FORM 10-KSB
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
[x] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended September 30, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from N/A to ____
Commission file #33-72880
GLENGATE APPAREL, INC.
(Exact Name of Registrant as Specified in its Charter)
New Jersey 22-3266971
(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)
207 Sheffield Street, Mountainside, New Jersey 07092
(Address of principal executive offices) (Zip Code)
Registrant's telephone No. including area code: (908) 518-0006
Securities registered pursuant to Section 12(b) of the Exchange Act:
None
(Title of class)
Securities registered pursuant to Section 12(g) of the Exchange Act:
None
(Title of class)
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 and Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the Registrant
was required to file such report), and (2) has been subject to such filing
requirement for the past 90 days. Yes X No __
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-B is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-K SB [ X] NONE
Issuer's Revenue for the fiscal year ended September 30, 1996: $ 6.2 million
The aggregate market value of the 3,613,433 shares of common stock held by non
affiliates of the Registrant as of December 5, 1996, was $4,289,145 based upon
the closing bid price of such shares as listed in the over the counter market.
Indicate the number of shares outstanding of each of the Registrant's classes of
common stock, as of December 5, 1996: $.001 par value, 8,113,932
Documents incorporated by reference
Incorporated in Part III of this Form 10-KSB: Proxy Statement to be furnished to
security holders for the fiscal year ended September 30,1996
Transitional Small Business Disclosure format Yes __ No X
<PAGE>
GlenGate Apparel, Inc.
Annual Report on Form 10-KSB
Table Of Contents
Item Page
Part I
1 Description of Business .................................... 3
2 Description of Property .................................... 5
3 Legal Proceedings .................................... 5
4 Submission of Matters to a Vote of Security Holders ........ 5
Part II
5 Market for Common Stock, Equity and Related
Stockholder Matters ................................. 6
6 Management's Discussion and Analysis of Financial
Condition and Plan of Operation .......................7
7 Financial Statements and Supplementary Data ................. 8
8 Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure....................8
Part III
9 Directors, Executive Officers, Promoters and
Control Persons; Compliance with
Section 16(a) of the Exchange Act .....................8
10 Executive Compensation .......................................8
11 Security Ownership of Certain Beneficial Owners
and Management .......................................9
12 Certain Relationships and Related Transactions................9
13 Exhibits and Reports on Form 8-K............................. 9
<PAGE>
PART I
ITEM 1- Description of Business
General
GlenGate Apparel, Inc., a New Jersey corporation, was formed on November 8,
1993. The Company is engaged in the design and production of golf apparel
marketed under the GlenGate label and sold primarily to public and private golf
course pro shops and resorts domestically through regional sales vice presidents
and independent sales representatives and internationally through licensed
distributors.
Design and Manufacturing
The Company designs and contracts for the design of classic golf-style garments
with contemporary influences with a view toward developing and maintaining
consumer recognition and loyalty across product lines from season to season. The
Company contracts with third parties to manufacture its lines of apparel. The
Company exhibits at international industry shows and presents two seasonal lines
of clothing which include men's knit cotton shirts, sweaters, slacks, shorts,
jackets and headwear. All items in each line are sold separately.
The Company staffs its design team with both Company and independent designers
who receive direction from the Company's sales, marketing and production staffs.
Product planning meetings occur on a regular basis to review the status of each
line and to discuss adjustments in line composition, fabrication, selection,
product mix and manufacturing. In addition, members of the design team attend
the industry's principal trade shows during each design cycle to discuss and
consult with customers concerning current retail trends. The design process for
each line is an approximate six-month process of styling, coloring, fabrication
of samples and selection of sewing techniques.
The Company's design and production team consists of six employees with
extensive experience in the apparel industry. The activities of these six
employees include management of the design and production process, sourcing,
merchandising and quality control. The merchandise manager is a graduate of the
Parson's School of Design in New York city with over seven years international
experience with men's clothing retailers and manufacturers. The production
assistants have been extensively involved with the athletic apparel field for
many years with emphasis on quality and production control.
The Company additionally utilizes the services of an independent design studio
located in New York City specializing in men's sportswear. The studio has
expertise in design, trends, color and patterns, style and product engineering
and packaging.
The Company has entered into purchase agreements with third party domestic
manufacturers to cut and sew the Company's products according to the Company's
specifications. The Company has no plans to own any manufacturing facilities.
The Company currently uses ten or more independent facilities to manufacture its
products. One such facility currently accounts for approximately 40% of such
manufacturing on an annual basis and two other facilities each account for
approximately 25%. No other facility accounts for more than 8% annually. The
Company has generally followed a policy of diversifying production among such
manufacturers while maintaining sufficient production at each to remain a
significant purchaser from each manufacturer. The Company believes that, while
the loss of any one manufacturer would prove detrimental, given the availability
of alternative sources of supply, such a loss and its impact on the Company's
business would likely be limited in scope and duration.
The Company has chosen to produce its primary product lines within the United
States where the Company believes that the availability of suppliers for both
raw and finished product is sufficient to cover its needs.
The Company's production staff coordinates product engineering (including
pattern and sample making), negotiates price and quantity with its cutting and
sewing contractors, establishes production scheduling and performs quality
control. The production staff also coordinates inspection of fabric as well as
sample testing of fabric for shrinkage, strength and color fastness. The
production staff additionally oversees production at the facilities of each of
the cutting and sewing contractors as well as the Company's contract embroidery
operations to monitor continuing compliance with the Company's specifications.
<PAGE>
The Company has implemented its original plan to custom embroider logos of
country clubs and resorts primarily utilizing the services of independent
embroidery contractors. The Company has recently acquired embroidery equipment
for in house embroidery operation at the warehouse and distribution center. The
implementation of the operation, is initially on a limited basis with plans to
expand the operation over the next two years. Final inspection, packing and
shipping of the Company's products is performed by the Company's employees at
its warehouse and distribution center. The Company has implemented a
computerized software system to monitor inventory levels of finished goods.
Sales and Marketing
Management believes that the Company's ability to attain and maintain brand name
recognition of the GlenGate label will be a critical element in enabling the
Company to successfully continue to participate in the growing golf industry.
The Company estimates that there are approximately 14,000 public and private
golf clubs and resorts with golf courses in the United States. The Company has
currently targeted approximately 3,500 of these clubs and resorts as customers.
The Company has either made sales to or received purchase orders from
approximately 1,400 clubs and resorts in the targeted group. No single customer
accounted for more than 3 % of the Company's net sales.
The Company enlists the services of 28 independent sales representatives who
sell on a commission basis. These independent representatives are responsible
for certain targeted accounts in a given territory. Sales management, consisting
of three regional sales vice-presidents and a customer service network of five
others directs and implements the sales and marketing plans and programs adopted
by the Company.
The Company has begun test marketing studies for acceptance of GlenGate Apparel
in the international market. Test marketing has successfully begun in Canada,
where there are over 1,200 clubs and resorts and to the prime resort facilities
in Bermuda.
The Company introduces new product at the two major golf industry trade shows
held January and September each year in Orlando, Florida and Las Vegas, Nevada.
Feedback received from the shows in the form of orders, comments, and booth
attendance is used to redefine the product lines and corresponding forecasts.
The Company has enlisted three touring golf professionals (Tom Purtzer, Donnie
Hammond and Ed Humenik) and other persons both inside and outside of the golf
industry (including Peter Kostis (a director of the Company), Don Criqui and
Dave Brown) to endorse and wear GlenGate apparel. In addition, the Company has
enlisted approximately 12 home club golf professionals to help promote the
Company's products. The Company has oral arrangements with such golf
professionals and other persons under which they have been compensated solely by
the granting of stock options. The Company may attempt to obtain additional
endorsement arrangements in the future with other touring golf professionals,
home club professionals and other notables.
The Company assists its pro shop customers with sales incentives and merchandise
assistance programs, including the placement of advertisements in golfing
publications and by the use of touring golf professionals.
The Company's sales terms generally require payment from customers within 30
days after shipment. The Company does not sell goods on consignment or accept
returns of purchased merchandise other than damaged goods or goods delivered
beyond the specified delivery date.
Competition
Golf apparel sold at the pro shop and resort level is not dominated by any
single company and is highly competitive, both within the United States and
abroad. The Company views Ashworth, Polo/Ralph Lauren, Izod and Sport-Haley as
its most significant competitors. Recent entries into the market by other
competitors offering comparable product may intensify competitive pressures.
Many of the existing competitors have longer operating histories, better name
recognition and greater financial, marketing and other resources than the
Company. The Company also competes with other high quality manufacturers of
men's leisurewear sold at the department and specialty store level. Tommy
Hilfiger, a well known sportswear manufacturer recently entered the golf apparel
market at the pro shop and department store level.
There can be no assurances that the Company will be able to obtain new and
maintain existing market share in the face of competition.
<PAGE>
Raw Materials
The Company's primary products are made of natural fibers. The selection of raw
materials is based on quality, consistency, availability, flexibility in meeting
changing production requirements and pricing. The Company's manufacturers
generally obtain the materials to manufacture the product lines in accordance
with the Company's design specifications.
Trademarks
The Company sells and markets its products under the GlenGate trademark. The
Company obtained registration of the GlenGate name with the United States Patent
and Trademark Office in 1994. Registration on the Principal Register constitutes
constructive nationwide notice of the registrant's claim of ownership of the
trademark and creates a refutable presumption of the registrant's exclusive
right to the trademark. Although the Company believes that it will have the
exclusive right to use the trademark for the United States and overseas markets
in which it is granted registration, there can be no assurance that the Company
will be able successfully to protect the trademark from conflicting uses or
claims of ownership.
Seasonality
The Company's business is seasonal, with the highest sales volume expected in
the period from February through July and the lowest sales volume in the period
from November through January. In the golf apparel business, inventories are at
their highest from February through April, as finished goods are accumulated for
Spring and Summer sales. The Company's cash requirements are highest during this
period to enable the Company to support the accumulation.
Employees
As of December 1, 1996, the Company had 35 full-time employees.
ITEM 2 - Description of Property
Property
The Company leases approximately 14,000 square feet of space in Mountainside,
New Jersey for use as its principal office, production, warehouse and
distribution facility. The lease provides for an annual base rental of $76,000
for the year ending December 31, 1997. when the existing lease will expire The
Company is also obligated to pay taxes, insurance and maintenance expenses.
Management believes that the existing facilities will be adequate for its needs
through 1997.
ITEM 3 - Legal Proceedings
At September 30,.1996, the Company was not a party to any material legal
proceedings .
ITEM 4 - Submission of Matters to a Vote of Security Holders
No matter was submitted to a vote of the Company's security holders during the
fourth quarter of the fiscal year covered by this report, either by proxy
solicitation or otherwise.
PART II
ITEM 5 - Market for Common Stock, Equity and Related Stockholder Matters
The Company's common stock is quoted on the over-the-counter market under the
symbol "GLNN." On August 19,1994 the Company completed its initial public
offering of 493,740 Units, each consisting of five shares of common stock and
one Warrant entitling the holder thereof to purchase one share of common stock.
In July 1995, the Company called for the redemption of all warrants outstanding
as of August 28,1995 at $.05 each. Through August 28,1995, 473,200 warrants were
exercised and 4,700 warrants were redeemed. The remaining 15,840 warrants not
redeemed were canceled on August 17,1996. <PAGE>
In June 1995, the Company commenced proceedings for the private placement of up
to 750,000 shares of common stock at $2.00 per share through August 10,1995. In
July 1995, the Company received $288,400 for 144,200 shares pursuant to that
private placement.
In May 1996, the Company commenced proceedings for the private placement of up
to 1,500,000 shares of common stock at $1.00 per share. In September 1996, the
Company received $1,250,000 for 1,250,000 shares and a warrant to purchase an
additional 85,000 shares at $1.00 through September 30,1997.
The following table sets forth the high and low bid quotations for the common
stock for the periods indicated. The quotations in the over-the-counter market
reflect inter-dealer prices without retail markup, markdown or commissions and
may not necessarily represent actual transactions.
<TABLE>
<CAPTION>
Period High Low
<S> <C> <C>
August 15, 1994 - September 30, 1994 $1.00 $1.00
Fiscal Year 1995
October 1, 1994 - December 31, 1994 $1.75 $1.25
January 1, 1995 - March 31, 1995 $3.00 $1.25
April 1, 1995 - June 30, 1995 $4.25 $2.25
July 1,1995 - September 30, 1995 $3.87 $1.43
Fiscal Year 1996
October 1, 1995 - December 31, 1995 $2.625 $1.625
January 1, 1996 - March 31, 1996 $2.125 $1.375
April 1, 1996 - June 30, 1996 $2.625 $1.25
July 1,1996 - September 30, 1996 $2.125 $1.25
</TABLE>
As of December 5,1996, there were approximately 500 holders of record of the
common stock and the closing bid price for the common stock was $1.187
The Company has never paid any cash dividends on its common stock. The Company
anticipates that for the foreseeable future any earnings will be retained for
use in the Company's business and no cash dividends will be paid to
stockholders.
ITEM - 6 Management's Discussion and Analysis of Financial Condition and
Plan of Operation
Results of Operations
Comparison of Fiscal Years Ended September 30, 1996 and 1995.
The results for the fiscal years ended September 30, 1996 and September 30,1995
are not comparable. Prior to March 1995 the Company was in the developmental
stage.
