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: NOVEMBER 28, 1998
-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
(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
12500 SAN PEDRO AVENUE, SUITE 500, SAN ANTONIO, TEXAS 78216
(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 requirements 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 JANUARY 28, 1999, THERE WERE OUTSTANDING 16,761,493 SHARES OF
COMMON STOCK, $.01 PAR VALUE, OF THE REGISTRANT.
1
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TRISTAR CORPORATION AND SUBSIDIARIES
INDEX TO FORM 10-Q
PART I. FINANCIAL INFORMATION PAGE
-----
Item 1. Financial Statements (Unaudited)
Consolidated balance sheets--November 28, 1998 and August 29, 1998 3
Consolidated statements of operations--thirteen week periods 5
ended November 28, 1998 and November 29, 1997, respectively
Consolidated statement of shareholders' equity -- thirteen weeks 6
ended November 28, 1998
Consolidated statements of cash flows--thirteen week periods ended 7
November 28, 1998 and November 29, 1997, respectively
Notes to consolidated financial statements--November 28, 1998 8
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 14
Item 3. Qualitative and Quantitative Disclosure About Market Risk 20
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 21
Item 2. Changes in Securities 21
Item 3. Defaults Upon Senior Securities 21
Item 4. Submission of Matters to a Vote of Security Holders 21
Item 5. Other Information 21
Item 6. Exhibits and Reports on Form 8-K 21
SIGNATURES 22
2
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
TRISTAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
NOVEMBER 28,
1998 AUGUST 29,
ASSETS (UNAUDITED) 1998*
----------- -----------
<S> <C> <C>
Current assets:
Cash ..................................................... $ 41,000 $ 66,000
Accounts receivable, less allowance for doubtful accounts
of $966,000 and $ 795,000, respectively ................ 16,061,000 14,206,000
Accounts receivable - related parties - net .............. 3,521,000 3,607,000
Inventories .............................................. 13,215,000 11,375,000
Prepaid expenses ......................................... 257,000 186,000
Other current assets ..................................... 117,000 141,000
----------- -----------
Total current assets ................................... 33,212,000 29,581,000
----------- -----------
Property, plant and equipment, less accumulated depreciation
of $9,239,000 and $8,805,000 ............................ 8,031,000 8,199,000
----------- -----------
Other assets:
Warrant valuation, less accumulated amortization
of $1,809,000 and $1,805,000, respectively ............. 99,000 103,000
Other assets ............................................. 760,000 825,000
----------- -----------
Total other assets ..................................... 859,000 928,000
----------- -----------
Total assets ............................................... $42,102,000 $38,708,000
=========== ===========
</TABLE>
* Prepared from audited financial statements for the year ended August 29, 1998.
SEE NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.
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TRISTAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONTINUED)
<TABLE>
<CAPTION>
NOVEMBER 28,
1998 August 29,
LIABILITIES AND SHAREHOLDERS' EQUITY (UNAUDITED) 1998 *
------------ ------------
<S> <C> <C>
Current liabilities:
Book overdraft .............................................. $ 392,000 $ 334,000
Revolving credit agreement borrowings, current .............. 6,662,000 7,612,000
Accounts payable--trade ..................................... 8,855,000 9,289,000
Accounts payable--related parties - net ..................... 5,118,000 5,185,000
Accrued bonuses ............................................ 82,000 164,000
Accrued interest expense-subordinated debt .................. 1,731,000 1,731,000
Other accrued expenses ...................................... 1,698,000 1,467,000
Current portion of capital lease obligations ................ 140,000 144,000
Current portion of long-term obligations .................... 900,000 822,000
------------ ------------
Total current liabilities ................................. 25,578,000 26,748,000
Long-term debt, less current portion .......................... 2,878,000 2,781,000
Obligations under capital leases, less current portion ........ 102,000 130,000
Subordinated long term debt - related parties ................. 1,700,000 1,700,000
------------ ------------
Total liabilities .......................................... 30,258,000 31,359,000
------------ ------------
Commitments and contingencies
Shareholders' equity (deficit):
Preferred stock, $.05 par value; authorized 1,000,000 shares;
Series A, 666,529 shares issued and outstanding ........... 4,666,000 4,666,000
Series B, 120,690 shares issued and outstanding ........... 4,511,000 4,511,000
Series C, 78,333 shares issued and outstanding ............ 4,699,000
Common stock, $.01 par value; authorized 30,000,000 shares;
issued and outstanding 16,761,493 shares and
16,761,493 shares, respectively ........................... 168,000 168,000
Additional paid-in-capital .................................. 12,790,000 12,483,000
Foreign currency translation ................................ (376,000) (376,000)
Accumulated deficit ......................................... (14,614,000) (14,103,000)
------------ ------------
Total shareholders' equity ................................ 11,844,000 7,349,000
------------ ------------
Total liabilities and shareholders' equity .................... $ 42,102,000 $ 38,708,000
============ ============
</TABLE>
* Prepared from audited financial statements for the year ended August 29, 1998.
SEE NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.
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TRISTAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
THIRTEEN WEEKS ENDED
----------------------------
NOVEMBER 28, NOVEMBER 29,
1998 1997
------------ ------------
Net sales .................................. $ 15,075,000 $ 20,865,000
Cost of sales .............................. 10,432,000 14,927,000
------------ ------------
Gross profit ............................... 4,643,000 5,938,000
Selling, general and administrative expenses 4,065,000 3,964,000
------------ ------------
Income from operations ..................... 578,000 1,974,000
Other income (expense):
Interest expense ....................... (331,000) (474,000)
Amortization of warrants ............... (28,000) (11,000)
Other income (expense) ................. 5,000 (84,000)
------------ ------------
Income before provision for income taxes ... 224,000 1,405,000
Provision for income taxes ................. -- 50,000
------------ ------------
Net income ................................. $ 224,000 $ 1,355,000
------------ ------------
Less:
Preferred stock dividends .............. (207,000) (113,000)
Effect of beneficial conversion feature (641,000) --
============ ============
Net income (loss) applicable to common stock $ (624,000) $ 1,242,000
============ ============
Earnings per common share:
Basic .................................. $ (.04) $ .07
============ ============
Diluted ................................ $ (.04) $ .07
============ ============
SEE NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.
5
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TRISTAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
THIRTEEN WEEKS ENDED NOVEMBER 28, 1998
<TABLE>
<CAPTION>
PREFERRED STOCK
-------------------------------------------------
COMMON STOCK SERIES A SERIES B
----------------------- ----------------------- -----------------------
NUMBER NUMBER NUMBER
OF SHARES AMOUNT OF SHARES AMOUNT OF SHARES AMOUNT
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balance, August 31, 1998 ........... 16,761,493 $ 168,000 666,529 $ 4,666,000 120,690 $ 4,511,000
=========== ========== ========= =========== ========== ===========
Net income .........................
Series C Preferred Stock Dividends..
Issuance of Series C Preferred Stock
and related warrants...............
=========== ========== ========== =========== ========== ===========
Balance, November 28, 1998 ......... 16,761,493 $ 168,000 666,529 $ 4,666,000 120,690 $ 4,511,000
=========== ========== ========== =========== ========== ===========
<CAPTION>
PREFERRED STOCK
-----------------------
SERIES C
----------------------- ADDITIONAL FOREIGN
NUMBER PAID-IN CURRENCY ACCUMULATED
OF SHARES AMOUNT CAPITAL TRANSLATION DEFICIT
---------- ---------- ----------- ----------- -----------
<S> <C> <C> <C>
Balance, August 31, 1998 ........... $ 12,483,000 ($ 376,000) $(14,103,000)
========== ========== ============ =========== ============
Net income ......................... 224,000
Preferred Stock Dividends .......... (94,000)
Issuance of Series C Preferred Stock
and related warrants............... 78,333 $ 4,699,000 307,000 (641,000)
Foreign Currency Translation........
Beneficial Conversion ..............
Issuance of Warrants................
========== =========== ============ =========== ============
Balance, November 28, 1998 ......... 78,333 $ 4,699,000 $ 12,790,000 $ (376,000) $(14,614,000)
========== =========== ============ =========== ============
</TABLE>
See notes to unaudited financial statements.
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TRISTAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED
---------------------------
NOVEMBER 28, NOVEMBER 28,
1998 1997
------------ -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income .......................................... $ 224,000 $ 1,355,000
Adjustments to reconcile net income to
net cash used in operating activities:
Depreciation and amortization ..................... 434,000 445,000
Provision for losses on accounts receivable ....... 273,000 156,000
Provision for inventory allowances ................ 130,000 128,000
Issuance of stock in connection with 401K plan .... -- --
Amortization of warrant valuations ................ 28,000 11,000
Amortization of deferred loan costs ............... 64,000 --
Compensation expense for extension of stock options -- 217,000
Change in operating assets and liabilities:
Accounts receivable ............................. (2,042,000) (5,524,000)
Inventories ..................................... (1,970,000) 569,000
Prepaid expenses ................................ (71,000) (262,000)
Other current assets ............................ 1,000 --
Income taxes payable ............................ -- 39,000
Accounts payable ................................ (501,000) 1,258,000
Accrued expenses ................................ 149,000 (148,000)
------------ -----------
Net cash used in operating activities ............. (3,281,000) (1,756,000)
------------ -----------
CASH FLOWS USED IN INVESTING ACTIVITIES:
Capital expenditures ................................ (266,000) (527,000)
Increase in other assets ............................ -- (112,000)
------------ -----------
Net cash used in investing activities ............. (266,000) (639,000)
------------ -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Book overdraft ...................................... 58,000 --
Repayment of revolving credit facility .............. (12,664,000) --
Borrowings under revolving credit facility .......... 11,714,000 --
Net borrowings under old revolving credit facility .. -- 2,426,000
Proceeds from long-term debt ........................ 380,000 --
Principal payments under new debt ................... (205,000) --
Principal payments on capital leases ................ (32,000) --
Principal payments under old long-term debt ......... -- (195,000)
Proceeds from exercise of stock options ............. -- 141,000
Issuance of Series C Preferred Stock
and related warrants................................ 4,699,000 --
Payment of issuance costs on Series C Preferred Stock (334,000) --
Payment of dividends on Series C Preferred Stock .... (94,000) --
------------ -----------
Net cash provided by financing activities ......... 3,522,000 2,372,000
------------ -----------
NET (DECREASE) INCREASE IN CASH ......................... (25,000) (23,000)
CASH AT BEGINNING OF PERIOD ............................. 66,000 492,000
------------ -----------
CASH AT END OF PERIOD ................................... $ 41,000 $ 469,000
============ ===========
</TABLE>
Supplemental disclosure of noncash financing and investing activities:
FIRST QUARTER 1998
o A non-cash increase in property and equipment and obligations under
capital lease of $250,000.
SEE NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.
7
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
TRISTAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOVEMBER 28, 1998
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 ended November 28, 1998, are not
necessarily indicative of the results that may be expected for the year ending
August 28, 1999.
NOTE 2: EARNINGS (LOSS) PER COMMON SHARE
A reconciliation of the numerators and denominators of the basic and diluted
earnings (loss) per share computations, as required by SFAS No. 128, is
presented below:
THIRTEEN WEEKS ENDED
----------------------------
NOVEMBER NOVEMBER
28, 1998 29, 1997
-------------- -----------
Basic EPS:
Net earnings (loss) applicable to common
stock ....................................... $ (624,000) $ 1,242,000
Weighted-average number of common shares
outstanding ................................. 16,761,493 $16,738,083
============== ===========
Basic EPS ....................................... $ (.04) $ .07
============== ===========
Diluted EPS (1):
Net income applicable to common stock ...... $ (624,000) $ 1,242,000
Weighted-average number of common shares
outstanding ................................. 16,761,493 16,738,083
Add: effects of assumed exercise of
options and warrants
Exercise of stock options ................. -- 269,134
Exercise of warrants ...................... -- 1,271,395
-------------- -----------
Weighted-average number of common shares
outstanding plus shares from assumed
exercise of options and warrants .......... 16,761,493 18,278,612
-------------- -----------
Diluted EPS ..................................... $ (.04) $ .07
============== ===========
8
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1. Dilutive EPS equals basic EPS for the thirteen week period ended November
28, 1998 as the assumed conversion of convertible preferred stock and the
assumed exercise of outstanding options and warrants would have an
anti-dilutive effect.
NOTE 3: INVENTORIES
Inventory is stated at the lower of cost or market. The components of inventory
are as follows:
November 28, August 29,
1998 1998
----------- -----------
Raw materials ........................ $ 4,639,000 $ 4,728,000
Work-in-process ...................... 680,000 1,209,000
Finished goods ....................... 8,841,000 6,342,000
----------- -----------
14,160,000 12,279,000
Inventory reserves ................... (945,000 (904,000
----------- -----------
$13,215,000 $11,375,000
=========== ===========
NOTE 4: CREDIT AGREEMENT BORROWINGS
The Company maintains a $22,000,000 Credit Agreement (the "Credit Agreement").
The Credit Agreement includes a revolving credit facility (the "Revolving
Credit") which provides for $15,100,000 of maximum borrowings bearing interest,
at the Company's election, at the Alternate Base Rate (the higher of the prime
rate or the Federal Funds Rate plus .50%) plus 1.50% or the London Interbank
Offered Rate (LIBOR) plus 3.50% (although, borrowings based on LIBOR cannot
exceed 60% of the total outstanding borrowings under the Revolving Credit). At
November 28, 1998, the Revolving Credit bore interest at a rate of 9.39%.
Borrowings under the Revolving Credit are limited by a formula based on Eligible
Accounts Receivable and Inventory. Remaining availability under the line as of
November 28, 1998 approximated $2,334,000 based on the borrowing formula.
Commitment fees equal to .50% per annum on the unused portion of the Revolving
Credit are payable monthly. The Credit Agreement contains certain provisions
giving the lender the right to accelerate payment of all outstanding amounts in
the event of a "material adverse change", as defined. Accordingly, all revolving
Credit amounts are classified as current in the accompanying consolidated
balance sheets. All outstanding amounts under the Revolving Credit Agreement are
due in December 2001.
The Credit Agreement also provides for a $3,400,000 term loan (the "Term Loan")
and a $3,500,000 capital expenditure facility (the "Cap Ex Facility"). The Term
Loan bears interest, payable monthly, at the Alternate Base Rate (7.90% at
November 28, 1998) plus 2.00%. Principal repayments of the Term Loan are $56,667
per month for 35 months beginning in January 1998 with a $1,416,655 balloon
payment due in December 2001. Additionally, 50% of annual excess cash flow, as
defined, must be applied to the Term Loan installments in the inverse order of
maturity.
