<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For quarterly period ended JUNE 30, 1996
-------------
Commission File Number 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)
(603) 888-1212
----------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---
As of August 5, 1996, there were issued and outstanding 18,501,205 shares
of common stock of the registrant.
<PAGE> 2
EKCO GROUP, INC. AND SUBSIDIARIES
<TABLE>
CONSOLIDATED CONDENSED BALANCE SHEETS
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<CAPTION>
JUNE 30, DECEMBER 31,
1996 1995
-------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 220 $ 142
Accounts receivable, net 33,802 43,823
Inventories 61,284 47,565
Other current assets 11,208 6,719
Deferred income tax 4,361 4,361
-------- --------
Total current assets 110,875 102,610
Property and equipment, net 56,882 56,380
Property held for sale or lease, net 2,793 2,830
Other assets 6,980 5,955
Excess of cost over fair value of net assets
acquired, net 134,382 136,600
-------- --------
Total assets $311,912 $304,375
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current portion of long-term obligations $ 40 $ 18,079
Accounts payable 15,704 15,607
Accrued expenses 23,084 23,711
Income taxes -- 538
-------- --------
Total current liabilities 38,828 57,935
-------- --------
Long-term obligations, less current portion 127,245 96,700
-------- --------
Other long-term liability 10,062 9,859
-------- --------
Series B ESOP Convertible Preferred Stock, net; outstanding 1,466 shares and
1,488 shares, respectively, redeemable at $3.61 per share 3,788 3,458
-------- --------
Commitments and contingencies -- --
Minority interest 498 498
-------- --------
Stockholders' equity
Common stock, $.01 par value; outstanding
18,487 shares and 18,414 shares, respectively 185 184
Capital in excess of par value 107,250 106,916
Cumulative translation adjustment 917 929
Retained earnings 28,697 33,614
Unearned compensation (3,810) (3,970)
Pension liability adjustment (1,748) (1,748)
-------- --------
131,491 135,925
-------- --------
Total liabilities and stockholders' equity $311,912 $304,375
======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
2
<PAGE> 3
EKCO GROUP, INC. AND SUBSIDIARIES
<TABLE>
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1996 AND JULY 2, 1995
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
------------------- ----------------------
1996 1995 1996 1995
------- ------- -------- --------
<S> <C> <C> <C> <C>
Net revenues $55,880 $61,691 $112,841 $120,423
------- ------- -------- --------
Costs and expenses
Cost of sales 39,344 43,229 80,433 83,954
Selling, general and administrative 13,890 12,398 27,249 25,683
Amortization of excess cost over
fair value 1,109 1,108 2,218 2,217
------- ------- -------- --------
54,343 56,735 109,900 111,854
------- ------- -------- --------
Income before interest and
income taxes 1,537 4,956 2,941 8,569
------- ------- -------- --------
Net interest expense
Interest expense 3,161 3,410 6,187 6,843
Investment income (9) -- (99) (75)
------- ------- -------- --------
3,152 3,410 6,088 6,768
------- ------- -------- --------
Income (loss) before income taxes and
extraordinary charge (1,615) 1,546 (3,147) 1,801
Income taxes (benefit) (1,080) 735 (1,621) 856
------- ------- -------- --------
Income (loss) before extraordinary
charge (535) 811 (1,526) 945
Extraordinary charge for early
retirement of debt, net of tax
benefit of $2,752 -- -- (2,595) --
------- ------- -------- --------
Net income $ (535) $ 811 $ (4,121) $ 945
======= ======= ======== ========
Earnings (loss) per common share:
Income (loss) before extraordinary
charge $ (0.03) $ 0.04 $ (0.08) $ 0.05
Extraordinary charge -- -- (0.14) --
------- ------- -------- --------
Earnings (loss) per common share $ (0.03) $ 0.04 $ (0.22) $ 0.05
======= ======= ======== ========
Weighted average number of shares used
in computation of per share data 18,460 20,308 18,435 20,266
======= ======= ======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE> 4
EKCO GROUP, INC. AND SUBSIDIARIES
<TABLE>
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND JULY 2, 1995
(AMOUNTS IN THOUSANDS)
(UNAUDITED)
<CAPTION>
1996 1995
--------- --------
<S> <C> <C>
Cash flows from operating activities
Net income (loss) $ (4,121) $ 945
Adjustments to reconcile net income to net cash
provided by (used for) operations
Depreciation and amortization 4,966 4,901
Amortization of excess of cost over fair value 2,218 2,217
Amortization of deferred finance costs 233 265
Other amortization 3,086 2,744
Extraordinary charge 2,595 --
Other 124 (1)
Change in certain assets and liabilities, net of effects from acquisition
of business, affecting cash provided by (used in) operations:
Accounts receivable 9,891 7,603
Inventories (13,722) (14,789)
Prepaid marketing costs (1,637) (2,330)
Other assets (2,163) (154)
Accounts payable and accrued expenses (327) (1,000)
Income taxes payable (537) (1,621)
--------- --------
Net cash provided by (used in) operations 606 (1,220)
--------- --------
Cash flows from investing activities
Proceeds from sale of property, equipment and product line 32 236
Capital expenditures (5,501) (6,926)
--------- --------
Net cash used in investing activities (5,469) (6,690)
--------- --------
Cash flows from financing activities
Proceeds from issuance of notes payable and long-term obligations 123,528 31,183
Proceeds from sale of investment held as collateral -- 3,600
Payment of dividends (796) (800)
Payment of note and long-term obligations (118,005) (25,645)
Other 213 (336)
--------- --------
Net cash provided by financing activities 4,940 8,002
--------- --------
Effect of exchange rate changes on cash 1 1
--------- --------
Net increase in cash and cash equivalents 78 93
Cash and cash equivalents at beginning of year 142 129
--------- --------
Cash and cash equivalents at end of period $ 220 $ 222
========= ========
Cash paid during the period for
Interest $ 3,553 $ 5,940
Income taxes 47 2,379
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE> 5
EKCO GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
(1) BASIS OF PRESENTATION AND OTHER MATTERS
The consolidated condensed financial statements included herein have been
prepared by Ekco Group, Inc. (the "Company"), without audit, 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 believed,
however, that the disclosures are adequate to make the information presented not
misleading. It is suggested that these condensed financial statements be read in
conjunction with the financial statements and the notes thereto included in the
Company's latest annual report on Form 10-K. The consolidated condensed
financial statements include the accounts of the Company and its subsidiaries.
All significant intercompany accounts and transactions have been eliminated. The
condensed financial statements, in the opinion of management, reflect all
adjustments necessary to fairly state the Company's financial position and the
results of its operations. Such adjustments are of a normal recurring nature.
A large part of the Company's business is seasonal. Historically, revenues
in the last half of the calendar year have been greater than revenues in the
first half of the year. Accordingly, the results for the entire year may not
necessarily be the product of annualizing results for any interim period.
(2) ACCOUNTS RECEIVABLE, NET
<TABLE>
Accounts receivable consisted of the following:
<CAPTION>
JUNE 30, 1996 DECEMBER 31, 1995
------------- -----------------
(AMOUNTS IN THOUSANDS)
<S> <C> <C>
Accounts receivable $34,897 $44,871
Allowance for doubtful accounts (1,095) (1,048)
------- -------
$33,802 $43,823
======= =======
</TABLE>
(3) INVENTORIES
<TABLE>
The components of inventory were as follows:
<CAPTION>
JUNE 30, 1996 DECEMBER 31, 1995
------------- -----------------
(AMOUNTS IN THOUSANDS)
<S> <C> <C>
Raw materials $11,022 $11,489
Work in process 6,886 3,097
Finished goods 43,376 32,979
------- -------
$61,284 $47,565
======= =======
</TABLE>
5
<PAGE> 6
EKCO GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
(4) PROPERTY AND EQUIPMENT, NET
<TABLE>
Property and equipment consisted of the following:
<CAPTION>
JUNE 30, 1996 DECEMBER 31, 1995
------------- -----------------
(AMOUNTS IN THOUSANDS)
<S> <C> <C>
Property and equipment at cost
Land, buildings and improvements $ 23,915 $22,856
Equipment, factory and other 76,202 71,922
-------- -------
100,117 94,778
Less accumulated depreciation 43,235 38,398
-------- -------
$ 56,882 $56,380
======== =======
</TABLE>
(5) EXCESS OF COST OVER FAIR VALUE OF NET ASSETS ACQUIRED, NET
Excess of cost over fair value of net assets acquired is net of
accumulated amortization of $29,945 and $27,727 as of June 30, 1996 and
December 31, 1995, respectively.
(6) INCOME TAXES
The Company's effective tax rate as reported in its latest annual report
on Form 10-K was 50% for the year ended December 31, 1995 ("Fiscal 1995"). The
difference between the Company's effective tax rate of 52% for the six months
ended June 30, 1996 and the Fiscal 1995 rate results primarily from amortization
of excess of cost over fair value of net assets acquired, which is not
deductible for income taxes (being a higher percentage of earnings (loss) before
income taxes).
