S> <C> <C> <C> <C> <C>
Net sales ............................... $ 218,730 $ 135,533 $ 84,642 $ 43,324 $ 80,585
Costs and expenses:
Product ............................ 97,870 59,788 37,205 19,436 35,046
Operations ......................... 43,843 25,615 14,007 6,915 13,954
Selling ............................ 48,864 33,505 23,727 11,730 24,416
General and administrative ......... 14,898 10,236 7,442 4,045 6,602
Interest, net ...................... (519) (3) 305 126 306
--------- --------- --------- --------- ---------
Income from continuing operations
before income taxes ................ 13,774 6,392 1,956 1,072 261
Provision (benefit) for income taxes .... 5,372 2,493 (10,402) (10,491) 26
--------- --------- --------- --------- ---------
Income from continuing operations ....... 8,402 3,899 12,358 11,563 235
Discontinued operations:
Loss from operations ............... -- -- (476) -- (1,074)
Loss on disposal ................... -- -- (8,511) -- (8,511)
--------- --------- --------- --------- ---------
Loss from discontinued operations ....... -- -- (8,987) -- (9,585)
--------- --------- --------- --------- ---------
Net income (loss) ....................... $ 8,402 $ 3,899 $ 3,371 $ 11,563 $ (9,350)
========= ========= ========= ========= =========
Net income (loss) per share:
Basic:
Continuing operations ............... $ 0.89 $ 0.54 $ 1.90 $ 1.77 $ 0.04
Discontinued operations ............. -- -- (1.38) -- (1.50)
--------- --------- --------- --------- ---------
Net income (loss) per share ......... $ 0.89 $ 0.54 $ 0.52 $ 1.77 $ (1.46)
========= ========= ========= ========= =========
Weighted average shares outstanding ..... 9,483 7,202 6,494 6,547 6,415
Diluted:
Continuing operations .............. $ 0.81 $ 0.48 $ 1.76 $ 1.63 $ 0.04
Discontinued operations ............ -- -- (1.28) -- (1.44)
--------- --------- --------- --------- ---------
Net income (loss) per share ........ $ 0.81 $ 0.48 $ 0.48 $ 1.63 $ (1.40)
========= ========= ========= ========= =========
Weighted average shares outstanding ..... 10,378 8,073 7,019 7,105 6,661
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
21
<PAGE>
DM MANAGEMENT COMPANY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(in thousands, except share data)
<TABLE>
<CAPTION>
Unrealized
Additional Loss on Total
Common Paid-In Marketable Accumulated Stockholders'
Stock Capital Securities Deficit Equity
------ -------- ------- -------- --------
<S> <C> <C> <C> <C> <C>
Balance at June 24, 1995 ............................. $ 42 $ 39,827 $ (51) $(20,967) $ 18,851
Exercise of stock options ............................ 1 29 -- -- 30
Stock granted under the 1993 Employee
Stock Purchase Plan .............................. -- 34 -- -- 34
Change in unrealized losses, net of tax .............. -- -- (85) -- (85)
Net loss ............................................. -- -- -- (9,350) (9,350)
------ -------- ------- -------- --------
Balance at June 29, 1996 ............................. 43 39,890 (136) (30,317) 9,480
Exercise of stock options ............................ 1 145 -- -- 146
Tax benefit from exercise of stock options ........... -- 13 -- -- 13
Change in unrealized losses, net of tax .............. -- -- 21 -- 21
Net income ........................................... -- -- -- 11,563 11,563
------ -------- ------- -------- --------
Balance at December 28, 1996 ......................... 44 40,048 (115) (18,754) 21,223
Issuance of 1,412,861 shares of common stock, net .... 14 17,440 -- -- 17,454
Exercise of stock options ............................ 3 408 -- -- 411
Tax benefit from exercise of stock options ........... -- 87 -- -- 87
Stock granted under the 1993 Employee
Stock Purchase Plan .............................. -- 58 -- -- 58
Change in unrealized losses, net of tax .............. -- -- 10 -- 10
Net income ........................................... -- -- -- 3,899 3,899
------ -------- ------- -------- --------
Balance at December 27, 1997 ......................... 61 58,041 (105) (14,855) 43,142
Exercise of stock options ............................ 3 1,115 -- -- 1,118
Tax benefit from exercise of stock options ........... -- 734 -- -- 734
Stock granted under 1993 Employee
Stock Purchase Plan .............................. -- 96 -- -- 96
Adjustment for stock split ........................... 32 (33) -- -- (1)
Change in unrealized losses, net of tax .............. -- -- 105 -- 105
Net income ........................................... -- -- -- 8,402 8,402
------ -------- ------- -------- --------
Balance at December 26, 1998 ......................... $ 96 $ 59,953 $ -- $ (6,453) $ 53,596
====== ======== ======= ======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
22
<PAGE>
DM MANAGEMENT COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Transition Twelve
Period Months
Twelve Months Ended Ended Ended
------------------------------------ -------- --------
Dec. 26, Dec. 27, Dec. 28, Dec. 28, June 29,
1998 1997 1996 1996 1996
(52 weeks) (52 weeks) (52 weeks) (26 weeks) (53 weeks)
-------- -------- -------- -------- --------
(unaudited)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) ........................................ $ 8,402 $ 3,899 $ 3,371 $ 11,563 $ (9,350)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization ............................ 2,853 1,493 1,049 571 910
Loss on sale of marketable securities .................... 159 -- -- -- --
Deferred income taxes .................................... (1,680) 824 (10,598) (10,598) --
Liability for expected losses ............................ -- (231) 231 (2,427) 2,658
Write-off of intangible assets ........................... -- -- 5,336 -- 5,336
Amortization related to discontinued operations .......... -- -- 189 -- 415
Changes in assets and liabilities:
Increase in inventory .................................... (6,268) (7,942) (2,783) (1,771) (622)
(Increase) decrease in prepaid catalog expenses .......... 1,221 (3,761) 2,952 1,440 270
(Increase) decrease in other current assets .............. (1,927) (314) 795 182 (557)
Increase (decrease) in accounts payable and
accrued expenses ....................................... 1,408 8,257 2,084 (1,069) 3,432
Increase in accrued customer returns ..................... 3,554 3,470 444 78 40
(Increase) decrease in net current assets (liabilities)
of discontinued operations ............................. -- 39 1,845 2,619 (2,265)
-------- -------- -------- -------- --------
Net cash provided by operating activities .................. 7,722 5,734 4,915 588 267
Cash flows used in investing activities:
Additions to property and equipment ...................... (35,221) (8,494) (1,512) (834) (796)
Proceeds from sale of marketable securities .............. 3,836 -- 6 -- 6
Payments for purchase of CARROLL REED (Note B) ........... -- -- (907) -- (907)
-------- -------- -------- -------- --------
Net cash used in investing activities ...................... (31,385) (8,494) (2,413) (834) (1,697)
Cash flows provided by (used in) financing activities:
Deposit on lease ......................................... (1,300) -- -- -- --
Borrowings under debt agreements ......................... 70,702 21,224 21,972 8,863 30,103
Payments of debt borrowings .............................. (46,950) (17,598) (24,617) (8,613) (28,747)
Proceeds from stock transactions ......................... 1,947 556 186 159 64
Issuance of common stock, net ............................ -- 17,454 -- -- --
-------- -------- -------- -------- --------
Net cash provided by (used in) financing activities ........ 24,399 21,636 (2,459) 409 1,420
-------- -------- -------- -------- --------
Net increase (decrease) in cash and cash equivalents ....... 736 18,876 43 163 (10)
Cash and cash equivalents at:
Beginning of period ...................................... 19,260 384 341 221 231
-------- -------- -------- -------- --------
End of period ............................................ $ 19,996 $ 19,260 $ 384 $ 384 $ 221
======== ======== ======== ======== ========
Supplemental information:
Non-cash investing activities:
Construction in progress accrued, not paid ............... $ 943 $ -- $ -- $ -- $ --
Cash paid for interest ..................................... $ 557 $ 493 $ 545 $ 252 $ 506
Cash paid for income taxes.................................. $ 5,994 $ 1,068 $ -- $ -- $ 2
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
23
<PAGE>
DM MANAGEMENT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
NATURE OF BUSINESS
DM Management Company and subsidiary (the "Company") is a specialty direct
marketer. The Company's primary products include high quality women's apparel,
accessories, shoes and gifts. In 1998 the Company also began featuring bed and
bath items. The Company currently markets its products through two discrete
catalog concepts, J. JILL and NICOLE SUMMERS.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiary. Intercompany balances and transactions have
been eliminated.
FISCAL YEAR
The Company's fiscal year ends on the last Saturday in December. The twelve
months ended December 26, 1998 ("fiscal 1998") and the twelve months ended
December 27, 1997 ("fiscal 1997") were 52-week periods. Prior to December 28,
1996, the Company's fiscal year had ended on the last Saturday in June. The
Company's change in fiscal year end resulted in a six-month transition period
ended December 28, 1996 (a 26-week period) (the "transition period"). Financial
information for the twelve months ended December 28, 1996 (a 52-week period) has
been presented for comparative purposes and is unaudited. The twelve months
ended June 29, 1996 ("fiscal 1996") was a 53-week period.
STOCK SPLIT
On May 29, 1998, the Company announced a three-for-two stock split to be
effected in the form of a stock dividend payable on June 30, 1998 to
shareholders of record on June 12, 1998. All historical earnings per share
information has been restated to include the effects of the stock split. The
consolidated balance sheet as of December 27, 1997 and the consolidated
statements of changes in stockholders' equity for dates prior to the stock split
have not been restated to include the effects of the stock split. All common
stock amounts and activity after the date of the stock split reflect the
three-for-two split.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
REVENUE RECOGNITION
The Company recognizes sales and the related cost of sales at the time the
products are shipped to customers. The Company provides an allowance based on
projected merchandise returns.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist primarily of cash on deposit in banks and
may also include cash invested in money market mutual funds and overnight
repurchase agreements. The Company considers all highly liquid instruments,
including certificates of deposits, with maturity at time of purchase of three
months or less to be cash equivalents.
24
<PAGE>
DM MANAGEMENT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
MARKETABLE SECURITIES
The Company sold its marketable securities during fiscal 1998 and
recognized a loss of $97,000 net of a deferred tax benefit of $62,000. There
were no realized gains or losses recorded in fiscal 1997.
At December 27, 1997 the Company's marketable securities consisted of
investments in mutual funds which were primarily invested in U.S. Treasury, U.S.
government and corporate bonds. The marketable securities were classified as
available-for-sale and carried at fair market value based on quoted market
prices at December 27, 1997. Unrealized holding losses at December 27, 1997 of
$105,000, net of a deferred tax benefit of $65,000, were included as a separate
component of stockholders' equity.
INVENTORY
Inventory, consisting of merchandise for sale, is stated at the lower of
cost or market, with cost determined using the first-in, first-out method. The
Company provides for markdown reserves based on expected net realizable market
value.
SELLING EXPENSES
Selling expenses consist primarily of the cost to produce, print and
distribute catalogs. These costs are considered direct-response advertising and
as such are capitalized as incurred and amortized over the expected sales life
of each catalog, which is generally a period not exceeding four months.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation expense is computed
using the straight-line method over the estimated useful lives of the assets,
which are 30 years for buildings and 1-7 years for computers, computer software,
equipment, furniture and fixtures. Improvements to leased premises are amortized
on a straight-line basis over the shorter of the estimated useful life or the
lease term. Maintenance and repairs are charged to expense as incurred. Upon
retirement or sale, the cost of the assets disposed of and the related
accumulated depreciation are removed from the accounts and any resulting gain or
loss is credited or charged to income. Assets under capital leases are recorded
at the present value of future lease payments and are depreciated over the term
of the lease.
The Company accounts for its internal use software in accordance with
American Institute of Certified Public Accountants issued Statement of Position
No. 98-1 ("SOP 98-1"), "ACCOUNTING FOR THE COSTS OF COMPUTER SOFTWARE DEVELOPED
OR OBTAINED FOR INTERNAL USE." SOP 98-1 requires that certain costs related to
the development or purchase of internal-use software be capitalized and
amortized over the estimated useful life of the software. SOP 98-1 also requires
that costs related to the preliminary project stage and the
post-implementation/operations stage of an internal-use computer software
development project be expensed as incurred. The Company has determined the
impact of SOP 98-1 to be immaterial to these consolidated financial statements.
LONG-LIVED ASSETS
Management periodically considers whether there has been a permanent
impairment in the value of its long-lived assets, primarily property and
equipment, by evaluating various factors, including current and projected future
operating results and undiscounted cash flows. Based on this assessment,
management concluded that as of December 26, 1998 and December 27, 1997, the
Company's long-lived assets were not permanently impaired.
25
<PAGE>
DM MANAGEMENT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(continued)
NET INCOME PER SHARE
The Company calculates net income per share ("EPS") in accordance with
Financial Accounting Standards Board issued Statement No. 128 ("SFAS 128"),
"EARNINGS PER SHARE." A reconciliation of the numerators and denominators of the
basic and diluted per share computation for income from continuing operations
follows (in thousands, except per share data). All share and per share
information below has been restated to reflect the effects of the three-for-two
stock split.
<TABLE>
<CAPTION>
Transition Twelve
Period Months
Twelve Months Ended Ended Ended
-------------------------------- ---------- ----------
Dec. 26, Dec. 27, Dec. 28, Dec. 28, June 29,
1998 1997 1996 1996 1996
(52 weeks) (52 weeks) (52 weeks) (26 weeks) (53 weeks)
-------- -------- -------- -------- --------
(unaudited)
<S> <C> <C> <C> <C> <C>
Numerator:
Income from continuing operations ......... $ 8,402 $ 3,899 $12,358 $11,563 $ 235
------- ------- ------- ------- -------
Denominator (shares):
Basic weighted average shares outstanding . 9,483 7,202 6,494 6,547 6,415
Assumed exercise of stock options ......... 895 871 525 558 246
------- ------- ------- ------- -------
Diluted weighted average shares outstanding 10,378 8,073 7,019 7,105 6,661
======= ======= ======= ======= =======
Income from continuing operations per share:
Basic ..................................... $ 0.89 $ 0.54 $ 1.90 $ 1.77 $ 0.04
Diluted ................................... $ 0.81 $ 0.48 $ 1.76 $ 1.63 $ 0.04
</TABLE>
Options to purchase 447,500, 129,000, 306,810, and 153,810 shares of common
stock were outstanding at December 26, 1998, December 27, 1997, December 28,
1996 and June 29, 1996, respectively, but were not included in the computation
of diluted EPS because the options' exercise price was greater than the average
market price of the common shares during the respective periods.
Between December 26, 1998 and March 12, 1999 options to purchase 50,000
shares of the Company's common stock were granted pursuant to the Company's
stock option plans and options to purchase 92,597 shares of common stock were
exercised pursuant to the Company's stock option plans.
COMPREHENSIVE INCOME
The Company calculates comprehensive income in accordance with Financial
Accounting Standards Board issued Statement No. 130 ("SFAS 130"), "REPORTING
COMPREHENSIVE INCOME," which establishes standards for reporting and display of
comprehensive income. The Company's comprehensive income (loss) includes net
income (loss) as reported in the accompanying consolidated statements of
operations plus the change in unrealized losses on marketable securities, net of
deferred tax benefit. Comprehensive income (loss) totaled $8,507,000 in fiscal
1998, $3,909,000 in fiscal 1997, $11,584,000 during the transition period and
($9,435,000) in fiscal 1996. The unrealized loss on marketable securities
represents accumulated other comprehensive income. There was no accumulated
other comprehensive income at December 26, 1998.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company periodically assesses the fair value of its financial
instruments. Based on a detailed analysis, the Company's long-term debt,
including current maturities, approximates fair value.
26
<PAGE>
DM MANAGEMENT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(continued)
CONCENTRATIONS OF CREDIT RISK
Financial instruments, which potentially subject the Company to significant
concentrations of credit risk, consist principally of cash investments. The
Company maintains cash and cash equivalents with various major financial
institutions. The Company performs periodic evaluations of the relative credit
standing of these financial institutions.
RECLASSIFICATIONS
Certain financial statement amounts have been reclassified to be consistent
with the presentation for fiscal 1998.
RECENT ACCOUNTING STANDARDS
The Company reports segment information in accordance with Financial
Accounting Standards Board issued Statement No. 131, "DISCLOSURES ABOUT SEGMENTS
OF AN ENTERPRISE AND RELATED INFORMATION." This statement, which is based on the
management approach to segment reporting establishes new standards for the way
public companies report information about operating segments and requires
companies to report selected segment information quarterly to stockholders. The
Company holds assets and reports sales in one operating segment.
In April 1998 the American Institute of Certified Public Accountants issued
Statement of Position No. 98-5, "REPORTING ON THE COSTS OF START-UP ACTIVITIES,"
which provides guidance on the financial reporting of start-up costs and
organization costs. It requires costs of start-up activities and organization
costs to be expensed as incurred. The Company adopted this statement in fiscal
1998. The adoption of this statement was immaterial to these consolidated
financial statements.
B. DISCONTINUED OPERATIONS:
On May 20, 1996, the Company announced its plan to divest its CARROLL
REED segment due to the incompatibility of the customer base and product line
of this segment with those of its other segment. Accordingly, the CARROLL
REED segment has been accounted for as a discontinued operation, and all
assets, liabilities, results of operations and cash flows associated with the
CARROLL REED segment have been segregated from those associated with
continuing operations. In connection with this divestiture, the Company
recorded a charge of $8,511,000 in fiscal 1996 for the loss on disposal of
discontinued operations, consisting of $5,336,000 related to the write-off of
the remaining unamortized intangible assets and $3,175,000 for expected
losses during the phase-out period. The results of the CARROLL REED
operations through May 20, 1996, including fiscal 1996 net sales through
May 20, 1996 of $12,415,000, have been classified as loss from discontinued
operations in the accompanying consolidated statements of operations. Since
May 20, 1996, the results of this discontinued operation have been charged to
the liability for expected losses established in connection with the
divestiture and have had no impact on the Company's operating results. As of
December 26, 1998, the Company had completed the phase-out of its CARROLL
REED segment and had utilized its reserve for expected losses, including the
recognition of certain tax benefits.
27
<PAGE>
DM MANAGEMENT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(continued)
C. PROPERTY AND EQUIPMENT:
Property and equipment consists of the following (in thousands):
<TABLE>
<CAPTION>
December 26, 1998 December 27, 1997
----------------- -----------------
<S> <C> <C>
Land and building ................................. $ 9,657 $ 9,657
Equipment ......................................... 8,704 4,176
Furniture, fixtures and leasehold improvements .... 1,870 1,684
Construction in progress .......................... 34,124 2,674
-------- --------
Total property and equipment ................. 54,355 18,191
Less accumulated depreciation and amortization .... (6,870) (4,017)
-------- --------
Property and equipment, net .................. $ 47,485 $ 14,174
======== ========
</TABLE>
At December 26, 1998 construction in progress was comprised primarily of
costs of constructing the new operations and fulfillment center in Tilton, New
Hampshire (the "Tilton Facility"). This facility was placed in full operation in
early 1999. Included in construction in progress at December 26, 1998 and
December 27, 1997 was $1,071,000 and $50,000, respectively, of capitalized
interest.
D. DEBT:
The Company's credit facilities at December 26, 1998 consisted of (i) a
$1,650,000 real estate loan (the "Real Estate Loan"); (ii) a $3,600,000 term
loan (the "Term Loan"); (iii) a $9,500,000 equipment loan (the "Equipment
Loan"); (iv) a $15,910,000 revolving line of credit (the "Revolver"); (v) a
$17,000,000 line of credit (the "Line of Credit"); and (vi) a $4,300,000
short-term note (the "Short-Term Note"). The Equipment Loan was collateralized
by substantially all of the Company's materials handling equipment. The
remaining credit facilities were collateralized by substantially all of the
Company's remaining assets. All of these credit facilities contain various
lending conditions and covenants, including restrictions on permitted liens and
required compliance with certain debt coverage ratios.
The Real Estate Loan requires monthly payments, based on a 15-year
amortization, with the balance payable on July 30, 2002. Interest on the Real
Estate Loan is fixed at 6.81% per annum until August 31, 1999, at which time the
Company may select from several interest rate options. The Term Loan requires
quarterly payments through its maturity on June 1, 2002 and provides for several
interest rate options (6.78% per annum at December 26, 1998). The Equipment Loan
requires monthly payments through its maturity on December 1, 2005 with the
interest rate fixed at 7.5% per annum. The Revolver is available for borrowings
and for letters of credit. At December 26, 1998 there were no borrowings
outstanding under the Revolver. At December 26, 1998 the Revolver bore interest
at 7.75% per annum. The outstanding letters of credit do not bear interest. The
Revolver matures on June 1, 1999. The Company is required to pay a commitment
fee of 1/8th of 1% per annum on the unused portion of the Revolver. The Line of
Credit bears interest at LIBOR plus 125 basis points repriced monthly (6.81% per
annum at December 26, 1998), expires on March 31, 1999 and does not require a
commitment fee. There was $17,000,000 outstanding under the Line of Credit at
December 26, 1998. The Short-Term Note bears interest at 7.06% per annum and
matures on March 31, 1999. There was $4,300,000 outstanding under the Short-Term
Note at December 26, 1998.
28
<PAGE>
DM MANAGEMENT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(continued)
A summary of the Company's outstanding long-term debt follows (in
thousands):
<TABLE>
<CAPTION>
December 26, 1998 December 27, 1997
----------------- -----------------
<S> <C> <C>
Real estate loans ............................ $ 1,503 $ 1,613
Term loans ................................... 2,520 7,540
Equipment loans .............................. 7,590 --
Capitalized lease obligations ................ 22 30
------- -------
Total long-term debt .................... 11,635 9,183
Less current maturities ...................... 1,735 837
------- -------
Long-term debt, less current portion .... $ 9,900 $ 8,346
======= =======
</TABLE>
Subsequent to December 26, 1998, the Company obtained long-term financing
for the Tilton facility. In connection with the long-term financing, the Company
contributed the new Tilton facility to Birch Pond Realty Corporation ("Birch
Pond"), a wholly owned subsidiary of the Company, in exchange for all the
outstanding shares of Birch Pond. On March 1, 1999, Birch Pond entered into a
$12,000,000 loan (the "Loan") with a financial institution and granted a
mortgage lien on the Tilton facility to the financial institution. Cash received
from the Loan, cash from the Company's fiscal 1997 public offering and cash from
operations were used to pay off the Short-Term Note and the Line of Credit and
to release the existing mortgage on the Tilton facility.
At December 26, 1998, aggregate maturities of long-term debt for the next
five fiscal years and thereafter were as follows: 1999--$1,735,000;
2000--$1,756,000; 2001--$1,826,000; 2002--$2,599,000; 2003 --$1,148,000; and
thereafter --$2,571,000.
Import letters of credit are for commitments issued through the Company's
bank to guarantee payment of foreign-sourced merchandise within agreed upon time
periods according to the terms of the agreements. Outstanding import letters of
credit totaled approximately $11,612,000 and $3,993,000 at December 26, 1998 and
December 27, 1997, respectively.
E. STOCKHOLDERS' EQUITY:
COMMON STOCK
In fiscal 1997 the Company completed its second offering of common stock to
the public, issuing 1,412,861 shares of common stock at a price to the public of
$13.50 per share. The Company received approximately $17,454,000 in net proceeds
from the offering, after underwriting discounts and commissions and expenses.
Expenses incurred by the Company in connection with the offering totaled
approximately $567,000. Also in connection with this public offering, 1,752,404
shares of the Company's common stock were sold by selling stockholders. The
Company did not receive any of the proceeds from the sale of shares by selling
stockholders. The information in this paragraph has not been restated to reflect
the effects of the three-for-two stock split.
SPECIAL PREFERRED STOCK
The Company has 1,000,000 shares of special preferred stock, $0.01 par
value per share, authorized. No special preferred stock was outstanding at
either of the reported balance sheet dates.
29
<PAGE>
DM MANAGEMENT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(continued)
F. STOCK-BASED PLANS:
At December 26, 1998, the Company had three stock-based plans--the 1988
Incentive Stock Option Plan (the "1988 Stock Option Plan"), the 1993 Incentive
and Nonqualified Stock Option Plan (the "1993 Stock Option Plan") and the 1998
Employee Stock Purchase Plan (the "1998 Stock Purchase Plan"). The Company
applies Accounting Principles Board Opinion No. 25 ("APB 25"), "ACCOUNTING FOR
STOCK ISSUED TO EMPLOYEES," and related interpretations to account for its stock
option plans and employee stock purchase plans. No compensation cost has been
recognized for these plans.
STOCK OPTION PLANS
The 1988 Stock Option Plan provides for the grant of options to purchase
common stock intended to qualify as incentive stock options as defined in
Section 422 of the Internal Revenue Code of 1986, as amended ("ISO's"). During
fiscal 1994, the Board of Directors voted not to issue any additional options
under the 1988 Stock Option Plan. The maximum term of options granted under the
1988 Stock Option Plan is ten years.
The 1993 Stock Option Plan authorizes (i) the grant of options to purchase
common stock intended to qualify as ISO's, and (ii) the grant of options that do
not so qualify. At December 26, 1998, the 1993 Stock Option Plan authorized the
issuance of options to purchase up to 2,400,000 shares of common stock (as
adjusted to reflect the effects of the three-for-two stock split). The
Compensation Committee of the Board of Directors administers the 1993 Stock
Option Plan and within certain limits has discretion to determine the terms and
conditions of options granted under the plan. The 1993 Stock Option Plan also
provides for the automatic grant of options to purchase a specified number of
shares to non-employee directors. The maximum term of options granted under the
1993 Stock Option Plan is ten years.
STOCK PURCHASE PLANS
Under the Company's stock purchase plans, eligible employees may be granted
the opportunity to purchase common stock of the Company at 85% of market value
on the first or last business day of the calendar year, whichever is lower. The
1993 Stock Purchase Plan authorized the issuance of up to 150,000 shares (as
adjusted to reflect the effects of the three-for-two stock split) of the
Company's common stock to eligible employees. Issuances of common stock under
the 1993 Stock Purchase Plan have been made as follows. All share information
below has been restated to reflect the effects of the three-for-two stock split.
<TABLE>
<CAPTION>
Aggregate
Purchase
Shares Price
------ ---------
<S> <C> <C>
December 31, 1997 .......... 45,156 $ 96,000
December 31, 1996 .......... 51,267 58,000
December 30, 1995 .......... 29,078 34,000
Prior Periods .............. 13,702 $ 37,000
</TABLE>
Immediately following the December 31, 1997 issuance, the 1993 Stock
Purchase Plan was terminated.
The 1998 Stock Purchase Plan authorizes the issuance of up to 150,000
shares (as adjusted to reflect the effects of the three-for-two stock split) of
the Company's common stock to eligible employees. A total of 150,000 shares of
common stock were available for issuance under the 1998 Stock Purchase Plan at
December 26, 1998. On December 31, 1998, 23,891 shares of common stock were
issued under the 1998 Stock Purchase Plan at an aggregate purchase price of
$211,000.
30
<PAGE>
DM MANAGEMENT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(continued)
The following table reflects the activity under the 1988 Stock Option Plan
and the 1993 Stock Option Plan. All amounts have been restated to reflect the
effects of the three-for-two stock split:
<TABLE>
<CAPTION>
1988 Stock Option Plan 1993 Stock Option Plan
------------------------------------- ------------------------------------------
Exercise Wtd. Avg. Exercise Wtd. Avg.
Number Price Exercise Number Price Exercise
of Shares Per Share Price of Shares Per Share Price
--------- --------- --------- -------- -------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Balance at June 24, 1995 ........ 734,016 $ 0.11-4.07 $ 1.03 183,000 $ 1.83-10.00 $ 6.84
Granted ..................... -- -- -- 631,500 1.38-3.33 1.93
Exercised ................... (37,275) 0.11-1.11 0.77 -- -- --
Canceled .................... (2,250) 1.11 1.11 (34,500) 2.67-7.25 5.57
------- -------
Balance at June 29, 1996 ........ 694,491 0.11-4.07 1.04 780,000 1.38-10.00 2.92
Granted ..................... -- -- -- 93,750 2.09-2.17 2.13
Exercised ................... (224,695) 0.11-1.11 0.63 (2,727) 1.83 1.83
Canceled .................... (4,245) 1.11 1.11 (37,500) 10.00 10.00
------- -------
Balance at December 28, 1996 .... 465,551 0.11-4.07 1.24 833,523 1.38-10.00 2.51
Granted ..................... -- -- -- 648,750 2.42-10.75 6.31
Exercised ................... (255,702) 0.11-4.07 1.35 (36,098) 1.50 - 3.33 1.81
Canceled .................... (2,250) 1.11 1.11 (11,700) 1.83 - 3.33 2.29
------- -------
Balance at December 27, 1997 .... 207,599 1.11 1.11 1,434,475 1.38-10.75 4.25
Granted ..................... -- -- -- 595,000 10.13-20.83 16.02
Exercised ................... (194,099) 1.11 1.11 (244,475) 1.38 - 10.00 3.69
Canceled .................... -- -- -- (38,250) 2.08 - 7.46 5.51
------- -------
Balance at December 26, 1998 .... 13,500 $ 1.11 $ 1.11 1,746,750 $ 1.38-20.83 $ 8.32
======= =======
</TABLE>
Options exercisable under the 1988 Stock Option Plan and the 1993 Stock
Option Plan were as follows. Amounts as of December 27, 1997 have been restated
to reflect the effects of the three-for-two stock split.
<TABLE>
<CAPTION>
December 26, 1998 December 27, 1997
----------------- -----------------
<S> <C> <C>
1988 Stock Option Plan ....................... 13,500 207,599
1993 Stock Option Plan ....................... 567,099 410,073
------- -------
Total ................................... 580,599 617,672
======= =======
Weighted average exercise price per share .... $ 4.53 $ 2.45
======= =======
</TABLE>
31
<PAGE>
DM MANAGEMENT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(continued)
The following table summarizes information about options outstanding under
the 1988 Stock Option Plan and the 1993 Stock Option Plan at December 26, 1998:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
------------------------------------------------ -------------------------------
Number Wtd. Avg. Wtd. Avg. Number Wtd. Avg.
Range of Exercise Outstanding at Remaining Exercise Exercisable at Exercise
Prices December 26, 1998 Contractual Life Price December 26, 1998 Price
- ------------------------- ----------------- ---------------- --------- ----------------- ---------
<S> <C> <C> <C> <C> <C>
$ 1.11-- 1.50 ...... 310,500 3.3 years $ 1.46 205,875 $ 1.45
1.83-- 2.42 ...... 253,400 4.5 years 2.30 122,975 2.31
2.83-- 3.83 ...... 152,000 4.6 years 3.13 60,000 3.08
5.00-- 7.25 ...... 290,350 5.3 years 6.46 118,300 6.07
7.79-- 10.75 ..... 406,500 6.1 years 10.27 35,949 10.09
14.13-- 20.83 .... 347,500 6.5 years 20.08 37,500 20.83
--------- -------
Total ..... 1,760,250 5.2 years $ 8.26 580,599 $ 4.53
========= =======
</TABLE>
The Company discloses stock-based compensation information in accordance
with Financial Accounting Standards Board issued Statement No. 123 ("SFAS 123"),
"ACCOUNTING FOR STOCK-BASED COMPENSATION," which requires disclosure of pro
forma net income, EPS and other information as if the fair value method of
accounting for stock options and other equity instruments described in SFAS 123
had been adopted. Pro forma disclosures include the effects of all options
granted after December 25, 1994. The effects of applying SFAS 123 in this pro
forma disclosure are not indicative of future amounts. SFAS 123 does not apply
to awards made prior to December 25, 1994. Additional awards in future years are
anticipated.
Had compensation cost for the Company's stock-based plans been based on the
fair value at the grant dates for awards made under these plans consistent with
SFAS 123, the Company's net income (loss) and EPS would have been as follows (in
thousands, except per share data). Prior period EPS amounts have been restated
to reflect the effects of the three-for-two stock split:
<TABLE>
<CAPTION>
Transition Twelve
Period Months
Twelve Months Ended Ended Ended
------------------------------------- ---------- ---------
Dec. 26, Dec. 27, Dec. 28, Dec. 28, June 29,
1998 1997 1996 1996 1996
(52 weeks) (52 weeks) (52 weeks) (26 weeks) (53 weeks)
--------- --------- ---------- ---------- ----------
(unaudited)
<S> <C> <C> <C> <C> <C>
Net income (loss):
As reported ...... $ 8,402 $ 3,899 $ 3,371 $ 11,563 $ (9,350)
Pro forma ........ 7,135 3,478 3,233 11,498 (9,420)
Basic EPS:
As reported ...... 0.89 0.54 0.52 1.77 (1.46)
Pro forma ........ 0.75 0.48 0.50 1.76 (1.47)
Diluted EPS:
As reported ...... 0.81 0.48 0.48 1.63 (1.40)
Pro forma ........ $ 0.69 $ 0.43 $ 0.46 $ 1.62 $ (1.41)
</TABLE>
32
<PAGE>
DM MANAGEMENT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(continued)
The Black-Scholes option-pricing model is used to estimate the fair
value on the date of grant of each option granted after December 25, 1994. The
Black-Scholes model is also used to estimate the fair value of the employees'
purchase rights. In each case, the following assumptions were used for stock
option grants and employee purchase right grants in fiscal 1998:
<TABLE>
<CAPTION>
1993 Stock 1998 Stock
Option Plan Purchase Plan
----------- -------------
<S> <C> <C>
Dividend yield............................................. 0.0% 0.0%
Expected volatility........................................ 75.0% 75.0%
Risk free interest rate.................................... 5.3% 5.7%
Expected lives............................................. 4.5 years 1 year
</TABLE>
The weighted average fair value of stock options granted and the
average fair value of the employee purchase rights granted were as follows. All
prior period amounts have been restated to reflect the effects of the
three-for-two stock split.
<TABLE>
<CAPTION>
Transition Twelve
Period Months
Twelve Months Ended Ended Ended
---------------------------------------- ---------- -------
Dec. 26, Dec. 27, Dec. 28, Dec. 28, June 29,
1998 1997 1996 1996 1996
(52 weeks) (52 weeks) (52 weeks) (26 weeks) (53 weeks)
--------- ---------- ---------- ----------- ----------
(unaudited)
<S> <C> <C> <C> <C> <C>
Fair value of stock options granted........... $ 10.11 $ 3.53 $ 1.17 $ 1.22 $ 1.08
Fair value of employee purchase rights granted $ 4.73 $ 0.91 $ 0.45 $ -- $ 0.45
</TABLE>
G. BENEFIT PLANS:
The Company offers a savings plan (the "Savings Plan") to its employees,
which permits participants to make contributions by salary reduction pursuant to
Section 401(k) of the Internal Revenue Code. At the discretion of the Board of
Directors, the Company may also make contributions dependent on profits each
year for the benefit of all eligible employees under the Savings Plan. Employee
eligibility is based on minimum age and employment requirements. The Company
contributed approximately $200,000, $100,000, $10,000 and $0 to the Savings Plan
for fiscal 1998, fiscal 1997, the transition period and fiscal 1996,
respectively.
H. INCOME TAXES:
The Company accounts for income taxes in accordance with of Financial
Accounting Standards Board issued Statement No. 109 ("SFAS 109"), "ACCOUNTING
FOR INCOME TAXES." Under SFAS 109, deferred tax assets and liabilities are
recognized based on temporary differences between the financial statement and
tax basis of assets and liabilities using enacted tax rates in effect in the
years in which the differences are expected to reverse. SFAS 109 requires
current recognition of net deferred tax assets to the extent that it is more
likely than not that such net assets will be realized. To the extent that the
Company believes that its net deferred tax assets will not be realized, a
valuation allowance must be placed against those assets.
33
<PAGE>
DM MANAGEMENT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(continued)
Significant components of the Company's deferred tax assets and liabilities
are as follows (in thousands):
<TABLE>
<CAPTION>
December 26, 1998 December 27, 1997
----------------- -----------------
<S> <C> <C>
Deferred tax assets:
Net operating losses........................................... $ 4,333 $ 4,787
Inventory...................................................... 4,123 2,593
Reserve for customer returns................................... 3,316 1,743
Discontinued segment........................................... -- 1,947
Property and equipment......................................... 708 229
Other.......................................................... 745 539
----------- --------
Total deferred tax assets................................. 13,225 11,838
----------- --------
Deferred tax liabilities:
Prepaid catalogs............................................... 1,771 1,899
Other.......................................................... -- 165
----------- --------
Total deferred tax liabilities............................ 1,771 2,064
----------- --------
Net deferred tax assets.............................. $ 11,454 $ 9,774
=========== ========
</TABLE>
Prior to December 28, 1996, management believed that the uncertainty
surrounding the realizability of its net deferred tax assets was sufficient to
require a valuation allowance to be placed against the entire balance of those
assets. However, as of December 28, 1996, management determined, based on the
Company's recent profitability trends and anticipated future profitability, that
it was more likely than not that sufficient book and taxable income would be
generated to fully realize the benefit of its net deferred tax assets. This
determination required the Company to remove the valuation allowance and
recognize the deferred tax benefit of $10,598,000 at December 28, 1996 in its
entirety.
At December 26, 1998, the Company had available net operating loss ("NOL")
carryforwards of approximately $12,379,000, of which $7,466,000 expires in 2004,
$2,530,000 expires in 2005 and $2,383,000 expires in 2006.
Section 382 of the Internal Revenue Code of 1986, as amended, restricts a
corporation's ability to use its NOL carryforwards following certain "ownership
changes." The Company determined that such an ownership change occurred as a
result of its initial public offering ("IPO") and accordingly the amount of the
Company's pre-IPO NOL carryforwards available for use in any particular taxable
year is limited to approximately $1.5 million annually. To the extent that the
Company does not utilize the full amount of the annual NOL limit, the unused
amount may be used to offset taxable income in future years. NOL carryforwards
expire 15 years after the tax year in which they arise, and the last of the
Company's current NOL carryforwards will expire in its 2006 tax year.
34
<PAGE>
DM MANAGEMENT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(continued)
The components of the Company's provision (benefit) for income taxes for
continuing operations are as follows (in thousands):
<TABLE>
<CAPTION>
Transition Twelve
Period Months
Twelve Months Ended Ended Ended
---------------------------------------- ---------- --------
Dec. 26, Dec. 27, Dec. 28, Dec. 28, June 29,
1998 1997 1996 1996 1996
(52 weeks) (52 weeks) (52 weeks) (26 weeks) (53 weeks)
---------- ------------ ----------- ----------- ---------
(unaudited)
<S> <C> <C> <C> <C> <C>
Current:
Federal................................ $5,717 $1,379 $ 98 $ 53 $ 8
State.................................. 1,335 750 98 54 18
Deferred:
Federal................................ (1,365) 213 (9,164) (9,164) --
State.................................. (315) 151 (1,434) (1,434) --
------ ------ -------- -------- --------
Provision (benefit) for income taxes........ $5,372 $2,493 $(10,402) $(10,491) $ 26
====== ====== ======== ======== ========
</TABLE>
The difference in income taxes at the U. S. federal statutory rate and the
income tax provision (benefit) reported in the accompanying consolidated
statements of operations is as follows (in thousands):
<TABLE>
<CAPTION>
Transition Twelve
Period Months
Twelve Months Ended Ended Ended
------------------------------------------- --------- -------
Dec. 26, Dec. 27, Dec. 28, Dec. 28, June 29,
1998 1997 1996 1996 1996
(52 weeks) (52 weeks) (52 weeks) (26 weeks) (53 weeks)
--------- ---------- ---------- --------- -------
(unaudited)
<S> <C> <C> <C> <C> <C>
Provision for income taxes at the U.S. federal
statutory rate..........................................$ 4,821 $ 2,173 $ 665 $ 364 $ 89
State taxes, net of federal tax benefits..................... 551 320 88 35 12
Valuation allowance change................................... -- -- (10,598) (10,598) --
Utilization of NOL carryforward.............................. -- -- (557) (275) (75)
Other........................................................ -- -- -- (17) --
-------- -------- --------- --------- --------
Provision (benefit) for income taxes at effective rate.......$ 5,372 $ 2,493 $ (10,402) $ (10,491) $ 26
======== ======== ========= ========= ========
</TABLE>
I. COMMITMENTS:
The Company leases certain of its facilities under noncancellable operating
leases having initial or remaining terms of more than one year. The majority of
these real estate leases require the Company to pay maintenance, insurance and
real estate taxes. Total rent expense, including these costs, amounted to
approximately $1,622,000 in fiscal 1998, $1,052,000 in fiscal 1997, $362,000
during the transition period and $666,000 in fiscal 1996.
At December 26, 1998, future minimum lease payments for operating leases
having a remaining term in excess of one year at such date totaled $19,458,000
and for the next five fiscal years and thereafter were as follows:
1999--$1,733,000; 2000-- $2,061,000; 2001-- $1,944,000; 2002--$1,911,000;
2003--$1,834,000; and thereafter--$9,975,000.
J. RELATED PARTY:
In fiscal 1996 the Company terminated its relationship with Shannon North
America, Limited ("Shannon"), a joint venture between the Company and Aer Rianta
cpt. The Company's investment in Shannon was immaterial. In fiscal 1998 and
fiscal 1997 the Company continued to provide various operational services to
Shannon. Amounts charged to Shannon totaled approximately $86,000 in fiscal
1998, $174,000 in fiscal 1997, $180,000 during the transition period and
$690,000 in fiscal 1996.
35
<PAGE>
DM MANAGEMENT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(continued)
K. QUARTERLY FINANCIAL DATA (UNAUDITED): (in thousands, except per share data)
<TABLE>
<CAPTION>
Fiscal 1998 Quarter Ended
----------------------------------------------------------------------------
March 28, 1998 June 27, 1998 Sept. 26, 1998 Dec. 26, 1998
--------------- -------------- -------------- -------------
<S> <C> <C> <C> <C>
Net sales..............................................$ 44,792 $ 59,359 $ 46,580 $ 67,999
Net income............................................. 1,175 2,973 1,407 2,847
Income per share (basic)............................... 0.13 0.31 0.15 0.30
Income per share (diluted).............................$ 0.11 $ 0.28 $ 0.14 $ 0.28
</TABLE>
<TABLE>
<CAPTION>
Fiscal 1997 Quarter Ended
----------------------------------------------------------------------------
March 29, 1997 June 28, 1997 Sept. 27, 1997 Dec. 27, 1997
-------------- ------------- -------------- -------------
<S> <C> <C> <C> <C>
Net sales..............................................$ 24,543 $ 32,885 $ 31,649 $ 46,456
Net income............................................. 541 1,205 691 1,462
Net income per share (basic)........................... 0.08 0.18 0.10 0.18
Net income per share (diluted).........................$ 0.07 $ 0.16 $ 0.09 $ 0.16
</TABLE>
<TABLE>
<CAPTION>
Transition Period Quarter Ended
----------------------------------------------------------------------------
Sept. 28, 1996 Dec. 28, 1996
-------------- -------------
<S> <C> <C>
Net sales.............................................. $ 20,541 $ 22,783
Net income............................................. 250 11,313
Net income per share (basic)........................... 0.04 1.71
Net income per share (diluted)......................... $ 0.04 $ 1.59
</TABLE>
<TABLE>
<CAPTION>
Fiscal 1996 Quarter Ended
-----------------------------------------------------------------------
Sept. 30, 1995 Dec. 30, 1995 March 30, 1996 June 29, 1996
-------------- ------------- -------------- --------------
<S> <C> <C> <C> <C>
Net sales................................................... $ 22,312 $ 16,955 $ 19,736 $ 21,582
Income (loss) from continuing operations.................... (274) (286) 250 545
Net income (loss)........................................... (667) (491) 264 (8,456)
Income (loss) from continuing operations per share (basic).. (0.04) (0.04) 0.04 0.08
Income (loss) from continuing operations per share (diluted) (0.04) (0.04) 0.04 0.08
Net income (loss) per share (basic)......................... (0.10) (0.08) 0.04 (1.31)
Net income (loss) per share (diluted)....................... $ (0.10) $ (0.08) $ 0.04 $ (1.19)
</TABLE>
On May 29, 1998, the Company announced a three-for-two stock split to be
effected in the form of a stock dividend payable on June 30, 1998 to
shareholders of record on June 12, 1998. All per share information above has
been restated to reflect the effects of the three-for-two stock split.
During the transition period the Company recorded a deferred tax benefit of
$10,598,000 (see Note H).
On May 20, 1996, the Company announced its plan to discontinue the
operations of its CARROLL REED segment and recorded a charge of $8,511,000 for
the loss on disposal of discontinued operations (see Note B).
The sum of the quarterly EPS amounts may not equal the full year amount
since the computations of the weighted average shares outstanding for each
quarter and the full year are made independently.
36
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
DM Management Company:
Our audits of the consolidated financial statements referred to in our
report dated February 5, 1999, except for Note D, as to which the date is March
1, 1999, appearing on page 19 of the 1998 Annual Report to Shareholders of DM
Management Company (which report and consolidated financial statements are
incorporated by reference in this Annual Report on Form 10-K) also included an
audit of the financial statement schedule listed in Item 14(a)(2) of this Form
10-K. In our opinion, this financial statement schedule presents fairly, in all
material respects, the information set forth therein when read in conjunction
with the related consolidated financial statements.
PricewaterhouseCoopers LLP
Boston, Massachusetts
February 5, 1999, except for Note D,
as to which the date is
March 1, 1999
37
<PAGE>
DM MANAGEMENT COMPANY
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
(in thousands)
<TABLE>
<CAPTION>
Balance, Amounts Write-Offs Balance,
Beginning Charged to Against End
Accrued Customer Returns: of Period Net Income Reserve of Period
--------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Year ended December 26, 1998............... $ 4,779 $ 63,838 $ 60,284 $ 8,333
============ ============ ========== ===========
Year ended December 27, 1997............... $ 1,309 $ 40,276 $ 36,806 $ 4,779
============ ============ ========== ===========
Six months ended December 28, 1996......... $ 1,231 $ 11,634 $ 11,556 $ 1,309
============ ============ ========== ===========
Year ended June 29, 1996................... $ 1,191 $ 22,534 $ 22,494 $ 1,231
============ ============ ========== ===========
</TABLE>
38
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
CONSOLIDATED FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information set forth under the captions "Directors and Executive
Officers" and "Section 16(a) Beneficial Ownership Reporting Compliance"
appearing in the Company's definitive Proxy Statement to be delivered to
stockholders in connection with the Annual Meeting of Stockholders to be held on
May 25, 1999, which will be filed with the Securities and Exchange Commission
not later than 120 days after December 26, 1998, is incorporated herein by
reference.
ITEM 11. EXECUTIVE COMPENSATION
The information set forth under the caption "Remuneration of Executive
Officers and Directors" appearing in the Company's definitive Proxy Statement to
be delivered to stockholders in connection with the Annual Meeting of
Stockholders to be held on May 25, 1999, which will be filed with the Securities
and Exchange Commission not later than 120 days after December 26, 1998, is
incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information set forth under the caption "Security Ownership of Certain
Beneficial Owners and Management" appearing in the Company's definitive Proxy
Statement to be delivered to stockholders in connection with the Annual Meeting
of Stockholders to be held on May 25, 1999, which will be filed with the
Securities and Exchange Commission not later than 120 days after December 26,
1998, is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
39
<PAGE>
PART IV
ITEM 14. EXHIBITS, CONSOLIDATED FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K
(1) FINANCIAL STATEMENTS
The financial statements filed as part of this report are listed on the
Index to Consolidated Financial Statements on Page 18.
(2) FINANCIAL STATEMENT SCHEDULE
<TABLE>
<CAPTION>
Index to Consolidated Financial Statement Schedule Page
----
<S> <C>
Report of Independent Accountants 37
Schedule II - Valuation and Qualifying Accounts 38
</TABLE>
(3) EXHIBITS
Exhibits 10.11 through 10.26 include the Company's compensatory plans or
arrangements required to be filed as exhibits pursuant to Item 14(c) of Form
10-K.
CERTIFICATE OF INCORPORATION AND BY-LAWS
3.1 Restated Certificate of Incorporation of the Company (included as Exhibit
4.2 to the Company's Quarterly Report on Form 10-Q for the quarter ended
September 25, 1993, File No. 0-22480, and incorporated herein by
reference)
3.2 By-Laws of the Company, as amended (included as Exhibit 3.2 to the
Company's Current Report on Form 8-K dated January 14, 1997, File No.
0-22480, and incorporated herein by reference)
MATERIAL CONTRACTS
10.1 Lease Agreement dated September 14, 1989, between the Company and Richard
D. Matthews and Richard J. Valentine, Trustees of Bare Cove Realty Trust
established u/d/t dated January 10, 1984, as amended (included as Exhibit
10.13 to the Company's Registration Statement on Form S-1, Registration
No. 33-67512, and incorporated herein by reference)
10.2 Third Amendment to Lease Agreement dated September 14, 1989, between the
Company and Richard D. Matthews and Richard J. Valentine, Trustees of Bare
Cove Realty Trust established u/d/t dated January 10, 1984, as previously
amended (included as Exhibit 10.3 to the Company's Transition Report on
Form 10-K for the transition period from June 30, 1996 to December 28,
1996, File No. 0-22480, and incorporated herein by reference)
10.3 Fourth Amendment to Lease Agreement dated September 14, 1989, between the
Company and Richard D. Matthews and Richard J. Valentine, Trustees of Bare
Cove Realty Trust established u/d/t dated January 10, 1984, as previously
amended (included as Exhibit 10.4 to the Company's Transition Report on
Form 10-K for the transition period from June 30, 1996 to December 28,
1996, File No. 0-22480, and incorporated herein by reference)
10.4 Fifth Amendment to Lease Agreement dated August 27, 1998, between the
Company and Richard D. Matthews and Richard J. Valentine, as Trustees of
Bare Cove Realty Trust established u/d/t dated January 10, 1984, as
amended
10.5 Lease dated August 15, 1997 between the Company and Central NH Realty,
Inc.(included as Exhibit 10.27 to the Company's Registration Statement on
Form S-2 dated September 10, 1997, File No. 0-22480, and incorporated
herein by reference)
10.6 Lease Agreement dated June 11, 1998 between the Company and Reading Outlet
Center Associates D/B/A Mass Realty Company (included as Exhibit 10.2 to
the Company's Quarterly Report on Form 10-Q for the quarter year ended
June 27, 1998, File No. 0-22480, and incorporated herein by reference)
10.7 Lease Agreement dated September 18, 1998, between the Company and National
Fire Protection Association (included as Exhibit 10.1 to the Company's
Quarterly Report on Form 10-Q for the quarter ended September 26, 1998,
File No. 0-22480, and incorporated herein by reference)
10.8 Lease Agreement dated October 5, 1998, between the Company and Chelsea GCA
Realty Partnership, L.P. (included as Exhibit 10.11 to the Company's
Quarterly Report on Form 10-Q for the quarter ended September 26, 1998,
File No. 0-22480, and incorporated herein by reference)
10.9 Lease Agreement dated October 23, 1998, between the Company and Tanger
Properties Limited Partnership (included as Exhibit 10.13 to the Company's
Quarterly Report on Form 10-Q for the quarter ended September 26, 1998,
File No. 0-22480, and incorporated herein by reference)
10.10 Lease dated March 1, 1999 between the Company and Birch Pond Realty
Corporation
40
<PAGE>
10.11 1988 Incentive Stock Option Plan (included as Exhibit 10.17 to the
Company's Registration Statement on Form S-1, Registration No. 33-67512,
and incorporated herein by reference)
10.12 Amended and Restated 1993 Incentive and Nonqualified Stock Option Plan
10.13 1998 Employee Stock Purchase Plan (included as Appendix B to the Company's
definitive Proxy Statement for its annual meeting of stockholders held on
May 28, 1998, File No. 0-22480, and incorporated herein by reference)
10.14 1998 Incentive Compensation Plan (included as Exhibit 10.11 to the
Company's Annual Report on Form 10-K for the fiscal year ended December
27, 1997, File No. 0-22480, and incorporated herein by reference)
10.15 1999 Incentive Compensation Plan
10.16 Employment Letter Agreement dated December 21, 1995, between the Company
and Gordon R. Cooke (included as Exhibit 10.4 to the Company's Quarterly
Report on Form 10-Q for the quarter ended December 30, 1995, File No.
0-22480, and incorporated herein by reference)
10.17 Employment Letter Agreement dated May 7, 1996, between the Company and
John J. Hayes (included as Exhibit 10.12 to the Company's Annual Report on
Form 10-K for the year ended June 29, 1996, File No. 0-22480, and
incorporated herein by reference)
10.18 Employment Letter Agreement between the Company and Kevin E. Burns
(included as Exhibit 10.7 to the Company's Quarterly Report on Form 10-Q
for the quarter ended September 27, 1997, File No. 0-22480, and
incorporated herein by reference)
10.19 Split Dollar Agreement and Assignment of Life Insurance Policy as
Collateral dated October 1, 1998 between the Company and Gordon R. Cooke
(included as Exhibit 10.12 to the Company's Quarterly Report on Form 10-Q
for the quarter ended September 26, 1998, File No. 0-22480, and
incorporated herein by reference)
10.20 Split Dollar Agreement and Assignment of Life Insurance Policy as
Collateral dated February 22, 1999 between the Company and Kevin Burns
10.21 Split Dollar Agreement and Assignment of Life Insurance Policy as
Collateral dated February 24, 1999 between the Company and Olga Conley
10.22 Split Dollar Agreement and Assignment of Life Insurance Policy as
Collateral dated February 24, 1999 between the Company and Gordon Cooke
10.23 Split Dollar Agreement and Assignment of Life Insurance Policy as
Collateral dated February 24, 1999 between the Company and John Hayes
10.24 Split Dollar Agreement and Assignment of Life Insurance Policy as
Collateral dated February 24, 1999 between the Company and Patricia Lee
10.25 Split Dollar Agreement and Assignment of Life Insurance Policy as
Collateral dated February 24, 1999 between the Company and Peter Tulp
10.26 Split Dollar Agreement and Assignment of Life Insurance Policy as
Collateral dated March 3, 1999 between the Company and Jane Dunning
10.27 Merchant Services Agreement between the Company and Hurley State Bank,
dated July 18, 1995 (included as Exhibit 10.21 to the Company's Annual
Report on Form 10-K for the fiscal year ended June 24, 1995, File No.
0-22480, and incorporated herein by reference)
10.28 Construction Agreement dated October 24, 1997 between the Company and
Clayco Construction Company, Inc. (included as Exhibit 10.39 to the
Company's Annual Report on Form 10-K for the fiscal year ended December
27, 1997, File No. 0-22480, and incorporated herein by reference)
10.29 Contract dated April 1, 1998, between the Company and Designed Conveyor
Systems, Inc. (included as Exhibit 10.1 to the Company's Quarterly Report
on Form 10-Q for the quarter ended March 28, 1998, File No. 0-22480, and
incorporated herein by reference)
10.30 Grant of Security Interest in Trademarks dated June 5, 1997 between the
Company and Citizens Bank of Massachusetts (included as Exhibit 10.6 to
the Company's Quarterly Report on Form 10-Q for the quarter ended June 28,
1997, File No. 0-22480, and incorporated herein by reference)
10.31 Account Control Agreement dated June 5, 1997 between the Company, Citizens
Bank of Massachusetts and Fleet National Bank (included as Exhibit 10.7 to
the Company's Quarterly Report on Form 10-Q for the quarter ended June 28,
1997, File No. 0-22480, and incorporated herein by reference)
10.32 Real Estate Note dated July 30, 1997 between the Company and Citizens Bank
of Massachusetts (included as Exhibit 10.8 to the Company's Quarterly
Report on Form 10-Q for the quarter ended June 28, 1997, File No. 0-22480,
and incorporated herein by reference)
10.33 Mortgage dated July 30, 1997 between the Company and Citizens Bank of
Massachusetts (included as Exhibit 10.9 to the Company's Quarterly Report
on Form 10-Q for the quarter ended June 28, 1997, File No. 0-22480, and
incorporated herein by reference)
41
<PAGE>
10.34 Mortgage (Bridge Mortgage) dated October 31, 1997 between the Company and
Citizens Bank of Massachusetts (included as Exhibit 10.3 to the Company's
Quarterly Report on Form 10-Q for the quarter ended September 27, 1997,
File No. 0-22480, and incorporated herein by reference)
10.35 First Amendment to Security Agreement dated October 31, 1997 between the
Company and Citizens Bank of Massachusetts (included as Exhibit 10.4 to
the Company's Quarterly Report on Form 10-Q for the quarter ended
September 27, 1997, File No. 0-22480, and incorporated herein by
reference)
10.36 First Amendment to Mortgage dated October 31, 1997 between the Company and
Citizens Bank of Massachusetts (included as Exhibit 10.5 to the Company's
Quarterly Report on Form 10-Q for the quarter ended September 27, 1997,
File No. 0-22480, and incorporated herein by reference)
10.37 Replacement Revolving Note dated October 31, 1997 between the Company and
Citizens Bank of Massachusetts (included as Exhibit 10.6 to the Company's
Quarterly Report on Form 10-Q for the quarter ended September 27, 1997,
File No. 0-22480, and incorporated herein by reference)
10.38 Second Amended and Restated Loan Agreement dated March 5, 1998 between the
Company and Citizens Bank of Massachusetts (included as Exhibit 10.27 to
the Company's Annual Report on Form 10-K for the fiscal year ended
December 27, 1997, File No. 0-22480, and incorporated herein by reference)
10.39 New Bridge Note dated March 5, 1998 between the Company and Citizens Bank
of Massachusetts (included as Exhibit 10.28 to the Company's Annual Report
on Form 10-K for the fiscal year ended December 27, 1997, File No.
0-22480, and incorporated herein by reference)
10.40 Short Term Revolving Note dated March 5, 1998 between the Company and
Citizens Bank of Massachusetts (included as Exhibit 10.29 to the Company's
Annual Report on Form 10-K for the fiscal year ended December 27, 1997,
File No. 0-22480, and incorporated herein by reference)
10.41 Second Amendment to Security Agreement dated March 5, 1998 between the
Company and Citizens Bank of Massachusetts (included as Exhibit 10.30 to
the Company's Annual Report on Form 10-K for the fiscal year ended
December 27, 1997, File No. 0-22480, and incorporated herein by reference)
10.42 Assignment of Certificate of Deposit dated March 5, 1998 between the
Company and Citizens Bank of Massachusetts (included as Exhibit 10.31 to
the Company's Annual Report on Form 10-K for the fiscal year ended
December 27, 1997, File No. 0-22480, and incorporated herein by reference)
10.43 Amended Bridge Mortgage dated March 5, 1998 between the Company and
Citizens Bank of Massachusetts (included as Exhibit 10.32 to the Company's
Annual Report on Form 10-K for the fiscal year ended December 27, 1997,
File No. 0-22480, and incorporated herein by reference)
10.44 Second Amendment to Mortgage (Meredith) dated March 5, 1998 between the
Company and Citizens Bank of Massachusetts (included as Exhibit 10.33 to
the Company's Annual Report on Form 10-K for the fiscal year ended
December 27, 1997, File No. 0-22480, and incorporated herein by reference)
10.45 First Amendment to Second Amended and Restated Loan Agreement dated June
30, 1998 between the Company and Citizens Bank of Massachusetts (included
as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 27, 1998, File No. 0-22480, and incorporated herein by
reference)
10.46 Second Amendment to Second Amended and Restated Loan Agreement dated
September 4, 1998, between the Company and Citizens Bank of Massachusetts
(included as Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q
for the quarter ended September 26, 1998, File No. 0-22480, and
incorporated herein by reference)
10.47 Third Amendment to Second Amended and Restated Loan Agreement dated
September 4, 1998, between the Company and Citizens Bank of Massachusetts
(included as Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q
for the quarter ended September 26, 1998, File No. 0-22480, and
incorporated herein by reference)
10.48 First Amendment to Assignment of Certificate of Deposit dated September 4,
1998, between the Company and Citizens Bank of Massachusetts (included as
Exhibit 10.4 to the Company's Quarterly Report on Form 10-Q for the
quarter ended September 26, 1998, File No. 0-22480, and incorporated
herein by reference)
10.49 Second Amendment to Bridge Mortgage dated September 4, 1998, between the
Company and Citizens Bank of Massachusetts (included as Exhibit 10.5 to
the Company's Quarterly Report on Form 10-Q for the quarter ended
September 26, 1998, File No. 0-22480, and incorporated herein by
reference)
10.50 Third Amendment to Mortgage (Meredith) dated September 4, 1998, between
the Company and Citizens Bank of Massachusetts (included as Exhibit 10.6
to the Company's Quarterly Report on Form 10-Q for the quarter ended
September 26, 1998, File No. 0-22480, and incorporated herein by
reference)
10.51 Replacement New Bridge Note dated September 4, 1998, between the Company
and Citizens Bank of Massachusetts (included as Exhibit 10.7 to the
Company's Quarterly Report on Form 10-Q for the quarter ended
September 26, 1998, File No. 0-22480, and incorporated herein by
reference)
42
<PAGE>
10.52 Replacement Short Term Revolving Note dated September 4, 1998, between the
Company and Citizens Bank of Massachusetts (included as Exhibit 10.8 to
the Company's Quarterly Report on Form 10-Q for the quarter ended
September 26, 1998, File No. 0-22480, and incorporated herein by
reference)
10.53 Second Replacement Revolving Note dated September 4, 1998, between the
Company and Citizens Bank of Massachusetts (included as Exhibit 10.9 to
the Company's Quarterly Report on Form 10-Q for the quarter ended
September 26, 1998, File No. 0-22480, and incorporated herein by
reference)
10.54 Third Amendment to Security Agreement dated September 4, 1998, between the
Company and Citizens Bank of Massachusetts (included as Exhibit 10.10 to
the Company's Quarterly Report on Form 10-Q for the quarter ended
September 26, 1998, File No. 0-22480, and incorporated herein by
reference)
10.55 Fourth Amendment to Second Amended and Restated Loan Agreement, dated as
of December 31, 1998, by and between the Company and Citizens Bank of
Massachusetts
10.56 Second Amendment to Assignment of Certificate of Deposit, dated as of
December 31, 1998, by and between the Company and Citizens Bank of
Massachusetts
10.57 Second Replacement New Bridge Note, dated as of December 31, 1998, by and
between the Company and Citizens Bank of Massachusetts
10.58 Second Replacement Short Term Revolving Note, dated as of December 31,
1998, by and between the Company and Citizens Bank of Massachusetts
10.59 Master Security Agreement, dated as of December 23, 1998, by and between
the Company and Citizens Leasing Corporation
10.60 Amendment No. 1 to the Master Security Agreement, dated as of December 23,
1998, by and between the Company and Citizens Leasing Corporation
10.61 Secured Promissory Note, dated as of December 23, 1998, by and between the
Company and Citizens Leasing Corporation
10.62 Secured Promissory Note, dated as of December 23, 1998, by and between the
Company and Citizens Leasing Corporation
10.63 Mortgage Note dated March 1, 1999 between Birch Pond Realty Corporation
and John Hancock Real Estate Finance, Inc.
10.64 Assignment of Leases and Rents dated March 1, 1999 between Birch Pond
Realty Corporation and John Hancock Real Estate Finance, Inc.
10.65 Mortgage, Assignment of Leases and Rents and Security Agreement dated
March 1, 1999 between Birch Pond Realty Corporation and John Hancock Real
Estate Finance, Inc.
10.66 Assignment of Agreements, Permits and Contracts dated March 1, 1999
between Birch Pond Realty Corporation and John Hancock Real Estate
Finance, Inc.
10.67 Indemnification Agreement dated March 1, 1999 between the Company, Birch
Pond Realty Corporation and John Hancock Real Estate Finance, Inc.
10.68 Guaranty Agreement dated March 1, 1999 between the Company and John
Hancock Real Estate Finance, Inc.
10.69 Replacement Reserve Agreement dated March 1, 1999 by and between Birch
Pond Realty Corporation and John Hancock Real Estate Finance, Inc.
10.70 Tenant Improvement and Leasing Commissions Agreement dated March 1, 1999
between Birch Pond Realty Corporation and John Hancock Real Estate
Finance, Inc.
10.71 Consent Agreement dated March 1, 1999 between the Company and Citizens
Bank of Massachusetts
CONSENT OF EXPERTS AND COUNSEL
23.1 Consent of PricewaterhouseCoopers LLP dated March 24, 1999
FINANCIAL DATA SCHEDULE
27.1 Financial Data Schedule for the year ended December 26, 1998
(4) REPORTS ON FORM 8-K
There were no reports on Form 8-K filed during the quarter ended
December 26, 1998.
43
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 of 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
DM Management Company
Dated: March 25, 1999 By: /s/ Gordon R. Cooke
---------------------------
Gordon R. Cooke
President, Chief Executive Officer,
Chairman of the Board of Directors and
Director (Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
President, Chief Executive Officer, March 25, 1999
/s/ Gordon R. Cooke Chairman of the Board of Directors and
- -------------------- Director (PRINCIPAL EXECUTIVE OFFICER)
Gordon R. Cooke
/s/ Olga L. Conley Senior Vice President-- Finance, Chief March 25, 1999
-------------------- Financial Officer and Treasurer
Olga L. Conley (PRINCIPAL FINANCIAL OFFICER)
/s/ Peter J. Tulp Vice President Finance, Corporate March 25, 1999
- --------------------- Controller (PRINCIPAL ACCOUNTING OFFICER)
Peter J. Tulp
/s/ William E. Engbers Director March 25, 1999
- ----------------------
William E. Engbers
/s/ Walter J. Levison Director March 25, 1999
- ----------------------
Walter J. Levison
/s/ Thomas J. Litle Director March 25, 1999
- ----------------------
Thomas J. Litle
/s/ Ruth M. Owades Director March 25, 1999
- ----------------------
Ruth M. Owades
/s/ Samuel L. Shanaman Director March 25, 1999
- ----------------------
Samuel L. Shanaman
</TABLE>
44
<PAGE>
DM MANAGEMENT COMPANY
FORM 10-K
FOR THE FISCAL YEAR ENDED DECEMBER 26, 1998
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
No. Description
- ------- -----------
MATERIAL CONTRACTS
<S> <C>
10.4 Fifth Amendment to Lease Agreement dated August 27, 1998, between the
Company and Richard D. Matthews and Richard J. Valentine, as Trustees of
Bare Cove Realty Trust established u/d/t dated January 10, 1984, as amended
10.10 Lease dated March 1, 1999 between the Company and Birch Pond Realty
Corporation
10.12 Amended and Restated 1993 Incentive and Nonqualified Stock Option Plan
10.15 1999 Incentive Compensation Plan
10.20 Split Dollar Agreement and Assignment of Life Insurance Policy as
Collateral dated February 22, 1999 between the Company and Kevin Burns
10.21 Split Dollar Agreement and Assignment of Life Insurance Policy as
Collateral dated February 24, 1999 between the Company and Olga Conley
10.22 Split Dollar Agreement and Assignment of Life Insurance Policy as
Collateral dated February 24, 1999 between the Company and Gordon Cooke
10.23 Split Dollar Agreement and Assignment of Life Insurance Policy as
Collateral dated February 24, 1999 between the Company and John Hayes
10.24 Split Dollar Agreement and Assignment of Life Insurance Policy as
Collateral dated February 24, 1999 between the Company and Patricia Lee
10.25 Split Dollar Agreement and Assignment of Life Insurance Policy as
Collateral dated February 24, 1999 between the Company and Peter Tulp
10.26 Split Dollar Agreement and Assignment of Life Insurance Policy as
Collateral dated March 3, 1999 between the Company and Jane Dunning
10.55 Fourth Amendment to Second Amended and Restated Loan Agreement, dated as
of December 31, 1998, by and between the Company and Citizens Bank of
Massachusetts
10.56 Second Amendment to Assignment of Certificate of Deposit, dated as of
December 31, 1998, by and between the Company and Citizens Bank of
Massachusetts
10.57 Second Replacement New Bridge Note, dated as of December 31, 1998, by and
between the Company and Citizens Bank of Massachusetts
10.58 Second Replacement Short Term Revolving Note, dated as of December 31,
1998, by and between the Company and Citizens Bank of Massachusetts
10.59 Master Security Agreement, dated as of December 23, 1998, by and between
the Company and Citizens Leasing Corporation
10.60 Amendment No. 1 to the Master Security Agreement, dated as of December 23,
1998, by and between the Company and Citizens Leasing Corporation
10.61 Secured Promissory Note, dated as of December 23, 1998, by and between the
Company and Citizens Leasing Corporation
10.62 Secured Promissory Note, dated as of December 23, 1998, by and between
the Company and Citizens Leasing Corporation
10.63 Mortgage Note dated March 1, 1999 between Birch Pond Realty Corporation
and John Hancock Real Estate Finance, Inc.
10.64 Assignment of Leases and Rents dated March 1, 1999 between Birch Pond
Realty Corporation and John Hancock Real Estate Finance, Inc.
10.65 Mortgage, Assignment of Leases and Rents and Security Agreement dated
March 1, 1999 between Birch Pond Realty Corporation and John Hancock Real
Estate Finance, Inc.
</TABLE>
45
<PAGE>
<TABLE>
<S> <C>
10.66 Assignment of Agreements, Permits and Contracts dated March 1, 1999
between Birch Pond Realty Corporation and John Hancock Real Estate Finance,
Inc.
10.67 Indemnification Agreement dated March 1, 1999 between the Company, Birch
Pond Realty Corporation and John Hancock Real Estate Finance, Inc.
10.68 Guaranty Agreement dated March 1, 1999 between the Company and John
Hancock Real Estate Finance, Inc.
10.69 Replacement Reserve Agreement dated March 1, 1999 by and between Birch
Pond Realty Corporation and John Hancock Real Estate Finance, Inc.
10.70 Tenant Improvement and Leasing Commissions Agreement dated March 1, 1999
between Birch Pond Realty Corporation and John Hancock Real Estate Finance,
Inc.
10.71 Consent Agreement dated March 1, 1999 between the Company and Citizens
Bank of Massachusetts
CONSENT OF EXPERTS AND COUNSEL
23.1 Consent of PricewaterhouseCoopers LLP dated March 24, 1999
FINANCIAL DATA SCHEDULE
27.1 Financial Data Schedule for the year ended December 26, 1998
</TABLE>
46
<PAGE>
Exhibit 10.4
FIFTH AMENDMENT TO LEASE
Reference is made to certain lease dated September 14, 1989, as amended
by Amendment to Lease dated December 5, 1991, as further amended by Second
Amendment to Lease dated December 16, 1992, as further amended by Third
Amendment to Lease dated February 28, 1994 as further amended by Fourth
Amendment to Lease dated December 18, 1995 (collectively, "Lease") between
D.M. MANAGEMENT COMPANY, INC., a Delaware corporation ("Tenant"), and Richard
D. Matthews and Richard J. Valentine, as Trustees of Bare Cove Realty Trust
u/d/t dated January 10, 1984 recorded in the Plymouth County Registry of
Deeds in Book 5608, Page 292 as amended to date ("Landlord") for office space
on the first and second floor of Bare Cove Executive Park II, 25 Recreation
Park Drive, Hingham, Massachusetts.
AGREEMENT
In consideration of the mutual benefits and obligations described in this
Fourth Amendment, and for other good and valuable consideration, Landlord and
Tenant agree to amend the Lease as follows:
1. Section 1 of the Lease is amended, as of the Fifth Amendment
Commencement Date (defined below), so that the demised premises will include
an additional 1,935 square feet of floor area (the "Fifth Amendment
Additional Space"), thus bringing the total floor area to 21,577 square feet
as shown on the attached Fifth Amendment Exhibit A. Section 1 is further
amended so that "the computation square footage" will include an additional
2,163 square feet, thus bringing the total computation square footage to
25,882 square feet.
2. Tenant agrees to accept the Fifth Amendment Additional Space in
substantially its present "as is" condition.
<PAGE>
3. Section 3.1 of the Lease is amended so that the term of the Lease
with respect to the Fifth Amendment Additional Space only is five years from
the Fifth Amendment Commencement Date.
4. Exhibit C to the Lease is amended by adding, with respect to the
Fifth Amendment Additional Space only, the minimum rent schedule as follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------
MONTHLY
MINIMUM RENT PER ANNUAL MINIMUM
PERIOD COMPUTATION SQUARE FOOT MINIMUM RENT RENT
- ----------------------------------------------------------------------------------
<S> <C> <C> <C>
Entire Term $19.50 for Fifth $42,178.50 $3,514.88
Amendment Additional
Space (2,163)
- -----------------------------------------------------------------------------------
</TABLE>
5. With respect only to the Fifth Amendment Additional Space, the Tax
Excess referred to in Section 6.1 of the Lease shall be based on $3,244.50,
(being the product of $1.50 and the Fifth Amendment Additional Space
Computation Square Footage)
6. With respect only to the Fifth Amendment Additional Space, the
Operating Excess referred to in Section 8.3 of the Lease shall be based on
$8,652.00 (being the product of $4.00 and the Fifth Amendment Additional
Space Computation Square Footage)
7. Tenant acknowledges that the Fifth Amendment Additional Space
currently is occupied by the Rheinner Group, Inc. under a lease that is
scheduled to expire on December 31, 1998. Tenant agrees to accept the Fifth
Amendment Additional Space earlier if for any reason The Rheinner Group
vacates earlier. The Fifth Amendment Commencement Date shall be January 1,
1999, or, if earlier, 30 days after notice from Landlord that the Fifth
Amendment Additional Space is available to Tenant. (If Landlord is unable to
give possession on January 1, 1999, for any reason, Landlord shall not have
any liability whatsoever for the failure to give possession on such date, nor
shall such failure in any way
<PAGE>
affect the validity of this Fifth Amendment or the obligations of Tenant
hereunder. However, rent attributable to the Fifth Amendment Additional Space
shall be abated for any period during which Landlord shall be unable to
deliver possession.
Except as specifically amended by this Fifth Amendment, all provisions of
the Lease are hereby ratified by Landlord and Tenant and remain in full force
and effect.
Executed as a document under seal on 27th August, 1998.
-----------
/s/ RICHARD D. MATTHEWS
------------------------------
Richard D. Matthews, as Trustee
of Bare Cove Realty Trust, and
not individually
/s/ RICHARD J. VALENTINE
-------------------------------
Richard J. Valentine, as
Trustee of Bare Cove Realty
Trust, and not individually
D.M. MANAGEMENT COMPANY, INC.
By: /s/ OLGA L. CONLEY
-------------------------
Its: Chief Financial Officer
-------------------------
hereunto duly authorized
<PAGE>
FIFTH AMENDMENT EXHIBIT "A"
See attached floor plan. (ommitted)
<PAGE>
ADDENDUM TO FIFTH AMENDMENT TO LEASE:
- ------------------------------------
With reference to item #2 in the Agreement, DM Management will have the
opportunity to tour and review the condition of the "Fifth Amendment
Additional Space" prior to taking occupancy to ensure that the space is in
"substantially" the same condition as it was during the DM Management
walk-through on August 14, 1998. If it is determined that the space is not in
"substantially" the same condition, Landlord agrees to perform, at its sole
cost, any and all repairs to restore the space to its 8/14/98 condition.
ACCEPTED AND AGREED TO: /s/ RICHARD B. MATTHEWS 8/27/98
----------------------- --------
Bare Cove Realty Trust Date
/s/ OLGA L. CONLEY 8/24/98
----------------------- --------
DM Management Company, Inc. Date
<PAGE>
Exhibit 10.10
INDEX
<TABLE>
<CAPTION>
SECTION/CAPTION PAGE
<S> <C> <C>
1. PROPERTY; Term of Lease...................................................1
1. Leased Property...................................................1
2. Hold Over ........................................................1
3. Definitions.......................................................2
2. BASIC RENT ................................................................2
1. Term..............................................................2
2. Time of Payment...................................................2
3. Manner of Payment of Rent; Absolutely Net ........................2
4. Additional Rent...................................................3
5. No Termination, Abatement, etc. ..................................3
3. CONDITION OF PROPERTY......................................................4
4. USE OF PROPERTY............................................................4
5. MAINTENANCE AND REPAIRS....................................................5
1. By Tenant.........................................................5
2. By Landlord.......................................................5
6. ALTERATIONS, ADDITIONS AND REPLACEMENTS....................................6
7. TENANT'S EQUIPMENT.........................................................6
8. UTILITY SERVICES...........................................................7
9. NO CLAIMS AGAINST LANDLORD, ETC............................................7
10. INDEMNIFICATION BY TENANT..................................................8
11. INSPECTION.................................................................8
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
12. PAYMENT OF IMPOSITIONS, ETC................................................9
13. COMPLIANCE WITH LEGAL AND INSURANCE REQUIREMENTS, INSTRUMENTS, ETC........10
14. LIENS, ETC................................................................10
15. PERMITTED CONTESTS........................................................11
16. INSURANCE.................................................................11
1. Risks to be Insured..............................................11
1. All Risk Insurance......................................11
2. Comprehensive Liability.................................12
3. Workmen's Compensation..................................12
4. Other Insurance.........................................12
2. Policy provisions................................................13
3. Subrogation......................................................13
4. Delivery of Policies; Insurance Certificate......................13
5. Adjustment ......................................................14
17. DAMAGE TO OR DESTRUCTION OF PROPERTY......................................14
1. Tenant to Give Notice ...........................................14
2. Restoration......................................................14
3. Insurance of Tenant's Equipment..................................15
18. TAKING OF PROPERTY........................................................15
1. Tenant to Give Notice............................................15
2. Taking Restoration...............................................15
3. Total Taking.....................................................16
4. Separate Award...................................................17
</TABLE>
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19. EVENTS OF DEFAULT; TERMINATION; LANDLORD'S REMEDIES.......................17
1. Events of Default and Termination................................17
2. Remedies of Landlord.............................................19
3. Reletting of Property............................................20
4. Landlord's Right to Cure.........................................20
5. Waiver of Redemption.............................................21
20. ESTOPPEL CERTIFICATES.....................................................21
1. By Tenant........................................................21
2. By Landlord......................................................22
21. NO WAIVER, ETC............................................................22
22. REMEDIES, ETC., CUMULATIVE................................................22
23. ACCEPTANCE OF SURRENDER...................................................23
24. CONVEYANCE BY LANDLORD....................................................23
25. ASSIGNMENT; SUBLEASE......................................................23
26. LIMITATION OF LIABILITY...................................................23
27. NOTICE TO MORTGAGEE.......................................................24
28. ASSIGNMENT OF RENTS.......................................................24
29. SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT.............................25
1. By Tenant........................................................25
2. By Landlord......................................................25
30. END OF TERM...............................................................26
31. QUIET ENJOYMENT...........................................................26
32. NOTICE OF LEASE...........................................................26
33. NO BROKER REPRESENTATION..................................................26
</TABLE>
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34. CERTAIN DEFINITIONS.......................................................27
35. NOTICES, ETC..............................................................30
36. ENVIRONMENTAL MATTERS.....................................................30
1. Hazardous Material ..............................................30
2. Environmental Indemnification ...................................32
1. Assumption of Defense ..................................32
2. Defense by Indemnified Party ...........................32
3. Notice of Environmental Losses .........................33
4. Rights Cumulative ......................................34
5. Survival of the Indemnity ..............................34
37. FORCE MAJEURE ............................................................34
38. GOVERNING LAW ............................................................34
39. MISCELLANEOUS ............................................................34
</TABLE>
EXHIBIT A: Property Description
<PAGE>
EXECUTION COPY
LEASE
LEASE dated as of March 1, 1999 between Birch Pond Realty Corporation,
a Delaware corporation with an address at 25 Recreation Park Drive, Hingham, MA
02043 (the "Landlord"), and DM Management Company, a Delaware corporation, doing
business as BPRC in the State of New Hampshire, with an address at 25 Recreation
Park Drive, Hingham, MA 02043 (the "Tenant").
l. LEASED PROPERTY; TERM OF LEASE
1.1. LEASED PROPERTY; LEASE TERM
Upon and subject to the conditions and limitations set forth below,
Landlord leases to Tenant, and Tenant rents from Landlord, for a term of
eighteen (18) years (herein sometimes referred to as the "Term") commencing on
the date hereof (the "Commencement Date") and expiring at midnight on the day
prior to the eighteenth (18th) anniversary of the Commencement Date, the land
and all rights appurtenant thereto (the "Land") described in Exhibit A hereto
and the buildings and other improvements now or hereafter erected thereon (the
"Improvements"; the Land and the Improvements being hereinafter collectively
referred to as the "Property"); subject, however, to (a) real estate taxes for
the current and subsequent years, not yet due and payable; (b) any facts an
accurate survey or personal inspection of the Property would disclose; (c)
present and future building restrictions and zoning and environmental laws and
other applicable laws; and (d) all easements, restrictions, encumbrances and
other matters of record.
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1.2. HOLD OVER. If Tenant should hold over after the end of the term,
the term of this Lease shall continue on a month-to-month basis until terminated
by either party by not less than thirty (30) days' prior written notice to the
other. All of the terms and provisions of this Lease in effect immediately prior
to such holdover shall be applicable during any holdover period and for any
further time following the end of the term hereof during which Tenant continues
to use or occupy the Property.
l.4. DEFINITIONS. Unless otherwise defined herein, capitalized words
and phrases used in this Lease shall have the meanings set forth in Section 34
hereof.
2. BASIC RENT.
2.1. TERM. During the Initial Term, Tenant shall pay to Landlord
annual basic rent of $1,990,746.00.
2.2. TIME OF PAYMENT. The Basic Rent shall be payable, in advance, in
equal monthly installments of $165,895.00 .on the first day of each month during
the Term. Basic Rent for any period of less than a full calendar month included
in the Term shall be prorated on a per diem basis. Basic Rent for the month in
which the Term commences shall be payable on the date of execution of this Lease
by Tenant.
2.3. MANNER OF PAYMENT OF RENT. The Basic Rent and other sums payable
to Landlord hereunder shall be paid to Landlord at Landlord's address set forth
in Section 35 hereof or to such agent or person or persons or at such other
address as Landlord from time to time may designate as provided herein. Basic
Rent shall be absolutely net to Landlord so that this Lease shall yield to
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Landlord the full amount of the installments of Basic Rent throughout the term
of this Lease without abatement, deduction, or offset, except as otherwise
provided herein.
2.4. ADDITIONAL RENT. Tenant shall also pay, from time to time as
provided in this Lease, as additional rent ("Additional Rent") all other
amounts, liabilities and obligations which Tenant herein assumes or agrees to
pay. In the event of any failure on the part of Tenant to pay any Additional
Rent, Landlord shall have all the rights, powers and remedies provided for in
this Lease or at law, in equity, or otherwise in the case of non-payment of
Basic Rent.
2.5. NO TERMINATION, ABATEMENT, ETC. Except as otherwise specifically
provided herein, this Lease shall not terminate, nor shall Tenant be entitled to
any abatement, deduction, deferment or reduction of rent, or set-off against the
rent, nor shall the respective obligations of Landlord and Tenant be otherwise
affected, by reason of damage to or destruction of the Property from whatever
cause, any Taking or Takings, the lawful or unlawful prohibition of Tenant's use
of the Property, the interference with such use by any private person,
corporation or other entity, or by reason of any eviction by paramount title, or
by reason of Tenant's acquisition of the Property (otherwise than pursuant to an
express provision of this Lease), or by any claim which Tenant has or might have
against the Landlord, or by reason of any default or breach of any warranty by
Landlord under this Lease or any other agreement between Landlord and Tenant or
to which Landlord and Tenant are parties, or for any other cause whether similar
or dissimilar to the foregoing, any present or future law to the contrary
notwithstanding; it being the intention that the obligations of Landlord and
Tenant hereunder shall be separate and independent covenants and agreements and
that the Basic Rent and Additional Rent and all other sums payable by Tenant
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hereunder shall continue to be payable in all events unless the obligations to
pay the same shall be terminated pursuant to the express provisions of this
Lease; and Tenant covenants and agrees that it will remain obligated under this
Lease in accordance with its terms, and that it will not take any action to
terminate, rescind or avoid this Lease, notwithstanding the bankruptcy,
insolvency, incapacity, death or other proceedings affecting Landlord or any
assignee of Landlord, and notwithstanding any action with respect to this Lease
that may be taken by a trustee or receiver of Landlord or any assignee of
Landlord or by any court in any such proceeding.
3. CONDITION OF PROPERTY
Tenant is fully familiar with the physical condition of the Property.
Landlord makes no representation or warranty with respect to the condition of
the Property or its fitness or availability for any particular use, and Landlord
shall not be liable for any latent or patent defect therein and has received the
same in good order and condition, and agrees that the Property complies in all
respects with the requirements of this Lease. Tenant acknowledges that Landlord
shall not be required to make any repairs, alterations or improvements to the
Property except as otherwise expressly provided herein.
4. USE OF PROPERTY
The Property shall not be used for any purpose other than for office,
warehouse and distribution purposes and as otherwise permitted as of right under
applicable zoning laws and any purposes incidental to the foregoing without the
prior written consent of Landlord, which consent shall not be unreasonably
withheld or delayed. Tenant will not do or permit any act or thing which is
contrary to any Legal Requirement or Insurance Requirement (unless, in the case
of an
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Insurance Requirement, (x) such act or thing would be permitted upon
payment of a higher insurance premium, (y) such higher premium has been paid by
Tenant and (z) such act or thing becomes, upon such payment, so permitted), or
which constitutes a public or private nuisance or waste.
5. MAINTENANCE AND REPAIRS
5.1. BY TENANT. During the Term, Tenant shall, at Tenant's sole cost
and expense, keep and maintain the Property in the same condition as on the
Commencement Date, or as it may be put in thereafter, reasonable wear and tear
excepted, and shall further keep and maintain all portions of the Property, and
all sidewalks and curbs located upon or appurtenant or adjacent to the Property,
in a clean and orderly condition, free of snow and ice, accumulation of dirt,
rubbish and debris. Tenant shall not commit or suffer to be committed any waste
upon or about the Property, and shall promptly at its cost and expense make all
required replacements, restorations, renewals and repairs to the Property, and
appurtenances thereto, whether interior or exterior, structural or
non-structural, ordinary or extraordinary, foreseen as well as unforeseen,
necessary to keep the Property in the foregoing order and condition, and such
repairs, replacements, restorations and renewals shall, to the maximum extent
possible, be equivalent in quality to the quality of the original work or the
property replaced, as the case may be. Tenant shall undertake preventive
maintenance as well, and a reasonable policy of inspection to ascertain the need
for repairs and replacements shall be adhered to by Tenant throughout the entire
term of this Lease.
5.2. BY LANDLORD. Landlord shall have absolutely no liability or
obligation whatsoever to build any further improvements on the Property, or to
make any repairs, replacements, alterations,
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restorations or renewals of any nature or description to the Property, whether
interior or exterior, ordinary or extraordinary, structural or non-structural,
foreseen or unforseen, or to make any expenditure whatsoever in connection with
this Lease or to inspect or maintain the Property.
6. ALTERATIONS, ADDITIONS AND REPLACEMENTS.
So long as no Event of Default shall have occurred and be continuing,
Tenant shall have the right, at any time and from time to time after providing
Landlord with written notice, to make or cause to be made reasonable alterations
of and additions to the Property or any part thereof, provided that any
alteration or addition (a) shall not change the general character of the
Property or reduce the fair market value thereof below its value immediately
before such alteration or addition or impair the usefulness of the Property, (b)
is effected with due diligence, in a good and workmanlike manner and in
compliance with all Legal Requirements and Insurance Requirements, (c) is
promptly and fully paid for, or caused to be paid for, by Tenant, (d) is
estimated to cost not more than $600,000, and (e) is made under the supervision
of a qualified architect or engineer. Upon completion of such alteration or
addition, Tenant shall provide Landlord with (i) a satisfactory final
improvement survey if the footprint of the building has been altered, (ii) any
final occupancy permit which may be required for the Improvements, (iii) all
other governmental permits, certificates and approvals and all other permits,
certificates and approvals of fire underwriters, which are required with respect
to the alterations and (iv) final lien waivers from all contractors,
subcontractors and materialmen.
7. TENANT'S EQUIPMENT
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All Tenant's Equipment shall be and remain the property of Tenant and
Tenant shall have the right to remove Tenant's Equipment at any time, provided
that Tenant shall repair any damage caused by such removal. In the event that
Tenant fails to remove Tenant's Equipment on or before the expiration or other
termination of this Lease, such Tenant's Equipment shall be deemed to have been
abandoned and Landlord shall have the right at Landlord's option to retain or
remove such Tenant's Equipment.
8. UTILITY SERVICES
Tenant will pay or cause to be paid all charges for all public or
private utility services and all sprinkler systems and protective services at
any time rendered to or in connection with the Property or any part thereof,
will comply with all contracts relating to any such services, and will do all
other things required for the maintenance and continuance of all such services.
9. NO CLAIMS AGAINST LANDLORD, ETC.
Nothing contained in this Lease shall constitute any consent or request
by Landlord, express or implied, for the performance of any labor or services or
for the furnishing of any materials or other property in respect of the Property
or any part thereof, nor as giving Tenant any right, power or authority to
contract for or permit the performance of any labor or services or the
furnishing of any materials or other property in such fashion as would permit
the making of any claim against Landlord in respect thereof. None of the
agreements herein contained are intended, nor shall the same be construed, to
create a partnership between Landlord and Tenant, to make them joint venturers,
or to make either party in any way responsible for the business, debts or losses
of the other party.
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10. INDEMNIFICATION BY TENANT
Tenant will protect and indemnify Landlord and save Landlord harmless
from and against all liabilities, obligations, claims, damages, penalties,
causes of action, costs and expenses (including, without limitation, reasonable
attorneys' fees and expenses) imposed upon or incurred by or asserted against
Landlord by reason of (a) any accident, injury to or death of persons or loss of
or damage to property occurring on or about the Property or any part thereof, or
(b) any use, non-use or condition of the Property or any part thereof, except,
in the case of (a) or (b) above, if arising from the gross negligence or willful
misconduct of Landlord or its agents or employees, or (c) any failure on the
part of Tenant to perform or comply with any of the terms of this Lease, or (d)
any breach of any representation or warranty of Tenant contained herein or
incorporated herein by reference, or (e) performance of any labor or services or
the furnishing of any materials or other property in respect of the Property or
any part thereof, except if the same has been provided, performed or furnished
at the express request of Landlord. The obligations of Tenant under this section
shall survive the termination of this Lease. In case any action, suit or
proceeding is brought against Landlord by reason of any such occurrence, Tenant,
upon Landlord's request, will at Tenant's expense resist and defend such action,
suit or proceeding, or cause the same to be resisted and defended by counsel
designated by Tenant and reasonably approved by Landlord.
11. INSPECTION.
Landlord and its authorized representatives may, upon reasonable
advance oral or written notice (except in the event of emergencies when no prior
notice shall be required), enter the
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Property or any part thereof at all reasonable times upon reasonable notice for
the purpose of inspecting the same, making the alterations and repairs, if any,
required to be made by it hereunder or as may reasonably be deemed necessary by
Landlord, exhibiting the same to prospective mortgagees and purchasers, and,
during the last six (6) months of the Term, exhibiting the same to prospective
tenants. Landlord shall not have any duty to make any such inspection or do any
such work nor shall it incur any liability or obligation for not making any such
inspection or doing any such work.
12. PAYMENT OF IMPOSITIONS, ETC.
Except as provided in Section 15 relating to contests, Tenant will pay
all Impositions when due, before any fine, penalty, interest or cost may be
added for non-payment, and will furnish to Landlord, upon request, official
receipts or other reasonably satisfactory proof evidencing such payments. To the
extent that the same may be permitted by law, Tenant shall have the right to
apply for the conversion of any betterment assessment during the Term in order
to cause the same to be payable in annual installments during the useful life of
such improvements and upon such conversion Tenant shall pay and discharge
punctually said installments as they shall become due and payable during the
Term. Landlord agrees to permit the application for the foregoing conversion to
be filed in Landlord's name, if necessary, and shall execute any and all
documents requested by Tenant which are necessary to accomplish the foregoing
result. In the event that the foregoing conversion is not permitted under law,
and the useful life of any improvements made during the Term extends beyond the
Term, any betterment assessment therefor shall be equitably apportioned between
Landlord and Tenant.
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13. COMPLIANCE WITH LEGAL AND INSURANCE REQUIREMENTS, INSTRUMENTS, ETC.
Except in provided in Section 15 relating to contests, Tenant at its
expense will promptly (a) comply with all Legal Requirements and Insurance
Requirements, whether or not compliance therewith shall require structural
changes in the Improvements or interfere with the use and enjoyment of the
Property or any part thereof, (b) procure, maintain and comply with all permits,
licenses and other authorizations required for any use of the Property or any
part thereof then being made, and for the proper erection, installation,
operation and maintenance of the Improvements and Tenant's Equipment or any part
thereof, and (c) comply with any instruments of record at the time in force
affecting the Property or any part thereof.
14. LIENS, ETC.
Tenant will not directly or indirectly create or permit to be created
or to remain, and will discharge any lien, encumbrance or charge on, pledge of,
or conditional sale or other title retention agreement with respect to the
Property or any part thereof, Tenant's interest therein, or the Basic Rent,
Additional Rent or any other sum payable under this Lease, other than (a) this
Lease and any assignment hereof or sublease hereunder permitted by the terms
hereof, and (b) liens for Impositions not yet payable, or payable without the
addition of any fine, penalty, interest or cost for non-payment, or being
contested as permitted by Section 15; provided, however, that nothing herein is
intended to impose upon Tenant the duty to discharge any lien, encumbrance or
charge created by Landlord with respect to the Property.
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15. PERMITTED CONTESTS
Tenant, at its expense, upon prior notice to Landlord, and, if legally
required, in the name of Landlord, may contest by appropriate legal proceedings
conducted in good faith and with due diligence, the amount or validity or
application, in whole or in part, of any Imposition or lien therefor or any
Legal Requirement or the application of any instrument of record referred to in
Section 13, provided that (a) in the case of any such contest, the prosecution
of such proceedings shall suspend the collection thereof from Landlord or the
Property, (b) neither the Property nor any part thereof or interest therein or
Basic or Additional Rent would be in any immediate danger of being sold,
forfeited or lost, (c) in the case of a Legal Requirement, Landlord would not be
in any danger of any additional civil or any criminal liability for failure to
comply therewith and the Property would not be subject to the immediate
imposition of any lien as a result of such failure, and (d) Tenant shall have
furnished such security, if any, as may be required in the proceedings and/or
reasonably requested by Landlord. Landlord, at the expense of Tenant, will
cooperate with Tenant and execute any documents or pleadings reasonably required
for any such contest, provided that any such cooperation or execution will not
impose any obligation on Landlord.
16. INSURANCE
16.l. RISKS TO BE INSURED. Tenant, at its expense, will maintain or
cause to be maintained with insurers reasonably satisfactory, from time to time,
to Landlord:
16.1.1. All-Risk insurance, without exclusion for vandalism,
flood, water damage, collapse, earthquake, debris removal and demolition, in an
amount at least equal to one hundred (100%) percent of the replacement cost of
the Improvements, as such replacement cost may from
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time to time be determined by agreement of the parties or if the parties cannot
agree, by an accredited insurance appraiser selected by Tenant and approved by
Landlord (the expense of such appraisal shall be shared equally by the
parties)with endorsements for contingent liability from operation of building
laws, increased cost of construction and demolition costs which may be necessary
to comply with building laws, but in any event such insurance shall include an
agreed amount endorsement and in no event shall the amount of such insurance be
less than the amount necessary to avoid coinsurance. Any deductible applicable
to such insurance shall not exceed $10,000 (or such other amount as Landlord and
Tenant may agree upon in writing from time to time).
16.1.2. Comprehensive liability insurance insuring Landlord
and Tenant against all claims and demands for any injury to person or property,
and for death to persons resulting from such injuries, which may be claimed to
have occurred on or about the Property or any part thereof, or on the sidewalk
or ways adjoining the Property or any part thereof, in a combined single limit
of not less than Ten Million ($10,000,000) Dollars.
16.1.3. Appropriate workmen's compensation insurance in
respect of any work on or about the Property.
16.1.4. Insurance in such other amounts, against such other
hazards, in such forms and with such companies as may from time to time be
reasonably required by Landlord or as may be customarily required by any
bank, insurance company or other lending institution holding a mortgage on
the Property or any part thereof.
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16.2. POLICY PROVISIONS. All insurance maintained by Tenant pursuant to
section 16.l shall: (a) except for workmen's compensation insurance, name
Landlord and Tenant and the Landlord's mortgagees as mortgagee, loss payee and
additional insured, as their respective interests may appear, (b) provide that
all insurance proceeds shall be adjusted by Tenant, except as otherwise
expressly provided in this Section 17, and, except in the case of public
liability, workmen's compensation insurance and insurance with respect to
Tenant's Equipment, be payable to Landlord, or any such mortgagee on behalf of
Landlord, as their respective interests may appear, (c) provide to the extent
that such provision is available, regardless of premium, that any losses shall
be payable notwithstanding any act or negligence of Landlord or Tenant, (d)
provide, to the extent that such provision is available, regardless of premium,
that no cancellation thereof shall be effective until at least ten (10)) days
after receipt by Landlord and any such mortgagee of written notice thereof, and
(e) be reasonably satisfactory to Landlord in all other respects.
16.3. SUBROGATION. Landlord and Tenant shall, when it can be arranged
without affecting such party's right to settle losses and receive proceeds,
cause the insurance maintained or caused to be maintained by each such party to
be written so that the insurer will not have rights of subrogation against the
other party. Landlord and Tenant hereby waive any right of recovery against the
other for loss or injury to the extent the waiving party is protected by
insurance so written.
16.4. DELIVERY OF POLICIES; INSURANCE CERTIFICATE. Tenant shall deliver
to Landlord with this Lease a certificate evidencing the insurance required by
this subsection and any additional insurance which shall be taken out on the
Property. Tenant shall deliver to Landlord certificates
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from the applicable insurer or its authorized agent of renewals or replacements
of all such policies of insurance at least five (5) days before any such
insurance shall expire and provide a true and certified copy of the property
policy once issued by the insurer.
16.5. ADJUSTMENT. In the event any of the Property is destroyed or
damaged by any casualty insured against hereunder (i) Landlord may, but shall
not be obligated to, make proof of loss if not made promptly by Tenant and (ii)
each insurance company concerned is hereby authorized and directed to make
payment for such loss directly to Landlord for application as required by
Section 17 hereof.
17. DAMAGE TO OR DESTRUCTION OF PROPERTY
17.1. TENANT TO GIVE NOTICE. In case of any material damage to or
destruction of the Property or any part thereof by fire or other casualty,
Tenant will promptly give written notice thereof to Landlord, generally
describing the nature and extent of such damage or destruction.
17.2. CASUALTY RESTORATION. In case of any damage to or destruction of
the Property or any part thereof by fire or other casualty, Landlord shall
promptly make the proceeds of the insurance carried by Tenant pursuant to
Section 16.1.1 available to Tenant, in accordance with the provisions of
Sections 3(d) and (e) of the Mortgage, and Tenant shall promptly and with
diligence, subject to the then applicable statutes, building codes, zoning
ordinances, and regulations of any governmental authority, proceed with the
repair, alteration, restoration , replacement or rebuilding ( such repair,
alteration, restoration, replacement and rebuilding herein the "Restoration") of
the Property as near as practicable to its value, utility, condition and
character prior to such damage or destruction. If the Property or any part
thereof shall have been
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rendered unfit for use and occupation hereunder by reason of such damage the
Basic Rent and Additional Rent or a just and equitable part thereof, according
to the nature and extent to which the Property shall have been so rendered
unfit, shall be suspended or abated until the Property shall have been restored
as nearly as practicable to its condition immediately prior to such fire or
other casualty, except that the Basic Rent and Additional Rent payable hereunder
by Tenant shall never be less than the sum (the "Carrying Costs") of (i) an
amount equal to the principal and interest payments due with respect to the
applicable period under the Note, as defined in Section 34 below, and (ii) an
amount equal to Impositions due with respect to the applicable period.
17.3. INSURANCE ON TENANT'S EQUIPMENT Landlord shall have no interest
in any policy of insurance carried with respect to Tenant's Equipment.
18. TAKING OF PROPERTY
18.l. TENANT TO GIVE NOTICE. In case of a Taking of all or any part of
the Property, or the commencement of any proceedings or negotiations which might
result in any such Taking, Tenant will promptly give written notice thereof to
Landlord.
18.2. TAKING RESTORATION In the event of a Taking which is less than a
Total Taking, this Lease shall remain in effect and Tenant shall promptly and
with diligence, subject to the then applicable statutes, building codes, zoning
ordinances, and regulations of any governmental authority, proceed with the
Restoration of the Property as near as possible to its value, utility, condition
and character prior to the Taking, except for any reduction in area caused
thereby. If the Property or any part thereof shall have been rendered unfit for
use and occupation by reason of the Taking, the Basic Rent and Additional Rent
or a just and equitable part thereof, according
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to the nature and extent to which the Property shall have been so rendered
unfit, shall be suspended or abated until the Property shall have been restored
as nearly as practicable to its condition immediately prior to the Taking,
except that in the case of the Taking of any portion of the Improvements, the
Basic Rent and Additional Rent payable hereunder by Tenant shall never be less
than the Carrying Costs.