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Borrowings under the Cap Ex Facility are limited to 80% of the cost of new
machinery and equipment, limited to annual utilization of $1,500,000. These
borrowings also bear interest, payable monthly, at the Alternate Base Rate plus
2.00%. Principal payments on the Cap Ex Facility commence one month after the
take down in an amount based on a three year amortization. However, a balloon
payment in an amount equal to all outstanding borrowings under the Cap Ex
Facility is also due in December 2001. As of November 28, 1998, the Company had
outstanding borrowings under the Cap Ex Facility totaling $990,000. Principal
repayments are due at the rate of $18,300 per month.
Borrowings under the Credit Agreement are collateralized by all of the Company's
present and future assets. The Credit Agreement contains restrictive financial
covenants including Minimum Tangible Net Worth, Minimum EBITDA, Maximum Loss,
Minimum Fixed Charge Coverage, Maximum Leverage and Maximum Capital
Expenditures. Additional covenants limit borrowings, asset sales and dividends.
The Company was not in violation of any financial covenants as of November 28,
1998.
NOTE 5: LITIGATION AND CONTINGENCIES
FREITAS AND KENNER
In October 1994, a suit was filed in Florida state court against the Company and
two of its directors by Ross Freitas, Carolyn Kenner, Rose Freitas and Melissa
Freitas. The complaint alleged causes of action by two plaintiffs for libel and
seeks indemnification of legal costs allegedly incurred by those plaintiffs in
suits and proceedings arising from the facts which were the subject of the
investigation conducted by the Special Committee of the Board of Directors in
1992. The complaint also alleged, on behalf of all four plaintiffs, that the
Company's disclosures relating to the Sheth Group's holding of Company stock and
other matters were fraudulent or negligently misrepresented. In April 1995, the
court dismissed the complaint without prejudice, in part due to the plaintiffs'
failure to state a claim for relief. In May 1995, the plaintiffs refiled the
complaint, asserting many of the same claims, and in June 1996, amended their
complaint yet again, naming only the Company and one of its directors as
defendants. In October 1998, the Court dismissed the claim against the one
director. 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 business, financial condition or results of operations.
INTERNAL REVENUE SERVICE EXAMINATION
In February, 1997 the Internal Revenue Service ("the IRS") concluded their
examination of the Company's tax returns submitted for fiscal years 1993, 1994
and 1995. The IRS proposed adjustments disallowing the deductions of payments
made in the settlement of the class action litigation and certain related legal
and professional fees. In April 1998, the Company filed a protest letter with
the IRS. In a letter dated August 17, 1998, the IRS rejected the Company's
response. The Company will now raise this issue to the Appeals Court. If the
Company is unsuccessful in its discussions or ultimately in an appeal, it could
be required to pay taxes from prior years and related interest thereon exceeding
$1,800,000, and it could lose a significant amount of its existing net operating
loss carryforward benefits. No accrual for the impact of the proposed IRS
adjustments has been recorded in the accompanying financial statements as the
Company does not believe it is probable that the IRS will prevail in this
matter.
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OTHER
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 Sheth Group who beneficially own 73% 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 and other affiliates of the
Sheth Group. The payables and receivables balances for individual parties 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. The following summarizes the presentations at
November 28, 1998 and August 29, 1998.
NOVEMBER 28, AUGUST 29,
1998 1998
----------- -----------
ACCOUNTS RECEIVABLE:
Total accounts receivable-related parties ..... $ 3,922,000 $ 4,153,000
Offset amount ................................. (401,000 (546,000)
----------- -----------
Net related parties receivables ............... $ 3,521,000 $ 3,607,000
=========== ===========
ACCOUNTS PAYABLE:
Total accounts payable-related parties ........ $ 5,519,000 $ 5,731,000
Offset amount ................................. (401,000 (546,000
----------- -----------
Net related parties payables .................. $ 5,118,000 $ 5,185,000
=========== ===========
The Company purchases finished goods and fragrance product components from Sheth
Group affiliates. During the thirteen week period ended November 28, 1998, and
for the comparable period in fiscal 1998, the Company purchased approximately
$1,376,000 and $1,073,000, respectively.
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During the thirteen week period ended November 28, 1998, and for the comparable
period in fiscal 1998, the Company sold products to Sheth Group affiliates in
the amounts of approximately $607,000 and $1,041,000, respectively.
NOTE 7: ISSUANCE OF SERIES C PREFERRED STOCK
Effective September 3, 1998, the Company sold 78,333 shares of Series C Senior
Convertible Preferred Stock ("Series C Preferred Stock") to a private investor
for $60 per share. Each share of Series C Preferred Stock is convertible into
11.0345 shares of the Company's common stock. In connection with the Series C
Preferred Stock issuance, the Company issued 125,000 common stock warrants which
are exercisable at a price of between $4.00 and $6.28 per share. The Company
received proceeds from issuance of the Series C Preferred Stock and the common
stock warrants of approximately $4,699,000 and expects to receive an additional
$1,300,000 in fiscal 1999 upon issuance of an additional 21,667 shares of Series
C Preferred Stock to the same investor, in accordance with the stated closing
schedule.
The Series C Preferred Stockholders are entitled to receive a cumulative cash
dividend of $4.80 per share annually. The dividend is payable quarterly ($1.20
per quarter). The dividends may be paid by issuance of additional shares of
Series C Preferred Stock except such shares bear a cumulative cash dividend of
$7.80 per share annually. Dividends of approximately $94,000 were paid in cash
on the Series C Preferred Stock during the thirteen week period ended November
28, 1998. The Series C Preferred Stockholders are entitled to receive a
liquidation preference equal to $60.00 per share plus interest thereon from the
date of issue until redemption or conversion at a compound rate of 20% per year.
The Series C Preferred Stock has full voting rights based on the number of
common shares into which it is convertible and is voted together with the Common
Stock as one class.
On September 3, 1998, the closing bid price of the Company's common stock as
reported by the NASDAQ was $5.44. The Series C Preferred Stock conversion ratio
was based on this closing bid price at date of issuance. The common stock
warrants issued to the Series C Preferred Stockholders were valued at
approximately $307,000 utilizing the Black Scholes Method. Additionally, the
Company incurred costs totaling $334,000 in connection with the Series C
Preferred Stock sale. The value of the common stock warrants and the issuance
costs have been accounted for as a beneficial conversion feature to the
preferred shareholders and thus have been charged directly to Accumulated
Deficit and have been reflected as a reduction in net income applicable to
common stock.
NOTE 8: SERIES A AND B PREFERRED STOCK
The Company's Series A and B Preferred Stockholders are entitled to receive
cumulative dividends of $.315 per share and $2.03 per share, respectively. To
date, no dividends have been paid on the Series A and B Preferred Stock.
Dividends accumulated on the Series A and B Preferred Stock for the thirteen
week period ended November 28, 1998 totaling approximately $113,000 have been
reflected as a reduction in net income applicable to common stock. Cumulative
dividends in arrears on the Series A and B Preferred Stock totaled approximately
$822,000 at November 28, 1998.
NOTE 9: SUBSEQUENT EVENT - SALE OF WHOLLY OWNED MEXICAN SUBSIDIARY
On January 6, 1999, the Company executed a letter of intent agreeing to sell all
of the outstanding stock and certain distribution rights of its wholly owned
Mexican subsidiary, to Transvit Holding Corporation ("THC"), a wholly owned
affiliate of the Sheth Group, for $2,540,000. The Company will receive payment
in the form of a reduction in subordinated debt and other indebtedness to Nevell
Investments S.A. ("Nevell"), another affiliate of the Sheth Group. The agreement
provides for non-compete restrictions and a supply arrangement whereby the
Company agrees to continue selling product to the Mexican unit through November
30, 2001. Additionally, the Company will receive an option to
12
<PAGE>
repurchase the stock and distribution rights from THC at a formula-based price
set forth in the agreement at any time prior to November 30, 2004. The Company
currently has no plans to repurchase the stock and distribution rights under
this option.
13
<PAGE>
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
RESULTS OF OPERATIONS FOR THE THIRTEEN WEEK PERIODS ENDED NOVEMBER 28, 1998 AND
NOVEMBER 29, 1997
This document contains certain statements that are "forward-looking" statements
within the meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934. All statements other than statements of
historical facts included in this document, including without limitation
statements that use terminology such as "anticipate", "believe," "continue,"
"estimate," "expect," "intend," "may,", "plan," "predict," "should," "will," and
similar expressions, are forward-looking statements. These forward-looking
statements include, among other things, the Company's business strategy and
expectations concerning the Company's market position, future operations,
margins, profitability, liquidity and capital resources, expenditures for
capital projects and attempts to reduce costs. Although the Company believes
that the assumptions upon which the forward-looking statements contained in this
document are based are reasonable, any of the assumptions could prove to be
inaccurate and, as a result, the forward-looking statements based on those
assumptions also could be incorrect. All phases of the operations of the Company
involve risks and uncertainties, many of which are outside the control of the
Company and any one of which, or a combination of which, could materially affect
the results of the Company's operations and whether the forward-looking
statements ultimately prove to be correct. Important factors that could cause
actual results to differ materially from the Company's expectations are set
forth under the captions "Management's Discussion and Analysis of Financial
Condition and Results of Operations," and elsewhere in this document. Actual
results and trends in the future may differ materially depending on a variety of
factors including, but not limited to, the timing and extent of changes in
fragrance components, fragrance and cosmetic prices and underlying demand and
availability of fragrance components; changes in the cost or availability of
means of transporting products; execution of planned capital projects; adverse
changes in the credit ratings assigned to the Company's trade credit; the extent
of the Company's success in developing and marketing new product lines; state
and federal environmental, economic, safety and other policies and regulations,
and changes therein, and any legal or regulatory delays or other factors beyond
the Company's control; adverse rulings, judgments, or settlements in litigation
or other legal matters; actions of customers and competitors; economic
conditions affecting the areas in which the Company's products are marketed;
political developments in foreign countries; and the conditions of the capital
markets and equity markets during the periods covered by the forward-looking
statements. Many of the factors are described in greater detail in other of the
Company's filings with the Commission. All subsequent written and oral
forward-looking statements attributable to the Company or persons acting on its
behalf are expressly qualified in their entirety by the foregoing. The Company
undertakes no obligation to publicly release the results of any revisions to any
such forward-looking statements that may be made to reflect events or
circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
For the thirteen week period ended November 28, 1998, the Company recorded net
income of $224,000 compared to net income of $1,355,000 for the thirteen week
period ended November 29, 1997. The November 28, 1998 results were negatively
affected primarily by lower sales which were partially offset by improved gross
profit margins. After giving effect to preferred stock dividends and the
beneficial conversion feature associated with the issuance of Series C Preferred
Stock, the Company recorded a net loss applicable to common stock of $624,000 or
$.04 per diluted share for the thirteen week period ended November 28, 1998
compared to net income applicable to common stock of $1,242,000 or $.07 per
diluted share for the related fiscal 1999 period.
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NET SALES
Net sales were $15,075,000 for the thirteen week period ended November 28, 1998,
a decrease of 28% versus net sales of $20,865,000 for the same period in fiscal
1998. The decrease in the thirteen week period ended November 28, 1998 is
related mainly to volume decreases in both the U.S. wholesale and Latin America
markets, primarily in the Royal Selections fragrance line. This decline was
somewhat offset by a volume increase in chain accounts, where the Regal
Collections fragrance line continued significant sales expansion to offset a
decline in the Designer Classic Alternatives fragrance line.
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 week period ended November
28, 1998, the Company experienced a decline mainly in the U.S. wholesale and
Latin America markets. Royal Selections market expansion slowed somewhat in the
thirteen week period as compared to the comparable period in fiscal 1998 as
competition continued intensified aggressive pricing initiatives and the U.S.
wholesale and Latin America channels experienced significant turmoil relating to
instability in the global financial markets. Sales of the Regal Collections
fragrance line grew significantly to somewhat offset decreases in the Designer
Collection Alternative Fragrance line and the Roxy Cosmetic line in the chain,
specialty chain, and mass merchandise channels.
NET SALES - RELATED PARTIES
In the thirteen week period ended November 28, 1998, sales to affiliates of the
Sheth Group, the Company's major stockholder, were $607,000, compared with
$1,041,000 for the same period in fiscal 1998.
NET SALES - PRODUCTS PURCHASED FROM RELATED PARTIES
Approximately 3% or $428,000 of the net sales in the thirteen week period of
fiscal 1999 resulted from the sale of products purchased from related parties as
finished goods. For the same period in fiscal 1998, comparable numbers were 5%,
or $1,113,000. In addition, fragrances and other products manufactured and sold
by the Company included some components that were purchased from related
parties. The cost of those components approximated 8% and 6% of cost of sales in
the same periods of fiscal 1999 and 1998, respectively.
GROSS PROFIT
The Company's gross profit for the thirteen week periods ended November 28, 1998
and November 29, 1997 was $4,643,000 or 31% of sales and $5,938,000 or 28% of
sales, respectively. The decline in gross profit in the thirteen week period
related primarily to the overall sales decrease. As a percent of sales, however,
gross margin improved compared to the same quarter in fiscal 1998 due to
favorable product mix.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses ("SG&A") were $4,065,000 for the
thirteen week period ended November 28, 1998, compared to $3,964,000 for the
comparable period of fiscal 1998. The fiscal 1998 period included expenses
associated with the Company's disposal of its former Brazilian subsidiary,
coupled with higher compensation expense in 1998 relating to extending the term
of certain stock options to a former employee. Offsetting these decreases in the
fiscal 1999 period were higher marketing expenses and banking fees.
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NON OPERATING INCOME OR EXPENSE
Interest expense decreased when comparing the thirteen week period of fiscal
1999 to the same period of fiscal 1998 as a result of lower revolving credit
borrowings in the current fiscal year. Other expense declined in the thirteen
week period ended November 28,1998 as compared with the same period in fiscal
1998 due mainly to a decrease in foreign exchange losses.
