FORM 10-Q
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For quarter ended June 30, 2001
Commission file number 1-19254
Lifetime Hoan Corporation
(Exact name of registrant as specified in its charter)
Delaware 11-2682486
(State or other jurisdiction (I.R.S.
of incorporation or Employer
organization) Identification
No.)
One Merrick Avenue, 11590
Westbury, NY
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code (516) 683-
6000
Not applicable
(Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the registrant (1) has
filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that
the registrant was required to file such reports), and
(2) has been subject to such filing requirements for
the past 90 days.
Yes X No
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest
practicable date.
Common Stock, $.01 Par Value 10,491,101 shares
outstanding as of July 31, 2001
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
LIFETIME HOAN CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
<table>
<caption>
<s>
<c> <c> <c>
June 30, December
2001 31,
(unaudited) 2000
ASSETS
CURRENT ASSETS
Cash and cash equivalents $16 $1,325
Accounts receivable, less allowances of
$2,898 in 2001 and
$3,582 in 2000 12,394 18,158
Merchandise inventories 52,754 45,595
Prepaid expenses 3,334 3,477
Deferred income taxes 445 870
Other current assets 2,758 2,667
TOTAL CURRENT ASSETS 71,701 72,092
PROPERTY AND EQUIPMENT, net 19,785 13,085
EXCESS OF COST OVER NET ASSETS ACQUIRED, 15,783 15,906
net
OTHER INTANGIBLES, net 9,585 9,780
OTHER ASSETS 2,308 1,256
TOTAL ASSETS $119,162 $112,119
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term borrowings $21,000 $10,746
Accounts payable and trade acceptances 7,505 6,709
Accrued expenses 12,978 16,619
TOTAL CURRENT LIABILITIES 41,483 34,074
MINORITY INTEREST 342 528
STOCKHOLDERS' EQUITY
Common Stock, $0.01 par value, authorized
25,000,000 shares;
issued and outstanding 10,489,871 in 2001
and 10,501,630 in 2000 105 105
Paid-in capital 61,081 61,155
Retained earnings 16,898 17,359
Notes receivable for shares issued to stockholders (486) (908)
Deferred compensation (7) (14)
Accumulated other comprehensive loss (254) (180)
TOTAL STOCKHOLDERS' EQUITY 77,337 77,517
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $119,162 $112,119
</table>
See notes to condensed consolidated financial statements.
LIFETIME HOAN CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
(unaudited)
<table>
<caption>
<s>
<c> <c> <c>
Three Months Six Months
Ended Ended
June 30, June 30,
<c>2001 <c>2000 <c>2001 <c>2000
Net Sales $27,571 $25,547 $58,878 $53,156 47 $58,87 6
Cost of Sales 15,213 13,252 32,580 27,769
Gross Profit 12,358 12,295 26,298 25,387
Selling, General and
Administrative Expenses 11,731 10,238 24,423 21,001
Interest Expense 344 160 548 194
Other (Income) (148) (136) (234) (227)
Income Before Income Taxes 431 2,033 1,561 4,419
Income Taxes 227 870 718 1,883
NET INCOME $204 $1,163 $843 $2,536
EARNINGS PER COMMON SHARE-
BASIC AND DILUTED $0.02 $0.10 $0.08 $0.22
</table>
See notes to condensed consolidated financial statements.
LIFETIME HOAN CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
<table>
<caption>
<s>
<c> <c>
Six Months Ended
June 30,
<c>2001 <c>2000
OPERATING ACTIVITIES
Net income $843 $2,536
Adjustments to reconcile net income to net cash
(used in) provided by operating activities:
Depreciation and amortization 1,714 1,413
Deferred tax (benefit) 425 157
Provision for losses on accounts receivable 222 1
Reserve for sales returns and allowances 2,371 2,201
Minority Interest (186) (91)
Changes in operating assets and liabilities:
Accounts receivable 3,170 6,839
Merchandise inventories (7,159) 1,167
Prepaid expenses, other current assets
and other assets (578) (1,501)
Accounts payable, trade acceptances
and accrued expenses (2,843) (2,567)
Income taxes payable - (606)
NET CASH (USED IN) PROVIDED BY OPERATING
ACTIVITIES (2,021) 9,549
INVESTING ACTIVITIES
Purchase of property and equipment, net (7,924) (981)
Acquisition of M. Kamenstein, Inc. (164) -
NET CASH (USED IN) INVESTING ACTIVITIES (8,088) (981)
FINANCING ACTIVITIES
Proceeds from short-term borrowings, net 10,254 2,164
Repurchase of Common stock (88) (10,146)
Proceeds from the exercise of stock options 13 47
Cash dividends paid (1,304) (1,449)
NET CASH PROVIDED BY(USED IN) FINANCING
ACTIVITIES 8,875 (9,384)
EFFECT OF EXCHANGE RATE ON CASH AND CASH
EQUIVALENTS (75) -
(DECREASE) IN CASH AND CASH
EQUIVALENTS (1,309) (816)
Cash and cash equivalents at beginning of
period 1,325 1,563
CASH AND CASH EQUIVALENTS AT END OF PERIOD $16 $747
</table>
See notes to condensed consolidated financial statements.
LIFETIME HOAN CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Note A - Basis of Presentation
The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with accounting
principles generally accepted in the United States for interim
financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include
all of the information and footnotes required by generally
accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of
normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the six
month period ended June 30, 2001 are not necessarily indicative
of the results that may be expected for the year ending December
31, 2001. It is suggested that these condensed financial
statements be read in conjunction with the financial statements
and footnotes thereto included in the Company's Annual Report on
Form 10-K for the year ended December 31, 2000.
Recent Accounting Pronouncements: In June 2000, SFAS No. 133
was amended by SFAS No.138, "Accounting for Certain Derivative
Financial Instruments and Certain Hedging Activities", which
amended or modified certain issues discussed in SFAS No. 133.
SFAS No. 138 is effective for all fiscal years beginning after
June 15, 2000. SFAS No. 133 and SFAS No. 138 establish accounting
and reporting standards requiring that every derivative
instrument be recorded in the balance sheet as either as an asset
or a liability measured at its fair value. The statements also
require that changes in the derivative's fair value be recognized
currently in earnings unless specific hedge accounting criteria
are met. The adoption did not have a material effect on the
Company's financial statements.
In July 2001, the FASB issued SFAS No.'s 141 and 142, "Business
Combinations" and "Goodwill and Other Intangibles". FASB 141
requires all business combinations initiated after June 30, 2001
to be accounted for using the purchase method. Under FASB 142,
goodwill is no longer subject to amortization over its estimated
useful life. Rather, goodwill is subject to at least an annual
assessment for impairment, applying a fair-value based test.
Additionally, an acquired intangible asset should be separately
recognized if the benefit of the intangible asset is obtained
through contractual or other legal rights, or if the intangible
asset can be sold, transferred, licensed, rented, or exchanged,
regardless of the acquirer's intend to do so. Other intangible
assets will continue to be valued and amortized over their
estimated lives; in-process research and development will
continue to be written off immediately. Statement No. 142 is
effective for fiscal years beginning after December 15, 2001.
The Company does not expect that the implementation of these
guidelines will have a material impact on its financial position
or results of operations.
