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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 28, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES ACT OF 1934
COMMISSION FILE NO. 1-7484
EKCO GROUP, INC.
(Exact name of registrant as specified in its charter)
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DELAWARE 11-21676167
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
98 SPIT BROOK ROAD, SUITE 102
NASHUA, NEW HAMPSHIRE 03062
(Address of principal executive offices) (Zip Code)
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REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (603) 888-1212
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
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Name of each exchange
Title of each class on which registered
Common Stock, $.01 par value New York Stock Exchange
Preferred Share Purchase Rights New York Stock Exchange
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SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
NONE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No __
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K, or any amendment to
this Form 10-K. [X]
The aggregate market value of the shares of voting capital stock held by
non-affiliates (without admitting that any person whose shares are not included
in determining such value is an affiliate) was approximately
$142 million based upon the closing price of the shares on the New York Stock
Exchange Composite Tape on March 19, 1998.
As of March 19, 1998, there were issued and outstanding 19,153,444 shares
of Common Stock of the registrant.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's Annual Report to Stockholders for the fiscal
year ended December 28, 1997: Parts I and II. Portions of the registrant's
definitive proxy statement with respect to the Annual Meeting of Stockholders to
be held on May 12, 1998: Part III.
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PART I
ITEM 1. BUSINESS
GENERAL
EKCO Group, Inc. ("EKCO" or the "registrant" and, together with its
subsidiaries, the "Company") is a leading United States developer, manufacturer
and marketer of multiple categories of branded houseware products for everyday
home use. The Company believes it is the leading United States supplier of metal
bakeware, kitchen tools and gadgets and non-toxic pest control products. In
addition, the Company believes it is a leading United States supplier of
cleaning products (primarily brushes, brooms and mops), small animal care and
control products and dog and cat supplies and accessories. The Company markets
its products primarily in the United States through substantially all
distribution channels that sell houseware products for everyday home use,
including mass merchandisers, supermarkets, hardware, specialty, drug and
department stores.
The Company was incorporated in Delaware in 1968. The current business of
the Company was established in 1987 through the Company's purchase of EKCO
Housewares, Inc. and through subsequent acquisitions and internal development.
The Company has acquired or developed the following businesses and product
categories (net of divestitures):
October 1987--acquisition of EKCO Housewares, Inc. ("Housewares"), a
manufacturer and marketer of bakeware and kitchen tools and gadgets.
January 1989--acquisition of Woodstream Corporation ("Woodstream"), a
manufacturer and marketer of non-toxic pest control products.
December 1989--acquisition of the non-toxic pest control product line of
McGill Metal Products Company.
December 1991--acquisition of the small animal care product line of Beacon
Industries, Inc.
April 1993--acquisition of Kellogg Brush Manufacturing Co. and
subsidiaries, a manufacturer and marketer of brushes, brooms and mops.
(Kellogg Brush Manufacturing's name has recently been changed to EKCO
Cleaning, Inc. ("EKCO Cleaning").
January 1995--introduction of an internally developed line of upscale
bakeware and kitchen tools, gadgets and other houseware products by B. VIA
International Housewares, Inc. ("VIA"), a newly formed subsidiary of the
Company.
December 1996--sublicense of the Farberware(R) brand name from Meyer
Marketing Company Ltd. for use on certain of the Company's bakeware
products.
July 1997--formation of EKCO International, Inc., a subsidiary organized to
grow the Company's business in international markets.
January 1998--acquisition of Aspen Pet Products, Inc. ("Aspen"), a marketer
of dog and cat supplies and accessories, as well as other pet products.
During the year ended December 28, 1997 ("Fiscal 1997"), the Company
operated in one industry segment, with revenues derived from sales in four
principal product categories: (i) bakeware, (ii) kitchenware, (iii) cleaning
products, and (iv) pest control and small animal care and control products. See
Note 14 of Notes to
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Consolidated Financial Statements appearing in Exhibit 13 hereto, incorporated
herein by reference, for industry and geographic area information.
The Company's business strategy is to continue to focus on growth through
its emphasis on marketing and sales. The Company seeks to create innovative and
attractive products, introduce new products quickly and strengthen customer
relationships. The Company also intends to pursue growth through acquisition of
additional consumer product lines and businesses as opportunities arise.
RECENT DEVELOPMENTS
In January 1998, the Company completed the acquisition (the "Acquisition")
of all of the outstanding equity securities of APP Holding Corporation ("APP"),
the parent corporation and sole stockholder of Aspen, a leading marketer of dog
and cat supplies and accessories, such as ropes, chews, collars and leashes.
Pursuant to the Stock Purchase and Sale Agreement, the Company paid
approximately $24.5 million in cash and refinanced APP's outstanding bank debt
of approximately $9.1 million. In addition, if Aspen achieves certain
predetermined financial results during fiscal 1998, 1999, 2000, 2001 and 2002,
the Company will make annual payments to certain former APP stockholders. The
Company funded the Acquisition with its existing cash and borrowings made
pursuant to a December 15, 1997 amendment to its bank credit facility. See Notes
19 and 5 of Notes to Consolidated Financial Statements appearing in Exhibit 13
hereto, incorporated herein by reference, for information about the Acquisition
and the amendment to the Company's credit facility.
PRODUCTS
BAKEWARE. The Company manufactures and markets a broad line of metal
bakeware for home use, including non-stick coated bakeware marketed under a
group of Baker's Secret(R) trademarks, uncoated bakeware marketed under the
EKCO(R) trademark, insulated non-stick coated "no burn" bakeware marketed under
the Baker's Secret(R) Air Insulated(TM) trademark, and non-stick coated and
uncoated bakeware marketed under the Farberware(R) brand name, more fully
described below under "--VIA." Sales of bakeware accounted for 31.5% of net
revenues for Fiscal 1997. Through Housewares, the Company has over 100 years of
experience in the metal bakeware market, and its bakeware products include
cookie sheets, muffin tins, brownie pans, loaf pans and similar metal bakeware
items. The Company emphasizes value, quality, functionality and, in the case of
coated products, ease of cleaning and release. The Company believes it is the
leading United States supplier of metal bakeware in the United States.
The Company continually develops new products to capitalize on its high
consumer brand recognition and broad retail distribution. New product
development efforts are conducted by the Company's internal staff and by third
parties on a contract basis. During Fiscal 1997 and at the National Housewares
Show in January 1998, the Company introduced many new product offerings,
including Baker's Secret(R) Bake `N Take travel bakeware products which feature
sturdy plastic lids with fold-down handles, Baker's Secret(R) FanciBakes(TM)
specialty bake pans such as fluted pie pans, EKCO(R) Air Ware(TM) uncoated
insulated bake pans, Baker's Secret(R) toaster oven non-stick bakeware items and
Baker's Secret(R) ovenware products such as roasters and broilers.
KITCHENWARE. The Company sells kitchen tools and gadgets under the EKCO(R),
EKCO PRO(TM) and Baker's Secret(R) trademarks. The Company markets more than
1,000 kitchen tool and gadget products, including multiple colors of the same
item and various packaging combinations. Sales of kitchenware products accounted
for 29.6% of net revenues for Fiscal 1997. Kitchen tools include metal, plastic
and wooden spoons, spatulas, serving forks, ladles and other cooking
accessories. Gadgets include peelers, corkscrews, whisks, can openers, bottle
openers and similar items. The Company also markets stainless steel and carbon
steel cutlery and stainless steel flatware, mixing bowls and colanders. The
Company believes that it is the leading United States supplier of kitchen tools
and gadgets.
