-----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, VBy1auvNF+sKela/h+3i7aRjlxlUAiR8ECUMhG7oso06gT0Dk4OCchceeAco9ccI sw08m8hryI1htLAgraUiow== 0001005477-99-001414.txt : 19990330 0001005477-99-001414.hdr.sgml : 19990330 ACCESSION NUMBER: 0001005477-99-001414 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 16 CONFORMED PERIOD OF REPORT: 19990101 FILED AS OF DATE: 19990329 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WESTERN BEEF INC /DE/ CENTRAL INDEX KEY: 0000081942 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-GROCERY STORES [5411] IRS NUMBER: 133266114 STATE OF INCORPORATION: DE FISCAL YEAR END: 0103 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 000-04485 FILM NUMBER: 99575261 BUSINESS ADDRESS: STREET 1: 47 05 METROPOLITAN AVE CITY: RIDGEWOOD STATE: NY ZIP: 11385 BUSINESS PHONE: 7188210011 FORMER COMPANY: FORMER CONFORMED NAME: QUAREX INDUSTRIES INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: RANCHERS PACKING CORP DATE OF NAME CHANGE: 19830713 10-K 1 FORM 10-K FORM 10-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 |X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended January 1, 1999 OR |_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____________________ to ________________________ Commission File Number 0-4485 WESTERN BEEF, INC. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 13-3266114 - -------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) 47-05 Metropolitan Avenue, Ridgewood, New York 11385 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip code) Registrant's telephone number, including area code: (718) 417-3770 Securities registered pursuant to Section 12 (b) of the Act: None Securities registered pursuant to Section 12 (g) of the Act: Common Stock par value $.05 per share ("Common Stock") - -------------------------------------------------------------------------------- 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 the definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. |_| The aggregate market value of the voting stock held by non-affiliates of the registrant based on the $6.50 average of the closing bid and asked prices reported by NASDAQ/NMS on March 23, 1999 was $10,056,235 As of March 23, 1999, the registrant had issued and outstanding 5,475,153 shares of Common Stock. DOCUMENTS INCORPORATED BY REFERENCE The following documents or the indicated portions thereof have been incorporated herein by reference: (1) Specifically identified information in the registrant's definitive proxy material for its 1999 Annual Meeting of Stockholders is incorporated by reference as Part III hereof, which definitive proxy material shall be filed not later than 120 days after January 1,1999. CAUTIONARY STATEMENT RELEVANT TO FORWARD-LOOKING INFORMATION FOR THE PURPOSE OF "SAFE HARBOR" PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for forward-looking statements. Certain information included in this Annual Report on Form 10-K contains or may contain forward-looking statements such as those statements pertaining to the renovation of the Company's existing stores, the construction or acquisition of new stores, the recoverability of deferred tax assets, the continued availability of credit lines for capital expansion, the suitability of facilities, access to suppliers, implementation of technological improvement programs and year 2000 issues relating to computer applications. Such forward-looking information involves important risks and uncertainties that could significantly affect expected results in the future from those expressed in any forward-looking statements made by, or on behalf of, the Company. These risks and uncertainties include, but are not limited to, uncertainties relating to economic conditions; delays and other hazards inherent in building and construction; competition in both the retail and wholesale markets; government and regulatory policies and certifications (in particular those relating to the United States Department of Agriculture food stamp program); the pricing and availability of the products the Company sells and distributes, including Western Beef label brand products; potential delays in the implementation of the Company's technological improvement programs; and the effectiveness of such programs upon the implementation of, and the Company's ability to resolve, any and all year 2000 computer applications. -1- PART 1 ITEM 1. BUSINESS General Western Beef, Inc. ("Western Beef" or the "Company") consists principally of a retail food business that currently operates 21 high-volume, warehouse-type supermarkets, two outlet-type food stores and a wholesale food business that primarily deals in beef, pork, poultry, provisions, produce and private label groceries. The Company's supermarkets serve the New York Metropolitan area, while the Company's wholesale business operates in the New York, New Jersey and Eastern Pennsylvania markets. In the fiscal years ended January 1, 1999 ("1998"), January 2, 1998 ("1997") and January 3, 1997 ("1996") (a fifty-three week fiscal year), the retail supermarket business accounted for approximately 82%, 73% and 70% respectively, of the Company's total net sales. See "ITEM 7. Management Discussion and Analysis of Financial Condition and Results of Operations." Western Beef's supermarkets are distinguishable from traditional supermarket formats by their unusually broad selection of meat and produce items and their limited selection of "non-food" items, such as health and beauty aids. Western Beef's supermarkets are truly "food stores". Key elements in Western Beef's business strategy include: o Competitive Prices - Western Beef's objective is to be perceived as the "value leader" in its markets by offering the best values to its customers on a consistent basis. Western Beef reinforces its image as a value leader by offering a large selection of high quality grocery items under the "Western Beef" label. These private label items are priced substantially below comparable national brand items. Western Beef sets its prices based on "everyday low pricing" policies on food staples such as, milk, bread, meat, produce, eggs and juices rather than the "high-low" pricing strategy (i.e. high regular prices with deep discounts on sale items) utilized by many other retailers. o Neighborhood/Ethnic Appeal - Western Beef's supermarkets are located in densely populated, culturally diverse neighborhoods in the New York Metropolitan area. The merchandise offerings in Western Beef's supermarkets are tailored to the preferences (i.e. specific items, brand names and packaging) of the various ethnic groups represented in each store's market area. Some of these products are not generally available in supermarkets operated by national chains. o Low-Cost Warehouse Format - In order to offer the lowest possible prices to its customers, Western Beef uses a low cost, no-frills warehouse store format. Management believes it can be successful in providing superior value to Western Beef's customers by carefully controlling all operating costs on a continuous basis. The retail and wholesale food businesses are generally characterized by low profit margins with earnings primarily dependent on rapid inventory turnover, careful cost control and the ability to achieve high sales volume. Since many food products, particularly produce, meat and dairy products, are subject to spoilage and become unmarketable with the passage of time, it is important to avoid overstocking and to reduce excess inventories when they occur. This is usually accomplished by promotional sales at reduced prices. It is advantageous to combine wholesale and retail businesses under common ownership because overstocking in the wholesale business can be relieved by promotional sales in commonly owned retail stores. Commonly owned operations can also more readily take advantage of opportunities for bargain purchases, including stocks with shorter than usual shelf life, as they become available in wholesale markets. For a description of certain financial information of the Company relative to the Company's segments, see "Note 10, Segments of Business, to the Company's Consolidated Financial Statements" included herein. -2- History Western Beef, Inc. was incorporated in Delaware on June 3, 1991 under the name New Southern Blvd. Supermarkets, Inc. The Company is the successor of the October 30, 1992 combination (the "Combination") of the food businesses of Quarex Industries, Inc., P.S.L. Food Market, Inc. and Southern Blvd. Supermarkets, Inc. Certain members of the Castellana family and their affiliates were controlling stockholders (the "Principal Stockholders") of each of these entities. Since the consummation of the Combination, the Principal Stockholders have held in excess of 70% of the outstanding Common Stock of the Company. In January 1993, the Company's name was changed to "Western Beef, Inc." The Company leases certain retail food stores, office and warehouse facilities from the Principal Stockholders. Concurrent with the Combination, independent appraisals were obtained of the rentals under all then existing Company leases in which the Principal Stockholders had an interest as landlord or tenant (other than one food store lease which was fixed on a formula basis). Any necessary revisions to the leases were made so that in the aggregate, such rentals did not exceed fair market value. The Company and the Principal Stockholders agreed that any future leases from such affiliates would be based on fair market value as established by independent appraisal. All Company leases in which the Principal Stockholders had an interest have been amended periodically, so that the rentals thereunder do not exceed fair market value. 1998 Developments In 1998, the Company opened its first outlet-type food stores which operate under the trade name "Junior's Food Outlets" ("Junior's") and two retail supermarkets bringing the total number of open supermarkets to twenty-one. The two Junior's were opened on Rockaway Boulevard in Queens, New York on March 30, 1998 and Myrtle Avenue in Brooklyn, New York on September 4, 1998 at approximate construction costs of $1,286,000 and $1,742,000, respectively. Unlike conventional supermarkets, these two stores sell a limited selection of food staples, most of which are Western Beef brand grocery products, as well as pre-packaged meats and cheese. The two retail supermarkets were opened in New Jersey in Manalapan on June 14, 1998 and Rahway on August 12, 1998 at approximate construction costs of $643,000 and $1,628,000 respectively. Because of the favorable response generated by the opening of the two Junior's, the Company decided to convert the space used by its Central Cutting operation, which had prepared, custom packed and distributed pre-packaged meats and cheese to the Company's retail supermarkets, to a distribution warehouse to service the Junior's currently open as well as new Junior's to be opened in the future. On May 4, 1998, the Company exercised an option to purchase land and a building currently occupied by an existing Western Beef supermarket on Empire Boulevard in Brooklyn, New York from an unrelated party for approximately $2,124,000. On December 2, 1998, the Company purchased land and a building located on Prospect Avenue, Bronx, New York from an unrelated party for approximately $1,705,000 on which the Company intends to open a Western Beef supermarket with satellite rental units. The total cost for the purchase of the land and renovation of the existing building is estimated to be $5,000,000. On December 17, 1998, the Company purchased a parcel of vacant land located on Frederick Douglas Boulevard, Manhattan, New York from an unrelated party for approximately $660,000 on which the Company intends to open a Junior's outlet-type store. The total cost of the land purchase and construction of this Junior's is estimated to be $1,900,000. -3- On December 21, 1998, the Company submitted the winning bid with New York City to purchase a parcel of land on New Lots Avenue, Brooklyn, New York for approximately $240,000. The Company intends to open a Junior's at a total cost of approximately $1,300,000 including land purchase costs. This transaction is expected to be consummated in the near future. On December 23, 1998, the Company purchased all outstanding capital stock of 814 Jamaica Avenue, Inc. ("Jamaica") from its sole shareholder who was unrelated to the Company, for approximately $744,000. Jamaica was the owner of land and a building on Jamaica Avenue, Brooklyn, New York on which the Company intends to open a Junior's at an estimated cost of approximately $2,100,000 including the purchase of capital stock of Jamaica. On January 29, 1999, the Company purchased a parcel of vacant land located on Wyckoff Avenue, Queens, New York from an unrelated party, for approximately $259,000 on which the Company intends to open a Junior's at a total cost of approximately $1,300,000 including the land purchase price. To pay for these and other 1998 additions, the Company: (i) used cash flow from operations; (ii) entered into a sale/leaseback arrangement in December 1997 with General Electric Capital Corporation ("G.E.C.C.") whereby G.E.C.C. committed to provide up to $5,500,000 to the Company over a twelve month period. The repayment provisions are for a six-year term (including three one-year renewals). Pursuant to this agreement, the Company took down a total of $4,507,000 including $913,000 and $1,262,000 on June 30, 1998 and December 31, 1998 at 7.28% and 6.44% per annum payable in monthly installments of $13,664 and $18,293 respectively; (iii) borrowed $2,055,263 from Hyson Joint Venture, the prior landlord of the Empire Boulevard property, at 6.25% per annum payable in monthly installments of $17,622 commencing June 1, 1998 through June 1, 2013; (iv) borrowed $1,700,000 for the Prospect Avenue location from North Fork Bank at its prime rate payable in interest only installments from January 4, 1999 to December 4, 2001, at which time the entire principal balance is due and payable; (v) borrowed $512,000 for the Frederick Douglas Boulevard location from North Fork Bank at 6.89% interest per annum payable in monthly installments of $5,942 commencing February 1, 1999 through January 1, 2009; (vi) borrowed $566,400 for the Jamaica Avenue location from North Fork Bank at 6.85% interest per annum payable in monthly installments of $6,562 commencing February 1, 1999 through January 1, 2009; and (vii) borrowed $160,000 for the Wyckoff Avenue location from its former owner, Lojo Realty, Inc., at 6% interest per annum payable in monthly installments of $2,337 commencing March 1, 1999 through February 28, 2006. The Company also has a $3,000,000 working capital line of credit from North Fork Bank, all of which is available to fund future operating and construction programs. To simplify the corporate structure of its retail division, the Company: (i) merged eighteen retail subsidiaries operating eighteen retail supermarkets and two food-outlet stores into Western Beef Metropolitan Avenue, Inc., which operated one retail supermarket and changed the name of the surviving corporation to Western Beef Retail, Inc. on January 30, 1998; and (ii) merged Western Beef Retail, Inc. into Western Beef Administration, Inc., the administrative arm of the Company, and changed the name of the surviving corporation to Western Beef Retail, Inc. on August 10, 1998. The Company also simplified its wholesale division on June 30, 1998, by merging its wholesale produce and central cutting subsidiaries into Western Beef Supermarkets, Inc., its wholesale grocery warehouse company. Finally, the Company amended the certificate of incorporation of its subsidiary, East Central Meats, Inc., changed its name to Western Beef Properties, Inc. and transferred the title to five pieces of real property owned by Western Beef Retail, Inc. to Western Beef Properties, Inc. On November 16, 1998, the Company announced that it had received an unsolicited proposal from Cactus Acquisition, Inc. ("Cactus"), a company controlled by the Principal Stockholders, to acquire all of the outstanding shares of common stock of Western Beef not currently owned by Cactus and its affiliates for a cash price of $7.50 per share. The Cactus offer is subject to a number of conditions, including negotiation of definitive documents, the filing of a disclosure statement and other documents with the Securities and Exchange Commission and approval of the merger by the holders of a majority of the issued and outstanding common stock. Cactus and its affiliates currently own approximately 3,982,000 shares of Western Beef common stock, or approximately 72% of the outstanding common stock. -4- In response to the Cactus offer, Western Beef's Board of Directors has appointed a Special Committee of the Board to determine the advisability and fairness of the offer to Western Beef's stockholders other than Cactus and its affiliates. The Special Committee has retained an independent investment banking adviser and legal counsel to advise it on the fairness of the offer from a financial point of view to the stockholders of Western Beef other than Cactus and its affiliates. It is expected that the Special Committee will make a recommendation regarding the offer to the Board of Directors in the second quarter of 1999. Year 2000 Issues The Company is executing a plan to ensure that the Company's computer systems and software applications will properly function beyond 1999. This plan involves identifying year 2000 issues, assigning priorities to items identified and correcting or replacing material items that are not year 2000 compliant. The plan also considers year 2000 vulnerability with respect to the Company's major suppliers and third party service providers. The Company is utilizing both internal and external resources to address year 2000 issues. Costs associated with year 2000 computer system modifications are currently estimated to be approximately $300,000. Included in these costs are $150,000 for certain front-end cash register systems whose upgrade was previously identified for non-year 2000 operational enhancements. The Company has already installed year 2000 program code on all of its financial, merchandise and distribution computer software systems. Effective with the first payroll week of 1999, the Company was operating on year 2000 compliant software provided by its third party payroll service company. Finally, the Company has received and completed the testing of the front-end register system enhancements previously discussed and expects to complete Company-wide implementation of this software before the end of the second quarter of 1999. As part of the Company's goal to achieve year 2000 compliance, it is seeking representations and/or warranties from suppliers, vendors and business partners about their year 2000 compliance. No assurances can be given that the Company will be able to identify and address all year 2000 issues due to their complexity and the Company's dependence on representations and preparedness of third parties with whom the Company does business. Although the Company believes that its efforts and plans will address year 2000 issues that are within the Company's reasonable control, there can be no assurance that year 2000 issues will not have a material adverse effect on the Company's business or results of operations. Retail Operations Western Beef operates twenty-one retail supermarkets in the New York Metropolitan area under the trade name "Western Beef" and two outlet-type food stores that operate under the trade name "Junior's." Its first two retail supermarkets were opened in 1973 and 1979. In the late 1980's, management decided to pursue a more aggressive growth and expansion program consisting of new supermarket acquisitions and remodelings and/or the closing of smaller supermarkets. Since that time, the Company has continued to search for suitable locations in the New York Metropolitan area to open new supermarkets. In 1998, the Company opened two Western Beef supermarkets and two Junior's food-outlet stores. No new supermarkets were opened in 1997 and two supermarkets were opened in 1996. During 1998, 1997 and 1996, the Company's capital expenditures for its retail business were $11,359,000, $7,085,000 and $12,933,000, respectively. All of the Company's supermarkets and outlet-type stores are operated by Western Beef Retail, Inc., a wholly-owned subsidiary of the Company. Most of the Company's supermarkets and stores are free standing. The supermarkets are open seven days a week, including evenings, and are high-volume operations. Most of the Company's supermarkets have refrigerated, warehouse-type facilities which are divided into separate areas kept at different temperatures. Non-perishable items are displayed in an area maintained at normal room temperatures. In most of the Company's supermarkets, meat is displayed in large refrigerated rooms where the Company sells both bulk meat, which is custom cut by the Company's butchers, as well as a full variety of pre-packaged meats. In nineteen of its supermarkets, the Company sells produce which is displayed in refrigerated cases maintained at 37 degrees Fahrenheit and where moisture content is regulated by automatic misting equipment. Dairy and deli products are sold in separate areas of the Company's supermarkets, maintained at 30-40 degrees Fahrenheit. Most of the Company's supermarkets also contain stand-alone freezers, which maintain temperatures suitable for storage of frozen foods, such as ice cream, vegetables and dinner entrees. The Company's supermarkets also sell a complete line of dry groceries and some non-food products such as paper products and household utensils. -5- Four of the Company's supermarkets operate scratch brick oven bakeries, which bake a large variety of old world bread and rolls from basic ingredients. One of these supermarkets supplies three other Company supermarkets with fresh baked goods. It is anticipated that as capacity permits these baked goods will be introduced into all of the Company's supermarkets. Fifteen supermarkets also operate full service delicatessen departments, which cut-to-order the various cheese and processed meats displayed. The Company's other supermarkets have self-service delicatessen departments. The Company's outlet-type stores are open six days a week from Monday to Saturday and are open about ten hours a day. From initial construction to daily operation they are designed and constructed using a no-frills approach. The building structures, which are approximately 11,000 square feet in size, are made of prefabricated material which reduces construction costs and are designed to be energy efficient. Refrigerated dairy, meat and frozen products are merchandised through rear-fed door display units. Dry grocery products are displayed on floor pallet stacks and "warehouse" type racking utilizing "cut case" display techniques. This merchandising format is unlike conventional supermarket formats in that they feature approximately 600 different products as compared to the more than 40,000 products featured in conventional supermarkets. Junior's sells high turnover food staples with a heavy emphasis on Western Beef label brand products. The Company promotes its "Western Beef" retail supermarkets and outlet food stores in full color store circulars and local newspapers, generally at least once a week. In addition, advertisements are also placed on local radio stations and smaller cable television networks in both the English and Spanish languages. The Company distributes its weekly circulars door-to-door in selected neighborhoods and through insertions in local newspapers. Advertising expenditures for 1998 were $2,391,000, covering ad promotion, preparation, placement and distribution. The Company's twenty-one retail supermarkets range in size from 9,000 square feet to 83,000 square feet, with an average of 30,000 square feet per store. They are supported by the Company's wholesale division warehouses totaling 117,000 square feet. In 1998, approximately 45% of the Company's retail purchases were derived from the Company's warehouses; the remaining purchases being delivered directly to the stores from manufacturers or outside wholesalers. White Rose Foods ("White Rose") is the Company's largest outside wholesaler. The Company does not have a formal supply agreement with White Rose. From time to time, the Company meets with other wholesale suppliers to ascertain if the service and prices charged by White Rose are as favorable as could be received from other sources. Based on these meetings, the Company has determined that purchasing from White Rose continues to be competitive with other supply sources and in the best interest of the Company. In 1998, White Rose accounted for approximately 22% of the Company's retail division's purchases. In 1998, no other supplier accounted for more than 10% of the Company's purchases. Management believes that the loss of White Rose as a supplier would not have a long-term adverse effect on the Company's performance since the Company has access to several other similar suppliers. During 1998, the Company increased both the number and diversity of the products marketed under the Western Beef brand label. These products are purchased from national and local food manufacturers. Western Beef brand -6- products are generally well accepted by the Company's retail customers and more Western Beef brand products are expected to be introduced. In general, Western Beef brand products, which are priced 20% to 50% lower than the comparable national brand products, generate higher gross profit margins for the Company than brand name merchandise. Wholesale Operations The Company also conducts a wholesale food business. It purchases beef, pork, poultry and provisions directly from major slaughterhouses, meat and poultry processors and other suppliers on a daily basis to ensure a supply of fresh products and to be responsive to customer needs. The Company does not have formal supply agreements with any of these entities. It purchases merchandise for its wholesale business by purchase orders, the terms of which are subject to normal market conditions such as pricing and availability at the time of purchase. The loss of any of these suppliers would not be material to the Company. Additionally, the Company's wholesale business warehouses and distributes grocery, produce, dairy and frozen food products to the Company's own retail food stores. The Company distributes products from its warehouses in Ridgewood, New York, which operate 24 hours a day. On average, the perishable inventory is turned over approximately once a week. Notwithstanding such turnover, the wholesale business requires large amounts of working capital for financing inventory and accounts receivable. To facilitate its wholesale business and retail distribution, the Company (through a wholly owned subsidiary) owns and operates a fleet of tractors, trailers and trucks, most of which are refrigerated. At various times since 1989, the Company has transported food products for others on a limited basis; however, substantially all trucking operations now are conducted for the Company's own distribution facilities. In addition, to enhance profitability, the Company "back hauls" merchandise inventory to achieve reduced product cost. Competition The wholesale and retail segments of the food industry are competitive throughout the market areas served by the Company. These businesses are generally characterized by low profit margins, with earnings primarily dependent on rapid inventory turnover, careful cost control and the ability to achieve high sales volume. Competition manifests itself in virtually every aspect of the retail food business, including pricing, advertising and promotion, store size, location and attractiveness, hours of operation, product selection and quality, employee friendliness, service and parking facilities. Although Management believes the Company's retail stores price their products competitively, such pricing has been made possible principally because of the low overhead costs incurred by presenting the food in no-frills, warehouse type, bulk display settings without the typical shelving, lighting, decor and other amenities offered by most suburban supermarkets. In the past, the Company's retail food business has grown by opening food supermarkets in locations in Metropolitan New York City areas where its supermarkets were larger than existing independent supermarkets and convenience food stores and where there had been a limited presence of national or regional chain supermarkets. In recent years, however, the Company has experienced competition from larger supermarket chains, some of which have greater resources than the Company, as well as with other independent operators. Such competitors have expanded and are likely to continue expanding, by opening retail food stores within the Company's markets. Although Management believes it will be able to continue to compete on the basis of quality, price and reputation, there can be no assurance that the Company will be able to maintain or improve its current competitive position. Wholesale competition is based principally on price, quality and service, including the extension of favorable credit terms. Financially stronger wholesale competitors may be better suited to take advantage of distressed, "bargain" price opportunities, which arise during periods of over-supply, and to finance the cost of carrying large inventories and receivables during periods of market weakness. The wholesale division competes with several other companies on the wholesale level, some of which are larger than the Company and may have greater resources. Currently, there are adequate suppliers and multiple sources of the products which the Company distributes and sells. However, there is a trend toward consolidation in the food industry with many smaller suppliers being acquired by larger concerns. -7- Government Regulation The food business is subject to, and affected by, substantial and complex federal, state and local laws and regulations that apply to the sale of food at both the wholesale and retail level, and it is required to obtain certain federal, state and local permits and/or licenses for accepting United States Department of Agriculture ("USDA") food stamps and Women, Infants and Children ("WIC") checks (assistance checks which can only be used to purchase certain dairy and grocery items), operating a bakery, processing meat, selling produce, beer and wine coolers, and otherwise in order to conduct business. In addition, such regulation includes unannounced inspections by government officials investigating sanitary conditions, weights, measures and other matters. The Company believes it currently holds all licenses and permits required to conduct its business and is in compliance in all material respects with applicable regulations. For fiscal 1998, 1997 and 1996, respectively, food stamp redemptions accounted for approximately 19%, 20% and 24% of the Company's retail sales. There would be a material adverse effect on the Company if it were to suffer the loss of its USDA permits to accept food stamps or if the Government was to reduce or eliminate the food stamp program. Management believes that the decline in 1998 and 1997 food stamp redemptions resulted from modifications made by the USDA regarding eligibility requirements for obtaining food stamps. Employees As of March 17, 1999, the Company's retail business employed approximately 1,700 people and its wholesale business employed approximately 100 people. None of these employees are represented by a labor union. The Company believes that its relationship with its employees is generally satisfactory. Seasonality No material portion of the Company's business is affected by seasonal fluctuations, except that sales are generally strongest around holidays, particularly the Fourth of July and Easter. Environmental Laws The Company is subject to various applicable federal, state and local laws and regulations relating to environmental matters. Under such laws, the Company is exposed to liability primarily as an owner or operator of real property and, as such, the Company may be responsible for the proper management or remediation of hazardous substances. Such substances for which the Company may be liable could include historic contamination of real property, asbestos-containing material in improvements and hazardous substances and oil used in the course of regular business operations. Remediation requirements may be imposed whether or not the owner or operator knew of, or was responsible for, the presence of contamination by hazardous substances. Also, the presence of contamination may hinder the owner or operator's ability to lease or sell property or to use the property as loan collateral. The Company believes that it does not have any material environmental liability and that compliance with environmental laws and regulations will not, individually or in the aggregate, have a material adverse effect on the Company's operations or its financial condition. There can be no assurance, however, that new or amended environmental laws or regulations or the future discovery of environmental conditions will not require additional expenditures by the Company. Dependence on Major Customers The business of the Company is not dependent on a single or a few customers. -8- Order Backlog The Company does not have any backlog of orders. Research and Development Activity The Company has not expended material amounts on research and development activities. Government Contracts Other than licenses to accept USDA food stamps and WIC checks, the Company does not have any material contracts or sub-contracts with any governmental agency. See "Government Regulation". ITEM 2. PROPERTIES-GENERAL The buildings utilized by the Company were constructed at various dates between 1918 and 1998. The Company considers its warehouse facilities to be in good condition. Most of the Company's retail facilities have been opened or modernized in recent years and the Company considers these facilities to be in good condition. The Company believes that all its physical facilities, both owned and leased, are suitable and adequate for their intended uses and purposes. Property-Retail The Company's twenty-one retail supermarkets range in size from 9,000 square feet to 83,000 square feet, with an average of 30,000 square feet per store. They are supported by Company warehouses totaling 117,000 square feet. The Junior's outlet-type stores average approximately 11,000 square feet. As of January 1, 1999, the Company owned six (including one outlet-type store) and leased seventeen of its supermarkets and outlet food stores currently in operation. Ten of the leased supermarkets are rented from non-affiliated real estate owners and the other seven (including one outlet-type store) are leased from entities owned by the Principal Stockholders. See "Item 1. Business-History". As described in greater detail above under "Item 1. Business - 1998 Developments", the Company: (i) opened two Western Beef supermarkets in Manalapan and Rahway, New Jersey; (ii) opened two Junior's Food Outlets in Queens and Brooklyn, New York; (iii) exercised an option to purchase property on Empire Boulevard in which the Company currently operates a supermarket; (iv) purchased four parcels of real estate on which the Company intends to open one supermarket and three outlet-type stores; and (v) submitted the winning bid to purchase from New York City a parcel of land on which the Company intends to build another outlet-type store. The Company's supermarkets and one outlet-type store are leased for terms, including options, of up to 40 years under leases which generally require the Company to pay for all real estate taxes, repairs and insurance. The average remaining life, including renewal options, of leases from non-affiliates and from the Principal Stockholders is 23 and 11 years, respectively. Property-Wholesale Under a lease purchase agreement, the Company occupies a two-story warehouse building located in Ridgewood, New York, of approximately 178,000 square feet with an adjacent parking area, requiring annual base rental payments of approximately $251,000 per year plus taxes, utilities and all other operating costs with the final payment scheduled for August 2004. The Company utilizes approximately half of the building for its wholesale operations and the remainder for its retail operations. -9- ITEM 3. LEGAL PROCEEDINGS The Company has various outstanding litigation matters which it considers to be in the ordinary course of business. In the opinion of Management, the outcome of these litigation matters will not materially adversely affect the Company's financial position. On December 3, 1998, a purported class action, Plumpe v. Castellana et al., No. 16807 NC, was filed in the Delaware Chancery Court against Western Beef, Peter Castellana, Jr., Joseph Castellana, Stephen R. Bokser and Arnold B. Becker. The action seeks to enjoin a transaction pursuant to which the Company would be acquired by an entity formed by certain Company officials and their family members, on the grounds that the transaction would create a breach of fiduciary duties to shareholders. The action also seeks recission of the transaction if it is consummated, and accounting, damages and attorneys' fees. By agreement with plaintiff, defendants' time to answer the complaint has been extended indefinitely, pending possible settlement discussions with plaintiff. Western Beef believes that plaintiff's claims are without legal merit and is prepared to defend them vigorously. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS There were no matters submitted to a vote of security holders during the fourth quarter of the fiscal year covered by this report. PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The Company's Common Stock is traded over-the-counter in the NASDAQ National Market System ("NASDAQ") under the symbol "BEEF". The range of the high and low bid prices per share of the Common Stock during the last two years, listed under the name Western Beef, Inc. as reported by NASDAQ, is set forth below: 1998 HIGH LOW ---- ---- --- 1st Quarter 9 1/2 7 2nd Quarter 8 1/2 7 3rd Quarter 10 7 4th Quarter 8 1/2 6 7/8 1997 HIGH LOW ---- ---- --- 1st Quarter 14 10 3/8 2nd Quarter 12 1/4 8 3rd Quarter 10 3/4 7 3/4 4th Quarter 9 1/2 6 As of March 23, 1999, there were 249 holders of record of the Company's Common Stock at which point the closing bid price on NASDAQ was $6.50 per share. -10- The Company has never paid cash dividends on its Common Stock. Payment of dividends if any, will be within the discretion of the Company's Board of Directors and will depend, among other factors, on earnings, capital requirements and the operating and financial condition of the Company. At the present time, the Company's anticipated capital requirements are such that it intends to follow a policy of retaining earnings, if any, in order to finance the development of its business. ITEM 6. SELECTED FINANCIAL DATA The selected financial data set forth below is derived from the Company's consolidated financial statements and should be read in conjunction with the consolidated financial statements and related notes included elsewhere in this Annual Report. See also "ITEM 7. Management Discussion and Analysis of Financial Condition and Results of Operations." WESTERN BEEF, INC. SELECTED FINANCIAL DATA (IN THOUSANDS, EXCEPT PER SHARE DATA)
January 1, January 2, January 3, December 29, December 30 1999 1998 1997(1) 1995 1994 - --------------------------------------------------------------------------------------------- Net sales $298,990 $317,079 $340,873 $301,387 $291,886 Net income $ 3,352 $ 3,203 $ 5,989 $ 4,934 $ 4,773 Net income per share $ .61 $ .59 $ 1.10 $ .90 $ .87 of common stock-basic Net income per share of $ .61 $ .58 $ 1.09 $ .90 $ .87 common stock-diluted Total assets $ 86,357 $ 76,254 $ 74,499 $ 63,313 $ 54,731 Long-term obligations $ 11,257 $ 8,837 $ 11,011 $ 7,691 $ 7,224 - ---------------------------------------------------------------------------------------------
(1) Fifty-three week fiscal year. The other fiscal years presented have fifty-two weeks. ITEM 7. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following should be read in conjunction with the Company's financial statements and the related notes included herein. OVERVIEW The Company expects competition in the retail segment from major chains as the Company expands and continues to open new retail supermarkets. Several of the Company's retail supermarkets have been impacted by this competition; however, the Company believes that its ability to serve its customers with quality merchandise at the lowest price should allow it to stay profitable and maintain a significant part of its market share. -11- General The Company opened two new retail supermarkets in 1998, bringing the total number of open supermarkets to twenty-one and two outlet-type food stores which operate under the trade name Junior's. The two supermarkets were opened in New Jersey in Manalapan on June 14, 1998 and Rahway on August 12, 1998 at approximate construction costs of $643,000 and $1,628,000, respectively. The two Junior's were opened on Rockaway Boulevard in Queens, New York on March 30, 1998 and Myrtle Avenue in Brooklyn, New York on September 4, 1998 at approximate construction costs of $1,286,000 and $1,742,000. Unlike conventional supermarkets, these two stores sell a limited selection of food staples, most of which are Western Beef brand grocery products, as well as pre-packaged meats and cheese. On May 4, 1998, the Company exercised an option to purchase land and a building currently occupied by an existing Western Beef supermarket on Empire Boulevard in Brooklyn, New York from an unrelated party for approximately $2,124,000. Because of the favorable response generated by the opening of the two Junior's, the Company decided to convert the space used by its Central Cutting operation, which had prepared, custom packed and distributed pre-packaged meats and cheese to the Company's supermarkets, to a distribution warehouse to service the Junior's currently open as well as new Junior's to be opened in the future. On December 2, 1998, the Company purchased land and a building located on Prospect Avenue, Bronx, New York from an unrelated party for approximately $1,705,000 on which the Company intends to open a Western Beef supermarket with satellite rental units. The total cost for the purchase of the land and renovation of the existing building is estimated to be $5,000,000. On December 17, 1998, the Company purchased a parcel of vacant land located on Frederick Douglas Boulevard, Manhattan, New York from an unrelated party for approximately $660,000 on which the Company intends to open a Junior's outlet-type store. The total cost of the land purchase and construction of this new Junior's is estimated to be $1,900,000. On December 21, 1998, the Company submitted the winning bid with New York City to purchase a parcel of land on New Lots Avenue, Brooklyn, New York for approximately $240,000. The Company intends to open a Junior's outlet-type store at a total cost of approximately $1,300,000 including land purchase costs. This transaction is expected to be completed in the near future. On December 23, 1998, the Company purchased all outstanding capital stock of 814 Jamaica Avenue, Inc. ("Jamaica") from its sole shareholder who was unrelated to the Company for approximately $744,000. Jamaica was the owner of land and building on Jamaica Avenue, Brooklyn, New York on which the Company intends to open a new Junior's at an estimated cost of $2,100,000 including the purchase of capital stock of Jamaica. On January 29, 1999, the Company purchased a parcel of vacant land located on Wyckoff Avenue, Queens, New York from an unrelated party for approximately $259,000 on which the Company intends to open a Junior's outlet-type store at a total cost of approximately $1,300,000 including the land purchase price. The cost of opening a new supermarket is dependent upon the size of the supermarket and the amount of building renovations necessary to convert the property into a supermarket. Other factors involved are the amount of equipment to be installed along with the number of product departments in the store. There can be no assurance that the Company can implement this strategy in a timely manner or at the costs stated above or that such strategy, when implemented, will be successful. The Company's growth and expansion program is susceptible to the hazards inherent in building and construction, including delays, cost overruns and zoning issues. While in the past such issues have not materially affected the Company's growth and expansion program, there can be no assurance that in the future such issues will not delay the implementation of this program or have a material effect on this program and the Company. -12- Year 2000 Issues The Company is executing a plan to ensure that the Company's computer systems and software applications will properly function beyond 1999. This plan involves identifying year 2000 issues, assigning priorities to items identified and correcting or replacing material items that are not year 2000 compliant. The plan also considers year 2000 vulnerability with respect to the Company's major suppliers and third party service providers. The Company is utilizing both internal and external resources to address year 2000 issues. Costs associated with year 2000 computer system modifications are currently estimated to be approximately $300,000. Included in these costs are $150,000 for certain front-end cash register systems whose upgrade was previously identified for non-year 2000 operational enhancements. The Company has already installed year 2000 program code on all of its financial, merchandise and distribution computer software systems. Effective with the first payroll week of 1999, the Company was operating on year 2000 compliant software provided by its third party payroll service company. Finally, the Company has received and completed the testing of the front-end register system enhancements previously discussed and expects to complete Company wide implementation of this software before the end of the second quarter of 1999. As part of the Company's goal to achieve year 2000 compliance, it is seeking representations and/or warranties from suppliers, vendors and business partners about their year 2000 compliance. No assurances can be given that the Company will be able to identify and address all year 2000 issues due to their complexity and the Company's dependence on representations and preparedness of third parties with whom the Company does business. Although the Company believes that its efforts and plans will address year 2000 issues that are within the Company's reasonable control, there can be no assurance that year 2000 issues will not have a material adverse effect on the Company's business or results of operations. RESULTS OF OPERATIONS 1998 Compared to 1997 For 1998, the Company achieved net income of $3,352,000, or $.61 per share, on net sales of $298,990,000 as compared to 1997 net income of $3,203,000, or $.58 per share, on net sales of $317,079,000. The 5.7% decrease in net sales in 1998 compared to 1997 resulted from: (i) a decline in retail and wholesale net sales as a result of lower food stamp redemptions, which the Company believes resulted from modifications made by the USDA to food stamp eligibility requirements; (ii) a decline of 34.8% in wholesale net sales as a result of a more restrictive credit policy adopted by the Company; (iii) low food price inflation; and (iv) increased competition. The decrease was partially offset by the sales of the two supermarkets and two outlet-type stores that opened in 1998. The retail segment provided 81.5% of total net sales in 1998, as compared with 73.3% of total net sales in 1997. Gross profits, as a percentage of net sales, for 1998 and 1997 were 26.8% and 25.0%, respectively. The increase in the gross profit percentage for 1998 resulted primarily from the increased ratio of retail to wholesale sales in 1998 as compared with 1997. For the years 1998 and 1997, the retail segment contributed 94.0% and 90.9% of the gross profit, respectively. Selling, general and administrative expenses expressed as a percentage of sales increased to 25.3% in 1998 from 23.5% in 1997 primarily as a result of: (i) the inclusion of the costs in 1998 of the two supermarkets and two outlet-type stores that opened in 1998; (ii) certain occupancy costs, such as utilities, rent and depreciation, which do not vary directly with sales declines, thereby increasing the expense ratio; and (iii) the large decrease in wholesale sales which generally have much lower related selling, general and administrative costs. -13- Income from operations decreased 3.9% to $4,549,000 in 1998 from $4,732,000 in 1997. This decrease was principally the result of: (i) decreased sales partially offset by an increase in the gross profit percentage; and (ii) higher selling, general and administrative expenses. Income Taxes The effective tax rate of the Company decreased to 37.4% for 1998 from 40.0% for 1997 as a result of the utilization of low income housing tax credits and lower state and local income taxes resulting from investment tax credits. The Company's investment in low income housing credits reduced the Company's effective tax rate approximately 3.6% in 1998 and 4.3% in 1997. In addition to the low income housing credits, the Company participated in the federally sponsored Work Opportunity Tax Credit ("WOTC") program which helped to reduce the 1998 and 1997 effective tax rates by 0.9% and 1.3%, respectively. Retail Segment Net sales in the retail segment increased 4.9% in 1998 compared to 1997 as a result of the sales generated by the two supermarkets and two outlet-type stores opened in 1998, but was partially offset by a decline in food stamp redemptions which the Company believes resulted from modifications by the USDA to food stamp eligibility requirements. Same store sales declined 0.52% in 1998 compared to 1997 due to decreased food stamp redemptions. Retail gross profits as a percentage of sales were 30.9% and 31.0% in 1998 and 1997, respectively. Retail income from operations decreased 8.8% to $4,310,000 in 1998 from $4,727,000 in 1997 principally as a result of the costs associated with opening the two new supermarkets in 1998. Wholesale Segment Wholesale net sales decreased 34.8% to $55,178,000 in 1998 from $84,679,000 in 1997. This decrease in wholesale net sales resulted primarily from: (i) an adjustment of the Company's credit policy to sell only to customers who have the requisite credit worthiness; (ii) low food price inflation; and (iii) reduced food stamp redemptions at wholesale customers of the Company. Wholesale gross profits as a percentage of sales for 1998 and 1997 were 8.8% and 8.6%, respectively. Wholesale income from operations increased to $239,000 in 1998 from $5,000 in 1997 due principally to better management of accounts receivable. 