<PAGE> 1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
---------
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
FOR THE FISCAL YEAR ENDED JANUARY 2, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES ACT OF 1934 (NO FEE REQUIRED)
COMMISSION FILE NO. 1-7484
EKCO GROUP, INC.
(Exact name of registrant as specified in its charter)
------------------------
DELAWARE 11-2167167
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
98 SPIT BROOK ROAD
NASHUA, NEW HAMPSHIRE 03062
(Address of principal executive offices) (Zip Code)
------------------------
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (603) 888-1212
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
Name of each exchange
Title of each class on which registered
Common Stock, $.01 par value New York Stock Exchange
Preferred Share Purchase Rights New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
NONE
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 by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K, or any amendment to
this Form 10-K. /X/
The aggregate market value of the shares of voting capital stock held by
non-affiliates (without admitting that any person whose shares are not included
in determining such value is an affiliate) was approximately $128 million based
upon the closing price of the shares on the New York Stock Exchange Composite
Tape on March 21, 1994.
As of March 21, 1994, there were issued and outstanding 17,848,317 shares
of Common Stock of the registrant.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's Annual Report to Stockholders for the fiscal
year ended January 2, 1994: Parts I and II. Portions of the registrant's
definitive proxy statement with respect to the Annual Meeting of Stockholders to
be held on May 17, 1994: Part III.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
Part I
------
Item 1. BUSINESS
- ------- --------
Ekco Group, Inc. (the "Company") is a leading United States
manufacturer and marketer of broad lines of branded houseware products for
everyday home use. The Company is the leading United States supplier of metal
bakeware, kitchen tools and gadgets and non-poisonous and low-toxic pest
control products and is also a leading United States supplier of plastic
storage products (including crates, containers, baskets and office organizers),
small animal care and control products, and brushes, brooms and mops. The
Company broadly markets its products, primarily in the United States and
Canada, through mass merchandise stores, including Wal-Mart and Kmart (the
Company's largest customers), supermarkets, hardware stores, drug stores,
specialty stores, home and agricultural centers and other retail outlets. As
used herein, unless the context requires otherwise, the "Company" and the
"registrant" refer to Ekco Group, Inc. and its subsidiaries.
<TABLE>
The Company's current business was established in 1987 through the
purchase of Ekco Housewares, Inc. and subsequently through five additional
acquisitions of leading consumer product businesses and product lines. The
following table lists the principal businesses and products which the Company
has acquired since 1987:
<CAPTION>
Date Business or Products
---- --------------------
<S> <C>
October 1987 Ekco Housewares, Inc. (bakeware and kitchen
tools and gadgets)
January 1989 Woodstream Corporation (non-poisonous and low-
toxic pest control products)
December 1989 Non-poisonous pest control product line of
McGill Metal Products Company
December 1991 Animal care product line of Beacon Industries,
Inc.
January 1992 Frem Corporation (molded plastic houseware and
office products)
April 1993 Kellogg Brush Manufacturing Co. (brushes, brooms
and mops)
</TABLE>
The Company's strategy is to continue pursuing acquisitions, internal
expansion and operating improvements. Management believes that there continues
to be significant acquisition opportunities due, among other things, to the
large number of companies in the consumer product and houseware industries that
are facing increased pressures from retailers to provide greater levels of
service and support. The Company intends to use available funds, borrowed
funds and proceeds from the issuance of additional debt or equity securities to
make acquisitions, to provide working capital and for general corporate
purposes to the extent permitted by the terms of its various
________________________________________________________________________________
Ekco(R), Baker's Secret(R), Victor(R), Havahart(R), Beacon(R) and Frem Better
by Design(R) are registered trademarks of subsidiaries of the registrant. Best
Results Professional(TM), Baker's Secret Pro(TM), Frem(TM), Woodstream(TM),
Buddy Box(TM) and Captain Hook(TM) are trademarks of subsidiaries of the
registrant.
1
<PAGE> 3
financing agreements or consented to by its lenders. There can be no
assurance, however, that capital to finance acquisitions will be available or
the terms with respect thereto, or that the Company will be able to complete
strategic acquisitions on a profitable basis in the future.
Recent Developments
- -------------------
RESTRUCTURING - During the fourth quarter of the fiscal year ended
January 2, 1994 ("Fiscal 1993"), the Company began implementing a restructuring
of its operations aimed at lowering the Company's cost base and improving
productivity. See Note 17 of Notes to Consolidated Financial Statements
appearing in Exhibit 13 hereto, incorporated herein by reference, for
information regarding the foregoing restructuring.
KELLOGG ACQUISITION - On April 1, 1993, the Company acquired Kellogg
Brush Manufacturing Co. and its wholly-owned subsidiaries, Wright-Bernet, Inc.
and Cleaning Specialty Company (collectively, "Kellogg"). Kellogg primarily
manufactures and markets brushes, brooms and mops which are sold in mass
merchandise, discount, grocery and hardware stores throughout the United States
and Canada. See Note 2 of Notes to Consolidated Financial Statements appearing
in Exhibit 13 hereto, incorporated herein by reference, for information
regarding the foregoing acquisition.
BANK CREDIT COMMITMENT - The Company has received a commitment for a
$40 million bank credit facility consisting of a $35 million bank credit line
and a $5 million standby letter of credit facility. See Note 6 of Notes to
Consolidated Financial Statements appearing in Exhibit 13 hereto, incorporated
herein by reference, for information regarding the foregoing bank credit
commitment.
Products
- --------
BAKEWARE. The Company manufactures and markets a broad line of metal
bakeware, including non-stick coated bakeware marketed under the Baker's Secret
and Baker's Secret Pro trademarks and uncoated bakeware marketed under the Ekco
trademark. The Company believes it is the leading supplier of metal bakeware
in the United States, based on trade association reports and the reports of an
independent national service providing sales and market share data from
supermarkets and mass merchandisers. The Company's bakeware products include
cookie sheets, muffin tins, brownie pans, loaf pans and similar items.
Bakeware products are distributed primarily through mass
merchandisers, supermarkets, discount drug chains and hardware stores. The
Company emphasizes value, quality, functionality, and, in the case of coated
products, ease of cleaning and release. These product features have
contributed to the Company's leading market share in bakeware.
Company-sponsored research indicates a 90% consumer awareness level of the Ekco
and Baker's Secret brands.
The Company regularly develops new products to take advantage of its
high consumer brand recognition and broad retail distribution. In 1993, the
Company redesigned its products marketed under the Baker's Secret trademark
with new shapes and sizes, including two sizes of broiling and baking pans with
racks and meat loaf pans, and also introduced cookie sheets and baking pans
marketed under the Baker's Secret Pro trademark.
In January 1994, the Company announced its national corporate
sponsorship of "The Frugal Gourmet Cooks Italian II" program series on Public
Broadcasting Services which will be televised beginning in September 1994.
Certain of the Company's bakeware products will contain a likeness of Jeff
2
<PAGE> 4
Smith, the host of "The Frugal Gourmet," along with a statement that the
Company is the sole corporate sponsor of these programs.
KITCHEN TOOLS AND GADGETS. The Company manufactures, purchases from
domestic and foreign sources and markets kitchen tools and gadgets under the
Ekco and Best Results Professional trademarks. Based upon management's
experience in the markets in which it has marketed products over a period of
years, the Company believes it is the leading supplier of kitchen tools and
gadgets in the United States. The Company markets more than 800 products in
its kitchen tools and gadgets line, including multiple colors of the same item
and various packaging combinations. Kitchen tools include metal, plastic and
wooden spoons, spatulas, serving forks, ladles and other cooking accessories.
Gadgets include peelers, corkscrews, whisks, can openers, bottle openers, and
similar items. The Company also markets stainless steel and carbon steel
cutlery and stainless steel flatware, mixing bowls and colanders.
Kitchen tools and gadgets are distributed primarily through grocery
stores and mass merchandisers, as well as hardware, drug, and specialty stores.
The Company's broad product lines, brand name recognition, quality, and service
have enabled it to obtain what management believes is the leading market
position in these products.
The Company frequently updates its kitchen tool and gadget line and
introduces new items. In 1993, the Company implemented its J-Hook
merchandising program, which provides a total store plan for retailers to add
up to 300 product offerings, including kitchen tools and gadgets and a number
of non-kitchen tools and gadgets items.
MOLDED PLASTIC PRODUCTS. The Company manufactures and markets
injection molded plastic housewares, office and juvenile products sold under
the Frem and Frem Better by Design trademarks. The Company's housewares
products include storage crates, laundry baskets, organizers, and recycling
containers. Office products include drawer systems, storage boxes, desk-top
organizers and file caddies. Juvenile products include two-pocket trays, toy
carts, drawer systems, and Buddy Box carry-all boxes. The Company emphasizes
functionality, as well as fashion and color.
Frem brand products are distributed through mass merchandisers, as well
as large specialty retailers, such as office supply stores, drug stores and
warehouse clubs. The Company currently offers over 70 Frem products in more
than 15 colors and also provides distinctive color lines to certain retailers.
Frem develops new products internally and works interactively with retailers on
design concepts. In 1993, the Company introduced a "Euro-design" series of
baskets, waste containers and buckets, supplemented its juvenile products with
Buddy Box carry-all boxes and audio trays, and supplemented its office products
with a vertical reference file and stacking in-out and sorting trays. In
January 1994, the Company introduced a juvenile activity desk. Based upon
management's experience in the markets in which the Company has marketed
products over a period of years, the Company believes it is a leading
manufacturer of plastic housewares and office products.
BRUSHES, BROOMS AND MOP. In April 1993, the Company acquired Kellogg,
which manufactures and markets a broad line of brushes, brooms and mops.
Kellogg's products include household cleaning brushes, brooms and mops marketed
under the Kellogg brand name, indoor and outdoor specialty cleaning brushes
marketed under the Wright-Bernet brand name and a full line of janitorial
cleaning implements (brushes and mops) marketed under the Cleaning Specialty
brand name.
3
<PAGE> 5
Each Kellogg company markets into distinct retail channels, thereby
covering most, if not all, of the market for brushes, brooms and mops. Kellogg
brand products are marketed to mass merchandisers, such as Wal-Mart and Kmart,
and supermarkets; Wright- Bernet products are marketed to specialty hardware
retailers such as Home Depot, ServiStar and Lowe's Home Centers; and Cleaning
Specialty products are marketed to janitorial supply and professional cleaning
companies. In 1993, Kellogg introduced an "easy action" dustpan and a
"flo-thru" all purpose brush, both with telescoping handles, along with a
"jumbo" Captain Hook angled hang-up broom and dust pan which snaps onto the
broom handle. Based upon management's experience in the markets in which the
Company has marketed products over a period of years, the Company believes that
Kellogg is a leading manufacturer of smallware products (primarily consisting
of brushes for household, kitchen and personal use and other specialty
brushes).
NON-POISONOUS AND LOW-TOXIC PEST CONTROL AND SMALL ANIMAL CARE AND
CONTROL PRODUCTS. The Company manufactures and markets non-poisonous and
low-toxic pest control products under the Victor and Havahart trademarks and
small animal care and control products under the Havahart and Beacon
trademarks. The Company's products include spring-action rodent traps and
glue-based rodent and insect traps marketed under the Victor trademark, as well
as live animal cage traps marketed under the Havahart trademark which are used
to control garden pests and other nuisance animals, such as raccoons.
The Company's pest control and animal care products are marketed to
mass merchandisers, hardware stores, drug and variety stores, farm stores,
agricultural centers, home centers and professional pest control companies.
Based upon management's experience in the markets in which the Company has
marketed products over a period of years, the Company believes it is the
leading supplier of rodent traps and live animal cage traps in the United
States. In 1993, the Company introduced a "no-see, no-touch" mouse trap, added
low-toxic roach control powder to its pest control products, and introduced a
number of point-of-sale merchandising displays.
Marketing
- ---------
The Company markets its product lines directly through its own sales
force to major retail stores and through distributors and manufacturer
representatives. Products are primarily purchased from the Company by
businesses located in the United States and Canada, including mass
merchandising stores, supermarkets, hardware stores, drug and variety stores,
office "superstores" and other retail outlets and by wholesalers who resell to
such retailers. The Company's products are marketed outside the United States
and Canada through distributors and agents who provide marketing support to
grocery stores, mass merchandising stores, specialty stores and department
stores. The Company's agreements with its distributors and agents are
generally terminable upon 30 days notice and are not deemed to be material by
the Company. No customer accounted for more than 10% of net revenue for
Fiscal 1993.
Competition
- -----------
The Company competes with a significant number of companies, some of
which are larger and have significantly greater resources than the Company.
The primary competitive factors in selling the Company's products to consumers
are brand name recognition, value, quality and availability at retail. Primary
competitive factors with respect to selling such products to retailers are
brand reputation, breadth of product line, retailer support and service,
4
<PAGE> 6
including prompt fulfillment of orders, retail space management and price. The
Company competes principally: in the sale of metal bakeware with three
companies in the United States and with two companies in Canada; in the sale of
kitchen tools and gadgets with a significant number of large and small domestic
and foreign suppliers and marketers, most of whom primarily import products
from the Far East; in the sale of molded plastic houseware and office products
with a significant number of domestic and foreign manufacturers; in the sale of
brushes, brooms and mops with six companies in the United States; in the sale
of non-poisonous and low-toxic pest control products with domestic and imported
products in both the United States and Canada and, with respect to non-
poisonous products, products and services using chemical treatment for pest
control; in the sale of live animal cages, with three companies in the United
States and imported products in Canada; in the sale of rabbit hutches and
feeders, with three companies in the United States and two companies in Canada;
and in the sale of brushes, brooms and mops, six companies.
Raw Materials
- -------------
The Company purchases raw materials for its products from a number of
suppliers, including several major steel companies, a number of plastic resin
suppliers and wood suppliers. The Company believes that the raw materials used
by it are available from multiple suppliers and that the loss of any of its
vendors would not have a material adverse effect on the Company. The Company
also purchases components and complete products, primarily for kitchen tools
and gadgets, from several domestic and foreign suppliers. The Company believes
that these items are available from other suppliers and that the loss of any
one of its suppliers would not have a material adverse effect on the Company.
Trademarks and Patents
- ----------------------
The Company has a number of trademarks, including Ekco, Baker's
Secret, Best Results Professional, Kellogg, Wright Bernet, Frem, Frem Better By
Design, Havahart, Victor and Woodstream, which the Company believes are
significant to its competitive position. The Company holds a number of patents
on various inventions, none of which is material to the Company's business.
Backlog
- -------
Information as to backlog is not material to an understanding of the
Company's business. Much of the Company's sales volume results from short
lead-time customer reorders. The Company is generally able to fill orders and
reorders from inventory. The Company's production capacity and its ability to
adjust production levels generally enable the Company to meet increases in
customers' orders that cannot be filled from inventory.
Seasonality
- -----------
A large part of the Company's business is seasonal. Historically,
revenues in the last half of the fiscal year have been significantly greater
than in the first half, with revenues in the second quarter being the lowest of
any quarter.
Employees
- ---------
As of January 2, 1994, the Company employed 1,320 persons in the
United States, of whom 574 were represented under collective bargaining
agreements which expire on dates ranging from October 1994 to January 1997.
The Company also employed 30 persons in Canada as of such date, of whom 10 were
represented under a collective bargaining agreement which expires in July 1997.
The Company considers its employee relations to be satisfactory.
5
<PAGE> 7
Item 2. PROPERTIES
- ------- ----------
As of January 2, 1994, the Company owned or leased for use in its
business the principal operating facilities set forth in the table below.
6
<PAGE> 8
<TABLE>
Principal Operating Facilities
------------------------------
<CAPTION>
Approximate Owned or Lease
Description of Property Location Square Footage Leased Expires
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Manufacturing, warehousing and Lititz, Pennsylvania 366,000 Owned N/A
office facilities for pest
control and animal care products
Manufacturing, warehousing, office Easthampton, Massachusetts 326,000 Owned N/A
and distribution facilities for
brushes, brooms and mops
Manufacturing, warehousing and Massillon, Ohio 244,000 Owned N/A
distribution center for bakeware
Warehousing and distribution cen- Franklin Park, Illinois 190,000 Leased 01/30/99
ter for kitchen tools and gadgets
and adjacent office facilities
Manufacturing, warehousing, dis- Worcester, Massachusetts 170,000 Owned N/A
tribution and office facilities for
injection-molded plastic products
Manufacturing and warehousing Phoenix, Arizona 104,000 Owned N/A
facilities for injection-molded
plastic products
Manufacturing, warehousing, office Hamilton, Ohio 100,000 Owned N/A
and distribution facilities for
brushes, brooms and mops
Warehousing and distribution for Elk Grove Village, Illinois 96,000 Leased 11/30/94
kitchen tools and gadgets and
bakeware
Warehousing facilities and Niagara Falls, Ontario 39,000 Owned N/A
offices Canada
Manufacturing and warehousing Obregon, Sonora 27,000 Leased 12/23/95
facilities for kitchen tools Mexico
and gadgets
Manufacturing, warehousing, office Nashville, Tennessee 25,000 Leased 09/10/97
and distribution facility for in-
stitutional mop and broom products
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
7
<PAGE> 9
In addition to the properties listed in the table, as of January 2,
1994, the Company owned approximately 1,130,000 square feet of floor space
which is being held for sale or lease. Approximately 35% of such space was
under lease to third parties as of that date.
The Company's executive offices are located in Nashua, New Hampshire in
a leased facility occupying approximately 8,000 square feet. From time to
time, the Company leases additional warehouse space. The Company considers its
principal operating properties generally suitable and adequate for its purposes
for the foreseeable future. Substantially all of the Company's property is
subject to security interests granted in connection with the Company's bank
credit agreements. For information regarding the terms of such security
interests, see Note 6 of Notes to Consolidated Financial Statements.
Item 3. LEGAL PROCEEDINGS
- ------- -----------------
Environmental Regulation and Claims
- -----------------------------------
From time to time, the Company has had claims asserted against it by
regulatory agencies or private parties for environmental matters relating to the
generation or handling of hazardous substances by the Company or its
predecessors and has incurred obligations for investigations or remedial actions
with respect to certain of such matters. While the Company does not believe
that any such claims asserted or obligations incurred to date will result in a
material adverse effect upon the Company's financial position, results of
operations or liquidity, the Company is aware that, with respect to its
operating facilities at Massillon, Ohio (more fully described below), Hamilton,
Ohio and Easthampton, Massachusetts (more fully described in Note 14 of Notes to
Consolidated Financial Statements appearing in Exhibit 13 and incorporated
herein by reference), Hudson, New Hampshire and Lititz, Pennsylvania, hazardous
substances or oil have been detected and that additional investigation will be,
and remedial action will or may be, required. Operations at these and other
facilities currently or previously owned or leased by the Company utilize, or in
the past have utilized, hazardous substances. There can be no assurance that
activities at these or any other facilities or any future facilities owned or
operated by the Company may not result in additional environmental claims being
asserted against the Company or additional investigations or remedial actions
being required.
Prior to the Company's acquisition of Ekco Housewares ("Housewares") in
1987, Housewares' Massillon, Ohio steel bakeware manufacturing facility was the
subject of administrative proceedings before the United States Environmental
Protection Agency complaint alleging violations of the Resource Conservation and
Recovery Act ("RCRA") resulting from operation of a wastewater lagoon at the
facility. American Home Products Corporation ("AHP"), a former owner of
Housewares, pursuant to an indemnity agreement (the "Indemnity Agreement") with
Housewares relating to acts occurring prior to September 7, 1984, assumed the
costs of remediation measures in addition to the defense of the administrative
proceedings with federal and state environmental protection agencies, as well as
preparation of closure plans and other plans called for as a result of these
proceedings. While AHP has acknowledged its full responsibility under the
Indemnity Agreement with respect to the wastewater lagoon, it has asserted that
Housewares should contribute to the cost of a remediation study and certain
remediation measures to the extent that Housewares exacerbated contamination at
the facility since September 7, 1984. Housewares has denied that it has
exacerbated contamination at the facility since such date. AHP and Housewares
have agreed to allocate such costs in proportion to their respective
responsibilities based on the results of an engineering study but in no event
will Housewares' share with respect to the wastewater lagoon exceed the lesser
of 25% of the
8
<PAGE> 10
total cost or $750,000. The Company is unable to determine to what extent, if
any, it will be responsible to contribute to such costs but the Company does
not believe that any such contribution that it may be required to make will
have a material adverse effect on its financial position.
In June 1992, the United States filed an action in the U.S. District Court for
the Northern District of Ohio against Housewares seeking penalties and
injunctive relief and alleging violations as a result of an alleged failure to
provide certain closure and post-closure financial assurances with respect to
the Massillon, Ohio site. Pursuant to the Indemnity Agreement and a
confirmatory letter from AHP to Housewares on December 19, 1988 (the "Indemnity
Documents"), AHP conducted and controlled all matters relating to such
financial assurances and the defense of the action filed in June 1992. In
January 1994, the court entered judgment in the amount of $4.6 million in the
lawsuit. AHP has filed a notice of appeal on behalf of Housewares. In March
1994, AHP informed Housewares that, should it be unsuccessful in its appeal,
it would attempt to hold Housewares responsible for a portion of the penalties
(approximately $600,000, exclusive of interest) arising from Housewares'
alleged delay in furnishing certain information to the Ohio Environmental
Protection Agency. In March 1994, Housewares notified AHP that Housewares
denies all liability and that AHP is liable for all liabilities, losses, costs
or damages arising from the lawsuit pursuant to the Indemnity Documents. The
Company is unable to predict the result of the appeal or AHP's attempts to
obtain contribution from Housewares, but the Company does not believe that any
such liability will have a material adverse effect on its financial position.
Litigation
- ----------
From time to time, the Company is a party to litigation and other legal
proceedings, including product liability claims. In many cases, claims are
partially or fully covered by insurance. Although the outcome of such
proceedings cannot be determined with certainty, the Company believes that the
final outcome of such proceedings will not have a material adverse effect on the
Company, after taking into account proceeds of available insurance.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------- ---------------------------------------------------
Not applicable.
9
<PAGE> 11
<TABLE>
EXECUTIVE OFFICERS OF THE REGISTRANT
------------------------------------
<CAPTION>
Name Age Office Held
- ---- --- -----------
<S> <C> <C>
Robert Stein 54 President and Chief Executive Officer,
February 1986 to present; Chief Financial Officer,
July 1980 to July 1993.
Jeffrey A. Weinstein 43 Executive Vice President, April 1985 to present;
Secretary, February 1988 to present;
General Counsel, October 1978 to present.
Ronald N. Fox 55 Senior Vice President, Operations, July 1992 to present;
Vice President, Operations, January 1990 to July 1992;
Vice President - Operations, Ekco Housewares, Inc.,
February 1988 to present.
Donato A. DeNovellis 49 Vice President and Chief Financial Officer,
July 1993 to present, Xerox Corporation (worldwide
document processing servicing company);
Managing Director, May 1992 to October 1992,
Executive Vice President and Chief Administrative Officer,
April 1991 to May 1992, Crum & Forster, Inc.
(property/casualty insurance holding company);
Senior Vice President, Operations Analysis, January 1990
to April 1991, Senior Vice President, Finance, September 1988
through December 1990, Xerox Financial Services (financial
services company).
Neil R. Gordon 46 Treasurer, May 1987 to present.
Brian R. McQuesten 44 Controller, May 1987 to present.
</TABLE>
The executive officers of the Company are elected annually by the Board
of Directors and serve, subject to the provisions of any employment agreement
between the executive and the Company, until their respective successors are
chosen and qualified or until their earlier resignation or removal.
10
<PAGE> 12
Part II
-------
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
- ------- -------------------------------------------------------------
MATTERS
-------
The information set forth in the section entitled "Common Stock Price
Range and Dividends" appearing in Exhibit 13 hereto is incorporated herein by
reference.
Item 6. SELECTED FINANCIAL DATA
- ------- -----------------------
The information set forth in the section entitled "Selected Consolidated
Financial Data" appearing in Exhibit 13 hereto is incorporated herein by
reference.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
- ------- -----------------------------------------------------------
AND RESULTS OF OPERATION
------------------------
The information set forth in the section entitled "Management's
Discussion and Analysis of Results of Operations and Financial Condition"
appearing in Exhibit 13 hereto is incorporated herein by reference.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- ------- -------------------------------------------
The information set forth in the consolidated financial statements and
notes thereto (including the note which sets forth certain supplementary
information) and the Report of Independent Auditors appearing in Exhibit 13
hereto are incorporated herein by reference. Reference is also made to Item 14
with respect to Financial Statement Schedules filed herewith.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
- ------- -----------------------------------------------------------
AND FINANCIAL DISCLOSURE
------------------------
None.
11
<PAGE> 13
Part III
--------
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
- -------- --------------------------------------------------
a) Directors - The information set forth in the section entitled
"Election of Directors" appearing in the Company's definitive proxy statement
with respect to the 1994 Annual Meeting of Stockholders is incorporated herein
by reference.
b) Executive Officers - See "Executive Officers of the Registrant"
appearing in Part I above.
Item 11. EXECUTIVE COMPENSATION
- -------- ----------------------
The information set forth in the sections entitled "Compensation of
Directors" and "Compensation of Executive Officers" (except for the information
under the captions "Report of the Compensation and Stock Plan Committees on
Executive Compensation" and "Performance Graph") appearing in the Company's
definitive proxy statement with respect to the 1994 Annual Meeting of
Stockholders is incorporated herein by reference.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- -------- --------------------------------------------------------------
The information set forth in the section entitled "Security Ownership of
Certain Beneficial Owners and Management" appearing in the Company's definitive
proxy statement with respect to the 1994 Annual Meeting of Stockholders is
incorporated herein by reference.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- -------- ----------------------------------------------
The information set forth in the section entitled "Certain Relationships
and Related Transactions" appearing in the Company's definitive proxy statement
with respect to the 1994 Annual Meeting of Stockholders is incorporated herein
by reference.
12
<PAGE> 14
Part IV
-------
<TABLE>
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
- -------- ----------------------------------------------------------------
<CAPTION>
Page Number in
Exhibit 13
--------------
<S> <C> <C>
(a) 1. Financial Statements:
- --- -- --------------------
Report of independent auditors............. 25
Consolidated balance sheets at January
2, 1994 and January 3, 1993................ 5
Consolidated statements of operations for
the fiscal years ended January 2, 1994,
January 3, 1993 and December 29, 1991...... 6
Consolidated statements of stockholders'
equity for the fiscal years ended
January 2, 1994, January 3, 1993 and
December 29, 1991.......................... 7
Consolidated statements of cash flows
for the fiscal years ended January 2, 1994,
January 3, 1993 and December 29, 1991...... 8
Notes to consolidated financial
statements................................. 9
</TABLE>
<TABLE>
<CAPTION>
Page Number in
Form 10-K
--------------
<S> <C>
Report of independent auditors............. 15
2. Financial Statement Schedules:
-- -----------------------------
III - Condensed Financial Information
of the Registrant........................ 16
VIII - Valuation and Qualifying Accounts........ 21
</TABLE>
Schedules other than those listed above have been omitted because they are not
required, not applicable or the required information is furnished in the
consolidated financial statements or notes thereto.
3. Exhibits: (See listing of Executive Compensation Plans
-------- and Arrangements beginning on page 22. See
Index to Exhibits beginning on page 24.)
(b) Reports on Form 8-K -- During the last quarter of the fiscal year
------------------- ended January 2, 1994, the registrant filed
reports on Form 8-K as of November 1, 1993, which set forth
information under "Item 5. Other Events." and as of December 15,
1993, which set forth information under "Item 5. Other Events." and
subsection "(c) Exhibits" of "Item 7. Financial Statements and
Exhibits."
13
<PAGE> 15
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) 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, on March 31, 1994.
EKCO GROUP, INC.
By: /s/ ROBERT STEIN
-----------------------------
Robert Stein, President and Chief
Executive Officer
(Principal Executive Officer)
By: /s/ DONATO A. DeNOVELLIS
-----------------------------
Donato A. DeNovellis, Vice President
and Chief Financial Officer
(Principal Financial Officer)
By: /s/ BRIAN R. McQUESTEN
-----------------------------
Brian R. McQuesten, Controller
(Principal Accounting Officer)
<TABLE>
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<S> <C> <C>
/s/ ANDREW D. DUNN Director March 31, 1994
- ------------------------
Andrew D. Dunn
/s/ T. MICHAEL LONG Director March 31, 1994
- ------------------------
T. Michael Long
/s/ STUART B. ROSS Director March 31, 1994
- ------------------------
Stuart B. Ross
/s/ BILL W. SORENSON Director March 31, 1994
- ------------------------
Bill W. Sorenson
/s/ HERBERT M. STEIN Director March 31, 1994
- ------------------------
Herbert M. Stein
/s/ ROBERT STEIN Director March 31, 1994
- ------------------------
Robert Stein
/s/ JEFFREY A. WEINSTEIN Director March 31, 1994
- -------------------------
Jeffrey A. Weinstein
</TABLE>
14
<PAGE> 16
Independent Auditors' Report
----------------------------
Board of Directors and Stockholders Ekco Group, Inc.:
Under date of February 7, 1994, we reported on the consolidated balance sheets
of Ekco Group, Inc. and subsidiaries as of January 2, 1994 and January 3, 1993,
and the related consolidated statements of operations, stockholders' equity and
cash flows for each of the years in the three-year period ended January 2,
1994, as contained in the 1993 annual report to stockholders. These
consolidated financial statements and our report thereon are incorporated by
reference in the annual report on Form 10-K for the fiscal year 1993. In
connection with our audits of the aforementioned consolidated financial
statements, we also have audited the related financial statement schedules
listed on page 13 of this report. These financial statement schedules are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statement schedules based on our audits.
In our opinion, such financial statement schedules, when considered in relation
to the basic consolidated financial statements taken as a whole, present
fairly, in all material respects, the information set forth therein.
As discussed in Note 2 to Schedule III, in 1993 the Company changed its method
of accounting for income taxes, post-retirement benefits other than pensions
and post-employment benefits.