During fiscal 1996 the Company had sales of approximately $6,230,000 an increase
of almost 89% when compared to the fiscal 1995 period. This sales increase was
due in part to the fact that there were seven months of operation in fiscal
1995. However, during the 1996 year, the customer base increased by almost 55%
from about 900 accounts to almost 1,400. During the fourteen weeks from August
to December 5, 1996 this trend has continued. During that period the Company had
booked approximately $4,100,000 in orders, an increase of almost 32% when
compared to the $3,100,000 during the comparable period last year. This
continuing increase in sales, order position and customer base, demonstrates the
acceptance of the product at the pro shop level and supports management's belief
in a continuing market penetration and acceptance of GlenGate product.
Cost of goods sold as a percentage of sales, was reduced to approximately 67% ,
an improvement of almost 3% when compared to 70% in fiscal 1995. The Company
continues to reduce its exposure to unusual costs of embroidery, irregulars and
other manufacturing problems. In October, the Company completed installation and
testing of an in house pilot embroidery operation to further reduce certain
costs associated with independent contract embroidery. <PAGE>
Warehousing, design, selling and administrative expenses as a percentage of
sales were reduced to approximately 53% , a reduction of almost 19% when
compared to 72% in fiscal 1995. An increase in the amount spent for warehousing,
design selling and administrative expense was primarily attributable to
increases in personnel and facility charges to accommodate the increases in
sales and order processing volume during the year.
Interest expenses increased by over $134,000 during the year ended September
30,1966. The increase resulted from the Company utilizing it's credit facility
to support almost $3,000,000 in sales and order increases during the fiscal year
ending September 1996.
The Company had an operating loss of $1,246,470 for the year ended September 30,
1996 and a net loss of $1,449,291 ($.22 per share) for the same period. The loss
can be attributed to a lack of sufficient sales to support the infrastructure
required and in place for future planned growth of the Company. Operations for
the fiscal year ended September 30,1995 are not comparable since the Company
remained in the developmental stage until March 1995 when it first began
shipping products to its customers.
Liquidity and Capital Resources
The Company continues to experience significant growth since emerging from a
developmental stage in March 1995. The proceeds from the Company's initial
public offering in 1994 and warrant and private placement offering in 1995 and
1996 have been used for the development of the Company's business as set forth
in the prospectus and private placement documents relating thereto.
Growth in sales and the need to continue to fund continuing losses during the
developmental stage increased the Company's working capital requirements. The
Company had cash used in operating activities during the fiscal year of
$2,628,100 resulting primarily from a net loss of $1,449,300 and increases in
inventory and accounts receivable of $1,368,200. Cash requirements for operating
activities during the fiscal year ended September 30, 1996 were funded primarily
by financing activities that provided additional net cash of $2,767,500
resulting from borrowings under the Company's credit facilities of $1,272,800,
$1,657,500 in net proceeds from the sale of common stock and the exercise of
options.
While the Company currently anticipates having net positive cash flow from
operations through 1997, interim working capital requirements are expected to be
funded utilizing availability under the credit facility agreement signed in
September 1996. The credit facility currently provides availability limited by a
collateral formula calculated as the overall lesser of $3,000,000 or 85% of
qualified accounts receivable and interim temporary financing available between
October 1, 1996 and April 30, 1997 of 50% of eligible finished goods inventory
to a maximum of $1,500,000. Peak inventory positions are required during the
October-April period to support spring purchases. Interest accrues at a variable
rate equal to 1 1/2% in excess of the bank's prime lending rate (8 1/4 % as of
September 30,1996). As of September 30, 1996, the Company had drawn down
approximately $1,598,000 under the facility and approximately $400,000 was
available based on the borrowing formula at that date.
As of September 30, 1996, the Company had purchase commitments with its
suppliers in the amount of approximately $2,425,000.
In the event the Company requires funds in addition to those available under the
current (or an amended) credit facility, management believes that such funds
will be available from offerings of common stock (if any), from the exercise of
stock options (if any) and additional loans from stockholders (as necessary) in
sufficient amounts to permit it to conduct its operations. Future events,
including the problems, expenses, difficulties and delays encountered in
connection with a new business and the competitive environment in which the
Company operates, may lead to cost overruns that could make the Company's
sources of working capital insufficient to fund the Company's planned
operations. No assurance can be given that the Company will be able to obtain
such funds or that the terms thereof will be acceptable to the Company. <PAGE>
The Company has currently outstanding $190,000 in notes in favor of certain of
its officers. The funds were advanced at varying times during the developmental
stages of the Company to satisfy working capital needs. The notes are
subordinate to all creditors of the Company. The notes mature with interest at a
rate per annum of 1 1/2% over prime to be paid April 15, 1997. The Company may
be unable to rely on its directors, officers and principal stockholders for
additional loans in the future.
ITEM 7 - Financial Statements
The financial information required by this Item are submitted beginning on Page
F-1
ITEM 8 - Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None
PART III
ITEM 9 - Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act
For information with respect to the Company's directors, see the section
entitled " Election of Directors" in the Company's Proxy Statement to be filed
in connection with the Annual Meeting of Stockholders of the Company to be held
on February 14,1997 which section is incorporated herein by reference.
ITEM 10- Executive Compensation
For information with respect to the Company's executive compensation, see the
section entitled "Executive Compensation" in the Company's Proxy Statement to be
filed in connection with the Annual Meeting of Stockholders of the Company to be
held on February 14,1997 which section is incorporated herein by reference.
ITEM 11 - Security Ownership of Certain Beneficial Owners and Management
For information with respect to the Company's security ownership of certain
beneficial owners and management, see the section entitled "Security Ownership
of Directors and Officers" and "Principal Stockholders" in the Company's Proxy
Statement to be filed in connection with the Annual Meeting of Stockholders of
the Company to be held on February 14,1997 which section is incorporated herein
by reference.
ITEM 12 - Certain Relationships and Related Transactions
For information with respect to the Company's relationships and related
transactions with certain directors, see the section entitled "Election of
Directors" in the Company's Proxy Statement to be filed in connection with the
Annual Meeting of Stockholders of the Company to be held on February 14,1997
which section is incorporated herein by reference.
ITEM 13 - Exhibits and Reports on Form 8 -K
Reports on form 8-K
No reports on Form 8-K were filed by the Company during the last quarter of the
period covered by this report.
<PAGE>
Exhibits
*3.1 Certificate of Incorporation of the Company
*3.2 Certificate of Amendment to the Certificate of Incorporation
3.3 Amended By-Laws of the Company
*4.1 Specimen certificate for common stock, $.001 par value
4.2 Form of warrant to purchase common stock issuable to The Koffman Group
*4.3 Form of Subordinated Note in favor of George Gatesy
*4.4 Form of Subordinated Note in favor of Richard Martinelli
10.1 Restricted stockholders agreement
10.2 Financing and Security Agreement
10.3 Lease dated October 4,1996
*10.11 GlenGate Apparel, Inc. 1994 Stock Option Plan
- -----------------------------------------------------------------------------
*Icorporated herein by reference to the identically numbered Exhibit in the
Company's Registration Statement on Form SB-2, Registration No. 33-7280 - NY
INDEX TO FINANCIAL STATEMENTS
Page
Report of Independent Certified Public Accountants....................F-1
Balance Sheets as of September 30, 1996 and 1995......................F-2
Statements of Operations for the years ended
September 30, 1996 and 1995........................................F-3
Statements of Stockholders' Equity for the years ended
September 30, 1996 and 1995........................................F-4
Statements of Cash Flows for the years ended September 30,
1996 and 1995......................................................F-5
Notes to Financial Statements..................................F-6 - F-10
<PAGE>
F-1
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Stockholders
GlenGate Apparel Inc.
Mountainside, New Jersey
We have audited the accompanying balance sheets of GlenGate Apparel Inc. as of
September 30, 1996 and 1995, and the related statements of operations,
stockholders' equity, and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of GlenGate Apparel Inc. as of
September 30, 1996 and 1995, and the results of its operations and its cash
flows for the years then ended, in conformity with generally accepted accounting
principles.
BDO Seidman, LLP
Woodbridge, New Jersey
November 25, 1996
<PAGE>
F-2
GLENGATE APPAREL INC.
BALANCE SHEETS
--------------
<TABLE>
<CAPTION>
September 30, September 30,
1996 1995
-------------- -------------
ASSETS (Note 5)
<S> <C> <C>
Current:
Cash $ 34,917 $10,038
Accounts receivable, net of allowance for doubtful
accounts of $173,515 and $28,765 1,848,507 805,337
Inventories (Note 3) 1,206,000 894,035
Prepaid and other current assets 314,968 191,280
-------------- -------------
TOTAL CURRENT ASSETS 3,404,392 1,900,690
Property and equipment, net of accumulated
depreciation and amortization (Note 4) 257,530 218,510
Organizational costs, net of accumulated
amortization of $5,945 and $3,889, respectively 4,457 6,513
Security deposits and other assets 31,460 9,460
-------------- -------------
TOTAL ASSETS $3,697,839 $2,135,173
============== =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current:
Notes payable - bank (Note 5) $1,597,918 $325,109
Current portion of equipment notes payable (Note 5) 5,127 13,527
Subordinated notes payable to stockholders (Note 6) 190,000 300,496
Accounts payable and accrued expenses 490,915 268,465
-------------- -------------
TOTAL CURRENT LIABILITIES 2,283,960 907,597
Equipment notes payable less current portion (Note 5) 10,617 32,543
-------------- -------------
2,294,577 940,140
Commitments and contingencies (Notes 7 and 9)
STOCKHOLDERS' EQUITY (Note 9):
Common stock at cost $.001 par value - 10,000,000
shares authorized; 8,113,932 and 6,284,600
issued and outstanding 8,114 6,285
Additional paid-in capital 4,668,139 3,012,448
Accumulated deficit (3,272,991) (1,823,700)
-------------- -------------
TOTAL STOCKHOLDERS' EQUITY 1,403,262 1,195,033
-------------- -------------
TOTAL STOCKHOLDERS' EQUITY AND LIABILITIES $3,697,839 $2,135,173
============== =============
</TABLE>
See accompanying notes to financial statements
<PAGE>
F-3
GLENGATE APPAREL INC.
STATEMENTS OF OPERATIONS
------------------------
<TABLE>
<CAPTION>
Year Ended September Year Ended September
30, 1996 30, 1995
-------------------- --------------------
<S> <C> <C>
Sales $6,229,728 $3,293,295
Cost of sales 4,150,138 2,303,850
-------------------- --------------------
GROSS PROFIT 2,079,590 989,445
-------------------- --------------------
Operating expenses:
Warehousing 318,516 214,580
Design 431,590 137,140
Selling 1,378,456 1,036,709
General and administrative 1,197,498 994,685
-------------------- --------------------
TOTAL OPERATING EXPENSES 3,326,060 2,383,114
-------------------- --------------------
Operating loss (1,246,470) (1,393,669)
Net interest expense, including
interest income of $37,023 in
1995 (202,821) (31,853)
-------------------- --------------------
Net Loss $(1,449,291) $(1,425,522)
==================== ===================
Loss per share $(.22) $(.25)
==================== ====================
Weighted average number of common
shares outstanding 6,605,941 5,609,113
==================== ====================
</TABLE>
<PAGE>
F-4
GLENGATE APPAREL INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
----------------------------------
<TABLE>
<CAPTION>
Common Stock Additional Treasury Accumu- Total
----------------- Paid-In Stock lated Stockholders'
Shares Amount Capital Deficit Equity
-------- ------ --------- -------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, SEPTEMBER
30, 1994 6,218,700 $6,219 $2,146,040 (700) $(398,178) $1,753,381
Cancellation of
treasury stock (700,000) (700) - 700 - -
Options exercised 148,500 149 148,351 - - 148,500
Warrants exercised
and redeemed 473,200 473 567,132 - - 567,605
Private placements
of common stock 144,200 144 288,256 - - 288,400
Offerings and
registration costs - - (137,331) - - (137,331)
Net loss - - - - (1,425,522) (1,425,522)
-------- ------ ---------- ------- ---------- -----------
Balance, September
30, 1995 6,284,600 6,285 3,012,448 - (1,823,700) 1,195,033
Options exercised 554,332 554 557,361 - - 557,915
Private placements
of common
stock 1,275,000 1,275 1,248,725 - - 1,250,000
Offering costs,
net - - (150,395) - - (150,395)
Net loss - - - - (1,449,291)(1,449,291)
--------- ------- ---------- ------ --------- -----------
Balance, September
30, 1996 8,113,932 $8,114 $4,668,139 - $(3,272,991) $1,403,262
========= ======= ========== ====== ========= ===========
</TABLE>
<PAGE>
F-5
GLENGATE APPAREL INC.
STATEMENTS OF CASH FLOWS
------------------------
<TABLE>
<CAPTION>
Year Ended Year Ended
September September
30, 1996 30, 1995
----------- ------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(1,449,291) $(1,425,522)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 77,578 31,811
Provision for doubtful accounts 13,051 28,765
Changes in assets and liabilities:
Inventories (311,965) (894,035)
Accounts receivable (1,056,221) (834,102)
Prepaid and other current assets (123,688) (105,806)
Accounts payable and accrued expenses 222,450 122,215
------------ ------------
Net cash used in operating activities (2,628,086) (3,076,674)
------------ ------------
Cash flows from investing activities:
Purchases of property and equipment (114,542) (244,612)
Maturity (purchase) of certificate of deposit - 200,000
Increase in security deposits and other assets - (9,460)
------------ ------------
Net cash used in investing activities (114,542) (54,072)
------------ ------------
Cash flows from financing activities:
Payment of financing cost (22,000) -
Proceeds from sale of common stock 1,250,000 288,400
Proceeds from options exercised 557,915 148,500
Proceeds from warrants exercised 567,605
Payment of offering and registration costs (150,395) (137,331)
Payment of organization costs -
Borrowings on equipment notes payable 46,070
Payment of equipment notes (30,326)
Net borrowings under line of credit 1,272,809 325,109
Repayments (payments) of borrowings from
stockholders (110,496) 89,751
-------------- ------------
Net cash provided by financing activities 2,767,507 1,328,104
-------------- ------------
Net increase (decrease) in cash 24,879 (1,802,642)
Cash, beginning of period 10,038 1,812,680
-------------- ------------
Cash, end of period $34,917 $10,038
============== ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid $196,216 $67,293
============== ============
</TABLE>
See accompanying notes to financial statements
<PAGE>
F-6
GLENGATE APPAREL INC.
