-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WnZsYVs3iFLkByRkpweMkV+i33dXCsP829dvUCCzM4YjjUxib0zPuBXane9/E2B/ q9W02poybYQ72Q2ExRFBLA== 0000043837-97-000003.txt : 19970505 0000043837-97-000003.hdr.sgml : 19970505 ACCESSION NUMBER: 0000043837-97-000003 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19970201 FILED AS OF DATE: 19970502 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: NOODLE KIDOODLE INC CENTRAL INDEX KEY: 0000043837 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-MISC DURABLE GOODS [5090] IRS NUMBER: 111771705 STATE OF INCORPORATION: NY FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-06083 FILM NUMBER: 97594554 BUSINESS ADDRESS: STREET 1: 105 PRICE PKWY CITY: FARMINGDALE STATE: NY ZIP: 11735 BUSINESS PHONE: 5162935300 MAIL ADDRESS: STREET 2: 105 PRICE PARKWAY CITY: FARMINGDALE STATE: NY ZIP: 11735 FORMER COMPANY: FORMER CONFORMED NAME: GREENMAN BROTHERS INC DATE OF NAME CHANGE: 19920703 10-K 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED). For the fiscal year ended February 1, 1997 Commission file number 1-6083 NOODLE KIDOODLE, INC. (Exact Name of Registrant as Specified in Its Charter) Delaware 11-1771705 (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification No.) 105 Price Parkway, Farmingdale, NY 11735 (Address of Principal Executive Offices) (Zip Code) Registrant's telephone number, including area code (516)-293-5300 Securities registered pursuant to Section 12 (b) of the Act: Name of Each Exchange Title of Each Class on Which Registered Common Stock, $.001 par value NASDAQ National Market Securities registered pursuant to Section 12 (g) of the Act: NONE 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 voting stock held by non-affiliates of the registrant as of April 1, 1997 was $23,212,648 based on the closing of same stock on that date. The number of shares of common stock outstanding as of April 1, 1997 was 7,579,640. -1- Documents Incorporated by reference: Certain portions of Registrant's definitive proxy statement with respect to its 1997 Annual Meeting of Stockholders to be filed, pursuant to Regulation 14A under the Securities Exchange Act of 1934, with the Commission within 120 days of the close of Registrant's fiscal year ended February 1, 1997 are incorporated by reference into Part III of this report. -2- TABLE OF CONTENTS Page PART I Item 1. Business 4 Item 2. Properties 7 Item 3. Legal Proceedings 8 Item 4. Submission of Matters to a Vote of Security Holders 8 Part II Item 5. Market for Registrant's Common Stock and Related Stockholders' Matters 8 Item 6. Selected Financial Data 9 Item 7. Management's Discussion and Analysis of Financial Condition and Results of 11 Operations Item 8. Financial Statements and Supplementary Data 17 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 17 PART III Item 10. Directors and Executive Officers of the Registrant 17 Item 11. Executive Compensation 17 Item 12. Security Ownership of Certain Beneficial Owners and Management 17 Item 13. Certain Relationships and Related Transactions 17 PART IV Item 14. Exhibits, Financial Statements, Schedules and Reports on Form 8-K 18 -3- PART I ITEM 1. BUSINESS. (a) General Noodle Kidoodle, Inc., a Delaware corporation (the "Company" or "Registrant") is a specialty retailer of a broad assortment of educationally oriented, creative and non-violent children's products, including toys, books, games, video and audio tapes, computer software, crafts and other learning products. The Company was founded in 1946 and, doing business under its former name Greenman Bros. Inc., engaged in the retail toy business as well as the wholesale distribution of general merchandise, with an emphasis on toys, stationery and housewares. During the 1980s, the Company operated a number of retail toy stores, including a chain of 330 stores under the Circus World name located principally in shopping malls in approximately 30 states. The Company sold the Circus World stores in Fiscal 1991 but continued to operate a number of retail toy stores under the Playworld name. The Company opened its first Noodle Kidoodle store in November 1993, and opened three additional Noodle Kidoodle stores in Fiscal 1995. During Fiscal 1996, management determined that the Company should focus exclusively on its retail business by expanding and developing the Noodle Kidoodle retail concept. Accordingly, in August 1995, the Company adopted a new business plan and ceased operating its wholesale division. The Company, in December 1995, changed its name from Greenman Bros. Inc. to Noodle Kidoodle, Inc. and, in January 1996, changed its jurisdiction of incorporation to Delaware. The Company operated 31 Noodle Kidoodle stores at the close of the fiscal year ended February 1, 1997 ("Fiscal 1997") located in New York, New Jersey, Connecticut and the Boston, Chicago, and Detroit metropolitan areas. The Company also operated one other retail toy store under the Playworld name. The Company plans to close the one remaining Playworld retail store as soon as certain lease issues are resolved. (b) Financial Information About Industry Segments Registrant currently operates in an industry segment which involves the retail sales of children's toys and other products. In prior years it also operated in a second segment which was the wholesale distribution of general merchandise. This segment was discontinued in August 1995 and the results are disclosed in discontinued operations. See Note 2 (Discontinued Operations) of the Notes to Consolidated Financial Statements. (c) Narrative Description of Business Noodle Kidoodle, Inc. is a specialty retailer of a broad assortment of educationally oriented, creative and non-violent children's products. The Noodle Kidoodle concept offers -4- something new to parents and children by combining the attractive pricing and larger size of traditional toy stores with the more creative product selection and superior customer service of small boutiques, while providing an entertaining shopping environment through interactive play areas and frequent in-store events. The Company's stores range from approximately 6,100 to 13,300 square feet and average approximately 10,600 square feet. Each store offers customers a warm and inviting shopping environment with brightly lit spaces, colorful walls, ceilings and carpets, wide aisles for strollers and kid-level seating and product shelving. Each store typically carries approximately 25,000 stock-keeping units ("SKU's"), conveniently displayed in separate merchandise departments, such as "Science & Nature" and "Arts & Crafts", which are identified by eye-catching signs that are visual as well as verbal so that children can understand them. All of the products carried in Noodle Kidoodle stores conform to the Company's creative, non-violent and educational merchandising strategy. The Company generally does not carry mass market television advertised toys. However, in certain product categories, the Company does carry brand name products which fit the Noodle Kidoodle philosophy, such as Crayola, Lego, Playmobil, the full line of Walt Disney video titles and the Goosebumps line of books. The Company purchases merchandise from over 600 suppliers. There is currently one supplier, Star Video Entertainment LP, who represents slightly more than 5% of total purchases. The Company operated 31 Noodle Kidoodle stores at the end of its 1997 fiscal year, located in New York, New Jersey, Connecticut and the Boston, Chicago and Detroit metropolitan areas. It has opened one store in fiscal 1998 in the Boston metropolitan area and expects to open one additional store in the second half of the year. The Company believes that there are opportunities for nationwide expansion over the longer term. The Company believes that the following elements are important to its retailing concept: + Interactive Shopping Environment - Each Noodle Kidoodle store is designed with children in mind. Each store has designated play areas where children and their parents are encouraged to explore toys and games in keeping with the Company's "try before you buy" philosophy. Among the key interactive features of each store are the Computer Center, "Kidoodle Theater" and the Electronic Learning Center. + Broad Assortment of Imaginative Products - Noodle Kidoodle stores offer a broad assortment of products designed to stimulate a child's imagination and contribute to his or her growth and development consistent with the Company's slogan that "Kids learn best when they're having fun." To keep its merchandise mix fresh and exciting, the Company continually seeks innovative new products. -5- + In-Store Events - The Company provides without charge frequent in-store events such as personal appearances by authors and children's television personalities, arts and crafts workshops and readings from selected books to provide entertainment to its customers, increase store traffic and position Noodle Kidoodle as a destination store. + Superior Customer Service - By providing knowledgeable and friendly customer service and selecting enthusiastic employees who enjoy working with children, the Company believes that it has a competitive advantage over lower-service superstores and mass merchandisers. + Targeted Marketing - The Company has created the Noodle Kidoodle Club in order to establish customer loyalty and track repeat customers. The club provides its members advance notice of sales events and special promotions, a bi-monthly newsletter and events calendar, birthday cards sent to children and similar special privileges. The Company also conducts a targeted direct mail marketing program and continuously updates its customer database for this purpose. + Competitive Pricing - Noodle Kidoodle offers everyday competitive pricing. Many products are regularly discounted and prices in general are believed to be competitive with those featured by superstores carrying similar lines of merchandise. Backlog is not considered relevant to an understanding of Registrant's business. Registrant is required to carry substantial amounts of inventory in the months of September through November of each year in order to meet holiday delivery requirements. Registrant did not have any customers that represented more than 10% of consolidated revenues for the year ended February 1, 1997. Registrant's business is highly seasonal and approximately 42% of its revenues occur in the fourth quarter. The retail toy business is highly competitive. The Company competes on the basis of its stores' interactive environment, broad merchandise selection, superior customer service and competitive pricing. The Company competes with a variety of mass merchandisers, superstores and other toy retailers, including Toys R Us and Kay Bee Toy Stores and other store formats selling children's products, such as discount stores and smaller specialty toy stores. Retailing of children's educational products is a relatively new concept. Included among the Company's direct competitors are Zany Brainy, Learningsmith and Imaginarium. Some of the Company's competitors are much larger in terms of sales volume and have more capital and greater management -6- resources than the Company. If any of the Company's larger competitors were to increase their focus on the educational market or if any regional competitors were to expand their activities in the markets primarily served by the Company, it could be adversely affected. If any of the Company's major competitors seek to gain or retain market share by reducing prices, it may be required to reduce its prices on key items in order to remain competitive, which would have the effect of reducing its profitability. As of February 1, 1997, the Company employed approximately 901 people, approximately 377 of whom were employed full-time. The Company also employs additional part-time personnel during the pre-Christmas season. The Company believes that its relations with its employees are generally good. The Company has registered several service marks and trademarks with Federal and State authorities, including Noodle Kidoodle (registered trademark), Oodles & Oodles of Fun Things to Learn (registered trademark), Kidoodle Animation (registered trademark), and the Company's slogan "Kids learn best when they're having fun (registered trademark)." The Company believes it has all licenses necessary to conduct its business. ITEM 2. PROPERTIES. The Company leases all of its Noodle Kidoodle stores. Original lease terms generally are for ten years, and many leases contain renewal options. The Company's stores are generally located in either strip centers or mall locations. The 31 stores operating at the end of Fiscal 1997 ranged in size from approximately 6,100 to 13,300 square feet. The Company currently supports its retail operations with an owned 269,000 square foot distribution center in Phillipsburg, New Jersey. The Company had previously supported its total retail and wholesale operations with three other distribution centers located in Farmingdale, New York, West Haven, Connecticut and Birmingham, Alabama. In conjunction with discontinuing its wholesale operations the Company has ceased operating the Farmingdale and West Haven distribution centers. The Company discontinued the use of the Birmingham center in 1989 and has been sub-leasing the space to third parties since such discontinuance. The Company sold the Farmingdale facility in July 1996. The lease for the West Haven center expired in March 1996. The Company does not believe that disposing of or discontinuing operations in any of these facilities will have a material adverse effect on its operations or financial condition. At the end of Fiscal 1997, the Company also operated one other retail toy store under the Playworld name which is located in Long Island, New York. This store is leased and is 10,000 square feet. The Company plans to close this store as soon as certain lease issues are resolved. -7- The Company's executive offices are located at Farmingdale, New York. The Company has signed a two-year lease, which contains renewal options, and will move its headquarters in June 1997 to Syosset, New York. Registrant believes that the foregoing facilities are adequate for its present operations and such facilities are maintained in a good state of repair. See Note 6 (Commitments and Contingencies) of the Notes to Consolidated Financial Statements. ITEM 3. LEGAL PROCEEDINGS. As disclosed last year, the Company was a defendant in a purported plaintiffs' class action filed in August 1995, in the United States District Court for the Eastern District of New York against Playmobil USA, Inc., a toy manufacturer ("Playmobil"), and against the Company and another retailer, as defendant class representatives of a purported class of those toy retailers nationwide selling products manufactured by Playmobil. The case was later consolidated with two others pending against Playmobil. On October 23, 1996, plaintiffs filed an Amended Complaint dropping the Company as a defendant, but naming it and three other retailers as "Co-conspirators who were induced to participate and did participate in an alleged price fixing scheme organized by Playmobil." No damages or other forms of relief are requested against the Company. These developments confirm the Company's earlier view that this litigation was not material to the Company. Except as set forth above, the Company is not a party to any legal proceedings other than claims and lawsuits arising in the normal course of its business which, in the opinion of the Company's management, are not individually or in the aggregate material to its business. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS. None PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDERS' MATTERS. The Company's Common Stock is quoted on the NASDAQ National Market under the symbol "NKID". Until December 13, 1995, the Common Stock was traded on the American Stock Exchange under the symbol "GMN". The following table sets forth, for the periods indicated, the high and low sales prices per share for the Common Stock for each of the fiscal quarters indicated for Fiscal 1997 and February 3, 1996 ("Fiscal 1996"). -8-
High Low Fiscal 1997 First Quarter $ 9.50 $ 6.25 Second Quarter 8.63 5.88 Third Quarter 8.00 5.38 Fourth Quarter 7.25 3.00 Fiscal 1996 First Quarter 5.44 4.00 Second Quarter 11.63 5.06 Third Quarter 14.63 9.25 Fourth Quarter 15.00 8.25