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The Company believes that the sale of kitchenware is more dependent on
impulse buying by the consumer than any other line of products the Company
offers. The Company continually updates its kitchenware line and introduces new
items. During Fiscal 1997 and in January 1998 at the National Housewares Show,
the Company introduced numerous new items, including kitchen tools marketed
under the EKCO PRO(TM) name, some with new ergonomic non-slip handles; three new
series of cutlery with ergonomic handles sold individually or in sets with wood
or plastic blocks, some of which include tools and gadgets or filled spice
bottles; a new flatware program that includes sets and open stock of flatware; a
line of corkscrews, bottle openers and other tools marketed under the Bar
Works(TM) trademark; a series of upscale kitchen tools, gadgets, cutlery and a
tea kettle marketed under the EKCO Endura(TM) trademark; new stainless steel and
colored whistling tea kettles; beechwood and polypropolene cutting board product
offerings; ceramic pantry sets including such items as spoon rests, salt and
pepper shakers, trivets and canister sets; and a number of "Zoo Tools" kitchen
tool product offerings in unique animal shapes. The Company also introduced five
new series of 18/10 stainless steel cookware, with either encapsulated aluminum
disk bottoms or copper disk bottoms and specially designed handles, under the
following brand names: EKCO(R) Cookware, EKCO Eterna(R), EKCO Endura(TM), EKCO
Endura(TM) non-stick and EKCO Copperelle(TM).
VIA. The Company's VIA(TM) baking and kitchenware products are designed for
the upscale and specialty marketplace. VIA(TM) products include the following:
pantryware, such as canister sets, spice racks and napkin and paper towel
holders; tea kettles and carafes; and baking equipment, including cooling racks,
cookie cutter sets and cast aluminum ovenware. VIA markets Farberware(R)
bakeware products, including cookie sheets, loaf pans and muffin tins in
heavy-gauge coated and uncoated steel and tin steel pans; and heavy-gauge coated
steel roasting pans. VIA's sales of bakeware and kitchenware accounted for 5.1%
of net revenues for Fiscal 1997. During Fiscal 1997 and at the National
Housewares Show in January 1998, VIA introduced a number of Farberware(R)
bakeware product offerings, including: uncoated heavy gauge tin steel
Professional Series(TM) bakeware pans; non-stick tin coated steel baking pans
and cookie sheets; non-stick air insulated baking pans and cookie sheets,
including a muffin pan that reverses to a baking pan; heavy duty 18/10 stainless
steel Classic Series(TM) baking pans and cookie sheets; and Millennium(R)
non-stick heavy gauge steel pans and cookie sheets. The VIA(TM) family of
products was also expanded to include a number of innovative product offerings,
including filled spice racks, some of which are combined with cutlery blocks or
kitchen tools and gadgets to save counter space.
CLEANING PRODUCTS. The Company manufactures and markets a broad line of
cleaning products, including brushes, brooms and mops for home use marketed
under the EKCO(R) and Clean Results(R) trademarks and indoor and outdoor
specialty cleaning products for janitorial use marketed under the
Wright-Bernet(TM) and Cleaning Specialty(TM) trademarks. Sales of cleaning
products accounted for 20.7% of net revenues for Fiscal 1997. The Company
believes that it is a leading manufacturer of cleaning brushes for household,
kitchen and personal use.
As with its other product offerings, the Company introduced many new
cleaning products in Fiscal 1997 and at the January 1998 National Housewares
Show. These products included: new stick goods products, including a magnetic
broom and a new "wing" sponge mop whose sides are at 90 degree angles to the mop
base to clean baseboards and floors at the same time; a line of 38 laundry care
items; new animal figures in the Cleaning Critters(R) kitchen and bath brush and
sponge product group; new brush and mop offerings in the Clean Results(R)
product grouping; new window and floor squeegees; and wire brushes marketed
under the Wright-Bernet(TM) brand name.
PEST CONTROL AND SMALL ANIMAL CARE AND CONTROL PRODUCTS. The Company
manufactures and markets non-toxic pest control and small animal care and
control products under the Victor(R) and Havahart(R) trademarks, respectively.
Sales of pest control and small animal care and control products accounted for
13.1% of net revenues for Fiscal 1997. The Company's products include
spring-action and other rodent and insect traps marketed under the Victor(R)
trademark, pet cages marketed under the Havahart(R) trademark and live animal
cage traps marketed under the Havahart(R) trademark, which are used to control
garden pests and other nuisance animals such as raccoons. The Company believes
it is the leading supplier of non-toxic pest control products, rodent traps and
live
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animal cage traps in the United States. In Fiscal 1997, the Company introduced
its line of "Thrifty but Nifty" dog home and training crates; a stray cat
rescue kit and disposable liners for rabbit hutch pans, marketed under the
Havahart(R) trademark; and a roach and insect station for indoor and outdoor use
which contains a trap with a roach pheromone attractant, a new "roach magnet"
"big roach problems" roach and insect station for indoor and outdoor use, and
fly and yellow jacket traps with bait included, marketed under the Victor(R)
trademark.
ASPEN PET PRODUCTS. Since its acquisition of Aspen in January 1998, the
Company has marketed a broad line of pet products, including leashes and
collars, toys, pan liners, and dog shampoos marketed under the Aspen Pet(TM)
brand name and litter boxes, cat toys and furniture, ropes, tugs, rings and
chews for dogs and birds marketed under the Booda(TM) brand name. The Company
believes that Aspen is a leading marketer of dog and cat supplies and
accessories, such as ropes, chews, collars and leashes.
CUSTOMERS AND DISTRIBUTION
Management believes that the Company has one of the broadest distribution
networks of any company in the housewares industry. The Company markets its
products primarily in the United States through substantially all distribution
channels that sell houseware products for everyday home use, including mass
merchandisers, supermarkets, hardware stores, drug stores, specialty stores and
other retail channels. The Company sells its products to more than 80 of the 100
largest mass merchandisers (as ranked in the January 1998 Home World Business
Magazine category analysis of the top 100 retailers), including Wal-Mart and
Kmart. The Company estimates that its houseware products are sold in over 90% of
the approximately 38,000 U.S. supermarkets, including Kroger, Albertson's and
Winn-Dixie. The Company sells its houseware products to many of the largest
hardware chains, including Ace Hardware, Home Depot, True Value, ServiStar and
Lowe's Home Centers. Of its customers, sales to Wal-Mart and Kmart accounted for
13.3% and 9.5%, respectively, of the Company's net revenues in Fiscal 1997. The
Company's houseware products are distributed through the following retail
channels: Bakeware is distributed primarily through mass merchandisers,
supermarkets and specialty stores; kitchenware is distributed primarily through
supermarkets and mass merchandisers, as well as hardware and drug stores;
VIA(TM) products are distributed primarily through department stores and
specialty stores; Wright-Bernet(TM) broom and brush products are marketed to
hardware and home center retailers, mops are marketed to janitorial supply and
professional cleaning companies and the remainder of the Company's cleaning
products are marketed primarily to mass merchandisers and supermarkets; and pest
control and small animal care and control products are marketed to mass
merchandisers, supermarkets, hardware, drug and variety stores, agricultural
centers, farm stores, home centers and professional pest control companies.
The Company's Aspen pet products are distributed primarily through mass
merchandisers, supermarkets, pet superstores, pet specialty stores and catalogs.
SALES AND MARKETING
The Company markets its products directly through its own sales and
marketing organization and through a network of representatives and brokers.
Outside the United States, the Company's products are marketed through its
Canadian and United Kingdom subsidiaries and distributors and agents who provide
marketing support to supermarkets, mass merchandising stores, specialty stores
and department stores. The Company's agreements with its distributors and agents
are generally terminable upon 30 days notice and are not deemed to be material
by the Company.
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MANUFACTURING AND SOURCING
The Company manufactures most of its bakeware, cleaning and pest control
and small animal care and control products. The Company utilizes a variety of
standard manufacturing processes, including metal stamping, injection molding,
mesh welding, wire forming and automatic staple setting. Kitchenware products
and Aspen's pet products are primarily sourced from third parties. The Company
regularly evaluates its manufacturing and third party sourcing options to
maintain an appropriate balance of quality and cost.
