SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number 1-13082
KENNETH COLE PRODUCTIONS, INC.
(Exact name of registrant as specified in its charter)
New York 13-3131650
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
152 West 57th Street, New York, NY 10019
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 265-1500
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 of each of the issuer's classes of common stock,
as of the latest practicable date:
Class August 12, 1996
----- ---------------
Class A Common Stock ( $.01 par value) 7,335,021
Class B Common Stock ( $.01 par value) 5,785,398
Page 1 of 41
Exhibit Index Appears on page 17
<PAGE>
Kenneth Cole Productions, Inc.
Index to 10-Q
<TABLE>
Part I. FINANCIAL INFORMATION
<S> <C>
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets as of June 30, 1996 and December 31, 1995 ........ 3
Consolidated Statements of Income for the three month and six month
periods ended June 30, 1996 and 1995 ......................................... 5
Consolidated Statement of Changes in Shareholders' Equity for the six
month period ended June 30, 1996 ............................................. 6
Consolidated Statements of Cash Flows for the six month periods
ended June 30, 1996 and 1995 ................................................. 7
Notes to Consolidated Financial Statements ................................... 8
Item 2. Management's Discussion and Analysis of Results of Operations
and Financial Condition ...................................................... 10
Part II. OTHER INFORMATION
Item 1. Legal Proceedings............................................................. 14
Item 2. Changes in Securities......................................................... 14
Item 3. Defaults Upon Senior Securities............................................... 14
Item 4. Submission of Matters to a Vote of Security Holders........................... 14
Item 5. Other Information............................................................. 15
Item 6. Exhibits and Reports on Form 8-K ............................................. 15
Signatures ............................................................................ 16
Index of Exhibits...................................................................... 17
</TABLE>
2
<PAGE>
Kenneth Cole Productions, Inc. and Subsidiaries
Consolidated Balance Sheets
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
--------------------------------------
(Unaudited)
<S> <C> <C>
Assets
Current assets:
Cash $ 1,036,000 $ 2,204,000
Due from factors 17,536,000 13,898,000
Accounts receivable, net 2,424,000 2,316,000
Inventories 22,276,000 16,361,000
Prepaid expenses and other current assets 635,000 909,000
Deferred taxes 514,000 514,000
--------------------------------------
Total current assets 44,421,000 36,202,000
Property and equipment
Furniture and fixtures 1,946,000 1,716,000
Machinery and equipment 2,202,000 1,788,000
Leasehold improvements 5,115,000 4,523,000
--------------------------------------
9,263,000 8,027,000
Less accumulated depreciation and amortization 2,853,000 2,374,000
--------------------------------------
Net property and equipment 6,410,000 5,653,000
--------------------------------------
Other assets:
Deferred taxes 422,000 422,000
Deposits and sundry 1,473,000 1,030,000
--------------------------------------
Total other assets 1,895,000 1,452,000
======================================
Total assets $52,726,000 $43,307,000
======================================
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
Kenneth Cole Productions, Inc. and Subsidiaries
Consolidated Balance Sheets
<TABLE>
<CAPTION>
June 30 December 31,
1996 1995
-------------------------------------
(Unaudited)
<S> <C> <C>
Liabilities and shareholders' equity
Current liabilities:
Accounts payable $ 6,220,000 $ 6,765,000
Accrued expenses and other current liabilities 2,349,000 1,859,000
Advances due under revolving credit facility and
current portion of long-term debt 1,545,000 54,000
Income taxes payable 1,869,000
Deferred license income 118,000 121,000
-------------------------------------
Total current liabilities 12,101,000 8,799,000
-------------------------------------
Deferred rent payable 407,000 367,000
Other non-current liabilities 892,000 652,000
Shareholders' equity
Preferred stock, par value $1.00, 1,000,000 shares
authorized, none outstanding
Class A common stock, par value $.01,
20,000,000 shares authorized, 7,309,075
and 7,281,840 outstanding in 1996
and 1995 73,000 73,000
Class B common stock, par value $.01,
6,000,000 shares authorized, 5,785,398 outstanding 58,000 58,000
Additional paid-in capital 18,574,000 18,510,000
Retained earnings 20,802,000 15,145,000
Deferred compensation (181,000) (297,000)
-------------------------------------
Total shareholders' equity 39,326,000 33,489,000
-------------------------------------
Total liabilities and shareholders' equity $52,726,000 $43,307,000
=====================================
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
Kenneth Cole Productions, Inc. and Subsidiaries
Consolidated Statements of Income
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
---------------------------------- ----------------------------------
1996 1995 1996 1995
---------------------------------- ----------------------------------
<S> <C> <C> <C> <C>
Net sales $ 35,019,000 $ 25,259,000 $ 70,129,000 $ 51,390,000
Cost of goods sold 20,707,000 14,713,000 41,032,000 29,919,000
---------------------------------- ----------------------------------
Gross profit 14,312,000 10,546,000 29,097,000 21,471,000
Licensing and other income 639,000 444,000 1,155,000 766,000
Selling, general and administrative and
shipping and warehousing
10,399,000 7,287,000 20,649,000 14,329,000
---------------------------------- ----------------------------------
Operating income 4,552,000 3,703,000 9,603,000 7,908,000
---------------------------------- ----------------------------------
Interest (income) expense, net
(26,000) (11,000) 15,000 (40,000)
Income before provision for income taxes 4,578,000 3,714,000 9,588,000 7,948,000
Provision for income taxes 1,877,000 1,486,000 3,931,000 3,179,000
---------------------------------- ----------------------------------
Net income $ 2,701,000 $ 2,228,000 $ 5,657,000 $ 4,769,000
================================== ==================================
Net income per share $.20 $.16 $.42 $.35
================================== ==================================
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
Kenneth Cole Productions, Inc. and Subsidiaries
Consolidated Statement of Changes in Shareholders' Equity
(Unaudited)
<TABLE>
<CAPTION>
Class A Class B
Common Stock Common Stock
------------------- ------------------- Total Additional Deferred
Number Number Common Paid-in Retained Compen-
of shares Amount of shares Amount Stock Capital Earnings sation Total
--------- ------- --------- ------- -------- ----------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Shareholders' equity
January 1, 1996 7,299,382 $73,000 5,785,398 $58,000 $131,000 $18,510,000 $15,145,000 ($297,000) $33,489,000
Exercise of Stock
Options 9,693 64,000 64,000
Net Income 5,657,000 5,657,000
Amortization of 116,000 116,000
deferred compensation
-----------------------------------------------------------------------------------------------------------
Shareholders' equity
June 30, 1996 7,309,075 $73,000 5,785,398 $58,000 $131,000 $18,574,000 $20,802,000 ($181,000) $39,326,000
===========================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE>
Kenneth Cole Productions, Inc. and Subsidiaries
Consolidated Statements of Cash Flows (Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30
1996 1995
------------------------------------
<S> <C> <C>
Cash flows from operating activities
Net income $ 5,657,000 $ 4,769,000
Adjustments to reconcile net income to net cash
(used in) provided by operating activities:
Depreciation and amortization 479,000 386,000
Amortization of deferred compensation 116,000 129,000
Provision for doubtful accounts 12,000
Provision for deferred taxes 25,000
Changes in assets and liabilities:
Increase in due from factors (3,638,000) (5,072,000)
(Increase) decrease in accounts receivable (108,000) 171,000
(Increase) decrease in inventories (5,915,000) (4,703,000)
Decrease (increase) in prepaid expenses and other current assets 274,000 (656,000)
Increase in deposits (443,000) (266,000)
Decrease in accounts payable (545,000) (348,000)
Increase (decrease) in income taxes payable 1,869,000 (508,000)
Increase (decrease) in accrued expenses and other current liabilities 487,000 (297,000)
Increase in other non-current liabilities 286,000 263,000
------------------------------------
Net cash used in operating activities (1,481,000) (6,095,000)
Cash flows from investing activities
Acquisition of property and equipment, net (1,236,000) (1,054,000)
------------------------------------
Net cash used in investing activities (1,236,000) (1,054,000)
Cash flows from financing activities
Proceeds from revolving line of credit, net 1,485,000 1,680,000
Proceeds from exercise of stock options 64,000 437,000
------------------------------------
Net cash provided by financing activities 1,549,000 2,117,000
------------------------------------
Net decrease in cash (1,168,000) (5,032,000)
Cash, beginning of period 2,204,000 5,315,000
------------------------------------
Cash, end of period $ 1,036,000 $ 283,000
====================================
Supplemental disclosures of cash flow information
Cash paid during the period for:
Interest $ 62,000 $ 16,000
Income taxes $ 1,857,000 $ 3,601,000
</TABLE>
See accompanying notes to consolidated financial statements.