As of February 1, 1997 there were approximately 623 holders of record of Common Stock. The Company has not paid cash dividends on its Common Stock since 1969 and currently anticipates that it will retain all available funds generated by its operations for the development and growth of its business. Any future determination as to dividend policy will be made at the discretion of the Board of Directors of the Company and will depend on a number of factors, including the future earnings, capital requirements, financial condition and business prospects of the Company and such other factors as the Board of Directors may deem relevant. ITEM 6. SELECTED FINANCIAL DATA. The selected financial data presented below reflects the consolidated results of operations, financial condition and operating data of the Company for the periods indicated, after giving retroactive effect to the Company's discontinued wholesale business segment. This data should be read in conjunction with the Consolidated Financial Statements and notes thereto and Management's Discussion and Analysis of Financial Condition and Results of Operations included elsewhere in this report. The consolidated financial data for the fifty-two weeks ended February 1, 1997, fifty-three weeks ended February 3, 1996, and the fifty-two weeks ended January 28, 1995, January 29, 1994, and January 30, 1993 are derived from the consolidated financial statements of the Company which have been audited by Janover Rubinroit, LLC, independent certified public accountants. -9-
Fiscal Years Ended February 1, February 3, January 28, January 29, January 30, 1997 1996 1995 1994 1993 (52 weeks) (53 weeks) (52 weeks) (52 weeks) (52 weeks) (In thousands except for per share data) STATEMENT OF OPERATIONS DATA: Net sales $59,410 $32,143 $23,308 $20,712 $18,250 Net income (loss) from: Continuing operations (7,492) (5,272) (4,490) (1,180) (425) Discontinued operations - (9,059) 1,096 1,889 2,226 Net income (loss) $(7,492) $(14,331) $(3,394) $ 709 $ 1,801 Net income (loss) per share from: Continuing operations $ (1.00) $ (.99) $ (.86) $ (.22) $ (.08) Discontinued operations - (1.70) .21 .35 .40 Net income (loss) per share $ (1.00) $ (2.69) $ (.65) $ .13 $ .32 Weighted average shares out- standing 7,488 5,320 5,220 5,338 5,575 BALANCE SHEET DATA: Working Capital $16,819 $14,031 $35,667 $39,810 $40,212 Total assets 51,036 37,276 48,042 49,629 50,296 Stockholders' equity 35,699 27,080 40,870 44,064 45,212 Long term debt obligations 753 - - - - Dividends per common share - - - - -
-10- ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. RESULTS OF OPERATIONS Fiscal Year Ended February 1, 1997 Compared to Fiscal Year Ended February 3, 1996 Continuing Operations Net sales increased a total of 85.0% to $59.4 million in Fiscal 1997 from $32.1 million in Fiscal 1996. Noodle Kidoodle sales increased $30.0 million or 108.3% to $57.7 million in Fiscal 1997 from $27.7 million in the prior year, primarily due to the addition of thirteen Noodle Kidoodle stores during Fiscal 1997. Other retail sales decreased 61.4% to $1.7 million in Fiscal 1997 from $4.4 million in the prior year, primarily as a result of the closing of one Playworld store and two Toy Park stores in the first half of Fiscal 1997. Comparable store sales were virtually flat. The Company operated 31 Noodle Kidoodle stores and one Playworld store at February 1, 1997 compared to 18 Noodle Kidoodle stores, two Playworld stores and two Toy Park stores at February 3, 1996. Fiscal 1997 contained 52 weeks compared to 53 weeks in Fiscal 1996. Sales for the extra week in Fiscal 1996 represented 1.7% of annual sales. Gross profit (derived from net sales less cost of products sold, which includes buying and warehousing costs) increased 86.2% to $22.9 million for Fiscal 1997 from $12.3 million in Fiscal 1996. Overall gross profit as a percentage of net sales ("gross profit percentage") increased to 38.5% in Fiscal 1997 from 38.3% in Fiscal 1996. The increase in gross profit percentage was primarily attributable to the increased sales volume at Noodle Kidoodle stores, which generated higher margins, offset by decreased sales and margins at the other retail stores. Gross profit percentage at Noodle Kidoodle stores increased to 38.5% in Fiscal 1997 from 37.9% in the prior year, primarily as a result of leveraging buying costs (including the salaries and related expenses of the Company's buyers) partially offset by increases in the cost of merchandise. Warehousing costs, which contain some fixed elements remained flat and did not rise commensurately with the increased sales levels. Gross margin in the other retail stores decreased to 36.5% in Fiscal 1997 from 40.7% in the prior year, primarily due to markdowns taken to liquidate inventories in three stores that were closed in the first half of Fiscal 1997 offset by lower buying and warehousing costs. Selling and administrative expenses, excluding the provision for restructuring in Fiscal 1996, increased 75.7% to $31.1 million in Fiscal 1997 from $17.7 million in the prior year. These increases resulted primarily from; higher direct store expenses, which increased $9.1 million due to changes in the store base; non- recurring charges of $.6 million for upgrading the stores' point of sale system and a provision for severance costs related to a -11- 20% administrative staff reduction; and higher home office expenses. Selling and administrative expenses as a percentage of net sales decreased to 52.4% in Fiscal 1997 from 55.0% in the prior year, primarily as a result of increased sales due to an increased store base. Provision for restructured operations was $.5 million in Fiscal 1996 related to the closing of certain other retail stores. This included losses from store operations from the date of announcement until closing, employee severance costs, estimated lease liabilities, loss on liquidation of inventories and disposition of assets and other related restructuring costs. Net loss from continuing operations increased 41.5% to $7.5 million ($1.00 per share) in Fiscal 1997 from $5.3 million ($.99 per share) in the prior year. The net loss in both Fiscal 1997 and Fiscal 1996 did not include tax benefits. At February 1, 1997, the Company had approximately $18.0 million of net operating loss carryforwards. Discontinued Operations In Fiscal 1997 the Company's discontinued operations had no sales. No income or loss was recognized from these operations in Fiscal 1997. Net sales were $51.9 million in Fiscal 1996. Operating loss before provision for discontinued operations was $1.9 million in Fiscal 1996. Provision for loss on disposal of discontinued operations was $7.1 million in Fiscal 1996 related to the disposal of the wholesale business, including the estimated losses through the disposal period and the anticipated sale of two of the Company's distribution centers, net of income tax expense of $1.6 million. Net loss from discontinued operations was $9.1 million ($1.70 per share) in Fiscal 1996 including the $7.1 million ($1.34 per share) provision for loss on disposal of discontinued operations. Fiscal Year Ended February 3, 1996 Compared to Fiscal year Ended January 28, 1995 Continuing Operations Net sales increased a total of 37.8% to $32.1 million in Fiscal 1996 from $23.3 million in the fiscal year ended January 28, 1995 ("Fiscal 1995"). Noodle Kidoodle sales increased $21.3 million or 332.8% to $27.7 million in Fiscal 1996 from $6.4 million in the prior year, primarily due to the addition of fourteen Noodle Kidoodle stores during Fiscal 1996. Other retail sales decreased 74.0% to $4.4 million in Fiscal 1996 from $16.9 million in the prior year, primarily as a result of the closing of six Playworld stores during January 1995. The Company operated 18 Noodle -12- Kidoodle stores, two Playworld stores and two Toy Park stores at February 3, 1996, compared to four Noodle Kidoodle stores, two Playworld stores and two Toy Park stores at January 28, 1995. Fiscal 1996 contained 53 weeks compared to 52 weeks in Fiscal 1995. Sales for the extra week represented 1.7% of annual sales. Gross profit (derived from net sales less the cost of products sold, which includes buying and warehousing costs) increased 73.2% to $12.3 million for Fiscal 1996 from $7.1 million in Fiscal 1995. Overall gross profit percentage increased to 38.3% in Fiscal 1996 from 30.5% in Fiscal 1995. The increase in gross profit percentage was primarily attributable to increased sales volume at Noodle Kidoodle stores, which generated higher margins than the Playworld stores and an increase in gross profit percentage in the remaining other retail stores. Gross profit percentage at Noodle Kidoodle stores increased to 37.9% in Fiscal 1996 from 37.2% in the prior year, primarily as a result of the fact that buying costs (including the salaries and related expenses of the Company's buyers) and certain warehousing costs contain some fixed elements and therefore did not rise commensurately with increased sales levels. The improvement in buying and warehousing costs was partially offset by an increase in the cost of merchandise. Gross profit percentage in the other retail stores increased to 40.7% in Fiscal 1996 from 28.0% in the prior year, primarily due to a greater sales contribution by higher margin Toy Park stores and a higher mix of lower margin merchandise in Fiscal 1995. Selling and administrative expenses, excluding the provision for restructuring, increased 63.9% to $17.7 million in Fiscal 1996 from $10.8 million in the prior year, primarily as a result of changes in the store base. Selling and administrative expenses at Noodle Kidoodle stores increased to $13.7 million in Fiscal 1996 from $3.2 million in the prior year, primarily as a result of higher direct store expenses, which increased by $6.8 million, higher advertising expenses, which increased by $2.2 million, and higher home office expenses. This increase was offset by a decrease in selling and administrative expenses at the other retail stores to $1.7 million in Fiscal 1996 from $5.3 million in the prior year, principally attributable to a decrease in direct store expenses as a result of the closing of six Playworld stores at the end of Fiscal 1995. Selling and administrative expenses as a percentage of net sales increased to 55.0% in Fiscal 1996 from 46.3% in the prior year. The primary factors in the increase were the higher operating costs of the Noodle Kidoodle stores and increased home office expenses resulting from the Company's rapid expansion program. Provision for restructured operations related to the closing of certain other retail stores was $0.5 million in Fiscal 1996, compared to $3.9 million in the prior year. This included losses from store operations from the date of announcement until closing, employee severance costs, estimated lease liabilities, losses on liquidation of inventories and disposition of assets and other related restructuring costs. -13- Operating loss decreased 22.4% to $5.9 million in Fiscal 1996 from $7.6 million in the prior year. Excluding restructuring charges, the loss from operations would have been $5.4 million for the period ended February 3, 1996 compared to $3.7 million in the prior year. Net loss from continuing operations increased 17.8% to $5.3 million ($.99 per share) in Fiscal 1996 from $4.5 million ($.86 per share) in the prior year. Excluding restructuring charges, the net loss would have been $4.8 million ($.90 per share) in Fiscal 1996 compared to $2.2 million ($.41 per share) in the prior year. The net loss in Fiscal 1996 included no tax benefit while the prior fiscal year included a tax benefit of $2.8 million. At February 3, 1996, the Company had approximately $15.0 million of net operating loss carryforwards. The additional week in the Fiscal 1996 year had no material impact on the net loss from continuing operations. Discontinued Operations Net sales decreased 54.2% to $51.9 million in Fiscal 1996 from $113.2 million in the prior year. This decrease resulted primarily from discontinuance of the wholesale business, effective August 30, 1995. Operating loss before provision for discontinued operations was $1.9 million in Fiscal 1996 compared to operating income of $1.8 million for the comparable period in the prior year. Provision for discontinued operations represents a loss of $7.1 million related to the disposal of the wholesale business, including estimated losses through the disposal period and the anticipated sale of two of the Company's distribution centers, net of income tax expense of $1.6 million. Net loss from discontinued operations was $9.1 million ($1.70 per share) in Fiscal 1996 including the $7.1 million ($1.34 per share) provision for discontinued operations, as compared to net income of $1.1 million ($.21 per share) for the prior year. LIQUIDITY AND CAPITAL RESOURCES During the past three fiscal years the Company satisfied the cash requirements for its continuing retail operations principally through the sale of securities, cash flows from discontinued wholesale operations and internal cash balances. These cash requirements principally include operating losses, working capital requirements and expenditures for new store openings. -14-
Fiscal Years Ended 1997 1996 1995 (In thousands) Net cash provided by (used in) Operating activities: Continuing operations $ (9,438) $(7,281) $(1,466) Discontinued operations (1,585) 12,128 9,066 Investing activities (1,798) (8,960) (2,472) Financing activities 16,882 477 16_ Net increase (decrease) in cash and cash equivalents 4,061 (3,636) 5,144 Cash and cash equivalents - beginning of year 7,272 10,908 5,764 Cash and cash equivalents - end of year $ 11,333 $ 7,272 $10,908
During Fiscal 1997, the Company generated $16.9 million of cash from financing activities, principally from the sale of new Common Stock, the net proceeds of which were approximately $16.0 million. Net cash used in investing activities was $1.8 million, composed of property additions for new stores and for upgrading the stores' point-of-sale computer system, which together totaled $9.4 million, offset by $7.6 million of proceeds from the sale of property from discontinued operations. Cash was also used to fund $9.4 million of cash requirements for continuing operations, attributable to a net loss of $7.5 million and increased working capital needs of $4.2 million due to new store openings and increased inventory levels, offset by non-cash charges of $2.3 million. Inventory increased from $10.3 million at February 3, 1996 to $17.3 million at February 1, 1997, primarily resulting from new store openings. As a result of the foregoing, cash and cash equivalents increased during the year by $4.1 million. During Fiscal 1996, the Company generated $12.1 million of cash from discontinued operations, primarily attributable to reductions in inventory and other working capital of $20.4 million and $.8 million of non-cash charges offset by a net loss of $9.1 million, which included a $7.1 million provision for the discontinuance of the wholesale operations. This cash was used primarily to fund $7.3 million of cash requirements for continuing retail operations, attributable to increases in working capital needs of $3.5 million due to new store openings and increased inventory levels as well as a net loss of $5.3 million. Inventory increased from $4.3 million at January 28, 1995 to $10.3 million at February 3, 1996 primarily as a result of new store openings. The Company also used cash to fund investing activities of $9.0 million, primarily for the purchase of fixed assets for new stores. As a result of the foregoing, cash and cash equivalents decreased during the year by $3.6 million. During Fiscal 1995, the Company generated $9.1 million of cash from discontinued operations, primarily attributable to reductions in working capital of $7.2 million, net income of $1.1 million and $.8 million of non-cash charges. This cash was -15- used primarily to fund $1.5 million of cash requirements for continuing retail operations, attributable to a net loss of $4.5 million offset by decreased working capital needs of $1.7 million. Inventory decreased from $6.3 million at January 29, 1994 to $4.3 million at January 28, 1995 as a result of the closing of six Playworld stores. The Company also used cash and $1.0 million of proceeds received from the sale of marketable securities to fund $4.0 million of property additions, primarily for the purchase of fixed assets for new stores. As a result of the foregoing, cash and cash equivalents increased during the year by $5.1 million. During the past several fiscal years, the Company did not require any cash borrowings under its $10.0 million revolving credit line, which expired in June 1995. In February 1996 the Company obtained a line of credit from a bank which is unsecured, and provides for maximum outstandings of $10.0 million in short-term loans and letters of credit. The expiration of that line of credit has been extended to May 31, 1997. The Company is currently evaluating financing proposals from several lenders to replace this expiring line of credit. While the Company expects to enter into a new financing agreement prior to the expiration of the current line of credit, there is no assurance that financing will be available in amounts or on terms acceptable to the Company. The Company expects to fund its near-term cash requirements principally from its existing cash balances. The Company expects to finance its long-term expansion plan principally with externally generated funds, which may include borrowings under future credit facilities, and through the sale of equity, equity- related or debt securities. There can be no assurance that financing will be available in amounts, or at rates or on terms and conditions acceptable to the Company. The Company anticipates that capital expenditures in Fiscal 1998 will be approximately $1.6 million, primarily to finance new stores. The Company has available net operating loss carryforwards of approximately $18.0 million for income tax purposes. Seasonality The Company's operations are highly seasonal and approximately 42% of its revenues fall within the Company's fourth quarter which coincides with the Christmas selling season. New stores are expected to be opened throughout the year, but generally before the Christmas selling season, which will make the Company's fourth quarter revenues an even greater percentage of the total year's revenues. Operations during the first three quarters are not expected to be profitable for the foreseeable future. -16- Impact of Inflation The impact of inflation on the Company's results of operations has not been significant. The Company attempts to pass on increased costs by increasing product prices over time. