<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
<TABLE>
<CAPTION>
<S> <C>
For the Quarter ended
May 27, 1995 Commission File Number 1-9637
- ------------------------- --------------------------------
</TABLE>
LILLIAN VERNON CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<CAPTION>
<S> <C>
Delaware 13-2529859
- ---------------------------- ---------------------------------------
(State of Incorporation) (IRS Employer Identification Number)
</TABLE>
543 MAIN STREET, NEW ROCHELLE, NEW YORK 10801
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (914) 576-6400
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 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
--
Number of shares outstanding of each of the issuer's classes of common
stock:
9,731,838 Shares of Common Stock, $.01 par value, as of July 5, 1995.
<PAGE>
LILLIAN VERNON CORPORATION
FORM 10-Q
MAY 27, 1995
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE #
- ------------------------------------------------------------------------- --------
<S> <C>
Item 1.
Consolidated Balance Sheets as of May 27, 1995, May 28, 1994
(unaudited) and February 25, 1995 (audited) .......................... 3
Consolidated Statements of Operations for the quarters ended May 27,
1995 and May 28, 1994 (unaudited) .................................... 4
Consolidated Statements of Cash Flows for the quarters ended May 27,
1995 and May 28, 1994 (unaudited) .................................... 5
Notes to Consolidated Financial Statements ........................... 6-7
Item 2.
Management's Discussion and Analysis of Financial Condition and
Results of Operations ................................................ 8-9
PART II. OTHER INFORMATION ............................................... 10
- --------------------------
Signatures ............................................................... 11
Exhibits ................................................................. 12
</TABLE>
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
LILLIAN VERNON CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
MAY 27, MAY 28, FEBRUARY 25,
1995 1994 1995
---------- ---------- --------------
(UNAUDITED) (AUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents .............................. $ 39,101 $ 39,735 $ 38,779
Accounts receivable .................................... 10,717 4,865 21,482
Merchandise inventories ................................ 32,878 32,322 30,418
Deferred income taxes .................................. -- -- 331
Prepayments and other current assets ................... 9,038 5,900 7,495
---------- ---------- --------------
Total current assets ................................. 91,734 82,822 98,505
Property, plant and equipment, net (Note 1) ............. 29,534 26,410 29,587
Deferred catalog costs .................................. 7,874 7,317 6,632
Other assets ............................................ 3,018 3,087 3,044
---------- ---------- --------------
Total ................................................ $132,160 $119,636 $137,768
---------- ---------- --------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Trade accounts payable and accrued expenses ........... $ 15,284 $ 12,822 $ 14,056
Customer deposits ...................................... 158 58 385
Current portion of long-term debt and lease obligations 1,428 1,400 1,420
Income taxes payable ................................... -- -- 3,576
Deferred income taxes .................................. 58 560 --
---------- ---------- --------------
Total current liabilities ............................ 16,928 14,840 19,437
Long-term debt, less current portion .................... 3,184 4,460 3,820
Capital lease obligations, less current portion ........ 474 626 515
Deferred compensation ................................... 3,071 2,463 2,913
Deferred income taxes ................................... 856 1,306 896
---------- ---------- --------------
Total liabilities .................................... 24,513 23,695 27,581
---------- ---------- --------------
Stockholders' equity:
Preferred stock, $.01 par value; 2,000,000 shares
authorized; no shares issued and outstanding ......... -- -- --
Common stock, $.01 par value; 20,000,000 shares
authorized; issued - 9,934,537 shares, 9,616,515
shares and 9,771,744 shares .......................... 99 96 98
Additional paid-in capital ............................. 26,146 20,844 23,300
Retained earnings ...................................... 85,416 76,326 88,922
Unearned compensation .................................. -- (51) (2)
Treasury stock, at cost - 227,699 shares, 92,774 shares
and 139,892 shares .................................... (4,014) (1,274) (2,131)
---------- ---------- --------------
Total stockholders' equity ........................... 107,647 95,941 110,187
---------- ---------- --------------
Total ................................................ $132,160 $119,636 $137,768
---------- ---------- --------------
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE>
LILLIAN VERNON CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
FISCAL QUARTER ENDED
---------------------
MAY 27, MAY 28,
1995 1994
---------- ---------
<S> <C> <C>
Revenues ............................................ $29,614 $26,002
Costs and expenses:
Product and delivery costs ......................... 15,229 12,031
Selling, general and administrative expenses ...... 18,972 15,700
---------- ---------
34,201 27,731
---------- ---------
Operating loss ................................... (4,587) (1,729)
Interest income ..................................... 521 391
Interest expense .................................... (152) (184)
---------- ---------
Loss before income taxes ......................... (4,218) (1,522)
