UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE THIRTEEN WEEKS ENDED NOVEMBER 2, 1996
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________________ to __________________
Commission file number: 1-8057
L. LURIA & SON, INC.
(Exact name of registrant as specified in its charter)
FLORIDA 59-0620505
(State of incorporation) (I.R.S. Employee Identification No.)
5770 MIAMI LAKES DRIVE, MIAMI LAKES, FLORIDA 33014
(Address of principal executive offices) (Zip Code)
(305) 557-9000
Registrant's telephone number, including area code:
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 [ ]
Common stock, par value $.01 per share: 5,451,588 shares
outstanding as of November 2, 1996
Class B stock, par value $.01 per share: 320 shares
outstanding as of November 2, 1996
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L. LURIA & SON, INC.
TABLE OF CONTENTS
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PART I - FINANCIAL INFORMATION Page
<S> <C>
Item 1. Financial Statements
Condensed Balance Sheets - November 2, 1996 (Unaudited),
October 28, 1995 (Unaudited), and February 3 ,1996........................................................ 3
Condensed Statements of Operations (Unaudited) for
the thirteen and thirty-nine weeks ended November 2, 1996 and October 28, 1995............................ 4
Condensed Statements of Cash Flows (Unaudited) for
the thirty-nine weeks ended November 2, 1996 and October 28,1995.......................................... 5
Notes to Condensed Financial Statements................................................................... 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations....................................................................... 7
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.......................................................................... 9
Signatures.................................................................................................................. 10
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Item 1. Financial Statements
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L. LURIA & SON, INC.
CONDENSED BALANCE SHEETS
(IN THOUSANDS)
November 2, October 28, February 3,
ASSETS 1996 1995 1996
----------- ----------- -----------
(Unaudited) (Unaudited)
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Current assets:
Cash and cash equivalents $ 1,467 $ 1,340 $ 4,941
Accounts receivable 1,210 1,252 1,129
Income tax receivable 0 0 3,392
Inventories 85,132 79,540 60,087
Prepaid expenses 3,348 2,809 1,037
Deferred taxes 756 0 756
----------- ----------- -----------
Total current assets 91,913 84,941 71,342
Property, net 28,728 39,738 38,303
Deferred taxes 4,465 0 4,466
Other assets 1,803 204 238
----------- ----------- -----------
Total assets $ 126,909 $ 124,883 $ 114,349
=========== =========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
- -------------------------------------
Current liabilities
Short-term bank borrowing $ 27,732 $ 24,150 $ 0
Accounts payable and accrued liabilities 49,290 22,182 44,262
Deferred taxes 1,839 0 1,839
Current portion of long-term debt 206 206 206
----------- ----------- -----------
Total current liabilities 79,067 46,538 46,307
----------- ----------- -----------
Long-term debt 655 791 791
Deferred taxes and other liabilities 5,730 1,995 2,454
Shareholders' Equity:
Preferred stock: $1 par value, 5,000,000 shares authorized;
no shares issued -- -- --
Common stock:
Common: $.01 par value, 14,000,000 shares authorized;
5,451,588 shares issued and outstanding at
November 2, 1996; 4,076,880 shares issued and
outstanding at October 28, 1995; and 4,100,274 issued
and outstanding at February 3, 1996 41 41 41
Class B: $ .01 par value, 6,000,000 shares authorized;
320 shares issued and outstanding at November 2, 1996
1,346,634 shares issued and outstanding at
October 28, 1995 and 1,346,634 shares issued and
outstanding at February 3, 1996. 13 13 13
Additional paid-in capital 18,220 18,230 18,220
Retained earnings 23,183 57,275 46,523
----------- ----------- ------------
Total shareholders' equity 41,457 75,559 64,797
----------- ----------- ------------
Total liabilities and shareholders' equity $ 126,909 $ 124,883 $ 114,349
=========== =========== ============
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See accompanying notes to condensed financial statements.
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L. LURIA & SON, INC.
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
THIRTEEN WEEKS THIRTEEN WEEKS THIRTY-NINE WEEKS THIRTY-NINE WEEKS
(in thousands, except loss ENDED ENDED ENDED ENDED
per common share) NOVEMBER 2, OCTOBER 28, NOVEMBER 2, OCTOBER 28,
1996 1995 1996 1995
-------------- -------------- ----------------- -----------------
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Net sales $ 23,581 $ 31,150 $ 80,502 $102,892
Cost of goods sold, buying and
warehousing costs 20,127 24,930 62,050 76,295
-------- -------- -------- --------
Gross margin 3,454 6,220 18,452 26,597
Operating expenses 15,742 13,645 40,572 38,218
-------- -------- -------- --------
Loss from operations (12,288) (7,425) (22,120) (11,621)
Interest (expense), net (550) (392) (1,220) (891)
-------- -------- -------- --------
Loss before income taxes (12,838) (7,817) (23,340) (12,512)
Income tax expense (benefit) 3,947(1) (2,532) 0 (4,292)
-------- -------- -------- --------
Net loss $(16,785) $ (5,285) $(23,340) $ (8,220)
======== ======== ======== ========
Weighted average number of
common shares outstanding 5,452 5,424 5,448 5,416
======== ======== ======== ========
Loss per common share $ (3.08) $ (.97) $ (4.28) $ (1.52)
======== ======== ======== ========
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- ------------------
(1) Reflects reversal of the income tax benefit recorded in the first and
second quarters of current fiscal year. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations - Income
Taxes."
See accompanying notes to condensed financial statements.
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L. LURIA & SON, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
THIRTY-NINE WEEKS THIRTY-NINE WEEKS
ENDED ENDED
NOVEMBER 2, 1996 OCTOBER 28, 1995
---------------- ------------------
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CASH FLOWS FROM OPERATING ACTIVITIES:
- -------------------------------------
Net loss $ (23,340) $ (8,220)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation 2,849 2,968
Deferred tax benefit 0 100
Deferred loss on sale leaseback 1,672 0
Gain on sale of property (87) 0
Decrease in accounts receivable 3,311 382
(Increase) Decrease in inventories (25,045) 3,391
Increase in prepaid expenses (2,311) (93)
(Increase) Decrease in other assets (1,562) 10
(Decrease) Increase in accounts payable and accrued liabilities 5,214 (29,987)
Increase in other liabilities 3,089 0
---------- ---------
Net cash used in operating activities (36,210) (31,449)
---------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
- -------------------------------------
Additions to property (4,902) (2,276)
Proceeds from sale of property 372 0
---------- ---------
Net cash applied to investing activities (4,530) (2,276)
---------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
- -------------------------------------
Borrowing under line of credit agreements 27,732 24,150
Repayments of long-term debt (136) (185)
Proceeds from sale leaseback 9,670 0
---------- ---------
Net cash provided by financing activities 37,266 23,965
---------- ---------
Net decrease in cash and cash equivalents (3,474) (9,760)
Cash and cash equivalents, beginning of period 4,941 11,100
---------- ---------
Cash and cash equivalents, end of period $ 1,467 $ 1,340
========== =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
- -------------------------------------------------
Cash paid or (received) during the period for:
Interest (net of amounts capitalized) $ 564 $ 1,045
Income taxes (refund) $ (7,364) $ (292)
</TABLE>
See accompanying notes to condensed financial statements.
5
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L. LURIA & SON, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
FOR THE THIRTEEN WEEKS ENDED NOVEMBER 2, 1996 AND OCTOBER 28, 1995
GENERAL
The accompanying condensed financial statements have been prepared in accordance
with the instructions to Form 10-Q of the Securities and Exchange Commission and
in accordance with generally accepted accounting principles applicable to
interim financial statements and do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management of L. Luria & Son, Inc. (the
"Company"), the accompanying condensed financial statements reflect all
adjustments necessary to present fairly the financial position of the Company as
of November 2, 1996 and October 28, 1995, and the results of its operations and
cash flows for the periods ended November 2, 1996 and October 28, 1995.
Furthermore, all adjustments were of a normal or recurring nature.