KPMG Peat Marwick
Boston, Massachusetts
February 7, 1994
15
<PAGE> 17
EKCO GROUP, INC. AND SUBSIDIARIES
<TABLE>
SCHEDULE III - CONDENSED FINANCIAL INFORMATION OF THE REGISTRANT
CONSOLIDATED CONDENSED BALANCE SHEETS
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
_________________________________________________________________________________________________
<CAPTION>
JANUARY 2, 1994 JANUARY 3, 1993
--------------- ---------------
(Restated)
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ - $ 16,355
Prepaid expenses and other current assets 421 267
Deferred income taxes 222 2,769
Investments pledged as collateral 4,350 5,100
------- -------
Total current assets 4,993 24,491
Furniture and equipment, net 101 100
Property held for sale or lease 6,620 8,205
Deferred income taxes 1,693 -
Other assets 7,142 5,653
Investment in and advances to subsidiaries 172,081 143,050
------- -------
Total assets $192,630 $181,499
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Notes payable $ 4,338 $ 5,108
Current portion of long-term obligation - 223
Accounts payable 525 451
Accrued expenses 4,306 3,616
Income taxes 4,953 3,878
------- -------
Total current liabilities 14,122 13,276
------- -------
Accrued pension cost 219 104
------- -------
Long-term obligation, less current portion 28,920 28,920
------- -------
Non-interest bearing note payable to Ekco
Housewares, Inc. 26,100 26,100
------- -------
Deferred income taxes - 312
------- -------
Other long-term liabilities 2,906 -
------- -------
Commitments and contingencies
Series B ESOP Convertible Preferred
Stock, net; outstanding January 2, 1994,
1,645 shares; outstanding January 3, 1993,
1,676 shares, redeemable at $3.61 per share 2,686 2,111
------- -------
Stockholders' equity:
Preferred stock, $.01 par value - -
Common stock, $.01 par value; outstanding
January 2, 1994, 17,844 shares; outstanding
January 3, 1993, 17,148 shares 178 171
Capital in excess of par value 104,202 96,651
Retained earnings 15,749 16,737
Unearned compensation (2,452) (2,883)
------- -------
117,677 110,676
------- -------
Total liabilities and stockholders' equity $192,630 $181,499
======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated condensed
financial statements.
16
<PAGE> 18
EKCO GROUP, INC. AND SUBSIDIARIES
<TABLE>
SCHEDULE III - CONDENSED FINANCIAL INFORMATION OF THE REGISTRANT (CONTINUED)
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
________________________________________________________________________________________________
<CAPTION>
FISCAL YEARS ENDED
------------------
JANUARY 2, 1994 JANUARY 3, 1993 DECEMBER 29, 1991
--------------- --------------- -----------------
(Restated) (Restated)
<S> <C> <C> <C>
Revenues
Investment income $ 500 $ 445 $ 697
Equity in earnings of subsidiaries 10,627 13,162 9,967
------ ------ ------
11,127 13,607 10,664
------ ------ ------
Costs and expenses:
General and administrative 3,374 4,203 4,000
Restructuring/reorganization and excess
facilities charge 3,631 - -
Interest expense 2,508 977 1,191
------ ------ ------
9,513 5,180 5,191
------ ------ ------
Income before income taxes and
cumulative effect of accounting changes 1,614 8,427 5,473
Income taxes (credit) (645) (220) (421)
------ ------ ------
Income before cumulative effect of
accounting changes 2,259 8,647 5,894
Cumulative effect of changes in method
of accounting for post-retirement
and post-employment benefits (net of
income taxes of $1,954) (3,247) - -
------ ------ ------
Net income (loss) $ (988) $ 8,647 $ 5,894
======= ======= =======
Per share data
Earnings before cumulative effect of
accounting changes $ .11 $ .46 $ .35
Cumulative effect of accounting changes (.19) - -
---- --- ---
Net income (loss) $(.08) $ .46 $ .35
===== ==== ====
Weighted average number of shares used
in computation of per share data
Earnings before cumulative effect
of accounting changes 19,999,013 18,785,364 17,011,659
Cumulative effect of accounting
changes 17,148,320 - -
</TABLE>
The accompanying notes are an integral part of the consolidated condensed
financial statements.
17
<PAGE> 19
EKCO GROUP, INC. AND SUBSIDIARIES
<TABLE>
SCHEDULE III - CONDENSED FINANCIAL INFORMATION OF THE REGISTRANT (CONTINUED)
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS)
<CAPTION>
FISCAL YEARS ENDED
------------------
JANUARY 2, JANUARY 3, DECEMBER 29,
---------- ---------- ------------
1994 1993 1991
---- ---- ----
(Restated) (Restated)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (988) $ 8,647 $ 5,894
Adjustments to reconcile net income to
net cash provided by (used in) operations:
Depreciation and amortization 643 362 228
Amortization of unearned compensation 1,129 1,160 1,156
Equity in earnings of subsidiaries (10,627) (13,162) (9,967)
Deferred income taxes 201 4,854 7,427
Cumulative effect of accounting change 3,247 - -
Other 1,085 800 191
Change in certain assets and liabilities
affecting cash provided by (used in)
operations:
Other assets (1,750) (470) (240)
Accounts payable and accrued expenses 879 6 (779)
Income taxes payable 1,075 561 119
------- ------- ------
Net cash used in operations (5,106) 2,758 4,029
------- ------- ------
Cash flows from investing activities:
Proceeds from sale of property and equipment 42 30 18
Capital expenditures (79) (1,226) (44)
Investment in and advances to subsidiaries (11,882) (15,982) (2,436)
------- ------- ------
Net cash provided by (used in)
investing activities (11,919) (17,178) (2,462)
------- ------- ------
Cash flows from financing activities:
Proceeds from issuance of long-term
obligations - 20,863 -
Proceeds from issuance of treasury stock - 7,587 -
Investments pledged as collateral 750 360 463
Payment of notes and long-term obligation (993) (534) (665)
Other 913 1,096 (159)
------- ------- ------
Net cash provided by (used in)
financing activities 670 29,372 (361)
------- ------- ------
Net increase (decrease) in cash and
cash equivalents (16,355) 14,952 1,206
Cash and cash equivalents at beginning
of year 16,355 1,403 197
------- ------- ------
Cash and cash equivalents at end of year $ - $ 16,355 $ 1,403
======== ======== =======
</TABLE>
The accompanying notes are an integral part of the consolidated condensed
financial statements.
18
<PAGE> 20
EKCO GROUP, INC. AND SUBSIDIARIES
SCHEDULE III - CONDENSED FINANCIAL INFORMATION OF THE REGISTRANT (CONTINUED)
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION AND OTHER MATTERS:
The condensed consolidated financial statements included herein
have been prepared by the Company pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations. It is suggested that these condensed consolidated
financial statements be read in conjunction with the financial
statements and the notes included in this Form 10-K.
The consolidated condensed financial statements include the
accounts of the Company and its subsidiaries all of which are
reported under the equity method of accounting. The accompanying
condensed financial statements include the fiscal years ended January
2, 1994 ("Fiscal 1993"), January 3, 1993 ("Fiscal 1992"), and
December 29, 1991 ("Fiscal 1991").
Equity in earnings of the Company's subsidiaries is presented
after elimination of management fees payable to the Company, for
Fiscal 1993 $4.2 million, for Fiscal 1992 $4.1 million, and for
Fiscal 1991 $3.3 million and interest payable of $2.1 million for
Fiscal 1993.
Under the Company's subsidiaries bank credit agreements and
Senior Subordinated Notes the amount which may be paid to the Company
by its subsidiaries in any fiscal year is limited in accordance with
formulas, which are based primarily on either the net revenues or the
net income of the subsidiary, depending upon which of the formulas
results in the lesser amount, plus reimbursement for expenses and
amounts due pursuant to a tax sharing arrangements between the
Company and its subsidiaries. At January 2, 1994, the amounts
payable to the Company from its subsidiaries amounted to
approximately $13 million.
During Fiscal 1993, Fiscal 1992, and Fiscal 1991, no dividends
were paid to the Company by its subsidiaries.
2. CHANGES IN ACCOUNTING PRINCIPLES:
The Financial Accounting Standards Board has issued three
Statements of Financial Accounting Standards that the Company adopted
in the first quarter of Fiscal 1993. Financial Accounting Standard
No. 109, "Accounting for Income Taxes" ("FAS 109"), was adopted by
restating financial statements beginning in 1988. The impact of
adopting FAS 109 is discussed in Note 3. The impact of adopting
Statement of Financial Accounting Standard No. 106, "Employees'
Accounting for Post- retirement Benefits Other Than Pensions" ("FAS
106"), and Statement of Financial Accounting Standard No. 112,
"Employees' Accounting for Post-employment Benefits" ("FAS 112") is
discussed in Note 9.
3. INCOME TAXES:
In February 1992, the Financial Accounting Standards Board
issued FAS 109. Under the asset and liability method of FAS 109,
deferred tax assets and
19
<PAGE> 21
EKCO GROUP, INC. AND SUBSIDIARIES
SCHEDULE III - CONDENSED FINANCIAL INFORMATION OF THE REGISTRANT (CONTINUED)
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
3. INCOME TAXES (CONTINUED):
liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying
amounts of existing assets and liabilities and their respective tax
bases. In addition the new accounting standard requires the
recognition of future tax benefits, such as net operating loss
carryforwards, to the extent that realization of such benefits is
more likely than not. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income
in the years in which those temporary differences are expected to be
recovered or settled. Under FAS 109, the effect on deferred tax
assets and liabilities of a change in tax rates is recognized in
income the period that includes the enactment date.
The Company adopted FAS 109 in 1993 and has applied the
provisions of FAS 109 retroactively to January 3, 1988. The Company
previously used the asset and liability method under FAS 96. The
adoption of FAS 109 resulted in a cumulative effect of a benefit of
$23.2 million, or $1.20 per common share at January 3, 1988 and the
financial statements of the Company for all fiscal years subsequent
to January 3, 1988 have been restated with the provisions of FAS 109.
The following summarizes the impact of applying FAS 109, which
resulted in additional income tax expense, on equity in earnings of
subsidiaries, net income and earnings per share for Fiscal 1992 and
1991.
<TABLE>
<CAPTION>
EQUITY IN
EARNINGS OF NET EARNINGS
SUBSIDIARIES INCOME PER SHARE
------------ ------ ---------
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
FISCAL 1992
- -----------
As previously reported $18,785 $14,050 $ .75
Effect of FAS 109 (5,623) (5,403) (.29)
------ ------ ----
As restated $13,162 $ 8,647 $ .46
======= ======= =====
FISCAL 1991
- -----------
As previously reported $14,638 $10,144 $ .60
Effect of FAS 109 (4,671) (4,250) (.25)
------ ------ ----
As restated $ 9,967 $ 5,894 $ .35
======= ======= =====
</TABLE>
20
<PAGE> 22
<TABLE>
EKCO GROUP, INC. AND SUBSIDIARIES
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
(AMOUNTS IN THOUSANDS)
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- -----------------------------------------------------------------------------------------------------------------------------------
--ADDITIONS TO RESERVES-- --DEDUCTIONS FROM RESERVES--
BALANCE AT ADDITIONS CHARGED TO SETTLEMENTS BALANCE
BEGINNING CHARGED TO OTHER OR WRITE- AT CLOSE
DESCRIPTION OF PERIOD INCOME OR LOSS ACCOUNTS PAYMENTS OFFS OF PERIOD
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
YEAR ENDED JANUARY 2, 1994:
Allowance for doubtful
accounts $1,607 $ 449 $375(1) $ - $ 673 $ 1,758
Provisions related to
restructuring/reorganization
and excess facilities cost - 11,000 - - 2,677 8,323
------ ------- ---- ------ ------ -------
$1,607 $11,449 $375 $ - $3,350 $10,081
====== ======= ==== ====== ====== =======
YEAR ENDED JANUARY 3, 1993:
Allowance for doubtful
accounts $1,429 $ 1,077 $162 (2) $ - $1,061 $ 1,607
Reserves related to plant
consolidations 1,771 - - 1,715 - 56
------ ------- ---- ------ ------ -------
$3,200 $ 1,077 $162 $1,715 $1,061 $ 1,663
====== ======= ==== ====== ====== =======
YEAR ENDED DECEMBER 29, 1991:
Allowance for doubtful
accounts $1,491 $ 302 $ - $ - $ 364 $ 1,429
Reserves related to plant
consolidations 2,269 - 498 - 1,771
------ ------- ----- ------ ------ -------
$3,760 $ 302 $ - $ 498 $ 364 $ 3,200
====== ======= ===== ====== ====== =======
- -----------------------------------------------------------------------------------------------------------------------------------
<FN>
(1) Included in valuation of assets of Kellogg Brush Manufacturing Co. acquired April 1, 1993.
(2) Included in valuation of assets of Frem Corporation purchased January 8, 1992.
</TABLE>
21
<PAGE> 23
EXECUTIVE COMPENSATION PLANS AND ARRANGEMENTS
Name of Plan or Arrangement and Location
- ----------------------------------------
1(a) 1984 Restricted Stock Purchase Plan, as amended --Registration
Statement No. 33-42785, Exhibit 10.1(a) to Form 10-K for the year
ended December 29, 1991.
1(b) Form of Restricted Stock Purchase Agreement dated October 3, 1990 with
each of Robert Stein, Jeffrey A. Weinstein, Ronald N. Fox, Neil R.
Gordon, Brian R. McQuesten and four other employees of the Company --
Exhibit 10.1(b) to Form 10-K for the year ended December 29, 1991.
1(c) Copy of Restricted Stock Purchase Agreement dated as of October 12,
1993 with Donato A. DeNovellis -- Exhibit 10.1(c) to Form 10-K for the
year ended January 2, 1994.
2(a) 1985 Restricted Stock Purchase Plan, as amended -- Registration
Statement No. 33-42785, Exhibit 10.3(a) to Form 10-K for the year
ended December 29, 1991.
2(b) Form of Restricted Stock Purchase Agreement dated October 3, 1990 with
each of Robert Stein, Jeffrey A. Weinstein, Ronald N. Fox, Neil R.
Gordon, Brian R. McQuesten and four other employees of the Company --
Exhibit 10.3(b) to Form 10-K for the year ended December 29, 1991.
3(a) 1987 Stock Option Plan, as amended -- Registration Statement No.
33-50802, Exhibit 10.11(a) to Form 10-K for the year ended December
29, 1991.
3(b) Forms of Non-Qualified Stock Option Agreements dated September 8, 1987
and amendment thereto, June 22, 1988 and amendment thereto, January
18, 1990 and amendment thereto, January 13, 1992, January 19, 1993 and
January 25, 1994 with each of Robert Stein, Jeffrey A. Weinstein,
Ronald N. Fox, Neil R. Gordon, Brian R. McQuesten and two other
employees of the Company (and January 25, 1995 with Donato A.
DeNovellis) -- Exhibit 10.12(b) to Form 10-K for the year ended
January 3, 1988 and Exhibit 10.11(b)(2) to Form 10-K for the year
ended December 29, 1991; Exhibit 10.12(c) to Form 10-K for the year
ended January 1, 1989 and Exhibit 10.11(c)(2) to Form 10-K for the
year ended December 29, 1991; Exhibit 10.13(d) to Form 10-K for the
year ended December 31, 1989 and Exhibit 10.11(e)(2) to Form 10-K for
the year ended December 29, 1991; Exhibit 10.11(f) to Form 10-K for
the year ended December 29, 1991; Exhibit 10.3(g) to Form 10-K for the
year ended January 3, 1993; and Exhibit 10.3(h) to Form 10-K for the
year ended January 4, 1994, respectively.
3(c) Form of Incentive Stock Option Agreement dated as of October 28, 1988
with Ronald N. Fox and certain other employees of Ekco Housewares,
Inc. and Ekco Canada Inc. -- Exhibit 10.12(d) to Form 10-K for the
year ended January 1, 1989.
22
<PAGE> 24
4(a) Employment Agreement with Robert Stein dated as of November 6, 1991 --
Exhibit 10.4 to Form 10-K for the year ended December 29, 1991.
4(b) Employment Agreement with Jeffrey A. Weinstein dated as of November 6,
1991 -- Exhibit 10.5 to Form 10-K for the year ended December 29,
1991.
4(c) Employment Agreement with Ronald N. Fox dated as of November 6, 1991
-- Exhibit 10.6 to Form 10-K for the year ended December 29, 1991.
4(d) Form of Employment Agreement with Neil R. Gordon, one other executive
officer, one other officer of the Company and one other employee of
the Company dated as of November 6, 1991 -- Exhibit 10.7 to Form 10-K
for the year ended December 29, 1991.
4(e) Form of First Amendment to Employment Agreement with Robert Stein,
Jeffrey A. Weinstein, Ronald N. Fox, Neil R. Gordon, one other
executive officer, one other officer of the Company and one other
employee of the Company dated as of January 1, 1992 -- Exhibit
10.11(a).
4(f) Second Amendment to Employment Agreement with Ronald N. Fox dated as
of July 16, 1992 -- Exhibit 10.11(b).
4(g) Form of Second Amendment to Employment Agreement with Robert Stein,
Jeffrey A. Weinstein, Neil R. Gordon, one other executive officer and
one other officer of the Company and Third Amendment to Employment
Agreement with Ronald N. Fox and one other employee of the Company
dated as of January 1, 1993 -- Exhibit 10.11(c).
4(h) Arrangement regarding change of control dated October 27, 1993 with
Donato A. DeNovellis -- Exhibit 10.11(d) to Form 10-K for the year
ended January 2, 1994.
5 Ekco Group, Inc. Incentive Compensation Plan for Executive Employees
of Ekco Group, Inc. and Subsidiaries -- Exhibit 10.9 to Form 10-K for
the year ended December 29, 1991.
6 Ekco Group, Inc. Supplemental Executive Retirement Plan dated as of
July 1, 1992 -- Exhibit 10.13.
7 Form of Split Dollar Agreement dated as of October 1, 1992 with Robert
Stein, Jeffrey A. Weinstein, Ronald N. Fox, Neil R. Gordon and Brian
R. McQuesten, and dated as of October 1, 1993 with Donato A.
DeNovellis -- Exhibit 10.14.
23
<PAGE> 25
<TABLE>
INDEX TO EXHIBITS
<CAPTION>
Exhibit
Number* Exhibit Description
- ------ -------------------
<S> <C>
3.1(a) Restated Certificate of Incorporation dated February
17, 1987, as amended (incorporated herein by
reference to Exhibit 3.1(a) to Form 10-K for the year
ended December 31, 1989).
3.1(b) Certificate of Designations of Series A Junior
Participating Preferred Stock, originally filed as
Exhibits 3.1(b) and 4.2(c) to Form 10-K for the
year ended December 28, 1986 (included in Exhibit
4.2(a)).
3.1(c) Certificate of Designations of Series B ESOP
Convertible Preferred Stock (incorporated herein by
reference to Exhibit 3.1(d) to Form 10-K for the year
ended January 1, 1989).
3.2 By-Laws as currently in effect (incorporated herein
by reference to Exhibit 3.2 to Form 10-K for the year
ended December 29, 1991).
4.1 Rights Agreement dated as of March 27, 1987,
including Form of Rights Certificate and Form of
Certificate of Designations of Series A Junior
participating Preferred Stock, originally filed as
Exhibit 4.2(c) to Form 10-K for the year ended
December 28, 1986; First Amendment dated as of June 9,
1988, originally filed as Exhibit 4.2(a)(2) to Form
10-K for the year ended January 1, 1989; [Second]
Amendment dated as of January 10, 1989, originally
filed as Exhibit 4.2(a)(3) to Form 10-K for the year
ended January 1, 1989; Third Amendment dated as of
March 23, 1992, originally filed as Exhibit 8 to Form
8 Amendment No. 2 to Form 8-A dated June 30, 1992;
and Fourth Amendment dated as of December 22, 1992,
originally filed as Exhibit 9 to Form 8 Amendment No.
3 dated January 8, 1993 to Form 8-A (incorporated
herein by reference to Exhibit 4.2 to Form 10-K for
the year ended January 3, 1993).
4.2 Form of Purchase Agreement dated as of December 1,
1988 between Ekco Housewares, Inc. and each of
Teachers Insurance and Annuity Association of
America, The Mutual Life Insurance Company of New
York, MONY Life Insurance Company of America, MONY
Legacy Life Insurance Company, Kemper Investors Life
Insurance Company and Federal Kemper Life Insurance
Company, as amended (incorporated herein by reference
to Exhibit 4.1 to Form 8-K as of December 21, 1988,
Exhibit 4.3(b) to Form 10-K for the year ended
December 30, 1990, Exhibit 28.2 to Form 8-K as of
January 8, 1992, and Exhibit 4.3(a) to Form 10-Q for
the quarterly period ended July 4, 1993).
<FN>
_______________________________________________________________________________
* Numbered in accordance with Item 601 of Regulation S-K.
</TABLE>
24
<PAGE> 26
<TABLE>
<S> <C>
10.1(a) 1984 Restricted Stock Purchase Plan, as amended
(incorporated herein by reference to Exhibit 10.1(a)
to Form 10-K for the year ended December 29, 1991).
10.1(b) Form of Restricted Stock Purchase Agreement dated
October 3, 1990 with Robert Stein, Jeffrey A.
Weinstein, Ronald N. Fox, Neil R. Gordon, Brian R.
McQuesten and four other employees of the Company
(incorporated herein by reference to Exhibit 10.1(b)
to Form 10-K for the year ended December 29, 1991).
10.1(c) Restricted Stock Purchase Agreement dated as of
October 12, 1993 with Donato A. DeNovellis.
10.2(a) 1985 Restricted Stock Purchase Plan, as amended
(incorporated herein by reference to Exhibit 10.3(a)
to Form 10-K for the year ended December 29, 1991).
10.2(b) Form of Restricted Stock Purchase Agreement dated
October 3, 1990 with Robert Stein, Jeffrey A.
Weinstein, Ronald N. Fox, Neil R. Gordon, Brian R.
McQuesten and four other employees of the Company
(incorporated herein by reference to Exhibit 10.3(b)
to Form 10-K for the year ended December 29, 1991).
10.3(a) 1987 Stock Option Plan, as amended, and form of
incentive stock option and non-qualified stock option
agreements (incorporated herein by reference to
Exhibit 10.11(a) to Form 10-K for the year ended
December 29, 1991).
10.3(b) Form of Non-Qualified Stock Option and Repurchase
Agreement dated September 8, 1987, as amended, with
each of Robert Stein, Jeffrey A. Weinstein, Ronald
N. Fox, Neil R. Gordon, Brian R. McQuesten and one
other employees of the Company (incorporated herein
by reference to Exhibit 10.12(b) to Form 10-K for the
year ended January 3, 1988 and Exhibit 10.11(b)(2) to
Form 10-K for the year ended December 29, 1991).
10.3(c) Form of Non-Qualified Stock Option and Repurchase
Agreement dated as of June 22, 1988, as amended, with
each of Robert Stein, Jeffrey A. Weinstein, Ronald N.
Fox, Neil R. Gordon and Brian R. McQuesten
(incorporated herein by reference to Exhibit 10.12(c)
to Form 10-K for the year ended January 1, 1989 and
Exhibit 10.11(c)(2) to Form 10-K for the year ended
December 29, 1991).
10.3(d) Form of Incentive Stock Option Agreement dated as of
October 28, 1988 with Ronald N. Fox and certain
employees of Ekco Housewares, Inc. and Ekco Canada
Inc. (incorporated herein by reference to Exhibit
10.12(d) to Form 10-K for the year ended January 1,
1989).
</TABLE>
25
<PAGE> 27
<TABLE>
<S> <C>
10.3(e) Form of Non-Qualified Stock Option and Repurchase
Agreement dated as of January 18, 1990, as amended,
with each of Robert Stein, Jeffrey A. Weinstein,
Ronald N. Fox, Neil R. Gordon and Brian R. McQuesten
(incorporated herein by reference to Exhibit 10.13(d)
to Form 10-K for the year ended December 31, 1989
and Exhibit 10.11(e)(2) to Form 10-K for the year
ended December 29, 1991).
10.3(f) Form of Non-Qualified Stock Option and Repurchase
Agreement dated as of January 13, 1992 with each of
Robert Stein, Jeffrey A. Weinstein, Ronald N. Fox,
Neil R. Gordon, Brian R. McQuesten and one other
employee of the Company, originally filed as Exhibit
10.11(f) to Form 10-K for the year ended December 29,
1991; Form of Non-Qualified Stock Option and
Repurchase Agreement dated as of January 19, 1993
with each of Robert Stein, Jeffrey A. Weinstein,
Ronald N. Fox, Neil R. Gordon and Brian R. McQuesten,
originally filed as Exhibit 10.3(g) to Form 10-K for
the year ended January 3, 1993; and Form of
Non-Qualified Stock Option and Repurchase Agreement
dated as of January 25, 1994 with each of Robert
Stein, Jeffrey A. Weinstein, Ronald N. Fox, Donato A.
DeNovellis, Neil R. Gordon and Brian R. McQuesten.
10.4(a) Form of Indemnity Agreement for officers and
directors (incorporated herein by reference to
Exhibit 10.11 to Form 10-K for the year ended January
1, 1989).
10.4(b) Schedule to Form of Indemnity Agreement for
directors and officers.
10.5 Ekco Group, Inc. 1988 Directors' Stock Option Plan
(incorporated herein by reference to Exhibit 10.15 to
Form 10-K for the year ended December 31, 1989).
10.6(a) Ekco Group, Inc. Employees' Stock Ownership Plan
effective as of January 1, 1989 (incorporated herein
by reference to Exhibit 10.13(a) to Form 10-K for the
year ended January 1, 1989).
10.6(b) ESOP Loan Agreement dated as of May 22, 1989 among
Neil R. Gordon, Trustee of Ekco Group, Inc.
Employees' Stock Ownership Plan, Ekco Group, Inc.
and Shawmut Bank, N.A. (incorporated herein by
reference to Exhibit 28.1 to Form 10-Q for the
quarterly period ended July 2, 1989).
10.6(c) ESOP Loan Agreement dated as of October 1, 1990 with
Neil R. Gordon, Trustee (incorporated herein by
reference to Exhibit 10.10(c) to Form 10-K for the
year ended December 30, 1990).
10.7 Employment Agreement with Robert Stein dated as of
November 6, 1991 (incorporated herein by reference to
Exhibit 10.4 to Form 10-K for the year ended December
29, 1991).
</TABLE>
26
<PAGE> 28
<TABLE>
<S> <C>
10.8 Employment Agreement with Jeffrey A. Weinstein dated
as of November 6, 1991 (incorporated herein by
reference to Exhibit 10.5 to Form 10-K for the year
ended December 29, 1991).
10.9 Employment Agreement with Ronald N. Fox dated as of
November 6, 1991 (incorporated herein by reference to
Exhibit 10.6 to Form 10-K for the year ended December
29, 1991).
10.10 Form of Employment Agreement with Neil R. Gordon,
one other executive officer, one other officer and
one other employee of the Company dated as of
November 6, 1991 (incorporated herein by reference to
Exhibit 10.7 to Form 10-K for the year ended December
29, 1991).
10.11(a) Form of First Amendment to Employment Agreement
dated as of January 1, 1992 with Robert Stein,
Jeffrey A. Weinstein, Ronald N. Fox, Neil R.
Gordon, one other executive officer and other
employee of the Company (incorporated herein by
reference to Exhibit 10.11(a) to Form 10-K for the
year ended January 3, 1993).
10.11(b) Second Amendment to Employment Agreement with Ronald
N. Fox dated as of July 16, 1992 (incorporated herein
by reference to Exhibit 10.11(b) to Form 10-K for the
year ended January 3, 1993).
10.11(c) Form of Second Amendment to Employment Agreement
with Robert Stein, Jeffrey A. Weinstein, Neil R.
Gordon, one other executive officer and one other
officer of the Company and Third Amendment to
Employment Agreement with Ronald N. Fox and one other
employee of the Company dated as of January 1, 1993
(incorporated herein by reference to Exhibit 10.11(c)
to Form 10-K for the year ended January 3, 1993).
10.11(d) Arrangement regarding change of control dated
October 27, 1993 with Donato A. DeNovellis.
10.12 Ekco Group, Inc. Incentive Compensation Plan for
Executive Employees of Ekco Group, Inc. and
Subsidiaries (incorporated herein by reference to
Exhibit 10.9 to Form 10-K for the year ended December
29, 1991).
10.13 Ekco Group, Inc. Supplemental Executive Retirement
Plan dated as of July 1, 1992.
10.14 Form of Split Dollar Agreement dated as of October 1,
1992 with Robert Stein, Jeffrey A. Weinstein, Ronald
N. Fox, Neil R. Gordon and Brian R. McQuesten, and
dated as of October 1, 1993 with Donato A. DeNovellis.
</TABLE>
27
<PAGE> 29
<TABLE>
<S> <C>
10.15 Standstill Agreement with Stephen Weinroth dated as
of March 27, 1987, originally filed as Exhibit 10.15
to Form 10-K for the year ended December 28, 1986
(incorporated herein by reference to Exhibit 10.13 to
Form 10-K for the year ended January 3, 1993).
10.16 Standstill Agreement with G. Chris Andersen dated as
of March 30, 1987, originally filed as Exhibit 10.17
to Form 10-K for the year ended December 28, 1986
(incorporated herein by reference to Exhibit 10.14 to
Form 10-K for the year ended January 3, 1993).
10.17(a) Indemnification Letter from American Home Products
Corporation dated February 8, 1985 to The Ekco Group,
Inc., originally filed as Exhibit 2.2 to Form 8-K as
of October 23, 1987 (incorporated herein by reference
to Exhibit 10.15(a) to Form 10-K for the year ended
January 3, 1993).
10.17(b) Letter of Restatement and Confirmation of the
Indemnification of American Home Products Corporation
to The Ekco Group, Inc. from American Home Products
Corporation to Centronics Corporation dated October
1, 1987, originally filed as Exhibit 2.3 to Form 8-K
as of October 23, 1987 (incorporated herein by
reference to Exhibit 10.15(b) to Form 10-K for the
year ended January 3, 1993).
10.17(c) Letter from American Home Products Corporation dated
December 19, 1988 (incorporated herein by reference
to Exhibit 10.17(d) to Form 10-K for the year ended
January 1, 1989).
10.18 Agreement dated as of March 7, 1989 with Howard R.
Curd et al. (incorporated herein by reference to
Exhibit 10.16 to Form 10-K for the year ended January
1, 1989).
10.19 Stock Purchase and Sale Agreement dated as of January
8, 1992 with Ekco Housewares, Inc., Frem Corporation,
Robert Frem and Bruce Phillips and related agreements
(incorporated herein by reference to Exhibits 2.1
through 2.5 to Form 8-K as of January 8, 1992).
10.20(a) Credit Agreement dated as of March 19, 1991 among
Woodstream Corporation, Fleet National Bank and
Algemene Bank Nederland, N.V., as amended
(incorporated herein by reference to Exhibit 10.19 to
Form 10-Q for the quarterly period ended March 31,
1991, Exhibit 10.18(b) to Form 10-K for the year
ended January 3, 1993).
