<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the quarterly period ended JUNE 1, 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 0-13099
TRISTAR CORPORATION
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 13-3129318
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(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
12500 SAN PEDRO AVENUE, SUITE 500, SAN ANTONIO, TEXAS 78216
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(Address of principal executive offices)
(Zip Code)
(210) 402-2200
---------------
(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 requirments for the past 90 days.
Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
ON JULY 11, 1996, THERE WERE OUTSTANDING 16,635,064
SHARES OF COMMON STOCK, $.01 PAR VALUE, OF THE REGISTRANT.
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TRISTAR CORPORATION AND SUBSIDIARIES
INDEX TO FORM 10-Q
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PART I. FINANCIAL INFORMATION PAGE
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Item 1. Financial Statements (Unaudited)
Consolidated balance sheets--June 1, 1996 and August 31, 1995 3
Consolidated statements of operations--thirteen and thirty-nine week and three and
nine month periods ended June 1, 1996 and May 31, 1995, respectively 5
Consolidated statements of cash flows--thirty-nine week and nine month periods ended
June 1, 1996 and May 31, 1995, respectively 6
Notes to consolidated financial statements--June 1, 1996 7
Independent Accountants' review report 10
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 15
Item 2. Changes in Securities 15
Item 3. Defaults Upon Senior Securities 15
Item 4. Submission of Matters to a Vote of Security Holders 15
Item 5. Other Information 15
Item 6. Exhibits and Reports on Form 8-K 15
SIGNATURES 16
</TABLE>
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
TRISTAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
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(UNAUDITED)
JUNE 1, AUGUST 31,
ASSETS 1996 1995 *
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Current assets:
Cash $ 304,000 $ 806,000
Accounts receivable, less allowance for doubtful accounts
of $583,000 and $419,000, respectively 7,694,000 6,038,000
Accounts receivable-related parties-net 793,000 662,000
Inventories 15,771,000 14,406,000
Prepaid expenses 301,000 253,000
Deferred income taxes 1,101,000 1,101,000
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Total current assets 25,964,000 23,266,000
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Property, plant and equipment, less accumulated depreciation
of $5,113,000 and $3,637,000, respectively 8,708,000 9,851,000
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Other assets:
Warrant valuation, less accumulated amortization
of $1,415,000 and $1,353,000, respectively 674,000 736,000
Other assets 422,000 195,000
Deferred income taxes 2,780,000 2,780,000
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Total other assets 3,876,000 3,711,000
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Total assets $ 38,548,000 $ 36,828,000
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</TABLE>
* Prepared from audited financial statements for the year ended August 31, 1995.
SEE NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.
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TRISTAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONTINUED)
<TABLE>
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(UNAUDITED)
JUNE 1, AUGUST 31,
LIABILITIES AND SHAREHOLDERS' EQUITY 1996 1995 *
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Current liabilities:
Short-term borrowings $ 10,515,000 $ 5,383,000
Accounts payable-trade 3,578,000 1,982,000
Accounts payable-related parties-net 1,543,000 536,000
Accrued bonuses 180,000 97,000
Accrued interest expense 420,000 603,000
Other accrued expenses 1,315,000 1,248,000
Taxes payable 279,000 508,000
Current portion of capital lease obligations 27,000 30,000
Current portion of long-term obligations 2,118,000 2,118,000
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Total current liabilities 19,975,000 12,505,000
Long-term debt, less current portion 2,686,000 3,044,000
Obligations under capital leases, less current portion 13,000 27,000
Subordinated long-term debt-related parties 11,166,000 11,166,000
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Total liabilities 33,840,000 26,742,000
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Commitments and contingencies
Shareholders' equity:
Preferred stock, $.05 par value; authorized 1,000,000 shares;
no shares issued --- ---
Common stock, $.01 par value; authorized 30,000,000 shares;
issued and outstanding 16,635,064 shares and 16,629,683
shares, respectively 166,000 166,000
Additional paid-in-capital 10,311,000 10,281,000
Accumulated deficit (5,769,000) (361,000)
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Total shareholders' equity 4,708,000 10,086,000
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Total liabilities and shareholders' equity $ 38,548,000 $ 36,828,000
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</TABLE>
* Prepared from audited financial statements for the year ended August 31, 1995.
SEE NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.
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TRISTAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
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THIRTEEN THREE THIRTY-NINE NINE
WEEKS MONTHS WEEKS MONTHS
ENDED ENDED ENDED ENDED
JUNE 1, MAY 31, JUNE 1, MAY 31,
1996 1995 1996 1995
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Net sales $ 10,997,000 $ 8,935,000 $ 38,511,000 $ 32,420,000
Cost of sales 8,683,000 6,532,000 29,696,000 22,755,000
------------ ------------ ------------- -------------
Gross profit 2,314,000 2,403,000 8,815,000 9,665,000
Selling, general and administrative expenses 4,565,000 3,199,000 11,830,000 8,928,000
------------ ------------ ------------- -------------
(Loss) income from operations (2,251,000) (796,000) (3,015,000) 737,000
Other income (expense):
Interest expense (620,000) (393,000) (1,745,000) (1,190,000)
Other expense (262,000) (290,000) (647,000) (342,000)
Insurance reimbursement --- 815,000 --- 2,065,000
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(Loss) income before provision for income taxes (3,133,000) (664,000) (5,407,000) 1,270,000
Provision for income taxes --- (214,000) --- 828,000
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Net (loss) income $ (3,133,000) $ (450,000) $ (5,407,000) $ 442,000
============ ============ ============= =============
Net (loss) income per common share $ (.19) $ (.03) $ (.33) $ .03
============ ============ ============= =============
Weighted average shares outstanding 16,635,064 16,628,040 16,634,104 16,623,879
============ ============ ============= =============
</TABLE>
SEE NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.
