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1-NY/1274427.2
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
____________
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) September 28,
2000
Lifetime Hoan Corporation
(Exact Name of Registrant as Specified in its Charter)
Delaware 1-19254 11-2682486
(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
One Merrick Avenue, Westbury, New York 11590
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code(516) 683-6000
N/A
(Former Name or Former Address, if Changed Since Last Report)
ITEM 2. Acquisition or Disposition of Assets
On September 28, 2000, effective for accounting purposes
only on September 1, 2000, MK Acquisition Corporation ("Buyer"),
a Delaware corporation and a wholly-owned subsidiary of Lifetime
Hoan Corporation, a Delaware corporation (the "Company")
purchased from M. Kamenstein, Inc., a Delaware corporation
("Seller") substantially all of the properties, assets and
business of Seller, all upon the terms and conditions of an
Assets Purchase Agreement dated as of September 28, 2000 between
Buyer and Seller (the "Assets Purchase Agreement").
Prior to the closing of the purchase (the "Closing"), Seller was
engaged in the creation, design, development, importation,
distribution and sale of pantryware, storage and organization
products, teakettles, buffet serveware and small furniture
accessories and packaging and selling spices in bottles and
related spice-racks and holders (the "Business"). Following the
closing, Buyer has been carrying on the business previously
conducted by Seller.
Upon the terms and provisions of the Assets Purchase Agreement,
Buyer purchased from Seller, all of Seller's existing properties
and assets of every kind and nature, real, personal, tangible or
intangible, wherever located, including, but not limited to, real
property, fixed assets, inventory, accounts receivable, prepaid
expenses, trademarks, copy rights, customer and supplier lists,
leases of real and personal property and other contracts, and the
Business as a going concern, including, without limitation,
Seller's corporate name, including the right to use such name,
and all of its other goodwill, but excluding therefrom the
properties and assets listed in Schedule 1(b) to the Assets
Purchase Agreement. The properties, assets and business sold by
Seller to Buyer pursuant to the Assets Purchase Agreement are
referred to as the "Assets".
As consideration for the Assets:
1. Buyer paid in cash:
(i) To Seller at the Closing a cashiers
check payable to the Internal Revenue Service ("IRS") in the
amount of $176,462.18 to be applied by Seller at or immediately
following the Closing to the payment in full of all of Seller's
outstanding obligations to the IRS pursuant to a certain Offer in
Compromise (IRS Form 656), as amended, by Seller to the IRS, as
accepted by the IRS on January 11, 1999;
(ii) To Seller at the Closing a cashiers
check payable to the Commonwealth of Massachusetts Department of
Revenue in the amount of $2,000.00 to be applied by Seller to the
payment in full of Seller's franchise tax obligations to the
Commonwealth of Massachusetts for the third quarter of fiscal
year 2000, and a cashiers check payable to the New York State
Department of Corporations in the amount of $500.00 to be applied
by Seller to the payment in full of Seller's franchise tax
obligations to the State of New York for the third quarter of
fiscal year 2000; and
(iii) To New England Partners earn-out
payments based on the accumulated gross profits of the Business
during the twelve-month period ended December 31, 2001, the
twenty four-month period ended December 31, 2002 and the thirty
six-month period ended December 31, 2003, calculated as described
in Schedule 2.1(C) to the Assets Purchase Agreement.
Buyer assumed and undertook to perform only the debts,
liabilities and obligations of Seller listed in Schedule 2.2 to
the Assets Purchase Agreement, including among others all debts,
obligations and liabilities of Seller incurred at or prior to and
existing at the Closing with respect to, arising from or in any
manner relating to the Business and/or the Assets, but excluding
therefrom certain liabilities including, but not limited to, (i)
all or any liabilities and obligations of Seller existing at
August 31, 2000 or arising out of any transaction at or prior to
August 31, 2000, to the extent that such liabilities or
obligations (A) are not reflected or reserved against in the
balance sheet of Seller as of August 31, 2000 referred to in
Section 6.6 of the Assets Purchase Agreement and (B) exceed
$50,000.00, (ii) all or any liabilities and obligations of Seller
arising out of any transaction or commitment made between
September 1, 2000 and the Closing otherwise than in the ordinary
course of the Business or with the pre-approval of Buyer and/or
the Company, (iii) all or any liabilities and obligations of
Seller relating to or arising out of any employee benefit
program, except for any and all of the liabilities and
obligations arising out of, based on, or in any manner relating
to Seller's pension and medical plans, (iv) all or any notes or
other obligations of Seller owing or payable to any stockholder,
director, officer or related party of Seller (except that Buyer
assumed and undertook Seller's obligation to repay (A)
$1,000,000.00 of Seller's $1,540,500.00 promissory note to Peter
D. Kamenstein and (B) the $100,000.00 loan made by Peter D.
Kamenstein to Seller after July 31, 2000 with the pre-approval of
Buyer and the Company), (v) all or any liability for any taxes
relating to Seller arising at or prior to the Closing, or the
Business at or prior to the Closing, except for transfer taxes
and bulk sales taxes, if any, arising out of the sale of the
Assets by Seller to Buyer pursuant to the Assets Purchase
Agreement, and (vi) all or any liabilities and obligations of
Seller relating to a commercial lease between B.G.H. Realty Trust
and Seller, dated February 22, 1996, as amended, for premises
located at 46 Industrial Road, Leominster, Massachusetts 01453
(the "Assumed Liabilities"), and to pay to or on behalf of Seller
and Taxter, Inc., Seller's sole stockholder ("Seller's Parent"),
the following amounts:
(i) to Peter D. Kamenstein $1,000,000.00 in cash (the "Kamenstein
Installment Payments") in partial satisfaction by Seller of the
amount owing to Peter D. Kamenstein by Seller pursuant to a loan
agreement among Peter D. Kamenstein, Seller and Seller's Parent
as follows:
DATE AMOUNT
At the Closing $ 333,334.00
First Anniversary of the Closing $ 333,333.00
Second Anniversary of the Closing $ 333,333.00
TOTAL $1,000,000.00
(ii) to Peter D. Kamenstein at the Closing $101,700.00 in cash
in full satisfaction of all amounts owing to Peter D. Kamenstein
pursuant to a commercial revolving promissory note dated as of
June 16, 2000 between Peter D. Kamenstein, Seller and Seller's
Parent.
(iii) to Bank of America at the Closing $7,716,247.29 in cash
(the "Pay-Off Amount") in full satisfaction of all amounts owing
to Bank of America by Seller's Parent pursuant to a loan and
security agreement dated as of September 26, 1997 among Seller,
Seller's Parent and Bank of America (formerly known as Nations
Bank) pursuant to which Bank of America had provided a
$15,000,000.00 revolving credit facility, as amended from time to
time.
(iv) to Seller at the Closing $128,532.04 in cash as
reimbursement for all amounts relating to the lease prepayment to
the end of the term with respect to a commercial lease between
B.G.H. Realty Trust and Seller, dated February 22, 1996, as
amended, for premises located at 46 Industrial Road, Leominster,
Massachusetts 01453.
.
Except for the Assumed Liabilities, Buyer did not assume or
undertake to perform or pay any other debt, liability or
obligation of Seller.
The cash paid at the Closing was borrowed by the Company under a
revolving line of credit with Bank of New York.
In addition, Buyer entered in to an agreement dated as of
September 28, 2000 with Bank of America, Seller, and Seller's
Parent (the "Agreement Regarding Certain Proceeds") with respect
to certain proceeds which were made available by Bank of America
for purposes of completing the transactions contemplated in the
Assets Purchase Agreement. An amount equal to the proceeds was
included in the amounts calculated by Bank of America as being
the Pay-Off Amount.
As evidence of Buyer's obligation to pay to Peter D. Kamenstein
in cash the balance of the Kamenstein Installment Payments
remaining unpaid following the Closing, Buyer executed and
delivered to Peter D. Kamenstein at the Closing a promissory note
of Buyer payable to Peter D. Kamenstein (the "Promissory Note").
In addition, Buyer, on behalf of the Company, executed and
delivered to Peter D. Kamenstein at the Closing a fully executed
guaranty, dated as of September 28, 2000, with respect to the
payment of the Promissory Note.