NOTES TO FINANCIAL STATEMENTS
-----------------------------
NOTE 1 - ORGANIZATION
- ---------------------
GlenGate Apparel, Inc. (the "Company") was incorporated in the State of New
Jersey on November 8, 1993. On or about March 15, 1995, the Company commenced
operations as a result of having completed the first sales of its products. The
Company designs, contracts to have made, and markets men's golf apparel. The
Company's primary products consist of men's knit cotton shirts and sweaters and
woven cotton slacks, shorts and headwear. Customers of the Company are primarily
public and private golf course pro shops and resorts in the United States.
NOTE 2 - SUMMARY OF ACCOUNTING POLICIES
- ---------------------------------------
CASH AND CASH EQUIVALENTS
For statement of cash flow purposes, the Company considers all highly liquid
investments with an original maturity of three months or less to be cash
equivalents. The Company did not have any cash equivalents at September 30, 1996
and 1995.
REVENUE RECOGNITION
Revenue is recognized upon shipment of goods to customers.
INVENTORIES
Inventories are valued at the lower of cost or market with cost determined by
the first-in, first-out (FIFO) method.
PROPERTY AND EQUIPMENT
Property and equipment is recorded at cost. Depreciation and amortization are
calculated on a straight line basis over the estimated useful lives of the
related assets.
ORGANIZATIONAL COSTS
Costs incurred to organize and incorporate the Company have been capitalized.
Amortization is calculated on a straight line basis over a sixty month period.
LOSS PER SHARE
Loss per share is computed on the basis of the weighted average number of common
shares outstanding during the period. The assumed conversion of common stock
equivalents has not been included because the effect would be anti-dilutive.
SIGNIFICANT RISKS AND UNCERTAINTIES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
<PAGE>
F-7
GLENGATE APPAREL INC.
NOTES TO FINANCIAL STATEMENTS
-----------------------------
EFFECT OF NEW ACCOUNTING PRONOUNCEMENTS
In March 1995, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standard ("SFAS") No. 121 "Accounting for
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of."
The Company believes that this pronouncement will not have a material impact on
the Company's results of operations and financial condition. In October 1995,
the FASB issued SFAS No. 123 "Accounting for Stock-Based Compensation." The
Company is currently studying SFAS No. 123, but does not currently plan to adopt
the fair value based method of accounting for stock options or similar equity
instruments. According-ly, the adoption of SFAS No. 123 is not expected to have
a material impact on the Company's results of operations or financial condition.
NOTE 3 - INVENTORIES
- --------------------
Inventories as of September 30 are summarized as follows:
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
Raw Materials $36,345 $84,675
Finished goods 1,139,655 788,510
Supplies 30,000 20,850
------------ ------------
$1,206,000 $894,035
============ ============
</TABLE>
NOTE 4 - PROPERTY AND EQUIPMENT
- -------------------------------
Property and equipment consists of the following as of September 30:
<TABLE>
<CAPTION>
Estimated
useful
lives
1996 1995 (years)
------------ ------------ ----------
<S> <C> <C> <C>
Leasehold improvements $37,718 $21,312 3
Machinery and equipment 153,311 148,811 4 - 5
Furniture and fixtures 90,020 48,867 3 - 5
Computer equipment and software 82,483 30,000 5
------------ ------------
363,532 248,990
Less: Accumulated depreciation
and amortization 106,002 30,480
------------ ------------
$257,530 $218,510
============ ============
</TABLE>
NOTE 5 - NOTES PAYABLE
- ----------------------
In September 1996, the Company entered into a two year revolving loan and
security agreement (the "Agreement") with a financial institution. Availability
under the Agreement, is limited by a collateral formula calculated as the lesser
of $3,000,000 or 85% of qualified accounts receivable. The lender also agreed to
advance additional funds to the Company between October 1, 1996 and April 30,
1997 based on a collateral formula calculated as the lesser of $750,000 or 50%
of eligible Finished Goods Inventory. Interest accrues at a variable rate equal
to 1 1/2% in excess of the bank's prime lending rate (8 1/4% as of September 30,
1996). Outstanding borrowings are collateralized by substantially all the assets
of the Company. Under the terms of the Agreement, the Company is also required
to meet various financial covenants, as defined.
<PAGE>
F-8
GLENGATE APRAREL INC.
NOTES TO FINANCIAL STATEMENTS
-----------------------------
The average amount outstanding under the Agreement during the year ended
September 30, 1996 was approximately $1,212,000 at a weighted average interest
rate of 9 3/4%.
The fair value of the debt approximates the recorded value based on the
borrowing rates currently available for loans with similar terms and maturities.
Additionally, the Company has outstanding borrowings under an equipment note
payable aggregating $15,744 as of September 30, 1996. Annual maturities of the
equipment note are $5,127 - September 30, 1997, $5,127 - September 30, 1998,
$5,490 - September 30, 1999.
NOTE 6 - NOTES PAYABLE - STOCKHOLDERS
- -------------------------------------
The Company has currently outstanding $190,000 in notes in favor of certain of
its officers. The funds were advanced at varying times during the developmental
stages of the Company to satisfy working capital needs. The notes are
subordinate to all creditors of the Company. The notes mature with interest at a
rate per annum of 1 1/2% over Prime to be paid April 15, 1997. The Company may
be unable to rely on its directors, officers and principal stockholders for
additional loans in the future.
NOTE 7 - COMMITMENTS
- --------------------
As of September 30, 1996, the Company has purchase commitments for merchandise
of approximately $2,425,000.
In January 1995, the Company entered into a three year operating lease agreement
with a three year renewal option for office and warehouse facilities under which
the future minimum annual rentals as of September 30, 1996 are as follows:
<TABLE>
<S> <C>
1997 $76,000
1998 19,000
==========
$95,000
==========
</TABLE>
Rent expense was $70,408 and $54,969 for the years ended September 30, 1996 and
1995, respectively.
NOTE 8 - INCOME TAXES
- ---------------------
The Company adopted the Provisions of Statement of Financial Accounting
Standards No. 109 "Accounting for Income Taxes" ("SFAS 109") effective November
8, 1993 (inception). SFAS 109 requires a company to recognize deferred tax
liabilities and assets for the expected future tax consequences of events that
have been recognized in a company's financial statements or tax returns. Under
this method, deferred tax liabilities and assets are determined based on the
difference between the financial statement carrying amounts and tax bases of
assets and liabilities using enacted tax rates in effect in the years in which
the differences are expected to reverse.
At September 30, 1996, the Company had net operating loss carryforwards of
approximately $3,089,000, which expire through 2011, and temporary differences
related primarily to inventory costs capitalized for tax purposes totalling
approximately $235,000. The deferred tax asset related to the net operating loss
carryforwards and temporary differences amounted to approximately $1,330,000 and
is fully offset by a valuation allowance of the same amount.
<PAGE>
F-9
GLENGATE APPAREL INC.
NOTES TO FINANCIAL STATEMENTS
-----------------------------
NOTE 9 - STOCKHOLDERS' EQUITY
- -----------------------------
a) Redeemable Common Stock Warrants
As part of the Company's initial public offering completed on August 15,
1994, 493,740 redeemable common stock purchase warrants were issued. The
warrants were originally exercisable at $1.20 per share through August 17,
1995 and, thereafter, at $1.40 per share through August 17, 1996. In July
1995, the Company called for the redemption of all warrants outstanding as
of August 28, 1995 at $.05 each and extended the exercise price of $1.20
through that date. Through August 28, 1995, 473,200 warrants were exercised
and 4,700 warrants were redeemed. The remaining 15,840 warrants not
redeemed as of September 30, 1995 were canceled on August 17, 1996.
b) Common Stock Options
In December 1994 the Company's Board of Directors approved the adoption of
the 1994 Stock Option Plan ("the "Plan) to provide incentives for selected
persons to promote the financial success and progress of the Company. The
Plan provides for the Compensation Committee or such other committee that
the Board may appoint to administer the Plan. The Plan provides for the
reservation of 2,500,000 shares of common stock for issuance upon the
exercise of granted options.
The following is a summary of the common stock options granted, canceled or
exercised for the period October 1, 1994 through September 30, 1996.
<TABLE>
<CAPTION>
Shares Exercise price per share
----------- ----------------------------
<S> <C> <C>
Outstanding -
September 30, 1994 -
Granted 2,222,500 $1.00 to $3.00
Canceled (140,000) $1.00
Exercised (148,500) $1.00
-----------
Outstanding -
September 30, 1995 1,934,000 $1.00 to $2.50
Granted 476,000 $1.25 to $1.625
Canceled (119,668) $1.00 to $2.50
Exercised (554,332) $1.00 to $1.25
-----------
Outstanding -
September 30, 1996 1,736,000 $1.00 to $2.50
===========
</TABLE>
As of September 30, 1996, 1,021,850 outstanding stock options were
exercisable at $1.00, 218,834 at $1.25, and 154,000 at prices between
$1.125 and $2.50. In fiscal 1997, 211,650 outstanding stock options become
exercisable at $1.00 and 70,334 become exercisable at prices between $1.25
and $2.00. In fiscal 1998, 59,332 outstanding stock options become
exercisable at prices between $1.25 and $1.50. The options expire at
various dates throught fiscal 2005 and all were granted at or above quoted
market value.
c) Stockholders Agreement
In April 1995, the Company and the founding stockholders (the
"Stockholders") negotiated a stockholders' agreement which requires the
Company to purchase the shares held by a Stockholder upon the death of that
Stockholder, at estimated fair market value (as defined in the new
stockholders' agreement), but limited to the extent of any insurance
proceeds payable to the Company as a result of the Stockholder's death.
<PAGE>
F-10
GLENGATE APPAREL INC.
NOTES TO FINANCIAL STATEMENTS
-----------------------------
d) Private Placements of Common Stock
In June 1995, the Company commenced proceedings for the private placement
of up to 750,000 shares of common stock at $2.00 per share through August
10, 1995. In July 1995, the Company received $288,400 for 144,200 shares
pursuant to that private placement.
In September 1996, the Company completed the private placement of 1,275,000
shares of common stock for gross proceeds of $1,250,000. In connection with
this private placement, the Company granted warrants to purchase an
additional 85,000 shares at $1.00 exercisable through September 30, 1997.
NOTE 10 - CONCENTRATION OF CREDIT RISK
- --------------------------------------
Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist principally of trade accounts receivable.
The Company performs ongoing credit evaluations of its customers' financial
condition to mitigate its credit risk.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
GlenGate Apparel, Inc.
BY:_____________________________
Dated: December 19, 1996 George J. Gatesy, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
Signature Title Date
_______________________ President, Director December 19,1996
George J. Gatesy (principal executive officer)
_______________________ Treasurer and Secretary December 19, 1996
Norman Britman (principal financial and
accounting officer)
_______________________ Director December 19, 1996
Peter J. Kostis
_______________________ Director December 19 ,1996
Richard J. Martinelli
_______________________ Director December 19 ,1996
Robert J. Munch
_______________________ Director December 19 ,1996
Jeffrey Koffman
_______________________ Director December 19 ,1996
Martin Koffman
AMENDED AND RESTATED
BYLAWS
OF
GLENGATE APPAREL, INC.
ARTICLE I
OFFICES
The registered office of Glengate Apparel, Inc. (the
"Corporation") in the State of New Jersey is 207 Sheffield Street, Mountainside,
New Jersey 07092. The name of the Corporation's registered agent at such address
is George J. Gatesy. The Corporation may also have such other offices at such
other places, within or without the State of New Jersey, as the Board of
Directors of the Corporation (the "Board") may from time to time designate or
the business of the Corporation may require.
ARTICLE II
SHAREHOLDERS
Section 1. Annual Meeting: The annual meeting of shareholders
for the election of directors and the transaction of any other business shall be
held on such date, in such city and state and at such time and place as may be
designated by the Board and set forth in the notice of such meeting. At the
annual meeting any business may be transacted and any corporate action may be
taken, whether stated in the notice of meeting or not, except as otherwise
expressly provided by law, the Certificate of Incorporation and the amendments
thereto or these Bylaws.
Section 2. Special Meetings: Special meetings of the
shareholders for any purpose may be called at any time with the unanimous
consent of the Board. At the direction of the Board any officer of the
Corporation may call a special meeting. Special meetings shall be held at such
place or places within or without the State of New Jersey as shall from time to
time be designated by the Board and stated in the notice of such meeting. At a
special meeting no business shall be transacted and no corporate action shall be
taken other than that stated in the notice of the meeting.
Section 3. Notice of Meetings: Written notice of the time and
place of any shareholder's meeting, whether annual or special, shall be given to
each shareholder entitled to vote thereat, by personal delivery or by mailing
the same to him at his address as the same appears upon the records of the
Corporation at least ten (10) days but not more than sixty (60) days before the
day of the meeting. Notice of any adjourned meeting need not be given except by
announcement at the meeting so adjourned, unless otherwise ordered in connection
with such adjournment. Such further notice, if any, shall be given as may be
required by law.