Provision for (benefit from) income taxes:
Current ............................................ (1,741) (1,598)
Deferred ........................................... 349 1,065
---------- ---------
(1,392) (533)
---------- ---------
Net loss ........................................ ($2,826) ($ 989)
---------- ---------
Net loss per common share ........................... ($ .29) ($ .10)
---------- ---------
Weighted average number of common shares outstanding 9,686 9,520
---------- ---------
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE>
LILLIAN VERNON CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FISCAL QUARTER ENDED
----------------------
MAY 27, MAY 28,
1995 1994
---------- ----------
(UNAUDITED)
<S> <C> <C>
Cash flows from operating activities:
Net loss ........................................................... $(2,826) $ (989)
Adjustments to reconcile net loss to net cash provided by (used in)
operating activities:
Depreciation ...................................................... 644 482
Amortization ...................................................... 87 119
(Increase) decrease in accounts receivable ........................ 10,765 6,360
(Increase) decrease in merchandise inventories .................... (2,460) (4,983)
(Increase) decrease in prepayments and other current assets ...... (1,543) (927)
(Increase) decrease in deferred catalog costs ..................... (1,242) (3,086)
(Increase) decrease in other assets ............................... (59) (73)
Increase (decrease) in trade accounts payable and accrued expenses 1,228 (5,647)
Increase (decrease) in customer deposits .......................... (227) (171)
Increase (decrease) in income taxes payable ....................... (3,576) (4,191)
Increase (decrease) in deferred compensation ...................... 158 150
Increase (decrease) in deferred income taxes ...................... 349 1,067
---------- ----------
Net cash provided by (used in) operating activities ............ 1,298 (11,889)
---------- ----------
Cash flows from investing activities:
Purchases of property, plant and equipment ......................... (591) (241)
---------- ----------
Net cash used in investing activities ........................... (591) (241)
---------- ----------
Cash flows from financing activities:
Principal payments on long-term debt and capital lease obligations (669) (664)
Proceeds from issuance of common stock ............................. 666 117
Dividends paid ..................................................... (679) (476)
Other .............................................................. 297 8
---------- ----------
Net cash used in financing activities ........................... (385) (1,015)
---------- ----------
Net increase (decrease) in cash and cash equivalents ........... 322 (13,145)
---------- ----------
Cash and cash equivalents at beginning of period .................... 38,779 52,880
---------- ----------
Cash and cash equivalents at end of period .......................... $39,101 $ 39,735
---------- ----------
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest .......................................................... $ 288 $ 358
Income taxes ...................................................... 3,884 4,671
</TABLE>
Supplemental disclosure of noncash financing activities--see Note 2
See Notes to Consolidated Financial Statements
<PAGE>
LILLIAN VERNON CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The consolidated financial statements included herein have been prepared by
the Company, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. The year-end condensed balance sheet data
was derived from audited financial statements, but does not include all
disclosures required by generally accepted accounting principles. The interim
financial statements furnished with this report reflect all adjustments,
consisting only of items of a normal recurring nature, which are, in the
opinion of management, necessary for the fair statement of the consolidated
financial condition and consolidated results of operations for the interim
periods presented. It is suggested that these financial statements be read in
conjunction with the financial statements and notes thereto included in the
Company's Annual Report on Form 10-K for the year ended February 25, 1995.
1. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are summarized as follows (in thousands):
<TABLE>
<CAPTION>
MAY 27, MAY 28, FEBRUARY 25,
1995 1994 1995
--------- --------- --------------
<S> <C> <C> <C>
Land and buildings .............................. $20,196 $17,186 $19,985
Machinery and equipment ......................... 22,214 18,916 21,840
Furniture and fixtures .......................... 3,040 2,781 3,033
Leasehold improvements .......................... 3,574 3,537 3,575
Capital leases .................................. 1,262 1,262 1,262
--------- --------- --------------
Total property, plant & equipment, at cost .... 50,286 43,682 49,695
Less, accumulated depreciation and amortization 20,752 17,272 20,108
--------- --------- --------------
Property, plant and equipment -- net ............ $29,534 $26,410 $29,587
--------- --------- --------------
</TABLE>
2. NONCASH FINANCING ACTIVITIES
During the three months ending May 27, 1995, non-qualified stock options
aggregating 105,000 shares were exercised by one of the Company's Directors,
with a total exercise price of $1,662,150. As consideration for the exercise
price and for income taxes required to be withheld, the Company received an
aggregate of 87,807 shares of Lillian Vernon Common Stock, which are reported
as Treasury Stock on the balance sheet. The number of shares was determined
by the market price of the Company's common stock on the exercise date.