(7) SERIES B ESOP CONVERTIBLE PREFERRED STOCK
<TABLE>
Series B ESOP Convertible Preferred Stock, net, consisted of the following:
<CAPTION>
JUNE 30, 1996 DECEMBER 31, 1995
------------- -----------------
(AMOUNTS IN THOUSANDS)
<S> <C> <C>
Series B ESOP Convertible Preferred
Stock, par value $.01, redeemable at
$3.61 per share $ 5,293 $ 5,372
Unearned compensation (1,505) (1,914)
------- -------
$ 3,788 $ 3,458
======= =======
</TABLE>
6
<PAGE> 7
EKCO GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
(8) COMMON STOCK, $.01 PAR VALUE
<TABLE>
Share information regarding common stock consisted of the following:
<CAPTION>
JUNE 30, 1996 DECEMBER 31, 1995
------------- -----------------
<S> <C> <C>
Authorized shares 60,000,000 60,000,000
========== ==========
Shares issued 27,906,868 27,854,441
Shares held in treasury 9,419,777 9,440,577
---------- ----------
18,487,091 18,413,864
========== ==========
</TABLE>
(9) NET INCOME PER COMMON SHARE
<TABLE>
Primary earnings per common share are based upon the weighted average of
common stock and dilutive common stock equivalent shares 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:
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
--------------------------- -------------------------
JUNE 30, JULY 2, JUNE 30, JULY 2,
-------- ------- -------- -------
1996 1995 1996 1995
-------- ------- -------- -------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C>
Weighted average shares of common
stock outstanding during the period 18,460 18,343 18,435 18,273
Series B ESOP Convertible
Preferred Stock anti- 1,533 anti- 1,551
dilutive dilutive
Weighted average common equivalent
shares due to stock options anti- anti-
dilutive 432 dilutive 442
------ ------ ------ ------
18,460 20,308 18,435 20,266
====== ====== ====== ======
</TABLE>
(10) CONTINGENCIES
LEGAL PROCEEDINGS
The Company is a party to several pending legal proceedings and claims,
including the matters described below. Although the outcome of such proceedings
and claims cannot be determined with certainty, the Company's management 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.
In April 1996, the U.S. District Court for the Northern District of Ohio ruled
that certain insulated bakeware products manufactured by the Company infringed a
patent held by a third-party plaintiff. The Company ceased manufacturing such
products in December 1995. In July 1996, monetary damages were assessed by the
Court. The Company is reviewing the damage assessment and will vigorously pursue
an appeal as it deems appropriate. The Company and its counsel believe that the
Company has meritorious grounds for appeal. The Company's management believes
that the final outcome will not have a material adverse effect upon the
Company's financial position, results of operations or liquidity.
7
<PAGE> 8
EKCO GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
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 in
Massillon and Hamilton, Ohio, Easthampton, Massachusetts, Lititz, Pennsylvania,
Chicago, Illinois and at the previously owned facility in Hudson, New Hampshire,
hazardous substances and oil have been detected and that additional
investigation will be, and remedial action will or may be, required at such
facilities. 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 owned or operated by the Company or future facilities may not result
in additional environmental claims being asserted against the Company or
additional investigations or remedial actions being required.
In connection with the acquisition of Kellogg Brush Manufacturing Co. and
subsidiaries ("Kellogg") by the Company in 1993, the Company engaged
environmental engineering consultants ("Consultants") to review potential
environmental liabilities at all of Kellogg's properties. Such investigation and
testing resulted in the identification of likely environmental remedial actions,
operation, maintenance and ground water monitoring and the estimated costs
thereof. Based upon such engineering studies, management originally estimated
the total remediation and ongoing ground water monitoring costs to be
approximately $6.0 million, including the effects of inflation and, accordingly,
at that time, recorded a liability of approximately $3.8 million, representing
the undiscounted costs of remediation and the net present value of future costs
discounted at 6%. Based upon the most recent cost estimates provided by the
Consultants, the Company believes the total remediation costs will be
approximately $2.0 million and the expense for the ongoing operation,
maintenance and ground water monitoring will be $50,000 for Fiscal 1996 and
$25,000 for each of the 30 years thereafter. As of June 30, 1996, the Company
has recorded a liability of approximately $3.4 million. The Company expects to
pay approximately $325,000 of the remediation costs in the current year ("Fiscal
1996") with the balance being paid out in fiscal years 1997 and 1998. During the
First Half of Fiscal 1996, the Company paid approximately $120,000 of such
costs. The estimates may subsequently change should additional sites be
identified or further remediation measures be required or undertaken or the
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.
(11) EXTRAORDINARY CHARGE
On March 25, 1996, the Company sold $125.0 million of its 9.25% Senior
Notes due 2006 at a price of 99.291% of face value in a private offering to
institutional investors. The Company used the net proceeds of the Senior Note
offering to (i) repurchase its outstanding 12.70% Notes due 1998 and 7.0%
Convertible Subordinated Note due 2002 and (ii) to repay substantially all
amounts outstanding under its revolving credit facility. Concurrently with
closing the sale of the 9.25% Senior Notes, the Company entered into an
amendment to its revolving credit facility,
8
<PAGE> 9
EKCO GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
<TABLE>
which amendment consolidated the outstanding debt and borrowing capacity of the
Company and its wholly-owned subsidiaries, Ekco Housewares, Inc. and Frem
Corporation, and revised certain financial covenants (as so amended, the
"Revolving Credit Facility"). Borrowings under the Revolving Credit Facility
bear interest at the bank's prime rate, or at LIBOR plus 1.25% or 1.5%,
depending on the Company's borrowing strategy and the ratio of total debt to
cash flow. The Revolving Credit Facility provides for a commitment fee of
three-eighths of one percent on the unused portion of the commitment amount and
a $60,000 annual agency fee. Borrowings under the Revolving Credit Facility
mature in December 1998. The Senior Notes, as well as the Revolving Credit
Facility, contain certain financial covenants that may restrict the sale of
assets, the incurrence of additional indebtedness and certain investments and
acquisitions by the Company. The early extinguishment of the 12.70% Notes and 7%
Convertible Subordinated Note resulted in an extraordinary charge of $2.6
million consisting of the following:
<CAPTION>
(Amounts in thousands)
<S> <C>
Premium on 12.70% Notes, due 1998 $ 6,511
Discount on prepayment of 7% Convertible
Subordinated Note, due 2002 (3,218)
Write-off of related unamortized financing costs 2,054
-------
Extraordinary charge before income tax benefit 5,347
Income tax benefit 2,752
-------
Net extraordinary charge $ 2,595
=======
</TABLE>
9
<PAGE> 10
EKCO GROUP, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
The following discussion and analysis of the consolidated results of
operations for the thirteen week periods ended June 30, 1996 (the "Second
Quarter of 1996") and July 2, 1995 (the "Second Quarter of 1995") and for the
twenty six week periods ended June 30, 1996 (the "First Half of 1996") and July
2, 1995 (the "First Half of 1995") and the financial condition at June 30, 1996
should be read in conjunction with the Company's Consolidated Condensed
Financial Statements and Notes thereto. Because of the seasonality of the
Company's revenues, which have historically been concentrated in the second half
of its fiscal year, the results of operations for any interim period and the
balance sheet as of the end of any interim period are not indicative of either a
full year's operations or the financial condition of the Company at the end of
any fiscal year.
NET REVENUES
Net revenues for the Second Quarter and First Half of 1996 decreased
approximately $5.8 million (9.4%) and $7.6 million (6.3%), respectively, from
the comparable prior year periods. The decline in net revenues was primarily due
to lower net revenues generated from sales of the Company's plastic and kitchen
tool and gadget products, partially offset by $1.6 million (Second Quarter of
1996) and $3.7 million (Second Half of 1996), respectively, in net revenues from
the Company's new line of VIA products. The revenue decline reflects the
weakness in general merchandise sales that began toward the end of 1995 and
which carried over into 1996. Last year's below average consumer spending
created higher than anticipated levels of inventory for retailers who lowered
their volume of re-orders in the First Half of 1996. In addition, sales of the
Company's plastic products were adversely affected by significant price
competition and delays in seasonal shipping.
GROSS PROFIT
The Company's gross profit margin for the second quarter periods remained
constant at 30%, while for the six month periods there was a decline from 30% in
the prior year to 29% for the First Half of 1996. This decline in gross margin
was primarily due to continuation of increased promotional discounting, which
was initiated in the fourth quarter of Fiscal 1995 to help stimulate consumer
demand, and unabsorbed manufacturing costs due to a shortfall in planned
volumes.
SELLING, GENERAL AND ADMINISTRATIVE
Selling, general and administrative expenses for the First Half of 1996
increased approximately $1.6 million from the comparable prior year period. Of
this increase, $1.5 million occurred in the Second Quarter of 1996. The primary
factors contributing to the increase were new product development and
introduction costs, principally for the Company's new insulated bakeware
products and Roach Magnet[TradeMark] and the growth of VIA and the Company's
subsidiary in the United Kingdom. Additionally, the prior year period
benefitted from the collection of receivables which had previously been written
off.
NET INTEREST EXPENSE
Net interest expense decreased $258,000 and $680,000 from the Second
Quarter of Fiscal 1995 level of $3.4 million and First Half of 1995 level of
$6.8 million, respectively. The decline in net interest expense was primarily
due to lower average borrowings.
10
<PAGE> 11
EKCO GROUP, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION (CONTINUED)
EXTRAORDINARY CHARGE
The extraordinary charge was due to the early extinguishment of the 12.7%
Notes and 7% Convertible Subordinated Note. See Note 11 of Notes to Consolidated
Condensed Financial Statements.
LIQUIDITY AND CAPITAL RESOURCES
During the First Half of Fiscal 1996, the Company generated $606,000 in
cash from operations. This amount, together with net proceeds of $2.5 million
from the refinancing of debt, seasonal borrowings of $3.0 million and net
issuances of common stock of $200,000, were used for capital expenditures of
approximately $5.5 million and dividend payments of approximately $800,000.
On March 25, 1996, the Company sold $125.0 million of its 9.25% Senior
Notes due 2006 ("Senior Notes") at a price of 99.291% of face value in a private
offering to institutional investors. The Company used net proceeds of the Senior
Note offering to (i) repurchase its outstanding 12.7% Notes due 1998 and 7.0%
Convertible Subordinated Note due 2002 and (ii) to repay substantially all
amounts outstanding under its revolving credit facility. Concurrently with
closing the sale of the 9.25% Senior Notes, the Company entered into an
amendment to its revolving credit facility, which amendment consolidated the
outstanding debt and borrowing capacity of the Company and its wholly-owned
subsidiaries, Ekco Housewares, Inc. and Frem Corporation, and revised certain
financial covenants (as so amended, the "Revolving Credit Facility"). Borrowings
under the Revolving Credit Facility bear interest at the bank's prime rate, or
at LIBOR plus 1.25% or 1.5%, depending on the Company's borrowing strategy and
the ratio of total debt to cash flow. The Revolving Credit Facility provides for
a commitment fee of three-eighths of one percent on the unused portion of the
commitment amount and a $60,000 annual agency fee. Borrowings under the
Revolving Credit Facility mature in December 1998. The Senior Notes, as well as
the Revolving Credit Facility, contain certain financial covenants that will
restrict the sale of assets, the incurrence of additional indebtedness and
certain investments and acquisitions by the Company.