10.20(b) Amendment No. 2 to Credit Agreement dated as of
February 3, 1994 among Woodstream Corporation and
Fleet Bank of Massachusetts, N.A.
</TABLE>
28
<PAGE> 30
<TABLE>
<S> <C>
10.21 Amended and Restated Credit Agreement dated as of
January 8, 1992 among Ekco Housewares, Inc., Ekco
Canada Inc., Fleet Bank of Massachusetts, N.A. and
ABN AMRO Bank N.V., as amended (incorporated herein
by reference to Exhibit 28.1 to Form 8-K as of
January 8, 1992, Exhibit 10.19(b) to Form 10-K for
the year ended January 3, 1993, and Exhibit 10.19(c)
to Form 10-Q for the quarterly period ended July 4,
1993).
10.22 Securities Purchase Agreement dated as of December
22, 1992 with The 1818 Fund, L.P., originally filed
as Exhibit 10.20(a) to Form 10-K for the year ended
January 3, 1993; Subordinated Convertible Note dated
December 22, 1992, originally filed as Exhibit
10.20(b) to Form 10-K for the year ended January 3,
1993; Registration Rights Agreement with The 1818
Fund, L.P., originally filed as Exhibit 10.20(c) to
Form 10-K for the year ended January 3, 1993; and
Standstill Agreement dated April 28, 1992 with Brown
Brothers Harriman & Co. and The 1818 Fund, L.P. Brown
Brothers Harriman & Co., originally filed as Exhibit
10.20 (d) to Form 10-K for the year ended January 3,
1993.
10.23 (i) Agreement and Plan of Merger dated March 31, 1993
by and among the registrant, KBM Acquisition
Corporation, Kellogg Brush Manufacturing Co., Robert
Ryan, Curtis Rodenhouse, Benton Wilde, Martin Strahs,
Robert Bernet, Jr., and Bank Boston Ventures, Inc.,
(ii) Registration Rights Agreement dated March 31,
1993 by and among the registrant, Robert Ryan, Curtis
Rodenhouse, Benton Wilde, Martin Strahs, and Robert
Bernet, Jr., and (iii) Form of Standstill Agreement
dated March 31, 1993 by and among the registrant,
Robert Ryan, Curtis Rodenhouse, Benton Wilde, Martin
Strahs, and Robert Bernet, Jr. (incorporated herein
by reference to Exhibits 2.1, 2.2, and 2.3,
respectively, to the registrant's Form 8-K as of
April 1, 1993).
11 Statement re computation of per share earnings.
(Reference is made to Note 13 of Notes to Consolidated
Financial Statements appearing in Exhibit 13 hereto.)
13 1993 Annual Report to Stockholders (Sections entitled
"Common Stock Price Range and Dividends," "Selected
Consolidated Financial Data," "Management's
Discussion and Analysis of Results of Operations and
Financial Condition," "Consolidated Balance Sheets,"
"Consolidated Statement of Operations," "Consolidated
Statements of Stockholders' Equity," "Consolidated
Statements of Cash Flows," "Notes to Consolidated
Financial Statements," and "Report of Independent
Auditors").
21 Subsidiaries of the registrant.
23 Consent of KPMG Peat Marwick.
<FN>
_______________________________________________________________________________
Schedules to Exhibits 10.18, 10,19, 10.20(a), 10.21 and 10.22 will be
supplied upon request by the Commission.
</TABLE>
29
<PAGE> 31
THE FOREGOING EXHIBITS WILL NOT BE INCLUDED IN COPIES OF THIS ANNUAL REPORT ON
FORM 10-K SUPPLIED TO STOCKHOLDERS. A COPY OF THESE EXHIBITS WILL BE FURNISHED
TO STOCKHOLDERS UPON WRITTEN REQUEST ADDRESSED TO NEIL R. GORDON, TREASURER,
EKCO GROUP, INC., 98 SPIT BROOK ROAD, NASHUA, NEW HAMPSHIRE 03062.
30
<PAGE> 32
<TABLE>
INDEX TO EXHIBITS FILED WITH FORM 10-K
FOR THE FISCAL YEAR ENDED JANUARY 2, 1994
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
10.1(c) Restricted Stock Purchase Agreement dated as of
October 12, 1993 with Donato A. DeNovellis.
10.3(f) Form of Non-Qualified Stock Option and Repurchase
Agreement dated as of January 13, 1992 with each of
Robert Stein, Jeffrey A. Weinstein, Ronald N. Fox,
Neil R. Gordon, Brian R. McQuesten and one other
employee of the Company, originally filed as Exhibit
10.11(f) to Form 10-K for the year ended December 29,
1991; Form of Non-Qualified Stock Option and
Repurchase Agreement dated as of January 19, 1993
with each of Robert Stein, Jeffrey A. Weinstein,
Ronald N. Fox, Neil R. Gordon and Brian R. McQuesten,
originally filed as Exhibit 10.3(g) to Form 10-K for
the year ended January 3, 1993; and Form of
Non-Qualified Stock Option and Repurchase Agreement
dated as of January 25, 1994 with each of Robert
Stein, Jeffrey A. Weinstein, Ronald N. Fox, Donato A.
DeNovellis, Neil R. Gordon and Brian R. McQuesten.
10.4(b) Schedule to Form of Indemnity Agreement for officers
and directors.
10.11(d) Arrangement regarding change of control dated October
27, 1993 with Donato A. DeNovellis.
10.13 Ekco Group, Inc. Supplemental Executive Retirement
Plan dated as of July 1, 1992.
10.14 Form of Split Dollar Agreement dated as of October 1,
1992 with Robert Stein, Jeffrey A. Weinstein, Ronald
N. Fox, Neil R. Gordon and Brian R. McQuesten, and
dated as of October 1, 1993 with Donato A. DeNovellis.
10.20(b) Amendment No. 2 to Credit Agreement dated as of
February 3, 1994 among Woodstream Corporation and
Fleet Bank of Massachusetts, N.A.
11 Statement re computation of per share earnings.
(Reference is made to Note 13 of Notes to Consolidated
Financial Statements appearing in Exhibit 13 hereto.)
13 1993 Annual Report to Stockholders (Sections entitled
"Common Stock Price Range and Dividends," "Selected
Consolidated Financial Data," "Management's
Discussion and Analysis of Results of Operations and
Financial Condition," "Consolidated Balance Sheets,"
"Consolidated Statement of Operations,"
"Consolidated Statements of Stockholders' Equity,"
"Consolidated
</TABLE>
31
<PAGE> 33
<TABLE>
<S> <C>
Statements of Cash Flows," "Notes to Consolidated
Financial Statements," and "Report of Independent
Auditors").
21 Subsidiaries of the registrant.
23 Consent of KPMG Peat Marwick.
</TABLE>
32
<PAGE> 1
EXHIBIT 10.1(c)
--------------
RESTRICTED STOCK PURCHASE AGREEMENT
AGREEMENT made as of the 12th day of October, 1993 by and between Ekco
Group, Inc., a Delaware corporation with a principal place of business at 98
Spit Brook Road, Nashua, New Hampshire 03062 (hereinafter the "Corporation")
and Donato A. DeNovellis, of 25 Butternut Lane, Basking Ridge, New Jersey
07920, (hereinafter the "Purchaser").
W I T N E S S E T H :
WHEREAS, the Corporation has adopted and amended the 1984 Restricted
Stock Purchase Plan (hereinafter the "1984 Plan") to promote the interests of
the Corporation by providing an incentive for employees, officers and
directors of the Corporation; and
WHEREAS, pursuant to the provisions of the 1984 Plan, the Corporation is
offering to sell to the Purchaser shares of the Corporation's Common Stock,
par value $.01 per share, in accordance with the provisions of the 1984 Plan
and on the terms and conditions hereinafter set forth; and
WHEREAS, Purchaser wishes to accept said offer.
NOW THEREFORE, in consideration of the premises and mutual interests to
be served hereby and the mutual covenants and promises contained herein, the
Corporation and Purchaser hereby agree as follows:
1. TERMS OF PURCHASE. The Purchaser hereby accepts the offer of the
Corporation to sell to the Purchaser, in accordance with the terms of the 1984
Plan and this Agreement, twenty-five thousand (25,000) shares of the
Corporation's Common Stock, par value $.01 per share (hereinafter collectively
the "Plan Shares") at a purchase price of $2,500.00, receipt of which is
hereby acknowledged by the corporation.
2. PLAN SHARES. The Purchaser specifically understands and agrees that
the Plan Shares are being sold to the Purchaser pursuant to the 1984 Plan, as
amended, a copy of which Purchaser acknowledges he or she has read and
understands and agrees to be bound by. The provisions of the 1984 Plan are
incorporated herein by reference. In the event of a conflict between the
terms and conditions of the 1984 Plan and this Agreement the provisions of the
Agreement will control.
3. RESTRICTIONS ON DISPOSITION. In accordance with Paragraph 5(b) of
the 1984 Plan, the Purchaser may not, and hereby specifically agrees that he
or she shall not pledge, encumber, hypothecate, assign, sell, transfer, give
or otherwise dispose of the Plan Shares, provided, however, that the aforesaid
restrictions shall no longer apply to:
(a) Any Plan Shares owned by the Purchaser upon the Purchaser's death.
(b) Any Plan Shares owned by the Purchaser upon the Purchaser's
"Disability" (as that term is specifically defined in Paragraph 8 hereof).
(c) Any Plan Shares owned by the Purchaser for which restrictions have
lapsed due to the Purchaser's satisfaction of length of employment
requirements.
(d) Any Plan Shares owned by the Purchaser for which restrictions have
lapsed due to the occurrence of a Change of Control. As used herein, a "Change
of Control" shall be deemed to have occurred (i) if any "person" (as such term
is used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934,
as amended), other than the Corporation or any employee stock
<PAGE> 2
plan of the Corporation, is or becomes the beneficial owner, directly or
indirectly, of securities of the Corporation representing fifteen percent (15%)
or more of the outstanding Common Stock of the Corporation; or (ii) ten (10)
days following the commencement of, or announcement of an intention to make, a
tender offer or exchange offer the consummation of which would result in the
beneficial ownership by any "person" of fifteen percent (15%) or more of the
Common Stock of the Corporation, provided, however, that at the conclusion of
such ten (10) day period such person has not discontinued or rescinded his
intention to make such a tender or exchange offer, or (iii) if during any
consecutive twelve (12) month period beginning on or after the date hereof
individuals who at the beginning of such period were directors of the
Corporation cease, for any reason, to constitute at least a majority of the
Board of Directors of the Corporation; or (iv) if a merger of, or consolidation
involving, the Corporation in which the Corporation's stock is converted into
securities of another corporation or into cash shall be consummated, or a plan
of complete liquidation of the Corporation (whether or not in connection with a
sale of all or substantially all of the Corporation's assets) shall be adopted
and consummated, or substantially all of the Corporation's operating assets are
sold (whether or not a plan of liquidation shall be adopted or a liquidation
occurs), excluding in each case a transaction solely for the purpose of
reincorporating the Corporation in a different jurisdiction or recapitalizing
the Corporation's stock.
(e) The occurrence of the events described in the aforementioned Sub-
sections (a), (b), (c) and (d) shall each be deemed a ("Lapsing Event").
Plan Shares as to which the restrictions on disposition have not lapsed
are hereinafter referred to as "Restricted Shares."
Any disposition or encumbrance of any Restricted Shares contrary to the
provisions hereof shall be null and void, and the Corporation shall have no
obligation to recognize or give effect to such disposition or encumbrance on
its books and records or otherwise.
4. ADDITIONAL SHARES. As used in this Agreement, the term "Restricted
Shares" shall be deemed to include any securities issued in respect of the
Restricted Shares as a result of a stock split, stock dividend, combination of
shares or an exchange for other securities by reclassification, redesignation,
merger, consolidation, recapitalization or otherwise.
5. ESCROW OF SHARE CERTIFICATES. Certificates representing Plan Shares
shall be delivered to Devine, Millimet and Branch, P.A., of Manchester, New
Hampshire, as Escrow Agent. The Escrow Agent will deliver any Plan Shares as
to which restrictions have lapsed pursuant to Section 3 immediately to the
Purchaser after receipt of written notice signed by either the President,
Secretary or Treasurer of the Corporation that a Lapsing Event has occurred.
Such notice shall identify the Lapsing Event, and shall instruct the Escrow
Agent to deliver such Plan Shares as to which restrictions have lapsed.
The Escrow Agent will deliver all Plan Shares then held in escrow to the
Purchaser as to which restrictions have lapsed pursuant to Section 3(d) upon
receipt of written notice signed by Purchaser that a Lapsing Event pursuant to
Section 3(d) has occurred.
6. TAX LIABILITY OF THE PURCHASER AND PAYMENT OF TAXES. The Purchaser
agrees that, to the extent that the lapsing of restrictions on disposition of
any of the Restricted Shares or the declaration of dividends on any such
shares before the lapse of such restrictions on disposition results in the
Purchaser's being deemed to be in receipt of earned income under the
provisions of the Internal Revenue Code of 1986, as amended, the Corporation
shall be entitled to immediate payment from the Purchaser of the amount of any
tax required to be withheld by the Corporation with respect to such earned
income as follows:
2
<PAGE> 3
(i) in cash to the extent of the greater of two thousand, five hundred
dollars ($2,500.00) or ten percent (10%) of such withholding tax, and
(ii) by the Purchaser's issuing a promissory note (the "Promissory
Note") to the Corporation in principal amount equal to the full amount of the
balance of such withholding tax, which Promissory Note shall be due and
payable with interest at the annual rate of the prime rate of Fleet Bank of
Massachusetts in effect at the date of the note plus one percent (1%), ninety
(90) days after the date on which the taxable event has occurred. The
Promissory Note shall also provide for mandatory prepayments equal to (a)
twenty-five percent (25%) of any net cash compensation, payable to the
Purchaser by the Corporation after the date of the Promissory Note, and (b)
one hundred percent (100%) of the proceeds from the sale by Purchaser of any
of the Plan Shares then owned. The Promissory Note shall be secured by a
pledge of all the Plan Shares which caused the tax liability to occur. Said
Promissory Note and pledge shall each be in form and substance reasonably
satisfactory to the Corporation. In the event Purchaser does not comply with
the foregoing within three days after payment and presentation of documents,
the Corporation, in addition to its other remedies, will be entitled to the
entire amount due hereunder from any salary or other payments due to
Purchaser.
7. SECURITIES LAW COMPLIANCE. The Purchaser represents that any sales
of Plan Shares at a time when the Purchaser may be deemed an "affiliate" of
the Corporation for purposes of the Securities Act of 1933, as amended (the
"Act"), shall be made in accordance with the requirements of Rule 144 under
the Act (or any successor rule) applicable to sales by an "affiliate" of
shares registered under the Act or in a transaction otherwise exempt from the
registration requirements of the Act and as to which the Corporation shall
have received an opinion of counsel satisfactory to it confirming such
exemption.
8. CORPORATION'S DUTY ON OCCURRENCE OF LAPSING EVENT. Upon the
occurrence of a Lapsing Event described in Section 3(c) or 3(d), the
Corporation shall give notice of such event to the Escrow Agent immediately,
but in no event, later than fifteen (15) days after such event. Upon receipt
of written request of a duly appointed executor or administrator of the estate
of the Purchaser, in the case of death of the Purchaser or the duly authorized
representative of the Purchaser or the Purchaser, in the case of Disability of
the Purchaser, and of documentation reasonably satisfactory to the Corporation
which substantiates the fact of death or Disability, the Corporation shall
notify the Escrow Agent immediately, but in no event, later than fifteen days
after receipt of such request.
The term "Disability shall mean permanent and total disability as
defined in the Corporations's Wage Continuation Plan in effect at the time
such Disability is being determined.
9. SALE OF RESTRICTED SHARES TO CORPORATION UPON TERMINATION OF
SERVICE.
(a) In the event that the Purchaser's employment with, or position as a
director of, the Corporation terminates for any reason (hereinafter
"Termination") other than death, Disability or Change of Control as defined in
Subsection 3(d), then, on the effective date of Termination, the Corporation
shall send written notice to the Escrow Agent of such event, no sooner than
twenty days and no later than thirty days after the effective date of
Termination. Such notice shall contain instructions to the Escrow Agent of
either (i) the Corporation's intention to repurchase the Restricted Shares
from Purchaser, or (ii) the Corporation's determination not to purchase all or
any portion of the Restricted Shares.
3
<PAGE> 4
(b) If the Corporation elects to purchase the Restricted Shares from the
Purchaser, the Escrow Agent shall deliver such Restricted Shares immediately
to the Secretary of the Corporation and the Corporation shall
contemporaneously with the receipt thereof make payment to the Purchaser at
the price specified in Subsection (a) above.
(c) If the Corporation elects not to purchase all or any portion of the
Restricted Shares, the Escrow Agent shall forthwith deliver one or more
certificates representing the Restricted Shares the Corporation has determined
not to purchase to the Purchaser and the Purchaser shall be restored to all
rights as a stockholder with respect to those shares as of the effective date
of Termination. The Corporation may impose such restrictions as it deems
appropriate on the transfer of the Restricted Shares which it does not
purchase hereunder, subject to the limitations set forth in Paragraph 7 of the
1984 Plan.
10. EQUITABLE RELIEF, CONSENT TO CONSENT TO JURISDICTION AND
APPOINTMENT OF AGENT FOR SERVICE OF PROCESS. The Purchaser specifically
acknowledges and agrees that in the event of a breach or threatened breach of
the provisions of this Agreement or the 1984 Plan, including the attempted
transfer of the Restricted Shares by the Purchaser, monetary damages may not
be adequate to compensate the Corporation, and, therefore, in the event of
such a breach or threatened breach, in addition to any right to damages, the
Corporation shall be entitled to equitable relief in any court having
competent jurisdiction. Nothing herein shall be construed as prohibiting the
Corporation from pursuing any other remedies available to it for any such
breach or threatened breach.
The Purchaser specifically consents to the jurisdiction of the courts of
the State of New Hampshire and to the appointment of the Secretary of the
Corporation as his or her agent for the service of process in any action,
whether at law or in equity, brought by the Corporation to protect any of its
rights hereunder or under the 1984 Plan.
11. NO IMPLIED AGREEMENT. Nothing herein contained shall be deemed to
give the Purchaser the right to be retained in the employ of the Corporation.
12. NOTICES. All notices required by this Agreement shall be in
writing signed by the party giving such notice and shall be delivered by
registered or certified mail, postage prepaid, to the addresses set forth
below:
To the Corporation: Ekco Group, Inc.
98 Spit Brook Road, Suite 102
Nashua, New Hampshire 03062
Attention: Secretary of the
Corporation
To the Purchaser: Purchaser's last address in the records of
the Company or an Affiliate
13. BINDING EFFECT. This Agreement shall be binding upon the parties
hereto and upon their respective successors and assigns and upon Purchaser's
heirs, executors and administrators.
14. GOVERNING LAW. This Agreement shall be interpreted and construed
in accordance with the laws of the State of New Hampshire.
15. SEVERABILITY. If any provision of this Agreement is held to be
invalid or unenforceable by a court of competent jurisdiction, then such
provision or provisions shall be modified to the extent necessary to make such
provision valid and enforceable, and to the extent that this is impossible,
4
<PAGE> 5
then such provision shall be deemed to be excised from this Agreement, and the
validity, legality and enforceability of the rest of this Agreement shall not
be affected thereby.
16. ENTIRE AGREEMENT. This Agreement and the 1984 Plan constitute the
entire agreement among the parties with respect to the subject matter hereof,
and may not be modified, amended, renewed, or terminated, nor may any term,
condition or breach of any term or condition be waived, except by a writing
signed by the person or persons sought to be bound by such modification,
amendment, renewal, termination or waiver. Any waiver of any term, condition
or breach hereof shall not be a waiver of any other term or condition or of
the same term or condition for the future, or of any subsequent breach.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
EKCO GROUP, INC.:
By: Jeffrey A. Weinstein
________________________________
Title: Executive Vice President
________________________________
Date: October 12, 1993
________________________________
PURCHASER:
Donato A. DeNovellis
________________________________
(Signature)
Date: October 12, 1993
________________________________
5
<PAGE> 1
EXHIBIT 10.3(f)
---------------
NON-QUALIFIED STOCK OPTION AND REPURCHASE AGREEMENT
---------------------------------------------------
EKCO GROUP, INC.
----------------
AGREEMENT made as of the [DATE] (the "Grant Date"), between Ekco
Group, Inc. (the "Company"), a Delaware corporation having a principal place of
business in Nashua, New Hampshire, and [NAME AND ADDRESS OF PURCHASER], an
employee of the Company (the "Employee");
WHEREAS, the Company desires to grant to the Employee an Option to
purchase shares of its common stock of a par value of $.01 a share (the
"Shares") under and for the purposes of the Company's 1987 Stock Option Plan,
as amended (the "Plan") pursuant to Article XII thereof as a non-qualified
stock option;
WHEREAS, the Company and the Employee understand and agree that any
terms used herein have the same meanings as in the Plan;
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
set forth and for other good and valuable consideration, the parties hereto
agree as follows:
1. GRANT OF OPTION
The Company hereby grants to the Employee the right and option to
purchase at one time or from time to time all or any part of an aggregate of
[NO. OF SHARES] Shares, subject to adjustment as provided in the Plan, on the
terms and conditions and subject to all the limitations set forth herein and in
the Plan, which is incorporated herein by reference. The Employee acknowledges
receipt of a copy of the Plan.
2. PURCHASE PRICE
The purchase price of the Shares covered by this Option shall be
[PURCHASE PRICE] per Share, subject to adjustment as provided in the Plan (the
"Purchase Price").
3. EXERCISE OF OPTION
(a) The Option granted hereby shall be exercisable immediately, within
the term set forth in Section 4 below, subject to the provisions of this
Agreement.
(b) Notwithstanding the provisions of the foregoing Subsection (a) and
except as otherwise provided herein or in the Plan, if the Employee ceases to
be an employee of the Company or of an Affiliate for any reason, then if such
termination occurs:
(i) during the period on or after the Grant Date and before the date
which is twelve months thereafter (the "First Anniversary Date") and the
Employee has theretofore exercised this Option for any Shares, then the
Company may purchase any or all of those Shares from the Employee at the
price paid by the Employee upon exercise;
(ii) during the period on or after the First Anniversary Date and
before the date which is twelve months thereafter (the "Second Anniversary
Date") and the Employee has theretofore exercised this Option for more
than [ONE-THIRD OF THE NO. OF SHARES] Shares, then the Company may
purchase from the Employee up to that number of Shares equal to the amount
by which the number of Shares purchased by the Employee pursuant to this
Option exceeds [ONE-THIRD OF THE NO. OF SHARES] Shares at the price paid
by the Employee upon exercise; or
<PAGE> 2
(iii) during the period on or after the Second Anniversary Date and
before the date which is twelve months thereafter (the "Third Anniversary
Date") and the Employee has theretofore exercised this Option for more
than [TWO-THIRDS OF THE NO. OF SHARES] Shares, then the Company may
purchase from the Employee up to that number of Shares equal to the amount
by which the number of Shares purchased by the Employee pursuant to this
Option exceeds [TWO-THIRDS OF THE NO. OF SHARES] Shares at the price paid
by the Employee upon exercise.
Notwithstanding the foregoing, in the event the Employee's employment
shall terminate as a result of death or Disability, the Purchase Option (as
hereinbelow defined) shall cease and terminate.
The right of the Company to purchase Shares pursuant to this
Subsection 3(b) is hereinafter referred to as the "Purchase Option" and such
Shares are hereinafter referred to as the "Purchase Stock."
(c) Notwithstanding the foregoing Subsection (b), but subject to the
other provisions hereof, the Purchase Option shall cease and terminate in the
event of, and immediately upon, a Change of Control that occurs at any time
before the Employee has ceased to be an employee of the Company or of an
Affiliate. As used herein, a "Change of Control" shall be deemed to have
occurred (i) if any "person" (as such term is used in Sections 13(d) and
14(d)(2) of the Securities Exchange Act of 1934, as amended), other than the
Company or any employee stock plan of the Company, is or becomes the beneficial
owner, directly or indirectly, of securities of the Company representing
fifteen percent (15%) or more of outstanding Shares of the Company; or (ii) ten
(10) days following the commencement of, or announcement of an intention to
make, a tender offer or exchange offer the consummation of which would result
in the beneficial ownership by any "person" of fifteen percent (15%) or more of
the Shares of the Company, provided, however, that at the conclusion of such
ten (10) day period such person has not discontinued or rescinded his intention
to make such a tender or exchange offer, or (iii) if during any consecutive
twelve (12) month period beginning on or after the date on which this Agreement
is executed individuals who at the beginning of such period were directors of
the Company cease, for any reason, to constitute at least a majority of the
Board of Directors of the Company; or (iv) if a merger of, or consolidation
involving, the Company in which the Company's stock is converted into
securities of another corporation or into cash shall be consummated, or a plan
of complete liquidation of the Company (whether or not in connection with a
sale of all or substantially all of the Company's assets) shall be adopted and
consummated, or substantially all of the Company's operating assets are sold
(whether or not a plan of liquidation shall be adopted or a liquidation
occurs), excluding in each case a transaction solely for the purpose of
reincorporating the Company in a different jurisdiction or recapitalizing the
Company's stock.
4. TERM OF OPTION
(a) This Option shall terminate ten (10) years and one (1) month from the
Grant Date of this Option, but shall be subject to earlier termination as
provided herein or in the Plan.
(b) If the Employee ceases to be an employee of the Company or of an
Affiliate (for any reason other than death or Disability or termination by the
Employee's employer for cause), then this Option may be exercised (subject to
the provisions herein and in the Plan regarding exercise of the Option) but
only within six (6) months and one (1) day after the date on which the Employee
ceases to be an employee, or within ten (10) years from the granting of this
Option, whichever is earlier, and may not be exercised thereafter. Immediately
upon the Employee's ceasing to be an employee as aforesaid, this Option shall
cease to be exercisable by the Employee as to those Shares, if any, which if
purchased
2
<PAGE> 3
immediately following such termination would be subject to the Company's
Purchase Option.
The provisions of this Subsection (b), and not the provisions of
Subsection (c) and (d) below, shall apply to the Employee if the Employee
subsequently becomes Disabled or dies after the Employee's termination of
employment; however, in the case of the Employee's death which occurs within
the six (6) months and one (1) day following the termination of employment, the
Employee's Survivors may exercise this Option within six (6) months after the
date of the Employee's death, but in no event beyond the originally prescribed
term hereof.
(c) In the event of the Disability of the Employee (as determined by
the 1987 Stock Option Plan Committee of the Company, and as to the fact and
date of which the Employee is notified by that Committee in writing), this
Option shall be exercisable within (1) year after the date of such Disability
or, if earlier, the term originally prescribed by this Agreement.
(d) In the event of the death of the Employee while an employee of the
Company or of an Affiliate, this Option may be exercised only by the Employee's
legal representatives and/or any person or persons who acquired the Employee's
rights to this Option by will or by the laws of descent and distribution.
The Company shall use reasonable efforts to notify the Employee's
legal representative, if known, or his or her next of kin or other persons
likely to know his or her legal representative, promptly after the date of
death of the existence of this Option. Any failure by the Company to give such
notice will not extend the period of time during which this Option may be
exercised or otherwise entitle the holder to any greater rights than stated in
this Agreement or in the Plan. This Option must be exercised, if at all,
within one (1) year after the date of death of the Employee, or, if earlier,
within the originally prescribed term of this Option.
(e) In the event the Employee's employment is terminated by the
Employee's employer for "cause" (as defined in the Plan), the Employee's right
to exercise any unexercised portion of this Option shall cease forthwith, and
this Option shall thereupon terminate.
5. NON-ASSIGNABILITY
This Option shall not be transferable by the Employee otherwise than by
will or by the laws of descent and distribution and shall be exercisable,
during the Employee's lifetime, only by the Employee (or by the Employee's duly
appointed legal representative). This Option shall not be assigned, pledged or
hypothecated in any way (whether by operation of law or otherwise) and shall
not be subject to execution, attachment or similar process. Any attempted
transfer, assignment, pledge, hypothecation or other disposition of this Option
or of any rights granted hereunder contrary to the provisions of this Section
5, or the levy of any attachment or similar process upon this Option or such
rights, shall be null and void.
6. EXERCISE OF OPTION AND ISSUE OF SHARES
This Option may be exercised, in whole or in part, at one time or
from time to time (to the extent that it is exercisable in accordance with its
terms) by giving written notice to the Company. Such written notice shall be
signed by the person exercising this Option, shall state the number of Shares
with respect to which this Option is being exercised, shall contain any
warranty required by Section 7 below, and shall otherwise comply with the
terms and conditions of this Agreement and the Plan. Such notice must be
received by the Company within the relevant exercise period specified in
Section 4 of this Agreement. Such notice shall either: (i) be accompanied by
payment of the full
3
<PAGE> 4
purchase price of such Shares, in which event the Company, subject to the
provisions of Section 7, shall deliver a certificate or certificates
representing such Shares as soon as practicable after the notice shall be
received, or (ii) fix a date (not less than five nor more than ten business
days after such notice shall be received by the Company, which date must be
within the relevant exercise period specified in Section 4 of this Agreement)
for the payment of the full purchase price of such Shares against delivery
subject to the provisions of Section 7, of a certificate or certificates
representing such Shares. Payment of such purchase price shall, in either
case, be made by check payable to the order of the Company, or in such other
manner as the Committee shall permit. The certificate or certificates for the
Shares as to which this Option shall have been so exercised shall be registered
in the name of the person or persons so exercising this Option and shall be
delivered as provided above to the person or persons exercising this Option.
All Shares that shall be purchased upon the exercise of this Option as provided
herein shall be fully paid and non- assessable.
The Employee agrees to pay to the Company upon exercise of this
Option that amount which is equal to the amount the Company is required to
withhold as a result of such exercise.
The Company shall pay all original issue taxes with respect to the
issue of the Shares pursuant hereto and all other fees and expenses necessarily
incurred by the Company in connection herewith. Except as specifically set
forth herein, the holder acknowledges that any income or other taxes due from
him or her with respect to this Option or the shares issuable pursuant to this
Option shall be the responsibility of the holder. The holder of this Option
shall have rights as a shareholder only with respect to any Shares covered by
this Option after due exercise of this Option and tender of the full exercise
price for the Shares being purchased pursuant to such exercise. Pursuant to
the Plan, the Company shall make delivery of the Shares against payment of the
Option price therefor.