POTENTIAL ADVERSE AFFECTS ON RESULTS OF OPERATIONS FOR FUTURE PERIODS
The Company's business, financial condition and results of operations could be
materially adversely affected by each or all of the following factors:
1. MEXICAN MARKET. The market for the Company's products continues to be
negatively impacted as a result of the devaluation of the Mexican Nuevo Peso
in December 1994 and the subsequent economic and political instability. These
factors sharply reduced the purchasing power of the Mexican consumer and
therefore the demand for the Company's products was adversely affected. Any
future significant deterioration of the Peso's value would be expected to
further adversely affect the Company's sales in Mexico and also the
collectability of accounts receivable. 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.
2. LATIN AMERICA ECONOMIES. Growth in sales, or even the maintenance of existing
sales levels, in certain Latin American countries depends to a large extent
on the economic health and political stability of those countries. Any
deterioration in the economic or political stability in such countries could
adversely affect sales.
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 including an affiliate of the Sheth Group. Any
inability of these vendors to meet the Company's requirements could have an
adverse effect on the Company's results until an alternative source could be
found and/or developed. In addition, the Company is dependent on the supply
of cosmetic products, other than cosmetic pencils, from Sheth Group
affiliates. If such affiliates were to cease or 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 sales
in Latin America. In the process, the Company incurs 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 or that it will recover its initial expenses and start up costs. In
addition, certain countries from time to time impose strict import
restrictions, high levels of taxes on imports, and restrictions on currency
transactions, all of which could affect the success of sales and marketing
activities and also affect the profitability of such activities.
5. INTERNAL REVENUE SERVICE. In February 1997, the Internal Revenue Service
("the IRS") concluded its examination of the Company's tax returns submitted
for fiscal years 1993, 1994 and 1995. The IRS proposed adjustments
disallowing the deductions of payments made in the settlement of the class
action litigation and certain related legal and professional fees. The
Company is in discussions with the IRS on these issues and will appeal the
proposed adjustments if necessary. If the Company is unsuccessful in its
discussions or ultimately in an appeal, it may be required to pay taxes from
prior years and related interest thereon exceeding $1,800,000, and it may
lose a significant amount of its existing net operating loss carryforward
benefits. No accrual for the impact of the proposed IRS
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adjustments has been recorded in the accompanying financial statements as the
Company does not believe it is probable that the IRS will prevail in this
matter.
At this time, it is not known whether, or to what degree, the above factors will
have a material adverse impact on future results.
LIQUIDITY AND CAPITAL RESOURCES
The Company currently is obtaining its working capital from three primary
sources: a revolving line of credit, cash generated from operations and by
delaying payments to vendors (primarily related parties) beyond customary terms.
OPERATING ACTIVITIES
Operations in the thirteen week period ended November 28, 1998, utilized
$3,281,000 in cash primarily due to increases in accounts receivable and
inventory, and a decrease in accounts payable. Offsetting the usages was cash
provided by net income as adjusted for non cash items.
Accounts receivable grew primarily due to varying extended financing terms given
to customers. Accounts payable decreased as the Company made payments to certain
vendors whose balances had been extended beyond credit terms. Inventory
increased in anticipation of future sales.
INVESTING ACTIVITIES
Capital expenditures during the thirteen week period were $266,000, consisting
primarily of investments in production related machinery and equipment,
facilities related items, and computer equipment. Capital expenditures in fiscal
1999 are expected to exceed the fiscal 1998 level with the major portion being
devoted to manufacturing equipment which will enable the Company to enhance its
level of customer service.
FINANCING ACTIVITIES
During the thirteen week period ended November 28, 1998, revolving credit
decreased by $950,000. This was offset by proceeds from the sale of Series C
Preferred Stock and related warrants, primarily resulting in net cash provided
by financing activities of $3,522,000 for the period.
The Company maintains a $22,000,000 credit agreement (the "Credit Agreement").
The Credit Agreement includes a revolving credit facility (the "Revolving
Credit") which provides for $15,100,000 of maximum borrowings bearing interest,
at the company's election, at the Alternate Base Rate (the higher of the prime
rate or the Federal Funds Rate plus .50%) plus 1.50% or the London Interbank
Offered Rate (LIBOR) plus 3.50% (although, borrowings based on LIBOR cannot
exceed 60% of the total outstanding borrowings under the Revolving Credit). At
November 28, 1998, the Revolving Credit bore interest at a rate of 9.40%.
Borrowings under the Revolving Credit are limited by a formula based on Eligible
Accounts Receivable and Inventory. Remaining availability under the line as of
November 28, 1998 approximated $2,334,000 based on the borrowing formula.
Commitment fees equal to .50% per annum on the unused portion of the Revolving
Credit are payable monthly. The Credit Agreement contains certain provisions
giving the lender the right to accelerate payment of all outstanding amounts in
the event of a "material adverse change", as defined. Accordingly, all revolving
Credit amounts are classified as current in the accompanying consolidated
balance sheets. All outstanding amounts under the Revolving Credit Agreement are
due in December 2001.
The Credit Agreement also provides for a $3,400,000 term loan (the "Term Loan")
and a $3,500,000 capital expenditure facility (the "Cap Ex Facility"). The Term
Loan bears interest, payable monthly, at the Alternate Base Rate (7.90% at
November 28, 1998) plus 2.00%. Principal payments on the Term
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Loan will equal monthly principal payments in the amount of $56,667 for 35
months beginning in January 1998 with a $1,416,655 balloon payment due in
December 2001. Additionally, 50% of annual excess cash flow, as defined, must be
applied to the Term Loan installments in the inverse order of maturity.
Borrowings under the Cap Ex Facility are limited to 80% of the cost of new
machinery and equipment, limited to annual utilization of $1,500,000. These
borrowings also bear interest, payable monthly, at the Alternate Base Rate plus
2.00%. Principal payments on the Cap Ex Facility commence one month after the
take down in an amount based on a three year amortization. However, a balloon
payment in an amount equal to all outstanding borrowings under the Cap Ex
Facility is also due in December 2001. As of November 28, 1998, the Company had
outstanding borrowings under the Cap Ex Facility totaling $990,000 in capital
expenditures. Principal payments are due at the rate of $18,300 per month.
Borrowings under the Credit Agreement are collateralized by all of the Company's
present and future assets. The Credit Agreement contains restrictive financial
covenants including Minimum Tangible Net Worth, Minimum EBITDA, Maximum Loss,
Minimum Fixed Charge Coverage, Maximum Leverage and Maximum Capital
Expenditures. Additional covenants limit borrowings, asset sales and dividends.
The Company was not in violation of any financial covenants as of November 28,
1998.
The Company also purchases certain equipment, primarily office furniture,
computer equipment and software, under long-term purchase agreements. These are
not material to the Company's cash flow. The Company does not have any plans to
pay any cash dividends on the Common or the Series A and B Preferred Stock in
the foreseeable future. Further, payments of such dividends are subject to
restrictions imposed by the Company's commercial lender in connection with the
existing Credit Agreement. On November 27, 1998, the Company paid $94,000 in
dividends to the Series C Preferred stockholders.
The Company believes the lines of credit, together with cash generated by
operations and the continued ability to delay payments to related party vendors
as required will provide sufficient cash to meet the requirements of the Company
for fiscal 1999.
Effective September 3, 1998, the Company sold 78,333 shares of Series C Senior
Convertible Preferred Stock ("Series C Preferred Stock") to a private investor
for $60 per share. Each share of Series C Preferred Stock is convertible into
11.0345 shares of the Company's common stock. In connection with the Series C
Preferred Stock issuance, the Company issued 125,000 common stock warrants which
are exercisable at a price of between $4.00 and $6.28 per share. The Company
received proceeds from issuance of the Series C Preferred Stock and the common
stock warrants of approximately $4,699,000 and expects to receive an additional
$1,300,000 in fiscal 1999 upon issuance of an additional 21,667 shares of Series
C Preferred Stock to the same investor, in accordance with the stated closing
schedule.
The Series C Preferred Stockholders are entitled to receive a cumulative cash
dividend of $4.80 per share annually. The dividend is payable quarterly ($1.20
per quarter). The dividends may be paid by issuance of additional shares of
Series C Preferred Stock except such shares bear a cumulative cash dividend of
$7.80 per share annually. Dividends of approximately $94,000 were paid in cash
on the Series C Preferred Stock during the thirteen week period ended November
28, 1998. The Series C Preferred Stockholders are entitled to receive a
liquidation preference equal to $60.00 per share plus interest thereon from the
date of issue until redemption or conversion at a compound rate of 20% per year.
The Series C Preferred Stock has full voting rights based on the number of
common shares into which it is convertible and is voted together with the Common
Stock as one class.
On September 3, 1998, the closing bid price of the Company's common stock as
reported by the NASDAQ was $5.44. The Series C Preferred Stock conversion ratio
was based on this closing bid price at date of issuance. The common stock
warrants issued to the Series C Preferred Stockholders were valued at
approximately $307,000 utilizing the Black Scholes Method. Additionally, the
Company incurred costs totaling $334,000 in connection with the Series C
Preferred Stock sale. The value of the common stock
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warrants and issuance costs have been accounted for as a beneficial conversion
feature to the preferred shareholders and thus have been charged directly to
Accumulated Deficit and have been reflected as a reduction in net income
applicable to common stock.
The Company's Series A and B Preferred Stockholders are entitled to receive
cumulative dividends of $.315 per share and $2.03 per share, respectively. To
date, no dividends have been paid on the Series A and B Preferred Stock.
Dividends accumulated on the Series A and B Preferred Stock for the thirteen
week period ended November 28, 1998 totaling approximately $113,000 have been
reflected as a reduction in net income applicable to common stock. Cumulative
dividends in arrears on the Series A and B Preferred Stock totaled approximately
$822,000 at November 28, 1998.
On January 6, 1999, the Company executed a letter of intent agreeing to sell all
of the outstanding stock and certain distribution rights of its wholly owned
Mexican subsidiary, to Transvit Holding Corporation ("THC"), a wholly owned
affiliate of the Sheth Group, for $2,540,000. The Company will receive payment
in the form of a reduction in subordinated debt and other indebtedness to Nevell
Investments S.A. ("Nevell"), another affiliate of the Sheth Group. The agreement
provides for non-compete restrictions and a supply arrangement whereby the
Company agrees to continue selling product to the Mexican unit through November
30, 2001. Additionally, the Company will receive an option to repurchase the
stock and distribution rights from THC at a formula-based price set forth in the
agreement at any time prior to November 30, 2004. The Company currently has no
plans to repurchase the stock and distribution rights under this option.
YEAR 2000 COMPLIANCE
The efficient operation of the Company's business is dependent on its computer
software programs and operating systems (collectively, "Programs and Systems").
These Programs and Systems are used in several key areas of the Company's
business, including information management services and financial reporting, as
well as in various administrative functions. The Company has been evaluating its
Programs and Systems to identify potential year 2000 compliance problems, as
well as manual processes, external interfaces with customers, and services
supplied by vendors to coordinate year 2000 compliance and conversion. The year
2000 problem refers to the limitations of the programming code in certain
existing software programs to recognize date sensitive information for the year
2000 and beyond. Unless modified prior to the year 2000, such systems may not
properly recognize such information and could generate erroneous data or cause a
system to fail to operate properly.
Based on current information, the Company expects to attain year 2000 compliance
and is in the process of instituting appropriate testing of its modifications
and replacements in a timely fashion and in advance of the year 2000 date
change. It is anticipated that modification or replacement of the Company's
Programs and Systems will be performed by Company or contract personnel. The
Company believes that, with modifications to existing software and conversions
to new software, the year 2000 problem will not pose a significant operational
problem for the Company. However, because most computer systems are, by their
very nature, interdependent, it is possible that non-compliant third party
computers may not interface properly with the Company's computer systems. The
Company could be adversely affected by the year 2000 problem if it or unrelated
parties fail to successfully address this issue. Although the ultimate costs of
attaining Year 2000 compliance is not fully known at this time, management
anticipates that its external costs will not exceed $200,000.
The above Year 2000 disclosure constitutes a "Year 2000 Readiness Disclosure" as
defined in the Year 2000 Information and Readiness Disclosure Act (the "Act"),
which was signed into law on October 19, 1998. The Act provides added protection
from liability for certain public and private statements concerning a Company's
Year 2000 readiness. The Act also potentially provides added protection from
liability for certain types of Year 2000 disclosures made after January 1, 1996
and before October 19, 1998. As such, to the extent permitted by applicable law.
Previously disclosed statements of or by the Company and its management
concerning the Company's Year 2000 readiness are intended to constitute "Year
2000 Readiness Disclosures" as defined by the Act.
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ITEM 3.
QUALITATIVE AND QUANTITATIVE DISCLOSURE ABOUT MARKET RISK
Market risk represents the risk of loss that may occur due to adverse changes in
financial market prices, including interest rate risk and foreign currency
exchange risk, and the effect they may have on the financial position, results
of operation or cashflow of the Company.
The Company's short term and long term debt at November 28, 1998 bears interest
at variable rates (See Note 4 of the Notes to the consolidated Financial
Statements). A one percentage point increase in the effective interest rate on
the debt would result in an approximate $114,000 reduction in annual pretax
earnings. This estimate assumes no change in the volume or composition of the
short term and long term debt as of November 28, 1998.
The Company's direct exports compromise approximately 44% of net sales for the
fiscal quarter ended November 28, 1998. In addition, certain U.S. based
customers ultimately distribute the Company's products into foreign countries.
As a result, the Company has exposure to risk associated with the decrease in
value of foreign currencies. Although the risk cannot be quantified, any
significant decrease in value of the currency of foreign countries where the
Company's products are distributed could have a material adverse effect on the
Company's sales and results of operations.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
See Note 5 of the Notes to the Consolidated Financial Statement.
ITEM 2. CHANGES IN SECURITIES
Not Applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable.
ITEM 5. OTHER INFORMATION
Not Applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
*10.1 EMPLOYMENT AGREEMENT BETWEEN THE COMPANY AND RICHARD HOWARD
DATED SEPTEMBER 1, 1998.
*10.2 EMPLOYMENT AGREEMENT BETWEEN THE COMPANY AND ROBERT M. VIOLA
DATED SEPTEMBER 1, 1998.
*27.1 FINANCIAL DATA SCHEDULE.
---------------------------
* FILED HEREWITH.
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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.