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TRISTAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
THIRTY-NINE NINE
WEEKS MONTHS
ENDED ENDED
JUNE 1, MAY 31,
1996 1995
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CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES
Net (loss) income $ (5,407,000) $ 442,000
Adjustments to reconcile net (loss) income to
net cash used in operating activities:
Depreciation and amortization 1,475,000 1,410,000
Provision for losses on accounts receivable 690,000 210,000
Provision for inventory allowances 1,133,000 1,692,000
Loss on disposal of assets 25,000 5,000
Issuance of stock in connection with 401K plan 30,000 52,000
Amortization of warrant valuations 62,000 190,000
Change in operating assets and liabilities:
Accounts receivable (2,477,000) 1,096,000
Accounts receivable-insurance reimbursement -- (815,000)
Inventories (2,498,000) (2,317,000)
Prepaid expense (48,000) 53,000
Refundable income taxes -- 1,722,000
Income taxes payable (229,000) (1,790,000)
Accounts payable 2,603,000 (1,160,000)
Accrued expenses (33,000) (515,000)
Shareholder litigation settlement liability -- (4,500,000)
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Net cash used in operating activities (4,674,000) (4,225,000)
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CASH FLOWS (USED IN) FROM INVESTING ACTIVITIES:
Capital expenditures (931,000) (550,000)
Proceeds from sale of fixed assets 580,000 64,000
(Increase) decrease in other assets (233,000) --
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Net cash used in investing activities (584,000) (486,000)
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CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES:
Net increase (decrease) in short term borrowings 5,132,000 (547,000)
Proceeds from subordinated long-term debt -- 6,550,000
Payments on subordinated long-term debt -- (2,700,000)
Proceeds from long-term debt 200,000 --
Principal payments under debt obligations (558,000) (30,000)
Principal payments other long-term debt (18,000) (42,000)
Collection on receivable from stockholder -- 500,000
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Net cash provided by (used in) financing activities 4,756,000 3,731,000
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NET (DECREASE) INCREASE IN CASH (502,000) (980,000)
CASH AT BEGINNING OF PERIOD 806,000 1,700,000
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CASH AT END OF PERIOD $ 304,000 $ 720,000
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</TABLE>
SEE NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
TRISTAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JUNE 1, 1996
NOTE 1: BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Rule 10-01 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 thirteen week period and thirty-nine week period
ended June 1, 1996, are not necessarily indicative of the results that may be
expected for the year ending August 31, 1996.
As of the beginning of the current fiscal year, the Company changed its fiscal
year end from one ending on August 31, to a 52-53 week fiscal year ending on
the Saturday nearest the last day of the month of August in each year. In
addition, the Company changed its fiscal quarters such that each quarter
consists of 13 weeks and ends on a Saturday.
NOTE 2: NET INCOME PER SHARE
Net income per share amounts were computed based upon the weighted average
number of common shares outstanding and common equivalents of dilutive stock
options and warrants.
NOTE 3: INVENTORIES
Inventory is stated at the lower of cost or market.
<TABLE>
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6/1/96 8/31/95
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<S> <C> <C>
Raw materials $ 8,833,000 $ 7,269,000
Work-in-process 461,000 426,000
Finished goods 8,635,000 8,608,000
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17,929,000 16,303,000
Inventory allowances (2,158,000) (1,897,000)
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$ 15,771,000 $ 14,406,000
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</TABLE>
NOTE 4: SHORT-TERM BORROWING
The Company's line of credit provides for maximum borrowings of $15,500,000 at
prime rate (8.25%) plus 2.75 percentage points per annum, with additional fees
approximating a percentage point per annum. Borrowing capability is based on
eligible domestic and foreign accounts receivable, and on eligible finished
goods and manufacturing inventories, within limits established under the
agreement.
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The line of credit expires July 1997. This facility is secured by
substantially all of the assets of the Company. The agreement contains
material adverse change provisions, as well as certain restrictions and
conditions among which are limitations on cash dividends, capital expenditures,
maximum levels of accounts receivable from related parties, and repayments of a
prior financing arrangement with a related party.
Remaining availability under the line as of June 1, 1996, was $529,000, based
on the borrowing formulas.
NOTE 5: LITIGATION AND CONTINGENCIES
FREITAS AND KENNER
In October 1994, a suit was filed in Florida state court against the Company,
as well as two of its directors, by Ross Freitas, Carolyn Kenner, Rose Freitas
and Melissa Freitas. As amended, the complaint alleges causes of action by two
plaintiffs for libel in connection with the work of the Special Committee of
the Board of Directors that investigated, among other things, a prior failure
to disclose the Core Sheth Families' holdings of Company stock. The complaint
as amended also alleges, on behalf of all four plaintiffs, that the Company's
disclosures relating to these and other matters were fraudulent or negligently
misrepresented. The Company intends to dispute these allegations vigorously
and believes that ultimate disposition of the case will not have a material
adverse effect on its financial condition.
In December 1993, the Company brought an action in the United States District
Court for the Eastern District of New York seeking to recover from Ross Freitas
and Carolyn Kenner short-swing profits resulting from the purchase and
subsequent sale of Company stock in 1989 while both were officers and directors
of the Company. On November 9, 1994, the Court awarded the Company partial
summary judgment with respect to these claims for approximately $101,000
against Mr. Freitas and $80,000 against Ms. Kenner, plus interest running from
May 1989. Mr. Freitas and Ms. Kenner appealed this judgment. On May 21, 1996,
a panel of the United States Court of Appeals for the Second Circuit reversed
the judgment of the District Court and directed the District Court to dismiss
the Company's complaint. The Company has filed a petition seeking a rehearing
and requesting that this matter be heard by the full Court of Appeals.
In November 1994, the United States District Court for the District of South
Carolina approved the disbursement of $1.25 million to the Company from the
proceeds of an executive liability and indemnification policy owned by the
Company. In December 1994, $1,000,000 of the proceeds were utilized to repay a
portion of the existing long term subordinated debt in accordance with the
financing agreement with the Core Sheth Families, a related party. In June
1995, the Company received the balance ($750,000) of the proceeds of the policy
as well as approximately $65,000 of interest earned during the period the court
held the proceeds. Other claimants under the policy have filed a motion to
alter or amend the judgment which ordered the June 1995 disbursement. The
Company and these claimants are currently conducting discovery in anticipation
of an evidentiary hearing on that motion.
CALIFORNIA AIR RESOURCES BOARD
Since January 1, 1995, the Company's personal fragrance products have not been
in compliance with regulations of the California Air Resources Board (the
"CARB") with respect to volatile organic compounds ("VOC's"). The Company has
reformulated a number of its products and is in the process of reformulating
the remainder of its primary fragrance lines to achieve compliance with the VOC
regulations. The Company has filed with the CARB required registrations of its
products and has received a temporary variance from VOC regulations until all
products not meeting the requirements can be reformulated. The variance allows
the Company to sell its non-complying products in California until
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September 30, 1996. The Company believes that its products will be
reformulated and will comply with the VOC regulations by September 30, 1996.
Any interruption of the Company's sales in California would have a material
adverse effect on the Company's financial condition.
The Company is subject to ordinary and routine litigation arising out of the
conduct of its business. Management believes that the ultimate disposition of
these proceedings will not have a material adverse effect on the Company's
financial condition.