Section 4. Quorum: Any number of shareholders, together
holding at least a majority of the shares of the Corporation issued and
outstanding and entitled to vote, who shall be present in person or represented
by proxy at any meeting duly called, shall constitute a quorum for the
transaction of all business, except as otherwise provided by law, by the
Certificate of Incorporation and the amendments thereto or by these Bylaws.
Section 5. Adjournment of Meetings: If less than a quorum
shall attend at the time for which a meeting shall have been called, the meeting
may adjourn from time to time by a majority vote of the shareholders present or
represented by proxy and entitled to vote without notice other than by
announcement at the meeting until a quorum shall attend. Any meeting at which a
quorum is present may also be adjourned in like manner and for such time or upon
such call as may be determined by a majority vote of the shareholders present or
represented by proxy and entitled to vote. At any adjourned meeting at which a
quorum shall be present, any business may be transacted and any corporate action
may be taken which might have been transacted at the meeting as originally
called.
<PAGE>
Section 6. Voting List: The Secretary shall prepare and make,
at least ten (10) days before every election of directors, a complete list of
the shareholders entitled to vote, arranged in alphabetical order and showing
the address of each shareholder and the number of shares of each shareholder.
Such list shall be open at a designated place within the city where the election
is to be held for said ten (10) days, to the examination of any shareholder, and
shall be produced and kept at the time and place of election during the whole
time thereof, and subject to the inspection of any shareholder who may be
present.
Section 7. Voting: Each shareholder entitled to vote at any
meeting may vote either in person or by proxy, but no proxy shall be voted on or
after eleven (11) months from its date, unless said proxy provides for a longer
period. Except as provided in the Corporation's Certificate of Incorporation and
the amendments thereto, each shareholder entitled to vote shall at every meeting
of the shareholders be entitled to one vote for each share registered in his
name on the record of shareholders. At all meetings of shareholders all matters,
except as otherwise provided by law or the Certificate of Incorporation and the
amendments thereto, shall be determined by the affirmative vote of the majority
of shares present in person or by proxy and entitled to vote on the subject
matter. Voting at meetings of shareholders need not be by written ballot.
Section 8. Record Date of Shareholders: The Board is
authorized to fix in advance a date not exceeding sixty (60) days nor less than
ten (10) days preceding the date of any meeting of shareholders, or the date for
the payment of any dividend, or the date for the allotment of rights, or the
date when any change or conversion or exchange of shares shall go into effect,
or a date in connection with obtaining the consent of shareholders for any
purposes, as a record date for the determination of the shareholders entitled to
notice of, and to vote at, any such meeting, and any adjournment thereof, or
entitled to receive payment of any such dividend, or to any such allotment of
rights, or to exercise the rights in respect of any such change, conversion or
exchange of shares, or to give such consent, and, in such case, such
shareholders and only such shareholders as shall be shareholders of record on
the date so fixed shall be entitled to such notice of, and to vote at, such
meeting, and any adjournment thereof, or to receive payment of such dividend, or
to receive such allotment of rights, or to exercise such rights, or to give such
consent, as the case may be, notwithstanding any transfer of any shares on the
books of the Corporation, after such record date fixed as aforesaid.
Section 9. Conduct of Meetings: The Board shall designate a
chairman for its regular or special meetings (for purposes of this Section 9
such designated chairman shall hereinafter be referred to as the "Chairman of
the Board"). The Chairman of the Board or the President or any Vice President
designated by the Chairman of the Board, shall preside at all regular or special
meetings of shareholders. To the maximum extent permitted by law, such presiding
person shall have the power to set procedural rules, including but not limited
to rules respecting the time allotted to shareholders to speak, governing all
aspects of the conduct of such meetings. The Secretary of the Corporation, or in
the Secretary's absence an Assistant Secretary, shall act as secretary of every
meeting, but if neither the Secretary nor an Assistant Secretary is present, the
presiding officer of the meeting shall appoint any person present to act as
secretary of the meeting.
Section 10. Action Without Meeting: Any action required or
permitted to be taken at any annual or special meeting of shareholders may be
taken without a meeting, without prior notice and without a vote, if a consent
or consents in writing, setting forth the action so taken, shall be signed by
the holders of outstanding shares having not less than the minimum number of
votes that would be necessary to authorize or take such action at a meeting at
which all shares entitled to vote thereon were present and voted and shall be
delivered to the Corporation by delivery to its registered office in the State
of New Jersey, its principal place of business, or an officer or agent of the
Corporation having custody of the book in which proceedings of meetings of
shareholders are recorded. Delivery made to the Corporation's registered office
shall be by hand or by certified or registered mail, return receipt requested.
Prompt notice of the taking of the corporate action without a meeting by less
than unanimous written consent shall be given to those shareholders who have not
consented in writing.
<PAGE>
ARTICLE III
DIRECTORS
Section 1. Number and Term of Office: The Board shall consist
of seven (7) directors divided into three classes, each class having a three
year term of office such that the term of one class shall expire each year. The
directors need not be shareholders.
Section 2. Election of Directors: The directors shall be
elected by the shareholders at the annual meeting of shareholders.
Section 3. Duration of Office: The directors chosen at any
annual meeting shall, except as hereinafter provided, hold office until the
expiration of their term of office and until their successors are elected and
qualify.
Section 4. Removal and Resignation of Directors: Any director
may be removed from the Board with or without cause, by the holders of a
majority of the shares entitled to vote, either by written consent or consents
or at any special meeting of the shareholders called for that purpose, and the
office of such director shall forthwith become vacant.
Any director may resign at any time. Such resignation shall
take effect at the time specified therein, and if no time be specified, at the
time of its receipt by the President or Secretary. The acceptance of a
resignation shall not be necessary to make it effective, unless so specified
therein.
Section 5. Filling of Vacancies: Any vacancy among the
directors, occurring from any cause whatsoever, may be filled by a unanimous
affirmative vote of the remaining directors, provided however, that the
shareholders removing any director may at the same meeting fill the vacancy
caused by such removal, and provided further, that if the directors fail to fill
any such vacancy, the shareholders may at any special meeting called for that
purpose fill such vacancy. In case of any increase in the number of directors,
the additional directors may be elected by the directors in office before such
increase.
Any person elected to fill a vacancy shall hold office,
subject to the right of removal as hereinbefore provided, until the next annual
election and until his successor is elected and qualifies.
Section 6. Regular Meetings. The Board shall hold an annual
meeting for the purpose of organization and the transaction of any business
immediately after the annual meeting of the shareholders, provided a quorum of
directors is present. Other regular meetings may be held at such times as may be
determined from time to time by resolution of the Board.
Section 7. Special Meetings. Special meetings of the Board
may be called with the unanimous consent of the Board. The Board may appoint
any officer of the Corporation to call a special meeting.
Section 8. Notice and Place of Meetings: Meetings of the Board
may be held at the principal office of the Corporation, or at such other place
as shall be stated in the notice of such meeting. Notice of any special meeting,
and, except as the Board may otherwise determine by resolution, notice of any
regular meeting also, shall be mailed to each director addressed to him at his
residence or usual place of business at least five (5) days before the date on
which the meeting is to be held, or if sent to him at such place by telegraph or
cable, or delivered personally or by telephone, not later than four (4) days
before the day on which the meeting is to be held.
Section 9. Business Transacted at Meetings, etc.: Any business
may be transacted and any corporate action may be taken at any regular or
special meeting of the Board at which a quorum shall be present, whether such
business or proposed action be stated in the notice of such meeting or not,
unless special notice of such business or proposed action shall be required by
law.
<PAGE>
Section 10. Quorum: A majority of the Board at any time in
office shall constitute a quorum. At any meeting at which a quorum is present,
the vote of a majority of the members present shall be the act of the Board
unless the act of a greater number is specifically required by law or by the
Certificate of Incorporation and the amendments thereto or these Bylaws. The
members of the Board shall act only as the Board and the individual members
thereof shall not have any powers as such.
Section 11. Compensation: Unless otherwise restricted by law,
the Certificate of Incorporation and the amendments thereto or these Bylaws, the
Board shall have the authority to fix compensation of directors. The directors
shall be reimbursed for their expenses, if any, of attendance at each meeting of
the Board and may be paid either a fixed sum for attendance at each meeting of
the Board and/or a stated salary as director. Members of the committees of the
Board may be allowed like compensation. Nothing herein contained shall preclude
any director from serving the Corporation in any other capacity, as an officer,
agent or otherwise, and receiving compensation therefor.
Section 12. Action Without a Meeting: Any action required or
permitted to be taken at any meeting of the Board or any committee thereof, may
be taken without a meeting if all members of the Board or committee, as the case
may be, consent thereto in writing, and the writing or writings are filed with
the minutes of the proceedings of the Directors or committee.
Section 13. Meetings Through Use of Communications Equipment:
Members of the Board, or any committee designated by the Board, shall, except as
otherwise provided by law, the Certificate of Incorporation and the amendments
thereto or these Bylaws, have the power to participate in a meeting of the
Board, or any committee, by means of a conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and such participation shall constitute presence in
person at the meeting.
<PAGE>
ARTICLE IV
COMMITTEES
Section 1. Executive Committee: The Board may, by resolution
passed by all of the Board, designate two or more of their number to constitute
an Executive Committee to hold office at the pleasure of the Board, which
Committee shall, during the intervals between meetings of the Board, have and
exercise all of the powers of the Board in the management of the business and
affairs of the Corporation, subject only to such restrictions or limitations as
the Board may from time to time specify, or as limited by the New Jersey
Business Corporation Act (the "Act"), and shall have power to authorize the seal
of the Corporation to be affixed to all papers which may require it.
Any member of the Executive Committee may be removed at any
time, with or without cause, by a resolution of the entire Board.
Any person ceasing to be a director shall ipso facto cease to
be a member of the Executive Committee.
Any vacancy in the Executive Committee occurring from any
cause whatsoever may be filled from among the directors by a resolution of all
of the Board.
Section 2. Other Committees: Other committees, whose members
need not be directors, may be appointed by the Board or the Executive Committee,
which committees shall consist of one or more members and shall hold office for
such time and have such powers and perform such duties as may from time to time
be assigned to them by the Board or the Executive Committee.
Any member of such a committee may be removed at any time,
with or without cause, by the Board or the Executive Committee. Any vacancy in a
committee occurring from any reason whatsoever may be filed by the Board or the
Executive Committee.
Section 3. Resignation: Any member of a committee may resign
at any time. Such resignation shall be made in writing and shall take effect at
the time specified therein, or, if no time be specified, at the time of its
receipt by the President or Secretary. The acceptance of a resignation shall not
be necessary to make it effective unless so specified therein.
Section 4. Quorum: A majority of the members of a committee
shall constitute a quorum. The act of a majority of the members of a committee
present at any meeting at which a quorum is present shall be the act of such
committee. The members of a committee shall act only as a committee, and the
individual members thereof shall not have any powers as such.
Section 5. Record of Proceedings, etc.: Each committee shall
keep a record of its acts and proceedings, and shall report the same to the
Board when and as required by the Board.
Section 6. Organization, Meetings, Notices, etc.: A committee
may hold its meetings at the principal office of the Corporation, or at any
other place which a majority of the committee may at any time agree upon. Each
committee may make such rules as it may deem expedient for the regulation and
carrying on of its meetings and proceedings. Unless otherwise ordered by the
Executive Committee, any notice of a meeting of such committee may be given by
the Secretary of the Corporation or by the chairman of the committee and shall
be sufficiently given if mailed to each member at his residence or usual place
of business at least five (5) days before the day on which the meeting is to be
held, or if sent to him at such place by telegraph or cable, or delivered
personally or by telephone not later then four (4) days before the day on which
the meeting is to be held.
Section 7. Compensation. The members of any committee
shall be entitled to such compensation as may be allowed them by resolution
of the Board.
<PAGE>
ARTICLE V
OFFICERS
Section 1. Number: The officers of the Corporation shall be a
President, one or more Vice Presidents, a Secretary and a Treasurer, and such
other officers as may be appointed in accordance with the provisions of Section
3 of this Article V. The Board in its discretion may also elect a Chairman of
the Board.
Section 2. Election, Term of Office and Qualifications: The
officers, except as provided in Section 3 of this Article V, shall be chosen by
the Board. Each such officer shall, except as herein otherwise provided, hold
office until his successor shall have been chosen and shall qualify. Except as
otherwise provided by law, any number of offices may be held by the same person.
Section 3. Other Officers: Other officers, including one or
more additional vice-presidents, assistant secretaries or assistant treasurers,
may from time to time be appointed by the Board, which other officers shall have
such powers and perform such duties as may be assigned to them by the Board or
the officer or committee appointing them.
Section 4. Removal of Officers: Subject to the provisions of
the Certificate of Incorporation and the amendments thereto, any officer of the
Corporation may be removed from office, with or without cause, by a vote of all
of the members of the Board.
Section 5. Resignation: Any officer of the Corporation may
resign at any time. Such resignation shall be in writing and shall take effect
at the time specified therein, and if no time be specified, at the time of its
receipt by the President or Secretary. The acceptance of a resignation shall not
be necessary in order to make it effective, unless so specified therein.
Section 6. Filling of Vacancies: Subject to the provisions of
the Certificate of Incorporation and the amendments thereto, a vacancy in any
office shall be filled by the Board or by the authority appointing the
predecessor in such office.