Buyer and Peter D. Kamenstein, the key executive of Seller,
entered into an employment agreement dated as of September 28,
2000 (the "Employment Agreement") pursuant to which the Buyer
agreed to employ Peter D. Kamenstein as its President for a term
commencing on September 28, 2000 and ending on July 31, 2003 for
a salary at the rate of $300,000.00 per year and certain earn-
out payments calculated as described in Attachment A to the
Employment Agreement. In addition, the Company granted to Peter
D. Kamenstein options to purchase 50,000 shares of Common Stock
of the Company at an exercise price equal to the fair market
value of the Company's Common Stock on the date of grant.
Following the Closing, Seller changed its corporate name to
Finally Done, Inc. and Buyer changed its corporate name to M.
Kamenstein Corp.
The information provided in this Item 2 is qualified in its
entirety by reference to the terms and conditions of the
Agreement, a copy of which is attached hereto as Exhibits 2.1.
ITEM 7. Financial Statements, Pro Forma Financial Information
and Exhibits.
Financial statements of business acquired.
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Taxter, Inc. and Subsidiary
Elmsford, New York
We have audited the accompanying consolidated balance sheet of
Taxter, Inc. and Subsidiary (the Company) as of December 31,
1999, and the related consolidated statements of operations,
stockholders' deficiency and cash flows for the year then ended.
These financial statements are the responsibility of the
Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial
position of Taxter, Inc. and Subsidiary as of December 31, 1999,
and the results of its operations and its cash flows for the year
then ended in conformity with generally accepted accounting
principles.
The accompanying financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed
in Note K to the financial statements, the Company has suffered
recurring losses from operations and has a net capital
deficiency, which raise substantial doubt about its ability to
continue as a going concern. Management's plans regarding those
matters are described in Note K. The financial statements do not
include any adjustments that might result from the outcome of
this uncertainty.
Messina, Ceci, Archer & Company, P.C.
May 15, 2000, except for Notes F and K, as to which the date is
September 19, 2000.
Stamford, Connecticut
Taxter, Inc. and Subsidiary
Consolidated Balance Sheet
December 31, 1999
1999
Assets
Current Assets
Cash and cash equivalents $ 125,719
Accounts receivables - net of allowances for
returns and bad debts of $745,000 3,433,989
Inventories 3,601,968
Prepaid expenses and other current assets 271,376
7,433,052
Property, Plant and Equipment, net 2,622,985
Other Assets
Intangible Assets, net 1,013,603
Other assets 8,411
1,022,014
$11,078,051
Liabilities and Stockholders' Deficiency
Current Liabilities
Accounts payable $ 2,852,000
Accrued expenses 1,403,957
Capital lease obligation 164,376
Current portion of long-term debt 6,767,637
11,187,970
Long-Term Liabilities
Notes payable to stockholder 1,540,500
Income taxes payable 170,000
1,710,500
Preferred Stock - Series B, redeemable, nonconvertible,
$.01 par value; authorized, issued and
outstanding,3,500,000 shares (liquidation
value $1.00 per share) 3,500,000
Preferred Stock - Series C, redeembable, nonconvertible,
$.01 par value; authorized, issued and
outstanding,3,250,000 shares (liquidation
value $1.00 per share) 3,250,000
Stockholders' Deficiency
Preferred Stock - Series A, convertible, $.01 par
value; authorized, issued and outstanding, 500,000
shares(liquidation value share $1.00 per) 500,000
Common Stock - $.01 par value; authorized,
600,000 shares; issued and outstanding,
52,940 shares 530
Paid-in capital 441
Accumulated deficit (9,071,390)
(8,570,419)
$11,078,051
The accompanying notes are an integral part of these consolidated
financial statements.
Taxter, Inc. and Subsidiary
Consolidated Statement of Operations
For the Years Ended December 31, 1999
1999
Net Sales $19,471,476
Cost of Sales 12,973,356
Gross Profit 6,498,120
Operating Expenses
Selling and marketing 2,609,258
Plant 1,370,546
General and administrative 3,541,367
Depreciation and amortization 1,406,529
8,927,700
Loss from Operations (2,429,580)
Other Expense
Relocation related expenses (132,513)
Loss on disposal of product line (549,800)
Interest expense (716,192)
(1,398,505)
Loss Before Benefit from Income Taxes (3,828,085)
Income Tax Benefit (8,039)
Net Loss $(3,820,046)
The accompanying notes are an integral part of these consolidated
financial statements.
Taxter, Inc. and Subsidiary
Consolidated Statement of Stockholders'Deficiency
For the Years Ended December 31, 1999
Preferred Stock Common Stock Paid
Series A -in Accumulated
Balance, Share Amount Shares Amount Capital Deficit Total
Dec. 31,1998 500,000 $500,000 52,940 $530 $441 $(5,251,344) $(4,750,373)
Net Loss - - - - - (3,820,046) (3,820,046)
Balance,
Dec. 31,1999 500,000 $500,000 52,940 $530 $441 $(9,071,390 $8,570,419)
The accompanying notes are an integral part of these consolidated
financial statements.
Taxter, Inc. and Subsidiary
Consolidated Statement of Cash Flows
For the Year Ended December 31, 1999
1999
Cash Flows from Operating Activities
Net loss $(3,820,046)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 1,865,512
Provision for returns and bad debts -
Provision for inventory reserve 28,797
Gain on tax settlement -
Loss on disposal of equipment 32,513
Changes in assets and liabilities:
Accounts receivable (274,656)
Inventories (1,248,076)
Prepaid expenses & other current assets (95,757)
Intangible and other assets (274,910)
Accounts payable 1,911,558
Accrued expenses & other current liabilities 404,686
Net Cash Used in Operating Activities (1,470,379)
Cash Flows from Investing Activities
Purchase of property and equipment (575,908)
Net Cash Used in Investing Activities (575,908)
Cash Flows from Financing Activities
Capital contributions -
Net borrowings under revolving credit facility 651,401
Proceeds from note payable to stockholder 1,540,500
Repayments under capital leases (22,921)
Net Cash Provided by Financing Activities 2,168,980
Net Increase in Cash and Cash Equivalents 122,693
Cash and Cash Equivalents, beginning 3,026
Cash and Cash Equivalents, ending $125,719
Supplemental Cash Flow Disclosures:
Income taxes paid $246,340
Interest paid $716,192
Capital leases entered into $121,188
The accompanying notes are an integral part of these consolidated
financial statements.
Taxter, Inc and Subsidiary
Notes to Consolidated Financial Statements
December 31, 1999
NOTE A - BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING
POLICIES
Organization
Taxter, Inc. and its wholly-owned subsidiary, M. Kamenstein, Inc.
(collectively, the "Company") were both incorporated in the state
of Delaware on May 15, 1997 and May 28, 1997, respectively. From
the dates of incorporation to June 13, 1997, neither company had
operations. On June 13, 1997, the Company acquired the net
assets and business of Home Resources, Inc. (a majority-owned
subsidiary of Code, Hennessey and Simmons Limited Partnership).
The purchase price consisted of the issuance of the Preferred
Stock - Series C valued at $3,250,000, plus acquisition costs.
The Company accounted for the acquisition under the purchase
method. The excess of the purchase price over the fair value of
the net assets acquired has been recorded as goodwill ($647,041)
and was being amortized over 15 years. As a result of recurring
operating losses, during the year ended December 31, 1998 the
Company determined that the carrying value of the goodwill was
impaired and wrote off all remaining goodwill. Amortization and
write-off of goodwill was $623,676 during the year ended December
31, 1998.
Description of Business
The Company is engaged in the design, development and marketing
of a broad line of wood, plastic and metal household and office
products, primarily in the United States.
Principles of Consolidation
The consolidated financial statements include the accounts of
Taxter, Inc. and its subsidiary. All intercompany balances and
transactions have been eliminated in consolidation.
Use in Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that effect the amounts reported
in the financial statements and accompanying notes. Actual
results could differ from those estimates.
Revenue Recognition
Revenue is recognized upon the shipment of products to customers.
Sales are recorded net of an estimate for returns and allowances.
Inventories
Inventories, which consist principally of finished goods and raw
materials that are imported, are stated at the lower of cost
(first-in, first-out method) or market.