NOTE 6: RELATED PARTY TRANSACTIONS:
Certain suppliers of fragrance product components and the primary suppliers of
cosmetic products are affiliates of the Core Sheth families who beneficially
own 84% of the Company's outstanding common stock. Related party accounts
payable result from the purchase of products from those vendors. Related party
accounts receivable result from the sale of products to those affiliates. The
payables and receivables balances are offset for presentation purposes and the
net balance of accounts receivable or accounts payable is presented on the
balance sheet. Related party payables also include payables due members of the
Company's Board of Directors which result, in the normal course of business,
from expenses associated with Board and related committee meetings. At August
31, 1995, these payables also included expenses incurred which related to the
Company's merger with a related party, Eurostar. The following summarizes the
presentations at June 1, 1996 and August 31, 1995.
<TABLE>
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JUNE 1, AUGUST 31,
----------------------------
1996 1995
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<S> <C> <C>
ACCOUNTS RECEIVABLE:
Total accounts receivable-related parties $ 847,000 1,070,000
Offset amount (54,000) (408,000)
----------------------------
Net related parties receivables $ 793,000 662,000
============================
ACCOUNTS PAYABLE:
Total accounts payable-related parties $ 1,597,000 944,000
Offset amount (54,000) (408,000)
----------------------------
Net related parties payables $ 1,543,000 536,000
============================
=============================================================================
</TABLE>
The Company purchases finished goods and fragrance product components from Core
Sheth Families affiliates. During the thirty-nine week period ended June 1,
1996, and for the respective period in fiscal 1995, the Company purchased
approximately $3,809,000 and $5,244,000, respectively.
During the thirty-nine week period ended June 1, 1996, and for the respective
period in fiscal 1995, the Company sold products to Core Sheth Families
affiliates in the amounts of approximately $1,209,000 and $959,000,
respectively.
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Independent Accountants' Review Report
The Board of Directors and Shareholders
Tristar Corporation:
We have reviewed the condensed consolidated balance sheet of Tristar
Corporation and subsidiaries as of June 1, 1996, and the related condensed
consolidated statements of operations for the thirteen week and thirty-nine
week periods ended June 1, 1996 and the three month and nine month periods
ended May 31, 1995 and the consolidated statements of cash flows for the
thirty-nine week period ended June 1, 1996 and the nine month period ended May
31, 1995. These condensed consolidated financial statements are the
responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted
in accordance with generally accepted auditing standards, the objective of
which is the expression of an opinion regarding the financial statements taken
as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the condensed consolidated financial statements referred to above
for them to be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of Tristar Corporation and
subsidiaries as of August 31, 1995, and the related consolidated statements of
operations, shareholders' equity, and cash flows for the year then ended (not
presented herein); and in our report dated November 6, 1995, which referred to
other auditors, we expressed an unqualified opinion on those consolidated
financial statements. In our opinion, the information set forth in the
accompanying condensed consolidated balance sheet as of August 31, 1995, is
fairly stated, in all material respects, in relation to the consolidated
balance sheet from which it has been derived.
San Antonio, Texas
July 10, 1996
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ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
RESULTS OF OPERATIONS FOR THE THIRTEEN AND THIRTY-NINE WEEK PERIODS ENDED JUNE
1, 1996, AND THE THREE AND NINE MONTH PERIODS ENDED MAY 31, 1995.
On August 31, 1995, the Company merged with Eurostar Perfumes, Inc., and its
subsidiaries, accordingly all fiscal 1995 amounts have been restated to reflect
the merger.
For the thirteen week period ended June 1, 1996, the Company recorded a net
loss of $3,133,000 or $0.19 per share, bringing the results for the thirty-nine
weeks ended June 1, 1996 to a loss of $5,407,000, or $0.33 per share. For the
three months and nine months ended May 31, 1995, the Company recorded a net
loss of $450,000 or $0.03 per share and net income of $442,000, or $0.03 per
share, respectively.
NET SALES
Net sales for the thirteen weeks ended June 1, 1996 were $10,997,000, an
increase of 23%, compared to the net sales of $8,935,000 for the three months
ended May 31, 1995. For the thirty-nine weeks ended June 1, 1996, sales were
$38,511,000, an increase of 19% over the nine months ended May 31, 1995
($32,420,000). The increase over the prior fiscal period can be primarily
attributed to growth in the U.S. chains, specialty chains, and mass
merchandisers. Sales outside the U.S. remained relatively constant in relation
to the same periods of fiscal 1995.
NET SALES - CHANNELS OF DISTRIBUTION
The Company markets and distributes products to wholesalers, distributors,
chain stores, mass merchandisers, and independent retail channels in various
markets throughout North and South America.
For the thirteen weeks and the thirty-nine weeks ended June 1, 1996, the
Company continued to experience growth in the U.S. market in chains, specialty
chains, and mass merchandiser channels while experiencing a decline in the
wholesale channel in comparison to fiscal 1995. The growth was attributable to
new customers and products and to expanded distribution within the existing
customer base. The wholesale channel has been negatively affected by increased
competition, a maturation of that market, and a decrease in purchases by
customers who ultimately distributed the Company's product into Mexico, Central
and South America. This trend is anticipated to continue. The Company
continues to devote resources to all channels of distribution in the U.S. with
programs including, but not limited to, promotions and limited advertising.
Sales made directly to foreign-based customers in North and South America as a
group remained relatively constant during the first three quarters of fiscal
1996 when compared to the prior year's first three quarters. Economic and
political conditions continue to restrict growth in many of these markets.
However, the Company continues to devote resources to selected channels of
distribution with similar programs to those in the U.S.
NET SALES - RELATED PARTIES
In the third quarter of fiscal 1996, sales to affiliates of the Core Sheth
Families, the Company's major stockholder, were $344,000 as compared to
$459,000 for the comparable period ended May 31, 1995. Year to date sales to
the Core Sheth Families for fiscal 1996 were $1,209,000, compared with $959,000
for the nine months ended May 31, 1995.
NET SALES - PRODUCTS PURCHASED FROM RELATED PARTIES
Of the net sales in the first thirty-nine weeks of fiscal 1996, approximately
11%, or $4,407,000, resulted from the sale of products purchased from related
parties as finished goods. For the same period in fiscal 1995, comparable
numbers were 13%, or $4,140,000. In addition, fragrance and other products
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manufactured and sold by the Company included some components that were
purchased from related parties. The cost of those components approximated 11%
and 13% of cost of sales in the same periods of fiscal 1996 and 1995,
respectively.
