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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. )
FILED BY REGISTRANT [X] FILED BY A PARTY OTHER THAN A REGISTRANT [ ]
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Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
EKCO GROUP, INC.
(Name of Registrant as Specified in Its Charter)
----
----
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (Set forth amount on which the filing fee is
calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
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<S> <C> <C>
[EKCO LOGO] EKCO Group, Inc. Telephone 603 888-1212
98 Spit Brook Road, Suite 102 FAX 603 888-1427
Nashua, New Hampshire 03062
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 20, 1997
To the Holders of the Company's Capital Stock:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of EKCO
GROUP, INC. will be held on Tuesday, May 20, 1997, at 9:30 a.m., local time, at
Fleet Bank of Massachusetts, N.A., 75 State Street, Eighth Floor Conference
Center, Boston, Massachusetts, for the following purposes:
1. To elect eight directors to hold office until the next annual meeting
of stockholders and until their successors are chosen and qualified;
2. To approve an amendment to the Company's 1987 Stock Option Plan to
limit the number of shares of Common Stock with respect to which
options may be granted to any one participant under such plan to
1,000,000 shares in any fiscal year; and
3. To transact such other business as may properly come before the Annual
Meeting or any adjournments thereof.
The close of business on March 21, 1997 has been fixed as the record date
for determining the stockholders entitled to notice of and to vote at the Annual
Meeting or any adjournments thereof. The transfer books will not be closed.
A list of the stockholders entitled to vote at the Annual Meeting will be
open to examination by stockholders for any purpose relevant to the Annual
Meeting, during ordinary business hours, for a period of ten days prior to the
Annual Meeting at the Company's Corporate Headquarters in Nashua, New Hampshire
and at the offices of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., One
Financial Center, Boston, Massachusetts. The list will likewise be available at
the Annual Meeting.
Stockholders are urged to date, sign, vote and return the enclosed form of
proxy at their earliest convenience even if they plan to attend the meeting. A
return envelope is enclosed for this purpose which requires no postage if mailed
in the United States. The proxy is revocable by the person giving it at any time
prior to exercise by written notice received by the Company, by delivery of a
duly executed later dated proxy, or by voting the shares in person at the Annual
Meeting.
By order of the Board of Directors,
JEFFREY A. WEINSTEIN
Secretary
March 27, 1997
<PAGE> 3
EKCO GROUP, INC.
98 SPIT BROOK ROAD, SUITE 102
NASHUA, NEW HAMPSHIRE 03062
PROXY STATEMENT
This Proxy Statement is being sent beginning on or about March 27, 1997 to
all holders of the common stock, $.01 par value per share ("Common Stock"), and
Series B ESOP Convertible Preferred Stock, par value $.01 per share ("ESOP
Preferred Stock"), of Ekco Group, Inc. (the "Company") entitled to vote at the
Annual Meeting of Stockholders to be held on Tuesday, May 20, 1997 (the "Annual
Meeting") in order to provide information on the business to be transacted.
Stockholders of record at the close of business on March 21, 1997 are entitled
to vote at the Annual Meeting. As of that date, the outstanding voting stock of
the Company consisted of 18,696,593 shares of Common Stock and 1,414,378 shares
of ESOP Preferred Stock, with each share being entitled to one vote.
A proxy card is enclosed for your use. YOU ARE SOLICITED BY THE BOARD OF
DIRECTORS OF THE COMPANY TO VOTE YOUR SHARES AND TO SIGN, DATE AND RETURN THE
PROXY CARD IN THE ENCLOSED SELF-ADDRESSED POSTAGE-PAID ENVELOPE.
The shares represented by the proxies received will be voted as you
specify, or, if no specification is made, will be voted for the election of each
of management's eight nominees for election as director and for the proposal
indicated in this Proxy Statement. Shares of ESOP Preferred Stock and Common
Stock held by the trustee of the Company's Employees' Stock Ownership Plan Trust
and not allocated to the accounts of plan participants will be voted in
proportion to the votes of the shares of ESOP Preferred Stock which have been
allocated to the accounts of participants.
You may revoke your proxy at any time before it is voted at the Annual
Meeting by delivering written notice of revocation to the Secretary of the
Company before the Annual Meeting, by submitting a later dated proxy, or by
voting the shares in person at the Annual Meeting. The solicitation will be
primarily by mail, but may also include telephone, facsimile or oral
communication by directors, officers and employees of the Company who will
receive no additional compensation for any such solicitation. The Company has
retained Georgeson & Company Inc. to advise and consult with the Company with
respect to the solicitation of proxies and to assist in the solicitation of
proxies for the Annual Meeting at a fee of $10,000, plus reimbursement of
expenses. All costs of the solicitation of proxies will be borne by the Company.
The Company will reimburse brokerage companies and others for their costs in
forwarding proxy materials to the beneficial owners of stock.
The presence, in person or by proxy, of the holders of a majority of the
outstanding shares of capital stock entitled to vote is necessary to constitute
a quorum at the Annual Meeting. Under Delaware law, with respect to the
tabulation of votes on any matter, abstentions are treated as votes against a
proposal, while broker non-votes have no effect on the vote.
KPMG Peat Marwick LLP, who was the Company's independent auditor for the
fiscal year ended December 29, 1996 ("Fiscal 1996") is expected to have a
representative present at the Annual Meeting who will have an opportunity to
make a statement if he so desires and who will be available to respond to
appropriate questions. The Company has not appointed an independent auditor for
the current fiscal year and is in process of interviewing independent auditing
firms, including KPMG Peat Marwick LLP, with respect to the provision of
independent auditing services for fiscal 1997.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of March 21, 1997, the number of shares
of Common Stock and ESOP Preferred Stock beneficially owned by each person known
by the Company to own more than 5% of either the outstanding Common Stock or
ESOP Preferred Stock, by each nominee for election as director, by each
individual named in the Summary Compensation Table on page 15 hereof, and by all
current executive officers and directors as a group, and the percentage of the
outstanding Common Stock and ESOP Preferred Stock which such shares represent.
Except as indicated in the accompanying notes and except in the case of the
Trust of the Ekco Group, Inc. Employees' Stock Ownership Plan (the "ESOP") which
holds shares of ESOP Preferred Stock and Common Stock on behalf of participants
in the ESOP and the participants in the ESOP who have voting power and
investment power as set forth in the ESOP, the owners have sole voting and
investment power with respect to the shares. Attached to each share of Common
Stock is a Preferred Share Purchase Right to acquire one-hundredth of a share of
the Company's Series A Junior Participating Preferred Stock, par value $.01 per
share, which rights are not presently exercisable.
<TABLE>
<CAPTION>
AMOUNT AND NATURE AMOUNT AND NATURE
OF BENEFICIAL PERCENT OF OF BENEFICIAL
OWNERSHIP OF COMMON OWNERSHIP OF ESOP PERCENT OF ESOP
BENEFICIAL OWNERS COMMON STOCK STOCK(1) PREFERRED STOCK PREFERRED STOCK
- ----------------- ----------------- ---------- ----------------- ---------------
<S> <C> <C> <C> <C>
Trust of the Ekco Group, Inc...... 2,352,202(2) 12.6% 1,414,378(2) 100%
Employees' Stock Ownership Plan
c/o Ekco Group, Inc.
98 Spit Brook Road, Suite 102
Nashua, NH 03062
First Manhattan Co................ 1,759,741(3) 9.4% -- --
437 Madison Avenue
New York, New York 10022
Tweedy, Browne Company L.P........ 1,614,175(4) 8.6% -- --
TBK Partners, L.P.
Vanderbilt Partners, L.P.
52 Vanderbilt Avenue
New York, NY 10017
Dimensional Fund Advisors Inc..... 1,110,200(5) 5.9% -- --
1299 Ocean Avenue
Santa Monica, CA 90401
Pioneering Management 1,051,400(6) 5.6% -- --
Corporation ....................
60 State Street
Boston, MA 02109
George W. Carmany, III............ 40,000(7) * -- --
Stuart W. Cohen................... 58,041(8)(9) * 972 *
Donato A. DeNovellis.............. 299,383(7)(8)(9) 1.6 3,097 *
(10)(11)
Michael G. Frieze................. 10,000 * -- --
Avram J. Goldberg................. -- -- -- --
T. Michael Long................... 890,582(12) 4.8% -- --
Stuart B. Ross.................... 34,373(12) * -- --
Malcolm L. Sherman................ 431,162(8)(12) 2.3% -- --
Bill W. Sorenson.................. 45,714(12) * -- --
Robert Stein...................... 386,425(7)(8)(13) 2.0% -- --
Herbert M. Stein.................. 138,915(12) * -- --
Robert Varakian................... 348,800(8)(9) 1.8% -- --
Jeffrey A. Weinstein.............. 595,219(7)(8)(9)(10) 3.1% 15,237 1.1%
All Current Directors............. 3,113,717(7)(8)(9) 15.1% 32,059 2.3%
and Executive Officers (10) (11)(12)
as a Group (14 Persons)
</TABLE>
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* Represents holdings of less than one percent.
(1) Computed on the basis of 18,696,593 shares of Common Stock outstanding,
plus, in the case of any person deemed to own shares of Common Stock as a
result of owning options or rights to purchase Common Stock exercisable
within 60 days or ESOP Preferred Stock which is presently convertible into
an equal number of shares of Common Stock by the record owner, the
additional shares of Common Stock which would be outstanding upon such
exercise, purchase or conversion by such person or group.
(2) The Trust of the ESOP disclaims beneficial ownership of the shares held by
it for the participants in the ESOP.
(3) Based on an amended Schedule 13G filed in January 1997 by First Manhattan
Co. ("FMC"), an investment advisor/broker dealer registered under Section
15 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
and investment advisor registered under the Investment Advisors Act of
1940. FMC has sole voting authority with respect to 198,350 of such shares,
more fully described below, shared voting authority with respect to
1,528,491 of such shares, sole dispositive power as to 56,000 of such
shares and shared dispositive power with respect to 1,703,741 of such
shares. The 198,350 shares referred to above are owned by general partners
of FMC and each such partner individually retains sole voting and
investment power over such shares. Family members of general partners own
an additional 32,250 shares as to which FMC shares voting power with
respect to 26,250 of such shares and disclaims dispositive power as to such
26,250 shares and beneficial ownership as to 6,000 of such shares.
(4) Based on an amended Schedule 13D jointly filed in June 1996 by Tweedy,
Browne Company L.P. ("TBC"), TBK Partners, L.P. ("TBK") and Vanderbilt
Partners, L.P. ("Vanderbilt"). TBC, a registered broker-dealer and
investment adviser and a member of the National Association of Securities
Dealers, Inc., may be deemed to be the beneficial owner of 1,507,275 of
such shares, which are held in the discretionary accounts of various
customers (the "TBC Accounts"), with respect to which it has obtained sole
voting authority as to 1,315,965 of such shares and shared dispositive
power as to all 1,507,275 such shares. Included in the TBC shares are 410
shares held in a TBC Account for a charitable foundation of which
Christopher H. Browne, a General Partner (as defined below) is a trustee.
In addition, TBK and Vanderbilt, each a private investment partnership,
beneficially own directly and have sole voting authority and investment
discretion with respect to 76,000 and 30,900 of such shares, respectively.
The aggregate number of shares of Common Stock with respect to which TBC,
TBK and Vanderbilt could be deemed to be the beneficial owner as of the
date of such amended Schedule 13D is 1,614,175 shares. The general partners
of TBC and Vanderbilt are Christopher H. Browne, William H. Browne and John
D. Spears (the "General Partners"). All of the General Partners and Thomas
P. Knapp are general partners of TBK. The General Partners may be deemed to
control TBC and Vanderbilt, and the General Partners and Thomas P. Knapp
may be deemed to control TBK. The aggregate number of shares of Common
Stock with respect to which each of the General Partners may be deemed to
be the beneficial owner by reason of his being a general partner of TBC,
TBK and Vanderbilt, respectively, is 1,614,175 shares, with Thomas P. Knapp
deemed to be the beneficial owner of 76,000 shares by reason of his being a
general partner of TBK. Each of TBC, TBK and Vanderbilt disclaims
beneficial ownership of Common Stock held by the others and held in the TBC
Accounts.
(5) Based upon a Schedule 13G filed in February 1997 by Dimensional Fund
Advisors Inc. ("Dimensional"), a registered investment advisor. All of such
shares are held in portfolios of DFA Investment Dimensions Group Inc., a
registered open-end investment company (the "Fund"), or in series of shares
of the DFA Investment Trust Company, a Delaware business trust (the
"Trust"), or the DFA Group
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Trust and DFA Participation Group Trust, investment vehicles for qualified
employee benefit plans, for all of which Dimensional serves as investment
manager and as to which Dimensional may be deemed to be the beneficial
owner. Of the foregoing shares, Dimensional has sole voting authority as to
752,100 shares and sole dispositive authority as to all 1,110,200 of such
shares. Persons who are officers of Dimensional also serve as officers of
the Fund and the Trust, and in such capacities, these persons vote 136,500
additional shares which are owned by the Fund and 221,600 shares which are
owned by the Trust. Dimensional disclaims beneficial ownership of all such
shares.
(6) Based upon a Schedule 13G filed in January 1997 by Pioneering Management
Corporation ("PMC"), an investment adviser. PMC has sole voting authority
with respect to all such shares and sole dispositive power as to 48,400 of
such shares and shared dispostive power as to 1,003,000 of such shares.
(7) Includes the following number of shares of Common Stock owned jointly by
the following persons and their wives as to which such persons may be
deemed to share voting and investment power: Mr. Carmany, 33,000 shares;
Mr. DeNovellis, 23,673 shares; Mr. Robert Stein, 37,088 shares; and Mr.
Varakian, 4,000 shares; but excludes 200 shares owned by Mr. Robert Stein's
children and 6,000 shares owned by Mr. Weinstein's children as to which Mr.
Robert Stein and Mr. Weinstein disclaim beneficial ownership.
(8) Includes the following number of shares of Common Stock currently issuable
upon the exercise of stock options held by the following persons pursuant
to the 1987 Stock Option Plan, as amended (the "1987 Stock Option Plan"):
Mr. Cohen, 26,432 shares; Mr. DeNovellis, 221,345 shares; Mr. Sherman,
410,000 shares; Mr. Varakian, 334,800 shares; and Mr. Weinstein, 397,728
shares, and all current executive officers and directors as a group,
1,532,190 shares. Of the foregoing shares, the following number are
presently subject to repurchase by the Company: Mr. Cohen, 19,763 shares;
Mr. DeNovellis, 36,807 shares; Mr. Varakian, 25,000 shares; Mr. Weinstein,
24,737 shares; and all current executive officers and directors as a group,
121,276 shares. The option shares granted to Mr. Sherman pursuant to the
1987 Stock Option Plan are not subject to repurchase by the Company. See
Note 13 for information regarding option shares of Mr. Robert Stein.
(9) Includes the following number of shares of Common Stock purchased pursuant
to the Company's 1984 and 1985 Restricted Stock Plans, as amended
(collectively, the "1984 and 1985 Plans") which are held in escrow, are
presently subject to repurchase by the Company and as to which certain
transfer restrictions apply: Mr. Cohen, 16,366 shares; Mr. DeNovellis,
40,246 shares; Mr. Varakian, 10,000 shares; Mr. Weinstein, 31,021 shares;
and all current executive officers and directors as a group, 117,628
shares.
(10) Includes the number of shares of ESOP Preferred Stock listed in the table,
if any, and the following number of shares of Common Stock allocated to the
ESOP accounts of the following participants: Mr. Cohen, 271 shares; Mr.
DeNovellis, 826 shares; Mr. Weinstein, 3,247 shares; and all current
executive officers and directors as a group, 7,279 shares. Mr. Sherman and
Mr. Varakian do not currently participate in the ESOP, and Mr. Robert
Stein's account balance was distributed to him in January 1997. Mr. Donato
A. DeNovellis, an executive officer, is also the trustee of the ESOP, but
the 1,414,378 shares of ESOP Preferred Stock and the 937,824 shares of
Common Stock held by the ESOP and not allocated to the accounts of
executive officers are not included in calculating the number of shares
held by "All Current Directors and Executive Officers as a Group," and Mr.