RAW MATERIALS AND COMPONENTS
The Company purchases primary raw materials, including steel, wood, natural
and synthetic fibers, sponges, corrugated boxes and card stock for packaging,
from a number of suppliers, including several major steel companies. All of
these materials are of a commodity nature and are subject to price fluctuations
as supply and demand change, which may adversely affect the Company's
profitability. The Company also purchases components and complete products,
primarily kitchenware and Aspen's pet products, from several domestic and
foreign suppliers. The Company believes that raw materials, component items and
complete products are available from numerous other suppliers, and that the loss
of any one of its suppliers would not have a material adverse effect on the
Company.
TRADEMARKS AND PATENTS
The Company believes that its EKCO(R) trademark, as well as its Baker's
Secret(R), Havahart(R), Victor(R), Wright-Bernet(TM), VIA(TM), Aspen Pet(TM) and
Booda(TM) trademarks, and the Farberware(R) trademark are significant to its
competitive position. The Company holds a number of patents, none of which is
believed to be material to the Company's business.
COMPETITION
The Company believes that the markets for all of its products are highly
competitive. Competition for retail sales to consumers is based on several
factors, including brand name recognition, value, quality, price, innovation and
availability. Primary competitive factors with respect to selling such products
to retailers are brand reputation, number of product categories offered, broad
product coverage within each product category, support and service to the
retailer and price.
The Company competes with many well-established companies, several of which
have substantially greater resources than those of the Company. There are no
substantial regulatory or other barriers to entry by new competitors. However,
suppliers that are able to maintain, or increase, the amount of retail space
allocated to a product may gain a competitive advantage in that product market.
The Company believes that the allocation of space by retailers is influenced by
many factors, including those mentioned above. The Company believes that its
ability to compete successfully is based on the wide recognition of its brand
names, its multiple category product offerings, its ability to design, develop,
acquire, manufacture and market competitively priced products, its broad product
coverage within most product categories, its attention to retailer and consumer
needs and its access to major channels of distribution. There can be no
assurance that the Company will be able to compete successfully against current
and future sources of competition or that the competitive pressures faced by the
Company will not adversely affect its profitability or financial performance.
SEASONALITY
Many of the Company's product categories are affected by seasonal consumer
purchasing patterns, including holiday cooking and baking and spring cleaning.
Historically, the Company's revenues in the last half of the fiscal year have
been greater than in the first half. See Note 16 of Notes to Consolidated
Financial Statements
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appearing in Exhibit 13 hereto, incorporated herein by reference, for
information regarding quarterly results of operations.
BACKLOG
Information as to backlog is not material to an understanding of the
Company's business because most of the Company's net revenues result from short
lead-time customer orders. The Company generally is able to fill orders from
inventory, and has generally been able to adjust production levels to meet
increases in customers' orders that cannot be filled from inventory.
EMPLOYEES
As of December 28, 1997, the Company employed 1,018 persons in the United
States, of whom 606 were represented under collective bargaining agreements
which expire on dates ranging from September 1998 to February 2002. As of such
date, the Company also employed 34 persons in Canada, 14 of whom were
represented under a collective bargaining agreement which expires in January
2000, and 16 persons in the United Kingdom. The Company considers its employee
relations to be satisfactory.
BUSINESS OUTLOOK
This annual report on Form 10-K, including "Business," "Properties," "Legal
Proceedings" and "Management's Discussion and Analysis of Results of Operations
and Financial Condition" in Exhibit 13 hereto, contains forward-looking
statements within the meaning of the safe-harbor provisions of Section 27A of
the Securities Act of 1933 and Section 21E of the Securities Exchange Act of
1934. Such statements are based on management's current expectations and are
subject to a number of factors and uncertainties which could cause actual
results to differ materially from those described in the forward-looking
statements. Such factors and uncertainties include, but are not limited to: the
impact of the level of the Company's indebtedness; restrictive covenants
contained in the Company's various debt documents; general economic conditions
and conditions in the retail environment; the Company's dependence on a few
large customers; price fluctuations in the raw materials used by the Company;
competitive conditions in the Company's markets; the timely introduction of new
products; the impact of competitive products and pricing; certain assumptions
related to consumer purchasing patterns; the seasonal nature of the Company's
business; and the impact of federal, state and local environmental requirements
(including the impact of current or future environmental claims against the
Company). As a result, the Company's operating results may fluctuate, especially
when measured on a quarterly basis. These forward-looking statements represent
the Company's best estimate as of the date of this Annual Report on Form 10-K.
The Company assumes no obligation to update such estimates except as required by
the rules and regulations of the Securities and Exchange Commission.
ITEM 2. PROPERTIES
As of December 28, 1997, the Company owned or leased for use in its
business the properties set forth in the table and footnotes below:
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Approximate Owned or Lease
DESCRIPTION OF PROPERTY(1)(2) LOCATION SQUARE FOOTAGE LEASED EXPIRES
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Executive offices Nashua, New Hampshire 8,000 Leased 11/06/02
Administrative offices for the Franklin Park, 190,000 Leased 01/31/04
housewares division and Illinois
warehousing and distribution
center for VIA products
Manufacturing, warehousing Massillon, Ohio 244,000 Owned N/A
and distribution center for
bakeware
Warehousing and distribution Bolingbrook, 260,000 Leased 06/30/02
center for kitchenware, Illinois 108,000 Leased 11/10/99
bakeware, VIA and other
Company products
Manufacturing, warehousing, Lititz, 300,000 Owned N/A
distribution and office facility Pennsylvania
for pest control and small
animal care and control products
Manufacturing, warehousing, Hamilton, Ohio 100,000 Owned N/A
distribution and office facility
for brushes, brooms and mops
Warehousing and distribution Monroe, Ohio 116,000 Leased 07/31/02
for brushes, brooms and mops
Office and warehousing facility Niagara Falls, 60,000 Owned N/A
for products for sale and Ontario, Canada
distribution in Canada
Manufacturing and distribution Nashville, 42,000 Leased 12/31/98
facility for institutional mop Tennessee
and broom products
Office and warehousing facility Chepstow, Gwent 45,000 Leased 06/03/14
for products for sale and U.K.
distribution in the U.K. and
internationally
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(1) In addition to the properties listed in the table, as of December 28, 1997
the Company owned approximately 839,000 square feet of floor space which is
being held for sale or lease. The Company leases other real properties not
set forth above which, in the aggregate, are not deemed material.
(2) Substantially all of the properties owned by the Company are subject to
mortgage liens granted in connection with the Company's credit facility.
The Company believes that its properties are generally suitable and
adequate for its purposes for the foreseeable future.
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ITEM 3. LEGAL PROCEEDINGS
LITIGATION
The Company is a party to several pending legal proceedings and claims,
including the matters described below. Although the outcome of such proceedings
cannot be determined with certainty, the Company's management, after
consultation with legal counsel, is of the opinion that the expected final
outcome should not have a material adverse effect on the Company's financial
position, results of operations or liquidity. In April 1996, the U.S. District
Court for the Northern District of Ohio ruled that certain insulated bakeware
products manufactured by the Company infringed a patent held by a third-party
plaintiff. The Company ceased manufacturing such products in December 1995. In
July 1996, the court enjoined the Company from infringing the patent and awarded
the plaintiff a royalty of 2% of sales, or approximately $88,000. The Company
believes that it is not liable for infringement, and in December 1996, the
Company filed a notice of appeal, and thereafter, the third-party plaintiff
filed a cross-appeal. The Company and its counsel believe that the Company has
meritorious grounds for its appeal of the court's decision. The Company's
management believes that the final outcome will not have a material adverse
effect on the Company's financial position, results of operations or liquidity.