The Company believes that the net proceeds from the Senior Note offering,
together with borrowing capacity under the Revolving Credit Facility will
provide sufficient borrowing capacity to finance its ongoing operations for the
foreseeable future. The Company may, however, require additional funds to
finance any future acquisitions.
The Company's properties held for sale include a former manufacturing
facility located in Chicago, Illinois and a warehouse located in Lititz,
Pennsylvania. The Company is actively pursuing the sale or lease of these
properties, and has leased the Lititz warehouse facility. The Company plans to
sell these properties within the next two years. The aggregate carrying values
of such properties, $2.8 million at June 30, 1996, are periodically reviewed and
are stated at the lower of cost or market.
The Company has provided approximately $3.4 million for environmental
remediation and ongoing operation, maintenance and ground water monitoring costs
associated with facilities owned or occupied by the Company's cleaning products
business. 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.
11
<PAGE> 12
EKCO GROUP, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION (CONTINUED)
BUSINESS OUTLOOK
This Quarterly Report, including "Management's Discussion and Analysis of
Results of Operations and Financial Condition," contains forward-looking
statements within the meaning of the "safe-harbor" provisions of the Private
Securities Litigation Reform Act of 1995. Such statements are based on
management's current expectations and are subject to a number of factors and
uncertainties which could cause actual results to differ materially from those
described in the forward-looking statements. Such factors and uncertainties
include, but are not limited to: the timely introduction of new products, the
impact of competitive products and pricing, certain assumptions related to
consumer purchasing patterns, the impact of the level of the Company's
indebtedness; restrictive covenants contained in the Company's various debt
documents; the seasonal nature of the Company's business; and the impact of
federal, state and local environmental requirements (including the impact of
current or future environmental claims against the Company). As a result, the
Company's operating results may fluctuate, especially when measured on a
quarterly basis.
12
<PAGE> 13
EKCO GROUP, INC. AND SUBSIDIARIES
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
The Company is a party to several pending legal proceedings and claims,
including the matters described below. Although the outcome of such proceedings
and claims cannot be determined with certainty, the Company's management 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.
In April 1996, the U.S. District Court for the Northern District of Ohio ruled
that certain insulated bakeware products manufactured by the Company infringed
a patent held by a third-party plaintiff. The Company ceased manufacturing such
products in December 1995. In July 1996, monetary damages were assessed by the
Court. The Company is reviewing the damage assessment and will vigorously pursue
an appeal as it deems appropriate. The Company and its counsel believe that the
Company has meritorious grounds for appeal. The Company's management believes
that the final outcome will not have a material adverse effect upon the
Company's financial position, results of operations or liquidity.
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 at its facilities in
Massillon (more fully described below) and Hamilton, Ohio, Easthampton,
Massachusetts (more fully described in Note 10 of Notes to Consolidated
Condensed Financial Statements hereinabove), Lititz, Pennsylvania, Chicago,
Illinois and at its previously owned facility in Hudson, New Hampshire,
hazardous substances and oil have been detected and that additional
investigation will be, and remedial action will or may be, required at such
facilities. 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 owned or operated by the Company or future facilities 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, Inc.
("Housewares") in 1987, Housewares' Massillon, Ohio steel bakeware manufacturing
facility was the subject of administrative proceedings before the United States
Environmental Protection Agency by issuance of an administrative complaint
alleging violations of the Resource Conservation and Recovery Act 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
13
<PAGE> 14
EKCO GROUP, INC. AND SUBSIDIARIES
PART II
OTHER INFORMATION (CONTINUED)
ENVIRONMENTAL REGULATION AND CLAIMS (CONTINUED)
to the wastewater lagoon exceed the lesser of 25% of the 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, results of operations or liquidity.
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 against Housewares in the amount of $4.6 million in the
lawsuit. AHP filed a notice of appeal on behalf of Housewares. In August 1995,
the Court of Appeals affirmed in part and reversed in part the penalty imposed
on Housewares and remanded the redetermination of civil penalties for certain
periods of time. The penalty affirmed by the Court of Appeals amounted to
$2,858,000, and, pursuant to the Indemnity Documents, AHP paid that amount, plus
applicable interest, on Housewares' behalf. With respect to the penalty reversed
and remanded by the Court of Appeals, the United States has agreed in principle
to a stipulated judgment that would resolve the remaining claims in the case for
$400,000. While such stipulated judgment has not yet been finalized and entered
by the Court, AHP, by letter dated May 6, 1996, notified Housewares that if such
judgment is entered AHP intends to pay that amount on Housewares' behalf and
will not seek reimbursement from the Company of the amounts AHP has paid or will
pay on Housewares' behalf in this litigation.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
<TABLE>
At the Annual Meeting of Stockholders held on May 21, 1996 in Boston,
Massachusetts, each of the persons nominated for election as a director of the
Company were elected by the votes shown below. Each director will hold office
until the next annual meeting of stockholders and until his successor is duly
chosen and qualified or until his earlier resignation or removal.
<CAPTION>
NO. OF NO. OF
SHARES VOTED SHARES
FOR WITHHELD
--------------------------------------------------------------------------------------
<S> <C> <C>
T. Michael Long 14,747,808 644,653
Stuart B. Ross 14,898,258 494,203
Malcolm L. Sherman 14,744,635 647,826
Bill W. Sorenson 14,895,858 496,603
Herbert M. Stein 14,681,955 710,506
Robert Stein 14,707,591 684,870
Jeffrey A. Weinstein 14,722,513 669,948
</TABLE>
14
<PAGE> 15
EKCO GROUP, INC. AND SUBSIDIARIES
PART II
OTHER INFORMATION (CONTINUED)
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K:
Exhibits:
10.9(b) Amendment dated as of May 17, 1996 to Amended and Restated
Employment Agreement with Donato A. DeNovellis.
10.12(b) First Amendment dated as of June 20, 1996 to 1995 Restatement
of the Incentive Compensation Plan for Executive Employees of
Ekco Group, Inc. and Subsidiaries.
10.15 Employment Agreement dated as of February 6, 1996 with John T.
Haran.
27 Financial Data Schedule.
15
<PAGE> 16
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
EKCO GROUP, INC.
-------------------------------
(Registrant)
Date: August 12, 1996 By: /s/ ROBERT STEIN
------------------------- ---------------------------
Robert Stein
President and
Chief Executive Officer
By: /s/ DONATO A. DENOVELLIS
----------------------------
Donato A. DeNovellis
Executive Vice President,
Finance and
Administration, and
Chief Financial Officer
16
<PAGE> 17
INDEX TO EXHIBITS FILED WITH FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1996
EXHIBIT NO. DESCRIPTION
----------- -----------
10.9(b) Amendment dated as of May 17, 1996 to Amended and
Restated Employment Agreement with Donato A. DeNovellis.
10.12(b) First Amendment dated as of June 20, 1996 to 1995
Restatement of the Incentive Compensation Plan for
Executive Employees of Ekco Group, Inc. and Subsidiaries.
10.15 Employment Agreement dated as of February 6, 1996 with
John T. Haran.
27 Financial Data Schedule.
17
<PAGE> 1
EXHIBIT 10.9(b)
---------------
AMENDMENT AGREEMENT
AMENDMENT AGREEMENT made as of the 17th day of May 1996 by and between
Ekco Group, Inc. (hereinafter "Group") and Donato A. DeNovellis (hereinafter
"Executive").
WHEREAS, a certain employment agreement was entered into between Group
and Executive as of May 25, 1995 (the "Agreement"); and
WHEREAS, the Executive and Group desire to amend the Agreement as
hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants set forth
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:
1. The Agreement is hereby amended as follows:
1.1 Deleting Section 5.5.3.1 in its entirety and
inserting in its the following:
"5.5.3.1 Amounts at the rate of the Adjusted Cash Salary in effect at
the date of such termination, payable in the manner specified
in Section 3.1.1, for a period of thirty-six (36) months
following the date of such termination at the rate of
one-twelfth of such Adjusted Cash Salary per month, LESS the
amount of any disability insurance proceeds actually paid to
or for the benefit of Executive (or his Estate) with respect
to such thirty-six (36) months following the date of
termination under any disability policy the premiums for which
have been paid by Group or any Affiliate. During such
thirty-six (36) months following termination of this Agreement
as a result of Executive's permanent and total disability,
Group shall maintain at Group's sole expense the life
insurance policies referred to in the second sentence of
Section 3.1.3. and in Section 5.4.1.3 and, in the event of
Executive's death during the thirty-six (36) months following
such termination, shall pay the death benefit provided for in
Section 5.4.1.3 notwithstanding the prior termination of this
Agreement as a result of Executive's total and permanent
disability, in addition to the life insurance benefits payable
to the beneficiaries of the policies referred to in Section
3.1.3 which shall be payable in the event of Executive's death
during such period of thirty-six (36) months;"
<PAGE> 2
2. The Agreement as amended hereby is hereinafter referred
to as the "Employment Agreement."
3. This Amendment Agreement constitutes the entire agreement
between the parties with respect to the subject matter hereof.
4. Except as expressly provided for herein, the Employment
Agreement is hereby ratified and confirmed and shall continue in full force and
effect.
5. This Amendment Agreement may be executed in any number of
counterparts, and each such counterpart hereof shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
agreement.