TRISTAR CORPORATION
(Registrant)
Date: January 28, 1999 /s/ Viren S. Sheth
---------------------- ---------------------------
VIREN S. SHETH
Chief Executive Officer
(Principal Executive Officer)
Date: January 28, 1999 /s/ Richard R. Howard
---------------------- ---------------------------
RICHARD R. HOWARD
President and Chief Operations Officer
Date: January 28, 1999 /s/ Robert M. Viola
---------------------- ---------------------------
ROBERT M. VIOLA
Executive Vice-President and Chief Financial
Officer
(Principal Financial and Accounting Officer)
22
EXHIBIT 10.1
EXECUTIVE EMPLOYMENT AGREEMENT
This EXECUTIVE EMPLOYMENT AGREEMENT (the "EMPLOYMENT AGREEMENT") effective
the 1st day of September, 1998 (the "EFFECTIVE DATE"), by and between TRISTAR
CORPORATION, a Delaware corporation ("EMPLOYER"), and RICHARD HOWARD
("EMPLOYEE"). This Agreement amends and restated in its entirety the Executive
Employment Agreement between Employer and Employee dated November 26, 1997.
W I T N E S S E T H:
WHEREAS, Employer desires to employ Employee as President and Chief
Operating Officer for a term of employment as herein provided and Employee
desires to accept such employment 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:
I. TERM OF EMPLOYMENT. The term of Employee's employment under this
Employment Agreement shall commence on the Effective Date and terminate on
August 31, 2000, unless terminated earlier as provided herein (the "TERM").
2. TITLE AND DUTIES OF EMPLOYEE. Employee shall serve as President and
Chief Operating Officer of Employer. Employee agrees to his employment by
Employer and to devote substantially his entire business time to the business of
Employer throughout the period of his employment, provided that Employee may
make personal passive investments and be involved in charitable activities
provided they do not interfere with his activities hereunder. Employee is
employed as President and Chief Operating Officer and shall perform such duties
as directed by the Chief Executive Officer or Board of Directors of Employer.
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 vested in the
office of the Chief Operating Officer of a company of Employer?s size and shall
be commensurate with such position. Subject to the prior sentence, 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. Employee
shall report to only the Board of Directors and Chief Executive Officer of
Employer.
3. SALARY. For all services rendered by him during the Term, Employee
shall be paid a base salary at the rate of Two Hundred Fifty Thousand Dollars
per annum ($250,000) ("SALARY"), payable weekly, subject to standard deductions
for all applicable state and federal taxes and other reasonable bonafide
deductions.
<PAGE>
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:
A. REIMBURSEMENT FOR TRAVEL, ENTERTAINMENT AND OTHER EXPENSES.
During the Term, Employer shall reimburse Employee 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.
B. ALL BENEFIT PLANS. During the Term, Employee shall be eligible to
participate in all benefit plans generally available to Employer's
officers, excluding any bonus plans other than as described in PARAGRAPH
4(C) below and shall at a minimum be provided with a health plan, long
term disability benefits (based upon Employee?s inability to do his job
for a consecutive period of 6 months) and life insurance coverage pursuant
to Employer?s benefit plan in existence at the time hereof as such plan
may be enhanced but not diminished during the term hereof.
C. BONUS PLAN. During the Term, Employee shall be eligible for
annual incentive compensation with a targeted maximum benefit of 40% of
Employee's Salary upon Employer achieving certain reasonable financial and
other goals to be agreed to by Employer and Employee and with adjustments
for a lesser bonus than the targeted maximum benefit if certain lesser
financial and other goals are achieved. In the event Employee?s employment
is terminated for reasons other than as set forth in SECTIONS 7(C) or 7(E)
after six (6) months from the commencement date hereof or after the first
six (6) months of any fiscal year of the Employer, Employee shall receive
a prorated bonus for the period of employment based upon the
accomplishment of the financial goals that are met for such period prior
to termination of employment.
D. STOCK OPTIONS. Employer shall be granted stock options pursuant
to a stock option agreement in substantially the form of the Stock Option
Agreement attached hereto as EXHIBIT A.
E. CAR ALLOWANCE. Employer shall pay Employee a car allowance of
$500.00 per month.
F. RELOCATION PACKAGE. Employer shall pay Employee?s temporary
living expenses, moving expenses, relocation expenses, family visitation
expenses and other incidental expenses related to Employee relocating
himself and his family to Employer?s place of business in San Antonio,
Bexar County, Texas. In satisfaction of the provisions of the preceding
sentence, Employer shall pay Employee $4,500 per month during the Term
pursuant to the provisions of this SECTION 4(F) as well as advances for
major expenses. If
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Employee relocates himself and his family to San Antonio, Bexar County,
Texas, within 12 months of the date hereof, Employer shall pay to Employee
$60,000, and upon such payment, no further payments described in the
preceding sentence shall be made to Employee. Employee shall promptly
notify Employer upon Employee's family relocating to San Antonio, Bexar
County, Texas.
5. RESIGNATION. If for any reason other than for Good Reason, as
hereinafter defined, Employee voluntarily resigns his employment prior to the
expiration of the Term, Employee shall forfeit any right to receive any payments
or benefits, including severance benefits, 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
Employee's employment, except for amounts accrued prior to such termination, a
bonus pursuant to SECTION 4(C), if any is earned, and any right of
indemnification hereunder or under the provisions of Employer's Bylaws and
Articles of Incorporation (the "INDEMNITY OBLIGATION"). Nevertheless, Employer
and 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. Employee may terminate his employment hereunder for
Good Reason, upon written notice to Employer setting forth the nature of such
Good Reason in reasonable detail. "GOOD REASON" shall mean (i) the failure of
Employer to provide Employee the salary, incentive and bonus compensation and
benefits in accordance with the terms hereof, (ii) the failure of Employer to
continue Employee in the position of Chief Operating Officer, (iii) the material
diminution in the nature or scope of the Employee?s responsibilities, duties or
authority, (iv) the relocation of Employer's offices from the San Antonio, Texas
area or (v) any other material breach of this Employment Agreement by Employer.
Upon Employer's receipt of written notice of Employee's termination for Good
Reason hereunder, such termination shall be effective thirty (30) days after
receipt of such notice if a cure for such event has not been effected.
6. SEVERANCE AND NON-RENEWAL PAYMENT. Notwithstanding anything to the
contrary herein contained, the provisions of this SECTION 6 shall not be
applicable to a termination of employment pursuant to SECTIONS 7(A), 7(B), 7(C)
or 7(E) of this Employment Agreement. In addition, there shall be no obligation
of Employee to mitigate his damages and seek employment following the
termination of Employee's employment in order to receive the Severance or
Non-Renewal Payment hereunder.
A. SEVERANCE. In the event the employment of Employee by Employer is
terminated prior to the end of the Term, for any reason other than the
reasons set forth in the preamble to this SECTION 6, Employer shall be
obligated to pay Employee a severance payment (the ?SEVERANCE?) in an
amount equal to two (2) years Salary payable in twenty-four (24) equal
monthly installments of $20,833.33 (each a ?SEVERANCE PAYMENT?) commencing
the first of the month following any such termination. Any Severance
hereunder shall be subject to the following conditions and adjustments:
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(i) The Severance shall be reduced by the number of
months salary paid by Employer from the Effective Date to the date
of termination hereunder multiplied by $20,833.33, and the number of
Severance Payments to be paid shall be reduced by the number of
months salary paid by Employer to Employee since the Effective Date
to the date of termination hereunder.
(ii) The Severance shall be reduced and offset on a
dollar for dollar basis in an amount equal to any sums earned and/or
received during the Severance period by Employee for any services
directly or indirectly provided to a third party such as salary,
incentive payments, bonus or consulting fees (the ?OFFSET RIGHT?).
During the Severance period Employee shall immediately give Employer
written notice upon Employee?s engagement by a third party for
Employee to directly or indirectly provide any type of employment,
advice or consulting services.
(iii) The first nine (9) months of Severance Payments
under this Section shall not be subject to the Offset Right.
(iv) Subject to Subsections (ii) and (iii) above, the
parties agree that notwithstanding any other provisions to the
contrary herein contained, the Employee shall be entitled to receive
Severance Payments equal to the greater of twelve (12) months or the
remaining balance of the Term at the date of termination, whichever
sum is greater.
B. NON-RENEWAL PAYMENT. At the end of the Term of this Employment
Agreement, provided this Employment Agreement has not been terminated, if
the Agreement is not renewed and extended on a basis that is mutually
acceptable to both Employer and Employee, then in such event, Employee
shall be entitled to receive twelve (12) months salary in equal monthly
installments over a 12-month period beginning on the first day of the
first month following the expiration of the Term as non-renewal benefit
(?NON-RENEWAL PAYMENT?) subject to the following conditions and
adjustments:
(i) The Non-Renewal Payment hereunder shall be subject to the Offset
Right.
(ii) The first nine (9) months Non-Renewal Payment shall not be
subject to the Offset Right.
C. SURVIVAL OF CERTAIN PROVISIONS. Upon any such termination, this
Employment Agreement shall be terminated and Employer shall be released
from all obligations to Employee with respect to this Employment
Agreement, except for the compensation obligations set forth herein and
the indemnification obligation. Nevertheless, Employer and Employee shall
continue to be bound
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and obligated by any provision of this Employment Agreement which is
intended by its terms to survive and continue beyond the termination of
this Employment Agreement, including, but not limited to, the provisions
of SECTION 9. The 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 employment under this
Employment Agreement shall continue until August 31, 2000, unless sooner
terminated pursuant to the provisions of SECTION 5 or SECTION 6 above, the
parties agree that employment under this Employment Agreement, and the
provisions hereof (except for any provision intended by its terms to survive and
continue, including, but not limited to, the provisions of SECTION 9), 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
has prevented him from performing effectively the duties of his employment
for a time period greater than six (6) consecutive months;
C. TERMINATION FOR CAUSE. Employer also reserves the right at its
election to terminate the employment of Employee for Cause. ?CAUSE? exists
if Employee (i) has engaged in a wilful act of dishonesty (other than good
faith expense account disputes), or (ii) has willfully violated any
material provision of Employer?s Code of Conduct which is currently in
effect, as the same may be modified, amended or restated from time to
time, and a copy of which is attached hereto and marked EXHIBIT B and
incorporated herein by reference. 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 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) 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 within sixty
(60) days of receiving actual knowledge of such default by the Chief
Executive Officer or Board of Directors of Employer 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 the obligations under this Employment Agreement, including
without limitation SECTION 3, 4, and 6, except as to any provision of this
Employment Agreement which is intended by its
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terms to survive and continue, including, but not limited to, the
provisions of SECTION 9.
D. TERMINATION BY EMPLOYER WITHOUT CAUSE. Employer terminates
Employee's employment with Employer during the Term without Cause.
E. TERMINATION BY EMPLOYEE WITHOUT GOOD REASON. Employee terminates
his employment with Employer during the Term without Good Reason.
F. TERMINATION BY EMPLOYEE FOR GOOD REASON. Employee terminates his
employment with Employer during the Term for Good Reason.
Upon the occurrence of any of the events described above in SECTIONS 7(A)
through 7(C) or SECTION 7(E), 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 except as otherwise
provided herein and further, provided that upon the occurrence of any event
described in SECTION 7(A), Employee shall be entitled to receive the proceeds of
the life insurance policy maintained by Employer on the life of Employee or upon
the occurrence of an 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. In all cases the indemnification obligation
shall continue.
8. EMPLOYEE OWNERSHIP. 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 other than the business of Employer other than the charitable
activities as permitted in SECTION 2 hereof.
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.
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C. CONFIDENTIAL AND PROPRIETARY INFORMATION. To the extent not
otherwise provided for in this Employment Agreement, except as reasonably
desirable in Employee's performance of his duties hereunder, 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 such information,
Employee will (i) promptly notify Employer so that Employer may seek a
protective order or other appropriate remedy and/or waive compliance under
this SECTION 9(C) and (ii) comply with all reasonable requests of Employer
in seeking a protective order or other appropriate remedy. If such
protective order or other remedy is not timely 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 Employer, however such termination is brought about (the "TERMINATION
DATE"), 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 or cosmetics segment of the perfume or
toiletries business, of the type currently sold by the persons set forth
on EXHIBIT C attached hereto and not mass brands of the types sold by
Proctor and Gamble, Unilever, Colgate-Palmolive, L'Oreal or Revlon (the
"BUSINESS"), in the United States or other countries the Employer or its
subsidiaries are doing business at the time of the termination of this
Employment Agreement (the "TERRITORY"). During the Restricted Period, in
the event Employee is employed by or consults with a Conglomerate, as
herein defined, and such Conglomerate?s primary business is not the
Business, as long as Employee is not directly or indirectly involved in
employment with or consulting in the Business, then in such event, that
employment is not prohibited from employment by such Conglomerate;
however, Employer shall be prohibited from being involved directly or
indirectly with the Business. Employee shall be prohibited from working
for a Conglomerate whose primary business is the Business. For the
purposes of this SECTION 9, "CONGLOMERATE" shall be defined as any
business which is comprised of entities or groups (e.g., divisions) with
multiple lines of business. Nothing herein shall prohibit Employee owning
an investment of less than ten percent (10%) of a Conglomerate.
E. NON-SOLICITATION AGREEMENT. During the Restricted Period,
Employee shall not, whether for his own account or for the account of
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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. The giving of references shall not be deemed a violation of this
Section.
F. REFORMATION. Each of the parties hereto recognizes the time
limitations and territorial restrictions contained in this SECTION 9 are
properly required for the adequate protection of the business and goodwill
of Employer and agrees in the event any covenant or provision contained
herein shall be deemed to be illegal, unenforceable, or unreasonable by a
court or other tribunal of competent jurisdiction with respect to the time
limitation or any part of the Territory, such provision or covenant should
be modified to extend to the maximum time and territory that is reasonable
and submits to the reduction of said time limitations and territorial
restriction to such a time or an area as said court or tribunal 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 and
permanent injunctive relief, including temporary restraining orders,
preliminary injunctions and permanent injunctions, to prevent a breach or
threatened breach of this SECTION 9 or to enforce the terms of this
SECTION 9. 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 a party of a breach of any provision of
this Employment Agreement shall not operate or be construed as a waiver of any
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subsequent breach by the other party of the same or any other provision of this
Employment Agreement.
11. NOTICES. Any notice required to be given under this Employment
Agreement shall be deemed sufficient, if in writing, and sent by certified mail,
return receipt requested, or hand delivered, or via overnight delivery service
to the other party at the address shown below:
For Employer: Tristar Corporation
12500 San Pedro, Suite 500
San Antonio, Texas 78216
Attn: Mr. Viren Sheth
With a copy to: Fulbright & Jaworski L.L.P.
