<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(MARK ONE)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED NOVEMBER 1, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 0-23440
NORTON MCNAUGHTON, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 13-3747173
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
463 SEVENTH AVENUE
NEW YORK, NY 10018
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 947-2960
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock, $0.01
par value
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates of the
registrant, as of January 30, 1998, was approximately $29,529,000.
As of January 30, 1998, there were 7,412,582 shares of the registrant's Common
Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE:
Certain portions of the Registrant's definitive proxy statement for the annual
meeting of stockholders to be held April 6, 1998, which will be filed with the
Commission subsequent to the date hereof pursuant to Regulation 14A of the
Securities Exchange Act of 1934, are incorporated by reference into Part III of
this report.
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PART I
ITEM 1. BUSINESS
Norton McNaughton, Inc. and Subsidiaries (the "Company") designs,
contracts for the manufacture of and markets a broad line of brand name,
moderately priced women's career and casual clothing. The Company's product
lines include collections of related separates coordinated by color and style,
as well as casual weekend wear and related knitwear separates. The Company
markets its products under its nationally known labels, including Norton
McNaughton(R), Norton McNaughton(R) Petite, Maggie McNaughton(R), Maggie
McNaughton(R) Petite, Pant-her(R), D.P.S. (R) and Norton Studio(R), and through
its subsidiary Miss Erika, Inc. ("Miss Erika"), Erika(R).
In fiscal 1997, the Company implemented certain strategic initiatives in
an effort to improve the Company's profitability and position the Company for
future growth. These included the narrowing of management's focus to the
Company's key divisions, including Norton McNaughton(R) and Norton Studio(R),
several merchandising initiatives in the Norton McNaughton(R) division,
including changes in pricing and product assortment, improvements in product
sourcing, significant reductions in overhead, and the decision to pursue
strategic acquisitions. The Company adopted its acquisition strategy in order to
diversify its distribution channels, broaden its product offerings, further
develop its global product sourcing capability, and to gain access to additional
merchandising and managerial talent.
On September 30, 1997, the Company completed the acquisition of
substantially all the assets and the assumption of substantially all the
liabilities of Miss Erika, a privately-held manufacturer of women's moderately
priced women's casual separates. The terms of the transaction provided for the
payment at closing of approximately $24 million in cash, with additional
consideration payable in cash or Company Common Stock, at the Company's option,
based on the profitability of Miss Erika in fiscal years 1998 and 1999. In
addition, the Company paid approximately $3.9 million at closing, including the
repayment of approximately $2.5 million of assumed indebtedness and $1.4 million
for other assumed liabilities.
In connection with the acquisition, the Company entered into a $140
million secured term loan and revolving credit facility with NationsBanc
Commercial Corporation and the CIT Group/Commercial Services, Inc. The proceeds
were used to finance the acquisition and will be for ongoing working capital
requirements of the combined entity. Pursuant to the new financing arrangement,
the Company will continue to factor its accounts receivable, as well as the
accounts receivable of Miss Erika.
PRODUCTS
The Company's Norton McNaughton and Norton Studio product lines are
marketed primarily as collections of related separates of jackets, skirts,
pants, shorts, blouses and knit products, which, while sold as separates, are
coordinated as to styles, colors and fabrics and are designed to be merchandised
and worn together. New collections of coordinated separates are introduced in
six principal selling seasons - spring, summer, transition, fall, winter and
holiday/resort. Products sold under the Erika and D.P.S. labels are marketed
primarily as separates, and are introduced in four key selling seasons, namely,
spring, transition, fall and holiday. All of the Company's products are
fabricated from natural and synthetic fibers and blends, and many are
manufactured in petite and large sizes in addition to misses. The introduction
of different collections in each season is staggered to ensure that consumers
are introduced on a monthly basis to fresh full-priced merchandise. The
Company's clothing collections are moderately priced and are designed for both
career and casual women's needs. The Company's products generally retail for $20
to $80, averaging approximately $30 to $50.
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The following table sets forth information concerning the Company's
product lines:
<TABLE>
<CAPTION>
LABEL PRINCIPAL DISTRIBUTION CHANNELS RETAIL PRICE RANGE
----- ------------------------------- ------------------
<S> <C> <C>
Norton McNaughton Department stores, national chains $20-80
Norton McNaughton Petite
Maggie McNaughton
Maggie McNaughton Petite
Norton Studio Department stores, national chains $20-80
Erika National chains,department stores, $10-50
mass merchants and specialty stores
D.P.S Department stores, national chains, $20-40
mass merchants and specialty stores
Pant-her The May Department Stores Company $25-80
</TABLE>
Norton McNaughton
The Norton McNaughton product line was introduced in 1981, and features
moderately priced color and style coordinated jackets, skirts, pants, shorts,
blouses and sweaters for the career woman. The product lines are sold in misses,
petite and large sizes under the Norton McNaughton, Norton McNaughton Petite,
Maggie McNaughton and Maggie McNaughton Petite labels to department stores and
national chains. The target customer for these product lines are working women
aged 25 to 55 with annual income of $20,000 to $50,000.
Norton Studio
The Norton Studio product line was introduced in early 1996, and consists
of moderately priced women's career and casual knitwear collections offered in
misses, petite and large sizes. The line is designed for the same target
customer as the Norton McNaughton product line and is sold in department stores
and national chains.
Erika
The Erika product line was introduced in 1968, and consists of women's
moderately priced knit and woven separates, including knit tops and bottoms,
sweaters, dresses and jackets, and more casual apparel such as shorts, skirts,
tank tops and jumpers. The target customer is a middle income, budgeted-minded
but fashionable woman ranging in age from 15 to 50 years old. The product line
is distributed in a variety of retail channels, including national chains and
department stores.
Miss Erika private-label
In addition to products sold under Miss Erika's brand names, Miss Erika
works with retail chains to develop product lines sold under the retailers'
private labels. Miss Erika coordinates with buyers to design and manufacture
private label products in specified colors, fabrics and styles. These buyers may
provide samples to Miss Erika, select styles already available in Miss Erika's
showroom or, together with Miss Erika's designers, create their own variations.
D.P.S.
The D.P.S. product line was introduced in 1995, and offers a line of
moderately priced weekend wear in misses and large sizes. The lines consist of
casual separates including jumpers, sport dresses, pants, shirts, skirts,
shorts, jackets and leggings. The lines are designed for the same target
customer as the Norton McNaughton product line and are sold to department
stores, national chains and mass merchants.
Pant-her
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The Pant-her product line was introduced in 1993 and is sold exclusively
to The May Department Stores Company ("May Company"). This product line features
a full line of traditional related separates in misses, petite and large sizes.
The Pant-her product line is designed for women ranging in age from 40 to 70
plus years old.
The Company's Norton McNaughton of Squire, Inc. ("Norton") subsidiary has
an agreement with May Company which requires Norton to sell Pant-her products
exclusively to May Company stores and requires May Company to purchase not less
than $7 million of Pant-her products during the 12-month period ending June 30,
1997 and each succeeding 12-month period thereafter. Norton and May Company have
mutually agreed to terminate their agreement effective March 1, 1998. Norton
does not currently anticipate that it will offer merchandise under this label
after the effective date of the termination. May Company is continuing to
purchase the Company's other product lines.
CUSTOMERS
The Company's products are sold nationwide in an estimated 7,000
individual stores operated by over 350 department stores, national chains,
mass merchants, specialty retailers and discount stores. The following table
sets forth approximate percentages of the Company's net sales to its three
largest customers in fiscal 1997, fiscal 1996 and fiscal 1995:
<TABLE>
<CAPTION>
Fiscal Fiscal Fiscal
Name 1997 (3) 1996 1995
---- -------- ---- ----
<S> <C> <C> <C>
May Company (1) 29% 34% 36%
Federated (2) 17 20 19
J.C. Penney 11 12 7
-- -- --
Total 57% 66% 62%
-- -- --
</TABLE>
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(1) Included in May Company are Hechts, Foley's, Robinsons-May, Kaufmann's,
Filene's, Famous Barr and Meier & Frank.
(2) Included in Federated Department Stores are Rich's, Burdines, Bon Marche,
Stern's and Macy's.
(3) Includes sales of Erika products for the fiscal month ended November 1,
1997 only.
MARKETING AND SALES
The Company's noncommission sales forces are located in their respective
New York City showrooms. The Company does not employ independent sales
representatives, nor maintain any regional showrooms. Senior management is
actively involved in the Company's marketing and selling efforts. The Company
emphasizes the development of long-term customer relationships by consulting
with its customers concerning the style and coordination of clothing purchased
by the store, optimal delivery schedules, floor presentation, pricing and other
merchandising considerations. Frequent communication between the Company's
senior management and other sales personnel and their counterparts at various
levels in the buying organizations of the Company's customers is an important
element of the Company's marketing and sales efforts. These contacts allow the
Company to monitor retail sales volume and to adjust product mix and pricing in
an attempt to maximize sales at acceptable profit margins for both the Company
and its customers. The Company's marketing efforts attempt to build upon the
success of prior selling seasons to encourage existing retail customers to
devote greater selling space to the Company's product lines, to penetrate
different buying groups at large customers, and to obtain additional retail
store customers. Currently, the Company does not advertise, although its
products are frequently featured by retailers in their advertisements.
The Company has implemented significant merchandising initiatives, which
the Company believes will help it achieve stronger sell-throughs with improved
gross margin levels in its Norton McNaughton division. The Company's improved
product sourcing (see "Sourcing and Distribution" below) facilitated its
adoption of a new pricing strategy emphasizing lower retail prices. In addition,
the Company initiated a new product strategy consisting of narrower product
assortments in its fashion groups while offering more fashionable products in a
wider variety of fabrications.
DESIGN
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The Company's design philosophy is to reproduce popular designer fashions
at moderate prices. The Company's design team is responsible for the creation,
development and coordination of product lines which interpret and mirror
existing fashion trends in better women's apparel. The design team also seeks to
enhance consumer appeal by combining functional fabrics in creative looks and
color schemes to encourage the coordination of outfits, resulting in the
purchase of more than one garment. Through its design and marketing staff, the
Company actively monitors the sales of its products to assess changes in
consumer preferences, fashion trends and the marketplace at large.
The design process begins with the development of fashion concepts, color
schemes and fabric selections approximately six to twelve months before the
production process begins. Once color schemes, fabric selections and other
concepts are developed, designs are finalized, fabric swatches and silhouettes
are selected, and finally, samples are produced. Approximately two to three
months prior to a product line's release, previews are held with the Company's
major customers to exchange ideas and to review colors, patterns, fabrics,
styling and price points. These previews allow the Company to redesign and
refocus the components of its collections before significant fabric and
production commitments are made.
The Company maintains an in-house art department for its print design
process to service its Norton McNaughton and D.P.S. product lines. Rather than
buying all of its printed fabrics from suppliers' open lines of fabrics, the
Company's design staff starts with "art work" which the Company purchases from
over 25 art studios worldwide. Working with the art departments at mills,
converters and other fabric suppliers, the Company's art department redesigns
the "art work" by altering colors, backgrounds, graphics, shapes and other items
to make it suitable for printed fabrics which it believes will fit the fashion
tastes of the Company's target retail consumers.
SOURCING AND DISTRIBUTION
The Company contracts for the manufacture of all of its products. The
Company believes that contract manufacturing allows it to maximize production
flexibility while avoiding significant capital expenditures and the fixed cost
of managing a large production work force. The Company sources its products both
domestically and abroad, and has continued to place a greater percentage of its
production overseas over the past five years. During fiscal 1997 and fiscal
1996, approximately 63% and 43%, respectively, of the Company's products were
manufactured outside the United States. The Company attributes the increase in
overseas production of its products during the past few fiscal years to more
competitive pricing, a highly skilled and better equipped labor force, higher
quality standards and changes in its product lines as dictated by fashion
trends.
The Company believes that foreign contract manufacturing allows it to take
advantage of lower manufacturing costs for products which are more labor
intensive, and to avail itself of a skilled labor force which is better equipped
and trained to produce certain products, such as knitwear and silk. With the
increasing incidence of casual dressing in the workplace, the importance of
knitwear as a continuing fashion trend, and with the acquisition of Miss Erika,
the Company anticipates that approximately 90% to 95% of its products will be
manufactured outside the United States in fiscal 1998. While the Company
believes that domestic contract manufacturing provides production flexibility
due to shorter required lead times, these benefits are substantially offset by
cost, diversity and quality considerations of overseas production.
The Company determines its sourcing requirements for each season according
to sales plans with retail customers, prior years' experience, current fashion
trends, regional considerations, feedback from retailers, early bookings and
management's estimates of a line's performance. Inventory for each delivery of
the Norton McNaughton and Norton Studio product lines is ultimately purchased
according to a line plan, which is developed after these factors are considered.
The Erika product lines are planned utilizing historical and current
performance, perceived growth opportunities and current fashion trends to
determine sales plans and gross profit objectives by merchandise category.
Planned receipts by month, customer order booking plans, and planned shipments
are each an integral part of the Company's business planning process.
In fiscal 1997, Norton engaged the services of approximately 45 sewing and
knitting contractors and purchasing agents in the United States, substantially
all of which are located in the New York City metropolitan area, and 28
overseas contractors and purchasing agents located in the Caribbean basin,
Central America, the Far East, the Middle East, and Europe. These contractors
may in turn subcontract work to other sewing or knitting contractors and these
purchasing agents contract work to sewing or knitting contractors. In
fiscal 1997, Miss Erika engaged the services of approximately 15 purchasing
agents located in the Far East, the Middle East, Europe and the United States.
These purchasing agents contract work to sewing or knitting contractors
located in the Far East, the Middle East, Central America, Africa and Europe.
The Company does not have any long-term supply agreements with any of its
sewing or knitting contractors or purchasing agents. No single sewing or
knitting contractor or purchasing agent accounted for more than 10% of
the Company's domestic or foreign manufacturing in fiscal 1997.
Miss Erika contracts for the production of its garments through a network
of purchasing agents located overseas. Although no contractual obligations
exist between Miss Erika and its purchasing agents, except on an order-by-order
basis, Miss Erika has consistently ordered
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its merchandise through these same agents, in several cases, for over ten years.
Although the agents facilitate the procurement process, Miss Erika maintains
relationships with many factories directly. The development and maintenance of
both of these relationships by Miss Erika's management team has provided Miss
Erika with what the Company believes to be a competitive advantage in the
pricing, scheduling, delivery and quality of the garments produced for it. Miss
Erika believes that the number and geographical diversity of its agents and
manufacturers minimize the risk of adverse consequences that would result from
the termination of its relationship with any single agent or manufacturer and
that replacements could be developed if necessary.
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The Company's Norton McNaughton and D.P.S. product lines consist of woven
garments, knits and sweaters. The woven components of these product lines are
sourced through import programs, and to a lesser degree, domestically, via
purchasing agents or directly with factories. The knit components of these
product lines, as well as the Erika and Norton Studio product lines, are
sourced primarily through import package programs transacted through agents.
The Company determines how and where goods will be sourced by considering
a number of factors. These include the origin of the proposed fabric, styling of
the garment, equipment requirements, skill of the indigenous labor force with
the fabric, and cost considerations. Once the locational determinations have
been made, the Company will approach several agents or factories for each order
using production samples and patterns produced by design staff. After evaluating
the quality, pricing, delivery and prior product expertise of the potential
manufacturers, a selection is made and purchase orders are issued. If an import
program, these orders may be supported by letters of credit.
The woven components of the Norton McNaughton and D.P.S. product lines are
sourced primarily through import programs, largely in China. The process starts
with the design and selection of the fabric for the garments to be produced in a
given program. The Company will source and develop the fabric with a local mill
or converter. This portion of the process requires lead time of two to four
months. Upon approval of the fabric, the Company will designate the fabric
supplier to be used by the factory, including the quantities necessary to be
purchased to satisfy the Company's purchase order. In most programs, the fabrics
are purchased directly by the factory. In addition, the Company is responsible
for the development of the patterns and markers, which the factory will use to
cut the fabric for the garments. The cycle time from fabric purchase commitment
by the factory to finished goods receipt is generally an additional four to six
months, creating total cycle time of six to ten months in the case of Far
Eastern, Middle Eastern, African and European sourced manufacturing. The Company
attempts to offset the long lead-time necessary for foreign sourced fabrics and
manufacturing by early and timely attention to production planning.
The Company also sources a large portion of its woven products in the
Caribbean basin or Mexico, utilizing favorable "807" customs regulations. In
general, these provide that articles assembled abroad from United States
components may be exempt from United States duties on the value of these
components. The remainder of the Company's woven product sourcing occurs
domestically. The domestic and "807" manufacturing process begins with the
receipt in the Company's warehouse of fabrics from mills, converters and other
fabric suppliers. Over the next one to four weeks, fabrics are cut to the
Company's design specifications. The cut goods are then shipped to various
outside contractors for sewing. The sewing process generally takes one to two
months for domestic contractors, and two to four months in the case of Caribbean
or Mexican contractors.
The knit and sweater components of the Norton McNaughton and D.P.S.
product lines, as well as the Erika and Norton Studio product lines are produced
almost exclusively abroad through a network of agents. The process begins with
the development of detailed design specifications regarding fabric, fit and
styling. Based upon these specifications, the factory creates the pattern and
develops a first prototype. Upon approval of the prototype, the factory
purchases all necessary fabric and other materials from various suppliers. As
the garments are being manufactured, the agent obtains the necessary quota
allocations and customs clearances, monitors production to ensure quality,
compliance with the Company's specifications and timely delivery of finished
goods, and issues inspection certificates. Depending upon the size of the order,
the cycle time for this process ranges from four to eight months.
Norton has long-term agreements with its domestic cutting contractor
(Cutting Edge Services, Inc., formerly Toni-Linda Productions, Inc.) and its
finished goods distribution contractor (Railroad Enterprises, Inc.) who perform
their functions in the contractors' leased cutting and warehouse facilities.
Generally, these agreements require Norton to utilize the services of the
contractors exclusively unless a contractor experiences volume limitations which
prevent it from performing services for Norton. The agreements also require the
contractors to provide their services exclusively to Norton. The agreements have
initial terms ending on June 30, 2000 (distribution) and June 30, 2001
(cutting), respectively, and may be terminated by Norton upon notice and lapse
of cure periods in the event that the contractors are not performing their
services under the agreements. In addition, after 2000 and 2001, respectively,
Norton may terminate either of the agreements on June 30 of any year in the
event that it elects to perform "in-house" the services provided by the
applicable contractor. In such event, Norton would be obligated to pay the
terminated contractor a fee equal to $0.15 for each garment cut or $0.10 for
each garment distributed, as applicable, during the year preceding the date on
which Norton terminates the agreement, but not less than $1,500,000, in the case
of the cutting contractor, or $750,000, in the case of the distribution
contractor. In addition, Norton would be required to assume certain obligations
of the terminated contractor arising under real estate leases (including the
leased warehouse facilities) and equipment purchase contracts, in either case
for property utilized in rendering services to Norton. Norton cannot determine
the amount of these obligations.
Due to the increasing movement of Norton's production abroad, it is
currently contemplating the termination of its agreement with its cutting
contractor. Preliminary negotiations are in progress and the Company anticipates
the cost of any termination will be no greater than $1.5 million. At the present
time, the Company cannot predict the ultimate disposition of these negotiations.
Norton has no present intention of bringing the distribution function "in-house"
or otherwise terminating such agreement. The loss of the
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services of the distribution contractor would have a materially adverse effect
on the Company's business until alternative arrangements could be secured. The
Company believes that it could replace this contractor within a six-month
period.
In addition to its agreements with these two contractors, Norton subleases
its fabric warehouse (see "Properties") from its cutting contractor and
guarantees that contractor's obligations under its prime lease in an amount up
to approximately $250,000 in the aggregate. Norton guarantees its distribution
contractor's obligations under its lease in an amount up to $500,000 in the
aggregate. From time to time, in the ordinary course of business, Norton makes
interest bearing loans to its distribution contractor to facilitate the
expansion and improvement of the contractor's distribution facilities for the
benefit of Norton. All such loans have been paid in accordance with their terms.
At November 1, 1997, the aggregate principal amount of such loans was
approximately $157,000.
The Company's quality control personnel monitor the manufacturing
processes at the Company's contractors domestically and abroad in order to
ensure that they meet the Company's quality standards. Substantially all of the
Company's fabrics for domestic and "807" production are inspected upon receipt
in the Company's warehouse. In addition, the Company's quality control program
includes on-site inspections of work-in-process and finished goods during the
production process and inspection of finished goods upon receipt. To date, the
Company has experienced a return rate of less than one percent for poor quality
garments.
Finished goods are received into the Company's distribution centers, where
incoming merchandise is checked against the purchase order, entered into the
Company's management information systems, undergoes quality assurance procedures
and is stored on racks by style number and color. Over the next one to six
weeks, shipments are made to the Company's customers in quantities, at
locations, and in packaging as specified by these customers. Miss Erika ships to
its retail customers daily principally through a local trucking company whose
primary customer is Miss Erika and whose headquarters are in the Miss Erika
warehouse. Miss Erika represents more than 95% of the trucking company's
revenues and is therefore able to negotiate favorable rates and scheduling. The
owner of the trucking company is an employee of Miss Erika.
The Company's sources of fabric and trim supply are established. The
Company has experienced little difficulty in obtaining raw materials and
believes that the current and potential sources of fabric and trim supply are
sufficient to meet its needs for the foreseeable future.
The Company has expanded its Electronic Data Interchange (EDI) program to
include the majority of its major customers and allow the Company to comply with
customers' specific requirements. This technology allows the electronic exchange
of purchase orders, invoices, and advanced shipping notices. In addition, the
Company is bar coding all merchandise to allow customers to track sales at store
registers, monitor inventory levels and provide timely feedback.
The Company operates separate management information systems for Norton
and Miss Erika. Norton's recently upgraded management information systems
address the purchasing, shipping, production and financial functions in an
integrated application. Miss Erika's stand-alone management information systems
have similar capabilities to those of Norton. During fiscal 1997, Norton
automated its design and production areas by implementing a CAD-based design
specification system. Norton will continue to improve and upgrade its management
information systems in fiscal 1998, and, over time, will integrate Miss Erika's
management information systems into Norton's. New systems developments will
include the implementation of a pattern making, marking and grading system to
automate these currently manual production functions. In addition, the Company
will be required to modify portions of the Company's software so that it will
function properly in the year 2000. Preliminary estimates of the total costs
to be incurred prior to the year 2000 are immaterial and will not have a
material impact on the Company's business, operations or its financial
condition. Maintenance or modification costs will be expensed as incurred,
while the costs of new software will be capitalized and amortized over the
software's useful life.
TRADEMARKS
The Company has registered the trademarks Norton McNaughton, Maggie
McNaughton, Norton Studio, D.P.S., Danielle Paige, Modiano and Pant-Her in the
United States. Miss Erika has registered the Erika, Alyssa Brooke, Private
Party, Return to Nature, Ricki, Sugar Blues, Sugar Co. Ltd. and White Mountain
College trademarks in the United States, and has filed for the U.S. Registration
of the Erika Dimensions trademark. The Company has registered the trademark
Pant-Her and Maggie McNaughton in Canada, and has filed for the registration of
the Norton McNaughton trademark in Canada. The Company has also registered the
trademark Norton McNaughton in Mexico and Chile and has filed for registration
in the European economic community. The Company has also registered the
trademark Maggie McNaughton in the United Kingdom. The Company regards its
trademarks as valuable assets and believes that they have value in the marketing
of its products.
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BACKLOG
At November 1, 1997, the Company had a total of approximately $121.0
million of unfilled, confirmed and unconfirmed customer orders compared to
approximately $63.0 million at November 2, 1996. The increase is due to Miss
Erika whose unfilled, confirmed and unconfirmed orders were $57.5 million at
November 1, 1997. These orders are generally scheduled for delivery within one
to two months after confirmation. The amount of unfilled orders at a particular
time is affected by a number of factors, including the scheduling of the
manufacturing and shipping of the products which, in many instances, depends on
customers' demands. Accordingly, a comparison of unfilled orders from period to
period is not necessarily meaningful and may not be indicative of eventual
actual shipments. There can be no assurance that cancellations, rejections and
returns will not reduce the amount of sales realized from the backlog of orders.
COMPETITION
There is intense competition in the women's apparel industry. The Company
competes with numerous other manufacturers and distributors, many of which are
larger and have substantially greater resources than the Company. The Company
believes that it competes favorably on the basis of the style, quality and value
of its products, production and sourcing strengths, and the long-term customer
relationships which it has developed.
EMPLOYEES
The Company currently employs approximately 339 full-time employees.
Norton presently has approximately 203 full-time employees, including eight in
executive or managerial positions, approximately 150 in production, design,
marketing and sales positions and approximately 45 in administrative and
accounting positions. Miss Erika presently has approximately 136 full-time
employees, including six in executive or managerial positions, approximately 105
in production, design, marketing and sales positions and approximately 25 in
administrative and accounting positions. None of the Company's employees are
subject to a collective bargaining agreement. The Company considers its
relations with its employees to be good.
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ITEM 2. PROPERTIES
The Company currently conducts its business from the following leased
facilities:
<TABLE>
<CAPTION>
Lease Approximate Approximate
Expiration Number of Annual Rental
Facility Location Date Square Feet Expenses(1)
- -------- -------- ---- ----------- -----------
<S> <C> <C> <C> <C>
Executive, 463 Seventh Avenue July 31, 2008 40,000 $ 410,000
production 9th and 10th Floors
and design offices New York, NY (Norton)
Showroom 1407 Broadway
New York, NY
4th Floor (Miss Erika) January 31, 2000 10,300 $ 350,000
26th Floor (Norton) January 31, 2004 11,600 $ 400,000
Fabric 3349 Whelan Road December 31, 2003 25,000 $ 100,000
warehouse(2) East Rutherford, NJ (Norton)
Administrative 333 North Street December 31, 2007 220,000 $1,420,000
offices and finished Teterboro, NJ (Miss Erika)
goods warehouse
</TABLE>
- ---------------
(1) Before escalations for taxes, CPI and other adjustments.
(2) This warehouse space is leased from the Company's cutting contractor. See
"Business-Sourcing and Distribution."
The Company believes that its existing facilities are well-maintained, in
good operating condition and will be adequate for its operations for the
foreseeable future.
ITEM 3. LEGAL PROCEEDINGS
The Company is involved in certain legal actions and claims arising in the
ordinary course of business. It is the opinion of management that such
litigation and claims will be resolved without material effect on the Company's
financial position, results of operations and cash flow.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted during the fourth quarter of the fiscal year
covered by this report to a vote of security holders through the solicitation of
proxies or otherwise.
10
<PAGE> 11
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock is traded on the NASDAQ Stock Market ("NASDAQ")
under the symbol NRTY. The table below sets forth the high and low sales prices
as reported by NASDAQ.
<TABLE>
<CAPTION>
Fiscal 1997 Fiscal 1996
-------------------- -------------------
High Low High Low
---- --- ---- ---
<S> <C> <C> <C> <C>
1st quarter $9.88 $6.00 $19.75 $5.75
2nd quarter $6.75 $5.38 $11.50 $7.00
3rd quarter $5.88 $4.63 $12.50 $6.00
4th quarter $6.25 $4.63 $ 8.94 $6.00
</TABLE>
The closing sales price of the Company's Common Stock on January 30, 1998
was $5.63 per share.
The Company has never paid cash or other dividends on its Common Stock.
The payment of dividends is within the discretion of the Company's Board of
Directors; however, in view of potential working capital needs and in order to
finance future growth, it is unlikely that the Company will pay any cash
dividends on its Common Stock in the foreseeable future. Pursuant to the
Company's secured term loan and revolving credit agreement, it may not pay cash
dividends without the prior written consent of the secured lenders so long as
any principal of or interest on loans or letters of credit issued thereunder
shall remain unpaid.
On January 30, 1998, there were approximately 84 record holders of the
Company's Common Stock and, the Company estimates, approximately 1,400
beneficial holders of the Company's Common Stock.
11
<PAGE> 12
ITEM 6. SELECTED FINANCIAL DATA
The following selected consolidated financial data should be read in
conjunction with Management's Discussion and Analysis of Financial Condition
and Results of Operations and the Consolidated Financial Statements and Notes
thereto included elsewhere in this Annual Report on Form 10-K.
<TABLE>
<CAPTION>
Fiscal Year Ended (1)
------------------------------------------------------------------------------------------
November 1, November 2, November 4, November 4, November 5,
1997 1996 1995 1994 1993
--------- -------- -------- -------- ---------
(In Thousands, Except Per Share Amounts)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales $ 218,782 $220,823 $227,530 $168,621 $ 133,329
Income (loss)
from operations (5,773)(4) 4,781 17,813 17,487 7,418
Net income (loss) (4,705)(4) 1,524 9,703 8,821(2) 2,692
Net income (loss)
per common
share ($ 0.63)(4) $ 0.20 $ 1.20 $ 1.22(2)(3) $ 0.43(3)
========= ======== ======== ======== =========
Weighted average
shares and
common share
equivalents
outstanding 7,488 7,781 8,056 7,084 5,086
========= ======== ======== ======== =========
BALANCE SHEET DATA:
Working capital $ 39,312 $ 40,057 $ 43,502 $ 34,586 $ 6,651
Total assets 118,762 61,109 73,524 55,331 35,226
Long-term debt,
excluding current
portion 12,000 -- -- -- 14,280
Class B Preferred
Stock -
redeemable -- -- -- -- 4,000
Stockholders'
equity
(deficiency) 42,163 48,286 50,469 40,300 (5,352)
</TABLE>
(Footnotes on following page)
12
<PAGE> 13
(1) The Company operates on a 52 or 53-week fiscal year. The Company's fiscal
year ends on October 31, if such date fell on a Saturday, or the first
Saturday following October 31. In fiscal years 1994 and prior, the
Company's fiscal year ended on October 31, if such date fell on a Friday,
or the first Friday following October 31. Closing its fiscal year on a
Saturday enables the Company to report the results of its operations in a
manner that is more consistent with both retail/apparel industry practice
and the close of its actual business cycle. Data for the fiscal year ended
November 1, 1997 reflects the acquisition of Miss Erika on September 30,
1997. Data for all fiscal years shown include the results of operations
for 52 weeks.
(2) Reflects net income after extraordinary item of $401,000, or $0.06 per
share. As a result of the repayment of long-term indebtedness in March
1994, the Company wrote off the remaining unamortized balance of deferred
financing costs of $704,000. This write-off was reflected as an
extraordinary item, net of tax of $303,000, in the consolidated statement
of income for the fiscal year ended November 4, 1994.
(3) Reflects net income available to holders of Common Stock after payment of
dividends on Class B Preferred Stock-redeemable of $168,000 and $480,000
in fiscal 1994 and 1993, respectively. This stock was redeemed by the
Company in March 1994.
(4) Loss from operations for fiscal year 1997 includes special charges of
approximately $9.4 million. On an after-tax basis, such special charges
aggregated $5.5 million, or $0.73 per share. (See "Management's Discussion
and Analysis of Financial Condition and Results of Operations").
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
General
As is the norm in the apparel industry, the Company engages in promotional
activity with its customers which affect the Company's sales, gross profit and
gross profit margins. Norton accomplishes this by granting its customers sales
allowances, while Miss Erika sells merchandise at promotional prices.
Accordingly, the Company's sales, gross profit and gross profit margins vary
from fiscal quarter to quarter and fiscal year to year. In addition, the Company
generally ships its products in accordance with normal apparel industry shipping
cycles. Correspondingly, sales, gross profit and gross profit margins may be
affected by the timing of shipping cycles or the delivery of finished goods.
This may result in shipments to customers occurring before or after a particular
fiscal quarter end, thereby affecting both fiscal quarter to quarter comparisons
and quarter to quarter results during a fiscal year.
The Company contracts for the manufacture of all of its products and
continues to increase the proportion of its products produced overseas. Contract
manufacturing allows the Company to avoid significant capital expenditures for
manufacturing facilities and the fixed costs of maintaining a large production
work force. Foreign contract manufacturing allows it to take advantage of lower
manufacturing costs, thereby allowing it to reduce prices to its customers. The
Company believes that foreign sourcing also allows the Company to avail itself
of a better equipped and more skilled labor force, thereby allowing it to
produce a higher quality, better valued product for its customers. The Company
offsets the longer lead-time necessary for foreign sourced fabrics and
manufacturing by early and timely attention to production planning.
The Company's continuing focus on improving profitability has led the
Company to undertake certain initiatives to improve gross profit and gross
profit margins. These include the implementation of certain merchandising
changes, as well as the closure of underperforming divisions.
In the merchandising area, the Company has recently reduced the number of
products (i.e. reduced the number of SKU's) offered in any particular collection
of its Norton McNaughton product line in an effort to minimize the number of
unrelated items unsold at the end of a selling period. The Company has
undertaken this initiative to reduce sales allowances required to compensate
retailers for retail price reductions taken to sell unrelated clothing items. In
addition, by taking advantage of product sourcing opportunities, the Company has
been able to offer quality and fashionable products to retailers at lower price
points in an effort to further enhance the sales of the Company's products to
retailers and to consumers and to further reduce sales allowances. These
initiatives have been undertaken without a change to quality of merchandise. As
a result of these initiatives, the Company anticipates that revenue levels in
fiscal 1998, excluding Miss Erika, will decrease from those in fiscal 1997.
The Company continually monitors the success, in terms of sales,
profitability and customer acceptance, of its product lines. In the event that
one or more of its product lines does not meet the Company's expectations, the
Company will discontinue their
13
<PAGE> 14
production. During the third quarter of fiscal 1997, the Company began selling
merchandise under its existing product lines to Sears, including Norton
McNaughton and Norton Studio. Correspondingly, the Company discontinued the
Modiano product line, which had been produced exclusively for Sears, in the
fourth quarter of fiscal 1997. In addition, the Company will discontinue the
Lauren Alexandra private-label product line produced for Federated Department
Stores and the catalog division in the first quarter of fiscal 1998, and the
Pant-her private-label product line produced for The May Department Stores
Company in the second quarter of fiscal 1998.
In addition, during the second quarter of fiscal 1997, the Company decided
to close its retail outlet stores due to this division's inability to meet the
Company's profitability targets. The Company utilized these retail outlets to
liquidate excess inventory, including end-of-stock, out-of-season and other
miscellaneous merchandise. Due to the Company's new merchandising strategy, the
Company believes that it will reduce its need to liquidate excess inventory. To
the extent that the Company is required to dispose of excess merchandise in the
future, the Company believes that it can do so on a more cost-effective basis
through discounters and other retailers.
In fiscal 1997, the aforementioned discontinued divisions contributed
approximately $33.4 million to net sales and experienced approximately breakeven
operating results. The Company recorded special charges in the fourth quarter of
fiscal 1997 of approximately $3.7 million in connection with the closure of
these divisions.
The Company implemented several other significant initiatives in fiscal
1997. In the second quarter of fiscal 1997, the Company appointed a new
President and Chief Operating Officer, and the Company's former President and a
consultant terminated their relationship with the Company. In addition, the
Company terminated certain lease obligations, and made the determination to
close its retail outlet stores, as discussed above. In connection with these
changes, the Company recorded special charges of approximately $5.7 million in
the second quarter of fiscal 1997.
During the fourth quarter of fiscal 1997, in an effort to further
streamline operations and in conjunction with the Company's decision to
discontinue the various divisions discussed earlier, the Company reduced its
workforce by approximately 33%. Other cost savings measures implemented included
merchandising changes, which will enable the Company to produce fewer samples,
and reductions in executive compensation and ancillary expenses. As a result of
these initiatives and those undertaken in the second quarter, the Company
anticipates that it (without taking Miss Erika into account) may achieve cost
savings of up to $3.0 million in fiscal 1998, although savings as a result of
workforce reductions will be offset by any new hires above the Company's plan.
This Management's Discussion and Analysis and other parts of this Annual
Report on Form 10-K contain forward-looking information about the Company's
anticipated operating results, including following the acquisition of Miss
Erika. The Company's ability to achieve its projected results is dependent on
many factors which are outside of management's control. Some of the most
significant factors would be a further deterioration in retailing conditions for
women's apparel, a further increase in price pressures and other competitive
factors, any of which could result in an unanticipated decrease in gross profit
margins, an unanticipated need to hire additional personnel above the Company's
plan, unanticipated problems arising with Miss Erika's business or the
integration of Miss Erika's business with that of the Company, the unanticipated
loss of a major customer, the unanticipated loss of a major contractor or
supplier, and weather conditions which could impact retail traffic and the
Company's ability to ship on a timely basis. Accordingly, there can be no
assurance that the Company, including following the acquisition of Miss Erika,
will achieve its anticipated operating results.
14
<PAGE> 15
Results of Operations
The following discussion and analysis should be read in conjunction with
the Company's Consolidated Financial Statements and the Notes thereto included
elsewhere herein. The following table is derived from the Company's Consolidated
Statements of Income and sets forth, for the periods indicated, selected
operating data as a percentage of net sales.
<TABLE>
<CAPTION>
Fiscal Year
----------------------------------------
1997(1) 1996 1995
------ ------ ------
<S> <C> <C> <C>
Net sales 100.0% 100.0% 100.0%
Cost of goods sold 82.1 79.7 75.5
------ ------ ------
Gross profit 17.9 20.3 24.5
Selling, general and administrative expenses 20.6 18.1 16.7
------ ------ ------
Income (loss) from operations (2.7) 2.2 7.8
Interest expense and amortization of deferred
financing costs 1.1 1.1 0.6
Other income, net (0.1) (0.1) (0.1)
------ ------ ------
Income (loss) before provision (benefit) for income taxes (3.7) 1.2 7.3
Provision (benefit) for income taxes (1.6) 0.5 3.0
------ ------ ------
Net income (loss) (2.1)% 0.7 % 4.3%
====== ====== ======
</TABLE>
- -----------------
(1) Includes Miss Erika from September 30, 1997.
Fiscal 1997 Compared to Fiscal 1996
Net sales decreased by $2.0 million, or 1.0 %, to $218.8 million in fiscal
1997 from $220.8 million in fiscal 1996. This decrease in net sales resulted
primarily from a decrease in net sales of $13.6 million in the Norton McNaughton
product lines, a decrease in net sales of $5.2 million in the Modiano product
line, a decrease in net sales of $3.8 million in the Pant-her product line, a
decrease in net sales of $2.1 million in the Lauren Alexandra product line and a
decrease in net sales of $3.0 million resulting from the discontinuation of the
Kate McNaughton product line in May 1996. These decreases were offset in part by
an increase in net sales of $10.2 million in the Norton Studio product line, an
increase in net sales of $2.8 million in the D.P.S. product line and net sales
of Erika product lines of $10.4 million, following the acquisition of Miss Erika
on September 30, 1997.
Gross profit and gross profit margin in fiscal 1997 were $39.2 million and
17.9%, respectively, as compared to gross profit and gross profit margin of
$44.8 million and 20.3%, respectively, in fiscal 1996. The gross profit in
fiscal 1997 reflects special charges taken in the fourth quarter of fiscal 1997
of approximately $3.7 million for sales allowances and inventory close-outs
related to the closure of certain underperforming divisions, including the
Modiano, Lauren Alexandra and catalog divisions, as well as the Pant-her
division, which will discontinue product shipments in the second quarter of
fiscal 1998. Excluding the special charges of $3.7 million, gross profit and
gross profit margin for fiscal 1997 would have been $42.9 million and 19.4%,
respectively. The decrease resulted primarily from sales of Norton McNaughton
holiday merchandise at lower gross profit margins than those experienced on such
merchandise in fiscal 1996.
Selling, general and administrative expenses ("SG&A" expenses) were $45.0
million in fiscal 1997, or 20.6% of net sales, as compared to $40.0 million in
fiscal 1996, or 18.1% of net sales. SG&A expenses in fiscal 1997 include special
charges of approximately $5.7 million for severance payments resulting from
management changes, the termination of certain lease obligations, and the
establishment of reserves for certain costs, including the closing of the
Company's retail outlet stores. Excluding this special charge of approximately
$5.7 million, SG&A expenses for fiscal 1997 would have been $39.3 million, or
18.0% of net sales. The net decrease of approximately $700,000, excluding the
special charges, resulted primarily from the implementation of certain cost
saving measures at the end of the third and fourth quarters of fiscal 1996.
These included a significant reduction in the Company's workforce due to a
further centralization of its production functions, resulting in savings of
approximately $1.3 million, the elimination of its in-store specialist program
which resulted in savings of approximately $600,000, and a reduction in
professional fees due primarily to the termination in the second quarter of a
consulting agreement. These decreases were offset in part by the addition of
approximately $1.7 million in overhead relating to Miss Erika, following the
acquisition on September 30, 1997.
Operating loss for fiscal 1997 was $5.8 million as compared to operating
income for fiscal 1996 of $4.8 million. Excluding the special charges of
approximately $9.4 million, the Company would have had operating income of
approximately $3.6 million. The reduction in fiscal 1997 operating income of
approximately $1.2 million, after adjusting for the special charges, resulted
primarily from the lower gross profit margins discussed above.
15
<PAGE> 16
Interest expense increased to $2.5 million in fiscal 1997 from $2.3
million in fiscal 1996. The increase is primarily attributable to incremental
interest expense associated with the acquisition of Miss Erika on September 30,
1997.
Fiscal 1996 Compared to Fiscal 1995
Net sales decreased by $6.7 million, or 2.9%, to $220.8 million in fiscal
1996 from $227.5 million in fiscal 1995. This decrease in net sales resulted
primarily from a decrease in net sales of $19.5 million in the Norton McNaughton
product lines and a decrease in net sales of $8.2 million resulting from the
discontinuation of the Kate McNaughton suit division in May 1996. The decrease
in net sales in the Norton McNaughton product lines resulted primarily from (i)
the reallocation by retailers of purchases from Norton McNaughton to Norton
Studio in fiscal 1996, (ii) a planned decrease in sales volume as the Company
began to minimize the production of merchandise which it did not anticipate
could be sold at a profit and (iii) the grant to customers of higher sales
allowances in fiscal 1996 as compared to fiscal 1995 due to competitive
pressures. These decreases were offset by an increase in net sales of $10.8
million resulting from the commencement of shipments of the Norton Studio
product line in January 1996, an increase in net sales of $8.1 million, in the
aggregate, resulting from shipments of the Lauren Alexandra and Danielle Paige
product lines, which commenced shipments in June 1995 and August 1995,
respectively, and an increase in net sales of $2.6 million, or 19.3%, in the
Pant-her product line.
Gross profit and gross profit margin in fiscal 1996 were $44.8 million and
20.3%, respectively, as compared to gross profit and gross profit margin of
$55.8 million and 24.5%, respectively, in fiscal 1996. The decrease was
primarily attributable to lower gross profit and gross profit margin experienced
in the Norton McNaughton product line in fiscal 1996 as compared to fiscal 1995
due to the sale of certain inventory at break-even or below cost, a higher level
of sales allowances granted to customers in all divisions in fiscal 1996 as
compared to fiscal 1995, and the liquidation of the Kate McNaughton inventory in
conjunction with the discontinuation of that product line in the second quarter
of fiscal 1996.
SG&A expenses were $40.0 million in fiscal 1996, or 18.1% of net sales, as
compared to $37.9 million in fiscal 1995, or 16.7% of net sales. The increase in
dollar amount of $2.1 million was primarily attributable to an increase in
personnel costs resulting from the hiring of additional production, design, and
selling staff necessitated by the introduction of the Danielle Paige product
line in August 1995 and the Norton Studio product line in January 1996, and an
increase in personnel costs, professional fees and other various expenses
related to the Company's implementation of new management information systems.
The increase in SG&A expenses as a percentage of net sales resulted from the
spreading of the increased SG&A dollars over lower net sales in fiscal 1996.
Operating income decreased to $4.8 million in fiscal 1996 from $17.8
million in fiscal 1995. The decrease in operating income resulted from the
decrease in gross profit and the increase in SG&A expenses in fiscal 1996 as
compared to fiscal 1995.
Interest expense increased to $2.3 million in fiscal 1996 from $1.4
million in fiscal 1995. The increase was caused by higher working capital
requirements associated with the build-up of inventory to support the
introduction of the Lauren Alexandra, Danielle Paige and Norton Studio product
lines, the earlier placement of goods into production in fiscal 1996 as compared
to fiscal 1995 and the purchase of common stock under the Company's previously
announced stock repurchase program.
Liquidity and Capital Resources
The Company's liquidity requirements arise from the funding of the
Company's working capital needs, primarily inventory and accounts receivable.
The Company's primary sources of working capital are cash flow from operations
and, prior to the closing of the new credit facility described below, advances
under the Company's factoring agreement for its trade accounts receivable (the
"Factoring Agreement" - see Note 4). The Company's borrowing requirements for
working capital purposes are seasonal, with peak working capital needs generally
arising at the end of the first and third fiscal quarters and extending through
the second and fourth fiscal quarters. The Company had working capital of $39.3
million at November 1, 1997 as compared to $40.1 million at November 2, 1996.
The Company sells its accounts receivable to a factor without recourse, up
to a maximum established by the factor for each customer. Receivables sold in
excess of these limitations are subject to recourse in the event of nonpayment
by the customer.
Prior to the Company's new revolving credit agreement entered into on
September 30, 1997, the Company borrowed up to 90% of the net balance due on
eligible accounts receivable, up to $10.0 million of additional advances and up
to $20.0 million in letter of credit financing. Interest on factor advances was
payable monthly at 0.75% below the NationsBank of Georgia, N.A. prime rate (the
"Nations Prime Rate") for amounts advanced which were less than the purchase
price of eligible accounts receivable, and 1.25% above the Nations Prime Rate
for amounts advanced in excess of the purchase price of eligible accounts
receivable.
16
<PAGE> 17
The Company entered into a $140 million secured term loan and revolving
credit facility with NationsBanc Commercial Corporation and The CIT
Group/Commercial Services, Inc. (the "Financing Agreement") on September 30,
1997 in connection with the acquisition of Miss Erika. The Financing Agreement
provides for a $15 million term loan and $125 million revolving credit facility
(the "RCF"). The Financing Agreement has an expiration date of October 2, 2000.
The proceeds were used to finance the acquisition of Miss Erika and will be used
for ongoing working capital requirements of the combined entity (see
"Business"). Pursuant to the new financing arrangement, the Company will
continue to factor its accounts receivable, as well as the accounts receivable
of Miss Erika.
Pursuant to the RCF, the Company has available credit of up to $125
million for working capital loans and letters of credit based upon a borrowing
base of 85% and 60% of Eligible Accounts Receivable and Eligible Inventory,
respectively, as defined in the Financing Agreement, and overadvances above the
borrowing base of $10 million at month end and up to $15 million permitted
mid-month ($20 million in the months of August, September and October), provided
that for any two consecutive month end periods, the combined overadvance amount
is zero. The RCF provides for maximum sublimits of $70 million for letters of
credit and $70 million for working capital loans.
The Financing Agreement provides for interest to be paid monthly in
arrears on revolving credit loan balances at an annual rate equal to, at the
Company's option, the prime rate at NationsBank, N.A. less 0.25%, or the LIBOR
rate plus 2.75%. The rates of interest decrease by 0.25% after the term loan is
repaid. Under the letter of credit facility, the Company is required to pay a
fee of 1.25% per annum of the stated amount of letters of credit upon opening,
in addition to lender administrative fees. In addition, the Financing Agreement
provides for a Co-agent fee of $150,000 per annum.
At November 1, 1997, borrowings and letters of credit outstanding under
the RCF were $44.5 million and $57.1 million, respectively. The Company had
total additional available credit of $8.4 million under the Financing Agreement
as of that date, pursuant to the borrowing base formula set forth therein.
The Financing Agreement provides for interest to be paid monthly in
arrears on the term loan at an annual rate equal to, at the Company's option,
the prime rate at NationsBank, N.A. plus (i) 0.25% on and before September 27,
1999 and (ii) 0.75% thereafter, or the LIBOR rate plus (i) 3.25% on and before
September 27, 1999 and (ii) 3.75% thereafter. The term loan requires monthly
principal payments of $250,000 on the first day of each month and a final
installment of $6,250,000 on October 2, 2000. The Financing Agreement also
provides for excess cash flow principal payments, as defined therein.
The Financing Agreement contains a number of restrictive covenants,
including covenants which limit incurrence of liens, indebtedness and capital
expenditures and payment of dividends, and requires that the Company maintain
certain financial ratios and meet specified minimum levels of working capital
and tangible net worth. The Company was in compliance with these covenants at
November 1, 1997. The Financing Agreement imposes decreasing prepayment
penalties under certain circumstances. All of the Company's assets are subject
to a security interest under the Financing Agreement.
The Company anticipates that in fiscal 1998 it will incur capital
expenditures of approximately $1,700,000 to $1,900,000, principally in
connection with the upgrade of its management information systems. The Company
expects to finance these capital expenditures from internally generated funds
and advances under the Financing Agreement. Additional expenditures will be
required to modify portions of the Company's software so that it will function
properly in the year 2000. Preliminary estimates of the total costs to be
incurred prior to the year 2000 are immaterial and will not have a material
impact on the Company's business, operations or its financial condition.
Maintenance or modification costs will be expensed as incurred, while the costs
of new software will be capitalized and amortized over the software's useful
life.
The Company's Board of Directors has authorized a stock repurchase
program, under which the Company may repurchase up to $7.5 million of the
Company's Common Stock. The Company expects that the shares may be purchased
from time to time in the open market and in block transactions. In fiscal 1996,
the Company purchased 396,000 shares of its stock in the open market at an
aggregate cost of approximately $3.8 million. In fiscal 1997, the Company
purchased 235,000 shares of its stock in the open market at an aggregate cost of
approximately $1.5 million. As of January 30, 1998, the Company has purchased a
total of 651,000 shares at an aggregate cost of approximately $5.5 million.
Management believes that cash generated from operations and advances under
its Financing Agreement will provide sufficient cash resources to finance the
Company's working capital and capital expenditure requirements for the current
and next fiscal year.
The moderate rate of inflation over the past few years has not had a
significant impact on the Company's sales or profitability. Inflation is not
expected to have a significant impact on the Company's business.
17
<PAGE> 18
Seasonality
Historically, the Company has achieved its highest sales in the fourth
quarter and, to a lesser extent, the second quarter of each fiscal year. As a
result of the acquisition of Miss Erika, the Company anticipates that it may
experience its highest sales in the second quarter, followed by the fourth
quarter. This pattern results primarily from the timing of shipments for each
season, although the timing of shipments can vary from quarter to quarter and
season to season. Spring season merchandise is generally shipped in the
Company's second fiscal quarter between February and April, and fall season
merchandise is generally shipped in the Company's fourth fiscal quarter between
August and October.
18
<PAGE> 19
PART III
ITEM 8. FINANCIAL STATEMENTS & SUPPLEMENTARY DATA
Information called for by this Item 8 is included following the "Index to
Consolidated Financial Statements, Financial Statement Schedule and
Supplementary Data" appearing at the end of this Annual Report on Form 10-K
beginning on page F-1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not Applicable.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information which is called for by this Item 10 is incorporated by
reference to the information set forth under the heading "Election of Directors"
in the Company's Proxy Statement relating to its 1998 Annual Meeting of
Stockholders to be filed pursuant to Regulation 14A (the "Company's 1998 Proxy
Statement").
ITEM 11. EXECUTIVE COMPENSATION
Information called for by this Item 11 is incorporated by reference to the
information set forth under the headings "Executive Compensation", "Compensation
of Directors" and "Employment Agreements" in the Company's 1998 Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information called for by this Item 12 is incorporated by reference to the
information set forth under the heading "Information Concerning Certain
Stockholders" in the Company's 1998 Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information called for by this Item 13 is incorporated by reference to the
information set forth under the headings "Election of Directors" and "Certain
Relationships and Related Transactions" in the Company's 1998 Proxy Statement.
19
<PAGE> 20
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report:
1. and 2. See "Index to Consolidated Financial Statements, Financial
Statement Schedule and Supplementary Data" on page F-1.
3. The Exhibits which are required to be filed as part of this Annual
Report on Form 10-K are listed on the Exhibit Index on page 21.
Exhibits 10.3, 10.3(a), 10.7 and 10.7(a), 10.8, 10.8(a) and
10.8(b), 10.9, 10.41, 10.42, 10.43, 10.44, 10.45, 10.46, 10.47 and
10.50 are the management contracts and compensatory plans or
arrangements required to be filed as part of this Annual Report on
Form 10-K.
(b) There was one Current Report on Form 8-K filed during the thirteen
weeks ended November 1, 1997. There was one Current Report on Form
8-K/A filed subsequent to November 1, 1997.
20
<PAGE> 21
Norton McNaughton, Inc. and Subsidiaries
Exhibit Index
<TABLE>
<CAPTION>
Exhibit
No. Description
--- -----------
<S> <C>
3.1 Certificate of Incorporation of Norton McNaughton, Inc., as
amended (incorporated herein by reference to Exhibit 3 to the
Registrant's Quarterly Report on Form 10-Q for the quarter
ended May 5, 1995).
3.2* By-Laws of the Company.
4.1* Specimen form of Common Stock Certificate.
4.2 Rights Agreement between Norton McNaughton, Inc. and American
Stock Transfer and Trust Company dated as of January 19, 1996
(incorporated herein by reference to Exhibit 4.1 to
Registrant's Current Report in Form 8-K filed January 26,
1996).
10.1***** 1994 Stock Option Plan.
10.1(a) Amended Norton McNaughton, Inc. 1994 Stock Option Plan
(incorporated herein by reference to Exhibit 10.2 to the
Registrant's Quarterly Report on Form 10-Q for the quarter
ended May 4,1996).
10.2** 1994 Employee Stock Purchase Plan.
10.3**** Amended and Restated Employment Agreement dated as of November
4, 1995 between Sanford Greenberg and Norton McNaughton of
Squire, Inc.
10.3(a)+ Amendment dated September 22, 1997 to Amended and Restated
Employment Agreement dated November 4, 1995 between Sanford
Greenberg and Norton McNaughton of Squire, Inc.
10.4**** Amended and Restated Employment Agreement dated as of November
4, 1995 between Norton Sperling and Norton McNaughton of
Squire, Inc.
10.4(a) Separation Agreement between Norton McNaughton of Squire, Inc.
and Norton Sperling dated May 3, 1997 (incorporated herein by
reference to Exhibit 10.1 to the Registrant's Current Report
on Form 8-K filed May 9, 1997).
10.4(b)xx Amendment dated November 25, 1997 to Separation Agreement
dated May 3, 1997 between Norton McNaughton of Squire, Inc.
and Norton Sperling.
10.5 Letter Agreement dated January 31, 1996 terminating Jay
Greenberg's Employment Agreement with Norton McNaughton of
Squire, Inc. dated as of November 5, 1993 (incorporated herein
by reference to Exhibit 10.2 to the Registrant's Quarterly
Report on Form 10-Q for the quarter ended February 3, 1996).
10.5(a) Consulting Agreement dated January 19, 1996 between Norton
McNaughton of Squire, Inc. and Jay Greenberg (incorporated
herein by reference to Exhibit 10.1 to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended February
3, 1996).
10.5(b) Separation Agreement between Jay Greenberg and Norton
McNaughton of Squire, Inc. dated May 2, 1997 (incorporated
herein by reference to Exhibit 10 to the Registrant's
Quarterly Report in Form 10-Q for the quarter ended May 3,
1997).
10.6* Amended and Restated Employment Agreement dated as of November
5, 1993 between Andrew Miller and Norton McNaughton of Squire,
Inc.
</TABLE>
21
<PAGE> 22
Norton McNaughton, Inc. and Subsidiaries
Exhibit Index (continued)
<TABLE>
<CAPTION>
Exhibit
No. Description
--- -----------
<S> <C>
10.6(a)+ Separation Agreement between Andrew Miller and Norton
McNaughton of Squire, Inc. dated December 17, 1997.
10.7* Amended and Restated Employment Agreement dated as of November
4, 1993 between Howard Greenberg and Norton McNaughton of
Squire, Inc.