Property, Plant and Equipment
Property, plant and equipment acquired on June 13, 1997 is stated
at fair value. All subsequent purchases are stated at cost. The
Company depreciates its assets using the straight-line method
over the related assets estimated useful lives which range from 2
to 30 years.
Intangible Assets
Intangible assets are being amortized on the straight-line method
over their estimated useful lives which range from 3 years to 15
years. The carrying value of intangible assets is reviewed when
facts and circumstances suggest that it may be impaired. The
Company assesses the recoverability of intangible assets by
determining whether the amortization of the intangible assets
balance over its remaining life can be recovered through
undiscounted projected future cash flows.
Income Taxes
The Company recognizes deferred income tax assets and liabilities
for the expected future tax consequences of temporary differences
between the financial reporting basis and the tax basis of assets
and liabilities.
Stock-Based Compensation
The Company accounts for stock-based compensation utilizing the
provisions of Statement of Financial Accounting Standards No. 123
("SFAS No. 123"), Accounting for Stock-Based Compensation. Under
SFAS No. 123, the Company will apply the provision of Accounting
Principles Board Opinion No. 25, Accounting for Stock Issued to
Employee to its stock-based employee compensation arrangements,
and is only required to supplement its financial statements with
additional pro forma disclosures.
Concentration of Credit Risk
Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of trade
accounts receivables. The Company performs ongoing credit
evaluations of its customers' financial conditions and generally
does not require collateral. Additionally, the Company factors
certain of its accounts receivable for which the Company pays a
fee to an unrelated third party based upon net sales. During the
year ended December 31, 1999, the Company had sales to two
customers that accounted for 28% and 13% of consolidated net
sales. During the year ended December 31, 1998, the Company had
sales to one customer that accounted for 26% of consolidated net
sales.
Comprehensive Income
The Company utilizes the provisions of Statement of Financial
Accounting Standards ("SFAS") No. 130, Reporting Comprehensive
Income. SFAS 130 requires that comprehensive income, which
includes net income (loss) as well as certain changes in assets
and liabilities recorded in stockholders' equity, be reported in
the financial statements. There were no components of
comprehensive income other than net loss for the year ended
December 31, 1999.
Reclassifications
Certain prior year balances have been reclassified to conform to
current year presentation
NOTE B - INVENTORIES
Inventories consist of the following as of December 31, 1999:
1999
Finished goods $ 2,732,216
Raw materials 1,187,507
3,919,723
Less reserve (317,755)
$ 3,601,968
NOTE C - PROPERTY, PLANT AND EQUIPMENT - NET
Property, plant and equipment consist of the following as of
December 31, 1999:
1999
Land $ 25,000
Building and improvements 557,507
Machinery, equipment, molds and fixtures 3,201,244
Computer software and equipment 1,035,244
4,818,995
Less accumulated depreciation and amortization (2,196,011)
$ 2,622,985
Computer software and equipment includes property under capital
leases with a book value of $170,617 at December 31, 1999,
respectively. Amortization of assets under capital leases is
included in depreciation expense. Depreciation and amortization
of property, plant and equipment was $1,065,464 during the year
ended December 31, 1999.
NOTE D - INTANGIBLE ASSETS - NET
Intangible assets consist of the following as of December 31,
1999:
1999
Patents, trademarks, intellectual property rights & pckg $1,577,368
Other 157,143
1,714,511
Less accumulated amortization (700,908)
$ 1,013,603
Amortization of intangible assets was $800,048 during the year
ended December 31,. Included in the $800,048 of 1999
amortization is a $458,983 write-off of a cancelled royalty
agreement, which is included in the loss from disposal of product
line in the consolidated statement of operations.
NOTE E - NOTE PAYABLE TO STOCKHOLDER
In June 1999, the Company borrowed $1,540,500 from the
Chairman/stockholder under a note payable, which bears interest
at 14% and is payable monthly. The principal portion of this
note payable is due in June 2004. The note is secured by
substantially all assets of the Company and is subordinate to the
line of credit discussed in Note F.
NOTE F - LONG-TERM DEBT
The Company entered into a revolving credit facility with a bank
in September 1997. The agreement, as amended through the eighth
amendment dated June 16, 2000, provides for a maximum line of
credit of $10 million. The amount available under the line of
credit is based upon certain levels of accounts receivable and
inventory, and is reduced by the amount of outstanding standby
letters of credit and import letters of credit. Amounts
outstanding under the line of credit bear interest ranging from
the bank's prime lending rate (8.5% as of December 31, 1999) to
the bank's prime rate plus 1.5% based on the underlying
collateral as described in the loan agreement. At December 31,
1999, the effective rate of interest is 9.4%.
The line of credit is collateralized by substantially all assets
of the Company and expires on March 31, 2001. The line of credit
is guaranteed up to $1,500,000 by NEPG II, LP, a preferred
stockholder. In addition, borrowings that exceed the prescribed
borrowing base plus the preferred stockholder guarantee are
guaranteed up to $1,100,000 by the Chairman/stockholder. The
line of credit contains various covenants, including specific
minimum financial coverage levels. At December 31, 1999, the
Company was in default of certain covenants, which the bank
agreed to waive through July 15, 2000. As of September 19, 2000,
the Company has classified this loan as short-term on the
accompanying balance sheet, as a waiver has not been received
past July 15, 2000.
NOTE G - COMMITMENTS
The Company is obligated under various operating leases for
office and warehouse space and equipment. Rent expense was
$838,346 during the year ended December 31, 1999. In February
1999, the Company entered into a sublease agreement with Holiday
Housewares to lease 120,000 square feet of warehouse space at its
Leominster, MA facility. This lease is for a period of 28 months
and expires on June 30, 2001. In May 2000, the Company entered
into a sublease agreement for the remaining 120,000 square feet
of warehouse space in Leominster, MA. This lease is for 14
months and expires on June 30, 2001.
Aggregate minimum annual rent commitments net of sublease income,
under noncancelable operating leases are as follows:
Year Ending
December 31,
2000 $ 466,216
2001 235,421
2002 237,306
2003 234,841
2004 28,721
NOTE H - INCOME TAXES
At December 31, 1999, the Company had a deferred tax asset of
approximately $3,500,000 consisting primarily of the tax effect
of the net operating loss carryforwards. Due to the Company's
losses incurred, management does not consider that enough support
exists to overcome the "more likely than not" criterion. As a
result, for financial reporting purposes, the deferred tax asset
is reduced by a full valuation allowance.
At December 31, 1999, the Company has a net operating loss
carryforward of approximately $7,800,000, which expires in 2013.
In connection with the acquisition of the net assets and business
of Home Resources, Inc., the Company assumed a $1.2 million
(including interest and penalties) liability relating to an
assessment from the Internal Revenue Service ("IRS"). On
December 31, 1998 the Company reached a settlement with the IRS
requiring a total payment of $540,000, payable $200,000 by April
15, 1999, $170,000 on January 31, 2000 and $170,000 on January
31, 2001. The balance due the IRS (including interest and
penalties) at December 31, 1998 was $1,352,029. The liability
due to the IRS is subordinate to the bank line of credit.
NOTE I - STOCKHOLDERS' EQUITY
Preferred Stock
The Series A convertible preferred stock (voting) is convertible,
at the option of the holder, into the number of shares of common
stock as determined in accordance with the provision of the
stockholders' agreement. The conversion price is $1.00 per share
and may be subject to adjustment as provided in the stockholders'
agreement.
The Series B redeemable preferred stock (nonvoting) is
mandatorily redeemable at $1.00 per share by the Company upon the
earlier of: (a) the occurrence of a liquidity event, as defined,
or (b) one-third of the shares on each of the following dates:
September 30, 2001, September 30, 2002, and September 30, 2003.
The Series C redeemable preferred stock (nonvoting) is
mandatorily redeemable at $1.00 per share by the Company upon the
earlier of: (a) the occurrence of a liquidity event, as defined,
or (b) the eighth anniversary from the date of issuance.
All preferred shares are entitled to receive dividends when
declared by the Board of Directors. Upon liquidation, each
preferred stockholder will be entitled to receive his liquidation
value per share before the common stockholders receive any
distributions.