3. SUBSEQUENT EVENT-MERGER AGREEMENT
On June 13, 1995, the Company and VB Investment Corporation, a Delaware
corporation controlled by FS Equity Partners III, L.P. ("FSEP III"), which is
an affiliate of Freeman Spogli & Co. Incorporated, entered into a definitive
merger agreement pursuant to which FSEP III will become a majority
stockholder of the Company in a merger transaction that will be accounted for
as a recapitalization. In this transaction, stockholders of the Company will
receive $19.00 per share in cash for certain shares of the Company's stock.
The merger agreement is subject to the approval by the Company's
stockholders, receipt of financing, and other customary closing conditions.
The merger will be submitted to stockholders at a special stockholders'
meeting expected to be held in August 1995.
4. RECLASSIFICATIONS
Certain reclassifications have been made in the prior year financial
statements to conform with the current presentation.
<PAGE>
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
QUARTER ENDED MAY 27, 1995
Revenues for the quarter ended May 27, 1995 of $29.6 million increased by
$3.6 million, or 13.9%, as compared to the same period last year. The
increase in revenues was primarily attributable to an increase of
approximately 5% in the volume of orders shipped and approximately 8% in the
average revenue per order. Catalog circulation was approximately 7% higher
than in the prior year due to the introduction of the Lillian Vernon's
Kitchen catalog.
Product and delivery costs increased by $3.2 million, or 26.6%, in the
quarter ended May 27, 1995, as compared to the same period last year. As a
percentage of revenues, these costs increased from 46.3% to 51.4% in the
current quarter. The increase in costs was partially attributable to higher
sales volume. In addition, both the gross margin amount and percentage were
negatively impacted by the expansion of the Company's free gift-with-purchase
promotion, and a higher level of markdowns in the current quarter.
Selling, general and administrative expenses ("SG&A"), the largest
component of which is the cost of producing, printing and distributing the
Company's catalogs, increased $3.3 million, or 20.8% in the current quarter,
and as a percentage of revenues, rose from 60.4% to 64.1%. A portion of the
increase was due to 7% higher circulation. In addition, significant increases
in the cost of paper due to tight supply, and higher postage costs resulting
from a U.S. Postal rate increase in January 1995, raised the cost of
producing and mailing the Company's catalog an average of 14% this quarter,
compared to the first quarter of fiscal 1995. While the Company's marketing
and merchandising strategies were responsible for raising average revenue per
catalog by 7%, catalog costs rose at a faster rate, causing SG&A as a
percentage of revenues to increase.
Interest income for the quarter ended May 27, 1995 of $.5 million
increased by $.1 million as compared to the first quarter of the prior year,
principally due to higher interest rates. Interest expense for the quarter
ended May 27, 1995 of $.2 million was comparable with that of the same period
last year.
The effective income tax rate was 33% in the current quarter, as compared
to 35% in the first quarter of fiscal 1995.
FINANCIAL CONDITION
The Company's current ratio at May 27, 1995 was 5.42 to 1, as compared to
5.07 to 1 at February 25, 1995 and 5.58 to 1 at May 28, 1994. The Company's
working capital needs have been met with funds generated from operations.
During the quarter ended May 27, 1995, the Company used less funds for net
working capital needs than in the same quarter last year. Higher receivables
from the deferred billing program were collected in the current quarter as
compared with the first quarter last year. The Company also spent less on
future catalog editions than last year, when it made earlier commitments for
certain catalog production costs. The net change in inventory levels in the
quarter also declined as compared to last year. During the quarter, the
Company spent $591,000 on capital expenditures, including an amount related
to planning and designing the expansion of its National Distribution Center.
In addition, the Company received $666,000 for the issuance of stock,
principally from the exercise of stock options which were expiring. The
Company also paid a $.07 per share cash dividend totalling $679,000.
On June 13, 1995, the Company entered into a definitive merger agreement
with VB Investment Corporation, a corporation controlled by an affiliate of
Freeman Spogli & Co. Incorporated. (See Note 3 to the Financial Statements).
As a result of the merger, the Company's leverage and debt service
requirements will increase significantly. Upon consummation of the merger,
the Company's common stock will no longer be publicly held.
<PAGE>
PART II.