10.7(a)xx Amendment dated October 22, 1997 to the Amended and Restated
Employment Agreement dated November 4, 1993 between Norton
McNaughton of Squire, Inc. and Howard Greenberg.
10.8* Employment Agreement dated as of November 4, 1993 between
Amanda J. Bokman and Norton McNaughton of Squire, Inc.
10.8(a) Amendment dated April 1, 1995 to Employment Agreement as of
November 4, 1993, between Amanda J. Bokman and Norton
McNaughton of Squire, Inc. (incorporated herein by reference
to Exhibit 10 to the Registrant's Quarterly Report on Form
10-Q for the quarter ended May 5, 1995).
10.8(b)xx Amendment dated October 22, 1997 to the Employment
Agreement dated November 4, 1993 between Norton
McNaughton of Squire, Inc. and Amanda J. Bokman.
10.9 Employment Agreement dated April 30, 1997 between Norton
McNaughton of Squire, Inc. and Peter Boneparth (incorporated
herein by reference to Exhibit 10 to the Registrant's Current
Report on Form 8-K filed May 9, 1997).
10.10x Agreement of Purchase and Sale made as of the 29th day of
August, 1997 by and among Miss Erika, Inc., a Delaware
corporation; Terbem Limited, a British Virgin Islands
corporation, Bobst Investment Corp., a British Virgin
Islands corporation, TCRI Offshore Partners C.V., a
Netherlands Antilles corporation and TCR International
Partners L.P., a Delaware limited partnership, Triumph
Capital, L.P. II, a Delaware limited partnership, Stuart
Bregman, Howard Zwilling, Sidney Goldstein, Christian
Baillet, ME Acquisition Corp., a Delaware corporation,
and Norton McNaughton, Inc., a Delaware corporation.
Schedules to this Agreement have been omitted and the
Company shall furnish to the Securities and Exchange
Commission a copy of any omitted schedule as supplemental
information upon request.
10.11x Financing Agreement dated as of September 25, 1997 by and
among Norton McNaughton, Inc., Norton McNaughton of Squire,
Inc., Miss Erika, Inc., the Financial Institutions from time
to time party thereto, NationsBanc Commercial Corporation and
The CIT Group/Commercial Services, Inc.
10.12x Factoring Agreement entered into between Miss Erika, Inc. and
Nationsbanc Commercial Corporation dated September 25, 1997.
10.13x Amended and Restated Factoring Agreement entered into between
Norton McNaughton of Squire, Inc. and NationsBanc Commercial
Corporation dated September 25, 1997.
10.14* Pledge Agreement dated as of January 14, 1994 made by Sanford
Greenberg in favor of Norton McNaughton of Squire, Inc.
</TABLE>
22
<PAGE> 23
Norton McNaughton, Inc. and Subsidiaries
Exhibit Index (continued)
<TABLE>
<CAPTION>
Exhibit
No. Description
--- -----------
<S> <C>
10.14(a)*** First Amendment to Pledge Agreement dated July 15, 1994,
amending and supplementing the Pledge Agreement dated as of
January 14, 1994 made by Sanford Greenberg in favor of Norton
McNaughton of Squire, Inc.
10.14(b) Second Amendment to Pledge Agreement dated March 27, 1995,
amending and supplementing the Pledge Agreement dated as of
January 14, 1994 made by Sanford Greenberg in favor of Norton
McNaughton of Squire, Inc. (incorporated herein by reference
to Exhibit 10.1 to the Registrant's Quarterly Report on Form
10-Q for the quarter ended May 5, 1995).
10.15* Pledge Agreement dated as of January 14, 1994 made by Norton
Sperling in favor of Norton McNaughton of Squire, Inc.
10.16*** First Amendment to Pledge Agreement dated July 15, 1994,
amending and supplementing the Pledge Agreement dated as of
January 14, 1994 made by Norton Sperling in favor of Norton
McNaughton of Squire, Inc.
10.16(a) Second Amendment to Pledge Agreement dated March 27, 1995,
amending and supplementing the Pledge Agreement dated as of
January 14, 1994 made by Norton Sperling in favor of Norton
McNaughton of Squire, Inc. (incorporated herein by reference
to Exhibit 10.2 to the Registrant's Quarterly Report on Form
10-Q for the quarter ended May 5, 1995).
10.17* Pledge Agreement dated as of January 14, 1994 made by Jay
Greenberg in favor of Norton McNaughton of Squire, Inc.
10.17(a)*** First Amendment to Pledge Agreement dated July 15, 1994,
amending and supplementing the Pledge Agreement dated as of
January 14, 1994 made by Jay Greenberg in favor of Norton
McNaughton of Squire, Inc.
10.17(b) Second Amendment to Pledge Agreement dated March 27, 1995,
amending and supplementing the Pledge Agreement dated as of
January 14, 1994 made by Jay Greenberg in favor of Norton
McNaughton of Squire, Inc. (incorporated herein by reference
to Exhibit 10.3 to the Registrant's Quarterly Report on Form
10-Q for the quarter ended May 5, 1995).
10.18* Pledge Agreement dated as of January 14, 1994 made by Andrew
Miller in favor of Norton McNaughton of Squire, Inc.
10.18(a)*** First Amendment to Pledge Agreement dated July 15, 1994,
amending and supplementing the Pledge Agreement dated as of
January 14, 1994 made by Andrew Miller in favor of Norton
McNaughton of Squire, Inc.
10.18(b) Second Amendment to Pledge Agreement dated March 27, 1995,
amending and supplementing the Pledge Agreement dated as of
January 14, 1994 made by Andrew Miller in favor of Norton
McNaughton of Squire, Inc. (incorporated herein by reference
to Exhibit 10.4 to the Registrant's Quarterly Report on Form
10-Q for the quarter ended May 5, 1995).
</TABLE>
23
<PAGE> 24
Norton McNaughton, Inc. and Subsidiaries
Exhibit Index (continued)
<TABLE>
<CAPTION>
Exhibit
No. Description
--- -----------
<S> <C>
10.19* Pledge Agreement dated as of January 14, 1994 made by Howard
Greenberg in favor of Norton McNaughton of Squire, Inc.
10.19(a)*** First Amendment to Pledge Agreement dated July 15, 1994,
amending and supplementing the Pledge Agreement dated as of
January 14, 1994 made by Howard Greenberg in favor of Norton
McNaughton of Squire, Inc.
10.19(b) Second Amendment to Pledge Agreement dated March 27, 1995,
amending and supplementing the Pledge Agreement dated as of
January 14, 1994 made by Howard Greenberg in favor of Norton
McNaughton of Squire, Inc. (incorporated herein by reference
to Exhibit 10.5 to the Registrant's Quarterly Report on Form
10-Q for the quarter ended May 5, 1995).
10.20* Amended and Restated Non-Negotiable Limited Recourse
Promissory Note of Sanford Greenberg dated as of November 5,
1993 payable to Norton McNaughton of Squire, Inc. in the
principal amount of $920,000.
10.20(a)*** Second Amended and Restated Non-Negotiable Limited Recourse
Promissory Note dated July 15, 1994, amending the Amended and
Restated Non-Negotiable Limited Recourse Promissory Note of
Sanford Greenberg dated as of November 5, 1993 payable to
Norton McNaughton of Squire, Inc. in the principal amount of
$920,000.
10.20(b) Third Amended and Restated Non-Negotiable Limited Recourse
Promissory Note dated March 27, 1995 amending the Amended and
Restated Non-Negotiable Limited Recourse Promissory Note of
Sanford Greenberg dated as of November 5, 1993 payable to
Norton McNaughton of Squire, Inc. in the principal amount of
$920,000 (incorporated herein by reference to Exhibit 10.6 to
the Registrant's Quarterly Report on Form 10-Q for the quarter
ended May 5, 1995).
10.21* Amended and Restated Non-Negotiable Limited Recourse
Promissory Note of Norton Sperling dated as of November 5,
1993 payable to Norton McNaughton of Squire, Inc. in the
principal amount of $920,000.
10.21(a)*** Second Amended and Restated Non-Negotiable Limited Recourse
Promissory Note dated July 15, 1994, amending the Amended and
Restated Non-Negotiable Limited Recourse Promissory Note of
Norton Sperling dated as of November 5, 1993 payable to Norton
McNaughton of Squire, Inc. in the principal amount of $920,000
(incorporated herein by reference to Exhibit 10.7 to the
Registrant's Quarterly Report on Form 10-Q for the quarter
ended May 5, 1995).
10.22* Amended and Restated Non-Negotiable Limited Recourse
Promissory Note of Jay Greenberg dated as of November 5, 1993
payable to Norton McNaughton of Squire, Inc. in the principal
amount of $920,000.
10.22(a)*** Second Amended and Restated Non-Negotiable Limited Recourse
Promissory Note dated July 15, 1994, amending the Amended and
Restated Non-Negotiable Limited Recourse Promissory Note of
Jay Greenberg dated as of November 5, 1993 payable to Norton
McNaughton of Squire, Inc. in the principal amount of
$920,000.
</TABLE>
24
<PAGE> 25
Norton McNaughton, Inc. and Subsidiaries
Exhibit Index (continued)
<TABLE>
<CAPTION>
Exhibit
No. Description
--- -----------
<S> <C>
10.22(b) Third Amended and Restated Non-Negotiable Limited Recourse
Promissory Note dated March 27, 1995 amending the Amended and
Restated Non-Negotiable Limited Recourse Promissory Note of
Jay Greenberg dated as of November 5, 1993 payable to Norton
McNaughton of Squire, Inc. in the principal amount of $920,000
(incorporated herein by reference to Exhibit 10.8 to the
Registrant's Quarterly Report on Form 10-Q for the quarter
ended May 5, 1995).
10.23* Amended and Restated Non-Negotiable Limited Recourse
Promissory Note of Andrew Miller dated as of November 5, 1993
payable to Norton McNaughton of Squire, Inc. in the principal
amount of $120,000.
10.23(a)*** Second Amended and Restated Non-Negotiable Limited Recourse
Promissory Note dated July 15, 1994, amending the Amended and
Restated Non-Negotiable Limited Recourse Promissory Note of
Andrew Miller dated as of November 5, 1993 payable to Norton
McNaughton of Squire, Inc. in the principal amount of
$120,000.
10.23(b) Third Amended and Restated Non-Negotiable Limited Recourse
Promissory Note dated March 27, 1995 amending the Amended and
Restated Non-Negotiable Limited Recourse Promissory Note of
Andrew Miller dated as of November 5, 1993 payable to Norton
McNaughton of Squire, Inc. in the principal amount of $120,000
(incorporated herein by reference to Exhibit 10.9 to the
Registrant's Quarterly Report on Form 10-Q for the quarter
ended May 5, 1995).
10.24* Amended and Restated Non-Negotiable Limited Recourse
Promissory Note of Howard Greenberg dated as of November 5,
1993 payable to Norton McNaughton of Squire, Inc. in the
principal amount of $120,000.
10.24(a)*** Second Amended and Restated Non-Negotiable Limited Recourse
Promissory Note dated July 15, 1994, amending the Amended and
Restated Non-Negotiable Limited Recourse Promissory Note of
Howard Greenberg dated as of November 5, 1993 payable to
Norton McNaughton of Squire, Inc. in the principal amount of
$120,000.
10.24(b) Third Amended and Restated Non-Negotiable Limited Recourse
Promissory Note dated March 27, 1995 amending the Amended and
Restated Non-Negotiable Limited Recourse Promissory Note of
Howard Greenberg dated as of November 5, 1993 payable to
Norton McNaughton of Squire, Inc. in the principal amount of
$120,000 (incorporated herein by reference to Exhibit 10.10 to
the Registrant's Quarterly Report on Form 10-Q for the quarter
ended May 5, 1995).
10.25* Form of Indemnification Agreement with Directors and Executive
Officers.
10.26* Agreement dated March 17, 1993 between Norton McNaughton of
Squire, Inc. and Toni-Linda Productions, Inc., as amended
December 15, 1993.
10.26(a)****Amendment dated November 7, 1995 to Agreement dated March 17,
1993 between Norton McNaughton of Squire, Inc. and Toni-Linda
Productions, Inc., now known as Cutting Edge Services, Inc.
10.27* Sublease Agreement dated January 17, 1994 between Norton
McNaughton of Squire, Inc. and Toni-Linda Productions, Inc.
</TABLE>
25
<PAGE> 26
Norton McNaughton, Inc. and Subsidiaries
Exhibit Index (continued)
<TABLE>
<CAPTION>
Exhibit
No. Description
--- -----------
<S> <C>
10.27(a)****Amendment dated November 7, 1995 to Sublease Agreement dated
January 17, 1994 between Norton McNaughton of Squire, Inc. and
Toni-Linda Productions, Inc., now known as Cutting Edge
Services, Inc.
10.28* Limited Guaranty dated December 30, 1993 made by Norton
McNaughton of Squire, Inc. in favor of Braun Management Inc.
10.28(a)****Amendment dated November 7, 1995 to Limited Guaranty dated
December 30, 1993 made by Norton McNaughton of Squire, Inc. in
favor of Braun Management Inc.
10.29* Agreement dated January 7, 1993 between Norton McNaughton of
Squire, Inc. and Railroad Enterprises, Inc.
10.30 6.00% Promissory Note of Railroad Enterprises, Inc. dated May
1, 1996 payable to Norton McNaughton of Squire, Inc., in the
principal amount of $300,000 (incorporated herein by reference
to Exhibit 10.1 to the Registrant's Quarterly Report on Form
10-Q for the quarter ended May 4, 1996).
10.31* Guaranty dated May 19, 1992 made by Norton McNaughton of
Squire, Inc. in favor of 5 Empire Boulevard Associates.
10.32* Agreement dated February 1, 1993 between Norton McNaughton of
Squire, Inc. and May Company.
10.33* Lease Agreement dated December 7, 1993 between Gettinger
Associates and Norton McNaughton of Squire, Inc.
10.34* Lease Agreement dated October 4, 1991 between 1400 Broadway
Associates and McNaughton Affiliates Inc.
10.35* Lease Agreement dated April 30, 1993 between The Arsenal
Company and Norton McNaughton of Squire, Inc.
10.36 Lease Agreement dated February 1, 1995 between Norton
McNaughton of Squire, Inc. and The Arsenal Company
(incorporated herein by reference to Exhibit 10 to the
Registrant's Quarterly Report on Form 10-Q for the quarter
ended February 3, 1995).
10.36(a) Cancellation Agreement between The Arsenal Company, LLC and
Norton McNaughton of Squire, Inc. dated April 30, 1997
(incorporated herein by reference to Exhibit 10.1 to the
Registrant's Quarterly Report on Form 10-Q for the quarter
ended May 3, 1997).
10.37**** Split Dollar Agreement dated March 8, 1994 between Norton
McNaughton, Inc. and Northwestern Mutual Life Insurance
Company for Sanford Greenberg.
10.38**** Split Dollar Agreement dated March 8, 1994 between Norton
McNaughton, Inc. and Northwestern Mutual Life Insurance
Company for Norton Sperling.
10.39**** Split Dollar Agreement dated March 8, 1994 between Norton
McNaughton, Inc. and Northwestern Mutual Life Insurance
Company for Jay Greenberg.
</TABLE>
26
<PAGE> 27
Norton McNaughton, Inc. and Subsidiaries
Exhibit Index (continued)
<TABLE>
<CAPTION>
Exhibit
No. Description
--- -----------
<S> <C>
10.40 5.96% Non-Negotiable Promissory Note between Jay Greenberg and
Norton McNaughton of Squire, Inc. dated December 1, 1996 in
the principal amount of $50,000 (incorporated herein by
reference to Exhibit 10 to the Registrant's Quarterly Report
on Form 10-Q for the quarter ended February 1, 1997).
10.41xxx ME Acquisition Corp. Bonus Plan for Senior Executives.
10.42xxx Employment Agreement dated August 29, 1997 between ME
Acquisition Corp. and Stuart Bregman.
10.43xxx Employment Agreement dated August 29, 1997 between ME
Acquisition Corp. and Howard Zwilling.
10.44xxx Employment Agreement dated August 29, 1997 between ME
Acquisition Corp. and Roberta Ciacci.
10.45xxx Employment Agreement dated August 29, 1997 between ME
Acquisition Corp and Samuel Glaser.
10.46xxx Employment Agreement dated August 29, 1997 between ME
Acquisition Corp. and Elizabeth Moser.
10.47xxx Employment Agreement dated August 29, 1997 between ME
Acquisition Corp. and Kenny Tse.
10.48+ Agency Agreement dated October 9, 1997 between The Ozer Group
LLC and Norty's, Inc.
10.49+ Consulting Agreement dated November 7, 1997 between DJM Asset
Management, Inc. and Norton McNaughton of Squire, Inc.
10.50xxxx Norton McNaughton, Inc. Executive Stock Option Plan.
10.51+ Lease Agreement dated December 16, 1993 between Gettinger
Associates, LP and Miss Erika, Inc.
10.52+ Lease Agreement dated April 1, 1975 between Empire Carpet
Corporation and Miss Erika, Inc.
10.52(a)+ Amendment dated January 17, 1978 to Lease Agreement dated
April 1, 1975 between Empire Carpet Corporation and Miss
Erika, Inc.
10.52(b)+ Second Amendment dated February 17, 1981 to Lease Agreement
dated April 1, 1975 between Empire Carpet Corporation and Miss
Erika, Inc.
10.52(c)+ Third Amendment dated March 5, 1982 to Lease Agreement dated
April 1, 1975 between Empire Carpet Corporation and Miss
Erika, Inc.
10.52(d)+ Fourth Amendment dated August 15, 1983 to Lease Agreement
dated April 1, 1975 between Empire Carpet Corporation and Miss
Erika, Inc.
10.52(e)+ Lease Modification and Extension Agreement dated January 24,
1985 between Teterboro Associates and Miss Erika, Inc. to
Lease Agreement dated April 1, 1975.
</TABLE>
27
<PAGE> 28
Norton McNaughton, Inc. and Subsidiaries
Exhibit Index (continued)
<TABLE>
<CAPTION>
Exhibit
No. Description
--- -----------
<S> <C>
10.52(f)+ Amendment to Lease dated August 8, 1985 to Lease Modification
and Extension Agreement dated January 24, 1985 between
Teterboro Associates and Miss Erika, Inc.
10.52(g)+ Second Lease Modification and Extension Agreement dated
December 18, 1986 to the Amended Lease Modification and
Extension Agreement dated August 8, 1985 between Teterboro
Associates and Miss Erika, Inc.
10.52(h)+ Third Lease Modification and Extension Agreement dated January
18, 1989 to the Amended Lease Modification and Extension
Agreement dated August 8, 1985 between Teterboro Associates
and Miss Erika, Inc.
10.52(i)+ Fourth Lease Modification and Extension Agreement dated June,
1991 to the Amended Lease Modification and Extension Agreement
dated August 8, 1985 between Teterboro Associates and Miss
Erika, Inc.
10.52(j)+ Fifth Lease Modification and Extension Agreement dated May 30,
1995 to the Amended Lease Modification and Extension Agreement
dated August 8, 1985 between Teterboro Associates and Miss
Erika, Inc.
10.52(k)+ Sixth Lease Modification and Extension Agreement dated March
5, 1997 to the Amended Lease Modification and Extension
Agreement dated August 8, 1985 between Teterboro Associates
and Miss Erika, Inc.
21+ List of Registrant's Subsidiaries.
23+ Consent of Ernst & Young LLP.
27+ Financial Data Schedule (For SEC use only).
99 Press Release dated January 30, 1997 (incorporated herein by
reference to Exhibit 99 to the Registrant's Current Report on
Form 8-K filed January 31, 1997).
99(a) Press Release dated May 6, 1997 (incorporated herein by
reference to Exhibit 99 to the Registrant's Current Report on
Form 8-K filed May 9, 1997).
99(b) Press Release dated September 4, 1997 (incorporated herein by
reference to Exhibit 99 to the Registrant's Current Report on
Form 8-K filed September 11, 1997).
</TABLE>
* Incorporated herein by reference to Exhibits to the Registrant's
Registration Statement on Form S-1 No. 33-74200.
** Incorporated herein by reference to the Registrant's Registration
Statement on Form S-8 No. 33-80370.
*** Incorporated herein by reference to Exhibits to the Registrant's Annual
Report on Form 10-K for the period ended November 4, 1994.
**** Incorporated herein by reference to Exhibits to the Registrant's Annual
Report on Form 10-K for the period ended November 4, 1995.
28
<PAGE> 29
Norton McNaughton, Inc. and Subsidiaries
Exhibit Index (continued)
***** Incorporated herein by reference to the Registrant's Registration
Statement on Form S-8 No. 33-92252.
x Incorporated herein by reference to the Registrant's Current Report
on Form 8-K filed October 15, 1997
xx Incorporated herein by reference to the Registrant's Current Report on
Form 8-K/A filed December 15, 1997.
xxx Incorporated herein by reference to the Registrant's Registration
Statement on Form S-8 No. 333-39049.
xxxx Incorporated herein by reference to the Registrant's Registration
Statement on Form S-8 No. 333-29195.
+ Filed herewith.
Exhibits have been included in copies of this Report filed with the Securities
and Exchange Commission. Stockholders of the Company will be provided with
copies of these exhibits upon written request to the Company.
29
<PAGE> 30
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.
Date: February 12, 1998 NORTON MCNAUGHTON, INC.
(Registrant)
By: /s/ Sanford Greenberg
--------------------------------
Sanford Greenberg, Chairman of the Board,
Chief Executive Officer and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Annual Report on Form 10-K has been signed below by the following persons on
behalf of the registrant and in the capacities indicated on February 12, 1998.
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
/s/ Sanford Greenberg Chairman of the Board, Chief Executive Officer
- ------------------------------ and Director
(Sanford Greenberg)
/s/ Peter Boneparth President, Chief Operating Officer and Director
- ------------------------------
(Peter Boneparth)
/s/ Amanda J. Bokman Vice President, Chief Financial Officer, Secretary,
- ------------------------------ Treasurer and Director (principal financial and
(Amanda J. Bokman) accounting officer)
/s/ David M. Blumberg Director
- ------------------------------
(David M. Blumberg)
/s/ Stuart Bregman Director
- ------------------------------
(Stuart Bregman)
/s/ Bradley P. Cost Director
- ------------------------------
(Bradley P. Cost)
/s/ Jerald Politzer Director
- ------------------------------
(Jerald Politzer)
</TABLE>
30
<PAGE> 31
NORTON MCNAUGHTON, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS, FINANCIAL STATEMENT SCHEDULE AND
SUPPLEMENTARY DATA
<TABLE>
<CAPTION>
Page
----
<S> <C>
Financial Statements:
Report of Independent Auditors F-2
Consolidated Balance Sheets at November 1, 1997 and November 2, 1996 F-3
Consolidated Statements of Operations for Each of the Three Years
in the Period Ended November 1, 1997 F-4
Consolidated Statements of Stockholders' Equity for Each of the
Three Years in the Period Ended November 1, 1997 F-5
Consolidated Statements of Cash Flows for Each of the Three Years
in the Period Ended November 1, 1997 F-6
Notes to Consolidated Financial Statements F-7
Financial Statement Schedule:
II - "Valuation and Qualifying Accounts" F-19
Note: Schedules other than that referred to above have been omitted as
inapplicable or not required under the instructions contained in
Regulation S-X or the information is included elsewhere in the
financial statements or the notes thereto.
Supplementary Data:
Quarterly Financial Data (Unaudited) F-20
</TABLE>
F-1
<PAGE> 32
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Stockholders
Norton McNaughton, Inc.
We have audited the accompanying consolidated balance sheets of Norton
McNaughton, Inc. and Subsidiaries (the "Company") as of November 1, 1997 and
November 2, 1996, and the related consolidated statements of operations,
stockholders' equity and cash flows for each of the three years in the period
ended November 1, 1997. Our audits also included the financial statement
schedule listed in the Index at Item 14(a). These financial statements and
schedule are the responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements and schedule based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Norton McNaughton, Inc. and Subsidiaries at November 1, 1997 and November 2,
1996 and the consolidated results of their operations, changes in their
stockholders' equity and their cash flows for each of the three years in the
period ended November 1, 1997 in conformity with generally accepted accounting
principles. Also, in our opinion, the related financial statement schedule, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects, the information set forth therein.
ERNST & YOUNG LLP
New York, New York
January 30, 1998
F-2
<PAGE> 33
NORTON MCNAUGHTON, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
NOVEMBER 1, NOVEMBER 2,
1997 1996
--------- --------
(Dollars in Thousands)
<S> <C> <C>
ASSETS
Current assets:
Cash $ 529 $ 333
Due from factor 64,644 30,794
Inventory 28,590 17,939
Income taxes receivable 3,201 99
Prepaid expenses and other current assets 5,227 2,880
--------- --------
Total current assets 102,191 52,045
Fixed assets, net 5,899 5,077
Notes receivable from management stockholders 2,655 2,655
Goodwill 3,853 --
Deferred financing costs 2,481 --
Other assets 1,683 1,332
--------- --------
Total assets $ 118,762 $ 61,109
========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 10,420 $ 11,334
Revolving credit loan 44,473 --
Term loan payable 3,000 --
Accrued expenses and other current liabilities 4,986 654
--------- --------
Total current liabilities 62,879 11,988
Term loan payable 12,000 --
Other long-term liabilities 1,720 835
--------- --------
Total liabilities 76,599 12,823
Commitments and contingencies
Stockholders' equity:
Common stock, $0.01 par value, authorized 20,000,000 shares, 8,060,640
and 8,052,718 shares issued, respectively, and 7,409,640 and 7,636,718
shares outstanding, respectively 81 80
Capital in excess of par 23,903 23,865
Retained earnings 23,714 28,419
Treasury stock, at cost, 651,000 shares and 416,000 shares, respectively (5,535) (4,078)
--------- --------
Total stockholders' equity 42,163 48,286
--------- --------
Total liabilities and stockholders' equity $ 118,762 $ 61,109
========= ========
</TABLE>
See accompanying notes.
F-3
<PAGE> 34
NORTON MCNAUGHTON, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
YEARS ENDED
------------------------------------------------
NOVEMBER 1, NOVEMBER 2, NOVEMBER 4,
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Net sales $ 218,782 $ 220,823 $ 227,530
Cost of goods sold 179,556 176,063 171,780
--------- --------- ---------
Gross profit 39,226 44,760 55,750
Selling, general and administrative expenses 44,999 39,979 37,937
--------- --------- ---------
Income (loss) from operations (5,773) 4,781 17,813
Interest expense and amortization of deferred financing costs 2,500 2,294 1,440
Other income, net (168) (164) (218)
--------- --------- ---------
Income (loss) before provision (benefit) for income taxes (8,105) 2,651 16,591
Provision (benefit) for income taxes (3,400) 1,127 6,888
--------- --------- ---------
Net income (loss) $ (4,705) $ 1,524 $ 9,703
========= ========= =========
PER SHARE DATA:
Net income (loss) $ (0.63) $ 0.20 $ 1.20
========= ========= =========
Weighted average number of common shares and common
stock equivalents outstanding 7,488 7,781 8,056
========= ========= =========
</TABLE>
See accompanying notes.
F-4
<PAGE> 35
NORTON MCNAUGHTON, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED NOVEMBER 1, 1997, NOVEMBER 2, 1996, AND NOVEMBER 4, 1995
(In Thousands)
<TABLE>
<CAPTION>
COMMON STOCK
----------------- CAPITAL IN RETAINED TREASURY
SHARES AMOUNT EXCESS OF PAR EARNINGS STOCK TOTAL
------ ------ ------------- -------- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Balance at November 4, 1994 7,999 $80 $23,028 $ 17,192 $ -- $ 40,300
Net income for the year -- -- -- 9,703 -- 9,703
Treasury stock acquired, 20,000
shares, at cost -- -- -- -- (326) (326)
Issuance of common stock
through stock purchase plan 4 -- 57 -- -- 57
Issuance of common stock
through stock option plan 44 -- 609 -- -- 609
Tax benefit from issuance of
common stock through stock
option plan -- -- 126 -- -- 126
----- --- ------- -------- ------- --------
Balance at November 4, 1995 8,047 80 23,820 26,895 (326) 50,469
Net income for the year -- -- -- 1,524 -- 1,524
Treasury stock acquired, 396,000
shares, at cost -- -- -- -- (3,752) (3,752)
Issuance of common stock
through stock purchase plan 6 -- 45 -- -- 45
----- --- ------- -------- ------- --------
Balance at November 2, 1996 8,053 80 23,865 28,419 (4,078) 48,286
Net loss for the year -- -- -- (4,705) -- (4,705)
Treasury stock acquired, 235,000
shares, at cost -- -- -- -- (1,457) (1,457)
Issuance of common stock
through stock purchase plan 8 1 38 -- -- 39
----- --- ------- -------- ------- --------
Balance at November 1, 1997 8,061 $81 $23,903 $ 23,714 $(5,535) $ 42,163
===== === ======= ======== ======= ========
</TABLE>
See accompanying notes.
F-5
<PAGE> 36
NORTON MCNAUGHTON, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
<TABLE>
<CAPTION>
YEAR ENDED
-----------------------------------------
NOVEMBER 1, NOVEMBER 2, NOVEMBER 4,
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Net income (loss) $ (4,705) $ 1,524 $ 9,703
Adjustments to reconcile net income (loss) to net cash provided by
(used for) operating activities:
Depreciation and amortization of fixed assets 931 628 447
Write off of leasehold improvements 492 -- --
Write off of fixed assets 135 -- --
Amortization of intangibles 131 34 34
Changes in operating assets and liabilities:
Due from factor (19,014) 5,016 (5,171)
Inventory 4,084 9,577 (10,876)
Trade credits receivable (1,872) -- --
Income taxes receivable (3,102) 291 (7,393)
Prepaid expenses and other current assets (73) (1,111) (100)
Other assets (333) (295) (564)
Accounts payable (2,598) (10,305) 8,629
Accrued expenses and other current liabilities (736) (134) 6,212
Other long-term liabilities 170 207 186
-------- -------- --------
Net cash (used for) provided by operating activities (26,490) 5,432 1,107
-------- -------- --------
INVESTING ACTIVITIES
Purchase of fixed assets (1,571) (1,841) (1,599)
Purchase of net assets of Miss Erika, net of cash of $70 (24,553) -- --
Notes receivable from management stockholders -- 5 243
-------- -------- --------
Net cash used for investing activities (26,124) (1,836) (1,356)
-------- -------- --------
FINANCING ACTIVITIES
Purchase of treasury stock (1,457) (3,752) (326)
Net advances under revolving credit agreement 44,287 -- --
Repayment of acquired company's debt (2,500) -- --
Deferred financing costs (2,559) -- --
Proceeds from issuance of common stock, net 39 45 792
Proceeds from term loan payable 15,000 -- --
-------- -------- --------
Net cash provided by (used for) financing activities 52,810 (3,707) 466
-------- -------- --------
Increase (decrease) in cash 196 (111) 217
Cash at beginning of year 333 444 227
-------- -------- --------
Cash at end of year $ 529 $ 333 $ 444
======== ======== ========
SUPPLEMENTAL DISCLOSURES
Income taxes paid $ 361 $ 529 $ 8,429
Interest paid $ 1,999 $ 2,272 $ 1,440
</TABLE>
See accompanying notes.
F-6
<PAGE> 37
NORTON MCNAUGHTON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND PRINCIPLES OF CONSOLIDATION
Norton McNaughton, Inc. (the "Company") was incorporated in Delaware on
December 30, 1993. On January 14, 1994, in a reorganization effected in order to
form a Delaware holding company, the Company became the owner of all of the
issued and outstanding stock of Norton McNaughton of Squire, Inc., a New York
corporation.
On September 30, 1997, the Company completed the acquisition of
substantially all the assets and the assumption of substantially all the
liabilities of Miss Erika, Inc. ("Miss Erika"), a privately-held manufacturer of
women's moderate apparel. The Company will, through a wholly owned subsidiary,
continue Miss Erika's business. The terms of the transaction provided for the
payment of approximately $24 million in cash, with additional consideration
payable at the Company's option in cash or Company common stock based on the
profitability of Miss Erika in fiscal years 1998 and 1999.
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries (the "Company"). All material intercompany
balances and transactions have been eliminated in consolidation.
PRINCIPAL BUSINESS ACTIVITY
The Company designs, contracts for the manufacture of and markets a broad
line of brand name, moderately priced women's career and casual clothing. The
Company's customer base consists principally of department stores, national
chains, mass merchandisers and specialty retailers.
FISCAL YEAR
The Company's fiscal year ends on October 31, if such date falls on a
Saturday, or the first Saturday following October 31. Data for each of the
fiscal years ended November 1, 1997, November 2, 1996 and November 4, 1995
includes the results of operations for 52 weeks. Data for the fiscal year ended
November 1, 1997 reflects the acquisition of Miss Erika on September 30, 1997.
INVENTORY
Inventory is stated at the lower of cost (first-in, first-out) or market.
FIXED ASSETS
Fixed assets are stated at cost. Depreciation of fixed assets is provided
for by the straight-line method over the estimated useful lives of the assets
ranging from five to seven years for financial reporting purposes and by
accelerated methods for income tax purposes. Leasehold improvements are
amortized using the straight-line method over the term of the related lease.
DEFERRED FINANCING COSTS
Deferred financing costs were incurred in fiscal 1997 in connection with
obtaining the credit facility described in Note 8. Financing costs are amortized
on a straight line basis over the three year term of the related credit
facility.
REVENUE RECOGNITION
Revenues are recorded at the time of shipment of merchandise. The Company
establishes reserves for sales discounts, returns and allowances.
GOODWILL
Goodwill resulting from the acquisition of Miss Erika is being amortized
by the straight-line method over twenty years.
F-7
<PAGE> 38
NORTON MCNAUGHTON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
DEFERRED RENT
Rent expense on leases is recorded by the straight-line method over the
lease period. The excess of rent expense over the actual cash paid has been
recorded as other long-term liabilities.
EARNINGS PER SHARE
Net income (loss) per share is computed based on the weighted average
number of common shares outstanding during the periods presented, including
common stock equivalents in the net income per share computation. Common stock
equivalents are excluded from the net loss per share computations because they
are antidilutive.
In February 1997, the Financial Accounting Standards Board issued
Statement No. 128, "Earnings per Share", which is required to be adopted for
both interim and annual financial statements for periods ending after December
15, 1997. At that time, the Company will be required to change the method
currently used to compute earnings per share and to restate all prior periods.
Under the new requirements for calculating primary earnings per share, the
dilutive effect of stock options will be excluded. The impact of Statement No.
128 on the calculation of earnings per share for the fiscal year ended November
1, 1997 is not expected to be material.
CASH AND CASH EQUIVALENTS
For purposes of the statements of cash flows, cash and cash equivalents
include all liquid debt instruments with a maturity of three months or less when
purchased.
CREDIT RISK
The Company sells its accounts receivable to a factor. At November 1,
1997, the amount due from factor was $64.6 million, of which approximately $5.6
million was with recourse. Other financial instruments which potentially subject
the Company to concentration of credit risk consist principally of temporary
cash investments. The Company places its temporary cash investments with high
quality financial institutions and limits the amount of credit exposure at any
one financial institution.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the consolidated financial
statements and accompanying notes. Actual results could differ from those
estimates.
SFAS 125, "ACCOUNTING FOR TRANSFERS AND SERVICING OF FINANCIAL ASSETS AND
EXTINGUISHMENT OF LIABILITIES"
During fiscal 1997, the Company adopted Statement 125, Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities.
Statement 125 is required to be applied to transfers of assets occurring after
January 1, 1997. The effect of adopting the new standard in fiscal 1997 was
immaterial.
ACCOUNTING FOR STOCK OPTIONS
The Company has elected to follow Accounting Principles Board Opinion No.
25. "Accounting for Stock Issued to Employees" (APB 25) and related
interpretations in accounting for its employee stock options because the
alternative fair value accounting provided for under FASB Statement No. 123,
"Accounting for Stock-Based Compensation," requires use of option valuation
models that were not developed for use in valuing employee stock options. Under
APB 25, because the exercise price of the Company's employee stock options
equals or exceeds the market price of the underlying stock on the date of grant,
no compensation expense is recognized. In the year of adoption, the effects of
applying FASB Statement No. 123 for pro forma disclosures may not be
representative of the effects on pro forma net income for future years.
F-8
<PAGE> 39
NORTON MCNAUGHTON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
SFAS 130, "REPORTING COMPREHENSIVE INCOME" AND SFAS 131, "DISCLOSURES ABOUT
SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION"
In June 1997, the Financial Accounting Standards Board issued SFAS No.
130. This new standard requires reclassification of financial statements for
earlier periods provided for comparative purposes, and will be effective
beginning with the Company's fiscal year ending October 31, 1998. The Company
has determined that the effect of adopting the new standard will be immaterial.
In June 1997, the Financial Accounting Standards Board issued SFAS No.
131. This new standard will be effective for financial statement periods
beginning after December 15, 1997. This Statement significantly changes the way
that public business enterprises report information about operating segments in
financial statements. The Company has not yet determined the impact of Statement
131 on disclosures in its financial statements.
2. ACQUISITION
On September 30, 1997, the Company completed the acquisition of
substantially all the assets and the assumption of substantially all the
liabilities of Miss Erika, a privately-held manufacturer of women's moderately
priced apparel. The Company will, through a wholly owned subsidiary, continue
Miss Erika's business. The terms of the transaction provided for the payment of
approximately $24 million in cash, with additional consideration payable at the
Company's option in cash or Company common stock based on the profitability of
Miss Erika in fiscal years 1998 and 1999.
In connection with the acquisition, the Company entered into a $140
million secured term loan and revolving credit facility with NationsBanc
Commercial Corporation and The CIT Group/Commercial Services, Inc. The proceeds
were used to finance the acquisition and will be for ongoing working capital
requirements of the combined entity. Pursuant to the new financing arrangement,
the Company will continue to factor its accounts receivable, as well as the
accounts receivable of Miss Erika.
The aggregate purchase price, as adjusted, of approximately $24.6 million
was allocated to Miss Erika's assets and liabilities, based on their fair
values, as follows:
<TABLE>
<CAPTION>
(In Thousands)
--------------
<S> <C>
Current assets $ 30,043
Fixed assets 809
Other assets 52
Goodwill 3,872
Current liabilities(a) (6,938)
Long-term debt(a) (2,500)
Other liabilities (715)
--------
$ 24,623
========
</TABLE>
- --------------
(a) Approximately $3.9 million was funded at closing for the repayment
of assumed long-term debt of $2.5 million and other assumed current
liabilities of $1.4 million.
The acquisition was accounted for as a purchase, and Miss Erika's results
are included in the consolidated results of operations beginning September 30,
1997. The following unaudited pro forma information indicates what net sales and
income (loss) from operations and income (loss) from operations per share, would
have been had the acquisition of Miss Erika been completed on November 2, 1996
and November 3, 1995, respectively.
F-9
<PAGE> 40
NORTON MCNAUGHTON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. ACQUISITION (CONTINUED)
The pro forma adjustments are based upon available information and
assumptions that management believes are reasonable at the time made. The
unaudited pro forma financial information does not purport to present the
financial position or results of operations of the Company had the acquisition
of Miss Erika occurred on the dates specified, nor is it necessarily indicative
of the financial position or results of operations that may be achieved in the
future. The unaudited pro forma financial information does not reflect any
adjustments for synergies that management expects to realize. No assurances can
be made as to the amount of cost savings or revenue enhancements, if any, that
may be realized.
<TABLE>
<CAPTION>
Year Ended
-------------------------------
November 1, November 2,
1997 1996
------------- --------------
(in thousands, except per share amounts)
<S> <C> <C>
Net sales $ 309,630 $ 315,566
Net income (loss) $ (4,237) $ 3,351
Per share:
Net income (loss) $ (0.57) $ 0.43
</TABLE>
3. SALES TO MAJOR CUSTOMERS
For the years ended November 1, 1997 and November 2, 1996, net sales made
to three customers were approximately 29%, 17% and 11%, and, approximately 34%,
20% and 12%, respectively. For the year ended November 4, 1995 net sales made to
two customers were approximately 36% and 19%.
4. DUE FROM FACTOR
The Company sells its accounts receivable to a factor without recourse, up
to a maximum established by the factor for each customer. Receivables sold in
excess of these limitations are subject to recourse in the event of nonpayment
by the customer.
Prior to the Company's new revolving credit facility on September 30, 1997
(see Note 8), the Company's working capital requirements were funded by
borrowings pursuant to its factoring agreement. Thereunder, the Company was able
to borrow up to 90% of the net balance due on eligible accounts receivable, up
to $10.0 million of additional advances and up to $20.0 million in letter of
credit financing. Interest on factor advances was payable monthly at 0.75% below
the NationsBank of Georgia, N.A. prime rate (the "Nations Prime Rate") for
amounts advanced which were less than the purchase price of eligible accounts
receivable, and 1.25% above the Nations Prime Rate for amounts advanced in
excess of the purchase price of eligible accounts receivable. As of November 2,
1996, due from factor was shown net of outstanding advances of approximately
$25.1 million.
5. INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
November 1, November 2,
1997 1996
----------------------------------
(In Thousands)
<S> <C> <C>
Raw Materials $ 2,979 $ 5,530
Work-in-process 2,258 3,337
Finished goods 23,353 9,072
--------- --------
$ 28,590 $ 17,939
========= ========
</TABLE>
F-10
<PAGE> 41
NORTON MCNAUGHTON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. FIXED ASSETS
Fixed assets are summarized as follows:
<TABLE>
<CAPTION>
November 1, November 2,
1997 1996
---------------------------
(In Thousands)
<S> <C> <C>
Machinery and equipment $ 872 $ 693
Furniture and fixtures 448 404
Computer equipment 4,032 2,531
Leasehold improvements 2,863 2,991
------ ------
Total 8,215 6,619
Less accumulated
depreciation
and amortization 2,316 1,542
------ ------
$5,899 $5,077
====== ======
</TABLE>
7. NOTES RECEIVABLE FROM MANAGEMENT STOCKHOLDERS
In 1993, the Company loaned certain management stockholders $3,000,000 in
the aggregate. Each loan is evidenced by a limited recourse promissory note with
interest accruing at 5.84% per annum. The Company's recourse on the promissory
notes is limited to the management stockholders' pledges of a portion of their
Common Stock of the Company.
In the event of any sale or transfer of shares of Common Stock by any of
the management stockholders, such person is required to apply a portion of the
net proceeds of the sale or transfer to the principal repayment of his loan from
the Company. No other principal payments are required under the loans except for
the payment at maturity. The loans mature on November 5, 2003 at which time full
payment is to be made by the management stockholders for the balance of their
respective loans. As of the end of the fourth quarter of fiscal 1997, all
necessary payments have been made under the terms of the loans by the management
stockholders.
As of November 1, 1997, the fair market value of the Company's Common
Stock pledged by the management stockholders as security for the loans was
$4,910,749, and the aggregate principal balance of all loans to management
stockholders was $2,654,680. The loan balance set forth above reflects the
required principal payments of $345,320 resulting from sales of Common Stock by
management stockholders. Interest income relating to these loans for the years
ended November 1, 1997, November 2, 1996 and November 4, 1995 amounted to
approximately $155,000, $155,000 and $158,000, respectively.
8. BANK BORROWINGS
The Company entered into a $140 million secured term loan and
revolving credit facility with NationsBanc Commercial Corporation and The CIT
Group/Commerical Services, Inc. as of September 30, 1997 (the "Financing
Agreement"). The Financing Agreement provides for a $15 million term loan and
$125 million revolving credit and letter of credit facility (the "RCF"). The
Financing Agreement has an initial expiration date of October 2, 2000. Prior
thereto, the Company's working capital requirements were funded by borrowings
pursuant to its factoring agreement (see Note 4).
Pursuant to the RCF, the Company has available credit of up to $125
million for working capital loans and letters of credit based upon a borrowing
base of 85% and 60% of Eligible Accounts Receivable and Eligible Inventory,
respectively, as defined in the Financing Agreement, and overadvances above the
borrowing base of $10 million at month end and up to $15 million permitted at
mid-month ($20 million in the months of August, September and October), provided
that for any two consecutive month end periods, the combined overadvance amount
is zero. The RCF provides for maximum sublimits of $70 million for letters of
credit and $70 million for working capital loans.
F-11
<PAGE> 42
NORTON MCNAUGHTON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. BANK BORROWINGS (CONTINUED)
The Financing Agreement provides for interest to be paid monthly in
arrears on revolving credit loan balances at an annual rate equal to, at the
Company's option, the prime rate at NationsBank, N.A. less 0.25%, or the LIBOR
rate plus 2.75%. The rates of interest decrease by 0.25% after the term loan is
repaid. Under the letter of credit facility, the Company is required to pay a
fee of 1.25% per annum of the stated amount of letters of credit upon opening,
in addition to lender administrative fees. In addition, the Financing Agreement
provides for a Co-agent fee of $150,000 per annum.
At November 1, 1997, borrowings and letters of credit outstanding under
the RCF were $44.5 million and $57.1 million, respectively. The Company had
total additional available credit of $8.4 million under the Financing Agreement
as of that date, pursuant to the borrowing base formula set forth above.
Long-term debt as of November 1, 1997 consists of the following:
<TABLE>
<CAPTION>
(In Thousands)
--------------
<S> <C>
Term Loan $ 15,000
Less current portion 3,000
--------
$ 12,000
=========
</TABLE>
The Financing Agreement provides for interest to be paid monthly in
arrears on the term loan at an annual rate equal to, at the Company's option,
the prime rate at NationsBank, N.A. plus (i) 0.25% on and before September 27,
1999 and (ii) 0.75% thereafter, or the LIBOR rate plus (i) 3.25% on and before
September 27, 1999 and (ii) 3.75% thereafter. The term loan requires monthly
principal payments of $250,000 on the first day of each month and a final
installment of $6,250,000 on October 2, 2000. The Financing Agreement also
provides for excess cash flow principal payments, as defined therein.
The Financing Agreement contains a number of restrictive covenants,
including covenants which limit incurrence of liens, indebtedness and capital
expenditures and payment of dividends, and requires that the Company maintain
certain financial ratios and meet specified minimum levels of working capital
and tangible net worth. The Company was in compliance with these covenants at
November 1, 1997. The Financing Agreement imposes decreasing prepayment
penalties in certain circumstances. The Company's assets are subject to lien or
security interest under the Agreement.
Future maturities of long-term debt at November 1, 1997 are as follows:
<TABLE>
<CAPTION>
Fiscal Year (In Thousands)
----------- --------------
<S> <C>
1998 $ 3,000
1999 3,000
2000 9,000
---------
$ 15,000
=========
</TABLE>
F-12
<PAGE> 43
NORTON MCNAUGHTON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. COMMITMENTS AND CONTINGENCIES
OPERATING LEASES
The Company operates principally in leased premises and leases other
assets under operating leases expiring through 2008. Some of the leases contain
escalation clauses and renewal options. The future minimum rental commitments
under noncancelable operating leases are as follows:
<TABLE>
<CAPTION>
Fiscal Year (In Thousands)
----------- --------------
<S> <C>
1998 $ 3,147
1999 3,074
2000 2,760
2001 2,645
2002 2,494
Thereafter 10,830
--------
$ 24,950
========
</TABLE>
Rent expense for the years ended November 1, 1997, November 2, 1996 and
November 4, 1995 amounted to approximately $2.1 million, $2.2 million and $1.8
million, respectively.
EMPLOYMENT AGREEMENTS
In the second quarter of fiscal 1997, the Company appointed a new
President and Chief Operating Officer. In connection therewith, the Company
entered into an employment agreement with this individual providing for a base
salary of $500,000 per annum and a signing bonus of $250,000. The employment
agreement terminates on November 4, 2000 (see Note 11).
The Company has entered into employment agreements with certain executive
officers which provide for aggregate minimum annual compensation of
approximately $3.6 million through November 1999 and $0.5 million through
November 2000. Such amounts reflect the retirement or resignation of two of
its executive officers who had been serving pursuant to employment agreements
with the Company. All employment agreements provide that the payment of bonuses
will be determined at the discretion of the Compensation Committee of the Board
of Directors. Other than the signing bonus described above and the annual
contract term extension bonus paid to the Chief Executive Officer in fiscal 1997
and fiscal 1996, no bonuses were paid for the years ended November 1, 1997,
November 2, 1996 and November 4, 1995.
The Company entered into a Separation Agreement in the second quarter of
fiscal 1997 with its former President which provided for a separation payment of
$2.5 million and the termination of his employment agreement. This agreement
also provides for a consulting arrangement through December 31, 2007.
CONTRACTOR AGREEMENTS
The Company has entered into agreements with a distribution contractor and
a cutting contractor. The agreements have initial terms ending on June 30, 2000
and June 30, 2001, respectively, and may be terminated by the Company upon
notice and lapse of cure periods in the event that the contractors are not
performing their services under the agreements. In addition, after the years
2000 and 2001, respectively, the Company may terminate either agreement on June
30 of any year in the event that it elects to perform "in-house" the services
provided by the applicable contractor, for minimum termination fees of $750,000
for the distribution agreement and $1,500,000 for the cutting agreement. In
addition, each of the agreements provides that in the event that the agreement
is terminated under such circumstances, the Company must assume certain
obligations of the terminated contractor arising under real estate leases and
equipment purchase contracts for property utilized to render services to the
Company. At this time, the Company cannot determine the amount of these
obligations. The Company guarantees its distribution contractor's obligation
under its lease in an amount up to $500,000 in the aggregate. The Company
subleases warehouse space from its cutting contractor and guarantees the
contractor's obligations under its lease in an amount up to approximately
$250,000 in the aggregate. For the years ended November 1, 1997, November 2,
1996 and November 4, 1995, the Company paid approximately $7.8 million, $8.6
million and $7.6 million, respectively, to its distribution contractor and
approximately $3.9 million, $5.8 million and $7.7 million, respectively, to its
cutting contractor.
F-13
<PAGE> 44
NORTON MCNAUGHTON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. COMMITMENTS AND CONTINGENCIES (CONTINUED)
CONTRACTOR AGREEMENTS (CONTINUED)
Miss Erika has an agreement for inland shipping services with a company
owned by a Miss Erika employee. Shipping costs under this agreement are
approximately $700,000 per annum.
STOCK REPURCHASE
The Company's Board of Directors has authorized a stock repurchase
program, under which the Company may repurchase up to $7.5 million of the
Company's Common Stock. The Company expects that the shares may be purchased
from time to time in the open market and in block transactions. In fiscal 1996,
the Company purchased 396,000 shares of its stock in the open market at an
aggregate cost of approximately $3.8 million. In fiscal 1997, the Company
purchased 235,000 shares of its stock in the open market at an aggregate cost of
approximately $1.5 million. As of January 30, 1998, the Company has purchased a
total of 651,000 shares at an aggregate cost of approximately $5.5 million.
LITIGATION
The Company is involved in certain legal actions and claims arising in the
ordinary course of business. It is the opinion of management that such
litigation and claims will be resolved without material effect on the Company's
financial position, results of operations and cash flow.
10. INCOME TAXES
Income taxes are provided using the liability method prescribed by
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes." Under the liability method, deferred income taxes reflect tax
carryforwards and the net tax effects of temporary differences between the
carrying amount of assets and liabilities for financial statement and income tax
purposes, as determined under enacted tax laws and rates. The financial effect
of changes in tax laws or rates is accounted for in the period of enactment.
Provision for income taxes for the fiscal years ended November 1, 1997, November
2, 1996 and November 4, 1995 is comprised of the following:
<TABLE>
<CAPTION>
Year ended
------------------------------------------------------
November 1, November 2, November 4,
1997 1996 1995
------- ------- -------
(Dollars in Thousands)
<S> <C> <C> <C>
Current:
Federal $(2,788) $ 530 $ 5,779
State and local 65 180 1,545
------- ------- -------
(2,723) 710 7,324
Deferred:
Federal 360 326 (342)
State and local (1,037) 91 (94)
------- ------- -------
(677) 417 (436)
------- ------- -------
$(3,400) $ 1,127 $ 6,888
======= ======= =======
</TABLE>
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities relating to research and
development, fixed assets, inventory, and capitalized rent. At November 1, 1997,
November 2, 1996 and November 4, 1995, there were net deferred tax assets of
$741,000, $183,000 and $592,000, respectively, related primarily to uniform
capitalization of inventory costs, the reporting of rent expense using the
straight-line method and state net operating loss carry forwards.
F-14
<PAGE> 45
NORTON MCNAUGHTON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. INCOME TAXES (CONTINUED)
Reconciliation of the statutory federal tax rate and the effective rate
for the fiscal years ended November 1, 1997, November 2, 1996 and November 4,
1995 is as follows:
<TABLE>
<CAPTION>
1997 1996 1995
Amount % Amount % Amount %
------- --- ------ --- ------ --
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Federal statutory tax rate $(2,768) 34% $ 928 34% $5,807 35%
State and local taxes, net of federal (632) 8 176 7 995 6
income tax benefit
Other, net -- -- -- 2 86 1
------- -- ------ -- ------ --
Provision for income taxes $(3,400) 42% $1,127 43% $6,888 42%
======= == ====== == ====== ==
</TABLE>
The Company has ongoing federal and state tax audits. The Company believes
any adjustments that may arise as a result of these audits will not be material
to the Company's financial position, results of operations and cash flow.
11. EMPLOYEE BENEFIT PLANS
STOCK OPTION PLANS
Pursuant to the Company's 1994 Stock Option Plan, as amended, the Company
may grant stock options to eligible individuals to purchase up to 850,000 shares
of its Common Stock. The exercise price for stock options may not be less than
100% (110% for holders of 10% or more of the Company's outstanding stock) of the
fair market value of the stock on the date of grant and the options will vest at
the discretion of the Stock Option Committee of the Board of Directors. All
options granted have 10 year terms.
The Company granted stock options in fiscal 1997 to its newly appointed
President and Chief Operating Officer, to purchase an aggregate of 700,000
shares of Common Stock of the Company at an exercise price of $5.50 per share,
which was the fair market value of the Common Stock on the date of grant. Such
options vest over the term of his Employment Agreement, with an acceleration of
the vesting if certain target stock prices are attained. The Employment
Agreement provides for 100,000 vested options on April 30, 1997; an additional
250,000 options to vest on the earlier to occur of (i) December 10, 1998 or (ii)
the date on which the stock price equals or exceeds $10.00 per share for twenty
consecutive trading days; an additional 250,000 options to vest on the earlier
to occur of (i) December 10, 1999 or (ii) the date on which the stock price
equals or exceeds $13.00 per share for twenty consecutive trading days; and the
remaining 100,000 options to vest on the earlier to occur of (i) November 4,
2000 or (ii) the date on which the stock price equals or exceeds $20.00 per
share for twenty consecutive trading days. The Employment Agreement also
provides that commencing on November 1, 1997, in the event of a change in
control involving the Company, all outstanding options shall become vested and
exercisable in full. Options granted have 10 year terms.
The Company granted stock options to certain Miss Erika executives and
employees in fiscal 1997 to purchase an aggregate of 140,000 shares of Common
Stock of the Company at an exercise price of $5.44 per share, which was the fair
market value of the Common Stock on the date of grant. Such options vested on
the date of grant. All options granted have 10 year terms. In addition, the Miss
Erika Bonus Plan provides for the annual grant of options in the event certain
earnings targets for Miss Erika are exceeded.
In fiscal 1997, the Stock Option Committee of the Board of Directors
authorized, at the employees' discretion, the canceling and regranting, with new
vesting schedules, of all stock options under the Company's 1994 Stock Option
Plan with exercise prices of $13.25 and $14.00. As a result, 235,500 options
were canceled and regranted, with new vesting schedules, at an exercise price of
$6.50 per share when the fair market value on the date of grant was $6.00 per
share.