18.3. TOTAL TAKING In the event of a Taking of all or substantially all
of the Property (a "Total Taking"), this Lease shall remain in effect until the
Mortgagee has received an amount, from the awards or proceeds of the Taking or
otherwise, sufficient to pay the Note in full and elected to apply such sum to
the discharge of the indebtedness under the Lease. From and after the date on
which Tenant is required to vacate all or any portion of the Property, the Basic
Rent and Additional Rent or a just and equitable part thereof, according to the
nature and extent to which Tenant shall have been required to vacate the
Property shall be suspended or abated, except that the Basic Rent and Additional
Rent payable hereunder by Tenant shall never be less than the Carrying Costs.
All awards or proceeds of a Total Taking shall be paid as follows:
(A) First, to the Mortgagee, in an amount sufficient to pay the Note
in full;
(B) Then to Tenant, in an amount equal to the sum of amounts, if any,
paid by Tenant to Landlord as Basic and Additional Rent as set forth above in
this Section from and after the date on which Tenant is required to vacate all
or any portion of the Property;
(C) The balance, if any to Landlord.
18.4. SEPARATE AWARD Nothing herein contained shall be construed to
prevent Tenant from obtaining and applying as it deems, appropriate any separate
award from any condemning
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authority for a taking of or damage to Tenant's personal property not included
in the Property or for moving expenses or business interruption, provided, such
award is not combined with and does not reduce the award for any taking of the
Property, including Tenant's interest therein.
19. EVENTS OF DEFAULT; TERMINATION; LANDLORD'S REMEDIES
19.1. EVENTS OF DEFAULT AND TERMINATION. If any one or more of the
following events ("Events of Default") shall occur:
(a) if Tenant shall fail to pay any Basic Rent, Additional Rent,
or other sum payable hereunder by Tenant within 15 days
following the date such sum is due and payable; or
(b) if Tenant shall fail to perform or comply with any term hereof
other than the payments covered pursuant to section 19.1(a)
above, and such failure shall continue for more than 30 days
after receipt of written notice thereof from Landlord or if
such default cannot reasonably be corrected within such 45 day
period, if Tenant shall fail, within such period, to commence
with due diligence and dispatch to cure such default and
thereafter to prosecute and complete with due diligence and
dispatch the curing of such default; or
(c) if Tenant shall file a petition in bankruptcy or for
reorganization or for an arrangement pursuant to any present
or future federal or state bankruptcy law or under any similar
federal or state law, or shall be adjudicated a bankrupt or
insolvent or shall make an assignment for the benefit of its
creditors or shall admit in writing its inability to pay its
debts generally as they become due, or if a petition
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or answer proposing the adjudication of Tenant as a bankrupt
or its reorganization under any present or future federal or
state bankruptcy law or any similar federal or state law shall
be filed in any court and Tenant shall have consented to or
acquiesced therein; or
(d) if an involuntary petition in bankruptcy or for a
reorganization or for the appointment of a receiver or trustee
of all or substantially all of the property of Tenant shall be
filed in any court and the same shall not be dismissed or
discharged within sixty (60) days of the date of such filing;
or
(e) if a receiver, trustee or liquidator of Tenant or of all or
substantially all of the assets of Tenant shall be constituted
or appointed in any proceeding brought by Tenant, or if any
such receiver, trustee or liquidator shall be appointed in any
proceeding brought against Tenant and shall not be discharged
within sixty (60) days after such appointment, or if Tenant
shall consent to or acquiesce in such appointment;
then and in any such event Landlord at any time thereafter may either (i)
without further demand or notice enter into and upon the Property or any part
thereof in the name of the whole and by such entry terminate this Lease or (ii)
give a written termination notice to Tenant specifying a date, not less than 30
days from the date of giving such notice, on which this Lease shall terminate,
and on such date the term of this Lease shall expire and terminate by limitation
and all rights of Tenant under this Lease shall cease, unless the default(s)
permitting such termination shall have been cured before the termination date
specified in such notice.
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19.2. REMEDIES OF LANDLORD. In the event of a termination of this Lease
pursuant to Section 19.1, Tenant covenants that, in case of such termination or
in case of termination under the provisions of statute by reason of the default
of Tenant, Tenant will, at the election of Landlord (which election may be made
at any time), either:
(a) pay to Landlord, on account of the unexpired portion of the
term, sums equal to the Basic Rent and Additional Rent at the
same times and in the same installments as such payments would
be due hereunder. If the Property or any portion thereof shall
have been relet, the sums so payable by Tenant shall be abated
in an amount equal to the excess of moneys actually received
from the new lessee over Landlord's reasonable expenses of
such reletting, including, without limiting the generality of
the foregoing, the cost of remodeling and attorneys' and
realtors' fees; or
(b) pay to Landlord, as liquidated damages, a sum which at the
time of such termination represents the present value of the
difference between the Basic Rent and Additional Rent for the
residue of the term and the then current rental value of the
Property for the same period.
Nothing herein contained shall limit or prejudice the right of Landlord to prove
for and obtain in proceedings for bankruptcy or insolvency by reason of
termination, an amount equal to the maximum allowed by any statute or rule of
law in effect at the time when, and governing the proceedings in which, the
damages are to be proved, whether or not the amount be greater, equal to, or
less than the amount of the loss or damage referred to above.
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19.3. RELETTING OF PROPERTY. In case of any termination of this Lease
by re-entry, expiration or dispossession by summary proceedings or otherwise,
Landlord may (i) relet the Property, or any part or parts thereof, for a term or
terms which may at Landlord's option be equal to or less than or exceed the
period which would otherwise have constituted the balance of the term of this
Lease and may grant concessions to the extent that Landlord, in its reasonable
judgment, considers advisable or necessary to relet the same and (ii) make such
alterations and repairs to the Property as Landlord, in its reasonable judgment,
considers advisable or necessary for the purpose of reletting the Property; and
the making of such alterations and repairs shall not operate or be construed to
release Tenant from any liability hereunder. Landlord shall not be liable for
failure to relet the Property, or, in the event that the Property is relet, for
failure to collect the rent under such reletting, provided that Landlord uses
reasonable efforts to relet the Property and to collect such rent.
19.4. LANDLORD'S RIGHT TO CURE. If Tenant shall default in the
performance or observance of any agreement, condition or other provision in this
Lease contained on its part to be performed or observed, Landlord may, at its
option, without waiving any claim for breach of this Lease, at any time
thereafter upon not less than forty-five (45) days' advance written notice to
Tenant, cure such default at the expense of Tenant. However, if it is necessary
in the reasonable judgment of Landlord to protect the real estate or Landlord's
interest therein or to prevent injury or damage to persons or property that
certain action be taken in less than such period to cure, Landlord shall have
the right to immediately cure such default on behalf of Tenant at Tenant's
expense. If by reason of any breach Landlord is compelled to pay, or reasonably
elects to pay, any sum of money
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or do any act which will require the payment of any sum of money, or incurs any
reasonable expense, including reasonable attorneys' fees, in instituting or
prosecuting any proceeding to enforce Landlord's rights hereunder, any
reasonable amounts so paid or paid on account of such expense shall be deemed to
be due from Tenant to Landlord as Additional Rent within fifteen (15) days
following demand therefor by Landlord and interest thereon shall accrue
commencing on the date of payment at the Default Rate until Landlord is
reimbursed by Tenant for such amounts.
19.5. WAIVER OF REDEMPTION. Tenant hereby waives and surrenders all
rights and privileges which it might have under or by reason of any present or
future New Hampshire law to redeem the Property or to have a continuance of this
Lease after the term hereof has been terminated, or Tenant has been dispossessed
or ejected therefrom, by process of law, or pursuant to the terms of this Lease
or otherwise.
20. ESTOPPEL CERTIFICATES
20.l. BY TENANT. Tenant will execute, acknowledge and deliver to
Landlord, promptly upon request, a certificate in the form attached hereto as
Exhibit B, certifying (a) that this Lease is unmodified and in full force and
effect (or, if there have been modifications, that the Lease is in full force
and effect, as modified, and stating the modifications), (b) the dates, if any,
to which the Basic Rent has been paid, (c) whether or not there are then
existing any offsets or defenses against the enforcement of any term hereof on
the part of Tenant to be performed or complied with (and, if so, specifying the
same), and (d) that no notice has been received by Tenant of any default which
has not been cured.
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20.2. BY LANDLORD. Landlord will execute, acknowledge and deliver to
Tenant, promptly upon request, a certificate certifying (a) that this Lease is
unmodified and in full force and effect (or, if there have been modifications,
that this Lease is in full force and effect, as modified, and stating the
modifications), (b) the dates, if any, to which the Basic Rent, and other sums
payable hereunder have been paid, and (c) whether or not there are, to the
knowledge of Landlord, then existing any defaults under this Lease (and, if so,
specifying the same).
21. NO WAIVER, ETC.
No failure by Landlord or Tenant to insist upon the strict performance
of any term hereof or to exercise any right, power or remedy consequent upon a
breach thereof, and no acceptance of full or partial rent during the continuance
of any such breach, shall constitute a waiver of any such breach or of any such
term. No waiver of any breach shall affect or alter this Lease, which shall
continue in full force and effect, or the rights of Landlord or Tenant with
respect to any other then existing or subsequent breach.
22. REMEDIES, ETC., CUMULATIVE
Each right, power and remedy of Landlord provided for in this Lease or
now or hereafter existing at law or in equity or by statute or otherwise shall
be cumulative and concurrent and shall be in addition to every other right,
power or remedy provided for in this Lease or now or hereafter existing at law
or in equity or by statute or otherwise, and the exercise or beginning of the
exercise by Landlord of any one or more of the rights, powers or remedies
provided for in this Lease or now or hereafter existing at law or in equity or
by statute or otherwise shall not preclude the simultaneous or later exercise by
Landlord of any or all such other rights, powers or remedies.
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23. ACCEPTANCE OF SURRENDER
No modification, termination or surrender of this Lease or surrender of
the Property or any part thereof or of any interest therein by Tenant shall be
valid or effective unless agreed to and accepted in writing by Landlord, and no
act by any representative or agent of Landlord, other than such a written
agreement and acceptance by Landlord, shall constitute an acceptance thereof.
24. CONVEYANCE BY LANDLORD
In case the original Landlord hereunder, or any successor Landlord
shall convey or otherwise dispose of its entire interest hereunder, such
original Landlord or successor Landlord, as the case may be, shall thereupon be
released from all liabilities and obligations of the Landlord under this Lease
occurring after the time of such conveyance or disposition and all such
liabilities and obligations shall thereupon become binding upon the new
Landlord.
25. ASSIGNMENT; SUBLEASE.
Tenant may not assign this Lease or sublet the Property, in whole or in
part, or permit the same, whether by operation of law or otherwise, without
obtaining, in each instance, the prior written consent of Landlord. Landlord's
consent in one instance hereunder shall not relieve Tenant of the requirement of
obtaining Landlord's consent in any other instance.
26. LIMITATION OF LIABILITY
Tenant specifically agrees to look solely to Landlord's then equity
interest in the Property, at the time owned, for recovery of any judgment from
Landlord, it being specifically agreed that Landlord (original or successor)
shall never be personally liable for any such judgment, or for the payment of
any monetary obligation to Tenant. The provision contained in the foregoing
sentence
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is not intended to, and shall not, limit any right that Tenant might
otherwise have to obtain injunctive relief against Landlord or Landlord's
successors in interest, or to take any action not involving the personal
liability of Landlord (original or successor) to respond in monetary damages
from Landlord's assets other than Landlord's equity interest in the Property. In
no event shall Landlord be liable to Tenant for indirect or consequential
damages.
27. NOTICE TO MORTGAGEE
After receiving notice from any person, firm or other entity that it
holds a mortgage which includes the Property, or any part thereof, as part of
the mortgaged premises, no notice from Tenant to Landlord shall be effective
unless and until a copy of the same is given to such holder (provided Tenant
shall have been furnished with the name and address of such holder), and the
curing of any of Landlord's defaults by such holder shall be treated as
performance by Landlord.
28. ASSIGNMENT OF RENTS
With reference to any assignment by Landlord of Landlord's interest in
this Lease, or the rents payable hereunder, conditional in nature or otherwise,
which assignment is made to the holder of a mortgage of property which includes
the Property or any part thereof, Tenant agrees that the execution thereof by
Landlord, and the acceptance thereof by the holder of such mortgage, shall never
be treated as an assumption by such holder of any of the obligations of Landlord
hereunder unless such holder shall, by notice sent to Tenant, specifically
otherwise elect and that, except as aforesaid, such holder shall be treated as
having assumed Landlord's obligations hereunder only upon foreclosure of such
holder's mortgage or the taking of possession of the Property.
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29. SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT.
29.1. BY TENANT. Tenant will, on request from time to time by one or
more holders of a mortgage that may hereafter be placed upon the Property or any
part thereof, subordinate this Lease and all of Tenant's rights and estate
hereunder to each such mortgage, and agree with each such holder that Tenant
will attorn to and recognize such holder or the purchaser at any foreclosure
sale or any sale under a power of sale contained in any such mortgage as
Landlord under this Lease for the balance of the then remaining term of this
Lease, subject to all of the terms and provisions of this Lease; provided,
however, that each such holder agrees to recognize the rights of the Tenant
hereunder and not to disturb the possession of the Tenant hereunder, upon any
such foreclosure or other sale, such agreement to be in the customary form and
reasonably satisfactory to both parties.
29.2. BY LANDLORD. If the holder of any mortgage on the Property or any
part thereof executed and recorded prior to the date of this Lease shall so
elect, this Lease, and the rights of Tenant hereunder, shall be superior in
rights to the rights of such mortgagee, with the same force and effect as if
this Lease had been executed, delivered and recorded, or a statutory notice
hereof recorded, prior to the execution, delivery and recording of such
mortgage. Any such election shall become effective upon either notice from such
mortgagee to Tenant in the same fashion as notices from Landlord to Tenant are
to be given hereunder, or by the recording in the appropriate registry of deeds
of an instrument in which such mortgagee subordinates its rights under such
mortgage to this Lease.
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30. END OF TERM
Upon the expiration or other termination of this Lease, Tenant shall
quit and surrender to Landlord the Property, broom clean, in the same order and
condition as on the date hereof, or as it may be put in during the Term,
ordinary wear and tear and damage by fire or other casualty and Taking excepted,
and Tenant shall remove all of Tenant's Equipment therefrom no later than the
expiration or other termination of the Lease.
31. QUIET ENJOYMENT
Landlord agrees that if Tenant shall pay the rent and perform, fulfill
and observe the other obligations and liabilities of Tenant herein, Tenant shall
peacefully and quietly have, hold and enjoy the Property without any manner of
hindrance or molestation by Landlord or anyone lawfully claiming by, through or
under Landlord.
32. NOTICE OF LEASE
Landlord and Tenant are, simultaneously with the execution and delivery
of this Lease, executing a Notice of Lease in recordable form which Tenant may
record at Tenant's sole cost and expense in the appropriate registry of deeds.
33. NO BROKER REPRESENTATION
Landlord and Tenant represent and warrant each to the other that they
have dealt with no broker in connection with this Lease or the transactions
contemplated hereby or referred to herein. Landlord and Tenant hereby each agree
to indemnify the other and to hold it harmless from and against any and all
loss, liability, claim, cost or expense (including, without limitation,
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reasonable attorneys' fees) arising from a breach of the aforesaid
representation and warranty by Landlord or Tenant, as the case may be.
34. CERTAIN DEFINITIONS
As used in this Lease the following terms have the following respective
meanings:
BASIC RENT: the basic rent due and payable pursuant to Section 2.1
hereof.
DEFAULT: any condition which constitutes or which, after notice or
lapse of time or both, would constitute an Event of Default.
DEFAULT RATE: an annual rate of interest equal to the lesser of (a) the
maximum rate of interest permitted under applicable law and (b) two (2%)
percentage points above the publicly announced base rate of BankBoston, Boston,
Massachusetts, in effect from time to time.
ESCROWED FUNDS: any insurance proceeds or awards as a result of a
Taking that are received by Landlord from time to time during the Term (and any
interest earned thereon), which Landlord is holding for the purposes specified
in Section 17 or Section 18 above, provided that the Escrowed Funds shall be
held in an interest bearing account.
EVENT OF DEFAULT: as defined in Section 19.1 of this Lease.
IMPOSITIONS: all taxes, assessments (including, without limitation, all
assessments for public improvements or betterments, whether or not commenced or
completed prior to the date hereof), ground water, sewer or other rents, rates
and charges, excises, levies, license fees, permit fees, inspection fees and
other authorization fees and other charges, in each case whether general or
special, ordinary or extraordinary, foreseen or unforeseen, of every character
(including all interest and penalties thereon), which at any time during or in
respect of the Term may be
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assessed, levied, confirmed or imposed on or in respect of or be a lien upon (a)
the Property or any part thereof or any rent therefrom or any estate, right or
interest therein, or (b) any occupancy, use or possession of or activity
conducted on the Property or any part thereof, other than any income or excess
profits tax of Landlord determined on the basis of its general income or
revenues, provided, however, that, if at any time during the Term the methods of
taxation prevailing at the commencement of the Term shall be altered so that in
addition to or in lieu of or as a substitute for the whole or any part of the
taxes now levied, assessed or imposed on real estate as such, there shall be
levied, assessed or imposed (i) a tax on the rents received from such real
estate, or (ii) a license fee measured by the rents receivable by Landlord for
the Property or any portion thereof, or (iii) a tax or license fee imposed upon
Landlord which is otherwise measured by or based in whole or in part upon rents
of the Property or any portion thereof, then the same shall be included in the
computation of taxes, computed as if the amount of such tax or fee so payable
were that due if the Property were the only property of Landlord subject
thereto.
INDEMNIFIED PARTY: Landlord and any holder of a first mortgage on
the Property, and its and their respective officers, directors, agents and
employees.
INSURANCE REQUIREMENTS: all terms of any insurance policy covering or
applicable to the Property or any part thereof, all requirements of the issuer
of any such policy, and all orders, rules, regulations and other requirements of
the National Board of Fire Underwriters (or any other body exercising similar
functions) applicable to or affecting the Property or any part thereof or any
use or condition of the Property or any part thereof.
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LEGAL REQUIREMENTS: all laws, statutes, codes, acts, ordinances,
orders, judgments, decrees, injunctions, rules, regulations, permits, licenses,
authorizations, directions and requirements of and agreements with all
governments, departments, commissions, boards, courts, authorities, agencies,
officials and officers, foreseen or unforeseen, ordinary or extraordinary, which
now or at any time hereafter may be applicable to the Property or any part
thereof, or any of the adjoining sidewalks, streets or ways, or any use or
condition of the Property or any part thereof.
LOAN: the loan evidenced by the Note.
LOCKOUT PERIOD EXPIRATION DATE: Lockout Period Expiration Date as
defined in the Note.
MORTGAGE: the Mortgage, Assignment of Leases & Rents and Security
Agreement given by Landlord to secure its obligations under the Note.
MORTGAGEE: the holder of the Note secured by the Mortgage.
NOTE: the Mortgage Note in the amount of Twelve Million
($12,000,000.00) Dollars made by Birch Pond Realty Corporation d/b/a in the
State of New Hampshire as BPRC to the order of John Hancock Real Estate Finance,
Inc. ("Hancock") dated March 1, 1999;
OPTION PRICE: the greater of (i) the fair market value of the Property
on the date of the Tenant's Exercise Notice, as determined pursuant to Section
40.3 below, or (ii) the amount (the "Loan Prepayment Amount") required to pay
the Loan in full on the Closing Date, as defined in Section 40.2 below.
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TENANT'S EQUIPMENT: all machinery, apparatus, furniture, furnishings
and other equipment and all temporary or removable auxiliary structures
installed by Tenant in or about the Property or any part thereof.
TAKING: a taking during the Term of all or any part of the Property, or
any interest therein or right accruing thereto, as the result of, or a deed in
lieu or in anticipation of, the exercise of the right of condemnation or eminent
domain, or a change of grade affecting the Property or any part thereof.
35. NOTICES, ETC.
All notices and other communications hereunder shall be in writing and
shall be deemed to have been given when delivered or within 4 days of being
mailed by first class registered or certified mail, postage prepaid, addressed:
(a) if to Tenant, DM Management Company, 25 Recreation Park Drive,
Hingham, MA 02043 Attn: Chief Financial Officer, or at such
other address as Tenant shall have furnished to Landlord in
writing, or
(b) if to Landlord, to Birch Pond Realty Corporation, 25
Recreation Park Drive, Hingham, MA 02043 Attn: Treasurer, or
at such other address as Landlord shall have furnished to
Tenant in writing.
36. ENVIRONMENTAL MATTERS.
36.1. HAZARDOUS MATERIAL. Tenant shall not use, generate, store,
transport or dispose of Hazardous Materials on, under, about, or from the
Property (collectively, "HAZARDOUS MATERIALS ACTIVITIES") except in accordance
with Legal Requirements. Landlord shall not be liable to
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Tenant for any loss, cost, expense, claims, damage or liability arising out of
any Hazardous Materials Activities by Tenant, Tenant's employees, agents,
contractors, licensees, customers or invitees and Tenant shall indemnify and
defend Landlord, and hold Landlord harmless, in accordance with the provisions
of Section 36.2 below, from and against any and all loss, costs, expenses,
claims, damages or liabilities (hereinafter "Environmental Losses") arising out
of all Hazardous Materials Activities on the Property. For purposes hereof,
"Hazardous Materials" shall mean any hazardous or toxic wastes, hazardous or
toxic substances or hazardous or toxic materials, and shall include but not be
limited to substances defined as "HAZARDOUS SUBSTANCES", "TOXIC SUBSTANCES", or
"HAZARDOUS WASTES" in the federal Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended; the federal Hazardous
Materials Transportation Act, as amended; and the federal Resource Conservation
and Recovery Act, as amended ("RCRA"); those substances defined as "hazardous
materials" or "hazardous wastes" under the laws of the State of New Hampshire
and those substances so defined in any other Legal Requirements. If Tenant's
activities violate any Legal Requirements with respect to Hazardous Materials,
Tenant shall cease such activities immediately upon notice from Landlord. Tenant
shall immediately notify Landlord both by telephone and in writing of any spill,
discharge or release of Hazardous Materials in or about the Property or of any
condition in or about the Property constituting an "IMMINENT HAZARD" under any
Legal Requirement. Landlord, Landlord's representatives and employees may enter
the Property at any reasonable time, and on reasonable notice, to inspect
Tenant's compliance herewith.
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36.2. ENVIRONMENTAL INDEMNIFICATION. Tenant hereby agrees to assume
liability for and to pay, indemnity, defend, and hold harmless each and every
Indemnified Party from and against any and all Environmental Losses, subject
only to the provisions of Sections 3.6.2 below.
36.2.1 ASSUMPTION OF DEFENSE. If an Indemnified Party notifies Tenant
of any claim, demand, action, administrative or legal proceeding, investigation
or allegation as to which the indemnity provided for in this Section 36.2
applies, Tenant shall assume on behalf of the Indemnified Party and conduct with
due diligence and in good faith the investigation and defense thereof and the
response thereto with counsel selected by Tenant but reasonably satisfactory to
the Indemnified Party; provided, that the Indemnified Party shall have the right
to be represented by advisory counsel of its own selection and at its own
expense; and provided further, that if any such claim, demand, action,
proceeding, investigation or allegation involves both Tenant and the Indemnified
Party and the Indemnified Party shall have been advised in writing by counsel
that there may be legal defenses available to it which are inconsistent with
those available to Tenant, then the Indemnified Party shall have the right to
select separate counsel to participate in the investigation and defense of and
response to such claim, demand, action, proceeding, investigation or allegation
on its own behalf, and Tenant shall pay or reimburse the Indemnified Party for
all reasonable attorney's fees incurred by the Indemnified Party because of the
selection of such separate counsel.
36.2.2 DEFENSE BY INDEMNIFIED PARTY. If any claim, demand, action,
proceeding, investigation or allegation arises as to which the indemnity
provided for in this Section 36.2 applies, and Tenant fails to assume promptly
(and in any event within fifteen (15) days after being
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notified of the claim, demand, action, proceeding, investigation or allegation)
the defense of the Indemnified Party, then the Indemnified Party may contest (or
settle, with the prior written consent of Tenant, which consent will not be
unreasonably withheld) the claim, demand, action, proceeding, investigation or
allegation at Tenant's expense using counsel selected by the Indemnified Party.
36.2.3 NOTICE OF ENVIRONMENTAL LOSSES. If an Indemnified Party receives
a written notice of Environmental Losses that such Indemnified Party believes
are covered by this Section 36.2, then such Indemnified Party will be expected
to promptly furnish a copy of such notice to Tenant. The failure to so provide a
copy of the notice to Tenant shall not excuse Tenant from its obligations under
this Section 36.2; provided, that if Tenant is unaware of the matters described
in the notice and such failure renders unavailable defenses that Tenant might
otherwise assert, or precludes actions that Tenant might otherwise take, to
minimize its obligations hereunder, then Tenant shall be excused from its
obligation to indemnify such Indemnified Party against Environmental Losses, if
any, which would not have been incurred but for such failure. For example, if
Landlord fails to provide Tenant with the required notice of an obligation
covered by the indemnity set out in Section 36.2 and Tenant is not otherwise
already aware of such obligation, and if as a result of such failure Landlord
becomes liable for penalties and interest covered by the indemnity in excess of
the penalties and interest that would have accrued if Tenant had been promptly
provided with a copy of the notice, then Tenant will be excused from any
obligation to Landlord to pay the excess.
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36.2.4. RIGHTS CUMULATIVE. The rights of each Indemnified
Party under this Section 36.2 shall be in addition to any other rights and
remedies of such Indemnified Party against Tenant under the other provisions of
this Lease or under any other document or instrument now or hereafter executed
by Tenant, or at law or in equity.
36.2.5. SURVIVAL OF THE INDEMNITY. Tenant's obligations under
this Section 36.2 shall survive the termination or expiration of this Lease.
37. FORCE MAJEURE.
Whenever in this Lease either party is required to perform, fulfill or
observe any agreement set forth herein (other than payment of money), delays
caused by or resulting from act of God, war, fire, casualty, eminent domain,
strike, governmental restrictions, shortage of labor or materials, collection of
insurance or Taking proceeds or other cause beyond such party's reasonable
control shall not be counted in determining the time when such performance,
fulfillment or observance must be completed.
38. GOVERNING LAW.
This Lease shall be deemed made under, and shall be governed and
construed in accordance with, the laws of the State of New Hampshire.
39. MISCELLANEOUS.
If any term of this Lease or any application thereof shall be invalid
or unenforceable, the remainder of this Lease and any other application of such
term shall not be affected thereby. Whenever in this Lease it is provided that
any document or matter is to be satisfactory to Landlord or may be required by
Landlord, it shall be deemed to mean reasonably satisfactory or
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reasonably required, as the case may be, in an ordinary business sense. Any
approval or consent of Landlord required hereunder shall not be unreasonably (in
an ordinary business sense) withheld or delayed. This Lease may be changed,
waived, discharged or terminated only by an instrument in writing signed by the
party against which enforcement of such change, waiver, discharge or termination
is sought. This Lease shall be binding upon and inure to the benefit of and be
enforceable by the respective successors and assigns of the parties hereto. The
headings in this Lease are for purposes of reference only and shall not limit or
define the meaning hereof. This Lease may be executed in any number of
counterparts, each of which shall be an original, but all of which shall
together constitute one and the same instrument. This Lease embodies the entire
agreement and understanding between the parties hereto with respect to the
subject matter hereof and supersedes all prior agreements and understandings
relating to the subject matter hereof.
WITNESS the execution hereof under seal the day and year first above
written.
LANDLORD: BIRCH POND REALTY
CORPORATION d/b/a in
New Hampshire as BPRC
By: /s/Olga L.Conley
------------------------
Name: Olga L. Conley
Title: Treasurer and Secretary
TENANT: DM MANAGEMENT COMPANY
By: /s/Olga L. Conley
-----------------------
Name: Olga L. Conley
Title: Chief Financial Officer
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EXHIBIT A
That certain lot or tract of land, with the buildings and improvements
thereon, located in Tilton, Belknap County, New Hampshire, and being bounded and
described as follows:
Beginning at the northeast corner of the described premises at land now
or formerly of the State of New Hampshire and at a re-bar on the westerly
sideline of Route 132, Sanborn Road:
1. S 19(Degree)20'44" E 45.87' by said Route 132 to a point; then
2. By a curve to the right having a Delta of 17(Degree)00'15", a
radius of 930.00 feet, an arc distance of 276.00 feet, and a
chord bearing of S 10(Degree) 50' 37" E and a chord distance
of 274.99 feet by said Route to a re-bar; then
3. S 02(Degree)20'29" E 155.23' by said Route to a re-bar; then
4. S 03(Degree)47'32" W 86.83' by said Route to a re-bar; then
5. S 03(Degree)05'40" W 523.55' by said Route to a re-bar; then
6. By a curve to the left having a Delta of 01(Degree)40'53" and
a radius of 11,489.16 feet, an arc distance of 337.18 feet,
and a chord bearing of S 02(Degree)15' 13" W and a chord
distance of 337.17 feet by said Route to a re-bar; then
7. By a curve to the left having a Delta of 02(Degree)59'59" and
a radius of 11,492.87 feet, an arc distance of 601.71 feet,
and a chord bearing of S 01(Degree) 03' 20" W and a chord
distance of 601.64 feet, by said Route to a re-bar; then
8. By a curve to the left having a Delta of 01(Degree)52'45" and
a radius of 11,501.15 feet, an arc distance of 377.22 feet,
and a chord bearing of S 02(Degree) 31' 31" W and a chord
distance of 377.20 feet, by said Route to a re-bar; then
9. S 03(Degree)27'54" E 248.12' by said Route to a point at now or
formerly of Oliver; then
10. S 89(Degree)39'25" W 287.08' by said land of Oliver to a re-bar,
then
11. S 08(Degree)48'25" W 225.00' by said land of Oliver to a re-bar;
then
12. S 08(Degree)48'25" W, a distance of 20.00' to a point at land
now or formerly of the State of New Hampshire; then
Page 1 of 3
<PAGE>
13. N70(Degree)50'37"W 54.78' by land of the State; then
14. N 81(Degree)42'19" W 58.01' by land of the State; then
15. S 82(Degree)53'59" W142.27' by land of the State; then
16. S76(Degree)57'22"W 157.00' by land of the State; then
17. S 89(Degree)46'48"W 67.18' by land of the State; then
18. N65(Degree)59'17"W 79.43' by land of the State; then
19. N47(Degree)43'27"W 87.84' by land of the State; then
20. N27(Degree)29'46"W 83.28' by land of the State; then
21. S73(Degree)59'49"W 53.30' by land of the State; then
22. N45(Degree)19'18"W 43.24' by land of the State; then
23. N26(Degree)13'08" W16.85'by land of the State; then
24. S83(Degree)49'28"W 29.65' by land of the State; then
25. N60(Degree)40'11"W 56.97' by land of the State; then
26. N38(Degree)05'58"W 37.81' by land of the State; then
27. N60(Degree)17'32"W 38.15' by land of the State; then
28. N31(Degree)50'23"W 27.09' by land of the State; then
29. N74(Degree)42'14"W 22.80' by land of the State; then
30. S74(Degree)47'09" W 91.21' by land of the State; then
31. N87(Degree)39'11"W 149.12' by land of the State; then
32. S72(Degree)41'13"W 67.05' by land of the State; then
33. N72(Degree)57'33" W 454.56' by land of the State; then
34. N29(Degree)36'39"W 498.10' by land of the State; then
Page 2 of 3
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35. N29(Degree)36'39"W 56.30' by land of the State; then
36. N16(Degree)46'49"W 348.61' by land of the State to a concrete
bound; then
37. N14(Degree)31'44"E 885.88' by land of the State to a concrete
bound; then
38. N58(Degree)29'32"E 430.73' by land of the State to a re-bar; then
39. N05(Degree)11'37"W 335.93' by land of the State to a re-bar; then
40. S76(Degree)46'28"W 55.90' by land of the State to a concrete
bound; then
41. N85(Degree)46'21"W 3.96' by land of the State to a point at
land now or formerly of DM Management Company ("DM") ; then
42. N66(Degree)32'51"E 1044.50 feet by land of said DM, then
43. N85(Degree)07'38"E 305.57' by land of said DM to a stone wall;
then
44. S25(Degree)23'01"E 51.24' by land now or formerly of Miller
and said wall to a re-bar at land of the State; then
45. S66(Degree)06'34"W 50.17' by land of the State and a stone
wall to a drill hole in the wall; then
46. S21(Degree)06'31"E 95.43' by land of the State; then
47. S18(Degree)16'00"E 175.19' by land of the State to a re-bar; then
48. N69(Degree)11'55"E 499.88' by land of the State to the point of
beginning.
Meaning and intending to describe and convey the land shown on Plan
entitled, "ALTA/ACSM LAND TITLE SURVEY, Plan of Land Prepared for DM Management
Company, Route 132 (Sanborn Road), Tilton, NH," dated November 19, 1998, by
Yerkes Surveying Consultants and recorded in the Belknap County Registry of
Deeds (the "Registry") on February 16, 1999, in Drawer L-31 #'s 61 and 62.
Page 3 of 3
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Exhibit 10.12
DM MANAGEMENT COMPANY
AMENDED AND RESTATED
1993 INCENTIVE AND NONQUALIFIED STOCK OPTION PLAN
SECTION 1. PURPOSE
This Amended and Restated 1993 Incentive and Nonqualified Stock Option
Plan (the "Plan") of DM Management Company (the "Company"), is designed to
provide additional incentive to executives and other key employees of the
Company, and any parent or subsidiary of the Company, and for certain other
individuals providing services to or acting as directors of the Company or any
such parent or subsidiary. The Company intends that this purpose will be
effected by the granting of incentive stock options ("Incentive Stock Options")
as defined in Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"), and nonqualified stock options ("Nonqualified Options") under the Plan
which afford such executives, key employees or other individuals an opportunity
to acquire or increase their proprietary interest in the Company through the
acquisition of shares of its Common Stock. The Company intends that Incentive
Stock Options issued under the Plan will qualify as "incentive stock options" as
defined in Section 422 of the Code and the terms of the Plan shall be
interpreted in accordance with this intention. The terms "parent" and
"subsidiary" shall have the respective meanings set forth in Section 424 of the
Code.
SECTION 2. ADMINISTRATION
<PAGE>
2.1 THE COMMITTEE. The Plan shall be administered by the Compensation
Committee of the Board of Directors (the "Board") or another committee
consisting of at least two members of the Company's Board (in either case, the
"Committee"). None of the members of the Committee shall be an officer or other
employee of the Company. It is the intention of the Company that the Plan shall
be administered by "Non-Employee Directors" within the meaning of Rule 16b-3
under the Securities Exchange Act of 1934 and by "outside directors" within the
meaning of Section 162(m) of the Code and the regulations promulgated
thereunder, but the authority and validity of any act taken or not taken by the
Committee shall not be affected if any person administering the Plan is not a
"Non-Employee Director" or "outside director." Except as specifically reserved
to the Board under the terms of the Plan, the Committee shall have full and
final authority to operate, manage and administer the Plan on behalf of the
Company. Action by the Committee shall require the affirmative vote of a
majority of all members thereof.
2.2 POWERS OF THE COMMITTEE. Subject to the terms and conditions of the
Plan, the Committee shall have the power:
(a) To determine from time to time the persons eligible to
receive options and the options to be granted to such persons under the
Plan and to prescribe the terms, conditions, restrictions, if any, and
provisions (which need not be identical) of each option granted under
the Plan to such persons;
(b) To construe and interpret the Plan and options granted
thereunder and to establish, amend, and revoke rules and regulations
for administration of the Plan. In this connection, the Committee may
correct any defect or supply any omission, or reconcile any
inconsistency in the Plan, or in any option agreement, in the manner
and to the extent it shall deem necessary or expedient to make the Plan
fully effective. All decisions and
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<PAGE>
determinations by the Committee in the exercise of this power shall be
final and binding upon the Company and optionees;
(c) To make, in its sole discretion, changes to any
outstanding option granted under the Plan, including:
(i) to reduce the exercise price, (ii) to accelerate the vesting
schedule or (iii) to extend the expiration date; and
(d) Generally, to exercise such powers and to perform such
acts as are deemed necessary or expedient to promote the best interests
of the Company with respect to the Plan.
SECTION 3. STOCK
3.1 STOCK TO BE ISSUED. The stock subject to the options granted under
the Plan shall be shares of the Company's authorized but unissued common stock,
$.01 par value (the "Common Stock"), or shares of the Company's Common Stock
held in treasury. The total number of shares that may be issued pursuant to
options granted under the Plan shall not exceed an aggregate of 2,400,000 shares
of Common Stock; provided, however, that the class and aggregate number of
shares which may be subject to options granted under the Plan shall be subject
to adjustment as provided in Section 8 hereof.
3.2 EXPIRATION, CANCELLATION OR TERMINATION OF OPTION. Whenever any
outstanding option under the Plan expires, is cancelled or is otherwise
terminated (other than by exercise), the shares of Common Stock allocable to the
unexercised portion of such option may again be the subject of options under the
Plan.
3.3 LIMITATION ON GRANTS. In no event may any person be granted options
under the Plan in any calendar year to purchase more than 150,000 shares of
Common Stock. The number of shares
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<PAGE>
of Common Stock issuable pursuant to an option granted under the Plan that is
subsequently forfeited, cancelled or otherwise terminated shall continue to
count toward the foregoing limitation in the calendar year of grant. In
addition, for purposes of applying the foregoing limitation, if the exercise
price of an option granted under the Plan is subsequently reduced, the
transaction shall be deemed a cancellation of the original option and the grant
of a new one.
SECTION 4. ELIGIBILITY
4.1 PERSONS ELIGIBLE. Incentive Stock Options under the Plan may be
granted only to officers and other employees of the Company or any parent or
subsidiary of the Company. Nonqualified Options may be granted to officers or
other employees of the Company or any parent or subsidiary of the Company, and
to members of the Board and consultants or other persons who render services to
the Company or any such parent or subsidiary (regardless of whether they are
also employees), provided, however, that options may be granted to members of
the Board who are not employees of the Company or any such parent or subsidiary
("Outside Directors") only as provided in Section 4.4.
4.2 GREATER-THAN-TEN-PERCENT STOCKHOLDERS. Except as may otherwise be
permitted by the Code or other applicable law or regulation, no Incentive Stock
Option shall be granted to an individual who, at the time the option is granted,
owns (including ownership attributed pursuant to Section 425 of the Code) more
than ten percent of the total combined voting power of all classes of stock of
the Company or any parent or subsidiary (a "greater-than-ten-percent
stockholder"), unless such Incentive Stock Option provides that (i) the purchase
price per share shall not be less than one hundred ten percent of the fair
market value of the Common Stock at the time such option is granted, and (ii)
that such option shall not be exercisable to any extent after the expiration of
five years from
4
<PAGE>
the date it is granted.
4.3 MAXIMUM AGGREGATE FAIR MARKET VALUE. The aggregate fair market
value (determined at the time the option is granted) of the Common Stock with
respect to which Incentive Stock Options are exercisable for the first time by
any optionee during any calendar year (under the Plan and any other plans of the
Company or any parent or subsidiary for the issuance of incentive stock options)
shall not exceed $100,000 (or such greater amount as may from time to time be
permitted with respect to incentive stock options by the Code or any other
applicable law or regulation).
4.4 OPTION GRANTS TO OUTSIDE DIRECTORS.
(a) GRANT OF OPTIONS.
(i) On the date each new Outside Director first joins the Board, such
Outsider Director shall automatically be granted a Nonqualified Option to
purchase 20,000 shares of Common Stock. Such Nonqualified Option shall be
immediately vested in full unless otherwise determined by the Committee prior to
the grant of such Nonqualified Option.
(ii) On the date of each annual meeting of the Company's stockholders
or special meeting in lieu thereof, each Outside Director who has served for at
least six months and continues to serve at that meeting shall automatically be
granted a Nonqualified Option to purchase 7,500 shares of Common Stock. Such
Nonqualified Option shall be immediately vested in full.
(b) PURCHASE PRICE. The purchase price per share of Common Stock under
each Nonqualified Option granted pursuant to this Section 4.4 shall be equal to
the fair market value of the Common Stock on the date the Nonqualified Option is
granted, such fair market value to be determined in accordance with the
provisions of Section 6.3.
(c) EXPIRATION. Each Nonqualified Option granted to an Outside Director
under
5
<PAGE>
this Section 4.4 shall expire on the seventh anniversary of the date of
grant.
SECTION 5. TERMINATION OF EMPLOYMENT OR DEATH OF OPTIONEE
5.1 TERMINATION OF EMPLOYMENT. Except as may be otherwise expressly
provided herein, options shall terminate on the earlier of:
(a) the date of expiration thereof;
(b) immediately upon the termination of the optionee's employment with
or performance of services for the Company (or any parent or subsidiary of the
Company) by the Company (or any such parent or subsidiary) for cause (as
determined by the Company or such parent or subsidiary); or
(c) thirty days after the date of termination of the optionee's
employment with or performance of services for the Company (or any parent or
subsidiary of the Company) by the Company (or any such parent or subsidiary)
without cause or voluntarily by the optionee; PROVIDED, that Nonqualified
Options granted to persons who are not employees of the Company (or any parent
or subsidiary of the Company) need not, unless the Committee determines
otherwise, be subject to the provisions set forth in clauses (b) and (c) above.
An employment relationship between the Company (or any parent or
subsidiary of the Company) and the optionee shall be deemed to exist during any
period in which the optionee is employed by the Company (or any such parent or
subsidiary). Whether authorized leave of absence, or absence on military or
government service, shall constitute termination of the employment relationship
between the Company (or any parent or subsidiary of the Company) and the
optionee
6
<PAGE>
shall be determined by the Committee at the time thereof. As used herein,
"cause" shall mean (x) any material breach by the optionee of any agreement to
which the optionee and the Company (or any parent or subsidiary of the Company)
are both parties, (y) any act or omission to act by the optionee which may have
a material and adverse effect on the business of the Company (or any such parent
or subsidiary) or on the optionee's ability to perform services for the Company
(or any such parent or subsidiary), including, without limitation, the
commission of any crime (other than ordinary traffic violations), or (z) any
material misconduct or material neglect of duties by the optionee in connection
with the business or affairs of the Company (or any such parent or subsidiary)
or any affiliate of the Company (or any such parent or subsidiary).
5.2 DEATH OR RETIREMENT OF OPTIONEE. In the event of the death of the
holder of an option that is subject to clause (b) or (c) of Section 5.1 above
prior to termination of the optionee's employment with or performance of
services for the Company (or any parent or subsidiary of the Company) and before
the date of expiration of such option, such option shall terminate on the
earlier of such date of expiration or one year following the date of such death.
After the death of the optionee, his executors, administrators or any person or
persons to whom his option may be transferred by will or by the laws of descent
and distribution, shall have the right, at any time prior to such termination,
to exercise the option to the extent the optionee was entitled to exercise such
option at the time of his death.
If, before the date of the expiration of an option that is subject to
clause (b) or (c) of Section 5.1 above, the optionee shall be retired in good
standing from the Company for reasons of age or disability under the then
established rules of the Company, the option shall terminate on the earlier of
such date of expiration or ninety (90) days after the date of such retirement.
In the event of such retirement, the optionee shall have the right prior to the
termination of such option to exercise the
7
<PAGE>
option to the extent to which he was entitled to exercise such option
immediately prior to such retirement.
SECTION 6. TERMS OF THE OPTION AGREEMENTS
Each option agreement shall be in writing and shall contain such terms,
conditions, restrictions, if any, and provisions as the Committee shall from
time to time deem appropriate. Such provisions or conditions may include without
limitation restrictions on transfer, repurchase rights, or such other provisions
as shall be determined by the Committee; PROVIDED THAT such additional
provisions shall not be inconsistent with any other term or condition of the
Plan and such additional provisions shall not cause any Incentive Stock Option
granted under the Plan to fail to qualify as an incentive option within the
meaning of Section 422 of the Code. The shares of stock issuable upon exercise
of an option by any executive officer, director or beneficial owner of more than
ten percent of the Common Stock of the Company may not be sold or transferred
(except that such shares may be issued upon exercise of such option) by such
officer, director or beneficial owner for a period of six months following the
grant of such option.
Option agreements need not be identical, but each option agreement by
appropriate language shall include the substance of all of the following
provisions:
6.1 EXPIRATION OF OPTION. Notwithstanding any other provision of the
Plan or of any option agreement, each option shall expire on the date specified
in the option agreement, which date shall not, in the case of an Incentive Stock
Option, be later than the tenth anniversary (fifth anniversary in the case of a
greater-than-ten-percent stockholder) of the date on which the option was
granted, or as specified in Section 5 of this Plan.
8
<PAGE>
6.2 EXERCISE. Each option may be exercised, so long as it is valid and
outstanding, from time to time in part or as a whole, subject to any limitations
with respect to the number of shares for which the option may be exercised at a
particular time and to such other conditions as the Committee in its discretion
may specify upon granting the option.
6.3 PURCHASE PRICE. The purchase price per share under each option
shall be determined by the Committee at the time the option is granted;
provided, however, that the option price of any Incentive Stock Option shall
not, unless otherwise permitted by the Code or other applicable law or
regulation, be less than the fair market value of the Common Stock on the date
the option is granted (110% of the fair market value in the case of a
greater-than-ten-percent stockholder) and the option price of any Nonqualified
Option shall not be less than 85% of the fair market value of the Common Stock
on the date the option is granted. For the purpose of the Plan the fair market
value of the Common Stock shall be the closing price per share on the date of
grant of the option as reported by a nationally recognized stock exchange, or,
if the Common Stock is not listed on such an exchange, as reported by the
National Association of Securities Dealers Automated Quotation System ("Nasdaq")
National Market System, or if the Common Stock is not listed on the Nasdaq
National Market System, the mean of the bid and asked prices per share on the
date of grant of the option or, if the Common Stock is not traded over the
counter, the fair market value as determined by the Committee.
6.4 TRANSFERABILITY OF OPTIONS. Options shall not be transferable by
the optionee otherwise than by will or under the laws of descent and
distribution, and shall be exercisable, during his lifetime, only by him/her.
6.5 RIGHTS OF OPTIONEES. No optionee shall be deemed for any purpose to
be the owner of any shares of Common Stock subject to any option unless and
until the option shall have been
9
<PAGE>
exercised pursuant to the terms thereof, and the Company shall have issued and
delivered the shares to the optionee.
6.6 REPURCHASE RIGHT. The Committee may in its discretion provide upon
the grant of any option hereunder that the Company shall have an option to
repurchase upon such terms and conditions as determined by the Committee all or
any number of shares purchased upon exercise of such option. The repurchase
price per share payable by the Company shall be such amount or be determined by
such formula as is fixed by the Committee at the time the option for the shares
subject to repurchase is granted. In the event the Committee shall grant options
subject to the Company's repurchase option, the certificates representing the
shares purchased pursuant to such option shall carry a legend satisfactory to
counsel for the Company referring to the Company's repurchase option.
6.7 "LOCKUP" AGREEMENT. The Committee may in its discretion specify
upon granting an option that the optionee shall agree for a period of time (not
to exceed 180 days) from the effective date of any registration of securities of
the Company (upon request of the Company or the underwriters managing any
underwritten offering of the Company's securities), not to sell, make any short
sale of, loan, grant any option for the purchase of, or otherwise dispose of any
shares issued pursuant to the exercise of such option, without the prior written
consent of the Company or such underwriters, as the case may be.
SECTION 7. METHOD OF EXERCISE; PAYMENT OF PURCHASE PRICE
7.1 METHOD OF EXERCISE. Any option granted under the Plan may be
exercised by the optionee by delivering to the Company on any business day a
written notice specifying the number of shares of Common Stock the optionee then
desires to purchase and specifying the address to which the certificates for
such shares are to be mailed (the "Notice"), accompanied by payment for
10
<PAGE>
such shares.
7.2 PAYMENT OF PURCHASE PRICE. Payment for the shares of Common Stock
purchased pursuant to the exercise of an option shall be made either by (i) cash
or check equal to the option price for the number of shares specified in the
Notice, or (ii) with the consent of the Committee, other shares of Common Stock
which (a) either have been owned by the optionee for more than six (6) months on
the date of surrender or were not acquired, directly or indirectly, from the
Company, and (b) have a fair market value on the date of surrender not greater
than the aggregate option price of the shares as to which such option shall be
exercised, (iii) with the consent of the Committee, delivery of such
documentation as the Committee and the broker, if applicable, shall require to
effect an exercise of the option and delivery to the Company of the sale or loan
proceeds required to pay the option price, (iv) with the consent of the
Committee, such other consideration which is acceptable to the Committee and
which has a fair market value equal to the option price of such shares, or (v)
with the consent of the Committee, a combination of (i), (ii) (iii), (iv) and/or
(v). For the purpose of the preceding sentence, the fair market value per share
of Common Stock so delivered to the Company shall be determined in the manner
specified in Section 6.3. As promptly as practicable after receipt of the Notice
and accompanying payment, the Company shall deliver to the optionee certificates
for the number of shares with respect to which such option has been so
exercised, issued in the optionee's name; provided, however, that such delivery
shall be deemed effected for all purposes when the Company or a stock transfer
agent of the Company shall have deposited such certificates in the United States
mail, addressed to the optionee, at the address specified in the Notice.
SECTION 8. CHANGES IN COMPANY'S CAPITAL STRUCTURE
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<PAGE>
8.1 RIGHTS OF COMPANY. The existence of outstanding options shall not
affect in any way the right or power of the Company or its stockholders to make
or authorize, without limitation, any or all adjustments, recapitalizations,
reorganizations or other changes in the Company's capital structure or its
business, or any merger or consolidation of the Company, or any issue of Common
Stock, or any issue of bonds, debentures, preferred or prior preference stock or
other capital stock ahead of or affecting the Common Stock or the rights
thereof, or the dissolution or liquidation of the Company, or any sale or
transfer of all or any part of its assets or business, or any other corporate
act or proceeding, whether of a similar character or otherwise.
8.2 RECAPITALIZATION, STOCK SPLITS AND DIVIDENDS. If the Company shall
effect a subdivision or consolidation of shares or other capital readjustment,
the payment of a stock dividend, or other increase or reduction of the number of
shares of the Common Stock outstanding, in any such case without receiving
compensation therefor in money, services or property, then (i) the number,
class, and price per share of shares of stock subject to outstanding options
hereunder shall be appropriately adjusted in such a manner as to entitle an
optionee to receive upon exercise of an option, for the same aggregate cash
consideration, the same total number and class of shares as he would have
received as a result of the event requiring the adjustment had he exercised his
option in full immediately prior to such event; and (ii) the number and class of
shares set forth in Sections 3.1, 3.3 and 4.4 shall be adjusted by substituting
therefor that number and class of shares of stock that the owner of an equal
number of outstanding shares of Common Stock would own as the result of the
event requiring the adjustment. The number of shares set forth in Sections 3.1,
3.3 and 4.4 have been so adjusted to reflect the 3-for-2 stock split in the form
of a stock dividend that was paid on June 30, 1998, and, notwithstanding the
foregoing provisions, there shall be no further adjustments to such numbers to
reflect such stock split.
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<PAGE>
8.3 MERGER WITHOUT CHANGE OF CONTROL. After a merger of one or more
corporations into the Company, or after a consolidation of the Company and one
or more corporations in which (i) the Company shall be the surviving
corporation, and (ii) the stockholders of the Company immediately prior to such
merger or consolidation own after such merger or consolidation shares
representing at least fifty percent of the voting power of the Company, each
holder of an outstanding option shall, at no additional cost, be entitled upon
exercise of such option to receive in lieu of the number of shares as to which
such option shall then be so exercisable, the number and class of shares of
stock or other securities to which such holder would have been entitled pursuant
to the terms of the agreement of merger or consolidation if, immediately prior
to such merger or consolidation, such holder had been the holder of record of a
number of shares of Common Stock equal to the number of shares for which such
option was exercisable.
8.4 SALE OR MERGER WITH CHANGE OF CONTROL. If the Company is merged
into or consolidated with another corporation under circumstances where the
Company is not the surviving corporation, or if there is a merger or
consolidation where the Company is the surviving corporation but the
stockholders of the Company immediately prior to such merger or consolidation do
not own after such merger or consolidation shares representing at least fifty
percent of the voting power of the Company, or if the Company is liquidated, or
sells or otherwise disposes of substantially all of its assets to another
corporation while unexercised options remain outstanding under the Plan, (i)
subject to the provisions of clause (iii) below, after the effective date of
such merger, consolidation, liquidation, sale or disposition, as the case may
be, each holder of an outstanding option shall be entitled, upon exercise of
such option, to receive, in lieu of shares of Common Stock, shares of such stock
or other securities, cash or property as the holders of shares of Common Stock
received pursuant to the terms of the merger, consolidation, liquidation, sale
or disposition; (ii) the
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<PAGE>
Committee may accelerate the time for exercise of all unexercised and unexpired
options to and after a date prior to the effective date of such merger,
consolidation, liquidation, sale or disposition, as the case may be, specified
by the Committee; or (iii) all outstanding options may be cancelled by the
Committee as of the effective date of any such merger, consolidation,
liquidation, sale or disposition provided that (x) notice of such cancellation
shall be given to each holder of an option and (y) each holder of an option
shall have the right to exercise such option to the extent that the same is then
exercisable or, if the Committee shall have accelerated the time for exercise of
all unexercised and unexpired options, in full during the 30-day period
preceding the effective date of such merger, consolidation, liquidation, sale or
disposition.
8.5 ADJUSTMENTS TO COMMON STOCK SUBJECT TO OPTIONS. Except as
hereinbefore expressly provided, the issue by the Company of shares of stock of
any class, or securities convertible into shares of stock of any class, for cash
or property, or for labor or services, either upon direct sale or upon the
exercise of rights or warrants to subscribe therefor, or upon conversion of
shares or obligations of the Company convertible into such shares or other
securities, shall not affect, and no adjustment by reason thereof shall be made
with respect to, the number or price of shares of Common Stock then subject to
outstanding options.
8.6 MISCELLANEOUS. Adjustments under this Section 8 shall be determined
by the Committee, and such determinations shall be conclusive. No fractional
shares of Common Stock shall be issued under the Plan on account of any
adjustment specified above.
SECTION 9. GENERAL RESTRICTIONS
9.1 INVESTMENT REPRESENTATIONS. The Company may require any person to
whom an option is granted, as a condition of exercising such option, to give
written assurances in substance and form
14
<PAGE>
satisfactory to the Company to the effect that such person is acquiring the
Common Stock subject to the option for his own account for investment and not
with any present intention of selling or otherwise distributing the same, and to
such other effects as the Company deems necessary or appropriate in order to
comply with federal and applicable state securities laws.
9.2 COMPLIANCE WITH SECURITIES LAWS. The Company shall not be required
to sell or issue any shares under any option if the issuance of such shares
shall constitute a violation by the optionee or by the Company of any provisions
of any law or regulation of any governmental authority. In addition, in
connection with the Securities Act of 1933, as now in effect or hereafter
amended (the "Act"), upon exercise of any option, the Company shall not be
required to issue such shares unless the Committee has received evidence
satisfactory to it to the effect that the holder of such option will not
transfer such shares except pursuant to a registration statement in effect under
such Act or unless an opinion of counsel satisfactory to the Company has been
received by the Company to the effect that such registration is not required.
Any determination in this connection by the Committee shall be final, binding
and conclusive. In the event the shares issuable on exercise of an option are
not registered under the Act, the Company may imprint upon any certificate
representing shares so issued the following legend or any other legend which
counsel for the Company considers necessary or advisable to comply with the Act
and with applicable state securities laws:
The shares of stock represented by this certificate have not
been registered under the Securities Act of 1933 or under the
securities laws of any State and may not be sold or
transferred except upon such registration or upon receipt by
the Corporation of an opinion of counsel satisfactory to the
Corporation, in form and substance satisfactory to the
Corporation, that registration is not required for such sale
or transfer.
The Company may, but shall in no event be obligated to, register any
securities covered hereby pursuant to the Act; and in the event any shares are
so registered the Company may remove
15
<PAGE>
any legend on certificates representing such shares. The Company shall not be
obligated to take any other affirmative action in order to cause the exercise of
an option or the issuance of shares pursuant thereto to comply with any law or
regulation of any governmental authority.
9.3 EMPLOYMENT OBLIGATION. The granting of any option shall not impose
upon the Company (or any parent or subsidiary of the Company) any obligation to
employ or continue to employ any optionee; and the right of the Company (or any
such parent or subsidiary) to terminate the employment of any officer or other
employee shall not be diminished or affected by reason of the fact that an
option has been granted to him/her.
9.4 WITHHOLDING TAX. Whenever under the Plan shares of Common Stock are
to be delivered upon exercise of an option, the Company shall be entitled to
require as a condition of delivery that the optionee remit an amount sufficient
to satisfy all federal, state and other governmental withholding tax
requirements related thereto.
SECTION 10. AMENDMENT OR TERMINATION OF THE PLAN
The Board of Directors may modify, revise or terminate this Plan at any
time and from time to time, except that (i) the class of persons eligible to
receive options and the aggregate number of shares issuable pursuant to this
Plan shall not be changed or increased, other than by operation of Section 8
hereof, without the consent of the stockholders of the Company and (ii) the
provisions of Section 4.4 shall not be amended more than once every six (6)
months, other than to comport with changes in the Code, the Employee Retirement
Income Security Act, or the rules thereunder.
SECTION 11. NONEXCLUSIVITY OF THE PLAN
16
<PAGE>
Neither the adoption of the Plan by the Board of Directors nor the
submission of the Plan to the stockholders of the Company for approval shall be
construed as creating any limitations on the power of the Board of Directors to
adopt such other incentive arrangements as it may deem desirable, including,
without limitation, the granting of stock options otherwise than under the Plan,
and such arrangements may be either applicable generally or only in specific
cases.
SECTION 12. EFFECTIVE DATE AND DURATION OF PLAN
The Plan shall become effective upon its adoption by the Board of
Directors provided that the stockholders of the Company shall have approved the
Plan within twelve months prior to or following the adoption of the Plan by the
Board. No option may be granted under the Plan after the tenth anniversary of
the effective date. The Plan shall terminate (i) when the total amount of Common
Stock with respect to which options may be granted shall have been issued upon
the exercise of options or (ii) by action of the Board of Directors pursuant to
Section 10 hereof, whichever shall first occur.
* * * * * * * *
17
<PAGE>
Exhibit 10.15
1999
INCENTIVE COMPENSATION PLAN
PURPOSE
This plan is designed to provide financial reward to key members of DM
Management for their contribution toward the attainment of the company's
financial goals in 1999.
PARTICIPATION
This plan is restricted to key management personnel whose performance has a
measurable impact on the company's ability to achieve its financial goals.
Participation in the plan and assignment of bonus percentages is made either by
the Compensation Committee of the Board of Directors in the case of executive
officers or by the President of the company in the case of everyone else. The
Compensation Committee and the President may also award additional bonuses at
their discretion.
ELIGIBILITY TO RECEIVE BONUS
o Bonus plan participants will be eligible to receive their bonus if the
company meets or exceeds its operating income (earnings before interest and
taxes) goal for the performance period.
o Participants in performance counseling will not be eligible for a bonus
payout for that season.
o Participants must be actively employed for a minimum of three months in the
season for which the bonus is earned.
o Participants must be employed on the last day of the bonus performance
period.
o Participants terminated for cause will not be eligible for bonus.
CALCULATION OF BONUS PAYMENT
To determine the amount of bonus to be paid to an individual, simply multiply
the individual's bonus percentage by the base salary earnings for the
performance period.
PERFORMANCE PERIOD
This plan pertains to the fiscal year ending December 25, 1999. For measurement
purposes the fiscal year will be divided into two seasonal performance periods:
Spring-December 27,1998 to June 26, 1999
Fall-June 27,1999 to December 25, 1999
<PAGE>
ADDITIONAL BONUSES
The Compensation Committee and the President may also award additional bonuses
at their discretion. The criteria for eligibility, the calculation of the bonus
payment and the performance period(s) for such bonuses shall all be determined
at the time of the additional bonus award.
PAYMENTS
Bonus payments will be made as soon as possible after the close of the
performance period (i.e.season).
EXAMPLE
Assume: Base annual salary of $50,000 and a bonus percentage of 10%
CASE 1: The Company meets the financial plan for both seasons:
<TABLE>
<CAPTION>
Base Salary Bonus % Bonus
----------- ------- -----
<S> <C> <C> <C>
Spring $ 25,000 10% $ 2,500
Fall $ 25,000 10% $ 2,500
-------- -------
Fiscal 1999 $ 50,000 $ 5,000
-------- -------
</TABLE>
CASE 2: The Company meets the Spring financial plan but not the Fall financial
plan:
<TABLE>
<CAPTION>
Base Salary Bonus % Bonus
----------- ------- -----
<S> <C> <C> <C>
Spring $ 25,000 10% $ 2,500
Fall $ 25,000 --- ---
-------- --------
Fiscal 1999 $ 50,000 $ 2,500
-------- -------
</TABLE>
<PAGE>
Exhibit 10.20
SPLIT DOLLAR AGREEMENT
ALLMERICA LIFE INSURANCE
POLICY NO. V062875000
AGREEMENT made as of this 22 day of February, 1999, by and between
Kevin Burns (the "Employee"), and DM Management Company, a Delaware
corporation (the "Employer").
WHEREAS, the Employee wishes to establish a life insurance program for
the benefit and protection of his family under Policy No. V062875000 (the
"Policy") issued by Allmerica Financial Life Insurance and Annuity Company, of
Worcester, Massachusetts (the "Insurer"); and
WHEREAS, the Employer wishes to help the Employee provide such
insurance for the benefit and protection of his family by the payment of the
premiums due on the Policy in accordance with Article 2 hereof; and
WHEREAS, the Employee will be the sole owner of the Policy, and will
assign the Policy to the Employer for the purpose of providing security for the
repayment of the amounts which the Employer will contribute toward payment of
the premium due or to become due on the Policy pursuant to an agreement of even
date to be executed by the parties hereto (the "Collateral Assignment"); and
WHEREAS, it is the desire of the parties to define the extent of the
Employer's interest in the cash surrender value and death proceeds of the
Policy;
NOW THEREFORE, in consideration of the mutual promises contained
herein, it is agreed between the parties hereto as follows:
ARTICLE 1: OWNERSHIP OF POLICY
The Policy is the exclusive property of the Employee, who may exercise
all rights of ownership with respect to his interest therein, subject to the
security interest of the Employer as expressed in this Agreement and the
Collateral Assignment and to any death benefit which may become due to the
Employer.
ARTICLE 2: PAYMENT OF PREMIUMS
A. For the first seven (7) years the Policy is in force, or until this
Agreement is earlier terminated as provided in Article 8, the Employer shall be
responsible for the payment of (i) the scheduled premium, or (ii) such lesser
amount as the Insurer advises is consistent with the insurance features of the
Policy. In addition, after the expiration of said seven-year period and while
this Agreement is still in effect, the Employer may make such additional
payments as the Insurer advises is consistent with maintaining the intended
value of the Policy but only if such greater amount or
<PAGE>
additional payments are approved by the Compensation Committee of the Employer's
Board of Directors.
B. The Employee understands that he will recognize taxable income in
each year with respect to the life insurance protection afforded to the Employee
in accordance with Internal Revenue Service rulings and regulations.
C. The Employer shall, before the end of any grace period provided in
the Policy for each premium payment, remit the annual premiums as stated in the
Policy until this Agreement is terminated as provided in Article 8. If
requested, the Employer shall give proof to the Employee of the timely payment
of each premium.
ARTICLE 3: COLLATERAL ASSIGNMENT
To secure the repayment to the Employer of an amount equal to the
aggregate amount of its premium payments under the Policy to the extent provided
in Article 6, the Employee has contemporaneously with the execution of this
Agreement assigned the Policy to the Employer as collateral, by means of the
form of Collateral Assignment attached to this Agreement as Schedule 1. The
Collateral Assignment shall not be altered, terminated or amended by Employee
without the express written consent of the Employer. The parties agree to take
all action necessary to cause such assignment to conform to the provisions of
this Agreement.
ARTICLE 4: RIGHTS IN POLICY
A. The Employer shall have no right to borrow against the Policy.
B. The Employee, in recognition of the defined contribution provisions
of this Agreement and the variable nature of the death benefits, shall have the
right to allocate the aggregate account value to particular investment vehicles,
subject to a right of the Employer to disapprove a particular investment vehicle
which it deems inappropriate.
C. The Employee shall have the right to exchange the Policy for such
other policies and/or insurers that he deems appropriate based upon the
investment performance or financial condition of the Insurer, subject to the
approval of the Employer, which approval shall not unreasonably be denied.
Action by the Employee or the Employer to change the Policy and/or insurer
pursuant to this paragraph shall not otherwise alter the rights and
responsibilities of the Employer and the Employee as set forth in this
Agreement.
D. The Employer shall have no responsibility for a shortfall in the
projected total return on the paid-in premiums available to provide the death
benefit.
E. The Employer shall not take any action that might endanger the
interest of the Employee in the Policy. The Employee shall not take any action
that might endanger the interest of the Employer in the Policy.
-2-
<PAGE>
ARTICLE 5: EMPLOYEE'S RIGHTS IN POLICY
The Employee retains all other rights in the Policy not specifically
assigned to the Employer including, but not limited to, the following rights:
A. The right to surrender the Policy as set forth in Paragraph D of the
Collateral Assignment.
B. The right to change the beneficiary of the Policy, to the extent of
his interest.
C. The right to select optional methods of settlement with regard to
the death benefit provided in PART TWO of Article 7.
D. All other rights contained in the Policy, to the extent the exercise
of such rights does not adversely affect the Employer's interest in the Policy.
ARTICLE 6: PAYMENT OF CASH SURRENDER VALUE
A. Except as set forth in this Article 6, Section B, in the event this
Agreement is terminated pursuant to Section A or B of Article 8, the Employer
shall have the unqualified right to receive from the Insurer a sum which is
equal to the lesser of (a) the then cash surrender value as defined in the
Policy or (b) the aggregate unreimbursed amount of premium payments with respect
to the Policy for which the Employer was responsible pursuant to Article 2,
Section A (the "Premium Reimbursement"). This amount shall be established in a
written statement to the Insurer by the Employer, and the Insurer shall have the
right, without liability to the Employee or his beneficiary or beneficiaries of
the Policy, to rely exclusively upon such statement. The Employer shall, upon
receiving such sum, release the Collateral Assignment of the Policy.
B. In the event that this Agreement is terminated pursuant to Section B
of Article 8 after the occurrence of a "Terminating Event" (as defined in
Section C of this Article 6), the Employer shall not be entitled to receive the
Premium Reimbursement pursuant to Section A of Article 6.
C. For purposes of this Article 6, a "Terminating Event" shall mean any
of the following if it occurs within two years of a "Change in Control" (as
defined in Section E of this Article 6):
(i) termination by the Employer of the Employee's employment
with the Employer for any reason other than (a) the Employee's death or
disability, or (b) for "Cause" (as such term is defined in Section D of this
Article 6), or
(ii) Employee's resignation as an employee of the Employer,
other than for reasons of disability, following a significant reduction in the
nature or scope of the Employee's duties, responsibilities, authority and powers
from the duties, responsibilities, authority and powers exercised by the
Employee immediately prior to the Change in Control or a reduction in the
Employee's annual base salary as in effect on the date of the Change in Control,
except for across-the-board salary reductions similarly affecting all management
personnel of the Employer (or the
-3-
<PAGE>
surviving entity, in the case of a merger or acquisition in which the Employer
is not the surviving entity).
D. For purposes of Section C of this Article 6, "Cause" shall mean:
(i) deliberate dishonesty with respect to the Employer or any
subsidiary or affiliate thereof;
(ii) conviction of a crime involving moral turpitude; or
(iii) gross and willful failure to perform a substantial
portion of the Employee's duties and responsibilities as an officer of the
Employer, which failure continues for more than thirty days after written notice
given to the Employee pursuant to a two-thirds vote of all of the members of the
Board of Directors of the Employer then in office, such vote to set forth in
reasonable detail the nature of such failure.
E. For the purposes of this Article 6, "Change in Control" shall mean
the occurrence of any one or more of the following events:
(i) if there is a merger or consolidation of the Employer with
any other entity and the voting securities of the Employer outstanding
immediately prior to such merger or consolidation do not continue to represent
(either by remaining outstanding or by being converted into voting securities of
the surviving entity) more than fifty percent (50%) of the combined voting power
of the voting securities of the Employer or such surviving entity immediately
after such merger or consolidation, or
(ii) when any person or entity or group of persons or entities
either related or acting in concert becomes the "beneficial owner" (as defined
in Rule 13d-3 under the Securities Exchange At of 1934, as amended) of
securities of the Employer representing more than fifty percent (50%) of the
total number of votes that may be cast for the election of directors of the
Employer (any such person or entity or group of persons or entities being
referred to, collectively in the case of any such group, as an "Acquiring
Person"), or
(iii) if the Employer sells all or substantially all of its
assets to another entity, other than in a transaction in which the voting
securities of the Employer outstanding immediately prior to such transaction
continue to represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) more than fifty percent (50%) of
the combined voting power of the voting securities of the Employer or such
surviving entity immediately after such transaction, or
(iv) during any period of two consecutive years (not
including any period prior to the execution of this Agreement), individuals who
are Continuing Directors (as hereinafter defined) cease for any reason to
constitute at least a majority of the Board of Directors of the Employer. For
this purpose, a "Continuing Director" shall mean (a) an individual who was a
director of the Employer at the beginning of such period or (b) any new director
(other than a director designated
-4-
<PAGE>
by an Acquiring Person) whose election by the Board or nomination for election
by the Board, a committee thereof or the Employer's stockholders was approved by
a vote of a majority of the directors then still in office who either were
directors at the beginning of such period or whose election or nomination for
election was previously so approved; or
(v) one or more Acquiring Persons has succeeded, as the result
of or in response to actual or threatened election contests, whether by
settlement or otherwise, in having elected to the Board of Directors of the
Employer, whether at one time or on a cumulative basis, a sufficient number of
its nominees to constitute (a) more than thirty percent (30%) of the members of
the Employer's Board of Directors, rounded down to the nearest whole number, if
the number of directors on the Employer's Board is eight or less, or (b) more
than forty percent (40%) of the members of the Employer's Board, rounded down to
the nearest whole number, if the number of directors on the Employer's Board is
nine or more.
ARTICLE 7: PAYMENT OF DEATH BENEFIT
In the event of the death of the Employee while the Policy and this
Agreement are in force, the net proceeds of the Policy shall be divided into two
parts and paid as follows:
PART ONE: To the Employer, a sum equal to the aggregate
unreimbursed amount of premium payments for which the Employer
was responsible pursuant to Section A of Article 2, unless
Section B of Article 6 applies.
PART TWO: To the designated beneficiaries of the Employee,
the remaining proceeds of the Policy.
ARTICLE 8: TERMINATION OF AGREEMENT
This Agreement shall terminate:
A. Upon surrender of the Policy by the Employee, except when the Policy
is surrendered and a new policy is issued pursuant to an exchange under
Article 4, Section C.
B. Upon the termination of the employment of the Employee for any
reason other than retirement at or after attaining the age of 65.
C. On the death of the Employee.
ARTICLE 9: EXCHANGE OF POLICY
In the event the Employer is required to exchange the Policy under
Article 4, Section C, the Employee shall execute any forms necessary or
appropriate to effect such exchange including, without limitation, the surrender
of the Policy, the transfer of proceeds to the new insurer and the
-5-
<PAGE>
execution of a new Split Dollar Agreement and Collateral Assignment. Such
exchange shall qualify under Section 1035 of the Internal Revenue Code or
successor provisions of similar import.
ARTICLE 10: OBLIGATIONS OF INSURER
Any payments made or action taken by the Insurer in accordance with the
provisions of the Policy and the Collateral Assignment shall fully discharge it
from all claims, suits, and demands of all persons whatsoever.
ARTICLE 11: MISCELLANEOUS
A. This Agreement shall be binding upon the parties hereto, their
heirs, legal representative, successors and assigns.
B. This Agreement and the Collateral Assignment embody all agreements
between or among the parties with respect to the Policy, and no change,
alteration, or modification may be made except in writing signed by all parties
hereto.
C. This Agreement shall be governed by, and construed in accordance
with the provisions of, the laws of the Commonwealth of Massachusetts without
regard to its principles of conflicts of laws.
D. Any dispute, controversy or claim with respect to any party's
performance under this Agreement shall be settled by arbitration in accordance
with the laws of The Commonwealth of Massachusetts by a single arbitrator who
shall be selected by the American Arbitration Association in Boston,
Massachusetts. Such arbitration shall be conducted in the City of Boston in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association. Punitive damages shall not awarded. Judgment upon the award
rendered by the arbitrator may be entered in any court having jurisdiction
thereof.
IN WITNESS WHEREOF, the parties hereto have set their hand and seals
effective as of the day and year first above written.
/s/ Kevin Burns
------------------------------------
Kevin Burns, Employee
Date: February 22, 1999
DM MANAGEMENT COMPANY, Employer
By /s/ Olga L. Conley
---------------------------------
Its Chief Financial Officer
--------------------------------
Date: February 22, 1999
-6-
<PAGE>
SCHEDULE 1 TO SPLIT DOLLAR AGREEMENT
ASSIGNMENT OF LIFE INSURANCE POLICY AS COLLATERAL
A. FOR VALUE RECEIVED, the undersigned Kevin Burns (hereinafter the
"Owner") hereby assigns, transfers and sets over to DM Management Company, a
Delaware corporation, its successors and assigns (hereinafter the "Assignee"),
the following specific rights (and only those specific rights) in and to policy
number V062875000, issued by Allmerica Financial Life Insurance and Annuity
Company (hereinafter the "Insurer") and any supplementary contract or contracts
issued in connection therewith (said policy and any such contracts hereinafter
the "Policy"), insuring the life of the Owner, subject to all terms and
conditions of the Policy and to all superior liens, if any, which the Insurer
may have against the Policy. The Owner, by this Assignment, and the Assignee, by
acceptance of the Assignment of the Policy to it hereunder, agree to the terms
and conditions contained in the Policy.
B. This Assignment is made, and the Policy is to be held as collateral
security for, all rights of and obligations owed to the Assignee, now existing
or hereafter arising under and pursuant to a certain Split Dollar Agreement, by
and between the Owner and the Assignee of even date herewith pertaining to the
Policy (hereinafter the "Agreement"). The Owner reserves all rights and powers
in and to the Policy, except those specific, limited rights in the Policy
granted to the Assignee hereby, as security for all rights of and obligations
owed to the Assignee under the Agreement.
C. It is expressly agreed that the Assignee's interest in the Policy
under and by virtue of this Assignment shall be limited to the following
specific rights, and no others: (1) in the case of the death of the Owner, the
right to be paid the amounts due it under PART ONE of Article 7 of the Agreement
by recovering said amounts directly from the Insurer out of the net death
proceeds of the Policy; (2) in the event that Agreement is terminated pursuant
to Article 8, Sections A or B, the right to be paid the amount due it, if any,
under Article 6 of the Agreement. Neither party shall have the right to borrow
against the Policy, except that the Owner may borrow against the Policy after
attaining the age of 65, so long as such borrowing shall not include funds from
the Assignee's interest in the Policy.
D. Notwithstanding this Assignment, the Owner shall specifically retain
all incidents of ownership in and to the Policy, including, but not limited, to:
(1) in accordance with the terms of the Agreement, the right to cancel or
surrender the Policy and to receive, subject to Paragraph C. 2. hereof, the
surrender value thereof at any time provided by the terms of the Policy and at
such other times as the Insurer may allow; (2) the right to designate and change
the Policy beneficiary, with respect to the amount to be paid pursuant to PART
TWO of Article 7 of the Agreement; (3) the right to elect any optional methods
of settlement with regard to the death benefit under PART TWO of Article 7; (4)
the right to borrow against the Policy after the Owner attains age 65, so long
as such borrowing shall not include funds from the Assignee's interest in the
Policy; (5) the right to designate any reallocation of unit values as permitted
by the Policy subject to a right of the Assignee to disapprove a particular
allocation which it deems inappropriate; and (6) all other rights contained
-1-
<PAGE>
in the Policy to the extent the exercise of such rights does not adversely
affect the interest of the Assignee; provided, however, that all of the
foregoing rights retained by the Owner in the Policy shall be subject to the
terms and conditions of the Agreement.
E. The Assignee agrees with the Owner as follows: (1) any funds
received by Assignee from the Insurer which are attributable to the portion of
the death benefit allocated to PART TWO of Article 7 of the Agreement shall be
paid by the Assignee to the beneficiaries designated by the Owner; and (2) if
the Policy is in the possession of the Assignee, the Assignee will, upon the
Owner's request, forward the Policy to the Insurer, without unreasonable delay,
for endorsement of any designation or change of beneficiary, any election of
optional mode of settlement, or the exercise of any other right reserved by the
Owner hereunder.
F. Notwithstanding anything in this Assignment to the contrary, the
Insurer shall be under no obligation to monitor the obligation of the Assignee
hereunder to pay to the designated beneficiaries of the Owner any amounts
received from the Insurer under PART TWO of Article 7 of the Agreement after
payment of PART ONE to the Assignee under the Agreement; and the Insurer shall
have no obligation or liability to any person or entity if the Assignee fails to
pay such amounts as required hereunder.
G. The Insurer is hereby authorized to recognize, and is protected in
recognizing, the Assignee's claims to amounts due it hereunder without
investigating the validity of its claim thereto, the reason for any action taken
by the Assignee, the validity or accuracy of the amount of any of the
liabilities of the Owner to the Assignee under the Agreement, the existence of
any default therein, the giving of any notice required therein, or the
application to be made by the Assignee of any amounts to be paid to the
Assignee. A receipt executed solely by the Assignee for any amounts received by
it from the Insurer shall be a full discharge and release of the Insurer from
the obligations released thereby.
H. In furtherance hereof, the Owner appoints the Assignee his
attorney-in-fact for the following purposes:
1. to receive the portion of the death benefit payable to the
Assignee upon the death of the Owner under PART ONE of Article
7 of the Agreement; and
2. to receive, upon termination of the Agreement pursuant to
Article 8, Sections A or B thereof, the amount, if any,
designated in Article 6, Sections A or B of the Agreement, as
the case may be.
This appointment is coupled with an interest in the Assignee and shall
be irrevocable so long as the Agreement remains in force.
I. The Insurer shall not comply with a request made by the Owner for
cancellation or surrender of the Policy without the consent of the Assignee.
Upon receipt of an assented-to request for cancellation or surrender, the
Insurer shall terminate the Policy and this Assignment shall be of
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<PAGE>
no further force or effect; provided, however, that the Insurer shall set aside
and deduct from any amounts to be paid to the Owner under the terms of the
Policy in consequence of its cancellation or surrender, the amount due to the
Assignee under the provisions of Article 6 of the Agreement, which amount shall
be paid to the Assignee by the Insurer.
J. In the event of any conflict between the provisions of this
Assignment and the provisions of the Agreement with respect to the Policy or the
Assignee's rights therein, the provisions of the Agreement shall prevail.
K. The Owner declares that no proceedings in bankruptcy are pending
against the Owner and that the Owner's property is not subject to any assignment
for the benefit of creditors of the Owner.
Signed and sealed as of the 22 day of February, 1999.
/s/ Kevin Burns
---------------------------------
Kevin Burns, Owner
Date: February 22, 1999
Accepted and Agreed:
DM Management Company
By: /s/ Olga L. Conley
----------------------------------
Its: Chief Financial Officer
---------------------------------
Date: February 22, 1999
ACKNOWLEDGEMENT OF SIGNATURE OF OWNER
COMMONWEALTH OF MASSACHUSETTS )
COUNTY OF PLYMOUTH ) ss:
On the 22 day of February, 1999, before me personally came Kevin Burns, to
me known to be the individual described in and who executed the assignment above
and acknowledged to me that he executed the same.
/s/ Patricia L. Eppich
------------------------------------
Notary Public
My commission expires: 4/1/05
--------------
[SEAL]
PATRICIA L EPPICH
Notary Public
My Commision Expires April 1, 2005
-3-
<PAGE>
ACKNOWLEDGEMENT OF SIGNATURE OF ASSIGNEE
COMMONWEALTH OF MASSACHUSETTS )
COUNTY OF PLYMOUTH ) ss:
On the 22 day of February, 1999, before me personally came Olga L. Conley, who
being by me duly sworn, did depose and say that he is the Chief Financial
Officer of DM Management Company, the corporation described in and which
executed the acceptance and agreement of assignment above; and that he signed
his name thereto by the authority granted to his office.
/s/ Patricia L. Eppich
------------------------------------
Notary Public
My commission expires: 4/1/05
--------------
[SEAL]
PATRICIA L EPPICH
Notary Public
My Commision Expires April 1, 2005
-4-
<PAGE>
Exhibit 10.21
SPLIT DOLLAR AGREEMENT
ALLMERICA LIFE INSURANCE
POLICY NO. V062874300
AGREEMENT made as of this 24 day of February, 1999, by and between Olga
Conley (the "Employee"), and DM Management Company, a Delaware corporation (the
"Employer").
WHEREAS, the Employee wishes to establish a life insurance program for
the benefit and protection of his family under Policy No. V062874300 (the
"Policy") issued by Allmerica Financial Life Insurance and Annuity Company, of
Worcester, Massachusetts (the "Insurer"); and
WHEREAS, the Employer wishes to help the Employee provide such
insurance for the benefit and protection of his family by the payment of the
premiums due on the Policy in accordance with Article 2 hereof; and
WHEREAS, the Employee will be the sole owner of the Policy, and will
assign the Policy to the Employer for the purpose of providing security for the
repayment of the amounts which the Employer will contribute toward payment of
the premium due or to become due on the Policy pursuant to an agreement of even
date to be executed by the parties hereto (the "Collateral Assignment"); and
WHEREAS, it is the desire of the parties to define the extent of the
Employer's interest in the cash surrender value and death proceeds of the
Policy;
NOW THEREFORE, in consideration of the mutual promises contained
herein, it is agreed between the parties hereto as follows:
ARTICLE 1: OWNERSHIP OF POLICY
The Policy is the exclusive property of the Employee, who may exercise
all rights of ownership with respect to his interest therein, subject to the
security interest of the Employer as expressed in this Agreement and the
Collateral Assignment and to any death benefit which may become due to the
Employer.
ARTICLE 2: PAYMENT OF PREMIUMS
A. For the first seven (7) years the Policy is in force, or until this
Agreement is earlier terminated as provided in Article 8, the Employer shall be
responsible for the payment of (i) the scheduled premium, or (ii) such lesser
amount as the Insurer advises is consistent with the insurance features of the
Policy. In addition, after the expiration of said seven-year period and while
this Agreement is still in effect, the Employer may make such additional
payments as the Insurer advises is consistent with maintaining the intended
value of the Policy but only if such greater amount or
<PAGE>
additional payments are approved by the Compensation Committee of the Employer's
Board of Directors.
B. The Employee understands that he will recognize taxable income in
each year with respect to the life insurance protection afforded to the Employee
in accordance with Internal Revenue Service rulings and regulations.
C. The Employer shall, before the end of any grace period provided in
the Policy for each premium payment, remit the annual premiums as stated in the
Policy until this Agreement is terminated as provided in Article 8. If
requested, the Employer shall give proof to the Employee of the timely payment
of each premium.
ARTICLE 3: COLLATERAL ASSIGNMENT
To secure the repayment to the Employer of an amount equal to the
aggregate amount of its premium payments under the Policy to the extent provided
in Article 6, the Employee has contemporaneously with the execution of this
Agreement assigned the Policy to the Employer as collateral, by means of the
form of Collateral Assignment attached to this Agreement as Schedule 1. The
Collateral Assignment shall not be altered, terminated or amended by Employee
without the express written consent of the Employer. The parties agree to take
all action necessary to cause such assignment to conform to the provisions of
this Agreement.
ARTICLE 4: RIGHTS IN POLICY
A. The Employer shall have no right to borrow against the Policy.
B. The Employee, in recognition of the defined contribution provisions
of this Agreement and the variable nature of the death benefits, shall have the
right to allocate the aggregate account value to particular investment vehicles,
subject to a right of the Employer to disapprove a particular investment vehicle
which it deems inappropriate.
C. The Employee shall have the right to exchange the Policy for such
other policies and/or insurers that he deems appropriate based upon the
investment performance or financial condition of the Insurer, subject to the
approval of the Employer, which approval shall not unreasonably be denied.
Action by the Employee or the Employer to change the Policy and/or insurer
pursuant to this paragraph shall not otherwise alter the rights and
responsibilities of the Employer and the Employee as set forth in this
Agreement.
D. The Employer shall have no responsibility for a shortfall in the
projected total return on the paid-in premiums available to provide the death
benefit.
E. The Employer shall not take any action that might endanger the
interest of the Employee in the Policy. The Employee shall not take any action
that might endanger the interest of the Employer in the Policy.
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<PAGE>
ARTICLE 5: EMPLOYEE'S RIGHTS IN POLICY
The Employee retains all other rights in the Policy not specifically
assigned to the Employer including, but not limited to, the following rights:
A. The right to surrender the Policy as set forth in Paragraph D of
the Collateral Assignment.
B. The right to change the beneficiary of the Policy, to the extent of
his interest.
C. The right to select optional methods of settlement with regard to
the death benefit provided in PART TWO of Article 7.
D. All other rights contained in the Policy, to the extent the exercise
of such rights does not adversely affect the Employer's interest in the Policy.
ARTICLE 6: PAYMENT OF CASH SURRENDER VALUE
A. Except as set forth in this Article 6, Section B, in the event this
Agreement is terminated pursuant to Section A or B of Article 8, the Employer
shall have the unqualified right to receive from the Insurer a sum which is
equal to the lesser of (a) the then cash surrender value as defined in the
Policy or (b) the aggregate unreimbursed amount of premium payments with respect
to the Policy for which the Employer was responsible pursuant to Article 2,
Section A (the "Premium Reimbursement"). This amount shall be established in a
written statement to the Insurer by the Employer, and the Insurer shall have the
right, without liability to the Employee or his beneficiary or beneficiaries of
the Policy, to rely exclusively upon such statement. The Employer shall, upon
receiving such sum, release the Collateral Assignment of the Policy.
B. In the event that this Agreement is terminated pursuant to Section B
of Article 8 after the occurrence of a "Terminating Event" (as defined in
Section C of this Article 6), the Employer shall not be entitled to receive the
Premium Reimbursement pursuant to Section A of Article 6.
C. For purposes of this Article 6, a "Terminating Event" shall mean any
of the following if it occurs within two years of a "Change in Control" (as
defined in Section E of this Article 6):
(i) termination by the Employer of the Employee's employment
with the Employer for any reason other than (a) the Employee's death or
disability, or (b) for "Cause" (as such term is defined in Section D of this
Article 6), or
(ii) Employee's resignation as an employee of the Employer,
other than for reasons of disability, following a significant reduction in the
nature or scope of the Employee's duties, responsibilities, authority and powers
from the duties, responsibilities, authority and powers exercised by the
Employee immediately prior to the Change in Control or a reduction in the
Employee's annual base salary as in effect on the date of the Change in Control,
except for across-the-board salary reductions similarly affecting all management
personnel of the Employer (or the
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<PAGE>
surviving entity, in the case of a merger or acquisition in which the Employer
is not the surviving entity).
D. For purposes of Section C of this Article 6, "Cause" shall mean:
(i) deliberate dishonesty with respect to the Employer or any
subsidiary or affiliate thereof;
(ii) conviction of a crime involving moral turpitude; or
(iii) gross and willful failure to perform a substantial
portion of the Employee's duties and responsibilities as an officer of the
Employer, which failure continues for more than thirty days after written notice
given to the Employee pursuant to a two-thirds vote of all of the members of the
Board of Directors of the Employer then in office, such vote to set forth in
reasonable detail the nature of such failure.
E. For the purposes of this Article 6, "Change in Control" shall mean
the occurrence of any one or more of the following events:
(i) if there is a merger or consolidation of the Employer with
any other entity and the voting securities of the Employer outstanding
immediately prior to such merger or consolidation do not continue to represent
(either by remaining outstanding or by being converted into voting securities of
the surviving entity) more than fifty percent (50%) of the combined voting power
of the voting securities of the Employer or such surviving entity immediately
after such merger or consolidation, or
(ii) when any person or entity or group of persons or entities
either related or acting in concert becomes the "beneficial owner" (as defined
in Rule 13d-3 under the Securities Exchange At of 1934, as amended) of
securities of the Employer representing more than fifty percent (50%) of the
total number of votes that may be cast for the election of directors of the
Employer (any such person or entity or group of persons or entities being
referred to, collectively in the case of any such group, as an "Acquiring
Person"), or
(iii) if the Employer sells all or substantially all of its
assets to another entity, other than in a transaction in which the voting
securities of the Employer outstanding immediately prior to such transaction
continue to represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) more than fifty percent (50%) of
the combined voting power of the voting securities of the Employer or such
surviving entity immediately after such transaction, or
(iv) during any period of two consecutive years (not including
any period prior to the execution of this Agreement), individuals who are
Continuing Directors (as hereinafter defined) cease for any reason to constitute
at least a majority of the Board of Directors of the Employer. For this purpose,
a "Continuing Director" shall mean (a) an individual who was a director of the
Employer at the beginning of such period or (b) any new director (other than a
director designated
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<PAGE>
by an Acquiring Person) whose election by the Board or nomination for election
by the Board, a committee thereof or the Employer's stockholders was approved by
a vote of a majority of the directors then still in office who either were
directors at the beginning of such period or whose election or nomination for
election was previously so approved; or
(v) one or more Acquiring Persons has succeeded, as the result
of or in response to actual or threatened election contests, whether by
settlement or otherwise, in having elected to the Board of Directors of the
Employer, whether at one time or on a cumulative basis, a sufficient number of
its nominees to constitute (a) more than thirty percent (30%) of the members of
the Employer's Board of Directors, rounded down to the nearest whole number, if
the number of directors on the Employer's Board is eight or less, or (b) more
than forty percent (40%) of the members of the Employer's Board, rounded down to
the nearest whole number, if the number of directors on the Employer's Board is
nine or more.
ARTICLE 7: PAYMENT OF DEATH BENEFIT
In the event of the death of the Employee while the Policy and this
Agreement are in force, the net proceeds of the Policy shall be divided into two
parts and paid as follows:
PART ONE: To the Employer, a sum equal to the aggregate
unreimbursed amount of premium payments for which the Employer
was responsible pursuant to Section A of Article 2, unless
Section B of Article 6 applies.
PART TWO: To the designated beneficiaries of the Employee, the
remaining proceeds of the Policy.
ARTICLE 8: TERMINATION OF AGREEMENT
This Agreement shall terminate:
A. Upon surrender of the Policy by the Employee, except when the Policy
is surrendered and a new policy is issued pursuant to an exchange under
Article 4, Section C.
B. Upon the termination of the employment of the Employee for any
reason other than retirement at or after attaining the age of 65.
C. On the death of the Employee.
ARTICLE 9: EXCHANGE OF POLICY
In the event the Employer is required to exchange the Policy under
Article 4, Section C, the Employee shall execute any forms necessary or
appropriate to effect such exchange including, without limitation, the surrender
of the Policy, the transfer of proceeds to the new insurer and the
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<PAGE>
execution of a new Split Dollar Agreement and Collateral Assignment. Such
exchange shall qualify under Section 1035 of the Internal Revenue Code or
successor provisions of similar import.
ARTICLE 10: OBLIGATIONS OF INSURER
Any payments made or action taken by the Insurer in accordance with the
provisions of the Policy and the Collateral Assignment shall fully discharge it
from all claims, suits, and demands of all persons whatsoever.
ARTICLE 11: MISCELLANEOUS
A. This Agreement shall be binding upon the parties hereto, their
heirs, legal representative, successors and assigns.
B. This Agreement and the Collateral Assignment embody all agreements
between or among the parties with respect to the Policy, and no change,
alteration, or modification may be made except in writing signed by all parties
hereto.
C. This Agreement shall be governed by, and construed in accordance
with the provisions of, the laws of the Commonwealth of Massachusetts without
regard to its principles of conflicts of laws.
D. Any dispute, controversy or claim with respect to any party's
performance under this Agreement shall be settled by arbitration in accordance
with the laws of The Commonwealth of Massachusetts by a single arbitrator who
shall be selected by the American Arbitration Association in Boston,
Massachusetts. Such arbitration shall be conducted in the City of Boston in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association. Punitive damages shall not awarded. Judgment upon the award
rendered by the arbitrator may be entered in any court having jurisdiction
thereof.
IN WITNESS WHEREOF, the parties hereto have set their hand and seals
effective as of the day and year first above written.
/s/ Olga Conley
------------------------------------
Olga Conley, Employee
Date: February 24, 1999
DM MANAGEMENT COMPANY, Employer
By /s/ Gordon R. Cooke
---------------------------------
Its Chief Executive Officer
--------------------------------
Date: February 24, 1999
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<PAGE>
SCHEDULE 1 TO SPLIT DOLLAR AGREEMENT
ASSIGNMENT OF LIFE INSURANCE POLICY AS COLLATERAL
A. FOR VALUE RECEIVED, the undersigned Olga Conley (hereinafter the
"Owner") hereby assigns, transfers and sets over to DM Management Company, a
Delaware corporation, its successors and assigns (hereinafter the "Assignee"),
the following specific rights (and only those specific rights) in and to policy
number V062874300, issued by Allmerica Financial Life Insurance and Annuity
Company (hereinafter the "Insurer") and any supplementary contract or contracts
issued in connection therewith (said policy and any such contracts hereinafter
the "Policy"), insuring the life of the Owner, subject to all terms and
conditions of the Policy and to all superior liens, if any, which the Insurer
may have against the Policy. The Owner, by this Assignment, and the Assignee, by
acceptance of the Assignment of the Policy to it hereunder, agree to the terms
and conditions contained in the Policy.
B. This Assignment is made, and the Policy is to be held as collateral
security for, all rights of and obligations owed to the Assignee, now existing
or hereafter arising under and pursuant to a certain Split Dollar Agreement, by
and between the Owner and the Assignee of even date herewith pertaining to the
Policy (hereinafter the "Agreement"). The Owner reserves all rights and powers
in and to the Policy, except those specific, limited rights in the Policy
granted to the Assignee hereby, as security for all rights of and obligations
owed to the Assignee under the Agreement.
C. It is expressly agreed that the Assignee's interest in the Policy
under and by virtue of this Assignment shall be limited to the following
specific rights, and no others: (1) in the case of the death of the Owner, the
right to be paid the amounts due it under PART ONE of Article 7 of the Agreement
by recovering said amounts directly from the Insurer out of the net death
proceeds of the Policy; (2) in the event that Agreement is terminated pursuant
to Article 8, Sections A or B, the right to be paid the amount due it, if any,
under Article 6 of the Agreement. Neither party shall have the right to borrow
against the Policy, except that the Owner may borrow against the Policy after
attaining the age of 65, so long as such borrowing shall not include funds from
the Assignee's interest in the Policy.
D. Notwithstanding this Assignment, the Owner shall specifically retain
all incidents of ownership in and to the Policy, including, but not limited, to:
(1) in accordance with the terms of the Agreement, the right to cancel or
surrender the Policy and to receive, subject to Paragraph C. 2. hereof, the
surrender value thereof at any time provided by the terms of the Policy and at
such other times as the Insurer may allow; (2) the right to designate and change
the Policy beneficiary, with respect to the amount to be paid pursuant to PART
TWO of Article 7 of the Agreement; (3) the right to elect any optional methods
of settlement with regard to the death benefit under PART TWO of Article 7; (4)
the right to borrow against the Policy after the Owner attains age 65, so long
as such borrowing shall not include funds from the Assignee's interest in the
Policy; (5) the right to designate any reallocation of unit values as permitted
by the Policy subject to a right of the Assignee to disapprove a particular
allocation which it deems inappropriate; and (6) all other rights contained
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<PAGE>
in the Policy to the extent the exercise of such rights does not adversely
affect the interest of the Assignee; provided, however, that all of the
foregoing rights retained by the Owner in the Policy shall be subject to the
terms and conditions of the Agreement.
E. The Assignee agrees with the Owner as follows: (1) any funds
received by Assignee from the Insurer which are attributable to the portion of
the death benefit allocated to PART TWO of Article 7 of the Agreement shall be
paid by the Assignee to the beneficiaries designated by the Owner; and (2) if
the Policy is in the possession of the Assignee, the Assignee will, upon the
Owner's request, forward the Policy to the Insurer, without unreasonable delay,
for endorsement of any designation or change of beneficiary, any election of
optional mode of settlement, or the exercise of any other right reserved by the
Owner hereunder.
F. Notwithstanding anything in this Assignment to the contrary, the
Insurer shall be under no obligation to monitor the obligation of the Assignee
hereunder to pay to the designated beneficiaries of the Owner any amounts
received from the Insurer under PART TWO of Article 7 of the Agreement after
payment of PART ONE to the Assignee under the Agreement; and the Insurer shall
have no obligation or liability to any person or entity if the Assignee fails to
pay such amounts as required hereunder.
G. The Insurer is hereby authorized to recognize, and is protected in
recognizing, the Assignee's claims to amounts due it hereunder without
investigating the validity of its claim thereto, the reason for any action taken
by the Assignee, the validity or accuracy of the amount of any of the
liabilities of the Owner to the Assignee under the Agreement, the existence of
any default therein, the giving of any notice required therein, or the
application to be made by the Assignee of any amounts to be paid to the
Assignee. A receipt executed solely by the Assignee for any amounts received by
it from the Insurer shall be a full discharge and release of the Insurer from
the obligations released thereby.
H. In furtherance hereof, the Owner appoints the Assignee his
attorney-in-fact for the following purposes:
1. to receive the portion of the death benefit payable to the
Assignee upon the death of the Owner under PART ONE of
Article 7 of the Agreement; and
2. to receive, upon termination of the Agreement pursuant to
Article 8, Sections A or B thereof, the amount, if any,
designated in Article 6, Sections A or B of the Agreement, as
the case may be.
This appointment is coupled with an interest in the Assignee and shall
be irrevocable so long as the Agreement remains in force.
I. The Insurer shall not comply with a request made by the Owner for
cancellation or surrender of the Policy without the consent of the Assignee.
Upon receipt of an assented-to request for cancellation or surrender, the
Insurer shall terminate the Policy and this Assignment shall be of
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<PAGE>
no further force or effect; provided, however, that the Insurer shall set aside
and deduct from any amounts to be paid to the Owner under the terms of the
Policy in consequence of its cancellation or surrender, the amount due to the
Assignee under the provisions of Article 6 of the Agreement, which amount shall
be paid to the Assignee by the Insurer.
J. In the event of any conflict between the provisions of this
Assignment and the provisions of the Agreement with respect to the Policy or the
Assignee's rights therein, the provisions of the Agreement shall prevail.
K. The Owner declares that no proceedings in bankruptcy are pending
against the Owner and that the Owner's property is not subject to any assignment
for the benefit of creditors of the Owner.
Signed and sealed as of the 24 day of February, 1999.
/s/ Olga Conley
---------------------------------
Olga Conley, Owner
Date: February 24, 1999
Accepted and Agreed:
DM Management Company
By: /s/ Gordon R. Cooke
----------------------------
Its: Chief Executive Cooke
---------------------------
Date: February 24, 1999
ACKNOWLEDGEMENT OF SIGNATURE OF OWNER
COMMONWEALTH OF MASSACHUSETTS )
COUNTY OF PLYMOUTH ) ss:
On the 24th day of February, 1999, before me personally came Olga Conley, to
me known to be the individual described in and who executed the assignment above
and acknowledged to me that she executed the same.
/s/ Patricia L. Eppich
------------------------------------
Notary Public
My commission expires: 4\1\05
--------------
[seal]
PATRICIA L. EPPICH
Notary Public
My Commission Expires April 1,2005
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<PAGE>
ACKNOWLEDGEMENT OF SIGNATURE OF ASSIGNEE
COMMONWEALTH OF MASSACHUSETTS )
COUNTY OF Plymouth ) ss:
On the 24th day of February, 1999, before me personally came Gordon R. Cooke,
who being by me duly sworn, did depose and say that he is the Chief Executive
Officer of DM Management Company, the corporation described in and which
executed the acceptance and agreement of assignment above; and that he signed
his name thereto by the authority granted to his office.
/s/ Patricia L. Eppich
-----------------------------------
Notary Public
My commission expires: 4\1\05
-------------
[seal]
PATRICIA L. EPPICH
Notary Public
My Commission Expires April 1,2005
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<PAGE>
Exhibit 10.22
SPLIT DOLLAR AGREEMENT
ALLMERICA LIFE INSURANCE
POLICY NO. V062874900
AGREEMENT made as of this 24 day of February, 1999, by and between
Gordon Cooke (the "Employee"), and DM Management Company, a Delaware
corporation (the "Employer").