ENVIRONMENTAL REGULATION AND CLAIMS
From time to time, the Company has had claims asserted against it by
regulatory agencies or private parties for environmental matters relating to the
generation or handling of hazardous substances by the Company or its
predecessors, and the Company has incurred obligations for investigations or
remedial actions with respect to certain of such matters. While the Company does
not believe that any such claims asserted or obligations incurred to date will
result in a material adverse effect upon the Company's financial position,
results of operations or liquidity, the Company is aware that at its facilities
at Massillon (more fully described below) and Hamilton, Ohio; Easthampton,
Massachusetts (more fully described in Note 13 of Notes to Consolidated
Financial Statements appearing in Exhibit 13 and incorporated herein by
reference); Chicago, Illinois and Lititz, Pennsylvania, and at its previously
owned facility in Hudson, New Hampshire, hazardous substances, oil or both have
been detected and that additional investigations will be, and remedial actions
will or may be, required at such facilities. Operations at these and other
facilities currently or previously owned or leased by the Company utilize, or in
the past have utilized, hazardous substances. There can be no assurance that
activities at these or any other facilities or future facilities may not result
in additional environmental claims being asserted against the Company or
additional investigations or remedial actions being required.
Prior to the Company's acquisition of Housewares in 1987, Housewares'
Massillon, Ohio steel bakeware manufacturing facility was the subject of
administrative proceedings before the United States Environmental Protection
Agency by issuance of an administrative complaint alleging violations of the
Resource Conservation and Recovery Act resulting from operation of a wastewater
lagoon at the facility. American Home Products Corporation ("AHP"), a former
owner of Housewares, pursuant to an indemnity agreement (the "Indemnity
Agreement") with Housewares relating to acts occurring prior to September 7,
1984, assumed the costs of remediation measures in addition to the defense of
the administrative proceedings with federal and state environmental protection
agencies, as well as preparation of closure plans and other plans called for as
a result of these proceedings. While AHP has acknowledged its full
responsibility under the Indemnity Agreement with respect to the wastewater
lagoon, it has asserted that Housewares should contribute to the cost of a
remediation study and certain remediation measures to the extent that Housewares
exacerbated contamination at the facility since September 7, 1984. Housewares
has denied that it has exacerbated contamination at the facility since such
date. AHP and Housewares agreed in 1988 to allocate such costs in proportion to
their respective responsibilities based on the results of an engineering study
but in no event will Housewares' share with respect to the investigation or
cleanup costs exceed the lesser of 25% of the cost of groundwater investigation
and cleanup or $750,000. To date, no further claim for such costs has been made.
The Company is unable to determine to what extent, if any, it will be
responsible to contribute to such costs but the Company does not believe that
any such
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contribution that it may be required to make will have a material adverse effect
on its financial position, results of operations or liquidity.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
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EXECUTIVE OFFICERS OF THE REGISTRANT
NAME AGE OFFICE HELD
Malcolm L. Sherman 66 Chief Executive Officer, December 1996 to present;
Chairman of the Board, July 1996 to present; and
consultant to the Company, February 1993 to December
1996. Since February 1993, Mr. Sherman has served as
Chairman of the Board of Advisors of Gordon Brothers
Partners, Inc. (a group of companies which provide
merchant and financial services to the retail
community as well as serve as wholesalers and
retailers of fine jewelry). He was Chairman and
Director of K.T. Scott, Ltd. (a chain of wallpaper
and window treatment stores) from January 1991 to
August 1995, and President and Chief Executive
Officer of Morse Shoe, Inc. (a manufacturer,
importer and retailer of shoes) from January 1992
until December 1993. Mr. Sherman has had many years
of experience in the retail and housewares
industries, including service as President of Zayre
Stores Inc. (a chain of retail chain stores),
chairman of Regina Electric (a manufacturer of
vacuum cleaners) and chairman of Channel Home
Centers, Inc. (a chain of home improvement stores).
Donato A. DeNovellis 53 Executive Vice President, Finance and
Administration, October 1994 to present; Chief
Financial Officer, July 1993 to present; Vice
President, July 1993 to October 1994; Senior Vice
President and Chief Financial Officer of EKCO House-
wares, Inc. from September 1996 to present.
Jeffrey A. Weinstein 47 Executive Vice President, April 1985 to present;
President and Managing Director, EKCO International,
Inc., July 1997 to present; Secretary, February 1988
to October 1997; General Counsel, October 1978 to
October 1997; and President, EKCO Consumer Plastics,
Inc., July 1996 to April 1997.
9
<PAGE> 11
John Jay Althoff 33 Vice President, Secretary and General Counsel,
October 1997 to present. Prior to joining the
Company, from September 1993 to September 1997 Mr.
Althoff was an associate with Ropes & Gray (a law
firm) working with corporate clients. From August
1987 through October 1989, Mr. Althoff was an
associate in the Capital Markets Group of Westpac
Banking Corporation (an Australian bank).
Stuart W. Cohen 51 Vice President, Strategic Planning and Business
Development, June 1995 to present. Prior to joining
the Company, from May 1991 to December 1994 Mr.
Cohen served as First Vice President of Van Kampen
Merritt, Inc. (an investment products and management
firm), where he was responsible for strategic
planning and business development.
Brian R. McQuesten 48 Vice President, February 1996 to present; and
Controller, May 1987 to present.
Paul S. Neustadt 44 Vice President and Chief Information Officer,
April 1997 to present. Prior to joining the Company,
from August 1996 to April 1997 Mr. Neustadt served
Digital Equipment Corporation (a technology company)
as a program manager, and from October 1989 to
August 1996 Mr. Neustadt was an attorney in private
practice.
Susan M. Scacchi 33 Treasurer from February 1997 to present; Vice
President--Finance of EKCO Housewares, Inc. from
July 1996 to February 1997; Corporate Accounting
Manager from August 1994 to July 1996. Prior to
joining the Company, from September 1992 to August
1994 Ms. Scacchi was an independent financial
management consultant.
The executive officers of the Company are elected annually by the Board of
Directors and serve, subject to the provisions of any employment agreement
between the executive and the Company, until their respective successors are
chosen and qualified or until their earlier resignation or removal.
10
<PAGE> 12
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The information set forth in the section entitled "Common Stock Price Range
and Dividends" appearing in Exhibit 13 hereto is incorporated herein by
reference.
ITEM 6. SELECTED FINANCIAL DATA
The information set forth in the section entitled "Selected Consolidated
Financial Data" appearing in Exhibit 13 hereto is incorporated herein by
reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The information set forth in the section entitled "Management's Discussion
and Analysis of Results of Operations and Financial Condition" appearing in
Exhibit 13 hereto is incorporated herein by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information set forth in the consolidated financial statements and
notes thereto (including the note which sets forth certain supplementary
information) and the Report of Independent Auditors appearing in Exhibit 13
hereto are incorporated herein by reference. Reference is also made to Item
14(a)2 with respect to Financial Statement Schedules filed herewith.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
11
<PAGE> 13
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
a) Directors - The information set forth in the section entitled "Election
of Directors" appearing in the Company's definitive proxy statement with respect
to the 1998 Annual Meeting of Stockholders is incorporated herein by reference.
b) Executive Officers - See "Executive Officers of the Registrant"
appearing in Part I above.
ITEM 11. EXECUTIVE COMPENSATION
The information set forth in the sections entitled "Compensation of
Directors" and "Compensation of Executive Officers" (except for the information
under the captions "Report of the Compensation Committee on Executive
Compensation" and "Performance Graph") appearing in the Company's definitive
proxy statement with respect to the 1998 Annual Meeting of Stockholders is
incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information set forth in the section entitled "Security Ownership of
Certain Beneficial Owners and Management" appearing in the Company's definitive
proxy statement with respect to the 1998 Annual Meeting of Stockholders is
incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information set forth in the section entitled "Certain Relationships
and Related Transactions" appearing in the Company's definitive proxy statement
with respect to the 1998 Annual Meeting of Stockholders is incorporated herein
by reference.