7. PURCHASE FOR INVESTMENT
Unless the offering and sale of the Shares to be issued upon the
particular exercise of this Option shall have been effectively registered under
the Securities Act of 1933, as now in force or hereafter amended, or any
successor legislation (the "Act"), the Company shall be under no obligation to
issue the Shares covered by such exercise unless and until the following
conditions have been fulfilled:
(i) The person(s) who exercise this Option shall warrant to the Company,
at the time of such exercise, that such person(s) are acquiring such
Shares for his or her own account, for investment and not with a view to,
or for sale in connection with, the distribution of any such Shares, in
which event the person(s) acquiring such Shares shall be bound by the
provisions of the following legend which shall in substantially the
following form be endorsed upon the certificate(s) evidencing the option
Shares issued pursuant to such exercise:
"The shares represented by this certificate have been taken for
investment and they may not be sold or otherwise transferred by any
person, including a pledgee, in the absence of an effective
registration statement for the shares under the Securities Act of
1933 or an opinion of counsel satisfactory to the Company that an
exemption from registration is then available."
(ii) The Company shall have received an opinion of its counsel that the
Shares may be issued upon such particular exercise in compliance with the
Act without registration thereunder.
4
<PAGE> 5
Without limiting the generality of the foregoing, the Company may delay
issuance of the Shares until completion of any reasonable action or
obtaining of any consent, which the Company deems reasonably necessary under
any applicable law (including without limitation state securities or "blue sky"
laws).
8. RESTRICTIONS ON TRANSFER OF SHARES; DETAILS OF THE PURCHASE OPTION
(a) Any Shares which are subject to the Purchase Option shall not be
transferred by the Employee except as permitted herein. Until the termination
of this Agreement, the Shares which are subject to the Purchase Option may not
be transferred by the Employee unless and until the transferee agrees, in a
form satisfactory to the Company, to be bound by this Agreement and to sell any
transferred Shares to the Company as herein provided.
(b) In the event the Company shall be entitled to elect to exercise the
Purchase Option, the Company shall be deemed to have made such election with
respect to all Shares which are Purchase Stock, unless it shall have given to
the Employee written notice of its non-election to exercise the Purchase
Option, in whole or in part, within ninety (90) days of the date of the event
entitling the Company to exercise the Purchase Option. If the Company shall
have given the Employee written notice of its election to exercise the Purchase
Option in part, any remaining Shares subject to the Purchase Option hereunder
shall thenceforth no longer be subject to the Purchase Option, except as such
notice may otherwise provide.
(c) In the event the Company shall be entitled to and shall have
determined to elect to exercise the Purchase Option, it shall give to the
Employee a written notice specifying a date for the Closing, which date shall
be not more than ten (10) business days after the giving of such notice. The
Closing shall take place at the Company's principal offices in New Hampshire,
or such other location as the Company may reasonably designate in such notice.
If the Company shall be deemed to have elected to exercise the Purchase Option
by virtue of the provisions of Subsection (b) above, the Closing will take
place on the tenth business day after the ninety (90) day period described in
Subsection (b) above.
(d) At the Closing, the Employee shall deliver the Purchase Stock being
purchased by the Company against the simultaneous delivery to the Employee of
the purchase price (by certified or bank cashier's check or in such other form
as mutually agreed to) for the number of shares of the Purchase Stock then
being purchased. In the event that the Employee fails so to deliver the shares
of Purchase Stock to be purchased, the Company may elect (a) to establish a
segregated account in the amount of the Purchase Price, such account to be
turned over to the Employee upon delivery of such shares of Purchase Stock, and
(b) immediately to take such action as is appropriate to transfer record title
of such of the Purchase Stock from the Employee to the Company and to treat the
Employee and such shares of the Purchase Stock in all respects as if delivery
of such shares of the Purchase Stock had been made as required by this
Agreement. The Employee hereby irrevocably grants the Company a power of
attorney for the purpose of effectuating the preceding sentence.
(e) If the Company shall pay a stock dividend or declare a stock split on
or with respect to any of the Company's common stock, $.01 par value (the
"Common Stock"), or otherwise distribute securities of the Company to the
holders of its Common Stock, whether before or after the exercise of this
Option, the number of shares of stock or other securities of the Company issued
with respect to the Purchase Stock then subject to the Purchase Option shall be
added to the Purchase Stock then subject to the Purchase Option without any
change in the aggregate purchase price. If the Company shall distribute to its
stockholders shares of stock of another corporation, the shares of stock of
such other corporation distributed with respect to the Purchase Stock then
subject to the Purchase
5
<PAGE> 6
Option shall be added to the Purchase Stock covered by the Purchase Option
without any change in the aggregate purchase price. Without limiting the
generality of the foregoing, the Employee shall be entitled to retain any and
all cash dividends paid by the Company on the Shares.
(f) If the outstanding shares of Common Stock of the Company shall be
subdivided into a greater number of shares or combined into a smaller number of
shares, or in the event of a reclassification of the outstanding shares of
Common Stock of the Company, or if the Company shall be a party to any capital
reorganization, whether before or after the exercise of this Option, there
shall be substituted for the Purchase Stock then covered by the Purchase Option
such amount and kind of securities as are issued in such subdivision,
combination, reclassification, or capital reorganization in respect of the
Purchase Stock subject to the Purchase Option immediately prior thereto,
without any change in the aggregate purchase price.
(g) If the Company shall be completely liquidated, then the Purchase
Option shall cease and terminate as of the date of such liquidation and the
Employee shall hold the Shares free of the Purchase Option.
(h) The Company shall not be required to transfer any Shares on its books
which shall have been sold, assigned or otherwise transferred in violation of
this Agreement, or to treat as owner of such Shares, or to accord the right to
vote as such owner or to pay dividends to, any person or organization to which
any such Shares shall have been sold, assigned or otherwise transferred, from
and after any sale, assignment or transfer of any Shares made in violation of
this Agreement.
(i) All certificates representing any Shares to be issued to the Employee
pursuant to the exercise of this Option which are subject to the Purchase
Option shall have endorsed thereon a legend substantially as follows:
"The shares represented by this certificate are subject to a Stock Option
and Repurchase Agreement dated as of [DATE OF AGREEMENT] between the
Corporation and [NAME OF EMPLOYEE], a copy of which Agreement is available
for inspection at the principal offices of the Company or will be made
available without charge upon request."
(j) This Agreement shall not restrict the transfer by the Employee of
shares, if any, which are not acquired pursuant to the exercise of this Option
or which are not, or cease to be, subject to the Purchase Option in accordance
with the terms hereof, except as otherwise provided in Section 7 hereof.
9. REGISTRATION RIGHTS
(a) In the event that the Company has an effective registration
statement covering the sale and resale of securities issued pursuant to the
Plan, then the Employee agrees to sign a waiver in substantially the following
form:
"For so long as a registration statement under the Securities Act of 1933,
as amended, is in effect covering the sale and resale of securities issued
pursuant to the 1987 Stock Option Plan of Ekco Group, Inc. (the "Company")
the undersigned Employee waives his/her rights to require the Company to
file a registration statement pursuant to Section 9 of the Non-Qualified
Stock Option and Repurchase Agreement dated as of [DATE OF AGREEMENT],
between the undersigned Employee and the Company."
(b) The Employee acknowledges that option agreements have been executed
by the Company with [NO. OF OTHER EMPLOYEES] other employees of the Company and
its Affiliates, five Outside Directors of the Company and may be executed with
other employees and Directors (collectively "Other Holders"), each containing
or to contain a section substantially identical to this Section 9. Subject to
the
6
<PAGE> 7
terms hereinafter set forth, at any time after the Grant Date, the holder shall
have the right, by written notice to the Company, to require the Company to
file and use its best efforts to cause to become effective a registration
statement under the Securities Act of 1933, as amended (the "Act") on Form S-8,
Form S-2 or Form S-3 or other like form, if available, covering such number of
Shares acquired or to be acquired prior to the effective date of such
registration statement, subject to the limitations that (i) the Company shall
be required to file no more than an aggregate of two (2) registration
statements pursuant to such notices and/or pursuant to notices received from
Other Holders, and (ii) if, in the opinion of counsel to the Company, the
holder can then sell, subject to such limitations as to the number of Shares
which may be sold as may be imposed by Rule 144 under the Act or any successor
rule, Shares requested to be included in any such registration statement,
without such registration, the Company need not so register such Shares. In no
event will the Company be required to register Shares which are subject to the
Purchase Option. The Company agrees to promptly notify a holder in the event
that it receives a notice from any of the Other Holders requiring it to file a
registration statement and to permit the holder to require the Company to
include Shares owned by the holder in such registration statement, subject to
the limitations set forth above.
(c) In connection with any registration statement pursuant to this Section
9:
(i) the holder will furnish to the Company in writing such appropriate
information as the Company, or the Securities and Exchange Commission (the
"Commission") or any other regulatory authority may request;
(ii) the holder agrees to execute, deliver and/or file with or supply to
the Company, the Commission, any underwriters and/or any state or other
regulatory authority such information, documents, representations,
undertakings and/or agreements necessary to carry out the provisions of
the registration agreements contained in this Agreement and/or to effect
the registration or qualification of the Shares under the Act and/or any
of the laws and regulations of any state or governmental instrumentality;
(iii) the Company will furnish to the holder of Shares included in the
registration statement such number of copies of such prospectus (including
each preliminary, amended or supplemental prospectus) as the holder may
reasonably request; and
(iv) in the event an offering of securities by the Company is pending,
the Company shall have the right to require that the holder delay any
offering of Shares for a period of ninety (90) days after the effective
date of such pending offering (upon the Company's having first delivered
to the holder the written opinion of its principal underwriter, or if
there be none, then from an officer of the Company based upon a good faith
resolution of the Board of Directors to the effect that the offering of
such Shares will have an adverse effect on the marketing of such pending
offering).
(d) The Company will pay all its out-of-pocket expenses and disbursements
in connection with any registration statement filed under this Section 9,
including, without limitation, printing expenses, fees of the Company's counsel
and auditors, registration fees, Blue Sky fees and similar costs to the extent
permitted by state and regulatory authorities.
(e) The Company will be obligated to keep any registration statement filed
by it under this Section 9 effective under the Act for a period of ninety (90)
days after the actual effective date of such registration statement and to
prepare and file such supplements and amendments necessary to maintain an
effective registration statement for such period. As a condition to the
Company's obligation under this Subsection (e), the holder will execute and
7
<PAGE> 8
deliver to the Company such written undertakings as the Company and its counsel
may reasonably require in order to assure full compliance with relevant
provisions of the Act.
(f) The Company will use its best efforts to register or qualify the
Shares covered by a registration statement filed pursuant hereto under such
securities or Blue Sky laws in such jurisdictions within the United States as
the holder may reasonably request, provided, however, that the Company reserves
the right, in its sole discretion, not to register or qualify such stock in any
jurisdiction where such stock does not meet with the requirements of such
jurisdiction or where the Company is required to qualify as a foreign
corporation to do business in such jurisdiction and is not so qualified therein
or is required to file any general consent to service of process.
(g) In the event that a holder has not sold all of his or her Shares
on or prior to the expiration of the period specified in Subsection (e) above,
the holder hereby agrees that the Company may deregister by post-effective
amendment any of his or her Shares covered by the registration statement or
notification but not sold on or prior to such date. The Company agrees that it
will notify the holder of the filing and effective date of such post-effective
amendment.
(h) The holder agrees that upon notification by the Company that the
prospectus in respect to any public offering covered by the provisions hereof
is in need of revision, the holder will immediately upon receipt of such
notification (i) cease to offer or sell any securities of the Company which
must be accompanied by such prospectus; (ii) return to the Company all such
prospectuses in the hands of the holder; and (iii) not offer or sell any
securities of the Company until the holder has been provided with a current
prospectus and the Company has given the holder notification permitting the
holder to resume offers and sales.
10. NOTICES
Any notices required or permitted by the terms of this Agreement or
the Plan shall be given by registered or certified mail, return receipt
requested, postage prepaid, addressed as follows:
To the Company: Ekco Group, Inc.
98 Spit Brook Road
Nashua, New Hampshire 03062
Attention: General Counsel
To the Employee: To Employee's last address in the records of the
Company
or to such other address as either party furnishes to the other by like notice.
Any such notice shall be deemed to have been given when mailed in accordance
with the foregoing provisions.
8
<PAGE> 9
11. GOVERNING LAW
This Agreement shall be construed and enforced in accordance with the
law of the State of New Hampshire, except to the extent the law of the State of
Delaware may be applicable.
12. BENEFIT OF AGREEMENT
This Agreement shall be for the benefit of and shall be binding upon
the heirs, executors, administrators, legal representatives and successors of
the parties hereto, subject to the provisions of Section 5 above.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed and delivered by its duly authorized officer and its corporate seal to
be hereunto affixed and the Employee has hereunto set his or her hand and seal
all as of the day and year first above written in duplicate originals.
EKCO GROUP, INC.
[SEAL]
By ___________________________
Title ________________________
______________________________
EMPLOYEE
9
<PAGE> 10
EKCO GROUP, INC.
1987 STOCK OPTION PLAN
SCHEDULE
<TABLE>
Each of the following employees of the Company has a Non-Qualified Stock
Option and Repurchase Agreement with the Company covering shares purchased
pursuant to the Company's 1987 Stock Option Plan which is identical in form to
the foregoing agreement except as to the date, number of shares, and exercise
price:
<CAPTION>
Name and Job Title(s) Dates No. of Shares
--------------------- ----- -------------
<S> <C> <C>
Robert Stein 01-13-92 77,000
President & Chief Executive 01-19-93 120,000
Officer 01-25-94 75,000
Jeffrey A. Weinstein 01-13-92 27,500
Executive Vice President, 01-19-93 60,000
Secretary & General Counsel 01-25-94 22,000
Ronald N. Fox 01-13-92 27,500
Senior Vice President 01-19-93 60,000
01-25-94 16,000
Donato A. DeNovellis 07-14-93 30,000
Vice President & Chief 01-25-94 20,000
Financial Officer
Neil R. Gordon 01-13-92 9,500
Treasurer 01-19-93 9,000
01-25-94 8,500
Brian R. McQuesten 01-13-92 9,500
Controller 01-19-93 10,000
01-25-94 8,500
Harry E. Whaley 01-13-92 18,500
President, Woodstream
Corporation (subsidiary
of the Company)
</TABLE>
10
<PAGE> 1
<TABLE>
EXHIBIT 10.4(b)
---------------
SCHEDULE OF INDEMNITY AGREEMENTS
WITH EKCO GROUP, INC.
Each of the following persons has an indemnity agreement with Ekco
Group, Inc. which is identical in form to the foregoing agreement except that
agreements executed before April 29, 1988 bear the former company name of
Centronics Corporation and agreements executed before February 17, 1987 bear
the former name of Centronics Data Computer Corp.:
<CAPTION>
Present Position
Name With the Company Date of Agreement
- ---- ---------------- -----------------
<S> <C> <C>
Edmond M. Coller Former Director 02-12-87
Andrew D. Dunn Director 08-03-87
Ronald N. Fox Senior Vice President 06-30-87
Neil R. Gordon Treasurer 07-30-86
Thomas G. Kamp Former Director & Officer 07-30-86
Michael D. Kaufman Former Director 01-04-87
Robert W. Kilcullen, Jr. Former Director & Officer 07-30-86
Milton C. Lauenstein Former Director 08-18-87
T. Michael Long Director 05-18-93
Brian R. McQuesten Controller 07-30-86
Linda R. Millman Associate General Counsel 01-01-92
& Assistant Secretary
Kenneth J. Novack Former Director 08-10-87
Stuart B. Ross Director 02-14-89
Harold J. Seigle Former Director 08-03-87
Bill W. Sorenson Director 03-15-88
Herbert M. Stein Director 08-03-87
Robert Stein President & Chief 07-30-86
Executive Officer
Jeffrey A. Weinstein Executive Vice President, 07-30-86
Secretary & General Counsel
Harry E. Whaley President, Woodstream 02-14-89
Corporation (subsidiary of
the Company) and Former Officer
</TABLE>
<PAGE> 1
[Ekco Group, Inc. Letterhead] EXHIBIT 10.11(d)
----------------
October 27, 1993
Donato A. DeNovellis
25 Butternut Lane
Basking Ridge, New Jersey 079920
Dear Don:
This letter sets forth the terms and conditions of certain obligations
which Ekco Group, Inc. (the "Company") is agreeing hereby to provide to you (i)
upon the occurrence of a Change of Control (as hereinafter defined) of the
Company, and (ii) if, following a Change of Control, you are terminated without
good cause (as hereinafter defined) or a Constructive Termination (as
hereinafter defined) occurs. The terms and conditions are as follows:
Immediately upon a Change of Control, and without regard to whether or not
your employment is terminated or a Constructive Termination occurs at such time
or thereafter, you shall immediately have the unconditional unencumbered and
free right, title and interest in all shares of stock of the Company which were
granted, sold or optioned (subject to your obligation to pay the option
exercise price to the extent theretofore not paid) to you by the Company at any
time prior to the Change of Control) as if all restrictions had lapsed and all
events necessary to vest in you such rights, including the lapsing of time, had
occurred.
Following a Change of Control and upon an event of Constructive
Termination or termination of your employment without good cause, you shall
receive within ten (10) days of such event (a) a lump-sum payment equal to
three (3) times the Adjusted Salary Rate (as hereinafter defined) in effect on
the date of such Constructive Termination, plus (b) a lump-sum cash payment
equal to (i) three (3) times the maximum payable to you under all compensation
bonus plans and arrangements (as hereinafter more fully described) for the
fiscal year in which the Constructive Termination occurs, plus (ii) an amount
equal to three (3) times the value of the securities, cash or other property
which shall have been allocated to your account in the Employees' Stock
Ownership Plan ("ESOP") for the fiscal year preceding the fiscal year in which
the Constructive Termination occurs. For the purposes of hereof, the time when
a Constructive Termination occurs shall be the day any event occurs which is
included in the definition of Constructive Termination below. In addition, you
shall immediately upon Constructive Termination have the unconditional,
unencumbered and free right, title and interest in all shares of stock of the
Company which were granted, sold or optioned (subject to your obligation to pay
the option price to the extent not theretofore paid) to you by the Company at
any time prior to the effective date of Constructive Termination as if all
restrictions had lapsed and all events necessary to vest in you such rights,
including the lapsing of time, had occurred.
This agreement is not intended nor shall it be deemed to be a guarantee of
employment with the Company.
As used herein, a "Change of Control" shall be deemed to have occurred
(i) if any "person" (as such term is used in Sections 13(d) and 14(d)(2) of the
Securities Exchange Act of 1934, as amended), other than the Company or any
employee stock plan of the Company, is or becomes the beneficial owner,
directly or indirectly, of securities of the Company, representing fifteen
percent (15%) or more of the outstanding Common Stock of the Company; or (ii)
ten (10) days following the commencement of or announcement of an intention to
make, a tender offer or exchange offer the consummation of which would result
in the beneficial ownership by any "person" of fifteen percent (15%) or more of
the Common Stock of the Corporation, provided, however, that at the conclusion
of such ten (10) day period such person has not discontinued or rescinded his
intention to make
<PAGE> 2
Letter to D. DeNovellis
October 27, 1993
Page Two
such a tender or exchange offer, or (iii) if during any consecutive twelve (12)
month period beginning on or after the date of this letter individuals who at
the beginning of such period were directors of the Company cease, for any
reason, to constitute at least a majority of the Board of Directors of the
Company; or (iv) if a merger of, or consolidation involving, the Company in
which the Company's stock is converted into securities of another corporation
or into cash shall be consummated, or a plan of complete liquidation of the
Company (whether or not in connection with a sale of all or substantially all
of the Company's assets) shall be adopted and consummated, or substantially all
of the Company's operating assets are sold (whether or not a plan of
liquidation shall be adopted or a liquidation occurs), excluding in each case a
transaction solely for the purpose of reincorporating the Company in a
different jurisdiction or recapitalizing the Company's stock.
As used herein, a "Constructive Termination" shall be deemed to have
occurred if and when (i) your base salary is decreased below the level in
effect on the date of your last salary adjustment, or the bonus percentage
applicable to your participation in any compensation bonus plan or arrangement
is reduced, without your consent, provided, however, that nothing herein shall
be construed to guarantee your bonus awards if performance is below applicable
targets, or (ii) the importance of your job responsibilities is reduced without
your consent, or (iii) a proposal is made to relocate you to a location other
than Nashua, New Hampshire or the greater Boston, Massachusetts metropolitan
area without your consent.
As used herein, following a Change of Control "good cause" shall not be
deemed to have occurred unless (a) the conduct which is the basis for such
material breach is either willful or intentionally unlawful, and (b) you shall
not have ceased such conduct or cured the effect thereof, if curable, so that
such breach shall no longer be material within thirty (30) days after you shall
have received written notice from the Company of the Company's intention to
terminate your employment for good cause, which notice shall specify in detail
the basis therefor.
As used herein, "Adjusted Salary Rate" shall be your base salary as from
time to time increased.
As used herein, "compensation and bonus arrangements" shall include
monetary compensation by way of bonus or otherwise, if any, as may be
determined from time to time by the Board of Directors its sole discretion and
such other compensation pursuant to such executive bonus plans, restricted
stock purchase plans, stock option plans or other stock plans, available to
employees of the Company from time to time, as the Board of Directors may in
its sole discretion determine.
Please acknowledge your acceptance of the foregoing terms and conditions
by countersigning and returning a duplicate original of this letter to Linda R.
Millman, Associate General Counsel of the Company.
Very truly yours,
/s/ JEFFREY A. WEINSTEIN
Jeffrey A. Weinstein
Executive Vice President
Acknowledged and Agreed:
/s/ DONATO A. DeNOVELLIS
- ------------------------
Donato A. DeNovellis
Date: 10-28-93
-------------------
<PAGE> 1
SCHEDULE 10.13
--------------
EKCO GROUP, INC.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
Effective
July 1, 1992
<PAGE> 2
EKCO GROUP, INC. SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
1 DEFINITIONS
1.1 Accrued Benefit, at any point in time, means the sum of:
(a) the Formula A retirement benefit in Section 3.1 based on
Credited Service at the time, plus
(b) the Formula B retirement benefit in Section 3.1, prorated by
a fraction, the numerator of which is the Participant's Credited Service at
the time and the denominator of which is the lesser of twenty (20) or the
total Credited Service the Participant would have had if employed until Normal
Retirement Date.
An Accrued Benefit is calculated as if it were a monthly annuity payable for
the Participant's lifetime, with the first payment commencing on the first day
of the month following Normal Retirement Date and ceasing in the month of the
participant's death. An Accrued Benefit which becomes first payable under the
Plan's terms at any other date (such as Early Retirement Date) or in any other
form (such as a lump sum) will be the Actuarial Equivalent of the Accrued
Benefit.
In the event of preretirement death, retirement due to Disability, or
termination in circumstances providing for salary continuation under any
employment contract between the Participant and the Employer, or termination
of employment for any reason within three (3) years after a Change in Control,
an Accrued Benefit will be calculated with reference to the Plan's special
definitions of Average Compensation and Credited Service in Sections 1.6 and
1.11.
1.2 Actuarial Equivalent of any benefit earned under the Plan shall be
determined by the Actuary. Whenever benefits are calculated to commence on a
date other than the first day of the month following Normal Retirement Date or
in a form other than a monthly annuity for life, the Actuary shall use the
following factors to determine the Actuarial Equivalent:
(a) Mortality -- life expectancies will be calculated under the
1983 Individual Annuity Mortality Table (Male Lives), with three (3) year set
back for males so that male and female lives be computed on a uniform basis).
(b) Interest -- funds are assumed to grow at the rate of 8% per
annum.
1.3 Actuary shall mean an Actuary appointed by the Administrator under
whose supervision valuation reports and benefit calculations are performed for
the plan. The Actuary must be enrolled under federal practice.
1.4 Administrator shall mean the committee charged with administering
the Plan and will be the Compensation Committee of Ekco. In the event of a
Change in Control, those persons who were serving as members of the
Compensation Committee prior to the Change In Control will continue to serve
as the administrative committee for this plan, if willing, and successors will
be appointed by that person who was serving as Chief Executive Officer of Ekco
immediately prior to the Change in Control and, if he is unable or unwilling
to make such successor appointments, by that person who was serving as General
Counsel of Ekco immediately prior to the Change in Control.
1.5 Affiliated Employer shall mean any corporation which is a member
of a controlled group of corporations (as defined in Code Section 414(b)) with
1
<PAGE> 3
Ekco or which is otherwise designated as an Affiliated Employer by the
Administrator.
1.6 Average Compensation of a Participant means the average of his
Compensation over any three (3) consecutive years, or over the period of his
service, if less, which produce the highest average. In the event of a
Participant's death or Disability prior to retirement, termination in
circumstances providing for salary continuation under any employment contract
between the Participant and the Employer, or in the event the Participant
terminates employment for any reason within three (3) years following a Change
In Control, the calculation of the three (3) highest consecutive years of
Average Compensation will include any future period for which the Executive
receives base salary related payments under an employment contract with the
Employer, if the inclusion of that period will produce a higher calculation.
1.7 Average Compensation Differential for a Participant means the
amount determined by assuming that the Participant's 1991 Compensation
increased at the rate of six (6%) percent per year and subtracting that
hypothetical amount from Average Compensation at the time of any calculation
of benefits hereunder. The Average Compensation Differential shall never be
less than zero.
1.8 Change In Control shall mean the occurrence of any of the
following events:
(a) when any person (as such term is used in Sections 13(d) and
14(d)(2) of the Securities Exchange Act of 1934, as amended), is or becomes
the beneficial owner, directly or indirectly, of securities of Ekco
representing thirty percent (30%) or more of the combined voting power of
Ekco's then outstanding securities, or
(b) when within any consecutive twelve (12) month period,
individuals who at the beginning of such period were directors of Ekco cease,
for any reason, to constitute at least a majority of the Board of Directors of
Ekco; or
(c) when a merger of, or consolidation involving, Ekco in which
Ekco's stock is converted into securities of another corporation or into cash
shall be consummated, or a plan of complete liquidation of Ekco in which Ekco
(whether or not in connection with a sale of all or substantially all of the
Ekco's assets) shall be adopted and consummated, excluding in each case a
transaction solely for the purpose of reincorporating Ekco in a different
jurisdiction or recapitalizing Ekco's stock; or
(d) in the case of any Participant whose employment contract
with the Employer provides for a definition of Change In Control, the
occurrence of any one or more events which would be considered a Change in
Control under the employment contract.
1.9 Code shall mean the Internal Revenue Code of 1986, as amended from
time to time. In the event of amendments to the Code, references to specific
sections in this Plan shall be deemed to refer to successor sections or
provisions, as appropriate.
1.10 Compensation shall mean the highest base salary, determined on an
annualized basis, as in effect for a participant during any calendar year.
Bonuses, commissions, and other incentive Compensation are specifically
excluded. Compensation for each Participant at the Effective Date is
scheduled in the Appendix.
Compensation shall be grossed up by the amount of Compensation reduction
elected by the participant under any Code Section 401(k) or Code Section 125
2
<PAGE> 4
benefit Plans or under any program or individual arrangement providing for
salary deferral.
In no event shall Compensation include any payments to or benefits received
under this or any other public or private employee benefit Plan, or amounts
paid or reimbursed for moving expenses, or amounts realized from the exercise
of any stock option, or when restricted stock or property held by a
participant either becomes freely transferable or is no longer subject to a
substantial risk of forfeiture, or any other amounts which are fringe
benefits, whether or not taxable, such as group term life insurance.
1.11 Credited Service for an Executive shall be measured in terms of
years and completed calendar months with a partial month counted as a full
month if it equals or exceeds fifteen (15) days. Credited Service may not
exceed twenty (20) years under the Plan. All paid service is credited,
including service while on paid leave of absence, including without limitation
paid leave for active service or service required of an Employee who is a
member of the reserves of the Armed Forces of the United States. Service on
unpaid leave of absence will not be credited without the consent of the
Administrator.
An Employee shall also be credited with service while employed by Centronics
Corporation. An Employee shall be credited with service performed for
Woodstream Corporation only on and after February 1, 1989, and with service
performed for Ekco Housewares, Inc. only on and after November 1, 1987, and
with Frem Corporation only on or after February 1, 1991. Unless provided
otherwise by the Administrator, if other companies are named as Affiliated
Employers, the initial Credited Service date for Executives employed by them
will not be earlier than the first day of the month following the date on
which affiliated ownership with Ekco commenced.
In the event of a Participant's death or Disability prior to retirement,
termination in circumstances providing for salary continuation under any
employment contract between the Participant and the Employer, or in the event
the Participant terminates employment for any reason within three (3) years
following a Change In Control, his Credited Service will be increased for any
future period for which the Executive receives base salary related payments
under an employment contract with the Employer if the inclusion of those
payments will produce a higher calculation.
1.12 Designated Compensation means an amount designated for each
Participant by the Administrator and scheduled in the Appendix. Designated
Compensation is not to exceed the Participant's Compensation at the later of
the Effective Date or the date of initial membership.
1.13 Disability means the long term or permanent inability to perform
services at the expected level of performance due to a physical or mental
impairment. The Committee will determine, in its sole discretion, if a
Participant has incurred a Disability.
1.14 Early Retirement Date shall mean the date of a Participant's
fifty-fifth (55th) birthday.
1.15 Effective Date of this Plan is July 1, 1992.
1.16 Ekco means Ekco Group, Inc., a Delaware corporation.
1.17 Employer shall mean Ekco. Other Affiliated Employers may join
this Plan with the consent of Ekco, although only Ekco will have the powers to
amend or terminate the entire Plan and to appoint the Administrator.
3
<PAGE> 5
1.18 Executive shall mean any person employed in a decision making or
managerial position. Only Executives designated by the Board under Article 2
may participate.
1.19 Normal Retirement Date shall mean the date of a participant's
sixty-fifth (65th) birthday.
1.20 Participant shall mean any Executive who has been named as a
Participant under Article . A Participant will be considered an active
Participant during such period as he is accruing benefits under the Plan and
will be an inactive Participant during the period from cessation of active
participation until all benefits accrued on his behalf have been paid to him
or, when relevant, to his surviving spouse.
1.21 Plan shall mean this Plan document, as it may be amended from time
to time.
1.22 Plan Year shall mean the calendar year.
2 ELIGIBILITY FOR PLAN PARTICIPATION
Executives shall become Participants in the Plan only if, as and when so
designated by the Board of Directors of Ekco, in the Board's sole discretion.
