-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, VK12yolTlD4uIfdUUXWLyG+MaLsBI5GU0r+J2H2Pojqcwxfh+jSJ5zZS2JNhCTPH oSL6306cB+xYFEYjufOnsQ== 0000898430-95-001271.txt : 199507170000898430-95-001271.hdr.sgml : 19950717 ACCESSION NUMBER: 0000898430-95-001271 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 19 CONFORMED PERIOD OF REPORT: 19950331 FILED AS OF DATE: 19950714 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: YES CLOTHING CO CENTRAL INDEX KEY: 0000856979 STANDARD INDUSTRIAL CLASSIFICATION: WOMEN'S, MISSES', AND JUNIORS OUTERWEAR [2330] IRS NUMBER: 953768671 STATE OF INCORPORATION: CA FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 000-18064 FILM NUMBER: 95554147 BUSINESS ADDRESS: STREET 1: 1380 WEST WASHINGTON BLVD CITY: LOS ANGELES STATE: CA ZIP: 90007 BUSINESS PHONE: 2137657800 MAIL ADDRESS: STREET 1: 1380 WEST WAHINGTON BLVD CITY: LOS ANGELES STATE: CA ZIP: 90007 10-K405 1 1995 FORM 10-K - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (MARK ONE) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED) FOR THE FISCAL YEAR ENDED MARCH 31, 1995 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED) FOR THE TRANSITION PERIOD FROM TO COMMISSION FILE NUMBER 0-18064 YES CLOTHING CO. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) CALIFORNIA 95-3768671 (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION INCORPORATION OR ORGANIZATION) NUMBER) 1380 WEST WASHINGTON BOULEVARD 90007 LOS ANGELES, CALIFORNIA (ZIP CODE) (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) Registrant's telephone number, including area code: (213) 765-7800 Securities registered pursuant to Section 12 (b) of the Act:
NAME OF EXCHANGE TITLE OF EACH CLASS ON WHICH REGISTERED ------------------- ------------------- NONE NONE
Securities registered pursuant to Section 12 (g) of the Act: COMMON STOCK, NO PAR VALUE (TITLE OF CLASS) Indicated 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 such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. YES X NO Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] The aggregate market value of the voting stock of the registrant held by non-affiliates of the registrant on June 26, 1995 based on the average bid and asked price on such date was $3,432,900. Number of shares of common Stock outstanding as of June 26, 1995: 3,851,799. DOCUMENTS INCORPORATED BY REFERENCE: The information required by Part III of Form 10-K is incorporated herein by reference to the registrant's definitive Proxy Statement relating to its 1995 Annual Meeting of Stockholders which will be filed with the Commission within 120 days after the end of the registrant's fiscal year. - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- YES CLOTHING COMPANY INDEX TO ANNUAL REPORT ON FORM 10-K
PAGE # ------ PART I. Item 1. Business.................................................... 3 Item 2. Properties.................................................. 8 Item 3. Legal Proceedings........................................... 8 Item 4. Submission of Matters to a Vote of Security Holders......... 8 PART II. Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters........................................ 9 Item 6. Selected Financial Data..................................... 10 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations................................... 11 Item 8. Financial Statements and Supplementary Data................. 15 Report of Management........................................ 16 Reports of Independent Accountants.......................... 17-18 Balance Sheet............................................... 19 Statement of Operations..................................... 20 Statement of Changes in Shareholders' Equity................ 21 Statement of Cash Flows..................................... 22 Notes to Financial Statements............................... 23-31 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.................................... 32 PART III. Item 10. Directors and Executive Officers of the Registrant.......... 32 Item 11. Executive Compensation...................................... 32 Item 12. Security Ownership of Certain Beneficial Owners and Management................................................. 32 Item 13. Certain Relationships and Related Transactions.............. 32 PART IV. Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K........................................................ 33-34
2 PART I ITEM 1. BUSINESS YES Clothing Co.(R), "the Company", designs, contracts for the manufacture of and markets diversified lines of apparel for women in junior sizes, young men and kids. The Company sells its apparel to retail department stores and specialty chains and stores. The Company's garments are made in the United States and to a lesser extent in the Far East. The Company was incorporated in California in 1982. Its principal executive offices are located at 1380 West Washington Boulevard, Los Angeles, California 90007, and its telephone number at that address is (213) 765-7800. ACQUISITION TRANSACTION On January 31, 1995, control of the Company changed when its two principal owners sold all of their shares, amounting to approximately 80% of the Company's outstanding stock, to affiliates of Georges Marciano, founder and former Chairman of Guess, Inc. In November 1994, former Company Chairman of the Board and Chief Executive Officer, George Randall, and former Company President, Moshe Tsabag, signed an agreement to sell their holdings in the Company to affiliates of Georges Marciano. The transaction closed on January 31, 1995, resulting in the acquisition by Marciano affiliates of approximately 80% of the outstanding common stock of the Company. As a result of the Acquisition Transaction, George Randall resigned his positions with the Company in January 1995 and Moshe Tsabag resigned as President in January 1995 and as a Board Member and employee in April 1995. This transaction is known herein as the Acquisition Transaction. BUSINESS STRATEGY Subsequent to the Acquisition Transaction by affiliates of Georges Marciano, the Company has embarked upon several new manufacturing, design and sales relationships. The Company has changed its product focus in styles produced, the price of its products and targeted gross margins. Most of its senior executive officers and a substantial portion of its Board of Directors have been replaced, its design staff has been supplemented, it has acquired new trademarks and terminated its previous agreements with licensees in Canada and the United States. The Company has shifted its focus from primarily using cotton/spandex knit, cotton jersey and denim in the production of dresses, skirts, pants, tank tops, jackets, leggings and jeans to using primarily denim and knit/woven cotton for shirts, pants, shorts, vests, jackets, dresses, T-shirts and sweatshirts. APPAREL AND APPAREL DESIGN The Company offers clothing for the women's "junior" market and for young men's and children's markets. The Company's business is generally divided among five retail selling seasons: Spring, Summer, Fall, Back-to-School and Holiday. For each selling season, the Company introduces a separate apparel collection each year. Seasonal factors can cause some variance in production and sales levels among fiscal quarters in any fiscal year, but the Company does not regard its overall business as highly seasonal. Junior's. The Company's clothing for the "junior" market incorporates current styles, fabrics and colors with a look that is designed to appeal to a broad cross-section of young women. Clothing for the junior market is characterized by sizes tailored for youthfully figured women. Prior to the Acquisition Transaction, the Company's Junior lines incorporated fabrics, primarily of cotton/spandex knit, cotton jersey and denim, in the production of dresses, skirts, pants, tank tops, jackets, leggings and jeans. Subsequent to the Acquisition Transaction, the Company changed its focus to using primarily denim and, to a lesser degree, twill, for shirts, pants, shorts, vests, jackets and dresses and knit and woven cotton for T-shirts, sweatshirts and other types of shirts. In addition, the Company has developed novelty knits for tops, using fabrics such as second skin satin, 3 printed mesh and printed nylon. The GM Surf(TM) women's line uses novelty fabrics of printed denim and pencel (a mixture of denim and nylon) for shirts, pants, vests, dresses and jackets. The Company's in-house design staff, under the direction of Georges Marciano, is responsible for all phases of product development. Young Men's. Prior to the Acquisition Transaction, the Company offered casual apparel for young men, principally between the ages of 15 to 30, in collections of knits and woven shirts, jackets, vests, and denim and casual pants and jeans. These were marketed under the YES Clothing Co.(R), and Sedan(R) brands and the YES Men(R) trademark. Subsequent to the Acquisition Transaction, the Company discontinued marketing under the Sedan(R) brand and began marketing under the YES U.S.A.(TM) label, denim jeans, shorts, jackets and vests and cotton and denim shirts, T-shirts and sweatshirts. The GM Surf(TM) men's line, with its distinctive Hawaiian look, uses denim, flannel, polar fleece, corduroy, cotton and rayon twill, wool and rayon gabardine, cotton pique and nylon in the production of T-shirts, sweatshirts, shirts, shorts, vests, jackets and pants. Children's Wear. Prior to fiscal 1994, the Company had manufactured children's wear, mainly for girls aged 7 to 14. In fiscal 1994, the Company discontinued the manufacture of children's wear and licensed out the YES(R) name for the production of children's apparel. Subsequent to the Acquisition Transaction, the Company reacquired the children's wear license and began marketing, under the YES Kids(R) label, denim jeans, overalls, shorts, shortalls, skirts, skirtalls, vests, and jackets, cotton T-shirts and sweatshirts and denim and cotton shirts. PRODUCTION Manufacturing. The Company manufactures its garments using independent cutting and sewing contractors located principally in the Los Angeles area. Prior to the Acquisition Transaction, the Company manufactured certain goods in Hong Kong and other locations in the Far East. The Company substantially decreased these overseas activities after the Acquisition Transaction. The Company seeks to produce high quality garments through its use of quality fabrics, insistence on quality workmanship and use of comprehensive fabric and garment inspection programs. The Company acquires fabric from suppliers and supplies such fabric, together with the garment pattern, to an independent contractor for cutting. The cut fabric and any buttons, zippers and other trim to be used on the garments are then delivered to independent sewing contractors. Under the Company's supervision, these contractors assemble and sew the fabric and add trim in accordance with production samples. The Company also employs a production coordinator and three full time production assistants who regularly visit the Company's contractors to review the quality of the work in progress. Prior to distribution, the garments are delivered to the Company's warehouse for final inspection in the Quality Control Department, which has two full time employees. The lead time to fill new orders placed by the Company with its manufacturing contractors generally ranges from three to four weeks for domestically produced garments. The Company generally schedules the manufacture of apparel based on orders received to reduce the risk of obsolescence of its garment inventory. The Company continuously monitors for obsolete and damaged inventory. Such inventory is usually sold to customers who specialize in merchandising off-price clothing and sold through a Company owned factory outlet store. The Company has long-standing relationships with its cutting contractor and many of its sewing production contractors but does not have written agreements with any of its contractors. For its domestically produced garments, the Company currently utilizes only one cutting contractor (who is located in the Company's facility and who works mainly for the Company) and approximately 25 sewing contractors (all of whom are located in the Los Angeles area). The Company believes that its relationships with its cutting and sewing contractors are satisfactory. The Company does not believe that the loss of any contractor would have a material adverse effect on the Company's 4 operations as there are a large number of domestic and foreign cutting and sewing contractors who can manufacture the Company's garments. However, the Company believes that it is the largest customer of certain of its sewing contractors. Fabric. Prior to the Acquisition Transaction, the fabrics used by the Company in its domestically produced garments were primarily cotton/spandex knit, which was acquired from suppliers located in Hong Kong, and cotton jersey and denim, which were acquired from suppliers located in the United States. The Company made its foreign purchases of fabric from its resident agent in Hong Kong, who placed orders with a number of fabric suppliers. Subsequent to the Acquisition Transaction, the Company substantially reduced its use of cotton/spandex knit. The Company primarily uses denim, cotton knits (jersey) and woven cotton (chambray and poplin), which are purchased domestically. The Company believes that during the fiscal year ended March 31, 1995, approximately 82% of its expenditures for fabrics used in its domestically produced garments were paid to suppliers located in the United States. For the fiscal year ended March 31, 1995, approximately 16% of the Company's expenditures for domestically purchased fabrics was accounted for by its largest domestic fabric supplier, approximately 41% of such expenditures was accounted for by the Company's four largest domestic suppliers and approximately 58% of such expenditures was accounted for by the Company's ten largest domestic suppliers. The Company does not have any long-term arrangements with any of its fabric suppliers. To date, the Company has not experienced any difficulty in satisfying its fabric requirements and it believes that the large number and diversity of potential suppliers minimizes the risk of the loss of any one supplier. The Company believes that the effect of the loss of one or a few of its fabric suppliers on the Company's operations would be minimal due to the large number and diversity of potential suppliers and the relative ease with which new supplier relationships may be established. SALES AND MARKETING The Company sells its apparel throughout the United States to retail department stores, specialty chains and specialty stores. Prior to the Acquisition Transaction, the Company had nominal sales in England, Europe, Japan and Korea. For the fiscal year ended March 31, 1995, the Company sold its apparel to over 1,300 retailing customers. Approximately 44% of sales were made to the Company's ten largest customers and approximately 89% of sales were made to the Company's 100 largest customers. Sales of the Company's garments are made through independent sales organizations and directly by the Company's sales staff. The Company maintains showrooms in New York City and Los Angeles for women's and men's apparel. The Company also engages the services of independent sales organizations located in Miami, Dallas, Chicago, Atlanta, and Philadelphia, which operate showrooms displaying the Company's products. Prior to the Acquisition Transaction, the Company had also engaged the services of an independent sales organization in Puerto Rico. Sales representatives at each showroom are responsible for marketing the Company's apparel within an assigned territory. Each sales representative meets with customers in the showroom, makes sales calls to customers and represents the Company at trade shows within the assigned territory. The sales organizations are retained on a non-exclusive basis. All of the Company's independent sales organizations are compensated on a commission basis on terms consistent with industry practice. The Company does not sell its garments on consignment. The Company generally sells its products on net-30 day terms, except for Misfits and GM Junior products which are sold on 8/10 end of month terms. The Company's backlog consists of purchase orders that have been received but not shipped, and amounted to approximately $3,200,000, $9,137,000 and $8,400,000 as of June 20, 1995, June 20, 1994, and June 20, 1993, respectively. The Company expects to ship substantially all of the orders comprising the backlog prior to 5 September 30, 1995. Subsequent to the Acquisition Transaction the Company's backlog decreased significantly due to a restructuring of product lines and the discontinuance of the Sedan(R) brand division. While the failure to fill orders on a timely basis could have a material adverse effect on the Company's sales, the Company has generally not experienced difficulty in shipping orders by the dates requested by its customers. The Company does not generally accept returns except for damaged or defective garments or with respect to late deliveries. However, the Company does grant markdown money for slow moving goods. ADVERTISING AND PROMOTION Prior to the Acquisition Transaction, the Company's advertising strategy was to promote an image that associated a fashionable look and youthful style and to promote the YES Clothing Co.(R) name. The Company advertised in national magazines, including Details, In Fashion, Sportswear International, Vogue, Seventeen Magazine, Elle and Source, among others. The Company had no cooperative advertising program for its retailers although it did, with advance approval, reimburse its customers for advertising the Company's products. The Company's expenditures for advertising and promotion were approximately $442,000 during fiscal 1995 (1.5% of net sales), $524,000 during fiscal 1994 (1.9% of net sales), and approximately $779,000 during fiscal 1993 (2.1% of net sales). Subsequent to the Acquisition Transaction, the Company has promoted the YES Clothing Co.(R) name in Women's Wear Daily, a trade newspaper, and Sportswear International and the GM Surf(TM) and Misfits(R) brands in In Fashion, Los Angeles Magazine, Surfer and Sportswear International. BRANDS AND TRADEMARKS The Company's principal trademarks, YES Clothing Co.(R), YES Men(R), YES Kids(R) and YES Jeans(R) are registered with the United States Patent and Trademark Office. The Company also has registered or has trademark applications pending, for these trademarks in other countries. The Company believes that these trademarks have significant value in the marketing of its apparel. While the Company is not aware of any claims against its right to these trademarks, the loss of the right to use these trademarks would have a material adverse effect on the Company's operations. There are other companies in the apparel and apparel-related industries that incorporate the word "yes" in their trademarks, and there can be no assurance that these or future trademarks which may be granted will not diminish the value of the Company's "YES Clothing Co.(R)" or "YES(R)" trademarks. Subsequent to the Acquisition Transaction, the Company applied for domestic and foreign trademarks for YES U.S.A.(TM) in a diamond design. Prior to the Acquisition Transaction, the Company sold under the YES Clothing Co.(R) and Sedan(R) brand names. The Company also manufactured and marketed its garments under private label for several large customers. Subsequent to the Acquisition Transaction, the Company discontinued private label and Sedan(R) brand sales, and, in addition to the YES(R) brand, began marketing under the GM Surf(TM) and Misfits(R) labels which are licensed to the Company under an agreement with Marble Sportswear, Inc., a company controlled by Georges Marciano (see Related Party Transactions). COMPETITION The segments of the apparel industry in which the Company competes are highly fragmented. The Company competes with numerous other apparel manufacturers, which vary in size and in the products with which they design and manufacture. In addition, department stores, including some of the Company's customers, sell competing apparel under their own labels. Many of the Company's competitors are larger and have greater financial resources than the Company. The marketing of apparel is highly competitive. The Company believes that the ability to gauge effectively and to respond to changes in consumer demands and tastes as well as the ability to produce and deliver its products on a timely bases are necessary to compete successfully in the apparel industry. The Company believes 6 that consumer acceptance depends on the image, design, quality and price of its garments, and that its continuity will depend on its ability to remain competitive in these areas. The failure to design garments that meet with acceptance in the marketplace in the future could result in the material deterioration of customer loyalty and the Company's image and could adversely affect the Company's business. EMPLOYEES As of March 31, 1995, the Company employed 98 persons. None of the Company's employees are represented by a labor union. The Company considers its relations with employees to be satisfactory. ENVIRONMENTAL REGULATION The cost and effect of complying with environmental regulations are not material due to the nature of the Company's business. ITEM 2. PROPERTIES Effective May 1, 1992, the Company's executive offices, merchandising, production, shipping and warehousing facilities became located in a facility in Los Angeles totaling approximately 75,000 square feet, occupied pursuant to a lease expiring in May 1997. The Company also leases the following showrooms pursuant to leases expiring as indicated: Los Angeles Women's (August 1997) and Men's (August 1996) and New York City Women's (September 1997), Men's (June 1996) and combined Women's/Men's showroom (June 2000). The Company is attempting to sublease its Women's New York showroom and does not anticipate any significant losses associated with the subleasing activity. Management expects that in the normal course of business, such leases will be renewed or replaced by other leases. The Company believes its current facilities are generally in good operating condition and are suitable and adequate for its foreseeable needs. The Company does not believe the loss of any of these facilities would have a material adverse effect on its operations as equivalent facilities are readily available. The Company also operates an Outlet Store located in Park City, Utah for the sale of slow moving/off season merchandise. ITEM 3. LEGAL PROCEEDINGS The Company is not involved in any legal proceeding. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS There were no matters submitted during the fourth quarter of fiscal year 1995 to a vote of security holders. 7 PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS PRICE RANGE OF COMMON STOCK The Company's Common stock is traded on the Nasdaq National Market under the symbol YSCO. The following table sets forth the range of high and low sales prices of the Common stock, as reported by The Nasdaq Stock Market, Inc. for each quarterly period during the past two fiscal years: MARKET PRICES
MARCH 31 DEC. 31 SEPT. 30 JUNE 30 -------- ------- -------- ------- FISCAL 1995 Low......................................... $3.25 $1.75 $1.37 $1.12 High........................................ 10.50 4.12 3.00 1.75 FISCAL 1994 Low......................................... $1.31 $1.75 $2.03 $2.00 High........................................ 2.38 2.50 3.00 2.88 FISCAL 1993 Low......................................... $1.50 $1.75 $2.00 $2.50 High........................................ 3.50 3.00 3.25 4.00
APPROXIMATE NUMBER OF HOLDERS OF COMMON STOCK SECURITIES The Company had approximately 775 holders of record of Common stock as of March 31, 1995. DIVIDENDS The Company has never paid cash dividends on its common equity. The Company is not restricted from making any cash dividend payments under its current credit agreement with its factor. However, the Company intends to retain any earnings within the Company for the foreseeable future. POTENTIAL DELISTING On June 14, 1995 the NASD notified the Company that its net worth as of March 31, 1995 had been reduced below the NASD's minimum standards for continued listing and suggested that the Company would be delisted from the NASD/NMS. In light of the capital infusion by Mr. Marciano--See "Management's Discussion and Analysis of Financial Condition--Subsequent Events", the Company believes its net worth is now in excess of the minimum standards and has applied to the NASD for a waiver from delisting. There is no assurance that the waiver will be granted. 8 ITEM 6. SELECTED FINANCIAL DATA The following selected financial data of the Company as of and for each of the five years in the period ended March 31, 1995 are derived from the audited Financial Statements of the Company and should be read in conjunction with such Financial Statements and related notes thereto and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included elsewhere in this report.
(000'S OMITTED) YEAR ENDED MARCH 31 ------------------------------------------------ 1995 1994 1993 1992 1991 -------- -------- -------- -------- -------- INCOME STATEMENT DATA Net Sales................... $ 28,580 $ 27,883 $ 37,940 $ 35,110 $ 36,249 Gross profit................ 3,370 3,673 8,052 9,627 10,467 Income (loss) before income taxes...................... (4,652) (2,784) (1,430) (1,043) 1,462 Net income (loss)........... (4,652) (2,934) (998) (722) 754 Earnings (loss) per share... (1.22) (.77) (.26) (.19) .20 Dividends per share......... -- -- -- -- -- Weighted average number of shares used in computation(a)............. 3,821 3,821 3,821 3,821 3,821 BALANCE SHEET DATA Inventory................... 2,158 3,213 3,243 2,985 3,379 Working capital............. 866 5,250 8,171 9,374 10,379 Long-term liabilities....... 449 171 214 -- -- Total assets................ 4,630 9,077 12,784 12,966 12,777 Total liabilities........... 3,095 2,805 3,578 2,762 1,851 Shareholders' equity.......... 1,535 6,272 9,206 10,204 10,926
- -------- (a) Weighted average number of shares have been computed based on the number of shares outstanding each period. The effect of options granted but not exercised has not been included as the effect would have either been immaterial or antidilutive. 9 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS The following table sets forth, for the periods indicated, the percentage of net sales represented by certain items in the Company's statements of operations.
PERCENTAGE OF NET SALES YEAR ENDED MARCH 31, --------------------------- 1995 1994 1993 ------- ------- ------- Net sales......................................... 100.0 % 100.0 % 100.0 % Cost of sales..................................... 88.2 86.8 78.8 ------- ------- ------- Gross profit...................................... 11.8 13.2 21.2 Commission income................................. 1.3 2.5 2.5 Royalty income.................................... .2 .2 .4 ------- ------- ------- Gross operating income............................ 13.3 15.9 24.1 Selling, general and administrative expenses...... (27.9) (31.7) (27.8) ------- ------- ------- Loss from operations.............................. (14.6) (15.8) (3.7) Other income--insurance........................... .2 6.0 -- Other expense..................................... (0.9) (0.2) -- License reacquisition............................. (1.0) -- -- ------- ------- ------- Loss before income taxes (benefit)................ (16.3) (10.0) (3.7) Income taxes (benefit)............................ -- 0.5 (1.1) ------- ------- ------- Net loss.......................................... (16.3)% (10.5)% ( 2.6)% ======= ======= =======
FISCAL YEARS 1995, 1994 AND 1993 NET SALES increased by $697,000 or 2.5% to $28,580,000 in fiscal 1995 due to the addition of the GM Surf(TM) and Misfits(R) product lines. In fiscal 1994, net sales decreased by $10,060,000 or 26.5% to $27,883,000 due to significantly decreased sales in all divisions except for an increase in sales in the Sedan(R) line of young men's and boy's knits and woven shirts. The decline in sales reflects both continued intense competition as well as a general decline in apparel purchases by consumers. GROSS PROFIT as a percentage of net sales decreased to 11.8% in fiscal 1995 from 13.2% in fiscal 1994 due to higher levels of markdowns and a reduction in prices negotiated by retailers in response to cost conscious consumers. Gross profit as a percentage of net sales decreased to 13.2% in fiscal 1994 from 21.2% in fiscal 1993. The significant decrease in gross profit percentage in 1994 reflects a number of factors, including decreased sales volume, significant price competition, increased materials costs primarily for trim, washing, bleaching and dying, and an increased unit cost for design and production salaries and expenses (as these total costs are spread over the decreased production). COMMISSION INCOME decreased by $306,000 or 44.4% to $383,000 due to the discontinuation of commission transactions subsequent to the acquisition transaction. Commission income is generated from shipments of goods manufactured in the Orient to domestic and overseas customers. In fiscal 1994, commission income decreased $264,000 or 27.7% to $689,000 from $953,000 in fiscal 1993 due to a general decline in sales. ROYALTY INCOME decreased by $9,000 to $51,000 in fiscal 1995 from $60,000 in fiscal 1994 due to the termination of licensee agreements in Canada and the United States. In fiscal 1994, royalty income decreased by $81,000 from $141,000 in fiscal 1993. The main reason for the decrease was the transition from a bankrupt licensee in Canada to a new licensee in 1994. 10 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES ("S,G&A") decreased to $7,972,000 in fiscal 1995 from $8,816,000 in fiscal 1994, which represented 27.9% and 31.7% of net sales, respectively. (When commission and royalty income is added to net sales, the percentage of S,G&A is reduced to 27.5% and 30.8%, respectively.) The main factors reducing S,G&A in fiscal 1995 were as follows: (1) Payroll and payroll tax decreased to $2,795,000 in fiscal 1995 from $3,364,000 in fiscal 1994 due to a reduction in the number of employees. (2) Insurance expense decreased to $467,000 or 1.64% of net sales in fiscal 1995 from $712,000 in fiscal 1994 or 2.56% of net sales due to renegotiated insurance rates and a workers' compensation insurance rebate. (3) Advertising, travel, contributions and profit sharing expenses were reduced to $775,000 in fiscal 1995 from $1,064,000 in fiscal 1994 in order to conserve working capital. S,G&A expenses decreased to $8,816,000 in fiscal 1994 from $10,564,000 is fiscal 1993 primarily due to decreases in advertising, legal and accounting expenses incurred in connection with the Company's business interruption claim and lower than anticipated bad debt expenses. OTHER INCOME--INSURANCE--Subsequent to March 31, 1992, the Company incurred the loss of substantially all of its finished goods inventory in connection with civil disturbances in the City of Los Angeles. During the fiscal year ended March 31, 1993 the Company recovered, from one insurance company, the cost of the inventory lost and its normal gross profit which would have been derived from the sales of those goods. During the fiscal year ended March 31, 1994 the Company recovered $1,658,000, net of costs, from a second insurance company for business interruption losses related to the civil disturbance. INTEREST INCOME decreased to $3,000 in fiscal 1995 from $74,000 in fiscal 1994 due to a net loss of $4,652,000 for fiscal 1995 and less funds being available for investment. Interest income increased to $74,000 in fiscal 1994 from $39,000 in fiscal 1993 due to more funds held on deposit with the factor in 1994. INTEREST EXPENSE increased to $255,000 in fiscal 1995 from $128,000 in fiscal 1994 due to increased working capital requirements and borrowings from the Company's Factor. Interest expense increased to $128,000 in fiscal 1994 from $107,000 in fiscal 1993 due to decreased borrowings from the Company's Factor. INCOME TAXES in fiscal 1995 includes a valuation allowance of $3,109,000 which is equal to 100% of the net deferred tax asset. This valuation allowance is considered appropriate since the Company cannot conclude that it is more likely than not that the net deferred tax asset will be realized. CAPITAL RESOURCES AND LIQUIDITY On June 17, 1995, Georges Marciano agreed to provide $3,300,000 in additional capital to the Company in exchange for 2,640,000 shares of common stock and to convert additional shares of common stock at $1.25 per share in exchange of approximately $700,000 owed by the Company to Mr. Marciano and his affiliates for advances and expenses incurred by them on the Company's behalf, subject in both cases to the receipt of a formal valuation and fairness opinion. Without the infusion of these funds and due to continuing losses, the Company would have completely depleted its working capital by June of 1995. Prior to receipt of the opinion, the Company operated on overdrafts from its factor guaranteed by letters of credit supplied by Mr. Marciano. The opinion, which is included as an exhibit to this Form 10-K was delivered on July 7, 1995 and the Company issued 3,184,693 shares to Mr. Marciano shortly thereafter. Prior to the capital infusion and its recent liquidity crisis, the Company had funded its activities principally from cash flow generated from operations and credit facilities with its institutional lender. 11 The Company had an agreement with a factor and through June 1994 with a bank, whereby the factor purchased accounts receivable from the Company on a non-recourse basis and remitted the funds on a maturity basis. The bank provided the Company with an unsecured $3,000,000 facility for commercial letters of credit and at March 31, 1994, the Company had $1,618,000 of letters of credit outstanding. Under the facility agreement, the Company was prohibited from declaring or paying any dividends on any class of its stock. The Company entered into a new factoring agreement with Republic Factors and a letter of credit facility with Republic National Bank of New York (the financing bank) effective through March 1996. Both the old and new agreements are non-recourse (ie, the factor purchases the Company's accounts receivable that it has preapproved, without recourse, except in cases where there are merchandise disputes in the normal course of business). Under the new factoring agreement, the Company sells substantially all of its trade accounts receivable, without recourse, and may request advances, up to 80% on the net sales factored at any time before their maturity date. The factor is responsible for the accounting and collection of all accounts receivable sold to it by the Company and receives a commission of 0.6% of purchased net receivables on a guaranteed minimum volume for the contract year of $30,000,000. The commission rate will increase to 0.75% of total invoices factored and be applied retroactively for the contract year if the guaranteed minimum volume is not attained. Under the letter of credit facility, the financing bank provides a credit line for letters of credit, ledger debt and factor guaranties up to the 80% advance rate provided under the factoring agreement with an additional over advance facility of $1,050,000. Commitments outstanding under the letter of credit facility as of March 31, 1995 amounted to $652,000. The agreements are collateralized by accounts receivable and inventory imported under letters of credit. The Company or the factor may terminate the credit agreement on the anniversary date of the agreement with at least 60 days prior written notice. As of March 31, 1995, the Company had net working capital of $866,000, as compared to $5,250,000 as of March 31, 1994. The Company's current ratio as of March 31, 1995 was 1.3, as compared to 3.0 as of March 31, 1994. The decreases in working capital and current ratio are primarily due to net losses amounting to $4,652,000. Funds due from factor as of March 31, 1995 was $678,000 as compared to $3,383,000 as of March 31, 1994 due to increased working capital requirements. Inventories at March 31, 1995 were $2,158,000 as compared to $3,213,000 at March 31, 1994, a decrease of $1,055,000. The decrease was due to a reduction of inventories to levels consistent with seasonal requirements, reduced backlog and the discontinuation of various product lines. The Company has funded its activities principally from cash flow generated from operations and credit facilities with its institutional lender. In recent years, the Company has experienced financial difficulties due to major customers filing for reorganization proceedings under bankruptcy laws and the unfavorable economic climate being experienced in the apparel industry. These conditions have had a significant negative impact on the Company's operations being reflected in declining sales and eroding margins, resulting in net losses amounting to $4,652,000 and $2,934,000 in fiscal 1995 and 1994, respectively. On January 31, 1995, control of the Company changed when approximately 80% of the Company's outstanding stock was acquired by affiliates of Georges Marciano. Georges Marciano has subsequently made unsecured non-interest bearing advances from an entity affiliated through common ownership, due on demand, and amounted to $538,000 as of March 31, 1995. Additional material financial difficulties encountered by the Company would require additional borrowing to avoid a negative impact on the Company's future operations. The Company believes that the working capital infusion provided by Georges Marciano and affiliates and the availability of credit under current lending agreements and other financial sources available to it will provide 12 sufficient resources to finance the Company's currently anticipated working capital needs and capital expenditures through the end of summer of 1995. Continued financial difficulties encountered by the Company would require additional borrowings and infusions of capital to avoid a negative impact on the Company's continued future operations after that time period. The Company has continued to cut its payroll. It has also reduced other operating costs such as advertising and payroll related costs. Notwithstanding the foregoing measures, the Company anticipates that it may not be profitable for the fiscal year ending March 31, 1996. SUBSEQUENT EVENTS On June 17, 1995, Georges Marciano agreed to become Chief Executive Officer and Chairman of the Board of the Company, to provide additional capital for the Company, and to license to YES certain trademarks controlled by Marciano affiliates. The additional capital was received by the Company on July 12, 1995 after receipt of a required valuation opinion. As Chief Executive Officer and Chairman of the Board of YES Clothing Co.(R), Mr. Marciano will receive a salary of $1 per year plus options to acquire 500,000 shares of common stock per year at $1.25 per share for four years (the closing price of the Company's common stock on June 13, 1995) vesting monthly during continued employment. In addition to his duties as Chairman and Chief Executive Officer, Mr. Marciano will supervise all of the Company's design departments. Mr. Marciano agreed to contribute $3,300,000 in additional capital to the Company in exchange for 2,640,000 shares of common stock and to convert additional shares of common stock at $1.25 per share in exchange of approximately $700,000 owed by the Company to Mr. Marciano and his affiliates for advances and expenses incurred by them on the Company's behalf subject in both cases to the receipt of a formal valuation and fairness opinion. In addition, the Company has granted Mr. Marciano a two-year warrant to acquire an additional 2,000,000 shares at $1.25 per share. The Company has also agreed to enter into five-year trademark license agreements for Mr. Marciano's "GM Surf(TM)" and "Misfits(R)" lines of clothing at royalties of 7% of gross sales, plus an additional 2% for advertising. In connection with the employment of the principal shareholder as Chief Executive Officer and Chairman of the Board, the Company has granted an option for 500,000 shares per year at $1.25 per share over four years, vesting ratably, expiring in ten years. If all of the shares, warrants and options described above are issued and exercised, Mr. Marciano and his affiliates' ownership of the Company may increase to approximately 93% by the end of four years. Shareholder approval will be sought for the grant of the options and warrant to Mr. Marciano. Copies of all of the agreements reflecting the foregoing are attached here to as exhibits. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 13 REPORT OF MANAGEMENT The accompanying financial statements have been prepared by management in conformity with generally accepted accounting principles, and necessarily include some amounts that are based on management's best estimates and judgments. Yes Clothing Co. maintains a system of internal accounting controls designed to provide management with reasonable assurance that assets are safeguarded against loss from unauthorized use or disposition, and that transactions are executed in accordance with management's authorization and recorded properly. The concept of reasonable assurance is based on the recognition that the cost of a system of internal control should not exceed the benefits derived and that the evaluation of those factors requires estimates and judgments by management. Further, because of inherent limitations in any system of internal accounting control, errors or irregularities may occur and not be detected. Nevertheless, management believes that a high level of internal control is maintained by Yes Clothing Co. through the selection and training of qualified personnel, and the establishment and communication of accounting and business policies. The Audit Committee of the Board of Directors, composed solely of outside directors, meets periodically with management and with Yes Clothing Co.'s independent auditors to review matters relating to the quality of financial reporting and internal accounting control, and the nature, extent and results of their audits. Yes Clothing Co.'s independent auditors have free access to the Audit Committee. GEORGES MARCIANO GUY ANTHOME JEFFREY BUSSE CHAIRMAN, PRESIDENT CHIEF FINANCIAL CHIEF EXECUTIVE OFFICER OFFICER 14 REPORT OF CERTIFIED PUBLIC ACCOUNTANTS Board of Directors Yes Clothing Co. We have audited the accompanying balance sheet of Yes Clothing Co. as of March 31, 1995 and the related statements of operations, changes in shareholders' equity and cash flows for the year then ended. We have also audited the financial statement schedule for the year ended March 31, 1995, listed under item 14. These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our 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 financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Yes Clothing Co. as of March 31, 1995, and the results of its operations and its cash flows for the year then ended, in conformity with generally accepted accounting principles. In our opinion, the schedule for the year ended March 31, 1995 presents fairly, in all material respects, the information set forth therein. MOSS ADAMS Los Angeles, California May 24, 1995 (except for Note 1(b), as to which the date is July 12, 1995) 15 REPORT OF CERTIFIED PUBLIC ACCOUNTANTS Board of Directors Yes Clothing Co. We have audited the accompanying balance sheet of Yes Clothing Co. as of March 31, 1994 and the related statements of operations, changes in shareholders' equity and cash flows for each of the two years in the period ended March 31, 1994. We have also audited the financial statement schedules listed under Item 14. These financial statements and schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedules based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Yes Clothing Co. as of March 31, 1994, and the results of its operations and its cash flows for each of the two years in the period ended March 31, 1994, in conformity with generally accepted accounting principles. As discussed in Note 12 to the financial statements, the Company changed its method of accounting for income taxes. Also, in our opinion, the schedules for the years ended March 31, 1994 and 1993 presents fairly, in all material respects, the information set forth therein. BDO SEIDMAN, LLP Los Angeles, California May 27, 1994 (except for Note 20 which is as of June 21, 1994) 16 YES CLOTHING CO. BALANCE SHEET MARCH 31, 1995 AND 1994 ASSETS
1995 1994 ----------- ----------- CURRENT ASSETS Cash................................................ $ 232,000 $ 335,000 Due from factor (Note 3)............................ 678,000 3,383,000 Accounts receivable (Note 4)........................ 209,000 282,000 Other receivables (Note 5).......................... 152,000 565,000 Inventories (Notes 2 and 6)......................... 2,158,000 3,213,000 Prepaid expenses.................................... 83,000 106,000 ----------- ----------- Total current assets.............................. 3,512,000 7,884,000 PROPERTY AND EQUIPMENT, at cost, net of accumulated depreciation and amortization (Notes 2 and 7)........ 1,034,000 1,099,000 OTHER ASSETS.......................................... 84,000 94,000 ----------- ----------- TOTAL ASSETS.......................................... $ 4,630,000 $ 9,077,000 =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable.................................... $ 2,145,000 $ 2,306,000 Accrued expenses (Note 8)........................... 243,000 284,000 Contracts payable................................... 50,000 44,000 ----------- ----------- Total current liabilities......................... 2,438,000 2,634,000 CONTRACTS PAYABLE, net of current portion (Note 9).... 119,000 171,000 DUE TO RELATED PARTY (Note 10)........................ 538,000 -- COMMITMENTS (Note 12) SHAREHOLDERS' EQUITY (Note 14) Preferred stock, no par; 2,000,000 shares authorized; no shares issued....................... -- -- Common stock, no par; 20,000,000 shares authorized; 3,821,000 issued and outstanding................... 4,513,000 4,598,000 (Accumulated deficit) retained earnings............. (2,978,000) 1,674,000 ----------- ----------- TOTAL SHAREHOLDERS' EQUITY............................ 1,535,000 6,272,000 ----------- ----------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY............ $ 4,630,000 $ 9,077,000 =========== ===========
See accompanying notes. 17 YES CLOTHING CO. STATEMENT OF OPERATIONS YEARS ENDED MARCH 31, 1995, 1994, AND 1993
1995 1994 1993 ------------ ------------ ------------ NET SALES............................ $ 28,580,000 $ 27,883,000 $ 37,943,000 COST OF SALES........................ 25,210,000 24,210,000 29,891,000 ------------ ------------ ------------ Gross profit..................... 3,370,000 3,673,000 8,052,000 COMMISSION INCOME.................... 383,000 689,000 953,000 ROYALTY INCOME....................... 51,000 60,000 141,000 ------------ ------------ ------------ Operating income................. 3,804,000 4,422,000 9,146,000 ------------ ------------ ------------ OPERATING EXPENSES Selling............................ 3,345,000 3,783,000 4,406,000 General and administrative......... 4,627,000 5,033,000 6,158,000 ------------ ------------ ------------ 7,972,000 8,816,000 10,564,000 ------------ ------------ ------------ Loss from operations............. (4,168,000) (4,394,000) (1,418,000) OTHER INCOME (EXPENSE) Insurance income, net.............. 63,000 1,658,000 -- Interest expense................... (255,000) (128,000) (107,000) Interest income.................... 3,000 74,000 39,000 License acquisition (Note 14)...... (295,000) -- -- Other income....................... -- 6,000 56,000 ------------ ------------ ------------ (484,000) 1,610,000 (12,000) ------------ ------------ ------------ LOSS BEFORE INCOME TAXES............. (4,652,000) (2,784,000) (1,430,000) INCOME TAX PROVISION (BENEFIT) (Note 14)................................. -- 150,000 (432,000) ------------ ------------ ------------ NET LOSS............................. $ (4,652,000) $ (2,934,000) $ (998,000) ============ ============ ============ LOSS PER SHARE....................... $ (1.22) $ (.77) $ (.26) ============ ============ ============ AVERAGE NUMBER OF SHARES OUTSTANDING. 3,821,000 3,821,000 3,821,000 ============ ============ ============
See accompanying notes. 18 YES CLOTHING CO. STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY YEARS ENDED MARCH 31, 1995, 1994 AND 1993
COMMON STOCK -------------------- RETAINED SHARES AMOUNT EARNINGS TOTAL --------- ---------- ----------- ----------- BALANCE, March 31, 1992........ 3,821,000 $4,598,000 $ 5,606,000 $10,204,000 Net loss..................... -- -- (998,000) (998,000) --------- ---------- ----------- ----------- BALANCE, March 31, 1993........ 3,821,000 4,598,000 4,608,000 9,206,000 Net loss..................... -- -- (2,934,000) (2,934,000) --------- ---------- ----------- ----------- BALANCE, March 31, 1994........ 3,821,000 4,598,000 1,674,000 6,272,000 Repurchase of stock options (Note 14)................... -- (330,000) -- (330,000) Capital contribution (Note 14)......................... -- 245,000 -- 245,000 Net loss..................... -- -- (4,652,000) (4,652,000) --------- ---------- ----------- ----------- BALANCE, March 31, 1995........ 3,821,000 $4,513,000 $(2,978,000) $ 1,535,000 ========= ========== =========== ===========
See accompanying notes. 19 YES CLOTHING CO. STATEMENT OF CASH FLOWS YEARS ENDED MARCH 31, 1995, 1994 AND 1993
1995 1994 1993 ----------- ----------- ---------- CASH FLOWS FROM OPERATING ACTIVITIES Net loss............................... $(4,652,000) $(2,934,000) $ (998,000) Reconciliation of net loss to net cash flows from operating activities Depreciation and amortization........ 341,000 298,000 212,000 Increase (decrease) in credits due customers and allowance for doubtful accounts............................ 364,000 (23,000) 319,000 Increase (decrease) in cash due to changes in assets and liabilities Due from factor.................... (887,000) 2,117,000 (352,000) Accounts receivable................ 77,000 904,000 (256,000) Other receivables.................. 413,000 378,000 (273,000) Inventories........................ 1,055,000 30,000 (257,000) Prepaid expenses................... 23,000 (45,000) 405,000 Deferred income taxes.............. -- 378,000 247,000 Other assets....................... 10,000 (1,000) 71,000 Accounts payable................... (161,000) (612,000) 1,250,000 Accrued expenses................... (41,000) (128,000) (671,000) ----------- ----------- ---------- Net cash (used) provided by operating activities............ (3,458,000) 362,000 (303,000) ----------- ----------- ---------- CASH FLOWS FROM INVESTING ACTIVITIES Purchases of property and equipment.... (276,000) (241,000) (702,000) ----------- ----------- ---------- CASH FLOWS FROM FINANCING ACTIVITIES Payments on contracts payable.......... (47,000) (33,000) (11,000) Proceeds from contracts payable........ -- -- 248,000 Advances from factor, net.............. 3,116,000 -- -- Contribution of capital................ 245,000 -- -- Borrowing from related party........... 538,000 -- -- Purchase of stock options.............. (330,000) -- -- ----------- ----------- ---------- Net cash provided (used) by financing activities............ 3,522,000 (33,000) 237,000 ----------- ----------- ---------- NET (DECREASE) INCREASE IN CASH.......... (212,000) 88,000 (768,000) CASH AND CASH EQUIVALENTS, Beginning of year...................... 444,000 356,000 1,124,000 ----------- ----------- ---------- CASH AND CASH EQUIVALENTS, End of year............................ $ 232,000 $ 444,000 $ 356,000 =========== =========== ========== SUPPLEMENTAL CASH FLOW INFORMATION Cash paid for Interest.............................. $ 255,000 $ 128,000 $ 107,000 =========== =========== ========== Income taxes.......................... -- 182,000 -- =========== =========== ==========
See accompanying notes. 20 YES CLOTHING CO. NOTES TO FINANCIAL STATEMENTS MARCH 31, 1995 AND 1994 NOTE 1--ORGANIZATION AND FINANCIAL CONDITION A) ORGANIZATION--Yes Clothing Co.(R) (the "Company") was incorporated on July 1, 1982, in the State of California. The Company designs, manufactures and markets a diversified line of apparel primarily for women and young men. The Company sells its garments throughout the United States and Canada to retail department stores, specialty chains and specialty stores. The Company also arranged for the manufacture, in the Orient, of certain of its styles, which are shipped directly from the manufacturer to customers in the United States, Europe and Japan. In connection therewithin, the Company received a percentage of the sales price charged by the manufacturer and recognized this amount as commission income in the accompanying statement of operations. Subsequent to the acquisition transaction as described below, the Company discontinued these commission transactions. In January 1995, control of the Company changed when its two principal shareholders sold all of their shares, amounting to approximately 80% of the Company's outstanding stock, to affiliates of an individual. This transaction is herein referred to as the "Acquisition Transaction" and the collective new majority interest as the "Principal Shareholder". The principal shareholder currently holds approximately 88% of the Company's outstanding stock. B) FINANCIAL CONDITION--The accompanying financial statements have been prepared in conformity with generally accepted accounting principles, which contemplates continuation of the Company as a going concern. The Company sustained a substantial loss for the year ended March 31, 1995 and has experienced operating and net losses each year since 1992. The operating results for the three months ended June 30, 1995 are anticipated to reflect continued net losses. At this time, the Company is not able to sustain operations without a significant infusion of capital. The Company is currently operating on short-term overdrafts provided by the factor (Note 3) which are guaranteed by limited letters of credit totaling $2,000,000 supplied by the principal shareholder. In June 1995, the Company's principal shareholder expressed an intent to provide additional capital in return for common stock, stock option, warrant and other considerations. The Company's Board of Directors has approved the transaction which was consummated after receipt of a formal valuation and fairness opinion (the grant of options remains subject to shareholder approval.) The significant terms of the transaction are as follows: . Contribution of $3,300,000 cash in exchange for common stock at $1.25 per share. . Conversion of amounts owed to the principal shareholder and his affiliate (Note 10) into approximately 560,000 shares of common stock, at a rate of $1.25 per share. . Issuance of 2,000,000 common stock warrant immediately exercisable, expiring in two years, at $1.25 per share. . Five year trademark license agreement with affiliates of the principal shareholder for "GM Surf(TM)" and "Misfits(R)" lines at a royalty rate of 7% of gross sales plus 2% for advertising. . In connection with the employment of the principal shareholder as Chief Executive Officer and Chairman of the Board, the Company has granted an option for 500,000 shares per year at $1.25 per share over four years, vesting ratably, expiring in ten years. 21 YES CLOTHING CO. NOTES TO FINANCIAL STATEMENTS--(CONTINUED) MARCH 31, 1995 AND 1994 NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES INVENTORIES--Inventories are stated at the lower of cost (first-in, first-out basis) or market. DEPRECIATION AND AMORTIZATION--Depreciation and amortization of property and equipment are provided principally by the straight-line method over the following estimated useful lives: Furniture and fixtures...................................... 5 years Machinery and equipment..................................... 10 years Leasehold improvements...................................... Life of lease