7
<PAGE>
Kenneth Cole Productions, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
General
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. The data contained in these financial statements are
unaudited and are subject to year end adjustment, however, 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
three and six month periods ended June 30, 1996 are not necessarily indicative
of the results that may be expected for the year ended December 31, 1996. For
further information, refer to the consolidated financial statements and
footnotes thereto included in the Company's annual report on Form 10-K for the
year ended December 31, 1995.
The condensed balance sheet at December 31, 1995 was derived from the audited
financial statements.
Basis of Presentation
The consolidated financial statements include the accounts of Kenneth Cole
Productions, Inc. and its wholly owned subsidiaries. All intercompany
transactions and balances have been eliminated. Certain amounts in prior year's
financial statements have been reclassified to conform with the 1996
presentation.
Net Income Per Share
Net income per share is based on the average number of shares outstanding
including the effect of dilutive stock options.
Contingencies
In 1992, legal action was commenced against the Company in the Supreme Court of
the State of New York situated in New York County. The complaint alleged that
the Company had breached its obligations under a lease with the plaintiff for
the rental of office space in New York City and, as amended, sought damages of
approximately $851,000, representing all rent then due under the lease. In
January 1994, a judgment was entered against the Company in the amount of
approximately $719,000, including interest costs and disbursements. The Company
contested the award based on the grounds that the plaintiff had failed to
mitigate its damages. In December 1995, the Court of Appeals affirmed the order
of the Appellate Division. Following the Court of Appeals decision, the Company
paid the full amount of the judgment, plus post judgment interest, in the total
amount of $846,000.
8
<PAGE>
Kenneth Cole Productions, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
In January 1994, a second action was commenced against the Company by the
plaintiff in the Supreme Court of the State of New York situated in New York
County for additional rent due under the lease. The complaint, as amended in
December 1995, sought damages of approximately $789,000.
In May 1996, the Company paid $608,000 in satisfaction of all plaintiff's claims
in the actions mentioned above, exclusive of the plaintiff's claim for attorneys
fees. The Company believes it has established adequate reserves with respect to
this matter.
9
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
The following table sets forth the Company's condensed consolidated statements
of income in thousands of dollars and as percentage of net sales for the quarter
ended June 30, 1996 and June 30, 1995 as well as for the six months ended June
30, 1996 and June 30, 1995.
Three Months ended
--------------------------------------------
June 30, 1996 June 30, 1995
-------------------- -------------------
(in thousands)
Net sales $35,019 100.0% $25,259 100.0%
Gross Profit 14,312 40.9 10,546 41.8
Licensing income 639 1.8 444 1.8
Selling, general and
administrative expenses 10,399 29.7 7,287 28.8
Operating income 4,552 13.0 3,703 14.7
Interest income, net 26 0.1 11 0.0
Income before income taxes 4,578 13.1 3,714 14.7
Income tax expense 1,877 5.4 1,486 5.9
Net income 2,701 7.7 2,228 8.8
Six Months ended
--------------------------------------------
June 30, 1996 June 30, 1995
-------------------- -------------------
(in thousands)
Net sales $70,129 100.0% $51,390 100.0%
Gross Profit 29,097 41.5 21,471 41.8
Licensing income 1,155 1.6 766 1.5
Selling, general and
administrative expenses 20,649 29.4 14,329 27.9
Operating income 9,603 13.7 7,908 15.4
Interest income, net (15) 0.0 40 0.1
Income before income taxes 9,588 13.7 7,948 15.5
Income tax expense 3,931 5.6 3,179 6.2
Net income 5,657 8.1 4,769 9.3
Three Months Ended June 30, 1996 Compared to Three Months Ended June 30, 1995
Net sales increased $9.8 million, or 38.6%, to $35.0 million for the three
months ended June 30, 1996 compared with net sales of $25.3 million for the
three months ended June 30, 1995. Net sales of the
10
<PAGE>
Company's wholesale operations, excluding sales to its retail division,
increased $6.2 million, or 29.2%, to $27.5 million from $21.3 million. This
increase was primarily due to an increase in sales of all company product lines
as a result of greater brand awareness coupled with the introduction of a new
product line, Reaction by Kenneth Cole. Sales through the Company's retail and
outlet stores increased $3.5 million, or 89.0%, to $7.5 million for the three
months ended June 30, 1996 compared to the three months ended June 30, 1995.
This increase reflects the sales from sixteen stores which generated flat
comparable store sales, the sales from stores open for the entire second quarter
of 1996 which were not open in the second quarter of 1995 and the sales from two
stores which opened during the second quarter of 1996.
Gross profit was $14.3 million for the three months ended June 30, 1996, an
increase of $3.8 million, or 35.7%, from $10.5 million for the three months
ended June 30, 1995. As a percentage of net sales, gross profit was 40.9%
compared to 41.8%. This decrease in gross profit was attributable, in part, to
changes in sales mix, with sales generated on a first-cost basis, which carry
lower margins than wholesale and retail sales, representing a larger portion of
net sales. The decrease in gross profit percentage is partially offset by the
increase in retail store sales as a percentage of total sales (retail gross
margins being higher than wholesale gross margins as a percentage of net sales).