Section 7. Compensation. The compensation of the officers
shall be fixed by the Board, or by any committee upon whom power in that regard
may be conferred by the Board.
Section 8. Chairman of the Board of Directors. The Chairman of
the Board of Directors shall be a director and shall preside at all meetings of
the Board at which he shall be present, and shall have such power and perform
such additional duties as may from time to time be assigned to him by the Board.
Section 9. President: The President shall, when present,
preside at all meetings of the shareholders and, in the absence of the Chairman
of the Board, at meetings of the Board. He shall have power to call special
meetings of the shareholders or of the Board or of the Executive Committee at
any time. He shall be the chief executive officer of the Corporation, and shall
have the general direction of the business, affairs and property of the
Corporation, and of its several officers, and shall have and exercise all such
powers and discharge such duties as usually pertain to the office of President.
Section 10. Vice Presidents: The Vice Presidents, or any of
them, shall, subject to the direction of the Board, at the request of the
President or in his absence, or in case of his inability to perform his duties
from any cause, perform the duties of the President, and, when so acting, shall
have all the powers of, and be subject to all restrictions upon, the President.
The Vice Presidents shall also perform such other duties as may be assigned to
them by the Board, and the Board may determine the order of priority among them.
<PAGE>
Section 11. Secretary: The Secretary shall perform such
duties as are incident to the office of Secretary, or as may from time to time
be assigned to him by the Board, or as are prescribed by these Bylaws.
Section 12. Assistant Secretaries: The Assistant Secretary, if
there be one, or, if there are more than one, the Assistant Secretaries in the
order determined by the President or the Board, shall, in the absence or
disability of the Secretary, perform such duties and exercise such powers as are
incident to the office of Secretary, or as may from time to time be assigned to
him by the President or Board, or as prescribed by these Bylaws.
Section 13. Treasurer: The Treasurer shall perform such
duties and have powers as are incident to the office of Treasurer or which
may be assigned to him by the Board.
Section 14. Assistant Treasurers: The Assistant Treasurer, if
there be one, or, if there are more than one, the Assistant Treasurers in the
order determined by the President or the Board, shall, in the absence or
disability of the Treasurer, perform such duties and exercise such powers as are
incident to the office of Treasurer, or as may from time to time be assigned to
him by the President or Board, or as prescribed by these Bylaws.
<PAGE>
ARTICLE VI
SHARES
Section 1. Issue of Share Certificates: Share certificates
shall be in such form as shall be approved by the Board. They shall be numbered
in the order of their issue and shall be signed by the Chairman of the Board,
the President or one of the Vice Presidents, and the Secretary or an Assistant
Secretary or the Treasurer or an Assistant Treasurer, and the seal of the
Corporation or a facsimile thereof shall be impressed or affixed or reproduced
thereon; provided, however, that where such certificates are signed by a
transfer agent or an assistant transfer agent or by a transfer clerk acting on
behalf of the Corporation and a registrar, the signature of any such Chairman of
the Board, President, Vice President, Secretary, Assistant Secretary, Treasurer
or Assistant Treasurer may be facsimile. In case any officer or officers who
shall have signed, or whose facsimile signature or signatures shall have been
used on any such certificate or certificates shall cease to be such officer or
officers of the Corporation, whether because of death, resignation or otherwise,
before such certificate or certificates shall have been delivered by the
Corporation, such certificate or certificates may nevertheless be adopted by the
Corporation and be issued and delivered as though the person or persons who
signed such certificate or certificates, or whose facsimile signature or
signatures shall have been used thereon have not ceased to be such officer or
officers of the Corporation.
Section 2. Registration and Transfer of Shares: The name of
each person owning a share of the Corporation shall be entered on the books of
the Corporation together with the number of shares held by him, the numbers of
the certificates covering such shares and the dates of issue of such
certificates. The shares of the Corporation shall be transferable on the books
of the Corporation by the holders thereof in person, or by their duly authorized
attorneys or legal representatives, on surrender and cancellation of
certificates for a like number of shares, accompanied by an assignment or power
of transfer endorsed thereon or attached thereto, duly executed, and with such
proof of the authenticity of the signature as the Corporation or its agents may
reasonably require. A record shall be made of each transfer.
The Board may make other and further rules and regulations
concerning the transfer and registration of share certificates and may appoint a
transfer agent or registrar or both and may require all share certificates to
bear the signature of either or both.
Section 3. Lost, Destroyed and Mutilated Certificates: The
holder of any shares of the Corporation shall immediately notify the Corporation
of any loss, theft, destruction or mutilation of the certificates therefor. The
Corporation may issue a new share certificate in the place of any certificate
theretofore issued by it alleged to have been lost, stolen or destroyed, and the
Board may, in its discretion, require the owner of the lost, stolen or destroyed
certificate, or his legal representatives, to give the Corporation a bond, in
such sum not exceeding double the value of the shares and with such surety or
sureties as they may require, to indemnify it against any claim that may be made
against it by reason of the issue of such new certificate and against all other
liability in the premises, or may remit such owner to such remedy or remedies as
he may have under the laws of the State of New Jersey.
ARTICLE VII
DIVIDENDS, SURPLUS, ETC.
The Board shall have power to fix and vary the amount to be
set aside or reserved as working capital of the Corporation, or as reserves, or
for other proper purposes of the Corporation, and, subject to the requirements
of the Certificate of Incorporation and all amendments thereto, to determine
whether any part of the surplus or net profits of the Corporation shall be
declared as dividends and paid to the holders of shares entitled thereto, and to
fix the date or dates for the payment of dividends.
ARTICLE VIII
INDEMNIFICATION
The Corporation shall indemnify any director, officer,
employee or agent of the Corporation, or other person, to the fullest extent
permitted by law.
<PAGE>
ARTICLE IX
MISCELLANEOUS PROVISIONS
Section 1. Fiscal Year: The fiscal year of the Corporation
shall commence on the first day of October of each year.
Section 2. Corporate Seal: The corporate seal shall be in such
form as approved by the Board and may be altered at their pleasure. The
corporate seal may be used by causing it or a facsimile thereof to be impressed
or affixed or reproduced or otherwise.
Section 3. Notices: Except as otherwise expressly provided,
any notice required by these Bylaws to be given shall be sufficient if given by
depositing the same in a post office or letter box in a sealed postpaid envelope
addressed to the person entitled thereto at his address, as the same appears
upon the books of the Corporation, or by delivery by overnight courier, hand
delivery or facsimile to such person at such addresses; and such notice shall be
deemed to be given at the time it is mailed, hand delivered or faxed.
Section 4. Waiver of Notice: Any shareholder or director may
at any time, by writing or by telegraph or by cable, waive any notice required
to be given under these Bylaws, and if any shareholder or director shall be
present at any meeting, his presence shall constitute a waiver of such notice.
Section 5. Checks, Drafts, etc.: All checks, drafts or other
orders for the payment of money, notes or other evidences of indebtedness issued
in the name of the Corporation, shall be signed by such officer or officers,
agent or agents of the Corporation, and in such manner, as shall from time to
time be designated by resolution of the Board.
Section 6. Deposits: All funds of the Corporation shall be
deposited from time to time to the credit of the Corporation in such bank or
banks, trust companies or other depositories as the Board may select, and, for
the purpose of such deposit, checks, drafts, warrants and other orders for the
payment of money which are payable to the order of the Corporation, may be
endorsed for deposit, assigned and delivered by any officer of the Corporation,
or by such agents of the Corporation as the Board or the President may authorize
for that purpose.
Section 7. Voting Shares of Other Corporations: Except as
otherwise ordered by the Board or an Executive Committee, the President or the
Treasurer shall have full power and authority on behalf of the Corporation to
attend and to act and to vote at any meeting of the shareholders of any
corporation of which the Corporation is a shareholder or at any meeting of the
partners of a partnership of which the Corporation is a partner and to execute a
proxy to any other person to represent the Corporation at any such meeting, and
at any such meeting the President or the Treasurer or the holder of any such
proxy, as the case may be, shall possess and may exercise any and all rights and
powers incident to ownership of such shares or partnership interest and which,
as owner thereof, the Corporation might have possessed and exercised if present.
The Board or an Executive Committee may from time to time confer like powers
upon any other person or persons.
ARTICLE X
AMENDMENTS
The Board shall have the power to make, rescind, alter, amend
and repeal these Bylaws, provided, however, that the shareholders shall have
power to rescind, alter, amend or repeal any Bylaws made by the Board, and to
enact Bylaws which if so expressed shall not be rescinded, altered, amended or
repealed by the Board. No change of the time or place for the annual meeting of
the shareholders for the election of directors shall be made except in
accordance with the laws of the State of New Jersey.
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES LAWS AND MAY NOT BE TRANSFERRED EXCEPT PURSUANT
TO EFFECTIVE REGISTRATION UNDER SAID ACT OR SUCH STATE SECURITIES LAWS OR IN A
TRANSACTION WHICH, IN THE OPINION OF COUNSEL REASONABLY SATISFACTORY TO GLENGATE
APPAREL, INC., QUALIFIES AS AN EXEMPT TRANSACTION UNDER SAID ACT AND THE RULES
AND REGULATIONS PROMULGATED THEREUNDER OR SUCH STATE SECURITIES LAWS.
STOCK SUBSCRIPTION WARRANT
To Purchase 85,000 Shares of Common Stock of
GlenGate Apparel, Inc., a New Jersey Corporation
(the "Company")
DATE OF INITIAL ISSUANCE: August 23, 1996
THIS CERTIFIES THAT, for value received, The Koffman Group, Inc., as
principal and agent, or registered assigns (hereinafter called the "Holder") is
entitled to purchase from the Company during the Term of this Warrant at the
times provided for herein, the number of shares of Common Stock, par value $.001
per share, of the Company (the "Common Stock") as specified herein, at the
Warrant Price (as hereinafter defined), payable in the manner specified herein.
The exercise of this Warrant shall be subject to the provisions, limitations and
restrictions herein contained.
1. Definitions.
For all purposes of this Warrant, the following terms shall have the
meanings indicated
1.1 Common Stock - shall mean and include the Company's authorized
Common Stock, par value $.001 per share, as constituted at the date hereof, and
shall also include any capital stock of any class of the Company hereafter
authorized which has the right to participate in the distribution of earnings
and assets of the Company without limit to amount or percentage.
1.2 Securities Act - the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder.
1.3 Term of this Warrant - shall mean the period beginning on August
23, 1996 and ending at 5:00 P.M., New Jersey time, on September 30, 1997.
1.4 Warrant Price - is defined in Section 2.1 hereof.
1.5 Warrant Rights - the rights of the Holder to purchase shares of
Common Stock upon exercise of this Warrant, which rights shall not relate to
shares of Common Stock already purchased pursuant to this Warrant.
1.6 Warrant Shares - shares of Common Stock purchased or purchasable by
the Holder of this Warrant upon the exercise hereof.
2. Exercise of Warrant.
2.1 Right to Exercise. At any time and from time to time during the
Term of this Warrant, the Holder may exercise this Warrant, in whole or in part
to purchase the number of shares of Common Stock set forth on the cover page
hereof, subject to adjustment as provided in Section 5. The Warrant Price shall
be $1.00 per share subject to adjustment as provided in Section 5 and shall be
paid in cash.
2.2 Procedure for Exercise of Warrant. To exercise this Warrant the
Holder shall deliver to the Company at its office referred to in Section 9
hereof at any time and from time to time during the Term of this Warrant: this
Warrant, together with the Notice of Exercise in the form attached hereto and
the payment of the aggregate Warrant Price with respect to the Warrants
exercised. In the event of any exercise of these rights represented by this
Warrant, a certificate or certificates for the shares of Common Stock so
purchased, registered in the name of the Holder or such other name or names as
may be designated by the Holder, shall be delivered to the Holder hereof within
a reasonable time, not exceeding fifteen (15) days, after the rights represented
by this Warrant shall have been so exercised. The person in whose name any
certificate for shares of Common Stock is issued upon exercise of this Warrant
shall for all purposes be deemed to have become the holder of record of such
shares on the date on which the Notice of Exercise was delivered and payment of
the Warrant Price and any applicable taxes was made, irrespective of the date of
delivery of such certificate, except that, if the date of such delivery and
payment is a date when the stock transfer books of the Company are closed, such
person shall be deemed to have become the holder of such shares at the close of
business on the next succeeding date on which the stock transfer books are open.
In the event this Warrant is exercised in part, a new Warrant for the balance of
shares of Common Stock purchasable shall be issued to the Holder.
2.3 Transfer Restriction Legend. Each certificate for Warrant Shares
shall bear the following legend (and any additional legend required by (i) any
applicable state securities laws and (ii) any securities exchange upon which
such Warrant Shares may, at the time of such exercise, be listed) on the face
thereof unless at the time of exercise such Warrant Shares shall be registered
under the Securities Act:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES LAWS AND MAY NOT BE TRANSFERRED EXCEPT PURSUANT
TO EFFECTIVE REGISTRATION UNDER SAID ACT OR SUCH STATE SECURITIES LAWS OR IN A
TRANSACTION WHICH, IN THE OPINION OF COUNSEL REASONABLY SATISFACTORY TO GLENGATE
APPAREL, INC., QUALIFIES AS AN EXEMPT TRANSACTION UNDER SAID ACT AND THE RULES
AND REGULATIONS PROMULGATED THEREUNDER OR SUCH STATE SECURITIES LAWS."