Note B - Inventories
Merchandise inventories, principally finished goods, are priced
at the lower of cost (first-in, first-out basis) or market.
Note C - Line of Credit Agreement
The Company has available an unsecured $25,000,000 line of credit
with one bank which may be used for short-term borrowings or
letters of credit. Borrowings under this Line bear interest
payable daily at a negotiated short-term borrowing rate. The
effective interest rate at June 30, 2001 was 5.4375%. As of June
30, 2001, the Company had $5,869,000 of letters of credit and
trade acceptances outstanding and $13,300,000 of borrowings. The
Company is charged a nominal fee on the entire Line. The line is
cancelable by either party at any time.
In April 2001, the Company obtained an additional $10,000,000
line of credit with a second bank which may be used for short-
term borrowings. Borrowings under this Line bear interest
payable monthly at a negotiated short-term borrowing rate. The
effective interest rate at June 30, 2001 was 6.40%. As of June
30, 2001, the Company had $5,000,000 of borrowings under this
line.
The Company is in the process of negotiating a $45 million
unsecured revolving credit facility with three banks to replace
its current $35 million credit lines with two banks. It's
anticipated that the new facility will consist of a $30 million
short-term credit line and a $15 million term loan. The Company
has received commitment letters from all three banks and is in
the process of negotiating formal agreements.
In addition to the lines of credit referred to above, the
Prestige Companies (the Company's 51% controlled European
subsidiaries) have three lines of credit with three separate
banks for a total available credit facility of approximately $3.3
million. As of June 30, 2001, the Prestige Companies had
approximately $2.7 million of borrowings against these lines.
Interest rates on these lines of credits range from 6.125% to
8.9%.
Note D - Capital Stock
Cash Dividends: On May 1, 2001, the Board of Directors declared
a regular quarterly cash dividend of $0.0625 per share to
shareholders of record on May 4, 2001, paid on May 18, 2001. On
July 31, 2001, the Board of Directors of the Company declared a
regular quarterly cash dividend of $0.0625 per share to
shareholders of record on August 3, 2001, to be paid on August
17, 2001.
Earnings Per Share: Basic earnings per share has been computed
by dividing net income by the weighted average number of common
shares outstanding of 10,488,000 for the three months ended June
30, 2001 and 11,115,000 for the three months ended June 30, 2000.
For the six month periods ended June 30, 2001 and June 30, 2000,
the weighted average number of common shares outstanding were
10,492,000 and 11,459,000, respectively. Diluted earnings per
share has been computed by dividing net income by the weighted
average number of common shares outstanding, including the
dilutive effects of stock options, of 10,534,000 for the three
months ended June 30, 2001 and 11,235,000 for the three months
ended June 30, 2000. For the six month periods ended June 30,
2001 and June 30, 2000, the diluted number of common shares
outstanding were 10,547,000 and 11,542,000, respectively.
Common Stock Buy Back: The Board of Directors of the Company has
authorized a repurchase of up to 3,000,000 of its outstanding
common shares in the open market. As of June 30, 2001, a total
of 2,128,000 common shares had been repurchased and retired at a
cost of approximately $15,235,000.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
RESULTS OF OPERATIONS
The following table sets forth income statement data of the
Company as a percentage of net sales for the periods indicated
below.
<table>
<caption>
<s>
<c> <c> <c>
Three Months Six Months
Ended Ended
June 30, June 30,
<c>2001 <c>2000 <c>2001 <c>2000
Net sales 100.0 % 100.0 % 100.0 % 100.0 %
Cost of sales 55.2 51.9 55.3 52.2
Gross profit 44.8 48.1 44.7 47.8
Selling, general and 42.5 40.1 41.5 39.5
administrative expenses
Interest expense 1.3 0.6 0.9 0.4
Other (income) (0.5) (0.5) (0.3) (0.4)
Income before income taxes 1.5 7.9 2.6 8.3
Tax provision 0.8 3.4 1.2 3.5
Net income 0.7 % 4.5 % 1.4 % 4.8 %
</table>
Three Months Ended June 30, 2001
Compared to Three Months ended June 30, 2000
Net Sales
Net sales for the three months ended June 30, 2001 were $27.6
million, 7.9% higher than the comparable 2000 quarter. The sales
increase was attributable to the M. Kamenstein, Inc. business,
acquired in September 2000, which contributed $4.2 million of net
sales to the second quarter results. Sales in the Company's
historic business were 8.5% lower in the 2001 quarter as the
Company's retail customers reduced inventory levels in response
to an uncertain economic climate.
Gross Profit
Gross profit for the three months ended June 30, 2001 was $12.4
million, an increase of 0.5% from the comparable 2000 period.
Gross profit as a percentage of net sales decreased to 44.8% from
48.1%, as a result of the combined impact of the added sales of
M. Kamenstein, Inc., which currently generate lower gross margins
than the Company's traditional business and of lower sales in the
Company's regular business.
Selling, General and Administrative Expenses
Selling, general and administrative expenses for the three months
ended June 30, 2001 were $11.7 million, an increase of 14.6% from
the comparable 2000 quarter. The increase was primarily
attributable to the $1.3 million of additional operating expenses
of the M. Kamenstein Inc. business, acquired in September 2000.
Excluding the impact of the Kamenstein business, selling, general
and administrative expenses increased by approximately $193,000,
or 1.6%, as compared to the 2000 quarter.
Six Months Ended June 30, 2001
Compared to Six Months ended June 30, 2000
Net Sales
Net sales for the six months ended June 30, 2001 were $58.9
million, an increase of $5.7 million or 10.8% as compared to the
corresponding 2000 period. The sales increase was attributable
to the M. Kamenstein, Inc. business, acquired in September 2000,
which contributed $8.3 million of net sales to the six month
results. Sales in the Company's historic business were 4.9%
lower in the 2001 period as the Company's retail customers
reduced inventory levels during the 2001 second quarter in
response to an uncertain economic climate.
Gross Profit
Gross profit for the six months ended June 30, 2001 was $26.3
million, an increase of 3.6% from the comparable 2000 period.
Gross profit as a percentage of net sales decreased to 44.7% from
47.8%, as a result of the combined impact of the added sales of
M. Kamenstein, Inc., which currently generate lower gross margins
than the Company's traditional business and lower sales in the
Company's regular business.
Selling, General and Administrative Expenses
Selling, general and administrative expenses for the six months
ended June 30, 2001 were $24.4 million, an increase of 16.3% from
the comparable 2000 period. The increase was primarily
attributable to the added selling, general and administrative
expenses of the M. Kamenstein, Inc. business, acquired in
September 2000.
Forward Looking Statements: This Quarterly Report on Form 10-Q
contains certain forward-looking statements within the meaning of
the "safe harbor" provisions of the Private Securities Litigation
Reform Act of 1995, including statements concerning the Company's
future products, results of operations and prospects. These
forward-looking statements involve risks and uncertainties,
including risks relating to general economic and business
conditions, including changes which could affect customer payment
practices or consumer spending; industry trends; the loss of
major customers; changes in demand for the Company's products;
the timing of orders received from customers; cost and
availability of raw materials; increases in costs relating to
manufacturing and transportation of products; dependence on
foreign sources of supply and foreign manufacturing; and the
seasonal nature of the business as detailed elsewhere in this
Quarterly Report on Form 10-Q and from time to time in the
Company's filings with the Securities and Exchange Commission.