GROSS PROFIT
The Company's gross profit for the thirteen week and thirty-nine week periods
ended June 1, 1996 was $2,314,000, or 21% of sales and $8,815,000 or 23% of
sales, respectively. Gross profit for the three months and nine months ended
May 31, 1995 was $2,403,000, or 27% of sales and $9,665,000, or 30% of sales,
respectively. The decrease in gross profit in the third quarter of fiscal 1996
in comparison to the third quarter of fiscal 1995 was due to manufacturing
variances attributable to costs associated with the introduction and
manufacturing of a new product line and as a result of selling excess and slow
moving inventories at below normal selling prices and writing down certain
existing inventories to market. Fiscal 1996 year to date gross profits were
lower than the comparable period in fiscal 1995 for the reasons stated above
for the third quarter and, in addition, was affected by manufacturing variances
associated with the extension of production efforts to meet market demands.
Gross profit margins are anticipated to remain at the current levels or improve
slightly in the last quarter of the fiscal year as production efficiencies are
expected to improve.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses ("SG&A") for the thirteen and
thirty-nine week periods ended June 1, 1996 increased 43% to $4,565,000 and 33%
to $11,830,000, respectively, from $3,199,000 and $8,928,000, respectively, for
the like fiscal 1995 periods. SG&A expenses, unrelated to the introduction of
new products, as a percentage of sales remained approximately the same. The
increases over the comparable prior fiscal periods were due primarily to
expenses associated with the introduction of a new product line, the costs to
develop new channels of distribution, the costs to enter those channels, growth
in support of existing sales channels, and increased support and controls over
other functions within the Company.
NON OPERATING INCOME OR EXPENSE
Interest expense increased for the third thirteen week period of fiscal 1996
over the previous year's like quarter to $620,000 from $393,000, respectively,
as a result of increased borrowings under the Company's lines of credit.
Interest expense for the thirty-nine weeks ended June 1, 1996, increased to
$1,745,000 compared to $1,190,000, for the same period of fiscal 1995.
Continuing litigation expenses arising from events related to the shareholder
litigation in fiscal 1993 and foreign currency translation losses were the
primary contributors to increased other expenses in the third quarter of fiscal
1996. In addition, the previous two quarters also included expenses associated
with the merger and financing costs associated with Brazilian operations
contributing to the increase for the three quarters of fiscal 1996 over the
same fiscal 1995 period.
The three quarters of fiscal 1995 included other income of $2,065,000 from
insurance proceeds under a company owned executive liability and indemnity
policy. The distribution included $65,000 of earned interest.
POTENTIAL ADVERSE AFFECTS ON RESULTS OF OPERATIONS FOR FUTURE PERIODS
The results for the remainder of fiscal 1996 could be adversely affected by
each or all of the following factors:
1. Mexican market. In December 1994, the Mexican government devalued the
Mexican Nuevo Peso by allowing the peso to float freely against the
U.S. dollar. This devaluation has resulted in a general increase of
100% or more in the cost of imported products to the Mexican consumer.
The increase and the resultant instability, including significant
business failures, higher interest rates, and high unemployment, have
caused a sharp decline in purchases of the
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Company's products by the Mexican consumer. It is not known if and
when the Peso will stabilize at a level where somewhat normal
purchasing will resume. Prior to the above mentioned economic and
political instability, sales directly and indirectly into Mexico had
accounted for a significant portion of Tristar's total sales.
The Company believes that some of its customers based in the United
States sell the Company's products (as well as the products of other
companies) to purchasers who, in turn, may attempt to import goods
into Mexico without full payment of applicable Mexican taxes and
customs duties. Enhanced enforcement efforts by Mexican authorities
may have an adverse effect on the Company's sales to such customers.
The Company has been unable to determine the effect, if any, that the
implementation of the North America Free Trade Agreement ("NAFTA") has
had or ultimately will have on the Company's business.
2. Distribution channels. Although the Company is making extensive
efforts to market products into Latin America and in the chain and
mass merchandising channels, the Company continues to remain dependent
on its original market, the wholesale channel. The maturation of this
market combined with competitive pressures have resulted in a slowing
of the general growth of this market. These factors are expected by
management to continue to negatively affect results for the remainder
of fiscal 1996.
3. Supply of products. The Company's ability to manufacture and to
satisfy consumer demand for fragrances is dependent on the supply of
certain components from single sources. Any inability of these
vendors to meet the Company's requirements could have an adverse
effect on the Company's results until alternate sources could be found
and/or developed.
In addition, the Company is dependent on the supply of cosmetic
products, other than cosmetic pencils, from related parties. If such
affiliates were to cease or to be unable to supply these cosmetic
products, the lack of these products, would have an adverse effect on
the Company until a secondary supplier could be located.
4. New and developing markets. The Company continues to develop and
expand marketing operations in Latin and South America. In the
process, the Company has invested in inventories and related taxes and
continues to incur significant expenses in order to establish a
marketing presence and an economically viable amount of sales. There
is no assurance that the Company will be successful in those endeavors
nor that it will recover its initial expenses or start up costs. In
addition certain countries impose strict import restrictions and high
levels of taxes on imports that could affect the success of sales and
marketing activities and also affect the profitability of such
activities.
5. Working capital availability. The Company is experiencing a limitation
on working capital availability as a result of investments in foreign
markets, investments in a new product line, entering new marketing
channels, and operating losses. The Company is currently meeting
working capital requirements by maximizing borrowings under the
Company's credit facility and by delaying payments to vendors
(primarily affiliates of the Core Sheth families) beyond customary
terms. The inability of the Company to continue to delay payments
could have a material adverse effect on the Company.
At this time, it is not known whether, or to what degree, the above
factors will have a material adverse impact on future results.
Page 13
<PAGE> 14
LIQUIDITY AND CAPITAL RESOURCES
The Company currently is obtaining its working capital from three primary
sources: a revolving line of credit, cash generated by operations, and from
delaying payments to vendors beyond customary terms.
Operating Activities
Operations in the thirty-nine week period ended June 1, 1996, utilized
$4,674,000 in cash primarily due to increased trade accounts receivable
($2,477,000) and increased inventory levels ($2,498,000), and a net loss of
$1,992,000 adjusted for non cash items. Offsetting the usage was an increase
in accounts payable ($2,603,000).
Accounts receivable grew primarily as a result of increased sales, entry into
new sales channels, varying extended financing terms given to customers, and
extended terms given to foreign customers in order to develop those markets.
Inventory levels grew primarily as a result of establishing a distribution
center in a foreign market and as a result of developing a new product line.