The Company continues to expand its licensing efforts, resulting in an increase
in licensing income of $195,000, or 43.9%, for the three months ended June 30,
1996 compared to the three months ended June 30, 1995
Selling, general and administrative expenses, including shipping and warehousing
costs, were $10.4 million (29.7% of net sales) for the three months ended June
30, 1996 compared to $7.3 million (28.8% of net sales) for the three months
ended June 30, 1995. The increase in selling, general and administrative
expenses as a percentage of net sales is primarily due to the additional retail
stores. The retail stores carry a higher expense level than the wholesale
division.
Operating income increased 22.9% to $4.6 million (13.0% of net sales) from $3.7
million (14.7% of net sales) for the three months ended June 30, 1996 and June
30, 1995, respectively. As stated in the foregoing, the increase is attributable
to higher sales levels reduced by lower gross margin percentages and higher
operating costs as a percentage of net sales.
11
<PAGE>
Six Months Ended June 30, 1996 Compared to Six Months Ended June 30, 1995
Net sales were $70.1 million in the first six months of 1996 compared to $51.4
million in the prior year's period, an increase of $18.7 million or 36.5%. Net
sales of the Company's wholesale operations, excluding sales to its retail
division increased $12.2 million or 27.2% to $57.0 million in the six months
from $44.8 million in last year's same period. This increase was due to
increases in sales of all product lines as a result of better brand awareness
coupled by the introduction of a new product line, Reaction by Kenneth Cole.
Sales through the Company's retail and outlet stores increased $6.5 million or
97.1% to $13.1 million. This increase reflects a 0.7% comparable store sales
increase, the sales of six stores open for the entire first half of 1996 which
were not open in the first half of 1995 and the sales of three stores opened
during the first six months of 1996.
Gross profit was $29.1 million in the six month period ended June 30, 1996, an
increase of $7.6 million or 35.5% from $21.5 million in the comparable period
last year. As a percentage of net sales, gross profit was 41.5% compared to
41.8%. This decrease was attributable, in part, to an increase in sales
generated on a first-cost basis, which carry lower margins than wholesale and
retail sales.
Selling, general and administrative expenses, including shipping and warehousing
costs, were $20.6 million (29.4% of net sales) in the six month period of 1996
and $14.3 million (27.9% of net sales) in the comparable period last year. The
increase is attributable to the additional retail stores which carry a higher
expense level that the wholesale division. Selling, general and administrative
expenses related to the wholesale division as a percentage of net sales remained
flat for the six months ended June 30, 1996 compared with the six months ended
June 30, 1996.
As a result of the above, operating income increased 22.7% in the six month
period of 1996 to $9.6 million (13.7% of net sales) from $7.9 million (15.4% of
net sales) in the same period last year.
12
<PAGE>
Liquidity and Capital Resources
The Company uses cash from operations and borrowings under its revolving credit
agreement as the primary sources of financing for its expansion and seasonal
requirements. Cash requirements vary from time to time as a result of the timing
of the receipt of merchandise from suppliers, the delivery by the Company of
merchandise to its customers, the level of accounts receivable and due from
factors balances and the Company's inventory levels. Cash used in operating
activities was $1.4 million for the six months ended June 30, 1996, compared to
$6.1 million for the six months ended June 30, 1995. The increase in cash flow
from operations is attributable, in part, to the timing of the payment of income
taxes and a smaller increase in the due from factors balance. At June 30, 1996
and December 31, 1995, working capital was $32.3 million and $27.4 million,
respectively.
The Company currently has a $20.0 million line of credit under which up to $10.0
million is available to finance working capital requirements and up to $10.0
million in letters of credit is available to finance the Company's inventory
purchases.
Capital expenditures totaled $1.2 million and $1.0 in the six months ended June
30, 1996 and 1995, respectively. Capital expenditures relate primarily to the
Company's retail and outlet store expansion and to the further development and
enhancement of the Company's management information systems.
Management believes that the Company's capital needs for the next twelve months
will be met through its existing credit facilities and cash generated from
operations without the need for additional financing.
Important Factors Relating to Forward Looking Statements
This report contains certain forward looking statements, as defined in The
Private Securities Litigation Reform Act of 1994, with respect to cash flows
from operations. The forward-looking statements contained in this Form 10-Q were
prepared by management and are qualified by, and subject to, significant
business, economic, competitive, regulatory and other uncertainties and
contingencies, all of which are difficult or impossible to predict and many of
which are beyond the control of the Company. Accordingly, there can be no
assurance that the forward-looking statements contained in this Form 10-Q will
be realized or that actual results will not be significantly higher or lower.
13
<PAGE>
Part II - OTHER INFORMATION
Item 1. Legal Proceedings. Incorporated by reference to the Financial
Statements included herein in Part I, Item I. See Notes to
Consolidated Financial Statements - Contingencies.
Item 2. Changes in Securities. None
Item 3. Defaults Upon Senior Securities. None
Item 4. Submission of Matters to a Vote of Security Holders.
(a) Kenneth Cole Productions, Inc. Annual Meeting of Shareholders was
held on May 23, 1996.
(b) Election of Directors - All nominees were elected through proxies
solicited pursuant to Regulation 14A under the Securities and
Exchange Act of 1934. There was no solicitation in opposition to
management's nominees as listed in the Proxy Statement, and each
of the nominees were elected to hold office until the next Annual
Meeting of Shareholders.
(c) No matters were voted on at the Annual Meeting of Shareholders
other than the election of directors and the ratification of the
selection of the independent public accountants.
The results of the election of Directors were as follows:
For Withheld Against
--- -------- -------
Paul Blum 63,015,426 29,230 0
Kenneth D. Cole 63,015,426 29,230 0
Maria Cuomo Cole 63,015,476 29,180 0
Denis F. Kelly 5,165,746 24,930 0
Jeffrey G. Lynn 5,165,546 25,130 0
Stanley A. Mayer 63,015,226 29,430 0
Holders of 5,190,676 shares of Class A Common Stock and 5,785,398
shares of Class B Common Stock, constituting approximately 83.83% of
the shares of capital stock entitled to vote, were present in person
or by proxy at the Annual Meeting of Shareholders. Each record holder
of Class A Common Stock is entitled to one vote per share, and each
record holder of Class B Common Stock is entitled to 10 votes per
share. Holders of Class A Common Stock voted separately to elect
Jeffrey G. Lynn and Denis Kelly.
With regard to the ratification of the appointment of Ernst & Young
LLP as the independent certified public accountants, the results were
as follows:
FOR AGAINST ABSTAIN
63,040,016 650 3,990
14
<PAGE>
Item 5. Other Information. None
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
10.1 Memorandum of Agreement between the New York Industrial
Council of the National Fashion Accessories Association
Inc. and Local 1 Leather Goods, Plastics, Handbags and
Novelty Workers Union, Division of Local 342-50 United
Food and Commercial Workers Union.