Common Stock
In September 1997, the Company adopted the Taxter, Inc. 1997
Employee Incentive Stock Option Plan (The "Plan"). The Plan
provides for grants to employees of incentive stock options and
nonqualified stock options for the purchase of up to 41,177
shares of the Company's common stock. Stock options are to be
granted at an exercise price of not less than fair market value
as determined by the Company's Board of Directors. All stock
options vest over four years and expire in five years.
During 1997, the Company granted stock options to purchase 5,882
shares of common stock at $1 per share. In February 1998, the
Company sold 5,882 shares of common stock for $500 upon exercise
of these options. There are no outstanding options as of
December 31, 1999.
NOTE J - 401 (K) PLAN
As of September 1, 1997, the Company adopted a 401(k) Plan.
Individuals who were 21 years of age and employees of the Company
as of September 1, 1997 were eligible to participate.
Individuals hired after this date are eligible to participate
after completing one year of service. Each employee can
contribute up to the maximum amount allowed by law. There is no
company matching contribution.
NOTE K - SUBSEQUENT EVENT - GOING CONCERN
The Company has suffered recurring losses from operations and has
a net capital deficiency, which raises substantial doubt about
its ability to continue as a going concern. In addition, the
Company is in default of certain of its loan covenants as of
September 19, 2000. Management believes that the uncertainty of
future operations is mitigated by its plan to sell substantially
all assets and operations of the Company, as described below.
The Company has a proposal from Lifetime Hoan Corporation to sell
substantially all assets of the Company, including real, personal
and intangible assets and the business as a going concern,
including the right to the use of its corporate name and certain
real property leases. The acquiring company will assume certain
of the liabilities of the Company, as defined in the proposal.
(b) Pro forma financial information.
The table below reflects unaudited pro forma combined results of
the Company, Lifetime and Kamenstein as if the acquisition had
taken place at the beginning of the years ended December 31, 2000
and 1999. The pro forma financial information is not necessarily
indicative of the operating results that may occur in the future
or that would have occurred had the acquisition of Kamenstein
been affected on the date indicated.
2000 PROFORMA
(in thousands) Lifetime Kamenstein Proforma Proforma
Hoan Adjustment 2000
Net sales $ 129,375 $12,921 $142,296
Cost of sales 75,001 9,707 84,708
Gross profit 54,374 3,214 57,588
Selling general & Adm. Expenses 47,903 6,162 54,065
Other(income)expense, net 220 917 1,137
Income (loss) before taxe 6,251 ($3,865) 2,386
Income taxes (benefit) 2,817 21 ($1,582) 1,256
Net income $3,434 ($3,886) $1,582 $1,130
Basic earnings (loss)per
Common share $0.31 ($0.35) $0.14 $0.10
Diluted earnings (loss)per
Per Common share $0.31 ($0.35) $0.14 $0.10
1999 PROFORMA
(in thousands) Lifetime Kamenstein Proforma Proforma
Hoan Adjustment 1999
Net sales $106,761 $19,471 $126,232
Cost of sales 57,979 12,973 70,952
Gross profit 48,782 6,498 55,280
Selling general & Admin Expenses 42,250 8,928 51,178
Other(income)expense,net (251) 1,398 1,147
Income(loss)before taxes 6,783 ($3,828) 2,955
Income taxes (benefit) 2,822 (8) ($1,546) 1,268
Net income $3,961 ($3,820) $1,546 $1,687
Basic earnings (loss)per
Common share $0.32 ($0.30) $0.12 $0.13
Diluted earnings(loss)per
Common share $0.31 ($0.30) $0.12 $0.13
The proforma adjustments for years 2000 and 1999 reflects
Lifetime Hoan Corporation's effective tax rate. The required
proforma balance sheet was previously filed with the December 31,
2000 Form 10-K.
(c) Exhibits. The following exhibits are filed with this
report:
Exhibit
Number Description
1 Assets Purchase Agreement dated as of Sept.28, 2000
between MK Acquisition Corporation and M.Kamenstein,
Inc.,together with Schedules 1(b) entitled Excluded
Assets,2.1(c) entitled NEP Earn-Out, and 2.2 entitled
Assumed Liabilities referred to therein (incorporated
herein by reference to Exhibit 10.31 of the Sept.30,
2000 form 10-Q[No.1-19254] of Lifetime Hoan
Corporation).
2 Agreement Regarding Certain Proceeds dated Sept. 28,
2000 among Bank of America, N.A., Taxter, Inc., M.
Kamenstein, Inc. and MK Acquisition corporation.
3 Promissory Note dated September 28, 2000 of MK
Acquisition Corporation payable to Peter D. Kamenstein.
4 Guarantee dated September 28, 2000 of Lifetime Hoan
Corporation with respect to the payment of the
Promissory Note.
5 Employment Agreement dated September 28, 2000
between MK
Acquisition Corporation and Peter D. Kamenstein.
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 hereunto duly authorized.
LIFETIME HOAN CORPORATION
Date: April 30, 2001 By:
Name: Jeffrey Siegel
Title: President and Chief Executive Officer
INDEX TO EXHIBITS
Exhibit
Number Description
1 Assets Purchase Agreement dated as of Sept. 28, 2000
between MK Acquisition Corporaion and M.
Kamenstein, Inc.,together with Schedules 1(b)
entitled Excluded Assets,2.1(c) entitled NEP
Earn-Out, and 2.2 entitled Assumed
Liabilities referred to therein (incorporated
herein by Reference to Exhibit 10.31 of the
September 30, 2000 form 10-Q [No. 1-19254] of
Lifetime Hoan Corporation).
2 Agreement Regarding Certain Proceeds dated
September 28, 2000 among Bank of America, N.A.,
Taxter, Inc., M.Kamenstein Inc. and MK
Acquisition Corporation.
3 Promissory Note dated September 28, 2000 of MK
Acquisition Corporation payable to Peter D.
Kamenstein.
4 Guarantee dated September 28, 2000 of Lifetime
HoanCorporation with respect to the payment
of the Promissory Note.
5 Employment Agreement dated September 28, 2000
between MK Acquisition Corporation and
Peter D. Kamenstein.
EXHIBIT 2
AGREEMENT REGARDING CERTAIN PROCEEDS
This Agreement is entered into September 28, 2000, by and among
Bank of America, N.A., (the "Lender") a national banking
association (formerly "nations Bank, N.A."), Taxter, Inc., a
corporation organized and existing under the laws of the State of
Delaware (the "Borrower"), M. Kamenstein, Inc., a corporation
organized and existing under the laws of the State of Delaware
("Guarantor") (the Borrower and the Guarantor being sometimes
referred to in this Agreement collectively as the "Loan
Parties"), and MK Acquisition Corporation (the "Buyer").
RECITALS
Borrower, Guarantor and Lender are parties to a Loan and Security
Agreement dated as of September 26, 1997 (as amended from time to
time, the "Lender Loan Agreement") and certain related financing
documents (collectively, the "Lender Loan Documents"), pursuant
to which Lender has extended certain financial accommodations to
Burrower as more fully set forth therein.
The Guarantor and the Buyer have entered into an Assets Purchase
Agreement dated September 28, 2000, (the "Assets Purchase
Agreement") pursuant to which Buyer is (i) to assume and
undertake substantially all of the liabilities of Guarantor, and
make certain other financial arrangements with or on behalf of
Burrower and Guarantor, including the repayment by the Guarantor
of its obligations under the Lender Loan Agreement, subject,
among other things, to the termination of the Lender Loan
Agreement and the release of the Borrower, guarantor, Peter
Kamenstein and NEFG from any and all obligations any of them may
have under and in respect of the Lender Loan Agreement, except as
otherwise provided in the Release (defined below and in this
Agreement.
A condition, among others, of the Buyer entering into the Assets
Purchase Agreement is that a Release (the "Release") be executed
and delivered by the Lender and the Loan Parties simultaneously
with the execution of the Assets Purchase Agreement.
The parties wish to set forth procedures for the disbursements of
certain proceeds relating to the Loan Agreement and to the
Guarantor's demand deposit account number 3299933004 with the
Bank (the "Deposit Account").