Such statements are based on management's current expectations
and are subject to a number of factors and uncertainties which
could cause actual results to differ materially from those
described in the forward-looking statements.
LIQUIDITY AND CAPITAL RESOURCES
The Company has a $25,000,000 unsecured line of credit with one
bank which may be used for short-term borrowings or letters of
credit and trade acceptances. Borrowings under this Line bear
interest payable daily at a negotiated short-term borrowing rate.
The effective interest rate at June 30, 2001 was 5.4375%. As of
June 30, 2001, the Company had $5,869,000 of letters of credit
and trade acceptances outstanding under the Line and $13,300,000
of borrowings and, as a result, the availability under the Line
was $5,831,000. The Company is charged a nominal fee on the
entire Line. This Line is cancelable by either party at any time.
In April 2001, the Company obtained an additional $10,000,000
line of credit with a second bank which may be used for short-
term borrowings. Borrowings under this Line bear interest
payable monthly at a negotiated short-term borrowing rate. The
effective interest rate at June 30, 2001 was 6.40%. As of June
30, 2001, the Company had $5,000,000 of borrowings under this
additional line and, as a result, the availability under the line
was $5,000,000.
In addition to the lines of credit referred to above, the
Prestige Companies (the Company's 51% controlled European
subsidiaries) have three lines of credit with three separate
banks for a total available credit facility of approximately $3.3
million. As of June 30, 2001, the Prestige Companies had
borrowings of approximately $2.7 million against these lines.
Interest rates on these lines of credits range from 6.125% to
8.9%.
The Company is in the process of negotiating a $45 million
unsecured revolving credit facility with three banks to replace
its current $35 million credit lines with two banks. It's
anticipated that the new facility will consist of a $30 million
short-term credit line and a $15 million term loan. The Company
has received commitment letters from all three banks and is in
the process of negotiating formal agreements.
At June 30, 2001, the Company had cash and cash equivalents of
$16,000 versus $1.3 million at December 31, 2000. The decrease
in cash and increase in short-term borrowings of $10.3 million is
primarily attributable to capital expenditures made for the
Company's new leased warehouse facility and increased inventory
levels, partially offset by decreased accounts receivable
balances.
On July 31, 2001, the Board of Directors declared a regular
quarterly cash dividend of $0.0625 per share to shareholders of
record on August 3, 2001, to be paid on August 17, 2001. The
dividend to be paid will be approximately $656,000.
The Company expects that all capital expenditures budgeted to be
incurred in 2001 will be financed from current operations, cash
and cash equivalents and additional borrowings under its current
lines of credit and the anticipated expanded $45 million credit
facilities discussed above.
The Company believes that its cash and cash equivalents,
internally generated funds and its existing credit arrangements
will be sufficient to finance its operations for at least the
next 12 months.
The results of operations of the Company for the periods
discussed have not been significantly affected by inflation or
foreign currency fluctuation. The Company negotiates
predominantly all of its purchase orders with its foreign
manufacturers in United States dollars. Thus, notwithstanding any
fluctuation in foreign currencies, the Company's cost for any
purchase order is not subject to change after the time the order
is placed. However, any weakening of the United States dollar
against local currencies could lead certain manufacturers to
increase their United States dollar prices for products. The
Company believes it would be able to compensate for any such
price increase.
Item 3. Quantitative and Qualitative Disclosures About Market
Risk
Market risk represents the risk of loss that may impact the
consolidated financial position, results of operations or cash
flows of the Company. The Company is exposed to market risk
associated with changes in interest rates. The Company's lines
of credits bear interest at variable rates. The Company is
subject to increases and decreases in interest expense on its
variable rate debt resulting from fluctuations in the interest
rates of such debt. There have been no changes in interest rates
that would have a material impact on the consolidated financial
position, results of operations or cash flows of the Company
during the six month period ended June 30, 2001.
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security-Holders
The Company's annual meeting of stockholders was held on June
14, 2001. At the meeting, all seven director nominees were
elected and the appointment of Ernst & Young LLP as independent
auditors was ratified.
(a) The following directors were elected for a one-year term by
the votes indicated:
<table>
<caption>
<s>
<c> <c> <c>
FOR WITHHOLD
Milton L. Cohen 7,321,246 139,650
Jeffrey Siegel 7,230,146 230,750
Bruce Cohen 7,262,546 198,350
Craig Phillips 7,230,146 230,750
Ronald Shiftan 7,367,346 93,550
Howard Bernstein 7,358,246 102,650
Leonard Florence 7,367,346 93,550
</table>
(b) The appointment of Ernst & Young was ratified by the
following vote:
FOR WITHHOLD
7,446,976 13,920
Item 6. Exhibit(s) and Reports on Form 8-K.
(a) Exhibit(s) in the second quarter of 2001:
10.32 Employment Agreement dated April 6, 2001
between Jeffrey Siegel and Lifetime Hoan Corporation.
10.33 Consulting Agreement dated April 7, 2001
between Milton L. Cohen and Lifetime Hoan
Corporation.
(b) Reports on Form 8-K in the second quarter of 2001:
Report dated May 15, 2001 relating to the Asset Purchase
Agreement between MK Acquisition Corp., a wholly owned
subsidiary of Lifetime Hoan Corporation, and M. Kamenstein,
Inc., dated September 28, 2000, including as part thereof,
Item 7, Financial Statements, Proforma Financial Information
and Exhibits.
SIGNATURES
Pursuant to the requirements 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.
Lifetime Hoan Corporation
August 10, 2001
/s/ Jeffrey Siegel
__________________________________
Jeffrey Siegel
Chief Executive Officer and President
(Principal Executive Officer)
August 10, 2001
/s/ Robert McNally
__________________________________
Robert McNally
Vice President - Finance and Treasurer
(Principal Financial and Accounting
Officer)
EXHIBITS
EXHIBIT 10.32 JEFFREY SIEGEL EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT
AGREEMENT made as of the 6th day of April, 2001 between
LIFETIME HOAN CORPORATION ("Corporation"), a Delaware
corporation, having its principal place of business at One
Merrick Avenue, Westbury, NY 11590, and JEFFREY SIEGEL
("Executive"), residing at 106 Centre Island Road, Centre Island,
NY 11771.
WHEREAS, the Executive is the President and Chief Executive
Officer of the Corporation; and
WHEREAS, the Corporation desires to continue to employ the
Executive as its President and Chief Executive Officer, and
commencing immediately following the 2001 annual meeting of
stockholders of the Company to employ the Executive as its
Chairman of the Board, and the Executive is willing to accept
such employment, all on the terms and conditions hereinafter set
forth;
NOW, THEREFORE, it is mutually agreed as follows:
1. Employment. The Corporation shall employ the Executive
and the Executive hereby agrees to serve the Corporation as its
President and Chief Executive Officer for a term commencing on
April 6, 2001, and as its Chairman of the Board commencing
immediately following the 2001 annual meeting of stockholders of
the Company, and continuing until April 6, 2006, and thereafter
continuing for additional consecutive periods of one year, unless
sooner terminated in the manner provided for herein and unless,
with respect to any such additional consecutive period, either
the Corporation or the Executive notifies the other, not later
than December 31 of the prior year, that the term is to end on
April 6 of the following year (the "Term").