SEASONALITY
The results of operations for the thirteen weeks ended November 2, 1996 are not
indicative of the results to be expected for the entire year because the
Company's operations are seasonal.
ACCOUNTING POLICIES
The accounting policies followed by the Company are set forth in Note 1 to the
Company's financial statements in the 1996 L. Luria & Son, Inc. Annual Report,
which is incorporated by reference in Form 10-K.
COMMITMENTS AND CONTINGENCIES
On November 30, 1995 the Company announced that a Florida Circuit Court jury had
returned a verdict of $13.8 million in favor of the Company in a case in which
the Company alleged that its competitor, Service Merchandise Company, had
tortiuously interfered with the Company's business relationship and business
rights at the Sawgrass Mills Shopping Center in Broward County, Florida. The
Company had executed a letter of intent with the shopping center's landlord, had
successfully negotiated a formal lease, but was unable to obtain execution of
the formal lease by the landlord. The jury decided in favor of the Company in
both of its theories: that the letter of intent was a binding contract with
which Service Merchandise had intentionally interfered and that, at the very
least, the letter of intent created a business relationship with which Service
Merchandise had intentionally and wrongfully interfered. The trial judge has
denied various post-trial motions and entered final judgment in favor of the
Company. Service Merchandise has indicated that it will appeal from the final
judgment. No award amount has been reflected in the financial statements.
The Company has received from the Internal Revenue Service (the "IRS") a
proposed adjustment to the Company's tax liability in connection with its
examination of the Company's 1992, 1993, 1994 and 1995 federal income tax
returns. The IRS has challenged certain deductions that, if disallowed, would
result in additional taxes of approximately $4 million, plus interest and
penalties. A response to the IRS has been submitted. The Company believes that
the tax returns are substantially correct as filed, and intends to vigorously
contest the proposed adjustments. The Company also believes that the amounts
that have been provided for income taxes, net of the Company's net operating
loss, are adequate. See "Income Taxes."
WORKING CAPITAL
The Company has a secured revolving credit arrangement providing for borrowings
based on the value of the Company's inventory. At November 2, 1996, there were
borrowings outstanding under the revolving credit agreement of approximately
$27.7 million and letters of credit outstanding of approximately $2.3 million,
and the unused availability under the revolving credit agreement was
approximately $3.0 million. At November 2, 1996, the Company was not in
compliance with three borrowing covenants. The Company has received waivers of
the covenants from the lender. The Company and the lender have agreed that,
effective December 15, 1996, the maximum borrowings under the credit agreement
shall be $30 million.
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L. LURIA & SON, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SUMMARY
The following table sets forth for the periods indicated percentages which
certain items reflected in the financial data bear to net sales of the Company:
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RELATIONSHIPS TO NET SALES
FOR THE PERIODS ENDED
Thirty-nine Weeks
THIRTEEN WEEKS THIRTEEN WEEKS ENDED THIRTY-NINE WEEKS
ENDED ENDED NOVEMBER 2, ENDED
NOVEMBER 2, 1996 OCTOBER 28, 1995 1996 OCTOBER 28, 1995
---------------- ---------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
----- ----- ----- -----
Cost of goods sold, buying and
warehousing costs 85.3 80.0 77.1 74.2
----- ----- ----- -----
Gross margin 14.7 20.0 22.9 25.8
Operating expenses 66.8 43.8 50.4 37.1
----- ----- ----- -----
Loss from operations (52.1) (23.8) (27.5) (11.3)
Interest (expense), net (2.3) (1.3) (1.5) (.9)
----- ----- ----- -----
Loss before income taxes (54.4) (25.1) (29.0) (12.2)
Income tax expense (benefit) 16.7(1) (8.1) 0 (4.2)
----- ----- ----- -----
Net loss (71.1)% (17.0)% (29.0)% (8.0)%
===== ===== ===== =====
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- ------------------
(1) Reflects reversal of the income tax benefit recorded in the first and
second quarters of current fiscal year. See "-Income Taxes."
NET SALES
For the thirteen weeks ended November 2, 1996, net sales were $23.6 million, a
24.3% decrease compared to the same period last year. Comparable store sales
decreased 19.3%. The Company believes these decreases were primarily
attributable to (i) greater discounts and promoted products sold at lower
margins as the Company reduced its inventory in significant categories in
preparation for new product lines planned for the current year's holiday season
as part of its newly remodeled store merchandise strategy, (ii) implementation
of the Company's newly remodeled store merchandise strategy, including the
renovation of approximately 26 stores during the quarter and realignment and
redistribution of jewelry inventory resulting in limited selection of jewelry
inventory at various times and at various stores throughout the quarter, and
(iii) changes in advertising programs. Sales for the thirty-nine weeks ended
November 2, 1996 decreased $22.4 million or 21.8% compared to the same period
last year, while comparable store sales decreased 23.2%. These comparative
period percentage sales decreases are not expected to improve in the fourth
quarter. As of November 2, 1996, the Company operated 43 stores.
GROSS MARGINS
Gross margins as a percent of net sales for the thirteen weeks ended November 2,
1996 were 14.7%, compared to 20.0% for the prior year. For the thirty-nine weeks
ended November 2, 1996, gross margins as a percent of net sales were 22.9%
compared to 25.8% for the prior year. Gross margins were lower primarily due to
greater discounts and
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promoted products sold at lower margins as the Company reduced its inventory in
significant categories in preparation for new product lines planned for the
current year's holiday season as part of its newly remodeled merchandise
strategy.
OPERATING EXPENSES
Operating expenses for the current quarter increased as a percent of net sales
to 66.8% this year from 43.8% last year, due primarily to lower sales than last
year. For the thirty-nine week period, operating expenses as a percent of net
sales increased to 50.4% from 37.1% last year. Operating expenses for the
quarter were 15.4% above last year's operating expenses primarily because of
increased payroll, advertising and occupancy costs. The increase in payroll
expense was primarily attributable to (i) the lump sum payment to the Company's
former chief executive officer pursuant to his employment contract, (ii)
increased store payroll to support the renovation of the Company's stores, and
(iii) hiring and training of additional sales staff for new departments to be
introduced in the stores after the renovation of all of the stores has been
completed. Advertising expenses increased primarily as a result of (i) lower
coop accruals from vendors, and (ii) advertising costs associated with promoting
closeout products which were not eligible for offset against vendor advertising
funds. During the second quarter, the Company entered into sale leaseback
transactions for three of its stores. As a result, occupancy costs, excluding
tax and license costs, previously not incurred by the Company for these stores
were incurred in the third quarter and will continue to be incurred throughout
the term of the leases. Approximately $480,000 of carrying costs associated with
previously closed stores has been charged against a reserve set up in fiscal
year 1996, primarily for closed stores.
INCOME TAXES
During the Company's prior fiscal year and the first two quarters of the current
fiscal year, the Company recognized an income tax benefit relating to its net
operating loss, which income tax benefit was netted against the loss for such
periods. The income tax benefit was also reflected as a differed tax asset on
the balance sheet for such periods. As a result of the amount of the continuing
losses experienced by the Company, the Company believes that the income tax
benefit associated with the net operating loss will likely not be recognized in
the immediate future. Accordingly, no income tax benefit or deferred tax asset
has been reflected in the financial statements for the current quarter, and the
tax benefits of approximately $3.9 million reflected in the statements of
operations for the twenty-six weeks ended August 3, 1996 have been reversed and
reflected as an income tax expense for the quarter.
LIQUIDITY AND CAPITAL RESOURCES
The Company had cash and cash equivalents of $1.5 million at November 2, 1996
compared to $4.9 million at February 3,1995. Working capital at November 2, 1996
was $12.8 million compared to $38.4 million at October 28, 1995 and $25.0
million at February 3, 1996. Net cash used by operations at November 2, 1996 was
$36.2 million, primarily due to the net loss of $23.3 million and an increase in
inventory of $25.0 million, partially offset by an increase in accounts payable
of $5.0 million and a decrease in income tax receivables of $3.3 million.