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. Reference is made to Item 14. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. Information with respect to directors and executive officers of the Company is incorporated herein by reference to the information set forth under the captions "Election of Directors", "Executive Officers", and "Compliance with Section 16(a) of the Exchange Act" in the Company's Proxy Statement for its 1997 Annual Meeting of Stockholders (the "1997 Proxy Statement"). ITEM 11. EXECUTIVE COMPENSATION. Information with respect to executive compensation is incorporated herein by reference to the information set forth under the captions, "Committees, Meetings, and Director Compensation" and "Executive Compensation", excluding the information under the captions "Executive Compensation - Compensation and Stock Option Committee Report on Executive Compensation" and "Executive Compensation - Performance Graph", in the Company's 1997 Proxy Statement. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. Information with respect to security ownership is incorporated herein by reference to the information set forth under the caption "Security Ownership" in the Company's 1997 Proxy Statement. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. Information with respect to certain relationships and related transactions is incorporated herein by reference to the information, if any, set forth under the caption "Certain Relationships and Related Transactions" in the Company's 1997 Proxy Statement. -17- PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K. (a) 1. Financial Statements Page Independent auditor's report F-1 Consolidated balance sheets at February 1, 1997 and February 3, 1996 F-2 Consolidated statements of operations for the years ended February 1, 1997, February 3, 1996 and January 28, 1995 F-3 Consolidated statements of stockholders' equity for the years ended February 1, 1997, February 3, 1996 and January 28, 1995 F-4 Consolidated statements of cash flows for the years ended February 1, 1997, February 3, 1996 and January 28, 1995 F-5 Notes to consolidated financial statements F-6 2. Schedules VIII. Valuation and qualifying accounts (available on request) All other schedules have been omitted because they are not applicable or the required information is shown in the financial statements or the notes thereto. The individual financial statements and schedules of Registrant have been omitted since consolidated financial statements have been filed and Registrant is primarily an operating company and all subsidiaries included in the consolidated financial statements filed are wholly-owned subsidiaries. Shareholders may obtain a copy of any exhibit not contained herein free of charge by writing to Kenneth S. Betuker, Vice President, Chief Financial Officer and Secretary, Noodle Kidoodle, Inc., 105 Price Parkway, Farmingdale, New York 11735. -18- 3. Index to Exhibits (a) The following documents are filed as Exhibits to this document:
Exhibit Number Description of Document 3.1 Certificate of Incorporation of the Registrant currently in effect, with all amendments thereto (Incorporated by reference to Exhibit 3.1 to Registrant's Form S-1 Registration Statement (Commission File No. 33-65029), effective February 13, 1996) 3.2 (New York) Certificate of Merger of Noodle Kidoodle, Inc., a New York corporation, into Noodle Kidoodle, Inc., a Delaware corporation (Incorporated by reference to Exhibit 3.2 to Registrant's Form S-1 Registration Statement (Commission File No. 33-65029), effective February 13, 1996) 3.3 Agreement and Plan of Merger of Noodle Kidoodle, Inc., a New York corporation, and Noodle Kidoodle, Inc., a Delaware corporation (Incorporated by reference to Exhibit 3.3 to Registrant's Form S-1 Registration Statement (Commission File No. 33-65029), effective February 13, 1996) 3.4 By-laws of Registrant (Incorporated by reference to Exhibit 3.4 to Registrant's Form S-1 Registration Statement(Commission File No. 33- 65029), effective February 13, 1996) 3.5 (Delaware) Certificate of Merger of Noodle Kidoodle, Inc., a New York corporation into Noodle Kidoodle, Inc., a Delaware corporation (Incorporated by reference to Exhibit 3.5 to Registrant's Form S-1 Registration Statement (Commission File No. 33-65029), effective February 13, 1996) 3.6* Plan of Merger of C.W.P.W., Inc., a Michigan corporation, into Noodle Kidoodle, Inc., a Delaware corporation 3.7* Certificate of Ownership and Merger of C.W.P.W., Inc., a Michigan corporation, into Noodle Kidoodle, Inc., a Delaware corporation -19- 4.1 Rights Agreement, dated as of May 6, 1988, between Registrant and Manufacturers Hanover Trust Company, as Rights Agent (Incorporated by reference to Registrant's Report on Form 8-K dated May 6, 1988 and the exhibits filed therewith) 4.2 First Amendment to Rights Agreement dated as of November 22, 1991 (Incorporated by reference to Registrant's Report on Form 8-K, dated November 22, 1991, and the exhibits filed therewith) 10.1 Stock Incentive Plan and Outside Directors Stock Option Plan, dated April 26, 1994 (Incorporated by reference to Registrant's Form S-8 Registration Statement (Commission File No. 33- 82104), effective July 26, 1994 and the exhibits filed therewith) 10.2 Employment Agreement by and between Registrant and Stanley Greenman dated as of February 1, 1995 (Incorporated by reference to Registrant's Annual Report on Form 10-K for the fiscal year ended January 28, 1995) 10.3 Employment Agreement by and between Registrant and Stewart Katz dated as of February 1, 1995 (Incorporated by reference to Registrant's Annual Report on Form 10-K for the fiscal year ended January 28, 1995) 10.4 Non-Contributory Insured Medical Reimbursement Plan (Incorporated by reference to Exhibit 10.05 to Registrant's Annual Report on Form 10-K for the fiscal year ended January 30, 1993) 10.5 Agreement and Plan of Merger dated February 1, 1994 by and between Registrant and certain wholly-owned subsidiaries of the Registrant (Incorporated by reference to Exhibit 10.08 to Registrant's Annual Report on Form 10-K for fiscal year ended January 29, 1994) 10.6 Amendment to Outside Directors Stock Option Plan, dated December 13, 1995 (Incorporated by reference to Exhibit 10.6 to Registrant's Form S- 1 Registration Statement (Commission File No. 33- 65029), effective February 13, 1996) 10.7* Purchase and Sale Agreement - Farmingdale Facility 11.1* Computation of Earnings Per Share -20- 21.1* Subsidiaries of Registrant 27.0* Financial Data Schedule
(b) The following documents are filed as Schedules to this Document: Schedule Number Description of Document VIII Valuation and Qualifying Accounts for the Fiscal Years Ended February 1, 1997, February 3, 1996 and January 28, 1995 (b) Reports on Form 8-K None * Filed herewith -21- SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. NOODLE KIDOODLE, INC. (Registrant) April 24, 1997 BY: /s/Stanley Greenman Stanley Greenman Chairman of the Board, Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant in the capacities and on the date indicated. /s/Stanley Greenman /s/Robin Farkas Stanley Greenman Robin Farkas, Director Chairman of the Board, Chief Executive Officer, and Treasurer /s/Lester Greenman (Principal Executive Officer) Lester Greenman, Director /s/Stewart Katz /s/Joseph Madenberg Stewart Katz, President, Joseph Madenberg, Director Chief Operating Officer, Assistant Secretary and Director /s/Melvin C. Redman Melvin C. Redman, Director /s/Kenneth S. Betuker Kenneth S. Betuker Vice President, /s/Barry W. Ridings Chief Financial Officer Barry W. Ridings, Director and Secretary (Principal Financial and Accounting Officer) /s/Robert Stokvis Robert Stokvis, Director -22- INDEPENDENT AUDITORS' REPORT To the Stockholders and Board of Directors of Noodle Kidoodle, Inc. We have audited the accompanying consolidated balance sheets of Noodle Kidoodle, Inc. and Subsidiaries as of February 1, 1997 and February 3, 1996 and the related consolidated statements of operations, stockholders' equity, and cash flows for each of the three years in the period ended February 1, 1997. Our audits also include the financial statement schedule listed in the index at Item 14(a)2. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Noodle Kidoodle, Inc. and Subsidiaries as of February 1, 1997 and February 3, 1996 and the results of their operations and cash flows for each of the years in the three year period ended February 1, 1997 in conformity with generally accepted accounting principles. Further, in our opinion, the above referenced financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly in all material respects the information set forth therein. Janover Rubinroit, LLC /s/Janover Rubinroit, LLC Garden City, New York March 31, 1997 F-1 NOODLE KIDOODLE, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS February 1, 1997 and February 3, 1996
February 1, February 3, 1997 1996 (In thousands except share data) ASSETS Current assets: Cash and cash equivalents $11,333 $ 7,272 Merchandise inventories 17,318 10,328 Prepaid expenses and other current assets 2,752 3,043 Net assets of discontinued operations - 3,584 Total current assets 31,403 24,227 Property, plant and equipment at cost 23,687 16,535 Less accumulated depreciation 4,104 3,541 19,583 12,994 Other assets 50 55 Total Assets $51,036 $37,276 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current maturities of long-term debt $ 18 $ - Trade accounts payable 5,049 5,283 Accrued expenses and taxes 7,092 4,913 Net liabilities of discontinued operations 2,425 - Total current liabilities 14,584 10,196 Long-term debt 753 - Commitments and contingencies - - Stockholders' equity: Preferred stock-authorized 1,000,000 shares, par value $.001 (none issued) - - Common stock-authorized 15,000,000 shares, par value $.001; issued 8,503,901 and 6,300,401 shares, respectively 9 6 Capital in excess of par value 43,063 26,955 Retained earnings (deficit) (3,581) 3,911 39,491 30,872 Less treasury stock, at cost, 924,261 shares 3,792 3,792 Total stockholders' equity 35,699 27,080 Total Liabilities and Stockholders' Equity $51,036 $37,276 The accompanying notes are an integral part of the financial statements.
F-2 NOODLE KIDOODLE, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS For the Fiscal Years Ended February 1, 1997, February 3, 1996 and January 28, 1995
February 1, February 3, January 28, 1997 1996 1995 (In thousands except share data) Net sales $59,410 $32,143 $23,308 Costs and expenses: Cost of products sold including buying and warehousing costs 36,542 19,825 16,192 Selling and administrative expenses 31,124 17,680 10,790 Provision for restructured operations - 500 3,900 67,666 38,005 30,882 Operating loss (8,256) (5,862) (7,574) Interest income 839 633 372 Interest expense (75) (43) (75) Loss from continuing operations before income taxes (7,492) (5,272) (7,277) Income taxes (benefit) - - (2,787) Net (loss) from continuing operations (7,492) (5,272) (4,490) Discontinued operations: Income (loss) net of income tax expense of $0, $0 and $685, respectively - (1,914) 1,096 Operating loss of $7,305 including gain from disposal of assets and income taxes of $1,602 - (7,145) - Net income (loss) from discontinued operations - (9,059) 1,096 Net (loss) $(7,492) $(14,331) $(3,394) Net income (loss) per share: Continuing operations $ (1.00) $ (.99) $ (.86) Discontinued operations - (1.70) .21 Net (loss) per share $ (1.00) $ (2.69) $ (.65) Weighted average shares outstanding 7,487,803 5,320,137 5,220,222 The accompanying notes are an integral part of the financial statements.
F-3 NOODLE KIDOODLE, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY For the Fiscal Years Ended February 1, 1997, February 3, 1996 and January 28, 1995 (In thousands)
Common Stock Capital in Retained Treasury Stock Excess of Earnings (at Cost) Shares Amount Par Value (Deficit) Shares Amount Balance - January 29, 1994 6,119 $ 612 $25,608 $21,636 924 $3,792 Exercise of stock options including related tax benefits 169 17 193 -- -- -- Tender of shares as payment for options exercised (103) (10) -- -- -- -- Net loss for the year -- -- -- (3,394) -- -- Balance - January 28, 1995 6,185 619 25,801 18,242 924 3,792 Exercise of stock options 115 12 529 -- -- -- Change in par value of common stock -- (625) 625 -- -- -- Net loss for the year -- -- -- (14,331) -- -- Balance - February 3, 1996 6,300 6 26,955 3,911 924 3,792 Common stock offering, net 2,180 3 16,007 - - - Exercise of stock options 24 - 101 - - - Net loss for the year - - - (7,492) - - Balance - February 1, 1997 8,504 $ 9 $43,063 $(3,581) 924 $3,792 The accompanying notes are an integral part of the financial statements.
F-4 NOODLE KIDOODLE, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS For the Fiscal Years Ended February 1, 1997, February 3, 1996 and January 28, 1995 (In thousands)
February 1, February 3, January 28, 1997 1996 1995 Cash flows from operating activities: Net loss from continuing operations $(7,492) $(5,272) $(4,490) Adjustments to reconcile to net cash provided (used): Depreciation 1,926 1,028 499 Restructuring charges - non-cash portion - 500 834 Loss on disposal of fixtures and equipment 327 - - Decrease (increase) in non-cash - - - working capital accounts: Merchandise inventories (6,990) (5,998) 1,989 Prepaid expenses and other current assets 291 (63) (1,905) Trade accounts payable (234) 3,021 (125) Accrued expenses and taxes 2,734 (497) 1,732 Net cash used in continuing operations (9,438) (7,281) (1,466) Net income (loss) from discontinued operations - (9,059) 1,096 Adjustments to reconcile to net cash provided (used): Decrease (increase) in non-cash working capital accounts and other (1,585) 21,187 7,970 Net cash provided by (used in) discontinued operations (1,585) 12,128 9,066 Net cash provided by (used in) operating activities (11,023) 4,847 7,600 Cash flows from investing activities: Proceeds from sale of securities - - 1,000 Proceeds from sales of property - discontinued operations 7,594 - - Property additions: Continuing operations (9,397) (8,877) (2,751) Discontinued operations - (86) (1,213) Other 5 3 492 Net cash used in investing activities (1,798) (8,960) (2,472) Cash flows from financing activities: Proceeds from sale of common stock 16,010 - - Increase in long-term debt 780 - - Reduction of long-term debt (9) (64) (64) Exercise of employee options 101 541 80 Net cash provided by financing activities 16,882 477 16 Net increase (decrease) in cash and cash equivalents 4,061 (3,636) 5,144 Cash and cash equivalents - beginning of year 7,272 10,908 5,764 Cash and cash equivalents - end of year $11,333 $ 7,272 $10,908 Supplemental cash flow information: Net cash paid (received) during the year for: Interest expense $ 75 $ 43 $ 75 Income taxes, net - (1,512) 328 The accompanying notes are an integral part of the financial statements.