WHEREAS, the Employee wishes to establish a life insurance program for
the benefit and protection of his family under Policy No. V062874900 (the
"Policy") issued by Allmerica Financial Life Insurance and Annuity Company, of
Worcester, Massachusetts (the "Insurer"); and
WHEREAS, the Employer wishes to help the Employee provide such
insurance for the benefit and protection of his family by the payment of the
premiums due on the Policy in accordance with Article 2 hereof; and
WHEREAS, the Employee will be the sole owner of the Policy, and will
assign the Policy to the Employer for the purpose of providing security for the
repayment of the amounts which the Employer will contribute toward payment of
the premium due or to become due on the Policy pursuant to an agreement of even
date to be executed by the parties hereto (the "Collateral Assignment"); and
WHEREAS, it is the desire of the parties to define the extent of the
Employer's interest in the cash surrender value and death proceeds of the
Policy;
NOW THEREFORE, in consideration of the mutual promises contained
herein, it is agreed between the parties hereto as follows:
ARTICLE 1: OWNERSHIP OF POLICY
The Policy is the exclusive property of the Employee, who may exercise
all rights of ownership with respect to his interest therein, subject to the
security interest of the Employer as expressed in this Agreement and the
Collateral Assignment and to any death benefit which may become due to the
Employer.
ARTICLE 2: PAYMENT OF PREMIUMS
A. For the first seven (7) years the Policy is in force, or until this
Agreement is earlier terminated as provided in Article 8, the Employer shall be
responsible for the payment of (i) the scheduled premium, or (ii) such lesser
amount as the Insurer advises is consistent with the insurance features of the
Policy. In addition, after the expiration of said seven-year period and while
this Agreement is still in effect, the Employer may make such additional
payments as the Insurer advises is consistent with maintaining the intended
value of the Policy but only if such greater amount or
<PAGE>
additional payments are approved by the Compensation Committee of the Employer's
Board of Directors.
B. The Employee understands that he will recognize taxable income in
each year with respect to the life insurance protection afforded to the Employee
in accordance with Internal Revenue Service rulings and regulations.
C. The Employer shall, before the end of any grace period provided in
the Policy for each premium payment, remit the annual premiums as stated in the
Policy until this Agreement is terminated as provided in Article 8. If
requested, the Employer shall give proof to the Employee of the timely payment
of each premium.
ARTICLE 3: COLLATERAL ASSIGNMENT
To secure the repayment to the Employer of an amount equal to the
aggregate amount of its premium payments under the Policy to the extent provided
in Article 6, the Employee has contemporaneously with the execution of this
Agreement assigned the Policy to the Employer as collateral, by means of the
form of Collateral Assignment attached to this Agreement as Schedule 1. The
Collateral Assignment shall not be altered, terminated or amended by Employee
without the express written consent of the Employer. The parties agree to take
all action necessary to cause such assignment to conform to the provisions of
this Agreement.
ARTICLE 4: RIGHTS IN POLICY
A. The Employer shall have no right to borrow against the Policy.
B. The Employee, in recognition of the defined contribution provisions
of this Agreement and the variable nature of the death benefits, shall have the
right to allocate the aggregate account value to particular investment vehicles,
subject to a right of the Employer to disapprove a particular investment vehicle
which it deems inappropriate.
C. The Employee shall have the right to exchange the Policy for such
other policies and/or insurers that he deems appropriate based upon the
investment performance or financial condition of the Insurer, subject to the
approval of the Employer, which approval shall not unreasonably be denied.
Action by the Employee or the Employer to change the Policy and/or insurer
pursuant to this paragraph shall not otherwise alter the rights and
responsibilities of the Employer and the Employee as set forth in this
Agreement.
D. The Employer shall have no responsibility for a shortfall in the
projected total return on the paid-in premiums available to provide the death
benefit.
E. The Employer shall not take any action that might endanger the
interest of the Employee in the Policy. The Employee shall not take any action
that might endanger the interest of the Employer in the Policy.
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<PAGE>
ARTICLE 5: EMPLOYEE'S RIGHTS IN POLICY
The Employee retains all other rights in the Policy not specifically
assigned to the Employer including, but not limited to, the following rights:
A. The right to surrender the Policy as set forth in Paragraph D of the
Collateral Assignment.
B. The right to change the beneficiary of the Policy, to the extent of
his interest.
C. The right to select optional methods of settlement with regard to
the death benefit provided in PART TWO of Article 7.
D. All other rights contained in the Policy, to the extent the exercise
of such rights does not adversely affect the Employer's interest in the Policy.
ARTICLE 6: PAYMENT OF CASH SURRENDER VALUE
A. Except as set forth in this Article 6, Section B, in the event this
Agreement is terminated pursuant to Section A or B of Article 8, the Employer
shall have the unqualified right to receive from the Insurer a sum which is
equal to the lesser of (a) the then cash surrender value as defined in the
Policy or (b) the aggregate unreimbursed amount of premium payments with respect
to the Policy for which the Employer was responsible pursuant to Article 2,
Section A (the "Premium Reimbursement"). This amount shall be established in a
written statement to the Insurer by the Employer, and the Insurer shall have the
right, without liability to the Employee or his beneficiary or beneficiaries of
the Policy, to rely exclusively upon such statement. The Employer shall, upon
receiving such sum, release the Collateral Assignment of the Policy.
B. In the event that this Agreement is terminated pursuant to Section B
of Article 8 after the occurrence of a "Terminating Event" (as defined in
Section C of this Article 6), the Employer shall not be entitled to receive the
Premium Reimbursement pursuant to Section A of Article 6.
C. For purposes of this Article 6, a "Terminating Event" shall mean any
of the following if it occurs within two years of a "Change in Control" (as
defined in Section E of this Article 6):
(i) termination by the Employer of the Employee's employment
with the Employer for any reason other than (a) the Employee's death or
disability, or (b) for "Cause" (as such term is defined in Section D of this
Article 6), or
(ii) Employee's resignation as an employee of the Employer,
other than for reasons of disability, following a significant reduction in the
nature or scope of the Employee's duties, responsibilities, authority and powers
from the duties, responsibilities, authority and powers exercised by the
Employee immediately prior to the Change in Control or a reduction in the
Employee's annual base salary as in effect on the date of the Change in Control,
except for across-the-board salary reductions similarly affecting all management
personnel of the Employer (or the
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<PAGE>
surviving entity, in the case of a merger or acquisition in which the Employer
is not the surviving entity).
D. For purposes of Section C of this Article 6, "Cause" shall mean:
(i) deliberate dishonesty with respect to the Employer or any
subsidiary or affiliate thereof;
(ii) conviction of a crime involving moral turpitude; or
(iii) gross and willful failure to perform a substantial
portion of the Employee's duties and responsibilities as an officer of the
Employer, which failure continues for more than thirty days after written notice
given to the Employee pursuant to a two-thirds vote of all of the members of the
Board of Directors of the Employer then in office, such vote to set forth in
reasonable detail the nature of such failure.
E. For the purposes of this Article 6, "Change in Control" shall mean
the occurrence of any one or more of the following events:
(i) if there is a merger or consolidation of the Employer with
any other entity and the voting securities of the Employer outstanding
immediately prior to such merger or consolidation do not continue to represent
(either by remaining outstanding or by being converted into voting securities of
the surviving entity) more than fifty percent (50%) of the combined voting power
of the voting securities of the Employer or such surviving entity immediately
after such merger or consolidation, or
(ii) when any person or entity or group of persons or entities
either related or acting in concert becomes the "beneficial owner" (as defined
in Rule 13d-3 under the Securities Exchange At of 1934, as amended) of
securities of the Employer representing more than fifty percent (50%) of the
total number of votes that may be cast for the election of directors of the
Employer (any such person or entity or group of persons or entities being
referred to, collectively in the case of any such group, as an "Acquiring
Person"), or
(iii) if the Employer sells all or substantially all of its
assets to another entity, other than in a transaction in which the voting
securities of the Employer outstanding immediately prior to such transaction
continue to represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) more than fifty percent (50%) of
the combined voting power of the voting securities of the Employer or such
surviving entity immediately after such transaction, or
(iv) during any period of two consecutive years (not including
any period prior to the execution of this Agreement), individuals who are
Continuing Directors (as hereinafter defined) cease for any reason to constitute
at least a majority of the Board of Directors of the Employer. For this purpose,
a "Continuing Director" shall mean (a) an individual who was a director of the
Employer at the beginning of such period or (b) any new director (other than a
director designated
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<PAGE>
by an Acquiring Person) whose election by the Board or nomination for election
by the Board, a committee thereof or the Employer's stockholders was approved by
a vote of a majority of the directors then still in office who either were
directors at the beginning of such period or whose election or nomination for
election was previously so approved; or
(v) one or more Acquiring Persons has succeeded, as the result
of or in response to actual or threatened election contests, whether by
settlement or otherwise, in having elected to the Board of Directors of the
Employer, whether at one time or on a cumulative basis, a sufficient number of
its nominees to constitute (a) more than thirty percent (30%) of the members of
the Employer's Board of Directors, rounded down to the nearest whole number, if
the number of directors on the Employer's Board is eight or less, or (b) more
than forty percent (40%) of the members of the Employer's Board, rounded down to
the nearest whole number, if the number of directors on the Employer's Board is
nine or more.
ARTICLE 7: PAYMENT OF DEATH BENEFIT
In the event of the death of the Employee while the Policy and this
Agreement are in force, the net proceeds of the Policy shall be divided into two
parts and paid as follows:
PART ONE: To the Employer, a sum equal to the aggregate
unreimbursed amount of premium payments for which the Employer
was responsible pursuant to Section A of Article 2, unless
Section B of Article 6 applies.
PART TWO: To the designated beneficiaries of the Employee,
the remaining proceeds of the Policy.
ARTICLE 8: TERMINATION OF AGREEMENT
This Agreement shall terminate:
A. Upon surrender of the Policy by the Employee, except when the Policy
is surrendered and a new policy is issued pursuant to an exchange under
Article 4, Section C.
B. Upon the termination of the employment of the Employee for any
reason other than retirement at or after attaining the age of 65.
C. On the death of the Employee.
ARTICLE 9: EXCHANGE OF POLICY
In the event the Employer is required to exchange the Policy under
Article 4, Section C, the Employee shall execute any forms necessary or
appropriate to effect such exchange including, without limitation, the surrender
of the Policy, the transfer of proceeds to the new insurer and the
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<PAGE>
execution of a new Split Dollar Agreement and Collateral Assignment. Such
exchange shall qualify under Section 1035 of the Internal Revenue Code or
successor provisions of similar import.
ARTICLE 10: OBLIGATIONS OF INSURER
Any payments made or action taken by the Insurer in accordance with the
provisions of the Policy and the Collateral Assignment shall fully discharge it
from all claims, suits, and demands of all persons whatsoever.
ARTICLE 11: MISCELLANEOUS
A. This Agreement shall be binding upon the parties hereto, their
heirs, legal representative, successors and assigns.
B. This Agreement and the Collateral Assignment embody all agreements
between or among the parties with respect to the Policy, and no change,
alteration, or modification may be made except in writing signed by all parties
hereto.
C. This Agreement shall be governed by, and construed in accordance
with the provisions of, the laws of the Commonwealth of Massachusetts without
regard to its principles of conflicts of laws.
D. Any dispute, controversy or claim with respect to any party's
performance under this Agreement shall be settled by arbitration in accordance
with the laws of The Commonwealth of Massachusetts by a single arbitrator who
shall be selected by the American Arbitration Association in Boston,
Massachusetts. Such arbitration shall be conducted in the City of Boston in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association. Punitive damages shall not awarded. Judgment upon the award
rendered by the arbitrator may be entered in any court having jurisdiction
thereof.
IN WITNESS WHEREOF, the parties hereto have set their hand and seals
effective as of the day and year first above written.
/s/ Gordon Cooke
------------------------------------
Gordon Cooke, Employee
Date: February 24, 1999
DM MANAGEMENT COMPANY, Employer
By /s/ Olga L. Conley
---------------------------------
Its Chief Financial Officer
--------------------------------
Date: February 24, 1999
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<PAGE>
SCHEDULE 1 TO SPLIT DOLLAR AGREEMENT
ASSIGNMENT OF LIFE INSURANCE POLICY AS COLLATERAL
A. FOR VALUE RECEIVED, the undersigned Gordon Cooke (hereinafter the
"Owner") hereby assigns, transfers and sets over to DM Management Company, a
Delaware corporation, its successors and assigns (hereinafter the "Assignee"),
the following specific rights (and only those specific rights) in and to policy
number V062874900, issued by Allmerica Financial Life Insurance and Annuity
Company (hereinafter the "Insurer") and any supplementary contract or contracts
issued in connection therewith (said policy and any such contracts hereinafter
the "Policy"), insuring the life of the Owner, subject to all terms and
conditions of the Policy and to all superior liens, if any, which the Insurer
may have against the Policy. The Owner, by this Assignment, and the Assignee, by
acceptance of the Assignment of the Policy to it hereunder, agree to the terms
and conditions contained in the Policy.
B. This Assignment is made, and the Policy is to be held as collateral
security for, all rights of and obligations owed to the Assignee, now existing
or hereafter arising under and pursuant to a certain Split Dollar Agreement, by
and between the Owner and the Assignee of even date herewith pertaining to the
Policy (hereinafter the "Agreement"). The Owner reserves all rights and powers
in and to the Policy, except those specific, limited rights in the Policy
granted to the Assignee hereby, as security for all rights of and obligations
owed to the Assignee under the Agreement.
C. It is expressly agreed that the Assignee's interest in the Policy
under and by virtue of this Assignment shall be limited to the following
specific rights, and no others: (1) in the case of the death of the Owner, the
right to be paid the amounts due it under PART ONE of Article 7 of the Agreement
by recovering said amounts directly from the Insurer out of the net death
proceeds of the Policy; (2) in the event that Agreement is terminated pursuant
to Article 8, Sections A or B, the right to be paid the amount due it, if any,
under Article 6 of the Agreement. Neither party shall have the right to borrow
against the Policy, except that the Owner may borrow against the Policy after
attaining the age of 65, so long as such borrowing shall not include funds from
the Assignee's interest in the Policy.
D. Notwithstanding this Assignment, the Owner shall specifically retain
all incidents of ownership in and to the Policy, including, but not limited, to:
(1) in accordance with the terms of the Agreement, the right to cancel or
surrender the Policy and to receive, subject to Paragraph C. 2. hereof, the
surrender value thereof at any time provided by the terms of the Policy and at
such other times as the Insurer may allow; (2) the right to designate and change
the Policy beneficiary, with respect to the amount to be paid pursuant to PART
TWO of Article 7 of the Agreement; (3) the right to elect any optional methods
of settlement with regard to the death benefit under PART TWO of Article 7; (4)
the right to borrow against the Policy after the Owner attains age 65, so long
as such borrowing shall not include funds from the Assignee's interest in the
Policy; (5) the right to designate any reallocation of unit values as permitted
by the Policy subject to a right of the Assignee to disapprove a particular
allocation which it deems inappropriate; and (6) all other rights contained
-1-
<PAGE>
in the Policy to the extent the exercise of such rights does not adversely
affect the interest of the Assignee; provided, however, that all of the
foregoing rights retained by the Owner in the Policy shall be subject to the
terms and conditions of the Agreement.
E. The Assignee agrees with the Owner as follows: (1) any funds
received by Assignee from the Insurer which are attributable to the portion of
the death benefit allocated to PART TWO of Article 7 of the Agreement shall be
paid by the Assignee to the beneficiaries designated by the Owner; and (2) if
the Policy is in the possession of the Assignee, the Assignee will, upon the
Owner's request, forward the Policy to the Insurer, without unreasonable delay,
for endorsement of any designation or change of beneficiary, any election of
optional mode of settlement, or the exercise of any other right reserved by the
Owner hereunder.
F. Notwithstanding anything in this Assignment to the contrary, the
Insurer shall be under no obligation to monitor the obligation of the Assignee
hereunder to pay to the designated beneficiaries of the Owner any amounts
received from the Insurer under PART TWO of Article 7 of the Agreement after
payment of PART ONE to the Assignee under the Agreement; and the Insurer shall
have no obligation or liability to any person or entity if the Assignee fails to
pay such amounts as required hereunder.
G. The Insurer is hereby authorized to recognize, and is protected in
recognizing, the Assignee's claims to amounts due it hereunder without
investigating the validity of its claim thereto, the reason for any action taken
by the Assignee, the validity or accuracy of the amount of any of the
liabilities of the Owner to the Assignee under the Agreement, the existence of
any default therein, the giving of any notice required therein, or the
application to be made by the Assignee of any amounts to be paid to the
Assignee. A receipt executed solely by the Assignee for any amounts received by
it from the Insurer shall be a full discharge and release of the Insurer from
the obligations released thereby.
H. In furtherance hereof, the Owner appoints the Assignee his
attorney-in-fact for the following purposes:
1. to receive the portion of the death benefit payable to the
Assignee upon the death of the Owner under PART ONE of Article
7 of the Agreement; and
2. to receive, upon termination of the Agreement pursuant to
Article 8, Sections A or B thereof, the amount, if any,
designated in Article 6, Sections A or B of the Agreement, as
the case may be.
This appointment is coupled with an interest in the Assignee and shall
be irrevocable so long as the Agreement remains in force.
I. The Insurer shall not comply with a request made by the Owner for
cancellation or surrender of the Policy without the consent of the Assignee.
Upon receipt of an assented-to request for cancellation or surrender, the
Insurer shall terminate the Policy and this Assignment shall be of
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<PAGE>
no further force or effect; provided, however, that the Insurer shall set aside
and deduct from any amounts to be paid to the Owner under the terms of the
Policy in consequence of its cancellation or surrender, the amount due to the
Assignee under the provisions of Article 6 of the Agreement, which amount shall
be paid to the Assignee by the Insurer.
J. In the event of any conflict between the provisions of this
Assignment and the provisions of the Agreement with respect to the Policy or the
Assignee's rights therein, the provisions of the Agreement shall prevail.
K. The Owner declares that no proceedings in bankruptcy are pending
against the Owner and that the Owner's property is not subject to any assignment
for the benefit of creditors of the Owner.
Signed and sealed as of the 24 day of February, 1999.
/s/ Gordon Cooke
------------------------------------
Gordon Cooke, Owner
Date: February 24, 1999
Accepted and Agreed:
DM Management Company
By: /s/ Olga L. Conley
----------------------------------
Its: Chief Financial Officer
---------------------------------
Date: February 24, 1999
ACKNOWLEDGEMENT OF SIGNATURE OF OWNER
COMMONWEALTH OF MASSACHUSETTS )
COUNTY OF Plymouth ) ss:
On the 24th day of February, 1999, before me personally came Gordon Cooke,
to me known to be the individual described in and who executed the assignment
above and acknowledged to me that he executed the same.
/s/ Patricia L. Eppich
------------------------------------
Notary Public
My commission expires: 4\1\05
--------------
[seal]
PATRICIA L. EPPICH
Notary Public
My Commission Expires April 1,2005
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<PAGE>
ACKNOWLEDGEMENT OF SIGNATURE OF ASSIGNEE
COMMONWEALTH OF MASSACHUSETTS )
COUNTY OF Plymouth )ss:
On the 24th day of February, 1999, before me personally came Olga L. Conley, who
being by me duly sworn, did depose and say that he is the Chief Financial
Officer of DM Management Company, the corporation described in and which
executed the acceptance and agreement of assignment above; and that he signed
his name thereto by the authority granted to his office.
/s/ Patricia L. Eppich
------------------------------------
Notary Public
My commission expires: 4\1\05
--------------
[seal]
PATRICIA L. EPPICH
Notary Public
My Commission Expires April 1,2005
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<PAGE>
Exhibit 10.23
SPLIT DOLLAR AGREEMENT
ALLMERICA LIFE INSURANCE
POLICY NO. V062874700
AGREEMENT made as of this 24 day of February, 1999, by and between
John Hayes (the "Employee"), and DM Management Company, a Delaware
corporation (the "Employer").
WHEREAS, the Employee wishes to establish a life insurance program for
the benefit and protection of his family under Policy No. V062874700 (the
"Policy") issued by Allmerica Financial Life Insurance and Annuity Company, of
Worcester, Massachusetts (the "Insurer"); and
WHEREAS, the Employer wishes to help the Employee provide such
insurance for the benefit and protection of his family by the payment of the
premiums due on the Policy in accordance with Article 2 hereof; and
WHEREAS, the Employee will be the sole owner of the Policy, and will
assign the Policy to the Employer for the purpose of providing security for the
repayment of the amounts which the Employer will contribute toward payment of
the premium due or to become due on the Policy pursuant to an agreement of even
date to be executed by the parties hereto (the "Collateral Assignment"); and
WHEREAS, it is the desire of the parties to define the extent of the
Employer's interest in the cash surrender value and death proceeds of the
Policy;
NOW THEREFORE, in consideration of the mutual promises contained
herein, it is agreed between the parties hereto as follows:
ARTICLE 1: OWNERSHIP OF POLICY
The Policy is the exclusive property of the Employee, who may exercise
all rights of ownership with respect to his interest therein, subject to the
security interest of the Employer as expressed in this Agreement and the
Collateral Assignment and to any death benefit which may become due to the
Employer.
ARTICLE 2: PAYMENT OF PREMIUMS
A. For the first seven (7) years the Policy is in force, or until this
Agreement is earlier terminated as provided in Article 8, the Employer shall be
responsible for the payment of (i) the scheduled premium, or (ii) such lesser
amount as the Insurer advises is consistent with the insurance features of the
Policy. In addition, after the expiration of said seven-year period and while
this Agreement is still in effect, the Employer may make such additional
payments as the Insurer advises is consistent with maintaining the intended
value of the Policy but only if such greater amount or
<PAGE>
additional payments are approved by the Compensation Committee of the Employer's
Board of Directors.
B. The Employee understands that he will recognize taxable income in
each year with respect to the life insurance protection afforded to the Employee
in accordance with Internal Revenue Service rulings and regulations.
C. The Employer shall, before the end of any grace period provided in
the Policy for each premium payment, remit the annual premiums as stated in the
Policy until this Agreement is terminated as provided in Article 8. If
requested, the Employer shall give proof to the Employee of the timely payment
of each premium.
ARTICLE 3: COLLATERAL ASSIGNMENT
To secure the repayment to the Employer of an amount equal to the
aggregate amount of its premium payments under the Policy to the extent provided
in Article 6, the Employee has contemporaneously with the execution of this
Agreement assigned the Policy to the Employer as collateral, by means of the
form of Collateral Assignment attached to this Agreement as Schedule 1. The
Collateral Assignment shall not be altered, terminated or amended by Employee
without the express written consent of the Employer. The parties agree to take
all action necessary to cause such assignment to conform to the provisions of
this Agreement.
ARTICLE 4: RIGHTS IN POLICY
A. The Employer shall have no right to borrow against the Policy.
B. The Employee, in recognition of the defined contribution provisions
of this Agreement and the variable nature of the death benefits, shall have the
right to allocate the aggregate account value to particular investment vehicles,
subject to a right of the Employer to disapprove a particular investment vehicle
which it deems inappropriate.
C. The Employee shall have the right to exchange the Policy for such
other policies and/or insurers that he deems appropriate based upon the
investment performance or financial condition of the Insurer, subject to the
approval of the Employer, which approval shall not unreasonably be denied.
Action by the Employee or the Employer to change the Policy and/or insurer
pursuant to this paragraph shall not otherwise alter the rights and
responsibilities of the Employer and the Employee as set forth in this
Agreement.
D. The Employer shall have no responsibility for a shortfall in the
projected total return on the paid-in premiums available to provide the death
benefit.
E. The Employer shall not take any action that might endanger the
interest of the Employee in the Policy. The Employee shall not take any action
that might endanger the interest of the Employer in the Policy.
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<PAGE>
ARTICLE 5: EMPLOYEE'S RIGHTS IN POLICY
The Employee retains all other rights in the Policy not specifically
assigned to the Employer including, but not limited to, the following rights:
A. The right to surrender the Policy as set forth in Paragraph D of the
Collateral Assignment.
B. The right to change the beneficiary of the Policy, to the extent of
his interest.
C. The right to select optional methods of settlement with regard to
the death benefit provided in PART TWO of Article 7.
D. All other rights contained in the Policy, to the extent the exercise
of such rights does not adversely affect the Employer's interest in the Policy.
ARTICLE 6: PAYMENT OF CASH SURRENDER VALUE
A. Except as set forth in this Article 6, Section B, in the event this
Agreement is terminated pursuant to Section A or B of Article 8, the Employer
shall have the unqualified right to receive from the Insurer a sum which is
equal to the lesser of (a) the then cash surrender value as defined in the
Policy or (b) the aggregate unreimbursed amount of premium payments with respect
to the Policy for which the Employer was responsible pursuant to Article 2,
Section A (the "Premium Reimbursement"). This amount shall be established in a
written statement to the Insurer by the Employer, and the Insurer shall have the
right, without liability to the Employee or his beneficiary or beneficiaries of
the Policy, to rely exclusively upon such statement. The Employer shall, upon
receiving such sum, release the Collateral Assignment of the Policy.
B. In the event that this Agreement is terminated pursuant to Section B
of Article 8 after the occurrence of a "Terminating Event" (as defined in
Section C of this Article 6), the Employer shall not be entitled to receive the
Premium Reimbursement pursuant to Section A of Article 6.
C. For purposes of this Article 6, a "Terminating Event" shall mean any
of the following if it occurs within two years of a "Change in Control" (as
defined in Section E of this Article 6):
(i) termination by the Employer of the Employee's employment
with the Employer for any reason other than (a) the Employee's death or
disability, or (b) for "Cause" (as such term is defined in Section D of this
Article 6), or
(ii) Employee's resignation as an employee of the Employer,
other than for reasons of disability, following a significant reduction in the
nature or scope of the Employee's duties, responsibilities, authority and powers
from the duties, responsibilities, authority and powers exercised by the
Employee immediately prior to the Change in Control or a reduction in the
Employee's annual base salary as in effect on the date of the Change in Control,
except for across-the-board salary reductions similarly affecting all management
personnel of the Employer (or the
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<PAGE>
surviving entity, in the case of a merger or acquisition in which the Employer
is not the surviving entity).
D. For purposes of Section C of this Article 6, "Cause" shall mean:
(i) deliberate dishonesty with respect to the Employer or any
subsidiary or affiliate thereof;
(ii) conviction of a crime involving moral turpitude; or
(iii) gross and willful failure to perform a substantial
portion of the Employee's duties and responsibilities as an officer of the
Employer, which failure continues for more than thirty days after written notice
given to the Employee pursuant to a two-thirds vote of all of the members of the
Board of Directors of the Employer then in office, such vote to set forth in
reasonable detail the nature of such failure.
E. For the purposes of this Article 6, "Change in Control" shall mean
the occurrence of any one or more of the following events:
(i) if there is a merger or consolidation of the Employer with
any other entity and the voting securities of the Employer outstanding
immediately prior to such merger or consolidation do not continue to represent
(either by remaining outstanding or by being converted into voting securities of
the surviving entity) more than fifty percent (50%) of the combined voting power
of the voting securities of the Employer or such surviving entity immediately
after such merger or consolidation, or
(ii) when any person or entity or group of persons or entities
either related or acting in concert becomes the "beneficial owner" (as defined
in Rule 13d-3 under the Securities Exchange At of 1934, as amended) of
securities of the Employer representing more than fifty percent (50%) of the
total number of votes that may be cast for the election of directors of the
Employer (any such person or entity or group of persons or entities being
referred to, collectively in the case of any such group, as an "Acquiring
Person"), or
(iii) if the Employer sells all or substantially all of its
assets to another entity, other than in a transaction in which the voting
securities of the Employer outstanding immediately prior to such transaction
continue to represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) more than fifty percent (50%) of
the combined voting power of the voting securities of the Employer or such
surviving entity immediately after such transaction, or
(iv) during any period of two consecutive years (not including
any period prior to the execution of this Agreement), individuals who are
Continuing Directors (as hereinafter defined) cease for any reason to constitute
at least a majority of the Board of Directors of the Employer. For this purpose,
a "Continuing Director" shall mean (a) an individual who was a director of the
Employer at the beginning of such period or (b) any new director (other than a
director designated
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<PAGE>
by an Acquiring Person) whose election by the Board or nomination for election
by the Board, a committee thereof or the Employer's stockholders was approved by
a vote of a majority of the directors then still in office who either were
directors at the beginning of such period or whose election or nomination for
election was previously so approved; or
(v) one or more Acquiring Persons has succeeded, as the result
of or in response to actual or threatened election contests, whether by
settlement or otherwise, in having elected to the Board of Directors of the
Employer, whether at one time or on a cumulative basis, a sufficient number of
its nominees to constitute (a) more than thirty percent (30%) of the members of
the Employer's Board of Directors, rounded down to the nearest whole number, if
the number of directors on the Employer's Board is eight or less, or (b) more
than forty percent (40%) of the members of the Employer's Board, rounded down to
the nearest whole number, if the number of directors on the Employer's Board is
nine or more.
ARTICLE 7: PAYMENT OF DEATH BENEFIT
In the event of the death of the Employee while the Policy and this
Agreement are in force, the net proceeds of the Policy shall be divided into two
parts and paid as follows:
PART ONE: To the Employer, a sum equal to the aggregate
unreimbursed amount of premium payments for which the Employer
was responsible pursuant to Section A of Article 2, unless
Section B of Article 6 applies.
PART TWO: To the designated beneficiaries of the Employee,
the remaining proceeds of the Policy.
ARTICLE 8: TERMINATION OF AGREEMENT
This Agreement shall terminate:
A. Upon surrender of the Policy by the Employee, except when the Policy
is surrendered and a new policy is issued pursuant to an exchange under
Article 4, Section C.
B. Upon the termination of the employment of the Employee for any
reason other than retirement at or after attaining the age of 65.
C. On the death of the Employee.
ARTICLE 9: EXCHANGE OF POLICY
In the event the Employer is required to exchange the Policy under
Article 4, Section C, the Employee shall execute any forms necessary or
appropriate to effect such exchange including, without limitation, the surrender
of the Policy, the transfer of proceeds to the new insurer and the
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<PAGE>
execution of a new Split Dollar Agreement and Collateral Assignment. Such
exchange shall qualify under Section 1035 of the Internal Revenue Code or
successor provisions of similar import.
ARTICLE 10: OBLIGATIONS OF INSURER
Any payments made or action taken by the Insurer in accordance with the
provisions of the Policy and the Collateral Assignment shall fully discharge it
from all claims, suits, and demands of all persons whatsoever.
ARTICLE 11: MISCELLANEOUS
A. This Agreement shall be binding upon the parties hereto, their
heirs, legal representative, successors and assigns.
B. This Agreement and the Collateral Assignment embody all agreements
between or among the parties with respect to the Policy, and no change,
alteration, or modification may be made except in writing signed by all parties
hereto.
C. This Agreement shall be governed by, and construed in accordance
with the provisions of, the laws of the Commonwealth of Massachusetts without
regard to its principles of conflicts of laws.
D. Any dispute, controversy or claim with respect to any party's
performance under this Agreement shall be settled by arbitration in accordance
with the laws of The Commonwealth of Massachusetts by a single arbitrator who
shall be selected by the American Arbitration Association in Boston,
Massachusetts. Such arbitration shall be conducted in the City of Boston in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association. Punitive damages shall not awarded. Judgment upon the award
rendered by the arbitrator may be entered in any court having jurisdiction
thereof.
IN WITNESS WHEREOF, the parties hereto have set their hand and seals
effective as of the day and year first above written.
/s/ John Hayes
------------------------------------
John Hayes, Employee
Date: February 24, 1999
DM MANAGEMENT COMPANY, Employer
By /s/ Olga L. Conley
---------------------------------
Its Chief Financial Officer
--------------------------------
Date: February 24, 1999
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<PAGE>
SCHEDULE 1 TO SPLIT DOLLAR AGREEMENT
ASSIGNMENT OF LIFE INSURANCE POLICY AS COLLATERAL
A. FOR VALUE RECEIVED, the undersigned John Hayes (hereinafter the
"Owner") hereby assigns, transfers and sets over to DM Management Company, a
Delaware corporation, its successors and assigns (hereinafter the "Assignee"),
the following specific rights (and only those specific rights) in and to policy
number V062874700, issued by Allmerica Financial Life Insurance and Annuity
Company (hereinafter the "Insurer") and any supplementary contract or contracts
issued in connection therewith (said policy and any such contracts hereinafter
the "Policy"), insuring the life of the Owner, subject to all terms and
conditions of the Policy and to all superior liens, if any, which the Insurer
may have against the Policy. The Owner, by this Assignment, and the Assignee, by
acceptance of the Assignment of the Policy to it hereunder, agree to the terms
and conditions contained in the Policy.
B. This Assignment is made, and the Policy is to be held as collateral
security for, all rights of and obligations owed to the Assignee, now existing
or hereafter arising under and pursuant to a certain Split Dollar Agreement, by
and between the Owner and the Assignee of even date herewith pertaining to the
Policy (hereinafter the "Agreement"). The Owner reserves all rights and powers
in and to the Policy, except those specific, limited rights in the Policy
granted to the Assignee hereby, as security for all rights of and obligations
owed to the Assignee under the Agreement.
C. It is expressly agreed that the Assignee's interest in the Policy
under and by virtue of this Assignment shall be limited to the following
specific rights, and no others: (1) in the case of the death of the Owner, the
right to be paid the amounts due it under PART ONE of Article 7 of the Agreement
by recovering said amounts directly from the Insurer out of the net death
proceeds of the Policy; (2) in the event that Agreement is terminated pursuant
to Article 8, Sections A or B, the right to be paid the amount due it, if any,
under Article 6 of the Agreement. Neither party shall have the right to borrow
against the Policy, except that the Owner may borrow against the Policy after
attaining the age of 65, so long as such borrowing shall not include funds from
the Assignee's interest in the Policy.
D. Notwithstanding this Assignment, the Owner shall specifically retain
all incidents of ownership in and to the Policy, including, but not limited, to:
(1) in accordance with the terms of the Agreement, the right to cancel or
surrender the Policy and to receive, subject to Paragraph C. 2. hereof, the
surrender value thereof at any time provided by the terms of the Policy and at
such other times as the Insurer may allow; (2) the right to designate and change
the Policy beneficiary, with respect to the amount to be paid pursuant to PART
TWO of Article 7 of the Agreement; (3) the right to elect any optional methods
of settlement with regard to the death benefit under PART TWO of Article 7; (4)
the right to borrow against the Policy after the Owner attains age 65, so long
as such borrowing shall not include funds from the Assignee's interest in the
Policy; (5) the right to designate any reallocation of unit values as permitted
by the Policy subject to a right of the Assignee to disapprove a particular
allocation which it deems inappropriate; and (6) all other rights contained
-1-
<PAGE>
in the Policy to the extent the exercise of such rights does not adversely
affect the interest of the Assignee; provided, however, that all of the
foregoing rights retained by the Owner in the Policy shall be subject to the
terms and conditions of the Agreement.
E. The Assignee agrees with the Owner as follows: (1) any funds
received by Assignee from the Insurer which are attributable to the portion of
the death benefit allocated to PART TWO of Article 7 of the Agreement shall be
paid by the Assignee to the beneficiaries designated by the Owner; and (2) if
the Policy is in the possession of the Assignee, the Assignee will, upon the
Owner's request, forward the Policy to the Insurer, without unreasonable delay,
for endorsement of any designation or change of beneficiary, any election of
optional mode of settlement, or the exercise of any other right reserved by the
Owner hereunder.
F. Notwithstanding anything in this Assignment to the contrary, the
Insurer shall be under no obligation to monitor the obligation of the Assignee
hereunder to pay to the designated beneficiaries of the Owner any amounts
received from the Insurer under PART TWO of Article 7 of the Agreement after
payment of PART ONE to the Assignee under the Agreement; and the Insurer shall
have no obligation or liability to any person or entity if the Assignee fails to
pay such amounts as required hereunder.
G. The Insurer is hereby authorized to recognize, and is protected in
recognizing, the Assignee's claims to amounts due it hereunder without
investigating the validity of its claim thereto, the reason for any action taken
by the Assignee, the validity or accuracy of the amount of any of the
liabilities of the Owner to the Assignee under the Agreement, the existence of
any default therein, the giving of any notice required therein, or the
application to be made by the Assignee of any amounts to be paid to the
Assignee. A receipt executed solely by the Assignee for any amounts received by
it from the Insurer shall be a full discharge and release of the Insurer from
the obligations released thereby.
H. In furtherance hereof, the Owner appoints the Assignee his
attorney-in-fact for the following purposes:
1. to receive the portion of the death benefit payable to the
Assignee upon the death of the Owner under PART ONE of Article
7 of the Agreement; and
2. to receive, upon termination of the Agreement pursuant to
Article 8, Sections A or B thereof, the amount, if any,
designated in Article 6, Sections A or B of the Agreement, as
the case may be.
This appointment is coupled with an interest in the Assignee and shall
be irrevocable so long as the Agreement remains in force.
I. The Insurer shall not comply with a request made by the Owner for
cancellation or surrender of the Policy without the consent of the Assignee.
Upon receipt of an assented-to request for cancellation or surrender, the
Insurer shall terminate the Policy and this Assignment shall be of
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<PAGE>
no further force or effect; provided, however, that the Insurer shall set aside
and deduct from any amounts to be paid to the Owner under the terms of the
Policy in consequence of its cancellation or surrender, the amount due to the
Assignee under the provisions of Article 6 of the Agreement, which amount shall
be paid to the Assignee by the Insurer.
J. In the event of any conflict between the provisions of this
Assignment and the provisions of the Agreement with respect to the Policy or the
Assignee's rights therein, the provisions of the Agreement shall prevail.
K. The Owner declares that no proceedings in bankruptcy are pending
against the Owner and that the Owner's property is not subject to any assignment
for the benefit of creditors of the Owner.
Signed and sealed as of the 24 day of February, 1999.
/s/ John Hayes
----------------------------------
John Hayes, Owner
Date: February 24, 1999
Accepted and Agreed:
DM Management Company
By:/s/ Olga L. Conley
---------------------------------------
Its: Chief Financial Officer
-------------------------------------
Date: February 24, 1999
ACKNOWLEDGEMENT OF SIGNATURE OF OWNER
COMMONWEALTH OF MASSACHUSETTS )
COUNTY OF Plymouth )ss:
On the 24th day of February, 1999, before me personally came John Hayes, to
me known to be the individual described in and who executed the assignment
above and acknowledged to me that he executed the same.
/s/ Patricia L. Eppich
------------------------------------
Notary Public
My commission expires: 4/1/05
--------------
PATRICIA L EPPICH
Notary Public
My Commision Expires April 1, 2005
-3-
<PAGE>
ACKNOWLEDGEMENT OF SIGNATURE OF ASSIGNEE
COMMONWEALTH OF MASSACHUSETTS )
COUNTY OF Plymouth )ss:
On the 24 day of February, 1999, before me personally came Olga L. Conley, who
being by me duly sworn, did depose and say that he is the Chief Financial
Officer of DM Management Company, the corporation described in and which
executed the acceptance and agreement of assignment above; and that he signed
his name thereto by the authority granted to his office.
/s/ Patricia L. Eppich
------------------------------------
Notary Public
My commission expires: 4\1\05
--------------
PATRICIA L EPPICH
Notary Public
My Commision Expires April 1, 2005
-4-
<PAGE>
Exhibit 10.24
SPLIT DOLLAR AGREEMENT
ALLMERICA LIFE INSURANCE
POLICY NO. V062875300
AGREEMENT made as of this 24 day of February, 1999, by and between
Patricia Lee (the "Employee"), and DM Management Company, a Delaware corporation
(the "Employer").
WHEREAS, the Employee wishes to establish a life insurance program for
the benefit and protection of his family under Policy No. V062875300 (the
"Policy") issued by Allmerica Financial Life Insurance and Annuity Company, of
Worcester, Massachusetts (the "Insurer"); and
WHEREAS, the Employer wishes to help the Employee provide such
insurance for the benefit and protection of his family by the payment of the
premiums due on the Policy in accordance with Article 2 hereof; and
WHEREAS, the Employee will be the sole owner of the Policy, and will
assign the Policy to the Employer for the purpose of providing security for the
repayment of the amounts which the Employer will contribute toward payment of
the premium due or to become due on the Policy pursuant to an agreement of even
date to be executed by the parties hereto (the "Collateral Assignment"); and
WHEREAS, it is the desire of the parties to define the extent of the
Employer's interest in the cash surrender value and death proceeds of the
Policy;
NOW THEREFORE, in consideration of the mutual promises contained
herein, it is agreed between the parties hereto as follows:
ARTICLE 1: OWNERSHIP OF POLICY
The Policy is the exclusive property of the Employee, who may exercise
all rights of ownership with respect to his interest therein, subject to the
security interest of the Employer as expressed in this Agreement and the
Collateral Assignment and to any death benefit which may become due to the
Employer.
ARTICLE 2: PAYMENT OF PREMIUMS
A. For the first seven (7) years the Policy is in force, or until this
Agreement is earlier terminated as provided in Article 8, the Employer shall be
responsible for the payment of (i) the scheduled premium, or (ii) such lesser
amount as the Insurer advises is consistent with the insurance features of the
Policy. In addition, after the expiration of said seven-year period and while
this Agreement is still in effect, the Employer may make such additional
payments as the Insurer advises is consistent with maintaining the intended
value of the Policy but only if such greater amount or
<PAGE>
additional payments are approved by the Compensation Committee of the
Employer's Board of Directors.
B. The Employee understands that he will recognize taxable income in
each year with respect to the life insurance protection afforded to the Employee
in accordance with Internal Revenue Service rulings and regulations.
C. The Employer shall, before the end of any grace period provided in
the Policy for each premium payment, remit the annual premiums as stated in the
Policy until this Agreement is terminated as provided in Article 8. If
requested, the Employer shall give proof to the Employee of the timely payment
of each premium.
ARTICLE 3: COLLATERAL ASSIGNMENT
To secure the repayment to the Employer of an amount equal to the
aggregate amount of its premium payments under the Policy to the extent provided
in Article 6, the Employee has contemporaneously with the execution of this
Agreement assigned the Policy to the Employer as collateral, by means of the
form of Collateral Assignment attached to this Agreement as Schedule 1. The
Collateral Assignment shall not be altered, terminated or amended by Employee
without the express written consent of the Employer. The parties agree to take
all action necessary to cause such assignment to conform to the provisions of
this Agreement.
ARTICLE 4: RIGHTS IN POLICY
A. The Employer shall have no right to borrow against the Policy.
B. The Employee, in recognition of the defined contribution provisions
of this Agreement and the variable nature of the death benefits, shall have the
right to allocate the aggregate account value to particular investment vehicles,
subject to a right of the Employer to disapprove a particular investment vehicle
which it deems inappropriate.
C. The Employee shall have the right to exchange the Policy for such
other policies and/or insurers that he deems appropriate based upon the
investment performance or financial condition of the Insurer, subject to the
approval of the Employer, which approval shall not unreasonably be denied.
Action by the Employee or the Employer to change the Policy and/or insurer
pursuant to this paragraph shall not otherwise alter the rights and
responsibilities of the Employer and the Employee as set forth in this
Agreement.
D. The Employer shall have no responsibility for a shortfall in the
projected total return on the paid-in premiums available to provide the death
benefit.
E. The Employer shall not take any action that might endanger the
interest of the Employee in the Policy. The Employee shall not take any action
that might endanger the interest of the Employer in the Policy.
-2-
<PAGE>
ARTICLE 5: EMPLOYEE'S RIGHTS IN POLICY
The Employee retains all other rights in the Policy not specifically
assigned to the Employer including, but not limited to, the following rights:
A. The right to surrender the Policy as set forth in Paragraph D of
the Collateral Assignment.
B. The right to change the beneficiary of the Policy, to the extent
of his interest.
C. The right to select optional methods of settlement with regard to
the death benefit provided in PART TWO of Article 7.
D. All other rights contained in the Policy, to the extent the exercise
of such rights does not adversely affect the Employer's interest in the Policy.
ARTICLE 6: PAYMENT OF CASH SURRENDER VALUE
A. Except as set forth in this Article 6, Section B, in the event this
Agreement is terminated pursuant to Section A or B of Article 8, the Employer
shall have the unqualified right to receive from the Insurer a sum which is
equal to the lesser of (a) the then cash surrender value as defined in the
Policy or (b) the aggregate unreimbursed amount of premium payments with respect
to the Policy for which the Employer was responsible pursuant to Article 2,
Section A (the "Premium Reimbursement"). This amount shall be established in a
written statement to the Insurer by the Employer, and the Insurer shall have the
right, without liability to the Employee or his beneficiary or beneficiaries of
the Policy, to rely exclusively upon such statement. The Employer shall, upon
receiving such sum, release the Collateral Assignment of the Policy.
B. In the event that this Agreement is terminated pursuant to Section B
of Article 8 after the occurrence of a "Terminating Event" (as defined in
Section C of this Article 6), the Employer shall not be entitled to receive the
Premium Reimbursement pursuant to Section A of Article 6.
C. For purposes of this Article 6, a "Terminating Event" shall mean any
of the following if it occurs within two years of a "Change in Control" (as
defined in Section E of this Article 6):
(i) termination by the Employer of the Employee's employment
with the Employer for any reason other than (a) the Employee's death or
disability, or (b) for "Cause" (as such term is defined in Section D of this
Article 6), or
(ii) Employee's resignation as an employee of the Employer,
other than for reasons of disability, following a significant reduction in the
nature or scope of the Employee's duties, responsibilities, authority and powers
from the duties, responsibilities, authority and powers exercised by the
Employee immediately prior to the Change in Control or a reduction in the
Employee's annual base salary as in effect on the date of the Change in Control,
except for across-the-board salary reductions similarly affecting all management
personnel of the Employer (or the
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<PAGE>
surviving entity, in the case of a merger or acquisition in which the Employer
is not the surviving entity).
D. For purposes of Section C of this Article 6, "Cause" shall mean:
(i) deliberate dishonesty with respect to the Employer or any
subsidiary or affiliate thereof;
(ii) conviction of a crime involving moral turpitude; or
(iii) gross and willful failure to perform a substantial
portion of the Employee's duties and responsibilities as an officer of the
Employer, which failure continues for more than thirty days after written notice
given to the Employee pursuant to a two-thirds vote of all of the members of the
Board of Directors of the Employer then in office, such vote to set forth in
reasonable detail the nature of such failure.
E. For the purposes of this Article 6, "Change in Control" shall mean
the occurrence of any one or more of the following events:
(i) if there is a merger or consolidation of the Employer with
any other entity and the voting securities of the Employer outstanding
immediately prior to such merger or consolidation do not continue to represent
(either by remaining outstanding or by being converted into voting securities of
the surviving entity) more than fifty percent (50%) of the combined voting power
of the voting securities of the Employer or such surviving entity immediately
after such merger or consolidation, or
(ii) when any person or entity or group of persons or entities
either related or acting in concert becomes the "beneficial owner" (as defined
in Rule 13d-3 under the Securities Exchange At of 1934, as amended) of
securities of the Employer representing more than fifty percent (50%) of the
total number of votes that may be cast for the election of directors of the
Employer (any such person or entity or group of persons or entities being
referred to, collectively in the case of any such group, as an "Acquiring
Person"), or
(iii) if the Employer sells all or substantially all of its
assets to another entity, other than in a transaction in which the voting
securities of the Employer outstanding immediately prior to such transaction
continue to represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) more than fifty percent (50%) of
the combined voting power of the voting securities of the Employer or such
surviving entity immediately after such transaction, or
(iv) during any period of two consecutive years (not including
any period prior to the execution of this Agreement), individuals who are
Continuing Directors (as hereinafter defined) cease for any reason to constitute
at least a majority of the Board of Directors of the Employer. For this purpose,
a "Continuing Director" shall mean (a) an individual who was a director of the
Employer at the beginning of such period or (b) any new director (other than a
director designated
-4-
<PAGE>
by an Acquiring Person) whose election by the Board or nomination for election
by the Board, a committee thereof or the Employer's stockholders was approved by
a vote of a majority of the directors then still in office who either were
directors at the beginning of such period or whose election or nomination for
election was previously so approved; or
(v) one or more Acquiring Persons has succeeded, as the result
of or in response to actual or threatened election contests, whether by
settlement or otherwise, in having elected to the Board of Directors of the
Employer, whether at one time or on a cumulative basis, a sufficient number of
its nominees to constitute (a) more than thirty percent (30%) of the members of
the Employer's Board of Directors, rounded down to the nearest whole number, if
the number of directors on the Employer's Board is eight or less, or (b) more
than forty percent (40%) of the members of the Employer's Board, rounded down to
the nearest whole number, if the number of directors on the Employer's Board is
nine or more.
ARTICLE 7: PAYMENT OF DEATH BENEFIT
In the event of the death of the Employee while the Policy and this
Agreement are in force, the net proceeds of the Policy shall be divided into two
parts and paid as follows:
PART ONE: To the Employer, a sum equal to the aggregate
unreimbursed amount of premium payments for which the Employer
was responsible pursuant to Section A of Article 2, unless
Section B of Article 6 applies.
PART TWO: To the designated beneficiaries of the
Employee, the remaining proceeds of the Policy.
ARTICLE 8: TERMINATION OF AGREEMENT
This Agreement shall terminate:
A. Upon surrender of the Policy by the Employee, except when the Policy
is surrendered and a new policy is issued pursuant to an exchange under
Article 4, Section C.
B. Upon the termination of the employment of the Employee for any
reason other than retirement at or after attaining the age of 65.
C. On the death of the Employee.
ARTICLE 9: EXCHANGE OF POLICY
In the event the Employer is required to exchange the Policy under
Article 4, Section C, the Employee shall execute any forms necessary or
appropriate to effect such exchange including, without limitation, the surrender
of the Policy, the transfer of proceeds to the new insurer and the
-5-
<PAGE>
execution of a new Split Dollar Agreement and Collateral Assignment. Such
exchange shall qualify under Section 1035 of the Internal Revenue Code or
successor provisions of similar import.
ARTICLE 10: OBLIGATIONS OF INSURER
Any payments made or action taken by the Insurer in accordance with the
provisions of the Policy and the Collateral Assignment shall fully discharge it
from all claims, suits, and demands of all persons whatsoever.
ARTICLE 11: MISCELLANEOUS
A. This Agreement shall be binding upon the parties hereto, their
heirs, legal representative, successors and assigns.
B. This Agreement and the Collateral Assignment embody all agreements
between or among the parties with respect to the Policy, and no change,
alteration, or modification may be made except in writing signed by all parties
hereto.
C. This Agreement shall be governed by, and construed in accordance
with the provisions of, the laws of the Commonwealth of Massachusetts without
regard to its principles of conflicts of laws.
D. Any dispute, controversy or claim with respect to any party's
performance under this Agreement shall be settled by arbitration in accordance
with the laws of The Commonwealth of Massachusetts by a single arbitrator who
shall be selected by the American Arbitration Association in Boston,
Massachusetts. Such arbitration shall be conducted in the City of Boston in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association. Punitive damages shall not awarded. Judgment upon the award
rendered by the arbitrator may be entered in any court having jurisdiction
thereof.
IN WITNESS WHEREOF, the parties hereto have set their hand and seals
effective as of the day and year first above written.
/s/ Patricia Lee
------------------------------------
Patricia Lee, Employee
Date: February 24, 1999
DM MANAGEMENT COMPANY, Employer
By /s/ Olga L. Conley
---------------------------------
Its CHIEF FINANCIAL OFFICER
--------------------------------
Date: February 24, 1999
-6-
<PAGE>
SCHEDULE 1 TO SPLIT DOLLAR AGREEMENT
ASSIGNMENT OF LIFE INSURANCE POLICY AS COLLATERAL
A. FOR VALUE RECEIVED, the undersigned Patricia Lee (hereinafter the
"Owner") hereby assigns, transfers and sets over to DM Management Company, a
Delaware corporation, its successors and assigns (hereinafter the "Assignee"),
the following specific rights (and only those specific rights) in and to policy
number V062875300 , issued by Allmerica Financial Life Insurance and Annuity
Company (hereinafter the "Insurer") and any supplementary contract or contracts
issued in connection therewith (said policy and any such contracts hereinafter
the "Policy"), insuring the life of the Owner, subject to all terms and
conditions of the Policy and to all superior liens, if any, which the Insurer
may have against the Policy. The Owner, by this Assignment, and the Assignee, by
acceptance of the Assignment of the Policy to it hereunder, agree to the terms
and conditions contained in the Policy.
B. This Assignment is made, and the Policy is to be held as collateral
security for, all rights of and obligations owed to the Assignee, now existing
or hereafter arising under and pursuant to a certain Split Dollar Agreement, by
and between the Owner and the Assignee of even date herewith pertaining to the
Policy (hereinafter the "Agreement"). The Owner reserves all rights and powers
in and to the Policy, except those specific, limited rights in the Policy
granted to the Assignee hereby, as security for all rights of and obligations
owed to the Assignee under the Agreement.
C. It is expressly agreed that the Assignee's interest in the Policy
under and by virtue of this Assignment shall be limited to the following
specific rights, and no others: (1) in the case of the death of the Owner, the
right to be paid the amounts due it under PART ONE of Article 7 of the Agreement
by recovering said amounts directly from the Insurer out of the net death
proceeds of the Policy; (2) in the event that Agreement is terminated pursuant
to Article 8, Sections A or B, the right to be paid the amount due it, if any,
under Article 6 of the Agreement. Neither party shall have the right to borrow
against the Policy, except that the Owner may borrow against the Policy after
attaining the age of 65, so long as such borrowing shall not include funds from
the Assignee's interest in the Policy.
D. Notwithstanding this Assignment, the Owner shall specifically retain
all incidents of ownership in and to the Policy, including, but not limited, to:
(1) in accordance with the terms of the Agreement, the right to cancel or
surrender the Policy and to receive, subject to Paragraph C. 2. hereof, the
surrender value thereof at any time provided by the terms of the Policy and at
such other times as the Insurer may allow; (2) the right to designate and change
the Policy beneficiary, with respect to the amount to be paid pursuant to PART
TWO of Article 7 of the Agreement; (3) the right to elect any optional methods
of settlement with regard to the death benefit under PART TWO of Article 7; (4)
the right to borrow against the Policy after the Owner attains age 65, so long
as such borrowing shall not include funds from the Assignee's interest in the
Policy; (5) the right to designate any reallocation of unit values as permitted
by the Policy subject to a right of the Assignee to disapprove a particular
allocation which it deems inappropriate; and (6) all other rights contained
-1-
<PAGE>
in the Policy to the extent the exercise of such rights does not adversely
affect the interest of the Assignee; provided, however, that all of the
foregoing rights retained by the Owner in the Policy shall be subject to the
terms and conditions of the Agreement.
E. The Assignee agrees with the Owner as follows: (1) any funds
received by Assignee from the Insurer which are attributable to the portion of
the death benefit allocated to PART TWO of Article 7 of the Agreement shall be
paid by the Assignee to the beneficiaries designated by the Owner; and (2) if
the Policy is in the possession of the Assignee, the Assignee will, upon the
Owner's request, forward the Policy to the Insurer, without unreasonable delay,
for endorsement of any designation or change of beneficiary, any election of
optional mode of settlement, or the exercise of any other right reserved by the
Owner hereunder.
F. Notwithstanding anything in this Assignment to the contrary, the
Insurer shall be under no obligation to monitor the obligation of the Assignee
hereunder to pay to the designated beneficiaries of the Owner any amounts
received from the Insurer under PART TWO of Article 7 of the Agreement after
payment of PART ONE to the Assignee under the Agreement; and the Insurer shall
have no obligation or liability to any person or entity if the Assignee fails to
pay such amounts as required hereunder.
G. The Insurer is hereby authorized to recognize, and is protected in
recognizing, the Assignee's claims to amounts due it hereunder without
investigating the validity of its claim thereto, the reason for any action taken
by the Assignee, the validity or accuracy of the amount of any of the
liabilities of the Owner to the Assignee under the Agreement, the existence of
any default therein, the giving of any notice required therein, or the
application to be made by the Assignee of any amounts to be paid to the
Assignee. A receipt executed solely by the Assignee for any amounts received by
it from the Insurer shall be a full discharge and release of the Insurer from
the obligations released thereby.
H. In furtherance hereof, the Owner appoints the Assignee his
attorney-in-fact for the following purposes:
1. to receive the portion of the death benefit payable to the
Assignee upon the death of the Owner under PART ONE of Article
7 of the Agreement; and
2. to receive, upon termination of the Agreement pursuant to
Article 8, Sections A or B thereof, the amount, if any,
designated in Article 6, Sections A or B of the Agreement, as
the case may be.
This appointment is coupled with an interest in the Assignee and shall
be irrevocable so long as the Agreement remains in force.
I. The Insurer shall not comply with a request made by the Owner for
cancellation or surrender of the Policy without the consent of the Assignee.
Upon receipt of an assented-to request for cancellation or surrender, the
Insurer shall terminate the Policy and this Assignment shall be of
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<PAGE>
no further force or effect; provided, however, that the Insurer shall set aside
and deduct from any amounts to be paid to the Owner under the terms of the
Policy in consequence of its cancellation or surrender, the amount due to the
Assignee under the provisions of Article 6 of the Agreement, which amount shall
be paid to the Assignee by the Insurer.
J. In the event of any conflict between the provisions of this
Assignment and the provisions of the Agreement with respect to the Policy or the
Assignee's rights therein, the provisions of the Agreement shall prevail.
K. The Owner declares that no proceedings in bankruptcy are pending
against the Owner and that the Owner's property is not subject to any assignment
for the benefit of creditors of the Owner.
Signed and sealed as of the 24 day of February, 1999.
/s/ Patricia Lee
---------------------------
Patricia Lee, Owner
Date: February 24, 1999
Accepted and Agreed:
DM Management Company
By: /s/ Olga L. Conley
---------------------------------
Its: CHIEF FINANCIAL OFFICER
-------------------------------
Date: February 24, 1999
ACKNOWLEDGEMENT OF SIGNATURE OF OWNER
COMMONWEALTH OF MASSACHUSETTS )
COUNTY OF PLYMOUTH ) ss:
On the 24th day of February, 1999, before me personally came Patricia Lee,
to me known to be the individual described in and who executed the assignment
above and acknowledged to me that she executed the same.
/s/ Patricia L. Eppich
------------------------------------
Notary Public
My commission expires: 4/1/05
--------
[SEAL]
PATRICIA L EPPICH
Notary Public
My Commision Expires April 1, 2005
-3-
<PAGE>
ACKNOWLEDGEMENT OF SIGNATURE OF ASSIGNEE
COMMONWEALTH OF MASSACHUSETTS )
COUNTY OF PLYMOUTH ) ss:
On the 24th day of February, 1999, before me personally came OLGA L. CONLEY,
who being by me duly sworn, did depose and say that he is the CHIEF FINANCIAL
OFFICER of DM Management Company, the corporation described in and
which executed the acceptance and agreement of assignment above; and that he
signed his name thereto by the authority granted to his office.
/s/ Patricia L. Eppich
------------------------------------
Notary Public
My commission expires: 4/1/05
---------
[SEAL]
PATRICIA L EPPICH
Notary Public
My Commision Expires April 1, 2005
-4-
<PAGE>
Exhibit 10.25
SPLIT DOLLAR AGREEMENT
ALLMERICA LIFE INSURANCE
POLICY NO. V062875100
AGREEMENT made as of this 24 day of February, 1999, by and between
Peter Tulp (the "Employee"), and DM Management Company, a Delaware
corporation (the "Employer").
WHEREAS, the Employee wishes to establish a life insurance program for
the benefit and protection of his family under Policy No. V062875100 (the
"Policy") issued by Allmerica Financial Life Insurance and Annuity Company, of
Worcester, Massachusetts (the "Insurer"); and
WHEREAS, the Employer wishes to help the Employee provide such
insurance for the benefit and protection of his family by the payment of the
premiums due on the Policy in accordance with Article 2 hereof; and
WHEREAS, the Employee will be the sole owner of the Policy, and will
assign the Policy to the Employer for the purpose of providing security for the
repayment of the amounts which the Employer will contribute toward payment of
the premium due or to become due on the Policy pursuant to an agreement of even
date to be executed by the parties hereto (the "Collateral Assignment"); and
WHEREAS, it is the desire of the parties to define the extent of the
Employer's interest in the cash surrender value and death proceeds of the
Policy;
NOW THEREFORE, in consideration of the mutual promises contained
herein, it is agreed between the parties hereto as follows:
ARTICLE 1: OWNERSHIP OF POLICY
The Policy is the exclusive property of the Employee, who may exercise
all rights of ownership with respect to his interest therein, subject to the
security interest of the Employer as expressed in this Agreement and the
Collateral Assignment and to any death benefit which may become due to the
Employer.
ARTICLE 2: PAYMENT OF PREMIUMS
A. For the first seven (7) years the Policy is in force, or until this
Agreement is earlier terminated as provided in Article 8, the Employer shall be
responsible for the payment of (i) the scheduled premium, or (ii) such lesser
amount as the Insurer advises is consistent with the insurance features of the
Policy. In addition, after the expiration of said seven-year period and while
this Agreement is still in effect, the Employer may make such additional
payments as the Insurer advises is consistent with maintaining the intended
value of the Policy but only if such greater amount or
<PAGE>
additional payments are approved by the Compensation Committee of the Employer's
Board of Directors.
B. The Employee understands that he will recognize taxable income in
each year with respect to the life insurance protection afforded to the Employee
in accordance with Internal Revenue Service rulings and regulations.
C. The Employer shall, before the end of any grace period provided in
the Policy for each premium payment, remit the annual premiums as stated in the
Policy until this Agreement is terminated as provided in Article 8. If
requested, the Employer shall give proof to the Employee of the timely payment
of each premium.
ARTICLE 3: COLLATERAL ASSIGNMENT
To secure the repayment to the Employer of an amount equal to the
aggregate amount of its premium payments under the Policy to the extent provided
in Article 6, the Employee has contemporaneously with the execution of this
Agreement assigned the Policy to the Employer as collateral, by means of the
form of Collateral Assignment attached to this Agreement as Schedule 1. The
Collateral Assignment shall not be altered, terminated or amended by Employee
without the express written consent of the Employer. The parties agree to take
all action necessary to cause such assignment to conform to the provisions of
this Agreement.
ARTICLE 4: RIGHTS IN POLICY
A. The Employer shall have no right to borrow against the Policy.
B. The Employee, in recognition of the defined contribution provisions
of this Agreement and the variable nature of the death benefits, shall have the
right to allocate the aggregate account value to particular investment vehicles,
subject to a right of the Employer to disapprove a particular investment vehicle
which it deems inappropriate.
C. The Employee shall have the right to exchange the Policy for such
other policies and/or insurers that he deems appropriate based upon the
investment performance or financial condition of the Insurer, subject to the
approval of the Employer, which approval shall not unreasonably be denied.
Action by the Employee or the Employer to change the Policy and/or insurer
pursuant to this paragraph shall not otherwise alter the rights and
responsibilities of the Employer and the Employee as set forth in this
Agreement.
D. The Employer shall have no responsibility for a shortfall in the
projected total return on the paid-in premiums available to provide the death
benefit.
E. The Employer shall not take any action that might endanger the
interest of the Employee in the Policy. The Employee shall not take any action
that might endanger the interest of the Employer in the Policy.
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<PAGE>
ARTICLE 5: EMPLOYEE'S RIGHTS IN POLICY
The Employee retains all other rights in the Policy not specifically
assigned to the Employer including, but not limited to, the following rights:
A. The right to surrender the Policy as set forth in Paragraph D of the
Collateral Assignment.
B. The right to change the beneficiary of the Policy, to the extent of
his interest.
C. The right to select optional methods of settlement with regard to
the death benefit provided in PART TWO of Article 7.
D. All other rights contained in the Policy, to the extent the exercise
of such rights does not adversely affect the Employer's interest in the Policy.
ARTICLE 6: PAYMENT OF CASH SURRENDER VALUE
A. Except as set forth in this Article 6, Section B, in the event this
Agreement is terminated pursuant to Section A or B of Article 8, the Employer
shall have the unqualified right to receive from the Insurer a sum which is
equal to the lesser of (a) the then cash surrender value as defined in the
Policy or (b) the aggregate unreimbursed amount of premium payments with respect
to the Policy for which the Employer was responsible pursuant to Article 2,
Section A (the "Premium Reimbursement"). This amount shall be established in a
written statement to the Insurer by the Employer, and the Insurer shall have the
right, without liability to the Employee or his beneficiary or beneficiaries of
the Policy, to rely exclusively upon such statement. The Employer shall, upon
receiving such sum, release the Collateral Assignment of the Policy.
B. In the event that this Agreement is terminated pursuant to Section B
of Article 8 after the occurrence of a "Terminating Event" (as defined in
Section C of this Article 6), the Employer shall not be entitled to receive the
Premium Reimbursement pursuant to Section A of Article 6.
C. For purposes of this Article 6, a "Terminating Event" shall mean any
of the following if it occurs within two years of a "Change in Control" (as
defined in Section E of this Article 6):
(i) termination by the Employer of the Employee's employment
with the Employer for any reason other than (a) the Employee's death or
disability, or (b) for "Cause" (as such term is defined in Section D of this
Article 6), or
(ii) Employee's resignation as an employee of the Employer,
other than for reasons of disability, following a significant reduction in the
nature or scope of the Employee's duties, responsibilities, authority and powers
from the duties, responsibilities, authority and powers exercised by the
Employee immediately prior to the Change in Control or a reduction in the
Employee's annual base salary as in effect on the date of the Change in Control,
except for across-the-board salary reductions similarly affecting all management
personnel of the Employer (or the
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<PAGE>
surviving entity, in the case of a merger or acquisition in which the Employer
is not the surviving entity).
D. For purposes of Section C of this Article 6, "Cause" shall mean:
(i) deliberate dishonesty with respect to the Employer or any
subsidiary or affiliate thereof;
(ii) conviction of a crime involving moral turpitude; or
(iii) gross and willful failure to perform a substantial
portion of the Employee's duties and responsibilities as an officer of the
Employer, which failure continues for more than thirty days after written notice
given to the Employee pursuant to a two-thirds vote of all of the members of the
Board of Directors of the Employer then in office, such vote to set forth in
reasonable detail the nature of such failure.
E. For the purposes of this Article 6, "Change in Control" shall mean
the occurrence of any one or more of the following events:
(i) if there is a merger or consolidation of the Employer with
any other entity and the voting securities of the Employer outstanding
immediately prior to such merger or consolidation do not continue to represent
(either by remaining outstanding or by being converted into voting securities of
the surviving entity) more than fifty percent (50%) of the combined voting power
of the voting securities of the Employer or such surviving entity immediately
after such merger or consolidation, or
(ii) when any person or entity or group of persons or entities
either related or acting in concert becomes the "beneficial owner" (as defined
in Rule 13d-3 under the Securities Exchange At of 1934, as amended) of
securities of the Employer representing more than fifty percent (50%) of the
total number of votes that may be cast for the election of directors of the
Employer (any such person or entity or group of persons or entities being
referred to, collectively in the case of any such group, as an "Acquiring
Person"), or
(iii) if the Employer sells all or substantially all of its
assets to another entity, other than in a transaction in which the voting
securities of the Employer outstanding immediately prior to such transaction
continue to represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) more than fifty percent (50%) of
the combined voting power of the voting securities of the Employer or such
surviving entity immediately after such transaction, or
(iv) during any period of two consecutive years (not including
any period prior to the execution of this Agreement), individuals who are
Continuing Directors (as hereinafter defined) cease for any reason to constitute
at least a majority of the Board of Directors of the Employer. For this purpose,
a "Continuing Director" shall mean (a) an individual who was a director of the
Employer at the beginning of such period or (b) any new director (other than a
director designated
-4-
<PAGE>
by an Acquiring Person) whose election by the Board or nomination for election
by the Board, a committee thereof or the Employer's stockholders was approved by
a vote of a majority of the directors then still in office who either were
directors at the beginning of such period or whose election or nomination for
election was previously so approved; or
(v) one or more Acquiring Persons has succeeded, as the result
of or in response to actual or threatened election contests, whether by
settlement or otherwise, in having elected to the Board of Directors of the
Employer, whether at one time or on a cumulative basis, a sufficient number of
its nominees to constitute (a) more than thirty percent (30%) of the members of
the Employer's Board of Directors, rounded down to the nearest whole number, if
the number of directors on the Employer's Board is eight or less, or (b) more
than forty percent (40%) of the members of the Employer's Board, rounded down to
the nearest whole number, if the number of directors on the Employer's Board is
nine or more.
ARTICLE 7: PAYMENT OF DEATH BENEFIT
In the event of the death of the Employee while the Policy and this
Agreement are in force, the net proceeds of the Policy shall be divided into two
parts and paid as follows:
PART ONE: To the Employer, a sum equal to the aggregate
unreimbursed amount of premium payments for which the Employer
was responsible pursuant to Section A of Article 2, unless
Section B of Article 6 applies.
PART TWO: To the designated beneficiaries of the Employee,
the remaining proceeds of the Policy.
ARTICLE 8: TERMINATION OF AGREEMENT
This Agreement shall terminate:
A. Upon surrender of the Policy by the Employee, except when the Policy
is surrendered and a new policy is issued pursuant to an exchange under
Article 4, Section C.
B. Upon the termination of the employment of the Employee for any
reason other than retirement at or after attaining the age of 65.
C. On the death of the Employee.
ARTICLE 9: EXCHANGE OF POLICY
In the event the Employer is required to exchange the Policy under
Article 4, Section C, the Employee shall execute any forms necessary or
appropriate to effect such exchange including, without limitation, the surrender
of the Policy, the transfer of proceeds to the new insurer and the
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<PAGE>
execution of a new Split Dollar Agreement and Collateral Assignment. Such
exchange shall qualify under Section 1035 of the Internal Revenue Code or
successor provisions of similar import.
ARTICLE 10: OBLIGATIONS OF INSURER
Any payments made or action taken by the Insurer in accordance with the
provisions of the Policy and the Collateral Assignment shall fully discharge it
from all claims, suits, and demands of all persons whatsoever.
ARTICLE 11: MISCELLANEOUS
A. This Agreement shall be binding upon the parties hereto, their
heirs, legal representative, successors and assigns.
B. This Agreement and the Collateral Assignment embody all agreements
between or among the parties with respect to the Policy, and no change,
alteration, or modification may be made except in writing signed by all parties
hereto.
C. This Agreement shall be governed by, and construed in accordance
with the provisions of, the laws of the Commonwealth of Massachusetts without
regard to its principles of conflicts of laws.
D. Any dispute, controversy or claim with respect to any party's
performance under this Agreement shall be settled by arbitration in accordance
with the laws of The Commonwealth of Massachusetts by a single arbitrator who
shall be selected by the American Arbitration Association in Boston,
Massachusetts. Such arbitration shall be conducted in the City of Boston in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association. Punitive damages shall not awarded. Judgment upon the award
rendered by the arbitrator may be entered in any court having jurisdiction
thereof.
IN WITNESS WHEREOF, the parties hereto have set their hand and seals
effective as of the day and year first above written.
/s/ Peter Tulp
------------------------------------
Peter Tulp, Employee
Date: February 24, 1999
DM MANAGEMENT COMPANY, Employer
By /s/Olga L. Conley
---------------------------------
Its Chief Financial Officer
--------------------------------
Date: February 24, 1999
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<PAGE>
SCHEDULE 1 TO SPLIT DOLLAR AGREEMENT
ASSIGNMENT OF LIFE INSURANCE POLICY AS COLLATERAL
A. FOR VALUE RECEIVED, the undersigned Peter Tulp (hereinafter the
"Owner") hereby assigns, transfers and sets over to DM Management Company, a
Delaware corporation, its successors and assigns (hereinafter the "Assignee"),
the following specific rights (and only those specific rights) in and to policy
number V062875100, issued by Allmerica Financial Life Insurance and Annuity
Company (hereinafter the "Insurer") and any supplementary contract or contracts
issued in connection therewith (said policy and any such contracts hereinafter
the "Policy"), insuring the life of the Owner, subject to all terms and
conditions of the Policy and to all superior liens, if any, which the Insurer
may have against the Policy. The Owner, by this Assignment, and the Assignee, by
acceptance of the Assignment of the Policy to it hereunder, agree to the terms
and conditions contained in the Policy.
B. This Assignment is made, and the Policy is to be held as collateral
security for, all rights of and obligations owed to the Assignee, now existing
or hereafter arising under and pursuant to a certain Split Dollar Agreement, by
and between the Owner and the Assignee of even date herewith pertaining to the
Policy (hereinafter the "Agreement"). The Owner reserves all rights and powers
in and to the Policy, except those specific, limited rights in the Policy
granted to the Assignee hereby, as security for all rights of and obligations
owed to the Assignee under the Agreement.
C. It is expressly agreed that the Assignee's interest in the Policy
under and by virtue of this Assignment shall be limited to the following
specific rights, and no others: (1) in the case of the death of the Owner, the
right to be paid the amounts due it under PART ONE of Article 7 of the Agreement
by recovering said amounts directly from the Insurer out of the net death
proceeds of the Policy; (2) in the event that Agreement is terminated pursuant
to Article 8, Sections A or B, the right to be paid the amount due it, if any,
under Article 6 of the Agreement. Neither party shall have the right to borrow
against the Policy, except that the Owner may borrow against the Policy after
attaining the age of 65, so long as such borrowing shall not include funds from
the Assignee's interest in the Policy.
D. Notwithstanding this Assignment, the Owner shall specifically retain
all incidents of ownership in and to the Policy, including, but not limited, to:
(1) in accordance with the terms of the Agreement, the right to cancel or
surrender the Policy and to receive, subject to Paragraph C. 2. hereof, the
surrender value thereof at any time provided by the terms of the Policy and at
such other times as the Insurer may allow; (2) the right to designate and change
the Policy beneficiary, with respect to the amount to be paid pursuant to PART
TWO of Article 7 of the Agreement; (3) the right to elect any optional methods
of settlement with regard to the death benefit under PART TWO of Article 7; (4)
the right to borrow against the Policy after the Owner attains age 65, so long
as such borrowing shall not include funds from the Assignee's interest in the
Policy; (5) the right to designate any reallocation of unit values as permitted
by the Policy subject to a right of the Assignee to disapprove a particular
allocation which it deems inappropriate; and (6) all other rights contained
-1-
<PAGE>
in the Policy to the extent the exercise of such rights does not adversely
affect the interest of the Assignee; provided, however, that all of the
foregoing rights retained by the Owner in the Policy shall be subject to the
terms and conditions of the Agreement.
E. The Assignee agrees with the Owner as follows: (1) any funds
received by Assignee from the Insurer which are attributable to the portion of
the death benefit allocated to PART TWO of Article 7 of the Agreement shall be
paid by the Assignee to the beneficiaries designated by the Owner; and (2) if
the Policy is in the possession of the Assignee, the Assignee will, upon the
Owner's request, forward the Policy to the Insurer, without unreasonable delay,
for endorsement of any designation or change of beneficiary, any election of
optional mode of settlement, or the exercise of any other right reserved by the
Owner hereunder.
F. Notwithstanding anything in this Assignment to the contrary, the
Insurer shall be under no obligation to monitor the obligation of the Assignee
hereunder to pay to the designated beneficiaries of the Owner any amounts
received from the Insurer under PART TWO of Article 7 of the Agreement after
payment of PART ONE to the Assignee under the Agreement; and the Insurer shall
have no obligation or liability to any person or entity if the Assignee fails to
pay such amounts as required hereunder.
G. The Insurer is hereby authorized to recognize, and is protected in
recognizing, the Assignee's claims to amounts due it hereunder without
investigating the validity of its claim thereto, the reason for any action taken
by the Assignee, the validity or accuracy of the amount of any of the
liabilities of the Owner to the Assignee under the Agreement, the existence of
any default therein, the giving of any notice required therein, or the
application to be made by the Assignee of any amounts to be paid to the
Assignee. A receipt executed solely by the Assignee for any amounts received by
it from the Insurer shall be a full discharge and release of the Insurer from
the obligations released thereby.
H. In furtherance hereof, the Owner appoints the Assignee his
attorney-in-fact for the following purposes:
1. to receive the portion of the death benefit payable to the
Assignee upon the death of the Owner under PART ONE of Article
7 of the Agreement; and
2. to receive, upon termination of the Agreement pursuant to
Article 8, Sections A or B thereof, the amount, if any,
designated in Article 6, Sections A or B of the Agreement, as
the case may be.
This appointment is coupled with an interest in the Assignee and shall
be irrevocable so long as the Agreement remains in force.
I. The Insurer shall not comply with a request made by the Owner for
cancellation or surrender of the Policy without the consent of the Assignee.
Upon receipt of an assented-to request for cancellation or surrender, the
Insurer shall terminate the Policy and this Assignment shall be of
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<PAGE>
no further force or effect; provided, however, that the Insurer shall set aside
and deduct from any amounts to be paid to the Owner under the terms of the
Policy in consequence of its cancellation or surrender, the amount due to the
Assignee under the provisions of Article 6 of the Agreement, which amount shall
be paid to the Assignee by the Insurer.
J. In the event of any conflict between the provisions of this
Assignment and the provisions of the Agreement with respect to the Policy or the
Assignee's rights therein, the provisions of the Agreement shall prevail.
K. The Owner declares that no proceedings in bankruptcy are pending
against the Owner and that the Owner's property is not subject to any assignment
for the benefit of creditors of the Owner.
Signed and sealed as of the 24 day of February, 1999.
/s/ Peter Tulp
-----------------------------------
Peter Tulp, Owner
Date: February 24, 1999
Accepted and Agreed:
DM Management Company
By:/s/ Olga L. Conley
--------------------------------
Its: Chief Financial Officer
------------------------------
Date: February 24, 1999
ACKNOWLEDGEMENT OF SIGNATURE OF OWNER
COMMONWEALTH OF MASSACHUSETTS )
COUNTY OF Plymouth ) ss:
On the 24th day of February, 1999, before me personally came Peter Tulp, to
me known to be the individual described in and who executed the assignment above
and acknowledged to me that he executed the same.
/s/ Patricia L. Eppich
------------------------------------
Notary Public
My commission expires: 4/1/05
-------------
[seal]
PATRICIA L. EPPICH
Notary Public
My Commission Expires April 1,2005
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<PAGE>
ACKNOWLEDGEMENT OF SIGNATURE OF ASSIGNEE
COMMONWEALTH OF MASSACHUSETTS )
COUNTY OF Plymouth ) ss:
On the 24th day of February, 1999, before me personally came Olga L. Conley, who
being by me duly sworn, did depose and say that he is the Chief Financial
Officer of DM Management Company, the corporation described in and which
executed the acceptance and agreement of assignment above; and that he signed
his name thereto by the authority granted to his office.
/s/ Patricia L. Eppich
------------------------------------
Notary Public
My commission expires: 4/1/05
-------------
PATRICIA . EPPICH
Notary Public
My Commission Expires April 1, 2005
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<PAGE>
EX 10.26
SPLIT DOLLAR AGREEMENT
ALLMERICA LIFE INSURANCE
POLICY NO. V062403700
AGREEMENT made as of this 3rd day of March, 1999, by and between Jane
Dunning (the "Employee"), and DM Management Company, a Delaware corporation (the
"Employer").
WHEREAS, the Employee wishes to establish a life insurance program for
the benefit and protection of his family under Policy No. V062403700 (the
"Policy") issued by Allmerica Financial Life Insurance and Annuity Company, of
Worcester, Massachusetts (the "Insurer"); and
WHEREAS, the Employer wishes to help the Employee provide such
insurance for the benefit and protection of his family by the payment of the
premiums due on the Policy in accordance with Article 2 hereof; and
WHEREAS, the Employee will be the sole owner of the Policy, and will
assign the Policy to the Employer for the purpose of providing security for the
repayment of the amounts which the Employer will contribute toward payment of
the premium due or to become due on the Policy pursuant to an agreement of even
date to be executed by the parties hereto (the "Collateral Assignment"); and
WHEREAS, it is the desire of the parties to define the extent of the
Employer's interest in the cash surrender value and death proceeds of the
Policy;
NOW THEREFORE, in consideration of the mutual promises contained
herein, it is agreed between the parties hereto as follows:
ARTICLE 1: OWNERSHIP OF POLICY
The Policy is the exclusive property of the Employee, who may exercise
all rights of ownership with respect to his interest therein, subject to the
security interest of the Employer as expressed in this Agreement and the
Collateral Assignment and to any death benefit which may become due to the
Employer.
ARTICLE 2: PAYMENT OF PREMIUMS
A. For the first seven (7) years the Policy is in force, or until this
Agreement is earlier terminated as provided in Article 8, the Employer shall be
responsible for the payment of (i) the scheduled premium, or (ii) such lesser
amount as the Insurer advises is consistent with the insurance features of the
Policy. In addition, after the expiration of said seven-year period and while
this Agreement is still in effect, the Employer may make such additional
payments as the Insurer advises is consistent with maintaining the intended
value of the Policy but only if such greater amount or
<PAGE>
additional payments are approved by the Compensation Committee of the Employer's
Board of Directors.
B. The Employee understands that he will recognize taxable income in
each year with respect to the life insurance protection afforded to the Employee
in accordance with Internal Revenue Service rulings and regulations.
C. The Employer shall, before the end of any grace period provided in
the Policy for each premium payment, remit the annual premiums as stated in the
Policy until this Agreement is terminated as provided in Article 8. If
requested, the Employer shall give proof to the Employee of the timely payment
of each premium.
ARTICLE 3: COLLATERAL ASSIGNMENT
To secure the repayment to the Employer of an amount equal to the
aggregate amount of its premium payments under the Policy to the extent provided
in Article 6, the Employee has contemporaneously with the execution of this
Agreement assigned the Policy to the Employer as collateral, by means of the
form of Collateral Assignment attached to this Agreement as Schedule 1. The
Collateral Assignment shall not be altered, terminated or amended by Employee
without the express written consent of the Employer. The parties agree to take
all action necessary to cause such assignment to conform to the provisions of
this Agreement.
ARTICLE 4: RIGHTS IN POLICY
A. The Employer shall have no right to borrow against the Policy.
B. The Employee, in recognition of the defined contribution provisions
of this Agreement and the variable nature of the death benefits, shall have the
right to allocate the aggregate account value to particular investment vehicles,
subject to a right of the Employer to disapprove a particular investment vehicle
which it deems inappropriate.
C. The Employee shall have the right to exchange the Policy for such
other policies and/or insurers that he deems appropriate based upon the
investment performance or financial condition of the Insurer, subject to the
approval of the Employer, which approval shall not unreasonably be denied.
Action by the Employee or the Employer to change the Policy and/or insurer
pursuant to this paragraph shall not otherwise alter the rights and
responsibilities of the Employer and the Employee as set forth in this
Agreement.
D. The Employer shall have no responsibility for a shortfall in the
projected total return on the paid-in premiums available to provide the death
benefit.
E. The Employer shall not take any action that might endanger the
interest of the Employee in the Policy. The Employee shall not take any action
that might endanger the interest of the Employer in the Policy.
-2-
<PAGE>
ARTICLE 5: EMPLOYEE'S RIGHTS IN POLICY
The Employee retains all other rights in the Policy not specifically
assigned to the Employer including, but not limited to, the following rights:
A. The right to surrender the Policy as set forth in Paragraph D of
the Collateral Assignment.
B. The right to change the beneficiary of the Policy, to the extent of
his interest.
C. The right to select optional methods of settlement with regard to
the death benefit provided in PART TWO of Article 7.
D. All other rights contained in the Policy, to the extent the exercise
of such rights does not adversely affect the Employer's interest in the Policy.
ARTICLE 6: PAYMENT OF CASH SURRENDER VALUE
A. Except as set forth in this Article 6, Section B, in the event this
Agreement is terminated pursuant to Section A or B of Article 8, the Employer
shall have the unqualified right to receive from the Insurer a sum which is
equal to the lesser of (a) the then cash surrender value as defined in the
Policy or (b) the aggregate unreimbursed amount of premium payments with respect
to the Policy for which the Employer was responsible pursuant to Article 2,
Section A (the "Premium Reimbursement"). This amount shall be established in a
written statement to the Insurer by the Employer, and the Insurer shall have the
right, without liability to the Employee or his beneficiary or beneficiaries of
the Policy, to rely exclusively upon such statement. The Employer shall, upon
receiving such sum, release the Collateral Assignment of the Policy.
B. In the event that this Agreement is terminated pursuant to Section B
of Article 8 after the occurrence of a "Terminating Event" (as defined in
Section C of this Article 6), the Employer shall not be entitled to receive the
Premium Reimbursement pursuant to Section A of Article 6.
C. For purposes of this Article 6, a "Terminating Event" shall mean any
of the following if it occurs within two years of a "Change in Control" (as
defined in Section E of this Article 6):
(i) termination by the Employer of the Employee's employment
with the Employer for any reason other than (a) the Employee's death or
disability, or (b) for "Cause" (as such term is defined in Section D of this
Article 6), or
(ii) Employee's resignation as an employee of the Employer,
other than for reasons of disability, following a significant reduction in the
nature or scope of the Employee's duties, responsibilities, authority and powers
from the duties, responsibilities, authority and powers exercised by the
Employee immediately prior to the Change in Control or a reduction in the
Employee's annual base salary as in effect on the date of the Change in Control,
except for across-the-board salary reductions similarly affecting all management
personnel of the Employer (or the
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<PAGE>
surviving entity, in the case of a merger or acquisition in which the Employer
is not the surviving entity).
D. For purposes of Section C of this Article 6, "Cause" shall mean:
(i) deliberate dishonesty with respect to the Employer or any
subsidiary or affiliate thereof;
(ii) conviction of a crime involving moral turpitude; or
(iii) gross and willful failure to perform a substantial
portion of the Employee's duties and responsibilities as an officer of the
Employer, which failure continues for more than thirty days after written notice
given to the Employee pursuant to a two-thirds vote of all of the members of the
Board of Directors of the Employer then in office, such vote to set forth in
reasonable detail the nature of such failure.
E. For the purposes of this Article 6, "Change in Control" shall mean
the occurrence of any one or more of the following events:
(i) if there is a merger or consolidation of the Employer with
any other entity and the voting securities of the Employer outstanding
immediately prior to such merger or consolidation do not continue to represent
(either by remaining outstanding or by being converted into voting securities of
the surviving entity) more than fifty percent (50%) of the combined voting power
of the voting securities of the Employer or such surviving entity immediately
after such merger or consolidation, or
(ii) when any person or entity or group of persons or entities
either related or acting in concert becomes the "beneficial owner" (as defined
in Rule 13d-3 under the Securities Exchange At of 1934, as amended) of
securities of the Employer representing more than fifty percent (50%) of the
total number of votes that may be cast for the election of directors of the
Employer (any such person or entity or group of persons or entities being
referred to, collectively in the case of any such group, as an "Acquiring
Person"), or
(iii) if the Employer sells all or substantially all of its
assets to another entity, other than in a transaction in which the voting
securities of the Employer outstanding immediately prior to such transaction
continue to represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) more than fifty percent (50%) of
the combined voting power of the voting securities of the Employer or such
surviving entity immediately after such transaction, or
(iv) during any period of two consecutive years (not
including any period prior to the execution of this Agreement), individuals
who are Continuing Directors (as hereinafter defined) cease for any reason to
constitute at least a majority of the Board of Directors of the Employer. For
this purpose, a "Continuing Director" shall mean (a) an individual who was a
director of the Employer at the beginning of such period or (b) any new
director (other than a director designated
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<PAGE>
by an Acquiring Person) whose election by the Board or nomination for election
by the Board, a committee thereof or the Employer's stockholders was approved by
a vote of a majority of the directors then still in office who either were
directors at the beginning of such period or whose election or nomination for
election was previously so approved; or
(v) one or more Acquiring Persons has succeeded, as the result
of or in response to actual or threatened election contests, whether by
settlement or otherwise, in having elected to the Board of Directors of the
Employer, whether at one time or on a cumulative basis, a sufficient number of
its nominees to constitute (a) more than thirty percent (30%) of the members of
the Employer's Board of Directors, rounded down to the nearest whole number, if
the number of directors on the Employer's Board is eight or less, or (b) more
than forty percent (40%) of the members of the Employer's Board, rounded down to
the nearest whole number, if the number of directors on the Employer's Board is
nine or more.
ARTICLE 7: PAYMENT OF DEATH BENEFIT
In the event of the death of the Employee while the Policy and this
Agreement are in force, the net proceeds of the Policy shall be divided into two
parts and paid as follows:
PART ONE: To the Employer, a sum equal to the aggregate
unreimbursed amount of premium payments for which the Employer
was responsible pursuant to Section A of Article 2, unless
Section B of Article 6 applies.
PART TWO: To the designated beneficiaries of the
Employee, the remaining proceeds of the Policy.
ARTICLE 8: TERMINATION OF AGREEMENT
This Agreement shall terminate:
A. Upon surrender of the Policy by the Employee, except when the Policy
is surrendered and a new policy is issued pursuant to an exchange under
Article 4, Section C.
B. Upon the termination of the employment of the Employee for any
reason other than retirement at or after attaining the age of 65.
C. On the death of the Employee.
ARTICLE 9: EXCHANGE OF POLICY
In the event the Employer is required to exchange the Policy under
Article 4, Section C, the Employee shall execute any forms necessary or
appropriate to effect such exchange including, without limitation, the surrender
of the Policy, the transfer of proceeds to the new insurer and the
-5-
<PAGE>
execution of a new Split Dollar Agreement and Collateral Assignment. Such
exchange shall qualify under Section 1035 of the Internal Revenue Code or
successor provisions of similar import.
ARTICLE 10: OBLIGATIONS OF INSURER
Any payments made or action taken by the Insurer in accordance with the
provisions of the Policy and the Collateral Assignment shall fully discharge it
from all claims, suits, and demands of all persons whatsoever.
ARTICLE 11: MISCELLANEOUS
A. This Agreement shall be binding upon the parties hereto, their
heirs, legal representative, successors and assigns.
B. This Agreement and the Collateral Assignment embody all agreements
between or among the parties with respect to the Policy, and no change,
alteration, or modification may be made except in writing signed by all parties
hereto.
C. This Agreement shall be governed by, and construed in accordance
with the provisions of, the laws of the Commonwealth of Massachusetts without
regard to its principles of conflicts of laws.
D. Any dispute, controversy or claim with respect to any party's
performance under this Agreement shall be settled by arbitration in accordance
with the laws of The Commonwealth of Massachusetts by a single arbitrator who
shall be selected by the American Arbitration Association in Boston,
Massachusetts. Such arbitration shall be conducted in the City of Boston in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association. Punitive damages shall not awarded. Judgment upon the award
rendered by the arbitrator may be entered in any court having jurisdiction
thereof.
IN WITNESS WHEREOF, the parties hereto have set their hand and seals
effective as of the day and year first above written.
/s/ Jane Dunning
------------------------------------------
Jane Dunning, Employee
Date: March 3, 1999
DM MANAGEMENT COMPANY, Employer
By /s/ Olga L. Conley
------------------------------------------
Its CHIEF FINANCIAL OFFICER
------------------------------------------
Date: March 3, 1999
-6-
<PAGE>
SCHEDULE 1 TO SPLIT DOLLAR AGREEMENT
ASSIGNMENT OF LIFE INSURANCE POLICY AS COLLATERAL
A. FOR VALUE RECEIVED, the undersigned Jane Dunning (hereinafter the
"Owner") hereby assigns, transfers and sets over to DM Management Company, a
Delaware corporation, its successors and assigns (hereinafter the "Assignee"),
the following specific rights (and only those specific rights) in and to policy
number V062403700, issued by Allmerica Financial Life Insurance and Annuity
Company (hereinafter the "Insurer") and any supplementary contract or contracts
issued in connection therewith (said policy and any such contracts hereinafter
the "Policy"), insuring the life of the Owner, subject to all terms and
conditions of the Policy and to all superior liens, if any, which the Insurer
may have against the Policy. The Owner, by this Assignment, and the Assignee, by
acceptance of the Assignment of the Policy to it hereunder, agree to the terms
and conditions contained in the Policy.
B. This Assignment is made, and the Policy is to be held as collateral
security for, all rights of and obligations owed to the Assignee, now existing
or hereafter arising under and pursuant to a certain Split Dollar Agreement, by
and between the Owner and the Assignee of even date herewith pertaining to the
Policy (hereinafter the "Agreement"). The Owner reserves all rights and powers
in and to the Policy, except those specific, limited rights in the Policy
granted to the Assignee hereby, as security for all rights of and obligations
owed to the Assignee under the Agreement.
C. It is expressly agreed that the Assignee's interest in the Policy
under and by virtue of this Assignment shall be limited to the following
specific rights, and no others: (1) in the case of the death of the Owner, the
right to be paid the amounts due it under PART ONE of Article 7 of the Agreement
by recovering said amounts directly from the Insurer out of the net death
proceeds of the Policy; (2) in the event that Agreement is terminated pursuant
to Article 8, Sections A or B, the right to be paid the amount due it, if any,
under Article 6 of the Agreement. Neither party shall have the right to borrow
against the Policy, except that the Owner may borrow against the Policy after
attaining the age of 65, so long as such borrowing shall not include funds from
the Assignee's interest in the Policy.
D. Notwithstanding this Assignment, the Owner shall specifically retain
all incidents of ownership in and to the Policy, including, but not limited, to:
(1) in accordance with the terms of the Agreement, the right to cancel or
surrender the Policy and to receive, subject to Paragraph C. 2. hereof, the
surrender value thereof at any time provided by the terms of the Policy and at
such other times as the Insurer may allow; (2) the right to designate and change
the Policy beneficiary, with respect to the amount to be paid pursuant to PART
TWO of Article 7 of the Agreement; (3) the right to elect any optional methods
of settlement with regard to the death benefit under PART TWO of Article 7; (4)
the right to borrow against the Policy after the Owner attains age 65, so long
as such borrowing shall not include funds from the Assignee's interest in the
Policy; (5) the right to designate any reallocation of unit values as permitted
by the Policy subject to a right of the Assignee to disapprove a particular
allocation which it deems inappropriate; and (6) all other rights contained
-1-
<PAGE>
in the Policy to the extent the exercise of such rights does not adversely
affect the interest of the Assignee; provided, however, that all of the
foregoing rights retained by the Owner in the Policy shall be subject to the
terms and conditions of the Agreement.
E. The Assignee agrees with the Owner as follows: (1) any funds
received by Assignee from the Insurer which are attributable to the portion of
the death benefit allocated to PART TWO of Article 7 of the Agreement shall be
paid by the Assignee to the beneficiaries designated by the Owner; and (2) if
the Policy is in the possession of the Assignee, the Assignee will, upon the
Owner's request, forward the Policy to the Insurer, without unreasonable delay,
for endorsement of any designation or change of beneficiary, any election of
optional mode of settlement, or the exercise of any other right reserved by the
Owner hereunder.
F. Notwithstanding anything in this Assignment to the contrary, the
Insurer shall be under no obligation to monitor the obligation of the Assignee
hereunder to pay to the designated beneficiaries of the Owner any amounts
received from the Insurer under PART TWO of Article 7 of the Agreement after
payment of PART ONE to the Assignee under the Agreement; and the Insurer shall
have no obligation or liability to any person or entity if the Assignee fails to
pay such amounts as required hereunder.
G. The Insurer is hereby authorized to recognize, and is protected in
recognizing, the Assignee's claims to amounts due it hereunder without
investigating the validity of its claim thereto, the reason for any action taken
by the Assignee, the validity or accuracy of the amount of any of the
liabilities of the Owner to the Assignee under the Agreement, the existence of
any default therein, the giving of any notice required therein, or the
application to be made by the Assignee of any amounts to be paid to the
Assignee. A receipt executed solely by the Assignee for any amounts received by
it from the Insurer shall be a full discharge and release of the Insurer from
the obligations released thereby.
H. In furtherance hereof, the Owner appoints the Assignee his
attorney-in-fact for the following purposes:
1. to receive the portion of the death benefit payable to the
Assignee upon the death of the Owner under PART ONE of
Article 7 of the Agreement; and
2. to receive, upon termination of the Agreement pursuant to
Article 8, Sections A or B thereof, the amount, if any,
designated in Article 6, Sections A or B of the Agreement, as
the case may be.
This appointment is coupled with an interest in the Assignee and shall
be irrevocable so long as the Agreement remains in force.
I. The Insurer shall not comply with a request made by the Owner for
cancellation or surrender of the Policy without the consent of the Assignee.
Upon receipt of an assented-to request for cancellation or surrender, the
Insurer shall terminate the Policy and this Assignment shall be of
-2-
<PAGE>
no further force or effect; provided, however, that the Insurer shall set aside
and deduct from any amounts to be paid to the Owner under the terms of the
Policy in consequence of its cancellation or surrender, the amount due to the
Assignee under the provisions of Article 6 of the Agreement, which amount shall
be paid to the Assignee by the Insurer.
J. In the event of any conflict between the provisions of this
Assignment and the provisions of the Agreement with respect to the Policy or the
Assignee's rights therein, the provisions of the Agreement shall prevail.
K. The Owner declares that no proceedings in bankruptcy are pending
against the Owner and that the Owner's property is not subject to any assignment
for the benefit of creditors of the Owner.
Signed and sealed as of the 3rd day of March, 1999.
/s/ Jane Dunning
---------------------------
Jane Dunning, Owner
Date: March 3, 1999
Accepted and Agreed:
DM Management Company
By:/s/ Olga L. Conley
- ------------------------------
Its:CHIEF FINANCIAL OFFICER
---------------------------
Date: March 3, 1999
ACKNOWLEDGEMENT OF SIGNATURE OF OWNER
COMMONWEALTH OF MASSACHUSETTS )
COUNTY OF PLYMOUTH ) ss:
On the 3rd day of March, 1999, before me personally came Jane Dunning, to me
known to be the individual described in and who executed the assignment above
and acknowledged to me that she executed the same.
/s/ Patricia L. Eppich
---------------------------------
Notary Public
My commission expires: 4/1/05
----------
[SEAL]
PATRICIA L EPPICH
Notary Public
My Commision Expires April 1, 2005
-3-
<PAGE>
ACKNOWLEDGEMENT OF SIGNATURE OF ASSIGNEE
COMMONWEALTH OF MASSACHUSETTS )
COUNTY OF PLYMOUTH ) ss:
On the 3rd day of March, 1999, before me personally came Olga L. Conley, who
being by me duly sworn, did depose and say that he is the Chief Financial
Officer of DM Management Company, the corporation described in and which
executed the acceptance and agreement of assignment above; and that he signed
his name thereto by the authority granted to his office.
/s/ Patricia L. Eppich
------------------------------------
Notary Public
My commission expires: 4/1/05
-------
PATRICIA L EPPICH
Notary Public
My Commision Expires April 1, 2005
-4-
<PAGE>
Exhibit 10.55
FOURTH AMENDMENT TO SECOND AMENDED
AND RESTATED LOAN AGREEMENT
This Fourth Amendment to Second Amended and Restated Loan Agreement
dated as of December 31, 1998, by and between Citizens Bank of Massachusetts
(herein "BANK"), and DM Management Company, a Delaware corporation (herein
"BORROWER").
WITNESSETH:
WHEREAS, BANK and BORROWER are parties to that certain Loan Agreement
made as of June 5, 1997 by and between BANK and BORROWER, as the same has been
amended and restated in a certain Amended and Restated Loan Agreement dated as
of October 31, 1997, and in a certain Second Amended and Restated Loan Agreement
dated March 5, 1998, and as amended by a certain First Amendment to Second
Amended and Restated Loan Agreement dated as of June 30, 1998, and Second
Amendment to Second Amended and Restated Loan Agreement dated as of September 4,
1998 and Third Amendment to Second Amended and Restated Loan Agreement dated
September 4, 1998 (as so restated and amended, the "Loan Agreement");
WHEREAS, BORROWER and the BANK wish to further amend the Loan Agreement
as more particularly hereafter set forth. Capitalized terms used herein without
definition shall have the meanings ascribed to them in the Loan Agreement.
NOW, THEREFORE, in consideration of the covenants and agreements herein
contained, the parties hereby agree that the Loan Agreement is hereby amended as
follows:
(a) By deleting the definition of CERTIFICATE OF DEPOSIT and
substituting the following in lieu thereof:
"CERTIFICATE OF DEPOSIT" shall mean a certain Certificate
of Deposit of the BANK issued to the BORROWER numbered
9802250739 in the amount of $12,327,632.99 as the same may be
amended, substituted for, replaced, increased or reduced.
<PAGE>
(b) By deleting the definition of REVOLVING CREDIT COMMITMENT
AMOUNT and substituting the following in lieu thereof:
"'REVOLVING CREDIT COMMITMENT AMOUNT' (sometimes the
'REVOLVING COMMITMENT AMOUNT') shall mean the sum of Eight
Million Five Hundred Thousand Dollars ($8,500,000.00) except
that during the period from the date hereof through March 31,
1999 it shall mean Twenty-Three Million Five Hundred Thousand
Dollars ($23,500,000.00) (unless BORROWER delivers written
notice to the BANK requesting a lesser amount and BANK
confirms same in writing), provided however that any such
increase as aforesaid (consisting of Fifteen Million Dollars
($15,000,000)) shall be reduced by the amount financed under
the CITIZENS LEASE."