INCOME TAXES--Income taxes are accounted for using an asset and liability approach. Deferred income taxes are provided for temporary differences between the financial reporting basis and the tax basis of the Company's assets and liabilities. Income taxes are further explained in Note 13. LOSS PER SHARE--Loss per share is based on the weighted average number of shares of common stock outstanding during each period. Stock options have not been considered in the loss per share calculations since the effect would be antidilutive. STATEMENT OF CASH FLOWS--For purposes of cash flows, the Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents, including matured funds held by the factor. NOTE 3--TRANSACTIONS WITH FACTOR AND BANK BORROWING The Company has a factoring agreement with a factor and a letter of credit facility with a related financing bank through March 1996. Under the factoring agreement, the Company sells substantially all of its trade accounts receivable, without recourse, and may request advances, up to 80%, on the net sales factored at any time before their maturity date. Under the letter of credit facility, the financing bank provides a credit line for letters of credit, ledger debt and factor guarantees up to the 80% advance rate provided under the factoring agreement with an additional overadvance facility of $1,050,000. The factor charges a commission on the net sales factored and interest on advances at prime plus a negotiated rate. The agreements are collateralized by accounts receivable and inventory imported under letters of credit. Open letters of credit at March 31, 1995 amounted to $426,000. Included in accounts payable at March 31, 1995 is $226,000 due to the factor for piece good purchases. Due from factor consists of the following:
1995 1994 ----------- ----------- Unmatured receivables Without recourse................................. $ 4,297,000 $ 3,521,000 With recourse.................................... 111,000 -- ----------- ----------- 4,408,000 3,521,000 (Advances) matured funds........................... (3,115,000) 109,000 Open credits....................................... (615,000) (247,000) ----------- ----------- $ 678,000 $ 3,383,000 =========== ===========
22 YES CLOTHING CO. NOTES TO FINANCIAL STATEMENTS--(CONTINUED) MARCH 31, 1995 AND 1994 NOTE 3--TRANSACTIONS WITH FACTOR AND BANK BORROWING (CONTINUED) During fiscal 1995, the maximum amount of advances outstanding was approximately $3,770,000. The average advances based upon month-end balances, was approximately $2,665,000. The average cost of borrowing, which includes factoring commission and interest, was approximately 17.2% during 1995. NOTE 4--ACCOUNTS RECEIVABLE
1995 1994 ---------- ---------- Accounts receivable................................... $ 425,000 $ 503,000 Less allowance for doubtful accounts.................. 216,000 221,000 ---------- ---------- $ 209,000 $ 282,000 ========== ========== NOTE 5--OTHER RECEIVABLES 1995 1994 ---------- ---------- Tax refund receivable................................. $ -- $ 393,000 Insurance premium refund receivable................... 112,000 63,000 Other................................................. 40,000 109,000 ---------- ---------- $ 152,000 $ 565,000 ========== ========== NOTE 6--INVENTORIES 1995 1994 ---------- ---------- Raw materials......................................... $ 560,000 $ 953,000 Work-in-progress...................................... 339,000 877,000 Finished goods........................................ 1,259,000 1,383,000 ---------- ---------- $2,158,000 $3,213,000 ========== ========== NOTE 7--PROPERTY AND EQUIPMENT 1995 1994 ---------- ---------- Furniture and fixtures................................ $ 203,000 $ 200,000 Machinery and equipment............................... 1,311,000 1,132,000 Leasehold improvements................................ 822,000 728,000 ---------- ---------- 2,336,000 2,060,000 Less accumulated depreciation and amortization........ 1,302,000 961,000 ---------- ---------- $1,034,000 $1,099,000 ========== ========== NOTE 8--ACCRUED EXPENSES 1995 1994 ---------- ---------- Accrued payroll....................................... $ 63,000 $ 120,000 Accrued vacation...................................... 125,000 100,000 Other................................................. 55,000 64,000 ---------- ---------- $ 243,000 $ 284,000 ========== ==========
23 YES CLOTHING CO. NOTES TO FINANCIAL STATEMENTS--(CONTINUED) MARCH 31, 1995 AND 1994 NOTE 9--CONTRACTS PAYABLE The Company leases equipment under capital leases which expire on various dates through March 1998. The remaining obligations under these capital leases for future years ended March 31 are as follows: 1996............................................................. $ 68,000 1997............................................................. 68,000 1998............................................................. 69,000 -------- 205,000 Amount representing interest..................................... (36,000) -------- Present value of minimum lease payments.......................... 169,000 Less current portion............................................. 50,000 -------- Long-term portion................................................ $119,000 ========
Equipment under capital leases and related accumulated depreciation amount to $248,000 and $98,000, respectively. NOTE 10--DUE TO RELATED PARTY An unsecured $330,000 note payable to the principal shareholder bears interest at the lessor of 8% or the prime rate of interest less 1%. The note is due thirteen months from demand or on the closing date of a public offering or private placement with gross proceeds of at least $6 million and at not less than $6 per share. Unsecured non-interest bearing advances of $208,000 were made to the Company by an entity affiliated through common ownership with the principal shareholder. As indicated in Note 1, these amounts were converted to common stock subsequent to March 31, 1995. NOTE 11--COMMITMENTS The Company leases its office, warehouse, retail store and showrooms under various operating leases expiring through August 1999. Minimum payments under non-cancelable operating leases for future years ending March 31 are as follows: 1996............................................................ $ 743,000 1997............................................................ 694,000 1998............................................................ 147,000 1999............................................................ 22,000 2000............................................................ 7,000 ---------- $1,613,000 ==========
Rent expense for the years ended March 31, 1995, 1994 and 1993, was approximately $609,000 (net of $115,000 sublease income), $593,000 and $639,000, respectively. 24 YES CLOTHING CO. NOTES TO FINANCIAL STATEMENTS--(CONTINUED) MARCH 31, 1995 AND 1994 NOTE 12--EMPLOYEE BENEFIT PLAN The Company has a profit sharing plan for the benefit of qualified employees. The amount of the contribution to the plan is discretionary and is determined annually by the Board of Directors. The Company has not accrued contributions for the years ended March 31, 1995 or 1994. In 1993, the Company contributed $374,000 to the Plan. Effective February 14, 1995, the Company terminated the plan pending IRS approval. The net assets of the plan will be distributed to participants according to their account balances. NOTE 13--INCOME TAXES Income taxes are summarized as follows:
1995 1994 1993 ---- --------- --------- Currently payable (refundable) Federal........................................ $-- $(211,000) $(697,000) State.......................................... -- 4,000 6,000 ---- --------- --------- -- (207,000) (691,000) ---- --------- --------- Deferred Federal........................................ -- 357,000 259,000 ---- --------- --------- $-- $ 150,000 $(432,000) ==== ========= =========
The primary differences between the income tax provision (benefit) computed at the U.S. statutory corporate income tax rate and the effective income tax rate are as follows:
1995 1994 1993 ----- ----- ----- Federal income taxes at the U.S. statutory rate................... (34.0)% 34.0 % (34.0)% State taxes, net of federal income tax benefit................ (6.0) (.1) .4 Unutilized net operating loss................... 40.0 (28.5) -- Other................... -- -- 3.4 ----- ----- ----- Effective income tax rate................... -- 5.4 % (30.2)% ===== ===== =====
Effective at the beginning of fiscal 1994, the Company changed its method of accounting for income taxes by adopting the provisions of Financial Accounting Standards Statement No. 109. The cumulative effect on prior years of this change was not significant. 25 YES CLOTHING CO. NOTES TO FINANCIAL STATEMENTS--(CONTINUED) MARCH 31, 1995 AND 1994 NOTE 13--INCOME TAXES (CONTINUED) At March 31, 1995 and 1994, deferred tax assets and liabilities are comprised of the following elements:
1995 1994 ----------- ----------- Gross deferred assets Reserve for chargebacks.......................... $ 246,000 $ 99,000 Provision for doubtful accounts.................. 87,000 88,000 Inventory basis.................................. 65,000 97,000 Accrued expenses................................. 50,000 23,000 Tax effect of net operating losses............... 2,724,000 867,000 Other............................................ -- 6,000 ----------- ----------- Gross deferred asset........................... 3,172,000 1,180,000 Deferred liability Accumulated depreciation......................... (63,000) (56,000) ----------- ----------- Net deferred asset before valuation allowance...... 3,109,000 1,124,000 Valuation allowance.............................. (3,109,000) (1,124,000) ----------- ----------- $ -- $ -- =========== ===========
The Company has established a valuation allowance equal to the net deferred tax asset as the Company cannot conclude that it is more likely than not that the net deferred tax asset will be realized. The Federal and State net operating loss carryforwards of approximately $6,550,000 and $8,286,000, respectively, expire from the years 2007 through 2010. Because ownership of the Company changed control during the year, a portion of the net operating loss carryforwards will be limited. Approximately $5,826,000 and $7,598,000 of Federal and State net operating losses, respectively, are subject to a maximum annual utilization totalling approximately $522,000. Deferred income taxes arise from temporary differences between financial and tax reporting. The effects of these differences on income taxes are as follows:
1995 1994 1993 ----------- ---------- -------- Tax effect of net operating losses........ $(1,857,000) $ (867,000) $ -- Inventory basis........................... 32,000 16,000 (3,000) Valuation and other reserves.............. (146,000) (61,000) (26,000) Accrued settlement of lawsuit............. -- -- 244,000 Other, net................................ (14,000) 145,000 44,000 Valuation allowance....................... 1,985,000 1,124,000 -- ----------- ---------- -------- Provision for deferred income taxes....... $ -- $ 357,000 $259,000 =========== ========== ========
26 YES CLOTHING CO. NOTES TO FINANCIAL STATEMENTS--(CONTINUED) MARCH 31, 1995 AND 1994 NOTE 14--SHAREHOLDERS' EQUITY STOCK OPTION PLAN--The Company has a stock option plan (the "Plan") for key employees, directors, officers and consultants of the Company. The plan provides for the issuance of up to 400,000 shares of common stock. Outstanding options are exercisable for a period of up to ten years and one week from the date of grant. Activity under this plan for 1993 through 1995 is as follows:
NUMBER OF EXERCISE SHARES PRICE --------- ------------ Outstanding, March 31, 1992......................... 160,000 $3.00--$8.75 Granted........................................... 190,000 2.00-- 4.00 -------- ------------ Outstanding, March 31, 1993......................... 350,000 2.00-- 8.75 Granted........................................... 20,000 1.88-- 2.00 -------- ------------ Outstanding, March 31, 1994......................... 370,000 1.88-- 8.75 Granted........................................... 15,000 6.00 Repurchased and canceled.......................... (260,000) 2.00-- 8.75 -------- ------------ Outstanding, March 31, 1995......................... 125,000 $1.88--$6.00 ======== ============
At March 31, 1995, there are 125,000 options exercisable at prices from $1.88 to $6.00 per share; 30,000 options at prices of $1.88 and $3.00 were subsequently exercised. As indicated in Note 1, subsequent to March 31, 1995, 4,000,000 additional options have been granted, subject to shareholder approval, at an exercise price of $1.25 per share. REPURCHASE OF STOCK OPTIONS--In conjunction with the change of principal ownership in January 1995, the Company repurchased various stock options for a total of $330,000. Funds for this transaction were provided by the new principal shareholder (Note 10). BUY BACK OF LICENSE AGREEMENTS--In connection with the change in principal ownership in 1995, the Company reacquired certain licenses for a total of $295,000. This amount is reflected as an "other expense" in the statement of operations. NOTE 15--INSURANCE RECOVERIES Subsequent to March 31, 1992, the Company incurred the loss of substantially all of its finished goods inventory in connection with civil disturbances in the City of Los Angeles. During the fiscal year ended March 31, 1993 the Company recovered from one insurance company, the cost of the inventory lost and its normal gross profit which would have been derived from the sale of those goods. For the years ended March 31, 1995 and 1994, the Company recovered a net $63,000 and $1,658,000, respectively, from a second insurance company for business interruption losses related to the civil disturbances. NOTE 16--OTHER RELATED PARTY TRANSACTIONS A law firm in which one member of the Board of Directors is a partner, was paid $93,000, $62,000 and $50,000 for legal services for the years ended March 31, 1995, 1994 and 1993, respectively. This Board member resigned effective May 16, 1995. One former member of the Board of Directors served as a consultant to the Company and was paid $111,000 for consulting services for the year ended March 31, 1994, $100,000 of which was a special bonus in connection with the settlement of the Company's business interruption claim (Note 15), and $6,000 and $7,000 annually for the years ended March 31, 1995 and 1993, respectively. Another former member of the Board of Directors served as a consultant to the Company and was paid $4,000 for consulting services for the year ended March 31, 1994. 27 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Information required by this item is hereby incorporated by reference to the Company's proxy statement to be filed pursuant to Regulation 14A which involves the election of Directors. ITEM 11. EXECUTIVE COMPENSATION Information required by this item is hereby incorporated by reference to the Company's proxy statement to be filed pursuant to Regulation 14A which involves the election of Directors. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Information required by this item is hereby incorporated by reference to the Company's proxy statement to be filed pursuant to Regulation 14A which involves the election of Directors. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Information required by this item is hereby incorporated by reference to the Company's proxy statement to be filed pursuant to Regulation 14A which involves the election of Directors. PART IV ITEM 14. EXHIBIT, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K FINANCIAL STATEMENTS AND SCHEDULES The following financial statements of Yes Clothing Co. are included in Item 8: Balance sheet Statement of operations Statement of changes in shareholders' equity Statement of cash flows Notes to financial statements Financial Statement Schedule: II--Valuation and qualifying accounts EXHIBITS See index to exhibits. REPORTS ON FORM 8-K Marciano transaction January 31, 1995. 28 YES CLOTHING CO. SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS YEARS ENDED MARCH 31, 1995, 1994 AND 1993
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E -------- ---------- ---------- ------------ ---------- ADDITIONS BALANCE AT CHARGED TO BALANCE AT BEGINNING COSTS AND ADDITIONS END OF DESCRIPTION OF PERIOD EXPENSES (DEDUCTIONS) PERIOD ----------- ---------- ---------- ------------ ---------- YEAR ENDED MARCH 31, 1995: Allowance for doubtful accounts on nonfactored accounts receivable........ $221,000 $158,000 $(163,000)(a) $216,000 ======== ======== ========= ======== Reserve for estimated returns, allowances and discounts on factored accounts................... $247,000 $368,000 $ -- $615,000 ======== ======== ========= ======== YEAR ENDED MARCH 31, 1994: Allowance for doubtful accounts on nonfactored accounts receivable........ $225,000 $(23,000) $ 19,000 (a) $221,000 ======== ======== ========= ======== Reserve for estimated returns, allowances and discounts on factored accounts................... $395,000 $ -- $(148,000)(b) $247,000 ======== ======== ========= ======== YEAR ENDED MARCH 31, 1993: Allowance for doubtful accounts on nonfactored accounts receivable........ $181,000 $319,000 $(275,000)(a) $225,000 ======== ======== ========= ======== Reserve for estimated returns, allowances and discounts on factored accounts................... $302,000 $233,000 $(140,000)(b) $395,000 ======== ======== ========= ========
- -------- (a) Represents net write-offs of uncollectible accounts against the allowance. (b) Represents write-offs of uncollectible accounts against the reserve. 29 SIGNATURES PURSUANT TO THE REQUIREMENTS OF SECTION 13 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. YES Clothing Co. By: Georges Marciano ---------------------------------- CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER July 12, 1995 PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED. SIGNATURE TITLE DATE Georges Marciano Chairman of the Board July 12, 1995 - ------------------------------------- Chief Executive GEORGES MARCIANO Officer and Director PRINCIPAL EXECUTIVE OFFICER Guy Anthome President and Director July 12, 1995 - ------------------------------------- GUY ANTHOME Jeffrey P. Busse Chief Financial July 12, 1995 - ------------------------------------- Officer and Director JEFFREY P. BUSSE PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER Irving B. Kroll Director July 12, 1995 - ------------------------------------- IRVING B. KROLL Maurice Schoenholz Director July 12, 1995 - ------------------------------------- MAURICE SCHOENHOLZ 30 INDEX TO EXHIBITS
PAGE SEQUENTIALLY ITEM NO. DESCRIPTION NUMBERED -------- ----------- ------------ 3.1 Restated Articles of Incorporation of the Company. (1) 3.2 Restated Bylaws of the Company.(1) 4.1 Specimen Common Stock Certificate.(1) 10.1 1989 Stock Option Plan with forms of stock option agreements thereunder.(1)* 10.2 Profit Sharing Plan dated March 22, 1993.* 10.3 Consultant Agreement dated as of April 21, 1989 between the Company and Alexander Menke.(1)* 10.4 Employment Agreement dated as of November 1, 1990 between the Company and Daniel V. Goodstein.(2)* 10.5 Form of Indemnification Agreement entered into with the Company's Directors and Executive Officers.(1) 10.6 Sublease dated May 3, 1989 between the Company and D.G.P. Limited Partnership.(1) 10.7 Lease dated August 15, 1991 between the Company and California Mart.(4) 10.8 Lease dated February 14, 1992 between the Company and Jody Apparel, Inc.(3) 10.9 Lease dated November 4, 1992 between the Company and California Mart.(4) 10.10 Lease dated May 10, 1993 between the Company and 1466 Broadway Associates.(4) 10.11 Lease dated September 17, 1990 between the Company and Gettinger Associates, as renewed pursuant to a letter dated September 22, 1993 from Gettinger Associates to the Company.(5) 10.12 Contract for the purchase of assets, including the Sedan trademark, between the Company and Camden Place, Ltd. dated March 9, 1992.(4) 10.13 Factoring Agreement dated May 15, 1994 between the Company and Republic Factors Corp., and related agreements.(5) 10.14 Form of Continuing Indemnity and Security Agreement between the Company and Republic Bank California N.A., and related agreements.(5) 10.15 Promissory Note dated March 9, 1995 between the Company and Georges Marciano. 10.16 Lease Assignment and First Amendment to lease between the Company and R.R. Park City, Inc. 10.17 Lease dated April 3, 1995 between the Company and 1466 Broadway Associates. 10.18 License Agreement dated as of April 1, 1995 between the Company and Marble Sportswear, Inc. 10.19 Amendment to Factoring Agreement dated March 2, 1995 between the Company and Republic Factors Corp. 10.20 Retainer Agreement dated June 17, 1995 between the Company and Houlihan Lokey Howard and Zukin. 10.21 Indemnification Agreement dated June 17, 1995 between the Company and Georges Marciano. 10.22 Indemnification Agreement dated May 3, 1995 between the Company and Irving B. Kroll. 10.23 Indemnification Agreement dated May 3, 1995 between the Company and Maurice Schoenholz. 10.24 Indemnification Agreement dated May 18, 1995 between the Company and Guy Anthome. 10.25 Indemnification Agreement dated May 18, 1995 between the Company and Jeffrey P. Busse. 10.26 Employment Agreement dated as of June 17, 1995 between the Company and Georges Marciano.*
31
PAGE SEQUENTIALLY ITEM NO. DESCRIPTION NUMBERED -------- ----------- ------------ 10.27 Stock Option Agreement dated June 17, 1995 between the Company and Georges Marciano.* 10.28 Warrant Agreement dated June 17, 1995 between the Company and Georges Marciano. 10.29 Three Party Agreement between the Company, Republic Factors Corp. and Georges Marciano dated June 12, 1995. 10.30 Three Party Agreement between the Company, Republic Factors Corp. and Georges Marciano dated June 21, 1995. 27 Financial Data Schedule. 99.1 Valuation and Fairness Opinion of Houlihan Lokey Howard and Zukin dated July 10, 1995.
- -------- *Management contract or executive compensation plan or arrangement. (1) Filed as an exhibit to the annual Report on Form 10-K for the fiscal year ended March 31, 1990, and incorporated herein by this reference. (2) Filed as an exhibit to the annual Report on Form 10-K for the fiscal year ended March 31, 1991 and incorporated herein by this reference. (3) Filed as an exhibit to the Annual Report on Form 10-K for the fiscal year ended March 31, 1992, and incorporated herein by this reference. (4) Filed as an exhibit to the Annual Report on Form 10-K for the fiscal year ended March 31, 1993 and incorporated herein by this reference. (5) Filed as an exhibit to the Annual Report on Form 10-K for the fiscal year ended March 31, 1994. 32 EX-10.15 2 PROMISSORY NOTE 3-9-95 WITH G. MARCIANO EXHIBIT 10.15 PROMISSORY NOTE --------------- $330,000.00 March 9, 1995 1. INDEBTEDNESS. FOR VALUE RECEIVED, the undersigned, YES CLOTHING ------------ CO., a California corporation (hereinafter referred to as "Maker"}, promises to pay-to GEORGES MARCIANO, an individual (hcrcinaftcr referred to as "Payee"), or order, at Los Angeles, California, or at such other place as may be designated in writing by the holder of this Promissory Note (hereinafter referred to as this "Note"), the principal sum of Three Hundred Thiry Thousand Dollars ($330,000.00), together with interest accrued thereon. 2. INTEREST. Commencing on the date hereof, the unpaid principal -------- balance of this Note shall bear interest at the rate that is from time to time the lower of (i) eight percent (8%) and (ii) a rate one (1) percentage point below the prime rate of interest announced by Republic National Bank of New York. Interest chargeable hereunder shall be calculated on the basis of a three hundred sixty (360) day year for actual days elapsed. Interest shall be due and payable annually on the anniversary date of the Note or as set forth in Section 3. 3. PAYMENT. Principal and interest shall be due and payable on the ------- earlier to occur of (a) the date that is thirteen (13) months after written demand is made by Payee to Maker or (b) the date of the closing of a public offering or private placement of Maker's securities with (i) aggregate gross proceeds of at least Six Million Dollars ($6,000,000.00) and (ii) at a price of not less than Six Dollars ($6.00) per share of the common stock of Maker, as presently constituted, subject to proportionate adjustment in the event of any stock split, stock dividend, reverse stock split, combination, consolidation, reclassification or similar event. 4. PREPAYMENT. Maker may prepay all or any part of the principal ---------- balance due under this Note, without premium or penalty. 5. DEFAULT. Should a default occur in the payment of any installment ------- of principal or interest due hereunder, and should such default continue for a period of ten (10) days after receipt by Maker of written notice from Payee of the occurrence of such default, then the entire amount of principal and interest due hereunder may thereupon be declared due and payable at the option of Payee without further notice. If any action is instituted in connection with this Note, Maker further agrees to pay all reasonable legal fees, court costs and other collection expenses incurred by Payee. 6. WAIVERS. Maker, for itself, its legal representatives, ------- successors and assigns, expressly waives presentment, protest, demand, notice of dishonor, notice of nonpayment, notice of maturity, notice of protest, presentment for the purpose of accelerating maturity, and diligence in collection, and consent that Payee may extend the time for payment or otherwise modify the terms of payment of any part or the whole of the debt evidenced hereby. To the fullest extent permitted by law, Maker waives the statute of limitations in any action brought by Payee in connection with this Note. 7. MODIFICATION. This Note may not be changed, modified, amended or -------------- terminated orally. YES CLOTHING CO., a California corporation By /s/ Daniel Goodstein ---------------------------- DANIEL GOODSTEIN Executive Vice President 2 EX-10.16 3 LEASE AGREEMENT WITH R.R. PARK CITY, INC. EXHIBIT 10.16 ASSIGNMENT AND FIRST AMENDMENT TO LEASE THIS ASSIGNMENT AND FIRST AMENDMENT TO LEASE (hereinafter "Amendment") is made this 3rd day of April , 1995, by and between R.R. Park City, Inc., a ----- ----- Delaware corporation whose address is c/o Rothschild Realty, Inc., 1251 Avenue of the Americas, 51st Floor, New York, New York 10020 ("Landlord") and Go U.S.A. Streetwear, Inc., a California corporation, dba Go U.S.A, Streetwear whose address is 9756 Wilshire Boulevard, Beverly Hills, California 90212 ("Assignor") and YES Clothing Co., a California corporation, whose address is 1380 West Washington Boulevard, Los Angeles, California 90007 ("Assignee"). WHEREAS, pursuant to that certain Lease Agreement, dated August 9, 1994 (the "Lease"), by and between R.R. Park City, Inc, and Go U.S.A. Streetwear Inc., in which Tenant leases Store No. H-117 consisting of approximately 1,250 square feet of floor area (the "Leased Premises") in that certain retail development commonly known as The Factory Stores @ Park City located in Park City, Utah (the "Shopping Center"); and WHEREAS, Assignor desires to modify its Permitted Trade Name and Landlord has consented to the modification. WHEREAS, Assignor desires to assign its right, title and interest in the Lease to Assignee and Assignee desires to accept sucb interest and assume all of the obligations arising under the Lease and Landlord is willing to consent to such assignment under the conditions herein; and WHEREAS, Landlord and Assignee mutually desire to modify the Lease in certain particulars to reflect the assignment and amendment to the Lease. NOW, THEREFORE, in consideration of the sum of Ten Dollars ($10.00), the mutual promises herein contained and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: 1. DEFINITIONS. Where appropriate, capitalized terms used herein shall have the same meanings ascribed to them in the Lease. 2. Assignor does hereby assign, transfer and set over to Assignee all of its right, title and interest in and to tire Lease, such assignment to be the (effective as of April 1, 1995 the Assignment Date"). Assignee does hereby accept such assignment and agrees to perform all of the terms, covenants and conditions on the part of the Tenant to be performed under the Lease, including without limitation, operation of the Leased Premises solely for the Permitted Use and under the Permitted Trade Name as set forth in the Lease, and as modified herein. 3. Assignor shall remain directly liable for all obligations of Assignee under the Lease. At landlord's option, a separate action or actions ,may be brought against, whether or not any action is first or subsequently brought against Assignee or whether or not Assignee is joined in any such action, and Assignor may be joined in any action or proceeding commenced by Landlord against Assignee arising out of, in connection with or based upon the Lease. Assignor waives any right to require Landlord to proceed against Assignee or pursue any other remedy in Landlord's power whatsoever, any right to complain of delay in the enforcement of Landlord's rights under the Lease, and any demand by Landlord and/or prior action by Landlord of any nature whatsoever against Assignee, or otherwise. Assignor's liability under the Lease shall remain in full force and effect and shall not be discharged in whole or in part notwithstanding any renewal, extension, modification, amendment or assignment of, or subletting, concession, franchising, licensing or permitting under, the Lease, provided, however, that none of the foregoing shall increase the obligations of Assignor as they shall exist under the Lease immediately prior to the execution hereof. Assignor's obligations under the Lease shall remain fully binding although Landlord may have waived one or more defaults by Assignee, extended the time of performance by Assignee, released, returned or misapplied other collateral at any time given as security for Assignee's obligations and/or released Assignee from the performance of its obligations under the Lease, and notwithstanding the institution by or against Assignee of bankruptcy, reorganization, receivership or insolvency proceedings of any nature, or the disaffirmance of the Lease in any such proceeding or otherwise. 4. As of the Assignment Date, all references to "Tenant" in the Lease as "Go U.S.A. Streetwear, Inc," are hereby deleted in their entirety and in lieu thereof "Tenant" shall hereby be defined as "YES Clothing Co.," and all references in the Lease shall thereafter refer to Tenant as defined herein. 5. SECTION 4.01 of the DATA SUMMARY. The "Permitted Trade Name" is deleted in its entirety and in lieu thereof is substituted the following: Permitted Trade Name: YES However, upon sixty (60) days prior written notice to Landlord, Tenant shall be permitted to change the Permitted Trade Name to "Georges Marciano Boutique" or Georges Marciano Design Studio. 6. This Amendment shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors, assigns, heirs and legal representatives. 7. This Amendment constitutes the entire understanding among the parties regarding this matter and no modification of any terms or provisions of this Amendment shall be effective unless set forth in writing and signed by each of the parties intended to be bound. 8. Neither the submission of this Amendment by Landlord to Assignor or Assignee prior to the execution by all parties hereto, nor any discussion between Landlord and either or both of Assignor and Assignee, shall create any legal obligation or liability whatsoever on Landlord with respect to the matters set forth herein nor shall be construed as Landlord's consent to the assignment described herein. 9. Except as specifically amended hereby, all of the terms, covenants, conditions and provisions of the Lease are hereby ratified and affirmed. In the event that a conflict arises between the terms of the Lease and this Assignment and First Amendment to Lease, the terms and conditions of this Amendment will control. The parties acknowledge the effectiveness of the Lease as so amended. [ASSIGNMENT AND FIRST AMENDMENT-GO USA] (signatures on following page) IN WITNESS WHEREOF, this Amendment is executed by the parties by their duly authorized officers, on the date first written above. WITNESS: LANDLORD: R.R. PARK CITY, INC., a Delaware corporation /s/ Mary Ann Peterson By: /s/ Wm. Neville - ------------------------------- ------------------------------- Name: Wm. Neville ----------------------------- Its: Exec. VP ------------------------------ WITNESS: ASSIGNOR: Go U.S.A. Streetwear, Inc., a California corporation /s/ Warren J. Klein By: /s/ Georges Marciano - ------------------------------- ------------------------------- Signature of: Warren J. Klein Signature of: Georges Marciano ------------------ --------------------- (Please print) (Please print) Title: Pres/C.E.O. ---------------------------- WITNESS: ASSIGNEE and TENANT: Y E S Clothing, Co., a California corporation /s/ Jessie Garcia By: /s/ Daniel Goodstein - ------------------------------- ------------------------------- Signature of: Jessie Garcia Signature of: Daniel Goodstein ------------------ --------------------- (Please print) (Please print) Title: Exec V.P. ---------------------------- [ASSIGNMENT AND FIRST AMENDMENT - GO USA] EX-10.17 4 LEASE DATED 4-3-95 WITH 1466 BROADWAY ASSOC. EXHIBIT 10.17 STANDARD FORM OF OFFICE LEASE 3/1/90 The Real Estate Board of New York, Inc. Agreement of Lease, made as of this 3RD day of April 1995 , between 1466 BROADWAY ASSOCIATES c/o HELMSLEY-NOYES COMPANY, INC., as Agent, having offices at 22 Cortlandt Street, New York, New York 10007 party of the first part, hereinafter referred to as OWNER, and YES CLOTHING COMPANY, having an address at 1380 W. Washington Boulevard, Los Angeles, California 90007 party of the second part, hereinafter referred to as TENANT, Witnesseth: Owner hereby leases to Tenant and Tenant hereby hires from Owner Room 1507-1508 in the building known as 1466 Broadway in the Borough of Manhattan, City of New York, for the term of Four (4) Years (or until such term shall sooner cease and expire as hereinafter provided) to commence on the 1st day of June nineteen hundred and ninety-five, and to end on the 31st day of May nineteen hundred and ninety-nine both dates inclusive, at an annual rental rate of (SEE ARTICLE #58) which Tenant agrees to pay in lawful money of the United States which shall be legal tender in payment of all debts and dues, public and private, at the time of payment, in equal monthly installments in advance on the first day of each month during said term, at the office of Owner or such other place as Owner may designate, without any set off or deduction whatsoever, except that Tenant shall pay xxxxxxxxx 1 monthly installment(s) on the execution hereof (unless this lease be a renewal). In the event that, at the commencement of the term of this lease, or thereafter, Tenant shall be in default in the payment of rent to Owner pursuant to the terms of another lease with Owner or with Owner's predecessor in interest, Owner may at Owner's option and without notice to Tenant add the amount of such arrears to any monthly installment of rent payable hereunder and the same shall be payable to Owner as additional rent. The parties hereto, for themselves, their heirs, distributees, executors, administrators, legal representatives, successors and assigns, hereby convenant as follows: Rent 1. Tenant shall pay the rent as above and as hereinafter provided. Occupancy 2. Tenant shall use and occupy demised premises for general offices and apparel showroom and for no other purpose. Tenant 3. Tenant shall make no changes in or to the demised premises of Alterations: any nature without Owner's prior written consent. Subject to the prior written consent of Owner which consent shall not be long as there is no prejudicial mechanical systems on the Premises, and to the provisions of this article, Tenant at Tenant's expense, may make alterations, installations, additions or improvements which are non-structural and which do not affect utility services or plumbing and electrical lines, in or to the interior of the demised premises by using contractors or mechanics first approved by Owner. Tenant shall, before making any alterations, additions, installations or improvements, at its expense, obtain all permits, approvals and certificates required by any governmental or quasi-governmental bodies and (upon completion) certificates of final approval thereof and shall deliver promptly duplicates of all such permits, approvals and certificates to Owner and Tenant agrees to carry and will cause Tenant's contractors and sub-contractors to carry such workman's compensation, general liability, personal and property damage insurance as Owner may require. If any mechanic's lien is filed against the demised premises, or the building of which the same forms a part, for work claimed to have been done for, or materials furnished to, Tenant, whether or not done pursuant to this article, the same shall be discharged by Tenant within thirty days after reasonable notice to Tenant, at Tenant's expense, by filing the bond required by law. All fixtures and all paneling, partitions, railings and like installations, installed in the premises at any time, either by Tenant or by Owner in Tenant's behalf, shall, upon installation, become the property of Owner and shall remain upon and be surrendered with the demised premises unless Owner, by notice to Tenant no later than twenty days prior to the date fixed as the termination of this lease, elects to relinquish Owner's right thereto and to have them removed by Tenant, in which event the same shall be removed from the premises by Tenant prior to the expiration of the lease, at Tenant's expense. Nothing in this Article shall be construed to give Owner title to or to prevent Tenant's removal of trade fixtures, movable office furniture and equipment, but upon removal of any such from the premises or upon removal of other installations as may be required by Owner, Tenant shall immediately and at its expense, repair and restore the premises to the condition existing prior to installation and repair any damage to the demised premises or the building due to such removal. All property permitted or required to be removed, by Tenant at the end of the term remaining in the premises after Tenant's removal shall be deemed abandoned and may, at the election of Owner, either be retained as Owner's property or may be removed from the premises by Owner, at Tenant's expense. Maintenance 4. Tenant shall, throughout the term of this lease, take good care and of the demised premises and the fixtures and appurtenances Repairs therein. Tenant shall be responsible for all damage or injury to the demised premises or any other part of the building and the systems and equipment thereof, whether requiring structural or nonstructural repairs caused by or resulting from carelessness, omission, neglect or improper conduct of Tenant, Tenant's subtenants, agents, employees, invitees or licensees, or which arise out of any work, labor, service or equipment done for or supplied to Tenant or any subtenant or arising out of the installation, use or operation of the property or equipment of Tenant or any subtenant. Tenant shall also repair all damage to the building and the demised premises caused by the moving of Tenant's fixtures, furniture and equipment. Tenant shall promptly make, at Tenant's expense, all repairs in and to the demised premises for which Tenant is responsible, using only the contractor for the trade or trades in question, selected from a list of at least two contractors per trade submitted aby Owner. Any other repairs in or to the building or the facilities and systems thereof for which Tenant is responsible shall be performed by Owner at the Tenant's expense. Owner shall maintain in good working order and repair the exterior and the structural portions of the building, including the structural portions of its demised premises, and the public portions of the building interior and the building plumbing, electrical, heating and ventilating systems (to the extent such systems presently exist) serving the demised premises. Tenant agrees to give prompt notice of any defective condition of which Tenant has actual knowledge in the premises for which Owner may be responsible hereunder. There shall be no allowance to Tenant for diminution of rental value and no liability on the part of Owner by reason of inconvenience, annoyance or injury to business arising from Owner or others making repairs, alterations, additions or improvements in or to any portion of the building or the demised premises or in and to the fixtures, appurtenances or equipment thereof. It is specifically agreed that Tenant shall not be entitled to any setoff or reduction of rent by reason of any failure of Owner to comply with the covenants of this or any other article of this Lease. Tenant agrees that Tenant's sole remedy at law in such instance will be by way of an action for damages for breach of contract. The provisions of this Article 4 shall not apply in the case of fire or other casualty which are dealt with in Article 9 hereof. Window 5. Tenant will not clean nor require, permit, suffer or allow Cleaning: any window in the demised premises to be cleaned from the outside in violation of Section 202 of the Labor Law or any other applic- able law or of the Rules of the Board of Standards and Appeals, or of any other Board or body having or asserting jurisdiction.* Requirements 6. Prior to the commencement of the lease term, if Tenant is then of Law, in possession, and at all times thereafter, Tenant, at Tenant's Fire sole cost and expense, shall promptly comply with all present and Insurance, future laws, orders and regulations of all state, federal, munic- Floor Loads: ipal and local governments, departments, commissions and boards and any direction of any public officer pursuant to law, and all orders, rules and regulations of the New York Board of Fire Underwriters, Insurance Services Office, or any similar body which shall impose any violation, order or duty upon Owner or Tenant with respect to the demised premises, whether or not arising out of Tenant's use or manner of use thereof,(including Tenant's permitted use) or, with respect to the building if arising out of Tenant's *Landlord shall make all repairs within ten (10) days of written notice by Tenant. If such repairs cannot be completed within ten (10) days, Landlord must undertake such work within the ten (10) day period. use or manner of use of the premises or the building (including the use permitted under the lease). Nothing herein shall require Tenant to make structural repairs or alterations unless Tenant has, by its manner of use of the demised premises or method of operation therein, violated any such laws, ordinances, orders, rules, regulations or requirements with respect thereto. Tenant may, after securing Owner to Owner's satisfaction against all damages, interest, penalties and expenses, including, but not limited to, reasonable attorney's fees, by cash deposit or by surety bond in an amount and in a company satisfactory to Owner, contest and appeal any such laws, ordinances, orders, rules, regulations or requirements provided same is done with all reasonable promptness and provided such appeal shall not subject Owner to prosecution for a criminal offense or constitute a default under any lease or mortgage under which Owner may be obligated, or cause the demised premises or any part thereof to be condemned or vacated. Tenant shall not do or permit any act or thing to be done in or to the demised premises which is contrary to law, or which will invalidate or be in conflict with public liability, fire or other policies of insurance at any time carried by or for the benefit of Owner with respect to the demised premises or the building of which the demised premises form a part, or which shall or might subject Owner to any liability or responsibility to any person or for property damage. Tenant shall not keep anything in the demised premises except as now or hereafter permitted by the Fire Department, Board of Fire Underwriters, Fire Insurance Rating Organization or other authority having jurisdiction, and then only in such manner and such quantity so as not to increase the rate for fire insurance applicable to the building, nor use the premises in a manner which will increase the insurance rate for the building or any property located therein over that in effect prior to the commencement of Tenant's occupancy. Tenant shall pay all costs, expenses, fines, penalties, or damages, which may be imposed upon Owner by reason of Tenant's failure to comply with the provisions of this article and if by reason of such failure the fire insurance rate shall, at the beginning of this lease or at any time thereafter, be higher than it otherwise would be, then Tenant shall reimburse Owner, as additional rent hereunder, for that portion of all fire insurance premiums thereafter paid by Owner which shall have been charged because of such failure by Tenant. In any action or proceeding wherein Owner and Tenant are parties, a schedule or "make-up" of rate for the building or demised premises issued by the New York Fire Insurance Exchange, or other body making fire insurance rates applicable to said premises shall be conclusive evidence of the facts therein stated and of the several items and charges in the fire insurance rates then applicable to said premises. Tenant shall not place a load upon any floor of the demised premises exceeding the floor load per square foot area which it was designed to carry and which is allowed by law. Owner reserves the right to prescribe the weight and position of all safes, business machines and mechanical equipment. Such installations shall be placed and maintained by Tenant, at Tenant's expense, in settings sufficient, in Owner's judgement, to absorb and prevent vibration, noise and annoyance. The Tenant shall not be liable for all of the laws, ordinances, regulations, etc. . ., in which the demised premises is in violation if the violation is not a direct result of Tenant's use or manner of use thereof. Subordination: 7. This lease is subject and subordinate to all ground or underlying leases and to all mortgages which may now or hereafter affect such leases or the real property of which demised premises are a part and to all renewals, modifications, consolidations, replacements and extensions of any such underlying leases and mortgages. This clause shall be self-operative and no further instrument of subordination shall be required by any ground or underlying lessor or by any mortgagee, affecting any lease or the real property of which the demised premises are a part. In confirmation of such subordination, Tenant shall execute promptly any certificate that Owner may request. Property- 8. Owner or its agents shall not be liable for any damage Loss, Damage, to property of Tenant or of others entrusted to employees Reimburse- of the building, nor for loss of or damage to any property ment, Indem- of Tenant by theft or otherwise, nor for any injury or damage nity: to persons or property resulting from any cause of whatsoever nature, unless caused by or due to the negligence of Owner, its agents, servants or employees. Owner or its agents will not be liable for any such damage caused by other tenants or persons in, upon or about said building or caused by operations in construction of any private, public or quasi public work. If at any time any windows of the demised premises are temporarily closed, darkened or bricked up (or permanently closed, darkened or bricked up, if required by law) for any reason whatsoever including, but not limited to Owner's own acts, Owner shall not be liable for any damage Tenant may sustain thereby and Tenant shall not be entitled to any compensation therefor nor abatement or diminution of rent nor shall the same release Tenant from its obligations hereunder nor constitute an eviction. Tenant shall indemnify and save harmless Owner against and from all liabilities, obligations, damages, penalties, claims, costs and expenses for which Owner shall not be reimbursed by insurance, including reasonable attorneys fees, paid, suffered or incurred as a result of any breach by Tenant, Tenant's agents, contractors, employees, invitees, or licensees, of any covenant or condition of this lease, or the carelessness, negligence or improper conduct of the Tenant, Tenant's agents, contractors, employees, invitees or licensees. Tenant's liability under this lease extends to the acts and omissions of any sub-tenant, and any agent, contractor, employee, invitee or licensee of any sub-tenant. In case any action or proceeding is brought against Owner by reason of any such claim, Tenant, upon written notice from Owner, will, at Tenant's expense, resist or defend such action or proceeding by counsel approved by Owner in writing, such approval not to be unreasonably withheld. Destruction, 9. (a) If the demised premises or any part thereof shall be Fire and Other damaged by fire or other casualty, Tenant shall give Casualty: immediate notice thereof to Owner and this lease shall continue in full force and effect except as hereinafter set forth. (b) If the demised premises are partially damaged or rendered partially unusable by fire or other casualty, the damages and additional rents thereto shall be repaired by and at the expense of Owner and the rent, until such repair shall be substantially completed, shall be apportioned from the day following the casualty according to the part of the premises which is usable. (c) If the demised premises are totally damaged or rendered wholly unusable by fire or other casualty, then the rent shall be proportionately paid up to the time of the casualty and thenceforth shall cease until the date when the premises shall have been repaired and restored by Owner, subject to Owner's right to elect not to restore the same as hereinafter provided. (d) If the demised premises are rendered wholly unusable or (whether or not the demised premises are damaged in whole or in part) if the building shall be so damaged that Owner shall decide to demolish it or to rebuild it, then, in any of such events, Owner may elect to terminate this lease by written notice to Tenant, given within 90 days after such fire or casualty, specifying a date for the expiration of the lease, which date shall not be more than 60 days after the giving of such notice, and upon the date specified in such notice the term of this lease shall expire as fully and completely as if such date were the date set forth above for the termination of this lease and Tenant shall forthwith quit, surrender and vacate the premises without prejudice however, to Landlord's rights and remedies against Tenant under the lease provisions in effect prior to such termination, and any rent owing shall be paid up to such date and any payments of rent made by Tenant which were on account of any period subsequent to such date shall be returned to Tenant. Unless Owner shall serve a termination notice as provided for herein, Owner shall make the repairs and restorations under the conditions of (b) and (c) hereof, with all reasonable expedition, subject to delays due to adjustment of insurance claims, labor troubles and causes beyond Owner's control. After any such casualty, Tenant shall cooperate with Owner's restoration by removing from the premises as promptly as reasonably possible, all of Tenant's salvageable inventory and movable equipment, furniture, and other property. Tenant's liability for rent shall resume ten (10) days after written notice from Owner that the premises are substantially ready for Tenant's occupancy. (e) Nothing contained hereinabove shall relieve Tenant from liability that may exist as a result of damage from fire or other casualty. Notwithstanding the foregoing, each party shall look first to any insurance in its favor before making any claim against the other party for recovery for loss or damage resulting from fire or other casualty, and to the extent that such insurance is in force and collectible and to the extent permitted by law, Owner and Tenant each hereby releases and waives all right of recovery against the other or any one claiming through or under each of them by way of subrogation or otherwise. The foregoing release and waiver shall be in force only if both releasors' insurance policies contain a clause providing that such a release or waiver shall not invalidate the insurance. If, and to the extent, that such waiver can be obtained only by the payment of additional premiums, then the party benefitting from the waiver shall pay such premium within ten days after written demand or shall be deemed to have agreed that the party obtaining insurance coverage shall be free of any further obligation under the provisions hereof with respect to waiver of subrogation. Tenant acknowledges that Owner will not carry insurance on Tenant's furniture and/or furnishings or any fixtures or equipment, improvements, or appurtenances removable by Tenant and agrees that Owner will not be obligated to repair any damage thereto or replace the same. (f) Tenant hereby waives the provisions of Section 227 of the Real Property Law and agrees that the provisions of this article shall govern and control in lieu thereof. Notwithstanding anything to the contrary set forth herein, Tenant shall be entitled to cancel and terminate this Lease if Owner fails to completely repair and restore the Premises within six (6) months of the date that such damage occurs. Eminent 10. If the whole or any part of the demised premises shall Domain: be acquired or condemned by Eminent Domain for any public or quasi public use or purpose, then and in that event, the term of this lease shall cease and terminate from the date of title vesting in such proceeding and Tenant shall have no claim for the value of any unexpired term of said lease and assigns to Owner, Tenant's entire interest in any such award 1 and all rents and additional rents shall be prorated as of such date. Assignment, 11. Tenant, for itself, its heirs, distributees, executors, Mortgage, administrators, legal representatives, successors and assigns, Etc.: expressly covenants that it shall not assign, mortgage or encumber this agreement, nor underlet, or suffer or permit the demised premises or any part thereof to be used by others, without the prior written consent of Owner which shall not be unreasonably withheld in each instance. Transfer of the majority of the stock of a corporate Tenant shall be deemed an assignment. If this lease be assigned, or if the demised premises or any part thereof be underlet or occupied by anybody other than Tenant, Owner may, after default by Tenant, collect rent from the assignee, under-tenant or occupant, and apply the net amount collected to the rent herein reserved, but no such assignment, underletting, occupancy or collection shall be deemed a waiver of this covenant, or the acceptance of the assignee, under-tenant or occupant as tenant, or a release of Tenant from the further performance by Tenant of covenants on the part of Tenant herein contained. The consent by Owner to an assignment or underletting shall not in any wise be construed to relieve Tenant from obtaining the express consent in writing of Owner to any further assignment or underletting. Electric 12. Rates and conditions in respect to submetering or Current: rent inclusion, as the case may be, to be added in RIDER (Symbol attached hereto. Tenant covenants and agrees that at all appears here) times its use of electric current shall not exceed the capacity of existing feeders to the building or the risers or wiring installation and Tenant may not use any electrical equipment which, in Owner's opinion, reasonably exercised, will overload such installations or interfere with the use thereof by other tenants of the building. The change at any time of the character of electric service shall in no wise make Owner liable or responsible to Tenant, for any loss, damages or expenses which Tenant may sustain. Access to 13. Owner or Owner's agents shall have the right (but shall Premises: not be obligated) to enter the demised premises in any emergency at any time, and, at other reasonable times, to examine the same and to make such repairs, replacements and improvements as Owner may deem necessary and reasonably desirable to the demised premises or to any other portion of the building or which Owner may elect to