In February 1996 the Company entered into a revolving credit agreement secured
by substantially all assets of the Company. The amount of credit available under
the revolving credit agreement is based on the value of the Company's inventory.
At November 2, 1996, there were borrowings outstanding under the revolving
credit agreement of approximately $27.7 million, letters of credit outstanding
of approximately $2.3 million, and the unused availability under the revolving
credit agreement was approximately $3.0 million. At November 2, 1996, the
Company was not in compliance with three borrowing covenants. The Company has
received waivers of the covenants from the lender. The Company and the lender
have agreed that, effective December 15, 1996, the maximum borrowings under the
credit agreement shall be $30 million.
The Company believes cash and cash equivalents and cash provided by operations,
as well as cash available from the existing credit facility, will be sufficient
to meet the Company's working capital and capital expenditure needs depending on
the rapid achievement in the short term of the following: (i) significantly
improved operating results, (ii) the successful implementation of the Company's
newly remodeled store merchandise strategy, (iii) the successful implementation
of the Company's plans to address its working capital needs,
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including closing and liquidating under-performing stores, selling the
warehouse/headquarters building, returning excess inventory to vendors and
bringing operating expenses in line with the reduced store count, and (iv) the
Company's compliance with the financial covenants under the existing credit
facility (collectively items (i) through (iv) referred to as the "Recovery
Plan"). The Company's operating results will depend on, among other things, the
success of the Company's strategic plans discussed above, the continued support
of the Company's numerous providers of goods and services, the competitive
environment, the prevailing economic climate and the ability of the Company to
adapt to these conditions. In the event, the Company is unable to make rapid
progress in the short term on this Recovery Plan, it is doubtful that the
Company will have sufficient working capital to meet its obligations as they
become due.
This report contains forward-looking statements that are subject to risks and
uncertainties, including but not limited to risks associated with the
repositioning of the Company and its strategic initiatives. Additional
discussions of factors that could cause actual results to differ materially from
management's projections, forecasts, estimates, anticipations and expectations
are contained in the Company's Current Report on Form 8-K, dated December 17,
1996.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
10.1 Employment Agreement with Peter Luria
10.2 Employment Agreement with Rachmil Lekach
27.1 Financial Data Schedule
(b) There was one report on Form 8-K filed with the SEC on
August 20, 1996 in regard to the Change in Control of
the Registrant.
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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.
L. LURIA & SON, INC.
Date: December 17, 1996 /S/ Rachmil Lekach
-------------------------------------
Rachmil Lekach
Chief Executive Officer
and Director
Date: December 17, 1996 /S/ Thomas A. Floerchinger
-------------------------------------
Thomas A. Floerchinger
Senior Vice President, Chief Financial Officer
and Principal Accounting Officer
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EXHIBIT 10.1
EMPLOYMENT AGREEMENT
This Agreement is made and entered into as of August 9,
1996 (the "EFFECTIVE DATE"), by and between L. LURIA & SON,
INC., a Florida corporation (the "COMPANY"), and PETER P. LURIA
(the "EXECUTIVE").
PRELIMINARY STATEMENTS:
A. The Company desires to retain the services of the Executive
pursuant to the terms and conditions of this Agreement.
B. The Executive is willing to make his services available to the
Company on the terms and subject to the conditions hereinafter set forth.
C. As of the Effective Date, Ocean Reef Cayman I, Ltd., a Cayman
Islands corporation, ("Cayman"), and Ocean Reef L.P., a Delaware limited
partnership ("Delaware" and together with Cayman, "Ocean Reef") purchased
1,320,105 shares (the "Ocean Reef Shares") of the Company's Class B common
stock, $.01 par value, which converted into the same number of shares of common
stock, $.01 par value (the "Common Stock"), of the Company upon such purchase.
AGREEMENT:
NOW, THEREFORE, in consideration of the premises and mutual covenants
set forth herein, the parties agree as follows:
1. EMPLOYMENT.
1.1 GENERAL. The Company hereby agrees to employ the Executive
as the President of the Company, and the Executive hereby agrees to provide
services to the Company, on the terms and subject to the conditions set forth
herein.
1.2 DUTIES OF EXECUTIVE. The Executive shall devote his full
business time and attention to the affairs of the Company, render services to
the best of his ability, and use his best efforts to promote the interests of
the Company. The Executive agrees to fulfill his fiduciary duties as an officer
and director of the Company. During the term of this Agreement, the Executive
shall serve as the President of the Company and shall perform such duties
assigned to him by the Chief Executive Officer and the Board of Directors (the
"Board") that are consistent with his title and position. The Executive shall
also be a member of the Board.
1.3 PLACE OF PERFORMANCE. In connection with the employment of
the Executive by the Company hereunder, the Executive shall perform his duties
and obligations hereunder primarily from the Company's offices located in Miami
Lakes, Florida, except for required travel on the Company's business.
<PAGE>
2. TERM.
2.1 INITIAL TERM. The initial term of the employment
of the Executive hereunder shall be for a period commencing on
the Effective Date and expiring on the two-year anniversary date
of the Effective Date (the "Initial Term"), unless sooner terminated in
accordance with the terms and conditions hereof.
2.2 RENEWAL TERM. The employment of the Executive hereunder
may be renewed and extended for such period or periods as may be mutually agreed
to by the Company and the Executive in a written supplement to this Agreement
signed by the Executive and the Company (a "WRITTEN SUPPLEMENT"). If this
Agreement is not so renewed and extended prior to the expiration of the Initial
Term, the employment of the Executive hereunder shall automatically terminate
upon the expiration of the Initial Term.
3. COMPENSATION.
3.1 BASE SALARY. As compensation for all services rendered by
the Executive to the Company hereunder, the Executive shall receive a base
salary at an annual rate of $250,000 (the "BASE SALARY") during the term of his
employment hereunder, which shall be payable in installments consistent with the
Company's normal payroll schedule, subject to applicable withholding and other
taxes. If the term of this Agreement shall be renewed and extended as provided
in Section 2.2 hereof, then during such renewal term the Executive shall be paid
a base salary as set forth in the Written Supplement.
3.2 DISCRETIONARY BONUS. At the sole discretion of the Board,
the Executive shall be entitled to receive a discretionary bonus pursuant to any
bonus plan approved by the Board after the Effective Date.
4. EXPENSE REIMBURSEMENT AND OTHER BENEFITS.
4.1 REIMBURSABLE EXPENSES. During the term of the Executive's
employment hereunder, the Company, upon the submission of proper substantiation
by the Executive, shall reimburse the Executive for all reasonable expenses
actually and necessarily paid or incurred by him in the course of and pursuant
to the business of the Company.
4.2 OTHER BENEFITS. During the term of the Executive's
employment hereunder, the Executive shall be entitled to participate in all
medical, dental, hospitalization, disability, group life insurance, 401(k) plan
and any and all other fringe benefit plans as are hereinafter provided by the
Company to all of its officers on the same terms as those of such other officers
of the Company and, in addition to such benefits, the Company shall continue in
force and pay the premiums relating thereto on (i) health insurance policies for
the Executive, his spouse and dependents in amounts and on terms no less
favorable than provided to the Executive as of the Effective Date, and (ii) all
life insurance policies on the life of the Executive in force as of the
Effective Date. Notwithstanding the termination of the Executive's employment
with the Company for any reason prior to the expiration of the Initial Term,
including a resignation by the Executive, the
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Company shall (i) until the expiration of the Initial Term, provide the
Executive, his spouse and dependents with medical, dental and any other health
benefits and coverage in amounts and on terms no less favorable than provided
immediately prior to such termination of employment and, in all other respects,
shall use its reasonable efforts to cause the Executive to be treated in a
manner that will cause him to remain eligible for said coverage throughout such
period, at no cost to the Executive, and (ii) at the time of such termination or
resignation, transfer, at no cost to the Executive, the life insurance policies
on the Executive's life to the Executive, or his designee, including any cash
value thereon. The provisions of this Section 4.2 shall survive the termination
of this Agreement.