IN WITNESS WHEREOF, the parties have caused this Amendment Agreement to
be executed and delivered by its duly authorized officer and its corporate seal
to be hereunto affixed and Executive has hereunto set his hand and seal as of
the day and year first above written in duplicate originals.
EKCO GROUP, INC.
[Seal]
By:/S/ROBERT STEIN
-------------------------------
Title: President and CEO
----------------------------
/S/DONATO A. DeNOVELLIS
----------------------------------
EXECUTIVE
<PAGE> 1
EXHIBIT 10.12(b)
----------------
EKCO GROUP, INC.
FIRST AMENDMENT TO 1995 RESTATEMENT OF THE
INCENTIVE COMPENSATION PLAN FOR EXECUTIVE EMPLOYEES
OF EKCO GROUP, INC. AND SUBSIDIARIES
The 1995 Restatement of the Incentive Compensation Plan for Executive
Employees of Ekco Group, Inc. and Subsidiaries (the "Incentive Compensation
Plan") is hereby amended as follows:
1. Section 6.4 is deleted in its entirety and the following is
inserting in its place:
"6.4 For 1995 and for 1997 and subsequent years the Committee shall
decide and for 1996 the Executive may decide (provided he
files a written irrevocable election with the Committee at
least six months before the start of 1996) whether any
increases over the Executive's 1994 Base Compensation level
will be paid under any of the payment choices in Section 6.6
or a combination of two or more of them. The Committee
decisions with respect to the manner in which 1995 Base
Compensation increases will be paid is scheduled in the
Appendix."
2. Section 6.5 is deleted in its entirety and the following is
inserting in its place:
"6.5 For 1995 and 1996 the Executive may decide (provided he files
a written irrevocable election with the Committee before the
start of the year to which his Bonus relates) and for
subsequent years the Committee will decide whether any
percentage up to one hundred percent (100%) of his Bonus will
be paid under any of the payment choices in Section 6.6 or a
combination of two or more of them."
3. Except as expressly provided for herein, the Incentive Compensation
Plan is hereby ratified and confirmed and shall continue in full force and
effect.
4. This First Amendment may be executed in any number of counterparts,
and each such counterpart hereof shall be deemed to
<PAGE> 2
First Amendment to
Incentive Compensation Plan
(continued)
be an original instrument, but all such counterparts together shall constitute
but one agreement.
Dated as of June 20, 1996.
Compensation Committee
of the Board of Directors
/S/T. MICHAEL LONG
-----------------------------------
T. Michael Long
/S/STUART B. ROSS
-----------------------------------
Stuart B. Ross
/S/BILL W. SORENSON
-----------------------------------
Bill W. Sorenson
-2-
<PAGE> 1
EXHIBIT 10.15
-------------
EMPLOYMENT AGREEMENT
BETWEEN
EKCO GROUP, INC.
AND
JOHN T. HARAN
AS OF
February 6, 1996
SECTION PAGE
- ------- ----
1. Employment 1
2. Principal Location 1
3. Compensation 2
4. Reimbursement of Expenses 3
5. Term and Termination 3
6. Services Furnished 10
7. Additional Insurance at Group's Option 10
8. Gross-Up Payments 11
9. Confidentiality and Non-Competition 11
10. Definitions 14
11. Arbitration 19
12. General 20
<PAGE> 2
EXHIBIT
- -------
Example of Calculation of Severance Payment A
EMPLOYMENT AGREEMENT
AGREEMENT made as of the 6th day of February, 1996, (the "Effective
Date") by and between Ekco Group, Inc., a Delaware corporation ("Group") with
its principal place of business in Nashua, New Hampshire and John
Haran("Executive"), of 170 West Old Mill Road, Lake Forest, Illinois 60045.
WHEREAS, Executive desires to be employed by Group and Group desires to
employ Executive all on the terms and conditions recited herein;
NOW, THEREFORE, in consideration of the mutual promises and agreements
herein contained, the parties covenant and agree as follows:
1. EMPLOYMENT. Group hereby employs Executive and Executive hereby accepts
employment as an executive employee of Group to perform such executive
and managerial services as may be assigned to him by or under the
authority of the Board of Directors (such term, and all other
capitalized terms not otherwise defined in this Agreement shall have
the meaning set forth in Section 10 of this Agreement), consistent with
such status as an executive employee. Executive agrees to use his best
efforts, skills and abilities faithfully to promote the interests of
Group and to perform such services as may be required of him by Group
from time to time consistent with his status, to the reasonable
satisfaction of the Board of Directors. Without limiting the generality
of the foregoing, Executive agrees to serve as Vice President and
Treasurer, of Group (if and so long as he is elected to that office by
the Board of Directors) and to serve without additional compensation as
a director, executive officer or executive employee of such Affiliates
as Group may from time to time reasonably request. Executive agrees to
work exclusively for Group and such Affiliates as his full-time
employment during the term of
2
<PAGE> 3
this Agreement, except as Group and Executive may otherwise agree in
writing from time to time.
2. PRINCIPAL LOCATION. Executive presently performs the duties of his
office generally in Nashua, New Hampshire and shall be obligated to
take such trips outside of the Nashua, New Hampshire or metropolitan
Boston, Massachusetts area as shall be reasonably necessary in
connection with his duties, and Group will pay all reasonable costs of
travel and living expenses incurred in connection therewith. Executive
recognizes that his duties hereunder may require significant travel.
Executive, subject to his rights under Section 5.3.4, agrees to
relocate to any other location in the United States of America at which
Group or an Affiliate has offices or operations, provided that
Executive's job at such new location involves compensation no less than
his existing compensation and comparable duties. In the event of any
such relocation, Group shall pay Executive all reasonable expenses
incurred by Executive in relocating to such new area.
3. Compensation.
------------
3.1 Except as otherwise provided in this Agreement, for his services and
agreements hereunder Executive shall receive from Group the following
compensation:
3.1.1 Salary at the annual rate of One Hundred and Forty Thousand
Dollars ($140,000) (the "Base Salary"), payable in equal
installments in accordance with Group's pay policy and in any
event not less frequently than monthly. The Base Salary shall
be subject to increase from time to time as determined by the
Board of Directors or the Compensation Committee in its sole
discretion pursuant to a review of Executive's performance by
the Board of Directors or the Compensation Committee, which
review shall be conducted at such time as the Board of
Directors or the Compensation Committee shall determine, but
in any event at least once during each twelve (12) months of
the term of this Agreement. The Base Salary as from time to
time increased is referred to herein as the "Adjusted Cash
Salary."
3
<PAGE> 4
3.1.2 Such other monetary compensation by way of bonus or otherwise,
if any, as may be determined from time to time by the Board of
Directors or the Compensation Committee in its sole
discretion;
3.1.3 Such fringe benefits (including, without limitation, vacation
time, group life, long term and short term disability,
medical, dental and other insurance, retirement, including,
pension, profit-sharing and similar plans) as Group may
provide from time to time for its executive employees, whether
or not the category of such benefits is addressed in this
Agreement, it being understood that Executive shall be
entitled to the greater of each benefit addressed in this
Agreement and that provided by Group for its executive
employees generally. Group shall in any event, whether or not
such coverage is provided for other executive employees,
provide Executive group life or other life insurance at its
expense with a death benefit equal to at least four (4) times
Executive's Adjusted Salary, in addition to any other life
insurance payable to Executive or his beneficiaries under
Section 5.4.1.3 below or any life insurance for which
Executive pays premiums; and
3.1.4 Such other compensation pursuant to such executive bonus
plans, restricted stock purchase plans, stock option plans or
other stock plans, available to executive employees of Group
from time to time, as the Board of Directors or the
Compensation Committee may in its sole discretion determine.
4. REIMBURSEMENT OF EXPENSES. Group shall reimburse Executive for travel,
entertainment and other business expenses reasonably incurred by him
in connection with the business of Group and its Affiliates to the
extent and in a manner consistent with then Group policy.
4
<PAGE> 5
5. Term and Termination.
--------------------
5.1. TERM. The term of this Agreement and Executive's employment
hereunder shall commence on the Effective Date and continue
until terminated as hereinafter set forth. For the purposes
of this Agreement, the date of termination shall be the
effective date of termination of Executive, rather than the
date of notice thereof.
5.2. Termination by Executive.
------------------------
5.2.1 Executive's employment may be terminated at any time by
Executive by written notice of at least three (3) months to
Group, which time period may be waived, in whole or in part,
by Group in its discretion in which event Executive's
employment shall end on such earlier date as agreed by Group
and Executive.
5.2.2 Except as provided in Section 5.2.3, if Executive's employment
is terminated pursuant to Section 5.2.1, Executive shall not
be entitled as of the date of termination to any further
compensation under this Agreement of any kind or nature,
except for Accrued and Unpaid Salary and Expenses.
5.2.3 However, if such notice is given after six (6) months after
but within twenty four (24) months after a Change of Control
(a "Change of Control Notice"), unless such Change of Control
shall have been approved by a resolution adopted by the Board
of Directors with at least two-thirds (2/3) of the then
serving Group directors who are Group directors as of the date
hereof voting in favor, then upon such termination by
Executive pursuant to Section 5.2.1, Group shall provide and
Executive (or his Estate) shall be entitled to receive:
5.2.3.1 Within thirty (30) days of the date of such termination a two
(2) year Lump Sum Payment Amount;
5.2.3.2 A Gross-Up Payment as set forth in Section 8 of this
Agreement;
5
<PAGE> 6
5.2.3.3 Continuation of all fringe benefits referred to in Section
3.1.3, including, but not limited to, Medical, Dental and Life
Insurance Coverage Continuation for a period of two (2) years
from the date of termination;
5.2.3.4 Accrued and Unpaid Salary and Expenses;
5.2.3.5 Outplacement Benefits; and
5.2.3.6 In the event of termination as provided in this Section 5.2.3,
Executive shall not be entitled to payments under both this
Section 5.2.3 and Section 5.3.4.2. Any compensation payable
under this Section 5.2.3 shall be paid notwithstanding
Executive's total and permanent disability or death occurring
after termination of his employment hereunder. In the event
Executive dies or becomes totally and permanently disabled
after the date of any such notice but prior to the date of
termination of his employment under this Section 5.2.3, the
provisions of this Section 5.2.3 and not the provisions of
Section 5.4 or 5.5 shall apply, provided that in the event of
Executive's total and permanent disability during such time,
Executive shall also be entitled to each benefit that Group
then provides to its executive employees upon and during the
continuance of total and permanent disability to the extent
such benefit exceeds those specified in this Section 5.2.3.