2. Duties and Responsibilities. Throughout the Term, the
Executive shall have the title of President and shall be the
Chief Executive Officer of the Corporation and, commencing
immediately following the 2001 annual meeting of stockholders of
the Corporation and continuing for the remainder of the Term, the
Executive shall have the title of Chairman of the Board of the
Corporation. As President and Chief Executive Officer of the
Corporation and as Chairman of the Board of the Corporation, he
shall have such duties and responsibilities relating to the
business and operations of the Corporation as the Board of
Directors may from time to time assign him. The Executive shall
devote his best efforts and all of his working time and attention
to the affairs of the Corporation, provided, however, that,
subject to Section 9, the Executive may devote time to his
personal endeavors so long as the same do not interfere with the
performance of his duties and responsibilities hereunder. The
Corporation agrees that, unless the Executive otherwise consents,
the headquarters for the performance of the Executive's services
shall be the principal offices of the Corporation located within
a thirty mile radius of Westbury, New York, subject to reasonable
travel as the performance of the Executive's duties may require.
3. Compensation. As compensation for the Executive's
services during the Term, the Corporation will pay and the
Executive will accept:
(a) A base salary ("Base Salary"), for the period
commencing April 6, 2001 and ending March 31,
2002, at a rate per annum equal to Seven Hundred
Thousand Dollars ($700,000) and, thereafter, for
each 12 month period commencing on April 1 of each
year and ending on March 31 of the immediately
succeeding year, at a rate increased, but not
decreased, by an amount equal to the product of
(i) the rate at which Base Salary is paid to the
Executive during the immediately preceding period
times (ii) the percentage by which the Bureau of
Labor Statistics Consumer Price Index for All
Urban Consumers (CPI-U), all items index, for New
York - Northern N.J. - Long Island, N.Y. - N.J. -
CT - PA, for the February immediately preceding
the last day of the immediately preceding period
in question (the "Prior Period") exceeds the CPI-
U, all items index, for New York - Northern N.J. -
Long Island, N.Y. - N.J. - CT - PA, for the
February immediately preceding the Prior Period
(Base Salary shall be payable in accordance with
the Corporation's payroll practices for
executives).
(b) The following bonuses:
(i)An amount equal to 3.5% of the Corporation's pre-tax income
for each fiscal year of the Corporation during the term of the
Executive's employment hereunder plus that amount equal to the
sum of all compensation for the Executive and for Milton L. Cohen
in his capacity as Chairman of the Board of the Corporation and
all significant non-recurring charges deducted in determining
such pre-tax income, all as determined in accordance with general
accounting principles consistently applied by the firm of
independent public accountants auditing the books and records of
the Corporation for such fiscal year, whose determination shall
be final, and payable no later than 120 days after the end of
such fiscal year (if such period is for less than a full fiscal
year such bonus shall equal the bonus that the Executive would
have received if he had been employed for the entire fiscal year
multiplied by the number of days the Executive was employed
during such fiscal year and divided by 365). The Corporation
will advance to the Executive for each fiscal year of the
Corporation during the term of the Executive's employment
hereunder that amount equal to 80% of such bonus anticipated to
be earned by the Executive based on the budget of the Corporation
for such fiscal year, such amount to be advanced to the Executive
in 26 equal semi-annual payments commencing two weeks following
the first day of such fiscal year and every two weeks thereafter
until advanced in full. If the amount of such bonus earned by
the Executive for such fiscal year is greater than such amount
advanced, the Corporation shall pay such excess to the Executive
as set forth above. If the amount of such bonus earned by the
Executive for such fiscal year is less than such amount advanced,
the Executive shall repay such deficiency to the Corporation on
demand.
ii)An amount equal to $350,000.00 payable to the Executive
in a lump sum on the earlier of (a) April 5, 2006 or (b)
termination of the Executive's employment hereunder by reason
of the Executive's death, disability or an Event of
Involuntary Termination (as defined in Section 8).
(iii)Such amount, if any, to which the Executive
shall be entitled pursuant to the terms of the Corporation's
2000 Incentive Bonus Compensation Plan.
4. Other Benefits.
Nothing contained herein shall be deemed to limit or affect
the right of the Executive to receive, in the sole discretion of
the Board of Directors of the Corporation or any committee
thereof, other forms of additional compensation or to
participate in any retirement, disability, profit sharing, stock
option, cash or stock bonus or other plan or arrangements, or in
any other benefits now or hereafter provided by the Corporation
for its employees generally. Without limiting the foregoing,
the Corporation shall provide the Executive with the following
benefits:
(a) During the Term of the Executive's employment
hereunder, the Corporation shall provide the
Executive with the type(s) of automobile(s), and
reimbursement of expenses incurred in connection
therewith, comparable to those heretofore provided
to the Executive as an officer of the Corporation
during its fiscal year ended December 31, 2000.
(b) It is contemplated that, in connection with his
employment hereunder, the Executive may be
required to incur reasonable business,
entertainment and travel expenses. The
Corporation agrees to reimburse the Executive in
full for all reasonable and necessary business,
entertainment and other related expenses,
including first class travel expenses for trips
that are scheduled to take more than two (2)
hours, incurred or expended by him incident to the
performance of the Executive's duties hereunder,
upon submission by the Executive to the
Corporation of vouchers or expense statements
satisfactorily evidencing the expenses as may
reasonably be requested by the Corporation. It is
understood that certain business of the
Corporation, involving travel of more than three
(3) days, will require or benefit from the
presence of the Executive's spouse (or significant
other), and this clause (b) applies as well to
such expenses relating to her.
(c) During the term of the Executive's employment
hereunder, he shall be entitled to annual paid
vacations (taken consecutively or in segments) the
length and time of which shall be in accordance
with current practices, provided that the
aggregate length of the Executive's annual
vacation(s) shall in no event be less than six
weeks.
(d) During the term of the Executive's employment
hereunder, the Corporation agrees to reimburse the
Executive in full for services paid for by the
Executive, or pay directly upon submission by the
Executive to the Corporation statements for
services payable by the Executive, rendered by any
person or persons of the Executive's choice that
the Executive retains to advise the Executive with
regard to legal, financial, investment and/or tax
advice and the drafting of wills and trusts in
connection with estate planning; provided however
such reimbursement or payment shall not in the
aggregate exceed ten thousand dollars ($10,000)
during any twelve (12) month period.
5. Insurance.
(a) The Executive agrees that the Corporation may at
any time or times and for the Corporation's own
benefit apply for and take out life, health,
accident and other insurance covering the
Executive either independently or together with
others, in an amount the Corporation deems to be
in its best interests and the Corporation may
maintain any existing insurance policies on the
life of the Executive owned by the Corporation.
The Corporation shall own all rights in the
insurance and in the cash value and proceeds
thereof and the Executive shall not have any
right, title or interest therein.
(b) Notwithstanding the foregoing, the Corporation agrees to
maintain or procure and maintain, as the case may be, throughout
the term of the Executive's employment hereunder, at the
Corporation's sole expense:
(i)the life insurance policy currently in effect on the life of
the Executive in the face amount of $5,000,000 payable upon the
death of the Executive. This policy (policy number 11120535) is
underwritten and issued by Massachusetts Mutual Life Insurance
Company. The Corporation is the sole owner of this policy. The
Executive has no right, title or privilege to this policy. The
Corporation is the beneficiary to the extent of the premium
payments made by the Corporation. The balance of the proceeds,
if any, are payable to the Trustees of the James G. Siegel AKA
Jeffrey Siegel Irrevocable Trust Agreement, dated May 10, 1989.