3 RETIREMENT AND DEATH BENEFITS
3.1 Normal retirement benefit.
Each Participant who retires at his or her Normal Retirement Date shall be
entitled to a lump sum payment within thirty (30) days of retirement. The
lump sum payment will be the Actuarial Equivalent of the following pension
benefit: a lifetime monthly pension, commencing on the first day of the month
following Normal Retirement Date, equal to the sum of the Formula A and
Formula B amounts below.
(a) FORMULA A MONTHLY RETIREMENT BENEFIT. One twelfth (1/12) of the
Participant's Designated Compensation multiplied by his Credited Service
multiplied by the Formula A percentage in the Appendix.
(b) FORMULA B RETIREMENT BENEFIT. One twelfth (1/12) of the
Participant's Average Compensation Differential (if any) multiplied by the
Formula B percentage in the Appendix.
4 Early retirement benefit.
A Participant who retires on or after Early Retirement Date is entitled to a
lump sum payment within thirty (30) days of retirement. The lump sum will be
the Actuarial Equivalent of such Participant's Accrued Benefit at the time.
4.1 Late retirement benefit.
A Participant who remains in the employ of the Employer after such
Participant's Normal Retirement Date is entitled to a lump sum payment within
thirty (30) days of his or her actual retirement. The lump sum payment will
be the Actuarial Equivalent of such Participant's Accrued Benefit at the time
of actual retirement, taking into account increases in Average Compensation,
if any, and any additional Credited Service (subject to the Plan's general
limitation that Credited Service under the Plan not exceed twenty (20) years).
4
<PAGE> 6
4.2 Disability retirement.
A Participant who retires because of disability is entitled to a lump sum
payment within thirty (30) days of his or her actual retirement. The lump sum
payment will be the Actuarial Equivalent of such Participant's Accrued Benefit
at the time, taking into account the Plan's special definitions of Average
Compensation and Credited Service applicable to Disability payments.
4.3 Vested retirement benefits.
A Participant who terminates employment and who has not qualified for normal,
early, late or Disability retirement benefits described above may still be
eligible for a retirement benefit.
The retirement benefit is a lump sum payment of the Actuarial Equivalent of
the non-forfeited ("vested") portion of the Participant's Accrued Benefit,
based on Average Compensation and Credited Service at the time of retirement.
The lump sum Actuarial Equivalent will be paid within thirty (30) days of the
later of (a) the Participant's fifty fifth (55th) birthday or (b) the date of
his retirement.
<TABLE>
The non forfeited portion of a Participant's Accrued Benefit will be
determined as follows:
<CAPTION>
Credited Service Vested % of Accrued Benefit
<S> <C>
Less than 5 years 0%
5 years 50%
6 years 60%
7 years 70%
8 years 80%
9 years 90%
10 years or more 100%
</TABLE>
4.4 Optional form of benefit payments and surviving spouse annuity.
In lieu of the lump sum payments provided for retirees under the above
Sections 3.1 through 4.3, a Participant eligible for such benefits may elect
to receive the monthly lifetime pension on which Accrued Benefits are based.
In lieu of the lifetime pension, a participant may also elect to receive a
pension for a term certain or a pension with survivor benefits for a spouse or
other named beneficiary. Any such alternate form of pension will be the
Actuarial Equivalent of the Participant's Accrued Benefit. Such benefit
election shall be in writing and shall be filed in accordance with the such
procedures as may be established by the Administrator prior to the date on
which monthly payments are to commence.
4.5 Retirement benefits upon a Change In Control.
Upon the occurrence of a Change in Control, all participants will be 100%
vested in their Accrued Benefits, regardless of the vesting schedule in
Section 4.3.
If a Participant terminates employment for any reason within three years after
a Change In Control, a lump sum payment will be made within thirty (30) days
of the termination date in lieu of all other payments hereunder.
The lump sum payment will be the Actuarial Equivalent of the Participant's
Accrued Benefit, taking into account the Plan's special definitions of Average
Compensation and Credited Service applicable to Change in Control payments and
5
<PAGE> 7
subject to the Plan's general limitation that Credited Service under the Plan
not exceed twenty (20) years.
4.6 Preretirement death benefits.
If a Participant dies while employed (or during such period as he is receiving
base salary related payments under an employment contract with the Employer) a
death benefit will be paid to his named beneficiary in lieu of all other
benefits hereunder. The death benefit will be a lump sum payment which is the
Actuarial Equivalent of the amount which would have been paid to the
Participant if he had retired on account of Disability on the day prior to his
death.
The Participant may designate his or her beneficiary in writing on such form
as the Administrator may provide for this purpose. If no beneficiary form is
in effect, the beneficiary will be the surviving spouse of the Participant at
the date of death, if any. If there is no spouse, the beneficiary will be the
estate of the Participant.
5 FUNDING.
The Plan is an unfunded retirement plan and is not secured with assets in a
separate trust.
6 AMENDMENT AND TERMINATION.
6.1 Amendment.
Ekco shall have the right to amend, alter or modify the Plan at any time, or
from time to time, in whole or in part. Any such amendment shall become
effective under its terms upon adoption by the Board of Ekco.
The Administrator or any successor committee appointed by Ekco may also make
amendments to the Plan without approval of the Board.
No amendment shall be made to the Plan which shall:
(a) Deprive any Participant of any portion of his Accrued
Benefit prior to the date of such action; or
(b) Alter the schedule for vesting in Accrued Benefits with
respect to any Participant with three (3) or more years of Credited Service
without his or her written consent; or
(c) Decrease or remove the protections provided in Section 4.5
with respect to a Change in Control.
6.2 Termination.
Ekco reserves the right to terminate the Plan in whole or in part with respect
to all or any specific group of Participants. A termination will serve only
to suspend the accrual of future benefits and no Accrued Benefits may be
forfeited if the Plan terminates, nor may there be any loss or reduction of
the protections provided in Section 4.5 with respect to a Change in Control.
In the event of full or partial termination, employees affected thereby shall
be fully vested in their Accrued Benefits, notwithstanding the vesting
schedule in Section 4.3.
6
<PAGE> 8
Payment of benefits will be in the form and at the time as provided under the
Plan prior to its termination unless the Administrator, in its sole
discretion, instructs earlier payment.
7 MISCELLANEOUS.
7.1 Plan does not affect employment.
The adoption of this Plan does not alter any rights with respect to
employment, created by contract or otherwise, between the Employer and any
Participant.
7.2 No offset of other claims against benefits.
Benefits are to be paid hereunder irrespective of other claims which the
Employer has against the Participant, it being intended that payments be
provided the same protection as if made from a retirement plan qualified under
Section 401 of the Code.
7.3 Tax withholding.
The Employer will withhold federal income and employment taxes and appropriate
state taxes from any payment to be made hereunder.
7.4 Benefits not assignable.
No benefits under the Plan shall in any manner or to any extent be assignable
or transferable by any Participant or beneficiary under the Plan or subject to
attachment, garnishment or other legal process. No attempted assignment or
transfer of any benefit under the Plan shall be recognized.
7.5 Distribution to legally incapacitated.
In the event any benefit is payable to an incompetent or to a person otherwise
under legal disability, or who is by sole reason of advanced age, illness, or
other physical or mental incapacity, incapable of handling the disposition of
his property, the Administrator, in its sole discretion, may direct payment of
the whole or any part of such benefits, directly to the care, comfort,
maintenance, support, education or use of such person or to pay or distribute
the whole or any part of such benefit to the spouse of such person, the parent
of such person, the guardian, committee or other legal representative,
wherever appointed, of such person, the person with whom such personal shall
reside, any other person having the care and control of such person, such
person personally, the receipt of the person to whom any such payment or
distribution is so made being a complete discharge of liability for Plan
obligations.
7.6 Governing law.
The provisions of this Plan shall be construed under the laws of the State of
Delaware, except to the extent such laws are preempted by federal law.
7.7 Construction.
Wherever appropriate, the use of the masculine gender shall be extended to
include the feminine or neuter or vice versa; and the singular form of words
shall be extended to include the plural; and the plural shall be restricted to
mean the singular.
7
<PAGE> 9
8 CLAIMS PROCEDURE.
Pursuant to procedures established by the Administrator, adequate notice in
writing shall be provided to any Participant or Beneficiary ("Claimant") whose
written claim for benefits under the Plan has been denied within ten (10)
business days of receipt of such written claim. The Administrator's notice
shall set forth the specific reason for such denial, shall be written in a
manner calculated to be understood by the Claimant, and advise of the right to
administrative review. If the Claimant or his or her authorized
representative files a written request for review within thirty (30) days of
receipt of the written notification of claim denial, the Administrator shall
afford a reasonable opportunity for a full and fair review by the
Administrator of the decision denying the claim. The review shall focus on
the additional facts, legal interpretations or material, if any, presented by
the claimant. A hearing at its place of business may be scheduled by the
Administrator, but a hearing is not required under the review procedure. A
final decision by the Administrator is required within ten (10) business days
of the Claimant's filing of his or her written request for review, unless the
Claimant consents to additional time.
A Participant who is dissatisfied with the decision may pursue such judicial
remedies as he or she determines appropriate. If any court awards a final
judgment in favor of the Participant, the Employer will pay all of the
Claimant's attorney's fees. In addition, to the extent the Participant is
successful in obtaining benefits which were denied after a Change In Control,
liquidated damages will be paid to the Claimant in an amount equal to three
time the awarded additional benefits.
IN WITNESS WHEREOF, Ekco adopts this Plan as of the first day of July, 1992.
EKCO GROUP, INC.
By /s/ ROBERT STEIN
-------------------------------------------
President/ Chief Executive Officer
Approved:
/s/ STUART B. ROSS
- --------------------------------
Chairman/ Compensation Committee
8
<PAGE> 1
EXHIBIT 10.14
-------------
FORM OF
SPLIT-DOLLAR AGREEMENT
----------------------
THIS AGREEMENT made and entered into as of the [Date], by and among Ekco
Group, Inc., a Delaware corporation with principal offices and place of
business in the State of New Hampshire (hereinafter referred to as the
"Employer"), and [Name of Employee], an individual residing in the State of
Illinois (hereinafter referred to as the "Employee").
WHEREAS, the Employee is employed by the Employer; and
WHEREAS, the Employee wishes to provide life insurance protection for
his family in the event of his death, and
WHEREAS, a policy of life insurance insuring his life, which policy is
described in Exhibit A, has been issued by the Guardian Life Insurance Company
(hereinafter referred to as the "Insurer"), and
WHEREAS, this agreement is meant to apply to that policy and to any
other policies which may be purchased and scheduled on Exhibit A with the
Employer's consent (the initial policy and any subsequent policies hereinafter
referred to as the "Policies"), and
WHEREAS, the Employer is willing to pay the initial and subsequent
premiums due on the Policies as an additional employment benefit for the
Employee, on the terms and conditions hereinafter set forth; and
WHEREAS, the Employee is the owner of the Policies and, as such,
possesses all incidents of ownership in and to the Policies; and
WHEREAS, the Employer wishes to have the Policies collaterally assigned
to it by the Employee, in order to secure the repayment of the amounts which
it will pay toward the premiums on the Policies and certain other amounts
hereinafter described; and
WHEREAS, the parties intend that by such collateral assignment the
Employer shall receive only the right to such repayments, with the Employee
retaining all other ownership rights in the Policies;
NOW, THEREFORE, in consideration of the premises and of the mutual
promises contained herein, the parties hereto agree as follows:
1. PURCHASE OF POLICIES. The Employee has purchased the Policies from the
Insurer in the total face amount listed on Exhibit A. The parties hereto have
taken all necessary action to cause the Insurer to issue the Policies, and
shall take any further action which may be necessary to cause the Policies to
conform to the provisions of this Agreement. The parties hereto agree that
the Policies shall be subject to the terms and conditions of this Agreement
and of the collateral assignment filed with the Insurer relating to the
Policies. All capitalized words and phrases not otherwise defined herein
shall have the same meaning such words and phrases have in the Policies.
<PAGE> 2
2. Ownership of Policies.
---------------------
a. The Employee shall be the sole and absolute owner of the Policies,
and may exercise all ownership rights granted to the owner by the terms of the
Policies, except as may be provided herein.
b. It is the intention of the parties that the Employee shall retain
all rights which the Policies grant to the owner thereof; the sole right of
the Employer hereunder shall be to be repaid the amounts which it has paid
toward the premiums on the Policies. Specifically, but without limitation,
the Employer shall neither have nor exercise any right as collateral assignee
of the Policies which could in any way defeat or impair the Employee's right
to receive the cash surrender value or the right of the Employee's beneficiary
to receive death proceeds of the Policies in excess of the amount due the
Employer hereunder. All provisions of this Agreement and of such collateral
assignment shall be construed so as to carry out such intention.
c. PAYMENT OF PREMIUMS. On or before the due date of each Policy's
premium, or within the grace period provided therein, the Employer shall pay
the full amount of the planned periodic premium to the Insurer, and shall,
upon request, promptly furnish the Employee evidence of timely payment of such
premium. Except with the written consent of the Employee, the Employer shall
not pay less than such planned periodic premium, but may, in its discretion,
at any time and from time to time, subject to the acceptance of such amount by
the Insurer, pay more than such planned periodic premium or make other premium
payments on the Policies. Except as otherwise agreed in writing by the
Employee and the Employer, the Employer's obligation to pay premiums due under
the Policies shall cease upon termination of employment or, if Employee is
entitled to salary continuation payments under any contract of employment or
otherwise, upon completion of payments under such contract or continuation
arrangement, with the Employer to pay a pro rata portion of premium for any
portion of the policy year in which the Employee was employed or entitled to
salary continuation. For any period in which premiums are paid by the Insurer
pursuant to a disability waiver feature of the Policies, the Employer shall be
excused from payment and accordingly shall have no right to recover such
amounts under the collateral assignment described herein.
d. COLLATERAL ASSIGNMENT. To secure the repayment to the Employer of
the amount of the premiums on the Policies paid by it hereunder, the Employee
has, contemporaneously herewith, assigned the Policies to the Employer as
collateral, under the form used by the Insurer for such assignments, which
collateral assignment specifically provides that the sole right of the
Employer thereunder is to be repaid the amount of the premiums on the Policies
paid by it. Any such repayment of premiums on the Policies paid by the
Employer shall be made from and shall be limited to the cash surrender value
of the Policies (including cash surrender value of any paid-up additions) if
this Agreement is terminated or if the Employee surrenders or cancels the
Policies. If the Employee should die while the Policies and Agreement remain
in force, such repayment to the Employer shall be made from the death proceeds
of the Policies. In no event shall the Employer have any right to borrow
2
<PAGE> 3
against or make withdrawals from the Policies, to surrender or cancel the
Policies, nor to take any other action which would impair or defeat the rights
of the Employee in and to the Policies. The collateral assignment of the
Policies to the Employer hereunder shall not be terminated, altered or amended
by the Employee while this Agreement is in effect. The parties hereto agree
to take all action necessary to cause such collateral assignment to conform to
the provisions of this Agreement.
e. APPLICATION OF DIVIDENDS. While this agreement is in force,
dividends under any policy shall be used to purchase paid-up additions and
shall not be applied to the payment of premiums or for any other dividend
option unless the parties so agree by amending this agreement and the Employee
subsequently amends the policy.
f. TAX STATEMENT. The Employer shall annually furnish the Employee a
statement of the amount of income reportable by the Employee for federal and
state income tax purposes, if any, as a result of the insurance protection
provided the Employee.
3. Limitations on Employee's Rights in Policies
--------------------------------------------
a. Except as otherwise provided herein, the Employee shall take no
action with respect to the Policies which would in any way compromise or
jeopardize the Employer's right to be repaid the amounts it has paid toward
premiums on the Policies while this Agreement is in effect.
b. The Employee may pledge or assign the Policies, subject to the
terms and conditions of this Agreement, in order to secure a loan from the
Insurer or from a third party, in an amount which shall not exceed the cash
surrender value of the Policies (and the cash surrender value of any paid-up
additions) as of the date to which premiums have been paid, less the amount
paid toward the premiums on the Policies by the Employer hereunder. Interest
charges on such loan shall be the responsibility of and be paid by the
Employee or, with the consent of Employer, may be paid from cash value
determined to be in excess of the amounts owed to the Employer hereunder.
c. The Employee may give the Policies, or any undivided portion
thereof, to a donee or donees, subject always to the Employer's right to be
repaid the amounts due it hereunder and the collateral assignment of the
Policies as security therefor.
d. The Employee shall have the sole right to surrender or cancel the
Policies, and to receive the full cash surrender value of the Policies
directly from the Insurer. To facilitate payment of amounts owed to the
Employer, Employee agrees that he will cooperate with Employer and the Insurer
so that the Employer may be paid directly all amounts that it is owed by the
Insurer, but any such payment (whether pursuant to a policy loan to the
Employee or a partial or full surrender) shall be considered a payment from
the Employee for purposes of this Agreement. Upon receipt of such payment,
the Employer will release the assignment and the Employee shall own the policy
3
<PAGE> 4
free of all provisions and restrictions of the assignment and this Agreement
shall thereupon terminate.
4. Collection of Death Proceeds.
----------------------------
a. Upon the death of the Employee, the Employer and the beneficiary
shall cooperate to take whatever action is necessary to collect the death
benefit provided under the Policies; when such benefit has been collected and
paid as provided herein, this Agreement shall thereupon terminate.
b. Upon the death of the Employee, the Employer shall have the
unqualified right to receive a portion of such death benefit equal to the
total amount of the premiums paid by it hereunder, without interest. The
balance of the death benefit provided under the Policies, if any, shall be
paid directly to the Employee's beneficiary, in the manner and in the amount
or amounts provided in the beneficiary designation for the Policies. In no
event shall the amount payable to the Employer hereunder exceed the Policies'
proceeds payable at the death of the Employee. No amount shall be paid from
such death benefit to the beneficiary until the full amount due the Employer
pursuant to the collateral assignment has been paid. The parties hereto agree
that the beneficiary designation provision of the Policies shall conform to
the provisions hereof.
5. Termination of the Agreement During the Employee's Lifetime.
-----------------------------------------------------------
The Employee may terminate this Agreement, while no premium under the Policies
is overdue, by written notice to the other parties hereto. Such termination
shall be effective as of the date of such notice.
6. Disposition of the Policies on Termination of the Agreement During the
----------------------------------------------------------------------
Employee's Lifetime.
- -------------------
a. For sixty (60) days after the date of the termination of this
Agreement during the Employee's lifetime, the Employee shall have the option
of obtaining the release of the collateral assignment of the Policies to the
Employer. To obtain such release, the Employee shall repay to the Employer
the total amount of the premium payments made by the Employer hereunder,
without interest. Upon receipt of such amount, the Employer shall release the
collateral assignment of the Policies, by the execution and delivery of an
appropriate instrument of release.
b. If the Employee fails to exercise such option within such sixty
(60) day period, then, at the request of the Employer, the Employee shall
execute any document or documents required by the Insurer to transfer the
interest of the Employer in the Policies to the Employer, and such transfer
may be accomplished at Employee's option by means of a loan to him or a
partial surrender of the policy. If the Employee does not cooperate, the
Employer may direct the Insurer to honor the collateral assignment and to make
a partial surrender of the policy so that the Employer may be paid the amount
it is owed directly. After the Employer is paid the amount of the premium
4
<PAGE> 5
payments made by it, neither the Employer nor the Employer's successors,
assigns or beneficiaries shall have any further interest in and to the
Policies, either under the terms thereof or under this Agreement.
7. INSURER NOT A PARTY. The Insurer shall be fully discharged from their
obligations under the Policies by payment of the Policies death benefits to
the beneficiary or beneficiaries named in the Policies, subject to the terms
and conditions of the Policies. In no event shall the Insurer be considered a
party to this Agreement, or any modification or amendment hereof. No
provision of this Agreement, nor of any modification or amendment hereof,
shall in any way be construed as enlarging, changing, varying, or in any other
way affecting the obligations of the Insurer as expressly provided in the
Policies, except insofar as the provisions hereof are made a part of the
Policies by the collateral assignment executed by the Employee and filed with
the Insurer in connection herewith.
8. Named Fiduciary, Determination of Benefits, Claims Procedure and
----------------------------------------------------------------
Administration.
- --------------
a. The Compensation Committee is hereby designated as the named
fiduciary under this Agreement. The named fiduciary shall have authority to
control and manage the operation and administration of this Agreement, and it
shall be responsible for establishing and carrying out a funding policy and
method consistent with the objectives of this Agreement.
b. CLAIM. A person who believes that he or she is being denied a
benefit to which he or she is entitled under this Agreement (hereinafter
referred to as a "Claimant") may file a written request for such benefit with
the Committee, setting forth his or her claim. The request must be sent in
care of the General Counsel of the Committee at its then principal place of
business.
c. CLAIM DECISION. Upon receipt of a claim, the Committee shall
advise the Claimant that a reply will be forthcoming within ninety (90) days
and shall, in fact, deliver such reply within such period. The Committee may,
however, extend the reply period for an additional ninety (90) days for
reasonable cause. If the claim is denied in whole or in part, the Committee
shall adopt a written opinion, using language calculated to be understood by
the Claimant, setting forth: (a) the specific reason or reasons for such
denial: (b) the specific reference to pertinent provisions of this Agreement
on which such denial is based; (c) a description of any additional material or
information necessary for the Claimant to perfect his or her claim and an
explanation why such material or such information is necessary; (d)
appropriate information as to the steps to be taken if the Claimant wishes to
submit the claim for review; and (e) the time limits for requesting a review
under subsection 8.d hereof.
d. REQUEST FOR REVIEW. Within sixty (60) after the receipt by the
Claimant of the written opinion described above, the Claimant may request in
writing that the Committee review its determination of the Committee. Such
5
<PAGE> 6
request must be addressed to the General Counsel of the Employer at the
Employer's principal place of business. The Claimant or his or her duly
authorized representative may, but need not, review the pertinent documents
and submit issues and comments in writing for consideration by the Committee.
If the Claimant does not request a review of the Committee's determination
within such sixty (60) day period, he or she shall be barred and estopped from
challenging the Committee's determination. After considering all materials
presented by the Claimant, the Committee will render a written opinion,
written in a manner calculated to be understood by the Claimant, setting forth
the specific reasons for the decision and containing specific references to
the pertinent provisions of this Agreement on which the decision is based. If
special circumstances require that the sixty (60) day time period be extended,
the Committee will so notify the Claimant and will render the decision as soon
as possible, but no later than one hundred twenty (120) days after receipt of
the request for review.
9. AMENDMENT. This Agreement may not be amended, altered or modified,
except by a written instrument signed by the parties hereto, or their
respective successors or assigns, and may not be otherwise terminated except
as provided herein.
10. BINDING EFFECT. This Agreement shall be binding upon and inure to the
benefit of the Employer and its successors and assigns, and the Employer, the
Employee, and their respective successors, assigns, heirs, executors,
administrators and beneficiaries.
11. NOTICE. Any notice, consent or demand required or permitted to be given
under the provisions of this Agreement shall be in writing, and shall be
signed by the party giving or making the same. If such notice, consent or
demand is mailed to a party hereto, it shall be sent by United States
certified mail, postage prepaid, addressed to such party's last known address
as shown on the records of the Employer. The date of such mailing shall be
deemed the date of notice, consent or demand.
12. GOVERNING LAW. This Agreement, and the rights of the parties hereunder,
shall be governed by and construed in accordance with the laws of the State of
Delaware.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement, in
duplicate, as of the day and year first above written.
EKCO GROUP, INC.
By ___________________
ATTEST:
_____________________
Secretary
________________________
[Employee]
6
<PAGE> 7
<TABLE>
SCHEDULE OF SPLIT DOLLAR AGREEMENTS
WITH EKCO GROUP, INC.
Each of the following persons has a Split Dollar Agreement with Ekco
Group, Inc. which is identical in form to the foregoing agreement except for
the date and for the face amount of the policy of life insurance described in
Exhibit A:
<CAPTION>
Name and Position Face Amount
With the Company Date of Agreement of Policy
- ----------------- ----------------- -----------
<S> <C> <C>
Donato A. DeNovellis 10-01-93 $ 471,381
Vice President & Chief
Financial Officer
Ronald N. Fox 10-01-92 $ 633,832
Senior Vice President
Neil R. Gordon 10-01-92 $ 289,035
Treasurer
Brian R. McQuesten 10-01-92 $ 279,742
Controller
Robert Stein 10-01-92 $1,895,038
President & Chief
Executive Officer
Jeffrey A. Weinstein 10-01-92 $ 527,352
Executive Vice President &
Secretary
</TABLE>
7
<PAGE> 1
EXHIBIT 10.20(b)
----------------
AMENDMENT NO. 2 TO CREDIT AGREEMENT
THIS AMENDMENT NO. 2 TO CREDIT AGREEMENT (this "Amendment") is dated as
of February 3, 1994 between Woodstream Corporation (the "Borrower") and Fleet
Bank of Massachusetts, N.A. ("Fleet") in its capacities as lender and agent
under the Credit Agreement (as hereinafter defined).
WHEREAS, the Borrower is party to a credit agreement dated as of March
19, 1991 with Fleet National Bank and Algemene Bank Nederland N.V., as
lenders, and Fleet National Bank, as agent, which credit agreement was
modified and amended by an Amendment No. 1 to Credit Agreement dated as of
December 21, 1992 among the Borrower, Fleet, as assignee of the rights and
obligations of Fleet National Bank in its capacity as lender, ABN AMRO Bank
N.V. ("ABN"), as successor by merger to Algemene Bank Nederland N.V., and
Fleet, as assignee of the rights and obligations of Fleet National Bank in its
capacity as agent (as amended, the "Credit Agreement").
WHEREAS, the Borrower recently consummated a sale of its line of plastic
sporting goods and utility case products to Doskocil Manufacturing Company,
Inc. (the "Sale").
WHEREAS, in connection with the Sale, (i) the Borrower caused a portion
of the sale proceeds to be paid to ABN in satisfaction of all obligations of
the Borrower to ABN under the Credit Agreement, and (ii) the Borrower released
ABN from its obligations to advance additional funds to the Borrower under the
Credit Agreement.
WHEREAS, the Borrower has requested that the terms of the Credit
Agreement be modified, amended and waived by Fleet to, INTER ALIA: (i)
reflect that ABN is no longer a party to the Credit Agreement; (ii) permit the
Borrower to pay certain proceeds from the Sale to EKCO Group, Inc. in
satisfaction of certain outstanding obligations of the Borrower to EKCO Group,
Inc.; (iii) reaffirm Fleet's obligation as sole remaining Lender under the
Credit Agreement to advance additional funds to the Borrower; and (iv)
consolidate and increase the credit facilities established by Fleet in favor
of the Borrower under the Credit Agreement into a single revolving credit
facility in the maximum principal amount of $7,000,000.
NOW THEREFORE, in consideration of the foregoing premises, the Borrower
and Fleet in its capacity as Agent and sole remaining Lender under the Credit
Agreement, hereby agree as follows:
A. General Provisions
------------------
1. The Term "Lenders" and "Lender" as used in the Credit Agreement
shall mean Fleet in its capacity as sole remaining lender under the Credit
Agreement.
2. Capitalized terms used herein without definition shall have the
meanings ascribed to such terms in the Credit Agreement.
<PAGE> 2
B. Specific Waivers and Consents
-----------------------------
1. The provisions in (a) the definition of "MAXIMUM REVOLVING CREDIT
AMOUNT" in Section 1.1 of the Credit Agreement (as amended by this Amendment),
(b) Section 4.1(e) of the Credit Agreement, and (c) Section 9.4 of the Credit
Agreement, providing for reduction of the credit facilities and repayment of
the Revolving Credit Notes as a result of certain sales or dispositions of
assets, are hereby waived with respect to the Sale.
2. The provision in Section 4.1(c) of the Credit Agreement requiring
that the daily outstanding balance of the Revolving Credit Notes equal zero
for not less than thirty days during each calendar year, is hereby waived for
the calendar year beginning January 1, 1994 and ending December 31, 1994.
3. The provision in Section 7.4 of the Credit Agreement requiring
that the leverage ratios set forth in Section 7.4 be reduced by the proceeds
of any sale or disposition of assets in excess of $500,000, is hereby waived
with respect to the Sale.
4. Fleet hereby consents to the payment by the Borrower to Ekco of
certain proceeds of the Sale in satisfaction of certain outstanding
obligations of the Borrower to Ekco; PROVIDED that, until such time as all
outstanding mortgage obligations of Ekco to John Hancock Mutual Life Insurance
Company have been repaid in full, Ekco shall cause such proceeds and all
additional sums paid to Ekco by the Borrower to be applied towards the
repayment of such outstanding mortgage obligations.
C. Amendments to the Credit Agreement
----------------------------------
1. The terms "MAXIMUM REDUCING REVOLVING CREDIT", "REDUCING REVOLVING
CREDIT ADVANCE", "REDUCING REVOLVING CREDIT COMMITMENT", and "REDUCING
REVOLVING CREDIT NOTES" in Section 1.1 of the Credit Agreement are hereby
deleted in their entirety.
2. The definition of "MAXIMUM REVOLVING CREDIT AMOUNT" is hereby
amended in Section 1.1 of the Credit Agreement in its entirety to read as
follows:
"'MAXIMUM REVOLVING CREDIT AMOUNT' shall mean $7,000,000. The
Maximum Revolving Credit Amount shall be reduced by the net
proceeds received by the Borrower from the sale of assets, other
than assets sold in the ordinary course of business, to the extent
that such proceeds received in any fiscal year of the Borrower
exceed $500,000, as of the date of the receipt of such proceeds."
3. The definition of the term "NOTES" in Section 1.1 of the Credit
Agreement is hereby amended in its entirety to read as follows:
"'NOTES' shall mean the Revolving Credit Note."
4. The definition of the term "REVOLVING CREDIT NOTES" in Section 1.1
of the Credit Agreement is hereby amended in its entirety to read as follows:
"'REVOLVING CREDIT NOTE' shall mean the Amended and Restated
Revolving Credit Note dated as of March 19, 1991 issued by
the Borrower in favor of Fleet in the principal sum of
$7,000,000."
5. The introductory paragraph of Article 2 of the Credit Agreement is
hereby amended in its entirety to read as follows:
"Subject to the terms and conditions hereof, and in reliance
on the representations and warranties contained herein, the
2
<PAGE> 3
Lender hereby establishes a revolving credit facility (the
"Revolving Credit") in favor of the Borrower in the
principal amount of $7,000,000. The Lender's Revolving
Credit Commitment, Maximum Commitment and Commitment
Percentage are as follows:
<TABLE>
<CAPTION>
REVOLVING
CREDIT MAXIMUM COMMITMENT
COMMITMENT COMMITMENT PERCENTAGE
---------- ---------- ----------
<S> <C> <C>
$7,000,000 $7,000,000 100.00%"
</TABLE>
6. Section 2.1 of the Credit Agreement is hereby deleted in its
entirety.