DeNovellis disclaims beneficial ownership of shares of ESOP Preferred Stock
and Common Stock held by the ESOP (other than shares specifically allocated
to his account under the ESOP).
(11) Includes 11,410 shares of Common Stock held by retirement plans of
subsidiary corporations of which Mr. DeNovellis is trustee and as to which
Mr. DeNovellis disclaims beneficial ownership.
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(12) Includes the following number of shares of Common Stock currently issuable
upon the exercise of stock options held by the following directors: Mr.
Long, 9,040 shares; Mr. Ross, 31,373 shares; Mr. Sherman, 16,162 shares of
which 10,774 shares are subject to repurchase by the Company; Mr. Sorenson,
35,714 shares; and Mr. Herbert Stein, 45,714 shares.
(13) Includes 193,000 shares of Common Stock issuable upon the exercise of stock
options held by Mr. Robert Stein pursuant to the 1987 Stock Option Plan,
which options expire in June 1997.
ELECTION OF DIRECTORS
Each director will hold office until the next annual meeting of
stockholders and until his successor is chosen and qualified, or until his
earlier resignation or removal. The Board of Directors has inquired of each
nominee and determined that each will serve if elected. If any of the nominees
becomes unavailable for election, the Board of Directors may designate
substitute nominees, in which event shares of Common Stock and ESOP Preferred
Stock, pursuant to directions received from the ESOP participants, represented
by proxies will be voted for such substitute nominees unless an instruction to
the contrary is indicated on the proxy.
Biographical summaries and ages as of March 21, 1997 of those persons
nominated by the Board of Directors for election as a director are listed below.
No nominee for director or executive officer has any family relationship with
any other nominee or with any other executive officer of the Company.
GEORGE W. CARMANY, III; AGE 57; PRESIDENT, G.W. CARMANY COMPANY (AN ADVISOR TO,
AND INVESTOR IN, SMALL COMPANIES).
Mr. Carmany has served as a director of the Company since February 1997 and
has been President of G.W. Carmany Company, which he established in 1995. From
1975 through 1994, he served American Express Company (a global travel and
financial services company) in senior positions in that company's international
banking division and at the corporate level, including Senior Executive Vice
President, Treasurer and Director of its subsidiary The Boston Company (an
investment management and private bank) from July 1990 to May 1993 and Chairman,
Olympia and York Noteholders Steering Committee from November 1992 to April
1994.
MICHAEL G. FRIEZE; AGE 59; CHIEF EXECUTIVE OFFICER, EXECUTIVE VICE PRESIDENT AND
TREASURER OF THE SEVERAL GORDON BROTHERS COMPANIES (A GROUP OF COMPANIES WHICH
PROVIDE RETAIL, MERCHANT AND FINANCIAL SERVICES AND WHOLESALE AND RETAIL FINE
JEWELRY).
Mr. Frieze has served as a director of the Company since February 1997. In
1966, he joined Gordon Brothers companies where he has served Gordon Brothers
Corporation (a jewelry distributor) as Chairman since January 1992, Chief
Executive Officer since January 1991, Executive Vice President since October
1993 and Treasurer since October 1990 and has served Gordon Brothers Partners,
Inc. (a merchant services company) as Chief Executive Officer, Executive Vice
President and Treasurer since January 1992. In addition, he also serves various
other Gordon Brothers companies in similar executive capacities, including
Jewelry Promotions, Inc. (a jewelry sales company), Kurt Gutman Jewelry, Inc.
(an importer and distributor of gold and jewelry), Gordon Brothers Capital
Corporation (a financial services company) and Gordon Brothers Ltd. (a U.K.
merchant services company).
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AVRAM J. GOLDBERG; AGE 67; CHAIRMAN, THE AVCAR GROUP, LTD. (A MANAGEMENT
CONSULTING FIRM).
Mr. Goldberg has served as a director of the Company since February 1997
and has been Chairman of The AVCAR Group since 1990. From 1958 to 1989, Mr.
Goldberg served The Stop & Shop Companies, Inc. (a chain of supermarket and mass
retailing stores) in a number of senior executive positions, including Chairman
of the Board and Chief Executive Officer from 1985 to 1989. Mr. Goldberg serves
as a director of Whole Foods Market, Inc. (a chain of natural foods
supermarkets).
T. MICHAEL LONG; AGE 53; GENERAL PARTNER, BROWN BROTHERS HARRIMAN & CO. (A
PRIVATE BANK AND A MEMBER OF THE NEW YORK STOCK EXCHANGE AND OTHER STOCK
EXCHANGES); CO-MANAGER, THE 1818 FUND, L.P. (A LIMITED PARTNERSHIP).
Mr. Long has served as a director of the Company since May 1993 and has
been a general partner of Brown Brothers Harriman & Co. since 1984 and a
co-manager of The 1818 Fund, L.P. since 1989. He is a director of Columbia
Healthcare Corp. (a chain of acute care hospitals), Nuevo Energy Company (an oil
and gas exploration and production company) and Gulf Canada Resources, Limited
(a Canadian oil and gas exploration and production company). See "Certain
Relationships and Related Transactions -- Certain Business Relationships -- The
1818 Fund, L.P." below.
STUART B. ROSS; AGE 59; EXECUTIVE VICE PRESIDENT, XEROX CORPORATION (A WORLDWIDE
DOCUMENT PROCESSING SERVICING COMPANY); CHAIRMAN AND CHIEF EXECUTIVE OFFICER,
XEROX FINANCIAL SERVICES, INC. (A FINANCIAL SERVICES COMPANY).
Mr. Ross has served as a director of the Company since February 1989. He
has served in his present positions with Xerox Corporation and Xerox Financial
Services since May 1990.
MALCOLM L. SHERMAN; AGE 65; CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER OF
THE COMPANY.
Mr. Sherman has served as Chief Executive Officer of the Company since
December 1996, Chairman of the Board since July 1996 and as a director of the
Company since May 1995. From February 1993 to July 1996, Mr. Sherman served as a
consultant to the Company. He has served as Chairman of the Board of Advisors
and a director of the Gordon Brothers companies since February 1993. He served
as Chairman and a director of K.T. Scott, Ltd. (a chain of wall paper and window
treatment stores) from January 1991 to August 1995. He served as President and
Chief Executive Officer of Morse Shoe, Inc. (a manufacturer, importer and
retailer of shoes) from January 1992 until December 1993. Mr. Sherman is a
director of Maxwell Shoe Co. (a shoe importer) and One Price Clothing, Inc. (a
chain of sportswear stores).
BILL W. SORENSON; AGE 65; CHAIRMAN AND DIRECTOR, MANAGEMENT RESOURCES OF
AMERICA, INC. (A MANAGEMENT CONSULTING FIRM); CHAIRMAN AND DIRECTOR, AMERICAN
SPORTS PRODUCTS GROUP INC. (A HOLDING COMPANY WHICH OWNS SPORTS EQUIPMENT
MANUFACTURING BUSINESSES).
Mr. Sorenson has served as a director of the Company since October 1986 and
has been Chairman and a director of Management Resources of America, Inc. since
January 1986 and was its Chief Executive Officer from January 1986 to May 1994.
He has been Chairman and a director of American Sports Products Group Inc. since
May 1994.
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HERBERT M. STEIN; AGE 68; CHAIRMAN, CHIEF EXECUTIVE OFFICER AND DIRECTOR,
ORGANOGENESIS INC. (A BIOTECHNOLOGY DEVELOPMENT COMPANY); PRESIDENT, H. M. STEIN
& CO., INC. (A FINANCIAL MANAGEMENT FIRM).
Mr. Herbert Stein has served as a director of the Company since September
1981. He has served as Chairman of Organogenesis Inc. since February 1991 and
Chief Executive Officer and as a director of that company since 1987. Mr. Stein
has also served as President of H. M. Stein & Co., Inc. since 1970. He is a
director of Apogee Technology (a company engaged in research and development of
digital amplification).
COMMITTEES OF BOARD OF DIRECTORS AND MEETING ATTENDANCE
Audit Committee. The Audit Committee consists of three non-employee
directors, George W. Carmany, III, T. Michael Long and Herbert M. Stein. The
Audit Committee reviews the engagement of the Company's independent auditors.
The Audit Committee also reviews the audit fees of the independent auditors and
the adequacy of the Company's internal accounting procedures. The Audit
Committee met once during Fiscal 1996.
Compensation Committee. The Compensation Committee consists of three
non-employee directors: T. Michael Long, Stuart B. Ross and Bill W. Sorenson.
The Compensation Committee reviews, approves and makes recommendations regarding
the Company's compensation policies, practices and procedures to ensure that the
legal and fiduciary responsibilities of the Board of Directors are carried out
and that such policies, practices and procedures contribute to the success of
the Company. The Compensation Committee administers the Company's 1984 and 1985
Restricted Stock Plans (collectively, the "Restricted Plans") and 1987 Stock
Option Plan. The Compensation Committee also administers the Company's 1984
Employee Stock Purchase Plan. The Committee met three times during Fiscal 1996.
Other Committees. The Company's Board of Directors has an Executive
Committee which consists of Malcolm L. Sherman and Jeffrey A. Weinstein. The
Executive Committee has the authority to take all actions that could be taken by
the full Board of Directors with certain exceptions. The Executive Committee
meets as necessary between regularly scheduled meetings of the Board of
Directors to take such action as is advisable for the efficient operation of the
Company. The Executive Committee met five times during Fiscal 1996. The Company
does not have a standing nominating committee or any other regular committee.
Meeting Attendance. During Fiscal 1996, there were ten meetings of the
Board of Directors, and the various committees of the Board of Directors met a
total of fifteen times. All the incumbent members of the Board of Directors
attended at least 75% of the aggregate of all meetings held by the Board of
Directors and the Committees of the Board upon which they served. In addition,
from time to time, the members of the Board of Directors and its committees act
by unanimous written consent pursuant to Delaware law.
REQUIRED VOTE FOR APPROVAL -- The affirmative vote of holders of a majority
of the issued and outstanding shares of the capital stock of the Company present
in person or represented by proxy and entitled to vote at the Annual Meeting is
required to elect each director.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ELECTION OF EACH PERSON NOMINATED
AS A DIRECTOR.
COMPENSATION OF DIRECTORS
DIRECTORS' FEES
Directors of the Company who are not employees receive an annual fee of
$10,000, a fee of $1,000 for each Board of Directors' meeting attended,
including telephonic meetings, and reimbursement of meeting
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<PAGE> 10
travel expenses. Such directors also receive a fee of $1,000 for attendance at
each meeting of a committee of the Board of Directors. Employee directors do not
receive additional compensation for serving on the Board of Directors.
DIRECTORS' STOCK OPTIONS
As of March 21, 1997, the Company had 345,331 shares available for future
grants under its 1988 Directors' Stock Option Plan, as amended (the "Directors'
Plan"). The Directors' Plan provides for the granting of non-qualified stock
options (each, a "Director Option") to purchase Common Stock to non-employee
directors of the Company. Under the terms of the Directors' Plan, Director
Options are automatically granted to Outside Directors (as defined) at the time
they so qualify. An "Outside Director" is a director who is not an employee of
the Company or an affiliate (as defined) of the Company, who has not been so
employed within one year before the time of grant, and has been elected as a
director by the stockholders of the Company. No Outside Director may be granted
more than one Director Option. The option exercise price for each share of
Common Stock covered by a Director Option is the fair market value (as defined)
of such share on the date the Director Option is granted. Each Director Option
covers that number of shares determined by dividing $100,000 by the fair market
value (as defined) of a share of Common Stock on the date of grant, but in no
event may the number of shares subject to such Director Option be greater than
50,000. Each Director Option has a term of ten years from the date of grant,
subject to earlier termination as provided in the Directors' Plan.
Each outstanding Director Option is exercisable at any time and from time
to time in accordance with the terms of the Directors' Plan. Shares purchased
pursuant to the exercise of any Director Option are subject to repurchase by the
Company within three years of the date of grant of the Director Option at the
exercise price upon termination of the Outside Director's directorship with the
Company as follows: as to all shares so purchased if termination occurs prior to
the first anniversary of the date of grant of the Director Option; as to up to
two-thirds of the shares purchased pursuant to the Director Option if
termination occurs prior to the second such anniversary; and as to up to
one-third of the shares purchased pursuant to the Director Option if termination
occurs prior to the third such anniversary. The shares cease to be subject to
the right of the Company to repurchase them if termination of the directorship
is due to the death of the Outside Director or if a change of control (as
defined) of the Company occurs at any time before the Outside Director's
directorship is terminated.
OTHER ARRANGEMENTS
During Fiscal 1996 prior to his appointment as Chief Executive Officer in
December 1996, Malcolm L. Sherman served as a consultant to the Company on
marketing, financial and general management matters and received fees totaling
$57,612 for services rendered in Fiscal 1996.
COMPENSATION OF EXECUTIVE OFFICERS
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Company's executive compensation program is administered by the three
member Compensation Committee of the Board of Directors. The following is a
report covering compensation paid or accrued in Fiscal 1996, which is submitted
by the Compensation Committee whose members are, T. Michael Long, Stuart B. Ross
and Bill W. Sorenson and a Special Committee whose members include each of the
foregoing persons and Herbert M. Stein. The Special Committee was constituted in
Fiscal 1996 to consider and recommend to the Compensation Committee the terms
and conditions of the respective changes of relationship of Malcolm L. Sherman,
the Company's Chief Executive Officer since December 1996 (the
8
<PAGE> 11
"CEO") and Robert Stein, the Company's former Chief Executive Officer (the
"Former CEO"). This report addresses the elements of the executive compensation
program for Fiscal 1996, including a discussion of the decisions regarding the
Fiscal 1996 compensation of the CEO and the Former CEO and the Company's other
executive officers who were executive officers in Fiscal 1996, including the
persons named in the Summary Compensation Table below (collectively, "Senior
Management") and the severance arrangement with the Former CEO.
The Compensation Committee has considered the effect of the limitations on
the deductibility of executive compensation under Section 162(m) of the Internal
Revenue Code of 1986, as amended (the "Code"), on the Company's compensation
policies and practices, and, in connection therewith, with the Board of
Directors, proposes that the stockholders approve the amendment to the 1987
Stock Option Plan set forth in Proposal 2 to this Proxy Statement. Section
162(m) generally disallows a tax deduction by a public company for annual
compensation in excess of $1 million paid to its chief executive officer and to
any of the four other most highly compensated executives. Certain
performance-based compensation of the type provided in the Company's 1987 Stock
Option Plan can be exempt from the Section 162(m) deduction limit if the plan
satisfies the requirements of Internal Revenue Service ("IRS") regulations
interpreting Section 162(m). It is the policy of the Compensation Committee and
Board of Directors to seek to preserve tax deductibility of compensation paid to
executives unless regulatory requirements to do so are contrary to the best
interests of the Company and its shareholders. In order for the compensation
corresponding to that which is recognized upon the exercise of stock options
under the 1987 Stock Option Plan to be tax deductible, IRS regulations require
that the stockholders approve at this Annual Meeting an amendment to the 1987
Stock Option Plan which limits the maximum number of shares with respect to
which options may be granted to any one participant under such plan. To retain
maximum flexibility, the Board of Directors has adopted an amendment to the 1987
Stock Option Plan to provide for a 1,000,000 share limit in any fiscal year and
is requesting that the stockholders approve the amendment in Proposal 2 of this
proxy statement. If the stockholders approve Proposal 2, the limitation on
deductible compensation under Section 162(m) will not apply to future
compensation of the Company's executives as a result of their exercise of
non-qualified stock options under the 1987 Stock Option Plan. Compensation
attributable to the Company's 1995 Incentive Plan and 1985 Plan does not
currently qualify for any exception to the Section 162(m) tax deduction
limitations and therefore counts against the limit.