(c) By deleting the definition of "SPECIAL EVENT".
(d) By deleting the definition of "SPECIAL PERIOD".
(e) By inserting a definition of "SECOND REPLACEMENT NEW
BRIDGE NOTE" as follows:
"SECOND REPLACEMENT NEW BRIDGE NOTE" is defined in
Section 5A.05.
2. Section 5A.05 is hereby deleted and the following substituted in
lieu thereof:
"5A.05 The term of the BRIDGE NOTE having expired and all
of the conditions of Article XV and Section 2.08 having been
satisfied and no EVENT OF DEFAULT having occurred, the BANK
agreed to extend the term for repayment of the BRIDGE LOAN
until December 31, 1998 and to reprice the same in the manner
provided. Such BRIDGE LOAN was evidenced by the NEW BRIDGE
NOTE. The BORROWER having represented that all of the
conditions of Article XV and Section 2.08 have been satisfied
and remain fulfilled as of the date hereof, and that no EVENT
OF DEFAULT has occurred, the BANK agrees to further extend
the term of the BRIDGE LOAN until March 31, 1999 and to
reprice the same in the manner provided in Section 5A.08
hereof."
-2-
<PAGE>
3. Concurrently herewith, BORROWER shall execute and deliver to the
BANK a replacement of the REPLACEMENT NEW BRIDGE NOTE (the "SECOND
REPLACEMENT NEW BRIDGE NOTE") to reflect the amended maturity date
of such note. All references in the Loan Agreement to the "NEW
BRIDGE NOTE" or "REPLACEMENT NEW BRIDGE NOTE" shall hereafter be
deemed to refer to such "SECOND REPLACEMENT NEW BRIDGE NOTE"
executed of even date herewith.
4. Section 5A.08 is hereby deleted and the following substituted in
lieu thereof:
"5A.08 The BORROWER shall from March 5, 1998 until the
full balance of principal and interest on the BRIDGE LOAN
shall have been paid in full, pay interest monthly in arrears
on the daily outstanding balance of the BRIDGE LOAN from time
to time outstanding at the rate provided in Section 5A.04.
for each INTEREST PERIOD (unless otherwise provided).
5. Concurrently herewith, BORROWER shall execute and deliver to the
BANK a replacement of the REPLACEMENT SHORT TERM REVOLVING NOTE
(the "SECOND REPLACEMENT SHORT TERM REVOLVING NOTE") to reflect
the amended maturity date(s) of such note. All references in the
Loan Agreement to "SHORT TERM REVOLVING NOTE" or "REPLACEMENT
SHORT TERM REVOLVING NOTE" shall hereafter be deemed to refer to
such "SECOND REPLACEMENT SHORT TERM REVOLVING NOTE" executed of
even date herewith.
6. Section 5B.02 is hereby deleted and the following substituted in
lieu thereof:
"5B.02 The SHORT TERM REVOLVING LOAN shall be paid in
full on the first to occur of (1) the obtaining of permanent
financing with respect to the Project or (2) March 31, 1999."
This Amendment shall take effect as of the date first above written.
Except as hereby amended, the Loan Agreement is hereby ratified,
confirmed and republished.
IN WITNESS WHEREOF, the parties hereto have set their hands and seals
as of the date first above written.
-3-
<PAGE>
Witness: DM MANAGEMENT COMPANY
/s/ Lori B. Leeth
- ---------------------------
By: /s/ Olga L. Conley
-------------------------------------
Olga L. Conley, Chief Financial Officer
CITIZENS BANK OF MASSACHUSETTS
By: /s/ Lori B. Leeth
-------------------------------------
Lori B. Leeth, Senior Vice President
-4-
<PAGE>
Exhibit 10.56
SECOND AMENDMENT TO
ASSIGNMENT OF CERTIFICATE OF DEPOSIT
This Second Amendment to Assignment of Certificate of Deposit dated as
of December 31st, 1998 by and between Citizens Bank of Massachusetts ("Bank")
and DM Management Company ("Debtor").
W I T N E S S E T H:
WHEREAS, Bank and Debtor are parties to that certain Assignment of
Certificate of Deposit dated as of March 5, 1998 as amended by a certain First
Amendment to Assignment of Certificate of Deposit dated as of September 4, 1998
(collectively, the "Assignment"); and
WHEREAS, the parties wish to amend the Assignment as hereafter set
forth.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. Section 1 of the Assignment is hereby amended by deleting the
language inserted by the said First Amendment to Assignment of Certificate of
Deposit and substituting therefor the following:
"accommodations to the undersigned debtor (the "Debtor"),
pursuant to a certain Second Amended and Restated Loan
Agreement dated March 5, 1998, as amended by a certain Third
Amendment to Second Amended and Restated Loan Agreement dated
September 4, 1998 and by a certain Fourth Amendment to Second
Amended and Restated Loan Agreement, of even date herewith and
as the same may be further amended from time to time
(collectively, the "Loan Agreement"),"
2. Exhibit A to said Assignment is hereby deleted in its entirety and
is replaced by Exhibit A hereto.
3. The sum set forth after the designation "Face Amount" is hereby
deleted and the sum of $12,327,632.99 is hereby inserted in lieu thereof.
Except as amended hereby, the Assignment is hereby ratified, confirmed
and republished.
<PAGE>
EXECUTED as an instrument under seal to be construed under the laws of
The Commonwealth of Massachusetts.
DEBTOR:
WITNESS: DM MANAGEMENT COMPANY
/s/ Lori B. Leeth By: /s/ Olga L. Conley
- ------------------------------- ---------------------------
Olga L. Conley
Chief Financial Officer
BANK:
WITNESS: CITIZENS BANK OF MASSACHUSETTS
/s/ Maryalice Trottier By: /s/ Lori B. Leeth
- ------------------------------- -----------------------------
Lori B. Leeth
Senior Vice President
-2-
<PAGE>
EXHIBIT A
(a) the full payment of the sum of $8,500,000.00, or such lesser amount
which shall have been advanced, together with interest and other charges, all as
provided in a certain "Revolving Note" of the Debtor to the order of the Bank
dated June 5, 1997, which Note was amended and replaced by a certain Replacement
Revolving Note dated October 31, 1997 in the face amount of $8,500,000.00 which
note was amended and replaced by a certain "Second Replacement Revolving Note"
dated September 4, 1998 in the face amount of $23,500,000.00, all as provided in
a certain Loan Agreement dated June 5, 1997, as amended and restated as of the
March 5, 1998, as amended dated September 4, 1998 hereof and as the same may
hereafter be amended (collectively, the "Loan Agreement") together with all
substitutions or replacements therefor and all renewals or extensions thereof
and the full performance of all other obligations of the maker of said note as
provided therein; (b) the full payment of the sum of $1,650,000.00, as provided
in a certain "Real Estate Note" (as defined in the Loan Agreement) of the Debtor
to the order of the Bank executed and delivered by the Debtor to the Bank,
pursuant to the Loan Agreement in the face amount of $1,650,000.00, with
interest and other charges as provided therein, together with all substitutions
and replacements therefor and all renewals and extensions thereof and the full
performance of all other obligations of the maker of said note as provided
therein and a certain Second Amendment to Mortgage executed and delivered in
connection therewith as the same may be amended from time to time; (c) the full
payment of the sum of $3,600,000.00, with interest and other charges, all as
provided in a certain "Term Note" (as defined in the Loan Agreement) of the
Debtor to the order of the Bank, dated June 5, 1997, executed and delivered by
the Debtor to the Bank pursuant to the Loan Agreement, in the original face
amount of $3,600,000.00, together with all substitutions or replacements
therefor and all renewals or extensions thereof and the full performance of all
other obligations of the maker of said note as provided therein; (d) the full
payment of the sum of Four Million Three Hundred Thousand Dollars
($4,300,000.00) together with interest and other charges, all as provided in a
certain "New Bridge Note" (as defined in the Loan Agreement) of the Debtor at
the order of the Bank dated as of March 5, 1998, executed and delivered by the
Debtor to the Bank pursuant to the Loan Agreement in the original face amount of
Four Million Three Hundred Thousand Dollars ($4,300,000.00) as amended and
replaced by that certain "Replacement New Bridge Note" (as defined in the Loan
Agreement) dated September 4, 1998 together with all substitutions or
replacements therefor and all renewals and extensions thereof and the full
performance of all other obligations of the maker of said note as provided
therein; (e) the full payment of the sum of $17,000,000.00 together with all
interest and other charges all as provided in a certain "Short Term Revolving
Note" (as defined in the Loan Agreement) of the Debtor to the order of the Bank
dated March 5, 1998 pursuant to the Loan Agreement in the face amount of
-3-
<PAGE>
$17,000,000.00, as amended and replaced by that certain "Replacement Short Term
Revolving Note" (as defined in the Loan Agreement) dated September 4, 1998 and
all substitutions or replacements therefor and all renewals and extensions
thereof and the full performance of all other Obligations of the maker of said
Note, and in a certain "Assignment of Certificate of Deposit dated as of
March 5, 1998 and executed and delivered in connection therewith, as amended
dated September 4, 1998, and as the same may hereafter be amended; (f) the
full payment and performance by the Debtor of all indebtedness, obligations
and liabilities of the Debtor to the Bank under the Loan Agreement, direct or
indirect, absolute or contingent, now existing or hereafter arising
(including, without limitation, all "Obligations", as defined in the Loan
Agreement whether or not specifically referred to herein) which Loan
Agreement provides, among other things, for the establishment of a "Revolving
Loan" (as defined therein) and for the issuance of Letter of Credit pursuant
to L/C Appreciations as defined therein, pursuant to which "Advances" (as
defined therein) may be made from time to time, and for repayment of all or a
portion of the outstanding balance of such Advances together with interest
and other charges all in accordance therewith and for the grant of "Loans"
(as defined therein) as provided therein; (g) the full payment and
performance of all covenants and agreements herein contained or referred to
on the part of the Debtor to be kept and performed (collectively hereafter
referred to as "Obligations").
-4-
<PAGE>
Exhibit 10.57
SECOND REPLACEMENT NEW BRIDGE NOTE
Boston, Massachusetts
$ 4,300,000.00 December 31, 1998
On or before March 31, 1999, the undersigned, DM Management Company,
for value received, promises to pay to the order of Citizens Bank of
Massachusetts (hereinafter called the "Bank"), at its principal office at 28
State Street, Boston, Massachusetts 02109, or such other location that the
holder may specify
Four Million Three Hundred Thousand DOLLARS ($4,300,000.00)
with interest payable as hereafter set forth. This is the "Second Replacement
New Bridge Note" issued pursuant to the terms of a certain Fourth Amendment to
Second Amended and Restated Loan Agreement dated as of the date hereof, by and
between Bank and the undersigned, as the same may further hereafter be amended
or restated (the "Loan Agreement").
Interest shall accrue at the rate provided in the Loan Agreement for
the Bridge Loan as defined therein and shall be paid monthly, in arrears, during
the term hereof commencing one (1) month from the date hereof and on the like
day of each month thereafter except all accrued but unpaid interest shall be due
and payable at maturity.
Overdue principal and overdue interest from time to time outstanding
shall bear interest in accordance with the terms of the Loan Agreement. If
payment is not made when due hereunder then, without limitation on any other
right of the Holder, there shall be a late charge as provided in the Loan
Agreement.
If an "Event of Default" (as defined in the Loan Agreement) shall
occur, the entire unpaid principal balance of this note and all accrued and
unpaid interest may become or be declared due and payable without notice or
demand, in the manner and with the effect provided in the Loan Agreement.
Every maker, endorser and guarantor of this note, or the obligation
represented by this note, waives presentment, demand, notice, protest, and all
other demands or notices in connection with the delivery, acceptance,
endorsement, performance, default, or enforcement of this note, assents to any
and all extensions or postponements of the time of payment or any other
indulgence, to any substitution, exchange, or release of collateral, and/or to
the addition or release of any other party or person primarily or secondarily
liable, and generally waives all suretyship defenses and defenses in the nature
thereof.
<PAGE>
The undersigned will pay all reasonable out-of-pocket costs and
expenses of collection, including reasonable attorneys' fees, incurred or paid
by the holder in enforcing this note or the obligations hereby evidenced, to the
extent permitted by law.
No delay or omission of the holder in exercising any right of remedy
hereunder shall constitute a waiver of any such right or remedy.
The holder need not enter payments of principal or interest upon this
note, but may maintain a record thereof on a separate ledger maintained by the
holder.
The word "holder" as used in this note shall mean the payee or indorsee
of this note who is in possession of it or the bearer if this note is at the
time payable to bearer.
This note shall be governed by and construed in accordance with the
laws of The Commonwealth of Massachusetts and shall take effect as an instrument
under seal.
WITNESS: DM MANAGEMENT COMPANY
/s/ Lori B. Leeth By: /s/ Olga L. Conley
- ------------------------------ ----------------------------------------
Olga L. Conley
- ------------------------------ Chief Financial Officer
<PAGE>
Exhibit 10.58
SECOND REPLACEMENT SHORT TERM REVOLVING NOTE
Boston, Massachusetts
$17,000,000.00 December 31, 1998
On or before March 31, 1999, the undersigned, DM Management Company,
for value received, promises to pay to the order of Citizens Bank of
Massachusetts (hereinafter called the "Bank"), at its principal office at 28
State Street, Boston, Massachusetts 02109, or such other location that the
holder may specify
Seventeen Million DOLLARS ($17,000,000.00)
with interest payable as hereafter set forth. This is the "Second Replacement
Short Term Revolving Note" issued pursuant to the terms of a certain Fourth
Amendment to Second Amended and Restated Loan Agreement dated as of the date
hereof by and between Bank and the undersigned, as the same may further
hereafter be amended or restated (the "Loan Agreement"), payment of which is
secured by an Assignment of Certificate of Deposit as amended by First Amendment
to Assignment of Certificate of Deposit dated September 4, 1998 and a certain
Second Amendment to Assignment of Certificate of Deposit of even date and
otherwise as provided in the Loan Agreement.
Interest shall accrue at the rate provided in the Loan Agreement for
the Short Term Revolving Loan as defined therein and shall be paid monthly, in
arrears, during the term hereof commencing one (1) month from the date hereof
and on the like day of each month thereafter except all accrued but unpaid
interest shall be due and payable at maturity.
Overdue principal and overdue interest from time to time outstanding
shall bear interest in accordance with the terms of the Loan Agreement. If
payment is not made when due hereunder then, without limitation on any other
right of the Holder, there shall be a late charge as provided in the Loan
Agreement.
If an "Event of Default" (as defined in the Loan Agreement) shall
occur, the entire unpaid principal balance of this note and all accrued and
unpaid interest may become or be declared due and payable without notice or
demand, in the manner and with the effect provided in the Loan Agreement.
Every maker, endorser and guarantor of this note, or the obligation
represented by this note, waives presentment, demand, notice, protest, and all
other demands or notices in connection with the delivery, acceptance,
endorsement, performance, default, or enforcement of this note, assents to any
and all extensions or postponements of the time of payment or any other
<PAGE>
indulgence, to any substitution, exchange, or release of collateral, and/or to
the addition or release of any other party or person primarily or secondarily
liable, and generally waives all suretyship defenses and defenses in the nature
thereof.
The undersigned will pay all reasonable out-of-pocket costs and
expenses of collection, including reasonable attorneys' fees, incurred or paid
by the holder in enforcing this note or the obligations hereby evidenced, to the
extent permitted by law.
No delay or omission of the holder in exercising any right of remedy
hereunder shall constitute a waiver of any such right or remedy.
The holder need not enter payments of principal or interest upon this
note, but may maintain a record thereof on a separate ledger maintained by the
holder.
The word "holder" as used in this note shall mean the payee or indorsee
of this note who is in possession of it or the bearer if this note is at the
time payable to bearer.
This note shall be governed by and construed in accordance with the
laws of The Commonwealth of Massachusetts and shall take effect as an instrument
under seal.
WITNESS: DM MANAGEMENT COMPANY
/s/ Lori B. Leeth By: /s/ Olga L. Conley
- ----------------------------- ---------------------------------
Olga L. Conley
- ----------------------------- Chief Financial Officer
<PAGE>
Exhibit 10.59
[LOGO]
MASTER SECURITY AGREEMENT
SECURED
PARTY: Citizens Leasing Corporation DEBTOR: DM Management Company
One Citizens Plaza a Delaware corporation
Providence, Rhode Island 02903 ("Debtor")
Telephone (401) 456-7000 Address: 25 Recreation Park Drive
Hingham, MA 02043
Telephone: (781) 740-2718
1. GRANT OF SECURITY INTEREST
For good and valuable consideration, the receipt and adequacy of which
are hereby acknowledged by Debtor, Debtor hereby grants to Secured Party a
continuing general lien and security interest in the items of equipment set
forth from time to time in each Secured Promissory Note issued pursuant to this
Master Security Agreement (individually a "Note" and collectively the "Notes")
including, without limitation, all accessories, additions, accessions,
alterations, attachments, parts, and repairs now or hereafter affixed thereto or
used in connection herewith and substitutions and replacements thereof or of any
part thereof (collectively, the "Equipment") and all proceeds of the foregoing
including, without limitation, and insurance proceeds with respect to the
foregoing; and any cash or cash equivalent deposits made by Debtor to Secured
Party from time to time to secure Debtor's obligations under any Note or other
agreement with Secured Party (a "Security Deposit"). The security interest
granted hereby shall secure Debtor's obligations to the Secured Party set forth
in the Notes and shall also secure the obligations set forth in the last
sentence of this paragraph. The terms and conditions of this Agreement shall be
construed and interpreted as to each Note hereunder as if a separate, but
identical, security agreement had been executed with regard to the Equipment set
forth in such Note, and, except as provided in the following sentence, the
Equipment set forth in such Note shall serve as collateral security for Debtor's
obligations under that Note only. Notwithstanding the foregoing, the Debtor
agrees that until the Note is paid in full, the Equipment relating to the Note
shall serve as collateral for any and all obligations of the Debtor to the
Secured Party or any parent, subsidiary or affiliated company of the Secured
Party.
The security interest granted herein shall attach to each item of
Equipment at the earlier of (i) Debtor's execution and delivery of the Note and
Acceptance Certificate with respect to such item which shall occur upon Debtor's
acceptance of such item pursuant to the terms of any purchase order or agreement
with the vendor of such item; or (ii) the time that Secured Party advances any
funds to or on behalf of Debtor in complete or partial payment for such
Equipment.
2. TERM AND PAYMENTS
The term of each Note with respect to each item of Equipment shall
commence on the date of the Note Acceptance Certificate with respect to such
item and shall continue for the number of months, and proration thereof,
specified in the applicable Note. Installment payments shall be in the amounts
and shall be due and payable as set forth in the applicable Note. If any amount
payable hereunder shall not be paid within 10 days of the due date, Debtor shall
pay as an administrative and late charge an amount equal to 5% of the amount of
any such overdue payment. In addition, if any payment shall not be made within
10 days of the due date, Secured Party shall have the option to require Debtor
to pay interest on such delinquent payment from the due date until paid at the
rate of 1-1/2% per month or the maximum amount permitted by law whichever is
lower. All payments to be made to Secured Party shall be made to Secured Party
at the address shown above, or at such other place as Secured Party shall
specify in writing.
3. INSPECTION; PERSONAL PROPERTY
Secured Party may enter the premises where the Equipment is located
during business hours for the purpose of inspecting the Equipment. The Equipment
shall always remain personal property even though the Equipment may hereafter
become attached or affixed to real property. Debtor agrees to give and record
such notices and to take such other action at its own expense as may be
necessary to prevent any third party (other than an assignee of Secured Party)
from acquiring or having the right under any circumstances to acquire any
interest in the Equipment. In the event such third party does acquire or have
the right to acquire any interest in the Equipment, Debtor shall remove such
third party's interest within 30 days of its being asserted.
4. DISCLAIMER OF WARRANTIES
DEBTOR ACKNOWLEDGES THAT THE EQUIPMENT FINANCED HEREUNDER WILL BE OF A
TYPE, DESIGN, SIZE, CAPACITY AND MANUFACTURE SELECTED BY DEBTOR; THAT SECURED
PARTY IS NOT A MANUFACTURER OF, OR DEALER IN, THE EQUIPMENT; THAT NEITHER THE
VENDOR, THE MANUFACTURER NOR ANY AGENT THEREOF IS AN AGENT OF SECURED PARTY;
THAT SECURED PARTY HAS NOT, WILL NOT, AND HAS NO OBLIGATION TO, INSPECT THE
EQUIPMENT PRIOR TO DELIVERY TO DEBTOR; THAT SECURED PARTY IS NOT RESPONSIBLE FOR
REPAIRS, SERVICE OR DEFECTS IN EQUIPMENT OR OPERATION THEREOF; AND THAT SECURED
----------------
PARTY HAS NOT MADE AND WILL NOT MAKE
- -------------------------------------
<PAGE>
ANY REPRESENTATION, WARRANTY OR COVENANT, EXPRESS OR IMPLIED, OF ANY KIND OR AS
- -------------------------------------------------------------------------------
TO ANY MATTER WHATSOEVER ON WHICH DEBTOR MAY RELY, INCLUDING WITHOUT LIMITATION
- -------------------------------------------------------------------------------
THE MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, COMPLIANCE WITH LAWS,
- ----------------------------------------------------------------------------
GOVERNMENTAL REGULATIONS OR RULES, ORDERS, SPECIFICATIONS OR CONTRACT,
- ----------------------------------------------------------------------
CONDITION, TITLE, QUALITY OF THE MATERIALS OR WORKMANSHIP, DESIGN, DURABILITY OR
- --------------------------------------------------------------------------------
SUITABILITY FOR DEBTOR'S PURPOSES OF THE EQUIPMENT IN ANY RESPECT, OR ANY PATENT
- --------------------------------------------------------------------------------
INFRINGEMENT, OR LATENT OR PATENT DEFECTS. SECURED PARTY SHALL NOT BE LIABLE TO
- ------------------------------------------
DEBTOR FOR ANY LIABILITY, LOSS OR DAMAGE CAUSED OR ALLEGED TO BE CAUSED DIRECTLY
OR INDIRECTLY BY THE EQUIPMENT OR ANY INADEQUACY THEREOF OR DEFICIENCY OR DEFECT
THEREIN OR BY ANY INCIDENT WHATSOEVER IN CONNECTION THEREWITH, AND DEBTOR HEREBY
ACKNOWLEDGES THE FOREGOING DISCLAIMER BY SECURED PARTY.
5. REPRESENTATIONS AND WARRANTIES
Debtor represents and warrants to Secured Party as of the date hereof
and as of the date of each Note hereunder that:
(a) Debtor is business organization as set forth in the first
paragraph hereof duly organized and in good standing under the laws of its
state of organization, is duly qualified and in good standing wherever
necessary to carry on its business as now being conducted and to own its
properties including the Equipment, and has full power to carry on its
business as now being conducted; (b) Debtor has full power and authority to
execute, deliver and perform this Agreement and each Note, and this Agreement
has been and each Note will be duly authorized by all necessary and proper
action on the part of the Debtor. No consent or approval of stockholders or
of any public authority is required in connection with the execution,
delivery or performance by Debtor of this Agreement or any Note. The
execution, delivery or performance by Debtor of this Agreement and each Note
will not violate any provision of law, or any judgment or decree applicable
to Debtor and will not conflict with or result in a breach of or create a
default under any corporate charter or by-laws or partnership agreement or
certificate or any agreement, bond, note or indenture to which it is a party
or by which it is bound; (c) This Agreement has been and each Note will be
duly executed and delivered, and constitute the valid and legally binding
obligations of Debtor, enforceable in accordance with their respective terms;
(d) Debtor has good title to, and is the lawful owner of the Equipment, and
the Equipment is and shall continue to be free from all adverse claims,
liens, encumbrances, charges or security interests whatsoever, except for the
lien and security interest granted by this Agreement, and Permitted
Encumbrances; (e) The provisions of this Agreement will create a valid and
perfected security interest in the Equipment as set forth in each Note,
enforceable in accordance with the terms hereof, subject to no prior or equal
lien, charge, encumbrance or security interest, upon the filing of
appropriate Uniform Commercial Code financing statements or equivalent
security or lien instruments with respect to the Equipment which shall be
timely delivered to Secured Party for filing at the appropriate offices,
except Permitted Encumbrances; (f) The Equipment will be used solely in the
conduct of Debtor's business and will remain in the location shown on the
applicable Note unless Secured Party and Debtor otherwise agree in writing
and Debtor has completed all notifications, filings, recordings, and other
actions in such new location as Secured Party may reasonably request to
protect Secured Party's interest in the Equipment. For purposes of this
Agreement, "Permitted Encumbrances" mean the items set forth on Schedule 1
hereto.
Debtor represents and warrants to and covenants with Secured Party that
(i) Debtor has not and is not now engaged in, and shall not, during any time
that any of Debtor's obligations hereunder are outstanding, engage in any
conduct or activity, including but not necessarily limited to, a pattern of
racketeering activity, that would subject any of Debtor's assets to forfeiture
or seizure and (ii) Debtor will give prompt written notice to the Secured Party
of any proceedings instituted against the Debtor by or in any federal or state
court or before any commission or other regulatory body, whether federal, state
or local, which if adversely determined, would have an adverse effect upon the
Debtor's business, operations, properties, assets or condition, financial or
otherwise.
6. INDEMNITY
Debtor assumes the risk of liability for, and hereby agrees to
indemnify and hold safe and harmless, and covenants to defend, Secured Party,
its employees, servants and agents from and against: (a) any and all
liabilities, losses, damages, claims and expenses (including legal expenses of
every kind and nature) arising out of the manufacturing, purchase, shipment and
delivery to Debtor, acceptance or rejection, ownership, titling, registration,
leasing, possession, operations, use, return or other disposition of the
Equipment, including, without limitation, any of such as may arise from patent
or latent defects in the Equipment (whether or not discoverable by Debtor), any
claims based on absolute tort liability or warranty and any claims based on
patent, trademark or copyright infringement; (b) any and all loss or damage to
the Equipment, normal wear and tear excepted; and (c) any obligation or
liability to the manufacturer and any supplier of the Equipment arising under
the purchase orders of Debtor.
The covenants and indemnities contained in this Section and Section 7
shall survive the termination of this Agreement or any Note hereunder.
7. TAXES AND OTHER CHARGES
Debtor agrees to comply with all laws, regulations and governmental
orders related to this Agreement and to the Equipment and its use or possession
and to pay when due, and to defend and indemnify Secured Party against liability
for all license fees, assessments and sales, use, property, excise, privilege
and other taxes (including any related or interest or penalties) or other
charges
<PAGE>
or fees now or hereafter imposed by any governmental body or agency upon any
Equipment, or with respect to the manufacturing, ordering, shipment, purchase,
ownership, delivery, installation, leasing, operation, possession, use, return,
or other disposition thereof or the installment payments hereunder. Any fees,
taxes or other lawful charges paid by Secured Party upon failure of Debtor to
make such payments shall at Secured Party's option become immediately due from
Debtor to Secured Party.
8. EVENTS OF DEFAULT
The occurrence of any of the following events (each an "Event of
Default") shall constitute a default hereunder and under each Note (a)
nonpayment of any principal of or interest on any Note or other amount
provided for hereunder, including any late charges pursuant to Section 2
hereof, promptly when due, whether by acceleration or otherwise; (b) default
by Debtor in the performance of any other obligation, term or condition of
this Agreement and the continuance of such default for ten (10) days after
written notice thereof shall have been given by Secured Party to Debtor; (c)
default by Debtor in the payment or performance of any other indebtedness or
obligation now or hereafter owed by which default has not been waived; (d)
the issuance of any writ or order of attachment or execution or other legal
process against any Equipment which is not discharged or satisfied within ten
(10) days; (e) death or judicial declaration of incompetency of Debtor, if an
individual; (f) the commencement of any bankruptcy, insolvency, arrangement,
reorganization, receivership, liquidation or other similar proceedings by or
against Debtor or the appointment of a trustee, receiver, liquidator or
custodian for Debtor or any of its properties of business, which if commenced
against Debtor is not stayed or dismissed with 60 days; (g) the Debtor shall
terminate its existence by merger, consolidation, sale of substantially all
of its assets, dissolution or otherwise, (h) the making by Debtor of a
general assignment or deed of trust for the benefit of creditors; (i) the
occurrence of any event or condition described in clause (e), (f), (g) or (h)
of this paragraph 8 with respect to any guarantor or any other party liable
for payment or performance of this Agreement; (j) if any certificate,
statement, representation, warranty or audit heretofore or hereafter
furnished by or on behalf of Debtor or any guarantor or other party liable
for payment or performance of this Agreement, pursuant to or in connection
with this Agreement, proves to have been false in any material respect at the
time as of which the facts therein set forth were stated of certified, or to
have omitted any substantial contingent or unliquidated liability or claim
against Debtor or any such guarantor or other party,; (k) Secured Party shall
determine, in its sole discretion and in good faith, that Debtor's ability to
make any payment hereunder promptly when due or otherwise comply with the
terms of this Agreement is impaired; (l) the Equipment shall be substantially
damaged or destroyed, or not properly maintained by Debtor or Secured Party
shall reasonably deem the Equipment to be unsafe or at risk; (m) Debtor shall
default in meeting any of its trade, tax, borrowing or other obligations as
they mature, except to the extent Debtor is contesting any such obligations
in good faith and has established adequate reserves therefor; (n) if an Event
of Default occurs under the terms and conditions of the Second Amended and
Restated Loan Agreement dated March 5, 1998 between Debtor and Citizens Bank
of Massachusetts and all additions, modifications, and amendments thereto or
(o) there shall be a change in the ownership of Debtor's stock such that
Debtor is no longer subject to the reporting requirements of the Securities
Exchange Act of 1934, or no longer has a class of equity securities
registered under Section 12 of the Securities Act of 1933.
Debtor shall promptly notify Secured Party or any holder(s) or
assignee(s) of all Notes of the occurrence of any Event of Default or the
occurrence or existence of any event or condition which, upon the giving of
notice lapse of time, or both may become an Event of Default.
9. REMEDIES
Upon the occurrence of any Event of Default, Secured Party may, at its
sole option and discretion, to the extent permitted by applicable law, exercise
one or more of the following remedies with respect to any or all of the
Equipment subject to any Note in default; (a) cause Debtor to, upon written
demand of Secured Party and at Debtor's expense, promptly return such Equipment
to such location as Secured Party may designate in accordance with the terms of
Section 18, or Secured Party, at its option, may enter upon the premises where
the Equipment is located and take immediate possession of and remove the same by
summary proceedings or otherwise all without liability to Secured Party for or
by reason of damage to property or such entry or taking possession; (b) sell any
or all the Equipment at public or private sale or otherwise dispose of, hold,
use, operate, lease to others or keep idle the Equipment, all as Secured Party
in its sole discretion may determine and all free and clear of any rights of
Debtor; (c) remedy such default, including making repairs or modifications to
the Equipment, for the account of and the expense of Debtor and Debtor agrees to
reimburse Secured Party for all of Secured Party's costs and expenses; (d)
declare by written notice any or all Notes and other obligations of Debtor
immediately due and payable and recover from Debtor the outstanding principal
balance of such Note or Notes, plus any accrued interest and late charges, and
the applicable prepayment premium calculated as of the date of default as set
forth in Section 12 hereof; (e) apply any Security Deposit or other cash
collateral or sale or remarketing proceeds of the Equipment at any time as it
sees fit to reduce any amounts due to Secured Party and; (f) exercise any other
right or remedy which may be available to it under applicable law and the
Uniform Commercial Code or proceed by appropriate court action to enforce the
terms hereof or to recover damages for the breach hereof, including reasonable
attorneys' fees and court costs. In addition to the foregoing, Debtor shall
continue to be liable for all indemnities under this Agreement and each Note and
for all legal fees and other costs and expenses resulting from any Event of
Default or the exercise of Secured Party's remedies.
No remedy referred to in this Section 9 is intended to be exclusive,
but each shall be cumulative and in addition to any other remedy referred to
above or otherwise available to Secured Party at law or in equity. The exercise
or beginning of exercise by
<PAGE>
Secured Party of any one or more of such remedies shall not preclude the
simultaneous or later exercise by Secured Party of any or all such other
remedies and all remedies hereunder shall survive termination of this Agreement
and any Note. The Secured Party may apply the proceeds of any sale of the
Equipment to any obligations of the Debtor to the Secured Party or any parent,
subsidiary or affiliated entity of the Secured Party in such order as it shall
determine in its sole and absolute discretion.
At the sale of the Equipment pursuant to this Section 9, Secured Party
may bid for and purchase the Equipment. All required notices, if any, of any
sale or other disposition hereunder by Secured Party shall be satisfied by the
mailing of such notice to Debtor at least ten (10) days prior to the sale or
other disposition. In the event Secured Party takes possession of the Equipment,
Secured Party shall give Debtor credit for any sums actually received by Secured
Party from the disposition of the Equipment after deductions of expenses of
disposition. A termination shall occur only upon written notice by Secured Party
and only with respect to such Equipment as Secured Party shall specify in such
notice. Termination under this Section 9 shall not affect Debtor's duty to
perform Debtor's obligations hereunder to Secured Party on demand for any and
all costs and expenses incurred by Secured Party in enforcing its rights
hereunder following the occurrence of an Event of Default, including, without
limitation, reasonable attorneys' fees, and the costs of foreclosing,
repossession, storage, insuring, leasing, selling and disposing of any and all
Equipment.
10. ADDITIONAL SECURITY
In order more fully to secure its payments and all other obligations to
Secured Party hereunder with respect to each Note, Debtor hereby grants to
Secured Party a security interest in any Security Deposit of Debtor to Secured
Party under Section 3(d) of any Note hereto. Such Security Deposit shall not
bear interest, may be commingled with other funds of Secured Party and shall be
immediately restored by Debtor if applied under Section 9(e) above. Upon
expiration of the term of the Note to which any Security Deposit relates and
satisfaction of all of Debtor's obligations under such Note, the Security
Deposit shall be returned to Debtor.
11. NOTICES
Any notices and demands required or permitted to be given under this
Agreement shall be given in writing and by regular mail and shall become
effective when deposited in the United States mail with postage prepaid to
Secured Party, and to Debtor at the addresses herein above set forth, or to such
other address as the party to receive notice hereafter designates by such
written notice.
12. TERMINATION AND PREPAYMENT
No Note may be prepaid, except in its entirety and all voluntary
prepayments shall include all late charges and accrued interest and will be
subject to a prepayment penalty calculated as of the date of voluntary
prepayment and expressed as a percentage of the outstanding principal on the
date of such prepayment equal to five percent (5%) during the first year of the
term of the Note, four percent (4%) during the second year, three percent (3%)
during the third year, two percent (2%) during the fourth year, one percent (1%)
during the fifth year and zero percent (0%) thereafter.
Involuntary prepayment and termination with respect to any item of
Equipment shall occur if any item of Equipment shall become lost, stolen or
destroyed, damaged beyond repair or rendered permanently unfit for use for any
reason, or in the event of any condemnation, confiscation, theft or seizure or
requisition of title or use of such item, in which event Debtor will promptly
pay to Secured Party an amount equal to the outstanding principal balance of the
Note with respect to such Equipment plus any accrued interest and late charges.
The principal balance at any time outstanding on the Note shall be calculated
based on a normal amortization calculation.
13. INSURANCE
Debtor shall obtain and maintain at its own expense for the
entire term of this Agreement Comprehensive General Liability and Property
Damage Insurance including products, completed operations and contractual
liability and All Risk Physical Damage Insurance including earthquake and flood,
in such amounts and form and with such insurers as shall be satisfactory to
Secured Party, provided, however, that the amount of insurance on any item of
Equipment shall not be less than the greater of (i) the full replacement value
of such item of Equipment or (ii) the aggregate unpaid principal amount of the
Note with respect to such item of Equipment.
Each insurance policy or certificate shall name Debtor as the insured
and Secured Party as loss payee and as an additional named insured as its
interest may appear, and shall provide that Secured Party shall receive 30 days
prior written notice of any termination, cancellation, or material change of the
terms of such insurance and shall provide that the coverage afforded to Secured
Party shall not be rescinded, impaired or invalidated by any act or neglect of
Debtor, Debtor shall furnish to Secured Party a certificate of insurance or
other evidence that such insurance coverage is in effect, provided however that
Secured Party shall be under no duty either to ascertain the existence of or to
examine such insurance policy or certificate or to advise Debtor in the event
such insurance coverage shall not comply with the requirements hereof. Secured
Party may, at its option, apply any insurance monies received under such
policies to the cost of repairs to the Equipment and/or payment of any of the
indebtedness of Debtor secured hereby, in any order Secured Party may determine
whether or not due, and shall remit any surplus to Debtor.
<PAGE>
In addition to the foregoing minimum insurance coverage, Debtor shall
procure and maintain such other insurance coverages as Secured Party may require
from time to time during the term of this Agreement. In case of failure of
Debtor to procure or maintain insurance, Secured Party may at its option obtain
such insurance, the cost of which will be paid by the Debtor as additional
indebtedness. Debtor hereby irrevocably appoints Secured Party as Debtor's
attorney-in-fact to file, settle or adjust, and receive payment of claims under
any such insurance policy and to endorse Debtor's name on any checks, drafts or
other instruments in payment of such claim.
14. LIMITATION OF LIABILITY
Secured Party shall have no liability in connection with or arising out
of the possession, furnishing, performance, ownership or use of the Equipment or
any special, indirect, incidental or consequential damages of any character,
including, without limitation, loss of use of production facilities or
equipment, loss of profits, property damage or lost production, whether suffered
by Debtor or any third party.
15. FINANCIAL STATEMENTS AND FURTHER ASSURANCES
Debtor shall promptly execute and deliver to Secured Party such
further documents and take such further action as Secured Party may
reasonably require in order to more effectively carry out the intent and
purpose of this Agreement and each Note. Debtor shall annually, within one
hundred twenty (120) days after the close of Debtor's fiscal year, furnish to
Secured Party financial statement of Debtor (including a balance sheet as of
the close of such year and income and surplus statements for such year)
prepared in accordance with generally accepted accounting principles
consistently applied and certified by Debtor's independent certified public
accountants. If requested by Secured Party, Debtor shall also provide
quarterly financial statements of Debtor similarly prepared for each of the
first three quarters of each fiscal year, which shall be certified (subject
to normal year-end audit adjustment(s)) by Debtor's chief financial officer
and furnished to Secured Party within sixty (60) days following the end of
the quarter. Notwithstanding the foregoing, as long as Debtor provides such
quarterly and annual financial statements to Citizens Bank of Massachusetts,
it shall not be required to forward them to Secured Party. Debtor shall
execute and deliver to Secured Party upon Secured Party's request such
instruments and assurances as Secured Party reasonably deems necessary for
the confirmation, preservation or perfection of this Agreement and each Note
and Secured Party's security interest and rights thereunder, including,
without limitation, such corporate resolutions and opinions of counsel as
Secured Party may request from time to time, and all schedules, forms and
other reports as may be required to satisfy obligations imposed by taxing
authorities. In furtherance thereof, Secured Party may file or record this
Agreement or a memorandum or a photocopy hereof or of a Note (which for the
purposes hereof shall be effective as a financing statement) so as to give
notice to third parties, and Debtor hereby appoints Secured Party as its
attorney-in-fact to execute, sign, file and record UCC financing statements
and other lien recordation documents with respect to the Equipment where
Debtor fails or refuses to do so after Secured Party's written request, and
Debtor agrees to pay all stamp fees or taxes arising from any such filings.
16. ASSIGNMENT
This Agreement and any Note and all rights of Secured Party hereunder
shall be assignable by Secured Party absolutely or as security, without notice
to Debtor, subject to the rights of Debtor hereunder. Any such assignment shall
not relieve Secured Party of its obligations hereunder unless specifically
assumed by the assignee, and Debtor agrees it shall not assert any defense,
rights of set-off or counterclaim against any assignee to which Secured Party
shall have assigned its rights and interests hereunder, and not to hold or
attempt to hold such assignee liable for any of Secured Party's obligations
hereunder.
DEBTOR SHALL NOT LIEN, ENCUMBER, ASSIGN OR DISPOSE OF ANY OF ITS RIGHTS
OR INTEREST IN THE EQUIPMENT OR ITS RIGHTS OR OBLIGATIONS UNDER THIS AGREEMENT
OR ANY NOTE OR ENTER INTO ANY LEASE WITH RESPECT TO ANY OF THE EQUIPMENT WITHOUT
THE EXPRESS PRIOR WRITTEN CONSENT OF SECURED PARTY.
17. DEBTOR'S OBLIGATIONS UNCONDITIONAL
Debtor hereby agrees that it shall not be entitled to any abatement of
installment payments or of any other amounts payable hereunder or under any Note
by Debtor and that its obligation to pay all amounts owing hereunder or under
any Note shall be absolute and unconditional under all circumstances, including,
without limitation, the following circumstances; (i) set-off, counterclaim,
recoupment, defense or other right which Debtor may have against Secured Party,
any seller or manufacturer of any Equipment or anyone else for any reason
whatsoever; (ii) the existence of any liens, encumbrances or rights of others
whatsoever with respect to any Equipment; or (iii) any other event or
circumstance whatsoever. Each payment made by Debtor hereunder and under each
Note shall be final and Debtor will not seek to recover all or any part of such
payment from Secured Party for any reason whatsoever.
18. DELIVERY OF EQUIPMENT
Upon demand of Secured Party as provided in Section 9, Debtor, at its
own expense, shall immediately deliver the Equipment described in any Note in
the same condition as when delivered to Debtor, ordinary wear and tear excepted,
to such location as
<PAGE>
Secured Party shall designate. The Equipment shall be delivered to Secured
Party free and clear of all liens, encumbrances and rights of others. The
risk of loss of the Equipment shall remain with Debtor until the Equipment is
accepted by Secured Party or such other entity to whom the Equipment is
delivered, and Debtor shall maintain insurance on the Equipment in accordance
with Section 13 until such acceptance occurs.
19. ENFORCEABILITY AND GOVERNING LAW
Any provision of this Agreement or any Note which is unenforceable in
any jurisdiction, shall be ineffective to the extent of such unenforceability
without invalidating the remaining provisions hereof, and any such
unenforceability in any jurisdiction shall not render unenforceable such
provisions in any other jurisdiction. To the extent permitted by applicable law,
Debtor hereby waives any provisions of law which render any provision hereof
unenforceable in any respect. Any waiver of the terms hereof shall be effective
only in the specific instance and for the specific purpose given. Time is of the
essence. The captions in this Agreement are for convenience only and shall not
define or limit any of the terms hereof.
THIS AGREEMENT AND EACH NOTE SHALL IN ALL RESPECTS BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF RHODE ISLAND. DEBTOR
HEREBY CONSENTS AND SUBMITS TO THE JURISDICTION OF THE COURTS OF THE STATE OF
RHODE ISLAND AND THE FEDERAL DISTRICT COURT FOR THE DISTRICT OF RHODE ISLAND FOR
THE PURPOSES OF ANY SUIT, ACTION OR OTHER PROCEEDING ARISING OUT OF ITS
OBLIGATIONS HEREUNDER OR UNDER THE NOTES, AND EXPRESSLY WAIVES ANY OBJECTIONS
THAT IT MAY HAVE TO THE VENUE OF SUCH COURTS. DEBTOR HEREBY EXPRESSLY WAIVES
TRIAL BY JURY IN ANY ACTION BROUGHT ON OR WITH RESPECT TO THIS AGREEMENT OR ANY
NOTE. Any action by Debtor against Secured Party for any cause of action under
this Agreement or any Note shall be brought within one year after any such cause
of action first occurs.
This Agreement consists of nineteen sections, and the terms and
provisions of any Note, Note Acceptance Certificate, rider, exhibit, amendment
or other document now or hereafter attached hereto and made a part hereof. THIS
AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS
BETWEEN THE PARTIES. DEBTOR ACKNOWLEDGES AND CERTIFIES THAT NO SUCH ORAL
AGREEMENTS EXIST. This Agreement may not be amended, nor may any rights
hereunder be waived, except by an instrument in writing signed by the party
charged with such amendment or waiver. The term "Debtor" as used herein shall
mean and include any and all Debtors who sign hereunder, each of whom shall be
jointly and severally bound hereby. This Agreement will not be binding on
Secured Party until executed by Secured Party.
Dated: December 23, 1998
SECURED PARTY: DEBTOR:
CITIZENS LEASING CORPORATION DM Management Company
By: /s/ John Young By: /s/ Peter J. Tulp
-------------------------------- -------------------------------
Title: VICE PRESIDENT Title: VP FINANCE
---------------------------- ---------------------------
CLC-020
<PAGE>
Exhibit 10.60
[LETTERHEAD]
One Citizens Plaza Amendment
Providence, RI 02903
This Amendment No. 1 dated DECEMBER 23, 1998 to the Master Security
Agreement dated DECEMBER 23, 1998 (the "Agreement") by and between CITIZENS
LEASING CORPORATION and DM MANAGEMENT COMPANY.
This Agreement is hereby amended as follows:
The following new Section 20 is added:
20. PAYMENT OF AFFILIATE OBLIGATIONS
Debtor is or may become indebted under or in respect of one or more
leases, loans, notes, credit agreements, reimbursement agreements, security
agreements, title retention or conditional sales agreements, or other
documents, instruments or agreements, whether now existing or hereafter
arising, evidencing Debtor's obligations for the payment of borrowed money or
other financial accommodations owing to the Secured Party or to one or more
entities that are either a parent, subsidiary of affiliated company of the
Secured Party (herein the "Affiliates"). If Debtor pays or repays all or
substantially all of its obligations owing to any Affiliate, whether or not
such payment or repayment is voluntary or involuntarily made by Debtor
before or after any default or acceleration of the obligations, then Debtor
shall pay, at Secured Party's option and immediately upon notice from Secured
Party, all or any part of Debtor's obligations owing to Secured Party,
including but not limited to Debtor's obligations under this Agreement and
all Schedules now or hereafter from time to time executed by Secured Party
and Debtor and made a part thereof."
Except as specifically set forth herein, all of the terms and provisions
of the Agreement remain in full force and effect.
Dated as of: December 23, 1998
SECURED PARTY: DEBTOR:
CITIZENS LEASING CORPORATION DM Management Company
By: /s/ John Young By: /s/ Peter J. Tulp
------------------------- -----------------------------
Title: Vice President Title: VP Finance
----------------------
<PAGE>
Exhibit 10.61
[LOGO]
One Citizens Plaza SECURED PROMISSORY NOTE
Providence, Rhode Island 02903
SECURED PARTY: CITIZENS LEASING CORPORATION DEBTOR: DM Management Company
One Citizens Plaza
Providence, Rhode Island 02903 Address: 25 Recreation Park Drive
(401)456-7000 Hingham, MA 02043
Telephone: (781)740-2718
1. Secured Party and Debtor have entered into a Master Security Agreement
dated as of December 23, 1998, (the "Security Agreement"). To secure payment
of the indebtedness set forth below, including the Principal Amount set forth
below, and the performance of all obligations contained herein, Debtor hereby
grants to Secured Party, its successors and assigns, a security interest in
the property set forth in Schedule A hereto, together with all attachments,
accessories, additions and accessions thereto, whether now existing or
hereafter acquired, all replacements and substitutions therefor, and all
proceeds thereof (all hereinafter referred to collectively as the
"Equipment").
2. Principal Amount. The original Principal Amount of this Note is:
$2,913,835.83.
3. a. Term. The Term of this Note is 84 months commencing on the Term
Commencement Date as set forth in the Note Acceptance Certificate to this Note
plus any partial period between the Acceptance Date of the Equipment as set
forth in the Note Acceptance Certificate and the Term Commencement Date.
b. Payments. Debtor hereby promises to pay the Principal Amount to
Secured Party and Interest thereon as follows:
(i) Interest only on the Term Commencement Date in an amount equal to
$606.07 multiplied by the number of days between the Acceptance Date up to and
including the Term Commencement Date.
(ii) Thereafter, the Principal Amount, together with interest thereon
at the fixed rate of 7.50 % per annum, shall be payable in (check one) [X]
advance/[ ] arrears in consecutive (check one) [X] monthly/[ ] quarterly
Installment Payments commencing on the 1st day of January 1999 and thereafter on
the same day of each successive (check one) [X] month/[ ] quarter inclusive
until fully paid, provided that the final installment shall be in the amount of
the unpaid balance hereof together with any accrued interest and late charges.
Interest shall be calculated based on the actual number of days elapsed over
twelve (12) thirty (30) day months.
The amount of each Installment Payment hereunder is as follows:
<TABLE>
<CAPTION>
Amount of Each
Installment Nos. Installment Payment
<S> <C>
1 - 83 $44,415.62
84 All remaining principal
and accrued interest
</TABLE>
c. Debtor agrees to pay Secured Party, in advance, the first Installment
Payment.
d. Secured Party acknowledges receipt from Debtor of a payment in the
amount of $ N/A to be held by Secured Party as a deposit to secure Debtor's
performance hereunder.
4. The Equipment will be located at the locations specified in Schedule A
hereto.
<PAGE>
5. This Note is secured by the Equipment, as set forth in Schedule A hereto
and as further defined in the Security Agreement, the terms and conditions of
which are incorporated herein by reference. This Note is one of the "Notes"
referred to in the Security Agreement.
Dated: December 23, 1998
SECURED PARTY: DEBTOR:
CITIZENS LEASING CORPORATION DM Management Company
By: By:
/s/ John Young /s/ Peter J. Tulp
----------------------------- --------------------------------
Title: Title:
Vice President VP Finance
----------------------------- --------------------------------
<PAGE>
[LETTERHEAD]
CITIZENS LEASING CORPORATION NOTE ACCEPTANCE CERTIFICATE
One Citizens Plaza
Providence, Rhode Island 02903
Note Acceptance Certificate to Secured Promissory Note dated 12/23/98,
(the "Note") to Master Security Agreement dated 12/23/98, (the "Security
Agreement"), by and between DM Management Company as Debtor, and CITIZENS
LEASING CORPORATION as Secured Party.
1. Debtor hereby acknowledges that the Equipment set forth on Schedule A
hereto (the "Equipment") is hereby unconditionally accepted by the Debtor for
all purposes under the above-referenced Note and hereby agrees to faithfully
perform all of its obligations under the Note as of the date hereof. Debtor
hereby also reaffirms all of its representations, warranties and covenants as
set forth in the Security Agreement and in the Note as of the hereof and
certifies that no event or condition has occurred and is continuing which
constitutes an Event of Default under the Security Agreement or the Note or
would constitute such an Event of Default with the passage of time and/or
giving of notice.
2. Debtor represents and warrants the (i) the Equipment has been
delivered and is in an operating condition and performing the operation for
which it is intended to the satisfaction of the Debtor; and (ii) if requested
by the Secured Party, the Equipment has been marked or labeled evidencing the
Secured Party's interest therein.
3. Debtor hereby agrees to pay Secured Party the Installment Payments,
as set forth in the Note, at the times and in the manner set forth in the
Note.
4. The Principal Amount of the Note is: $2,913,835.83.
5. The Term Commencement Date is the 1st day of January, 1999.
Dated: December 23, 1998 DEBTOR: DM Management Company
(the "Acceptance Date")
By: /s/ Peter J. Tulp
------------------------------
Title: VP Finance
---------------------------
Agreed and Accepted:
CITIZENS LEASING CORPORATION
By: /s/ John Young
-------------------------------
Title: Vice President
----------------------------
<PAGE>
SCHEDULE A EQUIPMENT
Page 1 of 6
LESSOR: CITIZENS LEASING CORPORATION LESSEE: DM Management Company
a Rhode Island corporation a Delaware Corporation
("Lessor") ("Lessee")
ADDRESS: One Citizens Plaza ADDRESS: 25 Recreation Park Drive
Providence, RI 02903 Hingham, MA 02043
Attached to and made a part of the following documents: Secured
Promissory Note, Note Acceptance, Uniform Commercial Code Financial
Statements and Consent and Waiver by Owner, Landlord or Mortgagee of Real
Estate.
QTY MANUFACTURER, DESCRIPTION MODEL NO./SERIAL NO. LOCATION
- --- --------------------------------------------- --------
12 Sandborn St.
Tilton, NH 03276
(1) American Baler Model 6042HAT-930R
(36) Coils of 10 gauge Baling Wire
ABOVE EQUIPMENT DISTRIBUTED BY: AQUEST CORPORATION
(1) M8010 Sweeper/Scrubber, Rider Midel 8010 S/N: 8010-218
Machine as equipped:
8010 Battery Sweeper Scrubber
36338 Batt/Chg Pkg. Ext Run, 1PH, 60HZ
87419 Brush, Side Polypropylene
363868 Brush, Main, Polypropylene
363012 Maxpro 1200 Scrub Head
30241 Brush, Non-scuff Poly f/MP1200
30241 Brush, Non-scuff Poly f/MP1200
08682-15 Det, 654 Heavy Duty, 15 Gal
363019 Es+Extended Scrubbing
48600 Wand, off Aisle Power
363455 Light Pkg, Revolving, OHG
(1) M5700 Scrubber, Walk Behing Model 5700 S/N: 5700-11109
Machine as equipped:
5700 Scrubber, Walk Behind
222342 Scrubhead, 700D, 28" Disk
222803 Squeegee Assy. 700D/700C
222359 Battery, 235AH Wet
374014 Charger, 115V, 20A, 1PH, 60HZ
222320 Brush, Polypropylene 700D
222611 Power Wand, off-Aisle
ABOVE EQUIPMENT DISTRIBUTED BY: TENNANT
(1) CubiScan 100L S/N: QIL971879
(1) Mobile Cart-A
(1) Computer Shuttle Arm-S
(1) PW800 Inverter/TC20 Charger/Cables
(1) Portable Power System (PW800-TC20)
ABOVE EQUIPMENT DISTRIBUTED BY: QUANTRONIX
(2) Composee Turbo 2 Keyboard Wedge
(2) Serial Input Cable
(2) BM 3287 Terminal Cable Set
(2) External Power Supply
(2) SC QuickScan 600 Scanner w/cabling
(1) Custom QBIT Interface
ABOVE EQUIPMENT DISTRIBUTED BY: QUANTRONIX
<PAGE>
SCHEDULE A EQUIPMENT
Page 2 OF 6
LESSOR: CITIZENS LEASING CORPORATION, LESSEE: DM Management Company
a Rhode Island corporation a Delaware corporation
("Lessor") ("Lessee")
ADDRESS: One Citizens Plaza ADDRESS: 25 Recreation Park Drive
Providence, RI 02903 Hingham, MA 02043
Attached to and made a part of the following documents: Secured
Promissory Note, Note Acceptance. Uniform Commercial Code Financial
Statements and Consent and Waiver by Owner. Landlord or Mortgagee of Real
Estate.
MANUFACTURER, DESCRIPTION,
QTY MODEL NO./SERIAL NO. LOCATION
- --- ------------------------- --------
12 Sandborn St.
Tilton, NH 03276
(1) 1020-1021 01-00001 Boom Lift 30-45 ELEC N40 ELC
S/N: 0300039334
(1) 1020-1001-01-0002 Personnel Lifts PERS LFT 25AMDC
S/N: 0900012248
ABOVE EQUIPMENT DISTRIBUTED BY ACTION EQUIPMENT
(6) Crown PTH50-27-48 Hand Pallet Jacks S/N: 7-142882
7-142883
7-142884
7-142885
7-142886
7-142887
ABOVE EQUIPMENT DISTRIBUTED BY CROWN TRUCKS
(1) T20497 EASI-Orderpicker Model OPC30TT S/N: EASI-98-AT20497
(1) T20498 EASI-Orderpicker Model OPC30TT S/N: EASI-98-AT20498
(1) T20499 EASI-Orderpicker Model OPC30TT S/N: EASI-98-AT20499
(1) T20500 EASI-Orderpicker Model OPC30TT S/N: EASI-98-AT20500
(1) T20501 EASI-Orderpicker Model OPC30TT S/N: EASI-98-AT20501
(1) T20502 EASI-Orderpicker Model OPC30TT S/N: EASI-98-AT20502
(1) T20503 EASI-Orderpicker Model OPC30TT S/N: EASI-98-AT20503
(1) T20504 EASI-Orderpicker Model OPC30TT S/N: EASI-98-AT20504
(1) T20505 EASI-Orderpicker Model OPC30TT S/N: EASI-98-AT20505
(1) T20506 EASI-Orderpicker Model OPC30TT S/N: EASI-98-AT20506
(1) BN8691 Battery Model 18-E155W-11 S/N: AWG108691
(1) BN8692 Battery Model 18-E155W-11 S/N: AWG108692
(1) BN8693 Battery Model 18-E155W-11 S/N: AWG108693
(1) BN8694 Battery Model 18-E155W-11 S/N: AWG108694
(1) BN8695 Battery Model 18-E155W-11 S/N: AWG108695
(1) BN8696 Battery Model 18-E155W-11 S/N: AWG108696
(1) BN8697 Battery Model 18-E155W-11 S/N: AWG108697
(1) BN8698 Battery Model 18-E155W-11 S/N: AWG108698
(1) BN8699 Battery Model 18-E155W-11 S/N: AWG108699
<PAGE>
SCHEDULE A EQUIPMENT
Page 3 of 6
LESSOR: CITIZENS LEASING CORPORATION LESSEE: DM Management Company
a Rhode Island corporation a Delaware Corporation
("Lessor") ("Lessee")
ADDRESS: One Citizens Plaza ADDRESS: 25 Recreation Park Drive
Providence, RI 02903 Hingham, MA 02043
Attached to and made a part of the following documents: Secured
Promissory Note, Note Acceptance, Uniform Commercial Code Financial
Statements and Consent and Waiver by Owner, Landlord or Mortgagee of Real
Estate.
MANUFACTURER, DESCRIPTION,
QTY MODEL NO./SERIAL NO. LOCATION
- --- -------------------------- --------
12 Sandborn St.
Tilton, NH 03276
(1) BN8700 Battery Model 18-E155W-11 S/N: AWG108700
(1) BN8701 Battery Model 18-E155W-11 S/N: AWG108701
(1) BN8702 Battery Model 18-E155W-11 S/N: AWG108702
(1) BN8703 Battery Model 18-E155W-11 S/N: AWG108703
(1) BN8704 Battery Model 18-E155W-11 S/N: AWG108704
(1) BN8705 Battery Model 18-E155W-11 S/N: AWG108705
(1) BN8706 Battery Model 18-E155W-11 S/N: AWG108706
(1) BN8707 Battery Model 18-E155W-11 S/N: AWG108707
(1) BN8708 Battery Model 18-E155W-11 S/N: AWG108708
(1) BN8709 Battery Model 18-E155W-11 S/N: AWG108709
(1) BN8710 Battery Model 18-E155W-11 S/N: AWG108710
(1) CN1941 Charger Model D3E-18-850B S/N: WF91941
(1) CN2620 Charger Model D3E-18-850B S/N: WF92620
(1) CN2621 Charger Model D3E-18-850B S/N: WF92621
(1) CN2622 Charger Model D3E-18-850B S/N: WF92622
(1) CN2623 Charger Model D3E-18-850B S/N: WF92623
(1) CN2624 Charger Model D3E-18-850B S/N: WF92624
(1) CN2625 Charger Model D3E-18-850B S/N: WF92625
(1) CN2629 Charger Model D3E-18-850B S/N: WF92629
(1) CN2633 Charger Model D3E-18-850B S/N: WF92633
(1) CN2682 Charger Model D3E-18-850B S/N: WF92682
(1) BN8687 Battery Model 18-E140-17 S/N: AWG108687
(1) BN8688 Battery Model 18-E140-17 S/N: AWG108688
(1) BN8689 Battery Model 18-E140-17 S/N: AWG108689
(1) BN8690 Battery Model 18-E140-17 S/N: AWG108690
(1) CN2771 Charger Model D3E-18-1200B S/N: WF92771
(1) CN2772 Charger Model D3E-18-1200B S/N: WF92772
(1) Smlss Steel Drip Pa
(1) UPC Charge, Batt Sys
(1) HP Watering System
(1) Wire Guide System
(1) T10530 EASI Reach Forkltruck Model EASIR45TT S/N: EZ-B-98-10530
(1) T10536 EASI Reach Forktruck Model EASIR45TT S/N: EZ-B-98-10536
ABOVE EQUIPMENT DISTRIBUTED BY ROBERT ABEL & CO., INC.
<PAGE>
SCHEDULE A EQUIPMENT
Page 4 of 6
LESSOR: CITIZENS LEASING CORPORATION LESSEE: DM Management Company
a Rhode Island corporation a Delaware corporation
("Lessor") ("Lessee")
ADDRESS: One Citizens Plaza ADDRESS: 25 Recreation Park Drive
Providence, RI 02903 Hingham, MA 020403
Attached to and made a part of the following documents: Secured
Promissory Note, Note Acceptance. Uniform Commercial Credit Code Financial
Statements and Consent and Waiver by Owner, Landlord or Mortgagee of Real
Estate.
MANUFACTURER, DESCRIPTION,
QTY MODEL NO./SERIAL NO. LOCATION
- --- ------------------------- --------
12 Sandborn St.
Tilton, NH 03276
(1) 000063 Wildeck Mezzanine System
(Phase I
(1) 000068 Wildeck Mezzanine System
Phase II
(1) 000070 Wildeck Mezzanine System
Phase III
(1) 000294 Vertical Reciprocating Conveyr
ABOVE EQUIPMENT DISTRIBUTED BY WILDECK, INC.
PALLET/CASE/RAI/RACK
PHASE I
Layout 41 Bays 96" w. 48"d x 84"h with 4 beam levels
Steel king Tulukar
55 RTFAP048084 Uprights - 3" X 1 5/8" x 48"d x 84"h
Capacity: 16,720# on 48" vertical centers
328 SBRXL300095 Step Beams - 3:h x 96"l x 1,448#capacity
328 WIRE DECKS 46"w x 48"d X 2" x 4" x 4GA. X 300#
PHASE II
SELECTIVE PALLET RACK
---------------------
Layout: 75 Bays 144"w x 42"d x 345"/407"h with 6 levels (floors + 5 beam levels)
8 RTFBW042407 End Uprights - 3" x 3" x 42"d x 407"h
BASEPLATES 5" x 7" X 3/8" FOR Zone 2A
Capacity: 30,560# per new 1998 RMI
71 RTFBW042345 Int. Uprights - 3" x 3" x 42"d x 345"h
BASEPLATES 5" x 7" x 3/8" for Zone 2A
Capacity:30,560# per new 1997 RMI
750 SBRXP600144 Step Beams - 6" x 144"l x 6,780# Capacity
375 BTWSG042 42" Beam Ties (required on all beams 120"+)
316 ANCHORS 1/2" x 3 3/4"
6 AISLE MARKERS 12" x 12" at all row ends
48 RSR3G018 Row Spacers - 18"
2 STEEL GUARD 102"L x 18"h
2#GR09 2 1/2" deep x 14"h x 11 Ga. X 102"L+C52
4FPS3K024 Free Standing Column Protector at S. Rows
RESERVE CARTON RACK
-------------------
Layout: 225 Bays - 144 w x 60"d x 384"h with 11 beam levels
30 RTFAP060417 End Uprights - 3" x 1 5/8" x 60"d x 417"h
BASEPLATES 5" x 7" x 3/8" for Zone 2A
Capacity: 16,703# per new 1998 RMI
210 RTFAP060384 Int. Uprights - 3" x 1 5/8" x 60"d x 384"h
BASEPLATES x3/8 for Zone 2A
Capacity: 16,730#per new 1998 RMI
<PAGE>
SCHEDULE A EQUIPMENT
Page 5 of 6
LESSOR: CITIZENS LEASING CORPORATION, LESSEE: DM Management Company
a Rhode Island corporation a Delaware corporation
("Lessor") ("Lessee")
ADDRESS: One Citizens Plaza ADDRESS: 25 Recreation Park Drive
Providence, RI 02903 Hingham, MA 02043
Attached to and made a part of the following documents: Secured
Promissory Note, Note Acceptance, Uniform Commercial Code Financial
Statements and Consent and Waiver by Owner, Landlord or Mortgagee of Real
Estate.
MANUFACTURER, DESCRIPTION,
QTY. MODEL NO./ SERIAL NO. LOCATION
- ---- ------------------------- --------
12 Sandborn St.
Tilton, NH 03276
4950 SBRXP400144 Step Beams-4"x 144"l x 1,870# capacity
960 ANCHORS 1/2"x 3 3/4"
4,950 WIRE DECKS 70"w x 60"d x 2" x 4" 4 GA x 1,200# ea.
30 AISLE MARKERS 12" x 12" at all row ends
30 STEEL GUARD 60"L x 18"H
60#SCL 4" x 4" x 1/4" Tube with 10"sq. x 5/8 Base
30#GRO5 2 1/3"Deep x 14"h x 11 Ga. X 60"L
ACTIVE CARTON RACK (Convertible to G.O.H Rack)
- ----------------------------------------------
Layout: 1079 Bays - 96"W x 48"d x 84"h with 4 beam levels
1,225 RTFAP048084 Uprights - 3" x 1 5/6 " x 48"d x 84"h
Capacity: 16,730# on 48"vertical centers
8,632 SBRXL300096 Step Beams - 3"h x 96"l x 1,448# capacity
2,450 ANCHORS 1/2" x 3 3/4"
160 AISLE MARKERS 12" x 12" at all row ends
4,904 WIRE DECKS 46"w x 48"d x 2" x 4" x 4Ga x 300#
ACTIVE CARTON FLOW RACK
- -----------------------
Layout: 56 Bays - 96" w x 120"d x 96"h with 4 shelf levels (6 runways/12
tracks + 5 guides per shelf)
64 Frames Vertical Frames - 96"d x 96"h
128 ANCHORS 1/2" x 3 3/4"
168 SWAY BRACES 96"
224 shelf frames 96"W x 120"d x 1,200# capacity
1,344 RUNWAYS 2 pcs x 120" long
1,120 GUIDES 120"L
16 AISLE MARKERS 12" x 12" at all row ends
GARMENT ON HANGER RACKS (Convertible to Active Carton Rack)
- -----------------------------------------------------------
Layout: 232 Runs - 56"L x 4'D with 50% two high & 50% one high
1,856 RTFAP048084 Uprights - 3" x 1 5/8" x 48"d x 84"h
Capacity: 16,730# on 48" vertical centers
3,248 SBRXL300096 Step Beam 3"h x 96"l x 1,448# capacity
3,712 ANCHORS 1/2" x 3 3/4"
60 PIPE HOLDERS Adjustable Brackets - 48"d
40,194 LN. FT. RAILS 1,315 x 14 ga. Zinc plated round tubing
Note 50% of runs include 2 levels high
<PAGE>
SCHEDULE A EQUIPMENT
Page 6 of 6
LESSOR: CITIZENS LEASING CORPORATION LESSEE: DM Management Company
a Rhode Island corporation a Delaware Corporation
("Lessor") ("Lessee")
ADDRESS: One Citizens Plaza ADDRESS: 25 Recreation Park Drive
Providence, RI 02903 Hingham, MA 02043
Attached to and made a part of the following documents: True Lease
Schedule, Acceptance Certificate, Bill of Sale and Uniform Commercial Code
Financial Statements.
MANUFACTURER, DESCRIPTION,
QTY MODEL NO./SERIAL NO. LOCATION
- --- -------------------------- --------
12 Sandborn St.
Tilton, NH 03276
24,000 TEK SCREWS 1"
3,016 INSERTS 20" splices
1,392 CAPS Rubber End Caps
5,600 CLIPS For attachments of rail to rack
0 WIRE DECKS 3584 Supplied from Laconia Location
464 AISLE MARKERS 12" x 12" at all row ends
ABOVE EQUIPMENT DISTRIBUTED BY STEEL KING INDUSTRIES, INC.
(2 9491 SRIENPACKER TYPE S3960 S/N:
-----------------------
ABOVE EQUIPMENT DISTRIBUTED BY SET POINT
WITH ALL STANDARD ACCESSORY EQUIPMENT
SECURED PARTY: DEBTOR:
CITIZENS LEASING CORPORATION DM Management, Inc.
By: /s/ John Young By: /s/ Peter J. Tulp
--------------------------- ----------------------
Title: Vice President Title: VP Finance
------------------------ ---------------
<PAGE>
[LETTERHEAD]
AUTHORIZATION TO CHARGE CHECKING ACCOUNT
TO: CITIZENS LEASING CORPORATION DATE: December 23, ,1998
One Citizens Plaza
Providence, RI 02903
Starting with my first payment which is due January 1, 1999*, and until
further notice, you are authorized to charge my checking account
No. each month on the due date of my Secured Promissory Note
dated 12/23/98 in the amount of $44,415.62 for the monthly payment then due.
Debtor:
DM Management Company
By: /S/ Peter J. Tulp
---------------------------
Title: VP Finance
------------------------
*The payment due January 1, 1999 will also include a one-time daily interest
charge based on the funding date and one-time Documentation Fees of $1,000.00
and $117.00 UCC Fees.
<PAGE>
[LETTERHEAD]
BORROWER'S AUTHORIZATION CERTIFICATE
DATE: December 23, 1998
-----------------
I (We) hereby authorize and direct CITIZENS LEASING CORPORATION to disburse
the proceeds of my (our) SECURED PROMISSORY NOTE dated December 23, 1998 for
$2,913,835.83 to be disbursed as follows:
TO: DM Management Company $2,913,835.83
---------------------
*In all cases, indicate the manner in which funds are to be disbursed. For
check payment indicate the check number. For direct deposit indicate account
number. For wire transfer indicate the bank to which the funds are to be sent
and the account number to be credited.
DEBTOR: DM Management Company
By: /s/ Peter J. Tulp
--------------------------
Title: VP Finance
-----------------------
<PAGE>
December 23, 1998
Citizens Leasing Corporation
One Citizens Plaza
Providence, RI 02903
RE: Secured Promissory Note in an amount of $2,913,835.83 dated
December , 1998 and Secured Promissory Note in an amount of
$4,676,523.20 dated December , 1998, (collectively the "Notes")
to Master Security Agreement dated December 1998 between DM
Management Company (DM), as Debtor and Citizens Leasing Corporation
(CLC), as Secured Party.
Dear Sirs:
DM agrees to provide to CLC by January 31, 1999 proof of payment for the
following invoices in connection with the above-referenced Notes:
- --Steel King--Invoice Nos. 93553 ($17,000), 94258 ($9,638) and 98831
($116,362).
- --Set Point--Invoice Nos. 180186 ($83,771) and 172662 ($83,771)
- --Unisource (division of Set Point)--Invoice Nos. 181370 ($160), 182440
($11,922.55), 183767 ($88,771)
- --AM Freece Invoice No. 64944 ($74,773.03)
- --Wildeck Invoice--evidence of payment for $23,658
In consideration of CLC agreeing to fund the Notes prior to receipt of the
above referenced evidence of payment, DM agrees to accept a buy back of the
Notes from CLC on or before January 31, 1999. CLC, may with not further
action required on its part, extend the deadline for receipt of all
outstanding issues.
If the foregoing correctly sets forth our agreement with respect to this
matter, please execute one copy of this letter in the place provided below
and return it to the undersigned.
Very truly yours,
DM MANAGEMENT COMPANY
By: /S/ Peter J. Tulp
-----------------------------
Title: VP Finance
--------------------------
Acknowledged and Agreed:
CITIZENS LEASING CORPORATION
By: /S/ John Young
-----------------------------
Title: Vice President
--------------------------
<PAGE>
[LOGO]
Exhibit 10.62
One Citizens Plaza SECURED PROMISSORY NOTE
Providence, Rhode Island 02903
SECURED PARTY: CITIZENS LEASING CORPORATION DEBTOR: DM Management Company
One Citizens Plaza
Providence, Rhode Island 02903 Address: 25 Recreation Park Drive
(401) 456-7000 Hingham, MA 02043
Telephone: (781) 740-2718
1. Secured Party and Debtor have entered into a Master Security Agreement
dated as of December 23, 1998, (the "Security Agreement"). To secure payment
of the indebtedness set forth below, including the Principal Amount set forth
below, and the performance of all obligations contained herein, Debtor hereby
grants to Secured Party, its successors and assigns, a security interest in
the property set forth in Schedule A hereto, together with all attachments,
accessories, additions and accessions thereto, whether now existing or
hereafter acquired, all replacements and substitutions therefor, and all
proceeds thereof (all hereinafter referred to collectively as the
"Equipment").
2. Principal Amount. The original Principal Amount of this Note is:
$4,676,523.20.
3. a. Term. The Term of this Note is 84 months commencing on the Term
Commencement Date as set forth in the Note Acceptance Certificate to this Note
plus any partial period between the Acceptance Date of the Equipment as set
forth in the Note Acceptance Certificate and the Term Commencement Date.
b. Payments. Debtor hereby promises to pay the Principal Amount to
Secured Party and Interest thereon as follows:
(i) Interest only on the Term Commencement Date in an amount equal to
$ 974.28 multiplied by the number of days between the Acceptance Date up to and
including the Term Commencement Date.
(ii) Thereafter, the Principal Amount, together with interest thereon
at the fixed rate of 7.50 % per annum, shall be payable in (check one) [X]
advance/[ ] arrears in consecutive (check one) [X] monthly/[ ] quarterly
Installment Payments commencing on the 1st day of January 1999 and thereafter on
the same day of each successive (check one) [X] month/[ ] quarter inclusive
until fully paid, provided that the final installment shall be in the amount of
the unpaid balance hereof together with any accrued interest and late charges.
Interest shall be calculated based on the actual number of days elapsed over
twelve (12) thirty (30) day months.
The amount of each Installment Payment hereunder is as follows:
Amount of Each
Installment Nos. Installment Payment
1 - 83 $71,284.28
84 All remaining principal
and accrued interest
c. Debtor agrees to pay Secured Party, in advance, the first Installment
Payment.
d. Secured Party acknowledges receipt from Debtor of a payment in the
amount of $ N/A to be held by Secured Party as a deposit to secure
Debtor's performance hereunder.
4. The Equipment will be located at the locations specified in Schedule A
hereto.
<PAGE>
5. This Note is secured by the Equipment, as set forth in Schedule A hereto
and as further defined in the Security Agreement, the terms and conditions of
which are incorporated herein by reference. This Note is one of the "Notes"
referred to in the Security Agreement.
Dated: December 23,1998
SECURED PARTY: DEBTOR:
CITIZENS LEASING CORPORATION DM Management Company
By: By:
/s/ John Young /s/ Peter J. Tulp
------------------------- -----------------------------
Title: Title:
Vice President VP Finance
------------------------- ---------------------------
<PAGE>
[LETTERHEAD]
CITIZENS LEASING CORPORATION NOTE ACCEPTANCE CERTIFICATE
One Citizens Plaza
Providence, Rhode Island 02903
Note Acceptance Certificate to Secured Promissory Note dated
12/23/98, (the "Note") to Master Security Agreement dated 12/23/98, (the
"Security Agreement"), by and between DM Management Company as Debtor, and
CITIZENS LEASING CORPORATION as Secured Party.
1. Debtor hereby acknowledges that the Equipment set forth on
Schedule A hereto (the "Equipment") is hereby unconditionally accepted by the
Debtor for all purposes under the above-referenced Note and hereby agrees to
faithfully perform all of its obligations under the Note as of the date
hereof. Debtor hereby also reaffirms all of its representations, warranties
and covenants as set forth in the Security Agreement and in the Note as of
the date hereof and certifies that no event or condition has occurred and is
continued which constitutes an Event of Default under the Security Agreement
or the Note or would constitute such an Event of Default with the passage of
time and/or giving of notice.
2. Debtor represents and warrants the (i) the Equipment has been
delivered and is in an operating condition and performing the operation for
which it is intended to the satisfaction of the Debtor; and (ii) if requested
by the Secured Party, the Equipment has been marked or labeled evidencing the
Secured Party's interest therein.
3. Debtor hereby agrees to pay Secured Party the Installment
Payments, as set forth in the Note, at the times and in the manner set forth
in the Note.
4. The Principal Amount of the Note is: $4,676,523.20.
5. The Term Commencement Date is the 1st day of January, 1999.
Dated: December 23, 1998 DEBTOR: DM Management Company
-----------------
(the "Acceptance Date")
By: /S/ Peter J. Tulp
-------------------------
Title: VP Finance
----------------------
Agreed and Accepted:
CITIZENS LEASING CORPORATION
By: /S/ John Young
--------------------------
Title: Vice President
-----------------------
<PAGE>
SCHEDULE A EQUIPMENT
LESSOR: CITIZENS LEASING CORPORATION, LESSEE: DM Management Company
a Rhode Island corporation a Delaware Corporation
("Lessor") ("Lessee")
ADDRESS: One Citizens Plaza ADDRESS: 25 Recreation
Providence, RI 02903 Park Drive
Hingham, MA 02043
Attached to and made a part of the following documents: Secured
Promissory Note, Note Acceptance, Uniform Commercial Code Financial
Statements and Consent and Waiver by Owner, Landlord or Mortgagee of Real
Estate.
<TABLE>
<CAPTION>
QTY MANUFACTURER, DESCRIPTION MODEL NO./SERIAL NO. LOCATION
- --- --------------------------------------------- --------
Seq. Conveyor Type of 12 Sandborn St.
# Series Panel Number Conveyor Tilton, NH 03276
--- ------ ----- -------- --------
<S> <C> <C> <C> <C> <C>
1 1 100 100-1 BPE100A PBE-Powered Belt Extendable
- ------------------------------------------------------------------------------
1 2 100 100-1 BPE100B PBE-Powered Belt Extendable
- ------------------------------------------------------------------------------
1 3 100 n/a T100 Track for Powered Belt Extendables
- ------------------------------------------------------------------------------
1 4 100 n/a GRC102A RGC160-Roller Gravity Curve
- ------------------------------------------------------------------------------
1 5 100 n/a GRC102B RGC160-Roller Gravity Curve
- ------------------------------------------------------------------------------
1 6 100 n/a GRC102C RGC160-Roller Gravity Curve
- ------------------------------------------------------------------------------
1 7 100 n/a GRC102D RGC160-Roller Gravity Curve
- ------------------------------------------------------------------------------
1 8 100 n/a GRC102E RGC160-Roller Gravity Curve
- ------------------------------------------------------------------------------
1 9 100 n/a GRC102F RGC160-Roller Gravity Curve
- ------------------------------------------------------------------------------
1 10 100 n/a GRC104A RGC160-Roller Gravity Curve
- ------------------------------------------------------------------------------
1 11 100 n/a GRC104B RGC160-Roller Gravity Curve
- ------------------------------------------------------------------------------
1 12 100 n/a GRC104C RGC160-Roller Gravity Curve
- ------------------------------------------------------------------------------
1 13 100 n/a GRC104D RGC160-Roller Gravity Curve
- ------------------------------------------------------------------------------
1 14 100 n/a GRC104E RGC160-Roller Gravity Curve
- ------------------------------------------------------------------------------
1 15 100 n/a GRC104F RGC160-Roller Gravity Curve
- ------------------------------------------------------------------------------
1 16 100 n/a GR106A RG1916-Roller Gravity
- ------------------------------------------------------------------------------
1 17 100 n/a GR106B RG1916-Roller Gravity
- ------------------------------------------------------------------------------
1 18 100 n/a GR106C RG1916-Roller Gravity
- ------------------------------------------------------------------------------
1 19 100 n/a GR106D RG1916-Roller Gravity
- ------------------------------------------------------------------------------
1 20 100 n/a GR106E RG1916-Roller Gravity
- ------------------------------------------------------------------------------
1 21 100 n/a GR106F RG1916-Roller Gravity
- ------------------------------------------------------------------------------
1 22 100 n/a GR106G RG1916-Roller Gravity
- ------------------------------------------------------------------------------
</TABLE>
Page 1 of 17
<PAGE>
SCHEDULE A EQUIPMENT
LESSOR: CITIZENS LEASING CORPORATION, LESSEE: DM Management Company
a Rhode Island corporation a Delaware Corporation
("Lessor") ("Lessee")
ADDRESS: One Citizens Plaza ADDRESS: 25 Recreation Park Drive
Providence, RI 02903 Hingham, MA 02043
Attached to and made a part of the following documents: Secured
Promissory Note, Note Acceptance, Uniform Commercial Code Financial
Statements and Consent and Waiver by Owner, Landlord or Mortgagee of Real
Estate.
<TABLE>
<CAPTION>
QTY MANUFACTURER, DESCRIPTION MODEL NO./SERIAL NO. LOCATION
--------------------------------------------- --------
Seq. Series Panel Conveyor Type of 12 Sandborn St.
# Number Conveyor Tilton, NH 03276
--- ------ ----- -------- --------
<S> <C> <C> <C> <C> <C>
1 23 100 100 LR124A LRTC-Live Roller Transportation
- ------------------------------------------------------------------------------
1 24 100 100 LR124B LRTC-Live Roller Transportation
- ------------------------------------------------------------------------------
1 25 100 100 LR124C LRTC-Live Roller Transportation
- ------------------------------------------------------------------------------
1 26 100 100 LR124D LRTC-Live Roller Transportation
- ------------------------------------------------------------------------------
1 27 100 100 LR124E LRTC-Live Roller Transportation
- ------------------------------------------------------------------------------
1 28 100 100 IB126A BSE-Indexing Belt
- ------------------------------------------------------------------------------
1 29 100 100 IB126B BSE-Indexing Belt
- ------------------------------------------------------------------------------
1 30 100 100 IB126C BSE-Indexing Belt
- ------------------------------------------------------------------------------
1 31 100 100 IB126D BSE-Indexing Belt
- ------------------------------------------------------------------------------
1 32 100 100 IB126E BSE-Indexing Belt
- ------------------------------------------------------------------------------
1 33 100 100 LRM128A LRSC-Live Roller Spur Curve
- ------------------------------------------------------------------------------
1 34 100 100 LRM128B LRSC-Live Roller Spur Curve
- ------------------------------------------------------------------------------
1 35 100 100 LRM128C LRSC-Live Roller Spur Curve
- ------------------------------------------------------------------------------
1 36 100 100 LRM128D LRSC-Live Roller Spur Curve
- ------------------------------------------------------------------------------
1 37 100 100 LRM128E LRSC-Live Roller Spur Curve
- ------------------------------------------------------------------------------
1 38 100 100 PB132 BRC-Powered Belt
- ------------------------------------------------------------------------------
1 39 100 100 LRC134 LRC-Live Roller Curve
- ------------------------------------------------------------------------------
1 40 100 100 PB1136 BIC-15 Degree Bell Incline
- ------------------------------------------------------------------------------
1 41 100 100 LRC138 LRC-Live Roller Curve
- ------------------------------------------------------------------------------
1 42 100 100 LRA140 LRZC-Zero Pressure Accumulation
- ------------------------------------------------------------------------------
1 43 100 100 LRC142 LRC-Live Roller Curve
- ------------------------------------------------------------------------------
1 44 100 100 LRA144 LRZC-Zero Pressure Accumulation
- ------------------------------------------------------------------------------
1 45 100 n/a LRM146 LREWS-Live Roller Merge
- ------------------------------------------------------------------------------
1 46 100 100 LRA148 LRZC-Zero Pressure Accumulation
- ------------------------------------------------------------------------------
1 47 100 n/a LRC150 LRC-Live Roller Curve
- ------------------------------------------------------------------------------
1 48 100 100 LRC152 LRZC-Zero Pressure Accumulation
- ------------------------------------------------------------------------------
1 49 100 n/a LRC154 LRC-Live Roller Curve
- ------------------------------------------------------------------------------
1 50 100 100 LRA156 LRZC-Zero Pressure Accumulation
- ------------------------------------------------------------------------------
</TABLE>
Page 2 of 17
<PAGE>
SCHEDULE A EQUIPMENT
LESSOR: CITIZENS LEASING CORPORATION, LESSEE: DM Management Company
a Rhode Island corporation a Delaware Corporation
("Lessor") ("Lessee")
ADDRESS: One Citizens Plaza ADDRESS: 25 Recreation Park Drive
Providence, RI 02903 Hingham, MA 02043
Attached to and made a part of the following documents: Secured
Promissory Note, Note Acceptance, Uniform Commercial Code Financial
Statements and Consent and Waiver by Owner, Landlord or Mortgagee of Real
Estate.
<TABLE>
<CAPTION>
QTY MANUFACTURER, DESCRIPTION MODEL NO./SERIAL NO. LOCATION
--------------------------------------------- --------
Seq. Series Panel Conveyor Type of 12 Sandborn St.
# Number Conveyor Tilton, NH 03276
--- ------ ----- -------- --------
<S> <C> <C> <C> <C> <C>
1 51 100 100 LR160 LRTC-Live Roller Transportation
- ----------------------------------------------------------------------------------
1 52 100 100 PB1162 BIC-15 Degree Belt Incline
- ----------------------------------------------------------------------------------
1 53 100 n/a LRC164 LRC-Live Roller Curve
- ----------------------------------------------------------------------------------
1 54 100 100 LRA166 LRZC-Zero Pressure Accumulation
- ----------------------------------------------------------------------------------
48 55 100 n/a GA100 1.5" Angle Guard Rail (bulk)
- ----------------------------------------------------------------------------------
43 56 100 n/a GCL100 5.75" Lapped Channel Guard Rail (bulk)
- ----------------------------------------------------------------------------------
1 57 200 200 BSB200A BMSE-Brake/Meter Belt
- ----------------------------------------------------------------------------------
1 58 200 200 BSB200B BMSE-Brake/Meter Belt
- ----------------------------------------------------------------------------------
1 59 200 200 BSB200C BMSE-Brake/Meter Belt
- ----------------------------------------------------------------------------------
1 60 200 200 BSB200D BMSE-Brake/Meter Belt
- ----------------------------------------------------------------------------------
1 61 200 200 LRS201A LRS-Live Roller Spur
- ----------------------------------------------------------------------------------
1 62 200 200 LRS201B LRS-Live Roller Spur
- ----------------------------------------------------------------------------------
1 63 200 200 LRS201C LRS-Live Roller Spur
- ----------------------------------------------------------------------------------
1 64 200 200 LRS201D LRS-Live Roller Spur
- ----------------------------------------------------------------------------------
1 65 200 200 LR202 LRTC-Live Roller Transportation
- ----------------------------------------------------------------------------------
1 66 200 n/a LRC204 LRC-Live Roller Curve
- ----------------------------------------------------------------------------------
1 67 200 200 LR206 SP-Skewed Roller Section
- ----------------------------------------------------------------------------------
1 68 200 200 LRA208 LRS-Live Roller Spur
- ----------------------------------------------------------------------------------
1 69 200 200 BSB210 BMSE-Brake/Meter Belt
- ----------------------------------------------------------------------------------
1 70 200 200 SOR212 BRE-Sort Belt
- ----------------------------------------------------------------------------------
1 71 200 200 SOR214 BRE-Sort Belt
- ----------------------------------------------------------------------------------
1 72 200 n/a DIV220 LFS-Line Flow Spur
- ----------------------------------------------------------------------------------
1 73 200 n/a DIV230 LFS-Line Flow Spur
- ----------------------------------------------------------------------------------
1 74 200 200 DIV260 LRSC-Live Roller Spur Curve
- ----------------------------------------------------------------------------------
1 75 200 200 PBD262 BDC-15 Degree Belt Decline
- ----------------------------------------------------------------------------------
1 76 200 n/a GR264 RG1916-Roller Gravity
- ----------------------------------------------------------------------------------
1 77 200 n/a DIV280 LFS-Line Flow Spur
- ----------------------------------------------------------------------------------
18 78 200 n/a GCL200 5.75"-Lapped Channel Guard Rail (bulk)
- ------------------------------------------------------------------------------
1 79 300 n/a DIV310 LFS-Line Flow Spur
</TABLE>
Page 3 of 17
<PAGE>
SCHEDULE A EQUIPMENT
LESSOR: CITIZENS LEASING CORPORATION, LESSEE: DM Management Company
a Rhode Island corporation a Delaware Corporation
("Lessor") ("Lessee")
ADDRESS: One Citizens Plaza ADDRESS: 25 Recreation Park Drive
Providence, RI 02903 Hingham, MA 02043
Attached to and made a part of the following documents: Secured
Promissory Note, Note Acceptance, Uniform Commercial Code Financial
Statements and Consent and Waiver by Owner, Landlord or Mortgagee of Real
Estate.
<TABLE>
<CAPTION>
QTY MANUFACTURER, DESCRIPTION MODEL NO./SERIAL NO. LOCATION
- --- --------------------------------------------- --------
Seq. Series Panel Conveyor Type of 12 Sandborn St.
# Number Conveyor Tilton, NH 03276
--- ------ ----- -------- --------
<S> <C> <C> <C> <C> <C>
1 95 300 300-1 LRC332 LRC-Live Roller Curve
- ----------------------------------------------------------------------------
1 96 300 300-1 PBD333 BDC-15 Degree Belt Decline
- ----------------------------------------------------------------------------
1 97 300 n/a LRC334A LRC-Live Roller Curve
- ----------------------------------------------------------------------------
1 98 300 300-1 LR334B LRTE-Live Roller Transportation
- ----------------------------------------------------------------------------
1 99 300 n/a LRC334C LRC-Live Roller Curve
- ----------------------------------------------------------------------------
1 100 300 300-1 LRA336 LRZC-Zero Pressure Accumulation
- ----------------------------------------------------------------------------
1 101 300 300-1 BSB338 BMSE-Brake/Motor Belt
- ----------------------------------------------------------------------------
1 102 300 300-1 SOR340 BRE-Sort Belt
- ----------------------------------------------------------------------------
1 103 300 300-1 LRA342 LRZC-Zero Pressure Accumulation
- ----------------------------------------------------------------------------
1 104 300 300-1 BSB344 BMSE-Brake/Motor Belt
- ----------------------------------------------------------------------------
1 105 300 300-1 BC346 PBC-Powered Belt Curve
- ----------------------------------------------------------------------------
1 106 300 300-2 SOR347 BRC-Sort Belt
- ----------------------------------------------------------------------------
1 107 300 300-2 SOR348 BRC-Sort Belt
- ----------------------------------------------------------------------------
1 108 300 300-2 LRA349 LRZC-Zero Pressure Accumulation
- ----------------------------------------------------------------------------
1 109 300 n/a DIV350A LFS-Line Flow Spur
- ----------------------------------------------------------------------------
1 110 300 n/a DIV350B LFS-Line Flow Spur
- ----------------------------------------------------------------------------
1 111 300 n/a DIV350C LFS-Line Flow Spur
- ----------------------------------------------------------------------------
1 112 300 n/a GRC351A RGC160-Roller Gravity Curve
- ----------------------------------------------------------------------------
1 113 300 n/a GRC351B RGC160-Roller Gravity Curve
- ----------------------------------------------------------------------------
1 114 300 n/a GRC351C RGC160-Roller Gravity Curve
- ----------------------------------------------------------------------------
1 115 300 n/a CH352A CHT-Chute
- ----------------------------------------------------------------------------
1 116 300 n/a CH352B CHT-Chute
- ----------------------------------------------------------------------------
1 117 300 n/a CH352C CHT-Chute
- ----------------------------------------------------------------------------
1 118 300 n/a CH352D CHT-Chute
- ----------------------------------------------------------------------------
1 119 300 n/a GR353A RG1916-Roller Gravity
- ----------------------------------------------------------------------------
1 120 300 n/a GR353B RG1916-Roller Gravity
- ----------------------------------------------------------------------------
1 121 300 n/a GR353C RG1916-Roller Gravity
- ----------------------------------------------------------------------------
1 122 300 n/a GR353D RG1916-Roller Gravity
- ------------------------------------------------------------------------------
</TABLE>
Page 4 of 17
<PAGE>
SCHEDULE A EQUIPMENT
LESSOR: CITIZENS LEASING CORPORATION, LESSEE: DM Management Company
a Rhode Island corporation a Delaware Corporation
("Lessor") ("Lessee")
ADDRESS: One Citizens Plaza ADDRESS: 25 Recreation Park Drive
Providence, RI 02903 Hingham, MA 02043
Attached to and made a part of the following documents: Secured
Promissory Note, Note Acceptance, Uniform Commercial Code Financial
Statements and Consent and Waiver by Owner, Landlord or Mortgagee of Real
Estate.
<TABLE>
<CAPTION>
QTY MANUFACTURER, DESCRIPTION MODEL NO./SERIAL NO. LOCATION
- --- --------------------------------------------- --------
Seq. Series Panel Conveyor Type of 12 Sandborn St.
# Number Conveyor Tilton, NH 03276
--- ------ ----- -------- --------
<S> <C> <C> <C> <C> <C>
1 123 300 n/a DIV355A LFS-Line Flow Spur
- -------------------------------------------------------------------------------
1 124 300 n/a DIV355B LFS-Line Flow Spur
- -------------------------------------------------------------------------------
1 125 300 n/a DIV355C LFS-Line Flow Spur
- -------------------------------------------------------------------------------
1 126 300 n/a GRC356A RGC160-Roller Gravity Curve
- -------------------------------------------------------------------------------
1 127 300 n/a GRC356B RGC160-Roller Gravity Curve
- -------------------------------------------------------------------------------
1 128 300 n/a GRC356C RGC160-Roller Gravity Curve
- -------------------------------------------------------------------------------
1 129 300 n/a CH357A CHT-Chute
- -------------------------------------------------------------------------------
1 130 300 n/a CH357B CHT-Chute
- -------------------------------------------------------------------------------
1 131 300 n/a CH357C CHT-Chute
- -------------------------------------------------------------------------------
1 132 300 n/a CH357D CHT-Chute
- -------------------------------------------------------------------------------
1 133 300 n/a GR358A RG1916-Roller Gravity
- -------------------------------------------------------------------------------
1 134 300 n/a GR358B RG1916-Roller Gravity
- -------------------------------------------------------------------------------
1 135 300 n/a GR358C RG1916-Roller Gravity
- -------------------------------------------------------------------------------
1 136 300 n/a GR358D RG1916-Roller Gravity
- -------------------------------------------------------------------------------
1 137 300 n/a DIV360A LFS-Lina Flow Spur
- -------------------------------------------------------------------------------
1 138 300 n/a DIV360B LFS-Lina Flow Spur
- -------------------------------------------------------------------------------
1 139 300 n/a DIV360C LFS-Lina Flow Spur
- -------------------------------------------------------------------------------
1 140 300 n/a GRC361A RGC160-Roller Gravity Curve
- -------------------------------------------------------------------------------
1 141 300 n/a GRC361B RGC160-Roller Gravity Curve
- -------------------------------------------------------------------------------
1 142 300 n/a GRC361C RGC160-Roller Gravity Curve
- -------------------------------------------------------------------------------
1 143 300 n/a CH362A CHT-Chute
- -------------------------------------------------------------------------------
1 144 300 n/a CH362B CHT-Chute
- -------------------------------------------------------------------------------
1 145 300 n/a CH362C CHT-Chute
- -------------------------------------------------------------------------------
1 146 300 n/a CH362D CHT-Chute
- -------------------------------------------------------------------------------
1 147 300 n/a GR363A RG1916-Roller Gravity
- -------------------------------------------------------------------------------
1 148 300 n/a GR363B RG1916-Roller Gravity
- -------------------------------------------------------------------------------
1 149 300 n/a GB363C RG1916-Roller Gravity
- -------------------------------------------------------------------------------
</TABLE>
Page 5 of 17
<PAGE>
SCHEDULE A EQUIPMENT
LESSOR: CITIZENS LEASING CORPORATION, LESSEE: DM Management Company
a Rhode Island corporation a Delaware Corporation
("Lessor") ("Lessee")
ADDRESS: One Citizens Plaza ADDRESS: 25 Recreation Park Drive
Providence, RI 02903 Hingham, MA 02043
Attached to and made a part of the following documents: Secured
Promissory Note. Note Acceptance, Uniform Commercial Code Financial
Statements and Consent and Waiver by Owner, Landlord or Mortgagee of Real
Estate.
<TABLE>
<CAPTION>
QTY MANUFACTURER, DESCRIPTION MODEL NO./SERIAL NO. LOCATION
--------------------------------------------- --------
Seq. Series Panel Conveyor Type of 12 Sandborn St.
# Number Conveyor Tilton, NH 03276
<S> <C> <C> <C> <C> <C>
1 150 300 n/a GR363D RG1916-Roller Gravity
- ------------------------------------------------------------------------------
1 151 300 n/a DIV365A LFS-Line Flow Spur
- ------------------------------------------------------------------------------
1 152 300 n/a DIV365B LFS-Line Flow Spur
- ------------------------------------------------------------------------------
1 153 300 n/a DIV365C LFS-Line Flow Spur
- ------------------------------------------------------------------------------
1 154 300 n/a GRC366A RGC160-Roller Gravity Curve
- ------------------------------------------------------------------------------
1 155 300 n/a GRC366B RGC160-Roller Gravity Curve
- ------------------------------------------------------------------------------
1 156 300 n/a GRC366C RGC160-Roller Gravity Curve
- ------------------------------------------------------------------------------
1 157 300 n/a CH367A CHT-Chule
- ------------------------------------------------------------------------------
1 158 300 n/a CH367B CHT-Chule
- ------------------------------------------------------------------------------
1 159 300 n/a CH367C CHT-Chule
- ------------------------------------------------------------------------------
1 160 300 n/a CH367D CHT-Chule
- ------------------------------------------------------------------------------
1 161 300 n/a GR368A RG1916-Roller Gravity
- ------------------------------------------------------------------------------
1 162 300 n/a GR368B RG1916-Roller Gravity
- ------------------------------------------------------------------------------
1 163 300 n/a GR368C RG1916-Roller Gravity
- ------------------------------------------------------------------------------
1 164 300 n/a GR368D RC1916-Roller Gravity
- ------------------------------------------------------------------------------
1 165 300 300-1 BC370 PBC-Powered Belt Curve
- ------------------------------------------------------------------------------
1 166 300 300-1 SOR377 BRC-Sort Belt
- ------------------------------------------------------------------------------
1 167 300 300-1 SOR378 BRC-Sort Belt
- ------------------------------------------------------------------------------
1 168 300 300-1 LRA379 LRZC-Zero Pressure Accumulation
- ------------------------------------------------------------------------------
1 169 300 300-1 LRC382 LRC-Live Roller Curve
- ------------------------------------------------------------------------------
1 170 300 300-1 LR383 LRC-Live Roller Transportation
- ------------------------------------------------------------------------------
1 171 300 n/a LRC384 LRC-Live Roller Curve
- ------------------------------------------------------------------------------
1 172 300 300-1 LRA386 LRZC-Zero Pressure Accumulation
- ------------------------------------------------------------------------------
1 173 300 300-1 BSB388 BMSE-Brake/Meter Belt
- ------------------------------------------------------------------------------
1 174 300 300-1 SOR390 BRE-Sort Belt
- ------------------------------------------------------------------------------
1 175 300 300-1 LRA392 LRZC-Zero Pressure Accumulation
- ------------------------------------------------------------------------------
1 176 300 300-1 BSB394 BMSE-Brake/Meter Belt
- ------------------------------------------------------------------------------
1 177 300 300-1 BC396 PBC-Powered Belt Curve
- ------------------------------------------------------------------------------
1 178 300 300-2 SOR397 BRC-Sort Belt
- ------------------------------------------------------------------------------
1 179 300 300-2 SOR398 BRC-Sort Belt
- ------------------------------------------------------------------------------
</TABLE>
Page 6 of 17
<PAGE>
SCHEDULE A EQUIPMENT
LESSOR: CITIZENS LEASING CORPORATION, LESSEE: DM Management Company
a Rhode Island corporation a Delaware Corporation
("Lessor") ("Lessee")
ADDRESS: One Citizens Plaza ADDRESS: 25 Recreation Park Drive
Providence, RI 02903 Hingham, MA 02043
Attached to and made a part of the following documents: Secured
Promissory Note, Note Acceptance, Uniform Commercial Code Financial
Statements and Consent and Waiver by Owner, Landlord or Mortgagee of Real
Estate.
<TABLE>
<CAPTION>
QTY MANUFACTURER, DESCRIPTION MODEL NO./SERIAL NO. LOCATION
- --- --------------------------------------------- --------
Seq. Series Panel Conveyor Type of 12 Sandborn St.