12
<PAGE> 14
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
Page Number in
EXHIBIT 13
(a) 1. FINANCIAL STATEMENTS:
Report of independent auditors............. 60
Consolidated balance sheets at December 28,
1997 and December 29, 1996 ................ 40
Consolidated statements of operations for
the fiscal years ended December 28, 1997,
December 29, 1996 and December 31, 1995.... 41
Consolidated statements of stockholders'
equity for the fiscal years ended
December 28, 1997, December 29, 1996 and
December 31, 1995.......................... 42
Consolidated statements of cash flows
for the fiscal years ended December 28, 1997,
December 29, 1996 and December 31, 1995.... 43
Notes to consolidated financial
statements................................. 44
Page Number in
FORM 10-K
Independent auditors' report............... 15
2. FINANCIAL STATEMENT SCHEDULE:
II Valuation and Qualifying Accounts....... 16
Schedules other than that listed above have been omitted because they are
not required, not applicable or the required information is furnished in the
consolidated financial statements or notes thereto.
3. EXHIBITS: (See Index to Exhibits beginning on page 17.)
(b) REPORTS ON FORM 8-K - On December 17, 1997, the registrant filed a
report on Form 8-K as of December 15, 1997 to report under "Item 5.
Other Events" the filing of a press release which announced that it had
entered into an agreement to acquire the outstanding equity securities
of APP Holding Corporation, the parent and sole stockholder of Aspen Pet
Products, Inc.
13
<PAGE> 15
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
EKCO GROUP, INC.
By: /s/MALCOLM L. SHERMAN
-----------------------------
Malcolm L. Sherman, Chief
Executive Officer
(Principal Executive Officer)
Date: March 27, 1998
By:/s/DONATO A. DENOVELLIS
-----------------------------
Donato A. DeNovellis, Executive Vice President, Finance and
Administration, and Chief Financial Officer
(Principal Financial Officer)
Date: March 27, 1998
By: /s/BRIAN R. MCQUESTEN
-----------------------------
Brian R. McQuesten, Vice President and
Controller
(Principal Accounting Officer)
Date: March 27, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
/S/GEORGE W. CARMANY, III Director March 27, 1998
- -------------------------
George W. Carmany, III
/S/MICHAEL G. FRIEZE Director March 27, 1998
- -------------------------
Michael G. Frieze
/S/AVRAM J. GOLDBERG Director March 27, 1998
- -------------------------
Avram J. Goldberg
/S/KENNETH J. NOVACK Director March 27, 1998
- -------------------------
Kenneth J. Novack
/S/STUART B. ROSS Director March 27, 1998
- -------------------------
Stuart B. Ross
/S/MALCOLM L. SHERMAN Director March 27, 1998
- -------------------------
Malcolm L. Sherman
/S/BILL W. SORENSON Director March 27, 1998
- -------------------------
Bill W. Sorenson
/S/HERBERT M. STEIN Director March 27, 1998
- -------------------------
Herbert M. Stein
14
<PAGE> 16
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
EKCO Group, Inc.
Under date of January 29, 1998, we reported on the consolidated balance
sheets of EKCO Group, Inc. and subsidiaries as of December 28, 1997 and December
29, 1996, and the related consolidated statements of operations, stockholders'
equity and cash flows for each of the fiscal years in the three-year period
ended December 28, 1997, as contained in the 1997 annual report to stockholders.
These consolidated financial statements and our report thereon are incorporated
by reference in this annual report on Form 10-K for the fiscal year 1997. In
connection with our audits of the aforementioned consolidated financial
statements, we also audited the related consolidated financial statement
schedule as listed in Item 14(a)2 of this report. This financial statement
schedule is the responsibility of the Company's management. Our responsibility
is to express an opinion on this financial statement schedule based on our
audits.
In our opinion, such financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
present fairly, in all material respects, the information set forth herein.
/s/ KPMG Peat Marwick LLP
Boston, Massachusetts
January 29, 1998
15
<PAGE> 17
<TABLE>
<CAPTION>
EKCO GROUP, INC. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(AMOUNTS IN THOUSANDS)
- ------------------------------------------------------------------------------------------------------------------------------------
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- ------------------------------------------------------------------------------------------------------------------------------------
--ADDITIONS TO RESERVES-- --DEDUCTIONS FROM RESERVES--
BALANCE AT ADDITIONS CHARGED TO SETTLEMENTS BALANCE
BEGINNING CHARGED TO OTHER OR WRITE- AT CLOSE
DESCRIPTION OF PERIOD INCOME OR LOSS ACCOUNTS PAYMENTS OFFS OF PERIOD
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 28, 1997:
Allowance for doubtful
accounts $ 760 $ 183 $ 14 $ -- $ -- $ 957
Provisions related to
consolidation of
cleaning business 1,697 -- -- 1,697 -- --
Provision for disposal of
discontinued operations 5,500 -- -- 5,500 -- --
-------- -------- ------ ------ ------ ------
$ 7,957 $ 183 $ 14 $7,197 $ -- $ 957
======== ======== ====== ====== ====== ======
YEAR ENDED DECEMBER 29, 1996:
Allowance for doubtful
accounts $ 948 $ 130 $ -- $ -- $ 318 $ 760
Provisions related to
consolidation of
cleaning business -- 4,921 -- -- 3,224 1,697
Provision for disposal of
discontinued operations -- 5,500 -- -- -- 5,500
-------- -------- ------ ------ ------ ------
$ 948 $ 10,551 $ -- $ -- $3,542 $7,957
======== ======== ====== ====== ====== ======
YEAR ENDED DECEMBER 31, 1995:
Allowance for doubtful
accounts $ 1,395 $ (290) $ -- $ -- $ 157 $ 948
Reserves related to plant
consolidations 3,305 -- -- 3,305 -- --
-------- -------- ------ ------ ------ ------
$ 4,700 $ (290) $ -- $3,305 $ 157 $ 948
======== ======== ====== ====== ====== ======
</TABLE>
16
<PAGE> 18
- -------------------------------------------------------------------------------
INDEX TO EXHIBITS
- -------------------------------------------------------------------------------
Exhibit
Number Exhibit Description
- --------------------------------------------------------------------------------
3.1(i)(a) Restated Certificate of Incorporation dated February 17, 1987, as
amended, originally filed as Exhibit 3.1(a) to Form 10-K for the
year ended December 31, 1989 (incorporated herein by reference to
Exhibit 3.1(i)(a) to Form 10-K for the year ended December 31,
1995).
3.1(i)(b) Form of Certificate of Designations of Series A Junior
Participating Preferred Stock.
3.1(i)(c) Certificate of Designations of Series B ESOP Convertible Preferred
Stock, originally filed as Exhibit 3.1(d) to Form 10-K for the
year ended January 1, 1989 (incorporated herein by reference to
Exhibit 3.1(c) to Form 10-K for the year ended January 1, 1995).
3.1(ii) By-laws as currently in effect (incorporated herein by reference
to Form 10-K for the year ended December 29, 1996).
4.1 Amended and Restated Rights Agreement dated as of March 21, 1997
with American Stock Transfer & Trust Company, including Form of
Rights Certificate (incorporated herein by reference to
Exhibit 4.1 to Form 8-K as of March 21, 1997).
4.2(a)(1) Indenture dated as of March 25, 1996 among the registrant, its
U.S. operating subsidiaries and Fleet National Bank of Connecticut
(incorporated herein by reference to Exhibit 4.2(a) to Form 10-K
for the year ended December 31, 1995).