F-15
<PAGE> 46
NORTON MCNAUGHTON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11. EMPLOYEE BENEFITS PLANS (CONTINUED)
STOCK OPTION PLANS (CONTINUED)
The change in outstanding options under the Company's stock option plans
for each of the three years in the period ended November 1, 1997, expressed in
number of shares, is as follows:
<TABLE>
<CAPTION>
Range of Exercise
Number of Shares Price Per Share
---------------- ---------------
<S> <C> <C>
Outstanding at November 4, 1994 243,000 $14.00 - $17.25
Granted 207,000 $ 13.25
Canceled -- --
Exercised (43,500) $ 14.00
--------
Outstanding at November 4, 1995 406,500 $13.25 - $17.25
Granted 274,500 $6.00 - $13.25
Canceled (61,000) $7.38 - $14.00
Exercised -- --
--------
Outstanding at November 2, 1996 620,000 $6.00 - $17.25
Granted 1,322,500 $5.44 - $8.19
Canceled (306,000) $7.38 - $14.00
Exercised -- --
---------
Outstanding at November 1, 1997 1,636,500 $5.44 - $17.25
=========
</TABLE>
Options outstanding at November 1, 1997 are as follows:
<TABLE>
<CAPTION>
Weighted Average
Remaining Weighted
Range of Exercise Number of Shares Contractual Life Average Exercise Shares
Prices Outstanding (in years) Price Exercisable
------ ----------- ---------- ----- -----------
<S> <C> <C> <C> <C>
$5.44 - $5.50 885,000 9.6 $5.49 275,000
6.00 - 8.19 658,500 7.9 6.75 25,000
13.25 - 17.25 93,000 6.5 14.45 84,000
--------- -------
1,636,500 8.7 6.51 384,000
========= =======
</TABLE>
As of November 1, 1997, 87 individuals held options, 10,000 shares were
available for future grants under the Company's 1994 Stock Option Plan and
500,000 shares were available for future grants to Miss Erika employees under
the Miss Erika Bonus Plan.
The Company has elected to follow Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" (ABP 25) and related
interpretations in accounting for its employee stock options because, as
discussed below, the alternative fair value accounting provided for under FASB
Statement No. 123, "Accounting for Stock-Based Compensation," requires use of
option valuation models that were not developed for use in valuing employee
stock options. Under APB 25, because the exercise price of the Company's
employee stock options equals or exceeds the market price of the underlying
stock on the date of grant, no compensation expense is recognized.
Pro forma information regarding net income and earnings per share is
required by FASB Statement No. 123, and has been determined as if the Company
had accounted for its employee stock options under the fair value method of that
Statement. The fair value of these options was estimated at the date of grant
using a Black-Scholes option pricing model with the following weighted-average
assumptions for fiscal 1997 and fiscal 1996: risk-free interest rates of 6.2%
for both fiscal years; zero dividend yields; volatility factor of the expected
market price of the Company's Common Stock of 0.56 for both fiscal years; a
weighted-average expected life of the option of 5 years for both fiscal years.
Based on the assumptions set forth above, the weighted average fair value of the
options granted in fiscal 1997 was $3.10 per share on the date of grant.
F-16
<PAGE> 47
NORTON MCNAUGHTON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11. EMPLOYEE BENEFITS PLANS (CONTINUED)
STOCK OPTION PLANS (CONTINUED)
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including the expected stock price
volatility. Because the Company's employee stock options have characteristics
significantly different from those of traded options, and because changes in the
subjective input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its employee stock options.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The Company's
pro forma information follows (in thousands, except for earnings per share
information):
<TABLE>
<CAPTION>
Year Ended
---------------------------
November 1, November 2,
1997 1996
------------ ------------
<S> <C> <C>
Net income:
As reported $(4,705) $ 1,524
Pro forma $(5,458) $ 1,322
Earnings per share:
As reported $ (0.63) $ 0.20
Pro forma $ (0.73) $ 0.17
</TABLE>
STOCK PURCHASE PLAN
Pursuant to a Stock Purchase Plan adopted on January 7, 1994, an aggregate
of 100,000 shares of Common Stock was made available for purchase to eligible
employees. The purchase price of the Common Stock under the plan is 85% of the
stock price, as defined. Participating employees may authorize the Company to
withhold a portion of their compensation, subject to certain deemed limitations,
to purchase the shares. As of November 1, 1997, 18,280 shares of Common Stock
have been issued under this plan.
SAVINGS PLAN
Effective January 1, 1995, the Company began sponsoring an employee savings plan
under Section 401(k) of the Internal Revenue Code for all full-time employees
with six months of continuous service. Eligible employees may make pre-tax
contributions of up to 15% of their annual compensation subject to the maximum
allowable contribution. Employee contributions of up to 6% of compensation are
matched by the Company at a rate of 35%. Employees are 100% vested in their
pre-tax contributions immediately, and become vested in the employer matching
contributions as follows: 25% vested after two years of service, 50% vested
after three years of service, 75% vested after four years of service and 100%
vested after five years of service. The Company's matching contributions for the
years ended November 1, 1997, November 2, 1996 and November 4, 1995 were
$193,220, $192,687 and $146,524, respectively.
PROFIT SHARING PLAN
The Company sponsors a profit sharing plan covering Miss Erika employees
with more than one year of continuous service. Vesting occurs at a rate of 25%
per year and employees are fully vested after four years. The plan provides for
an accrual of 15% of each employee's gross compensation plus bonus, up to a
maximum contribution of approximately $22,500 per employee. From the acquisition
date of September 30, 1997 to November 1, 1997, the accrual amounted to $46,815.
Profit sharing plan assets consist primarily of stocks, bonds and U.S.
Government securities.
F-17
<PAGE> 48
NORTON MCNAUGHTON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
12.SHAREHOLDER RIGHTS PLAN
On January 19, 1996, the Company's Board of Directors adopted a
Shareholder Rights Plan in which shareholders of record on February 8, 1996
received a dividend distribution of one common share purchase right for each
outstanding share of the Company's Common Stock held. Each right entitles the
holder to purchase from the Company Common Stock at an initial exercise price of
$32.00.
The rights are not exercisable or transferable apart from the Common Stock
until the earlier to occur of (i) ten days following a public announcement that
a person or group of affiliated or associated persons have acquired beneficial
ownership of 20% or more of the outstanding Common Stock of the Company, or (ii)
ten business days following the commencement of, or announcement of, an
intention to make a tender offer or exchange offer, the consummation of which
would result in the beneficial ownership by a person or group of 20% or more of
such outstanding Common Stock.
The rights are redeemable by the Company's Board of Directors at a price
of $0.01 per right at any time prior to the acquisition by a person or group of
beneficial ownership of 20% or more of the Company's Common Stock.
If a person or group acquires 20% or more of the Company's outstanding
Common Stock, each right will entitle the holder to purchase, at the right's
exercise price, a number of shares of the Company's Common Stock having a market
value at that time of twice the right's exercise price. If the Company is
acquired in a merger or other business combination transaction, each right will
entitle its holder to purchase, at the right's exercise price, a number of the
acquiring company's common shares having a market value at that time of twice
the right's exercise price.
F-18
<PAGE> 49
NORTON MCNAUGHTON, INC. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(In Thousands)
<TABLE>
<CAPTION>
Balance at Balance
Beginning Costs and at End
Description of Year Expenses Deductions(1) of Year
----------- ------- -------- ------------- -------
<S> <C> <C> <C> <C>
Year ended November 1, 1997
Reserve for sales discounts, returns
and allowances ..................... $ 500 $44,730(2) $43,032 $2,198
Year ended November 2, 1996
Reserve for sales discounts,returns
and allowances ..................... $1,448 $50,648 $51,596 $ 500
Year ended November 4, 1995
Reserve for sales discounts, returns
and allowances ..................... $ 501 $43,136 $42,189 $1,448
</TABLE>
(1) Discounts, returns and allowances granted to customers and charged against
reserve.
(2) Includes Miss Erika, Inc.'s acquired reserve at September 30, 1997.
F-19
<PAGE> 50
NORTON MCNAUGHTON, INC. AND SUBSIDIARIES
QUARTERLY FINANCIAL DATA (UNAUDITED)
(In Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
First Second Third Fourth Fiscal
FISCAL 1997 Quarter Quarter Quarter Quarter Year
- ----------- ------- ------- ------- ------- ----
<S> <C> <C> <C> <C> <C>
Net sales $ 41,596 $ 52,873 $48,240 $ 76,073 $ 218,782
Gross profit 9,299 8,959 10,777 10,191 39,226
Net income (loss) 43 (3,551) 712 (1,909) (4,705)
PER SHARE DATA:
Net income (loss) $ 0.01 $ (0.47) $ 0.10 $ (0.26) $ (0.63)
======== ======== ======= ======== =========
Weighted average number of common shares
and common stock equivalents outstanding 7,658 7,489 7,414 7,410 7,488
======== ======== ======= ======== =========
FISCAL 1996
Net sales $ 42,407 $ 57,439 $48,261 $ 72,716 $ 220,823
Gross profit 9,810 10,050 11,210 13,690 44,760
Net income (loss) (280) (736) 583 1,957 1,524
PER SHARE DATA:
Net income (loss) $ (0.03) $ (0.09) $ 0.08 $ 0.26 $ 0.20
======== ======== ======= ======== =========
Weighted average number of common shares
and common stock equivalents outstanding 8,004 7,792 7,654 7,646 7,781
======== ======== ======= ======== =========
FISCAL 1995
Net sales $ 34,564 $ 59,594 $50,848 $ 82,524 $ 227,530
Gross profit 9,631 16,412 13,544 16,163 55,750
Net income 1,335 3,917 2,219 2,232 9,703
PER SHARE DATA:
Net income $ 0.17 $ 0.49 $ 0.28 $ 0.28 $ 1.20
======== ======== ======= ======== =========
Weighted average number of common shares
and common stock equivalents outstanding 8,039 8,060 8,028 8,089 8,056
======== ======== ======= ======== =========
</TABLE>
F-20
<PAGE> 1
Exhibit 10.3 (a)
AMENDMENT TO AMENDED AND
RESTATED EMPLOYMENT AGREEMENT
AMENDMENT dated as of the 22 day of September, 1997 to AMENDED AND
RESTATED EMPLOYMENT AGREEMENT dated as of November 4, 1995 by and between NORTON
MCNAUGHTON OF SQUIRE, INC., a New York corporation (the "Company") and SANFORD
GREENBERG (the "Employee").
W I T N E S S E T H:
WHEREAS, the Employee and the Company have heretofore entered into
an Amended and Restated Employment Agreement dated as of November 4, 1995 (the
"Employment Agreement"); and
WHEREAS, the parties desire to amend the Employment Agreement as
hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements hereinafter set forth, the parties hereto, intending to be legally
bound, hereby agree as follows:
A. Section 5 of the Employment Agreement is hereby amended by adding
a new paragraph at the end thereof to read as follows:
"For the period commencing on the date hereof until the death of the
Employee, the Company agrees, at its expense, to provide the
Employee and the Employee's spouse and his children under age 20 or
under age 24 if such children are full-time students with coverage
under the medical plans of the Company on the same terms and
conditions (including the same Company-paid portions) that coverage
is generally available to employees of the Company. In the event
that the Company is unable to provide the coverage set forth in the
preceding sentence during any month as a result of (a) a change of
law or regulation which restricts the provision of coverage for
persons who are not employees the Company, (b) the failure by the
Company's insurance carrier or plan to provide coverage for persons
who are not employees of the Company or (c) a change in the cost of
such coverage
<PAGE> 2
such that the cost to the Company to provide such coverage for any
monthly period exceeds the amount set forth on Exhibit A hereto
under the column labelled "Monthly Premium", the Company shall not
be obligated to provide such coverage under its medical plans and
shall reimburse Employee for any premiums paid by Employee for
comparable medical coverage. Such reimbursement shall not exceed the
amount set forth on Exhibit A hereto under the column labelled
"Monthly Premium" for any monthly period."
B. Except as hereby amended, the Employment Agreement continues in
full force and effect.
* * *
IN WITNESS WHEREOF, the parties hereto have executed this Amendment
on the date first above written.
NORTON MCNAUGHTON OF SQUIRE, INC.
By: /s/ Peter Boneparth
---------------------
Title: President
/s/ Sanford Greenberg
---------------------
Sanford Greenberg
<PAGE> 3
EXHIBIT A
MEDICAL INSURANCE PREMIUMS TO SANFORD GREENBERG
IF COMPANY IS UNABLE TO PROVIDE COVERAGE
----------------------------------------
<TABLE>
<CAPTION>
FISCAL PERIOD
- ---------------------
BEGINNING ENDED ANNUAL MONTHLY
MAY 1: APRIL 30: PREMIUM PREMIUM
- --------------------- ------- -------
<S> <C> <C> <C>
1997 1998 $6,500.00 $541.67
1998 1999 6,825.00 568.75
1999 2000 7,166.25 597.19
2000 2001 7,524.56 627.05
2001 2002 7,900.79 658.40
2002 2003 8,295.83 691.32
2003 2004 8,710.62 725.89
2004 2005 9,146.15 762.18
2005 2006 9,603.46 800.29
2006 2007 10,083.63 840.30
2007 2008 10,587.82 882.32
2008 2009 11,117.21 926.43
2009 2010 11,673.07 972.76
2010 2011 12,256.72 1,021.39
2011 2012 12,869.56 1,072.46
2012 2013 13,513.03 1,126.09
2013 2014 14,188.68 1,182.39
2014 2015 14,898.12 1,241.51
2015 2016 15,643.03 1,303.59
2016 2017 16,425.18 1,368.76
2017 2018 17,246.44 1,437.20
2018 2019 18,108.76 1,509.06
2019 2020 19,014.19 1,584.52
2020 2021 19,964.90 1,663.74
2021 2022 20,963.15 1,746.93
2022 2023 22,011.31 1,834.28
2023 2024 23,111.87 1,925.99
2024 2025 24,267.47 2,022.29
2025 2026 25,480.84 2,123.40
2026 2027 26,754.88 2,229.57
2027 2028 28,092.63 2,341.05
2028 2029 29,497.26 2,458.10
2029 2030 30,972.12 2,581.01
2030 2031 32,520.73 2,710.06
2031 2032 34,146.76 2,845.56
2032 2033 35,854.10 2,987.84
2033 2034 37,646.80 3,137.23
2034 2035 39,529.15 3,294.10
2035 2036 41,505.60 3,458.80
2036 2037 43,580.88 3,631.74
2037 2038 45,759.93 3,813.33
2038 2039 48,047.92 4,003.99
2039 2040 50,450.32 4,204.19
2040 2041 52,972.84 4,414.40
2041 2042 55,621.48 4,635.12
2042 2043 58,402.55 4,866.88
2043 2044 61,322.68 5,110.22
2044 2045 64,388.81 5,365.73
2045 2046 67,608.25 5,634.02
2046 2047 70,988.67 5,915.72
2047 2048 74,538.10 6,211.51
2048 2049 78,265.00 6,522.08
2049 2050 82,178.25 6,848.19
2050 2051 86,287.17 7,190.60
</TABLE>
<PAGE> 1
Exhibit 10.6 (a)
SEPARATION AGREEMENT
AGREEMENT made as of the 17th day of December, 1997 by and between
NORTON MCNAUGHTON OF SQUIRE, INC., a New York corporation (the "Company"), and
ANDREW MILLER ("Miller").
W I T N E S S E T H:
WHEREAS, Miller and, the Company were parties to the Amended and
Restated Employment Agreement dated as of November 4, 1993 (the "Employment
Agreement"); and
WHEREAS, the Employment Agreement expired by its terms effective as
of November 4, 1997.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements hereinafter set forth, the parties hereto, intending to be legally
bound, hereby agree as follows:
1. Term; Performance of Agreement.
1.1 The Company agrees to retain Miller for, and Miller agrees to
provide, any mutually agreed upon consulting services on a project-by-project
basis for the period commencing on January 1, 1998 (the "Separation Date") and
terminating on December 31, 2007 (the "Term").
1.2 The parties hereto acknowledge that Miller will retain all
options to purchase shares of common stock, $.01 par value, of Norton
McNaughton, Inc. presently held by Miller, and that the terms and conditions of
such options shall be governed by the Norton McNaughton, Inc. Stock Options
Plan.
2. Consulting Services; Independent Contractor.
2.1 During the Term, Miller shall provide any mutually agreed upon
consulting services as shall be requested by the Board of Directors of the
Company and agreed to by Miller, particularly with respect to management
information systems matters. Subject to Miller's availability, Miller shall
devote such time and attention to the performance of his duties and
responsibilities hereunder as shall be necessary for the proper performance
thereof.
2.2 Miller shall perform any duties and responsibilities hereunder
as an independent contractor. Nothing
<PAGE> 2
2
herein shall be deemed to create a partnership, joint venture or employment
relationship between Miller and the Company.
3. Consulting Fee. (A) For the period commencing on the Separation
Date and ending on July 31, 1999, the Company shall pay Miller or his
beneficiaries (as defined in Section 13 hereof), and Miller shall accept, a
consulting fee at a rate of $320,000 per annum, payable periodically in
accordance with the standard payroll practices of the Company. (B) During the
remainder of the Term, the Company shall pay Miller, and Miller shall accept, a
mutually agreed upon consulting fee, in a mutually agreed upon amount determined
on a project-by-project basis by Miller and the Board of Directors of the
Company.
4. Medical Insurance. For the period commencing on the Separation
Date until the earlier of either (i) July 31, 1999 or (ii) the date on which
Miller obtains health insurance coverage through any employer offering health
insurance coverage (the "Medical Insurance Term"), the Company agrees, at its
expense, to provide Miller and his spouse coverage under the medical plans of
the Company on the same terms and conditions (including the same Company-paid
portions) that coverage is generally available to employees of the Company. In
the event that the Company is unable to provide the coverage set forth in the
preceding sentence during any month as a result of (a) a change of law or
regulation which restricts the provision of coverage for persons who are not
employees of the Company, (b) the failure by the Company's insurance carrier or
plan to provide coverage for persons who are not employees of the Company or (c)
a change in the cost of such coverage such that the cost to the Company to
provide such coverage for any monthly period exceeds $500 per month, the Company
shall not be obligated to provide such coverage under its medical plans and,
during the Medical Insurance Term, shall reimburse Miller for any premiums paid
by Miller for comparable medical coverage, provided that such reimbursement
shall not exceed $500 per month during 1998 and $525 per month during 1999. In
the event of an occurrence of an event described in clause (c) above, the
Company shall notify Miller of such occurrence and, in lieu of reimbursing
Miller as aforesaid, at Miller's option exercised promptly, if at all, the
Company shall continue to provide coverage during the Medical Insurance Term to
Miller and his spouse under its medical plans and Miller shall reimburse the
Company on a monthly basis for the cost of such coverage in excess of $500 per
month during 1998 and in excess of $525 per month during 1999.
5. Disability and Life Insurance. (A) For the period commencing on
the Separation Date until the earlier of either (i)
<PAGE> 3
3
July 31, 1999 or (ii) the date on which Miller obtains disability insurance
coverage through any employer offering disability insurance coverage, the
Company shall, at its expense, continue to provide Miller with coverage under
the disability policies under which Miller was covered on December 15, 1997. (B)
For the period commencing on the Separation Date until the earlier of either (i)
July 31, 1999 or the date on which Miller obtains life insurance coverage
through any employer offering life insurance coverage, the Company shall, at its
expense, continue to provide Miller with coverage under the life insurance
policy under which Miller was covered at the expense of the Company on December
17, 1997; provided that, in the event that the foregoing life insurance policy
is transferable, the Company shall cooperate with Miller in the event that
Miller desires to purchase the foregoing life insurance policy on the earlier to
occur of such dates.
6. Automobile. For the period commencing on the Separation Date
until the earlier of either (i) July 31, 1999 or (ii) the date on which Miller
obtains the use of an automobile through any employer offering such benefit, the
Company shall pay all lease payments, the premiums for automobile insurance
coverage, and standard maintenance and gas expenses for the 1997 Land Rover
currently leased by the Company and used by Miller. After the earlier to occur
of such dates, Miller shall return the automobile or be solely responsible for
such lease payments, automobile insurance coverage, and standard maintenance and
gas expenses.
7. Computer. Subject to Section 9 of this Agreement, Miller shall
be entitled to retain the personal computers used by him during his employment
with the Company (the "P.C.'s"), one of which is located at Miller's office at
the Company and one of which is located at Miller's residence.
8. Termination of Employment; Release.
8.1 Miller hereby resigns his position as an officer of the Company
and each of its subsidiary and affiliate entities (collectively with the
Company, the "Norton Companies") effective as of December 17, 1997, and the
Company accepts said resignation.
8.2 Miller's employment with the Norton Companies shall terminate on
December 31, 1997 (the "Termination Date"), and thereafter Miller and the
Company shall have no further rights or obligations under the Employment
Agreement. Notwithstanding the foregoing, and without limiting Sections 2 and 3
hereof, Miller agrees to remain available, from time to
<PAGE> 4
4
time as reasonably requested by the Company, during the month of January 1998 to
assist the Company during a transition period.
8.3 Miller acknowledges and agrees that the consulting arrangement
contemplated by Section 2 of this Agreement, the consulting fee contemplated by
Section 3 of this Agreement and the benefits to Miller contemplated by Sections
4, 5, 6 and 7 of this Agreement exceed any benefit to which Miller is otherwise
entitled and shall constitute consideration for the release of claims set forth
in Section 8.4 of this Agreement and for the agreements set forth in Section 9
and 10 of this Agreement.
8.4 In consideration of the payments and benefits to Miller set
forth herein, Miller for himself and his heirs, administrators, successors and
assigns releases the Company, Norton McNaughton, Inc., a Delaware corporation
("Norton"), and each of their respective subsidiary and affiliate entities, and
its and their respective officers, directors and employees (collectively, the
"Releasees"), from all claims, actions, causes of action, suits, debts, dues,
sums of money, accounts, covenants, contracts, controversies, agreements,
promises, damages, judgments, executions and demands whatsoever, in law or
equity, including, without limitation, all claims and rights under Title VII of
the Civil Rights Act of 1964, the Age Discrimination in Employment Act of 1967,
the New York State Human Rights Law, the New York City Human Rights Law, the
Americans with Disabilities Act, the Civil Rights Act of 1866 (42 U.S.C.
ss. 1981), the Civil Rights Act of 1991, the Equal Pay Act, the Family and
Medical Leave Act, the Fair Labor Standards Act and the Employee Retirement
Income Security Act of 1974, all as amended, including, but not limited to, the
right to the payment of wages, vacation, pension benefits or any other employee
benefits, or any other rights arising under federal, state or local laws
prohibiting discrimination and/or harassment on the basis of race, color, creed,
religion, sex, pregnancy, marital status, sexual orientation, national origin,
age, physical or mental handicap or disability, alienage/citizenship status or
any other basis prohibited by law, which Miller ever had, now has or hereafter
can, shall or may have against the Company, Norton or any of the other Releasees
arising out of or relating to the Employment Agreement, Miller's employment or
other relationship with the Company, Norton or any of the other Releasees, and
the termination thereof, from the beginning of the world to the date of this
Agreement, except for any liability or claim arising out of this Agreement.
Miller agrees never directly or indirectly to commence or prosecute, or assist
in the filing, commencement or prosecution of any action, proceeding or charge
against the
<PAGE> 5
5
Company, Norton or any of the other Releasees with respect to the matters hereby
released.
8.5 The Company has advised Miller to consult with an attorney of
his choosing prior to the signing of this Agreement, and Miller hereby
represents and warrants to the Company that he has been offered an opportunity
to consult with an attorney prior to the execution of this Agreement. Miller
acknowledges that he was offered the opportunity to consider the waiver of
claims under the Age Discrimination in Employment Act of 1967 for a period of
twenty-one (21) days from the time that he received this Agreement, and was
advised to review it with an attorney of his choice. Miller is further advised
that he has seven (7) days after he signs this Agreement to revoke the waiver of
any claims under the Age Discrimination in Employment Act of 1967 by notifying
the Company in writing. The release of any claims under the Age Discrimination
in Employment Act of 1967 will not become effective or enforceable until the
seven (7) day period has expired.
8.6 Miller expressly represents and warrants that he has carefully
read and fully understands that this Agreement includes a general release of all
claims, including all claims under the Age Discrimination in Employment Act of
1967, that he has had a full opportunity to review this Agreement with an
attorney and that he has executed this Agreement voluntarily, without duress,
coercion or undue influence and with such advice from his attorney as
appropriate.
8.7 The Company and Norton release and discharge Miller and his
heirs, executors, administrators, assigns or agents from any and all claims
arising in connection with the Employment Agreement, Miller's employment or
other relationship with the Company, Norton or any of the other Releasees and
the termination thereof, which the Company, Norton and any of the other
Releasees ever had, now have or hereafter can, shall or may have against Miller
for, upon, or by reason of any matter, cause or thing whatsoever from the
beginning of the world to the date of this Agreement, except for any liability
or claim arising out of this Agreement.
9. Confidential Information.
9.1 Miller shall treat as confidential and not disclose, publish or
otherwise make available to the public or to any individual, firm or corporation
any confidential material (as hereinafter defined). Miller has returned or will
return to the Company on or before the Termination Date all confidential
<PAGE> 6
6
material, reports, files, memoranda, records, credit cards, cardkey passes, door
and file keys, computer software and programs (including all software and
programs loaded or otherwise electronically reproduced or stored on the P.C.'s),
computer access codes, computer tapes, cassettes, diskettes, compact discs-read
only memory (CD-ROM's), computer instruction manuals, and other physical or
personal property which Miller has received in connection with his employment or
other relationship with the Company or any of the other Norton Companies, and
Miller has not retained and will not retain any copies, facsimiles, duplicates,
reproductions or excerpts thereof.
9.2 For the purposes hereof, the term "confidential material" shall
mean all information heretofore or hereafter acquired by Miller in any way
concerning the products, projects, activities, business or affairs of the
Company, Norton and any of their subsidiary or affiliate entities (collectively,
the "Company Group") or the agents, customers or suppliers of the Company or any
member of the Company Group, including, without limitation, all information
concerning trade secrets and the preparation of raw material for, manufacture
of, or finishing processes utilized in the production of, the products or
projects of the Company or any member of the Company Group or any improvements
therein, all sales and financial information concerning the Company or any
member of the Company Group, all customer and supplier lists, all information
concerning projects in research and development or marketing plans for any such
projects, and all information in any way concerning the products, projects,
activities, business or affairs of the agents, customers or suppliers of the
Company or any member of the Company Group which is furnished to Miller by the
Company or any of its employees (current or former), agents, customers or
suppliers, as such; provided, however, that the term "confidential material"
shall not include information which (a) becomes generally available to the
public other than as a result of a disclosure by Miller, (b) was available to
Miller on a non-confidential basis prior to his employment with the Company or
(c) becomes available to Miller on a non-confidential basis from a source other
than the Company or any of its agents, customers or suppliers, provided that
such source is not bound by a confidentiality agreement with the Company or any
of such agents, customers or suppliers.
9.3 Neither Miller nor his representative(s) or attorney(s) will
publish, publicize or disseminate, or cause to be published, publicized or
disseminated, any information relating to this Agreement, including, without
limitation, the amount or structure of the consideration that the Company has
<PAGE> 7
7
agreed to pay pursuant hereto or any information relating to the conclusion of
Miller's employment or other relationship with the Company, Norton or other
member of the Company Group. This paragraph will not be construed to prevent
Miller from describing his duties at the Company or Norton in connection with
any effort to obtain employment. In addition, the provisions of this paragraph
shall not prevent Miller from disclosing the information contained in this
Agreement to his attorney(s) or accountant(s) whom he consults for the purpose
of obtaining professional advice or services, so long as prior to any such
disclosure, Miller advises such persons that such information is confidential
and may not be disclosed by such person.
10. Non-Disparagement. The parties agree that they will not make, or
cause to be made, any statements, observations or opinions, or communicate any
information (whether oral or written), that disparages or is likely in any way
to harm (whether or not intended to harm) the reputation or goodwill of the
other or of any member of the Company Group or any of their respective
directors, officers or employees.
11. Equitable Relief: Jurisdiction; Waiver of Trial by Jury. (A) In
the event of a breach or threatened breach by Miller of Sections 8, 9 or 10 of
this Agreement, Miller hereby consents and agrees that the Company or other
injured person shall be entitled to pre-judgment injunctive relief or similar
equitable relief restraining Miller from committing or continuing any such
breach or threatened breach or granting specific performance of any act required
to be performed by Miller under any of such provisions, without the necessity of
showing any actual damage or that money damages would not afford an adequate
remedy and without the necessity of posting any bond or other security. (B) The
parties hereto hereby consent to the jurisdiction of the Federal courts located
in the Southern District of New York and the state courts located in such
District for any proceedings under this Agreement, including this Section 11.
(C) EACH OF THE PARTIES HERETO HEREBY WAIVES THEIR RESPECTIVE RIGHT TO A TRIAL
BY JURY IN THE EVENT OF ANY LITIGATION ARISING OUT OF THIS AGREEMENT, THE
EMPLOYMENT AGREEMENT, MILLER'S EMPLOYMENT AND THE TERMINATION THEREOF, OR OTHER
RELATIONSHIP BETWEEN THE PARTIES. (D) Nothing herein shall be construed as
prohibiting the Company from pursuing any other remedies at law or in equity
which it may have.
12. No Admission of Liability. By entering into this Agreement,
neither Miller nor the Company admits to any violation of statute, law,
regulation or ordinance, and each of Miller and the Company expressly denies
committing any such violation.
<PAGE> 8
8
13. Successors and Assigns. Miller may not assign this Agreement or
any part thereof without the prior written consent of a majority of the Board of
Directors of the Company; provided, however, that nothing herein shall preclude
one or more beneficiaries of Miller from receiving any benefits set forth in
this Agreement following the occurrence of his legal incompetency or his death
and shall not preclude the legal representative of his estate from receiving
such benefits or from assigning any right hereunder to the person or persons
entitled thereto under his will or, in the case of intestacy, to the person or
persons entitled thereto under the laws of the intestacy applicable to his
estate. The term "beneficiaries", as used in this Agreement, shall mean the
legal representative of Miller (in the event of his incompetency) or Miller's
estate.
14. Governing Law. This Agreement shall be deemed a contract made
under, and for all purposes shall be construed in accordance with, the laws of
the State of New York applicable to contracts to be performed entirely within
such State.
15. Entire Agreement. This Agreement contains all the understandings
and representations between the parties hereto pertaining to the subject matter
hereof and supersedes all undertakings and agreements, whether oral or in
writing, if there be any, previously entered into by them with respect thereto.
16. Modification and Amendment; Waiver. The provisions of this
Agreement may be modified, amended or waived, but only upon the written consent
of the party against whom enforcement of such modification, amendment or waiver
is sought and then such modification, amendment or waiver shall be effective
only to the extent set forth in such waiver. No delay or failure on the part of
any party hereto in exercising any right, power or remedy hereunder shall effect
or operate as a waiver thereof, nor shall any single or partial exercise thereof
or any abandonment or discontinuance of steps to enforce such right, power or
remedy preclude any further exercise thereof or of any other right, power or
remedy.
17. Notices. All notices, requests or instructions hereunder shall
be in writing and delivered personally, sent by telecopier or sent by registered
or certified mail, postage prepaid, return receipt requested, or sent by Federal
Express or any other nationally recognized overnight courier service as follows:
If to the Company:
<PAGE> 9
9
Norton McNaughton of Squire, Inc.
463 Seventh Avenue
New York, New York 10018
Attention: President
Telecopy No.: (212) 563-2766
Telephone No.: (212) 947-2960
If to Miller:
Andrew Miller
27 Reynolds Lane
Katonah, New York 10536
Any of the above addresses may be changed at any time by notice given as
provided above; provided, however, that any such notice of change of address
shall be effective only upon receipt. All notices, requests or instructions
given in accordance herewith shall be deemed received on the date of delivery,
if hand delivered, telecopied or sent by Federal Express or any other recognized
overnight courier service, and three business days after the date of mailing, if
mailed by registered or certified mail, return receipt requested.
18. Severability. Should any provision of this Agreement be held by
a court of competent jurisdiction to be enforceable only if modified, such
holding shall not affect the validity of the remainder of this Agreement, the
balance of which shall continue to be binding upon the parties hereto with any
such modification to become a part hereof and treated as though originally set
forth in this Agreement. The parties further agree that any such court is
expressly authorized to modify any such unenforceable provision of this
Agreement in lieu of severing such unenforceable provision from this Agreement
in its entirety, whether by rewriting the offending provision, deleting any or
all of the offending provision, adding additional language to this Agreement, or
by making such other modifications as it deems warranted to carry out the intent
and agreement of the parties as embodied herein to the maximum extent permitted
by law. The parties expressly agree that this Agreement as so modified by the
court shall be binding upon and enforceable against each of them. In any event,
should one or more of the provisions of this Agreement be held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provisions hereof, and if such
provision or provisions are not modified as provided above, this Agreement shall
be construed as if such invalid, illegal or unenforceable provisions had never
been set forth herein.
<PAGE> 10
10
19. Survivorship. The respective rights and obligations of the
parties hereunder shall survive any termination of this Agreement to the extent
necessary to the intended preservation of such rights and obligations.
20. Expenses. Each of the parties hereto shall bear his or its own
costs and expenses, including attorneys' fees and disbursements, incurred in
connection with this Agreement and the transactions contemplated hereby.
21. Titles. Titles of the sections of this Agreement are intended
solely for convenience and no provision of this Agreement is to be construed by
reference to the title of any section.
22. Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which taken together shall
constitute one and the same instrument.
23. Construction. No provision of this Agreement shall be construed
against or interpreted to the disadvantage of any party by any court by reason
of such party having or being deemed to have drafted, devised or imposed such
provision.
* * *
<PAGE> 11
11
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
on the date first above written.
NORTON MCNAUGHTON SQUIRE, INC.
By: /s/ Peter Boneparth
----------------------
Title: President
/s/ Andrew Miller
----------------------
Andrew Miller
<PAGE> 1
Exhibit 10.48
AGENCY AGREEMENT
This Agency Agreement is made this 9th day of October, 1997, by and
between The Ozer Group LLC, a Massachusetts corporation with a principal place
of business at 233 Needham Street, 5th Floor, Newton, Massachusetts 02164 (the
"Agent") and Norty's, Inc., a Delaware corporation with a principal place of
business at 463 Seventh Avenue, New York, New York 10018 (the "Merchant").
WHEREAS, the Merchant operates ten (10) stores and a warehouse and
desires that the Agent act as the Merchant's exclusive sales agent for the
limited purpose of conducting the Sale (as hereinafter defined).
NOW THEREFORE, in consideration of the mutual covenants and
agreements set forth hereinafter and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the Agent and the
Merchant hereby agree as follows:
1. Agency Appointment
Agent shall serve as the Merchant's exclusive agent to (i) conduct a
Store Closing on Everything Sale (the "Sale") of all inventory assets as further
defined in subsection 2(c) hereof (the "Merchandise") from ten (10) of
Merchant's stores located at the locations set forth on Exhibit 1 hereto (the
"Stores"); and (ii) take such steps as may be deemed necessary and appropriate
in Agent's sole discretion to liquidate the Merchandise consistent with the
preceding sentence so as maximize the Proceeds (as hereinafter defined). It is
expressly agreed that the Sale shall be advertised as a "Store Closing Sale" or
similar handle throughout the Sale Term (as hereinafter defined). Agent shall be
entitled to advertise the Sale and use Merchant's trade name and logo consistent
with the preceding sentence. All
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such advertising will be submitted to the Merchant for approval on forty eight
(48) hours notice, which approval shall not be unreasonably withheld. Absent a
response from the Merchant with regard to Agent's request for such approval
within forty eight (48) of Merchant's receipt of Agent's request, such
advertising will be deemed approved.
2. Merchandise
a. Inventory
The Agent shall cause to be taken a "Retail Price"
physical inventory (as hereinafter defined) of the Merchandise, as defined in
subsection 2(c) herein (the "Physical Inventory"), to be conducted beginning at
the close of business at the Stores on October 2 and 3, 1997 ("Inventory Dates")
and no sales shall be transacted during the Physical Inventory. Merchant and
Agent shall jointly employ a certified inventory taking service such as RGIS
(the "Inventory Service") to conduct such inventory, and Merchant and Agent each
shall pay 50% of the costs and fees of such inventory taking service. Other than
such costs and fees, each of Merchant and Agent shall bear its own costs
relative thereto. Merchant and Agent shall each have representatives present
during the Physical Inventory taking and each shall have the right to review and
verify the listing and tabulation of the inventory count as provided by the
Inventory Service. The procedures to perform the Physical Inventory and its
verifications are set forth in Exhibit 2. Prior to the Physical Inventory, Agent
shall have full access to all records and all documents and files of Merchant
relative to the actual costs and Retail Prices of the Merchandise.
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b. Valuation
(i) For purposes of this Agreement "Retail Price" shall
mean in the Stores (as hereinafter defined), the lowest ticketed price offered
to the public since August 1, 1997, except for: (i) inventory offered in the
outlet stores that has been offered at any time at a point of sale ("P0S")
discount of fifty percent (50%) or greater, in which case "Retail Price'shall
mean the lowest offered prices to the customer for such items at any time by any
means, and (ii) Seasonal and Clearance merchandise (as hereinafter defined) in
the Stores at the Sale Commencement Date (as hereinafter defined), in which case
"Retail Price'shall be determined in accordance with Section 2(f), hereof. As
to defective inventory, Merchant and Agent shall agree upon a mutually
acceptable "retail" value.
(ii) The "Retail Price", using the Physical Inventory,
is subject to a verification that, other than markdowns and transfers in the
normal course of Merchant's business: (a) no tickets have been marked up since
August 1, 1997; (b) all ticketing, including ticketing of on-order inventory
received from today to the date of the physical inventory, will be done in
accordance with Merchant's customary, historic and ordinary ticketing practices
and consistent with current ticketing; (c) all normal course hard markdowns have
been taken consistent with past and customary practices and normal course hard
markdowns have been taken on defective inventory; (d) the inventory is free and
clear of all liens, claims and encumbrances, except as set forth on Exhibit 5;
and (f) no movement of inventory to or from the Stores so as to alter inventory
mixes, quantities, and categories, except in the normal course, has occurred or
will occur from and after August 1, 1997, it being the intent that the Stores
are being operated in the ordinary course consistent with Merchant's historical
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<PAGE> 4
practices, other than as agreed upon by Merchant and Agent prior to the Sale
Commencement Date.
c. Gross Rings
i) In the event that the Physical Inventory at a
particular Store is taken prior to the Sale Commencement Date, at which Store
the Merchant continues to conduct sales in the ordinary course of business
between the Inventory Date and the Sale Commencement Date, Agent and Merchant
shall jointly keep (i) a strict count of gross register receipts of sales of
Merchandise, less applicable sales tax ("Pre-Sale Gross Rings"), and (ii) cash
reports of sales at the Stores. The register receipts shall show for each item
sold the Retail Price and the storewide or other markdown or discount granted in
connection with such sales. All such records and reports shall be made available
to Agent by Merchant during regular business hours upon reasonable notice. For
the purposes of this Agreement, the Retail Price of Merchandise subject to
Pre-Sale Gross Rings shall be the total Pre-Sale Gross Rings multiplied by 102%
("Pre-Sale Gross Rings Amount"). The Pre-Sale Gross Rings Amount shall be
deducted from the Physical Inventory.
ii) In the event that the Physical Inventory at a
particular Store is taken after the Sale Commencement Date, Agent and Merchant
shall jointly keep (i) a strict count of gross register receipts of sales of
Merchandise, less applicable sales tax ("Pre-Inventory") and (ii) cash reports
of sales at the Stores. The register receipts shall show for each item sold the
Retail Price and the storewide or other markdown or discount granted in
connection with such sales. All such records and reports shall be made available
to Agent by Merchant during regular business hours upon reasonable notice. The
Pre-Inventory Gross
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Rings shall be included in the Proceeds. For the purposes of this Agreement, the
Retail Price of Merchandise subject to Pre-Inventory Gross Rings shall be the
total Pre-Inventory Gross Rings multiplied by 102% ("Pre-Inventory Gross Rings
Amount"). The Pre-Inventory Gross Rings Amount shall be included in and added to
the Physical Inventory.
d. Merchandise Subject to this Agreement
For purposes hereof, Merchandise shall mean all first
quality saleable inventory located at the Stores from today, including goods
received at the Stores during the Physical Inventory in the ordinary course of
business; inventory transferred from Merchant's warehouse, as provided in
section 2(e) hereof; "seasonal" or "clearance" goods (as herein defined); and
"defective" goods. "Seasonal" goods or "Clearance" goods are goods not normally
sold in the current selling season. "Defective" goods are goods agreed upon and
identified by Merchant and Agent as defective or otherwise not salable in the
ordinary course during the Physical Inventory process because they are dented,
scratched, torn, worn, dated, mismatched, have broken parts or contain other
characteristics making them not "first quality". Display merchandise shall not
be deemed defective per se. If Merchant and Agent cannot agree on the value of
an item that is Seasonal, Clearance or Defective, then such item shall be
excluded from Merchandise for purposes of this Agreement and shall be subject to
Section 2(f) hereof. Merchandise shall not include goods held by Merchant on
consignment; goods retained by Merchant as bailee; furnishings, fixtures and
equipment; goods subject to "special order"; and goods on layaway or held for
repair. Merchant shall remain responsible for processing and handling all goods
referred to in the preceding sentence, and contracts relating thereto, and Agent
shall have no cost, expense or responsibility in connection therewith.
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e. Merchandise in Transit from Warehouse
Inventory may be transferred from Merchant's Warehouse
to the Stores, at the Merchant's expense prior to the Physical Inventory, to be
included in the Physical Inventory and to be sold during the Sale, pursuant to a
schedule mutually agreed upon by Merchant and Agent. Notwithstanding the
foregoing, supplies (e.g. boxes, bags) shall not be redirected or directed by
Merchant between or among Stores prior to the Inventory Date so as to alter the
relative supplies levels of the Stores from those existing on the Inventory
Date. Merchant does not represent that adequate stocks of supplies are or will
be available at the Stores as of the Sale Commencement Date.
f. Defective, Seasonal and Clearance Goods
If, at the time of the Physical Inventory, Merchant and
Agent cannot in good faith agree on (i) whether an item constitutes Seasonal,
Clearance or Defective goods; and/or (ii) the value of an item that constitutes
Seasonal, Clearance or Defective goods, then such goods shall not be included as
"Merchandise" as defined in Section 2(d). Upon Merchant's request, Agent shall
sell such goods on a consignment basis, on account of which sale the proceeds
shall be shared 70/30 between Merchant and Agent respectively. If Merchant does
not request that Agent sell such goods on a consignment basis, then Merchant
shall retain title to any such goods.
g. Additional Inventory:
If Merchant and Agent agree upon a price and other
mutually agreed upon terms, Merchant shall, at Agent's request and sole
discretion, make available new
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fall on order merchandise so as to increase the inventory level at the Stores to
an amount not to exceed $3.5 Million.
3. Sale
a. Term
Unless otherwise agreed to between Merchant and Agent,
the Sale shall commence as soon as those conditions set forth in Section 6
hereto are satisfied or met (the "Sale Commencement Date") but in no event later
than October 3, 1997 so that the advertised portion of the Sale can commence by
October 3, 1997. Unless otherwise agreed to between Merchant and Agent, the Sale
shall terminate on or before January 10, 1998 (the "Sale Termination Date"). The
Agent shall have the discretion to terminate the Sale as to any Store at any
time within that time frame, unless the Sale is extended by mutual written
agreement of Agent and Merchant. If Agent terminates the Sale as to any
particular Store prior to the Sale Termination Date, Agent may consolidate goods
remaining therein in other Stores. The period from the Sale Commencement Date to
the Sale Termination Date shall be hereinafter referred to as the "Sale Term".
b. Rights of Agent
The Agent shall conduct the Sale during the Sale Term in
the name of and on behalf of the Merchant in a commercially reasonable manner.
The Agent, in the exercise of its sole discretion, however, shall be entitled
(i) to establish and implement advertising and promotion programs, (ii) to
establish Sale prices, (iii) to use, during the Sale Term and for purposes of
selling the Merchandise, without charge, all customer lists, furniture,
fixtures, equipment, advertising materials, supplies, intangible assets
(including
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<PAGE> 8
Merchant's name, logo, and tax I.D. numbers) and other assets of Merchant
(whether owned, leased, or licensed) which will be returned to Merchant at the
end of the Sale Term, and have not been used (e.g. supplies) or otherwise
disposed of through no fault of Agent, (iv) to use the Merchant's personnel, to
the extent that Agent, in the exercise of its sole discretion, shall deem
appropriate, (v) to have access to the Stores upon the execution of this
Agreement to prepare for the Sale and to prepare for the Sale in a manner so as
not to disrupt Merchant's on going business operations, and thereafter, to use
all Store keys, case keys, security codes, and safe and lock combinations to
gain access to and to operate the Stores, and (vi) to transfer Merchandise
between Stores. All sales of Merchandise will be "final sales" and "as is" and
all advertisements and sales receipts will reflect the same. Agent shall not
warrant the Merchandise in any manner, but will pass to the customers,
manufacturers' warranties to the extent transferable. Merchant shall indemnify
and hold harmless Agent for all liabilities and costs of whatever kind related
to or resulting from any consumer warranty or products liability claims relating
to the Merchandise and at Agent's cost, Agent shall be added as an insured on
Merchant's product liability insurance coverage. Other than as specifically
contemplated herein, nothing in this Agreement shall authorize Agent to bind or
otherwise legally obligate Merchant.
c. Obligations of Agent
i) During the Sale Term, the Agent shall collect from
Sales at the Stores all Sale-related sales, excise and gross receipts taxes
payable to any taxing authorities having jurisdiction, which taxes shall be
added to the sale price and shall be paid by the customer. The Agent shall
reimburse Merchant for sales taxes collected as part of the
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<PAGE> 9
weekly reconciliation between Merchant and Agent. Agent agrees to cooperate with
the Merchant at Merchant's request as it relates to questions from taxing
authorities. So long as Agent complies with the provisions of this subsection,
the Merchant shall indemnify and hold harmless the Agent from and against any
and all costs including, but not limited to, reasonable attorneys' fees,
assessments, fines or penalties which the Agent sustains or incurs as a result
or consequence of the failure by the Merchant to promptly pay such taxes to the
proper taxing authorities and/or the failure by the Merchant to promptly file
with such taxing authorities any and all reports and other documents required,
by applicable law, to be filed with or delivered to such taxing authorities.
ii) The Agent shall pay, or if paid by Merchant, Agent
shall reimburse Merchant, in each case on a weekly basis, for Store-level
operating expenses of the Sales which arise during the Sale Term at the Stores,
including but not limited to the following: base payroll for Store employees
(including a store incentive program for employees and managers of the Stores
equal to 10% of the base payroll, inclusive of statutory benefits), payroll
related expenses (including Workers Compensation insurance), not to exceed 20%
of payroll, excluding Merchant provided central administrative services for the
Sale, including home office payroll processing, data processing and other
services, as needed by Agent and which Merchant shall provide to Agent during
the Sale Term) and benefits; inventory insurance; advertising and promotional
costs, store to store transfers of inventory; in-store signage; long-distance
and local telephone expenses; security, bank charges and fees, legal fees; and
the Physical Inventory fee (collectively, the "Expenses"). "Expenses" shall not
include Occupancy (which is rent, percentage rent, CAM, utilities, real estate
and use taxes
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<PAGE> 10
and Merchant's Associations dues and charges, building insurance, HVAC, building
and store maintenance and structural repair during the Sale Term. "Expenses"
also specifically excludes any other costs and expenses payable by Merchant
(including but not limited to costs resulting from administration of matters
such as layaways, store credits, gift certificates, and the shipment of
Merchandise from the Warehouse to the Stores during the Sale, which shall be the
responsibility of Merchant); employee benefit costs (such as, but not limited to
pension, health, vacation or severance benefits except as they fall under the
20% cap) other costs and expenses not enumerated above; and rental for
furniture, fixtures and equipment except as such rentals are ordered by Agent.
All Expenses shall be paid from the Proceeds, as follows:
a. While the Merchant is in control of the
Proceeds, in accordance with Section 4 hereof, during the Sale Term, Merchant
and Agent shall reconcile the Expenses, on each Wednesday for the prior week's
(i.e. Sunday through Saturday) Expenses including the Wednesday following the
Sale Termination Date. Once the Expenses have been reconciled Merchant shall
tender payment for the Expenses from the Proceeds. In the event that the Agent
pays an Expense directly, Agent shall invoice Merchant for such Expense and such
Expense shall be included in the following week's reconciliation of Expenses.
b. While the Agent is in control of the Proceeds,
in accordance with Section 5(b)(iii) hereof, during the Sale Term, Merchant and
Agent shall, reconcile the Expenses on each Wednesday for the prior week's (i.e.
Sunday through Saturday) Expenses including the Wednesday following the Sale
Termination Date. Once the Expenses have been reconciled Agent shall tender
payment for the Expenses from the
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Proceeds. In the event that the Merchant pays an Expense directly, Merchant
shall invoice Agent for such Expense and such Expense shall be included in the
following weeks reconciliation of Expenses.
iii) During the Sale Term, the Merchant shall process
the base payroll for all Merchant employees utilized by the Agent. Such
employees will be identified by Agent prior to the Sale Commencement Date. Agent
may request that Merchant terminate such employees at any time during the Sale,
and will use best efforts to notify any employee to be terminated at least seven
(7) days prior to termination, except for a termination "for cause'such as
dishonesty, fraud or breach of employee duties. In the event that Merchant
refuses to terminate such employee, then Agent has no obligation to continue to
pay such employee's base payroll or payroll related benefits or expenses. Each
week during the Sale Term, either (i) the Merchant shall pay out of the
Proceeds, or (ii) the Agent shall pay to Merchant, or shall deposit into an
account designated by the Merchant, the base payroll plus related payroll taxes.
Base payroll and related payroll taxes of employees are designated on Exhibit 3
hereto. Merchant shall not transfer employees between Stores without Agent's
consent. The Agent shall not be responsible for reimbursement or payment of any
other compensation or costs due to employees, including but not limited to
vacation pay, severance pay, sick pay, leave-of-absence pay, or pension benefits
or amounts required to be paid by statute or law. Nothing herein shall make
Agent liable under any collective bargaining or employment agreement, nor shall
Agent be deemed a joint or successor employer.
iv) Except as specifically set forth in this Agreement,
the Agent shall not assume, nor shall its actions be construed as an assumption
of, any of the
11
<PAGE> 12
Merchant's liabilities or obligations and Merchant shall not assume, nor shall
its actions be construed as an assumption or any of the Agent's liabilities or
obligations. The Merchant shall indemnify and hold the Agent harmless in respect
to all claims, if any, for those obligations and liabilities arising out of
Merchant's actions or failure to act hereunder. The Agent shall indemnify and
hold the Merchant harmless in respect to all claims, if any, for those
obligations and liabilities arising out of Agent's actions or failure to act
hereunder.
4. Proceeds
a. For purposes of this Agreement, Proceeds shall mean the
total amount (in dollars) of all sales of Merchandise made under this Agreement
(exclusive of sales, excise and gross receipt taxes; credit card fees; and
returns, allowances and customer credits). All sales will be made only for cash,
by approved checks and by credit cards currently accepted by Merchant. The Agent
shall accept Merchant gift certificates, store credits and due bills issued in
accordance with Merchant's historical policy prior to the Sale Commencement Date
but the amount thereof will not be Proceeds. Agent also shall accept returns of
goods sold within seven (7) days prior to the Sale Commencement Date in
accordance with Merchant's historic return policy, but the amount thereof will
not be Proceeds. Merchant shall reimburse Agent for all gift certificates,
stores creditors, due bills and returns which are honored pursuant to this
Agreement. All such reimbursement shall be applied as an offset to the weekly
payment of Expenses provided for in Section 3(c)(ii) hereof. If requested by
Merchant, Agent may, at its option, purchase from Merchant such returned goods
that are resalable at the Retail Price (applicable to that category of
12
<PAGE> 13
Merchandise as if such returned item were "Merchandise" hereunder) multiplied by
the inverse of the applicable discount at the time of the return, multiplied by
eighteen percent (18%).
b. All Proceeds shall be deposited into Merchant's bank
accounts until such time as the Merchant has been paid the Guaranteed Amount and
the Expenses to date have been paid in accordance with Sections 3(c)(ii) and
5(b) hereof. Once the Merchant has been paid the Guaranteed Amount and the
Expenses to date have been paid, in accordance with Sections 3(c)(ii) and 5(b)
hereof, the Proceeds shall be deposited into special agency accounts, for which
the Agent shall have sole signatory authority and control. Merchant shall
execute and deliver all necessary documents to open and maintain the accounts.
5. Payment
a. Payment Amount
i) Agent shall guarantee to the Merchant a sum equal to
eighteen percent (18%) of the inventory value at "retail" in the Stores plus the
percentage of any Additional Inventory, as defined in Section 2(g) hereof, to be
added to the Sale, as mutually agreed between the Merchant and Agent, calculated
as follows (the "Guaranteed Amount"):
1. twenty-two percent (22%) of the "retail" value of
the Additional Inventory if the "retail" value of
the Additional Inventory to be added to the Sale
aggregates approximately $1.1 million; or
2. twenty-four and one-half percent (24.5%) of the
"retail" value of the Additional Inventory to the
extent that the "retail" value of the Additional
Inventory to be added to the Sale is less than
13
<PAGE> 14
$650,000 (or such other additional mutually
agreeable amount); and
3. twenty-two percent (22%) of the "retail" value of
the Additional Inventory to the extent that the
"retail" value of the Additional Inventory to be
added to the Sale exceeds $650,000 (or such other
additional mutually agreeable amount) but is
significantly less than $1.1 million.
If the Proceeds from the Sale exceed the sum of (i) the Guaranteed Amount and
(ii) the Expenses of the Sale, then the Agent will keep as its Fee, the next two
percent (2.0%) of the inventory value at "retail" in the Stores (the "Agent's
Fee"). If the Proceeds of the Sale exceed the sum of (i) the Guaranteed Amount;
(ii) the Expenses of the Sale; and (iii) the Agent's Fee, then the Merchant and
Agent will share equally in such excess Proceeds (the "Sharing Amount").
b. Time of Payment of Guaranteed Amount and Expenses
i) The Guaranteed Amount and the Expenses shall be paid
from the Proceeds from the Sale on a weekly basis. To secure its obligation to
pay the Guaranteed Amount and the Expenses to be paid to Merchant by Agent,
Agent will deliver to Merchant an irrevocable standby letter of credit in the
form set forth as Exhibit 7 (the "Agent L/C"), in an amount equal to $500,000
(the "Face Amount") together with the execution and delivery hereof by Agent,
but in no event later than October 14, 1997.
ii) If this Agreement has not previously been terminated
pursuant to Section 11(a) hereof, and in the event that (a) the Proceeds are not
sufficient to pay the Guaranteed Amount and the Expenses and (b) Agent fails to
make
14
<PAGE> 15
Merchant whole within seventy two (72) hours of Merchant notifying Agent of such
deficiency, then Merchant (or any person or entity claiming by, through, or
under Merchant, by assignment, pledge or otherwise) may draw against the Agent
L/C to the extent necessary to pay the balance of any remaining unpaid portion
of the Guaranteed Amount and the Expenses on the Sale Termination Date.
iii) Notwithstanding the Face Amount, any draws against
the Agent L/C as provided for herein shall not exceed an amount equal to the
Guaranteed Amount and the Expenses.
iv) Once Merchant has received the Guaranteed Amount and
the Expenses to date have been paid, Merchant shall surrender all control of the
Proceeds to the Agent.
v) Every two (2) weeks, starting from the Sale
Commencement Date through the Sale Termination Date, Merchant shall authorize
the reduction of the Agent L/C by an amount equal to the amount of the Proceeds
that Merchant received, as of the close of business on the previous day.
vi) Unless otherwise agreed to between Merchant and
Agent, upon receipt by Merchant of the full Guaranteed Amount and the Expenses
to date, the Agent L/C shall be reduced to an amount equal to two (2) weeks
Expenses.
vii) The Agent L/C shall terminate automatically two (2)
weeks after the Sale Termination Date.
d. Agent's Payments
15
<PAGE> 16
The Merchant shall not be entitled to the payment of any
other monies from the Sale or otherwise, except as specified in this Agreement.