Accounts payable increased as the Company delayed payments to certain vendors
(primarily affiliates of the Core Sheth families who beneficially own 84% of
the Company's outstanding common stock) and as the Company increased its
purchases for the newly developed product line.
Investing Activities
Capital expenditures during the thirty-nine week period were $931,000,
consisting primarily of investments in machinery and equipment, facilities
related items, and computer equipment. Capital expenditures for the remainder
of the fiscal year are expected to be primarily for manufacturing equipment,
and computer equipment and software with lesser amounts being invested in
equipment for distribution activities
Financing Activities
During the thirty-nine week period ending June 1, 1996, short term borrowings
increased $5,132,000 to $10,515,000 under its revolving line of credit.
Remaining availability under the line as of June 1, 1996, was $529,000 based on
the borrowing formulas.
The Company is currently experiencing a limitation on working capital
availability primarily as a result of (1) investments in foreign markets with
significant repayments of those investments not projected in the immediate
future, (2) investments in the development and introduction of the new product
line noted above, (3) the cost of entry into the marketing channel where this
new product line is currently being sold, and (4) losses incurred on operations
unrelated to the new product line. The restricted availability has resulted in
maximization of borrowings under the Company's credit facility and in the
delaying of payments to certain vendors (primarily affiliates of the Core Sheth
families) beyond customary terms. The Company has established programs to
improve liquidity through increased emphasis on selling slow moving inventory,
through improved management of other inventories, tightened controls on the
utilization of cash in other areas, and reductions of SG&A expenses and
headcounts. While the Company anticipates that these measures combined with
utilizing its credit facility, cash generated by operations, and the continued
ability to extend the payment terms of certain vendors will relieve the
limitation on availability prior to the end of the calendar 1996, there can be
no assurance that the Company will be successful.
Page 14
<PAGE> 15
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
CALIFORNIA AIR RESOURCES BOARD
See the Company's Quarterly report on form 10Q for the thirteen weeks ended
March 2, 1996.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A) EXHIBITS
10 Employment Agreement between the Company and Joseph DeKama
dated April 19, 1996.
23 Awareness Letter of KPMG Peat Marwick LLP.
27 Financial Data Schedule.
Page 15
<PAGE> 16
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.
TRISTAR CORPORATION
(Registrant)
Date: July 16, 1996 /s/ Viren S. Sheth
------------- -------------------------------------
VIREN S. SHETH
President and Chief Executive Officer
(Principal Executive Officer)
Date: July 16, 1996 /s/ Loren M. Eltiste
------------- -------------------------------------
LOREN M. ELTISTE
Vice-President and Chief Financial
Officer (Principal Financial and
Accounting Officer)
Page 16
<PAGE> 17
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number
- -------
<S> <C>
10 Employment Agreement between the Company and Joseph DeKama
dated April 19, 1996.
23 Awareness Letter of KPMG Peat Marwick LLP.
27 Financial Data Schedule.
</TABLE>
<PAGE> 1
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (the "Employment Agreement"), is made and entered
into this 19th day of April, 1996, by and between TRISTAR CORPORATION, a Texas
corporation ("Employer"), and Joseph DeKama ("Employee"), a resident of the
State of New York.
W I T N E S S E T H:
WHEREAS, Employer desires to employ Employee as its Senior Vice President -
Director of Sales for the United States and Canada for a term of employment as
herein provided and Employee desires to become an employee of Employer as
herein provided; and
WHEREAS, the parties desire to establish by contract the terms and
conditions of the employment of Employee by Employer;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements contained herein, the parties agree as follows:
1. TERM OF EMPLOYMENT. The term of this Employment Agreement shall
commence on April 1, 1996 and terminate on August 31, 1998. The Company's
fiscal year ends on August 31 of each year (the "Fiscal Year"). Following
August 31, 1998, so long as Employee is not in default of any of Employee's
obligations hereunder, this Employment Agreement shall automatically be renewed
at the end of each subsequent Fiscal Year for an additional Fiscal Year if
Employer has attained at least 50% of the annual revenue targets for such
Fiscal Year as set forth on Exhibit C attached hereto.
2. TITLE AND DUTIES OF EMPLOYEE AND ESTABLISHMENT OF SALES AND
MARKETING OFFICE. Employee shall serve as Senior Vice President - Director of
Sales of Employer for the United States and Canada. Employee agrees to his
employment by Employer and to devote his entire time, skill, labor, and
attention exclusively to the business of Employer throughout the period of his
employment. A schedule of business activities that Employee may engage in
which shall not be a violation of Employee's commitment to devote his entire
time and energy to is attached hereto as Exhibit A and incorporated herein by
reference (the "Permitted Activities"). Employer shall have the right at any
time to change or modify the work or duties to be performed by Employee,
provided that such work or duties as so changed or modified shall include the
general powers and duties usually invested in the office of Senior Vice
President - Director of Sales of a corporation. Employer shall have the
exclusive power and authority to determine the matters to be assigned to
Employee and the specific duties to be performed by him. During the Term,
Employer will establish a Sales and Marketing Office in New York located at 250
West 57th Street, New York, New York or such other address designated in
writing by Employer from time to time. The office will be staffed and include
the salary and benefits of up to 2 employees, rent, and operating expenses such
as telephone and supplies. The maximum annual cost for such sales office shall
be $100,000. A schedule of the costs of such sales and marketing office will
be prepared by Employee and submitted to the Employer for approval.
3. SALARY. For all services rendered by him during the Term,
Employee shall be paid an annual salary of Three Hundred Sixty Thousand Dollars
($360,000) ("Salary"), payable monthly, minus standard deductions for all
applicable state and federal taxes and other reasonable bona fide deductions.
If the Term of this Employment Agreement is extended beyond Fiscal 1998 as
provided in Section 1 above, there will be a review of the salary and
compensation provisions for any such extension and any adjustments shall be set
forth in the written extension agreement referred to herein.
4. ADDITIONAL BENEFITS. During the Term, Employee shall be entitled
to the following other benefits, in addition to his Salary or as otherwise
described in this Employment Agreement:
<PAGE> 2
A. REIMBURSEMENT FOR TRAVEL, ENTERTAINMENT AND OTHER EXPENSES.
During the Term, Employer shall reimburse Employee up to $100,000 per
year (beginning the date hereof) for any reasonable travel,
entertainment or other necessary expenses incurred in the performance
of his duties under this Employment Agreement, consistent with the
policies of Employer at the time of such reimbursement with respect to
such expenses, as such policy may be modified from time to time. On
an annual basis (beginning the date hereof), Employee shall prepare a
maximum annual budget for such expenses (which budget shall not exceed
$100,000) or such other amount as agreed to by the parties from time
to time, and an executive officer of Employer must approve such budget
before any such expenses are reimbursed.