1997 Compared to 1996 For 1997, the Company achieved net income of $3,203,000, or $.58 per share, on net sales of $3l7,079,000 as compared to 1996 net income of $5,989,000, or $1.09 per share, on net sales of $340,873,000. The 7.0% decrease in net sales in 1997 compared to 1996 resulted from: (i) 1996 being a 53-week fiscal year, whereas 1997 was a 52-week fiscal year; (ii) a decline in retail and wholesale net sales as a result of lower food stamp redemptions, which the Company believes resulted from modifications made by the USDA to food stamp eligibility requirements; (iii) a decline of 16.3% in wholesale net sales as a result of a more restrictive credit policy adopted by the Company; (iv) low food price inflation; and (v) increased competition. These decreases were partially offset by the full year's sales in 1997 of the two stores that opened in 1996. The retail segment provided 73.3% of total net sales in 1997, as compared with 70.3% of total net sales in 1996. -14- Gross profits, as a percentage of net sales, for 1997 and 1996 were 25.0% and 24.2%, respectively. The increase in the gross profit percentage for 1996 resulted primarily from the increased ratio of retail to wholesale sales in 1997 as compared with 1996. For the years 1997 and 1996, the retail segment contributed 90.9% and 89.0% of the gross profit, respectively. Selling, general and administrative expenses expressed as a percentage of sales increased to 23.5% in 1997 from 21.3% in 1996 primarily as a result of: (i) the inclusion of the full year's cost in 1997 of the two stores that opened in 1996; (ii) certain occupancy costs, such as utilities, rent and depreciation which do not vary directly with sales declines thereby increasing the expense ratio; and (iii) wage and related benefit costs which were unfavorably impacted by increases in the federal minimum wage. Income from operations decreased 51.3% to $4,732,000 in 1997 from $9,717,000 in 1996. This decrease was principally the result of: (i) decreased sales partially offset by an increase in the gross profit percentage; and (ii) higher selling, general and administrative expenses. Income Taxes The effective tax rate of the Company decreased to 40.0% for 1997 from 43.3% for 1996 as a result of the utilization of low income housing tax credits and lower state and local income taxes resulting from investment tax credits. The Company's investment in low income housing credits reduced the Company's effective tax rate approximately 4.3% in 1997 and 2.1% in 1996. In addition to the low income housing credits, the Company participated in the federally sponsored Work Opportunity Tax Credit ("WOTC") program which helped to reduce the 1997 tax rate by 1.3%. Retail Segment Net sales in the retail segment decreased 3.0% in 1997 compared to 1996 as a result of: (i) 1996 being a 53-week fiscal year, whereas 1997 was a 52-week fiscal year; (ii) a decline in food stamp redemptions, which the Company believes resulted from modifications made by the USDA to food stamp eligibility requirements; (iii) low food price inflation; and (iv) increased competition. These declines were partly offset by the inclusion in 1997 net sales of full year net sales for the two supermarkets opened by the Company in 1996. Same store sales decreased 4.0% in 1997 as compared to 1996 due to 1997 being a shorter fiscal year and decreased food stamp redemptions. Retail gross profits as a percentage of sales increased to 31.0% in 1997 from 30.6% in 1996, principally as a result of the increased ratio of retail to wholesale sales, as well as the capital expansion program, which increased the selling square footage dedicated to the higher gross profit dairy, frozen and bakery merchandise categories. Retail income from operations decreased 46.2% to $4,727,000 in 1997 from $8,793,000 in 1996. This decrease was principally the result of: (i) decreased net sales; and (ii) higher selling, general and administrative expenses. Wholesale Segment Wholesale net sales decreased 16.3% to $84,679,000 in 1997 from $101,162,000 in 1996. This decrease in wholesale net sales resulted primarily from: (i) an adjustment of the Company's credit policy to sell only to customers who have the requisite credit worthiness; (ii) low food price inflation; and (iii) reduced food stamp redemptions at wholesale customers of the Company. Wholesale gross profit for 1997 and 1996 was 8.6% and 8.9%, respectively. Wholesale income from operations decreased 99.5% to $5,000 in 1997 as compared with $924,000 in 1996 due principally to increased write-offs of uncollectible receivables. Wholesale gross profits as a percentage of sales decreased to 8.6% in 1997 from 8.9% in 1996, principally as a result of: (i) higher purchase costs; and (ii) increased competition. -15- Recent Accounting Standards In 1997, the Financial Account Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS No. 130"). SFAS No. 130 established standards for reporting and display of comprehensive income and its components within financial statements. Comprehensive income consists of all changes in equity during a period except those resulting from investments by and distributions to owners. SFAS No. 130 also requires that all components of comprehensive income be disclosed in a separate financial statement or on the face of the income statement. This statement was effective for the Company beginning in 1998 and required re-classification of prior period information for comparative purposes. In 1997, the FASB also issued Statement of Financial Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and Related Information" ("SFAS No. 131"). SFAS No. 131 replaced the products and services approach of SFAS No. 14's to reporting business segments with the management approach. Under the provision of SFAS No. 131, business segments are based on the way that the chief operating decision maker organizes the segments within the enterprises, for deciding how to allocate resources and in assessing performance. SFAS No. 131 was effective for the Company in 1998, and segment information that is reported with corresponding information for the initial year must be re-stated unless it is impractical to do so. In 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 132, "Employers" Disclosures about Pensions and Other Post-retirement Benefits" ("SFAS No. 132"), an amendment of FASB Statements No. 87, 88 and 106. SFAS No. 132 revises employers' disclosure about pension and other post-retirement benefit plans. SFAS No. 132 was effective for the Company in 1998. The adoption of these statements did not have a material effect on the consolidated financial statements of the Company. Liquidity and Capital Resources Net cash flow from operations was $11,725,000 for 1998. The Company had capital expenditures of $11,675,000 for 1998 primarily relating to: (i) the acquisition of the Empire Boulevard property; (ii) equipment purchases and improvements at the two supermarkets and two outlet-type stores opened in 1998; (iii) the four real estate parcels acquired in December 1998 on which the Company intends to open one supermarket and three outlet-type stores; and (iv) miscellaneous equipment purchases and leasehold improvements at its other existing store locations. The Company also repaid long term debt of $2,704,000 in 1998. As of January 1, 1999, the Company had $12,086,000 in cash and cash equivalents available for acquisitions and expansion. These additions and improvements were funded by: (i) cash flow from operations; (ii) the takedown of $913,000 and $1,262,000 on June 30, 1998 and December 31, 1998 at 7.28% and 6.44% per annum payable in monthly installments of $13,664 and $18,293 respectively under a sale/leaseback arrangement with General Electric Capital Corporation; (iii) $2,055,263 borrowed from Hyson Joint Venture, the prior Empire Boulevard landlord, at 6.25% per annum payable in monthly installments of $17,622 commencing June 1, 1998 through June 1, 2013; (iv) $1,700,000 borrowed for the Prospect Avenue location from North Fork Bank at its prime rate payable in interest only installments from January 4, 1999 to December 4, 2001, at which time the entire principal balance is due and payable; (v) $512,000 borrowed for the Frederick Douglas Boulevard location from North Fork Bank at 6.89% interest per annum payable in monthly installments of $5,942 commencing February 1, 1999 through January 1, 2009; and (vi) $566,400 borrowed for the Jamaica Avenue location at 6.85% interest per annum from North Fork Bank payable in monthly installments of $6,562 commencing February 1, 1999 through January 1, 2009. The Company has available a $3,000,000 working capital line of credit from North Fork Bank expiring on June 30, 1999, which the Company expects will be renewed for another year on similar terms. At January 1, 1999, the entire balance was available for use by the Company. The Company also has several financial institutions that it believes would be willing to finance new store equipment, usually over a five to ten year period. -16- The Company plans to utilize most of its available cash flow to fund capital expenditures for renovating existing stores and for opening new retail outlets. There are no restrictions on the transfer of assets between segments, though the Company intends to let each segment develop its own growth. The Company expects that available cash flow from the wholesale segment will be used to expand its customer base, which should result in higher levels of inventory and accounts receivable. Although Management believes that these expenditures will enable the Company to expand its customer base, there can be no assurance that this strategy will be successful. In 1999, the Company intends to commence the construction of one Western Beef supermarket and four Junior's outlet-type stores. The Company expects the aggregate 1999 capital commitments for these projects to be approximately $11,600,000. See "Overview" for a description of the factors that may affect the costs of opening a new supermarket and the risks inherent in the Company's growth and expansion plan. ITEM 7A QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Market risk represents the risk of loss that may impact the consolidated financial position, results of operations or cash flows of the Company due to adverse changes in financial rates. The Company may be exposed to market risk in the area of interest rates; however, the Company borrows at fixed rates of interest and the Company's management does not believe that there is a significant market risk to interest rate changes at the present time. The Company does not currently maintain any interest rate hedging arrangements due to the reasonable risk that near-term interest rates will not rise significantly. The Company is continuously evaluating this risk and will implement interest rate hedging arrangements when deemed appropriate. -17- ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Western Beef, Inc. and Subsidiaries Consolidated Financial Statements Years Ended January 1, 1999, January 2, 1998 and January 3, 1997 -18- Western Beef Inc. and Subsidiaries Contents Reports of Independent Accountants F-1-2 Consolidated Balance Sheets F-3 Consolidated Statements of Income F-4 Consolidated Statements of Stockholders' Equity F-5 Consolidated Statements of Cash Flows F-6 Notes to Consolidated Financial Statements F-7-21 Report of Independent Accountants on Consolidated Financial Statement Schedule F-22 Schedule II-- Valuation and Qualifying Accounts F-23 Report of Independent Accountants To the Board of Directors and Stockholders of Western Beef, Inc. In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of income, stockholders' equity and cash flows present fairly, in all material respects, the financial position of Western Beef, Inc. and Subsidiaries at January 1, 1999 and January 2, 1998 and the results of their operations and their cash flows for each of the fifty-two week periods then ended in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. /s/ PricewaterhouseCoopers LLP PricewaterhouseCoopers LLP New York, New York March 5, 1999 F-1 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS To the Stockholders and Directors of Western Beef, Inc. We have audited the accompanying consolidated statements of income, stockholders' equity and cash flows of Western Beef, Inc. for the year ended January 3, 1997. We have also audited the schedule listed in the accompanying index. These consolidated financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements and schedule based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements and schedule are free of material misstatement. An audit includes examining on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements and schedule. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and schedule. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the results of operations and cash flows of Western Beef, Inc. for the year ended January 3, 1997, in conformity with generally accepted accounting principles. Also, in our opinion, the schedule presents fairly, in all material respects, the information set forth therein for the year ended January 3, 1997. /s/ BDO Seidman, LLP BDO Seidman, LLP New York, New York March 5, 1997 F-2 Western Beef, Inc. and Subsidiaries Consolidated Balance Sheets (In Thousands, Except Par Value) - -------------------------------------------------------------------------------- January 1, January 2, 1999 1998 Assets Current: Cash and cash equivalents $ 12,086 $ 7,527 Accounts receivable, net of allowance for doubtful accounts of $522 and $552 5,632 6,275 Inventories 15,290 14,113 Deferred income taxes 1,550 1,235 Prepaid expenses and other current assets 2,133 2,933 -------- -------- Total current assets 36,691 32,083 Property, plant and equipment, net 47,373 41,918 Other assets 2,293 2,253 -------- -------- Total assets $ 86,357 $ 76,254 ======== ======== Liabilities and Stockholders' Equity Current: Current portion of long-term debt $ 1,681 $ 1,571 Current portion of obligations under capital leases 690 1,090 Accounts payable 10,564 8,903 Accounts payable-related party 3,765 1,997 Accrued expenses and other current liabilities 5,610 4,834 -------- -------- Total current liabilities 22,310 18,395 Long-term debt, net of current portion 8,819 5,707 Obligations under capital leases, net of current portion 2,438 3,130 Deferred income taxes liability 2,497 2,059 Other non-current liabilities 1,760 1,834 -------- -------- Total liabilities 37,824 31,125 -------- -------- Commitments and contingencies (Note 7) Stockholders' equity: Preferred stock, $.05 par value - 2,000 shares authorized; none issued Common stock, $.05 par value - 15,000 shares authorized; 5,475 and 5,466 shares, respectively, issued and outstanding 274 273 Capital in excess of par value 11,407 11,390 Retained earnings 36,915 33,563 Deferred compensation (63) (97) -------- -------- Total stockholders' equity 48,533 45,129 -------- -------- Total liabilities and stockholders' equity $ 86,357 $ 76,254 ======== ======== The accompanying notes are an integral part of these financial statements. F-3 Western Beef, Inc. and Subsidiaries Consolidated Statements of Income (In Thousands, Except Per Share Amounts) - -------------------------------------------------------------------------------- 1998 1997 1996 Net sales $298,990 $317,079 $340,873 Cost of sales 218,865 237,808 258,402 -------- -------- -------- Gross profit 80,125 79,271 82,471 Selling, general and administrative expenses 75,576 74,539 72,754 -------- -------- -------- Income from operations 4,549 4,732 9,717 Other income, net 814 603 837 -------- -------- -------- Income before provision for income taxes 5,363 5,335 10,554 Provision for income taxes 2,011 2,132 4,565 -------- -------- -------- Net income $ 3,352 $ 3,203 $ 5,989 ======== ======== ======== Net income per share of common stock: Basic $ .61 $ .59 $ 1.10 ======== ======== ======== Diluted $ .61 $ .58 $ 1.09 ======== ======== ======== Weighted average shares outstanding: Basic 5,473 5,465 5,463 ======== ======== ======== Diluted 5,507 5,503 5,497 ======== ======== ======== The accompanying notes are an integral part of these financial statements. F-4 Western Beef, Inc. and Subsidiaries Consolidated Statements of Stockholders' Equity (In Thousands) - --------------------------------------------------------------------------------
Common Stock Capital in --------------------- Excess of Retained Deferred Shares Par Value Par Value Earnings Compensation --------- ---------- ----------- -------- ------------ Balance, December 29, 1995 5,463 $ 273 $11,379 $24,371 $ (164) Net income for 1996 -- -- -- 5,989 -- Amortization of deferred compensation -- -- -- -- 34 ------- ------- ------- ------- ------- Balance, January 3, 1997 5,463 273 11,379 30,360 (130) Net income for 1997 -- -- -- 3,203 -- Amortization of deferred compensation -- -- -- -- 33 Stock options exercised 3 -- 11 -- -- ------- ------- ------- ------- ------- Balance, January 2, 1998 5,466 273 11,390 33,563 (97) ------- ------- ------- ------- ------- Net income for 1998 -- -- -- 3,352 -- Amortization of deferred compensation -- -- -- -- 34 Stock options exercised 9 1 17 -- -- ------- ------- ------- ------- ------- Balance, January 1, 1999 5,475 $ 274 $11,407 $36,915 $ (63) ======= ======= ======= ======= =======
The accompanying notes are an integral part of these financial statements. F-5 Western Beef, Inc. and Subsidiaries Consolidated Statements of Cash Flows (In Thousands) - --------------------------------------------------------------------------------
1998 1997 1996 Cash flows from operating activities: Net income $ 3,352 $ 3,203 $ 5,989 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 4,170 4,172 3,395 Provision for losses on accounts receivable 348 955 611 Deferred income taxes 123 593 (316) Gain on disposal of property, plant and equipment (139) (80) (20) (Increase) decrease in assets: Accounts receivable 295 1,204 (291) Inventories (1,177) 3,555 (1,709) Prepaid expenses and other current assets 800 (1,472) 559 Other assets (40) (140) (59) (Decrease) increase in liabilities: Accounts payable 3,429 (514) (1,720) Accrued expenses and other current liabilities 638 114 1,530 Non-current liabilities (74) 456 1,142 -------- -------- -------- Net cash provided by operating activities 11,725 12,046 9,111 -------- -------- -------- Cash flows from investing activities: Capital expenditures (11,675) (7,322) (13,121) -------- -------- -------- Net cash used in investing activities (11,675) (7,322) (13,121) -------- -------- -------- Cash flows from financing activities: Proceeds from sale of property, plant and equipment 2,361 2,517 112 Proceeds on issuance of long-term debt 4,834 647 6,377 Payments on long-term debt (2,704) (3,006) (2,276) Issuance of common stock 18 11 -- -------- -------- -------- Net cash provided by financing activities 4,509 169 4,213 -------- -------- -------- Net increase in cash and cash equivalents 4,559 4,893 203 Cash and cash equivalents, beginning of year 7,527 2,634 2,431 -------- -------- -------- Cash and cash equivalents, end of year $ 12,086 $ 7,527 $ 2,634 ======== ======== ======== Cash paid during the year for: Interest $ 985 $ 1,086 $ 1,071 Income taxes $ 1,509 $ 2,569 $ 4,442
The accompanying notes are an integral part of these financial statements. F-6 Western Beef, Inc. and Subsidiaries Notes to Consolidated Financial Statements - -------------------------------------------------------------------------------- 1. Summary of Significant Accounting Policies Description of Business Western Beef, Inc. and Subsidiaries, all of which are wholly-owned, (the "Company") operate high-volume, warehouse-type, retail food stores and a wholesale meat and poultry business. During 1998, the Company operated twenty three retail food stores. During 1997 and 1996, the Company operated nineteen retail stores. The Company also sells poultry, beef, pork and provisions through its wholesale operations to supermarket chains, retailers and other distributors. The retail stores serve the New York/New Jersey metropolitan area and the wholesale business operates principally in the New York, New Jersey and Eastern Pennsylvania markets. Principles of Consolidation The consolidated financial statements include the accounts of the Company and its subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. Fiscal Year The Company uses a 52-53 week fiscal year. The fiscal years ended January 1, 1999, January 2, 1998 and January 3, 1997 are referred to as 1998, 1997 and 1996, respectively, throughout these financial statements. Fiscal years 1998 and 1997 include 52 weeks and fiscal year 1996 includes 53 weeks. Revenue Recognition Retail revenues are recorded at the time of sale. Wholesale revenues are recorded at the time the products are shipped. Inventories Inventories, consisting of meats, poultry, groceries and other food products held for resale, are stated at the lower of cost (first-in, first-out retail method) or market. Property, Plant and Equipment Property, plant and equipment are recorded at cost. Depreciation and amortization are computed on the straight-line method over the estimated useful lives of the assets. The buildings under capital lease and leasehold improvements are being amortized over their useful lives. Repairs and maintenance are charged to operations. Renewals and improvements are capitalized. Estimated Fair Value of Financial Instruments Statement of Financial Accounting Standards No. 107 ("SFAS No. 107"), "Disclosure about Fair Value of Financial Instruments", requires disclosures of fair value information about financial instruments for which it is practicable to estimate the value, whether or not recognized on the balance sheet. The fair values of accounts receivable, accounts payable, accrued expenses and long-term debt approximate their carrying values. Income Taxes Deferred income taxes are recognized for temporary differences between the basis of assets and liabilities for financial statement and income tax purposes. Deferred income taxes represent the future tax return consequences of those differences which will either be taxable or deductible when the assets and liabilities are recovered or settled. F-7 Western Beef, Inc. and Subsidiaries Notes to Consolidated Financial Statements - ------------------------------------------------------------------------------ Other Assets Included in other assets are investments in two limited liability partnerships and the net cash surrender value of life insurance policies. The investments in limited liability partnerships of approximately $821,000 and $901,000 at January 1, 1999 and January 2, 1998, respectively, were made by the Company during 1995. These investments have generated low income housing tax credits to be used to offset future federal income taxes. In accordance with Emerging Issues Task Force Issue No. 94-1, "Accounting for Tax Benefits Resulting from Investments in Affordable Housing Projects", these investments are accounted for under the effective yield method. The credits are guaranteed by an indemnification agreement in the partnership contract. Life insurance policies insure principally the officers of the Company. At January 1, 1999 and January 2, 1998, the value of these policies totaled $1,044,000 and $905,000, net of outstanding loans of $405,000 and $425,000, respectively. Cash Equivalents Cash equivalents include all highly liquid debt instruments with an original maturity of three months or less. Cash equivalents consist primarily of money market accounts. Concentration of Credit Risk Financial instruments which potentially expose the Company to concentrations of credit risk consist primarily of cash and trade accounts receivable. The Company maintains some of its cash balances in accounts which exceed federally insured limits, but has not experienced any losses to date resulting from this policy. The Company sells primarily to retail customers and wholesale food businesses located in the New York metropolitan area. Although the Company is directly affected by the well-being of the food industry, management does not believe significant credit risk exists. Store Opening Costs Costs associated with the opening of new stores are expensed as incurred. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues, costs and expenses during the reporting period. Actual results could differ from those estimates. Reclassifications Certain reclassifications have been made to the prior year amounts to conform to the fiscal 1998 presentation. F-8 Western Beef, Inc. and Subsidiaries Notes to Consolidated Financial Statements - ------------------------------------------------------------------------------ 2. Property, Plant and Equipment Property, plant and equipment consist of the following (in thousands):
Depreciable life January 1, January 2, in years 1999 1998 Land $ 5,740 $ 3,373 Buildings 35 to 39 9,922 6,003 Improvements 10 to 30 31,859 30,241 Machinery and equipment 6 to 30 20,995 19,594 Furniture and fixtures 5 to 7 2,935 2,814 Transportation equipment 5 189 189 ------- ------- 71,640 62,214 Less: Accumulated Depreciation and Amortization 24,267 20,296 ------- ------- $47,373 $41,918 ======= =======
Included in land, buildings and machinery and equipment is property under capital leases totaling $650,000, $1,950,000 and $3,328,000, respectively, at January 1, 1999 and $650,000, $1,950,000 and $7,341,000, respectively, at January 2, 1998. F-9 Western Beef, Inc. and Subsidiaries Notes to Consolidated Financial Statements - ------------------------------------------------------------------------------ 3. Debt Installment Notes
January 1, January 2, 1999 1998 Long-term debt consists of the following (in thousands): Installment notes payable in monthly installments of $127 including interest, at rates ranging from 7.55% to 10%, expiring at various dates through 2001 and collateralized by certain accounts receivable, inventory and equipment. $ 2,065 $ 3,407 Installment notes payable in monthly installments of $77 including interest, at rates ranging from 6.25% to 9.38%, expiring at various date through 2013 and collateralized by land and buildings. 6,575 3,711 Mortgage note payable with a lump sum principal payment due in December 2001, monthly interest payments at the Bank's prime rate (7.75% at 1/1/99) and collateralized by certain land and building. 1,700 -- Installment note payable in annual principal payments of $16, plus interest at 8%; payments commence in 2001 through 2010. 160 160 ------- ------- 10,500 7,278 Less: Current maturities 1,681 1,571 ------- ------- $ 8,819 $ 5,707 ======= =======
As of January 1, 1999, debt matures as follows (in thousands): 1999 $ 1,681 2000 1,099 2001 2,267 2002 396 2003 342 Thereafter 4,715 ------- $10,500 ======= At January 1, 1999, land, property and equipment with a net book value of $11,612,000 was pledged as collateral for the debt. F-10 Western Beef, Inc. and Subsidiaries Notes to Consolidated Financial Statements - ------------------------------------------------------------------------------ For fiscal years 1998, 1997 and 1996, interest expense (net of interest income of $295,000, $106,000 and $164,000, respectively) was $690,000, $965,000 and $907,000, respectively. Bank Facility During 1998, the Company renewed its agreement for a credit facility that permits borrowings of up to $3,000,000, expiring June 30, 1999. The facility is available for working capital purposes and is secured by all monies possessed by the bank that are at any time credited by or due from the bank to the Company. Borrowings under the facility bear interest at the bank's prime rate of 7.75% at January 1, 1999. The facility provides for an additional fee payable (at the bank's prime rate plus 4%) if and to the extent that the aggregate average monthly balance in non-interest bearing deposit accounts is less than $1,000,000. During 1998, the Company had no borrowings under this facility. Capital Lease Obligations The Company utilizes certain land, buildings and equipment in its operations pursuant to lease agreements which are accounted for as capital leases. Future minimum lease payments under capital lease obligations, together with the present value of the net minimum lease payments at January 1, 1999, were as follows (in thousands): Fiscal Year 1999 $ 932 2000 932 2001 932 2002 553 2003 251 Thereafter 167 ------ 3,767 Less: Amounts representing interest 639 ------ Present value of net minimum lease payments 3,128 Less: Current portion 690 ------ $2,438 ====== F-11 Western Beef, Inc. and Subsidiaries Notes to Consolidated Financial Statements - -------------------------------------------------------------------------------- 4. Income Taxes The provision for income taxes consists of the following (in thousands): 1998 1997 1996 Federal: Current $ 1,556 $ 704 $ 2,744 Deferred 91 467 (183) ------- ------- ------- 1,647 1,171 2,561 ------- ------- ------- State and local: Current 330 837 2,137 Deferred 34 124 (133) ------- ------- ------- 364 961 2,004 ------- ------- ------- $ 2,011 $ 2,132 $ 4,565 ======= ======= ======= The deferred income tax provision (benefit) results primarily from the annual change in temporary differences between the basis of assets and liabilities for financial reporting purposes and such amounts as measured by income tax laws. A reconciliation of income taxes at the 34% federal statutory income tax rate for 1998, 1997 and 1996 to income taxes as reported is as follows: 1998 1997 1996 Statutory federal income tax rate 34.0% 34.0% 34.0% State and local income taxes, net of federal income tax benefit 7.9 12.2 12.1 Low income housing tax credits (3.6) (4.3) (2.1) Work opportunity tax credit (0.9) (1.3) -- Other -- (.6) (.7) ---- ---- ---- Effective income tax rate 37.4% 40.0% 43.3% ==== ==== ==== The Company has qualified low income housing tax credits of $1,269,000 which are available to reduce future regular federal income taxes. F-12 Western Beef, Inc. and Subsidiaries Notes to Consolidated Financial Statements - -------------------------------------------------------------------------------- The components of net deferred tax assets (liabilities) are as follows (dollars in thousands): January 1, January 2, 1999 1998 Deferred tax assets: Capitalized costs for income tax purposes $ 788 $ 877 Accounts receivable allowance 230 280 Lease obligations 532 78 ------- ------- Deferred income taxes included in current assets $ 1,550 $ 1,235 ======= ======= Deferred tax liabilities: Depreciation and amortization (2,497) (2,059) ------- ------- Deferred income taxes included in non-current liabilities $(2,497) $(2,059) ======= ======= F-13 Western Beef, Inc. and Subsidiaries Notes to Consolidated Financial Statements - -------------------------------------------------------------------------------- 5. Reconciliation of Basic and Diluted Net Income per Share (in thousands, except per share amounts) Weighted Average Net Shares Per Share Income Outstanding Amounts 1998 Basic net income per share $3,352 5,473 $ .61 Effect of dilutive securities: Stock options -- 34 -- ------ ----- ------- Diluted net income per share $3,352 5,507 $ .61 ====== ===== ======= 1997 Basic net income per share $3,203 5,465 $ .59 Effect of dilutive securities: Stock options -- 38 (.01) ------ ----- ------- Diluted net income per share $3,203 5,503 $ .58 ====== ===== ======= 1996 Basic net income per share $5,989 5,463 $ 1.10 Effect of dilutive securities: Stock options -- 34 (.01) ------ ----- ------- Diluted net income per share $5,989 5,497 $ 1.09 ====== ===== ======= A total of 63,400, 27,700 and 15,000 options were not included in the 1998, 1997 and 1996, respectively, effect of diluted securities due to the anti-dilutive nature of the options. 6. Stock Options At January 1, 1999, the Company has two stock option plans which are described below. The Company applies APB Opinion No. 25, "Accounting for Stock Issued to Employees," and related interpretations in accounting for the plans. Under APB Opinion No. 25, when the exercise price of the stock option equals the market price of the underlying stock on the date of grant, no compensation cost is recognized. Options granted during 1998, 1997 and 1996 were issued at the fair market value on the date of grant. Pursuant to the 1995 Stock Option Plan (the "Plan"), options to purchase an aggregate of not more than 1,300,000 shares of common stock may be granted from time to time to key employees, officers, directors, advisors and independent consultants to the Company or to any of its subsidiaries. The total number of shares of common stock for which options may be granted under the Plan shall F-14 Western Beef, Inc. and Subsidiaries Notes to Consolidated Financial Statements - -------------------------------------------------------------------------------- not exceed 2% cumulatively of the number of shares issued as of January 1 of each year. The Plan is administered by a committee of the Board of Directors. The per share exercise price for incentive stock options ("ISO's") will not be less than 100% of the fair market value of a share of common stock on the date the option is granted (ISO's may not be granted if the optionee owns more than 10% of the Company's common stock) and nonqualified stock options will not be less than 25% of the fair market value on the date the option is granted. Options may be granted for a term, to be determined by the committee, of not more than ten years from the date of grant. Pursuant to the 1995 Nonemployee Director Stock Option Plan (the "Directors' Plan"), options to purchase an aggregate of not more than 200,000 shares of common stock may be granted from time to time to directors who are neither employees nor officers of the Company. The Directors' Plan is administered by a committee of the Board of Directors. Each option granted prior to December 31, 1996 shall vest one year from the date granted and will expire at a term, determined by the committee, not to exceed ten years. Options granted after January 1, 1997 will vest over a five year period, at equal percentages, and will expire at a term, determined by the committee, not to exceed ten years. Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS No. 123"), requires the Company, if material, to provide pro forma information regarding net income and net income per share as if compensation cost for the Company's stock option plans had been determined in accordance with the fair value based method prescribed in SFAS No. 123. The compensation costs associated with the Company's stock option plan determined in accordance with SFAS No. 123 would have been $55,000, $77,000 and $70,000 for 1998, 1997 and 1996, respectively. The fair value of the options was estimated at the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions for 1998, 1997 and 1996: dividend yield of 0; expected volatility of 44% and expected life of 5 years. The weighted average risk free interest rate for 1998, 1997 and 1996 was 5.4%, 6.5% and 6.5%, respectively. The weighted average fair values of options granted during 1998, 1997 and 1996, for which the exercise price equaled the market price on the grant dates, were $3.81, $4.12 and $3.34 per option, respectively. F-15 Western Beef, Inc. and Subsidiaries Notes to Consolidated Financial Statements - -------------------------------------------------------------------------------- The following table contains information regarding options under both plans: Exercise Weighted Price Range Average Options Per Share Exercise Price Outstanding, December 29, 1995 81,949 $1.50 to $6.00 $ 3.93 Granted during 1996 15,000 $ 9.31 9.31 Canceled during 1996 (7,000) $5.88 to $6.00 5.91 -------- Outstanding, January 3, 1997 89,949 $1.50 to $9.31 4.67 Granted during 1997 32,300 $11.50 11.50 Exercised during 1997 (2,833) $1.50 to $6.00 3.88 Canceled during 1997 (16,600) $6.00 to $11.50 8.52 -------- Outstanding, January 2, 1998 102,816 $1.50 to $11.50 6.22 Granted during 1998 29,550 $8.25 8.25 Exercised during 1998 (9,003) $l.50 to $6.00 2.00 Canceled during 1998 (5,600) $6.00 to $11.50 9.39 -------- Outstanding, January 1, 1999 117,763 $1.50 to $11.50 6.88 ======== As of January 1, 1999, approximately 51,000 of the options granted were exercisable and approximately 440,000 options were available for future grants. 7. Commitments and Contingencies Operating Leases The Company has commitments for various noncancellable operating leases which expire at various dates through January 2017. Certain of the leases are with related parties (see Note 9). Many of the leases have renewal options and most contain provisions for passing through incremental costs. Future minimum rental payments required under noncancellable operating leases at January 1, 1999 are as follows (in thousands): F-16 Western Beef, Inc. and Subsidiaries Notes to Consolidated Financial Statements - -------------------------------------------------------------------------------- Fiscal Year 1999 $ 5,989 2000 5,186 2001 4,576 2002 3,502 2003 3,203 Thereafter 13,873 -------- Total future minimum rentals $ 36,329 ======== For fiscal years 1998, 1997, 1996, rent expense was $6,057,000, $5,225,000 and $4,838,000, respectively. The Company has entered into sublease agreements for certain space located within its various retail facilities. For fiscal years 1998, 1997 and 1996, rental income from subleases was $1,120,000, $997,000 and $906,000,` respectively. The Company retains the right to sublease the additional unoccupied space. The subleases currently in effect provide for future rental income as follows (in thousands): Fiscal Year 1999 $ 1,172 2000 1,053 2001 979 2002 861 2003 613 Thereafter 1,332 -------- $ 6,010 ======== Litigation The Company is engaged in various outstanding litigation matters which arose in the ordinary course of business. In the opinion of management, the outcome of such matters will not have a material adverse effect on the Company's financial position or operating results. Standby Letter of Credit The Company has outstanding letters of credit totaling $4,350,000 to collateralize incurred but unpaid insurance claims. 8. Profit Sharing Plans In 1998, the Company consolidated their profit sharing and 401(k) plans. The plan allows for salary deferral arrangements under the provisions of Section 401(k) of the Internal Revenue Code. The Company's funding requirements for the plan are nonobligatory; however, for fiscal years 1998, F-17 Western Beef, Inc. and Subsidiaries Notes to Consolidated Financial Statements - -------------------------------------------------------------------------------- 1997 and 1996, the profit sharing plan expense was $779,000, $750,000 and $625,000, respectively. 9. Related Party Transactions The Company leases land, various retail food stores and warehouse storage and office space from affiliates of the principal stockholders under various leases which expire through January 2017. For fiscal years 1998, 1997 and 1996, rent expense relating to these leases was $3,004,000, $2,829,000 and $2,737,000, respectively (see Note 7). The Company made capital expenditures of approximately $436,000, $2,022,000 and $725,000 during 1998, 1997 and 1996, respectively, at leaseholds owned by affiliates of the principal stockholders. For fiscal years 1998, 1997 and 1996, the Company purchased various food products in the amounts of $46,287,000, $37,111,000 and $27,423,000, respectively, from a company in which an officer is also a director of the Company. As of January 1, 1999 and January 2, 1998, the Company had accounts payable of $3,765,000 and $1,997,000, respectively, due to such company. For fiscal years 1998, 1997 and 1996, the Company had sales to related parties of $561,000, $894,000 and $335,000, respectively. During 1998, the Company received an unsolicited proposal from Cactus Acquisition, Inc. ("Cactus") to acquire, for a price of $7.50 per share in cash, all of the outstanding capital stock of the Company not currently owned by Cactus and its affiliates. At January 1, 1999, Cactus and its affiliates owned approximately 72% of the outstanding shares of Western Beef common stock. In response to the Cactus offer, Western Beef's Board of Directors has appointed a Special Committee of the Board to determine the advisability and fairness of that offer to Western Beef's stockholders other than Cactus and its affiliates. The Special Committee will retain independent investment banking advisers and legal counsel to advise it on the fairness of the offer from the financial point of view of the stockholders of Western Beef other than Cactus and its affiliates. F-18 Western Beef, Inc. and Subsidiaries Notes to Consolidated Financial Statements - -------------------------------------------------------------------------------- 10. Segments of Business In 1998, the Company adopted Statement of Financial Accounting Standards No.131, "Disclosures about Segments of an Enterprise and Related Information" ("SFAS No. 131"). SFAS No. 131 supersedes SFAS No. 14, "Financial Reporting for Segments of a Business Enterprise" ("SFAS No. 14"). One of the principal changes under SFAS No. 131 is the method for reporting segment information, referred to as the "management" approach, in contrast to the "industry segment" approach of SFAS No. 14. Under the management approach, operating segments and certain aspects of such, are identified based on the way that management evaluates the information for making operating decisions and assessing overall performance of the segments. The adoption of SFAS No. 131 did not affect the results of operations or financial position but did affect the disclosure of segment information required to be presented. All prior period information has been restated to conform to the required disclosures. The Company operates in two industry segments. The wholesale segment primarily sells poultry, beef, pork and provisions to retailers, restaurants and institutions. The retail segment sells various meat and grocery items to the general public. The accounting policies of the segments are the same as those described in the summary of significant accounting policies. All intersegment sales prices are market based. Corporate overhead costs are allocated to each of its operating segments based on overall sales. The Company evaluates the performance of its segments based on operating earnings before taxes of the respective business units. F-19 Western Beef, Inc. and Subsidiaries Notes to Consolidated Financial Statements - -------------------------------------------------------------------------------- The tables below present information about reported segments for fiscal years 1998, 1997 and 1996 (in thousands): 1998 Retail Wholesale Totals ---------- ---------- ---------- Net sales $243,812 $ 55,178 $298,990 Intersegment sales -- 55,546 55,546 Interest expense 838 147 985 Interest income 227 68 295 Net interest expense 611 79 690 Depreciation and amortization 4,038 132 4,170 Income from operations 4,310 239 4,549 Other significant non cash items: Bad debt expense -- 352 352 Identifiable assets 72,642 13,715 86,357 Capital expenditures 11,359 298 11,657 1997 Retail Wholesale Totals ---------- ---------- ---------- Net sales $ 232,400 $ 84,679 $ 317,079 Intersegment sales -- 53,931 53,931 Interest expense 923 148 1,071 Interest income 75 31 106 Net interest expense 848 117 965 Depreciation and amortization 4,034 138 4,172 Income from operations 4,727 5 4,732 Other significant non cash items: Bad debt expense -- 955 955 Identifiable assets 63,738 12,516 76,254 Capital expenditures 7,085 237 7,322 1996 Retail Wholesale Totals ---------- ---------- ---------- Net sales $ 239,711 $ 101,162 $ 340,873 Intersegment sales -- 60,775 60,775 Interest expense 909 162 1,071 Interest income 125 39 164 Net interest expense 784 123 907 Depreciation and amortization 3,214 181 3,395 Income from operations 8,793 924 9,717 Other significant non cash items: Bad debt expense -- 611 611 Identifiable assets 60,475 14,024 74,499 Capital expenditures 12,933 188 13,121 F-20 Western Beef, Inc. and Subsidiaries Notes to Consolidated Financial Statements - -------------------------------------------------------------------------------- 11. Quarterly Information (Unaudited) The summarized quarterly financial data presented below (in thousands except per share amounts) reflects all adjustments which, in the opinion of management, are of a normal and recurring nature necessary to present fairly the results of operations for the periods presented.