# Number Conveyor Tilton, NH 03276
--- ------ ----- -------- --------
<S> <C> <C> <C> <C> <C>
1 180 300 300-2 LRA399 LRZC-Zero Pressure Accumulation
- ----------------------------------------------------------------------------------
90 181 300 n/a GCL300 5.75" Lapped Channel Guard Rail (bulk)
- ----------------------------------------------------------------------------------
1 182 400 n/a GR400 RG1916-Roller Gravity
- ----------------------------------------------------------------------------------
1 183 400 400 PB1401 BRE-12 Degree Booster Belt
- --------------------------------------------------------------------------------
1 184 400 400 LRA402 LRZC-Zero Pressure Accumulation
- ----------------------------------------------------------------------------------
1 185 400 n/a GR403 RG1916-Roller Gravity
- ----------------------------------------------------------------------------------
1 186 400 400 PB1401 BRE-12 Degree Booster Belt
- ----------------------------------------------------------------------------------
1 187 400 n/a LRM405 LREWS-Live Roller Merge
- ----------------------------------------------------------------------------------
1 188 400 400 LRA406 LRZC-Zero Pressure Accumulation
- ----------------------------------------------------------------------------------
1 189 400 n/a GR407 RG1916-Roller Gravity
- ----------------------------------------------------------------------------------
1 190 400 400 PB1408 BRE-12 Degree Booster Belt
- ----------------------------------------------------------------------------------
1 191 400 n/a LRM409 LREWS-Live Roller Merge
- ----------------------------------------------------------------------------------
1 192 400 n/a GR410 RG1916-Roller Gravity
- ----------------------------------------------------------------------------------
1 193 400 400 PB1411 BRE-12 Degree Booster Belt
- ----------------------------------------------------------------------------------
1 194 400 n/a LRM412 LREWS-Live Roller Merge
- ----------------------------------------------------------------------------------
1 195 400 400 LRA413 LRZC-Zero Pressure Accumulation
- ----------------------------------------------------------------------------------
1 196 400 n/a GR414 RG1916-Roller Gravity
- ----------------------------------------------------------------------------------
1 197 400 400 PB1415 BRE-12 Degree Booster Belt
- ----------------------------------------------------------------------------------
1 198 400 n/a LRM416 LREWS-Live Roller Merge
- ----------------------------------------------------------------------------------
1 199 400 n/a GR417 RG1916-Roller Gravity
- ----------------------------------------------------------------------------------
1 200 400 400 PB1418 BRE-12 Degree Booster Belt
- ----------------------------------------------------------------------------------
1 201 400 n/a LRM419 LREWS-Live Roller Merge
- ----------------------------------------------------------------------------------
1 202 400 400 PB1420 BRE-12 Degree Booster Belt
- ----------------------------------------------------------------------------------
1 203 400 400 LRC421 LRC-Live Roller Curve
- ----------------------------------------------------------------------------------
1 204 400 400 PB1422 BRE-12 Degree Booster Belt
- ----------------------------------------------------------------------------------
1 205 400 400 LRA423 LRZC-Zero Pressure Accumulation
- ----------------------------------------------------------------------------------
1 206 400 n/a LRC424 LRC-Live Roller Curve
- ----------------------------------------------------------------------------------
1 207 400 400 LRA425 LRZC-Zero Pressure Accumulation
- ----------------------------------------------------------------------------------
1 208 400 n/a GR450 RG1916-Roller Gravity
- ----------------------------------------------------------------------------------
1 209 400 400 PB1451 BRE-12 Degree Booster Belt
- ----------------------------------------------------------------------------------
</TABLE>
Page 7 of 17
<PAGE>
SCHEDULE A EQUIPMENT
LESSOR: CITIZENS LEASING CORPORATION LESSEE: DM Management Company
a Rhode Island corporation a Delaware corporation
("Lessor") ("Lessee")
ADDRESS: One Citizens Plaza ADDRESS: 25 Recreation Park Drive
Providence, RI 02903 Hingham, MA 02043
Attached to and made a part of the following documents: Secured
Promissory Note, Note Acceptance, Uniform Commercial Code Financial
Statements and Consent and Waiver by Owner, Landlord or Mortgagee of Real
Estate.
<TABLE>
<CAPTION>
QTY MANUFACTURER, DESCRIPTION MODEL NO./SERIAL NO. LOCATION
--------------------------------------------- --------
Seq. Series Panel Conveyor Type of 12 Sandborn St.
# Number Conveyor Tilton, NH 03276
<S> <C> <C> <C> <C> <C>
1 210 400 400 LRA452 LRZC-Zero Pressure Accumulation
- ------------------------------------------------------------------------------
1 211 400 n/a GR453 RG-1916-Roller Gravity
- ------------------------------------------------------------------------------
1 212 400 400 PB1454 BRE-12 Degree Booster Belt
- ------------------------------------------------------------------------------
1 213 400 n/a LRM455 LREWS-Live Roller Merge
- ------------------------------------------------------------------------------
1 214 400 400 LRA456 LRZC-Zero Pressure Accumulation
- ------------------------------------------------------------------------------
1 215 400 n/a GR457 RG1916-Roller Gravity
- ------------------------------------------------------------------------------
1 216 400 400 PB1458 BRE-12 Degree Booster Belt
- ------------------------------------------------------------------------------
1 217 400 n/a LRM459 LREWS-Live Roller Marge
- ------------------------------------------------------------------------------
1 218 400 n/a GR460 RG1916-Roller Gravity
- ------------------------------------------------------------------------------
1 219 400 400 PB1461 BRE-12 Degree Booster Belt
- ------------------------------------------------------------------------------
1 220 400 n/a LRM462 LREWS-Live Roller Merge
- ------------------------------------------------------------------------------
1 221 400 400 LRM463 LRZC-Zero Pressure Accumulation
- ------------------------------------------------------------------------------
1 222 400 n/a GR464 RG1916-Roller Gravity
- ------------------------------------------------------------------------------
1 223 400 400 PB1465 BRE-12 Degree Booster Belt
- ------------------------------------------------------------------------------
1 224 400 n/a LRM466 LREWS-Live Roller Merge
- ------------------------------------------------------------------------------
1 225 400 n/a GR467 RG1916-Roller Gravity
- ------------------------------------------------------------------------------
1 226 400 400 PB1468 BRE-12 Degree Booster Belt
- ------------------------------------------------------------------------------
1 227 400 n/a LRM469 LREWS-LIve Roller Merge
- ------------------------------------------------------------------------------
1 228 400 400 LRC471 LRC-Live Roller Curve
- ------------------------------------------------------------------------------
1 229 400 400 LRA473 LRZC-Zero Pressure Accumulation
- ------------------------------------------------------------------------------
1 230 400 n/a LRC474 LRC-Live Roller Curve
- ------------------------------------------------------------------------------
1 231 400 400 LRA475 LRZC-Zero Pressure Accumulation
- ------------------------------------------------------------------------------
1 232 400 n/a GCL400 5.75"Lapped Channel Guard Rail (bulk)
- ------------------------------------------------------------------------------
1 233 500 200 DIV500 LRSC-Live Roller Spur Curve
- ------------------------------------------------------------------------------
1 234 500 200 PB1502 BIC-15 Degree Belt Incline
- ------------------------------------------------------------------------------
1 235 500 n/a LRC504 LRC-Live Roller Curve
- ------------------------------------------------------------------------------
1 236 500 200 LRA506 LRZC-Zero Pressure Accumulation
- ------------------------------------------------------------------------------
1 237 500 200 LRA508 LRZC-Zero Pressure Accumulation
- ------------------------------------------------------------------------------
1 238 500 n/a LRC510 LRC-Live Roller Curve
- ------------------------------------------------------------------------------
1 239 500 500 PBD512 BDC-15 Degree Belt Decline
</TABLE>
Page 8 of 17
<PAGE>
SCHEDULE A EQUIPMENT
LESSOR: CITIZENS LEASING CORPORATION, LESSEE: DM Management Company
a Rhode Island corporation a Delaware Corporation
("Lessor") ("Lessee")
ADDRESS: One Citizens Plaza ADDRESS: 25 Recreation Park Drive
Providence, RI 02903 Hingham, MA 02043
Attached to and made a part of the following documents: Secured
Promissory Note, Note Acceptance, Uniform Commercial Code Financial
Statements and Consent and Waiver by Owner, Landlord or Mortgagee of Real
Estate.
<TABLE>
<CAPTION>
QTY MANUFACTURER, DESCRIPTION MODEL NO./SERIAL NO. LOCATION
- --- --------------------------------------------- --------
Seq. Series Panel Conveyor Type of 12 Sandborn St.
# Number Conveyor Tilton, NH 03276
--- ------ ----- -------- --------
<S> <C> <C> <C> <C> <C>
1 240 500 500 LRA514 LRZE-Zero Pressure Accumulation
- ------------------------------------------------------------------------------
1 241 500 n/a LRM516 LREWS-Live Roller Merge
- ------------------------------------------------------------------------------
1 242 500 n/a LRC518 LRC-Live Roller Curve
- ------------------------------------------------------------------------------
1 243 500 500 LRC520 LRC-Live Roller Curve
- ------------------------------------------------------------------------------
1 244 500 500 LRA522 LRZE-Zero Pressure Accumulation
- ------------------------------------------------------------------------------
1 245 500 500 BSB524 BMSE-Brake/Meter Belt
- ------------------------------------------------------------------------------
1 246 500 500 SOR526 BRC-Sort Belt
- ------------------------------------------------------------------------------
1 247 500 500 SOR528 BRC-Sort Belt
- ------------------------------------------------------------------------------
1 248 500 500 SOR530 BRC-Sort Belt
- ------------------------------------------------------------------------------
1 249 500 500 BC532 PBC-Powered Belt Curve
- ------------------------------------------------------------------------------
1 250 500 500 SOR534 BRC-Sort Belt
- ------------------------------------------------------------------------------
1 251 500 500 SOR536 BRC-Sort Belt
- ------------------------------------------------------------------------------
1 252 500 500 SOR538 BRC-Sort Belt
- ------------------------------------------------------------------------------
1 253 500 500 LRA540 LRZC-Zero Pressure Accumulation
- ------------------------------------------------------------------------------
1 254 500 500 DIV545 LRSC-Live Roller Spur Curve
- ------------------------------------------------------------------------------
1 255 500 500 GRC546 RGC160-Roller Gravity Curve
- ------------------------------------------------------------------------------
1 256 500 n/a GR547 RG1916-Roller Gravity
- ------------------------------------------------------------------------------
1 257 500 n/a DIV550A LFS-Line Flow Spur
- ------------------------------------------------------------------------------
1 258 500 n/a DIV550B LFS-Line Flow Spur
- ------------------------------------------------------------------------------
1 259 500 n/a DIV550C LFS-Line Flow Spur
- ------------------------------------------------------------------------------
1 260 500 n/a DIV550D LFS-Line Flow Spur
- ------------------------------------------------------------------------------
1 261 500 n/a DIV550E LFS-Line Flow Spur
- ------------------------------------------------------------------------------
1 262 500 n/a DIV550F LFS-Line Flow Spur
- ------------------------------------------------------------------------------
1 263 500 n/a DIV550G LFS-Line Flow Spur
- ------------------------------------------------------------------------------
1 264 500 n/a DIV550H LFS-Line Flow Spur
- ------------------------------------------------------------------------------
1 265 500 n/a DIV550J LFS-Line Flow Spur
- ------------------------------------------------------------------------------
1 266 500 n/a DIV550K LFS-Line Flow Spur
- ------------------------------------------------------------------------------
1 267 500 n/a DIV550L LFS-Line Flow Spur
- ------------------------------------------------------------------------------
1 268 500 n/a DIV550M LFS-Line Flow Spur
- ------------------------------------------------------------------------------
1 269 500 n/a DIV550N LFS-Line Flow Spur
- ------------------------------------------------------------------------------
1 270 500 n/a DIV550P LFS-Line Flow Spur
- ------------------------------------------------------------------------------
1 271 500 n/a DIV550Q LFS-Line Flow Spur
- ------------------------------------------------------------------------------
</TABLE>
Page 9 of 17
<PAGE>
SCHEDULE A EQUIPMENT
LESSOR: CITIZENS LEASING CORPORATION, LESSEE: DM Management Company
a Rhode Island corporation a Delaware Corporation
("Lessor") ("Lessee")
ADDRESS: One Citizens Plaza ADDRESS: 25 Recreation Park Drive
Providence, RI 02903 Hingham, MA 02043
Attached to and made a part of the following documents: Secured
Promissory Note, Note Acceptance, Uniform Commercial Code Financial
Statements and Consent and Waiver by Owner, Landlord or Mortgagee of Real
Estate.
<TABLE>
<CAPTION>
QTY MANUFACTURER, DESCRIPTION MODEL NO./SERIAL NO. LOCATION
--------------------------------------------- --------
Seq. Series Panel Conveyor Type of 12 Sandborn St.
# Number Conveyor Tilton, NH 03276
--- ------ ----- -------- --------
<S> <C> <C> <C> <C> <C>
1 301 500 n/a GR552N RG1916-Roller Gravity
- ------------------------------------------------------------------------------
1 302 500 n/a GR552P RG1916-Roller Gravity
- ------------------------------------------------------------------------------
1 303 500 n/a GR552Q RG1916-Roller Gravity
- ------------------------------------------------------------------------------
1 304 500 n/a GR552R RG1916-Roller Gravity
- ------------------------------------------------------------------------------
36 305 500 n/a GCL500 5.75" Lapped Channel Guard Rail
- ------------------------------------------------------------------------------
1 306 600 600 LR600A LRTE-Live Roller Transportation
- ------------------------------------------------------------------------------
1 307 600 600 LR600B LRTE-Live Roller Transportation
- ------------------------------------------------------------------------------
1 308 600 600 LR600C LRTE-Live Roller Transportation
- ------------------------------------------------------------------------------
1 309 600 600 LR600D LRTE-Live Roller Transportation
- ------------------------------------------------------------------------------
1 310 600 600 LR600E LRTE-Live Roller Transportationt
- ------------------------------------------------------------------------------
1 311 600 600 LR600F LRTE-Live Roller Transportation
- ------------------------------------------------------------------------------
1 312 600 600 LR600G LRTE-Live Roller Transportation
- ------------------------------------------------------------------------------
1 313 600 600 LR600H LRTE-Live Roller Transportation
- ------------------------------------------------------------------------------
1 314 600 600 LR600J LRTE-Live Roller Transportation
- ------------------------------------------------------------------------------
1 315 600 600 LR600K LRTE-Live Roller Transportation
- ------------------------------------------------------------------------------
1 316 600 600 LR600L LRTE-Live Roller Transportation
- ------------------------------------------------------------------------------
1 317 600 600 LR600M LRTE-Live Roller Transportation
- ------------------------------------------------------------------------------
1 318 600 600 LR600N LRTE-Live Roller Transportation
- ------------------------------------------------------------------------------
1 319 600 600 LR600P LRTE-Live Roller Transportation
- ------------------------------------------------------------------------------
1 320 600 600 LR600Q LRTE-Live Roller Transportation
- ------------------------------------------------------------------------------
1 321 600 600 LR600R LRTE-Live Roller Transportation
- ------------------------------------------------------------------------------
1 322 600 600 LR600S LRTE-Live Roller Transportation
- ------------------------------------------------------------------------------
1 323 600 600 IB602A BSE-Indexing Belt
- ------------------------------------------------------------------------------
1 324 600 600 IB602B BSE-Indexing Belt
- ------------------------------------------------------------------------------
1 325 600 600 IB602C BSE-Indexing Belt
- ------------------------------------------------------------------------------
1 326 600 600 IB602D BSE-Indexing Belt
- ------------------------------------------------------------------------------
1 327 600 600 IB602E BSE-Indexing Belt
- ------------------------------------------------------------------------------
1 328 600 600 IB602F BSE-Indexing Belt
- ------------------------------------------------------------------------------
1 329 600 600 IB602G BSE-Indexing Belt
- ------------------------------------------------------------------------------
1 330 600 600 IB602H BSE-Indexing Belt
- ------------------------------------------------------------------------------
</TABLE>
Page 10 of 17
<PAGE>
SCHEDULE A EQUIPMENT
LESSOR: CITIZENS LEASING CORPORATION, LESSEE: DM Management Company
a Rhode Island corporation a Delaware Corporation
("Lessor") ("Lessee")
ADDRESS: One Citizens Plaza ADDRESS: 25 Recreation Park Drive
Providence, RI 02903 Hingham, MA 02043
Attached to and made a part of the following documents: Secured
Promissory Note, Note Acceptance, Uniform Commercial Code Financial
Statements and Consent and Waiver by Owner, Landlord or Mortgagee of Real
Estate.
<TABLE>
<CAPTION>
QTY MANUFACTURER, DESCRIPTION MODEL NO./SERIAL NO. LOCATION
- --- --------------------------------------------- --------
Seq. Series Panel Conveyor Type of 12 Sandborn St.
# Number Conveyor Tilton, NH 03276
--- ------ ----- -------- --------
<S> <C> <C> <C> <C> <C>
1 272 500 n/a DIV550R LFS-Line Flow Spur
- ------------------------------------------------------------------------------
1 273 500 n/a GRC551A RGC160-Roller Gravity Curve
- ------------------------------------------------------------------------------
1 274 500 n/a GRC551B RGC160-Roller Gravity Curve
- ------------------------------------------------------------------------------
1 275 500 n/a GRC551C RGC160-Roller Gravity Curve
- ------------------------------------------------------------------------------
1 276 500 n/a GRC551D RGC160-Roller Gravity Curve
- ------------------------------------------------------------------------------
1 277 500 n/a GRC551E RGC160-Roller Gravity Curve
- ------------------------------------------------------------------------------
1 278 500 n/a GRC551F RGC160-Roller Gravity Curve
- ------------------------------------------------------------------------------
1 279 500 n/a GRC551G RGC160-Roller Gravity Curve
- ------------------------------------------------------------------------------
1 280 500 n/a GRC551H RGC160-Roller Gravity Curve
- ------------------------------------------------------------------------------
1 281 500 n/a GRC551J RGC160-Roller Gravity Curve
- ------------------------------------------------------------------------------
1 282 500 n/a GRC551K RGC160-Roller Gravity Curve
- ------------------------------------------------------------------------------
1 283 500 n/a GRC551L RGC160-Roller Gravity Curve
- ------------------------------------------------------------------------------
1 284 500 n/a GRC551M RGC160-Roller Gravity Curve
- ------------------------------------------------------------------------------
1 285 500 n/a GRC551N RGC160-Roller Gravity Curve
- ------------------------------------------------------------------------------
1 286 500 n/a GRC551P RGC160-Roller Gravity Curve
- ------------------------------------------------------------------------------
1 287 500 n/a GRC551Q RGC160-Roller Gravity Curve
- ------------------------------------------------------------------------------
1 288 500 n/a GRC551R RGC160-Roller Gravity Curve
- ------------------------------------------------------------------------------
1 289 500 n/a GR552A RGC160-Roller Gravity Curve
- ------------------------------------------------------------------------------
1 290 500 n/a GR552B RG1916-Roller Gravity
- ------------------------------------------------------------------------------
1 291 500 n/a GR552C RG1916-Roller Gravity
- ------------------------------------------------------------------------------
1 292 500 n/a GR552D RG1916-Roller Gravity
- ------------------------------------------------------------------------------
1 293 500 n/a GR552E RG1916-Roller Gravity
- ------------------------------------------------------------------------------
1 294 500 n/a GR552F RG1916-Roller Gravity
- ------------------------------------------------------------------------------
1 295 500 n/a GR552G RG1916-Roller Gravity
- ------------------------------------------------------------------------------
1 296 500 n/a GR552H RG1916-Roller Gravity
- ------------------------------------------------------------------------------
1 297 500 n/a GR552J RG1916-Roller Gravity
- ------------------------------------------------------------------------------
1 298 500 n/a GR552K RG1916-Roller Gravity
- ------------------------------------------------------------------------------
1 299 500 n/a GR552L RG1916-Roller Gravity
- ------------------------------------------------------------------------------
1 300 500 n/a GR552M RG1916-Roller Gravity
- ------------------------------------------------------------------------------
</TABLE>
Page 11 of 17
<PAGE>
SCHEDULE A EQUIPMENT
LESSOR: CITIZENS LEASING CORPORATION, LESSEE: DM Management Company
a Rhode Island corporation a Delaware Corporation
("Lessor") ("Lessee")
ADDRESS: One Citizens Plaza ADDRESS: 25 Recreation Park Drive
Providence, RI 02903 Hingham, MA 02043
Attached to and made a part of the following documents: Secured
Promissory Note, Note Acceptance, Uniform Commercial Code Financial
Statements and Consent and Waiver by Owner, Landlord or Mortgagee of Real
Estate.
<TABLE>
<CAPTION>
QTY MANUFACTURER, DESCRIPTION MODEL NO./SERIAL NO. LOCATION
- --- --------------------------------------------- --------
Seq. Series Panel Conveyor Type of 12 Sandborn St.
# Number Conveyor Tilton, NH 03276
--- ------ ----- -------- --------
<S> <C> <C> <C> <C> <C>
1 331 600 600 IB602J BSE-Indexing Belt
- ------------------------------------------------------------------------------
1 332 600 600 IB802K BSE-Indexing Belt
- ------------------------------------------------------------------------------
1 333 600 600 IB602L BSE-Indexing Belt
- ------------------------------------------------------------------------------
1 334 600 600 IB602M BSE-Indexing Belt
- ------------------------------------------------------------------------------
1 335 600 600 IB602N BSE-Indexing Belt
- ------------------------------------------------------------------------------
1 336 600 600 IB602P BSE-Indexing Belt
- ------------------------------------------------------------------------------
1 337 600 600 IB602Q BSE-Indexing Belt
- ------------------------------------------------------------------------------
1 338 600 600 IB602R BSE-Indexing Belt
- ------------------------------------------------------------------------------
1 339 600 600 IB602S BSE-Indexing Belt
- ------------------------------------------------------------------------------
1 340 600 600 LRM604A LRSC-Live Roller Spur Curve
- ------------------------------------------------------------------------------
1 341 600 600 LRM604B LRSC-Live Roller Spur Curve
- ------------------------------------------------------------------------------
1 342 600 600 LRM604C LRSC-Live Roller Spur Curve
- ------------------------------------------------------------------------------
1 343 600 600 LRM604D LRSC-Live Roller Spur Curve
- ------------------------------------------------------------------------------
1 344 600 600 LRM604E LRSC-Live Roller Spur Curve
- ------------------------------------------------------------------------------
1 345 600 600 LRM604F LRSC-Live Roller Spur Curve
- ------------------------------------------------------------------------------
1 346 600 600 LRM604G LRSC-Live Roller Spur Curve
- ------------------------------------------------------------------------------
1 347 600 600 LRM604H LRSC-Live Roller Spur Curve
- ------------------------------------------------------------------------------
1 348 600 600 LRM604J LRSC-Live Roller Spur Curve
- ------------------------------------------------------------------------------
1 349 600 600 LRM604K LRSC-Live Roller Spur Curve
- ------------------------------------------------------------------------------
1 350 600 600 LRM604L LRSC-Live Roller Spur Curve
- ------------------------------------------------------------------------------
1 351 600 600 LRM604M LRSC-Live Roller Spur Curve
- ------------------------------------------------------------------------------
1 352 600 600 LRM604N LRSC-Live Roller Spur Curve
- ------------------------------------------------------------------------------
1 353 600 600 LRM604P LRSC-Live Roller Spur Curve
- ------------------------------------------------------------------------------
1 354 600 600 LRM604Q LRSC-Live Roller Spur Curve
- ------------------------------------------------------------------------------
1 355 600 600 LRM604R LRSC-Live Roller Spur Curve
- ------------------------------------------------------------------------------
1 356 600 600 LRC606 LRSC-Live Roller Curve
- ------------------------------------------------------------------------------
1 357 600 600 PB610 BRC-Powered Belt
- ------------------------------------------------------------------------------
1 358 600 600 PB612 BRC-Powered Belt
- ------------------------------------------------------------------------------
</TABLE>
Page 12 of 17
<PAGE>
SCHEDULE A EQUIPMENT
LESSOR: CITIZENS LEASING CORPORATION, LESSEE: DM Management Company
a Rhode Island corporation a Delaware Corporation
("Lessor") ("Lessee")
ADDRESS: One Citizens Plaza ADDRESS: 25 Recreation Park Drive
Providence, RI 02903 Hingham, MA 02043
Attached to and made a part of the following documents: Secured
Promissory Note, Note Acceptance, Uniform Commercial Code Financial
Statements and Consent and Waiver by Owner, Landlord or Mortgagee of Real
Estate.
<TABLE>
<CAPTION>
QTY MANUFACTURER, DESCRIPTION MODEL NO./SERIAL NO. LOCATION
- --- --------------------------------------------- --------
Seq. Series Panel Conveyor Type of 12 Sandborn St.
# Number Conveyor Tilton, NH 03276
--- ------ ----- -------- --------
<S> <C> <C> <C> <C> <C>
1 359 500 600 LRC614 LRC-Live Roller Curve
- ------------------------------------------------------------------------------
1 360 500 600 LRC616 LRC-Live Roller Curve
- ------------------------------------------------------------------------------
1 361 500 600 PB1618 BIC-15 Degree Incline Belt
- ------------------------------------------------------------------------------
1 362 500 600 LRA620 LRZC-Zero Pressure Accumulation
- ------------------------------------------------------------------------------
1 363 500 600 BSB622 BMSE-Brake/Motor Belt
- ------------------------------------------------------------------------------
1 364 600 600 PB630 BRC-Powered Belt
- ------------------------------------------------------------------------------
1 365 600 600 PB632 BRC-Powered Belt
- ------------------------------------------------------------------------------
1 366 600 600 LRC634 LRC-Live Roller Curve
- ------------------------------------------------------------------------------
1 367 600 600 LRC636 LRC-Live Roller Curve
- ------------------------------------------------------------------------------
1 368 600 600 PB1638 BIC-15 Degree Belt Incline
- ------------------------------------------------------------------------------
1 369 600 600 LRA640 LRZE-Zero Pressure Accumulation
- ------------------------------------------------------------------------------
1 370 600 600 BSB642 BMSE-Brake/Meter Belt
- ------------------------------------------------------------------------------
1 371 600 600 BM650 PBM-Powered Belt Merge
- ------------------------------------------------------------------------------
1 372 600 600 SOR652 BRC-Sort Belt
- ------------------------------------------------------------------------------
1 373 600 600 LRA854 LRZE-Zero Pressure Accumulation
- ------------------------------------------------------------------------------
1 374 600 600 DIV680 LRSC-Live Roller Spur Curve
- ------------------------------------------------------------------------------
1 375 600 600 PB1662 BIC-15 Degree Belt Incline
- ------------------------------------------------------------------------------
1 376 600 600 LRA664 LRZE-Zero Pressure Accumulation
- ------------------------------------------------------------------------------
1 377 600 n/a DIV670 LFS-Line Flow Spur
- ------------------------------------------------------------------------------
1 378 600 n/a LRC674 LRC-Live Roller Curve
- ------------------------------------------------------------------------------
1 379 600 600 LRA676 LRZE-Zero Pressure Accumulation
- ------------------------------------------------------------------------------
1 380 600 n/a CH678 CHT-Chute
- ------------------------------------------------------------------------------
1 381 600 n/a GR680 RG1916-Roller Gravity
- ------------------------------------------------------------------------------
105 382 600 n/a GA500 1.5" Angle Guard Rail (bulk)
- ------------------------------------------------------------------------------
43 383 600 n/a GCL600 5.75" Lapped Channel Guard Rail
- ------------------------------------------------------------------------------
1 384 700 n/a LRC724 LRC-Live Roller Curve
- ------------------------------------------------------------------------------
1 385 700 700 LRA726 LRZE-Zero Pressure Accumulation
- ------------------------------------------------------------------------------
1 386 700 700 BSB728 BMSE-Brake/Motor Belt
- ------------------------------------------------------------------------------
1 387 700 700 BM730 PAM-Powered Belt Merge
- ------------------------------------------------------------------------------
</TABLE>
Page 13 of 17
<PAGE>
SCHEDULE A EQUIPMENT
LESSOR: CITIZENS LEASING CORPORATION, LESSEE: DM Management Company
a Rhode Island corporation a Delaware Corporation
("Lessor") ("Lessee")
ADDRESS: One Citizens Plaza ADDRESS: 25 Recreation Park Drive
Providence, RI 02903 Hingham, MA 02043
Attached to and made a part of the following documents: Secured Promissory
Note, Note Acceptance, Uniform Commercial Code Financial Statements and
Consent and Waiver by Owner, Landlord or Mortgagee of Real Estate.
<TABLE>
<CAPTION>
Qty Manufacturer, Description Model No./Serial No. Location
--------------------------------------------- --------
Seq. Series Panel Conveyor Type of 12 Sandborn St.
# Number Conveyor Tilton, NH 03276
<S> <C> <C> <C> <C> <C>
1 388 700 700 BC732 PBC-Powered Belt Curve
- --------------------------------------------------------------------------------
1 389 700 700 SB734 SB-Scale Belt
- --------------------------------------------------------------------------------
1 390 700 700 SOR736 BRC-Sort Belt
- --------------------------------------------------------------------------------
1 391 700 700 SOR738 BRC-Sort Belt
- --------------------------------------------------------------------------------
1 392 700 700 LRC740 LRC-Live Roller Curve
- --------------------------------------------------------------------------------
1 393 700 n/a LRC742 LRC-Live Roller Curve
- --------------------------------------------------------------------------------
1 394 700 n/a LRM744 LREWS-Live Roller Merge
- --------------------------------------------------------------------------------
1 395 700 n/a LRA746 LRZC-Zero Pressure Accumulation
- --------------------------------------------------------------------------------
1 396 700 n/a BSB748 BMSE-Brake/Meter Belt
- --------------------------------------------------------------------------------
1 397 700 n/a DIV750A LFS-Line Flow Spur
- --------------------------------------------------------------------------------
1 398 700 n/a DIV750B LFS-Line Flow Spur
- --------------------------------------------------------------------------------
1 399 700 n/a DIV750C LFS-Line Flow Spur
- --------------------------------------------------------------------------------
1 400 700 n/a DIV750D LFS-Line Flow Spur
- --------------------------------------------------------------------------------
1 401 700 n/a DIV750E LFS-Line Flow Spur
- --------------------------------------------------------------------------------
1 402 700 n/a GRC751A RGC150-Roller Gravity Curve
- --------------------------------------------------------------------------------
1 403 700 n/a GRC751B RGC150-Roller Gravity Curve
- --------------------------------------------------------------------------------
1 404 700 n/a GRC751C RGC150-Roller Gravity Curve
- --------------------------------------------------------------------------------
1 405 700 n/a GRC751D RGC150-Roller Gravity Curve
- --------------------------------------------------------------------------------
1 406 700 n/a GRC751E RGC150-Roller Gravity Curve
- --------------------------------------------------------------------------------
1 407 700 n/a CH752A CHT-Chute
- --------------------------------------------------------------------------------
1 408 700 n/a CH752B CHT-Chute
- --------------------------------------------------------------------------------
1 409 700 n/a CH752C CHT-Chute
- --------------------------------------------------------------------------------
1 410 700 n/a CH752D CHT-Chute
- --------------------------------------------------------------------------------
1 411 700 n/a CH752E CHT-Chute
- --------------------------------------------------------------------------------
1 412 700 n/a GR753A RG1916-Roller Gravity
- --------------------------------------------------------------------------------
1 413 700 n/a GR753B RG1916-Roller Gravity
- --------------------------------------------------------------------------------
1 414 700 n/a GR753C RG1916-Roller Gravity
- --------------------------------------------------------------------------------
1 415 700 n/a GR753D RG1916-Roller Gravity
- ----------------------------------------------------------------------------
1 416 700 n/a GR753E RG1916-Roller Gravity
- --------------------------------------------------------------------------------
1 417 700 n/a DIV760 LFS-Line Flow Spur
- ----------------------------------------------------------------------------
</TABLE>
Page 14 of 17
<PAGE>
SCHEDULE A EQUIPMENT
LESSOR: CITIZENS LEASING CORPORATION, LESSEE: DM Management Company
a Rhode Island corporation a Delaware Corporation
("Lessor") ("Lessee")
ADDRESS: One Citizens Plaza ADDRESS: 25 Recreation Park Drive
Providence, RI 02903 Hingham, MA 02043
Attached to and made a part of the following documents: Secured
Promissory Note, Note Acceptance, Uniform Commercial Code Financial
Statements and Consent and Waiver by Owner, Landlord or Mortgagee of Real
Estate.
<TABLE>
<CAPTION>
QTY MANUFACTURER, DESCRIPTION MODEL NO./SERIAL NO. LOCATION
- --- --------------------------------------------- --------
Seq. Series Panel Conveyor Type of 12 Sandborn St.
# Number Conveyor Tilton, NH 03276
--- ------ ----- -------- --------
<S> <C> <C> <C> <C> <C>
1 418 700 n/a GRC761 RGC160-Roller Gravity Curve
- ------------------------------------------------------------------------------
1 419 700 700 PB1762 BIC-15 Degree Belt Incline
- ------------------------------------------------------------------------------
1 420 700 n/a GRC764 RGC160-Roller Gravity Curve
- ------------------------------------------------------------------------------
1 421 700 n/a GR766 RG1916-Roller Gravity
- ------------------------------------------------------------------------------
1 422 700 n/a GRC768 RGC160-Roller Gravity Curve
- ------------------------------------------------------------------------------
1 423 700 n/a CH770 CHT-Chule
- ------------------------------------------------------------------------------
1 424 700 n/a GR772 RG1916-Roller Gravity
- ------------------------------------------------------------------------------
59 425 700 n/a GCL700 5.75" Lapped Channel Guard Rail (bulk)
- ------------------------------------------------------------------------------
1 426 800 100 PB800A BIC-12.5 Degree Incline Trash Belt
- ------------------------------------------------------------------------------
1 427 800 100 PB800B BIC-12.5 Degree Incline Trash Belt
- ------------------------------------------------------------------------------
1 428 800 100 PB800C BIC-12.5 Degree Incline Trash Belt
- ------------------------------------------------------------------------------
1 429 800 100 PB800D BIC-12.5 Degree Incline Trash Belt
- ------------------------------------------------------------------------------
1 430 800 100 PB810 BIC-15 Degree Incline Trash Belt
- ------------------------------------------------------------------------------
1 431 800 300-2 PB820 BIC-12.5 Degree Incline Trash Belt
- ------------------------------------------------------------------------------
1 432 800 n/a CH821 CT-Chule
- ------------------------------------------------------------------------------
1 433 800 300-2 PB822 BSC-Trash Belt
- ------------------------------------------------------------------------------
1 434 800 300-2 PB824 BIC-15 Degree Incline Trash Belt
- ------------------------------------------------------------------------------
1 435 800 300-2 PB830 BIC-12.5 Degree Incline Trash Belt
- ------------------------------------------------------------------------------
1 436 800 n/a CH832 CHT-Chule
- ------------------------------------------------------------------------------
1 437 800 300-2 PB833 BSC-Trash Belt
- ------------------------------------------------------------------------------
1 438 800 300-2 PB834 BIC-15 Degree Incline Trash Belt
- ------------------------------------------------------------------------------
1 439 800 400 PB840 BSC-Trash Belt
- ------------------------------------------------------------------------------
1 440 800 400 PB842 BSC-Trash Belt
- ------------------------------------------------------------------------------
1 441 800 800 PB844 BIC-15 Degree Incline Trash Belt
- ------------------------------------------------------------------------------
1 442 800 800 PB850 BSC-Trash Belt
- ------------------------------------------------------------------------------
1 443 800 800 PB855 BSC-Trash Belt
- ------------------------------------------------------------------------------
1 444 800 800 CH857 CHT-Chule
- ------------------------------------------------------------------------------
1 445 800 800 PB860A BSSE-Pitched Trash Belt
- ------------------------------------------------------------------------------
1 446 800 800 PB860B BSE-Pitched Trash Belt
- ------------------------------------------------------------------------------
1 447 800 800 PB860C BSE-Pitched Trash Belt
- ------------------------------------------------------------------------------
</TABLE>
Page 15 of 17
<PAGE>
SCHEDULE A EQUIPMENT
LESSOR: CITIZENS LEASING CORPORATION, LESSEE: DM Management Company
a Rhode Island corporation a Delaware Corporation
("Lessor") ("Lessee")
ADDRESS: One Citizens Plaza ADDRESS: 25 Recreation Park Drive
Providence, RI 02903 Hingham, MA 02043
Attached to and made a part of the following documents: Secured
Promissory Note, Note Acceptance, Uniform Commercial Code Financial
Statements and Consent and Waiver by Owner, Landlord or Mortgagee of Real
Estate.
<TABLE>
<CAPTION>
QTY MANUFACTURER, DESCRIPTION MODEL NO./SERIAL NO. LOCATION
- --- --------------------------------------------- --------
Seq. Series Panel Conveyor Type of 12 Sandborn St.
# Number Conveyor Tilton, NH 03276
--- ------ ----- -------- --------
<S> <C> <C> <C> <C> <C>
1 448 800 800 PB860D BSE-Pitched Trash Belt
- ------------------------------------------------------------------------------
1 449 800 800 PB860E BSE-Pitched Trash Belt
- ------------------------------------------------------------------------------
1 450 800 800 PB860F BSE-Pitched Trash Belt
- ------------------------------------------------------------------------------
1 451 800 800 PB860G BSE-Pitched Trash Belt
- ------------------------------------------------------------------------------
1 452 800 800 PB860H BSE-Pitched Trash Belt
- ------------------------------------------------------------------------------
1 453 800 800 PB860J BSE-Pitched Trash Belt
- ------------------------------------------------------------------------------
1 454 800 800 PB860K BSE-Pitched Trash Belt
- ------------------------------------------------------------------------------
1 455 800 800 PB860L BSE-Pitched Trash Belt
- ------------------------------------------------------------------------------
1 456 800 800 PB860M BSE-Pitched Trash Belt
- ------------------------------------------------------------------------------
1 457 800 800 PB860N BSE-Pitched Trash Belt
- ------------------------------------------------------------------------------
1 458 800 800 PB860P BSE-Pitched Trash Belt
- ------------------------------------------------------------------------------
1 459 800 800 PB860Q BSE-Pitched Trash Belt
- ------------------------------------------------------------------------------
1 460 800 800 PB860R BSE-Pitched Trash Belt
- ------------------------------------------------------------------------------
1 461 800 800 PB862 BSC-Trash Belt
- ------------------------------------------------------------------------------
1 462 800 800 PB864 BSC-Trash Belt
- ------------------------------------------------------------------------------
1 463 800 800 PB866 BIC-15 Degree Incline Trash Belt
- ------------------------------------------------------------------------------
1 464 800 n/a CH870A CHT-Drop Chute
- ------------------------------------------------------------------------------
1 465 800 n/a CH870B CHT-Drop Chute
- ------------------------------------------------------------------------------
1 466 800 n/a CH870C CHT-Drop Chute
- ------------------------------------------------------------------------------
1 467 800 n/a CH870D CHT-Drop Chute
- ------------------------------------------------------------------------------
1 468 800 n/a CH880A CHT-Drop Chute
- ------------------------------------------------------------------------------
1 469 800 n/a CH880B CHT-Drop Chute
- ------------------------------------------------------------------------------
1 470 800 n/a CH880C CHT-Drop Chute
- ------------------------------------------------------------------------------
</TABLE>
Page 16 of 17
<PAGE>
SCHEDULE A EQUIPMENT
LESSOR: CITIZENS LEASING CORPORATION, LESSEE: DM Management Company
a Rhode Island corporation a Delaware Corporation
("Lessor") ("Lessee")
ADDRESS: One Citizens Plaza ADDRESS: 25 Recreation Park Drive
Providence, RI 02903 Hingham, MA 02043
Attached to and made a part of the following documents: Secured
Promissory Note, Note Acceptance, Uniform Commercial Code Financial
Statements and Consent and Waiver by Owner, Landlord or Mortgagee of Real
Estate.
<TABLE>
<CAPTION>
QTY MANUFACTURER, DESCRIPTION MODEL NO./SERIAL NO. LOCATION
- --- --------------------------------------------- --------
Seq. Series Panel Conveyor Type of 12 Sandborn St.
# Number Conveyor Tilton, NH 03276
--- ------ ----- -------- --------
<S> <C> <C> <C> <C> <C>
1 471 800 n/a CH880D CHT-Drop Chule
- ------------------------------------------------------------------------------
81 472 800 n/a GA800 1.5" Angle Guard Rail (bulk)
- ------------------------------------------------------------------------------
118 473 800 n/a GCL800 5.75" Lapped Channel Guard Rail (bulk)
- ------------------------------------------------------------------------------
52 474 800 n/a GCL18-800 18" Channel Guard Rail (bulk)
- ------------------------------------------------------------------------------
475 900 500 Auto Bag Sorter
- ------------------------------------------------------------------------------
1 476 PL n/a PL01 Platform (Crossovers Only)
- ------------------------------------------------------------------------------
1 477 PL n/a PL02 Platform
- ------------------------------------------------------------------------------
1 478 PL n/a PL03 Platform
- ------------------------------------------------------------------------------
1 479 PL n/a PL04 Platform
- ------------------------------------------------------------------------------
1 480 PL n/a PL05 Platform
- ------------------------------------------------------------------------------
</TABLE>
Above equipment distributed by: Designed Conveyor Systems, Inc.
WITH ALL STANDARD AND ACCESSORY EQUIPMENT
Page 17 of 17
Citizens Leasing Corporation DM Management Company
By: /S/ John Young By: /S/ Peter J. Tulp
------------------------ -----------------------
Title: Vice President Title: VP Finance
---------------------- --------------------
<PAGE>
[LETTERHEAD]
AUTHORIZATION TO CHARGE CHECKING ACCOUNT
TO: CITIZENS LEASING CORPORATION DATE: December 23, , 1998
One Citizens Plaza
Providence, RI 02903
Starting with my first payment which is due January 1, 1999*, and until
---------------
further notice, you are authorized to charge my checking account
No. each month on the due date of my Secured Promissory Note
-----------
dated 12/23/98 in the amount of $71,284.28 for the monthly payment then due.
-------- ----------
Debtor:
DM Management Company
By: /S/ Peter J. Tulp
--------------------------------
Title: VP Finance
-----------------------------
*The payment due January 1, 1999 will also include a one-time daily interest
---------------
charge based on the funding date.
<PAGE>
[LETTERHEAD]
BORROWER'S AUTHORIZATION CERTIFICATE
DATE: December 23, 1998
-----------------
I (We) hereby authorize and direct CITIZENS LEASING CORPORATION to disburse
the proceeds of my (our) SECURED PROMISSORY NOTE dated December 23, 1998 for
-----------------
$4,676,523.20 to be disbursed as follows:
- -------------
TO: DM Management Company $4,676,523.20
*In all cases, indicate the manner in which funds are to be disbursed. For
check payment indicate the check number. For direct deposit indicate account
number. For wire transfer indicate the bank to which the funds are to be sent
and the account number to be credited.
DEBTOR: DM Management Company
By: /S/ Peter J. Tulp
-------------------------
Title: VP Finance
----------------------
<PAGE>
Exhibit 10.63
Loan No. 3212525
MORTGAGE NOTE
$12,000,000.00 Tilton, New Hampshire
March 1, 1999
FOR VALUE RECEIVED, BIRCH POND REALTY CORPORATION, a Delaware
corporation (doing business in the State of New Hampshire as BPRC), having its
principal place of business at 100 Birch Pond Drive, Tilton, New Hampshire 03289
(hereinafter referred to as "MAKER"), promises to pay to the order of JOHN
HANCOCK REAL ESTATE FINANCE, INC. ("JHREF"), a Delaware corporation, its
successors and assigns, at its principal place of business at John Hancock
Place, T-53, 200 Clarendon Street, Boston, Massachusetts 02116 (JHREF and each
successor or assign being hereinafter referred to as "PAYEE"), or at such place
as the holder hereof may from time to time designate in writing, the principal
sum of TWELVE MILLION AND 00/100 DOLLARS ($12,000,000.00) in lawful money of the
United States of America with interest thereon to be computed from the date of
disbursement of the loan proceeds at the Applicable Interest Rate (hereinafter
defined).
1. PAYMENT OF PRINCIPAL AND INTEREST. Principal and interest shall be
paid as follows:
(a) If the loan proceeds are not disbursed on the first
day of a month, then interest only at the Applicable
Interest Rate from and including the date of
disbursement of the loan proceeds to the first day of
the month following such disbursement shall be due
and payable in advance on the date of such
disbursement;
(b) Principal and interest is to be paid in installments
as follows: $95,209.00 on May 1, 1999, and on the
first day of each calendar month thereafter up to and
including March 1, 2009; and
(c) The outstanding principal balance and all accrued and
unpaid interest thereon and all other sums and fees
due under this Note shall be due and payable on April
1, 2009 (the "MATURITY DATE").
Interest on the principal balance of this Note shall be calculated on a
monthly basis using, as the agreed method of calculation, an actual/360 day
formula. Such formula shall use, as the numerator, the actual number of days
elapsed in each month and, as the denominator, 360 days; PROVIDED, HOWEVER, that
interest for a period of less than a full month shall be calculated using, as
the agreed method of calculation, an actual/365 formula, using, as the
numerator, the actual number of days elapsed in each such period and, as the
denominator, 365 days.
The term "APPLICABLE INTEREST RATE" as used in this Note shall mean
from the date of disbursement of the loan proceeds through and including the
Maturity Date, a rate of SEVEN AND THIRTY ONE HUNDREDTHS PERCENT (7.30%) per
annum.
<PAGE>
Loan No. 3212525
If at any time Payee receives, from Maker or otherwise, any amount
applicable to the Debt (hereinafter defined) which is less than all amounts due
and payable at such time, Payee may apply that payment to amounts then due and
payable in any manner and in any order determined by Payee, in Payee's sole
discretion. Payee shall, however, be under no obligation to accept any amount
less than all amounts then due and payable. Maker agrees that neither Payee's
acceptance of a payment from Maker in an amount that is less than all amounts
then due and payable nor Payee's application of such payment shall constitute or
be deemed to constitute either a waiver of the unpaid amounts or an accord and
satisfaction. This provision shall control notwithstanding any inconsistent
direction by Maker or any other obligor hereunder.
The whole of the principal sum of this Note, together with all interest
accrued and unpaid thereon and all other sums due under this Note and any other
instrument now or hereafter evidencing, securing, guaranteeing or executed in
connection with the indebtedness evidenced hereby (the "LOAN DOCUMENTS") (all
such sums hereinafter collectively referred to as the "DEBT") shall without
notice become immediately due and payable at the option of Payee if any payment
required in this Note is not paid within five (5) days after the same is due or
on the happening of any other default, after the expiration of any applicable
notice and grace periods, herein or under the terms of any other Loan Document
(hereinafter collectively an "EVENT OF DEFAULT"). All of the terms, covenants
and conditions contained in the Mortgage (hereinafter defined) and the other
Loan Documents are hereby made part of this Note to the same extent and with the
same force as if they were fully set forth herein.
2. PREPAYMENT.
(a) The principal balance of this Note may not be prepaid in
whole or in part except as expressly permitted pursuant hereto.
(b) At any time after the Lockout Period Expiration Date (as
hereinafter defined), and provided no event of default exists, Maker
may obtain the release of the Mortgaged Property (as hereinafter
defined) from the lien of the Mortgage upon the satisfaction of the
following conditions precedent:
(i) Maker shall provide Payee with not less than sixty
(60) days prior written notice before a Defeasance
(as hereinafter defined) is to occur, which
Defeasance shall occur on a regularly scheduled
payment date (the "Release Date");
(ii) Maker shall pay to Payee all interest accrued and
unpaid on the principal balance of the Note to and
including the Release Date, and all other sums then
due and payable under the Note, the Mortgage and the
other Loan Documents;
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Loan No. 3212525
(iii) If Payee is to purchase the U.S. Obligations (as
hereinafter defined) on behalf of Maker, as provided
below, Maker shall pay to Payee the Defeasance
Deposit (as hereinafter defined); and
(iv) Maker shall deliver to Payee:
(A) a security agreement (the "Defeasance
Security Agreement"), in form and substance
satisfactory to Payee, creating a first
priority lien on and a perfected security
interest in the Defeasance Deposit and the
U.S. Obligations;
(B) a form of release ("Release") of the
Mortgaged Property from the lien of the
Mortgage (for execution by Payee) in a form
acceptable to Payee and appropriate for the
jurisdiction in which the Mortgaged Property
is located;
(C) a certificate from an officer of Maker
certifying that the requirements set forth
in this Section have been satisfied;
(D) an opinion of counsel for Maker in form and
substance and delivered by counsel
satisfactory to Payee, stating, among other
things, (x) that the U.S. Obligations and
the Defeasance Collateral Account and the
proceeds thereof have been duly and validly
assigned and delivered to Payee and that
Payee has a valid perfected first priority
security interest in the U.S. Obligations
and the Defeasance Collateral Account (as
hereinafter defined); (y) that the
Defeasance Security Agreement is enforceable
against Maker in accordance with its terms;
(z) if the Mortgage has been placed in a
secondary market transaction, (1) the U.S.
Obligations and the Defeasance Collateral
Account have been validly assigned to a
REMIC, and (2) that the Defeasance will not
cause any trust or other entity to fail to
qualify as a "real estate mortgage
investment conduit" (a "REMIC"), within the
meaning of Section 860D of the Internal
Revenue Code of 1986, as amended from time
to time or any successor statute and has
been effected in accordance with such
statute and the regulations promulgated
therefore; (aa) the Defeasance will not
result in a deemed exchange for purposes of
the Internal Revenue Code and will not
adversely affect the status of the Note as
indebtedness for federal income tax
purposes; and (bb) the delivery of the U.S.
Obligations and the grant of the security
interest therein and in the Defeasance
Collateral
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Loan No. 3212525
Account to Payee shall not constitute an
avoidable preference under Section 547 of
the Bankruptcy Code or applicable state law;
(E) evidence in writing from the applicable
Rating Agencies to the effect that such
release will not result in a
re-qualification, reduction or withdrawal of
any rating in effect immediately prior to
such Defeasance for any securities issued in
connection with a secondary market
transaction;
(F) if the U.S. Obligations are purchased by
Maker, a certificate of Maker's independent
certified public accountant certifying that
the U.S. Obligations will generate the
Scheduled Defeasance Payments;
(G) such other certificates, opinions, documents
or instruments as Payee may reasonably
request; and
(v) in connection with a Defeasance under this Section,
if the Maker shall continue to own assets other than
the U.S. Obligations and the Defeasance Collateral
Account following the Defeasance, Maker may, and at
the request of Payee shall, at Maker's expense,
establish or designate a successor entity (the
"Successor Maker"), which shall be a single purpose
bankruptcy remote entity approved by Payee. Maker
shall transfer and assign all obligations, rights and
duties under and to this Note and the Defeasance
Security Agreement together with the pledged U.S.
Obligations to such Successor Maker. Such Successor
Maker shall execute an assumption agreement in form
and substance satisfactory to Payee in its sole
discretion, pursuant to which such Successor Maker
shall assume Maker's obligations under the Note and
the Defeasance Security Agreement. As a condition to
such assignment and assumption, Maker shall (i)
deliver to Payee an opinion of counsel in form and
substance and delivered by counsel satisfactory to
Payee in its sole discretion, stating, among other
things, (x) that such assumption agreement is
enforceable against Maker and such Successor Maker in
accordance with its terms and that the Note, the
Defeasance Security Agreement, and the other Loan
Documents, as so assumed, are enforceable against
such Successor Maker in accordance with their
respective terms, and (y) if required by the
applicable Rating Agencies, a non-consolidation
opinion with respect to the Successor Maker; and (ii)
pay all costs and expenses incurred by Payee or its
agents in connection with such assignment and
assumption (including, without limitation, the review
of the proposed Successor
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<PAGE>
Loan No. 3212525
Maker and the preparation of the assumption agreement
and related documentation). Maker shall pay $1,000.00
to any such Successor Maker as consideration for
assuming the obligations under the Note and the
Defeasance Security Agreement. No other assumption
fee shall be payable upon a transfer of the Note in
accordance with this Section.
(vi) Payment of all costs and expenses incurred in
connection with the Defeasance, including, without
limitation, reasonable attorneys' fees, revenue,
documentary stamp or intangible taxes or any other
tax or charge due in connection with the Defeasance.
(c) Maker shall either purchase the U.S. Obligations itself and
establish the Defeasance Collateral Account, or at its option may request Payee
to purchase the U.S. Obligations on its behalf. If Maker elects to have Payee
purchase the U.S. Obligations on its behalf, Maker shall pay to Payee the
Defeasance Deposit, and Maker hereby appoints Payee as its agent and
attorney-in-fact for the purpose of using the Defeasance Deposit to purchase
U.S. Obligations which will provide for the Scheduled Defeasance Payments.
Maker, pursuant to the Defeasance Security Agreement or other appropriate
document, shall authorize and direct that the payments received from the U.S.
Obligations may be made directly to Payee and applied to satisfy the obligations
of Maker under the Note. Maker shall, at Payee's option, open a Defeasance
Collateral Account in an institution acceptable to Payee. The Defeasance
Collateral Account shall contain only the U.S. Obligations and cash from
interest and principal paid on the U.S. Obligations. All cash from interest and
principal payments paid on the U.S. Obligations shall be paid over to Payee as
Scheduled Defeasance Payments and applied first to accrued and unpaid interest
and then to principal. Maker shall cause the institution at which the U.S.
Obligations are deposited to enter into an agreement with Maker and Payee,
satisfactory to Payee in its discretion, pursuant to which such institution
shall agree to hold and distribute the U.S. Obligations in accordance with this
Section. Maker shall be the owner of the Defeasance Collateral Account and shall
report all income accrued on the U.S. Obligations for federal, state and local
income tax purposes in its income tax return. Maker shall prepay all costs and
expenses associated with opening and maintaining the Defeasance Collateral
Account. Payee shall not, in any way, be liable by reason of any insufficiency
in the Defeasance Collateral Account.
(d) Upon compliance with the requirements of this Section, the
Mortgaged Property shall be released from the lien of the Mortgage and the
pledged U.S. Obligations and the Defeasance Collateral Account shall be the sole
source of collateral securing the Note. If Maker elects to have Payee purchase
the U.S. Obligations with the Defeasance Deposit, any portion of the Defeasance
Deposit in excess of the amount necessary to purchase the U.S. Obligations
required by clause (b) above to satisfy Maker's obligations under this Section
shall be remitted to Maker with the release of the Mortgaged Property from the
lien of the Mortgage.
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Loan No. 3212525
(e) For purposes of this Section, the following terms shall have the
following meanings:
(i) The term "Defeasance" shall mean the Release, the
delivery of the Defeasance Deposit to Payee (if Payee
is to purchase the U.S. Obligations on Maker's
behalf), the establishing of the Defeasance
Collateral Account, and the providing of the
Defeasance Security Agreement;
(ii) The term "Defeasance Collateral Account" shall mean
an account acceptable to Payee at an institution
acceptable to Payee into which the U.S. Obligations
shall be placed at Payee's option;
(iii) The term "Defeasance Deposit" shall mean an amount
equal to the remaining principal amount of the Note,
the Yield Maintenance Premium (as hereinafter
described), any costs and expenses incurred or to be
incurred in the purchase of U.S. Obligations
necessary to meet the Scheduled Defeasance Payments
and any revenue, transfer, transaction, documentary
stamp or intangible taxes or any other tax or charge
due in connection with the transfer of the Note or
otherwise required to accomplish the agreements of
this Section;
(iv) The term "Lock Out Period Expiration Date" shall mean
the date which is the earlier of (1) the third
anniversary of the date that is the "start up day",
within the meaning of Section 860G(a)(9) of the
Internal Revenue Code, as amended from time to time
or any successor statute, of a REMIC that holds this
Note, or (2) the fourth anniversary of the first day
of the first full calendar month following the date
of this Note;
(v) The term "Scheduled Defeasance Payments" shall mean
payments on or prior, but as close as possible, to
all successive scheduled payment dates of this Note
after the Release Date upon which interest and
principal payments are required under this Note
(including, without limitation, through and including
the Maturity Date) and in amounts equal to or greater
than the scheduled payments of interest and principal
due under this Note, including the principal balance
of this Note scheduled to be outstanding on the
Maturity Date;
(vi) The term "U.S. Obligations" shall mean direct,
non-callable and non- redeemable obligations of the
United States of America; and
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Loan No. 3212525
(vii) The term "Yield Maintenance Premium" shall mean the
amount (if any) which, when added to the remaining
principal amount of the Note, will be sufficient to
purchase U.S. Obligations providing the required
Scheduled Defeasance Payments.
(f) Upon release of the Mortgaged Property in accordance with this
Section, Maker shall have no further right to prepay the Note in whole or in
part or to be the subject of any further Defeasance.
(g) If a Default Prepayment (defined below) occurs, at Payee's option,
Maker shall pay to Payee the entire Debt, including, without limitation, an
amount (the "Default Consideration") equal to the greater of (i) the amount (if
any) which when added to the then outstanding principal amount of this Note will
be sufficient to purchase U.S. Obligations providing the required Scheduled
Defeasance Payments assuming Defeasance would be permitted hereunder, or (ii)
one percent (1%) of the Default Prepayment. For purposes of this Section, the
term "Default Prepayment" shall mean a prepayment of the principal amount of the
Note made after the occurrence of any Event of Default or an acceleration of the
maturity date under any circumstances.
(h) Notwithstanding anything to the contrary herein, Maker may prepay
the principal balance of this Note without premium or penalty (i) in whole
during the 90 days prior to the maturity date or (ii) in whole or in part in
connection with a prepayment resulting from the application of insurance
proceeds or condemnation awards pursuant to the Mortgage, but in each instance
Maker shall be required to pay all other sums due hereunder, and no principal
amount repaid may be reborrowed.
3. INTENTIONALLY DELETED.
4. DEFAULT RATE. Maker does hereby agree that upon the occurrence of an
Event of Default and while any Event of Default exists, including, without
limitation, the failure of Maker to pay the Debt in full on the Maturity Date,
Payee shall be entitled to receive and Maker shall pay interest on the entire
unpaid principal sum, effective from the date of Maker's initial default with
respect to such Event of Default without allowance for any applicable notice
and/or grace period, at a rate (the "DEFAULT RATE") equal to seven percent (7%)
above the Applicable Interest Rate, but in no event to exceed the highest rate
permitted under the laws of the jurisdiction where the property secured by the
Mortgage is situated. This charge shall be added to the Debt, and shall be
deemed secured by the Mortgage. This clause, however, shall not be construed as
an agreement or privilege to extend the date of the payment of the Debt, nor as
a waiver of any other right or remedy available to Payee by reason of the
occurrence of any Event of Default.
5. LATE CHARGE. If any monthly principal and interest payment payable
under this Note is not paid in full within five (5) days of the date on which it
is due, Maker shall pay to Payee an amount equal to the lesser of five percent
(5%) of such unpaid sum or the maximum amount
7
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Loan No. 3212525
permitted by applicable law to defray the expenses incurred by Payee in handling
and processing such delinquent payment and to compensate Payee for the loss of
the use of such delinquent payment and such amount shall be secured by the Loan
Documents.
6. SECURITY FOR LOAN. This Note is secured by the Mortgage and certain
other Loan Documents. The term "MORTGAGE" as used in this Note shall mean the
Mortgage(s), Assignment(s) of Leases and Rents and Security Agreement(s) dated
the date hereof in the principal sum of $12,000,000 given by Maker for the use
and benefit of Payee covering certain premises located at Tilton, Belknap
County, New Hampshire, as more particularly described therein.
7. COMPLIANCE WITH LAW. It is expressly stipulated and agreed to be the
intent of Maker and Payee at all times to comply with applicable state law or
applicable United States federal law (to the extent that it permits Payee to
contract for, charge, take, reserve or receive a greater amount of interest than
under state law) and that this paragraph shall control every other covenant and
agreement in this Note and the other Loan Documents. If the applicable law
(state or federal) is ever judicially interpreted so as to render usurious any
amount called for under this Note or any of the other Loan Documents, or
contracted for, charged, taken, reserved or received with respect to the Debt,
or if Payee's exercise of the option to accelerate the Maturity Date, or if any
prepayment by Maker results in Maker's having paid any interest in excess of
that permitted by applicable law, then it is Payee's express intent that all
excess amounts theretofore collected by Payee shall be credited on the principal
balance of this Note and all other Debt and the provisions of this Note, and the
other Loan Documents immediately be deemed reformed and the amounts thereafter
collectible hereunder and thereunder reduced, without the necessity of the
execution of any new documents, so as to comply with the applicable law, but so
as to permit the recovery of the fullest amount otherwise called for hereunder
or thereunder. All sums paid or agreed to be paid to Payee for the use or
forbearance of the Debt shall, to the extent permitted by applicable law, be
amortized, prorated, allocated and spread throughout the full stated term of the
Debt until payment in full so that the rate or amount of interest on account of
the Debt does not exceed the maximum lawful rate from time to time in effect and
applicable to the Debt for so long as the Debt is outstanding. Notwithstanding
anything to the contrary contained herein, in the Mortgage or in any of the
other Loan Documents, it is not the intention of Payee to accelerate the
maturity of any interest that has not accrued at the time of such acceleration
or to collect unearned interest at the time of such acceleration.
8. AMENDMENTS. This Note may not be modified, amended, waived,
extended, changed, discharged or terminated orally or by any act or failure to
act on the part of Maker or Payee, but only by an agreement in writing signed by
the party against whom enforcement of any modification, amendment, waiver,
extension, change, discharge or termination is sought.
9. JOINT AND SEVERAL LIABILITY. If Maker consists of more than one
person or party, the obligations and liabilities of each such person or party
shall be joint and several.
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Loan No. 3212525
10. CONSTRUCTION. Whenever used, the singular number shall include the
plural, the plural the singular, and the words "PAYEE" and "MAKER" shall include
their respective successors, assigns, heirs, executors and administrators.
11. WAIVERS. Maker and all others who may become liable for the payment
of all or any part of the Debt do hereby severally waive presentment and demand
for payment, notice of dishonor, protest, notice of protest and non-payment and
notice of intent to accelerate the maturity hereof (and of such acceleration).
No release of any security for the Debt or extension of time for payment of this
Note or any installment hereof and no alteration, amendment or waiver of any
provision of this Note, the Mortgage or any other Loan Documents made by
agreement between Payee and any other person or party shall release, modify,
amend, waive, extend, change, discharge, terminate or affect the liability of
Maker and any other who may become liable for the payment of all or any part of
the Debt, under this Note, the Mortgage or any other Loan Documents.
12. AUTHORITY. Maker (and the other undersigned representative of
Maker, if any) represents that Maker has full power, authority and legal right
to execute, deliver and perform its obligations pursuant to this Note, the
Mortgage and the other Loan Documents and that this Note, the Mortgage and the
other Loan Documents constitute valid and binding obligations of Maker.
13. TIME. Time is of the essence of this Note.
14. REPLACEMENT NOTE. In the event of the loss, theft or destruction of
this Note, upon Maker's receipt of a reasonably satisfactory indemnification
agreement executed in favor of Maker by Payee or in the event of the mutilation
of this Note, upon the surrender of the mutilated Note by Payee to Maker, Maker
shall execute and deliver to Payee a new Mortgage note in form and content
identical to this Note in lieu of the lost, stolen, destroyed or mutilated Note.
15. NOTICE. All notices required to be given pursuant hereto shall be
given in the manner specified in the Mortgage directed to the parties at their
respective addresses as provided therein.
16. COSTS AND EXPENSES. Borrower shall pay all expenses and costs,
including fees and out-of-pocket expenses of attorneys and expert witnesses and
costs of investigation incurred by Payee as a result of any Event of Default or
in connection with efforts to collect any amount due under this Note or to
enforce the provisions of any of the Loan Documents, including those incurred in
post-judgment collection efforts and in any bankruptcy proceeding (including any
action for relief from the automatic stay of any bankruptcy proceeding) or
judicial or non-judicial foreclosure proceeding.
17. FORBEARANCE. Any forbearance by Payee in exercising any right or
remedy under this Note, the Mortgage or any other Loan Document or otherwise
afforded by applicable law shall not be a waiver of or preclude the exercise of
that or any other right or remedy. The acceptance by Payee of any payment after
the due date of such payment or in an amount which is less than the required
payment shall not be a waiver of Payee's right to require prompt payment when
due of all
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Loan No. 3212525
other payments or to exercise any right or remedy with respect to any failure to
make prompt payment. Enforcement by Payee of any security for Maker's
obligations under this Note shall not constitute an election by Payee of
remedies so as to preclude the exercise of any other right or remedy available
to Payee.
18. SECTION HEADINGS. The Section headings inserted in this Note have
been included for convenience only and are not intended and shall not be
construed to limit or define in any way the substance of any section contained
herein.
19. LIMITATION ON LIABILITY. Notwithstanding anything to the contrary
contained herein, but subject to the obligations of PARAGRAPH 45 of the
Mortgage, any claim based on or in respect of any liability of Maker under this
Note, the Mortgage or any other Loan Document shall be enforced only against the
Mortgaged Property (as such term is defined in the Mortgage) and any other
collateral now or hereafter given to secure this Note and not against any other
assets, properties or funds of Maker; PROVIDED, HOWEVER, that the liability of
Maker for loss, costs or damage arising out of the matters described in
subsections (i) through (vi) below (collectively, "NON-RECOURSE CARVEOUT
OBLIGATIONS") shall not be limited solely to the Mortgaged Property and other
collateral now or hereafter given to secure this Note but shall include all of
the assets, properties and funds of Maker: (i) fraud, misrepresentation and
waste, (ii) any rents, issues or profits collected more than one (1) month in
advance of their due dates, (iii) any misapplication of loan proceeds, rents,
issues or profits, security deposits and any other payments from tenants or
occupants (including, without limitation, lease termination fees), insurance
proceeds, condemnation awards or other sums of a similar nature, (iv) liability
under environmental covenants, conditions and indemnities contained in the
Mortgage and in any separate environmental indemnity agreements, (v) the
unauthorized sale, conveyance or transfer of title to the Mortgaged Property or
encumbrance of the Mortgaged Property and (vi) the failure of Maker to maintain
its status as a single purpose, bankruptcy-remote entity pursuant to its
organizational documents and the Loan Documents. Nothing herein shall be deemed
(w) to be a waiver of any right which Payee may have under any bankruptcy law of
the United States or the state where the Mortgaged Property is located
including, but not limited to, Section 506(a), 506(b), 1111(b) or any other
provisions of the U.S. Bankruptcy Code to file a claim for the full amount of
the indebtedness secured by the Mortgage or to require that all collateral
securing the indebtedness secured hereby shall continue to secure all of the
indebtedness owing to Payee in accordance with this Note, the Mortgage and the
other Loan Documents; (x) to impair the validity of the indebtedness secured by
the Mortgage; (y) to impair the right of Payee as mortgagee or secured party to
commence an action to foreclose any lien or security interest; or (z) to modify,
diminish or discharge the liability of any guarantor under any guaranty or of
any indemnitor under any indemnity agreement.
This Note shall be governed and construed in accordance with the laws
of the State of New Hampshire and the applicable laws of the United States of
America.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK; SIGNATURE PAGE(S) FOLLOW(S)]
10
<PAGE>
IN WITNESS WHEREOF, Maker has duly executed and delivered this Note the
day and year first above written.
BIRCH POND REALTY CORPORATION
(doing business in the State of New Hampshire as
BPRC)
By: /s/ Olga L. Conley
--------------------------------------------
Name: Olga L. Conley
Its: Treasurer
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Exhibit 10.64
Loan No. 3212525
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ASSIGNMENT OF LEASES AND RENTS
BIRCH POND REALTY CORPORATION
(Assignor)
TO
JOHN HANCOCK REAL ESTATE FINANCE, INC.
(Assignee)
Dated: As of March 1, 1999
LOCATION OF PROPERTY:
100 Birch Pond Drive
Tilton, Belknap County, New Hampshire
RECORD AND RETURN TO:
Hebb & Gitlin
A Professional Corporation
One State Street
Hartford, CT 06103
Attention: John B. D'Agostino, Esq.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
Loan No. 3212525
THIS ASSIGNMENT OF LEASES AND RENTS (this "ASSIGNMENT") made as of
March 1, 1999, by BIRCH POND REALTY CORPORATION, a Delaware corporation (doing
business in the State of New Hampshire as BPRC), having its principal place of
business at 100 Birch Pond Drive, Tilton, New Hampshire 03289 ("ASSIGNOR") to
JOHN HANCOCK REAL ESTATE FINANCE, INC., a Delaware corporation, having its
principal place of business at John Hancock Place, T-53, 200 Clarendon Street,
Boston, Massachusetts 02116 ("ASSIGNEE").
W I T N E S S E T H:
THAT Assignor for good and valuable consideration, receipt whereof is
hereby acknowledged, hereby grants, transfers and absolutely and unconditionally
assigns to Assignee the entire lessor's interest in and to all current and
future leases and other agreements affecting the use, enjoyment or occupancy of
all or any part of that certain lot or piece of land, more particularly
described in EXHIBIT A hereto, together with the buildings, structures,
fixtures, additions, enlargements, extensions, modifications, repairs,
replacements and improvements now or hereafter located thereon (hereinafter
collectively referred to as the "MORTGAGED PROPERTY") (including any use or
occupancy arrangements created pursuant to Section 365(h) of Title 11 of the
United States Code (the "BANKRUPTCY CODE") or otherwise in connection with the
commencement or continuance of any bankruptcy, reorganization, arrangement,
insolvency, dissolution, receivership or similar proceedings, or any assignment
for the benefit of creditors in respect of any tenant or occupant of any portion
of the Mortgaged Property), together with any extension or renewal of the same;
The leases and other agreements described above together with all other
present and future leases and present and future agreements and any extension or
renewal of the same are hereinafter collectively referred to as the "LEASES";
TOGETHER WITH all income, rents, issues, revenues and profits arising
from the Leases and renewals thereof and together with all income, rents, issues
and profits, revenues and proceeds (including, but not limited to, all oil and
gas or other mineral royalties and bonuses) from the use, enjoyment and
occupancy of the Mortgaged Property (including any payments received pursuant to
Section 502(b) of the Bankruptcy Code or otherwise in connection with the
commencement or continuance of any bankruptcy, reorganization, arrangement,
insolvency, dissolution, receivership or similar proceedings, or any assignment
for the benefit of creditors, in respect of any tenant or occupant of any
portion of the Mortgaged Property and all claims as a creditor in connection
with any of the foregoing) (hereinafter collectively referred to as the "RENTS")
and all proceeds from the sale, cancellation, surrender or other disposition of
the Leases and the right to receive and apply the Rents to the payment of the
Loan (as hereinafter defined).
THIS ASSIGNMENT is made in consideration of that certain loan (the
"LOAN") made by Assignee to Assignor evidenced by that certain mortgage note
made by Assignor to Assignee, dated the date hereof, in the principal sum of
$12,000,000.00 (the "NOTE") and secured by that certain mortgage, assignment of
leases and rents and security agreement given by Assignor to Assignee, dated the
date hereof, in the principal sum of $12,000,000.00, covering the Mortgaged
Property (the "MORTGAGE").
This Assignment, the Note, the Mortgage and other documents now or
hereafter executed by Assignor and/or others and by or in favor of Assignee
which evidence, secure, guarantee or are executed in connection with the Loan
shall be hereinafter referred to as the "LOAN DOCUMENTS".
<PAGE>
Loan No. 3212525
ASSIGNOR WARRANTS that (i) Assignor is the sole owner of the entire
lessor's interest in the Leases; (ii) that the rent roll or occupancy schedule
attached as an exhibit to the application, in connection with the Loan, given by
Assignor to Assignee (the "RENT ROLL") is a true, accurate and complete list of
all Leases or options to lease now in effect at the Mortgaged Property; (iii)
the Leases are valid and enforceable and have not been altered, modified or
amended in any manner whatsoever except as herein set forth; (iv) none of the
Rents reserved in the Leases have been assigned or otherwise pledged or
hypothecated; (v) none of the Rents have been collected for more than one (1)
month in advance; (vi) Assignor has full power and authority to execute and
deliver this Assignment and the execution and delivery of this Assignment has
been duly authorized and does not conflict with or constitute a default under
any law, judicial order or other agreement affecting Assignor or the Mortgaged
Property; (vii) the premises demised under the Leases have been completed and
the tenants under the Leases have accepted the same and have taken possession of
the same on a rent-paying basis; and (viii) there exist no offsets or defenses
to the payment of any portion of the Rents.
ASSIGNOR COVENANTS with Assignee that Assignor shall not, without the
prior written consent of Assignee, (a) lease all or any part of the Mortgaged
Property, (b) alter or change the terms of any Lease or cancel or terminate,
abridge or otherwise modify the terms of any Lease, (c) consent to any
assignment of or subletting under any Lease not in accordance with its terms,
(d) cancel, terminate, abridge or otherwise modify any guaranty of any Lease or
the terms thereof, (e) collect or accept prepayments of installments of Rents
for a period of more than one (1) month in advance or (f) further assign the
whole or any part of the Leases or the Rents.
ASSIGNOR FURTHER COVENANTS with Assignee that, with respect to each
Lease, Assignor shall (a) observe and perform each and every provision thereof
on the lessor's part to be fulfilled or performed under each Lease and not do or
permit to be done anything to impair the value of the Lease as security for the
Loan, (b) promptly send to Assignee copies of all notices of default which
Assignor shall send or receive thereunder, (c) enforce all of the terms,
covenants and conditions contained in such Lease upon the lessee's part to be
performed, short of termination thereof, (d) execute and deliver, at the request
of Assignee, all such further assurances, confirmations and assignments in
connection with the Mortgaged Property as Assignee shall, from time to time,
require and (e) upon request, furnish Assignee with executed copies of all
Leases.
THIS ASSIGNMENT is made on the following terms, covenants and
conditions:
1. PRESENT ASSIGNMENT. Assignor does hereby absolutely and
unconditionally assign to Assignee Assignor's right, title and interest in all
current and future Leases and Rents, it being intended by Assignor that this
assignment constitutes a present, absolute and unconditional assignment and not
an assignment for additional security only. Such assignment to Assignee shall
not be construed to bind Assignee to the performance of any of the covenants,
conditions or provisions contained in any such Lease or otherwise to impose any
obligation upon Assignee. Assignor agrees to execute and deliver to Assignee
such additional instruments, in form and substance reasonably satisfactory to
Assignee, as may hereinafter be requested by Assignee to further evidence and
confirm said assignment. Nevertheless, subject to the terms of this PARAGRAPH 1,
Assignee grants to Assignor a revocable license to operate and manage the
Mortgaged Property and to collect the Rents. Assignor shall hold the Rents or a
portion thereof sufficient
2
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Loan No. 3212525
to discharge all current sums due on the Loan for use in the payment of such
sums. Upon an Event of Default (as defined in the Mortgage), the license granted
to Assignor herein shall be automatically revoked by Assignee and Assignee shall
immediately be entitled to receive and apply all Rents, whether or not Assignee
enters upon and takes control of the Mortgaged Property. Assignee is hereby
granted and assigned by Assignor the right, at its option, upon the revocation
of the license granted herein to enter upon the Mortgaged Property in person, by
agent or by court-appointed receiver to collect the Rents. Any Rents collected
after the revocation of the license herein granted may be applied toward payment
of the Loan in such priority and proportion as Assignee, in its discretion,
shall deem proper. Notwithstanding the license granted to Assignor in this
Paragraph 1, if any Lease is terminated (including without limitation a
voluntary termination of the Lease approved by Assignee and a termination or
rejection of a Lease in a bankruptcy or other similar proceeding) and in
connection with such termination or rejection there is the payment of (i) a lump
sum settlement, (ii) a termination fee, premium or penalty, or (iii) any other
amount or amounts paid in conjunction with such termination (collectively and
singly, the "TERMINATION AMOUNT") then in such event, whether or not Assignor is
in default under the Note, the Mortgage, any other Loan Document or any Lease,
the Termination Amount shall be payable directly to Assignee and, at Assignee's
option, may be (x) applied to outstanding amounts due under the Loan, without
premium, or (y) held by Assignee as additional collateral securing the Note
until a new Lease or other collateral acceptable to Assignee in its reasonable
discretion is substituted for the terminated Lease. Nothing herein shall be
deemed approval by Assignee of the termination of any Lease or the payment of
any Termination Amount.
2. REMEDIES OF ASSIGNEE. Upon or at any time after an Event of Default,
Assignee may, at its option, without waiving such Event of Default, without
notice and without regard to the adequacy of the security for the Loan, either
in person or by agent, with or without bringing any action or proceeding, or by
a receiver appointed by a court, enforce its interest in the Leases and Rents
and take possession of the Mortgaged Property and have, hold, manage, lease and
operate the Mortgaged Property on such terms and for such period of time as
Assignee may deem proper and either with or without taking possession of the
Mortgaged Property in its own name, demand, sue for or otherwise collect and
receive all Rents, including those past due and unpaid with full power to make
from time to time all alterations, renovations, repairs or replacements thereto
or thereof as may seem proper to Assignee and may apply the Rents to the payment
of the following in such order and proportion as Assignee in its sole discretion
may determine, any law, custom or use to the contrary notwithstanding: (a) all
reasonable expenses of managing and securing the Mortgaged Property, including,
without being limited thereto, the salaries, fees and wages of a managing agent
and such other employees or agents as Assignee may deem necessary or desirable
and all reasonable expenses of operating and maintaining the Mortgaged Property,
including, without being limited thereto, all taxes, charges, claims,
assessments, water charges, sewer rents and any other liens, and premiums for
all insurance which Assignee may deem necessary or desirable, and the reasonable
cost of all alterations, renovations, repairs or replacements, and all expenses
incident to taking and retaining possession of the Mortgaged Property; and (b)
the Loan, together with all costs and attorneys' fees. In addition to the rights
which Assignee may have herein, upon the occurrence of an Event of Default,
Assignee, at its option, may either require Assignor to pay monthly in advance
to Assignee, or any receiver appointed to collect the Rents, the fair and
reasonable rental value for the use and occupation of such part of the Mortgaged
Property as may be in possession of Assignor or may require Assignor to vacate
and surrender possession of the Mortgaged Property to Assignee or to such
receiver and, in default thereof, Assignor may be evicted by summary proceedings
or otherwise. For purposes of Paragraphs 1 and 2,
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Loan No. 3212525
Assignor grants to Assignee its irrevocable power of attorney, coupled with an
interest, to take any and all of the aforementioned actions and any or all other
actions designated by Assignee for the proper management and preservation of the
Mortgaged Property. The exercise by Assignee of the option granted it in this
Paragraph 2 and the collection of the Rents and the application thereof as
herein provided shall not be considered a waiver of any default by Assignor
under the Note, the Mortgage, the Leases, this Assignment or the Loan Documents.
3. NO LIABILITY OF ASSIGNEE. Assignee shall not be liable for any loss
sustained by Assignor resulting from Assignee's failure to let the Mortgaged
Property after an Event of Default or from any other act or omission of Assignee
in managing the Mortgaged Property after default unless such loss is caused by
the willful misconduct and bad faith of Assignee. Assignee shall not be
obligated to perform or discharge any obligation, duty or liability under the
Leases or under or by reason of this Assignment and Assignor shall, and hereby
agrees to, indemnify Assignee for and hold Assignee harmless from, any and all
liability, loss or damage which may or might be incurred under the Leases or
under or by reason of this Assignment and from any and all claims and demands
whatsoever, including the defense of any such claims or demands which may be
asserted against Assignee by reason of any alleged obligations and undertakings
on its part to perform or discharge any of the terms, covenants or agreements
contained in the Leases. Should Assignee incur any such liability, the amount
thereof, including costs, expenses and reasonable attorneys' fees, shall be
secured hereby and by the Mortgage and the Loan Documents and Assignor shall
reimburse Assignee therefor immediately upon demand and upon the failure of
Assignor so to do Assignee may, at its option, declare all sums secured hereby,
the Note, and the Mortgage and the Loan Documents immediately due and payable.
This Assignment shall not operate to place any obligation or liability for the
control, care, management or repair of the Mortgaged Property upon Assignee, nor
for the carrying out of any of the terms and conditions of the Leases; nor shall
it operate to make Assignee responsible or liable for any waste committed on the
Mortgaged Property by the tenants or any other parties, or for any dangerous or
defective condition of the Mortgaged Property, including, without limitation,
the presence of any Hazardous Materials (as defined in the Mortgage), or for any
negligence in the management, upkeep, repair or control of the Mortgaged
Property resulting in loss or injury or death to any tenant, licensee, employee
or stranger.
4. NOTICE TO LESSEES. Assignor hereby authorizes and directs the
lessees named in the Leases or any other or future lessees or occupants of the
Mortgaged Property upon receipt from Assignee of written notice to the effect
that Assignee is then the holder of the Mortgage and that a default exists
thereunder or under this Assignment, the Note or the other Loan Documents to pay
over to Assignee all Rents and to continue so to do until otherwise notified by
Assignee.
5. OTHER SECURITY. Assignee may take or release other security for the
payment of the Loan, release any party primarily or secondarily liable therefor
and apply any other security held by it to the reduction or satisfaction of the
Loan without prejudice to any of its rights under this Assignment.
6. OTHER REMEDIES. Nothing contained in this Assignment and no act done
or omitted by Assignee pursuant to the power and rights granted to Assignee
hereunder shall be deemed to be a waiver by Assignee of its rights and remedies
under the Note, the Mortgage or the Loan Documents and this Assignment is made
and accepted without prejudice to any of the rights and remedies possessed by
4
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Loan No. 3212525
Assignee under the terms thereof. The right of Assignee to collect the Loan and
to enforce any other security therefor held by it may be exercised by Assignee
either prior to, simultaneously with, or subsequent to any action taken by it
hereunder.
7. NO MORTGAGEE IN POSSESSION. Nothing herein contained shall be
construed as constituting Assignee a "mortgagee in possession" in the absence of
the taking of actual possession of the Mortgaged Property by Assignee. In the
exercise of the powers herein granted Assignee, no liability shall be asserted
or enforced against Assignee, all such liability being expressly waived and
released by Assignor.
8. CONFLICT OF TERMS. In case of any conflict between the terms of this
Assignment and the terms of the Mortgage, the terms of the Mortgage shall
prevail.
9. NO ORAL CHANGE. This Assignment and any provisions hereof may not be
modified, amended, waived, extended, changed, discharged or terminated orally,
or by any act or failure to act on the part of Assignor or Assignee, but only by
an agreement in writing signed by the party against whom the enforcement of any
modification, amendment, waiver, extension, change, discharge or termination is
sought.
10. CERTAIN DEFINITIONS. Unless the context clearly indicates a
contrary intent or unless otherwise specifically provided herein, words used in
this Assignment may be used interchangeable in singular or plural form and the
word "ASSIGNOR" shall mean "each Assignor and any subsequent owner or owners of
the Mortgaged Property or any part thereof or any interest therein," the word
"ASSIGNEE" shall mean "Assignee and any subsequent holder of the Note," the word
"NOTE" shall mean "the Note and any other evidence of indebtedness secured by
the Mortgage," the word "PERSON" shall include an individual, corporation,
partnership, trust, unincorporated association, government, governmental
authority, and any other entity, the words "MORTGAGED PROPERTY" shall include
any portion of the Mortgaged Property and any interest therein, and the word
"LOAN" shall mean the principal balance of the Note with interest thereon as
provided in the Note and the Mortgage and all other sums due pursuant to the
Note, the Mortgage, this Assignment and the other Loan Documents; whenever the
context may require, any pronouns used herein shall include the corresponding
masculine, feminine or neuter forms, and the singular form of nouns and pronouns
shall include the plural and vice versa.
11. NON-WAIVER. The failure of Assignee to insist upon strict
performance of any term hereof shall not be deemed to be a waiver of any term of
this Assignment. Assignor shall not be relieved of Assignor's obligations
hereunder by reason of (i) failure of Assignee to comply with any request of
Assignor or any other party to take any action to enforce any of the provisions
hereof or of the Mortgage, the Note or the other Loan Documents, (ii) the
release, regardless of consideration, of the whole or any part of the Mortgaged
Property, or (iii) any agreement or stipulation by Assignee extending the time
of payment or otherwise modifying or supplementing the terms of this Assignment,
the Note, the Mortgage or the Other Security Documents. Assignee may resort for
the payment of the Loan to any other security held by Assignee in such order and
manner as Assignee, in its discretion, may elect. Assignee may take any action
to recover the Loan, or any portion thereof, or to enforce any covenant hereof
without prejudice to the right of Assignee thereafter to enforce its rights
under this Assignment. The rights of Assignee under this Assignment shall be
separate, distinct and cumulative and none shall be given effect to the
exclusion of the
5
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Loan No. 3212525
others. No act of Assignee shall be construed as an election to proceed under
any one provision herein to the exclusion of any other provision.
12. INAPPLICABLE PROVISIONS. If any term, covenant or condition of this
Assignment is held to be invalid, illegal or unenforceable in any respect, this
Assignment shall be construed without such provision.
13. DUPLICATE ORIGINALS. This Assignment may be executed in any number
of duplicate originals and each such duplicate original shall be deemed to be an
original.
14. GOVERNING LAW. This Assignment shall be governed and construed in
accordance with the laws of the State in which the real property encumbered by
the Mortgage is located.
15. TERMINATION OF ASSIGNMENT. Upon payment in full of the Loan and the
delivery and recording of a satisfaction or discharge of Mortgage duly executed
by Assignee, this Assignment shall become and be void and of no effect.
16. LIMITATION ON LIABILITY. The provisions of Paragraph 46 of the
Mortgage are incorporated herein by this reference to the fullest extent as if
the text of such paragraph were set forth in its entirety herein.
THIS ASSIGNMENT, together with the covenants and warranties therein
contained, shall inure to the benefit of Assignee and any subsequent holder of
the Mortgage and shall be binding upon Assignor, his heirs, executors,
administrators, successors and assigns and any subsequent owner of the Mortgaged
Property.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK; SIGNATURE PAGE(S) FOLLOW(S)]
6
<PAGE>
IN WITNESS WHEREOF, Assignor has executed this Assignment as of the day
and year first above written.
ASSIGNOR:
BIRCH POND REALTY CORPORATION
Witnessed By: (doing business in the State of New Hampshire
as BPRC)
By: /s/ Olga L. Conley
-----------------------------------
Name:Olga L. Conley
Its: Treasurer
Name: /s/ Deborah B. Breznay
--------------------------
Name: /s/ Deborah B. Breznay
--------------------------
COMMONWEALTH OF MASSACHUSETTS)
)
COUNTY OF SUFFOLK )
The foregoing instrument was acknowledged before me this 1st day of
March, 1999 by Olga L. Conley, Treasurer, of Birch Pond Realty Corporation, a
Delaware corporation (doing business in the State of New Hampshire as BPRC),
on behalf of said corporation.
/s/ Katherine Culkin
------------------------------
Notary Public: Katherine Culkin
My Commission Expires: 05/27/05
[SEAL]
7
<PAGE>
EXHIBIT A
That certain lot or tract of land, with the buildings and improvements
thereon, located in Tilton, Belknap County, New Hampshire, and being bounded and
described as follows:
Beginning at the northeast corner of the described premises at land now
or formerly of the State of New Hampshire and at a re-bar on the westerly
sideline of Route 132, Sanborn Road:
1. S 19(Degree)20'44" E 45.87' by said Route 132 to a point; then
2. By a curve to the right having a Delta of 17(Degree)00'15", a
radius of 930.00 feet, an arc distance of 276.00 feet, and a
chord bearing of S 10(Degree) 50' 37" E and a chord distance
of 274.99 feet by said Route to a re-bar; then
3. S 02(Degree)20'29" E 155.23' by said Route to a re-bar; then
4. S 03(Degree)47'32" W 86.83' by said Route to a re-bar; then
5. S 03(Degree)05'40" W 523.55' by said Route to a re-bar; then
6. By a curve to the left having a Delta of 01(Degree)40'53" and
a radius of 11,489.16 feet, an arc distance of 337.18 feet,
and a chord bearing of S 02(Degree)15' 13" W and a chord
distance of 337.17 feet by said Route to a re-bar; then
7. By a curve to the left having a Delta of 02(Degree)59'59" and
a radius of 11, 492.87 feet, an arc distance of 601.71 feet,
and a chord bearing of S 01(Degree) 03' 20" W and a chord
distance of 601.64 feet, by said Route to a re-bar; then
8. By a curve to the left having a Delta of 01(Degree)52'45" and
a radius of 11,501.15 feet, an arc distance of 377.22 feet,
and a chord bearing of S 02(Degree) 31' 31" W and a chord
distance of 377.20 feet, by said Route to a re-bar; then
9. S 03(Degree)27'54" E 248.12' by said Route to a point at now or
formerly of Oliver; then
10. S 89(Degree)39'25" W 287.08' by said land of Oliver to a re-bar,
then
11. S 08(Degree)48'25" W 225.00' by said land of Oliver to a re-bar;
then
12. S 08(Degree)48'25" W, a distance of 20.00' to a point at land
now or formerly of the State of New Hampshire; then
Page 1 of 3
<PAGE>
13. N70(Degree)50'37"W 54.78' by land of the State; then
14. N 81(Degree)42'19" W 58.01' by land of the State; then
15. S 82(Degree)53'59" W142.27' by land of the State; then
16. S76(Degree)57'22"W 157.00' by land of the State; then
17. S 89(Degree)46'48"W 67.18' by land of the State; then
18. N65(Degree)59'17"W 79.43' by land of the State; then
19. N47(Degree)43'27"W 87.84' by land of the State; then
20. N27(Degree)29'46"W 83.28' by land of the State; then
21. S73(Degree)59'49"W 53.30' by land of the State; then
22. N45(Degree)19'18"W 43.24' by land of the State; then
23. N26(Degree)13'08" W16.85'by land of the State; then
24. S83(Degree)49'28"W 29.65' by land of the State; then
25. N60(Degree)40'11"W 56.97' by land of the State; then
26. N38(Degree)05'58"W 37.81' by land of the State; then
27. N60(Degree)17'32"W 38.15' by land of the State; then
28. N31(Degree)50'23"W 27.09' by land of the State; then
29. N74(Degree)42'14"W 22.80' by land of the State; then
30. S74(Degree)47'09" W 91.21' by land of the State; then
31. N87(Degree)39'11"W 149.12' by land of the State; then
32. S72(Degree)41'13"W 67.05' by land of the State; then
33. N72(Degree)57'33" W 454.56' by land of the State; then
34. N29(Degree)36'39"W 498.10' by land of the State; then
Page 2 of 3
<PAGE>
35. N29(Degree)36'39"W 56.30' by land of the State; then
36. N16(Degree)46'49"W 348.61' by land of the State to a concrete
bound; then
37. N14(Degree)31'44"E 885.88' by land of the State to a concrete
bound; then
38. N58(Degree)29'32"E 430.73' by land of the State to a re-bar; then
39. N05(Degree)11'37"W 335.93' by land of the State to a re-bar; then
40. S76(Degree)46'28"W 55.90' by land of the State to a concrete
bound; then
41. N85(Degree)46'21"W 3.96' by land of the State to a point at
land now or formerly of DM Management Company ("DM") ; then
42. N66(Degree)32'51"E 1044.50 feet by land of said DM, then
43. N85(Degree)07'38"E 305.57' by land of said DM to a stone wall;
then
44. S25(Degree)23'01"E 51.24' by land now or formerly of Miller
and said wall to a re-bar at land of the State; then
45. S66(Degree)06'34"W 50.17' by land of the State and a stone
wall to a drill hole in the wall; then
46. S21(Degree)06'31"E 95.43' by land of the State; then
47. S18(Degree)16'00"E 175.19' by land of the State to a re-bar; then
48. N69(Degree)11'55"E 499.88' by land of the State to the point of
beginning.
Meaning and intending to describe and convey the land shown on Plan
entitled, "ALTA/ACSM LAND TITLE SURVEY, Plan of Land Prepared for DM Management
Company, Route 132 (Sanborn Road), Tilton, NH," dated November 19, 1998, by
Yerkes Surveying Consultants and recorded in the Belknap County Registry of
Deeds (the "Registry") on February 16, 1999, in Drawer L-31 #'s 61 and 62.
Page 3 of 3
<PAGE>
Exhibit 10.65
Loan No. 3212525
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
MORTGAGE, ASSIGNMENT OF LEASES AND RENTS AND
SECURITY AGREEMENT
Dated as of March 1, 1999
BIRCH POND REALTY CORPORATION
(doing business in the State of New Hampshire as BPRC)
(Mortgagor)
TO
JOHN HANCOCK REAL ESTATE FINANCE, INC.
(Mortgagee)
LOCATION OF PROPERTY:
100 Birch Pond Drive
Tilton, Belknap County, New Hampshire
RECORD AND RETURN TO:
Hebb & Gitlin
A Professional Corporation
One State Street
Hartford, CT 06103
Attention: John B. D'Agostino, Esq.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
Loan No. 3212525
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C> <C>
1. PAYMENT OF INDEBTEDNESS AND INCORPORATION OF COVENANTS, CONDITIONS AND AGREEMENTS..4
2. WARRANTY OF TITLE..................................................................4
3. INSURANCE; CASUALTY................................................................5
4. PAYMENT OF TAXES, ET..............................................................10
5. ESCROW FUND.......................................................................11
6. CONDEMNATION......................................................................12
7. LEASES AND RENTS..................................................................13
8. MAINTENANCE AND USE OF MORTGAGED PROPERTY.........................................15
9. TRANSFER OR ENCUMBRANCE OF THE MORTGAGED PROPERTY.................................16
10. ESTOPPEL CERTIFICATES.............................................................19
11. NO COOPERATIVE OR CONDOMINIUM.....................................................20
12. CHANGES IN THE LAWS REGARDING TAXATION............................................20
13. NO CREDITS ON ACCOUNT OF THE INDEBTEDNESS.........................................20
14. DOCUMENTARY STAMPS................................................................20
15. RIGHT OF ENTRY....................................................................20
16. BOOKS AND RECORDS.................................................................21
17. PERFORMANCE OF OTHER AGREEMENTS...................................................21
18. REPRESENTATIONS AND COVENANTS CONCERNING LOAN.....................................22
19. SINGLE PURPOSE ENTITY/SEPARATENESS................................................23
</TABLE>
i
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<TABLE>
<CAPTION>
<S> <C> <C>
20. EVENTS OF DEFAULT; REMEDIES.......................................................26
21. ADDITIONAL REMEDIES...............................................................28
22. RIGHT TO CURE DEFAULTS............................................................31
23. LATE PAYMENT CHARGE...............................................................31
24. PREPAYMENT........................................................................31
25. PREPAYMENT AFTER EVENT OF DEFAULT.................................................31
26. APPOINTMENT OF RECEIVER..........................................................32
27. SECURITY AGREEMENT...............................................................32
28. AUTHORITY........................................................................33
29. ACTIONS AND PROCEEDINGS..........................................................33
30. FURTHER ACTS, ETC................................................................33
31. RECORDING OF MORTGAGE, ETC.......................................................34
32. USURY LAWS.......................................................................34
33. SOLE DISCRETION OF MORTGAGEE.....................................................35
34. RECOVERY OF SUMS REQUIRED TO BE PAID.............................................35
35. MARSHALLING AND OTHER MATTERS....................................................35
36. WAIVER OF NOTICE.................................................................35
37. REMEDIES OF MORTGAGOR............................................................35
38. REPORTING REQUIREMENTS...........................................................35
39. HAZARDOUS MATERIALS..............................................................36
40. ASBESTOS.........................................................................38
41. BANKRUPTCY OR INSOLVENCY.........................................................39
</TABLE>
ii
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<TABLE>
<CAPTION>
Loan No. 3212525
<S> <C> <C>
42. COMPLIANCE WITH ERISA AND STATE STATUTES ON GOVERNMENTAL PLANS...................39
43. ASSIGNMENTS......................................................................41
44. COOPERATION......................................................................41
45. INDEMNIFICATION FOR NON-RECOURSE CARVEOUT OBLIGATIONS............................41
46. EXCULPATION......................................................................42
47. NOTICES..........................................................................42
48. NON-WAIVER.......................................................................43
49. JOINT AND SEVERAL LIABILITY......................................................44
50. SEVERABILITY.....................................................................44
51. DUPLICATE ORIGINALS..............................................................44
52. INDEMNITY AND MORTGAGEE'S COSTS..................................................44
53. CERTAIN DEFINITIONS..............................................................44
54. NO ORAL CHANGE...................................................................45
55. NO FOREIGN PERSON................................................................45
56. SEPARATE TAX LOT.................................................................45
57. RIGHT TO RELEASE ANY PORTION OF THE MORTGAGED PROPERTY...........................45
58. SUBROGATION......................................................................46
59. ADMINISTRATIVE FEES..............................................................46
60. DISCLOSURE.......................................................................46
61. HEADINGS, E......................................................................46
62. ADDRESS OF REAL PROPERTY.........................................................46
63. WIRE TRANSFER....................................................................46
64. PUBLICITY........................................................................46
65. RELATIONSHIP.....................................................................46
66. HOMESTEAD........................................................................46
</TABLE>
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Loan No. 3212525
<TABLE>
<CAPTION>
<S> <C> <C>
67. NO THIRD PARTY BENEFICIARIES......................................................47
68. ENTIRE AGREEMENT..................................................................47
69. SERVICER..........................................................................47
70. GOVERNING LAW; CONSENT TO JURISDICTION............................................47
71. YEAR 2000.........................................................................48
72. PARTIAL RELEASE...................................................................48
73. SPECIAL STATE PROVISIONS..........................................................50
</TABLE>
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Loan No. 3212525
THIS MORTGAGE, ASSIGNMENT OF LEASES AND RENTS AND SECURITY AGREEMENT (this
"MORTGAGE"), made as of March 1, 1999, by BIRCH POND REALTY CORPORATION, a
Delaware corporation (doing business in the State of New Hampshire as BPRC),
having its principal place of business at 100 Birch Pond Drive, Tilton, New
Hampshire 03289 ("MORTGAGOR"), to and for the benefit of JOHN HANCOCK REAL
ESTATE FINANCE, INC. having its principal place of business at John Hancock
Place, T-53, 200 Clarendon Street, Boston, Massachusetts 02116 ("MORTGAGEE").
W I T N E S S E T H:
To secure the payment of an indebtedness in the principal sum of TWELVE
MILLION AND 0/100 DOLLARS ($12,000,000.00), lawful money of the United States of
America, to be paid with interest and all other sums and fees payable according
to a certain mortgage note dated the date hereof made by Mortgagor to Mortgagee
(the mortgage note, together with all extensions, renewals or modifications
thereof, being hereinafter collectively called the "NOTE"; and the loan
evidenced by the Note being hereinafter referred to as the "LOAN") and all
indebtedness, obligations, liabilities and expenses due hereunder and under any
other Loan Document (as hereinafter defined) (the indebtedness, interest, other
sums, fees, obligations and all other sums due under the Note and/or hereunder
and/or any other Loan Document being collectively called the "INDEBTEDNESS"),
Mortgagor has mortgaged, given, granted, bargained, sold, alienated, enfeoffed,
conveyed, confirmed, pledged, assigned and hypothecated and by these presents
does mortgage, give, grant, bargain, sell, alien, enfeoff, convey, confirm,
pledge, assign and hypothecate unto Mortgagee with MORTGAGE COVENANTS and hereby
grants unto Mortgagee a security interest in the following property and rights,
whether now owned by Mortgagor or held or hereafter acquired by Mortgagor
(collectively, the "MORTGAGED PROPERTY"):
GRANTING CLAUSE ONE
All right, title and interest in and to the real property or properties
described on EXHIBIT A hereto (collectively, the "LAND ").
GRANTING CLAUSE TWO
All additional lands, estates and development rights hereafter acquired by
Mortgagor for use in connection with the Land and the development of the Land
and all additional lands and estates therein which may, from time to time, by
supplemental mortgage or otherwise, be expressly made subject to the lien hereof
(collectively, the "ADDITIONAL LAND").
GRANTING CLAUSE THREE
Any and all buildings, structures, fixtures, additions, enlargements,
extensions, modifications, repairs, replacements and improvements now or
hereafter located on the Land or any part thereof (collectively, the
"IMPROVEMENTS"; the Land, the Additional Land and the Improvements hereinafter
collectively referred to as the "REAL PROPERTY").
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Loan No. 3212525
GRANTING CLAUSE FOUR
All easements, rights-of-way, strips and gores of land, streets, ways,
alleys, passages, sewer rights, water, water courses, water rights and powers,
oil, gas and mineral rights, air rights and development rights, zoning rights,
tax credits or benefits and all estates, rights, titles, interests, privileges,
liberties, tenements, hereditaments and appurtenances of any nature whatsoever
in any way belonging, relating or pertaining to the Real Property or any part
thereof and the reversion and reversions, remainder and remainders and all land
lying in the bed of any street, road or avenue, opened or proposed, in front of
or adjoining the Land or any part thereof to the center line thereof and all the
estates, rights, titles, interests, dower and rights of dower, curtesy and
rights of curtesy, property, possession, claim and demand whatsoever, both in
law and in equity, of Mortgagor in, of and to the Real Property and every part
and parcel thereof, with the appurtenances thereto.
GRANTING CLAUSE FIVE
All machinery, equipment, fixtures and other property of every kind and
nature whatsoever owned by Mortgagor or in which Mortgagor has or shall have an
interest (to the extent of such interest) now or hereafter located upon the Real
Property or appurtenant thereto and usable in connection with the present or
future operation and occupancy of the Real Property and all building equipment,
materials and supplies of any nature whatsoever owned by Mortgagor or in which
Mortgagor has or shall have an interest (to the extent of such interest) now or
hereafter located upon the Real Property or appurtenant thereto or usable in
connection with the present or future operation and occupancy of the Real
Property, including but not limited to all heating, ventilating, air
conditioning, plumbing, lighting, communications and elevator machinery,
equipment and fixtures (hereinafter collectively called the "EQUIPMENT") and the
right, title and interest of Mortgagor in and to any of the Equipment which may
be subject to any security agreements (as defined in the Uniform Commercial Code
of the State in which the Mortgaged Property is located (the "UNIFORM COMMERCIAL
CODE")) superior, inferior or PARI PASSU in lien to the lien of this Mortgage.