CEO COMPENSATION -- The CEO was elected as CEO effective upon the
resignation of the Former CEO on December 4, 1996. The CEO had been elected as
Chairman in July 1996. The CEO's compensation and the Former CEO's severance
arrangement were negotiated by the Special Committee with the advice of KPMG
Peat Marwick LLP ("KPMG"), who acted as independent compensation consultants to
the Company to assist the Special Committee in determining reasonable
arrangements with the CEO and the Former CEO for compensation and severance,
respectively. These arrangements were subsequently approved by the Compensation
Committee. The compensation for the Former CEO prior to his termination of
employment is discussed in "Senior Management, Including the Former CEO" below.
The CEO's compensation approved by the Compensation Committee in November
1996 is comprised of an annual salary of $250,000, such bonus as may be
determined by the Board of Directors or the Compensation Committee and a stock
option covering 900,000 shares of Common Stock pursuant to the Company's 1987
Stock Option Plan (the "1987 Stock Option Plan"). Of the 900,000 shares, 300,000
shares are immediately exercisable and the remaining 600,000 shares will become
exercisable in two 300,000 share increments when the fair market value (as
defined) of the Common Stock is equal to or greater than $6.00 and $8.00,
respectively. KPMG compared the CEO's above-described compensation to a
compensation peer group consisting of fifteen consumer goods companies, some of
which were substantially larger and substantially smaller than the Company, and
the CEO's cash compensation was found to be less than the
9
<PAGE> 12
25th percentile of such companies and his long-term compensation was above that
paid to other new chief executive officers but reflected the relatively high
risk involved with stock options. Overall, the CEO's total compensation is at
median competitive levels with respect to other recently hired outside chief
executive officers. The CEO's Fiscal 1996 compensation also includes an award
made by the Compensation Committee in September 1996 pursuant to the Company's
1996 Performance Unit Rights Award Plan (as amended, the "1996 Performance Unit
Rights Award Plan") adopted by the Company in September 1996 in order to attract
and retain competent key employees and directors and provide those persons with
an opportunity to participate in the increased value of the Company. The award
to the CEO was in recognition of his election and contribution to the Company as
Chairman and is more fully described in "-- Option/SAR Grants Table" below. In
February 1997, the awards made to the CEO and certain Senior Management under
the 1996 Performance Unit Rights Award Plan were canceled and replaced by stock
options granted pursuant to the 1987 Stock Option Plan, as more fully described
in "SAR Awards" below.
The Former CEO's severance arrangement was negotiated with the advice of
KPMG and was in lieu of the rights accorded to him under his employment
agreement with the Company. The terms of the Former CEO's severance arrangement
are described in "-- Employment, Termination of Employment and Change of Control
Arrangements" below, and consisted of the following: A lump sum payment of
$1,917,000, waiver of restrictions on transfer of 103,795 shares of restricted
stock owned by the Former CEO, benefit coverage continuation for a maximum
period of three years, options to purchase an aggregate of 193,000 shares of
Common Stock to remain in force in accordance with the terms of such stock
option agreements, cancellation of the remaining 604,718 options and issuance by
the Company of performance unit rights pursuant to the Company's 1996
Performance Unit Rights Award Plan, more fully described in "-- Option/SAR
Grants Table" below. The Former CEO's severance arrangement also provides for a
three year covenant against competition with the Company and for consultation
services to be provided by him on an as-needed basis for a period of three
years.
SENIOR MANAGEMENT, INCLUDING THE FORMER CEO -- GENERAL -- Compensation for
Senior Management, which includes the Former CEO until his resignation in
December 1996 but excludes Robert Varakian whose compensation is discussed in
"Other Arrangements" below, was based upon the Company's 1995 Incentive
Compensation Plan for Executive Employees (the "1995 Incentive Plan"). The
purpose of the 1995 Incentive Plan is to enable the Company and its subsidiaries
to attract and retain highly qualified executive management and to motivate such
individuals by providing competitive total compensation based partly on their
performance and partly on the performance of the Company. The 1995 Incentive
Plan provides variable performance incentives based on the Company's performance
and the participating executive's individual performance and contribution to the
achievement of Company objectives.
The structure of the 1995 Incentive Plan was proposed by Towers Perrin, an
independent consulting firm retained by the Compensation Committee (the
"Independent Consultant") for compensation during the period of Fiscal 1995
through Fiscal 1999, inclusive. The 1995 Incentive Plan is based on total
remuneration and provides for a combination of salary, stock options and
restricted stock. The 1995 Incentive Plan consists of three components: Base
compensation, annual incentive compensation awards (cash bonuses based on Return
on Capital (defined as pre-tax operating income (before interest expense and
amortization of goodwill) divided by invested capital), and long-term incentive
awards (an award made in the Company's 1995 fiscal year of restricted stock
which vests based on performance goals for each of the five fiscal years
beginning in Fiscal 1995 (with no further grants anticipated to be made in such
fiscal years), and stock option awards granted each year for long-term
incentive). Each calendar year participating Senior Management are allocated
incentive compensation awards from a profit sharing pool determined by the
Compensation Committee, based upon Target Return on Capital (as defined)
determined by the Compensation Committee for each fiscal year from Fiscal 1995
through Fiscal 1999, as follows: At the beginning of each year, a target
10
<PAGE> 13
bonus amount will be specified for each executive. As of the end of the year,
the profit sharing pool will be comprised of the sum of all such target bonus
amounts adjusted to reflect actual Operating Profit (as defined) for the fiscal
year. One-half of the amount of the profit sharing pool will then be allocated
among eligible executives according to the ratios of the target bonus amounts
determined for them at the start of the year compared to the total of target
bonus amounts for all executives in the profit sharing pool. The balance of the
amounts in such profit sharing pool will be allocated to eligible executives at
the discretion of the Compensation Committee.
The 1995 Incentive Plan provides participating executives with the option
to have all or a portion of any bonus and any increase in base compensation over
the prior year's base compensation paid either (i) in cash, (ii) deferred until
a specified date or time with interest to be paid by the Company at a rate
agreed to by the Committee, (iii) in shares of restricted stock valued at 130%
of the foregone cash payment based upon the market price of such Common Stock on
the last trading day of the year preceding the year to which the payment
relates, or (iv) in stock options valued at 250% of the foregone cash payment
according to the Black-Scholes method of valuation and calculated as of the last
trading day of the year preceding the year to which the payment relates.
Restricted stock and stock options are subject to the terms and conditions of
the Company's respective stock plans and such additional restrictions as may be
specified in the 1995 Incentive Plan. Such terms and conditions are more fully
described below and in the notes following the Summary Compensation and
Option/SAR Grants Tables.
In the event of a Change of Control (as defined), the 1995 Incentive Plan
provides for accelerated payment of unpaid annual incentive compensation
amounts, the lapsing of all restrictions on restricted stock and of the
Company's repurchase rights on stock acquired through the exercise of stock
options.
FISCAL 1996 TOTAL REMUNERATION -- The mix of total remuneration for the
Former CEO and each of the members of Senior Management participating in the
1995 Incentive Plan ("Participating Senior Management") was approved by the
Compensation Committee based upon the Independent Consultant's general
recommendations. The Independent Consultant's recommendations were determined
with consideration to the mix of pay for executives in similar firms, the
Company's historical pay practices and its compensation philosophy which
emphasizes variable stock-based compensation. In its comparison with similar
firms, the Independent Consultant utilized its Annual Executive Compensation
Data Bank Survey comprised of approximately 350 companies, of which
approximately 60 were consumer products companies and the remainder were general
industrial companies. Such companies are representative of those included in the
peer groups used in the performance graph in the section which follows this
Report.
The following chart summarizes the mix of compensation components for the
Former CEO and Participating Senior Management in Fiscal 1996:
<TABLE>
<CAPTION>
ANNUAL
ANNUALIZED STOCK
1996 BASE TARGET RESTRICTED OPTION
EXECUTIVE(1) SALARY BONUS SHARES SHARES TOTAL
------------ --------- ------ ---------- ------ -----
<S> <C> <C> <C> <C> <C>
Stuart W. Cohen (2)..................... 65% 11% 8% 15% 100%
Donato A. DeNovellis.................... 51% 17% 11% 21% 100%
Robert Stein, Former CEO................ 41% 20% 13% 26% 100%
Jeffrey A. Weinstein.................... 60% 15% 9% 16% 100%
</TABLE>
- ---------------
* Percentages of total remuneration were rounded.
11
<PAGE> 14
(1) Neither the CEO nor Robert Varakian participate in the 1995 Plan. The CEO's
compensation is described above in "CEO Compensation." Mr. Varakian's
compensation is described below in "Other Arrangements."
(2) Stuart W. Cohen was hired by the Company in June 1995. Mr. Cohen's
compensation was approved by the Compensation Committee based upon the
evaluation of the position which he was filling and his experience and
qualifications.
FISCAL 1996 BASE COMPENSATION -- Base compensation for Fiscal 1996 was set
by the Compensation Committee in February 1996. Base compensation increased 4.2%
for the Former CEO and from 4.2% to 7.0% for Participating Senior Management
compared to base compensation for Fiscal 1995. In accordance with the terms of
the 1995 Incentive Plan, for Fiscal 1996, the Former CEO and all other
Participating Senior Management elected to forego 100% of their Fiscal 1996
salary increases to acquire restricted stock.
FISCAL 1996 ANNUAL INCENTIVE COMPENSATION AWARDS -- No bonuses were paid
for Fiscal 1996 to Participating Senior Management because the Target Return on
Capital (as defined) for Fiscal 1996 was not met.
LONG-TERM INCENTIVE AWARDS -- In October 1994, the Compensation Committee
approved the award of grants of restricted stock reflected in the tables that
follow pursuant to the 1984 and 1985 Plans to the Former CEO and Participating
Senior Management (except for Mr. Cohen whose award was approved in connection
with his hiring by the Company in June 1995), with no further grants anticipated
to be made through fiscal 1999 other than to reflect promotions or changes in
responsibilities. The number of shares granted was set by the Compensation
Committee based on the total remuneration percentages described above based on
the $6.375 share closing price of the Common Stock as reported by the New York
Stock Exchange (the "NYSE") on January 3, 1995, the date of award. Under the
1995 Incentive Plan and the individual restricted stock purchase agreements, the
shares are apportioned into five blocks ("Performance Blocks"), with each
identified with one fiscal year in the 5-year period beginning with the fiscal
1995 and ending with fiscal 1999. Restrictions on disposition on shares in each
Performance Block lapse either (i) if the specified Target Return on Capital (as
defined) for the performance of the Company for the designated year for the
Performance Block is achieved, at the rate of 20% per year on each of the first,
second, third, fourth and fifth anniversaries of the closing date (as defined)
for each full year of employment following the later to occur of (a) January 1
of the year designated for the Performance Block, or (b) the closing date (as
defined) for the shares in such Performance Block; (ii) upon the purchaser's
death or disability (as defined); (iii) upon a change of control (as defined);
or (iv) upon specified continued service with the Company. The restrictions on
disposition also lapse in accordance with the terms of the Participating Senior
Management's employment agreements, more fully described in "-- Employment,
Termination of Employment and Change of Control Arrangements" below.
Restrictions on disposition on shares held by the Former CEO were waived by the
Company in connection with his severance arrangement with the Company more fully
described in "CEO Compensation" above.
The Compensation Committee also approved the grant for Fiscal 1996 of stock
options reflected in the tables that follow pursuant to the 1987 Stock Option
Plan and the 1995 Incentive Plan to the Former CEO and Participating Senior
Management. Each option granted under the 1987 Stock Option Plan is referred to
as an "Employee Option." The number of shares covered by options pursuant to the
1995 Incentive Plan was set by the Compensation Committee based on the total
remuneration percentages described above at a $3.79 Black-Scholes value
calculated by the Independent Consultant based upon a $6.375 share closing price
of the Common Stock as reported by the New York Stock Exchange on January 3,
1995, the date of award. Employee Option grants provide the right to purchase
shares of Common Stock at the fair market value on the date of grant. Each
Employee Option for Fiscal 1996 for Participating Senior Management becomes
12
<PAGE> 15
exercisable immediately but is subject to repurchase rights of the Company which
lapse over three years of the date of grant of the option or upon the
executive's death or disability (as defined), upon a change of control (as
defined), or in accordance with the terms of Participating Senior Management's
employment agreements, more fully described in "-- Employment, Termination of
Employment and Change of Control Arrangements" below. The Former CEO's Employee
Option granted to him for Fiscal 1996 was among those options canceled in
connection with his severance arrangement with the Company more fully described
in "CEO Compensation" above. See also "SAR Awards" below.
PAYMENT IN FISCAL 1996 OF INTERMEDIATE PORTION OF 1994 INCENTIVE
PLAN -- The 1995 Incentive Plan provided that accruals under the intermediate
portion of the prior plan (the "1994 Incentive Plan") were "frozen" as of
December 31, 1994 and that payment of awards, if any, which were to be made in
future years pursuant to the terms of the 1994 Incentive Plan, were not
accelerated. The intermediate portion of the 1994 Incentive Plan was based on an
approximate 25% compounded growth in earnings per share ("EPS") per year for
fiscal years 1992 and 1993 and 15% for fiscal 1994 in order for plan
participants to receive 100% of the award and a minimum 10% compounded growth in
EPS per year below which no award could be earned. The maximum award (100%) was
determined on the basis of a percentage of the executive's salary for each year
in the measuring period, which for the Former CEO was 30% and for Mr. DeNovellis
and Mr. Weinstein was 20%. In Fiscal 1994, 93% of the target EPS growth rate was
achieved and participants received payment for the first and second three-year
performance cycles (Fiscal 1992 through Fiscal 1994 and Fiscal 1993 through
Fiscal 1995). Amounts were calculated for the remaining three-year performance
cycle, and payments reflected in the Summary Compensation Table below were made
for the third three-year performance cycle (Fiscal 1994 through Fiscal 1996)
based on the following percentages of the executives' Fiscal 1994 base salary:
The Former CEO, 5% and Mr. DeNovellis and Mr. Weinstein, each 3.3%. The CEO, Mr.
Cohen and Mr. Varakian did not participate in the 1994 Incentive Plan, and the
Former CEO received a severance payment more fully described above in "CEO
Compensation" in lieu of any payment under the 1994 Incentive Plan.
OTHER ARRANGEMENTS -- Mr. Varakian's Fiscal 1996 compensation from January
1, 1996 to July 23, 1996 was based upon an employment agreement with B. VIA
International Housewares, Inc. entered into in a prior year for services
rendered as that company's President. In July 1996, Mr. Varakian was appointed
to serve as an executive officer of the Company, at which time the Compensation
Committee approved the grant to him of 10,000 shares of restricted stock and a
stock option covering 25,000 shares, more fully described in the "Summary
Compensation Table" and the notes with respect thereto below, based upon his
increased responsibilities. Effective September 1996 when he assumed
responsibility as Senior Vice President -- Sales and Marketing of Ekco
Housewares, Inc. in addition to his other responsibilities, the Company
negotiated and entered into an employment agreement with Mr. Varakian which is
more fully described in "-- Employment, Termination of Employment and Change of
Control Arrangements" below and awarded him a SAR under the 1996 Performance
Unit Rights Award Plan, more fully described below.
SAR AWARDS -- In September 1996, awards were made pursuant to the 1996
Performance Unit Rights Award Plan to the CEO to recognize his appointment and
contribution as Chairman, to Mr. DeNovellis to recognize his appointment and
contribution as Senior Vice President of Ekco Housewares, Inc., a subsidiary of
the Company, to Mr. Varakian to recognize his increased responsibilities and
contribution as Senior Vice President -- Sales and Marketing of Ekco Housewares,
Inc., and to Mr. Weinstein to recognize his appointment and contribution as
President of Ekco Consumer Plastics, Inc., a subsidiary of the Company. Awards
under this plan are more fully described in "-- Option/SAR Grants Table" below.