F-5 NOODLE KIDOODLE, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES: The following summary of the Company's major accounting policies is presented to assist in the interpretation of the financial statements. Principles of consolidation The consolidated financial statements include the accounts of the parent company and all subsidiary companies. All significant intercompany balances and transactions are eliminated in consolidation. The Company and its subsidiaries are on a 52-53 week accounting period ending on the Saturday closest to January 31. Fiscal 1997 and 1995 each contained 52 weeks and Fiscal 1996 contained 53 weeks. Description of business The Company is a specialty retailer of a broad assortment of educationally oriented, creative and non-violent children's products, including toys, books, games, video and audio tapes, computer software, crafts, and other learning products. Cash equivalents and short-term investments All highly liquid investments purchased with a maturity of three months or less are considered to be cash equivalents. The Company places its temporary cash investments in high grade instruments with high credit quality financial institutions and, by policy, limits the amount of credit exposure to any one financial institution. Inventories Inventories are stated at the lower of cost (first-in, first-out) or market. Earnings per share The computation of earnings per share is based on the weighted average number of outstanding common shares. The inclusion of common stock equivalents had no significant dilutive effect or were antidilutive and therefore, were not utilized in the computations of net income (loss) per share. Property, plant and equipment Plant and equipment is stated at cost and is depreciated on a straight-line basis over estimated useful lives. Repairs and maintenance are charged to expense as incurred; renewals and betterments, which significantly extend the useful lives of existing plant and equipment, are capitalized. Leasehold improvements are amortized over the terms of the respective leases or over their useful lives, whichever is shorter. Useful lives of other plant and equipment varie among the classifications, but range for buildings and improvements from 10-40 years and for fixtures and equipment from 4-10 years. F-6 Pre-opening expenses Costs incurred in the opening of new stores are amortized over the first twelve months of operations. Income taxes Deferred taxes provided under SFAS No. 109 result principally from temporary differences in depreciation, capitalized inventory costs, restructuring charges, and allowance for doubtful accounts. Use of estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expense during the reporting period. Actual results could differ from those estimates. Fair value disclosures The carrying amounts of cash and cash equivalents, other current assets, accounts payable and other current liabilities approximates fair value because of the short term maturity of these instruments. The stated value of long-term debt, including current maturities, approximates fair value. Accounting changes Effective February 4, 1996, the Company adopted Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for The Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of". This statement requires companies to write down to estimated fair value long- lived assets that are impaired. The adoption of SFAS No. 121 resulted in no impairment loss required to be recognized for applicable assets of continuing operations. Effective February 4, 1996, the Company adopted SFAS No. 123, "Accounting for Stock-Based Compensation", which encourages, but does not require, recognition of compensation expense for all stock-based awards granted to employees. The Company has adopted the disclosure only provisions, and accordingly, no compensation cost has been recognized for the stock option plans. The Company's stock compensation plans are discussed in Note 8. NOTE 2 - DISCONTINUED OPERATIONS: On August 30, 1995, the Company adopted a formal plan to discontinue its wholesale business segment. The plan provided for the sale of two of the Company's distribution centers and the disposition through sale or liquidation of substantially all of the operating assets of such segment. The operations and net assets of the wholesale business segment are being accounted for as a discontinued operation, and accordingly, its operating results and net assets are reported in this manner in all periods presented in the accompanying consolidated financial statements. In connection with discontinuing its wholesale operations, the Company recorded a provision of $7.1 million in the fiscal quarter ended July 29, 1995 for (i)estimated gains or losses on the sale or liquidation of F-7 wholesale assets and (ii) estimated losses until such disposal or liquidation is completed. Summary of operating results from discontinued operations are as follows:
Fiscal Years Ended February 1, February 3, January 28, 1997 1996 1995 (In thousands) Net sales $ - $51,931 $113,194 Gross profit - 9,726 24,604 Operating income (loss) - (1,914) 1,781 Provision for discontinued operations - 7,145 - Net income (loss) - (9,059) 1,096
Net assets of this segment at February 3, 1996 consisted principally of accounts receivable and properties of $5,131,000 less accounts payable accrued expenses and capital lease obligations of $1,547,000. Net liabilities of this segment at February 1, 1997 consisted principally of accounts payable, accrued expenses and capitalized lease obligations of $3,712,000 less accounts receivable and properties of $1,287,000. NOTE 3 - PROPERTY, PLANT AND EQUIPMENT:
Fiscal Years Ended February 1, February 3, 1997 1996 (In thousands) Land $ 272 $ 272 Building and improvements 1,665 1,658 Fixtures and equipment 10,735 6,931 Leasehold improvements 11,015 7,674 23,687 16,535 Less accumulated depreciation (4,104) (3,541) $19,583 $12,994
F-8 NOTE 4 - ACCRUED EXPENSES AND TAXES:
Fiscal Years Ended February 1, February 3, 1997 1996 (In thousands) Payroll and related benefits $ 752 $ 468 Rent and occupancy 1,532 512 Insurance 312 276 Restructuring charges 1,424 1,929 Fixtures and equipment 602 297 Other 2,470 1,431 $7,092 $4,913
F-9 NOTE 5 - LONG-TERM DEBT: Long-term debt consists of the following:
Fiscal Years Ended February 1, February 3, 1997 1996 (In thousands) Bank credit line $ - $ - 8% unsecured promissory note, due in quarterly installments through 2016 771 - 771 - Less current maturities 18 - $753 $ -
The Company has an unsecured credit line with a bank which provides for maximum borrowings of $10 million until May 31, 1997, to be used to meet the Company's normal short term working capital needs. Interest on borrowings will be at either the bank's prime rate or at a Eurodollar rate. The Company had no borrowings under this agreement during Fiscal 1997 and 1996. Annual maturities of long-term debt during the next five years are $18,000, $20,000, $21,000, $23,000, and $25,000. NOTE 6 - COMMITMENTS AND CONTINGENCIES: Minimum annual commitments under non-cancelable leases in effect at February 1, 1997 are as follows:
Sublease Operating Rental Leases Income (In thousands) 1998 $ 8,243 $ 360 1999 8,833 150 2000 8,932 - 2001 8,998 - 2002 9,125 - Thereafter 42,331 - Total minimum obligations $86,462 $ 510
At February 1, 1997, the Company and its subsidiaries were lessees of stores and transportation equipment under various leases. In addition to fixed rents and rentals based on sales, certain of the leases require the payment of taxes and other costs. Some leases include renewal options. F-10 Rental expense (income) for operating leases was as follows:
Fiscal Years Ended February 1, February 3, January 28, 1997 1996 1995 (In thousands) Minimum rentals $ 5,430 $3,089 $1,850 Taxes and other costs 2,115 1,335 1,027 Sublease rentals (642) (916) (953) $ 6,903 $3,508 $1,924
Litigation Several lawsuits are pending against the Company. In the opinion of management, the Company has meritorious defenses or is covered by insurance, and the Company's liability, if any, when ultimately determined, will not be material. Employment and consulting agreements The Company has employment and consulting agreements with certain directors, officers, and employees. Certain agreements provide for minimum salary levels as well as for incentive bonuses which are payable if specified performance goals are attained. NOTE 7 - CAPITAL STOCK: Common Stock On February 13, 1996, the Company completed a public offering of 2.18 million shares (including the over allotment option) of common stock at $8.00 per share. Proceeds from the offering, net of commissions and expenses, were approximately $16.0 million. The net proceeds from the offering are being used primarily to finance the Company's store expansion plans as well as for general corporate purposes, including approximately $1.0 million to improve its MIS systems capabilities. Preferred stock The Company has 1,000,000 authorized (non-issued) shares of preferred stock, par value $0.001, consisting of 440,000 shares of Series A Junior Participating Preferred reserved for use under the Stockholders' Rights Plan and the remainder for other unspecified purposes. Stockholders' rights plan Each outstanding share of the Company's common stock carries a stock purchase right. Under certain circumstances, as defined in a rights agreement, each right may be exercised to purchase 1/100 of a share of Series A Junior Participating Preferred Stock for $25.00, subject to certain anti-dilution adjustments. The rights are redeemable by the Company or, under certain circumstances, by a third party to whom the Company assigns its rights at $.01 each until a person or group acquires fifteen percent of the Company's common stock or until they expire on May 15, 1998. F-11 Treasury stock On February 4, 1993, the Company's Board of Directors authorized the repurchase from time to time of up to 500,000 shares of its common stock. The Company purchased 413,600 shares of common stock at an average price of $4.52 per share under this authorization. In April 1995, the Board terminated its stock repurchase program. NOTE 8 - STOCK OPTIONS: Stock incentive plan The Company's Stock Incentive Plan (the "Plan") for key employees and consultants, reserves 500,000 shares of common stock for the issuance of stock options, stock appreciation rights (SAR's), dividend equivalent rights, restricted stock, unrestricted stock and performance shares and is administered by the Compensation and Stock Option Committee (the "Committee") of the Board of Directors of the Company. Under the terms of the Plan, options granted may be either non-qualified or incentive stock options and the exercise price, determined by the Committee, shall be at least 75% (100% in the case of an incentive stock option) of the fair market value of a share on the date of grant. SAR's may be granted (subject to specified restrictions) in connection with all or any part of, or independently of, any option granted under the Plan. No SAR's, dividend equivalent rights, restricted stock, unrestricted stock or performance shares have been granted to date under the Plan. Options granted under the Plan are exercisable in installments; however, no options are exercisable within one year or later than ten years from the date of grant. Stock option plan for outside directors The Company's Outside Directors Stock Option Plan reserves 125,000 shares of common stock for the issuance of stock options related to this plan. The Stock Option Plan for Outside Directors provides that upon the initial election to the Board, each eligible director is granted an option to purchase 5,000 shares of common stock and 4,000 shares each year thereafter at the fair market value on the date of grant. The options have a term of five years and become exercisable 50% on the first anniversary of the date of grant and 50% on the second anniversary of the date of grant. The following summary sets forth the activity under the Company's stock incentive plans:
Fiscal Years Ended February 1, 1997 February 3, 1996 Shares Price Range Shares Price Range Outstanding at beginning of year 580,359 $3.50-$13.13 501,459 $3.50-$ 6.50 Granted 272,000 $5.63-$ 8.00 213,500 $4.56-$13.13 Exercised (23,500)$3.50-$ 4.81 (115,100) $4.00-$ 6.50 Terminated (198,000)$4.56-$13.13 (19,500) $4.13-$ 6.50 Outstanding at end of year 630,859 $4.13-$13.13 580,359 $3.50-$13.13 Exercisable at end of year 312,609 $4.13-$13.13 298,078 $3.50-$ 6.50 Available for grant at end of year 253,500 279,250
F-12 The Company has adopted the disclosure only provisions of SFAS No. 123, "Accounting For Stock Based Compensation", and, accordingly, no compensation cost has been recognized for the stock option plans. The fair value of options at date of grant was estimated using the Black- Scholes model with the following weighted average assumptions:
Fiscal Years Ended February 1, February 3, 1997 1996 Expected life (years) 5 5 Risk-free interest rate 6.0% 6.5% Expected volatility 45.3% 35.4% Dividend yield 0.0% 0.0%
Had compensation for options granted in Fiscal 1997 and 1996 been determined consistent with SFAS No. 123, the Company's net loss and net loss per share would approximate the pro-forma amounts indicated below (in thousands, except share data).
Fiscal Years Ended February 1, February 3, 1997 1996 Net loss $(7,558) $(14,400) Net loss per share (1.01) (2.71)
The effects of applying SFAS No. 123 in this proforma disclosure are not indicative of future effects. SFAS No. 123 does not apply to awards prior to Fiscal 1996, and additional awards in future years are anticipated. The weighted average fair value of options granted was $4.09 and $5.17 for Fiscal 1997 and 1996, respectively. NOTE 9 - TAXES ON INCOME: Income taxes (benefit) consist of the following:
Fiscal Years Ended February 1, February 3, January 28, 1997 1996 1995 (In thousands) Current: Federal $ - $ - $(1,429) State and local - - - - - (1,429) Deferred - 1,602 (673) - 1,602 (2,102) Discontinued operations - 1,602 685 Continuing operations $ - $ - $(2,787)
F-13 A reconciliation of the statutory federal income tax rate attributable to income (loss) from continuing operations to the effective income tax rate is as follows:
Federal at statutory rates (34)% (34)% (34)% State and local taxes net of federal tax benefits (4) (4) (4) Losses with no current tax benefit 38 38 - -% -% (38)%
The components of deferred tax assets (liabilities) consist of the following:
Fiscal Years Ended February 1, February 3, 1997 1996 (In thousands) Net operating loss carryforward (expires 2012) $6,760 $5,742 Capitalizable inventory costs 312 160 Discontinued operations 992 - Allowance for doubtful accounts 485 485 Restructured operations and other 778 459 Gross deferred tax assets 9,327 6,846 Depreciation (433) (126) Gross deferred tax liabilities (433) (126) Net deferred tax assets 8,894 6,720 Valuation allowance 8,894 6,720 Net tax assets $ - $ -
Deferred income taxes result from temporary differences in the recognition of revenue and expense for tax and financial statement purposes. Principal items resulting in deferred income tax liabilities or assets are differences in depreciation, inventory valuations, restructuring charges and allowance for doubtful accounts. As a result of the Company's decision to discontinue the wholesale business segment, the Company has incurred losses for which no current tax benefits are available. Management's decision resulted in a reevaluation of its ability to fully recognize its 1995 deferred tax assets. The provision for income taxes for the year ended February 3, 1996 results primarily from a F-14 reduction in net deferred tax assets. For financial reporting purposes, the effective tax rate in Fiscal 1996 represents an increase in the valuation allowance of net deferred tax assets to an amount realizable based upon taxes paid for prior years without relying on future income. NOTE 10 - EMPLOYEE RETIREMENT PLANS: The Company has a 401-k savings plan designed to provide additional financial security during retirement by providing eligible employees with an incentive to make regular savings contributions. The Company matches 10% of the first 4% of compensation contributed by the employee. The Company participates in various multi-employer pension plans. Contributions and costs are determined in accordance with the provisions of negotiated labor contracts or terms of the plans. The Company does not administer or control the plans. One of the plans covering certain former employees, to which the Company and many other employers made contributions, has been terminated. The Employee Retirement Income Security Act ("ERISA") imposes certain liabilities upon employers who are contributors to a multi-employer pension plan in the event of withdrawal or termination of such a plan. During the year, the Company agreed to settle its liability for approximately $780,000, payable in quarterly installments over 20 years, plus interest at 8% per annum. The liability was provided for in prior periods and was charged to discontinued operations in those periods. NOTE 11 - INDUSTRY SEGMENTS: The Company operates substantially in one industry segment which includes the retail sales of children's toys and other products. NOTE 12 - PROVISION FOR RESTRUCTURED OPERATIONS: On August 10, 1994, the Company announced the closing of stores operating under the name Playworld Toy Stores and one leased department operation. A provision of $3,900,000 was recorded for restructuring costs representing employee severance costs ($550,000), estimated lease liabilities ($1,050,000), losses on liquidation of inventories ($1,250,000), disposition of fixed assets ($1,000,000) and other related restructuring costs ($50,000). This charge increased the net loss for Fiscal 1995 by $2,340,000, ($.45 per share). The Company provided an additional $500,000 ($.09 per share) in Fiscal 1996 primarily to reflect the closing of one additional store that was not anticipated previously. F-15 NOTE 13 - INTERIM FINANCIAL DATA (UNAUDITED):
First Second Third Fourth Quarter Quarter Quarter Quarter (In thousands except per share data) Fiscal Year Ended February 1, 1997: Sales $ 9,113 $ 9,531 $11,845 $28,921 Gross profit 3,186 3,446 4,604 11,632 Net income (loss) - continuing operations $(2,693) $(3,075) $(2,468) $ 744 Net income (loss) per share: $ (.37) $ (.41) $ (.33) $ .10 Weighted average shares outstanding 7,239 7,558 7,574 7,580 Fiscal Year Ended February 3, 1996: Sales $ 3,281 $ 3,939 $ 6,288 $18,635 Gross profit 1,162 1,396 2,166 7,594 Net income (loss): Continuing operations (1,226) (1,674) (2,970) 598 Discontinued operations (840) (8,219) -- -- Net income (loss) $(2,066) $(9,893) $(2,970) $ 598 Net income (loss) per share: Continuing operations $ (.23) $ (.32) $ (.55) $ .11 Discontinued operations (.16) (1.55) -- -- Net income (loss) per share $ (.39) $ (1.87) $ (.55) $ .11 Weighted average shares outstanding 5,263 5,287 5,356 5,615
The Company's sales are highly seasonal. Income (loss) per share calculations for each of the quarters are based on the weighted average number of shares outstanding for each period and the sum of the quarters may not necessarily be equal to the full year income (loss) per share amount. F-16 SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
For the Fiscal Years Ended February 1, 1997, February 3, 1996 and January 28, 1995 (In thousands) Column A Column B Column C Column D Column E Additions (1) (2) Balance at Charged to Charged to Deductions Balance at beginning of costs and other end of year expenses accounts year For estimated losses in collection: Year ended February 1, 1997 $ 1,277 $ - $ - $ - $ 1,277 Year ended February 3, 1996 $ 983 $ 581 $ - $ 287 (a) $ 1,277 Year ended January 28, 1995 $ 874 $ 250 $ - $ 141 (a) $ 983 (a) Write-offs net of recoveries All amounts are included in discontinued operations.
EXHIBIT 11.1 NOODLE KIDOODLE, INC. AND SUBSIDIARIES COMPUTATION OF EARNINGS PER SHARE
Fiscal Years Ended February 1, February 3, January 28, January 29, January 30, 1997 1996 1995 1994 1993 (52 weeks) (53 weeks) (52 weeks) (52 weeks) (52 weeks) (a) Net income (loss) $(7,491,769) $(14,330,657) $(3,394,364) $ 709,487 $1,801,120 (b) Weighted average number of shares of common stock outstanding during year 7,487,803 5,320,137 5.220,222 5,338,012 5,574,547 Income (loss) per share (a/b) $ (1.00) $ (2.69) $ (.65) $ .13 $ .32 (c) Incremental shares based on the treasury stock method for stock options, using the average market price 112,631 178,110 141,219 59,673 94,082 (d)Incremental shares based on the treasury stock method for stock options, using the ending market price 112,625 205,168 153,036 82,310 94,082 Income (loss) per common and common equivalent shares (primary) (a/(b+c)) $ (.99) $ (2.61) $ (.63) $ .13 $ .32 Income (loss) per common and common equivalent shares assuming full dilution (a/(b+d)) $ (.99) $ (2.59) $ (.63) $ .13 $ .32 NOTE: The inclusion of common stock equivalents were antidilutive in Fiscal 1995, 1996, and 1997 and had no significant dilutive effect on all other years presented, and therefore, were not utilized in the above computation of income (loss) per share.
EXHIBIT 21.1 SUBSIDIARIES OF REGISTRANT Name(s) Under Which Name of Subsidiary Jurisdiction of Incorporation Subsidiary Does Business M.Z. Catalog Services, New Jersey M.Z. Catalog Services, Inc. Inc.