All capitalized terms used in this Agreement and not defined
herein shall have the meaning given to them in the Lender Loan
Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and of the
mutual covenants herein contained and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
The parties acknowledge that the Payoff Amounts (as that term is
defined in the Release) include (a) $45,715.90 (the "Letter of
Credit Security"), to be held by the Lender to cover and secure
the obligations of the Borrower and the Guarantor under the
letters of credit described on Schedule 1 attached to and made a
part of this Agreement (each a "Letter of Credit," collectively,
the "Letters of Credit"), (b) $50,000 (the "Other Charges
Security") to be held by the Lender to cover items returned,
mathematical errors, and other amounts incorrectly omitted in the
calculations of the Payoff Amounts and determined after the date
of this Agreement (collectively, the "Other Charges"), and (c)
$140,000 which has been advanced on September 27, 2000, to the
Borrower by deposit to the deposit account (the "Deposit
Advance").
The Borrower and the Guarantor agree to pay to the Buyer on
October 28, 2000, or upon such earlier date as the Buyer, the
Guarantor and the Borrower may agree, all amounts remaining in
the Deposit Account. The Lender agrees that it shall not
exercise any right of offset it may otherwise have with respect
to funds in the Deposit Account to cover amounts owed under the
Lender Loan Agreement, the Release of this Agreement. The Lender,
solely in its capacity as depository bank, may, however, charge
the Deposit account for checking fees and other deposit account
charges as the existing agreements between the Guarantor and the
Lender, solely in its capacity as depository bank, relating to
the Deposit Account may provide.
With respect to the Letters of Credit:
The Lender shall apply the Letter of Credit Security to the
reimbursement and other obligations with respect to the Letters
of Credit as they may arise from time to time.
Upon surrender of a Letter of Credit, upon the security of a
Letter of Credit with another Letter of Credit in form and
substance and from an issuer satisfactory to the Lender, or
within thirty-five (35) days after termination or expiration of a
Letter of Credit, whichever is soonest, the Lender shall release
from the Letter of Credit Security and amount equal to the stated
amount of such Letter of Credit minus the amount of all draws
which have been paid and other obligations with respect thereto.
The Lender may apple the Other Charges Security to Other Charges
as they arise from time to time.
To the extent not sooner applied as provided for in clause (b) of
Paragraph 1 above, the Lender shall release to the Buyer of its
order the balance of the Other Charges Security on November 28,
2000, provided, however, that in the event a claim of reasonable
merit has been made but not resolved with respect to the Letters
of Credit or Other Charges, the Lender may retain an amount that
could reasonably be expected to be due with respect to such claim
until the Lender has, in the exercise of its reasonable judgment,
determined that such claim has been paid or resolved.
The Loan Parties acknowledge and agree that the Letter of Credit
Security and the Other Charges Security are the property of the
Buyer and that the Lender may follow the sole directions of the
Buyer with respect to any portion of the Letter of Credit
Security or the Other Charges Security it is to release.
This Agreement shall survive the execution and delivery of the
Release. Except as otherwise provided in this Agreement, The
Release continues in full force and effect.
This Agreement may be executed in counterparts, each of which
when so executed and delivered shall be deemed an original, but
all such counterparts together shall constitute one and the same
instrument. Delivery of an executed counterpart of a signature
page to this Agreement by facsimile transmission shall be
effective as delivery of a manually executed counterpart of this
Agreement.
This Agreement shall be governed by and construed in accordance
with the laws of the State of Maryland, without giving effect to
the conflicts of laws provisions thereof.
IN WITHESS WHEREOF, the parties hereto have executed or cause
this Agreement to be executed by the duly authorized
representatives as of the date and year first above written.
BANK OF AMERICA, N.A. ("Lender")
By: ____________________________
Name:
Title:
MK ACQUISITION CORPORATION ("Buyer")
By: ____________________________
Name:
Title:
TAXTER, INC. ("Borrower")
By: ____________________________
Name:
Title:
M. KAMENSTEIN, INC. ("Guarantor")
By: ____________________________
Name:
Title:
EXHIBIT 3
MK ACQUISITION CORPORATION
PROMISSORY NOTE
September 28, 2000
FOR VALUE RECEIVED, MK ACQUISITION CORPORATION ("Buyer"), a
Delaware corporation, hereby promises to pay MR. PETER KAMENSTEIN
("Peter Kamenstein"), an individual, the principal amount of
$666,666.00 in two installments as follows:
Date of Amount of
Installment Installment
September 28, 2001 $333,333.00
September 28, 2002 $333,333.00
This Note shall bear no interest. Payments of principal shall be
made in immediately available funds in lawful money of the United
States of America by certified check to Peter Kamenstein at 665
Titicus Road, North Salem, New York 10560.
This Note is issued in accordance with and subject to the terms
and conditions herein set forth.
1. Contingent Upon Employment. Notwithstanding the foregoing,
in the event that Peter Kamenstein terminates his employment with
Buyer under that certain Employment Agreement dated September 28,
2000 between Peter Kamenstein and Buyer (the "Employment
Agreement") or the Employment Agreement is terminated pursuant to
Section 6 thereof (except for Section 6(C)(iv)), this Note shall
immediately be canceled and no further amounts shall be owing
hereunder.
2. Optional Payments. Buyer, at its option, may prepay, without
premium, at any time all or any part of the unpaid balance of the
principal amount of this Note. Any such optional payment shall
be applied to the then unpaid installments of principal of this
Note in order of the maturity thereof.
3. Default, Acceleration. If any of the following events shall
occur:
(A) If Buyer shall default for more than 10 days in the payment
of any installment of principal of this Note after the same shall
become due and payable; or
(B) If Buyer shall make an assignment for the benefit of
creditors, or shall admit in writing its inability to pay its
debts as they become due, or shall file a
voluntary petition in bankruptcy, or shall be adjudicated a
bankrupt or insolvent, or shall file any petition or answer
seeking for itself any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under
any present or future statute, law or regulation, or shall file
any answer admitting or not contesting the material allegations
of a petition filed against it in any such proceeding, or shall
seek or consent to or acquiesce in the appointment of any
trustee, receiver or liquidator of it or of all or any
substantial part of its properties; or
(C) If, within 60 days after the commencement of any proceeding
against Buyer seeking any reorganization, arrangement,
composition, readjustment, liquidation, dissolution or similar
relief under any present or future statute, law or regulation,
such proceeding shall not have been dismissed, or if, within 60
days after the appointment without the consent or acquiescence of
Buyer of any trustee, receiver or liquidator of Buyer or of all
or any substantial part of its properties, such appointment shall
not have been vacated or stayed, or if, within 60 days after the
expiration of any such stay, such appointment shall not have been
vacated,
then and in any such event, the holder of this Note may at any
time (unless all defaults shall have theretofore been remedied),
at its option, by written notice to Buyer, declare this Note to
be due and payable, whereupon the same shall forthwith mature and
become due and payable without presentment, demand, protest or
notice, all of which are hereby waived.
4. Reimbursement of Costs of Collection. In case of an Event of
Default, Buyer will reimburse Peter Kamenstein for all costs of
collection including reasonable attorneys' fees.
5. Securities Representation. Peter Kamenstein represents that
he will not dispose of all or any part of this Note in violation
of the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.
6. Notices. All notices, requests, consents and other
communications hereunder shall be in writing and shall be deemed
to have been duly given when delivered or mailed by first class
registered or certified mail, postage prepaid, addressed, (i) if
to the holder of this Note to whom this Note is originally
issued, to Mr. Peter Kamenstein, 665 Titicus Road, North Salem,
New York 10560 or at such other address as may have been
furnished to Buyer by such holder in writing, or (ii) if to
Buyer, to MK Acquisition Corporation, c/o Lifetime Hoan
Corporation, One Merrick Avenue, Westbury, New York 11590 or such
other address as may have been furnished in writing by Buyer to
Peter Kamenstein.
7. Amendments and Waivers. Neither this Note nor any term
hereof may be changed, waived, discharged or terminated orally or
in writing, except that any term of this Note may be amended and
the observance of any such term may be waived (either generally
or in a particular instance and either retroactively or
prospectively) with (but only with) the written consent of the
holder of this Note.