Upon the death of the Executive, the Corporation will pay to the
estate of James Gary Siegel AKA Jeffrey Siegel (i.e. the
Executive), the sum of the proceeds received under this policy,
which represents the sum of the premium payments. Any and all
income taxes due as a result of this payment, is the obligation
solely of the recipient. It is expressly understood that if,
for any reason, the Insurance Company does not pay the life
insurance death benefits under this policy, the Corporation will
have no obligation to make any payments under this Agreement.
(ii) the life insurance policy currently in
effect on the life of the Executive in the
face amount of $750,000 payable upon the
death of the Executive. This policy (policy
number 3240296) is underwritten and issued by
Guardian Life Insurance Company. The
Corporation is the sole owner of this policy.
The Executive has no right, title or
privilege to this policy. The Corporation is
the beneficiary to the extent of the premium
payments made by the Corporation. The
balance of the proceeds, if any, are payable
to the Trustees of the James G. Siegel AKA
Jeffrey Siegel Irrevocable Trust Agreement,
dated May 10, 1989. Upon the death of the
Executive, the Corporation will pay to the
estate of James Gary Siegel AKA Jeffrey
Siegel (i.e. the Executive), the sum of the
proceeds received under this policy, which
represents the sum of the premium payments.
Any and all income taxes due as a result of
this payment, is the obligation solely of the
recipient. It is expressly understood that
if, for any reason, the Insurance Company
does not pay the life insurance death
benefits under this policy, the Corporation
will have no obligation to make any payments
under this Agreement.
(iii)disability insurance for the Executive, if obtainable, in
an amount sufficient to pay the Executive $10,000 per month
during the term of this Agreement in the event the Executive
becomes disabled and his employment is terminated
pursuant to Section 6 .
(c) The Executive agrees to assist the Corporation at
the Corporation's sole expense in obtaining the
insurance referred to in Subsections 5(a) and (b)
, among other things, by submitting to the
customary examinations and correctly preparing,
signing and delivering applications and other
documents as reasonably may be required.
6. Termination of Employment. Anything herein to the
contrary notwithstanding, the employment of the Executive shall
terminate before April 5, 2006 in the event any of the following
occur before that date:
(a) If the Executive and the Corporation mutually
agree in writing to terminate his employment; or
(b) If the Executive shall become physically or mentally disabled
so that he is prevented from performing his usual duties for the
aggregate period of more than twelve (12) months in any eighteen
(18) month period; or
(c) If the Executive should die; or
(d) If the Executive commits any act of gross
negligence in the performance of his duties or
obligations to the Corporation or any act of
disloyalty or dishonesty or breach of trust
against the Corporation; or
(e) If the Board of Directors of the Corporation
determines in its judgment that the Executive has
breached any material provision of this Agreement;
or
(f) If the Corporation gives the Executive written
notice that, in the judgment of the Board of
Directors of the Corporation, the Executive has
acted in a manner which results in material injury
to the Corporation and the Executive fails to
remedy the same within 10 days following the
receipt of such notice; or
(g) If within the ten (10) day period following an
Initiating Event (as defined in Section 8(a)), the
Board of Directors of the Corporation determines
in its judgment that it is in the best interest of
the Corporation.
Except as otherwise provided in Sections 3, 4, 7 and 8,
termination of the Executive's employment pursuant to the
foregoing shall relieve the Corporation of any obligation to make
any further payments to the Executive under this Agreement.
7. Disability and Death Payments.
(a) Notwithstanding anything to the contrary in this
Agreement, in the event the Corporation terminates
the Executive's employment hereunder pursuant to
Subsection 6(b), the Corporation shall continue to
pay the Executive compensation during the term of
this Agreement as follows:
(i)during the period prior to termination and for
a period of twelve (12) months thereafter, the
Executive or his personal representative, as
the case may be, shall be entitled to receive
the full amount of compensation and all
applicable benefits provided in Sections 3, 4
and 8, as the case may be; and
(ii) from and after the twelve (12) month
period described in (i) above and for the
remainder of the term of this Agreement, the
Executive shall be entitled to receive one-
half (1/2) the full compensation received by
the Executive immediately preceding the onset
of his disability, plus the amount of
disability insurance set forth in Subsection
5(b)(ii) , plus any accrued and/or vested
employee benefits referred to in Section 4 .
(b) Notwithstanding anything to the contrary in this
Agreement, in the event of the death of the
Executive during the term of this Agreement, the
Executive's personal representative shall be
entitled to receive the compensation specified in
Subsection 3(a) for a period of five years
following the Executive's death even though such
period may extend beyond the term of this
Agreement. The Corporation thereafter shall be
discharged and released of and from any further
obligations under this Agreement, except for its
obligation to pay any accrued and/or vested
employee benefits referred to in Section 4 .
8. Severance Allowance.
(a) For the purpose of this Section 8, the following
terms shall have the following respective
meanings:
(i)Event of Involuntary Termination - Each of the
following, if not agreed to in writing by the
Executive, shall be deemed an Event of
Involuntary Termination;
(A) The termination of the Executive's
employment by the Corporation other
than pursuant to Section 1 or
Subsections 6(b), (c), (d), (e),
(f) or (g) ; or
(B) The appointment of a person other
than the Executive to serve as
President or Chief Executive
Officer of the Corporation, or the
diminution of the Executive's
duties, responsibilities or powers
to duties, responsibilities or
powers less than those previously
exercised or held by the Executive;
(C) a reduction in the aggregate amount
of compensation and other benefits
received by the Executive pursuant
to Sections 3 and 4 (other than a
reduction of benefits made for
employees generally); or
(D) a transfer of the Executive's
principal place of employment to a
location other than within a thirty
mile radius of Westbury, New York.
(ii) Initiating Event - The consolidation or
merger of the Corporation with or into another
corporation or other reorganization of the
Corporation (other than with or into a
subsidiary or affiliate of the Corporation)
any of which results in a change in control of
the Corporation; the sale of all or
substantially all the assets of the
Corporation (other than to a subsidiary or
affiliate or the Corporation); or the
acquisition, directly or indirectly, by any
Person, or by any two or more Persons acting
together, of beneficial ownership of more than
fifty percent (50%) of the outstanding voting
securities of the Corporation, including
without limitation, any acquisition by means
of a tender or exchange offer or proxy
solicitation or pursuant to a judgment, decree
or final order of a judicial or administrative
body of competent jurisdiction.
(iii) Person - An individual, partnership, joint
venture, corporation, trust, unincorporated
association, other business entity or
government or department, agency or
instrumentality thereof (whether domestic or
foreign).
(b) Upon the occurrence of an Event of Involuntary
Termination following an Initiating Event, the
Executive shall be entitled to receive, and the
Corporation agrees to pay, an amount (the
"Severance Allowance") equal to the salary the
Executive would have received pursuant to
Subsections 3(a) and (b) during the period
commencing with the Event of Involuntary
Termination and terminating three years thereafter
(the Severance Period"). The Severance Allowance
shall be paid in the manner in which the
Executive's salary was paid by the Corporation
immediately prior to the occurrence of the first
Initiating Event.