In February 1997, the Compensation Committee approved the cancellation of the
awards made to the CEO, Mr. DeNovellis, Mr. Varakian and Mr. Weinstein in
exchange for the grant of stock options pursuant to the 1987 Stock Option Plan,
more fully described below in Note 2 to the "Option/SAR Grants Table" below.
13
<PAGE> 16
The tables below and the accompanying footnotes reflect the decisions
covered by the above discussion.
T. MICHAEL LONG STUART B. ROSS BILL W. SORENSON HERBERT M. STEIN
PERFORMANCE GRAPH
The following table compares the total shareholder return to the Company's
Common Stock with the Standard & Poor's 500 Index and the Dow Jones Consumer
Non-Cyclical Index for the period of five years and assumes $100 was invested on
December 31, 1991. Total return assumes that dividends, if any, were reinvested.
The stock performance in the table below is not necessarily indicative of future
price performance.
[GRAPH]
<TABLE>
<CAPTION>
MEASUREMENT PERIOD DJ CONSUMER,
(FISCAL YEAR COVERED) EKCO GROUP, INC. S&P 500 NON-CYCLICAL
<S> <C> <C> <C>
12/91 100.00 100.00 100.00
12/92 103 108 95
12/93 71 118 92
12/94 66 120 102
12/95 62 165 149
12/96 46 203 186
</TABLE>
14
<PAGE> 17
SUMMARY COMPENSATION TABLE
The following Summary Compensation Table includes individual compensation
information for the Company's CEO, its former CEO and each of the four other
most highly compensated executive officers of the Company in Fiscal 1996 who
were serving as executive officers of the Company at the end of Fiscal 1996
(collectively, the "Named Executive Officers") for services rendered in all
capacities to the Company during the last three fiscal years:
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION AWARDS
---------------------------------------------
ANNUAL COMPENSATION RESTRICTED SECURITIES
NAME AND ------------------- STOCK UNDERLYING ALL OTHER
PRINCIPAL SALARY BONUS AWARD(S) OPTIONS/SARS COMPENSATION
POSITION(S) YEAR ($)(1) ($)(2) ($)(3)(4) (#)(3)(5)(6) ($)(7)
- ---------------------------------- ----- -------- ------- ---------- --------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Malcolm L. Sherman(8)............. 1996 18,108 -- -- 900,000/100,000 76,612
Chairman and Chief
Executive Officer
Stuart W. Cohen................... 1996 182,300 -- -- 12,847 5,127
Vice President, 1995 97,596 -- 108,425 7,161 --
Strategic Planning
and Business Development
Donato A. DeNovellis.............. 1996 207,000 6,297 21,739 24,538/100,000 22,609
Executive Vice 1995 207,000 6,297 212,821 24,538 27,471
President, Finance 1994 198,714 58,492 -- 20,000 18,463
and Administration,
and Chief Financial
Officer
Robert Varakian................... 1996 300,000 199,000 51,500 33,000/250,000 --
Vice President of Marketing
Jeffrey A. Weinstein.............. 1996 219,600 7,320 16,248 16,491/50,000 23,178
Executive Vice 1995 219,600 7,320 165,024 16,491 28,766
President, Secretary and 1994 219,600 53,910 -- 22,000 30,245
General Counsel
Robert Stein(9)................... 1996 344,385 -- 27,470 66,359/525,718 2,040,292
Former President and 1995 370,000 18,500 578,570 66,359 62,780
Chief Executive Officer 1994 370,000 148,000 -- 75,000 78,486
</TABLE>
- ---------------
(1) The amounts shown include the individual's before-tax contributions to the
Company's 401(k) retirement plan.
(2) The amounts shown for Fiscal 1996 are bonuses paid pursuant to the
intermediate portion of the Company's 1994 Incentive Plan except for Mr.
Varakian whose Fiscal 1996 bonus was paid pursuant to his Employment
Agreement.
(3) Pursuant to the Company's Series A Junior Participating Preferred Stock
Purchase Rights Plan, with each share of Common Stock issued, including
shares of Common Stock issued in connection with a compensation plan, a
right to purchase one-hundredth of a share of the Company's Series A Junior
Participating Preferred Stock will be issued. Such rights are not currently
exercisable.
(4) The amounts shown for Fiscal 1996 for each of the following persons include
restricted stock awards made pursuant to the 1985 Plan as a result of the
elections made by such individuals to forego all of their increases in
salary for Fiscal 1996 in accordance with the terms of the 1995 Incentive
Plan and valued based upon the following closing prices of the Common Stock
as reported by The Wall Street Journal (net of the consideration paid) the
day after the end of each fiscal quarter when a portion of such shares were
awarded (on April 1, 1996 at $5.875 per share, July 1, 1996 at $5.625 per
share, September 30, 1996
15
<PAGE> 18
at $4.625 per share and December 30, 1996 at $4.125 per share (or as to Mr.
Stein, December 4, 1996 at $3.375)), as follows: Mr. DeNovellis, 4,381
shares valued at $21,739; Mr. Robert Stein, 5,753 shares valued at $27,470;
and Mr. Weinstein, 3,274 shares valued at $16,248. All such shares are held
in escrow. (Mr. Cohen, who participated in the 1995 Incentive Plan, did not
make any such election. Mr. Sherman and Mr. Varakian did not participate in
the 1995 Incentive Plan.) Under the 1985 Plan, restrictions on disposition
lapse at the rate of 20% per year on each of the first, second, third,
fourth and fifth anniversaries of the closing date (as defined), provided
that the purchaser is at each such anniversary date an employee or director
of the Company, upon the purchaser's death or disability (as defined) or
upon a change of control (as defined). Dividends are paid on restricted
shares of Common Stock at the same rate paid to all shareholders (dividends
were declared for the first two quarters of Fiscal 1996 at the quarterly
rate of $0.02 per share).
The amount shown for Fiscal 1996 for Robert Varakian reflects an award of
restricted stock made pursuant to the Company's 1985 Restricted Stock Plan
(the "1985 Plan") which is valued based upon the $5.25 closing price of the
Common Stock on the NYSE as reported by The Wall Street Journal (net of the
consideration paid) on the August 6, 1996 grant date. The shares are
apportioned into Performance Blocks, with each identified with a year of a
4-year period beginning with 1996 and ending with 1999. Restrictions on
disposition on shares in each Performance Block lapse either (i) if the
specified target return on capital (as defined) for the performance of the
Company for the designated year for the Performance Block is achieved, then
at the rate of 25% per year on each of the first, second, third and fourth
anniversaries of the closing date (as defined) for each full year of
employment following the later to occur of (a) January 1 of the year
designated for the Performance Block, or (b) the closing date (as defined)
for the shares in such Performance Block; (ii) upon the purchaser's death,
disability (as defined); (iii) upon a change of control (as defined); or
(iv) upon specified continued service with the Company. All such shares are
held in escrow.
On December 29, 1996, the number of shares listed below were held in escrow,
are presently subject to repurchase by the Company and as to which certain
transfer restrictions apply pursuant to the terms of the 1984 and 1985 Plans
for each named purchaser. The shares are valued as of December 31, 1996 at
$4.125 per share (net of consideration paid).
<TABLE>
<CAPTION>
NO. OF MARKET VALUE
SHARES AT 12/31/96
------ ------------
<S> <C> <C>
Stuart W. Cohen................................................ 16,366 $ 65,873
Donato A. DeNovellis........................................... 40,246 $ 161,990
Robert Varakian................................................ 10,000 $ 40,250
Jeffrey A. Weinstein........................................... 31,021 $ 124,860
</TABLE>
(5) Options to purchase the number of shares shown were granted pursuant to the
Company's 1987 Stock Option Plan.
(6) Performance unit rights ("SARs") covering the number of shares shown were
granted pursuant to the 1996 Performance Unit Rights Award Plan. All SARs
except for those awarded to Robert Stein were canceled in February 1997 in
exchange for stock options. See Note 2 to the "Options/SAR Grants Table"
below.
(7) The amounts shown for Fiscal 1996 consist of (i) the sum of the economic
benefit to each of the following persons for split dollar life insurance
coverage plus the difference between the premiums paid in 1996 and the
present value of the recoverable premium, as follows: Mr. DeNovellis,
$15,166; and Mr. Weinstein, $14,443; the $46,992 economic benefit of the
Fiscal 1996 premium for Mr. Stein whose policy terminated in Fiscal 1996 and
who had death benefits through his date of termination (Mr. Sherman, Mr.
16
<PAGE> 19
Cohen and Mr. Varakian did not have such coverage); (ii) the value of shares
of ESOP Preferred Stock and Common Stock allocated to the account of each
person for plan year 1996 pursuant to the ESOP, as follows: Mr. Cohen,
$5,127; Mr. DeNovellis, $7,443; and Mr. Weinstein, $8,735 (Mr. Sherman and
Mr. Varakian do not participate in the ESOP in Fiscal 1996); (iii) for Mr.
Sherman, $19,000 of fees for services as a director and $57,612 of fees for
services as a consultant, both prior to his December 4, 1996 appointment as
Chief Executive Officer; (iv) an accrued severance payment to Mr. Stein of
$1,917,000, and (v) the $76,300 value of shares of ESOP Preferred Stock and
Common Stock paid to Mr. Stein in January 1997 based upon the closing price
of the Common Stock as reported by The Wall Street Journal on January 20,
1997.
(8) Mr. Sherman became Chief Executive Officer of the Company on December 4,
1996 at a current annual salary of $250,000.
(9) Mr. Stein resigned from his positions as President and Chief Executive
Officer on December 4, 1996.
OPTION/SAR GRANTS TABLE
The following table sets forth information as to option and SAR grants made
by the Company during Fiscal 1996 to the Named Executive Officers pursuant to
the 1987 Stock Option Plan and 1996 Performance Unit Rights Award Plan:
<TABLE>
<CAPTION>
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/SARS
UNDERLYING GRANTED TO EXERCISE GRANT DATE
OPTIONS/SARS EMPLOYEES OR BASE PRICE EXPIRATION PRESENT
NAME (#)(1)(2) IN FISCAL YEAR ($/SH) DATE VALUE($)(3)
- ---- --------------- -------------- -------------- ----------------- -----------------
<S> <C> <C> <C> <C> <C>
Stuart W. Cohen.............. 12,847/ -- 1.1/ -- 5.9375/ -- 03-06-06/ -- 39,659/ --
Donato A. DeNovellis......... 24,538/100,000 2.0/ 9.7 5.9375/4.8875 03-06-06/12-31-01 75,749/168,600
Malcolm L. Sherman........... 900,000/100,000 74.5/ 9.7 3.3750/4.8875 12-04-06/12-31-01 1,494,000/168,600
Robert Stein (4)............. --/200,000 --/19.5 --/3.6875 --/09-08-98 --/111,400
--/124,000 --/12.1 --/3.5000 --/06-22-99 --/ 94,984
--/ 69,000 --/ 6.7 --/3.5000 --/12-01-99 --/ 69,414
--/ 66,359 --/ 6.5 --/5.9375 --/12-01-99 --/ 28,269
--/ 66,359 --/ 6.5 --/6.5000 --/12-01-99 --/ 23,624
Robert Varakian.............. 8,000/250,000 0.7/24.4 5.9375/4.8875 02-06-06/12-31-01 24,696/421,500
25,000/ -- 2.1/ -- 5.3750/ -- 08-23-06/ -- 66,325/ --
Jeffrey A. Weinstein......... 16,491/ 50,000 1.4/ 4.9 5.9375/4.8875 03-06-06/12-31-01 50,908/ 84,300
</TABLE>
(1) The Employee Options were granted pursuant to the 1987 Stock Option Plan and
individual option agreements. The exercise price of each Employee Option
(which is equal to 100% of the fair market value of the Common Stock on the
date of grant) is subject to adjustment for stock splits or dividends,
combinations, recapitalizations or similar transactions. Except for the
Employee Options held by Malcolm L. Sherman and one Employee Option held by
Robert Varakian more fully described below, the Employee Options are
exercisable at any time and from time to time in accordance with the terms
of the individual option agreements between the Company and the optionees.
Shares of Common Stock purchased pursuant to the exercise of any such option
are subject to repurchase by the Company within three years of the date of
grant of the option at the option exercise price upon the termination of the
employee's employment with the Company as follows: as to all shares so
purchased if such termination occurs prior to the first anniversary of the
date of grant of the option; as to up to two-thirds of the shares which may
be purchased pursuant to the option if termination occurs prior to the
second such anniversary; and as to up to one-third of the shares which may
be purchased pursuant to the option if termination occurs prior to the third
such anniversary. Shares of Common Stock purchased upon the exercise of such
Employee Options cease to be subject to the right of the Company to purchase
them if
17
<PAGE> 20
termination of employment is due to the death or disability (as defined) of
the employee, or if a change of control (as defined) of the Company occurs
at any time before the employee's employment is terminated or as otherwise
provided in the executive's employment agreement.
The Employee Option granted to Mr. Sherman is immediately exercisable as to
300,000 shares and exercisable as to up to two additional 300,000 share
increments on or after the date on which the fair market value (as defined)
of the Common Stock is equal to or greater than $6.00 and $8.00,
respectively. Mr. Sherman's Employee Option becomes immediately fully
exercisable in the event of the merger or consolidation of the Company or if
the Company is liquidated or as otherwise provided in his employment
agreement.
The Employee Option covering 8,000 shares granted to Mr. Varakian in
February 1996 becomes exercisable in equal annual installments over a
five-year period assuming continued employment. This Employee Option will be
fully exercisable by Mr. Varakian on and after the fifth anniversary of the
date of grant. This Employee Option becomes fully exercisable upon the
occurrence of Mr. Varakian's death or disability (as defined) or as
otherwise provided in Mr. Varakian's employment agreement.
(2) The SARs were granted pursuant to the 1996 Performance Unit Rights Award
Plan. All of the SARs granted, except for Mr. Stein's SARs were exchanged
for stock options in February 1997, as more fully described below. The SARs
were exercisable, in whole or in part, at any time during a period beginning
on the date of award and ending on the dates specified in the above table.
With the exception of the SARs granted to Mr. Stein, as described below in
Note 4, the following terms applied: Upon exercise, the participant was
entitled to payment of an amount equal to the appreciation in value of the
SAR above its value on the grant date. If the participant's employment with
the Company terminated for any reason other than good cause (as defined),
the participant had three months from the date of termination to exercise
any unexercised SARs. If the participant was terminated from his employment
by the Company for good cause, any SAR that had not theretofore been
exercised would be forfeited.
The SARs awarded to the CEO, Mr. DeNovellis, Mr. Varakian and Mr. Weinstein
were canceled in February 1997 in exchange for stock options covering the
following number of shares pursuant to the 1987 Stock Option Plan: The CEO,
110,000 shares, Mr. DeNovellis, 110,000 shares, Mr. Varakian, 275,000 shares
and Mr. Weinstein, 55,000 shares. All of such options are immediately
exercisable, and each such stock option has an exercise price of $4.125 per
share (the closing price on the date of grant) and a term of 10 years.
(3) Based on the Black-Scholes option pricing model adapted for use in valuing
executive stock options and SARs. The actual value, if any, an executive may
realize will depend on the excess of the stock price over the exercise price
on the date the option or the SAR is exercised, so there is no assurance
that the value realized by an executive will be at or near the value
estimated by the Black-Scholes model. The estimated values under that model
are based upon the following assumptions: stock price volatility of 0.5,
future dividend yield of 0, and interest rates of 5.67%, 5.89%, 6.05% and
6.22%, based on the 1, 2, 3 and 6-year Treasury Strip for the week ending
December 31, 1996. It was also assumed that Employee Options have an
expected life of five years and nine months and that the various SARs had
expected life of 3 years, 2 years and 3 months, 1 year and 5 months or 1
year based on the agreements described in Notes 1 and 2 above and historical
data with respect to exercises of Employee Options.
(4) The SARs were granted to Mr. Stein as part of his severance arrangement.
Each of the SARs has a ceiling on the value of the Common Stock on the
exercise date of $6.625.