perform. Tenant shall permit Owner to use and maintain and replace pipes and conduits in and through the demised premises and to erect new pipes and conduits therein provided they are concealed within the walls, floor, or ceiling. Owner may, during the progress of any work in the demised premises, take all necessary materials and equipment into said premises without the same constituting an eviction nor shall the Tenant be entitled to any abatement of rent while such work is in progress, nor to any damages by reason of loss or interruption of business or otherwise. Throughout the term hereof Owner shall have the right to enter the demised premises on reasonable notice to Tenant, (except in the case of an emergency) at reasonable hours for the purpose of showing the same to prospective purchasers or mortgages of the building, and during the last six months of the term for the purpose of showing the same to prospective tenants. Provided the Owner shall, at all times use its reasonable efforts to minimize the disruption and interference to Tenant's business from Owner's entry. If Tenant is not present to open and permit an entry into the premises, Owner or Owner's agents may enter the same whenever such entry may be necessary or permissible by master key or forcibly and provided reasonable care is exercised to safeguard Tenant's property, such entry shall not render Owner or its agents liable therefor, nor in any event shall the obligations of Tenant hereunder be affected. If during the last month of the term Tenant shall have removed all or substantially all of Tenant's property therefrom Owner may immediately enter, alter, renovate or redecorate the demised premises without limitation or abatement of rent, or incurring liability to Tenant for any compensation and such act shall have no effect on this lease or Tenant's obligations hereunder. Vault, 14. No Vaults, vault space or area, whether or not enclosed or Vault Space, covered, not within the property line of the building is leased Area: hereunder, anything contained in or indicated on any sketch, blue print or plan, or anything contained elsewhere in this lease to the contrary notwithstanding. Owner makes no representation as to the location of the property line of the building. All vaults and vault space and all such areas not within the property line of the building, which Tenant may be permitted to use and/or occupy, is to be used and/or occupied under a revocable license, and if any such license be revoked, or if the amount of such space or area be diminished or required by any federal, state or municipal authority or public ability, Owner shall not be subject to any liability nor shall Tenant be entitled to any compensation or diminution or abatement of rent, nor shall such revocation, diminution or requisition be deemed constructive or actual eviction. Any tax, fee or charge of municipal authorities for such vault or area shall be paid by Tenant to the extent such Vault Area is actually used by Tenant. Occupancy: 15. Tenant will not at any time use or occupy the demised premises in violation of the certificate of occupancy issued for the building of which the demised premises are a part. Tenant has inspected the premises and accepts them as is, subject to the riders annexed hereto with respect to Owner's work, if any. In any event, Owner makes no representation as to the condition of the premises and Tenant agrees to accept the same subject to violations, whether or not of record. (b) it is stipulated and agreed that in the event of the termination of this lease pursuant to (a) hereof, Owner shall forthwith, notwithstanding any other provisions of this lease to the contrary, be entitled to recover from Tenant as and for liquidated damages an amount equal to the difference between the rent reserved hereunder for the unexpired portion of the term demised and the fair and reasonable rental value of the demised premises for the same period. In the computation of such damages the difference between any installment of rent becoming due hereunder after the date of termination and the fair and reasonable rental value of the demised premises for the period for which such installment was payable shall be discounted to the date of termination at the rate of four percent (4%) per annum. If such premises or any part thereof be relet by the Owner for the unexpired term of said lease, or any part thereof, before presentation of proof of such liquidated damages to any court, commission or tribunal, the amount of rent reserved upon such reletting shall be deemed to be the fair and reasonable rental value for the part or the whole of the premises so re-let during the term of the re-letting. Nothing herein contained shall limit or prejudice the right of the Owner to prove for and obtain as liquidated damages by reason of such termination, an amount equal to the maximum allowed by any statute or rule of law in effect at the time when, and governing the proceedings in which, such damages are to be proved, whether or not such amount be greater, equal to, or less than the amount of the difference referred to above. Default: 17. (1) If Tenant defaults in fulfilling any of the covenants of this lease other than the covenants for the payment of rent or additional rent; or if the demised premises become vacant or deserted; or if any execution or attachment shall be issued against Tenant or any of Tenant's property whereupon the demised premises shall be taken or occupied by someone other than Tenant; or if this lease be rejected under (SS)235 of Title 11 of the U.S. Code (bankruptcy code); or if Tenant shall fail to move into or take possession of the premises within fifteen (15) days after the commencement of the term of this lease, then, in any one or more of such events, upon Owner serving a written ten (10) days notice upon Tenant specifying the nature of said default and upon the expiration of said ten (10) days, if Tenant shall have failed to comply with or remedy such default, or if the said default or omission complained of shall be of a nature that the same cannot be completely cured or remedied within said ten (10) day period, and if Tenant shall not have diligently commenced curing such default within such ten (10) day period, and shall not thereafter with reasonable diligence and in good faith, proceed to remedy or cure such default, then Owner may serve a written three (3) days' notice of cancellation of this lease upon Tenant, and upon the expiration of said three (3) days this lease and the term thereunder shall end and expire as fully and completely as if the expiration of such three (3) day period were the day herein definitely fixed for the end and expiration of this lease and the term thereof and Tenant shall then quit and surrender the demised premises to Owner but Tenant shall remain liable as hereinafter provided. (2) If the notice provided for in (1) hereof shall have been given, and the term shall expire as aforesaid; or if Tenant shall make default in the payment of the rent reserved herein or any item of additional rent herein mentioned or any part of either or in making any other payment herein required then and in any of such events Owner may without notice, re-enter the demised premises either by force or otherwise, and dispossess Tenant by summary proceedings or otherwise, and the legal representative of Tenant or other occupant of demised premises and remove their effects and hold the premises as if this lease had not been made, and Tenant hereby waives the service of notice of intention to re-enter or to institute legal proceedings to that end. If Tenant shall make default hereunder prior to the date fixed as the commencement of any renewal or extension of this lease, Owner may cancel and terminate such renewal or extension agreement by written notice. Remedies of 18. In case of any such default, re-entry, expiration and/or Owner and dispossess by summary proceedings or otherwise, (a) the rent shall Waiver of become due thereupon and be paid up to the time of such re-entry, Redemption: dispossess and/or expiration, (b) Owner may re-let the premises or any part or parts thereof, either in the name of Owner or otherwise, for a term or terms, which may at Owner's option be less than or exceed the period which would otherwise have constituted the balance of the term of this lease and may grant concessions or free rent or charge a higher rental than that in this lease, and/or (c) Tenant or the legal representatives of Tenant shall also pay Owner as liquidated damages for the failure of Tenant to observe and perform said Tenant's convenants herein contained, any deficiency between the rent hereby reserved and/or covenanted to be paid and the net amount, if any, of the rents collected on account of the lease or leases of the demised premises for each month of the period which would otherwise have constituted the balance of the term of this lease. The failure of Owner to re- let the premises or any part or parts thereof shall not release or affect Tenant's liability for damages. In computing such liquidated damages there shall be added to the said deficiency such expenses as Owner may incur in connection with re-letting, such as legal expenses, attorneys' fees, brokerage, advertising and for keeping the demised premises in good order or for preparing the same for re-letting. Any such liquidated damages shall be paid in monthly installments by Tenant on the rent day specified in this lease and any suit brought to collect the amount of the deficiency for any month shall not prejudice in any way the rights of Owner to collect the dificiency for any subsequent month by a similar proceeding. Owner, in putting the demised premises in good order or preparing the same for re-rental may, at Owner's option, make such alterations, repairs, replacements, and/or decorations in the demised premises as Owner, in Owner's reasonable judgement, considers advisable and necessary for the purpose of re- letting the demised premises, and the making of such alterations, repairs, replacements, and/or decorations shall not operate or be construed to release Tenant from liability hereunder as aforesaid. Owner shall in no event be liable in any way whatsoever for failure to re-let the demised premises, or in the event that the demised premises are re-let, for failure to collect the rent thereof under such re-letting, and in no event shall Tenant be entitled to receive any excess, if any, of such net rents collected over the sums payable by Tenant to Owner hereunder. In the event of a breach or threatened breach by Tenant of any of the covenants or provisions hereof, Owner shall have the right of injunction and the right to invoke any remedy allowed at law or in equity as if re--entry, summary proceedings and other remedies were not herein provided for. Mention in this lease of any particular remedy, shall not preclude Owner from any other remedy, in law or in equity. Tenant hereby expressly waives any and all rights of redemption granted by or under any present or future laws in the event of Tenant being evicted or dispossessed for any cause, or in the event of Owner obtaining possession of demised premises, by reason of the violation by Tenant of any of the covenants and conditions of this lease, or otherwise. Fees and 19. If Tenant shall default in the observance or performance of Expenses: any term or covenant on Tenant's part to be observed or performed under or by virtue of any of the terms or provisions in any article of this lease, then, unless otherwise provided elsewhere in this lease, Owner may upon five (5) days' written notice to Tenant immediately or at any time thereafter perform the obligation of Tenant thereunder. If Owner, in connection with the foregoing or in connection with any default by Tenant in the covenant to pay rent hereunder, makes any expenditures or incurs any obligations for the payment of money, including but not limited to attorney's fees, in instituting, prosecuting or defending any action or proceeding, then Tenant will reimburse Owner for such sums so paid or obligations incurred with interest and costs. The foregoing expenses incurred by reason of Tenant's default shall be deemed to be additional rent hereunder and shall be paid by Tenant to Owner within five (5) days of rendition of any bill or statement to Tenant therefor. If Tenant's lease term shall have expired at the time of making of such expenditures or incurring of such obligations, such sums shall be recoverable by Owner as damages. Building 20. Owner shall have the right at any time without the same Alterations constituting an eviction and without incurring liability to Tenant and therefor to change the arrangement and/or location of public Management: entrances, passageways, doors, doorways, corridors, elevators, stairs, toilets or other public parts of the building and to change the name, number or designation by which the building may be known. There shall be no allowance to Tenant for diminution of rental value and no liability on the part of Owner by reason of inconvenience, annoyance or injury to business arising from Owner or other Tenants making any repairs in the building or any such alterations, additions and improvements. Furthermore, Tenant shall not have any claim against Owner by reason of Owner's imposition of such controls of the manner of access to the building by Tenant's social or business visitors as the Owner may deem necessary for the security of the building and its occupants. No Repre- 21. Neither Owner nor Owners's agents have made any sentations representations or promises with respect to the physical condition by Owner: of the building, the land upon which *Then, and in any of such events, Owner shall in accordance with the appropriate legal procedures and proceedings, pursue its legal and equitable remedies against Tenant. it is erected or the demised premises, the rents, leases, expenses of operation or any other matter or thing affecting or related to the premises except as herein expressly set forth and no rights, easements or licenses are acquired by Tenant by implication or otherwise except as expressly set forth in the provisions of this lease. Tenant has inspected the building and the demised premises and is thoroughly acquainted with their condition and agrees to take the same "as is" and acknowledges that the taking of possesion of the demised premises by Tenant shall be conclusive evidence that the said premises and the building of which the same form a part were in good and satisfactory condition at the time such possession was so taken, except as to latent defects. All understandings and agreements heretofore made between the parties hereto are merged in this contract, which alone fully and completely expresses the agreement between Owner and Tenant and any executory agreement hereafter made shall be ineffective to change, modify, discharge or effect an abandonment of it in whole or in part, unless such executory agreement is in writing and signed by the party against whom enforcement of the change, modification, discharge or abandonment is sought. End of 22. Upon the expiration or other termination of the term of this Term: lease, Tenant shall quit and surrender to Owner the demised premises, broom clean, in good order and condition, ordinary wear and and damages which Tenant is not required to repair as provided elsewhere in this lease excepted, and Tenant shall remove all its property. Tenant's obligation to observe or perform this covenant shall survive the expiration or other termination of this lease. If the last day of the term of this Lease or any renewal thereof, falls on Sunday, this lease shall expire at noon on the preceding Saturday unless it be a legal holiday in which case it shall expire at noon on the preceding business day. Quiet 23. Owner covenants and agrees with Tenant that upon Tenant paying Enjoyment: the rent and additional rent and observing and performing all the terms, covenants and conditions, on Tenant's part to be observed and performed, Tenant may peaceably and quietly enjoy the premises hereby demised, subject, nevertheless, to the terms and conditions of this lease including, but not limited to, Article 31 hereof and to the ground leases, underlying leases and mortgages hereinbefore mentioned. Failure 24. If Owner is unable to give possession of the demised premises to Give on the date of the commencement of the term hereof, because of the Possession: holding-over or retention of possession of any tenant, undertenant or occupants or if the demised premises are located in a building being constructed, because such building has not been sufficiently completed to make the premises ready for occupancy or because of the fact that a certificate of occupancy has not been procured or for any other reason, Owner shall not be subject to any liability for failure to give possession on said date and the validity of the lease shall not be impaired under such circumstances, nor shall the same be construed in any wise to extend the term of this lease, but the rent payable hereunder shall be abated (provided Tenant is not responsible for Owner's inability to obtain possession) until after Owner shall have given Tenant written notice that the premises are substantially ready for Tenant's occupancy. if permission is given to Tenant to enter into the possession of the demised premises or to occupy premises other than the demised premises prior to the date specified as the commencement of the term of this lease, Tenant covenants and agrees that such occupancy shall be deemed to be under all the terms, covenants, conditions and provisions of this lease, except as to the covenant to pay rent. The provisions of this article are intended to constitute "an express provision to the contrary" within the meaning of Section 223-a of the New York Real Property Law. No Waiver: 25. The failure of Owner to seek redress for violation of, or to insist upon the strict performance of any covenant or condition of this lease or of any of the Rules or Regulations, set forth or hereafter adopted by Owner, shall not prevent a subsequent act which would have originally constituted a violation from having all the force and effect of an original violation. The receipt by Owner of rent with knowledge of the breach of any covenant of this lease shall not be deemed a waiver of such breach and no provision of this lease shall be deemed to have been waived by Owner or Tenant unless such waiver be in writing signed by Owner or Tenant. No payment by Tenant or receipt by Owner of a lesser amount than the monthly rent herein stipulated shall be deemed to be other than on account of the earliest stipulated rent, nor shall any endorsement or statement of any check or any letter accompanying any check or payment as rent be deemed an accord and satisfaction, and Owner may accept such check or payment without prejudice to Owner's right to recover the balance of such rent or pursue any other remedy in this lease provided. No act or thing done by Owner or Owner's agents during the term hereby demised shall be deemed an acceptance of a surrender of said premises, and no agreement to accept such surrender shall be valid unless in writing signed by Owner. No employee of Owner or Owner's agent shall have any power to accept the keys of said premises prior to the termination of the lease and the delivery of keys to any such agent or employee shall not operate as a termination of the lease or a surrender of the premises. Waiver of 26. It is mutually agreed by and between Owner and Tenant that the Trial by respective parties hereto shall and they hereby do waive trial by Jury: in any action, proceeding or counter-claim brought by either of the parties hereto against the other (except for personal injury or property damage) on any matters whatsoever arising out of or in any way connected with this lease, the relationship of Owner and Tenant, Tenant's use of or occupancy of said premises, and any emergency statutory or any other statutory remedy. It is further mutually agreed that in the event Owner commences any summary proceeding for possession of the premises, Tenant will not interpose any counterclaim of whatever nature or description in any such proceeding including a counterclaim under Article 4. Inability to 27. This Lease and the obligation of Tenant to pay rent hereunder Perform: and perform all of the other covenants and agreements hereunder on part of Tenant to be performed shall in no wise be affected, impaired or excused because Owner is unable to fulfill any of its obligations under this lease or to supply or is delayed in supplying any service expressly or impliedly to be supplied or is unable to make, or is delayed in making any repair, additions, alterations or decorations or is unable to supply or is delayed in supplying any equipment or fixtures if Owner is prevented or delayed from so doing by reason of strike or labor troubles or any cause whatsoever including, but not limited to, government preemption in connection with a National Emergency or by reason of any rule, order or regulation of any department or subdivision thereof of any government agency or by reason of the conditions of supply and demand which have been or are affected by war or other emergency. Bills and 28. Except as otherwise in this lease provided, a bill, statement, Notices: notice or communication which Owner may desire or be required to give to Tenant, shall be deemed sufficiently given or rendered if, in writing, delivered to Tenant personally or sent by registered or certified mail addressed to Tenant at the building of which the demised premises form a part or at the last known residence address or business address of Tenant or left at any of the aforesaid premises addressed to Tenant, and the time of the rendition of such bill or statement and of the giving of such notice or communication shall be deemed to be the time when the same is delivered to Tenant, mailed, or left at the premises as herein provided. Any notice by Tenant to Owner must be served by registered or certified mail addressed to Owner at the address first hereinabove given or at such other address as Owner shall designate by written notice. Services 29. As long as Tenant is not in default under any of the covenants Provided by of this lease. Owner shall provide: (a) necessary elevator Owners facilities on business days from 8 a.m. to 6 p.m. and have one elevator subject to call at all other times; (b) heat to the demised premises when and as required by law, on business days from 8 a.m. to 6 p.m.; (c) water for ordinary lavatory purposes, but if Tenant uses or consumes water for any other purposes or in unusual quantities (of which fact Owner shall be the sole judge), Owner may install a water meter at Tenant's expense which Tenant shall thereafter maintain at Tenant's expense in good working order and repair to register such water consumption and Tenant shall pay for water consumed as shown on said meter as additional rent as and when bills are rendered; Tenant shall pay Owner the cost of removal of any of Tenant's refuse and rubbish from the building; (f) Owner reserves the right to stop services of the heating, elevators, plumbing, air-conditioning, power systems or cleaning or other services, if any, when necessary by reason of accident or for repairs, alterations, replacements or improvements necessary or desirable in the judgment of Owner for as long as may be reasonably required by reason thereof. If the building of which the demised premises are a part supplies manually-operated elevator service, Owner at any time may substitute automatic-control elevator service and upon ten days' written notice to Tenant, proceed with alterations necessary therefor without in any wise affecting this lease or the obligation of Tenant hereunder. The same shall be done with a minimum of inconvenience to Tenant and Owner shall pursue the alteration with due diligence. Captions: 30. The Captions are inserted only as a matter of convenience and for reference and in no way define, limit or describe the scope of this lease nor the intent of any provisions thereof. Definitions: 31. The term "office", wherever used in this lease, shall not be construed to mean premises used as a store or stores, for the sale or display, at any time, of goods, wares or merchandise, or any kind, or as a restaurant, shop, booth, bootblack or other stand, barber shop, or for other similar purposes or for manufacturing. The term "Owner" means a landlord or lessor, and as used in this lease means only the owner, or the mortgagee in possession, for the time being of the land and building (or the owner of a lease of the building or of the land and building) or which the demised premises form a part, so that in the event or any sale or sales of said land and building or of said lease, or in the event of a lease of said building, or of the land and building, the said Owner shall be and hereby is entirely freed and relieved of all covenants and obligations of Owner hereunder, and it shall be deemed and construed without further agreement between the parties or their successors in interest, or between the parties and the purchaser, at any such sale, or the said lessee of the building, or of the land and building, that the purchaser or the lessee of the building has assumed and agreed to carry out any and all covenants and obligations of Owner, hereunder. The words "re-enter" and "re-ent" as used in this lease are not restricted to their technical legal meaning. The term "business days" as used in this lease shall exclude Saturdays (except such portion thereof as is covered by specific hours in Article 29 hereof), Sundays and all days observed by the State or Federal Government as legal holidays and those designated as holidays by the applicable building service union employees service contract or by the applicable Operating Engineers contract with respect to HVAC service. - -------------- [SYMBOL APPEARS HERE] Rider to be added if necessary. * See Article #59 Adjacent 32. If an excavation shall be made upon land adjacent to the Excavation-- demised premises, or shall be authorized to be made, Tenant shall Shoring: afford to the person causing or authorized to cause such excavation, license to enter upon the demised premises for the purpose of doing such work as said person shall deem necessary to preserve the wall or the building of which demised premises form a part from injury or damage and to support the same by proper foundations without any claim for damages or indemnity against Owner, or diminution or abatement of rent. Rules and 33. Tenant and Tenant's servants, employees, agents, visitors, and Regulations licensees shall observe faithfully, and comply strictly with, the Rules and Regulations and such other and further reasonable Rules and Regulations as Owner or Owner's agents may from time to time adopt. Notice of any additional rules or regulations shall be given in such manner as Owner may elect. In case Tenant disputes the reasonableness of any additional Rule or Regulation hereafter made or adopted by Owner or Owner's agents, the parties hereto agree to submit the question of the reasonableness of such Rule or Regulation for decision to the New York office of the American Arbitration Association, whose determination shall be final and conclusive upon the parties hereto. The right to dispute the reasonableness of any additional Rule or Regulation upon Tenant's part shall be deemed waived unless the same shall be asserted by service of a notice, in writing upon Owner within ten (10) days after the giving of notice thereof. Nothing in this lease contained shall be construed to impose upon Owner any duty or obligation to enforce the Rules and Regulations or terms, covenants or conditions in any other lease, as against any other tenant and Owner shall not be liable to Tenant for violation of the same by any other tenant, its servants, employees, agents, visitors or licensees. Security: 34. Tenant has deposited with Owner the sum of $20,136.66* as [SYMBOL security for the faithful performance and observance by Tenant of APPEARS HERE] the terms, provisions and conditions of this lease; it is agreed that in the event Tenant defaults in respect of any of the terms, provisions and conditions of this lease, including, but not limited to, the payment of rent and additional rent, Owner may use, apply or retain the whole or any part of the security so deposited to the extent required for the payment of any rent and additional rent or any other sum as to which Tenant is in default or for any sum which Owner may expend or may be required to expend by reason of Tenant's default in respect of any of the terms, covenants and conditions of this lease, including but not limited to, any damages or deficiency in the re- letting of the premises, whether such damages or deficiency accrued before or after summary proceedings or other re-entry by Owner. In the event that Tenant shall fully and faithfully comply with all of the terms, provisions, covenants and conditions of this lease, the security shall be returned to Tenant after the date fixed as the end of the Lease and after delivery of entire possession of the demised premises to Owner. In the event of a sale of the land and building or leasing of the building, of which the demised premises form a part, Owner shall have the right to transfer the security to the vendee or lessee and Owner shall thereupon be released by Tenant from all liability for the return of such security; and Tenant agrees to look to the new Owner solely for the return of said security, and it is agreed that the provisions hereof shall apply to every transfer or assignment made of the security to a new Owner. Tenant further covenants that it will not assign or encumber or attempt to assign or encumber the monies deposited herein as security and that neither Owner nor its successors or assigns shall be bound by any such assignment, encumbrance, attempted assignment or attempted encumbrance. - ------------------------------------------------------- [SYMBOL APPEARS HERE] Space to be filled in or deleted. In Witness Whereof, Owner and Tenant have respectively signed and sealed this lease as of the day and year first above written. 1466 BROADWAY ASSOCIATES c/o HELMSLEY-NOYES COMPANY, INC. as Agent Witness for Owner: .................................... BY: .................................... .................................... Senior Vice President YES CLOTHING COMPANY Witness for Tenant: .................................... /s/ Jessie Garcia BY: Daniel Goodstein .................................... .................................... ACKNOWLEDGMENTS CORPORATE OWNER STATE OF NEW YORK, ss.: County of On this day of , 19 , before me personally came to me known, who being by me duly sworn, did depose and say that he resides in : that he is the of the corporation described in and which executed the foregoing instrument, as OWNER: 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. ................................................... INDIVIDUAL OWNER STATE OF NEW YORK, ss.: County of On this day of , 19 , before me personally came to me known and known to me to be the individual described in and who, as OWNER, executed the foregoing instrument and acknowledged to me that he executed the same. ................................................... CORPORATE TENANT STATE OF NEW YORK, ss.: County of On this day of , 19 , before me personally came to me known, who being by me duly sworn, did depose and say that he resides in : that he is the of the corporation described in and which executed the foregoing instrument, as TENANT: that he knows the seal of said corporation; that the seal affixed 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. ................................................... INDIVIDUAL TENANT STATE OF NEW YORK, ss.: County of On this day of , 19 , before me personally came to me known and known to me to be the individual described in and who, as TENANT, executed the foregoing instrument and acknowledged to me that he executed the same. ................................................... GUARANTY FOR VALUE RECEIVED, and in consideration for, and as an inducement to Owner making the within lease with Tenant, the undersigned guarantees to Owner, Owner's successors and assigns, the full performance and observance of all the covenants, conditions and agreements, therein provided to be performed and observed by Tenant, including the "Rules and Regulations" as therein provided, without requiring any notice of non-payment, non-performance, or non-observance, or proof, or notice, or demand, whereby to charge the undersigned therefor, all of which the undersigned hereby expressly waives and expressly agrees that the validity of this agreement and the obligations of the guarantor hereunder shall in no wise be terminated, affected or impaired by reason of the assertion by Owner against Tenant of any of the rights or remedies reserved to Owner pursuant to the provisions of the within lease. The undersigned further covenants and agrees that this guaranty shall remain and continue in full force and effect as to any renewal, modification or extension of this lease and during any period when Tenant is occupying the premises as a "statutory tenant." As a further inducement to Owner to make this lease and in consideration thereof, Owner and the undersigned covenant and agree that in any action or proceeding brought by either Owner or the undersigned against the other on any matters whatsoever arising out of, under, or by virtue of the terms of this lease or of this guarantee that Owner and the undersigned shall and do hereby waive trial by jury. Dated: ________________________________________________________________19______ _______________________________________________________________________________ Guarantor _______________________________________________________________________________ Witness _______________________________________________________________________________ Guarantor's Residence _______________________________________________________________________________ Business Address _______________________________________________________________________________ Firm Name STATE OF NEW YORK ) ss.: COUNTY OF ) On this day of , 19 , before me personally came __________________________________________________________________________ to me known and known to me to be the individual described in, and who executed the foregoing Guaranty and acknowledged to me that he executed the same. _____________________________________________________ Notary [SYMBOL APPEARS HERE] IMPORTANT - PLEASE READ [SYMBOL APPEARS HERE] RULES AND REGULATIONS ATTACHED TO AND MADE A PART OF THIS LEASE IN ACCORDANCE WITH ARTICLE 33. 1. The sidewalks, entrances, driveways, passages, courts, elevators, vestibules, stairways, corridors or halls shall not be obstructed or encumbered by any Tenant or used for any purpose other than for ingress or egress from the demised premises and for delivery of merchandise and equipment in a prompt and efficient manner using elevators and passageways designated for such delivery by Owner. There shall not be used in any space, or in the public hall of the building, either by any Tenant or by jobbers or others in the delivery or receipt of merchandise, any hand trucks, except those equipped with rubber tires and sideguards. If said premises are situated on the ground floor of the building, Tenant thereof shall further, at Tenant's expense, keep the sidewalk and curb in front of said premises clean and free from ice, snow, dirt and rubbish. 2. The water and wash closets and plumbing fixtures shall not be used for any purposes other than those for which they were designed or constructed and no sweepings, rubbish, rags, acids or other substances shall be deposited therein, and the expense of any breakage, stoppage, or damage resulting from the violation of this rule shall be borne by the Tenant who, or whose clerks, agents, employees or visitors, shall have caused it. 3. No carpet, rug or other article shall be hung or shaken out of any window of the building; and no Tenant shall sweep or throw or permit to be swept or thrown from the demised premises any dirt or other substances into any of the corridors or halls, elevators, or out of the doors or windows or stairways of the building and Tenant shall not use, keep or permit to be used or kept any foul or noxious gas or substance in the demised premises, or permit or suffer the demised premises to be occupied or used in a manner offensive or objectionable to Owner or other occupants of the building by reason of noise, odors, and/or vibrations, or interfere in any way with other Tenants or those having business therein, nor shall any animals or birds be kept in or about the building. Smoking or carrying lighted cigars or cigarettes in the elevators of the building is prohibited. 4. No awnings or other projections shall be attached to the outside walls of the building without the prior written consent of Owner. 5. No sign, advertisement, notice or other lettering shall be exhibited, inscribed, painted or affixed by any Tenant on any part of the outside of the demised premises or the building or on the inside of the demised premises if the same is visible from the outside of the premises without the prior written consent of Owner, except that the name of Tenant may appear on the entrance door of the premises. In the event of the violation of the foregoing by any Tenant, Owner may remove same without any liability, and may charge the expense incurred by such removal to Tenant or Tenants violating this rule. Interior signs on doors and directory tablet shall be inscribed, painted or affixed for each Tenant by Owner at the expense of such Tenant, and shall be of a size, color and style acceptable to Owner. 6. No Tenant shall mark, paint, drill into, or in any way deface any part of the demised premises or the building of which they form a part. No boring, cutting or stringing of wires shall be permitted, except with the prior written consent of Owner, and as Owner may direct. No Tenant shall lay linoleum, or other similar floor covering, so that the same shall come in direct contact with the floor of the demised premises, and, if linoleum or other similar floor covering is desired to be used an interlining of builder's deadening felt shall be first affixed to the floor, by a paste or other material, soluble in water, the use of cement or other similar adhesive material being expressly prohibited. 7. No additional locks or bolts of any kind shall be placed upon any of the doors or windows by any Tenant, nor shall any changes be made in existing locks or mechanism thereof. Each Tenant must, upon the termination of his Tenancy, restore to Owner all keys of stores, offices and toilet rooms, either furnished to, or otherwise procured by, such Tenant, and in the event of the loss of any keys, so furnished, such Tenant shall pay to Owner the cost thereof. 8. Freight, furniture, business equipment, merchandise and bulky matter of any description shall be delivered to and removed from the premises only on the freight elevators and through the service entrances and corridors, and only during hours and in a manner approved by Owner. Owner reserves the right to inspect all freight to be brought into the building and to exclude from the building all freight which violates any of these Rules and Regulations of the lease or which these Rules and Regulations are a part. 9. Canvassing, soliciting and peddling in the building is prohibited and each Tenant shall cooperate to prevent the same. 10. Owner reserves the right to exclude from the building between the hours of 6 P.M. and 8 A.M. and at all hours on Sundays, and legal holidays all persons who do not present a pass to the building signed by Owner. Owner will furnish passes to persons for whom any Tenant requests same in writing. Each Tenant shall be responsible for all persons for whom he requests such pass and shall be liable to Owner for all acts of such persons. 11. Owner shall have the right to prohibit any advertising by any Tenant which in Owner's opinion, tends to impair the reputation of the building or its desirability as a building for offices, and upon written notice from Owner, Tenant shall refrain from or discontinue such advertising. 12. Tenant shall not bring or permit to be brought or kept in or on the demised premises, any inflammable, combustible or explosive fluid, material, chemical or substance, or cause or permit any odors of cooking or other processes, or any unusual or other objectionable odors to permeate in or emanate from the demised premises. 13. If the building contains central air conditioning and ventilation, Tenant agrees to keep all windows closed at all times and to abide by all rules and regulations issued by the Owner with respect to such services. If Tenant requires air conditioning or ventilation after the usual hours, Tenant shall give notice in writing to the building superintendent prior to 3:00 P.M. in the case of services required on week days, and prior to 3:00 P.M. on the day prior in the case of after hours service required on weekends or on holidays. 14. Tenant shall not move any safe, heavy machinery, heavy equipment, bulky matter, or fixtures into or out of the building without Owner's prior written consent. If such safe, machinery, equipment, bulky matter or fixtures requires special handling, all work in connection therewith shall comply with the Administrative Code of the City of New York and all other laws and regulations applicable thereto and shall be done during such hours as Owner may designate. Address Premises - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- TO - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- STANDARD FORM OF [LOGO OF BOARD OF Office [LOGO OF BOARD OF NEW YORK REAL ESTATE Lease NEW YORK REAL ESTATE APPEARS HERE] APPEARS HERE] The Real Estate Board of New York, Inc. (c)Copyright 1983. All rights Reserved. Reproduction in whole or in part prohibited. - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- Dated 19 Rent per Year Rent per Month Term From To Drawn by _____________________________Checked by ______________________________ Entered by ___________________________Approved by _____________________________ - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- SERVING REAL ESTATE NEEDS [LOGO OF HELMSLEY-NOYES APPEARS HERE] SINCE 1898 NOTICE TO 1466 BROADWAY TENANTS: FREIGHT POLICY -------------- 1. Freight Elevator Hours of Operation: Monday through Friday: 8:00 am - 5:,30 pm Saturday and Sunday : Closed Access: 143 West 41st Street (Between Broadway and Sixth Avenues) 2. Use of the Freight Elevator will be made available to Tenants when scheduled no later than 4:00 pm the day of the move at a cost of $50.00 per hour starting at 5:30 pm. Any freight movement in or out of the building after 5:30 pm will be considered overtime and Tenant will be -------- billed accordingly. Tenants will be billed on their following rent statement indicated by Code 93. -------- 3. Tenant's failure to provide adequate prior notice, as provided for in the above Article #2, shall result in a cash payment of $50.00, paid to the union freight personnel required at each instance the elevator is required open. 4. Tenants shall be denied lobby access for any delivery or removal of goods during, before, and after business hours. At no time are racks, displays, or furniture to be placed in passenger elevators. 5. All construction materials must enter through the freight entrance at 143 West 4lst Street. 6. Tenants who do not cooperate and persist in using the lobby access over the objections of the concierge personnel shall be billed a penalty of $50.00 per abuse occurrence. ACKNOWLEDGED & AGREED --------------------- Daniel Goodstein 4/18/95 -------------------------------- Signature Date RIDER ANNEXED TO LEASE DATED April 3, 1995 BETWEEN ------------------------------------------ 1466 BROADWAY ASSOCIATES, AS LANDLORD, AND YES CLOTHING COMPANY ------------------------------------, AS TENANT, OF Rm. 1507-1508 IN THE BUILDING KNOWN AS 1466 BROADWAY. ------------ 37. RIDER PROVISIONS PREVAIL: ------------------------- If and to the extent that any of the provisions of this Rider conflict or are otherwise inconsistent with any of the preceding printed provisions of this lease, or of the Rules and Regulations attached to this lease, whether or not such inconsistency is expressly noted in this Rider, the provisions of this Rider shall prevail, and in case of inconsistency with said Rules and Regulations, shall be deemed a waiver of such Rules and Regulations with respect to Tenant to the extent of such inconsistency. 38. ADDITIONAL DEFINITIONS: ----------------------- For the purposes of this lease and all agreements supplemental to this lease, and all communications with respect thereto, unless the context otherwise requires: 1. The term "fixed rent" shall mean rent at the annual rental rate or rates provided for in the granting clause appearing at the beginning of this lease. 2. The term "additional rent" shall mean all sums of money, other than fixed rent, and which becomes due and payable from Tenant to Landlord hereunder, and Landlord shall have the same remedies therefor as for a default in payment of fixed rent. 3. The term "rent" and "rents" shall mean and include fixed rent and/or additional rent hereunder. 4. The terms "Commencement Date" and "Expiration Date" shall mean the dates fixed in this lease, or to be determined pursuant to the provisions of this lease, respectively, as the beginning and the end of the term for which the demised premises are hereby leased. 39. ESCALATION FOR INCREASE IN REAL ESTATE TAX: -------------------------------------------- A. As used herein: 1. "Real Property" shall mean the land and buildings presently designated as Section 4, Block 994, Lot 54 of the Tax Map of the County of New York. 2. "Taxes" shall mean the real estate taxes and assessments imposed upon the Real Property. Penalties and interest on Taxes and income, franchise, transfer, inheritance and capital stock taxes shall be deemed excluded from the term Taxes for the purposes hereof. However, if and to the extent that, due to a change in the method of assessment of taxation, any franchise, capital stock, capital, rents, income, profits or other tax or charge shall be substituted in whole or in part for the Taxes now or hereafter imposed upon the Real Property, such franchise, capital stock, capital, rents, income, profits or other tax or charge, computed as if Landlord owned or operated no property other than the Real Property, shall be deemed included in the term "Taxes" for the purposes hereof. 3. "Tax Year" shall mean each period of twelve (12) months commencing on the first day of July of each such period, in which occurs any part of the term of this lease or such other period of twelve (12) months occurring during the term of this lease as hereafter may be duly adopted as the fiscal year for real estate tax purposes of the City of New York. 4. "Base Tax" shall mean the Taxes for the Calendar 1995 (the "Base Tax Year"). - 1 - B. If the Taxes for any Tax Year shall be greater than the Base Tax, Tenant shall pay as additional rent for such Tax Year a sum equal to 2.5 % of -- the amount by which the Taxes for such Tax Year are greater than the Base Tax (which amount is hereinafter called the "Tax Payment"). Should this lease commence or terminate prior to the expiration of a Tax Year, such Tax Payment shall be prorated to, and shall be payable on, or as and when ascertained after, the Commencement Date or the Expiration Date as the case may be. Tenant's obligation to pay such additional rent and Landlord's obligation to refund pursuant to Paragraph C below, as the case may be, shall survive the termination of this lease. If the Taxes for any Tax Year subsequent to the Base Tax Year, or an installment thereof, shall be reduced before such Taxes, or such installment, shall be paid, the amount of Landlord's reasonable costs and expenses of obtaining such reduction (but not exceeding the amount of such reduction) shall be added to and be deemed part of the Taxes for such Tax Year. Payment of additional rent for any Tax Payment due from Tenant shall be made as and subject to the conditions hereinafter provided in this Article. C. Landlord shall be under no obligation to contest the Taxes of the assessed valuation of the Real Property for any Tax Year or to refrain from contesting the same, and may settle any such contest on such terms as Landlord in its sole judgement considers proper. If Landlord shall receive a refund for any Tax Year for which a Tax Payment shall have been made by Tenant pursuant to Paragraph B above, Landlord shall repay to Tenant, with reasonable promptness, 2.5 % of such refund after deducting from such refund the reasonable costs - -------- and expenses (including experts' and attorneys' fees) of obtaining such refund. If the assessment for the Base Tax Year shall be reduced from the amount originally imposed after Landlord shall have rendered a comparative statement (as provided in Paragraph D below) to Tenant with respect to a Tax Year, the amount of the Tax Payment shall be adjusted in accordance with such change and Tenant, on Landlord's demand, shall pay any increase in additional rent resulting from such adjustment. D. At any time during a Tax Year after the Taxes for such Tax Year become known Landlord may, or else with reasonable promptness after the end of each Tax Year, Landlord shall render to Tenant a comparative statement showing the amount of the Base Tax, the amount of the Taxes for such Tax Year and the Tax Payment, if any, due from Tenant for such Tax Year, indicating thereon in reasonable detail the computation of such Tax Payment. The Tax Payment shown on such comparative statement may, at Landlord's option, be payable in full or in such installments (not more frequent than monthly) as Landlord may determine. Tenant shall pay the amount of the Tax Payment shown on such comparative statement (or the balance of a proportionate installment thereof, if only an installment is involved) concurrently with the installment of fixed rent then or next due, or if such statement shall be rendered at or after the termination of this lease within thirty (30) days of such rendition, whenever so requested, but not more than once a year, Landlord will furnish Tenant with a reproduced copy of the bill (or receipted bill) for the Taxes for the current or next preceding Tax Year. E. Landlord's failure during the lease term to prepare and deliver any notice, statement or bill, or Landlord's failure to make a demand, shall not in any way cause Landlord to forfeit or surrender Landlord's right to collect any additional rent which may have become due during the term of this lease under this Article and Tenant's liability for amounts due under this Article shall survive the termination of this lease. 40. As used in this Article, the words and terms which follow mean and include the following: A. "Calendar Year" shall mean each calendar year, subsequent to --------------- the base year in which occurs any part of the term of this Lease. - 2 - B. "Base Year" shall mean the year January 1, 1995 to December ------------ -- 31, 1995. -- C. "Area of the Premises" shall mean the rentable square foot ----------------------- area of the Demised Premises (which the parties have agreed shall be 4,315 ----- square feet for the purposes of this Article.) D. "Hourly Wage Rate" as respects any Operation Year shall mean ------------------- the minimum hourly wage prescribed to be paid to the workers described below, appropriately adjusted from time to time to reflect changes in fringe benefits required by law or applicable labor agreements and computed on an hourly basis, in major office buildings (hereinafter called "Class A Office Building") and in effect as of January 1 in such Operation Year (or if such rate and/or benefits shall be subject to change during an Operation Year then the average thereof for such Operation Year as reasonably estimated or calculated by Landlord) pursuant to an agreement between the Realty Advisory Board on Labor Relations, Incorporated (or any successor thereto) and Local 32B of the Service Employees International Union, AFL-CIO (or any successor thereto) covering the wage rates of those workers classified as "Others" (or any successor or equivalent designation) in Class A Office Buildings which said minimum hourly wage rates shall be computed on the basis of the total weekly amount required to be paid to said workers in the building for regular work weeks (exclusive of any overtime or premium pay work in such regular work weeks). Such total weekly amounts shall be inclusive of all payments and benefits of every nature and kind (including those required to be paid by the employer directly to the taxing authorities or others on account of the employment) such as, without limiting the generality of the foregoing, social security, unemployment and all other similar taxes, holiday and vacation pay, incentive pay, accident, health and welfare, insurance programs, pension plans, guarantee pay plans and supplemental unemployment benefit programs, and fringe benefits, payments, plans or programs or a similar or dissimilar nature, irrespective of whether they may be required or provided for in any applicable law or regulation or otherwise. If there is no such agreement in effect as of any such January 1 by which the Hourly Wage Rate is determinable, computations and payments shall thereupon be made upon the basis of the Hourly Wage Rate being paid by the Landlord or by the contractor performing the cleaning services for Landlord on such January 1 for the porters or cleaners, as the case may be, and appropriate retroactive adjustment shall thereafter be made when the Hourly Wage Rate paid on such January 1 pursuant to such agreement for said workers is finally determined and provided further that if as of the last day of such Operation Year no such agreement covering the January 1 occurring in such Operation Year shall have been in effect, the Hourly Wage Rate paid by the Landlord or by the contractor performing the cleaning services for Landlord on such January 1 for porters and cleaners shall be for all purposes hereof deemed to be such Hourly Wage Rate prescribed by such agreement between said Board (or any successor thereto) and said Union (or any successor thereto) for such Operation Year. E. "Labor Rate" for any Operation Year shall mean the Hourly Wage ------------- Rate for workers classified as "Others". F. "Base Labor Rate" shall mean the Labor Rate for Base Year. ------------------ G. "Escalation Statement" shall mean statement in writing signed ----------------------- by Landlord, setting forth the amount payable by Tenant for a specified Operation Year pursuant to this Article. H. "Operation Year" shall mean each calendar year or portion of ----------------- year subsequent to the Base Year in which occurs any part of the term of this lease. - 3 - 1. If the Labor Rate for any Operation Year shall be greater than the Base Labor Rate, Tenant shall pay to Landlord as additional rent for the Demised Premises for such Operation Year an amount equal to the product obtained by multiplying the Area of the Premises by one (1) times the number of cents (including any fraction of a cent) by which the Labor Rate for such Operation Year exceeds the Base Labor Rate. 2. Any such adjustment payable shall commence as of the first day of the relevant Operation Year and, after Landlord shall furnish Tenant with an Escalation Statement relating to such Operation Year, all monthly installments of rental shall reflect one-twelfth of the annual amount of such adjustment until a new adjustment becomes effective pursuant to the provisions of this Article, provided however, that if said Escalation Statement is furnished to Tenant after the commencement of such Operation Year, there shall be promptly paid by Tenant to Landlord, an amount equal to the portion of such adjustment allocable to the part of such Operation Year which shall elapse prior to the first day of the calendar month next succeeding the calendar month in which said Escalation Statement is furnished to Tenant. 