The Remaining Proceeds (after payment of the Guaranteed Amount, the Expenses,
the Agent's Fee and the Merchant's share of the Sharing Amount) shall belong to
Agent in consideration of goods and services provided by Agent hereunder. All
Merchandise remaining at the conclusion of the Sale shall become the property of
Agent, free and clear of all liens, claims and encumbrances of any kind or
nature whatsoever, other than Agent's obligation to pay Merchant's equal portion
of the Sharing Amount, if any, relating to the subsequent sale of this
Merchandise.
16
<PAGE> 17
6. "Cash Savings"
a. In addition to and separate from the Guaranteed Amount,
Expenses and the Sharing Amount, the difference between the actual cost of the
Merchandise on Merchant's books and the Guaranteed Amount, shall be paid by D&W
Enterprises, Inc. ("D&W") to Merchant solely in the form of "Cash Savings" on
merchandise, services, travel/hotels and media that Merchant may be interested
in purchasing from D&W and that may be contained in D&W's then current
inventory.
b. "Cash Savings" shall be defined as the difference between
the lowest price (after cash discounts) at which Merchant could reasonably pay
for any such merchandise or services through Merchant's normal channels and the
price at which D&W will sell to Merchant any such merchandise or service. Upon
delivery of any such items to Merchant by D&W, Merchant will pay D&W such lower
cash cost for the item delivered under the terms mutually agreed to between
Merchant and D&W each time merchandise or services are sold to Merchant by D&W.
"Cash Savings'shall be realized by Merchant through those purchase orders
issued by Merchant to D&W and the respective invoices issued by D&W to Merchant
which specifically outline the "Cash Savings" Merchant is to receive for any
merchandise or services sold to Merchant.
c. It is expressly intended and understood that any balance of
payment due to Merchant by D&W shall be remitted solely by means herein set
forth for the time period required to accomplish this result and that D&W shall
not be required to remit any other form of payment or cash to Merchant in
payment of any "Cash Savings" due by D&W to Merchant hereunder. D&W shall offer
Merchant merchandise, services, and media
17
<PAGE> 18
in its inventory or as may become available to D&W. This section does not apply
to the Guaranteed Amount or the Sharing Amount. Merchant has no obligation
hereunder to purchase any merchandise or services from D&W.
d. It is expressly intended and understood that any "Cash
Savings" of the Merchant, as provided herein, shall be for the benefit of
Merchant, or any affiliate, including, without limitation, Norton McNorton of
Squire, Inc. or Miss Erika, Inc.
e. It is expressly intended and understood that Agent has no
obligations or liability with respect to the Cash Savings and D&W.
7. Conditions
The Agent's and Merchant's willingness to enter into the
transaction contemplated hereunder and Agent's and Merchant's obligations
hereunder are directly conditioned upon the satisfaction, compliance, and
completion of the following:
a. The Merchant having obtained all government permits and
consents necessary to conduct the Sale and any other necessary government
approval.
b. The Merchant having obtained all other consents and
approvals, whether required by contract or otherwise (including those of
landlords for the Stores) necessary to consummate and perform the transaction
herein contemplated.
c. The Merchant possessing and the Agent having the right to
the undisturbed and unencumbered use and occupancy of, and the peaceful and
quiet possession of, the Stores and assets currently located thereat and the
services provided thereto.
d. The Merchant continuing to operate the Stores in the
ordinary course of business from the date hereof to the Sale Commencement Date,
selling
18
<PAGE> 19
Merchandise during said period at prices currently charged therefor, not
promoting or advertising any "sales" or in-store promotions to the public, and
not making any management personnel moves or changes. If any casualty or act of
God substantially inhibits the conduct of business in the ordinary course at any
Store, such Store and Merchandise thereat shall be deleted from this Agreement.
e. As of the Sale Commencement Date, the Merchant is current
with all of its rent and related obligations under the Leases for the Stores.
f. As of the Sale Commencement Date, the Merchant is current
with all of its obligations to its advertising vendors.
g. Prior to and during the Sale Term, Merchant shall not issue
any communications about or concerning the Sale without Agent's prior consent,
which will not be unreasonably withheld.
h. Unless otherwise consented to by the Agent, the Physical
Inventory shall have been completed at each Store, and the Inventory Service
shall have issued its final report to Merchant and Agent.
i. Upon reconciliation of the Physical Inventory and the
Additional Inventory, Agent shall provide Merchant with a projected budget of
the Expenses (the "Projected Expense Budget"). While Agent shall use its best
efforts to maintain the Expenses within the budget, other than for Supervisor's
Pay and Bonuses, as identified on Exhibit 4 hereto, the Expenses shall not be to
limited to the amounts set forth in the budget.
19
<PAGE> 20
8. Representations and Warranties
a. The Merchant hereby makes the following representations and
warranties to the Agent, which shall survive the execution and delivery of this
Agreement:
i) The Merchant is a corporation, duly organized,
validly existing and in good standing under the laws of Delaware and has the
corporate power and authority to own, lease and operate its assets, properties
and business and to carry on its business as now being conducted.
ii) The Merchant has the right, power and authority
required to execute, deliver and perform fully its obligations hereunder. This
Agreement has been duly executed and delivered by the Merchant and constitutes
the valid and binding obligation of the Merchant enforceable in accordance with
its terms, subject to the Order. No court order or decree of any federal, state,
or local government authority or regulatory body is in effect that would prevent
or impair consummation of the transactions contemplated by this Agreement, and
no consent of any third party other than that obtained by Merchant is required
therefor.
iii) The Merchant has operated the Stores in the
ordinary course of business consistent with historical operations and has not
conducted any promotions or advertised sales except promotions and sales in the
ordinary course of business prior to the Inventory Date consistent with
historical promotions and sales for comparable periods last year and subject to
Agent's prior reasonable review.
20
<PAGE> 21
iv) The Merchant is authorized to conduct business in
all necessary states and has all licenses, permits and authorizations of
governmental bodies necessary therefor.
v) The Merchant will remain current through to the Sale
Termination Date on its rent and related obligations under the Leases for the
Stores.
vi) The Merchant will remain current through to the Sale
Termination Date, with its advertising vendors.
vii) The Merchandise is owned free and clear of liens,
claims and encumbrances except for the liens listed on Exhibit 5 hereto.
viii) The Merchant has obtained all appropriate consents
or approvals of all parties identified on Exhibit 5 hereto as are necessary to
consummate and perform the transaction herein contemplated.
ix) Since August 1, 1997, Merchant has maintained its
records for the Merchandise of the Stores in the ordinary course and prices
charged to the public for the Merchandise (whether in-store, by advertisement or
otherwise) are the same as set forth in the said pricing files as of and for the
periods indicated, except for the promotions and sales described in Section
7(a)(iii). Merchant shall identify and provide, as requested by Agent, copies of
all pricing files and records since March 1, 1997 as to all Merchandise in the
Stores, and represents that same are true and accurate in all material respects
as to the actual cost to Merchant for purchasing said Merchandise and as to the
selling price to the public therefor as of the dates and for the periods of such
files and records.
21
<PAGE> 22
x) There has been since August 1, 1997, and currently
is, no threatened or pending legal, administrative or other proceeding with
respect to the Stores or any inventory transferred to the Stores pursuant to
Section 2(d) hereof which would in any way impact Merchant's responsibilities
hereunder. There has been since August 1, 1997 and is, no event, report,
proceeding or matter concerning or affecting the business of Merchant or its
assets which had, has or may have a material adverse impact on the business of
Merchant.
b. The Agent represents and warrants to Merchant as follows,
which representations and warranties shall survive the execution of this
Agreement:
i) The Agent is a corporation, duly organized, validly
existing and in good standing under the laws of the Commonwealth of
Massachusetts and has the power and authority to consummate the transactions
contemplated hereby.
ii) The Agent has the right, power and authority to
execute and deliver this Agreement and perform its obligations hereunder and has
taken all necessary action required to authorize the execution, delivery and
performance of this Agreement and no further approval is required for the Agent
to enter into and deliver this Agreement and to perform its obligations
hereunder.
iii) This Agreement has been duly executed and delivered
by the Agent and constitutes the legal, valid and binding obligation of the
Agent enforceable against the Agent in accordance with its terms subject only to
any applicable bankruptcy, insolvency or similar laws affecting the rights of
creditors generally. No court order or decree of any federal, state, or local
governmental authority or regulatory body is in
22
<PAGE> 23
effect that would prevent or impair or is required for the Agent's consummation
of the transactions contemplated by this Agreement and no consent of any third
party is required therefor. No contract or other agreement to which the Agent is
a party or by which the Agent is otherwise bound will prevent or impair the
consummation of the transactions contemplated by this Agreement.
iv) The Agent does not hold or represent any interest
adverse to, or have any relationship with the Merchant, its agents or employees.
v) The Agent agrees that this Agreement or its
obligations hereunder is not assignable unless Agent obtains the prior written
consent of Merchant, which consent shall not be unreasonably withheld.
vi) The items to be included in the Projected Expense
Budget represent the projected amount of actual cost and do not include a mark
up of any kind.
vii) To the extent that there is Merchandise remaining
after the conclusion of the Sale, Agent shall notify Merchant of any subsequent
sale and the proceed, net of the expenses, realized from such sale.
viii) To the Agent's knowledge, no actions or
proceedings have been instituted by or against the Agent, or have been
threatened, which proceeds, net of expense related to such sale, realized,
question the validity of this Agreement or any action taken or to be taken by
the Agent in connection with this Agreement or that, if adversely determined,
would have a material adverse effect upon the Agent's ability to perform its
obligations under this Agreement.
23
<PAGE> 24
ix) No actions or proceedings (including, but not
limited to, bankruptcy or other insolvency proceedings) have been instituted
against the Agent or, to its knowledge, are threatened or are likely to be
instituted against the Agent.
9. Insurance
a. Until the expiration of the Sale Term, the Merchant shall
continue in force all insurance in such amounts as it currently has in effect
which the Merchant represents is accurately shown on Exhibit 6 attached hereto.
The Agent shall be named as an additional loss payee as its interests may
appear. The Agent shall reimburse the Merchant for costs of inventory insurance
(which is defined as an Expense) during the Sale Term upon receipt of an invoice
therefor from the Merchant.
b. During the Sale Term, the Agent shall maintain, at its
cost, separate comprehensive public liability insurance for injury to persons in
an amount equal to at least $1 million per occurrence, naming Merchant as
additional loss payee as its interests may appear, subject to a $10,000
deductible per occurrence.
FURNITURE, FIXTURES AND EQUIPMENT
10. At the Merchant's request, Agent shall arrange for the sale or
disposition of furniture, fixtures and equipment. In consideration of the
Agent's efforts, Agent shall retain 7.5% of the sales price received therefor,
less sales taxes.
11. Defaults
The following shall be "Events of Default" hereunder:
24
<PAGE> 25
a. The Merchant or Agent shall fail to perform any material
obligation hereunder if such failure remains uncured seven days after written
notice thereof; or
b. Any representation or warranty made by Merchant or Agent
proves untrue in any material respect when made; or
c. The Sale is terminated at a Store for reasons other than a
default, breach or action by Agent not authorized hereunder.
12. Miscellaneous
a. All communications provided for pursuant to this Agreement
must be in writing, and mailed by Federal Express or other overnight delivery
service, as follows:
If to the Agent: 233 Needham Street
5th Floor
Newton, MA 02164
Attn: Steve Miller
TRAUB, BONACQUIST & FOX LLP
489 Fifth Avenue - 27th Floor
New York, New York 10017
Attn: Paul Traub
If to the Merchant: 463 Seventh Avenue
New York, New York 10018
Attn: Amanda Bokman
b. This Agreement shall be construed and enforced in
accordance with the laws of the State of New York.
25
<PAGE> 26
Agreement by their duly authorized representative as a sealed instrument as of
the day and year first written above.
As to all Sections other than
Section 6
THE OZER GROUP LLC
By: /s/ Stephen S. Miller
------------------------------------
Its: principal
As to the Entire Agreement
NORTY'S. INC.
By: /s/ Illegible
------------------------------------
Its:
As to Section 6 Only
D&W ENTERPRISES, INC.
By: /s/ Illegible
------------------------------------
Its:
26
<PAGE> 27
Agreement by their duly authorized representative as a sealed instrument as of
the day and year first written above.
As to all Sections other than
Section 6
THE OZER GROUP LLC
By: /s/ Illegible
------------------------------------
Its:
As to the Entire Agreement
NORTY'S. INC.
By: /s/ Amanda J. Bokman
------------------------------------
Its: VP, CFO, Secretary & Treasurer
As to Section 6 Only
D&W ENTERPRISES, NC.
By: /s/ Illegible
------------------------------------
Its:
26
<PAGE> 28
Agreement by their duly authorized representative as a sealed instrument as of
the day and year first written above.
As to all Sections other than
Section 6
THE OZER GROUP LLC
By: /s/ Illegible
------------------------------------
Its:
As to the Entire Agreement
NORTY'S. INC.
By: /s/ Amanda J. Bokman
------------------------------------
Its: VP, CFO, Secretary & Treasurer
As to Section 6 Only
D&W ENTERPRISES, NC.
By: /s/ Sanford Greenberg
------------------------------------
Its: CEO
26
<PAGE> 29
Exhibit 1
List of Stores
<TABLE>
<CAPTION>
Store Location Store Location
- ----- ------------------------- ----- -------------------------
<S> <C> <C> <C>
1 35 S. Willowdale Drive 6 645 Outlet Center Drive
Lancaster, PA 18447 Nashville, TN 37214
Telephone (717) 394-0474 Telephone (615) 889-5750
2 Tanger Factory Outlet 7 St. Augustine Outlet Center
800 Steven B. Tanger Blvd. 2700 SR. 16, Suite 907
Suite 108 St. Augustine, FL 32092
Commerce, GA 30529 Telephone (904) 826-3484
Telephone (706) 335-5545
8 I79 & US Route 208, Suite 220
3 1000 Tanger Drive Grove City, PA 16127
Locust Grove, GA 30248 Telephone (412) 748-3351
Telephone (770) 957-0660
9 Orlando Shopping Center
4 8330 Factory Shops Blvd. 5247 International Drive
Jeffersonville, OH 43128 Orlando, FL 32819
Telephone (614) 948-2809 Telephone (407) 352-0644
5 121 Outlet Square 10 Outlet Park at Waceamaw Mat
Hershey, PA 17033 3200 Pottery Road
Telephone (717) 534-2821 Myrtle Beach, SC 29577
</TABLE>
Exhibit 1 1
<PAGE> 30
EXHIBIT 2
Unless otherwise agreed between the parties, within a reasonable
time of the execution of this Agreement, Merchant will provide Agent with
instructions regarding the procedure for inventory taking and verification that
are mutually acceptable to Merchant and Agent and are in conformity with
historical practice and procedures such inventory taking and verification.
<PAGE> 31
Exhibit 3
Base Payroll and Payroll Tax Information
A listing of the Merchant's current employees by location is attached.
Exhibit 3 1
<PAGE> 32
- --------------------------------------------------------------------------------
PAYROLL REGISTER - DETAIL CHECK DATE 10/03/97 WEEK 40 10/02/97
NORTY'S GROUP - 1291 PERIOD BEGIN 09/25/97 PERIOD END 10/01/97 PAGE 1
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
EMPLOYEE NAME EARNINGS PAY CURRENT YTD DEDUCTIONS CURRENT YTD
ID SSN STATE/FRQ STS LOCATION DESCR RATE HOURS AMOUNT HOURS AMOUNT DESCR AMOUNT AMOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
DELMONACO, IDA 1 REGULAR 40.00 320.00 1600.00 12800.00 6 CHECKING 270.45 4327.20
1703 ###-##-#### FL FL FL
52 S2/S2 FL 9
8.0000 Hourly
------- ------- -------- --------- -------- --------
EMPLOYEE TOTAL 40.00 320.00 1600.00 12800.00 270.45 4327.20
- ------------------------------------------------------------------------------------------------------------------------------------
HAMRICK, CARMEN 1 REGULAR 40.00 280.00 1567.75 10974.25
1705 ###-##-#### FL FL FL
52 N1/M1 FL 9
7.0000 Hourly
------- ------- -------- ---------
EMPLOYEE TOTAL 40.00 280.00 1567.75 10974.25
- ------------------------------------------------------------------------------------------------------------------------------------
MAZER, DORIS 1 REGULAR 24.50 159.25 478.50 3110.29
1507 ###-##-#### FL FL FL
52 S0/S0 FL 9
6.5000 Hourly
------- ------- -------- ---------
EMPLOYEE TOTAL 24.50 159.25 478.50 3110.29
- ------------------------------------------------------------------------------------------------------------------------------------
VALLE, MERARI 1 REGULAR 12.50 65.63 49.00 257.26
1752 ###-##-#### FL FL FL
52 S0/S0 FL 9
5.2500 Hourly
------- ------- -------- ---------
EMPLOYEE TOTAL 12.50 65.63 49.00 257.26
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- -------------------------------------------------------------------------------------
EMPLOYEE NAME TAXES CURRENT YTD NET PAY
ID SSN STATE/FRQ STS LOCATION DESCR AMOUNT AMOUNT CHECK NO
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
DELMONACO, IDA FEDERAL 25.07 1002.80 0.00
1703 ###-##-#### FL FL FL OASDI 19.84 793.60 DIRDEP
52 S2/S2 FL 9 MEDICARE 4.64 185.60
8.0000 Hourly
------- --------
EMPLOYEE TOTAL 49.55 1982.00
- -------------------------------------------------------------------------------------
HAMRICK, CARMEN FEDERAL 15.75 605.59 242.83
1705 ###-##-#### FL FL FL OASDI 17.36 680.40 4145
52 N1/M1 FL 9 MEDICARE 4.06 159.12
7.0000 Hourly
------- --------
EMPLOYEE TOTAL 37.17 1445.11
- -------------------------------------------------------------------------------------
MAZER, DORIS FEDERAL 16.24 306.04 130.83
1507 ###-##-#### FL FL FL OASDI 9.87 192.86 4146
52 S0/S0 FL 9 MEDICARE 2.31 45.09
6.5000 Hourly
------- --------
EMPLOYEE TOTAL 28.42 543.99
- -------------------------------------------------------------------------------------
VALLE, MERARI FEDERAL 2.20 15.66 58.41
1752 ###-##-#### FL FL FL OASDI 4.07 15.95 4147
52 S0/S0 FL 9 MEDICARE 0.95 3.73
5.2500 Hourly
------- --------
EMPLOYEE TOTAL 7.22 35.34
- -------------------------------------------------------------------------------------
</TABLE>
<PAGE> 33
- --------------------------------------------------------------------------------
PAYROLL REGISTER - DETAIL CHECK DATE 10/03/97 WEEK 40 10/02/97
NORTY'S GROUP - 1291 PERIOD BEGIN 09/25/97 PERIOD END 10/01/97 PAGE 2
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
EMPLOYEE NAME EARNINGS PAY CURRENT YTD DEDUCTIONS CURRENT YTD
ID SSN STATE/FRQ STS LOCATION DESCR RATE HOURS AMOUNT HOURS AMOUNT DESCR AMOUNT AMOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ORLANDO 1 REGULAR 117.00 824.88 4233.50 30130.52 6 CHECKING 270.45 4327.20
DEPARTMENT TOTALS
4 EMPLOYEES 4 CHECKS
------- ------- -------- --------- -------- --------
DEPARTMENT TOTAL 117.00 824.88 4233.50 30130.52 270.45 4327.20
- ------------------------------------------------------------------------------------------------------------------------------------
DIAMOND, ERIKA M 1 REGULAR 11.25 59.06 27.75 145.69
1754 ###-##-#### FL FL FL
52 S0/S0 FL 15
5.2500 Hourly
------- ------- -------- ---------
EMPLOYEE TOTAL 11.25 59.06 27.75 145.69
- ------------------------------------------------------------------------------------------------------------------------------------
GANSON, JESSICA 1 REGULAR 4.75 25.18 455.50 2297.09
1633 ###-##-#### FL FL FL
52 S0/S0 FL 15
5.3000 Hourly
------- ------- -------- ---------
EMPLOYEE TOTAL 4.75 25.18 455.50 2297.09
- ------------------------------------------------------------------------------------------------------------------------------------
GOVAN, CINDY A. 1 REGULAR 425.00 17000.00 6 CHECKING 317.87 5085.92
1495 ###-##-#### FL FL FL K 401-K -17.00 -680.00 E EXPANDED DI 0.19 7.60
52 S0/S0 FL 15 P MED 125 -5.00 -200.00
425.00 Salary 20 401K E-M 5.95 238.00
------- --------- -------- --------
EMPLOYEE TOTAL 403.00 16120.00 318.06 5093.52
425.00 17000.00
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- --------------------------------------------------------------------------------------
EMPLOYEE NAME TAXES CURRENT YTD NET PAY
ID SSN STATE/FRQ STS LOCATION DESCR AMOUNT AMOUNT CHECK NO
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ORLANDO FEDERAL 59.26 2017.46 432.07
DEPARTMENT TOTALS OASDI 51.14 1868.12
4 EMPLOYEES 4 CHECKS MEDICARE 11.96 436.92
------- --------
122.36 4322.50
ER OASDI 51.14 1868.10
ER MEDCR 11.96 436.90
ER FUI 1.80 162.85
FL ER SUI 0.25 22.40
------- --------
65.15 2490.25
------- --------
DEPARTMENT TOTAL 187.51 6812.75
- --------------------------------------------------------------------------------------
DIAMOND, ERIKA M FEDERAL 1.21 1.84 53.33
1754 ###-##-#### FL FL FL OASDI 3.66 9.03 4148
52 S0/S0 FL 15 MEDICARE 0.86 2.12
5.2500 Hourly
------- --------
EMPLOYEE TOTAL 5.73 12.99
- --------------------------------------------------------------------------------------
GANSON, JESSICA FEDERAL 98.91 23.25
1633 ###-##-#### FL FL FL OASDI 1.56 142.45 4149
52 S0/S0 FL 15 MEDICARE 0.37 33.30
5.3000 Hourly
------- --------
EMPLOYEE TOTAL 1.93 274.66
- --------------------------------------------------------------------------------------
GOVAN, CINDY A. FEDERAL 52.81 2112.40 0.00
1495 ###-##-#### FL FL FL OASDI 26.04 1041.60 DIRDEP
52 S0/S0 FL 15 MEDICARE 6.09 243.60
425.00 Salary
------- --------
EMPLOYEE TOTAL 84.94 3397.60
- --------------------------------------------------------------------------------------
</TABLE>
<PAGE> 34
- --------------------------------------------------------------------------------
PAYROLL REGISTER - DETAIL CHECK DATE 10/03/97 WEEK 40 10/02/97
NORTY'S GROUP - 1291 PERIOD BEGIN 09/25/97 PERIOD END 10/01/97 PAGE 3
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
EMPLOYEE NAME EARNINGS PAY CURRENT YTD DEDUCTIONS CURRENT YTD
ID SSN STATE/FRQ STS LOCATION DESCR RATE HOURS AMOUNT HOURS AMOUNT DESCR AMOUNT AMOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
MANUCY, ELIZABETH R 1 REGULAR 10.50 55.13 34.00 178.51
1753 ###-##-#### FL FL FL
52 S0/S0 FL 15
5.2500 Hourly
------- ------- -------- ---------
EMPLOYEE TOTAL 10.50 55.13 34.00 178.51
- ------------------------------------------------------------------------------------------------------------------------------------
RAKE, PEGGY S 1 REGULAR 38.00 228.00 1138.25 6829.50 6 CHECKING 194.96 2990.10
1672 ###-##-#### FL FL FL 2 OVERTIME 5.75 51.75
52 M0/M0 FL 15
6.0000 Hourly
------- ------- -------- --------- -------- --------
EMPLOYEE TOTAL 38.00 228.00 1144.00 6881.25 194.96 2990.10
- ------------------------------------------------------------------------------------------------------------------------------------
SINGLETON, LINDA 1 REGULAR 40.00 260.00 1600.00 10400.00 6 CHECKING 215.85 1079.30
1443 ###-##-#### FL FL FL P MED 125 -5.00 -200.00
52 M0/M0 FL 15
6.5000 Hourly
------- ------- -------- --------- -------- --------
EMPLOYEE TOTAL 40.00 255.00 1600.00 10200.00 215.85 1079.30
260.00 10400.00
- ------------------------------------------------------------------------------------------------------------------------------------
ST. AUGUSTINE 1 REGULAR 104.50 1052.37 4124.00 41691.34 6 CHECKING 728.68 9155.32
DEPARTMENT TOTALS 2 OVERTIME 5.75 51.75 E EXPANDED DI 0.19 7.60
6 EMPLOYEES 6 CHECKS 4 3RD PART 133.71 13 3RD PARTY S 123.48
K 401-K -17.00 -680.00 33 3RD PARTY O 8.30
P MED 125 -10.00 -450.00 34 3RD PARTY M 1.93
20 401K E-M 5.95 238.00
------- ------- -------- --------- -------- --------
DEPARTMENT TOTAL 104.50 1025.37 4129.75 40746.80 728.87 9296.63
1052.37 41876.80
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- -------------------------------------------------------------------------------------
EMPLOYEE NAME TAXES CURRENT YTD NET PAY
ID SSN STATE/FRQ STS LOCATION DESCR AMOUNT AMOUNT CHECK NO
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
MANUCY, ELIZABETH R FEDERAL 0.63 3.85 50.28
1753 ###-##-#### FL FL FL OASDI 3.42 11.07 4150
52 S0/S0 FL 15 MEDICARE 0.80 2.59
5.2500 Hourly
------- --------
EMPLOYEE TOTAL 4.85 17.51
- -------------------------------------------------------------------------------------
RAKE, PEGGY S FEDERAL 15.59 401.93 0.00
1672 ###-##-#### FL FL FL OASDI 14.14 426.66 DIRDEP
52 M0/M0 FL 15 MEDICARE 3.31 99.78
6.0000 Hourly
------- --------
EMPLOYEE TOTAL 33.04 928.37
- -------------------------------------------------------------------------------------
SINGLETON, LINDA FEDERAL 19.64 785.60 0.00
1443 ###-##-#### FL FL FL OASDI 15.81 632.40 DIRDEP
52 M0/M0 FL 15 MEDICARE 3.70 147.90
6.5000 Hourly
------- --------
EMPLOYEE TOTAL 39.15 1565.90
- -------------------------------------------------------------------------------------
ST. AUGUSTINE FEDERAL 89.88 3663.94 126.86
DEPARTMENT TOTALS OASDI 64.63 2580.93
6 EMPLOYEES 6 CHECKS MEDICARE 15.13 603.59
GA STATE 1.23
------- --------
169.64 6849.69
ER OASDI 64.63 2589.10
ER MEDCR 15.13 605.52
ER FUI 2.93 230.09
FL ER SUI 0.40 31.33
GA ER SUI 8.78
GA ADMIN 0.20
------- --------
83.09 3465.02
------- --------
DEPARTMENT TOTAL 252.73 10314.71
- -------------------------------------------------------------------------------------
</TABLE>
<PAGE> 35
- --------------------------------------------------------------------------------
PAYROLL REGISTER - DETAIL CHECK DATE 10/03/97 WEEK 40 10/02/97
NORTY'S GROUP - 1291 PERIOD BEGIN 09/25/97 PERIOD END 10/01/97 PAGE 4
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
EMPLOYEE NAME EARNINGS PAY CURRENT YTD DEDUCTIONS CURRENT YTD
ID SSN STATE/FRQ STS LOCATION DESCR RATE HOURS AMOUNT HOURS AMOUNT DESCR AMOUNT AMOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
* FLORIDA * 1 REGULAR 221.50 1877.25 8357.50 71821.86 6 CHECKING 999.13 13482.52
BRANCH TOTALS 2 OVERTIME 5.75 51.75 E EXPANDED DI 0.19 7.60
10 EMPLOYEES 10 CHECKS 4 3RD PART 133.71 13 3RD PARTY S 123.48
K 401-K -17.00 -680.00 33 3RD PARTY O 8.30
P MED 125 -10.00 -450.00 34 3RD PARTY M 1.93
20 401K E-M 5.95 238.00
------- ------- -------- --------- -------- --------
BRANCH TOTAL 221.50 1850.25 8363.25 70877.32 999.32 13623.83
1877.25 72007.32
- ------------------------------------------------------------------------------------------------------------------------------------
CHAMBERS, TERRI 1 REGULAR 12.50 81.25 347.00 1980.05
1720 ###-##-#### GA GA GA
52 S0/S0 GA 11
6.5000 Hourly
------- ------- -------- ---------
EMPLOYEE TOTAL 12.50 81.25 347.00 1980.05
- ------------------------------------------------------------------------------------------------------------------------------------
WEBB, PAULA M 1 REGULAR 40.00 360.00 1428.75 12350.00
1676 ###-##-#### GA GA GA 2 OVERTIME 60.25 756.38
52 S0/S0 GA 11
9.0000 Hourly
------- ------- -------- ---------
EMPLOYEE TOTAL 40.00 360.00 1489.00 13106.38
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- -------------------------------------------------------------------------------------
EMPLOYEE NAME TAXES CURRENT YTD NET PAY
ID SSN STATE/FRQ STS LOCATION DESCR AMOUNT AMOUNT CHECK NO
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
* FLORIDA * FEDERAL 149.14 5681.40 558.93
BRANCH TOTALS OASDI 115.77 4449.05
10 EMPLOYEES 10 CHECKS MEDICARE 27.09 1040.51
GA STATE 1.23
------- --------
292.00 11172.19
ER OASDI 115.77 4457.20
ER MEDCR 27.09 1042.42
ER FUI 4.73 392.94
FL ER SUI 0.65 53.73
GA ER SUI 8.78
GA ADMIN 0.20
------- --------
BRANCH TOTAL 148.24 5955.27
------- --------
440.24 17127.46
- -------------------------------------------------------------------------------------
CHAMBERS, TERRI FEDERAL 4.54 151.78 69.89
1720 ###-##-#### GA GA GA OASDI 5.04 122.77 4151
52 S0/S0 GA 11 MEDICARE 1.18 28.73
6.5000 Hourly GA STATE 0.60 23.75
------- --------
EMPLOYEE TOTAL 11.36 327.03
- -------------------------------------------------------------------------------------
WEBB, PAULA M FEDERAL 46.36 1697.06 270.81
1676 ###-##-#### GA GA GA OASDI 22.32 812.59 4152
52 S0/S0 GA 11 MEDICARE 5.22 190.05
9.0000 Hourly GA STATE 15.29 559.23
------- --------
EMPLOYEE TOTAL 89.19 3258.93
- -------------------------------------------------------------------------------------
</TABLE>
<PAGE> 36
- --------------------------------------------------------------------------------
PAYROLL REGISTER - DETAIL CHECK DATE 10/03/97 WEEK 40 10/02/97
NORTY'S GROUP - 1291 PERIOD BEGIN 09/25/97 PERIOD END 10/01/97 PAGE 5
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
EMPLOYEE NAME EARNINGS PAY CURRENT YTD DEDUCTIONS CURRENT YTD
ID SSN STATE/FRQ STS LOCATION DESCR RATE HOURS AMOUNT HOURS AMOUNT DESCR AMOUNT AMOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
WILLIAMS, KRISTY 1 REGULAR 33.25 232.75 523.75 3666.25
1735 ###-##-#### GA GA GA
52 S1/S1 GA 11
7.0000 Hourly
------- ------- -------- ---------
EMPLOYEE TOTAL 33.25 232.75 523.75 3666.25
- ------------------------------------------------------------------------------------------------------------------------------------
COMMERCE 1 REGULAR 85.75 674.00 4498.75 32084.33 D DISABILITY 6.20
DEPARTMENT TOTALS 2 OVERTIME 82.25 986.46 E EXPANDED DI 3.10
3 EMPLOYEES 3 CHECKS P MED 125 -100.00 F LTD-LONG TE 2.50
G GARNISHEE 338.13
------- ------- -------- --------- --------
DEPARTMENT TOTAL 85.75 674.00 4581.00 32970.79 349.93
33070.79
- ------------------------------------------------------------------------------------------------------------------------------------
HIGGINS, SHELLIE 1 REGULAR 40.00 280.00 574.25 4019.75
1731 ###-##-#### GA GA GA 2 OVERTIME 5.00 52.50
52 S1/S1 GA 14
7.0000 Hourly
------- ------- -------- ---------
EMPLOYEE TOTAL 40.00 280.00 579.25 4072.25
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- -------------------------------------------------------------------------------------
EMPLOYEE NAME TAXES CURRENT YTD NET PAY
ID SSN STATE/FRQ STS LOCATION DESCR AMOUNT AMOUNT CHECK NO
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
WILLIAMS, KRISTY FEDERAL 19.62 335.89 189.40
1735 ###-##-#### GA GA GA OASDI 14.43 227.30 4153
52 S1/S1 GA 11 MEDICARE 3.37 53.14
7.0000 Hourly GA STATE 5.93 109.38
------- --------
EMPLOYEE TOTAL 43.35 725.71
- -------------------------------------------------------------------------------------
COMMERCE FEDERAL 70.52 3336.12 530.10
DEPARTMENT TOTALS OASDI 41.79 2157.42
3 EMPLOYEES 3 CHECKS MEDICARE 9.77 504.64
GA STATE 21.82 1014.50
------- --------
143.90 7012.68
ER OASDI 41.79 2157.40
ER MEDCR 9.77 504.55
ER FUI 2.51 229.52
GA ER SUI 8.29 799.67
GA ADMIN 0.19 18.17
------- --------
62.55 3709.31
------- --------
DEPARTMENT TOTAL 206.45 10721.99
- -------------------------------------------------------------------------------------
HIGGINS, SHELLIE FEDERAL 26.71 381.50 223.11
1731 ###-##-#### GA GA GA OASDI 17.36 252.48 4154
52 S1/S1 GA 14 MEDICARE 4.06 59.04
7.0000 Hourly GA STATE 8.76 124.09
------- --------
EMPLOYEE TOTAL 56.89 817.11
- -------------------------------------------------------------------------------------
</TABLE>
<PAGE> 37
- --------------------------------------------------------------------------------
PAYROLL REGISTER - DETAIL CHECK DATE 10/03/97 WEEK 40 10/02/97
NORTY'S GROUP - 1291 PERIOD BEGIN 09/25/97 PERIOD END 10/01/97 PAGE 6
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
EMPLOYEE NAME EARNINGS PAY CURRENT YTD DEDUCTIONS CURRENT YTD
ID SSN STATE/FRQ STS LOCATION DESCR RATE HOURS AMOUNT HOURS AMOUNT DESCR AMOUNT AMOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
OLDFIELD, KIMBERLY 1 REGULAR 40.00 360.00 570.50 4793.50 6 CHECKING 283.93 851.79
1732 ###-##-#### GA GA GA 2 OVERTIME 30.00 286.23
52 M0/M0 GA 14
9.0000 Hourly
------- ------- -------- --------- -------- --------
EMPLOYEE TOTAL 40.00 360.00 600.50 5079.73 283.93 851.79
- ------------------------------------------------------------------------------------------------------------------------------------
PENN, JACLYN D 1 REGULAR 25.00 150.00 218.25 1309.50
1750 ###-##-#### GA GA GA
52 S0/S0 GA 14
6.0000 Hourly
------- ------- -------- ---------
EMPLOYEE TOTAL 25.00 150.00 218.25 1309.50
- ------------------------------------------------------------------------------------------------------------------------------------
TAYLOR, DOROTHY 1 REGULAR 12.00 66.00 133.00 731.51
1738 ###-##-#### GA GA GA
52 S1/S1 GA 14
5.5000 Hourly
------- ------- -------- ---------
EMPLOYEE TOTAL 12.00 66.00 133.00 731.51
- ------------------------------------------------------------------------------------------------------------------------------------
LOCUST GROVE 1 REGULAR 117.00 856.00 4636.75 33380.18 6 CHECKING 283.93 1387.26
DEPARTMENT TOTALS 2 OVERTIME 154.50 1867.30
4 EMPLOYEES 4 CHECKS K 401-K -210.49
20 401K E-M 73.68
P2 MED 125 -135.00
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- -------------------------------------------------------------------------------------
EMPLOYEE NAME TAXES CURRENT YTD NET PAY
ID SSN STATE/FRQ STS LOCATION DESCR AMOUNT AMOUNT CHECK NO
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OLDFIELD, KIMBERLY FEDERAL 35.39 501.44 0.00
1732 ###-##-#### GA GA GA OASDI 22.32 314.95 DIRDEP
52 M0/M0 GA 14 MEDICARE 5.22 73.66
9.0000 Hourly GA STATE 13.14 186.34
------- --------
EMPLOYEE TOTAL 76.07 1076.39
- -------------------------------------------------------------------------------------
PENN, JACLYN D FEDERAL 14.86 127.66 120.68
1750 ###-##-#### GA GA GA OASDI 9.30 81.19 4155
52 S0/S0 GA 14 MEDICARE 2.18 18.98
6.0000 Hourly GA STATE 2.98 26.89
------- --------
EMPLOYEE TOTAL 29.32 254.72
- -------------------------------------------------------------------------------------
TAYLOR, DOROTHY FEDERAL 1.01 60.95
1738 ###-##-#### GA GA GA OASDI 4.09 45.34 4156
52 S1/S1 GA 14 MEDICARE 0.96 10.64
5.5000 Hourly GA STATE 0.89
------- --------
EMPLOYEE TOTAL 5.05 57.88
- -------------------------------------------------------------------------------------
LOCUST GROVE FEDERAL 76.96 2684.49 404.74
DEPARTMENT TOTALS OASDI 53.07 2043.20
4 EMPLOYEES 4 CHECKS MEDICARE 12.42 477.96
GA STATE 24.88 944.56
------- --------
167.33 6150.21
ER OASDI 53.07 2043.13
ER MEDCR 12.42 477.85
ER FUI 6.85 233.20
GA ER SUI 22.59 818.01
GA ADMIN 0.52 18.59
- -------------------------------------------------------------------------------------
</TABLE>
<PAGE> 38
- --------------------------------------------------------------------------------
PAYROLL REGISTER - DETAIL CHECK DATE 10/03/97 WEEK 40 10/02/97
NORTY'S GROUP - 1291 PERIOD BEGIN 09/25/97 PERIOD END 10/01/97 PAGE 7
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
EMPLOYEE NAME EARNINGS PAY CURRENT YTD DEDUCTIONS CURRENT YTD
ID SSN STATE/FRQ STS LOCATION DESCR RATE HOURS AMOUNT HOURS AMOUNT DESCR AMOUNT AMOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
------- ------- -------- --------- -------- --------
DEPARTMENT TOTAL 117.00 856.00 4791.25 34901.99 283.93 1387.26
35247.48
- ------------------------------------------------------------------------------------------------------------------------------------
* GEORGIA * 1 REGULAR 202.75 1530.00 9135.50 65464.51 6 CHECKING 283.93 1387.26
BRANCH TOTALS 2 OVERTIME 236.75 2853.76 D DISABILITY 6.20
7 EMPLOYEES 7 CHECKS K 401-K -210.49 E EXPANDED DI 3.10
-100.00 F LTD-LONG TE 2.50
P MED 125
P2 MED 125 73.68 G GARNISHEE 338.13
-135.00
------- ------- -------- --------- -------- --------
BRANCH TOTAL 202.75 1530.00 9372.25 67872.78 283.93 1737.19
68318.27
- ------------------------------------------------------------------------------------------------------------------------------------
CROOKS, JUDY 1 REGULAR 19.50 126.75 687.00 4286.25
1640 ###-##-#### OH OH OH
52 M0/M0 OH 8
6.5000 Hourly
------- ------- -------- ---------
EMPLOYEE TOTAL 19.50 126.75 687.00 4286.25
- ------------------------------------------------------------------------------------------------------------------------------------
CUPP, JANET E 1 REGULAR 10.00 55.00 189.00 1039.50
1722 ###-##-#### OH OH OH
52 M0/M0 OH 8
5.5000 Hourly
------- ------- -------- ---------
EMPLOYEE TOTAL 10.00 55.00 189.00 1039.50
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- -------------------------------------------------------------------------------------
EMPLOYEE NAME TAXES CURRENT YTD NET PAY
ID SSN STATE/FRQ STS LOCATION DESCR AMOUNT AMOUNT CHECK NO
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
------- --------
DEPARTMENT TOTAL 95.45 3590.78
262.78 9740.99
- -------------------------------------------------------------------------------------
* GEORGIA * FEDERAL 147.48 6020.61 934.84
BRANCH TOTALS OASDI 94.86 4200.62
7 EMPLOYEES 7 CHECKS MEDICARE 22.19 982.60
GA STATE 46.70 1959.06
------- --------
311.23 13162.89
ER OASDI 94.86 4200.53
ER MEDCR 22.19 982.40
ER FUI 9.36 462.72
GA ER SUI 30.88 1617.68
GA ADMIN 0.71 36.76
------- --------
158.00 7300.09
------- --------
BRANCH TOTAL 469.23 20462.98
- -------------------------------------------------------------------------------------
CROOKS, JUDY FEDERAL 0.41 30.90 115.37
1640 ###-##-#### OH OH OH OASDI 7.86 265.78 4157
52 M0/M0 OH 8 MEDICARE 1.84 62.19
6.5000 Hourly OH STATE 1.27 40.78
------- --------
EMPLOYEE TOTAL 11.38 399.65
- -------------------------------------------------------------------------------------
CUPP, JANET E OASDI 3.41 64.46 50.40
1722 ###-##-#### OH OH OH MEDICARE 0.75 15.07 4158
52 M0/M0 OH 8 OH STATE 0.44 8.43
5.5000 Hourly
------- --------
EMPLOYEE TOTAL 4.60 87.96
- -------------------------------------------------------------------------------------
</TABLE>
<PAGE> 39
- --------------------------------------------------------------------------------
PAYROLL REGISTER - DETAIL CHECK DATE 10/03/97 WEEK 40 10/02/97
NORTY'S GROUP - 1291 PERIOD BEGIN 09/25/97 PERIOD END 10/01/97 PAGE 8
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
EMPLOYEE NAME EARNINGS PAY CURRENT YTD DEDUCTIONS CURRENT YTD
ID SSN STATE/FRQ STS LOCATION DESCR RATE HOURS AMOUNT HOURS AMOUNT DESCR AMOUNT AMOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
MCCONKEY, CATHY 1 REGULAR 375.00 15000.00
1549 ###-##-#### OH OH OH K 401-K -18.75 -750.00
52 S0/S0 OH 8 20 401K E-M 6.56 262.40
375.00 Salary P2 MED 125 -5.00 -200.00
------- ---------
EMPLOYEE TOTAL 351.25 14050.00
375.00 15000.00
- ------------------------------------------------------------------------------------------------------------------------------------
RANDOLPH, MARY 1 REGULAR 40.00 280.00 1600.00 11200.00
1538 ###-##-#### OH OH OH K 401-K -11.20 -448.00
52 M0/M0 OH 8 20 401K E-M 3.92 156.80
7.0000 Hourly
------- ------- -------- ---------
EMPLOYEE TOTAL 40.00 268.80 1600.00 10752.00
280.00 11200.00
- ------------------------------------------------------------------------------------------------------------------------------------
OHIO 1 REGULAR 69.50 836.75 2922.50 34204.75
DEPARTMENT TOTALS K 401-K -29.95 -1198.00
4 EMPLOYEES 4 CHECKS 20 401K E-M 10.48 419.20
P2 MED 125 -5.00 -305.00
------- ------- -------- ---------
DEPARTMENT TOTAL 69.50 801.80 2922.50 32701.75
836.75 34204.75
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- -------------------------------------------------------------------------------------
EMPLOYEE NAME TAXES CURRENT YTD NET PAY
ID SSN STATE/FRQ STS LOCATION DESCR AMOUNT AMOUNT CHECK NO
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
MCCONKEY, CATHY FEDERAL 45.04 1801.60 269.98
1549 ###-##-#### OH OH OH OASDI 22.94 917.60 4159
52 S0/S0 OH 8 MEDICARE 5.32 214.60
375.00 Salary OH STATE 7.97 318.80
------- --------
EMPLOYEE TOTAL 81.27 3252.60
- -------------------------------------------------------------------------------------
RANDOLPH, MARY FEDERAL 21.71 868.40 220.87
1538 ###-##-#### OH OH OH OASDI 17.36 694.40 4160
52 M0/M0 OH 8 MEDICARE 4.06 162.40
7.0000 Hourly OH STATE 4.80 192.00
------- --------
EMPLOYEE TOTAL 47.93 1917.20
- -------------------------------------------------------------------------------------
OHIO FEDERAL 67.16 2937.46 656.62
DEPARTMENT TOTALS OASDI 51.57 2148.75
4 EMPLOYEES 4 CHECKS MEDICARE 11.97 502.59
OH STATE 14.48 585.40
PA STATE 21.20
BERKS PA 7.59
------- --------
145.18 6202.99
ER OASDI 51.57 2148.68
ER MEDCR 12.07 502.51
ER FUI 1.45 181.25
OH ER SUI 2.37 338.06
PA ER SUI 44.62
------- --------
67.46 3215.12
------- --------
DEPARTMENT TOTAL 212.64 9418.11
- -------------------------------------------------------------------------------------
</TABLE>
<PAGE> 40
- --------------------------------------------------------------------------------
PAYROLL REGISTER - DETAIL CHECK DATE 10/03/97 WEEK 40 10/02/97
NORTY'S GROUP - 1291 PERIOD BEGIN 09/25/97 PERIOD END 10/01/97 PAGE 9
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
EMPLOYEE NAME EARNINGS PAY CURRENT YTD DEDUCTIONS CURRENT YTD
ID SSN STATE/FRQ STS LOCATION DESCR RATE HOURS AMOUNT HOURS AMOUNT DESCR AMOUNT AMOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
* OHIO * 1 REGULAR 69.50 836.75 2922.50 34204.75
BRANCH TOTALS K 401-K -29.95 -1198.00
4 EMPLOYEES 4 CHECKS 20 401K E-M 10.48 419.20
P2 MED 125 -5.00 -305.00
------- ------- -------- ---------
BRANCH TOTAL 69.50 801.80 2922.50 32701.75
836.75 34204.75
- ------------------------------------------------------------------------------------------------------------------------------------
FALATKO, DANIEL 1 REGULAR 11.50 63.25 385.75 2121.66
1709 ###-##-#### PA PA PA
52 S0/S0 PA 1
5.5000 Hourly
------- ------- -------- ---------
EMPLOYEE TOTAL 11.50 63.25 385.75 2121.66
- ------------------------------------------------------------------------------------------------------------------------------------
FERHAT, DANIEL 1 REGULAR 1.75 9.63 58.25 320.40
1805 ###-##-#### PA PA PA
52 S0/S0 PA 1
5.5000 Hourly TERM-06/04/97
------- ------- -------- ---------
EMPLOYEE TOTAL 1.75 9.63 58.25 320.40
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- -------------------------------------------------------------------------------------
EMPLOYEE NAME TAXES CURRENT YTD NET PAY
ID SSN STATE/FRQ STS LOCATION DESCR AMOUNT AMOUNT CHECK NO
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
* OHIO * FEDERAL 67.16 2937.46 656.62
BRANCH TOTALS OASDI 51.57 2148.75
4 EMPLOYEES 4 CHECKS MEDICARE 11.97 502.59
OH STATE 14.48 585.40
PA STATE 21.20
BERKS PA 7.59
------- --------
145.18 6202.99
ER OASDI 51.57 2148.68
ER MEDCR 12.07 502.51
ER FUI 1.45 181.25
OH ER SUI 2.37 338.06
PA ER SUI 44.62
------- --------
67.46 3215.12
------- --------
BRANCH TOTAL 212.64 9418.11
- -------------------------------------------------------------------------------------
FALATKO, DANIEL FEDERAL 1.84 174.07 54.17
1709 ###-##-#### PA PA PA OASDI 3.92 131.55 4161
52 S0/S0 PA 1 MEDICARE 0.92 30.74
5.5000 Hourly PA STATE 1.77 59.41
BERKS PA 0.63 21.24
------- --------
EMPLOYEE TOTAL 9.08 417.01
- -------------------------------------------------------------------------------------
FERHAT, DANIEL FEDERAL 14.84 8.52
1805 ###-##-#### PA PA PA OASDI 0.60 19.87 4162
52 S0/S0 PA 1 MEDICARE 0.14 4.65
5.5000 Hourly TERM-06/04/97 PA STATE 0.27 8.97
BERKS PA 0.10 3.20
------- --------
EMPLOYEE TOTAL 1.11 51.53
- -------------------------------------------------------------------------------------
</TABLE>
<PAGE> 41
- --------------------------------------------------------------------------------
PAYROLL REGISTER - DETAIL CHECK DATE 10/03/97 WEEK 40 10/02/97
NORTY'S GROUP - 1291 PERIOD BEGIN 09/25/97 PERIOD END 10/01/97 PAGE 10
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
EMPLOYEE NAME EARNINGS PAY CURRENT YTD DEDUCTIONS CURRENT YTD
ID SSN STATE/FRQ STS LOCATION DESCR RATE HOURS AMOUNT HOURS AMOUNT DESCR AMOUNT AMOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
MAHONEY, DARRIN 1 REGULAR 600.00 24000.00 6 CHECKING 415.76 6652.16
6387 ###-##-#### PA PA PA 20 401K E-M 12.60 504.00 E EXPANDED DI 0.72 28.80
52 M1/M1 PA 1 KP 401K PA -36.00 -1440.00 S STOCK PURCH 5.00 200.00
600.00 Salary P1 MED 125 -20.00 -800.00
------- --------- -------- --------
EMPLOYEE TOTAL 544.00 21760.00 421.48 6880.96
600.00 24000.00
- ------------------------------------------------------------------------------------------------------------------------------------
MAHONEY, JAY 1 REGULAR 2100.00 84000.00 6 CHECKING 1529.08 23489.94
6980 ###-##-#### PA PA PA 20 401K E-M 44.10 1764.00 E EXPANDED DI 15.75 630.00
52 M10/M10 PA 1 KP 401K PA -126.00 -5040.00 S STOCK PURCH 20.00 800.00
2100.00 Salary P1 MED 125 -30.00 -1200.00
------- --------- -------- --------
EMPLOYEE TOTAL 1944.00 77760.00 1564.83 24919.94
2100.00 84000.00
- ------------------------------------------------------------------------------------------------------------------------------------
KUTZTOWN 1 REGULAR 13.25 2772.88 830.50 112567.92 6 CHECKING 1944.84 30142.10
DEPARTMENT TOTALS 20 401K E-M 56.70 2268.00 E EXPANDED DI 16.47 658.80
4 EMPLOYEES 4 CHECKS KP 401K PA -162.00 -6480.00 S STOCK PURCH 25.00 1000.00
P1 MED 125 -50.00 -2000.00
------- ------- -------- --------- -------- --------
DEPARTMENT TOTAL 13.25 2560.88 830.50 104087.92 1986.31 31800.90
2772.88 112567.92
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- -------------------------------------------------------------------------------------
EMPLOYEE NAME TAXES CURRENT YTD NET PAY
ID SSN STATE/FRQ STS LOCATION DESCR AMOUNT AMOUNT CHECK NO
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
MAHONEY, DARRIN FEDERAL 55.35 2214.00 0.00
6387 ###-##-#### PA PA PA OASDI 35.96 1438.40 DIRDEP
52 M1/M1 PA 1 MEDICARE 8.41 336.40
600.00 Salary PA STATE 16.80 672.00
BERKS PA 6.00 240.00
------- --------
EMPLOYEE TOTAL 122.52 4900.80
- -------------------------------------------------------------------------------------
MAHONEY, JAY FEDERAL 269.40 10776.00 0.00
6980 ###-##-#### PA PA PA OASDI 4054.80 DIRDEP
52 M10/M10 PA 1 MEDICARE 29.97 1200.60
2100.00 Salary PA STATE 58.80 2352.00
BERKS PA 21.00 840.00
------- --------
EMPLOYEE TOTAL 379.17 19223.40
- -------------------------------------------------------------------------------------
KUTZTOWN FEDERAL 326.59 13188.57 62.69
DEPARTMENT TOTALS OASDI 40.48 5729.49
4 EMPLOYEES 4 CHECKS MEDICARE 39.44 1592.31
PA STATE 77.64 3121.20
BERKS PA 27.73 1112.00
------- --------
511.88 24743.57
ER OASDI 40.48 5729.50
ER MEDCR 39.49 1592.26
ER FUI 0.59 142.48
PA ER SUI 4.30 1168.88
------- --------
84.86 8633.12
------- --------
DEPARTMENT TOTAL 596.74 33376.69
- -------------------------------------------------------------------------------------
</TABLE>
<PAGE> 42
- --------------------------------------------------------------------------------
PAYROLL REGISTER - DETAIL CHECK DATE 10/03/97 WEEK 40 10/02/97
NORTY'S GROUP - 1291 PERIOD BEGIN 09/25/97 PERIOD END 10/01/97 PAGE 11
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
EMPLOYEE NAME EARNINGS PAY CURRENT YTD DEDUCTIONS CURRENT YTD
ID SSN STATE/FRQ STS LOCATION DESCR RATE HOURS AMOUNT HOURS AMOUNT DESCR AMOUNT AMOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AMMER, MARY 1 REGULAR 37.75 273.69 730.25 4530.69 L LOAN 10.00
1566 ###-##-#### PA PA PA
52 M1/M1 PA 3
7.2500 Hourly
------- ------- -------- --------- --------
EMPLOYEE TOTAL 37.75 273.69 730.25 4530.69 10.00
- ------------------------------------------------------------------------------------------------------------------------------------
COLE, VIKI E 1 REGULAR 22.00 132.00 482.50 2895.00
1506 ###-##-#### PA PA PA
52 S2/S2 PA 3
6.0000 Hourly
------- ------- -------- ---------
EMPLOYEE TOTAL 22.00 132.00 482.50 2895.00
- ------------------------------------------------------------------------------------------------------------------------------------
NORRIS, SHERRY 1 REGULAR 350.00 14000.00 L LOAN 10.00
1899 ###-##-#### PA PA PA 2 OVERTIME 2.25 190.38
52 M0/M0 PA 3 20 401K E-M 7.35 298.00
350.00 Salary KP 401K PA -21.00 -851.42
P1 MED 125 -20.00 -800.00
------- -------- --------- --------
EMPLOYEE TOTAL 309.00 2.25 12538.96 10.00
350.00 14190.38
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- -------------------------------------------------------------------------------------
EMPLOYEE NAME TAXES CURRENT YTD NET PAY
ID SSN STATE/FRQ STS LOCATION DESCR AMOUNT AMOUNT CHECK NO