10.2 Employment Agreement, dated as May 30, 1996, between
Kenneth Cole Productions, Inc. and Paul Blum.
27 Financial Data Schedule.
(b) Reports on Form 8-K: The Company did not file any reports on Form
8-K during the three months ended June 30, 1996.
15
<PAGE>
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.
Kenneth Cole Productions, Inc.
------------------------------
Registrant
August 12, 1996 /s/ STANLEY A. MAYER
----------------------
Stanley A. Mayer
Executive Vice President and
Chief Financial Officer
16
<PAGE>
INDEX OF EXHIBITS
Sequential
Exhibit Number: Description Page No.
- - - --------------- ----------- --------
10.1 Memorandum of Agreement between the New York
Industrial Council of the National Fashion
Accessories Association Inc. and Local 1 Leather
Goods, Plastics, Handbags and Novelty Workers Union,
Division of Local 342-50 United Food and Commercial
Workers Union. 18
10.2 Employment Agreement between Kenneth Cole
Productions, Inc. and Paul Blum. 25
27 Financial Data Schedule. 40
17
MEMORANDUM OF AGREEMENT made and entered into this 25th day of June, 1996
by and between the New York Industrial Council of the National Fashion
Accessories Association Inc. ("Council") and Local 1 Leather Goods, Plastics,
Handbags and Novelty Workers Union, Division of Local 342-50 United Food and
Commercial Workers Union ("Union").
The following are the terms of the settlement for new Collective Bargaining
Agreement ("CBA") between the Council and the Union consisting of the provisions
of the Agreement dated April 25, 1993 to April 24, 1996 ("Agreement") and
Memorandum of Understanding ("MOU") of same date as modified, and amended, as
follows: References are to the said Agreement.
1. Section 25 - (Scale of Wages-Increases).
Amend paragraph (25) A as follows:
A. Employees (including piece rate and incentive Employees) who as of
the applicable effective date have completed 30 working days from date of
hire, shall receive the following wage increases on such effective date,
subject to Paragraph B below:
Effective April 25, 1997 $.266 per hour
($10.00 per week
based on a 37.5
hour week)
<PAGE>
Effective April 25, 1998 $ .40 per hour
($15.00 per week
based on a 37.5
hour week)
Effective April 25, 1999 $.40 per hour
($15.00 per week
based on a 37.5
hour week)
Delete "Exclusions" paragraph following wage increases on page 28 of
Agreement.
Bonus: All Employees actively employed on April 26, 1996 and June 21, 1996
shall receive a bonus of $300 subject to legally required deductions and
excluded from "gross wages" for purposes of JRF percentage contributions.
Amend paragraph 25B to adjust wage increase effective dates and coordinate
pre-wage increase period dates in accordance with wage increase effective dates
in paragraph 25A.
2. Section 25. Paragraphs C D and E: Scale of Wages.
Carry forward and redate to April 25, 1996 the most recent minimum rates
set forth therein.
3. Section 27 (Vacation Allowance) is amended by adding the following:
2
<PAGE>
If the Employer grants an Employee's request for a vacation at a time when
vacation allowance is not payable under Section 27, such employee shall receive
vacation allowance (in whole weeks) for which he/she may be eligible at the time
the requested vacation is taken. Holiday pay and vacation allowance shall be
paid on the employee's then current regular straight time hourly rate of pay.
Where the Employer schedules vacation time during July or December, employees
eligible for vacation allowance as of the vacation time shall be paid such
allowance prior to the commencement of vacation time.
4. Section 51 (Hospitalization, Surgical/Medical and Life Insurance).
(a) Paragraphs A and C are amended to read as follows:
A. After thirty (30) working days of employment, the Employer shall provide
all Employees with Empire Blue Cross/Blue Shield ("BC/BS") single coverage
indemnity POS Benefit Plan effective September 1, 1996 (excluding prescription
drug coverage) at the monthly premium of $125.12 per employee; and after sixty
(60) working days, the Employer shall provide life insurance in the amount of
seven thousand ($7,000) dollars.
* * *
3
<PAGE>
C. Should the cost of the hospitalization, surgical/medical, and life
insurance in the sum of $7,000 be increased or decreased by the respective
carriers, then the Employer shall pay the increased/decreased premiums provided,
however, that the Employer's monthly premium for BC/BS single coverage shall not
exceed $135.00 per month per employee during the term of this Collective
Bargaining Agreement.
5. Delete Section 52 (Insurance Trust Fund ("ITF") Welfare Benefits. With
respect to pension benefits provided pursuant to Section 53 (Pension Benefits)
the parties shall act and recommend through their respective Trustees on the
Board of the Joint Retirement Fund to adopt a "Future-Future-Service" benefit of
$7 per year of service for years after 1996 (or up to $8 per year of service for
years after 1996 subject to actuarial funding parameters) pursuant to which all
future benefit accrual is based on credits earned in 1996 and thereafter.
Maximum benefit based on twenty five (25) years of service in total, pre and/or
post 1996 years of service.
Paragraph (lO)E of the 1993 Memorandum of Understanding is readopted herein
dealing with increasing the 3% JRF contribution rate to 4%.
4
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6. Section 60 Paragraph C - Term of Agreement and MOU.
Four (4) year term, April 25, 1996 to April 24, 2000. Re-date 1993 Memorandum of
Understanding to April 25, 1996 and execute same. Incorporate pages re "Errata
and Obsolete language" changes of April 16, 1996.
7. Section 21 (Equal Division of Work).
Delete and replace with "Judith Leiber Jewelry Division Clause" attached
hereto.
8. Add to Section 38-Steward's Training Day:
The Employer shall grant one (1) day off per year for the shop Steward to
attend Union training session. The Union shall give the Employer reasonable
advance written notice of the session date and shall certify to the Employer
attendance by the Steward in writing.
9. Section 48.
Change reference to Local 342-50 Cultural Educational Fund ("CEF").
Effective April 1, 2000, delete reference to $100 contribution per company per
year and replace with $1 per employee per month. The $9,000 in Employer
contributions currently held in escrow for scholarship purposes shall be paid
over to the CEF as and for contributions to the CEF on behalf of Employer
members of the Council who are parties to this Agreement.
5
<PAGE>
10. Section 44. Paragraph B.
Replace reference to Theodore Kheel and Richard Adelman with a panel of six
(6) arbitrators selected by the parties as Impartial Chairman. Grievances shall
be submitted to each arbitrator in rotation. Either party may terminate any
Impartial Chairman at any time on sixty (60) days notice to the other party.
11. Section 49 Paid Sick Leave Days.
Paragraph A: Delete phrases in second sentence "third consecutive work day"
and "three (3) consecutive work days" and insert at both places the phrase
"first work day of an illness." Delete phrase in third sentence "all three (3)
consecutive work days, including..."