3. In the event (F) that the date of the expiration or other termination of this lease shall be a day other than the last day of an Operation Year, or (F) of any increase or decrease in the Area of the Demised Premises (as may be provided herein), then in each such event in applying the provisions of this Article with respect to any Operation Year in which such event shall have occurred, appropriate adjustments shall be made to reflect the occurrence of such event on a basis consistent with the principles underlying the provision of this Article taking into consideration: (a) the portion of such Operation Year which shall have elapsed prior to the date of such expiration or termination; or, (b) in the case of any such increase or decrease, the portion of the Demised Premises to which the same relate. Similarly, if the term of this lease shall begin or end on a date which is not the first (with respect to term commencement) or the last (with respect to expiration or termination) day of a calendar month, appropriate adjustment shall be made to Basic Rent and additional rent for the first or last month of the term, as the case may be, to reflect the portion of a month falling within the term of this lease. 4. Payments shall be made pursuant to this Article notwithstanding the fact that an Escalation Statement is furnished to Tenant after the expiration of the term of this lease. 41. CLEANING -------- Tenant, at its expense, and in a manner satisfactory to Landlord, shall cause the Demised Premises, including the exterior and interior of the windows thereof, to be kept clean, Tenant shall, at Tenant's expense, remove all Tenant's rubbish and trash to such area of the building as Landlord shall designate. The Tenant agrees to employ such office cleaning and maintenance contractor as the Landlord may from time to time designate for all cleaning, waxing, polishing and maintenance work in the Demised Premises provided that the charges therefor are reasonably comparable to the charges of other contractors for such services. Tenant shall regularly, at Tenant's expense, but using such contractor as Landlord may from time to time designate, clean the interior and exterior of the windows in the Demised Premises. In no event shall the Tenant employ any other such contractor or individual for any of the aforementioned services without the Landlord's prior written consent. 42. MAINTENANCE OF FIXTURES AND EQUIPMENT: -------------------------------------- Tenant, at Tenant's own cost and expense, shall maintain and keep in good order and repair, all air conditioning equipment situated in the Demised Premises and all other fixtures, including but not limited to ranges and refrigerators, situated in the Demised Premises. Tenant shall be responsible for any damage to said equipment and shall promptly repair same and/or replace same with comparable equipment. - 4 - 43. AMENDING ARTICLE 11: -------------------- Notwithstanding the provisions of Article 11, and in modification and amplification thereof: A. If Tenant's interest in this lease is assigned, whether or not in violation of the provisions of this lease, Landlord may collect rent from the assignee; if the demised premises or any part thereof are sublet to, or occupied by, or used by, any person other than Tenant, whether or not in violation of this lease, Landlord, after default by Tenant under this lease and expiration of Tenant's time, if any, to cure such default, may collect rent from the subtenant, user or occupant. In either case, Landlord shall apply the net amount collected to the rents reserved in this lease, but neither any such assignment, subletting, occupancy, nor use, nor any such collection or application shall be deemed a waiver of any terms, covenants or conditions of this lease or the acceptance by Landlord of such assignee, subtenant, occupant or user as tenant. The consent by Landlord to any assignment, subletting, occupancy or use shall not relieve Tenant from its obligation to obtain the express prior written consent of Landlord to any further assignment, subletting, occupancy or use. The listing of any name other than Tenant's on any door of the Demised Premises, or on any directory, or on any elevator in the building, or otherwise, shall not operate to vest in the party so named, any right or interest in this lease or in the Demised Premises, or be deemed to constitute, or serve as a substitute for, any prior written consent of Landlord required under this Article, and it is understood that any such listing shall constitute a privilege extended by Landlord which shall be revocable at Landlord's will by notice to Tenant. Tenant agrees to pay to Landlord any reasonable counsel fees incurred by Landlord in connection with any proposed assignment of Tenant's interest in this lease or any proposed subletting of the Demised Premises or any part thereof. Neither any assignment of Tenant's interest in this lease nor any subletting, occupancy or use of the Demised Premises or any part thereof by any person other than Tenant, nor any collection of rent by Landlord from any person other than Tenant as provided in this Paragraph A, nor any application of any such rent as aforementioned as provided in this Paragraph A, shall in any circumstances relieve Tenant of Tenant's obligations fully to observe and perform the terms, covenants and conditions of this lease on Tenant, part to be observed and performed. B. If Tenant shall desire to assign this lease or to sublet the Demised Premises, Tenant shall submit to Landlord a written request for Landlord's consent to such assignment or subletting, which request shall contain or be accompanied by the following information: (i) the name and address of the proposed assignee or subtenant; (ii) the terms and conditions of the proposed assignment or subletting; (iii) the nature and character of the business of the proposed assignee or subtenant and its proposed use of the Demised Premsies; and (iv) banking, financial and other credit information with respect to the proposed assignee or subtenant reasonably sufficient to enable Landlord to determine the financial responsibility of the proposed assignee or subtenant. Landlord shall then have the following options to be exercised by notice ("Exercise Notice") given to Tenant within thirty (30) days after receipt of Tenant's request for consent: 1. Landlord may require Tenant to surrender the Demised Premises to Landlord and to accept a termination of this lease as of a date (the "Termination Date") to be designated by Landlord in the Exercise Notice, which date shall not be less than sixty (60) days or more than one hundred twenty (120) days following date of Landlord's Exercise Notice; or 2. Landlord may require Tenant to assign this lease to Landlord without merger of Landlord's estates effective as of the day preceding the proposed assignment or sublease. - 5 - If Landlord shall elect to require Tenant to surrender the Demised Premises and accept a termination of this lease, then this lease shall expire on the Termination Date as if that date had been originally fixed as the Expiration Date and Tenant shall be released from all further and future obligations owed under the Lease. Regardless of which option Landlord exercises under this Paragraph B, whether to terminate this lease or to take an assignment thereof, Landlord shall be free to, and shall have no liability to Tenant if Landlord shall lease the Demised Premises to Tenant's prospective assignee or subtenant. C. If Landlord shall not exercise either of its options under Paragraph B above within the time period therein provided, then Landlord shall not unreasonably withhold or delay consent to the proposed assignment or subletting of the entire Demised Premises, provided that Tenant is not then in default under this lease and further provided that the following further conditions shall be fulfilled: 1. The proposed subtenant or assignee shall not be a school of any kind, or an employment or placement agency or governmental or quasi governmental agency or travel or tourist agency or telephone or secretarial service or labor union or photographic studio; 2. The subletting or assignment shall be to a tenant whose occupancy will be in keeping with the dignity and character of the then use and occupancy of the building and whose occupancy will not be more objectionable or more hazardous than that of Tenant herein or impose any additional burden upon Landlord in the operation of the building; 3. The proposed sublease or assignment shall not be at a lower rental rate than that being charged by Landlord at the time for similar space in the building; 4. The proposed sublessee or assignee shall not be a tenant, subtenant or assignee of any premises in the building; and 5. The proposed sublessee or assignee is a reputable party whose financial net worth and financial responsibility is, considering the obligations undertaken, reasonably satisfactory to Landlord; 6. In case of a subletting, it shall be expressly subject to all of the obligations of Tenant under this lease and the further condition and restriction that the sublease shall not be assigned, encumbered or otherwise transferred or the subleased premises further sublet by the sublessee in whole or in part, or any part thereof suffered or permitted by the sublessee to be used or occupied by others, without the prior written consent of Landlord in each instance. D. Anything herein contained to the contrary notwithstanding, but without releasing Tenant from its obligations for full performance hereunder, Tenant shall have the right, without the consent of Landlord, to assign or sublet all or any part of the Demised Premises to one or more controlled or subsidiary companies, or to a parent company (existing or future), and Tenant shall have the right to permit the Demised Premises or any part thereof to be used by any controlled subsidiary and/or parent companies, provided that a duplicate original of the assignment or sublease shall be delivered to Landlord within seven (7) days after the execution, and provided that such assignment or sublease shall permit only such use and occupancy as is permitted under this lease. Further, Tenant may assign this lease in its entirety without the consent of Landlord to any successor corporation (by consolidation or merger or sale of substantially all of its assets) provided the assets and consolidated net worth of such successor corporation and its consolidated subsidiaries, determined in accordance with generally accepted accounting principles on a pro forma basis from the then most recent audited (by independent certified public accountants) balance sheets of all corporations which shall have been merged or consolidated with or into such successor corporation, shall not be less than the assets and consolidated net worth of Tenant and its consolidated subsidiaries as shown by Tenant's most recent audited (by independent certified - 6 - public accountants) balance sheets of all corporations which shall have been merged or consolidated with or into such successor corporation, shall not be less than the assets and consolidated net worth of Tenant and its consolidated subsidiaries as shown by Tenant's most recent audited (by independent certified public accountants) balance sheet, provided that Tenant shall have delivered to Landlord an agreement on the part of such successor corporation whereby such successor corporation agrees to assume, and does assume, all of the obligations and duties on the part of the Tenant to be performed hereunder. E. No permitted or consented to assignment or subletting shall be effective or valid for any purpose whatsoever unless and until a counterpart of the assignment or a counterpart or reproduced copy of the sublease shall have been first delivered to the Landlord, and, in the event of an assignment, the Tenant shall deliver to Landlord a written agreement executed and acknowledged by the Tenant and such assignee in recordable form wherein such assignee shall assume jointly and severally with Tenant the due performance of this lease on Tenant's part to be performed to the full end of the term of this lease notwithstanding any other or further assignment. F. Any transfer by operation of law or otherwise, of Tenant's interest in this lease or of a fifty (50%) percent or greater interest in Tenant (whether stock, partnership interest or otherwise) shall be deemed an assignment of this lease for purposes of this Article. 44. SUPPLEMENTING ARTICLE 3: ------------------------ Landlord's consent shall not be required for minor changes to the Demised Premises such as painting and installation of cabinets and shelves. All other renovations, decorations, additions, installations, improvements and/or alterations of any kind or nature in the Demised Premises (herein "Tenant's Changes") shall require the prior written consent of Landlord thereto, which, in the case of non-structural interior Tenant's Changes, Landlord agrees not to unreasonably withhold or delay. In granting its consent to any Tenant's Changes, Landlord may impose such conditions (as to guarantee of completion, payment restoration, and otherwise) as Landlord may reasonably require. In no event shall Landlord be required to consent to any Tenant's Changes which would physically affect any part of the building outside of the Demised Premises or would adversely affect the proper functioning of the mechanical, electrical, sanitary or other service systems of the building. At the time Tenant requests Landlord's written consent to any Tenant's Changes, Tenant shall deliver to Landlord detailed plans and specifications therefor. Tenant shall pay to Landlord any reasonable fees or expenses incurred by Landlord in connection with Landlord's submitting such plans and specifications, if it so chooses, to an architect or engineer selected by Landlord for review or examination. Landlord's approval of any plans or specifications does not relieve Tenant from the responsibility for the legal sufficiency and technical competency thereof. Tenant, before commencement of any Tenant's Changes, shall: 1. Obtain the necessary consents, authorizations and licenses from all federal, state and/or municipal authorities having jurisdiction over such work; 2. Furnish to Landlord a certificate or certificates of Workmen's Compensation Insurance covering all persons who will perform Tenant's Changes for Tenant or any contractor, subcontractor or other person; 3. Furnish to Landlord an original Policy of Public Liability Insurance covering Landlord in limit of not less than ONE MILLION & 00/100 ($1,000,000.000) DOLLARS, for injuries or damages to person and property, in a company approved by Landlord. Such policy shall be maintained at all times during the progress of Tenant's Changes and until completion thereof, and shall provide that no cancellation shall be effective unless ten (10) days prior written notice has been given to Landlord. Tenant agrees to indemnify and save Landlord harmless from and against any and all bills for labor performed and equipment, fixtures and materials furnished to Tenant and from and against any and all liens, Property and from and against all losses, damages, costs, expenses, suits - 7 - and claims whatsoever in connection with Tenant's Changes. The cost of Tenant's Changes shall be paid for in cash or its equivalent, so that the Demised Premises and the Real Property shall at all times be free of liens for labor and materials supplied or claimed to have been supplied. Tenant, at its expense, shall cause any Tenant's Changes consented to by Landlord to be performed in compliance with all applicable requirements of insurance bodies having jurisdiction and in such manner as not to interfere with, delay or impose any additional expense upon the Landlord in the maintenance or operation of the building and so as to maintain harmonious labor relations in the building. Notwithstanding the provisions of Article #3, Tenant shall not be required to restore the Demised Premises to its condition prior to the making of any Tenant Changes except if and to the extent that such restoration is made an express condition of Landlord's consent to such Tenant's Change. If the performance of Tenant's Changes shall interfere with the comfort and/or convenience of other tenants in the building or shall cause damage to or otherwise interfere with the occupancy of adjacent buildings, Tenant shall, upon Landlord's demand, remedy or remove the condition or conditions complained of. Tenant further covenants and agrees to indemnify and save Landlord harmless from and against any and all claims, losses, damages, costs, expenses, suits and demands whatsoever made or asserted against Landlord by reason of the foregoing. 45. CERTIFICATES BY TENANT: ----------------------- At any time and from time to time, Tenant, for the benefit of Landlord and the lessor under any ground lease or underlying lease or the holder of any leasehold mortgage affecting any ground lease or underlying lease, or of any fee mortgage covering the land or the land and building, on at lease five (5) days prior written request by Landlord, will deliver to Landlord a statement, certifying that this lease is not modified and is in full force and effect (or if there shall have been modifications that same is in full force and effect as modified, and stating the modifications), the Commencement and Expiration Dates hereof, the dates to which the fixed rent, additional rent and other charges have been paid, and whether or not, to the best knowledge of the signer of such statement, there are any then existing defaults on the part of either Landlord or Tenant in the performance of the terms, covenants and conditions of this lease, and if so, specifying the default of which the signer of such statement has knowledge. 46. LIMITATION OF LIABILITY: ------------------------ Tenant agrees that the liability of Landlord under this lease and all matters pertaining to or arising out of the tenancy and the use and occupancy of the Demised Premises, shall be limited to Landlord's interest in the Real Property and in no event shall Tenant make any claim against or seek to impose any personal liability upon any general or limited partner of Landlord, or any principal of any firm or corporation that may hereafter be or become the Landlord. 47. INDEMNIFICATION AND INSURANCE: ------------------------------ Tenant will indemnify and save Landlord harmless from and against all damages, liabilities, claims, costs and expenses, including reasonable attorneys' fees, arising out of the use of the Demised Premises or any work or thing done, or any condition created by Tenants or its employees, agents or contractors whether or not caused. by negligence or breach of an obligation by Tenant. Tenant shall, throughout the term of this lease, at its own cost and expense, but for the mutual benefit of Landlord and Tenant, maintain. General Public Liability Insurance against claims for personal injury, death or property damage occurring upon, in or about the Demised Premises, such insurance to afford protection to the limit of not less than ONE MILLION & 00/100 ($1,000,000.00) DOLLARS in respect of personal - 8 - injury or death and damage to property in respect of any one occurrence. The Certificate of Insurance shall specifically have the indemnity clause referred to in the first paragraph of this Article typed on the certificate evidencing that the "hold harmless" clause has been insured. Tenant shall furnish to Landlord certificates of such policies and provide for the insurance carrier's endorsements and such policies shall not be terminated without ten (10) days' prior notice to Landlord as well as Tenant. 48. ELECTRICITY: ------------ If the Landlord elects to supply electric current to the Demised Premises, the Tenant agrees that electric current will be supplied by the Landlord and the Tenant will pay the Landlord or the Landlord's designated agent, as additional rent for the supplying of electric current, an amount or amounts set by the Landlord computed at rates not exceeding those in the Service Classification No. 4 of Consolidated Edison Company of New York, Inc. in effect during August 1970. The Landlord, at its option, may, however, increase the additional rent charges for supplying electricity to the Demised Premises based upon changes, occurring subsequent to the aforementioned date, in the method, rates or manner by which the Landlord thereafter purchases electricity for the building of which the Demised Premises are a part. Such increases in the additional rent charges for electricity shall be determined by a comparison to the nearest full percentage of the average cost per kilowatt hour to the Landlord at the rate in effect at which Landlord purchased electricity prior to such change and the rate under which the Landlord will purchase electricity after such change. The periods to be used for the aforesaid computation shall be the bill periods ended in February and August immediately preceding such change. Average cost per kilowatt hour is defined as including energy charges, demand charges, fuel adjustment charges, rate adjustment charges, sales taxes where applicable, and/or any other factors used by the public utility in computing its charges to the Landlord, applied to the kilowatt hours purchased by Landlord during a given bill period. Where more than one meter measures the service of Tenant, the service rendered through each meter may be computed and billed separately in accordance with the rates herein. Bills therefor shall be rendered at such times as Landlord may elect and the amount shall be deemed to be, and be paid as, additional rent. In the event that such bills are not paid within five (5) days after the same are rendered, Landlord may, without further notice, discontinue the service of electric current to the Demised Premises without releasing Tenant from any liability under this lease and without Landlord or Landlord's agent incurring any liability for any damage or loss sustained by Tenant by such discontinuance of service. At the option of Landlord, Tenant also agrees to purchase from Landlord or its agent all lamps or bulbs used in the Demised Premises and to pay for cost of installation thereof. Landlord shall not in any way be liable or responsible to Tenant for any loss or damage or expense which Tenant may sustain or incur if either the quantity or character of electric service is changed or is no longer available or suitable for Tenant's requirements. All additional feeders or risers or other electrical conductors or equipment required to provide any increase in electric service to the Demised Premises shall be provided by Landlord, and the cost thereof shall be paid by Tenant on Landlord's demand, provided that, in Landlord's judgement, such additional feeders or risers will not cause permanent damage or injury to the building or the Demised Premises or cause or create a dangerous or hazardous condition or entail excessive or unreasonable alterations or repairs or interfere with or disturb other tenants or occupants of the building. Rigid conduit only will be allowed. Tenant agrees that its use of electric current in the Demised Premises shall not at anytime exceed the capacity of any of the electrical conductors and equipment in otherwise serving the Demised Premises. It is further agreed by Tenant that all of the aforesaid costs and expenses are chargeable and collectible as additional rent and shall be paid by Tenant to Landlord within five (5) days after condition of any bill or statement to Tenant therefor. Landlord may discontinue any of the aforesaid services upon thirty (30) days notice to Tenant without being liable to Tenant therefor or without in any way affecting this lease or the liability of Tenant hereunder or causing a diminution of rent and the same shall not be deemed to be a lessening or diminution of services within the meaning of any law, rule or regulation now or hereafter enacted, promulgated or issued. In the event Landlord gives - 9 - such notice of discontinuance Landlord shall permit Tenant to receive such service direct from the public utility corporation upon condition that the Tenant shall, at its sole expense entirely, segregate the Tenant's electrical system so that the same is in no way dependent upon or connected to the circuits or distribution facilities of the Landlord or any other tenant and that upon vacating the Demised Premises Tenant will restore, at its sole expense, same to the condition existing prior to such segregation. Tenant shall make no electrical installations, alterations, additions or changes to electrical equipment or appliances without the prior written consent of the Landlord in each instance, which consent will not be unreasonably withheld. Tenant will comply with the General Rules, Regulations, Terms and Conditions applicable to Service, Equipment, Wiring and Changes in Requirements in accordance with the requirements of the public utility supplying electricity to the building in the same manner as if the Tenant was serviced directly by such utility. If any tax is imposed upon Landlord's receipt from the sale or resale of electrical energy or gas or telephone service to Tenant by any Federal, State or Municipal Authority, Tenant agrees that, where permitted by law, Tenant's pro-rata share of such taxes shall be passed on to, and included in the bill of, and paid by, Tenant to Landlord. Landlord shall furnish and install Tenant's electrical meter in accordance with the above provision. If there shall be any delay in the installation of such electrical meter, then Tenant shall be charged on a pro-rata adjustment basis for such period that meter has not been installed and operable, and such pro-rata adjustments shall be based on the average charge for electricity per day in the Demised Premises, after Tenant's first meter reading, multiplied by the number of days that the meter has not been installed and operable. 49. BROKER: ------ Tenant represents and warrants that if neither consulted nor negotiated with any broker or finder with regard to the rental of the Demised Premises from Landlord other than Helmsley-Noyes Company, Inc., Tenant agrees to indemnify and ---------------------------- hold Landlord harmless from any damages, costs, and expenses suffered by Landlord by reason of any breach of the foregoing representation. 50. BINDING EFFECT: -------------- It is specifically understood and agreed that this lease is offered to Tenant for signature by the managing agent of the building solely in its capacity as such agent and subject to Landlord's acceptance and approval, and that Tenant shall have affixed its signature hereto with the understanding that such act shall not, in any way, bind Landlord or its agents until such time as this lease shall have been approved and executed by Landlord and delivered to Tenant. 51. MISCELLANEOUS: ------------- A. Without incurring any liability to Tenant, Landlord may permit access to the Demised Premises and open the same, whether or not Tenant shall be present, upon demand of any receiver, trustee, assignee for the benefit of creditors, sheriff, marshall or court officer entitled to, or reasonably purporting to be entitled to, such access for the purpose of taking possession of or removing, Tenant's property or for any other lawful purpose (but this provision and any action by Landlord hereunder shall not be deemed a recognition by Landlord that the person or official making such demand has any right or interest in or to this lease, or in or to the premises), or upon demand of any representative of the fire, police, building, sanitation or other department of the city, state or federal government. B. The terms "person" and "persons" as used in this lease, shall be deemed to include natural persons, firms, corporations, associations and any other private or public entities. C. No receipt of monies by Landlord from Tenant, after any reentry or after cancellation or termination of this lease in any lawful manner, shall reinstate the lease; and alter the service of notice - 10 - to terminate this lease, or after the commencement of any action, proceeding or other remedy, Landlord may demand, receive and collect any monies due, and apply them on account of Tenant's obligations under this lease but without in any respect affecting such notice, action, proceeding or remedy, except that if a money judgement is being sought in any such action or proceeding, the amount of such judgement shall be reduced by such payment. D. If Tenant is in arrears in the payment of fixed rent or additional rent, Tenant waives it right, if any, to designate the items in arrears against which any payments made by Tenant are to be credited and Landlord may apply any of such payments to any such items in arrears as Landlord, in its sole discretion, shall determine, irrespective of any designation or request by Tenant as to the items against which any such payments shall be credited. E. No payments by Tenant nor receipt by Landlord of a lesser amount that may be required to be paid hereunder shall be deemed to be other than on account of any such payment, nor shall any endorsement or statement on any check or any letter accompanying any check tendered as payment be deemed an accord and satisfaction and Landlord may accept such check or payment without prejudice to Landlord's right to recover the balance of such payment due or pursue any other remedy in this lease provided. F. If in this lease it is provided that Landlord's consent or approval as to any matter will not be unreasonably withheld, and it is established by a court or body having final jurisdiction thereover that Landlord has been unreasonable, the only effect of such finding shall be that Landlord shall be deemed to have given its consent or approval; but Landlord shall not be liable to Tenant in any respect for money damages by reason of withholding its consent. G. At Landlord's option, Tenant shall pay a "late charge" of one (1%) percent per month from the due date of any installment of rent (fixed rent and additional rent) if said rent payment is made more than ten (10) days after its due date. Nothing herein contained shall be deemed to limit any right or recovery which Landlord may have under this lease, at law or in equity. H. In the event any ground or underlying lease is terminated, or any mortgage foreclosed, this lease shall not terminate or be terminable by Tenant unless Tenant was specifically named in any termination or foreclosure judgement or final order. In the event any ground or underlying lease is terminated as aforesaid, Tenant agrees to enter a new lease at the Demised Premises for the remaining term of this lease and otherwise on the same terms, conditions and rentals as herein provided with, and at the option of the holder of any superior lease, or if there is no superior lease in existence, then with and at the option of the holder of the fee title to the Real Property. 52. ADDITIONAL SECURITY: -------------------- In the event Tenant shall fail to pay to Landlord any rent or additional rent within ten (10) days after the date the same becomes due in two (2) successive months, then Tenant shall, within ten (10) days after demand by Landlord, deposit with Landlord the sum of $9,349.16 which sum shall be held by Landlord as a security deposit in accordance with the provisions of Article 33 hereof. The exercise by Landlord of its rights under this Article shall not preclude Landlord from exercising any other rights or remedies which it may have under this lease by reason of the default of Tenant in paying such rent or additional rent when due. 53. PROHIBITION: ------------ Tenant shall use the Demised Premises solely for the purposes set forth under Article 2 hereof, and Tenant and its employees or invitees shall not at any time during the term of this lease use the Demised Premises as an apartment or for dominant or accessory residential use of any type or kind whatsoever. 54. Intentionally Omitted. ---------------------- - 11 - 55. The Tenant accepts the premises and appurtenances "as is" and without representation on the part of the Landlord or its Agent as to condition, physical or otherwise. During the term hereof, the Tenant agrees that is will not call upon the Landlord for any expenditures for repairs, operation or maintenance, except as may otherwise be specifically provided for in this lease. 56. Notwithstanding anything to the contrary contained herein, it is mutually understood and agreed that the Tenant will not place any sign or lettering outside the Tenant's premises, on the door or corridor wall, except the building standard door sign and lettering. The Tenant agrees to reimburse the building for the cost of said door plaque and lettering, which cost will not exceed One Hundred Dollars ($100.00). If the Tenant desires to have listings in the lobby directory, Tenant will be permitted up to three (3) listing spaces which will be at Tenant's cost and expense. 57. ADDENDUM TO ARTICLE #17: ------------------------ This Lease and the term and estate hereby granted are subject to the following further limitation. Whenever Tenant shall default in the payment of any installment of annual rental, or in the payment of any ' additional rent or any other charge payable by Tenant to Landlord, on any day upon which the same ought to be paid, and such default shall continue for ten (10) days after Landlord shall have given Tenant a notice specifying such default, then in any such case, Landlord may give to Tenant a notice of intention to end the term of this Lease at the expiration of three (3) business days from the date of the service of such notice of intention, and upon the expiration of said three (3) business days of this lease and the term and estate hereby granted, whether or not the term shall theretofore have commenced, shall terminate with the same effect as if that day were set forth herein for the expiration of the term hereof, but Tenant shall remain liable for damages as provided in this lease. 58. It is hereby understood and agreed that the annual base rental for the terms of this lease shall be payable as follows: (a) ONE HUNDRED TWELVE THOUSAND ONE HUNDRED NINETY & 00/100 ($112,190.00) DOLLARS, per annum, payable in equal monthly installments of $9,349.16 commencing June 1, 1995 and ending May 1, 1996; (b) ONE HUNDRED SIXTEEN THOUSAND FIVE HUNDRED FIVE & 00/100 ($116,505.00) DOLLARS, per annum, payable in equal monthly installments of $9,708.75 commencing June 1, 1996 and ending May 1, 1998; (c) ONE HUNDRED TWENTY THOUSAND EIGHT HUNDRED TWENTY & 00/100 ($120,820.00) DOLLARS, per annum, payable in equal monthly installments of $10,068.33 commencing June 1, 1998 and ending May 1, 1999. 59. It is hereby understood and agreed between the parties, Landlord and Tenant, that the security deposit requirement for the demised premises, Rooms 1507-1508, shall total $20,136.66. Said sum shall consist of $8,000.00, which shall be transferred from Tenant's existing account in Room 1202; the balance of $12,136.66 shallbe paid by Tenant upon the signing of this Lease. The total monies of $20,136.66 shall be held in an interest bearing, Day of Deposit, Day of Withdrawal account. Interest earned, less 1% administrative fee, shall be paid to Tenant annually. 60. It is hereby understood and agreed that Tenant's present lease for Room 1202 dated May 10, 1993 shall continue in full force and effect until such time as the initial installation of the Demised Premises, Rooms 1507-1508, are substantially completed and prepared for occupancy, or May 31, 1995, whichever date shall occur first. It is further understood and agreed that Landlord is to be notified by Tenant in writing upon substantial completion of Tenant's initial installation for Rooms 1507-1508. - 12 - 61. CR & ME, INC. & CATHY ALLEN, INC. SPACE; ROOMS 1507 & 1508, ----------------------------------------------------------- RESPECTIVELY: ------------- Tenant acknowledges that it has been advised (i) that Rooms 1507 and 1508A-E, consisting of approximately 1,610 rentable square feet and 2,705 rentable square feet, respectively, and representing a part of the fifteenth (15th) floor portion of the within demised premises, are currently occupied by CR ,ME, MK INC,. And CATHY ALLEN, INC., pursuant to certain leases with Landlord, the terms of which expire August 31, 1995 and May 31, 1995, respectively; and (ii) that Landlord and CR & ME, INC. AND CATHY ALLEN, INC. have entered into a certain lease cancellation agreement pursuant to which such leases with CR & ME, INC. and CATHY ALLEN, INC. shall be cancelled and terminated effective as of April 15, 1995. Supplementing Article #24 hereof, Landlord shall not be liable to Tenant in any way if either falls to vacate their present premises, Rooms 1507 and 1508A-E on or before such expiration date. However, Landlord agrees that it will use all reasonable diligence to obtain possession of the CR & ME, INC. and CATHY ALLEN, INC. Spaces prior to April 15, 1995. If, despite such diligence by Landlord, either CR & ME INC. or CATHY ALLEN, INC. fails vacate Room 1507 or 1508A-E on or prior to April 15, 1995, then Landlord will use all reasonable diligence to cause CR & ME, INC. and CATHY ALLEN, INC. To vacate after such date, including, without limitation, the commencement and diligent prosecution of a summary holdover dispossess proceeding. Tenant expressly waives any right to rescind this Lease under Section 223-a of the New York Real Property Law or under any present or future statute of similar import then in force. 62. RENT CREDIT: ------------ Tenant shall be entitled to a rent credit in the amount of SIXTY-FIVE THOUSAND & 00/100 ($65,000.00) DOLLLARS (without electricity) due under this Lease; except that Tenant shall nevertheless be obligated, during such periods, to pay any additional rents hereunder, and to pay any amounts due under Article #48 hereof for Tenant's consumption of electricity in the demised premises. The foregoing rent credit shall be conditioned on Tenant not being in default, beyond any applicable notice and/or grace period, under any of the material terms, covenants and conditions of this Lease. Upon the occurrence of any such default by Tenant, the application of any rent credit which Tenant is then receiving hereunder shall be deemed suspended unless and until Tenant fully cures such default, at which time the application of such rent credit shall resume and continue until Tenant has received the full amount thereof, (or Tenant again so defaults). Anything contained herein to the contrary notwithstanding, if Tenant, at any time during the term of this Lease after Tenant has been granted all or a portion of the rent credit described above or there reimbursement obligation, breaches any covenant, condition or provision of this Lease and fails to cure such breach within any applicable grace period, and provided that this Lease is terminated by Landlord because of such default, then, in addition to all other damages and remedies herein provided and to which Landlord may otherwise be entitled, Landlord shall also be entitled to the repayment of the unamortized portion of any such rent credit or reimbursement obligation theretofore enjoyed by Tenant, which sum shall be deemed additional rent hereunder and shall be due upon demand by Landlord. The obligation of Tenant to pay such additional rent, (or damages), to Landlord shall survive the expiration or sooner termination of the term of this Lease; provided, however, that such obligation shall be reduced pro rata as and to the extent that Landlord thereafter is paid all rent and additionnl rent due under this Lease through the date originally fixed for the expiration of the term hereof, whether in the form of damages or as rent from the relettimg of the demised premises by Landlord, plus any other amounts due to Landlord under Article #18 hereof. 63. RIGHT OF PRIOR CONSIDERATION: ----------------------------- If, at any time during the term of this Lease, Tenant notifies Landlord that Tenant needs and wants additional expansion space, and such space on the fifteenth (15th) floor of the Building is then vacant and available for leasing by Landlord, (ie: not currently under offer to a proposed tenant or --- subject to the option of another tenant; and subject to the right of any existing tenant to renew and extend its occupancy of such space), then, provided Tenant is not then in default under this Lease beyond any applicable grace period, Landlord shall so advise Tenant, and, at Tenant's written request, will negotiate with Tenant on rent and other terms for the leasing of said space by Tenant. If for any reason Landlord and Tenant cannot agree on such rental and other terms within thirty (30) days after such negotiations begin, then Landlord thereafter shall be free to rent such space to whomever Landlord wishes and for such term of years and at whatever rental and other terms Landlord desires. - 13 - EX-10.18 5 LICENSE AGREEMENT WITH MARBLE SPORTSWEAR EXHIBIT 10.18 LICENSE AGREEMENT ----------------- This License Agreement ("Agreement") is by and between Marble Sportswear, Inc. as LICENSOR and YES Clothing Co., a California corporation, as LICENSEE. W I T N E S S E T H: ------------------- WHEREAS, LICENSOR owns rights in certain trademarks and copyrights (and the current applications for federal registration of certain other trademarks), as well as the associated goodwill; WHEREAS, LICENSEE desires to obtain an exclusive license to use such intellectual property rights in connection with the sale, marketing and distribution of certain goods; and, WHEREAS, LICENSOR is willing to grant such a license to LICENSEE under the terms of this Agreement. NOW THEREFORE, in consideration of the mutual promises contained herein and subject to the terms and conditions of this Agreement, LICENSOR and LICENSEE agree as follows: 1. LICENSE GRANT ------------- a. LICENSOR grants to LICENSEE only the exclusive right and license to use the Marks (as defined below) in the Territory in connection with the manufacture and wholesale sale of the Licensed Goods (as defined below) during the term of this Agreement. b. "Marks" is defined in this Agreement are the trademark and copyright registrations and applications for registration as shown in Exhibit A. c. "Licensed Goods" is defined in this Agreement as only the following men's and women's sportswear: casual blouses, casual dresses, casual jackets, jeans, overalls, casual shirts, shortalls, shorts, casual skirts, sweaters, sweatpants, sweatshirts, T-shirts, tank tops, casual trousers, casual vests. d. "Territory" means United States of America and Puerto Rico. e. LICENSEE agrees that LICENSOR retains full ownership of the Marks and the goodwill associated with the Marks, that LICENSEE shall not acquire any rights in the Marks other than those rights expressly granted by this Agreement, and that use of the Marks by LICENSEE inures to the benefit of LICENSOR. LICENSEE agrees to cooperate fully with LICENSOR in securing and maintaining the goodwill of LICENSOR in the Marks, and to execute and deliver any and all agreements, instruments and other documents necessary or appropriate to secure, maintain and evidence such goodwill of LICENSOR in the Marks. 2. TERM ---- The term of this Agreement shall commence as of April 1, 1995, and expire on March 31, 2000. 3. DEFINITIONS ----------- a. "Allowances" and "Markdowns" are any written credit given by the LICENSEE to a customer after delivery. b. "Closeouts" are sales of Licensed Goods at a price reduction in excess of that permitted below. c. "Contract Year" is each year of the Term commencing on April 1st. d. "Gross Sales" means sales (by LICENSEE) at the wholesale price of Licensed Goods as listed on the Licensed Goods Approval Form. e. "Net Sales" are Gross Sales of Licensed Goods less only credits taken by customers for returns, trade discounts, allowances and markdowns as permitted by this Agreement. f. "Trade discounts" are all reductions in the list wholesale selling price (as stated on the Licensed Goods Approval Form) which are customary in the trade and which are granted by LICENSEE in writing prior to delivery. All trade discounts must appear on the face of each invoice. 4. ROYALTY AND ADVERTISING PAYMENTS -------------------------------- a. It is the intention of the parties that royalties will be based on the bona fide wholesale prices at which LICENSEE sells Licensed Goods to independent retailers in arms' length transactions. If LICENSEE sells Licensed Goods to its affiliates, friends or employees, royalties shall be calculated on the basis of wholesale price stated on the Licensed Goods Approval Form for Licensed Good; and all such sales shall be stated separately on the Statement of Royalties (Exhibit B). A Licensed Good is considered "sold" upon the date when such Licensed Good is invoiced, shipped or paid for, whichever event occurs first. b. Each quarter commencing January 31, 1996, for goods sold after that date LICENSEE shall pay to LICENSOR and account for a non-refundable copyright and trademark royalty in an amount in United States Dollars equal to 7% (seven percent) on all of LICENSEE's Net Sales. This percentages is the "Trademark Royalty". The Trademark Royalty is due and payable as follows: the payment for January, February and March of each -2- year shall be due May 1; the payment for April, May and June shall be due August 1; the payment for July, August and September, shall be due November 1; and the payment for October, November and December shall be due February 1. c. Each quarter commencing January 31, 1996, for goods sold after that date LICENSEE shall pay to LICENSOR and account for a non-refundable advertising advance in an amount in United States Dollars equal to 2% (two percent) on all of LICENSEE's Net Sales. This percentage is the "Advertising Royalty". The Advertising Royalty is due and payable as follows: the payment for January, February and March of each year shall be due May 1; the payment for April, May and June shall be due August 1; the payment for July, August and September, shall be due November 1; and the payment for October, November and December shall be due February 1. The Advertising Royalty shall be used by LICENSOR to advertise and promote the marks licensed hereunder. LICENSOR agrees to provide to LICENSEE, upon LICENSEE's request, evidence that an amount at least equal to the Advertising Royalty has been applied by LICENSOR for such advertising and promotion. d. For each calendar quarter, LICENSEE shall pay LICENSOR the Trademark and Advertising Royalty. All payments shall be sent to: Licensing Department, Marble Sportswear, Inc. at 9756 Wilshire Boulevard, Beverly Hills, California 90212. The obligation of LICENSEE to pay royalties is absolute notwithstanding any claim which LICENSEE may assert against LICENSOR. LICENSEE shall not have the right to set-off, reduce or deduct from royalty payments for any reason. e. If the payment of any installment of royalties is delayed for any reason, interest shall accrue on the unpaid principal amount of such installment from and after the date on which the same became due at the highest rate permitted by law in California. 5. STATEMENTS AND PAYMENTS ----------------------- Simultaneous with the submission of all payments, but regardless of whether any payment is due, LICENSEE shall submit a quarterly report on the "Statement of Royalties" (Exhibit B), of the number, description and invoice price of each Product sold (by Style Number), the Gross Sales, returns actually received, trade discounts, allowances and markdowns actually granted, the Net Sales, and any other information that may be required for the relevant quarter. 6. BOOKS OF ACCOUNT AND RECORDS ---------------------------- LICENSEE agrees to keep accurate books of account and records covering all transactions relating to the Licensed Goods. LICENSOR and its authorized representatives shall have the right to examine and copy said books of account and other records; provided, however, that such examination and copying shall be done at the usual place of business (and only during reasonable hours) of LICENSEE, unless such restriction is not required by said LICENSEE. An essential supply analysis may be used in the audit. If there is an error in favor of LICENSEE in excess of two percent (2%) of royalties in each year in computing -3- such royalties, all expenses in connection with such inspection and audit should be borne by LICENSEE. 7. QUALITY CONTROL, ADVERTISING MATERIALS AND MARKETING ---------------------------------------------------- a. LICENSEE agrees to maintain such quality of Licensed Goods sold or otherwise provided under or in connection with the Marks in accordance with specifications set forth by LICENSOR from time to time. LICENSOR reserves the right to inspect all places of manufacture to ensure that the quality required is maintained. Upon request, LICENSEE shall provide to LICENSOR a list of all places where the Licensed Goods are manufactured. b. LICENSOR may from time to time require LICENSEE to furnish LICENSOR samples of advertising or other promotional materials to be used in connection with the Licensed Goods. LICENSEE agrees that it will use the Marks in any reasonable manner required by LICENSOR in order to identify the LICENSOR's rights in such Marks. c. LICENSEE shall obtain the written approval of LICENSOR of all Licensed Goods prior to manufacture by LICENSEE. Each season, LICENSEE shall submit all items which are to be sold that season for written approval by LICENSOR. Approval for one season is not approval for any other season. Samples of each Licensed Good shall be submitted with the actual fabric to be used for that Licensed Good. The samples shall be submitted with the Licensed Good Approval Form (Exhibit C) and must be accompanied by additional Material/Fabric and/or Color Approval Forms (Exhibit D). d. Within two (2) weeks of when each style is produced, LICENSEE shall deliver to LICENSOR at least one (1) finished Licensed Good of each style. If any Licensed Good is not manufactured in strict adherence to the appropriate materials, color, workmanship, designs, dimensions, styling detail and quality approved by LICENSOR, LICENSOR shall notify LICENSEE in writing within ten (10) days. LICENSEE shall promptly correct any problem. The judgment of LICENSOR, exercised in good faith, will be binding and conclusive as to whether or not any Licensed Good meets design or quality standards of the original sample. LICENSEE agrees that the Marks may not be placed on any Licensed Goods that do not meet such standards or quality standards and, upon receipt of notification that certain Licensed Goods do not meet such standards, LICENSEE must refrain from distributing such non-conforming Licensed Goods, placing the Marks on any other non-conforming products and must repurchase all non-conforming Licensed Goods sold to its customers. If a Licensed Good, as repaired or changed, is still not approved, the Marks shall be promptly removed from the item, at the option of LICENSOR, in which event the item may be sold by LICENSEE, provided it is in no way identified as a Licensed Good. e. All advertising or packaging or other business materials relating to any Licensed Goods or bearing the Marks shall be submitted to LICENSOR for prior approval on the Licensed Property Use Approval Form (Exhibit E). LICENSOR may revise or disapprove any items submitted. Approval shall be effective until revoked by LICENSOR. LICENSEE shall, at the option of LICENSOR, include on its business materials an indication -4- of the relationship of the parties in a form approved by LICENSOR. All uses of the Marks by LICENSEE, including without limitation, use on any business documents, invoices, stationery, advertising, promotions, labels, packaging and otherwise, shall require LICENSOR's prior written consent. f. LICENSEE shall sell Licensed Goods only to those specialty shops, department stores and other retail outlets which deal in products similar in quality and prestige to Licensed Goods and whose operations are consistent with the quality and prestige of the Marks. Prior to first shipment, LICENSEE shall submit to LICENSOR for approval the names of all its intended customers. Any additions to this initial customer list shall be submitted on the "Customer Profile Form" (Exhibit F) prior to sale to any new customer. Each January 1, LICENSEE shall send a list of all current customers. 8. DEFAULT; TERMINATION -------------------- a. In the event that either LICENSOR or LICENSEE is in breach of or default under the terms of this Agreement (a "Default"), the other party may serve on the defaulting party a notice of default ("Notice of Default") specifying the nature of the Default. If the Default is not cured within fifteen (15) days from service of the Notice of Default, the other party may then serve a notice ("Termination Notice") that it is terminating this Agreement and the Agreement shall be automatically terminated. b. This Agreement automatically terminates if: i. LICENSEE does not deliver any payment due to LICENSOR within ten (10) days of when it is due; or ii. there is a change of fifty percent (50%) or more of the ownership of the stock or assets of LICENSEE and the prior written approval of LICENSOR was not obtained. c. LICENSOR may cancel the application of Section 8(b) in a particular case, upon written notice to LICENSEE (which shall be binding upon both parties). d. Upon termination or expiration of this Agreement for any reason, all rights granted to LICENSEE hereunder shall cease, and LICENSEE will immediately refrain from further use of the Marks, remove all signs displaying the Marks, and destroy or return to LICENSOR all other materials containing, displaying or using the Marks. LICENSEE shall have a period of one-hundred and twenty (120) days following such expiration (but not termination) to sell off any remaining inventory of the Licensed Goods strictly in accordance with this Agreement. e. LICENSOR has exclusive ownership of any designs for the Licensed Goods which incorporate any trademark or logo owned by LICENSOR. LICENSEE shall not use any designs owned by LICENSOR after the end of this Agreement. -5- 9. INDEMNITY AND INSURANCE ----------------------- a. LICENSEE agrees that it is wholly responsible for all goods offered or sold by it and that LICENSOR shall have no liability for or in connection with any services offered, sold or otherwise provided by LICENSEE in connection with the Marks. LICENSEE agrees to indemnify, protect, defend and hold harmless LICENSOR and the officers, directors, shareholders, employees and agents of LICENSOR, from and against any and all claims, demands, causes of action, damages, costs and expenses, including court costs and reasonable attorneys' fees, caused by or arising out of or in connection with the use by LICENSEE of the Marks or the offer, sales or provision of the Licensed Goods by LICENSEE, including without limitation, claims or actions for negligence, breach of contract, strict liability and patent or copyright infringement, except as set forth below. b. Without limiting LICENSEE's liability under the indemnity provisions, LICENSEE shall maintain comprehensive general liability insurance in the amount of at least $3,000,000 (combined single limit per occurrence) plus defense costs during the first year of this Agreement, and at least $5,000,000 (combined single limit per occurrence) plus defense costs thereafter. This insurance shall include broad form blanket contractual liability; products and completed operations liability; cross-liability; an endorsement stating that LICENSOR shall receive at least thirty (30) days written notice prior to modification, cancellation or non-renewal of coverage; an endorsement naming LICENSOR as an additional insured; an endorsement stating that the insurance shall be primary as to LICENSOR; and a waiver of subrogation in favor of LICENSOR. No later than July 1, 1995, LICENSEE shall furnish certificates of the required insurance policies. Upon request, LICENSEE shall provide copies of policies and endorsements. c. LICENSOR agrees to indemnify, protect, defend and hold harmless LICENSEE, and the officers, directors, shareholders, employees and agents of LICENSEE from and against any and all claims, demands, causes of action, damages, costs and expenses, including court costs and reasonable attorney's fees, caused by or arising out of or in connection with the use by LICENSEE of the marks or the offer, sales or promotion of any licensed goods by LICENSEE where such claims, demands, causes of action, damages, costs and expense are occasioned by a claim from third parties that the marks licensed hereunder infringe upon the trademarks and copyrights of another person. 