(c) In the event the Executive dies before receiving
the full amount of the Severance Allowance, his
personal representative shall be entitled to
receive the Severance Allowance specified in
Subsection (b) for the balance of the Severance
Period.
(d) In addition to Severance Allowance, the
Corporation or its successors shall pay to the
Executive an amount equal to that which the
Executive would have received under the
Corporation's pension plan had he continued to be
an active, full-time employee of the Corporation
during the Severance Period and had he received
during that period a salary equal to, and paid in
the manner of, the Severance Allowance. The
payments shall be made at such times as the
Executive would have received payments under the
pension plan he continued to be an active, full-
time employee of the Corporation during the
Severance Period.
9. Restrictive Covenants; Injunctive Relief. The Executive
acknowledges and agrees that (i) the principal business of the
Corporation is the design, importation and distribution of a
broad range of household cutlery, kitchenware, cutting boards,
pantryware and bakeware products; (ii) he is one of the limited
number of persons who has developed, and will continue to
develop, that business; (iii) the business of the Corporation is
conducted throughout the United States; (iv) his work for the
Corporation has included the identification and solicitation of
present and prospective suppliers and customers and the
maintenance of supplier and customer relationships and goodwill;
(v) the suppliers and customers of the Corporation are engaged in
supplying and purchasing various types of houseware products
including cutlery, kitchenware, cutting boards, pantryware and
bakeware products; (vi) his work for the Corporation has provided
him, and will continue to provide him, with confidential and
proprietary in formation including customer and supplier lists
and marketing strategies; and (vii) the business of the
Corporation and the potential for its continued success have
been, and will continue to be, dependent on unique personal
skills of the Executive and his diligent efforts in implementing
those skills on behalf of the Corporation and in this regard the
services to be provided by him are special, unique and
extraordinary. Accordingly, in order to induce the Corporation
to enter into this Agreement, the Executive covenants and agrees
that:
(a) During the Term and for a period of five years
thereafter (together, the "Restricted Period"),
the Executive shall not:
(i)engage in the business of importing or
distributing any cutlery, kitchenware, cutting
boards, pantryware or bakeware products
whatsoever or any other houseware products
related to or competitive with the products
distributed by the Corporation or any of its
subsidiaries or engage in any other business
engaged in by the Corporation or any of its
subsidiaries at the time or at any time during
the immediately preceeding twelve-month period
(the "Prohibited Activity") in the United
States for his own account; (b) directly or
indirectly, enter the employ of, or render any
services to, any Person engaged in any
Prohibited Activity in the United States; (c)
have an interest in any Person engaged in any
Prohibited Activity in the United States,
directly or indirectly, as an individual,
partner, shareholder, officer, director,
principal, agent, employee, trustee,
consultant or in any other relationship or
capacity; provided, however, that the
Executive may own directly, or indirectly,
solely as in investment, securities of any
Person which are traded on any national
securities exchange or in the over-the-counter
market if the Executive (c) is not a
controlling person of, or a member of a group
that controls, the person or (y) does not
directly or indirectly, own 5% or more of any
class of securities of the person;
(ii) directly or indirectly hire, engage or
retain any Person who at any time within the
immediately preceeding two (2) year period was
a supplier, client or customer of the
Corporation or any of its subsidiaries as, or
directly or indirectly solicit, entice or
induce any Person to become, a supplier,
client or customer of any other Person engaged
in any Prohibited Activity; or
(iii) directly or indirectly hire, employ or
retain any person who at any time within the
immediately preceeding two (2) year period was
an employee of the Corporation or any of its
subsidiaries or directly or indirectly
solicit, entice, induce or encourage any such
person to become employed by any other Person.
(b) During the Restricted Period, and for a period of
two (2) years thereafter, the Executive shall keep
secret and retain in strictest confidence, and
shall not use for the benefit of himself or others
except in connection with the business and affairs
of the Corporation, all confidential or
proprietary information of the Corporation and its
subsidiaries, including, without limitation, trade
"know-how", secrets, consultant contracts,
supplier lists, customer lists, pricing policies,
cost information, operational methods, marketing
plans or strategies, product development
techniques or plans, business acquisition plans,
new personnel plans, methods of manufacture,
technical processes, designs and design projects
and other business affairs of the Corporation and
its subsidiaries learned by the Executive
heretofore or during the terms of this Agreement,
and shall not disclose them to anyone outside the
Corporation and its subsidiaries, either during or
after his retention as a consultant by the
Corporation, except as required in the course of
performing duties hereunder or with the
Corporation's express written consent; provided,
however, that the Executive shall not be bound by
the restrictive obligations of this Section 9(B)
with respect to any matter that is or becomes
publicly known through no act of the Executive or
that is permitted by Section 9(A). All memoranda,
reports, notes, customer or supplier lists,
correspondence, records and other documents (and
all copies t) made or compiled by the Executive,
or made available to the Executive, concerning the
business of the Corporation or any of its
subsidiaries shall be the Corporation's property
and shall be delivered to the Corporation promptly
upon the termination of the Term.
(c) The Executive hereby acknowledges that the
covenants of the Executive contained in Sections
9(A) and (B) (the "Restrictive Covenants") are
reasonable and valid in all respects and that the
Corporation is entering into this Agreement in
reliance, inter alia, on his acknowledgement. If
the Executive breaches, or threatens to commit a
breach of, any of the Restrictive Covenants, the
Corporation shall have the right and remedy to
have the Restrictive Covenants specifically
enforced by any court having equity jurisdiction,
it being acknowledged and agreed that any breach
or threatened breach will cause irreparable injury
to the Corporation and that money damages will not
provide an adequate remedy to the Corporation such
right and remedy shall be in addition to, and not
in lieu of, any other right or remedy available to
the Corporation under law or in equity. If any
court determines that any of the Restrictive
Covenants, or any part t, is invalid or
unenforceable, the remainder of the Restrictive
Covenants shall not thereby be affected and shall
be given full effect, without regard to the
invalid portions; and if any court construes any
of the Restrictive Covenants, or any part t, to be
unenforceable because of the duration of the
provision or the area covered thereby, the court
shall have the power to reduce the duration or
area of the provision and, in its reduced form,
the provision shall then be enforceable and shall
be enforced.
(d) For purposes of this Section 9, the term "Person"
shall mean an individual, partnership, joint
venture, corporation, trust, unincorporated
association, other business entity or government
or department, agency or instrumentality t
(whether domestic or foreign).
10. Notices. Any notice required to be given hereunder
shall be in writing and shall be deemed sufficient if delivered
or mailed by registered mail as follows: if to the Corporation,
to its office at One Merrick Avenue, Westbury, New York 11590, or
such other address as the Corporation may hereafter designate for
that purpose; and if to the Executive, to him at 40 Merrivale
Road, Great Neck, NY 11020, or such other address as he may
hereafter designate for that purpose.
11. Enforceability. Any provision of this Agreement
which may be determined by competent authority to be prohibited
or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions ,
and any such prohibition or unenforceability in any jurisdiction
shall not invalidate or render unenforceable such provision in
any other jurisdiction.