18
<PAGE> 21
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION/SAR
VALUES
The table below sets forth information as to the number of securities
underlying Employee and Director Options and SARs and the value of such
securities at the end of Fiscal 1996 with respect to the Named Executive
Officers. None of the Named Executive Officers exercised any stock options
during Fiscal 1996.
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
PTIONS/SARS AT OPTIONS/SARS AT
FY-END (#) FY-END($)
EXERCISABLE/ EXERCISABLE/
NAME UNEXERCISABLE(1) UNEXERCISABLE(1)
- ---- ---------------- ----------------
<S> <C> <C>
Stuart W. Cohen........................................... -- --
Donato A. DeNovellis...................................... -- --
100,000/100,000 --
Malcolm L. Sherman........................................ 300,000/600,000 225,000/450,000
100,000/100,000 --
Robert Stein(2)........................................... 193,000/ -- 355,813/ --
525,718/525,718 --
Robert Varakian........................................... -- --
250,000/250,000 --
Jeffrey A. Weinstein...................................... 192,000/ -- 233,750/ --
50,000/50,000 --
</TABLE>
- ---------------
(1) Based upon the $4.125 closing price of the Common Stock on December 31, 1996
as reported by The Wall Street Journal. The Employee Options and SARs have
exercise or base prices equal to the fair market value (as defined) of the
Common Stock on the dates of grant.
(2) The Employee Options are exercisable by Mr. Stein until June 4, 1997.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
In July 1992, the Company adopted the Supplemental Executive Retirement
Plan (the "SERP"). The SERP is a retirement plan which uses a defined benefit
formula to provide for lump sum payments to be made upon retirement, termination
of employment, death or disability, to certain officers designated by the Board
of Directors, as more fully described below. The SERP is not qualified under
Section 401(a) of the Internal Revenue Code of 1986, as amended (the "Code").
Each lump sum payment to a participant in the SERP is calculated in order
to equal the actuarial equivalent of a lifetime pension. The amount of a
participant's payment under the SERP is generally determined by multiplying an
amount designated by the Compensation Committee with respect to such participant
by such participant's years of Credited Service (as defined). Certain additional
payments are payable to a participant under the SERP if his employment with the
Company terminates within three years of a change in control (as defined) and
under certain other circumstances specified in the SERP. A participant's
benefits under the SERP vest at 20% per year beginning upon the attainment of
five years of Credited Service (as defined), becoming fully vested upon the
attainment of ten years of Credited Service; notwithstanding the foregoing, upon
a change in control (as defined) of the Company, all participants shall become
100% vested in their benefits in the SERP, and if such participant's employment
with the Company terminates within three years after such change in control, a
lump sum payment of SERP benefits shall be made to such participant.
19
<PAGE> 22
The estimated lump sum payments payable under the SERP to the Named
Executive Officer-participants upon each such Named Executive Officer's
respective Normal Retirement Date (as defined) will be the actuarial equivalent
of an annual payment of the following amounts: Mr. DeNovellis, $41,782 per
annum; and Mr. Weinstein, $47,151 per annum. In connection with his termination
of employment in Fiscal 1996, Mr. Robert Stein received $592,147 as payment of
his vested accrued benefit from the SERP in the current year. Mr. Cohen, Mr.
Sherman and Mr. Varakian do not participate in the SERP.
EMPLOYMENT, TERMINATION OF EMPLOYMENT AND CHANGE OF CONTROL ARRANGEMENTS
The Company has employment agreements (collectively, "Employment
Agreements") with its Chief Executive Officer and Senior Management, as well as
with other executives and management personnel. The Employment Agreements with
Messrs. DeNovellis and Weinstein were amended and restated effective May 25,
1995 and were implemented for Mr. Cohen, Mr. Sherman and Mr. Varakian as of June
12, 1995, December 4, 1996 and September 25, 1996, respectively. The Employment
Agreements currently provide for base salaries of $182,300, $226,800, $250,000,
$300,000, and $234,400 for Messrs. Cohen, DeNovellis, Sherman, Varakian and
Weinstein, respectively. The Employment Agreements provide for certain fringe
benefits, including life insurance, participation in certain benefit plans of
the Company, certain medical expenses, the use of an automobile provided by the
Company in the case of Mr. DeNovellis, Mr. Varakian and Mr. Weinstein and an
automobile allowance arrangement in the case of Mr. Sherman.
The Employment Agreements with Mr. Cohen, Mr. DeNovellis and Mr. Weinstein
(the "1995 Employment Agreements") provide for increases as determined by the
Board of Directors or the Compensation Committee based on performance reviews
performed at least annually. The term of each of the 1995 Employment Agreements
began on above-mentioned dates and will continue until terminated by the
executive or the Company. In the event of the total and permanent disability (as
defined) of such executive, the 1995 Employment Agreements provide for salary
and medical, dental and life insurance coverage continuation (as defined) for 36
months (as to DeNovellis and Mr. Weinstein) and 12 months (as to Mr. Cohen), and
outplacement benefits. In the event of such executive's death, the executive's
estate shall receive a lump sum payment of one year's salary in addition to
payment received under the Company's group life plan. In the event of the
executive's death or total and permanent disability, the executive's estate in
the case of death or the executive in the case of disability shall immediately
have the unconditional, unencumbered and free right, title and interest in all
shares of stock of the Company which have granted, sold or optioned (subject to
the estate's or his obligation to pay the option exercise price to the extent
theretofore not paid) to the executive by the Company at any time prior to the
executive's death or disability. The 1995 Employment Agreements provide that if
employment of the executive is terminated by the Company without good cause (as
defined) prior to a change of control (as defined) of the Company or in the case
of Mr. Weinstein if he notifies the Company of his termination of employment
within 90 days after the Company proposes to relocate him without his consent,
the Company is obligated to pay the executive a lump sum in cash (the "Lump Sum
Payment Amount") equal to (i) the executive's then current salary, plus (ii) the
maximum payable to him under all specified compensation bonus plans and
arrangements for the fiscal year in which the termination occurs (subject to
certain adjustments), plus (iii) an amount equal to the value of the securities,
cash or other property allocated to the executive's account in the ESOP for the
fiscal year preceding the fiscal year in which the termination occurs, in
addition to any distribution from the ESOP to which the executive may be
entitled, multiplied by (iv) in the case of Mr. DeNovellis and Mr. Weinstein, by
two, and in the case of Mr. Cohen, by one. In addition, the executive shall be
entitled to benefit coverage continuation until the earlier of either his full
time employment by a third party or, as to Mr. DeNovellis and Mr. Weinstein, two
years, and as to Mr. Cohen, one year, following such termination, as well as
outplacement benefits. Following such termination, certain automobile benefits
are provided to Mr. Weinstein and Mr. DeNovellis for a period of two years, and
each of the above-named executives shall have unconditional, unencumbered and
free right, title and interest
20
<PAGE> 23
to all shares of stock of the Company which have been granted, sold or optioned
(subject to his obligation to pay the option exercise price to the extent
theretofore not paid) to the executive by the Company at any time prior to such
termination. In addition, each of the above-named executives shall be entitled
to receive a gross-up payment (as defined) ("Gross-Up Payment") if any payment
received by him (or his estate) as a result of such termination are subject to
the excise tax imposed by Section 4999 of the Code.
Immediately upon a change of control (as defined) while the executive is
employed by the Company and without regard to whether or not the executive's
employment is terminated, the 1995 Employment Agreements provide that executive
shall immediately have unconditional, unencumbered and free right, title and
interest to all shares of stock of the Company which have been granted, sold or
optioned (subject to his obligation to pay the option exercise price to the
extent theretofore not paid) to the executive by the Company at any time prior
to the change of control. Following a change of control and upon an event of
constructive termination (as defined) or termination of the executive's
employment by the Company without good cause or if the executive elects to
terminate his 1995 Employment Agreement after six months but within 24 months of
the occurrence of a change of control of the Company (unless such change of
control was approved by the resolution of the Company's board of directors with
at least two-thirds of the directors serving as of May 1995 (or June 1995 for
Mr. Cohen) voting in favor), the 1995 Employment Agreements of Mr. DeNovellis
and Mr. Weinstein require that the Company pay each such executive three times
his respective Lump Sum Payment Amount (two times as to Mr. Cohen) as well as
the rights to shares of the Company's stock described above immediately upon
such constructive termination, and provide benefit coverage continuation for a
period of three years for Mr. DeNovellis and Mr. Weinstein (two years for Mr.
Cohen), and outplacement benefits, with respect to Mr. DeNovellis and Mr.
Weinstein, automobile benefits for a period of three years. In addition, each
executive shall be entitled to receive a Gross-Up Payment (as defined) in
certain circumstances.
The 1995 Employment Agreements of Mr. DeNovellis and Mr. Weinstein provide
that in order to assure prompt payment of amounts due upon termination and as
necessary to secure the Company's obligations under any stock appreciation
rights plan or other equity-linked plan (excluding stock options, restricted
stock subject to repurchase rights, or any equity plan which gives the executive
ownership of shares, the Company has agreed to keep in place irrevocable letters
of credit in amounts equal to at least four times the annual salary of Mr.
DeNovellis and Mr. Weinstein. Each of the 1995 Employment Agreements includes a
covenant against competition with the Company extending for a period of 24
months as to Mr. DeNovellis and Mr. Weinstein and 12 months as to Mr. Cohen
after termination for any reason.
The term of the Employment Agreement of Malcolm L. Sherman began on
December 4, 1996 and will continue until terminated by Mr. Sherman or the
Company for any reason. The Employment Agreement provides for salary at the
annual rate of $250,000, such bonus as may be determined by the Board of
Directors or the Compensation Committee and a stock option to purchase an
aggregate of 900,000 shares pursuant to the Company's 1987 Stock Option Plan.
The Employment Agreement includes a covenant against competition with the
Company extending for a period of 36 months after termination for any reason and
provides for a Gross Up Payment in certain circumstances.
The term of the Employment Agreement of Robert Varakian began on September
25, 1996 and will continue until December 31, 1999 unless terminated earlier
and, if not terminated on or before such date, it will automatically renew from
year to year. The Employment Agreement provides for salary at the annual base
salary rate of $300,000 and for a Fiscal 1996 bonus of the greater of $150,000
or 2% of net sales of the Company's subsidiary, B. VIA International Housewares,
Inc., for a fiscal year 1997 bonus of $200,000, with no bonus potential for
fiscal years 1998 or 1999, and for subsequent years of the term, such bonus, if
any, as the Board of Directors or Compensation Committee may determine annually.
In the event of Mr. Varakian's death, his estate shall receive a lump sum
payment of one year's base salary. In the event of the termination of his
employment as a result of his total and permanent disability (as defined), the
Employment Agreement
21
<PAGE> 24
provides for salary continuation for 12 months. If he elects to terminate his
Employment Agreement after six months but within 24 months of the occurrence of
a change of control of the Company (unless such change of control was approved
by resolution of the Company's board of directors with at least two-thirds of
the directors serving as of September 25, 1996 voting in favor), the Company is
obligated to pay him a lump sum cash payment equal to (a) three times his then
current base salary, plus (b) three times the greater of (i) $150,000, or (ii)
the bonus received by him for the fiscal year prior thereto (the "Lump Sum
Payment"), and he shall be entitled to the continuation of medical, dental and
life insurance benefit coverage continuation ("Benefit Continuation") until the
earlier of his full-time employment by a third party with comparable benefits or
three years. If his employment is terminated by the Company without good cause
(as defined) at any time during the term prior to a change of control or if the
Employment Agreement is not renewed, the Company is obligated to pay him a lump
sum payment equal to two times his base salary rate plus any bonus to which he
is entitled. In addition, he is entitled to Benefit Continuation for a period of
two years. Immediately upon a change of control (as defined) while he is
employed by the Company, he shall immediately have the unconditional,
unencumbered and free right, title and interest in all shares of stock of the
Company which have been granted, sold or optioned (subject to his obligation to
pay the option exercise price to the extent not theretofore paid) to him by the
Company at any time prior to the change of control. Following a change of
control and upon an event of constructive termination (as defined) or
termination of his employment by the Company without good cause, his Employment
Agreement requires the Company to pay him the Lump Sum Payment. The Employment
Agreement includes a covenant against competition with the Company extending for
a period of 12 months after termination of employment.
In Fiscal 1996, the Company entered into a severance arrangement with Mr.
Robert Stein which provided for payments and benefits in lieu of rights pursuant
to his employment contract with the Company. The severance arrangement provided
for a lump sum payment in January 1997 of $1,917,000, benefit coverage
continuation through the earlier of November 30, 1999 or his commencement of
full-time employment with an employer with comparable benefits, waiver of
restrictions on transfer of 103,795 shares of restricted stock owned by Mr.
Stein, cancellation of stock options covering 604,718 shares and issuance of
performance unit rights more fully described in the Option/SAR Grants Table
above. Mr. Stein's severance arrangement includes a covenant against competition
with the Company extending until November 30, 1999 and consultation services to
be provided by him on an as-needed basis through such date. In addition, Mr.
Stein received payment of an accrued vested benefit of $592,147 pursuant to the
SERP. Mr. Stein relinquished all right to the split-dollar life insurance policy
purchased for him by the Company.
401(K) RETIREMENT PLAN
The Company sponsors a plan which permits employees to defer compensation
to the extent permitted by Section 401(k) of the Code (the "Retirement Plan").
The Retirement Plan permits, but does not require discretionary contributions by
the Company. Other than the employee deferred compensation, the Company made no
contributions to the Retirement Plan in Fiscal 1996.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
CERTAIN BUSINESS RELATIONSHIPS
THE 1818 FUND, L.P. SHARE PURCHASE. Pursuant to a Securities Purchase
Agreement, in December 1992 the 1818 Fund, L. P. (the "1818 Fund") acquired from
the Company 881,542 shares of Common Stock and a 7.0% Note, which could have
been converted into an aggregate of 2,095,238 shares of Common Stock, subject to
adjustment, for an aggregate purchase price of approximately $30 million. In
March 1996, the Company used a portion of the net proceeds of a private offering
to institutional investors of an aggregate of $125 million
22
<PAGE> 25
principal amount of 9 1/4% Senior Notes due April 2006 to repurchase the $22.0
million outstanding principal amount of the 7.0% Note for a repurchase price of
approximately $18.8 million plus accrued and unpaid interest. As of March 21,
1997, the Fund beneficially owned 4.7% of the Company's outstanding shares of
Common Stock. The Securities Purchase Agreement provided that so long as the
1818 Fund holds certain voting stock (or securities convertible into such voting
stock) that in the aggregate represents five percent or more of the outstanding
voting stock of the Company, commencing with the Company's 1993 Annual Meeting
(or upon the occurrence of certain specified events), at each annual meeting of
stockholders of the Company the 1818 Fund will be entitled to designate one
director to be nominated to the Company's Board of Directors. Mr. T. Michael
Long served as a director of the Company from May 1993 to May 1995 pursuant to
the Securities Purchase Agreement.
ESOP LOANS
On February 23, 1989, the Company's Board of Directors adopted the ESOP.
Simultaneously with the adoption of the ESOP, the Board authorized 1.8 million
shares of ESOP Preferred Stock. On February 28, 1989, the Company sold 1,800,000
shares of ESOP Preferred Stock at a price of $3.61 per share to the ESOP trust
in exchange for an approximately $6.5 million 25-year non-recourse note bearing
interest at 11% per annum (the "1989 ESOP Note"). On March 30, 1995, the trustee
of the ESOP, an executive officer of the Company, borrowed approximately $3.6
million (the "1989 ESOP Note") at a rate of 7.5% interest per annum for a
20-year term (the "1995 ESOP Note"). The proceeds of the 1995 ESOP Note were
used to repay a bank loan pursuant to which the ESOP had borrowed approximately
$6.4 million in May 1989 and repaid the ESOP Note to the Company.