10. MISCELLANEOUS ------------- 10.1 CONFIDENTIALITY --------------- "Confidential Information" is information including a formula, pattern, compilation, program, device, method, technique, or process that: derives independent economic value, actual or potential, from not being generally known to the public or to other persons who can obtain economic value from its disclosure or use; and is the subject of efforts that are reasonable under the circumstances to maintain its secrecy. -6- A confidential relationship is created by this Agreement. Each party shall keep confidential, not disclose to others, or take or use for its own purposes (except in connection with its rights and obligations under this Agreement), any Confidential Information of the other. LICENSEE shall have no right of access to LICENSOR'S Confidential Information and waives all right to see such Confidential Information in any dispute. Except as required by law, neither party shall disclose the terms of this Agreement to third parti es. 10.2 NOTICES ------- Any notice, request, consent or communication (collectively a "Notice") under this Agreement shall be effective only if it is in writing and (a) personally delivered, (b) sent by certified or registered mail, return receipt requested, postage prepaid, (c) sent by a nationally recognized overnight delivery service, with delivery confirmed, or (d) telexed or telecopied with receipt confirmed as follows: LICENSOR: Marble Sportswear, Inc. Attn: Licensing Department Boulevard 9756 Wilshire Boulevard Beverly Hills, California 90212 Telephone: (310) 246-5555 Facsimile: (310) 247-9045 LICENSEE: Yes Clothing Co. Attn: Chief Financial Officer 1380 W. Washington Los Angeles, California 90007 Telephone: (213) 765-7800 Facsimile: (213) 628-0326 10.3 ASSIGNMENT ---------- LICENSEE shall not assign this Agreement without the prior written approval of LICENSOR. LICENSOR may assign this Agreement. 10.4 ENTIRE AGREEMENT; MODIFICATION ------------------------------ This Agreement contains the complete expression of the Agreement between the parties with respect to the matter addressed herein and there are not promises, representation, or inducements except as herein provided. The terms and provisions of the Agreement may not be modified, supplemented or amended except in writing signed by both parties hereto. All terms and provisions of this Agreement shall be binding upon and inure to the benefit of and be enforceable by the respective successors and permitted assigns of the parties hereto. -7- 10.5 APPLICABLE LAW -------------- All questions concerning this Agreement, the rights and obligations of the parties, its enforcement, and its validity, effect, interpretation and construction which are governed by state law shall be determined under the laws of the State of California. 10.6 SEVERABILITY ------------ The provisions of this Agreement are severable, and if any provision shall be held illegal, invalid, or unenforceable, the parties affected thereby shall substitute for the affected provision an enforceable provision that approximates the intent and economic benefit of the affected provision as closely as possible, but all other provisions shall continue in full force and effect 10.7 NO WAIVER --------- Failure by either party hereto to enforce at any time or for any period of time any provision or right hereunder shall not constitute a waiver of such provision or of the right of such party thereafter to enforce each and every such provision. 10.8 HEADINGS -------- All article or section headings in this Agreement are for reference only and shall not be deemed control or affect in any way the meaning or construction of any of the provisions hereof. 10.9 COUNTERPARTS ------------ This Agreement may be executed in any number of counterparts, all of which together shall constitute one agreement binding on the parties hereto. 10.10 ARBITRATION ----------- Except as provided, all disputes arising out of or relating to this Agreement shall be settled and determined by arbitration only in Los Angeles, California. 10.10.1 Arbitration shall be before three arbitrators, at least one of whom shall be an attorney with experience in trademark matters and at least one of whom shall be a certified public accountant. The Arbitrators shall be bound by the terms and conditions of this Agreement and shall have no power, in rendering their award, to alter or depart from any express provision of this Agreement, and their failure to observe this limitation shall constitute grounds for vacating their award. The Arbitrators shall not have jurisdiction to award punitive damages, but may award attorneys fees and costs as they determine appropriate. -8- 10.10.2 The Arbitrators shall have the power to award specific performance or permanent injunctive relief and other rights or monies in accordance with the provisions of this Agreement. All provisional remedies shall be the exclusive jurisdiction of the Courts. LICENSEE acknowledges and admits that the Marks possess a special, unique and extraordinary character, which makes difficult the assessment of monetary damages which LICENSOR might sustain by any use which is inconsistent with this Agreement, and that irreparable injury would be caused to LICENSOR thereby, such that injunctive and similar relief would be appropriate in the event of any such uses. Without prejudice to any other right and/or remedy either party may have under this Agreement or the law, if, after notice, the other party fails to take any action which it is obligated to take under this Agreement, including without limitation, providing any information and submitting required reports, products or uses of the Marks, then the non-breaching party shall be entitled to an award of specific performance to compel such action. 10.10.3 The parties preserve all of their respective rights to provisional remedies which they would have at law or equity, including injunctive or similar relief. LICENSOR reserves the right to obtain injunctions and other declaratory relief to protect its trademarks and goodwill. 10.10.4 Any award of the Arbitrators shall be final and binding upon the parties and judgment may be entered in the courts of the State of California or any United States court in California. LICENSEE waives any objection to (a) personal jurisdiction; (b) venue; and (c) service of process of any United States Federal court or California state court in Los Angeles County, California, United States of America. 10.10.5 Any claim is barred and waived unless the claimant institutes arbitration proceedings prior to the date when any action in court would be barred by the statute of limitations. The failure to institute arbitration proceedings prior to the expiration of the applicable statute of limitations constitutes an absolute bar to the institution of any arbitration or other proceeding by either party. All issues relating to the statute of limitations barring or preventing the commencement of proceedings shall be determined in court proceedings, and the Arbitrators shall not have power or jurisdiction to determine such issues. -9- IN WITNESS WHEREOF, this License Agreement has been duly executed by the parties hereto as of the date first written above. LICENSEE: LICENSOR: YES CLOTHING CO., MARBLE SPORTSWEAR, INC., A CALIFORNIA CORPORATION A CALIFORNIA CORPORATION By: /s/ Jeffrey Busse By: /s/ Georges Marciano ------------------------------- ---------------------------- Name: Jeffrey Busse Name: Georges Marciano ----------------------------- -------------------------- Title: Controller ---------------------------- Dated as of April 1, 1995 -10- EX-10.19 6 AMENDMENT TO FACTORING AGMT. DATED 3-2-95 EXHIBIT 10.19 _______________________________________________________________ AMENDMENT TO FACTORING AGREEMENT March 2, 1995 Republic Factors Corp. 1000 Wilshire Boulevard, Suite 400 Los Angeles, California 90017 Gentlemen: Reference is made to the Factoring Agreement between us dated May 15, 1994 (the "Factoring Agreement"). This will confirm that the Factoring Agreement is amended as follows, effective March 1, 1995: 1. CHANGE IN THE DEFINITION OF COLLECTION DAYS. The words "5 business --------------------------------------------- days" contained in the third sentence of Section 4.B. are amended to read: "3 business days". 2. CHANGE IN FACTORING COMMISSION. The first sentence of Section 6.A. is -------------------------------- amended to read as follows: "As compensation for your services as factor hereunder, we agree to pay to you a factoring commission equal to 0.60% of the amount of each bill or invoice less discounts granted to the customer." 3. GUARANTEED MINIMUM VOLUME AND ADDITION OF SURCHARGE TO FACTORING ------------------------------------------------------------------ COMMISSION. The following sentence shall be added to the end of Section 6.A.: - ------------ If at the end of any Contract Year (as defined below) the total invoices factored with you during such Contract Year were less than $30,000,000, then the commission shall be retroactively adjusted for such Contract Year from 0.60% to 0.75% of the amount of each bill or invoice for such Contract Year, and the difference shall be charged to our account as of the end of such Contract Year. 4. CLARIFICATION OF CONTRACT YEAR. The definition of the term "Contract -------------------------------- Year" in the fifth sentence of Section 6.B. is amended to mean the twelve month period from April 1, 1995 to March 31, 1996 and each subsequent twelve month period. 5. EXTENSION OF TERM. The first two sentences of Section 13.A. are ------------------- amended to read as follows: This Agreement shall continue in full force and effect until March 31, 1996, and from year to year thereafter unless terminated by you (Republic) or unless we (Client) notify you of our desire to terminate this Agreement effective on March 31 of 1996 or March 31 of any subsequent year by REPUBLIC FACTORS CORP. AMENDMENT TO FACTORING AGREEMENT ------------------------------------------------------------------- giving you at least sixty (60) days' prior written notice. Republic shall have the right to terminate this Agreement at any time upon sixty days' prior written notice. This Amendment, the Factoring Agreement, any prior written amendments to the Factoring Agreement signed by you and us, and the other written documents and agreements between you and us set forth in full all of your and our representations and agreements with respect to the subject matter hereof and supersede all prior discussions, representations, agreements and understandings between us with respect to the subject hereof. As herein expressly amended, all of the terms and provisions of the Factoring Agreement (as the same may have been previously amended), and all other documents and agreements between you and us shall continue in full force and effect and the same are hereby ratified and confirmed. Please confirm the foregoing by signing the enclosed copy of this letter and returning it to us. Sincerely yours, YES CLOTHING CO. By Daniel Goodstein ----------------------------- Title Executive Vice President --------------------------- ACCEPTED AND AGREED: REPUBUC FACTORS Corp. By David Landy -------------------------- Title Senior Vice President ----------------------- - 2 - EX-10.20 7 RETAINER AGREEMENT WITH HOULIHAN LOKEY EXHIBIT 10.20 Houlihan Lokey Howard & Zukin, Inc. 1930 Century Park West Los Angeles, CA 90067 310-553-8871 June 17, 1995 Mr. Jeffrey Busse Chief Financial Officer YES Clothing Co. 1380 West Washington Boulevard Los Angeles, CA 90007 Dear Mr. Busse: This letter, when properly signed, will constitute a retainer agreement ("Agreement" hereinafter) between Houlihan, Lokey, Howard & Zukin, Inc. ("Houlihan Lokey" hereinafter) and YES Clothing Co. ("YES" or the "Company" hereinafter) upon the terms and conditions set forth below. 1. Background. We understand that the Company has entered into an ---------- agreement with its largest shareholder, Georges Marciano ("Marciano"), whereby Marciano has agreed to: a) become Chief Executive Officer ("CEO") and Chairman of the Board ("CoB") of the Company; b) provide additional capital for the Company; and c) license to YES certain trademarks controlled by Marciano affiliates. With respect to Marciano becoming Chief Executive Officer and Chairman of the Board, we understand that Marciano will receive: a) $1 per year in salary; and Mr. Jeffrey Busse YES Clothing Co. June 17, 1995 -2- b) options to acquire 500,000 shares of the Company's common stock per year at $1.25 per share, vesting monthly during continued employment for up to four additional years, (the "Executive Options"). With respect to Marciano providing additional capital to the Company, we understand that Marciano agreed to: a) contribute $3,300,000 in new capital in exchange for 2,640,000 shares of YES' common stock; and b) convert approximately $700,000 owed by the Company to Marciano into additional shares of YES' common stock valued at $1.25 per share. With respect to Marciano licensing to YES certain trademarks controlled by Marciano affiliates, we understand that the Company has entered into five year trademark license agreement for Marciano's "GM Surf" and "Misfits" lines of clothing at royalties of 7 percent of gross sales, plus an additional 2 percent for advertising. Marciano becoming CEO and CoB of YES, Marciano providing additional capital to YES, and Marciano entering into licensing agreements with YES is collectively referred to herein as the "Restructuring". In connection with the Restructuring, we understand that the Company has granted Marciano a two year option to acquire an additional 2,000,000 shares of YES' common stock at $1.25 per share, (the "Additional Options"). Finally, we understand that the Company is publicly traded on the NASD National Market System (the "NASD NMS"), and has received a notice of potential delisting from the NASD NMS because its net worth has fallen below minimum listing standards. However, we understand that the capital infusion associated with the Restructuring may provide YES with sufficient capital to avoid such action by the NASD NMS. Moreover, we understand that Moss-Adams, the Company's outside auditors, has indicated that it would issue a qualified opinion for the Company's fiscal year ended March 31, 1995 without the completion of at least a portion of the Restructuring. The Restructuring and the Company's granting of the Additional Options are collectively referred to herein as the Transaction. 2. Opinion. We understand that the Company's Board of Directors ------- ("Board") has requested that Houlihan Lokey render an opinion (the "Opinion") as to: a) whether the fair market value of the Company's common stock prior to and without giving effect to the Transaction is not more than $1.25 per share; and b) the fairness of the Transaction to the Company from a financial point of view. Mr. Jeffrey Busse YES Clothing Co. June 17, 1995 -3- The Opinion will be delivered in writing at the request of the Board. The Opinion shall not address the Company's underlying business decision to effect the Transaction, nor have we been engaged to initiate any discussions with third parties with respect to a possible acquisition of the Company. It is contemplated that the Opinion will include, in addition to any other matters that Houlihan Lokey in its sole discretion deems appropriate, a description of the principal materials that Houlihan Lokey has reviewed and upon which Houlihan Lokey is relying, and the principal assumptions and qualifications upon which Houlihan Lokey has relied. The Opinion will be signed and delivered as contemplated below. Houlihan Lokey shall be responsible only for conclusions or opinions set forth in its written Opinion, subject to the limitations set forth herein. We understand that shareholder approval will be sought for the Executive Options and the Additional Options and that the Opinion will be used in connection with seeking such shareholder approval. Houlihan Lokey consents to a description of and the inclusion of the text of its written Opinion in any filing required to be made by the Company with the Securities and Exchange Commission and the National Association of Securities Dealers in connection with the Transaction and in materials delivered to the Company's stockholders that are a part of such filings, provided that any such description or inclusion shall be subject to Houlihan Lokey's prior review and approval, which approval shall not be unreasonably withheld. Any summary of, or reference to, the Opinion, any verbal presentation with respect thereto, or other references to Houlihan Lokey in connection with the Transaction, will in each instance be subject to Houlihan Lokey's prior review and written approval (which shall not be unreasonably withheld). Other than as set forth above, the Opinion will not be included in, summarized or referred to in any manner in any materials distributed to the public or the securityholders of the Company, or filed with or submitted to any governmental agency, without Houlihan Lokey's express, prior written consent (which shall not be unreasonably withheld). Neither Houlihan Lokey's verbal conclusions nor the Opinion will be used for any purpose other than in connection with the Transaction. The Opinion will contain language substantially as follows: "This Opinion is furnished solely for your benefit and may not be relied upon by any other person without our express, prior written consent. This Opinion is delivered to each recipient subject to the conditions, scope of engagement, limitations and understandings set forth in this Opinion and our engagement letter, and subject to the understanding that the obligations of Houlihan Lokey in the Transaction are solely corporate obligations, and no officer, director, employee, agent, shareholder or controlling person of Houlihan Lokey shall be subjected to any personal liability whatsoever to any person, nor will any such claim be asserted by or on behalf of you or your affiliates." Mr. Jeffrey Busse YES Clothing Co. June 17, 1995 -4- In connection with the Opinion, Houlihan Lokey shall, subject to the limitations expressed herein or in the Opinion, make such reviews, analyses and inquiries as we deem necessary and appropriate under the circumstances. Among other things, Houlihan Lokey will meet with certain senior management of the Company, visit certain facilities and business offices of the Company, review certain of the Company's historical financial statements, review certain other documents pertaining to the Transaction, review forecasts and projections prepared by Company management and/or the Company's advisors, and review publicly available data about certain companies it deems comparable to the Company and certain transactions it deems relevant. 3. Securities Position. In the course of trading activities of ------------------- Houlihan Lokey affiliates, Houlihan Lokey may from time to time have long or short positions in and buy or sell debt or equity securities or options on securities of the Company and other companies that are or may be the subject of the engagement contemplated by this Agreement. To the extent Houlihan Lokey has any such position in the securities of the Company or such other companies as of the date of this Agreement, it has been disclosed to the Company. 4. Information. The Company, each signatory hereto, and all recipients ----------- of the Opinion recognize and confirm that in rendering services hereunder, Houlihan Lokey has been, prior to the date hereof, and hereafter will be, using and relying and assuming the accuracy of, without independent verification, data, material and other information (including without limitation, the financial forecasts and projections), with respect to the Company, furnished to Houlihan Lokey by or on behalf of the Company and its agents, counsel, employees and representatives (the "Information"). Houlihan Lokey does not assume responsibility for the accuracy and completeness of the Information, including, but not limited to, any disclosure materials related to the Transaction, and Houlihan Lokey shall not be obligated to conduct any independent study or investigation as to the accuracy or completeness of the Information. The Company represents that the disclosure materials will not contain any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in light of the circumstances in which they were made, not false or misleading. In addition, the Company represents and warrants that the Information will be true, complete and correct in all material respects. The foregoing shall remain operative and in full force and effect regardless of any investigation made by or on behalf of Houlihan Lokey or any Indemnified Person (as defined elsewhere in this agreement) or any person controlling any of them. The Company will furnish to Houlihan Lokey complete copies of all relevant documents with respect to the Transaction filed with or submitted to any regulatory agency prior to the consummation of the Transaction, and all such other data, material and other information as Houlihan Lokey may reasonably request. The Company will furnish to Houlihan Lokey, concurrently with their submission to others, all material drafts of and a copy of the final disclosure materials and financing and other documents related to the Transaction, and will keep Mr. Jeffrey Busse YES Clothing Co. June 17, 1995 -5- Houlihan Lokey apprised of changes in the terms of the Transaction on a timely basis as they are decided upon. 5. Fees; Expenses. The Company will pay Houlihan Lokey a fee of -------------- $75,000 for its services in connection with this Agreement, plus reasonable out- of-pocket expenses that may be incurred by Houlihan Lokey in connection herewith. Payment to Houlihan Lokey will be made in the amount of $37,500 upon signing of this Agreement, and the remainder promptly upon receipt of periodic billings. The full fees set forth above shall become due and payable upon Houlihan Lokey's delivery of the Opinion, but Houlihan Lokey will be entitled to full payment on July 31, 1995, even if it has not delivered the Opinion, as long as Houlihan Lokey has notified the Company in writing that it has completed its investigation and review with respect to the Opinion and that it is prepared (subject to its review of final documents) to deliver the Opinion. If for any reason the Transaction is terminated prior to its consummation and Houlihan Lokey is requested to terminate work prior to its having given notification to the Company, as set forth above, then Houlihan Lokey's fee shall be mutually agreed upon by the Company and Houlihan Lokey, but shall not be less than the greater of $37,500, or Houlihan Lokey's total time costs at its normal rates for such projects, plus, in either case, reasonable out-of-pocket expenses. No portion of the fee is contingent upon the consummation of the Transaction or the conclusions reached in the Opinion. Out-of-pocket expenses shall include, but not be limited to, reasonable travel, lodging and meal expenses, duplicating charges, long-distance telephone calls, and computer charges that have been or may be incurred by Houlihan Lokey in connection with the Transaction. Houlihan Lokey shall, in addition, be reimbursed for reasonable fees and expenses of its legal counsel in connection with this Agreement and Opinion. If Houlihan Lokey is requested to expand its Opinion to cover any areas other than that set forth in Section 2, or beyond the scope listed in said Section, such expanded scope of engagement and the fee to be paid to Houlihan Lokey shall be negotiated and agreed upon prior to Houlihan Lokey's undertaking such expanded engagement. 6. Indemnification; Contribution; and Standard of Care. The Company --------------------------------------------------- agrees to provide indemnification to Houlihan Lokey and certain other parties, in accordance with Schedule 1, which is attached hereto and incorporated herein by this reference. In no event, regardless of the legal theory advanced, shall Houlihan Lokey be responsible to any person other than for its gross negligence, bad faith, willful misfeasance, or reckless disregard of its obligations or duties. In no event, regardless of the legal theory advanced, shall Houlihan Lokey's aggregate liability to all parties in connection with the Transaction or its services in connection therewith exceed the aggregate fees actually received by Houlihan Lokey hereunder. Mr. Jeffrey Busse YES Clothing Co. June 17, 1995 -6- 7. Other Services. If Houlihan Lokey is called upon to render services -------------- directly or indirectly relating to the subject matter of this Agreement beyond the services contemplated above (including, but not limited to, producing of documents, answering interrogatories, giving depositions, giving expert or other testimony, whether by agreement, subpoena or otherwise), the Company shall pay Houlihan Lokey's then current hourly rates for the persons involved by the time expended in rendering such services, including, but not limited to, time for meetings, conferences, preparation and travel, and all related costs and expenses, and the reasonable legal fees and expenses of Houlihan Lokey's counsel. 8. Corporate Obligation. The obligations of Houlihan Lokey are solely -------------------- corporate obligations, and no officer, director, employee, agent, shareholder or controlling person shall be subjected to any personal liability whatsoever to any person, nor will any such claim be asserted by or on behalf of any other party to this Agreement or any person relying on the Opinion. 9. Attorney Fees; Choice of Law. If any party to this Agreement brings ---------------------------- an action directly or indirectly based upon this Agreement or the matters contemplated hereby, the prevailing party shall be entitled to recover, in addition to any other appropriate amounts, its reasonable costs and expenses in connection with such proceeding, including, but not limited to reasonable attorneys' fees and court costs. Any right to trial by jury with respect to any law suit, claim or other proceeding arising out of or relating to this Agreement or the services to be rendered by Houlihan Lokey hereunder is expressly and irrevocably waived. This Agreement shall be governed by the internal laws of the State of California, without regard to conflict of laws principles. 10. Other Issues. This Agreement shall not be assigned by Houlihan ------------ Lokey without the Company's prior written consent. By executing this Agreement each signatory acknowledges receipt of a copy of Houlihan Lokey's current brochure (the "Brochure"). Please contact Houlihan Lokey at the address shown above to receive future editions of the Brochure. The signatories hereto also acknowledge that, upon consummation of the Transaction, Houlihan Lokey is authorized at its sole discretion to place the customary "tombstone" advertisement or similar announcement in such form and in such media as it deems appropriate. Nothing in this Agreement, expressed or implied, is intended to confer or does confer on any person or entity other than the parties hereto and their respective successors and assigns and, to the extent expressly set forth herein, the Indemnified Persons, any rights or remedies under or by reason of this Agreement or as a result of the services to be rendered by Houlihan Lokey hereunder. Mr. Jeffrey Busse YES Clothing Co. June 17, 1995 -7- The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect pursuant to the terms hereof. This Agreement incorporates the entire understanding of the parties and supersedes all previous agreements or understandings, whether written or oral, and may be modified only by an express writing executed by all parties hereto. This Agreement has been reviewed by the signatories hereto and their counsel. There shall be no construction of any provision against Houlihan Lokey because this Agreement was drafted by Houlihan Lokey, and the parties waive any statute or rule of law to such effect. 11. Consent; No Conflict. Each signatory hereto and each recipient of -------------------- the Opinion acknowledges that Houlihan Lokey may be requested to render certain services to other participants in the Transaction in the form of an opinion or advice, and that services rendered in the past or to be rendered by Houlihan Lokey hereunder or in the future do not represent any actual or potential conflict of interest on the part of Houlihan Lokey. If during the course of this Transaction any party hereto in good faith determines that a conflict of interest has arisen herefrom, each signatory hereto hereby waives such conflict of interest. Each signatory hereto consents to Houlihan Lokey's use of any information obtained and to be obtained in the course of the activities contemplated by said other engagement, and to the sharing of any information, obtained or derived pursuant to its services hereunder, with the other participants in the Transaction. 12. Survival of Certain Provisions. The provisions of Section 2 ------------------------------ entitled "Opinion," Section 5 entitled "Fees; Expenses," Section 6 entitled "Indemnification; Contribution; and Standard of Care," Section 7 entitled "Other Services," Section 8 entitled "Corporate Obliga tion," Section 9 entitled "Attorney Fees; Choice of Law," Section 10 entitled "Other Issues," and this Section shall survive any termination of this Agreement. Mr. Jeffrey Busse YES Clothing Co. June 17, 1995 -8- We trust that the foregoing terms and provisions are agreeable to you, and request that you sign and return the enclosed copy of this Agreement to Houlihan Lokey. Sincerely, HOULIHAN, LOKEY, HOWARD & ZUKIN, INC. By /s/ Marjorie L. Bowen Marjorie L. Bowen Senior Vice President Enclosures The foregoing has been read, understood and approved, and the undersigned agrees to retain Houlihan, Lokey, Howard & Zukin, Inc. upon the foregoing terms. Dated: June 17, 1995 YES Clothing Co. By /s/ Jeffrey Busse Jeffrey Busse Chief Financial Officer SCHEDULE 1 ---------- INDEMNIFICATION AND CONTRIBUTION -------------------------------- This Schedule 1 is a part of and incorporated into that certain letter agreement (together, the "Agreement"), dated June 17, 1995. (a) If Houlihan Lokey or any employee, agent, officer, director, attorney, shareholder or any person who controls Houlihan Lokey (any or all of the foregoing, hereinafter an "Indemnified Person") becomes involved in any capacity in any legal or administrative action, suit, proceeding, investigation or inquiry, regardless of the legal theory or the allegations made in connection therewith, directly or indirectly in connection with, arising out of, based upon, or in any way related to (i) this Agreement; (ii) the services that are the subject of this Agreement; (iii) any document or information, whether verbal or written, referred to herein or supplied to Houlihan Lokey; (iv) the breach of the representations, warranties or covenants by the Company given pursuant hereto; (v) Houlihan Lokey's involvement in the Transaction or any part thereof; (vi) any filings made by or on behalf of any party with any governmental agency in connection with the Transaction; (vii) the Transaction; or (viii) proceedings by or on behalf of any recipients of the Opinion, the Company will on demand, advance or pay promptly, on behalf of each Indemnified Person, reasonable attorneys' fees and other expenses and disbursements (including, but not limited to, the cost of any investigation and related preparation) as they are incurred by the Indemnified Person, (subject to the provisions of paragraph (c) below). The Company also indemnifies and holds harmless each Indemnified Person against any and all losses, claims, damages, liabilities, costs and expenses (including, but not limited to, attorneys' fees, disbursements and court costs, and costs of investigation and preparation) ("Losses") to which such Indemnified Person may become subject in connection with any such matter. (b) If for any reason the foregoing indemnification is determined to be unavailable to any Indemnified Person or insufficient fully to indemnify any such person, then the Company will contribute to the amount paid or payable by such person as a result of any such Losses in such proportion as is appropriate to reflect (i) the relationship between Houlihan Lokey's fee on the one hand and the aggregate value of the Transaction on the other hand or (ii) if the allocation provided by clause (i) is not permitted by applicable law, not only such relative benefit but also the relative fault of the other participants in the Transaction, on the one hand, and Houlihan Lokey and the Indemnified Persons on the other hand, and any other relevant equitable considerations in connection with the matters as to which such Losses relate; provided, however, that in no event shall the amount to be contributed by all Indemnified Persons in the aggregate exceed the amount of the fees actually received by Houlihan Lokey hereunder. (c) The Company shall be notified in writing by any Indemnified Person seeking indemnification if any action is commenced against such Indemnified Person, within a reasonable time after such Indemnified Person shall have been served with a summons or other first legal process, but failure so to notify the Company shall not relieve the Company from any liability which it may have hereunder or otherwise, except to the extent that such failure so to notify the Company materially prejudices the rights of the Company. The Company shall assume, at its Schedule 1 Idemnification and Contribution -2- own expense, the defense of any suit brought to enforce any such claim, and such defense shall be conducted by counsel chosen by the Company and reasonably satisfactory to the Indemnified Person, (which counsel may be Company counsel); provided, however, that (i) if the Company shall fail to assume or actively and diligently conduct such defense, the Indemnified Person shall have the right to employ such person's own separate counsel in any such action, at the Company's expense, and such counsel shall have the right to have charge of such matters for such person; and (ii) if the defendants in any such action include both an Indemnified Person and the Company and such Indemnified Person shall have been advised in writing by its counsel that there are conflicts between the legal defenses available to such Indemnified Person and those available to the Company, which in the reasonable opinion of such counsel are sufficient to make it inappropriate for the same counsel to represent both the Company and such Indemnified Person, such Indemnified Person shall have the right to employ its own counsel in such action, and in such event the reasonable fees and expenses of such counsel shall be borne by the Company. (d) The indemnification obligations hereunder shall not apply to any Losses that are finally judicially determined on the merits to have been material and caused primarily by the gross negligence, bad faith, willful misfeasance, or reckless disregard of its obligations or duties on the part of Houlihan Lokey or such Indemnified Person. In the event of such final judicial determination, the Company shall, subject to Houlihan Lokey's rights of contribution, be entitled to recover from the Indemnified Person or Houlihan Lokey the costs and expenses paid on behalf of such Indemnified Person pursuant to this indemnification obligation. (e) The Company agrees that it will not settle, compromise or discharge any suit, claim, litigation, threatened litigation or threatened claim arising out of, based upon, or in any way related to the Transaction and to which Houlihan Lokey is or may reasonably be expected to be a party, unless and until the Company has obtained a written agreement, approved by Houlihan Lokey (which shall not be unreasonably withheld) and executed by each party to such proposed settlement, compromise or discharge, releasing Houlihan Lokey and each Indemnified Person from any and all liability. Houlihan Lokey agrees that it will not settle, compromise or discharge any such suit, claim, litigation or threatened claim without the prior written consent of the Company, which will not be unreasonably withheld. (f) The Company's obligations under this Section shall be in addition to any liability that the Company or any other person may otherwise have to Houlihan Lokey or any Indemnified Person. The foregoing provisions shall be enforceable by each Indemnified Person and such person's heirs, representatives and successors, and shall survive any termination of this Agreement or the completion of services hereunder. EX-10.21 8 INDEMNIFICATION AGMT W/ G. MARCIANO EXHIBIT 10.21 DIRECTORS AND OFFICERS INDEMNIFICATION AGREEMENT This Indemnification Agreement ("Agreement"), is effective as of June 17, 1995, and is made by and between YES CLOTHING CO., a California corporation (the "Company"), and GEORGES MARCIANO (the "Indemnitee"). WHEREAS, the Indemnitee is a director or officer of the Company serving at the Company's request; WHEREAS, in recognition of the Indemnitee's services on behalf of the Company, the Company wishes to provide for the continuing indemnification of the Indemnitee, and to provide for the continued coverage of the Indemnitee under the Company's directors and officers' liability insurance policies for the period and subject to the terms set forth in this Agreement. NOW, THEREFORE, in consideration of the Indemnitee's service to the Company, and intending to be legally bound hereby, the parties hereto agree as follows: 1. Definitions. ----------- 1.1 Expenses. For purposes of this Agreement, "Expenses" mean -------- reasonable attorneys' fees and disbursements, accounting and witness fees, travel and deposition costs, expenses of investigations, expenses of Proceedings and related appeals, and any expenses of establishing a right to indemnification, pursuant to this Agreement or otherwise, including reasonable compensation for time spent by Indemnitee in connection with the investigation, defense or appeal of a Proceeding (as defined in Section 1.2 below) or action for indemnification for which he is not otherwise compensated by the Company or any third party. The term "Expenses" does not include the amount of judgments, fines or penalties actually levied against Indemnitee. 1.2 Proceeding. For purposes of this Agreement, "Proceeding" ---------- means any threatened, pending, or completed action, suit or other proceeding, whether brought in the name of the Company or otherwise and whether civil, criminal, administrative, investigative or any other type whatsoever. 2. Additional Indemnification. The Company and the Indemnitee agree -------------------------- that this Agreement does not replace or supersede prior Indemnification Agreements by and between the Company and the Indemnitee to the extent that such prior Agreement provides additional or broader indemnification coverage. 3. Indemnification. Subject to the limitations set forth in --------------- Sections 7 and 8, the Indemnitee shall be entitled to the following indemnification by the Company: 3.1 Third Party Actions. If the Indemnitee was or is a party or ------------------- is threatened to be made a party to any Proceeding (other than an action by or in the right of the Company to procure a judgment in its favor) by reason of the fact that the Indemnitee was or is a director of the Company, or by reason of the fact that Indemnitee was or is serving at the request of the Company as a director, officer, agent or employee of another enterprise, or by reason of anything done or not done by the Indemnitee in any such capacity, the Company shall indemnify the Indemnitee against any and all Expenses, judgments, fines, penalties and amounts paid in settlement, in each case to the extent actually and reasonably incurred by the Indemnitee in connection with the investigation, defense, settlement or appeal of such Proceeding, to the fullest permitted by the Company's Articles of Incorporation, California law, public policy or other applicable law, including binding regulations and orders of, and undertakings or other commitments with, any governmental entity or agency, as the same exists or may hereinafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Company to provide broader indemnification rights than said law permitted the Company to provide prior to such amendment). 3.2 Derivative Actions. If the Indemnitee was or is a party or ------------------ is threatened to be made a party to any Proceeding by or in the right of the Company to procure a judgment in the Company's favor by reason of the fact that the Indemnitee is or was a director of the Company or by reason of the fact that Indemnitee was or is serving at the request of the Company as a director, officer, agent or employee of another enterprise, or by reason of anything done or not done in any such capacity, the Company shall indemnify the Indemnitee against all Expenses actually and reasonably incurred by the Indemnitee in connection with the defense or settlement of such Proceeding, to the fullest extent permitted by the Company's Articles of Incorporation, California law, public policy, or other applicable law, including binding regulations and orders of, and undertakings or other commitments with, any governmental entity or agency, as the same exists or may hereinafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Company to provide broader indemnification rights than said law permitted the Company to provide prior to such amendment). 3.3 Expenses Paid by Insurance. Notwithstanding the foregoing, -------------------------- the Company shall not be obligated to indemnify the Indemnitee for Expenses, judgments, fines, penalties or amounts paid in settlement which have been paid directly to Indemnitee by directors' and officers' insurance, if any. 3.4 Duty to Obtain Insurance Coverage. The Company currently --------------------------------- has and will keep in force a policy of insurance for directors and officers with a minimum aggregate limit of liability of $10,000,000. The Company shall pay all premiums, commissions and other costs or charges incurred in obtaining the endorsement and shall promptly deliver to Indemnitee a certificate of confirmation of insurance with respect to such policy. 4. Partial Indemnification. If the Indemnitee is entitled to ----------------------- indemnification on some claims, issues or matters, but not on others, involved in a Proceeding, the Company -2- shall indemnify the Indemnitee against Expenses, judgments, fines, penalties and amounts paid in settlement incurred by the Indemnitee concerning those matters for which the Indemnitee is entitled to be indemnified pursuant to the provisions of this Agreement. 5. Advancement of Expenses. The Expenses incurred by Indemnitee in ----------------------- investigating, defending, or appealing any Proceeding covered hereunder shall be paid by the Company in advance (unless, in the opinion of regular outside counsel to the Company, the provisions of applicable law precludes such advance payment), with the understanding, agreement and undertaking by Indemnitee that in the event it shall ultimately be determined that Indemnitee was not entitled to be indemnified, or was not entitled to be fully indemnified, that Indemnitee shall repay to the Company such amount, or the appropriate portion thereof, so paid or advanced. 6. Notice and Other Indemnification Procedures. ------------------------------------------- 6.1 Notice to Company. Promptly after becoming aware of or ----------------- receiving notice of the commencement of or the threat of commencement of any Proceeding, the indemnitee shall, if the Indemnitee believes that indemnification with respect thereto may be sought from the Company under this Agreement, notify the Company in writing of the commencement or threat of commencement thereof. In addition, Indemnitee shall give the Company such information and cooperation as it may reasonably require and as shall be within Indemnitee's power. The omission to so notify the Company will not relieve it from any liability which it may have to Indemnitee other than under this Agreement. 6.2 Notice to Insurer. At the time of the receipt of a notice ----------------- of the commencement of a Proceeding pursuant to Section 6.1 hereof, the Company shall give prompt notice of the commencement of such Proceeding to the insurer in accordance with the procedures set forth in the respective policies. The Company shall thereafter take all reasonably necessary and desirable action to cause such insurer to pay, on behalf of the Indemnitee, all amounts payable as a result of such Proceeding in accordance with the terms of such policies, unless the Company has already paid such amounts directly to the Indemnitee. 6.3 Choice of Counsel. If the Company shall be obligated to pay ----------------- the Expenses of any Proceeding, the Company shall be entitled to assume the defense of such Proceeding, with counsel approved by the Indemnitee (which approval the Indemnitee shall not unreasonably withhold), upon the delivery to the Indemnitee of written notice of the Company's election to do so. After delivery of such notice, approval of such counsel by the Indemnitee and the retention of such counsel by the Company, the Company will not be liable to the Indemnitee under this Agreement for any fees of any counsel other than the counsel approved by the Indemnitee and retained by the Company which may be subsequently incurred by the Indemnitee with respect to the same Proceeding; provided that (a) the Indemnitee shall have the right to employ his own counsel in any such Proceeding at the Indemnitee's expense; and (b) if (1) the employment of counsel by the Indemnitee has been previously authorized by the Company in writing, (2) the Indemnitee shall have reasonably concluded that there is an actual conflict of interest between the Company and the -3- Indemnitee in the conduct of any such defense or (3) the Company shall not, in fact, have employed counsel to assume the defense of such Proceeding, then the Expenses of Indemnitee's counsel reasonably and actually incurred by the Indemnitee shall be payable by the Company. 7. Determination of Right to Indemnification. ----------------------------------------- 7.1 Presumption of Right to Indemnification. To the extent the --------------------------------------- Indemnitee has been successful on the merits or otherwise in defense of any Proceeding referred to in Section 3.1 or 3.2 of this Agreement or in the defense of any claim, issue or matter involved in any such Proceeding, the Indemnitee shall be presumed to have met the applicable standard of conduct, if any, for indemnification under this Agreement. 7.2 Burden of Proof. If Section 7.1 is inapplicable, the --------------- Company shall not withhold indemnification pursuant to Section 3.1 or 3.2 of this Agreement unless (a) the board of directors of the Company shall determine that California law or other applicable law prohibits the indemnification of Indemnitee under the terms of this Agreement, or (b) the Company shall receive a written opinion from independent legal counsel selected by the Indemnitee and the Company to that effect. The Company shall have the burden of proving to such counsel that indemnification is not available to the Indemnitee as set forth in the preceding sentence. Any failure between the Indemnitee and the Company to agree in the selection of the independent legal counsel shall be resolved pursuant to Sections 7.3 through 7.6 below. 7.3 Selection of Counsel. If the Indemnitee and the Company are -------------------- unable to agree on the selection of the independent counsel, such independent counsel shall be selected by lot from among the ten (10) law firms having the most lawyers practicing in Los Angeles, California (excluding any firms that have acted as counsel for the Company). Regular counsel to the Company shall contact such counsel in order of their selection by lot, requesting each such firm to accept engagement to make the determination required hereunder until one of such firms accepts such engagement. The fees for such counsel shall be paid by the Company. 7.4 Response of Company. As soon as practicable, and in no ------------------- event later than 20 days after the selection of independent legal counsel pursuant to Section 7.3 above, the Company shall, at its own expense, submit to the independent legal counsel, in such manner as the independent legal counsel may reasonably request, its claim, if any, that the Indemnitee is not entitled to indemnification. 7.5 Appeal. Notwithstanding a determination by an independent ------ legal counsel appointed pursuant to Section 7.3 hereof that Indemnitee is not entitled to indemnification with respect to a specific Proceeding, the Indemnitee shall have the right to apply to the court in which that Proceeding is or was pending, or such other court of competent jurisdiction, for the purpose of enforcing the Indemnitee's right to indemnification pursuant to this Agreement. The Company agrees that a determination by the independent legal counsel that the Indemnitee has not met the standard of conduct required for -4- indemnification shall not create a presumption, in any subsequent court proceeding, that the Indemnitee has failed to meet the applicable standard of conduct. 7.6 Actions Under Agreement. The Company shall indemnify the ----------------------- Indemnitee against all Expenses reasonably and actually incurred by the Indemnitee in connection with any hearing or proceeding under this Section 7 involving the Indemnitee and against all Expenses reasonably and actually incurred by the Indemnitee in connection with any other proceeding between the Company and the Indemnitee involving the interpretation or enforcement of the rights of the Indemnitee under this Agreement, unless a court of competent jurisdiction finds that each of the claims and/or defenses of the Indemnitee in any such Proceeding was frivolous or not made in good faith. 8. Exceptions. Any other provision herein to the contrary ---------- notwithstanding, the Company shall not be obligated pursuant to the terms of this Agreement: 8.1 Claims Initiated by Indemnitee. To indemnify the Indemnitee ------------------------------ with respect to Proceedings initiated or brought voluntarily by the Indemnitee and not by way of defense, except with respect to Proceedings brought to establish or enforce a right to indemnification under this Agreement or any other statute or law or otherwise; 8.2 Lack of Good Faith. To indemnify the Indemnitee for any ------------------ Expenses incurred by the Indemnitee with respect to any Proceeding instituted by the Indemnitee to enforce or interpret this Agreement, if a court of competent jurisdiction determines that each of the material assertions made by the Indemnitee in such Proceeding was not made in good faith or was frivolous; 8.3 SEC Limitation. To indemnify the Indemnitee to the extent -------------- such indemnification would cause the Company to violate any undertaking the Company makes to the Securities and Exchange Commission ("SEC") with respect to indemnification; 8.4 Excluded Acts. To indemnify the Indemnitee as to ------------- circumstances in which indemnification is prohibited pursuant to California law; or 8.5 Settlements. To indemnify the Indemnitee for any amount ----------- paid in settlement of any Proceeding without the prior written consent of the Company, which consent shall not be unreasonably withheld. 9. Subrogation. In the event of payment under this Agreement, the ----------- Company shall be subrogated to the extent of such payment to all of the rights of recovery of the Indemnitee, who shall do all things that may be necessary to secure such rights, including the execution of such documents necessary to enable the Company effectively to bring suit to enforce such rights. 10. Non-exclusivity and Continuation of Rights. The provisions for ------------------------------------------ indemnification and advancement of Expenses set forth in this Agreement shall not be deemed exclusive of any other rights which the Indemnitee may have pursuant to the Articles -5- of Incorporation or Bylaws, any agreement, vote of the Company's stockholders or disinterested directors, provisions of California law or otherwise. The Indemnitee's rights hereunder shall continue after the Indemnitee has ceased acting as a director of the Company. 11. Severability. If any provision or provisions of this Agreement ------------ shall be held to be invalid, illegal or unenforceable for any reason whatsoever, (a) the validity, legality and enforceability of the remaining provisions of this Agreement (including without limitation, all portions of any paragraphs of this Agreement containing any such provision held to be invalid, illegal or unenforceable that are not themselves invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby, and (b) to the fullest extent possible, the provisions of this Agreement (including, without limitation, all portions of any paragraph of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that are not themselves invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal or unenforceable. 12. Modification and Waiver. No supplement, modification or ----------------------- amendment of this Agreement shall be binding unless executed in writing by both of the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provision hereof (whether or not similar) nor shall such waiver constitute a continuing waiver. 13. Effectiveness of Agreement. This Agreement shall be effective as -------------------------- of the date set forth on the first page (the "Effective Date") and shall apply to acts or omissions of Indemnitee which occurred prior to such date if Indemnitee was an officer or director of the Company, or was serving at the request of the Company as a director, officer, agent or employee of another enterprise, at the time such act or omission occurred. 14. Successors and Assigns. The terms of this Agreement shall bind, ---------------------- and shall inure to the benefit of, the successors and assigns of the parties hereto. 15. Notice. All notices, requests, demands and other communications ------ under this Agreement shall be in writing, addressed to the parties' addresses set forth below their signatures to this Agreement, and shall be deemed duly given (a) if delivered by hand and received by the party notice was sent to on the day delivered, or (b) if mailed by certified or registered mail with postage prepaid, on the third business day after the mailing date. Any party may change its address for notices, requests, demands and communications by giving notice thereof in the manner specified in this Section 15. 16. Governing Law. This Agreement shall be governed exclusively by ------------- and construed according to the laws of the State of California. -6- IN WITNESS WHEREOF, the parties hereto have entered into this Agreement effective as of the date first above written. YES CLOTHING CO. By: /s/ Guy Anthome ------------------------------------- Guy Anthome Its President Address: YES Clothing Co. 1380 West Washington Boulevard Los Angeles, California 90007-1233 Attn: INDEMNITEE /s/ Georges Marciano ----------------------------------------- Georges Marciano Address: Georges Marciano Design Studio 9756 Wilshire Boulevard Beverly Hills, California 90212 -7- EX-10.22 9 INDEMNIFICATION AGMT W/ IRVING KROLL EXHIBIT 10.22 DIRECTORS AND OFFICERS INDEMNIFICATION AGREEMENT This Indemnification Agreement ("Agreement"), is effective as of May 3, 1995, and is made by and between YES CLOTHING CO., a California corporation (the "Company"), and IRVING KROLL (the "Indemnitee"). WHEREAS, the Indemnitee is a director or officer of the Company serving at the Company's request; WHEREAS, in recognition of the Indemnitee's services on behalf of the Company, the Company wishes to provide for the continuing indemnification of the Indemnitee, and to provide for the continued coverage of the Indemnitee under the Company's directors and officers' liability insurance policies for the period and subject to the terms set forth in this Agreement. NOW, THEREFORE, in consideration of the Indemnitee's service to the Company, and intending to be legally bound hereby, the parties hereto agree as follows: 1. Definitions. ----------- 1.1 Expenses. For purposes of this Agreement, "Expenses" mean -------- reasonable attorneys' fees and disbursements, accounting and witness fees, travel and deposition costs, expenses of investigations, expenses of Proceedings and related appeals, and any expenses of establishing a right to indemnification, pursuant to this Agreement or otherwise, including reasonable compensation for time spent by Indemnitee in connection with the investigation, defense or appeal of a Proceeding (as defined in Section 1.2 below) or action for indemnification for which he is not otherwise compensated by the Company or any third party. The term "Expenses" does not include the amount of judgments, fines or penalties actually levied against Indemnitee. 