300 Convent, Suite 2200
San Antonio, Texas 78205
Attn: Phillip M. Renfro, Esq.
For Employee: Mr. Richard Howard
6 Woods End Road
Rumson, New Jersey 07760
With a copy to: Proskauer Rose LLP
1585 Broadway
New York, New York 10036
Attn: Michael S. Sirkin, Esq.
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 where Employer has its
corporate and administrative offices without regard to the conflicts of laws
rules thereof and is made and entered into in San Antonio, Bexar County, Texas.
Any and all controversies between the Employer and Employee shall be settled by
arbitration, in accordance with the Commercial Arbitration rules, then existing,
of the American Arbitration Association. Any arbitration hereunder shall be
before one arbitrator associated with the American Arbitration Rules of the
American Arbitration Association. The award of the arbitrator shall be final,
and judgment upon the award rendered may be entered in Bexar County, Texas. The
arbitrator may award attorneys' fees and costs to the prevailing party pursuant
to the terms of this Employment Agreement.
13. SEVERABILITY. If any of the provisions of this Employment Agreement is
determined to be invalid or unenforceable in part, the remaining provisions, and
the
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enforceable portions of any partially unenforceable provisions, shall
nevertheless be binding and enforceable.
14. BINDING EFFECT; EFFECTIVE DATE; ENTIRE AGREEMENT. Subject to SECTION
15 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 hereof. This Employment
Agreement contains the entire agreement between the parties and supersedes any
prior agreements, letter agreements, term sheets or discussions between the
parties, including the letter agreement between the parties dated November 4,
1997. This Employment Agreement may not be amended except by a written agreement
signed by the parties.
15. ASSIGNMENT. This Employment Agreement shall not be assignable by
Employee without the prior written consent of Employer. This Employment
Agreement may only be assigned by Employer in connection with a sale of all or
substantially all of the assets of the Employer. In such event a written
assumption agreement shall be promptly delivered to Employee by the buyer of
such assets.
16. 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.
17. 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
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".
18. INDEMNITY. Employer and Employee will enter into an Indemnity
Agreement in substantially the form attached hereto as EXHIBIT D
contemporaneously with or promptly after the execution hereof, which will
provide that the Employer will provide, subject to a customary limits and
exclusions, for the payment of legal fees and expenses related to the defense of
Employee of an action brought against Employee for which he is entitled to be
indemnified hereunder. The Employer will have the obligation to maintain and
continue in full force and effect an officer and directors insurance policy with
terms generally consistent with the officer and director insurance policy
currently in place.
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19. REIMBURSEMENT OF EMPLOYEE'S ATTORNEY'S FEES. Employer shall pay
Employee for the legal fees of Employee?s attorneys, Proskauer Rose LLP,
incurred in connection with the negotiation and execution of this Employment
Agreement.
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IN WITNESS WHEREOF, the parties hereto have executed this Employment
Agreement as of the date first above written.
TRISTAR CORPORATION
By: /s/ VIREN SHETH
Name: VIREN SHETH
Title: CHIEF EXECUTIVE OFFICER
/s/ RICHARD HOWARD
--------------------------------------------
RICHARD HOWARD
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EXHIBIT A
LONG-TERM INCENTIVE PLAN
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT dated as of the Grant Date (the "Grant Date") set
forth on Schedule I hereto, between TRISTAR CORPORATION, a Delaware corporation
(the "Company"), and the employee of the Company or of a subsidiary of the
Company identified on Schedule I hereto (the "Employee").
The Company and Employee are parties to an employment agreement (the
"Employment Agreement") dated September 1, 1998.
On the Grant Date the Company granted to the Employee the option or
options hereinafter described pursuant to, and subject to and upon the terms and
conditions set forth in, the Tristar Corporation Long-Term Incentive Plan, as
amended from time to time (the "Plan"), and promptly thereafter notified the
Employee of the grant of such option or options.
NOW, THEREFORE, in consideration of the mutual covenants hereinafter set
forth and for other good and valuable consideration, the parties hereto hereby
agree as follows:
1. GRANT OF OPTION.
(a) On the Grant Date, the Company irrevocably granted to the
Employee, as a matter of separate agreement and not in lieu of salary or
any other compensation for services, the right and option to purchase all
or any part of the aggregate number of shares of its Common Stock, par
value $.01 per share (the "Common Stock"), set forth on Schedule I hereto,
on the terms and conditions herein set forth.
(b) To the extent set forth in Schedule I hereto, the right and
option to purchase shares of Common Stock are intended to be an incentive
stock option (an "ISO") within the meaning of Section 422(b) of the
Internal Revenue Code of 1986, as amended (the "Code"). To the extent such
right and option to purchase shares of Common Stock as set forth on
Schedule I hereto is not identified as being intended to be an ISO, such
right and option will be considered a non-statutory option. In addition,
to the extent that a right and option to purchase shares of Common Stock
intended to be an ISO does not qualify as an ISO, such right and option,
to the extent that it does not so qualify, shall be converted to a
non-statutory option.
(c) The ISOs and non-statutory stock options granted to the Employee
hereunder are each referred to as an "Option" and collectively referred to
as the "Options".
2. TERMS.
(a) EXERCISE PRICE. The exercise price per share for the shares of
Common Stock subject to an Option granted hereunder shall be the per share
amount set forth in Schedule I hereto for such Option (the "Exercise
Price"). With respect to any Option that is intended to be an ISO, the
Exercise Price shall not be less than the fair market value per share
(determined as of the date the Option is granted) of the Common Stock on
such date.
(b) VESTING. Subject to the provisions of Section 4 of this
Agreement and the Plan, the Option or Options granted hereunder shall
become exercisable as to the portions of the aggregate number of shares
covered by such Option as set forth on Schedule I hereto on and after each
of the related dates during the term of such Option set forth on Schedule
I hereto.
(c) TERM AND CONDITIONS OF EXERCISE. An Option granted hereunder
shall be exercisable in whole at any time or in part from time to time
during the term of such Option as to all or any of the shares then
purchasable under such Option.
The term of the Option or Options subject hereto shall be for the
number of years from the Grant Date set forth on Schedule I hereto with respect
to such Option or such shorter period of time as is described in Section 4. In
no event shall the term of the Option exceed ten years from the Grant Date.
Except as provided in Section 4, an Option granted hereunder shall
not be exercisable unless the Employee shall, at the time of exercise, be an
employee of the Company or of a subsidiary of the Company. The holder of such
Option shall have none of the rights of a stockholder with respect to the shares
subject to such Option until such shares are transferred to the holder upon the
exercise of such Option.
3. RESTRICTIONS ON TRANSFER. An Option granted hereunder shall not be
assignable or transferrable by the Employee except by will or by the laws of
descent and distribution, and subject to Section 4(a), such Option is
exercisable, during the Employee?s lifetime, only by the Employee. The
designation of a beneficiary by the Employee shall not constitute a transfer.
More particularly (but without limiting the generality of the foregoing), such
Option may not be assigned, transferred (except as aforesaid), pledged or
encumbered in any way (whether by operation of law or otherwise) and shall not
be subject to execution, attachment or similar process. In the event of any
attempted assignment, transfer, pledge, encumbrance or other disposition of such
Option contrary to the provisions hereof, or the levy of any attachment or
similar process upon such Option, such Option shall be null and void and of no
further effect.
4. STATUS OF OPTION UPON CERTAIN EVENTS. If the Employee?s
employment shall terminate prior to the complete exercise of an Option granted
hereunder, then such Option shall thereafter be exercisable solely to the extent
provided in paragraphs (a) through (c) of this Section 4; provided, however,
that such Option may not be exercised after the scheduled expiration date.
(a) DEATH OR DISABILITY OR RETIREMENT. If the Employee shall die, be
subject to Disability (as defined in Section 22(e)(3) of the Code) while
employed by the Company or a subsidiary, retire (as such term is used in
any of the Company?s employee benefit plans), or if his employment is
terminated other than by reason of his retirement and other than pursuant
to Section 7A, 7B, 7C or 7E of the Employment Agreement, an Option granted
hereunder (unless previously terminated pursuant to paragraphs (b) or (c)
below) may be exercised as follows: (i) in the case of death, for the
number of shares for which such Option shall have vested as provided on
Schedule I hereto on the date of Employee?s death by the legatee or
legatees of such Option under the Employee?s last will, or by the personal
representatives or distributees of the Employee, at any time within a
period of one year after the Employee?s death, but in no event after the
expiration of such Option set forth in Section 2(c) herein; (ii) in the
case of Disability while employed by the Company or a subsidiary, for the
number of shares for which such Option shall have vested as provided on
Schedule I hereto on the date of Disability by the Employee or by the
personal representatives of the Employee if the Employee is unable to act
for himself, at any time within a period of one year after the Employee
ceases to be an employee of the Company or one of its subsidiaries, but in
no event after the expiration of such Option set forth in Section 2(c)
herein; (iii) in the case of retirement, for the number of shares for
which such Option shall have vested as provided on Schedule I hereto as of
the date of such retirement so long as the Employee does not become
employed by a ?competitor? of the Company subsequent to such retirement,
by the Employee or by the personal representatives of the Employee if the
Employee is unable to act for himself or herself, at any time within a
period of one year after the date of such retirement, but in no event
after the expiration of the Option set forth in Section 2(c) herein; and
(iv) in the case of termination of employment other than by reason of his
retirement and other than pursuant to Section 7A, 7B, 7C or 7E of the
Employment Agreement, for the number of shares for which such Option shall
have been vested as provided on Schedule I hereto on the date of
termination, at any time within a period of one year after such date of
termination, but in no event after the expiration of the Option set forth
in Section 2(c) herein. A determination as to whether the Employee has
become employed by a ?competitor,? and the definition of ?competitor,?
shall be made by the Compensation Committee (the ?Committee?), in its sole
discretion. If an ISO is exercised more than three months after the
Employee?s retirement and the Employee has not died or incurred a
Disability, such Option will be converted to a non-statutory option.
(b) TERMINATION BY COMPANY WITH CAUSE OR BY EMPLOYEE WITHOUT GOOD
REASON. If the Employee's employment with the Company or a subsidiary
shall be terminated pursuant to the provisions of Section 7C or 7E of the
Employment Agreement, then any unexercised part of the Option held by the
Employee shall immediately terminate and be forfeited unless the
Committee, in its sole discretion, shall otherwise determine.
(c) CHANGE IN EMPLOYMENT. The Option or Options granted hereunder
shall not be affected by any change of employment (or by any temporary
leave of absence approved by the Committee or by the Board itself), so
long as the Employee continues to be in the employ of the Company or of a
subsidiary of the Company.
5. ADJUSTMENTS. If all or any portion of an Option granted hereunder is
exercised subsequent to any stock dividend, stock split, recapitalization,
combination, exchange of shares, merger, consolidation, liquidation, split-up,
split-off, spin-off or other similar change in capitalization, any distribution
to stockholders, including a rights offering, other than regular cash dividends,
changes in the outstanding stock of the Company by reason of any increase or
decrease in the number of issued shares of Common Stock resulting from a
split-up or consolidation of shares or any similar capital adjustment or the
payment of any stock dividend, any share repurchase at a price in excess of the
closing market price (as determined by the Committee) of the Common Stock at the
time such repurchase is announced or other increase or decrease in the number of
such shares, the Committee may make such appropriate adjustments in the purchase
price paid upon exercise of such Option and the aggregate number and class of
shares or other securities or property issuable upon any such exercise as the
Committee shall, in its sole discretion, determine. In any such event, no
fractional share shall be issued upon any such exercise, and the aggregate price
paid shall be appropriately reduced on account of any fractional share not
issued; further, the minimum number of full shares which may be purchased upon
any such exercise shall be the minimum number specified on Schedule I hereto
adjusted proportionately.
6. PAYMENT; METHOD OF EXERCISE. Payment of the purchase price of the
shares of Common Stock subject to an Option granted hereunder may be made (i) in
any combination of cash or whole shares of Common Stock already owned by the
Employee or (ii) in shares of Common Stock withheld by the Company from the
shares of Common Stock otherwise issuable to the Employee as a result of the
exercise of such Option (?cashless exercise?). Subject to the terms and
conditions of this Agreement, such Option may be exercised by written notice to
the Company at its principal office, attention of the Secretary. Such notice
shall (a) state the election to exercise such Option, the number of shares in
respect of which it is being exercised and the manner of payment for such shares
and (b) be signed by the person or persons so exercising such Option and, in the
event such Option is being exercised pursuant to Section 4 by any person or
persons other than the Employee, accompanied by appropriate proof of the right
of such person or persons to exercise such Option. If the Option being exercised
is an ISO and non-statutory options have also been granted to the Employee
hereunder, such notice shall also identify whether the Option being exercised is
an ISO and, if so, the number of shares of Common Stock to be purchased pursuant
to such exercise. Such notice shall either (i) elect cashless exercise or be
accompanied by payment of the full purchase price of such shares, in which event
the Company shall issue and deliver a certificate or certificates representing
such shares as soon as practicable after the notice is received, or (ii) fix a
date (not more than 10 business days from the date of such notice) for the
payment of the full purchase price of such shares at the Company?s principal
office, against delivery of a certificate or certificates representing such
shares. Cash payments of such purchase price shall, in case of clause (i) or
(ii) above, be made by cash or check payable to the order of the Company. Common
Stock payments (valued at the closing market price on the date of exercise, as
determined by the Committee), shall be made by delivery of stock certificates in
negotiable form. All cash and Common Stock payments shall, in either case, be
delivered to the Company at its principal office, attention of the Secretary.
Shares of Common Stock withheld pursuant to a cashless exercise election shall
be valued at the closing market price on the date of exercise, as determined by
the Committee. If certificates representing Common Stock are used to pay all or
part of the purchase price of an Option granted hereunder, a replacement
certificate shall be delivered by the Company representing the number of shares
delivered but not so used, and an additional certificate shall be delivered
representing the additional shares to which the holder of such Option is
entitled as a result of the exercise of such Option. The certificate or
certificates for the shares as to which such Option shall have been so exercised
shall be registered in the name of the person or persons so exercising the
Option and shall be delivered as aforesaid to or upon the written order of the
person or persons exercising such Option. All shares issued as provided herein
will be fully paid and nonassessable.