5.3. Termination by Group; Change of Control; and Constructive Termination.
---------------------------------------------------------------------
5.3.1 Executive's employment may be terminated at any time by Group,
with or without Good Cause, by written notice to Executive,
effective immediately unless otherwise stated in such notice.
5.3.2 TERMINATION BY GROUP WITH GOOD CAUSE. In the event Group shall
terminate Executive's employment for Good Cause, then
Executive shall not be entitled as of the date of termination
to any further compensation under this Agreement of any kind
or nature, except for Accrued and Unpaid Salary and Expenses.
6
<PAGE> 7
5.3.3 Termination by Group Without Good Cause Prior to a Change of
------------------------------------------------------------
Control.
-------
5.3.3.1 In the event Executive's employment hereunder is terminated by
Group without Good Cause prior to a Change of Control, then
subject to Section 5.3.3.2 Group shall provide and Executive
(or his Estate) shall be entitled to the following:
5.3.3.1.1 A one half (1/2) year Lump Sum Payment Amount if the
termination occurs on or prior to August 7, 1996 and if the
date of termination occurs thereafter a one (1) year Lump Sum
Payment Amount, each payable within thirty (30) days of the
date of termination;
5.3.3.1.2 On and after August 7, 1996 and thereafter during the term of
this Agreement Executive shall, immediately upon termination,
pursuant to this Section 5.3.3 have the unconditional,
unencumbered and free right, title and interest in all shares
of stock of Group which were granted, sold or optioned
(subject, if Executive elects to exercise unexercised rights,
to his obligation to pay the option exercise price or other
purchase price to the extent theretofore not paid) to
Executive by Group at any time prior to the date of
termination as if all restrictions imposed by Group had lapsed
and all events necessary to vest in Executive such rights,
including the lapsing of time, had occurred, and Group shall
take all such actions as may be necessary to release any then
existing restrictions imposed by Group and waive any rights to
repurchase such shares;
5.3.3.1.3 Medical, Dental and Life Insurance Coverage Continuation for a
period of six (6) months from the date of termination if the
date of termination is on or before August 7, 1996 and
thereafter one (1) year from the date of termination;
5.3.3.1.4 Accrued and Unpaid Salary and Expenses;
5.3.3.1.5 On and after August 7, 1996 and thereafter during the term of
this Agreement, Outplacement Benefits; and
7
<PAGE> 8
5.3.3.1.6 Gross-Up Payment
5.3.3.2 Any compensation payable under this Section 5.3.3 shall be
paid notwithstanding Executive's total and permanent
disability or death subsequent to Group's notice of
termination. In the case of termination of his employment
under this Section 5.3.3, Executive shall not be entitled as
of the date of termination to any other compensation under
this Agreement, except as provided in this Section 5.3.3,
provided that in the event of Executive's total and permanent
disability at such time, Executive shall also be entitled to
all of the benefits Group then provides to its executive
employees upon and during the continuance of total and
permanent disability.
5.3.4 CHANGE OF CONTROL; CONSTRUCTIVE TERMINATION; SUBSEQUENT
TERMINATION BY GROUP WITHOUT GOOD CAUSE.
5.3.4.1 Immediately upon a Change of Control while Executive is
employed hereunder, and without regard to whether or not
Executive's employment is terminated, whether a Constructive
Termination occurs at such time or thereafter or the manner of
any subsequent termination of Executive's employment,
Executive shall immediately have the unconditional,
unencumbered and free right, title and interest in all shares
of stock of Group which were granted, sold or optioned
(subject, if Executive elects to exercise unexercised rights,
to his obligation to pay the option exercise price or other
purchase price to the extent theretofore not paid) to
Executive by Group at any time prior to the Change of Control
as if all restrictions imposed by Group had lapsed and all
events necessary to vest in Executive such rights, including
the lapsing of time, had occurred, and Group shall take all
such actions as may be necessary to release any then existing
restrictions imposed by Group and waive any rights to
repurchase such shares.
5.3.4.2 If following a Change of Control there shall be either an
event of Constructive Termination or termination by Group of
Executive's employment without Good Cause,
8
<PAGE> 9
then Group shall provide and Executive (or his Estate) shall
be entitled to the following:
5.3.4.2.1 Within ten (10) days of such event a two (2) year Lump-Sum
Payment Amount. For the purposes of this Section 5.3.4, the
time when a Constructive Termination occurs shall be the day
any event occurs which is included in the definition of
Constructive Termination;
5.3.4.2.2 Executive shall immediately upon termination pursuant to this
Section 5.3.4 have the unconditional, unencumbered and free
right, title and interest in all shares of stock of Group
which were granted, sold or optioned (subject, if Executive
elects to exercise unexercised rights, to his obligation to
pay the option exercise price or other purchase price to the
extent theretofore not paid) to Executive by Group at any time
prior to the date of termination as if all restrictions
imposed by Group had lapsed and all events necessary to vest
in Executive such rights, including the lapsing of time, had
occurred, and Group shall take all such actions as may be
necessary to release any then existing restrictions imposed by
Group and waive any rights to repurchase such shares;
5.3.4.2.3 Medical, Dental and Life Insurance Coverage Continuation for a
period of two (2) years from the date of termination;
5.3.4.2.4 Accrued and Unpaid Salary and Expenses;
5.3.4.2.5 Outplacement Benefits; and
5.3.4.2.6 Gross-Up Payment.
5.4. Termination upon Death.
----------------------
5.4.1 This Agreement, except for the provisions of Sections 8, 9, 11
and 12, shall terminate upon the death of Executive, provided
that Executive's Estate shall have the right to receive, and
Group shall be obligated to pay or provide to Executive's
Estate the following:
9
<PAGE> 10
5.4.1.1 Executive's Estate shall immediately upon such termination
have the unconditional, unencumbered and free right, title and
interest in all shares of stock of Group which were granted,
sold or optioned (subject, if Executive's Estate elects to
exercise unexercised rights, to the obligation to pay the
option exercise price or other purchase price to the extent
theretofore not paid) to Executive by Group at any time prior
to his death as if all restrictions imposed by Group had
lapsed and all events necessary to vest in Executive such
rights, including the lapsing of time, had occurred, and Group
shall take all such actions as may be necessary to release any
then existing restrictions imposed by Group and waive any
rights to repurchase such shares;
5.4.1.2 All of the benefits Group provides to its executive employees
as provided in Section 3.1.3 to the extent such benefits are
greater than those specified in this Agreement;
5.4.1.3 A lump-sum payment equal to the Adjusted Salary in effect at
the date of death payable no later than sixty (60) days after
the date of death. To secure such payment, Group may in its
discretion maintain life insurance on Executive's life payable
to his Estate or other beneficiary, which life insurance
coverage shall be in addition to the amount provided for
pursuant to the provisions of Section 3.1.3 above (or any life
insurance for which Executive pays premiums), and to the
extent benefits are paid pursuant to such insurance coverage
maintained by Group under this Section 5.4.1.3, Group's
commitment under this Section 5.4.1.3 shall be satisfied; and
5.4.1.4 Accrued and Unpaid Salary and Expenses.
5.5. Termination upon Disability.
---------------------------
5.5.1 This Agreement shall terminate if, by virtue of total and
permanent disability, Executive is unable to perform his
duties hereunder, provided that Executive's (or his legal
representative's) right to receive, and
10
<PAGE> 11
Group's obligations to pay, amounts as a result of such
termination shall survive any such termination.
5.5.2 The determination that, by virtue of total and permanent
disability, Executive is unable to perform his duties
hereunder shall be made by a physician chosen by Group and
reasonably satisfactory to Executive (or his legal
representative). The cost of such examination shall be borne
by Group. Without limiting the generality of the foregoing,
unless otherwise agreed, Executive shall be conclusively
presumed to be totally and permanently disabled hereunder if
for reasons involving mental or physical illness or physical
injury he fails to perform such duties for a period of one
hundred and eighty (180) consecutive calendar days or for any
periods aggregating one hundred and eighty (180) days or more
in any twelve (12) month period. For purposes of this Section
5.5, the date of termination in the event of such total and
permanent disability shall be the earlier of the date of such
physician's examination pursuant to which such determination
is made or the first business day after which such 180-day
period has expired.