1.2 Proceeding. For purposes of this Agreement, "Proceeding" ---------- means any threatened, pending, or completed action, suit or other proceeding, whether brought in the name of the Company or otherwise and whether civil, criminal, administrative, investigative or any other type whatsoever. 2. Additional Indemnification. The Company and the Indemnitee agree -------------------------- that this Agreement does not replace or supersede prior Indemnification Agreements by and between the Company and the Indemnitee to the extent that such prior Agreement provides additional or broader indemnification coverage. 3. Indemnification. Subject to the limitations set forth in --------------- Sections 7 and 8, the Indemnitee shall be entitled to the following indemnification by the Company: 3.1 Third Party Actions. If the Indemnitee was or is a party or ------------------- is threatened to be made a party to any Proceeding (other than an action by or in the right of the Company to procure a judgment in its favor) by reason of the fact that the Indemnitee was or is a director of the Company, or by reason of the fact that Indemnitee was or is serving at the request of the Company as a director, officer, agent or employee of another enterprise, or by reason of anything done or not done by the Indemnitee in any such capacity, the Company shall indemnify the Indemnitee against any and all Expenses, judgments, fines, penalties and amounts paid in settlement, in each case to the extent actually and reasonably incurred by the Indemnitee in connection with the investigation, defense, settlement or appeal of such Proceeding, to the fullest permitted by the Company's Articles of Incorporation, California law, public policy or other applicable law, including binding regulations and orders of, and undertakings or other commitments with, any governmental entity or agency, as the same exists or may hereinafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Company to provide broader indemnification rights than said law permitted the Company to provide prior to such amendment). 3.2 Derivative Actions. If the Indemnitee was or is a party or ------------------ is threatened to be made a party to any Proceeding by or in the right of the Company to procure a judgment in the Company's favor by reason of the fact that the Indemnitee is or was a director of the Company or by reason of the fact that Indemnitee was or is serving at the request of the Company as a director, officer, agent or employee of another enterprise, or by reason of anything done or not done in any such capacity, the Company shall indemnify the Indemnitee against all Expenses actually and reasonably incurred by the Indemnitee in connection with the defense or settlement of such Proceeding, to the fullest extent permitted by the Company's Articles of Incorporation, California law, public policy, or other applicable law, including binding regulations and orders of, and undertakings or other commitments with, any governmental entity or agency, as the same exists or may hereinafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Company to provide broader indemnification rights than said law permitted the Company to provide prior to such amendment). 3.3 Expenses Paid by Insurance. Notwithstanding the foregoing, -------------------------- the Company shall not be obligated to indemnify the Indemnitee for Expenses, judgments, fines, penalties or amounts paid in settlement which have been paid directly to Indemnitee by directors' and officers' insurance, if any. 3.4 Duty to Obtain Insurance Coverage. The Company currently --------------------------------- has and will keep in force a policy of insurance for directors and officers with a minimum aggregate limit of liability of $10,000,000. The Company shall pay all premiums, commissions and other costs or charges incurred in obtaining the endorsement and shall promptly deliver to Indemnitee a certificate of confirmation of insurance with respect to such policy. 4. Partial Indemnification. If the Indemnitee is entitled to ----------------------- indemnification on some claims, issues or matters, but not on others, involved in a Proceeding, the Company -2- shall indemnify the Indemnitee against Expenses, judgments, fines, penalties and amounts paid in settlement incurred by the Indemnitee concerning those matters for which the Indemnitee is entitled to be indemnified pursuant to the provisions of this Agreement. 5. Advancement of Expenses. The Expenses incurred by Indemnitee in ----------------------- investigating, defending, or appealing any Proceeding covered hereunder shall be paid by the Company in advance (unless, in the opinion of regular outside counsel to the Company, the provisions of applicable law precludes such advance payment), with the understanding, agreement and undertaking by Indemnitee that in the event it shall ultimately be determined that Indemnitee was not entitled to be indemnified, or was not entitled to be fully indemnified, that Indemnitee shall repay to the Company such amount, or the appropriate portion thereof, so paid or advanced. 6. Notice and Other Indemnification Procedures. ------------------------------------------- 6.1 Notice to Company. Promptly after becoming aware of or ----------------- receiving notice of the commencement of or the threat of commencement of any Proceeding, the indemnitee shall, if the Indemnitee believes that indemnification with respect thereto may be sought from the Company under this Agreement, notify the Company in writing of the commencement or threat of commencement thereof. In addition, Indemnitee shall give the Company such information and cooperation as it may reasonably require and as shall be within Indemnitee's power. The omission to so notify the Company will not relieve it from any liability which it may have to Indemnitee other than under this Agreement. 6.2 Notice to Insurer. At the time of the receipt of a notice ----------------- of the commencement of a Proceeding pursuant to Section 6.1 hereof, the Company shall give prompt notice of the commencement of such Proceeding to the insurer in accordance with the procedures set forth in the respective policies. The Company shall thereafter take all reasonably necessary and desirable action to cause such insurer to pay, on behalf of the Indemnitee, all amounts payable as a result of such Proceeding in accordance with the terms of such policies, unless the Company has already paid such amounts directly to the Indemnitee. 6.3 Choice of Counsel. If the Company shall be obligated to pay ----------------- the Expenses of any Proceeding, the Company shall be entitled to assume the defense of such Proceeding, with counsel approved by the Indemnitee (which approval the Indemnitee shall not unreasonably withhold), upon the delivery to the Indemnitee of written notice of the Company's election to do so. After delivery of such notice, approval of such counsel by the Indemnitee and the retention of such counsel by the Company, the Company will not be liable to the Indemnitee under this Agreement for any fees of any counsel other than the counsel approved by the Indemnitee and retained by the Company which may be subsequently incurred by the Indemnitee with respect to the same Proceeding; provided that (a) the Indemnitee shall have the right to employ his own counsel in any such Proceeding at the Indemnitee's expense; and (b) if (1) the employment of counsel by the Indemnitee has been previously authorized by the Company in writing, (2) the Indemnitee shall have reasonably concluded that there is an actual conflict of interest between the Company and the -3- Indemnitee in the conduct of any such defense or (3) the Company shall not, in fact, have employed counsel to assume the defense of such Proceeding, then the Expenses of Indemnitee's counsel reasonably and actually incurred by the Indemnitee shall be payable by the Company. 7. Determination of Right to Indemnification. ----------------------------------------- 7.1 Presumption of Right to Indemnification. To the extent the --------------------------------------- Indemnitee has been successful on the merits or otherwise in defense of any Proceeding referred to in Section 3.1 or 3.2 of this Agreement or in the defense of any claim, issue or matter involved in any such Proceeding, the Indemnitee shall be presumed to have met the applicable standard of conduct, if any, for indemnification under this Agreement. 7.2 Burden of Proof. If Section 7.1 is inapplicable, the --------------- Company shall not withhold indemnification pursuant to Section 3.1 or 3.2 of this Agreement unless (a) the board of directors of the Company shall determine that California law or other applicable law prohibits the indemnification of Indemnitee under the terms of this Agreement, or (b) the Company shall receive a written opinion from independent legal counsel selected by the Indemnitee and the Company to that effect. The Company shall have the burden of proving to such counsel that indemnification is not available to the Indemnitee as set forth in the preceding sentence. Any failure between the Indemnitee and the Company to agree in the selection of the independent legal counsel shall be resolved pursuant to Sections 7.3 through 7.6 below. 7.3 Selection of Counsel. If the Indemnitee and the Company are -------------------- unable to agree on the selection of the independent counsel, such independent counsel shall be selected by lot from among the ten (10) law firms having the most lawyers practicing in Los Angeles, California (excluding any firms that have acted as counsel for the Company). Regular counsel to the Company shall contact such counsel in order of their selection by lot, requesting each such firm to accept engagement to make the determination required hereunder until one of such firms accepts such engagement. The fees for such counsel shall be paid by the Company. 7.4 Response of Company. As soon as practicable, and in no ------------------- event later than 20 days after the selection of independent legal counsel pursuant to Section 7.3 above, the Company shall, at its own expense, submit to the independent legal counsel, in such manner as the independent legal counsel may reasonably request, its claim, if any, that the Indemnitee is not entitled to indemnification. 7.5 Appeal. Notwithstanding a determination by an independent ------ legal counsel appointed pursuant to Section 7.3 hereof that Indemnitee is not entitled to indemnification with respect to a specific Proceeding, the Indemnitee shall have the right to apply to the court in which that Proceeding is or was pending, or such other court of competent jurisdiction, for the purpose of enforcing the Indemnitee's right to indemnification pursuant to this Agreement. The Company agrees that a determination by the independent legal counsel that the Indemnitee has not met the standard of conduct required for -4- indemnification shall not create a presumption, in any subsequent court proceeding, that the Indemnitee has failed to meet the applicable standard of conduct. 7.6 Actions Under Agreement. The Company shall indemnify the ----------------------- Indemnitee against all Expenses reasonably and actually incurred by the Indemnitee in connection with any hearing or proceeding under this Section 7 involving the Indemnitee and against all Expenses reasonably and actually incurred by the Indemnitee in connection with any other proceeding between the Company and the Indemnitee involving the interpretation or enforcement of the rights of the Indemnitee under this Agreement, unless a court of competent jurisdiction finds that each of the claims and/or defenses of the Indemnitee in any such Proceeding was frivolous or not made in good faith. 8. Exceptions. Any other provision herein to the contrary ---------- notwithstanding, the Company shall not be obligated pursuant to the terms of this Agreement: 8.1 Claims Initiated by Indemnitee. To indemnify the Indemnitee ------------------------------ with respect to Proceedings initiated or brought voluntarily by the Indemnitee and not by way of defense, except with respect to Proceedings brought to establish or enforce a right to indemnification under this Agreement or any other statute or law or otherwise; 8.2 Lack of Good Faith. To indemnify the Indemnitee for any ------------------ Expenses incurred by the Indemnitee with respect to any Proceeding instituted by the Indemnitee to enforce or interpret this Agreement, if a court of competent jurisdiction determines that each of the material assertions made by the Indemnitee in such Proceeding was not made in good faith or was frivolous; 8.3 SEC Limitation. To indemnify the Indemnitee to the extent -------------- such indemnification would cause the Company to violate any undertaking the Company makes to the Securities and Exchange Commission ("SEC") with respect to indemnification; 8.4 Excluded Acts. To indemnify the Indemnitee as to ------------- circumstances in which indemnification is prohibited pursuant to California law; or 8.5 Settlements. To indemnify the Indemnitee for any amount ----------- paid in settlement of any Proceeding without the prior written consent of the Company, which consent shall not be unreasonably withheld. 9. Subrogation. In the event of payment under this Agreement, the ----------- Company shall be subrogated to the extent of such payment to all of the rights of recovery of the Indemnitee, who shall do all things that may be necessary to secure such rights, including the execution of such documents necessary to enable the Company effectively to bring suit to enforce such rights. 10. Non-exclusivity and Continuation of Rights. The provisions for ------------------------------------------ indemnification and advancement of Expenses set forth in this Agreement shall not be deemed exclusive of any other rights which the Indemnitee may have pursuant to the Articles -5- of Incorporation or Bylaws, any agreement, vote of the Company's stockholders or disinterested directors, provisions of California law or otherwise. The Indemnitee's rights hereunder shall continue after the Indemnitee has ceased acting as a director of the Company. 11. Severability. If any provision or provisions of this Agreement ------------ shall be held to be invalid, illegal or unenforceable for any reason whatsoever, (a) the validity, legality and enforceability of the remaining provisions of this Agreement (including without limitation, all portions of any paragraphs of this Agreement containing any such provision held to be invalid, illegal or unenforceable that are not themselves invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby, and (b) to the fullest extent possible, the provisions of this Agreement (including, without limitation, all portions of any paragraph of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that are not themselves invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal or unenforceable. 12. Modification and Waiver. No supplement, modification or ----------------------- amendment of this Agreement shall be binding unless executed in writing by both of the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provision hereof (whether or not similar) nor shall such waiver constitute a continuing waiver. 13. Effectiveness of Agreement. This Agreement shall be effective as -------------------------- of the date set forth on the first page (the "Effective Date") and shall apply to acts or omissions of Indemnitee which occurred prior to such date if Indemnitee was an officer or director of the Company, or was serving at the request of the Company as a director, officer, agent or employee of another enterprise, at the time such act or omission occurred. 14. Successors and Assigns. The terms of this Agreement shall bind, ---------------------- and shall inure to the benefit of, the successors and assigns of the parties hereto. 15. Notice. All notices, requests, demands and other communications ------ under this Agreement shall be in writing, addressed to the parties' addresses set forth below their signatures to this Agreement, and shall be deemed duly given (a) if delivered by hand and received by the party notice was sent to on the day delivered, or (b) if mailed by certified or registered mail with postage prepaid, on the third business day after the mailing date. Any party may change its address for notices, requests, demands and communications by giving notice thereof in the manner specified in this Section 15. 16. Governing Law. This Agreement shall be governed exclusively by ------------- and construed according to the laws of the State of California. -6- IN WITNESS WHEREOF, the parties hereto have entered into this Agreement effective as of the date first above written. YES CLOTHING CO. By /s/ Daniel V. Goodstein -------------------------------------- Daniel V. Goodstein Its Chief Financial Officer Address: YES Clothing Co. 1380 West Washington Boulevard Los Angeles, California 90007-1233 Attn: INDEMNITEE /s/ Irving Kroll ----------------------------------------- Irving Kroll Address: 19750 Wells Drive Woodland Hills, California 91364 -7- EX-10.23 10 INDEMNIFICATION AGMT W/ M. SCHOENHOLZ EXHIBIT 10.23 DIRECTORS AND OFFICERS INDEMNIFICATION AGREEMENT This Indemnification Agreement ("Agreement"), is effective as of May 3, 1995, and is made by and between YES CLOTHING CO., a California corporation (the "Company"), and MAURICE SCHOENHOLZ (the "Indemnitee"). WHEREAS, the Indemnitee is a director or officer of the Company serving at the Company's request; WHEREAS, in recognition of the Indemnitee's services on behalf of the Company, the Company wishes to provide for the continuing indemnification of the Indemnitee, and to provide for the continued coverage of the Indemnitee under the Company's directors and officers' liability insurance policies for the period and subject to the terms set forth in this Agreement. NOW, THEREFORE, in consideration of the Indemnitee's service to the Company, and intending to be legally bound hereby, the parties hereto agree as follows: 1. Definitions. ----------- 1.1 Expenses. For purposes of this Agreement, "Expenses" mean -------- reasonable attorneys' fees and disbursements, accounting and witness fees, travel and deposition costs, expenses of investigations, expenses of Proceedings and related appeals, and any expenses of establishing a right to indemnification, pursuant to this Agreement or otherwise, including reasonable compensation for time spent by Indemnitee in connection with the investigation, defense or appeal of a Proceeding (as defined in Section 1.2 below) or action for indemnification for which he is not otherwise compensated by the Company or any third party. The term "Expenses" does not include the amount of judgments, fines or penalties actually levied against Indemnitee. 1.2 Proceeding. For purposes of this Agreement, "Proceeding" ---------- means any threatened, pending, or completed action, suit or other proceeding, whether brought in the name of the Company or otherwise and whether civil, criminal, administrative, investigative or any other type whatsoever. 2. Additional Indemnification. The Company and the Indemnitee agree -------------------------- that this Agreement does not replace or supersede prior Indemnification Agreements by and between the Company and the Indemnitee to the extent that such prior Agreement provides additional or broader indemnification coverage. 3. Indemnification. Subject to the limitations set forth in --------------- Sections 7 and 8, the Indemnitee shall be entitled to the following indemnification by the Company: 3.1 Third Party Actions. If the Indemnitee was or is a party or ------------------- is threatened to be made a party to any Proceeding (other than an action by or in the right of the Company to procure a judgment in its favor) by reason of the fact that the Indemnitee was or is a director of the Company, or by reason of the fact that Indemnitee was or is serving at the request of the Company as a director, officer, agent or employee of another enterprise, or by reason of anything done or not done by the Indemnitee in any such capacity, the Company shall indemnify the Indemnitee against any and all Expenses, judgments, fines, penalties and amounts paid in settlement, in each case to the extent actually and reasonably incurred by the Indemnitee in connection with the investigation, defense, settlement or appeal of such Proceeding, to the fullest permitted by the Company's Articles of Incorporation, California law, public policy or other applicable law, including binding regulations and orders of, and undertakings or other commitments with, any governmental entity or agency, as the same exists or may hereinafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Company to provide broader indemnification rights than said law permitted the Company to provide prior to such amendment). 3.2 Derivative Actions. If the Indemnitee was or is a party or ------------------ is threatened to be made a party to any Proceeding by or in the right of the Company to procure a judgment in the Company's favor by reason of the fact that the Indemnitee is or was a director of the Company or by reason of the fact that Indemnitee was or is serving at the request of the Company as a director, officer, agent or employee of another enterprise, or by reason of anything done or not done in any such capacity, the Company shall indemnify the Indemnitee against all Expenses actually and reasonably incurred by the Indemnitee in connection with the defense or settlement of such Proceeding, to the fullest extent permitted by the Company's Articles of Incorporation, California law, public policy, or other applicable law, including binding regulations and orders of, and undertakings or other commitments with, any governmental entity or agency, as the same exists or may hereinafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Company to provide broader indemnification rights than said law permitted the Company to provide prior to such amendment). 3.3 Expenses Paid by Insurance. Notwithstanding the foregoing, -------------------------- the Company shall not be obligated to indemnify the Indemnitee for Expenses, judgments, fines, penalties or amounts paid in settlement which have been paid directly to Indemnitee by directors' and officers' insurance, if any. 3.4 Duty to Obtain Insurance Coverage. The Company currently --------------------------------- has and will keep in force a policy of insurance for directors and officers with a minimum aggregate limit of liability of $10,000,000. The Company shall pay all premiums, commissions and other costs or charges incurred in obtaining the endorsement and shall promptly deliver to Indemnitee a certificate of confirmation of insurance with respect to such policy. 4. Partial Indemnification. If the Indemnitee is entitled to ----------------------- indemnification on some claims, issues or matters, but not on others, involved in a Proceeding, the Company -2- shall indemnify the Indemnitee against Expenses, judgments, fines, penalties and amounts paid in settlement incurred by the Indemnitee concerning those matters for which the Indemnitee is entitled to be indemnified pursuant to the provisions of this Agreement. 5. Advancement of Expenses. The Expenses incurred by Indemnitee in ----------------------- investigating, defending, or appealing any Proceeding covered hereunder shall be paid by the Company in advance (unless, in the opinion of regular outside counsel to the Company, the provisions of applicable law precludes such advance payment), with the understanding, agreement and undertaking by Indemnitee that in the event it shall ultimately be determined that Indemnitee was not entitled to be indemnified, or was not entitled to be fully indemnified, that Indemnitee shall repay to the Company such amount, or the appropriate portion thereof, so paid or advanced. 6. Notice and Other Indemnification Procedures. ------------------------------------------- 6.1 Notice to Company. Promptly after becoming aware of or ----------------- receiving notice of the commencement of or the threat of commencement of any Proceeding, the indemnitee shall, if the Indemnitee believes that indemnification with respect thereto may be sought from the Company under this Agreement, notify the Company in writing of the commencement or threat of commencement thereof. In addition, Indemnitee shall give the Company such information and cooperation as it may reasonably require and as shall be within Indemnitee's power. The omission to so notify the Company will not relieve it from any liability which it may have to Indemnitee other than under this Agreement. 6.2 Notice to Insurer. At the time of the receipt of a notice ----------------- of the commencement of a Proceeding pursuant to Section 6.1 hereof, the Company shall give prompt notice of the commencement of such Proceeding to the insurer in accordance with the procedures set forth in the respective policies. The Company shall thereafter take all reasonably necessary and desirable action to cause such insurer to pay, on behalf of the Indemnitee, all amounts payable as a result of such Proceeding in accordance with the terms of such policies, unless the Company has already paid such amounts directly to the Indemnitee. 6.3 Choice of Counsel. If the Company shall be obligated to pay ----------------- the Expenses of any Proceeding, the Company shall be entitled to assume the defense of such Proceeding, with counsel approved by the Indemnitee (which approval the Indemnitee shall not unreasonably withhold), upon the delivery to the Indemnitee of written notice of the Company's election to do so. After delivery of such notice, approval of such counsel by the Indemnitee and the retention of such counsel by the Company, the Company will not be liable to the Indemnitee under this Agreement for any fees of any counsel other than the counsel approved by the Indemnitee and retained by the Company which may be subsequently incurred by the Indemnitee with respect to the same Proceeding; provided that (a) the Indemnitee shall have the right to employ his own counsel in any such Proceeding at the Indemnitee's expense; and (b) if (1) the employment of counsel by the Indemnitee has been previously authorized by the Company in writing, (2) the Indemnitee shall have reasonably concluded that there is an actual conflict of interest between the Company and the -3- Indemnitee in the conduct of any such defense or (3) the Company shall not, in fact, have employed counsel to assume the defense of such Proceeding, then the Expenses of Indemnitee's counsel reasonably and actually incurred by the Indemnitee shall be payable by the Company. 7. Determination of Right to Indemnification. ----------------------------------------- 7.1 Presumption of Right to Indemnification. To the extent the --------------------------------------- Indemnitee has been successful on the merits or otherwise in defense of any Proceeding referred to in Section 3.1 or 3.2 of this Agreement or in the defense of any claim, issue or matter involved in any such Proceeding, the Indemnitee shall be presumed to have met the applicable standard of conduct, if any, for indemnification under this Agreement. 7.2 Burden of Proof. If Section 7.1 is inapplicable, the --------------- Company shall not withhold indemnification pursuant to Section 3.1 or 3.2 of this Agreement unless (a) the board of directors of the Company shall determine that California law or other applicable law prohibits the indemnification of Indemnitee under the terms of this Agreement, or (b) the Company shall receive a written opinion from independent legal counsel selected by the Indemnitee and the Company to that effect. The Company shall have the burden of proving to such counsel that indemnification is not available to the Indemnitee as set forth in the preceding sentence. Any failure between the Indemnitee and the Company to agree in the selection of the independent legal counsel shall be resolved pursuant to Sections 7.3 through 7.6 below. 7.3 Selection of Counsel. If the Indemnitee and the Company are -------------------- unable to agree on the selection of the independent counsel, such independent counsel shall be selected by lot from among the ten (10) law firms having the most lawyers practicing in Los Angeles, California (excluding any firms that have acted as counsel for the Company). Regular counsel to the Company shall contact such counsel in order of their selection by lot, requesting each such firm to accept engagement to make the determination required hereunder until one of such firms accepts such engagement. The fees for such counsel shall be paid by the Company. 7.4 Response of Company. As soon as practicable, and in no ------------------- event later than 20 days after the selection of independent legal counsel pursuant to Section 7.3 above, the Company shall, at its own expense, submit to the independent legal counsel, in such manner as the independent legal counsel may reasonably request, its claim, if any, that the Indemnitee is not entitled to indemnification. 7.5 Appeal. Notwithstanding a determination by an independent ------ legal counsel appointed pursuant to Section 7.3 hereof that Indemnitee is not entitled to indemnification with respect to a specific Proceeding, the Indemnitee shall have the right to apply to the court in which that Proceeding is or was pending, or such other court of competent jurisdiction, for the purpose of enforcing the Indemnitee's right to indemnification pursuant to this Agreement. The Company agrees that a determination by the independent legal counsel that the Indemnitee has not met the standard of conduct required for -4- indemnification shall not create a presumption, in any subsequent court proceeding, that the Indemnitee has failed to meet the applicable standard of conduct. 7.6 Actions Under Agreement. The Company shall indemnify the ----------------------- Indemnitee against all Expenses reasonably and actually incurred by the Indemnitee in connection with any hearing or proceeding under this Section 7 involving the Indemnitee and against all Expenses reasonably and actually incurred by the Indemnitee in connection with any other proceeding between the Company and the Indemnitee involving the interpretation or enforcement of the rights of the Indemnitee under this Agreement, unless a court of competent jurisdiction finds that each of the claims and/or defenses of the Indemnitee in any such Proceeding was frivolous or not made in good faith. 8. Exceptions. Any other provision herein to the contrary ---------- notwithstanding, the Company shall not be obligated pursuant to the terms of this Agreement: 8.1 Claims Initiated by Indemnitee. To indemnify the Indemnitee ------------------------------ with respect to Proceedings initiated or brought voluntarily by the Indemnitee and not by way of defense, except with respect to Proceedings brought to establish or enforce a right to indemnification under this Agreement or any other statute or law or otherwise; 8.2 Lack of Good Faith. To indemnify the Indemnitee for any ------------------ Expenses incurred by the Indemnitee with respect to any Proceeding instituted by the Indemnitee to enforce or interpret this Agreement, if a court of competent jurisdiction determines that each of the material assertions made by the Indemnitee in such Proceeding was not made in good faith or was frivolous; 8.3 SEC Limitation. To indemnify the Indemnitee to the extent -------------- such indemnification would cause the Company to violate any undertaking the Company makes to the Securities and Exchange Commission ("SEC") with respect to indemnification; 8.4 Excluded Acts. To indemnify the Indemnitee as to ------------- circumstances in which indemnification is prohibited pursuant to California law; or 8.5 Settlements. To indemnify the Indemnitee for any amount ----------- paid in settlement of any Proceeding without the prior written consent of the Company, which consent shall not be unreasonably withheld. 9. Subrogation. In the event of payment under this Agreement, the ----------- Company shall be subrogated to the extent of such payment to all of the rights of recovery of the Indemnitee, who shall do all things that may be necessary to secure such rights, including the execution of such documents necessary to enable the Company effectively to bring suit to enforce such rights. 10. Non-exclusivity and Continuation of Rights. The provisions for ------------------------------------------ indemnification and advancement of Expenses set forth in this Agreement shall not be deemed exclusive of any other rights which the Indemnitee may have pursuant to the Articles -5- of Incorporation or Bylaws, any agreement, vote of the Company's stockholders or disinterested directors, provisions of California law or otherwise. The Indemnitee's rights hereunder shall continue after the Indemnitee has ceased acting as a director of the Company. 11. Severability. If any provision or provisions of this Agreement ------------ shall be held to be invalid, illegal or unenforceable for any reason whatsoever, (a) the validity, legality and enforceability of the remaining provisions of this Agreement (including without limitation, all portions of any paragraphs of this Agreement containing any such provision held to be invalid, illegal or unenforceable that are not themselves invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby, and (b) to the fullest extent possible, the provisions of this Agreement (including, without limitation, all portions of any paragraph of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that are not themselves invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal or unenforceable. 12. Modification and Waiver. No supplement, modification or ----------------------- amendment of this Agreement shall be binding unless executed in writing by both of the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provision hereof (whether or not similar) nor shall such waiver constitute a continuing waiver. 13. Effectiveness of Agreement. This Agreement shall be effective as -------------------------- of the date set forth on the first page (the "Effective Date") and shall apply to acts or omissions of Indemnitee which occurred prior to such date if Indemnitee was an officer or director of the Company, or was serving at the request of the Company as a director, officer, agent or employee of another enterprise, at the time such act or omission occurred. 14. Successors and Assigns. The terms of this Agreement shall bind, ---------------------- and shall inure to the benefit of, the successors and assigns of the parties hereto. 15. Notice. All notices, requests, demands and other communications ------ under this Agreement shall be in writing, addressed to the parties' addresses set forth below their signatures to this Agreement, and shall be deemed duly given (a) if delivered by hand and received by the party notice was sent to on the day delivered, or (b) if mailed by certified or registered mail with postage prepaid, on the third business day after the mailing date. Any party may change its address for notices, requests, demands and communications by giving notice thereof in the manner specified in this Section 15. 16. Governing Law. This Agreement shall be governed exclusively by ------------- and construed according to the laws of the State of California. -6- IN WITNESS WHEREOF, the parties hereto have entered into this Agreement effective as of the date first above written. YES CLOTHING CO. By /s/ Daniel V. Goodstein ------------------------------------- Daniel V. Goodstein Its Chief Financial Officer Address: YES Clothing Co. 1380 West Washington Boulevard Los Angeles, California 90007-1233 Attn: INDEMNITEE /s/ Maurice Schoenholz ---------------------------------------- Maurice Schoenholz Address: c/o Republic Factors Corp. 1000 Wilshire Boulevard Suite 400 Los Angeles, California 90017 -7- EX-10.24 11 INDEMNIFICATION AGMT W/ G. ANTHOME EXHIBIT 10.24 DIRECTORS AND OFFICERS INDEMNIFICATION AGREEMENT This Indemnification Agreement ("Agreement"), is effective as of May 18, 1995, and is made by and between YES CLOTHING CO., a California corporation (the "Company"), and GUY ANTHOME (the "Indemnitee"). WHEREAS, the Indemnitee is a director or officer of the Company serving at the Company's request; WHEREAS, in recognition of the Indemnitee's services on behalf of the Company, the Company wishes to provide for the continuing indemnification of the Indemnitee, and to provide for the continued coverage of the Indemnitee under the Company's directors and officers' liability insurance policies for the period and subject to the terms set forth in this Agreement. NOW, THEREFORE, in consideration of the Indemnitee's service to the Company, and intending to be legally bound hereby, the parties hereto agree as follows: 1. Definitions. ----------- 1.1 Expenses. For purposes of this Agreement, "Expenses" mean -------- reasonable attorneys' fees and disbursements, accounting and witness fees, travel and deposition costs, expenses of investigations, expenses of Proceedings and related appeals, and any expenses of establishing a right to indemnification, pursuant to this Agreement or otherwise, including reasonable compensation for time spent by Indemnitee in connection with the investigation, defense or appeal of a Proceeding (as defined in Section 1.2 below) or action for indemnification for which he is not otherwise compensated by the Company or any third party. The term "Expenses" does not include the amount of judgments, fines or penalties actually levied against Indemnitee. 1.2 Proceeding. For purposes of this Agreement, "Proceeding" ---------- means any threatened, pending, or completed action, suit or other proceeding, whether brought in the name of the Company or otherwise and whether civil, criminal, administrative, investigative or any other type whatsoever. 2. Additional Indemnification. The Company and the Indemnitee agree -------------------------- that this Agreement does not replace or supersede prior Indemnification Agreements by and between the Company and the Indemnitee to the extent that such prior Agreement provides additional or broader indemnification coverage. 3. Indemnification. Subject to the limitations set forth in --------------- Sections 7 and 8, the Indemnitee shall be entitled to the following indemnification by the Company: 3.1 Third Party Actions. If the Indemnitee was or is a party or ------------------- is threatened to be made a party to any Proceeding (other than an action by or in the right of the Company to procure a judgment in its favor) by reason of the fact that the Indemnitee was or is a director of the Company, or by reason of the fact that Indemnitee was or is serving at the request of the Company as a director, officer, agent or employee of another enterprise, or by reason of anything done or not done by the Indemnitee in any such capacity, the Company shall indemnify the Indemnitee against any and all Expenses, judgments, fines, penalties and amounts paid in settlement, in each case to the extent actually and reasonably incurred by the Indemnitee in connection with the investigation, defense, settlement or appeal of such Proceeding, to the fullest permitted by the Company's Articles of Incorporation, California law, public policy or other applicable law, including binding regulations and orders of, and undertakings or other commitments with, any governmental entity or agency, as the same exists or may hereinafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Company to provide broader indemnification rights than said law permitted the Company to provide prior to such amendment). 3.2 Derivative Actions. If the Indemnitee was or is a party or ------------------ is threatened to be made a party to any Proceeding by or in the right of the Company to procure a judgment in the Company's favor by reason of the fact that the Indemnitee is or was a director of the Company or by reason of the fact that Indemnitee was or is serving at the request of the Company as a director, officer, agent or employee of another enterprise, or by reason of anything done or not done in any such capacity, the Company shall indemnify the Indemnitee against all Expenses actually and reasonably incurred by the Indemnitee in connection with the defense or settlement of such Proceeding, to the fullest extent permitted by the Company's Articles of Incorporation, California law, public policy, or other applicable law, including binding regulations and orders of, and undertakings or other commitments with, any governmental entity or agency, as the same exists or may hereinafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Company to provide broader indemnification rights than said law permitted the Company to provide prior to such amendment). 3.3 Expenses Paid by Insurance. Notwithstanding the foregoing, -------------------------- the Company shall not be obligated to indemnify the Indemnitee for Expenses, judgments, fines, penalties or amounts paid in settlement which have been paid directly to Indemnitee by directors' and officers' insurance, if any. 3.4 Duty to Obtain Insurance Coverage. The Company currently --------------------------------- has and will keep in force a policy of insurance for directors and officers with a minimum aggregate limit of liability of $10,000,000. The Company shall pay all premiums, commissions and other costs or charges incurred in obtaining the endorsement and shall promptly deliver to Indemnitee a certificate of confirmation of insurance with respect to such policy. 4. Partial Indemnification. If the Indemnitee is entitled to ----------------------- indemnification on some claims, issues or matters, but not on others, involved in a Proceeding, the Company -2- shall indemnify the Indemnitee against Expenses, judgments, fines, penalties and amounts paid in settlement incurred by the Indemnitee concerning those matters for which the Indemnitee is entitled to be indemnified pursuant to the provisions of this Agreement. 5. Advancement of Expenses. The Expenses incurred by Indemnitee in ----------------------- investigating, defending, or appealing any Proceeding covered hereunder shall be paid by the Company in advance (unless, in the opinion of regular outside counsel to the Company, the provisions of applicable law precludes such advance payment), with the understanding, agreement and undertaking by Indemnitee that in the event it shall ultimately be determined that Indemnitee was not entitled to be indemnified, or was not entitled to be fully indemnified, that Indemnitee shall repay to the Company such amount, or the appropriate portion thereof, so paid or advanced. 6. Notice and Other Indemnification Procedures. ------------------------------------------- 6.1 Notice to Company. Promptly after becoming aware of or ----------------- receiving notice of the commencement of or the threat of commencement of any Proceeding, the indemnitee shall, if the Indemnitee believes that indemnification with respect thereto may be sought from the Company under this Agreement, notify the Company in writing of the commencement or threat of commencement thereof. In addition, Indemnitee shall give the Company such information and cooperation as it may reasonably require and as shall be within Indemnitee's power. The omission to so notify the Company will not relieve it from any liability which it may have to Indemnitee other than under this Agreement. 6.2 Notice to Insurer. At the time of the receipt of a notice ----------------- of the commencement of a Proceeding pursuant to Section 6.1 hereof, the Company shall give prompt notice of the commencement of such Proceeding to the insurer in accordance with the procedures set forth in the respective policies. The Company shall thereafter take all reasonably necessary and desirable action to cause such insurer to pay, on behalf of the Indemnitee, all amounts payable as a result of such Proceeding in accordance with the terms of such policies, unless the Company has already paid such amounts directly to the Indemnitee. 6.3 Choice of Counsel. If the Company shall be obligated to pay ----------------- the Expenses of any Proceeding, the Company shall be entitled to assume the defense of such Proceeding, with counsel approved by the Indemnitee (which approval the Indemnitee shall not unreasonably withhold), upon the delivery to the Indemnitee of written notice of the Company's election to do so. After delivery of such notice, approval of such counsel by the Indemnitee and the retention of such counsel by the Company, the Company will not be liable to the Indemnitee under this Agreement for any fees of any counsel other than the counsel approved by the Indemnitee and retained by the Company which may be subsequently incurred by the Indemnitee with respect to the same Proceeding; provided that (a) the Indemnitee shall have the right to employ his own counsel in any such Proceeding at the Indemnitee's expense; and (b) if (1) the employment of counsel by the Indemnitee has been previously authorized by the Company in writing, (2) the Indemnitee shall have reasonably concluded that there is an actual conflict of interest between the Company and the -3- Indemnitee in the conduct of any such defense or (3) the Company shall not, in fact, have employed counsel to assume the defense of such Proceeding, then the Expenses of Indemnitee's counsel reasonably and actually incurred by the Indemnitee shall be payable by the Company. 7. Determination of Right to Indemnification. ----------------------------------------- 7.1 Presumption of Right to Indemnification. To the extent the --------------------------------------- Indemnitee has been successful on the merits or otherwise in defense of any Proceeding referred to in Section 3.1 or 3.2 of this Agreement or in the defense of any claim, issue or matter involved in any such Proceeding, the Indemnitee shall be presumed to have met the applicable standard of conduct, if any, for indemnification under this Agreement. 7.2 Burden of Proof. If Section 7.1 is inapplicable, the --------------- Company shall not withhold indemnification pursuant to Section 3.1 or 3.2 of this Agreement unless (a) the board of directors of the Company shall determine that California law or other applicable law prohibits the indemnification of Indemnitee under the terms of this Agreement, or (b) the Company shall receive a written opinion from independent legal counsel selected by the Indemnitee and the Company to that effect. The Company shall have the burden of proving to such counsel that indemnification is not available to the Indemnitee as set forth in the preceding sentence. Any failure between the Indemnitee and the Company to agree in the selection of the independent legal counsel shall be resolved pursuant to Sections 7.3 through 7.6 below. 7.3 Selection of Counsel. If the Indemnitee and the Company are -------------------- unable to agree on the selection of the independent counsel, such independent counsel shall be selected by lot from among the ten (10) law firms having the most lawyers practicing in Los Angeles, California (excluding any firms that have acted as counsel for the Company). Regular counsel to the Company shall contact such counsel in order of their selection by lot, requesting each such firm to accept engagement to make the determination required hereunder until one of such firms accepts such engagement. The fees for such counsel shall be paid by the Company. 7.4 Response of Company. As soon as practicable, and in no ------------------- event later than 20 days after the selection of independent legal counsel pursuant to Section 7.3 above, the Company shall, at its own expense, submit to the independent legal counsel, in such manner as the independent legal counsel may reasonably request, its claim, if any, that the Indemnitee is not entitled to indemnification. 7.5 Appeal. Notwithstanding a determination by an independent ------ legal counsel appointed pursuant to Section 7.3 hereof that Indemnitee is not entitled to indemnification with respect to a specific Proceeding, the Indemnitee shall have the right to apply to the court in which that Proceeding is or was pending, or such other court of competent jurisdiction, for the purpose of enforcing the Indemnitee's right to indemnification pursuant to this Agreement. The Company agrees that a determination by the independent legal counsel that the Indemnitee has not met the standard of conduct required for -4- indemnification shall not create a presumption, in any subsequent court proceeding, that the Indemnitee has failed to meet the applicable standard of conduct. 7.6 Actions Under Agreement. The Company shall indemnify the ----------------------- Indemnitee against all Expenses reasonably and actually incurred by the Indemnitee in connection with any hearing or proceeding under this Section 7 involving the Indemnitee and against all Expenses reasonably and actually incurred by the Indemnitee in connection with any other proceeding between the Company and the Indemnitee involving the interpretation or enforcement of the rights of the Indemnitee under this Agreement, unless a court of competent jurisdiction finds that each of the claims and/or defenses of the Indemnitee in any such Proceeding was frivolous or not made in good faith. 8. Exceptions. Any other provision herein to the contrary ---------- notwithstanding, the Company shall not be obligated pursuant to the terms of this Agreement: 8.1 Claims Initiated by Indemnitee. To indemnify the Indemnitee ------------------------------ with respect to Proceedings initiated or brought voluntarily by the Indemnitee and not by way of defense, except with respect to Proceedings brought to establish or enforce a right to indemnification under this Agreement or any other statute or law or otherwise; 8.2 Lack of Good Faith. To indemnify the Indemnitee for any ------------------ Expenses incurred by the Indemnitee with respect to any Proceeding instituted by the Indemnitee to enforce or interpret this Agreement, if a court of competent jurisdiction determines that each of the material assertions made by the Indemnitee in such Proceeding was not made in good faith or was frivolous; 8.3 SEC Limitation. To indemnify the Indemnitee to the extent -------------- such indemnification would cause the Company to violate any undertaking the Company makes to the Securities and Exchange Commission ("SEC") with respect to indemnification; 8.4 Excluded Acts. To indemnify the Indemnitee as to ------------- circumstances in which indemnification is prohibited pursuant to California law; or 8.5 Settlements. To indemnify the Indemnitee for any amount ----------- paid in settlement of any Proceeding without the prior written consent of the Company, which consent shall not be unreasonably withheld. 9. Subrogation. In the event of payment under this Agreement, the ----------- Company shall be subrogated to the extent of such payment to all of the rights of recovery of the Indemnitee, who shall do all things that may be necessary to secure such rights, including the execution of such documents necessary to enable the Company effectively to bring suit to enforce such rights. 10. Non-exclusivity and Continuation of Rights. The provisions for ------------------------------------------ indemnification and advancement of Expenses set forth in this Agreement shall not be deemed exclusive of any other rights which the Indemnitee may have pursuant to the Articles -5- of Incorporation or Bylaws, any agreement, vote of the Company's stockholders or disinterested directors, provisions of California law or otherwise. The Indemnitee's rights hereunder shall continue after the Indemnitee has ceased acting as a director of the Company. 11. Severability. If any provision or provisions of this Agreement ------------ shall be held to be invalid, illegal or unenforceable for any reason whatsoever, (a) the validity, legality and enforceability of the remaining provisions of this Agreement (including without limitation, all portions of any paragraphs of this Agreement containing any such provision held to be invalid, illegal or unenforceable that are not themselves invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby, and (b) to the fullest extent possible, the provisions of this Agreement (including, without limitation, all portions of any paragraph of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that are not themselves invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal or unenforceable. 12. Modification and Waiver. No supplement, modification or ----------------------- amendment of this Agreement shall be binding unless executed in writing by both of the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provision hereof (whether or not similar) nor shall such waiver constitute a continuing waiver. 13. Effectiveness of Agreement. This Agreement shall be effective as -------------------------- of the date set forth on the first page (the "Effective Date") and shall apply to acts or omissions of Indemnitee which occurred prior to such date if Indemnitee was an officer or director of the Company, or was serving at the request of the Company as a director, officer, agent or employee of another enterprise, at the time such act or omission occurred. 14. Successors and Assigns. The terms of this Agreement shall bind, ---------------------- and shall inure to the benefit of, the successors and assigns of the parties hereto. 15. Notice. All notices, requests, demands and other communications ------ under this Agreement shall be in writing, addressed to the parties' addresses set forth below their signatures to this Agreement, and shall be deemed duly given (a) if delivered by hand and received by the party notice was sent to on the day delivered, or (b) if mailed by certified or registered mail with postage prepaid, on the third business day after the mailing date. Any party may change its address for notices, requests, demands and communications by giving notice thereof in the manner specified in this Section 15. 16. Governing Law. This Agreement shall be governed exclusively by ------------- and construed according to the laws of the State of California. -6- IN WITNESS WHEREOF, the parties hereto have entered into this Agreement effective as of the date first above written. YES CLOTHING CO. By /s/ Irving Kroll -------------------------------------- Irving Kroll Chairman of the Board of Directors Address: YES Clothing Co. 1380 West Washington Boulevard Los Angeles, California 90007-1233 Attn: INDEMNITEE /s/ Guy Anthome ----------------------------------------- Guy Anthome Address: YES Clothing Co. 1380 West Washington Boulevard Los Angeles, California 90007-1233 -7- EX-10.25 12 INDEMNIFICATION AGMT W/ JEFFREY P. BUSSE EXHIBIT 10.25 DIRECTORS AND OFFICERS INDEMNIFICATION AGREEMENT This Indemnification Agreement ("Agreement"), is effective as of May 18, 1995, and is made by and between YES CLOTHING CO., a California corporation (the "Company"), and JEFFREY BUSSE (the "Indemnitee"). WHEREAS, the Indemnitee is a director or officer of the Company serving at the Company's request; WHEREAS, in recognition of the Indemnitee's services on behalf of the Company, the Company wishes to provide for the continuing indemnification of the Indemnitee, and to provide for the continued coverage of the Indemnitee under the Company's directors and officers' liability insurance policies for the period and subject to the terms set forth in this Agreement. NOW, THEREFORE, in consideration of the Indemnitee's service to the Company, and intending to be legally bound hereby, the parties hereto agree as follows: 1. Definitions. ----------- 1.1 Expenses. For purposes of this Agreement, "Expenses" mean -------- reasonable attorneys' fees and disbursements, accounting and witness fees, travel and deposition costs, expenses of investigations, expenses of Proceedings and related appeals, and any expenses of establishing a right to indemnification, pursuant to this Agreement or otherwise, including reasonable compensation for time spent by Indemnitee in connection with the investigation, defense or appeal of a Proceeding (as defined in Section 1.2 below) or action for indemnification for which he is not otherwise compensated by the Company or any third party. The term "Expenses" does not include the amount of judgments, fines or penalties actually levied against Indemnitee. 