8. Guaranty. The obligations of the Buyer under this Note are
supported by an irrevocable guaranty of Lifetime Hoan
Corporation, dated the date hereof, and executed simultaneously
and in connection herewith in the form of Attachment A hereto.
9. Benefit. All of the covenants, stipulations, promises and
agreements contained in this Note by Buyer shall be binding upon
Buyer and its successors and assigns and shall inure to the
benefit of and be enforceable by Peter Kamenstein.
10. Law Governing. This Note shall be governed by and
construed in accordance with the laws of the State of New York,
without giving effect to the conflicts of law provisions thereof
(other than New York General Obligations Law 5-1401).
MK ACQUISITION CORPORATION
By_____________________________
Jeffrey Siegel
President
EXHIBIT 4
GUARANTY
THIS GUARANTY ("Guaranty") is given as of September 28,
2000 by Lifetime Hoan Corporation, a Delaware corporation with
its principal offices located in Westbury, New York (the
"Guarantor"), in favor of Peter Kamenstein, an individual
residing in North Salem, New York (the "Obligee").
Preliminary Statements
MK Acquisition Corporation ("Buyer"), a Delaware corporation and
a wholly-owner subsidiary of guarantor has entered into an
Assets Purchase Agreement (the "Assets Purchase Agreement") with
M. Kamenstein, Inc. dated September 28, 2000.
It is a condition of the effectiveness of the Assets Purchase
Agreement that Buyer issue a promissory note to Obligee in the
amount of $666,666,00 (the "Note").
It is a further condition to the effectiveness of the Guaranty
that Guarantor provide this Guaranty to guaranty the obligations
of Buyer under the Note. Capitalized terms used and not
otherwise defined in this Guaranty shall have the meanings given
to them in the Assets Purchase Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, the guarantor
hereby agrees as follows:
1. Guaranty. The Guarantor hereby unconditionally guarantees
the full and punctual payment when due, by acceleration or
otherwise, of all obligations of the Buyer now or hereafter
existing under the Note, whether for principal, interest, fees,
expenses or otherwise, it being understood and agreed that the
Guarantor agrees to pay any and all expenses (including counsel
fees and expenses, whether or not litigation is commenced and
during both the trial and any appellate phases of litigation)
incurred by the Obligee in enforcing any rights under this
Guarantee. All such obligations described above in this Section
1, and all replacements, renewals, consolidations, amendments
and other modifications thereof, are collectively referred to
herein as the "Obligations".
Guaranty Absolute. The Guarantor guarantees tat the Obligations
will be paid strictly in accordance with the terms of the Note
as agreed to by the Buyer and the Obligee, regardless of any
law, regulation or order now or hereafter in effect in any
jurisdiction affecting any of such terms or the rights of the
Guarantor with respect thereto. The liability of the Guarantor
under this Guaranty shall be absolute and unconditional
irrespective of:
any lack of validity or enforceability of the Note;
(b) any change in the time, manner or place of payment of, or in
any other term including, without limitation, the rate or amount
of interest payable under), all or any of the Obligations, or any
other amendment or waiver of or any consent to departure from the
Note;
(c) any change in the corporate existence, structure or
ownership of the Buyer or any insolvency, bankruptcy, suspension
or payments, reorganization or other similar proceedings
affecting the Buyer or any resulting release or discharge of an
obligation of the Buyer contained in the Note or any other
related documents;
any other circumstances which might otherwise constitute a
defense available to, or a discharge of, an obligator or a
guarantor.
The Obligations of the guarantor hereunder shall remain in full
force and effect until the Obligations have been paid in full.
If (i) or at any time payment of any of the Obligations is
rescinded or must otherwise be returned upon the insolvency,
bankruptcy or reorganization of the Buyer or the Guarantor or
otherwise, all as though such payment had not been made, or (ii)
this Guaranty is released in consideration of a payment of money
or transfer of property or grant of a security interest by the
guarantor or any other person and such payment, transfer or grant
is rescinded or must otherwise be returned by the Obligee upon
the insolvency, bankruptcy or reorganization of such person or
otherwise, all as though such payment, transfer or grant had not
been made, the Guarantor's obligations hereunder with respect to
such payments shall be reinstated at such time as though such
payments had been due but not made or such actions had not been
taken and related interest, costs, expenses and liabilities in
connection therewith.
2. Waiver. The Guarantor hereby waives promptness, diligence,
notice of acceptance and any other notice with respect to any of
the Obligations and this Guaranty and any requirement that the
guarantor exhaust any right or take any action against Buyer or
any other person or any collateral.
3. Waiver of Subrogation; Stay of Acceleration
Guarantor agrees not exercise or enforce any and all rights of
subrogation,
indemnification or reimbursement and/or any similar rights
against the Buyer with respect to this Guaranty, whether such
rights arise under an express or implied contract or by operation
of law unless and until all of the Obligations have been fully
paid; it being the intention of the parties that the guarantor
shall not be deemed to be a "creditor" (as defined in section 101
of the Federal Bankruptcy Code) of the Buyer by reason of the
existence of this Guaranty in the event that the Buyer becomes a
debtor in any proceeding under the Federal Bankruptcy Code.
If acceleration of the time for payment of any amount payable by
the Buyer
under the note is stayed upon insolvency, bankruptcy or
reorganization of the Buyer or otherwise, all such amounts
otherwise subject to acceleration under the terms of the Note
shall nonetheless be payable by the guarantor forthwith on demand
by the Obligee,
4. Representations and Warranties. The Guarantor hereby
represents and warrants to the Obligee as follows:
The Guarantor is a corporation duly incorporated, validity
existing and in good
standing under the laws of the State of Delaware.
(b) The Guarantor has full legal right, power and authority to
carry on its present business, to own its property and assets and
to perform its obligations hereunder.
(c ) All appropriate and necessary action has been taken by the
Guarantor to authorize the execution and delivery of this
Guaranty and to authorize its performance and observance of the
terms hereof.
(d) This Guaranty constitutes the legal, valid and binding
obligation of the guarantor enforceable in accordance with its
terms. The execution, delivery and performance of this Guaranty
will not violate any provision of law, other governmental
directive or decree, order or judgment binding upon the Guarantor
or any of its assets, or conflict with or result in the breach of
any provision of any agreement to which the guarantor is a party
or by which it or any of its properties or assets is bound and
will not constitute a default or an event that with the giving of
notice or the passing of time, or both, would constitute a
default under any such agreement.
5. Events of Default. Each of the following events and
occurrences shall constitute an Event or Default under this
Guaranty:
(a) The Guarantor shall fail to make any payments to the Obligee
when due and payable of any amount that the Guarantor is obliged
to pay under this Guaranty.
Any representation or warranty made by the guarantor herein shall
have been incorrect or misleading in any material respect when
made or deemed to have been made.
(c) The Guarantor shall (A) become insolvent or unable or
generally fail to pay its debts as they become due; (B) commit
any act of bankruptcy, including filing a petition in any
bankruptcy, reorganization, winding-up or liquidation proceeding;
(C) fail to have such petition filed by any other party
discharged within 30 days; (D) make any assignment for the
benefit of creditors; (E) admit in writing its inability to pay
its debts as they become due; (F) apply for, consent to or
acquiesce in the appointment of a trustee, receiver, sequestrator
or other custodian for itself; and/or (G) take any corporate
action authorizing or in furtherance of any of the foregoing.
(d) The Guarantor shall cease to do business or terminate
its business as presently conducted for any reason whatsoever or
institute any proceeding for its dissolution or termination.
It shall be unlawful for the guarantor to perform any material
obligation hereunder.
Amendments; Addresses for Notices.
(a) No amendment or waiver of any provision of
this Guaranty nor consent to any departure by the Obligee
therefrom shall be effective unless the same shall be in writing
and signed by the Obligee, and then such waiver or consent shall
be effective only in the specific instance and for the specific
purpose for which given.
(b) All Notices and other communications
provided for hereunder shall be in writing and shall be
delivered, as provided in the Agreement,
To the Guarantor at
One Merrick Avenue
Westbury, New York 11590
Attn: Jeffrey Siegel, President
To the Obligee at
665 Ticicus road
North Salem, New York 10560
Either party may change its address for purposes hereof by
written notice to the other.