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Fiscal year ended January 1, 1999 Sales $ 70,061 $ 76,193 $ 75,031 $ 77,705 Gross profit 19,005 20,323 20,320 20,477 Net income 948 858 821 725 Net income per share of common stock - basic .17 .16 .15 .13 ============================================== Fiscal year ended January 2, 1998 Sales $ 72,795 $ 81,881 $ 86,372 $ 76,031 Gross profit 18,142 19,939 21,605 19,585 Net income 813 779 867 744 Net income per share of common stock - basic .15 .14 .16 .14 ============================================== Fiscal year ended January 3, 1997 Sales $ 79,349 $ 84,180 $ 85,167 $ 92,177 Gross profit 19,589 20,014 20,680 22,188 Net income 1,262 1,520 1,522 1,685 Net income per share of common stock - basic .23 .28 .28 .31 ==============================================
F-21 REPORT OF INDEPENDENT ACCOUNTANTS ON CONSOLIDATED FINANCIAL STATEMENT SCHEDULE To the Board of Directors and Stockholders of Western Beef, Inc. Our audit of the consolidated financial statements referred to in our report dated March 5, 1999 appearing on page F-1 of this 1998 Annual Report on Form 10-K also included an audit of the financial statement schedule listed on page F-23 of this Form 10-K. In our opinion, this financial statement schedule presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statement. /s/ PricewaterhouseCoopers LLP PricewaterhouseCoopers LLP New York, New York March 5, 1999 F-22 Western Beef, Inc. and Subsidiaries Schedule II - Valuation and Qualifying Accounts (In Thousands) - --------------------------------------------------------------------------------
Additions -------------------------- Balance at Charged to Balance at Beginning of Cost and Charge to End of Year Expenses Other Accounts Deductions Year Year ended January 1, 1999: Allowance for doubtful accounts $ 552 $ 352 $-- $(382) $ 522 Year ended January 2, 1998: Allowance for doubtful accounts $ 386 $ 955 $-- $(789) $ 552 Year ended January 3, 1997: Allowance for doubtful accounts $ 326 $ 611 $-- $(551) $ 386
F-23 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. NONE PART III All items under this section are incorporated by reference to the Company's proxy statement that will be filed no later than 120 days after January 1, 1999. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8K The following documents are being filed as a part of this report: (a) 1. Financial Statements 2. Financial Statement Schedule All other schedules are omitted since the required information is either not required or not present. 3. Exhibits 3.1 Certificate of Incorporation of the Company, as amended (1) 3.2 Certificate of Amendment to the Certificate of Incorporation of the Company, dated January 13, 1993 (3) 3.3 By-Laws of the Company (2) 10.1 Agreement of Combination (2) 10.2 Agreement of Merger (1) 10.3 Certificate of Merger (1) 10.4 Master Lease Agreement dated December 29, 1997 between the Company and General Electric Capital Corporation (4) 10.5 $3,000,000 Line of Credit Agreement expiring June 30, 1999 between the Company and North Fork Bank in the form of a Promissory Note dated July 29, 1998 from the Company to North Fork Bank (5) 10.6 Lease Agreement dated November 1, 1991 between P.M.C. Supermarket, Inc. d/b/a Western Beef Forest Avenue Inc. and Forest Associates, an affiliate of the Principal Stockholders for the rental of the Company's Forest Avenue store. (4) 10.7 Store Lease dated February 6, 1990 between the Company and 130-35 Merrick Boulevard Associates, L.P., an affiliate of the Principal Stockholders, for the rental of the Company's Merrick Boulevard Store. (4) -19- 10.8 Parking Lot Lease dated February 6, 1990 between the Company and CM Boulevard Associates, L.P., an affiliate of the Principal Stockholders, for the rental of the parking lot at the Company's Merrick Boulevard Store. (4) 10.9 Agreement of Lease dated July 6, 1989 between Quarex, Inc. and Elmont Q. Properties, an affiliate of the Principal Stockholders, for the rental of the Company's Elmont Store. (4) 10.10 Lease Agreement dated November 1, 1992 between Western Beef - 173rd Street Inc. and Peter Castellana, Jr. and Marie Castellana for the rental of the Company's 173rd Street Store. (4) 10.11 Lease Agreement dated March 1, 1990 between Western Beef East New York Inc. and Elmont Q. Properties, Inc., an affiliate of the Principal Stockholders, for the rental of the Company's East New York Store. (4) 10.12 Store Lease dated January 30, 1997 between the Company and ANT Realty Corp., an affiliate of the Principal Stockholders, for the lease of the Company's Rockaway Boulevard Store. (4) 10.13 Lease Agreement dated January 23, 1992 between Quarex Inc. and 61 2nd Street Associates, an affiliate of the Principal Stockholders for the lease of the Company's Mineola Store. (4) 10.14 Agreement dated September 18, 1995 between the Company and Amplicon Financial Corp. (4) 10.15 Assignment dated March 19, 1996 between Western Beef-Steinway Street, Inc. and Metlife Capital Financial Corporation (4) 10.16 Amended and Restated Mortgage dated March 19, 1996 between Western Beef - Steinway Street, Inc. and Metlife Capital Financial Corporation (4) 10.17 Amended and Restated Promissory Noted dated March 19, 1996 between Western Beef-Steinway Street, Inc. and Metlife Capital Financial Corporation (4) 10.18 Indenture dated September 17, 1993 between Ranbar Packing, Inc. and Astoria Federal Savings and Loan Association (4) 10.19 Note dated September 17, 1993 between Ranbar Packing, Inc. and Astoria Federal Savings and Loan Association (4) 10.20 Contract of Sale dated June 29, 1993 between Ranbar Packing, Inc. and Astoria Federal Savings and Loan Association (4) 10.21 Mortgage agreement dated December 2, 1998 between Western Beef Properties, Inc. and North Fork Bank pertaining to the purchase of the Prospect Avenue, Bronx, New York real estate.(5) 10.22 Bargain and sale deed dated May 5, 1998 from Hyson Joint Venture to Western Beef Retail, Inc. for the sale of the land and a building currently occupied by the Company's Empire Boulevard store.(5) -20- 10.23 Contract of Sale - Office, Commercial and multi-Family Residential Premises dated July _______, 1998 between Western Beef Properties, Inc. and LOJO Realty, Inc. for the purchase of vacant land on Wyckoff Avenue, Queens, New York by Western Beef Properties, Inc. for $250,000.(5) 10.24 Mortgage agreement dated January 29, 1999 between Western Beef Properties, Inc. and LOJO Realty, Inc. pertaining to the purchase of the Wyckoff Avenue, Queens, New York property.(5) 10.25 Mortgage Note dated December 17, 1998 between Western Beef Properties, Inc. and North Fork Bank pertaining to the purchase of vacant land on Frederick Douglas Boulevard, Manhattan, New York.(5) 10.26 Indenture agreement dated December 17, 1998 between the City of New York and Western Beef Properties, Inc. for the purchase of vacant land on Frederick Douglas Boulevard, Manhattan, New York.(5) 10.27 Acquisition agreement dated September 18, 1999 between Western Beef, Inc. and Michael Alagna for the purchase of all outstanding capital stock of 814 Jamaica Avenue, the owner of a parcel of real estate of Jamaica Avenue, Brooklyn, New York.(5) 10.28 Amendment to lease (Exhibit 20.13) between 61 2nd Street Associates and Western Beef Mineola, Inc. dated February 1, 1997.(5) 10.29 Certificate of Merger dated January 29, 1998 of Western Beef - 14th Street, Inc. et al into Western Beef Metropolitan Avenue, Inc.(5) 10.30 Certificate of Merger dated June 30, 1998 of Western Beef Retail, Inc. into Western Beef Administration, Inc.(5) 10.31 Certificate of Merger dated June 30, 1998 of Western Beef Produce - Metropolitan Avenue, Inc. and W. B. Packing, Inc. into Western Beef Supermarket, Inc.(5) 21 Subsidiaries (5) 23.1 Consent of PricewaterhouseCoopers LLP (5) 23.2 Consent of BDO Seidman, LLP (5) 27 Financial Data Schedule (5) - -------------------------------------------------------------------------------- (1) Incorporated by reference to the Form 8-K Current Report filed November 13, 1992 (the "8-K") (2) Incorporated by reference to Form S-4 File No. 33-44494. (3) Filed with the Annual Report on Form 10-K for the fiscal year 1992. (4) Filed with the Annual Report on Form 10-K for the fiscal year 1997. (5) Filed herewith. -21- Reports on Form 8K (b) The registrant filed a report on Form 8-K in November 1998 pertaining to the receipt of an unsolicited proposal from Cactus Acquisition, Inc. ("Cactus") to acquire all of the outstanding capital stock of the Company not currently owned by Cactus and its affiliates for a price of $7.50 per share in cash. (c) See Item 14(a)3, above (d) Not applicable -22- SIGNATURES Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. WESTERN BEEF, INC. By: /s/Peter Castellana, Jr., ------------------------------ Peter Castellana, Jr., President, Date: March 26, 1999 SIGNATURE TITLE DATE - --------- ----- ---- /s/ Peter Castellana, Jr. - ------------------------- President, Chief Executive Officer March 26, 1999 Peter Castellana, Jr. and Director /s/ Chris Darrow - ------------------------- Chief Financial Officer March 26, 1999 Chris Darrow /s/ Joseph Castellana - ------------------------- Director March 26, 1999 Joseph Castellana /s/ Stephen R. Bokser - ------------------------- Director March 26, 1999 Stephen R. Bokser /s/ Arnold B. Becker - ------------------------- Director March 26, 1999 Arnold B. Becker -23- EX-10.21 2 MORTGAGE THIS MORTGAGE, made the 2nd day of December, 1998, BETWEEN WESTERN BEEF PROPERTIES, INC., a New York corporation with a principal office and place of business at 47-05 Metropolitan Avenue, Ridgewood, New York 11383 (hereinafter called the "Owner"), the mortgagor, and NORTH FORK BANK, a New York banking corporation having an office at 275 Broad Hollow Road, Melville, New York 11747 (hereinafter called the "Mortgagee"), the mortgagee WITNESSETH That to secure the payment of an indebtedness in the sum of ONE MILLION SEVEN HUNDRED THOUSAND ($1,700,000.00) DOLLARS lawful money of the United States, together with interest thereon (the "Indebtedness") as evidenced by a note of even date (the "Note"), the Owner hereby mortgages to the Mortgagee the entire premises hereinafter described, which premises are located at 1030 Union Avenue, Bronx, New York (Block 2679, Lot 1), a/k/a 1041 Prospect Avenue, Bronx, New York, a/k/a 815-23 E. 165th Street, Bronx, New York, 1057-59 Prospect Avenue, Bronx, New York (Block 2679 Lot 34), 1053-1055 Prospect Avenue, Bronx, New York (Block 2679, Lot 34), East 165th Street, Bronx, New York (Block 2679, Lot 57) and 1020 Union Avenue, Bronx, New York (Block 2679, Lot 63), (hereinafter referred to as the "Premises"), and being more particularly described in Exhibit A annexed hereto and made a part hereof. TOGETHER with all right, title and interest of the Owner in and to the land lying in the streets and roads in front of and adjoining said premises. TOGETHER with all fixtures, chattels and articles of personal property now or hereafter permanently attached to or used in connection with said premises, including but not limited to furnaces, boilers, oil burners, radiators and piping, coal stokers, plumbing and bathroom fixtures, refrigeration, air conditioning and sprinkler systems, wash-tubs, sinks, gas and electric fixtures, stoves, ranges, awnings, screens, window shades, elevators, motors, dynamos, refrigerators, kitchen cabinets, incinerators, plants and shrubbery, and all other equipment and machinery, appliances, fittings, and fixtures of every kind in or used in the operation of the buildings standing on said premises, together with any and all replacements thereof and additions thereto; TOGETHER with all awards heretofore and hereafter made to the Owner for taking by eminent domain the whole or any part of said premises or any easement therein, including any awards for changes of grade of streets, which said awards are hereby assigned to the Mortgagee, who is hereby authorized to collect and receive the proceeds of such awards and to give proper receipts and acquittances therefor, and to apply the same toward the payment of the mortgage debt, notwithstanding the fact that the amount owing thereon may not then be due and payable; and the said Owner hereby agrees, upon request, to make, execute and deliver any and all assignments and other instruments sufficient for the purpose of assigning said awards to the Mortgagee, free, clear and discharged of any encumbrances of any kind or nature whatsoever. The Mortgage is and shall be and remain a valid first lien against the Premises, and is and shall be and remain also a lien on, and is hereby spread to cover the entire Premises and all buildings, improvements, fixtures and articles of personal property now or hereafter permanently affixed to, placed upon or used in connection with the operation of the Premises and the proceeds thereof, all of which are covered by the Mortgage, which Mortgage shall also constitute a security agreement. This provision shall be self-operative, but the Owner will execute and deliver to the Mortgagee on demand, and hereby irrevocably appoints the Mortgagee the attorney-in-fact of the Owner to execute, deliver and file such financing statements and other instruments as the Mortgagee may require in order to impose the lien of the Mortgage upon said fixtures and personal property. If the lien of the Mortgage on any fixtures or personal property is subject to a security interest covering such fixtures or personal property, then in the event of any default under the Mortgage, all the right, title and interest to the Owner in and to any and all deposits are hereby assigned to the Mortgagee, together with the benefit of any payments now or hereafter made thereon. The Mortgage is and shall be and remain also a valid first lien on, and is hereby spread to cover all proceeds of the conversion, voluntary or involuntary, of the Premises or any part thereof into cash or liquidated claims, including, without limitation, proceeds of casualty insurance, title insurance or any other insurance maintained on the Premises and the Building Equipment (as herein defined), and to all awards and/or other compensation ("Awards") heretofore and hereafter made to the Owners of the Premises and Building Equipment by any governmental or other lawful authorities for the taking, by eminent domain, condemnation or otherwise, of all or any part of the Premises and Building Equipment or any easement or other rights therein, including Awards for any change of grade of streets. The Mortgage is and shall be and remain also a valid first lien on, and is hereby spread to cover (i) all rents, issues and profits, revenues, income and other benefits due or to become due to the Owner for the use, operation or occupancy of the Premises, (ii) any amounts refunded or to be refunded by taxing authorities from amounts paid for real estate taxes, water and sewer rents and charges affecting the Premises, and (iii) any amounts refunded or to be refunded by any insurer from amounts paid for insurance premiums for insurance affecting the Premises. AND the Owner further covenants with the Mortgagee as follows: 1. That the Owner will punctually pay the Indebtedness as hereinbefore provided, all in legal tender of the United States of America for the payment of public or private debt. 2. (a) That the Owner shall keep the buildings on the mortgaged premises and all fixtures, chattels and articles of personal property now or hereafter attached to or used in connection with the mortgaged premises, including, without limitation, furnaces, boilers, oil burners, radiators and piping, coal stokers, plumbing and bathroom fixtures, refrigeration, air conditioning and sprinkler systems, dishwashers, wash-tubs, sinks, gas and electric fixtures, stoves, ranges, awnings, screens, window shades, elevators, motors, dynamos, refrigerators, kitchen cabinets, incinerators, computers, security equipment, plants and shrubbery, and all other equipment and machinery, appliances, fittings and fixtures of every kind in or used in the operation of the buildings standing on the mortgaged premises, and any and all replacements thereof and additions thereto (collectively, the "Building Equipment"), insured for the benefit of the Mortgagee (i) against loss by fire; and other hazards covered by an all-risk coverage insurance 2 policy for the full insurable value thereof (which, unless the Mortgagee shall otherwise agree in writing, shall mean the full repair and replacement value thereof without reduction for depreciation or co-insurance, but in no event less than the outstanding amount of the indebtedness) with deductible from the loss payable for any casualty in amounts approved by Mortgagee, in its sole discretion; all policies of insurance carried in accordance with this subparagraph shall contain a "Replacement Cost Endorsement" satisfactory to Mortgagee; (ii) Boiler and machinery insurance covering pressure vessels, air tanks, boilers, machinery, pressure piping, heating, air-conditioning and elevator equipment and escalator equipment, provided the Premises contains equipment of such nature; (iii) against war risks as, when and to the extent such insurance is obtainable from the United States of America or an agency thereof; (iv) against loss of rentals due to any of the foregoing causes; (v) against loss by flood if the Premises or any part thereof are located in an area now or hereafter identified by the Secretary of Housing and Urban Development or other identifying agencies as an area having special flood hazards and in which flood insurance has been made available under the National Flood Insurance Act of 1968, as amended or replaced; and (vi) when and to the extent required by the Mortgagee, against any other risk insured against by persons or parties operating like properties in the locality of the Premises; that the Owner will reimburse the Mortgagee for any premiums paid for insurance made by the Mortgagee on the Owner's default in taking out such insurance, or in so assigning and delivering the policies, together with interest thereon at the rate per annum specified in Paragraph 4 hereof, and the same (with interest thereon) shall be added to the indebtedness secured by the Mortgage; (b) that such insurance shall be provided by policies written in terms and amounts, and by companies satisfactory to the Mortgagee, and losses thereunder shall be payable to the Mortgagee pursuant to a New York standard mortgagee endorsement; (c) that regardless of the types or amounts of insurance required and approved by the Mortgagee, the Owner will assign and deliver to the Mortgagee all policies of insurance acquired by the Owner to insure against any loss or damage to the Premises or any part thereof, or evidence of coverage under a blanket policy which shall be satisfactory to the Mortgagee as additional security for the indebtedness; (d) that, notwithstanding the provisions of Subdivision 4 of Section 254 of the New York Real Property Law, the Mortgagee shall be entitled to retain and apply the proceeds of any insurance, whether against fire or other hazard, to the payment of the indebtedness secured hereby, or, if the Mortgagee in its sole discretion shall so elect, the Mortgagee may, on terms it deems appropriate, hold any or all of such proceeds for application to payment of the cost of restoration; (e) that not less than thirty (30) days prior to the expiration date of each policy furnished by the Owner pursuant to this Article, the Owner will deliver to the Mortgagee a renewal policy or policies marked "premium paid" or accompanied by other evidence of payment satisfactory to the Mortgagee; and (f) that in the event of a foreclosure of the Mortgage, the purchaser of the Premises or any part hereof shall succeed to all the rights of the Owner, including any rights to the proceeds of insurance and to unearned premiums, in and to all policies of insurance assigned and delivered (or required to be 3 assigned and delivered) to the Mortgagee pursuant to this Article. (g) all insurance policies and endorsements required hereunder shall be fully paid for and contain such provisions and expiration dates and be in such form and issued by insurance companies satisfactory to Mortgagee and licensed to do business in the State of New York. Each policy shall provide that such policy may not be cancelled or materially changed except upon thirty (30) days' prior written notice to the Mortgagee of the intention of non-renewal, cancellation or material change and that no act or thing done by the Owner shall invalidate the policy as against the Mortgagee. All policies of insurance required by the terms of this Mortgage shall contain an endorsement or agreement by the insurer that any loss shall be payable in accordance with the terms of such policy notwithstanding any act of negligence of Owner which might otherwise result in forfeiture of said insurance and the further agreement of the insurer waiving all rights of set off, counterclaim, recoupment, deduction or subrogation against Owner. (h) in the event of damage or destruction to the Premises or the Building Equipment, whether insured or uninsured, the Owners shall give prompt written notice thereof to the Mortgagee and shall promptly commence and diligently continue to perform repair, restoration and rebuilding of the portion of the Premises and Building Equipment so damaged or destroyed (hereinafter referred to as the "work") to restore the Premises and the Building Equipment in full compliance with all Legal Requirements and so that the Premises and the Building Equipment shall be at least equal in value and general utility as they were prior to the damage or destruction. (i) the Owner immediately shall deliver to the Mortgagee any proceeds of insurance paid on account of any damage or destruction to the Premises ("Proceeds") which are paid directly to the Owner by the casualty insurance carrier with respect to any damage or destruction to the Premises or the Building Equipment, or any part thereof. All Proceeds paid directly to the Owner and delivered to the Mortgagee as aforesaid, together with all Proceeds paid directly to the Mortgagee on account of damage or destruction to the Premises, shall in the Mortgagee's sole discretion be applied by Mortgagee (i) to the payment of the Indebtedness, notwithstanding the fact that the Indebtedness may not then be due and payable, or (ii) upon written request of Owner to the payment of the cost of the work referred to in subparagraph (h) above. All proceeds which are applied, in the Mortgagee's discretion, to the payment of the Indebtedness shall be applied as follows: first, to the payment of delinquency or "late" charges, if any; secondly, to accrued and unpaid interest on the Indebtedness; and thirdly, to the reduction of the principal sum of the Indebtedness; provided, however, that such application to the payment of the Indebtedness shall not release the Owner from, or otherwise affect, the Owner's obligations hereunder to repair and restore the Premises and Building Equipment. It is intended that, anything contained in Subdivision 4 of Section 254 of the New York Real Property Law to the contrary notwithstanding, no trust shall be created by the receipt by the Mortgagee of any proceeds of insurance, but only a debtor-creditor relationship between the Mortgagee and to Owner for an amount equal to but not in excess of such proceeds which the Mortgagee shall be entitled to dispose of as herein provided, nor shall there be any obligations on the Mortgagee to pay any interest thereon. (j) any claims under any policy of insurance provided hereunder shall be settled or adjusted jointly by the 4 Owner and the Mortgagee; provided, however, in the event that the Owner and the Mortgagee fail to agree, the decision of the Mortgagee shall govern. 3. That no building or other property now or hereafter covered by the lien of the Mortgage shall be removed, demolished or materially altered without the prior written consent of the Mortgagee, except that Owner shall have the right, without such consent, to remove and dispose of, free from the lien of the Mortgage, such Building Equipment as from time to time may become worn out or obsolete, provided that either (a) simultaneously with or prior to such removal, any such equipment shall be replaced with other equipment of a value at least equal to that of the replaced equipment and free from any security agreement, and by such removal and replacement the Owner shall be deemed to have subjected such Building Equipment to the lien of the Mortgage, or (b) any net cash proceeds received from such disposition shall be paid over promptly to the Mortgagee to be applied to the last installments due on the Indebtedness secured by the Mortgage, without any charge for prepayment. 4. That in the event of any default in the performance of any of the Owner's covenants or agreements herein, the Mortgagee may after giving the notice provided for herein, at the option of the Mortgagee, perform the same and the cost thereof, with interest at a rate equal to five (5%) percent per annum above the then current rate payable under this Note and Mortgage, but in no event in excess of the maximum rate allowed to be charged by law (the "Delinquency Rate"), shall immediately be due from the Owner to the Mortgagee and shall be secured by he Mortgage. Upon a default under the Mortgage or if the principal sum secured by the Mortgage shall not be paid at its maturity, or on its acceleration pursuant to Article 20 or any other provision hereof, interest thereon shall thereafter be computed and paid at the said rate per annum specified in this Article 4. If, after the principal sum secured by the Mortgage becomes immediately due and payable by reason of a default by the Owner under the Note or the Mortgage, or the terms hereof, the Owner, prior to the foreclosure and sale of the Premises, tenders payment of the amount necessary to satisfy the principal amount then owing and all accrued interest and other sums then due under the Note, the Mortgage, and the terms hereof such tender shall constitute an evasion of the prepayment terms under the Note and shall be deemed a voluntary prepayment under the Note, and to the extent permitted by applicable law, the Owner shall pay to the Mortgagee, together with such payment of principal, interest and other sums then due under the Note, a prepayment charge as provided for in the Note, if any. 5. That the Owner will, except to the extent same are covered by amounts actually paid to the Mortgagee pursuant to Article 36 hereof, pay, prior to the imposition of late penalties, late charges or interest for failure to timely pay same, all taxes, assessments, water rents, sewer rents and other governmental impositions or charges or any kind or nature now or hereafter levied against the Premises, any part thereof, or any articles of personal property covered by the Mortgage, and also (without limitation) any and all license fees or similar charges which may at any time be imposed by the municipality in which the Premises are situated for the use of vaults, chutes, areas and other space beyond the lot line and on or abutting the public sidewalks in front of or adjoining the Premises (together with any and all penalties or interest on any of the foregoing), and in default thereof the Mortgagee may pay the same and the Owner will repay the same with interest thereon at the rate per annum specified in Article 4 hereof, and the same shall be added to the indebtedness secured hereby and be secured by the Mortgage; that 5 upon request of the Mortgagee, the Owner will, upon notice and demand, exhibit to the Mortgagee receipts for the payment of all items specified in this Article prior to the date when the same shall become delinquent. 6. That the Mortgagee, in any action to foreclose the Mortgage, shall be entitled (without notice of any kind to the Owner, without regard to the adequacy of any security for the debt, and without regard to the solvency of any person, firm or corporation liable for the payment thereof) to the appointment of a receiver of the rents and profits of the Premises. 7. That the Owner, within three (3) days upon request in person or within ten (10) days upon request by mail, will furnish written statement duly acknowledged setting forth the entire unpaid principal amount secured by the Mortgage, the rate of interest and maturity date hereof, and stating either that no offsets or defenses exist against the mortgage debt, or if such offsets or defenses are alleged to exist, the amount and the nature thereof. 8. That notice and demand or request may be made in writing and may be served in person or by mail. 9. That the Owner: (a) warrants title to the Premises and the Building Equipment; (b) shall execute and deliver, from time to time, such further instruments (including further security agreements) as may be requested by the Mortgagee to confirm the lien of the Mortgage on any Building Equipment or otherwise; (c) upon request, shall make, execute, acknowledge, and deliver any and all instruments sufficient for the purpose of confirming the assignment to the Mortgagee of awards for the taking by eminent domain of the whole or any part of the Premises or any easement therein, including any awards for changes of grade of streets, free, clear and discharged of any encumbrances of any kind or nature whatsoever; (d) shall not, without the prior written consent of the Mortgagee, further encumber the Premises for debt or otherwise; (e) shall not, without the prior written consent of the Mortgagee, lease all or substantially all of the Premises or sell, assign, convey or otherwise transfer, directly or indirectly, the Premises or any part thereof or any interest therein, except as may herein otherwise be expressly provided; (f) if the Owner is a corporation, the Owner shall not, nor shall the present holders of a majority of the voting stock thereof shall, without the prior written consent of the Mortgagee, sell, assign, transfer, pledge, hypotheccate or otherwise transfer the Owner's or such stockholders voting stock as security for debt or otherwise; and (g) if the Owner is a partnership, joint venture, syndicate or other group (collectively, the "partnership"), the Owner shall not, nor shall the present holders of a majority of the record or beneficial interest thereof, without the prior written consent of the Mortgagee, sell, assign, transfer, pledge, hypothecate or otherwise transfer the Owner's or any partner's, individual's or entity's interest therein as security for debt or otherwise. North Fork Bank consents to the placement of a second mortgage on the herein described premises in an amount yet to be determined but satisfactory to North Fork Bank and its counsel and in a form satisfactory to North Fork Bank and its counsel. If the Mortgagee and/or its counsel consent to the Owner's making and delivering a subordinate mortgage covering all or any part of the Premises (including a purchase money mortgage), among other requirements that the Mortgagee may impose, any such subordinate mortgage covering the Premises executed and delivered subsequent to the execution and delivery of this Mortgage shall contain express covenants to the effect that (i) such Mortgage is and shall remain in all respects subject and subordinate to the 6 Mortgage and to any modifications, consolidations, extensions or renewals thereof, (ii) no tenant under any lease of any portion of the Premises will be made a party defendant in any foreclosure of such Subordinate Mortgage, nor will any other action be taken in connection with such foreclosure which would have the effect of terminating any such lease, (iii) no portion of the rents, issues and profits of the Premises shall be collected in connection with the foreclosure of such Subordinate Mortgage except through a receiver appointed by the court in which such foreclosure action is brought, after due notice of the application of the appointment of such receiver shall have been given to the Mortgagee, (iv) the rents, issues and profits collected by any such receiver shall be applied first to the payment of taxes, maintenance and operating charges and disbursements incurred in connection with the operation and maintenance of the Premises and next to the payment of principal and interest due under the Mortgage at the time of such application, before any portion of such rents, issues and profits shall be applied to such Subordinate Mortgage, (v) if during the pendency of any such foreclosure action, an action shall be brought for the foreclosure of the Mortgage and an application shall be made for an extension of such receivership for the benefit of the Mortgagee, all such rents, issues and profits held by such receiver as of the date of such application shall be applied by the receiver solely for the benefit of the Mortgagee, and the holder of such Subordinate Mortgage shall not be entitled to any portion thereof, and (vi) due notice of the commencement of any foreclosure of such Subordinate Mortgage shall be given to the Mortgagee and true copies of all papers served or entered in such action will be delivered to the Mortgagee. 10. That in case of a foreclosure sale, the Premises, or so much thereof as may be affected by the Mortgage, may be sold in one parcel (or otherwise, as the Mortgagee shall, from time to time, determine). 11. That if any action or proceeding be commenced (including, without limitation, an action to foreclose the Mortgage or to collect the indebtedness secured hereby), in which the Mortgagee becomes a party or participates, by reason of being the holder of the Mortgage or the debt secured hereby, all sums paid or incurred by the Mortgagee for the expense of so becoming a party or participating (including reasonable counsel fees) shall on notice and demand be paid by the Owner, together with interest thereon at the rate per annum specified in Article 4 hereof, and shall be a lien on the Premises, prior to any right or title to, interest in, or claim upon, the Premises subordinate to the lien of the Mortgage, and shall be secured by the Mortgage; and that in any action or proceeding to foreclose the Mortgage, or to recover or collect the debt secured hereby, the provisions of law respecting the recovery of costs, disbursements and allowances shall apply in addition to the foregoing. Owner waives any and all right to claim or recover against Mortgagee, its officers, employees, agents and representatives, for loss of or damage to Owner, the Premises, Owner's property or the property of others under Owner's control from any cause whatsoever, except for the willful misconduct or gross negligence of Mortgagee, its officers, employees, agents or representatives. 12. That the Owner will maintain the Premises and the Building Equipment in good condition and repair, will not commit, permit or suffer any waste thereof or the conduct of any nuisance or unlawful occupation or business on, or use of, the Premises or any part thereof; will not, directly or indirectly, without the prior written consent of the Mortgagee, threaten, commit, permit or suffer to occur any alteration, demolition or removal of the Premises; that the Owner will promptly repair, 7 restore, replace or rebuild any part of the Premises or the Building Equipment now or hereafter subject to the lien of the Mortgage which may be damaged or destroyed by any casualty whatsoever (and whether or not covered by insurance) or which may be affected by any proceeding of the character referred to in Paragraph 13; that Owner will comply with Legal Requirements affecting Owner or the Premises and to cause the tenants under the leases to comply with all Legal Requirements affecting the Premises, whether the same be directed to the erection, repair, manner of use or structural alteration of buildings or otherwise; and that the Owner will not initiate, join in, execute or consent to the creation of or any change in any private restrictive covenant, zoning ordinance, or right created thereunder, or other public or private restrictions, limiting or defining the uses which may be made of the Premises or any part thereof without the prior written consent of the Mortgagee. 13. (a) The Owner, immediately upon obtaining knowledge of the institution of any proceedings for the condemnation of the Premises or any portion thereof, shall notify the Mortgagee of the pendency of such proceedings. The Mortgagee, at its election and in its discretion, may participate in any such proceedings and the Owner, from time to time, shall deliver to the Mortgagee all instruments requested by it to permit such participation. All awards or other taking or purchase in lieu thereof, of the Premises or any portion thereof (the "Awards"), shall be paid in accordance with the provisions of this Paragraph 13. All awards or other taking or purchase in lieu thereof, of the Premises or any part thereof, are hereby assigned to and shall be paid to the Mortgagee. The Owner, upon the request by the Mortgagee, shall make, execute and deliver any and all instruments requested for the purposes of confirming the assignment of the aforesaid awards and compensation to the Mortgagee free and clear of any liens, charges or encumbrances of any kind or nature whatsoever. The Owner hereby authorizes the Mortgagee to collect and receive such Awards, to give the proper receipts and acquittances therefor and, in the Mortgagee's discretion, to apply the same as hereinafter provided. (b) That notwithstanding any taking by eminent domain or other governmental action causing injury to, or decrease in value of, the Premises or any part thereof and/or creating a right to compensation therefor, including, without limitation, the change of the grade of any street, the Owner shall continue to pay interest, computed at the rate per annum hereinabove provided, on the entire unpaid principal amount secured by the Mortgage, until the award or compensation for such taking or other action shall have been actually received by the Mortgagee and such award or compensation need not be applied by the Mortgagee in reduction of principal but may be applied in such proportions and priority as the Mortgagee, in the Mortgagee's sole discretion, may elect, to the payment of principal, interest or other sums secured by the Mortgage and/or to payment to the Owner, on such terms as the Mortgagee may in its sole discretion specify, for the sole purpose of altering, restoring or rebuilding any part of the Premises which may have been altered, damaged or destroyed as a result of any such taking or other action; that if, prior to the receipt by the Mortgagee of such award or compensation, the Premises or any part thereof shall have been sold on foreclosure of the Mortgage, the Mortgagee shall have the right to receive said award or compensation to the extent of any deficiency found to be due upon such sale, with interest thereon as specified in Paragraph 4, whether or not a deficiency judgment on the Mortgage shall have been sought or recovered or denied, together with counsel fees and any and all other costs and disbursements incurred by the 8 Mortgagee in connection with the collection of such award or compensation. (c) In the event that a portion of the Premises is taken or condemned so that there is less than a complete taking, then, the Owner promptly shall commence and diligently continue to repair, restore, replace or rebuild the Premises in accordance with the provisions of Paragraph 2 hereof, as if such taking or condemnation had resulted in "damage or destruction to the Premises" (within the meaning of said Paragraph 2), substantially to its condition immediately prior to such taking or condemnation or, if the foregoing is not possible, as to constitute the same a distinct and functional architectural unit. 14. That the Mortgagee and any persons authorized by the Mortgagee shall have the right to enter and inspect the Premises or any part thereof at all reasonable times during business hours and upon reasonable notice (which may be by telephone) except that any inspection required in connection with any emergency shall not require notice and may be conducted at any time. If, at any time after a default the management or maintenance of the Premises or any part thereof shall be determined by the Mortgagee to be unsatisfactory, the Owner shall employ, for the duration of such default, as managing agent of the Premises, such person or firm as from time to time shall be approved by the Mortgagee. 15. The Owner shall keep adequate records and books of account identifying income received and expenses paid and shall permit the Mortgagee, by its agents, accountants and attorneys, to visit and inspect the Premises and examine its records and books of account and to discuss its affairs, finances and accounts with the officers of the Owner at such reasonable times during business hours and on such reasonable notice as ma y be requested by Mortgagee. That the Owner shall furnish to the Mortgagee: within ninety (90) days after the end of each calendar year, a statement of the income and expense of the Premises for such year prepared on an accrual basis in accordance with generally accepted accounting principles, consistently applied, and such other statements pertaining to the operation of the Premises as may reasonably be requested by the Mortgagee, all certified by independent certified public accountants satisfactory to the Mortgagee, such interim financial or other information with respect to the operation of the Premises as the Mortgagee may reasonably request; and annually and otherwise within ten (10) days after written request, a then current rent roll showing the names of tenants, space occupied by each tenant, rent and other charges payable by each tenant (gross and per square foot in the case of commercial tenants), lease security, if any, and lease or occupancy expiration dates, options for renewal, rental during renewal terms, cancellation provisions and other relevant information. If the Owner shall have leased all or substantially all of the Premises to another lessee, such statements shall cover the earnings and expenses in the latest fiscal year of the lessee under such lease. In the case of such a lease, if the lessee shall be an affiliate of the owner, the Owner will also furnish to the Mortgagee the lessee's balance sheet as of such fiscal year, all in reasonable detail and stating in comparative form the figures as of the end of and for the previous fiscal year, and verified by an authorized financial officer of the lessee. Notwithstanding anything herein or otherwise to the contrary, if a lease of all or substantially all of the Premises is made, whether to an affiliate or otherwise, without the Mortgagee's prior written approval, the Mortgagee can elect to accelerate the entire principal sum plus accrued interest then secured hereunder. If there are any guarantors of 9 the Indebtedness, such guarantors shall furnish the Mortgagee annually, within ninety (90) days of the end of each calendar year, with a balance sheet and a copy of their tax returns as well as any other information concerning such guarantors as may be reasonably requested by the Mortgagee or as is specifically provided for in paragraphs (46), (47), and (48) hereinafter set forth. 16. That the Owner hereby assigns to the Mortgagee, as further security for the payment of the indebtedness secured hereby, the rents, issues and profits of the premises, together with all leases and other documents evidencing such rents, issues and profits now or hereafter in effect and the Owner's interest in any and all deposits held as security under said leases, and shall, upon demand, deliver to the Mortgagee an executed counterpart of each such lease or other document. Nothing contained in the foregoing sentence shall be construed to bind the Mortgagee to the performance of any of the covenants, conditions or provisions contained in any such lease or other document or otherwise to impose any obligation on the Mortgage (including, without limitation, any liability under the covenant of quiet enjoyment contained in any lease in the event that any tenant shall have been joined as a party defendant in any action to foreclose the Mortgage and shall have been barred and foreclosed thereby of all right, title and interest and equity of redemption in the Premises), except that the Mortgagee shall be accountable for money actually received pursuant to such assignment. The Owner hereby further grants to the Mortgagee the right (i) to enter upon and take possession of the Premises for the purpose of collecting the said rents, issues and profits, (ii) to dispossess by summary proceedings or otherwise any tenant defaulting in the payment thereof to the Mortgagee, (iii) to let the Premises, or any part thereof, and (iv) to apply said rents, issues and profits, after payment of all necessary charges and expenses, on account of the indebtedness secured hereby. Such assignment and grant shall continue in effect until the Indebtedness and all other obligations secured by the Mortgage are paid, the execution of this Mortgage constituting and evidencing the irrevocable consent of the Owner to the entry upon and taking possession of the Premises by the Mortgagee pursuant to such grant, whether foreclosure has been instituted or not, and without applying for a receiver. The Mortgagee, however, hereby waives the right to enter upon and take possession of the Premises for the purpose of collecting said rents, issues and profits, and the Owner shall be entitled to collect and receive the same until the occurrence of an Event of Default. The Owner agrees to use said rents, issues and profits in payment of principal and interest due or becoming due on the Mortgage and in payment of taxes, assessments, water rates, sewer rents and carrying charges and/or other expenses becoming due against the Premises. Such rights of the Owner to collect and receive said rents, issues and profits may be revoked by the Mortgagee upon any such default by the Owner by giving not less than five (5) days written notice of such revocation, served personally upon or sent by registered or certified mail to the Owner. The Owner hereby agrees to execute and deliver to the Mortgagee such additional documents as the Mortgagee shall request in order to further evidence the foregoing assignment. 17. That, in the event of any default under the Mortgage, the Owner will pay monthly in advance to the Mortgagee, on its entry into possession pursuant to Paragraph 16 hereof, or to any receiver appointed to collect said rents, issues and profits, the fair and reasonable rental value for the use and occupation of the Premises or of such part thereof as may be in the possession of the Owner (or any party deemed affiliated with the Owner), and upon default in any such payment, will vacate and 10 surrender possession of the Premises or such part thereof, as the case may be, to the Mortgagee or to such receiver and, in default thereof, may be evicted by summary proceedings. 18. (a) That the Owner has no right or power, as against the Mortgagee without its prior written consent, to cancel, abridge or otherwise modify the leases or subleases of or affecting Premises or any part thereof, or any of the terms, provisions or covenants thereof, so as to diminish Mortgagee's security in the Premises, or to accept prepayments of installments of rent to become due thereunder, and shall not do so without such consent. This agreement, insofar as it affects any lease or sublease which is not primarily for the residential purposes of the owner of the leasehold estate and which, at the date hereof, has an unexpired term of not less than five (5) years, is made with reference to Section 291-f of the New York Real Property Law. The Owner shall furnish to the Mortgagee, within thirty (30) days after a request by the Mortgagee, a written statement of the respective leases on any portion of the Premises, the space occupied and the rentals payable thereunder. All leases shall be subordinate to this Mortgage, and the Mortgagee shall not be bound by any payment of rent or additional rent for more than one month in advance, except prepayments in the nature of security for the performance by the Lessee of its obligations under the Lease. In addition, the following requirements shall apply to every non-residential Lease: (i) each Lease shall be executed substantially in the form submitted to and approved by Mortgagee prior to the execution thereof, which approval shall not be unreasonably withheld or delayed, (ii) to the extent not so provided by applicable law, each lease shall provide that in the event of the enforcement by Mortgagee of any of the remedies provided for by law or by this Mortgage, the Lessee thereunder will, on request of any person succeeding to the interest of the Owner as a result of such enforcement, automatically become the lessee of said successor in interest, without any change in the terms or other provision of such Lease, provided, however, that the Mortgagee shall not be bound by any amendment or modification of the Lease made without the consent of the Mortgagee or such successor in interest or the payment of any rent for more than one month in advance. Each Lease shall also provide that, upon request by said successor in interest, such Lessee shall execute and deliver an instrument or instruments confirming such attornment. (b) That the Owner shall not enter into a lease of all or substantially all of the Premises without the express prior consent of the Mortgagee. If the Mortgagee shall consent to any such lease, then (i) such lease shall expressly provide that the leasehold estate created thereby shall be subject and subordinate to the leasehold estates of subtenants created by existing subleases, notwithstanding any clause in any such sublease purporting to subordinate such sublease and the rights of the subtenant thereunder to ground or underlying leases, (ii) such lease shall require that each sublease thereafter made and each renewal of any existing sublease shall provide that, (A) in the event of the termination of the underlying lease, the sublease shall not terminate or be terminable by the subtenant; (B) in the event of any action for the foreclosure of the Mortgage, the sublease shall not terminate or be terminable by the subtenant by reason of the termination of the underlying lease unless a subtenant is specifically named in and joined in any such action and unless a judgment is obtained therein against the subtenant; and (C) in the event that the underlying lease is terminated as aforesaid, the subtenant shall 11 attorn to the lessor under the underlying lease or to the purchaser at the sale of the Premises on such foreclosure, as the case may be, and (iii) the lessee in such lease shall agree, and be authorized by the Owner, to direct and require the subtenants and other occupants of space in the Premises to pay to the Mortgagee on its entry into possession pursuant to Paragraph 16 hereof, or to a receiver appointed to collect the rents, issues and profits of the Premises, the rents payable by them under the terms of their subleases or occupancy agreements upon being notified by the Mortgagee of any default under the Mortgage and of the Mortgagee's entry into possession of the Premises, or of the appointment of any such receiver, with the same force and with like effect as if said lease had not been entered into and the Owner were entitled to receive the said space rents directly. The Owner shall upon ten (10) days prior written notice from Mortgagee furnish to Mortgagee copies of all leases affecting the Premises. 19. That upon notice and demand, the Owner shall, from time to time, execute, acknowledge and deliver or cause to be executed, acknowledged and delivered to the Mortgagee, in form satisfactory to the Mortgagee one or more separate assignments (confirmatory of the general assignment provided in Paragraph 16 hereof) of the lessor's interest in any lease or sublease now or hereafter affecting the whole or any part of the Premises, or one or more agreements pursuant to Section 291-f of the New York Real Property Law, restricting the Owner's right or power, as against the Mortgagee, without its consent, to cancel, abridge or otherwise modify, or accept prepayments of installments of rent to become due under, any lease or sublease hereafter in existence which is of the character described in the second sentence of Paragraph 18(a) hereof. The Owner shall pay to the Mortgagee the expenses incurred by the Mortgagee in connection with the preparation and recording of any such assignment or agreement. With respect to any lease referred to in Paragraph 18 (b) hereof, or which at any time is covered by any such agreement or any such assignment of lessor's interest in such lease, the Owner will (i) fulfill or perform each and every condition and covenant of the same to be fulfilled or performed by the lessor thereunder, (ii) give prompt notice to the Mortgagee of any notices of default by the lessee thereunder received by the Owner, together with a complete copy of any such notice, and (iii) enforce, short of termination thereof, the performance or observance of each and every covenant and condition thereof by the lessee thereunder to be performed or observed. 20. (a) That the whole or said principal sum and interest shall become due, at the option of the Mortgagee, upon the occurrence of any of the following events, unless the same are cured within the applicable grace periods, if any, provided therefor: (i) after default in the payment of any installment of principal or interest for ten (10) days; or (ii) after default in the payment of any tax, water rate, sewer rent, assessment or vault tax or license fee or other charge, levy or imposition against or affecting any part of the Premises prior to the date penalties accrue for failure to pay said charge, it being understood and agreed that an assessment which has been made payable in installments at the application of the Owner or any lessee of the Premises shall, for the purposes of this clause, be deemed due and payable prior to the time of installment becoming a lien on the mortgaged premises; or if the Owner fails to furnish the Mortgagee with receipted tax bills or other reasonable proof of payment of the 12 aforesaid items by no later than the dates on which such items must be paid so as not to constitute a default hereunder; or (iii) after default, after notice and demand, either in assigning and delivering the policies of insurance herein described or referred to, or in reimbursing the Mortgagee for premiums paid on such insurance, as hereinbefore provided; or (iv) upon the actual or threatened waste, removal, demolition or material alternation of any building or other property on the Premises, except as permitted by Paragraph 3; or (v) upon assignment by the Owner of the whole or any part of the rents, issues or profits arising from the Premises to any person or entity without the prior written consent of the Mortgagee or the lease by Owner of all or substantially all of the Premises without the prior written consent of Mortgagee; or (vi) if the buildings on the Premises are not maintained in reasonably good repair; or (vii) after failure to comply with any requirement or order or notice of violation of law or ordinance issued by any governmental department claiming jurisdiction over the Premises within the time period provided in said order, notice or violation or if no such time periods is set forth in same then within two (2) months from the issuance thereof or such longer reasonable time period if Owner promptly commenced and diligently proceeds to cure same; or (viii) the refusal, on application of the Owner or the Mortgagee, by two or more fire insurance companies lawfully doing business in the State of New York to issue policies insuring the buildings on the Premises; or (ix) the passage of any law deducting from the value of real property for the purposes of taxation any lien thereon, or changing in any way the taxation of mortgages or debts secured thereby for State or local purposes, or the manner of collecting such taxes and imposing a tax, either directly or indirectly, on the Mortgage or the debt secured hereby, unless such law shall permit the Owner to pay, and the Owner pays such tax or taxes within the thirty (30) day period following notice to the Owner of such law; or (x) the failure by the Owner to make payment of any other sums required to be paid hereunder within the period required by any specific provision of the Mortgage, or, if no such period is so provided, within ten (10) days after written notice thereof shall have been given by the Mortgagee; or (xi) the failure by the Owner to comply with any other covenants or conditions contained in the Mortgage (except with respect to the failure to pay money), which failure shall continue unremedied for the period within which performance is required to be made by any specific provision of the Mortgage, or, if no such period is so provided, for a period of ten (10) days after written notice thereof shall have been given by the Mortgagee or, with respect to any such default which shall be of such nature that it cannot reasonably be cured or remedied within ten (10) days, if the Owner shall not promptly commence within such ten (10) days and thereafter exercise due diligence and continuous effort to remedy the same; or 13 (xii) the Owner or any guarantor of the indebtedness secured by the Mortgage (the "Guarantor") shall: (a) commence a voluntary case for relief as a debtor under the United States Bankruptcy Code or file a petition to take advantage of any other present or future insolvency act or other applicable law relating to bankruptcy, insolvency, reorganization or relief of debtors; (b) make an assignment for the benefit of creditors; or (c) consent to, or acquiesce in, the appointment of a receiver, liquidator, trustee, custodian or other similar official of itself or of the whole or any substantial part of its properties or assets; or (xiii) without the consent or acquiescence of the Owner or any Guarantor, (a) a court of competent jurisdiction shall enter an order, judgment or decree appointing a receiver, liquidator, trustee, custodian or other similar official of the Owner or Guarantor or of the whole or any substantial part of the property of assets of the Owner or Guarantor, and such order, judgment or decree shall not be vacated, or set aside, or stayed, within thirty (30) days after the entry thereof, or (b) an involuntary case under said Bankruptcy Code shall be commenced against the Owner or any Guarantor or a petition shall be filed against either seeking similar relief under any other present or future insolvency act or other applicable law relating to bankruptcy, insolvency, reorganization or relief of debtors, and such case or petition shall remain undismissed for thirty (30) days, or (c) under the provisions of any other law for the relief or aid of debtors, any court of competent jurisdiction shall assume custody or control of the Owner or any Guarantor or of the whole or any substantial part of either's property or assets, and such custody or control shall remain unterminated or unstayed for thirty (30) days; or (xiv) a judgment for Fifty Thousand ($50,000.00) Dollars or more shall be rendered against the Owner which shall not be discharged or bonded pending appeal within thirty (30) days from the entry thereof; or (xv) any representation, warranty or statement contained in any writing delivered to the Mortgagee prior to or simultaneously with the execution and delivery hereof shall prove to be incorrect or incomplete in any material respect at the time when made; or (xvi) without the prior written consent of the Mortgagee, (a) the Premises or any part thereof or any interest therein shall be sold, assigned, conveyed or otherwise transferred, except for residential leases with a term of three (3) years or less and commercial leases with a term of less than five (5) years, made in the ordinary course of business; or (b) if the Premises or any part thereof shall be further encumbered for debt by the Owner; or (c) if the Owner shall be a corporation, its voting stock shall be sold, assigned, transferred, pledged, hypothecated or otherwise transferred by the Owner or the present holders of a majority of the voting stock thereof as security for debt or otherwise; or (d) if the Owner shall be a partnership, joint venture, syndicate or other group, (collectively "partnership") all or any portion of the record or beneficial interest of the Owner or the present holders of a majority of such interest shall be sold, assigned, or transferred, pledged, hypothecated or otherwise transferred by the Owner or such holder of a majority of such interest as security for debt or otherwise. In determining whether to grant or withhold its consent under this clause (xvi) the Mortgagee, without limitation of its rights hereunder or otherwise, may not only consider the character and financial ability of the proposed purchaser, transferee or encumbrancer, but may also condition its 14 consent on a change in the terms of payment of the Note, including an increase in the rate of interest payable thereunder. In any event, it is understood and agreed that Mortgagee may arbitrarily withhold its consent under this or any provision of the Mortgage; or (xvii) after default by the Owner in any of the terms and/or conditions of any other Mortgage affecting the Premises. (xviii) after default by the Owner, any partner of the Owner (if a partnership) any officer or shareholder of the Owner (if a corporation) or any person or entity which shall control, be controlled by, or be under common control with any of the foregoing, under any agreement with the Mortgagee now hereafter in effect. (b) The Mortgagee may upon the occurrence of any Event of Default take such action, as it deems advisable to protect and enforce its rights against the Owner and in and to the Premises and Building Equipment, including, but not limited to, the following actions, each of which may be pursued concurrently or otherwise, at which time and in such order as Mortgagee may determine, in its sole discretion, without impairing or otherwise affecting the other rights and remedies of the Mortgagee: (1) declare the entire unpaid Indebtedness to be immediately due and payable; or (2) enter into or upon the Premises, either personally or by its agents, nominees or attorneys and dispossess the Owner and its agents and servants therefrom, and thereupon the Mortgagee may (a) use, operate, manage, control, insure, maintain, repair, restore and otherwise deal with all and every part of the Premises and conduct the business at the Premises; (b) exercise all rights and powers of the Owner with respect to the Premises, whether in the name of the Owner or otherwise, and (c) apply the receipts from the Premises to the payment of the Indebtedness, after deducting therefrom all expenses (including attorney's fees and broker's fees) incurred in connection with the aforesaid operations or (3) institute proceedings for the complete or partial foreclosure of this Mortgage in which case the Premises may be sold for cash or upon credit in one or more parcels; or (4) institute an action, suit or proceeding in equity for the specific performance of any covenants, condition or any agreement contained herein or in the Note or in the Assignment of Leases and Rents; or (5) recover judgment on the Note either before, during or after any proceedings for the enforcement of this Mortgage; and (6) apply for the appointment of a trustee, receiver, liquidator or conservator of the Premises, or (7) pursue such other remedies as the Mortgagee may have under applicable law. The purchase money proceeds or avails of any sale made under or by virtue of the exercise of any of the rights of the Mortgagee, together with any other sums which then may be held by the Mortgagee under this Mortgage, shall be applied as follows: First: To the payment of the costs and expenses of any such sale, including reasonable compensation to the Mortgagee, its agents and counsel, and of any judicial proceedings wherein the same may be made, and of all expenses, liabilities and advances made or incurred by the Mortgagee under this Mortgage, together with interest as provided herein on all advances made by the Mortgagee and all taxes or assessments, except any taxes, assessments or other charges subject to which the Premises shall have been sold; Second: To the payment of interest, delinquency and late charges remaining unpaid under the Note; Third: To the payment of the entire outstanding principal sum of the Note; Fourth: To the payment of any other sums required to be paid by the Owner pursuant to any provision of this Mortgage, the Note or 15 the Assignment of the Leases and Rents; Fifth: The payment of the surplus, if any, to whomsoever may be lawfully entitled to receive the same. The Mortgagee and any receiver of the Premises, or any part thereof, shall be liable to account for only those rents, issues and profits actually received by it. No recovery of any judgment by the Mortgagee and no levy of an execution under any judgment upon the Premises or upon any property of the Owner shall affect in any manner or to any extent, the lien of this Mortgage upon the Premises or any part thereof, or any liens, powers or remedies of the Mortgagee hereunder, but such liens, rights, powers and remedies of the Mortgagee shall continue unimpaired as before. 