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
AMMER, MARY FEDERAL 14.80 47.29 227.65
1566 ###-##-#### PA PA PA OASDI 16.97 280.90 4163
52 M1/M1 PA 3 MEDICARE 3.97 65.69
7.2500 Hourly PA STATE 7.66 126.85
MERCER PA 30.90
108M PA 2.74 14.43
------- --------
EMPLOYEE TOTAL 46.14 566.06
- -------------------------------------------------------------------------------------
COLE, VIKI E FEDERAL 16.06 116.89
1506 ###-##-#### PA PA PA OASDI 8.18 179.50 4164
52 S2/S2 PA 3 MEDICARE 1.91 41.97
6.0000 Hourly PA STATE 3.70 81.06
MERCER PA 18.66
108M PA 1.32 10.33
------- --------
EMPLOYEE TOTAL 15.11 347.58
- -------------------------------------------------------------------------------------
NORRIS, SHERRY FEDERAL 27.74 1136.45 242.71
1899 ###-##-#### PA PA PA OASDI 20.46 830.20 4165
52 M0/M0 PA 3 MEDICARE 4.79 194.20
350.00 Salary PA STATE 9.80 397.32
108M PA 3.50 28.23
MERCER PA 113.68
------- --------
EMPLOYEE TOTAL 66.29 2700.08
- -------------------------------------------------------------------------------------
</TABLE>
<PAGE> 43
- --------------------------------------------------------------------------------
PAYROLL REGISTER - DETAIL CHECK DATE 10/03/97 WEEK 40 10/02/97
NORTY'S GROUP - 1291 PERIOD BEGIN 09/25/97 PERIOD END 10/01/97 PAGE 12
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
EMPLOYEE NAME EARNINGS PAY CURRENT YTD DEDUCTIONS CURRENT YTD
ID SSN STATE/FRQ STS LOCATION DESCR RATE HOURS AMOUNT HOURS AMOUNT DESCR AMOUNT AMOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
GROVE CITY 1 REGULAR 59.75 755.69 2392.00 29275.74 L LOAN 30.00
DEPARTMENT TOTALS 2 OVERTIME 2.25 190.38
3 EMPLOYEES 3 CHECKS 20 401K E-M 7.35 298.00
KP 401K PA -21.00 -851.42
P1 MED 125 -20.00 -800.00
------- ------- -------- --------- --------
DEPARTMENT TOTAL 59.75 714.69 2394.25 27814.70 30.00
755.69 29466.12
- ------------------------------------------------------------------------------------------------------------------------------------
HUNTSBERGER, EDITH 1 REGULAR 40.00 280.00 596.00 4172.00
1716 ###-##-#### PA PA PA 2 OVERTIME 6.50 68.25
52 S1/S1 PA 4
7.0000 Hourly
------- ------- -------- ---------
EMPLOYEE TOTAL 40.00 280.00 602.50 4240.25
- ------------------------------------------------------------------------------------------------------------------------------------
KOWKER, CAROL 1 REGULAR 17.00 102.00 451.50 2709.00
1605 ###-##-#### PA PA PA
52 M0/M0 PA 4
6.0000 Hourly
------- ------- -------- ---------
EMPLOYEE TOTAL 17.00 102.00 451.50 2709.00
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- -------------------------------------------------------------------------------------
EMPLOYEE NAME TAXES CURRENT YTD NET PAY
ID SSN STATE/FRQ STS LOCATION DESCR AMOUNT AMOUNT CHECK NO
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
GROVE CITY FEDERAL 42.54 1912.29 587.15
DEPARTMENT TOTALS OASDI 45.61 2089.86
3 EMPLOYEES 3 CHECKS MEDICARE 10.67 488.87
PA STATE 21.16 966.19
BERKS PA 5.12
MERCER PA 236.62
DERRY PA 6.72
DAIRY PA 43.76
108M PA 7.56 52.99
------- --------
127.54 5802.42
ER OASDI 45.61 2089.79
ER MEDCR 10.67 488.76
ER FUI 3.25 218.54
PA ER SUI 23.94 1670.65
------- --------
83.47 4467.74
------- --------
DEPARTMENT TOTAL 211.01 10270.16
- -------------------------------------------------------------------------------------
HUNTSBERGER, EDITH FEDERAL 26.71 395.68 221.23
1716 ###-##-#### PA PA PA OASDI 17.36 262.89 4166
52 S1/S1 PA 4 MEDICARE 4.06 61.49
7.0000 Hourly PA STATE 7.84 118.73
DERRY PA 2.80 42.42
------- --------
EMPLOYEE TOTAL 58.77 881.21
- -------------------------------------------------------------------------------------
KOWKER, CAROL FEDERAL 10.00 290.90 80.32
1605 ###-##-#### PA PA PA OASDI 6.32 167.97 4167
52 M0/M0 PA 4 MEDICARE 1.48 39.31
6.0000 Hourly PA STATE 2.86 75.84
DAIRY PA 7.80
DERRY PA 1.02 19.29
------- --------
EMPLOYEE TOTAL 21.68 601.11
- -------------------------------------------------------------------------------------
</TABLE>
<PAGE> 44
- --------------------------------------------------------------------------------
PAYROLL REGISTER - DETAIL CHECK DATE 10/03/97 WEEK 40 10/02/97
NORTY'S GROUP - 1291 PERIOD BEGIN 09/25/97 PERIOD END 10/01/97 PAGE 13
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
EMPLOYEE NAME EARNINGS PAY CURRENT YTD DEDUCTIONS CURRENT YTD
ID SSN STATE/FRQ STS LOCATION DESCR RATE HOURS AMOUNT HOURS AMOUNT DESCR AMOUNT AMOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
KOWKER, MARY A 1 REGULAR 12.00 78.00 728.50 4693.25
1580 ###-##-#### PA PA PA
52 S0/S0 PA 4
6.5000 Hourly
------- ------- -------- ---------
EMPLOYEE TOTAL 12.00 78.00 728.50 4693.25
- ------------------------------------------------------------------------------------------------------------------------------------
MAHONEY, DONNA 1 REGULAR 450.00 18000.00 6 CHECKING 320.73 5130.98
1488 ###-##-#### PA PA PA 20 401K E-M 6.30 252.00 E EXPANDED DI 3.60 134.80
52 M0/M0 PA 4 KP 401K PA -18.00 -720.00 S STOCK PURCH 10.00 400.00
450.00 Salary
------- --------- -------- --------
EMPLOYEE TOTAL 432.00 17280.00 334.33 5665.78
450.00 18000.00
- ------------------------------------------------------------------------------------------------------------------------------------
STANLEY, DOTTIE 1 REGULAR 10.00 65.00 707.00 4553.60
1569 ###-##-#### PA PA PA
52 M1/M1 PA 4
6.5000 Hourly
------- ------- -------- ---------
EMPLOYEE TOTAL 10.00 65.00 707.00 4553.60
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- -------------------------------------------------------------------------------------
EMPLOYEE NAME TAXES CURRENT YTD NET PAY
ID SSN STATE/FRQ STS LOCATION DESCR AMOUNT AMOUNT CHECK NO
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
KOWKER, MARY FEDERAL 4.06 447.66 65.01
1580 ###-##-#### PA PA PA OASDI 4.84 290.96 4168
52 S0/S0 PA 4 MEDICARE 1.13 68.06
6.5000 Hourly PA STATE 2.18 131.44
DAIRY PA 19.74
DERRY PA 0.78 27.23
------- --------
EMPLOYEE TOTAL 12.99 985.09
- -------------------------------------------------------------------------------------
MAHONEY, DONNA FEDERAL 46.19 1847.60 0.00
1488 ###-##-#### PA PA PA OASDI 27.90 1116.00 DIRDEP
52 M0/M0 PA 4 MEDICARE 6.48 261.00
450.00 Salary PA STATE 12.60 504.00
BERKS PA 4.50 180.00
------- --------
EMPLOYEE TOTAL 97.67 3908.60
- -------------------------------------------------------------------------------------
STANLEY, DOTTIE OASDI 4.03 282.35 57.56
1569 ###-##-#### PA PA PA MEDICARE 0.94 66.03 4169
52 M1/M1 PA 4 PA STATE 1.82 127.49
6.5000 Hourly DAIRY PA 23.86
DERRY PA 0.65 21.71
------- --------
EMPLOYEE TOTAL 7.44 521.44
- -------------------------------------------------------------------------------------
</TABLE>
<PAGE> 45
- --------------------------------------------------------------------------------
PAYROLL REGISTER - DETAIL CHECK DATE 10/03/97 WEEK 40 10/02/97
NORTY'S GROUP - 1291 PERIOD BEGIN 09/25/97 PERIOD END 10/01/97 PAGE 14
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
EMPLOYEE NAME EARNINGS PAY CURRENT YTD DEDUCTIONS CURRENT YTD
ID SSN STATE/FRQ STS LOCATION DESCR RATE HOURS AMOUNT HOURS AMOUNT DESCR AMOUNT AMOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STONER, SANDY 1 REGULAR 8.00 48.00 483.50 2809.25
1572 ###-##-#### PA PA PA
52 M1/M1 PA 4
6.0000 Hourly
------- ------- -------- ---------
EMPLOYEE TOTAL 8.00 48.00 483.50 2809.25
- ------------------------------------------------------------------------------------------------------------------------------------
HERSHEY 1 REGULAR 87.00 1023.00 4891.50 49949.25 6 CHECKING 320.73 5130.98
DEPARTMENT TOTALS 2 OVERTIME 37.00 466.50 E EXPANDED DI 3.60 134.80
6 EMPLOYEES 6 CHECKS 20 401K E-M 6.30 271.63 S STOCK PURCH 10.00 400.00
KP 401K PA -18.00 -776.12
P1 MED 125 -140.00
------- ------- -------- --------- -------- --------
DEPARTMENT TOTAL 87.00 1005.00 4928.50 49499.63 334.33 5665.78
1023.00 50415.75
- ------------------------------------------------------------------------------------------------------------------------------------
GERHART, HELEN E. 1 REGULAR 15.00 82.50 784.50 4419.25 L LOAN 10.00
1486 ###-##-#### PA PA PA
52 M0/M0 PA 12
5.5000 Hourly
------- ------- -------- --------- --------
EMPLOYEE TOTAL 15.00 82.50 784.50 4419.25 10.00
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- --------------------------------------------------------------------------------------
EMPLOYEE NAME TAXES CURRENT YTD NET PAY
ID SSN STATE/FRQ STS LOCATION DESCR AMOUNT AMOUNT CHECK NO
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
STONER, SANDY OASDI 2.98 174.15 42.50
1572 ###-##-#### PA PA PA MEDICARE 0.70 40.71 4170
52 M1/M1 PA 4 PA STATE 1.34 78.68
6.0000 Hourly DAIRY PA 14.68
DERRY PA 0.48 13.44
------- --------
EMPLOYEE TOTAL 5.50 321.66
- --------------------------------------------------------------------------------------
HERSHEY FEDERAL 86.96 3900.19 466.62
DEPARTMENT TOTALS OASDI 63.43 3452.52
6 EMPLOYEES 6 CHECKS MEDICARE 14.79 807.56
PA STATE 28.64 1565.60
BERKS PA 4.50 213.70
DAIRY PA 169.78
LOCAL PA 10.66
108M PA 28.66
DERRY PA 5.73 136.63
------- --------
204.05 10285.30
ER OASDI 63.43 3452.46
ER MEDCR 14.84 807.43
ER FUI 4.58 357.48
PA ER SUI 33.81 2715.47
------- --------
116.66 7332.84
------- --------
DEPARTMENT TOTAL 320.71 17618.14
- --------------------------------------------------------------------------------------
GERHART, HELEN E. FEDERAL 51.59 73.87
1486 ###-##-#### PA PA PA OASDI 5.12 274.02 4171
52 M0/M0 PA 12 MEDICARE 1.20 64.08
5.5000 Hourly PA STATE 2.31 123.82
------- --------
EMPLOYEE TOTAL 8.63 513.51
- --------------------------------------------------------------------------------------
</TABLE>
<PAGE> 46
- --------------------------------------------------------------------------------
PAYROLL REGISTER - DETAIL CHECK DATE 10/03/97 WEEK 40 10/02/97
NORTY'S GROUP - 1291 PERIOD BEGIN 09/25/97 PERIOD END 10/01/97 PAGE 15
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
EMPLOYEE NAME EARNINGS PAY CURRENT YTD DEDUCTIONS CURRENT YTD
ID SSN STATE/FRQ STS LOCATION DESCR RATE HOURS AMOUNT HOURS AMOUNT DESCR AMOUNT AMOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
OREILLY, ALICE 1 REGULAR 340.00 40.00 13600.00 6 CHECKING 222.75 3341.30
1459 ###-##-#### PA PA PA 20 401K E-M 7.14 285.60 E EXPANDED DI 2.55 102.00
52 M0/M0 PA 12 KP 401K PA -34.00 -1360.00 F LTD-LONG TE 0.61 24.40
340.00 Salary P1 MED 125 -5.00 -200.00 L LOAN 10.00
S STOCK PURCH 10.00 400.00
------- -------- --------- -------- --------
EMPLOYEE TOTAL 301.00 40.00 12040.00 235.91 3877.70
340.00 13600.00
- ------------------------------------------------------------------------------------------------------------------------------------
READING 1 REGULAR 15.00 422.50 824.50 18019.25 6 CHECKING 222.75 3341.30
DEPARTMENT TOTALS 20 401K E-M 7.14 285.60 E EXPANDED DI 2.55 102.00
2 EMPLOYEES 2 CHECKS KP 401K PA -34.00 -1360.00 F LTD-LONG TE 0.61 24.40
P1 MED 125 -5.00 -200.00 L LOAN 20.00
S STOCK PURCH 10.00 400.00
------- ------- -------- --------- -------- --------
DEPARTMENT TOTAL 15.00 383.50 824.50 16459.25 235.91 3887.70
422.50 18019.25
- ------------------------------------------------------------------------------------------------------------------------------------
CARPENTER, ELISE 1 REGULAR -35.25 -193.88 59.50 327.26
1737 ###-##-#### PA PA PA
52 S0/S0 PA 13
5.5000 Hourly
------- ------- -------- ---------
EMPLOYEE TOTAL -35.25 -193.88 59.50 327.26
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- --------------------------------------------------------------------------------------
EMPLOYEE NAME TAXES CURRENT YTD NET PAY
ID SSN STATE/FRQ STS LOCATION DESCR AMOUNT AMOUNT CHECK NO
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OREILLY, ALICE FEDERAL 26.54 1067.05 0.00
1459 ###-##-#### PA PA PA OASDI 20.77 830.80 DIRDEP
52 M0/M0 PA 12 MEDICARE 4.86 194.30
340.00 Salary PA STATE 9.52 380.80
108M PA 3.40 136.00
------- --------
EMPLOYEE TOTAL 65.09 2608.95
- --------------------------------------------------------------------------------------
READING FEDERAL 26.54 1192.87 73.87
DEPARTMENT TOTALS OASDI 25.89 1195.30
2 EMPLOYEES 2 CHECKS MEDICARE 6.06 279.54
PA STATE 11.83 546.32
108M PA 3.40 150.91
------- --------
73.72 3364.94
ER OASDI 25.89 1206.55
ER MEDCR 6.06 282.18
ER FUI 0.66 104.48
PA ER SUI 4.87 831.35
------- --------
37.48 2424.56
------- --------
DEPARTMENT TOTAL 111.20 5789.50
- --------------------------------------------------------------------------------------
CARPENTER, ELISE FEDERAL -21.44 12.54 -150.24
1737 ###-##-#### PA PA PA OASDI -12.02 20.28 4128
52 S0/S0 PA 13 MEDICARE -2.81 4.76 VOID
5.5000 Hourly PA STATE -5.43 9.17
108M PA -1.94 3.28
------- --------
EMPLOYEE TOTAL -43.64 50.03
- --------------------------------------------------------------------------------------
</TABLE>
<PAGE> 47
- --------------------------------------------------------------------------------
PAYROLL REGISTER - DETAIL CHECK DATE 10/03/97 WEEK 40 10/02/97
NORTY'S GROUP - 1291 PERIOD BEGIN 09/25/97 PERIOD END 10/01/97 PAGE 16
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
EMPLOYEE NAME EARNINGS PAY CURRENT YTD DEDUCTIONS CURRENT YTD
ID SSN STATE/FRQ STS LOCATION DESCR RATE HOURS AMOUNT HOURS AMOUNT DESCR AMOUNT AMOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CRANEY, EILEEN 1 REGULAR 282.00 156.00 1530.00
1745 ###-##-#### PA PA PA 2 OVERTIME 0.25 3.00
52 S1/S1 PA 13
8.0000 Hourly
------- -------- ---------
EMPLOYEE TOTAL 282.00 156.25 1533.00
- ------------------------------------------------------------------------------------------------------------------------------------
CRANEY, EILEEN 1 REGULAR 156.00 1530.00
1745 ###-##-#### PA PA PA 2 OVERTIME 0.25 3.00
52 S1/S1 PA 13
8.0000 Hourly
-------- ---------
EMPLOYEE TOTAL 156.25 1533.00
- ------------------------------------------------------------------------------------------------------------------------------------
CRANEY, EILEEN 1 REGULAR 36.00 288.00 156.00 1530.00
1745 ###-##-#### PA PA PA 2 OVERTIME 0.25 3.00
52 S1/S1 PA 13
8.0000 Hourly
------- ------- -------- ---------
EMPLOYEE TOTAL 36.00 288.00 156.25 1533.00
- ------------------------------------------------------------------------------------------------------------------------------------
DADIOMOFF, HEDA 1 REGULAR 29.00 181.25 401.00 2390.01
1729 ###-##-#### PA PA PA
52 S0/S0 PA 13
6.2500 Hourly
------- ------- -------- ---------
EMPLOYEE TOTAL 29.00 181.25 401.00 2390.01
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- --------------------------------------------------------------------------------------
EMPLOYEE NAME TAXES CURRENT YTD NET PAY
ID SSN STATE/FRQ STS LOCATION DESCR AMOUNT AMOUNT CHECK NO
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CRANEY, EILEEN FEDERAL 27.01 153.50 222.70
1745 ###-##-#### PA PA PA OASDI 17.48 95.05 1282
52 S1/S1 PA 13 MEDICARE 4.09 22.23 MANUAL
8.0000 Hourly PA STATE 7.90 42.92
108M PA 2.82 15.33
------- --------
EMPLOYEE TOTAL 59.30 329.03
- --------------------------------------------------------------------------------------
CRANEY, EILEEN FEDERAL 153.50 0.00
1745 ###-##-#### PA PA PA OASDI 95.05 12821
52 S1/S1 PA 13 MEDICARE 22.23 MANUAL
8.0000 Hourly PA STATE 42.92
108M PA 15.33
--------
EMPLOYEE TOTAL 329.03
- --------------------------------------------------------------------------------------
CRANEY, EILEEN FEDERAL 27.91 153.50 227.11
1745 ###-##-#### PA PA PA OASDI 17.86 95.05 4172
52 S1/S1 PA 13 MEDICARE 4.18 22.23
8.0000 Hourly PA STATE 8.06 42.92
108M PA 2.88 15.33
------- --------
EMPLOYEE TOTAL 60.89 329.03
- --------------------------------------------------------------------------------------
DADIOMOFF, HEDA FEDERAL 19.54 251.47 140.95
1729 ###-##-#### PA PA PA OASDI 11.24 148.18 4173
52 S0/S0 PA 13 MEDICARE 2.63 34.66
6.2500 Hourly PA STATE 5.08 66.94
108M PA 1.81 23.91
------- --------
EMPLOYEE TOTAL 40.30 525.16
- --------------------------------------------------------------------------------------
</TABLE>
<PAGE> 48
- --------------------------------------------------------------------------------
PAYROLL REGISTER - DETAIL CHECK DATE 10/03/97 WEEK 40 10/02/97
NORTY'S GROUP - 1291 PERIOD BEGIN 09/25/97 PERIOD END 10/01/97 PAGE 17
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
EMPLOYEE NAME EARNINGS PAY CURRENT YTD DEDUCTIONS CURRENT YTD
ID SSN STATE/FRQ STS LOCATION DESCR RATE HOURS AMOUNT HOURS AMOUNT DESCR AMOUNT AMOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
HIEMENZ, CRISTI ANNE 1 REGULAR 16.25 89.38 36.25 199.38
1755 ###-##-#### PA PA PA
52 S0/S0 PA 13
5.5000 Hourly
------- ------- -------- ---------
EMPLOYEE TOTAL 16.25 89.38 36.25 199.38
- ------------------------------------------------------------------------------------------------------------------------------------
MAHONEY, JOHN 1 REGULAR 600.00 24000.00 6 CHECKING 416.91 4169.10
1524 ###-##-#### PA PA PA 20 401K E-M 12.60 504.00 D DISABILITY 3.06 113.20
52 M3/M3 PA 13 KP 401K PA -36.00 -1440.00 E EXPANDED DI 0.72 28.80
600.00 Salary P1 MED 125 -20.00 -800.00 F LTD-LONG TE 1.08 43.20
S STOCK PURCH 15.00 600.00
------- --------- -------- --------
EMPLOYEE TOTAL 544.00 21760.00 436.77 4954.30
600.00 24000.00
- ------------------------------------------------------------------------------------------------------------------------------------
REINERT, ANITA 1 REGULAR 14.00 77.00 149.00 819.51
1749 ###-##-#### PA PA PA
52 S0/S0 PA 13
5.5000 Hourly
------- ------- -------- ---------
EMPLOYEE TOTAL 14.00 77.00 149.00 819.51
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- --------------------------------------------------------------------------------------
EMPLOYEE NAME TAXES CURRENT YTD NET PAY
ID SSN STATE/FRQ STS LOCATION DESCR AMOUNT AMOUNT CHECK NO
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
HIEMENZ, CRISTI ANNE FEDERAL 5.76 7.60 73.39
1755 ###-##-#### PA PA PA OASDI 5.54 12.36 4174
52 S0/S0 PA 13 MEDICARE 1.30 2.90
5.5000 Hourly PA STATE 2.50 5.58
108M PA 0.89 1.99
------- --------
EMPLOYEE TOTAL 15.99 30.43
- --------------------------------------------------------------------------------------
MAHONEY, JOHN FEDERAL 40.06 1602.40 0.00
1524 ###-##-#### PA PA PA OASDI 35.96 1438.40 DIRDEP
52 M3/M3 PA 13 MEDICARE 8.41 336.40
600.00 Salary PA STATE 16.80 672.00
BERKS PA 6.00 240.00
------- --------
EMPLOYEE TOTAL 107.23 4289.20
- --------------------------------------------------------------------------------------
REINERT, ANITA FEDERAL 3.91 58.29 64.27
1749 ###-##-#### PA PA PA OASDI 4.77 50.82 4175
52 S0/S0 PA 13 MEDICARE 1.12 11.89
5.5000 Hourly PA STATE 2.16 22.95
108M PA 0.77 8.21
------- --------
EMPLOYEE TOTAL 12.73 152.16
- --------------------------------------------------------------------------------------
</TABLE>
<PAGE> 49
- --------------------------------------------------------------------------------
PAYROLL REGISTER - DETAIL CHECK DATE 10/03/97 WEEK 40 10/02/97
NORTY'S GROUP - 1291 PERIOD BEGIN 09/25/97 PERIOD END 10/01/97 PAGE 18
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
EMPLOYEE NAME EARNINGS PAY CURRENT YTD DEDUCTIONS CURRENT YTD
ID SSN STATE/FRQ STS LOCATION DESCR RATE HOURS AMOUNT HOURS AMOUNT DESCR AMOUNT AMOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ROCKVALE 1 REGULAR 60.00 1323.75 3633.25 54417.96 6 CHECKING 416.91 4660.22
DEPARTMENT TOTALS 2 OVERTIME 7.25 75.38 D DISABILITY 3.06 113.20
6 EMPLOYEES 8 CHECKS 4 3RD PART 182.14 E EXPANDED DI 0.72 102.94
K 401-K -349.57 F LTD-LONG TE 1.08 43.20
20 401K E-M 12.60 793.03 L LOAN 20.00
KP 401K PA -36.00 -2056.12 S STOCK PURCH 15.00 880.00
P1 MED 125 -20.00 -830.00 13 3RD PARTY S 168.21
33 3RD PARTY O 11.29
34 3RD PARTY M 2.64
------- ------- -------- --------- -------- --------
DEPARTMENT TOTAL 60.00 1267.75 3640.50 51439.79 436.77 6001.70
1323.75 54675.48
- ------------------------------------------------------------------------------------------------------------------------------------
* PENNSYLVANIA * 1 REGULAR 235.00 6297.82 14234.00 274879.38 6 CHECKING 2905.23 43274.60
BRANCH TOTALS 2 OVERTIME 46.50 732.26 D DISABILITY 3.06 113.20
21 EMPLOYEES 23 CHECKS 4 3RD PART 182.14 E EXPANDED DI 23.34 998.54
K 401-K -459.30 F LTD-LONG TE 1.69 73.60
20 401K E-M 90.09 4001.24 L LOAN 70.00
KP 401K PA -271.00 -11722.31 S STOCK PURCH 60.00 2680.00
P1 MED 125 -95.00 -4170.00 13 3RD PARTY S 168.21
33 3RD PARTY O 11.29
34 3RD PARTY M 2.64
------- ------- -------- --------- -------- --------
BRANCH TOTAL 235.00 5931.82 14280.50 259442.17 2993.32 47392.08
6297.82 275793.78
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- --------------------------------------------------------------------------------------
EMPLOYEE NAME TAXES CURRENT YTD NET PAY
ID SSN STATE/FRQ STS LOCATION DESCR AMOUNT AMOUNT CHECK NO
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ROCKVALE FEDERAL 102.75 3412.61 578.18
DEPARTMENT TOTALS OASDI 80.83 3269.52
6 EMPLOYEES 8 CHECKS MEDICARE 18.92 764.76
PA STATE 37.07 1474.39
SC STATE 18.51
108M PA 7.23 286.65
BERKS PA 6.00 240.00
------- --------
252.80 9466.44
ER OASDI 80.83 3269.48
ER MEDCR 18.92 764.65
ER FUI 5.80 269.58
PA ER SUI 42.69 2074.73
SC ER SUI 13.98
SC CONTIN 0.32
------- --------
148.24 6392.74
------- --------
DEPARTMENT TOTAL 401.04 15859.18
- --------------------------------------------------------------------------------------
* PENNSYLVANIA * FEDERAL 585.38 23606.53 1768.51
BRANCH TOTALS OASDI 256.24 15736.69
21 EMPLOYEES 23 CHECKS MEDICARE 89.88 3933.04
PA STATE 176.34 7673.70
SC STATE 18.51
LOCAL PA 10.66
MERCER PA 236.62
DAIRY PA 213.54
DERRY PA 5.73 143.35
108M PA 18.19 519.21
BERKS PA 38.23 1570.82
------- --------
1169.99 53662.67
ER OASDI 256.24 15747.78
ER MEDCR 89.98 3935.28
ER FUI 14.88 1092.56
PA ER SUI 109.61 8461.08
SC ER SUI 13.98
SC CONTIN 0.32
------- --------
470.71 29251.00
------- --------
BRANCH TOTAL 1640.70 82913.67
- --------------------------------------------------------------------------------------
</TABLE>
<PAGE> 50
- --------------------------------------------------------------------------------
PAYROLL REGISTER - DETAIL CHECK DATE 10/03/97 WEEK 40 10/02/97
NORTY'S GROUP - 1291 PERIOD BEGIN 09/25/97 PERIOD END 10/01/97 PAGE 19
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
EMPLOYEE NAME EARNINGS PAY CURRENT YTD DEDUCTIONS CURRENT YTD
ID SSN STATE/FRQ STS LOCATION DESCR RATE HOURS AMOUNT HOURS AMOUNT DESCR AMOUNT AMOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
HARPER, PATSY L 1 REGULAR 37.00 296.00 590.25 4722.00
1724 ###-##-#### SC SC SC 2 OVERTIME 2.50 30.00
52 M0/M0 SC 16
8.0000 Hourly
------- ------- -------- ---------
EMPLOYEE TOTAL 37.00 296.00 592.75 4752.00
- ------------------------------------------------------------------------------------------------------------------------------------
MAHONEY, LISA J. 1 REGULAR 500.00 20000.00 6 CHECKING 346.02 5536.37
8166 ###-##-#### PA PA PA 20 401K E-M 10.50 420.00
52 S0/S0 SC 16 KP 401K PA -30.00 -1200.00
500.00 Salary P1 MED 125 -5.00 -200.00
------- --------- -------- --------
EMPLOYEE TOTAL 465.00 18600.00 346.02 5536.37
500.00 20000.00
- ------------------------------------------------------------------------------------------------------------------------------------
SMITH, STEPHANIE E 1 REGULAR 32.75 229.25 204.25 1429.75
1742 ###-##-#### SC SC SC
52 S1/S1 SC 16
7.0000 Hourly
------- ------- -------- ---------
EMPLOYEE TOTAL 32.75 229.25 204.25 1429.75
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- --------------------------------------------------------------------------------------
EMPLOYEE NAME TAXES CURRENT YTD NET PAY
ID SSN STATE/FRQ STS LOCATION DESCR AMOUNT AMOUNT CHECK NO
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
HARPER, PATSY L FEDERAL 25.79 415.04 232.62
1724 ###-##-#### SC SC SC OASDI 18.35 294.62 4176
52 M0/M0 SC 16 MEDICARE 4.29 68.89
8.0000 Hourly SC STATE 14.95 241.22
------- --------
EMPLOYEE TOTAL 63.38 1019.77
- --------------------------------------------------------------------------------------
MAHONEY, LISA J. FEDERAL 62.11 2484.40 0.00
8166 ###-##-#### PA PA PA OASDI 30.69 1227.60 DIRDEP
52 S0/S0 SC 16 MEDICARE 7.18 287.10
500.00 Salary PA STATE 14.00 560.00
BERKS PA 5.00 200.00
------- --------
EMPLOYEE TOTAL 118.98 4759.10
- --------------------------------------------------------------------------------------
SMITH, STEPHANIE E FEDERAL 19.10 115.09 186.28
1742 ###-##-#### SC SC SC OASDI 14.21 88.64 4177
52 S1/S1 SC 16 MEDICARE 3.32 20.73
7.0000 Hourly SC STATE 6.34 40.52
------- --------
EMPLOYEE TOTAL 42.97 264.98
- --------------------------------------------------------------------------------------
</TABLE>
<PAGE> 51
- --------------------------------------------------------------------------------
PAYROLL REGISTER - DETAIL CHECK DATE 10/03/97 WEEK 40 10/02/97
NORTY'S GROUP - 1291 PERIOD BEGIN 09/25/97 PERIOD END 10/01/97 PAGE 20
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
EMPLOYEE NAME EARNINGS PAY CURRENT YTD DEDUCTIONS CURRENT YTD
ID SSN STATE/FRQ STS LOCATION DESCR RATE HOURS AMOUNT HOURS AMOUNT DESCR AMOUNT AMOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
TATE-NEIMAN, DIANA 1 REGULAR 31.75 305.59 293.25 5902.54 6 CHECKING 228.40 2158.93
1723 ###-##-#### SC SC SC 2 OVERTIME 1.00 14.44
52 S0/S0 SC 16
385.00 Salary
------- ------- -------- --------- -------- --------
EMPLOYEE TOTAL 31.75 305.59 294.25 5916.98 228.40 2158.93
- ------------------------------------------------------------------------------------------------------------------------------------
MYRTLE BEACH 1 REGULAR 101.50 1330.84 1422.00 35137.67 6 CHECKING 574.42 7695.30
DEPARTMENT TOTALS 2 OVERTIME 12.75 155.44
4 EMPLOYEES 4 CHECKS 20 401K E-M 10.50 420.00
KP 401K PA -30.00 -1200.00
P1 MED 125 -5.00 -200.00
------- ------- -------- --------- -------- --------
DEPARTMENT TOTAL 101.50 1295.84 1434.75 33893.11 574.42 7695.30
1330.84 35293.11
- ------------------------------------------------------------------------------------------------------------------------------------
1 REGULAR 101.50 1330.84 1422.00 35137.67 6 CHECKING 574.42 7695.30
BRANCH TOTALS 2 OVERTIME 12.75 155.44
4 EMPLOYEES 4 CHECKS 20 401K E-M 10.50 420.00
KP 401K PA -30.00 -1200.00
P1 MED 125 -5.00 -200.00
------- ------- -------- --------- -------- --------
BRANCH TOTAL 101.50 1295.84 1434.75 33893.11 574.42 7695.30
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- --------------------------------------------------------------------------------------
EMPLOYEE NAME TAXES CURRENT YTD NET PAY
ID SSN STATE/FRQ STS LOCATION DESCR AMOUNT AMOUNT CHECK NO
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
TATE-NEIMAN, DIANA FEDERAL 38.19 765.28 0.00
1723 ###-##-#### SC SC SC OASDI 18.95 366.86 DIRDEP
52 S0/S0 SC 16 MEDICARE 4.43 85.80
385.00 Salary SC STATE 15.62 321.87
------- --------
EMPLOYEE TOTAL 77.19 1539.81
- --------------------------------------------------------------------------------------
MYRTLE BEACH FEDERAL 145.19 3887.52 418.90
DEPARTMENT TOTALS OASDI 82.20 2142.94
4 EMPLOYEES 4 CHECKS MEDICARE 19.22 501.15
PA STATE 14.00 560.00
SC STATE 36.91 651.33
BERKS PA 5.00 200.00
------- --------
302.52 7942.94
ER OASDI 82.20 2142.94
ER MEDCR 19.22 501.17
ER FUI 6.64 174.12
PA ER SUI 472.00
SC ER SUI 21.93 389.77
SC CONTIN 0.50 8.86
------- --------
130.49 3688.86
------- --------
DEPARTMENT TOTAL 433.01 11631.80
- --------------------------------------------------------------------------------------
FEDERAL 145.19 3887.52 418.90
BRANCH TOTALS OASDI 82.20 2142.94
4 EMPLOYEES 4 CHECKS MEDICARE 19.22 501.15
PA STATE 14.00 560.00
SC STATE 36.91 651.33
BERKS PA 5.00 200.00
------- --------
302.52 7942.94
ER OASDI 82.20 2142.94
ER MEDCR 19.22 501.17
ER FUI 6.64 174.12
PA ER SUI 472.00
SC ER SUI 21.93 389.77
SC CONTIN 0.50 8.86
------- --------
130.49 3688.86
------- --------
BRANCH TOTAL 433.01 11631.80
- --------------------------------------------------------------------------------------
</TABLE>
<PAGE> 52
- --------------------------------------------------------------------------------
PAYROLL REGISTER - DETAIL CHECK DATE 10/03/97 WEEK 40 10/02/97
NORTY'S GROUP - 1291 PERIOD BEGIN 09/25/97 PERIOD END 10/01/97 PAGE 21
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
EMPLOYEE NAME EARNINGS PAY CURRENT YTD DEDUCTIONS CURRENT YTD
ID SSN STATE/FRQ STS LOCATION DESCR RATE HOURS AMOUNT HOURS AMOUNT DESCR AMOUNT AMOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1330.84 35293.11
- ------------------------------------------------------------------------------------------------------------------------------------
BOOTH, WILSYE 1 REGULAR 4.00 22.00 325.75 1791.63
1657 ###-##-#### TN TN TN
52 M1/M1 TN 7
5.5000 Hourly
------- ------- -------- ---------
EMPLOYEE TOTAL 4.00 22.00 325.75 1791.63
- ------------------------------------------------------------------------------------------------------------------------------------
HINKLEY, HEIDI S. 1 REGULAR 40.00 290.00 120.00 870.00
1751 ###-##-#### TN TN TN
52 S1/S1 TN 7
7.2500 Hourly
------- ------- -------- ---------
EMPLOYEE TOTAL 40.00 290.00 120.00 870.00
- ------------------------------------------------------------------------------------------------------------------------------------
REEVES, LINDSY 1 REGULAR 17.00 93.50 66.75 367.13
1758 ###-##-#### TN TN TN
52 S0/S0 TN 7
5.5000 Hourly
------- ------- -------- ---------
EMPLOYEE TOTAL 17.00 93.50 66.75 367.13
- ------------------------------------------------------------------------------------------------------------------------------------
RIDDLE, STEVE T 1 REGULAR 3.00 21.75 119.75 868.19
1744 ###-##-#### TN TN TN 2 OVERTIME 7.50 81.56
52 S0/S0 TN 7
7.2500 Hourly
------- ------- -------- ---------
EMPLOYEE TOTAL 3.00 21.75 127.25 949.75
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- --------------------------------------------------------------------------------------
EMPLOYEE NAME TAXES CURRENT YTD NET PAY
ID SSN STATE/FRQ STS LOCATION DESCR AMOUNT AMOUNT CHECK NO
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------
BOOTH, WILSYE OASDI 1.36 111.04 20.32
1657 ###-##-#### TN TN TN MEDICARE 0.32 26.01 4178
52 M1/M1 TN 7
5.5000 Hourly
------- --------
EMPLOYEE TOTAL 1.68 137.05
- --------------------------------------------------------------------------------------
HINKLEY, HEIDI S. FEDERAL 28.21 84.63 239.60
1751 ###-##-#### TN TN TN OASDI 17.98 53.94 4179
52 S1/S1 TN 7 MEDICARE 4.21 12.63
7.2500 Hourly
------- --------
EMPLOYEE TOTAL 50.40 151.20
- --------------------------------------------------------------------------------------
REEVES, LINDSY FEDERAL 6.38 24.49 79.96
1758 ###-##-#### TN TN TN OASDI 5.80 22.77 4180
52 S0/S0 TN 7 MEDICARE 1.36 5.34
5.5000 Hourly
------- --------
EMPLOYEE TOTAL 13.54 52.60
- --------------------------------------------------------------------------------------
RIDDLE, STEVE T FEDERAL 106.45 20.08
1744 ###-##-#### TN TN TN OASDI 1.35 58.88 4181
52 S0/S0 TN 7 MEDICARE 0.32 13.77
7.2500 Hourly
------- --------
EMPLOYEE TOTAL 1.67 179.10
- --------------------------------------------------------------------------------------
</TABLE>
<PAGE> 53
- --------------------------------------------------------------------------------
PAYROLL REGISTER - DETAIL CHECK DATE 10/03/97 WEEK 40 10/02/97
NORTY'S GROUP - 1291 PERIOD BEGIN 09/25/97 PERIOD END 10/01/97 PAGE 22
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
EMPLOYEE NAME EARNINGS PAY CURRENT YTD DEDUCTIONS CURRENT YTD
ID SSN STATE/FRQ STS LOCATION DESCR RATE HOURS AMOUNT HOURS AMOUNT DESCR AMOUNT AMOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
TODD, CYNTHIA 1 REGULAR 18.00 121.50 65.25 440.44
1760 ###-##-#### TN TN TN
52 S0/S0 TN 7
6.7500 Hourly
------- ------- -------- ---------
EMPLOYEE TOTAL 18.00 121.50 65.25 440.44
- ------------------------------------------------------------------------------------------------------------------------------------
WHITE, TERRY Y. 1 REGULAR 40.00 350.00 1600.00 14000.00
1579 ###-##-#### TN TN TN 2 OVERTIME 113.25 1486.41
52 S0/S0 TN 7 P MED 125 -5.00 -200.00
8.7500 Hourly
------- ------- -------- ---------
EMPLOYEE TOTAL 40.00 345.00 1713.25 15286.41
350.00 15486.41
- ------------------------------------------------------------------------------------------------------------------------------------
NASHVILLE 1 REGULAR 122.00 898.75 4345.00 31389.60
DEPARTMENT TOTALS 2 OVERTIME 121.25 1572.85
6 EMPLOYEES 6 CHECKS P MED 125 -5.00 -200.00
------- ------- -------- ---------
DEPARTMENT TOTAL 122.00 893.75 4466.25 32762.45
898.75 32962.45
- ------------------------------------------------------------------------------------------------------------------------------------
SEVIERVILLE EMPLOYEES -- STORE CLOSED
- --------------------------------------------------------------------------------------
<CAPTION>
- --------------------------------------------------------------------------------------
EMPLOYEE NAME TAXES CURRENT YTD NET PAY
ID SSN STATE/FRQ STS LOCATION DESCR AMOUNT AMOUNT CHECK NO
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
TODD, CYNTHIA FEDERAL 12.58 43.49 99.63
1760 ###-##-#### TN TN TN OASDI 7.53 27.30 4182
52 S0/S0 TN 7 MEDICARE 1.76 6.38
6.7500 Hourly
------- --------
EMPLOYEE TOTAL 21.87 77.17
- --------------------------------------------------------------------------------------
WHITE, TERRY Y. FEDERAL 49.11 2239.54 269.50
1579 ###-##-#### TN TN TN OASDI 21.39 947.77 4183
52 S0/S0 TN 7 MEDICARE 5.00 221.61
8.7500 Hourly
------- --------
EMPLOYEE TOTAL 75.50 3408.92
- --------------------------------------------------------------------------------------
NASHVILLE FEDERAL 96.28 3404.21 729.09
DEPARTMENT TOTALS OASDI 55.41 2045.45
6 EMPLOYEES 6 CHECKS MEDICARE 12.97 478.35
------- --------
164.66 5928.01
ER OASDI 55.41 2045.40
ER MEDCR 12.97 478.36
ER FUI 4.39 197.62
TN ER SUI 4.66 209.98
------- --------
77.43 2931.36
------- --------
DEPARTMENT TOTAL 242.09 8859.37
- --------------------------------------------------------------------------------------
SEVIERVILLE EMPLOYEES -- STORE CLOSED
- --------------------------------------------------------------------------------------
</TABLE>
<PAGE> 54
SUPERVISOR PAY AND BONUSES
exhibit 4
One lead supervisor: $2,250 per week plus reasonable out of packet expenses
Two district supervisors: $2,000 per week plus reasonable out of pocket expenses
In addition to this base compensation, each supervisor shall receive a
performance based bonus that is tied (1) first to the performance of the whole
project against plan and (2) second to individual performance.
At or near plan, there will be a bonus pool equal to 50% of all base fees (see
above) paid to supervisors. The distribution of this pool among the individual
supervisors shall be determined by The Ozer Group.
Example:
Total supervisor fees paid: $50,000
at or near plan bonus pool: $25,000 (50% of $50,000)
In the event that the project performs measurably above or below the plan, the
50% bonus pool will be increased or decreased ratably, but in no event will the
bonuses be less than 0% nor more than 100% of the supervisor base fees.
Example:
If the project generates 50% more net available money than the plan (i.e. to be
shared among Ozer and Norty's), then the bonus pool would be increased by 50% to
75% of base fees.
If the project generates 50% less than the plan, then the bonus pool would be
decreased by 50% to 25% of base fees.
<PAGE> 55
Exhibit 5
List of Liens and Encumbrances
Liens and encumbrances on Norty's inventory are held by the following parties:
The CIT Group/Commercial Services, Inc.
Nationsbanc Commercial Corporation
Exhibit 5 1
<PAGE> 56
Exhibit 6
Schedule of Insurance
Special Businessowner's Policy
Provider: Fireman's Fund
Policy #: AA1AZC80514942
Policy Term: 3/9/97 - 3/9/98
Norty's Location included in policy:
All locations listed on Exhibit 1 (list of Stores)
<TABLE>
<CAPTION>
Coverage
<S> <C>
Limit of Liability - Per Occurence $1,000,000
Limit of Liability - Aggregate Per Location $2,000,000
Hired and Non-Owned Automobile Liability
All Risk, Replacement Cost, No Coinsurance
Loss of Income/Actual Loss Sustained - 12 Mths
Property Deductible $1,000
Employee Dishonesty $100,000
Money & Securities - On Premises $10,000
Money & Securities - Off Premises $2,500
Computer Equipment/Software $15,000
Accounts Receivable $15,000
Valuable Papers $15,000
Property of Others $15,000
Off Premises Including Transit $15,000
Glass
Signs
</TABLE>
- --------------------------------------------------------------------------------
Property and Liability Package Policy
Provider: Fireman's Fund
Policy #: S80MXX80639350
Policy Term: 3/4/97-3/4/98
Norty's Location included in policy:
40 Willow Street, Kutztown, PA (warehouse)
Coverage
Blanket Contents - Furniture, Fixtures, Improvements, Betterments, Machinery
and Equipment only.
<TABLE>
<S> <C>
Liability including Vendors and Employee Benefits $1,000,000
Stop Gap $2,000,000
Employee Dishonesty/ Depositors Forgery $500,000
Money & Securities, On/Off Premises $10,000
Computer Hardware $325,000
Computer Software $75,000
Deductible $1,000
</TABLE>
Exhibit 6 1
<PAGE> 57
Exhibit 6
Schedule of Insurance
Workers Compensation Policy
Provider: Graphic Arts Mutual Insurance Co.
Policy #: 1993237
Policy Term: 4/1/97-4/1/98
Norty's Location included in policy:
See Exhibit 1, Stores 2,3,6,7,9,10
Coverage
Workers Compensation Insurance applies to the Workers Compensation Law of
the following states:
South Carolina, Florida, Georgia and Tennessee
<TABLE>
<CAPTION>
Employers Liability Insurance:
Limits of Liability:
<S> <C> <C>
Bodily Injury by Accident Each Accident $100,000
Bodily Injury by Disease Each Limit $500,000
Bodily Injury by Disease Each Employee $100,000
</TABLE>
- --------------------------------------------------------------------------------
Workers Compensation Policy
Provider: Utica Mutual Insurance Company
Policy #: 1993230
Policy Term: 4/1/97-4/1/98
Norty's Location included in policy:
See Exhibit 1, Stores 1,5,8
Also included is the warehouse located at 40 Willow Street, Kutztown, PA
Coverage
Workers Compensation Insurance applies to the Workers Compensation Law
of Pennsylvania
<TABLE>
<CAPTION>
Employers Liability Insurance:
Limits of Liability:
<S> <C> <C>
Bodily Injury by Accident Each Accident $100,000
Bodily Injury by Disease Each Limit $500,000
Bodily Injury by Disease Each Employee $100,000
</TABLE>
- --------------------------------------------------------------------------------
Workers Compensation Policy
Provider:* Ohio Renaissance Healthcare Options Ltd.
* Provider and coverage selected by Ohio state
Norty's Location included in policy:
See Exhibit 1, Store 6
Coverage
Workers Compensation Insurance applies to the Workers Compensation Law
of Ohio
Exhibit 6 2
<PAGE> 58
NORWEST BANK MINNESOTA N.A.
733 MARQUETTE AVENUE - 3RD FLOOR
MINNEAPOLIS, MINNESOTA 55479-0093
Irrevocable Standby Letter of Credit _______ Date: October __, 1997
BENEFICIARY: NORTY'S, INC.
463 SEVENTH AVENUE
NEW YORK, NEW YORK 10018
Gentlemen:
BY ORDER OF:
THE OZER GROUP LLC
233 NEEDHAM STREET - 5TH FLOOR
NEWTON, MASSACHUSETTS 02164
We hereby open in your favor our Irrevocable Standby Letter of
Credit for the account of THE OZER GROUP LLC for a sum or sums not exceeding a
total of US Dollars,___________________________________________________________
available by your draft(s) at SIGHT on OURSELVES effective immediately and
expiring at OUR COUNTERS at the close of business on January 24, 1998.
Draft(s) must be accompanied by a signed statement in the form
attached as Exhibit A, and this original letter of credit.
Partial drawings are permitted, but are subject to the conditions
set forth in paragraph __ of the Agency Agreement, dated October __, 1997.
Each draft must bear upon its face the clause "Drawn under Letter of
Credit No. __ dated _____ of Norwest Bank Minnesota N.A."
The face amount of this Letter of Credit may be reduced from time to
time upon presentation of a signed statement in the form attached as Exhibit B,
and this original Letter of Credit.
<PAGE> 59
Except so far as otherwise expressly stated herein, this letter of
credit is subject to the "Uniform Customs and Practices for Documentary Credits
(1993 Revision), International Chamber of Commerce Publication No. 500".
We hereby agree that drafts drawn under and in compliance with the
terms of this Letter of Credit will be duly honored if presented to the above
mentioned drawee bank on or before January 24, 1998.
Kindly address all correspondence regarding this letter of credit to
the attention of Nancy Campion, at the above address, mention our reference
number as it appears above. Telephone inquiries can be made to 612/667-9067.
Very truly yours,
Authorized official
<PAGE> 60
Except so far as otherwise expressly stated herein, this letter of
credit is subject to the "Uniform Customs and Practices for Documentary Credits
(1993 Revision), International Chamber of Commerce Publication No. 500".
We hereby agree that drafts drawn under and in compliance with the
terms of this Letter of Credit will be duly honored if presented to the above
mentioned drawee bank on or before January 24, 1998.
Kindly address all correspondence regarding this letter of credit to
the attention of Nancy Campion at the above address, mention our reference
number as it appears above. Telephone inquiries can be made to 612/667-9067.
Very truly yours,
Authorized official
<PAGE> 61
EXHIBIT A
TO IRREVOCABLE LETTER OF CREDIT NO. _____________
Re: Drawing for Amounts Due to:
NORTY'S, INC.
463 SEVENTH AVENUE
NEW YORK, NEW YORK 10018
Ladies and Gentlemen:
I refer to your Letter of Credit No.____ (the "Letter of Credit"). The
undersigned, hereby certifies to you that:
(i) The Proceeds of the Sale, as such terms are defined in that
certain Agency Agreement dated as of October __, 1997, between
The Ozer Group LLC and Norty's, Inc. (the "Agreement"), are
insufficient to pay the Guaranteed Amount and the Expenses,
as such terms are defined in the Agreement. All cure and grace
periods under the Agreement have expired.
(ii) The deficiency amount is $____________ (the "Deficiency
Amount").
(iii) Payment is hereby demanded in an amount equal to the lesser of
(a) the Deficiency Amount and (b) the amount available on the
date hereof to be drawn under the Letter of Credit.
(iv) The Letter of Credit has not expired prior to the delivery of
this letter and the accompanying sight draft.
(v) The payment hereby demanded is requested to be made no later
than ____, _______, time, on_____ 199__ by wire transfer to
account no. ________ with _______.
IN WITNESS WHEREOF, I have executed and delivered this letter as of this ____
day of ______, 1997.
Very truly yours,
NORTY'S, INC.
By:
--------------------------
Title:
-----------------------
<PAGE> 62
EXHIBIT B
TO IRREVOCABLE LETTER OF CREDIT NO. ________
Re: Drawing for Amounts Due to:
NORTY'S, INC.
463 SEVENTH AVENUE
NEW YORK, NEW YORK 10018
Ladies and Gentlemen:
I refer to your Letter of Credit No. _______ (the "Letter of Credit"). The
undersigned, hereby certifies to you that:
(i) The face amount of Letter of Credit No. ___________________
hereby shall be reduced from its original face or current face
amount of $______________ to a new face amount of $__________.
IN WITNESS WHEREOF, I have executed and delivered this letter as of this _____
day of _____, 1997.
Very truly yours,
NORTY'S, INC.
By:
--------------------------
Title:
-----------------------
<PAGE> 1
Exhibit 10.49
[LETTERHEAD OF DJM ASSET MANAGEMENT, INC.]
November 7, 1997
Ms. Amanda Bokman
Chief Financial Officer
Norton McNaughton, Inc.
463 7th Avenue
New York, NY 10018
Dear Amanda:
DJM Asset Management, Inc. ("DJM") agrees to act as real estate consultant to
Norty's, Inc., a subsidiary of Norton McNaughton of Squire, Inc., (the
"Company") to evaluate and dispose of retail real estate leases for selected
stores.
I. Services
o Review leases.
o Preparation of a program for negotiation with Landlords and the
marketing of leases for assignments, to be approved in advance in
writing by the Company.
o Negotiate lease terminations for stores on Schedule "A" in
conjunction with marketing leases for assignment.
II. Fees
A) Store Lease Terminations/Assignment of Lease
Budget -- $330,000 (approximates -- 6 months rent and extras plus
projected rent and extras to be paid while Company remains in occupancy)
For any acceptable settlement there will be a minimum fee due of $2,000.
Success Fee
In the event that total landlord termination payments and rent and extras
paid while Company remains in occupancy, less any sale proceeds received
by the Company generated from the sale of the leases for stores on
Schedule "A" are less than $330,000 DJM will receive a success fee of the
following amounts:
Settled for $ 0 - $151,000 = DJM to receive 60% of savings from
budget.
Settled for $151,001- $246,000 = DJM to receive 50% of savings from
budget.
Settled for $246,001- $330,000 = DJM to receive 40% of savings from
budget.
1
<PAGE> 2
For example:
DJM settles lease obligations for $250,000 and sells one lease for
$50,000; DJM will have settled total lease obligations for $200,000
($250,000 - $50,000 = $200,000). DJM will receive a bonus fee of $65,000
(Budget of $330,000 - $200,000 = $130,000; $130,000 X 50% = $65,000).
III. Expenses
DJM will not be responsible for any transactional costs and or legal
expense incurred by the Company in connection with DJM's involvement with
the properties. DJM will obtain the approval of the Company's CFO in
advance of incurring any such expenses on the Company's behalf if greater
than $500.
All actual expenses for marketing in accordance with DJM's marketing
program must be approved in advance by the Company's CFO and paid directly
by them within 10 business days of the receipt of the invoice. DJM shall
be reimbursed for all travel expenses. Travel expenses will be
pre-approved by the Company's CFO.
Retainer - A $10,000 retainer will be paid to DJM upon the execution of
this agreement. Such retainer, or any portion there of, shall be
refundable to the extent not earned by DJM in accordance with this
agreement, and such retainer shall be applied against any fees due DJM.
IV. Payment of Fees and Expense
Within 30 business days upon receipt of invoice. All fees due DJM are
earned upon the final execution of each landlord settlement document.
V. Exclusive
During the term of this agreement DJM shall have the sole and exclusive
authority to offer for disposition all leases on Schedule "A" held by the
Company on an exclusive right to sell basis. All inquiries regarding the
leases made to the Company or any representative of the Company or any
related party, shall be re-directed to DJM. The Company has sole
discretion to accept or reject for any reason any offer presented by DJM.
This Agreement does not authorize DJM to bind or otherwise act on behalf
of the Company in any manner and DJM shall not hold itself out as having
such authority.
VI. Survival
This agreement expires on 4/30/98 but shall continue thereafter unless
either party terminates on 10 days notice to the other.
In the event DJM has communicated or negotiated with a third party or
landlord prior to the termination of this Agreement and the transaction
closing with such person occurs within 6 months after the expiration of
this Agreement, DJM will be entitled to a fee in accordance with the terms
of this Agreement.
2
<PAGE> 3
VII. The Company's Responsibilities
o The Company shall provide to DJM all leases, lease abstracts, and
contact person and phone number of Landlord.
o The Company shall make available to DJM all information reasonably
requested in a timely fashion.
o The Company shall deal with DJM fairly and in good faith to allow
DJM to perform all of its duties.
o The Company acknowledges that all information provided to DJM shall
be materially accurate.
The Company shall:
(a) indemnify DJM and hold it harmless against any and all losses,
claims, damages or liabilities to which DJM may become subject
arising in any manner out of, or in connection with the proper and
lawful rendering of services herein, unless such losses, claims,
damages or liabilities resulted from the gross negligence or willful
misconduct or bad faith of DJM or any of its employees; and
(b) reimburse DJM immediately for any other reasonable legal expenses
reasonably incurred by it, subject to Section III herein, in
connection with investigating, preparing to defend or defending any
lawsuits, claims or other proceedings arising from, in any manner
out of, or in connection with the proper and lawful rendering of
services by DJM hereunder.
VIII. Breach
In the event of a breach of any provision in this Agreement, either party
may terminate this Agreement upon 10 days written notice.
IX. Notices
Notices hereunder shall be sent to the following:
DJM Asset Management, Inc. Norton McNaughton of Squire, Inc.
99 Park Avenue, 6th Floor 463 7th Avenue
New York, New York 10016 New York, New York 10018
Attn: Andrew Graiser Attn: Amanda Bokman
Phone: (212) 922-1200 x223 Phone: (212) 244-0583
Fax: (212) 922-9155 Fax: (212) 563-2766
Agreed to: Agreed to:
/s/ Andrew Graiser /s/ Amanda Bokman
- ------------------------ ------------------------
Andrew Graiser Amanda Bokman
DJM Asset Management, Inc.
3
<PAGE> 4
Schedule "A"
Norton McNaughton
CLOSURES
Store Locations
1. Commerce
2. Orlando
3. Locust Grove
4. Myrtle Beach
5. Columbus
6. Hershey
7. Nashville
8. St. Augustine
9. Grove City
10. Lancaster
4
<PAGE> 1
Exhibit 10.51
[COMPANY LOGO]
GETTINGER ASSOCIATES Landlord
TO
MISS ERIKA INC.
----------------------------------------------------
Tenant
LEASE
PREMISES 1407 BROADWAY
SPACE:
Unit "405" on the 4th floor
TERM:
from February 1, 1994 to January 31, 2000
-------------------------------------- ---------------------
Gettinger & Gettinger
Attorneys at Law
1407 BROADWAY
NEW YORK N.Y.