7. No Waiver; Remedies.
(a) No failure on the part of the Obligee to
exercise, and no delay in exercising, any right hereunder shall
operate as a waiver thereof; nor shall any single or partial
exercise o any right hereunder preclude any other or further
exercise thereof or the exercise of any other right.
(b) The remedies herein provided are cumulative and not
exclusive of any remedies provided by law.
8. Continuing Guaranty; Transfer of Obligations. This Guaranty
is a continuing guaranty and shall (a) remain in full force and
effect until payment in full (after termination of the Agreement)
of the Obligations and all other amounts payable under this
Guaranty, (b) be binding upon the guarantor and its successors
and assigns, and (c) inure to the benefit of and be enforceable
by the Obligee and its successors, assigns and transferees.
Without limiting the generality of the foregoing clause (c) and
subject to the terms of the Agreement, the Obligee may assign or
otherwise transfer the Note, or any interest of the Obligee
therein, to any other person, and such other person shall
thereupon become vested with all the rights in respect thereof
granted to the Obligee herein.
9. Governing Law. This Guaranty shall be governed by the
internal substantive laws of the State of New York without giving
effect to the conflicts of law provisions thereof.
10. Consent to Forum. The Guarantor hereby consents to the
jurisdiction of any state or federal court located within the
county of New York in the State of New York, and waives personal
service of any; and all process upon the Guarantor and consents
that all such service of process be made by certified or
registered mail directed to the Guarantor as provided in Section
6 hereof and service so be made shall be deemed to be completed
upon actual receipt thereof. The guarantor waives any objection
to jurisdiction and venue of any action instituted against the
guarantor as provided herein and agrees not to assert any defense
based on lack of jurisdiction or venue. For so long as the
Obligee has a residence in the State of New York, the Guarantor
further agrees not to assert against the Obligee (except by way
of a defense or counterclaim in a proceeding initiated by the
Obligee) any claim or other assertion of liability with respect
to this Guaranty, the Obligations, the Note, the Obligee's
conduct in respect of any of the foregoing or otherwise in any
jurisdiction other than in the foregoing jurisdictions. For so
long as the Guarantor has a place of business in the State of New
York, the Obligee agrees not to assert against the Guarantor any
claims with respect the Guaranty, the Obligations, the Note or
the Guarantor's conduct in respect of any of the foregoing or
otherwise in any jurisdiction other than in the foregoing
jurisdictions. At such time as one party to this Agreement no
longer has a residence or place of business, as applicable, in
the State of New York (the "Non-Resident Party"), nothing in this
Section 10 shall (a) affect the right of the other party to serve
legal process in any other manner permitted by law or affect the
right of the other party to bring any action or proceedings
against the guarantor in the courts of any other jurisdictions,
(b) limit the right of the other party to bring proceedings
against such Non-Resident Party in the courts of any jurisdiction
or jurisdictions or to bring proceedings in more than
jurisdiction concurrently. Furthermore, nothing in this Section
10 or otherwise shall affect any right of either party to serve
process in any manner permitted by law.
11. Severability. If any one or more of the provisions
contained in this Guaranty shall be or become invalid, illegal or
unenforceable in any respect under any applicable law, the
validity, legality and enforceability of the remaining provisions
contained herein shall not in any way be affected or impaired.
Anything in this guaranty to the contrary notwithstanding, the
obligation of the guarantor to pay interest on or in respect of
the Obligations shall be subject to the limitations that no
payment of such interest shall be required to the extent that
receipt of such payment would be contrary to applicable usury
laws.
12. Miscellaneous.
(a) This Guaranty may be modified only by an instrument in
writing signed by the Obligee and the Guarantor.
(b) The failure or delay of the Obligee to require
performance by the Guarantor if any provision of this Guaranty
shall not affect its right to require performance of such
provision unless and until such performance has been waived by
the Obligee in writing. Each and every right granted to the
Obligee hereunder or under any other document or instrument
delivered hereunder or in connection herewith, or allowed at law
or in equity, shall be cumulative and may be exercised from time
to time. This agreement shall be binding upon and shall be
enforceable by the Obligee and its successors and assigns.
(c) If any one or more of the provisions contained in this
Guaranty shall be or become invalid, illegal or unenforceable in
any respect under any applicable law, the validity, legality and
enforceability of the remaining provisions contained herein shall
not in any way be affected or impaired.
13. WAIVER OF JURY TRIAL. TO THE FULLEST EXTENT PERMITTED BY
LAW, AND AS SEPARATELY BARGAINED FOR CONSIDERATION TO THE
OBLIGEE, THE GUARANTOR HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY
(WHICH THE OBLIGEE ALSO WAIVES) IN ANY ACTION, SUIT, PROCEEDI NGS
OR COUNTERCLAIM OF ANY KIND ARISING OUT OF OR RELATING TO THIS
GUARANTY, THE OBLIGATIONS, THE NOTE OR THE OBLIGEE'S CONDUCT IN
RESPECT OF ANY OF THE FOREGOING.
IN WITNESS WHEREOF, the Guarantor has caused this Guaranty
to be executed and delivered by its duly authorized
representative as of the date first above written.
Lifetime Hoan Corporation
By: ___________________________
Name: Jeffrey Siegel
Title: President
EXHIBIT 5
EMPLOYMENT AGREEMENT
AGREEMENT made the 28th day of September, 2000 between MK
ACQUISITION CORPORATION (the "Company"), having its principal
place of business at 565 Taxter Road, Elmsford, NY 10523, and
Peter Kamenstein ("Employee"), residing at 665 Titicus Road,
North Salem, NY 10560.
WHEREAS, Lifetime Hoan Corporation ("Lifetime"), parent and sole
shareholder of the Company, desires to purchase substantially all
of the assets of M. Kamenstein, Inc. pursuant to an Assets
Purchase Agreement between the Company and M. Kamenstein, Inc.
dated as of the date hereof (the "Assets Purchase Agreement");
WHEREAS, the Company wishes to employ the Employee and the
Employee is willing to accept such employment, all upon the terms
and conditions hereinafter set forth;
NOW, THEREFORE, the parties hereto agree as follows:
Employment; Term. The Company hereby employs the Employee, and
the Employee hereby agrees to serve the Company as its President,
for a term commencing on the date hereof and ending on August 31,
2003.
Duties. Throughout the period of employment hereunder, the
Employee shall have such duties and responsibilities relating to
the business and operation of the Company as the Board of
Directors of the Company may from time to time assign to him,
consistent with the duties of the President and consistent with
past practice. The Employee shall be in charge of his own work
schedule within the bounds of what is appropriate for an
executive in this position and consistent with past practice.
Compensation. As Compensation for the Employee's services during
his employment hereunder, the Company will pay to the Employee,
and the Employee will accept, so long as his employment hereunder
continues:
(A) a salary at the rate of $300,000 per annum, payable in
installments at such regular intervals as the Company at the time
is using for the payment of salaries;
(B) earn-out payments, calculated as described in Attachment A
hereto; provided, however, that such payments shall be subject to
the set-off provisions of Section 14 of the Assets
Purchase Agreement;
(C) reimbursement for reasonable out-of-pocket expenses Employee
incurs in connection with performance of his duties herunder; and
(D) on the date hereof, Lifetime shall grant to Employee options
to purchase 50,000 shares of Common Stock of Lifetime, at an
exercise price equal to the Fair Market Value (hereinafter
defined) of Lifetime's Common Stock on the date of grant,
pursuant to Lifetime's 1996 Incentive Stock Option Plan (the
"Plan"), a copy of which is attached hereto as Exhibit A. Fair
Market Value shall have such meaning as defined in the Plan.
4. Benefits. During the period of Employee's employment
hereunder, Employee shall have the right to:
(A) participate in all health, medical, disability and other
employee benefit plans established by the Company for the benefit
of its employees generally for which he is not ineligible by
virtue of the nature of the plan; and
(B) travel first class to the Orient for purposes of the
Company's business, and may upgrade, at his own expense, to first
class for other business travel for the Company.
5. Automobile. During the period of Employee's employment
hereunder, the Company will pay to the Employee an automobile
allowance of $1415.00 per month for the Employee to expend for
the purchase and/or lease and/or use of an automobile by the
Employee in the performance of his duties hereunder.