7. ADMINISTRATION. The Committee shall have the power to interpret the
Plan and this Agreement, and to adopt such rules for the administration,
interpretation and application of the Plan as are consistent therewith and to
interpret or revoke any such rules. All actions taken and all interpretations
and determinations made by the Committee shall be final and binding upon the
Employee, the Company and all other interested persons.
8. TAXES. The Company shall have the right to deduct or withhold, or
require the person exercising an Option to remit to the Company, an amount
sufficient to satisfy federal, state and local taxes (including such person?s
FICA obligation) required by law to be withheld with respect to any taxable
event arising or as a result of this Option.
9. RESERVES, ETC. Shares of Common Stock delivered upon the exercise of an
Option granted hereunder shall, in the discretion of the Board or the Committee,
be either shares of Common Stock heretofore or hereafter authorized and then
unissued, or previously issued shares of Common Stock heretofore or hereafter
acquired through purchase in the open market or otherwise, or some of each. The
Company shall be under no obligation to reserve or to retain in its treasury any
particular number of shares of Common Stock at any time, and no particular
shares, whether unissued or held as treasury shares, shall be identified as
those covered by an Option granted hereunder.
10. NO RIGHT TO CONTINUED EMPLOYMENT. Nothing in this Agreement or in the
Plan shall confer upon the Employee any right to continue in the employ of the
Company or shall interfere with or restrict in any way the rights of the
Company, which are hereby expressly reserved, to discharge the Employee at any
time for any reason whatsoever, with or without cause.
11. GENERAL RESTRICTIONS.
(a) An Option granted hereunder shall be subject to the requirement
that, if at any time the Committee shall determine that (i) the listing,
registration or qualification of the shares of Common Stock subject or
related thereto upon any securities exchange or under any state or Federal
law, or (ii) the consent or approval of any governmental regulatory body,
or (iii) an agreement by the recipient of such Option granted pursuant to
this Agreement with respect to the disposition of shares of Common Stock
is necessary or desirable (in connection with any requirement or
interpretation of any Federal or state securities law, rule or regulation)
as a condition of, or in connection with, the granting of such Option or
the issuance, purchase or delivery of shares of Common Stock thereunder,
such Option may not be exercised in whole or in part unless such listing,
registration, qualification, consent, approval or agreement shall have
been effected or obtained free of any conditions not acceptable to the
Committee.
(b) The Employee hereby (i) represents and warrants that any shares
of Common Stock issued, transferred or delivered to, or acquired by, the
Employee pursuant to this Agreement shall be acquired solely for the
Employee's own account for investment, and not with a view to any
distribution thereof that would violate the Securities Act of 1933 (the
"Securities Act") or the applicable securities laws of any state, (ii)
agrees that he or she will not distribute any such shares of Common Stock
in violation of the Securities Act or the applicable securities laws of
any state, and (iii) acknowledges that, unless notified to the contrary by
the Company, such shares of Common Stock will not have been registered
under the Securities Act or the securities laws of any state and must be
held indefinitely unless subsequently registered under the Securities Act
and any applicable state securities laws or unless an exemption from such
registration becomes or is available.
12. ENTIRE AGREEMENT; AMENDMENT. This Agreement together with the Plan
constitutes the entire agreement between the parties with respect to the subject
matter hereof. This Agreement supersedes in all respect the provisions of the
Employment Agreement related to stock options, including without limitation
Section 4D of the Employment Agreement. Any term or provision of this Agreement
may be waived at any time by the party which is entitled to the benefits
thereof, except that any waiver of any term or condition of this Agreement must
be in writing.
The Committee shall have the authority to amend this Agreement to include
any provision which, at the time of such amendment, is authorized under the
terms of the Plan; however, an Option granted hereunder may not be revoked or
altered in a manner unfavorable to the holder without the written consent of the
holder.
13. GOVERNING LAW. The laws of the State of Delaware shall govern the
interpretation, validity and performance of the terms of this Agreement
regardless of the law that might be applied under principles of conflict of
laws.
14. SUCCESSORS. This Agreement shall be binding upon and inure to the
benefit of the successors, assigns and heirs of the respective parties.
15. NOTICES. All notices or other communications made or given in
connection with this Agreement shall be in writing and shall be deemed to have
been duly given when delivered or mailed by registered or certified mail, return
receipt requested, to those listed below at their following respective addresses
or at such other address as each may specify by notice to the others:
TO THE EMPLOYEE:
As set forth in Schedule I
TO THE COMPANY:
MAILING ADDRESS:
Tristar Corporation
12500 San Pedro, Suite 500
San Antonio, Texas 78216
Attention: Compensation Committee
16. WAIVER. The failure of a party to insist upon strict adherence to any
term of this Agreement on any occasion shall not be considered a waiver thereof
or deprive that party of the right thereafter to insist upon strict adherence to
that term or any other term of this Agreement.
17. CONSTRUCTION. Titles are provided herein for convenience only and are
not to serve as a basis for interpretation on construction of the Agreement. The
singular form shall include the plural, when the context so indicates. In the
event of an inconsistence between the terms of this Agreement and the terms of
Schedule I hereto, the terms of Schedule I shall prevail. In the event of an
inconsistency between the terms of this Agreement (including Schedule I) and the
terms of the Plan, the terms of the Plan shall prevail.
[SIGNATURES ON NEXT PAGE]
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Agreement to be duly
executed by its officer thereunto duly authorized, and the Employee has hereunto
set his or her signature, all as of the Grant Date.
TRISTAR CORPORATION
By:
Viren S. Sheth
Chief Executive Officer
Employee
<PAGE>
SCHEDULE I
Employee Name RICHARD HOWARD
Employee Address
Grant Date
Shares of Common Stock underlying Option 50,000
------
Option Term 10 YEARS
Options Considered to be ISO?s within
the meaning of Section 422(b) of the
Code Yes XX No
Exercise Price Per Share $
-
(Closing price on date of Grant
as reported by the Nasdaq SmallCap
Market)
Vesting Schedule:
The Option shall be exercisable according to the following schedule:
(a) shares on ;
------------ -------------------
(b) shares on ;
------------ -------------------
(c) shares on ;
------------ -------------------
(d) shares on ;
------------ -------------------
(e) shares on ; and
------------ -------------------
(f) If, at any time prior to , the Employee?s employment with the Company or a
subsidiary shall be terminated by the Company or such subsidiary for any
reason other than the reasons set forth in Section 7.C of the Employment
Agreement, or if the Employee terminates his employment with the Company
or a subsidiary for any reason other than the reasons set forth in Section
7.E of the Employment Agreement, then the Option granted hereunder may be
exercised in whole or in part by the Employee or by the personal
representatives of the Employee if the Employee is unable to act for
himself, for an aggregate of shares at any time within a period of one
year after the Employee ceases to be an employee of the Company or one of
its subsidiaries. The remaining part of the Option shall immediately
terminate and be forfeited unless the Committee, in its sole discretion,
shall otherwise determine.
<PAGE>
EXHIBIT B
CODE OF CONDUCT
B-1
<PAGE>
EXHIBIT C
LIST OF COMPETITORS
UNITED STATES CANADA VENEZUELA
Jean Philippe Cartland Glamour, C. A. (Jean Nacris)
Delagar Claude G
Parfums DeCoeur
Fragrance Impressions
Lady in Red
L?Illusions
Yaz
From France to You
Paris Design
Q Perfumes
Deborah
Artmatic
Pavion
Wet n Wild
C-1
<PAGE>
EXHIBIT D
INDEMNIFICATION AGREEMENT
This agreement is made as of the __th day of ___________, 199_, by and
between Tristar Corporation, a Delaware corporation (the "COMPANY"), and the
undersigned Officer of the Company (the "INDEMNITEE"), with reference to the
following facts:
18. The Company desires that Indemnitee continue as an officer and
employee of the Company and the Indemnitee wishes to continue to serve in such
capacity.
19. Section 145 of the General Corporation Law of the State of Delaware,
under which Law the Company is organized, empowers corporations to indemnify a
person serving as a director, officer, employee or agent of the corporation and
a person who serves at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust, or
other enterprise, and said Section 145 specifies that the indemnification set
forth therein shall not be deemed exclusive of any other rights to which those
seeking indemnification may be entitled under any By-Law, agreement, vote of
stockholders or disinterested directors or otherwise.
20. The Company's Certificate of Incorporation and Bylaws expressly
provide for the indemnification of certain individuals of the Company to the
full extent permitted by applicable law, the advancement of expenses in respect
thereof, and permit the execution of contracts, such as this Agreement,
providing for indemnification in addition to the indemnification obligations of
the Company set forth therein. The Indemnitee has indicated that he does not
regard the indemnities available under the Company's Certificate of
Incorporation and By-Laws as adequate to protect him against the risks
associated with his service to the Company and has noted that the Company does
not currently provide directors' and officers' liability insurance for his
benefit, although the Company intends to do so. In this connection the Company
and the Indemnitee now agree they should enter into this Indemnification
Agreement in order to provide greater protection to Indemnitee against such
risks of service to the Company
21. In order to induce the Indemnitee to continue to serve as an officer
and employee of the Company and in consideration of his continued service, the
Company hereby agrees to indemnify the Indemnitee as follows:
INDEMNITEE. The Company will indemnify and hold harmless the
Indemnitee, his executors, administrators or assigns, for any Expenses (as
defined below) which the Indemnitee is or becomes legally obligated to pay
in connection with any Proceeding. As used in this Agreement the term
"PROCEEDING" shall include any threatened, pending or completed claim,
action, suit or proceeding, (other than actions brought by or in the right
of the
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<PAGE>
Company) or otherwise and whether of a civil, criminal, administrative or
investigative nature, in which the Indemnitee may be or may have been
involved as a party or otherwise, by reason of the fact that Indemnitee is
or was an officer and employee of the Company, by reason of any actual or
alleged error or misstatement or misleading statement made or suffered by
the Indemnitee, by reason of any action taken by him or of any inaction on
his part while acting as such officer or employee, or by reason of the
fact that he was serving at the request of the Company as a director,
trustee, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise; provided, that in each such case
indemnitee acted in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interests of the Company,
and, in the case of a criminal proceeding, in addition had no reasonable
cause to believe that his conduct was unlawful. With respect to any action
brought by or in the right of the Company, such Indemnitee shall also be
indemnified, to the extent not prohibited by applicable laws or as
determined by a court of competent jurisdiction, against expenses actually
and reasonably incurred by him in connection with such action if he acted
in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Company. As used in this Agreement,
the term "OTHER ENTERPRISE" shall include (without limitation) employee
benefit plans and administrative committees thereof, and the term "FINES"
shall include (without limitation) any excise tax assessed with respect to
any employee benefit plan.
EXPENSES. As used in this Agreement, the term "EXPENSES" shall
include, without limitation, damages, judgments, fines, penalties,
settlements and costs, attorneys' fees and disbursements and costs of
attachment or similar bonds, investigations, and any expenses of
establishing a right to indemnification under this Agreement.
ENFORCEMENT. If a claim or request under this Agreement is not paid
by the Company, or on its behalf, within thirty days after a written claim
or request has been received by the Company, the Indemnitee may at any
time thereafter bring suit against the Company to recover the unpaid
amount of the claim or request and if successful in whole or in part, the
Indemnitee shall be entitled to be paid also the Expenses of prosecuting
such suit. The Company shall have the right to recoup from the Indemnitee
the amount of any item or items of Expenses theretofore paid by the
Company pursuant to this Agreement, to the extent such Expenses are not
reasonable in nature or amounts; provided, however, that the Company shall
have the burden of proving such Expenses to be unreasonable. The burden of
proving that the Indemnitee is not entitled to indemnification for any
other reason shall be upon the Company.
SUBROGATION. In the event of payment under this Agreement, the
Company shall be subrogated to the extent of such payment to all of the
rights of recovery of the Indemnitee, who shall execute all papers
required and shall do everything that may be necessary to secure such
rights, including the execution
D-2
<PAGE>
of such documents necessary to enable the Company effectively to bring
suit to enforce such rights and providing all assistance requested by the
Company.
EXCLUSIONS. The Company shall not be liable under this Agreement to
pay any Expenses in connection with any claim made against the Indemnitee:
to the extent that payment is actually made to the Indemnitee
under a valid, enforceable and collectible insurance policy of the
Company;
in connection with a judicial action by or in the right of the
Company, in respect of any claim, issue or matter as to which the
Indemnitee shall have been adjudged to be liable for gross
negligence or misconduct in the performance of his duty to the
Company unless and only to the extent that any court in which such
action was brought shall determine upon application that, despite
the adjudication of liability but in view of all the circumstances
of the case, the Indemnitee is fairly and reasonably entitled to
indemnity for such Expenses as such court shall deem proper;
if it is provided by final judgment in a court of law or other
final adjudication to have been based upon or attributable to the
Indemnitee?s in fact having gained any personal profit or advantage
to which he was not legally entitled;
brought about or contributed to by the dishonesty of the
Indemnitee seeking payment hereunder, however, notwithstanding the
foregoing, the Indemnitee shall be protected under this Agreement as
to any claims upon which suit may be brought against him by reason
of any alleged dishonesty on his part, unless a judgment or other
final adjudication thereof adverse to the Indemnitee shall establish
that he committed (i) acts of active and deliberate dishonesty, (ii)
with actual dishonest purpose and intent, (iii) which acts were
material to the cause of action so adjudicated; or
for any Expense which the Company is prohibited by applicable
law from paying as indemnity or for any other reason.
INDEMNIFICATION OF EXPENSES OF SUCCESSFUL PARTY. Notwithstanding any other
provision of this Agreement, to the extent that the Indemnitee has been
successful on the merits or otherwise in defense of any Proceeding or in defense
of any claim, issue or matter therein, including dismissal without prejudice,
Indemnitee shall be indemnified against any and all Expenses incurred in
connection therewith.
D-3
<PAGE>
PARTIAL INDEMNIFICATION. If the Indemnitee is entitled under any provision
of this Agreement to the indemnification by the Company for some or a portion of
Expenses, but not, however, for the total amount thereof, the Company shall
nevertheless indemnify the Indemnitee for the portion of such Expenses to which
the Indemnitee is entitled.
ADVANCES OF EXPENSES. Expenses incurred by the Indemnitee in connection
with any Proceeding, except the amount of any settlement, shall be paid by the
Company in advance upon the request of the Indemnitee that the Company pay such
Expenses. The Indemnitee hereby undertakes to repay to the Company the amount of
any Expenses theretofore paid by the Company to the extent that it is ultimately
determined that such Expenses were not reasonable or that the Indemnitee is not
entitled to indemnification.