4.3 WORKING FACILITIES. During the term of the Executive's
employment hereunder, the Company shall furnish the Executive with an office and
secretarial help of his choice, and such other facilities adequate for the
performance of his duties hereunder at the Company's corporate headquarters
located in Miami Lakes, Florida.
4.4 STOCK OPTIONS. Subject to the terms and conditions of the
Company's 1996 Stock Option Plan (the "Plan"), the Company grants to the
Executive, effective as of the Effective Date, a 10-year option (the "Option")
to purchase 100,000 shares of the Company's Common Stock at an exercise price
equal to the closing price of the Common Stock on the first business day
preceding the Effective Date. The Option shall become exercisable with respect
to 50,000 shares of Common Stock on the date of grant and the remaining 50,000
shares of Common Stock on the one-year anniversary date from the date of grant;
provided that, notwithstanding the provisions set forth in the Stock Option
Plan, (i) in the event the Executive's employment is terminated by the Company
for any reason prior to such one-year anniversary date, all shares of Common
Stock subject to the Option shall become immediately exercisable; and (ii) the
Option will expire in all events on the 10-year anniversary date of the date of
grant, notwithstanding the termination of the Executive's employment with the
Company for any reason, including resignation by the Executive. The terms of
this Section 4.4 shall survive the termination of this Agreement.
5. TERMINATION.
5.1 TERMINATION FOR CAUSE. The Company shall at all times have
the right, upon written notice to the Executive, to terminate the Executive's
employment hereunder, for cause. For purposes of this Agreement, the term
"cause" shall mean solely (a) a willful breach by the Executive of any of the
material terms or provisions of this Agreement which is not cured within ten
(10) days after receipt by the Executive of written notice of same, (b) the
Executive's conviction of a felony involving moral turpitude, or (c) commission
by the Executive of an act or acts involving fraud, embezzlement,
misappropriation or theft against the Company. Upon any termination pursuant to
this Section 5.1, the Executive shall be entitled to be paid his Base Salary and
any accrued but unpaid bonus to the date of termination and, subject to the
provisions of Sections 4.2 and 4.4, the Company shall have no further liability
hereunder (other than for reimbursement for reasonable business expenses
incurred prior to the date of termination, subject, however to the provisions of
Section 4.1).
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5.2 CHANGE OF CONTROL. The Executive may terminate his
employment under this Agreement upon a Change of Control. For purposes of this
Section 5.2, "Change of Control" shall mean the failure of Applicable Directors
(defined below) to constitute a majority of the Board. "Applicable Directors"
shall mean those five individuals who were appointed at the direction of Ocean
Reef at the Effective Date and any new director whose election to the Board or
nomination for election to the Board was approved (prior to any vote thereon by
the shareholders) by a vote of at least a majority of the directors then still
in office who either were directors appointed by Ocean Reef as of the Effective
Date or whose election or nomination for election was previously approved as
provided in this sentence. To terminate his employment under this Agreement upon
a Change of Control, the Executive shall give the Company a written termination
notice. The termination date shall be the date specified in such notice, which
date may not be earlier than 30 days nor later than 90 days from the Company's
receipt of such notice. If this Agreement is terminated by the Executive
pursuant to this Section 5.2, or if the Company terminates this Agreement upon a
Change of Control, or within six months from the date of a Change of Control,
then, as long as the Executive is not a member of the "control group" (within
the meaning of the rules and regulations of the Securities and Exchange
Commission) of the entity causing the Change of Control, in addition to the
provisions of Sections 4.2 and 4.4, the Executive will be entitled to be paid a
lump sum payment equal to the sum of (x) the Base Salary that the Executive
would otherwise have been entitled to receive through the end of the Initial
Term, plus (y) a severance payment equal to $250,000.
5.3 TERMINATION WITHOUT CAUSE; DEATH; OR DISABILITY. At any
time the Company shall have the right to terminate the Executive's employment
hereunder (i) by written notice to the Executive, (ii) if the Executive, as a
result of mental or physical incapacity, illness or disability, fails to perform
his duties and responsibilities provided for herein for more than 90 days in any
365-day period, or (iii) upon the death of the Executive. In the event of any
termination pursuant to this Section 5.3, then, in addition to the provisions of
Sections 4.2 and 4.4, the Executive (or his estate) shall be entitled to be paid
his Base Salary and any accrued but unpaid bonus to the date of termination and
receive reimbursements for reasonable business expenses incurred prior to such
date of termination (subject, however, to the provisions of Section 4.1), and to
be paid the following severance payments: (a) if the termination occurs on or
prior to the one-year anniversary date of the Effective Date, the Company shall
pay the Executive (or his estate) a lump sum payment equal to the Base Salary
that the Executive would otherwise have been entitled to receive through the end
of the Initial Term, and (b) if the termination occurs after the one-year
anniversary date of the Effective Date, but prior to the expiration of the
Initial Term, the Company shall pay the Executive (or his estate) a lump sum
payment equal to the sum of (x) the Base Salary that the Executive would
otherwise have been entitled to receive through the end of the Initial Term,
plus (y) $250,000.
5.4 TERMINATION BY EXECUTIVE. The Executive may terminate his
employment under this Agreement for Good Reason (defined below). "Good Reason"
shall mean (A) that the Company (through its Board or otherwise) has (i)
assigned the Executive duties other than those contemplated by Section 1.2 above
without the Executive's consent, (ii) named a new President of the Company,
(iii) limited the powers of the Executive in any
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manner, or (iv) breached any of its other covenants and obligations hereunder;
or (B) the inability of the Executive to perform his duties hereunder. A
purported termination of this Agreement by the Company pursuant to any provision
of this Section 5 which is disputed and which is finally determined not to have
been proper shall be deemed a breach by the Company of this Agreement. To
terminate his employment under this Agreement for Good Reason, the Executive
shall give the Company written notice of the Executive's intent to terminate his
employment with the Company pursuant to this Section 5.4, which notice shall
specify the Executive's reasons therefor in detail. The Company shall have 30
days from its receipt of such notice to attempt to cure any such condition
giving rise to Good Reason hereunder. If such cure is acceptable to the
Executive, the Executive may accept such cure and continue this Agreement in
full force and effect as if the initial notice of termination under this Section
5.4 had not been given by the Executive; provided, however, that acceptance of
such cure and the continuation of the Executive's employment shall not act as a
waiver of any rights of the Executive with respect to such actions or inactions
of the Company and/or limit the Executive's right to terminate this Agreement
for the same or similar action or inaction by the Company following such cure.
If the Executive does not accept such cure, the termination date of this
Agreement shall be the 30th day after the Company's receipt of the Executive's
termination notice. Upon any termination of this Agreement pursuant to this
Section 5.4, then, in addition to the provisions of Sections 4.2 and 4.4, the
Executive shall be entitled to receive his Base Salary and any accrued but
unpaid bonus through the end of the Initial Term, in installments consistent
with the Company's normal payroll practices, and reimbursement for reasonable
business expenses incurred prior to the date of termination, subject, however,
to the provisions of Section 4.1.
5.5 NON-RENEWAL. In the event that this Agreement is not
renewed beyond the Initial Term as provided in Section 2.1 hereof, then this
Agreement shall terminate at the end of such Initial Term of this Agreement. The
last day of the Initial Term shall be the termination date for a termination
pursuant to this Section 5.5. If the Executive is employed by the Company at the
end of the Initial Term, then, upon any termination of this Agreement pursuant
to this Section 5.5, the Executive shall be entitled to receive a lump-sum
payment of $250,000.
5.6 MITIGATION. The Executive shall not be required to
mitigate the amount of any payment provided for in this Section 5 by seeking
other employment or otherwise, nor shall the amount of any payment provided for
in this Section 5 be reduced by any compensation earned by the Executive as the
result of employment by another employer after the termination date.