EX-27 2
5 1000 YEAR FEB-01-1997 FEB-04-1996 FEB-01-1997 11,333 0 0 0 17,318 31,403 23,687 4,104 51,036 14,584 0 0 0 9 35,690 51,036 59,410 59,410 36,542 36,542 31,124 0 75 (7,492) 0 (7,492) 0 0 0 (7,492) (1.00) (1.00)
EX-99.3.6 3 Exhibit 3.6 CERTIFICATE OF OWNERSHIP AND MERGER OF C.W.P.W., INC. (a Michigan corporation) into NOODLE KIDOODLE, INC. (a Delaware corporation) It is hereby certified that: 1. Noodle Kidoodle, Inc., hereinafter sometimes referred to as the "Corporation" is a business corporation of the State of Delaware. 2. The Corporation is the owner of all of the outstanding shares of stock of C.W.P.W., Inc., which is a business corporation of the State of Michigan. 3. The laws of the jurisdiction of organization of C.W.P.W., Inc., permit the merger of a business corporation of that jurisdiction with a business corporation of another jurisdiction. 4. The Corporation hereby merges C.W.P.W., Inc., into the Corporation. 5. The following are resolutions adopted on November 26, 1996, by the Board of Directors of the Corporation to merge the said C.W.P.W., Inc., into the Corporation: RESOLVED that C.W.P.W., Inc., be merged into this Corporation, and that all of the estate, property, rights, privileges, powers, and franchises of C.W.P.W., Inc., be vested in and held and enjoyed by this Corporation as fully and entirely and without change or diminution as the same were before held and enjoyed by C.W.P.W., Inc., in its name. RESOLVED that this Corporation assumes all of the obligations of C.W.P.W., Inc., including without limitation all obligations arising under leases to which C.W.P.W., Inc., is a party. Additionally, all obligations of C.W.P.W., Inc., which had been guarantied by the Corporation shall, on the date of the merger, become the primary obligations of the Corporation. RESOLVED upon the effectiveness of the merger, all property, real, personal and mixed of C.W.P.W., Inc., and all the debts due on whatever account to C.W.P.W., Inc., as well as all stock subscriptions and other choses in action belonging to C.W.P.W., Inc., shall be transferred to and vested in the surviving corporation; and all claims, demands, property and other interests shall be the property of the surviving corporation. The merger shall have all the effects provided by Section 259 of the Delaware General Corporation Law and Section 450.1724 of the Business Corporation Act of the State of Michigan. RESOLVED that this Corporation shall cause to be executed and filed and/or recorded the documents prescribed by the laws of the State of Delaware, by the laws of the State of Michigan, and by the laws of any other appropriate jurisdiction and will cause to be performed all necessary acts within the jurisdiction of organization of C.W.P.W., Inc., and of this Corporation and in any other appropriate jurisdiction to effectuate this merger. 6. The effective time of the Certificate of Ownership and Merger shall be January 31, 1997, and that, insofar as the General Corporation Law of the State of Delaware shall govern the same, said time shall be the effective merger time. Executed on January 14, 1997. NOODLE KIDOODLE, INC. By:/s/ Stewart Katz Stewart Katz, President (..continued) KL2:167192.2 EX-99.3.7 4 Exhibit 3.7 PLAN OF MERGER OF C.W.P.W., INC. (a Michigan Corporation) into NOODLE KIDOODLE, INC. (a Delaware Corporation) PLAN OF MERGER adopted by C.W.P.W., Inc., a business corporation organized under the laws of the State of Michigan, by resolution of its Board of Directors on January 9, 1997, and adopted by Noodle Kidoodle, Inc., a business corporation organized under the laws of the State of Delaware, by resolution of its Board of Directors on November 26, 1996. The names of the corporations planning to merge are C.W.P.W., Inc., a business corporation organized under the laws of the State of Michigan, and Noodle Kidoodle, Inc., a business corporation organized under the laws of the State of Delaware. The name of the surviving corporation into which C.W.P.W., Inc., plans to merge is Noodle Kidoodle, Inc. 1. C.W.P.W., Inc., is a wholly owned subsidiary of Noodle Kidoodle, Inc. 2. C.W.P.W., Inc., shall, pursuant to the provisions of the Business Corporation Act of the State of Michigan and the provisions of the laws of the State of Delaware, be merged with and into Noodle Kidoodle, Inc., which shall be the surviving corporation on the effective date of the merger and which is sometimes hereinafter referred to as the "surviving corporation", and which shall continue to exist as said surviving corporation under its present name pursuant to the provisions of the laws of the State of Delaware. The separate existence of C.W.P.W., Inc., which is sometimes hereinafter referred to as the "non-surviving corporation", shall cease on the effective date of the merger in accordance with the provisions of the Business Corporation Act of the State of Michigan. 3. The certificate of incorporation of the surviving corporation on the effective date of the merger in the State of Delaware will be the certificate of incorporation of said surviving corporation and said certificate of incorporation shall continue in full force and effect until amended and changed in the manner prescribed by the provisions of the laws of the State of Delaware. 4. The bylaws of the surviving corporation on the effective date of the merger in the State of Delaware will be the bylaws of said surviving corporation and will continue in full force and effect until changed, altered, or amended as therein provided and in the manner prescribed by the provisions of the laws of the State of Delaware. 5. The directors and officers in office of the surviving corporation on the effective date of the merger in the State of Delaware shall be the directors and officers of the surviving corporation, all of whom shall hold their directorships and offices until the election and qualification of their respective successors or until their tenure is otherwise terminated in accordance with the bylaws of the surviving corporation. 6. Each issued share of the non-surviving corporation shall, on the effective date of the merger, be cancelled. The issued shares of the surviving corporation shall not be converted or exchanged in any manner, but each said share which is issued at the effective date of the merger shall continue to represent one issued share of the surviving corporation. 7. All of the obligations under existing leases of the non-surviving corporation shall, on the date of the merger, be assumed by the surviving corporation. 8. All obligations of the non-surviving corporation which had been guarantied by the surviving corporation shall, on the date of the merger, become the primary obligations of the surviving corporation. 9. Upon the effectiveness of the merger, all of the estate, property, rights, privileges, powers and franchises of C.W.P.W., Inc., and all of its property, real, personal and mixed, and all the debts due on whatever account to C.W.P.W., Inc., as well as all stock subscriptions and other choses in action belonging to C.W.P.W., Inc., shall be transferred to and vested in the surviving corporation; and all claims, demands, property and other interests shall be the property of the surviving corporation. The merger shall have all the effects provided by Section 259 of the Delaware General Corporation Law and Section 450.1724 of the Business Corporation Act of the State of Michigan. 10. The Plan of Merger herein made and approved shall be submitted to the shareholders of the non-surviving corporation for their approval or rejection in the manner prescribed by the provisions of the Business Corporation Act of the State of Michigan, and the merger of the non-surviving corporation with and into the surviving corporation shall be authorized in the manner prescribed by the laws of the State of Delaware. 11. In the event that the Plan of Merger shall have been approved by the shareholders entitled to vote of the non-surviving corporation in the manner prescribed by the provisions of the Business Corporation Act of the State of Michigan, and in the event that the merger of the non-surviving corporation with and into the surviving corporation shall have been duly authorized in compliance with the laws of the State of Delaware, the non-surviving corporation and the surviving corporation hereby stipulate that they will cause to be executed and filed and/or recorded any document or documents prescribed by the laws of the State of Michigan and of the State of Delaware, and that they will cause to be performed all necessary acts therein and elsewhere to effectuate the merger. 12. The Board of Directors and the proper officers of the non-surviving corporation and of the surviving corporation, respectively, are hereby authorized, empowered, and directed to do any and all acts and things, and to make, execute, deliver, file, and/or record any and all instruments, papers, and documents which shall be or become necessary, proper, or convenient to carry out or put into effect any of the provisions of this Plan of Merger or of the merger herein provided for. 13. The effective date of the merger herein provided for shall be January 31, 1997. (..continued) - 3 - EX-99.10.7 5 Exhibit 10.7 PURCHASE AND SALE AGREEMENT - Farmingdale Facility This Purchase and Sale Agreement (this "Agreement") made as of the 17th day of April, 1996, between Noodle Kidoodle, Inc., a Delaware corporation, as successor by merger to Noodle Kidoodle, Inc. f/k/a/ Greenman Bros., Inc., (a New York corporation), having an office at 105 Price Parkway, Farmingdale, New York 11735 ("Seller"), and Reckson Operating Partnership, L.P., a New York partnership, having an office at 225 Broadhollow Road, Melville, New York 11747 ("Purchaser"). RECITALS: 1. Sale and Purchase. Seller shall sell and Purchaser shall purchase, subject to the terms and conditions herein, that certain parcel of land more particularly described on Schedule A attached hereto and made a part hereof, located at 105 Price Parkway, Farmingdale, New York 11735, together with all the improvements thereon including: (i) Seller's interest in all buildings, building fixtures (including all mechanical, electrical, heating and plumbing systems owned by Seller located on the subject premises and used in connection with the operation thereof), utilities and other improvements existing thereon, excluding, however, all personal property of the Seller including, without limitations, all equipment, furniture and furnishings. (ii) Seller's right, title and interest, if any, in and to: any strips or gores of land adjoining the subject premises; any land lying in the bed of any street, road or avenue, opened or proposed, in front of or adjoining the subject premises, to the center line thereof; any condemnation award made or to be make in lieu thereof and any unpaid award for damage to the subject premises by reason of change of grade of any street. Seller will, upon demand, execute and deliver to Purchaser at the Closing, all proper instruments for the conveyance of such right, title and interest and for the assignment and collection of any such awards, if applicable; and (iii) Seller's interest, if any, in all easements, rights of way or uses, privileges, licenses, appurtenances and rights belonging or appertaining to the subject premises. The foregoing property to be conveyed to Purchaser is hereinafter referred to collectively as the "Premises". 2. Purchase Price. The purchase price payable by Purchaser to Seller for the Premises (the "Purchase Price") shall be Eight Million Three Hundred Five Thousand Dollars ($8,305,000) payable as follows: (a) $700,000 shall be paid contemporaneously with the execution of this Agreement (the "Deposit"), such Deposit to be paid to and held in escrow pursuant to Section 3 hereof by First American Title Insurance Company, the Purchaser's title company, (hereinafter "First American" or the "Escrowee"); (b) On the date of the closing of this sale (the "Closing"), the Purchaser shall pay by bank or certified check drawn on a member bank of the New York Clearing House, or by wire transfer of Federal Funds, the sum of $7,605,000.00 to Seller or its designee(s) subject to adjustment as provided herein. 3. Escrow. (a) The Deposit shall be paid by bank or certified check drawn to the order of and delivered to Escrowee, to hold in escrow. Escrowee shall deposit the Deposit in an interest-bearing escrow account separately designated with reference to Seller and Purchaser. Escrowee shall hold and distribute the Deposit as provided in this Agreement. The party receiving any interest earned on the Deposit shall pay any income taxes thereon. Purchaser represents and warrants that its federal tax identification number is 11-3233647 and Seller represents and warrants that its federal tax identification number is 11-1771705. (b) Copies of all notices to be sent under Sections 5, 7, 12, 14 and 16 shall be sent to Escrowee as well. (c) The parties acknowledge that Escrowee is acting solely as a stakeholder at their request and for their convenience, that Escrowee shall not be deemed to be the agent of either of the parties and shall not be liable for any acts or omissions of any kind, unless they are grossly negligent or taken in willful disregard of this Agreement or in bad faith. Escrowee shall be entitled to rely on any instrument or signature believed by it to be genuine and may assume that any person purporting to give any written notice or instruction in connection herewith is fully authorized to do so by the party on whose behalf such written notice or instruction is given. Escrowee shall not receive any payment for handling the Deposit. Seller and Purchaser, jointly and severally, shall indemnify, defend and hold Escrowee harmless from and against all costs, claims, losses, liabilities and expenses, including reasonable attorneys' fees, incurred in connection with or arising from the performance of Escrowee's duties hereunder, except for acts or omissions which are grossly negligent or which are taken or suffered by Escrowee in bad faith, or in willful disregard of this Agreement. However, as between Seller and Purchaser, the party ultimately determined not to be entitled to the payment of the Deposit shall bear all such costs and expenses. Such indemnity shall survive the Closing or other termination of this Agreement. (d) Escrowee shall not be responsible in any manner whatsoever for any failure or inability of Seller or Purchaser to perform or comply with any of the provisions of this Agreement. (e) Escrowee shall not be bound or in any way affected by any notice of any modification or cancellation of this Agreement, unless notice of the same is delivered to Escrowee in writing, signed by the Seller and Purchaser and, in the case of a modification relating to the escrow, unless such modification shall be reasonably satisfactory to Escrowee solely with respect to its duties as Escrowee and, in such case, approved by Escrowee in writing. 4. Section 4 Intentionally Omitted. 5. Seller's Compliance Period 1. Between the date this Agreement is executed and June 8, 1996 ("Seller's Compliance Period"), Seller shall undertake to do the following: (A) Asbestos abatement in accordance with all applicable laws and under the oversight of ATC Environmental, Inc. ("ATC"). Said asbestos abatement shall be carried out substantially in accordance with the Project Manual for Asbestos Abatement and Re-Fireproofing dated March, 1996 prepared by ATC and by either of the contractors listed on Schedule C. At the completion of the abatement project, Seller shall deliver to Purchaser a written statement from ATC that the asbestos abatement project has been lawfully carried out and that all accessible asbestos containing spray on fire proofing material has been removed and disposed of in accordance with law and all inaccessible asbestos was sealed and enclosed. Seller shall also deliver the so-called "close-out report" which includes air monitoring data documenting compliance with 12 NYCRR 56-17.8 and a waste disposal manifest and a detailed survey identifying all locations where friable forms of asbestos remain in the building. (B) Take such actions with respect to the underground petroleum storage tanks located on the Premises so that Seller shall deliver to Purchaser a statement from the County of Suffolk in the form attached hereto as Schedule I (or any similar, substitute form established by the County of Suffolk) with the first alternative listed checked off. If the second alternative is checked off, then, to comply with the requirements of this clause (B), Seller shall deliver to Purchaser the letter in the form attached hereto as Schedule I-A from the New York State Department of Environmental Control (or any similar, substitute form established by the NYS Department of Environmental Control). (C) Take such actions with respect to any septic tanks and systems located on the Premises so that Seller shall deliver to Purchaser a Certificate of Compliance (form P19) from the Southwest Sewer District of Suffolk County, and Form S-9 attached hereto as Schedule II (or any similar, substitute form established by the County of Suffolk). 2. At such time as Seller has complied with clauses (A) (B) and (C) and copies of the certificates and/or statement have been delivered to Purchaser, Seller's Compliance Period shall be deemed to have ended. 