5.5.3 In the event of such a termination as a result of Executive's
total and permanent disability, all compensation hereunder
shall terminate, Executive shall immediately upon such
termination have the unconditional, unencumbered and free
right, title and interest in all shares of stock of Group
which were granted, sold or optioned (subject, if Executive or
his Estate elects to exercise unexercised rights, to his
obligation to pay the option exercise price or other purchase
price to the extent theretofore not paid) to Executive by
Group at any time prior to the effective date of termination
as if all restrictions had lapsed and all events necessary to
vest in Executive such rights, including the lapsing of time,
had occurred, and Executive shall be entitled to and Group
shall pay to Executive the following:
11
<PAGE> 12
5.5.3.1 Amounts at the rate of the Adjusted Cash Salary in effect at
the date of such termination, payable in the manner specified
in Section 3.1.1, for a period of twelve (12) months following
the date of such termination at the rate of one-twelfth of
such Adjusted Cash Salary per month, LESS the amount of any
disability insurance proceeds actually paid to or for the
benefit of Executive (or his Estate) with respect to such
twelve (12) months following the date of termination under any
disability policy the premiums for which have been paid by
Group or any Affiliate. During such twelve (12) months
following termination of this Agreement as a result of
Executive's permanent and total disability, Group shall
maintain at Group's sole expense the life insurance policies
referred to in the second sentence of Section 3.1.3. and in
Section 5.4.1.3 if then in force and, in the event of
Executive's death during the twelve (12) months following such
termination, shall pay the death benefit provided for in
Section 5.4.1.3 notwithstanding the prior termination of this
Agreement as a result of Executive's total and permanent
disability, in addition to the life insurance benefits payable
to the beneficiaries of the policies referred to in Section
3.1.3 which shall be payable in the event of Executive's death
during such period of twelve (12) months;
5.5.3.2 Medical, Dental and Life Insurance Coverage Continuation for a
period of one (1) year from the date of termination;
5.5.3.3 Accrued and Unpaid Salary and Expenses;
5.5.3.4 Continuation of each of the medical, dental and other benefits
which Group provides to its permanently disabled executive
employees in accordance with Group's then existing policy to
the extent each benefit is greater than that specified in this
Section 5.5; and
5.5.3.5 Outplacement Benefits.
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<PAGE> 13
6. SERVICES FURNISHED. Group shall furnish Executive with office space,
secretarial assistance, and such other facilities and services at
Group's facility to which Executive may be assigned, as shall be
suitable to the Executive's position and adequate for the performance
of his duties as set forth herein.
7. ADDITIONAL INSURANCE AT GROUP'S OPTION. Group, in its sole discretion,
may apply for and procure in its own name (whether or not for its own
benefit) policies of insurance insuring the life of Executive in such
amounts as Group may deem advisable, in addition to insurance policies
contemplated by Section 3.1.3 and Section 5.4.1.3. Executive shall have
no right, title, or interest in any such policies of insurance, except
to the extent his Estate or other persons are specifically named as
beneficiaries thereof. Executive agrees to submit to any medical or
other examination and to execute and deliver any applications or other
instrument in writing, reasonably necessary to effectuate such
insurance.
8. "GROSS-UP" PAYMENTS. Executive shall be paid an additional amount
("Gross Up Payment") if any payments ("Payment Amounts") made to him
(or his Estate) by Group or any of its Affiliates, under this Agreement
or otherwise, are subject to the excise tax imposed by Internal Revenue
Code Section 4999 or any successor Internal Revenue Code Section (the
"Section 4999 Tax"). The Gross Up Payment shall be computed so that
Executive (or his Estate) retains a net amount equal to the Payment
Amounts after deduction of any Section 4999 Tax on the Payment Amounts
and any Federal, state or local tax (including any Section 4999 Tax) on
the Gross Up Payment.
For the purposes of determining the amount of the Gross Up Payment,
Executive shall be deemed to pay Federal, State and local income taxes
at the highest marginal rate of taxation in the calendar year in which
the Payment Amounts are taxable to him under Code Section 4999. State
and local income taxes shall be calculated based upon the state and
locality of Executive's domicile in said calendar year.
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<PAGE> 14
The determination of the amount of the Section 4999 Tax and whether
such Section 4999 Tax is payable shall be made by tax counsel selected
and paid for by Group and approved by Executive. The Gross Up Payment
shall be paid within thirty (30) days of such computation and in no
event (without written consent of Executive) later than the last day of
the calendar year with respect to which the Section 4999 Tax is
imposed.
If such determination is not finally accepted by the Internal Revenue
Service upon audit, then tax counsel (selected and paid for under the
above procedure) shall represent Executive in any such audit or appeal
process thereafter and compute appropriate adjustments and additional
Gross Up Payments as provided above, after which Group shall pay
Executive such adjustment, and Group shall reimburse Executive for
interest and other tax penalties, if applicable.
9. Confidentiality, Inventions and Non-Competition.
-----------------------------------------------
9.1 Executive's agreements set forth in this Section 9 shall survive the
expiration or termination of this Agreement and the termination of his
employment with Group for any reason.
9.2 Executive acknowledges that irreparable injury would be caused to Group
by his breach of any of the provisions of this Section 9, and agrees
that in the event of any such breach, Group and any of its Affiliates,
in addition to such other rights and remedies as may exist in its
favor, may apply to any court of law or equity having jurisdiction to
enforce the specific performance of the provisions of this Section 9
and may apply for injunctive relief against any act which would violate
any such provisions.
9.3 Executive recognizes that he now has knowledge of and/or may hereafter
gain knowledge of, confidential information, trade secrets,
confidential processes, confidential patentable or unpatentable
inventions or confidential "know how", including, without limitation,
techniques, formulae, designs, developments, projects, technical
information and manufacturing process and distribution methods,
relating to, or concerned with the business of Group and its Affiliates
14
<PAGE> 15
prior to the termination of this Agreement and their respective
suppliers, customers, stockholders, licensors, licensees, and other
persons or entities with which Group or its Affiliates has, has had, or
may in the future have any commercial, scientific or technical
relationship. During the term of this Agreement and at all times
following the termination of Executive's employment for any reason,
Executive will not, directly or indirectly, divulge, furnish or make
accessible to anyone (other than as required in the regular course of
his employment by Group or with the consent of the Board of Directors)
such information. The prohibitions contained in this Section 9.3 shall
not apply to information which is (a) within the domain of the general
public; (b) generally known within the industry or industries in which
Group or its Affiliates is involved; or (c) independently developed by
Executive without utilization of confidential information gained while
in the employ of Group; provided that Executive shall not have
disclosed such information in violation of this Agreement. All
documents, records, apparatus, equipment and other physical property
furnished to Executive by Group or any Affiliate of Group or produced
by Executive or others in connection with his services to Group or any
such Affiliate shall be and remain the sole property of Group.
Executive will return and deliver such property to Group as and when
requested by Group. Copies of documents and records may be kept, but
shall be kept completely confidential to the same extent as other
confidential information of Group. Executive shall return and deliver
all such property upon termination of his employment for any reason,
and Executive will not take with him any such property or any
reproduction of such property upon such termination.
9.4 Any work or research or the results thereof, made or developed by
Executive, alone or in conjunction with others during the term of his
employment, including but without limitation, any designs, patents,
inventions, processes, know-how or formulae created, invented or
conceived during the period of his employment by Group, whether during
or out of the usual hours of work, which arise out of or are related to
the business, research, or development work or field of operation of
Group, or any of its Affiliates, shall to the extent of Executive's
interest therein be the sole
15
<PAGE> 16
and exclusive property of Group, shall be disclosed in writing to Group
and to no other person, unless so directed in writing by the Board of
Directors, and Executive hereby assigns to Group all and any rights
which he has or may acquire in the same. To this end, both during the
period of Executive's employment and at all times thereafter, Executive
agrees to execute all necessary papers, instruments and documents
properly required to effect such assignment to Group or its nominee, to
make application through Group's patent attorney or general counsel at
the expense of Group, for such United States and foreign patents as may
be specified from time to time by Group on inventions, processes, or
formulae which are or become the property of Group hereunder, and to
execute assignments upon Group's request, for Executive's entire
interest in all such applications to Group or to its nominee without
compensation (other than his usual compensation as an employee of
Group) and Executive agrees to give Group and its patent attorney or
general counsel all reasonable assistance in preparing such
applications, descriptions, and illustrations of each such invention,
process, or formula and in connection with proceedings relating thereto
or to such other applications or patents resulting therefrom; and
further agrees to execute all lawful papers considered necessary by
Group and do all that Group reasonably requests in order to protect
Group's rights in said inventions, processes, and formulae or to obtain
patents thereon, including, without limitation, continuations,
reissues, renewals, and extensions. It is further agreed that
Executive's obligations specified hereunder shall not expire with the
termination of this Agreement or his employment, but Group agrees to
pay Executive a reasonable amount for any time that Executive spends in
such work at Group's request after the termination of this Agreement or
his employment hereunder and agrees to reimburse Executive for expenses
reasonably or necessarily incurred in connection with such work.
9.5 In consideration of his continued employment by Group, and the other
benefits accruing to him hereunder, and subject to the fulfillment by
Group of its obligations to Executive hereunder, either directly or
through draw-down under the letter(s) of credit or other device
established pursuant to Section 6, Executive agrees that during the
term hereof and
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<PAGE> 17
for a period of twelve (12) months following the date of termination of
Executive's employment pursuant to Section 5 provided that Executive
has received and is continuing to receive all payments and benefits
required to be paid and provided to him pursuant to this Agreement
(such period of employment and twelve (12) month period being referred
to in this Agreement as the "Non-Competition Period"), he will not
engage or participate, directly or indirectly, within the United States
of America or Canada either as principal, agent, employee, employer,
consultant, stockholder, partner or in any other individual or
representative capacity whatever, in the conduct or management of, or
own any stock or other proprietary interest in, or debt of, any
business which shall be competitive with any business which is or was
conducted by Group or any Affiliate of Group, while Executive was an
employee of Group, unless he shall have obtained the prior written
consent of the Board of Directors, and which consent shall make express
reference to this Agreement. Notwithstanding any other provision in
this Section 9, Executive shall be free without such consent to make
investments, directly or indirectly, in the securities of any
publicly-owned entity if his ownership thereof is limited to not more
than three percent (3%) of the issued and outstanding securities of any
class of securities of such entity. Executive acknowledges that his
skills and experience are such that he can anticipate finding
employment at an executive level in a wide variety of industries and
represents and agrees that the restrictions imposed by this Section 9
on employment are necessary for the protection of the legitimate
interests and competitive position of Group and do not impose undue
hardships on Executive.
9.6 During the Non-Competition Period, Executive shall not, directly or
indirectly, solicit any officer, director, executive, employee or
consultant of Group or any Affiliate of Group to leave such employment
or terminate such position.