Any certificate issued at any time in exchange or substitution for any
certificate bearing such legend (except a new certificate issued upon completion
of a public distribution under a registration statement of the securities
represented thereby) shall also bear such legend unless, in the opinion of
counsel for the holder thereof (which counsel shall be reasonably satisfactory
to counsel for the Company) the securities represented thereby are not, at such
time, required by law to bear such legend.
3. Covenants as to Common Stock. The Company covenants and agrees that all
shares of Common Stock that may be issued upon the exercise of the rights
represented by this Warrant will, upon issuance and receipt by the Company of
the Warrant Price, be validly issued, fully paid and nonassessable, and free
from all taxes, liens and charges with respect to the issue thereof. The Company
further covenants and agrees that it will pay when due and payable any and all
federal and state taxes which may be payable in respect of the issue of this
Warrant, or any Common Stock or certificates therefor issuable upon the exercise
of this Warrant. The Company further covenants and agrees that the Company will
at all times have authorized and reserved, free from preemptive rights, a
sufficient number of shares of Common Stock to provide for the exercise of the
rights represented by this Warrant. The Company further covenants and agrees
that if any shares of capital stock to be reserved for the purpose of the
issuance of shares upon the exercise of this Warrant require registration with
or approval of any governmental authority under any federal or state law before
such shares may be validly issued or delivered upon exercise, then the Company
will in good faith and as expeditiously as possible endeavor to secure such
registration or approval, as the case may be. If and so long as the Common Stock
issuable upon the exercise of this Warrant is listed on any national securities
exchange, the Company will, if permitted by the rules of such exchange, list and
keep listed on such exchange, upon official notice of issuance, all shares of
such Common Stock issuable upon exercise of this Warrant.
4. Ownership.
4.1 Register; Transfer or Exchange of Warrants. The Company shall keep
at its office maintained in Mountainside, New Jersey a register in which the
Company shall provide for the registration of Warrants and for the registration
of transfer of Warrants. The Holder of any Warrant may, at its option and either
in person or by duly authorized attorney, surrender the same for registration of
transfer or exchange at such office and, without expense to such Holder (other
than transfer taxes, if any), receive in exchange therefor a new Warrant or
Warrants, dated as of the date to which transfer is effectuated, for the same
aggregate amount of shares as the Warrant or Warrants so surrendered for
transfer or exchange and each registered in such name or names as may be
designated by such Holder. Every Warrant so made and delivered in exchange for
any Warrant shall in all other respects be in the same form and have the same
terms as the Warrant so surrendered for transfer or exchange.
4.2 Ownership of This Warrant. The Company may deem and treat the
person in whose name this Warrant is registered as the holder and owner hereof
(notwithstanding any notations of ownership or writing hereon made by anyone
other than the Company) for all purposes and shall not be affected by any notice
to the contrary until presentation of this Warrant for registration or transfer
as provided in this Section 4.
4.3 Transfer and Replacement. This Warrant and all rights hereunder
are, subject to applicable federal and state securities laws, transferable in
whole or in part upon the books of the Company by the Holder hereof in person or
by duly authorized attorney, and a new Warrant or Warrants, of the same tenor as
this Warrant but registered in the name of the transferee or transferees shall
be made and delivered by the Company upon surrender of this Warrant duly
endorsed. No Warrant may be sold, transferred or otherwise disposed of by the
Holder in the absence of registration of the Warrant under the Securities Act
and state securities laws, or an exemption therefrom. Upon receipt by the
Company of evidence reasonably satisfactory to it of the loss, theft or
destruction, and, in such case, of indemnity or security reasonably satisfactory
to it, and upon surrender of this Warrant if mutilated, the Company will make
and deliver a new Warrant of like tenor, in lieu of this Warrant; provided that
if the Holder hereof is an instrumentality of a state or local government or an
institutional holder or a nominee for such an instrumentality or institutional
holder, an irrevocable agreement of indemnity by such Holder shall be sufficient
for all purposes of this Section 4, and no evidence of loss or theft or
destruction shall be necessary. This Warrant shall be promptly canceled by the
Company upon the surrender hereof in connection with any transfer or
replacement. Except as otherwise provided above, in the case of the loss, theft
or destruction of a Warrant, the Company shall pay all expenses, taxes and other
charges payable in connection with any transfer or replacement of this Warrant,
other than stock transfer taxes (if any) payable in connection with a transfer
of this Warrant, which shall be payable by the Holder.
5. Adjustment of Warrant Price and Number of Shares. The number of shares of
Common Stock purchasable upon the exercise of this Warrant shall be 85,000 and
the Warrant Price shall be $1.00 per share, subject to adjustment upwards or
downwards from time to time upon the happening of certain events, as follows:
5.1 Adjustments. The number of shares of Common Stock purchasable upon
the exercise of this Warrant and the Warrant Price shall be subject to
adjustment as follows:
(a) In case the Company shall (i) pay a dividend on the Common
Stock in additional shares of equity securities of the Company, (ii) subdivide
or reclassify its outstanding Common Stock, (iii) combine its outstanding Common
Stock into a smaller number of shares of Common Stock, (iv) issue securities of
the Company which are convertible into shares of Common Stock at a per share
price of less than the lesser of the then current (I) Current Market Price or
(II) Warrant Price, or (v) distribute to all holders of Common Stock at a per
share price of less than the lesser of the then current (I) Current Market Price
or (II) Warrant Price, the number of shares of Common Stock purchasable upon
exercise of this Warrant immediately prior thereto shall be adjusted so that the
Holder shall be entitled to receive, upon exercise of this Warrant, the kind and
number of shares of Common Stock or other securities of the Company which it
would have owned or would have been entitled to receive after the happening of
any of the events described above had this Warrant in fact been exercised
immediately prior to the happening of such event (or any record date with
respect thereto). Any adjustment made pursuant to this paragraph (a) shall
become effective immediately after the effective date of such event and such
adjustment shall be retroactive to the record date, if any, for such event.
(b) No adjustment in the number of shares of Common Stock
purchasable hereunder or the Warrant Price thereof shall be required unless such
adjustment would require an increase or decrease of at least one percent in the
number of shares of Common Stock then purchasable upon the exercise of the
Warrant; provided, however, that any adjustments which by reason of this
paragraph (b) are not required to be made immediately shall be carried forward
and taken into account in any subsequent adjustment. In calculating any
adjustment hereunder, the Warrant Price shall be calculated to the nearest
$.0001.
(c) Whenever the number of shares of Common Stock purchasable
upon the exercise of this Warrant is adjusted as herein provided, the Warrant
Price payable upon exercise of this Warrant shall also be adjusted by
multiplying such Warrant Price immediately prior to such adjustment by a
fraction, of which the numerator shall be the number of shares of Common Stock
purchasable upon the exercise of this Warrant immediately prior to such
adjustment, and of which the denominator shall be the number of shares of Common
Stock so purchasable immediately after such adjustment, such that at all times
the aggregate Warrant Price shall equal $85,000.
(d) Except as provided in Section 5.1 (a), no adjustment with
respect to any ordinary dividends (made out of current earnings) on shares of
Common Stock shall be made during the term of this Warrant or upon the exercise
of this Warrant.
(e) Whenever the number of shares of Common Stock purchasable
upon the exercise of this Warrant or the Warrant Price is adjusted as herein
provided, the Company shall cause to be promptly mailed to the Holder, notice of
such adjustment or adjustments and a certificate setting forth the number of
shares of Common Stock purchasable upon the exercise of this Warrant and the
Warrant Price after such adjustment, a brief statement of the facts requiring
such adjustment and the computation by which such adjustment was made.
5.2 Adjustment for Consolidation, Merger, Sale of Assets,
Reorganization and the Like. In case the Company (a) shall consolidate with or
merge into any other person and shall not be the continuing or surviving
corporation of such consolidation or merger, (b) shall permit any other person
to consolidate with or merge into it and the Company shall be the continuing or
surviving person but, in connection with such consolidation or merger, the
Common Stock shall be changed into or exchanged for stock or other securities of
any other person or cash or any other property, or (c) shall transfer all or
substantially all of its properties or assets to any other person, then proper
provision shall be made so that, upon the basis and the terms and in the manner
provided in this Warrant, the Holder, upon the exercise of this Warrant in
accordance herewith, shall be entitled to receive (at the aggregate exercise
price in effect at the time of the consummation of such transaction for all of
the shares of Common Stock), in lieu of the shares of Common Stock that would
have been issuable to the Holder upon the exercise of this Warrant, the stock
and other securities, cash or property to which the Holder would have been
entitled upon consummation of such transaction if the Holder had exercised the
rights represented by this Warrant immediately prior thereto and participated in
such transaction as a holder of Common Stock of the Company, in each case
subject to adjustments (subsequent to such transaction) as nearly equivalent as
possible to the adjustments provided for in this Section 5.
5.3 Definition of Current Market Price. For purposes of this Section 5,
the term "Current Market Price" shall mean, on any date specified herein, (a) if
the Common Stock is listed or admitted to trading on any national securities
exchange, the highest price obtained by taking the arithmetic mean over a period
of thirty consecutive trading days ending the second trading day prior to such
date of the average, on each such trading day, of the high and low sale price of
shares of Common Stock or if no such sale takes place on such date, the average
of the highest closing bid and lowest closing asked prices thereof on such date,
in each case as officially reported on all national securities exchanges on
which the Common Stock is then listed or admitted to trading, or (b) if no
shares of Common Stock are then listed or admitted to trading on any national
securities exchange, the highest closing price thereof on such date in the
over-the-counter market as shown by the NASDAQ National Market System or, if no
such shares of Common Stock are then quoted in such system, as published by the
National Quotation Bureau, Incorporated or any similar successor organization,
and in either case as reported by any member firm of the New York Stock Exchange
selected by the Company. If no shares of Common Stock are then listed or
admitted to trading on any national securities exchange and if no closing bid
and asked prices thereof are then so quoted or published in the over-the-counter
market, "Current Market Price" shall mean the fair value per share of Common
Stock, as of a date which is 15 days preceding the date as of the determination
is to be made, in each case, as determined in good faith by the Board of
Directors of the Company.
6. Notice of Extraordinary Dividends. If the Board of Directors of the Company
shall declare any dividend or other distribution on its Common Stock except out
of earned surplus or by way of a stock dividend payable in shares of its Common
Stock, the Company shall mail notice thereof to the Holder not less than fifteen
(15) days prior to the record date fixed for determining shareholders entitled
to participate in such dividend or other distribution, and the Holder hereof
shall not participate in such dividend or other distribution unless this Warrant
is exercised, in whole or in part, pursuant to Section 2.1 of this Warrant, and
is exercised prior to such record date. The provisions of this Section 6 shall
not apply to distributions made in connection with transactions covered by
Section 5.
7. Fractional Shares. Fractional shares shall not be issued upon the exercise of
this Warrant but in any case where the Holder would, except for the provisions
of this Section 7, be entitled under the terms hereof to receive a fractional
share upon the exercise of this Warrant, the Company shall, upon the exercise of
this Warrant, pay a sum in cash equal to the excess of the value of such
fractional share (determined in such reasonable manner as may be prescribed in
good faith by the Board of Directors of the Company).
8. Notices. Any notice or other document required or permitted to be given or
delivered to the Holder or the Company shall be effected on the seventh day
following delivery to the United States Post office, proper postage prepaid,
sent by certified or registered mail return receipt requested, or on the day
delivered by hand and receipted, or on the second business day after delivery to
a recognized overnight courier service, addressed to the Holder at the address
thereof specified in the Capitalization Agreement or to such other address as
shall have been furnished to the Company in writing by the Holder or the Company
at the address thereof specified in the Capitalization Agreement or to such
other address as shall have been furnished in writing to the Holder by the
Company.
9. No Rights as Stockholder; Limitation of Liability. This Warrant shall not
entitle the Holder to any of the rights of a shareholder of the Company. No
provision hereof, in the absence of affirmative action by the Holder to purchase
shares of Common Stock, and no mere enumeration herein of the rights or
privileges of the Holder, shall give rise to any liability of the Holder for the
Warrant Price hereunder or as a shareholder of the Company, whether such
liability is asserted by the Company or by creditors of the Company.
10. Law Governing. This Warrant shall be governed by, and construed and
enforced in accordance with, the laws of the State of New Jersey.
11. Miscellaneous. This Warrant and any provision hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the party
(or any predecessor in interest thereof) against which enforcement of the same
is sought. The headings in this Warrant are for purposes of reference only and
shall not affect the meaning or construction of any of the provisions hereof.
IN WITNESS WHEREOF, the Company has caused this Warrant to be
signed by its Chief Operating officer and Secretary, and has caused its
corporate seal to be affixed hereunto.
GLENGATE APPAREL, INC.
By: /s/ Richard J. Martinelli
-----------------------------
Richard J. Martinelli
Chief Operating Officer
By: /s/ Norman Britman
----------------------
Norman Britman
Secretary
<PAGE>
[FORM OF ELECTION TO EXERCISE]
To be executed by the registered holder if
such holder desires to exercise the Warrant
To: GlenGate Apparel, Inc.