In connection with Equipment which is leased to Mortgagor or which is subject to
a lien or security interest which is superior to the lien of this Mortgage, this
Mortgage shall also cover all right, title and interest of each Mortgagor in and
to all deposits and the benefit of all payments now or hereafter made with
respect to such Equipment. It is expressly agreed that the fixtures and personal
property listed on EXHIBIT B attached hereto are owned by the tenant of Real
Property, are not owned by Mortgagor and shall not be included in the Mortgaged
Property.
GRANTING CLAUSE SIX
All awards or payments, including interest thereon, which may heretofore
and hereafter be made with respect to the Real Property or any part thereof,
whether from the exercise of the right of eminent domain (including but not
limited to any transfer made in lieu of or in anticipation of the exercise of
said right), or for a change of grade or for any other injury to or decrease in
the value of the Real Property.
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Loan No. 3212525
GRANTING CLAUSE SEVEN
All leases and subleases (including, without limitation, all guarantees
thereof) and other agreements affecting the use, enjoyment and/or occupancy of
the Real Property or any part thereof, now or hereafter entered into (including
any use or occupancy arrangements created pursuant to Section 365(h) of Title 11
of the United States Code (the "BANKRUPTCY CODE") or otherwise in connection
with the commencement or continuance of any bankruptcy, reorganization,
arrangement, insolvency, dissolution, receivership or similar proceedings or any
assignment for the benefit of creditors in respect of any tenant or occupant of
any portion of the Real Property), together with any extension or renewal of the
same (the "LEASES") and all income, rents, issues, profits, revenues and
proceeds including, but not limited to, all oil and gas or other mineral
royalties and bonuses from the Real Property (including any payments received
pursuant to Section 502(b) of the Bankruptcy Code or otherwise in connection
with the commencement or continuance of any bankruptcy, reorganization,
arrangement, insolvency, dissolution, receivership or similar proceedings or any
assignment for the benefit of creditors in respect of any tenant or occupant of
any portion of the Real Property and all claims as a creditor in connection with
any of the foregoing) (the "RENTS") and all proceeds from the sale,
cancellation, surrender or other disposition of the Leases and the right to
receive and apply the Rents to the payment of the Indebtedness.
GRANTING CLAUSE EIGHT
All proceeds of and any unearned premiums on any insurance policies
covering the Real Property or any part thereof including, without limitation,
the right to receive and apply the proceeds of any insurance, judgments or
settlements made in lieu thereof, for damage to the Real Property or any part
thereof.
GRANTING CLAUSE NINE
All tax refunds, including interest thereon, tax credits and tax abatements
and the right to receive or benefit from the same, which may be payable or
available with respect to the Real Property.
GRANTING CLAUSE TEN
The right, in the name and on behalf of Mortgagor, to appear in and defend
any action or proceeding brought with respect to the Real Property or any part
thereof and to commence any action or proceeding to protect the interest of
Mortgagee in the Real Property or any part thereof.
GRANTING CLAUSE ELEVEN
All accounts receivable, utility or other deposits, intangibles, contract
rights, interests, estate or other claims, both in law and in equity, which
Mortgagor now has or may hereafter acquire in the Real Property or any part
thereof.
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Loan No. 3212525
GRANTING CLAUSE TWELVE
All rights which Mortgagor now has or may hereafter acquire to be
indemnified and/or held harmless from any liability, loss, damage, cost or
expense (including, without limitation, attorneys' fees and disbursements)
relating to the Real Property or any part thereof.
GRANTING CLAUSE THIRTEEN
All plans and specifications, maps, surveys, studies, reports, contracts,
subcontracts, service contracts, management contracts, and other agreements,
approvals, consents, permits, special permits, licenses and rights, whether
governmental or otherwise, respecting the use, occupation, development,
construction and/or operation of the Real Property or any part thereof or the
activities conducted thereon or therein, or otherwise pertaining to the Real
Property or any part thereof.
GRANTING CLAUSE FOURTEEN
Any and all proceeds and products of any of the foregoing any and all other
security and collateral of any nature whatsoever, now or hereafter given to
secure the repayment of the Indebtedness and/or the performance of Mortgagor's
obligations to Mortgagee, including, without limitation, any escrow or reserve
fund held by Mortgagee.
TO HAVE AND TO HOLD the above granted and described Mortgaged Property unto
and to the use and benefit of Mortgagee and the successors and assigns of
Mortgagee forever.
This mortgage is upon the STATUTORY CONDITION and upon the other terms and
conditions of the Note and other Loan Documents, and upon the further condition
that in the event of any breach thereof or upon the occurrence of any Event of
Default (as hereinafter defined), Mortgagee shall have the STATUTORY POWER OF
SALE.
PROVIDED, HOWEVER, these presents are upon the express condition, if
Mortgagor shall well and truly pay to Mortgagee the Indebtedness at the time and
in the manner provided in the Note and this Mortgage and shall well and truly
abide by and comply with each and every covenant and condition set forth herein,
in the Note and in the other Loan Documents, these presents and the estate
hereby granted shall cease, terminate and be void.
PART I - GENERAL PROVISIONS
AND Mortgagor represents to, covenants with and warrants to Mortgagee that:
1. PAYMENT OF INDEBTEDNESS AND INCORPORATION OF COVENANTS, CONDITIONS AND
AGREEMENTS. Mortgagor shall pay the Indebtedness at the time and in the manner
provided in the Note, this Mortgage and the other Loan Documents. All the
covenants, conditions and agreements contained in the Note and the other Loan
Documents are hereby made a part of this Mortgage to the same extent and with
the same force as if fully set forth herein.
2. WARRANTY OF TITLE. Mortgagor has good and marketable title to the
Mortgaged Property; Mortgagor has the right to mortgage, give, grant, bargain,
sell, alienate, enfeoff, convey, confirm, pledge, lease, assign, hypothecate and
grant a security interest in the Mortgaged Property; Mortgagor possesses an
indefeasible fee estate in the Real Property; and Mortgagor owns the Mortgaged
Property free and clear of all liens, encumbrances and charges whatsoever except
those
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Loan No. 3212525
exceptions shown in the title insurance policy insuring the lien of this
Mortgage (this Mortgage and the liens, encumbrances and charges shown as
exceptions in such title policy, hereinafter collectively referred to as the
"PERMITTED ENCUMBRANCES"). Mortgagor shall forever warrant, defend and preserve
such title and the validity and priority of the lien of this Mortgage and shall
forever warrant and defend the same to Mortgagee against the claims of all
persons whomsoever.
3. INSURANCE; CASUALTY.
(a) Mortgagor, at its sole cost and expense, shall keep, or shall cause to
be kept, the Mortgaged Property insured during the term of this Mortgage for the
mutual benefit of Mortgagor and Mortgagee against loss or damage by any peril
covered by a standard "all risk of physical loss" insurance policy including,
without limitation, riot and civil commotion, vandalism, malicious mischief,
burglary and theft in an amount (i) equal to at least one hundred percent (100%)
of the then "full replacement cost" of the Improvements and Equipment, without
deduction for physical depreciation and (ii) such that the insurer would not
deem Mortgagor a coinsurer under such policies. The policies of insurance
carried in accordance with this PARAGRAPH 3 shall be paid annually in advance
and shall contain the "Replacement Cost Endorsement", and shall have a
deductible no greater than $10,000 unless so agreed by Mortgagee.
(b) Mortgagor, at its sole cost and expense, for the mutual benefit of
Mortgagor and Mortgagee, shall also obtain and maintain during the term of this
Mortgage the following policies of insurance:
(i) Flood insurance if any part of the Real Property is located in an
area identified by the Secretary of Housing and Urban Development as an
area having special flood hazards and in which flood insurance has been
made available under the National Flood Insurance Act of 1968 (and any
successor act thereto) in an amount at least equal to the outstanding
principal amount of the Note or the maximum limit of coverage available
with respect to the Improvements and Equipment under said Act, whichever is
less.
(ii) Comprehensive public liability insurance, including broad form
property damage, blanket contractual and personal injuries (including death
resulting therefrom) coverages.
(iii) Rental loss insurance in an amount equal to at least one hundred
percent of the aggregate annual amount of all rents and additional rents
payable by all of the tenants under the Leases (whether or not such Leases
are terminable in the event of a fire or casualty), such rental loss
insurance to cover rental losses for a period of at least one (1) year
after the date of the fire or casualty in question. The amount of such
rental loss insurance shall be increased from time to time during the term
of this Mortgage as and when new Leases and renewal Leases are entered into
in accordance
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with the terms of this Mortgage, to reflect all increased rent and
increased additional rent payable by all of the tenants under such renewal
Leases and all rent and additional rent payable by all of the tenants under
such new Leases.
(iv) Insurance against loss or damage from explosion of steam boilers,
air conditioning equipment, high pressure piping, machinery and equipment,
pressure vessels or similar apparatus now or hereafter installed in the
Improvements.
(v) Such other insurance (including, without limitation, earthquake
insurance) as may from time to time be reasonably required by Mortgagee in
order to protect its interests or, in the event of a Secondary Market
Transaction, as required by the Rating Agencies (as such terms are
hereinafter defined).
(c) All policies of insurance (the "POLICIES") required pursuant to this
PARAGRAPH 3 (i) shall be issued by an insurer satisfactory to Mortgagee (and, in
the event of a Secondary Market Transaction, to the Rating Agencies), (ii) shall
contain the standard New York Mortgagee non-contribution clause naming Mortgagee
as the person to which all payments made by such insurance company shall be
paid, (iii) shall be maintained throughout the term of this Mortgage without
cost to Mortgagee, (iv) shall be delivered to Mortgagee, (v) shall contain such
provisions as Mortgagee deems reasonably necessary or desirable to protect its
interest including, without limitation, endorsements providing that neither
Mortgagor, Mortgagee nor any other party shall be a co-insurer under such
Policies and that Mortgagee shall receive at least thirty (30) days prior
written notice of any modification or cancellation and (vi) shall be
satisfactory in form and substance to Mortgagee (and, in the event of a
Secondary Market Transaction, to the Rating Agencies) and shall be approved by
Mortgagee (and, in the event of a Secondary Market Transaction, by the Rating
Agencies) as to amounts, form, risk coverage, deductibles, loss payees and
insureds. Not later than thirty (30) days prior to the expiration date of each
of the Policies, Mortgagor will deliver to Mortgagee satisfactory evidence of
the renewal of each of the Policies.
(d) If the Improvements shall be damaged or destroyed, in whole or in part,
by fire or other casualty, Mortgagor shall give prompt notice thereof to
Mortgagee and prior to the making of any repairs thereto. Following the
occurrence of fire or other casualty, Mortgagor, regardless of whether insurance
proceeds are payable under the Policies or, if paid, are made available to
Mortgagor by Mortgagee, shall promptly proceed with the repair, alteration,
restoration, replacement or rebuilding of the Improvements as near as possible
to their value, utility, condition and character prior to such damage or
destruction. Such repairs, alterations, restoration, replacement and rebuilding
are herein collectively referred to as the "RESTORATION". The Restoration shall
be performed in accordance with the following provisions:
(i) Mortgagor shall procure, pay for and furnish to Mortgagee true
copies of all required governmental permits, certificates and approvals
with respect to the Restoration.
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Loan No. 3212525
(ii) Mortgagor shall furnish Mortgagee, within thirty (30) days of the
casualty, evidence reasonably satisfactory to Mortgagee of the cost to
complete the Restoration.
(iii) If the Restoration involves structural work or the estimated
cost to complete the Restoration exceeds $600,000, the Restoration shall be
conducted under the supervision of an architect (the "ARCHITECT") selected
by Mortgagor and approved by Mortgagee (which approval shall not be
unreasonably withheld), and no such Restoration shall be made except in
accordance with detailed plans and specifications, detailed cost estimates
and detailed work schedules approved by Mortgagee (which approval shall not
be unreasonably withheld).
(iv) If the estimated cost of the Restoration shall exceed $1,200,000
in the aggregate, at the request of Mortgagee, Mortgagor, before commencing
any work, shall cause to be furnished to Mortgagee a surety bond or bonds,
in form and substance reasonably satisfactory to Mortgagee, naming
Mortgagor and Mortgagee as co-obligees, in an amount that is not less than
the estimated cost of the Restoration, issued by a surety company or
companies reasonably satisfactory to Mortgagee.
(v) The Restoration shall be prosecuted to completion with all due
diligence and in an expeditious and first class workmanlike manner and in
compliance with all laws and other governmental requirements, all permits,
certificates and approvals, all requirements or fire underwriters and all
insurance policies then in force with respect to the Real Property.
(vi) At all times when any work is in progress, Mortgagor shall
maintain all insurance then required by law or customary with respect to
such work, and, prior to the commencement of any work, shall furnish to
Mortgagee duplicate originals or certificates of the policies therefor.
(vii) Upon completion of the Restoration, Mortgagor shall obtain (A)
any occupancy permit which may be required for the Improvements and (B) all
other governmental permits, certificates and approvals and all permits,
certificates and approvals of fire underwriters which are required for or
with respect to the Restoration, and shall furnish true copies thereof to
Mortgagee.
(viii) An Event of Default (as hereinafter defined) shall be deemed to
have occurred under this Mortgage if Mortgagor, after having commenced
demolition or construction of any Improvements, shall abandon such
demolition or the construction work or shall fail to complete such
demolition and construction within a reasonable time after the commencement
thereof.
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Loan No. 3212525
(e) Mortgagor and Mortgagee shall jointly adjust and settle all insurance
claims, PROVIDED, HOWEVER, if an Event of Default shall have occurred and be
continuing, Mortgagee shall have the right to adjust and settle such claims
without the prior consent of Mortgagor. In the event of any insured loss, the
payment for such loss shall be made directly to Mortgagee. Mortgagee shall have
the option in its sole discretion to apply any insurance proceeds payable under
any of the Policies to the payment of the Indebtedness or to allow all or a
portion of such proceeds to be used for the Restoration. Notwithstanding the
foregoing, provided (i) no Event of Default or event that with the passage of
time or giving of notice or both would constitute a default has occurred
hereunder, under the Note or under any of the other Loan Documents and remains
uncured at the time of such application, (ii) the insurer does not deny
liability to any named insured, (iii) each major and/or anchor tenant (as
determined by Mortgagee) whose Lease permits termination thereof as a result of
such insured loss, agrees in writing to continue its Lease, (iv) rental loss
insurance is available and in force and effect to offset in full any abatement
of rent to which any tenant may be entitled as a result of such damage,
destruction or loss, (v) the remaining Improvements continue at all times to
comply with all applicable building, zoning and other land use laws and
regulations, (vi) in Mortgagee's judgment, the Restoration is practicable and
can be completed within one (1) year after the damage, destruction or loss and
at least one (1) year prior to the Maturity Date (as such term is defined in the
Note) and (vii) rebuilding of the Improvements to substantially identical size,
condition and use as existed prior to the casualty is permitted by all
applicable laws and ordinances, then all of such proceeds shall be used for
Restoration. Any application of insurance proceeds to the Indebtedness shall be
to the unpaid installments of principal due under the Note in the inverse order
of their maturity, such that the regular payments under the Note shall not be
reduced or altered in any manner. In the event the above criteria are satisfied
(including that no Event of Default or event that, with the passage of time or
giving of notice or both, would constitute a default has occurred hereunder,
under the Note or other Loan Documents) or Mortgagee otherwise elects to allow
the use of such proceeds for the Restoration, such proceeds shall be disbursed
in accordance with the following provisions:
(i) Each request for an advance of insurance proceeds shall be
made on seven (7) days' prior notice to Mortgagee and shall be
accompanied by a certificate of the Architect, if one be required
under PARAGRAPH 3(d)(III) above, otherwise by an executive officer or
managing general partner or managing member of Mortgagor, stating (A)
that all work completed to date has been performed in compliance with
the approved plans and specifications and in accordance with all
provisions of law, (B) the sum requested is properly required to
reimburse Mortgagor for payments by Mortgagor to, or is properly due
to, the contractor, subcontractors, materialmen, laborers, engineers,
architects or other persons rendering services or materials for the
Restoration (giving a brief description of such services and
materials), and that when added to all sums, if any, previously
disbursed by Mortgagee, does not exceed the value of the work done to
the date of such certificate and (C) that the amount of such proceeds
remaining in the hands of Mortgagee will be sufficient on completion
of the
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Loan No. 3212525
work to pay the same in full (giving, in such reasonable detail as
Mortgagee may require, an estimate of the cost of such completion).
(ii) Each request for an advance of insurance proceeds shall, to
the extent permitted under applicable law, be accompanied by waivers
of liens satisfactory to Mortgagee covering that part of the
Restoration previously paid for, if any, and by a search prepared by a
title company or by other evidence reasonably satisfactory to
Mortgagee including without limitation a title endorsement
satisfactory to Mortgagee if available in the state where the Real
Property is located, that there has not been filed with respect to the
Real Property any mechanic's lien or other lien or instrument and that
there exist no encumbrances on or affecting the Real Property other
than the Permitted Encumbrances or otherwise approved by Mortgagee. In
addition to the foregoing, the request for the final advance shall be
accompanied by (A) any final occupancy permit which may be required
for the Improvements, (B) all other governmental permits, certificates
and approvals and all other permits necessary for the occupancy and
operation of the Real Property, (C) Tenant estoppels from tenants
whose space was affected and (D) final lien waivers from all
contractors, subcontractors and materialmen.
(iii) No advance of insurance proceeds shall be made if there
exists an Event of Default or event which with the passage of time or
the giving of notice or both would constitute a default on the part of
Mortgagor under this Mortgage, the Note or any other Loan Document.
(iv) If the cost of the Restoration (as reasonably estimated by
Mortgagee) at any time shall exceed the amount of the insurance
proceeds available therefor, insurance proceeds shall not be advanced
until Mortgagor, before commencing the Restoration or continuing the
Restoration, as the case may be, shall deposit the full amount of the
deficiency (or other assurances reasonably satisfactory to Mortgagee)
with Mortgagee and the amount so deposited shall first be applied
toward the cost of the Restoration before any portion of the insurance
proceeds is disbursed for such purpose.
Upon completion of the Restoration and payment in full therefor, or upon
failure on the part of Mortgagor promptly to commence or diligently to continue
the Restoration, or at any time upon request by Mortgagor, Mortgagee may apply
the amount of any such proceeds then or thereafter in the hands of Mortgagee to
the payment of the Indebtedness; PROVIDED, HOWEVER, that nothing herein
contained shall prevent Mortgagee from applying at any time the whole or any
part of such proceeds to the curing of any default that has not been cured
within the applicable cure period under this Mortgage, the Note or any other
Loan Document.
(f) Insurance proceeds and any additional funds deposited by Mortgagor with
Mortgagee shall constitute additional security for the Indebtedness. Mortgagor
shall execute,
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Loan No. 3212525
deliver, file and/or record, at its expense, such documents and
instruments as Mortgagee deems necessary or advisable to grant to Mortgagee a
perfected, first priority security interest in the insurance proceeds and such
additional funds. If the insurance proceeds are applied to Restoration, (i) the
insurance proceeds shall be, at Mortgagee's election, disbursed in installments
by Mortgagee or by a disbursing agent ("DEPOSITORY") selected by Mortgagee and
whose fees and expenses shall be paid by Mortgagor in the manner provided in
PARAGRAPH 3(e) above and (ii) Mortgagee shall be entitled to receive a fee in
the amount of one percent (1%) of the insurance proceeds as compensation for
administering the use of insurance proceeds, such fee to be in addition to fees
paid the Depository.
4. PAYMENT OF TAXES, ETC.
(a) Mortgagor shall pay all taxes, assessments, water rates and sewer
rents, now or hereafter levied or assessed or imposed against the Mortgaged
Property or any part thereof (the "TAXES") and all ground rents, maintenance
charges, other governmental impositions, and other charges, including, without
limitation, vault charges and license fees (collectively, "Other Charges") for
the use of vaults, chutes and similar areas adjoining the Real Property, as same
become due and payable. Mortgagor will deliver to Mortgagee, promptly upon
Mortgagee's request, evidence satisfactory to Mortgagee that the Taxes and Other
Charges have been so paid and are not then delinquent. Mortgagor shall not
suffer or permit any lien or charge (including, without limitation, any
mechanic's lien) against all or any part of the Mortgaged Property and Mortgagor
shall promptly cause to be paid and discharged any lien or charge whatsoever
which may be or become a lien or charge against the Mortgaged Property.
Mortgagor shall promptly pay for all utility services provided to the Mortgaged
Property. In addition, Mortgagee may, at its option, retain the services of a
firm to monitor the payment of Taxes, the cost of which shall be borne by
Mortgagor.
(b)Notwithstanding the provisions of subsection (a) of this PARAGRAPH 4,
Mortgagor shall have the right to contest in good faith the amount or validity
of any such Taxes, liens or Other Charges (including, without limitation, tax
liens and mechanics' liens) referred to in subsection (a) above by appropriate
legal proceedings and in accordance with all applicable law, after notice to,
but without cost or expense to, Mortgagee, provided that (i) no Event of Default
or event that, with the passage of time or giving of notice or both, would
constitute a default hereunder, under the Note or other Loan Documents has
occurred and is continuing, (ii) Mortgagor pays such Taxes, liens or Other
Charges as same become due and payable, unless Mortgagor delivers evidence
satisfactory to Mortgagee that, as a result of Mortgagor's contest, Mortgagor's
obligation to pay such Taxes, liens or Other Charges has been deferred by the
appropriate governmental authority, in which event, Mortgagor may defer such
payment of such Taxes, liens or Other Charges until the date specified by such
governmental authority, (iii) such contest shall be promptly and diligently
prosecuted by and at the expense of Mortgagor, (iv) Mortgagee shall not thereby
suffer any civil penalty, or be subjected to any criminal penalties or
sanctions, (v) such contest shall be discontinued and such Taxes, liens or Other
Charges promptly paid if at any time all or any part of the Mortgaged Property
shall be in
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Loan No. 3212525
imminent danger of being foreclosed, sold, forfeited or otherwise
lost or if the liens of this Mortgage or the priority thereof shall be in
imminent danger of being impaired, (vi) Mortgagor shall have set aside adequate
reserves (in Mortgagee's judgment) for the payment of such Taxes, liens or Other
Charges, together with all interest and penalties thereon and (vii) Mortgagor
shall have furnished such security as may be required in the proceeding or as
may be requested by Mortgagee, to insure the payment of any such Taxes, liens or
Other Charges, together with all interest and penalties thereon.
5. ESCROW FUND.
(a) TAX AND INSURANCE FUND. Mortgagor shall pay to Mortgagee on the first
day of each calendar month an amount equal to (i) one-twelfth of an amount which
would be sufficient to pay, at least thirty (30) days prior to the date the
Taxes and Other Charges are due without the payment of any penalties or
interest, the Taxes and Other Charges estimated by Mortgagee to be payable,
during the next ensuing twelve (12) months and (ii) one-twelfth of an amount
which would be sufficient to pay, at least thirty (30) days prior to their due
date for the renewal of the coverage afforded by the Policies upon the
expiration thereof, the insurance premiums for the Policies estimated by
Mortgagee to be payable on such due date, (said amounts in (i) and (ii) above
hereafter called the "Tax and Insurance Fund").
(b) REPLACEMENT ESCROW FUND. Mortgagor shall enter into a Replacement
Reserve Agreement which shall require Mortgagor to pay to Mortgagee on the first
day of each calendar month one twelfth (1/12) of the amount reasonably estimated
by Mortgagee to be due for the replacements and capital repairs required to be
made to the Mortgaged Property during each calendar year (the "REPLACEMENT
ESCROW FUND"). At least thirty (30) days prior to the end of each calendar year,
Mortgagor shall deliver to Mortgagee for Mortgagee's review and approval, a
capital expenditure budget (the "BUDGET") itemizing the replacements and capital
repairs which are anticipated to be made to the Mortgaged Property during the
next immediately succeeding calendar year. Mortgagee may, upon notice to
Mortgagor, adjust the monthly amounts required to be deposited into the
Replacement Escrow Fund to a monthly amount equal to one twelfth (1/12) of the
total amount specified in each approved Budget. Mortgagee shall make
disbursements from the Replacement Escrow Fund for items specified in each
approved Budget or in the Replacement Reserve Agreement as set forth in such
Agreement. Mortgagee may require an inspection of the Mortgaged Property prior
to making a disbursement in order to verify completion of replacements and
repairs. Mortgagee reserves the right to make any disbursement from the
Replacement Escrow Fund directly to the party furnishing materials and/or
services. Provided that (i) the Mortgagor named herein is the owner of the
Mortgaged Property, (ii) there is no default by Mortgagor under the Loan
Documents and (iii) the Mortgaged Property is being properly maintained by
Mortgagor, then the monthly deposits to the Replacement Escrow Fund may be
suspended so long as the balance of the Replacement Escrow Fund is equal to at
least twenty-four times the monthly deposit required (the "CAP AMOUNT"), it
being understood that if any disbursements under the Replacement Reserve
Agreement shall cause said balance to be less than the Cap Amount, or
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Loan No. 3212525
if such balance shall for any other reason be less than the Cap Amount, the
monthly deposits shall resume until the balance of the Replacement Escrow Fund
is again equal to the Cap Amount.
(c) TENANT IMPROVEMENT AND LEASING COMMISSION ESCROW. Mortgagor shall enter
into a Tenant Improvement and Leasing Commission Agreement which shall require
Mortgagor to pay to Mortgagee on the first day of each calendar month deposits
for additional collateral in the amount of $8,400.00 each for payment of costs
and expenses incurred by Mortgagor in connection with the performance of work to
refit and release space in the Improvements that may be vacated during the term
of the Loan, and for payment of leasing commissions incurred by Mortgagor in
connection with the releasing of space in the Improvements that may be vacated
during the term of the Loan (the "TENANT IMPROVEMENT AND LEASING COMMISSION
ESCROW FUND"), all according to the Tenant Improvement and Leasing Commission
Agreement.
The amounts in (a), (b) and (c) above shall hereinafter be collectively
called the "ESCROW FUND". Mortgagor hereby pledges to Mortgagee any and all
monies now or hereafter deposited as the Escrow Fund as additional security for
the payment of the Indebtedness. Mortgagee may apply the Escrow Fund to payments
of Taxes, Other Charges, insurance premiums and, as applicable, payments for
replacements and capital repairs, tenant improvements and leasing commissions
and repairs and remediations required to be made by Mortgagor pursuant to the
terms hereof or pursuant to the terms of any other Loan Documents (even though
subsequent owners of the Mortgaged Property may benefit thereby); PROVIDED,
HOWEVER, if there is an Event of Default which is continuing, then Mortgagee may
credit such Escrow Fund against the Indebtedness in such priority and
proportions as Mortgagee in its discretion shall deem proper. If the Escrow Fund
is not sufficient to fully pay for the Taxes, Other Charges and/or the insurance
premiums or, as applicable, amounts for replacements and capital repairs, tenant
improvements and leasing commissions and repairs and remediation when due,
Mortgagor shall promptly pay to Mortgagee, upon demand, an amount which
Mortgagee shall estimate as sufficient to make up the deficiency. The Escrow
Fund shall not constitute a trust fund and may be commingled with other monies
held by Mortgagee. No earnings or interest on the Escrow Fund shall be payable
to Mortgagor, except as otherwise provided in a written agreement between
Mortgagor and Mortgagee.
6. CONDEMNATION. Mortgagor shall promptly give Mortgagee written notice of
the actual or threatened commencement of any condemnation or eminent domain
proceeding and shall deliver to Mortgagee copies of any and all papers served in
connection with such proceedings. Following the occurrence of a condemnation,
Mortgagor, regardless of whether an award is available, shall promptly proceed
to restore, repair, replace or rebuild the Improvements to the extent
practicable to be of at least equal value and of substantially the same
character as prior to such condemnation, all to be effected in accordance with
applicable law. Notwithstanding any taking by any public or quasi-public
authority through eminent domain or otherwise (including but not limited to any
transfer made in lieu of or in anticipation of the exercise of such taking),
Mortgagor shall continue to pay the Indebtedness at the time and in the manner
provided for its payment in the Note, in this Mortgage and the other
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Loan No. 3212525
Loan Documents and the Indebtedness shall not be reduced until any award or
payment therefor shall have been actually received after expenses of collection
and applied by Mortgagee to the discharge of the Indebtedness. Mortgagor shall
cause the award or payment made in any condemnation or eminent domain
proceeding, which is payable to Mortgagor, to be paid directly to Mortgagee.
Mortgagee may apply any such award or payment (for purposes of this PARAGRAPH 6,
the award or payment that may be made in any condemnation or eminent domain
proceeding shall mean the entire award allocated to Mortgagor in any capacity)
to the discharge of the Indebtedness whether or not then due and payable (such
application to be without prepayment fee or premium, except that if an Event of
Default, or an event with notice and/or the passage of time, or both, would
constitute an Event of Default, has occurred, then such application shall be
subject to a prepayment premium computed in accordance with the Note). If the
Mortgaged Property is sold, through foreclosure or otherwise, prior to the
receipt by Mortgagee of such award or payment, Mortgagee shall have the right,
whether or not a deficiency judgment on the Note shall have been sought,
recovered or denied, to receive said award or payment or a portion thereof
sufficient to pay the Indebtedness.
7. LEASES AND RENTS.
(a) Mortgagor does hereby absolutely and unconditionally assign to
Mortgagee its right, title and interest in all current and future Leases and
Rents and all proceeds from the sale, cancellation, surrender or other
disposition of the Leases, it being intended by Mortgagor that this assignment
constitutes a present, absolute assignment and not an assignment for additional
security only. Such assignment to Mortgagee shall not be construed to bind
Mortgagee to the performance of any of the covenants, conditions or provisions
contained in any such Lease or otherwise to impose any obligation upon
Mortgagee. Mortgagor agrees to execute and deliver to Mortgagee such additional
instruments in form and substance satisfactory to Mortgagee, as may hereafter be
requested by Mortgagee to further evidence and confirm such assignment.
Nevertheless, subject to the terms of this PARAGRAPH 7, Mortgagee grants to
Mortgagor a revocable license to operate and manage the Mortgaged Property and
to collect the Rents. Mortgagor shall hold the Rents, or a portion thereof
sufficient to discharge all current sums due on the Indebtedness, in trust for
the benefit of Mortgagee for use in the payment of such sums. The grant of the
foregoing license is subject to the provisions of PARAGRAPH 1 of the separate
Assignment of Leases and Rents of even date herewith granted by the Mortgagor as
"Assignor" to the Mortgagee as "Assignee" with respect to the Mortgaged Property
("ASSIGNMENT OF LEASES AND RENTS"). Upon the occurrence of an Event of Default,
the license granted to Mortgagor herein shall be automatically revoked and
Mortgagee shall immediately be entitled to possession of all Rents, whether or
not Mortgagee enters upon or takes control of the Mortgaged Property. Mortgagee
is hereby granted and assigned by Mortgagor the right, at its option, upon the
revocation of the license granted herein to enter upon the Mortgaged Property in
person, by agent or by court-appointed receiver to collect the Rents. Any Rents
collected after the revocation of the license herein granted may be applied
toward payment of the Indebtedness in such priority and proportion as Mortgagee
in its discretion shall deem proper. It is further the intent of Mortgagor and
Mortgagee that the Rents hereby absolutely assigned are no longer, during the
term of this Mortgage, property of
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Loan No. 3212525
Mortgagor or property of any estate of Mortgagor as defined in Section 541 of
the Bankruptcy Code and shall not constitute collateral, cash or otherwise, of
Mortgagor. The term "Rents" as used herein shall mean the gross rents without
deduction or offsets of any kind.
(b) All Leases executed after the date of this Mortgage shall provide that
they are subordinate to this Mortgage and that the lessee agrees to attorn to
Mortgagee; PROVIDED, HOWEVER, that nothing herein shall affect Mortgagee's right
to designate from time to time any one or more Leases as being superior to this
Mortgage and Mortgagor shall execute and deliver to Mortgagee and shall cause to
be executed and delivered to Mortgagee from each tenant under such Lease any
instrument or agreement as Mortgagee may deem necessary to make such Lease
superior to this Mortgage. Upon request, Mortgagor shall promptly furnish
Mortgagee with executed copies of all Leases.
(c) Mortgagor shall not, without the prior consent of Mortgagee, (i) lease
all or any part of the Mortgaged Property, (ii) alter or change the terms of any
Lease or cancel or terminate, abridge or otherwise modify the terms of any
Lease, (iii) consent to any assignment of or subletting under any Lease not in
accordance with its terms, (iv) cancel, terminate, abridge or otherwise modify
any guaranty of any Lease or the terms thereof, (v) collect or
accept prepayments of installments of Rents for a period of more than one (1)
month in advance or (vi) further assign the whole or any part of the Leases or
the Rents.
(d) With respect to each Lease, Mortgagor shall (i) observe and perform
each and every provision thereof on the lessor's part to be fulfilled or
performed under each Lease and not do or permit to be done anything to impair
the value of the Lease as security for the Loan, including surrender or
voluntary termination of any Lease, (ii) promptly send to Mortgagee copies of
all notices of default which Mortgagor shall send or receive thereunder, (iii)
enforce all of the terms, covenants and conditions contained in such Lease upon
the lessee's part to be performed, short of termination thereof, (iv) execute
and deliver, at the request of Mortgagee, all such further assurances,
confirmations and assignments in connection with the Mortgaged Property as
Mortgagee shall, from time to time, require and (v) upon request, furnish
Mortgagee with executed copies of all Leases. Upon the occurrence of any Event
of Default under this Mortgage, Mortgagor shall pay monthly in advance to
Mortgagee, or any receiver appointed to collect the Rents, the fair and
reasonable rental value for the use and occupation of the Mortgaged Property or
part of the Mortgaged Property as may be occupied by Mortgagor or any one
Mortgagor and upon default in any such payment Mortgagor shall vacate and
surrender possession of the Mortgaged Property to Mortgagee or to such receiver
and, in default thereof, Mortgagor may be evicted by summary proceedings or
otherwise.
(e) All security deposits of tenants, whether held in cash or any other
form, shall not be commingled with any other funds of Mortgagor and, if cash,
shall be deposited by Mortgagor at such commercial or savings bank or banks as
may be reasonably satisfactory to Mortgagee. Any bond or other instrument which
Mortgagor is permitted to hold in lieu of cash
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Loan No. 3212525
security deposits under any applicable legal requirements shall be maintained in
full force and effect in the full amount of such deposits unless replaced by
cash deposits as hereinabove described, shall be issued by an institution
reasonably satisfactory to Mortgagee, shall, if permitted pursuant to any legal
requirements, name Mortgagee as payee or Mortgagee thereunder (or at Mortgagee's
option, be fully assignable to Mortgagee) and shall, in all respects, comply
with any applicable legal requirements and otherwise be reasonably satisfactory
to Mortgagee. Mortgagor shall, upon request, provide Mortgagee with evidence
reasonably satisfactory to Mortgagee of Mortgagor's compliance with the
foregoing. Following the occurrence and during the continuance of any Event of
Default, Mortgagor shall, upon Mortgagee's request, if permitted by any
applicable legal requirements, turn over to Mortgagee the security deposits (and
any interest theretofore earned thereon) with respect to all or any portion of
the Mortgaged Property, to be held by Mortgagee subject to the terms of the
Leases.
8. MAINTENANCE AND USE OF MORTGAGED PROPERTY. Mortgagor shall, at its sole
cost and expense, keep and maintain the Mortgaged Property, including, without
limitation, parking lots and recreational and landscaped portions thereof, if
any, in the same condition which exists as of the date hereof, reasonable wear
and tear excepted, but in any event, in good order and condition. The
Improvements and the Equipment shall not be diminished, removed, demolished or
materially altered (except for normal replacement of Equipment) and Mortgagor
shall not erect any new buildings, structures or building additions on the
Mortgaged Property without the prior consent of Mortgagee. So long as no Event
of Default shall have occurred and be continuing, Mortgagor shall have the right
at any time and from time to time after providing Mortgagee with written notice
to make or cause to be made reasonable alterations of and additions to the
Mortgaged Property or any part thereof, PROVIDED that any alteration or addition
(a) shall not change the general character of the Mortgaged Property or reduce
the fair market value thereof below its value immediately before such alteration
or addition, or impair the usefulness of the Mortgaged Property, (b) is effected
with due diligence, in a good and workmanlike manner and in compliance with all
applicable laws and with all provisions of any insurance policy covering or
applicable to the Mortgaged Property and all requirements of the issuers
thereof, (c) is promptly and fully paid for, or caused to be paid for, by
Mortgagor, (d) the estimated cost of such alteration or addition does not exceed
$600,000, and (e) is made under the supervision of a qualified architect or
engineer, (f) shall not violate the terms of any Leases, and (g) upon
completion, Mortgagor shall provide Mortgagee with (i) a satisfactory final
improvement survey if the footprint of the building has been altered, (ii), any
final occupancy permit which may be required for the Improvements, (iii) all
other governmental permits, certificates and approvals and all other permits,
certificates and approvals of fire underwriters which are required with respect
to the alterations and additions and the use and occupancy thereof, and shall
furnish true copies thereof to Mortgagee, and (iv) final lien waivers from all
contractors, subcontractors and materialmen. Mortgagor shall promptly comply
with all laws, orders and ordinances affecting the Mortgaged Property, or the
use thereof, PROVIDED, HOWEVER, that nothing in the foregoing clause shall
require Mortgagor to comply with any such law, order or ordinance so long as
Mortgagor shall in good faith, after notice to, but without cost or expense to,
Mortgagee, contest the validity of such law, order or ordinance by appropriate
legal proceedings and in accordance with all applicable law, which proceedings
must operate to prevent (a) the enforcement thereof, (b) the payment of any
fine, charge
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Loan No. 3212525
or penalty, (c) the sale or forfeiture of the Mortgaged Property or any part
thereof, (d) the lien of this Mortgage and the priority thereof from being
impaired, (e) the imposition of criminal liability on Mortgagee and (f) the
imposition, unless stayed, of civil liability on Mortgagee; PROVIDED that during
such contest Mortgagor shall, at the option of Mortgagee, provide cash, bonds or
other security satisfactory to Mortgagee, indemnifying and protecting Mortgagee
against any liability, loss or injury by reason of such non-compliance or
contest, and PROVIDED FURTHER, that such contest shall be promptly and
diligently prosecuted by and at the expense of Mortgagor. Mortgagor shall
promptly, at its sole cost and expense, repair, replace or rebuild any part of
the Mortgaged Property which may be destroyed by any casualty, or become
damaged, worn or dilapidated. Mortgagor shall not commit any waste at the
Mortgaged Property. Mortgagor shall not initiate, join in, acquiesce in or
consent to any change in any private restrictive covenant, zoning law or other
public or private restriction, limiting or defining the uses which may be made
of the Mortgaged Property or any part thereof. If under applicable zoning
provisions the use of all or any portion of the Mortgaged Property is or shall
become a nonconforming use, Mortgagor will not cause or permit such
nonconforming use to be discontinued or abandoned without the express consent of
Mortgagee. Mortgagor covenants and agrees that it shall operate, or cause to be
operated, the Mortgaged Property at all times as a first-class office,
warehouse, distribution and industrial building. Without limiting the foregoing,
Mortgagor agrees that if any of the fixtures or personal property listed on
EXHIBIT B are removed from the Improvements, then Mortgagor shall restore (or
cause to be restored) any damage to the Mortgaged Property caused by or
resulting from such removal.
9. TRANSFER OR ENCUMBRANCE OF THE MORTGAGED PROPERTY.
(a) Mortgagor acknowledges that Mortgagee has examined and relied on the
creditworthiness and experience of Mortgagor in owning and operating properties
such as the Mortgaged Property in agreeing to make the Loan, and that Mortgagee
will continue to rely on Mortgagor's ownership of the Mortgaged Property as a
means of maintaining the value of the Mortgaged Property as security for
repayment of the Indebtedness. Mortgagor acknowledges that Mortgagee has a valid
interest in maintaining the value of the Mortgaged Property so as to ensure
that, should Mortgagor default in the repayment of the Indebtedness, Mortgagee
can recover the Indebtedness by a sale of the Mortgaged Property. Mortgagor
shall not, without the prior consent of Mortgagee, sell, convey, alienate,
mortgage, encumber, pledge or otherwise transfer the Mortgaged Property or any
part thereof, or permit the Mortgaged Property or any part thereof to be sold,
conveyed, alienated, mortgaged, encumbered, pledged or otherwise transferred.
(b) A sale, conveyance, alienation, mortgage, encumbrance, pledge or
transfer within the meaning of this PARAGRAPH 9 shall be deemed to include (i)
an installment sales agreement wherein Mortgagor agrees to sell the Mortgaged
Property or any part thereof for a price to be paid in installments, (ii) an
agreement by Mortgagor leasing all or a substantial part of the Mortgaged
Property for other than actual occupancy by a space tenant thereunder or a sale,
assignment or other transfer of, or the grant of a security interest in,
Mortgagor's right, title and interest in and to any Leases or any Rents, (iii)
if Mortgagor, the guarantor of any Non-Recourse Carveout Obligations, or any
general partner or managing member of Mortgagor or such guarantor is a
corporation, the voluntary or involuntary sale, conveyance or transfer of such
corporation's stock (or the stock of any corporation directly or indirectly
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Loan No. 3212525
controlling such corporation by operation of law or otherwise, except the stock
of DM Management Company in the event such stock is traded on a public stock
exchange or NASDAQ) or the creation or issuance of new stock in one or a series
of transactions by which an aggregate of more than 10% of such corporation's
stock (other than the stock of DM Management Company in the event such stock is
traded on a public stock exchange or NASDAQ) shall be vested in a party or
parties who are not now stockholders or any change in the control of such
corporation (other than a change in control with respect to the stock of DM
Management Company in the event such stock is traded on a public stock exchange
or NASDAQ) and (iv) if Mortgagor, any said guarantor or any general partner or
managing member of Mortgagor or any said guarantor is a limited or general
partnership, joint venture or limited liability company, the change, removal,
resignation or addition of a general partner, managing partner, limited partner,
joint venturer or member or the transfer of the partnership interest of any
general partner, managing partner or limited partner or the transfer of the
interest of any joint venturer or member.
(c) Mortgagee shall not be required to demonstrate any actual impairment of
its security or any increased risk of default hereunder in order to declare the
Indebtedness immediately due and payable upon Mortgagor's sale, conveyance,
alienation, mortgage, encumbrance, pledge or transfer of the Mortgaged Property
without Mortgagee's consent. This provision shall apply to every sale,
conveyance, alienation, mortgage, encumbrance, pledge or transfer of the
Mortgaged Property regardless of whether voluntary or not, or whether or not
Mortgagee has consented to any previous sale, conveyance, alienation, mortgage,
encumbrance, pledge or transfer of the Mortgaged Property.
(d) Mortgagee's consent to a sale, conveyance, alienation, mortgage,
encumbrance, pledge or transfer of the Mortgaged Property shall not be deemed to
be a waiver of Mortgagee's right to require such consent to any future
occurrence of same. Any sale, conveyance, alienation, mortgage, encumbrance,
pledge or transfer of the Mortgaged Property made in contravention of this
PARAGRAPH 9 shall be null and void and of no force and effect.
(e) Mortgagor agrees to bear and shall pay or reimburse Mortgagee on demand
for all reasonable expenses (including, without limitation, reasonable
attorneys' fees and disbursements, title search costs and title insurance
endorsement premiums) incurred by Mortgagee in connection with the review,
approval and documentation of any such sale, conveyance, alienation, mortgage,
encumbrance, pledge or transfer.
(f) Mortgagee's consent to the sale or transfer of the Mortgaged Property
will not be unreasonably withheld after consideration of all relevant factors,
PROVIDED that:
(i) no Event of Default shall have occurred and remain uncured;
(ii) the proposed transferee ("TRANSFEREE"), the guarantors of Non-
Recourse Carveout Obligations (hereinafter defined) and the indemnitors of
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Loan No. 3212525
environmental liabilities shall be reputable entities or persons of good
character, creditworthy, with sufficient financial worth considering the
obligations assumed and undertaken, as evidenced by financial statements
and other information reasonably requested by Mortgagee;
(iii) the Transferee and its property manager shall have sufficient
experience in the ownership and management of properties similar to the
Mortgaged Property, and Mortgagee shall be provided with reasonable
evidence thereof (and Mortgagee reserves the right to approve the
Transferee without approving the substitution of the property manager);
(iv) that Mortgagee has received a written request for approval from
the Mortgagor at least sixty (60) days prior to the proposed transfer
(including a description of the proposed terms of the transfer), together
with a diagram showing the legal structure of the Transferee, the proposed
guarantor of Non-Recourse Carveout Obligations and the proposed indemnitor
of environmental liabilities and all of the constituent entities of each,
after the contemplated transfer, and a list of the names, types of
interests and ownership percentages of all persons to have ownership
interests in any of the foregoing or any constituent entity thereof,
financial statements for all such entities and an administrative fee of
$5,000, which shall be deemed fully earned on the date of receipt and shall
be retained by Mortgagee regardless of whether or not the transfer occurs
and whether or not approval is given;
(v) Mortgagee and its counsel have received (aa) certification from
Mortgagor and the Transferee that the proposed terms of the transfer
described in its subparagraph 9(f)(iv) are the actual terms of the
transfer, (bb) evidence of casualty insurance and other applicable
insurance, (cc) all corporate, partnership or other entity documents and
(dd) all other certificates, legal opinions, title materials and other
documents which Mortgagee may reasonably require, all in form and substance
reasonably satisfactory to Mortgagee, at least 30 days prior to the
proposed transfer;
(vi) Mortgagee shall be provided satisfactory evidence concerning the
effect of any change in the real estate taxes to result from the sale and
the effect of such change on the ability of the Security to generate a cash
flow sufficient to pay the debt service on the Loan and to maintain a debt
service coverage ratio satisfactory to Mortgagee;
(vii) to the extent applicable, Mortgagee shall have received in
writing evidence from the Rating Agencies to the effect that such transfer
will not result in a re-qualification, reduction or withdrawal of any
rating initially assigned or to be assigned in a Secondary Market
Transaction together with such legal opinions as may be requested by the
Rating Agencies. The term "RATING AGENCIES" as used herein shall mean each
of Standard & Poor's Ratings Group, Moody's Investors Service, Inc., Duff &
Phelps
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Loan No. 3212525
Credit Rating Co., Fitch Investors Service, Inc. or any other
nationally-recognized statistical rating agency who shall then be rating
the certificates or securities issued in connection with the Secondary
Market Transaction;
(viii) the Transferee and its constituent entities shall comply with
all of the Single Purpose Entity/Separateness requirements set forth in
Paragraph 19 hereof;
(ix) the Transferee shall have executed and delivered to Mortgagee an
assumption agreement in form and substance acceptable to Mortgagee,
evidencing such Transferee's agreement to abide and be bound by the terms
of the Note, this Mortgage and the other Loan Documents, together with an
executed guaranty of Non- Recourse Carveout Obligations under the Note from
an approved guarantor and an executed separate environmental indemnity
agreement from an approved indemnitor, both in form and substance
acceptable to Mortgagee, and such legal opinions and title insurance
endorsements as may be reasonably requested by Mortgagee; and
(x) Mortgagee shall have received an assumption fee equal to one
percent (1%) of the then unpaid principal balance of the Note (against
which the administrative fee shall be credited) in addition to the payment
of all costs and expenses incurred by Mortgagee in connection with such
assumption (including reasonable attorney's fees and costs).
In the event all of the foregoing conditions are satisfied and Mortgagee
consents to the sale or transfer, Mortgagee agrees to release (aa) the
transferor Mortgagor and the prior guarantors of Non- Recourse Carveout
Obligations with respect to matters first arising solely after the transfer, and
(bb) the prior indemnitors of environmental liabilities with respect to a
presence and/or release which first occurs solely after acquisition of title to
the Mortgaged Property by Mortgagee upon a foreclosure or acceptance of a deed
in lieu of foreclosure and surrender of possession and occupancy of the
Mortgaged Property by the transferor Mortgagor, the prior guarantors and the
prior indemnitors, their agents, affiliates, employees and independent
contractors. The transferor Mortgagor, the prior guarantors and the prior
indemnitors, respectively, shall have the burden of proving that the conditions
in this PARAGRAPH 9 (including, without limitation, the time as to which matters
described herein arose) were satisfied by clear and convincing evidence and
shall continue to defend with counsel satisfactory to Mortgagee and shall
indemnify and hold Mortgagee harmless for all matters set forth in PARAGRAPH 39
and in the Non-Recourse Carveout Obligations unless and until a court of
competent jurisdiction finds that such transferor Mortgagor, prior guarantors or
prior indemnitors, respectively, met such burden.
10. ESTOPPEL CERTIFICATES.
(a) Mortgagor, within ten (10) business days after request by
Mortgagee, shall furnish Mortgagee from time to time with a statement, duly
acknowledged and certified, setting forth (i) the amount of the original
principal amount of the Note, (ii) the unpaid principal
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Loan No. 3212525
amount of the Note, (iii) the rate of interest in the Note, (iv) the date
through which all installments of interest, commitment fees and/or
principal have been paid, (v) any offsets or defenses to the payment of the
Indebtedness, if any, (vi) that the Note and this Mortgage have not been
modified or if modified, giving particulars of such modification and (vii)
such other information as shall be reasonably requested by Mortgagee.
(b) Mortgagor, after request by Mortgagee, will obtain and furnish
(within the time periods, if any, provided in the applicable Leases or if
no time period is so specified, within ten (10) business days after
request) Mortgagee from time to time with estoppel certificates from any
tenants under then existing Leases, which certificates shall be in form and
substance as required by such Leases, or if not required, then in form and
substance reasonably satisfactory to Mortgagee.
11. NO COOPERATIVE OR CONDOMINIUM. Mortgagor shall not operate the
Mortgaged Property, or permit the Mortgaged Property to be operated as a
cooperative or condominium building or buildings in which the tenants or
occupants participate in the ownership, control or management of the Mortgaged
Property or any part thereof, as tenant stockholders or otherwise.
12. CHANGES IN THE LAWS REGARDING TAXATION. If any law is enacted or
adopted or amended after the date of this Mortgage which deducts the
Indebtedness or any portion thereof from the value of the Mortgaged Property for
the purpose of taxation or which imposes a tax, either directly or indirectly,
on the principal amount of the Note or Mortgagee's interest in the Mortgaged
Property, Mortgagor will pay such tax, with interest and penalties thereon, if
any. In the event Mortgagee is advised by counsel chosen by it that the payment
of such tax or interest and penalties by Mortgagor would be unlawful or taxable
to Mortgagee or unenforceable or provide the basis for a defense of usury, then
in any such event, Mortgagee shall have the option, by notice of not less than
sixty (60) days, to declare the Indebtedness immediately due and payable.
13. NO CREDITS ON ACCOUNT OF THE INDEBTEDNESS. Mortgagor will not claim or
demand or be entitled to any credit or credits on account of the Indebtedness
for any part of the Taxes assessed against the Mortgaged Property or any part
thereof and no deduction shall otherwise be made or claimed from the taxable
value of the Mortgaged Property, or any part thereof, by reason of this Mortgage
or the Indebtedness. In the event such claim, credit or deduction shall be
required by law, Mortgagee shall have the option, by notice of not less than
sixty (60) days, to declare the Indebtedness immediately due and payable without
premium.
14. DOCUMENTARY STAMPS. If at any time the United States of America, any
State thereof or any subdivision of any such State shall require revenue or
other stamps to be affixed to the Note or this Mortgage, or impose any other tax
or charge on the same, Mortgagor will pay for the same, with interest and
penalties thereon, if any.
15. RIGHT OF ENTRY. Mortgagee and its agents shall have the right to enter
and inspect the Mortgaged Property at any time during reasonable business hours
upon twenty-four (24) hour notice
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Loan No. 3212525
to Mortgagor, except in the case of an emergency, in which event Mortgagee and
its agents may enter and inspect the Mortgaged Property at any time.
16. BOOKS AND RECORDS.
(a) Mortgagor will maintain full, accurate and complete books of
accounts and other records reflecting the results of the operations of the
Mortgaged Property as well as its other operations and will furnish, or cause
to be furnished, to Mortgagee the following:
(i) (A) within ninety (90) days after the end of each fiscal year, the
Mortgagor will furnish to Mortgagee, a statement of Mortgagor's financial
condition, including a balance sheet and profit and loss statement, and a
statement of annual income and expenses satisfactory in form and substance
to Mortgagee in connection with the operation of the Mortgaged Property, in
detail satisfactory to Mortgagee, prepared by Mortgagor, and audited and
certified by a certified public accountant who is a member of the American
Institute of Certified Public Accountants; provided, that so long as there
are no Events of Default in existence, if such statements audited and
certified by such accountant are not available within such ninety (90) day
period, then Mortgagor shall furnish such statements prepared and certified
by Borrower within such ninety (90) day period, provided, further that in
any event such statements audited and certified by such accountant shall be
delivered no later than one hundred eighty (180) days after the end of such
fiscal year, and, (B) in addition, within forty-five (45) days after the
end of each fiscal quarter of Mortgagor, Mortgagor shall provide the above
information except that it may be prepared and certified by the financial
officer of Mortgagor who is responsible for the preparation of such annual
financial statements.
(ii) accompanying the submission of the certified statements of annual
and quarterly income and expenses, shall be a certified current rent roll,
which shall include among other things tenant names, lease commencement and
expiration dates, square footage, annual rent, annual operating expense and
real estate tax contributions and any and all other fees paid by tenants
and security deposits currently held.
(iii) accompanying the submission of the certified statements of
annual and quarterly income and expenses shall be such additional financial
information as Mortgagee shall reasonably require.
(b) Mortgagee shall have the right, upon five (5) business days' prior
notice to Mortgagor, to inspect and make copies of Mortgagor's books and records
and income tax returns and notices.
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(c) In the event of a Secondary Market Transaction, Mortgagor shall
furnish from time to time such information relating to Mortgagor
and the Mortgaged Property as shall be requested by the Rating
Agencies.
17. PERFORMANCE OF OTHER AGREEMENTS. Mortgagor shall observe and perform
each and every term to be observed or performed by such Mortgagor pursuant to
the terms of any agreement or recorded instrument affecting or pertaining to the
Mortgaged Property.
18. REPRESENTATIONS AND COVENANTS CONCERNING LOAN. Mortgagor represents,
warrants and covenants as follows:
(a) The Note, this Mortgage and the other Loan Documents are not
subject to any right of rescission, set-off, counterclaim or defense,
including the defense of usury, nor would the operation of any of the
terms of the Note, this Mortgage and the other Loan Documents, or the
exercise of any right thereunder, render this Mortgage unenforceable, in
whole or in part, or subject to any right of rescission, set-off,
counterclaim or defense, including the defense of usury.
(b) All certifications, permits, licenses and approvals, including,
without limitation, certificates of completion and occupancy permits
required for the legal use, occupancy of the Mortgaged Property, have
been obtained and are in full force and effect. The Mortgaged Property
is free of material damage and is in good repair, and there is no
proceeding pending for the total or partial condemnation of, or
affecting, the Mortgaged Property.
(c) All of the Improvements which were included in determining the
appraised value of the Mortgaged Property lie wholly within the
boundaries and building restriction lines of the Mortgaged Property, and
no improvements on adjoining properties encroach upon the Mortgaged
Property, and no easements or other encumbrances upon the Land encroach
upon any of the Improvements, so as to affect the value or marketability
of the Mortgaged Property except those which are insured against by
title insurance. All of the Improvements comply with all requirements of
applicable zoning and subdivision laws and ordinances in all material
respects.
(d) The Mortgaged Property is not subject to any Leases other than the
Leases described in the rent roll delivered to Mortgagee in connection
with this Mortgage. No person has any possessory interest in the
Mortgaged Property or right to occupy the same except under and pursuant
to the provisions of the Leases. Except as otherwise disclosed in
writing to Mortgagee, the current Leases are in full force and effect
and there are no defaults thereunder by either party and there are no
conditions that, with the passage of time or the giving of notice, or
both, would constitute defaults thereunder. Except as otherwise
disclosed in writing to Mortgagee, all presently existing Leases are
subordinate to the Mortgage.
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(e) The Mortgaged Property and the Lease are in compliance with all
statutes, ordinances, regulations and other governmental or
quasi-governmental requirements and private covenants now or hereafter
relating to the ownership, construction, use or operation of the
Mortgaged Property.
(f) There has not been and shall never be committed by Mortgagor or
any other person in occupancy of or involved with the operation or use
of the Mortgaged Property any act or omission affording the federal
government or any state or local government the right of forfeiture as
against the Mortgaged Property or any part thereof or any monies paid in
performance of Mortgagor's obligations under any of the Loan Documents.
Mortgagor hereby covenants and agrees not to commit, permit or suffer to
exist any act or omission affording such right of forfeiture.
(g) Mortgagor operates the Mortgaged Property and has not entered into
any agreement (oral, written or otherwise) with any third party relating
to the operation and management of the Mortgaged Property, and no third
party is entitled to any management fee or has any interest in or right
to receive any portion of the income derived from owning, operating or
managing the Mortgaged Property. In the event Mortgagor desires to have
a third party operate the Mortgaged Property it shall enter into a
management agreement (the "MANAGEMENT AGREEMENT") with such party,
provided that Mortgagee approves such party (the "MANAGER"), and Manager
and Mortgagor shall execute an assignment and subordination of such
Management Agreement in form satisfactory to Mortgagee, in its sole
discretion, assigning and subordinating the Manager's interest in the
Mortgaged Property and all fees and other right of the Manager pursuant
to such Management Agreement to the rights of the Mortgagee. Such
Management Agreement, if any, shall remain in full force and effect and
there shall be no default, breach or violation existing thereunder by
any party thereto and no event shall occur (other than payments due but
not yet delinquent) that, with the passage of time or the giving of
notice, or both, would constitute a default, breach or violation by any
party thereunder. Mortgagor shall not terminate, cancel, modify, renew
or extend the Management Agreement, or enter into any agreement relating
to the management or operation of the Mortgaged Property with Manager or
any other party without the express written consent of Mortgagee, which
consent shall not be unreasonably withheld. If at any time Mortgagee
consents to the appointment of a new manager, such new manager and
Mortgagor shall, as a condition of Mortgagee's consent, execute a
Manager's Consent and Subordination of Management Agreement in the form
then used by Mortgagee.
19. SINGLE PURPOSE ENTITY/SEPARATENESS. Mortgagor represents, warrants and
covenants as follows:
(a) The purpose for which the Mortgagor is organized shall be limited
solely to (A) owning, holding, selling, leasing, transferring,
exchanging, operating and managing the Mortgaged Property, (B) entering
into the Loan with the Mortgagee, (C) refinancing the Mortgaged Property
in connection with a permitted repayment of the Loan, and (D)
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Loan No. 3212525
transacting any and all lawful business for which a corporation may be organized
under Delaware law that is incident, necessary and appropriate to accomplish the
foregoing.
(b) Mortgagor does not own and will not own any asset or property other
than (i) the Mortgaged Property, and (ii) incidental personal property necessary
for and used in connection with the ownership, operation or managing of the
Mortgaged Property.
(c) Mortgagor will not engage in any business other than the ownership,
management and operation of the Mortgaged Property.
(d) Except as otherwise disclosed on Exhibit C to the Borrower's
Certificate delivered by Mortgagor to Mortgagee in connection herewith,
Mortgagor will not enter into any contract or agreement with any affiliate of
Mortgagor, any constituent party of Mortgagor, any owner of the Mortgagor, the
Guarantors or any affiliate of any constituent party or Guarantor, except upon
terms and conditions that are intrinsically fair, commercially reasonable and
substantially similar to those that would be available on an arms-length basis
with third parties not affiliated with the Mortgagor or its owner(s) or
constituent part(ies).
(e) Mortgagor has not incurred and will not incur any indebtedness, other
than (i) the Loan, (ii) trade and operational debt incurred in the ordinary
course of business with trade creditors and in amounts as are normal and
reasonable under the circumstances provided such debt is not evidenced by a note
and is paid when due, and (iii) indebtedness incurred in the financing of
equipment and other personal property used on the Mortgaged Property. No
indebtedness other than the Loan may be secured (subordinate or PARI PASSU) by
the Mortgaged Property.
(f) Mortgagor has not made and will not make any loans or advances to any
entity or person (including any affiliate or constituent party or owner of
Mortgagor, any Guarantor or any affiliate of any constituent party or
Guarantor), and shall not acquire obligations or securities of its affiliates or
any constituent party .
(g) Mortgagor is and will remain solvent and Mortgagor will pay its debts
and liabilities (including, as applicable, shared personnel and overhead
expenses) from its assets as the same shall become due.
(h) Mortgagor has done or caused to be done and will do all things
necessary to observe organizational formalities and preserve its existence, and
Mortgagor will not, nor will Mortgagor permit any constituent party or owner of
Mortgagor or any Guarantor to amend, modify or otherwise change the partnership
certificate, partnership agreement, articles of incorporation and bylaws,
operating agreement, trust or other organizational documents of Mortgagor or
such constituent party or Guarantor without the written consent of Mortgagee
(other than DM Management Company in the event its stock is traded on a public
stock exchange or NASDAQ).
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Loan No. 3212525
(i) Mortgagor will maintain all of its books, records, financial statements
and bank accounts separate from those of its affiliates and any constituent
party. Mortgagor's assets will not be listed as assets on the financial
statement of any other entity. Mortgagor shall have its own separate financial
statement, provided, however, that Mortgagor's assets may be included in a
consolidated financial statement of its parent if such inclusion on the
financial statements of its parent complies with the requirements of generally
accepted accounting principles ("GAAP"), provided that such consolidated
financial statement shall contain a footnote to the effect that Mortgagor's
assets are owned by Mortgagor, and further provided that such assets shall be
listed on Mortgagor's own separate balance sheet. Mortgagor will file separate
tax returns, or if part of a consolidated, unitary or combined group, then it
will be shown as a separate member of such group. Mortgagor shall maintain its
books, records, resolutions and agreements as official records.
(j) Mortgagor will be, and at all times will hold itself out to the public
as, a legal entity separate and distinct from any other entity (including any
affiliate of Mortgagor, any constituent party of Mortgagor, any Guarantor or any
affiliate of any constituent party or Guarantor), shall correct any known
misunderstanding regarding its status as a separate entity, shall conduct
business in its own name, shall not identify itself or any of its affiliates as
a division or part of the other and shall maintain and utilize separate
telephone numbers, stationery, invoices and checks.
(k) Mortgagor will maintain adequate capital for the normal obligations
reasonably foreseeable in a business of its size and character and in light of
its contemplated business operations.
(l) Neither Mortgagor nor any constituent party will seek the dissolution,
winding up, liquidation, consolidation or merger in whole or in part, or the
sale of material assets of Mortgagor.
(m) Mortgagor will not commingle the funds and other assets of Mortgagor
with those of any affiliate, any constituent party or owner of Mortgagor, any
Guarantor, or any affiliate of any constituent party or Guarantor, or any other
person, and will not participate in a cash management system with any such
party.
(n) Mortgagor will not commingle its assets with those of any other person
or entity and will hold all of its assets in its own name.
(o) Mortgagor will not guarantee or become obligated for the debts of any
other entity or person and does not and will not hold itself out as being
responsible for the debts or obligations of any other person.
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(p) If Mortgagor is a limited partnership or a limited liability company,
at least one general partner or member (an "SPC PARTY") shall be a corporation
whose sole asset is its interest in Mortgagor, and each such SPC Party will at
all times comply, and shall cause Mortgagor to comply, with each of the
representations, warranties and covenants contained in this PARAGRAPH 19 as if
such representation, warranty or covenant was made directly by such SPC Party.
(q) Mortgagor shall allocate fairly and reasonably any overhead expenses
that are shared with an affiliate, including paying for office space and
services performed by any employee of an affiliate.
(r) The stationery, invoices and checks utilized by Mortgagor or utilized
to collect its funds or pay its expenses shall bear its own name and shall not
bear the name of any other entity unless such entity is clearly designated as
being Mortgagor's agent.
(s) Mortgagor shall not pledge its assets for the benefit of any other
person or entity, and other than with respect to the Loan.
(t) Mortgagor shall correct any known misunderstanding regarding its
separate identity.
(u) Mortgagor shall not identify itself as a division of any other person
or entity.
(v) Mortgagor shall at all times cause there to be at least one duly
appointed member of the board of directors (an "INDEPENDENT DIRECTOR") of
Mortgagor, in the case of a corporation, and each SPC Party in Mortgagor in the
case of a limited partnership or limited liability company, in each case
reasonably satisfactory to Mortgagee who is not at the time of initial
appointment, and has not been at any time during the preceding five (5) years:
(a) stockholder, director, officer, employee, partner, attorney or counsel of
the SPC Party, the Mortgagor or any affiliate of either of them; (b) a customer,
supplier or other person who derives more than 10% of its purchases or revenues
from its activities with the SPC Party, the Mortgagor or any affiliate of either
of them; (c) a person or other entity controlling or under common control with
any such stockholder, partner, customer, supplier or other person; or (d) a
member of the immediate family of any such stockholder, director, officer,
employee, partner, customer, supplier or other person. As used herein, the term
"control" means the possession, directly or indirectly, of the power to direct
or cause the direction of management, policies or activities of a person or
entity, whether through ownership of voting securities, by contract or
otherwise.
(w) Mortgagor shall not cause or permit the board of directors of each SPC
Party in Mortgagor to take any action which, under the terms of any certificate
of incorporation, by-laws or any voting trust agreement with respect to any
common stock, requires the vote of each
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Loan No. 3212525
SPC Party in Mortgagor unless at the time of such action there shall be at
least one member who is an Independent Director.
Subject to the other terms and conditions of this Mortgage and the other
Loan Documents, Mortgagor shall have the right to pay dividends and make
payments in return of capital to Mortgagor's shareholders.
20. EVENTS OF DEFAULT; REMEDIES. Each of the following events shall
constitute an "EVENT OF DEFAULT" hereunder:
(a) if (i) any installment of interest or principal is not paid within
five (5) days after the same is due, (ii) the entire Indebtedness is not
paid on or before the Maturity Date (or if the Maturity Date has been
accelerated, upon such acceleration), or (iii) any other payment or charge
due under the Note, this Mortgage or any other Loan Documents is not paid
when due;
(b) if any Taxes payable directly to the billing authority by
Mortgagor are not paid before interest becomes payable on the amount due or
a penalty is assessed (provided that the foregoing provisions of this
clause (b) shall be subject to the right to contest Taxes granted to
Mortgagor in PARAGRAPH 4(b) of this Mortgage, but only for so long as the
conditions in PARAGRAPH 4(b) of this Mortgage remain satisfied);
(c) if the Policies are not kept in full force and effect and are not
delivered to Mortgagee when required hereunder, or if the Policies are not
delivered to Mortgagee within ten (10) days after request by Mortgagee;
(d) if any of the provisions of PARAGRAPHS 7, 8(b), 9, 19 or 39 herein
are violated or not complied with;
(e) if any of the events described in PARAGRAPH 41 shall occur;
(f) if at any time any representation or warranty of Mortgagor or any
Guarantor made herein or in any guaranty, agreement, certificate, report,
affidavit, owner's affidavit, financial statement or other instrument
furnished to Mortgagee shall be false or misleading in any material
respect;
(g) if any mortgagee under a mortgage on the Mortgaged Property,
whether superior or subordinate to this Mortgage (i) demands payment in
full or otherwise accelerates any indebtedness of Mortgagor or (ii)
otherwise commences the exercise of any remedy available to such party
under any Loan Document;
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Loan No. 3212525
(h) if Mortgagor fails to cure promptly any violation of any law or
ordinance affecting the Mortgaged Property (provided that the foregoing
provisions of this clause (h) shall be subject to any right to contest such
violation specifically granted to Mortgagor in PARAGRAPH 8 of this
Mortgage);
(i) if any Guaranty (as hereinafter defined) is terminated or any
event or condition occurs which, in the reasonable judgment of Mortgagee,
may materially impair the ability of any Guarantor to perform its
obligations under any Guaranty or any Guarantor attempts to withdraw,
cancel or disclaim any Guaranty;
(j) if a default by Mortgagor under any of the other terms, covenants
or conditions of the Note, this Mortgage or any other Loan Document shall
occur and such default shall not have been cured within thirty (30) days
after notice from Mortgagee, provided that if such default is not
susceptible of being cured within such thirty (30) day period and Mortgagor
shall have commenced the cure of such default within such thirty (30) day
period and thereafter diligently pursues such cure to completion, then such
thirty (30) day period shall be extended for a period of ninety (90) days
from the occurrence of the default, provided, further, that the notice and
grace period set forth in this subparagraph (j) shall not apply to any
other Event of Default expressly set forth in this PARAGRAPH 20 or to any
other Event of Default defined as such in any other Loan Document or to any
other covenant or condition with respect to which a grace period is
expressly provided elsewhere; or
(k) if any of the provisions of PARAGRAPHS 42(d) and/or PARAGRAPH
42(f) are violated or not complied with, and/or if any representation or
warranty in PARAGRAPH 42(b) and/or 42(c) shall prove false or misleading in
any material respect and/or if any of the events described in PARAGRAPH
42(e) shall occur.
Upon the occurrence of any Event of Default, the Indebtedness shall
immediately become due at the option of Mortgagee.
Upon the occurrence of any Event of Default, Mortgagor shall pay interest
on the entire unpaid principal balance of the Note, as defined in and provided
for in the Note.
Upon the occurrence of any Event of Default, Mortgagee may, to the extent
permitted under applicable law, elect to treat the fixtures included in the
Mortgaged Property either as real property or as personal property, or both, and
proceed to exercise such rights as apply thereto. With respect to any sale of
real property included in the Mortgaged Property made under the powers of sale
herein granted and conferred, Mortgagee may, to the extent permitted by
applicable law, include in such sale any fixtures included in the Mortgaged
Property and relating to such real property.
21. ADDITIONAL REMEDIES.
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Loan No. 3212525
(a) Upon the occurrence of any Event of Default, Mortgagee may take
such action, without notice or demand, as it shall deem advisable to
protect and enforce its rights against Mortgagor and in and to the
Mortgaged Property or any part thereof or interest therein, including, but
not limited to, the following actions, each of which may be pursued
concurrently or otherwise, at such time and in such order as Mortgagee may
determine, in its sole discretion, without impairing or otherwise affecting
the other rights and remedies of Mortgagee (i) enter into or upon the Real
Property, either personally or by its agents, nominees or attorneys and
dispossess Mortgagor and its agents and servants therefrom, and thereupon
Mortgagee may (A) use, operate, manage, control, insure, maintain, repair,
restore and otherwise deal with all and every part of the Mortgaged
Property and conduct the business thereat, (B) complete any construction on
the Mortgaged Property in such manner and form as Mortgagee deems
advisable, (C) make alterations, additions, renewals, replacements and
improvements to or on the Mortgaged Property, (D) exercise all rights and
powers of Mortgagor with respect to the Mortgaged Property, whether in the
name of Mortgagor or otherwise, including, without limitation, the right to
make, cancel, enforce or modify leases, obtain and evict tenants and
demand, sue for, collect and receive all earnings, revenues, rents, issues,
profits and other income of the Mortgaged Property and every part thereof
and (E) apply the receipts from the Mortgaged Property to the payment of
the Indebtedness, after deducting therefrom all expenses (including
reasonable attorneys' fees and expenses) incurred in connection with the
aforesaid operations and all amounts necessary to pay the taxes,
assessments, insurance and other charges in connection with the Mortgaged
Property, as well as just and reasonable compensation for the services of
Mortgagee and its counsel, agents and employees, or (ii) institute
proceedings for the complete foreclosure of this Mortgage in which case the
Mortgaged Property may be sold for cash or upon credit in one or more
parcels, or (iii) with or without entry, to the extent permitted and
pursuant to the procedures provided by applicable law, institute
proceedings for the partial foreclosure of this Mortgage for the portion of
the Indebtedness then due and payable, subject to the continuing lien of
this Mortgage for the balance of the Indebtedness not then due, or (iv)
sell for cash or upon credit the Mortgaged Property or any part thereof and
all or any part of any estate, claim, demand, right, title and interest of
Mortgagor therein and rights of redemption thereof, pursuant to power of
sale or otherwise, at one or more sales, as an entity or in parcels, at
such time and place, upon such terms and after such notice thereof as may
be required or permitted by law, and in the event of a sale, by foreclosure
or otherwise, of less than all of the Mortgaged Property, this Mortgage
shall continue as a lien on the remaining portion of or estate in the
Mortgaged Property, or (v) institute an action, suit or proceeding in
equity for the specific performance of any covenant, condition or agreement
contained herein or in the Note or any other Loan Document, or (vi) recover
judgment on the Note or any Guaranty either before, during or after any
proceedings for the enforcement of this Mortgage or (vii) pursue such other
remedies as Mortgagee may have under applicable law.
(b) The purchase money proceeds or avails of any sale made under or by
virtue of this PARAGRAPH 21, together with any other sums which then may be
held by Mortgagee under
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Loan No. 3212525
this Mortgage, whether under the provisions of this PARAGRAPH 21 or
otherwise, shall be applied as follows:
FIRST: To the payment of the costs and expenses of any such sale,
including reasonable compensation to Mortgagee, its agents and counsel, and
of any judicial proceedings wherein the same may be made, and of all
expenses, liabilities and advances made or incurred by Mortgagee under this
Mortgage, together with interest as provided herein on all advances made by
Mortgagee and all taxes or assessments, except any taxes, assessments or
other charges subject to which the Mortgaged Property shall have been sold.
SECOND: To the payment of the whole amount then due, owing or unpaid
upon the Note for principal, together with any and all applicable interest,
fees and late charges.
THIRD: To the payment of any other sums required to be paid by
Mortgagor pursuant to any provision of this Mortgage or of the Note or of
the Guaranty.
FOURTH: To the payment of the surplus, if any, to whomsoever may be
lawfully entitled to receive the same.
Mortgagee and any receiver of the Mortgaged Property, or any part
thereof, shall be liable to account for only those rents, issues and
profits actually received by it.
(c) Mortgagee may adjourn from time to time any sale by Mortgagee to
be made under or by virtue of this Mortgage by announcement at the time and
place appointed for such sale or for such adjourned sale or sales; and,
except as otherwise provided by any applicable provision of law, Mortgagee,
without further notice or publication, may make such sale at the time and
place to which the same shall be so adjourned.
(d) Upon the completion of any sale or sales made by Mortgagee under
or by virtue of this PARAGRAPH 21, Mortgagee, or an officer of any court
empowered to do so, shall execute and deliver to the accepted purchaser or
purchasers a good and sufficient instrument, or good and sufficient
instruments, conveying, assigning and transferring all estate, right, title
and interest in and to the property and rights sold. Mortgagee is hereby
irrevocably appointed the true and lawful attorney of Mortgagor, in its
name and stead, to make all necessary conveyances, assignments, transfers
and deliveries of the Mortgaged Property and rights so sold and for that
purpose Mortgagee may execute all necessary instruments of conveyance,
assignment and transfer, and may substitute one or more persons with like
power, Mortgagor hereby ratifying and confirming all that its said attorney
or such substitute or substitutes shall lawfully do by virtue hereof. Any
such sale or sales made under or by virtue of this PARAGRAPH 21, whether
made under the power of sale herein granted or under or by virtue of
judicial proceedings or of a judgment or decree of foreclosure and sale,
shall operate to divest all the estate, right, title, interest, claim and
demand whatsoever, whether at law or in equity, of Mortgagor in and to the
properties and rights so sold, and shall be a perpetual bar both at law
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Loan No. 3212525
and in equity against Mortgagor and against any and all persons claiming or
who may claim the same, or any part thereof from, through or under
Mortgagor.
(e) In the event of any sale made under or by virtue of this PARAGRAPH
21 (whether made under the power of sale herein granted or under or by
virtue of judicial proceedings or of a judgment or decree of foreclosure
and sale) the entire Indebtedness, if not previously due and payable,
immediately thereupon shall, anything in the Note, this Mortgage, any
Guaranty or any other Loan Document to the contrary notwithstanding, become
due and payable.
(f) Upon any sale made under or by virtue of this PARAGRAPH 21
(whether made under the power of sale herein granted or under or by virtue
of judicial proceedings or of a judgment or decree of foreclosure and
sale), Mortgagee may bid for and acquire the Mortgaged Property or any part
thereof and in lieu of paying cash therefor may make settlement for the
purchase price by crediting upon the Indebtedness the net sales price after
deducting therefrom the expenses of the sale and the costs of the action
and any other sums which Mortgagee is authorized to deduct under this
Mortgage.
(g) No recovery of any judgment by Mortgagee and no levy of an
execution under any judgment upon the Mortgaged Property or upon any other
property of Mortgagor shall affect in any manner or to any extent, the lien
of this Mortgage upon the Mortgaged Property or any part thereof, or any
liens, rights, powers or remedies of Mortgagee hereunder, but such liens,
rights, powers and remedies of Mortgagee shall continue unimpaired as
before.
22. RIGHT TO CURE DEFAULTS. Upon the occurrence of any Event of Default or
if Mortgagor fails to make any payment or to do any act as herein provided,
Mortgagee may, but without any obligation to do so and without notice to or
demand on Mortgagor and without releasing Mortgagor from any obligation
hereunder, make or do the same in such manner and to such extent as Mortgagee
may deem necessary to protect the security hereof. Without limiting the
foregoing, Mortgagee may enter upon the Mortgaged Property for such purposes or
appear in, defend, or bring any action or proceeding to protect its interest in
the Mortgaged Property, and the cost and expense thereof (including, without
limitation, attorneys' fees and disbursements to the extent permitted by law),
with interest as provided in this PARAGRAPH 22, shall be immediately due and
payable to Mortgagee upon demand by Mortgagee therefor. All such costs and
expenses incurred by Mortgagee in remedying such Event of Default or in
appearing in, defending, or bringing any such action or proceeding shall bear
interest at the Default Rate, for the period from the date that such cost or
expense was incurred to the date of payment to Mortgagee. All such costs and
expenses, together with interest thereon at the Default Rate, shall be added to
the Indebtedness and shall be secured by this Mortgage. If the principal sum of
the Note or any other amount required to be paid on the Maturity Date under the
Note shall not be paid on the Maturity Date, interest shall thereafter be
computed and paid at the Default Rate.
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23. LATE PAYMENT CHARGE. If any monthly principal and interest payment is
not paid in accordance with the Note, a late charge (the "LATE CHARGE") shall be
due as provided for in the Note.
24. PREPAYMENT. The Indebtedness may be prepaid only in accordance with the
terms of the Note.
25. PREPAYMENT AFTER EVENT OF DEFAULT. A tender of the amount necessary to
satisfy the entire indebtedness, paid at any time following an Event of Default
or acceleration (which acceleration shall be at Mortgagee's sole option),
including at a foreclosure sale or during any subsequent redemption period, if
any, shall be deemed a voluntary prepayment, which payment shall include a
premium equal to the Default Consideration, as determined in accordance with the
terms of the Note.
26. APPOINTMENT OF RECEIVER. Mortgagee, upon the occurrence of an Event of
Default or in any action to foreclose this Mortgage or upon the actual or
threatened waste to any part of the Mortgaged Property, shall be entitled to the
appointment of a receiver without notice and without regard to the value or
condition of the Mortgaged Property as security for the Indebtedness or the
solvency or insolvency of any person liable for the payment of the Indebtedness.
27. SECURITY AGREEMENT.
(a) This Mortgage is both a real property Mortgage and a "security
agreement" within the meaning of the Uniform Commercial Code. The Mortgaged
Property includes both real and personal property and all other rights and
interests, whether tangible or intangible in nature, of Mortgagor in the
Mortgaged Property. Mortgagor, by executing and delivering this Mortgage
grants to Mortgagee, as security for the Indebtedness, a security interest
in the Mortgaged Property to the full extent that the Mortgaged Property
may be subject to the Uniform Commercial Code (such portion of the
Mortgaged Property so subject to the Uniform Commercial Code being called
in this PARAGRAPH 27 the "COLLATERAL"). Mortgagor shall execute and deliver
to Mortgagee, in form and substance satisfactory to Mortgagee, such
financing statements and further assurances as Mortgagee may, from time to
time, reasonably request in order to create, perfect, and preserve the
security interest(s) herein granted. This Mortgage shall also constitute a
"fixture filing" for the purposes of the Uniform Commercial Code and shall
cover all items of the Collateral that are or are to become fixtures.
Information concerning the security interest(s) herein granted may be
obtained from Mortgagee upon request.
If an Event of Default shall occur, Mortgagee, in addition to any
other rights and remedies which it may have, shall have and may exercise
immediately and without demand, any and all rights and remedies granted to
a secured party upon default under the Uniform Commercial Code, including,
without limiting the generality of the foregoing, the right to take
possession of the Collateral or any part thereof, and to take such other
measures as Mortgagee may deem necessary for the care, protection and
preservation of the Collateral. Upon request
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or demand of Mortgagee, Mortgagor shall at its expense assemble the
Collateral and make it available to Mortgagee at a convenient place
acceptable to Mortgagee. Mortgagor shall pay to Mortgagee on demand any and
all expenses, including legal expenses and attorneys' fees and
disbursements, incurred or paid by Mortgagee in protecting its interest in
the Collateral and in enforcing its rights hereunder with respect to the
Collateral. Any notice of sale, disposition or other intended action by
Mortgagee with respect to the Collateral sent to Mortgagor in accordance
with the provisions hereof at least five (5) days prior to such shall
constitute reasonable notice to Mortgagor. The proceeds of any disposition
of the Collateral, or any part thereof, may be applied by Mortgagee to the
payment of the Indebtedness in such priority and proportions as Mortgagee
in its discretion shall deem proper.
Mortgagor shall notify Mortgagee of any change in name, identity or
structure of Mortgagor and shall promptly execute, file and record, at its
sole cost and expense, such Uniform Commercial Code forms as are necessary
to maintain the priority of the lien of Mortgagee upon and security
interest in the Collateral. In addition, Mortgagor shall promptly execute,
file and record such additional Uniform Commercial Code forms or
continuation statements as Mortgagee shall deem necessary and shall pay all
expenses and fees in connection with the filing and recording thereof,
provided that no such additional documents shall increase the obligations
of Mortgagor under the Note, this Mortgage or the other Loan Documents.
Mortgagor hereby grants to Mortgagee an irrevocable power of attorney,
coupled with an interest, to file with the appropriate public office on its
behalf any financing or other statements signed only by Mortgagee, as
secured party, in connection with the Collateral covered by this Mortgage.
(b) That portion of the Mortgaged Property consisting of personal
property and equipment, shall be owned by Mortgagor and shall not be the
subject matter of any lease or other transaction whereby the ownership or
any beneficial interest in any of such property is held by any person or
entity other than Mortgagor nor shall Mortgagor create or suffer to be
created any security interest covering any such property as it may from
time to time be replaced, other than the security interest created herein.
28. AUTHORITY.
(a) Mortgagor has full power, authority and legal right to execute
this Mortgage, and to mortgage, give, grant, bargain, sell, alien, enfeoff,
convey, confirm, pledge, hypothecate and assign and grant a security
interest in the Mortgaged Property pursuant to the terms hereof and to keep
and observe all of the terms of this Mortgage on Mortgagor's part to be
performed.
(b) Mortgagor represents and warrants to Mortgagee that Mortgagor is
not a "foreign person" and covenants with Mortgagee that Mortgagor will
not, throughout the term of the Note, become a "foreign person" within the
meaning of Section 1445 and Section 7701 of the Internal Revenue Code of
1986, (26 USC Sections 1445, 7701) and the related Treasury Department
regulations, including, without limitation, temporary regulations
(hereinafter collectively the
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"CODE"); that is, such Mortgagor is not a non-resident alien, foreign
corporation, foreign partnership, foreign trust or foreign estate as those
terms are defined in the Code.
29. ACTIONS AND PROCEEDINGS. Mortgagee shall have the right to appear in
and defend any action or proceeding brought with respect to the Mortgaged
Property and to bring any action or proceeding, in the name and on behalf of
Mortgagor, which Mortgagee, in its discretion, shall decide should be brought to
protect its interest(s) in the Mortgaged Property.
30. FURTHER ACTS, ETC. Mortgagor will, at the sole cost of Mortgagor, and
without expense to Mortgagee, do, execute, acknowledge and deliver all and every
such further acts, deeds, conveyances, Mortgages, assignments, notices of
assignments, transfers and assurances as Mortgagee shall, from time to time,
reasonably require, for the better assuring, conveying, assigning, transferring
and confirming unto Mortgagee the property and rights hereby mortgaged, given,
granted, bargained, sold, aliened, enfeoffed, conveyed, confirmed, pledged,
assigned and hypothecated or intended now or hereafter so to be, or which
Mortgagor may be or may hereafter become bound to convey or assign to Mortgagee,
or for carrying out the intention or facilitating the performance of the terms
of this Mortgage or for filing, registering or recording this Mortgage and, on
demand, will execute and deliver within five (5) business days after request of
Mortgagee, and if Mortgagor fails to so deliver, hereby authorizes Mortgagee
thereafter to execute in the name of Mortgagor without the signature of
Mortgagor to the extent Mortgagee may lawfully do so, one or more financing
statements, chattel Mortgages or comparable security instruments, to evidence
more effectively the lien hereof upon the Mortgaged Property. Mortgagor grants
to Mortgagee an irrevocable power of attorney coupled with an interest for the
purpose of exercising and perfecting any and all rights and remedies available
to Mortgagee at law and in equity, including without limitation such rights and
remedies available to Mortgagee pursuant to this PARAGRAPH 30.
31. RECORDING OF MORTGAGE, ETC. Mortgagor forthwith upon the execution and
delivery of this Mortgage, will cause this Mortgage, and any security instrument
creating a lien or security interest or evidencing the lien hereof upon the
Mortgaged Property, to be filed, registered or recorded and, thereafter, from
time to time, each such other instrument of further assurance to be filed,
registered or recorded, all in such manner and in such places as may be required
by any present or future law in order to publish notice of and fully to protect
the lien or security interest hereof upon, and the interest(s) of Mortgagee in,
the Mortgaged Property. Mortgagor will pay all filing, registration or recording
fees, and all expenses incident to the preparation, execution and acknowledgment
of this Mortgage, any Mortgage supplemental hereto, any security instrument with
respect to the Mortgaged Property and any instrument of further assurance, and
all federal, state, county and municipal, taxes, duties, imposts, assessments
and charges arising out of or in connection with the making, execution, delivery
and/or recording of this Mortgage, any Mortgage supplemental hereto,
any security instrument with respect to the Mortgaged Property or any instrument
of further assurance, except where prohibited by law so to do. Mortgagor shall
hold harmless and indemnify Mortgagee, its successors and assigns, against any
liability incurred by reason of the imposition of any tax on the making,
execution, delivery and/or recording of this Mortgage, any Mortgage supplemental
hereto,
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any security instrument with respect to the Mortgaged Property or any
instrument of further assurance.
32. USURY LAWS. This Mortgage and the Note are subject to the express
condition that at no time shall Mortgagor be obligated or required to pay
interest on the principal balance due under the Note at a rate which could
subject the holder of the Note to either civil or criminal liability as a result
of being in excess of the maximum interest rate which Mortgagor is permitted by
law to contract or agree to pay. If by the terms of this Mortgage or the Note,
Mortgagor is at any time required or obligated to pay interest on the principal
balance due under the Note at a rate in excess of such maximum rate, the rate of
interest under the Note shall be deemed to be immediately reduced to such
maximum rate and the interest payable shall be computed at such maximum rate and
all prior interest payments in excess of such maximum rate shall be applied and
shall be deemed to have been payments in reduction of the principal balance of
the Note and the principal balance of the Note shall be reduced by such amount
in the inverse order of maturity.
33. SOLE DISCRETION OF MORTGAGEE. Wherever pursuant to this Mortgage,
Mortgagee exercises any right given to it to approve or disapprove, or any
arrangement or term is to be satisfactory to Mortgagee, the decision of
Mortgagee to approve or disapprove or to decide that arrangements or terms are
satisfactory or not satisfactory shall be in the sole discretion of Mortgagee
and shall be final and conclusive, except as may be otherwise specifically
provided herein.
34. RECOVERY OF SUMS REQUIRED TO BE PAID. Mortgagee shall have the right
from time to time to take action to recover any sum or sums which constitute a
part of the Indebtedness as the same become due, without regard to whether or
not the balance of the Indebtedness shall be due, and without prejudice to the
right of Mortgagee thereafter to bring an action of foreclosure, or any other
action, for a default or defaults by Mortgagor existing at the time such earlier
action was commenced.
35. MARSHALLING AND OTHER MATTERS. Mortgagor waives, to the extent
permitted by law, the benefit of all appraisement, valuation, stay, extension,
reinstatement and redemption laws now or hereafter in force and all rights of
marshalling in the event of any sale hereunder of the Mortgaged Property or any
part thereof or any interest therein. Further, Mortgagor expressly waives any
and all rights of redemption from sale under any order or decree of foreclosure
of this Mortgage on behalf of Mortgagor, and on behalf of each and every person
acquiring any interest in or title to the Mortgaged Property subsequent to the
date of this Mortgage and on behalf of all persons to the extent permitted by
applicable law.
36. WAIVER OF NOTICE. Mortgagor shall not be entitled to any notices of any
nature whatsoever from Mortgagee except with respect to matters for which this
Mortgage specifically and expressly provides for the giving of notice by
Mortgagee to Mortgagor and except with respect to matters for which Mortgagee is
required by applicable law to give notice, and Mortgagor hereby expressly waives
the right to receive any notice from Mortgagee with respect to any matter for
which this Mortgage does not specifically and expressly provide for the giving
of notice by Mortgagee to Mortgagor.
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37. REMEDIES OF MORTGAGOR. In the event that a claim or adjudication is
made that Mortgagee has acted unreasonably or unreasonably delayed acting in any
case where by law or under the Note, this Mortgage or the other Loan Documents,
it has an obligation to act reasonably or promptly, Mortgagee shall not be
liable for any monetary damages, and Mortgagor's remedies shall be limited to
injunctive relief or declaratory judgment.
38. REPORTING REQUIREMENTS. At the request of Mortgagee, Mortgagor shall
supply or cause to be supplied to Mortgagee either (a) a copy of a completed
Form 1099-B, Statement for Recipients of Proceeds from Real Estate, Broker and
Barter Exchange Proceeds prepared by Mortgagor's attorney or other person
responsible for the preparation of such form, together with a certificate from
the person who prepared such form to the effect that such form has, to the best
of such person's knowledge, been accurately prepared and that such person will
timely file such form or (b) a certification from Mortgagor that the Loan is a
refinancing of the Mortgaged Property or is otherwise not required to be
reported to the Internal Revenue Service pursuant to Section 6045(e) of the
Code. Mortgagor hereby indemnifies, defends and holds Mortgagee harmless from
and against all loss, cost, damage and expense (including without limitation,
attorneys' fees and disbursements and costs incurred in the investigation,
defense and settlement of claims) that Mortgagee may incur, directly or
indirectly, as a result of or in connection with the assertion against Mortgagee
of any claim relating to the failure of Mortgagee to comply with this PARAGRAPH
38.
39. HAZARDOUS MATERIALS.
(a) Mortgagor represents and warrants that (i) the Mortgaged Property
is now and at all times during Mortgagor's ownership thereof has been free
of contamination from any petroleum product and all hazardous or toxic
substances, wastes or substances, any substances which because of their
quantitative concentration, chemical, radioactive, flammable, explosive,
infectious or other characteristics, constitute or may reasonably be
expected to constitute or contribute to a danger or hazard to public
health, safety or welfare or to the environment, including, without
limitation, any asbestos (whether or not friable) and any
asbestos-containing materials, waste oils, solvents and chlorinated oils,
polychlorinated biphenyls (PCBs), toxic metals, etchants, pickling and
plating wastes, explosives, reactive metals and compounds, pesticides,
herbicides, radon gas, urea formaldehyde foam insulation and chemical,
biological and radioactive wastes, or any other similar materials or any
hazardous or toxic wastes or substances which are included under or
regulated by any federal, state or local law, rule or regulation (whether
now existing or hereafter enacted or promulgated, as they may be amended
from time to time) pertaining to environmental regulations, contamination,
clean-up or disclosures, and any judicial or administrative interpretation
thereof, including any judicial or administrative orders or judgments
("HAZARDOUS MATERIALS"), including, without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C.
section 9601 ET SEQ. ("CERCLA"); The Federal Resource Conservation and
Recovery Act, 42 U.S.C. section 6901 ET SEQ. ("RCRA"); Superfund Amendments
and Reauthorization Act of 1986, Public Law No. 99-499 ("SARA"); Toxic
Substances Control Act, 15 U.S.C. section 2601 ET SEQ. ("TSCA"); the
Hazardous Materials Transportation Act, 49 U.S.C. section 1801 ET SEQ.;
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and any other state superlien or environmental clean-up or disclosure
statutes (all such laws, rules and regulations being referred to
collectively as "ENVIRONMENTAL LAWS"), (ii) Mortgagor has not caused or
suffered to occur any discharge, spill, uncontrolled loss or seepage of any
Hazardous Materials onto any property adjoining the Mortgaged Property and
(iii) neither the Mortgagor nor any tenant or occupant of all or part of
the Mortgaged Property is now or has been involved in operations at the
Mortgaged Property which could lead to liability for Mortgagor or any other
owner of the Mortgaged Property or the imposition of a lien on the
Mortgaged Property under any Environmental Law.
(b) At its sole cost and expense, Mortgagor shall comply with and
shall cause all tenants and other occupants of the Mortgaged Property to
comply with all Environmental Laws now in effect or hereafter enacted with
respect to the discharge, generation, removal, transportation, storage and
handling of Hazardous Materials. Mortgagor shall promptly notify Mortgagee
if Mortgagor shall become aware of any Hazardous Materials (other than
"Complying Hazardous Materials," as defined below) on or near the Mortgaged
Property and/or if Mortgagor shall become aware that the Mortgaged Property
is in direct or indirect violation of any Environmental Laws and/or if
Mortgagor shall become aware of any condition on or near the Mortgaged
Property which shall pose a threat to the health, safety or welfare of
humans. Mortgagor shall promptly remove all contained Hazardous Materials
(other than Complying Hazardous Materials) from the Mortgaged Property, and
shall remediate all other Hazardous Materials present on the Mortgaged
Property, such removal or remediation, as the case may be, to be performed
in accordance with all applicable federal, state and local laws, statutes,
rules and regulations. Mortgagor shall pay immediately when due the cost of
any removal or remediation of any Hazardous Materials and shall keep the
Mortgaged Property free of any lien imposed pursuant to any Environmental
Laws now in effect or hereinafter enacted. The term "COMPLYING HAZARDOUS
MATERIALS" shall mean substances generally available and (a) used in the
ordinary course of managing and operating the Mortgaged Property for their
intended purpose to clean and maintain the Mortgaged Property, or (b) used
by tenants at the Mortgaged Property in their ordinary course of business;
provided that, in each case, the use, storage and disposal of all such
substances shall be conducted in strict compliance with all applicable
laws.
(c) Mortgagor grants Mortgagee and its employees and agents an
irrevocable and non-exclusive license, subject to the rights of tenants, to
enter the Mortgaged Property to conduct testing and to remove or remediate,
as the case may be, any Hazardous Materials, and the costs of such testing
and removal or remediation shall immediately become due to Mortgagee and
shall be secured by this Mortgage. Promptly upon the request of Mortgagee,
which may be made at any time during which an Event of Default is
continuing, at any time Mortgagee has a reasonable basis to believe that
Hazardous Materials may be present on the Mortgaged Property, or once every
three (3) years, Mortgagor, at Mortgagor's expense, shall provide Mortgagee
with an environmental site assessment or environmental audit report, or an
update of such an assessment or report, all in scope, form and content
satisfactory to Mortgagee. In addition, Mortgagee, at Mortgagee's expense,
shall have the right of access to
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Loan No. 3212525
the Mortgaged Property at any time to obtain an environmental site
assessment or audit report, including intensive testing. Mortgagor shall
maintain the integrity of all storage tanks and drums on or under the
Mortgaged Property during the term of the Loan in compliance with all
Environmental Laws now in effect or hereinafter enacted. Mortgagor shall
follow an operation and maintenance program with respect to all storage
tanks and drums on or under the Mortgaged Property, which program has been
approved in writing by Mortgagee.
(d) Mortgagor shall indemnify Mortgagee and hold Mortgagee harmless
from and against all liability, loss, cost, damage and expense (including,
without limitation, reasonable attorneys' fees and costs incurred in the
investigation, defense and settlement of claims) that Mortgagee may incur
as a result of or in connection with the assertion against Mortgagee
(whether as past or present holder of this Mortgage, as mortgagee in
possession or as past or present owner of the Mortgaged Property by virtue
of a foreclosure or acceptance of a deed in lieu of foreclosure) of any
claim relating to the presence and/or release, threatened release, storage,
disposal, generating or removal of any Hazardous Materials or compliance
with any Environmental Laws now in effect or hereinafter enacted. The
obligations and liabilities of Mortgagor under this PARAGRAPH 39 shall
survive full payment of the Loan, entry of a judgment of foreclosure or
acceptance of a deed in lieu of foreclosure or any subsequent transfer to a
third party. It is understood that the presence and/or release of
substances referred to in this section hereof does not pertain to a
presence and/or release which first occurs solely after (A) repayment of
the Loan in full in accordance with the Loan Documents or (B) acquisition
of title to the Property by Mortgagee upon a foreclosure or acceptance of a
deed in lieu of foreclosure and surrender of possession and occupancy of
the Property by Mortgagor, its agents, affiliates, employees and
independent contractors. Mortgagor shall have the burden of proving that
the conditions in subsection (d) were satisfied by clear and convincing
evidence and shall continue to defend with counsel satisfactory to
Mortgagee and shall indemnify and hold Mortgagee harmless for all matters
set forth in this Paragraph 39, unless and until a court of competent
jurisdiction finds that Mortgagor has met such burden.
(e) Nothing contained herein shall constitute or be construed as a
waiver of any statutory or judicial federal, state or local law which may
provide rights or remedies to Mortgagee against Mortgagor or others in
connection with any claim relating to the Mortgaged Property and pertaining
to the presence and/or release, threatened release, storage, disposal,
generating or removal of any Hazardous Materials or to the failure to
comply with any Environmental Laws now or hereafter enacted.
(f) Mortgagor, at its sole cost and expense, shall maintain a policy
of environmental insurance with respect to the Mortgaged Property which
shall be in form and substance, and with a carrier, satisfactory to
Mortgagee, and which shall name Mortgagee as an additional insured.
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(g) Notwithstanding anything to the contrary provided herein,
Mortgagor shall be entitled to allow the storage and use of Complying
Hazardous Materials at the Mortgaged Property.
40. ASBESTOS. Mortgagor shall not install or permit to be installed in the
Mortgaged Property, friable asbestos or any substance containing asbestos. With
respect to any such material currently present in the Mortgaged Property,
Mortgagor, at Mortgagor's expense, shall promptly comply with and shall cause
all occupants of the Mortgaged Property to comply with all present and future
applicable federal, state or local laws, rules, regulations or orders relating
to asbestos, friable asbestos and asbestos containing materials. In the event
any asbestos, friable asbestos or asbestos containing material is discovered at
the Mortgaged Property, Mortgagor shall obtain a comprehensive asbestos report
prepared by a licensed engineer or asbestos consultant acceptable to Mortgagee
describing the form, extent, location and condition of such asbestos and
recommending methods of removal or abatement. Mortgagor shall promptly comply at
its sole cost and expense with the recommendations contained in such report,
such compliance to be performed in accordance with all applicable federal, state
and local laws, statutes, rules and regulations. Mortgagor shall indemnify
Mortgagee and hold Mortgagee harmless from and against all loss, cost, damage
and expense (including, without limitation, attorneys' fees and costs incurred
in the investigation, defense and settlement of claims) that Mortgagee may incur
as a result of or in connection with the assertion against Mortgagee (whether as
past or present holder of the Mortgage, as mortgagee in possession, or as past
or present owner of the Mortgaged Property by virtue of a foreclosure or
acceptance of a deed in lieu of foreclosure) of any claim relating to the
presence or removal of any asbestos substance referred to in this PARAGRAPH 40,
or compliance with any federal, state or local laws, rules, regulations or
orders relating thereto. The obligations and liabilities of Mortgagor under this
PARAGRAPH 40 shall survive full payment of the Loan, entry of a judgment of
foreclosure or a deed in lieu of foreclosure.