7. Section 2.2 of the Credit Agreement is hereby amended in its
entirety to read as follows:
"Section 2.2. THE REVOLVING CREDIT. Subject to the
terms and conditions of this Agreement and so long as there
exists no Default, at any time prior to December 31, 1994 or
the earlier acceleration or maturity of the Revolving Credit
Note, the Lender shall make such Revolving Credit Advances
to the Borrower as the Borrower may from time to time
request, by notice to the Agent in accordance with
Section 2.3, and issue letters of credit of not more than
one year in length, payable upon sight drafts, provided that
no Revolving Credit Advance or face amount of any letter of
credit requested shall exceed an amount determined by
subtracting:
(a) the aggregate outstanding balance of all
Revolving Credit Advances and face amounts of letters of
credit theretofore made or issued by the Lender FROM
(b) the Maximum Revolving Credit Amount; PROVIDED
that the Agent and the Lender shall have the absolute right
to refuse to make any Revolving Credit Advances or issue
letters of credit for so long as there would exist any
Default upon the making of such an Advance or after giving
effect thereto. Concurrently with the execution of this
Credit Agreement, the Borrower will execute and deliver to
the Lender the Revolving Credit Note evidencing the
Revolving Credit Advances.
Subject to the foregoing limitations and the provisions of
Article 4 and EXHIBIT E attached hereto, the Borrower shall
have the right to make prepayments reducing the outstanding
balance of Revolving Credit Advances and to request further
Revolving Credit Advances and letters of credit, by notice
to the Agent in accordance with Section 2.3. The Revolving
Credit Note shall be prepaid in accordance with Article 4
hereof. All outstanding Revolving Credit Advances and all
interest accrued and unpaid thereon shall be paid in full on
December 31, 1994."
8. Section 2.3 of the Credit Agreement is hereby amended by deleting
the second sentence of Section 2.3 in its entirety and replacing it with the
following new sentence:
"Each such request shall state the requested date and amount
of, and the choice of interest rate to apply to, such
3
<PAGE> 4
Advance, as set out in Section 2.4, and, for IBOR Rate
Loans, the duration of the Interest Period which shall not
in any event extend beyond December 31, 1994."
9. Section 2.13 of the Credit Agreement is hereby amended by deleting
the third sentence of Section 2.13 in its entirety and replacing it with the
following new sentence:
"Each Letter of Credit shall have an expiring date not more
than one year from the date of issuance thereof, but in no
event later than December 31, 1994."
10. Section 7.4 of the Credit Agreement is hereby amended to reflect
that the ratio of (a) total consolidated liabilities to (b) the Tangible Net
Worth shall not exceed 1.85 at any time during the period from December 31,
1993 through the expiration of the Credit Agreement (as amended by this
Amendment).
11. Section 9.9(a)(ii) of the Credit Agreement is hereby amended in
its entirety to read as follows:
"(ii) The Borrower shall not pay such management fees
(other than pass-through expenses) and tax sharing payments
to Ekco if after giving effect thereto: (x) the sum of Net
Worth and accrued management fees shall be less than
$21,200,000, or (y) the sum of accrued management fees shall
be less than $1,000,000; and"
12. Section 9.10 of the Credit Agreement is hereby amended in its
entirety to read as follows:
"Section 9.10. EXPENDITURES FOR FIXED ASSETS. Incur
expenditures for fixed assets for any calendar year in
excess of (a) $4,000,000 for the year ending December 31,
1993, and (b) $2,500,000 for any subsequent year."
D. EXECUTION OF AMENDED AND RESTATED REVOLVING CREDIT NOTE.
The Borrower shall execute and deliver to Fleet contemporaneously with
the execution and delivery of this Amendment, an original Amended and
Restated Revolving Credit Note in substantially the form of Exhibit A
hereto, in substitution for and replacement of that certain Revolving
Credit Note issued by the Borrower in favor of Fleet National Bank in
the original principal amount of $2,250,000 (the "Old Revolving Credit
Note"), and upon receipt by Fleet of the original executed Amended and
Restated Revolving Credit Note, the Old Revolving Credit Note shall be
deemed null and void, and Fleet shall promptly return the same to the
Borrower for cancellation.
E. Representations and Warranties.
-------------------------------
1. The representations and warranties of the Borrower contained in
the Credit Agreement continue to be true and correct in all material respects
on the date hereof, except to the extent such representations and warranties
by their terms are made solely as of a prior date.
2. The execution, delivery and performance of this Amendment, the
Amended and Restated Revolving Credit Note, and all other documents delivered
or to be delivered by the Borrower to Fleet (i) are within the corporate
powers of the Borrower, having been duly authorized by its Board of Directors
or other similar governing body, and, if required by law, by its charter
documents or by its By-laws, by its stockholders; (ii) do not require any
approval or consent of, or filing with, any governmental agency or other
Person and are not, in any material respect, in contravention of law or the
4
<PAGE> 5
terms of the charter documents or By-laws of the Borrower or any amendment
thereof (except to such extent as shall have no practical adverse effect, as
determined by the Lender in its sole discretion); and (iii) do not and will
not (x) result in a breach of or constitute a default under any indenture or
loan or credit agreement or any other agreement, lease or instrument to which
the Borrower is a party or by the Borrower or any of its properties are bound
or affected (except to such extent as shall have no practical adverse effect,
as determined by the Lender in its sole discretion), (y) result in, or
require, the creation or imposition of any mortgage, deed of trust, pledge,
lien, security interest or other charge or encumbrance of any nature on any
property now owned or hereafter acquired by the Borrower, except as provided
in the Lender Agreements, or (z) result in a material violation of or default
under any law, rule, regulation, order, writ, judgment, injunction, decree,
determination, award, indenture, agreement, lease or instrument now in effect
having applicability to the Borrower or to any of its properties (except to
such extent as shall have no practical adverse effect, as determined by the
Lender in its sole discretion).
3. This Amendment, the Amended and Restated Revolving Credit Note,
and all other documents executed in connection herewith constitute, or will
constitute when delivered, the valid and binding obligations of the Borrower
enforceable in accordance with their respective terms.
F. SCOPE OF AMENDMENT. Except as expressly provided in this
Amendment, all of the terms and conditions of the Credit Agreement shall
remain in full force and effect. The Borrower confirms that the Lender
Obligations, as modified hereby, are entitled to the benefits of, and shall be
secured by, the Security Documents.
G. GOVERNING LAW. This Amendment shall be governed by and construed
and enforced under the internal laws (and not the law of conflicts) of The
Commonwealth of Massachusetts, but giving effect to federal laws applicable to
national banks.
H. HEADINGS. Section headings in this Amendment are for convenience
of reference only, and shall not govern the interpretation of any of the
provisions of this Amendment.
I. COUNTERPARTS. This Amendment may be executed in several
counterparts, each of which shall be an original. The several counterparts
shall constitute a single agreement.
IN WITNESS WHEREOF, the Borrower and Fleet, as Lender and Agent, have
caused this Amendment to be executed by their duly authorized officers as of
the date set forth above.
WOODSTREAM CORPORATION
By: /s/ Neil R. Gordon
----------------------
Name: Neil R. Gordon
----------------------
Title: Treasurer
----------------------
FLEET BANK OF MASSACHUSETTS, N.A.,
in its capacities as Lender and Agent
By: /s/ Peter F. Pacetti
----------------------
Name: Peter F. Pacetti
----------------------
Title: Senior Vice President
----------------------
5
<PAGE> 1
<TABLE>
EXHIBIT 13
SELECTED CONSOLIDATED FINANCIAL DATA ----------
The selected consolidated financial data of the Company shown below for the five-year period ended January 2, 1994 are derived
from the consolidated financial statements of the Company audited by independent certified public accountants. The information set
forth below is qualified in its entirety by the more detailed financial statements and the notes thereto included elsewhere herein.
The following table should be read in conjunction with Management's Discussion and Analysis of Results of Operations and Financial
Condition, the Company's audited Consolidated Financial Statements and Notes thereto appearing elsewhere herein. Financial
Accounting Standard No. 109 "Accounting for Income Taxes" ("FAS 109") was adopted by the Company in fiscal year 1993 by restating
financial statements beginning in 1988.
<CAPTION>
Fiscal years
-----------------------------------------------------------------
(Amounts in thousands, except per share data) 1993(1)(2) 1992(2)(3) 1991(3) 1990(3) 1989(3)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Consolidated Balance Sheet Data
Current assets $ 89,831 $ 79,679 $ 64,808 $ 58,834 $ 64,248
Total assets 307,961 255,081 211,484 210,276 228,556
Current liabilities 64,062 41,113 45,173 40,721 53,615
Long-term obligations, less current portion 111,982 93,264 71,644 81,099 81,067
Series B ESOP Convertible Preferred Stock, net 2,686 2,111 1,649 1,118 505
Stockholders' equity 116,864 110,567 86,841 80,050 84,862
Common shares outstanding 17,844 17,148 14,676 14,500 15,177
Consolidated Statement of Operations Data
Net revenues $246,428 $206,628 $166,717 $162,196 $166,496
Cost of sales 161,349 129,085 99,130 103,967 110,652
Consolidation and restructuring charges 11,000 - - 3,600 -
Selling, general and administrative 50,841 46,581 43,220 39,160 36,301
Amortization of excess of cost over fair value 4,195 3,557 2,770 2,767 2,773
Net interest expense 12,206 10,680 9,594 10,206 12,191
Income before income taxes 6,837 16,725 12,003 2,496 4,579
Income taxes 4,578 8,078 6,109 2,196 4,006
Income before cumulative effect of accounting changes 2,259 (4) 8,647 5,894 300 573
Earnings per common share before cumulative effect
of accounting changes .11 (4) .46 .35 .02 .03
<FN>
(1) Includes operations of Kellogg Brush Manufacturing Co. and subsidiaries, acquired on April 1, 1993.
(2) Includes operations of Frem Corporation, acquired on January 8, 1992.
(3) The Company adopted FAS 109 in Fiscal 1993 and restated all prior years presented.
(4) During Fiscal 1993, the Company recorded a charge of $3,247,000 (net of income taxes of $1,954,000) to reflect the
cumulative effect of changes in method of accounting for post-retirement and post-employment benefits.
(5) The Company has not paid any cash dividends during the periods presented.
</TABLE>
<TABLE>
COMMON STOCK PRICE RANGE AND DIVIDENDS
The Company's common stock $.01 par value per share ("Common Stock"), is traded on the New York Stock Exchange under the ticker
symbol "EKO." The following table sets forth the high and low sale prices per share as reported on the New York Stock Exchange
Composite Tape during the calendar periods indicated:
<CAPTION>
Low High
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1993
First Quarter 9 7/8 12 1/8
Second Quarter 10 11 3/4
Third Quarter 8 1/8 10 5/8
Fourth Quarter 6 1/8 8 5/8
1992
First Quarter 8 3/4 14
Second Quarter 6 5/8 11
Third Quarter 6 1/2 9
Fourth Quarter 7 3/4 10 3/4
</TABLE>
On March 4, 1994, the Company had 2,402 stockholders of record. The Company
has not paid a cash dividend on its Common Stock since 1981. The Board of
Directors has no current intention to pay cash dividends and will determine
whether to declare cash dividends in the future in light of then applicable
circumstances, including among such circumstances the Company's earnings,
financial condition and capital requirements. In addition, the Company's bank
credit facilities and certain debt instruments restrict dividend and other
payments that the Company's operating subsidiaries may make to the Company.
These restrictions may limit the Company's ability to pay dividends in the
future.
1
<PAGE> 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION
Ekco Group, Inc. and Subsidiaries
Results of Operations
The following discussion and analysis of the consolidated results of
operations for the fiscal years ended January 2, 1994 ("Fiscal 1993"), January
3, 1993 ("Fiscal 1992") and December 29, 1991 ("Fiscal 1991") and the financial
condition at January 2, 1994 should be read in conjunction with the Company's
Consolidated Financial Statements and Notes thereto. Financial Accounting
Standard No. 109, "Accounting for Income Taxes" ("FAS 109"), was adopted by the
Company in Fiscal 1993 by restating financial statements beginning in 1988.
Fiscal 1993 vs. Fiscal 1992
Net revenues
Net revenues for Fiscal 1993 increased approximately $39.8 million
(19.3%) from the prior year. The increase was primarily due to the inclusion of
the results of Kellogg Brush Manufacturing Co. and subsidiaries ("Kellogg")
acquired on April 1, 1993 (approximately $37 million) and increases in sales of
kitchen tools and gadgets (approximately $9 million). The increase was
partially offset by declines in bakeware sales due primarily to retail softness
and more aggressive inventory reduction management by many of the Company's
customers.
Gross profit
The Company's gross profit margin declined from 37.5% in Fiscal 1992 to
34.5% in Fiscal 1993. The decline was due to the inclusion of the results of
Kellogg, whose gross margin was lower than the Company's consolidated gross
margin.
Selling, general and administrative
As a percentage of net revenues, selling, general and administrative
expenses decreased from 22.5% to 20.6%. This improvement reflects the
increased net revenues resulting from the acquisition of Kellogg. Selling,
general and administrative expenses for Fiscal 1993 increased approximately
$4.3 million (9.1%) from the prior year primarily due to the inclusion of
Kellogg (approximately $5 million).
Rental income of approximately $1.5 million for Fiscal 1993 and $1.2
million for Fiscal 1992, derived from leasing a portion of the Company's
property held for sale or lease, has been included as a reduction of selling,
general and administrative expenses.
Restructuring/reorganization and excess facilities charge
During the fourth quarter of Fiscal 1993, the Company recorded an $11
million charge ($6.6 million after income taxes) resulting from management's
analysis of the Company's operations and future strategy. Of this charge,
approximately $3.5 million related to property held for sale and approximately
$2.7 million of the total charge was non-cash.
Over the past seven years,the Company has grown rapidly through
acquisitions. It acquired Ekco Housewares in 1987, adding Woodstream in 1989,
Frem in 1992 and Kellogg in 1993. These companies each have different
operational, financial and distribution methods largely as a result of the
continuation of their historical operations. During the respective
post-acquisition periods, management's focus has been on increasing the
financial performance of the individual subsidiaries with less emphasis on the
efficiencies that could be achieved by synthesizing these companies on a group
basis. Management believes that the Company is at a juncture because of its
size and complexity where future growth and operating efficiency of the Company
is dependent on implementing Company-wide savings and common processes
throughout all subsidiaries. To achieve this, management has provided for:(i)
severance and related personnel costs associated with a reduction and
realignment in administrative and operating personnel, principally at Ekco
Housewares; (ii) costs associated with the consolidation of differing
distribution and information systems within the Company including the closing
of excess facilities which are not compatible with the new group strategy
(including lease contingencies) as well as the write-off of equipment no longer
relevant to the operating strategy; and, (iii) costs associated with excess
facilities currently classified as held for sale.
<TABLE>
<CAPTION>
The amounts involved in the charge are as follows:
---------------------------------------------------------------------------------------------
<S> <C>
Severance and related personnel costs $ 3,200,000
Write-down of equipment 1,250,000
Costs associated with implementing distribution and operating strategy 2,600,000
Costs associated with property held for sale 3,450,000
Other, primarily fees and costs associated with implementation 500,000
-----------
$11,000,000
===========
</TABLE>
2
<PAGE> 3
Property held for sale has also increased over the last several years
as a result of acquisitions. The commerical real estate market has been very
soft during this period. The charges included above represent a change in
management's focus on eliminating these excess facilities. Management has
retained a nationally recognized real estate firm to assist them in selling
property currently held for sale within the next two years. Management has also
re-evaluated its belief regarding the carrying value of these properties. As a
result, a reserve for the operating costs of these properties net of lease
commitments has been established for $1.9 million and additional valuation
allowances aggregating $1.6 million has been netted against the respective
asset values.
In 1994, the Company expects to realize benefits from the restructuring
in the range of $2.5 to $3.0 million and incrementally thereafter.
Interest expense
Interest expense for Fiscal 1993 increased approximately $1.6 million
from the prior year primarily due to consummation of a private placement of a
$22 million 7% convertible note on December 22, 1992 and increased borrowings
principally attributable to the acquisition of Kellogg on April 1, 1993.
Income taxes
The Company adopted FAS 109 during the First Quarter of Fiscal 1993 and
restated its financial statements beginning with fiscal year 1988.
The effective tax rate on a restated basis increased from 48% in Fiscal
1992 to 67% in Fiscal 1993 primarily as a result of amortization of goodwill
becoming a higher percentage of earnings before income taxes.
Cumulative effect of changes in method of accounting
The charge in Fiscal 1993 for the cumulative effect of changes in
method of accounting was due to the adoption by the Company of Statement of
Financial Accounting Standard No. 106, "Employees' Accounting for
Post-retirement Benefits Other Than Pensions" and Statement of Financial
Accounting Standard No. 112, "Employees' Accounting for Post-employment
Benefits."
Fiscal 1992 vs. Fiscal 1991
Net revenues
Net revenues for Fiscal 1992 increased approximately $39.9 million
(23.9%) from the prior year. The increase was primarily due to the inclusion of
the results of Frem Corporation ("Frem"), acquired on January 8, 1992 ($30.5
million), and an animal care product line ($4.1 million) acquired during
December 1991 from Beacon Industries, Inc. ("Beacon"), as well as increased
sales of the Company's insulated bakeware, "professional quality" kitchen tools
and gadgets, and hunting cases.
Gross profit
The Company's gross profit margin declined from 40.5% in Fiscal 1991 to
37.5% in Fiscal 1992. The decline was primarily due to the inclusion of the
results of Frem and the animal care product line acquired from Beacon whose
gross margins are lower than the Company's consolidated gross margin, increased
promotional allowances, other changes in product mix and the effect of
increases in product costs not offset by price increases in 1992.
Selling, general and administrative
Selling, general and administrative expenses for Fiscal 1992 increased
approximately $3.4 million (7.8%) from the prior year. The increase was
primarily due to the inclusion of the results of Frem ($5.5 million in Fiscal
1992), partially offset primarily by the inclusion in Fiscal 1991 of costs
associated with redesigning the packaging for the Company's kitchenware
products and costs associated with the introduction of products.
Rental income of approximately $800,000 for Fiscal 1991 and $1.2
million for Fiscal 1992, derived from leasing a portion of the Company's
property held for sale or lease, has been included as a reduction of selling,
general and administrative expenses.
Interest expense
Interest expense for Fiscal 1992 increased $764,000 (7.3%) from the
prior year period primarily due to higher average bank borrowings due to the
acquisition of Frem in January 1992, offset in part by lower average interest
rates.
Investment income
The decline in investment income from the prior year period was
primarily due to lower cash balances resulting from the acquisition of Frem,
and lower interest rates.
Income taxes
The effective tax rate declined from 51% to 48% primarily as a result
of a dividend paid to the Company by its Canadian subsidiary in Fiscal 1991.
3
<PAGE> 4
Liquidity and Capital Resources
During Fiscal 1993 the Company generated approximately $9.7 million in
cash from operations. Such cash, along with borrowings of approximately $30
million and year-end cash balances, was used in part for capital expenditures
(approximately $15 million as compared to approximately $13 million for Fiscal
1992), the acquisition of Kellogg and reduction of bank debt (approximately $17
million).
On April 1, 1993, the Company acquired all the capital stock of Kellogg
for a cash payment of $26 million and approximately 565,000 shares of the
Company's common stock, valued at approximately $6.5 million.
After adjusting for the acquisition of Kellogg, the Company's accounts
receivable, inventories and property and equipment increased approximately $3
million, $6 million and $4 million, respectively, from the January 3, 1993
level. The increase in accounts receivable results primarily from shipments
taking place later in the fiscal year and a change in customer mix. Inventories
increased primarily due to increases in distribution of the Company's kitchen
tools and gadgets with major customers, implementation of the kitchenware "J
hook" program and fourth quarter sales for the Company's bakeware product line
falling below expectations. The increase in property and equipment over Fiscal
1992 levels was primarily due to expenditures of approximately $4.9 million in
connection with construction of a 104,000 square foot manufacturing and
distribution facility in Phoenix, Arizona.
The Company has a commitment for a $40 million bank credit facility
consisting of a $35 million credit line ("Group Credit Line") and a $5 million
standby letter of credit facility. The proceeds from the Group Credit Line
will be used to retire a 10% mortgage note ($6.9 million at January 2, 1994)
and refinance loans under the Woodstream Credit Agreement ($1.3 million at
January 2, 1994) and the Kellogg Credit Agreements ($9.6 million at January 2,
1994). The remaining line ($17.2 million as of January 2, 1994) will be
available for general corporate purposes, including working capital and
acquisitions. The credit line reduces to $30 million at December 14, 1995 and
$25 million at December 14, 1996. Final maturity will be on December 14,
1998.
Loans under the Group Credit Line will bear interest at either the
bank's prime rate plus one-quarter of one percent or the IBOR rate plus 1.75%.
The Group Credit Line will provide for a commitment fee of three-eighths of one
percent on the unused portion of the commitment amount and a $25,000 annual
agency fee.
The Company will pay the bank a one-time fee of $100,000 in connection
with this transaction.
Borrowings under the Group Credit Line will be collateralized by
substantially all of the assets of the Company not otherwise pledged. The Group
Credit Line will contain certain financial and operating covenants. The most
restrictive covenant will require the Company to maintain a minimum level of
cash flow.
The Company and its operating subsidiaries have credit facilities
(including the Group Credit Line) of $59.6 million, of which $38.3 million was
outstanding at January 2, 1994 (including the 10% mortgage note). These credit
facilities reduce to $56.4 million at the end of Fiscal 1994 and to $32.6
million at the end of Fiscal 1995. The Company believes it will have sufficient
borrowing capacity to finance its ongoing operations through the end of fiscal
year 1994. The Company may require additional funds to finance any further
acquisitions.
During January 1994, the Company sold for no gain or loss the assets of
its plastic tackle and hunting storage container business for cash of
approximately $3.9 million. The proceeds of the sale were used to reduce
outstanding debt. The tackle and hunting business had net revenues of
approximately $13 million in Fiscal 1993.
The Company has land and buildings in Hudson, New Hampshire; Toronto,
Ontario; Chicago, Illinois; and a portion of its facilities in Lititz,
Pennsylvania, held for sale. The Company is actively pursuing the sale or lease
of these properties, and has partially leased the Hudson, Lititz and Toronto
facilities. As previously discussed, the Company plans to sell these properties
within the next two years. The aggregate carrying values of such properties are
periodically reviewed and are stated at the lower of cost or market. During the
fourth quarter of Fiscal 1993, the Company provided an additional $1 million
carrying value write-down.
The bank credit facilities for Ekco Housewares, Inc. and Frem
Corporation and 12.7% Senior Subordinated Notes restrict the payments that
these operating subsidiaries may make to the Company, as well as, contain
certain financial and operating covenants and limit or restrict the sale of
assets, additional indebtedness, and certain investments and acquisitions.
Under the most restrictive covenant, these subsidiaries individually must
maintain, for their four most recently ended fiscal quarters, earnings before
interest, taxes, amortization of goodwill and depreciation of at least $125% of
interest and principal payments required under the respective loan agreements
for the same period. At January 2, 1994, the amounts that could be paid to the
Company from these subsidiaries totalled approximately $13 million. The Company
believes that this amount, plus such additional amounts as are expected to be
payable to the Company by such subsidiaries in the future, as well as available
credit lines are adequate to fund the Company's parent operations in Fiscal
1994.
The Company has provided approximately $3.8 million for environmental
remediation and ongoing operation, maintenance and ground water monitoring
costs associated with Kellogg-owned or -occupied facilities. The Company
believes the provision is adequate, but will continue to monitor and adjust the
provision, as appropriate, should additional sites be identified or further
remediation measures be required or undertaken or interpretation of current
laws or regulations be modified.
4
<PAGE> 5
<TABLE>
CONSOLIDATED BALANCE SHEETS
Ekco Group, Inc. and Subsidiaries
<CAPTION>
(Amounts in thousands, except per share data) January 2, 1994 January 3, 1993
- -----------------------------------------------------------------------------------------------------------------------
Assets (Restated)
<S> <C> <C>
Current assets
Cash and cash equivalents $ 327 $ 16,998
Accounts receivable, net of allowance for doubtful accounts
(January 2, 1994, $1,758; January 3, 1993, $1,607) 36,095 25,758
Inventories 33,612 20,562
Prepaid expenses and other current assets 5,800 1,697
Deferred income taxes 9,647 9,564
Investments pledged as collateral 4,350 5,100
--------- ---------
Total current assets 89,831 79,679
Property and equipment, net 53,241 39,280
Property held for sale or lease, net of accumulated depreciation
(January 2, 1994, $9,055; January 3, 1993, $8,318) 9,353 11,159
Other assets 10,006 8,169
Excess of cost over fair value of net assets acquired, net of accumulated
amortization (January 2, 1994, $18,852; January 3, 1993, $14,657) 145,530 116,794
--------- ---------
Total assets $ 307,961 $ 255,081
========= =========
Liabilities and Stockholders' Equity
Current liabilities
Note payable $ 4,338 $ 5,108
Current portion of long-term obligations 9,238 1,715
Accounts payable 13,955 8,550
Accrued expenses 31,659 21,082
Income taxes 4,872 4,658
--------- ---------
Total current liabilities 64,062 41,113
--------- ---------
Accrued pension cost 1,466 551
--------- ---------
Long-term obligations, less current portion 111,982 93,264
--------- ---------
Deferred income taxes 1,589 6,977
--------- ---------
Other long-term liabilities 8,814 -
--------- ---------
Commitments and contingencies
Series B ESOP Convertible Preferred Stock, net; outstanding January 2, 1994, 1,645
shares; outstanding January 3, 1993, 1,676 shares, redeemable at $3.61 per share 2,686 2,111
--------- ---------
Minority interest 498 498
--------- ---------
Stockholders' equity
Common stock, $.01 par value; outstanding January 2, 1994, 17,844 shares;
outstanding January 3, 1993, 17,148 shares 178 171
Capital in excess of par value 104,202 96,651
Cumulative translation adjustment 1,091 1,094
Retained earnings 15,749 16,737
Unearned compensation (2,452) (2,883)
Pension liability adjustment (1,904) (1,203)
--------- ---------
116,864 110,567
--------- ---------
Total liabilities and stockholders' equity $ 307,961 $ 255,081
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE> 6
<TABLE>
CONSOLIDATED STATEMENTS OF OPERATIONS
Ekco Group, Inc. and Subsidiaries
<CAPTION>
Fiscal years ended
---------------------------------------------
January 2, January 3, December 29,
(Amounts in thousands, except share data) 1994 1993 1991
- -----------------------------------------------------------------------------------------------------------------------
(Restated) (Restated)
<S> <C> <C> <C>
Net revenues $246,428 $206,628 $166,717
-------- -------- --------
Costs and expenses
Cost of sales 161,349 129,085 99,130
Selling, general and administrative 50,841 46,581 43,220
Restructuring/reorganization and excess facilities charge 11,000 - -
Amortization of excess of cost over fair value 4,195 3,557 2,770
-------- -------- --------
227,385 179,223 145,120
-------- -------- --------
Income before interest and income taxes 19,043 27,405 21,597
-------- -------- --------
Net interest expense
Interest expense 12,755 11,187 10,423
Investment income (549) (507) (829)
-------- -------- --------
12,206 10,680 9,594
-------- -------- --------
Income before income taxes and cumulative effect of accounting changes 6,837 16,725 12,003
Income taxes 4,578 8,078 6,109
-------- -------- --------
Income before cumulative effect of accounting changes 2,259 8,647 5,894
Cumulative effect of changes in method of accounting for post-retirement
and post-employment benefits (net of income taxes of $1,954) (3,247) - -
-------- -------- --------
Net income (loss) $ (988) $ 8,647 $ 5,894
======== ======== ========
Per share data
Earnings before cumulative effect of accounting changes $ .11 $.46 $.35
Cumulative effect of accounting changes (.19) - -
----- ---- ----
Net income (loss) $(.08) $.46 $.35
===== ==== ====
Weighted average number of shares used in computation of per share data
Earnings before cumulative effect of accounting changes 19,999,013 18,785,364 17,011,659
Cumulative effect of accounting changes 17,148,320 - -
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE> 7
<TABLE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Ekco Group, Inc. and Subsidiaries
<CAPTION>
Common Capital in Cumulative Pension
stock, par excess of translation Retained Unearned liability
(Amounts in thousands) Shares value $.01 par value adjustment earnings compensation adjustment
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 30, 1990 (Restated) 14,500 $145 $ 79,304 $1,662 $ 2,196 $(2,943) $ (314)
Shares issued under employee common
stock purchase and option plans 179 1 495 - - - -
Income tax reductions relating to stock plans - - 191 - - - -
Purchase of treasury stock (22) - (99) - - - -
Treasury shares issued upon preferred
stock conversions 19 - 69 - - - -
Net income for the year - - - - 5,894 - -
Foreign currency translation adjustment - - - 14 - - -
Unearned compensation relating to
common stock purchases by employee
stock ownership plan - - - - - (469) -
Amortization of unearned compensation - - - - - 469 -
Pension liability adjustment - - - - - - 226
------ ---- -------- ------ ------- ------- -------
Balance, December 29, 1991 14,676 146 79,960 1,676 8,090 (2,943) (88)
Shares issued under employee common stock
purchase and option plans 326 3 1,177 - - - -
Shares issued under restricted common
stock purchase plans 37 - 417 - - (413) -
Shares issued upon preferred stock conversion 59 1 214 - - - -
Income tax reductions relating to stock plans - - 795 - - - -
Treasury shares issued for acquisition 1,175 12 6,588 - - - -
Treasury shares issued for cash 882 9 7,578 - - - -
Purchase of treasury stock (7) - (78) - - - -
Net income for the year - - - - 8,647 - -
Foreign currency translation adjustment - - - (582) - - -
Amortization of unearned compensation - - - - - 473 -
Pension liability adjustment - - - - - - (1,115)
------ ---- -------- ------ ------- ------- -------
Balance, January 3, 1993 17,148 171 96,651 1,094 16,737 (2,883) (1,203)
Shares issued under employee common
stock purchase and option plans 89 1 594 - - - -
Net shares issued under restricted common
stock purchase plans 11 - 13 - - (12) -
Shares issued upon preferred stock conversions 31 - 110 - - - -
Treasury shares issued for acquisition 565 6 6,516 - - - -
Income tax reductions relating to stock plans - - 318 - - - -
Net loss for the year - - - - (988) - -
Foreign currency translation adjustment - - - (3) - - -
Amortization of unearned compensation - - - - - 443 -
Pension liability adjustment - - - - - - (701)
------ ---- -------- ------ ------- ------- -------
Balance, January 2, 1994 17,844 $178 $104,202 $1,091 $15,749 $(2,452) $(1,904)
====== ==== ======== ====== ======= ======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
7
<PAGE> 8
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
Ekco Group, Inc. and Subsidiaries
Fiscal years ended
-------------------------------------------
January 2, January 3, December 29,
(Amounts in thousands) 1994 1993 1991
- -----------------------------------------------------------------------------------------------------------------------
Cash flows from operating activities (Restated) (Restated)
<S> <C> <C> <C>
Net income (loss) $ (988) $ 8,647 $ 5,894
Adjustments to reconcile net income to net cash
provided by (used in) operations
Depreciation and amortization 9,545 7,287 5,412
Restructuring/reorganization and excess facilities charge 2,677 - -
Amortization of assets 6,503 4,221 3,179
Deferred income taxes (554) 5,480 4,306
Cumulative effect of accounting change 3,247 - -
Other 1,715 2,240 1,702
Change in certain assets and liabilities, net of effects from
acquisition and dispositions of businesses, affecting
cash provided by (used in) operations
Accounts and note receivable (4,431) (4,891) (2,241)
Inventories (6,622) 5,245 (5,903)
Other assets (7,943) 769 600
Accounts payable and accrued expenses 6,885 (5,669) 1,323
Income taxes payable (361) (200) 722
------- ------- --------
Net cash provided by operations 9,673 23,129 14,994
------- ------- --------
Cash flows from investing activities
Proceeds from sale of property and equipment 194 550 475
Capital expenditures (15,111) (12,649) (7,946)
Acquisitions of businesses (26,428) (18,645) (2,087)
------- ------- --------
Net cash used in investing activities (41,345) (30,744) (9,558)
------- ------- --------
Cash flows from financing activities
Proceeds from issuance of notes payable and long-term obligations 30,274 51,452 25,524
Proceeds from issuance of treasury stock - 7,587 -
Investments pledged as collateral 750 360 463
Purchase of common stock for employee stock ownership plan - - (469)
Payment of notes and long-term obligations (17,049) (39,069) (32,489)
Other 913 1,096 308
------- ------- --------
Net cash provided by (used in) financing activities 14,888 21,426 (6,663)
Effect of exchange rate changes on cash 113 49 (17)
------- ------- --------
Net increase (decrease) in cash and cash equivalents (16,671) 13,860 (1,244)
Cash and cash equivalents at beginning of year 16,998 3,138 4,382
------- ------- --------
Cash and cash equivalents at end of year $ 327 $16,998 $ 3,138
======= ======= ========
Cash paid during the year for
Interest $12,181 $10,730 $ 10,056
Income taxes 4,753 2,800 1,285
</TABLE>
See accompanying notes to consolidated financial statements.