207 Sheffield Street
Mountainside, New Jersey 07092
The undersigned hereby irrevocably elects to exercise the Warrant to
purchase shares of Common Stock issuable upon the exercise of such Warrant and
requests that Certificate for such shares be issued in the name of:
- -----------------------------------------------------------------
(Please print name and address)
- -----------------------------------------------------------------
(Please insert social security or other identifying number)
- -----------------------------------------------------------------
(Please insert number of shares exercised)
- -----------------------------------------------------------------
(Please specify whether payment is in cash or Debentures)
If such number of shares of Common Stock shall not be all the shares of Common
Stock evidenced by the accompanying Warrant, a new Warrant for the balance
remaining of such shares of Common Stock shall be registered in the name of and
delivered to:
- -----------------------------------------------------------------
(Please print name and address)
- -----------------------------------------------------------------
(Please insert social security or other identifying number)
Dated:____________, 19__
[HOLDER]
By:_______________________
AMENDED AND RESTATED
STOCKHOLDERS AGREEMENT
This Amended and Restated Stockholders Agreement (the
"Agreement") is made and entered into as of this _____ day of __________, 1996,
by and among GlenGate Apparel, Inc., a New Jersey corporation (the "Company"),
George J. Gatesy, an individual resident in the State of New Jersey ("Gatesy"),
Richard J. Martinelli, an individual resident in the State of New Jersey
("Martinelli"), and Peter J. Kostis, an individual resident in the State of
Arizona ("Kostis"; Gatesy, Martinelli and Kostis are sometimes referred to
herein, collectively, as "Stockholders").
WITNESSETH:
WHEREAS, the Stockholders entered into that certain
Stockholders Agreement dated September 12, 1995 which the Stockholders hereby
desire to amend and restate; and
WHEREAS, Gatesy is a director, the chief executive officer and
an employee of the Company, and Martinelli and Kostis are also directors of the
Company; and
WHEREAS, the Stockholders believe that it is in their best
interest, and in the best interest of the Company, to provide certain
restrictions on each Stockholder's right to transfer his Shares (as defined
below) upon his death, and so the parties desire to enter into this Agreement;
NOW, THEREFORE, in consideration of the foregoing and the
mutual promises set forth in this Agreement, the parties hereby agree as
follows:
Section 1. Definitions. As used herein, the following terms
shall have the following meanings:
1.1 "Agreed Price" means, with respect to any Shares, the
product of the Average Price and the number of such Shares.
1.2 "Average Price" means the average of the published bid
prices per share of Common Stock for the 60-day period immediately preceding the
date of a Stockholder's death. Published bid prices means: (i) if traded over
the counter and not listed on an automated quotation system sponsored by the
National Association of Securities Dealers, Inc., the average of the last bid
and ask prices for the Common Stock for each day during the period, with the
overall average of such prices to be obtained by totalling the applicable
average bid and ask prices for each regular business day within such 60-day
period and dividing the total by the number of such regular business days;
provided, that if there is not both a bid price and an ask price on any such
date, then such day shall be ignored, and the number of days in such period
shall accordingly be reduced; or (ii) the last sales price reported for the
Common Stock for each day during the period, (x) as reported by the principal
national securities exchange in the United States on which the Common Stock is
then traded, or (y) if not traded on any such exchange, as quoted on an
automated quotation system sponsored by the National Association of Securities
Dealers, Inc., with the overall average of such prices to be obtained by
totalling the prices for each regular business day within such 60-day period on
which the Common Stock was reported or quoted and dividing the total by the
number of such regular business days.
1.3 "Common Stock" means the Company's Common Stock, par
value $.001 per share.
1.4 "Representative(s)" means, with respect to any deceased
Stockholder, such Stockholder's personal representative(s), executor(s) or
administrator(s).
1.5 "Shares" means, with respect to any Stockholder, all
Common Stock owned by such Stockholder at the time of his death.
1.6 "Transfer" means, with respect to any Shares, any
transfer, sale, assignment, conveyance, bequest or other disposition, any pledge
or other encumbrance or any agreement that could result in any of the foregoing.
Section 2. Restrictions on Transfer of Shares.
2.1 Inter Vivos Transfers. Nothing in this Agreement shall
restrict or otherwise limit any Stockholder from making any Transfer of any or
all of his shares of Common Stock to any person during his lifetime, and in the
event of such a Transfer, the transferee may be issued a substitute certificate
representing the shares so transferred without any restrictive legend regarding
this Agreement.
2.2 Transfers Upon Death.
2.2.1 No Shares shall be Transferred upon the
death of any Stockholder except in accordance with the provisions of this
Agreement, and any attempted Transfer in violation of the terms and conditions
of this Agreement shall be void ab initio.
2.2.2 Upon the death of a Stockholder, such
Stockholder (hereinafter the "Deceased Stockholder") shall automatically, and
without further action by his estate or Representative(s), be deemed to have
offered to sell his Shares to the Company at the Agreed Price. The Company shall
be obligated to purchase from the estate or Representative of the Deceased
Stockholder the maximum amount of Stockholder's Shares that the Company can
purchase at the Agreed Price using all of the insurance proceeds payable to the
Company upon the death of the Deceased Stockholder, provided, however, that upon
the death of Gatesy, the Company may use $1,000,000 of any insurance proceeds
then payable to the Company to operate the Company and locate and hire a
replacement for Gatesy and the balance of such insurance proceeds shall be used
to purchase the maximum amount of Gatesy's Shares at the Agreed Price. The
Company may, but will not be obligated to, purchase any additional shares from
any Deceased Stockholder's estate or Representative to the extent insurance
proceeds payable to the Company upon the Deceased Stockholder's death are
insufficient to purchase all of the Deceased Stockholder's Shares. The Company
shall be entitled to keep the excess insurance proceeds payable to the Company
upon the Deceased Stockholder's death, if any, which remain after the Company
purchases all of the Deceased Stockholder's Shares at the Agreed Price. Within
30 days following the death of a Stockholder, the Company shall notify such
Stockholder's Representative(s) (as then known to the Company) as to: the number
of such Shares shown on the Company's books; the Average Price of such Shares;
the Agreed Price for such Shares, the availability of any insurance proceeds to
fund the Company's purchase of such Shares' and whether the Company will
purchase any such Shares for which insurance proceeds are not or will not be
available to pay the Agreed Price.
2.2.3 The closing of the sale and purchase of Shares pursuant
to this Section 2.2. shall take place at the office of the Company within 30
days after the insurance proceeds are received by the Company or as otherwise
agreed by the parties thereto, but no later than six months following the death
of the Stockholder. At the closing, the Company shall cause the Agreed Price to
be paid to the estate of the Stockholder (or otherwise as directed by his
Representative(s)), by wire transfer of immediately available funds, by
certified check of next day funds or otherwise, as designated by the
Stockholder's Representative(s). Against such payment, the Stockholder's
Representative(s) shall cause to be sold and delivered to the Company a
certificate or certificates representing the Shares, free and clear of any
liens, claims or encumbrances, in each case duly endorsed or accompanied by
appropriate stock powers.
2.2.4 Anything in this Agreement to the contrary
notwithstanding, if, in accordance with this Agreement, any Shares of a Deceased
Stockholder are not purchased by the Company, then such Shares shall be free
from any restrictions hereunder.
Section 3. Life Insurance. In order to provide the funds
necessary to purchase each Stockholder's shares in the manner set forth herein
at Section 2.2.2, the Company shall establish and maintain in full force and
effect, with a carrier or carriers reasonably acceptable to Gatesy, a
split-dollar or other life insurance policy or policies on the life of each of
Gatesy, Martinelli and Kostis reasonably acceptable to the Stockholders. The
Company shall pay all out-of-pocket premiums on or before the dates on which
they have become due under such policy or policies, and the Company shall not
cause or suffer such policies to be encumbered in any respect without the
consent of the Stockholder whose life is covered thereby. This provision is a
material inducement for each Stockholder to enter into this arrangement.
Section 4. Miscellaneous.
4.1 Injunctive Relief. Each party hereto
acknowledges that it will be impossible to measure in money the damages that
would be suffered if any party fails to comply with any of the obligations
herein imposed on such party and that in the event of any such failure, an
aggrieved person will be irreparably damaged and will not have an adequate
remedy at law. Any such person shall, therefore, be entitled to injunctive
relief and/or specific performance to enforce such obligations, without the
necessity of posting any bond or furnishing any security, and if any action
should be brought in equity to enforce any of the provisions of this Agreement
none of the parties hereto shall raise the defense that there is adequate remedy
at law.
4.2 Further Assurances. Each party hereto
shall do and perform or cause to be done and performed all such further acts and
things and shall not execute and deliver all such other agreements,
certificates, instruments, and documents as any other party hereto reasonably
may request in order to carry out the intent and accomplish the purposes of this
Agreement and consummation of the transactions contemplated hereby.
4.3 Governing Law. This Agreement and the
rights and obligations of the parties hereunder shall be governed by, and
construed and interpreted in accordance with the laws of the State of [New
Jersey] without giving effect to such State's principles governing conflicts of
law.
4.4 Entire Agreement; Amendment; Waiver.
This Agreement contains the entire agreement among the parties hereto with
respect to the subject matter hereof, and supersedes any and all prior
agreements, arrangements and understandings (whether written or oral) among the
parties, including without limitation the Restricted Stockholders' Agreement
dated November 29, 1993 by and among the parties and Messrs. Thomas P. Noone and
Michael A. Vadas, and any amendments thereto, all of which are hereby merged
herein. This Agreement may not be amended, modified, supplemented or terminated
except by an instrument or counterparts thereof in writing signed by all the
parties then subject to this Agreement. No waiver of any term or provision of
this Agreement shall be effective unless in writing and signed by the party to
be charged. The wavier by any party of a breach of any term or provision of this
Agreement shall not be construed as a waiver of any subsequent breach.
4.5 Successors and Assigns. This Agreement
shall be binding upon and inure to the benefit of the parties and their
respective successors and Representatives. Nothing in this Agreement, either
express or implied, is intended to confer on any person other than the parties
hereto and their respective successors and Representatives, any rights, remedies
or obligations under or by reason of this Agreement.
4.6 Notice. All notices and other
communications hereunder shall be in writing and shall be delivered by hand or
by first-class regular mail, postage prepaid, to the address set forth beneath
each party's name on the execution page hereof. Any party may change its address
for notices hereunder by similar notice to the other parties. All communications
and notices provided for in this Agreement shall be deemed to have been given
when sent, except notices as to changes of address, which notices shall be
deemed to have been given when received.
4.7 Headings, Counterparts. The headings and
captions contained herein are for convenience or reference only and shall not
control or affect the meaning or construction of any provision hereof. This
Agreement may be executed in any number of counterparts, each of which shall be
deemed to be an original and all of which together shall constitute on and the
same instrument.
<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed by or on
behalf of each of the parties hereto as of the date first above written.
GLENGATE APPAREL, INC.
207 Sheffield Street
Mountainside, New Jersey 07092
By:/s/ George J. Gatesy
---------------------------
George J. Gatesy, President
/s/ George J. Gatesy
--------------------
GEORGE J. GATESY
1100 Wychwood Road
Westfield, New Jersey 07090
/s/ Richard J. Martinelli
-------------------------
RICHARD J. MARTINELLI
325 Wychwood Road
Westfield, New Jersey 07090
/s/ Peter J. Kostis
-------------------
PETER J. KOSTIS
9160 N. 69th Street
Paradise Valley, AZ 85253
SECURITY AGREEMENT - GOODS AND CHATTELS
TO: MILBERG FACTORS, INC.
99 Park Avenue
New York, NY 10016
Gentlemen:
1. To secure the payment of all debts, liabilities,
obligations, covenants and duties owing by us to you under that certain Security
Agreement (Accounts Receivable - Financing) bearing the effective date of
September 26, 1996, as well as to secure the payment in full of the other
Obligations referred to herein, we hereby grant to you a continuing security
interest in all goods and general intangibles (as defined in Article 9 of the
Uniform Commercial Code) whether now owned or hereafter acquired by us and
wherever located, all replacements and substitutions therefor or accessions
thereto and all proceeds thereof, including, without limitation, the machinery
and equipment described in the annexed Schedule "A" (all herein referred to
collectively as "Collateral"). Inventory is specifically excluded from the
Collateral.
2. The term "Obligations" as used herein shall mean and
include the indebtedness owing by us to you as hereinabove specifically set
forth and also any and all other loans, advances, extensions of credit,
endorsements, guaranties, benefits or financial accommodations heretofore or
hereafter made, granted or extended by you to us or which you have or will
become obligated to make, grant or extend to or for our account and any and all
interest, commissions, obligations, liabilities, indebtedness, charges or
expenses heretofore or hereafter chargeable against us or owing by us to you or
upon which we may be or have become liable as endorser and guarantor and any and
all renewals or extensions of any of the foregoing, no matter how or when
arising, direct or indirect, absolute or contingent, liquidated or unliquidated,
and whether under any present or future agreement or instrument between us or
otherwise and the amount due upon any notes or other obligations given to or
received by you for or on account of any of the foregoing and the performance
and fulfillment by us of all of the terms, conditions, promises, covenants,
provisions and warranties contained in this Security Agreement and any note or
notes secured hereby or in any present or future agreement or instrument between
us.
3. Unless expressly limited by the provisions of paragraph
"1", your security interest granted and created in the Collateral shall extend
and attach to the entire Collateral whether the same constitutes personal
property or fixtures, including, without limitation, to all dies, jiggs, tools,
benches, tables, substitutions, accretions, component parts, replacements
thereof and additions thereto, as well as to all accessories, motors, engines,
auxiliary parts used in connection with or attached to the Collateral and any
packing material in which the Collateral may be contained. We shall furnish you
from time to time upon request with written statements and schedules identifying
and describing the Collateral and any additions thereto and substitutions
thereof in such detail as you may require.