OTHER INFORMATION
Items 1, 2, 3, 4, and 5 are not applicable and have been omitted.
Item 6. Exhibits and Reports on Form 8-K
Exhibit A: Resignation and General Release Agreement dated June 9, 1995
between Stephen S. Marks and Lillian Vernon Corporation.
Exhibit #11: Computation of Loss per Share Assuming Primary and Full Dilution
Reports on Form 8-K:
-- Filed June 22, 1995 -- Item 5 -- Other Events: Resignation of
Registrant's President and Chief Operating Officer
-- Filed June 27, 1995 -- Item 1 -- Change in Control of Registrant:
Merger Agreement Between Registrant and VB Investment Corporation
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, a duly authorized officer and registrant's principal financial
and accounting officer.
Lillian Vernon Corporation
By: /s/ Andrew Gregor
--------------------
Andrew Gregor
Vice President, Chief Financial Officer
(Principal Financial and Accounting Officer)
Date: July 10, 1995
<PAGE>
EXHIBIT 11
LILLIAN VERNON CORPORATION AND SUBSIDIARIES
COMPUTATION OF LOSS PER SHARE ASSUMING PRIMARY AND FULL DILUTION
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
MAY 27, 1995 MAY 28, 1994
--------------------------- --------------------------
PRIMARY FULLY DILUTED PRIMARY FULLY DILUTED
---------- --------------- --------- ---------------
<S> <C> <C> <C> <C>
Net loss .................. ($2,826) ($ 2,826) ($ 989) ($ 989)
---------- --------------- --------- ---------------
Common Shares:
Average number of shares
outstanding ............. 9,686 9,686 9,520 9,520
Assumed exercise of stock
options ................. 395 406 479 479
---------- --------------- --------- ---------------
10,081 10,092 9,999 9,999
---------- --------------- --------- ---------------
Loss Per Share ............ ($ 0.28) ($ 0.28) ($ 0.10) ($ 0.10)
---------- --------------- --------- ---------------
</TABLE>
EXHIBIT A
RESIGNATION
AND
GENERAL RELEASE AGREEMENT
This Resignation and General Release Agreement ("Agreement") made this
9th day of June 1995, by and between Stephen S. Marks (the "Employee"), an
individual, and Lillian Vernon Corporation (the "Company"), a corporation, is a
resignation agreement which includes a general release of claims.
In consideration of the covenants undertaken and the releases contained
in this Agreement, the Employee and the Company agree as follows:
1. Voluntary Resignation. The Employee acknowledges that he voluntarily
resigned from his position as president and as an employee of the Company (and
its subsidiary) and in any and all other capacities effective May 29, 1995.
2. Letter of Reference; No Disparagement. (a) The Company agrees that it
will not in any way disparage the Employee. The Employee acknowledges that with
respect to employment references, it is the policy of the Company to verify
position held and dates of employment, and to verify salary level only if the
former employee had provided his salary to the individual conducting the
reference check. In addition to this information, if requested, the Company will
advise references, that the Employee left the Company through a mutually
agreeable decision, based upon changes in management direction and
organization.
(b) Employee for his part agrees he will not in any manner disparage
the Company or its directors, officers or employees and shall answer inquiries
concerning his resignation in a manner consistent with the Company's response
to such inquiries, namely, that the Employee left the Company through a
mutually agreeable decision, based upon changes in management direction and
organization.
3. Severance and Other Benefits. (a) The Company agrees to pay to
Employee a total of Three Hundred Fourteen Thousand Five Hundred ($314,500)
Dollars (the "Full Severance Amount") in full satisfaction of the Company's
obligations to Employee under Section 4(b) of the Employment Agreement between
Employee and the Company dated June 25, 1993 (the "Employment Agreement"). The
Full Severance Amount less applicable withholding and payroll taxes shall be
paid to Employee by the Company on the date this Agreement becomes non-
revocable.
(b) The Employee's Company paid individual health, dental and life
insurance coverage will be in force until August 31, 1995. The Employee will be
eligible for COBRA continuation coverage rights, effective September 1, 1995
for a period of eighteen (18) months. The monthly COBRA premium rates are
$578.75 for family medical and $50.15 for family dental per month, and are
subject to future adjustments in COBRA premium rates.
(c) The Employee will receive payment for nineteen
2
(19) days of accrued vacation pay upon the date this Agreement becomes non-
revocable.