On October 1, 1990, the Board of Directors of the Company authorized the
Company to lend funds to the trustee to make purchases of 1,000,000 shares of
Common Stock on the open market or from the Company as he deemed appropriate,
and as of March 21, 1997, the trustee of the ESOP had acquired 1,000,000 shares
of Common Stock for the ESOP. The Company and the trustee of the ESOP entered
into a twenty-year term loan effective October 1, 1990 pursuant to which the
Company has loaned approximately $3.3 million to the ESOP at an interest rate of
10% per annum. As of December 31, 1996, $2,880,259 was outstanding under the
1990 ESOP Note, and 322,811 of the aforementioned shares were allocated to
employee accounts.
PROPOSAL TO AMEND THE 1987 STOCK
OPTION PLAN TO LIMIT THE NUMBER OF OPTIONS
TO BE GRANTED TO ANY ONE PARTICIPANT
GENERAL
In August 1987, the Board of Directors of the Company approved the adoption
of the 1987 Stock Option Plan, and in April 1988 the 1987 Stock Option Plan
received stockholder approval. The 1987 Stock Option Plan, as amended in
September 1987, March 1988, June 1988, August 1995 and March 1997, is
hereinafter referred to as the "Plan." The Plan provides for the granting of
both options intended to be incentive stock options ("ISO's") within the meaning
of Section 422 of the Code, and non-statutory stock options ("Non-Qualified
Options").
In February 1997, the Board of Directors approved an amendment to the Plan
to limit the number of shares of Common Stock with respect to which options may
be granted to any one participant to 1,000,000 shares per fiscal year. The Board
adopted the amendment to enable the Company to exclude compensation received by
executives from the exercise of Non-Qualified Options from the limitations
otherwise imposed by Section 162(m) of the Internal Revenue Code, as amended
(the "Code"). Section 162(m) generally disallows a tax deduction by a public
company for annual compensation in excess of $1 million paid to its chief
executive officer and to any of its four other most highly compensated
executives. Certain performance-based
23
<PAGE> 26
compensation of the type provided in the Plan can be exempt from the Section
162(m) deduction limit if the plan satisfies the requirements of Internal
Revenue Service ("IRS") regulations interpreting Section 162(m). It is the
policy of the Compensation Committee and Board of Directors to seek to preserve
tax deductibility of compensation paid to employees unless regulatory
requirements to do so are contrary to the best interests of the Company and its
shareholders. In order for compensation corresponding to that which is
recognized upon the exercise of Non-Qualified Options under the Plan to be tax
deductible, IRS regulations require that the stockholders approve at this Annual
Meeting an amendment to the Plan which limits the maximum number of shares with
respect to which options may be granted to any one participant under the Plan.
To retain maximum flexibility, the Board of Directors has adopted an amendment
to the Plan to provide for a 1,000,000 share limit in any fiscal year and is
requesting that the stockholders approve the amendment in this Proposal. If the
stockholders approve the amendment, the limitation on deductible compensation
under Section 162(m) will not apply to future compensation of the Company's
executives as a result of their exercise of Non-Qualified Options under the
Plan. If the stockholders do not approve the amendment, the Company intends to
restrict the exercisability of any Non-Qualified Option granted under the Plan
having an exercise price not less than the fair market value of the Common Stock
on the date of grant. The restriction will provide that such options will not be
exercisable during those times for which the Compensation Committee determines
that it is likely that Section 162(m) will limit tax deductibility of
compensation corresponding to the exercise of such options.
The text of the proposed amendment is attached to this proxy statement as
Exhibit A. See "Plan Benefits" below for information regarding stock options
granted pursuant to the Plan. Principal features of the Plan are outlined below.
NATURE AND PURPOSES OF THE PLAN
The Plan is an arrangement under which employees of and consultants to the
Company and its affiliates (as that term is defined in the Code), other than
those persons who are members of the Compensation Committee may be granted stock
options to purchase the Common Stock. Pursuant to the Company's Series A Junior
Participating Preferred Stock Purchase Rights Plan, a right to purchase one
one-hundredth of a share of the Company's Series A Junior Participating
Preferred Stock is to be issued with each share of Common Stock issued pursuant
to the Plan.
The purposes of the Plan are to encourage ownership of the Common Stock by
employees of and consultants to the Company and its affiliates, to attract able
employees and consultants, to encourage employees and consultants to remain
affiliated with the Company and its affiliates and to provide additional
incentive for such employees and consultants to promote the success of the
Company and its affiliates.
ADMINISTRATION
The Plan is administered by the Board of Directors, who has delegated its
authority to the Compensation Committee. Subject to the express provisions of
the Plan, the Committee has the sole discretion and authority to decide when and
to whom to make grants of options, and to determine the number of shares to be
subject to each option and the other terms and conditions of each option,
including but not limited to restrictions upon exercise and Company repurchase
rights. Within the limits imposed by the Plan, the Compensation Committee also
has the power to interpret the Plan and any option agreement and to make such
rules and determinations as it deems necessary or advisable. Each option granted
pursuant to the Plan is evidenced by a written agreement (an "option
agreement").
TERM OF PLAN AND AMENDMENT
Authority to grant options under the Plan will terminate on May 12, 2002,
unless earlier terminated by vote of the stockholders of the Company. (Any such
earlier termination, however, will not affect any options granted prior to the
effective date of such termination.) The Plan may be amended from time to time
by the
24
<PAGE> 27
stockholders of the Company or by the Board of Directors or the Compensation
Committee, including, without limitation, to the extent necessary to qualify any
of all outstanding options granted or to be granted under the Plan for favorable
federal income tax treatment, provided that any amendment whose scope is such as
to require stockholder approval shall be subject to obtaining such stockholder
approval. No amendment shall affect any options previously granted or option
agreements previously signed unless the amendment expressly states such effect
and the written consent of any option holder adversely affected thereby is
obtained.
ELIGIBILITY
Options may be granted under the Plan to any employee, including officers
and officer-directors, of the Company or its affiliates and to consultants to
the Company. Only employees of the Company are eligible to receive ISO's under
the Plan. Notwithstanding the foregoing, a person serving as a member of the
Compensation Committee is not eligible to receive options granted under the Plan
while serving as a Compensation Committee member. As of March 21, 1997, there
were approximately 1,200 employees and one consultant who were eligible to
receive options under the Plan. All current executive officers of the Company,
two of whom are also directors, are eligible to participate in the Plan.
STOCK SUBJECT TO THE PLAN
The total number of shares of Common Stock that may be issued pursuant to
the Plan cannot exceed, in the aggregate, 4,000,000 shares, subject to
adjustment for stock splits or dividends, combinations, recapitalizations or
similar transactions. Shares subject to options which expire, terminate or are
relinquished will again be available for grant under the Plan. As of March 21,
1997, options covering 3,252,872 shares are currently outstanding under the
Plan. On March 21, 1997, the closing market price of the Common Stock on the New
York Stock Exchange was $5.125 as reported by The Wall Street Journal.
DESCRIPTION OF TERMS OF OPTIONS
The terms of each option, including the option's duration, time or times of
exercise, number of shares covered by the option and exercise price of the
option are determined by the Compensation Committee and stated in the individual
option agreements. The form of payment shall be specified by the Compensation
Committee either by rule or in the individual option agreements. Payment is due
upon the exercise of the option. In addition, each option granted pursuant to
the Plan shall contain the following terms and conditions and such other terms
and conditions as the Compensation Committee may deem appropriate in each case.
Option Exercise Price. The option exercise price for each share of Common
Stock covered by an ISO granted under the Plan may not be less than the fair
market value (as defined) of the Common Stock on the date of grant. In the case
of an ISO granted to a person who owns more than 10% of the voting power of the
Company's capital stock, the price may not be less than 110% of the fair market
value (as defined) on the date of grant, and no such option may be exercisable
more than five years after the date of grant. The option exercise price for each
share of Common Stock covered by a Non-Qualified Option granted under the Plan
may not be less than 50% of the fair market value of such share on the date of
grant.
Option Term. The Compensation Committee may designate any term it deems
appropriate for options granted under the Plan, but no ISO shall be for a term
of more than 10 years from the date of grant (5 years for certain options noted
above) and no Non-Qualified Option shall be for a term of more than 11 years.
Option Exercise. The Plan does not require a minimum holding period before
options may be exercised. Individual agreements, however, may provide that
options will vest, i.e., become exercisable, during the optionee's employment or
consultancy in periodic installments or in their entirety at a specified time or
times or upon the attainment of stated goals or in installments upon the
occurrence of specified events. The Plan permits the Compensation Committee to
include in individual option agreements a repurchase agreement
25
<PAGE> 28
giving the Company the right to repurchase shares upon termination of the
optionee's employment or consultancy. An option is exercisable during the term
thereof by the optionee or his or her legal representative (in the event of the
optionee's incapacity) during the optionee's lifetime, and after death by the
optionee's survivors (as defined). Persons holding options have no rights as
stockholders of the Company until such options are duly exercised and full
payment for the Common Stock purchased has been tendered to the Company. Options
granted under the Plan may not be transferred by the optionee other than by will
or laws governing distribution of a decedent's estate.
Option Exercise in the Event of Termination of Employment or Consultancy,
Disability and Death; Termination of Option. In the event the employment or
consultancy of an optionee to whom an option has been granted under the Plan
shall be terminated other than by death, disability (as defined) or for cause
(as defined), the optionee must exercise the option in accordance with the terms
of his or her option agreement in the case of Non-Qualified Options, and in no
event later than 3 months after the date of termination of employment in the
case of an ISO. If the optionee becomes disabled after termination of employment
or consultancy, the optionee must exercise the option as aforesaid. If the
optionee dies after termination of employment or consultancy, his or her
survivors (as defined) may exercise the option within 6 months after the date of
death, but in no event beyond the term of the option. If the optionee's
employment or consultancy terminates due to disability or death, exercise of the
option by the optionee or his or her survivors must take place within one year
after the date of disability or death or, if earlier, within the original term
of the option. An optionee whose employment or consultancy is terminated by the
Company or an affiliate for cause (as defined) shall immediately cease to have
any right to exercise an option upon such termination.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Incentive Stock Options. ISO's are intended to be eligible for the federal
income tax treatment accorded "incentive stock options" under the Code.
Generally, an employee will not realize taxable income by reason of the grant of
an ISO. Upon exercise of an ISO, the optionee does not recognize taxable income.
The amount by which the fair market value of the shares on the exercise date of
an ISO exceeds the option price, however, will be an item of tax preference for
purposes of the alternative minimum tax.
The federal income tax consequences of disposing of stock acquired through
the exercise of an ISO depend on the timing of the disposition in relation to
the dates on which the option was granted and exercised. If an optionee
exercises an ISO and does not dispose of the shares prior to the expiration of
certain holding periods as described in Section 422 of the Code (two years after
the grant of the option and one year after the transfer of such shares to the
optionee upon exercise), the entire gain, if any, realized upon disposition will
be taxable to the optionee as long-term capital gain. If an optionee exercises
an ISO and disposes of shares prior to the expiration of the holding periods
referenced above (a "disqualifying disposition"), the optionee will realize
ordinary income in the year of disposition in an amount equal to the excess of
the fair market value of the shares on the date the option is exercised over the
option price. In the case of a disqualifying disposition with respect to which a
loss (if sustained) would be recognized, the amount of ordinary income will be
limited to the excess of the amount realized on the disqualifying disposition
over the option price. Any additional appreciation will be treated as a capital
gain (long-term or short-term depending on how long the optionee held the shares
prior to disposition).
There are no federal income tax consequences to the Company by reason of
the grant or exercise of an ISO. To the extent that an optionee recognizes
compensation income when he or she sells or disposes of shares acquired upon
exercise without satisfying the applicable holding period requirements, the
Company will be entitled to a corresponding expense deduction in the tax year in
which the disposition occurs. The Company will be required to report to the
Internal Revenue Service any ordinary income realized by the optionee by
26
<PAGE> 29
reason of a disqualifying disposition if such information is available to the
Company and will be required to withhold taxes from the optionee's compensation
with respect to such income.
Non-Qualified Options. Non-Qualified Options are subject to federal income
tax treatment pursuant to rules governing options that are not incentive stock
options. An option otherwise qualifying as an ISO will be treated as a
Non-Qualified Option to the extent that the aggregate fair market value of stock
with respect to which ISOs are exercisable for the first time by an individual
during any calendar year exceeds $100,000.
Generally, there will be no federal income tax consequences to either the
employee or consultant or to the Company by reason of the grant of a
Non-Qualified Option. Upon the exercise of a Non-Qualified Option, the optionee
(except as described below) will recognize taxable ordinary income equal to the
difference between the option price of the shares and the fair market value of
the shares on the exercise date. Generally, upon the exercise of a Non-Qualified
Option by an optionee, the Company is required to withhold from regular wages an
amount based on the ordinary income realized, or the optionee may be required to
provide the Company with funds to satisfy the withholding obligation. The
Company will be entitled to a compensation expense deduction in an amount equal
to the optionee's taxable ordinary income if the Company properly reports the
compensation income on form W-2 or 1099, as appropriate.
Upon disposition of the shares acquired upon exercise of a Non-Qualified
Option, the optionee will recognize long-term or short-term capital gain or
loss, as the case may be, equal to the difference between the amount realized on
such disposition and the basis for the shares, which will include the amount
previously recognized by the optionee as ordinary income. The holding period for
capital gains purposes will commence on the day the optionee acquires the shares
pursuant to the option. There are no tax consequences to the Company by reason
of the disposition by the optionee of stock acquired upon exercise of a
Non-Qualified Option.
27
<PAGE> 30
OPTION INFORMATION
The following table sets forth as of March 21, 1997, all options granted
pursuant to the 1987 Stock Option Plan to (i) the CEO and Named Executive
Officers, (ii) all current executive officers of the Company as a group, (iii)
all current directors of the Company who are not executive officers as a group,
and (iv) all employees, including all current officers who are not executive
officers, as a group:
<TABLE>
<CAPTION>
NO. OF OPTIONS
NAME TITLE GRANTED(#)(1)
---- ----- --------------
<S> <C> <C>
Malcolm L. Sherman.................. Chairman and Chief Executive 1,010,000
Officer
Stuart W. Cohen..................... Vice President, Strategic Planning 26,432
and Business Development
Donato A. DeNovellis................ Executive Vice President, Finance & 221,345
Administration and Chief Financial
Officer
Robert Varakian..................... Vice President, Marketing 366,000
Jeffrey A. Weinstein................ Executive Vice President, Secretary 397,728
and General Counsel
All current executive officers as a 2,163,390
group (7 persons).................
All current directors who are not --
executive officers as a group (6
persons)..........................
All employees who are not executive 618,412
officers as a group (2)...........
</TABLE>
- ---------------
(1) Of the options granted to the CEO, Named Executive Officers and all current
executive officers as a group, the following number of shares are presently
subject to repurchase by the Company: Mr. Cohen, 19,763 shares; Mr.
DeNovellis, 36,807 shares; Mr. Varakian, 25,000 shares; Mr. Weinstein,
24,737 shares; and all current executive officers as a group, 121,276
shares. Mr. Sherman's options are not subject to repurchase by the Company.
Of the options granted to Mr. Sherman and Mr. Varakian, 600,000 and 31,200,
respectively, of the option shares are not currently exercisable under the
terms of their respective stock option agreements.
(2) Net of all canceled options (1,686,543 shares). Does not include options to
purchase 555,867 shares of Common Stock that have been exercised by all such
employees.
On March 21, 1997, the market value of the Common Stock was $5.125 per
share based upon the closing price of such Common Stock as reported by The Wall
Street Journal.
Required Vote for Approval -- The affirmative vote of holders of a majority
of the issued and outstanding shares of the capital stock of the Company present
in person or represented by proxy and entitled to vote at the Annual Meeting is
required to approve the amendment to the Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE PROPOSED
AMENDMENT TO THE COMPANY'S 1987 STOCK OPTION PLAN.