21. That any payment made in accordance with the terms of the Mortgage by any person at any time liable for the payment of the whole or any part of the sums now or hereafter secured by the Mortgage, or by any subsequent owner of the Premises, or by any other person whose interest in the Premises might be prejudiced in the event of a failure to make such payment, or by any stockholder, officer or director of a corporation which at any time may be liable for such payment or may own or have such an interest in the Premises, shall be deemed, as between the Mortgagee and all persons who at any time may be liable as aforesaid or may own the Premises, to have been on behalf of all such persons. 22. That any failure by the Mortgagee to insist upon the strict performance of any of the terms and provisions hereof shall not be deemed to be a waiver of any of the terms and provisions hereof, and the Mortgagee, notwithstanding any such failure, shall have the right thereafter to insist upon the strict performance by the Owner of any and all of the terms and provisions of the Mortgage; that neither the Owner nor any other person now or hereafter obligated for the payment of any sums now or hereafter secured by the Mortgage shall be relieved of such obligation by reason of the failure of the Mortgagee to comply with any request by the Owner, or by any other person so obligated, to take action to foreclose the Mortgage or otherwise enforce any of the provisions of the Mortgage or any obligations secured by the Mortgage, or by reason of the release, regardless of consideration, of any Guarantor or of the whole or any part of the security held for the indebtedness secured by the Mortgage, or by reason of any agreement or stipulation between any subsequent owner or owners of the Premises and the Mortgagee extending the time of payment or modifying the term of the Mortgage without first having obtained the consent of the Owner or such other person, and in the latter event, the Owner and all such other persons shall continue to be liable to make such payments according to the terms of any such agreement of extension or modification unless expressly released and discharged in writing by the Mortgagee; that, regardless of consideration and without the necessity for any notice to or consent by the holder of any subordinate lien on the Premises, the Mortgagee may release the obligation of anyone at any time liable for any of the indebtedness secured by the Mortgage or any part of the security held for the indebtedness without, as to the security or the remainder thereof, in any wise impairing or affecting the lien hereof or the priority thereof over any subordinate encumbrance; and that the Mortgagee may resort for the payment of the indebtedness secured hereby to any other security therefore held by the Mortgagee in such order and manner as the Mortgagee may elect. 23. The Owner shall pay any and all taxes, charges, filing, registration and recording fees, excises and levies imposed upon the Mortgagee by reason of its ownership of 16 the Note or this Mortgage, the Assignment of Leases and Rents, or any security instrument with respect to the Building Equipment or with respect to its interest therein and any instrument of further assurance, other than income, franchise and doing business taxes, and shall pay all stamp taxes and other taxes required to be paid on the Note or the Mortgage. In the event the Owner fails to make such payments within five (5) days after written notice thereof from the Mortgagee, then the Mortgagee shall have the right, but shall not be obligated, to pay the amounts due, and the Owner shall, on demand, reimburse the Mortgagee for said amounts, together with interest thereon at the Delinquency Rate from the date said amounts are so advanced until the same are paid to the Mortgagee. 24. That when and if the Owner and the Mortgagee shall respectively become Debtor and Secured Party in any Uniform Commercial Code Financing Statement affecting Building Equipment or other property referred to or described herein, this Mortgage shall be deemed the Security Agreement as defined in the Uniform Commercial Code of the State of New York and the remedies for any violation of the covenants, terms and conditions of the agreements contained shall be (a) as prescribed herein, (b) by general law, and (c) as to such part of the security which is also reflected in said Financing Statement, by the specific statutory consequences now or hereafter enacted and specified in said Uniform Commercial Code, all at the Mortgagee's sole election. The filing of such a Financial Statement in the record normally having to do with personal property shall never be construed as in any way derogating from or impairing this declaration and hereby stated intention of the parties hereto, that all items of Building Equipment and other property used in connection with the production of income from the Premises (tenant furniture only excepted) or adapted for use therein or which are described or reflected in the Mortgage are, and at all times and for all purposes and in all proceedings, both legal and equitable, shall be, regarded as part of the real estate irrespective of whether or not (a) any such item is physically attached to the improvements, (b) serial numbers are used (herein or otherwise) for the better identification of certain equipment, or (c) any such item is referred to or reflected in any such Financing Statement so filed at any time. Similarly, the mention in any such Financing Statement of (x) the rights in or the proceeds of any fire and/or hazard insurance policy, (y) any award in eminent domain proceedings for a taking or for loss of value, or (z) the debtor's interest as lessor in any present or future lease or rights to income growing out of the use or occupancy of the Premises, whether pursuant to a lease or otherwise, shall never be construed as in any way altering any of the rights of the Mortgagee as determined by this instrument or impugning the priority of the Mortgagee's lien granted hereby or by any other recorded document, but such mention in the Financing Statement is declared to be for the protection of the Mortgagee in the event any court or judge shall at any time hold with respect to (x), (y) or (z) that notice of the Mortgagee's priority of interest, to be effective against a particular class of persons, including but not limited to the Federal government and any subdivisions or entity of the Federal government, must be filed in the Uniform Commercial Code records. Pursuant to Section 9-402(2)(e) of said Uniform Commercial Code, the Owner hereby authorizes the Mortgagee, without the signature of the Owner, to execute and file Financing Statements (or continuations thereof) if the Mortgagee shall determine that such are necessary or advisable in order to perfect or continue its security interest in any fixtures, chattels or articles of personal property covered by the Mortgage, and shall pay to the Mortgagee on demand any expenses incurred by the Mortgagee in connection 17 with the preparation, execution and filing of such statements and any continuation statements that may be filed by the Mortgagee. 25. That the Owner will not at any time insist upon, or plead, or in any manner whatever claim or take any stay or extension or moratorium law, any exemption from execution or sale of the Premises or any part thereof, wherever enacted, now or at any time hereafter in force, which may affect the covenants and terms of performance of the Mortgage, nor claim, take or insist upon any benefit or advantage of any law now or hereafter in force providing for the valuation or appraisal of the Premises, or any part thereof, prior to any sale or sales thereof which may be made pursuant to any provision herein, or pursuant to the decree, judgment or order of any court of competent jurisdiction; nor, after any such sale or sales, claim or exercise any right under any statute heretofore or hereafter enacted to redeem the property so sold or any part thereof, and the Owner, to the extent permitted by law, hereby expressly waives all benefit or advantage of any such law or laws and covenants not to hinder, delay or impede execution of any power herein granted or delegated to the Mortgagee, but to suffer and permit the execution of every power as though no such law or laws had been made or enacted. The Owner, for itself and all who may claim under it, waives, to the extent that it lawfully may, all right to have the Premises marshalled upon any foreclosure hereof. 26. That if the Owner consists of more than one party, such parties shall be jointly and severally liable under any and all obligations, covenants and agreements of the Owner contained herein. 27. That the clauses and covenants contained herein which are construed by Section 254 of the New York Real Property Law shall be construed as provided in that section, except as otherwise provided in Paragraph 2 hereof; that the additional clauses and covenants contained herein shall afford rights supplemental to and not exclusive of the rights conferred by the clauses and covenants construed by such Section 254 (or any other laws of the State of New York, including Section 271 and 272 of the New York Real Property Law) and shall not impair, modify, alter or defeat such rights, notwithstanding that such additional clauses and covenants may relate to the same subject matter or provide for different or additional rights in the same or similar contingencies as the clauses and covenants construed by Section 254; that the rights of the Mortgagee arising under the clauses and covenants contained in the Mortgage and/or herein shall be separate, distinct and cumulative, and none of them shall be in exclusion of the others; that no act of the Mortgagee shall be construed as an election to proceed under any one provision herein to the exclusion of any other provision, anything herein or otherwise to the contrary notwithstanding. 28. That the execution of the Mortgage has been duly authorized by the Board of Directors of the Owner, if a corporation. 29. That the Owner will, in compliance with Section 13 of the New York Lien Law, receive the advances secured hereby and will hold the right to receive such advances as a trust fund to be applied first for the purpose of paying the cost of improvement and will apply the same first to the payment of the cost of improvement before using any part of the total of the same for any other purpose. 30. That wherever used in the Mortgage, unless the context clearly indicates a contrary intent or unless otherwise 18 specifically provided herein, the word "lease" shall mean "tenancy, subtenancy, lease or sublease", the word "Owner" shall mean "Owner and Owners" whenever the sense of the Mortgage so requires, the word "Person" or "Parties" shall mean "an individual, corporation, partnership or unincorporated association" , and the word "Premises" shall include the real estate herein described and further described on Exhibit A hereto, together with all improvements thereon, including, without limitation, the Building Equipment, and to the extent the context so requires, the condemnation awards and any other rights or property interests at any time made subject to the lien of the mortgage by the terms hereof (and/or, if necessary for the further protection of the Mortgagee, any part thereof). If there be more than one Owner, the covenants and warranties of the Mortgage shall be joint and several. 31. That the Mortgage cannot be changed or terminated orally. 32. That the Owner: (a) shall keep the Mortgage a valid mortgage lien upon the Premises; (b) shall not at any time create or allow to accrue or exist any debt, lien or charge which would be prior to or on a parity with the lien of the Mortgage upon any part of the Premises; and (c) shall not cause or permit the lien of the Mortgage to be diminished or impaired in any way. Within ten (10) days after notification of the filing of any lien on the Premises, the Owner shall release or discharge the same of record by payment, bonding or otherwise. 33. That, notwithstanding the grace period set forth in Article 20(a)(i) hereof, the Mortgagee may collect a late charge, not to exceed four (4) cents for each dollar of each installment of principal, and/or interest and/or other sum which is not made within ten (10) days of when due, or, if applicable, which cannot be debited from its account due to insufficient balance on its debit date. 34. That the Owner shall pay all fees and charges incurred in the preparation, execution and enforcement of this Mortgage and granting of consent herein, including, without limitation, the fees and disbursements of the Mortgagee's attorneys, charges for appraisals, fees and expenses relating to examination of title, title insurance premiums, surveys and mortgage recording documentary, transfer or other similar taxes and revenue stamps, and in default thereof the Mortgagee may pay the same and the Owner will repay the same with interest thereon at the rate per annum specified in Paragraph 4 hereof and the same shall be added to the indebtedness secured hereby and be secured by the Mortgage. 35. All payments, including escrow and prior late charges, owing under this Mortgage and the Note shall be paid to the Mortgagee on the date due and payable by wire transfer or the deposit or credit of other immediately available funds to the Mortgagee at 275 Broad Hollow Road, Melville, New York 11747, Attention: Loan Servicing Department, or to such other address as the Mortgagee may direct in writing. 36. That, at the option of the Mortgagee, the obligations of the Owner to pay the insurance premiums, taxes, and assessments, water and sewer charges assessed against the Premises shall be discharged as follows: on the first day of every month the Owner shall deposit with the Mortgagee a sum equal to one-twelfth (1/12) of the annual amount of insurance premiums, taxes, assessments, water and sewer charges assessed against the Premises (as estimated from time to time by the Mortgagee). The sums to be deposited as aforesaid and any 19 additional sums deposited as hereinafter provided shall be held by the Mortgagee not as a trust fund, but are to be applied by the Mortgagee in payment of insurance premiums, taxes, assessments, water charges and sewer rents, if, whether now or hereafter levied or assessed, on the lands and premises covered hereby on the dates specified by law or otherwise for the payment thereof. If at any time the Mortgagee determines that the balance of said fund in the hands of the Mortgagee, thirty (30) days before the due date of any such item, will be insufficient to pay any item when due, the Owner will, upon demand, make a further deposit of money with the Mortgagee to cover the deficiency in said fund to meet said item. If at any time there shall be a surplus in said fund, it shall be applied by the Mortgagee in the reduction of the next installment for the payment of taxes as hereinabove provided. The Owner shall not be entitled to any interest upon said fund. If the Mortgage shall be assigned, all funds on deposit may be transferred by the Mortgagee to the assignee. If the Premises be conveyed subject to the Mortgage, all funds on deposit shall be held by the Mortgagee to the credit of the new owner for the payment of insurance premiums, taxes, water and sewer charges and assessments. If at any time a tender or offer of payment of the mortgage debt shall be made, whether by a party having a legal right to do so or not, the Mortgagee or the then holder of the Mortgage in receiving such payment shall apply any balance of said fund toward the payment of interest and the remainder, if any, toward the reduction of principal. Upon the application of the balance of the fund in said account as hereinabove provided, there shall be no further obligation on the part of the Mortgagee with respect to said fund. It is further understood and agreed that in case of failure by the Owner to make any of the foregoing deposits or additional deposits, as and when required by the foregoing provisions of this Paragraph, the whole principal sum then secured by the Mortgage and all interest accrued thereon shall, at the option of the Mortgagee, immediately become due and payable. If the Owner defaults under the Mortgage, all sums held under this Paragraph can be applied to the debt secured by the Mortgage. 37. (a) The Owner represents and warrants that, to the best of Owner's knowledge, after due inquiry and investigation, the Premises is not now and has not ever been used to generate, manufacture, refine, transport, treat, store, handle, dispose, transfer, produce, process or in any manner deal with, Hazardous Materials (as hereinafter defined), and that no Hazardous Materials have ever been installed, placed, or in any manner dealt with on the Premises, and that no owner of the Premises or any tenant, subtenant, occupant, prior tenant, prior subtenant or prior occupant has received any notice or advice from any governmental agency or any tenant, subtenant or occupant with regard to Hazardous Materials on, from or affecting the Premises. The Owner covenants that the Premises shall be kept free of Hazardous Materials, and shall not be used to generate, manufacture, refine, transport, treat, store, handle, dispose, transfer, produce, process or in any manner deal with, Hazardous Materials, and the Owner shall not cause or permit, as a result of any intentional or unintentional act or omission on the part of the Owner or any tenant or subtenant or occupant, the installation of Hazardous Materials in the Premises or onto any other property or suffer the presence of Hazardous Materials on the Premises. The Owner shall agree to comply with and ensure compliance by all tenants, subtenants and occupants with all applicable federal, state and local laws, ordinances, rules and regulations, with respect to Hazardous Materials, and shall keep the Premises free and clear of any liens imposed pursuant to such laws, ordinances, rules or regulations. In the event that the Owner received or receives any notice or advice from any 20 governmental agency, any tenant, subtenant or occupant with regard to Hazardous Materials on, from or affecting the Premises, the Owner shall agree to immediately notify the Mortgagee. The Owner shall conduct and complete all investigations, studies, sampling, and testing, and all remedial, removal, and other actions necessary to clean up and remove all Hazardous Materials, on, from or affecting the Premises in accordance with all applicable federal, state, and local laws, ordinances, rules, regulations, and policies and to the satisfaction of the Mortgagee. For these purposes, "Hazardous Materials" shall include, without limitation, any flammable explosives, gasoline, petroleum products, polychlorinated biphenyls, radioactive materials, hazardous materials, hazardous wastes, hazardous or toxic substances, or related or similar materials, asbestos or any materials containing asbestos, or any other substance or material as defined by any federal, state or local environmental law, ordinance, rules, or regulation including, without limitation, the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended (42 U.S.C. Section 9601, et seq.), the Hazardous Materials Transportation Act, as amended (49 U.S.C. Section 1801, et seq.), the Resource Conservation and Recovery Act, as amended (42 U.S.C. Section 6901, et seq.), and in the regulations adopted and publications promulgated pursuant thereto. These obligations and liabilities of the owner shall survive any foreclosure involving the Premises or the delivery of a deed in lieu of foreclosure. (b) The Owner shall protect, indemnify and save harmless the Mortgagee from and against all liabilities, obligations, claims, damages, penalties, causes of action, costs and expenses (including without limitation reasonable attorney's fees and expenses), imposed upon or incurred by or asserted against the Mortgagee by reason of (i) the presence, disposal, escape, seepage leakage, spillage, discharge, emission, release, or threatened release of any Hazardous Materials on, from or affecting the Premises or any other property; (ii) any personal injury (including wrongful death) or property damage (real or personal) arising out of or related to such Hazardous Materials; (iii) any lawsuit brought or threatened, settlement reached, or government order relating to such Hazardous Materials; or (iv) any violation of laws, orders, regulations, requirements, or demands of government authorities, or any policies or requirements of the Mortgagee which are based upon or in any related to such Hazardous Materials including, without limitation, attorney or consultant fees, investigation and laboratory fees, court costs and litigation expenses. (c) To enforce Owner's obligations under this section, the Mortgagee may conduct or cause to be conducted future environmental audits and tests of the Premises from time to time as it deems necessary in its sole discretion. The Owner shall pay the cost of such audits or tests. Should the Mortgagee in its sole discretion believe there to be a use of, or a condition existing on, the Premises which would violate applicable federal, state or local laws, or which would constitute a dangerous, unhealthy or noxious use thereof or condition thereon, or which would give rise to potential liability for hazardous substances, the Mortgagee may, but shall not be obligated to, perform or cause to be performed any remedial action, including but not limited to removal and clean-up, which the Mortgagee in its sole discretion believes necessary under the circumstances. The Owner shall reimburse the Mortgagee for any such expenses incurred, regardless of whether the Owner would have ultimately been responsible for such costs under applicable law. 21 38. That the Owner covenants and agrees that if at any time the Owner shall make a payment to the Mortgagee for interest, principal, escrow deposits under Paragraph 36, or any other charges for fees due under this Mortgage, on either a date later than such item's due date or in an amount less than that required hereunder, the Mortgagee shall have the right to apply such payment, when received, toward the discharge of the aforesaid items, in such proportions and priorities as the Mortgagee, in its sole discretion, may elect, without waiver of its rights hereunder. 39. That, notwithstanding anything to the contrary contained herein, in no event shall the total of all charges payable under the Note and the Mortgage which are or could be held to be in the nature of interest exceed the maximum rate permitted to be charged under applicable law. If the Mortgagee receives any payment which is or would be in excess of that permitted to be charged under any applicable usury law, such payment shall have been, and shall be deemed to have been made in error and shall automatically be applied to reduce the principal balance outstanding on the Note. 40. (a) The Owner covenants and agrees to pay or cause to be paid all taxes, filing fees and other charges (collectively, the "Article 31-B Expenses") imposed or payable under the provisions of Article 31-B of the New York Gains Tax Law (the "Gains Tax Law"), in connection with any transfer of the Premises by the Owner or the Mortgagee, the making or satisfaction of this Mortgage, the taking of any action permitted to be taken hereunder by the Mortgagee including, without limitation, foreclosure, the granting of a deed or assignment in lieu of foreclosure or the appointment of a receiver, or any transfer pursuant to any sale of the Premises on a foreclosure, and hereby covenants and agrees to execute and file all required forms, applications, affidavits and other documents or instruments required pursuant to the provisions of the Gains Tax Law and to submit fully executed copies of same to the Mortgagee upon request. The Owner hereby irrevocably constitutes and appoints the mortgagee as the Owner's attorney-in-fact to execute and file any instrument which the Mortgagee may deem necessary or appropriate in connection with any Article 31-B Expenses or matters relating to the Gains Tax Law. (b) The Owner shall, from time to time, within fifteen (15) days after request by the Mortgagee but no more than once each year except after an event of default, furnish to the Mortgagee, a statement (which may be relied upon by any person) setting forth in detail satisfactory to the Mortgagee any changes to the Owner's "original purchase price (as such term is defined in the Gains Tax Law) in the Premises. (c) The Owner shall indemnify and hold the Mortgagee harmless and defend it against any loss or liability, cost or expense (including, without limitation, attorneys' fees and disbursements) and all claims, actions, procedures and suits arising out of, or incurred in connection with, the Mortgagor's failure promptly to comply with and perform its covenants and agreements contained in this paragraph 40. Anything herein, in the Note, the Mortgage or in the Assignment of Leases and Rent to the contrary notwithstanding, the obligations of Owner under this Paragraph 40 shall be the personal obligations of Owner, whether or not Owner is personally obligated to pay the Indebtedness and notwithstanding the provisions of Paragraph 39 with the same force and effect as though each of them had personally executed and delivered this Mortgage. 22 (d) The provisions of this Paragraph 40 shall survive any sale of the Premises on a foreclosure of this Mortgage or by deed in lieu of foreclosure. 41. The Owner shall have the privilege to prepay all said principal sum in accordance with the prepayment provisions contained in the Note of even date herewith. 42. (a) All notices hereunder shall be in writing and shall be deemed to have been sufficiently given or served for all purposes when delivered in person or sent by certified mail, return receipt requested, to any party hereto at its address above stated or at such other address of which it shall have notified the party giving such notice in writing as aforesaid. (b) The provisions and covenants of this Mortgage shall be binding upon the Owner and shall inure to the benefit of the Mortgagee, subsequent holder of this Mortgage and their respective successors and assigns. (c) The Owner shall do, execute, acknowledge and deliver, at the sole cost and expense of the Owner, all and every such further acts, deeds, conveyances, mortgages, assignments, estoppel certificates, notices of assignment, transfers and assurances as the Mortgagee may reasonably require from time to time in order to better assure, convey, assign, transfer and confirm unto the Mortgagee, the rights now or hereafter intended to be granted to the Mortgagee under this Mortgage, any other instrument executed in connection with this Mortgage or any other instrument under which the Owner may be or may hereafter become bound to convey, mortgage or assign to the Mortgagee for carrying out the intention of facilitating the performance of the terms of this Mortgage. The Owner hereby appoints the Mortgagee its attorney-in-fact to execute, acknowledge and deliver for and in the name of the Owner any and all of the instruments mentioned in this Article 40(c) and this power, being coupled with an interest, shall be irrevocable as long as any part of the Indebtedness remains unpaid. (d) The Owner waives the right to a trial by jury or the right to assert any set-offs or counterclaims in any action brought by the Mortgagee to foreclosure the Mortgage. This Agreement supersedes any prior oral communications between the parties and any such oral communications are deemed merged into this Mortgage. (e) Any provision of this Mortgage which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof or affecting the validity or enforceability of such provisions in any other jurisdiction. (f) This Mortgage cannot be altered, amended, modified or discharged orally and no executory agreement shall be effective to modify or discharge it in whole or in part, unless it is in writing and signed by the party against whom enforcement of the modification, alteration, amendment or discharge is sought. This Mortgage, and all the covenants, terms and provisions herein set forth, shall run with the land and bind the Owner, the heirs, executors, administrators, personal and legal representative, successors and assigns of the Owner and all subsequent encumbrances, tenants and subtenants of the Premises, and shall inure to the benefit of the Mortgagee and the successors and assigns of the Mortgagee. 23 43. This Mortgage does not cover real property principally improved or to be improved by one or more structures containing in the aggregate not more than six residential dwelling units, each having their own separate cooking facilities. 44. Owner agrees to maintain all tenant security deposits affecting the premises in a tenant security account and also maintain a deposit or operating account at a branch of the Mortgagee designated by the Mortgagee during the entire life of the loan. 45. All payments shall be made by automatic debit from an account maintained at the bank in which borrower shall maintain a balance sufficient to pay any and all monthly payments. The interest on the Note shall be paid monthly in arrears, computed on the basis of a 360 day year and actual number of days elapsed. 46. Borrower and/or Guarantors agree to furnish audited fiscal Financial Statements and 10-K (if public company) reports periodically and within one hundred twenty (120) days of their respective fiscal end of years. 47. Guarantors agree to furnish copies of quarterly Financial Statements to North Fork Bank within ninety (90) days of Guarantors fiscal end of quarter and agree not to further pledge and/or encumber inventory and/or receivables located at the mortgage premises without the consent of North Fork Bank. IN WITNESS WHEREOF, this Mortgage has been duly executed by the parties hereto as of the day and year first above written. WESTERN BEEF PROPERTIES INC. By: /s/ Frank Castellana V.P. --------------------------------- FRANK CASTELLANA, Executive Vice-President STATE OF NEW YORK ) ) SS.: COUNTY OF SUFFOLK ) On this 2 day of December, 1998, before me personally came FRANK CASTELLANA to me known, who, being by me duly sworn, did depose and say that he resides at 47-05 Metropolitan Avenue, Ridgewood, New York; that he is the Executive Vice-President of WESTERN BEEF PROPERTIES INC. the corporation described in and which executed the foregoing instrument; and that he signed his name to said instrument by order of the Board of Directors of said corporation. /s/ James W. Burns --------------------------------- Notary Public JAMES W. BURNS Notary Public State of New York No. 4524231 Qualified in Nassau County Commission Expires June 30, 2000 24 SCHEDULE "A" ALL that certain plot, piece or parcel of land, situate, lying and being in the Borough of Bronx, County of Bronx, City of New York, State of New York, bounded and described as follows: BEGINNING at the corner formed by the intersection of the northerly side of East 165th Street with the easterly side of Union Avenue; THENCE northerly along said easterly side of Union Avenue, 378.10 feet; THENCE easterly along a line which forms an exterior angle of 89 degrees 48 minutes 18 seconds with the last mentioned course, 89.63 feet; THENCE northerly along a line which forms an exterior angle of 90 degrees 19 minutes 37 seconds with the last mentioned course, 49.69 feet; THENCE easterly along a line which forms an interior angle of 90 degrees 19 minutes 10 seconds with the last-mentioned course, 85 feet; THENCE southerly along a line which forms an interior angle of 89 degrees 44 minutes 10 seconds with the last mentioned course, 26.81 feet; THENCE easterly along a line which forms an exterior angle of 90 degrees 27 minutes 32 seconds with the last mentioned course, 145.04 feet to the westerly side of Prospect Avenue as legally opened; THENCE southerly along said westerly side of Prospect Avenue, 243.53 feet; THENCE westerly at right angles to said westerly side of Prospect Avenue, 144.77 feet; THENCE southerly along a line which forms an exterior angle of 90 degrees 06 minutes 50 seconds with the last mentioned course, 10.67 feet; THENCE westerly along a line which forms an interior angle of 90 degrees 06 minutes 50 seconds with the last mentioned course, 0.21 feet; THENCE southerly at right angles to the last mentioned course, 39.34 feet; THENCE westerly along a line which forms an interior angle of 90 degrees 52 minutes 15 seconds with the last mentioned course, 50 feet; THENCE southerly along a line which forms an exterior angle of 90 degrees 52 minutes 15 seconds with the last mentioned course and part of the distance through a party wall, 107.23 feet to the northerly side of East 165th Street; THENCE westerly along said northerly side of East 165th Street, 135.00 feet to the point or place of BEGINNING. AS TO PARCEL A (BLOCK 2679 LOTS 1 AND 57): ALL that certain plot, piece or parcel of land, situate, lying and being in the Borough of Bronx, County of Bronx, City of New York, State of New York, bounded and described as follows: BEGINNING at a point on the northerly side of East 165th Street as legally opened distant 20 feet easterly from the corner formed by the intersection of said northerly side of East 165th Street with the easterly side of Union Avenue as legally opened; RUNNING THENCE northerly parallel with said easterly side of Union Avenue, 84.80 feet; THENCE westerly parallel with said northerly side of East 165th Street, 20 feet to said easterly side of Union Avenue; THENCE northerly along said easterly side of Union Avenue, 293.30 feet; THENCE easterly along a line which forms an exterior angle of 89 degrees 48 minutes 18 seconds with the last mentioned course, 89.63 feet; THENCE northerly along a line which forms an exterior angle of 90 degrees 19 minutes 37 seconds with the last mentioned course, 49.69 feet; THENCE easterly along a line which forms an interior angle of 90 degrees 19 minutes 37 seconds with the last mentioned course, 85 feet; THENCE southerly along a line which forms an interior angles of 89 degrees 44 minutes 10 seconds with the last mentioned course, 103.30 feet; SCHEDULE "A" CONTINUED THENCE easterly along a line which forms an exterior angle of 90 degrees 15 minutes 50 seconds with the last mentioned course, 144.43 feet to the westerly side of Prospect Avenue as legally opened; THENCE southerly along said westerly side of Prospect Avenue, 167.58 feet; THENCE westerly at right angles to said westerly side of Prospect Avenue, 144.77 feet; THENCE southerly along a line which forms an interior angle of 90 degrees 06 minutes 50 seconds with the last mentioned course, 10.67 feet; THENCE westerly along a line which forms an interior angle of 90 degrees 06 minutes 50 seconds with the last mentioned course, 0.21 feet; THENCE southerly at right angles to the last mentioned course, 39.34 feet; THENCE westerly along a line which forms an exterior angle of 90 degrees 52 minutes 15 seconds with the last mentioned course, 50 feet; THENCE southerly along a line which forms an interior angle of 90 degrees 52 minutes 15 seconds with the last mentioned course and part of the distance through a party wall, 107.23 feet to the northerly side of East 165th Street; THENCE westerly along said northerly side of East 165th Street, 105 feet to the point or place of BEGINNING. AS TO PARCEL B (BLOCK 2679 LOT 63): ALL that certain lot, piece or parcel of land, situate, lying and being in the Borough of Bronx, County of Bronx, City and State of New York known and designated as Lot 63 in Block 2679, Section 10 on the Tax Map of the City of New York for the Borough of Bronx, as said Map was on 4/28/82. AS TO PARCEL C (BLOCK 2679 LOT 35): ALL that certain lot, piece or parcel of land, situate, lying and being in the Borough of Bronx, County of Bronx, City and State of New York known and designated as Lot 35 in Block 2679, Section 10 on the Tax Map of the City of New York for the Borough of Bronx, as said Map was on 8/3/76. AS TO PARCEL D (BLOCK 2679 LOT 34): All that certain plot, piece or parcel of land, situate, lying and being in the Borough of Bronx, City and State of New York, bounded and described as said Tax Nap as on 7/25/72 as Section 10 Block 2679 Lot 34. SCHEDULE B ESTOPPEL CERTIFICATE North Fork Bank 275 Broad Hollow Road Melville, New York 11747 Re: Lease dated _______________________ (the "Lease") between ____________________________________(the "Landlord") and ____________________________________(the "Tenant") Relating to premises at ____________________________________ (the "Property"). Proposed Mortgage between __________________________________ as mortgagor and North Fork Bank as mortgagee (the "Mortgage"). Gentlemen: The undersigned is Tenant under the Lease and, hereby certifies to the mortgagee as follows: a. The Lease is unmodified and in full force and effect; b. Under the Lease, Tenant is presently obligated to pay rent at the rate of $________________ per month. Rent is paid through and including ____________________ 19 . No rent has been or will be paid more than 30 days in advance, and Tenant has no claim against the Landlord for any deposits or other sums; c. No notice of default or termination of the Lease has been served on Tenant under the terms of the Lease; d. To the best of Tenant's knowledge, neither it nor the Landlord are in default in any way under the Lease. In addition, Tenant certifies that no event has occurred that with the passage of time or giving of notice would constitute default under the Lease by either it or the Landlord. e. There has not been filed by or against nor, to the best of the knowledge and belief of Tenant, is there threatened against or contemplated by Tenant, a petition in bankruptcy, any assignment for the benefit of creditors, or any partition seeking reorganization or arrangement under the bankruptcy laws of the United States or of any state thereof. f. The address for notices to be sent to Tenant is as set forth in the Lease. g. Tenant has no right of first refusal, option or other right to purchase the Property or any part thereof, including, without limitation, the Premises. 26 h. The Lease is subject and subordinate to the Mortgage. i. Tenant understands that Landlord intends to assign the Lease to Lender and agrees that if Lender so requests pursuant to such assignment, Tenant will pay all rents and other charges due and payable under said Lease directly to Lender. ____________________________________ ____________________________________ 27 Mortgage No. ------------------------------------- WESTERN BEEF PROPERTIES, INC., f/k/a EAST CENTRAL MEATS, INC. TO NORTH FORK BANK ------------------------------------- MORTGAGE AND SECURITY AGREEMENT ------------------------------------- The land affected by the within instrument lies in: 1030 Union Ave. XXXXXXXX Block 2679 Lot 1 County Bronx 1057-1059 Prospect Ave. XXXXXXXX Block 2679 Lot 34 County Bronx 1053-1055 Prospect Ave. XXXXXXXX Block 2679 Lot 35 County Bronx 815-823 E. 165th Street XXXXXXXX Block 2679 Lot 57 County Bronx 1020 Union Avenue XXXXXXXX Block 2679 Lot 63 County Bronx RECORD AND RETURN TO: BENJAMIN J. KLEMANOWICZ, JR., P.C. 1001 Franklin Avenue, Suite 311 Garden City, New York 11530 28 MORTGAGE NOTE $ 1,700,000.00 December 2, 1998 FOR VALUE RECEIVED, WESTERN BEEF PROPERTIES INC., a New York corporation with an office at 47-05 Metropolitan Avenue, Ridgewood, New York 11383 (the "Maker") promises to pay to NORTH FORK BANK, a New York banking corporation, or order, at 275 Broad Hollow Road, Melville, New York 11747, Attention: Loan Servicing Department (the "Payee"), or at such other place as may be designated in writing by the holder of this Note, the principal sum of ONE MILLION SEVEN HUNDRED ($1,700,000.00) DOLLARS with interest thereon from the date hereof at the per annum rate equal to North Fork Bank's Prime Rate, as same may adjust from time to time, in monthly interest only payments, commencing on the 4th day of January, 1999, and continuing on the 4th day of each succeeding month thereafter, until the 4th day of December, 2001, the Maturity Date, when any unpaid balance, together with any interest as may then be due and owing, shall be paid in full. Each payment when received by the holder thereof will be applied to interest at the rate aforesaid then to principal until the Maturity Date, namely, December 4, 2001 on which date all outstanding principal, together with interest then due, shall be paid in their entirety. The Maker shall have full right to prepay this indebtedness, in whole or in part, at any time, without penalty. Presentment for payment, notice of dishonor, protest and notice of protest are hereby waived. This Note is secured by a mortgage made by the Maker to the Payee of even date herewith (the "Mortgage"), on the premises known as 1030 Union Avenue, Block 2679 Lot 1, a/k/a 1041 Prospect Avenue, Block 2679, Lot 34, 1053-1055 Prospect Avenue, Block 2679, Lot 35, East 165th Street Block 2679 Lot 57 and 1020 Union Avenue, Block 2679 Lot 63, Bronx, New York (the "Premises") and is subject to the terms and provisions of the Mortgage, to which reference is made for description of the events of default and the rights of acceleration of maturity in the event of default. All notices hereunder shall be in writing and shall be deemed to have been sufficiently given or served for all purposes when delivered in person or sent by certified mail, return receipt requested, to any party hereto at its address above stated or at such other address of which it shall have notified the party given such notice in writing as aforesaid. The provisions and covenants of this Note shall be binding upon the Maker and shall inure to the benefit of the Payee, any subsequent holder of this Mortgage and their respective successors and assigns. Any privileges granted to Maker shall inure to the benefit of any successors or assigns of the Mortgaged premises. The Payee may collect a late charge, not to exceed four (4) cents for each dollar of each installment of principal, and/or interest and and/or other sum which is not made within ten (10) days of when due, or, if applicable, which cannot be debited from its account due to insufficient balance on its debit date. All payments shall be made by automatic debit from an account maintained at the bank in which borrower shall maintain a balance sufficient to pay any and all monthly payments. The interest on the Note shall be paid monthly in arrears, computed on the basis of a 360 day year and actual number of days elapsed. This note may not be changed or terminated orally. WESTERN BEEF PROPERTIES INC. BY: /s/ Frank Castellana ----------------------------- Frank Castellana, Exec. VP STATE OF NEW YORK Ss: COUNTY OF SUFFOLK On the 2nd day of December, 1998 before me personally came FRANK CASTELLANA to me known, who, being by me duly sworn, did depose and say that he resides at 47-05 Metropolitan Avenue, Ridgewood, New York 11383 That he is the Executive Vice-President of WESTERN BEEF PROPERTIES INC. the corporation described in and which executed the foregoing instrument; and that he signed his name to said instrument by order of the Board of Directors of said corporation. /s/ James W. Burns ------------------------------ Notary Public JAMES W. BURNS Notary Public State of New York No. 4524231 Qualified in Nassau County Commission Expires June 30, 2000 EX-10.22 3 BARGAIN AND SALE DEED ================================================================================ BARGAIN AND SALE DEED dated May 5, 1998 from HYSON JOINT VENTURE Grantor to WESTERN BEEF RETAIL, INC. Grantee ================================================================================ Section: 5 Block: 1313 Lot: 1, 14, 19, 26, 89 and 91 County: Kings Please record and return to: George Cacoulidis, Esq. Salon, Marrow & Dyckman 685 Third Avenue 21st Floor New York, NY 10017 BARGAIN AND SALE DEED THIS INDENTURE, made May 5, 1998 between HYSON JOINT VENTURE, a New York general partnership, having an address at 40 Seeley Street, Brooklyn, NY 11218 ("Grantor"), and WESTERN BEEF RETAIL, INC., a New York corporation, having an address at 47-05 Metropolitan Avenue, Ridgewood, NY 11365 ("Grantee"). WITNESSETH, that Grantor, in consideration of Ten Dollars and other valuable consideration, the receipt and sufficiency of which hereby are acknowledged, does hereby grant and release unto Grantee and the legal representatives, successors and Grantee forever, ALL those certain plots, pieces or parcels of land, with the buildings and improvements thereon erected, situate, lying and in the Borough of Brooklyn, County of Kings, City and State of New York, being more particularly described in Schedule A attached hereto and made a part hereof, TOGETHER with all right, title and interest, if any, of Grantor in and to any streets and roads abutting the above described premises to the center lines thereof, TOGETHER with the appurtenances and all the estate and rights of Grantor in and to said premises, SUBJECT TO all laws, ordinances and regulations of governmental authorities affecting said premises; the state of facts a current survey of said premises would show; and all matters of record. TO HAVE AND TO HOLD the premises herein granted unto Grantee and the legal representatives, successors and assigns of Grantee forever. Grantor is the owner of said premises. Said premises are not located in an agricultural district. Grantor covenants that Grantor has not done or suffered anything whereby said premises have been encumbered in any way whatever, except as set forth herein. Grantor, in compliance with Section 13 of the Lien Law, covenants that Grantor will receive the consideration for this conveyance Bargain and Sale Deed: Page 1 and will hold the right to receive such consideration as a trust fund to be applied first for the purpose of paying the cost of the improvement before using any part of the total of the same for any other purpose. IN WITNESS WHEREOF Grantor has duly executed this deed on the date first above written. In the presence of: HYSON JOINT VENTURE By: /s/ Jeffrey S. Aaron ------------------------------------- Jeffrey S. Aaron, General Partner /s/ Audrey M. Toro - --------------------------- Witness STATE OF NEW YORK) )ss.: COUNTY OF NASSAU ) On the 5th day of May, 1998, before me personally came Jeffrey S. Aaron, to me known, who, being by me duly sworn, did depose and say that he resides at 4500 Gefion Court, Apartment 105, Lake Worth, Florida 33467; that he is a general partner of HYSON JOINT VENTURE, the partnership described in and which executed the foregoing Deed; that he had authority to execute said Deed; and that he executed said Deed in the name of HYSON JOINT VENTURE for and on behalf of said partnership. /s/ Beatrice Greenberg ---------------------- Notary Public [NOTARY SEAL] Bargain and Sale Deed: Page 2 SCHEDULE A TO BARGAIN AND SALE DEED PARCEL A, BLOCK 1313, LOT 1 ALL that certain plot, piece or parcel of land, with buildings and improvements thereon erected, situate, lying and being in the Borough of Brooklyn, County of Kings, City and State of New York, bounded and described as follows: BEGINNING at the corner formed by the intersection of the northerly side of Sterling Street with the easterly side of Washington Avenue; RUNNING THENCE northerly along the easterly side of Washington Avenue 16 feet 4-3/4 inches to the easterly side of Franklin Avenue; THENCE northerly along the easterly side of Franklin Avenue 195 feet 5-3/8 inches to the southerly side of Empire Boulevard; THENCE easterly along the southerly side of Empire Boulevard 152 feet 4-1/8 inches; THENCE southerly at right angles to the southerly side of Empire Boulevard part of the distance through a party wall as set forth in a Party Wall Agreement between Aaron Construction Company Inc. and Fanwood Building Corporation dated May 12, 1924 and recorded September 19, 1924 in Liber 4445 at Page 269, 200 feet to the northerly side of Sterling Street; THENCE westerly along the northerly side of Sterling Street 12 feet 10-1/4 inches to the northwesterly side of lot number 1 as laid down on a certain map entitled "Map of Lots in Flatbush Kings County New York" belonging to Charles McCauley & others surveyed by S.A. Beers City Surveyor and filed in the office of the Register of the County of Kings in December 1868; THENCE northeasterly along the said northwesterly side of lot number 1 on said map 31 feet 8-5/8 inches to the northwesterly line of land of heirs of Garritson; THENCE northwesterly along said land of the heirs of Garritson 47 feet 8 inches to the southeasterly line of lot number 23 as laid down on a certain map entitled "Real Estate", the property of the Schedule A to Bargain and Sale Deed: Page 1 heirs of Samuel Garritson situate in Flatbush, L.I. surveyed by Roswell Graves Jr., August 1836 and filed in the office of the Register of the County of Kings on September 2, 1837; THENCE southwesterly along the southeasterly side of said lot number 23 and along the southeasterly side of lot 48 as laid down on said last mentioned map 180 feet 10-1/2 inches to the northerly side of Sterling Street; THENCE westerly along the northerly side of Sterling Street 33 feet 1-3/4 inches to the corner the point or place of BEGINNING. SUBJECT to terms, covenants and restrictions contained in the Party Wall Agreement between Aaron Construction Company Inc. and Fanwood Building Corporation, dated May 12, 1924 and recorded September 19, 1924 in Liber 4445 at Page 269. SUBJECT to terms, covenants, restrictions and setbacks contained in deeds recorded in the office of the Register of the County of Kings in Liber 840 of conveyances Page 347 and Liber 863 of conveyances Page 138 provided same are in force and effect. ***** PARCEL B, BLOCK 1313, LOTS 14, 19 AND 26 ALL that certain plot, piece or parcel of land, with the buildings and improvements thereon erected, situate, lying and being in the Borough of Brooklyn, County of Kings, City and State of New York, bounded and described as follows: BEGINNING at a point on the southerly side of Empire Boulevard (formerly known as Malbone Street) distant four hundred feet westerly from the corner formed by the intersection of the southerly side of Empire Boulevard with the westerly side of Bedford Avenue; BEGINNING THENCE westerly along the southerly side of Empire Boulevard three hundred and forty feet seven and five-eighths inches to the line of land of the Aaron Construction Co. Inc. THENCE southerly along the line of land of the Aaron Construction Co. Inc. one hundred feet; Schedule A to Bargain and Sale Deed: Page 2 THENCE easterly parallel with Empire Boulevard three hundred and forty feet, seven and five-eighths inches; THENCE northerly parallel with Bedford Avenue one hundred feet to the southerly side of Empire Boulevard, the point or place of BEGINNING. SUBJECT to terms, covenants, restrictions and setback contained in deeds recorded in the office of the Register of the County of Kings in Liber 840 of conveyances Page 347 and Liber 863 of conveyances Page 138 provided same are in force and effect. ***** PARCEL C, BLOCK 1313, LOT 89 ALL that certain plot, piece or parcel of land, with the buildings and improvements thereon erected, situate, lying and being in the Borough of Brooklyn, County of Kings, City and State of New York, and being more particularly designated as Section 5, Block 1313, Lot 89 on the Tax Map of the City of New York for the Borough of Brooklyn, as said Tax Map was on March 2, 1953. SUBJECT TO the One Dollar condemnation clause as contained in the deed from the City of New York to Parbrook Construction Co., Inc., dated February 25, 1967 and recorded March 7, 1967 in Record Liber 375 at Page 324. ***** PARCEL D, BLOCK 1313, LOT 91 ALL that certain plot, piece or parcel of land, with the buildings and improvements thereon erected, situate, lying and being in the Borough of Brooklyn, County of Kings, City and State of New York, bounded and described as follows: BEGINNING at a point on the northerly side of Sterling Street distant 33 feet 1-3/4 inches easterly from the corner formed by the intersection of the northerly side of Sterling Street with the easterly side of Washington Avenue; Schedule A to Bargain and Sale Deed: Page 3 RUNNING THENCE northeasterly at an interior angle of 24 degrees 0 minutes 20 seconds with the northerly side of Sterling Street, 180 feet 10-1/2 inches; THENCE southeasterly at an interior angle with the last course of 89 degrees 17 minutes 40 seconds, 47 feet 8 inches; THENCE southwesterly at an interior angle with the last course of 136 degrees 56 minutes, 31 feet 8-5/8 inches to the northerly side of Sterling Street; THENCE westerly along the northerly side of Sterling Street 173 feet 4-3/8 inches to the point or place of BEGINNING. Schedule A to Bargain and Sale Deed: Page 4 RESUME OF TRANSACTION On September 1, 1994 Western Beef-Empire Boulevard, Inc., as Tenant, entered into a long term lease agreement with Hyson Joint Venture, as Landlord, for use of the Premises known as 44, 62, 70 and 100 Empire Boulevard, Brooklyn, New York, Among other Standard Commercial leasing provisions, the agreement between the parties contained a Purchase Option at article 32, page 33, which provided for Tenant's option to purchase the Premises at various times throughout the term of the lease. The lease further led that the Landlord would provide purchase money financing of the entire Purchase Price. The Tenant pursuant to written notice exercised it's option to purchase the premises in September of 1997. The Purchase Price was listed in the lease as $2,105,263.16. Interest on the purchase money loan was listed at six and one quarter (6 1/4%) percent. The Purchase Price was reduced pursuant to agreement of the Landlord and Tenant to $2,055,263.16. Said reduction was a result of a verbal agreement between the principals of the Landlord and Tenant to the effect that the original Purchase price of $2,105,263.16 was designed to compensate the Landlord for any capital gains tax that would result from any sale. The true Purchase price between the parties was $2,000,000.00. The sum of $105,263.16 was the amount of capital gains tax that the Landlord would be responsible for. The intention of the parties was to make whole the Landlord if such taxes were to be incurred. This agreement was a verbal agreement of the parties negotiated by the Landlord just prior to execution of the lease. Nowhere in the lease is this agreement provided for, however, counsels' notes of the agreement and early drafts of the lease show the originally contemplated Purchase price of $2,000,000.00. Tenant accepted this agreement since Landlord would be providing 100% purchase money financing (which results in savings to Tenant as a result of not having to pay typical Bank lending fees) and as result of the favorable interest rate. However, on or about June of 1997, the New York State Capital Gains Tax ("Cuomo Tax") was repealed and no longer a cost to Landlord. As a result, Tenant, as Purchaser, negotiated the current Purchase Price of $2,055,263.16. The tenant, Western Beef-Empire Boulevard, Inc. assigned its interest in and to the purchase option to a newly formed related entity called Western Beef Retail, Inc. Western Beef Retail, Inc. is the current holding corporation for all of western Beef, Inc.'s Real Estate holdings. Closing took place on May 5, 1998 at 10 A.M. at the offices of Landlord, (Sellers) counsel Kleiger & Kleiger 80 Cuttermill Road, Great Neck, New York 11021. Tenant, (Purchaser) was represented by George Cacoulidis of Salon, Marrow & Dyckman, LLP, 685 Third Avenue, 21st Floor, New York, New York 10017. The specific closing costs of the transaction are set forth in the enclosed closing statement. PURCHASER'S CLOSING STATEMENT Purchaser : Western Beef-Retail, Inc. 47-05 Metropolitan Avenue Ridgewood, New York 11385 Seller : Hyson Joint Venture 40 Seeley Street Brooklyn, New York 11218 Premises Purchased : Real Property and all buildings located at 44, 62, 70 and 100 Empire Boulevard, Brooklyn, New York 11225 and 23 and 25 Sterling Street, Brooklyn, New York 11225, known as Section 5; Block 1313; lots 1, 14, 19, 26, 89 and 91 on the Kings County Land and Tax Maps. Purchase Price : $2,055,263.16 Mortgagee : Seller Hyson Joint Venture Terms of Mortgage : l00% purchase money financing at 6 1/4% amortized and self liquidated over 15 years (180) consecutive monthly payments. Title Company : Chicago Title Insurance Co. 1211 Avenue of the Americas New York, New York Attendance at Closing : - Seller, Hyson Joint Venture, by: Jeffrey S. Aaron, General Partner; - Seller's Counsel by: Kleiger & Kleiger - Messrs. Howard Kleiger and Michael Schacter - Purchaser, Western Beef-Empire Boulevard, Inc., by: Peter Castellana, Jr., President; - Frank Castellana, Secretary; - Purchaser's Counsel, by: Salon, Marrow & Dyckman, LLP, by: George Cacoulidis, Esq.; - Chicago Title Insurarance Company. [LETTERHEAD OF SALON, MARROW & DYCKMAN, LLP] Via Telecopier May 22, 1998 Western Beef, Inc. 47-05 Metropolitan Avenue Ridgewood, New York 11385 Attention: Santino Montalbano Re: Empire Boulevard Note payments Dear Santino: The Empire Boulevard note is payable as follows: Term: Fifteen (15) Years Total Number of Payments: One Hundred Eighty (180) Amount of Note: $2,055,263.16 Monthly Payment: $17,622.30 SPECIAL NOTE: (A) On June 1, 1998 an interest only payment of $9,502.07 is due for the period May 5, 1998 (closing date) through May 31, 1998. (B) Commencing July 1, 1998 monthly payments of $17,622.30 shall be payable the first day of each and every month through to June 1, 2013 at which time the loan will have be paid full. Very truly yours, /s/ George Cacoulidis George Cacoulidis WB-EMPIRE BLVD. EB260000 CLOSING STATEMENT SUMMARY HYSON JOINT VENTURE - PROPERTY 5/4/98 EXPENSES RENT 5/1-4/98 1,612.90 WATER 6,925.04 WATER 954.15 DIF. ON REFUND (1,841.08) --------- TOTAL 7,651.01 ========= SEC DEP. 9/94 25,000.00 --------- REFUND 5/4/98 17,348.99 ========= PROPERTY COSTS: MORTGAGE NOTE-HYSON JOINT VENTURE 2,055,263.16 MISCELLANEOUS TITLE COSTS 12,443.00 MORTGAGE RECORDING TAX 56,519.74 ------------ TOTAL ACQUISITION COST 2,124,225.90 ============ ALLOCATION: LAND 20% 424,845.18 BUILDING 80% 1,699,380.72 ------------ TOTAL 2,124,225.90 ============ EMPIRE BLVD. Compound Period .........: Monthly Nominal Annual Rate .....: 6.250 % Effective Annual Rate ...: 6.432 % Periodic Rate ...........: 0.5208 % Daily Rate ..............: 0.01712% CASH FLOW DATA - -------------------------------------------------------------------------------- Event Start Date Amount Number Period End Date - -------------------------------------------------------------------------------- 1 Loan 05/05/1998 2,055,263.16 1 2 Payment 06/01/1998 9,502.07 1 3 Payment 07/01/1998 17,622.30 180 Monthly 06/01/2013 AMORTIZATION SCHEDULE - Normal Amortization
- ------------------------------------------------------------------------------------------ Date Payment Interest Principal Balance - ------------------------------------------------------------------------------------------ Loan 05/05/1998 2,055,263.16 1 06/01/1998 9,502.07 9,502.08 0.01- 2,055,263.17 2 07/01/1998 17,622.30 10,704.50 6,917.80 2,048,345.37 3 08/01/1998 17,622.30 10,668.47 6,953.83 2,041,391.54 4 09/01/1998 17,622.30 10,632.25 6,990.05 2,034,401.49 5 10/01/1998 17,622.30 10,595.85 7,026.45 2,027,375.04 6 11/01/1998 17,622.30 10,559.25 7,063.05 2,020,311.99 7 12/01/1998 17,622.30 10,522.46 7,099.84 2,013,212.15 1998 Totals 115,235.87 73,184.86 42,051.01 8 01/01/1999 17,622.30 10,485.49 7,136.81 2,006,075.34 9 02/01/1999 17,622.30 10,448.31 7,173.99 1,998,901.35 10 03/01/1999 17,622.30 10,410.95 7,211.35 1,991,690.00 11 04/01/1999 17,622.30 10,373.39 7,248.91 1,984,441.09 12 05/01/1999 17,622.30 10,335.64 7,286.66 1,977,154.43 13 06/01/1999 17,622.30 10,297.68 7,324.62 1,969,829.81 14 07/01/1999 17,622.30 10,259.54 7,362.76 1,962,467.05 15 08/01/1999 17,622.30 10,221.19 7,401.11 1,955,065.94 16 09/01/1999 17,622.30 10,182.64 7,439.66 1,947,626.28 17 10/01/1999 17,622.30 10,143.89 7,478.41 1,940,147.87 18 11/01/1999 17,622.30 10,104.94 7,517.36 1,932,630.51 19 12/01/1999 17,622.30 10,065.79 7,556.51 1,925,074.00 1999 Totals 211,467.60 123,329.45 88,138.15 20 01/01/2000 17,622.30 10,026.43 7,595.87 1,917,478.13 21 02/01/2000 17,622.30 9,986.87 7,635.43 1,909,842.70 22 03/01/2000 17,622.30 9,947.10 7,675.20 1,902,167.50 23 04/01/2000 17,622.30 9,907.13 7,715.17 1,894,452.33 24 05/01/2000 17,622.30 9,866.94 7,755.36 1,886,696.97 25 06/01/2000 17,622.30 9,826.55 7,795.75 1,878,901.22 26 07/01/2000 17,622.30 9,785.95 7,836.35 1,871,064.87
EMPIRE BLVD.