B. ALL BENEFIT PLANS.. During the Term, Employee shall be
eligible to participate in all benefit plans generally available to
Employer's officers,
C. BONUS. During the Term, Employee shall be eligible for annual
incentive compensation of up to $60,000 in accordance with the terms
and conditions as set forth in Exhibit B attached hereto and
incorporated herein by reference.
D. STOCK OPTIONS. Employer will be eligible to receive stock
options to acquire up to 250,000 shares of Employer's common stock in
accordance with the terms and conditions set forth in Exhibit C
attached hereto and incorporated herein by reference.
5. RESIGNATION.
A. WITHOUT GOOD REASON. If for any reason Employee voluntarily
resigns his employment prior to the expiration of the Term other than
for Good Reason (as defined in Section 5.B. below), Employee shall
forfeit any right to receive any further payments or benefits,
including the Lump Sum Payment (as defined in Section 6), pursuant to
this Employment Agreement and Employer shall be released and
discharged from any liability, obligation or duty arising in
connection with this Employment Agreement or in connection with his
employment. Nevertheless, Employee shall continue to be bound and
obligated by any provision of this Employment Agreement which is
intended by its terms to survive and continue beyond the resignation
of Employee, including, but not limited to, the provisions of Section
9.
B. WITH GOOD REASON. If Employee voluntarily resigns his
employment with Employer for Good Reason, then provided that Employee
strictly complies with the terms of the Employment Agreement, Employer
shall be obligated to pay Employee the Lump Sum Payment (as defined
below). For purposes of this Section 5.B., "Good Reason" shall mean
(a) a reduction, without Employee's consent, of Employee's Salary, (b)
the assignment to Employee of duties inconsistent with those duties
typically performed by the office of vice president of a corporation,
without Employee's consent, or (c) the Employer's material breach of
any other material provision in this Employment Agreement; provided,
however, that in the event the Employee intends to resign for Good
Reason, the Employee must give the Employer 30 days' prior written
notice of his intent to do so, setting forth the conditions he
reasonably believes constitute "Good Reason" hereunder; and provided,
further, that the Employer shall have 30 days, or such longer period
of time as mutually agreed upon, to cure the condition to Employee's
reasonable satisfaction. In the event Employee resigns prior to the
expiration of Employer's period to cure, such termination shall not
constitute a resignation for Good Reason. In addition, upon any such
resignation for Good Reason by Employee hereunder, Employee shall
continue to be bound and obligated by any
<PAGE> 3
provision of this Employment Agreement which is intended by its terms
to survive and continue beyond the resignation of Employee, including,
but not limited to, the provisions of Section 9.
6. TERMINATION IN DISCRETION OF EMPLOYER. If the employment of
Employee by Employer is terminated by Employer in its discretion prior to the
end of the Term, other than a termination pursuant to Section 7 of this
Employment Agreement, then during the remainder of the Term, and provided that
Employee strictly complies with the terms of this Employment Agreement,
Employer shall be obligated to pay Employee the greater of (i) the balance of
Employee's salary under this Employment Agreement until August 31, 1998 (for a
termination prior to August 31, 1998) or the balance of Employee's salary for
the Employer's Fiscal Year during the year of termination (for a termination
after August 31, 1998) or (ii) three months salary (the "Lump Sum Payment").
Upon such termination, this Employment Agreement shall be terminated and
Employee shall be released from all obligations to Employee with respect to
this Employment Agreement, including but not limited to compensation, except
for the Lump Sum Payment and obligations accrued prior to such date of
termination. Nevertheless, Employee shall continue to be bound and obligated
by any provision of this Employment Agreement which is intended by its terms to
survive and continue beyond the resignation of Employee, including, but not
limited to, the provisions of Section 9. This right of Employer to terminate
Employee in Employer's discretion prior to the end of the Term is an
independent and absolute right, and may be applied and enforced separately by
Employer at its election and in its sole discretion, notwithstanding any other
provision contained in this Employment Agreement to the contrary.
7. TERMINATION EARLIER THAN BY EXPIRATION OF TERM. Although the
parties expressly intend that this Employment Agreement shall continue during
the Term until its expiration unless sooner terminated pursuant to the
provisions of Section 5 or Section 6 above, the parties mutually agree that
this Employment Agreement, and its provisions (except for any provision
intended by its terms to survive and continue, including, but not limited to,
the provisions of Section 9), in addition shall be terminated in advance of the
expiration of the Term upon the occurrence of any one of the following events:
A. DEATH. The death of Employee;
B. DISABILITY. The physical or mental disability of Employee
that prevents him from performing effectively the duties of his
employment for a time period greater than six (6) consecutive months.
For purposes of this Section 7.B., the determination of whether
Employee has been physically or mentally disabled for more than six
(6) consecutive months shall be made in the majority, written opinion
of a three-person panel of licensed medical doctors, said panel to be
made up of one licensed medical doctor appointed by Employee (or his
legal representative, which representative may be his closest living
relation if no legal representative exists), one licensed medical
doctor appointed by Employer and a third licensed medical doctor
selected by the other two panel members; or
C. TERMINATION FOR CAUSE. Employer also reserves the right at
its election to terminate the employment of Employee, and thereby
effect a termination of this Employment Agreement, if it determines
that Employee, at any time, (i) has engaged in misconduct, including
an act of dishonesty or moral turpitude, or (ii) has violated in any
material respect any material covenant, term or condition contained in
this Employment Agreement or any applicable material policy or
policies of Employer, or (iii) has been negligent in his attention to
the business of Employer or has intentionally failed to perform a
reasonably requested directive or assignment from the President or the
Board of Directors of Employer. Upon the occurrence of any event
described in clause (i) of this Section 7.C., regardless of whether
such event is also described in clause (ii) of this Section 7.C.,
notice of termination for cause of the
<PAGE> 4
employment of Employee may be given in writing by Employer to Employee
and such termination shall be effective immediately upon the delivery
of such notice. Upon the occurrence of any event described in clause
(ii) or (iii) of this Section 7.C. Notice of termination for cause of
the employment of Employee setting forth the grounds for such
termination shall be given to Employee by Employer in writing and such
termination shall be effective thirty (30) days thereafter if a cure
for such event has not been effected. The giving of such notice shall
also effect a termination of this Employment Agreement except as to
any provision of this Employment Agreement which is intended by its
terms to survive and continue, including, but not limited to, the
provisions of Section 9.