1.2 Proceeding. For purposes of this Agreement, "Proceeding" ---------- means any threatened, pending, or completed action, suit or other proceeding, whether brought in the name of the Company or otherwise and whether civil, criminal, administrative, investigative or any other type whatsoever. 2. Additional Indemnification. The Company and the Indemnitee agree -------------------------- that this Agreement does not replace or supersede prior Indemnification Agreements by and between the Company and the Indemnitee to the extent that such prior Agreement provides additional or broader indemnification coverage. 3. Indemnification. Subject to the limitations set forth in --------------- Sections 7 and 8, the Indemnitee shall be entitled to the following indemnification by the Company: 3.1 Third Party Actions. If the Indemnitee was or is a party or ------------------- is threatened to be made a party to any Proceeding (other than an action by or in the right of the Company to procure a judgment in its favor) by reason of the fact that the Indemnitee was or is a director of the Company, or by reason of the fact that Indemnitee was or is serving at the request of the Company as a director, officer, agent or employee of another enterprise, or by reason of anything done or not done by the Indemnitee in any such capacity, the Company shall indemnify the Indemnitee against any and all Expenses, judgments, fines, penalties and amounts paid in settlement, in each case to the extent actually and reasonably incurred by the Indemnitee in connection with the investigation, defense, settlement or appeal of such Proceeding, to the fullest permitted by the Company's Articles of Incorporation, California law, public policy or other applicable law, including binding regulations and orders of, and undertakings or other commitments with, any governmental entity or agency, as the same exists or may hereinafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Company to provide broader indemnification rights than said law permitted the Company to provide prior to such amendment). 3.2 Derivative Actions. If the Indemnitee was or is a party or ------------------ is threatened to be made a party to any Proceeding by or in the right of the Company to procure a judgment in the Company's favor by reason of the fact that the Indemnitee is or was a director of the Company or by reason of the fact that Indemnitee was or is serving at the request of the Company as a director, officer, agent or employee of another enterprise, or by reason of anything done or not done in any such capacity, the Company shall indemnify the Indemnitee against all Expenses actually and reasonably incurred by the Indemnitee in connection with the defense or settlement of such Proceeding, to the fullest extent permitted by the Company's Articles of Incorporation, California law, public policy, or other applicable law, including binding regulations and orders of, and undertakings or other commitments with, any governmental entity or agency, as the same exists or may hereinafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Company to provide broader indemnification rights than said law permitted the Company to provide prior to such amendment). 3.3 Expenses Paid by Insurance. Notwithstanding the foregoing, -------------------------- the Company shall not be obligated to indemnify the Indemnitee for Expenses, judgments, fines, penalties or amounts paid in settlement which have been paid directly to Indemnitee by directors' and officers' insurance, if any. 3.4 Duty to Obtain Insurance Coverage. The Company currently --------------------------------- has and will keep in force a policy of insurance for directors and officers with a minimum aggregate limit of liability of $10,000,000. The Company shall pay all premiums, commissions and other costs or charges incurred in obtaining the endorsement and shall promptly deliver to Indemnitee a certificate of confirmation of insurance with respect to such policy. 4. Partial Indemnification. If the Indemnitee is entitled to ----------------------- indemnification on some claims, issues or matters, but not on others, involved in a Proceeding, the Company -2- shall indemnify the Indemnitee against Expenses, judgments, fines, penalties and amounts paid in settlement incurred by the Indemnitee concerning those matters for which the Indemnitee is entitled to be indemnified pursuant to the provisions of this Agreement. 5. Advancement of Expenses. The Expenses incurred by Indemnitee in ----------------------- investigating, defending, or appealing any Proceeding covered hereunder shall be paid by the Company in advance (unless, in the opinion of regular outside counsel to the Company, the provisions of applicable law precludes such advance payment), with the understanding, agreement and undertaking by Indemnitee that in the event it shall ultimately be determined that Indemnitee was not entitled to be indemnified, or was not entitled to be fully indemnified, that Indemnitee shall repay to the Company such amount, or the appropriate portion thereof, so paid or advanced. 6. Notice and Other Indemnification Procedures. ------------------------------------------- 6.1 Notice to Company. Promptly after becoming aware of or ----------------- receiving notice of the commencement of or the threat of commencement of any Proceeding, the indemnitee shall, if the Indemnitee believes that indemnification with respect thereto may be sought from the Company under this Agreement, notify the Company in writing of the commencement or threat of commencement thereof. In addition, Indemnitee shall give the Company such information and cooperation as it may reasonably require and as shall be within Indemnitee's power. The omission to so notify the Company will not relieve it from any liability which it may have to Indemnitee other than under this Agreement. 6.2 Notice to Insurer. At the time of the receipt of a notice ----------------- of the commencement of a Proceeding pursuant to Section 6.1 hereof, the Company shall give prompt notice of the commencement of such Proceeding to the insurer in accordance with the procedures set forth in the respective policies. The Company shall thereafter take all reasonably necessary and desirable action to cause such insurer to pay, on behalf of the Indemnitee, all amounts payable as a result of such Proceeding in accordance with the terms of such policies, unless the Company has already paid such amounts directly to the Indemnitee. 6.3 Choice of Counsel. If the Company shall be obligated to pay ----------------- the Expenses of any Proceeding, the Company shall be entitled to assume the defense of such Proceeding, with counsel approved by the Indemnitee (which approval the Indemnitee shall not unreasonably withhold), upon the delivery to the Indemnitee of written notice of the Company's election to do so. After delivery of such notice, approval of such counsel by the Indemnitee and the retention of such counsel by the Company, the Company will not be liable to the Indemnitee under this Agreement for any fees of any counsel other than the counsel approved by the Indemnitee and retained by the Company which may be subsequently incurred by the Indemnitee with respect to the same Proceeding; provided that (a) the Indemnitee shall have the right to employ his own counsel in any such Proceeding at the Indemnitee's expense; and (b) if (1) the employment of counsel by the Indemnitee has been previously authorized by the Company in writing, (2) the Indemnitee shall have reasonably concluded that there is an actual conflict of interest between the Company and the -3- Indemnitee in the conduct of any such defense or (3) the Company shall not, in fact, have employed counsel to assume the defense of such Proceeding, then the Expenses of Indemnitee's counsel reasonably and actually incurred by the Indemnitee shall be payable by the Company. 7. Determination of Right to Indemnification. ----------------------------------------- 7.1 Presumption of Right to Indemnification. To the extent the --------------------------------------- Indemnitee has been successful on the merits or otherwise in defense of any Proceeding referred to in Section 3.1 or 3.2 of this Agreement or in the defense of any claim, issue or matter involved in any such Proceeding, the Indemnitee shall be presumed to have met the applicable standard of conduct, if any, for indemnification under this Agreement. 7.2 Burden of Proof. If Section 7.1 is inapplicable, the --------------- Company shall not withhold indemnification pursuant to Section 3.1 or 3.2 of this Agreement unless (a) the board of directors of the Company shall determine that California law or other applicable law prohibits the indemnification of Indemnitee under the terms of this Agreement, or (b) the Company shall receive a written opinion from independent legal counsel selected by the Indemnitee and the Company to that effect. The Company shall have the burden of proving to such counsel that indemnification is not available to the Indemnitee as set forth in the preceding sentence. Any failure between the Indemnitee and the Company to agree in the selection of the independent legal counsel shall be resolved pursuant to Sections 7.3 through 7.6 below. 7.3 Selection of Counsel. If the Indemnitee and the Company are -------------------- unable to agree on the selection of the independent counsel, such independent counsel shall be selected by lot from among the ten (10) law firms having the most lawyers practicing in Los Angeles, California (excluding any firms that have acted as counsel for the Company). Regular counsel to the Company shall contact such counsel in order of their selection by lot, requesting each such firm to accept engagement to make the determination required hereunder until one of such firms accepts such engagement. The fees for such counsel shall be paid by the Company. 7.4 Response of Company. As soon as practicable, and in no ------------------- event later than 20 days after the selection of independent legal counsel pursuant to Section 7.3 above, the Company shall, at its own expense, submit to the independent legal counsel, in such manner as the independent legal counsel may reasonably request, its claim, if any, that the Indemnitee is not entitled to indemnification. 7.5 Appeal. Notwithstanding a determination by an independent ------ legal counsel appointed pursuant to Section 7.3 hereof that Indemnitee is not entitled to indemnification with respect to a specific Proceeding, the Indemnitee shall have the right to apply to the court in which that Proceeding is or was pending, or such other court of competent jurisdiction, for the purpose of enforcing the Indemnitee's right to indemnification pursuant to this Agreement. The Company agrees that a determination by the independent legal counsel that the Indemnitee has not met the standard of conduct required for -4- indemnification shall not create a presumption, in any subsequent court proceeding, that the Indemnitee has failed to meet the applicable standard of conduct. 7.6 Actions Under Agreement. The Company shall indemnify the ----------------------- Indemnitee against all Expenses reasonably and actually incurred by the Indemnitee in connection with any hearing or proceeding under this Section 7 involving the Indemnitee and against all Expenses reasonably and actually incurred by the Indemnitee in connection with any other proceeding between the Company and the Indemnitee involving the interpretation or enforcement of the rights of the Indemnitee under this Agreement, unless a court of competent jurisdiction finds that each of the claims and/or defenses of the Indemnitee in any such Proceeding was frivolous or not made in good faith. 8. Exceptions. Any other provision herein to the contrary ---------- notwithstanding, the Company shall not be obligated pursuant to the terms of this Agreement: 8.1 Claims Initiated by Indemnitee. To indemnify the Indemnitee ------------------------------ with respect to Proceedings initiated or brought voluntarily by the Indemnitee and not by way of defense, except with respect to Proceedings brought to establish or enforce a right to indemnification under this Agreement or any other statute or law or otherwise; 8.2 Lack of Good Faith. To indemnify the Indemnitee for any ------------------ Expenses incurred by the Indemnitee with respect to any Proceeding instituted by the Indemnitee to enforce or interpret this Agreement, if a court of competent jurisdiction determines that each of the material assertions made by the Indemnitee in such Proceeding was not made in good faith or was frivolous; 8.3 SEC Limitation. To indemnify the Indemnitee to the extent -------------- such indemnification would cause the Company to violate any undertaking the Company makes to the Securities and Exchange Commission ("SEC") with respect to indemnification; 8.4 Excluded Acts. To indemnify the Indemnitee as to ------------- circumstances in which indemnification is prohibited pursuant to California law; or 8.5 Settlements. To indemnify the Indemnitee for any amount ----------- paid in settlement of any Proceeding without the prior written consent of the Company, which consent shall not be unreasonably withheld. 9. Subrogation. In the event of payment under this Agreement, the ----------- Company shall be subrogated to the extent of such payment to all of the rights of recovery of the Indemnitee, who shall do all things that may be necessary to secure such rights, including the execution of such documents necessary to enable the Company effectively to bring suit to enforce such rights. 10. Non-exclusivity and Continuation of Rights. The provisions for ------------------------------------------ indemnification and advancement of Expenses set forth in this Agreement shall not be deemed exclusive of any other rights which the Indemnitee may have pursuant to the Articles -5- of Incorporation or Bylaws, any agreement, vote of the Company's stockholders or disinterested directors, provisions of California law or otherwise. The Indemnitee's rights hereunder shall continue after the Indemnitee has ceased acting as a director of the Company. 11. Severability. If any provision or provisions of this Agreement ------------ shall be held to be invalid, illegal or unenforceable for any reason whatsoever, (a) the validity, legality and enforceability of the remaining provisions of this Agreement (including without limitation, all portions of any paragraphs of this Agreement containing any such provision held to be invalid, illegal or unenforceable that are not themselves invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby, and (b) to the fullest extent possible, the provisions of this Agreement (including, without limitation, all portions of any paragraph of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that are not themselves invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal or unenforceable. 12. Modification and Waiver. No supplement, modification or ----------------------- amendment of this Agreement shall be binding unless executed in writing by both of the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provision hereof (whether or not similar) nor shall such waiver constitute a continuing waiver. 13. Effectiveness of Agreement. This Agreement shall be effective as -------------------------- of the date set forth on the first page (the "Effective Date") and shall apply to acts or omissions of Indemnitee which occurred prior to such date if Indemnitee was an officer or director of the Company, or was serving at the request of the Company as a director, officer, agent or employee of another enterprise, at the time such act or omission occurred. 14. Successors and Assigns. The terms of this Agreement shall bind, ---------------------- and shall inure to the benefit of, the successors and assigns of the parties hereto. 15. Notice. All notices, requests, demands and other communications ------ under this Agreement shall be in writing, addressed to the parties' addresses set forth below their signatures to this Agreement, and shall be deemed duly given (a) if delivered by hand and received by the party notice was sent to on the day delivered, or (b) if mailed by certified or registered mail with postage prepaid, on the third business day after the mailing date. Any party may change its address for notices, requests, demands and communications by giving notice thereof in the manner specified in this Section 15. 16. Governing Law. This Agreement shall be governed exclusively by ------------- and construed according to the laws of the State of California. -6- IN WITNESS WHEREOF, the parties hereto have entered into this Agreement effective as of the date first above written. YES CLOTHING CO. By /s/ Irving Kroll -------------------------------------- Irving Kroll Chairman of the Board of Directors Address: YES Clothing Co. 1380 West Washington Boulevard Los Angeles, California 90007-1233 Attn: INDEMNITEE /s/ Jeffrey Busse ----------------------------------------- Jeffrey Busse Address: YES Clothing Co. 1380 West Washington Boulevard Los Angeles, California 90007-1233 -7- EX-10.26 13 EMPLOYMENT AGMT W/ G. MARCIANO EXHIBIT 10.26 YES CLOTHING CO. 1380 WEST WASHINGTON BOULEVARD LOS ANGELES, CALIFORNIA 90007-1233 DATE: As of June 17, 1995 Georges Marciano c/o Georges Marciano Design Studio 9756 Wilshire Boulevard Beverly Hills, California 90212 Re: Employment Agreement -------------------- Dear Mr. Marciano: When executed by you ("Executive") and by a duly authorized representative of YES Clothing Co., a California corporation ("Company"), this letter will set forth the terms and conditions of your employment. 1. SERVICES 1.1 EMPLOYMENT. Company employs Executive during the Term (as hereinafter defined) to serve as Chairman of the Board of Directors and Chief Executive Officer of Company, and to render such other services ("Services") as Company may from time to time reasonably request which are consistent with the duties Executive is to perform and Executive's stature and experience. Executive has been appointed to the Board of Directors of Company and shall thereafter be included in management's slate of directors nominated for approval by the Company's shareholders. The Services shall be generally performed in Los Angeles, California. In addition, the Services may be performed by Executive from time to time on a temporary travel basis at such other locations as Company shall reasonably request consistent with its reasonable business needs. 1.2 REPORTING REQUIREMENTS AND AUTHORITY. Executive shall report to the Board of Directors of Company or the Executive Committee thereof. Except for those officers and employees subject to election by the Board of Directors of Company, Executive shall have the authority to select and employ all staff necessary to conduct the business of Company and each of its subsidiaries, and all such staff shall ultimately report to, and be subject to the control and direction of, Executive. Georges Marciano As of June 17, 1995 Page 2 1.3 TERM/EXCLUSIVITY 1.3.1 The Term of this Agreement shall commence and this Agreement shall become effective as of June 17, 1995 and shall end on June 16, 1996 unless extended or sooner terminated in accordance with the provisions of this Agreement (the "Term"). 1.3.2 The Services shall be rendered on a full time basis during normal working hours and all services of Executive shall be exclusive to Company; provided, however, that Executive may engage in other business activities with Company's prior written consent, which consent shall not be unreasonably withheld, provided that such other business activities shall not adversely affect the performance of Executive's Services hereunder. Executive acknowledges that Executive's performances and services hereunder are of a special, unique, unusual, extraordinary and intellectual character which gives them peculiar value, the loss of which cannot be reasonably or adequately compensated in an action at law for damages. with Company. 1.4 CONFIDENTIALITY. Executive acknowledges that his Services will, throughout the Term, bring Executive into close contact with many confidential affairs of Company and its Affiliates, including information about costs, profits, markets, sales, products, key personnel, pricing policies, operational methods, technical processes and other business affairs and methods and other information not readily available to the public, and plans for future development. Executive further acknowledges that the businesses of Company and its Affiliates are international in scope, that their products are marketed throughout the world, that Company and its Affiliates compete in nearly all of their business activities with other organizations which are or could be located in nearly any part of the world and that the nature of Executive's Services, position and expertise are such that he is capable of competing with Company and its Affiliates from nearly any location in the world. In recognition of the foregoing, Executive covenants and agrees to keep secret all material confidential matters of Company and its Affiliates which are not otherwise in the public domain and will not intentionally disclose them to anyone outside of Company or its Affiliates, either during or after the Term, except with Company's written consent and except for such disclosure as is necessary in the performance of Executive's duties during the Term. 1.5 INDEMNIFICATION. Executive shall be entitled throughout the Term to the benefit of the indemnification provisions contained on the date hereof in the Bylaws of Company notwithstanding any future changes therein, to the extent permitted by applicable law at the time of the assertion of any liability against Executive, and to the most favorable indemnification provisions or agreements available to any other senior executive of Company. Georges Marciano As of June 17, 1995 Page 3 2. COMPENSATION As compensation and consideration for all Services provided by Executive during the Term pursuant to this Agreement, Company agrees to pay to Executive the compensation set forth below. 2.1 FIXED ANNUAL COMPENSATION. For the period commencing on the effective date hereof and ending on June 16, 1996, Executive shall receive Fixed Annual Compensation in the amount of One Dollar ($1.00). Executive's Fixed Annual Compensation for subsequent years, if the Term is extended, shall be negotiated between Executive and the Board. 2.2 STOCK OPTIONS. Upon Executive's execution of the stock option agreement referred to hereinafter in this Section 2.2, as a special inducement to Executive, Company will grant to Executive options to acquire 2,000,000 shares of Company's common stock at the closing price of Company's common stock on June 13, 1995 (the "Options"), with the Options to vest as follows (unless they vest earlier as provided in Section 3.2.2 or Section 3.3.3 (b)): (i) 41,667 Options will vest on the first day of each month from July 1995 through May 1999; (ii) an additional 41,651 Options will vest on June 1, 1999. The Options may be exercised until the earlier of: (a) ten (10) years from the date hereof; or (b) ninety (90) days after termination of employment. The Options will be subject to such additional terms and conditions as may be set forth in Stock Option Agreement to be entered into concurrently herewith between Company and Executive. Executive agrees that the aforementioned grant of Options is subject to shareholder approval. 2.3 ADDITIONAL BENEFITS. Executive shall be entitled to participate in any profit-sharing, pension, health, vacation, insurance or other plans, benefits or policies available to the senior executive employees of Company and not duplicative of those provided herein on the terms determined by the Company from time to time, and will be entitled to reimbursement of his reasonable and customary business expenses (including first-class travel) incurred on behalf of Company or Company's Affiliates ("Additional Benefits"). 3. TERMINATION Company or Executive shall have the right to terminate the Term at any time by written notice to the other to that effect. Should the Term be terminated by either party, Georges Marciano As of June 17, 1995 Page 4 Executive shall have no right to any further Fixed Annual Compensation from and after termination or to any Additional Benefits accruing for the fiscal year of termination or thereafter, and all Options not then vested shall terminate. 4. GENERAL 4.1 APPLICABLE LAW CONTROLS. Nothing contained in this Agreement shall be construed to require the commission of any act contrary to law and wherever there is any conflict between any provisions of this Agreement and any material statute, law, ordinance or regulation contrary to which the parties have no legal right to contract, then the latter shall prevail; provided, however, that in any such event the provisions of this Agreement so affected shall be curtailed and limited only to the extent necessary to bring them within applicable legal requirements, and provided further that if any obligation to pay the Fixed Annual Compensation or any other amount due Executive hereunder is so curtailed, then such compensation or amount shall be paid as soon thereafter, either during or subsequent to the Term, as permissible. 4.2 WAIVER/ESTOPPEL. Any party hereto may waive the benefit of any term, condition or covenant in this Agreement or any right or remedy at law or in equity to which any party may be entitled but only by an instrument in writing signed by the party to be charged. No estoppel may be raised against any party except to the extent the other party relies on an instrument in writing, signed by the party to be charged, specifically reciting that the other party may rely thereon. The parties' rights and remedies under and pursuant to this Agreement or at law or in equity shall be cumulative and the exercise of any rights or remedies under one provision hereof or rights or remedies at law or in equity shall not be deemed an election of remedies; and any waiver or forbearance of any breach of this Agreement or remedy granted hereunder or at law or in equity shall not be deemed a waiver of any preceding or succeeding breach of the same or any other provision hereof or of the opportunity to exercise such right or remedy or any other right or remedy, whether or not similar, at any preceding or subsequent time. 4.3 NOTICES. Any notice which Company is required or may desire to give to Executive hereunder shall be in writing and may be served by delivering it to Executive, or by sending it to Executive by mail (effective three (3) days after mailing) or overnight delivery of same (effective the next business day), at the address set forth on page one hereof, or by telecopy (effective twelve (12) hours after confirmation), or such substitute address as Executive may from time to time designate by notice to Company. Any notice which Executive is required or may desire to serve upon Company hereunder shall be served in writing and may be served by delivering it personally or by sending it by mail, telex or telegraph to the address set forth on page one hereof, attention President, or such other substitute address as Company may from time to time designate by notice to Executive. Georges Marciano As of June 17, 1995 Page 5 4.4 GOVERNING LAW. This Agreement shall be governed by, construed and enforced and the legality and validity of each term and condition shall be determined in accordance with the internal, substantive laws of the State of California applicable to agreements fully executed and performed entirely in California. 4.5 CAPTIONS. The section headings contained herein are for reference purposes only and shall not in any way affect the meaning or interpretation of this Agreement. 4.6 NO JOINT VENTURE. Nothing herein contained shall constitute a partnership between or joint venture by the parties hereto or appoint any party the agent of any other party. No party shall hold itself out contrary to the terms of this Section and, except as otherwise specifically provided herein, no party shall become liable for the representation, act or omission of any other party. This Agreement is not for the benefit of any third party who is not referred to herein and shall not be deemed to give any right or remedy to any such third party. 4.7 MODIFICATION/ENTIRE AGREEMENT. This Agreement may not be altered, modified or amended except by an instrument in writing signed by all of the parties hereto. No person, whether or not an officer, agent, employee or representative of any party, has made or has any authority to make for or on behalf of that party any agreement, representation, warranty, statement, promise, arrangement or understanding not expressly set forth in this Agreement or in any other document executed by the parties concurrently herewith ("Parol Agreements"). This Agreement and all other documents executed by the parties concurrently herewith constitute the entire agreement between the parties and supersede all express or implied, prior or concurrent, Parol Agreements and prior written agreements with respect to the subject matter hereof. The parties acknowledge that in entering into this Agreement, they have not relied and will not in any way rely upon any Parol Agreements. Georges Marciano As of June 17, 1995 Page 6 Please confirm your agreement to the foregoing by signing below where indicated. Dated as of June 17, 1995. Very truly yours, YES Clothing Co., a Delaware corporation By: /s/ Guy Anthome ------------------------------------ Guy Anthome, President AGREED AND ACCEPTED as of this 17th day of June, 1995 /s/ Georges Marciano - ------------------------------------------ GEORGES MARCIANO EX-10.27 14 STOCK OPTION AGMT W/ G. MARCIANO EXHIBIT 10.27 EXECUTIVE STOCK OPTION AGREEMENT This Stock Option Agreement (the "Agreement") dated as of June 17, 1995, is entered into between YES Clothing Co., a California corporation ("Company"), and Georges Marciano ("Optionee"). Reference is made to that certain Employment Agreement of even date herewith between the Company and Optionee (the "Employment Agreement"). 1. GRANT OF OPTION. The Company hereby grants to Optionee the option ("Option") to purchase upon, and subject to, the terms and conditions set forth herein, all or any part of Two Million (2,000,000) shares of Company's common stock ("Common Stock") at a price of $1.25 per share. The Option granted hereunder is not intended to qualify as an "Incentive Stock Option" within the meaning of Section 422A of the Internal Revenue Code of 1986, as amended. 2. TERM AND EXERCISABILITY. The term of the Option granted hereunder shall commence as of the date hereof and shall terminate on the tenth anniversary hereof, unless sooner terminated in accordance with the provisions set forth herein. Subject to Section 7, the Option shall vest and be exercisable as follows: (a) 41,667 Options will vest on the first day of each month from July 1995 through May 1999; (b) an additional 41,651 Options will vest on June 1, 1999. 3. EXERCISE OF OPTION. 3.1 NOTICE. The Option shall be exercised by written notice delivered to the Company stating the number of shares with respect to which the Option is being exercised, together with the full purchase price of the applicable shares (i) in cash or by certified or cashier's check payable to the order of the Company, (ii) by cancellation of indebtedness owed by the Company to the Optionee, (iii) by delivery of Common Stock of the Company already owned by, and in the possession of the Optionee, (iv) if authorized by the Board of Directors of the Company, by a promissory note made by the Optionee in favor of the Company, subject to terms and conditions determined by the Board of Directors of the Company, secured by the Common Stock issuable upon exercise of the Option, and in compliance with all applicable federal and state laws, (v) by any combination thereof, or (vi) in such other manner as the Board of Directors of Company may specify. If the Option is being exercised by any person(s) other than Optionee, notice shall be accompanied by proof, satisfactory to counsel for the Company, of the right of the applicable person(s) to exercise the Option. Not less than one thousand (1000) shares may be purchased at any one time unless the number purchased is the total number which may be purchased under the Option and in no event may the Option be exercised with respect to fractional shares. 3.2 WITHHOLDING TAX. Optionee may not exercise all or any portion of the Option granted hereunder unless and until Optionee shall have made all arrangements which the Company and its counsel shall deem necessary to satisfy the Company's federal and state income tax withholding obligations, including paying to the Company the amount of any taxes which the Company may be required to withhold with respect thereto. 4. NONTRANSFERABILITY; DISABILITY OR DEATH OF OPTIONEE. The Option shall not be transferable except by will or by the laws of descent and distribution and shall be exercisable only by Optionee during his lifetime. After death, the persons to whom Optionee's rights under the Option shall have passed by order of a court of competent jurisdiction, by will or by the applicable laws of descent and distribution or the executor or administrator of Optionee's estate, shall have the right to exercise the Option, pursuant to the terms of this Agreement. 5. PRIVILEGES OF STOCK OWNERSHIP. Optionee shall have no rights as a stockholder with respect to the Common Stock until the date of issuance of stock certificates to Optionee. No adjustment will be made for dividends or other rights for which the record date is prior to the date the stock certificates are issued. 6. HOLDING OF STOCK AFTER EXERCISE OF OPTION. At the discretion of the Company, the Company may at any time require that Optionee, or any person acquiring shares upon exercise of the Option, by accepting this Option, represents and agrees that none of the shares acquired upon exercise of this Option will be acquired with a view to any sale, transfer or distribution of said shares in violation of the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder, and Optionee, or the person entitled to exercise the same, shall furnish evidence satisfactory to the Company (including a written and signed representation) to that effect in form and substance satisfactory to the Company and its counsel, including an indemnification of the Company in the event of any violation of the Securities Act of 1933 by such person. A legend to the foregoing effect shall be placed upon any shares received upon exercise of this Option. 7. TERMINATION OF EMPLOYMENT/VESTING. Any portion of this Option not then vested shall be cancelled at such time as Optionee is neither an employee of the Company nor a member of the Board of Directors of the Company. In the event of termination, any Options previously vested may be exercised for a period of 90 days thereafter. 8. ADJUSTMENTS. 8.1 If the outstanding shares of the Common Stock of the Company are increased, decreased, changed into or exchanged for a different number or kind of shares or securities of the Company through a reorganization, recapitalization, reclassification, stock dividend, stock split, reverse stock split or other similar transaction, an appropriate and proportionate adjustment shall be made in the maximum number and kind of shares as to which all or any portion of this Option may be exercised hereunder. Any such adjustment in the outstanding shares under this Option shall be made without change to the aggregate -2- purchase price applicable to the unexercised portion of the Option but with a corresponding adjustment in the purchase price for each share covered by the Option. 8.2 This Agreement shall terminate and any portion of the Option granted hereunder not then vested (or not vested due to the events set forth below) shall be cancelled upon the dissolution or liquidation of the Company, or upon a reorganization, merger or consolidation of the Company with one or more corporations as a result of which the Company is not the surviving corporation, or upon the sale of substantially all the property or more than eighty percent of the then outstanding stock of the Company to another corporation. 8.3 Notwithstanding the foregoing, the Board of Directors of the Company may provide in writing in connection with such transaction for any or all of the following alternatives (separately or in combination): (i) for the Option to become immediately exercisable; (ii) for the assumption by the successor corporation of the Option or the substitution by such corporation for the Option or new stock options covering the stock of the successor corporation, or a parent or subsidiary thereof, with appropriate adjustments as to the number and kind of shares and prices; or (iii) for the continuance of the Option by such successor corporation in which event the Option granted hereunder shall continue in the manner and under the terms so provided. 8.4 Adjustments under this Section 8 shall be made by the Board of Directors of the Company, whose determination as to what adjustments shall be made, and the extent thereof, shall be final, binding and conclusive. No fractional shares of stock shall be issued hereunder on any such adjustment. 9. NOTICES. Any notice to the Company provided for in this Agreement shall be addressed to it in care of its President at its main office, and any notice to Optionee shall be addressed to Optionee's address on file with the Company or a subsidiary corporation, or to such other address as either may designate to the other in writing. Any notice shall be deemed to be duly given if and when enclosed in a properly sealed enveloped and addressed as stated above, and deposited, postage prepaid, in a post office or branch post office regularly maintained by the United States government. In lieu of giving notice by mail as aforesaid, any written notice under this Agreement may be given to Optionee in person, and to the Company by personal delivery to its President. -3- Please confirm your agreement to the foregoing by signing below where indicated. Yes Clothing Co. a California corporation By: /s/ Guy Anthome ----------------------------------- Guy Anthome Its: President ----------------------------------- AGREED AND ACCEPTED: /s/ Georges Marciano - ------------------------------------ Georges Marciano -4- EX-10.28 15 WARRANT AGREEMENT W/ G. MARCIANO EXHIBIT 10.28 ________________________________________________________________________________ WARRANT AGREEMENT OF YES CLOTHING CO. 2,000,000 SHARES Dated as of June 17, 1995 ________________________________________________________________________________ COMMON STOCK PURCHASE WARRANT WARRANT AGREEMENT dated as of June 17, 1995, between YES Clothing Co., a California corporation (the "Company"), the Company as Warrant Agent, and Georges Marciano (the "Warrant Holder" or "Holder"). The Company proposes to issue the Common Stock Purchase Warrant as hereinafter described (the "Warrant") to purchase an aggregate of up to 2,000,000 shares of its Common Stock (the "Common Stock"), no par value per share (the shares of Common Stock issuable on exercise of the Warrant being referred to herein as the "Warrant Shares"), in favor of Warrant Holder. In consideration of the benefits and services provided to the Company by the Warrant Holder, and for the purpose of defining the terms and provisions of the Warrant and the respective rights and obligations thereunder of the Company and the Holder, the Company and the Warrant Holder hereby agree as follows: SECTION 1. TRANSFERABILITY AND FORM OF THE WARRANT. 1.1 REGISTRATION. The Warrant shall be numbered and shall be registered on the books of the Company maintained at the principal office of the Company in Los Angeles, California ("the Warrant Register"). The Company shall be entitled to treat the Holder of the Warrant as the owner in fact thereof for all purposes and shall not be bound to recognize any equitable or other claim to or interest in such Warrant on the part of any other person, and shall not be liable for any Company registration or transfer of Warrant which is registered or to be registered in the name of a fiduciary or the nominee of a fiduciary unless made with the actual knowledge that a fiduciary or nominee is committing a breach of trust in requesting such registration or transfer, or with such knowledge of such facts that its participation therein amounts to bad faith. 1.2 TRANSFER--GENERAL. Subject to the terms hereof, the Warrant shall be transferable only on the books of the Company maintained at its principal office upon delivery thereof duly endorsed by the Holder or by his duly authorized attorney or representative, or accompanied by proper evidence of succession, assignment or authority to transfer. In all cases of transfer by an attorney, the original power of attorney, duly approved, or a copy thereof, duly certified, shall be deposited and remain with the Company. In case of transfer by executors, administrators, guardians or other legal representatives, duly authenticated evidence of their authority shall be produced, and may be required to be deposited and to remain with the Company in its discretion. Upon any registration of transfer, the Company shall countersign and deliver a new Warrant to the persons entitled thereto. The Company or the Warrant Agent may require the payment of a sum sufficient to cover any tax or governmental charge that may be imposed in connection with any such transfer. 1.3 TRANSFER RESTRICTIONS. The Holder may provide for the transfer of the Warrant only as may be permitted under applicable federal and state securities laws. 1.4 FORM OF THE WARRANT. The text of the Warrant and of the form of election to purchase Warrant Shares (the "Purchase Form") shall be substantially as set forth in Exhibit A attached hereto. The price per Warrant Share and the number of Warrant Shares issuable upon exercise of each Warrant are subject to adjustment upon the occurrence of certain events, all as hereinafter provided. The Warrant shall be executed on behalf of the Company by its President or one of its Vice Presidents, under its corporate seal reproduced thereon, and attested by its Secretary or an Assistant Secretary. The Warrant shall be dated as of the date of countersignature thereof by the Company either upon initial issuance or upon transfer. SECTION 2. TERM OF THE WARRANT; EXERCISE OF THE WARRANT; WARRANT PRICE, ETC. 2.1 TERM OF THE WARRANT. Subject to the terms of this Agreement, the Holder shall have the right, which may be exercised from time to time, until a date two years from the date hereof, to purchase from the Company the number of fully paid and nonassessable Warrant Shares which the Holder may at the time be entitled to purchase on exercise of such Warrant. If the last day for the exercise of the Warrant shall not be a business day, then the Warrant may be exercised on the next succeeding business day. 2.2 EXERCISE OF THE WARRANT. The Warrant may be exercised upon surrender to the Company, at its principal office, of the certificate evidencing the Warrant to be exercised, together with the Purchase Form on the reverse thereof duly filled in and signed, and upon payment to the Company, of the Warrant Price (as defined in and determined in accordance with the provisions of Sections 2 and 6 hereof), for the number of Warrant Shares in respect of which such Warrant is then exercised. Upon partial exercise, a Warrant Certificate for the unexercised portion shall be delivered to the Holder. Payment of the aggregate Warrant Price shall be made in cash, by certified or official bank check. Subject to Section 3 hereof, upon such surrender of the Warrant and payment of the Warrant Price as aforesaid, the Company shall issue and cause to be delivered with all reasonable dispatch to or upon the written order of the Holder and in such name or names as the Holder may designate, a certificate or certificates for the number of full Warrant Shares so purchased upon the exercise of such Warrant, together with cash, as provided in Section 7 hereof, in respect of any fractional Warrant Shares otherwise issuable upon such surrender. Such certificate or certificates shall be deemed to have been issued and any person so designated to be named therein shall be deemed to have become a holder of record of such Warrant Shares as of the date of the surrender of such Warrant and payment of the Warrant Price, as aforesaid; provided, however, -------- ------- that if, at the date of surrender of such Warrant and payment of such Warrant Price, the transfer books for the Warrant Shares or other class of stock purchasable upon the exercise of such Warrant shall be closed, the certificates for the Warrant Shares in respect of which such Warrant are then exercised shall be issuable as of the date on which such books shall next be opened (whether before or after the Expiration Date) and until such date the Company shall be under no duty to deliver any -2- certificate for such Warrant Shares; provided, further, that the transfer books -------- ------- of record, unless otherwise required by law, shall not be closed at any one time for a period longer than 20 calendar days. 2.3 COMPLIANCE WITH GOVERNMENT REGULATIONS. Holder acknowledges that none of the Warrant or Warrant Shares has been registered under the Securities Act, and may be sold or disposed of in the absence of such registration only pursuant to an exemption from such registration and in accordance with this Agreement. The Warrant and the Warrant Shares will bear a legend to the following effect: "THE SALE OF THE SECURITIES REPRESENTED HEREBY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). NO SALE OR OTHER DISPOSITION OR PLEDGE OF THESE SECURITIES OR THE SECURITIES UNDERLYING THESE SECURITIES CAN BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATING THERETO OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY OR A NO ACTION LETTER OR INTERPRETIVE OPINION OF THE STAFF OF THE SECURITIES AND EXCHANGE COMMISSION THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE ACT." 2.4 WARRANT PRICE. The price per share at which Warrant Shares shall be purchasable upon exercise of the Warrant (the "Warrant Price") shall be $1.25, subject to adjustment pursuant to Section 6 hereof. 2.5 SHAREHOLDERS APPROVAL. This Warrant may only be exercised after the grant hereof has been approved by a vote of the Company's shareholders. The Company covenants to seek shareholder approval as soon as possible. SECTION 3. PAYMENT OF TAXES. The Company will pay all documentary stamp taxes, if any, attributable to the initial issuance of Warrant and Warrant Shares upon the exercise of Warrant; provided, however, that the Company shall -------- ------- not be required to pay any tax or taxes which may be payable in respect of any transfer involved in the issue or delivery of the Warrant or certificates for Warrant Shares in a name other than that of the Holder of such Warrant. SECTION 4. MUTILATED OR MISSING WARRANT. In case the Warrant shall be mutilated, lost, stolen or destroyed, the Company shall issue and deliver in exchange and substitution for and upon cancellation of the mutilated Warrant, or in lieu of and substitution for the Warrant lost, stolen or destroyed, a new Warrant certificate of like tenor and representing an equivalent right or interest; but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction of such Warrant certificate and indemnity or bond, if requested, also reasonably satisfactory to them. An applicant for such substitute Warrant certificate shall also comply with such other reasonable regulations and pay such other reasonable charges as the Company may prescribe. -3- SECTION 5. RESERVATION OF WARRANT SHARES. 5.1 RESERVATION OF WARRANT SHARES. There have been reserved, and the Company shall at all times keep reserved, out of its authorized shares of Common Stock, a number of shares of Common Stock sufficient to provide for the exercise of the rights of purchase represented by the outstanding Warrant. The transfer agent for the Common Stock ("Transfer Agent"), and every subsequent transfer agent for any shares of the Company's capital stock issuable upon the exercise of any of the rights of purchase aforesaid will be and are hereby irrevocably authorized and directed at all times until the Expiration Date to reserve such number of authorized shares as shall be requisite for such purpose. The Company will keep a copy of this Agreement on file with the Transfer Agent and with every subsequent transfer agent for any shares of the Company's capital stock issuable upon the exercise of the rights of purchase represented by the Warrant. The Company covenants that all Warrant Shares which may be issued upon exercise of Warrant will, upon issue, be fully paid, nonassessable, free of preemptive rights and free from all taxes, liens, charges and security interests with respect to the issue thereof. The Company will supply such Transfer Agent and any subsequent transfer agent with duly executed stock certificates for such purpose and will itself provide or otherwise make available any cash which may be payable as provided in Section 7 of this Agreement. The Company will furnish to such Transfer Agent a copy of all notices of adjustments, and certificates related thereto, transmitted to each Holder. The Warrant surrendered in the exercise of the rights thereby evidenced shall be cancelled by the Company. 5.2 CANCELLATION OF THE WARRANT. In the event the Company shall purchase or otherwise acquire the Warrant, the same shall be cancelled and retired. SECTION 6. ADJUSTMENT OF WARRANT PRICE AND NUMBER OF WARRANT SHARES. The number and kind of securities purchasable upon the exercise of the Warrant and the Warrant Price shall be subject to adjustment from time to time upon the happening of certain events, as hereinafter defined. 