(d) Employee and the Company agrees that of the seventy five thousand
(75,000) option shares granted to Employee pursuant to the Employment Agreement
twenty five thousand (25,000) option shares have vested (which Employee may
exercise until August 28, 1995) and the balance of fifty thousand (50,000)
option shares are hereby deemed cancelled and of no further force or effect as
of this date. The Employee agrees that all other options granted to him by the
Company including the grant of thirty thousand (30,000) option shares on July
20, 1994 are hereby deemed cancelled and of no further force or effect as of
this date. The Company will cause its counsel to issue an opinion letter to the
Company's transfer agent to the effect that the five thousand (5,000) shares
granted to Executive under the Employment Agreement and any shares acquired by
Executive pursuant to the exercise of the twenty five thousand (25,000) vested
option shares have been registered and are freely tradeable.
(e) Employee acknowledges that he is indebted to the Company in the
amount of Seventeen Thousand One Hundred Thirty Four Dollars and Twenty Seven
Cents ($17,134.27) and agrees to pay the same to the Company on the date this
Agreement becomes non-revocable.
(f) The Employee will immediately return to the Company all Company
property including, without limitation,
3
credit cards, keys and the Company leased automobile used by him.
4. Release. (a) In exchange for the consideration provided for in this
Agreement, Employee, for himself and his heirs, executors, administrators and
assigns (collectively the "Releasor") forever waive, release and discharge the
Company and its affiliates, successors and assigns, past and present officers,
directors, employees and agents, and any fiduciaries of any employee benefit
plan or policy of the company (collectively, "Releasees"), from any and all
claims, demands, causes of action, fees and liabilities and expenses (inclusive
of attorneys' fees) of any kind whatsoever, whether known or unknown, which
Employee ever has or now has against Releasees by reason of any actual or
alleged act, omission, transaction, practice, conduct, occurrence, or other
matter up to and including the date of this Agreement, including but not
limited to, any claims under Title VII of the Civil Rights Act of 1964, as
amended, the Equal Pay Act, as amended, the Age Discrimination in Employment
Act, as amended, and/or any other Federal, state or local law (statutory or
decisional), regulation or ordinance, and or any claims under the Employment
Agreement and/or claims with respect to severance pay, vacation pay, holiday
pay, bonus payments, sick leave, life insurance, group medical insurance,
workmen's compensation or disability claims, participation in the Company's
Profit Sharing Plan or in the 401K plan except to the extent of the Employee's
own contributions to the 401K plan.
(b) The foregoing release shall not apply to any claim
4
for unemployment compensation or any claim relating to the enforcement of
Employee's rights under this Agreement. The Company knows of no reason to
oppose and will not oppose an unemployment claim.
(c) Employee acknowledges that he has been advised by the Company to
consult an attorney and his financial advisor before signing this Agreement and
that he has executed this Agreement with the waiver and release set forth above
after having the opportunity to consult with an attorney and his financial
advisor and to consider the terms of this Agreement for at least twenty-one
(21) days. Employee further acknowledges that he has read this Agreement in its
entirety, that he understands all of its terms, and that he knowingly and
voluntarily assents to all of the terms and conditions contained herein
including, without limitation, the waiver and release of his right to claims
arising under the Age Discrimination in Employment Act, as amended.
(d) This Agreement shall not become effective until the eighth day
following Employee's execution of this Agreement and Employee may at any time
prior to the effective date revoke this Agreement by giving written notice of
such revocation to the Company attention: Larry Blum.
(e) Employee agrees that he will not disclose to any entity or other
person the terms and conditions of this Agreement without the prior written
consent of an appropriate officer of the Company, except that he may disclose
the terms of this
5
Agreement to his spouse, attorney, financial advisor and/or accountant,
provided that they agree to maintain the confidentiality of the terms hereof.
5. Restrictive Covenant, Non-Solicitation of Employees and Non-
Disclosure.
(a) The parties agree that the provisions of this section supersede and
replace the provisions of Section 5(a) of the Employment Agreement. Executive
agrees that he will not (prior to May 31, 1996) directly or indirectly compete
with the Company or any of its subsidiaries or render advice or services to or
be employed by or represent or be an agent for or participate as a stockholder,
partner or joint venturer or have any direct or indirect interest in any
person, firm or corporation whose business in whole or in part directly or
indirectly competes with the business of the Company in that it sells gift,
household, gardening, decorative, Christmas and children's products (except
childrens' apparel) by catalog. The foregoing shall not be construed to prevent
employee owning less than a two (2%) percent interest in any publicly held
corporation even if such corporation competes with the Company.