- ------------------------------------------------------------------------------------------ Date Payment Interest Principal Balance - ------------------------------------------------------------------------------------------ 27 08/01/2000 17,622.30 9,745.13 7,877.17 1,863,187.70 28 09/01/2000 17,622.30 9,704.11 7,918.19 1,855,269.51 29 10/01/2000 17,622.30 9,662.87 7,959.43 1,847,310.08 30 11/01/2000 17,622.30 9,621.41 8,000.89 1,839,309.19 31 12/01/2000 17,622.30 9,579.74 8,042.56 1,831,266.63 2000 Totals 211,467.60 117,660.23 93,807.37 32 01/01/2001 17,622.30 9,537.85 8,084.45 1,823,182.18 33 02101/2001 17,622.30 9,495.75 8,126.55 1,815,055.63 34 03/01/2001 17,622.30 9,453.42 8,168.88 1,806,886.75 35 04/01/2001 17,622.30 9,410.87 8,211.43 1,798,675.32 36 05/01/2001 17,622.30 9,368.11 8,254.19 1,790,421.13 37 06/01/2001 17,622.30 9,325.11 8,297.19 1,782,123.94 38 07/01/2001 17,622.30 9,281.90 8,340.40 1,773,783.54 39 08/01/2001 17,622.30 9,238.46 8,383.84 1,765,399.70 40 09/01/2001 17,622.30 9,194.79 8,427.51 1,756,972.19 41 10/01/2001 17,622.30 9,150.90 8,471.40 1,748,500.79 42 11/01/2001 17,622.30 9,106.78 8,515.52 1,739,985.27 43 12/01/2001 17,622.30 9,062.43 8,559.87 1,731,425.40 2001 Totals 211,467.60 111,626.37 99,841.23 44 01/01/2002 17,622.30 9,017.85 8,604.45 1,722,820.95 45 02/01/2002 17,622.30 8,973.03 8,649.27 1,714,171.68 46 03/01/2002 17,622.30 8,927.98 8,694.32 1,705,477.36 47 04/01/2002 17,622.30 8,882.70 8,739.60 1,696,737.76 48 05/01/2002 17,622.30 8,837.18 8,785.12 1,687,952.64 49 06/01/2002 17,622.30 8,791.42 8,830.88 1,679,121.76 50 07/01/2002 17,622.30 8,745.43 8,876.87 1,670,244.89 51 08/01/2002 17,622.30 8,699.20 8,923.10 1,661,321.79 52 09/01/2002 17,622.30 8,652.72 8,969.58 1,652,352.21 53 10/01/2002 17,622.30 8,606.01 9,016.29 1,643,335.92 54 11/01/2002 17,622.30 8,559.05 9,063.25 1,634,272.67 55 12/01/2002 17,622.30 8,511.84 9,110.46 1,625,162.21 2002 Totals 211,467.60 105,204.41 106,263.19 56 01/01/2003 17,622.30 8,464.39 9,157.91 1,616,004.30 57 02/01/2003 17,622.30 8,416.69 9,205.61 1,606,798.69 58 03/01/2003 17,622.30 8,368.75 9,253.55 1,597,545.14 59 04/01/2003 17,622.30 8,320.55 9,301.75 1,588,243.39 60 05/01/2003 17,622.30 8,272.11 9,350.19 1,578,893.20 61 06/01/2003 17,622.30 8,223.41 9,398.89 1,569,494.31 62 07/01/2003 17,622.30 8,174.45 9,447.85 1,560,046.46 63 08/01/2003 17,622.30 8,125.25 9,497.05 1,550,549.41 64 09/01/2003 17,622.30 8,075.78 9,546.52 1,541,002.89 65 10/01/2003 17,622.30 8,026.06 9,596.24 1,531,406.65 66 11/01/2003 17,622.30 7,976.08 9,646.22 1,521,760.43 67 12/01/2003 17,622.30 7,925.84 9,696.46 1,512,063.97 2003 Totals 211,467.60 98,369.36 113,098.24
EMPIRE BLVD.
- ------------------------------------------------------------------------------------------ Date Payment Interest Principal Balance - ------------------------------------------------------------------------------------------ 68 01/01/2004 17,622.30 7,875.34 9,746.96 1,502,317.01 69 02/01/2004 17,622.30 7,824.57 9,797.73 1,492,519.28 70 03/01/2004 17,622.30 7,773.54 9,848.76 1,482,670.52 71 04/01/2004 17,622.30 7,722.25 9,900.05 1,472,770.47 72 05/01/2004 17,622.30 7,670.68 9,951.62 1,462,818.85 73 06/01/2004 17,622.30 7,618.85 10,003.45 1,452,815.40 74 07/01/2004 17,622.30 7,566.75 10,055.55 1,442,759.85 75 08/01/2004 17,622.30 7,514.38 10,107.92 1,432,651.93 76 09/01/2004 17,622.30 7,461.73 10,160.57 1,422,491.36 77 10/01/2004 17,622.30 7,408.81 10,213.49 1,412,277.87 78 11/01/2004 17,622.30 7,355.62 10,266.68 1,402,011.19 79 12/01/2004 17,622.30 7,302.15 10,320.15 1,391,691.04 2004 Totals 211,467.60 91,094.67 120,372.93 80 01/01/2005 17,622.30 7,248.39 10,373.91 1,381,317.13 81 02/01/2005 17,622.30 7,194.36 10,427.94 1,370,889.19 82 03/01/2005 17,622.30 7,140.05 10,482.25 1,360,406.94 83 04/01/2005 17,622.30 7,085.46 10,536.84 1,349,870.10 84 05/01/2005 17,622.30 7,030.58 10,591.72 1,339,278.38 85 06/01/2005 17,622.30 6,975.41 10,646.89 1,328,631.49 86 07/01/2005 17,622.30 6,919.96 10,702.34 1,317,929.15 87 08/01/2005 17,622.30 6,864.22 10,758.08 1,307,171.07 88 09/01/2005 17,622.30 6,808.19 10,814.11 1,296,356.96 89 10/01/2005 17,622.30 6,751.86 10,870.44 1,285,486.52 90 11/01/2005 17,622.30 6,695.25 10,927.05 1,274,559.47 91 12/01/2005 17,622.30 6,638.33 10,983.97 1,263,575.50 2005 Totals 211,467.60 83,352.06 128,115.54 92 01/01/2006 17,622.30 6,581.13 11,041.17 1,252,534.33 93 02/01/2006 17,622.30 6,523.62 11,098.68 1,241,435.65 94 03/01/2006 17,622.30 6,465.81 11,156.49 1,230,279.16 95 04/01/2006 17,622.30 6,407.71 11,214.59 1,219,064.57 96 05/01/2006 17,622.30 6,349.30 11,273.00 1,207,791.57 97 06/01/2006 17,622.30 6,290.58 11,331.72 1,196,459.85 98 07/01/2006 17,622.30 6,231.56 11,390.74 1,185,069.11 99 08/01/2006 17,622.30 6,172.24 11,450.06 1,173,619.05 100 09/01/2006 17,622.30 6,112.60 11,509.70 1,162,109.35 101 10/01/2006 17,622.30 6,052.66 11,569.64 1,150,539.71 102 11/01/2006 17,622.30 5,992.40 11,629.90 1,138,909.81 103 12/01/2006 17,622.30 5,931.83 11,690.47 1,127,219.34 2006 Totals 211,467.60 75,111.44 136,356.16 104 01/01/2007 17,622.30 5,870.94 11,751.36 1,115,467.98 105 02/01/2007 17,622.30 5,809.73 11,812.57 1,103,655.41 106 03/01/2007 17,622.30 5,748.21 11,874.09 1,091,781.32 107 04/01/2007 17,622.30 5,686.36 11,935.94 1,079,845.38 108 05/01/2007 17,622.30 5,624.20 11,998.10 1,067,847.28 109 06/01/2007 17,622.30 5,561.71 12,060.59 1,055,786.69
EMPIRE BLVD
- ------------------------------------------------------------------------------------------ Date Payment Interest Principal Balance - ------------------------------------------------------------------------------------------ 110 07/01/2007 17,622.30 5,498.89 12,123.41 1,043,663.28 111 08/01/2007 17,622.30 5,435.75 12,186.55 1,031,476.73 112 09/01/2007 17,622.30 5,372.28 12,250.02 1,019,226.71 113 10/01/2007 17,622.30 5,308.48 12,313.82 1,006,912.89 114 11/01/2007 17,622.30 5,244.34 12,377.96 994,534.93 115 12/01/2007 17,622.30 5,179.87 12,442.43 982,092.50 2007 Totals 211,467.60 66,340.76 145,126.84 116 01/01/2008 17,622.30 5,115.07 12,507.23 969,585.27 117 02/01/2008 17,622.30 5,049.93 12,572.37 957,012.90 118 03/01/2008 17,622.30 4,984.44 12,637.86 944,375.04 119 04/01/2008 17,622.30 4,918.62 12,703.68 931,671.36 120 05/01/2008 17,622.30 4,852.46 12,769.84 918,901.52 121 06/01/2008 17,622.30 4,785.95 12,836.35 906,065.17 122 07/01/2008 17,622.30 4,719.09 12,903.21 893,161.96 123 08/01/2008 17,622.30 4,651.89 12,970.41 880,191.55 124 09/01/2008 17,622.30 4,584.33 13,037.97 867,153.58 125 10/01/2008 17,622.30 4,516.43 13,105.87 854,047.71 126 11/01/2008 17,622.30 4,448.17 13,174.13 840,873.58 127 12/01/2008 17,622.30 4,379.55 13,242.75 827,630.83 2008 Totals 211,467.60 57,005.93 154,461.67 128 01/01/2009 17,622.30 4,310.58 13,311.72 814,319.11 129 02/01/2009 17,622.30 4,241.25 13,381.05 800,938.06 130 03/01/2009 17,622.30 4,171.55 13,450.75 787,487.31 131 04/01/2009 17,622.30 4,101.50 13,520.80 773,966.51 132 05/01/2009 17,622.30 4,031.08 13,591.22 760,375.29 133 06/01/2009 17,622.30 3,960.29 13,662.01 746,713.28 134 07/01/2009 17,622.30 3,889.13 13,733.17 732,980.11 135 08/01/2009 17,622.30 3,817.61 13,804.69 719,175.42 136 09/01/2009 17,622.30 3,745.71 13,876.59 705,298.83 137 10/01/2009 17,622.30 3,673.43 13,948.87 691,349.96 138 11/01/2009 17,622.30 3,600.78 14,021.52 677,328.44 139 12/01/2009 17,622.30 3,527.75 14,094.55 663,233.89 2009 Totals 211,467.60 47,070.66 164,396.94 140 01/01/2010 17,622.30 3,454.34 14,167.96 649,065.93 141 02/01/2010 17,622.30 3,380.55 14,241.75 634,824.18 142 03/01/2010 17,622.30 3,306.38 14,315.92 620,508.26 143 04/01/2010 17,622.30 3,231.82 14,390.48 606,117.78 144 05/01/2010 17,622.30 3,156.87 14,465.43 591,652.35 145 06/01/2010 17,622.30 3,081.52 14,540.78 577,111.57 146 07/01/2010 17,622.30 3,005.79 14,616.51 562,495.06 147 08/01/2010 17,622.30 2,929.66 14,692.64 547,802.42 148 09/01/2010 17,622.30 2,853.14 14,769.16 533,033.26 149 10/01/2010 17,622.30 2,776.22 14,846.08 518,187.18 150 11/01/2010 17,622.30 2,698.89 14,923.41 503,263.77 151 12/01/2010 17,622.30 2,621.17 15,001.13 488,262.64
EMPIRE BLVD.
- ------------------------------------------------------------------------------------------ Date Payment Interest Principal Balance - ------------------------------------------------------------------------------------------ 2010 Totals 211,467.60 36,496.35 174,971.25 152 01/01/2011 17,622.30 2,543.04 15,079.26 473,183.38 153 02/01/2011 17,622.30 2,464.50 15,157.80 458,025.58 154 03/01/2011 17,622.30 2,385.55 15,236.75 442,788.83 155 04/01/2011 17,622.30 2,306.19 15,316.11 427,472.72 156 05/01/2011 17,622.30 2,226.42 15,395.88 412,076.84 157 06/01/2011 17,622.30 2,146.23 15,476.07 396,600.77 158 07/01/2011 17,622.30 2,065.63 15,556.67 381,044.10 159 08/01/2011 17,622.30 1,984.61 15,637.69 365,406.41 160 09/01/2011 17,622.30 1,903.16 15,719.14 349,687.27 161 10/01/2011 17,622.30 1,821.29 15,801.01 333,886.26 162 11/01/2011 17,622.30 1,738.99 15,883.31 318,002.95 163 12/01/2011 17,622.30 1,656.27 15,966.03 302,036.92 2011 Totals 211,467.60 25,241.88 186,225.72 164 01/01/2012 17,622.30 1,573.11 16,049.19 285,987.73 165 02/01/2012 17,622.30 1,489.52 16,132.78 269,854.95 166 03/01/2012 17,622.30 1,405.50 16,216.80 253,638.15 167 04/01/2012 17,622.30 1,321.03 16,301.27 237,336.88 168 05/01/2012 17,622.30 1,236.13 16,386.17 220,950.71 169 06/01/2012 17,622.30 1,150.79 16,471.51 204,479.20 170 07/01/2012 17,622.30 1,065.00 16,557.30 187,921.90 171 08/01/2012 17,622.30 978.76 16,643.54 171,278.36 172 09/01/2012 17,622.30 892.08 16,730.22 154,548.14 173 10/01/2012 17,622.30 804.94 16,817.36 137,730.78 174 11/01/2012 17,622.30 717.35 16,904.95 120,825.83 175 12/01/2012 17,622.30 629.30 16,993.00 103,832.83 2012 Totals 211,467.60 13,263.51 198,204.09 176 01/01/2013 17,622.30 540.80 17,081.50 86,751.33 177 02/01/2013 17,622.30 451.83 17,170.47 69,580.86 178 03/01/2013 17,622.30 362.40 17,259.90 52,320.96 179 04/01/2013 17,622.30 272.51 17,349.79 34,971.17 180 05/01/2013 17,622.30 182.14 17,440.16 17,531.01 181 06/01/2013 17,622.30 91.29 17,531.01 0.00 2013 Totals 105,733.80 1,900.97 103,832.83 Grand Totals 3,181,516.07 1,126,252.91 2,055,263.16
EX-10.23 4 CONTRACT OF SALE Distributed Julius Blumberg, Inc. NYC 10013 154 Contract of sale for New York office, commercial and multi-family residential premises. 2-95 Prepared by the Real Property Committee of the Association of the Bar of the City of New York. NOTE: This form is intended to cover matters to most transactions. Provisions should be added, altered or deleted to suit the circumstances of a particular transaction. Contract of Sale -- Office, Commercial and Multi-Family Residential Premises Table of Contents Section 1. Sale of premises and acceptable title Section 2. Purchase price, acceptable funds, existing mortgages, purchase money mortgage, escrow of downpayment and foreign persons Section 3. The closing Section 4. Representations and warranties of seller Section 5. Acknowledgements of purchaser Section 6. Seller's obligations as to leases Section 7. Responsibility for violations Section 8. Destruction, damage or condemnation Section 9. Covenants of seller Section 10. Seller's closing obligations Section 11. Purchaser's closing obligations Section 12. Apportionments Section 13. Objections to title, failure of seller or purchaser to perform and vendee's lien Section 14. Broker Section 15. Notices Section 16. Limitations on survival of representations, warranties, covenants and other obligations Section 17. Gains tax and miscellaneous provisions Signatures and receipt by escrowee Schedule A. Description of premises (to be attached) Schedule B. Permitted exceptions Schedule C. Purchase price Schedule D. Miscellaneous Schedule E. Rent schedule (to be attached) CONTRACT dated 1998 between LOJO REALTY, INC., a New York corporation, having an office at 73-39 68th Avenue, Middle Village, New York 11379, ("Seller") and Western Beef Properties, Inc. a New York corporation, having an office at 47-05 Metropolitan Avenue, Ridgewood, New York 11385, ("Purchaser"). Seller and Purchaser hereby covenant and agree as follows: Section 1. Sale of Premises and Acceptable Title ss.1.01. Seller shall sell to Purchaser, and Purchaser shall purchase from Seller, at the price and upon the terms and conditions set forth in this contract: (a) the parcel of land more particularly described in Schedule A attached hereto ("Land"); (b) all buildings and improvements situated on the Land (collectively, "Building"); (c) all right, title and interest of Seller, if any, in and to the land lying in the bed of any street or highway in front of or adjoining the Land to the center line thereof and to any unpaid award for any taking by condemnation or any damage to the Land by reason of a change of grade of any street or highway; (d) the appurtenances and all the estate and rights of Seller in and to the Land and Building; and (e) all right, title and interest of Seller, if any, in and to the fixtures, equipment and other personal property attached or appurtenant to the Building (collectively, "Premises"). The Premises are located at or known as 1071-1077 Wycoff Avenue, Queens, New York. ss.1.02. Seller shall convey and Purchaser shall accept fee simple title to the Premises in accordance with the terms of this contract, subject only to: (a) the matters set forth in Schedule B attached hereto (collectively, "Permitted Exceptions"); and (b) such other matters as (i) the title insurer specified in Schedule D attached hereto (or if none is so specified, then any title insurer licensed to do business by the State of New York) shall be willing, without special premium, to omit as exceptions to coverage or to except with insurance against collection out of or enforcement against the Premise provided the cost thereof is borne by Seller and (ii) shall be accepted by any lender described in Section 274-a of the Real Property Law ("Institutional Lender") which has committed in writing to provide mortgage financing to Purchaser for the purchase of the Premises ("Purchaser's Institutional Lender"), Section 2. Purchase Price, Acceptable Funds, Existing Mortgages, Purchase Money Mortgage, Escrow of Downpayment and Foreign Persons ss.2.01. The purchase price ("Purchase Price") to be paid by Purchaser to Seller for the Premises as provided in Schedule C attached hereto is $250,000.00 ss.2.02. All monies payable under this contract, unless otherwise specified in this contract, shall be paid by (a) certified checks of Purchaser or any person making a purchase money loan to Purchaser drawn on any bank, savings bank, trust company or savings and loan association having a banking office in the State of New York or (b) official bank checks drawn by any such banking institution, payable to the order of Seller, except that uncertified checks of Purchaser payable to the order of Seller up to the amount of one-half of one percent of the Purchase Price shall be acceptable for sums payable to Seller at the Closing. ss.2.04. (a) If Schedule C provides for payment of a portion of the Purchase Price by execution and delivery to Seller of a note secured by a purchase money mortgage ("Purchase Money Mortgage"), such note and Purchase Money Mortgage shall be drawn by the attorney for the Seller on the most recent forms of the New York Board of Title Underwriters for notes and for mortgages of like lien, as modified by this contract. At the Closing, Purchaser shall pay the mortgage recording tax and recording fees therefor and the filing fees for any financing statements delivered in connection therewith. (c) The Purchase Money Mortgage shall contain the following additional provisions: (i) "The mortgagor or any owner of the mortgaged premises shall have the right to prepay the entire unpaid indebtedness together with accrued interest, but without penalty, at any time on not less than 10 days' written notice to the holder hereof." (ii) "Notwithstanding anything to the contrary contained herein, the obligation of the mortgagor for the payment of the indebtedness and for the performance of the terms, covenants and conditions contained herein and in the note secured hereby is limited solely to recourse against the property secured by this mortgage, and in no event shall the mortgagor or any principal of the mortgagor, disclosed or undisclosed, be personally liable for any breach of or default under the note [ILLEGIBLE] mortgage or for any deficiency resulting from or through any proceedings to foreclose this mortgage, nor shall any deficiency judgment, money judgment or other personal judgment be sought or entered against the mortgagor or any principal of the mortgagor, disclosed or undisclosed, but the foregoing shall not adversely affect the lien of this mortgage or the mortgagee's right of foreclosure." (iii) "In addition to performing its obligations under Section 274-a of the Real Property Law, the mortgagee, if other than one of the institutions listed in Section 274-a, agrees that, within 10 days after written request by the mortgagor, but not more than twice during any period of 12 consecutive months, it will execute, acknowledge and deliver without charge a certificate of reduction in recordable form (a) certifying as to (1) the then unpaid principal balance of the indebtedness secured hereby, (2) the maturity date thereof, (3) the rate of interest, (4) the last date to which interest has been paid and (5) the amount of any escrow deposits then held by the mortgagee, and (b) stating, to the knowledge of the mortgagee, whether there are any alleged defaults hereunder and, if so, specifying the nature thereof." (iv) "All notices required or desired to be given under this mortgage shall be in writing and shall be delivered personally or shall be sent by prepaid registered or certified mail, addressed to the mortgagor and mortgagee at the addresses specified in this mortgage or to such other parties or at such other addresses, not exceeding two, as may be designated in a notice given to the other party or parties in accordance with the provisions hereof." (v) The additional provisions, if any, specified in a rider hereto. ss.2.05. (a) If the sum paid under paragraph (a) of Schedule C or any other sums paid on account of the Purchase Price prior to the Closing (collectively, "Downpayment") are paid by check or checks drawn to the order of and delivered to Seller's attorney or another escrow agent ("Escrowee"), the Escrowee shall hold the proceeds thereof in escrow in a special bank account (or as otherwise agreed in writing by Seller, Purchaser and Escrowee) until the Closing or sooner termination of this contract and shall pay over or apply such proceeds in accordance with the terms of this section. Escrowee need not hold such proceeds in an interest-bearing account, but if any interest is earned thereon, such interest shall be paid to the same party entitled to the escrowed proceeds, and the party receiving such interest shall pay any income taxes thereon. The tax identification numbers of the parties are either set forth in Schedule D or shall be furnished to Escrowee upon request. At the Closing, such proceeds and the interest thereon, if any, shall be paid by Escrowee to Seller. If for any reason the Closing does not occur and either party makes a written demand upon Escrowee for payment of such amount, Escrowee shall give written notice to the other party of such demand. If Escrowee does not receive a written objection from the other party to the proposed payment within 10 business days after the giving of such notice, Escrowee is hereby authorized to make such payment. If Escrowee does receive such written objection within such 10 day period or if for any other reason Escrowee in good faith shall elect not to make such payment, Escrowee shall continue to hold such amount until otherwise directed by written instructions from the parties to this contract or a final judgment of a court. However, Escrowee shall have the right at any time to deposit the escrowed proceeds and interest thereon, if any, with the clerk of the Supreme Court of the county in which the Land is located. Escrowee shall give written notice of such deposit to Seller and Purchaser. Upon such deposit Escrowee shall be relieved and discharged of all further obligations and responsibilities hereunder. (b) 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 that Escrowee shall not be liable to either of the parties for any act or omission on its part unless taken or suffered in bad faith, in willful disregard of this contract or involving gross negligence. Seller and Purchaser shall jointly and severally indemnify and hold Escrowee harmless from and against all costs, claims and expenses, including reasonable attorneys' fees, incurred in connection with the performance of Escrowee's duties hereunder, except with respect to actions or omissions taken or suffered by Escrowee in bad faith, in willful disregard of this contract or involving gross negligence on the part of Escrowee. (c) Escrowee has acknowledged agreement to these provisions by signing in the place indicated on the signature page of this contract. ss.2.06. In the event that Seller is a "foreign person", as defined in Internal Revenue Code Section 1445 and regulations issued thereunder (collectively, the "Code Withholding Section"), or in the event that Seller fails to deliver the certification of non-foreign status required under ss.10.12(c), or in the event that Purchaser is not entitled under the Code Withholding Section to rely on such certification, Purchaser shall deduct and withhold from the Purchase Price a sum equal to ten percent (10%) thereof and shall at Closing remit the withheld amount with Forms 8288 and 8288A (or any successors thereto) to the Internal Revenue Service; and the cash balance of the Purchase Price payable to Seller at the Closing after deduction of net adjustments, apportionments and credits (if any) to be made or allowed in favor of Seller at the Closing as herein provided is less than ten percent (10%) of the Purchase Price, Purchaser shall have the right to terminate this contract, in which event Seller shall refund the Downpayment to Purchaser and shall reimburse Purchaser for title examination and survey costs as if this contract were terminated pursuant to ss.13.02. The right of termination provided for in this ss.2.06 shall be in addition to and not in limitation of any other rights or remedies available to Purchaser under applicable law. Section 3. The Closing ss.3.01. Except as otherwise provided in this contract, the closing of title pursuant to this contract ("Closing") shall take place on the scheduled date and time of closing specified in Schedule D (the actual date of the Closing being herein referred to as "Closing Date") at the place specified in Schedule D. Section 4. Representations and Warranties of Seller Seller represents and warrants to Purchaser as follows: ss.4.01. Unless otherwise provided in this contract, Seller is the sole owner of the Premises. ss.4.02. If the Premises are encumbered by an Existing Mortgage(s), no written notice has been received from the Mortgagee(s) asserting that a default or breach exists thereunder which remains uncured and no such notice shall have been received and remain uncured on the Closing Date. If copies of documents constituting the Existing Mortgage(s) and note(s) secured thereby have been exhibited to and initialed by Purchaser or its representative, such copies are true copies of the originals and the Existing Mortgage(s) and note(s) secured thereby have not been modified or amended except as shown in such documents. ss.4.06. If an insurance schedule is attached hereto, such schedule lists all insurance policies presently affording coverage with respect to the Premises, and the information contained therein is accurate as of the date set forth therein or, if no date is set forth therein, as of the date hereof. ss.4.10. The assessed valuation and real estate taxes set forth in Schedule D, if any, are the assessed valuation of the Premises and the taxes paid or payable with respect thereto for the fiscal year indicated in such schedule. Except as otherwise set forth in Schedule D, there are no tax abatements or exemptions affecting the Premises. ss.4.13. Except as otherwise set forth in Schedule D, Seller has no actual knowledge of any assessment payable in annual installments, or any part thereof, which has become a lien on the Premises. ss.4.14. Seller is not a "foreign person" as defined in the Code Withholding Section. Section 5. Acknowledgments of Purchaser Purchaser acknowledges that: ss.5.01. Purchaser has inspected the Premises, is fully familiar with the physical condition and state of repair thereof, and, subject to the provisions of ss.7.01, ss.8.01, and ss.9.04, shall accept the Premises "as is" and in their present condition, subject to reasonable use, wear, tear and natural deterioration between now and the Closing Date, without any reduction in the Purchase Price for any change in such condition by reason thereof subsequent to the date of this contract. ss.5.02. Before entering into this contract, Purchaser has made such examination of the Premises, the operation, income and expenses thereof and all other matters affecting or relating to this transaction as Purchaser deemed necessary. In entering into this contract, 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 contract, whether or not any such representations, warranties or statements were made in writing or orally. Section 6. Seller's Obligations as to Leases Section 7. Responsibility for Violations. See Schedule "D" ss.7.04. If required, Seller, upon written request by Purchaser, shall promptly furnish to Purchaser written authorizations to make any necessary searches for the purposes of determining whether notes or notices of violations have been noted or issued with respect to the Premises or liens have attached thereto. Section 8. Destruction, Damage or Condemnation ss.8.01. The provisions of Section 5-1311 of the General Obligations Law shall apply to the sale and purchase provided for in this contract. Section 9. Covenants of Seller Seller covenants that between the date of this contract and the Closing: ss.9.03. If an insurance schedule is attached hereto, Seller shall maintain in full force and effect until the Closing the insurance policies described in such schedule or renewals thereof for no more than one year of those expiring before the Closing. ss.9.05. Seller shall not withdraw, settle or otherwise compromise any protest or reduction proceeding affecting real estate taxes assessed against the Premises for any fiscal period in which the Closing is to occur or any subsequent fiscal period without the prior written consent of Purchaser, which consent shall not be unreasonably withheld. Real estate tax refunds and credits received after the Closing Date which are attributable to the fiscal tax year during which the Closing Date occurs shall be apportioned between Seller and Purchaser, after deducting the expenses of collection thereof, which obligation shall survive the Closing. ss.9.06. Seller shall allow Purchaser or Purchaser's representatives access to the Premises, and documents required to be delivered under this contract upon reasonable prior notice at reasonable times. Section 10. Seller's Closing Obligations At the Closing, Seller shall deliver the following to Purchaser: ss.10.01. A statutory form of bargain and sale deed with covenant against grantor's acts, containing the covenant required by Section 13 of the Lien Law, and properly executed in proper form for recording so as to convey the title required by this contract. ss.10.06. An assignment to Purchaser, without recourse or warranty, of all of the interest of [ILLEGIBLE] those insurance policies, certificates, permits and other documents to be delivered to Purchaser at the Closing which are then in effect and are assignable by Seller. ss.10.09. All original insurance policies with respect to which premiums are to be apportioned or, if unobtainable, true copies or certificates thereof. ss.10.10. To the extent they are then in Seller's possession and not posted at the Premises, certificates, licenses, permits, authorizations and approvals issued for or with respect to the Premises by governmental and quasi-governmental authorities having jurisdiction. ss.10.11. Such affidavits as Purchaser's title company shall reasonably require in order to omit from its title insurance policy all exceptions for judgments, bankruptcies or other returns against persons or entities whose names are the same as or similar to Seller's name. ss.10.12(a) Checks to the order of the appropriate officers in payment of all applicable real property transfer taxes and copies of any required tax returns therefor executed by Seller, which checks shall be certified or official bank checks if required by the taxing authority, unless Seller elects to have Purchaser pay any of such taxes and credit Purchaser with the amount thereof, (b) the Tentative Assessment and Return or Statement of No Tax Due or affidavit (whichever is applicable) and the checks and other items (if any) required under ss. 17.09(a), and (c) a certification of non-foreign status, in form required by the Code Withholding Section, signed under penalty of perjury. Seller understands that such certification will be retained by Purchaser and will be made available to the Internal Revenue Service on request. ss.10.16. If Seller is a corporation and if required by Section 909 of the Business Corporation Law, a resolution of Seller's board of directors authorizing the sale and delivery of the deed and a certificate executed by the secretary or assistant secretary of Seller certifying as to the adoption of such resolution and setting forth facts showing that the transfer complies with the requirements of such law. The deed referred to in ss.10.01 shall also contain a recital sufficient to establish compliance with such law. ss.10.17. Possession of the Premises in the condition required by this contract. ss.10.18. Any other documents required by this contract to be delivered by Seller. Section 11. Purchaser's Closing Obligations At the Closing, Purchaser shall: ss.11.01. Deliver to Seller checks in payment of the portion of the Purchase Price payable at the Closing, as adjusted for apportionments under Section 12, plus the amount of escrow deposits, if any, assigned pursuant to ss.10.08. ss.11.02. Deliver to Seller the Purchase Money Mortgage, if any, in proper form for recording, the note secured thereby, all properly executed, and Purchaser shall pay the mortgage recording tax and recording fees for any Purchase Money Mortgage. ss.11.04. Cause the deed to be recorded, duly complete all required real property transfer tax returns and cause all such returns and checks in payment of such taxes to be delivered to the appropriate officers promptly after the Closing. ss.11.05. Deliver any other documents required by this contract to be delivered by Purchaser. Section 12. Apportionments ss.12.01. The following apportionments shall be made between the parties at the Closing as of the close of business on the day prior to the Closing Date: (c) real estate taxes, water charges, sewer rents and vault charges, if any, on the basis of the fiscal period for which assessed, except that if there is a water meter on the Premises, apportionment at the Closing shall be based on the last available reading, subject to adjustment after the Closing when the next reading is available; (i) insurance premiums on transferable insurance policies listed on a schedule hereto or permitted renewals thereof; (k) any other items listed in Schedule D. If the Closing shall occur before a new tax rate is fixed, the apportionment of taxes at the Closing shall be upon the basis of the old tax rate for the preceding period applied to latest assessed valuation. Promptly after the new tax rate is fixed, the apportionment of taxes shall be recomputed. Any discrepancy resulting from such recomputation and any errors or omissions in computing apportionments at Closing shall be promptly corrected, which obligations shall survive the Closing. Section 13. Objections to Title, Failure of Seller or Purchaser to Perform and Vendee's Lien ss.13.01. Purchaser shall promptly order an examination of title and shall cause a copy of the title report to be forwarded to Seller's attorney upon receipt. Seller shall be entitled to a reasonable adjournment or adjournments of the Closing for up to 60 days or until the expiration date of any written commitment of Purchaser's Institutional Lender delivered to Purchaser prior to the scheduled date of Closing, whichever occurs first, to remove any defects in or objections to title noted in such title report and any other defects or objections which may be disclosed on or prior to the Closing Date. ss.13.02. If Seller shall be unable to convey title to the Premises at the Closing in accordance with the provisions of this contract or if Purchaser shall have any other grounds under this contract for refusing to consummate the purchase provided for herein, Purchaser, nevertheless, may elect to accept such title as Seller may be able to convey with a credit against the monies payable at the Closing equal to the reasonably estimated cost to cure the same (up to the Maximum Expense described below), but without any other credit or liability on the part of Seller. If Purchaser shall not so elect, Pur- chaser may terminate this contract and the sole liability of Seller shall be to refund the Downpayment to purchaser and to reimburse Purchaser for the net cost of title examination, but not to exceed the net amount charged by Purchaser's title company therefor without issuance of a policy, and the net cost of updating the existing survey of the Premises or the net cost of a new survey of the Premises if there was no existing survey or the existing survey was not capable of being updated and a new survey was required by Purchaser's Institutional Lender. Upon such refund and reimbursement, this contract shall be null and void and the parties hereto shall be relieved of all further obligations and liability other than any arising under Section 14. Seller shall not be required to bring any action or proceeding or to incur any expense in excess of the Maximum Expense specified in Schedule D (or if none is so specified, the Maximum Expense shall be one-half of one percent of the Purchase Price) to cure any title defect or to enable Seller otherwise to comply with the provisions of this contract, but the foregoing shall not permit Seller to refuse to pay off at the Closing, to the extent of the monies payable at the Closing, mortgages on the Premises, other than Existing Mortgages, of which Seller has actual knowledge. ss.13.03. Any unpaid taxes, assessments, water charges and sewer rents, together with the interest and penalties thereon to a date not less than two days following the Closing Date, and any other liens and encumbrances which Seller is obligated to pay and discharge or which are against corporations, estates or other persons in the chain of title, together with the cost of recording or filing any instruments necessary to discharge such liens and encumbrances of record, may be paid out of the proceeds of the monies payable at the Closing if Seller delivers to Purchaser on the Closing Date official bills for such taxes, assessments, water charges, sewer rents, interest and penalties and instruments in recordable form sufficient to discharge any other liens and encumbrances of record. Upon request made a reasonable time before the Closing, Purchaser shall provide at the Closing separate checks for the foregoing payable to the order of the holder of any such lien, charge or encumbrance and otherwise complying with ss.2.02. If Purchaser's title insurance company is willing to insure both Purchaser and Purchaser's Institutional Lender, if any, that such charges, liens and encumbrances will not be collected out of or enforced against the Premises, then, unless Purchaser's Institutional Lender reasonably refuses to accept such insurance in lieu of actual payment and discharge, Seller shall have the right in lieu of payment and discharge to deposit with the title insurance company such funds or assurances or to pay such special or additional premiums as the title insurance company may require in order to so insure. In such case the charges, liens and encumbrances with respect to which the title insurance company has agreed so to insure shall not be considered objections to title. ss.13.04. If Purchaser shall default in the performance of its obligation under this contract to purchase the Premises, the sole remedy of Seller shall be to retain the Downpayment as liquidated damages for all loss, damage and expense suffered by Seller, including without limitation the loss of its bargain. ss.13.05. Purchaser shall have a vendee's lien against the Premises for the amount of the Downpayment, but such lien shall not continue after default by Purchaser under this contract. Section 14. Broker ss.14.01. If a broker is specified in Schedule D, Seller and Purchaser mutually represent and warrant that such broker is the only broker with whom they have dealt in connection with this contract and that neither Seller nor Purchaser knows of any other broker who has claimed or may have the right to claim a commission in connection with this transaction, unless otherwise indicated in Schedule D. The commission of such broker shall be paid pursuant to separate agreement by the party specified in Schedule D. If no broker is specified in Schedule D, the parties acknowledge that this contract was brought about by direct negotiation between Seller and Purchaser and that neither Seller nor Purchaser knows of any broker entitled to a commission in connection with this transaction. Unless otherwise provided in Schedule D, Seller and purchaser shall indemnify and defend each other against any costs, claims or expenses, including attorneys' fees, arising out of the breach on their respective parts of any representations, warranties or agreements contained in this paragraph. The representations and obligations under this paragraph shall survive the Closing or, if the Closing does not occur, the termination of this contract. Section 15. Notices ss. 15.01. All notices under this contract shall be in writing and shall be delivered personally or shall be sent by prepaid registered or certified mail, addressed as set forth in Schedule D, or as Seller or Purchaser shall otherwise have given notice as herein provided. Section 16. Limitations on Survival of Representations, Warranties, Covenants and other Obligations ss.16.01. Except as otherwise provided in this contract, no representations, warranties, covenants or other obligations of Seller set forth in this contract shall survive the Closing, and no action based thereon shall be commenced after the Closing. The representation warranties, covenants and other obligations of Seller set forth in ss.4.03, ss.6.01 and ss.6.02 shall survive until the Limitation Date specified in Schedule D (or if none is so specified, the Limitation Date shall be the date which is six months after the Closing Date), and no action based thereon shall be commenced after the Limitation Date. ss.16.02. 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 to be performed hereunder, except those obligations of Seller which are expressly stated in this contract to survive the Closing. Section 17. Gains Tax and Miscellaneous Provisions ss.17.01. If consent of the Existing Mortgagee(s) is required under ss.2.03(b), Purchaser shall not assign this contract or its rights hereunder without the prior written consent of Seller. No permitted assignment of Purchaser's rights under this contract shall be effective against Seller unless and until an executed counterpart of the instrument of assignment shall have been delivered to Seller and Seller shall have been furnished with the name and address of the assignee. The term "Purchaser" shall be deemed to include the assignee under any such effective assignment. ss.17.02. This contract embodies and constitutes the entire understanding between the parties with respect to the transaction contemplated herein, and all prior agreements, understandings, representations and statements, oral or written, are merged into this contract. Neither this contract nor any provision hereof may be waived, modified, amended, discharged or terminated except by an instrument signed by the party against whom the enforcement of such waiver, modification, amendment, discharge or termination is sought, and then only to the extent set forth in such instrument. ss.17.03. This contract shall be governed by, and construed in accordance with, the law of the State of New York. ss.17.04. The captions in this contract are inserted for convenience of reference only and in no way define, describe or limit the scope or intent of this contract or any of the provisions hereof. ss.17.05. This contract shall be binding upon and shall inure to the benefit of the parties hereto and their respective heirs or successors and permitted assigns. ss.17.06. This contract shall not be binding or effective until properly executed and delivered by Seller and Purchaser. ss.17.07. As used in this contract, the masculine shall include the feminine and neuter, the singular shall include the plural and the plural shall include the singular, as the context may require. ss.17.08. If the provisions of any schedule or rider to this contract are inconsistent with the provisions of this contract, the provisions of such schedule or rider shall prevail. Set forth in Schedule D is a list of any and all schedules and riders which are attached hereto but which are not listed in the Table of Contents. ss.17.09. (a) If Required, Seller and Purchaser agree 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"). Purchaser agrees to deliver to Seller a duly executed and acknowledged Transferee Questionnaire simultaneously with the execution of this contract or within five (5) business days after subsequent written request from Seller or Seller's attorney. At the Closing, Seller shall deliver (i) an official Statement of No Tax Due or (ii) an official Tentative Assessment and Return accompanied by a certified check or official bank check drawn on any banking institution described in ss.2.02(a), 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 shall be the minimum installment of such tax then permitted to be paid), or (iii) if applicable, a duly executed and acknowledged affidavit in form permitted under the Gains Tax Law claiming exemption therefrom. (b) Seller agrees (i) 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, (ii) to indemnify and save the 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 (iii) to make any other payments and execute, acknowledge and deliver such further documents as may be necessary to comply with the Gains Tax Law. (c) If this contract is assignable by Purchaser, no assignment of any rights hereunder shall be effective unless every assignor and assignee complies in a timely manner with the requirements of the Gains Tax Law applicable to the assignment transaction and unless an assignor or assignee de- livers to Seller at or before the Closing the applicable items referred to in subparagraph (a) of this Section, all as may be required as a prerequisite to the recording of the deed. In addition to making the payments and delivering the instruments and documents referred to above, Purchaser and any assignor or assignee of this contract shall promptly (i) make any other payments and (ii) execute, acknowledge and deliver such further documents and instruments as may be necessary to comply with the Gains Tax Law. (d) Purchaser, if request is made within a reasonable time prior to the Closing Date, shall provide at the Closing a separate certified or official bank check drawn on any banking institution described in ss.2.02(a) 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. (e) The provisions of this ss.17.09 shall survive the delivery of the deed. IN WITNESS WHEREOF, the parties hereto have executed this contract as of the date first above written. Seller: LOJO REALTY, INC. By /s/ Louis Lodato ----------------------------------- Purchaser: WESTERN BEEF PROPERTIES, INC. By /s/ Peter Castellana, Jr. ----------------------------------- Receipt by Escrowee The undersigned Escrowee hereby acknowledges receipt of $ 20,000.00, by check subject to collection, to be held in escrow pursuant to ss.2.05. By: /s/ VITTORIA & FORYSYTHE --------------------------- Schedule A DESCRIPTION OF PREMISES (to be attached separately and to include tax map designation) Schedule B PERMITTED EXCEPTIONS 1. Zoning regulations and ordinances which are not violated by the existing structures or present use thereof and which do not render title uninsurable. Subject to the Provisions of rider Paragraph #1. 2. Consents by the Seller or any former owner of the Premises for the erection of any structure or structures on, under or above any street or streets on which the Premises may abut. 5. Unpaid installments of assessments not due and payable on or before the Closing Date. 6. Financing statements, chattel mortgages and liens on personalty filed more than 5 years prior to the Closing Date and not renewed, or filed against property or equipment no longer located on the Premises or owned by Tenants. 