6.1 MECHANICAL ADJUSTMENTS. The number of Warrant Shares purchasable upon the exercise of the Warrant and the Warrant Price shall be subject to adjustment as follows: (a) In case the Company shall at any time after the date of this Agreement (i) declare or pay a dividend in shares of Common Stock or make a distribution in shares of Common Stock, (ii) subdivide its outstanding shares of Common Stock, (iii) combine its outstanding shares of Common Stock into a smaller number of shares of Common Stock or (iv) issue any shares of its capital stock in a reclassification of the Common Stock (including any such reclassification in connection with a consolidation or merger in which the Company is the continuing entity), the number of Warrant Shares purchasable upon exercise of the Warrant immediately prior thereto shall be adjusted so that the Holder of the Warrant shall be entitled to receive the kind and number of Warrant Shares or other securities of the -4- Company which he would have owned or have been entitled to receive after the happening of any of the events described above, had such Warrant been exercised immediately prior to the happening of such event or any record date with respect thereto. An adjustment made pursuant to this paragraph (a) shall become effective immediately after the effective date of such event retroactive to the record date, if any, for such event. (b) In case the Company shall issue rights, options or warrants to holders of its outstanding Common Stock entitling them (for a period within 45 days after the record date mentioned below) to subscribe for or purchase shares of Common Stock at a price per share which is lower at the record date mentioned below than the then current market price per share of Common Stock (as defined in paragraph (e) below), the number of Warrant Shares thereafter purchasable upon the exercise of the Warrant shall be determined by multiplying the number of Warrant Shares theretofore purchasable upon exercise of the Warrant by a fraction, of which the numerator shall be the number of shares of Common Stock outstanding on the date of issuance of such rights, options or warrants plus the number of additional shares of Common Stock offered for subscription or purchase, and of which the denominator shall be the number of shares of Common Stock outstanding on the date of issuance of such rights, options or warrants plus the number of shares which the aggregate offering price of the total number of shares of Common Stock so offered would purchase at the current market price per share of Common Stock at such record date. Such adjustments shall be made whenever such rights, options or warrants are issued, and shall become effective immediately after the record date for the determination of stockholders entitled to receive such rights, options or warrants. (c) In case the Company shall distribute to holders of its shares of Common Stock evidences of its indebtedness or assets (excluding cash dividends or distributions payable out of consolidated earnings or earned surplus legally available for payment of dividends at the time of any such payment or distribution, but excluding dividends or distributions referred to in paragraph (a) above or in the paragraph immediately following this paragraph) or rights, options or warrants, or convertible or exchangeable securities containing the right to subscribe for or purchase shares of Common Stock (excluding those referred to in paragraph (b) above), then in each case the number of Warrant Shares thereafter purchasable upon the exercise of the Warrant shall be determined by multiplying the number of Warrant Shares theretofore purchasable upon the exercise of the Warrant by a fraction, of which the numerator shall be the then current market price per share of Common Stock (as defined in paragraph (e) below) on the date of such distribution, and of which the denominator shall be the then current market price per share of Common Stock, less the then fair value (as determined by the Board of Directors of the Company, whose determination shall be conclusive) of the portion of the assets or evidences of indebtedness so distributed or of such subscription rights, options or warrants, or of such convertible or exchangeable securities applicable to one share of Common Stock. Such adjustment shall be made whenever any such distribution is -5- made, and shall become effective on the date of distribution retroactive to the record date for the determination of stockholders entitled to receive such distribution. In the event of a distribution by the Company to holders of its shares of Common Stock of stock of a subsidiary or securities convertible into or exercisable for such stock, then in lieu of an adjustment in the number of Warrant Shares purchasable upon the exercise of the Warrant, the Holder of the Warrant, upon the exercise thereof at any time after such distribution, shall be entitled to receive from the Company, such subsidiary or both, as the Company shall determine, the stock or other securities to which such Holder would have been entitled if such Holder had exercised such Warrant immediately prior thereto, all subject to further adjustment as provided in this Section 6.1; provided, however, that ------- no adjustment in respect of dividends or interest on such stock or other securities shall be made during the term of a Warrant or upon the exercise of a Warrant other than adjustments required by this Section 6. (d) In case the Company shall issue shares of Common Stock or rights, options or warrants containing the right to subscribe for or purchase shares of Common Stock or securities convertible into Common Stock (excluding (i) shares, rights, options, warrants or convertible securities issued in any of the transactions described in paragraphs (a), (b) or (c) above, or (ii) Warrant Shares issued upon exercise of the Warrant), for a price per share of Common Stock, in the case of the issuance of Common Stock, or for a price per share of Common Stock initially deliverable upon conversion or exchange of such securities less than the then current market price per share of Common Stock (as defined in paragraph (e) below) on the date the Company fixed the offering, conversion or exchange price of such additional shares, the number of Warrant Shares thereafter purchasable upon the exercise of the Warrant shall be determined by multiplying the number of Warrant Shares theretofore purchasable upon exercise of the Warrant by a fraction, of which the numerator shall be the number of shares of Common Stock outstanding on such date plus the number of additional shares of Common Stock offered for subscription or purchase, and of which the denominator shall be the number of shares of Common Stock outstanding on such date plus the number of shares which the aggregate offering price of the total number of shares of Common Stock so offered would purchase at the current market price per share of Common Stock at such record date. Such adjustment shall be made whenever such shares, rights, options or warranties are issued, and shall become effective immediately after the effective date of such event retroactive to the record date, if any, for such event. (e) For the purpose of any computation under paragraphs (b), (c) and (d) of this Section, the current market price per share of Common Stock at any date shall be the average of the daily closing prices for 10 consecutive trading days commencing 12 trading days before the date of such computation. The closing price for each day shall be the last such reported sales price regular way or, in case no such reported sale takes place on such day, the average of the closing bid and -6- asked prices regular way for such day, in each case on the principal national securities exchange or in the NASDAQ National Market System to which the shares of Common Stock are listed or admitted to trading or, if not listed or admitted to trading, the average of the closing bid and asked prices of the Common Stock in the over-the-counter market as reported by NASDAQ or any comparable system, or if the Common Stock is not listed on NASDAQ or a comparable system, the average of the closing bid and asked prices as furnished by two members of the National Association of Securities Dealers, Inc. selected from time to time by the Board of Directors of the Company for that purpose. In the absence of one or more such quotations, the Board of Directors of the Company shall determine the current market price on the basis of such quotations as it considers appropriate or in the case of securities which are not quoted, the Board of Directors of the Company shall determine the current market price based upon such information and advice as it considers appropriate. In the case of rights, options, warrants or convertible or exchangeable securities, the price per share of Common Stock shall be determined by dividing (x) the total amount received or receivable by the Company in consideration of the sale and issuance of such rights, options, warrants or convertible or exchangeable securities, plus the total consideration payable to the Company upon exercise or conversion or exchange thereof, by (y) the total number of shares of Common Stock covered by such rights, options, warrants or convertible or exchangeable securities. (f) Whenever the number of Warrant Shares purchasable upon the exercise of the Warrant is adjusted, as herein provided, the Warrant Price payable upon exercise of the Warrant shall be adjusted by multiplying such Warrant Price immediately prior to such adjustment by a fraction, of which the numerator shall be the number of Warrant Shares purchasable upon the exercise of the Warrant immediately prior to such adjustment, and of which the denominator shall be the number of Warrant Shares purchasable immediately thereafter. (g) In case the Company shall sell or issue shares of Common Stock or rights, options, warrants or convertible or exchangeable securities containing the right to subscribe or purchase shares of Common Stock in the following situations: (i) to officers, directors, consultants or employees of the Company pursuant to an employee stock option plan approved by the Company's shareholders either at a price not less than 90% of the current market price of the Company's Common Stock or in an amount (taking into account all prior sales or issuances excluded pursuant to this clause (i)) not greater than 5% of the total number of shares of Common Stock outstanding on a fully diluted basis; or (ii) to sellers of assets or interests in other enterprises in exchange for such assets or interests, -7- there shall be no adjustment in the Warrant Price or the number of Warrant Shares either upon the initial issuance of such securities or upon the exercise or conversion thereof. (h) No adjustment in the number of Warrant Shares purchasable hereunder shall be required unless such adjustment would result in an increase or decrease of at least one percent (1%) of the Warrant Price; provided, however, that any adjustments which by reason of this -------- ------- paragraph (h) are not required to be made shall be carried forward and taken into account in any subsequent adjustment or upon exercise of the Warrant. All calculations shall be made to the nearest cent or to the nearest one-thousandth of a share, as the case may be. (i) No adjustment in the number of Warrant Shares purchasable upon the exercise of the Warrant need be made under paragraphs (b), (c), or (d) if the Company issues or distributes to the Holder of the Warrant the shares, rights, options, warrants, or convertible or exchangeable securities, or evidences of indebtedness or assets referred to in those paragraphs which the Holder of the Warrant would have been entitled to receive had the Warrant been exercised prior to the happening of such event or the record date with respect thereto. No adjustment in the number of Warrant Shares purchasable upon the exercise of the Warrant need be made for sales of Warrant Shares pursuant to a Company plan for reinvestment of dividends or interest. No adjustment need be made for a change in the par value of the Warrant Shares. (j) For the purpose of this Section 6.1, the term "shares of Common Stock" shall mean (i) the class of stock designated as the Common Stock of the Company at the date of this Agreement, or (ii) any other class of stock resulting from successive changes or reclassifications of such shares consisting solely of changes from no par value to par value, changes in par value, or changes from par value to no par value. In the event that at any time, as a result of an adjustment made pursuant to paragraph (a) above, the Holder shall become entitled to purchase any securities of the Company other than shares of Common Stock, thereafter the number of such other shares so purchasable upon exercise of the Warrant and the Warrant Price of such shares shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the Warrant Shares contained in paragraphs (a) through (h), inclusive, above, and the provisions of Section 2 and Sections 6.2 through 6.3, inclusive, with respect to the Warrant Shares, shall apply on like terms to any such other securities; provided, however, that the -------- ------- Warrant Price shall at no time be less than the par value of the Common Stock of the Company; provided, further, that the Company shall reduce the -------- ------- par value of its Common Stock from time to time as necessary so that such par value shall not be more than the Warrant Price then in effect. (k) Upon the expiration of any rights, options, warrants or conversion or exchange privileges, the issuance of which required an adjustment in -8- the number of shares of Common Stock purchasable upon exercise of the Warrant, if any thereof shall not have been exercised, the Warrant Price and the number of shares of Common Stock purchasable upon the exercise of the Warrant shall, upon such expiration, be readjusted and shall thereafter be such as it would have been had it been originally adjusted (or had the original adjustment not been required, as the case may be) as if (A) the only shares of Common Stock so issued were the shares of Common Stock, if any, actually issued or sold upon the exercise of such rights, options, warrants or conversion or exchange rights and (B) such shares of Common Stock, if any, were issued or sold for the consideration actually received by the Company upon such exercise plus the aggregate consideration, if any, actually received by the Company for the issuance, sale or grant of all such rights, options, warrants or conversion or exchange rights whether or not exercised; provided, however, that no such readjustment shall have the -------- ------- effect of increasing the Warrant Price or decreasing the number of shares of Common Stock purchasable upon the exercise of the Warrant by an amount in excess of the amount of the adjustment initially made in respect to the issuance, sale or grant of such rights, options, warrants or conversion or exchange rights, and provided further that the issuance of shares of Common Stock pursuant to rights, options, warrants or conversion or exchange rights shall not be cause for additional adjustments beyond the adjustments provided in respect of the initial issuance of the rights, options, warrants or conversion or exchange rights. 6.2 NOTICE OF ADJUSTMENT. Whenever the number of Warrant Shares purchasable upon the exercise of the Warrant or the Warrant Price of such Warrant Shares is adjusted, as herein provided, the Company shall mail by first class, postage prepaid, to each Holder notice of such adjustment or adjustments and shall deliver to the Holder a copy of a certificate of either the Board of Directors of the Company or of a firm of independent public accountants selected by the Board of Directors of the Company (who may be the regular accountants employed by the Company) setting forth the number of Warrant Shares purchasable upon the exercise of the Warrant and the Warrant Price of such Warrant Shares after such adjustment, setting forth a brief statement of the facts requiring such adjustment and setting forth the computation by which such adjustment was made. Such certificate shall be conclusive evidence of the correctness of such adjustment in the absence of manifest error. 6.3 NO ADJUSTMENT FOR DIVIDENDS. Except as provided in Section 6.1, no adjustment in respect of any dividends shall be made during the term of a Warrant or upon the exercise or conversion of a Warrant. 6.4 PRESERVATION OF PURCHASE RIGHTS UPON MERGER, CONSOLIDATION, ETC. In case of any consolidation of the Company with or merger of the Company into another corporation or in case of any sale, transfer or lease to another corporation of all or substantially all the property of the Company, the Company or such successor or purchasing corporation, as the case may be, shall execute an amendment to this Agreement that each Holder shall have the right thereafter upon payment of the Warrant Price in effect -9- immediately prior to such action to purchase upon exercise of the Warrant the kind and amount of shares and other securities and property which he would have owned or have been entitled to receive upon the happening of such consolidation, merger, sale, transfer or lease had such Warrant been exercised immediately prior to such action; provided, however, that no adjustment in respect of -------- ------- dividends, interest or other income on or from such shares or other securities and property shall be made during the term of a Warrant or upon the exercise of a Warrant. Such agreement shall provide for adjustments, which shall be as nearly equivalent as may be practicable to the adjustments provided for in this Section 6. The provisions of this Section 6.4 shall similarly apply to successive consolidations, mergers, sales, transfers or leases. 6.5 STATEMENT ON THE WARRANT. Irrespective of any adjustments in the Warrant Price or the number or kind of shares purchasable upon the exercise of the Warrant, the Warrant theretofore or thereafter issued may continue to express the same price and number and kind of shares as are stated in the Warrant initially issuable pursuant to this Agreement. SECTION 7. FRACTIONAL INTERESTS. The Company shall not be required to issue fractional Warrant Shares on the exercise of the Warrant. If any fraction of a Warrant Share would, except for the provisions of this Section 7, be issuable on the exercise of the Warrant (or specified portion thereof), the Company shall pay an amount in cash equal to the closing price for one share of the Common Stock, as defined in paragraph (e) of Section 6.1, on the trading day immediately preceding the date the Warrant is presented for exercise, multiplied by such fraction. SECTION 8. NO RIGHTS AS STOCKHOLDER; NOTICES TO HOLDER. Nothing contained in this Agreement or in the Warrant shall be construed as conferring upon the Holder or his permitted transferees the right to vote or to receive dividends or to consent to or receive notice as a stockholder in respect of any meeting of stockholders for the election of directors of the Company or any other matter, or any rights whatsoever as a stockholder of the Company. SECTION 9. INSPECTION OF WARRANT AGREEMENT. The Company shall keep copies of this Agreement and any notices given or received hereunder available for inspection by the Holder during normal business hours at its principal office. SECTION 10. IDENTITY OF TRANSFER AND WARRANT AGENT. Forthwith upon the appointment of any subsequent transfer agent for the Common Stock or Warrant Agent, or any other shares of the Company's capital stock issuable upon the exercise of the Warrant, the Company will notify the Holder of the name and address of such subsequent transfer agent. SECTION 11. NOTICES. Any notice pursuant to this Agreement by any Holder to the Company, shall be in writing and shall be mailed first class, postage prepaid, or delivered to -10- the Company at its office at 1380 West Washington Boulevard, Los Angeles, California 90007-1233, Attention: President. Each party hereto may from time to time change the address to which notices to it are to be delivered or mailed hereunder by notice in writing to the other party. Any notice mailed pursuant to this Agreement by the Company or the Warrant Agent to the Holder shall be in writing and shall be mailed first class, postage prepaid, or delivered to the Holder at his address on the books of the Warrant Agent. SECTION 12. GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of California, without giving effect to principles of conflict of laws. The parties hereto agree to submit to the jurisdiction of the Courts of the State of California in any action or proceeding arising out of or relating to this Agreement. SECTION 13. SUPPLEMENTS AND AMENDMENTS. The Company and the Warrant Agent may from time to time supplement or amend this Agreement in order to cure any ambiguity or to correct or supplement any provision contained herein which may be defective or inconsistent with any other provision herein, or to make any other provisions in regard to matters or questions arising hereunder which the Company and the Warrant Agent may deem necessary or desirable and which shall not be inconsistent with the provisions of the Warrant and which shall not adversely affect the interests of the Holder. SECTION 14. SUCCESSORS. All the covenants and provisions of this Agreement by or for the benefit of the Company or the Warrant Agent shall bind and inure to the benefit of their respective successors and assigns hereunder. SECTION 15. MERGER OR CONSOLIDATION OF THE COMPANY. So long as the Warrant remains outstanding, the Company will not merge or consolidate with or into, or sell, transfer or lease all or substantially all of its property to, any other corporation unless the successor or purchasing corporation, as the case may be (if not the Company), shall expressly assume, by supplemental agreement, the due and punctual performance and observance of each and every covenant and condition of this Agreement to be performed and observed by the Company. SECTION 16. BENEFITS OF THIS AGREEMENT. Nothing in this Agreement shall be construed to give to any person or corporation other than the Company, and the Holder any legal or equitable right, remedy or claim under this Agreement, but this Agreement shall be for the sole and exclusive benefit of the Company and the Holder. SECTION 17. CAPTIONS. The captions of the Sections of this Agreement have been inserted for convenience only and shall have no substantive effect. SECTION 18. COUNTERPARTS. This Agreement may be executed in any number of counterparts each of which so executed shall be deemed to be an original; but such counterparts together shall constitute but one and the same instrument. -11- IN WITNESS WHEREOF, the Company has caused this Agreement to be duly executed as of the day, month and year first above written. THE COMPANY: YES Clothing Co., a California corporation By: /s/ Guy Anthome --------------- Title: President --------- THE WARRANT AGENT: YES Clothing Co., a California corporation By: /s/ Guy Anthome -------------- Title: President --------- THE WARRANT HOLDER: Georges Marciano /s/ Georges Marciano -------------------- Address: __________________________________________ __________________________________________ -12- EXHIBIT A Warrant Certificate No. [ ] 2,000,000 Shares COMMON STOCK PURCHASE WARRANT Void After 5:00 P.M. Pacific Time on June 16, 1997 THIS CERTIFIES THAT, for value received, Georges Marciano, the registered holder of this Common Stock Purchase Warrant (the "Warrant") or permitted assigns (the "Holder"), is entitled to purchase from YES Clothing Co., a California corporation (the "Company"), at any time until 5:00 p.m. Pacific Time on June 16, 1997 (the "Expiration Date"), at the purchase price of $1.25 per share (the "Warrant Price"), the number of shares of Common Stock of the Company (the "Common Stock") which is equal to the number of Shares set forth above. The number of shares purchasable upon exercise of this Warrant and the Warrant Price per share shall be subject to adjustment from time to time as set forth in the Warrant Agreement referred to below. This Warrant may only be exercised after the grant hereof has been approved by a vote of the Company's shareholders. The Company covenants to seek shareholder approval as soon as possible. This Warrant is issued under and in accordance with a Warrant Agreement dated as of June 17, 1995, between the Company and the Warrant Holder and is subject to the terms and provisions contained in the Warrant Agreement, to all of which the Holder of this Warrant by acceptance hereof consents. A copy of the Warrant Agreement may be obtained for inspection by the Holder hereof upon written request to the Company. This Warrant may be exercised in whole or in part by presentation of this Warrant with the Purchase Form on the reverse side hereof duly executed and simultaneous payment of the Warrant Price (subject to adjustment) at the principal office of the Company in Los Angeles, California. Payment of such price shall be made at the option of the Holder hereof in cash or by certified or official bank check. Terms relating to exercise of Warrant is set forth more fully in the Warrant Agreement. This Warrant may be exercised in whole or in part. Upon partial exercise, a Warrant Certificate for the unexercised portion shall be delivered to the Holder. No fractional shares will be issued upon the exercise of this Warrant but the Company shall pay the cash value of any fraction upon the exercise of the Warrant. This Warrant is transferable only in limited circumstances as described in this Warrant Agreement at the office of the Company in Los Angeles, California, in the manner and subject to the limitations set forth in the Warrant Agreement. "THE SALE OF THE SECURITIES REPRESENTED HEREBY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). NO SALE OR OTHER DISPOSITION OR PLEDGE OF THESE SECURITIES OR THE SECURITIES UNDERLYING THESE SECURITIES CAN BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATING THERETO OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY OR A NO ACTION LETTER OR INTERPRETIVE OPINION OF THE STAFF OF THE SECURITIES AND EXCHANGE COMMISSION THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE ACT." The Holder hereof may be treated by the Company and all other persons dealing with this Warrant as the absolute owner hereof for any purpose and as the person entitled to exercise the rights represented hereby, or to the transfer hereof on the books of the Company. Any notice to the contrary notwithstanding, and until such transfer on which books, the Company may treat the Holder hereof as the owner for all purposes. This Warrant does not entitle any Holder hereof to any of the rights of a stockholder of the Company. This Warrant shall not be valid or obligatory for any purpose until it shall have been countersigned by the Company. YES Clothing Co. By: /s/ Guy Anthome ------------------------------------ Guy Anthome, President Attest /s/ Jeffrey Busse -------------------------- Jeffrey Busse Secretary DATED: As of June 17, 1995 -2- PURCHASE FORM Mailing Address ______________________________________ _______________________________________ ______________________________________ _______________________________________ ______________________________________ _______________________________________ The undersigned hereby irrevocably elects to exercise the right of purchase represented by the within Warrant for, and to purchase thereunder, _______________ shares of the stock provided for therein, and tenders herewith payment of the purchase price in full in the form of cash or by cashier's check in the amount of $______________.] The undersigned requests that certificates for such shares be issued in the name of: ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ (Please Print Name, Address and Social Security No.) DATED: , 19 Name of Warrantholder or Permitted Assignee: ________________________________________________________________________________ Address: ________________________________________________________________________________ ________________________________________________________________________________ Signature:______________________________________________________________________ Signature Guaranteed: Note: The above signature must correspond with the name as written upon the face of this Warrant Certificate in every particular, without alteration or enlargement or any change whatever, unless this Warrant has been assigned. EX-10.29 16 THREE PARTY AGMT DATED 6-12-95 EXHIBIT 10.29 THREE PARTY AGREEMENT This agreement ("Agreement") is entered into as of June 12, 1995, by and among REPUBLIC FACTORS CORP. ( "REPUBLIC" ) , YES CLOTHING CO. ("YES"), and GEORGES MARCIANO ("MARCIANO"). WHEREAS, REPUBLIC and YES are parties to a factoring agreement (the "Factoring Agreement") whereby REPUBLIC has advanced and continues to advance monies to YES, the repayment of which advances is secured by a security interest in certain assets of YES granted by YES to REPUBLIC; and WHEREAS, YES has requested REPUBLIC to advance certain sums (the "overadvances") in excess of amounts to which YES is entitled under the terms of the Factoring Agreement; and WHEREAS, REPUBLIC is willing to provide YES with the Overadvances, in its discretion and in accordance with the Factoring Agreement, if YES or a third party provides a letter of credit in favor of REPUBLIC to support additional extensions of credit; and WHEREAS, MARCIANO and his affiliates are shareholders of YES; and WHEREAS, MARCIANO is willing to provide a letter of credit in favor of REPUBLIC to support the Overadvances to YES, provided that YES and REPUBLIC agree that any sums drawn under such letter of credit benefit from and succeed to the security supporting the Factoring Agreement, subject only to the prior rights of REPUBLIC in and to such security; NOW, THEREFORE, in consideration of the premises and mutual covenants contained herein, and intending to be legally bound, the parties agree as follows: 1. Letter of Credit. MARCIANO shall deliver to REPUBLIC a letter of credit ----------------- in favor of REPUBLIC in the face amount of One Million Dollars ($1,000,000.00) in the form attached hereto as Exhibit "A" (the "Letter of Credit"). 2. Draws. REPUBLIC shall be entitled to make draws against the Letter of ------ Credit, for the period and on the terms set forth in the Letter of Credit, to reimburse REPUBLIC for indebtedness liabilities, or other obligations owing by YES to REPUBLIC under or in connection with the Factoring Agreement. 3. Repayment of Draws, Expense. YES agrees to repay on demand to --------------------------- MARCIANO any and all amounts disbursed by MARCIANO, without duplication, in connection with the establishment, maintenance or draw on or under the Letter of Credit. 4. Security. To the extent that REPUBLIC should make any draws against the ---------- Letter of Credit, MARCIANO shall be subrogated to and shall benefit from any and all security held by REPUBLIC for the repayment of indebtedness of YES and, subject to the prior right of repayment of REPUBLIC, MARCIANO shall stand in the place of REPUBLIC with respect to such security; provided, that MARCIANO's -------- subrogation rights with respect to security held by REPUBLIC for the repayment of indebtedness shall only be enforceable after, and shall be subordinate to, the repayment in full of all obligations and indebtedness of YES to REPUBLIC. 5. No Guaranty. Neither this Agreement nor the Letter of Credit shall ----------- constitute or imply any guaranty, representation or other commitment on the part of MARCIANO and nothing contained in this Agreement shall require MARCIANO to review, replace or supplement the Letter of Credit or otherwise accommodate YES or REPUBLIC in any way. 6. Other Documents. Each party agrees to perform any further acts and to --------------- execute, deliver and record any other documents which may be reasonably necessary to effect the provisions of this Agreement. 7. Waiver of Jury. EACH OF THE REPUBLIC, YES AND MARCIANO HEREBY WAIVES -------------- THE RIGHT TO TRIAL BY JURY IN ANY ACTION, CLAIM, LAWSUIT OR PROCEEDING IN WHICH REPUBLIC IS A PARTY (OTHER THAN A NOMINAL PARTY AGAINST WHICH NO RELIEF IS SOUGHT) BASED UPON, ARISING OUT OF, OR IN ANY WAY RELATING TO (I) THIS AGREEMENT OR ANY SUPPLEMENT OR AMENDMENT THERETO, OR (II) ANY OTHER PRESENT INSTRUMENT OR AGREEMENT BETWEEN SUCH PARTIES OR (III) ANY FUTURE INSTRUMENT OR AGREEMENT BETWEEN SUCH PARTIES INCORPORATING THIS WAIVER, OR (IV) ANY BREACH, CONDUCT, ACTS OR OMISSIONS OR REPUBLIC, YES OR MARCIANO OR ANY OF THEIR RESPECTIVE DIRECTORS, OFFICERS, EMPLOYEES, AGENTS, ATTORNEYS OR ANY OTHER PERSON AFFILIATED WITH OR REPRESENTING REPUBLIC, YES OR MARCIANO; IN EACH OF THE FOREGOING CASES, WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE. As a material part of the consideration to the parties for entering into this Agreement, each of YES and MARCIANO (i) agrees that, at the option of REPUBLIC, all actions and proceedings based upon, arising out of or relating in any way directly or indirectly to this Agreement shall be litigated exclusively in courts located within Los Angeles County, California, (ii) consents to the jurisdiction of any such court and consent to the service of process in any such action or proceeding by personal delivery, first class mail, or any other method permitted by law, and (iii) waives any and all rights to transfer or change the venue of any such action or proceeding to any court located outside Los Angeles County, California. 8. Attorneys' Fees. In the event that any party hereto should bring any --------------- action, suit,. arbitration or other proceedings against 2 any other party hereto or its related individuals or entities, concerning any matter referred to herein, or contesting the validity of this Agreement, or attempting to rescind, negate, modify or reform this Agreement or any of the terms or provisions thereof, or to remedy, prevent or obtain relief from a breach of this Agreement, or arising out of a breach of this Agreement, the prevailing party shall recover all of such party's reasonable attorneys' fees incurred in each and every such action, suit, or other proceeding, including all appeals and petitions therefrom. 9. Counterparts. This Agreement may be executed in counterparts, all of ------------ which shall be construed as one document. 10. Successors & Assigns. The provisions of this Agreement shall bind and -------------------- inure to the benefit of the parties and their respective trustees, heirs, beneficiaries, executors, administrators, officers, directors, partners, shareholders, employees, affiliates, representatives, agents, attorneys, accountants, successors and assigns. 11. Severability. The invalidity or unenforceability of any particular ------------ provision of this Agreement shall not affect the other provisions, and this Agreement shall be construed in all respects as if any invalid or unenforceable provision were omitted. To the extent permitted by applicable law, the parties hereby waive any provision of law that renders any portion of this Agreement prohibited or unenforceable in any respect. To the extent any such provision should be omitted, the parties will negotiate in good faith to replace the stricken provision with a new provision reflecting the same allocation of benefits and burdens. 12. California Law. The validity, construction and performance of this -------------- Agreement shall be governed by the laws, without regard to the laws as to choice or conflict of laws, of the State of California. 13. Integration. The parties affirm and acknowledge that their respective ----------- signatures affixed hereto are given voluntarily and without coercion, undue influence, duress, or reliance on any representation extrinsic or collateral to the terms of this Agreement and that this Agreement supersedes and replaces any prior discussion, negotiation or proposal all of which are merged herein. 3 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date first written. "REPUBLIC" Republic Factors Corp-, a CALIF corporation ------- By:____________________________ its: ________________________ "YES" YES Clothing Co., a California corporation By:_____________________________ its:__________________________ "MARCIANO" ________________________________ Georges Marciano IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date first written. "REPUBLIC" Republic Factors Corp-, a ________ corporation By:____________________________ its: ________________________ "YES" YES Clothing Co., a California corporation By:_____________________________ its:__________________________ "MARCIANO" ________________________________ Georges Marciano IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date first written. "REPUBLIC" Republic Factors Corp-, a _______ corporation By:____________________________ its: ________________________ "YES" YES Clothing Co., a California corporation By:_____________________________ its:__________________________ "MARCIANO" ________________________________ Georges Marciano 4 WELLS FARGO BANK Trade Services Division Northern CaLifornia 525 Market Street, 25th Floor EXHIBIT A San Francisco, CA 94105 415-396-2858 PAGE: 1 DATE OF ISSUE: JUNE 13, 1995 OUR IRREVOCABLE STANDBY CREDIT NO. NAS210772 DATE OF EXPIRY: AUGUST 31, 1995 PLACE OF EXPIRY: AT OUR ABOVE COUNTERS APPLICANT: BENEFICIARY: GEORGES MARCIANO REPUBLIC FACTORS CORP. 9465 WILSHIRE BLVD., STE. 700 1000 WILSHIRE BLVD., SUITE 400 BEVERLY HILLS, CALIFORNIA 90210 LOS ANGELES, CA 90017 AMOUNT: USD1,000,000.00 ONE MILLION AND 00/100 UNITED STATES DOLLARS WE HEREBY ESTABLISH IN YOUR FAVOR THIS CREDIT AVAILABLE WITH WELLS FARGO BANK, N.A., SAN FRANCISCO, CA BY PAYMENT OF YOUR DRAFT(S) AT SIGHT DRAWN ON WELLS FARGO BANK, N.A., SAN FRANCISCO, CA ACCOMPANIED BY: YOUR SIGNED AND DATED STATEMENT WORDED AS FOLLOWS: (1) "THE UNDERSIGNED, AN AUTHORIZED REPRESENTATIVE OF REPUBLIC FACTORS CORP., HEREBY CERTIFIES THAT THE ACCOMPANYING DRAFT DRAWN UNDER WELLS FARGO BANK, N.A. LETTER OF CREDIT NO. NAS210772 REPRESENTS INDEBTEDNESS, LIABILITIES OR OTHER OBLIGATIONS OWING TO REPUBLIC FACTORS CORP. UNDER OR IN CONNECTION WITH A FACTORING AGREEMENT BETWEEN REPUBLIC FACTORS CORP. AND YES CLOTHING CO. (OTHER THAN ANY INDEBTEDNESS ARISING FROM OBLIGATIONS FOR PURCHASES MADE BY YES CLOTHING CO. FROM ANY OTHER CONCERN FACTORED BY REPUBLIC FACTORS CORP.), WHICH REMAINS UNPAID AND OUTSTANDING, OR WHICH HAS BEEN PAID BUT WHICH PAYMENT (OR PORTION THEREOF REFLECTED BY THE DRAW) WAS PAID WITHIN NINETY (90) DAYS OF A PETITION FILED BY OR AGAINST YES CLOTHNG CO. UNDER THE BANKRUPTCY CODE OR THE MAKING OF AN ASSIGNMENT FOR THE BENEFIT OF CREDITORS." PARTIAL DRAWINGS ARE PERMITTED. (MORE THAN ONE DRAFT MAY BE DRAWN AND PRESENTED UNDER THE LETTER OF CREDIT) IF ANY INSTRUCTIONS ACCOMPANYING A DRAWING UNDER THIS LETTER OF CREDIT REQUEST THAT PAYMENT IS TO BE MADE BY TRANSFER TO AN ACCOUNT WITH US OR AT ANOTHER BANK, WE AND/OR SUCH OTHER BANK MAY RELY ON AN ACCOUNT NUMBER SPECIFIED IN SUCH INSTRUCTIONS EVEN IF THE NUMBER IDENTIFIES A PERSON OR ENTITY DIFFERENT FROM THE INTENDED PAYEE. DOCUMENTS MUST BE PRESENTED TO US NO LATER THAN 5:00 P.M. DRAFT(S) MUST INDICATE THE NUMBER AND DATE OF THIS CREDIT. EACH DRAFT PRESENTED HEREUNDER MUST BE ACCOMPANIED BY THIS ORIGINAL CREDIT WELLS FARGO BANK Trade Services Division Northern California 525 Market Street, 25th Floor San Francisco, CA 94105 415-396-2858 PAGE 2 THIS IS AN INTEGRAL PART OF LETTER OF CREDIT NUMBER: NAS210772 FOR OUR ENDORSEMENT THEREON OF THE AMOUNT OF SUCH DRAFT. DOCUMENTS MUST BE FORWARDED TO US IN ONE PARCEL AND MAY BE MAILED TO WELLS FARGO BANK, N.A. INTERNATIONAL TRADE SERVICES DIVISION, 525 MARKET STREET, 25TH FLOOR, SAN FRANCISCO, CA 94105. THIS CREDIT IS SUBJECT TO THE UNIFORM CUSTOMS AND PRACTICE FOR DOCUMENTARY CREDITS (1993 REVISION), INTERNATIONAL CHAMBER OF COMMERCE, PUBLICATION NUMBER 500 (THE 'UCP"). WE HEREBY ENGAGE WITH YOU THAT DRAFTS DRAWN UNDER AND IN COMPLIANCE WITH THE TERMS OF THIS LETTER OF CREDIT WILL BE DULY HONORED IF PRESENTED TO US AT OUR ABOVE OFFICE ON OR BEFORE AUGUST 31, 1995. THIS LETTER OF CREDIT SETS FORTH IN FULL THE TERMS OF OUR UNDERTAKING, AND THIS UNDERTAKING SHALL NOT IN ANY WAY BE AMENDED OR AMPLIFIED BY, REFERENCE TO ANY DOCUMENT, INSTRUMENT OR AGREEMENT REFERRED TO HEREIN (INCLUDING WITHOUT LIMITATION THE FACTORING AGREEMENT BETWEEN REPUBLIC FACTORS CORP. AND YES CLOTHING CO.) EXCEPT THE UCP, AND ANY SUCH REFERENCE SHALL NOT BE DEEMED TO INCORPORATE HEREIN BY REFERENCE ANY SUCH DOCUMENT, INSTRUMENT OR AGREEMENT EXCEPT THE UCP. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, OUR OBLIGATION UNDER THIS LETTER OF CREDIT IS INDEPENDENT FROM THE OBLIGATIONS OF ANY PARTY UNDER SAID FACTORING AGREEMENT. NO AMENDMENT OF SAID FACTORING AGREEMENT, SHALL IMPAIR OR AFFECT IN ANY WAY OUR OBLIGATION TO HONOR YOUR DRAFTS DRAWN UNDER AND IN COMPLIANCE WITH THE TERMS OF THIS LETTER OF CREDIT. NO DEFENSE OR CLAIM OF ANY PARTY UNDER SAID FACTORING AGREEMENT AND NO BANKRUPTCY OR INSOLVENCY OF YES CLOTHING CO. SHALL IMPAIR OR AFFECT OUR OBLIGATION TO HONOR YOUR DRAFTS DRAWN UNDER AND IN COMPLIANCE WITH THE TERMS OF THIS LETTER OF CREDIT, EXCEPT TO THE EXTENT THAT APPLICABLE LAW OR AN ORDER OF A COURT OF COMPETENT JURISDICTION PROVIDES OTHERWISE. WELLS FARGO BANK, N.A. _________________________ (AUTHORIZED SIGNATURE) EX-10.30 17 THREE PARTY AGMT DATED 6-21-95 EXHIBIT 10.30 SECOND THREE PARTY AGREEMENT This agreement ("Agreement") is entered into as of June 21, 1995, by and among REPUBLIC FACTORS CORP. ("REPUBLIC"), YES CLOTHING CO. ("YES"), and GEORGES MARCIANO ("MARCIANO"). WHEREAS, REPUBLIC and YES are parties to a factoring agreement (the "Factoring Agreement") whereby REPUBLIC has advanced and continues to advance monies to YES, the repayment of which advances is secured by a security interest in certain assets of YES granted by YES to REPUBLIC; and WHEREAS, YES has requested REPUBLIC to advance certain sums (the "Overadvances") in excess of amounts, in REPUBLIC's discretion, otherwise available to YES under the terms of the Factoring Agreement; and WHEREAS, REPUBLIC is willing to provide YES with the overadvances, in its discretion and in accordance with the Factoring Agreement, if YES or a third party provides a letter of credit in favor of REPUBLIC to support additional extensions of credit; and WHEREAS, MARCIANO and his affiliates are shareholders of YES; WHEREAS, MARCIANO has previously established a letter of credit in favor of REPUBLIC pursuant to the terms of a Three Party Agreement, dated as of June 12, 1995 (the "June 12 Agreement"); and WHEREAS, MARCIANO is willing to provide a second letter of credit in favor of REPUBLIC to support further Overadvances to YES, provided that YES and REPUBLIC agree that any sums drawn under such letter of credit benefit from and succeed to the security supporting the Factoring Agreement, subject only to the prior rights of REPUBLIC in and to such security; NOW, THEREFORE, in consideration of the premises and mutual covenants contained herein, and intending to be legally bound, the parties agree as follows: 1. Letter of Credit. MARCIANO shall deliver to REPUBLIC a letter of ---------------- credit in favor of REPUBLIC in the face amount of One Million Dollars ($1,000,000.00) in the form attached hereto as Exhibit "A" (the "Letter of Credit"). 2. Draws. REPUBLIC shall be entitled to make draws against the Letter of ----- Credit, for the period and on the terms set forth in the Letter of Credit, to reimburse REPUBLIC for indebtedness liabilities, or other obligations owing by YES to REPUBLIC under or in connection with the Factoring Agreement. 3. Repayment of Draws, Expense. YES agrees to repay on demand to --------------------------- MARCIANO any and all amounts disbursed by MARCIANO, without duplication, in connection with the establishment, maintenance or draw on or under the Letter of Credit. 4. Security. To the extent that REPUBLIC should make any draws against the -------- Letter of Credit, MARCIANO shall be subrogated to and shall benefit from any and all security held by REPUBLIC for the repayment of indebtedness of YES and, subject to the prior right of repayment of REPUBLIC, MARCIANO shall stand in the place of REPUBLIC with respect to such security (such rights, when taken together with MARCIANO's rights in the security arising under the June 12 Agreement, referred to hereinafter collectively as the "Subrogation Rights"; provided, that MARCIANO's Subrogation Rights with respect to security held by - -------- REPUBLIC for the repayment of indebtedness shall only be enforceable after, and shall be subordinate to, the repayment in full of all obligations and indebtedness of YES to REPUBLIC. 5. No Guaranty. Neither this Agreement nor the Letter of Credit shall ----------- constitute or imply any guaranty, representation or other commitment on the part of MARCIANO and nothing contained in this Agreement shall require MARCIANO to review, replace or supplement the Letter of Credit or otherwise accommodate YES or REPUBLIC in any way. 6. Other Documents. Each party agrees to perform any further acts and to --------------- execute, deliver and record any other documents which may be reasonably necessary to effect the provisions of this Agreement. 7. Waiver of Jury. EACH OF THE REPUBLIC, YES AND MARCIANO HEREBY WAIVES -------------- THE RIGHT TO TRIAL BY JURY IN ANY ACTION, CLAIM, LAWSUIT OR PROCEEDING IN WHICH REPUBLIC IS A PARTY (OTHER THAN A NOMINAL PARTY AGAINST WHICH NO RELIEF IS SOUGHT) BASED UPON, ARISING OUT OF, OR IN ANY WAY RELATING TO (I) THIS AGREEMENT OR ANY SUPPLEMENT OR AMENDMENT THERETO, OR (II) ANY OTHER PRESENT INSTRUMENT OR AGREEMENT BETWEEN SUCH PARTIES OR (III) ANY FUTURE INSTRUMENT OR AGREEMENT BETWEEN SUCH PARTIES INCORPORATING THIS WAIVER, OR (IV) ANY BREACH, CONDUCT, ACTS OR OMISSIONS OR REPUBLIC, YES OR MARCIANO OR ANY OF THEIR RESPECTIVE DIRECTORS, OFFICERS, EMPLOYEES, AGENTS, ATTORNEYS OR ANY OTHER PERSON AFFILIATED WITH OR REPRESENTING REPUBLIC, YES OR MARCIANO; IN EACH OF THE FOREGOING CASES, WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE. As a material part of the consideration to the parties for entering into this Agreement, each of YES and MARCIANO (i) agrees that, at the option of REPUBLIC, all actions and proceedings based upon, arising out of or relating in any way directly or indirectly to this Agreement shall be litigated exclusively in courts located within Los Angeles County, California, (ii) consents to the 2 jurisdiction of any such court and consent to the service of process in any such action or proceeding by personal delivery, first class mail, or any other method permitted by law, and (iii) waives any and all rights to transfer or change the venue of any such action or proceeding to any court located outside Los Angeles County, California. 8. Attorneys' Fees. In the event that any party hereto should bring any ---------------- action, suit, arbitration or other proceedings against any other party hereto or its related individuals or entities, concerning any matter referred to herein, or contesting the validity of this Agreement, or attempting to rescind, negate, modify or reform this Agreement or any of the terms or provisions thereof, or to remedy, prevent or obtain relief from a breach of this Agreement, or arising out of a breach of this Agreement, the prevailing party shall recover all of such party's reasonable attorneys' fees incurred in each and every such action, suit, or other proceeding, including all appeals and petitions therefrom. 9. Counterparts. This Agreement may be executed in counterparts, all of ------------ which shall be construed as one document. 10. Successors & Assiqns. The provisions of this Agreement shall bind and -------------------- inure to the benefit of the parties and their respective trustees, heirs, beneficiaries, executors, administrators, officers, directors, partners, shareholders, employees, affiliates, representatives, agents, attorneys, accountants, successors and assigns. 11. Severability. The invalidity or unenforceability of any particular ------------ provision of this Agreement shall not affect the other provisions, and this Agreement shall be construed in all respects as if any invalid or unenforceable provision were omitted. To the extent permitted by applicable law, the parties hereby waive any provision of law that renders any portion of this Agreement prohibited or unenforceable in any respect. To the extent any such provision should be omitted, the parties will negotiate in good faith to replace the stricken provision with a new provision reflecting the same allocation of benefits and burdens. 12. California Law. The validity, construction and performance of this -------------- Agreement shall be governed by the laws, without regard to the laws as to choice or conflict of laws, of the State of California. 13. Integration. The parties affirm and acknowledge that their respective ----------- signatures affixed hereto are given voluntarily and without coercion, undue influence, duress, or reliance on any representation extrinsic or collateral to the terms of this Agreement and that this Agreement supersedes and replaces any prior discussion, negotiation or proposal all of which are merged herein. 3 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date first written. "REPUBLIC" Republic Factors Corp., a CALIF corporation --------------- By:__________________________ its:_______________________ "YES" YES Clothing Co., a California corporation By:__________________________ its:_______________________ "MARCIANO" ______________________________ Georges Marciano IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date first written. "REPUBLIC" Republic Factors Corp., a _______________corporation By:__________________________ its:_______________________ "YES" YES Clothing Co., a California corporation By:__________________________ its:_______________________ "MARCIANO" ______________________________ Georges Marciano IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date first written. "REPUBLIC" Republic Factors Corp., a _______________corporation By:__________________________ its:_______________________ "YES" YES Clothing Co., a California corporation By:__________________________ its:_______________________ "MARCIANO" ______________________________ Georges Marciano 4 WELLS FARGO BANK Trade Services Division Northern California 525 Market Street, 25th Floor EXHIBIT A San Francisco, CA 94105 415-396-2858 PAGE: 1 DATE OF ISSUE: JUNE 21, 1995 OUR IRREVOCABLE STANDBY CREDIT NO. NAS211044 DATE OF EXPIRY: JANUARY 31, 1996 PLACE OF EXPIRY: AT OUR ABOVE COUNTERS APPLICANT: BENEFICIARY: GEORGES MARCIANO REPUBLIC FACTORS CORP. 9465 WILSHIRE BOULEVARD 1000 WILSHIRE BOULEVARD SUITE 700 SUITE 400 BEVERLY HILLS, CALIFORNIA 90210 LOS ANGELES, CALIFORNIA 90017 AMOUNT: USD1,000,000.00 ONE MILLION AND 00/100 UNITED STATES DOLLARS WE HEREBY ESTABLISH IN YOUR FAVOR THIS CREDIT AVAILABLE WITH WELLS FARGO BANK, N.A., SAN FRANCISCO, CA BY PAYMENT OF YOUR DRAFT(S) AT SIGHT DRAWN ON WELLS FARGO BANK, N.A., SAN FRANCISCO, CA ACCOMPANIED BY: (1) YOUR SIGNED AND DATED STATEMENT RECEIVED BY US PRIOR TO SEPTEMBER 30, 1995, IN THE FOLLOWING FORM: "THE UNDERSIGNED, AN AUTHORIZED REPRESENTATIVE OF REPUBLIC FACTORS CORP., HEREBY CERTIFIES THAT THE ACCOMPANYING DRAFT DRAWN UNDER WELLS FARGO BANK, N.A. LETTER OF CREDIT NO. NAS211044 REPRESENTS INDEBTEDNESS, LIABILITIES OR OTHER OBLIGATIONS OWING TO REPUBLIC FACTORS CORP. UNDER OR IN CONNECTION WITH A FACTORING AGREEMENT BETWEEN REPUBLIC FACTORS CORP. AND YES CLOTHING CO. (OTHER THAN ANY INDEBTEDNESS ARISING FROM OBLIGATIONS FOR PURCHASES MADE BY YES CLOTHING CO. FROM ANY OTHER CONCERN FACTORED BY REPUBLIC FACTORS CORP.), WHICH REMAINS UNPAID AND OUTSTANDING." OR (2) YOUR SIGNED AND DATED STATEMENT RECEIVED BY US PRIOR TO JANUARY 31, 1996, IN THE FOLLOWING FORM : "THE UNDERSIGNED, AN AUTHORIZED REPRESENTATIVE OF REPUBLIC FACTORS CORP., HEREBY CERTIFIES THAT THE ACCOMPANYING DRAFT DRAWN UNDER WELLS FARGO BANK, N.A. LETTER OF CREDIT NUMBER NAS211044 REPRESENTS AN AMOUNT WHICH HAS BEEN PAID WITH RESPECT TO INDEBTEDNESS, LIABILITIES OR OTHER OBLIGATIONS OWING TO REPUBLIC FACTORS CORP. UNDER OR IN CONNECTION WITH A FACTORING AGREEMENT BETWEEN REPUBLIC FACTORS CORP. AND YES CLOTHING CO. (OTHER THAN INDEBTEDNESS ARISING FROM OBLIGATIONS FOR PURCHASES MADE BY REPUBLIC FACTORS CORP.) BUT WHICH PAYMENT (OR PORTION THEREOF REFLECTED BY THE DRAW) WAS PAID WITHIN NINETY (90) DAYS OF A PETITION FILED BY OR AGAINST YES CLOTHING CO. UNDER THE BANKUPTCY CODE OR THE MAKING OF AN ASSIGNMENT WELLS FARGO BANK Trade Services Division Northern California 525 Market Street, 25th Floor San Francisco, CA 94105 415-396-2858 PAGE: 2 THIS IS AN INTEGRAL PART OF LETTER OF CREDIT NUMBER: NAS211044 FOR THE BENEFIT OF CREDITORS." PARTIAL DRAWINGS ARE PERMITTED. (MORE THAN ONE DRAFT MAY BE DRAWN AND PRESENTED UNDER THE LETTER OF CREDIT) IF ANY INSTRUCTIONS ACCOMPANYING A DRAWING UNDER THIS LETTER OF CREDIT REQUEST THAT PAYMENT IS TO BE MADE BY TRANSFER TO AN ACCOUNT WITH US OR AT ANOTHER BANK, WE AND/OR SUCH OTHER BANK MAY RELY ON AN ACCOUNT NUMBER SPECIFIED IN SUCH INSTRUCTIONS EVEN IF THE NUMBER IDENTIFIES A PERSON OR ENTITY DIFFERENT FROM THE INTENDED PAYEE. DOCUMENTS MUST BE PRESENTED TO US NO LATER THAN 5:00 P.M. DRAFT(S) MUST INDICATE THE NUMBER AND DATE OF THIS CREDIT. EACH DRAFT PRESENTED HEREUNDER MUST BE ACCOMPANIED BY THIS ORIGINAL CREDIT FOR OUR ENDORSEMENT THEREON OF THE AMOUNT OF SUCH DRAFT. DOCUMENTS MUST BE FORWARDED TO US INONE PARCEL AND MAY BE MAILED TO WELLS FARGO BANK, N.A. INTERNATIONAL TRADE SERVICES DIVISION, 525 MARKET STREET, 25TH FLOOR, SAN FRANCISCO, CA 94105. THIS CREDIT IS SUBJECT TO THE UNIFORM CUSTOMS AND PRACTICE FOR DOCUMENTARY CREDITS (1993 REVISION), INTERNATIONAL CHAMBER OF COMMERCE, PUBLICATION NUMBER 500 (THE 'UCP"). WE HEREBY ENGAGE WITH YOU THAT DRAFTS DRAWN UNDER AND IN COMPLIANCE WITH THE TERMS OF THIS LETTER OF CREDIT WILL BE DULY HONORED IF PRESENTED TO US AT OUR ABOVE OFFICE ON OR BEFORE JANUARY 31, 1996. THIS LETTER OF CREDIT SETS FORTH IN FULL THE TERMS OF OUR UNDERTAKING, AND THIS UNDERTAKING SHALL NOT IN ANY WAY BE AMENDED OR AMPLIFIED BY REFERENCE TO ANY DOCUMENT, INSTRUMENT OR AGREEMENT (INCLUDING WITHOUT LIMITATION THE FACTORING AGREEMENT BETWEEN REPUBLIC FACTORS CORP. AND YES CLOTHING CO.) EXCEPT THE UCP, AND ANY SUCH REFERENCE SHALL NOT BE DEEMED TO INCORPORATE HEREIN BY REFERENCE ANY SUCH DOCUMENT, INSTRUMENT OR AGREEMENT EXCEPT THE UCP. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, OUR OBLIGATION UNDER THIS LETTER OF CREDIT IS INDEPENDENT FROM THE OBLIGATIONS OF ANY PARTY UNDER SAID FACTORING AGREEMENT. NO AMENDMENT OF SAID FACTORING AGREEMENT, SHALL IMPAIR OR AFFECT IN ANY WAY OUR OBLIGATION TO HONOR YOUR DRAFTS DRAWN UNDER AND IN COMPLIANCE WITH THE TERMS OF THIS LETTER OF CREDIT. NO DEFENSE OR CLAIM OF ANY PARTY UNDER SAID FACTORING AGREEMENT AND NO BANKRUPTCY OR INSOLVENCY OF YES CLOTHING CO. SHALL IMPAIR OR AFFECT OUR OBLIGATION TO HONOR YOUR DRAFTS DRAWN UNDER AND IN COMPLIANCE WITH THE TERMS OF THIS LETTER OF CREDIT, WELLS FARGO BANK Trade Services Division Northern California 525 Market Street, 25th Floor San Francisco, CA 94105 PAGE: 3 415-396-2858 THIS IS AN INTEGRAL PART OF LETTER OF CREDIT NUMBER: NAS211044 EXCEPT TO THE EXTENT THAT APPLICABLE LAW OR AN ORDER OF A COURT OF COMPETENT JURISDICTION PROVIDES OTHERWISE. WELLS FARGO BANK, N.A. ____________________________ (AUTHORIZED SIGNATURE) EX-27 18 FINANCIAL DATA SCHEDULE-ARTICLE 5
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL STATEMENT OF YES CLOTHING CO. FOR THE YEAR ENDED MARCH 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. YEAR MAR-31-1995 APR-01-1994 MAR-31-1995 232,000 0 1,870,000 (831,000) 2,158,000 3,512,000 2,336,000 (1,302,000) 4,630,000 2,438,000 0 4,513,000 0 0 (2,978,000) 1,535,000 28,580,000 29,014,000 25,210,000 25,210,000 0 526,000 255,000 (4,652,000) 0 (4,652,000) 0 0 0 (4,652,000) (1.22) (1.22)
EX-99.1 19 FAIRNESS OPINION OF HOULIHAN LOKEY 7-10-95 EXHIBIT 99.1 Houlihan Lokey Howard & Zukin 1930 Century Park West Los Angeles, CA 90067 310-553-8871 July 10, 1995 To The Board of Directors YES Clothing Co. 1380 West Washington Boulevard Los Angeles, CA 90007 Gentlemen: We understand that YES Clothing Co. (the "Company" or "YES") has entered into an agreement with its largest shareholder, Georges Marciano ("Marciano"), whereby Marciano has agreed to: a) become Chief Executive Officer ("CEO") and Chairman of the Board ("CoB") of the Company; b) provide additional capital for the Company; and c) license to YES certain trademarks controlled by Marciano affiliates. With respect to Marciano becoming Chief Executive Officer and Chairman of the Board, we understand that Marciano will receive: a) $1 per year in salary; and b) options to acquire 500,000 shares of the Company's common stock per year at $1.25 per share, vesting monthly during continued employment for up to four additional years, (the "Executive Options"). With respect to Marciano providing additional capital to the Company, we understand that Marciano agreed to: a) contribute $3,300,000 in new capital in exchange for 2,640,000 shares of YES' common stock; and b) convert approximately $700,000 owed by the Company to Marciano into additional shares of YES' common stock valued at $1.25 per share. With respect to Marciano licensing to YES certain trademarks controlled by Marciano affiliates, we understand that the Company has entered into five year trademark license agreement for Marciano's "GM Surf" and "Misfits" lines of clothing at royalties of 7 percent of gross sales, plus an additional 2 percent for advertising. To the Board of Directors YES Clothing Co. July 10, 1995 -2- Marciano becoming CEO and CoB of YES, Marciano providing additional capital to YES, the Company's granting of the Executive Options, and Marciano entering into licensing agreements with YES is collectively referred to herein as the "Restructuring". In connection with the Restructuring, we understand that the Company has granted Marciano a two year option to acquire an additional 2,000,000 shares of YES' common stock at $1.25 per share, (the "Additional Options"). Finally, we understand that the Company is publicly traded on the NASD National Market System (the "NASD NMS"), and has received a notice of potential delisting from the NASD NMS because its net worth has fallen below minimum listing standards. However, we understand that the capital infusion associated with the Restructuring may provide YES with sufficient capital to avoid such action by the NASD NMS. Moreover, we understand that Moss-Adams, the Company's outside auditors, has indicated that it would issue a qualified opinion for the Company's fiscal year ended March 31, 1995 without the completion of at least a portion of the Restructuring. The Restructuring and the Company's granting of the Additional Options are collectively referred to herein as the Transaction. You have requested our opinion (the "Opinion") as to the matters set forth below. This Opinion does not address the Company's underlying business decision to effect the Transaction. We have not been requested to, and did not, solicit third party indications of interest in acquiring all or any part of the Company. Furthermore, at your request, we have not negotiated the Transaction or advised you with respect to alternatives to it. We understand that shareholder approval will be sought for the Executive Options and the Additional Options and that this Opinion will be used in connection with seeking such shareholder approval. In connection with this Opinion, we have made such reviews, analyses and inquiries as we have deemed necessary and appropriate under the circumstances. Among other things, we have: a) met with senior management and toured the Company's warehouse; b) toured Georges Marciano's Beverly Hills store, which sells YES merchandise; c) reviewed the Company's 10K and annual report for the five fiscal years ended March 31, 1994; d) reviewed a draft of the Company's 10K for the fiscal year ended March 31, 1995; e) reviewed the Company's internal projections for the year ended March 31, 1996; f) reviewed the Company's weekly cash flow projections for May 1995 through July 1995; g) reviewed Republic Factors', (the Company's factor), cash availability schedule for February 1995 through June 1995; To the Board of Directors YES Clothing Co. July 10, 1995 -3- h) reviewed copies of the following agreements: the Employment Agreement between YES and Marciano, the Executive Stock Option Agreement for 2,000,000 shares vesting monthly over a four year term, at $1.25 per share, the Warrant Agreement for 2,000,000 shares at $1.25 per share for a two year term, and the License Agreement between Marble Sportswear and YES for the license of the GM Surf and Misfits trademarks at 7 percent royalty plus 2 percent advertising; i) reviewed analyst reports, financial information, trading information, and market pricing for the Company, for companies we consider comparable to the Company, and for other participants in the apparel industry; and j) conducted other studies that we deemed appropriate. We have relied upon and assumed, without independent verification, that the financial forecasts and projections provided to us have been reasonably prepared and reflect the best currently available estimates of the future financial results and condition of the Company, and that there has been no material change in the assets, financial condition, business or prospects of the Company since the date of the most recent financial statements made available to us. We have not independently verified the accuracy and completeness of the information supplied to us with respect to the Company and do not assume any responsibility with respect to it. We have not made any physical inspection or independent appraisal of any of the properties or assets of the Company. Our opinion is necessarily based on business, economic, market and other conditions as they exist and can be evaluated by us at the date of this letter. Based upon the foregoing, and in reliance thereon, it is our opinion that: a) the fair market value of the Company's common stock prior to and without giving effect to the Transaction is not more than $1.25 per share; and b) the Transaction is fair to the Company and the Company's shareholders, other than Marciano and Marciano's affiliates, from a financial point of view. HOULIHAN, LOKEY, HOWARD & ZUKIN, INC. /s/ Houlihan Lokey Howard & Zukin, Inc. -----END PRIVACY-ENHANCED MESSAGE-----