4. We hereby warrant and covenant to you that:
(a) the Collateral is presently located at 207
Sheffield Street, Mountainside, N.J. 07092 and we will notify you promptly of
any new location where Collateral may be located;
(b) we are the lawful owner of the Collateral
free from any adverse lien, security or encumbrance whatsoever and have the sole
right to grant a security interest therein and will defend the Collateral
against all claims and demands of all persons;
(c) we will keep the Collateral free and clear
of all attachments, levies, taxes, liens, security interests and encumbrances of
every kind and nature;
<PAGE>
(d) we will at our own cost and expense keep the
Collateral in good state of repair and will not waste or destroy the same or any
part thereof;
(e) we will not without your prior written
consent, sell, exchange, lease or otherwise dispose of the Collateral or any of
our rights therein or permit any lien or security interest to attach to same,
except that created by this Agreement;
(f) we will insure the Collateral in your name
against loss or damage by fire, theft, burglary, pilferage, loss in transit and
such other hazards as you shall specify in amounts and under policies by
insurers acceptable to you and all premiums thereon shall be paid by us and the
policies delivered to you. If we fail to do so, you may procure such insurance
and charge the cost to our account;
(g) we will not permit any Collateral to be
removed from its present location without your prior written consent, and we
will at all times allow you or your representatives free access to and the right
of inspection of the Collateral;
(h) we shall comply with the terms and conditions
of any leases covering the premises wherein the Collateral is located and any
orders, ordinances, laws or statutes of any city, state, or governmental
department having jurisdiction with respect to such premises or the conduct of
business thereon, and, when requested by you, we will execute any written
instruments and do any other acts necessary to effectuate more fully the
purposes and provisions of this Agreement;
(i) if any of the Collateral is or in your
opinion may become part of any real estate, we will obtain and deliver to you a
written waiver by the record owner and any mortgagees of said real estate of all
interest in the Collateral and a written subordination by any person who has a
lien on said real estate which is or may be superior to the security interest
granted hereby;
(j) we will not permit anything to be done that
may impair or lessen the value of any Collateral or the security intended to be
afforded by this Agreement;
(k) we will indemnify and save you harmless from
all loss, costs, damage, liability or expense, including reasonable attorneys'
fees, that you may sustain or incur to enforce payment, performance, or
fulfillment of any of the debts or obligations secured hereby or in the
enforcement of this Agreement and the priority thereof or in the prosecution or
defense of any action or proceeding either against you or us concerning any
matter growing out of or in connection with this Agreement and/or any of the
Obligations secured hereby and/or any of the Collateral;
(l) the execution of this Agreement has been
duly approved by the undersigned in any manner required by law.
5. We shall be in default under this Agreement upon the
happening of any of the following events or conditions:
(a) we shall fail to pay when due or punctually
perform any of the Obligations;
(b) any covenant, warranty, representation or
statement made or furnished to you by us or on our behalf was false in any
material respect when made or furnished;
(c) the loss, theft, substantial damage,
destruction, sale or encumbrance to or of any of the Collateral or the making of
any levy, seizure or attachment thereof or thereon;
(d) we shall become insolvent, cease operations,
dissolve, terminate our business existence, make an assignment for the benefit
of creditors, suffer the appointment of a receiver, trustee, liquidator or
custodian of all or any part of our property;
(e) any proceedings under any bankruptcy or
insolvency law shall be commenced by or against us or any guarantor or endorser
of the Obligations; or
(f) any guarantor or endorser of the Obligations
shall die, make an assignment for the benefit of creditors, or suffer the
appointment of a receiver of any part of such guarantor's or endorser's
property.
<PAGE>
6. Upon any such default and at any time thereafter, you may
declare all Obligations secured hereby immediately due and payable and you shall
have the remedies of the secured party provided in the Uniform Commercial Code,
and in addition, those provided by other provisions of law and in this
Agreement. You will at all times have the right to take possession of the
Collateral and to maintain such possession on our premises or to remove the
Collateral or any part thereof to such other premises as you may desire. Upon
your request, we shall assemble the Collateral and make it available to you at a
place designated by you. If any notification of intended disposition of any
Collateral is required by law, such notification, if mailed, shall be deemed
properly and reasonably given if at least five days before such disposition,
postage prepaid, addressed to us either at our address shown herein or at any
address appearing on your records for us. Any proceeds of any disposition of any
of the Collateral shall be applied by you to the payment of all expenses in
connection with the sale of the Collateral, including reasonable attorneys' fees
and other legal expenses and disbursements and the reasonable expense of
retaking, holding, preparing for sale, sale, and the like, and any balance of
such proceeds may be applied by you toward the payment of the Obligations
secured hereby in such order of application as you may elect, and we shall be
liable for any deficiency.
7. If we default in the performance or fulfillment of any of
the terms, conditions, promises, covenants, provisions or warranties on our part
to be performed or fulfilled under or pursuant to this Agreement, you may at
your option without waiving your right to enforce this Agreement according to
its terms, immediately or at any time thereafter and without notice to us,
perform or fulfill the same or cause the performance or fulfillment of the same
for our account and at our sole cost and expense, and the cost and expense
thereof (including reasonable attorneys' fees) shall be added to the Obligations
secured hereby and shall be payable on demand with interest thereon at the rate
charged upon the Obligations secured hereby, but not in excess of that permitted
by law.
8. No delay or failure on your part in exercising any right,
privilege or option hereunder shall operate as a waiver of such or of any other
right, privilege, remedy or option, and no waiver whatever shall be valid unless
in writing, signed by you and then only to the extent therein set forth, and no
waiver by you of any default shall operate as a waiver of any other default or
of the same default on a future occasion. Your books and records containing
entries with respect to the Obligations secured hereby shall be admissible in
evidence in any action or proceeding, shall be binding upon us for the purpose
of establishing the items therein set forth and shall constitute prima facie
proof thereof. You shall have the right to enforce any one or more of the
remedies available to you, successively, alternately or concurrently. We agree
to join with you in executing financing statements or other instruments pursuant
to the Uniform Commercial Code in form satisfactory to you and in executing such
other documents or instruments as may be required or deemed necessary by you for
purposes of affecting or continuing your security interest in the collateral.
9. This Agreement cannot be terminated orally. All of the
rights, remedies, options, privileges and elections given to you hereunder shall
enure to the benefit of your successors and assigns. The term "you" as herein
used shall include your company, any parent of your company, any of your
subsidiaries and any co-subsidiaries of your parent, whether now existing or
hereafter created or acquired, and all of the terms, conditions, promises,
covenants, provisions and warranties of this Agreement shall enure to the
benefit of and shall bind the representatives, successors and assigns of each of
us and them.
<PAGE>
Very truly yours,
(Seal)
GlenGate Apparel, Inc.
Attest:
/s/ Norman Britman By: /s/ George J. Gatesy
Norman Britman, Secretary George J. Gatesy
President & Ceo
On: September 26, 1996
(Seal) Accepted at New York, New York
On: September 26, 1996
Attest: MILBERG FACTORS, INC.
/s/ Harold H. Oertell By: /s/ Joseph V. Goldberg, Jr.
Harold H. Oertell Joseph V. Goldberg, Jr.
Secretary/Treasurer President
FIRST AMENDMENT TO LEASE, made this 4th day of October, 1996,
MAURICE M. WEILL, TRUSTEE UNDER TRUST INDENTURE DATED AUGUST 30, 1968, having an
office at 51 Commerce Street, Springfield, New Jersey 07081, hereinafter called
the "Landlord"; and GLENGATE APPAREL, INC., a New Jersey corporation, having an
office at 207 Sheffield Street, Mountainside, New Jersey 07092, hereinafter
called the "Tenant".
WITNESSETH:
WHEREAS, the Landlord owns certain lands and premises in the
Borough of Mountainside, County of Union and State of New Jersey, which said
lands and premises are located at 207 Sheffield Street (the "Property"); and
WHEREAS, the Landlord has erected on the Property a one-story
office and warehouse building containing approximately 14,000 square feet,
hereinafter called the "Building"; and
WHEREAS, the Landlord and Tenant have heretofore entered into
a certain lease agreement dated November 14, 1994, hereinafter called the
"Lease", pursuant to which Tenant has leased approximately 10,000 square feet of
space, hereinafter called the "Original Leased Premises", all in accordance with
the terms and conditions of the Lease; and
WHEREAS, the Landlord has agreed to provide and lease to
Tenant additional space containing approximately 4,000 square feet, outside
dimensions to center line of common wall, hereinafter called the "Additional
Leased Premises" in the Building hereinabove referred to in accordance with the
terms and conditions hereinafter provided; and
WHEREAS, the Landlord and Tenant by this First Amendment to
Lease wish to modify, supplement and amend the terms and conditions of the Lease
to provide for additional rent and other Lease obligations as the same shall be
required and attributable to the Additional Leased Premises,
NOW, THEREFORE, in consideration of the sum of One ($1.00)
Dollar and other good and valuable consideration, the parties hereto covenant
and agree as follows:
1. Effective as of the Additional Commencement Date, as
hereinafter defined, the Leased Premises shall consist of the 10,000 square feet
of Original Leased Premises, together with the 4,000 square feet of Additional
Leased Premises, which total leased space shall comprise the entire Building
containing 14,000, hereinafter called the Revised Leased Premises, and Article
1.1 of the Lease is hereby modified accordingly.
2. The Lease term under the Lease as to the Additional Leased
Premises shall commence on January 1, 1997, hereinafter called the "Additional
Commencement Date", and shall expire as to the Revised Leased Premises on
December 31, 1997.
3. Commencing on the Additional Commencement Date,
Article 3.1(c) of the Lease is modified and amended as follows:
"(c) During the third year of the three (3) year
lease term, Tenant shall pay Base Rent in the amount of Seventy Six Thousand
and 00/100 ($76,000.00) Dollars per annum, in equal installments of Six
Thousand Three Hundred Thirty Three and 33/100 ($6,333.33) Dollars per month."
4. It is expressly understood and agreed that the Tenant
currently occupies the Additional Leased Premises under a Sublease Agreement
with American Aluminum Company, a New Jersey corporation, and that Tenant shall
continue to occupy the Additional Leased Premises and improvements as of the
Additional Commencement Date in an "as is" condition.
5. Effective as of the Additional Commencement Date Tenant's
Percentage for all Lease purposes shall be revised from 71.4% to 100% and
Article 1.2 of the Lease is hereby revised accordingly.
<PAGE>
6. Subarticles 46(1) and (2) of the Lease are hereby
modified, supplemented and amended as follows:
"(1) There shall be paid annually minimum Base Rent
in the amount which is the greater of:
(a) Eighty Seven Thousand Nine Hundred
Seventy Nine and 50/100 ($87,979.00) Dollars per annum; or
b) The minimum Base Rent of Seventy Six
Thousand and 00/100 ($76,000.00) Dollars per annum as provided in Article 3
herein, hereinafter referred to as the "Original Base Rent", and adjusted as
hereinafter provided. Original Base Rent shall be increased, if applicable, in
the event of an increase in the Cost of Living Index based on application of the
Cost of Living formula which is hereinafter defined as follows:
At the inception of the three (3) year renewal term, there shall be compared the
"All Items" Index figures for the New York-Northeastern New Jersey average of
the "Consumers Price Index for All Urban Consumers" (revised CPI-U) (1982-84
equal to 100) published by the Bureau of Labor Statistics of the U.S. Department
of Labor (in this paragraph hereinafter referred to as the "Index") for the
first month of the original term of this lease with the first month of the three
(3) year renewal term. If there is an increase n the Index for the first month
of the three (3) year renewal period compared to the applicable Index for the
first month of the original term of this lease, said increase in Index figures
shall be used to determine the applicable percentage of increase which shall be
the basis for determining rent increase over the Original Base Rent in
accordance with the formula hereinbefore set forth, and as shown in the
following example:
EXAMPLE: If the Index figure for the first month of the basic
lease is 100 (the denominator) and the Index figure for the first month of the
applicable renewal term is 120, the increase in the Index figures will produce
an increase of 20%.
(120-100)
100
Applying the formula, 20% of $76,000.00 is equal to $15,200.00. Adding said sum
of $15,200.00 to the Original Base Rent of $76,000.00 produces an annual renewal
rent of $91,200.00 payable in equal monthly installments of $7,600.00.
Since the rent payment for at least the first month of the three (3) year
renewal term will have been paid prior to the determination of any applicable
rent increase in excess of the Original Base Rent payable for the three (3) year
renewal term, any increase for months already elapsed after commencement of the
three (3) year renewal term shall then be added to the next monthly rent payment
then becoming due and payable.
(2) Anything herein contained to the contrary notwithstanding,
it is expressly understood and agreed that the minimum rent during the renewal
period shall not be less than Eighty Seven Thousand Nine Hundred Seventy Nine
and 50/100 ($87,979.00) Dollars per annum."
7. Except as in the First Amendment to Lease provided, all
other terms and conditions of the Lease shall remain in full force and effect
and shall be applicable to the Additional Leased Premises upon the Additional
Commencement Date.
8. This Agreement shall be binding on the parties
hereto, their heirs, successors and assigns.
IN WITNESS WHEREOF, the parties have hereunto set their hands
and seals or cause these presents to be signed by its proper corporate officers
and caused its proper corporate seal to be hereunto affixed, the day and year
first above written.
WITNESS:
____________________________ /s/ Maurice M. Weill
MAURICE M. WEILL, TRUSTEE UNDER
TRUST INDENTURE DATED AUGUST 30,
1968
ATTEST: GLENGATE APPAREL,INC.
____________________________ By: /s/ Norman Britman
Norman Britman, Treasurer
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000916394
<NAME> GlenGate Apparel, Inc.
<S> <C>
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<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
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0
0
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<EPS-PRIMARY> (.22)
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</TABLE>