7. (a) Rights of utility companies to lay, maintain, install and repair pipes, lines, poles, conduits, cable boxes and related equipment on, over and under the Premises, provided that none of such rights imposes any monetary obligation on the owner of the Premises or render the Premises uninsurable. (b) Encroachments of stoops, areas, cellar steps, trim cornices, lintels, window sills, awnings, canopies, ledges, fences, hedges, coping and retaining walls projecting from the Premises over any street or highway or over any adjoining property and encroachments of similar elements projecting from adjoining property over the Premises. (c) Revocability or lack of right to maintain vaults, coal chutes, excavations or sub-surface equipment beyond the line of the Premises. (d) Any state of facts that an accurate survey would disclose, provided that such facts do not render title unmarketable or uninsuarable. Purchaser shall not be required to expend any monies in order to render title Insurable, which should be Seller's obligation. Schedule C PURCHASE PRICE The Purchase Price shall be paid as follows: (a) By check subject to collection, the receipt of which is hereby acknowledged by Seller: $20,000.00 (b) By check or checks delivered to Seller at the Closing in accordance with the provisions of ss.2.02: 70,000.00 Any existing mortgages will be cleared of record as of the date of closing. (d) By execution and delivery to Seller by Purchaser or its assignee of a note secured by a Purchase Money Mortgage on the Premises, payable as follows: 160,000.00 with interest at 6% per annum. Eighty-four (84) equal monthly installments of $2,337.37 commencing 1998, and continuing through , 2005 with each monthly installment being used first to pay interest on the unpaid principal sum and then to reduce the principal sum ----------- Purchase Price $250,000.00 =========== Schedule D MISCELLANEOUS 1. Title insurer designated by the parties (ss.1.02): 4. Prepayment Date on or after which Purchase Money Mortgage may be prepaid (ss.2.04(c)): At any time. 5. Seller's tax identification number (ss.2.05): 6. Purchaser's tax identification number (ss.2.05): 7. Scheduled time and date of Closing (ss.3.0l): On or about September 30, 1998 or as the Parties may otherwise agree in writing. 8. Place of Closing (ss.301): Vittoria & Forsythe 630 Fifth Avenue New York, New York 10111 9. Assessed valuation of Premises (ss.4.10): Actual Assessment: Transition Assessment: 10. Fiscal year and annual real estate taxes on Premises (ss.4.10): 11. Tax abatements or exemptions affecting Premises (ss.4.10): 12. Assessments on Premises (ss.4.13): 13. Maximum Amount which Seller must spend to cure violations, etc. (ss.7.02): $3,000.00 14. Maximum Expense of Seller to cure title defects, etc. (ss.13.02): $3,000.00 15. Broker, if any (ss.14.01): None 16. Party to pay broker's commission (ss.14.01): Seller, if any. 17. Address for notices (ss.15.01): If to Seller: Louis Lodato LOJO Realty, Inc. 73-39 68th Avenue Middle Village, New York 11379 with a copy to Seller's attorney: Warren Forsythe Vittoria & Forsythe 630 Fifth Avenue New York, New York 10111 If to Purchaser: Western Beef Properties, Inc. 47-05 Metropolitan Avenue Ridgewood, New York 11385 with a copy to Purchaser's attorney: George Cacoulidis Salon, Marrow & Dyckman LLP 685 Third Avenue New York, New York 10017 18. Limitation Date for actions based on Seller's surviving representations and other obligations (ss.16.01): Six (6) months 19. Additional Schedules or Riders (ss.17.08): 20. See Rider to contract annexed hereto and made a part hereof for additional contract terms and provisions. RIDER RIDER TO CONTRACT OF SALE DATED JULY __, 1998, BY AND BETWEEN LOJO REALTY, INC., AS SELLER, AND WESTERN BEEF PROPERTIES, INC. PURCHASER. 1. Notwithstanding anything to the contrary contained in the standard form of contract of sale, of which this rider is attached, the obligations of Purchaser shall be expressly subject and conditioned upon Purchaser obtaining zoning and building department approval for the construction and maintenance of Purchasers prototypical "Junior's" retail supermarket with parking. By executing the contract of sale and rider, Seller shall be deemed to have consented to any and all of the specifications and details of Purchasers prototypical "Junior's" retail supermarket. In the event Purchaser shall be unable to obtain zoning and building department approval, as aforesaid, then, and in that event, Purchaser shall be entitled to a refund of its down payment upon written demand to Seller's counsel Vittoria & Forsythe, who shall return said down payment within five (5) days of such written demand. 2. Seller shall not be bound nor liable in any manner to Purchaser as a result of any statements, representations or information pertaining to the above premises furnished by any broker, agent, employee, servant or other person, unless the same is specifically embodied in this agreement. 3. Purchasers counsel shall deliver to the attorney for Seller at least two (2) weeks prior to closing a written notice of any title defects or encumbrances. LOJO REALTY, INC. (Seller) BY: /s/ Louis Lodato --------------------------- WESTERN BEEF PROPERTIES, INC. (Purchaser) BY: /s/ Peter Castellana, Jr. --------------------------- Dated: ------------------------- SCHEDULE A All that certain plot, piece or parcel of land, with the buildings and improvements thereon erected, situate, lying and being in the Borough of Queens, City and State of New York, designated on the tax map of the City of New York for the Borough of Queens, as said Tax Map was on July 22, 1975, Block 3555, Lots 1 and 8 property known as 1071-1077 Wycoff Avenue, Queens, New York. CORPORATE RESOLUTION At a special Director's meeting of Western Beef Properties, Inc., (the "Corporation") held on January 29, 1999, at the offices of the Corporation, 47-05 Metropolitan Avenue, Ridgewood, New York, it was resolved by motion made, seconded and by two third vote carried as followed that: WHEREAS, the Corporation having entered into a Contract of Sale to purchase a parcel of vacant land located at 1071-1077 Wycoff Avenue, Flushing, New York, Queens County Block 3555; lot(s) 1 and 8, the "Property" on such terms and conditions as the officers of the Corporation deemed advisable; and WHEREAS, the Contract of Sale requires the Corporation to enter into a purchase money mortgage in the amount of $160,000 to consummate the purchase; NOW, THEREFORE, BE IT: RESOLVED that the Corporation execute and enter into the purchase money mortgage on such terms as the officers of the Corporation deem advisable in order to consummate the Contract of Sale and the purchase of the property. Dated: January 29, 1999 /s/ Peter Castellana, Jr. --------------------------------------------------- Peter Castellana, Jr., President of the Corporation /s/ Peter Admirand --------------------------------------------------- Peter Admirand, Secretary of the Corporation CORPORATE RESOLUTION At a special Director's meeting of Western Beef Properties, Inc., (the "Corporation") held on January 29, 1999, at the offices of the Corporation, 47-05 Metropolitan Avenue, Ridgewood, New York, it was resolved by motion made, seconded and by two third vote carried as followed that: WHEREAS, the Corporation desires to purchase a certain parcel of vacant land located at 1071-1077 Wycoff Avenue, Flushing, New York, Queens County, Block 3555; Lot(s) 1 and 8", the "Property" in furtherance the Corporation's business objectives, and; WHEREAS, the Corporation desires that the purchase should be made on such terms and conditions as the officers of the Corporation deem advisable, NOW, THEREFORE, BE IT: RESOLVED that the Corporation enter into and consummate a Contract of Sale for the purchase of the property on such terms and conditions as the officers of the Corporation deem advisable. Dated: January 29, 1999 /s/ Peter Castellana, Jr. --------------------------------------------------- Peter Castellana, Jr., President of the Corporation /s/ Peter Admirand --------------------------------------------------- Peter Admirand, Secretary of the Corporation AGREEMENT made as of this 29th day of January, 1999 by and between Lojo realty, Inc., having an address of 73-39 68th Avenue, Middle Village, New York 11379, (hereinafter "Seller") and Western Beef Properties, Inc., having an address of 47-05 Metropolitan Avenue Ridgewood, New York 11385, (hereinafter "Purchaser") WITNESSETH: WHEREAS, Seller and Purchaser are parties to a contract of sale wherein Seller agreed to sell and Purchaser agreed to purchase the real property known as l07l-1089 Wyckoff Avenue, Flushing, N.Y. Block: 3555; Lot(s) 1 and 8, (hereinafter the "Contract"); and WHEREAS, there may be certain obligations of the Seller, pursuant to the contract, which remain to be performed; and WHEREAS, Parties wish to set forth their understanding concerning the performance of these obligations, NOW THEREFORE, in consideration of the mutual covenants and conditions herein contained, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: 1. The obligations of Seller under the contract (set forth in #2 below) which have not been performed as of the date of closing January 29, 1999, shall survive the delivery of the deed. 2. Such obligations are the payment of real estate taxes, notices of violations or violations of record against the real property, existing as of January 29, 1999. 3. Seller agrees to indemnify, release and hold harmless the purchaser from any and all costs, suits or actions, of whatsoever nature, arising out of or as a result of Seller's failure to perform it's obligations under the contract. 4. This indemnity shall survive the delivery of the deed for a period of eight (8) months past the date of closing January 29, 1999 only. 5. This agreement may not be changed or modified, except by a writing executed by the parties. IN WITNESS WHEREOF, the parties have hereunto signed and sealed this agreement as of the date set forth below. Accepted and Agreed to: Accepted and Agreed to: Lojo Realty, Inc. Western Beef Properties, Inc. By: /s/ Joseph Lodato V.P. By: /s/ Frank Castellana ---------------------------- ------------------------------------ Dated: January 29, 1999 State of New York ) ) County of Queens ) On this 29th day of January, 1999, before me personally came Frank Castellana, to me known, who being by me duly sworn, did depose and say that he/she resides in 47-05 Metropolitan Avenue, Ridgewood, NY, that he/she is the Vice President of the corporation described in and which executed the foregoing instrument; that he/she knows the seal of said corporation; the seal affixed to said instrument is such corporate seal; that it was so by order of the Board of Directors of said corporation; and that he/she signed his name thereto by like order. /s/ Brian Tracz ---------------------------------------- Notary BRIAN TRACZ Notary Public, State of New York No. 02 TR5011673 Qualified in Queens County Commission Expires May 15, 1999 State of New York ) ) County of Queens ) On this 29th day of January, 1999, before me personally came Joseph Lodato to me known, who being by me duly sworn, did depose and say that he/she resides in 78-12 86th St, Glendale, NY that he/she is the Vice President of the corporation described in and which executed the foregoing instrument; that he/she knows the seal of said corporation; the seal affixed to aid instrument is such corporate seal; that it was so affixed by order of the Board of Directors of said corporation; and that he/she signed his name thereto by like order. /s/ Brian Tracz ---------------------------------------- Notary BRIAN TRACZ Notary Public, State of New York No. 02 TR5011673 Qualified in Queens County Commission Expires May 15, 1999 [ILLEGIBLE] JULIUS SLUMBERS, INC., LAW BLANK PUBLISHERS Bargain & sale deed, with covenant against grantor's acts--Ind. or Corp. CONSULT YOUR LAWYER BEFORE SIGNING THIS INSTRUMENT -- THIS INSTRUMENT SHOULD BE USED BY LAWYERS ONLY ----------------------------------------- THIS INDENTURE, made the 29th day of January, nineteen hundred and ninety-nine BETWEEN LOJO REALTY INC., a New York corporation having an office at 73-39 68th Avenue, Middle Village, New York 11379, party of the first part, and WESTERN BEEF PROPERTIES, INC., a New York corporation having an office at 47-05 Metropolitan Avenue, Ridgewood, New York 11385 party of the second part, WITNESSETH, that the party of the first part, in consideration of Ten and 00/100 ($10.00) dollars, lawful money of the United States, paid by the party of the second part, does hereby grant and release unto the party of the second part, the heirs or successors and assigns of the party of the second part forever, ALL that certain plot, piece or parcel of land, with the buildings and improvements thereon erected, situate, lying and being in the Borough of Queens, city and state of New York, designated on the Tax Map of the City of New York for the Borough of Queens, as said Tax Map was on July 22, 1975, Block 3555, Lots 1 and 8, being bounded and described as follows: BEGINNING at the corner formed by the intersection of the northeasterly side of Wyckoff Avenue and the southeasterly side of Summerfield Avenue; RUNNING THENCE Northeasterly, along the southeasterly side of Summerfield Avenue, 84.51 feet; THENCE Southeasterly, at right angles to the southeasterly side of Summerfield Avenue, 100.05 feet; THENCE Northeasterly, at right angles to the last mentioned course, 4.30 feet; THENCE Southeasterly, at right angles to the northwesterly side of Decatur Street, 100.05 feet to the northwesterly side of Decatur Street; THENCE Southwesterly along the northwesterly side of Decatur Street, 100.08 feet to the northeasterly side of Wyckoff Avenue; THENCE Northwesterly along the northeasterly side of Wyckoff Avenue, 200.42 feet to the point or place of BEGINNING. The premises herein described are and are intended to be the same as those described indeed recorded in reel 2345 at page 831 This conveyance has been made with the unanimous consent in writing of all stockholders of the party of the first part. TOGETHER with all right, title and interest, if any, of the party of the first part in and to any streets and roads abutting the above described premises to the center lines thereof, TOGETHER with the appurtenances and all the estate and rights of the party of the first part in and to said premises, TO HAVE AND TO HOLD the premises herein granted unto the party of the second part, the heirs or successors and assigns of the party of the second part forever. AND the party of the first part covenants that the party of the first part has not done or suffered anything whereby the said premises have been incumbered in any way whatever, except as aforesaid. AND the party of the first part, in compliance with Section 13 of the Lien Law, covenants that the party of the first part will receive the consideration for this conveyance and will hold the right to receive such consideration as a trust fund to be applied first for the purpose of paying the cost of the improvement and will apply the same first to the payment of the cost of the improvement before using any part of the total of the same for any other purpose. The word "party" shall be construed as if it read "parties" whenever the sense of this indenture so requires. IN WITNESS WHEREOF, the party of the first part has duly executed this deed the day and year first above written. IN PRESENCE OF: LOJO REALTY INC. /s/ Warren Forsythe By: /s/ Joseph Lodato, Jr. V.P. - ---------------------------------- ------------------------------------- STATE OF NEW YORK, COUNTY OF ss: On the day of 19 , before me personally came to me known to be the individual described in and who executed the foregoing instrument, and acknowledged that executed the same. STATE OF NEW YORK, COUNTY OF QUEENS ss: On the 29th day of January 1999 , before me personally came JOSEPH R. LODATO to me known, who, being known by me duly sworn, did depose and say that he resides at No. 78-12 86th St Glendale, NY; that he is the Vice President of LOJO REALTY, INC., the corporation described in and which executed the foregoing instrument; that he knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by order of the board of directors of said corporation, and that he signed his name thereto by like order. /s/ Brian Tracz BRIAN TRACZ Notary Public, State of New York No. 02 TR5011673 Qualified in Queens County Commission Expires May 15, 1999 Bargain and Sale Deed WITH COVENANT AGAINST GRANTOR'S ACTS STATE OF NEW YORK, COUNTY OF ss: On the day of 19 , before me personally came to me known to be the individual described in and who executed the foregoing instrument, and acknowledged that executed the same. STATE OF NEW YORK, COUNTY OF ss: On the day of 19 , before me personally came the subscribing witness to the foregoing instrument, with whom I am personally acquainted, who, being by me duly sworn, did depose and say that he resides at No. ; that he knows to be the individual described in and who executed the foregoing instrument; that he, said subscribing witness, was present and saw execute the same; and that he, said witness, at the same time subscribed h name as witness thereto. TITLE NO. ================================================================================ LOJO REALTY INC. TO WESTERN BEEF PROPERTIES, INC. SECTION BLOCK 3555 LOTS 1 and 8 COUNTY OF QUEENS RETURN BY MAIL TO: - --------------------------------------- GEORGE CACOULIDIS, ESQ. Salon, Marrow & Dyckman 685 Third Avenue New York, New York 10017 Zip No. - --------------------------------------- - -------------------------------------------------------- Reserve this space for use of Recording Office. - -------------------------------------------------------- CONSULT YOUR LAWYER BEFORE SIGNING THIS INSTRUMENT -- THIS INSTRUMENT SHOULD BE USED BY LAWYERS ONLY ------------------------------------- THIS INDENTURE, made the 29th day of January, nineteen hundred and ninety-nine BETWEEN LOJO REALTY INC., a New York corporation having an office at 73-39 68th Avenue, Middle Village, New York 11379, party of the first part,and WESTERN BEEF PROPERTIES, INC., a New York corporation having an office at 47-05 Metropolitan Avenue, Ridgewood, New York 11385 party of the second part, WITNESSETH, that the party of the first part, in consideration of Ten and 00/100 ($10.00) dollars, lawful money of the United States, paid by the party of the second part, does hereby grant and release unto the party of the second part, the heirs or successors and assigns of the party of the second part forever, ALL that certain plot, piece or parcel of land, with the buildings and improvements thereon erected, situate, lying and being in the Borough of Queens, City and State of New York, designated on the Tax Map was of the City of New York for the Borough of Queens, as said Tax Map was on July 22, 1975, Block 3555, Lots 1 and 8, being bounded and described as follows: BEGINNING at the corner formed by the intersection of the northeasterly side of Wyckoff Avenue and the southeasterly side of Summerfield Avenue; RUNNING THENCE Northeasterly, along the southeasterly side of Summerfield Avenue, 84.51 feet; THENCE Southeasterly, at right angles to the southeasterly side of Summerfield Avenue, 100.05 feet; THENCE Northeasterly, at right angles to the last mentioned course, 4.3O feet; THENCE Southeasterly, at right angles to the northwesterly side of Decatur Street, 100.05 feet to the northwesterly side of Decatur Street; THENCE Southwesterly along the northwesterly side of Decatur Street, 100.08 feet to the northeasterly side of Wyckoff Avenue; THENCE Northwesterly along the northeasterly side of Wyckoff Avenue, 200.42 feet to the point or place of BEGINNING. The premises herein described are and are intended to be the same as those described indeed recorded in reel 2345 at page 831. The conveyance has been made with the unanimous consent in writing of all stockholders of the party of the first part. TOGETHER with all right, title and interest, if any, of the party of the first part in and to any streets and roads abutting the above described premises to the center lines thereof, TOGETHER with the appurtenances and all the estate and rights of the party of the first part in and to said premises, TO HAVE AND TO HOLD the premises herein granted unto the party of the second part, the heirs or successors and assigns of the party of the second part forever. AND the party of the first part covenants that the party of the first part has not done or suffered anything whereby the said premises have been incumbered in any way whatever, except as aforesaid. AND the party of the first part, in compliance with Section 13 of the Lien Law, covenants that the party of the first part will receive the consideration for this conveyance and will hold the right to receive such consideration as a trust fund to be applied first for the purpose of paying the cost of the improvement and will apply the same first to the payment of the cost of the improvement before using any part of the total of the same for any other purpose. The word "party" shall be construed as if it read "parties" whenever the sense of this indenture so requires. IN WITNESS WHEREOF, the party of the first part has duly executed this deed the day and year first above written. IN PRESENCE OF: LOJO REALTY, INC. /s/ Warren Forsythe By: /s/ Joseph Lodato V.P. - ----------------------------------- ------------------------------------- STATE OF NEW YORK, COUNTY OF ss: On the day of 19 , before me personally came to me known to be the individual described in and who executed the foregoing instrument, and acknowledged that executed the same. STATE OF NEW YORK, COUNTY OF QUEENS ss: On the 29th day of January 1999 , before me personally came JOSEPH R. LODATO to me known, who, being known by me duly sworn, did depose and say that he resides at No. 78-12 86th St Glendale, NY; that he is the Vice President of LOJO REALTY, INC. the corporation described in and which executed the foregoing instrument; that he knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed order of the board of directors of said corporation, and that he signed his name thereto by like order. /s/ Brian Tracz BRIAN TRACZ Notary Public, State of New York No. 02 TR5011673 Qualified in Queens County Commission Expires May 15, 1999 STATE OF NEW YORK, COUNTY OF ss: On the day of 19 , before me personally came to me known to be the individual described in and who executed the foregoing instrument, and acknowledged that executed the same. STATE OF NEW YORK, COUNTY OF ss: On the day of 19 , before me personally came the subscribing witness to the foregoing instrument, with whom I am personally acquainted, who, being by me duly sworn, did depose and say that he resides at No. ; that he knows to be the individual described in and who executed the foregoing instrument; that he, said subscribing witness, was present and saw execute the same; and that he, said witness, at the same time subscribed h name as witness thereto. Bargain and Sale Deed WITH COVENANT AGAINST GRANTOR'S ACTS TITLE NO. ================================================================================ LOJO REALTY INC. TO WESTERN BEEF PROPERTIES, INC. SECTION BLOCK 3555 LOTS 1 and 8 COUNTY OF QUEENS RETURN BY MAIL TO: - --------------------------------------- GEORGE CACOULIDIS, ESQ. Salon, Marrow & Dyckman 685 Third Avenue New York, New York 10017 Zip No. - --------------------------------------- - -------------------------------------------------------- Reserve this space for use of Recording Office. - -------------------------------------------------------- EX-10.24 5 MORTGAGE CONSULT YOUR LAWYER BEFORE SIGNING THIS INSTRUMENT--THIS INSTRUMENT SHOULD BE USED BY LAWYERS ONLY. ---------------------------------------- THIS MORTGAGE, made the 29th day of January, nineteen hundred and ninety-nine BETWEEN WESTERN BEEF PROPERTIES, INC., a New York corporation having an office at 47-05 Metropolitan Avenue, Ridgewood, New York 11385, the mortgagor, and LOJO REALTY INC., a New York corporation having an office at 73-39 68th Avenue, Middle Village, New York 11379, the mortgagee, WITNESSETH, that to secure the payment of an indebtedness in the sum of One Hundred Sixty Thousand and 00/100 ($160,000.00) dollars, lawful money of the United States, to be paid in eighty-four (84) equal monthly installments of Two Thousand Three Hundred Thirty-Seven and 37/100 ($2,337.37) Dollars commencing March 1, 1999, and continuing through February 1, 2006 with interest thereon to be computed from the date hereof, at the rate of six (6%) per centum per annum, with each monthly installment being used first to pay the interest on the unpaid principal sum and then to reduce the principal sum according to a certain bond, note or obligation bearing even date herewith, the mortgagor hereby mortgages to the mortgagee ALL that certain plot, piece or parcel of land, with the buildings and improvements thereon erected, situate, lying and being in the Borough of Queens, City and State of New York, designated on the Tax Map of the City of New York for the Borough of Queens, as said Tax Map was on July 22, 1975, Block 3555, Lots 1 and 8, being bounded and described as follows: BEGINNING at the corner formed by the intersection of the northeasterly side of Wyckoff Avenue and the southeasterly side of Summerfield Avenue; RUNNING THENCE Northeasterly, along the southeasterly side of Summerfield Avenue, 84.51 feet; THENCE Southeasterly, at right angles to the southeasterly side of Summerfield Avenue, 100.05 feet; THENCE Northeasterly, at right angles to the last mentioned course, 4.30 feet; THENCE Southeasterly, at right angles to the northwesterly side of Decatur Street, 100.05 feet to the northwesterly side of Decatur Street; THENCE Southwesterly along the northwesterly side of Decatur Street, 100.08 feet to the northeasterly side of Wyckoff Avenue; THENCE Northwesterly along the northeasterly side of Wyckoff Avenue, 200.42 feet to the point or place of BEGINNING. TOGETHER with all right, title and interest of the mortgagor in and to the land lying in the streets and roads in front of and adjoining said premises; TOGETHER with all fixtures, chattels and articles of personal property now or hereafter attached to or used in connection with said premises, including but not limited to furnaces, boilers, oil burners, radiators and piping, coal stokers, plumbing and bathroom fixtures, refrigeration, air conditioning and sprinkler systems, wash-tubs, sinks, gas and electric fixtures, stoves, ranges, awnings, screens, window shades, elevators, motors, dynamos, refrigerators, kitchen cabinets, incinerators, plants and shrubbery and all other equipment and machinery, appliances, fittings, and fixtures of every kind in or used in the operation of the buildings standing on said premises, together with any and all replacements thereof and additions thereto; TOGETHER with all awards heretofore and hereafter made to the mortgagor for taking by eminent domain the whole or any part of said premises or any easement therein, including any awards for changes of grade of streets, which said awards are hereby assigned to the mortgagee, who is hereby authorized to collect and receive the proceeds of such awards and to give proper receipts and acquittances therefor, and to apply the same toward the payment of the mortgage debt, notwithstanding the fact that the amount owing thereon may not then be due and payable; and the said mortgagor hereby agrees, upon request, to make, execute and deliver any and all assignments and other instruments sufficient for the purpose of assigning said awards to the mortgagee, free, clear and discharged of any encumbrances of any kind or nature whatsoever. AND the mortgagor covenants with the mortgagee as follows: 1. That the mortgagor will pay the indebtedness as hereinbefore provided. 2. That the mortgagor will keep the buildings on the premises insured against loss by fire for the benefit of the mortgagee; that he will assign and deliver the policies to the mortgagee; and that he will reimburse the mortgagee for any premiums paid for insurance made by the mortgagee on the mortgagor's default in so insuring the buildings or in so assigning and delivering the policies. 3. That no building on the premises shall be altered, removed or demolished without the consent of the mortgagee. 4. That the whole of said principal sum and interest shall become due at the option of the mortgagee: after default in the payment of any instalment of principal or of interest for fifteen days; or after default in the payment of any tax, water rate, sewer rent or assessment for thirty days after notice and demand; or after default after notice and demand either in assigning and delivering the policies insuring the buildings against loss by fire or in reimbursing the mortgagee for premiums paid on such insurance, as hereinbefore provided; or after default upon request in furnishing a statement of the amount due on the mortgage and whether any offsets or defenses exist against the mortgage debt, as hereinafter provided. An assessment which has been made payable in instalments at the application of the mortgagor or lessee of the premises shall nevertheless, for the purpose of this paragraph, be deemed due and payable in its entirety on the day the first instalment becomes due or payable or a lien. 5. That the holder of this mortgage, in any action to foreclose it, shall be entitled to the appointment of a receiver. 6. That the mortgagor will pay all taxes, assessments, sewer rents or water rates, and in default thereof, the mortgagee may pay the same. 7. That the mortgagor within five days upon request in person or within ten days upon request by mail will furnish a written statement duly acknowledged of the amount due on this mortgage and whether any offsets or defenses exist against the mortgage debt. 8. That notice and demand or request may be in writing and may be served in person or by mail. 9. That the mortgagor warrants the title to the premises. 10. That the fire insurance policies required by paragraph No. 2 above shall contain the usual extended coverage endorsement; that in addition thereto the mortgagor, within thirty days after notice and demand, will keep the premises insured against war risk and any other hazard that may reasonably be required by the mortgagee. All of the provisions of paragraphs No. 2 and No. 4 above relating to fire insurance and the provisions of Section 254 of the Real Property Law construing the same shall apply to the additional insurance required by this paragraph. 11. That in case of a foreclosure sale, said premises, or so much thereof as may be affected by this mortgage, may be sold in one parcel. 12. That if any action or proceeding be commenced (except an action to foreclose this mortgage or to collect the debt secured thereby), to which action or proceeding the mortgagee is made a party, or in which it becomes necessary to defend or uphold the lien of this mortgage, all sums paid by the mortgagee for the expense of any litigation to prosecute or defend the rights and lien created by this mortgage (including reasonable counsel fees), shall be paid by the mortgagor, together with interest thereon at the rate of six per cent. per annum, and any such sum and the interest thereon shall be a lien on said premises, prior to any right, or title to, interest in or claim upon said premises attaching or accruing subsequent to the lien of this mortgage, and shall be deemed to be secured by this mortgage. In any action or proceeding to foreclose this mortgage, or to recover or collect the debt secured thereby, the provisions of law respecting the recovering of costs, disbursements and allowances shall prevail unaffected by this covenant. 13. That the mortgagor hereby assigns to the mortgagee the rents, issues and profits of the premises as further security for the payment of said indebtedness, and the mortgagor grants to the mortgagee the right to enter upon and to take possession of the premises for the purpose of collecting the same and to let the premises or any part thereof, and to apply the rents, issues and profits, after payment of all necessary charges and expenses, on account of said indebtedness. This assignment and grant shall continue in effect until this mortgage is paid. The mortgagee hereby waives the right to enter upon and to take possession of said premises for the purpose of collecting said rents, issues and profits, and the mortgagor shall be entitled to collect and receive said rents, issues and profits until default under any of the covenants, conditions or agreements contained in this mortgage, and agrees to use such rents, issues and profits in payment of principal and interest becoming due on this mortgage and in payment of taxes, assessments, sewer rents, water rates and carrying charges becoming due against said premises, but such right of the mortgagor may be revoked by the mortgagee upon any default, on five days' written notice. The mortgagor will not, without the written consent of the mortgagee, receive or collect rent from any tenant of said premises or any part thereof for a period of more than one month in advance, and in the event of any default under this mortgage will pay monthly in advance to the mortgagee, or to any receiver appointed to collect said rents, issues and profits, the fair and reasonable rental value for the use and occupation of said premises or of such part thereof as may be in the possession of the mortgagor, and upon default in any such payment will vacate and surrender the possession of said premises to the mortgagee or to such receiver, and in default thereof may be evicted by summary proceedings. 14. That the whole of said principal sum and the interest shall become due at the option of the mortgagee: (a) after failure to exhibit to the mortgagee, within ten days after demand, receipts showing payment of all taxes, water rates, sewer rents and assessments; or (b) after the actual or threatened alteration, demolition or removal of any building on the premises without the written consent of the mortgagee; or (c) after the assignment of the rents of the premises or any part thereof without the written consent of the mortgagee; or (d) if the buildings on said premises are not maintained in reasonably good repair; or (e) after failure to comply with any requirement or order or notice of violation of law or ordinance issued by any governmental department claiming jurisdiction over the premises within three months from the issuance thereof; or (f) if on application of the mortgagee two or more fire insurance companies lawfully doing business in the State of New York refuse to issue policies insuring the buildings on the premises; or (g) in the event of the removal, demolition or destruction in whole or in part of any of the fixtures, chattels or articles of personal property covered hereby, unless the same are promptly replaced by similar fixtures, chattels and articles of personal property at least equal in quality and condition to those replaced, free from chattel mortgages or other encumbrances thereon and free from any reservation of title thereto; or (h) after thirty days' notice to the mortgagor, in the event of the passage of any law deducting from the value of land for the purposes of taxation any lien thereon, or changing in any way the taxation of mortgages or debts secured thereby for state or local purposes; or (i) if the mortgagor fails to keep, observe and perform any of the other covenants, conditions or agreements contained in this mortgage. 15. That the mortgagor will, in compliance with Section 13 of the Lien Law, receive the advances secured hereby and will hold the right to receive such advances as a trust fund to be applied first for the purpose of paying the cost of the improvement and will apply the same first to the payment of the cost of the improvement before using any part of the total of the same for any other purpose. Strike out this clause 16 if inapplicable. 16. That the execution of this mortgage has been duly authorized by the board of directors of the mortgagor. 17. The principal sum secured by this mortgage may be prepaid by the mortgagor in whole or in part at any time without penalty or premium. 18. This mortgage may not be assigned to any third party without the prior written consent of the mortgagee, which consent shall not be unreasonably withheld. 19. This is a purchase money mortgage. This mortgage may not be changed or terminated orally. The covenants contained in this mortgage shall run with the land and bind the mortgagor, the heirs, personal representatives, successors and assigns of the mortgagor and all subsequent owners, encumbrancers, tenants and subtenants of the premises, and shall enure to the benefit of the mortgagee, the personal representatives, successors and assigns of the mortgagee and all subsequent holders of this mortgage. The word "mortgagor" shall be construed as if it read "mortgagors" and the word "mortgagee" shall be construed as if it read "mortgagees" whenever the sense of this mortgage so requires. IN WITNESS WHEREOF, this mortgage has been duly executed by the mortgagor. IN PRESENCE OF: WESTERN BEEF PROPERTIES, INC. /s/ George Cacoulidis By: Frank Castellana VP - --------------------- -------------------- STATE OF NEW YORK, COUNTY OF ss: On the 29th day of January 1999, before me personally came Frank Castellana to me known to be the individual described in and who executed the foregoing instrument, and acknowledged that executed the same. STATE OF NEW YORK, COUNTY OF QUEENS ss: On the 29th day January 1999 , before me personally came Frank Castellana to me known, who, being by me duly sworn, did depose and say that he resides at No. 47-05 Metropolitan Ave, Ridgewood, that he is the Vice President of WESTERN BEEF PROPERTIES, INC., the corporation described in and which executed the foregoing instrument; that he knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by order of the board of directors of said corporation, and that he signed his name thereto by like order. /s/ Brian Tracz BRIAN TRACZ Notary Public, State of New York No. 02 TR5011673 Qualified in Queens County Commission Expires May 15, 1999 STATE OF NEW YORK, COUNTY OF ss: On the day of 19 , before me personally came to me known to be the individual described in and who executed the foregoing instrument, and acknowledged that executed the same. STATE OF NEW YORK, COUNTY OF ss: On the day of 19 , before me personally came the subscribing witness to the foregoing instrument, with whom I am personally acquainted, who, being by me duly sworn, did depose and say that he resides at No. ; that he knows to be the individual described in and who executed the foregoing instrument; that he, said subscribing witness, was present and saw execute the same; and that he, said witness, at the same time subscribed h name as witness thereto. Mortgage TITLE NO. ================================================================================ WESTERN BEEF PROPERTIES, INC. TO LOJO REALTY INC. SECTION BLOCK 3555 LOTS 1 and 8 COUNTY of Queens RETURN BY MAIL TO: - --------------------------------------- WARREN FORSYTHE, ESQ. VITTORIA & FORSYTHE 630 FIFTH AVENUE NEW YORK, NEW YORK Zip No. 10111 - --------------------------------------- RESERVE THIS SPACE FOR USE OF RECORDING OFFICE - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Standard N.Y.B.T.U. Form 80 JULIUS BLUMBERG, INC., LAW BLANK PUBLISHERS Mortgage Note. Individual or Corporation. CONSULT YOUR LAWYER BEFORE SIGNING THIS INSTRUMENT--THIS INSTRUMENT SHOULD BE USED BY LAWYERS ONLY. - -------------------------------------------------------------------------------- MORTGAGE NOTE $ 160,000.00 New York, January 29, 1999 FOR VALUE RECEIVED, WESTERN BEEF PROPERTIES, INC., a New York corporation having an office at 47-05 Metropolitan Avenue, Ridgewood, New York 11385, promises to pay to LOJO REALTY INC., a New York corporation having an office at 73-39 68th Avenue, Middle Village, New York 11379, or order, at 73-39 68th Avenue, Middle Village, New York 11379 or at such other place as may be designated in writing by the holder of this note, the principal sum of One Hundred Sixty Thousand and 00/100 ($160,000.00) dollars to be paid in eighty-four (84) equal monthly installments of Two Thousand Three Hundred Thirty-Seven and 37/100 ($2,337.37) Dollars commencing March 1, 1999, and continuing through February 1, 2006 with interest thereon to be computed from the date hereof, at the rate of six (6%) per centum per annum Each monthly installment will be used first to pay the principal sum and then to reduce the principal sum. IT IS HEREBY EXPRESSLY AGREED, that the said principal sum secured by this note shall become due at the option of the holder thereof on the happening of any default or event by which, under the terms of the mortgage securing this note, said principal sum may or shall become due and payable; also, that all of the covenants, conditions and agreements contained in said mortgage are hereby made part of this instrument. Presentment for payment, notice of dishonor, protest and notice of protest are hereby waived. This note is secured by a mortgage made by the maker to the payee of even date herewith, on property situate at 1071-1089 Wyckoff Avenue, Flushing, Queens County, New York. This note may not be changed or terminated orally. WESTERN BEEF PROPERTIES, INC. BY: Frank Castellana ------------------ VP STATE OF NEW YORK, COUNTY OF ss: On the day of 19 , before me personally came to me known to be the individual executed the foregoing instrument, and acknowledged that executed the same. STATE OF NEW YORK, COUNTY OF QUEENS ss: On the 29th day January 1999, before me personally came Frank Castellana to me known, who, being by me duly sworn, did depose and say that he resides at No. 47-05 Metropolitan Ave, Ridgewood, NY, that he is the Vice President of WESTERN BEEF PROPERTIES, INC., the corporation described in and which executed the foregoing instrument; that he knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by order of the board of directors of said corporation, and that he signed his name thereto by like order. /s/ Brian Tracz BRIAN TRACZ Notary Public, State of New York No. 02 TR5011673 Qualified in Queens County Commission Expires May 15, 1999 STATE OF NEW YORK, COUNTY OF ss: On the day of 19 , before me personally came to me known to be the individual described in and who executed the foregoing instrument, and acknowledged that executed the same. STATE OF NEW YORK, COUNTY OF ss: On the day of 19 , before me personally came the subscribing witness to the foregoing instrument, with whom I am personally acquainted, who, being by me duly sworn, did depose and say that he resides at No. ; that he knows to be the individual described in and who executed the foregoing instrument; that he, said subscribing witness, was present and saw execute the same; and that he, said witness, at the same time subscribed h name as witness thereto. TITLE NO. - -------------------------------------------------------------------------------- LOAN NO. ================================================================================ WESTERN BEEF PROPERTIES, INC. TO LOJO REALTY INC. ================================================================================ Mortgage Note ================================================================================ Dated January 29, 1999 EX-10.25 6 MORTGAGE NOTE MORTGAGE NOTE Melville, New York $ 512,000.00 December 17, 1998 FOR VALUE RECEIVED, WESTERN BEEF PROPERTIES, INC., with an office at 47-05 Metropolitan Avenue, Ridgewood, New York 11383 (the "Maker") promises to pay to NORTH FORK BANK, a New York banking corporation, or order, at 275 Broad Hollow Road, Melville, New York 11747, Attention: Loan Servicing Department (the "Payee"), or at such other place as may be designated in writing by the holder of this Note, the principal sum of FIVE HUNDRED TWELVE AND no/100 ($512,000.00) DOLLARS with interest thereon from the date hereof at the rate of six and 89/100 (6.89%) percent per annum by payments of $5,942.00 commencing on February 1, 1999 and continuing monthly thereafter in a like amount until January 1, 2009 when any unpaid balance shall be due and payable. Each payment when received by the holder thereof will be applied first to interest at the rate of six and 89/100 (6.89%) percent and the balance in reduction of principal. Borrower shall make an interest only payment on January 1, 1999 for the period December 17, 1998 to December 31, 1998. The Maker shall have the privilege to prepay principal in whole or in part, at any time, without penalty. Presentment for payment, notice of dishonor, protest and notice of protest are hereby waived. This Note is secured by a mortgage made by the Maker to the Payee of even date herewith (the "Mortgage"), on the premises known as 2926 Frederick Douglas Boulevard, New York, New York (the "Premises") and is subject to the terms and provisions of the Mortgage, to which reference is made for description of the events of default and the rights of acceleration of maturity in the event of default. All notices hereunder shall be in writing and shall be deemed to have been sufficiently given or served for all purposes when delivered in person or sent by certified mail, return receipt requested, to any party hereto at its address above stated or at such other address of which it shall have notified the party giving such notice in writing as aforesaid. The Payee may collect a late charge, not to exceed four (4) cents for each dollar of each installment of principal, and/or interest and/or other sum which is not made within ten (10) days of when due, or, if applicable, which cannot be debited from its account due to insufficient balance on its debit date. All payments shall be made by automatic debit from an account maintained at the bank in which borrower shall maintain a balance sufficient to pay any and all monthly payments. The interest on the Note shall be paid monthly in arrears, computed on the basis of a 360 day year and actual number of days elapsed. The provisions and covenants of this Note shall be binding upon the Maker and shall inure to the benefit of the Payee, any subsequent holder of this Mortgage and their respective successors and assigns. Any privileges granted to Maker shall inure to the benefit of any successors or assigns of the mortgaged premises. This note may not be changed or terminated orally. WESTERN BEEF PROPERTIES, INC. By: /s/ Frank Castellana, Exec. VP -------------------------------- Frank Castellana, Exec. VP EX-10.26 7 INDENTURE THIS INDENTURE, made the 17TH day of December nineteen hundred and ninety-eight between THE CITY OF NEW YORK, a municipal corporation, having its principal office at City Hall, Borough of Manhattan, City and State of New York the first party and WESTERN BEEF PROPERTIES, INC. a domestic corporation having its principal place of business at 47-05 Metropolitan Avenue, Ridgewood, NY 11385 hereinafter designated as the second party. WHEREAS, after the appraisal under the direction of the Mayor of the City of New York, and after a public hearing held on the 25th day of February, 1998, the Mayor by authorization dated the 11th day of March, 1998 (Calendar No.49), duly ordered and directed the sale at public auction of the premises therein and hereinafter described for the minimum or upset price of ONE HUNDRED THIRTY ONE THOUSAND FIVE HUNDRED ($131,500.00) DOLLARS and WHEREAS, after advertisement in the manner provided by law, said Premises