4.2(a)(2) First Supplemental Indenture dated as of January 16, 1998 among
the registrant, its U.S. subsidiary guarantors and State Street
Bank and Trust Company.
4.2(b) Form of 9 1/4% Senior Note due 2006, included in Exhibit 4.2(a)(1)
(incorporated herein by reference to Exhibit 4.2(b) to Form 10-K
for the year ended December 31, 1995).
4.2(c) Registration Rights Agreement dated as of March 25, 1996 among the
registrant, its U.S. operating subsidiaries, Bear, Stearns & Co.
Inc. and Smith Barney Inc. (incorporated herein by reference to
Exhibit 4.2(c) to Form 10-K for the year ended December 31, 1995).
4.3 EKCO Group, Inc. Dividend Reinvestment and Stock Purchase Plan
(incorporated herein by reference to Exhibit 4.3 to Form 10-K for
the year ended December 31, 1995).
10.1(a)* 1984 Restricted Stock Purchase Plan, as amended (incorporated
herein by reference to Exhibit 10.1(a) to Form 10-K for the year
ended December 29, 1996).
------------------------------------------------------------------------
(1) Numbered in accordance with Item 601 of Regulation S-K.
(2) An asterisk (*) denotes the Company's management contracts or
compensatory plans or arrangements.
17
<PAGE> 19
10.1(b)* 1985 Restricted Stock Purchase Plan, as amended (incorporated
herein by reference to Exhibit 10.1(b) to Form 10-K for the year
ended December 29, 1996).
10.1(c)* Form of Restricted Stock Purchase Agreement, as amended
(incorporated herein by reference to Exhibit 10.1(b) to Form 10-K
for the year ended January 1, 1995, Exhibit 10.1(c)(3) to Form
10-K for the year ended December 31, 1995 and schedule thereto in
Exhibit 10.1(c)(2) to Form 10-K for the year ended December 29,
1996).
10.1(d)* Form of Restricted Stock Purchase Agreement, as amended
(incorporated by reference to Exhibits 10.1(d) to Form 10-K for
the year ended December 31, 1995).
10.2(a)* 1987 Stock Option Plan, as amended, including forms of incentive
stock option and non-qualified stock option agreements.
10.2(b)(1)* Form of non-qualified stock option and repurchase agreement, as
amended (incorporated herein by reference to Exhibit 10.2(b)(2)(i)
to Form 10-K for the year ended December 31, 1995).
10.2(b)(2) Schedule to form of non-qualified stock option and repurchase
agreement, as amended.
10.2(c)* Form of non-qualified stock option agreement (incorporated herein
by reference to Exhibit 10.2(e) to Form 10-K for the year ended
December 29, 1996).
10.2(d)* Form of incentive stock option agreement (incorporated herein by
reference to Exhibits 10.3(d) to Form 10-K for the year ended
January 1, 1995 and schedule thereto contained in Exhibit
10.2(d)(2) to Form 10-K for the year ended December 29, 1996).
10.2(e)* Form of non-qualified stock option and repurchase agreement.
10.2(f)* Form of non-qualified stock option agreement.
10.3(a)* Form of Indemnity Agreement for officers and directors
(incorporated herein by reference to Exhibit 10.3(c) to Form 10-K
for the year ended January 1, 1995 and to the schedule thereto
contained in Exhibit 10.3(b) to Form 10-K for the year ended
December 29, 1996).
10.4* EKCO Group, Inc. 1988 Directors' Stock Option Plan, as amended,
and form of Non-Qualified Stock Option and Repurchase Agreement.
10.5(a)* EKCO Group, Inc. Employees' Stock Ownership Plan ("ESOP")
effective as of January 1, 1989, as amended (incorporated herein
by reference to Exhibits 10.6(a)(1) and (2) to Form 10-K for the
year ended January 1, 1995 and Exhibits 10.5(a)(2) and 10.5(a)(3)
to Form 10-K for the year ended December 29, 1996).
10.5(b) ESOP Loan Agreement dated as of October 1, 1990 (incorporated
herein by reference to Exhibit 10.5(b) to Form 10-K for the year
ended December 31, 1995).
10.5(c) ESOP Loan Agreement dated as of March 30, 1995 (incorporated
herein by reference to Exhibit 10.5(c) to Form 10-K for the year
ended December 31, 1995).
10.6* Employment Agreement with Malcolm L. Sherman dated December 4,
1996 (incorporated herein by reference to Exhibit 10.6 to Form
10-K for the year ended December 29, 1996).
18
<PAGE> 20
10.7* Amended and Restated Employment Agreement with Donato A.
DeNovellis dated as of May 25, 1995, as amended (incorporated
herein by reference to Exhibit 10.3 to Form 10-Q for the quarterly
period ended October 1, 1995, Exhibit 10.9(b) to Form 10-Q for the
period ended June 30, 1996 and Exhibit 10.10 to Form 10-K for the
year ended December 29, 1996).
10.8* Amended and Restated Employment Agreement with Jeffrey A.
Weinstein dated as of May 25, 1995 (incorporated herein by
reference to Exhibit 10.2 to Form 10-Q for the quarterly period
ended October 1, 1995 and Exhibit 10.10 to Form 10-K for the year
ended December 29, 1996).
10.9* Form of Amended and Restated Employment Agreement with Brian R.
McQuesten and another officer dated as of May 25, 1995, as amended
(incorporated herein by reference to Exhibit 10.5 to Form 10-Q for
the quarterly period ended October 1, 1995).
10.10* Employment Agreement with Stuart W. Cohen dated as of June 12,
1995 (incorporated herein by reference to Exhibit 10.4 to Form
10-Q for the quarterly period ended October 1, 1995).
10.11(a)* Employment Agreement with Robert Varakian dated as of
September 25, 1996 (incorporated herein by reference to Exhibit
10.11 to Form 10-K for the year ended December 29, 1996).
10.11(b)* Amendment to Employment Agreement with Robert Varakian dated as of
November 14, 1997.
10.12* 1995 Restatement of Incentive Compensation Plan for Executive
Employees of EKCO Group, Inc. and its Subsidiaries, as amended.
10.13* EKCO Group, Inc. Supplemental Executive Retirement Plan
dated as of July 1, 1992 (incorporated herein by reference to
Exhibit 10.13 to Form 10-K for the year ended January 2, 1994).
10.14* Form of Split Dollar Agreement (incorporated herein by reference
to Exhibits 10.14 to Form 10-K for the year ended January 2, 1994
and schedule with respect thereto in Exhibit 10.15(b) to Form 10-K
for the year ended December 29, 1996).
10.15* EKCO Group, Inc. Amended 1996 Performance Unit Rights Award Plan
(incorporated herein by reference to Exhibit 10.16(a) to Form 10-K
for the year ended December 29, 1996).
10.16(a) Indemnification Letter from American Home Products Corporation
dated February 8, 1985 to The Ekco Group, Inc.
10.16(b) Letter of Restatement and Confirmation of the Indemnification of
American Home Products Corporation to The Ekco Group, Inc. from
American Home Products Corporation to Centronics Corporation dated
October 1, 1987.
10.16(c) Letter from American Home Products Corporation dated December 19,
1988, originally filed as Exhibit 10.17(d) to Form 10-K for the
year ended January 1, 1989 (incorporated herein by reference to
Exhibit 10.18(c) to Form 10-K for the year ended January 1, 1995).
19
<PAGE> 21
10.17 Agreement dated as of March 7, 1989 with Howard R. Curd et al,
originally filed as Exhibit 10.16 to Form 10-K for the year ended
January 1, 1989 (incorporated herein by reference to Exhibit 10.19
to Form 10-K for the year ended January 1, 1996).