6. RESTRICTIVE COVENANTS.
6.1 NON-COMPETITION. During the Non-competition Period (as
hereinafter defined), the Executive shall not, directly or indirectly, engage in
or have any interest in any sole proprietorship, partnership, corporation or
business or any other person or entity that directly or indirectly is engaged in
the jewelry or gift retail business primarily in Florida; PROVIDED, HOWEVER,
that (i) nothing herein shall be deemed to prevent the Executive from owning an
interest in the equity or debt securities of the Company or any of its direct or
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indirect subsidiaries, and (ii) nothing herein shall be deemed to prevent the
Executive from acquiring through market purchases and owning, solely as an
investment, less than five percent of the equity securities of any class of any
issuer whose shares are registered under Section 12(b) or 12(g) of the
Securities Exchange Act of 1934, as amended, and are listed or admitted for
trading on any United States national securities exchange or are quoted on the
National Association of Securities Dealers Automated Quotations System, or any
similar system of automated dissemination of quotations of securities prices in
common use, so long as the Executive is not a member of any "control group"
(within the meaning of the rules and regulations of the United States Securities
and Exchange Commission) of any such issuer. For purposes of this Section 6.1,
the term "NON-COMPETITION PERIOD" shall mean (i) at all times while the
Executive is employed by the Company, and (ii) at all times while the Executive
is receiving Base Salary payments from the Company, but in no event more than
six months from the date the Executive is no longer employed by the Company.
6.2 NONDISCLOSURE. Except as expressly permitted by the
Company or in connection with the performance of his duties hereunder, the
Executive shall not, unless otherwise required by law, divulge, communicate, use
to the detriment of the Company or for the benefit of any other person or
persons, or misuse in any way, any confidential information pertaining to the
business of the Company. Any confidential information or data heretofore or
hereafter acquired by the Executive with respect to the business of the Company
(which shall include, but not be limited to, information concerning the
Company's financial condition, prospects, customers, suppliers, sources of
leads, methods of doing business, importation, marketing and distribution of
the Company's services) shall be deemed a valuable, special and unique asset of
the Company that is received by the Executive in confidence and as a fiduciary,
and the Executive shall remain a fiduciary to the Company with respect to all of
such information. Notwithstanding any provision hereof which may be to the
contrary, confidential information shall not include (a) information that is or
becomes generally available to the public other than as a result of a disclosure
by the Executive, or (b) information lawfully acquired by the Executive from
sources other than the Company or its affiliates who are not bound by any
agreement of confidentiality.
6.3 NONSOLICITATION OF EMPLOYEES. While employed by the
Company and for a period of one year following the date his employment is
terminated hereunder, the Executive shall not, directly or indirectly, for
himself or for any other person, firm, corporation, partnership, association or
other entity, solicit any employee of the Company.
6.4 BOOKS AND RECORDS. All books, records, and accounts
relating in any manner to the Company, whether prepared by the Executive or
otherwise coming into the Executive's possession, shall be the exclusive
property of the Company and shall be returned immediately to the Company on
termination of the Executive's employment hereunder or on the Company's request
at any time. The Executive shall not retain copies, extracts or compilations of
any such books, records or accounts.
6.5 COMPANY INCLUDES SUBSIDIARIES. For purposes of this
Section 6 and Section 7 hereof, the term "Company" shall be deemed to include
the Company and any of its direct or indirect subsidiaries.
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6.6 SURVIVAL. The terms of this Section 6 shall survive the
termination of this Agreement.
7. INJUNCTION. It is recognized and hereby acknowledged by the parties
hereto that a breach by the Executive of any of the covenants contained in
Section 6 of this Agreement will cause irreparable harm and damage to the
Company, the monetary amount of which may be virtually impossible to ascertain.
As a result, the Executive recognizes and hereby acknowledges that the Company
shall be entitled to an injunction from any court of competent jurisdiction
enjoining and restraining any violation of any or all of the covenants contained
in Section 6 of this Agreement by the Executive or any of his affiliates,
associates, partners or agents, either directly or indirectly, and that such
right to injunction shall be cumulative and in addition to whatever other
remedies the Company may possess.
8. INDEMNIFICATION. The Executive shall be entitled to be indemnified
and defended as provided to other officers and directors of the Company in
accordance with the Company's charter documents and Florida law.
9. ASSIGNMENT. Subject to the provisions of Section 5.2 hereof, the
Executive agrees that any or all of the rights and interests of the Company
hereunder (i) may be assigned to any purchaser of substantially all of the
assets of the Company, and (ii) may be assigned as a matter of law to the
surviving entity in any merger of the Company. The Executive shall not delegate
his employment obligations hereunder, or any portion thereof, to any other
person.
10. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Florida.
11. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties hereto with respect to the subject matter hereof and
supersedes all prior agreements, understandings and arrangements, both oral and
written, between the parties hereto with respect to such subject matter. This
Agreement may not be modified in any way unless by a written instrument signed
by each of the parties hereto.
12. NOTICES. Any notice required or permitted to be given hereunder
shall be in writing and shall be given by personal delivery, facsimile
transmission, Federal Express (or other equivalent courier service) or by
registered or certified mail, postage prepaid, return receipt requested (a) if
to the Company, 5770 Miami Lakes Drive, Miami Lakes, Florida 33014, Attention:
Chief Executive Officer, and (b) if to the Executive, to his address as
reflected on the payroll records of the Company, or to such other addresses as
either party hereto may from time to time give notice of to the other. Notice by
registered or certified mail will be effective three days after deposit in the
United States mail. Notice by any other permitted means will be effective upon
receipt.
13. BENEFITS; BINDING EFFECT. This Agreement shall be for the benefit
of and binding upon the parties hereto and their respective heirs, personal
representatives, legal representatives, successors and, where applicable,
assigns, including, without limitation, any
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successor to the Company, whether by merger, consolidation, sale of stock, sale
of assets or otherwise.
14. SEVERABILITY. The invalidity of any one or more of the words,
phrases, sentences, clauses or sections contained in this Agreement shall not
affect the enforceability of the remaining portions of this Agreement or any
part thereof, all of which are inserted conditionally on their being valid in
law, and, in the event that any one or more of the words, phrases, sentences,
clauses or sections contained in this Agreement shall be declared invalid, this
Agreement shall be construed as if such invalid word or words, phrase or
phrases, sentence or sentences, clause or clauses, or section or sections had
not been inserted. If such invalidity is caused by length of time or size of
area, or both, the otherwise invalid provision will be considered to be reduced
to a period or area which would cure such invalidity.
15. WAIVERS. The waiver by either party hereto of a breach or
violation of any term or provision of this Agreement shall not operate nor be
construed as a waiver of any subsequent breach or violation.
16. DAMAGES. Nothing contained herein shall be construed to prevent any
party hereto from seeking and recovering from the other damages sustained by
either or both of them as a result of its or his breach of any term or provision
of this Agreement. In the event that either party hereto brings suit for the
collection of any damages resulting from, or for the injunction of any action
constituting, a breach of any of the terms or provisions of this Agreement, then
the prevailing party shall pay all reasonable costs, fees (including reasonable
attorneys' fees) and expenses of the non-prevailing party.
17. SECTION HEADINGS. The section headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
18. NO THIRD PARTY BENEFICIARY. Nothing expressed or implied in this
Agreement is intended, or shall be construed, to confer upon or give any person
other than the parties hereto and their respective heirs, personal
representatives, legal representatives, successors and assigns, any rights or
remedies under or by reason of this Agreement.
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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first above written.
L. LURIA & SON, INC.
By:/s/Rachmil Lekach
------------------------
Name: Rachmil Lekach
Title: Chairman of the Board
/s/Peter P. Luria
------------------------
PETER P. LURIA
9
EXHIBIT 10.2
EMPLOYMENT AGREEMENT
This Agreement is made and entered into as of August 30, 1996 (the
"Effective Date"), by and between L. LURIA & SON, INC., a Florida corporation
(the "COMPANY"), and RACHMIL LEKACH (the "EXECUTIVE").
PRELIMINARY STATEMENTS:
A. The Company desires to retain the services of the Executive pursuant
to the terms and conditions of this Agreement.