were duly sold by and under the direction of the Department of Citywide Administrative Services, Division of Real Property (now known as Division of Real Estate Services) at public auction at the time and place set forth in such advertisement for the sum of SIX HUNDRED FORTY THOUSAND($640,000.00) DOLLARS that being the highest bid therefor at the said sale, NOW, THEREFORE, WITNESSETH: That the first party, in consideration of the sum of SIX HUNDRED FORTY THOUSAND($640,000.00) DOLLARS lawful money of the United States, paid by the second party, does hereby grant and release unto the second party, the heirs or successors and assigns of the second party forever, All that/those certain piece/s or parcel/s of land, together with any improvements thereon, situate, lying and being in the Borough of MANHATTAN City and State of New York, designated on the Tax Map of the City of New York, for the Borough of MANHATTAN , as said Tax Map was on August 29, 1978, Block 2040 Lot/s 61 TO HAVE AND TO HOLD the premises herein granted unto the second party, the heirs or successors and assigns of the second party forever. Subject to: (1) Any state of facts an accurate survey would show; (2) The rights, if any, of tenants and persons in possession, if any; (3) All violations of any local, State or Federal Government having jurisdiction thereof existing at the time of closing; (4) Building restrictions and zoning regulations in force at the time of the delivery of the deed and covenants, restrictions of record, and easements affecting the subject property; (5) The trust fund provisions of section thirteen of the Lien Law; and (6) All provisions of the Standard Terms and Conditions of Sale in force and effect at the time of the Sale that are applicable. In the event of the acquisition by the City of New York, by condemnation or otherwise, of any part or portion of the premises herein granted (except for the portion of the premises herein granted containing a building as of the date of this deed), lying within the bed of any street, avenue, parkway, expressway, park, public place or catch-basin, as said street, avenue, parkway, expressway, park, public place or catch-basin is shown on the present City Map, the second party, the heirs or successors and assigns of the second party, shall only be entitled as compensation for such acquisition by the City to the amount of One Dollar, and shall not be entitled to compensation for any buildings or structures erected thereon after July 20, 1998, within the lines of the street, avenue, parkway, expressway, park, public place or catch-basin so laid out and acquired. This covenant shall be binding upon and run with the land and shall endure until the second party, the heirs or successors and assigns of the second party, obtains a written release of this covenant executed by the Deputy Commissioner of Department of Citywide Administrative Services, Division of Real Estate Services or a person designated by the City's Mayor who may in his sole discretion execute such release if the City Map has already been changed so as to eliminate the lines of said street, avenue, parkway, expressway, park, public place or catch-basin from any part or portion of the premises if the City Map has not been so changed, the said officer may execute such a release after authorization by the City's Mayor. The second party, the heirs or successors and assigns of the second party shall pay such consideration for the release as said officer shall deem appropriate. IN WITNESS WHEREOF, the party of the first part has caused these presents to be subscribed to by the Deputy Commissioner of the Department of Citywide Administrative Services, Division of Real Estate Services and by the City Clerk and its corporate seal to be hereunto affixed the day and year first above written. THE CITY OF NEW YORK Approved As To Form: By: /s/ Lori Fierstein ---------------------------------- Deputy Commissioner Department of Citywide Administrative Service , Division Real Estate Services /s/ Theodore K. Okun By: /s/ Raymond C. Teatum - ---------------------------- --------------------------------------- Theodore K. Okun City Clerk Acting Corporation Counsel, RAYMOND C. TEATUM 1st Deputy and Acting City Clerk STATE OF NEW YORK, ) COUNTY OF NEW YORK ) ss.: On this 10 day of NOV 1998, before me personally came LORI FIERSTEIN to me known and known to me to be the Deputy Commissioner of the Department of Citywide Administrative Services, Division of Real Estate Services of the City of New York and the same person who executed the foregoing Deed, and she acknowledged that she executed the foregoing Deed on behalf of the City of New York as said Deputy Commissioner of the Department of Citywide Administrative Services, Division of Real Estate Services pursuant to the authority vested in her by authorization of the Mayor, date and Calendar number, set forth in the within instrument. /s/ Ann Marie Neary STATE OF NEW YORK, ) ANN MARIE NEARY COUNTY OF NEW YORK ) ss.: Commissioner of Deeds City of New York No. 1-0053 Certificate Filed in New York County Commission Expires May 1, 1999 On this day of 19 , before me personally came CARLOS CUEVAS, with whom I am acquainted and known to me to be the City Clerk of The City of New York, who being by me duly sworn, did depose and say that he is doing business at 1 Centre Street, New York, New York 10007; that he is the City Clerk of the City of New York, the municipal corporation described in and which executed the foregoing Deed; that he knows the seal of said corporation; that the seal affixed to said Deed is such seal; that it was so affixed as provided by law, and that he signed his name thereto as City Clerk by like authority. STATE OF NEW YORK, ) COUNTY OF NEW YORK ) ss.: On this 16th day of Nov 1998, before me personally came RAYMOND TEATUM, with whom I am acquainted and known to me to be the First Deputy City Clerk of The City of New York, who being by me duly sworn, did depose and say that he is doing business at 1 Centre Street, New York, New York 10007; that he is the City Clerk of the City of New York, the municipal corporation described in and which executed the foregoing Deed; that he knows the seal of said corporation; that the seal affixed to said Deed is such seal; that it was so affixed as provided by law, and that he signed his name thereto as City Clerk by like authority. /s/ Ann Marie Neary ANN MARIE NEARY Commissioner of Deeds City of New York No. 1-0053 Certificate Filed in New York County Commission Expires May 1, 1999 - ------------------------------ DEED - ------------------------------ BLOCK(S) 2040 THE CITY OF NEW YORK LOT(S): 61 COUNTY: MANHATTAN TO WESTERN BEEF PROPERTIES, INC. Record and return to: Bruce J. Cooper, Esq 17 Battery Place NY, NY 10004 CONTINENTAL ABSTRACT CORPORATION SCHEDULE C POLICY NO: 331005107 3108 ALL that certain lot, piece or parcel of land, with the buildings and improvements thereon erected, situate, lying and being in the Borough of Manhattan, County of New York, city and State of New York, more particularly designated on the Tax Map of the City of New York, for the Borough of Manhattan as Section 7, Block 2040, Lot 61 as said Tax Map was on the 29th day of August, 1978, being more particularly bounded and described as follows: BEGINNING at the corner formed by the intersection of the southerly side of West 155th Street with the easterly side of Frederick Douglas Boulevard; RUNNING THENCE Easterly along the southerly side of West 155th Street a distance of 325.00 feet; RUNNING THENCE Southerly at right angles to the last mentioned course, a distance of 99,92 feet; RUNNING THENCE Southerly at right angles to the last mentioned course, a distance of 225.00 feet; RUNNING THENCE Northerly at right angles to the last mentioned course, a distance of 74.92 feet; RUNNING THENCE Westerly at right angles to the last mentioned course, a distance of 100.00 feet to the easterly side of Frederick Douglas Boulevard; RUNNING THENCE Northerly along the easterly side of Frederick Douglas Boulevard, 25.00 feet to the point or place of BEGINNING. P61.C FOR USE WITH ALTA LOAN AND OWNER'S POLICY. EX-10.27 8 ACQUISITION AGREEMENT Michael Alagna the Seller WESTERN BEEF, INC. the Buyer -------------- ACQUISITION AGREEMENT -------------- Dated as of September 18, 1998 Purchase of all of the outstanding capital stock of 814 Jamaica Avenue, Inc. This ACQUISITION AGREEMENT, dated as of September 18,1998 (this "Agreement"), between Western Beef Inc., a Delaware corporation, with an office at 47-05 Metropolitan Avenue, Ridgewood, New York 11385 (the "Buyer") and Michael Alagna, an individual residing at 23277 Barlake Drive, Race Raton, Florida 33423(the "Seller"), WITNESSETH: WHEREAS, the Seller owns all of the issued and outstanding shares of capital stock, no par value (the "Company Shares") of 814 Jamaica Avenue, Inc. New York corporation (the "Company"); and WHEREAS, the Buyer desires to acquire from the Seller, and the Seller desires to sell to the Buyer the Company Shares, upon the terms and subject to the conditions set forth In this Agreement. NOW, THEREFORE, in reliance upon the representations, warranties and agreements made herein and in consideration of the premises and mutual promises herein contained, the receipt and sufficiency of which are hereby acknowledged, the Buyer and the Seller agree as follows: ARTICLE I TERMS OF THE TRANSACTION Section 1.1. Sale and Purchase of Company Shares. The Seller shall, on the Closing Date, sell transfer and assign to the Buyer the Company Shares by delivering to the Buyer, against payment therefore as provided in Section 1.2, certificates for the Company Shares in proper form for transfer by delivery or with duty executed stock powers attached thereto, together with funds for payment of all transfer taxes respecting the Company Shares, if any. The Company Shares shall be sold by the Seller and shall be purchased by the Buyer for an aggregate purchase price of Sixty-Five Thousand ($65,000.00) Dollar (the "Purchase Price"). The Purchase Price shall be paid as follows: (a) On the signing of this Agreement, by unendorsed check payable to the "Escrow Agent", as hereinafter defined, subject to collection, the receipt of which is hereby acknowledged, the sum of $18,000 (the "Downpayment"); and (b) At the Closing, as herein provided, by official, unendorsed cashiers or unendorsed certified check payable to Seller, drawn on a bank which is a member of the New York Clearing House, the sum $53,000 provided, however, that upon Seller's request made at least 48 hours prior to closing of title hereunder, payments shall be broken down into such amounts and made to such payees as Seller designates. Section 1.3. The Downpayment. (a) Buyer has delivered the Downpayment to Malcolm Fein, Esq., (the "Escrow Agent"), subject to collection end the Escrow Agent, by his execution of this Agreement, acknowledges receipt of the Downpayment and agrees to hold the Downpayment, and Seller and Buyer agree that the Downpayment is to be held in escrow by the Escrow Agent, on the following terms and conditions: (i) The Escrow Agent shall deposit the payment in his name in an interest bearing account at European American Bank and shall dispose of the Downpayment pursuant to the provisions of this Agreement. (ii) The Escrow Agent shall have the right, but not the obligation, to require and receive such written certifications or instructions from Seller and/or 3 Purchaser as he deems necessary or appropriate before taking any action hereunder. (iii) If any dispute arises between Seller and Buyer, or if the Escrow Agent is uncertain as to his obligations under this Agreement, the Escrow Agent shall have the right, but not the obligation, to refrain from taking any action other than to continue to hold the Downpayment in escrow as herein provided, until otherwise directed by a final judgment of a court of competent jurisdiction or by a written agreement signed by Seller and Buyer. (iv) The Escrow Agent may assume the genuineness of any document or signature which appears to him to be genuine (whether an original or photocopy) if such document or signature is presented to him. (v) The Escrow Agent shall have no obligation other than those specifically set forth in this paragraph. The Escrow Agent shall have no liability to any party hereto except for his willful misconduct or gross negligence and shall in no event be liable or responsible for any failure of any banking institution in which the Downpayment is deposited to pay the Downpayment at the Escrow Agent's direction. (vi) The Escrow Agent shall not be obligated to, but may, institute legal proceedings of any kind including, but not limited to, a legal proceeding or action in a court of competent jurisdiction to determine his obligations hereunder or to seek permission to deposit the Downpayment and any interest earned thereon in court and be relieved of all further obligations hereunder. Upon such deposit of the Downpayment in court, the Escrow Agent shall be relieved of all obligations and liabilities hereunder. (vii) The parties acknowledge that the Escrow Agent is acting solely as a stakeholder at their request and for their convenience, that Escrow Agent 4 shall not be deemed to be the agent of either of the parties, and that the Escrow Agent shall not be liable to either of the parties for any act or omission on its part unless taken or suffered in bad faith, in willful disregard of this Agreement or involving gross negligence. Seller and Purchaser shall jointly and severally indemnify, defend and hold the Escrow Agent harmless from and against any claim, damage, cost, liability, obligation or expense (including, but not limited to, reasonable attorneys fees and disbursements) made against or incurred by the Escrow Agent by reason of his acting hereunder, unless such claim, damage, cost, liability, obligation or expense results solely from the Escrow Agent's own gross negligence or willful misconduct. The provisions of this subparagraph (vii) shall survive the expiration, termination or cancellation of this Agreement or the closing of title, as the case may be. (viii) Any notice under this paragraph shall be sent in the manner provided in Section 10.4 with any notice to be sent to the Escrow Agent to be sent to him at the following address: 123 Joralemon Street, Brooklyn, New York 11201, or such other address as the Escrow Agent shall designate in accordance with said paragraph. Copies of any notices or other communications sent to the Escrow Agent under this paragraph shall be sent to the parties hereto in the manner provided in Section 10.4. (ix) In any action or proceeding relating to the subject matter of this Agreement, Seller may be represented by the Escrow Agent and Purchaser shall not object to such representation. (x) The Escrow Agent has acknowledged agreement to these provisions by signing in the place indicated on the signature page of this Agreement. 5 Section 1.4. Certain Expenses. Neither the Buyer nor the Company shall pay or be liable for or be required to pay any of the following liabilities, fees or expenses incurred by the Seller, all of which shall be borne and paid by the Seller: (i) fees and expenses, if any, of any person retained by Seller or the Company for financial services or services as a finder rendered to the Company or the Seller in connection with the sale contemplated by this Agreement. (ii) professional fees of counsel for the Company or the Seller and any accountant or auditor for the Company or the Seller for services rendered to the Company or the Seller and out-of-pocket disbursements and other expenses of the Company, the Seller, any of their counsel or accountants, incurred in connection with the sale contemplated by this Agreement, including the expenses of the Company in connection with the preparation of the Balance Sheet (as hereafter defined). (iii) documentary stamp taxes or other similar charges, taxes, including real property transfer taxes, or expenses incurred by the Seller in connection with the transfer of the Company Shares to the Buyer. (iv) any income, capital gains or other taxes incurred by the Seller as a result of the sale of the Company Shares to the Buyer. Section 1.5. The Closing. The closing of the transactions contemplated by this Agreement (the "Closing") shall be held at the offices of Malcom Fein, Esq., 123 Joralemon Street, Brooklyn, New York 11201 or at such other place or places as the parties may agree upon, at 9:30 o'clock A.M., New York time, on October 16, 1998 (the "Closing Date"). 6 ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE SELLER The Seller represents and warrants to the Buyer that: Section 2.1. The Company Organization and Authority. The Company is a corporation duly organized and validly existing and in good standing under the laws of the State of New York. The Company is not required to be qualified to do business as a foreign corporation in any other jurisdiction by reason of the Company's ownership or leasing of real property, maintenance of offices, warehousing of goods, other conduct or operation of its business activities, the nature of its business or otherwise. The Company has all necessary corporate power and authority to own all of its properties and assets and to carry on its business as now conducted. Section 2.2. Company Capitalization. The Company has an authorized capital of 200 shares of common stock, no par value, or which 100 shares, constituting the Company Shares, are issued and outstanding. Each of the Company Shares has been duly authorized and validly issued, is fully paid and non-assessable and was issued by the Company in compliance with all applicable federal and state securities laws and all applicable rules and regulations thereunder. There are no outstanding options, warrants, convertible securities or other rights to subscribe for or purchase any securities of the Company. Section 2.3. Subsidiaries. The Company does not beneficially own, directly or indirectly, any of the outstanding stock or other equity interest in any other corporation or entity. The Company is not a party to any partnership or joint venture agreement or arrangement. 7 Section 2.4. Real Property. (a) Except for the parcel of land more particularly identified and described on Schedule 2.4(a) (the "Land"), the buildings and improvements situated on the Land located at or known as 814 Jamaica Avenue, Brooklyn, New York (collectively, the "Building"), all right, title and interest of the Company, if any, in and to the land tying in the bed of any street or highway in front of or adjoining the Land to the center line thereof and to any unpaid award for any taking by condemnation or any damage to the Land by reason of a change of grade of any street or highway, the appurtenances and all the estate and rights of Seller in and to the Land and Building, and all right, title and interest of the Company, if any, in and to the fixtures, equipment and other personal property attached or appurtenant to the Building (collectively, the "Premises") the Company does not own, have legal or equitable title in, or have a leasehold interest in any real property. (b) The Company has, and at dosing will have, good and marketable title in fee simple to the Premises, free and clear of any mortgage, lien claim, charge, exception, imperfection of title, encroachment, easement, right-of-way, tenancy, squatters' right or encumbrance (collectively "Impairments"); except for those Impairments (i) which are described on Schedule 2.4 (b) ("Permitted Impairments") and such other matters that any title insurer licensed to do business in the State of New York shall be willing, without special premium, to omit as exceptions to coverage or to except with insurance against collection out of or enforcement against the Premises. (c) With respect to the mortgages referred to on Schedule 2.4(b), no default or event of default on the part of the Company as mortgagor or, to the knowledge of the Seller, no default or event of default on the part of the mortgagee, under the provisions of any of said mortgages, and no event which with the giving of notice or passage of time, or both, would constitute such default or event of default on the part of the Company or, to the knowledge of Seller, on the part of any such mortgagee, has occurred and is continuing unremedied or unwaived. 8 Copies of documents constituting such existing mortgage(s) and any note(s) secured thereby are attached hereto as Schedule 2.4(c). Such copies are true copies of the originals and such mortgage(s) and note(s) secured thereby have not been modified or amended except as shown in such documents. (d) There exists no pending or, to the knowledge of Seller, threatened condemnation, eminent domain or similar proceeding with respect to, or which could affect the Premises, except that the tax lien of the City of New York has been transferred to another lienor. (e) There are no tax abatements or exemptions affecting the Premises. Except as set forth on Schedule 2.6(e), Seller has no actual knowledge of any assessment payable in annual installments, or any part thereof, which has become a lien on the Premises. (f) Seller has no actual knowledge that any incinerator, boiler or other burning equipment on the Premises is being operated in violation of applicable law. If copies of a certificate or certificates therefor have been exhibited to and initialed by Buyer or its representative, such copies are true copies of the originals. 9 Section 2.5. The Company Shares. The Seller is the beneficial and record owner of all the Company Shares and the Company Shares are owned by the Seller free and clear of all liens, charges, encumbrances, equities and claims whatsoever and are not subject to any restrictions with respect to transferability, except as such transferability may be restricted by the provisions of the Securities Act of 1933, as amended (the "Securities Act"), or applicable state securities laws. Upon the delivery of the certificates and payment for the Company Shares all as provided for hereunder, the Buyer will receive good and marketable title thereto, free and clear of all liens, charges, encumbrances, equities and claims whatsoever. On the Closing Date, all stock transfer or other taxes and charges (other than income taxes) which are required to be paid in connection with the sale and transfer of the Company Shares to the Buyer hereunder will have been fully paid by the Seller and all laws imposing such taxes or charges will have been fully complied with in respect of the Company Shares by the Seller. Section 2.6. Foreign Person. Seller is not a "foreign person" as defined in Section 1445 of the Internal Revenue Code of 1986, as amended, and the regulations promulgated thereunder (collectively, the "Code Withholding Section") and at the closing, Seller will deliver to Buyer a certificate of non-foreign status, in form required by the Code Withholding Section, signed under penalty of perjury. Section 2.7. Maximum Liabilities of the Company. The liabilities of the Company as of the Closing Date of every kind and nature, including Permitted Impairments and all known as of the Closing Date, shall not exceed the sum of Six Hundred Forty Three thousand ($643,000.00) Dollars (the "Maximum Liabilities"). In determining the liabilities of the Company as of the Closing Date, the following adjustments shall be made as of the close of business on the day prior 10 to the Closing Date: (i) the Company's liabilities as of the Closing Date shall include real estate taxes, water charges, sewer rents and vault charges, if any, on the basis of the fiscal period for which assessed, except that if there is a water meter on the Premises, adjustment therefor at the Closing shall be based on the last available reading; and (ii) the Company's liabilities shall be reduced for the fuel stored on the Premises, at the price then charged by the Company's supplier, including any taxes. Section 2.8. No Leases. There are no outstanding leases of the Premises or any part thereof. Section 2.9. Disclosure: Representations Warranties. The Seller has made full, true and complete responses to all the Buyer's requests for information, documents, contracts and records of the Seller and the Company. Neither this Agreement nor any statement certificate, writing or document furnished to the Buyer by the Seller or the Company in connection with this Agreement contains, as of the dates of such documents, any untrue statement of a material fact or omits to state a material fact necessary to make the statements contained therein not misleading. Except only as set forth in this Agreement or in a Schedule hereto, no fact (other than circumstances or events which are common knowledge or normal business risks) with respect to the Company's business, operations or condition is known to the Seller or the company which materially and adversely affects the Company's business, operations or condition or any of its assets or properties. 11 ARTICLE III REPRESENTATIONS AND WARRANTIES BY THE BUYER The Buyer represents and warrants that: Section 3.1. Organization and Authority. The Buyer is a corporation duly organized and validly existing in good standing under the laws of the State of Delaware and is duly registered as a foreign corporation in the State of New York. The Buyer has the corporate power to execute, deliver and perform this Agreement and the documents, agreement and certificates executed and delivered by the Buyer in connection with this Agreement. The Buyer has taken all action required by law, its certificate of incorporation, its by-laws or otherwise to authorize the execution and delivery of this Agreement. The execution and delivery of this Agreement does not, and the consummation of the transactions contemplated hereby and thereby will not, violate any provision of the certificate of incorporation or by-laws of the Buyer, or any provision of any agreement, instrument, order, judgment or decree to which the Buyer is a party or by which it is bound. Section 3.2. Acquisition of Company Shares. The Buyer is purchasing the Company Shares for its own account for investment only and not with a view to, or for sale in connection with, any distribution of the Company Shares. Section 3.3. Litigation: Consents. (a) The Buyer knows of no pending or threatened action, suit, proceeding or investigation before any court or governmental body, or by any governmental agency to restrain or prevent the performance of the transactions contemplated by this Agreement or which might affect the right of the Buyer to own, the Company Shares. 12 (b) Except as otherwise referred to herein, no consent, action, approval or authorization of, or registration, declaration or filing with, any governmental department, commission, agency or other instrumentality having jurisdiction over the Buyer is required to be obtained by the Buyer to authorize the execution and delivery by the Buyer of this agreement or the performance by the Buyer of its terms. ARTICLE IV COVENANTS OF THE SELLER AND THE BUYER Section 4.1. Maintain Company Shares. Before the Closing Date, the Seller will not, without the consent of the Buyer, (a) sell or otherwise transfer any of the Company Shares or (b) incur or permit to exist any lien, charge or encumbrance on any of the Company Shares. Section 4.2. Approvals: Consents. The Seller will obtain or cause to be obtained all consents, approvals and authorizations required by law, statute, rule, regulation, contract or agreement to be obtained by the Seller in connection with the consummation of the sale and transfer by the Seller to the Buyer of the Company Shares and the transactions contemplated hereby. (a) From the date hereof to and including the Closing Date, the Seller will use its best efforts to cause the Company to continue the operation of its business in the ordinary course, and to maintain its real property and other assets, properties and rights in at least as good order and condition as exists on the date hereof and will not permit the Company to: (i) encumber any of its assets, properties or right or enter into any transaction or make any contract or commitment relating to its assets, properties or business, except in the ordinary course of business; 13 (ii) enter into any employment contract which is not immediately terminable; (iii) enter into any contract or agreement; (iv) reclassify or change in any manner its outstanding shares of capital stock or issue or sell any shares of its capital stock or other securities, or redeem or otherwise acquire, or enter into any contract or commitment to redeem or otherwise acquire, any shares of capital stock of the Company; (v) make any declaration, payment or distribution of a dividend or any other payment to any shareholder; (vi) transfer any assets of the Company to any shareholder; Section 4.3. Maintain company Business From the date hereof to and including the Closing Date, the Seller will use its best efforts to cause the company to continue the operation of its business in the ordinary course, and to maintain its real property and other assets, properties and rights in at least as goad order and condition as exists on the date hereof, and will not permit the Company to: (a) encumber any of its assets, properties or right or enter into any transaction or make any contract or commitment relating to its assets, properties or business, except in the ordinary course of business; (b) Enter into any employment contract which is not immediately terminable; (c) enter into any contract or agreement; (d) reclassify or change in any manner its outstanding shares of capital stock or issue or sell any shares of its capital stock or other securities, or redeem, 14 or otherwise acquire, or enter into any contract or commitment to redeem or otherwise acquire, any shares of capital stock of the Company; (e) make any declaration, payment or distribution of a dividend or any other payment to any shareholder; (f) transfer any assets of the Company to any shareholder. Section 4.4. Representations. The Seller (a) will take all action necessary to render accurate as of the Closing Date its representations and warranties contained herein, (b) will refrain from taking any action which would render any such representation or warranty inaccurate in any material respect as of such time, and (c) will perform or cause to be satisfied each covenant or condition to be performed or satisfied by it or them as contemplated by this Agreement. Section 4.5. Title Search. (a) The Buyer shall promptly order an examination of title with respect to the Premises and shall cause a copy of the title report to be forwarded to Seller's attorney upon receipt. Seller shall be entitled to a reasonable adjournment of the Closing for up to 60 days to cause the Company to remove any defects in or objections to title noted in such title report and any other defects or objections which may be disclosed on or prior to the Closing Date. (b) If Seller shall be unable to cause the title to the Premises to be in accordance with the provisions of this Agreement or if Buyer shall have any other grounds under this Agreement for refusing to consummate the acquisition of the Company Shares, Buyer, nevertheless, may elect to close hereunder with a credit against the Purchase Price equal to the reasonably estimated cost to cure the same, but without any other credit or liability on the part of the Seller. If Buyer shall not so elect, Buyer may terminate this 15 Agreement and the sole liability of Seller shall be to refund the Downpayment to Buyer and to reimburse Buyer for the net cost of title examination, but not to exceed the net amount charged by Buyers title company therefor without Issuance of a policy. Seller shall not be required to bring any action or proceeding or to incur any expense in excess of the Purchase Price to cure any title defect or to enable Seller otherwise to comply with this Agreement. ARTICLE VI INDEMNIFICATION Section 5.1. Indemnification by the Seller. (a) The Seller shall be liable for, indemnify the Buyer and its affiliates for, hold the Buyer and its affiliates harmless from, and reimburse the Buyer and its affiliates for, any and all Buyers Damages (as defined in Section 5.1(b)) in the manner and to the extent set forth in this Section 5.1. (b) The term "Buyer's Damages" shall include all losses, costs, expenses (including attorney's fees and expenses), fees, liabilities and damages sustained by the Buyer prior to any reimbursement therefor: (i) arising from any breach of a representation or warranty of the Seller contained in or made pursuant to this Agreement or in any certificate, instrument or agreement delivered to the Buyer pursuant to or in connection with this Agreement; (ii) resulting from a default in the performance of any of the covenants or obligations that the Seller is required to perform under this Agreement; or (iii) resulting from any foreign, Federal, state or local income or franchise tax payable with respect to the period ending on the Closing Date. 16 Section 5.2. Indemnification by the Buyer. (a) The Buyer shall be liable for, indemnify the Seller for, hold the Seller harmless from and reimburse the Seller for any and all Seller's Damages (as defined in Section 5.2(b)) in the manner and to the extent set forth in this Section 5.2. (b) The term "Seller's Damages" shall include all losses, costs, expenses (including attorney's fees and expenses), fees, liabilities and damages sustained by the Seller prior to any reimbursement therefor arising from any breach of a representation or warranty of the Buyer contained in or made pursuant to this Agreement or in any certificate, instrument or agreement delivered to the Seller pursuant to or in connection with this Agreement, but in no event in an amount in excess of the down payment hereunder. ARTICLE VI TERMINATION OF AGREEMENT Section 6.1. Termination of Agreement. This Agreement and the transactions contemplated hereby may be terminated or abandoned at any time before the Closing Date: (a) by mutual consent of the Seller and the Buyer. (b) by the Buyer, if there has been a material misrepresentation in this Agreement by the Seller, or a material breach by the Seller of any warranty or covenant set forth herein, or a failure of any condition to which the obligations of the Buyer are subject or in the event that Buyer, in its sole discretion, is not satisfied with the results of the Phase I and it conducted a Phase II environmental survey of the Premises; or (c) by the Seller, if there has been a material misrepresentation in this Agreement by the Buyer, or a material breach by the Buyer of any warranty or covenant set forth herein, or failure of any condition to which the obligations of the Seller are. 17 ARTICLE VII CONDITIONS TO THE BUYER'S OBLIGATIONS The obligations of the Buyer to purchase the Company Shares pursuant to this Agreement shall be subject to the satisfaction, at or before the Closing Date, of the following conditions (any of which may be waived, in whole or in part, by the Buyer). Section 7.1 Representations and Warranties. The Representations and warranties of the Seller contained in this Agreement (including the Schedules and Exhibits hereto), or in any certificate or document delivered to the Buyer in connection herewith shall be true in all material respects at the Closing Date as if made again on and as of the Closing Date. The Seller shall have duly performed and complied with all agreements and conditions required by this Agreement to be performed or complied with by them at or before the Closing Date. The Buyer shall have been furnished with certificates of appropriate officers of the Seller of appropriate certifying in such detail as the Buyer may reasonably request to the fulfillment of the foregoing conditions. Section 7.2. Certain Documents. At the Closing, the Seller shall have furnish the Buyer with the following documents: (a) the Certificate of Incorporation of the Company and the Seller and all amendments thereto; (b) The by-laws of the Company, duly certified by the Seller as being in force and effect at all times; (c) Resignations, effective on the Closing Date, of all officers and directors of the Company; 18 (d) The complete and correct corporate minute books, stock transfer records and corporate seal of the Company; (e) Written consents of the mortgagee(s) with respect to the Premises and certificates executed by such mortgagee(s) in proper form for recording and certifying the amount of the unpaid principal balance thereof, the maturity date thereof the interest rate, the last date to which interest has been paid thereon and the amount of any escrow deposits held by such mortgagee(s). Any mortgagee which is an institutional lender may furnish a letter complying with Section 274-a of the Real Property Law in lieu of such certificate. (f) To the extent they are then in the Company's possession and not posted at the Premises, certificates, licenses, permits, authorizations and approvals issued for or with respect to the Premises by governmental and quasi-governmental authorities having jurisdiction. (g) Such affidavits as Buyer's title insurance company shall reasonably require in order to omit from its title insurance policy all exceptions for judgments, bankruptcies or other returns against persons or entities whose names are the same as or similar to the Company's or Seller's name. (h) Checks to the order of the appropriate officers in payment of all applicable real property transfer taxes and copies of any required tax returns therefor executed by the Company, which checks shall be certified or official bank checks if required by the taxing authority; (i) Notice(s) to the mortgagee(s) executed by the Company advising of the sale of the Premises to Buyer and directing that future bills and other correspondence should thereafter be sent to Buyer or as Buyer may direct; (j) Possession of the Premises in the condition required by this Agreement, free and clear from all tenancies and leases, and the keys therefor; and 19 (k) Certificate or certificates for the Company Shares, duly endorsed for transfer or with a duly executed stock power attached, together with funds in payment of any applicable stock transfer tax payable in respect of the transfer of the Company Shares; and (i) any other documents required by this Agreement to be delivered by Seller. Section 7.3. Release. The Seller shall have delivered to the Buyer and the Company a general release of all claims it my have through the Closing Date against the Company and the Company shall give Seller a similar general release Section 7.4. No Material Change There shall not have been any material adverse change in the Company's assets from the date hereof to the Closing Date. Section 7.5. No Litigation No action, suit, proceeding or investigation shall be pending or, so far as is known to the Seller, the Company or the Sellers or the Company's executive officers, be threatened before any court or governmental body, or by any governmental agency challenging the transactions contemplated by this Agreement or otherwise seeking damages, or seeking to restrain or prevent the consummation of the transactions contemplated by this Agreement or to prohibit or limit the ability of the Buyer to exercise full rights of ownership of the Company Shares. Section 7.6. Settlement of Real Estate Taxes Seller shall not withdraw, settle or otherwise compromise any protest or reduction proceeding affecting real estate taxes assessed against the Premises for any fiscal period in which the Closing is to occur or any subsequent fiscal period to an amount less than $500,000 without the prior written of Purchaser, which consent shall not be unreasonably withheld. 20 ARTICLE IX CONDITIONS TO SELLER'S OBLIGATIONS The obligation of the Seller to sell the Company Shares to the Buyer pursuant to this Agreement shall be subject to the satisfaction, at or before the Closing Date, of the following conditions (any of which may be waived, in whole or in part, by the Seller). Section 9.1. Representations and Warranties. The representations and warranties of the Buyer contained in this Agreement or in any certificate or document delivered to the Seller pursuant hereto shall be true in all material respects at the Closing Date as if made on and as of the Closing Date. The Buyer shall have duly performed and complied with all agreements and conditions required by this Agreement to be performed or complied with by the Buyer at or before the Closing Date. The Seller shall have been furnished with certificates of appropriate officers of the Buyer, dated the Closing Date, certifying in such detail as the Seller may reasonably request to the fulfillment of the foregoing conditions. Seller has not made and does not make any representations as to the physical condition, expenses, operation or anything else affecting or related to the Premises, except as herein specifically set forth, and Buyer hereby expressly acknowledges that no such representations have been made. Seller is not liable or bound in any manner, by express or implied warranties, guarantees, promises, statements or representations pertaining to the Premises, the condition thereof or any other matter whatsoever made or furnished by any real estate broker, agent, employee, servant or other person representing or purporting to represent Seller, unless such warranties, guaranties, promises, statements or representations are expressly and specifically set forth herein. Buyer represents and warrants to Seller that Buyer has examined the Premises, is familiar with the physical condition thereof and agrees to accept the Premises in its "as is" condition on the Closing Date. 21 Section 9.2. Payment. The Buyer shall have paid to the Seller by delivery of a certified check or official bank check on the Closing Date the amount required to be paid to the Seller pursuant to Section 1.2. ARTICLE XI MISCELLANEOUS Section 10.1. Survival of Representations and Warranties. The representations and warranties made in this Agreement in any certificate, Schedule, Exhibit or document delivered in connection therewith shall survive the Closing Date. Section 10.2. Brokers. The Buyer and the Seller each represents and warrants that there are no claims for brokerage commissions or finders fees in connection with the transactions contemplated hereby resulting from any action taken by the Buyer, the Seller, the Company, officers or directors of the Buyer, the Seller or the Company other than Empress Realty, 3372 Fulton Street, Brooklyn, New York 11208. The commission to such broker shall be paid by Seller pursuant to separate agreement. Section 10.3. Governing Law. This Agreement shall be construed and enforced in accordance with the internal, substantive laws of the State of New York, without giving effect to the conflict of law rules thereof. Section 10.4. Notices. 22 All notices, consents, requests, instructions, approvals and other communications provided for herein shall be deemed validly given, made or served if in writing and delivered personally (as of such delivery) or sent by certified mail (as of two days after deposit in a United States post office), postage prepaid, or by telex, telecopier or telegraph, charges prepaid. (a) if to the Seller, addressed to: Michael Alagna 23277 Barlake Drive Boca Raton, Florida 33423 with a copy to: Malcolm Fein, Esq. 123 Joralemon Street Brooklyn, New York 11201 (b) if to the Buyer, addressed to: Western Beef, Inc. 47-05 Metropolitan Avenue Ridgewood, New York 11385 Attn: Peter Castellana, Jr. with a copy to: Howard W. Muchnick, Esq. Muchnick, Golieb, Golieb, P.C. 630 Fifth Avenue New York, New York 10011 or such other address as shall be furnished in writing by either party to the other. Section 10.5. Jurisdiction; Agent For Service. Legal proceedings commenced by the Seller or the Buyer arising out of any of the transactions or obligations contemplated by this agreement shall be brought 23 exclusively in the federal courts or, in the absence of federal jurisdiction, state courts, in either case in New York, New York. The Buyer and the Seller irrevocably and unconditionally submit to the jurisdiction of such courts and agree to take any and all future action necessary to submit to the jurisdiction of such courts. Each of the Buyer and the Seller irrevocably waives any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding brought In any federal or state court in New York and further irrevocably waives any claims that any such suit, action or proceeding brought in any such court has been brought In an inconvenient forum. The Seller hereby irrevocably designates, appoints and empowers Malcolm Fein, whose present address is 123 Joralemon Street, Brooklyn, New York 11201, as its authorized agent to receive, for and on behalf of the Seller, service of process in the state of New York as and when such actions and proceedings may be brought, and such services of process shall be deemed completed upon the date of delivery thereof to such agent whether or not such agent gives notice thereof to the Seller, or upon the earliest of any other date permitted by applicable law. Final judgment against the Seller in any such suit shall be conclusive and may be enforced in other jurisdictions by suit on the judgment, a certified or true copy of which shall be conclusive evidence of the fact and the amount of any indebtedness or liability of the Seller therein described, or by appropriate proceedings under any applicable treaty or otherwise. Section 10.6. Assignment. Amendments. Waivers. (a) Neither the Buyer nor the Seller shall assign any of its rights or obligations under this Agreement without the prior written consent of the other, except that the Buyer may assign its rights hereunder to one or more direct or indirect wholly-owned subsidiaries of the Buyer provided that the Buyer shall continue to be obligated to perform all the obligations to be performed by the Buyer hereunder. 