12. Benefit. This Agreement shall be binding upon and
inure to the benefit of the legal representatives, successors and
assigns of the parties, including any corporation into which the
Corporation shall consolidate or merge or to which it shall
transfer substantially all of its assets.
13. Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of New
York.
14. Exclusive Jurisdiction. The parties hereto each
irrevocably submit to the exclusive jurisdiction of any New York
State or Federal Court sitting in the City of New York or in
Nassau or Suffolk County over any suit, action or proceeding
relating to or arising out of this Agreement. The Executive
irrevocably waives any objection, including without limitation,
any objection to the laying of venue or based on the grounds of
forum non conveniens, which the Executive may now or hereafter
have to the bringing of any such suit, action or proceeding in
any such jurisdiction.
15. Counterparts. This Agreement may be signed in
counterparts, each of which shall be an original, with the same
effect as if the signatures hereto and thereto were upon the same
instrument.
IN WITNESS W, the parties hereto have duly executed this
Agreement as of the day and year first above written.
LIFETIME HOAN CORPORATION
By________________________
Name:
Title:
__________________________
Jeffery Siegel
EXHIBIT 10.32 MILTON L. COHEN CONSULTING AGREEMENT
CONSULTING AGREEMENT
AGREEMENT made as of April 7, 2001 between LIFETIME HOAN
CORPORATION, a Delaware corporation (the "Corporation"), having
its principal place of business at One Merrick Avenue, Westbury,
NY 11590, and MILTON L. COHEN, (the "Consultant"), residing at
133 Everit Avenue, Hewlett Bay Park, New York 11557.
WHEREAS, Consultant has served the Corporation as its
Chairman of the Board, President and Chief Executive Officer;
WHEREAS, the Corporation wishes to retain the services of
Consultant for the purpose of consulting with the Corporation on
its business and the Consultant is willing to act in such
capacity, all upon the terms and conditions hereinafter set
forth;
NOW, THEREFORE, the parties hereto agree as follows:
1. Retention. The Corporation hereby agrees to retain the
Consultant, and the Consultant hereby accepts such retention as a
consultant to the Corporation, for a term commencing on the date
hereof and ending on April 6, 2006 unless sooner terminated
pursuant to the terms of Section 8 hereof (the "Term").
2. Responsibilities. Throughout the Term, the Consultant shall
consult with, assist and advise with respect to the business and
operations of the Corporation as the Corporation may from time to
time request of him. The Consultant is not expected and will not
be required to travel on behalf of the Corporation in the
performance of his services hereunder.
3. Independent Contractor. The parties agree and acknowledge
that the Consultant is and shall remain an independent contractor
at all times during the Term, and shall not be considered an
employee of the Corporation or be entitled to any rights as an
employee of the Corporation.
4. Compensation. As full compensation for the services to be
rendered hereunder by the Consultant, the Corporation agrees to
pay to the Consultant, and the Consultant agrees to accept, for
his services hereunder a fee at the rate of four hundred forty
thousand ($440,800) per annum, payable in monthly installments on
the 6th of each month commencing May 6, 2001 of $36,733.33 each.
5. Benefits.
Throughout the Term, the Corporation shall provide the
Consultant with the benefits set forth below.
(A) The Corporation will continue to cover the Consultant
under the medical and dental plans of the Corporation under which
the Consultant is presently covered or such other plans as the
Corporation may adopt in replacement of such present plans,
providing benefits no less favorable than such present plans.
(B) The Corporation will maintain in force the life
insurance policy on the life of the Consultant presently
maintained by the Corporation on the life of the Consultant. The
Consultant agrees to assist the Corporation, at the Corporation's
sole expense, in maintaining such insurance policy by, among
other things, submitting to customary examinations, if required,
and correctly preparing, signing and delivering such documents as
reasonably may be required.
6. Stock Options. Concurrently with the execution of this
Agreement, the Corporation will grant to Consultant options to
purchase 40,000 shares of common stock of the Corporation for a
purchase price per share equal to the closing price of a share of
common stock of the Corporation on the date of this Agreement as
reported by NASDAQ. Such options shall vest 25% each year for
four (4) consecutive years commencing on April 7, 2002.
7. Office Space. During the Term, the Consultant shall have the
right to use the office that the Consultant is presently using at
the Corporation's principal place of business; provided, however,
the obligation of the Corporation to permit the Consultant to use
such office shall terminate and the Corporation shall have no
obligation to provide any other office or other space for any
purpose whatsoever to the Consultant if (i) the Corporation sells
the building in which such office is located, (ii) a Change of
Control Event (as defined in this Section 6) occurs or (iii) the
Consultant changes his primary residence to a location outside of
the New York City metropolitan area.
The term "Change of Control Event" means the consolidation
or merger of the Corporation with or into another corporation or
other reorganization of the Corporation (other than with or into
a subsidiary or affiliate of the Corporation) any of which
results in a change in control of the Corporation; the sale of
all or substantially all the assets of the Corporation (other
than to a subsidiary or affiliate or the Corporation); or the
acquisition, directly or indirectly, by any Person, or by any two
or more Persons acting together, of beneficial ownership of more
than thirty percent (30%) of the outstanding voting securities of
the Corporation, including, without limitation, any acquisition
by means of a tender or exchange offer or proxy solicitation or
pursuant to a judgment, decree or final order of a judicial or
administrative body of competent jurisdiction.
8. Automobiles. The Corporation shall continue to permit the
Consultant to use the automobile, and shall reimburse the
Consultant for expenses incurred in connection therewith, that
the Consultant is presently using throughout the term of the
lease pursuant to which the Corporation is currently leasing such
automobile. Such lease terminates on June 17, 2002. Thereafter
the Corporation shall have no obligation to provide the
Consultant with such automobile or any other automobile.
9. Termination. Anything herein to the contrary
notwithstanding, the retention of the Consultant shall terminate
before April 6, 2006 in the event any of the following occurs
before that date:
(A) if the Consultant and the Corporation mutually
agree in writing to terminate his consulting arrangement; or
(B) if the Consultant should die or become
permanently disabled; or
(C) if (i) the Consultant breaches this Agreement or
(ii) the Corporation gives the Consultant written notice of
conduct by him which would prejudice the interests of the
Corporation, and the Consultant fails to remedy such conduct
within 10 days following receipt of such notice, the Corporation
in any of such cases may send the Consultant written notice
terminating his arrangement under this Agreement and specifying
the date of termination.
Termination of the Consultant's services pursuant to the
foregoing shall relieve the Corporation of any obligation to make
any further payments to the Consultant under this Agreement,
except in the case of Consultant's death or permanent disability
in which case, if Norma Cohen, Consultants present wife, shall
survive him in the case of his death or be then living in the
case of his permanent disability, the payments that would
otherwise have been made to Consultant under Section 4 of this
Agreement shall be made to Norma Cohen, provided, however, if
Norma Cohen shall die before April 6, 2006, the obligation of the
Corporation to make such payments to Norma Cohen shall terminate
upon her death.