APPROVAL OF EXPENSES. No Expenses for which indemnity shall be sought
under this Agreement, other than those in respect of judgments and verdicts
actually rendered, shall be incurred without the prior consent of the Company,
which consent shall not be unreasonably withheld.
NOTICE OF CLAIM. The Indemnitee, as a condition precedent to his right to
be indemnified under this Agreement, shall give to the Company notice in writing
as soon as practicable of any claim made against him for which indemnity will or
could be sought under this Agreement. Notice to the Company shall be given at
its principal office and shall be directed to the Corporate Secretary (or such
other address as the Company shall designate in writing to the Indemnitee);
notice shall be deemed received if sent by prepaid mail properly addressed, the
date of such notice being the date postmarked. In addition, the Indemnitee shall
give the Company such information and cooperation as it may reasonably require
and as shall be within the Indemnitee?s power.
COUNTERPARTS. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one instrument.
INDEMNIFICATION HEREUNDER NOT EXCLUSIVE. Nothing herein shall be deemed to
diminish or otherwise restrict the Indemnitee?s right to indemnification under
any provision of the Certificate of Incorporation or By-Laws of the Company and
amendments thereto or under law.
GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware.
SAVING CLAUSE. Wherever there is conflict between any provision of this
Agreement and any applicable present or future statute, law or regulation
contrary to which the Company and the Indemnitee have no legal right to
contract, the latter shall prevail, but in such event the affected provisions of
this
D-4
<PAGE>
Agreement shall be curtailed and restricted only to the extent necessary to
bring them within applicable legal requirements.
COVERAGE. The provisions of this Agreement shall apply with respect to the
Indemnitee's service as an officer and employee of the Company prior to the date
of this Agreement and with respect to all periods of such service after the date
of this Agreement, even though the Indemnitee may have ceased to be an officer
and employee of the Company.
WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed and signed as of the day and year first above written.
TRISTAR CORPORATION
By: /s/ VIREN SHETH
Name: VIREN SHETH
Title: CHIEF EXECUTIVE OFFICER
/s/ RICHARD HOWARD
--------------------------------
RICHARD HOWARD
EXHIBIT 10.2
EXECUTIVE EMPLOYMENT AGREEMENT
This EXECUTIVE EMPLOYMENT AGREEMENT (the "EMPLOYMENT AGREEMENT") effective
the 1st day of September, 1998 (the "EFFECTIVE DATE"), by and between TRISTAR
CORPORATION, a Delaware corporation ("EMPLOYER"), and ROBERT VIOLA ("EMPLOYEE").
W I T N E S S E T H:
WHEREAS, Employer desires to employ Employee as Executive Vice President
and Chief Financial Officer for a term of employment as herein provided and
Employee desires to accept such employment 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:
I. TERM OF EMPLOYMENT. The term of Employee's employment under this
Employment Agreement shall commence on the Effective Date and terminate on
August 31, 2000, unless terminated earlier as provided herein (the "TERM").
2. TITLE AND DUTIES OF EMPLOYEE. Employee shall serve as Executive Vice
President and Chief Financial Officer of Employer. Employee agrees to his
employment by Employer and to devote substantially his entire business time to
the business of Employer throughout the period of his employment, provided that
Employee may make personal passive investments and be involved in charitable
activities provided they do not interfere with his activities hereunder.
Employee is employed as Executive Vice President and Chief Financial Officer and
shall perform such duties as directed by the President or Board of Directors of
Employer. 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 vested
in the office of the Chief Financial Officer of a company of Employer's size and
shall be commensurate with such position. Subject to the prior sentence,
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.
Employee shall report to only the Board of Directors, President, Chief Executive
Officer and Chief Operating Officer of Employer.
3. SALARY. For all services rendered by him during the Term, Employee
shall be paid a base salary at the rate of One Hundred Ninety Thousand Dollars
per annum ($190,000) ("SALARY"), payable weekly, subject to standard deductions
for all applicable state and federal taxes and other reasonable bonafide
deductions.
<PAGE>
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:
A. REIMBURSEMENT FOR TRAVEL, ENTERTAINMENT AND OTHER EXPENSES.
During the Term, Employer shall reimburse Employee 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.
B. ALL BENEFIT PLANS. During the Term, Employee shall be eligible to
participate in all benefit plans generally available to Employer's
officers, excluding any bonus plans other than as described in PARAGRAPH
4(C) below and shall at a minimum be provided with a health plan, long
term disability benefits (based upon Employee's inability to do his job
for a consecutive period of 6 months) and life insurance coverage pursuant
to Employer's benefit plan in existence at the time hereof as such plan
may be enhanced but not diminished during the term hereof.
C. BONUS PLAN. During the Term, Employee shall be eligible for
annual incentive compensation with a targeted maximum benefit of 25% of
Employee's Salary upon Employer achieving certain reasonable financial and
other goals to be agreed to by Employer and Employee and with adjustments
for a lesser bonus than the targeted maximum benefit if certain lesser
financial and other goals are achieved. In the event Employee's employment
is terminated for reasons other than as set forth in SECTIONS 7(C) or 7(E)
after six (6) months from the commencement date hereof or after the first
six (6) months of any fiscal year of the Employer, Employee shall receive
a prorated bonus for the period of employment based upon the
accomplishment of the financial goals that are met for such period prior
to termination of employment.
D. CAR ALLOWANCE. Employer shall pay Employee a car allowance of
$500.00 per month.
E. RELOCATION PACKAGE. Employer shall pay Employee's temporary
living expenses, moving expenses, relocation expenses, family visitation
expenses and other incidental expenses related to Employee relocating
himself and his family to Employer's place of business in San Antonio,
Bexar County, Texas. In satisfaction of the provisions of the preceding
sentence, Employer shall pay Employee $4,000 per month during the Term
pursuant to the provisions of this SECTION 4(E) as well as advances for
major expenses. If Employee relocates himself and his family to San
Antonio, Bexar County, Texas, within 12 months of the date hereof,
Employer shall pay to Employee $35,000, and upon such payment, no further
payments described in the preceding
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<PAGE>
sentence shall be made to Employee. Employee shall promptly notify Employer upon
Employee's family relocating to San Antonio, Bexar County, Texas.
5. RESIGNATION. If for any reason other than for Good Reason, as
hereinafter defined, Employee voluntarily resigns his employment prior to the
expiration of the Term, Employee shall forfeit any right to receive any payments
or benefits, including severance benefits, 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
Employee's employment, except for amounts accrued prior to such termination, a
bonus pursuant to SECTION 4(C), if any is earned, and any right of
indemnification hereunder or under the provisions of Employer's Bylaws and
Articles of Incorporation (the "INDEMNITY OBLIGATION"). Nevertheless, Employer
and 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. Employee may terminate his employment hereunder for
Good Reason, upon written notice to Employer setting forth the nature of such
Good Reason in reasonable detail. "GOOD REASON" shall mean (i) the failure of
Employer to provide Employee the salary, incentive and bonus compensation and
benefits in accordance with the terms hereof, (ii) the failure of Employer to
continue Employee in the position of Chief Financial Officer, (iii) the material
diminution in the nature or scope of the Employee's responsibilities, duties or
authority, (iv) the relocation of Employer's offices from the San Antonio, Texas
area or (v) any other material breach of this Employment Agreement by Employer.
Upon Employer's receipt of written notice of Employee's termination for Good
Reason hereunder, such termination shall be effective thirty (30) days after
receipt of such notice if a cure for such event has not been effected.
6. SEVERANCE AND NON-RENEWAL PAYMENT. Notwithstanding anything to the
contrary herein contained, the provisions of this SECTION 6 shall not be
applicable to a termination of employment pursuant to SECTIONS 7(A), 7(B), 7(C)
or 7(E) of this Employment Agreement. In addition, there shall be no obligation
of Employee to mitigate his damages and seek employment following the
termination of Employee's employment in order to receive the Severance or
Non-Renewal Payment hereunder.
A. SEVERANCE. In the event the employment of Employee by Employer is
terminated prior to the end of the Term, for any reason other than the
reasons set forth in the preamble to this SECTION 6, Employer shall be
obligated to pay Employee a severance payment (the "SEVERANCE") in an
amount equal to two (2) years Salary payable in twenty-four (24) equal
monthly installments of $15,833.33 (each a "SEVERANCE PAYMENT") commencing
the first of the month following any such termination. Any Severance
hereunder shall be subject to the following conditions and adjustments:
(i) The Severance shall be reduced by the number of
months salary paid by Employer from the Effective Date to the date
of termination
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<PAGE>
hereunder multiplied by $15,833.33, and the number of Severance
Payments to be paid shall be reduced by the number of months salary
paid by Employer to Employee since the Effective Date to the date of
termination hereunder.
(ii) The Severance shall be reduced and offset on a
dollar for dollar basis in an amount equal to any sums earned and/or
received during the Severance period by Employee for any services
directly or indirectly provided to a third party such as salary,
incentive payments, bonus or consulting fees (the "OFFSET RIGHT").
During the Severance period Employee shall immediately give Employer
written notice upon Employee's engagement by a third party for
Employee to directly or indirectly provide any type of employment,
advice or consulting services.
(iii) The first nine (9) months of Severance Payments
under this Section shall not be subject to the Offset Right.
(iv) Subject to Subsections (ii) and (iii) above, the
parties agree that notwithstanding any other provisions to the
contrary herein contained, the Employee shall be entitled to receive
Severance Payments equal to the greater of twelve (12) months or the
remaining balance of the Term at the date of termination, whichever
sum is greater.
B. NON-RENEWAL PAYMENT. At the end of the Term of this Employment
Agreement, provided this Employment Agreement has not been terminated, if
the Agreement is not renewed and extended on a basis that is mutually
acceptable to both Employer and Employee, then in such event, Employee
shall be entitled to receive twelve (12) months salary in equal monthly
installments over a 12-month period beginning on the first day of the
first month following the expiration of the Term as non-renewal benefit
("NON-RENEWAL PAYMENT") subject to the following conditions and
adjustments:
(i) The Non-Renewal Payment hereunder shall be subject
to the Offset Right.
(ii) The first nine (9) months Non-Renewal Payment shall
not be subject to the Offset Right.
C. SURVIVAL OF CERTAIN PROVISIONS. Upon any such termination, this
Employment Agreement shall be terminated and Employer shall be released
from all obligations to Employee with respect to this Employment
Agreement, except for the compensation obligations set forth herein and
the indemnification obligation. Nevertheless, Employer and 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 termination of this Employment
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<PAGE>
Agreement, including, but not limited to, the provisions of SECTION 9. The
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 employment under this
Employment Agreement shall continue until August 31, 2000, unless sooner
terminated pursuant to the provisions of SECTION 5 or SECTION 6 above, the
parties agree that employment under this Employment Agreement, and the
provisions hereof (except for any provision intended by its terms to survive and
continue, including, but not limited to, the provisions of SECTION 9), 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
has prevented him from performing effectively the duties of his employment
for a time period greater than six (6) consecutive months;
C. TERMINATION FOR CAUSE. Employer also reserves the right at its
election to terminate the employment of Employee for Cause. "CAUSE" exists
if Employee (i) has engaged in a wilful act of dishonesty (other than good
faith expense account disputes) or (ii) has willfully violated any
material provision of Employer's Code of Conduct which is currently in
effect, as the same may be modified, amended or restated from time to
time, and a copy of which is attached hereto and marked EXHIBIT A and
incorporated herein by reference. 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 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) 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 within sixty
(60) days of receiving actual knowledge of such default by the President,
Chief Executive Officer or Board of Directors of Employer 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 the obligations under this Employment Agreement,
including without limitation SECTION 3, 4, and 6, 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.
-5-
<PAGE>
D. TERMINATION BY EMPLOYER WITHOUT CAUSE. Employer terminates
Employee's employment with Employer during the Term without Cause.
E. TERMINATION BY EMPLOYEE WITHOUT GOOD REASON. Employee terminates
his employment with Employer during the Term without Good Reason.
F. TERMINATION BY EMPLOYEE FOR GOOD REASON. Employee terminates his
employment with Employer during the Term for Good Reason.
Upon the occurrence of any of the events described above in SECTIONS 7(A)
through 7(C) or SECTION 7(E), 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 except as otherwise
provided herein and further, provided that upon the occurrence of any event
described in SECTION 7(A), Employee shall be entitled to receive the proceeds of
the life insurance policy maintained by Employer on the life of Employee or upon
the occurrence of an 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. In all cases the indemnification obligation
shall continue.
8. EMPLOYEE OWNERSHIP. 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 other than the business of Employer other than the charitable
activities as permitted in SECTION 2 hereof.
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, except as reasonably
desirable in Employee's performance of his duties hereunder, Employee
agrees to maintain the confidentiality of all confidential and
-6-
<PAGE>
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 such information,
Employee will (i) promptly notify Employer so that Employer may seek a
protective order or other appropriate remedy and/or waive compliance under
this SECTION 9(C) and (ii) comply with all reasonable requests of Employer
in seeking a protective order or other appropriate remedy. If such
protective order or other remedy is not timely 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 Employer, however such termination is brought about (the "TERMINATION
DATE"), 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 or cosmetics segment of the perfume or
toiletries business, of the type currently sold by the persons set forth
on EXHIBIT B attached hereto and not mass brands of the types sold by
Proctor and Gamble, Unilever, Colgate-Palmolive, L'Oreal or Revlon (the
"BUSINESS"), in the United States or other countries the Employer or its
subsidiaries are doing business at the time of the termination of this
Employment Agreement (the "TERRITORY"). During the Restricted Period, in
the event Employee is employed by or consults with a Conglomerate, as
herein defined, and such Conglomerate's primary business is not the
Business, as long as Employee is not directly or indirectly involved in
employment with or consulting in the Business, then in such event, that
employment is not prohibited from employment by such Conglomerate;
however, Employer shall be prohibited from being involved directly or
indirectly with the Business. Employee shall be prohibited from working
for a Conglomerate whose primary business is the Business. For the
purposes of this SECTION 9, "CONGLOMERATE" shall be defined as any
business which is comprised of entities or groups (e.g., divisions) with
multiple lines of business. Nothing herein shall prohibit Employee owning
an investment of less than ten percent (10%) of a Conglomerate.
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
-7-
<PAGE>
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. The giving
of references shall not be deemed a violation of this Section.