24 (b) This Agreement shall be binding upon and shall inure to the benefit of the parties and their respective successors and permitted assigns, and no other person shall acquire or have any right under or by virtue of this Agreement. (c) No provision of this Agreement may be amended, modified or waived except by written agreement duly executed by each of the parties. Section 10.7. Entire Agreement. This Agreement represents the entire agreement between the parties and supersedes and cancels any prior oral or written agreement, letter of intent or understanding related to the subject matter hereof Section 10.8. Counterparts. This Agreement may be executed in one or more counterparts, and shall become effective when one or more counterparts have been signed by each of the parties. IN WITNESS WHEREOF, this Agreement has been duly executed by the parties hereto on the day and year first above written. Western Beef, Inc. By: ---------------------------- Name: Frank Castellana ---------------------------- Title: Vice President ---------------------------- Michael Alagna /s/ Malcolm Fein ---------------------------------------- By: Malcolm Fein Attorney-in-Fact /s/ Malcolm Fein ---------------------------------------- Malcolm Fein, as to Section 1.3 only, as Escrow Agent 25 APPROXIMATE DEBTS First Mortgage $ 40,000.00 Taxes 550,000.00 Water and Sewer 14,000.00 Judgment 15,000.00 ECB's 350.00 Yellow Book 1,339.82 Household Finance 5,908.89 Commissioner of Labor 2,718.76 Taxation, Elm Street 572.76 Total at present $629,890.23 26 DRAFT WESTERN BEEF PROPERTIES, INC. Purchaser and MICHAEL ALAGNA Seller CLOSING STATEMENT Purchase of the 814 Jamaica Avenue, Inc. by Western Beef Inc. December 23, 1998 I. PROPERTY TRANSFER AND STOCK PURCHASE: Pursuant to an Acquisition Agreement dated September 18, 1998 (the "Agreement"), Western Beef lnc., (the "WBI") agreed to purchase all outstanding capital stock (the "Company Shares") of 814 Jamaica Avenue, Inc. (the "Corporation") from the sole shareholder of the Corporation, Michael Alagna ("Seller"). At the time of contract, the property known as 814 Jamaica Avenue, Brooklyn, New York (the "Premises") was owned by Seller. Prior to Closing, WBI assigned its right, title and interest under the Agreement to Western Beef Properties, Inc. ("Purchaser") pursuant to an Assignment and Assumption Agreement. Immediately prior to Closing, Seller transferred title to the Premises to the Corporation. The original purchase price was $708,000, with money to be applied to pay Sellers debts the the balance, if any, payable to Seller. Upon execution of the Agreement $12,000 was deposited with and held in Escrow by Malcolm Fein, Esq., as Escrow Agent. The parties subsequently renegotiated the purchase price and agreed to a final purchase price of $743,500 00 (the "Purchase Price"). At the Closing, approximately $709,357.05 of Seller's debts and obligations were assumed by Purchaser. Thereafter, $20,000 was paid to Seller or as directed by Seller, plus the Escrow Agent retained $12,000. The remaining $2,142.95 ($743,500 less $709,357.05, $20,000 and $12,000) is being held in escrow pending any additional debts of Seller arising which would impact on the property or Purchasers rights in the Corporation. FINANCING The Corporation borrowed $566,400 (the "Loan") from North Fork Bank ("North Fork"). The Loan is evidenced by a Mortgage Note (the "Note") and secured by a Mortgage encumbering the Premises- The Note provides for a ten (10) year term and bears interest at the rate of 6.85% per annum. The first monthly payment of principal and interest in the amount of $6,582.00 is due on February 1, 1999 and thereafter is due and payable on the first day of each month and shall continue until January 1, 2009 when any unpaid balance shall be due and payable. At Closing, an interest payment was made for January 1, 1999 for the period of December 23, 1998 to December 31, 1998.. The Loan was guaranteed by Western Beef. Inc., Western Beef Properties, Inc. and Western Beef Retail, Inc. The Closing was held at the offices of Benjamin J. Klemanowicz, P.C., 1001 Franklin Avenue, Suite 311, Garden City, New York at 4:00 P.M. II. PARTIES Seller Michael Alagna Dolores Spera Neither Michael Alagna or Dolores Spera was present at Closing 3 Attorneys for Seller: Malcolm Fein, Esq. By: Malcolm Fein, Esq. Neither Mr. Fein nor anyone from his was not present at Closing Purchaser Western Beef Properties, Inc. By: Frank Castellana Peter Admirand Santino Montalbano Attorneys for Purchaser: Muchnick, Golieb & Golieb, P.C. By: Howard W. Muchnick, Esq. Elizabeth A. St. Lifer, Esq. Janice P. Olyarchuk, Esq. Ms. Olyarchuk was not present at closing Title Company By: TPS Abstract Corporation By: Bill Janhonan Lender: North Fork Bank By: Benjamin J. Klemanowicz, Jr., P.C. By: James Burns, Esq Empress Realty By: Mario Di Pinto A representative of Mr. DePinto was present for part of the Closing Ill. PURCHASE PRICE AND CLOSING ADJUSTMENTS (as of December 23, 1998) A. Credits to Seller: Purchase Price: $743,500.00 =========== 4 B. Credits to Purchaser 1. Down Payment Paid at Signing of Agreement 12,000.00 2. Payment of Seller's Debts: a. Bank of Ireland 15,000.00 b. Yellow Book 1,000.00 c. Household Finance 3,354.40 d. Commissioner of Labor 3,700.00 e. First Mortgage WAMCO 25,000.00 f Sales Tax to 12/28 13,698.67 g. ECB Violation 800.00 h. ECB violation for fire 3,000.00 NYC Dept. of Finance (taxes) estimated to 616,833.10 12/28 NYCTL 1998 H LIV Trust j. NYC Department of Finance 1,500.00 k. NYC Department of Finance (liquor license) 2,000.00 C. Seller's Closing Costs a. NYC Real Property Transfer Tax 19,516.88 b. Pickup Fee to Pay Debts 1,000.00 c. Recording Satisfactions 80.00 d. NYS Doc Stamps 2,974.00 3. Disbursed to Seller after the closing 20,000.00 4. Cash held in escrow 2,142.95 ----------- $743,500.00 =========== IV. DISBURSEMENTS OF PURCHASE PRICE Unless otherwise indicated, all checks are dated December 23, 1998: A. Balance Due to Seller and Seller's closing expenses were disbursed as follows: B Wire transfer from North Fork Bank on December 24, 1998 to TPS Abstract Corp. ("TPS") to pay Seller's Closing expenses $566.400.00 C. Wire Transfer from Purchaser on December 24, 1998 to TPS 142,957.05 to pay Seller's Closing expenses 5 D. Check no. 1034 drawn by Western Beef, Inc. on North Fork Bank to the order of Muchnick, Golieb & Golieb, P.C., as 22,142.95 Attorneys ----------- TOTAL ................................ $731,500.00 =========== V. CLOSING EXPENSES The following Closing Expenses were paid by Purchaser or on its or the Corporation's behalf at closing: Disbursements Payee Amount A. Title Costs Survey TPS Abstract Corp. 400.00 Mortgage Insurance TPS 1,507.00 Fee Insurance TPS 3,224.00 Municipal Searches TPS 315.00 Mortgage Tax TPS 15,576.00 Recording Mortgage TPS 230.00 Recording. Mortgage TPS 200.00 Recording Assignment of TPS 125.00 Vault Search TPS 35.00 Continuation TPS 50.00 2nd half 98/99 Real Estate TPS 17,769.20 Title Closer Gratuity Bill Johnonon 200.00 Total Title Closing Fees 39,631.20 --------- Loan Origination Fee North Fork Bank 2,832.00 Appraisal North Fork Bank 2,000.00 Tax Escrow Account North Fork Bank 2,962.00 Interest from 12/23 to North Fork Bank 969.96 12/31/98 Tax Service North Fork Bank 89.00 Lender's Attorneys Fee B.J. Klemanowicz, Jr., 2500.00 --------- Total Bank Closing Fees 11,352.96 Total Closing $50,984.l6 ========== 6 7 VI. CLOSING DOCUMENTS Copies of all closing documents are annexed hereto as Exhibits and unless otherwise indicated, they are dated as of December 23, 1998. The description of the documents contained herein does not purport to be complete: Reference should be made to the documents themselves for the exact terms and provisions thereof Property Transfer Documents and Stock Transfer 1. Acquisition Agreement between Michael Alagna ("Sellers") and Western Beef, Inc. ("Buyer") made as of September 18, 1997 2. Minutes of 814 Jamaica Avenue, Inc., election of director, officer and issuance of shares 3. Share Certificate for 10 Shares of 814 Capital Stock 4. SS-4 application for EIN for 814 5. Bargain and Sale Deed from Seller to 814 Jamaica Avenue, Inc. ("814") 6. NYS Combined Real Estate Transfer Tax Return and Credit Line Mortgage Certificate from Seller to 814 7. NYC-RPT Real Property Transfer Tax Return from Seller to 814 8. Smoke Detecting Alarm Affidavit from Seller 9. Affidavit in lieu of Registration Statement from Seller 10. Certification of Non-Foreign Status (FIRPTA) from Seller 11. Unanimous Consent of the Sole Shareholder and Director of 814 12. Unanimous Written Consent of Directors of Western Beef, Inc. to Assignment 13. Assignment - Western Beef, Inc to Western Beef Properties, Inc. 8 14. Unanimous Written Consent of Directors of Western Beef Properties, Inc. to Assignment 15. Unanimous Written Consent of the Directors of Western Beef Properties, Inc. to acquire 814 16. Stock Power from Seller to Buyer 17. Resignation Letter from Alagna 18. Resignation Letter from Spera 19. NYS Combined Real Estate Transfer Tax Return and Credit Line Mortgage Certificate from Seller from 814 to Buyer 20. NYC-RPT Real Property Transfer Tax Return from 814 to Western 21. Smoke Detecting Alarm Affidavit from 814 22. Affidavit in lieu of Registration Statement from 814 23. Certification of Non-Foreign Status (FIRPTA) from 814 Title Documents 24. Title Insurance Commitment No.4-744 430 issued by TPS Abstract Corporation on behalf of Lawyers Title Insurance Corporation 25. Title Affidavit of Seller Financing Documents 26. North Fork Bank Commitment dated December 9,1995 Original Note 27. Copy of Mortgage (original being recorded by title company) 28. Original Guarantee of Western Beef Properties, Inc. 29. Original Guarantee of Western Beef Inc. 30. Original Guarantee of Western Beef Retail, Inc. 9 31. UCC-1 copies 32. Affidavit - No judgments 33. Certificate of President and Secretary of Western Beef Properties, Inc. 34. Certificate of President and Secretary of Western Beef Inc. 35. Certificate of President and Secretary of Western Beef Retail, Inc. 36. Certificate of President and Secretary of 814 Jamaica Avenue Inc. 37. Certificate - Loans to One Borrower (no folder, bank to provide doc) 38. Owners Estoppel Certificate (no folder, shouldn't need) 39. Counsel's Opinion Letter 40. Certification of No Change in Condition 41. Errors and Omissions Form 42. Taxpayer Authorization Forms 43. Certificate of Insurance and Fire Insurance Policy 44. Title Report 45. Title Policy 46. Attorneys Fee Statement 47. Benjamin J. Klemanowicz, Jr., P.C. invoice 48. Survey - Title Company is certifying 49 Copy of Loan Disbursement Checks 50. Computation of escrow 51. Copy of Appraisal Report 52. Copy of Environmental Phase I 10 53. Name Change Certificate of Amendment - East Central Meats Inc. to Western Beef Properties, Inc. as dated and/or filed 8/6/98. 54. Share certificate of 814 Jamaica Avenue Inc. in favor of Western Beef Properties 55. Unanimous Written Consent of Sole Shareholder of 814 Jamaica Avenue Inc (to elect director) 56. Unanimous Written Consent of Director of 814 Jamaica Avenue Inc. (to elect officers) 57. Unanimous Written Consent of Director of 814 Jamaica Avenue Inc. (authorizing loan) 58. Secretarial Certification of 814 Jamaica Avenue Inc. 59. Secretarial Certification of Western Beef Properties, Inc. 60. Corporate Resolution of Western Beef Properties, Inc. 61. Secretarial Certification of Western Beef Inc. 62. Corporate Resolution of Western Beef Inc. 63. Secretarial Certification of Western Beef Retail Inc. 64. Corporate Resolution of Western Beef Retail Inc. 65. Copy of Deed dated ___________________ to 814 Jamaica Avenue Inc. 66. Copy of Acquisition Agreement dated September 18, 1998 67. Photo identification (no folder) 68. Title Company Invoice (no folder) Miscellaneous 69. General Release from Seller 70. General Release from Buyer 11 71. Pay-off Letter for taxes 72. Certificate of Incorporation for 814 73. Brokerage Agreement 74. Copies of checks Dated: February , 1999 Respectfully Submitted, MUCHNICK, GOLIEB & GOLIEB. P.C. 630 Fifth Avenue, Suite 1425 New York, New York 1O111 12 EX-10.28 9 AMENDMENT TO LEASE AMENDMENT TO LEASE Between 61 2nd Street Associates ("Landlord") and Western Beef Mineola, Inc. ("Tenant") Premises: 61 2nd Street Mineola, New York This Amendment is made and entered into this 1st day of February, 1997 ("Effective Date") between 61 2nd Street Associates, as Landlord and Western Beef Mineola, Inc. ("Western"), as Tenant. WHEREAS, on January 23, 1992, Landlord and Quarex, Inc. ("Quarex") entered into a certain Lease Agreement ("Lease") for the building known as 61 2nd Street, Mineola, New York. WHEREAS, on January 30, 1997, Quarex, as Assignor, Western, as Assignee and Western Beef, Inc. as Guarantor, with the approval of Landlord, entered into a certain Assignment and Assumption of Lease whereby Quarex assigned to Western all of Quarex's rights, title and interest in the Lease. WHEREAS, 61 2nd Street Associates, as Landlord, and Western Beef, Inc., as Tenant, desire to amend the Lease as follows: 1. The Parties restate Paragraph 67 as follows: "Provided the Tenant is not in default under any provisions of this Lease, the Parties agree to extend the Lease Term for an additional fifteen (15) year period to wit: February 1, 1997 through January 31, 2012." Commencing February 1, 1997, through January 31, 1998, the annual base rent shall be $446,698.44 ($37,224.87 per month). Thereafter the annual base rent shall be as provided in Paragraph 42, below. 2. The Parties restate Paragraph 42 as follows: "For the purposes of this Lease, "Lease Year" shall be deemed to be the period from February 1st through January 31st. Commencing February 1, 1998, and each year thereafter, such annual base rent shall be adjusted in accordance with the provisions of this Article. The annual base rent for each Lease Year shall be increased by five (5%) percent of the prior Lease Year's rent. (Annexed hereto and made a part hereof as Schedule "A" is the base rent schedule for the term hereunder.) Such percentage increase shall be multiplied by the then current annual base rent to determine the amount required to be paid by the Tenant as additional rent for the then current Lease Year. The Landlord shall give the Tenant a written statement of the calculation of the amount of any increase so determined prior to the end of a Lease Year. For each Lease Year, the annual base rent and increase thereto shall be due and payable to the Landlord in twelve (12) equal monthly installments beginning February 1st of each Lease Year (however in the event increased to the annual base such accrued by unpaid additional rent for any such month(s) subsequent to February 1st shall be due with the next rent payment as herein provided). Adjustments hereunder shall survive the termination of this Lease. 3. All other terms and conditions of the Lease, its Assignment and Guaranty shall remain in full force and effect for term hereunder. The Parties have signed this Lease Amendment as of the date and year first written above. LANDLORD 61 2ND STREET ASSOCIATES By: /s/ Michael Castellana ------------------------- TENANT WESTERN BEEF MINEOLA, INC. By: /s/ Peter Castellana, Jr. ------------------------- GUARANTOR WESTERN BEEF, INC. (A Delaware Corporation) By: /s/ Peter Castellana, Jr. ------------------------- SCHEDULE A BASE RENT SCHEDULE MONTHLY YEARLY YEAR RENT RENT ---- ---- ---- 02/01/1998 - 01/31/1999 39,086.11 469,033.36 02/01/1999 - 01/31/2000 41,040.42 492,485.03 02/01/2000 - 01/31/2001 43,092.44 517,109.28 02/01/2001 - 01/31/2002 45,247.06 542,964.74 02/01/2002 - 01/31/2003 47,509.41 570,112.98 02/01/2003 - 01/31/2004 49,884.88 598,618.63 02/01/2004 - 01/31/2005 52,379.13 628,549.56 02/01/2005 - 01/31/2006 54,998.08 659,977.04 02/01/2006 - 01/31/2007 57,747.99 692,975.89 02/01/2007 - 01/31/2008 60,635.39 727,624.69 02/01/2008 - 01/31/2009 63,667.15 764,005.92 02/01/2009 - 01/31/2010 66,850.51 802,206.22 02/01/2010 - 01/31-2011 70,193.04 842,316.53 02/01/2011 - 01/31/2012 73,702.69 884,432.35 [Letterhead of Property Appraisal Services, Inc.] Mr. Peter Castellana, Jr. March 4, 1997 Ant Realty Corp. 47-05 Metropolitan Avenue Ridgewood, NY 11385 Re: 61 Second Avenue Mineola, NY Dear Mr. Castellana: In reference to the above mentioned property, as indicated in our April 1996 appraisal of the property, the Fair Market Rental Value is $15 per square foot or $677,835 per year, based upon a "Net" lease where the tenant pays all operating costs and increases in fixed costs over the base year. A typical lease would be for 10 years with 4 percent annual increases. If you have any additional questions, please do not hesitate to contact us. Very truly yours, /s/ Richard J. Anastasio /s/ P. Jude Collins Richard J. Anastasio, MAI P. Jude Collins, ASA NYS certified General NYS Certified General Appraiser #46-2882 Appraiser #46-670 [Letterhead of The Vincent A. Deiorio Law Firm] March 25, 1997 VIA OVERNIGHT MAIL Western Beef, Inc. 47-05 Metropolitan Avenue Ridgewood, New York 11385 Attn: Santino Montalbano Re: 61 2nd Street, Mineola, New York Dear Santino: Enclosed herewith please find revised Lease Amendment and Assignment and Assumption of Lease in accordance with our telephone conversations today. I will contact you tomorrow around 12:00 p.m. to discuss the Merrick Lease. Should you require anything additional with respect to this matter, please do not hesitate to contact me. Very truly yours, /s/ Patrick V. DeIorio Patrick V. DeIorio PVD:jm enclosure EX-10.29 10 CERTIFICATE OF MERGER N. Y. S. DEPARTMENT OF STATE DIVISION OF CORPORATIONS AND STATE RECORDS ALBANY, NY 12231-0 FILING RECEIPT ================================================================================ ENTITY NAME : WESTERN BEEF RETAIL, INC. DOCUMENT TYPE : MERGER (DOM. BUSINESS) COUNTY : QUEENS NAME SERVICE COMPANY : CT CORPORATION SYSTEM SERVICE CODE : 07 CONSTITUENT NAME: WESTERN BEEF -- 14TH STREET INC. (ET AL) ================================================================================ FILED: 01/30/1998 DURATION: ********* CASH 980130000710 FILM #: 9801300000 ADDRESS FOR PROCESS EFFECT DATE - ------------------- ----------- 01/30/1998 [SEAL OF THE STATE OF NEW YORK] REGISTERED AGENT - ---------------- ================================================================================ FILER FEES 95.00 PAYMENTS 95 - ----- ---- -------- MUCHNICK GOLIEB & GOLIEB PC FILING: 60.00 CASH: 0 630 FIFTH AVENUE TAX: 0.00 CHECK: 95 CERT: 0.00 BILLED: 0 NEW YORK, NY 10111 COPIES: 10.00 HANDLING: 25.00 REFUND: 0 ------- ================================================================================ OS-1025 (11/89) State of New York ) ) ss. Department of State ) I hereby certify that the annexed copy has been compared with the original document in the custody of the Secretary of State and that the same is a true copy of said original. Witness my hand and seal of the Department of State on FEB 04 1998 [SEAL OF THE STATE OF NEW YORK] /s/ [ILLEGIBLE] Special Deputy Secretary of State DOS-1266 (5/96) CT-07 CT-07 CERTIFICATE OF MERGER OF WESTERN BEEF-14TH STREET INC. (a New York Corporation), WESTERN BEEF-173RD STREET INC. (a New York Corporation), WESTERN BEEF-COLLEGE POINT BLVD., INC. (a New York Corporation), WESTERN BEEF (EAST NEW YORK), INC. (a New York Corporation), WESTERN BEEF, EAST ORANGE, N.J. INC. (a New Jersey Corporation), WESTERN BEEF ELMONT INC. (a New York Corporation), WESTERN BEEF EMPIRE BOULEVARD, INC. (a New York Corporation), WESTERN BEEF-FOREST AVE. INC. (a New York Corporation), WESTERN BEEF MERRICK BLVD. INC. (a New York Corporation), WESTERN BEEF-MINEOLA, INC., (a New York Corporation), WESTERN BEEF MYRTLE AVE., INC. (a New York Corporation), WESTERN BEEF-PARK AVENUE, INC. (a New York Corporation), WESTERN BEEF-ROCKAWAY BLVD., INC. (a New York Corporation), WESTERN BEEF ROOSEVELT, INC. (a New York Corporation), WESTERN BEEF-ROSEDALE AVE. INC. (a New York Corporation), WESTERN BEEF-STEINWAY STREET INC. (a New York Corporation), WESTERN BEEF-WEST END AVE. INC. (a New York Corporation) and WESTERN BEEF-MORRIS AVE INC. (a New York Corporation) INTO WESTERN BEEF-METROPOLITAN AVE, INC. (a New York Corporation) UNDER SECTION 904 OF THE BUSINESS CORPORATION LAW The undersigned, Peter Castellana, Jr. and Peter Admirand, being, respectively, the President and Secretary of each of Western Beef-14th Street Inc., Western Beef-173rd Street Inc., Western Beef College Point Blvd., Inc., Western Beef (East New York) Inc., Western Beef, East Orange, N.J. Inc., Western Beef Elmont Inc., Western Beef Empire Boulevard, Inc., Western Beef Forest Ave Inc., Western Beef-Merrick Blvd. Inc., Western Beef 1 Mineola, Inc., Western Beef Myrtle Ave., Inc., Western Beef-Park Avenue, Inc., Western Beef-Rockaway Blvd., Inc., Western Beef Roosevelt, Inc., Western Beef-Rosedale Ave. Inc., Western Beef-Steinway Street Inc., Western Beef-West End Ave. Inc. and Western Beef-Morris Ave Inc., and Peter Castellana, Jr. and Peter Admirand, being, respectively, the President and Secretary of Western Beef-Metropolitan Ave. Inc., hereby certify: 1. (a) The name of each constituent corporation is as follows: Western Beef-14th Street Inc., Western Beef-173rd Street Inc., Western Beef-College Point Blvd., Inc., Western Beef (East New York), Inc., Western Beef, East Orange, N.J. Inc., Western Beef-Elmont Inc., Western Beef Empire Boulevard, Inc., Western Beef-Forest Ave. Inc., Western Beef-Merrick Blvd. Inc., Western Beef-Mineola, Inc., Western Beef Myrtle Ave., Inc., Western Beef-Park Avenue, Inc., Western Beef-Rockaway Blvd., Inc., Western Beef Roosevelt, Inc., Western Beef Rosedale Ave. Inc., Western Beef-Steinway Street Inc., Western Beef-West End Ave. Inc., Western Beef-Morris Ave Inc. and Western Beef-Metropolitan Ave, Inc. (b) The name of the surviving corporation is Western Beef-Metropolitan Ave, Inc. Following the merger its name shall be Western Beef Retail, Inc. 2 As to each constituent corporation, the designation and number of outstanding shares of each class and series and the voting rights thereof are as follows: - -------------------------------------------------------------------------------- Designation and Number of Shares in each Class or Class or Series Shares entitled Name of Series of Shares to Vote as a Corporation Outstanding Entitled to vote Class or Series - -------------------------------------------------------------------------------- Western Beef-14 Common/100 Common N/A Street Inc. - -------------------------------------------------------------------------------- Western Beef-173rd Common/100 Common N/A Street Inc. - -------------------------------------------------------------------------------- Western Beef Common/100 Common N/A College Point Blvd., Inc. - -------------------------------------------------------------------------------- Western Beef (East Common/100 Common N/A New York), Inc. - -------------------------------------------------------------------------------- Western Beef, East Common/100 Common N/A Orange, N.J. Inc. - -------------------------------------------------------------------------------- Western Beef- Common/100 Common N/A Elmont Inc. - -------------------------------------------------------------------------------- Western Beef Common/100 Common N/A Empire Boulevard, Inc. - -------------------------------------------------------------------------------- Western Beef- Common/100 Common N/A Forest Ave. Inc. - -------------------------------------------------------------------------------- Western Beef- Common/100 Common N/A Merrick Blvd. Inc. - -------------------------------------------------------------------------------- Western Beef- Common/100 Common N/A Mineola, Inc. - -------------------------------------------------------------------------------- Western Beef Common/100 Common N/A Myrtle Ave., Inc. - -------------------------------------------------------------------------------- Western Beef Park Common/100 Common N/A Avenue, Inc. - -------------------------------------------------------------------------------- 3 - -------------------------------------------------------------------------------- Western Beef- Common/100 Common N/A Rockaway Blvd., Inc. - -------------------------------------------------------------------------------- Western Beef Common/100 Common N/A Roosevelt, Inc. - -------------------------------------------------------------------------------- Western Beef Common/100 Common N/A Rosedale Ave. Inc. - -------------------------------------------------------------------------------- Western Beef- Common/100 Common N/A Steinway Street Inc. - -------------------------------------------------------------------------------- Western Beef-West Common/100 Common N/A End Ave. Inc. - -------------------------------------------------------------------------------- Western Beef- Common/100 Common N/A Morris Ave Inc. - -------------------------------------------------------------------------------- Western Beef- Common/100 Common N/A Metropolitan Ave, Inc. - -------------------------------------------------------------------------------- 3. Western Beef-Metropolitan Ave, Inc. was incorporated under the laws of the State of New York on August 7, 1992. Western Beef-14th Street Inc. was incorporated under the laws of the State of New York on August 7, 1992. Western Beef-173rd Street Inc. was incorporated under the laws of the State of New York on October 19, 1992. Western Beef College Point Blvd., Inc. was incorporated under the laws of the State or New York on April 6, 1973. It was incorporated as Ranbar Packing, Inc. Western Beef (East New York), Inc. was incorporated under the laws of the State of New York on February 7, 1990. 4 Western Beef, East Orange, N.J. Inc. was incorporated under the laws of the State of New Jersey on March 22, 1985. This corporation does not conduct business in New York and thus no Application for Authority has been filed with the Department of State. Western Beef-Elmont Inc. was incorporated under the laws of the State of New York on October 13, 1987. It was incorporated as Quarex-Elmont Inc. Western Beef Empire Boulevard, Inc. was incorporated under the laws of the State of New York on September 14, 1994. Western Beef-Forest Ave. Inc. was incorporated under the laws of the State of New York on August 7, 1992. Western Beef-Merrick Blvd. Inc. was incorporated under the laws of the State of New York on August 7, 1992. Western Beef-Mineola, Inc. was incorporated under the laws of the State of New York on February 12, 1992. Western Beef Myrtle Ave., Inc. was incorporated under the laws of the State of New York on December 5, 1996. Western Beef Park Avenue, Inc. was incorporated under the laws of the State of New York on September 25, 1991. Western Beef-Rockaway Blvd., Inc. was incorporated under the laws of the State of New York on January 29, 1997. 5 Western Beef Roosevelt, Inc. was incorporated under the laws of the State of New York on May 6, 1996. Western Beef-Rosedale Ave. Inc. was incorporated under the laws of the State of New York on February 10, 1993. Western Beef-Steinway Street Inc. was incorporated under the laws of the State of New York on February 10, 1993. Western Beef-West End Ave. Inc. was incorporated under the laws of the State of New York on February 5, 1993. It was incorporated as Western Beef-Associated I, Inc. On February 17, 1993, its name was changed to Western-Beef Atlantic Ave. Inc. On November 17, 1995, its name was changed to Western Beef-West End Ave. Inc. Western Beef-Morris Ave Inc. was incorporated under the laws of the State of New York on August 7, 1992. 4. The merger was adopted by each constituent corporation in the following manner: Western Beef-14th Street Inc., Western Beef 173rd Street Inc., Western Beef-College Point Blvd., Inc., Western Beef (East New York), Inc., Western Beef-Elmont Inc., Western Beef Empire Boulevard, Inc., Western Beef-Forest Ave. Inc., Western Beef-Merrick Blvd. Inc., Western Beef-Mineola, Inc., Western Beef Myrtle Ave., Inc., Western Beef-Park Avenue, Inc. Western Beef- 6 Rockaway Blvd., Inc., Western Beef Roosevelt, Inc., Western Beef-Rosedale Ave. Inc., Western Beef-Steinway Street Inc., Western Beef-West End Ave. Inc., Western Beef-Morris Ave Inc. and Western Beef-Metropolitan Ave. Inc. have complied with the applicable provisions of the laws of the State of New York in which they are incorporated and this merger is permitted by such laws. The manner in which the merger was authorized with respect to each of said corporations was by the unanimous written consent of the shareholders and directors. Western Beef, East Orange, N.J. Inc. has complied with the applicable provisions of the laws of the State of New Jersey in which it is incorporated and this merger is permitted by such laws. The manner in which the merger was authorized with respect to said corporation was by the unanimous written consent of the shareholders and directors. 5. The mergers shall be effective upon the date of filing with the New York Department of State. IN WITNESS WHEREOF, we have signed this certificate on the 29th day of January, 1998 and we affirm the statements contained therein as true under penalties of perjury. 7 WESTERN BEEF-14TH STREET INC. By: /s/ Peter Castellana, Jr. --------------------------------- Peter Castellana, Jr., President By: /s/ Peter R. Admirand --------------------------------- Peter Admirand, Secretary WESTERN BEEF-173RD STREET INC. By: /s/ Peter Castellana, Jr. --------------------------------- Peter Castellana, Jr., President By: /s/ Peter R. Admirand --------------------------------- Peter Admirand, Secretary WESTERN BEEF-COLLEGE POINT BLVD. INC. By: /s/ Peter Castellana, Jr. --------------------------------- Peter Castellana, Jr., President By: /s/ Peter R. Admirand --------------------------------- Peter Admirand, Secretary WESTERN BEEF (EAST NEW YORK), INC. By: /s/ Peter Castellana, Jr. --------------------------------- Peter Castellana, Jr., President 8 By: /s/ Peter R. Admirand --------------------------------- Peter Admirand, Secretary WESTERN BEEF, EAST ORANGE, N.J. INC. By: /s/ Peter Castellana, Jr. --------------------------------- Peter Castellana, Jr., President By: /s/ Peter R. Admirand --------------------------------- Peter Admirand Secretary WESTERN BEEF-ELMONT INC. By: /s/ Peter Castellana, Jr. --------------------------------- Peter Castellana, Jr., President By: /s/ Peter R. Admirand --------------------------------- Peter Admirand Secretary WESTERN BEEF EMPIRE BOULEVARD, INC. By: /s/ Peter Castellana, Jr. --------------------------------- Peter Castellana, Jr., President By: /s/ Peter R. Admirand --------------------------------- Peter Admirand Secretary WESTERN BEEF-FOREST AVE. INC. By: /s/ Peter Castellana, Jr. --------------------------------- Peter Castellana, Jr., President 9 By: /s/ Peter R. Admirand --------------------------------- Peter Admirand Secretary WESTERN BEEF-MERRICK BLVD. INC. By: /s/ Peter Castellana, Jr. --------------------------------- Peter Castellana, Jr., President By: /s/ Peter R. Admirand --------------------------------- Peter Admirand Secretary WESTERN BEEF-MINEOLA, INC. By: /s/ Peter Castellana, Jr. --------------------------------- Peter Castellana, Jr., President By: /s/ Peter R. Admirand --------------------------------- Peter Admirand Secretary WESTERN BEEF MYRTLE AVE., INC. By: /s/ Peter Castellana, Jr. --------------------------------- Peter Castellana, Jr., President By: /s/ Peter R. Admirand --------------------------------- Peter Admirand Secretary WESTERN BEEF-PARK AVENUE, INC. By: /s/ Peter Castellana, Jr. --------------------------------- Peter Castellana, Jr., President 10 By: /s/ Peter R. Admirand --------------------------------- Peter Admirand Secretary WESTERN BEEF-ROCKAWAY BLVD., INC. By: /s/ Peter Castellana, Jr. --------------------------------- Peter Castellana, Jr., President By: /s/ Peter R. Admirand --------------------------------- Peter Admirand Secretary WESTERN BEEF ROOSEVELT, INC. By: /s/ Peter Castellana, Jr. --------------------------------- Peter Castellana, Jr., President By: /s/ Peter R. Admirand --------------------------------- Peter Admirand Secretary WESTERN BEEF-ROSEDALE AVE. INC. By: /s/ Peter Castellana, Jr. --------------------------------- Peter Castellana, Jr., President By: /s/ Peter R. Admirand --------------------------------- Peter Admirand Secretary WESTERN BEEF-STEINWAY STREET INC. By: /s/ Peter Castellana, Jr. --------------------------------- Peter Castellana, Jr., President 11 By: /s/ Peter R. Admirand --------------------------------- Peter Admirand Secretary WESTERN BEEF-WEST END AVE. INC. By: /s/ Peter Castellana, Jr. --------------------------------- Peter Castellana, Jr., President By: /s/ Peter R. Admirand --------------------------------- Peter Admirand Secretary WESTERN BEEF-MORRIS AVE INC. By: /s/ Peter Castellana, Jr. --------------------------------- Peter Castellana, Jr., President By: /s/ Peter R. Admirand --------------------------------- Peter Admirand Secretary WESTERN BEEF-METROPOLITAN AVE, INC. By: /s/ Peter Castellana, Jr. --------------------------------- Peter Castellana, Jr., President By: /s/ Peter R. Admirand --------------------------------- Peter Admirand Secretary 12 CT-07 CERTIFICATE OF MERGE OF WESTERN BEEF-14TH STREET INC. WESTERN BEEF-173RD STREET INC. WESTERN BEEF-COLLEGE POINT BLVD. INC. WESTERN BEEF (EAST NEW YORK), INC. WESTERN BEEF, EAST ORANGE, N.J. INC. WESTERN BEEF-ELMONT INC. WESTERN BEEF EMPIRE BOULEVARD, INC. WESTERN BEEF-FOREST AVE. INC. WESTERN BEEF-MERRICK BLVD. INC. WESTERN BEEF-MINEOLA, INC. WESTERN BEEF MYRTLE AVE., INC. WESTERN BEEF-PARK AVENUE, INC. WESTERN BEEF-ROCKAWAY BLVD., INC. WESTERN BEEF ROOSEVELT, INC. WESTERN BEEF-ROSEDALE AVE. INC. WESTERN BEEF-STEINWAY STREET INC. WESTERN BEEF-WEST END AVE. INC. WESTERN BEEF-MORRIS AVE INC. INTO WESTERN BEEF-METROPOLITAN AVE. INC. UNDER SECTION 904 OF THE BUSINESS CORPORATION LAW STATE OF NEW YORK DEPARTMENT OF STATE FILED JAN 30 1998 TAX $ -- ---------------- BY: /s/ [ILLEGIBLE] ---------------- QUEENS MUCHNICK GOLIEB & GOLIEB PC 630 FIFTH AVENUE NEW YORK, NY 10111 13 EX-10.30 11 CERTIFICATE OF MERGER N.Y.S. DEPARTMENT OF STATE DIVISION OF CORPORATIONS AND STATE RECORDS ALBANY, NY l2231-00[ILLEGIBLE] FILING RECEIPT ================================================================================ ENTITY NAME : WESTERN BEEF RETAIL, INC. DOCUMENT TYPE : MERGER (DOM. BUSINESS) COUNTY: QUEENS NAME SERVICE COMPANY : CT CORPORATION SYSTEM SERVICE CODE: 07[ILLEGIBLE] CONSTITUENT NAME : WESTERN BEEF RETAIL, INC. ================================================================================ FILED: 08/06/1998 DURATION: ********* CASH # : 980806000530 FILM #: 9808060005[ILLEGIBLE] ADDRESS FOR PROCESS EFFECTIVE DATE - ------------------- -------------- 08/06/1998 [STATE OF NEW YORK DEPARTMENT OF STATE SEAL] REGISTERED AGENT - ---------------- ================================================================================ FILER FEES 95.00 PAYMENTS 95.00 - ----- ---- -------- HOWARD W. MUCHNICK FILING : 60.00 CASH : 0.00 MUCHNICK GOLIEB & GOLIEB, P.C. TAX : 0.00 CHECK : 95.00 630 FIFTH AVENUE. SUITE. 1425 CERT : 0.00 BILLED: 0.00 NEW YORK, NY 10111 COPIES : 10.00 HANDLING : 25.00 REFUND: 0.00 ------ ================================================================================ 0S-1025 (11/89) State of New York } } ss: Department of State } I hereby certify that the annexed copy has been compared with the original document in the custody of the Secretary of State and that the same is true copy of said original. Witness my hand and seal of the Department of State on AUG 10 1998 [STATE OF NEW YORK /s/ [ILLEGIBLE] DEPARTMENT OF STATE SEAL] Special Deputy Secretary of State DOS-1266 (5/96) CERTIFICATE OF MERGER OF WESTERN BEEF RETAIL, INC. (a New York Corporation) INTO WESTERN BEEF ADMINISTRATION, INC. (a New York Corporation) UNDER SECTION 904 OF THE BUSINESS CORPORATION LAW The undersigned, Peter Castellana, Jr. and Peter Admirand, being, respectively, the President and Secretary of Western Beef Retail, Inc. and Peter Castellana, Jr. and Peter Admirand, being, respectively, the President and Secretary of Western Beef Administration, Inc., hereby certify: 1. (a) The name of each constituent corporation is as follows: Western Beef Retail, Inc. and Western Beef Administration, Inc. (b) The name of the surviving corporation is Western Beef Administration, Inc. Following the merger its name shall be Western Beef Retail, Inc. 2. As to each constituent corporation, the designation and number of outstanding shares of each class and series and the voting rights thereof are as follows: 1 - -------------------------------------------------------------------------------- Designation and Number of Shares in each Class or Class or Series Shares entitled Name of Series of Shares to Vote as a Corporation Outstanding Entitled to Vote Class or Series - -------------------------------------------------------------------------------- Western Beef Common/100 Common N/A Retail, Inc. - -------------------------------------------------------------------------------- Western Beef Common/100 Common N/A Administration, Inc. - -------------------------------------------------------------------------------- 3. Western Beef Retail, Inc. was incorporated under the laws of the State of New York on August 7, 1992. It was incorporated as Western Beef-Metropolitan Ave, Inc. Western Beef Administration, Inc. was incorporated under the laws of the State of New York on December 16, 1985. It was incorporated as Western Beef, Inc. 4. The merger was adopted by each constituent corporation in the following manner: Western Beef Retail, Inc. and Western Beef Administration, Inc. have complied with the applicable provisions of the laws of the State of New York in which they are incorporated and this merger is permitted by such laws. The manner in which the merger was authorized with respect to each of 2 said corporations was by the unanimous written consent of the shareholders and directors. 5. The mergers shall be effective upon the date of filing with the New York Department of State. IN WITNESS WHEREOF, we have signed this certificate on the 30th day of June, 1998 and we affirm the statements contained therein as true under penalties of perjury. WESTERN BEEF RETAIL, INC. By: /s/ Peter Castellana, Jr. ------------------------------------ Peter Castellana, Jr., President By: /s/ Peter Admirand ------------------------------------ Peter Admirand, Secretary WESTERN BEEF ADMINISTRATION, INC. By: /s/ Peter Castellana, Jr. ------------------------------------ Peter Castellana, Jr., President By: /s/ Peter Admirand ------------------------------------ Peter Admirand, Secretary 3 CERTIFICATE OF MERGER OF WESTERN BEEF RETAIL, INC. (a New York Corporation) INTO WESTERN BEEF ADMINISTRATION, INC. (a New York Corporation) UNDER SECTION 904 OF THE BUSINESS CORPORATION LAW STATE OF NEW YORK DEPARTMENT OF STATE FILED AUG 06 1998 TAX $______________ BY: /s/ [ILLEGIBLE] --------------- QUEENS HOWARD W MUCHNICK MUCHNICK, GOLIEB & GOLIEB, P.C. 630 FIFTH AVENUE SUITE 1425 NEW YORK, NY 10111-0000 4 EX-10.31 12 CERTIFICATE OF MERGER N.Y.S. DEPARTMENT OF STATE DIVISION OF CORPORATIONS AND STATE RECORDS ALBANY, NY l2231-00[ILLEGIBLE] FILING RECEIPT ================================================================================ ENTITY NAME : WESTERN BEEF SUPERMARKET, INC. DOCUMENT TYPE : MERGER (DOM. BUSINESS) COUNTY: QUEENS NAME SERVICE COMPANY : CT CORPORATION SYSTEM SERVICE CODE: 07[ILLEGIBLE] CONSTITUENT NAME : WESTERN BEEF PRODUCE - METROPOLITAN AVE. INC. (ET AL) ================================================================================ FILED: 08/06/1998 DURATION: ********* CASH # : 980806000524 FILM #: 980806000511 ADDRESS FOR PROCESS EFFECTIVE DATE - ------------------- -------------- 08/06/1998 [STATE OF NEW YORK DEPARTMENT OF STATE SEAL] REGISTERED AGENT - ---------------- ================================================================================ FILER FEES 95.00 PAYMENTS 95.00 - ----- ---- -------- HOWARD W. MUCHNICK FILING : 60.00 CASH : 0.00 MUCHNICK GOLIEB & GOLIEB, P.C. TAX : 0.00 CHECK : 95.00 630 FIFTH AVENUE. SUITE. 1425 CERT : 0.00 BILLED: 0.00 NEW YORK, NY 10111 COPIES : 10.00 HANDLING : 25.00 REFUND: 0.00 ------ ================================================================================ DOS-1025 (11/89) State of New York } } ss: Department of State } I hereby certify that the annexed copy has been compared with the original document in the custody of the Secretary of State and that the same is true copy of said original. Witness my hand and seal of the Department of State on AUG 10 1998 [STATE OF NEW YORK /s/ [ILLEGIBLE] DEPARTMENT OF STATE SEAL] Special Deputy Secretary of State DOS-1266 (5/96) CERTIFICATE OF MERGER OF WESTERN BEEF PRODUCE - METROPOLITAN AVE. INC. (a New York Corporation) and W.B. PACKING, INC. (a New York Corporation) INTO WESTERN BEEF SUPERMARKET, INC. (a New York Corporation) UNDER SECTION 904 OF THE BUSINESS CORPORATION LAW The undersigned, Peter Castellana, Jr. and Peter Admirand, being, respectively, the President and Secretary of each of Western Beef Produce - Metropolitan Ave. Inc. and W.B. Packing, Inc. and Peter Castellana, Jr. and Peter Admirand, being, respectively, the President and Secretary of Western Beef Supermarket, Inc., hereby certify: 1. (a) The name of each constituent corporation is as follows: Western Beef Produce - Metropolitan Ave. Inc., W.B. Packing, Inc. and Western Beef Supermarket, Inc. (b) The name of the surviving corporation is Western Beef Supermarket, Inc. 2. As to each constituent corporation, the designation and number of outstanding shares of each class and series and the voting rights thereof are as follows: - -------------------------------------------------------------------------------- Designation and Number of Shares in each Class or Class or Series Shares entitled Name of Series of Shares to Vote as a Corporation Outstanding Entitled to Vote Class or Series - -------------------------------------------------------------------------------- Western Beef Common/100 Common N/A Produce - Metropolitan Ave. Inc. - -------------------------------------------------------------------------------- W.B. Packing, Inc. Common/100 Common N/A - -------------------------------------------------------------------------------- Western Beef Common/100 Common N/A Supermarket, Inc. - -------------------------------------------------------------------------------- 3. Western Beef Produce - Metropolitan Ave. Inc. was incorporated under the laws of the State of New York on August 7, 1992. W.B. Packing, Inc. was incorporated under the laws of the State of New York on November 25, 1992. Western Beef Supermarket, Inc. was incorporated under the laws of the State of New York on August 11, 1981. 4. The merger was adopted by each constituent corporation in the following manner: 2 Western Beef Produce - Metropolitan Ave. Inc., W.B. Packing, Inc. and Western Beef Supermarket, Inc. have complied with the applicable provisions of the laws of the State of New York in which they are incorporated and this merger is permitted by such laws. The manner in which the merger was authorized with respect to each of said corporations was by the unanimous written consent of the shareholders and directors. 5. The mergers shall be effective upon the date of filing with the New York Department of State. IN WITNESS WHEREOF, we have signed this certificate on the 30th day of June, 1998 and we affirm the statements contained therein as true under penalties of perjury. WESTERN BEEF PRODUCE - METROPOLITAN AVE. INC. By: /s/ Peter Castellana, Jr. ------------------------------------ Peter Castellana, Jr., President By: /s/ Peter Admirand ------------------------------------ Peter Admirand, Secretary W.B. PACKING, INC. By: /s/ Peter Castellana, Jr. ------------------------------------ Peter Castellana, Jr., President 3 By: /s/ Peter Admirand ------------------------------------ Peter Admirand, Secretary WESTERN BEEF SUPERMARKET, INC. By: /s/ Peter Castellana, Jr. ------------------------------------ Peter Castellana, Jr., President By: /s/ Peter Admirand ------------------------------------ Peter Admirand, Secretary 4 CERTIFICATE OF MERGER OF WESTERN BEEF PRODUCE - METROPOLITAN AVE., INC. (a New York Corporation) AND W.B. PACKING, INC. (a New York Corporation) INTO WESTERN BEEF SUPERMARKET, INC. (a New York Corporation) UNDER SECTION 904 OF THE BUSINESS CORPORATION LAW STATE OF NEW YORK DEPARTMENT OF STATE FILED AUG 06 1998 TAX $______________ BY: /s/ [ILLEGIBLE] --------------- QUEENS HOWARD W MUCHNICK MUCHNICK, GOLIEB & GOLIEB, P.C. 630 FIFTH AVENUE SUITE 1425 NEW YORK, NY 10111-0000 EX-21 13 SUBSIDIARIES Exhibit 21 Subsidiaries: 1. General Western Beef Inc. conducts its retail and wholesale food business directly and through nine consolidated wholly-owned subsidiaries as follows: Western Beef Retail, Inc. (Successor by mergers dated January 29, 1998 between Western Beef - 14th Street, Inc. et al into Western Beef Metropolitan Avenue, Inc. and August 10, 1998 between Western Beef Retail, Inc. and Western Beef Administration, Inc.) Western Beef Properties, Inc. (Formerly known as East Central Meats, Inc.) Western Beef Supermarket, Inc. Food Nation, Inc. Awesome Transportation, Inc. W.B.I. International, Inc. W.B. Manalapan, Inc. W.B. Rahway, Inc. W.B. Sayerville, Inc. (inactive corporation) EX-23.1 14 CONSENT OF INDEPENDENT AUDITORS Consent of Independent Auditors We hereby consent to the incorporation by reference in the Registration Statement on Form S-8 (No. 33-80379) of our report dated March 5, 1999 relating to the financial statements of Western Beef, Inc. included in its Annual Report on Form 10-K for the year ended January 1, 1999. We also consent to the incorporation by reference of our report on the Financial Statement Schedule which appears in this Form 10-K. PricewaterhouseCoopers LLP New York, New York March 22, 1999 EX-23.2 15 EXHIBIT 23.2 CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS We hereby consent to the incorporation by reference in the respective Registration Statement on Form S-8 (No. 33-80379) of our report dated March 5, 1997, relating to the consolidated financial statements and schedule of Western Beef, Inc. for year ended January 3, 1997, appearing in the Company's Annual Report on Form 10-K for the year ended January 1, 1999. /s/ BDO Seidman, LLP BDO Seidman, LLP New York, New York March 22, 1999 EX-27 16 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from the Annual Report of Western Beef, Inc. and Subsidiaries on Form 10-K for the year ended January 1, 1999 and is qualified in its entirety by reference to such financial statements. 12-MOS JAN-01-1999 JAN-03-1998 JAN-01-1999 12,086 0 6,154 522 15,290 36,691 71,640 24,267 86,357 22,310 11,257 0 0 274 48,259 86,357 298,990 298,990 218,865 218,865 73,777 0 985 5,363 2,011 3,352 0 0 0 3,352 .61 .61
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