10. Restrictive Covenants; Injunctive Relief. The Consultant
acknowledges and agrees that (i) the principal business of the
Corporation is the design, importation and distribution of a
broad range of household cutlery, kitchenware, cutting boards,
pantryware and bakeware products; (ii) he is one of the limited
number of persons who has developed, and will continue to
develop, that business; (iii) the business of the Corporation is
conducted throughout the United States; (iv) his work for the
Corporation has included the identification and solicitation of
present and prospective suppliers and customers and the
maintenance of supplier and customer relationships and goodwill;
(v) the suppliers and customers of the Corporation are engaged in
supplying and purchasing various types of houseware products
including cutlery, kitchenware, cutting boards, pantryware and
bakeware products; (vi) his work for the Corporation has provided
him, and will continue to provide him, with confidential and
proprietary in formation including customer and supplier lists
and marketing strategies; and (vii) the business of the
Corporation and the potential for its continued success have
been, and will continue to be, dependent on unique personal
skills of the Consultant and his diligent efforts in implementing
those skills on behalf of the Corporation and in this regard the
services to be provided by him are special, unique and
extraordinary. Accordingly, in order to induce the Corporation
to enter into this Agreement, the Consultant covenants and agrees
that:
(A) During the Term and for a period of five years
thereafter (together, the "Restricted Period"), the Consultant
shall not:
(i) (a) engage in the business of importing or
distributing any cutlery, kitchenware, cutting boards,
pantryware or bakeware products whatsoever or any other
houseware products related to or competitive with the
products distributed by the Corporation or any of its
subsidiaries or engage in any other business engaged in
by the Corporation or any of its subsidiaries at the
time or at any time during the immediately preceeding
twelve-month period (the "Prohibited Activity") in the
United States for his own account; (b) directly or
indirectly, enter the employ of, or render any services
to, any Person engaged in any Prohibited Activity in
the United States; (c) have an interest in any Person
engaged in any Prohibited Activity in the United
States, directly or indirectly, as an individual,
partner, shareholder, officer, director, principal,
agent, employee, trustee, consultant or in any other
relationship or capacity; provided, however, that the
Consultant may own directly, or indirectly, solely as
in investment, securities of any Person which are
traded on any national securities exchange or in the
over-the-counter market if the Consultant (c) is not a
controlling person of, or a member of a group that
controls, the person or (y) does not directly or
indirectly, own 5% or more of any class of securities
of the person;
(ii) directly or indirectly hire, engage or
retain any Person who at any time within the
immediately preceeding two (2) year period was a
supplier, client or customer of the Corporation or any
of its subsidiaries as, or directly or indirectly
solicit, entice or induce any Person to become, a
supplier, client or customer of any other Person
engaged in any Prohibited Activity; or
(iii) directly or indirectly hire, employ or
retain any person who at any time within the
immediately preceeding two (2) year period was an
employee of the Corporation or any of its subsidiaries
or directly or indirectly solicit, entice, induce or
encourage any such person to become employed by any
other Person.
(B) During the Restricted Period, and for a period of
two (2) years thereafter, the Consultant shall keep secret and
retain in strictest confidence, and shall not use for the benefit
of himself or others except in connection with the business and
affairs of the Corporation, all confidential or proprietary
information of the Corporation and its subsidiaries, including,
without limitation, trade "know-how", secrets, consultant
contracts, supplier lists, customer lists, pricing policies, cost
information, operational methods, marketing plans or strategies,
product development techniques or plans, business acquisition
plans, new personnel plans, methods of manufacture, technical
processes, designs and design projects and other business affairs
of the Corporation and its subsidiaries learned by the Consultant
heretofore or during the terms of this Agreement, and shall not
disclose them to anyone outside the Corporation and its
subsidiaries, either during or after his retention as a
consultant by the Corporation, except as required in the course
of performing duties hereunder or with the Corporation's express
written consent; provided, however, that the Consultant shall
not be bound by the restrictive obligations of this Section 9(B)
with respect to any matter that is or becomes publicly known
through no act of the Consultant or that is permitted by Section
9(A). All memoranda, reports, notes, customer or supplier lists,
correspondence, records and other documents (and all copies
thereof) made or compiled by the Consultant, or made available to
the Consultant, concerning the business of the Corporation or any
of its subsidiaries shall be the Corporation's property and shall
be delivered to the Corporation promptly upon the termination of
the Term.
(C) The Consultant hereby acknowledges that the
covenants of the Consultant contained in Sections 9(A) and (B)
(the "Restrictive Covenants") are reasonable and valid in all
respects and that the Corporation is entering into this Agreement
in reliance, inter alia, on his acknowledgement. If the
Consultant breaches, or threatens to commit a breach of, any of
the Restrictive Covenants, the Corporation shall have the right
and remedy to have the Restrictive Covenants specifically
enforced by any court having equity jurisdiction, it being
acknowledged and agreed that any breach or threatened breach will
cause irreparable injury to the Corporation and that money
damages will not provide an adequate remedy to the Corporation
such right and remedy shall be in addition to, and not in lieu
of, any other right or remedy available to the Corporation under
law or in equity. If any court determines that any of the
Restrictive Covenants, or any part thereof, is invalid or
unenforceable, the remainder of the Restrictive Covenants shall
not thereby be affected and shall be given full effect, without
regard to the invalid portions; and if any court construes any of
the Restrictive Covenants, or any part thereof, to be
unenforceable because of the duration of the provision or the
area covered thereby, the court shall have the power to reduce
the duration or area of the provision and, in its reduced form,
the provision shall then be enforceable and shall be enforced.
(D) For purposes of this Section 9, the term "Person"
shall mean an individual, partnership, joint venture,
corporation, trust, unincorporated association, other business
entity or government or department, agency or instrumentality
thereof (whether domestic or foreign).
11. Notices. Any notice required to be given hereunder shall be
in writing and shall be deemed sufficient if delivered or mailed
by registered mail as follows: if to the Corporation, to its
office at One Merrick Avenue, Westbury, New York 11590, or such
other address as the Corporation may hereafter designate for that
purpose; and if to the Consultant, to him at 133 Everit Avenue,
Hewlett Bay Park, New York 11557 (with a copy to Paul M. Brown,
Esq., Satterlee Stephens Burke & Burke LLP, 230 Park Avenue, New
York, NY 10169), or such other address as he may hereafter
designate for that purpose.
12. Enforceability. Any provision of this Agreement which may be
determined by competent authority to be prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions
hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such
provision in any other jurisdiction.
13. Benefit. This Agreement shall be binding upon and inure to
the benefit of the legal representatives, successors and assigns
of the parties, including any corporation into which the
Corporation shall consolidate or merge or to which it shall
transfer substantially all of its assets.
14. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York.
15. Exclusive Jurisdiction. The parties hereto each irrevocably
submit to the exclusive jurisdiction of any New York State or
Federal Court sitting in the City of New York or in Nassau or
Suffolk County over any suit, action or proceeding relating to or
arising out of this Agreement. The Consultant irrevocably waives
any objection, including without limitation, any objection to the
laying of venue or based on the grounds of forum non conveniens,
which the Consultant may now or hereafter have to the bringing of
any such suit, action or proceeding in any such jurisdiction.
16. Counterparts. This Agreement may be signed in counterparts,
each of which shall be an original, with the same effect as if
the signatures hereto and thereto were upon the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement
on the day and year first above written.
LIFETIME HOAN CORPORATION
By _____________________
Name: Jeffrey Siegel
Title: Chairman of the Board,
President and
Chief Executive Officer
________________________
Name: Milton L. Cohen