41. BANKRUPTCY OR INSOLVENCY. In the event that Mortgagor or any Guarantor
or, if Mortgagor or any Guarantor is a general or limited partnership, any
general partner of any such entity (a) admits in writing its inability to pay
its debts generally as they become due, or does not pay its debts generally as
they become due, (b) commences as debtor any case or proceeding under any
bankruptcy, insolvency, reorganization, liquidation, dissolution or similar law,
or seeks or consents to the appointment of a receiver, conservator, trustee,
custodian, manager, liquidator or similar official for it or the whole or any
substantial part of its property, (c) has a receiver, conservator, trustee,
custodian, manager, liquidator, or similar official appointed for it or the
whole or any substantial part of its property, by any governmental authority
with jurisdiction to do so, (d) makes a proposal or any assignment for the
benefit of its creditors, or enters into an arrangement or composition or
similar plan or scheme with or for the benefit of creditors generally occurring
in circumstances in which such entity is unable to meet its obligations as they
become due or (e) has filed against it any case or proceeding under any
bankruptcy, insolvency, reorganization, liquidation, dissolution or similar law
which (i) is consented to or not timely contested by such entity, (ii) results
in the entry of an order for relief, appointment of a receiver, conservator,
trustee, custodian, manager, liquidator or similar official for such entity or
the whole or any substantial part of its property or (iii) is not dismissed
within sixty (60) days, an Event of Default shall have occurred and as a result,
the entire principal balance of the
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Note and all obligations under any Guaranty shall become immediately due and
payable at the option of Mortgagee without notice to Mortgagor or any Guarantor
and Mortgagee may exercise any remedies available to it hereunder, under any
other Loan Document, at law or in equity.
42. COMPLIANCE WITH ERISA AND STATE STATUTES ON GOVERNMENTAL PLANS.
(a) Mortgagee represents and warrants to Mortgagor that, as of the
date of this Mortgage and throughout the term of this Mortgage, the source
of funds from which Mortgagee extends this Mortgage is its general account,
which is subject to the claims of its general creditors under state law.
(b) Mortgagor represents and warrants that, as of the date of this
Mortgage and throughout the term of this Mortgage, (i) Mortgagor is not an
"employee benefit plan" as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), which is
subject to Title I of ERISA and (ii) the assets of such Mortgagor do not
constitute "plan assets" of one or more such plans within the meaning of 29
C.F.R. Section 2510.3- 101.
(c) Mortgagor represents and warrants to Mortgagee that, as of the
date of this Mortgage and throughout the term of this Mortgage (i)
Mortgagor is not a "governmental plan" within the meaning of Section 3(32)
of ERISA and (ii) transactions by or with Mortgagor or any Mortgagor are
not subject to state statues regulating investments of and fiduciary
obligations with respect to governmental plans.
(d) Mortgagor covenants and agrees to deliver to Mortgagee such
certifications or other evidence from time to time throughout the term of
this Mortgage, as requested by Mortgagee in its sole discretion, that (i)
Mortgagor is not an "employee benefit plan" or a "governmental plan", (ii)
Mortgagor is not subject to state statutes regulating investments and
fiduciary obligations with respect to governmental plans, and (iii) one or
more of the following circumstances is true:
(A)Equity interests in Mortgagor are publicly offered securities,
within the meaning of 29 C.F.R. Section 2510.3-101(b)(2);
(B)Less than 25 percent of all equity interests in such Mortgagor
are held by "benefit plan investors" within the meaning of 29 C.F.R.
Section 2510.3-101(f)(2); or
(C)Mortgagor qualifies as an "operating company" or a "real
estate operating company" within the meaning of 29 C.F.R.
Section 2510.3-101(c) or (e).
(e) Any of the following shall constitute an Event of Default under
this Mortgage, entitling Mortgagee to exercise any and all remedies to
which it may be entitled under this Mortgage, and any other Loan Documents
(i) the failure of any representation or
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warranty made by any Mortgagor under this PARAGRAPH 42 to be true and
correct in all respects, (ii) the failure of any Mortgagor to provide
Mortgagee with the written certifications and evidence referred to in this
PARAGRAPH 42 or (iii) the consummation by Mortgagor or any one Mortgagor of
a transaction which would cause this Mortgage or any exercise of
Mortgagee's rights under this Mortgage, or the other Loan Documents to
constitute a non-exempt prohibited transaction under ERISA or a violation
of a state statute regulating governmental plans, or otherwise subjecting
Mortgagee to liability for violation of ERISA or such state statute.
(f) Mortgagor shall indemnify Mortgagee and defend and hold Mortgagee
harmless from and against all civil penalties, excise taxes, or other loss,
cost, damage and expense (including, without limitation, attorneys' fees
and disbursements and costs incurred in the investigation, defense and
settlement of claims and losses incurred in correcting any prohibited
transaction or in the sale of a prohibited loan, and in obtaining any
individual prohibited transaction exemption under ERISA that may be
required, in Mortgagee's sole discretion) that Mortgagee may incur,
directly or indirectly, as a result of a default under this PARAGRAPH 42.
This indemnity shall survive any termination, satisfaction or foreclosure
of this Mortgage.
43. ASSIGNMENTS. Mortgagee shall have the right to assign or transfer its
rights under this Mortgage without limitation. Any assignee or transferee shall
be entitled to all the benefits afforded Mortgagee under this Mortgage.
44. COOPERATION. Mortgagor acknowledges that Mortgagee and its successors
and assigns may (a) sell this Mortgage, the Note and other Loan Documents to one
or more investors as a whole loan, (b) participate the Loan to one or more
investors, (c) deposit this Mortgage, the Note and other Loan Documents with a
trust, which trust may sell certificates to investors evidencing an ownership
interest in the trust assets or (d) otherwise sell the Loan or interest therein
to investors (the transactions referred to in clauses (a) through (d) are
hereinafter referred to as "SECONDARY MARKET TRANSACTIONS"). Mortgagor shall
cooperate in good faith with Mortgagee in effecting any such Secondary Market
Transaction and shall cooperate in good faith to implement all requirements
imposed by the Rating Agency involved in any Secondary Market Transaction
including, without limitation, all structural or other changes to the Loan,
modifications to any documents evidencing or securing the Loan, delivery of
opinions of counsel acceptable to the Rating Agency and addressing such matters
as the Rating Agency may require; PROVIDED, HOWEVER, that Mortgagor shall not be
required to modify any documents evidencing or securing the Loan which would
modify (i) the interest rate payable under the Note, (ii) the stated maturity of
the Note, (iii) the amortization of principal of the Note or (iv) any other
material economic term of the Loan. Mortgagor shall provide such information and
documents relating to Mortgagor, Guarantor, if any, the Mortgaged Property, the
Lease and the Lessee as Mortgagee may reasonably request in connection with a
Secondary Market Transaction. Mortgagee shall have the right to provide to
prospective investors any information in its possession, including, without
limitation, financial statements relating to Mortgagor, the Guarantor, if any,
the Mortgaged Property and the Lessee. Mortgagor acknowledges that certain
information
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Loan No. 3212525
regarding the Loan and the parties thereto and the Mortgaged Property may be
included in a private placement memorandum, prospectus or other disclosure
documents.
45. INDEMNIFICATION FOR NON-RECOURSE CARVEOUT OBLIGATIONS. Mortgagor hereby
covenants and agrees unconditionally and absolutely to indemnify and save
harmless Mortgagee, its officers, directors, shareholders, employees, agents and
attorneys against all damages, losses, liabilities, obligation, claims,
litigation, demands or defenses, judgments, suits, proceedings, fines,
penalties, costs, disbursements and expenses of any kind or nature whatsoever
(including without limitation attorneys' fees reasonably incurred), which may at
any time be imposed upon, incurred by or asserted or awarded against Mortgagee
and arising from the Non-Recourse Carveout Obligations.
This indemnity shall survive any foreclosure of this Mortgage, the taking
of a deed in lieu thereof, or any other discharge of the obligations of the
Mortgagor hereunder or a transfer of the Mortgaged Property, even if the
indebtedness secured hereby is satisfied in full. Mortgagor agrees that the
indemnification granted herein may be enforced by Mortgagee without resorting to
or exhausting any other security or collateral or without first having recourse
to the Note or the Mortgaged Property covered by this Mortgage through
foreclosure proceedings or otherwise; provided, however, that, subject to
PARAGRAPH 46 of this Mortgage, nothing herein contained shall prevent Mortgagee
from suing on the Note or foreclosing this Mortgage or from exercising any other
rights under the Loan Documents.
46. EXCULPATION. Notwithstanding anything to the contrary contained herein,
but subject to PARAGRAPH 45 hereof, any claim based on or in respect of any
liability of Mortgagor under the Note or under this Mortgage or any other Loan
Document shall be enforced only against the Mortgaged Property and any other
collateral now or hereafter given to secure the Loan and not against any other
assets, properties or funds of Mortgagor; PROVIDED, HOWEVER, that the liability
of Mortgagor for loss, costs or damage arising out of the matters described in
subparagraphs (i) through (vi) below (collectively, "Non-Recourse Carveout
Obligations") shall not be limited solely to the Mortgaged Property and other
collateral now or hereafter given to secure the Loan but shall include all of
the assets, properties and funds of Mortgagor: (i) fraud, misrepresentation and
waste, (ii) any rents, issues or profits collected more than one (1) month in
advance of their due dates, (iii) any misapplication of loan proceeds, rents,
issues or profits, security deposits and any other payments from tenants or
occupants (including, without limitation, lease termination fees) insurance
proceeds, condemnation awards, or other sums of a similar nature, (iv) liability
under environmental covenants, conditions and indemnities contained in the
Mortgage and in any separate environmental indemnity agreements, (v) the
unauthorized sale, conveyance or transfer of title to the Mortgaged Property or
encumbrance of the Mortgaged Property and (vi) the failure of Mortgagor to
maintain its status as a single purpose, bankruptcy-remote entity pursuant to
its organizational documents and the Loan Documents. Nothing herein shall be
deemed (w) to be a waiver of any right which Mortgagee may have under any
bankruptcy law of the United States or the State of New Hampshire, including,
but not limited to, Section 506(a), 506(b), 1111(b) or any other provisions of
the U.S. Bankruptcy Code, to file a claim for the full amount of the
indebtedness secured by this Mortgage or to require that all of the collateral
securing the indebtedness secured hereby shall continue to secure all of the
indebtedness owing to
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Loan No. 3212525
Mortgagee under the Note, this Mortgage and the other Loan Documents; (x) to
impair the validity of the indebtedness secured by this Mortgage; (y) to impair
the right of Mortgagee as Mortgagee or secured party to commence an action to
foreclose any lien or security interest; or (z) to modify, diminish or discharge
the liability of any guarantor under any guaranty.
47. NOTICES. Any notice, demand, statement, request or consent made
hereunder shall be effective and valid only if in writing, referring to this
Mortgage, signed by the party giving such notice, and delivered either
personally to such other party, or sent by nationally recognized overnight
courier delivery service or by certified mail of the United States Postal
Service, postage prepaid, return receipt requested, addressed to the other party
as follows (or to such other address or person as either party or person
entitled to notice may by notice to the other party specify):
TO MORTGAGEE:
John Hancock Real Estate Finance, Inc.
John Hancock Place, T-53
200 Clarendon Street
Boston, MA 02116
Re: Loan No. 3212525
and with a copy concurrently to:
Hebb & Gitlin
A Professional Corporation
One State Street
Hartford, CT 06103
Attention: John B. D'Agostino, Esq.
TO MORTGAGOR:
Birch Pond Realty Corporation
100 Birch Pond Drive
Tilton, New Hampshire 03289
and with a copy concurrently to:
Foley, Hoag & Eliot, Esq.
One Post Office Square
Boston, Massachusetts 02109
Attention: Deborah Breznay, Esq.
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Loan No. 3212525
Unless otherwise specified, notices shall be deemed given as follows: (i)
if delivered personally, when delivered, (ii) if delivered by nationally
recognized overnight courier delivery service, on the day following the day such
material is sent, or (iii) if delivered by certified mail, on the third day
after the same is deposited with the United States Postal Service as provided
above.
48. NON-WAIVER. The failure of Mortgagee to insist upon strict performance
of any term hereof shall not be deemed to be a waiver of any term of this
Mortgage. Mortgagor shall not be relieved of Mortgagor's obligations hereunder
by reason of (a) failure of Mortgagee to comply with any request of Mortgagor or
any Guarantor to take any action to foreclose this Mortgage or otherwise enforce
any of the provisions hereof or of the Note, any Guaranty or the other Loan
Documents, (b) the release, regardless of consideration, of the whole or any
part of the Mortgaged Property, or of any person liable for the Indebtedness or
portion thereof or (c) any agreement or stipulation by Mortgagee extending the
time of payment or otherwise modifying or supplementing the terms of the Note,
any Guaranty, this Mortgage or the other Loan Documents. Mortgagee may resort
for the payment of the Indebtedness to any other security held by Mortgagee in
such order and manner as Mortgagee, in its discretion, may elect. Mortgagee may
take action to recover the Indebtedness, or any portion thereof, or to enforce
any covenant hereof without prejudice to the right of Mortgagee thereafter to
foreclose this Mortgage. The rights of Mortgagee under this Mortgage shall be
separate, distinct and cumulative and none shall be given effect to the
exclusion of the others. No act of Mortgagee shall be construed as an election
to proceed under any one provision herein to the exclusion of any other
provision. Mortgagee shall not be limited exclusively to the rights and remedies
herein stated but shall be entitled to every right and remedy now or hereafter
afforded by law.
49. JOINT AND SEVERAL LIABILITY. If there is more than one party comprising
Mortgagor, then the obligations and liabilities of each party under this
Mortgage shall be joint and several.
50. SEVERABILITY. If any term, covenant or condition of the Note, any
Guaranty or this Mortgage is held to be invalid, illegal or unenforceable in any
respect, the Note, any Guaranty and this Mortgage shall be construed without
such provision.
51. DUPLICATE ORIGINALS. This Mortgage may be executed in any number of
duplicate originals and each such duplicate original shall be deemed to
constitute but one and the same instrument.
52. INDEMNITY AND MORTGAGEE'S COSTS. Mortgagor agrees to pay all costs,
including, without limitation, attorneys' fees and expenses, incurred by
Mortgagee in enforcing the terms hereof and/or the terms of any of the other
Loan Documents or the Note or any Guaranty, whether or not suit is filed and
waives to the full extent permitted by law all right to plead any statute of
limitations as a defense to any action hereunder. Mortgagor agrees to indemnify
and hold Mortgagee harmless from any and all liability, loss, damage or expense
(including, without limitation, attorneys' fees and disbursements) that
Mortgagee may or might incur hereunder or in connection with the enforcement of
any of its rights or remedies hereunder, any action taken by Mortgagee
hereunder, or by reason or in defense of any and all claims and demands
whatsoever that may be asserted against Mortgagee
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Loan No. 3212525
arising out of the Mortgaged Property; and should Mortgagee incur any such
liability, loss, damage or expense, the amount thereof with interest thereon at
the Default Rate shall be payable by Mortgagor immediately without demand, shall
be secured by this Mortgage, and shall be a part of the Indebtedness.
53. CERTAIN DEFINITIONS. Unless the context clearly indicates a contrary
intent or unless otherwise specifically provided herein, words used in this
Mortgage shall be used interchangeably in singular or plural form. The word
"MORTGAGOR" shall mean Mortgagor and/or any subsequent owner or owners of the
Mortgaged Property or any part thereof or interest therein. The word "MORTGAGEE"
shall mean Mortgagee or any subsequent holder of the Note. The word "GUARANTY"
shall mean any Guaranty of Payment, Guaranty of Completion, Guaranty of
Collection, Environmental Indemnity or any other Guaranty or Indemnity given at
any time to or for the benefit of Mortgagee in connection with the Loan. The
word "GUARANTOR" shall mean any person giving or making any Guaranty. The word
"NOTE" shall mean the Note or any other evidence of indebtedness secured by this
Mortgage. The words "LOAN DOCUMENTS" shall mean the Note, this Mortgage, the
loan agreement, if any, between Mortgagor and Mortgagee, the security agreement,
if any, between Mortgagor and Mortgagee, the assignment of leases and rents, if
any, made by Mortgagor to Mortgagee, any escrow agreements between Mortgagor and
Mortgagee, the assignment of contracts, if any, made by Mortgagor to Mortgagee,
all Guaranties, if any, made to Mortgagee, any other Mortgage or deed of trust
securing the Note and any other agreement, instrument, affidavit or document
executed by Mortgagor, any Guarantor or any indemnitor and delivered to
Mortgagee in connection with the Loan. The word "PERSON" shall include an
individual, corporation, partnership, trust, unincorporated association,
government, governmental authority or other entity. The words "MORTGAGED
PROPERTY" shall include any portion of the Mortgaged Property or interest
therein. Whenever the context may require, any pronouns used herein shall
include the corresponding masculine, feminine or neuter forms, and the singular
form of nouns and pronouns shall include the plural and vice versa.
54. NO ORAL CHANGE. This Mortgage, and any provisions hereof, may not be
modified, amended, waived, extended, changed, discharged or terminated orally or
by any act or failure to act on the part of Mortgagor or any one Mortgagor or
Mortgagee, but only by an agreement in writing signed by the party against whom
enforcement of any modification, amendment, waiver, extension, change, discharge
or termination is sought.
55. NO FOREIGN PERSON. Mortgagor is not a "foreign person" within the
meaning of Section 1445(f)(3) of the Internal Revenue Code of 1986, as amended
and the related Treasury Department Regulations, including temporary
regulations.
56. SEPARATE TAX LOT. Except as set forth in the Borrower's Certificate
delivered to Mortgagee by Mortgagor herewith, the Mortgaged Property is assessed
for real estate tax purposes as one or more wholly independent tax lot or lots,
separate from any adjoining land or improvements not constituting a part of such
lot or lots, and no other land or improvements is assessed and taxed together
with the Mortgaged Property or any portion thereof. Mortgagor hereby covenants
and agrees to use its best efforts to cause the Mortgaged Property to be a
separate tax lot. In any event,
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Loan No. 3212525
Mortgagor agrees to pay before delinquency any and all taxes assessed against
any portion of the Mortgaged Property, including any taxes assessed against
other property in the event such assessment includes any portion of the
Mortgaged Property.
57. RIGHT TO RELEASE ANY PORTION OF THE MORTGAGED PROPERTY. Mortgagee may
release any portion of the Mortgaged Property for such consideration as
Mortgagee may require without, as to the remainder of the Mortgaged Property, in
any way impairing or affecting the lien or priority of this Mortgage, or
improving the position of any subordinate lienholder with respect thereto,
except to the extent that the obligations hereunder shall have been reduced by
the actual monetary consideration, if any, received by Mortgagee for such
release, and may accept by assignment, pledge or otherwise any other property in
place thereof as Mortgagee may require without being accountable for so doing to
any other lienholder. This Mortgage shall continue as a lien and security
interest in the remaining portion of the Mortgaged Property.
58. SUBROGATION. The Mortgagee shall be subrogated for further security to
the lien, although released of record, of any and all encumbrances paid out of
the proceeds of the Loan secured by this Mortgage.
59. ADMINISTRATIVE FEES. Mortgagee may charge reasonable administrative
fees and be reimbursed for all costs and expenses, including reasonable
attorneys' fees and disbursements, associated with reviewing and processing
post-closing requests of Mortgagor.
60. DISCLOSURE. Mortgagor represents and warrants that it has fully
disclosed to Mortgagee all facts material to the Mortgaged Property, the
Mortgagor, the Mortgagor's business
operations to the extent material to this loan transaction, any guarantor of
Non-Recourse Carveout Obligations and any indemnitor of environmental
liabilities.
61. HEADINGS, ETC.. The headings and captions of various paragraphs of this
Mortgage are for convenience of reference only and are not to be construed as
defining or limiting, in any way, the scope or intent of the provisions hereof.
62. ADDRESS OF REAL PROPERTY. The street address of the Real Property is as
follows: 100 Birch Pond Drive, Tilton, Belknap County, New Hampshire.
63. WIRE TRANSFER. All payments of principal and interest and other amounts
due under this Mortgage shall be paid to Mortgagee by wire transfer of
immediately available funds to such bank or place, or in such manner, as
Mortgagee may from time to time designate.
64. PUBLICITY. Mortgagor agrees that Mortgagee, at its expense, may
publicize the financing of the Mortgaged Property in trade and similar
publications.
65. RELATIONSHIP. The relationship of Mortgagee to Mortgagor under this
Mortgage is strictly and solely that of lender and borrower and nothing
contained in this Mortgage or any other
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Loan No. 3212525
Loan Document is intended to create, or shall in any event or under any
circumstance be construed to create, a partnership, joint venture,
tenancy-in-common, joint tenancy or other relationship of any nature whatsoever
between Mortgagee and Mortgagor other than that of lender and borrower.
66. HOMESTEAD. The Mortgaged Property is not homestead property. Mortgagor
hereby waives and renounces all homestead and exemption rights provided by the
constitution and the laws of the United States and of any state, in and to the
Land as against the collection of the Indebtedness, or any part hereof.
67. NO THIRD PARTY BENEFICIARIES. Nothing contained herein is intended or
shall be deemed to create or confer any rights upon any third person not a party
hereto, whether as a third-party beneficiary or otherwise, except as expressly
provided herein.
68. ENTIRE AGREEMENT. This Mortgage, the Note and the other Loan Documents
constitute the entire agreement among Mortgagor and Mortgagee with respect to
the subject matter hereof and all understandings, oral representations and
agreements heretofore or simultaneously had among the parties are merged in, and
are contained in, such documents and instruments.
69. SERVICER. Mortgagee may from time to time appoint a servicer (the
"SERVICER") to administer the Loan, which Servicer shall have the power and
authority to exercise all of the rights and remedies of Mortgagee and to act as
agent of Mortgagee hereunder.
70. GOVERNING LAW; CONSENT TO JURISDICTION. THIS MORTGAGE SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE IN WHICH THE MORTGAGED
PROPERTY IS LOCATED WITHOUT REGARD TO CONFLICT OF LAW PROVISIONS THEREOF. EACH
MORTGAGOR, ENDORSER AND GUARANTOR HEREBY SUBMITS TO PERSONAL JURISDICTION IN
SAID STATE AND THE FEDERAL COURTS OF THE UNITED STATES OF AMERICA LOCATED IN
SAID STATE (AND ANY APPELLATE COURTS TAKING APPEALS THEREFROM) FOR THE
ENFORCEMENT OF SUCH MORTGAGOR'S, ENDORSER'S OR GUARANTOR'S OBLIGATIONS
HEREUNDER, UNDER THE NOTE, THE GUARANTY AND THE OTHER LOAN DOCUMENTS, AND WAIVES
ANY AND ALL PERSONAL RIGHTS UNDER THE LAW OF ANY OTHER STATE TO OBJECT TO
JURISDICTION WITHIN SUCH STATE FOR THE PURPOSES OF SUCH ACTION, SUIT, PROCEEDING
OR LITIGATION TO ENFORCE SUCH OBLIGATIONS OF SUCH MORTGAGOR, ENDORSER OR
GUARANTOR. EACH MORTGAGOR, ENDORSER AND GUARANTOR HEREBY WAIVES AND AGREES NOT
TO ASSERT, AS A DEFENSE IN ANY ACTION, SUIT OR PROCEEDING ARISING OUT OF OR
RELATING TO THIS MORTGAGE, THE NOTE, ANY GUARANTY OR ANY OTHER LOAN DOCUMENT,
(A) THAT IT IS NOT SUBJECT TO SUCH JURISDICTION OR THAT SUCH ACTION, SUIT OR
PROCEEDING MAY NOT BE BROUGHT OR IS NOT MAINTAINABLE IN THOSE COURTS OR THAT
THIS MORTGAGE, THE NOTE, THE GUARANTY AND/OR ANY OF THE OTHER LOAN DOCUMENTS MAY
NOT BE ENFORCED IN OR BY THOSE COURTS OR THAT IT IS EXEMPT OR IMMUNE FROM
EXECUTION, (B) THAT THE ACTION, SUIT OR PROCEEDING IS BROUGHT IN AN INCONVENIENT
FORUM OR (C) THAT THE VENUE OF THE ACTION, SUIT
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Loan No. 3212525
OR PROCEEDING IS IMPROPER. IN THE EVENT ANY SUCH ACTION, SUIT, PROCEEDING OR
LITIGATION IS COMMENCED, MORTGAGOR, ENDORSER AND GUARANTOR AGREE THAT SERVICE OF
PROCESS MAY BE MADE, AND PERSONAL JURISDICTION OVER SUCH MORTGAGOR, ENDORSER OR
GUARANTOR OBTAINED, BY SERVICE OF A COPY OF THE SUMMONS, COMPLAINT AND OTHER
PLEADINGS REQUIRED TO COMMENCE SUCH LITIGATION UPON SUCH MORTGAGOR, ENDORSER OR
GUARANTOR AT 100 BIRCH POND DRIVE, TILTON, NEW HAMPSHIRE 03289.
71. YEAR 2000. Mortgagor shall take all action necessary to ensure that all
software, hardware, equipment, goods, and systems used by or material to the
physical operations, business operations, or financial reporting of Mortgagor or
of the equipment, the improvements, and all other components of the Mortgaged
Property will not malfunction or cease to function or provide invalid or
incorrect results and will continue to operate and perform date-sensitive
functions before, during, and after the Year 2000, including with regard to the
Year 2000 leap year.
72. PARTIAL RELEASE. Subsequent to the Closing, Mortgagor may request that
Mortgagee release from the lien of this Mortgage and the other Loan Documents
the land shown as Lots 1 and 3 on a certain plan (the "SUBDIVISION PLAN")
entitled "Subdivision, Plan of Land Prepared for DM Management Company, Route
132 (Sanborn Road) Tilton, NH, 2 Sheets" dated January 20, 1999, by Yerkes
Surveying Consultants, Laconia NH, together with the improvements thereon (the
"Release Parcel"). Mortgagee will release the Release Parcel, provided that:
(a) no default has occurred under this Mortgage or the Loan Documents
(b) the loan to value ratio with respect to the Mortgaged Property
remaining after the release ("Remaining Security") is not greater than 75%
and the debt service coverage ratio is not less than 1.40x, all as
determined by Mortgagee in its sole discretion. ;
(c) all documentation pertaining to the Remaining Security, including
without limitation, the existing zoning, are satisfactory to Mortgagee;
(d) the Release Parcel and the Remaining Security shall have been
legally and validly subdivided in accordance with, and the Remaining
Security shall be in compliance with, all applicable federal, state and
local laws and regulations, including, without limitation, all laws and
regulations pertaining to environmental, land use, zoning, minimum lot
size, parking requirements, setback, frontage, site plan approval and
access to a public way, and both parcels function legally and operationally
independently in the reasonable judgment of Mortgagee, except as
specifically approved by Mortgagee;
(e) the Remaining Security and the Release Parcel shall each
constitute separate tax and zoning lots and Mortgagor shall deliver to
Mortgagee evidence in form and substance satisfactory to Mortgagee and its
special counsel, including without limitation, an opinion of
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Loan No. 3212525
Mortgagor's counsel, that the Remaining Security constitutes a lawful
parcel and has been separately assessed for real property tax purposes;
(f) Mortgagor delivers to Mortgagee surveys of the Release Parcel and
the Remaining Security, together with surveyors' certificates addressed to
Mortgagee and the title insurance company insuring title to the Mortgaged
Property, which surveys shall comply with all of Mortgagee's survey
requirements, including without limitation showing the acreage, the metes
and bounds, easements, setback lines, and proper legal description of both
the Release Parcel and the Remaining Security, the dimensions and locations
of the improvements, and show that the Remaining Security has all necessary
utility lines, parking areas, sewer and septic lines and tanks, drain
fields, access to a public way, and such other items as Mortgagee and its
counsel shall request;
(g) Mortgagor delivers to Mortgagee an endorsement to the title
insurance policy covering the Mortgaged Property (1) updating such policy
to the date of the recording of such release, (2) reflecting the new legal
description of the Remaining Security, (3) certifying and insuring that
this Mortgage remains and constitutes an enforceable first lien on the
Remaining Security, subject to no other exceptions to title except the
title exceptions contained in the title policy issued to Mortgagee at the
time this Mortgage was first recorded, and (4) insuring that the Remaining
Security continues to be in compliance with all state and local zoning,
subdivision and parking laws and regulations;
(h) Mortgagor delivers to Mortgagee a valid, binding and enforceable
agreement signed by the Mortgagor with respect to the utility easement over
Lot 3 appurtenant to the Remaining Security and the pipe drainage easement
over the Remaining Security appurtenant to Lot 3, which are in form and
substance satisfactory to Mortgagee, and in the event that the Release
Parcel is the subject of an application for a zoning variance or other
governmental permit of which Mortgagor receives notice and to which
Mortgagor has standing to object, then Mortgagor will promptly notify
Mortgagee of any such application and cooperate with Mortgagee in the event
Mortgagee desires to oppose the granting of any such variance or other
permit;
(i) the release of the Release Parcel will not violate the terms of,
or entitle an tenant to reduce the rent payable under, any lease on the
Remaining Security;
(j) Mortgagor shall have the Certificate of Occupancy (to the extent
available under applicable laws, regulations and codes) for the Remaining
Security duly amended to reflect the subdivision of the Release Parcel from
the Remaining Security;
(k) Mortgagor delivers notice to, and obtains consent of, any party
requiring notice or consent to the release of the Release Parcel
(including, without limitation, any tenant under any lease);
(l) Mortgagor provides Mortgagee with (1) evidence satisfactory to
Mortgagee and its special counsel that the release will not interfere with
vehicular, pedestrian or rail access, utilities to or other items affecting
the Remaining Parcel, (2) any easements for access, utilities
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Loan No. 3212525
or other items affecting the Release Parcel required by Mortgagee and its
special counsel and satisfactory to them in form and substance, and (3) any
joint use agreement deemed appropriate by Mortgagee and its special
counsel, satisfactory in form and substance to them; it is understood that
the agreement by Mortgagee to consent to or to subordinate its lien to any
easements or use agreements with respect to the Remaining Security is
predicated on receiving this information;
(m) Mortgagee and its special counsel are satisfied with the size,
boundaries and location of the Release Parcel, provided that all other
conditions hereunder are met;
(n) the Release Parcel has legal access satisfactory to Mortgagee and
its special counsel;
(o) no construction shall occur on the Release Parcel prior to the
release thereof in accordance with the conditions set forth herein; and
(p) Mortgagor shall pay all legal, administrative, title, recording an
any other costs and expenses incurred in connection with the release of the
Release Parcel including, without limitation, any such costs and expenses
incurred by Mortgagee.
73. SPECIAL STATE PROVISIONS.
(a) INCONSISTENCY. In the event of any inconsistency between this
Paragraph 73 and the other Paragraphs of this Mortgage, the terms and
conditions of this Paragraph 73 shall control and be binding.
(b) MORTGAGE COVENANTS. In addition, to and in no way abrogating or
amending the granting language or any other term contained in this
Mortgage, for consideration paid, and to timely secure the payment and
performance of the Indebtedness, the Mortgagee hereby grants the Mortgaged
Property to Mortgagee with Mortgage Covenants.
(c) POWER OF SALE. In addition to any other rights and remedies of the
Mortgagee set forth in this Mortgage, including, but not limited to, those
set forth in Paragraph 21, this Mortgage is granted with, contains and is
subject to the STATUTORY POWER OF SALE and Mortgagee shall have the ability
and option to exercise the STATUTORY POWER OF SALE and, upon compliance
with the requirements of the New Hampshire laws respecting a Power of Sale
mortgage foreclosure of real estate, may sell the Mortgaged Property, or
any part thereof at public auction at some place in the city or town where
the Mortgaged Property is situated or at the principal office of the
Mortgagee or any other location at Mortgagee's election, in one or more
lots, at one or several sales, to the highest bidder, and Mortgagor hereby
appoints Mortgagee, as Mortgagor's agent, and attorney-in-fact to sell and
convey the Mortgaged Property so sold to the purchaser by indefeasible
title, discharged of all rights of redemption by Mortgagor or its
successors and assigns, or any other person claiming under them. It is
agreed that Mortgagee, its successors and assigns, or any person on their
behalf, may purchase at any sale or sales made as aforesaid.
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Loan No. 3212525
(d) STATUTORY CONDITIONS. This Mortgage is given upon and contains the
Statutory Conditions and for any breach of said Statutory Conditions,
Mortgagee shall have any and all remedies available to it pursuant to this
Mortgage, including, but not limited to the STATUTORY POWER OF SALE.
(e) ENTRY NOT A TRESPASS OR BREACH OF PEACE. If the Mortgagee shall
enter upon the Mortgaged Premises pursuant to the exercise of any of its
rights or remedies pursuant to this Mortgage or the Loan Documents,
Mortgagee shall not be deemed to have committed a trespass or a breach of
the peace.
(f) ADDITIONAL ENVIRONMENTAL LAWS. The definition of Environmental
Laws shall include New Hampshire RSA 125-A, 125-C, 125-I, 146-A, 146-C,
147-A, 147-B, 149-I and 149-M, as they may be amended.
(g) ADDITIONAL WAIVER PROVISIONS. MORTGAGOR AND MORTGAGEE EACH, TO THE
EXTENT PERMITTED BY LAW, WAIVE ANY RIGHT TO A JURY TRIAL OR TO HAVE A JURY
PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT,
OR OTHERWISE BETWEEN MORTGAGEE AND MORTGAGOR ARISING OUT OF, IN CONNECTION
WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN
MORTGAGOR AND MORTGAGEE IN CONNECTION WITH THE LOAN, THE NOTE, THE MORTGAGE
OR THE LOAN DOCUMENTS OR ANY OTHER AGREEMENT, INSTRUMENT OR DOCUMENT
EXECUTED OR DELIVERED IN CONNECTION THEREWITH OR THE TRANSACTIONS RELATED
THERETO. THIS WAIVER SHALL NOT IN ANY WAY AFFECT, WAIVE, LIMIT, AMEND OR
MODIFY MORTGAGEE'S ABILITY TO PURSUE REMEDIES PURSUANT TO ANY CONFESSION OF
JUDGMENT OR COGNOVIT PROVISION CONTAINED IN THIS NOTE, OR ANY OTHER
AGREEMENT, INSTRUMENT OR DOCUMENT RELATED THERETO.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK; SIGNATURE PAGE(S) FOLLOW(S)]
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Loan No. 3212525
IN WITNESS WHEREOF, Mortgagor has duly executed and delivered this Mortgage
as of the day and year first above written.
BIRCH POND REALTY CORPORATION
Witnessed By: (doing business in the State of New Hampshire
as BPRC)
By: /s/ Olga L. Conley
---------------------------
Name: /s/ Deborah B. Breznay Name: Olga L. Conley
--------------------------- Its: Treasurer
Name: /s/ Deborah B. Breznay
---------------------------
COMMNWEALTH OF MASSACHUSETTS )
)
COUNTY OF SUFFOLK )
The foregoing instrument was acknowledged before me this day of March,
1999, by , of Birch Pond Realty Corporation, a Delaware corporation (doing
business in the State of New Hampshire as BPRC), on behalf of said corporation.
/s/ Katherine Culkin
-------------------------------------
Notary Public: Katherine Culkin
My Commission Expires: 05/27/05
[SEAL]
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EXHIBIT A
That certain lot or tract of land, with the buildings and improvements
thereon, located in Tilton, Belknap County, New Hampshire, and being bounded
and described as follows:
Beginning at the northeast corner of the described premises at land now or
formerly of the State of New Hampshire and at a re-bar on the westerly
sideline of Route 132, Sanborn Road:
1. S 19 DEG. 20'44" E 45.87' by said Route 132 to a point; then
2. By a curve to the right having a Delta of 17 DEG. 00'15", a radius of
930.00 feet, an arc distance of 276.00 feet, and a chord bearing of S
10 DEG. 50'37" E and a chord distance of 274.99 feet by said Route to
a re-bar; then
3. S 02 DEG. 20'29" E 155.23' by said Route to a re-bar; then
4. S 03 DEG. 47'32" W 86.83' by said Route to a rebar; then
5. S 03 DEG. 05'40" W 523.55' by said Route to a rebar; then
6. By a curve to the left having a Delta of 01 DEG. 40'53" and a radius of
11,489.16 feet, an arc distance of 337.18 feet, and a chord bearing of
S 02 DEG. 15'13" W and a chord distance of 337.17 feet by said Route to
a re-bar; then
7. By a curve to the left having a Delta of 02 DEG. 59'59" and a radius of
11,492.87 feet, an arc distance of 601.71 feet, and a chord bearing of
S 01 DEG. 03'20" W and a chord distance of 601.64 feet by said Route to
a re-bar; then
8. By a curve to the left having a Delta of 01 DEG. 52'45" and a radius of
11,501.15 feet, an arc distance of 377.22 feet, and a chord bearing of
S 02 DEG. 31'31" W and a chord distance of 377.20 feet by said Route
to a re-bar; then
9. S 03 DEG. 27'54" E 248.12' by said Route to a point at now or formerly
of Oliver; then
10. S 89 DEG. 39'25" W 287.08' by said land of Oliver to a rebar; then
11. S 08 DEG. 48'25" W 225.00' by said land of Oliver to a rebar; then
12. S 08 DEG. 48'25" W, a distance of 20.00' to a point at land now or
formerly of
Page 1 of 3
<PAGE>
the State of New Hampshire; then
13. N70 DEG. 50'37"W 54.78' by land of the State; then
14. N 81 DEG. 42'19"W 58.01' by land of the State; then
15. S 82 DEG. 53'59"W142.27' by land of the State; then
16. S76 DEG. 57'22"W 157.00' by land of the State; then
17. S 89 DEG. 46'48"W 67.18' by land of the State; then
18. N65 DEG. 59'17"W 79.43' by land of the State; then
19. N47 DEG. 43'27"W 87.84' by land of the State; then
20. N27 DEG.29'46"W 83.28' by land of the State; then
21. S73 DEG. 59'49"W 53.30' by land of the State; then
22. N45 DEG. 19'18"W 43.24' by land of the State; then
23. N26 DEG. 13'08" W16.85' by land of the State; then
24. S83 DEG. 49'28"W 29.65' by land of the State; then
25. N60 DEG. 40'11"W 56.97' by land of the State; then
26. N38 DEG. 05'58"W 37.81' by land of the State; then
27. N60 DEG. 17'32"W 38.15' by land of the State; then
28. N31 DEG. 50'23"W 27.09' by land of the State; then
29. N74 DEG. 42'14"W 22.80' by land of the State; then
30. S74 DEG. 47'09" W 91.21' by land of the State; then
31. N87 DEG. 39'11"W 149.12' by land of the State; then
32. S72 DEG. 41'13"W 67.05' by land of the State; then
33. N72 DEG. 57'33" W 454.56' by land of the State; then
34. N29 DEG. 36'39"W 498.10' by land of the State: then
Page 2 of 3
<PAGE>
35. N29 DEG. 36'39"W 56.30' by land of the State; then
36. N16 DEG. 46'49"W 348.61' by land of the State to a concrete bound;
then
37. N14 DEG. 31'44"E 885.88' by land of the State to a concrete bound;
then
38. N58 DEG. 29'32"E 430.73' by land of the State to a re-bar; then
39. N05 DEG. 11'37"W 335.93' by land of the State to a re-bar; then
40. S76 DEG. 46'28"W 55.90' by land of the State to a concrete bound;
then
41. N85 DEG. 46'21"W 3.96' by land of the State to a point at land now
or formerly of DM Management Company ("DM"); then
42. N66 DEG. 32'51"E 1044.50 feet by land of said DM, then
43. N85 DEG. 07'38"E 305.57' by land of said DM to a stone wall; then
44. S25 DEG. 23'01"E 51.24' by land now or formerly of Miller and said
wall to a re-bar at land of the State; then
45. S66 DEG. 06'34"W 50.17' by land of the State and a stone wall to a
drill hole in the wall; then
46. S21 DEG. 06'31"E 95.43' by land of the State; then
47. S18 DEG. 16'00"E 175.19' by land of the State to a re-bar; then
48. N69 DEG. 11'55"E 499.88' by land of the State to the point of
beginning.
Meaning and intending to describe the land shown on a Plan entitled,
"ALTA/ACSM LAND TITLE SURVEY, Plan of Land Prepared for DM Management
Company, Route 132 (Sanborn Road), Tilton, NH," dated November 19, 1998, by
Yerkes Surveying Consultants and recorded in the Belknap County Registry of
Deeds on February 16, 1999, in Drawer L-31 #'s 61 and 62.
Page 3 of 3
<PAGE>
EXHIBIT B
PERSONAL PROPERTY OWNED BY TENANT
<TABLE>
<CAPTION>
Qty Manufacturer, Description Model No./Serial No. Location
- --- ---------------------------------------------- --------
<S> <C> <C>
12 Sandborn St
Tilton, NH 03276
(1) American Bater Model 6042HAT-930R
(36) Coils of 10 gauge Baling Wire
Above equipment distributed by: Aquest Corporation
(1) M8010 Sweeper/Scrubber, Rider Model 8010 S/N: 8010-218)
Machine as equipped:
6010 Battery Sweeper Scrubber
36388 Batt/Chg Pkg. Ext.Run. 1PH. 60HZ
87419 Brush, Side Polypropylene
363868 Brush, Main, Polypropylene
363012 Maxpro 1200 Scrub Head
30241 Brush, Non-scuff Poly f/MP1200
30241 Brush, Non-scuff Poly f/MP1200
08682-15 Det654 Heavy Duty, 15 Gal
363019 Es-Extended Scrubbing
48600 Wand. off Aisle Power
363455 Light Pkg. Revolving, OHG
(1) M5700 Scrubber, Walk Behind Model 5700 S/N:5700-11109
Machine as equipped:
5700 Scrubber, Walk Behind
222342 Scrubhead, 7000, 28" Disk
222803 Squeegee Assy. 700D/700C
222358 Battery, 235AH Wet
374014 Charger, 115V, 20A, 1PH, 60HZ
222320 Brush, Polypropylene 700D
222611 Power Wand, off-Aisle
Above equipment distributed by: Tennant
(1) CubiScan 100L S/N: QIL971879
(1) Mobile Cart-A
(1) Computer Shuttle Arm-S
(1) PW800 Inverter/TC20 Charger/Cables
(1) Portable Power System (PW800-TC20)
Above equipment distributed by: Quantronix
(2) Composee Turbo 2 Keyboard Wedge
(2) Serial Input Cable
(2) BM 3287 Terminal Cable Set
(2) External Power Supply
(2) SC QuickScan 600 Scanner w/cabling
(1) Custom QBIT Interface
Above equipment distributed by: Quantronix
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Qty. Manufacturer, Description, Model No./Serial No. Location
- ---- ----------------------------------------------- --------
<S> <C> <C>
12 Sandborn St.
Tilton, NH 03276
(1) 1020-1021 01-00001 Boom Lift 30-45 ELEC N40 ELC S/N: 0300039334
(2) 1020-1001 01-00002 Personnel Lifts PERS LFT 25AMDC S/N: 0900012248
Above equipment distributed by Action Equipment
(6) Crown PTH50-27-48 Hand Pallet Jacks S/N: 7-142882
7-142883
7-142884
7-142885
7-142886
7-142887
Above equipment distributed by Crown Trucks
(1) T20497 EASI-Orderpicker Model OPC30TT S/N: EASI-98-AT20497
(1) T20498 EASI-Orderpicker Model OPC30TT S/N: EASI-98-AT20498
(1) T20499 EASI-Orderpicker Model OPC30TT S/N: EASI-98-AT20499
(1) T20500 EASI-Orderpicker Model OPC30TT S/N: EASI-98-AT20500
(1) T20501 EASI-Orderpicker Model OPC30TT S/N: EASI-98-AT20501
(1) T20502 EASI-Orderpicker Model OPC30TT S/N: EASI-98-AT20502
(1) T20503 EASI-Orderpicker Model OPC30TT S/N: EASI-98-AT20503
(1) T20504 EASI-Orderpicker Model OPC30TT S/N: EASI-98-AT20504
(1) T20505 EASI-Orderpicker Model OPC30TT S/N: EASI-98-AT20505
(1) T20506 EASI-Orderpicker Model OPC30TT S/N: EASI-98-AT20506
(1) BN8691 Battery Model 18-E155W-11 S/N: AWG108691
(1) BN8692 Battery Model 18-E155W-11 S/N: AWG108692
(1) BN8693 Battery Model 18-E155W-11 S/N: AWG108693
(1) BN8694 Battery Model 18-E155W-11 S/N: AWG108694
(1) BN8695 Battery Model 18-E155W-11 S/N: AWG108695
(1) BN8696 Battery Model 18-E155W-11 S/N: AWG108696
(1) BN8697 Battery Model 18-E155W-11 S/N: AWG108697
(1) BN8698 Battery Model 18-E155W-11 S/N: AWG108698
(1) BN8699 Battery Model 18-E155W-11 S/N: AWG108699
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Manufacturer, Description
Qty. Model No./Serial No. Location
---- ------------------------- --------
<S> <C> <C>
12 Sandborn St.
Tilton, NH 03276
(1) BN8700 Battery Model 18-EI55W-11 S/N: AWG108700
(1) BN8701 Battery Model 18-EI55W-11 S/N: AWG108701
(1) BN8702 Battery Model 18-EI55W-11 S/N: AWG108702
(1) BN8703 Battery Model 18-EI55W-11 S/N: AWG108703
(1) BN8704 Battery Model 18-EI55W-11 S/N: AWG108704
(1) BN8705 Battery Model 18-EI55W-11 S/N: AWG108705
(1) BN8706 Battery Model 18-EI55W-11 S/N: AWG108706
(1) BN8707 Battery Model 18-EI55W-11 S/N: AWG108707
(1) BN8708 Battery Model 18-EI55W-11 S/N: AWG108708
(1) BN8709 Battery Model 18-EI55W-11 S/N: AWG108709
(1) BN8710 Battery Model 18-EI55W-11 S/N: AWG108710
(1) CN1941 Charger Model D3E-18-850B S/N: WF91941
(1) CN2620 Charger Model D3E-18-850B S/N: WF92620
(1) CN2621 Charger Model D3E-18-850B S/N: WF92621
(1) CN2622 Charger Model D3E-18-850B S/N: WF92622
(1) CN2623 Charger Model D3E-18-850B S/N: WF92623
(1) CN2624 Charger Model D3E-18-850B S/N: WF92624
(1) CN2625 Charger Model D3E-18-850B S/N: WF92625
(1) CN2629 Charger Model D3E-18-850B S/N: WF92629
(1) CN2633 Charger Model D3E-18-850B S/N: WF92633
(1) CN2682 Charger Model D3E-18-850B S/N: WF92682
(1) BN8687 Battery Model 18-EI40-17 S/N: AWG108687
(1) BN8688 Battery Model 18-EI40-17 S/N: AWG108688
(1) BN8689 Battery Model 18-EI40-17 S/N: AWG108689
(1) BN8690 Battery Model 18-EI40-17 S/N: AWG108690
(1) CN2771 Charger Model D3E-18-1200B S/N: WF92771
(1) CN2772 Charger Model D3E-18-1200B S/N: WF92772
(1) Stnlss Steel Drip Pa
(1) UPC Charge, Batt Sys
(1) HP Watering System
(1) Wire Guide System
(1) T10530 EASI Reach Forktruck Model EASIR45TT S/N: EZ-B-98-10530
(1) T10536 EASI Reach Forktruck Model EASIR45TT S/N: EZ-B-98-10536
</TABLE>
ABOVE EQUIPMENT DISTRIBUTED BY ROBERT ABEL & CO., INC.
<PAGE>
<TABLE>
<CAPTION>
Manufacturer Description
Qty. Model No./Serial No. Location
---- ------------------------ --------
<S> <C> <C>
12 Sandborn St.
Tilton, NH 03276
</TABLE>
(1) 000063 Wildeck Mezzanine System
(Phase I
(1) 000068 Wildeck Mezzanine System
Phase II
(1) 000070 Wildeck Mezzanine System
Phase III
(1) 000294 Vertical Reciprocating Convoy
ABOVE EQUIPMENT DISTRIBUTED BY WILDECK, INC.
PALLET/CASE/RAI/RACK
PHASE I
Layout: 41 Bays 96"w x 48"d x 84"h with 4 beam levels
Steel King Tulukar
55 RTFAP048084 Uprights - 3" x 1 5/8" x 48"d x 84"h
Capacity: 16,720# on 48" vertical centers
328 SBRXL300096 Step Beams - 3"h x 96"l x 1,448#capacity
328 WIRE DECKS 46"w x 48"d x 2" x 4" x 4Ga. x 300#
PHASE II
SELECTIVE PALLET RACK
Layout: 75 Bays 144"w x 42"d x 345"/407"h with 6 levels (floor +5 beam levels)
8 RTFBW042407 End Uprights - 3" x 3" x 42"d x 407"h
BASEPLATES 5' x 7' x 3/8" FOR Zone ZA
Capacity: 30,560# per new 1998 RMI
71 RTFBW042345 inL Uprights - 3" x 3' x 42"d, x 345"h
BASEPLATES 5" x 7" x 3/8" for Zone 2A
Capacity: 30,560# per new 1997 RMI
750 SBRXP600144 Stop Beams - 6" x 144'1 x 6,780# Capacity
375 BTWSG042 42" Beam Ties (required on all beams 120"+)
316 ANCHORS 1/2" x 3 1/4"
6 AISLE MARKERS 12" x 12" at all row ends
48 RSR3G018 Row Spacers - 18"
2 STEEL GUARD 102"lx18"h
2#GR09 2 1/2" deep x 14"h x 11 Ga. x 102"L#C52
4FPS3K024 Free Standing Column Protector at S. Rows
RESERVE CARTON RACK
Layout: 225 Bays - 144 w x 60"d x 364"h with 11 beam levels
30 RTFAP060417 End Uprights - 3" x 1 5/8" x 60"d x 417"h
BASEPLATES 5" x 7" x 3/8" for Zone 2A
Capacity: 16,730# per new 1998 RMI
210RTFAP060384 Int. Uprights - 3" x 1 5/8" x 60"d x 384"h
BASEPLATES x3/8 for Zone 2A
Capacity: 16,730#per new 1996 RMI
<PAGE>
<TABLE>
<CAPTION>
Manufacturer, Description,
Qty. Model No./Serial No. Location
---- -------------------------- --------
<S> <C> <C>
12 Sandborn St.
Tilton, NH 03276
</TABLE>
4950 SBRXP400144 Step Beams-4" x 144"l x 1,870# capacity
960 ANCHORS 1/2" x 3 3/4"
4,950 WIRE DECKS 70"w x 60"d x 2" x 4" & GA x 1,200# ea.
30 AISLE MARKERS 12" x 12" at all row ends
30 STEEL GUARO 60"Lx18"H
60#SCL 4" x 4" x 3/4" Tube with 10" sq. x 5/8 Base
30# GRO5 2 1/2" Deep x 14"h x 11 Ga. x 60"L
ACTIVE CARTON RACK (Convertible G.O.H. Rack)
- --------------------------------------------
Layout 1079 Bays -- 96" W x 48"d x 84"h with 4 beam levels
1,225 RTFAP048084 Uprights -- 3" x 1 5/8" x 48"d x 84"h
Capacity: 16,730# on 48" vertical centers
8,632 SBRXL300096 Step Beams -- 3"h x 96l x 1,448# capacity
2,450 ANCHORS 1/2" x 3 3/4"
160 AISLE MARKERS 12" x 12" at all row ends
4,904 WIRE DECKS 46"W X 48"d x 2" x 4" x 4Ga x 300#
ACTIVE CARTON FLOW RACK
- ---------------------------------------------
lAYOUT: 56 Bays -- 96" w x 120"d x 96"h with 4 shelf levels (6 runways/12
tracks + 5 guides per shelf)
64 Frames verticle Frames -- 96"d x 96"h
128 ANCHORS 1/2" x 3 3/4"
168 SWAY BRACES 96"
224 shelf frames 96" Wx120"d x 1,200# capacity
1,344 RUNWAYS 2 pcs x 120" long
1,120 GUIDES 120"L
16 AISLE MARKERS 12" x 12" at all row ends
GARMENT ON HANGER RACKS (Convertible to Active Carton Rack)
Layout: 232 Runs -- 56"L x 4"D with 50% two high & 50% one high
1,856 RTFAP048084 Uprights -- 3" x 1 5/8" x 48"d x 84"h
Capacity: 16,730# on 48" vertical centers
3,248 SRRXL300096 Step Beam 3"hx96"l x 1,448# capacity
3,712 ANCHORS 1/2" x 3 3/4"
60 PIPE HOLDERS Adjustable Brackets -- 48"d
40,194 LN.FT.Rails 1,315 x 14 ga. Zinc plated round tubing
Note 50% of runs include 2 levels high
<PAGE>
<TABLE>
<CAPTION>
Manufacturer, Description
Qty. Model No./Serial No. Location
---- ------------------------- --------
<S> <C> <C>
12 Sandborn St.
Tilton, NH 03276
24,000 TEK SCREWS 1"
3,016 INSERTS 20" splices
1,392 CAPS Rubber End Caps
5,600 CLIPS For attachments of rail to rack
0 WIRE DECKS 3584 Supplied from Laconia Location
464 AISLE MARKERS 12" x 12" at all row ends
</TABLE>
ABOVE EQUIPMENT DISTIBUTED BY THE STEEL KING INDUSTRIES, INC.
(2 9491 SRIENPACKER TYPE S3960 S/N:
--------------------
ABOVE EQUIPMENT DISTRIBUTED BY SET POINT
<PAGE>
<TABLE>
<CAPTION>
QTY MANUFACTURER, DESCRIPTION MODEL NO./SERIAL NO. LOCATION
- --- --------------------------------------------- --------
Seq. Conveyor Type of 12 Sandborn St.
# Series Panel Number Conveyor Tilton, NH 03276
--- ------ ----- -------- --------
<S> <C> <C> <C> <C> <C>
1 1 100 100-1 BPE100A PBE-Powered Belt Extendable
- ------------------------------------------------------------------------------
1 2 100 100-1 BPE100B PBE-Powered Belt Extendable
- ------------------------------------------------------------------------------
1 3 100 n/a T100 Track for Powered Belt Extendables
- ------------------------------------------------------------------------------
1 4 100 n/a GRC102A RGC160-Roller Gravity Curve
- ------------------------------------------------------------------------------
1 5 100 n/a GRC102B RGC160-Roller Gravity Curve
- ------------------------------------------------------------------------------
1 6 100 n/a GRC102C RGC160-Roller Gravity Curve
- ------------------------------------------------------------------------------
1 7 100 n/a GRC102D RGC160-Roller Gravity Curve
- ------------------------------------------------------------------------------
1 8 100 n/a GRC102E RGC160-Roller Gravity Curve
- ------------------------------------------------------------------------------
1 9 100 n/a GRC102F RGC160-Roller Gravity Curve
- ------------------------------------------------------------------------------
1 10 100 n/a GRC104A RGC160-Roller Gravity Curve
- ------------------------------------------------------------------------------
1 11 100 n/a GRC104B RGC160-Roller Gravity Curve
- ------------------------------------------------------------------------------
1 12 100 n/a GRC104C RGC160-Roller Gravity Curve
- ------------------------------------------------------------------------------
1 13 100 n/a GRC104D RGC160-Roller Gravity Curve
- ------------------------------------------------------------------------------
1 14 100 n/a GRC104E RGC160-Roller Gravity Curve
- ------------------------------------------------------------------------------
1 15 100 n/a GRC104F RGC160-Roller Gravity Curve
- ------------------------------------------------------------------------------
1 16 100 n/a GR106A RG1916-Roller Gravity
- ------------------------------------------------------------------------------
1 17 100 n/a GR106B RG1916-Roller Gravity
- ------------------------------------------------------------------------------
1 18 100 n/a GR106C RG1916-Roller Gravity
- ------------------------------------------------------------------------------
1 19 100 n/a GR106D RG1916-Roller Gravity
- ------------------------------------------------------------------------------
1 20 100 n/a GR106E RG1916-Roller Gravity
- ------------------------------------------------------------------------------
1 21 100 n/a GR106F RG1916-Roller Gravity
- ------------------------------------------------------------------------------
1 22 100 n/a GR106G RG1916-Roller Gravity
- ------------------------------------------------------------------------------
</TABLE>
Page 1 of 17
<PAGE>
<TABLE>
<CAPTION>
QTY MANUFACTURER, DESCRIPTION MODEL NO./SERIAL NO. LOCATION
--------------------------------------------- --------
Seq. Series Panel Conveyor Type of 12 Sandborn St.
# Number Conveyor Tilton, NH 03276
--- ------ ----- -------- --------
<S> <C> <C> <C> <C> <C>
1 23 100 100 LR124A LRTC-Live Roller Transportation
- ------------------------------------------------------------------------------
1 24 100 100 LR124B LRTC-Live Roller Transportation
- ------------------------------------------------------------------------------
1 25 100 100 LR124C LRTC-Live Roller Transportation
- ------------------------------------------------------------------------------
1 26 100 100 LR124D LRTC-Live Roller Transportation
- ------------------------------------------------------------------------------
1 27 100 100 LR124E LRTC-Live Roller Transportation
- ------------------------------------------------------------------------------
1 28 100 100 IB126A BSE-Indexing Belt
- ------------------------------------------------------------------------------
1 29 100 100 IB126B BSE-Indexing Belt
- ------------------------------------------------------------------------------
1 30 100 100 IB126C BSE-Indexing Belt
- ------------------------------------------------------------------------------
1 31 100 100 IB126D BSE-Indexing Belt
- ------------------------------------------------------------------------------
1 32 100 100 IB126E BSE-Indexing Belt
- ------------------------------------------------------------------------------
1 33 100 100 LRM128A LRSC-Live Roller Spur Curve
- ------------------------------------------------------------------------------
1 34 100 100 LRM128B LRSC-Live Roller Spur Curve
- ------------------------------------------------------------------------------
1 35 100 100 LRM128C LRSC-Live Roller Spur Curve
- ------------------------------------------------------------------------------
1 36 100 100 LRM128D LRSC-Live Roller Spur Curve
- ------------------------------------------------------------------------------
1 37 100 100 LRM128E LRSC-Live Roller Spur Curve
- ------------------------------------------------------------------------------
1 38 100 100 PB132 BRC-Powered Belt
- ------------------------------------------------------------------------------
1 39 100 100 LRC134 LRC-Live Roller Curve
- ------------------------------------------------------------------------------
1 40 100 100 PB1136 BIC-15 Degree Bell Incline
- ------------------------------------------------------------------------------
1 41 100 100 LRC138 LRC-Live Roller Curve
- ------------------------------------------------------------------------------
1 42 100 100 LRA140 LRZC-Zero Pressure Accumulation
- ------------------------------------------------------------------------------
1 43 100 100 LRC142 LRC-Live Roller Curve
- ------------------------------------------------------------------------------
1 44 100 100 LRA144 LRZC-Zero Pressure Accumulation
- ------------------------------------------------------------------------------
1 45 100 n/a LRM146 LREWS-Live Roller Merge
- ------------------------------------------------------------------------------
1 46 100 100 LRA148 LRZC-Zero Pressure Accumulation
- ------------------------------------------------------------------------------
1 47 100 n/a LRC150 LRC-Live Roller Curve
- ------------------------------------------------------------------------------
1 48 100 100 LRC152 LRZC-Zero Pressure Accumulation
- ------------------------------------------------------------------------------
1 49 100 n/a LRC154 LRC-Live Roller Curve
- ------------------------------------------------------------------------------
1 50 100 100 LRA156 LRZC-Zero Pressure Accumulation
- ------------------------------------------------------------------------------
</TABLE>
Page 2 of 17
<PAGE>
<TABLE>
<CAPTION>
QTY MANUFACTURER, DESCRIPTION MODEL NO./SERIAL NO. LOCATION
--------------------------------------------- --------
Seq. Series Panel Conveyor Type of 12 Sandborn St.
# Number Conveyor Tilton, NH 03276
--- ------ ----- -------- --------
<S> <C> <C> <C> <C> <C>
1 51 100 100 LR160 LRTC-Live Roller Transportation
- ----------------------------------------------------------------------------------
1 52 100 100 PB1162 BIC-15 Degree Belt Incline
- ----------------------------------------------------------------------------------
1 53 100 n/a LRC164 LRC-Live Roller Curve
- ----------------------------------------------------------------------------------
1 54 100 100 LRA166 LRZC-Zero Pressure Accumulation
- ----------------------------------------------------------------------------------
48 55 100 n/a GA100 1.5" Angle Guard Rail (bulk)
- ----------------------------------------------------------------------------------
43 56 100 n/a GCL100 5.75" Lapped Channel Guard Rail (bulk)
- ----------------------------------------------------------------------------------
1 57 200 200 BSB200A BMSE-Brake/Meter Belt
- ----------------------------------------------------------------------------------
1 58 200 200 BSB200B BMSE-Brake/Meter Belt
- ----------------------------------------------------------------------------------
1 59 200 200 BSB200C BMSE-Brake/Meter Belt
- ----------------------------------------------------------------------------------
1 60 200 200 BSB200D BMSE-Brake/Meter Belt
- ----------------------------------------------------------------------------------
1 61 200 200 LRS201A LRS-Live Roller Spur
- ----------------------------------------------------------------------------------
1 62 200 200 LRS201B LRS-Live Roller Spur
- ----------------------------------------------------------------------------------
1 63 200 200 LRS201C LRS-Live Roller Spur
- ----------------------------------------------------------------------------------
1 64 200 200 LRS201D LRS-Live Roller Spur
- ----------------------------------------------------------------------------------
1 65 200 200 LR202 LRTC-Live Roller Transportation
- ----------------------------------------------------------------------------------
1 66 200 n/a LRC204 LRC-Live Roller Curve
- ----------------------------------------------------------------------------------
1 67 200 200 LR206 SP-Skewed Roller Section
- ----------------------------------------------------------------------------------
1 68 200 200 LRA208 LRS-Live Roller Spur
- ----------------------------------------------------------------------------------
1 69 200 200 BSB210 BMSE-Brake/Meter Belt
- ----------------------------------------------------------------------------------
1 70 200 200 SOR212 BRE-Sort Belt
- ----------------------------------------------------------------------------------
1 71 200 200 SOR214 BRE-Sort Belt
- ----------------------------------------------------------------------------------
1 72 200 n/a DIV220 LFS-Line Flow Spur
- ----------------------------------------------------------------------------------
1 73 200 n/a DIV230 LFS-Line Flow Spur
- ----------------------------------------------------------------------------------
1 74 200 200 DIV260 LRSC-Live Roller Spur Curve
- ----------------------------------------------------------------------------------
1 75 200 200 PBD262 BDC-15 Degree Belt Decline
- ----------------------------------------------------------------------------------
1 76 200 n/a GR264 RG1916-Roller Gravity
- ----------------------------------------------------------------------------------
1 77 200 n/a DIV280 LFS-Line Flow Spur
- ----------------------------------------------------------------------------------
18 78 200 n/a GCL200 5.75"-Lapped Channel Guard Rail (bulk)
- ------------------------------------------------------------------------------
1 79 300 n/a DIV310 LFS-Line Flow Spur
</TABLE>
Page 3 of 17
<PAGE>
<TABLE>
<CAPTION>
QTY MANUFACTURER, DESCRIPTION MODEL NO./SERIAL NO. LOCATION
- --- --------------------------------------------- --------
Seq. Series Panel Conveyor Type of 12 Sandborn St.
# Number Conveyor Tilton, NH 03276
--- ------ ----- -------- --------
<S> <C> <C> <C> <C> <C>
1 95 300 300-1 LRC332 LRC-Live Roller Curve
- ----------------------------------------------------------------------------
1 96 300 300-1 PBD333 BDC-15 Degree Belt Decline
- ----------------------------------------------------------------------------
1 97 300 n/a LRC334A LRC-Live Roller Curve
- ----------------------------------------------------------------------------
1 98 300 300-1 LR334B LRTE-Live Roller Transportation
- ----------------------------------------------------------------------------
1 99 300 n/a LRC334C LRC-Live Roller Curve
- ----------------------------------------------------------------------------
1 100 300 300-1 LRA336 LRZC-Zero Pressure Accumulation
- ----------------------------------------------------------------------------
1 101 300 300-1 BSB338 BMSE-Brake/Motor Belt
- ----------------------------------------------------------------------------
1 102 300 300-1 SOR340 BRE-Sort Belt
- ----------------------------------------------------------------------------
1 103 300 300-1 LRA342 LRZC-Zero Pressure Accumulation
- ----------------------------------------------------------------------------
1 104 300 300-1 BSB344 BMSE-Brake/Motor Belt
- ----------------------------------------------------------------------------
1 105 300 300-1 BC346 PBC-Powered Belt Curve
- ----------------------------------------------------------------------------
1 106 300 300-2 SOR347 BRC-Sort Belt
- ----------------------------------------------------------------------------
1 107 300 300-2 SOR348 BRC-Sort Belt
- ----------------------------------------------------------------------------
1 108 300 300-2 LRA349 LRZC-Zero Pressure Accumulation
- ----------------------------------------------------------------------------
1 109 300 n/a DIV350A LFS-Line Flow Spur
- ----------------------------------------------------------------------------
1 110 300 n/a DIV350B LFS-Line Flow Spur
- ----------------------------------------------------------------------------
1 111 300 n/a DIV350C LFS-Line Flow Spur
- ----------------------------------------------------------------------------
1 112 300 n/a GRC351A RGC160-Roller Gravity Curve
- ----------------------------------------------------------------------------
1 113 300 n/a GRC351B RGC160-Roller Gravity Curve
- ----------------------------------------------------------------------------
1 114 300 n/a GRC351C RGC160-Roller Gravity Curve
- ----------------------------------------------------------------------------
1 115 300 n/a CH352A CHT-Chute
- ----------------------------------------------------------------------------
1 116 300 n/a CH352B CHT-Chute
- ----------------------------------------------------------------------------
1 117 300 n/a CH352C CHT-Chute
- ----------------------------------------------------------------------------
1 118 300 n/a CH352D CHT-Chute
- ----------------------------------------------------------------------------
1 119 300 n/a GR353A RG1916-Roller Gravity
- ----------------------------------------------------------------------------
1 120 300 n/a GR353B RG1916-Roller Gravity
- ----------------------------------------------------------------------------
1 121 300 n/a GR353C RG1916-Roller Gravity
- ----------------------------------------------------------------------------
1 122 300 n/a GR353D RG1916-Roller Gravity
- ------------------------------------------------------------------------------
</TABLE>
Page 4 of 17
<PAGE>
<TABLE>
<CAPTION>
QTY MANUFACTURER, DESCRIPTION MODEL NO./SERIAL NO. LOCATION
- --- --------------------------------------------- --------
Seq. Series Panel Conveyor Type of 12 Sandborn St.
# Number Conveyor Tilton, NH 03276
--- ------ ----- -------- --------
<S> <C> <C> <C> <C> <C>
1 123 300 n/a DIV355A LFS-Line Flow Spur
- -------------------------------------------------------------------------------
1 124 300 n/a DIV355B LFS-Line Flow Spur
- -------------------------------------------------------------------------------
1 125 300 n/a DIV355C LFS-Line Flow Spur
- -------------------------------------------------------------------------------
1 126 300 n/a GRC356A RGC160-Roller Gravity Curve
- -------------------------------------------------------------------------------
1 127 300 n/a GRC356B RGC160-Roller Gravity Curve
- -------------------------------------------------------------------------------
1 128 300 n/a GRC356C RGC160-Roller Gravity Curve
- -------------------------------------------------------------------------------
1 129 300 n/a CH357A CHT-Chute
- -------------------------------------------------------------------------------
1 130 300 n/a CH357B CHT-Chute
- -------------------------------------------------------------------------------
1 131 300 n/a CH357C CHT-Chute
- -------------------------------------------------------------------------------
1 132 300 n/a CH357D CHT-Chute
- -------------------------------------------------------------------------------
1 133 300 n/a GR358A RG1916-Roller Gravity
- -------------------------------------------------------------------------------
1 134 300 n/a GR358B RG1916-Roller Gravity
- -------------------------------------------------------------------------------
1 135 300 n/a GR358C RG1916-Roller Gravity
- -------------------------------------------------------------------------------
1 136 300 n/a GR358D RG1916-Roller Gravity
- -------------------------------------------------------------------------------
1 137 300 n/a DIV360A LFS-Lina Flow Spur
- -------------------------------------------------------------------------------
1 138 300 n/a DIV360B LFS-Lina Flow Spur
- -------------------------------------------------------------------------------
1 139 300 n/a DIV360C LFS-Lina Flow Spur
- -------------------------------------------------------------------------------
1 140 300 n/a GRC361A RGC160-Roller Gravity Curve
- -------------------------------------------------------------------------------
1 141 300 n/a GRC361B RGC160-Roller Gravity Curve
- -------------------------------------------------------------------------------
1 142 300 n/a GRC361C RGC160-Roller Gravity Curve
- -------------------------------------------------------------------------------
1 143 300 n/a CH362A CHT-Chute
- -------------------------------------------------------------------------------
1 144 300 n/a CH362B CHT-Chute
- -------------------------------------------------------------------------------
1 145 300 n/a CH362C CHT-Chute
- -------------------------------------------------------------------------------
1 146 300 n/a CH362D CHT-Chute
- -------------------------------------------------------------------------------
1 147 300 n/a GR363A RG1916-Roller Gravity
- -------------------------------------------------------------------------------
1 148 300 n/a GR363B RG1916-Roller Gravity
- -------------------------------------------------------------------------------
1 149 300 n/a GB363C RG1916-Roller Gravity
- -------------------------------------------------------------------------------
</TABLE>
Page 5 of 17
<PAGE>
<TABLE>
<CAPTION>
QTY MANUFACTURER, DESCRIPTION MODEL NO./SERIAL NO. LOCATION
--------------------------------------------- --------
Seq. Series Panel Conveyor Type of 12 Sandborn St.
# Number Conveyor Tilton, NH 03276
<S> <C> <C> <C> <C> <C>
1 150 300 n/a GR363D RG1916-Roller Gravity
- ------------------------------------------------------------------------------
1 151 300 n/a DIV365A LFS-Line Flow Spur
- ------------------------------------------------------------------------------
1 152 300 n/a DIV365B LFS-Line Flow Spur
- ------------------------------------------------------------------------------
1 153 300 n/a DIV365C LFS-Line Flow Spur
- ------------------------------------------------------------------------------
1 154 300 n/a GRC366A RGC160-Roller Gravity Curve
- ------------------------------------------------------------------------------
1 155 300 n/a GRC366B RGC160-Roller Gravity Curve
- ------------------------------------------------------------------------------
1 156 300 n/a GRC366C RGC160-Roller Gravity Curve
- ------------------------------------------------------------------------------
1 157 300 n/a CH367A CHT-Chule
- ------------------------------------------------------------------------------
1 158 300 n/a CH367B CHT-Chule
- ------------------------------------------------------------------------------
1 159 300 n/a CH367C CHT-Chule
- ------------------------------------------------------------------------------
1 160 300 n/a CH367D CHT-Chule
- ------------------------------------------------------------------------------
1 161 300 n/a GR368A RG1916-Roller Gravity
- ------------------------------------------------------------------------------
1 162 300 n/a GR368B RG1916-Roller Gravity
- ------------------------------------------------------------------------------
1 163 300 n/a GR368C RG1916-Roller Gravity
- ------------------------------------------------------------------------------
1 164 300 n/a GR368D RC1916-Roller Gravity
- ------------------------------------------------------------------------------
1 165 300 300-1 BC370 PBC-Powered Belt Curve
- ------------------------------------------------------------------------------
1 166 300 300-1 SOR377 BRC-Sort Belt
- ------------------------------------------------------------------------------
1 167 300 300-1 SOR378 BRC-Sort Belt
- ------------------------------------------------------------------------------
1 168 300 300-1 LRA379 LRZC-Zero Pressure Accumulation
- ------------------------------------------------------------------------------
1 169 300 300-1 LRC382 LRC-Live Roller Curve
- ------------------------------------------------------------------------------
1 170 300 300-1 LR383 LRC-Live Roller Transportation
- ------------------------------------------------------------------------------
1 171 300 n/a LRC384 LRC-Live Roller Curve
- ------------------------------------------------------------------------------
1 172 300 300-1 LRA386 LRZC-Zero Pressure Accumulation
- ------------------------------------------------------------------------------
1 173 300 300-1 BSB388 BMSE-Brake/Meter Belt
- ------------------------------------------------------------------------------
1 174 300 300-1 SOR390 BRE-Sort Belt
- ------------------------------------------------------------------------------
1 175 300 300-1 LRA392 LRZC-Zero Pressure Accumulation
- ------------------------------------------------------------------------------
1 176 300 300-1 BSB394 BMSE-Brake/Meter Belt
- ------------------------------------------------------------------------------
1 177 300 300-1 BC396 PBC-Powered Belt Curve
- ------------------------------------------------------------------------------
1 178 300 300-2 SOR397 BRC-Sort Belt
- ------------------------------------------------------------------------------
1 179 300 300-2 SOR398 BRC-Sort Belt
- ------------------------------------------------------------------------------
</TABLE>
Page 6 of 17
<PAGE>
<TABLE>
<CAPTION>
QTY MANUFACTURER, DESCRIPTION MODEL NO./SERIAL NO. LOCATION
- --- --------------------------------------------- --------
Seq. Series Panel Conveyor Type of 12 Sandborn St.
# Number Conveyor Tilton, NH 03276
--- ------ ----- -------- --------
<S> <C> <C> <C> <C> <C>
1 180 300 300-2 LRA399 LRZC-Zero Pressure Accumulation
- ----------------------------------------------------------------------------------
90 181 300 n/a GCL300 5.75" Lapped Channel Guard Rail (bulk)
- ----------------------------------------------------------------------------------
1 182 400 n/a GR400 RG1916-Roller Gravity
- ----------------------------------------------------------------------------------
1 183 400 400 PB1401 BRE-12 Degree Booster Belt
- --------------------------------------------------------------------------------
1 184 400 400 LRA402 LRZC-Zero Pressure Accumulation
- ----------------------------------------------------------------------------------
1 185 400 n/a GR403 RG1916-Roller Gravity
- ----------------------------------------------------------------------------------
1 186 400 400 PB1401 BRE-12 Degree Booster Belt
- ----------------------------------------------------------------------------------
1 187 400 n/a LRM405 LREWS-Live Roller Merge
- ----------------------------------------------------------------------------------
1 188 400 400 LRA406 LRZC-Zero Pressure Accumulation
- ----------------------------------------------------------------------------------
1 189 400 n/a GR407 RG1916-Roller Gravity
- ----------------------------------------------------------------------------------
1 190 400 400 PB1408 BRE-12 Degree Booster Belt
- ----------------------------------------------------------------------------------
1 191 400 n/a LRM409 LREWS-Live Roller Merge
- ----------------------------------------------------------------------------------
1 192 400 n/a GR410 RG1916-Roller Gravity
- ----------------------------------------------------------------------------------
1 193 400 400 PB1411 BRE-12 Degree Booster Belt
- ----------------------------------------------------------------------------------
1 194 400 n/a LRM412 LREWS-Live Roller Merge
- ----------------------------------------------------------------------------------
1 195 400 400 LRA413 LRZC-Zero Pressure Accumulation
- ----------------------------------------------------------------------------------
1 196 400 n/a GR414 RG1916-Roller Gravity
- ----------------------------------------------------------------------------------
1 197 400 400 PB1415 BRE-12 Degree Booster Belt
- ----------------------------------------------------------------------------------
1 198 400 n/a LRM416 LREWS-Live Roller Merge
- ----------------------------------------------------------------------------------
1 199 400 n/a GR417 RG1916-Roller Gravity
- ----------------------------------------------------------------------------------
1 200 400 400 PB1418 BRE-12 Degree Booster Belt
- ----------------------------------------------------------------------------------
1 201 400 n/a LRM419 LREWS-Live Roller Merge
- ----------------------------------------------------------------------------------
1 202 400 400 PB1420 BRE-12 Degree Booster Belt
- ----------------------------------------------------------------------------------
1 203 400 400 LRC421 LRC-Live Roller Curve
- ----------------------------------------------------------------------------------
1 204 400 400 PB1422 BRE-12 Degree Booster Belt
- ----------------------------------------------------------------------------------
1 205 400 400 LRA423 LRZC-Zero Pressure Accumulation
- ----------------------------------------------------------------------------------
1 206 400 n/a LRC424 LRC-Live Roller Curve
- ----------------------------------------------------------------------------------
1 207 400 400 LRA425 LRZC-Zero Pressure Accumulation
- ----------------------------------------------------------------------------------
1 208 400 n/a GR450 RG1916-Roller Gravity
- ----------------------------------------------------------------------------------
1 209 400 400 PB1451 BRE-12 Degree Booster Belt
- ----------------------------------------------------------------------------------
</TABLE>
Page 7 of 17
<PAGE>
<TABLE>
<CAPTION>
QTY MANUFACTURER, DESCRIPTION MODEL NO./SERIAL NO. LOCATION
--------------------------------------------- --------
Seq. Series Panel Conveyor Type of 12 Sandborn St.
# Number Conveyor Tilton, NH 03276
<S> <C> <C> <C> <C> <C>
1 210 400 400 LRA452 LRZC-Zero Pressure Accumulation
- ------------------------------------------------------------------------------
1 211 400 n/a GR453 RG-1916-Roller Gravity
- ------------------------------------------------------------------------------
1 212 400 400 PB1454 BRE-12 Degree Booster Belt
- ------------------------------------------------------------------------------
1 213 400 n/a LRM455 LREWS-Live Roller Merge
- ------------------------------------------------------------------------------
1 214 400 400 LRA456 LRZC-Zero Pressure Accumulation
- ------------------------------------------------------------------------------
1 215 400 n/a GR457 RG1916-Roller Gravity
- ------------------------------------------------------------------------------
1 216 400 400 PB1458 BRE-12 Degree Booster Belt
- ------------------------------------------------------------------------------
1 217 400 n/a LRM459 LREWS-Live Roller Marge
- ------------------------------------------------------------------------------
1 218 400 n/a GR460 RG1916-Roller Gravity
- ------------------------------------------------------------------------------
1 219 400 400 PB1461 BRE-12 Degree Booster Belt
- ------------------------------------------------------------------------------
1 220 400 n/a LRM462 LREWS-Live Roller Merge
- ------------------------------------------------------------------------------
1 221 400 400 LRM463 LRZC-Zero Pressure Accumulation
- ------------------------------------------------------------------------------
1 222 400 n/a GR464 RG1916-Roller Gravity
- ------------------------------------------------------------------------------
1 223 400 400 PB1465 BRE-12 Degree Booster Belt
- ------------------------------------------------------------------------------
1 224 400 n/a LRM466 LREWS-Live Roller Merge
- ------------------------------------------------------------------------------
1 225 400 n/a GR467 RG1916-Roller Gravity
- ------------------------------------------------------------------------------
1 226 400 400 PB1468 BRE-12 Degree Booster Belt
- ------------------------------------------------------------------------------
1 227 400 n/a LRM469 LREWS-LIve Roller Merge
- ------------------------------------------------------------------------------
1 228 400 400 LRC471 LRC-Live Roller Curve
- ------------------------------------------------------------------------------
1 229 400 400 LRA473 LRZC-Zero Pressure Accumulation
- ------------------------------------------------------------------------------
1 230 400 n/a LRC474 LRC-Live Roller Curve
- ------------------------------------------------------------------------------
1 231 400 400 LRA475 LRZC-Zero Pressure Accumulation
- ------------------------------------------------------------------------------
1 232 400 n/a GCL400 5.75"Lapped Channel Guard Rail (bulk)
- ------------------------------------------------------------------------------
1 233 500 200 DIV500 LRSC-Live Roller Spur Curve
- ------------------------------------------------------------------------------
1 234 500 200 PB1502 BIC-15 Degree Belt Incline
- ------------------------------------------------------------------------------
1 235 500 n/a LRC504 LRC-Live Roller Curve
- ------------------------------------------------------------------------------
1 236 500 200 LRA506 LRZC-Zero Pressure Accumulation
- ------------------------------------------------------------------------------
1 237 500 200 LRA508 LRZC-Zero Pressure Accumulation
- ------------------------------------------------------------------------------
1 238 500 n/a LRC510 LRC-Live Roller Curve
- ------------------------------------------------------------------------------
1 239 500 500 PBD512 BDC-15 Degree Belt Decline
</TABLE>
Page 8 of 17
<PAGE>
<TABLE>
<CAPTION>
QTY MANUFACTURER, DESCRIPTION MODEL NO./SERIAL NO. LOCATION
- --- --------------------------------------------- --------
Seq. Series Panel Conveyor Type of 12 Sandborn St.
# Number Conveyor Tilton, NH 03276
--- ------ ----- -------- --------
<S> <C> <C> <C> <C> <C>
1 240 500 500 LRA514 LRZE-Zero Pressure Accumulation
- ------------------------------------------------------------------------------
1 241 500 n/a LRM516 LREWS-Live Roller Merge
- ------------------------------------------------------------------------------
1 242 500 n/a LRC518 LRC-Live Roller Curve
- ------------------------------------------------------------------------------
1 243 500 500 LRC520 LRC-Live Roller Curve
- ------------------------------------------------------------------------------
1 244 500 500 LRA522 LRZE-Zero Pressure Accumulation
- ------------------------------------------------------------------------------
1 245 500 500 BSB524 BMSE-Brake/Meter Belt
- ------------------------------------------------------------------------------
1 246 500 500 SOR526 BRC-Sort Belt
- ------------------------------------------------------------------------------
1 247 500 500 SOR528 BRC-Sort Belt
- ------------------------------------------------------------------------------
1 248 500 500 SOR530 BRC-Sort Belt
- ------------------------------------------------------------------------------
1 249 500 500 BC532 PBC-Powered Belt Curve
- ------------------------------------------------------------------------------
1 250 500 500 SOR534 BRC-Sort Belt
- ------------------------------------------------------------------------------
1 251 500 500 SOR536 BRC-Sort Belt
- ------------------------------------------------------------------------------
1 252 500 500 SOR538 BRC-Sort Belt
- ------------------------------------------------------------------------------
1 253 500 500 LRA540 LRZC-Zero Pressure Accumulation
- ------------------------------------------------------------------------------
1 254 500 500 DIV545 LRSC-Live Roller Spur Curve
- ------------------------------------------------------------------------------
1 255 500 500 GRC546 RGC160-Roller Gravity Curve
- ------------------------------------------------------------------------------
1 256 500 n/a GR547 RG1916-Roller Gravity
- ------------------------------------------------------------------------------
1 257 500 n/a DIV550A LFS-Line Flow Spur
- ------------------------------------------------------------------------------
1 258 500 n/a DIV550B LFS-Line Flow Spur
- ------------------------------------------------------------------------------
1 259 500 n/a DIV550C LFS-Line Flow Spur
- ------------------------------------------------------------------------------
1 260 500 n/a DIV550D LFS-Line Flow Spur
- ------------------------------------------------------------------------------
1 261 500 n/a DIV550E LFS-Line Flow Spur
- ------------------------------------------------------------------------------
1 262 500 n/a DIV550F LFS-Line Flow Spur
- ------------------------------------------------------------------------------
1 263 500 n/a DIV550G LFS-Line Flow Spur
- ------------------------------------------------------------------------------
1 264 500 n/a DIV550H LFS-Line Flow Spur
- ------------------------------------------------------------------------------
1 265 500 n/a DIV550J LFS-Line Flow Spur
- ------------------------------------------------------------------------------
1 266 500 n/a DIV550K LFS-Line Flow Spur
- ------------------------------------------------------------------------------
1 267 500 n/a DIV550L LFS-Line Flow Spur
- ------------------------------------------------------------------------------
1 268 500 n/a DIV550M LFS-Line Flow Spur
- ------------------------------------------------------------------------------
1 269 500 n/a DIV550N LFS-Line Flow Spur
- ------------------------------------------------------------------------------
1 270 500 n/a DIV550P LFS-Line Flow Spur
- ------------------------------------------------------------------------------
1 271 500 n/a DIV550Q LFS-Line Flow Spur
- ------------------------------------------------------------------------------
</TABLE>
Page 9 of 17
<PAGE>
<TABLE>
<CAPTION>
QTY MANUFACTURER, DESCRIPTION MODEL NO./SERIAL NO. LOCATION
--------------------------------------------- --------
Seq. Series Panel Conveyor Type of 12 Sandborn St.
# Number Conveyor Tilton, NH 03276
--- ------ ----- -------- --------
<S> <C> <C> <C> <C> <C>
1 301 500 n/a GR552N RG1916-Roller Gravity
- ------------------------------------------------------------------------------
1 302 500 n/a GR552P RG1916-Roller Gravity
- ------------------------------------------------------------------------------
1 303 500 n/a GR552Q RG1916-Roller Gravity
- ------------------------------------------------------------------------------
1 304 500 n/a GR552R RG1916-Roller Gravity
- ------------------------------------------------------------------------------
36 305 500 n/a GCL500 5.75" Lapped Channel Guard Rail
- ------------------------------------------------------------------------------
1 306 600 600 LR600A LRTE-Live Roller Transportation
- ------------------------------------------------------------------------------
1 307 600 600 LR600B LRTE-Live Roller Transportation
- ------------------------------------------------------------------------------
1 308 600 600 LR600C LRTE-Live Roller Transportation
- ------------------------------------------------------------------------------
1 309 600 600 LR600D LRTE-Live Roller Transportation
- ------------------------------------------------------------------------------
1 310 600 600 LR600E LRTE-Live Roller Transportationt
- ------------------------------------------------------------------------------
1 311 600 600 LR600F LRTE-Live Roller Transportation
- ------------------------------------------------------------------------------
1 312 600 600 LR600G LRTE-Live Roller Transportation
- ------------------------------------------------------------------------------
1 313 600 600 LR600H LRTE-Live Roller Transportation
- ------------------------------------------------------------------------------
1 314 600 600 LR600J LRTE-Live Roller Transportation
- ------------------------------------------------------------------------------
1 315 600 600 LR600K LRTE-Live Roller Transportation
- ------------------------------------------------------------------------------
1 316 600 600 LR600L LRTE-Live Roller Transportation
- ------------------------------------------------------------------------------
1 317 600 600 LR600M LRTE-Live Roller Transportation
- ------------------------------------------------------------------------------
1 318 600 600 LR600N LRTE-Live Roller Transportation
- ------------------------------------------------------------------------------
1 319 600 600 LR600P LRTE-Live Roller Transportation
- ------------------------------------------------------------------------------
1 320 600 600 LR600Q LRTE-Live Roller Transportation
- ------------------------------------------------------------------------------
1 321 600 600 LR600R LRTE-Live Roller Transportation
- ------------------------------------------------------------------------------
1 322 600 600 LR600S LRTE-Live Roller Transportation
- ------------------------------------------------------------------------------
1 323 600 600 IB602A BSE-Indexing Belt
- ------------------------------------------------------------------------------
1 324 600 600 IB602B BSE-Indexing Belt
- ------------------------------------------------------------------------------
1 325 600 600 IB602C BSE-Indexing Belt
- ------------------------------------------------------------------------------
1 326 600 600 IB602D BSE-Indexing Belt
- ------------------------------------------------------------------------------
1 327 600 600 IB602E BSE-Indexing Belt
- ------------------------------------------------------------------------------
1 328 600 600 IB602F BSE-Indexing Belt
- ------------------------------------------------------------------------------
1 329 600 600 IB602G BSE-Indexing Belt
- ------------------------------------------------------------------------------
1 330 600 600 IB602H BSE-Indexing Belt
- ------------------------------------------------------------------------------
</TABLE>
Page 10 of 17
<PAGE>
<TABLE>
<CAPTION>
QTY MANUFACTURER, DESCRIPTION MODEL NO./SERIAL NO. LOCATION
- --- --------------------------------------------- --------
Seq. Series Panel Conveyor Type of 12 Sandborn St.
# Number Conveyor Tilton, NH 03276
--- ------ ----- -------- --------
<S> <C> <C> <C> <C> <C>
1 272 500 n/a DIV550R LFS-Line Flow Spur
- ------------------------------------------------------------------------------
1 273 500 n/a GRC551A RGC160-Roller Gravity Curve
- ------------------------------------------------------------------------------
1 274 500 n/a GRC551B RGC160-Roller Gravity Curve
- ------------------------------------------------------------------------------
1 275 500 n/a GRC551C RGC160-Roller Gravity Curve
- ------------------------------------------------------------------------------
1 276 500 n/a GRC551D RGC160-Roller Gravity Curve
- ------------------------------------------------------------------------------
1 277 500 n/a GRC551E RGC160-Roller Gravity Curve
- ------------------------------------------------------------------------------
1 278 500 n/a GRC551F RGC160-Roller Gravity Curve
- ------------------------------------------------------------------------------
1 279 500 n/a GRC551G RGC160-Roller Gravity Curve
- ------------------------------------------------------------------------------
1 280 500 n/a GRC551H RGC160-Roller Gravity Curve
- ------------------------------------------------------------------------------
1 281 500 n/a GRC551J RGC160-Roller Gravity Curve
- ------------------------------------------------------------------------------
1 282 500 n/a GRC551K RGC160-Roller Gravity Curve
- ------------------------------------------------------------------------------
1 283 500 n/a GRC551L RGC160-Roller Gravity Curve
- ------------------------------------------------------------------------------
1 284 500 n/a GRC551M RGC160-Roller Gravity Curve
- ------------------------------------------------------------------------------
1 285 500 n/a GRC551N RGC160-Roller Gravity Curve
- ------------------------------------------------------------------------------
1 286 500 n/a GRC551P RGC160-Roller Gravity Curve
- ------------------------------------------------------------------------------
1 287 500 n/a GRC551Q RGC160-Roller Gravity Curve
- ------------------------------------------------------------------------------
1 288 500 n/a GRC551R RGC160-Roller Gravity Curve
- ------------------------------------------------------------------------------
1 289 500 n/a GR552A RGC160-Roller Gravity Curve
- ------------------------------------------------------------------------------
1 290 500 n/a GR552B RG1916-Roller Gravity
- ------------------------------------------------------------------------------
1 291 500 n/a GR552C RG1916-Roller Gravity
- ------------------------------------------------------------------------------
1 292 500 n/a GR552D RG1916-Roller Gravity
- ------------------------------------------------------------------------------
1 293 500 n/a GR552E RG1916-Roller Gravity
- ------------------------------------------------------------------------------
1 294 500 n/a GR552F RG1916-Roller Gravity
- ------------------------------------------------------------------------------
1 295 500 n/a GR552G RG1916-Roller Gravity
- ------------------------------------------------------------------------------
1 296 500 n/a GR552H RG1916-Roller Gravity
- ------------------------------------------------------------------------------
1 297 500 n/a GR552J RG1916-Roller Gravity
- ------------------------------------------------------------------------------
1 298 500 n/a GR552K RG1916-Roller Gravity
- ------------------------------------------------------------------------------
1 299 500 n/a GR552L RG1916-Roller Gravity
- ------------------------------------------------------------------------------
1 300 500 n/a GR552M RG1916-Roller Gravity
- ------------------------------------------------------------------------------
</TABLE>
Page 11 of 17
<PAGE>
<TABLE>
<CAPTION>
QTY MANUFACTURER, DESCRIPTION MODEL NO./SERIAL NO. LOCATION
- --- --------------------------------------------- --------
Seq. Series Panel Conveyor Type of 12 Sandborn St.
# Number Conveyor Tilton, NH 03276
--- ------ ----- -------- --------
<S> <C> <C> <C> <C> <C>
1 331 600 600 IB602J BSE-Indexing Belt
- ------------------------------------------------------------------------------
1 332 600 600 IB802K BSE-Indexing Belt
- ------------------------------------------------------------------------------
1 333 600 600 IB602L BSE-Indexing Belt
- ------------------------------------------------------------------------------
1 334 600 600 IB602M BSE-Indexing Belt
- ------------------------------------------------------------------------------
1 335 600 600 IB602N BSE-Indexing Belt
- ------------------------------------------------------------------------------
1 336 600 600 IB602P BSE-Indexing Belt
- ------------------------------------------------------------------------------
1 337 600 600 IB602Q BSE-Indexing Belt
- ------------------------------------------------------------------------------
1 338 600 600 IB602R BSE-Indexing Belt
- ------------------------------------------------------------------------------
1 339 600 600 IB602S BSE-Indexing Belt
- ------------------------------------------------------------------------------
1 340 600 600 LRM604A LRSC-Live Roller Spur Curve
- ------------------------------------------------------------------------------
1 341 600 600 LRM604B LRSC-Live Roller Spur Curve
- ------------------------------------------------------------------------------
1 342 600 600 LRM604C LRSC-Live Roller Spur Curve
- ------------------------------------------------------------------------------
1 343 600 600 LRM604D LRSC-Live Roller Spur Curve
- ------------------------------------------------------------------------------
1 344 600 600 LRM604E LRSC-Live Roller Spur Curve
- ------------------------------------------------------------------------------
1 345 600 600 LRM604F LRSC-Live Roller Spur Curve
- ------------------------------------------------------------------------------
1 346 600 600 LRM604G LRSC-Live Roller Spur Curve
- ------------------------------------------------------------------------------
1 347 600 600 LRM604H LRSC-Live Roller Spur Curve
- ------------------------------------------------------------------------------
1 348 600 600 LRM604J LRSC-Live Roller Spur Curve
- ------------------------------------------------------------------------------
1 349 600 600 LRM604K LRSC-Live Roller Spur Curve
- ------------------------------------------------------------------------------
1 350 600 600 LRM604L LRSC-Live Roller Spur Curve
- ------------------------------------------------------------------------------
1 351 600 600 LRM604M LRSC-Live Roller Spur Curve
- ------------------------------------------------------------------------------
1 352 600 600 LRM604N LRSC-Live Roller Spur Curve
- ------------------------------------------------------------------------------
1 353 600 600 LRM604P LRSC-Live Roller Spur Curve
- ------------------------------------------------------------------------------
1 354 600 600 LRM604Q LRSC-Live Roller Spur Curve
- ------------------------------------------------------------------------------
1 355 600 600 LRM604R LRSC-Live Roller Spur Curve
- ------------------------------------------------------------------------------
1 356 600 600 LRC606 LRSC-Live Roller Curve
- ------------------------------------------------------------------------------
1 357 600 600 PB610 BRC-Powered Belt
- ------------------------------------------------------------------------------
1 358 600 600 PB612 BRC-Powered Belt
- ------------------------------------------------------------------------------
</TABLE>
Page 12 of 17
<PAGE>
<TABLE>
<CAPTION>
QTY MANUFACTURER, DESCRIPTION MODEL NO./SERIAL NO. LOCATION
- --- --------------------------------------------- --------
Seq. Series Panel Conveyor Type of 12 Sandborn St.
# Number Conveyor Tilton, NH 03276
--- ------ ----- -------- --------
<S> <C> <C> <C> <C> <C>
1 359 500 600 LRC614 LRC-Live Roller Curve
- ------------------------------------------------------------------------------
1 360 500 600 LRC616 LRC-Live Roller Curve
- ------------------------------------------------------------------------------
1 361 500 600 PB1618 BIC-15 Degree Incline Belt
- ------------------------------------------------------------------------------
1 362 500 600 LRA620 LRZC-Zero Pressure Accumulation
- ------------------------------------------------------------------------------
1 363 500 600 BSB622 BMSE-Brake/Motor Belt
- ------------------------------------------------------------------------------
1 364 600 600 PB630 BRC-Powered Belt
- ------------------------------------------------------------------------------
1 365 600 600 PB632 BRC-Powered Belt
- ------------------------------------------------------------------------------
1 366 600 600 LRC634 LRC-Live Roller Curve
- ------------------------------------------------------------------------------
1 367 600 600 LRC636 LRC-Live Roller Curve
- ------------------------------------------------------------------------------
1 368 600 600 PB1638 BIC-15 Degree Belt Incline
- ------------------------------------------------------------------------------
1 369 600 600 LRA640 LRZE-Zero Pressure Accumulation
- ------------------------------------------------------------------------------
1 370 600 600 BSB642 BMSE-Brake/Meter Belt
- ------------------------------------------------------------------------------
1 371 600 600 BM650 PBM-Powered Belt Merge
- ------------------------------------------------------------------------------
1 372 600 600 SOR652 BRC-Sort Belt
- ------------------------------------------------------------------------------
1 373 600 600 LRA854 LRZE-Zero Pressure Accumulation
- ------------------------------------------------------------------------------
1 374 600 600 DIV680 LRSC-Live Roller Spur Curve
- ------------------------------------------------------------------------------
1 375 600 600 PB1662 BIC-15 Degree Belt Incline
- ------------------------------------------------------------------------------
1 376 600 600 LRA664 LRZE-Zero Pressure Accumulation
- ------------------------------------------------------------------------------
1 377 600 n/a DIV670 LFS-Line Flow Spur
- ------------------------------------------------------------------------------
1 378 600 n/a LRC674 LRC-Live Roller Curve
- ------------------------------------------------------------------------------
1 379 600 600 LRA676 LRZE-Zero Pressure Accumulation
- ------------------------------------------------------------------------------
1 380 600 n/a CH678 CHT-Chute
- ------------------------------------------------------------------------------
1 381 600 n/a GR680 RG1916-Roller Gravity
- ------------------------------------------------------------------------------
105 382 600 n/a GA500 1.5" Angle Guard Rail (bulk)
- ------------------------------------------------------------------------------
43 383 600 n/a GCL600 5.75" Lapped Channel Guard Rail
- ------------------------------------------------------------------------------
1 384 700 n/a LRC724 LRC-Live Roller Curve
- ------------------------------------------------------------------------------
1 385 700 700 LRA726 LRZE-Zero Pressure Accumulation
- ------------------------------------------------------------------------------
1 386 700 700 BSB728 BMSE-Brake/Motor Belt
- ------------------------------------------------------------------------------
1 387 700 700 BM730 PAM-Powered Belt Merge
- ------------------------------------------------------------------------------
</TABLE>
Page 13 of 17
<PAGE>
<TABLE>
<CAPTION>
Qty Manufacturer, Description Model No./Serial No. Location
--------------------------------------------- --------
Seq. Series Panel Conveyor Type of 12 Sandborn St.
# Number Conveyor Tilton, NH 03276
<S> <C> <C> <C> <C> <C>
1 388 700 700 BC732 PBC-Powered Belt Curve
- --------------------------------------------------------------------------------
1 389 700 700 SB734 SB-Scale Belt
- --------------------------------------------------------------------------------
1 390 700 700 SOR736 BRC-Sort Belt
- --------------------------------------------------------------------------------
1 391 700 700 SOR738 BRC-Sort Belt
- --------------------------------------------------------------------------------
1 392 700 700 LRC740 LRC-Live Roller Curve
- --------------------------------------------------------------------------------
1 393 700 n/a LRC742 LRC-Live Roller Curve
- --------------------------------------------------------------------------------
1 394 700 n/a LRM744 LREWS-Live Roller Merge
- --------------------------------------------------------------------------------
1 395 700 n/a LRA746 LRZC-Zero Pressure Accumulation
- --------------------------------------------------------------------------------
1 396 700 n/a BSB748 BMSE-Brake/Meter Belt
- --------------------------------------------------------------------------------
1 397 700 n/a DIV750A LFS-Line Flow Spur
- --------------------------------------------------------------------------------
1 398 700 n/a DIV750B LFS-Line Flow Spur
- --------------------------------------------------------------------------------
1 399 700 n/a DIV750C LFS-Line Flow Spur
- --------------------------------------------------------------------------------
1 400 700 n/a DIV750D LFS-Line Flow Spur
- --------------------------------------------------------------------------------
1 401 700 n/a DIV750E LFS-Line Flow Spur
- --------------------------------------------------------------------------------
1 402 700 n/a GRC751A RGC150-Roller Gravity Curve
- --------------------------------------------------------------------------------
1 403 700 n/a GRC751B RGC150-Roller Gravity Curve
- --------------------------------------------------------------------------------
1 404 700 n/a GRC751C RGC150-Roller Gravity Curve
- --------------------------------------------------------------------------------
1 405 700 n/a GRC751D RGC150-Roller Gravity Curve
- --------------------------------------------------------------------------------
1 406 700 n/a GRC751E RGC150-Roller Gravity Curve
- --------------------------------------------------------------------------------
1 407 700 n/a CH752A CHT-Chute
- --------------------------------------------------------------------------------
1 408 700 n/a CH752B CHT-Chute
- --------------------------------------------------------------------------------
1 409 700 n/a CH752C CHT-Chute
- --------------------------------------------------------------------------------
1 410 700 n/a CH752D CHT-Chute
- --------------------------------------------------------------------------------
1 411 700 n/a CH752E CHT-Chute
- --------------------------------------------------------------------------------
1 412 700 n/a GR753A RG1916-Roller Gravity
- --------------------------------------------------------------------------------
1 413 700 n/a GR753B RG1916-Roller Gravity
- --------------------------------------------------------------------------------
1 414 700 n/a GR753C RG1916-Roller Gravity
- --------------------------------------------------------------------------------
1 415 700 n/a GR753D RG1916-Roller Gravity
- ----------------------------------------------------------------------------
1 416 700 n/a GR753E RG1916-Roller Gravity
- --------------------------------------------------------------------------------
1 417 700 n/a DIV760 LFS-Line Flow Spur
- ----------------------------------------------------------------------------
</TABLE>
Page 14 of 17
<PAGE>
<TABLE>
<CAPTION>
QTY MANUFACTURER, DESCRIPTION MODEL NO./SERIAL NO. LOCATION
- --- --------------------------------------------- --------
Seq. Series Panel Conveyor Type of 12 Sandborn St.