12. Section 37 Visitation of Business Agents.
The parties understand that the notification to the Employer required by
paragraph A may be informal and by telephone. The parties shall cooperate and
act in good faith in carrying out this provision.
13. Except as otherwise amended, supplemented and modified herein the new
Collective Bargaining Agreement shall incorporate
6
<PAGE>
the terms and provisions of the Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Memorandum of
Agreement to be executed as of the date first set forth above.
LOCAL 1 LEATHER GOODS, PLASTICS NEW YORK INDUSTRIAL COUNCIL
HANDBAGS & NOVELTY WORKERS UNION OF THE NATIONAL FASHION
DIVISION OF LOCAL 342-50 ACCESSORIES ASSOCIATION, INC.
UNITED FOOD &-COMMERCIAL
WORKERS UNION
/s/ Illegible /s/ Eileen Stewart
- - - --------------------------------- ------------------------------
By: By:
Title: Title: Chairperson
7
EMPLOYMENT AGREEMENT
--------------------
This Employment Agreement is dated as of May 30, 1996, and is entered into
between Kenneth Cole Productions, Inc., an New York corporation (the "Company"),
and Paul Blum ("Executive").
WHEREAS, Executive currently serves as Executive Vice President of the
Company; and
WHEREAS, Executive and the Company desire to formalize in this Agreement
the terms and conditions under which Executive shall be employed.
NOW, THEREFORE, the parties hereby agree as follows:
Article I.
Employment, Duties and Responsibilities
---------------------------------------
1.1. Employment. The Executive shall serve as Executive Vice President of
the Company. Executive agrees to devote his full time and efforts to promote the
interests of the Company.
1.2. Duties and Responsibilities. Executive shall perform such duties and
exercise such supervision and authority over and with regard to the business of
the Company as are similar in nature to those duties and services customarily
associated with the position of Executive Vice President.
1.3. Base of Operation. Executive's principal base of operation for the
performance of his duties and responsibilities under this Agreement shall be the
offices of the Company in New York, New York or the Company's offices in
Secaucus, New Jersey, or at such other office location for senior management
utilized by the Company from time to time; provided, however, that Executive
shall perform such duties and responsibilities not involving a permanent
transfer of his base of operation outside of the New York metropolitan area at
such other places as shall from time to time be reasonably necessary to fulfill
his obligations hereunder.
<PAGE>
Article II.
Term
----
2.1. Term. (a) The term of this Agreement (the "Term") shall commence on
May 30, 1996 and shall continue for a period of three years until May 29, 1999.
(b) Executive represents and warrants to the Company that to the best of
his knowledge, neither the execution and delivery of this Agreement nor the
performance of his duties hereunder violates or will violate the provisions of
any other agreement to which he is a party or by which he is bound.
Article III.
Compensation and Expenses
3.1. Salary. As compensation and consideration for the performance by
Executive of his obligations under this Agreement, Executive shall be entitled
to and the Company shall pay Executive a base salary during each year of the
Term (each, a "Base Salary"), payable in accordance with the normal payment
procedures of the Company and subject to such withholdings and other normal
employee deductions as may be required by law, as follows:
(a) $250,000 during the first year of the Term;
(b) $300,000 during the second year of the Term; and
(c) $350,000 during the third year of the Term.
3.2. Bonuses and Other Compensation.
(a) As compensation and consideration for the performance by Executive of
his obligations under this Agreement, Executive shall participate during the
Term in the Company's annual cash bonus plan for senior management, with a
annual bonus (the "Annual Bonus") for each fiscal year of the Company which ends
during the Term (each, a "Fiscal Year") in an amount equal to the amounts
calculated in paragraph (b) and (c) of this Section 3.2, based on the following
amounts (the "Target Bonus Amount"):
(i) with respect to the Annual Bonus for Fiscal Year 1996, $175,000;
(ii) with respect to the Annual Bonus for Fiscal Year 1997, $240,000;
and
(iii) with respect to the Annual Bonus for Fiscal Year 1998, $315,000.
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<PAGE>
(b) The amount of the Annual Bonus to which Executive is entitled for
Fiscal Year 1995 shall be determined as follows:
(i) one-third of the Annual Bonus (i.e., up to one-third of the Target
Bonus Amount) for Fiscal Year 1996 shall be based on specific personal
and/or corporate objectives approved by the Compensation Committee of the
Board of Directors (the "Committee"), calculated in accordance with
Schedule A hereto;
(ii) one-third of the Annual Bonus (i.e., up to one-third of the
Target Bonus Amount) for Fiscal Year 1996 shall be based on the percentage
increase in annual net sales of the Company for Fiscal Year 1996 over the
immediately preceding Fiscal Year, calculated in accordance with Schedule B
hereto; and
(iii) one-third of the Annual Bonus (i.e., up to one-third of the
Target Bonus Amount) for Fiscal Year 1996 shall be based on the percentage
increase in earnings per share of the Class A common stock, par value $.01
per share ("Common Stock") for Fiscal Year 1996 over the immediately
preceding Fiscal Year, calculated in accordance with Schedule C hereto.
(c) The amount of the Annual Bonus to which Executive is entitled for
Fiscal Year 1997 and Fiscal Year 1998 shall be determined as follows:
(i) one-third of the Annual Bonus (i.e., up to one-third of the Target
Bonus Amount) for Fiscal Year 1997 or Fiscal Year 1998, as the case may be,
shall be based on specific personal and/or corporate objectives approved by
the Committee at the beginning of Fiscal Year 1997 or Fiscal Year 1998,
respectively;
(ii) one-third of the Annual Bonus (i.e., up to one-third of the
Target Bonus Amount) for Fiscal Year 1997 or Fiscal Year 1998, as the case
may be, shall be based on a percentage increase in annual net sales of the
Company for such Fiscal Year over the immediately preceding Fiscal Year.
The Committee shall establish, at the beginning of Fiscal Year 1997 or
Fiscal Year 1998, respectively, the specific criteria for awarding that
portion of the Annual Bonus based on the percentage increase in annual net
sales of the Company for such Fiscal Year; and
(iii) one-third of the Annual Bonus (i.e., up to one-third of the
Target Bonus Amount) for Fiscal Year 1997 or Fiscal Year 1998 shall be
based on a percentage increase in earnings per share of the Common Stock
for such Fiscal Year over the immediately preceding Fiscal Year. The
Committee shall establish, at the beginning of Fiscal Year 1997 or Fiscal
Year 1998, respectively, the specific criteria for awarding that
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<PAGE>
portion of the Annual Bonus based on the percentage increase in earnings
per share of Common Stock for such Fiscal Year.