F. REFORMATION. Each of the parties hereto recognizes the time
limitations and territorial restrictions contained in this SECTION 9 are
properly required for the adequate protection of the business and goodwill
of Employer and agrees in the event any covenant or provision contained
herein shall be deemed to be illegal, unenforceable, or unreasonable by a
court or other tribunal of competent jurisdiction with respect to the time
limitation or any part of the Territory, such provision or covenant should
be modified to extend to the maximum time and territory that is reasonable
and submits to the reduction of said time limitations and territorial
restriction to such a time or an area as said court or tribunal 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 and
permanent injunctive relief, including temporary restraining orders,
preliminary injunctions and permanent injunctions, to prevent a breach or
threatened breach of this SECTION 9 or to enforce the terms of this
SECTION 9. 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 a party of a breach of any provision of
this Employment Agreement shall not operate or be construed as a waiver of any
subsequent breach by the other party of the same or any other provision of this
Employment Agreement.
11. NOTICES. Any notice required to be given under this Employment
Agreement shall be deemed sufficient, if in writing, and sent by certified mail,
return
-8-
<PAGE>
receipt requested, or hand delivered, or via overnight delivery service to the
other party at the address shown below:
For Employer: Tristar Corporation
12500 San Pedro, Suite 500
San Antonio, Texas 78216
Attn: Mr. Viren Sheth
With a copy to: Fulbright & Jaworski L.L.P.
300 Convent, Suite 2200
San Antonio, Texas 78205
Attn: Phillip M. Renfro, Esq.
For Employee: Mr. Robert Viola
120 High Street
E. Williston, New York 11596
With a copy to: Raul Felder, P.C.
437 Madison Avenue, 30th Floor
New York, New York 10022
Attn: Robert Frey, Esq.
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 where Employer has its
corporate and administrative offices without regard to the conflicts of laws
rules thereof and is made and entered into in San Antonio, Bexar County, Texas.
Any and all controversies between the Employer and Employee shall be settled by
arbitration, in accordance with the Commercial Arbitration rules, then existing,
of the American Arbitration Association. Any arbitration hereunder shall be
before one arbitrator associated with the American Arbitration Rules of the
American Arbitration Association. The award of the arbitrator shall be final,
and judgment upon the award rendered may be entered in Bexar County, Texas. The
arbitrator may award attorneys' fees and costs to the prevailing party pursuant
to the terms of this Employment Agreement.
13. SEVERABILITY. If any of the provisions of this Employment Agreement is
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.
14. BINDING EFFECT; EFFECTIVE DATE; ENTIRE AGREEMENT. Subject to SECTION
15 below, this Employment Agreement shall inure to the benefit of and shall be
binding upon Employer and its successors and assigns, and upon Employee
-9-
<PAGE>
and his heirs, legatees, executors, administrators, successors and
beneficiaries. This Employment Agreement shall be effective as of the date
hereof. This Employment Agreement contains the entire agreement between the
parties and supersedes any prior agreements, letter agreements, term sheets or
discussions between the parties, including the letter agreement between the
parties dated November 4, 1997. This Employment Agreement may not be amended
except by a written agreement signed by the parties.
15. ASSIGNMENT. This Employment Agreement shall not be assignable by
Employee without the prior written consent of Employer. This Employment
Agreement may only be assigned by Employer in connection with a sale of all or
substantially all of the assets of the Employer. In such event a written
assumption agreement shall be promptly delivered to Employee by the buyer of
such assets.
16. 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.
17. 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
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".
18. INDEMNITY. Employer and Employee will enter into an Indemnity
Agreement in substantially the form attached hereto as EXHIBIT C
contemporaneously with or promptly after the execution hereof, which will
provide that the Employer will provide, subject to a customary limits and
exclusions, for the payment of legal fees and expenses related to the defense of
Employee of an action brought against Employee for which he is entitled to be
indemnified hereunder. The Employer will have the obligation to maintain and
continue in full force and effect an officer and directors insurance policy with
terms generally consistent with the officer and director insurance policy
currently in place.
19. REIMBURSEMENT OF EMPLOYEE'S ATTORNEY'S FEES. Employer shall pay
Employee for the legal fees of Employee's attorneys, Raul Felder, P.C., incurred
in connection with the negotiation and execution of this Employment Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Employment
Agreement as of the date first above written.
-10-
<PAGE>
TRISTAR CORPORATION
By: /s/ VIREN SHETH
Name: VIREN SHETH
Title: CHIEF EXECUTIVE OFFICER
/s/ ROBERT VIOLA
-------------------------------------
ROBERT VIOLA
-11-
<PAGE>
EXHIBIT A
CODE OF CONDUCT
A-1
<PAGE>
EXHIBIT B
LIST OF COMPETITORS
UNITED STATES CANADA VENEZUELA
Jean Philippe Cartland Glamour, C. A. (Jean Nacris)
Delagar Claude G
Parfums DeCoeur
Fragrance Impressions
Lady in Red
L'Illusions
Yaz
From France to You
Paris Design
Q Perfumes
Deborah
Artmatic
Pavion
Wet n Wild
B-1
<PAGE>
EXHIBIT C
INDEMNIFICATION AGREEMENT
This agreement is made as of the __th day of ___________, 199_, by and
between Tristar Corporation, a Delaware corporation (the "COMPANY"), and the
undersigned Officer of the Company (the "INDEMNITEE"), with reference to the
following facts:
A. The Company desires that Indemnitee continue as an officer and employee
of the Company and the Indemnitee wishes to continue to serve in such capacity.
B. Section 145 of the General Corporation Law of the State of Delaware,
under which Law the Company is organized, empowers corporations to indemnify a
person serving as a director, officer, employee or agent of the corporation and
a person who serves at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust, or
other enterprise, and said Section 145 specifies that the indemnification set
forth therein shall not be deemed exclusive of any other rights to which those
seeking indemnification may be entitled under any By-Law, agreement, vote of
stockholders or disinterested directors or otherwise.
C. The Company's Certificate of Incorporation and Bylaws expressly provide
for the indemnification of certain individuals of the Company to the full extent
permitted by applicable law, the advancement of expenses in respect thereof, and
permit the execution of contracts, such as this Agreement, providing for
indemnification in addition to the indemnification obligations of the Company
set forth therein. The Indemnitee has indicated that he does not regard the
indemnities available under the Company's Certificate of Incorporation and
By-Laws as adequate to protect him against the risks associated with his service
to the Company and has noted that the Company does not currently provide
directors' and officers' liability insurance for his benefit, although the
Company intends to do so. In this connection the Company and the Indemnitee now
agree they should enter into this Indemnification Agreement in order to provide
greater protection to Indemnitee against such risks of service to the Company
D. In order to induce the Indemnitee to continue to serve as an officer
and employee of the Company and in consideration of his continued service, the
Company hereby agrees to indemnify the Indemnitee as follows:
(1) INDEMNITEE. The Company will indemnify and hold harmless the
Indemnitee, his executors, administrators or assigns, for any Expenses (as
defined below) which the Indemnitee is or becomes legally obligated to pay
in connection with any Proceeding. As used in this Agreement the term
"PROCEEDING" shall include any threatened, pending or completed claim,
action, suit or proceeding, (other than actions brought by or in the right
of the
C-1
<PAGE>
Company) or otherwise and whether of a civil, criminal, administrative or
investigative nature, in which the Indemnitee may be or may have been
involved as a party or otherwise, by reason of the fact that Indemnitee is
or was an officer and employee of the Company, by reason of any actual or
alleged error or misstatement or misleading statement made or suffered by
the Indemnitee, by reason of any action taken by him or of any inaction on
his part while acting as such officer or employee, or by reason of the
fact that he was serving at the request of the Company as a director,
trustee, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise; provided, that in each such case
indemnitee acted in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interests of the Company,
and, in the case of a criminal proceeding, in addition had no reasonable
cause to believe that his conduct was unlawful. With respect to any action
brought by or in the right of the Company, such Indemnitee shall also be
indemnified, to the extent not prohibited by applicable laws or as
determined by a court of competent jurisdiction, against expenses actually
and reasonably incurred by him in connection with such action if he acted
in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Company. As used in this Agreement,
the term "OTHER ENTERPRISE" shall include (without limitation) employee
benefit plans and administrative committees thereof, and the term "FINES"
shall include (without limitation) any excise tax assessed with respect to
any employee benefit plan.
(2) EXPENSES. As used in this Agreement, the term "EXPENSES" shall
include, without limitation, damages, judgments, fines, penalties,
settlements and costs, attorneys' fees and disbursements and costs of
attachment or similar bonds, investigations, and any expenses of
establishing a right to indemnification under this Agreement.
(3) ENFORCEMENT. If a claim or request under this Agreement is not
paid by the Company, or on its behalf, within thirty days after a written
claim or request has been received by the Company, the Indemnitee may at
any time thereafter bring suit against the Company to recover the unpaid
amount of the claim or request and if successful in whole or in part, the
Indemnitee shall be entitled to be paid also the Expenses of prosecuting
such suit. The Company shall have the right to recoup from the Indemnitee
the amount of any item or items of Expenses theretofore paid by the
Company pursuant to this Agreement, to the extent such Expenses are not
reasonable in nature or amounts; provided, however, that the Company shall
have the burden of proving such Expenses to be unreasonable. The burden of
proving that the Indemnitee is not entitled to indemnification for any
other reason shall be upon the Company.
(4) SUBROGATION. In the event of payment under this Agreement, the
Company shall be subrogated to the extent of such payment to all of the
rights of recovery of the Indemnitee, who shall execute all papers
required and shall do everything that may be necessary to secure such
rights, including the execution
C-2
<PAGE>
of such documents necessary to enable the Company effectively to bring
suit to enforce such rights and providing all assistance requested by the
Company.
(5) EXCLUSIONS. The Company shall not be liable under this Agreement
to pay any Expenses in connection with any claim made against the
Indemnitee:
(a) to the extent that payment is actually made to the
Indemnitee under a valid, enforceable and collectible insurance
policy of the Company;
(b) in connection with a judicial action by or in the right of
the Company, in respect of any claim, issue or matter as to which
the Indemnitee shall have been adjudged to be liable for gross
negligence or misconduct in the performance of his duty to the
Company unless and only to the extent that any court in which such
action was brought shall determine upon application that, despite
the adjudication of liability but in view of all the circumstances
of the case, the Indemnitee is fairly and reasonably entitled to
indemnity for such Expenses as such court shall deem proper;
(c) if it is provided by final judgment in a court of law or
other final adjudication to have been based upon or attributable to
the Indemnitee's in fact having gained any personal profit or
advantage to which he was not legally entitled;
(d) brought about or contributed to by the dishonesty of the
Indemnitee seeking payment hereunder, however, notwithstanding the
foregoing, the Indemnitee shall be protected under this Agreement as
to any claims upon which suit may be brought against him by reason
of any alleged dishonesty on his part, unless a judgment or other
final adjudication thereof adverse to the Indemnitee shall establish
that he committed (i) acts of active and deliberate dishonesty, (ii)
with actual dishonest purpose and intent, (iii) which acts were
material to the cause of action so adjudicated; or
(e) for any Expense which the Company is prohibited by
applicable law from paying as indemnity or for any other reason.
(6) INDEMNIFICATION OF EXPENSES OF SUCCESSFUL PARTY. Notwithstanding
any other provision of this Agreement, to the extent that the Indemnitee
has been successful on the merits or otherwise in defense of any
Proceeding or in defense of any claim, issue or matter therein, including
dismissal without prejudice, Indemnitee shall be indemnified against any
and all Expenses incurred in connection therewith.
C-3
<PAGE>
(7) PARTIAL INDEMNIFICATION. If the Indemnitee is entitled under any
provision of this Agreement to the indemnification by the Company for some
or a portion of Expenses, but not, however, for the total amount thereof,
the Company shall nevertheless indemnify the Indemnitee for the portion of
such Expenses to which the Indemnitee is entitled.
(8) ADVANCES OF EXPENSES. Expenses incurred by the Indemnitee in
connection with any Proceeding, except the amount of any settlement, shall
be paid by the Company in advance upon the request of the Indemnitee that
the Company pay such Expenses. The Indemnitee hereby undertakes to repay
to the Company the amount of any Expenses theretofore paid by the Company
to the extent that it is ultimately determined that such Expenses were not
reasonable or that the Indemnitee is not entitled to indemnification.
(9) APPROVAL OF EXPENSES. No Expenses for which indemnity shall be
sought under this Agreement, other than those in respect of judgments and
verdicts actually rendered, shall be incurred without the prior consent of
the Company, which consent shall not be unreasonably withheld.
(10) NOTICE OF CLAIM. The Indemnitee, as a condition precedent to
his right to be indemnified under this Agreement, shall give to the
Company notice in writing as soon as practicable of any claim made against
him for which indemnity will or could be sought under this Agreement.
Notice to the Company shall be given at its principal office and shall be
directed to the Corporate Secretary (or such other address as the Company
shall designate in writing to the Indemnitee); notice shall be deemed
received if sent by prepaid mail properly addressed, the date of such
notice being the date postmarked. In addition, the Indemnitee shall give
the Company such information and cooperation as it may reasonably require
and as shall be within the Indemnitee's power.
(11) COUNTERPARTS. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one instrument.
(12) INDEMNIFICATION HEREUNDER NOT EXCLUSIVE. Nothing herein shall
be deemed to diminish or otherwise restrict the Indemnitee's right to
indemnification under any provision of the Certificate of Incorporation or
By-Laws of the Company and amendments thereto or under law.
(13) GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware.
(14) SAVING CLAUSE. Wherever there is conflict between any provision
of this Agreement and any applicable present or future statute, law or
regulation contrary to which the Company and the Indemnitee have no legal
right to contract, the latter shall prevail, but in such event the
affected provisions of this
C-4
<PAGE>
Agreement shall be curtailed and restricted only to the extent necessary
to bring them within applicable legal requirements.
(15) COVERAGE. The provisions of this Agreement shall apply with
respect to the Indemnitee's service as an officer and employee of the
Company prior to the date of this Agreement and with respect to all
periods of such service after the date of this Agreement, even though the
Indemnitee may have ceased to be an officer and employee of the Company.
WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed and signed as of the day and year first above written.
TRISTAR CORPORATION
By: /s/ VIREN SHETH
Name: VIREN SHETH
Title: CHIEF EXECUTIVE OFFICER
/s/ ROBERT VIOLA
-------------------------------------
ROBERT VIOLA
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