8
<PAGE> 9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Ekco Group, Inc. and Subsidiaries
1. Summary of Significant Accounting Policies
Principles of consolidation
The consolidated financial statements include the accounts of the
Company and its subsidiaries. The Company's principal operating subsidiaries
are wholly-owned Ekco Housewares, Inc. ("Housewares"), Frem Corporation
("Frem"), (acquired January 8, 1992), and Kellogg Brush Manufacturing
("Kellogg") (acquired April 1, 1993), and majority-owned Woodstream Corporation
("Woodstream"). All significant intercompany accounts and transactions have
been eliminated.
Basis of presentation
The Company uses a 52-53 week fiscal year ending on the Sunday nearest
December 31. Accordingly, the accompanying consolidated financial statements
include the fiscal years ended January 2, 1994 ("Fiscal 1993"), January 3, 1993
("Fiscal 1992"), and December 29, 1991 ("Fiscal 1991").
Cash and cash equivalents
Short-term investments which have an original maturity of 90 days or
less are considered cash equivalents.
Prepaid expenses and other current assets
The Company incurs certain costs in connection with expanding its
market position. These costs are deferred and amortized over the lesser of the
period of benefit or program period. Program periods presently range from one
to three years. It is the Company's policy to periodically review and evaluate
that the benefits associated with these costs are expected to be realized and
therefore deferral and amortization is justified. Approximately $4 million and
$300,000 of these costs are included in prepaid expenses at January 2, 1994 and
January 3, 1993, respectively.
Inventories
Inventories are stated at the lower of cost or market. Cost is
determined on a first-in, first-out basis for all subsidiaries except for
Kellogg, whose cost is determined on a last-in, first-out basis. At January 2,
1994, Kellogg's inventory balance determined under the last-in, first-out basis
was the same as if it had been valued on a first-in, first-out basis. During
Fiscal 1993 there was no effect on net income from liquidation of last-in,
first-out layers.
Investments
Investments are carried at cost which approximates market.
Property and equipment
Property and equipment are stated at cost. Assets acquired through
business combinations accounted for under the purchase method are recorded at
appraised value determined as of the acquisition date. The Company provides for
depreciation and amortization over the estimated useful lives of assets or
terms of capital leases on the straight-line method. Improvements are
capitalized, while repair and maintenance costs are charged to operations. When
assets are retired or disposed of, the cost and accumulated depreciation
thereon are removed from the accounts, and gains or losses, if any, are
included in operations.
Property held for sale or lease
It is the Company's policy to make available for sale or lease property
considered by management to no longer be necessary for the operations of the
Company. The aggregate carrying values of such property are periodically
reviewed and are stated at the lower of cost or market.
Intangible assets
The excess of cost over fair value of net assets acquired ("goodwill")
is being amortized over 12-to-40-year periods. It is the Company's policy to
periodically review and evaluate the recoverability of goodwill by assessing
long-term trends of profitability and cash flows and to determine whether the
amortization of goodwill over its remaining life can be recovered through
expected future results and cash flows.
Favorable lease rights included in other assets are being amortized
over the life of the lease. Deferred financing costs included in other assets
are debt issuance costs which have been deferred and are being amortized over
the terms of the respective financing arrangements.
9
<PAGE> 10
Income recognition
Revenues from product sales are recognized at the time the product is
shipped. Investment income is accrued as earned. Rental income earned from the
lease of property held for sale or lease is recognized on an accrual basis in
accordance with the terms and conditions of the respective lease or rental
agreements.
Translation of foreign currency
The assets and liabilities of the Company's Canadian subsidiary are
translated at year-end exchange rates. Income and expenses are translated at
exchange rates prevailing during the year. The resulting net translation
adjustment for each year is included as a separate component of stockholders'
equity.
Changes in accounting principles
The Financial Accounting Standards Board has issued three Statements of
Financial Accounting Standards that the Company adopted in the first quarter of
Fiscal 1993. Financial Accounting Standard No. 109, "Accounting for Income
Taxes" ("FAS 109"), was adopted by restating financial statements beginning in
1988. The impact of adopting FAS 109 is discussed in Note 8. The impact of
adopting Statement of Financial Accounting Standard No. 106, "Employees'
Accounting for Post-retirement Benefits Other Than Pensions" ("FAS 106"), and
Statement of Financial Accounting Standard No. 112, "Employees' Accounting for
Post-employment Benefits" ("FAS 112") is discussed in Note 9.
Income taxes
In February 1992, the Financial Accounting Standards Board issued FAS
109. Under the asset and liability method of FAS 109, deferred tax assets and
liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases. In addition, the new accounting
standard requires the recognition of future tax benefits, such as net operating
loss carryforwards, to the extent that realization of such benefits is more
likely than not. Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. Under FAS 109,
the effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income for the period that includes the enactment date.
The Company adopted FAS 109 in 1993 and has applied the provisions of
FAS 109 retroactively to January 3, 1988. The Company previously used the asset
and liability method under FAS 96. The adoption of FAS 109 resulted in a
cumulative effect of a benefit of $23.2 million, or $1.20 per common share at
January 3, 1988 and the financial statements of the Company for all fiscal
years subsequent to January 3, 1988 have been restated with the provisions of
FAS 109.
Provision for U.S. income taxes on the undistributed earnings of
foreign subsidiaries is made only on those amounts in excess of the funds
considered to be permanently reinvested.
2. Acquisition of Kellogg Brush Manufacturing Co.
On April 1, 1993, the Company acquired Kellogg for a cash payment of
approximately $26 million and 564,651 shares of the Company's common stock
valued at approximately $6.5 million. The shares issued are released from
restriction in increments of 12.5% beginning on July 1, 1993 and on each 90-day
anniversary thereafter.
<TABLE>
Kellogg primarily manufactures and markets brushes, brooms and mops,
which are sold in mass merchandise, discount, grocery and hardware stores
throughout the United States and Canada. The acquisition has been accounted for
under the purchase method of accounting. Goodwill of approximately $33 million
is being amortized over 40 years. During the fourth quarter of Fiscal 1993, the
Company revised its initial estimate of goodwill by increasing goodwill
approximately $1.8 million primarily due to the resolution of certain purchase
contingencies including tax equalization payments and interest payments to the
former owners. In connection with the acquisition, liabilities were as follows:
(amounts in thousands)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C>
Fair value of assets acquired $ 59,545
Cash paid for common stock of Kellogg (26,028)
Company's common stock issued for common stock of Kellogg (6,522)
Expenses incurred in connection with the acquisition (400)
--------
Liabilities assumed $ 26,595
========
</TABLE>
The following unaudited pro forma combined results of operations for
Fiscal 1993 and Fiscal 1992 have been prepared assuming that the acquisition of
Kellogg occurred at the beginning of each such period. In preparing the pro
forma data, adjustments have been made for: (i) the amortization of goodwill;
(ii) the interest expense related to the borrowings under bank credit agreements
to finance a
10
<PAGE> 11
portion of the purchase price; (iii) reduction in investment income for
utilization of the Company's cash and investments to finance a portion of the
purchase price; (iv) the interest expense and weighted average share effect of
the Company's December 22, 1992 financing with The 1818 Fund, L.P.; and (v) the
elimination of costs associated with the exercise of options under Kellogg's
stock option plan which were exercised in connection with the acquisition of
Kellogg.
<TABLE>
The following unaudited pro forma financial information is not
necessarily indicative of results of operations that would have occurred had
the transaction been put into effect at the beginning of each of Fiscal 1993 or
Fiscal 1992 or of future results of the combined companies.
<CAPTION>
(Amounts in thousands, except per share data) Fiscal 1993 Fiscal 1992
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net revenues $256,876 $249,994
Income before income taxes and cumulative effect of changes
in method of accounting 3,152 (a) 17,879
Income before cumulative effect of changes in method of accounting (23) 9,057
Net income (loss) (3,270) 9,057
Per share data
Income before cumulative effect of changes in method of accounting - .45
Net income (loss) (.19) .45
</TABLE>
(a) During the first quarter of Fiscal 1993 (prior to acquisition by the
Company) Kellogg recorded a $3.2 million provision for environmental
matters.
<TABLE>
3. Inventories
The components of inventory were as follows:
<CAPTION>
(Amounts in thousands) January 2, 1994 January 3, 1993
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Raw materials $10,040 $ 6,321
Work in process 1,871 2,268
Finished goods 21,701 11,973
------- -------
$33,612 $20,562
======= =======
</TABLE>
4. Property and Equipment, Net
<TABLE>
Property and equipment consisted of the following:
<CAPTION>
(Amounts in thousands) January 2, 1994 January 3, 1993
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Property and equipment at cost
Land, buildings and improvements $ 21,151 $ 13,268
Equipment, factory and other 57,227 45,977
-------- --------
78,378 59,245
Less accumulated depreciation and amortization 25,137 19,965
-------- --------
$ 53,241 $ 39,280
======== ========
</TABLE>
5. Note Payable
The note payable at January 2, 1994 and January 3, 1993 represents
borrowings of the Company's Employee Stock Ownership Plan ("ESOP") which the
Company guarantees (the "ESOP Loan"). The Company is required to maintain cash
equivalent investments in an amount equal to the outstanding ESOP Loan balance.
The interest rate on the ESOP Loan has been fixed at 2.75% until June 15, 1994.
Interest expense charged to operations for Fiscal 1993, Fiscal 1992 and Fiscal
1991 relating to the ESOP Loan was $148,000, $195,000 and $355,000,
respectively. The ESOP Loan is payable in equal monthly payments of principal
and interest, adjusted from time to time as rates change, until maturity in May
2009. In addition, under the terms of the ESOP Loan, the Company is required to
purchase the note from the bank on four business days notice from the bank.
11
<PAGE> 12
<TABLE>
Certain information with respect to notes payable follows:
<CAPTION>
(Amounts in thousands, except percentages) Fiscal 1993 Fiscal 1992 Fiscal 1991
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Amount of borrowings outstanding at end of year $4,338 $5,108 $5,439
Average interest rate of borrowings outstanding at end of year 2.75% 3.13% 3.75%
Maximum amount of borrowings outstanding at any month-end $5,089 $5,439 $5,905
Average aggregate borrowings during the year (a) $4,768 $5,268 $5,672
Weighted average interest rate during the year (b) 3.10% 3.7% 6.3%
<FN>
(a) The average aggregate borrowings outstanding for each fiscal year have been computed based upon the daily balance
outstanding under the loan arrangements from the date the debt was incurred, until the earlier of the last day of the
fiscal year, the date when such debt was repaid in full, or the date when such debt was classified as long-term.
(b) The weighted average interest rate has been computed by dividing the interest expense for each fiscal year by the average
aggregate borrowings during such fiscal year.
</TABLE>
<TABLE>
6. Long-term Obligations
Long-term obligations consisted of the following:
<CAPTION>
(Amounts in thousands) January 2, 1994 January 3, 1993
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Frem Credit Agreement $ 6,500 $ 5,316
Housewares Credit Agreement 13,956 -
Borrowings expected to be refinanced
Woodstream Credit Agreement 1,286 -
Kellogg Credit Agreements 9,614 -
10% Mortgage Note 6,920 7,143
12.7% Senior Subordinated Notes 60,000 60,000
7% Convertible Subordinated Note 22,000 22,000
Other 944 520
--------- --------
121,220 94,979
Less current portion 9,238 1,715
--------- --------
$ 111,982 $ 93,264
========= ========
</TABLE>
The Company has received a commitment for a $40 million bank credit
facility consisting of a $35 million bank credit line ("Group Credit Line") and
a $5 million standby letter of credit facility. The proceeds from the Group
Credit Line will be used to retire the 10% Mortgage Note and refinance loans
under the Woodstream Credit Agreement and the Kellogg Credit Agreements and,
consequently, all amounts due under these agreements have been classified as
long-term. The remaining line ($17.2 million as of January 2, 1994) will be
available for general corporate purposes. The credit line reduces to $30
million at December 14, 1995 and $25 million at December 14, 1996. Final
maturity will be on December 14, 1998.
Loans under the Group Credit Line will bear interest at either the
bank's prime rate plus one-quarter of one percent or the IBOR rate plus 1.75%.
The Group Credit Line will provide for a commitment fee of three-eighths of one
percent on the unused portion of the commitment amount and a $25,000 annual
agency fee.
The Company will pay the bank a one-time fee of $100,000 in connection
with this transaction.
Borrowings under the Group Credit Line will be collateralized by
substantially all of the assets of the Company not otherwise pledged. The Group
Credit Line will contain certain financial and operating covenants. The most
restrictive covenant will require the Company to maintain a minimum level of
cash flow.
The Housewares Credit Agreement provides for a maximum commitment,
until final maturity in December 1995, of $18 million subject to the bank's
right, after December 31, 1993, to declare up to $8 million due 364 days after
notice is given. Loans under the Housewares Credit Agreement bear interest at
either the bank's prime rate plus one-half of one percent or the IBOR rate plus
two percent.
The Frem Credit Agreement provides for (i) a $2.5 million term loan,
due in monthly installments of $20,833, plus interest commencing on July 31,
1992 and continuing until May 31, 1997, with the balance payable on June 30,
1997, (ii) a $2.5 million revolving credit line, reducing quarterly, with a
final maturity in June 1997, and (iii) a revolving credit line of $2.5 million
maturing on June 30, 1994. Loans under the agreement bear interest at either
the bank's Commercial Base Rate (as defined) plus one-half of one percent or
the IBOR rate plus two percent.
A commitment fee of one-half of one percent per annum is payable
quarterly on the unused portion of the commitments under each of the Housewares
and Frem credit agreements. These credit agreements provide for mandatory
prepayment under certain specified circumstances and for acceleration after the
occurrence of a Change in Control (as defined).
12
<PAGE> 13
Borrowings under each of the Housewares and Frem credit agreements are
collateralized by substantially all the assets of the respective subsidiary. At
January 2, 1994, total assets of Housewares and Frem excluding intercompany
items were approximately $220 million.
<TABLE>
Certain information with respect to credit agreements follows:
<CAPTION>
(Amounts in thousands, except percentages) Fiscal 1993 Fiscal 1992
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Average interest rate of borrowings outstanding at end of year 6.13% 6.06%
Maximum amount of borrowings outstanding at any month-end $ 47,239 $ 36,774
Average aggregate borrowings during the year $ 30,898 $ 30,587
Weighted average interest rate during the year 6.12% 6.11%
</TABLE>
The 12.7% Senior Subordinated Notes are due in 1998 and are
subordinated and junior in right of payment to the first $13 million of
indebtedness incurred under the Housewares Credit Agreement. The principal is
payable as follows: $18 million on each of December 15, 1996 and 1997, and $24
million on December 15, 1998. In the event of a Change in Control (as defined),
each Noteholder may require Housewares to prepay the Notes held by such
Noteholder. In addition, if, after a Change of Control, Housewares fails to
perform or observe any Triggering Covenant (as defined) in stated time periods
and specified circumstances, then each Noteholder may require Housewares to
prepay the Notes held by such Noteholder and to pay a substantial premium.
The Housewares and Frem credit agreements and the Senior Subordinated
Notes restrict the payments that these subsidiaries can make to the Company, as
well as, contain certain financial and operating covenants and limit or
restrict the sale of assets, additional indebtedness, and certain investments
and acquisitions. Under the most restrictive covenant, these subsidiaries
individually must maintain, for their four most recently ended fiscal quarters,
earnings before interest, taxes, amortization of goodwill and depreciation of
at least 125% of interest and principal payments required under the respective
loan agreements for the same period. At January 2, 1994, the total amount that
could be paid to the Company by Housewares and Frem was approximately $13
million. Total net assets (total assets less total liabilities) of Housewares
and Frem excluding intercompany items were approximately $82 million at January
2, 1994.
On December 22, 1992, the Company consummated a $30 million private
placement, including 881,542 shares of common stock priced at $9.075 per share
and a $22 million Convertible Subordinated Note (the "Note") issued to The 1818
Fund, L.P., an affiliate of Brown Brothers Harriman & Co. The Note was sold at
par. The Company paid The 1818 Fund, L.P. a $1.2 million fee in connection with
this transaction.
The Note is due November 30, 2002, bears interest at 7% per annum, and
is convertible into common stock at a conversion price of $10.50 per share
subject to certain adjustments. It is not callable until December 1994, is
callable for two years thereafter if the price of the common stock averages $18
or more for 45 consecutive days immediately preceding the call notice date and
after four years, the Note is callable at an initial premium of 3.5%, which
declines to zero in the final year of maturity. The Note requires the Company
to maintain a minimum net worth of $84 million subject to adjustment under
certain circumstances.
Maturities of long-term obligations (amounts in thousands) for the five
fiscal years ending December 1998 are as follows: 1994- $9,238; 1995- $8,926;
1996- $18,928; 1997- $19,983; 1998- $41,921.
<TABLE>
7. Accrued Expenses
Accrued expenses consisted of the following:
<CAPTION>
(Amounts in thousands) January 2, 1994 January 3, 1993
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Payroll $ 1,918 $ 2,536
Compensated absences 1,805 1,483
Sales and promotional allowances 6,164 6,057
Provisions related to restructuring/reorganization and excess facilities costs 8,323 -
Interest and non-income taxes 3,934 2,247
Insurance 2,091 1,711
Professional fees 2,299 1,728
Other 5,125 5,320
------- -------
$31,659 $21,082
======= =======
</TABLE>
13
<PAGE> 14
8. Income Taxes
In February 1992, the Financial Accounting Standards Board issued FAS
109. Under the asset and liability method of FAS 109, deferred tax assets and
liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases. In addition, the new accounting
standard requires the recognition of future tax benefits, such as net operating
loss carryforwards, to the extent that realization of such benefits is more
likely than not. Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. Under FAS 109,
the effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date.
The Company adopted FAS 109 in 1993 and has applied the provisions of
FAS 109 retroactively to January 3, 1988. The Company previously used the asset
and liability method under FAS 96. The adoption of FAS 109 resulted in a
cumulative effect of a benefit of $23.2 million, or $1.20 per common share at
January 3, 1988 and the financial statements of the Company for all fiscal
years subsequent to January 3, 1988 have been restated with the provisions of
FAS 109. The following summarizes the impact of applying FAS 109, which
resulted in additional income tax expense, on net income and earnings per share
for 1992 and 1991.
<TABLE>
<CAPTION>
Fiscal 1992 Fiscal 1991 December 30, 1990
-------------------- --------------------- -----------------
Net Earnings Net Earnings Retained
(Amounts in thousands, except per share data) income per share income per share earnings
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
As previously reported $ 14,050 $ .75 $ 10,144 $ .60 $(14,758)
Effect of FAS 109 (5,403) (.29) (4,250) (.25) 16,954
-------- ----- -------- ----- --------
As restated $ 8,647 $ .46 $ 5,894 $ .35 $ 2,196
======== ===== ======== ===== ========
</TABLE>
<TABLE>
Total income tax expense for Fiscal 1993, Fiscal 1992 and Fiscal 1991 was allocated as follows:
<CAPTION>
(Amounts in thousands) Fiscal 1993 Fiscal 1992 Fiscal 1991
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Income from operations $ 4,578 $ 8,078 $ 6,109
Stockholders' equity, for compensation expense for tax purposes in
excess of amounts recognized for financial reporting purposes (318) (795) (191)
------- ------- -------
$ 4,260 $ 7,283 $ 5,918
======= ======= =======
</TABLE>
<TABLE>
A reconciliation of the provision for income taxes to the statutory income tax rate applied to combined domestic and foreign income
before income taxes for Fiscal 1993, Fiscal 1992 and Fiscal 1991 was as follows:
<CAPTION>
(Amounts in thousands, except percentages) Fiscal 1993 Fiscal 1992 Fiscal 1991
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Income (loss) before income taxes
Domestic $ 7,573 $16,491 $11,174
Foreign (736) 234 829
------- ------- -------
$ 6,837 $16,725 $12,003
======= ======= =======
Federal income tax at normal rates 35% 34% 34%
State income taxes, net of federal benefit 11% 6% 6%
Change in federal rate (3%)
Difference between foreign and federal effective rates 2% 1% 3%
Amortization of excess of cost over fair value 22% 7% 8%
-- -- --
67% 48% 51%
== == ==
</TABLE>
14
<PAGE> 15
<TABLE>
The components of the provision for income taxes were as follows:
<CAPTION>
(Amounts in thousands) Federal State Foreign Total
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Fiscal 1993
Current $ 3,640 $ 1,484 $ 8 $ 5,132
Deferred (38) (372) (144) (554)
------- ------- ------ -------
$ 3,602 $ 1,112 $ (136) $ 4,578
Fiscal 1992 ======= ======= ======= =======
Current $ 341 $ 2,032 $ 225 $ 2,598
Deferred 5,939 (435) (24) 5,480
------- ------- ------ -------
$ 6,280 $ 1,597 $ 201 $ 8,078
Fiscal 1991 ======= ======= ======= =======
Current $ 367 $ 1,001 $ 435 $ 1,803
Deferred 4,290 46 (30) 4,306
------- ------- ------ -------
$ 4,657 $ 1,047 $ 405 $ 6,109
======= ======= ======= =======
</TABLE>
<TABLE>
The significant components of deferred income tax expense attributable to income from operations for Fiscal 1993, Fiscal 1992 and
Fiscal 1991 were as follows:
<CAPTION>
(Amounts in thousands) Fiscal 1993 Fiscal 1992 Fiscal 1991
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Utilization of net operating loss and tax credits $ 2,303 $5,680 $6,369
Depreciation (1,438) (667) 259
Inventory (173) 378 (835)
Benefit plans 1,815 41 (598)
Restructuring/reorganization and excess facilities charge (4,400) - -
Other 1,339 48 (889)
------- ------ ------
$ (554) $5,480 $4,306
======= ====== ======
</TABLE>
<TABLE>
The tax effects of temporary differences and carryforwards that give rise to significant portions of net deferred tax asset
(liability) consisted of the following:
<CAPTION>
(Amounts in thousands) January 2, 1994 January 3, 1993
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Receivables $ 757 $ 755
Inventory 901 1,263
Benefit plans 3,084 1,539
Accruals, provisions and other liabilities 8,936 3,572
Net operating loss carryforward - 1,400
Alternative minimum tax - 903
Depreciation (4,739) (5,264)
Other (881) (1,581)
------- --------
$ 8,058 $ 2,587
======= ========
</TABLE>
The Company's federal income tax returns for all years subsequent to
December 1987 are subject to review by the Internal Revenue Service.
As part of the sale of the Company's printer business in 1987, the
Company indemnified the purchaser with respect to foreign tax liabilities of
the Company's former foreign subsidiaries relating to periods prior to the
sale.
9. Retirement Plans, Post-Retirement and Post-Employment Benefits
The Company and its subsidiaries have various pension plans which cover
most of their employees and provide for monthly payments to eligible employees
upon retirement. Benefits for non-union employees are generally based upon
earnings and years of service prior to 1989 and certain non-union employees
receive benefits from allocated accounts under a defined contribution plan.
Benefits for certain union employees are based upon dollar amounts attributed
to each year of credited service; the remainder of the union employees receive
benefits from allocated accounts under a defined contribution plan and from
prior contributions to a multi-employer plan. The Company's policy is to make
contributions to these plans sufficient to meet the minimum funding
requirements of applicable laws and regulations, plus such amounts, if any, as
the Company's actuarial consultants determine to be appropriate. The Company
also provides supplemental retirement benefits for certain management personnel
based on earnings and years of service.
15
<PAGE> 16
At January 2, 1994 and January 3, 1993, the Company reported, as a
separate component of stockholders' equity, the amount of the additional
liability in excess of the unrecognized prior service costs of its pension
plans.
<TABLE>
Net pension expense consisted of the following:
<CAPTION>
(Amounts in thousands) Fiscal 1993 Fiscal 1992 Fiscal 1991
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. defined benefit plans
Service cost-benefits earned during the period $ 229 $ 108 $ 58
----- ----- -----
Interest accrued on projected benefit obligation 528 491 441
----- ----- -----
Expected return on assets
Actual return (373) (501) (791)
Unrecognized gain (loss) (183) 39 372
----- ----- -----
(556) (462) (419)
Amortization of prior service cost and unrecognized loss 54 56 60
Settlement loss 38 38 19
----- ----- -----
U.S. defined benefit plans, net 293 231 159
Canadian defined benefit plan (2) (4) (8)
U.S. defined contribution plans 129 28 70
----- ----- -----
Total net pension expense $ 420 $ 255 $ 221
===== ===== =====
</TABLE>
<TABLE>
The following sets forth the funded status of the Company's defined
benefit pension plans and amounts recognized in the consolidated balance
sheets:
<CAPTION>
January 2, 1994 January 3, 1993
--------------------------------- -------------------------------------
Plans with Plans with Plans with Plans with
assets exceeding accumulated assets exceeding accumulated
accumulated benefits accumulated benefits
(Amounts in thousands) benefits exceeding assets benefits exceeding assets
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Accumulated benefit obligation
Vested $(1,411) $(7,034) $ (544) $(6,289)
Nonvested (54) (52) - (13)
------- ------- ------ -------
Total (1,465) (7,086) (544) (6,302)
Effect of projected compensation increases (204) - (179) -
------- ------- ------ -------
Projected benefit obligation (1,669) (7,086) (723) (6,302)
Plan assets 2,557 5,231 1,141 5,338
------- ------- ------ -------
Plan assets in excess of (less than)
projected benefit obligations 888 (1,855) 418 (964)
Unrecognized actuarial net (gain) losses (290) 2,293 (418) 1,616
Unrecognized prior service cost 29 43 - 38
Additional liability - (1,947) - (1,241)
------- ------- ------ -------
Prepaid (accrued) pension cost included
in consolidated balance sheet $ 627 $(1,466) $ - $ (551)
======= ======= ====== =======
</TABLE>
Plan assets are invested primarily in long=term debt and equity
instruments through pooled funds maintained by an insurance company. The
projected benefit obligation was determined using an assumed discount rate of
7% for January 2, 1994 and 8% for January 3, 1993. The nature of the domestic
pension plans is such that an estimate of future compensation increases is not
required. The assumed long-term rate of return on plan assets was 9% for Fiscal
1993, Fiscal 1992 and Fiscal 1991. At January 2, 1994, the various plans held
an aggregate of 11,410 shares of the Company's common stock.
The Company sponsors defined benefit post-retirement health and life
insurance plans that cover certain retired and active employees. The Company
expects to continue these benefits indefinitely, but reserves the right to
amend or discontinue all or any part of the plans at any time.
Effective January 4, 1993, the Company adopted FAS 106 and recognized
immediately the cumulative effect of the change in accounting for
post-retirement benefits of $2.9 million ($1.8 million after income taxes)
which represents the accumulated post-retirement benefit obligation existing at
January 1, 1993. FAS 106 requires that the cost of these benefits be recognized
in the financial statements during employees' active working lives. Previously,
costs were recognized as claims were incurred. The Company's funding policy for
these plans remains on a pay-as-you-go basis.
16
<PAGE> 17
<TABLE>
The following sets forth the amounts recognized in the consolidated balance
sheets for the Company's post-retirement benefit plans:
<CAPTION>
January 2, 1994
- ------------------------------------------------------------------------------------------------------------------------
<S> <C>
Accumulated post-retirement benefit obligation
Fully eligible active employees $ 737,000
Retirees 1,594,000
Other active employees 629,000
----------
$2,960,000
Plan assets -
Unrecognized net gain (21,000)
----------
Accrued post-retirement benefit cost $2,939,000
==========
</TABLE>
<TABLE>
Post-retirement benefit expense consisted of the following:
<CAPTION>
Fiscal 1993
- ------------------------------------------------------------------------------------------------------------------------
<S> <C>
Service cost (benefits attributed to employee services during the year) $ 44,000
Interest expense on the accumulated post-retirement benefit obligation 206,000
-----------
Net periodic post-retirement benefit expense $ 250,000
===========
</TABLE>
The discount rate used in determining the accumulated post-retirement
benefit obligation as of January 2, 1994 was 7%. The Company subsidy is a
defined dollar amount and will not increase in the future; therefore, no
medical trend rate has been assumed and the results of the calculation of the
plan liabilities will not be impacted by future medical cost trends. The
pay-as-you-go expenditures for post-retirement benefits were $170,000 for
Fiscal 1993.