10.18(a) Amended and Restated Credit Agreement dated as of April 11, 1995
and amended and restated as of July 8, 1997 with Fleet National
Bank (incorporated herein by reference to Exhibit 10.22 to Form
10-Q for the quarterly period ended June 29, 1997).
10.18(b) First Amendment to Amended and Restated Credit Agreement dated as
of December 15, 1997.
10.19 Subordinated Promissory Note dated March 28, 1997 made by Austin
Products, Inc. to Ekco Consumer Plastics, Inc. (incorporated
herein by reference to Exhibit 10.1 to Form 10-Q for the quarterly
period ended March 30, 1997).
10.20 Stock Purchase and Sale Agreement dated as of December 15, 1997
with APP Holding Corporation ("APP"), APP's stockholders and APP's
warrantholder (incorporated herein by reference to Exhibit 2 to
Form 8-K as of January 16, 1998).
11 Statement re: computation of per share earnings. (Reference is
made to Note 12 of Notes to Consolidated Financial Statements in
Exhibit 13 hereto.)
13 1997 Annual Report to Stockholders (Sections entitled "Common
Stock Price Range and Dividends," "Selected Consolidated Financial
Data," "Management's Discussion and Analysis of Results of
Operations and Financial Condition," "Consolidated Balance
Sheets," "Consolidated Statement of Operations," "Consolidated
Statements of Stockholders' Equity," "Consolidated Statements of
Cash Flows," "Notes to Consolidated Financial Statements" and
"Report of Independent Auditors").
21 Subsidiaries of the registrant.
23 Consent of KPMG Peat Marwick LLP.
27(1) Financial Data Schedule.
27(2) Financial Data Schedule (Restated).
27(3) Financial Data Schedule (Restated).
- -------------------------------------
Schedules to Exhibits 10.17 and 10.18(a) will be supplied upon
request by the Commission.
THE FOREGOING EXHIBITS WILL NOT BE INCLUDED IN COPIES OF THIS
ANNUAL REPORT ON FORM 10-K SUPPLIED TO STOCKHOLDERS. A COPY OF
THESE EXHIBITS WILL BE FURNISHED TO STOCKHOLDERS UPON WRITTEN
REQUEST ADDRESSED TO SUSAN M. SCACCHI, TREASURER, EKCO GROUP,
INC., 98 SPIT BROOK ROAD, SUITE 102, NASHUA, NEW HAMPSHIRE 03062.
20
<PAGE> 22
INDEX TO EXHIBITS FILED WITH FORM 10-K
FOR THE FISCAL YEAR ENDED DECEMBER 28, 1997
EXHIBIT NO. DESCRIPTION
3.1(i)(b) Form of Certificate of Designations of Series A Junior
Participating Preferred Stock, originally filed as part of Exhibit
4.2(c) to Form 10-K for the year ended December 28, 1986.
4.2(a)(2) First Supplemental Indenture dated as of January 16, 1998 among
the registrant, its U.S. subsidiary guarantors and State Street
Bank and Trust Company.
10.2(a)* 1987 Stock Option Plan, as amended, including forms of incentive
stock option and non-qualified stock option agreements.
10.2(b)(2) Schedule to form of non-qualified stock option and repurchase
agreement, as amended.
10.2(e)* Form of non-qualified stock option and repurchase agreement.
10.2(f)* Form of non-qualified stock option agreement.
10.4* EKCO Group, Inc. 1988 Directors' Stock Option Plan, as amended,
and form of non-qualified stock option and repurchase agreement.
10.11(b)* Amendment to Employment Agreement with Robert Varakian dated as of
November 14, 1997.
10.12* 1995 Restatement of Incentive Compensation Plan for Executive
Employees of EKCO Group, Inc. and its Subsidiaries, as amended.
10.16(a) Indemnification Letter from American Home Products Corporation
dated February 8, 1985 to The Ekco Group, Inc., originally filed
as Exhibit 2.2 to Form 8-K as of October 23, 1987.
10.16(b) Letter of Restatement and Confirmation of the Indemnification of
American Home Products Corporation to The Ekco Group, Inc. from
American Home Products Corporation to Centronics Corporation dated
October 1, 1987, originally filed as Exhibit 2.3 to Form 8-K as of
October 23, 1987.
10.18(b) First Amendment to Amended and Restated Credit Agreement dated as
of December 15, 1997.
11 Statement re: computation of per share earnings. (Reference is
made to Note 12 Notes to Consolidated Financial Statements in
Exhibit 13 hereto.)
13 1997 Annual Report to Stockholders (Sections entitled "Common
Stock Price Range and Dividends," "Selected Consolidated Financial
Data," "Management's Discussion and Analysis of Results of
Operations and Financial Condition," "Consolidated Balance
Sheets," "Consolidated Statement of Operations," "Consolidated
Statements of Stockholders' Equity," "Consolidated Statements of
21
<PAGE> 23
Cash Flows," "Notes to Consolidated Financial Statements" and
"Report of Independent Auditors").
21 Subsidiaries of the registrant.
23 Consent of KPMG Peat Marwick LLP.
27(1) Financial Data Schedule.
27(2) Financial Data Schedule (Restated).
27(3) Financial Data Schedule (Restated).
- ---------------------------------------------------------------------
(1) Numbered in accordance with Item 601 of Regulation S-K.
(2) An asterisk (*) denotes the Company's management contracts or
compensatory plans or arrangements.
22
<PAGE> 1
EXHIBIT 3(i)(b)
FORM
of
CERTIFICATE OF DESIGNATION
of
SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
of
CENTRONICS CORPORATION
(Pursuant to Section 151 of the
Delaware General Corporation Law)
-------------------------
Centronics Corporation, a corporation organized and existing under the
General Corporation Law of the State of Delaware (hereinafter called the
"Corporation"), hereby certifies that the following resolution was adopted by
the Board of Directors of the Corporation as required by Section 151 of the
General Corporation Law at a meeting duly called and held on March 27, 1987:
RESOLVED, that pursuant to the authority granted to and vested in the
Board of Directors of this Corporation (hereinafter called the "Board of
Directors" or the "Board") in accordance with the provisions of the Restated
Certificate of Incorporation, the Board of Directors hereby creates a series of
Preferred Stock, par value $.01 per share (the "Preferred Stock"), of the
Corporation and hereby states the designation and number of shares, and fixes
the relative rights, preferences, and limitations as follows:
Series A Junior Participating Preferred Stock:
I. DESIGNATION AND AMOUNT
The shares of such series shall be designated as "Series A Junior
Participating Preferred Stock" (the "Series a Preferred Stock") and the number
of shares constituting the Series A Preferred Stock shall be 600,000. Such
number of shares may be increased or decreased by resolution of the Board of
Directors; PROVIDED, that no decrease shall reduce the number of shares of
Series A Preferred Stock to a number less than the number of shares then
outstanding plus the number of shares reserved for
<PAGE> 2
issuance upon the exercise of outstanding options, rights or warrants or upon
the conversion of any outstanding securities issued by the Corporation
convertible into Series A Preferred Stock.