10. Definitions.
-----------
As used in this Agreement, the following terms shall have the following
meanings:
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<PAGE> 18
10.1 "Accrued and Unpaid Salary and Expenses" shall mean such portion of
Executive's Adjusted Cash Salary as has accrued by virtue of
Executive's employment during the period prior to the date of
termination and has not yet been paid, together with any amounts for
expense reimbursement, vacation accruals and similar items which have
been properly incurred or accrued in accordance with the provisions of
this Agreement prior to the date of termination and have not yet been
paid.
10.2 "Adjusted Salary" shall mean the Adjusted Cash Salary plus an amount
equal to the amount of any salary increase(s), if any, provided in the
form of restricted stock or stock options.
10.3 "Adjusted Cash Salary" shall have the meaning set forth in Section
3.1.1.
10.4 "Affiliate" shall mean any corporation, joint venture, or other
business enterprise, whether incorporated or unincorporated, which
Group directly, or indirectly through one or more intermediaries,
controls or is controlled by, or is under common control with.
10.5 "Agreement" shall mean this Employment Agreement.
10.6 "Base Salary" shall have the meaning set forth in Section 3.1.1.
10.7 "Board of Directors" shall mean the Board of Directors of Group.
10.8 "Change of Control" shall mean and 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 Group or any employee stock plan of Group, is or becomes the
beneficial owner, directly or indirectly, of securities of Group
representing fifteen percent (15%) or more of the outstanding Common
Stock of Group, 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
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<PAGE> 19
(15%) or more of the outstanding Common Stock of Group, 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 Group cease, for any reason,
to constitute at least a majority of the Board of Directors of Group;
or (iv) if a merger of, or consolidation involving, Group in which
Group's stock is converted into securities of another corporation or
into cash shall be consummated, or a plan of complete liquidation of
Group (whether or not in connection with a sale of all or substantially
all of Group's assets) shall be adopted and consummated, or
substantially all of Group'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 Group in a different jurisdiction or recapitalizing
Group's stock.
10.9 "Change of Control Notice" shall have the meaning set forth in
Section 5.2.3.
10.10 "Compensation Committee" shall mean the Compensation Committee of the
Board of Directors.
10.11 "Constructive Termination" shall be deemed to have occurred if and
when (i) Executive's Adjusted Salary is decreased below the level in
effect on the date of the last amendment of this Agreement, or the
aggregate Adjusted Salary and incentive compensation or benefits
available to be earned by Executive is directly or indirectly reduced
or eliminated, or the bonus percentage applicable to Executive's
participation in any compensation or bonus plan or arrangement is
reduced, without Executive's consent, provided, however, that nothing
herein shall be construed to guarantee Executive's bonus awards if
performance is below applicable targets, or (ii) the importance of
Executive's job responsibilities is reduced without Executive's
consent, or (iii) a proposal is made to relocate Executive to a
location other than Nashua, New Hampshire or the greater Boston,
Massachusetts metropolitan area without his consent.
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<PAGE> 20
10.12 "Effective Date" shall have the meaning set forth in the first
paragraph of this Agreement.
10.13 "ESOP" shall mean the Ekco Group, Inc. Employees' Stock Ownership
Plan.
10.14 "Estate" shall mean Executive's estate, legal representative or
beneficiaries as the context so requires.
10.15 "Executive" shall mean the individual defined as such in the first
paragraph of this Agreement, and shall include the Estate of such
individual where the context so requires.
10.16 "Good Cause" shall include, but not be limited to, repeated or
serious neglect of duty, dishonesty, conviction of a felony, breach of
this Agreement or repeated or serious violations of corporate rules or
regulations. Notwithstanding the foregoing, following a Change of
Control, "Good Cause" shall not be deemed to have occurred unless (a)
the conduct which is the basis for breach is material and is either
willful or intentionally unlawful and (b) Executive shall not have
ceased such conduct and cured the effect thereof, if curable, so that
such breach shall no longer be material within thirty (30) days after
Executive shall have received written notice from Group of Group's
intention to terminate Executive's employment for Good Cause, which
notice shall specify in detail the basis therefor.
10.17 "Gross-Up Payment" shall have the meaning set forth in Section 8.
10.18 "Group" shall mean Ekco Group, Inc., and its successors and permitted
assigns.
10.19 "Lump Sum Payment Amount" shall mean a cash amount payable in a lump
sum equal to the sum of (a) the Adjusted Salary in effect immediately
prior to the date of such termination, plus (b) the maximum amount
payable to Executive including all cash and the value of all equity
based options and grants of stock except for equity based options and
grants of stock issued pursuant to Section 6.6 of the 1995 Plan (as
defined below) (the value of each stock
20
<PAGE> 21
option to be determined as of the grant date thereof and the value of
each grant of restricted stock to be determined as of the date
described hereinbelow by applying the Black-Scholes model where
applicable or another recognized form of valuation if the Black-Scholes
model is not applicable, with the value ascribed by Group to each such
stock option and grant of restricted stock as of the aforementioned
dates to be conclusively presumed to be the value thereof) under all
compensation and bonus plans and arrangements identified in Sections
3.1.2, 3.1.3 and 3.1.4 for the fiscal year in which the date of the
termination occurs, plus (c) the value of the securities, cash or other
property which were allocated to Executive's account in the ESOP for
the fiscal year immediately preceding the fiscal year in which the date
of termination occurs (which shall be in addition to any distribution
from the ESOP to which he is entitled thereunder), which sum shall be
multiplied by the number of years specified in Sections 5.2.3.1,
5.2.4.1., 5.3.3.1.1 and 5.3.4.2.1, respectively. For purposes of
calculating the amount of clause (b), the maximum payable under any
plan shall generally be the maximum amount actually allocated to
Executive, or if no such allocation was made, the amount, if any,
specifically targeted for Executive. However, for purposes of
calculating the maximum payable under the 1995 Restatement of Incentive
Compensation Plan for Executive Employees of Ekco Group, Inc. and its
Subsidiaries (the "1995 Plan") for purposes of clause (b), (i) the
annual bonus amount shall be the greatest of (x) the target award for
the current fiscal year, (y) the target award for the prior fiscal year
and (z) the amount of the award paid or payable with respect to the
prior fiscal year, and (ii) the number of shares of restricted stock
awarded as long-term incentive awards shall be equal to the number of
such shares most recently awarded to Executive as a long-term grant
pursuant to the 1995 Plan divided by the number of blocks in such
grant. Such shares shall be valued as of the date utilized by Group to
calculate the number of shares issued to Executive, or if such date is
not readily ascertainable, the date of issuance of the shares. Attached
hereto and incorporated herein as Exhibit A is an example ("Example")
detailing the calculation of the Lump Sum Amount utilizing certain
stated assumptions and including other severance payments. The Example
defines the manner and method for
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<PAGE> 22
this calculation and for other severance payments and shall be followed
in making severance payments hereunder.
10.20 "Medical, Dental and Life Insurance Coverage Continuation" shall mean
the continuation of the medical, dental and life insurance coverage
which Executive (including his family) shall have been receiving from
Group as of the earlier of the date of Executive's termination and the
date of notice of termination by either Group or Executive, from the
date of termination until the earlier of (x) Executive's full-time
employment by a third party who offers Executive at least comparable
benefits in the particular benefit category or (y) the number of years
or months specified in Sections 5.2.3.3, 5.3.3.1.3, 5.3.4.2.3 and
5.5.3.2, respectively, following such date of termination. If and to
the extent Group is not able to continue the applicable coverage of
Executive under the terms of such group policies or other policies
providing coverage for Executive, Group shall cooperate with Executive
in any actions which may be necessary to allow Executive, to the extent
possible, either (i) to buy such policy or (ii) to continue insurance
coverage with the insurer writing Group's applicable group policy
outside of Group's group plan or a substitute reasonably satisfactory
to Executive, and in such event, Group shall pay to Executive 140% of
the cost of such insurance coverage, but in no event more than twice
the cost of such coverage allocable to Executive under the group or
other policy covering him prior to termination.
10.21 "Non-Competition Period" shall have the meaning set forth in Section
9.5.
10.22 "Payment Amount shall have the meaning set forth in Section 8.
10.23 "Outplacement Benefits" shall mean outplacement services by a
professional outplacement firm of Executive's choosing at the expense
of Group, who shall engage such firm directly on behalf of Executive,
provided, however, that Group's liability with respect to providing
such services will be limited to one-half of Executive's Adjusted
Salary.
11. Arbitration.
-----------
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<PAGE> 23
Except with respect to the provisions of Section 9, any dispute or
disagreement arising under or relating to the provisions of this
Agreement, or any breach thereof, including, without limitation,
relating to Section 1 hereof or to whether a termination of Executive's
employment was with Good Cause, shall be resolved by binding
arbitration in accordance with the Commercial Rules of the American
Arbitration Association or its successor (except as set forth herein),
and judgment upon the award rendered by the arbitrator or arbitrators
may be entered in any court having jurisdiction thereof. The decision
of the arbitrators shall be made by majority vote and be final and
absolute. In any such arbitration, one arbitrator shall be selected by
Group and one arbitrator shall be selected by Executive. Each party
shall have thirty (30) days from the receipt by one party of a notice
from the other party of submission to arbitration to choose an
arbitrator. A third arbitrator shall be selected by the two (2) so
chosen within ten (10) days of the selection of the most recently
selected of the two arbitrators so chosen. Failing action within any of
such periods by any party or the arbitrators, any unappointed
arbitrator or arbitrators shall be appointed by the American
Arbitration Association (or its successor) upon application of any
party or arbitrator. The parties shall promptly furnish to the
arbitrators such information as the arbitrators may reasonably request.
The expenses of any arbitration proceeding shall be paid by Group
(including Executive's attorney's fees and expenses) if Executive
recovers any amount or otherwise obtains relief in such proceeding and
by Executive (including Group's attorney's fees and expenses) if
Executive initiated arbitration and there is a specific finding that
Executive's claim was frivolous. In all other circumstances, the
expenses of such arbitration proceeding (not including attorney's fees
and expenses, each party to bear such party's own attorney's fees and
expenses) shall be divided equally. Arbitration shall take place in
Nashua, New Hampshire, or such other place on which the parties shall
agree. This Agreement and any arbitration proceeding are subject to
N.H.R.S.A. ch. 542.