<TABLE>
The effects of the accounting change discussed above are summarized as follows:
- ------------------------------------------------------------------------------------------------------------------------
<S> <C>
Cumulative effect of accounting change on January 4, 1993 $2,859,000
Plus post-retirement benefit expense in Fiscal 1993 250,000
Less post-retirement benefit cash expenditures in Fiscal 1993 170,000
----------
Accrued post-retirement benefit cost at January 2, 1994 $2,939,000
==========
</TABLE>
The Company also adopted FAS 112 effective January 4, 1993, resulting
in an after-tax charge of $1.4 million (net of income taxes of $900,000)
reflected as a cumulative effect of an accounting change. FAS 112 requires the
Company to accrue benefits provided to former or inactive employees after
employment but before retirement. The ongoing impact of this change is not
expected to have a material effect on earnings in future years.
There was no cash flow impact associated with either the adoption of
FAS 106 or FAS 112.
10. Employee Stock Ownership Plan
On February 23, 1989, the Company's Board of Directors adopted the Ekco
Group, Inc. Employees' Stock Ownership Plan (the "ESOP") for non-union United
States employees of the Company and subsidiaries designated by the Company's
Board of Directors as participants in the plan. Under the plan, the Company
sold 1.8 million shares of the Series B ESOP Convertible Preferred Stock at a
price of $3.61 per share to the ESOP trust. The ESOP satisfied its obligation
to the Company with borrowings from a bank. The Company has guaranteed the
ESOP borrowing and reported the unpaid balance of this loan as a liability of
the Company. At January 2, 1994, approximately 1.6 million shares of the
Company's common stock were reserved for conversion of Series B ESOP
Convertible Preferred Stock.
An unearned ESOP compensation amount is reported as an offset to the
Series B ESOP Convertible Preferred Stock amount in the consolidated balance
sheets. The unearned compensation is being amortized as shares in the Series B
ESOP Convertible Preferred Stock are allocated to employees. Shares are
allocated ratably over the life of the ESOP Loan or, if less, the actual period
of time over which the indebtedness is repaid. The allocation of shares is
based upon a formula equal to a percentage of the Company's payroll costs. The
percentage is determined by the Company's Board of Directors annually and may
require principal prepayments. The Company's Board of Directors has approved
principal prepayments of $439,000, $380,000 and $124,000 for Fiscal 1993,
Fiscal 1992 and Fiscal 1991 to be paid in 1993, 1992 and 1991, respectively.
For Fiscal 1993, Fiscal 1992 and Fiscal 1991, $686,000, $687,000 and $687,000,
respectively, has been charged to operations. The actual cash contributions,
excluding the above mentioned prepayments, to the ESOP by the Company during
Fiscal 1993, Fiscal 1992 and Fiscal 1991 were $390,000, $402,000 and $596,000,
respectively.
17
<PAGE> 18
Upon retirement or termination from the Company, each employee has the
option to either convert the vested Series B ESOP Convertible Preferred Stock
into common stock of the Company or redeem the Series B ESOP Convertible
Preferred Stock for cash at a price of $3.61 per share. The change in the
principal amount of the Series B ESOP Convertible Preferred Stock from year to
year is solely due to redemptions and conversions by vested employees retiring
or leaving the Company. The Series B ESOP Convertible Preferred Stock does not
pay a dividend.
<TABLE>
Series B ESOP Convertible Preferred Stock, net, consisted of the following:
<CAPTION>
(Amounts in thousands) January 2, 1994 January 3, 1993
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Series B ESOP Convertible Preferred Stock, par value $.01, no dividend $ 5,939 $ 6,050
Unearned compensation (3,253) (3,939)
------- -------
$ 2,686 $ 2,111
======= =======
</TABLE>
In October 1990, the Company's Board of Directors authorized the
Trustee of the ESOP to purchase up to one million shares of the Company's
common stock. The Company agreed to finance the purchase through a 20-year 10%
loan from the Company to the ESOP. Through January 2, 1994, the ESOP had
purchased in open market transactions approximately 863,000 shares of the
Company's common stock at a total cost of approximately $2.4 million. Unearned
compensation equal to such cost is being amortized as shares of the Company's
common stock are allocated to employee accounts. Shares are allocated ratably
over the life of the loan or, if less, the actual period of time over which the
indebtedness is repaid, subject to the minimum allocation of 50,000 shares in
any one year. In 1990, 12,500 shares were allocated to employee accounts based
on the partial year, while for each of Fiscal 1992 and Fiscal 1991, 50,000
shares were allocated to employees' accounts. For Fiscal 1993, Fiscal 1992 and
Fiscal 1991, $136,000, $141,000 and $136,000, respectively, have been charged
to operations.
11. Minority Interest
Minority interest consisted of 5% cumulative preferred stock of
Woodstream Corporation, $50 par value (redeemable at Woodstream's option at $52
per share). Dividends on the 5% cumulative preferred stock are included in
interest expense.
12. Stockholders' Equity
Preferred stock, $.01 par value
On February 12, 1987, the Company's stockholders authorized a class of
20 million shares of preferred stock which may be divided and issued in one or
more series having such relative rights and preferences as may be determined by
the Company's Board of Directors.
Preferred stock rights
In 1987, the Board of Directors of the Company declared a dividend
payable to stockholders of record as of April 9, 1987, of one preferred share
purchase right ("Right") for each outstanding share of common stock. In 1988,
1989 and 1992, the Company's Board of Directors amended the preferred share
purchase rights plan. The amended plan provides that each Right, when
exercisable, will entitle the holder thereof until April 9, 1997, to purchase
one one-hundredth of a share of Series A Junior Participating Preferred Stock,
par value $.01 per share, at an exercise price of $20, subject to certain
anti-dilution adjustments. The Rights will not be exercisable or transferable
apart from shares of common stock until the earlier of (i) the tenth day after
a public announcement that a person or group has acquired beneficial ownership
of 15% or more of the outstanding shares of common stock, other than, so long
as certain conditions are met, as a result of the beneficial ownership of
certain common stock or securities convertible into common stock held by The
1818 Fund, L.P., a Delaware limited partnership, (an "Acquiring Person") or
(ii) the tenth day after a person commences, or announces an intention to
commence, a tender or exchange offer for 15% or more of the outstanding shares
of common stock. The Rights are redeemable by the Company at $.02 per Right at
any time prior to the time that a person or group becomes an Acquiring Person.
In the event that the Company is a party to a merger or other business
combination transaction in which the Company is not the surviving entity, each
Right will entitle the holder to purchase, at the exercise price of the Right,
that number of shares of the common stock of the acquiring company which, at
the time of such transaction would have a market value of two times the
exercise price of the Right. In addition, if a person or group becomes an
Acquiring Person, each Right not owned by such person or group would become
exercisable for the number of shares of common stock which, at that time, would
have a market value of two times the exercise price of the Right.
18
<PAGE> 19
<TABLE>
Common stock, $.01 par value
Share information regarding common stock consisted of the following:
<CAPTION>
January 2, 1994 January 3, 1993
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Authorized shares 60,000,000 60,000,000
========== ==========
Shares issued 27,067,262 26,936,571
Shares held in treasury 9,223,600 9,788,251
---------- ----------
Shares outstanding 17,843,662 17,148,320
========== ==========
</TABLE>
Treasury stock
During Fiscal 1993, the Company issued 564,651 shares of treasury stock
in connection with the acquisition of Kellogg. Significant treasury stock
activity during Fiscal 1992 included the issuance of 1,174,674 shares in
connection with the acquisition of Frem Corporation and 881,542 shares in
connection with the private placement of stock with The 1818 Fund, L.P.
Stock option plans
At January 2, 1994, approximately 1.8 million shares of the Company's
common stock were available for grants of options to employees and directors
under the Company's stock option plans. Options granted under both plans are
granted at prices not less than 100% of the fair market value (as defined) on
the dates the options are granted and, accordingly, there have been no charges
to income in connection with the options other than incidental expenses.
Options must be exercised within the period prescribed by the respective stock
option plan agreements, but not later than 10 years for certain options and 11
years for others.
<TABLE>
Changes in options and option shares under the plans during the respective fiscal years were as follows:
<CAPTION>
Fiscal 1993 Fiscal 1992 Fiscal 1991
---------------------------- ---------------------------- --------------------------
Option price Number of Option price Number of Option price Number of
per share shares per share shares per share shares
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Options outstanding beginning of year $2.13 -- $10.06 1,857,248 $2.13 -- $ 5.19 1,544,515 $2.13 -- $3.69 1,614,443
Options granted $7.44 -- $11.31 746,773 $7.25 -- $10.06 574,433 $2.63 -- $5.19 88,500
Options exercised $2.25 -- $ 5.19 (15,100) $2.13 -- $ 3.69 (245,600) $2.19 -- $3.69 (91,552)
Options cancelled $2.56 -- $11.31 (104,200) $2.25 -- $10.06 (16,100) $2.19 -- $2.69 (66,876)
--------- --------- ---------
Options outstanding, end of year $2.13 -- $11.31 2,484,721 $2.13 -- $10.06 1,857,248 $2.13 -- $5.19 1,544,515
========= ========= =========
Options exercisable, end of year $2.13 -- $11.31 1,723,292 $2.13 -- $10.06 1,286,915 $2.13 -- $3.69 1,306,715
========= ========= =========
Shares reserved for future grants 1,756,360 2,398,933 1,383,433
========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
Option price and market value at date of grant
------------------------------------------------------
Number of shares Per share Amount
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Options outstanding at January 2, 1994, which were granted during fiscal years:
1987 380,000 $ 3.69 $ 1,401,250
1988 529,142 $2.13 -- $ 2.25 1,143,998
1989 51,373 $3.19 -- $ 3.38 167,501
1990 240,800 $ 2.56 617,050
1991 59,300 $ 2.63 155,663
1992 545,333 $7.25 -- $ 10.06 5,375,122
1993 678,773 $7.44 -- $ 11.31 6,967,194
--------- -----------
2,484,721 $15,827,778
========= ===========
</TABLE>
Of the options outstanding at January 2, 1994, options to acquire
1,431,805 shares at a weighted average exercise price of $5.32 per share became
exercisable on the grant date. Under certain circumstances, a portion of shares
purchased pursuant to the exercise of such options are subject to repurchase by
the Company within three years of the date of grant of the option at the option
exercise price. At January 2, 1994, 389,290 of such shares were subject to such
repurchase.
The remaining options outstanding at January 2, 1994, to acquire
1,052,916 shares at a weighted average exercise price of $7.80 per share are
exercisable from the date of grant through the date of exercise up to one-fifth
of the number of shares covered by such options on or after each of the first
five anniversaries of the date of grant. All such options will be fully
exercisable on and after the fifth such anniversary.
19
<PAGE> 20
Restricted stock purchase plans
Under the Company's restricted stock purchase plans, the Company may
offer to sell shares of common stock to employees of the Company and its
subsidiaries at a price per share of not less than par value ($.01) and not
more than 10% of market value on the date the offer is approved, and on such
other terms as deemed appropriate. Shares are awarded in the name of the
employee, who has all rights of a stockholder, subject to certain restrictions
or provisions for forfeiture. Restrictions on the disposition of shares for the
shares purchased prior to January 2, 1994, expire annually over a period not to
exceed five years. Common stock reserved for future grants aggregated 951,500
shares at January 2, 1994. The following table summarizes the activity of the
restricted stock purchase plans during the respective fiscal years (fair market
value determined at date of purchase).
<TABLE>
<CAPTION>
Fiscal 1993 Fiscal 1992 Fiscal 1991
------------------ ------------------ ------------------
Number Fair Number Fair Number Fair
of market of market of market
(Amounts in thousands) shares value shares value shares value
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Unvested shares outstanding, beginning of year 291 $ 988 372 $ 835 489 $1,160
Shares issued 25 306 37 417 - -
Shares repurchased (14) (171) - - - -
Shares vested (125) (347) (118) (264) (117) (325)
---- ----- ------ ----- ------ ------
Unvested shares outstanding, end of year 177 $ 776 291 $ 988 372 $ 835
==== ===== ====== ===== ====== ======
</TABLE>
The difference between the issue price and the fair market value of the
shares at the date of issuance is accounted for as unearned compensation and
amortized to expense over the lapsing of restrictions. During Fiscal 1993,
Fiscal 1992 and Fiscal 1991, unearned compensation charged to operations was
$307,000, $332,000 and $333,000, respectively. To the extent the amount
deductible for income taxes exceeds the amount charged to operations for
financial statement purposes, the related tax benefits are credited to
additional paid-in-capital when realized.
Employee stock purchase plan
The Company has an employee stock purchase plan that permits employees
to purchase up to a maximum of 500 shares per quarter of the Company's common
stock at a 15% discount from market value. During Fiscal 1993, Fiscal 1992 and
Fiscal 1991, employees purchased 73,880 shares, 80,569 shares, and 86,669
shares, respectively, for a total of approximately $545,000, $515,000 and
$251,000, respectively. At January 2, 1994, approximately 1.3 million shares
were reserved for future grants under the plan. There have been no charges to
income in connection with the plan other than incidental expenses.
Income tax benefits
Income tax benefits relating to stock option plans, restricted stock
plans and employee stock purchase plan credited to additional paid-in-capital
as realized in Fiscal 1993, Fiscal 1992 and Fiscal 1991 were $318,000, $795,000
and $191,000, respectively.
13. Earnings Per Common Share
Primary earnings per common share are based upon the weighted average
of common stock and dilutive common stock equivalent shares, including Series B
ESOP Convertible Preferred Stock, outstanding during each period. Fully diluted
earnings per share have been omitted since they are either the same as primary
earnings per share or anti-dilutive. The weighted average number of shares used
in computation of earnings per share consisted of the following for the periods
presented.
<TABLE>
<CAPTION>
(Amounts in thousands) Fiscal 1993 Fiscal 1992 Fiscal 1991
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Weighted average shares of common stock outstanding during the year 17,616 16,082 14,579
Weighted average common equivalent shares due to stock options 713 993 661
Series B ESOP Convertible Preferred Stock 1,670 1,710 1,772
------ ------ ------
19,999 18,785 17,012
====== ====== ======
</TABLE>
14. Commitments and Contingencies
Employment contracts
The Company has employment agreements with certain of
its executive officers and management personnel. These agreements generally
continue until terminated by the executive or the Company, and provide for
salary continuation for a specified number of months under certain
circumstances. Certain of the agreements provide the employees with certain
additional rights after a Change of
20
<PAGE> 21
Control (as defined) of the Company occurs. Included in other assets are
$4.1 million of time deposits held by a bank to collateralize letters of credit
issued to secure a portion of the Company's obligations under certain of these
agreements. The agreements include a covenant against competition with the
Company, which extends for a period of time after termination for any reason.
As of January 2, 1994, if all of the employees under contract were to be
terminated by the Company without good cause (as defined) under these
contracts, the Company's liability would be approximately $7 million ($10
million following a Change of Control).
Severance policy
The Board of Directors of the Company has adopted a severance policy
for all exempt employees of the Company. In the event of a Change of Control
(as defined), each exempt employee of the Company whose employment is
terminated, whose duties or responsibilities are substantially diminished, or
who was directed to relocate within 12 months after such Change of Control,
will receive, in addition to all other severance benefits accorded to similarly
situated employees, salary continuation benefits for a period of months
determined by dividing his or her then yearly salary by $10,000, limited to not
more than 12 months. This policy does not apply to any exempt employee of the
Company who is a party to a contractual commitment with the Company which
provides him or her with greater than 12 months salary, severance payment or
salary continuation upon his or her termination in the event of a Change of
Control. This policy may be rescinded at any time by the Company's Board of
Directors prior to a Change of Control.
<TABLE>
Leases
The Company leases offices, warehouse facilities, vehicles and
equipment under operating and capital leases. The terms of certain leases
provide for payment of minimum rent, real estate taxes, insurance and
maintenance. Rents of approximately $1.9 million, $1.4 million and $1.1
million, were charged to operations for Fiscal 1993, Fiscal 1992 and Fiscal
1991, respectively.
The Company receives rental income from properties currently held for
sale. Rental income included in selling, general and administrative expenses
was approximately $1.5 million, $1.2 million and $800,000, for Fiscal 1993,
Fiscal 1992 and Fiscal 1991, respectively.
Minimum rental payments and income required under leases that had
initial or remaining noncancellable lease terms in excess of one year as of
January 2, 1994, were as follows:
<CAPTION>
(Amounts in thousands) Operating leases Capital leases Rental income
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Fiscal Year
1994 $1,180 $ 88 $1,156
1995 382 88 763
1996 282 88 678
1997 218 7 572
1998 21 - 535
----
271
Less interest cost 52
----
Present value of minimum lease payments $219
====
</TABLE>
Legal proceedings
The Company is a party to several pending legal proceedings and claims.
Although the outcome of such proceedings and claims cannot be determined with
certainty, the Company's management, after consultation with outside legal
counsel, is of the opinion that the expected final outcome should not have a
material adverse effect on the Company's financial position, results of
operations or liquidity.
Environmental matters
From time to time, the Company has had claims asserted against it by
regulatory agencies or private parties for environmental matters relating to
the generation or handling of hazardous substances by the Company or its
predecessors and has incurred obligations for investigations or remedial
actions with respect to certain of such matters. While the Company does not
believe that any such claims asserted or obligations incurred to date will
result in a material adverse effect upon the Company's financial position,
results of operations or liquidity, the Company is aware that at its facilities
at Massillon and Hamilton, Ohio; Easthampton, Massachusetts; Hudson, New
Hampshire; and Lititz, Pennsylvania, hazardous substances and oil have been
detected and that additional investigation will be, and remedial action will or
may be, required. Operations at these and other facilities currently or
previously owned or leased by the Company utilize, or in the past have
utilized, hazardous substances. There can be no assurance that activities at
these or any other facilities or future facilities owned or operated by the
Company may not result in additional environmental claims being asserted
against the Company or additional investigations or remedial actions being
required.
21
<PAGE> 22
In connection with the acquisition of Kellogg by the Company in 1993,
the Company engaged environmental engineering consultants ("Consultants") to
review potential environmental liabilities at all of Kellogg's properties.
Additional investigation and testing resulted in the identification of likely
environmental remedial actions, operation, maintenance and ground water
monitoring and the estimated costs therefore. Based upon the cost estimates
provided by the Consultants, the Company believes remediation costs will be
approximately $1.5 million and the expense for the ongoing operation,
maintenance and ground water monitoring will be $195,000 for the first ten
years and $130,000 for 20 years thereafter. Management believes that the total
amount for these liabilities is approximately $6 million, including the effects
of inflation. Accordingly, the Company has recorded a liability of
approximately $3.8 million. This amount represents the undiscounted costs of
remediation and the net present value of future operation, maintenance and
ground water monitoring costs discounted at 6%. The Company expects to pay
approximately $424,000 of the remediation costs in Fiscal 1994 with the balance
being paid out in Fiscal 1995 and Fiscal 1996. These estimates may subsequently
change should additional sites be identified or further remediation measures be
required or undertaken or interpretation of current laws or regulations be
modified. The Company has not anticipated any insurance proceeds or third-party
payments in arriving at the above estimates.
15. Industry and Geographic Area Information
The Company operates primarily in one industry segment consisting of
the manufacture, marketing and distribution of non-electric houseware and
hardware products. The Company's products include bakeware, kitchenware,
low-toxic pest control and animal care products, and plastic storage
containers. The Company's operations in non-houseware and non-hardware products
are not significant. Sales and marketing operations outside the United States
are conducted principally through a subsidiary in Canada and by direct sales.
One customer accounted for approximately $21.6 million or 10.5% and another
customer accounted for approximately $20.1 million or 9.7% of net revenues for
Fiscal 1992, but no customer accounted for more than 10% of net revenue for
either Fiscal 1993 or Fiscal 1991.
<TABLE>
The following table shows information by geographic area:
<CAPTION>
Unaffiliated Income before
(Amounts in thousands) net revenues income taxes Total assets
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Fiscal 1993
United States $232,447 $ 7,677 $303,933
Canada 13,981 (736) 9,152
Eliminations - (104) (5,124)
-------- ------- --------
Consolidated $246,428 $ 6,837 $307,961
======== ======= ========
Fiscal 1992
United States $193,284 $16,437 $251,520
Canada 13,344 234 8,581
Eliminations - 54 (5,020)
-------- ------- --------
Consolidated $206,628 $16,725 $255,081
======== ======= ========
Fiscal 1991
United States $153,207 $12,293 $207,387
Canada 13,510 829 11,606
Eliminations - (1,119) (7,509)
-------- ------- --------
Consolidated $166,717 $12,003 $211,484
======== ======= ========
</TABLE>
United States revenues include approximately $9.7 million, $10.6
million and $9.9 million of export sales to unaffiliated customers for Fiscal
1993, Fiscal 1992 and Fiscal 1991, respectively.
22
<PAGE> 23
16. Supplementary Information
<TABLE>
The following amounts were charged to costs and expenses:
<CAPTION>
(Amounts in thousands) Fiscal 1993 Fiscal 1992 Fiscal 1991
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Maintenance and repairs $ 2,686 $ 2,128 $ 3,084
======= ======= =======
Taxes, other than payroll and income taxes
Real estate $ 1,335 $ 1,198 $ 975
Other 249 241 139
------- ------- -------
$ 1,584 $ 1,439 $ 1,114
======= ======= =======
Advertising $ 4,920 $ 5,359 $ 4,187
======= ======= =======
Royalties $ 99 $ 248 $ 139
======= ======= =======
Provision for doubtful accounts $ 449 $ 1,077 $ 302
======= ======= =======
Amortization of assets
Excess of cost over fair value $ 4,195 $ 3,557 $ 2,770
Favorable lease rights 73 73 73
Prepaid marketing costs 1,768 145 -
Deferred financing costs 467 446 336
------- ------- -------
$ 6,503 $ 4,221 $ 3,179
======= ======= =======
</TABLE>
17. Quarterly Results of Operations (Unaudited)
<TABLE>
The following table presents the unaudited quarterly results of operations for Fiscal 1993 and Fiscal 1992 (restated for FAS 109):
<CAPTION>
First Second Third Fourth Total
(Amounts in thousands, except per share amounts) quarter quarter quarter quarter year
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Fiscal 1993
Net revenues $46,320 $57,439 $73,287 $69,382 $246,428
Gross profit 16,112 17,865 26,511 24,591 85,079
Income (loss) before income taxes 1,418 1,449 7,310 (3,340) 6,837
Income (loss) before cumulative
effect of changes in method of accounting 770 778 3,682 (2,971) 2,259
Income (loss) per share before cumulative
effect of changes in method of accounting .04 .04 .18 (.17) .11
Fiscal 1992
Net revenues $46,361 $39,983 $55,282 $65,002 $206,628
Gross profit 16,244 13,008 21,587 26,704 77,543
Income before income taxes 1,744 275 5,567 9,139 16,725
Net income 902 142 2,878 4,725 8,647
Net income per share .05 .01 .15 .25 .46
</TABLE>
Restructuring/reorganization and excess facilities charge
During the fourth quarter of Fiscal 1993, the Company recorded an $11
million charge ($6.6 million after income taxes) resulting from
management's analysis of the Company's operations and future strategy. Of this
charge, approximately $3.5 million related to property held for sale and
approximately $2.7 million of the total charge was non-cash.
Over the past seven years,the Company has grown rapidly through
acquisitions. It acquired Ekco Housewares in 1987, adding Woodstream in 1989,
Frem in 1992 and Kellogg in 1993. These companies each have different
operational, financial and distribution methods largely as a result of the
continuation of their historical operations. During the respective
post-acquisition periods, management's focus has been on increasing the
financial performance of the individual subsidiaries with less emphasis on the
efficiencies that could be achieved by synthesizing these companies on a group
basis. Management believes that the Company is at a juncture because of its size
and complexity where future growth and operating efficiency of the Company is
dependent on implementing Company-wide savings and common processes throughout
all subsidiaries. To achieve this, management has provided for:(i) severance and
related personnel costs associated with a reduction and realignment in
administrative and operating personnel, principally at Ekco Housewares; (ii)
costs associated with the consolidation of differing distribution and
information systems within the Company including the closing of excess
facilities which are not compatible with the new group strategy (including lease
contingencies) as well as the write-off of equipment no longer relevant to the
operating strategy; and,(iii) costs associated with excess facilities currently
classified as held for sale.
23
<PAGE> 24
<TABLE>
The amounts involved in the charge are as follows:
- -----------------------------------------------------------------------------------------------------------------------
<S> <C>
Severance and related personnel costs $ 3,200,000
Write-down of equipment 1,250,000
Costs associated with implementing distribution and operating strategy 2,600,000
Costs associated with property held for sale 3,450,000
Other, primarily fees and costs associated with implementation 500,000
-----------
$11,000,000
===========
</TABLE>
Property held for sale has also increased over the last several years
as a result of acquisitions. The commerical real estate market has been very
soft during this period. The charges included above represent a change in
management's focus on eliminating these excess facilities. Management has
retained a nationally recognized real estate firm to assist them in selling
property currently held for sale within the next two years. Management has also
re-evaluated its belief regarding the carrying value of these properties. As a
result a reserve for the operating costs of these properties net of lease
commitments has been established for $1.9 million and additional valuation
allowances aggregating $1.6 million has been netted against the respective
asset values.
18. Disclosures about Fair Value of Financial Instruments
The carrying amounts of cash, accounts receivable, investments pledged
as collateral, time deposits, accounts payable, 10% mortgage note and accrued
expenses approximate fair value because of the short maturity of these items.
The carrying amounts of the note payable and debt issued pursuant to
the Company's subsidiaries' bank credit agreements approximate fair value
because the interest rates on these instruments change with market interest
rates.
There are no quoted market prices for the 12.7% Senior Subordinated
Notes, 7% Convertible Subordinated Note or Series B ESOP Preferred Stock.
Because each of these securities contain unique terms, conditions, covenants
and restrictions, there are no identical obligations that have quoted market
prices. In order to determine the fair value of the 7% Convertible Subordinated
Note, the Company compared it to obligations which trade publicly and concluded
that the fair value of the note is approximately its book value, $22 million.
In order to determine the fair value of the 12.7% Senior Subordinated Notes,
the Company discounted the cash payments on the notes using discount rates
ranging from 8.5% to 9%. Based upon such discount rates, the fair value of the
$60 million 12.7% Senior Subordinated Notes would range between $62.8 million
and $68.9 million.
Each share of Series B ESOP Preferred Stock is redeemable at a price of
$3.61 per share or convertible into one share of the Company's common stock.
Assuming all shares were allocated and all employees were fully vested, the
redemption value of the ESOP Preferred Stock would be $6.1 million. Given these
same assumptions the shares could be converted into common stock having a
market value of $11.3 million at January 2, 1994.
These fair value estimates are subjective in nature and involve
uncertainties and matters of significant judgment and therefore cannot be
determined with precision. Changes in assumptions could significantly affect
these estimates.
24
<PAGE> 25
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Stockholders Ekco Group, Inc.
We have audited the accompanying consolidated balance sheets of Ekco
Group, Inc. and subsidiaries as of January 2, 1994 and January 3, 1993, and the
related consolidated statements of operations, stockholders' equity and cash
flows for each of the fiscal years in the three-year period ended January 2,
1994. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits 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 audits provide 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 Ekco Group,
Inc. and subsidiaries as of January 2, 1994 and January 3, 1993, and the
results of their operations and their cash flows for each of the fiscal years
in the three-year period ended January 2, 1994, in conformity with generally
accepted accounting principles.
As discussed in Note 1 to the consolidated financial statements, in
1993 the Company changed its method of accounting for income taxes,
post-retirement benefits other than pensions and post-employment benefits.
Boston, Massachusetts
February 7, 1994
25
<PAGE> 1
<TABLE>
EXHIBIT 21
----------
SUBSIDIARIES OF EKCO GROUP, INC.
The following are the subsidiaries of the registrant, all of which are
wholly-owned except for Woodstream Corporation which is majority-owned:
<CAPTION>
Jurisdiction of
Name of Subsidiary Incorporation
- ------------------ ---------------
<S> <C>
Ekco Housewares, Inc. Delaware
Ekco Canada Inc. Ontario, Canada
Frem Corporation Massachusetts
Kellogg Brush Manufacturing Co. Massachusetts
Woodstream Corporation Pennsylvania
Cleaning Specialty Co. Tennessee
Wright-Bernet, Inc. Ohio
Ekco Capital Enterprises, Inc. Delaware
Delhi Manufacturing Corporation Delaware
Ekco Wood Products Co. Delaware
Fenwick California
FPI, Inc. Washington
Trappe of Aspen, Inc. Pennsylvania
</TABLE>
<PAGE> 1
EXHIBIT 23
----------
Consent of Independent Auditors
-------------------------------
Board of Directors and Stockholders of Ekco Group, Inc.
We consent to incorporation by reference in the Registration Statement on
Form S-8 (File No. 33-42785) pertaining to the 1984 and 1985 Restricted Stock
Purchase Plans of Ekco Group, Inc., in the Registration Statement on Form S-8
(File No. 33-50800) pertaining to the 1984 Employee Stock Purchase Plan of Ekco
Group, Inc., in the Registration Statement on Form S-8 (File No. 33-50802)
pertaining to the 1987 Stock Option Plan of Ekco Group, Inc., and in the
Registration Statement on Form S-8 (File No. 33-29448) pertaining to the 1988
Directors' Stock Option Plan of Ekco Group, Inc., of our report dated February
7, 1994 relating to the consolidated balance sheets of Ekco Group, Inc. and
subsidiaries as of January 2, 1994 and January 3, 1993, and the related
consolidated statements of operations, stockholders' equity and cash flows for
each of the fiscal years in the three year period ended January 2, 1994, which
report is included in the January 2, 1994 Annual Report on Form 10-K of Ekco
Group, Inc.
Our report dated February 7, 1994 contains an explanatory paragraph
that states that in 1993 the Company changed its method of accounting for
income taxes and for certain post-retirement and post-employment benefits.
KPMG Peat Marwick
Boston, Massachusetts
March 31, 1994