<PAGE> 2
LEASE, dated December 16, 1993, between GETTINGER ASSOCIATES,
LANDLORD
a limited partnership, hereinafter referred to as "Landlord," and MISS ERIKA
INC., a New York Corporation, having its principal place of business at 1407
Broadway, New York, New York,
TENANT
hereinafter jointly, severally and collectively referred to as "Tenant."
SPACE
WITNESSETH: The Landlord does hereby lease to Tenant, and Tenant does
hereby take from the Landlord, the space designated as Unit "405" on the 4th
floor,
TERM
substantially as outlined in red on the plan (x) attached hereto, on the fourth
floor of the building known as 1407 BROADWAY, hereinafter referred to as "the
building," in the Borough of Manhattan, City, County and State of New York,
which space, together with all the fixtures and improvements which, at the
commencement of or during the term, are thereto attached, is hereinafter
referred to as "the premises" or "the demised premises," for a term to commence
on February 1, 1994, and to end on January 31, 2000,
RENT
at the annual rental of THREE HUNDRED FORTY NINE THOUSAND SIX HUNDRED AND NO/100
($349,6O0.00) DOLLARS,
which Tenant agrees to pay in lawful money of the United States of America, in
equal monthly installments in advance on the first day of each month during said
term, at the office of Landlord, except that Tenant shall pay the first monthly
installment on the execution thereof unless this lease (Lease) be a renewal.
The parties hereto, for themselves their heirs, distributees, executors,
administrators, legal representatives, successors and assigns, hereby covenant,
as follows:
USE
1. Tenant shall pay the rent and additional rent as above and as
hereinafter provided.
2. Tenant shall use and occupy the premises for SHOWROOM AND OFFICE FOR
THE SALE (WHOLESALE ONLY) AND DISPLAY OF LADIES WEARING APPAREL,
and the premises shall be used for no other purpose.
1
<PAGE> 3
ASSIGNMENT
AND
SUBLETTING
3. Tenant for itself, its heirs, distributees, executors, administrators,
legal representatives, successors and assigns, expressly covenants that it shall
not assign, mortgage or encumber this Lease, nor sublet or suffer or permit the
demised premises or any part thereof, to be used by others without the prior
written consent of Landlord in each instance. The transfer of a majority of any
class of the issued and outstanding capital stock of any corporate Tenant of
this Lease or a majority of the total interest of any partnership or individual
Tenant, however accomplished, whether in a single transaction or in a series of
related or unrelated transactions, shall be deemed an assignment of this Lease.
If this Lease be assigned or if the demised premises or any part thereof be
sublet or occupied by anyone other than Tenant, Landlord may, after default by
Tenant, collect rent, additional rent and other charges from the assignee,
sublessee or occupant, and apply the net amount so collected to the rent,
additional rent or other charges herein provided, but no such assignment,
subletting, occupancy or collection shall be deemed a waiver of this covenant,
or the acceptance of the assignee, sublessee or occupant as tenant, or a
release of Tenant from the further performance by it of the covenants on
its part to be performed hereunder. The consent by Landlord to an assignment or
subletting shall not in any way be construed to relieve Tenant, subtenant or any
assignee from obtaining the express consent in writing of Landlord to any
further assignment or subletting. The listing of any name other than that of the
Tenant, whether on the doors of the premises or on the building or floor
directories, or otherwise, shall not operate to vest any right or interest in
this Lease or in the premises, or be deemed to be the written consent of the
Landlord mentioned in this paragraph, it being expressly understood that any
such listing is a privilege extended by the Landlord, revocable at will by
written notice to the Tenant, subtenant or assignee where Landlord has consented
in writing to such subleasing or assignment.
OBSTRUCTIONS,
SIGNS
4. The Tenant shall not obstruct or permit the obstruction of windows,
halls, areas, roofs, stairways or entrances to the building, and will not affix,
erect or inscribe any signs, projections, awnings, signals, lettering, painting
or advertisements of any kind to any part of the premises including the inside
or outside of the windows or doors and will not paint the inside or outside of
the windows or doors unless and until the style, size, color, construction and
location thereof have been approved in writing by the Landlord. The Landlord
shall have the right to withdraw such approval at any time and to require the
Tenant to remove any such signs, projections, awnings, signals, lettering,
painting or advertisements without being liable to the Tenant by reason thereof
and to charge the cost of doing so to the Tenant as additional rent. The
Landlord also reserves to itself the sole right to designate the person, firm or
corporation which shall do the work of lettering, painting and erecting of any
and all signs to be affixed to the premises or the building. Landlord agrees not
to unreasonably withhold its consent to lettering on Tenant's entrance door and
to Tenant's affixing building standard signs in places designated by Landlord.
INITIAL
/s/ [ILLEGIBLE]
HERE
ALTERATIONS;
[ILLEGIBLE]
5. Tenant shall make no alterations, changes, repairs, decorations,
additions or improvements (structural or non-structural), in or to the demised
premises including any and all mechanical, electrical, air conditioning,
heating, and plumbing systems without Landlord's prior written consent, which
shall not be unreasonably withheld, and then only by contractors or mechanics
approved by Landlord. All such work shall be done at such times and in such
manner as Landlord may designate. Prior to Tenant's commencing any work in and
to the premises as provided in this paragraph, Tenant shall obtain in writing
and deliver to Landlord, written and unconditional waivers of mechanics' and
materialmen's liens from the persons or parties who are to perform such work and
services in the premises, in such form as may be approved by Landlord. Any
mechanic's or other lien filed against the premises or the building, for work
claimed to have been done for or materials claimed to have been furnished to
Tenant, shall be discharged by Tenant within 10 days thereafter at Tenant's
expense by filing the bond required by law. All work done or required to be done
by the Tenant shall be done with union labor and union made materials only and
shall comply in all respects and at all times with the rules and regulations of
all municipal or other authorities having jurisdiction thereof. Asbestos
encapsulation, removal or other treatment, respecting asbestos in the confines
of the demised premises, as may he required by law, shall at all times be at
Tenant's sole cost and expense, in the manner as approved by Landlord.
INITIAL
/s/ [ILLEGIBLE]
HERE
6. All fixtures, equipment, improvements made and appurtenances attached
to or built into the space or premises at the
2
<PAGE> 4
FIXTURES
commencement of or during the term, whether by the Landlord at its own expense
or at the expense of the Tenant, or by the Tenant, shall be and remain part of
the premises and shall not be removed by the Tenant at any time unless otherwise
expressly provided in this Lease. All electric, plumbing, heating, sprinkling,
telephone, telegraph, communication and radio systems, fixtures and outlets,
partitions, railings, gates, doors, vaults, paneling, molding, shelving,
radiator enclosures, corks, rubber, linoleum and composition floors,
ventilating, silencing, air conditioning and cooling equipment shall be deemed
to be included in such fixtures, equipment, improvements and appurtenances.
Where not built into the space or premises and if furnished by or at the expense
of the Tenant, all removable electric fixtures, carpets, wind deflectors,
electric fans, water coolers, furniture, trade fixtures and business equipment
shall not be deemed to be included in such fixtures, equipment, improvements and
appurtenances, and may be removed by the Tenant upon condition that such removal
does not render any damage to the building or premises and upon condition also
that in the event of any damage the cost of repairing same shall be paid by the
Tenant. All the outside walls of the premises, Including corridor walls and the
outside entrance doors to the premises, any balconies, terraces, roofs adjacent
to the premises, and any space in the premises used for shafts, stacks, pipes,
conduits, ducts or other building facilities and systems and the use thereof, as
well as access thereto in and through the premises for the purpose of operation,
maintenance, decoration and repair, are expressly reserved to the Landlord and
the Landlord does not convey any rights to the Tenant therein.
REPAIRS
7. Tenant shall take good care of the premises and fixtures therein and,
subject to the provisions of paragraph 5 hereof shall make, as and when needed,
as a result of misuse or neglect by Tenant or Tenant's servants, employees,
agents, visitors, licensees, contractors, guests or invitees all repairs in and
about the demised premises necessary to preserve them in good order and
condition, which repairs shall be in quality and class equal to the original
work. However, Landlord after twenty (20) days prior written notice to Tenant if
Tenant shall not have commenced to make such repair within such twenty (20) day
period, except in an emergency, in which event no notice shall be required, may
repair, at the expense of Tenant, all damage or injury to the demised premises
or to the building or to its fixtures, appurtenances or equipment, done or
caused by Tenant or Tenant's servants, employees, agents, visitors, licensees,
contractors, guests or invites, or caused by moving property of Tenant in or out
of the building, or by installation or removal of furniture or other property,
or resulting from fire, air-conditioning unit or system short circuits, overflow
or leakage of water, steam, illuminating gas, sewer gas, sewage or odors, or by
frost, or by bursting or leaking of pipes or plumbing works, or gas, or from any
other cause, due to the carelessness, negligence, or improper conduct of Tenant,
or Tenant's servants, employees, agents, visitors, licensees, contractors,
guests or invitees. Except as provided in paragraph 13 hereof, there shall be no
allowance to Tenant for a diminution of rental value, and no liability on the
part of Landlord by reason of inconvenience, annoyance or injury to person(s),
property or business arising from the making of any repairs, alterations,
additions or improvements in or to any portion of the building or the premises
or in or to the fixtures, appurtenances or equipment, nor shall there be any
liability upon the Landlord for failure to make any repairs, alterations,
additions or improvements in or to any portion of the building or the demised
premises or in or to the fixtures, appurtenances or equipment, The Tenant shall
and does hereby indemnify and hold the Landlord harmless and free from all
liability for all injuries suffered by any person(s), and for damages sustained
to property, and for any monies paid out by Landlord in settlement of any claims
or judgements resulting from such damages or injuries, as well as for all
expenses and attorney's fees incurred by Landlord in connection therewith,
except if caused by negligence or acts of Landlord, its agents, representatives,
employees and contractors.
INITIAL
/s/ [ILLEGIBLE]
HERE
WINDOW
CLEANING
8. Tenant will not clean, nor require, permit, suffer or allow any window
in the premises to be cleaned, from the outside in violation of Section 202 of
the Labor Law or of the rules of the Board of Standards and Appeals, or of any
other board or body having or asserting jurisdiction.
9. Tenant, at Tenant's expense, shall comply with all laws, orders and
regulations of federal, state, county and municipal
3
<PAGE> 5
REQUIREMENTS
[ILLLEGIBLE] LAW
authorities, and with any direction of any public officer or officers, pursuant
to law, which shall impose any duty upon Landlord or Tenant arising out of the
Tenant's use or occupancy of the demised premises, and shall not do or permit to
be done, any act or thing upon said premises, which will invalidate or be in
conflict with fire insurance policies covering the building, fixtures and
property therein, and shall not do or permit to be done any act or thing upon
said premises which shall or might subject the Landlord to any liability or
responsibility for injury to any person or persons or to any property by reason
of any business or operation being carried on upon said premises; and shall
comply with all rules, orders, regulations or requirements of the New York Board
of Fire Underwriters, or any other similar body and shall not do or permit
anything to be done in or upon said premises, or bring or keep anything therein,
which shall increase the rate of fire insurance on the building or on property
located therein. If by reason of failure of Tenant to comply with the provisions
hereof, or if by reason of the nature of the Tenant's occupancy, the fire
Insurance rate shall at any time be higher than it otherwise would be, then
Tenant shall reimburse Landlord as additional rent hereunder, for that part of
all fire insurance premiums thereafter paid by Landlord, which shall have been
charged because of such violation or because of such occupancy by Tenant, and
shall make such reimbursement upon the first day of the month following such
outlay by Landlord. In any action or proceeding wherein Landlord and Tenant are
parties, a schedule or "make up" of rate for the building or the premises issued
by the New York Fire Insurance Exchange or other body making fire insurance
rates for said premises, shall be conclusive evidence of the facts therein
stated and of the several items and charges in the fire insurance rate then
applicable to said premises.
SUBORDINATION
10. This Lease is and shall remain subject and subordinate to all ground
or underlying leases, leasehold mortgages, and mortgages and building loan
mortgages which may now or hereafter affect the real property of which the
demised premises form a part and each and every of the advances which have
heretofore been made or which may hereafter be made thereunder, and to all
renewals, modifications, consolidations, replacements and extensions thereof. In
confirmation of such subordination, Tenant shall execute promptly any
instruments or certificate that Landlord may request. Tenant hereby irrevocably
constitutes and appoints Landlord the Tenant's attorney-in-fact to execute any
such instrument or certificate for and on behalf of Tenant. This clause shall,
nevertheless, be self-operative.
RULES
AND
REGULATIONS
11. Tenant and Tenant's agents, employees, visitors, licensees,
contractors, guests or invitees, shall faithfully comply with the Rules and
Regulations set forth on the back cover of this Lease, and with such further
reasonable Rules and Regulations as Landlord at any time may make and
communicate to Tenant, which, in the Landlord's judgment, shall be necessary for
the reputation, safety, care or appearance of the building, or the preservation
of good order therein, or the operation or maintenance of the building, its
equipment, or the more useful occupancy or comfort of the Tenants and others in
the building. Landlord shall not be liable to Tenant for the violation of any
said Rules and Regulations, or the breach of any covenant or condition in any
lease by any other tenant in the building.
PROPERTY
[ILLEGIBLE]
DAMAGE
12. Landlord or Landlord's agents shall not be liable for any damage to
property entrusted to employees of the building nor for the loss of any property
by theft or otherwise. Landlord or Landlord's agents shall not be liable for any
injury or damage to persons or property resulting from falling plaster, steam,
gas, electricity, water, rain or snow which may leak from any part of the
building or from the pipes, appliances or plumbing works of the same, or
from the street or sub-surface, or from any other place, or by dampness or
any other cause of whatsoever nature, unless caused by or due to the negligence
of Landlord: nor shall Landlord be liable for any such damage caused by other
tenants or persons in the building, or for interference with the light or other
incorporeal hereditaments, or caused by operations in construction of any public
or quasi public work; nor shall Landlord be liable for any latent defect in the
building. Tenant shall reimburse Landlord as additional rent for all expenses,
damages or fines incurred or suffered by Landlord by
4
<PAGE> 6
reason of any breach, violation or non-performance of any covenant or provision
of this Lease by Tenant, or Tenant's servants, employees, agents, visitors,
licensees, contractors, guests or invitees, or by reason of damage to person or
property caused by moving property in or out of the building, or by the
installation or removal of furniture or other property of or for the Tenant, or
by reason of or arising out of the occupancy or use by Tenant of the premises or
of the building, or from any other cause due to the carelessness, negligence or
improper conduct of the Tenant or the Tenant's servants, employees, agents,
visitors, licensees, contractors, guests or invitees.
INITIAL
/s/ [ILLEGIBLE]
HERE
DESTRUCTION
FIRE OR
OTHER CAUSE
13. If the demised premises shall be partially damaged by fire or other
cause the damages shall be repaired by and at the expense of Landlord and the
rent and additional rent until such repairs shall be made shall be apportioned
according to that part of the premises which is usable by Tenant. No penalty
shall accrue for reasonable delay which may arise by reason of adjustment of
fire insurance on the part of Landlord or Tenant, and for reasonable delay on
account of "labor troubles" or any other cause beyond Landlord's control. But if
the demised premises are totally damaged or are rendered wholly untenantable by
fire or other cause, and the Landlord shall decide not to rebuild the same, or
if the building of which the demised premises are a part shall be so damaged
that Landlord shall decide to demolish it or to rebuild it, then or in any of
such events Landlord may, within ninety (90) days after such fire or other
cause, give Tenant a notice in writing of such decision, and thereupon the term
of this Lease shall expire by lapse of time upon the third day after such notice
is given, and Tenant shall vacate the demised premises and surrender the same to
Landlord.
(see paragraph 48)
EMINENT
DOMAIN
14. If the entire land and building of which the demised premises are a
part, shall be taken or condemned by any competent authority for any public or
quasi public use or purpose, then and in that event, the term of this lease
shall cease and terminate from the date when the possession thereof shall be
required for such use or purpose. If any part of the land or the building of
which the demised premises are a part or any part of the demised premises shall
be so acquired or condemned, then and in that event, the term of this Lease, at
the option of the Landlord, on ten (10) days notice by Landlord to Tenant, shall
cease and terminate from the date when possession of the part so taken shall be
required for such use or purpose. In the event that Landlord shall not elect to
terminate this Lease and part of the demised premises shall be so taken or
condemned, the annual rental, additional rent and other charges, shall be
apportioned from the date thereof. In no event, under any of the circumstances
described herein, shall Tenant have any claim for the value of any part of the
unexpired term of the within Lease or any portion of the demised premises so
taken or condemned and shall not share in any award that may be made to Landlord
or others.
ELEVATORS,
HEAT,
CLEANING
15. As long as Tenant is not in default under any of the covenants of this
Lease, Landlord shall, if and insofar as the existing facilities provide, at
Landlord's expense: (a) run elevators on business days from 8 A.M. to 6 P.M. and
in addition on Saturdays from 8 A.M. to 1 P.M. and also provide one elevator
which will be subject to call during all other hours on business days,
Saturdays, Sundays and holidays; (b) furnish on business days from 8 A.M. to 6
P.M. ------------------ heat to warm the demised, premises when and as required
by law; c) cause to be kept clean the halls, corridors and public portions of
the building, which are used in common by all tenants. Tenant shall, at Tenant's
expense, keep the demised premises clean and in order, to the satisfaction of
Landlord, and remove its own rubbish. Landlord shall have the sole right to
designate and appoint the person or concern to be employed, at Tenant's expense,
for the removal of Tenant's refuse and rubbish from the building. Landlord
reserves the right to stop service of the heat, elevator, air conditioning,
cooling, plumbing and electric systems, when necessary by reason of accident, or
for repairs, altera-
5
<PAGE> 7
tions or improvements, including conversion of each and any of the elevators
from manual to automatic, in the judgement of Landlord desirable or necessary to
be made, until such repairs, alterations or improvements shall have been
completed, and shall further have no responsibility or liability for failure to
supply heat, elevator, plumbing, air conditioning, cooling and electric service,
when prevented from so doing by strikes or accidents or by any cause beyond
Landlord's reasonable control, or by orders or regulations of any federal,
state, county or municipal authority or failure of coal, oil or other suitable
fuel supply, or inability by exercise of reasonable diligence to obtain coal,
oil or other suitable fuel. It is expressly understood and agreed that any
covenants on Landlords part to furnish any service pursuant to any of the terms
or provisions of this Lease or to perform any act or thing for the benefit of
Tenant shall not be deemed breached if Landlord is unable to perform the same by
virtue of a strike or labor trouble or any other cause whatsoever beyond
Landlord's control and Tenant agrees that there shall be no abatement or
reduction of rent in the event that any of said systems or service should fail
to function for the reasons above set forth.
WATER
16. Landlord shall have the right to install a separate water meter or
meters for the demised premises or any part thereof and Tenant shall pay the
cost therefor, and if so installed, Tenant shall keep same in repair and pay the
charges made by the municipality for or in respect of the consumption of water
together with sewer rental charges based thereon as and when billed therefor. If
the building or any part thereof be supplied with water through a meter or
meters, the Tenant shall pay to the Landlord, as and when billed therefor, the
Tenant's proportionate part of all such charges together with sewer rental based
on such meter charges, which amount shall be determined by multiplying the
percentage factor set forth in paragraph 33(b) by the total of the water bills
and sewer charges rendered by the municipality or other public authority from
time to time. All water and sewer rental bills submitted by any public authority
shall be conclusive evidence of the amount due. All payments required to be made
by the Tenant under this paragraph shall be deemed additional rent.
ELECTRIC
CURRENT
17. Landlord shall furnish Tenant with electric current (subject to
discontinuance as provided herein), at no additional charge except as may be
hereinafter provided in subparagraph (a) hereof and paragraph 33(d), during
business hours on business days, consistent with the normal purposes for which
the demised premises have been leased to Tenant, subject to all the provisions
as may be herein contained.
(a) In the event there is an increase or decrease, as the case may be, in
the rate schedule or rates for the purchase of electric current or electricity,
including demand or energy charges, fuel adjustment rates, service charges or
sales taxes, hereinafter collectively referred to as "electric consumption and
demand charges," from the public utility or other supplier of electricity to the
Landlord, from and after the date hereof, such increase or decrease shall, at
Landlord's option, be added to and made a part of, or subtracted from the annual
rental provided for in this Lease, and if this Lease has not yet commenced, then
such increase or decrease shall be added to and made a part of, or subtracted
from the annual rental upon the commencement of the Lease. The amount of such
increase or decrease shall be computed by: ascertaining the electric consumption
and demand charges for the entire building for the 12 months immediately
preceeding the effective date of the increase or decrease; then ascertaining
such electric consumption and demand charges based upon the new rates and
charges; then computing the percentage of increase or decrease, as the case may
be, and multiplying such percentage of increase or decrease by the difference
between the annual rental and the amount set forth in subdivision (c) below,
(b) Tenant shall make no changes in or additions to the electrical system,
wiring, conduits, switches, fixtures, outlets or any other electrical equipment
in the building or demised premises during the term of this Lease and any
extensions or renewals thereof without first obtaining the written consent of
the Landlord thereto. Tenant shall not, during the term of this Lease, connect
to the risers, feeders, outlets, base receptacles, wiring or installations
constituting Landlord's electrical distribution system, any electrical
machinery, electrical equipment, electrical computers or any other office or
electrical appliances without first obtaining the written
6
<PAGE> 8
consent of the Landlord thereto. Tenant further agrees not to permit, at any
time during the term of this Lease, its electrical consumption to overtax the
capacity of Landlord's existing electrical distribution system.
(c) The Landlord may discontinue the supply of electric current to the
Tenant, at any time, notwithstanding any contrary provisions of this Lease, upon
giving Tenant thirty (30) days prior written notice of Landlord's intention so
to do and thereupon Tenant may contract or otherwise arrange with any person,
firm or corporation for the purchase and supply of such electric current, all
without affecting or changing the obligations of the Tenant under this Lease,
provided, however, that in the event of the discontinuance of the electric
current by the Landlord, the annual rental shall be reduced to the sum of $
329,036.00 and Tenant shall have no further rights under this Lease with respect
thereto. In the event of such discontinuance of electric current, Tenant shall
have no right to use or utilize Landlord's electrical distribution system,
including its risers, feeders, wiring or installations for the supply of
Tenant's electric current. Tenant may install, at its own cost and expense any
risers, feeders, wiring or installations to enable it to obtain electric
current, subject, however to there being available space, areas and facilities
in the building for the inclusion and insertion of such risers, feeders, wiring
and installations, of which availability Landlord shall be the sole judge;
provided that same shall not cause damage or injury to the building or the
demised premises, or cause or create a dangerous or hazardous condition, or
interfere with or disturb other tenants, or overtax the capacity of Landlord's
existing electrical distribution system, and provided further that any such work
will at all times comply with the laws, rules and regulations of all
governmental bureaus, agencies and other subdivisions having jurisdiction over
the demised premises. The aforesaid risers, feeders, wiring and installations to
be installed by Tenant shall, at all times, be and remain the property of
Landlord.
(d) The Landlord agrees to supply electric current to the Tenant in the
manner as herein set forth, to the extent that the quality, character and
quantity of the supply of electric current shall be available to the Landlord
from the public utility company or other supplier supplying the same and the
Landlord and Tenant further agree that Landlord shall not be liable to the
Tenant for any loss, damage or expense resulting from change in the quality,
character or quantity or due to the cessation or interruption of said supply
without any fault on the part of the Landlord, or for Landlord's failure to
supply such electric current when prevented from do doing by strikes, accidents,
repairs, alterations, improvements or other causes beyond Landlord's control or
by orders or laws of any federal, state, county or municipal authorities, and
there shall be no abatement of rent upon the happening and during the period of
such event or events.
AIR
CONDITIONING
AND COOLING
18. The Landlord has installed within the building of which the demised
premises are a part, machinery, appliances, equipment and appurtenances for the
operation and maintenance of a modern peripheral air-conditioning system which
is capable, during the summer time, when the outside temperature is 95 degrees,
of maintaining inside the building a temperature of approximately 10 degrees
less and a proportionately less difference of temperature between the inside and
outside, as the outside temperature falls to 75 degrees Fahrenheit. The Landlord
has provided main cooling system units at the windows which service the
peripheral area and has installed two or more main ducts and booster units on
all floors of the building as a part of the air-conditioning system.
(a) It is expressly understood by the Tenant that in order for the air
conditioning system to function properly, the Tenant is obliged to, and the
Tenant agrees to keep all windows in the premises closed. Tenant acknowledges
that the air-conditioning system will not function properly if the demised
premises are occupied by more than an average of one person for each 100 sq.
ft., or if Tenant installs or operates lighting loads in excess of 3 1/2
watts per sq. ft., or if Tenant installs and operates electrical equipment which
gives off heat that cannot be adequately absorbed by Landlord's existing
air-conditioning system in the demised premises.
(b) Subject always to events and causes, physical, mechanical and
otherwise, beyond the reasonable control of the Landlord, for the failure of
which the Landlord shall not be liable in any event whatever, the Landlord will
service and maintain said air-condi-
7
<PAGE> 9
tioning system In such matter as to provide air conditioning for the premises on
business days generally during the hours of 8 A.M. to 6 P.M. during the
months of June, July, August and September, when required, consistent with the
provisions hereof.
(c) Any damage caused to the appliances, equipment or appurtenances as a
result of the negligence of or the careless operation by the Tenant or the
agents, servants, employees, contractors, visitors, guests, licensees or
invitees of the Tenant, shall be repaired by the Landlord at the cost and
expense of the Tenant, which expense shall constitute additional rent.
ACCESS
TO
PREMISES
19. (a) Tenant shall permit Landlord to erect, use and maintain, pipes and
conduits in and through the demised premises. Landlord's agents shall have the
right to enter the demised premises at all times to examine same, to show them
to prospective purchasers or lessees of the building, and to make such
decorations, repairs, alterations, improvements or additions as Landlord may
deem necessary or desirable either to the building or to the demised premises
and Landlord shall be allowed to take all material into and upon said premises
that may be required therefor without the same constituting an eviction of
Tenant in whole or in part and the rent reserved shall in no wise abate while
said decorations, repairs, alterations, improvements or additions are being
made, by reason of loss or interruption of the business of Tenant, because of
the prosecution of any such work or otherwise.
(b) The Tenant shall give prompt notice to the Landlord of any fire,
accident to or defective condition in any part of the demised premises,
including but not limited to the sanitary, electrical, heating, air
conditioning, cooling and other systems located in, or passing through the
premises, and the damage or defective condition shall be remedied by the
Landlord with due diligence, but if such damage or defective condition was
caused by the Tenant or if the system was installed for the particular use of
the Tenant and the damage or defective condition was not caused by the
negligence of the Landlord, the cost of the remedy thereof shall be paid by the
Tenant.
(c) During the six months prior to the expiration of the term of this
Lease, Landlord may exhibit the premises to prospective tenants at all
reasonable hours.
(d) If, during the last month of the Term, Tenant shall have removed all
or substantially all of Tenant's property from the premises, Landlord may
immediately enter and alter, renovate and decorate the premises or any part
thereof without affecting this Lease and without liability to Tenant for an
abatement of rent or other compensation.
(e) Landlord may permit access to the premises without incurring liability
to the Tenant, whether or not the Tenant shall be present, upon demand of any
receiver, trustee, assignee for the benefit of creditors, sheriff, marshal,
court officer or government official entitled to, or reasonably purporting to be
entitled to such access for the purpose of taking possession of or removing
Tenant's property or for any other lawful purpose. This provision and any action
by the Landlord hereunder shall not be deemed a recognition by Landlord that the
person or official making such demand has any right or interest in or to this
Lease or on or to the premises.
(f) Landlord shall have the right to change the arrangement and location
of entrances or passageways, doors and doorways, and corridors, elevators,
stairs, toilets or other public parts of the building, and after reasonable
notice, to change the name, number or designation by which the building
is commonly known. Nothing herein contained, however, shall be deemed or
construed to impose upon Landlord any obligation, responsibility or liability
whatsoever for the care, supervision or repair of the building or any part
thereof, unless herein otherwise provided.
8
<PAGE> 10
(g) In the event of a refusal by the Tenant to permit an entry upon the
premises as in this paragraph provided, the Landlord and the Landlord's agents
may forcibly enter the same nevertheless without incurring any liability by
reason thereof.
PLATE
GLASS
20. The Tenant shall repair, at its own expense, all damage to or
destruction of any plate or window glass in the demised premises, and shall
maintain adequate plate glass insurance at its own expense for the benefit of
the Landlord. If the Tenant fails to repair the damage to any plate or window
glass in the demised premises, or fails or refuses to maintain adequate plate
glass insurance for the benefit of the Landlord, then the Landlord may repair
said damage or destruction or may insure the plate glass and charge the cost of
such repair or the cost of the premium for the plate glass insurance to the
Tenant and the amount thereof shall be deemed to be additional rent.
VAULTS
21. No vaults, vault space or space not within the property line of the
building is leased hereunder, anything contained in or indicated on any sketch,
blueprint or plan, or anything elsewhere in this Lease to the contrary
notwithstanding, Landlord makes no representation as to the location of the
property line of the building. All vaults and vault space and all space not
within property line of the building, which Tenant may be permitted to use and
occupy, is to be used and occupied under a revocable license, and if any such
license be revoked or, if the amount of such space be curtailed by any federal,
state or municipal authority, Landlord shall not be subject to any liability
nor shall Tenant be entitled to any compensation or diminution or abatement of
rent nor shall such revocation or curtailment be deemed a constructive or
actual, total or partial eviction.
CERTIFICATE
OF
OCCUPANCY
22. Tenant will not at any time use or occupy the premises in violation of
the certificate of occupancy issued for the building, and in the event that any
department of the City or State of New York shall hereafter at any time contend
that the premises are used for a purpose which is a violation of such
certificate of occupancy, in that event Tenant shall, upon 5 days written notice
from Landlord, immediately discontinue such use of said premises. Failure by
Tenant to discontinue such use after such notice shall be considered a default
in the fulfillment of a covenant of this Lease and Landlord shall have the right
to terminate this Lease immediately and in addition thereto shall have the right
to exercise any and all rights and privileges and remedies given to Landlord
pursuant to the provisions of paragraph 25 hereof. The statement in this Lease
of the nature of the business to the conducted by Tenant in the demised premises
shall not be deemed or construed to constitute a representation or guaranty by
Landlord that such business is lawful or permissible under the certificate of
occupancy issued for the building or otherwise permitted by law.
SPRINKLERS
23. If the "sprinkler system" or any of its parts or appliances shall he
damaged or not in proper working order by reason of any act or omission of
Tenant, Tenant shall forthwith at its own expense restore the same to good
working condition; and if the New York Board of Fire Underwriters or the New
York Fire Insurance Exchange or any bureau, department or official of the state
or city government, require or recommend that any changes, modifications,
alterations or additional sprinkler heads or other equipment, be made or
supplied by reason of Tenant's business, or the location of partitions, trade
fixtures, or other contents, of the demised premises, or if any such changes,
modifications, alterations, additional sprinkler heads or other equipment,
become necessary to prevent the imposition of a penalty or charge against the
full allowance for a sprinkler system in the fire insurance rate as fixed by
said Exchange, or by any fire insurance company. Tenant shall, at its expense,
promptly make and supply such changes, modifications, alterations, additional
sprinkler heads or other equipment.
9
<PAGE> 11
BANKRUPTCY
(a) PRIOR
TO TERM
24. (a) If at any time prior to the date herein fixed as the commencement
of the term of this Lease there shall be filed by or against Tenant in any court
pursuant to any statute either of the United States or of any State a petition
in bankruptcy or insolvency, or for reorganization, or for the appointment of a
receiver or trustee of all or a portion of Tenant's property, or if Tenant makes
an assignment for the benefit of creditors, or petitions for or enters into an
arrangement, this Lease shall at the option of the Landlord, be cancelled and
terminated in which event neither Tenant nor any person claiming through or
under Tenant by virtue of any statute or order of any court shall be entitled to
possession of the demised premises and Landlord, in addition to the other rights
and remedies given by (c) hereof or by virtue of any other provision herein or
elsewhere in this Lease contained, or by virtue of any statute or rule of law,
may retain as liquidated damages any rent, security, deposit or monies received
by it from Tenant or others in behalf of Tenant.
(b) DURING
TERM
(b) If at the date fixed as the commencement of the term of this Lease or
if at any time during the term hereof, there shall be filed by or against Tenant
in any court pursuant to any statute either of the United States or of any State
a petition in bankruptcy or insolvency or for reorganization or for the
appointment of a receiver or trustee of all or a portion of Tenant's property,
and within thirty (30) days thereafter Tenant fails to secure a discharge
thereof, or if Tenant makes an assignment for the benefit of creditors or
petitions for or enters into an arrangement, this Lease, at the option of
Landlord, exercised within a reasonable time after notice of the happening of
any one or more of such events, may be cancelled and terminated in which event
neither Tenant nor any person claiming through or under Tenant by virtue of any
statute or order of any court shall be entitled to possession or to remain in
possession of the premises but shall forthwith quit and surrender the premises
and Landlord, in addition to the other rights and remedies Landlord has by
virtue of any other provision herein or elsewhere in this Lease contained, or by
virtue of any statute or rule of law, may retain as liquidated damages, any
rent, security, deposit or monies received from Tenant or others in behalf of
Tenant.
MEASURE
OF
DAMAGES
(c) In the event of the termination of this Lease pursuant to (a) or (b)
hereof, Landlord shall forthwith, notwithstanding any other provisions of this
lease to the contrary, be entitled to recover from Tenant as and for liquidated
damages an amount equal to the difference between the rent reserved hereunder
for the unexpired portion of the term demised and the then fair and reasonable
rental value of the demised premises for the same period. In the computation of
such damages the difference between any installment of rent becoming due
hereunder after the date of termination and the fair and reasonable rental value
of the demised premises for the period for which such installment was payable
shall be discounted to the date of termination at the rate of two per cent (2%)
per annum. If such premises or any part thereof be re-let by the Landlord for
the unexpired term of this Lease, or any part thereof, before presentation of
proof of such liquidated damages to any court, commission or tribunal, the
amount of rent reserved upon such reletting shall be deemed prima facie to be
the fair and reasonable rental value for the part or the whole of the premises
so re-let during the term of the reletting. Nothing herein contained shall limit
or prejudice the right of the Landlord to claim and obtain as liquidated damages
by reason of such termination, an amount equal to the maximum allowed by any
statute or rule of law in effect at such time and governing the proceedings in
which such damages are to be proved, whether or not such amount be greater,
equal to or less than the amount of the difference referred to above.
25. (a) If Tenant shall make default in fulfilling any of the covenants of
this Lease other than the covenants for the payment of rent or additional rent
and such default shall continue to exist for 15 days after notice thereof by
Landlord to Tenant, or if the premises become vacant or deserted, Landlord may
give Tenant three days notice of intention to end the term of this Lease and
thereupon, at the expiration of said three days the term under this Lease shall
expire as fully and completely as if that day were the day herein definitely
fixed for the expiration of the term, and Tenant will then quit and surrender
the premises to Landlord but Tenant shall remain liable as hereinafter provided.
10
<PAGE> 12
(b) If the second notice provided for in (a) hereof shall have been given
and the term shall expire as aforesaid; or (1) if Tenant shall make default in
the payment of the rent reserved herein or any item of additional rent as and
when such rent or additional rent becomes due and payable or any part of either
or in making any other payment herein provided; or (2) if any execution or
attachment shall be issued against Tenant or any of Tenant's property whereupon
the premises shall be taken or occupied or attempted to be taken or occupied by
someone other than Tenant; or (3) if Tenant shall be in default with respect to
any other lease between Landlord and Tenant; or (4) if Tenant shall fail to move
into or take possession of the premises within fifteen (15) days after the
commencement of the term of this Lease, then, and in any of such events Landlord
may without notice, re-enter the premises either by force or otherwise, and
dispossess Tenant or the legal representatives of Tenant or other occupant of
the premises, by summary proceeding or otherwise, and remove their effects and
hold the premises as if this Lease had not been made and Tenant hereby waives
any notice of intention to re-enter or to institute legal proceedings to that
end. If Tenant shall be in default hereunder prior to the date fixed as the
commencement of any renewal or extension of this Lease then any renewal,
extension or other lease shall, at Landlord's sole option, be cancelled and
terminated.
REMEDIES
OF
LANDLORD
(c) In case of any such default, re-entry, expiration or dispossess by
summary proceedings or otherwise, as provided above: (1) the rent shall become
due thereupon and be paid up to the time thereof together with such expenses as
Landlord may incur for legal expenses, attorneys' fees, brokerage, and putting
the premises in good order and in preparing the same for re-rental; (2) Landlord
may re-let the premises or any part or parts thereof, either in the name of
Landlord or otherwise, for a term or terms which may at Landlord's option be
less than or exceed the period which would otherwise have constituted the
balance of the term of this Lease and may grant concessions or free rent; (3)
Tenant or the legal representatives of Tenant shall also pay Landlord as
liquidated damages for the failure of Tenant to observe and perform said
Tenant's covenants herein contained, any deficiency between hereby reserved and
convenanted to be paid and the net amount, if any, of the rents collected on
account of the leasing of the premises for each month of the period which would
otherwise have constituted the balance of the term of this Lease. In computing
such liquidated damages there shall be added to the said deficiency such
expenses as Landlord may incur in connection with re-letting, such as legal
expenses, attorneys' fees, brokerage and for keeping the premises in good order
or for preparing the same for re-letting. Any such liquidated damages shall be
paid in monthly installments by Tenant on the rent day specified in this Lease
and any suit brought to collect the amount of the deficiency for any month shall
not prejudice in any way the rights of Landlord to collect the deficiency for
any subsequent month by a similar proceeding. Landlord, at its option, may make
such alterations and decorations in the premises as Landlord in its sole
judgment considers advisable and necessary for the purpose of re-letting the
premises and the making of such alterations and decorations shall not operate or
be construed to release Tenant from liability hereunder as aforesaid. Landlord
shall in no event be liable in any way whatsoever for failure to relet the
premises, or in the event that the premises are re-let, for failure to collect
the rent thereof under such re-letting. In the event of a breach or threatened
breach by Tenant of any of the covenants or provisions hereof, Landlord shall
have the right of injunction and the right to invoke any remedy allowed at law
or in equity as if re-entry, summary proceedings and other remedies were not
herein provided for, The mention in this Lease of any particular remedy, shall
not preclude Landlord from using any other remedy, In law or in equity.
WAIVER
OF
REDEMPTION
(d) Tenant for itself and on behalf of any and all persons or parties
claiming through or under the Tenant, including creditors hereby expressly
waives any and all rights of redemption granted by or under any present or
future laws in the event of Tenant being evicted or dispossessed for any cause,
or in the event of Landlord obtaining possession of the demised premises by
reason of the violation by Tenant of any of the covenants and conditions of this
Lease or otherwise.
FEES
AND
EXPENSES
26. If Tenant shall default in the performance of any covenant, term or
condition on Tenant's part to be performed as in this Lease contained, Landlord
may immediately, or at any time thereafter, without notice, perform the same for
the account of Tenant. If Landlord at any time is compelled to pay or elects to
pay any sum of money, or do any act which will require the payment of any sum of
money, by reason of the failure of Tenant to comply with any provision hereof,
or if Landlord is compelled to or does incur any expense including reasonable
attorneys' fees, instituting, prosecuting or defending any action or proceeding,
whether instituted by Landlord
11
<PAGE> 13
INITIAL
/s/ [ILLEGIBLE]
HERE
or Tenant, by reason of any cause whatsoever, including a default of Tenant
hereunder, the sum or sums so paid by Landlord with all interest, costs and
damages, shall be deemed to be additional rent hereunder and shall be due from
Tenant to Landlord on the first day of the month following the incurring of such
respective expenses or at the Landlord's option on the first day of any
subsequent month. Notwithstanding anything to the contrary contained herein,
Landlord agrees to pay Tenant's reasonable counsel fees in the event Landlord
unsuccessfully prosecutes any legal action against Tenant.
REPRESENTATIONS BY
LANDLORD
27. Landlord or Landlords agents have made no representations or promises
with respect to the said building or demised premises except as herein expressly
set forth. The taking possession of the premises by Tenant shall be conclusive
evidence, as against Tenant, that the demised premises and the building were in
good and satisfactory condition at the time such possession was taken. Tenant
has inspected the building and the demised premises and is thoroughly acquainted
with their condition and agrees to take same "as is."
END OF
TERM
28. Upon the expiration or other termination of the term hereof, Tenant
shall quit and surrender to Landlord the premises, broom clean, in good order
and condition, ordinary wear excepted. Tenant shall remove all property of
Tenant as directed by Landlord. If the last day of the term of this Lease or any
renewal thereof falls on Sunday or a legal holiday this Lease shall expire at 12
noon on the business day immediately preceeding. Tenants obligation to observe
or perform this covenant shall survive the expiration or other termination of
the term of this Lease. Any personal property of the Tenant or other occupant
which shall remain in the premises or building after the expiration or other
termination of the term shall be deemed to have been abandoned by the Tenant or
other occupant and either may be retained by the Landlord as its property or may
be disposed of in such manner as the Landlord may see fit. If such personal
property or any part thereof shall be sold, the Landlord may receive and retain
the proceeds of such sale and apply the same, at its option, against the
expenses of the sale, the cost of moving and storage, any arrears of rent or
additional rent payable hereunder and any damages to which the Landlord may be
entitled under paragraph 25 hereof or pursuant to law. In the event Landlord
shall notify Tenant not later than ninety (90) days after the expiration or
other termination of this Lease, Tenant shall restore the premises to the
condition existing immediately prior to the commencement of this Lease. Such
restoration shall include demolition of walls and other structures, construction
and erection of walls, ceilings and other structures, ceiling patching,
duct-work, sprinkler-head changes, electric work and such other alterations,
decorations or repairs as may be necessary to restore the premises to the
condition existing immediately prior to the commencement of this Lease.
Notwithstanding anything to the contrary contained herein, any alterations,
changes, decorations, additions or improvements made by Tenant with Landlord's
consent may remain in the premises upon the expiration or other termination of
this Lease.
INITIAL
/s/ [ILLEGIBLE]
HERE
[ILLEGIBLE]
ENJOYMENT
29. Landlord covenants and agrees with Tenant that upon Tenant paying the
rent and additional rent and performing all the covenants and conditions
aforesaid, on Tenant's part to be observed and performed, Tenant shall and may
peaceably and quietly have, hold and enjoy the demised premises for the term
aforesaid, subject, however, to the terms of this Lease, the ground and
underlying leases, if any, and mortgages herein before mentioned, except that
the provisions hereof shall only apply so long as Landlord or any successor to
Landlord's interest is in possession and is collecting rent from Tenant but not
thereafter.
[ILLEGIBLE]
POSSESSION
30, If the Landlord shall be unable to give possession of the demised
premises on the date of the commencement of the term of this Lease, such failure
to give possession shall not in any way affect the obligations of the Tenant
except that the rent and additional rent, reserved and covenanted to be paid
hereunder, shall not commence until possession of the demised premises are made
available
12
<PAGE> 14
for occupancy by the Tenant, nor shall such failure to give or afford possession
be construed In any way to extend the term of this Lease. No liability whatever
shall arise or accrue against the Landlord by reason of its failure to deliver
possession and the Tenant hereby releases and discharges the Landlord from any
claim for damage, loss or Injury of every kind whatever, for such period of time
as Landlord may be unable to give or deliver possession of the demised premises.
Rider to be added at the end of paragraph 30 hereof:
"Permission is hereby given to Tenant to enter into the demised premises prior
to the commencement date of this Leases, or if permission is given to occupy
premises in the building other than the demised premises hereunder, Landlord and
Tenant covenant and agree that such occupancy shall be deemed to be under all of
the terms, covenants, conditions and provisions of this Lease, except as to the
covenant to pay rent and additional rent. In either case, rent and additional
rent shall commence on the date specified in this Lease."
INITIAL
NO /s/ [ILLEGIBLE]
WAIVER HERE
32. The failure of Landlord to seek redress for violation of, or to insist
upon the strict performance of any covenant or condition of this Lease, or any
of the Rules and Regulations set forth on the inside cover of this Lease or
hereafter adopted by Landlord, shall not prevent a subsequent act, which would
have originally constituted a violation, from having all the force and effect of
an original violation. The receipt by Landlord of rent, additional rent or other
charges, with or without knowledge of the breach of any covenant or condition of
this Lease or the Rules and Regulations, shall not be deemed a waiver of such
breach. The failure of Landlord to enforce any of the covenants, conditions or
Rules and Regulations against Tenant or any other tenant in the building shall
not be deemed a waiver of any such covenants, conditions or Rules and
Regulations. No provision of this Lease or the Rules and Regulations shall be
deemed to have been waived by Landlord, unless such waiver be in writing signed
by Landlord. No payment by Tenant or receipt by Landlord of any amount, whether
designated by Tenant as rent, past rent, additional rent, tax or operating
expense escalation charges under paragraph 33 or otherwise, shall be binding
upon Landlord and Landlord may apply any such amount, however designated by
Tenant, to rent, past rent, additional rent, tax or operating expense escalation
charges under paragraph 33 or otherwise, as Landlord in its sole discretion may
determine; nor shall any endorsement or statement on any check or any letter or
direction by Tenant or someone on its behalf, whether or not accompanying any
check or payment of any such items or charges, be deemed an accord and
satisfaction or binding upon Landlord, and Landlord may accept such check or
payment without prejudice to Landlord's right to recover the balance of any such
items or charges or pursue any other remedy provided in this Lease. The
acceptance of payment of any such items or charges by Landlord from any party
other than Tenant, or if such payment is made on behalf of Tenant by any party
other than Tenant, shall not constitute a waiver of the provisions of paragraph
#3 respecting the assignment of the Lease or subletting of the premises, if the
term "Tenant" as used herein refers to more than one person, party, corporation,
company or other entity. Landlord may treat any breach of this Lease by one of
such parties as a breach by all.
LEASE
YEAR AND
TAX YEAR
33. (a) For the purposes of this paragraph, the term "tax year" shall mean
each consecutive 12-month period commencing July 1st, all or any part of which
falls within the term of this Lease; the term "lease year'shall mean each
calendar year, all or any part of which falls within the term of this Lease. If
the first or the final tax year or lease year shall contain less than 12 months,
the additional rent payable under subdivisions (b) and (c) of this paragraph
with respect to such tax years or (d) with respect to such lease years shall be
pro-rated by multiplying such amount by a fraction which has as a numerator the
number of months in such tax or lease year and a denominator of 12. In the event
Landlord has not computed the operating expenses for the next-to-last or last
lease year prior to the expiration date of this Lease, the additional rent
payable under subdivision (d) of this paragraph for such next-to-last or last
lease year shall be based upon either the operating expenses for the last full
lease year where such figures are available, or Landlord, at its option, shall
have the right to estimate the operating expenses for such next-to-last or last
lease year, and the additional rent due under subdivision (d) of this paragraph
for such next-to-last or last lease year shall be due and payable by Tenant to
Landlord sixty (60) days prior to the expiration or earlier termination of this
Lease.
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<PAGE> 15
REAL
ESTATE
TAXES
(b) In the event that the real estate taxes payable with respect to the
building and the land on which it is located, for any tax year in which this
Lease shall be in effect (inclusive of any certiorari fees paid or to be paid
with respect thereto) shall be greater than the amount of such taxes due and
payable for the tax year next preceding the term commencement date (sometimes
hereinafter referred to as "base tax year") whether by reason of an increase in
either the tax rate or the assessed valuation, or by reason of the levy,
assessment or imposition of any tax on real estate as such, not now levied,
assessed or imposed, or for any other reason, Tenant shall pay to Landlord, when
billed, after the date on which the real estate taxes for such tax year shall be
fixed and determined, as additional rent for the lease year in which such date
occurs, an amount equal to 1.077% of the difference between the amount of such
tax or installment and the corresponding tax or installment paid for the base
tax year. The base tax year, as referred to in this subparagraph,
notwithstanding anything to the contrary otherwise contained within, shall, for
the purposes hereof, be deemed to mean the tax year 1993/94.
ASSESSMENTS
(c) Tenant shall also pay to Landlord, within thirty (30) days after the
same shall be payable by Landlord and as additional rent for the lease year in
which the same shall be so payable, an amount equal to 1.077% of any assessment
or installment thereof for public betterments or improvements which may be
levied upon the said land and building.
OPERATING
EXPENSES
(d) In the event that the operating expenses (as hereinafter defined)
incurred by Landlord during any lease year shall be greater than the operating
expenses incurred by Landlord during the calendar year next preceding the term
commencement date (sometimes hereinafter referred to as "base expense year'),
Tenant shall pay to Landlord, as additional rent for such lease year, when
billed, an amount equal to 1.077% of such increase. For the purposes of this
subparagraph, "operating expenses" shall mean any or all of the following,
either paid or incurred by Landlord with respect to the building of which the
demised premises form a part: salaries, wages, medical, surgical and general
welfare benefits (including group life insurance), pension plan contributions,
health, disability and workmen's compensation insurance and payroll taxes of
employees of Landlord engaged in the operation and maintenance of the building
of which the demised premises are a part ("labor costs"), electric consumption
and demand charges (except that only 50% of the increase in the rate schedule of
rates (which Landlord and Tenant attribute to the operation of Landlord's
electric plant, machinery or equipment and not Tenant's use of electricity in
its premises) in any lease year, as determined by an independent electrical
engineer or firm, selected by Landlord, with respect to the entire building,
shall be included herein if Tenant has had a rent increase under paragraph 17(a)
in any lease year, and the base expense year electric charge shall also be
reduced by 50%), steam, utility taxes, casualty and liability, fire, boiler or
other insurance, repairs (structural and non-structural) and maintenance,
alterations, changes, additions and improvements, whether made by reason of
compliance with laws, regulations and requirements of any public or
administrative authorities or insurance companies or otherwise made (except that
the cost for structural repairs, alterations, changes and additions, at
Landlord's sole option, shall be charged over the balance of Tenant's lease term
or lesser period of time), building cleaning supplies, uniforms and dry
cleaning, window cleaning, management fees (whether paid or not, if Landlord or
a wholly-owned entity manages the building) at the rate charged by independent
agents for the management of first-class office buildings in the area, service
contracts with independent contractors, telephone, telegraph, stationery,
advertising, legal fees incurred in connection with certiorari proceedings (if
not previously charged under paragraph 33(b) above) and all other expenses paid
or incurred in connection with the operation of the building and the demised
premises. Landlord and Tenant acknowledge and agree that the Repairs and
Maintenance heading, as indicated in the Summary Schedule, for the base expense
year 1994, will be reduced by a total of $500,000.00 (rounded off), to reflect
Landlord's non-recurring 1994 costs in that category, which Landlord and Tenant
agree shall constitute the total of Landlord's non-recurring expenditures for
1994 and shall be deemed final and conclusive for the purpose hereof. The
calendar year next preceding the term commencement date, or base expense year as
referred to in this subparagraph, notwithstanding anything to the contrary
otherwise contained herein shall, for the purposes hereof, be deemed to mean the
calendar year 1994.
(e) Landlord shall have the further right, at its option, to bill Tenant
monthly, in any lease year during the term of this Lease, for 1/12 of its share
of the difference between the operating expenses for the Tenant's base expense
year and the previous calendar year's operating expenses, plus the then current
calender year's estimated expense increase which shall not be less than the
difference between the preceding two calendar years' operating expenses. At the
end of each such lease year, Landlord shall bill the Tenant for the difference
14
<PAGE> 16
between what Tenant paid during such lease year and the amount computed to be
due for such lease year, which shall be paid when billed, or conversely, if
Tenant's payments exeeded the amount due for such lease year, Landlord shall
then refund such difference to Tenant. Landlord shall furnish Tenant with a
brief Summary Schedule in each lease year, which shall be deemed final and
conclusive if not contested by Tenant within 30 days after delivery thereof to
Tenant.
WAIVER OF
TRIAL BY JURY
34. It is mutually agreed by and between Landlord and Tenant that the
respective parties hereto shall and they hereby do waive trial by jury in any
action, proceeding or counterclaim brought by either of the parties hereto
against the other on any matters whatsoever arising out of or in any way
connected with this Lease, any extension or renewal thereof or the Tenant's use
or occupancy of said premises.
SHIPPING
RESTRICTION
35. Tenant shall not ship or receive goods, merchandise or inventory other
than for sample purposes, or use the public corridors of the building to ship or
receive same and Tenant shall not at anytime use any hand trucks or other
wheeled vehicles in the public or other corridors of the building.
NOTICES,
BILLS
AND
STATEMENTS
36. Except as otherwise in this Lease provided, any notice, bill or
statement by either party to the other may be given or sent and shall be deemed
to have been duly given or sent if either delivered personally or mailed in a
post-paid envelope, addressed to the Landlord at 1407 Broadway, New York, N.Y.,
and to the Tenant at the premises (or at the Tenant's present address as above
set forth, if mailed prior to the Tenants occupancy of the premises), or if any
address for notices shall have been truly changed as hereinafter provided, if
mailed to the party at such changed address. Either party may at any time change
the address for notices, bills or statement by delivering or mailing, as
aforesaid, a notice stating the change and setting forth the changed address.
Should the term "Tenant", as used in this Lease, refer to more than one
person, party, corporation, company or other entity, any notice, bill or
statement given or sent as aforesaid to any one of such entitles shall be deemed
to have been duly given or sent to the Tenant.
SECURITY
37. The Tenant has deposited with the Landlord the sum of $29,133.33 as
security for the performance by the Tenant of the terms of this Lease. The
Landlord may use, apply, or retain the whole or any part of the security so
deposited to the extent required for the payment of any rent and additional rent
or other sum as to which the Tenant is in default in respect of any of the terms
of this Lease, Including, but not limited to, any damages or deficiency in the
reletting of the demised premises, whether such damages or deficiency accrued
before or after summary proceedings or other reentry by the Landlord, including,
but not limited to, leasing commissions incurred in connection with the leasing
of the premises and legal or other which the Landlord may incur. In the event
that the Tenant shall comply with all of the terms of this Lease, the security
shall be returned to the Tenant after the date fixed as the end of the Lease and
after delivery of possession of the demised premises to the Landlord. In the
event of a sale or lease of the premises of which the demised premises forms a
part, the Landlord shall have the right to transfer the security to the vendee
or lessee and the Landlord shall thereupon be released from all liability for
the return of such security and the Tenant shall look solely to the new landlord
for the return of such security. The Tenant shall not assign or encumber the
money deposited as security, and neither the Landlord nor its successors or
assigns shall be bound by any such assignment or encumbrance.
Security shall be placed in an interest-bearing account.
INITIAL
/s/ [ILLEGIBLE]
HERE
38. The marginal notes are inserted only as a matter of convenience and
for reference and in no way define, limit or describe the scope or intent of
this Lease nor in any way affect this Lease.
15
<PAGE> 17
DEFINITION
39. (a) The term "Landlord" as used in this Lease means only the owner or
the mortgagee in possession for the time being of the land and building (or the
owner of a lease of the building), so that in the event of any sale or sales of
said land and building or of said lease, or in the event of a lease of said
building, or other disposition of said land and building or said leasehold, the
said Landlord shall be and hereby is entirely freed and relieved of all
covenants and obligations of Landlord hereunder, and it shall be deemed and
construed without further agreement between the parties or their successors in
interest, or between the parties and the purchaser, at any such sale, or the
said lessee of the building, that the purchaser or the lessee of the building
has assumed and agreed to carry out any and all covenants and obligations of
Landlord hereunder
(b) The term "business days'shall be construed to mean Monday to Friday
inclusive, excluding holidays.
(c) The words "re-enter" and "re-entry" as used in this Lease are not
restricted to their technical legal meaning.
(d) The term "gross square feet" if and when used herein, shall be deemed
to mean and include all the space taken up by and for stairways, stairwells,
lobbies, elevator shafts, lavatories, washrooms, utilities, air-conditioning and
mechanical equipment in the building, whether or not all or any part of such
space or equipment is located in the demised premises, the determination of
which as computed by Landlord, shall be final and conclusive.