B. The Executive is willing to make his services available to the
Company on the terms and subject to the conditions hereinafter set forth.
AGREEMENT:
NOW, THEREFORE, in consideration of the premises and mutual covenants
set forth herein, the parties agree as follows:
1. EMPLOYMENT.
1.1 GENERAL. The Company hereby agrees to employ the Executive
as the Chairman of the Board and Chief Executive Officer of the Company, and the
Executive hereby agrees to provide services to the Company, on the terms and
subject to the conditions set forth herein.
1.2 DUTIES OF EXECUTIVE. Subject to the provisions of Section
8, during the term of this Agreement, the Executive shall be available to the
Company on a full-time basis, render services to the best of his ability, and
use his best efforts to promote the interests of the Company. The Executive
agrees to fulfill his fiduciary duties as an officer and director of the
Company. During the term of this Agreement, the Executive shall serve as the
Chairman of the Board and Chief Executive Officer of the Company. The Executive
shall be responsible for the management of the Company's day to day operations,
including, but not limited to, all hiring and firing, merchandising,
advertising, store and warehouse operations, contracts, accounting, personnel,
budgets and expenses. The Executive shall also perform such other duties
assigned to him by the Board of Directors (the "BOARD") that are consistent with
his title and position and that do not violate the terms of this Agreement. The
Executive shall also be a member of the Board.
1.3 PLACE OF PERFORMANCE. In connection with the employment of
the Executive by the Company hereunder, the Executive shall perform his duties
and obligations hereunder primarily from the Company's offices located in Miami
Lakes, Florida, except for required travel on the Company's business. The
Company shall not require the Executive to change his place of permanent
residency to a place outside of the Dade County, Florida area.
2. TERM.
2.1 INITIAL TERM. The initial term of the employment of the
Executive hereunder shall be for a period commencing on the Effective Date and
expiring on December 31, 1999 (the "INITIAL TERM"), unless sooner terminated in
accordance with the terms and conditions hereof.
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2.2 RENEWAL TERM. The employment of the Executive hereunder
may be renewed and extended for such period or periods as may be mutually agreed
to by the Company and the Executive in a written supplement to this Agreement
signed by the Executive and the Company (a "WRITTEN SUPPLEMENT"). If this
Agreement is not so renewed and extended prior to the expiration of the Initial
Term, the employment of the Executive hereunder shall automatically terminate
upon the expiration of the Initial Term.
3. COMPENSATION.
3.1 BASE SALARY. As compensation for all services rendered by
the Executive to the Company hereunder, the Executive shall receive a base
salary at an annual rate of $300,000 (the "BASE SALARY") during the term of his
employment hereunder, which shall be payable in installments consistent with the
Company's normal payroll schedule, subject to applicable withholding and other
taxes. The Base Salary shall be increased annually to reflect any increase from
the previous year in the Consumer Price Index for the Dade County, Florida area.
In addition, the Base Salary may be increased from time to time in accordance
with the normal business practices of the company and, if so increased, shall
not thereafter during the term of this Agreement be decreased. If the term of
this Agreement shall be renewed and extended as provided in Section 2.2 hereof,
then during such renewal term the Executive shall be paid a base salary as set
forth in the Written Supplement.
3.2 DISCRETIONARY BONUS. At the discretion of the Board, the
Executive shall be entitled to receive discretionary bonuses pursuant to bonus
plans approved by the Board after the Effective Date.
4. EXPENSE REIMBURSEMENT AND OTHER BENEFITS.
4.1 REIMBURSABLE EXPENSES. During the term of the Executive's
employment hereunder, the Company, upon the submission of proper substantiation
by the Executive, shall reimburse the Executive for all reasonable expenses
actually and necessarily paid or incurred by him in the course of and pursuant
to the business of the Company.
4.2 OTHER BENEFITS. During the term of the Executive's
employment hereunder, the Executive shall be entitled to participate in all
medical and hospitalization, group life insurance, and any and all other fringe
benefit plans as are hereinafter provided by the Company to its officers on the
same terms as those of such other officers of the Company. Notwithstanding the
termination of the Executive's employment with the Company for any reason prior
to the expiration of the Initial Term, including a resignation by the Executive,
the Company shall (i) until the expiration of the Initial Term, provide the
Executive, his spouse and dependents with medical, dental and any other health
benefits and coverage in amounts and on terms no less favorable than provided
immediately prior to such termination of employment and, in all other respects,
shall use its reasonable efforts to cause the Executive to be treated in a
manner that will cause him to remain eligible for said coverage throughout such
period, at no cost to the Executive, and (ii) at the time of such termination or
resignation, transfer, at no cost to the Executive, the life insurance policies
on the Executive's life to the Executive, or his designee, including any cash
value thereon. The provisions of this Section 4.2 shall survive the termination
of this Agreement.
4.3 WORKING FACILITIES. During the term of the Executive's
employment hereunder, the Company shall furnish the Executive with an office and
secretarial help of his choice, and such other facilities adequate for the
performance of his duties hereunder at the Company's corporate headquarters
located in Miami Lakes, Florida.
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4.4 STOCK OPTIONS. Subject to the terms and conditions of the
Company's stock option plans currently in effect for the Company, as amended,
modified or replaced from time to time, or any new stock option plan adopted by
the Company with the same or similar purpose of such stock option plans
(collectively, the "Plan"), and shareholder approval, if required, the Company
grants to the Executive, effective as of the Effective Date, a non-qualified
stock option to purchase 400,000 shares of the Company's Common Stock (the
"STOCK OPTION"), at an exercise price of $4.125 (the closing price of the Common
Stock on the day immediately prior to the Effective Date). The Stock Option
shall vest on the six-month anniversary date from the date of grant; provided,
that, the Stock Option shall vest immediately if (i) a Change of Control (as
hereinafter defined) occurs, or (ii) the Executive's employment is terminated
for any reason (including a resignation by the Executive). In addition,
notwithstanding the provisions set forth in the Plan, the Stock Option will
expire in all events on the 10-year anniversary date of the date of grant,
notwithstanding the termination of the Executive's employment with the Company
for any reason, including resignation by the Executive. The terms of this
Section 4.4 shall survive the termination of this Agreement.
5. TERMINATION.
5.1 TERMINATION FOR CAUSE. The Company shall at all times have
the right, upon written notice to the Executive, to terminate the Executive's
employment hereunder, for cause. For purposes of this Agreement, the term
"cause" shall mean solely (a) a willful breach by the Executive of any of the
material terms or provisions of this Agreement which is not cured within ten
(10) days after receipt by the Executive of written notice of same, (b) the
Executive's conviction of a felony involving moral turpitude, or (c) commission
by the Executive of an act or acts involving fraud, embezzlement,
misappropriation or theft against the Company. Upon any termination pursuant to
this Section 5.1, the Executive shall be entitled to be paid his Base Salary to
the date of termination and, subject to the provisions of Sections 4.2 and 4.4,
the Company shall have no further liability hereunder (other than for
reimbursement for reasonable business expenses incurred prior to the date of
termination, subject, however to the provisions of Section 4.1).