Upon the occurrence of any of the events described above in Section 7. A. -
7. C., Employer shall be released and discharged from any liability, obligation
or duty arising in connection with this Employment Agreement or in connection
with Employee's employment, including payment of the Lump Sum Payment, provided
that upon the occurrence of any event described in Section 7.B., Employee shall
be entitled to the benefits of any disability policy of Employer covering such
event to the extent provided in such policy.
8. BEST EFFORTS OF EMPLOYEE. Employee agrees he will at all times
faithfully, industriously, and to the best of his ability, experience, and
talent, perform to the reasonable satisfaction of Employer all of the duties
that may be required of and from him pursuant to the express and implicit terms
of this Employment Agreement. During the Term, Employee will not directly or
indirectly, on his own behalf or as a partner, officer, consultant, principal,
agent, stockholder (except by ownership of five percent (5%) or less of the
outstanding stock of any publicly held corporation) or in any other capacity,
invest or engage in, or devote any material endeavor or effort to any other
business than the Permitted Activities.
9. RECORDS; CONFIDENTIAL INFORMATION; NON-COMPETITION AGREEMENT;
TANGIBLE PROPERTIES.
A. OWNERSHIP. All business records, data and information
("Records") are and shall remain the exclusive property of Employer.
Employee shall not under any circumstances whatsoever permanently
remove any Records from the premises of Employer without prior written
consent of Employer.
B. RETURN OF RECORDS. Upon request, Employee shall immediately
return to Employer all Records and copies thereof in Employee's
possession.
C. CONFIDENTIAL AND PROPRIETARY INFORMATION. To the extent not
otherwise provided for in this Employment Agreement, Employee agrees
to maintain the confidentiality of all confidential and proprietary
information relating to the business or internal operation of Employer
both during and after his employment by Employer, provided that if
Employee becomes legally compelled to disclose any of such
information, Employee will promptly notify Employer so that Employer
may seek a protective order or other appropriate remedy and/or waive
compliance under this Section 9. C. If such protective order or other
remedy is not obtained, or if Employer waives compliance with the
provisions of this Section 9.C., Employee will furnish only that
portion of such information that is legally required. Employee
understands and agrees that this Section 9 is a material part of this
Employment Agreement, his acceptance of which is an inducement to
Employer to enter into this Employment Agreement.
D. NON-COMPETITION AGREEMENT. Employee covenants and agrees that
for the period beginning the date of Employee's termination of his
employment with
<PAGE> 5
Employer and ending on the second (2nd) anniversary of said date (the
"Restricted Period"), Employee will not, directly or indirectly, on
his own behalf or as a partner, officer, consultant, principal, agent,
stockholder (except by ownership of five percent (5%) or less of the
outstanding stock of any publicly held corporation) or in any other
capacity, invest or engage in, or devote any endeavor or effort to the
alternative designer fragrances segment of the perfume or toiletries
business (the "Business"), including without limitation the companies
set forth on Exhibit D attached hereto, in the United States or Canada
or in other jurisdictions in which Employer may operate (the
"Territory").
E. NON-SOLICITATION AGREEMENT. During the Restricted Period,
Employee shall not, whether for his own account or for the account of
any other individual, partnership, firm, corporation or other business
organization, intentionally solicit, endeavor to entice away from
Employer or any entity controlled by or under common control with
Employer, or otherwise interfere in a material fashion with the
relationship with, any person who is employed by or otherwise engaged
to perform services for Employer or any person or entity who is as of
the Termination Date, or within the then most recent 12-month period,
a customer or client of Employer.
F. REFORMATION. Each of the parties hereto recognizes that the
time limitations and territorial restrictions contained in this
Section 9 are properly required for the adequate protection of the
Business and that in the event any covenant or other provision
contained herein shall be deemed to be illegal, unenforceable, or
unreasonable by a court or other tribunal of competent jurisdiction
with respect to any part of the Territory, such covenant or provisions
shall not be affected with respect to any other part of the Territory,
and each of the parties hereto agrees and submits to the reduction of
said time limitations and territorial restriction to such an area as
said court shall deem reasonable.
G. DOCUMENTS, WRITTEN MATERIALS AND TANGIBLE PROPERTIES. To the
extent not otherwise provided for in this Employment Agreement,
Employee agrees that all documents, written materials and other
tangible property, including copies thereof, relating in any way to
the business of Employer, shall be and remain the exclusive property
of Employer and shall be returned to Employer by Employee immediately
upon termination of his employment by Employer or at the request of
Employer.
H. INJUNCTIVE RELIEF. Employee hereby acknowledges and agrees
that Employer could not be fully compensated for damages resulting
from a continuing and material breach of any of the provisions of this
Section 9 and, accordingly, that Employer shall be entitled to
temporary or permanent injunctive relief, including temporary
restraining orders, preliminary injunctions and permanent injunctions,
to enforce any such provision. This right of Employer with respect to
the obtaining of injunctive relief shall not, however, diminish any
right of Employer to claim and recover monetary damages or to obtain
any other remedy.
I. SURVIVAL. The provisions of this Section 9 shall continue in
effect notwithstanding the termination of, or resignation from, the
employment of Employee by Employer.
10. WAIVER OF BREACH. A waiver by Employer of a breach of any
provision of this Employment Agreement shall not operate or be construed as a
waiver of any subsequent breach by Employee of the same or any other provision
of this Employment Agreement.
11. NOTICES. Any notice required to be given under this Employment
Agreement
<PAGE> 6
shall be deemed sufficient, if in writing, and sent by certified mail, return
receipt requested, or hand delivered, to the other party at the address shown
below
FOR Employer: Tristar Corporation
12500 San Pedro, Suite 500
San Antonio, Texas 78216
Attn: President
WITH a copy to: Akin, Gump, Strauss, Hauer & Feld, L.L.P.
300 Convent, Suite 1500
San Antonio, Texas 78205
Attn: Cecil Schenker, P.C.
FOR Employee: Joseph DeKama
250 West 57th Street
New York, New York
Either party may change its or his address for notices under this section by
giving notice of the change to the other pursuant to this section.