3. If at the end of Seller's Compliance Period, Seller has not completed undertaking (A), (B) and/or (C), Purchaser shall have the right, to be exercised within 5 days of the end of Seller's Compliance Period, to either (x) terminate this Agreement upon written notice or (y) notify Seller that it is willing to take title to the Premises subject to all existing conditions including those conditions covered by this Section 5 and the Purchase Price shall be reduced by the amount of contract price yet to be performed as stipulated by Seller's contractor(s). If Purchaser elects alternative (x), the Deposit shall be returned to Purchaser together with all accrued interest (as Purchaser's sole and exclusive remedy) and this Agreement shall terminate and be of no force and effect. If Purchaser elects alternative (y), this Agreement shall continue in full force and effect and Section 6 shall govern with respect to establishing the Closing Date. 6. Closing (A) Closing shall be held at the offices of Purchaser or its counsel. The Closing Date shall be no earlier than 20 days or later than 30 days after Seller's Compliance Period, (as it may be extended), or such other date as the parties hereto may otherwise agree to (provided that this Agreement has not been previously terminated as provided herein). Purchaser shall designate the date of Closing within that time frame by notice given to Seller within five (5) days after the end of Seller's Compliance Period provided that Purchaser agrees to reasonably accommodate Seller if Seller requests an alternate date during that time frame. B. Deliveries at Closing. (a) On the Closing Date, Seller shall convey the Premises to Purchaser by executing, acknowledging (where appropriate) and delivering to Purchaser the following documents as may be applicable (and Purchaser shall execute, acknowledge (where appropriate) and deliver to Seller as indicated, the following documents): (i) A bargain and sale deed with covenants against Grantor's acts (the "Deed") for the Premises in recordable form conveying fee simple title to the Premises, subject only to the matters expressed herein and the "Permitted Encumbrances" (as defined in Paragraph 7 of this Agreement). (ii) An assignment, duly executed and acknowledged by Seller, of Seller's interest in all certificates, licenses, permits, authorizations, consents and approvals relating to the ownership of the Premises issued by governmental authorities to the Premises. (iii) Such resolutions and certificates as First American shall reasonably require as evidence of the due authorization of the documents delivered or to be delivered at Closing; all reasonable and customary affidavits reasonably required by such title company to permit it to issue to Purchaser an owner's policy of title insurance, subject to the matters expressed herein and such other standard title exceptions. (iv) An affidavit in form and content reasonably acceptable to Purchaser in accordance with Section 1445 of the Internal Revenue Code certifying that Seller is not a foreign entity. (v) Keys to the buildings and improvements in the Premises in the possession or control of Seller. (vi) The Seller's sublease executed as of the date hereof by New Breed and Seller for a portion of the Premises consented to by Purchaser. (b) (i) At Closing, Seller shall deliver a certified check or official bank check drawn on any banking institution which is a member of the New York City Clearinghouse Association, payable to the order of the appropriate State, City or County officer (or at Seller's option on written notice to Purchaser given not later than three (3) days prior to Closing, Purchaser shall provide such check(s) and receive a credit at Closing in the amount thereof) in the amount of any applicable transfer tax payable by reason of the delivery or recording of the Deed (other than the gains tax pursuant to Article 31-B of the Tax Law, which is covered by section (b) (ii) hereof), together with any required tax return. Purchaser agrees to duly complete the tax return as and if required and to cause the check(s) and the tax return to be delivered to the appropriate officer promptly (but nevertheless within the time required by applicable law) after Closing. (ii) Seller agrees to comply in a timely manner with the requirements of Article 31-B of the Tax Law of the State of New York and the regulations applicable thereto, as the same from time to time may be amended collectively, the "Gains Tax law") and Seller agrees to make all necessary submissions to the N.Y.S. Taxing Commission by April 30, 1996. Purchaser agrees to deliver to Seller a duly executed and acknowledged Transferee Questionnaire upon the execution of this Agreement. At the Closing, Seller shall deliver (x) an official Statement of No Tax Due or (y) an official Tentative Assessment and Return accompanied by a certified check or official bank check drawn on any banking institution which is a member of the New York City Clearinghouse Association, payable to the order of the State Tax Commission in the amount of the tax shown to be due thereon (it being understood, however, that if Seller has duly elected to pay such tax in installments, the amount so required to be paid may be the minimum installment of such tax then permitted to be paid). Seller shall pay all Gains Tax due under the Gains Tax Law as well as New York State real estate transfer tax (deed stamps). Seller shall have the right after Closing to attempt to reduce the amount of the Gains Tax; any refund it receives shall belong exclusively to Seller. (iii) Seller agrees (A) to pay promptly any installment(s) or additional tax due under the Gains Tax Law, and interest and penalties thereon, if any, which may be assessed or due after the Closing, (B) to indemnify and save Purchaser harmless from and against any of the foregoing and any damage, liability, cost or expense (including reasonable attorneys' fees) which may be suffered or incurred by Purchaser by reason of the non-payment thereof, and (C) to make any other payments and execute, acknowledge and deliver such further documents as may be necessary to comply with the Gains Tax law. (iv) Purchaser, if request is made not later than three (3) days prior to Closing, shall provide a separate certified or official bank check in the amount of the tax shown to be due on the official Tentative Assessment and Return, which amount shall be credited against the balance of the Purchase Price payable at the Closing. (v) The provisions of this subparagraph (b) shall survive the delivery of the Deed. (c) Each party will bear its own attorneys fees. (d) At Closing, Seller and Purchaser shall deliver or cause to be delivered such other payments, documents or agreements as may be required by the terms of this Agreement and to evidence and effectuate the transaction contemplated herein. (e) It shall be a condition to Closing that the Deposit and accrued interest thereon be delivered to Seller by certified or bank check payable to Seller. 7. Title. (a) Seller shall convey and Purchaser shall accept title to the Premises in accordance with the terms of this Agreement, subject only to the matters expressed herein and the Permitted Encumbrances. The title that Purchaser is required to accept as provided herein shall be insured by First American under an 1992 ALTA Owner's Policy at regular rates. The term Permitted Encumbrances shall mean (i) all land use, zoning and similar laws, statutes and regulations now or hereafter applicable to the Premises ; (ii) the exceptions to title listed on Schedule B hereto; (iii) the lien of real estate taxes not yet due and payable ; (iv) any additional exceptions to title arising as of the Closing, as to which First American agrees to omit (v) the Seller's sublease and consent agreement; (vi) UCC filings against Seller's personal property; (vii) the occupancy of a portion of the Premises pursuant to a Lease between Purchaser and New Breed Leasing Corporation); (viii) letter agreement dated October 26, 1992 with Richard and Patricia Miller; and (ix) all violations of record including without limitation health, building, street and highway violations. (b) At or prior to the Closing, Seller shall, at its option,either (1) take such steps by indemnification or otherwise satisfactory to First American so as to permit First American to omit the Payment Encumbrances, defined below, or to insure that collection of such matters shall not be made from the Premises or (2) satisfy and discharge any fee mortgages of record and all other liens and judgments of Seller of record that can be discharged by payment of a sum certain other than the Permitted Encumbrances ("Payment Encumbrances"). If Seller fails to take either of such actions with respect to the Payment Encumbrances by Closing, Purchaser shall accept the Premises subject to such Payment Encumbrances and receive a credit, as an adjustment to the Purchase Price, in the amount reasonably determined by First American, required to remove or discharge any Payment Encumbrance of record. If the title update delivered at Closing discloses any defects in title other than the Permitted Encumbrances and Payment Encumbrances (the "Unpermitted Non- Payment Encumbrances"), Purchaser may, at its option, terminate this Agreement by giving Seller five days prior written notice at the Closing to Seller in which event this Agreement shall be of no force and effect and the Deposit and interest thereon shall be returned to Purchaser as its sole and exclusive remedy unless within the said five day period, Seller has First American omit any such Unpermitted Non Payment Encumbrance in which event the Closing will be rescheduled to the earliest date reasonably possible. In the alternative, at Closing Purchaser may accept such title subject to the Unpermitted Non-Payment Encumbrances without reduction or adjustment of the Purchase Price. Payment of the Purchase Price shall be conclusive evidence that Purchaser has so accepted title. Seller shall under no circumstances have any obligation to cure any such Unpermitted Non Payment Encumbrances or title defect or have any liability with respect thereto. 8. Representations and Warranties of Seller. (a) Seller represents that the following is true and correct as of the date hereof and the same shall be true as of the Closing: (i) Seller has the legal right, power, and authority to enter into and perform its obligations under this Agreement and the individual signing on behalf of Seller has authority to bind Seller; and all action necessary or appropriate for Seller's execution and performance of this Agreement has been taken; and upon Seller's execution, this Agreement and the other such documents will constitute legal, valid and binding obligations of Seller enforceable against Seller in accordance with their respective terms except as may be limited by bankruptcy, insolvency or other laws of general application relating to or affecting the enforcement of creditor's rights. (ii) Seller is not the subject of any insolvency, bankruptcy or other similar proceeding. (iii) The Premises will be delivered at Closing free of any tenancies and occupants other than Seller pursuant to its sublease and non disturbance agreement(and the New Breed Lease). (iv) There are no service contracts relating to the operation, maintenance or repair of the Premises or the personal property located thereon other than those which will be terminated on or prior to Closing. (v) To Seller's knowledge, there are no existing, pending or, to its knowledge, threatened condemnation, zoning or other land use proceedings or road widening proceedings affecting or pertaining to the Premises. Seller has not received any notice of any violations of or claim under or pursuant to any Environmental Law except as set forth on Schedule III. Except as set forth on Schedule III, Seller (without having made any independent investigation of its own)is not aware of any Environmental Activity at the Premises or the existence of any Hazardous Materials at the Premises. (vi) Seller is not a "foreign person" as defined in the Internal Revenue Code Section 1445 and the regulations issued thereunder. (vii) Seller has fee simple title to the Premises subject to the Permitted Encumbrances and the other matters expressed herein. (viii) As of the date of the signing of this Agreement, there is no litigation, proceeding or claim pending, or to Seller's knowledge, threatened in writing, which (A) materially adversely affects Seller's title to the Premises, or (B) materially adversely affects Seller's ability to perform its obligations under this Agreement. (ix) Seller will maintain the insurance policies (currently in effect) with respect to the Premises listed on Schedule IV: (x) Seller will maintain the Premises and otherwise operate the Premises in the same manner as before the making of this Agreement. (xi) From and after the date hereof Seller shall not enter into any mortgage or security agreement affecting the Premises or any portion thereof or enter into any agreement, undertaking or instrument affecting title to or the use of the Premises without Purchaser's prior written approval provided that Seller shall have the right to enter into or grant such easement or similar rights as would be considered Permitted Encumbrances under clause (iv) of that definition. (xii) Seller has delivered to Purchaser the Certificates of Occupancy for the Premises. (b) Purchaser's right to make a bona fide claim against Seller for the untruthfulness of any matter set forth in this Paragraph 8 shall survive the Closing but not the termination of this Agreement for a period of three (3) months only provided that clauses (i), (v), (vii), (viii), (x), (xi) and (xii) shall not survive Closing or the termination of this Agreement. In the event that Purchaser had knowledge at the Closing of the untruthfulness of any matter set forth in this Paragraph 8, Purchaser shall be deemed to have waived such matter and its right to make any claim against Seller. Under no circumstance shall Purchaser be entitled to make any claim for special or consequential damages or recision. 9. Representations and Warranties of Purchaser. (a) Purchaser represents and warrants to the Seller as follows: (i) Purchaser has full power to execute, deliver and carry out the terms and provisions of this Agreement and has taken all necessary action to authorize the execution, delivery and performance of this Agreement. The individual(s) executing this Agreement on behalf of Purchaser has the authority to bind Purchaser to the terms and conditions of this Agreement. This Agreement and all documents required hereby to be executed by Purchaser, when so executed, shall be legal, valid and binding obligations of Purchaser enforceable against Purchaser in accordance with their respective terms except as may be limited by bankruptcy, insolvency or other laws of general application relating to or affecting the enforcement of creditor's rights. (ii) Purchaser will be accepting the Premises in an "as is" condition including, without limitation, all of the matters disclosed on the Engineers Report attached hereto as Schedule D as well as the matters set forth on Schedule III subject, however, to Section 5 and Section 16. Other than its right to cancel as provided in Sections 5 and 16, Purchaser hereby waives any and all claims whatsoever it might have with respect to the nature or condition of the Premises. Purchaser understands that Seller is under no obligation whatsoever, to make any alterations, repairs, renovations, improvements of any nature or kind to the Premises. Seller, however, shall have all of its personal property removed from that portion of the Premises it is not occupying under its Sublease by the Closing Date and said portion shall be delivered in a "broom clean" condition. (iii) Before entering into this Agreement, Purchaser has made all examinations, inspections and investigations of the operation, condition, income and expenses of the Premises and all other matters affecting or relating to this transaction as Purchaser deemed necessary or desirable. In entering into this Agreement, Purchaser has not been induced by and has not relied upon any representations, warranties or statements, whether express or implied, made by Seller or any agent, employee or other representative of Seller or by any broker or any other person representing or purporting to represent Seller, which are not expressly set forth in this Agreement, whether or not any such representations, warranties or statements were made in writing or orally. (iv) No Litigation. As of the date of the signing of this Agreement, there is no litigation, proceeding or claim pending, or to Purchaser's knowledge, threatened in writing, which materially adversely affects Purchaser's ability to perform its obligations under this Agreement. (b) The provisions set forth in this Section 9 shall survive the Closing but not the termination of this Agreement. 10. Apportionments. (a) The following shall be apportioned and adjusted between Seller and Purchaser as of midnight of the day preceding the Closing Date: (i) real estate and other taxes, assessments and charges (provided that same shall not include taxes based on the income or profits of Purchaser or Seller), and other municipal and state charges, license and permit fees (provided that same shall not include fees or charges for operating the business of either party other than those arising out of the operation or ownership of the Premises), if any, on the basis of the fiscal period for which assessed or charged; (ii) water and sewer rents and charges on the basis of the fiscal period for which assessed or charged; (iii) water, electric, gas, steam and other utility charges for services furnished to the Premises; (iv) fuel, if any, and all taxes thereon, on the basis of a reading taken as late as possible prior to the Closing Date, at the price then charged by Seller's supplier, including any taxes; (v) such additional adjustments as are normally made in connection with the sale of buildings in New York State or as may be provided herein. (vi) Intentionally omitted. (vii) all interest accrued on the Deposit shall be credited against the Purchase Price. (b) Aggregate apportionments payable at the Closing by either party hereto must be paid by certified check, wire transfer or attorney's check. (c) The obligation to adjust as provided hereunder, shall survive Closing (but not the termination of this Agreement) to the extent any amounts are not known or incorrectly computed. 11. Recording Charges. (a) Purchaser shall pay the recording fees imposed for recording of the Deed and for recording of any other incidental documents related to conveyance of title to Purchaser. It being expressly understood and agreed that Seller shall not be responsible for any fees, taxes or other charges relating to the recording of Purchaser's mortgage or other financing documents, if any. 12. Intentionally omitted. 13. Tax Reduction Proceedings. There are, as of the date hereof, no presently pending tax reduction proceedings involving the Premises. If any such proceeding is commenced by Seller prior to Closing, Purchaser shall continue prosecution of same, which Purchaser may settle and resolve in its sole and reasonable discretion. If Purchaser obtains a refund by commencing its own proceeding, the refund, less the legal fees incurred in connection therewith, shall be apportioned between Seller and Purchaser as provided herein. The provisions of this Section 13 shall survive the Closing but not the termination of this Agreement. Purchaser shall commence a tax reduction proceeding involving the Premises no later than May 3, 1996 and if the transaction contemplated herein does not close as provided herein, Purchaser shall assign all of its right, title and interest in such action to Seller in a written instrument satisfactory to Purchaser's counsel. 