(d) Executive shall receive (i) on March 1, 1997 (or such other date during
Fiscal Year 1997 set by the Committee for the grant to senior management of
options to purchase Common Stock) a grant of options under the Kenneth Cole
Productions 1994 Stock Option Plan (the "Stock Option Plan") to purchase 20,000
shares of Common Stock and (ii) on March 1, 1998 (or such other date during
Fiscal Year 1998 set by the Committee for the grant to senior management of
options to purchase Common Stock), grant of options under the Stock Option
Plan to purchase 20,000 shares of Common Stock; in each case at an exercise
price equal to the market price of the Common Stock as reported by the New York
Stock Exchange, Inc. on the date of grant of such options (or the immediately
preceding business day if such day is a weekend day or a holiday), and on such
other terms and conditions as shall be established by the Committee. Executive
shall also be eligible for additional grants of options under the Stock Option
Plan to be earned in accordance with the terms and conditions established by the
Committee for awards granted to senior management of the Company.
3.3. Benefits.
(a) Executive shall participate during the Term in such pension, life
insurance, health, disability and major medical insurance plans, and in such
other employee benefit plans and programs, for the benefit of the employees of
the Company, as may be maintained from time to time during the Term, in each
case to the extent and in the manner available to other officers of the Company
and subject to the terms and provisions of such plans or programs.
(b) Executive shall be entitled to a reasonable paid vacation period (but
not necessarily consecutive vacation weeks) during the Term.
3.4. Automobile Allowance. The Company will reimburse Executive in an
amount equal to six hundred dollars ($600) per month during the Term for
automobile expenses incurred by him in connection with the performance of his
duties hereunder during the Term, subject, however, to the Company's policies
relating to business-related expenses as in effect from time to time during the
Term.
3.5. Other Expenses. The Company will reimburse Executive for reasonable
business-related expenses incurred by him in connection with the performance of
his duties hereunder during the Term, subject, however, to the Company's
policies relating to business-related expenses as in effect from time to time
during the Term.
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<PAGE>
Article IV.
Exclusivity, Etc.
-----------------
4.1. Exclusivity. Executive agrees to perform his duties, responsibilities
and obligations hereunder efficiently and to the best of his ability. Executive
agrees that he will devote his entire working time, care and attention and best
efforts to such duties, responsibilities and obligations throughout the Term.
Executive also agrees that he will not engage in any other business activities,
pursued for gain, profit or other pecuniary advantage, that are competitive with
the activities of the Company. Executive agrees that all of his activities as an
employee of the Company shall be in conformity with all present and future
policies, rules and regulations and directions of the Company not inconsistent
with this Agreement.
4.2. Other Business Ventures. Executive agrees that, so long as he is
employed by the Company, he will not own, directly or indirectly, any
controlling or substantial stock or other beneficial interest in any business
enterprise which is engaged in, or competitive with, any business engaged in by
the Company. Notwithstanding the foregoing, Executive may own, directly or
indirectly, up to 10% of the outstanding capital stock of any business having a
class of capital stock which is traded on any national stock exchange or in the
over-the-counter market
4.3 Confidentiality; Non-solicitation.
(a) Executive agrees that he will not, at any time during or after the
Term, make use of or divulge to any other person, firm, corporation or other
entity any trade or business secret, process, method or means, or any other
confidential information concerning the business or policies of the Company
which he may have learned in connection with his employment hereunder. For
purposes of this Agreement, a "trade or business secret, process, method or
means, or any other confidential information" shall mean and include written
information treated as confidential or as a trade secret by the Company.
Executive's obligation under this Section 4.3(a) shall not apply to any
information which (i) is known publicly; (ii) is in the public domain or
hereafter enters the public domain without the fault of Executive; (iii) is
known to Executive prior to his receipt of such information from the Company, as
evidenced by written records of Executive or (iv) is hereafter disclosed to
Executive by a third party not under an obligation of confidence to the Company.
Executive agrees not to remove from the premises of the Company, except as an
employee of the Company in pursuit of the business of the Company or except as
specifically permitted in writing by the Company, any document or other object
containing or reflecting any such confidential information. Executive
-5-
<PAGE>
recognizes that all such documents and objects, whether developed by him or by
someone else, will be the sole exclusive property of the Company. Upon
termination of his employment hereunder, Executive shall forthwith deliver to
the Company all such confidential information, including without limitation all
lists of customers, correspondence, accounts, records and any other documents or
property made or held by him or under his control in relation to the business or
affairs of the Company, and no copy of any such confidential information shall
be retained by him.
(b) (i) While the Executive is employed by the Company, (ii) during the
period in which the Executive receives payments as set forth in Section 5.6
hereof following a Wrongful Termination (as defined herein), and (iii) for a
period of one (1) year following termination of the Executive's employment by
the Company for Cause (as defined herein) or by the Executive for other than
Good Reason (as defined herein), the Executive shall not directly or indirectly,
whether as an employee, consultant, independent contractor, partner, joint
venturer or otherwise, (A) solicit or induce, or in any manner attempt to
solicit or induce, any person employed by, or as agent of, the Company to
terminate such person's contract of employment or agency, as the case may be,
with the Company or (B) divert, or attempt to divert, any person, concern, or
entity from coins business with the Company, nor will he attempt to induce any
such person, concern or entity to cease being a customer or supplier of the
Company.
(c) Executive agrees that, at anY time and from time to time during and
after the Term, he will execute any and all documents which the Company may deem
reasonably necessary or appropriate to effectuate the provisions of this Section
4.3.
4.4. Covenant Not to Compete. (a) While the Executive is employed by the
Company, (b) during the period in which the Executive receives payments as set
forth in Section 5.6 hereof following a Wrongful Termination and (c) for a
period of one (1) year following termination of the Executive's employment by
the Company for Cause or by the Executive for other than Good Reason (as defined
herein), the Executive will not, directly or indirectly, whether as an
executive, agent, officer, director, consultant, independent contractor,
partner, joint venturer or otherwise, own (other than the ownership of not more
than ten percent (10%) of the capital stock or equity of any entity the capital
stock or equity of which is publicly traded), manage, operate, control, or
participate in the ownership, management, operation or control of, or authorize
the use of the Executive's or the Company's name by, or be connected in any
manner with, any business, firm, partnership, corporation, limited liability
company or other entity, that engages in business activities of the type carried
on by the Company (including its subsidiaries) either at the date hereof or on
the date of such termination of employment.
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<PAGE>
Article V.
Termination
-----------
5.1. Termination by the Company. The Company shall have the right to
terminate the Executive's employment at any time for "Cause". For purposes of
this Agreement, "Cause" shall mean (i) substantial and continued failure by the
Executive to perform his duties hereunder, or (ii) the conviction of a felony.
Except in the case of conviction of a felony, Executive shall be given notice by
the Company specifying in detail the particular act or failure to act on which
the Company is relying to terminate him for Cause, and Executive shall have a
period of thirty (30) days to cure any such act or failure to act unless such
act or failure to act is part of a pattern of continued misconduct or undertaken
in bad faith.