28
<PAGE> 31
STOCKHOLDER PROPOSALS AND OTHER MATTERS
Under Rule 14a-8 promulgated under the Exchange Act, shareholders of the
Company may present proper proposals for inclusion in the Company's proxy
statement and for consideration at the next annual meeting of stockholders by
submitting their proposals to the Company in a timely manner. In order to be
considered for inclusion in the proxy statement distributed to stockholders
prior to the annual meeting in 1998, a stockholder proposal must be received by
the Company no later than December 1, 1997 and must otherwise comply with the
requirements of Rule 14a-8. Requests should be delivered in writing to Jeffrey
A. Weinstein, Secretary and General Counsel, Ekco Group, Inc., 98 Spit Brook
Road, Suite 102, Nashua, New Hampshire 03062.
The Board of Directors does not know of any other business to be acted upon
at the Annual Meeting other than that which is explained in this Proxy
Statement. If any other business calling for a vote of the stockholders is
properly presented at the Annual Meeting, the persons holding the proxies will
vote your shares in accordance with their best judgment on such matters.
In order that your shares may be represented if you do not plan to attend
the Annual Meeting, and in order to assure the required quorum, please fill out,
sign, date and return your proxy promptly.
By Order of the Board of Directors
JEFFREY A. WEINSTEIN
Secretary
Dated: March 27, 1997
THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER
29, 1996 (OTHER THAN THE EXHIBITS THERETO) FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION, WHICH PROVIDES ADDITIONAL INFORMATION ABOUT THE COMPANY, IS
AVAILABLE TO BENEFICIAL HOLDERS OF THE COMMON STOCK AND ESOP PREFERRED STOCK
WITHOUT CHARGE UPON WRITTEN REQUEST TO SUSAN M. SCACCHI, TREASURER, EKCO GROUP,
INC., 98 SPIT BROOK ROAD, SUITE 102, NASHUA, NEW HAMPSHIRE 03062.
29
<PAGE> 32
EXHIBIT A
PROPOSED AMENDMENT TO THE 1987 STOCK OPTION PLAN
The 1987 Stock Option Plan is hereby amended by deleting in its entirety
the second paragraph of Article IV and inserting in its place the following:
"The Administrator may at any time and from time to time grant one or
more Options to one or more Ekco Employees or Consultants and may
designate the number of shares to be optioned under each Option so
granted; provided, however, that (a) no Options shall be granted after
the later to occur of ten (10) years from the date of the adoption of
the Plan by the Company or the approval of the Plan by the shareholders
of the Company or the termination of the Plan, (b) the aggregate fair
market value (determined at the time of the grant of the Option) of the
Shares with respect to which incentive stock options are exercisable for
the first time by the Ekco Employee in any calendar year (under the Plan
and/or under any other incentive stock option plan of the Company or an
Affiliate) shall not exceed $100,000, and (c) no individual shall be
granted Options to purchase more than 1,000,000 Shares under the Plan
during any fiscal year period."
A-1
<PAGE> 33
APPENDIX I
----------
EKCO GROUP, INC.
98 Spit Brook Road
Nashua, New Hampshire 03062
PROXY SOLICITED BY THE BOARD OF DIRECTORS
-------------------------------------------
For the Annual Meeting of Stockholders, May 20, 1997
------------------------------------------------------
The undersigned stockholder hereby appoints MALCOLM L. SHERMAN and JEFFREY
A. WEINSTEIN, and each of them, as attorneys-in-fact and proxies of the
undersigned, with full power of substitution, to vote all shares of capital
stock of Ekco Group, Inc. standing in the name of the undersigned on March 21,
1997 at the Annual Meeting of Stockholders to be held May 20, 1997 at Fleet
Bank of Massachusetts, N.A., 75 State Street, Eighth Floor Conference Center,
Boston, Massachusetts, at 9:30 a.m., local time, and all adjournments thereof,
for the election of directors and for the proposal to approve an amendment to
the Company's 1987 Stock Option Plan as set forth on the reverse side and more
fully described in the accompanying Proxy Statement.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
ON THE REVERSE SIDE. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR THE
ELECTION OF EACH OF MANAGEMENT'S NOMINEES FOR DIRECTOR AND FOR PROPOSAL 2.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS, WHICH RECOMMENDS A
VOTE FOR THE ELECTION OF ALL NOMINEES FOR DIRECTOR AND FOR PROPOSAL 2. IN
THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER MATTERS AS
MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENTS THEREOF.
PLEASE MARK THIS PROXY, DATE AND SIGN IT ON THE REVERSE SIDE AND RETURN IT
PROMPTLY IN THE ACCOMPANYING ENVELOPE WHICH REQUIRES NO POSTAGE IF MAILED IN
THE UNITED STATES.
<PAGE> 34
__________ Please mark your
votes as in this
__________ example.
<TABLE>
<S> <C> <C> <C>
(1) ELECTION FOR all nominees WITHHOLD NOMINEES: George W. Carmany, III
OF listed to the right AUTHORITY to vote Michael G. Frieze
DIRECTORS (except as marked for all nominees Avram J. Goldberg
to the contrary). listed to the right. T. Michael Long
________ ________ Stuart B. Ross
Malcolm L. Sherman
________ ________ Bill W. Sorenson
Herbert M. Stein
</TABLE>
(Instructions: To withhold authority to vote for any
individual nominee(s), write that nominee's name on
the space provided below.)
_____________________________________________________
(2) TO APPROVE AN AMENDMENT TO THE COMPANY'S 1987 STOCK OPTION PLAN TO LIMIT THE
NUMBER OF SHARES OF COMMON STOCK WITH RESPECT TO WHICH OPTIONS MAY BE
GRANTED TO ANY ONE PARTICIPANT UNDER SUCH PLAN TO 1,000,000 SHARES IN ANY
FISCAL YEAR.
FOR AGAINST ABSTAIN
_______ _______ _______
_______ _______ _______
(3) OTHER The Proxies shall vote in their discretion upon such other business
MATTERS: as may properly come before the meeting or any adjournments
thereof.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
Signature_______________ Date__________ Signature_______________ Date__________
IF HELD JOINTLY
NOTE: PLEASE SIGN EXACTLY AS YOUR NAME(S) APPEAR(S) HEREON. When signing as
attorney, executor, administrator, trustee or guardian, please give your full
title as it appears hereon. Joint owners should each sign this proxy. If the
account is registered in the name of a corporation, partnership or other entity,
a duly authorized individual must sign on its behalf and give their title.
<PAGE> 35
APPENDEX II
-----------
EKCO GROUP, INC.
1987 STOCK OPTION PLAN
I. DEFINITIONS AND PURPOSES
------------------------
A. Definitions
-----------
Unless otherwise specified or unless the context otherwise requires,
the following terms, as used in this 1987 Stock Option Plan, have the
following meanings:
(1) "COMPANY" means Ekco Group, Inc.
(2) "PLAN" means this 1987 Stock Option Plan.
(3) "ADMINISTRATOR" means the Board of Directors except to the extent
the Board of Directors delegates its authority to a committee of
the Board of Directors.
(4) "AFFILIATE" means a corporation which, for purposes of Section
422 of the Code, is a parent or subsidiary of the Company, direct
or indirect.
(5) "BOARD OF DIRECTORS" means the Board of Directors of the Company.
(6) "CODE" means the United States Internal Revenue Code of 1986, as
amended.
(7) "CONSULTANT" means a person who has a relationship or is
otherwise affiliated with the Company as a consultant.
(8) "DISABILITY" or "DISABLED" means (a) with respect to any Option
granted pursuant hereto which is not intended to be an incentive
stock option within the meaning of Section 422 of the Code and
which is granted to an Ekco Employee who is a party to an
employment agreement with the Company or any Affiliate, which
employment agreement defines disability with respect to such
Ekco Employee and is in full force and effect as of the date as
of which such disability is to be determined, notwithstanding
any later expiration or termination of such employment
agreement, such definition is in such
(03-97)
1
<PAGE> 36
circumstances deemed incorporated herein by reference; and (b) in
all other circumstances, permanent and total disability as
defined in Section 105(d)(4) of the Code.
(9) "EKCO EMPLOYEE" means any employee of the Company or of an
Affiliate (including, without limitation, an employee who is also
serving as an officer or director of the Company or of the
Affiliate).
(10) "OPTION" means a right or option granted under the Plan.
(11) "OPTION AGREEMENT" means an agreement between the Company and a
Participant executed and delivered pursuant to the Plan.
(12) "PARTICIPANT" means an Ekco Employee or Consultant to whom one
or more Options are granted under the Plan, or, where the
context requires, his legal representative.
(13) "PARTICIPANT'S SURVIVORS" means a deceased Participant's legal
representatives and/or any person or persons who acquired the
Participant's rights to an Option by will or by the laws of
descent and distribution.
(14) "SHARES" means the following shares of the capital stock of the
Company as to which Options have been or may be granted under the
Plan: Common Stock, $0.01 par value, or any shares of capital
stock into which the Shares are changed or for which they are
exchanged within the provisions of Article VII of the Plan. The
shares issued upon exercise of Options granted under the Plan may
be authorized and unissued shares or shares held by the Company
in its treasury, or both.
B. Purpose of the Plan:
-------------------
The Plan is intended to encourage ownership of Shares by Ekco
Employees and Consultants in order to attract such Ekco Employees and
Consultants, to induce such Ekco Employees and Consultants to
remain affiliated with the Company or an Affiliate and to provide
additional incentive for such Ekco Employees and Consultants to
promote the success of the Company or of an Affiliate. Except as
provided in Article XII below, it is further intended that Options
issued pursuant to the Plan shall be eligible to constitute
"incentive stock options" within the meaning of Section 422 of the
Code. Notwithstanding the foregoing, only Ekco Employees are
eligible to receive "incentive stock options" under the Plan. It is
2
<PAGE> 37
also intended that the Plan shall comply in all respects with Rule
16b-3 or its successors ("Rule 16b-3"), promulgated pursuant to
Section 16 of the Securities Exchange Act of 1934, as amended (the
"1934 Act"), with respect to Participants who are subject to Section
16 of the 1934 Act, and any provision in the Plan with respect to such
persons contrary to Rule 16b-3 shall be deemed null and void to the
extent permissible by law and deemed appropriate by the Administrator.
II. SHARES SUBJECT TO THE PLAN
--------------------------
The aggregate number of Shares as to which Options may be granted from
time to time shall be 4,000,000 Shares as of May 12, 1992 (and the
equivalent of such number of Shares after giving effect to any
stock-split, stock dividend, combination, recapitalization or similar
transaction effected after such date).
If an Option ceases to be "outstanding", in whole or in part, the
Shares which were subject to such Option shall be available for the
granting of other Options under the Plan. Any Option shall be treated
as "outstanding" until such Option is exercised in full or terminates
or expires under the provisions of the Plan or by agreement of the
parties to the pertinent Option Agreement. The aggregate number of
Shares as to which incentive stock options may be granted shall be
subject to change only by means of an amendment of the Plan duly
adopted by the Company and approved by the shareholders of the
Company within twelve (12) months before or after the date of the
adoption of any such amendment, subject to the provisions of Article
VII.
III. ADMINISTRATION OF THE PLAN
--------------------------
The term "Administrator" as used herein shall mean the Board of
Directors or the committee (the "Committee") of the Board of Directors
to whom it delegates its authority and whose membership shall be
determined by the Board of Directors and subject to change without
cause and without notice, from time to time, by the Board of
Directors. Subject to the provisions of the Plan, the Administrator is
authorized to --
A. interpret the provisions of the Plan or of any Option or Option
Agreement and to make all rules and determinations which it deems
necessary or advisable for the administration of the Plan;
3
<PAGE> 38
B. determine which employees or Consultants of the Company or of
an Affiliate shall be granted Options;
C. determine the number of Shares for which an Option or Options
shall be granted, subject to the last paragraph of IV, below; and
D. specify the terms and conditions upon which Options may be
granted;
E. accelerate the time at which an Option may be exercised if in its
judgment it concludes that such acceleration is in the best
interest of the Company and, if an incentive stock option, with
prior written consent of the Participant.
provided, however, that all such interpretations, rules,
determinations, terms and conditions shall be made and prescribed in
the context of preserving the tax status of the Options as incentive
stock options within the meaning of Section 422 of the Code
(hereinafter "incentive stock options"), except as to Options granted
pursuant to Article XII, and complying with Rule 16b-3 with respect to
Participants who are subject to Section 16 of the 1934 Act to the
extent deemed appropriate by the Administrator.
IV. ELIGIBILITY FOR PARTICIPATION
-----------------------------
Each Participant must be an employee or Consultant of the Company or
of an Affiliate at the time an Option is granted. Consultants are
not eligible to receive incentive stock options under the Plan.
Notwithstanding any other provision herein, no member of the
Committee shall be eligible to receive an Option.
The Administrator may at any time and from time to time grant one or
more Options to one or more Ekco Employees or Consutants and may
designate the number of shares to be optioned under each Option so
granted; provided, however, that (a) no Options shall be granted
after the later to occur of ten (10) years from the date of the
adoption of the Plan by the Company or the approval of the Plan by
the shareholders of the Company or the termination of the Plan, (b)
the aggregate fair
4
<PAGE> 39
market value (determined at the time of the grant of the Option) of
the Shares with respect to which incentive stock options are
exercisable for the first time by the Ekco Employee in any calendar
year (under the Plan and/or under any other incentive stock option
plan of the Company or an Affiliate) shall not exceed $100,000, and
(c) no individual shall be granted Options to purchase more than
1,000,000 shares under the Plan during any fiscal year period.
Notwithstanding any of the foregoing provisions, the Administrator
may authorize the grant of an Option to a person not then in the
employ or not yet a Consultant of the Company or of an Affiliate. The
actual grant of such option however shall be conditioned upon such
person becoming eligible to become a Participant at or prior to the
time of the execution of the Option Agreement evidencing such Option.
V. TERMS AND CONDITIONS OF OPTIONS
-------------------------------
Each Option shall be set forth in an Option Agreement substantially in
the form hereto annexed and marked Exhibit A (except as otherwise
provided in Article XII below), duly executed on behalf of the Company
and by the Participant to whom such Option is granted. No Option shall
be granted and no purported grant of any Option shall be exercisable
unless an Option Agreement shall have been duly executed on behalf of
the Company and by the Participant. Each such Option Agreement shall
be subject to at least the following terms and conditions:
A. Option Price:
------------
(1) Except as provided in Paragraph (2) below, if the optionee owns
(immediately before the Option is granted) directly or by reason
of the applicable attribution rules (at Code Section 425(d)) ten
percent (10%) or less of the total combined voting power of all
classes of share capital of the Company or an Affiliate, the
Option price (per share) of the Shares covered by each Option
shall be not less than the "fair market value" as hereinafter
defined (per share) of the Shares on the date of the grant of the
Option. In all other cases (except as provided in Paragraph (2)
below), the Option price shall be not less than one hundred ten
percent (110%) of the said fair market value on the date of
grant.
(2) If the Option is granted pursuant to Article XII below, then the
Option price (per share) of the Shares covered by such Option
shall be not less than fifty percent (50%) of the "fair market
value" as on the date of the grant of the Option.
(3) For the purpose of the foregoing Paragraphs (1) and (2), fair
market value shall be determined as follows. If such Shares are
then listed on any national securities exchange, the fair market
5
<PAGE> 40
value shall be the mean between the high and low sales prices, if
any, on the largest such exchange on the date of the grant of the
Option, or, if none, on the most recent trade date thirty (30)
days or less prior to the date of the Option. If the Shares are
not then listed on any such exchange, the fair market value of
such Shares shall be the mean between the closing "Bid" and the
closing "Ask" prices, if, any as reported in the National
Association of Securities Dealers Automated Quotation System
("NASDAQ") for the date of the grant of the Option, or if none,
on the most recent trade date thirty (30) days or less prior to
the date of the grant of the Option for which such quotations are
reported. If the Shares are not then either listed on any such
exchange or quoted in NASDAQ, the fair market value shall be the
mean between the average of the "Bid" and the average of the
"Ask" prices, if any, as reported in the National Daily Quotation
Service for the date of the grant of the Option or, if none, for
the most recent trade date thirty (30) days or less prior to the
date of the grant of the Option for which such quotations are
reported. If the fair market value cannot be determined under the
preceding three sentences, it shall be determined in good faith
by the Administrator.