(b) Commencing immediately and until May 31, 1996, Employee agrees that
he will not solicit or otherwise induce any employee of the Company or its
subsidiaries to leave the employ of the Company or such subsidiaries or to
become associated, whether as an employee, officer, partner, director,
consultant or otherwise, with any business organization, including, but not
6
limited to a competitor.
(c) The Employee shall return to the Company and shall not take or copy
in any form or manner lists of customers, prices sources, marketing plans, and
similar confidential materials or information.
(d) Without the prior written consent of the Company, except to the
extent required by an order of a court having competent jurisdiction or under
subpoena from an appropriate government agency, Employee shall not disclose any
trade secrets, customer lists, sources of supply, product development and
related information, marketing plans and related information, sales plans and
related information, management organization and related information (including
data and other information related to members of the Board and management),
operating policies and manuals, business plans and related information,
financial records and related information, packaging design and related
information or other financial, commercial, business or technical information
related to the Company or any of its subsidiaries to any third person unless
such information has been previously disclosed to the public by the Company or
has become public knowledge other than by a breach of this Agreement.
6. General. (a) This Agreement shall be binding upon and inure to the
benefit of the heirs, trustees, executors, administrators, successors and
assigns of the respective parties. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original but all of which
shall
7
constitute the same instrument. This Agreement shall be governed by and subject
to the laws of the State of New York without giving effect to its conflict of
laws rules.
(b) All payments and benefits contemplated hereunder shall be subject
to withholding in accordance with applicable Federal, state, or local law. If a
withholding payment becomes due in connection with the exercise of a Company
stock option or sale of Company stock by the Employee, then Employee agrees
promptly upon request to pay to the Company any amount due to be withheld by
the Company.
(c) This Agreement contains a complete statement of all the
arrangements between Employee and the Company with respect to his employment
and his resignation and the termination of his employment with the Company and
supersedes all existing agreements, whether written or oral, between Employee
and the Company concerning Employee's employment or such resignation and
termination.
(d) The Company expressly denies any violation of Employment Agreement
or any other agreements with Employee, or any of its policies, procedures,
Federal, state or local laws or regulations. Accordingly, while this Agreement
resolves all issues between the Company and the Employee relating to any
alleged violation of its prior agreements with Employee, Company policies or
procedures or any Federal, state or local law or regulation, this Agreement
does not constitute an adjudication or finding on the merits and it is not, and
shall not be construed
8
as, an admission by the Company of any violation of its policies, procedures,
Federal state or local laws or regulations. Simultaneously, the Employee
expressly denies any violation of the Employment Agreement or any other
agreements with the Company of any of the Company's policies or of any of his
obligations as an employee of the Company. Moreover, neither this Agreement nor
anything in this Agreement shall be construed to be or shall be admissible in
any proceeding as evidence of or an admission by the Company of any violation
of the Employment Agreement or the Company's policies, procedures, Federal,
state or local laws or regulations. Likewise, neither this Agreement nor
anything in this Agreement shall be construed to be or should be admissible in
any proceeding as evidence of or an admission by the Employee of any violation
by him of the Employment Agreement or any of the Company's policies or any of
his obligations to the Company as an employee. This Agreement may be
introduced, however, in any proceeding to enforce this Agreement. Such
introduction shall be pursuant to an order protecting its confidentiality.
IN WITNESS WHEREOF, the parties have executed this Agreement this year
and date first above written.
LILLIAN VERNON CORPORATION
By: ______________________
__________________________
STEPHEN S. MARKS
9
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<MULTIPLIER> 1,000
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-24-1996
<PERIOD-END> MAY-27-1995
<CASH> 39,101
<SECURITIES> 0
<RECEIVABLES> 10,717
<ALLOWANCES> 0
<INVENTORY> 32,878
<CURRENT-ASSETS> 91,734
<PP&E> 50,286
<DEPRECIATION> 20,752
<TOTAL-ASSETS> 132,160
<CURRENT-LIABILITIES> 16,928
<BONDS> 3,658
<COMMON> 99
0
0
<OTHER-SE> 107,548
<TOTAL-LIABILITY-AND-EQUITY> 132,160
<SALES> 29,614
<TOTAL-REVENUES> 29,614
<CGS> 15,229
<TOTAL-COSTS> 34,201
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 152
<INCOME-PRETAX> (4,218)
<INCOME-TAX> (1,392)
<INCOME-CONTINUING> (2,826)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,826)
<EPS-PRIMARY> (0.29)
<EPS-DILUTED> (0.29)
</TABLE>