12. GOVERNING LAW; FORUM. This Employment Agreement shall be governed
by and construed in accordance with the laws of the State of Texas without
regard to the conflicts of laws rules thereof and is made and entered into in
San Antonio, Bexar County, Texas. Each of the parties hereto agree that any
lawsuit or claim relating to this Employment Agreement shall be brought in the
State District Court for Bexar County, Texas or in the United States Federal
District Court for the Western District of Texas, San Antonio Division
13. ENTIRE AGREEMENT. This Employment Agreement contains the entire
agreement between the parties. This Employment Agreement shall not be amended
except by a written agreement signed by both parties. The execution of this
Employment Agreement shall terminate in full that certain Independent Sales
Representative Agreement by and among Employer, Employee and Ascending Sales,
Inc. executed in October, 1995 and upon the termination thereof, such
Independent Sales Representative Agreement shall be of no force and effect.
14. SEVERABILITY. If any of the provisions of this Employment
Agreement are determined to be invalid or unenforceable in part, the remaining
provisions, and the enforceable portions of any partially unenforceable
provisions, shall nevertheless be binding and enforceable.
15. BINDING EFFECT; EFFECTIVE DATE. Subject to Section 16 below, this
Employment Agreement shall inure to the benefit of and shall be binding upon
Employer and its successors and assigns, and upon Employee and his heirs,
legatees, executors, administrators, successors and beneficiaries. This
Employment Agreement shall be effective as of the date first above written.
16. ASSIGNMENT. This Employment Agreement shall not be assignable by
Employee without the prior written consent of Employer.
17. CAPTIONS. Captions of Sections are inserted only as a matter of
convenience and reference and in no way define, limit or describe the substance
or scope of this Employment Agreement or the intent of any of its provisions.
18. RULES OF CONSTRUCTION. This Employment Agreement has been
negotiated by the parties and is to be interpreted according to its fair
meaning as if the parties had prepared it together and not strictly for or
against any party. All references in this Employment Agreement to "parties"
refer to parties in this Employment Agreement unless expressly indicated
otherwise. References in this
<PAGE> 7
Employment Agreement to sections are to sections of this Employment Agreement
unless expressly indicated otherwise. References in this Employment Agreement
to "provisions" of this Employment Agreement refer to the terms, conditions and
promises contained in this Employment Agreement. At each place in this
Employment Agreement where the context so requires, the masculine, feminine or
neuter gender includes the others and the singular or plural number includes
the other. Forms of the verb "including" mean "including without limitation."
The word "or" is inclusive and includes "and ."
(SIGNATURE PAGE FOLLOWS)
<PAGE> 8
IN WITNESS WHEREOF, the parties hereto have executed this Employment
Agreement as of the date first above written,
TRISTAR CORPORATION
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
----------------------------------------
JOSEPH DEKAMA
<PAGE> 9
EXHIBIT A
PERMITTED ACTIVITIES
Employee's wife currently participates in the wholesale distribution of
brand name fragrances. Such activities shall constitute a Permitted Activity
hereunder unless such activities materially increase during the Term from the
level of activity for the year prior to the date hereof. On a quarterly basis,
Employee shall provide Employer with a report of such activities and in the
event Employer determines that such activities have materially increased, such
activity shall be a "Permitted Activity" hereunder only to the extent that
Employer determines that such increase was not the result, directly or
indirectly, of Employee's employment with Employer or from knowledge gained,
directly or indirectly, from Employee's employment with Employer
<PAGE> 10
EXHIBIT C
TERMS AND CONDITIONS OF STOCK OPTION
<TABLE>
<S> <C> <C>
1. Aggregate number of Option Shares Up to 250,000 in one to six separate option grants
2. Type Nonqualified, not under any existing company plan
3. Exercise Price Fair market value on the date of grant
4. Expiration Date Seven years from the date of grant
5. Death, Disability, Retirement, Options, to the extent exercisable upon occurrence of event, shall
Resignation or Other Termi nation remain exercisable for three months
Without Cause
6. Termination With Cause Options, to the extent exercisable upon termination shall be forfeited
7. Grant of Options Effective upon the date hereof, options for 50,000 shares shall be
granted. If certain annual revenue targets are attained by Employer
in the four consecutive years beginning with fiscal year 1997, then
Employee shall be granted additional options to acquire 50,000 shares
for each fiscal year in which such targets are met. Notwithstanding
the preceding, if in any such fiscal year Employer attains only 50% to
99% of an annual revenue target, then the number of options for which
Employee shall be eligible to receive in such fiscal year shall equal
the percentage of the annual revenue target attained times 50,000 (for
example, if 50% of an annual revenue target is attained, the number of
options which shall be granted at that fiscal year end shall be
25,000), and if Employer attains less than 50% of an annual revenue
target, then the number of options which shall be granted at that
fiscal year end shall be 0. All options not granted to Employee in any
fiscal year due to Employer obtaining less than 100% but at least 50%
of the annual revenue target for such fiscal year shall be accumulated
in a pool (up to 50,000 shares) out of which Employee shall receive
options for up to 50,000 shares in fiscal year 2001 in the same
percentage manner as set forth above based upon achieving the annual
revenue targets for fiscal year 2001. Each option, when granted,
shall be immediately exercisable ir full on the date of grant.
</TABLE>
<PAGE> 11
<TABLE>
<S> <C> <C> <C>
8. Revenue Targets Fiscal Year 1997 - $20,000,000
Fiscal Year 1999 - $45,000,000
Fiscal Year 1998 - $39,000,000
Fiscal Year 2000 - $52,000,000
Fiscal Year 2001 - $60,000,000
</TABLE>
<PAGE> 12
EXHIBIT D
LIST OF COMPETITORS
<TABLE>
<CAPTION>
United States Canada Venezuela
- ------------- ------ ---------
<S> <C> <C>
Jean Philippe Cartland Glamour, C. A. (Jean Nacris)
Delagar Claude G
Parfums DeCoeur
Fragrance Impressions
Lady in Red
Quintessence
L'Illusions
Tsumura Int'i
Yaz
From France to You
Paris Design
Q Perfumes
Deborah
Artmatic
Pavion
Wet n Wild
</TABLE>
<PAGE> 1
EXHIBIT 23
Tristar Corporation
San Antonio, Texas
Ladies and Gentlemen:
RE: REGISTRATION STATEMENT NO. 33-45396
With respect to the subject registration statement, we acknowledge our
awareness of the use therein of our report dated July 10, 1996 related to our
review of interim financial information.
Pursuant to Rule 436(c) under the Securities Act of 1933, such report is not
considered part of a registration statement prepared or certified by an
accountant or a report prepared or certified by an accountant within the
meaning of sections 7 and 11 of the Act.
Very truly yours,
San Antonio, Texas
July 10, 1996
Page 24
<TABLE> <S> <C>
<ARTICLE> 5
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