B. Number of Shares:
-----------------
Each Option shall state the number of Shares to which it
pertains.
C. Term of Option:
---------------
Each Option shall terminate not more than ten (10) years from the
date of the grant thereof, or at such earlier time as the Option
Agreement may provide, and shall be subject to earlier
termination as herein provided, except that (1) if the Option
price is required under Paragraph A of this Article V to be at
least 110% of fair market value, each such Option shall terminate
not more than five (5) years from the date of the grant thereof,
and (2) if such Option is not intended to be an "incentive stock
option" within the meaning of Section 422 of the Code, then such
Option shall terminate not more than eleven (11) years from the
date of grant thereof.
D. Date of Exercise:
----------------
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<PAGE> 41
Upon the authorization of the grant of an Option, the
Administrator may, subject to the provisions of Paragraph C of
this Article V, prescribe the date or dates on which the Option
becomes exercisable, and may provide that the Option rights
accrue or become exercisable in installments over a period of
years or upon the attainment of stated goals or entirely or in
installments upon the occurrence of specified events.
E. Medium of Payment:
-----------------
The Option price shall be payable upon the exercise of the
Option. It shall be payable in such form (permitted by Section
422 of the Code if the Option is intended to be an incentive
stock option within the meaning of such provision), as the
Administrator shall either by rules promulgated pursuant to the
provisions of Article III of the Plan, or in the particular
Option Agreement, provide.
F. Termination of Employment or Consultancy:
----------------------------------------
A participant who ceases to be an employee or Consultant of the
Company or of an Affiliate (for any reason other than death,
Disability or termination by the Participant's employer for
cause), may exercise any Option granted to such Participant, to
the extent that the right to purchase Shares thereunder has
accrued on the date of such termination of employment or
consultancy, but only within such term as the Administrator
shall designate in its discretion in the pertinent Option
Agreement, provided, however, in no event may the Option be
exercised any later than the originally prescribed term of the
Option and, if the Option is intended to be an incentive stock
option within the meaning of Section 422 of the Code, only
within three (3) months after such date. The provisions of this
paragraph, and not the provisions of Paragraph G and H of this
Article V, shall apply to a Participant who subsequently becomes
Disabled or dies after the termination of employment or
consultancy; however in the case of a Participant's death, the
Participant's Survivors may exercise the Option within six (6)
months after the date of the Participant's death, but in no event
beyond ten (10) years after the date of the grant of the Option,
or in the case of an Option not intended
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<PAGE> 42
to be an "incentive stock option" within the meaning of Section
422 of the Code, beyond eleven (11) years after the date of the
grant of the Option. A Participant's employment shall not be
deemed terminated by reason of a transfer to another entity
which is the Company or an Affiliate.
A Participant whose employment or consultancy is terminated by
the Company or Affiliate for "cause" shall forthwith upon such
termination cease to have any right to exercise any Option. For
purposes of this paragraph, "cause" shall be deemed to include
(but shall not be limited to) dishonesty with respect to an
employer, insubordination, substantial malfeasance or
non-feasance of duty, unauthorized disclosure of confidential
information and conduct substantially prejudicial to the
business of the Company or any Affiliate. The determination of
the Administrator as to the existence of cause shall be
conclusive on the Participant and the Company. Notwithstanding
the foregoing, if the Participant is a party to an agreement
with the Company or an Affiliate, which agreement defines cause
for termination and is in effect at the time of such
termination, then for purposes of application of this paragraph
to such Participant, cause shall be deemed to be as defined in
such agreement and any dispute shall be determined as provided
in such agreement, which determination shall be conclusive on
the Participant and the Company.
An Ekco Employee to whom an Option has been granted under the
Plan who is absent from work with the Company or with an
Affiliate because of temporary disability (any disability other
than a permanent and total Disability as defined at Paragraph A
(7) of Article I hereof), or who is on leave of absence for any
purpose permitted by any authoritative interpretation (e.g.,
regulation, ruling, case law, etc.) of Section 422 of the Code,
shall not, during the period of any such absence, be deemed, by
virtue of such absence alone, to have terminated such Ekco
Employee's employment with the Company or with an Affiliate and,
in the case of Options not intended to be incentive stock
options for any purpose approved by the Board of Directors.
G. Total and Permanent Disability:
-------------------------------
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<PAGE> 43
An Ekco Employee who ceases to be an employee of the Company or
of an Affiliate by reason of Disability may exercise any Option
granted to such Ekco Employee:
(1) to the extent that the right to purchase Shares thereunder
has accrued on the date such Ekco Employee becomes Disabled;
and
(2) in the event rights to exercise the Option accrue
periodically, to the extent of a pro rata portion of any
additional rights as would have accrued had the Ekco
Employee not become Disabled prior to the end of the
particular accrual period. The proration shall be based
upon the number of days of the accrual period during which
the Ekco Employee was not Disabled.
A Disabled Ekco Employee shall exercise such rights only within a
period of not more than one (1) year after the date that the
Ekco Employee became Disabled or, if earlier, within the
originally prescribed term of the Option.
The Administrator shall make the determination both of whether
Disability has occurred and the date thereof, unless a procedure
is set forth in an employment agreement for such determination,
in which case such procedure shall be used for such
determination. If requested, the Ekco Employee shall be
examined by a physician selected or approved by the
Administrator, the cost of which examination shall be paid for
by the Company.
The provisions of this Section V G shall not apply to
Consultants.
H. Death:
------
In the event of the death of a Participant to whom an Option has
been granted while the Participant is an employee or Consultant
of the Company or of an Affiliate, such Option:
(1) to the extent exercisable but not exercised as of the date
of death; and
(2) in the event rights to exercise the Option accrue
periodically, to the extent of a pro rata portion of such
rights as would have accrued had the Participant not died
prior to the end of the particular accrual period;
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<PAGE> 44
may be exercised by the Participant's Survivors. The proration
shall be based upon the number of days during the accrual periods
prior to the Participant's death. Such Option must be exercised
by the Participant's Survivors, if at all, within one (1) year
after the date of death of such Participant or, if earlier,
within the originally prescribed term of the Option,
notwithstanding that the decedent might have been able to
exercise the Option as to some or all of the shares on a later
date if the Participant were alive and had continued to be an
employee or Consultant of the Company or of an Affiliate.
I. Exercise of Option and Issue of Shares:
---------------------------------------
Options shall be exercised by giving written notice to the
Company. Such written notice shall be signed by the person
exercising the Option, shall state the number of Shares with
respect to which the Option is being exercised and shall contain
any warranty required by Article VI. Reasonably promptly
following receipt by the Company of such written notice, the
Company shall give notice to participant of a date for delivery
of the Option Shares to the Participant (or to the Participant's
Survivors, as the case may be), against payment of the Option
price. In determining what constitutes "reasonably promptly", it
is expressly understood that the delivery of the Option Shares
may be delayed by the Company in order to comply with any law or
regulation which requires the Company to take any action with
respect to the Option Shares prior to the issuance thereof,
whether pursuant to the provisions of Article VI or otherwise.
The Option Shares shall, upon delivery, be evidenced by an
appropriate certificate or certificates for paid-up
non-assessable Shares.
J. Rights as a Shareholder:
-----------------------
No Participant to whom an Option has been granted shall have
rights as a shareholder with respect to any Shares covered by
such Option except after due exercise of the Option and tender of
the full exercise price for the shares being purchased pursuant
to such exercise.
K. Assignability and Transferability of Option:
--------------------------------------------
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<PAGE> 45
By its terms, an Option granted to a Participant shall not be
transferable by the Participant otherwise than by will or by the
laws of descent and distribution and shall be exercisable, during
the Participant's lifetime, only by such Participant (or his or
her legal representative). Such Option shall not be assigned,
pledged or hypothecated in any way (whether by operation of law
or otherwise) and shall not be subject to execution, attachment
or similar process. Any attempted transfer, assignment, pledge,
hypothecation or other disposition of any Option or of any rights
granted thereunder contrary to the provisions of this Paragraph
K, or the levy of any attachment or similar process upon an
Option or such rights, shall be null and void.
L. Other Provisions:
-----------------
The Option Agreement shall contain such limitations and
restrictions upon the exercise of the Option and shall be
necessary in order that such Option can be an "incentive stock
option" within the meaning of Section 422 of the Code, if the
Option is intended to be an incentive stock option within the
meaning of such provision. Further, the Option Agreements
authorized under the Plan shall be subject to such other terms
and conditions, including, without limitation, restrictions upon
the exercise of the Option and rights of the Company to
repurchase shares purchased upon the exercise of the Option, as
the Administrator shall deem advisable and, if the Option is
intended to be an incentive stock option within the meaning of
such provision, which are not inconsistent with the requirements
of Section 422 of the Code.
VI. PURCHASE FOR INVESTMENT
-----------------------
Unless the offering and sale of the Shares to be issued upon the
particular exercise of an Option shall have been effectively
registered under the Securities Act of 1933, as now in force or
hereafter amended, or any successor legislation (the "Act"), the
Company shall be under no obligation to issue the Shares covered by
such exercise unless and until the following conditions have been
fulfilled:
(1) The person(s) who exercise such Option shall warrant to
the Company, at the
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<PAGE> 46
time of such exercise, that such person(s) are
acquiring such Shares for his or her own account, for
investment and not with a view to, or for
sale in connection with, the distribution of any such
Shares, in which event the person(s) acquiring such
Shares shall be bound by the provisions of the
following legend which shall be endorsed upon the
certificate(s) evidencing their option Shares issued
pursuant to such exercise:
"The shares represented by this certificate
have been taken for investment and they may
not be sold or otherwise transferred by any
person, including a pledgee, in the absence
of an effective registration statement for
the shares under the Securities Act of 1933
or an opinion of counsel satisfactory to
the Company that an exemption from
registration is then available.
(2) The Company shall have received an opinion of its
counsel that the Shares may be issued upon such
particular exercise in compliance with the Act without
registration thereunder.
Without limiting the generality of the foregoing, the Company may
delay issuance of the Shares until compensation of any reasonable
action or obtaining of any consent, which the Company deems reasonably
necessary under any applicable law (including without limitation state
securities or "blue sky" laws).
VII. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION
------------------------------------------
To prevent dilution or enlargement of rights, in the event that the
outstanding Shares of the Company are changed into or are exchanged
for a different number or kind of shares or other securities of the
Company or of another corporation by reason of any reorganization,
merger, consolidation, recapitalization, reclassification, change in
par value, stock split-up, combination of shares or dividend payable
in capital stock, or the like, appropriate adjustment shall be made in
the number and kind of shares for the purchase of which Options may be
granted under the Plan and, in
12
<PAGE> 47
addition, appropriate adjustment to prevent dilution or enlargement of
the rights granted to or available for Participants, shall be made in
the number and kind of shares and in the option price per share
subject to outstanding Options. In addition, the Committee, upon
authorization from the Board of Directors, may make other adjustments
in outstanding options which it deems appropriate to prevent dilution
or enlargement of rights. No such adjustment shall be made which
shall, within the meaning of Section 425 of the Code, constitute such
a modification, extension or renewal of an Option, which is intended
to be an "incentive stock option" within the meaning of Section 422 of
the Code, as to cause it to be considered as the grant of a new
Option.
VIII. DISSOLUTION OR LIQUIDATION OF THE COMPANY
-----------------------------------------
Upon the dissolution or liquidation of the Company other than in
connection with a transaction to which the preceding Article VII is
applicable, all Options granted hereunder shall terminate and become
null and void; provided, however, that if the rights of a Participant
or a Participant's Survivors hereunder have not otherwise terminated
and expired, the Participant or the Participant's Survivors shall have
the right immediately prior to such dissolution or liquidation to
exercise any Option granted hereunder to the extent that the right to
purchase shares thereunder has accrued as of the date immediately
prior to such dissolution or liquidation.
IX. TERMINATION OF THE PLAN
-----------------------
The Plan shall terminate on May 12, 2002 unless terminated at an
earlier date by vote of the stockholders of the Company; provided,
however, that any such earlier termination shall not affect any
Options granted or Option Agreements executed prior to the effective
date of such termination.
X. AMENDMENT OF THE PLAN
---------------------
The Plan may be amended by (i) the Stockholders of the Company; or
(ii) the Administrator, including, without limitation, to the extent
necessary to qualify any or all outstanding Options granted under the
Plan or Options to be granted under the Plan for favorable federal
income tax treatment (including deferral of taxation upon exercise) as
may be afforded incentive stock options under Section 422 of the Code,
to the
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<PAGE> 48
extent necessary to ensure the qualification of the Plan under Rule
16b-3, and to the extent necessary to qualify the shares issuable upon
exercise of any outstanding Options granted, or Options to be granted,
under the Plan for listing on any national securities exchange or
quotation in any national automated quotation system of securities
dealers, provided, however, that any amendment approved by the
Administrator which is of a scope that requires shareholder approval
in order to ensure favorable tax treatment for any incentive stock
options, or requires shareholder approval in order to ensure the
compliance of the Plan with Rule 16b-3, or requires shareholder
approval for listing of the shares, shall be subject to obtaining such
shareholder approval. No amendment shall affect any Options
theretofore granted or any Option Agreements theretofore executed by
the Company and a Participant to whom an Option has been granted who
would be adversely affected by such amendment consents in writing
thereto.
XI. EMPLOYMENT OR CONSULTANCY RELATIONSHIP
--------------------------------------
Nothing herein contained shall be deemed to prevent the Company or an
Affiliate from terminating the employment or consultancy, as the case
may be, of a Participant, nor to prevent a Participant from
terminating the Participant's employment or consultancy with the
Company or an Affiliate.
XII. OPTIONS OTHER THAN INCENTIVE STOCK OPTIONS
------------------------------------------
Subject to the provisions of Article II and IV dealing with the
aggregate number of Shares as to which Options may be granted under
this Plan, the Administrator may at any time and from time to time
grant Options in connection with the rendition of services to the
Company or an Affiliate that cannot and/or are not intended to qualify
as "incentive stock options", within the meaning of Section 422 of the
Code, on such terms and conditions as it may from time to time
determine. To the extent that Options are granted which are not
"incentive stock options", the number of Shares available for the
issuance of "incentive stock options" shall be correspondingly reduced
and no such non-incentive stock options shall be issued on such terms
as to affect adversely Options intended to be "incentive stock
options". Any Option which is intended to qualify as an "incentive
stock option" within the meaning of Section 422 of the Code shall be
set forth in an Option Agreement substantially in the form hereto
annexed and marked Exhibit B, with such other terms and
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<PAGE> 49
provisions as may be approved by the Committee as authorized under
this Plan.
XIII. EFFECTIVE DATE
--------------
This Plan shall become effective upon the later of adoption by the
Board of Directors or of adoption by the Committee, but this Plan
shall only become effective for Options intended to be incentive stock
options within the meaning of Section 422 of the Code if and when:
(a) The Administrator shall have adopted a resolution stating that
incentive stock options may be granted pursuant to this Plan on
or after the date of such resolution; and
(b) either (i) The Plan and the authority to grant incentive stock
options pursuant to the Plan shall have been
approved by holders of at least a majority of the
holders of at least a majority of the issued and
outstanding shares of capital stock of the Company
entitling such holders to vote within twelve (12)
months either before or after adoption of such a
resolution by the Administrator as provided in
Subsection (a) immediately above; or
(ii) the effectiveness of the Plan and the effectiveness
of the grant of any incentive stock option granted
pursuant to the Plan shall have been made subject
to approval by holders of at least a majority of
issued and outstanding shares of capital stock of
the Company entitling such holders to a right to
vote within twelve (12) months either before or
after the adoption of such a resolution by the
Administrator as provided in Subsection (a)
immediately above.
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