# Number Conveyor Tilton, NH 03276
--- ------ ----- -------- --------
<S> <C> <C> <C> <C> <C>
1 418 700 n/a GRC761 RGC160-Roller Gravity Curve
- ------------------------------------------------------------------------------
1 419 700 700 PB1762 BIC-15 Degree Belt Incline
- ------------------------------------------------------------------------------
1 420 700 n/a GRC764 RGC160-Roller Gravity Curve
- ------------------------------------------------------------------------------
1 421 700 n/a GR766 RG1916-Roller Gravity
- ------------------------------------------------------------------------------
1 422 700 n/a GRC768 RGC160-Roller Gravity Curve
- ------------------------------------------------------------------------------
1 423 700 n/a CH770 CHT-Chule
- ------------------------------------------------------------------------------
1 424 700 n/a GR772 RG1916-Roller Gravity
- ------------------------------------------------------------------------------
59 425 700 n/a GCL700 5.75" Lapped Channel Guard Rail (bulk)
- ------------------------------------------------------------------------------
1 426 800 100 PB800A BIC-12.5 Degree Incline Trash Belt
- ------------------------------------------------------------------------------
1 427 800 100 PB800B BIC-12.5 Degree Incline Trash Belt
- ------------------------------------------------------------------------------
1 428 800 100 PB800C BIC-12.5 Degree Incline Trash Belt
- ------------------------------------------------------------------------------
1 429 800 100 PB800D BIC-12.5 Degree Incline Trash Belt
- ------------------------------------------------------------------------------
1 430 800 100 PB810 BIC-15 Degree Incline Trash Belt
- ------------------------------------------------------------------------------
1 431 800 300-2 PB820 BIC-12.5 Degree Incline Trash Belt
- ------------------------------------------------------------------------------
1 432 800 n/a CH821 CT-Chule
- ------------------------------------------------------------------------------
1 433 800 300-2 PB822 BSC-Trash Belt
- ------------------------------------------------------------------------------
1 434 800 300-2 PB824 BIC-15 Degree Incline Trash Belt
- ------------------------------------------------------------------------------
1 435 800 300-2 PB830 BIC-12.5 Degree Incline Trash Belt
- ------------------------------------------------------------------------------
1 436 800 n/a CH832 CHT-Chule
- ------------------------------------------------------------------------------
1 437 800 300-2 PB833 BSC-Trash Belt
- ------------------------------------------------------------------------------
1 438 800 300-2 PB834 BIC-15 Degree Incline Trash Belt
- ------------------------------------------------------------------------------
1 439 800 400 PB840 BSC-Trash Belt
- ------------------------------------------------------------------------------
1 440 800 400 PB842 BSC-Trash Belt
- ------------------------------------------------------------------------------
1 441 800 800 PB844 BIC-15 Degree Incline Trash Belt
- ------------------------------------------------------------------------------
1 442 800 800 PB850 BSC-Trash Belt
- ------------------------------------------------------------------------------
1 443 800 800 PB855 BSC-Trash Belt
- ------------------------------------------------------------------------------
1 444 800 800 CH857 CHT-Chule
- ------------------------------------------------------------------------------
1 445 800 800 PB860A BSSE-Pitched Trash Belt
- ------------------------------------------------------------------------------
1 446 800 800 PB860B BSE-Pitched Trash Belt
- ------------------------------------------------------------------------------
1 447 800 800 PB860C BSE-Pitched Trash Belt
- ------------------------------------------------------------------------------
</TABLE>
Page 15 of 17
<PAGE>
<TABLE>
<CAPTION>
QTY MANUFACTURER, DESCRIPTION MODEL NO./SERIAL NO. LOCATION
- --- --------------------------------------------- --------
Seq. Series Panel Conveyor Type of 12 Sandborn St.
# Number Conveyor Tilton, NH 03276
--- ------ ----- -------- --------
<S> <C> <C> <C> <C> <C>
1 448 800 800 PB860D BSE-Pitched Trash Belt
- ------------------------------------------------------------------------------
1 449 800 800 PB860E BSE-Pitched Trash Belt
- ------------------------------------------------------------------------------
1 450 800 800 PB860F BSE-Pitched Trash Belt
- ------------------------------------------------------------------------------
1 451 800 800 PB860G BSE-Pitched Trash Belt
- ------------------------------------------------------------------------------
1 452 800 800 PB860H BSE-Pitched Trash Belt
- ------------------------------------------------------------------------------
1 453 800 800 PB860J BSE-Pitched Trash Belt
- ------------------------------------------------------------------------------
1 454 800 800 PB860K BSE-Pitched Trash Belt
- ------------------------------------------------------------------------------
1 455 800 800 PB860L BSE-Pitched Trash Belt
- ------------------------------------------------------------------------------
1 456 800 800 PB860M BSE-Pitched Trash Belt
- ------------------------------------------------------------------------------
1 457 800 800 PB860N BSE-Pitched Trash Belt
- ------------------------------------------------------------------------------
1 458 800 800 PB860P BSE-Pitched Trash Belt
- ------------------------------------------------------------------------------
1 459 800 800 PB860Q BSE-Pitched Trash Belt
- ------------------------------------------------------------------------------
1 460 800 800 PB860R BSE-Pitched Trash Belt
- ------------------------------------------------------------------------------
1 461 800 800 PB862 BSC-Trash Belt
- ------------------------------------------------------------------------------
1 462 800 800 PB864 BSC-Trash Belt
- ------------------------------------------------------------------------------
1 463 800 800 PB866 BIC-15 Degree Incline Trash Belt
- ------------------------------------------------------------------------------
1 464 800 n/a CH870A CHT-Drop Chute
- ------------------------------------------------------------------------------
1 465 800 n/a CH870B CHT-Drop Chute
- ------------------------------------------------------------------------------
1 466 800 n/a CH870C CHT-Drop Chute
- ------------------------------------------------------------------------------
1 467 800 n/a CH870D CHT-Drop Chute
- ------------------------------------------------------------------------------
1 468 800 n/a CH880A CHT-Drop Chute
- ------------------------------------------------------------------------------
1 469 800 n/a CH880B CHT-Drop Chute
- ------------------------------------------------------------------------------
1 470 800 n/a CH880C CHT-Drop Chute
- ------------------------------------------------------------------------------
</TABLE>
Page 16 of 17
<PAGE>
<TABLE>
<CAPTION>
QTY MANUFACTURER, DESCRIPTION MODEL NO./SERIAL NO. LOCATION
- --- --------------------------------------------- --------
Seq. Series Panel Conveyor Type of 12 Sandborn St.
# Number Conveyor Tilton, NH 03276
--- ------ ----- -------- --------
<S> <C> <C> <C> <C> <C>
1 471 800 n/a CH880D CHT-Drop Chule
- ------------------------------------------------------------------------------
81 472 800 n/a GA800 1.5" Angle Guard Rail (bulk)
- ------------------------------------------------------------------------------
118 473 800 n/a GCL800 5.75" Lapped Channel Guard Rail (bulk)
- ------------------------------------------------------------------------------
52 474 800 n/a GCL18-800 18" Channel Guard Rail (bulk)
- ------------------------------------------------------------------------------
475 900 500 Auto Bag Sorter
- ------------------------------------------------------------------------------
1 476 PL n/a PL01 Platform (Crossovers Only)
- ------------------------------------------------------------------------------
1 477 PL n/a PL02 Platform
- ------------------------------------------------------------------------------
1 478 PL n/a PL03 Platform
- ------------------------------------------------------------------------------
1 479 PL n/a PL04 Platform
- ------------------------------------------------------------------------------
1 480 PL n/a PL05 Platform
- ------------------------------------------------------------------------------
</TABLE>
Above equipment distributed by: Designed Conveyor Systems, Inc.
<PAGE>
Exhibit 10.66
Loan No. 3212525
ASSIGNMENT OF
AGREEMENTS, PERMITS AND CONTRACTS
THIS ASSIGNMENT, given as of March 1st, 1999, by BIRCH POND REALTY
CORPORATION (doing business in the State of New Hampshire as BPRC) ("BORROWER"),
to JOHN HANCOCK REAL ESTATE FINANCE, INC., a Delaware corporation, having its
principal place of business at John Hancock Place, T-53, 200 Clarendon Street,
Boston, Massachusetts 02116 ("LENDER").
W I T N E S S E T H :
WHEREAS, Borrower is the owner of the fee estate in the premises
described in EXHIBIT A attached hereto (hereinafter referred to as the
"PREMISES");
WHEREAS, the Lender has made a loan in the principal sum of
$12,000,000.00 to Borrower (the "LOAN");
WHEREAS the Loan is evidenced by a certain note in the principal sum of
$12,000,000.00 given by Borrower to lender (the "NOTE") and is secured by that
certain Mortgage, Assignment of Leases and Rents and Security Agreement, dated
of even date herewith, in the principal sum of $12,000,000.00, covering the
Premises (the "MORTGAGE") (said Note and Mortgage together with all other
documents evidencing or securing the Loan being hereinafter collectively
referred to as the "LOAN DOCUMENTS");
WHEREAS, the Lender was unwilling to make the Loan to the Borrower
unless the Borrower in the manner hereinafter set forth assigned to Lender as
additional security for the payment of the Loan and the observance and
performance by the Borrower of the terms, covenants and conditions of the Loan
Documents on the part of the Borrower to be observed and performed, all of the
Borrower's right, title and interest in and to all permits, license agreements,
operating contracts, licenses (including liquor licenses, to the extent
assignable by Borrower), franchise agreements and all management, service,
supply and maintenance contracts and agreements, and any other agreements,
permits or contracts of any nature whatsoever now or hereafter obtained or
entered into by the Borrower with respect to the operation of the Premises,
including without limitations those documents and agreements described in
EXHIBIT B attached hereto and made a part hereof (collectively, the
"AGREEMENTS");
NOW, THEREFORE, in consideration of the sum of Ten Dollars ($10) and
other good and valuable consideration the receipt and sufficiency of which are
hereby acknowledged, the Borrower hereby assigns to Lender as additional
security for the payment of the Loan and the observance and performance by the
Borrower of the terms, covenants and conditions of the Loan Documents on the
part of the Borrower to be observed or performed, all of the Borrower's right,
title and interest in and to the Agreements.
The Borrower covenants and agrees that the Borrower will (a) fulfill
and perform each and every term, covenant and provision of the Agreements to be
fulfilled or performed by the Borrower thereunder, if any, (b) give prompt
notice to the Lender of any notice received by the Borrower under any of the
Agreements, together with a complete copy of any such notice, (c) enforce, short
of termination thereof,
1
<PAGE>
Loan No. 3212525
the performance and observance of each and every term, covenant and provision of
the Agreements to be performed or observed, if any and (d) not terminate any of
the Agreements without the prior written consent of the Lender.
The Borrower hereby represents and warrants that as of the date hereof,
there are no operating agreements, service agreements or other agreements to
which Borrower is a party, and that there are no permits, licenses, or
certificates required for the operation of the Mortgaged Property (as defined in
the Mortgage), other than as set forth on EXHIBIT B attached hereto and all such
agreements are in full force and effect with no defaults thereunder and all such
agreements have been assigned to or are in the name of the Borrower. Borrower
hereby agrees that it shall constitute an Event of Default under the Mortgage if
the representation or warranty set forth in the preceding sentence is false or
inaccurate.
This Assignment is given as collateral security for the obligations of
the Borrower to the Lender pursuant to the Loan Documents.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK; SIGNATURE PAGE(S) FOLLOW(S)]
2
<PAGE>
IN WITNESS WHEREOF, the Borrower has duly executed this instrument as
of the day and year first above written.
BIRCH POND REALTY CORPORATION
Witnessed By: (doing business in the State of New
Hampshire as BPRC)
By: /s/ Olga L. Conley
/s/ Katherine Culkin -----------------------------------
- -------------------------------------
Name: Name: Olga L. Conley
Its: TREASURER
- -------------------------------------
Name:
COMMONWEALTH OF MASSACHUSETTS )
)
COUNTY OF SUFFOLK )
The foregoing instrument was acknowledged before me this 1st day of
March, 1999, by Olga L. Conley, Treasurer of Birch Pond Realty Corporation, a
Delaware corporation (doing business in the State of New Hampshire as BPRC), on
behalf of said corporation.
Katherine Culkin
---------------------------------
Notary Public Katherine Culkin
My Commission Expires: 5-27-05
[SEAL]
3
<PAGE>
EXHIBIT A
That certain lot or tract of land, with the buildings and improvements
thereon, located in Tilton, Belknap County, New Hampshire, and being bounded
and described as follows:
Beginning at the northeast corner of the described premises at land now or
formerly of the State of New Hampshire and at a re-bar on the westerly
sideline of Route 132, Sanborn Road:
1. S 19 DEG. 20'44" E 45.87' by said Route 132 to a point; then
2. By a curve to the right having a Delta of 17 DEG. 00'15", a radius of
930.00 feet, an arc distance of 276.00 feet, and a chord bearing of S
10 DEG. 50'37" E and a chord distance of 274.99 feet by said Route to
a re-bar; then
3. S 02 DEG. 20'29" E 155.23' by said Route to a re-bar; then
4. S 03 DEG. 47'32" W 86.83' by said Route to a rebar; then
5. S 03 DEG. 05'40" W 523.55' by said Route to a rebar; then
6. By a curve to the left having a Delta of 01 DEG. 40'53" and a radius of
11,489.16 feet, an arc distance of 337.18 feet, and a chord bearing of
S 02 DEG. 15'13" W and a chord distance of 337.17 feet by said Route to
a re-bar; then
7. By a curve to the left having a Delta of 02 DEG. 59'59" and a radius of
11,492.87 feet, an arc distance of 601.71 feet, and a chord bearing of
S 01 DEG. 03'20" W and a chord distance of 601.64 feet by said Route to
a re-bar; then
8. By a curve to the left having a Delta of 01 DEG. 52'45" and a radius of
11,501.15 feet, an arc distance of 377.22 feet, and a chord bearing of
S 02 DEG. 31'31" W and a chord distance of 377.20 feet by said Route
to a re-bar; then
9. S 03 DEG. 27'54" E 248.12' by said Route to a point at now or formerly
of Oliver; then
10. S 89 DEG. 39'25" W 287.08' by said land of Oliver to a rebar; then
11. S 08 DEG. 48'25" W 225.00' by said land of Oliver to a rebar; then
12. S 08 DEG. 48'25" W, a distance of 20.00' to a point at land now or
formerly of
Page 1 of 3
<PAGE>
the State of New Hampshire; then
13. N70 DEG. 50'37"W 54.78' by land of the State; then
14. N 81 DEG. 42'19"W 58.01' by land of the State; then
15. S 82 DEG. 53'59"W142.27' by land of the State; then
16. S76 DEG. 57'22"W 157.00' by land of the State; then
17. S 89 DEG. 46'48"W 67.18' by land of the State; then
18. N65 DEG. 59'17"W 79.43' by land of the State; then
19. N47 DEG. 43'27"W 87.84' by land of the State; then
20. N27 DEG.29'46"W 83.28' by land of the State; then
21. S73 DEG. 59'49"W 53.30' by land of the State; then
22. N45 DEG. 19'18"W 43.24' by land of the State; then
23. N26 DEG. 13'08" W16.85' by land of the State; then
24. S83 DEG. 49'28"W 29.65' by land of the State; then
25. N60 DEG. 40'11"W 56.97' by land of the State; then
26. N38 DEG. 05'58"W 37.81' by land of the State; then
27. N60 DEG. 17'32"W 38.15' by land of the State; then
28. N31 DEG. 50'23"W 27.09' by land of the State; then
29. N74 DEG. 42'14"W 22.80' by land of the State; then
30. S74 DEG. 47'09" W 91.21' by land of the State; then
31. N87 DEG. 39'11"W 149.12' by land of the State; then
32. S72 DEG. 41'13"W 67.05' by land of the State; then
33. N72 DEG. 57'33" W 454.56' by land of the State; then
34. N29 DEG. 36'39"W 498.10' by land of the State: then
Page 2 of 3
<PAGE>
35. N29 DEG. 36'39"W 56.30' by land of the State; then
36. N16 DEG. 46'49"W 348.61' by land of the State to a concrete bound;
then
37. N14 DEG. 31'44"E 885.88' by land of the State to a concrete bound;
then
38. N58 DEG. 29'32"E 430.73' by land of the State to a re-bar; then
39. N05 DEG. 11'37"W 335.93' by land of the State to a re-bar; then
40. S76 DEG. 46'28"W 55.90' by land of the State to a concrete bound;
then
41. N85 DEG. 46'21"W 3.96' by land of the State to a point at land now
or formerly of DM Management Company ("DM"); then
42. N66 DEG. 32'51"E 1044.50 feet by land of said DM, then
43. N85 DEG. 07'38"E 305.57' by land of said DM to a stone wall; then
44. S25 DEG. 23'01"E 51.24' by land now or formerly of Miller and said
wall to a re-bar at land of the State; then
45. S66 DEG. 06'34"W 50.17' by land of the State and a stone wall to a
drill hole in the wall; then
46. S21 DEG. 06'31"E 95.43' by land of the State; then
47. S18 DEG. 16'00"E 175.19' by land of the State to a re-bar; then
48. N69 DEG. 11'55"E 499.88' by land of the State to the point of
beginning.
Meaning and intending to describe the land shown on a Plan entitled,
"ALTA/ACSM LAND TITLE SURVEY, Plan of Land Prepared for DM Management
Company, Route 132 (Sanborn Road), Tilton, NH," dated November 19, 1998, by
Yerkes Surveying Consultants and recorded in the Belknap County Registry of
Deeds on February 16, 1999, in Drawer L-31 #'s 61 and 62.
Page 3 of 3
<PAGE>
EXHIBIT B
DESCRIPTION OF CERTAIN AGREEMENTS, PERMITS AND CONTRACTS
1. Contract for Snow Removal and Related Services with Outside
Unlimited Landscape Contractors dated September 12, 1998.
2. Elevator Inspection Certificate expiring 12/1999.
Exhibit B-1
<PAGE>
Exhibit 10.67
Loan No. 3212525
INDEMNIFICATION AGREEMENT
THIS INDEMNIFICATION AGREEMENT made as of March 1, 1999, by BIRCH
POND REALTY CORPORATION, a Delaware corporation (doing business in the State of
New Hampshire as BPRC), with a principal place of business at 100 Birch Pond
Drive, Tilton, New Hampshire 03289 and DM MANAGEMENT COMPANY, a Delaware
corporation with a mailing address at 25 Recreation Park Drive, Hingham,
Massachusetts 02043, (hereinafter, together, "INDEMNITOR"), to and for the
benefit of JOHN HANCOCK REAL ESTATE FINANCE, INC., a Delaware corporation,
having its principal place of business at John Hancock Place, T-53, 200
Clarendon Street, Boston, Massachusetts 02116 ("MORTGAGEE"),
W I T N E S S E T H:
WHEREAS, Birch Pond Realty Corporation has applied to Mortgagee for a
real estate mortgage loan in the amount of TWELVE MILLION AND 0/100 DOLLARS
($12,000,000.00) (the "LOAN"), to be evidenced by its note (the "NOTE") in that
amount of even date herewith, secured by a real estate mortgage (the "MORTGAGE")
on property now known as Dm Management Office and Distribution Facility and
located at 100 Birch Pond Drive, Tilton, Belknap County, New Hampshire (the
"MORTGAGED PROPERTY"), bearing the same date as the Note; and
WHEREAS, Mortgagee is unwilling to make said Loan unless Indemnitor
agrees to indemnify and hold Mortgagee harmless from and against certain
matters;
WHEREAS, Indemnitor desires to give such indemnification to Mortgagee
in order to induce Mortgagee to make the Loan; and
WHEREAS, Indemnitor has full authority and power to execute and deliver
this Indemnification Agreement and to assume liability hereunder;
NOW, THEREFORE, for the purpose of inducing Mortgagee to make the Loan
to Indemnitor, which Indemnitor acknowledges is good, valuable, and sufficient
consideration:
1. INDEMNITIES.
(a) Notwithstanding any provisions in the Note or Mortgage or
any other instrument evidencing, securing, guaranteeing or executed in
connection with the Loan (collectively the "LOAN DOCUMENTS") limiting
or negating Indemnitor's personal liability, Indemnitor agrees to
unconditionally and absolutely indemnify and hold Mortgagee (as defined
in Section 12 hereof), its officers, directors, policyholders,
employees, agents and attorneys harmless from and against any loss,
cost, liability, damage, claim or expense, including reasonable
attorneys' fees, suffered or incurred by Mortgagee in connection with
the Mortgaged Property at any time, whether before, during or after
enforcement of Mortgagee's rights and remedies upon default under the
Loan Documents, under or on account of, or as a result of (i) any
Environmental Laws, as that term is defined in Section 13 hereof, (ii)
any presence (other than "Complying Hazardous Materials,
<PAGE>
Loan No. 3212525
as defined below),release, or threat of release of Hazardous Materials,
as defined in Section 13 hereof, at, upon, under or within the
Mortgaged Property, (iii) the presence of asbestos or
asbestos-containing materials, PCB's, radon gas, urea formaldehyde
foam insulation or lead (whether in paint, water, soil, or plaster)
at the Mortgaged Property, (iv) any breach of the covenants and
warranties made in Section 2 hereof or in Paragraph 39 of the
Mortgage or in that certain Environmental Certificate, as amended
(the "ENVIRONMENTAL CERTIFICATE") executed in connection with
Indemnitor's application for the Loan, (v) the falsity of any of the
representations made in Section 2 hereof or in Paragraph 39 of the
Mortgage or in the Environmental Certificate, whether or not caused
by Indemnitor or (vi) the failure of Indemnitor to duly perform the
obligations or actions set forth in Section 2 hereof and in
Paragraph 39 of the Mortgage, including, without limitation, for all
parts of this subsection 1(a), with respect to: (A) the imposition
by any governmental authority of any lien upon the Mortgaged
Property, (B) clean-up costs, (C) liability for personal injury or
property damage or damage to the environment, (D) any diminution in
the value of the Mortgaged Property and (E) fines, penalties and
punitive damages. The term "COMPLYING HAZARDOUS MATERIALS" shall
mean substances generally available and (a) used in the ordinary
course of managing and operating the Mortgaged Property for their
intended purpose to clean and maintain the Mortgaged Property, or
(b) used by tenants at the Mortgaged Property in their ordinary
course of business; provided that, in each case, the use, storage
and disposal of all such substances shall be conducted in strict
compliance with all applicable laws.
(b) Indemnitor further agrees that Mortgagee shall not assume
any liability or obligation for loss, damage, fines, penalties, claims
or duty to clean up or dispose of wastes or materials on or relating to
the Mortgaged Property as a result of any conveyance of title to the
Mortgaged Property to the Mortgagee or otherwise or as a result of any
inspections or any other actions made or taken by Mortgagee on the
Mortgaged Property. Indemnitor agrees to remain fully liable and shall
indemnify and hold harmless Mortgagee from any costs, expenses,
clean-up costs, waste disposal costs, litigation costs, fines and
penalties, including without limitation any costs, expenses, penalties
and fines within the meaning of any Environmental Laws.
(c) Indemnitor shall assume the burden and expense of
defending Mortgagee, with counsel satisfactory to Mortgagee, against
all legal and administrative proceedings arising out of the occurrences
set forth in this Indemnification Agreement. Mortgagee shall have the
right, but not the obligation, to participate in the defense of any
such proceedings. Indemnitor may compromise or settle any such
proceedings without the consent of Mortgagee only if the claimant
agrees as part of the compromise or settlement that Mortgagee shall
have no responsibility or liability for the payment or discharge of any
amount agreed upon or obligation to take any other action.
(d) Indemnitor shall pay when due any judgments against
Mortgagee which have been indemnified under this Indemnification
Agreement and which are rendered by a final order or decree of a court
of competent jurisdiction from which no further appeal may be taken or
has been taken within the applicable appeal period. In the event that
such payment is not made, Mortgagee, in its sole discretion, may pay
any such judgments, in whole or in part, and look to Indemnitor for
2
<PAGE>
Loan No. 3212525
reimbursement pursuant to this Indemnification Agreement, or may
proceed to file suit against Indemnitor to compel such payment.
(e) It is understood that the presence and/or release of
substances referred to in section 1(a) hereof does not pertain to a
presence and/or release which first occurs solely after (A) repayment
of the Loan in full accordance with the Loan Documents or (B)
acquisition of title to the Mortgaged Property by Mortgagee upon a
foreclosure or acceptance of a deed in lieu of foreclosure and
surrender of possession and occupancy of the Mortgaged Property by
Indemnitor, its agents, affiliates, employees and independent
contractors. Indemnitor shall have the burden of proving that the
conditions in this subsection (e) were satisfied by clear and
convincing evidence and shall continue to defend with counsel
satisfactory to Mortgagee and shall indemnify and hold Mortgagee
harmless for all matters set forth in Section 1(a) hereof, unless and
until a court of competent jurisdiction finds that Indemnitor has met
such burden.
2. INDEMNITOR'S REPRESENTATIONS AND WARRANTIES. Indemnitor hereby
represents and warrants to Mortgagee as follows:
(a) Indemnitor is solvent and the execution of this
Indemnification Agreement does not render Indemnitor insolvent. Any and
all financial statements, balance sheets, net worth statements and
other financial data which have heretofore been furnished to Mortgagee
with respect to Indemnitor fairly and accurately present the financial
condition of Indemnitor as of the date they were furnished to Mortgagee
and, since that date, there has been no material adverse change in the
financial condition of Indemnitor.
(b) There are no legal proceedings or material claims or
demands pending against or, to the best of Indemnitor's knowledge,
threatened against Indemnitor or any of its assets, except if set forth
in any EXHIBIT A attached hereto.
(c) The execution and delivery of this Indemnification
Agreement and the assumption of liability hereunder have been in all
respects authorized and approved by Indemnitor and, if applicable, each
constituent party or owner of Indemnitor; Indemnitor has full authority
and power to execute this Indemnification Agreement and to perform its
obligations hereunder; and this Indemnification Agreement constitutes a
legal, valid and binding obligation of Indemnitor and is enforceable in
accordance with its terms, except as may be limited by (i) bankruptcy,
insolvency, or other similar laws affecting the rights of creditors
generally, and (ii) general principles of equity.
(d) Neither the execution nor the delivery of this
Indemnification Agreement nor the fulfillment and compliance with the
provisions hereof will conflict with or result in a breach of or
constitute a default under or result in the creation of any lien,
charge or encumbrance upon any property or assets of Indemnitor under
any agreement or instrument to which Indemnitor is now a party or by
which it may be bound.
3
<PAGE>
Loan No. 3212525
(e) (i) Indemnitor has performed reasonable
investigations, studies and tests as to any possible
environmental contamination, liabilities or problems with
respect to the Mortgaged Property and such investigations,
studies and tests have disclosed no Hazardous Materials or
possible violations of any Environmental Laws.
(ii) To the best of Indemnitor's knowledge, there
have been no releases of Hazardous Materials either at, upon,
under or within the Mortgaged Property and no Hazardous
Materials have migrated to the Mortgaged Property. No
Hazardous Materials are located, stored or used on (other than
Complying Hazardous Materials) or have been processed or
disposed of on or released or discharged from (including
ground water contamination) the Mortgaged Property, and no
above or underground storage tanks exist on the Property.
(iii) Indemnitor shall not allow any Hazardous
Materials to exist or be stored, located, discharged,
released, possessed, managed, processed or otherwise handled
on the Mortgaged Property(except materials which (a) are
ordinarily and customarily used in the regular operation of
the Mortgaged Property as an office, warehouse, distribution
and industrial building by the Mortgagor or any current tenant
or any future tenant, which tenant and its lease have been
approved by the Mortgagee, and (b) are used, stored, disposed
of and handled in compliance with and in quantities permitted
by all applicable Environmental Laws), and shall strictly
comply with all Environmental Laws affecting the Mortgaged
Property, including those laws regarding the generation,
storage, disposal, release and discharge of Hazardous
Materials. Without limiting the generality of the foregoing,
Indemnitor has not been, is not and will not become involved
in operations at the Mortgaged Property which could lead to
imposition on Indemnitor of liability under any Environmental
Law. Indemnitor expressly warrants, represents and covenants
that Indemnitor shall strictly comply with all requirements of
applicable Environmental Laws and shall immediately notify
Mortgagee of any releases of Hazardous Materials at, upon,
under or within the Mortgaged Property.
(iv) Neither Indemnitor, the Mortgaged Property or
any affiliate of Indemnitor (A) has received notice of or is
subject to any private or governmental lien or judicial or
administrative notice, order or action relating to Hazardous
Materials or environmental problems, impairments or
liabilities with respect to the Mortgaged Property or such
other property or (B) is in or, with any applicable notice or
lapse of time or failure to take certain curative or remedial
actions, will be in either direct or indirect violation of any
Environmental Laws.
(v) Indemnitor shall strictly comply with the
requirements of all Environmental Laws affecting the Mortgaged
Property.
(vi) Indemnitor hereby warrants and represents that,
except as set forth on Exhibit B attached hereto and made a
part hereof, all of the answers on the Environmental
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Loan No. 3212525
Certificate are true and complete as of the date hereof.
Indemnitor shall immediately notify Mortgagee in writing
should Indemnitor become aware that any of the answers on the
Environmental Certificate either (A) was not true at the time
the Environmental Certificate was executed or (B) becomes
untrue during the term of the Loan.
3. WAIVERS. Indemnitor hereby waives the following: (a) notice of
Mortgagee's acceptance of this Indemnification Agreement; (b) notice of
Indemnitor's grant to Mortgagee of a security interest lien or encumbrance in
any of Indemnitor's assets; (c) Mortgagee's release, waiver, modification or
amendment of any Loan Document or any security interest, lien or encumbrance in
any other party's assets given to Mortgagee to secure any Loan Document; (d)
presentment, demand, notice of default, non-payment, partial payment and protest
and all other notices or formalities to which Indemnitor may be entitled; (e)
extensions of time of payment of the Note granted to Indemnitor or any other
forbearances in Mortgagee's enforcement of the Loan Documents; (f) acceptance
from Indemnitor (or any other party) of any partial payment or payments of the
Note or any collateral securing the payment thereof or the settlement,
subordination, discharge or release of the Note; (g) notice of any of the
matters set forth in parts (c) through (f) of this Section 3; (h) all suretyship
defenses of every kind and nature; and (i) the defense of the statute of
limitations in any action brought to enforce this Indemnification Agreement.
Indemnitor agrees that Mortgagee may have done, or at any time may do, any or
all of the foregoing actions in such manner, upon such terms and at such times
as Mortgagee, in its sole discretion, deems advisable, without in any way
impairing, affecting, reducing or releasing Indemnitor from Indemnitor's
obligations under this Indemnification Agreement and Indemnitor hereby consents
to each of the foregoing actions.
4. ENFORCEMENT.
(a) Indemnitor agrees that this Indemnification Agreement may
be enforced by Mortgagee without first resorting to or exhausting any
other security or collateral or without first having recourse to the
Note or any of the property covered by the Mortgage through foreclosure
proceedings or otherwise; provided, however, that nothing herein
contained shall prevent Mortgagee from suing on the Note or foreclosing
the Mortgage or from exercising any other rights thereunder.
(b) Indemnitor agrees that the indemnifications set forth
herein are separate, independent of and in addition to Birch Pond
Realty Corporation's undertakings under the Note. Indemnitor agrees
that a separate action may be brought to enforce the provisions of this
Indemnification Agreement which shall in no way be deemed to be an
action on the Note, whether or not Mortgagee would be entitled to a
deficiency judgment following a judicial foreclosure or sale under the
Mortgage.
(c) This Indemnification Agreement shall be enforced and
construed in accordance with the laws of the state in which the
Mortgaged Property is located. Indemnitor hereby submits to personal
jurisdiction in said state for the enforcement of this Indemnification
Agreement and hereby waives any claim or right under the laws of any
other state or of the United States to object to such jurisdiction. If
such litigation is commenced, Indemnitor agrees that service of process
may
5
<PAGE>
Loan No. 3212525
be made by serving a copy of the summons and complaint upon Indemnitor,
through any lawful means, including upon its registered agent within
said state, whom Indemnitor hereby appoints as its agent for these
purposes. Nothing contained herein shall prevent Mortgagee's bringing
any action or exercising any rights against Indemnitor personally or
against any property of Indemnitor within any other county, state, or
country. The means of obtaining personal jurisdiction and perfecting
service of process set forth above are not intended to be exclusive but
are in addition to all other means of obtaining personal jurisdiction
and perfecting service of process now or hereafter provided by
applicable law.
5. DURATION. Indemnitor agrees that this Indemnification Agreement
shall survive a foreclosure or the taking of a deed in lieu of foreclosure, the
discharge of Indemnitor's obligations under any of the Loan Documents, or any
transfer of the Mortgaged Property.
6. NOTICE BY INDEMNITOR. Indemnitor shall promptly after obtaining
knowledge thereof advise Mortgagee in writing of (a) any governmental or
regulatory actions instituted or threatened in writing under any Environmental
Law affecting the Mortgaged Property or the matters indemnified hereunder,
including without limitation any notice of inspection, abatement or
non-compliance; (b) all claims made or threatened in writing by any third party
against Indemnitor or the Mortgaged Property relating to damage, contribution,
cost recovery, compensation, loss or injury resulting from the presence,
release, threat of release or discharge on or from the Mortgaged Property of any
Hazardous Materials; and (c) Indemnitor's discovery of the presence of Hazardous
Materials on the Mortgaged Property or on any real property adjoining or in the
vicinity of the Mortgaged Property, or of any occurrence or condition on any
such property which could subject Indemnitor or the Mortgaged Property to a
claim under any Environmental Law or to any restrictions on ownership,
occupancy, transferability or use of the Mortgaged Property under any
Environmental Law. Indemnitor shall deliver to Mortgagee any documentation or
records as Mortgagee may request and which are susceptible of being obtained by
Indemnitor without undue cost or expense and without the necessity for
initiating legal proceedings to obtain the same in connection with all such
actions, claims, discoveries, notices, inquiries and communications and shall
advise Mortgagee of any subsequent developments regarding the same.
7. PAYMENT OF MORTGAGEE'S EXPENSES. If Mortgagee retains counsel for
advice or other representation to enforce Indemnitor's obligations hereunder,
the attorneys' fees arising from such services and all related expenses and
court costs shall be paid by Indemnitor upon demand of Mortgagee. If Mortgagee
retains counsel for advice or other representation for any other matter arising
hereunder, including, without limitation, any litigation, contest, dispute,
suit, or proceeding (whether instituted by Mortgagee, Indemnitor, or any other
party) relating to any of the occurrences for which indemnification is given in
this Indemnification Agreement or otherwise relating in any way to this
Indemnification Agreement and the indemnities described herein, the reasonable
attorney's fees arising from such services and all related reasonable expenses
and court costs shall be paid by Indemnitor upon demand of Mortgagee.
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<PAGE>
Loan No. 3212525
8. NO WAIVER.
(a) Indemnitor's obligations hereunder shall in no way be
impaired, reduced or released by reason of (i) Mortgagee's omission or
delay to exercise any right described herein or (ii) any act or
omission of Mortgagee in connection with any notice, demand, warning or
claim regarding violations of codes, laws or ordinances governing the
Mortgaged Property.
(b) Nothing contained herein shall constitute or be construed
as a waiver of any statutory or judicial federal, state or local law
which may provide rights or remedies to Mortgagee against Indemnitor or
others in connection with any claim relating to the Mortgaged Property
and pertaining to the presence and/or release, threatened release,
storage, disposal, generating or removal of any Hazardous Materials or
to the failure to comply with any Environmental Laws now or hereafter
enacted.
9. NOTICE. All notices hereunder shall be given at the following
address. If to Indemnitor, to Birch Pond Realty Corporation, 100 Birch Pond
Drive, Tilton, New Hampshire 03289 and to DM Management Company, 25 Recreation
Park Drive, Hingham, Massachusetts 02043, Attention: Olga Conley; if to
Mortgagee, John Hancock Real Estate Finance, Inc., 200 Clarendon Street, T-53,
Boston, Massachusetts 02116, Re: Loan No. 3212525. Either party may change their
address for notice purposes upon giving fifteen (15) days prior notice thereof
in accordance with this section. All notices given hereunder shall be in writing
and shall be considered properly given if delivered either personally to such
other party, or sent by nationally recognized overnight courier delivery service
or by certified mail of the United States Postal Service, postage prepaid return
receipt requested, addressed to the other party as set forth above (or to such
other address or person as either party entitled to notice may by notice to the
other party specify). Unless otherwise specified, notices shall be deemed given
as follows: (i) if delivered personally, when delivered, (ii) if delivered by
nationally recognized overnight courier delivery service, on the day following
the day such material is sent or (iii) if delivered by certified mail, on the
third day after the same is deposited in the United States Postal Service as
provided above.
10. AMENDMENT AND WAIVER. This Indemnification Agreement may be amended
and observance of any term of this Indemnification Agreement may be waived only
with the written consent of Mortgagee.
11. SEVERABILITY. All provisions contained in this Indemnification
Agreement are severable, and the invalidity or unenforceability of any provision
shall not affect or impair the validity or enforceability of the remaining
provisions of this Indemnification Agreement.
12. SUCCESSORS AND ASSIGNS. This Indemnification Agreement shall inure
to the benefit of and may be enforced by, and the term "Mortgagee" as used in
this Agreement shall include, John Hancock Real Estate Finance, Inc. and its
successors and assigns, including (a) any subsequent holder of the Note and
Mortgage, and (b) any person or entity that acquires the Mortgaged Property at a
foreclosure sale or by deed in lieu of foreclosure and the immediate grantee of
such person or entity. This Agreement shall be
7
<PAGE>
Loan No. 3212525
binding upon and enforceable against Indemnitor and its legal representatives or
successors. This Agreement may not be assigned or transferred by Indemnitor, in
whole or in part.
13. DEFINITIONS. "HAZARDOUS MATERIALS" shall mean and include, but
shall not be limited to, any petroleum product and all hazardous or toxic
substances, wastes or substances, any substances which because of their
quantitative concentration, chemical, radioactive, flammable, explosive,
infectious or other characteristics, constitute or may reasonably be expected to
constitute or contribute to a danger or hazard to public health, safety or
welfare or to the environment, including, without limitation, any asbestos
(whether or not friable) and any asbestos-containing materials, waste oils,
solvents and chlorinated oils, polychlorinated biphenyls (PCBs), toxic metals,
etchants, pickling and plating wastes, explosives, reactive metals and
compounds, pesticides, herbicides, radon gas, urea formaldehyde foam insulation
and chemical, biological and radioactive wastes, or any other similar materials
or any hazardous or toxic wastes or substances which are included under or
regulated by any federal, state or local law, rule or regulation (whether now
existing or hereafter enacted or promulgated, as they may be amended from time
to time) pertaining to environmental regulations, contamination, clean-up or
disclosures and any judicial or administrative interpretation thereof, including
any judicial or administrative orders or judgments, including, without
limitation, the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, 42 U.S.C. section 9601 ET SEQ. ("CERCLA"); The Federal Resource
Conservation and Recovery Act, 42 U.S.C. section 6901 ET SEQ. ("RCRA");
Superfund Amendments and Reauthorization Act of 1986, Public Law No. 99-499
("SARA"); Toxic Substances Control Act, 15 U.S.C. section 2601 ET SEQ. ("TSCA");
the Hazardous Materials Transportation Act, 49 U.S.C. section 1801 ET SEQ.; and
any other state superlien or environmental clean-up or disclosure statutes (all
such laws, rules and regulations being referred to collectively as
"ENVIRONMENTAL LAWS").
14. JOINT AND SEVERAL LIABILITY. If more than one person is included in
the definition of Indemnitor, the liability of all such persons hereunder shall
be joint and several.
15. SPECIAL STATE PROVISIONS.
(a) In the event of any inconsistencies between the other
paragraphs of this Indemnification Agreement and this Paragraph 15, the
terms and conditions of this Paragraph 15 shall control and be binding.
(b) ENVIRONMENTAL LAWS. The term "Environmental Laws" shall be
deemed to include, without limitation, the following statutes: New
Hampshire RSA 125-A, 125-C, 125-I, 146-A, 146-C, 147-A, 147-B, 149-I
and 149-M, as they may be amended.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK; SIGNATURE PAGE(S) FOLLOW(S)]
8
<PAGE>
IN WITNESS WHEREOF, Indemnitor has executed this instrument under seal
the day and year first above written.
BIRCH POND REALTY CORPORATION
(doing business in the State of New Hampshire
as BPRC)
By: /s/ Olga L. Conley
--------------------------------------------
Name: OLGA L. CONLEY
Its: TREASURER
DM MANAGEMENT COMPANY
By: /s/ Olga L. Conley
--------------------------------------------
Name: OLGA L. CONLEY
Its: CHIEF FINANCIAL OFFICER
9
<PAGE>
EXHIBIT A
LEGAL CLAIMS
From time to time DM Management Company (the "Company") receives claims
asserting infringement by the Company of trademark and other intellectual
property rights. These claims are normally resolved without formal legal
proceedings and without payment by the Company of significant amounts of money.
The following is a summary of a recently received claim:
The Company received a letter from Williams-Sonoma, Inc. dated December
2, 1998 alleging certain infringement by the Company of
Williams-Sonoma's intellectual property rights in its Pottery Barn
catalogs and certain unethical use by the Company of Williams-Sonoma's
mailing lists. The Company believes that these claims are without
merit, and the Company's attorneys have responded on the Company's
behalf through a letter to Williams-Sonoma's attorneys dated December
22, 1998. To date the Company and its attorneys have not heard anything
further from Williams-Sonoma or its attorneys.
10
<PAGE>
EXHIBIT B
WARRANTIES AND REPRESENTATIONS
The Environmental Questionnaire and Certificate originally submitted to
Mortgagee by DM Management Company failed to state that Complying Hazardous
Materials are located on the Mortgaged Property.
11
<PAGE>
Exhibit 10.68
Loan No. 3212525
GUARANTY AGREEMENT
THIS GUARANTY AGREEMENT ("GUARANTY"), is entered into effective as of
March 1, 1999, by DM MANAGEMENT COMPANY, a Delaware corporation with a mailing
address at 25 Recreation Park Drive, Hingham, Massachusetts 02043,
("GUARANTOR"), in favor of JOHN HANCOCK REAL ESTATE FINANCE, INC., a Delaware
corporation ("LENDER"), and the subsequent owners and holders of the herein
below defined Note.
RECITALS:
A. Birch Pond Realty Corporation, a Delaware corporation ("BORROWER")
has requested a loan (the "LOAN") from Lender in the amount of $12,000,000.00 to
be evidenced by the Mortgage Note of even date herewith executed by Borrower,
payable to Lender in the original principal sum of $12,000,000.00 (the "NOTE"),
and secured by, INTER ALIA, the Mortgage, Assignment of Leases and Rents and
Security Agreement of even date herewith executed by Borrower in favor of Lender
covering certain property in Tilton, Belknap County, New Hampshire (the
"MORTGAGE");
B. Section 19 of the Note sets forth certain amounts, obligations and
other liabilities for which Borrower is fully liable to Lender (the
"NON-RECOURSE CARVEOUT OBLIGATIONS"), notwithstanding limitations on Borrower's
liability pursuant to said Section 19 of the Note;
C. Guarantor is the owner of a direct or indirect interest in Borrower,
and Guarantor will directly benefit from Lender's making the Loan to Borrower;
and
D. As a condition to making the Loan, Lender has required that
Guarantor guarantee the payment of the Non-Recourse Carveout Obligations and
performance of the obligations set forth in Section 1 below (the "GUARANTEED
OBLIGATIONS").
AGREEMENT:
NOW, THEREFORE, as a material inducement to Lender to agree to make the
Loan to Borrower, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Guarantor hereby does irrevocably
and unconditionally warrant and represent unto and covenant with Lender as
follows:
1. GUARANTY. Guarantor hereby (a) guarantees unto Lender the full
and timely payment of the amounts due, or to become due, to Lender under the
Non-Recourse Carveout Obligations and (b) agrees with Lender to pay to Lender
(i) the amounts due under the Non- Recourse Carveout Obligations within five
(5) business days from the date Lender notifies Guarantor of Borrower's
failure to pay the same, if and when the same becomes due, and at the place
specified in the Note for payment and (ii) Lender's reasonable attorneys'
fees and all court costs incurred by Lender in enforcing or protecting any of
Lender's rights, remedies or recourses hereunder. Guarantor is not hereby
guaranteeing payment of any portion of the indebtedness or performance of any
portion of the obligations under the documents evidencing, securing,
guaranteeing or executed in connection with the Loan (the "LOAN DOCUMENTS"),
other than the Non-Recourse Carveout Obligations.
<PAGE>
Loan No. 3212525
2. GUARANTOR'S REPRESENTATIONS AND WARRANTIES. Guarantor hereby
warrants and represents unto Lender as follows:
(a) that this Guaranty constitutes the legal, valid and
binding obligation of Guarantor and is fully enforceable against Guarantor in
accordance with its terms, except as may be limited by (i) bankruptcy,
insolvency or other similar laws affecting the rights of creditors generally,
and (ii) general principles of equity;
(b) that there are no legal proceedings or material claims or
demands pending against or, to the best of Guarantor's knowledge threatened
against, Guarantor or any of its assets, except as set forth on Exhibit A
attached hereto and made a part hereof;
(c) that the execution and delivery of this Guaranty and the
assumption of liability hereunder have been in all respects authorized and
approved by Guarantor and, if applicable, each constituent party or owner of
Guarantor; Guarantor has full authority and power to execute this Guaranty and
to perform its obligations hereunder; and
(d) that neither the execution nor the delivery of this
Guaranty nor the fulfillment and compliance with the provisions hereof will
conflict with, result in a breach of, constitute a default under or result in
the creation of any lien, charge, or encumbrance upon any property or assets of
Guarantor under any agreement or instrument to which Guarantor is now a party or
by which it may be bound.
3. WAIVER. Guarantor hereby waives (a) all notices of acceptance
hereof, protest, demand and dishonor, presentment, notice of nonpayment, notice
of intention to accelerate maturity, notice of acceleration of maturity and all
notices and demands of any kind now or hereafter provided for by any statute or
rule of law other than the five (5) day notice referred to in PARAGRAPH 1 above,
(b) any and all requirements that Lender institute any action or proceeding, or
exhaust or attempt to enforce any or all of Lender's right, remedies or
recourses against Borrower or anyone else or in respect of any mortgaged
property or collateral covered by any Loan Documents, or join Borrower or any
other persons liable on the Non-Recourse Carveout Obligations in any action to
enforce this Guaranty as a condition precedent to bringing an action against
Guarantor upon this Guaranty, it being expressly agreed that the liability of
Guarantor hereunder shall be primary and not secondary, (c) any defense arising
by reason of any disability, insolvency, lack of authority or power, death,
insanity, minority, dissolution or any other defense of Borrower, or any other
surety, co-maker, endorser or guarantor of the Non- Recourse Carveout
Obligations (even though rendering same void, unenforceable or otherwise
uncollectible), it being agreed that Guarantor shall remain liable hereon
regardless of whether Borrower or any other such person be found not liable
thereon for any reason, (d) all suretyship defenses of every kind and nature and
(e) any claim Guarantor might otherwise have against Lender by virtue of
Lender's invocation of any right, remedy or recourse permitted it hereunder or
under the Loan Documents. This is a guaranty of payment and not a guaranty of
collection.
4. SUBSEQUENT ACTS. Guarantor hereby agrees with Lender that (a) the
payments called for and provisions contained in the Loan Documents, including
specifically (but without limitation) the Note, may be renewed, extended,
rearranged, modified, released or canceled, (b) all or any part of any mortgaged
2
<PAGE>
Loan No. 3212525
property and collateral for the indebtedness may be released from, and any new
or additional security may be added to, the lien and security interest of the
Loan Documents, (c) any additional parties who may become personally liable for
repayment of the Note may hereafter be released from their liability hereunder
and thereon and (d) Lender may take, or delay in taking or refuse to take, any
and all action with reference to the Note and the other Loan Documents
(regardless of whether same might vary the risk or alter the rights, remedies or
recourses of Guarantor), including specifically (but without limitation) the
settlement or compromise of any amount allegedly due thereunder, all without
notice or consideration to or the consent of Guarantor, and no such acts shall
in any way release, diminish or affect the absolute nature of Guarantor's
obligations and liabilities hereunder. It is the intent of Guarantor and Lender
that such obligations and liabilities hereunder are primary, absolute and
unconditional under any and all circumstances and that, until the Non-Recourse
Carveout Obligations are fully and finally satisfied, such obligations and
liabilities shall not be discharged or released, in whole or in part, by any act
or occurrence which, but for this PARAGRAPH 4, might be deemed a legal or
equitable discharge or release of Guarantor.
5. REMEDIES CUMULATIVE. Guarantor hereby agrees with Lender that all
rights, remedies and recourses afforded to Lender by reason of this Guaranty or
otherwise are (a) separate and cumulative and may be pursued separately,
successively or concurrently, as occasion therefor shall arise, and (b)
non-exclusive and shall in no way limit or prejudice any other legal or
equitable right, remedy or recourse which Lender may have.
6. SUBORDINATION AND NO SUBROGATION. If, for any reason whatsoever,
Borrower now is or hereafter becomes indebted to Guarantor, such indebtedness
and all interest thereon, shall, at all times, be subordinate in all respects to
the Loan Documents, and Guarantor shall not be entitled to enforce or receive
payment thereof until the Non-Recourse Carveout Obligations have been fully
satisfied. Notwithstanding anything to the contrary contained in this Guaranty
or any payments made by Guarantor hereunder, Guarantor shall not have any right
of subrogation in or under the Loan Documents or to participate in any way
therein or in any right, title or interest in and to any mortgaged property or
any collateral for the Loan, all such rights of subrogation and participation,
together with any other contractual, statutory or common law right which
Guarantor may have to be reimbursed for any payments Guarantor may make to
Lender pursuant to this Guaranty, being hereby expressly waived and released.
7. LAW GOVERNING AND SEVERABILITY. This Guaranty shall be governed by
and construed in accordance with the laws of the State of New Hampshire and is
intended to be performed in accordance with, and only to the extent permitted
by, such laws. If any provision of this Guaranty or the application thereof to
any person or circumstance, for any reason and to any extent, shall be invalid
or unenforceable, neither the remainder of this Guaranty nor the application of
such provision to any other persons or circumstances shall be affected thereby,
but rather the same shall be enforced to the greatest extent permitted by law.
8. SUCCESSORS AND ASSIGNS. This Guaranty and all the terms, provisions
and conditions hereof shall be binding upon Guarantor and the Guarantor's heirs,
legal representatives, successors and assigns and shall inure to the benefit of
Lender, its successors and assigns and all subsequent holders of the Note.
3
<PAGE>
Loan No. 3212525
9. PARAGRAPH HEADINGS. The paragraph headings inserted in this Guaranty
have been included for convenience only and are not intended, and shall not be
construed, to limit or define in any way the substance of any paragraph
contained herein.
10. EFFECT OF BANKRUPTCY. This Guaranty shall continue to be effective
or reinstated, as the case may be, if at any time payment to Lender of all or
any part of the Non-Recourse Carveout Obligations is rescinded or must otherwise
be restored or refunded by Lender pursuant to any insolvency, bankruptcy,
reorganization, receivership or other debtor relief proceeding involving
Borrower. In the event that Lender must rescind or restore any payment received
by Lender in satisfaction of the Non-Recourse Carveout Obligations, as set forth
herein, any prior release or discharge of the terms of this Guaranty given to
Guarantor by Lender shall be without effect and this Guaranty shall remain in
full force and effect.
11. NOTICES. All notices hereunder shall be given at the following
address:
If to Guarantor: DM Management Company
25 Recreation Park Drive
Hingham, Massachusetts 02043
Attention: Olga Conley
If to Lender: John Hancock Real Estate Finance, Inc.
John Hancock Place, T-53
200 Clarendon Street
Boston, Massachusetts 02116
Re: Loan No. 3212525.
All notices given hereunder shall be in writing and shall be considered
properly given if delivered either personally to such other party, or sent by
nationally recognized overnight courier delivery service or by certified mail of
the United States Postal Service, postage prepaid return receipt requested,
addressed to the other party as set forth above (or to such other address or
person as either party entitled to notice may by notice to the other party
specify). Unless otherwise specified, notices shall be deemed given as follows:
(i) if delivered personally, when delivered, (ii) if delivered by nationally
recognized overnight courier delivery service, on the day following the day such
material is sent or (iii) if delivered by certified mail, on the third day after
the same is deposited in the United States Postal Service as provided above.
12. BENEFIT. Guarantor warrants and represents that Guarantor has
received, or will receive, direct or indirect benefit from the execution and
delivery of this Guaranty.
13. NO REPRESENTATIONS BY LENDER. Neither Lender nor anyone acting on
behalf of Lender has made any representation, warranty or statement to Guarantor
to induce Guarantor to execute and deliver this Guaranty.
14. APPLICATION OF FORECLOSURE PROCEEDS. In the event of any
foreclosure sales of the mortgaged property and collateral covered by the Loan
Documents, the proceeds of such sales shall be applied first to the discharge of
that portion of the indebtedness then remaining unpaid as to which
4
<PAGE>
Loan No. 3212525
Guarantor is not fully personally liable pursuant to this Guaranty, it being the
express intention of the parties that the application of the proceeds of such
foreclosure sales shall be in such a manner as not to extinguish or reduce
Guarantor's personal liability hereunder until all of the indebtedness as to
which Guarantor is not personally liable hereunder has been paid in full.
Nothing contained in this PARAGRAPH 14 shall be construed to require that Lender
foreclose the liens and security interests created in the Loan Documents as a
condition precedent to bringing an action against Guarantor upon this Guaranty,
or as an agreement that Guarantor's liability is limited to any deficiency
remaining after such a foreclosure.
15. JOINT AND SEVERAL LIABILITY. If more than one person is included in
the definition of Guarantor, the liability of all such persons hereunder shall
be joint and several.
EXECUTED effective as of the date first above written.
Witnessed by:
________________________________ DM MANAGEMENT COMPANY
/s/ Katherine Culkin By: /s/ Olga L. Conley
- ------------------------------- --------------------------------
Name: OLGA L. CONLEY
Its: CHIEF FINANCIAL OFFICER
COMMONWEALTH OF MASSACHUESETTS )
)
COUNTY OF SUFFOLK )
The foregoing instrument was acknowledged before me this 1st day of
March, 1999 by OLGA L. CONLEY, CHIEF FINANCIAL OFFICER of DM Management Company
a Delaware corporation, on behalf of said corporation.
/s/ Katherine Culkin
--------------------------------
Notary Public KATHERINE CULKIN
My Commission Expires: 5/27/05
[SEAL]
5
<PAGE>
Loan No. 3212525
EXHIBIT A
LEGAL CLAIMS
From time to time DM Management Company (the "Company") receives claims
asserting infringement by the Company of trademark and other intellectual
property rights. These claims are normally resolved without formal legal
proceedings and without payment by the Company of significant amounts of money.
The following is a summary of a recently received claim:
The Company received a letter from Williams-Sonoma, Inc. dated December
2, 1998 alleging certain infringement by the Company of
Williams-Sonoma's intellectual property rights in its Pottery Barn
catalogs and certain unethical use by the Company of Williams- Sonoma's
mailing lists. The Company believes that these claims are without
merit, and the Company's attorneys have responded on the Company's
behalf through a letter to Williams-Sonoma's attorneys dated December
22, 1998. To date the Company and its attorneys have not heard anything
further from Williams-Sonoma or its attorneys.
6
<PAGE>
<PAGE>
Exhibit 10.69
JHREF Loan No.3212525
REPLACEMENT RESERVE AGREEMENT
THIS REPLACEMENT RESERVE AGREEMENT (the "AGREEMENT") is made as of the
1st day of March, 1999 by and between BIRCH POND REALTY CORPORATION, a
Delaware corporation (doing business in the State of New Hampshire as BPRC)
("BORROWER") and JOHN HANCOCK REAL ESTATE FINANCE, INC., a Delaware corporation
("LENDER").
W I T N E S S E T H
WHEREAS, Borrower is the owner of a certain property (the "MORTGAGED
PROPERTY") located in Tilton, Belknap County, New Hampshire, more particularly
described in the Loan Documents (as hereinafter defined), and in connection
therewith, Lender has loaned Borrower the principal sum of TWELVE MILLION AND
00/100 DOLLARS ($12,000,000.00) (the "LOAN"); and
WHEREAS, the Loan is evidenced by a Note executed by Borrower as of
even date herewith in the principal amount of $12,000,000.00 payable to the
order of Lender (the "NOTE"); and
WHEREAS, the Note is secured by a Mortgage dated as of even date
herewith, which encumbers the Mortgaged Property, and by the other "LOAN
DOCUMENTS" (as such term is defined in the Note); and
WHEREAS, Borrower is required to complete certain capital replacements
to the Mortgaged Property, which are listed in SCHEDULE 1 attached hereto (the
"REPLACEMENTS"); and
WHEREAS, Lender requires, as a condition precedent to Lender's
acceptance of the Note, that Borrower make certain deposits with Lender of
certain funds, to be held, released and used as provided in this Agreement to
reimburse Borrower for the cost of completing the Replacements as hereinafter
described.
NOW, THEREFORE, in consideration of the foregoing, the covenants and
conditions contained in this Agreement and other good and valuable
consideration, the receipt and legal sufficiency of which are hereby
acknowledged, Borrower and Lender hereby agree as follows:
1. DEFINITIONS. Any capitalized term utilized herein shall have
the meaning as specified in the Mortgage, unless such term is otherwise
specifically defined herein.
2. THE DEPOSIT(S).
(A) INITIAL DEPOSIT. Concurrently with its execution of this
Agreement, Borrower has deposited with Lender the cash sum of $0.00
("INITIAL DEPOSIT").
(B) MONTHLY DEPOSITS. In addition, on each date that a
regularly scheduled payment of principal and/or interest is due under
the Note, Borrower shall deposit with
1
<PAGE>
JHREF Loan No.3212525
Lender the applicable monthly deposit ("Monthly Deposit") required as
set forth in SCHEDULE 2, attached hereto. The Initial Deposit, if any,
and the Monthly Deposits, if any, and all other funds deposited by
Borrower pursuant to this Agreement shall hereinafter be collectively
referred to as the "Replacement Reserve".
(c) LIMITATION ON MONTHLY DEPOSITS. Provided that (i) Birch
Pond Realty Corporation is the owner of the Mortgaged Property, (ii)
there is no default by Borrower under the Loan Documents or this
Agreement, and (iii) the Mortgaged Property is being properly
maintained by Borrower, then Monthly Deposits may be suspended so long
as the balance of the Replacement Reserve is at least $80,952.00 (it
being understood that if any disbursements hereunder from such
Replacement Reserve shall cause the balance to be less than $80,952, or
if such balance shall for any other reason be less than $80,952,
Monthly Deposits shall resume until the Replacement Reserve balance is
again at least $80,952).
The Replacement Reserve shall be held and released by Lender, and used
by Borrower, in accordance with the terms and conditions of this Agreement.
Lender (or a designated representative of Lender) shall have the sole right to
make withdrawal of the Replacement Reserve in accordance with the terms and
conditions of this Agreement.
3. USE OF THE REPLACEMENT RESERVE. Except as otherwise
expressly set forth herein, and provided there then exists no Event of
Default under the Loan Documents, the Replacement Reserve shall be
used to reimburse Borrower as provided herein for the reasonable costs
and expenses incurred by Borrower in completing the Replacements. This
Agreement does not constitute a guaranty of payment or performance by
Lender. Lender shall have no obligation to pay any amounts to Borrower
to the extent that any request exceeds the amount in the Replacement
Reserve. Lender shall have no obligation to authorize any disbursement
or withdrawals from the Replacement Reserve after an Event of Default.
4. PERFORMANCE OF REPLACEMENTS.
(a) Borrower shall make each Replacement when required in
order to keep the Mortgaged Property in good order and repair and in a
good, marketable condition and to keep the Mortgaged Property or any
portion thereof from deteriorating. Borrower shall complete all such
Replacements as soon as practicable following commencement of each such
Replacement.
(b) Borrower shall pay for and obtain or cause to be paid for
and obtained all permits, licenses and approvals required by all
applicable laws with regard to the Replacements, whether necessary for
commencement, completion, use or otherwise.
(c) Borrower shall perform or cause to be performed all work
in connection with the Replacements in a good and workmanlike manner,
in compliance with all applicable laws, ordinances, rules and
regulations (including, without limitation, any and all environmental
laws and laws for the handicapped and/or disabled), and with all
applicable insurance
2
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JHREF Loan No.3212525
requirements, which performance by Borrower shall be without regard to
the sufficiency of the Replacement Reserve to cover the cost of any
Replacement or the Replacements as a whole.
(d) If requested by Lender, in addition to any insurance
required under the Loan Documents, Borrower shall provide or cause to
be provided workers' compensation, builder's risk (if required by
Lender), and public liability insurance and other insurance required
under applicable laws in connection with any of the Replacements. All
such policies shall be in form and amount satisfactory to Lender. All
such policies which can be endorsed with standard mortgage clauses
making losses payable to Lender or its assigns shall be so endorsed.
(e) Borrower covenants and agrees that the Replacements shall
be constructed, installed or completed, as applicable, free and clear
of any and all liens (including mechanic's, materialman's or other
liens), claims and encumbrances whatsoever, subject to Borrower's right
to contest as specified in the Mortgage (as defined in the Note).
(f) If at any time during the term of the Loan, Lender
reasonably determines that Replacements not listed on SCHEDULE 1 are
needed to keep the Mortgaged Property in good order and repair and in a
good, marketable condition or to prevent deterioration of the Mortgaged
Property ("Additional Replacements"), Lender may send Borrower written
notice of the need for making such Additional Replacements. Borrower
shall promptly, but in no event later than thirty (30) days after the
date of such notice, commence making such Additional Replacements in
accordance with the requirements of this Agreement. Additional
Replacements shall be deemed Replacements for all purposes of this
Agreement.
5. RELEASE OF REPLACEMENT RESERVE. The following condition shall
apply to any release of the Replacement Reserve to Borrower:
(a) If Borrower shall not then be in breach of any provision
of this Agreement nor shall an Event of Default then exist under any of
the Loan Documents (and no act, event or condition shall then exist
that, with the giving of notice or the passage of time, or both, would
constitute a breach hereunder or an Event of Default under any of the
Loan Documents), then Lender, within ten (10) business days of receipt
of a disbursement request ("Disbursement Request") specifying the
amount requested and the Replacement for which reimbursement is
requested in the form attached hereto as EXHIBIT "A" shall, subject to
the terms and conditions set forth below, release to Borrower the
reimbursement requested in the Disbursement Request. It is understood
and agreed that releases of the Replacement Reserve will be permitted
on a quarterly basis, in minimum amounts of Ten Thousand Dollars
($10,000.00);
(b) Borrower shall provide evidence satisfactory to Lender
(including, without limitation, access to the Mortgaged Property to
Lender, Lender's representatives, an architect and/or engineer
specified by Lender for the purpose of an inspection of work done, at
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<PAGE>
JHREF Loan No.3212525
Borrower's expense, if requested by Lender) that the Replacement for
which the reimbursement is being requested has been completed in
accordance with this Agreement.
(c) Borrower shall submit to Lender copies of paid invoices
for the Replacements for which the reimbursement has been requested and
unconditional final lien waivers and releases conforming to the
requirements of local law from all parties furnishing materials and/or
services in connection with the Disbursement Request;
(d) Borrower shall reimburse Lender all out-of-pocket
inspection fees and/or reasonable attorney's fees and expenses incurred
by Lender in connection with the Disbursement Request;
(e) Borrower shall provide Lender with such additional
documents, certificates and affidavits as Lender may reasonably
request, including but not limited to a "date-down" endorsement to the
mortgagee's title insurance policy showing that no mechanic's or
materialman's liens or other liens (that have not been bonded off to
Lender's satisfaction) have been placed against the Mortgaged Property
since the date of recordation of the Mortgage and that the title to the
Mortgaged Property is free and clear of all liens (other than the lien
of the Mortgage and any other liens previously approved in writing by
the Lender, if any), provided, however, Lender shall not request such
"date down" endorsements more often than two (2) times per any twelve
month period, unless Lender reasonably believes that additional liens
may have been placed on the Mortgaged Property; and if required by
Lender, Borrower shall execute and deliver to Lender a certificate (in
form and substance satisfactory to Lender) that the Replacements
covered by the applicable Disbursement Request comply with, and
Borrower has fully satisfied, the terms and provisions of SECTION 4
above, that the Replacements for which a Disbursement Request has been
submitted have been fully paid for, and that no claim or claims exist
against the Borrower or against the Mortgaged Property out of which a
lien based on furnishing labor or material exists or might ripen;
(f) Except as set forth in SECTION 5(G) below, Lender shall
not be obligated to release any portion of the Replacement Reserve (i)
for the payment of the cost of an improvement or other item other than
a Replacement as set forth on SCHEDULE 1 hereto or for an Additional
Replacement, or (ii) for costs of a Replacement in excess of the costs
approved by Lender;
(g) The Replacement Reserve shall remain with Lender in
accordance with the terms of this Agreement for as long as any sums
remain due and payable to Lender under the Loan Documents. Upon the
full and final payment to Lender of all such sums, Lender shall return
to Borrower the portion of the Reserve then being held by Lender.
(h) In addition to the conditions set forth above, Lender
shall not be obligated to honor any Disbursement Request (i) in the
event of Borrower's breach of any provision of this Agreement or upon
the occurrence of an Event of Default under any of the other Loan
Documents which breach or occurrence shall be continuing, nor (ii) upon
the occurrence and
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JHREF Loan No.3212525
during the continuation of any act, event or condition then existing
that, with the giving of notice or the passage of time, or both, would
constitute a breach hereunder or an Event of Default under any of the
Loan Documents.
6. INSPECTIONS. Borrower shall permit Lender or Lender's
representatives (including an independent person such as an engineer,
architect, or inspector) to enter onto the Mortgaged Property during
normal business hours (subject to the rights of tenants under their
leases), and inspect the progress of any Replacements and all
materials being used in connection with the Replacements. Borrower
agrees to cause all contractors and subcontractors to cooperate with
Lender, Lender's representatives and such other persons described
above in connection with such inspections.
7. REMEDIES.
(a) In order to secure Borrower's repayment of the Note and
performance of all other covenants and conditions required on the part
of Borrower to be observed or performed hereunder and under the Loan
Documents, Borrower, to the extent Borrower possesses any interest in
the Replacement Reserve, hereby pledges, assigns and grants to Lender a
continuing first lien security interest in the Replacement Reserve, and
Lender is hereby given a lien upon, security title to, and a security
interest in the Replacement Reserve and all documents evidencing the
Replacement Reserve. Borrower hereby acknowledges that Lender has
complete dominion and control over the Replacement Reserve, and
Borrower shall not, without the express written consent of Lender, have
any access to or right to draw against any of the Replacement Reserve.
(b) Upon the occurrence of an Event of Default or in the event
and during the continuation of Borrower's breach of any provision of
this Agreement, Lender may terminate this Agreement and shall have all
remedies available under Article 9 of the Uniform Commercial Code,
under common law, and under any other applicable laws and, in addition,
may retain the Replacement Reserve then being held pursuant to this
Agreement and apply such Replacement Reserve in such order and in such
amounts as Lender shall elect, in its sole and absolute discretion: (i)
to repayment of the indebtedness evidenced by the Note and the Loan
Documents; (ii) toward reimbursement of Lender for any losses or
expenses (including, without limitation, legal fees) suffered or
incurred by Lender as a result of such default; and/or (iii) in order
to proceed under existing contracts or enter into contracts with third
parties to make or complete the Replacements.
In the Event of Default, Lender shall have the right, but not
the obligation, to enter onto the Mortgaged Property and perform any
and all work and labor necessary to make or complete the Replacements
and/or employ watchmen to protect the Mortgaged Property from damage.
All sums so expended by Lender shall be construed to have been paid to
Borrower and shall be secured by the Mortgage. Borrower hereby
constitutes and appoints Lender its true and lawful attorney-in-fact
with full power of substitution to complete or undertake the
Replacements in the name of the Borrower, enter into contracts for the
completion of the Replacements, incur such obligations, enforce any
contracts or agreements made by or on
5
<PAGE>
JHREF Loan No.3212525
behalf of Borrower (including the prosecution and defense of all
actions or proceedings in connection with the Replacements and the
payment, settlement, or compromise of all claims for materials and work
performed in connection with the Replacements) and do any and all
things necessary or proper to complete the Replacements. This power of
attorney shall be construed to be a power coupled with an interest
which cannot be revoked. Borrower hereby assigns to Lender all rights,
claims and causes of action Borrower may have against any person or
entities supplying labor or materials in connection with the
Replacements; provided, however, that Lender may not pursue any such
right, claim or cause of action unless an Event of Default shall have
occurred under the Loan Documents or Borrower shall have otherwise
breached any provision in this Agreement.
8. INDEMNIFICATION. Borrower shall hold harmless, indemnify and
defend Lender from and against any and all liabilities, obligations,
claims, demands, damages, penalties, causes of action, losses,
fines, costs and expenses (including without limitation reasonable
attorneys' fees and expenses) imposed upon or incurred by Lender
arising from, or in connection with, directly or indirectly, this
Agreement, except to the extent arising solely out of the willful
misconduct or gross negligence of Lender. This indemnity is in
addition to any other indemnity agreements made by Borrower to
Lender in the Mortgage, the Note or in any of the other Loan
Documents. Borrower covenants and agrees that, in performing any of
its duties under this Agreement, neither Lender nor any of its
successors or assigns shall be liable for any losses, costs or
damages which may be incurred by any of them as a result thereof,
except for any losses, costs or damages arising out of the willful
misconduct or gross negligence of such party.
9. MISCELLANEOUS.
(a) Except as otherwise expressly provided herein, in any
instance where the consent or approval of Lender is required or may be
given or where any determination, judgment or decision is to be
rendered by Lender under this Agreement, such approval and consent
shall be given or withheld in Lender's sole and absolute discretion.
(b) All notices hereunder shall be given in accordance with
the provisions of the Mortgage, except all notices hereunder to Lender
shall be given to the following address: John Hancock Real Estate
Finance, Inc., John Hancock Place, 200 Clarendon Street, Boston,
Massachusetts 02116, Attn: Mary Lou Staples, Loan Number 3212525.
(c) This Agreement shall be binding upon Borrower and its
heirs, devisees, representatives, successors and assigns, including
successors in interest of Borrower in and to all or any part of the
Mortgaged Property, and shall inure to the benefit of and may be
enforced by Lender and its heirs, successors, legal representatives,
substitutes and assigns. Borrower shall not assign any of its rights or
obligations under this Agreement.
(d) This Agreement is intended solely for the benefit of
Borrower and Lender, and no third party shall have any right or
interest in this Agreement, nor any right to enforce this Agreement
against any party hereto.
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JHREF Loan No.3212525
(e) This Agreement contains the complete and entire
understanding of the parties with respect to the matters covered and
may not be modified, amended, waived, extended, changed, discharged or
terminated orally or by any act or failure to act on the part of
Borrower and Lender, but only by an agreement in writing signed by the
party against whom the enforcement of any modification, amendment,
waiver, extension, change, discharge or termination is sought.
(f) No provision of this Agreement or action taken by Lender
pursuant hereto shall be construed as acceptance or approval by Lender
of any Replacement or an acknowledgment that any Replacement has been
completed in accordance with applicable building, zoning or other
codes, ordinances, statutes, laws, regulations or requirements of any
governmental authority. Each and every provision for the consent,
approval, inspection, review or verification by Lender hereunder is for
Lender's own purpose and benefit only, and no other party may require
that the same be given or be entitled to assume that Lender shall
refuse to make or give the same. In addition, in no event shall any
term hereof, or any action taken by Lender contemplated hereby, be
deemed to be or construed as a warranty or representation by Lender as
to the adequacy of any Replacement, nor that the same complies with
applicable laws (including, without limitation, any and all
environmental laws and laws for the handicapped and/or disabled).
(g) Borrower hereby covenants that Borrower shall not further
pledge, assign or grant a security interest or any other interest in or
to, the Replacement Reserve, or any proceeds, replacement or
substitutes thereto.
(h) No right or remedy conferred upon or reserved to Lender
under this Agreement is intended to be exclusive of any other right or
remedy, and each and every such right and remedy shall be cumulative
and concurrent and may be enforced separately, successively or
together, and may be exercised from time to time as often as may be
deemed necessary by Lender.
(i) Nothing herein or in the Loan Documents is intended to
create, nor creates, nor shall be deemed to create, a joint venture,
partnership, tenancy-in-common, or joint tenancy relationship between
Borrower and Lender, nor to grant Lender any interest in the Mortgaged
Property other than that of creditor or mortgagee.
(j) If any provisions of this Agreement shall conflict with
any provisions of the other Loan Documents regarding the Replacement
Reserve, the provisions contained in this Agreement shall control.
(k) If any term, covenant or condition of this Agreement is
held to be invalid, illegal or unenforceable in any respect, this
Agreement shall be construed without such provision.
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JHREF Loan No.3212525
(l) This Agreement shall be governed by and construed in
accordance with the laws of the State of New Hampshire and the
applicable laws of the United States of America.
(m) This Agreement may be executed in multiple counterparts,
each of which when taken together shall constitute one and the same
original.
IN WITNESS WHEREOF, Borrower and Lender have executed this Agreement as
of the date first above written.
BORROWER:
BIRCH POND REALTY CORPORATION, A
DELAWARE CORPORATION
(doing business in the State of New Hampshire
as BPRC)
By: /s/ Olga L. Conley
----------------------------------------------
Name: OLGA L. CONLEY
Title: TREASURER
LENDER:
JOHN HANCOCK REAL ESTATE FINANCE,
INC., A DELAWARE CORPORATION
By: /s/ Timothy A. Roseen
---------------------------------------------
Name: TIMOTHY A. ROSEEN
Title: VICE PRESIDENT
8
<PAGE>
JHREF Loan No.3212525
LIST OF SCHEDULES AND EXHIBITS
Schedule 1 - Replacements
Schedule 2 - Monthly Deposits
Schedule 3 - Modified Monthly Deposits
Exhibit "A" - Disbursement Request (with Annex 1)
9
<PAGE>
JHREF Loan No.3212525
SCHEDULE 1
REPLACEMENTS
UNSPECIFIED
Schedule 1-1
<PAGE>
JHREF Loan No.3212525
SCHEDULE 2
MONTHLY DEPOSITS
The amount of each monthly deposit is Three Thousand Three Hundred Seventy-Three
Dollars ($3,373.00).
Schedule 2-1
<PAGE>
JHREF Loan No.3212525
SCHEDULE 3
MODIFIED MONTHLY DEPOSITS
NONE
Schedule 3-1
<PAGE>
JHREF Loan No.3212525
EXHIBIT "A"
DISBURSEMENT REQUEST (NO. )
JHREF LOAN NO. 3212525
TO: JOHN HANCOCK REAL ESTATE FINANCE, INC. ("LENDER")
FROM: BIRCH POND REALTY CORPORATION ("BORROWER")
This Disbursement Request is submitted by Borrower in accordance with
the Replacement Reserve Agreement dated as of ___________, 199__, between
Borrower and Lender (the "AGREEMENT"). Terms used with initial capital letters
and not defined in this Disbursement Request have the meanings given them in the
Agreement.
1. Borrower hereby requests disbursement for the payment of the
Replacements (or a portion thereof) in the amounts specified below:
<TABLE>
<CAPTION>
COST OF REPLACEMENTS (include quantity, materials AMOUNT/PRICE
and labor)
<S> <C>
TOTAL DISBURSEMENT REQUESTED $_____________
</TABLE>
2. Borrower certifies, represents and warrants to Lender that all
statements, invoices, bills, costs, expenses and any other sums of money owing
with respect to the Replacements incurred on or before this date have been paid
in full in the amounts, if any, described on a line item basis on ANNEX 1
hereto. The estimated costs of completing the uncompleted Replacements as of
this date are as described on a line item basis on ANNEX 1.
3. Borrower certifies, represents and warrants to Lender that (a)
Borrower is entitled to a disbursement of the Replacement Reserve for the items
and amounts requested in Section 1 above pursuant to the Agreement; (b)
Borrower's representations and warranties made in the Loan Documents and the
Agreement are true and correct on and as of this date; (c) no Event of Default
nor any event which with the giving of notice or the lapse of time, or both,
would become an Event of Default, has occurred and (d) the Replacements listed
in Section 1 above have been fully paid for,
Exhibit A-1
<PAGE>
JHREF Loan No.3212525
and no claim or claims exist against the Borrower or against the Mortgaged
Property out of which a lien based on furnishing labor or material exists or
might ripen.
Date: ______________, 199__.
BORROWER:
By:
Name:
Title:
SWORN TO AND SUBSCRIBED BEFORE ME by ______________________, this
_______ day of ____________, 199__.
Notary Public (Seal)
Name (Print):
My Commission Expires:
Initial Approval -- Name:___________________ Date: __________________
Disbursement Approval -- Name:______________ Date: __________________
Exhibit A-2
<PAGE>
JHREF Loan No.3212525
ANNEX 1
<TABLE>
<CAPTION>
REPLACEMENTS AMOUNTS PAID
- ------------ ------------
<S> <C>
</TABLE>
Annex 1-1
<PAGE>
Exhibit 10.70
JHREF Loan No. 3212525
TENANT IMPROVEMENT AND LEASING
COMMISSIONS AGREEMENT
THIS TENANT IMPROVEMENT AND LEASING COMMISSIONS AGREEMENT (the "AGREEMENT")
is made as of the 1st day of March, 1999 by and between BIRCH POND REALTY
CORPORATION, a Delaware corporation (doing business in the State of New
Hampshire as BPRC) ("BORROWER") and JOHN HANCOCK REAL ESTATE FINANCE, INC., a
Delaware corporation ("LENDER").
W I T N E S S E T H:
WHEREAS, Borrower is the owner of a certain property (the "MORTGAGED
PROPERTY") located in Tilton, Belknap County, New Hampshire, more particularly
described in the Loan Documents (as hereinafter defined), and in connection
therewith, Lender has loaned Borrower the principal sum of TWELVE MILLION AND
00/100 DOLLARS ($12,000,000.00) (the "LOAN"); and
WHEREAS, the Loan is evidenced by a Note executed by Borrower as of even
date herewith in the principal amount of $12,000,000.00 payable to the order of
Lender (the "NOTE"); and
WHEREAS, the Note is secured by a Mortgage dated as of even date herewith,
which encumbers the Mortgaged Property, and by the other "LOAN DOCUMENTS" (as
such term is defined in the Note); and
WHEREAS, Lender requires, as a condition of the Loan, that Borrower deposit
with Lender certain funds, to be held, released and used as provided in this
Agreement to reimburse the cost of completing the Tenant Improvements and paying
for Leasing Commissions as hereinafter described.
NOW, THEREFORE, in consideration of the foregoing, the covenants and
conditions contained in this Agreement and other good and valuable
consideration, the receipt and legal sufficiency of which are hereby
acknowledged, Borrower and Lender hereby agree as follows:
1. DEFINITIONS. Any capitalized term utilized herein shall have the meaning
as specified in the Mortgage, unless such term is otherwise specifically defined
herein. For purposes of this Agreement, the following capitalized terms shall
have the meanings indicated:
(a) TENANT IMPROVEMENTS shall mean construction or modification of
improvements on or installation of fixtures or equipment in the Mortgaged
Property as required to be performed by Borrower pursuant to the terms of a
Lease (as hereinafter defined) necessary for the space, or a portion
thereof ("TENANT PREMISES") subject to such Lease to be deemed ready for
occupancy and/or use by a tenant.
(b) LEASING AGENT shall mean a licensed real estate broker in the
state where the Mortgaged Property is located who is not affiliated with
the Borrower or its principals.
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JHREF Loan No. 3212525
(c) LEASING COMMISSIONS shall mean reasonable and customary
commissions paid to a Leasing Agent pursuant to a written agreement with
such Leasing Agent under which such Leasing Agent has procured a tenant for
a Tenant Premises in connection with an Lease.
(d) LEASE shall mean a lease for space in the Mortgaged Property
(approved by the Lender if such right of approval is required by the Loan
Documents). For the purposes of this Agreement, the Lease shall be as set
forth on EXHIBIT A attached hereto.
2. THE DEPOSIT(S).
(a) INITIAL DEPOSIT. Concurrently with its execution of this
Agreement, Borrower has deposited with Lender the cash sum of Zero Dollars
($0.00) ("INITIAL DEPOSIT").
(b) MONTHLY DEPOSITS. In addition, on each date that a regularly
scheduled payment of principal and/or interest is due under the Note,
Borrower shall deposit with Lender the applicable monthly deposit ("MONTHLY
DEPOSIT") required as set forth in SCHEDULE 1, attached hereto. The Initial
Deposit, if any, and the Monthly Deposits, if any, and all other funds
deposited by Borrower pursuant to this Agreement shall hereinafter be
collectively referred to as the "Reserve".
The Reserve shall be held and released by Lender, in accordance with the
terms and conditions of this Agreement. Lender (or a designated representative
of Lender) shall have the sole right to make withdrawal of the Reserve, in
accordance with the terms and conditions of this Agreement.
3. THE RESERVE.
(a) Lender shall hold the Reserve in one or more interest bearing
accounts ("ACCOUNTS" or "ACCOUNT") invested at such financial institutions
as Lender shall select in its sole discretion, more particularly described
in 3(b) below.
(b) Any interest earned on the Account shall be for the benefit of
Borrower and shall be added to the principal balance of the Account and
disbursed in accordance with this Agreement. Lender shall not be
responsible for any losses resulting from investment of monies in the
Reserve or for obtaining any specific level or percentage of earnings on
such investment.
The Reserve deposited pursuant to Section 3(b) shall be invested by the
Lender in Accounts maintained in the name of the Lender as secured party
with respect to the Borrower in commercial or savings banks provided that
such Accounts shall at all times be with an institution insured by the
Federal Deposit Insurance Corporation to the fullest possible extent
consistent with applicable laws (currently $100,000), and further provided
that the Accounts shall be demand accounts, withdrawable at the time for
payment for Tenant Improvements or Leasing Commissions, and the funds so
obtained shall be disbursed pursuant to the terms of this Agreement.
The Account options are:
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JHREF Loan No. 3212525
X Cash Investment Account at Wachovia Bank of North Carolina,
------ Charlotte, North Carolina
Business Premier Money Market Account at Wachovia Bank of
------ North Carolina, Charlotte, North Carolina (minimum balance of
$10,000)
Account selection at the execution of this Agreement is for the life of the
Loan.
The above selected bank and any assign or successor to such bank shall
hereinafter be referred to as "BANK." Borrower acknowledges that the Bank is
hereby selected by Lender with Borrower's consent, and Borrower agrees that any
loss of funds while in the hands of Bank is at the risk of the Borrower.
Borrower further acknowledges and agrees to be fully responsible for any and all
fees charged by the Bank for the Account that is maintained therein. Lender
reserves the right in its sole discretion to move the Account to another bank in
the event the Bank fails to satisfy Lender or rating agency criteria, at which
time, Borrower may be required to choose from alternative account options.
4. USE OF THE RESERVE. The Reserve shall be held as additional security to
secure Borrower's repayment of the Note and performance of all other covenants
and conditions required on the part of Borrower to be observed or performed
hereunder and under the Loan Documents.
5. TERM; TERMINATION. The Reserve shall remain on deposit with Lender in
accordance with the terms of this Agreement for so long as any sums remain due
and payable to Lender under the Loan Documents. Upon the full and final payment
to Lender of all such sums, Lender shall return to Borrower the portion of the
Reserve then being held by Lender (including any accrued interest thereon).
6. REMEDIES.
(a) In order to secure Borrower's repayment of the Note and
performance of all other covenants and conditions required on the part of
Borrower to be observed or performed hereunder and under the Loan
Documents, Borrower, to the extent Borrower possesses any interest in the
Reserve and the Account, hereby pledges, assigns and grants to Lender a
continuing first lien security interest in the Reserve and the Account, and
Lender is hereby given a lien upon, security title to, and a security
interest in the Reserve and the Account and all documents evidencing the
Reserve and the Account. Borrower hereby acknowledges that Lender has
complete dominion and control over the Reserve and the Account, and
Borrower shall not, without the express written consent of Lender, have any
access to or right to draw against any of the Reserve or the Account.
(b) Upon the occurrence of an Event of Default or in the event and
during the continuation of Borrower's breach of any provision of this
Agreement, Lender may terminate this Agreement and shall have all remedies
available under Article 9 of the Uniform Commercial Code, under common law,
and under any other applicable laws and, in addition, may retain the
Reserve then being held pursuant to this Agreement and apply such Reserve
in such order and in such amounts as Lender shall elect, in its sole and
absolute discretion: (i) to repayment of the indebtedness evidenced by the
Note and the Loan Documents; (ii) toward reimbursement of Lender for any
losses or expenses (including, without limitation, legal fees) suffered or
incurred by Lender
3
<PAGE>
JHREF Loan No. 3212525
as a result of such default; and/or (iii) in order to proceed under
existing contracts or enter into contracts with third parties to make or
complete the Tenant Improvements.
In the Event of Default, Lender shall have the right, but not the
obligation, to enter onto the Mortgaged Property and perform any and all
work and labor necessary to make or complete the Tenant Improvements and/or
employ watchmen to protect the Mortgaged Property from damage. All sums so
expended by Lender shall be construed to have been paid to Borrower and
shall be secured by the Mortgage. Borrower hereby constitutes and appoints
Lender its true and lawful attorney-in-fact with full power of substitution
to complete or undertake the Tenant Improvements in the name of the
Borrower, enter into contracts for the completion of the Tenant
Improvements, incur such obligations, enforce any contracts or agreements
made by or on behalf of Borrower (including the prosecution and defense of
all actions or proceedings in connection with the Tenant Improvements and
the payment, settlement, or compromise of all claims for materials and work
performed in connection with the Tenant Improvements) and do any and all
things necessary or proper to complete the Tenant Improvements. This power
of attorney shall be construed to be a power coupled with an interest which
cannot be revoked. Borrower hereby assigns to Lender all rights, claims and
causes of action Borrower may have against any person or entities supplying
labor or materials in connection with the Tenant Improvements; provided,
however, that Lender may not pursue any such right, claim or cause of
action unless an Event of Default shall have occurred under the Loan
Documents or Borrower shall have otherwise breached any provision in this
Agreement.
7. INDEMNIFICATION. Borrower shall hold harmless, indemnify and defend
Lender from and against any and all liabilities, obligations, claims, demands,
damages, penalties, causes of action, losses, fines, costs and expenses
(including without limitation reasonable attorneys' fees and expenses) imposed
upon or incurred by Lender arising from, or in connection with, directly or
indirectly, this Agreement, except to the extent arising solely out of the
willful misconduct or gross negligence of Lender. This indemnity is in addition
to any other indemnity agreements made by Borrower to Lender in the Mortgage,
the Note or in any of the other Loan Documents. Borrower covenants and agrees
that, in performing any of its duties under this Agreement, neither Lender nor
any of its successors or assigns shall be liable for any losses, costs or
damages which may be incurred by any of them as a result thereof, except for any
losses, costs or damages arising out of the willful misconduct or gross
negligence of such party.
8. FEES AND COSTS. Borrower shall pay Lender at the closing of the Loan a
one time administrative fee of $500.00 for its services in administering the
Reserve. In addition, Borrower shall reimburse Lender within ten (10) days after
demand all reasonable fees, charges, costs and expenses incurred by Lender in
connection with all inspections made by Lender or Lender's representatives in
carrying out Lender's responsibility to make certain determinations under this
Agreement.
9. MISCELLANEOUS.
(a) Except as otherwise expressly provided herein, in any instance
where the consent or approval of Lender is required or may be given or
where any determination, judgment or decision is to be rendered by Lender
under this Agreement, such approval and consent shall be given or withheld
in Lender's sole and absolute discretion.
4
<PAGE>
JHREF Loan No. 3212525
(b) All notices hereunder shall be given in accordance with the
provisions of the Mortgage, except all notices hereunder to Lender shall be
given to the following address: John Hancock Real Estate Finance, Inc.,
John Hancock Place, 200 Clarendon Street, Boston, Massachusetts 02116,
Attn: Mary Lou Staples, Loan Number 3212525.
(c) This Agreement shall be binding upon Borrower and its heirs,
devisees, representatives, successors and assigns, including successors in
interest of Borrower in and to all or any part of the Mortgaged Property,
and shall inure to the benefit of and may be enforced by Lender and its
heirs, successors, legal representatives, substitutes and assigns. Borrower
shall not assign any of its rights or obligations under this Agreement.
(d) This Agreement is intended solely for the benefit of Borrower and
Lender, and no third party shall have any right or interest in this
Agreement, nor any right to enforce this Agreement against any party
hereto.
(e) This Agreement contains the complete and entire understanding of
the parties with respect to the matters covered and may not be modified,
amended, waived, extended, changed, discharged or terminated orally or by
any act or failure to act on the part of Borrower and Lender, but only by
an agreement in writing signed by the party against whom the enforcement of
any modification, amendment, waiver, extension, change, discharge or
termination is sought.
(f) No provision of this Agreement or action taken by Lender pursuant
hereto shall be construed as acceptance or approval by Lender of any Tenant
Improvement or an acknowledgment that the Tenant Improvement has been
completed in accordance with applicable building, zoning or other codes,
ordinances, statutes, laws, regulations or requirements of any governmental
authority. Each and every provision for the consent, approval, inspection,
review or verification by Lender hereunder is for Lender's own purpose and
benefit only, and no other party may require that the same be given or be
entitled to assume that Lender shall refuse to make or give the same. In
addition, in no event shall any term hereof, or any action taken by Lender
contemplated hereby, be deemed to be or construed as a warranty or
representation by Lender as to the adequacy of any Tenant Improvement, nor
that the same complies with applicable laws (including, without limitation,
any and all environmental laws and laws for the handicapped and/or
disabled).
(g) Borrower hereby covenants that Borrower shall not further pledge,
assign or grant a security interest or any other interest in or to, the
Reserve or the Account, or any proceeds, replacement or substitutes
thereto.
(h) No right or remedy conferred upon or reserved to Lender under this
Agreement is intended to be exclusive of any other right or remedy, and
each and every such right and remedy shall be cumulative and concurrent and
may be enforced separately, successively or together, and may be exercised
from time to time as often as may be deemed necessary by Lender.
(i) Nothing herein or in the Loan Documents is intended to create, nor
creates, nor shall be deemed to create, a joint venture, partnership,
tenancy-in-common, or joint tenancy
5
<PAGE>
JHREF Loan No. 3212525
relationship between Borrower and Lender, nor to grant Lender any interest
in the Mortgaged Property other than that of creditor or mortgagee.
(j) If any provisions of this Agreement shall conflict with any
provisions of the other Loan Documents regarding the Funds, the provisions
contained in this Agreement shall control.
(k) If any term, covenant or condition of this Agreement is held to be
invalid, illegal or unenforceable in any respect, this Agreement shall be
construed without such provision.
(l) This Agreement shall be governed by and construed in accordance
with the laws of the State of New Hampshire and the applicable laws of the
United States of America.
(m) This Agreement may be executed in multiple counterparts, each of
which when taken together shall constitute one and the same original.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK; SIGNATURE PAGE(S) FOLLOW(S)]
6
<PAGE>
IN WITNESS WHEREOF, Borrower and Lender have executed this Agreement as of
the date first above written.
BORROWER:
Witnessed By: BIRCH POND REALTY CORPORATION
(doing business in the State of New Hampshire
as BPRC)
By: /s/Olga L. Conley
------------------------------------------
Name: Katherine Culkin Name: Olga L. Conley
---------------------- Its: Treasurer
Borrower's Social Security or Taxpayer
Identification Number: 02-0506310
Name:
LENDER:
JOHN HANCOCK REAL ESTATE
FINANCE, INC.,
A DELAWARE CORPORATION
By: /s/ Timothy A. Roseen
------------------------------------------
Name: Timothy A. Roseen
----------------------------------------
Title: Vice President
---------------------------------------
7
<PAGE>
SCHEDULES AND EXHIBITS
Schedule 1 - Monthly Deposits
[Exhibit A - Specific Lease]
1
<PAGE>
SCHEDULE 1
MONTHLY DEPOSITS
The amount of each monthly deposit is Eight Thousand Four Hundred Dollars
($8,400.00).
Schedule 1-1
<PAGE>
SCHEDULE 3
REQUEST FOR RELEASE (NO. )
TO: JOHN HANCOCK REAL ESTATE FINANCE, INC. ("LENDER")
FROM: ("BORROWER")
This Request for Release is submitted by Borrower in accordance with the
Tenant Improvement and Leasing Commissions Agreement dated as of ,
199-, between Borrower and Lender (the "AGREEMENT"). Terms used with initial
capital letters and not defined in this Disbursement Request have the meanings
given them in the Agreement.
Borrower hereby requests disbursement for the payment of the Tenant
Improvements (or a portion thereof) in the amounts specified below:
COST OF TENANT IMPROVEMENTS (include quantity, AMOUNT/PRICE
materials and labor)
- ---------------------------------------------------- ----------------------
- ---------------------------------------------------- ----------------------
- ---------------------------------------------------- ----------------------
- ---------------------------------------------------- ----------------------
- ---------------------------------------------------- ----------------------
- ---------------------------------------------------- ----------------------
TOTAL DISBURSEMENT REQUESTED $
---------------------
1. Borrower hereby requests disbursement for the payment of leasing
commissions in the amount specified below:
AMOUNT OF LEASING COMMISSIONS LEASING AGENT
- -------------------------------------- -------------------------------------
- -------------------------------------- -------------------------------------
2. Borrower certifies, represents and warrants to Lender that all
statements, invoices, bills, costs, expenses and any other sums of money owing
with respect to the Tenant Improvement and Leasing Commissions incurred on or
before this date have been paid in full in the amounts, if any, described on
ANNEX 1 hereto. The estimated costs of completing the uncompleted Tenant
Improvements as of this date are as described on a line item basis on ANNEX 1.
Schedule 3-1
<PAGE>
3. Borrower certifies, represents and warrants to Lender that (a) Borrower
is entitled to a disbursement of the Reserve for the items and amounts requested
in Section 1 above pursuant to the Agreement; (b) Borrower's representations and
warranties made in the Loan Documents and the Agreement are true and correct on
and as of this date; (c) no Event of Default nor any event which with the giving
of notice or the lapse of time, or both, would become an Event of Default, has
occurred and (d) the Tenant Improvement and Leasing Commissions listed in
Sections 1 and 2 above have been fully paid for, and no claim or claims exist
against the Borrower or against the Mortgaged Property out of which a lien based
on a leasing commission or furnishing labor or material exists or might ripen.
Date:______________, 199___.
BORROWER:
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
SWORN TO AND SUBSCRIBED BEFORE ME by ______________________,
this________ day of_____________, 199__.
-----------------------------------------
Notary Public (Seal)
Name (Print):
----------------------------
My Commission Expires:
Initial Approval -- Name: Date:
------------------- --------------------.
Disbursement Approval -- Name: D a t e
-----------------
Schedule 3-2
<PAGE>
ANNEX 1
TENANT IMPROVEMENTS AMOUNTS PAID ESTIMATED COSTS OF
COMPLETION
LEASING COMMISSIONS AMOUNTS PAID
<PAGE>
EXHIBIT A
[SPECIFIC LEASE]
1. Lease dated March 1, 1999 between DM Management Company and Birch Pond
Realty Corporation.
Schedule 3-2
<PAGE>
Exhibit 10.71
CONSENT AGREEMENT
This Consent Agreement is made as of this 1st day of March, 1999 by
Citizens Bank of Massachusetts (the "Bank") and DM Management Company ("DM").
Whereas, the Bank originally extended financing to DM in June, 1997,
which was supplemented in October 1997 and secured at such time by a Mortgage
(the "Mortgage") on a certain parcel of land located in Tilton, New Hampshire
(the "Tilton Property");
Whereas, the Bank and DM further amended the financing extended to DM
pursuant to a Second Amended and Restated Loan Agreement dated as of March 5,
1998 ( as amended, the "Loan Agreement"), which is secured pursuant to the terms
of a Security Agreement between the Bank and DM, dated June 5, 1997 (as amended,
the "Security Agreement");
Whereas, to further secure additional financing extended by the Bank to
DM under the New Bridge Note dated March 5, 1998 (as replaced by the Replacement
New Bridge Note and the Second Replacement Bridge Note, the "Bridge Note") and
the Short Term Revolving Note dated March 5, 1998 (as replaced by the
Replacement Short Term Revolving Note and the Second Replacement Short Term
Revolving Note, the "Short Term Revolving Note"), DM entered into the Amended
Bridge Mortgage on March 5, 1998;
Whereas, the Amended Bridge Mortgage was further amended by the Second
Amendment to Bridge Mortgage on September 4, 1998 (the Mortgage, the Amended
Bridge Mortgage and the Second Amendment to Bridge Mortgage are referred to
herein collectively as the "Mortgages"; the documents referred to above with the
other documents executed in connection with such documents are referred to
herein as the "Loan Documents");
Whereas, DM desires to transfer the Tilton Property to its subsidiary,
Birchpond Realty Corporation ("Birchpond"), which will obtain financing from
John Hancock Real Estate Finance, Inc. ("Hancock");
Now, therefore, in consideration of the premises, the Bank and DM agree
as follows:
1. Contingent upon its receipt of payment in full of all amounts owed
under the Bridge Note and the Short Term Revolving Note, the Bank hereby
consents to the transfer of the Tilton Property to Birchpond and agrees to
execute and deliver one or more releases of the Mortgages. Such transfer shall
not constitute a breach of any term or provision of the Loan Agreement, the
Security Agreement, or any other agreement between the Bank and DM.
2. The Bank hereby consents to DM's guaranty of the Non-Recourse
Covenant Obligations of Birchpond as defined in the Mortgage Note from Birchpond
to Hancock of even date herewith in the principal sum of $12,000,000, as more
fully set forth in the attached Guaranty Agreement, and agrees that such
guaranty shall not constitute a breach of any term or provision of
<PAGE>
the Loan Agreement, the Security Agreement or any other agreement between the
Bank and DM. The Bank also consents to DM's execution, delivery and performance
of an Indemnification Agreement with Hancock and Birchpond pursuant to which DM
will indemnify Hancock with respect to the certain liabilities arising under
environmental laws, as more fully set forth in the attached Indemnification
Agreement, and agrees that such indemnification shall not constitute a breach of
any term or provision of the Loan Agreement, the Security Agreement or any other
agreement between the Bank and DM.
3. Except as modified by the above paragraphs, in all other respects
the Loan Documents remain in full force and effect between the parties in
accordance with their terms and DM is not aware of any default by either party
thereunder.
In witness whereof, the Bank and DM have executed this Consent under
seal as of the date first set forth above.
CITIZENS BANK OF MASSACHUSETTS
By: /s/ Lori B. Leeth
-----------------------------------
Title: SVP
DM MANAGEMENT COMPANY
By: /s/ Olga L. Conley
-----------------------------------
Title: CHIEF FINANCIAL OFFICER
<PAGE>
EXHIBIT
23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in these registration statements
of DM Management Company and subsidiary on Form S-8 (File Nos. 33-71266,
33-71776, 33-72166, 33-86982, 333-03845, 333-42183, 333-53915 and 333-53917)
of our reports dated February 5, 1999, except for Note D, as to which the
date is March 1, 1999, on our audits of the consolidated financial statements
and financial statement schedule of DM Management Company and subsidiary as
of December 26, 1998 and December 27, 1997 and for each of the two years in
the period ended December 26, 1998, the six month period ended December 28,
1996 and the twelve month period ended June 29, 1996, which reports are
included in this Annual Report on Form 10-K.
PricewaterhouseCoopers LLP
Boston, Massachusetts
March 24, 1999
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S CONSOLIDATED BALANCE SHEET AT DECEMBER 26, 1998 AND FROM THE
CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 26, 1998
CONTAINED IN THE COMPANY'S ANNUAL REPORT OF FORM 10-K FOR THE YEAR ENDED
DECEMBER 26, 1998.
</LEGEND>
<CIK> 0000910721
<NAME> DM MANAGEMENT COMPANY
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-26-1998
<PERIOD-START> DEC-28-1997
<PERIOD-END> DEC-26-1998
<CASH> 19,996
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 26,847
<CURRENT-ASSETS> 62,187
<PP&E> 47,485
<DEPRECIATION> 0
<TOTAL-ASSETS> 115,492
<CURRENT-LIABILITIES> 51,996
<BONDS> 9,900
0
0
<COMMON> 96
<OTHER-SE> 53,500
<TOTAL-LIABILITY-AND-EQUITY> 115,492
<SALES> 218,730
<TOTAL-REVENUES> 218,730
<CGS> 97,870
<TOTAL-COSTS> 141,713
<OTHER-EXPENSES> 63,762
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (519)
<INCOME-PRETAX> 13,774
<INCOME-TAX> 5,372
<INCOME-CONTINUING> 8,402
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,402
<EPS-PRIMARY> 0.89
<EPS-DILUTED> 0.81
</TABLE>