5.2 CHANGE OF CONTROL. The Executive may terminate his
employment under this Agreement upon a Change of Control. For purposes of this
Section 5.2 "Change of Control" shall mean (i) the failure of Applicable
Directors (defined below) to constitute a majority of the Board, (ii) the
shareholders of the Company shall approve a plan of merger, consolidation,
reorganization, liquidation or dissolution in which the Company does not
survive, unless such approved merger, consolidation, reorganization, liquidation
or dissolution is subsequently abandoned, or (iii) the shareholders of the
Company shall approve a plan for the sale, lease, exchange or other disposition
of all or substantially all of the property and assets of the Company, unless
such plan is subsequently abandoned; provided, that, a Change of Control shall
not be deemed to have occurred as a result of subclauses (ii) and (iii) of this
sentence if such transaction is with Parlux Fragrances, Inc. or Perfumania,
Inc., unless, at the time of such transaction, the Executive is no longer
affiliated with these entities. As used herein, "Applicable Directors" shall
mean those individuals who were members of the Board as of the Effective Date
and appointed at the direction of Ocean Reef Management, Inc. ("Ocean Reef"),
and any new director whose election to the Board or nomination for election to
the Board was approved (prior to any vote thereon by the shareholders) by a vote
of at least a majority of the directors then still in office who either were
directors appointed by Ocean Reef as of the Effective Date or whose election or
nomination for election was previously approved as provided in this sentence. To
terminate his employment under this Agreement upon a Change of Control, the
Executive shall give the Company a written termination notice. The termination
date shall be the date specified in such notice, which date may not be earlier
than 30 days nor later than 90 days from the
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Company's receipt of such notice. If this Agreement is terminated by the
Executive pursuant to this Section 5.2, or if the Company terminates this
Agreement upon a Change of Control, or within six months from the date of a
Change of Control, then, as long as the Executive is not a member of the
"control group" (within the meaning of the rules and regulations of the
Securities and Exchange Commission) of the entity causing the Change of Control,
in addition to the provisions of Sections 4.2 and 4.4, the Executive will be
entitled to be paid a lump sum payment equal to the sum of (x) the Base Salary
that the Executive would otherwise have been entitled to receive through the end
of the Initial Term, plus (y) a severance payment equal to $300,000.
5.3 TERMINATION WITHOUT CAUSE; DEATH; OR DISABILITY. At any
time the Company shall have the right to terminate the Executive's employment
hereunder (i) by written notice to the Executive, (ii) if the Executive, as a
result of mental or physical incapacity, illness or disability, fails to perform
his duties and responsibilities provided for herein for more than 90 days in any
365-day period, or (iii) upon the death of the Executive. In the event of any
termination pursuant to this Section 5.3, then, in addition to the provisions of
Sections 4.2 and 4.4, the Executive (or his estate) shall be entitled to be paid
his Base Salary and any accrued but unpaid bonus to the date of termination and
receive reimbursements for reasonable business expenses incurred prior to such
date of termination (subject, however, to the provisions of Section 4.1), and to
be paid the following severance payments: (a) if the termination occurs on or
prior to the one-year anniversary date of the Effective Date, the Company shall
pay the Executive (or his estate) a lump sum payment equal to the Base Salary
that the Executive would otherwise have been entitled to receive through the end
of the Initial Term, and (b) if the termination occurs after the one-year
anniversary date of the Effective Date, but prior to the expiration of the
Initial Term, the Company shall pay the Executive (or his estate) a lump sum
payment equal to the sum of (x) the Base Salary that the Executive would
otherwise have been entitled to receive through the end of the Initial Term,
plus (y) $300,000.
5.4 TERMINATION BY EXECUTIVE. The Executive may terminate his
employment under this Agreement for Good Reason (defined below). "Good Reason"
shall mean (A) that the Company (through its Board or otherwise) has (i)
assigned the Executive duties other than those contemplated by Section 1.2 above
without the Executive's consent, (ii) named a new Chairman of the Board or Chief
Executive Officer of the Company, (iii) limited the powers of the Executive in
any manner, or (iv) breached any of its other covenants and obligations
hereunder; or (B) the inability of the Executive to perform his duties
hereunder. A purported termination of this Agreement by the Company pursuant to
any provision of this Section 5 which is disputed and which is finally
determined not to have been proper shall be deemed a breach by the Company of
this Agreement. To terminate his employment under this Agreement for Good
Reason, the Executive shall give the Company written notice of the Executive's
intent to terminate his employment with the Company pursuant to this Section
5.4, which notice shall specify the Executive's reasons therefor in detail. The
Company shall have 30 days from its receipt of such notice to attempt to cure
any such condition giving rise to Good Reason hereunder. If such cure is
acceptable to the Executive, the Executive may accept such cure and continue
this Agreement in full force and effect as if the initial notice of termination
under this Section 5.4 had not been given by the Executive; PROVIDED, HOWEVER,
that acceptance of such cure and the continuation of the Executive's employment
shall not act as a waiver of any rights of the Executive with respect to such
actions or inactions of the Company and/or limit the Executive's right to
terminate this Agreement for the same or similar action or inaction by the
Company following such cure. If the Executive does not accept such cure, the
termination date of this Agreement shall be the 30th day after the Company's
receipt of the Executive's termination notice. Upon any termination of this
Agreement pursuant to this Section 5.4, then, in addition to the provisions of
Sections 4.2 and 4.4, the Executive shall be entitled to receive his Base Salary
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and any accrued but unpaid bonus through the end of the Initial Term, in
installments consistent with the Company's normal payroll practices, and
reimbursement for reasonable business expenses incurred prior to the date of
termination, subject, however, to the provisions of Section 4.1.
5.5 NON-RENEWAL. In the event that this Agreement is not
renewed beyond the Initial Term as provided in Section 2.1 hereof, then this
Agreement shall terminate at the end of such Initial Term of this Agreement. The
last day of the Initial Term shall be the termination date for a termination
pursuant to this Section 5.5. If the Executive is employed by the Company at the
end of the Initial Term, then, upon any termination of this Agreement pursuant
to this Section 5.5, the Executive shall be entitled to receive a lump-sum
payment of $300,000.
5.6 MITIGATION. The Executive shall not be required to
mitigate the amount of any payment provided for in this Section 5 by seeking
other employment or otherwise, nor shall the amount of any payment provided for
in this Section 5 be reduced by any compensation earned by the Executive as the
result of employment by another employer after the termination date.
6. RESTRICTIVE COVENANTS.
6.1 NON-COMPETITION. During the Non-competition Period (as
hereinafter defined), the Executive shall not, directly or indirectly, engage in
or have any interest in any sole proprietorship, partnership, corporation or
business or any other person or entity that directly or indirectly is engaged in
the jewelry or gift retail business primarily in Florida (the "Business");
PROVIDED, HOWEVER, that nothing herein shall be deemed to prevent the Executive
from (i) owning an interest in the equity or debt securities of the Company,
Parlux Fragrances, Inc., Perfumania, Inc., or any successor (whether by merger,
acquisition, sale or otherwise) of such companies, or any direct or indirect
subsidiaries of such companies, and (ii) acquiring through market purchases and
owning, solely as an investment, less than five percent of the equity securities
of any class of any issuer whose shares are registered under Section 12(b) or
12(g) of the Securities Exchange Act of 1934, as amended, and are listed or
admitted for trading on any United States national securities exchange or are
quoted on the National Association of Securities Dealers Automated Quotations
System, or any similar system of automated dissemination of quotations of
securities prices in common use, so long as the Executive is not a member of any
"control group" (within the meaning of the rules and regulations of the United
States Securities and Exchange Commission) of any such issuer. For purposes of
this Section 6.1, the term "NON-COMPETITION PERIOD" shall mean (i) at all times
while the Executive is employed by the Company, and (ii) at all times while the
Executive is receiving Base Salary payments from the Company, but in no event
more than six months from the date the Executive is no longer employed by the
Company.
6.2 NONDISCLOSURE. Except as expressly permitted by the
Company or in connection with the performance of his duties hereunder, the
Executive shall not, unless otherwise required by law, divulge, communicate, use
to the detriment of the Company or for the benefit of any other person or
persons, or misuse in any way, any confidential information pertaining to the
business of the Company. Any confidential information or data heretofore or
hereafter acquired by the Executive with respect to the business of the Company
(which shall include, but not be limited to, information concerning the
Company's financial condition, prospects, customers, suppliers, sources of
leads, methods of doing business, importation, marketing and distribution of the
Company's services) shall be deemed a valuable, special and unique asset of the
Company that is received by the Executive in confidence and as a fiduciary, and
the Executive shall remain a fiduciary to the Company with respect to all of
such
-5-
<PAGE>
information. Notwithstanding any provision hereof which may be to the contrary,
confidential information shall not include (a) information that is or becomes
generally available to the public other than as a result of a disclosure by the
Executive, or (b) information lawfully acquired by the Executive from sources
other than the Company or its affiliates who are not bound by any agreement of
confidentiality.