(e) The term "additional rent" as used herein, shall be deemed to mean any
and all costs, charges, expenses, adjustments of rent and electricity which
Tenant assumes, agrees or is obligated to pay to Landlord or others pursuant to
the provisions of this Lease or any other agreement, and in the event of the
non-payment thereof, Landlord shall have all of the rights and remedies with
respect thereto as provided for herein or by applicable law in case of the
non-payment of annual rent.
40. The covenants, conditions and agreements contained in this Lease shall
bind and inure to the benefit of Landlord and Tenant and their respective heirs,
distributees, executors, administrators, successors, and, except as otherwise
provided in this Lease, their assigns.
41. This Lease contains the entire agreement between the parties and may
not be modified or amended except by an agreement in writing signed by the
parties hereto.
42. The parties herein agree that NO BROKERS brought about or had any
connection with the procuring, execution and delivery of this Lease.
(see paragraph 49)
43. The riders annexed hereto as paragraphs 44 to are incorporated
herein and made a part of this Lease.
16
<PAGE> 18
ADDITIONAL PARAGRAPHS attached to and forming a part of Lease dated December 16,
1993, between GETTINGER ASSOCIATES and MISS ERIKA INC.
44. (a) In the event Tenant desires to assign the Lease or sublet all or a
part of the demised premises, Tenant shall first notify Landlord to such effect,
in writing, (hereinafter referred to as "Tenant's Notice") and, if a sublet,
shall specify and indicate such part or parts of the demised premises and, if an
assignment or sublet, the name of the assignee or sublessee, the annual rental,
terms and conditions, including the purchase price if furniture, furnishings or
fixtures are to be sold and conveyed, the commencement date (which shall not be
less than 60 or more than 90 days from the date of the Tenant's Notice) and the
termination date. Landlord or Landlord's nominee shall have the right and
option, to be exercised by giving written notice to Tenant (hereinafter referred
to as "Landlord's Notice") within 60 days after receipt of Tenant's Notice, to
recapture the demised premises or such part thereof as may be described in
Tenant's Notice and Landlord's Notice shall, if given, cancel and terminate the
Lease or Landlord shall assume the obligations thereof with respect to such part
or parts of the demised premises, as of the commencement date specified in
Tenant's Notice. If a part of the demised premises is recaptured, in the manner
as provided herein, the annual rental, additional rent and other charges shall
be apportioned and adjusted in the same ratio that the part of the demised
premises to be occupied by the Tenant (non-recaptured premises) shall bear to
the entire demised premises. The Lease, as modified and amended by the
provisions hereof shall continue in full force and effect.
(b) In the event Landlord shall not exercise its right and option, as
provided in paragraph (a) above, Landlord shall not unreasonably withhold its
consent to an assignment of the Lease or to a subletting of the demised
premises, as set forth in Tenant's Notice, provided that such subletting is for
the entire demised premises to one subtenant only and provided further that such
assignment or subletting complies with the following conditions:
(i) The assignee or sublessee shall be of good reputation and
financial responsibility.
(ii) The assignee shall execute Landlord's form of assignment and
assume all of the terms, covenants and conditions of this Lease and shall agree
not to further assign the Lease or the sublessee shall execute Landlord's form
of Lease and assume all of the terms, covenants and conditions of this Lease.
(iii) Such assignment or subletting shall not release the Tenant
from the due, prompt and punctual performance of all of the terms, covenants and
conditions contained in this lease on its part to be performed and from the
payment of the rents, additional rents and other charges reserved In the Lease.
(iv) The consent of the Landlord to such assigning or subletting
shall not constitute a waiver of the provisions of paragraph 3 hereof and no
further assigning or subletting shall be made by the Tenant, assignee or
subtenant without the Landlord's prior consent in writing as provided In
paragraph 3 hereof, notwithstanding anything to the contrary contained In
paragraph (b) hereof.
(v) In the event Landlord permits Tenant to assign the Lease or
sublet the entire demised premises to one subtenant only or does not respond to
Tenant's Notice (provided that same shall be an assignment of the Lease or
subletting of the entire demised premises to one tenant only) and such
assignment or subletting does not commence during a period which shall be not
less than 60 nor more than 90 days from the date of Tenant's Notice, then
Landlord's consent shall be deemed withdrawn and Tenant shall comply anew with
the provisions of subdivision (a).
(vi) Tenant will not sublet the demised premises or assign the Lease
to any person, firm, subsidiary, affiliate, or group who, or which, at the time
of the proposed subletting or assignment occupies any space in the building.
(vii) Tenant agrees to pay Landlord, as additional rent, 50% of any
rent and other charges received by it in excess of what it pays under this
Lease, including the rental of and sales proceeds of any furniture, furnishings
or equipment, after deducting its reasonable costs and expenses and agrees not
to sublease for any lesser amount. The rent, additional rent and other charges
shall be paid directly to Landlord, for the account of Tenant, and the
acceptance of same shall not relieve Tenant of Its obligations hereunder nor
constitute an attornment by Landlord.
TO BE INITIALLED BY THE LANDLORD AND TENANT
- --------------------------------------------------------------------------------
GETTINGER ASSOCIATES
INITIAL
(LESSOR) (LESSEE)
(LANDLORD) /s/ [ILLEGIBLE] (TENANT)
HERE
/s/ [ILLEGIBLE]
<PAGE> 19
ADDITIONAL PARAGRAPHS attached to and forming a part of Lease dated December 16,
1993, between GETTINGER ASSOCIATES and MISS ERIKA INC.
45. Notwithstanding anything to the contrary contained herein, Tenant shall pay
no annual rental from February 1, 1994 through May 31, 1994, and Tenant shall
pay the amount of $9,466.65 for June 1994.
46. Landlord agrees to demolish that part of the demised premises as indicated
by the red hash marks on the floor plan annexed hereto promptly after Landlord's
approval of Tenant's plans.
47. Notwithstanding anything to the contrary contained in paragraph 5 of this
Lease, Landlord and Tenant agree that the last sentence of paragraph 5 hereof
shall be deleted and replaced by the following:
"(a) Asbestos encapsulation, removal or other treatment respecting
asbestos in the confines of the demised premises, as may be required by law,
shall, at all times, be at Landlord's cost and expense, and Landlord shall,
within five (5) days following Tenant's notice, retain and hire the contractor
or contractors to promptly render or perform such work, except as set forth in
(b) below.
(b) Tenant agrees not to make any alterations, changes, repairs,
decorations, additions or improvements, structural or non-structural, in and to
any mechanical, electrical, air conditioning, heating or plumbing systems, which
would require the dismantling or removal of the heating or air conditioning
ducts around the perimeter of the demised premises, known by the trade name
"Weathermaster", which shall at all times remain and continue to remain in the
condition as rented to Tenant, and Landlord shall have the responsibility for
maintaining same, except as same may be damaged by Tenant."
48. The following is hereby added at the end of paragraph 13 hereof:
Landlord and Tenant hereby release the other from any and all liability or
responsibility (to the other or anyone claiming through or under them by way of
subrogation or otherwise) under fire and extended coverage or supplementary
contract casualties, if such fire or other casualty shall have been caused by
the fault or negligence of the other party, or anyone for whom such party may be
responsible; provided, however, that this release shall be applicable and in
force and effect only with respect to loss or damage occurring during such time
as the releasor's policies shall contain a clause or endorsement to the effect
that any such release shall not adversely affect or impair said policies or
prejudice the right of the releasor to recover thereunder. Each of Landlord
and Tenant agrees that its policies will include such a clause or endorsement so
long as same shall be obtainable without extra cost, or if such cost shall be
charged therefor, so long as the other party pays such extra cost. If extra
cost shall be chargeable therefor, each party shall notify the other thereof and
of the amount of the extra cost, and the other party shall be obligated to pay
the extra cost, unless, within ten (10) days after such notice, it elects not to
be obligated so to do by written notice to the original party. If such clause or
endorsement is not available, or if either party shall not desire the coverage
at extra cost to it, then the provisions of this paragraph
TO BE INITIALLED BY THE LANDLORD AND TENANT
- --------------------------------------------------------------------------------
GETTINGER ASSOCIATES
INITIAL
(LESSOR) (LESSEE)
(LANDLORD) /s/ [ILLEGIBLE] (TENANT)
HERE
/s/ [ILLEGIBLE]
<PAGE> 20
ADDITIONAL PARAGRAPHS attached to and forming a part of Lease dated December 16,
1993, between GETTINGER ASSOCIATES and MISS ERIKA INC.
shall not apply to the policy or policies in question. Landlord shall use its
best efforts to obtain a waiver of subrogation in its insurance policies in
favor of Tenant.
49. The following is hereby added at the end of paragraph 42 hereof:
Each party agrees to defend, indemnify and hold the other harmless from and
against any claims or demands for brokerage commissions and finder's fees
founded upon a claim that the substance of the aforesaid statement of the
indemnifying party is untrue, together with any and all losses, damages, costs
and expenses (including reasonable attorney's fees) relating to such claims or
arising therefrom or incurred by the indemnified party in connection with the
enforcement of this indemnification provision.
TO BE INITIALLED BY THE LANDLORD AND TENANT
- --------------------------------------------------------------------------------
GETTINGER ASSOCIATES
INITIAL
(LESSOR) (LESSEE)
(LANDLORD) /s/ [ILLEGIBLE] (TENANT)
HERE
/s/ [ILLEGIBLE]
<PAGE> 21
IN WITNESS WHEREOF, Landlord and Tenant have respectively signed and sealed this
lease as of the day and year first above written.
GETTINGER ASSOCIATES "Landlord"
By: /s/ [ILLEGIBLE]
- ------------------------------- ----------------------------
GENERAL PARTNER
MISS ERIKA INC.
- ------------------------------- ----------------------------
WITNESS FOR TENANT: Tenant
By: /s/ [ILLEGIBLE]
---------------------------(L.S.)
---------------------------(L.S.)
ACKNOWLEDGEMENTS
PARTNERSHIP LANDLORD
STATE OF NEW YORK,
County of New York, }ss.:
City of New York
On this day of , 19 , before me personally came to me
known and known to me to be a member of the firm GEFFINGER ASSOCIATES and the
person described in and who executed the foregoing instrument in the name of
said firm, and he duly acknowledged to me that he executed the same for and as
the act and deed of said firm.
- --------------------------------------------------------------------------------
CO-PARTNERSHIP TENANT
STATE OF NEW YORK,
County of New York. }ss.:
City of New York
On this day of , 19 , before me personally came to me known and known to
me to be a member of the firm of _____________________________________ and the
person described in and who executed the foregoing instrument in the name of
said firm, and he duly acknowledged to me that he executed the same for and as
the act and deed of said firm.
- --------------------------------------------------------------------------------
CORPORATE TENANT
STATE OF NEW YORK,
County of New York, }ss.:
City of New York
On this day of , 19 , before me personally came
to me known, who being by me duly sworn, did depose and say that he resides in
that he is the of
the corporation described in and which executed
the foregoing instrument as TENANT: that he knows the seal of said corporation;
that the seal affixed by order of the Board of Directors of said corporation,
and that he signed his name thereto by like order.
- --------------------------------------------------------------------------------
INDIVIDUAL TENANT
STATE OF NEW YORK,
County of New York, }ss.:
City of New York
On this day of 19 , before me personally came to me
known and known to me to be the individual described in and who, as TENANT,
executed the foregoing instrument and acknowledged to me that
be executed the same.
- --------------------------------------------------------------------------------
17
<PAGE> 22
[GRAPHIC OMITTED]
FLOOR PLAN
RENTAL PLAN o 4TH FLOOR
1407 BROADWAY o WEST 38th STREET N.Y. N.Y.
all dimensions are approximate
INITIAL
/s/ [ILLEGIBLE]
HERE
<PAGE> 1
Exhibit 10.52
AGREEMENT OF LEASE, dated the 1st day of April, 1975, between EMPIRE
CARPET CORPORATION, A Delaware corporation, having an office at 333 North
Street, Teterboro, New Jersey (hereinafter referred to as LANDLORD) and Miss
Erika, Inc. having an office at 1410 Broadway, NYC, New York (hereinafter
referred to as TENANT).
WITNESSETH:
LANDLORD and TENANT hereby agree with each other as follows:
1. Premises. LANDLORD hereby leases demises and lets to TENANT and TENANT
hereby takes and hires from LANDLORD that portion of the building known as 333
North Street, Teterboro, New Jersey, that is denoted AREA No. 2 ("TENANT Space
No. 2") on the diagram annexed hereto as Exhibit "A" (hereinafter called the
"Demised Premises"). TENANT'S employees, customers and invitees shall have the
right to use the driveways, 6 parking spaces and entrances and other similar or
related facilities in and about the building of which the demised premises are a
part in common with LANDLORD'S other tenants.
1.1
<PAGE> 2
2. Term. The term shall be for a period of three (3) years commencing on
April 1, 1975 and expiring at midnight on March 31, 1978.
2.1
<PAGE> 3
3. Delivery of Possession. LANDLORD shall deliver the Demised Premises
free from all tenancies and occupancies, and free from all suits, complaints,
reports, notices or orders with respect to violations of any federal, state,
municipal or other governmental laws and regulations.
3.1
<PAGE> 4
4. Rent. TENANT covenants to pay LANDLORD, without previous demand
therefor, rent at a first year annual rate of Thirty-seven thousand eight
hundred dollars ($37,800.00) payable in equal monthly installments of Three
thousand one hundred fifty dollars ($3,150.00) in advance. The second years rate
will be Thirty-nine thousand nine hundred and sixty dollars ($39,960.00) payable
in equal monthly installments of ($3,330.00) Three thousand three hundred
thirty dollars. The third years rental will be Forty two thousand one hundred
twenty dollars ($42,120.00) payable in equal monthly installments of Three
thousand five hundred ten dollars ($3,510.00).
The first installment is payable upon the commencement of the term and
subsequent installments are payable on the first business day of each successive
calendar month throughout the term.
A security deposit will be made at the time of signing the lease in the
amount of six-thousand three hundred dollars ($6,300.00). One half of this
deposit will be applied against the eighteenth month rental, while the balance
will be applied against the thirty-sixth months' rental.
The space the tenant is renting consists of 21,600 square feet.
4.1
<PAGE> 5
5. Use. TENANT may use and occupy the Demised Premises for general
warehouse purposes and any other similar lawful purposes not incompatible with
the general warehousing and office occupancies of LANDLORD and other tenants in
the building. LANDLORD represents that the Demised Premises lawfully may be used
for general warehouse purposes. If any law, ordinance, ruling, order or
regulation now exists or is hereafter enacted prohibiting the use of the Demised
Premises for the foregoing purposes, then TENANT, at its option, may terminate
this lease and all of its liability hereunder shall cease from and after the
date when such law, ordinance, ruling, order or regulation becomes effective,
and any unearned rent paid in advance by TENANT shall be refunded to it by
LANDLORD.
5.1
<PAGE> 6
6. Repairs.
(a) TENANT shall, during the term of this Lease, at its sole
expense, keep and maintain the Demised Premises in good order and repair,
provided, however, TENANT shall not be obligated to make any structural repairs
or any repairs which LANDLORD is obligated to make under Section 13(a) of this
Lease, or which are occasioned by defective materials or workmanship in the
construction of the Demised Premises or the building of which the Demised
Premises forms a part.
(b) LANDLORD, during the term of this Lease, at its sole cost, shall
keep the structural supports, walls and roof of the entire building of which the
Demised Premises are a part and adjacent parking area and sidewalks in good
order, condition and repair. The LANDLORD shall maintain in good working order
and repair the electrical system, the duct work and heating, pipes and plumbing,
ventilating systems, and all necessary apparatus pertaining to the foregoing,
whether or not said specifically named items are within the Demised Premises.
6.1
<PAGE> 7
7. Alterations. TENANT shall make no major alterations, changes in, or
additions or improvements to the Demised Premises without the prior consent of
LANDLORD. If any alterations or improvements, whether or not major, except
painting or wall papering, are lawfully made at TENANT'S expense or if TENANT
shall lawfully install anything in the Demised Premises (including, without
limitation, drapes, carpets, furniture, business machines, counters, shelving,
lighting fixtures, removable partitions, trade fixtures, or advertising signs),
they shall remain TENANT'S property and may be removed by TENANT prior to
termination of TENANT'S occupancy, in accordance with the provisions of Section
8 of this Lease.
7.1
<PAGE> 8
8. End of Term. At the expiration or sooner termination of the term,
TENANT shall surrender the Demised Premises in as good condition as they were in
at the beginning of the term of the Lease, reasonable wear and tear and damage
by fire or other casualty not occurring through the TENANT'S negligence
excepted. TENANT may (and, if LANDLORD so requests, shall) remove from the
Demised Premises all alterations and improvements made by it, and all of its
trade fixtures, materials, equipment and property of every sort installed or
placed by TENANT in the Demised Premises, provided that any damage to the
Demised Premises caused by any such removal shall be repaired by Tenant and
Demised Premises shall be restored to the same condition as they were in on the
commencement date of this Lease, reasonable wear and tear excepted. Any
alterations, improvements or property not so removed at the expiration of the
respective terms shall belong to LANDLORD.
8.1
<PAGE> 9
9. Signs. Upon prior written approval by LANDLORD of the size, weight,
number, proposed location, method of attachment to the building and functional
and aesthetic relationship to the entire building and other occupancies therein,
TENANT may place and maintain in and about the Demised Premises such neat and
appropriate signs advertising its business as it shall desire. Upon termination
of this Lease, TENANT shall remove all such signs, and repair any damage to the
Demised Premises caused by the erection, maintenance, or removal of such signs,
and restore the Demised Premises to the same condition they were in on the
commencement date of this Lease, reasonable wear and tear excepted.
9.1
<PAGE> 10
10. Real Estate Taxes. LANDLORD shall remit, when due and payable, all
applicable taxes and general and special assessments assessed against the entire
property of which the Demised Premises form a part, provided, however, that
TENANT shall pay to LANDLORD, as additional rent, an amount equal to
proportional excess taxes, if any, for the calendar year or portion thereof
falling within the Lease term. LANDLORD shall furnish TENANT with a properly
authenticated statement of the initial real estate taxes assessed against the
entire property of which the Demised Premises form a part and with true copies
of pertinent receipted bills for taxes for any subsequent year in which an
increase amount has been assessed, together with an allocation compution. Should
LANDLORD be successful in having an increase in real estate taxes reduced after
TENANT has paid its proportionate share of any such increase, TENANT shall be
repaid its proportionate share of any such reduction, less the proportionate
share of the costs, expenses and fees involved in procurring such reduction. For
the purpose of this tax adjustment of rental clause:
(a) "applicable taxes" shall mean only those ad valorem real
property taxes that are assessed and levied against the entire property of which
the Demised Premises are a part, and that are for and pertain to the calendar
year next following that in which occurs the tax status day (also called "the
tax day" or "assessment day") used in the determination of said taxes.
10.1
<PAGE> 11
(b) "lease term" shall include the original term of this Lease
Agreement and all extensions thereof unless the Lease Agreement be terminated or
cancelled earlier in accordance with this Lease Agreement, in which case the
lease term shall include only the abbreviated period.
(c) "excess taxes" shall mean that amount, if any, by which
applicable taxes for any calendar year, any part of which occurs within the
lease term, exceeds the applicable taxes levied the first calendar year within
the lease term for which the entire building, of which the Demised Premises are
but a part, is assessed as fully completed. Applicable taxes attributable to
subsequent improvements not made by TENANT shall not be included in the
computation of excess taxes.
(d) "proportional excess taxes" shall mean that amount of excess
taxes, computed as set forth above, reduced to the proporation thereof that the
total square footage hereby leased, bears to the total square footage of the
entire building of which the Demised Premises are a part; provided, however,
that proportional excess taxes for any calendar year shall be further limited to
the proportion thereof that the number of days the lease term exists within the
calendar year bears to the total number of days in said calendar year.
10.2
<PAGE> 12
11. Utilities and Services. TENANT shall arrange to procure, and to pay
promptly when due all charges for, utilities furnished and supplied to the
Demised Premises including, without limiting the generally hereof, water, heat,
air conditioning, if any, janitorial services and supplies, lighting,
electricity, gas and telephone. LANDLORD shall not be liable for any damages
sustained by TENANT resulting from the failure or interruption of any services
if such failure or interruption is not caused by LANDLORD'S negligence. TENANT
shall see that the Demised Premises are heated to the extent necessary to
prevent the sprinkler system from freezing, providing that no such obligation
shall exist at any time that, through no fault of TENANT, there shall be such
failure or interruption of services as to render the heating system incapable of
providing sufficient heat.
11.1
<PAGE> 13
12. Public Liability Insurance. TENANT shall at all times during the term
hereof, at its sole expense, maintain general public liability insurance against
claims for bodily injury, death or property damage occuring in, on, or about the
Demised Premises. Such insurance shall afford protection to LANDLORD and TENANT,
with coverage in amounts of not less than $300,000, with respect to bodily
injury or death of any one person, $500,000 with respect to bodily injury or
death of more than one person in any one incident, and $10,000, with respect to
damage to property of others in one incident. The policies for such insurance
shall name LANDLORD as a co-insured thereunder.
12.1
<PAGE> 14
13. Fire and other Casualties.
(a) In case of damage to the Demised Premises, or to the building of
which the Demised Premises form a part, by fire or other casualty covered by the
standard New Jersey Extended Coverage Endorsement attached to fire insurance
policies in the area in which the Demised Premises are located, if the damage is
so extensive as to amount practically to the total destruction of the Demised
Premises or the building of which the Demised Premises form a part, this Lease
shall terminate, and the rent shall be apportioned to the time of the damage. In
all other cases where the Demised Premises are damaged by fire or other such
casualty, LANDLORD shall repair warehouse purposes to which the Demised Premises
were being devoted at the time of such casualty, and LANDLORD cannot reasonably
render them tenantable within thirty (30) days next following the casualty, and
if such casualty shall have originated elsewhere than within the Demised
Premises, LANDLORD or TENANT may, at its election, terminate the Lease by
written notice to the other. There shall be an apportionment of the rent until
the damage has been repaired or until the Lease shall have been so terminated.
(b) TENANT agrees, at its own cost and expense, to comply with all
of the rules, regulations, and requirements of LANDLORDS insurance carrier
(Factory Mutual Insurance Company) including but not limited to, any additional
sprinklering required by reason of TENANT'S use. If the fire insurance rate
applicable to the Demised Premises on to the building of which
13.1
<PAGE> 15
the Demised Premises form a part and their contents shall be raised over the
rate in effect at the commencement of the term of this Lease because of TENANT'S
use of the Demised Premises, TENANT will either cease such use or pay to
LANDLORD, on demand, as additional rent, such increase as LANDLORD'S insurance
carrier shall certify is attributable to TENANT'S use of the Demised Premises.
(c) TENANT agrees, at its own cost and expense, to cause the
contents of the Demised Premises, and all of its equipment, fixtures,
alterations and improvements to be insured against fire and other insurable
casualty.
13.2
<PAGE> 16
14. Eminent Domain.
(a) If the whole of the Demised Premises or the building of which
the Demised Premises form a part shall be taken for any public or quasi-public
use under any statute or by right of eminent domain, or by private purchase in
lieu thereof, then this Lease shall automatically terminate as of the date that
possession shall be taken. If any part of the Demised Premises shall be so taken
as to render the remainder thereof unusable for the general warehouse purposes
to which the Demised Premises were being devoted at the time of such taking, or
if any part or all of the building and appurtenant premises of which the Demised
Premises forms a part shall be taken so as to render said building was being
devoted at the time of such taking (irrespective of whether or not such taking
shall render, all or part of the Demised Premises unusable), then LANDLORD and
TENANT shall each have the right to terminate this Lease on thirty (30) days'
notice to the other given within ninety (90) days after the date of such taking.
In the event that the Lease shall so terminate or be terminated, the rent shall
be apportioned to the date of the taking.
(b) If any part of the Demised Premises shall be so taken and this
Lease shall not terminate or be terminated under the provisions of subparagraph
(a) hereof, then the rent shall be apportioned according to the floor space so
taken, and LANDLORD shall, at its own cost and expense, restore the remaining
14.1
<PAGE> 17
portion of the Demised Premises to the extent necessary to render same
reasonably suitable for the purposes for which the Demised Premises were leased,
and shall make all repairs to the building of which the Demised Premises form a
part to the extent necessary to constitute the remaining portion of the building
a complete architectural unit, provided that such work shall not exceed (a) the
scope of the work done by LANDLORD in originally constructing such building, or
(b) the amount of the compensation or award attributable to the taking of the
Demised Premises.
All compensation awarded or paid upon such a total or partial taking of
the Demised Premises shall belong to and be the property of LANDLORD without any
participation by TENANT; provided, however, that nothing contained herein shall
be construed to preclude TENANT from prosecuting any claim directly against the
condemning authority in such condemnation proceedings for loss of business,
and/or depreciation to, damage to, and/or cost of removal of, and/or for the
value of, stock and/or trade fixtures, furniture and other personal property
belonging to TENANT; provided, however, that no such claim shall diminish or
otherwise adversely affect LANDLORD'S award.
14.2
<PAGE> 18
15. Bankruptcy, Insolvency. In the event that all or substantially all of
the assets of the TENANT shall be placed in the hands of a receiver or trustee,
and such receivership or trusteeship continues for a period of (60) days, or
should TENANT make an assignment for the benefit of creditors or be adjudicated
a bankrupt, or should the TENANT institute any proceedings under the Bankruptcy
Act as presently in force, or any amendment thereof which may be hereafter be
enacted, or under any other Act relating to the subject of bankruptcy, wherein
the TENANT seeks to be adjudicated a bankrupt, or seeks to be discharged of its
debts, or seeks to effect a plan of liquidation, or should any involuntary
proceeding be filed against the TENANT under any such bankruptcy law, and the
TENANT shall consent thereto or acquiesce therein, by its pleading or by
default, then neither this Lease nor any interest in and to Demised Premises
shall become an asset in any of such proceedings, and in any such event, and in
addition to any and all other rights or remedies of the LANDLORD hereunder or by
law provided, it shall be lawful for the LANDLORD, at its option, to terminate
the within Lease forthwith, and to re-enter the Demised Premises and take
possession thereof and remove all persons therefrom, and the TENANT shall have
no further claim thereon or hereunder.
15.1
<PAGE> 19
16. Assignment and Sub-Letting. TENANT shall not assign the within Lease
and the TENANT'S leasehold estate created herein, in whole or in part. TENANT
shall, however, have the right at any time at its discretion, to leave the
premises unoccupied, provided that, during any such period, TENANT shall not be
released from any obligation undertaken by it under this Lease.
The TENANT shall have the right to sub-let in whole with the written
permission of the landlord, which consent shall not be unreasonably withheld.
Should subletting occur at a higher rent than the rent in this lease, the amount
received above the rent paid in this lease shall be remitted to the Landlord.
16
<PAGE> 20
17. Default.
(a) LANDLORD may give TENANT ten (10) days' notice of intention to
terminate this Lease in any of the following circumstances:
(1) If TENANT shall be in default in the payment of rent and
such default is not cured within ten (10) business days after mailing of written
notice thereof by LANDLORD;
(2) If TENANT shall be in default in the performance of any
covenant of this Lease (other than the covenant for the payment of rent) and if
such default is not cured within thirty (30) days after written notice thereof
given by LANDLORD, or, if such default be of such a nature that it cannot be
completely cured within such thirty (30) day period, if TENANT shall not have
promptly commenced within the first ten (10) days of such thirty (30) day period
or shall not thereafter proceed with reasonable diligence and in good faith to
remedy such default.
(b) If LANDLORD shall give the ten (10) days' notice of termination
provided in subparagraph (a), then, if the default in question shall not have
been remedied at the expiration of such period, this Lease shall terminate as
completely as if that was the date here fixed for the expiration of the term of
this Lease, and TENANT shall then surrender the Demised Premises to LANDLORD. If
this Lease shall so terminate, it shall be lawful for LANDLORD, at its option,
to re-enter the Demised Premises and to remove TENANT therefrom.
17.1
<PAGE> 21
(c) TENANT shall remain liable for all its obligations under this
Lease, despite LANDLORD'S re-entry, and LANDLORD may re-enter or use the Demised
Premises as agent for TENANT, if LANDLORD so elects.
17.2
<PAGE> 22
18. Holding Over. In the event that the TENANT or any assignee or
sub-tenant shall hold over or remain in possession of the Demised Premises after
expiration of the within Lease or after any earlier termination hereof by reason
of any of the provisions of this Lease, without there being any new lease
between the parties, such holding over or continued possession shall be deemed
to be pursuant to a tenancy at sufferance only, and to payment for such
continued possession at the rate previously paid for rent or at any other rate
shall be deemed sufficient to change the tenancy at sufferance into a tenancy
for a year or from year to year, nor shall such holding over or the acceptance
by LANDLORD of any such payment constitute a bar to LANDLORD'S installation of
any proceedings for the immediate recovery of possession without notice. For and
during the period prior to such recovery of possession, TENANT shall be
obligated to pay LANDLORD a sum equivalent to the rent in effect under the terms
hereof during the last month proceeding such expiration or termination.
18.1
<PAGE> 23
19. Floor and Ceiling Loads. LANDLORD represents that the floor load per
square foot of the Demised Premises is five hundred (500) pounds. TENANT
covenants that it will not place a load on the floor of the Demised Premises
which exceeds the said floor load.
LANDLORD has informed TENANT that the ceilings and roof structure
have not been designed to carry any additional loads and TENANT therefore
covenants not to attach to or suspend from the ceiling or any supporting member
thereof any weight whatsoever.
19.1
<PAGE> 24
20. Water Damage. It is expressly understood and agreed by and between the
parties hereto that LANDLORD shall not be liable for any damage or injury which
may be sustained by TENANT or other person from water, by reason of the
breakage, leakage or obstruction of the roof, roof drains, sprinkler system,
water or soil pipes or any other leakage in or about the building herein
demised, or resulting from the carelessness, negligence or improper conduct on
the part of any of LANDLORD'S other tenants, their agents or employees.
20.1
<PAGE> 25
21. Access to Premises. TENANT agrees that LANDLORD and its agents or any
mortgagee of the fee of the Demised Premises shall have the right to enter into
and upon the Demised Premises from time to time during usual business hours, or
at any time in the event of an emergency, for the purpose of examining said
premises or making repairs thereto, in accordance with the provisions of this
Lease Agreement.
TENANT also agrees that LANDLORD, or its agents, during the six (6)
month period next preceding the expiration of the term of this Lease or any
renewal or extension thereof, shall have the right to enter into and upon the
Demised Premises at any time during usual business hours for the purpose of
showing the premises to persons wishing to lease or purchase same, and may affix
to any suitable part of the Demised Premises a sign or signs offering the same
for sale or lease.
21.1
<PAGE> 26
22. Mortgage Subordination. This Lease Agreement shall be subject and
subordinate to any and all institutional mortgages (hereby defined to mean
mortgages granted by savings or commercial banks, savings and loan associations
or insurance companies) which may now or hereafter be held on the Demised
Premises, and to any and all advances to be made thereunder and all renewals,
modifications, consolidations, replacements and extensions thereof, and copies
of all of these shall be furnished to TENANT upon request; provided, however,
that all such mortgages shall provide that so long as TENANT shall not be in
default under this Lease Agreement, no proceedings pertaining to any such
mortgage shall interfere with or disturb in any way the quiet use and occupancy
of the Demised Premises by TENANT or the tenancy and estate hereby created.
TENANT shall promptly execute such documents as may reasonably be required by
LANDLORD or LANDLORDS mortgagee in confirmation of such subordination, and a
refusal to execute such documents shall be considered a default hereunder.
22.1
<PAGE> 27
23. Quiet Enjoyment. LANDLORD warrants and represents that it has the
right to let the Demised Premises for the respective aforesaid terms, and
covenants that, upon TENANT'S performing and observing all of its obligations
hereunder, TENANT may peaceably and quietly have, hold and enjoy the Demised
Premises for the term of this Lease and any extensions thereof.
23.1
<PAGE> 28
24. Notices. All notices to be given hereunder by either party shall be in
writing and given by personal delivery or sent by certified or registered mail,
return receipt requested, to the other (and the date of mailing shall be deemed
the date of notice by certified or registered mail) delivered or addressed to
the parties as follows:
To the TENANT:
Miss Erika, Inc.
1410 Broadway
New York City, New York
Attention: Mr. Allen Guttman
To the LANDLORD:
Empire Carpet Corporation
333 North Street
Teterboro, New Jersey 07608
Attention: Mr. F. G. Hoylman
or at such other address as either party may designate to the other by written
notice in the manner provided above.
24.1
<PAGE> 29
25. Brokers. LANDLORD shall pay any and all commissions, brokerage or
other compensation which may be payable to any person, firm or corporation for
bringing about this Lease. In consideration of TENANT'S representation
hereinafter set forth, LANDLORD hereby agrees to indemnify and hold TENANT
harmless from claim for commissions, brokerage or other compensation. TENANT
hereby represents that the only person with whom it dealt as broker, agent,
finder or other intermediary in bringing about this Lease is Marcus Associates
and LANDLORD acknowledges its liability to said broker and its co-broker, Byrnes
& Foody, Inc. in accordance with separate commission agreements.
25
<PAGE> 30
26. LANDLORD'S Consent. LANDLORD covenants that an consent or approval
required of it hereunder shall not be held unreasonable.
26.1
<PAGE> 31
27. Attornment. This sublease is subject to the terms and provisions of
the main lease between GRAPHIC ARTS BUILDING CO., INC. (hereby designated
GRAPHIC) as Landlord, and EMPIRE CARPET C0RPORATI0N (hereby designated EMPIRE),
(the LANDLORD in this sublease) as Tenant, dated January, 13, 1969, and TENANT
herein, as sub-tenant, agrees to attorn to GRAPHIC in the event of default on
the part of EMPIRE.
27.1
<PAGE> 32
28. Interpretation. This agreement shall be governed by the laws of the
State of New Jersey, and the meaning, interpretation, application and
administration of its terms and provisions shall be determined and resolved in
accordance therewith.
The paragraph captions as to contents of particular paragraphs
herein have been inserted only for convenience and shall in no way be construed
as a part of this Lease or as a limitation on the scope of the respective
paragraphs to which they refer.
28.1
<PAGE> 33
29. Entire Agreement. This Lease contains the entire understanding between
the parties with respect to the subject matter hereof and may be changed or
modified only by a writing signed by both parties. No oral statement or prior
writing shall have any force or effect.
29.1
<PAGE> 34
30. Binding. This Lease shall be binding upon and inure to the benefit of
LANDLORD and TENANT and their respective successors and, unless otherwise herein
expressly so stated, their assigns.
30.1
<PAGE> 35
31. Security Deposit. TENANT has this day deposited with LANDLORD sum of
$6,300.00 as non-interest bearing security for the full and faithful performance
by TENANT of all of the terms and conditions upon TENANT'S part to be performed.
In the event of a bona fide sale, subject to this Lease, LANDLORD
shall have the right to transfer the security to the vendee for the benefit of
TENANT and LANDLORD shall be considered released by TENANT from all liability
for the aforesaid application of such security and TENANT agrees to look to the
new LANDLORD solely for such application. It is agreed that this provision shall
apply to every transfer or assignment made of the security to a new landlord.
32. Cinderblock Repair. The LANDLORD agrees to cinderblock, at his
expense, the present opening in the East Wall.
31.1
<PAGE> 36
IN WITNESS WHEREOF, the parties hereto have executed this Lease as
of the day and year first above written.
ATTEST: Empire Carpet Corporation
/s/ [ILLEGIBLE] By /s/ [ILLEGIBLE]
----------------------- -----------------------
Secretary President
ATTEST: Miss Erika, Inc.
/s/ [ILLEGIBLE] By /s/ [ILLEGIBLE]
- ----------------------- ------------------------
Secretary President
<PAGE> 37
EXHIBIT A
GRAPHIC OMITTED
FLOOR PLAN
<PAGE> 1
Exhibit 10.52 (a)
[Letterhead of Empire Carpet Corporation]
January 17, 1978
Miss Erika, Inc.
1410 Broadway
New York, N.Y.
Attention: Mr. Allen Guttman
Dear Mr. Guttman:
This letter is to act as a three-year extension of the Agreement of
Lease between the Empire Carpet Corporation as Landlord and Miss Erika, Inc. as
Tenant that was dated the first day of April 1975.
All conditions of that Lease will remain in effect except the rent
for the first year (April 1, 1978 through March 31, 1979) will be Forty-nine
thousand six hundred eighty ($49,680.00) dollars, payable in equal monthly
installments of Four thousand one hundred forty ($4,140.00) dollars in advance.
The second year rate will be Fifty-one thousand eight hundred forty
($51,840.00) dollars payable in equal monthly installments of Four thousand
three hundred twenty (4,320.00) dollars.
The third year rental will be Fifty-four thousand ($54,00.00)
dollars payable in equal monthly installments of Four thousand five hundred
($4,500.00) dollars.
The security deposit made April 1, 1975 in the amount of $6,300.00
was diminished by $3,150.00 on the eighteenth month of your original Lease. The
remaining $3,150.00 will remain with Empire as a security deposit on this
three-year extension.
You may execute this as a contract by signing below and returning
the original and two copies to the undersigned.
Very truly yours,
/s/ Frank G. Hoylman
Frank G. Hoylman
President
MISS ERIKA, INC.
By /s/ [ILLEGIBLE]
---------------------
Title Treasurer
------------------
<PAGE> 1
Exhibit 10.52 (b)
[Letterhead of Empire Carpet Corporation]
February 17, 1981
Miss Erika, Inc.
1410 Broadway
New York, New York
Attention: Mr. David Guttman
Dear Mr. Guttman:
This letter is to be a new Agreement of Lease between Empire Carpet
as Landlord and Miss Erika, Inc. as Tenant on the space presently occupied by
Tenant for a period of five years commencing April 1, 1981.
The first years rent will be Sixty-Four Thousand Eight Hundred
($64,800.00) DOLLARS payable in equal monthly installments of Five Thousand Four
Hundred ($5,400.00) DOLLARS.
On each April 1st of the lease period this rent will increase by
one-half the percentage increase in the Metropolitan New York cost-of-living
index for the past twelve months but in no case shall the increase be less than
5% each year.
All other conditions of the previous lease shall remain in effect
except:
1. There shall be no smoking in the warehouse area.
2. Either two sprinkler heads or drop out ceiling panels shall be
installed in the office area by Tenant.
You may execute this lease by signing below and returning the
original and two copies to the undersigned.
Very truly yours,
/s/ Frank G. Hoylman
Frank G. Hoylman
President
MISS ERIKA, INC.
By /s/ Stuart Alpert
---------------------
Title President
------------------
<PAGE> 1
Exhibit 10.52 (c)
[Letterhead of Empire Carpet Corporation]
March 5, 1982
Miss Erika, Inc.
1410 Broadway
New York, New York
Attention: Mr. David Guttman
Dear David:
This letter is to be an Agreement of Lease between Empire Carpet Corporation as
Landlord and Miss Erika, Inc. as Tenant for 9600 square feet of warehouse space
adjacent to your present warehouse space on North Street, Teterboro, New Jersey.
The attached drawing delineates the space involved.
The term of the Lease shall be from April 1, 1982 to April 1, 1986.
The first years rent will be Thirty-One Thousand Two Hundred ($31,200)
DOLLARS payable in equal monthly installments of Two Thousand Six Hundred
($2,600.00) DOLLARS.
On each April 1st of the lease period the rent will increase by one-half the
percentage increase in the Metropolitan New York cost-of-living index for the
past twelve months but in no case shall the increase be less than 5% each year.
Each month of the lease Empire Carpet will submit copies of electric and
gas bills and Miss Erika will pay Empire 7.86% of each bill.
Empire will knock hole in wall between your present space and this new
space and will install fire door.
Miss Erika will enclose the presently open side of their space with a
floor-to-ceiling fence equal to that on the East side of this space. Said fence
to become the property of Empire Carpet at the end of the lease period. Said
fence to be erected by April 30, 1982. Miss Erika will install a fire exit door
equal to the other fire-doors in the West wall of the building.
<PAGE> 2
Mr. David Guttman
Page Two
March 5, 1982
Miss Erika may Install offices within these spaces as long as the type
construction is approved by Factory Mutual Insurance Company. Electrical power
for the office area is to be connected to Miss Erika's electric meter. Miss
Erika is responsible for getting a building permit for the office area and fire
door.
All other conditions of your present lease shall apply.
You may execute this lease by signing below and returning the original and two
copies to the undersigned.
Very truly yours,
/s/ F. G. Hoylman
F. G. Hoylman
President
MISS ERIKA, INC.
By /s/ Stuart Alpert
---------------------
Title President
------------------
<PAGE> 1
Exhibit 10.52 (d)
[Letterhead of Armstrong]
August 15, 1983
Miss Erika, Inc.
Attn: Mr. Sid Goldstein
1410 Broadway
New York, NY 10018
Dear Sid:
RE: Amendment to Lease
21,600 Additional Square Feet
333 North Street
Teterboro, New Jersey
This letter will serve as an amendment to your master lease dated April 1, 1975,
and subsequently amended by letter agreements dated January 17, 1978, February
17, 1981 and March 5, 1982, between Miss Erika, Inc. and Empire Carpet
Corporation covering 31,200 square feet of space in Empire's building located at
333 North Street, Teterboro, New Jersey.
In accordance with Empire and Miss Erika's mutual desires, Empire has agreed to
lease to Miss Erika an additional 21,600 square feet of warehouse space as shown
on Exhibit "A" attached to this letter, bringing Miss Erika's total leased
premises to 52,800 square feet of warehouse space.
The term of this lease shall be from July 15, 1983 to April 1, 1986. Rental for
the additional 21,600 square feet shall be $7,500 for the period July 15 through
August 31, 1983. Rental for the period September 1, 1983 to April 1, 1984 shall
be $6,142.50 per month. Subsequent years rental shall be increased by one-half
the percentage increase in the metropolitan New York cost-of-living index for
the past 12 months, but in no case shall the increase be less than 5% each
year.
All other terms and conditions contained in the master lease and subsequent
letter agreements, as applicable, shall remain in full force and effect.
Additionally, Miss Erika has agreed to pay for one-third the cost of the
demising wall, shown on the attached drawing, to be constructed by Empire, and
has agreed to provide its own access to this additional space from space
presently leased by Miss Erika. Miss Erika shall also be responsible for
obtaining all necessary occupancy permits, and construction permits necessary to
provide this access between its spaces.
<PAGE> 2
Miss Erika, Inc. -2- August 15, 1983
Miss Erika shall be responsible for its prorated share of monthly electric and
gas charges for the additional space, which shall be paid to either Empire or
the adjacent tenant on the east side of the demising wall, if services cannot be
separated and placed on individual meters.
Please execute this amendment by signing and returning all three copies of this
letter which will then be executed by Empire and returned to you.
Sincerely,
/s/ David W. Laubach
David W. Laubach
General Manager
Real Estate Department
Secretary's Office
SAC
Enclosure
MISS ERIKA, INC.
By /s/ Sid Goldstein
---------------------------
Date 9/6/83
-------------------------
EMPIRE CARPET CORPORATION
By /s/ [ILLEGIBLE]
---------------------------
President
Date Sept. [ILLEGIBLE], 1983
------------------------
<PAGE> 1
Exhibit 10.52 (e)
LEASE MODIFICATION AND EXTENSION AGREEMENT
THIS AGREEMENT made this 24TH day of January, 1985, by and between
TETERBORO ASSOCIATES, a New Jersey limited partnership, having its principal
office at 84 Orient Way, Rutherford, New Jersey 07070 (the "Landlord") and MISS
ERIKA, INC., having an office at 1407 Broadway, New York, New York (the
"Tenant").
W I T N E S S E T H:
WHEREAS, on April 1, 1975, Empire Carpet Corporation ("Empire") and
Tenant entered into a lease for premises (the "Demised Premises") located at 333
North Street, Teterboro, New Jersey (said lease and all letters amending said
lease being hereinafter referred to as the "Lease"); and
WHEREAS, by letter dated January 17, 1978, the Lease was extended
for a three-year period commencing April 1, 1978; and
WHEREAS, by letter dated February 17, 1981, the Lease was extended
for an additional five-year period commencing April 1, 1981; and
WHEREAS, by letter dated March 5, 1982, the Lease was amended to
provide that the Demised Premises include an additional 9,600 square feet of
warehouse space; and
WHEREAS, by letter dated August 15, 1983, the Lease was amended to
provide that the Demised Premises include an additional 21,600 square feet of
warehouse space (i.e., a total of 52,800 square feet); and
<PAGE> 2
WHEREAS, the Lease was assigned by Armstrong World Industries, Inc.
(as the successor-in-interest to Empire) to Landlord by Assignment dated March
7, 1984; and
WHEREAS, it is the desire of Landlord and Tenant to modify and
extend the Leases hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained, the parties hereto do hereby agree as follows:
1. Section 1 of the Lease is amended to provide that the Demised
Premises be deemed to include the 52,800 square feet of space in that portion of
the building known as 333 North Street, Teterboro, New Jersey, designated on
Exhibit A attached hereto and made a part hereof.
2. Section 2 is amended to provide that the term of the Lease is
extended for a period of five (5) years commencing on April 1, 1986 and expiring
at midnight on March 31, 1991. Notwithstanding any provision in the Lease or
this Agreement to the contrary, any reference to "the first calendar year within
the Lease term", and other words of like import shall mean the one-year period
commencing April 1, 1975 and terminating March 31, 1976; any reference to
"commencement of the term" and other words of like import shall mean April 1,
1975.
3. Effective April 1, 1986, the first and second paragraphs of
Section 4 are amended to read as follows:
-2-
<PAGE> 3
Tenant covenants to pay Landlord, without previous demand therefor,
a minimum annual rental (the "Minimum Rent") of $237,600.00, payable
in equal monthly installments of $19,800.00, based upon the payment
of $4.50 per square foot, in advance on the first day of each month
commencing on April 1, 1986, provided, however, that the Minimum
Rent shall be increased five percent (5%) per annum as follows:
Commencing on April 1, 1987, the Minimum Rent shall be $249,480.00;
commencing on April 1, 1988, the Minimum Rent shall be $261,954.00;
commencing on April 1, 1989, the Minimum Rent shall be $275,051.70;
commencing on April 1, 1990, the Minimum Rent shall be $288,804.29.
5. Effective April 1, 1986, the Lease is hereby amended to include
the following Section 4A:
4A. Additional Rent.
(a) In addition to the Minimum Rent provided for in Section 4 of
this Lease, the Tenant agrees to pay as Additional Rent its
proportionate share of: (i) all insurance premium costs incurred by
Landlord; and (ii) all costs and expenses incurred by Landlord in
connection with Landlord's operation, maintenance and repair of the
common areas, in accordance with the provisions of the Lease,
including, but not limited to, the grounds, parking areas,
utilities, landscaping, sprinkler system, if the same shall be
furnished by the Landlord, as well as all other costs, fees and
expenses incurred by the Landlord in performing its obligations
hereunder, but excluding all payroll and administrative costs of
Landlord.
(b) The Additional Rent shall be paid by Tenant to Landlord within
ten (10) days of Tenant's receipt of invoice therefore from
Landlord.
(c) Tenant's proportionate share is agreed to be 24.22%, based on
the ratio of square footage of the Demised Premises (52,800 sq. ft.)
to the square footage of the entire building (218,000 sq. ft.).
6. Effective April 1, 1986, Section 6 is amended to read as follows:
-3-
<PAGE> 4
6. Repairs.
(a) Landlord's Obligation: Landlord shall be responsible for the
structural integrity of the Building and shall make all repairs
thereto and shall also make all repairs to the exterior walls,
exterior building and roof except where said repairs are
necessitated by the negligence, default or abuse by Tenant or where
said repairs are the responsibility of Tenant as set forth below.
(b) Tenant's Obligation:
(1) Tenant shall, throughout the term, take good care of the
Premises and shall not do or suffer or permit any waste with respect
thereto. Tenant shall keep and maintain all interior portions of the
Premises including, without limitation, all building equipment,
windows, doors, loading bay doors and shelters, plumbing and
electrical systems, heating, ventilating and air conditioning
("HVAC") systems in a clean and orderly condition. Tenant shall keep
and maintain all floors, sidewalks, curbing or paving. The phrase
"keep and maintain" as used herein includes repairs, replacement
and/or restoration as appropriate. Tenant shall maintain the
exterior area adjoining the Premises free of accumulation of snow,
ice, dirt and rubbish.
(2) Tenant shall promptly notify Landlord of any condition of which
Tenant is, or should be aware, for which Landlord has the
responsibility of maintenance and repair.
(3) Tenant shall be responsible to Landlord for all expenses
incurred by Landlord due to (i) failure to Tenant to promptly notify
Landlord of required repairs, (ii) negligence or abuse (whether
accidental or intentional) by Tenant which requires additional
maintenance or repairs beyond normal wear and tear, and (iii)
Tenant's failure to repair and maintain those items set forth in
Paragraph 6(b) above.
7. Effective April 1, 1986, the Lease is hereby amended to include
the following Section 10A:
10A. Impositions. If at any time during the term of this Lease the
methods of taxation prevailing at the execution hereof shall be
-4-
<PAGE> 5
changed or altered so that in lieu of or as a supplement to or a
substitute for the whole or any part of the real estate taxes or
assessments now or from time to time hereafter levied, assessed or
imposed by applicable taxing authorities, there shall be imposed (i)
a tax, assessment, levy, imposition or charge wholly or partially as
a capital levy or otherwise, on the rents received from the
Premises, or (ii) a tax, assessment, levy (including but not limited
to any municipal, state or federal levy), imposition or charge
measured by or based in whole or in part upon the Premises and
imposed upon Landlord, (iii) a tax or excise on rent, or any other
tax however described, against Landlord on account of rentals
payable to Landlord hereunder, or (iv) a license fee measured by the
rent payable under this Lease, then all such taxes, assessments,
levies, impositions and/or charges, or the part thereof so measured
or based shall be deemed to be included in the general real estate
taxes and assessments payable by Tenant pursuant to Section 10 of
the Lease, to the extent, that such taxes, assessments, levies,
impositions and charges would be payable if the Premises were the
only property of Landlord subject thereto, and Tenant shall pay and
discharge the same as herein provided in respect of the payment of
general real estate taxes and assessments.
8. Effective April 1, 1986, Section 12 of the Lease is amended to
read as follows:
12. Public Liability Insurance. Tenant shall at all times during the
term hereof, at its sole expense, maintain general public liability
insurance against claims for bodily injury, death or property damage
occuring in, on, or about the Demised Premises. Such insurance shall
afford protection to Landlord and Tenant, with coverage in amounts
of not less than $1,000,000 with respect to bodily injury or death
of any one person, $3,000,000 with respect to bodily injury or death
of more than one person in any one incident, and $100,000 with
respect to damage to property of others in one incident. The
policies for such insurance shall name Landlord as a co-insured
thereunder.
9. Section 22 of the Lease is hereby amended to include the
following paragraph:
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<PAGE> 6
Tenant shall promptly execute such documents, including amendments
to this Lease, as may be reasonably requested by Landlord's
mortgagee.
10. Except as herein, amended, all of the terms and conditions of
the Lease are ratified and confirmed.
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the day and year first above written.
WITNESS: TETERBORO ASSOCIATES
/s/ Margaret T. McAuley By: /s/ [ILLEGIBLE]
- ---------------------------- --------------------
ATTEST: MISS ERIKA, INC.
/s/ A.S. Goldberg By: /s/ Sid Goldstein
- ---------------------------- --------------------
/s/ Stuart Alpert
-6-
<PAGE> 7
[GRAPHIC OMITTED]
FLOOR PLAN
<PAGE> 1
Exhibit 10.52 (f)
AMENDMENT TO LEASE
THIS AGREEMENT made this 8 day of August, 1985, by and between
TETERBORO ASSOCIATES, a New Jersey limited partnership, having its principal
office at 84 Orient Way, Rutherford, New Jersey 07070 (the "Landlord") and MISS
ERIKA, INC., having an office at 1407 Broadway, New York, New York (the
"Tenant").
W I T N E S S E T H:
WHEREAS, on April 1, 1975, Empire Carpet Corporation ("Empire") and
Tenant entered into a lease for premises (the "Demised Premises") located at 333
North Street, Teterboro, New Jersey (said lease and the Lease Modification And
Extension Agreement and all letters amending said lease hereinafter mentioned
being hereinafter referred to as the "Lease"); and
WHEREAS, by letter dated January 17, 1978, the Lease was extended
for a three-year period commencing April 1, 1978; and
WHEREAS, by letter dated February 17, 1981, the Lease was extended
for an additional five-year period commencing April 1, 1981; and
WHEREAS, by letter dated March 5, 1982, the Lease was amended to
provide that the Demised Premises include an additional 9,600 square feet of
warehouse space; and
WHEREAS, by letter dated August 15, 1983, the Lease was amended to
provide that the Demised Premises include an
<PAGE> 2
additional 21,600 square feet of warehouse space (i.e., a total of 52,800 square
feet; and
WHEREAS, the Lease was assigned by Armstrong World Industries, Inc.
(as the successor-in-interest to Empire) to Landlord by Assignment dated March
7, 1984; and
WHEREAS, by Lease Modification And Extension Agreement dated January
24, 1985, the Lease was extended through March 31, 1991 and was modified in
various other respects; and
WHEREAS, the parties are desirous of amending the Lease in order to
provide for the leasing by Landlord to Tenant of an additional 50,400 square
feet of space (the "Additional Premises") as designated on Exhibit A attached
hereto and made a part hereof and which space is adjacent to the Demised
Premises and is presently occupied by Springfield Instrument ("Springfield").
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein contained, the parties do hereby agree as
follows:
1. Landlord leases to Tenant, and Tenant rents from Landlord, in
addition to the Demised Premises, the Additional Premises. It is understood that
the term of the Lease for the Additional Premises shall commence the day
following Springfield vacating the Additional Premises (the "Commencement
Date"), and thereafter be coincidental with the term of the Lease, that is,
ending March 31, 1991. Tenant agrees to accept the Additional Premises on the
Commencement Date in its then "as
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<PAGE> 3
is" condition, Landlord having no obligation to make any restoration or repair.
2. Section 1 of the Lease is amended to provide that, effective as
of the Commencement Date, the phrase "the Demised Premises" shall be deemed to
mean and refer to the aggregate leased space constituting the Demised Premises
and the Additional Premises, except as the context otherwise requires.
3. Section 4 of the Lease is amended to provide, that in addition to
the Minimum Rent currently provided for, Tenant covenants to pay Landlord,
without previous demand therefor, a Minimum Rent for the Additional Premises of
$244,440.00, payable in equal monthly installments of $20,370.00, based upon the
payment of $4.85 per square foot, in advance commencing on the Commencement
Date; provided, however, that the Minimum Rent for the Additional Premises shall
be increased five (5%) percent per annum as follows:
Commencing The Minimum Rent for the
---------- Additional Premises shall
-------------------------
April 1, 1987 $256,662.00
April 1, 1988 269,495.10
April 1, 1989 282,969.85
April 1, 1990 297,118.34
4. Section 4A(c) is hereby amended to read as follows:
(c) Tenant's proportionate share is agreed to be 47.3%, based on the
ratio of square footage of the Demised Premises (103,200 sq. ft.) to
the square footage of the entire building (218,000 sq. ft.).
5. Section 5 is amended to read as follows:
Use. (a) Tenant covenants and agrees to continuously use and occupy
the Demised Premises solely for the purpose of general
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<PAGE> 4
warehousing and offices and represents and covenants that such use
and occupancy shall be in compliance with all applicable laws,
ordinances, requirements and regulations of any governmental
authority having jurisdiction, including the responsibility of
obtaining any permits or approvals for its use of the Demised
Premises.