14. Liquidated Damages. (a) If Purchaser shall fail to close title in accordance with all of the terms and provisions of this Agreement all monies theretofore paid or deposited by Purchaser under this Agreement (and interest accrued thereon) shall be retained by Seller as liquidated damages (which the parties hereby acknowledge are fair and equitable and not a penalty) as its sole and exclusive remedy and this Agreement shall terminate and be of no force and effect, and the parties hereto shall not thenceforth have any claim of any nature against the other party hereto. (b) In the event Seller (assuming Purchaser has unconditionally waived all of its rights hereunder to terminate) does not convey title at Closing as a result of a wrongful, willful failure by Seller, Purchaser shall be entitled to undertake any legal or equitable remedies available to it including, without limitation, a suit for specific performance. 15. Brokerage. Each party represents to the other that it has not dealt with any broker, agent, or finder in connection with the transactions contemplated by this Agreement, other than Sutton and Edwards Incorporated (the "Broker"). Each party shall indemnify and defend the other party from any loss incurred by the other party, including reasonable legal fees and disbursements, arising out of a breach of the foregoing representations made by such party under this Section 15. Seller shall be responsible for any fees due to Broker in connection with the transaction contemplated by this Agreement provided that Purchaser shall be responsible to pay Broker or any other entity or individual claiming any compensation with respect to Seller's Sublease and/or the New Breed Lease. Notwithstanding anything to the contrary in this Agreement, the representations and indemnifications of the parties under this paragraph 15 shall survive either the Closing or the termination of this Agreement. 16. Risk of Loss; Eminent Domain. (a) The parties hereby waive the provisions of Section 5- 1311 of the New York General Obligations Law. (b) If, prior to Closing, any portion of the Premises shall be damaged or destroyed by fire or other cause, Seller shall as soon as practicable, but in no event later than 10 days after the occurrence of such damage or destruction notify Purchaser of the estimated cost of restoration of the Premises as determined by written estimate of an independent, duly licensed construction contracting firm or architect with at least 5 years experience selected by Seller from the following list which list is hereby approved by Purchaser: 1) IVI 2) Herzbeg Sanchez 3) Emanuel Neeval If the cost of repairing the damage or casualty shall be $300,000 or more , then this Agreement shall terminate and be of no force and effect and Purchaser (as its sole and exclusive remedy) shall receive the Deposit with all accrued interest unless Purchaser elects by written notice given to Seller within 5 business days of receipt of said estimate to purchase the Premises "as is", In which event the Closing shall take place on the later of the date established under Section 6 or ten days after Purchaser's written election to purchase "as is". If the estimated cost of repair is less than $300,000, then this Agreement shall continue in full force and effect and Seller shall give Purchaser a credit against the Purchase Price in an amount (not to exceed $300,000) equal to the estimated cost of repair (as set forth in the estimate sent to Purchaser) and Seller shall retain all rights to any insurance proceeds. In all events Seller shall have no obligation to repair or restore the Premises. If the cost of repair exceeds $300,000 and Purchaser shall not elect to terminate as set forth above, then the Purchase Price shall be reduced by $300,000 and Seller shall retain a priority right to the insurance proceeds up to $300,000 and , the balance of the proceeds shall be assigned to Purchaser (if title is transferred to Purchaser). (c) If, prior to the Closing, any condemnation or eminent domain proceedings are initiated which could result in the taking of any part of the Premises, Seller shall promptly notify Purchaser of such initiation and the following shall apply. (i) If the taking is or would be material and permanent as defined below, this Agreement shall automatically terminate and be of no further force and effect and the Purchaser shall receive the Deposit (as its sole and exclusive remedy) with all accrued interest. (ii) If the taking is either not material or non- permanent, then this Agreement shall continue in full force and effect without any adjustment in the Purchase Price because of such taking or condemnation, in which event Seller shall assign to Purchaser (without recourse to Seller) all of Seller's rights, title and interest in and to any award made in connection with such condemnation or eminent domain proceedings. (d) If any taking shall be for a period of more than one year it shall be deemed "permanent". If more than 10% of the non-improved portion of the Premises is subject to such permanent taking it shall be deemed to be "material". (e) Notwithstanding the determination that the condemnation or taking is material or permanent as defined herein, Purchaser may, by written notice to Seller given within 5 business days of Seller's notice concerning the condemnation or taking, agree to purchase the Premises in which event this Agreement will continue in full force and effect and at the Closing, Seller shall assign all of its right, title and interest in any awards to Purchaser and the Purchase Price shall not be adjusted because of such condemnation or taking. 17. Limitation on Survival of Representations. Except as specifically provided for in this Agreement, no covenant, representation or warranty of either Seller or Purchaser shall survive the Closing or termination of this Agreement and the delivery of the Deed by Seller; and the acceptance thereof by Purchaser, shall be deemed the full performance and discharge of every obligation on the part of Seller except those which are expressly stated in this Agreement to survive the Closing. 18. Notices, Etc. All notices, consents, approvals and other communications under this Agreement shall be in writing and shall be deemed given the third business day after mailing by one party addressed as follows: If to Seller: Noodle Kidoodle, Inc. 105 Price Parkway Farmingdale, New York 11735 Attn: Stewart Katz, President with a copy to: Charles Bartel, Esq. Ferrara, Turitz, Harraka & Goldberg, P.C. 505 Main Street Hackensack, New Jersey 07601 If to Purchaser: At the address set forth above. with a copy to: Lazer, Aptheker, Feldman, Rosella & Yedid, L.L.P. 35 Pinelawn Road Melville, New York 11747 Attention: Lawrence Feldman, Esq. Any writing which may be mailed pursuant to the foregoing may also be delivered by hand or transmitted by telegraph, telex or telecopier or by overnight courier service of recognized national standing with guaranteed next-day delivery, and shall be effective when received by the addressee. Any notices which either party may be required to give or may desire to give; any consents by either party under this Agreement; and any adjournments of the Closing Date may be given or consented to by the attorney for such party with the same force and effect as if given or consented to by such party. Either party may, from time to time, specify as its address for purposes of this Agreement any other address upon the giving of 5 days' notice thereof to the other party. 19. Integration. All understandings and agreements between the parties with respect to the subject matter of this Agreement are merged in this Agreement, which alone fully expresses their agreement with respect to such subject matter. 20. Consents, Approvals, Etc. Whenever the consent or approval of a party is required under any provision of this Agreement or a matter is subject to the satisfaction of a party, such party shall not unreasonably delay or withhold such consent or approval and shall not be unreasonable in deciding whether such matter is satisfactory. 21. No Assignment. Purchaser may assign its rights hereunder provided such assignment shall in no way act to relieve Purchaser of any of its obligations hereunder. To be effective any such assignment (i) must be in writing, (ii) a copy thereof must be delivered to Seller within three days of its execution or at Closing whichever occurs first, (iii) the assignee must unconditionally assume all of Purchaser's obligations hereunder, and (iv) Purchaser must confirm its continuing liability hereunder. 22. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York. 23. Amendments and Waivers. Neither this Agreement nor any of the terms hereof may be terminated, amended or waived orally, but only by an instrument in writing signed by the party against which enforcement of the termination, amendment or waiver is sought, and then only to the extent set forth in such instrument. No waiver of any breach of this Agreement or of any provision herein contained shall be deemed a waiver of any preceding or succeeding breach thereof or of this Agreement or of any provision herein contained. No extension of time for performance of any obligations to be performed hereunder shall be deemed an extension of the time for performance of any other obligations hereunder. 24. Interpretation. The headings of the various subdivisions of this Agreement are for convenience of reference only and shall not define or limit any of the terms or provisions hereof. All pronouns shall be deemed to refer to the masculine, feminine, neuter, singular or plural as the identity of the person or persons may require. 25. Recording. Purchaser shall not record, or cause to be recorded, this Agreement or any memorandum thereof. 26. No Third Party Beneficiaries. Seller and Purchaser do not intend to confer any benefit by or under this Agreement upon any person or entity other than Seller and its successors and assigns and Purchaser and its permitted successors and assigns. 27. Purchaser's Lien. The Deposit and the reasonable actual costs incurred by Purchaser in connection with this Agreement for title examination and survey expenses, shall be liens against the Premises; provided, however, in the event Purchaser is in default under this Agreement, all such liens shall be automatically null and void. 28. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, and it shall not be necessary in making proof of this Agreement to produce or account for more than one such counterpart. 29. Certain Definitions. To the extent utilized herein, "Environmental Activity" means any use, storage, release, threatened release, emission, disposal, escape, seepage, leakage, spillage, pumping, pouring, emptying, injection, dumping, presence, migration, transferring, manufacturing, discharge, generation, processing, abatement, removal or disposition of any Hazardous Materials from, under, into or on the Premises or the groundwater beneath the Premises or any handling, transportation or treatment of Hazardous Materials arranged by or on behalf of Seller and relating to the Premises. To the extent utilized herein, "Environmental Laws" means any current federal, state or local statute, code, ordinance, rule, regulation, permit, consent, approval, license, judgment, order, writ, decree, injunction, guidance or policy statement or other authorization, including, but not limited to, the Comprehensive Environmental Response, Compensation and Liability Act, as amended (42 U.S.C. Section 9601 et seq.), the Resource Conservation and Recovery Act as amended (42 U.S.C. Section 6901 et seq.), the Hazardous Materials Transportation Act, as amended, (49 U.S.C. Section 1801 et seq.), the Clean Air Act, as amended (33 U.S.C. Section 1251 et seq.), the Federal Water Pollution Control Act, as amended (33 U.S.C.Section 1251, et seq.), the New York State Environmental Conservation Law, as amended, the Sanitary Code of Suffolk, and any applicable requirements to register underground storage tanks, relating to emissions, discharges, releases or threatened releases of Hazardous Materials into ambient air, surface water, groundwater, publicly owned treatment works, septic systems or land, or otherwise relating to the pollution or protection of health or the environment. To the extent utilized herein, "Hazardous Materials" means (a) any substance, material or waste defined, used or listed as a "hazardous waste", "extremely hazardous waste", "restricted hazardous waste", "hazardous substance", "hazardous materials", "toxic substance" or other similar terms as defined or used in any Environmental Laws, and (b) any petroleum products, asbestos, polychlorinated biphenyls, flammable explosives or radioactive materials, 30. Exchange Language. Like-Kind Exchange. Seller acknowledges that Purchaser has advised Seller that Purchaser may exchange the Premises for real property of like kind under such terms and conditions that qualify as an exchange within the meaning of Section 1031 of the Internal Revenue Code of 1986, as amended. Notwithstanding any other provisions of this Agreement to the contrary, the following conditions are agreed and understood by the parties hereto: Purchaser shall have the right, to assign this Agreement to a trustee under an exchange trust agreement to facilitate a like kind exchange under Internal Revenue Code Section 1031 provided that the last sentence of paragraph 21 shall be complied with. Seller shall not be required to incur any cost or liability or spend or advance any sums of money in excess of that which Seller otherwise would have been required to incur or expend in connection with the sale of the Premises; all such excess sums of money and all such costs and liabilities shall be the responsibility of an provided by Purchaser, and shall be paid or undertaken, as the case may require, by Purchaser in accordance with the provisions of the exchange trust agreement. WITNESS: SELLER: /s/Charles Bartel By:/s/Stewart Katz, President Stewart Katz WITNESS: PURCHASER: _________________________ By:/s/Mitchel Reckson The undersigned hereby agrees to act as Escrowee pursuant to the terms of the Purchase and Sale Agreement set forth above and pursuant to the Rider annexed hereto acknowledges receipt of the Deposit. FIRST AMERICAN TITLE INSURANCE, INC. By:/s/Andrew S. Knee, Sr. V.P. ESCROWEE G:\MAIN\CORPS\CO-3376\6thPSA.401 RIDER TO CONTRACT OF SALE ADDITOINAL ESCROW PROVISIONS 1. Escrowee acknowledges its receipt of the Deposit by check and agrees to hold it pursuant to the provisions of this Agreement for the benefit of each of Purchaser and Seller in accordance with the Contract. The Deposit shall be invested in a money-market account at either Chemical Bank or EAB in a Nassau County Branch, New York or other interest bearing account with a federally insured banking or savings institution having offices in New York City as selected by Escrowee and agreed to by Seller and Purchaser. It is expressly acknowledged by Seller and Purchaser that Escrowee shall be permitted and obligated to deposit the funds with a federally insured institution, but each recognizes and agrees that the limits of such insurance may be less than the total funds on deposit and that Escrowee shall not be required to spread the funds among different institutions in order to fall within the federal insurance coverage limitations. Escrowee shall have no liability for the loss of principal or interest on the deposited funds by any depository or the failure of a depository to return the principal of, or pay interest on, the deposited funds when requested, or for any other default, action or in action on the part of such depository. Seller and Purchaser understand that it may take some time to deposit the funds and some time to withdraw the funds and that the funds will earn no interest during such times. The term "Deposit" as used herein shall, unless otherwise provided, be deemed to include any and all interest earned on the Deposit pursuant to this Agreement. 2. If a dispute shall arise as to the disposition of the Deposit or if Escrowee shall be uncertain as to its duties or rights hereunder, Escrowee is authorized to (x) refrain from taking any action other than to keep safely the Deposit, except to comply with the judgment of a court of competent jurisdiction as to the disposition thereof, or (y) deposit or turn over the Deposit with or to any court of competent jurisdiction and thereupon be relieved from all responsibilities with respect thereto. LIST OF SCHEDULES Schedule A................................. Legal Description Schedule B............................ Permitted Encumbrances Schedule C............................... List of Contractors Schedule D................................. Engineer's Report Schedule I................................ County Certificate Schedule I-A..................................... Dec. Letter Schedule II......................................... Form S-9 Schedule III........................... Environmental Matters Schedule IV........................................ Insurance SCHEDULE "A" - Legal Discription FIRST AMERICAN TITLE INSURANCE COMPANY OF NEW YORK Title No. 151-S-1422 ALL that certain plot, piece of parcel of land, situate, lying and being at Farmingdale, Town of Babylon, County of Suffolk and State of New York, more particularly bounded and described as follows: BEGINNING at a point on the Northerly side of Price Parkway, which point of beginning is 1547.61 feet, West of the corner formed by the intersection of the Westerly side of Broad Hollow Road and the Northerly side of Price Parkway; RUNNING THENCE along the Northerly side of Price Parkway, South 72 degrees 58 minutes 48 seconds West, a distance of 736.62 feet; THENCE North 40 degrees 22 minutes 06 seconds West, 266.91 feet; THENCE North 23 degrees 09 minutes 16 seconds East, a distance of 419.99 feet, to a point; THENCE along the arc of a curve, bearing to the right, the radius of which is 310 feet and the arc angle of which is 56 degrees 45 minutes 26 seconds for a length of 307.09 feet, to a point; THENCE North 21 degrees 44 minutes 52 seconds East a distance of 43.64 feet; THENCE North 68 degrees 15 minutes 08 seconds West, a distance of 320 feet; THENCE South 21 degrees 44 minutes 12 seconds West, a distance of 464.44 feet; THENCE North 68 degrees 15 minutes 48 seconds West, 58 feet; THENCE North 21 degrees 44 minutes 12 seconds East, 522.44 feet; THENCE South 68 degrees 15 minutes 08 seconds East, a distance of 677.55 feet; THENCE South 17 degrees 01 minutes 12 seconds East, a distance of 565.39 feet, to the point or place of BEGINNING. SCHEDULE "B" - Permitted Encumbrances FIRST AMERICAN TITLE INSURANCE COMPANY OF NEW YORK Title No. 151-S-1422 Hereinafter set forth are additional matters which will appear in our policy as exceptions from coverage unless disposed of to our satisfaction prior to the closing of delivery of the policy. DISPOSITION: 1. Any state of facts which an accurate survey of current date would disclose. 