6.3 NONSOLICITATION OF EMPLOYEES. While employed by the
Company and for a period of one year following the date his employment is
terminated hereunder, the Executive shall not, directly or indirectly, for
himself or for any other person, firm, corporation, partnership, association or
other entity, solicit any employee of the Company.
6.4 BOOKS AND RECORDS. All books, records, and accounts
relating in any manner to the Company, whether prepared by the Executive or
otherwise coming into the Executive's possession, shall be the exclusive
property of the Company and shall be returned immediately to the Company on
termination of the Executive's employment hereunder or on the Company's request
at any time. The Executive shall not retain copies, extracts or compilations of
any such books, records or accounts.
6.5 COMPANY INCLUDES SUBSIDIARIES. For purposes of this
Section 6 and Section 7 hereof, the term "Company" shall be deemed to include
the Company and any of its direct or indirect subsidiaries.
6.6 SURVIVAL. The terms of this Section 6 shall survive the
termination of this Agreement.
7. INJUNCTION. It is recognized and hereby acknowledged by the parties
hereto that a breach by the Executive of any of the covenants contained in
Section 6 of this Agreement will cause irreparable harm and damage to the
Company, the monetary amount of which may be virtually impossible to ascertain.
As a result, the Executive recognizes and hereby acknowledges that the Company
shall be entitled to an injunction from any court of competent jurisdiction
enjoining and restraining any violation of any or all of the covenants contained
in Section 6 of this Agreement by the Executive or any of his affiliates,
associates, partners or agents, either directly or indirectly, and that such
right to injunction shall be cumulative and in addition to whatever other
remedies the Company may possess.
8. OTHER ACTIVITIES OF THE EXECUTIVE. The Company acknowledges and
agrees that the Executive and his affiliates are engaged in the business of
investing in, acquiring and/or managing businesses and other ventures for the
Executive's own account, for the account of the Executive's affiliates and
associates (as such terms are defined by the rules and regulations of the
Securities and Exchange Commission) and for the account of other unaffiliated
parties (collectively the "Investment Activities"), and the Executive plans to
continue to be engaged in such Investment Activities during the term of this
Agreement (which may include employment of the Executive by the entities
conducting such Investment Activities). No aspect or element of such present or
future Investment Activities shall be deemed to be engaged in for the benefit of
the Company or any of its subsidiaries nor to constitute a conflict of interest
or a breach of this Agreement unless such activities violate Section 6.1 of this
Agreement. The Executive shall be required to bring only such investment and/or
business opportunities to the attention of the Company and its subsidiaries that
relate to the Business. Absent the provisions of this Section 8, the
compensation required by the Executive would have been considerably higher or
the Executive would not have entered into this Agreement.
-6-
<PAGE>
9. INDEMNIFICATION. The Company and its present and future subsidiaries
agree to jointly and severally indemnify and hold harmless the Executive to the
fullest extent permitted by corporate law at the present time (or as may be
increased in the future). The Company and its subsidiaries, jointly and
severally, agree to reimburse the Executive on a monthly basis for any cost of
defending any action or investigation (including attorneys' fees and expenses)
subject to an undertaking from the Executive to repay the Company or its
subsidiaries if the Executive is determined not to be entitled to such
indemnity.
10. ASSIGNMENT. Subject to the provisions of Section 5.2 hereof, the
Executive agrees that any or all of the rights and interests of the Company
hereunder (i) may be assigned to any purchaser of substantially all of the
assets of the Company, and (ii) may be assigned as a matter of law to the
surviving entity in any merger of the Company. The Executive shall not delegate
his employment obligations hereunder, or any portion thereof, to any other
person.
11. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Florida.
12. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties hereto with respect to the subject matter hereof and
supersedes all prior agreements, understandings and arrangements, both oral and
written, between the parties hereto with respect to such subject matter. This
Agreement may not be modified in any way unless by a written instrument signed
by each of the parties hereto.
13. NOTICES. Any notice required or permitted to be given hereunder
shall be in writing and shall be given by personal delivery, facsimile
transmission, Federal Express (or other equivalent courier service) or by
registered or certified mail, postage prepaid, return receipt requested (a) if
to the Company, 5770 Miami Lakes Drive, Miami Lakes, Florida 33014, Attention:
Board of Directors, and (b) if to the Executive, to his address as reflected on
the payroll records of the Company, or to such other addresses as either party
hereto may from time to time give notice of to the other. Notice by registered
or certified mail will be effective three days after deposit in the United
States mail. Notice by any other permitted means will be effective upon receipt.
14. BENEFITS; BINDING EFFECT. This Agreement shall be for the benefit
of and binding upon the parties hereto and their respective heirs, personal
representatives, legal representatives, successors and, where applicable,
assigns, including, without limitation, any successor to the Company, whether by
merger, consolidation, sale of stock, sale of assets or otherwise.
15. SEVERABILITY. The invalidity of any one or more of the words,
phrases, sentences, clauses or sections contained in this Agreement shall not
affect the enforceability of the remaining portions of this Agreement or any
part thereof, all of which are inserted conditionally on their being valid in
law, and, in the event that any one or more of the words, phrases, sentences,
clauses or sections contained in this Agreement shall be declared invalid, this
Agreement shall be construed as if such invalid word or words, phrase or
phrases, sentence or sentences, clause or clauses, or section or sections had
not been inserted. If such invalidity is caused by length of time or size of
area, or both, the otherwise invalid provision will be considered to be reduced
to a period or area which would cure such invalidity.
16. WAIVERS. The waiver by either party hereto of a breach or violation
of any term or provision of this Agreement shall not operate nor be construed as
a waiver of any subsequent breach or violation.
-7-
<PAGE>
17. DAMAGES. Nothing contained herein shall be construed to prevent any
party hereto from seeking and recovering from the other damages sustained by
either or both of them as a result of its or his breach of any term or provision
of this Agreement. In the event that either party hereto brings suit for the
collection of any damages resulting from, or for the injunction of any action
constituting, a breach of any of the terms or provisions of this Agreement, then
the prevailing party shall pay all reasonable costs, fees (including reasonable
attorneys' fees) and expenses of the non-prevailing party.
18. SECTION HEADINGS. The section headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
19. NO THIRD PARTY BENEFICIARY. Nothing expressed or implied in this
Agreement is intended, or shall be construed, to confer upon or give any person
other than the parties hereto and their respective heirs, personal
representatives, legal representatives, successors and assigns, any rights or
remedies under or by reason of this Agreement.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first above written.
L. LURIA & SON, INC.
By:/s/Thomas Floerchinger
-----------------------------
Name: Thomas Floerchinger
Title: Chief Financial Officer
/s/Rachmil Lekach
---------------------------
RACHMIL LEKACH
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF LURIA & SON, INC. FOR THE QUARTER ENDED NOVEMBER 2,
1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> FEB-01-1997
<PERIOD-START> FEB-04-1996
<PERIOD-END> NOV-02-1996
<EXCHANGE-RATE> 1
<CASH> 1,467
<SECURITIES> 0
<RECEIVABLES> 1,210
<ALLOWANCES> 0
<INVENTORY> 85,132
<CURRENT-ASSETS> 91,913
<PP&E> 67,239
<DEPRECIATION> (38,511)
<TOTAL-ASSETS> 126,909
<CURRENT-LIABILITIES> 79,067
<BONDS> 655
0
0
<COMMON> 54
<OTHER-SE> 41,457
<TOTAL-LIABILITY-AND-EQUITY> 126,909
<SALES> 80,502
<TOTAL-REVENUES> 80,502
<CGS> 62,050
<TOTAL-COSTS> 40,572
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,220
<INCOME-PRETAX> (23,340)
<INCOME-TAX> 0
<INCOME-CONTINUING> (23,340)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (23,340)
<EPS-PRIMARY> (4.28)
<EPS-DILUTED> 0
</TABLE>