(b) Tenant acknowledges that there are federal, state and local
laws, regulations and guidelines, and that additional laws,
regulations and guidelines may hereafter be enacted relating to or
affecting the Demised Premises and concerning the impact on the
environment of construction, land use, the maintenance and operation
of structures, and the conduct of business. Tenant will not cause or
permit to be caused by Tenant or its agents, servants, invitees and
employees, any act or practice, by negligence, omission or
otherwise, that would adversely affect the environment or that would
violate any of said laws, regulations or guidelines and agrees to
comply with all said laws, regulations and guidelines.
(c) Tenant agrees to indemnify and hold Landlord harmless from and
against all liability, claims and demands on account of personal
injuries or property loss or damage of any kind whatsoever which
arise out of or are in any manner connected with Tenant's use and
occupancy of the Demised Premises, including, but not limited to,
any damage due to violations of any environmental laws and
regulations.
6. With respect to the Additional Premises only, Tenant agrees to
pay to Landlord as additional rent all real taxes and assessments or substitutes
therefor upon, applicable, attributable or reasonably allocable to the
Additional Premises or any part thereof for any tax year or other tax period or
partial tax year or period during the term hereof (i.e. Tenant agrees to pay
23.1% of the total tax bill for the building and
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<PAGE> 5
lot on which the building is situated). Said taxes and assessments shall be paid
by Tenant to Landlord within ten (10) days of Tenant's receipt of a copy of the
tax bill and the invoice therefor from Landlord. Tenant shall also pay to
Landlord the amount of all assessments, impositions and taxes made, levied or
assessed against or imposed upon any and all improvements in, on or about the
Additional Premises which were made by or on behalf of Tenant or which in whole
or part belong to Tenant. In the event landlord receives any tax refunds or
rebates allocable to the Additional Premises, Tenant shall be entitled to
receive that portion of such tax refunds or rebates allocable to the term of
this Lease less a proportionate share of Landlord's legal fees and expenses
incurred relating to any tax contest or proceeding pursuant to which said tax
refunds or rebates were paid. With respect to the remainder of the Demised
Premises, Tenant shall be obligated to pay real estate taxes in accordance with
Section 10 of the Lease.
7. Tenant has this day deposited with the landlord the sum of
$40,740.00 as security for the payment of the rent hereunder and the full and
faithful performance by the Tenant of the covenants and conditions on the part
of the Tenant to be performed. Said sum shall be returned to the Tenant, with
interest, after the expiration of the term hereof, provided that the Tenant has
fully and faithfully performed all such covenants and conditions and is not in
arrears in rent or other amounts payable under this Lease. During the term
hereof, the
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<PAGE> 6
Landlord may, if the Landlord so elects, have recourse to such security, to make
good any default by the Tenant, in which event the Tenant shall, on demand,
promptly restore said security in its original amount. Liability to repay said
security to the Tenant shall run with the reversion and title to said premises,
whether any change in ownership thereof be by voluntary alienation or as the
result of judicial sale, foreclosure or other proceedings, or the exercise of a
right of taking or entry by any mortgagee. The Landlord shall assign or transfer
said security, for the benefit of the Tenant, to any subsequent owner or holder
of the reversion or title to said premises, in which case the assignee shall
become liable for the repayment thereof as herein provided, and the assignor
shall be deemed to be released by the Tenant from all liability for such
security. This provision shall be applicable to every alienation or change in
title and shall in no wise be deemed to permit the Landlord to retain the
security after termination of the Landlord's ownership or the reversion of
title. The Tenant shall not mortgage, encumber or assign said security without
the written consent of the Landlord.
8. Tenant agrees to promptly furnish Landlord a certificate of
insurance evidencing the public liability insurance required under Section 12
for the Demised Premises and naming Landlord as an additional insured. The
insurance policy maintained pursuant to Section 12 shall contain a provision
that such policy shall not be cancelled unless the Landlord
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<PAGE> 7
is notified at least fifteen (15) days prior to such cancellation. At least
fifteen (15) days prior to the expiration of any such policy, the Tenant shall
furnish evidence that such policy has been renewed or replaced. No such
insurance policy shall contain a co-insurance clause without the prior written
consent of the Landlord.
9. Section 16 of the Lease is hereby amended to read as follows:
If the Tenant requests the Landlord's consent to an assignment of
the lease or subletting of all or part of the Demised Premises, it shall submit
to the Landlord in writing the name of the proposed assignee or subtenant, and
the nature and character of the business of the proposed assignee or subtenant.
The Landlord shall have the option (to be exercised within thirty (30) days from
the submission of Tenant's written request) to cancel the lease as to the
specific portion of the Demised Premises to be sublet or assigned only as of the
commencement date stated in the above-mentioned sublet or assignment. If the
Landlord elects to cancel the within lease as stated, then, the term, tenancy
and occupancy of the said premises, under said lease or otherwise, shall cease,
determine, expire, and come to an end as if the cancellation date was the
original termination date of the within lease, and all rent and additional rent
be proportionately reduced.
If the Landlord shall not exercise its option within the time set
forth above, its consent to any such proposed assignment or subletting shall not
be unreasonably withheld provided:
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<PAGE> 8
(i) That the Tenant is not then in default, beyond any applicable
cure period under any of the terms, covenants, conditions,
provisions or agreements of this lease;
(ii) That the Tenant while in possession does not simultaneously
sublet to more than one subtenant;
(iii) That neither such sublease or assignment nor Landlord's
consent thereto, shall release or discharge the Tenant of or from
any liability, whether past, present or future, under this lease;
(iv) That the Tenant shall continue to be fully liable under this
lease without notice being required from the Landlord of default
under or in respect of any of the terms, covenants, conditions,
provisions or agreements of this lease;
(v) That any assignee shall agree to perform faithfully and be bound
by all of the terms, conditions, covenants, provisions and
agreements of this lease for the period covered by the assignment,
and that a duly executed copy of the assignment and assumption shall
be submitted to Landlord for approval prior to execution, which
approval shall not be unreasonably withheld;
(vi) That any sublease shall contain a provision making such
sublease subject to the terms and conditions of this lease; and
(vii) That should Tenant receive a higher rent than that provided in
the lease, the excess shall be remitted to Landlord.
10. Section 24 of the Lease is hereby amended to provide that all
notices shall be given to the Landlord at:
Teterboro Associates
84 Orient Way
Rutherford, New Jersey 07070
Attention: Stuart Alpert
11. The effectiveness of this Amendment to Lease
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<PAGE> 9
is subject to and contingent upon the termination of Springfield's lease and its
vacating the Additional Premises. In the event Springfield's lease is not
terminated and the Additional Premises vacated by Springfield by October 1,
1986, either party upon notice to the other shall have the right to terminate
this Amendment to Lease and neither party shall have any further liability with
respect to the Additional Premises.
12. Tenant represents that it has dealt with no brokers in
connection with the transaction contemplated hereby and will indemnify Landlord
from the claims of any brokers arising by reason of the execution of this
Amendment or the consummation of the transaction contemplated hereby.
13. Except as herein amended, all of the terms and conditions of the
Lease are ratified and confirmed and shall be deemed to apply to both the
Demised Premises and the Additional Premises.
IN WITNESS WHEREOF, the parties have executed this agreement as of
the day and year first above written.
WITNESS: TETERBORO ASSOCIATES
/s/ D.S. Goldberg By: /s/ C. Terance Kern
- ------------------ ------------------------
ATTEST: MISS ERIKA, INC.
/s/ D.S. Goldberg By: /s/ Stuart Alpert
- ------------------ ------------------------
-9-
<PAGE> 1
Exhibit 10.52 (g)
SECOND LEASE MODIFICATION AND EXTENSION AGREEMENT
THIS AGREEMENT made this 18th day of December, 1986, by and between
TETERBORO ASSOCIATES, a New Jersey limited partnership having its principal
office at 90 Main Street, Hackensack, New Jersey 07601 ("Landlord") and MISS
ERIKA, INC., having an office at 1407 Broadway, New York, New York ("Tenant").
W I T N E S S E T H:
WHEREAS, on April 1, 1975, Empire Carpet Corporation ("Empire")
and Tenant entered into a lease for premises located at 333 North Street,
Teterboro, New Jersey (said lease and the Lease Modification and Extension
Agreement, the Amendment to Lease and all letters amending said lease
hereinafter mentioned being hereinafter referred to as the "Lease"; and
WHEREAS, by letter dated January 17, 1978, the Lease was extended
for a three-year period commencing April 1, 1978; and
WHEREAS, by letter dated February 17, 1981, the Lease was extended
for an additional five-year period commencing April 1, 1981; and
WHEREAS, by letter dated March 5, 1982, the Lease was amended to
provide that the premises initially demised include an additional 9,600 square
feet of warehouse space; and
WHEREAS, by letter dated August 15, 1983, the Lease was amended to
provide that the premises initially demised include an
<PAGE> 2
additional 21,600 square feet of warehouse space (i.e., a total of 52,800 square
feet -- the "Initial Space"); and
WHEREAS, the Lease was assigned by Armstrong World Industries, Inc.
(as successor-in-interest to Empire) to Landlord by Assignment dated March 7,
1984; and
WHEREAS, by Lease Modification and Extension Agreement dated January
24, 1985, the lease was extended through March 31, 1991 and was modified in
various other respects; and
WHEREAS, by Lease Amendment dated August 8, 1985, the Lease was
amended to provide that the Initial Space include an additional 50,400 square
feet of warehouse space (the "Additional Space") (i.e., a total of 103,200
square feet) and was modified in various respects; and
WHEREAS, the parties are desirous of amending the Lease in order to
provide for the leasing by Landlord to Tenant of an additional 67,500 square
feet of space (the "Expansion Space") as designated on Exhibit A attached hereto
and made a part hereof and which space is adjacent to the Initial Space and
formerly occupied by Mohasco, Inc. and Perugina Chocolates and Confections, Inc.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein contained the parties do hereby agree as
follows:
1. Landlord leases to Tenant, and Tenant rents from Landlord, in
addition to the premises already demised, the
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<PAGE> 3
Expansion Space. It is understood that the term of the Lease for the Expansion
Space shall commence January 1, 1987 (the "Commencement Date") and shall
terminate on December 31, 1992 (the "Expiration Date"). Tenant agrees to accept
the Expansion Space on the Commencement Date in its then "as is" condition,
Landlord having no obligation to make any restoration or repair.
2. Section 1 of the Lease is amended to provide that (i) effective
as of the Commencement Date, the phrase "the Demised Premises" shall be deemed
to mean and refer to the aggregate leased space constituting the Initial Space,
the Additional Space and the Expansion Space, except as the context otherwise
requires, and (ii) the words "6 parking spaces" appearing in line 8 of Section 1
is hereby deleted and "57 parking spaces'substituted therefor.
3. Section 2 is hereby amended to provide that the term of the Lease
is extended for a period of twenty-one (21) months so that the term of the Lease
shall expire at midnight on December 31, 1992; it being the intent of the
parties that the expiration date the term in respect of the Initial Space, the
Additional Space and the Expansion Space shall be December 31, 1992.
4. Section 4 of the Lease is hereby deleted and amended and restated
as follows:
(a) Tenant covenants to pay Landlord, without previous
demand therefor, a minimum annual rental ("Minimum Rent") with
respect to the Initial Space of $237,600.00, payable in equal
monthly installments of $19,800, based upon the payment of
$4.50 per square foot, in advance on the first day of each
month commencing on April 1, 1986, provided, however that the
Minimum Rent for the
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<PAGE> 4
Initial Space shall be increased five (5%) per cent per annum
as follows:
<TABLE>
<CAPTION>
Minimum Rent for Initial
Commencing Premises shall be
---------- -----------------
<S> <C>
April 1, 1987 $249,480.00
April 1, 1988 261,954.00
April 1, 1989 275,051.70
April 1, 1990 288,804.29
April 1, 1991 303,244.50
April 1, 1992 238,808.04 (pro rated
for nine
months)
</TABLE>
(b) Tenant covenants to pay Landlord, without previous demand
therefor, a Minimum Rent with respect to the Additional Space
of $244,440.00, payable in equal monthly installments of
$20,370.00, based upon the payment of $4.85 per square foot in
advance on the first day of each month commencing on April 1,
1986; provided, however, that the Minimum Rent for the
Additional Space shall be increased five (5%) percent per
annum as follows:
<TABLE>
<CAPTION>
The Minimum Rent for the
Commencing Additional Premises shall be
---------- ----------------------------
<S> <C>
April 1, 1987 $256,662.00
April 1, 1988 269,495.10
April 1, 1989 282,969.85
April 1, 1990 297,118.34
April 1, 1991 311,974.26
April 1, 1992 245,679.73 (pro rated
for nine
months)
</TABLE>
(c) Tenant covenants to pay Landlord, without previous demand
therefor, a Minimum Rent with respect to the Expansion Space
of $371,250.00, payable in equal monthly installments of
$30,937.50, based upon the payment of $5.50 per square foot,
in advance on the first day of each month commencing on
January 1, 1987, provided, however that the
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<PAGE> 5
Minimum Rent for the Expansion Space shall be increased five
(5%) percent per annum as follows:
<TABLE>
<CAPTION>
The Minimum Rent for the
Commencing Expansion Space shall be
<S> <C>
April 1, 1988 $389,812.50
April 1, 1989 409,303.12
April 1, 1990 429,768.28
April 1, 1991 451,256.69
April 1, 1992 355,364.64 (pro rated
for nine
months)
</TABLE>
Accordingly, pursuant to the foregoing, the gross Minimum Rent
payable in respect of the Demised Premises shall be as follows, effective
January 1, 1987:
<TABLE>
<S> <C> <C> <C>
1. 1/1/87 - 3/31/87 : $ 213,322.50 = $71,107.50
2. 4/1/87 - 3/31/88 : $ 877,392.00 = 73,116.00
3. 4/1/88 - 3/31/89 : $ 921,261.60
4. 4/1/89 - 3/31/90 : $ 967,324.67 = 76,771.80
5. 4/1/90 - 3/31/91 : $1,015,690.91 = 84,640.91
6. 4/1/91 - 3/31/92 : $1,066,415.45 = 88,872.95
7. 4/1/92 - 12/31/92 : $ 839,852.41 = 93,316.93
</TABLE>
5. Section 4A(c) of the Lease is hereby deleted and the following
substituted therefor:
(c) Tenant's proportionate share is agreed to be 78.30% based on
the ratio of square footage of the Demised Premises (170,700
sq. ft.) to the square footage of the entire building (218,000
sq. ft.).
6. On. January 7, 1987 Tenant shall deposit as security (the
"Security") with Landlord a letter of credit (the "Letter of
Credit"), issued by a bank satisfactory to Landlord, in form and substance
substantially similar to the form of letter of credit attached hereto and made a
part hereof as Exhibit "B", in the
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<PAGE> 6
amount (in United States Dollars) of Seven Hundred Fifty Thousand and 00/100
Dollars ($750,000.00) during the term hereof plus a period of thirty (30) days
following the expiration or sooner termination of the term of this Lease. The
Letter of Credit shall (i) specify that it is irrevocable and, at the direction
of Landlord, transferable to Landlord's successors and assigns of Landlord's
interest under this Lease, at Tenant's sole cost and expense, (ii) be addressed
to Landlord, (iii) be payable upon each presentation of a sight draft,
accompanied by a statement signed by an authorized official of Landlord that the
amount represented by the sight draft is due and owing and has not been paid,
and (iv) be payable subject to the aggregate amount thereof from the date of
issuance up to a date which is not less than one year from the date of issuance.
Tenant shall, not later than thirty (30) days prior to the expiration of the
Letter of Credit or any replacements, substitutions or extensions thereof, as
the case may be, furnish Landlord with a new Letter of Credit in accordance with
the foregoing or an extension of the Letter of Credit then in effect. Upon an
event of default (after the giving of the applicable notice and the expiration
of the applicable grace period, if any) under this Lease or if Tenant fails to
furnish a new letter of credit or an extension as aforesaid within thirty (30)
days prior to the expiration of the Letter of Credit or any replacement or
extension thereof, Landlord, may immediately and without notice to Tenant, draw
upon the Letter of Credit and hold the proceeds thereof in accordance with the
provisions of this Paragraph.
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<PAGE> 7
Landlord may use, apply or retain the whole or any part of the
Security so deposited (and the interest accrued thereon if the Letter of Credit
shall be drawn down pursuant to the provisions hereof) to the extent required
for the payment of any Minimum Rent, Additional Rent or any other sums as to
which Tenant is in default in respect of any of the terms, covenants or
conditions of this Lease, including but not limited to, any damages or
deficiency in the reletting of the Demised Premises, whether such damages or
deficiency accrued before or after summary proceedings or other re-entry by
Landlord. In the event that Tenant shall fully and faithfully comply with all of
the terms, provisions, covenants and conditions of this Lease, the Security,
including the letter of credit so deposited shall be returned to Tenant after
(a) the expiration of this Lease and (b) delivery of exclusive possession of the
entire Demised Premises to Landlord in accordance with the provisions of this
Lease.
Simultaneously with the deposit of the Security with Landlord by
Tenant, Landlord shall return to Tenant any security deposit previously held by
Landlord under this Lease.
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<PAGE> 8
8. Paragraph 10 of the Lease and Paragraph 6 of the Amendment to
Lease are hereby deleted and the following substituted therefor effective
January 1, 1987:
10. Real Estate Taxes. Landlord shall remit, when due and payable,
all real estate taxes and assessments or substitutes therefor
upon, applicable or attributable or reasonably allocable to
the entire property of which the Demised Premises form a part.
Tenant agrees to pay to Landlord as Additional Rent (in
addition to that set forth in Section 4A hereof) all real
estate taxes and assessments or substitutes therefor upon,
applicable, attributable or reasonably allocable to the
Demised Premises or any part thereof for any tax year or other
tax period or partial tax year or period during the term
hereof (i.e. Tenant agrees to pay 78.30% of the total tax
bill for the building and lot on which the building is
situated). Said taxes and assessments shall be paid by Tenant
to Landlord within 30 days of Tenant's receipt of a copy of
the tax bill and the invoice therefor from Landlord. Tenant
shall also pay to Landlord the amount Tenant proportional
share of all assessments, impositions and taxes made, levied
or assessed against or imposed upon any and all improvements
in, on or about the Demised Premises which were made by or on
behalf of Tenant or which in whole or part belong to Tenant.
In the event Landlord receives any tax refunds or rebates
allocable to the Demised Premises, Tenant shall be entitled to
receive that portion of such tax refund or rebate allocable to
the term of this
-8-
<PAGE> 9
Lease less a proportionate share of Landlord's reasonable
legal fees and expenses incurred relating to any tax contest
or proceeding pursuant to which said tax refund or rebate was
paid.
9. Section 16 (vii) is hereby deleted and the following substituted
therefor:
(vii) Tenant shall pay to Landlord one-half (1/2) of the amount by
which the Minimum Rent under the assignment or subletting exceeds
the Minimum Rent payable under this Lease.
10. Section 24 of the Lease is hereby amended to provide that all
notices shall be given to the Tenant at:
Miss Erika, Inc. with copies to:
1407 Broadway Smith, Steibel, Alexander &
New York, New York 10018 Saskor, P.C.
Attn: Mr. Sidney Goldstein 460 Park Avenue
New York, New York 10022
and to the Landlord at:
Teterboro Associates
90 Main Street
Hackensack, New Jersey 07601
Attn: Stuart R. Alpert
11. Section 27 of the Lease is hereby deleted.
12. Tenant represents that it has dealt with no brokers in
connection with the transaction contemplated hereby and will indemnify Landlord
from the claims of any brokers arising by reason of the execution of this Second
Lease Modification and Extension Agreement on the consummation of the
transaction contemplated hereby.
13. Landlord undertakes to use all reasonable efforts to obtain from
its mortgage lender, Massachusetts Mutual Life Insurance Company, or any other
mortgage lender a non-disturbance agreement in favor of Tenant and in respect of
its leasehold hereunder.
14. Landlord represents to Tenant that the Initial Space, the
Additional Space and the Expansion Space constitute not less than 78.3% of the
-9-
<PAGE> 10
entire rentable square footage of the building located at 333 North Street,
Teterboro, New Jersey.
15. Except as herein amended all of the terms and conditions of the
Lease are ratified and confirmed and shall be deemed to apply to Demised
Premises, as expanded by the Expansion Space.
IN WITNESS WHEREOF, the parties have executed this agreement as of
the day and year first above written.
WITNESS TETERBORO ASSOCIATES
By NANCY REALTY CORP., GENERAL PARTNER
/s/ Stuart Alpert By: /s/ C. Lawrence Keller
- ---------------------------- ----------------------------
C. Lawrence Keller, Pres.
ATTEST: MISS ERIKA, INC.
/s/ [ILLEGIBLE] - Controller BY: /s/ SG Sid Goldberg
- ---------------------------- ----------------------------
-10-
<PAGE> 11
EXHIBIT B
FORM OF LETTER OF CREDIT
TETERBORO ASSOCIATES
90 Main Street
Hackensack, New Jersey 07602
Re: Irrevocable and transferable Letter of Credit No.________
For U.S. $750,000.00
Gentlemen:
We hereby issue our Irrevocable and transferable Letter of Credit
No. _________ in favor of Teterboro Associates for the account of Miss Erika,
Inc.
We undertake to honor your draft or drafts at sight on us not
exceeding U.S. $750,000.00 in the aggregate when accompanied by:
Statement signed by either of Messrs. Alpert or Keller or the
successor to either of them on letterhead of Teterboro Associates
that the amount of the accompanying draft is due and owing by Miss
Erika, has not been paid to Teterboro Associates.
This Letter of Credit is valid until Jan. 30, 1993 and drafts drawn hereunder,
when accompanied by the statement referred to above, will be honored if
presented to us at our office at _______________________ on or before that date.
All drafts must be marked "Drawn under Letter of Credit No. ________
dated _____________.
There are no other conditions to this Letter of Credit. Very truly
Very truly yours,
(Name of Bank)
By /s/ Illegible
---------------------
(title)
<PAGE> 1
Exhibit 10.52 (h)
THIRD LEASE MODIFICATION AND EXTENSION AGREEMENT
THIS AGREEMENT made this 18th day of January, 1989, by and between
TETERBORO ASSOCIATES, a New Jersey limited partnership having its principal
office at 90 Main Street, Hackensack, New Jersey 07601 ("Landlord") and MISS
ERIKA, INC., having an office at 1407 Broadway, New York, New York ("Tenant").
W I T N E S S E T H:
WHEREAS, on April 1, 1975, Empire Carpet Corporation ("Empire") and
Tenant entered into a lease for premises o located at 333 North Street,
Teterboro, New Jersey (said lease and the Lease Modification and Extension
Agreement, the Amendment to Lease and all letters o amending said lease
hereinafter mentioned being hereinafter referred to as the "Lease"; and
WHEREAS, by letter dated January 17, 1978, the Lease was extended
for a three-year period commencing April 1, 1978; and
WHEREAS, by letter dated February 17, 1981, the Lease was extended
for an additional five-year period commencing April 1, 1981; and
WHEREAS, by letter dated March 5, 1982, the Lease was amended to
provide that the premises initially demised include an additional 9,600 square
feet of warehouse space; and
<PAGE> 2
WHEREAS, by letter dated August 15, 1983, the Lease was amended to
provide that the premises initially demised include an additional 21,600 square
feet of warehouse space (i.e., a total of 52,800 square feet -- the "Initial
Space"); and
WHEREAS, the Lease was assigned by Armstrong World Industries, Inc.
(as successor-in-interest to Empire) to Landlord by Assignment dated March 7,
1984; and
WHEREAS, by Lease Modification and Extension Agreement dated January
24, 1985, the Lease was extended through March 31, 1991 and was modified in
various, other respects; and
WHEREAS, by Lease Amendment dated August 8, 1985, the Lease was
amended to provide that the Initial Space include an additional 50,400 square
feet of warehouse space (the "Additional Space") (i.e., a total of 103,200
square feet) and was modified in various respects; and
WHEREAS, by Second Lease Modification and Extension Agreement dated
December 18, 1986, the Lease was amended to add to the Initial Space and the
Additional Space some 67,500 square feet of space (the "Expansion Space") (i.e.,
a total of 170,700 square feet) (the Initial Space, Additional Space and
Expansion Space hereinafter collectively referred to as the "Demised Premises"),
extended through December 31, 1992 and was modified in various other respects.
-2-
<PAGE> 3
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein contained the parties do hereby agree as
follows:
1. Section 2 of the Lease is hereby amended to provide that the term
of the Lease is extended for a period of four years so that the term of the
Lease shall, expire at midnight on December 31, 1996.
2. Section 4 of the Lease is hereby deleted and amended and restated
as follows:
(a) Tenant covenants to pay Landlord, without previous
demand therefor, a minimum annual rental ("Minimum Rent") with
respect to the Initial Space of $237,600.00, payable in equal
monthly installments of $19,800, based upon the payment of
$4.50 per square foot, in advance on the first day of each
month commencing on April 1, 1986, provided, however that the
Minimum Rent for the Initial Space shall be increased five
(5%) per cent per annum as follows:
<TABLE>
<CAPTION>
Minimum Rent for Initial
Commencing Premises shall be
---------- ------------------------
<S> <C>
April 1, 1987 $249,480.00
April 1, 1988 261,954.00
April 1, 1989 275,051.70
April 1, 1990 288,804.29
April 1, 1991 303,244.50
April 1, 1992 318,406.73
April 1, 1993 334,327.07
April 1, 1994 351,043.42
April 1, 1995 368,595.59
April 1, 1996 290,269.03*
</TABLE>
* - prorated for 9 months
(b) Tenant covenants to pay Landlord, without previous demand
therefor, a Minimum Rent with respect to the Additional Space
of $244,440.00, payable in equal
-3-
<PAGE> 4
monthly installments of $20,370.00, based upon the payment of
$4.85 per square foot in advance on the first day of each
month commencing on April 1, 1986; provided, however, that the
Minimum Rent for the Additional Space shall be increased five
(5%) percent per annum as follows:
<TABLE>
<CAPTION>
The Minimum Rent for the
Commencing Additional Premises shall be
---------- ----------------------------
<S> <C>
April 1, 1987 $256,662.00
April 1, 1988 269,495.10
April 1, 1989 282,969.85
April 1, 1990 297,118.34
April 1, 1991 311,974.26
April 1, 1992 327,572.97
April 1, 1993 343,951.62
April 1, 1994 361,149.20
April 1, 1995 379,206.66
April 1, 1996 298,625.24*
</TABLE>
* - prorated for 9 months
(c) Tenant covenants to pay Landlord, without previous demand
therefore, a Minimum Rent with respect to the Expansion Space
of $371,250.00, payable in equal monthly installments of
$30,937.50, based upon the payment of $5.50 per square foot,
in advance on the first day of each month commencing on
January 1, 1987, provided, however that the Minimum Rent for
the Expansion Space shall be increased five (5%) percent per
annum as follows:
<TABLE>
<CAPTION>
The Minimum Rent for the
Commencing Expansion Space shall be
---------- ------------------------
<S> <C>
April 1, 1988 $389,812.50
April 1, 1989 409,303.12
April 1, 1990 429,768.28
April 1, 1991 451,256.69
April 1, 1992 473,819.52
April 1, 1993 497,510.50
April 1, 1994 522,386.03
April 1, 1995 548,505.33
April 1, 1996 431,542.95*
</TABLE>
* - prorated for 9 months
-4-
<PAGE> 5
Accordingly, pursuant to the foregoing, the gross Minimum Rent
payable in respect of the Demised Premises shall be as follows:
<TABLE>
<S> <C> <C>
1. 4/1/88 - 3/31/89 : $ 921,261.60
2. 4/1/89 - 3/31/90 : $ 967,324.67
3. 4/1/90 - 3/31/91 : $1,015,690.91
4. 4/1/91 - 3/31/92 : $1,066,475.45
5. 4/1/92 - 3/31/93 : $1,119,799.22
6. 4/1/93 - 3/31/94 : $1,175,789.19
7. 4/1/94 - 3/31/95 : $1,234,578.65
8. 4/1/95 - 3/31/96 : $1,296,307.58
9. 4/1/96 - 12/31/96 : $1,020,437.22
</TABLE>
3. Tenant represents that it has dealt with no brokers in connection
with the transaction contemplated hereby and will indemnify Landlord from the
claims of any brokers arising by reason of the execution of this Third Lease
Modification and Extension Agreement on the consummation of the transaction
contemplated hereby.
4. Except as herein amended, all of the terms and conditions of the
Lease are ratified and confirmed.
IN WITNESS WHEREOF, the parties have executed this
-5-
<PAGE> 6
agreement as of the day and year first above written.
ATTEST: TETERBORO ASSOCIATES
By: Nancy Realty Corp.
General Partner
/s/ Lorraine Sudner By: /s/ C. Lawrence Keller
- ------------------------ ---------------------------
ATTEST: MISS ERIKA, INC
/s/ [ILLEGIBLE] By: /s/ Sid Goldberg
- ------------------------ ---------------------------
-6-
<PAGE> 1
Exhibit 10.52 (i)
FOURTH LEASE MODIFICATION AND EXTENSION AGREEMENT
THIS AGREEMENT (the "Agreement") made this day of June, 1991, by and
between TETERBORO ASSOCIATES, a New Jersey limited partnership, having its
principal office at 90 Main Street, Hackensack, New Jersey 07601 (the
"Landlord") and MISS ERIKA, INC., having an office at 1407 Broadway, New York,
New York ("Tenant").
W I T N E S S E T H:
WHEREAS, on April 1, 1975, Empire Carpet Corporation, ("Empire") and
Tenant entered into a lease for premises located at 333 North Street, Teterboro,
New Jersey (the "Initial Lease"); and
WHEREAS, by letters dated January 17, 1978 and February 17, 1981, the
Initial Lease was extended to March 30, 1986; and
WHEREAS, the Initial Lease as so extended was further modified by letters
dated March 5, 1982 and August 15, 1983 adding a total of 31,200 square feet of
warehouse space to the space initially demised; and
WHEREAS, the Initial Lease as so extended and modified was assigned by
Armstrong World Industries, Inc. (as the successor-in-interest to Empire) to
Landlord by Assignment dated March 7, 1984; and
WHEREAS, the Initial Lease as so extended and modified was further
modified and extended pursuant to Lease Modification and Extension Agreement
dated January 24, 1985, pursuant to which, inter alia, the lease term was
further extended to March 31, 1991; and
WHEREAS, by Lease Amendment dated August 8, 1985 (the "August 8, 1985
Agreement"), the Initial Lease as so amended and modified was further modified
to add an additional 50,400 square feet of warehouse space to the space
previously demised and was modified in various other respects; and
WHEREAS, by Second Lease Modification and Extension Agreement dated
December 18, 1986 (the "1986 Agreement"), the Initial Lease as so amended and
modified was further modified to add an additional 67,500 square feet of space
to the space previously demised, for a total of 170,700 square feet comprising
and constituting the "Demised Premises", extending the term of the lease through
December 31, 1992 and was modified in various other respects; and
WHEREAS, by Third Lease Modification and Extension Agreement dated January
18, 1989, the Initial Lease as so amended and modified was further modified to
extend the term of the lease through December 31, 1996 and was modified in
various other
<PAGE> 2
respects (the Initial Lease as so modified and extended as described in this and
the foregoing "WHEREAS" clauses is hereinafter referred to as the "Lease").
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements herein contained the parties do hereby agree as follows:
1. The foregoing "WHEREAS" clauses are incorporated herein by reference.
2. Section 2 of the Lease is hereby amended to provide that the term of
the Lease is further extended for a period of five (5) years so that the term of
the Lease shall expire at midnight on December 31, 2001.
3. Section 4 of the Lease is amended and restated as follows:
Tenant covenants to pay Landlord, without previous demand therefor, a
minimum annual rental ("Minimum Rent") with respect to the Demised Premises,
effective as of July 1, 1991, payable in equal monthly installments, in advance
on the first day of each and every month during the term hereof, as follows:
<TABLE>
<CAPTION>
Commencing Minimum Rent Minimum Rent
(Per Annum) (Per Month)
---------- ----------- -----------
<S> <C> <C>
July 1, 1991 $1,066,475.40 $88,872.95
July 1, 1992 $1,066,475.40 $88,872.95
July 1, 1993 $1,066,475.40 $88,872.95
July 1, 1994 $1,098,469.60 $91,539.14
July 1, 1995 $1,131,423.60 $94,285.30
July 1, 1996 $1,187,994.70 $98,999.56
July 1, 1997 $1,167,994.70 $98,999.56
July 1, 1998 $1,187,994.70 $98,999.56
July 1, 1999 $1,223,634.50 $101,969.54
July 1, 2000
through the end
of the term $1,260,343.50 $105,028.63
</TABLE>
4. The following additional paragraph is hereby added at the end of and
forming a part of Section 7 of the Lease (as appearing in the Initial Lease at
Page 7.1 thereof):
Landlord agrees that it shall not unreasonably withhold or delay its
consent to any alterations proposed by and to be performed solely at the expense
of Tenant. Notwithstanding anything to the contrary herein, Tenant shall not be
required to obtain Landlord's prior written consent for minor non-structural
alterations. All alterations which are structural in character or which affect
the mechanical, electrical or HVAC systems must
-2-
<PAGE> 3
receive Landlord's prior written consent. Tenant shall furnish Landlord with
outline plans and specifications for all alterations prior to the performance of
the work. In addition, Tenant shall provide Landlord with "as-built" plans for
any and all alterations, immediately after completion thereof. Tenant agrees
that any alterations shall be done in a good and workmanlike manner and in
conformity with all laws, ordinances and regulations of all public authorities
having jurisdiction. In addition, all Tenant alterations shall consist of
quality materials installed in a good and workmanlike manner. Tenant agrees to
pay promptly when due the entire cost of any work done by or for Tenant upon the
Premises so that the Premises shall at all times be free of liens for labor or
materials.
5. Supplementing Section 9 of the Lease, Landlord agrees not to
unreasonably withhold or delay its consent to any sign or signs proposed by
Tenant, provided that any such sign or signs conforms in all respects to all
laws, ordinances and regulations of all public authorities having jurisdiction.
The following words are hereby inserted at the very end of said Section 9 (as
appearing in the Initial Lease at Page 9.1 thereof) after the words "reasonable
wear and tear excepted": "and damage by fire or other casualty."
6. The words "and general office" are hereby inserted after the word
"warehouse" appearing on line 11 of Section 13(a) of the Lease (appearing in the
Initial Lease at Page 13.1 thereof).
7. The words "or general office" are hereby added after the words "general
warehouse" appearing on line 8 of Section 14(a) of the Lease (appearing in the
Initial Lease at Page 14.1 thereof).
8. The following is hereby added after the words "Lease Agreement"
appearing at the very end of the first paragraph of Section 21 of the Lease
(appearing in the Initial Lease at Page 21.1 thereof): ", provided Landlord
shall have given Tenant reasonable prior notice of such entry (except in the
case of an emergency); and provided further that such entry shall not
unreasonably interfere with Tenant's use and occupancy of the Premises." The
following is added after the words 'sale or lease" appearing at the very end of
Section 21 of the Lease (appearing in the Initial Lease at Page 21.1 thereof):
"provided that Landlord shall give Tenant reasonable prior notice of each such
entry."
-3-
<PAGE> 4
9. The word "unreasonable" appearing at the very end of Section 26 of the
Lease (appearing in the Initial Lease at Page 26.1 thereof) is hereby deleted
and "or delayed unreasonably'substituted therefor.
10. The words "or delayed" are hereby added after the word "withheld"
appearing on the third line of the second paragraph of Section 16 of the Lease
(appearing in the August 8, 1985 Agreement in Paragraph 9 at Page 7 thereof)
substituted therefor.
11. Subparagraph (ii) of Section 16 of the Lease (appearing in the August
8, 1985 Agreement in Paragraph 9 at Page 8 thereof) is hereby deleted and the
following substituted therefor:
(ii) That the Tenant while in possession does not either
simultaneously sublet to more than three subtenants or sublet more than
one-third of the Premises;
12. The word "additional" is hereby inserted before the word "notice" on
the third line of Subparagraph (iv) of Section 16 of the Lease (appearing in the
August 8, 1985 Agreement in paragraph 9 at Page 8 thereof).
13. Subparagraph (vii) of Section 16 of the Lease (appearing in the 1986
Agreement in Paragraph 9 at Page 9 thereof) is hereby deleted and the following
substituted therefor:
(vii) Tenant shall pay to Landlord one-half of the amount by which
the Minimum Rent under the assignment or subletting exceeds the Minimum
Rent payable under this Lease after deducting all reasonable expenses
incurred by Tenant in connection with such assignment or subletting.
13. The number "30" appearing on line 17 of Section 10 of the Lease
(appearing in the 1986 Agreement in Paragraph 8 at Page 8 thereof) is hereby
deleted and "45" substituted therefor.
14. Landlord and Tenant agree that Landlord shall have the right at any
time during the term of the Lease, upon reasonable notice to Tenant, to relocate
Tenant from the 9600 square foot area designated as "Unit 'A'" on Exhibit A
annexed hereto and made a part hereof to a similar sized unit located within the
area designated as "Unit 'B'" on said Exhibit A. The cost of the relocation as
well as the refitting of Tenant's space (in a manner consistent with the tenant
finishes in the Unit "A'space) occasioned by such relocation shall be borne
solely by Landlord.
15. Tenant agrees that it shall upon request of Perugina Corp. and
Landlord, extend the term of that certain sublease (the "Sublease") for
approximately 3467 square feet made by Tenant, as sublessor, and Perugina Corp.,
as sublessee, as may be agreed
-4-
<PAGE> 5
upon in good faith by Tenant and Perugina Corp.; provided, however, that (a)
there shall not have occurred and be continuing a material default on the part
of Perugina Corp. under the Sublease, and (b) the extended term of the Sublease
shall not extend beyond the expiration of the Lease, as amended by this
Agreement. Tenant further agrees that it shall make available and let to
Perugina Corp. upon request of Perugina Corp. and Landlord not less than an
additional 2500 square feet contiguous to the Sublease space upon such terms as
Perugina Corp. and Tenant may agree in good faith (it being understood and
agreed that Tenant shall be under no obligation to agree to a rental for such
expansion space at a rental which would not cover Tenant's own rental
obligations to Landlord for such space, together with Tenant's reasonable costs
of such leasing transaction); provided, however, that (x) there shall not have
occurred and be continuing a material default on the part of Perugina Corp.
under the Sublease, and (y) the extended term of the Sublease, as expanded,
shall not extend beyond the expiration of the Lease, as amended by this
Agreement.
16. Landlord and Tenant represent to each other that they have dealt with
no brokers in connection with the transaction contemplated hereby and will
indemnify each other from the claims of any brokers arising by reason of the
execution of this Agreement or the consummation of the transaction contemplated
hereby.
17. Except as herein amended, all of the terms, covenants and conditions
of the Lease are ratified and confirmed and shall continue to be and remain in
full force and effect.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
ATTEST: TETERBORO ASSOCIATES
By: Nancy Realty Corp.
General Partner
/s/ Stuart Alpert By: /s/ C. Lawrence Keller
- ---------------------- ---------------------------
ATTEST: MISS ERIKA, INC.
/s/ [ILLEGIBLE] By: /s/ Sid Goldberg, V. Pres.
- ---------------------- ---------------------------
-5-
<PAGE> 1
Exhibit 10.52 (j)
FIFTH LEASE MODIFICATION AND EXTENSION AGREEMENT
FIFTH LEASE MODIFICATION AND EXTENSION AGREEMENT (this "Agreement")
made this 30 day of May, 1995, by and between TETERBORO ASSOCIATES, a New
Jersey limited partnership, having its principal office at 90 Main Street,
Hackensack, New Jersey 07601 (the "Landlord") and MISS ERIKA, INC., having an
office at 1407 Broadway, New York, New York (the "Tenant").
W I T N E S S E T H:
WHEREAS, on April 1, 1975, Empire Carpet Corporation ("Empire") and
Tenant entered into a lease for premises located at 333 North Street, Teterboro,
New Jersey (the "Initial Lease"); and
WHEREAS, by letters dated January 17, 1978 and February 17, 1981,
the Initial Lease was extended to March 30, 1986; and
WHEREAS, the Initial Lease as so extended was further modified by
letters dated March 5, 1982 and August 15, 1983 adding a total of 31,200 square
feet of warehouse space to the space initially demised; and
WHEREAS, the Initial Lease as so extended and modified was assigned
by Armstrong World Industries, Inc. (as successor-in-interest to Empire) to
Landlord by Assignment dated March 7, 1984; and
WHEREAS, the Initial Lease as so extended and modified was further
modified and extended pursuant to Lease Modification and Extension Agreement
dated January 24, 1985, pursuant to which, inter alia, the lease term was
further extended to March 31, 1991; and
WHEREAS, by Lease Amendment dated August 8, 1985, the Initial Lease
as so amended and modified was further modified to add an additional 50,400
square feet of warehouse space to the space previously demised and was modified
in various other respects; and
WHEREAS, by Second Lease Modification and Extension Agreement dated
December 18, 1986, the Initial Lease as so amended and modified was further
modified to add an additional 67,500 square feet of warehouse space to the space
previously demised, for a total of 170,700 square feet comprising and
constituting the "Warehouse Space", extending the term of the lease through
December 31, 1992 and was modified in various other respects; and
WHEREAS, by Third Lease Modification and Extension Agreement dated
January 18, 1989, the Initial Lease as so amended and modified was further
modified to extend the term of the lease
<PAGE> 2
through December 31, 1996 and was modified in various other respects; and
WHEREAS, by Fourth Lease Modification and Extension Agreement dated
June, 1991, the Initial Lease as so amended and modified was further modified to
extend the term of the lease through December 31, 2001 and was modified in
various other respects (the Initial Lease as so modified and extended as
described in this and the foregoing "WHEREAS" clauses is hereinafter referred to
as the "Lease"); and
WHEREAS, the parties are desirous of amending the Lease in order to
provide for the leasing by Landlord to Tenant of an additional 21,600 square
feet of space (the "Expansion Space") as designated on Exhibit A attached hereto
and made a part hereof and which space is adjacent to the Warehouse Space and is
presently occupied by Novo Corp. (Bonded Warehouse) ("Novo").
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained, the parties hereto do hereby agree as follows:
1. The foregoing recitals are incorporated herein by reference.
2. Landlord leases to Tenant, and Tenant rents from Landlord, in
addition to the Warehouse Space, the Expansion Space. It is understood that the
term of the Lease for the Expansion Space shall commence on January 1, 1996 (the
"Commencement Date"), and thereafter be coincidental with the term of the Lease,
that is, ending December 31, 2001. Tenant agrees to accept the Expansion Space
on the Commencement Date in its then "AS IS" condition, Landlord having no
obligation to make any restoration or repair, except the space will be delivered
vacant, broom-clean with all systems in good operating condition. Landlord
agrees to use its best efforts to obtain possession of the Expansion Space when
the Novo lease expires on December 31, 1995. If Landlord has not obtained
possession of the Expansion Space by January 1, 1996, then the Commencement Date
shall be extended until Landlord can deliver possession of the Expansion Space
to Tenant but not later than May 1, 1996. If Landlord has not obtained
possession of the Expansion Space by May 1, 1996, either Landlord or Tenant can
cancel this Agreement by written notice to the other.
3. Section 1 of the Lease is amended to provide that, effective as
of the Commencement Date, the phrase "the Demised Premises" shall be deemed to
mean and refer to the aggregate leased space constituting the Warehouse Space
and the Expansion Space, except as the context otherwise requires.
-2-
<PAGE> 3
4. Section 4 of the Lease is amended to provide that in addition to
the Minimum Rent currently provided for, Tenant covenants to pay Landlord,
without previous demand therefor, a minimum annual rental (the "Minimum Rent")
for the Expansion Space, effective as of the Commencement Date, payable in equal
monthly installments, in advance on the first day of each and every month during
the Lease term, as follows:
<TABLE>
<CAPTION>
Commencing Minimum Rent Minimum Rent
(per annum) (per month)
---------- ------------ ------------
<S> <C> <C>
January 1, 1996 -
December 31, 1998 $150,336.00 $12,528.00
January 1, 1999 -
December 31, 1999 $154,872.00 $12,906.00
January 1, 2000 -
December 31, 2001 $159,408.00 $13,284.00
</TABLE>
Notwithstanding the foregoing, the Minimum Rent for the months of January,
February, March and April, 1996 (if possession of the Expansion Space is
delivered by then) shall be One Hundred ($100.00) Dollars per month.
5. Section 4A(c) of the Lease is hereby amended and restated as
follows:
Tenant's proportionate share is agreed to be 88.21% based on the
ratio of square footage of the Demised Premises (192,300 square
feet) to the square footage of the entire building (218,000 square
feet).
6. The thirteenth (13th) line of Section 10 of the Lease is hereby
amended and restated as follows:
term hereof (i.e. Tenant agrees to pay 88.21% of
7. The amount of the Letter of Credit that the Tenant shall maintain
on deposit with the Landlord pursuant to the Lease shall by increased to Eight
Hundred Twenty-Five Thousand Dollars ($825,000) (U.S.). Tenant shall deliver
such increased Letter of Credit to Landlord at such time as Tenant is required
to either furnish a new letter of credit or extend or replace the existing
Letter of Credit under the Lease.
8. Landlord and Tenant represent to each other that they have dealt
with no brokers in connection with the transaction contemplated hereby and will
indemnify each other from the claims of any brokers arising by reason of the
execution of this Agreement or the consummation of the transaction contemplated
hereby.
-3-
<PAGE> 4
9. Paragraph 14 of the Fourth Lease Amendment is hereby deleted.
10. Except as herein amended, all of the terms and conditions of the
Lease are hereby ratified and confirmed and shall be deemed to apply to the
Demised Premises, as expanded by the Expansion Space.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first set forth hereinabove.
TETERBORO ASSOCIATES
By: Nancy Realty Corp.,
General Partner
By: /s/ C. Lawrence Keller
--------------------------
Name:
Title:
MISS ERIKA, INC.
By: /s/ [ILLEGIBLE]
-------------------
Name:
Title: V.P. Finance
-4-
<PAGE> 1
Exhibit 10.52 (k)
SIXTH LEASE MODIFICATION AND EXTENSION AGREEMENT
SIXTH LEASE MODIFICATION AND EXTENSION AGREEMENT (this "Agreement")
made this 5th day of March, 1997, by and between TETERBORO ASSOCIATES, a New
Jersey limited partnership, having its principal office at 90 Main Street,
Hackensack, New Jersey 07601 (the "Landlord") and MISS ERIKA, INC., having an
office at 1407 Broadway, New York, New York (the "Tenant").
W I T N E S S E T H:
WHEREAS, on April 1, 1975, Empire Carpet Corporation ("Empire") and
Tenant entered into a lease for premises located at 333 North Street, Teterboro,
New Jersey (the "Initial Lease"); and
WHEREAS, by letters dated January 17, 1978 and February 11, 1981,
the Initial Lease was extended to March 30, 1986; and
WHEREAS, the Initial Lease as so extended was further modified by
letters dated March 5, 1982 and August 15, 1983 adding a total of 31,200 square
feet of warehouse space to the space initially demised; and
WHEREAS, the Initial Lease as so extended and modified was assigned
by Armstrong World Industries, Inc. (as successor-in-interest to Empire) to
Landlord by Assignment dated March 7, 1984; and
WHEREAS, the Initial Lease as so extended and modified was further
modified and extended pursuant to Lease Modification and Extension Agreement
dated January 24, 1985, pursuant to which, inter alia, the lease term was
further extended to March 31, 1991; and
WHEREAS, by Lease Amendment dated August 8, 1985, the Initial Lease
as so amended and modified was further modified to add an additional 50,400
square feet of warehouse space to the space previously demised and was modified
in various other respects; and
WHEREAS, by Second Lease Modification and Extension Agreement dated
December 18, 1986 the Initial Lease as so amended and modified was further
modified to add an additional 67,500 square feet of warehouse space to the space
previously demised, extending the term of the lease through December 31, 1992
and was modified in various other respects; and
WHEREAS, by Third Lease Modification and Extension Agreement dated
January 18, 1989, the Initial Lease as so amended and modified was further
modified to extend the term of the lease through December 31, 1996 and was
modified in various other respects; and
<PAGE> 2
WHEREAS, by Fourth Lease Modification and Extension Agreement dated
June, 1991, the Initial Lease as so amended and modified was further modified to
extend the term of the lease through December 31, 2001 and was modified in
various other respects; and
WHEREAS, by Fifth Lease Modification and Extension Agreement dated
May 30, 1995, the Initial Lease as so amended and modified was further modified
to add an additional 21,600 square feet of space to the space previously
demised, for a total of 192,300 square feet comprising and constituting the
"Warehouse Space" and was modified in various other respects (the Initial Lease
as so modified and extended as described in this and the foregoing "WHEREAS"
clauses is hereinafter referred to as the "Lease"); and
WHEREAS, the parties are desirous of amending the Lease in order to
provide for the leasing by Landlord to Tenant of an additional 26,400 square
feet of space (the "Expansion Space") as designated on Exhibit A attached hereto
and made a part hereof and which space is adjacent to the Warehouse Space and is
presently leased to and occupied by Perugina Chocolate & Confections, a division
of Nestle USA, Inc. (except a portion of which is subleased to and occupied by
Tenant pursuant to that certain Sublease Agreement dated July, 1989 between
Tenant and Perugina Chocolate & Confections. Inc., a division of Nestle USA,
Inc.).
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained, the parties hereto do hereby agree as follows:
1. The foregoing recitals are incorporated herein by reference.
2. Landlord leases to Tenant, and Tenant rents from Landlord, in
addition to the Warehouse Space, the Expansion Space. It is understood that the
term of the Lease for the Expansion Space shall commence on March 10, 1997 (the
"Commencement Date"), and thereafter be coincidental with the term of the Lease.
Tenant agrees to accept the Expansion Space on the Commencement Date in its then
"AS IS" condition, Landlord having no obligation to make any restoration or
repair, except the space will be delivered vacant, broom-clean with all systems
in good operating condition. Landlord agrees to use its best efforts to obtain
possession of the Expansion Space by March 10, 1997. If Landlord has not
obtained possession of the Expansion Space by March 10, 1997, then the
Commencement Date shall be extended until Landlord can deliver possession of the
Expansion Space to Tenant but not later than April 10, 1997. If Landlord has not
obtained possession of the Expansion Space by April 10, 1997, either Landlord or
Tenant may cancel this Agreement by written notice to the other party.
-2-
<PAGE> 3
3. Section 1 of the Lease is amended to provide that, effective as
of the Commencement Date, the phrase "the Demised Premises" shall be deemed to
mean and refer to the aggregate leased space constituting the Warehouse Space
and the Expansion Space, except as the context otherwise requires.
4. Section 2 of the Lease is amended to provide that the term of the
Lease is further extended for a period of six (6) years so that the term of the
Lease shall expire at midnight on December 31, 2007.
5. Section 4 of the Lease is amended to provide that in addition to
the Minimum Rent currently provided for, Tenant covenants to pay Landlord,
without previous demand therefor, a minimum annual rental (the "Minimum Rent")
for the Expansion Space, effective as of the Commencement Date, of Seventy-Nine
Thousand Two Hundred Dollars ($79,200.00), payable in equal monthly installments
of Six Thousand Six Hundred Dollars ($6,600.00) in advance on the first day of
each and every month during the Lease term. The Minimum Rent shall be
apportioned for any partial month.
The Minimum Rent for the Warehouse Space and the Expansion Space
during the extended Lease term of six (6) years from January 1, 2002 through
December 31, 2007, payable in equal monthly installments in advance on the first
day of each and every month during the Lease term, is as follows:
<TABLE>
<CAPTION>
Commencing Minimum Rent Minimum Rent
(per annum) (per month)
---------- ------------ ------------
<S> <C> <C>
January 1, 2002 -
December 31, 2003 $1,312,200.00 $109,350.00
January 1, 2004 -
December 31, 2005 $1,366,875.00 $113,906.25
January 1, 2006 -
December 31, 2007 $1,421,550.00 $118,462.50
</TABLE>
6. Section 4A(c) of the Lease is hereby amended and restated as
follows:
Tenant's proportionate share is agreed to be 100.00%.
7. The thirteenth (13th) line of Section 10 of the Lease is hereby
amended and restated as follows:
term hereof (i.e. Tenant agrees to pay 100.00% of
8. The amount of the Letter of Credit that the Tenant shall maintain
on deposit with the Landlord pursuant to the Lease shall by increased to Nine
Hundred Fifty Thousand Dollars ($950,000) (U.S.). Tenant shall deliver such
increased Letter of
-3-
<PAGE> 4
Credit to Landlord at such time as Tenant is required to either furnish a new
letter of credit or extend or replace the existing Letter of Credit under the
Lease.
9. Landlord and Tenant represent to each other that they have dealt
with no brokers in connection with the transaction contemplated hereby and will
indemnify each other from the claims of any brokers arising by reason of the
execution of this Agreement or the consummation of the transaction contemplated
hereby.
10. A new Paragraph 33 is added to the Lease as follows:
33. Right to Terminate. Tenant may, at its option elect to terminate
the Lease effective midnight December 31, 2001 provided Tenant
delivers to Landlord written notice of its election to terminate the
Lease no earlier than January 1, 2001 and no later than February 28,
2001, together with a check payable to the order of Landlord in an
amount equal to the sum of (i) four and one-half (4-1/2) months of
Tenant's rent called for in this Agreement for the year 2002 and
(ii) four and one-half (4-1/2) months of Tenant's real estate taxes
in the amount currently being paid by Tenant at the time Tenant
elects to terminate the Lease.
11. Except as herein amended, all of the terms and conditions of the
Lease are hereby ratified and confirmed and shall be deemed to apply to the
Demised Premises, as expanded by the Expansion Space.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first set forth hereinabove.
TETERBORO ASSOCIATES
By: Nancy Realty Corp.,
General Partner
By: /s/ [ILLEGIBLE]
-------------------
Name:
Title:
MISS ERIKA, INC.
By: /s/ [ILLEGIBLE]
-------------------
Name:
Title:
-4-
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF THE COMPANY
Norton McNaughton of Squire, Inc., a New York corporation ("Squire"), is a
wholly-owned subsidiary of the Company. Norty's Inc., a Delaware corporation, is
a wholly-owned subsidiary of Squire. Miss Erika, Inc., a Delaware corporation,
is a wholly-owned subsidiary of the Company.
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration
Statements (Form S-8 No. 33-80370), (Form S-8 No. 33-92252), (Form S-8 No.
333-29195) and (Form S-8 No. 333-39049), pertaining to the Stock Option Plan of
Norton McNaughton, Inc. and the Employee Stock Purchase Plan of Norton
McNaughton, Inc., the Executive Stock Option Plan of Norton McNaughton, Inc. and
the Senior Executive Bonus Plan of ME Acquisition Corp., of our report dated
January 30, 1998, with respect to the consolidated financial statements and
schedule of Norton McNaughton, Inc. included in this Annual Report (Form 10-K)
for the year ended November 1, 1997.
ERNST & YOUNG LLP
New York, New York
February 9, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from SEC Form
10-K and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> NOV-01-1997
<PERIOD-START> NOV-02-1996
<PERIOD-END> NOV-01-1997
<EXCHANGE-RATE> 1
<CASH> 529
<SECURITIES> 0
<RECEIVABLES> 64,644
<ALLOWANCES> 0
<INVENTORY> 28,590
<CURRENT-ASSETS> 102,191
<PP&E> 8,215
<DEPRECIATION> 2,316
<TOTAL-ASSETS> 118,762
<CURRENT-LIABILITIES> 62,879
<BONDS> 0
0
0
<COMMON> 81
<OTHER-SE> 42,082
<TOTAL-LIABILITY-AND-EQUITY> 118,762
<SALES> 218,782
<TOTAL-REVENUES> 218,782
<CGS> 179,556
<TOTAL-COSTS> 44,999
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,332
<INCOME-PRETAX> (8,105)
<INCOME-TAX> (3,400)
<INCOME-CONTINUING> (4,705)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,705)
<EPS-PRIMARY> (0.63)
<EPS-DILUTED> (0.63)
</TABLE>