2. The exact location, courses, distances and dimensions of the premises described in Schedule A are not insured without a survey thereof acceptable to this Company. 3. Covenants and/or restrictions set forth in a(n) Declaration by and between East coast Lumber Terminal, Inc., dated October 4, 1954, recorded October 21, 1954, in Liber 3777 page 424. (See Within). 4. Covenants and/or restrictions set forth in a(n) Declaration by and between East Coast Lumber Terminal, Inc., dated September 17, 1954, recorded October 21, 1954, in Liber 3777 page 426 (See Within). 5. Easement contained in deed by and between East Cost Lumber Terminal, Inc., and S.K. Plainview Corp., dated January 26, 1961, in Liber 4944 page 359 (See Within) not located. 6. Rights and Easements contained in instrument dated June 15, 1962, by and between The Long Island Railroad Company and East Coast Lumber Terminal, Inc., recorded July 23, 1962, in Liber 5201 page 179 (See Within), as amended by Indenture by and between the Long Island Railroad Company and Virgil M. Price Industrial Park, Inc., dated December 10, 1965, recorded January 28, 1966, in Liber 5903 page 83. (See Within). 7. Terms, Covenants, Conditions and Easements in Agreement by and between East Coast Lumber Terminal, Inc., and Max L. Bliss, dated June 30, 1962, recorded September 23, 1962, in Liber 5236 page 68 (See Within) Easements not located. 8. Covenants and/or restrictions set forth in a(n) Declaration by and between Virgil M. Price Industrial Park, Inc., recorded April 10, 1963, in Liber 5331 page 479. (See Within). 9. Drainage Easement contained in instrument dated February 26, 1976, by and between Greenman Bros., Inc., and town of Babylon, recorded May 28, 1976, in Liber 8040 page 597 (See Within) (Affects Easterly 39.5 feet and Northerly portion of premises (not specifically located). 10. Covenants and/or restrictions set forth in a(n) deed by and between Marlyn Associates and 85 Willis Avenue Realty Corp., dated January 31, 1969, and recorded February 25, 1969 in Liber 6510 at page 282. (See Within). SCHEDULE "C" - List of Contractors SCHEDULE C TO CONTRACT BETWEEN NOODLE KIDOODLE, INC. AND RECKSON OPERATION PARTNERSHIP EWT Contracting 47-47 58th Street Woodside, New York 11377 (718) 533-8306 Asbestos Containment Services 1 World Trade Center New York, New York 10048 (212) 912-1620
SCHEDULE "D" - Engineer's Report REMEDIAL COST ESTIMATES DEFERRED MAINTENANCE & EXISTING DEFICIENCIES COST ESTIMATE No. DESCRIPTION IMMEDIATE SHORT-TERM (0-1 Year) 1.1 Apply Coal Tar Sealant (3-Coats) to Parking Areas & Drives - Asphalt pavement is severely oxidized and encumbered by cracks and oil staining in the parking spaces. $12,200 Clean all surface cracks 1/4" or larger and fill using a hot rubberized crack filler ASTM 3405. Clean all surfaces and prime all oil spots. Squeegee apply Poly- Tar Coal Tar Emulsion or equal sealer. First coat (primer) to be without sand, and the second and third coasts are to include 6 lbs. Sand per gallon of emul- sion. Upon completion, re-stripe parking lot and all directional stenciling. $ 500 1.2 Replace Deteriorated Sections of Asphalt Pavement - Paved parking areas are encumbered by cracks, soft areas having extensive crazing and alligatoring of the surface, and deteriorated sections. Previous patch type repairs were noted. $ 1,500 Saw cut and excavate to a depth of 6" asphalt paving from deteriorated sections. Install 6" of suitable base material, either Item IV or crushed limerock, and compact. Apply liquid tack coat for bonding. Install 1 1/2" of Type III asphalt, and machine roll for com- paction and smooth finish. Cost will vary depending upon the area replaced. 1.3 Replace Concrete Walkway Sections - Significant sections of walkways are severely cracked, settled and heaved. Such condition is noted at the main entrance on the south side of the building. Remove deteriorated sections, prepare bed, and install new 4" thick side- walks complete with W.W.F. and expansion joints. Sections that exhibit cracks but that do not warrant replacement should have all cracks pointed with a non- shrinking grout. $500 1.4 Repair Cracked and Spalled Steps, and Replace Hand- rails - The concrete steps located at service areas are cracked, deteriorated, and spalled. Complete replacement does not appear to be necessary at this time. However, patching of cracked and deteriorated surfaces is recommended. Replace damaged steel pipe railings with new painted units. $ 3,500 2.0 Substructure & Superstructure 2.1 Superstructure: Replace Missing & Damaged Fire- proofing Applied to Structural Steel - Fireproof covering to the steel beams located at the mezza- nine level area is missing or damaged. Similarly, column fireproofing is also lacking at some areas. All beam and girder fireproofing should be repaired, damaged column fireproofing removed, the column examined for soundness, and its fireproofing restored. $ 1,000 3.0 Exterior - Stone, Concrete & Masonry Systems 3.1 Repair Brick & CMU Walls - Masonry facade walls are cracked, have open mortar joints, are displaced, spalled, and damaged by service vehicles. Seal and grout all open joints, cracks and wall penetrations, and replace damaged masonry walls. $15,000 3.2 Fenestration & Doors: Paint Service Doors and Miscellaneous Metals - Paint on hollow metal doors, railings and miscellaneous metals is faded and weathered. Wire brush and prepare surfaces, prime and apply two (2) coats of Glidden Industrial Enamel #4550, or equal. $ 2,000 4.0 Roof 4.1 Apply aluminum Reflective Coating to Smooth-Surface Built-up Roof - Existing reflective coating is beginning to fade. A re-application of an aluminum coating is recommended to reflect the sun's heat to prevent further drying-up of the remaining flood coat, to reduce the building's cooling load, and to extend the expected useful life of the BUR system. $75,200 Make necessary remedial flashing repairs and broom sweep roof of all debris. Further clean roof surface with Castrol Super Clean, or equal, diluted with 10 parts water. Then apply Karnak Aluminum Coating or equal in full conformance with manufacturer's instructions. Budget cost over three (3) years with 1/3 of the roof to be coated each year. 5.0 Interior 5.1 Repair CMU Warehouse Wall - Loose and displaced CMU at an interior warehouse wall at the northwest corner appear to be in eminent danger of falling. Remove loose masonry and repair the hazardous condition. $500 5.2 Replace Stained and Damaged Ceiling Tiles - Numerous acoustic ceiling tiles are damaged, missing or stained from roof leaks. Budget replace with new ceiling tiles. $ 500 7.0 Heating, Ventilation & Air Conditioning 7.1 Repair Leaks at Boilers - There are indications of water circulator pump leaks and oil leaks. Replace or repair pumps as necessary. $ 500 7.2 Refurbish Space Heaters - Hydronic space heaters in the require refurbishing with new fans, motors, pumps, etc. $12,000 7.3 Replace HVAC System - Five (5) original equipment air handling units have realized its EUL. Numerous repairs have not rectified the problems. Replace with package RTU's to be phased-in over three (3) years. $ 7,700 8.0 Electric 8.1 Relamp and Provide new Ballasts - The 400 watts HPS lights require relamping and new ballasts. The original units have realized their EUL. $ 5,000 8.1 Perform Electrical Repairs and Maintenance - Rusted EMT at the roof area, loose wiring, missing cover plates, etc. were noted throughout the building. Perform replacement and repairs to comply with code requirements. $ 5,000 Total: $ 1,000 $141,600 Rounded Total: $ 1,000 $142,000
SCHEDULE "I" - County Certificate COUNTY OF SUFFOLK ROBERT J. GAFFNEY SUFFOLK COUNTY EXECUTVE DEPARTMENT OF HEALTH SERVICES MARY E. HIROCAD, M.D., M.P.H. COMMISSIONER Date: October 5, 1996 To: G & M Dege From: Suffolk County Department 250 Orchard Road of Health Services E. Patchogue, NY 11772 Bureau of Hazardous Materials 15 Horseblock Place Farmingville, NY 11730 Re: Decommissioning of Underground Storage Tanks SCDHG ID # 2-1672 Facility Name: Facility Address: Gentlemen/Madem: This is to confirm that on a representative of this department witnessed the proper [ ] removal / [ ] abandonment in place of the following above/underground tank(s): ___________________________ _______________________________ ___________________________ _______________________________ ___________________________ _______________________________ ___________________________ _______________________________ ___________________________ _______________________________ [X] This required inspection of the tank removal(s) reveals no visible ground contamination within the excavation. [ ] This required inspection of the tank removal(s) revealed ground contamination. [ ] This required inspection of the tank abandonment(s) con- firmed that this tank was properly cleaned and filled with sand/concrete. Samples taken from the required groundwater monitoring wells will be analyzed by the NYSDEO and they will notify you of any necessary remedial action. Very truly yours, /s/John A. Gladyez Bureau of Hazardous Materials JOHN A. GLADYEZ SR. PUBLIC HEALTH SANITARIAN SCHEDULE "I-A" - Dec. Letter (516) 444-0320 __________________________ __________________________ __________________________ RE: Spill # ____________________________________ Dear _________: This Department has reviewed the referenced spill file. Based upon this review, we have no further requirements for this spill at this time. Should additional environmental problems be discovered at this referenced site, this office will require further action at that time. This spill file has been removed from our active spill list. Sincerely, ______________________ ______________________ SCHEDULE "II" - Form S-9 FORM S-9 S.C. DEPT. OF PUBLIC WORKS, DIV. OF SANITATION S.C. DEPT. OF HEALTH Purported owner Building Permit No. _____________ Name _________________________ Map Name ________________________ Address ______________________ Map No. ________________________ ______________________ Hamlet of _______________________ Telephone No. ________________ Township of _____________________ Lot No. _________________________ TO WHOM IT MAY CONCERN:; The sanitary sewers and appurtenances, sewage disposal facilities and water supply for the above mentioned structure have been inspected by these departments and found to be satisfactory. Construction ____________________ Administration __________________ Sanitary Sewers and Appurtenances Date ____________________________________________________________ Dept. of Public Works, Div. Of Sanitation Sewage Disposal Facilities Date ____________________________________________________________ Department of Health Water Supply Date ____________________________________________________________ Department of Health PLEASE NOTE -Where required by contract, escrow deposits must be made to the Department of Public Works, Division of Sanitation, before Certificate of Occupancy can be issued. IMPORTANT - Please be advised that a minimum of three (3) business days are required to process this form. THIS FORM MUST BE SUBMITTED IN TRIPLICATE. SCHEDULE "III" - Environmental Matters Schedule III to Contract between Noodle Kidoodle, Inc. and Reckson Operating Partnership L.P. 1. Letter from U.S. Department of Labor dated 1/18/96 copy attached. 2. Response to U.S. Department of Labor dated 1/25/96, copy attached. 3. Letter from A.N.S. Insulation Corp. 4. Existing unregistered underground oil tank. 5. Possible asbestos in a portion of the warehouse. U.S. DEPARTMENT OF LABOR Occupational Safety and Health Administration 990 Westbury Road Westbury, NY 11590 516-334-3344 Fax: 516-334-3326 1/18/96 Noodle Kidoodle 105 Price Parkway Farmingdale, NY 11735 RE: Noodle Kidoodle Complaint No. 76949817 Dear Leslie Fischbein: On 1/17/96, the Occupational Safety and Health Administration (OSHA) received a notice of (safety and/or health) hazards at your worksite at: 105 Price Parkway Farmingdale, NY 11735 We appreciate the opportunity we had to discuss the alleged hazards with you over the telephone on 1/18/96. A review of the specific nature of the alleged hazards is as follow: Office in the rear, employees (approximately 30 - 50) potentially exposed to asbestos. We have not determined whether the hazards, as alleged, exist at your workplace; and we do not intent to conduct an inspection at this time. However, since allegations of violations and/or hazards have been made, we request that you immediately investigate the alleged conditions and make any necessary corrections or modifications. Please advise me in writing, no later than 1/25/96 of the results of your investigation. You must provide supporting documentation of your findings, including any applicable measurements or monitoring results, and photographs/video which you believe would be helpful, as well as a description of any corrective action you have taken or are in the process of taking, including of the corrected condition. This letter is not a citation of proposed penalty which, according to the OSHA Act, may be issued only after an inspection or investigation of the workplace. It is our goal to assure that hazards are promptly identified and eliminated. Please take immediate corrective action where needed. We encourage employee participation in investigating and responding to any alleged hazard. If we do not receive a response from you by 1/25/96 indicating that appropriate action has been taken or that no hazard exists and why, and OSHA inspection will be conducted. An inspection may include a review of the following: injury and illness records, hazard communication, personal protective equipment, emergency action or response, bloodborne pathogens, confined space entry, lockout and related safety and health issues. Please note, however, that OSHA selects for inspection some cases where we have received letters in which employees have indicated satisfactory corrective action. This is to ensure that employers have actually taken the action stated in their letters. The State of New York offers OSHA consultation services, without charge, to assist in resolving all occupational safety and health issues. The variety of services available or the scheduling of those services may be limited by the consultation project's requirement to give priority to small businesses in high hazard industries and by its backlog. However, you may be able to obtain similar services from your insurance carrier or private consultant in a more timely fashion. To discuss or request the services, call or write your New York consultation project at the following address: New York State Department of Labor Division of Occupational Safety and Health 175 Fulton Avenue Hempstead, NY 11550 516-485-4408 You are requested to post a copy of this letter where it will be readily accessible for review by all of your employees and return a copy of the signed Certificate of Posting (Attachment A) to this office. Also, you are requested to provide a copy of this letter and your response to it to a representative of any recognized employee union of safety committee if these are at your facility. Failure to do this may result in an on-site inspection. The complainant has been furnished a copy of this letter and will be advised of your response. Section 11(c) of the OSHA Act provides projection for employees against discrimination because of their involvement in protected safety and health related activity. If you have any questions concerning this matter, please contact the Area Office at the address in the letterhead. Your personal support and interest in the safety and health of your employees is appreciated. Sincerely, /s/Anthony J. DeSiervi Anthony J. DeSiervi Area Director Enclosure AJD: Noodle Kidoodle, Inc. 105 Price Parkway Farmingdale, NY 11735 January 25, 1996 U.S. Department of Labor Occupational Safety and Health Administration 990 Westbury Road Westbury, NY 11950 Attn: Lucy Zurek RE: Noodle Kidoodle Complaint No. 76949817 Dear Ms. Zurek: As I advised you during our telephone conversation today, Noodle Kidoodle is in the process of contracting to sell the building at 105 Price Parkway, Farmingdale. The potential buyer hired an environmental company to inspect the building. Since I have not been able to get a commitment as to when the report will be available, I have contacted A.N.S. Environmental to do an inspection for Noodle Kidoodle. It is my understanding that they will finish their inspection by January 29, 1996 and provide us with a written report shortly thereafter. I will furnish you with the findings and any necessary action plan by February 2, 1996. Thank you. Very truly yours, /s/Charles A. Rollins, Jr. Charles A. Rollins, Jr. Vice President CAR:ak A.N.S. INSULATION CORP. Asbestos Abatement Specialist Commercial . Industrial . Residential (516) 249-5565 . Fax (516) 249-3798 January 29, 1996 Greenman Bros, Inc. 105 Price Parkway Farmingdale, NY 11735 Attn: Mr. Charles A. Rollins, Jr. Re: 105 Price Parkway We have visually inspected the upper office area at 105 Price Parkway and to the best of our ability and knowledge, we cannot see any sign of asbestos present. There does not seem to be any potential exposure. If you have any further questions, please feel free to call. Sincerely, /s/Paula Collins Paula Collins ll/PC
SCHEDULE "IV" - Insurance 111 Dale Street, West Babylon, New York 11704 GREENMAN BROS., INC. SCHEDULE OF INSURANCE FOR 105 PRICE PARKWAY, FARMINGDALE, NY Policy Carrier Coverages Policy Period Property Arkwright Building - $8,051,000 7/1/95-7/1/96 Machinery & Equipment - $3,810,000 Special Form Includes Flood and Earthquake Boiler Coverage Included Deductible $50,000 Comm'l Gen. Liab. Fireman's Limit - $1,000,000 Occurrence 7/1/95-7/1/96 Fund $2,000,000 Aggregate $2,000,000 Prod./Compl. Ops. Umbrella Fidelity & Limit $10,000,000 7/1/95-7/1/96 Casualty of NY Excess U.S. Fire Ins. Limit $10,000,000 x/s $10,000,000 7/1/95-7/1/96 Liab. Co.
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