5.2. Death. In the event Executive dies during the Term, this Agreement
shall automatically terminate, such termination to be effective on the date of
Executive's death.
5.3 Disability. In the event that Executive shall suffer a disability which
shall have prevented him from performing satisfactorily his obligations
hereunder for a period of at least ninety (90) consecutive days, the Company
shall have the right to terminate this Agreement, such termination to be
effective upon the giving of notice thereof to Executive in accordance with
Section 6.3 hereof.
5.4. Termination by Executive for Good Reason. The Executive's employment
may be terminated during the Term by the Executive for Good Reason, by giving
thirty (30) days advance written notice to the Company. For purposes of this
Agreement, the following circumstances shall constitute "Good Reason":
(a) the assignment to the Executive of any duties inconsistent in any
material respect with the Executive's position, (including status, offices,
titles and reporting requirements), or with his authority, duties or
responsibilities as contemplated by Section 1.1 or 1.2 of this Agreement, or any
other action by the Company or its successor which results in a material
diminution or material adverse change in such position, status, authority,
compensation, duties or responsibilities;
(b) any material breach by the Company or its successor of the provisions
of this Agreement;
(c) any failure by the Company to comply with and satisfy Section 6.2(b) of
this Agreement; or
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<PAGE>
(d) a relocation of Executive's principal base of operation to any location
other than the locations described in Section 1.3 hereof.
5.5. Termination by Executive Upon Change of Control. The Executive's
employment may be terminated during the Term by the Executive for Good Reason
following a Change of Control, by giving thirty (30) days written notice to the
Company. For purposes of this Agreement, the following circumstances shall
constitute a "Change of Control":
(a) the acquisition by any individual, entity or group (within the meaning
of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) (a "Person") of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of 50% or more (on a
fully diluted basis) of either (i) the then outstanding shares of Common Stock
of the Company, taking into account as outstanding for this purpose such common
stock issuable upon the exercise of options or warrants, the conversion of
convertible stock or debt, and the exercise of any similar right to acquire such
common stock or (ii) the combined voting power of the then outstanding voting
securities of the Company entitled to vote generally in the election of
directors; provided, however, that for purposes of this subsection (a), the
following acquisitions shall not constitute a Change of Control: (i) any
acquisition by the Company or any "affiliate" of the Company, within the meaning
of 17 C.F.R. ss. 230.405 (an "Affiliate"), or (ii) any acquisition by any
employee benefit plan (or related trust) sponsored or maintained by the Company
or any Affiliate of the Company;
(b) consummation of a reorganization, merger or consolidation or sale or
other disposition of all or substantially all of the assets of the Company; or
(c) approval by the shareholders of the Company of a complete liquidation
or dissolution of the Company.
5.6. Effect of Termination.
(a) In the event of termination of Executive's employment by either party
for any reason, or by reason of the Executive's death or disability, the Company
shall pay to Executive (or his beneficiary in the event of his death) any base
salary or other compensation earned but not paid to Executive prior to the
effective date of such termination.
(b) In the event of termination of Executive's employment (i) by the
Company other than for Cause or (ii) by Executive for Good Reason (each, a
"Wrongful Termination"), the Company shall continue to pay to Executive the
Executive's Base
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Salary through the end of the Term in accordance with Section 3.1 hereof and
shall pay to Executive an amount equal to Executive's then current bonus, in
twelve equal monthly installments following the date of such termination. For
this purpose, Executive's then current bonus shall be Executive's Target Bonus
Amount for the Fiscal Year of the Company within which such termination occurs.
In addition, upon any Wrongful Termination, all outstanding options to purchase
Common Stock granted to Executive under the Stock Option Plan shall become
immediately vested and exercisable.
(c) In the event of termination of Executive's employment by Executive for
Good Reason following a Change of Control, the Company shall pay to Executive,
in addition to the amounts described in Section 5.6(a) hereof, an amount equal
to one year's then current Base Salary and then current bonus, in twelve equal
monthly installments following the date of such termination. For this purpose,
Executive's then current bonus shall be Executive's Target Bonus Amount for the
Fiscal Year of the Company within which such termination occurs. In addition,
upon any such termination, all outstanding options to purchase Common Stock
granted to Executive under the Stock Option Plan or otherwise shall become
immediately vested and exercisable
In the event any payment or benefit received or to be received by Executive
pursuant to this Agreement or any other compensation plan or agreement between
Executive and the Company or its affiliates in connection with a Change in
Control ("Change in Control Payments") would not be deductible in whole or in
part for federal income tax purposes by reason of Section 280G of the Internal
Revenue Code of 1986, as amended (the "Code"), such Change in Control Payments
may, in the sole discretion of the Committee, be reduced by the minimum amount
necessary to preserve the deductibility of such Change in Control Payments. For
purposes of this limitation, (i) no portion of the Change in Control Payments
shall be taken into account which, in the opinion of tax counsel selected by the
Company and reasonably acceptable to the Executive, does not constitute an
excess parachute payment within the meaning of Section 280G(b)(2) of the Code;
(ii) in the event the Compensation Committee elects to reduce the Change in
Control Payments, the Change in Control Payments shall be reduced only to the
extent necessary so that the Change in Control Payments are not subject to
disallowance of deductions, in the opinion of the tax counsel referred to in
clause (i); and (iii) the value of any non-cash benefit or any deferred payment
or benefit included in the Change in Control Payments shall be determined by the
Company's independent auditors in accordance with the principles of Section
280G(b)(3) and (4) of the Code and the regulations thereunder.
(d) Except as expressly provided in Section 5.6(b) and Section 5.6(c),
Executive's rights upon termination of employment with respect to option awards
received under the Stock Option Plan shall be governed by the terms and
conditions of the Stock
-9-
<PAGE>
Option Plan and any option agreements entered into by Executive with respect to
such awards.
Article VI.
Miscellaneous
-------------
6.1. Life Insurance. Executive agrees the the Company may apply for and
secure and own insurance on Executive's life (in amounts determined by the
Company). Executive agrees to cooperate fully in the application for and
securing of such insurance, including the submission by Executive to such
physical and other examinations, and the answering of such questions and
furnishing of such information by Executive, as may be required by the
carrier(s) of such insurance. Notwithstanding anything to the contrary contained
herein, the Company shall not be required to obtain any insurance for or on
behalf of Executive, except as provided in Section 3.3(a) hereof.
6.2. Benefit of Agreement; Assignment; Beneficiary.
(a) This Agreement shall inure to the benefit of and be binding upon the
Company and its successors and assigns, including, without limitation, any
corporation or person which may acquire all or substantially all of the
Company's assets or business, or with or into which the Company may be
consolidated or merged. This Agreement shall also inure to the benefit of, and
be enforceable by, the Executive and his personal or legal representatives,
executors, administrators, successors, heirs, distributees, devisees and
legatees. If the Executive should die while any amount would still be payable to
the Executive hereunder if he had continued to live, all such amounts shall be
paid in accordance with the terms of this Agreement to the Executive's
beneficiary, devisee, legatee or other designee, or if there is no such
designee, to the Executive's estate.