6. Termination of Employment. Anything herein to the contrary
notwithstanding, the employment of the Employee shall terminate
before August 31, 2003 in the event any of the following occur
before that date:
(A) if the Employee and the Company mutually agree in writing to
terminate his employment; or
(B) if the Employee should die; or
(C) if (i) the Employee is convicted of a felony or any other
crime involving fraud or embezzlement, (ii) willfully breaches
this Agreement, (iii) the Company gives the Employee written
notice of continued neglect by him in performing his duties under
this Agreement or conduct by him which would materially prejudice
the interests of the Company, and the Employee fails to remedy
such neglect in performance or conduct within 10 business days
following receipt of such notice, or (iv) if the Employee becomes
disabled (as that term is used in connection with disability
benefits under the Social Security Act), the Company in any of
such cases may send the Employee written notice terminating his
employment under this Agreement.
Termination of the Employee's employment pursuant to the
foregoing shall relieve the Company of any obligation to make any
further payments to the Employee under this Agreement, except for
payment in full of Employee's accrued salary, benefits and
accrued, unpaid incentive compensation, if any, through the date
of termination.
7. Confidentiality.
(A) Employee acknowledges that the services to be rendered by
him to the Company are peculiar, special, unique and
extraordinary, and that he may during the term of his employment
obtain confidential information of the Company concerning the
assets, business or affairs of the Company, including, without
limitation, any trade secrets, sources of supply, costs, pricing,
practices, customer lists, financial data, employee information,
information as to organizational structure or any other
proprietary information (collectively, the "Confidential
Information"), the use or revelation of which by Employee during
his employment or after the termination of the employment
hereunder, might, would or could injure or cause injury to the
Company's business. Accordingly, Employee agrees that he will
forever keep secret and inviolate any Confidential Information
and will not utilize the same for his private benefit or directly
or indirectly for the benefit of others and he will never
disclose such Confidential Information to anyone else. The
foregoing shall not be applicable to any Confidential Information
which now is or hereafter shall be in the public domain, except
by reason of Employee's unauthorized disclosure thereof.
(B) Should Employee at any time reveal or threaten to reveal any
Confidential Information, or during any restricted period, engage
or threaten to engage in any activity in violation of this
Agreement, or in any way violate or threaten to violate any of
the provisions of this Agreement, the Company shall be entitled
to an injunction restraining Employee from doing or continuing to
do or performing any such acts, and Employee hereby consents to
the issuance of such an injunction.
(C) In the event that a proceeding is brought in equity to
enforce the provisions of this paragraph 7, Employee shall not
urge as a defense that there is an adequate remedy at law, nor
shall the Company be prevented from seeking any other remedies
which may be available. The rights, powers and remedies of the
Company under this Agreement are cumulative and not exclusive of
any other right, power or remedy which the Company may have under
any other agreement or by law.
(D) The existence of any claim or cause of action by the Company
against Employee, or by Employee against the Company, whether
predicated upon this Agreement or otherwise, shall not constitute
a defense to the enforcement by the Company of the foregoing
restrictive covenants but shall be litigated separately.
(E) The provisions of this paragraph 7 shall survive termination
of this Agreement.
8. Non-competition. In consideration of the employment by the
Company of the Employee under this Agreement, the Employee agrees
that, without the prior written consent of the Company, he will
not at any time up to and including August 31, 2005, enter into
the employ of, render services or advice to, or engage in or
become the proprietor, partner, member, stockholder in excess of
5% or holder of any other interest in excess of 5% of any
business anywhere in the world which competes with the Company or
any parent, subsidiary or any affiliate of the Company, provided
in all events that if under the circumstances existing at the
time of the enforcement of any provision of this Section 8, the
period, scope or area shall be held to be unreasonable, the
parties agree that the maximum period, scope or area reasonable
under the circumstances shall be substituted for the stated
period, scope or area. The Employee agrees that the remedies at
law for any breach of any provision of this Section 8 will be
inadequate and that, with a court determination, the Company
shall be entitled to injunctive relief to enforce any of the
provisions of this Section 8. Nothing herein shall be construed
as prohibiting the Company from pursuing any other available
remedy for any such breach, including the recovery of damages.
The restraints in this Section 8 shall be of no force and effect
if the Company terminates the Employee under any circumstances
other than those set forth in Section 6 hereof. The restraints
of this Section 8 shall not apply to picture hanging accessories.
9. Notices. Any notice required to be given hereunder shall be
in writing and shall be deemed sufficient if delivered or mailed
by registered mail as follows: if to the Company, to Mr. Jeffrey
Siegel, Lifetime Hoan Corporation, One Merrick Avenue, Westbury,
NY 11590 or such other address as the Company may hereafter
designate for that purpose; and if to the Employee, to him at
665Titicus Road, North Salem, NY, 10560, or such other address as
he may hereafter designate for that purpose.
10. Enforceability. If any provision of this Agreement is held
to be invalid or unenforceable, such invalidity or
unenforceability shall not invalidate this Agreement as a whole,
but this Agreement shall be construed as though it did not
contain the particular provision or provisions held to be invalid
or unenforceable and the rights and obligations of the parties
shall be construed and enforced only to such extent as shall be
permitted by law.
11. Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the legal representatives,
successors and assigns of the parties, including any corporation
or other entity into which the Company shall consolidate or merge
or to which it shall transfer substantially all of its assets.
12. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York.
13. Entire Agreement. This Agreement contains the entire
agreement between the parties hereto with regard to the subject
matter hereof and may not be changed orally, but only by an
agreement in writing signed by the party against whom enforcement
is sought.
14. Prior Agreements. Employee represents that he is not now
under any written agreement, nor has he previously, at any time,
entered into any written agreement with any person, firm or
corporation, which would or could in any manner preclude or
prevent him from giving freely and the Company from receiving the
exclusive benefit of his services. This Agreement supersedes any
and all prior agreements and understandings between the parties
hereto respecting the subject matter hereof.
15. Dispute Resolution. The Company and Employee agree that any
dispute or controversy arising out of or in connection with this
Agreement or any alleged breach thereof shall be settled by
arbitration in New York, New York pursuant to the rules of the
American Arbitration Association then in effect. If the two
parties cannot jointly select a single arbitrator to determine
the matter, one arbitrator shall be chosen by each party (or, if
a party fails to make a choice, by the American Arbitration
Association on behalf of such party) and the two arbitrators so
chosen will select a third. The decision of the single
arbitrator jointly selected by the parties, or, if three
arbitrators are selected, the decision of any two of them, will
be final and binding upon the parties and the judgment of a court
of competent jurisdiction may be entered thereon. Fees of the
arbitrators and costs of arbitration shall be borne by the
parties in such manner as shall be determined by the arbitrator
or arbitrators.
IN WITNESS WHEREOF, the parties have executed this Agreement on
the day and year first above written.
MK ACQUISITION CORPORATION
By:
Jeffrey Siegel
Chairman of the Board
Peter Kamenstein
Attachment A
Earn-Out Calculation
Peter Kamenstein will be entitled to earn-out payments, subject
to the set-off provisions of Section 14 of the Assets Purchase
Agreement, as follows:
(1)
On March 31, 2002, a payment equal to 50% of the amount
calculated by multiplying (i) that amount equal to (a) the earned
gross profits* of the business acquired from Seller during the
year ended December 31, 2001, less (b) $7,946,000 (ii) times
0.10.
(2)
On March 31, 2003, a payment equal to 50% of the amount
calculated by multiplying (i) that amount equal to (a) the
accumulated earned gross profits* of the business acquired from
Seller during the two year period ended December 31, 2002, less
(b) $15,892,000 times (ii) 0.10, less any amount paid on March
31, 2002.
(3)
On March 31, 2004, a payment equal to that amount calculated by
multiplying (i) that amount equal to (a) the accumulated earned
gross profits* of the business acquired from Seller during the
three year period ended December 31, 2003, less (b) $23,838,000
times (iii) 0.10, less any amounts paid on March 31, 2002 and
March 31, 2003 pursuant to the above calculations.
* In determining the earned gross profits of the business for
this calculation, cost of sales shall not include any
depreciation expense or any general warehouse expenses