12. General.
-------
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12.1 This Agreement is personal and shall in no way be subject to assignment
by Executive.
12.2 This Agreement shall be binding upon and shall inure to the benefit of
Group and its successors and assigns either by merger, operation of
law, consolidation, assignment, purchase or otherwise of a controlling
interest in the business of Group and Executive, his heirs, executors,
administrators, legal representatives, and permitted assigns. Group
agrees that a successor in interest by merger, operation of law,
consolidation, assignment, purchase or otherwise of a controlling
interest in the business of Group will be informed prior to such event
of the existence of this Agreement. Group shall require any successor
(whether direct or indirect, by purchase, merger, operation of law,
consolidation, assignment or otherwise of a controlling interest in the
business, stock or other assets of Group) to assume expressly and agree
to perform this Agreement. Failure of Group to obtain such assumption
and agreement prior to the effectiveness of any such succession shall
be a breach of this Agreement and shall entitle Executive to such
compensation and benefits in the same amount and on the same terms as
he would be entitled hereunder in the event of a termination without
Good Cause after a Change of Control, except that, for the purposes of
implementation hereof, the date on which any such succession becomes
effective shall be deemed to be the date on which Executive becomes
entitled to such compensation and benefits from Group.
12.3 The parties intend this Agreement to be enforced as written. However,
(i) if any portion or provision of this Agreement shall to any extent
be declared illegal or unenforceable by a duly authorized court of
competent jurisdiction, then the remainder of this Agreement, or the
application of such portion or provision in circumstances other than
those as to which it is so declared illegal or unenforceable, shall not
be affected thereby, and each portion and provision of this Agreement
shall be valid and be enforceable to the fullest extent permitted by
law; and (ii) if any provision, or any part thereof, is held to be
unenforceable because of the duration of such provision or the area
covered thereby, Group and Executive agree that the court making such
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<PAGE> 25
determination shall have the power to reduce the duration and/or area
of such provision, and/or to delete specific words and phrases
("blue-pencilling") and in its reduced or blue-pencilled form such
provision shall then be enforceable and shall be enforced.
12.4 All notices and communications required or permitted to be given
hereunder shall be duly given by delivering the same in hand, by
reputable overnight delivery service or by depositing such notice or
communication in the mail, sent by certified or registered mail, return
receipt requested, postage prepaid, as follows:
If sent to Group: Ekco Group, Inc.
98 Spit Brook Road
Nashua, New Hampshire 03062
Attention: Executive Vice
President, Secretary and
General Counsel
If sent to Executive: To Executive's
last address in
the records of Group
or such other address as either party furnishes to the other
by like notice.
12.5 This Agreement constitutes the entire agreement and understanding
between the parties in relation to the subject matter hereof. There are
no promises, representations, conditions, provisions or terms related
thereto other than those set forth in this Agreement. This Agreement
supersedes all previous understandings, agreements and representations
between Group and Executive regarding Executive's employment by Group,
written or oral.
12.6 All captions in this Agreement are intended solely for the convenience
of the parties, and none shall be deemed to affect the meaning or
construction of any provision hereof. Any references in this Agreement
to a section shall be deemed to include all subsections of that section
unless specifically excluded.
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<PAGE> 26
12.7 No failure of Group or Executive to exercise any power reserved to it
or him, respectively, by this Agreement, or to insist upon strict
compliance by Executive or Group, respectively, with any obligation or
condition hereunder, and no custom or practice of the parties at
variance with the terms hereof, shall constitute a waiver of Group's or
Executive's right, as the case may be, to demand exact compliance with
any of the terms hereof. Waiver by either party of any particular
default by the other party hereto shall not affect or impair the
waiving party's rights with respect to any subsequent default of the
same, similar or different nature, nor shall any delay, forbearance or
omission of either party to exercise any power or right arising out of
any breach or default by the other party of any of the terms,
provisions or covenants hereof, affect or impair its or his right to
exercise the same, nor shall such constitute a waiver by Group or
Executive, as the case may be, of any right hereunder, or the right to
declare any subsequent breach or default and to terminate this
Agreement prior to the expiration of its term.
12.8 This is a New Hampshire contract and shall be construed under and be
governed in all respects by the law of the State of New Hampshire.
12.9 Executive shall not be required to mitigate the amount of any payment
provided for in this Agreement by seeking other employment or
otherwise, nor shall the amount of any payment provided for herein be
reduced by any compensation earned by Executive as the result of
employment by another employer or by retirement benefits after the date
of termination or otherwise, except as specifically set forth herein.
12.10 No amendment or modification to this Agreement shall be effective
unless in writing and signed by both parties hereto. This Agreement may
be executed in any number of counterparts, and each such counterpart
hereof shall be deemed to be an original instrument, but all such
counterparts together shall constitute but one agreement.
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IN WITNESS WHEREOF, Group has caused this Agreement to be executed and
delivered by its duly authorized officer and its corporate seal to be hereunto
affixed and Executive has hereunto
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set his hand and seal as of the day and year first written above in duplicate
originals.
EKCO GROUP, INC.
By /S/DONATO A. DeNOVELLIS
--------------------------------
/S/JOHN T. HARAN
-----------------------------------
Executive
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JOHN T. HARAN EXHIBIT A
<TABLE>
- -------------------------------------------------------------------------------------------------
ASSUMPTIONS:
- ------------
<CAPTION>
<S> <C>
Termination on July 15, 1996. 1x or 2x severance benefit, as defined.
Current market value of common stock $ 15.000
--------
Adjusted cash salary $120,000
Less: car allowance ($7,000)
1995 salary increase 7,000
Adjusted Salary 120,000
--------
Bonus:
Current year target award $ 50,000
Target award for prior fiscal year 25,000
Amount paid or payable for prior year 5,000
Note: Executive elected to take 5% of bonus in cash, 50% in
Restricted Stock and the balance in stock options.
Relocation - Executive is partially relocated when terminated.
Other: Executive participates in the Supplemental Executive Retirement Plan.
Executive is granted stock options and is offered and purchases Restricted Stock
Executive participates in Employee Stock Purchase Plan, 401k and ESOP.
- -------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
- -------------------------------------------------------------------------------------------------
TERMINATION BY GROUP WITHOUT GOOD CAUSE
- ---------------------------------------
<CAPTION>
LUMP SUM PAYMENT AMOUNT: 1X 2X
-------- --------
<S> <C> <C> <C>
ADJUSTED SALARY $120,000 $240,000
MAXIMUM PAYABLE UNDER 3.1.2
Greatest of this year's target, last year's
target or last year's actual award $50,000 50,000 100,000
Other-completion of relocation per
company policy 3,500 3,500
- -------------------------------------------------------------------------------------------------
</TABLE>
29
<PAGE> 30
<TABLE>
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
MAXIMUM PAYABLE UNDER 3.1.3
Supplemental Executive Retirement Plan:
MAXIMUM PAYABLE UNDER 3.1.4
Other compensation:
Other Executive bonus plans 0 0
Restricted stock purchase plans:
1995 grant 16,000
Number of years in cycle 5
Annualized grant 3,200
Market value on date of grant $ 7.500
-------
Value of restricted stock 24,000 24,000 48,000
-------
1996 grant 5,000
Number of years in cycle 5
Annualized grant 1,000
Market value on date of grant $ 8.000
-------
Value of restricted stock 8,000 8,000 16,000
Stock option plans:
Grant this fiscal year 9,000
Black Scholes value at date of grant $ 3.50
Value of option 31,500 31,500 63,000
Other-Employee Stock Purchase Plan:
# shares purchased this fiscal year 1,000
Current market value $15.000
-------
Value of stock 15,000
-------
benefit (15% discount from market) 2,250 2,250 4,500
Value of securities allocated to ESOP
account in previous fiscal year
Common shares allocated 863
Preferred shares allocated 1,423
Allocation of unvested forfeited shares 14
-------
Total shares allocated 2,300
Current market value $15.000
-------
Value of ESOP shares allocated 34,500
Dividends received not reflected
above 184
-------
Total value of ESOP securities
allocated 34,684 34,684 69,368
- ------------------------------------------------------------------------------------------------------------
</TABLE>
30
<PAGE> 31
<TABLE>
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OTHER PAYMENTS:
Unpaid salary to date of termination 2,308 2,308
Accrued vacation-weeks 5
Weekly rate 2,308
-----
Total 11,538 11,538
Unreimbursed expenses (if applicable)
Gross up payment (if applicable)
Total payment $287,780 $558,214
======== ========
- ------------------------------------------------------------------------------------------------------------
</TABLE>
31
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<EXCHANGE RATE> 1
<CASH> 220
<SECURITIES> 0
<RECEIVABLES> 34,897
<ALLOWANCES> 1,095
<INVENTORY> 61,284
<CURRENT-ASSETS> 110,875
<PP&E> 100,117
<DEPRECIATION> 43,235
<TOTAL-ASSETS> 311,912
<CURRENT-LIABILITIES> 38,828
<BONDS> 127,285
<COMMON> 185
3,788
0
<OTHER-SE> 131,306
<TOTAL-LIABILITY-AND-EQUITY> 311,912
<SALES> 112,841
<TOTAL-REVENUES> 112,841
<CGS> 80,433
<TOTAL-COSTS> 107,682
<OTHER-EXPENSES> 2,218
<LOSS-PROVISION> 126
<INTEREST-EXPENSE> 6,187
<INCOME-PRETAX> (3,147)
<INCOME-TAX> (1,621)
<INCOME-CONTINUING> (1,526)
<DISCONTINUED> 0
<EXTRAORDINARY> (2,595)
<CHANGES> 0
<NET-INCOME> (4,121)
<EPS-PRIMARY> (.22)
<EPS-DILUTED> (.22)
</TABLE>