(b) The Company shall require any successor (whether direct or indirect, by
operation of law, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place.
6.3. Notices. Any notice required or permitted hereunder shall be in
writing and shall be sufficiently given if personally delivered or if sent by
telegram or telex or by registered or certified mail, postage prepaid, with
return receipt requested, addressed: (a) in the case of the Company to Kenneth
Cole Productions, Inc., 152 West 57th Street, New York, New York, Attention
President, or to such other address and/or
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<PAGE>
to the attention of such other person as the Company shall designate by written
notice to Executive; and (b) in the case of Executive, to Paul Blum, 71
Pinecrest Drive, Hastings-On-Hudson, New York 10706, or to such other address as
Executive shall designate by written notice to the Company. Any notice given
hereunder shall be deemed to have been given at the time of receipt thereof by
the person to whom such notice is given.
6.4. Entire Agreement; Amendment. This Agreement contains the entire
agreement of the parties hereto with respect to the terms and conditions of
Executive's employment during the term and supersedes any and all prior
agreements and understandings, whether written or oral, between the parties
hereto with respect to compensation due for services rendered hereunder. This
Agreement may not be changed or modified except by an instrument in writing
signed by both of the parties hereto.
6.5. Waiver. The waiver by either party of a breach of any provision of
this Agreement shall not operate or be construed as a continuing waiver or as a
consent to or waiver of any subsequent breach hereof.
6.6. Headings. The Article and Section headings herein are for convenience
of reference only, do not constitute a part of this Agreement and shall not be
deemed to limit or affect any of the provisions hereof.
6.7. Governing Law. This Agreement shall be governed by, and construed and
interpreted in accordance with, the internal laws of the State of New York
without reference to the principles of conflict of laws.
6.8. Agreement to Take Actions. Each party hereto shall execute and deliver
such documents, certificates, agreements and other instruments, and shall take
such other actions, as may be reasonably necessary or desirable in order to
perform his or its obligations under this Agreement or to effectuate the
purposes hereof.
6.9. Attorneys' Fees. In the event of any arbitration or legal proceeding
between the parties hereto arising out of the subject matter of this Agreement,
including any such proceeding to enforce any right or provision hereunder, which
proceeding shall result in the rendering by an arbitration panel or court of a
decision in favor of Executive, the Company shall pay to Executive all costs and
expenses incurred therein by Executive, including, without limitation,
reasonable attorneys' fees, which costs, expenses and attorneys' fees shall be
included in and as a part of any award or judgment rendered in such arbitration
or legal proceeding.
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<PAGE>
6.10. Survivorship. The respective rights and obligations of the parties
hereunder shall survive any termination of this Agreement to the extent
necessary to the intended preservation of such rights and obligations.
6.11. Validity.
(a) The invalidity or unenforceability of any provision or provisions of
this Agreement shall not affect the validity or enforceability of any other
provision or provisions of this Agreement, which shall remain in full force and
effect.
(b) If the event that any of the provisions of this Agreement relating to
the temporal scope of the covenants contained herein shall be declared by a
court of competent jurisdiction to exceed the maximum restrictiveness such court
deems enforceable, such provision shall be deemed, for purposes of the
preceedings before such court, to be replaced herein by the maximum restriction
deemed enforceable by such court.
6.12. Counterparts This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
IN WITNESS WHEREOF, each of the parties hereto has duly executed this
Agreement as of the date first above written.
KENNETH COLE PRODUCTIONS, INC.
By: /s/ Kenneth D. Cole, Pres.
------------------------------------------
Name:
Title:
/s/ Paul Blum
------------------------------------------
Paul Blum
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<PAGE>
SCHEDULE A
----------
The Company shall pay Executive bonus compensation equal to one percent (1%) of
Base Salary for each point awarded to Executive in accordance with this Schedule
A. Executive may be awarded up to a maximum of 23.3 points for Fiscal Year 1996.
The awarding of points by the Committee will be based on Executive's achievement
of the specific personal and/or corporate objectives approved by the Committee.
<PAGE>
SCHEDULE B
----------
The Company shall pay Executive bonus compensation equal to one percent (1%) of
Base Salary for each point awarded for Fiscal Year 1996 to Executive in
accordance with this Schedule B. Executive may be awarded up to a maximum of
23.3 points for Fiscal Year 1996. The awarding of points by the Committee will
be based on the following percentage increase in annual net sales for Fiscal
Year 1996 over the immediately preceding Fiscal Year:
Percentage Net Sales Increase Points Awarded
----------------------------- --------------
1996
- - - ----
0 - 14.99 0
15 2.3
20 11.7
25 or above 23.3
If percentage increases in annual net sales fall between the specific percentage
increases enumerated above, points awarded will be prorated, based on the
maximum number of points for Fiscal Year 1996.
<PAGE>
SCHEDULE C
----------
The Company shall pay Executive bonus compensation equal to one percent (1%) of
Base Salary for each point awarded to Executive for Fiscal Year 1996 in
accordance with this Schedule C. Executive may be awarded up to a maximum of
23.3 points for Fiscal Year 1996. The awarding of points by the Committee will
be based on the following percentage increases in earnings per share of Common
Stock for Fiscal Year 1996 over the immediately preceding Fiscal Year:
Percentage Net Sales Increase Points Awarded
----------------------------- --------------
1996
----
0 - 14.99 0
15 2.3
20 11.7
25 or above 23.3
If percentage increases in earnings per share of Common Stock fall between the
specific percentage increases enumerated above, points awarded will be prorated,
based on the maximum number of points for Fiscal Year 1996.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
KENNETH COLE PRODUCTIONS, INC. CONSOLIDATED BALANCE SHEET AS OF JUNE 30,
1996, AND THE CONSOLIDATED STATEMENT OF INCOME FOR THE SIX MONTHS ENDED
JUNE 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 1,036
<SECURITIES> 0
<RECEIVABLES> 19,990
<ALLOWANCES> (30)
<INVENTORY> 22,276
<CURRENT-ASSETS> 44,421
<PP&E> 9,263
<DEPRECIATION> 479
<TOTAL-ASSETS> 52,726
<CURRENT-LIABILITIES> 12,101
<BONDS> 0
0
0
<COMMON> 131
<OTHER-SE> 39,195
<TOTAL-LIABILITY-AND-EQUITY> 52,726
<SALES> 70,129
<TOTAL-REVENUES> 70,129
<CGS> 20,707
<TOTAL-COSTS> 20,707
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 15
<INCOME-PRETAX> 9,588
<INCOME-TAX> 3,931
<INCOME-CONTINUING> 5,657
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,657
<EPS-PRIMARY> .42
<EPS-DILUTED> .42
</TABLE>