II. DIVIDENDS AND DISTRIBUTIONS
(A) Subject to the rights of the holders of any shares of any
series of Preferred Stock (or any similar stock) ranking prior
and superior to the Series A Preferred Stock with respect to
dividends, the holders of shares of Series A Preferred Stock,
in preference to the holders of Common Stock, par value $.01
per share (the "Common Stock"), of the Corporation, and of any
other junior stock, shall be entitled to receive, when, as and
if declared by the Board of Directors out of funds legally
available for the purpose, quarterly dividends payable in cash
on the first day of March, June, September and December in
each year (each such date being referred to herein as a
"Quarterly Dividend Payment Date"), commencing on the first
Quarterly Dividend Payment Date after the first issuance of a
share or fraction of a share of Series A Preferred Stock, in
an amount per share (rounded to the nearest cent) equal to the
greater of (a) $10 or (b) subject to the provision for
adjustment hereinafter set forth, 100 times the aggregate per
share amount of all cash dividends, and 100 times the
aggregate per share amount (payable in kind) of all non-cash
dividends or other distributions, other than a dividend
payable in shares of Common Stock or a subdivision of the
outstanding shares of Common Stock (by reclassification or
otherwise), declared on the Common Stock since the immediately
preceding Quarterly Dividend Payment Date or, with respect to
the first Quarterly Dividend Payment Date, since the first
issuance of any shares or fraction of a share of Series A
Preferred Stock. In the event the Corporation shall at any
time declare or pay any dividend on the Common Stock payable
in shares of Common Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of
Common Stock (by reclassification or otherwise than by
2
<PAGE> 3
payment of a dividend in shares of Common Stock) into a
greater or lesser number of shares of Common Stock, then in
each such case the amount to which holders of shares of Series
A Preferred Stock were entitled immediately prior to such
event under clause (b) of the preceding sentence shall be
adjusted by multiplying such amount by a fraction, the
numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator
of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(B) The Corporation shall declare a dividend or distribution on
the Series A Preferred Stock as provided in paragraph (A) of
this Section immediately after it declares a dividend or
distribution on the Common Stock (other than a dividend or
distribution on the Common Stock (other than a dividend
payable in shares of Common Stock (other than a dividend
payable in shares of Common Stock (other than a dividend
payable in shares of Common Stock); provided that, in the
event no dividend or distribution shall have been declared on
the Common Stock during the period between any Quarterly
Dividend Payment Date and the next subsequent Quarterly
Dividend Payment Date, a dividend of $10 per share on the
Series A Preferred Stock shall nevertheless be payable on such
subsequent Quarterly Dividend Payment Date.
(C) Dividends shall begin to accrue and be cumulative on
outstanding shares of Series A Preferred Stock from the
Quarterly Dividend Payment Date next preceding the date of
issue of such shares, unless the date of issue of such shares
is prior to the record dated for the first Quarterly Dividend
Payment Date, in which case dividends on such shares shall
begin to accrue from the date of issue of such shares, or
unless the date of issue is a Quarterly Dividend Payment Date
or is a date after the record date for the determination of
holders of shares of Series A Preferred Stock entitled to
receive a quarterly dividend and before such Quarterly
Dividend Payment Date, in either of which events such
3
<PAGE> 4
dividends shall begin to accrue and be cumulative from such
Quarterly Dividend Payment Date. Accrued but unpaid dividends
shall not bear interest. Dividends paid on the shares of
Series A Preferred Stock in an amount less than the total
amount of such dividends at the time accrued and payable on
such shares shall be allocated pro rata on a share-by-share
basis among all such shares at the time outstanding. The Board
of Directors may fix a record date for the determination of
holders of shares of Series A Preferred Stock entitled to
receive payment of a dividend or distribution declared
thereon, which record date shall be not more than 60 days
prior to the date fixed for the payment thereof.
III. VOTING RIGHTS
The holders of shares of Series A Preferred Stock shall have
the following voting rights:
(A) Subject to the provision for adjustment hereinafter
set forth, each share of Series A Preferred Stock
shall entitle the holder thereof to 100 votes on all
matters submitted to a vote of the shareholders of
the Corporation. In the event the Corporation shall
at any time declare or pay any dividend on the Common
Stock payable in shares of Common Stock, or effect a
subdivision or combination or consolidation of the
outstanding shares of Common Stock (by
reclassification or otherwise than by payment of the
dividend in shares of Common Stock) into a greater or
lesser number of shares of Common Stock, then in each
such case the number of votes per share to which
holders of shares of Series A Preferred Stock were
entitled immediately prior to such event shall be
adjusted by multiplying such number by a fraction,
the numerator of which is the number of shares of
Common Stock outstanding immediately after such event
and the denominator of which is the number of shares
of Common Stock that were outstanding immediately
prior to such event.
4
<PAGE> 5
(B) Except as otherwise provided herein, in any other
Certificate of Designation creating a series of
Preferred Stock or any similar stock, or by law, the
holders of shares of Series A Preferred Stock an the
holders of shares of Common Stock and any other
capital stock of the Corporation having general
voting rights shall vote together as one class on all
matters submitted to a vote of shareholders of the
Corporation.
(C) Except as set forth herein, or as otherwise provided
by law, holders of Series A Preferred Stock shall
have no voting rights.
IV. CERTAIN RESTRICTIONS
(A) Whenever quarterly dividends or other dividends or
distributions payable on the Series A Preferred Stock
as provided in Section II are in arrears, thereafter
and until all accrued and unpaid dividends and
distributions, whether or not declared, on shares of
Series A Preferred Stock outstanding shall have been
paid in full, the Corporation shall not:
(i) declare or pay dividends, or make any other
distributions, on any shares of stock
ranking junior (either as to dividends or
upon liquidation, dissolution or winding up)
to the Series A Preferred Stock;
(ii) declare or pay dividends, or make any other
distributions, on any shares of stock
ranking on a parity (either as to dividends
or upon liquidation, dissolution or winding
up) with the Series A Preferred Stock,
except dividends paid ratably on the Series
A Preferred Stock and all such parity stock
on
5
<PAGE> 6
which dividends are payable or in arrears in
proportion to the total amounts to which the
holders of all such shares are then
entitled.
(iii) Redeem or purchase or otherwise acquire for
consideration shares of any stock ranging
junior (either as to dividends or upon
liquidation, dissolution or winding up) to
the Series A Preferred Stock, provided that
the Corporation may at any time redeem,
purchase or otherwise acquire shares of any
such junior stock in exchange for shares of
any stock of the Corporation ranking junior
(either as to dividends or upon dissolution,
liquidation or winding up) to the Series A
Preferred Stock; or
(iv) Redeem or purchase or otherwise acquire for
consideration any shares of Series A
Preferred Stock, or any shares of stock
ranking on a parity with the Series A
Preferred Stock, except in accordance with a
purchase offer made in writing or by
publication (as determined by the Board of
Directors) to all holders of such shares
upon such terms as the Board of Directors,
after consideration of the respective annual
dividend rates and other relative rights and
preferences of the respective series and
classes, shall determine in good faith will
result in
6
<PAGE> 7
fair and equitable treatment among the
respective series or classes.
(B) The Corporation shall not permit any subsidiary of
the Corporation to purchase or otherwise acquire for
consideration any shares of stock of the Corporation
unless the Corporation could, under paragraph (A) of
this Section IV purchase or otherwise acquire such
shares at such time and in such manner.
V. REACQUIRED SHARES
Any shares of Series A Preferred Stock purchased or otherwise acquired
by the Corporation in any manner whatsoever shall be retired and cancelled
promptly after the acquisition thereof. All such shares shall upon their
cancellation become authorized but unissued shares of Preferred Stock and many
be reissued as part of a new series of Preferred Stock subject to the conditions
and restrictions on issuance set forth herein, in the Restated Certificate of
Incorporation, in any other Certificate of Designations creating a series of
Preferred Stock or any similar or as otherwise required by law.
VI. LIQUIDATION, DISSOLUTION OR WINDING UP
Upon any liquidation, dissolution or winding up of the Corporation, no
distribution shall be made (1) to the holders of shares of stock ranking junior
(either as to dividends or upon liquidation, dissolution or winding up) to the
Series A Preferred Stock shall have received $100 per share, plus an amount
equal to accrued and unpaid dividends and distributions thereon, whether or not
declared, to the date of such payment, provided that the holders of shares
Series A Preferred Stock shall be entitled to receive an aggregate amount per
share, subject to the provision for adjustment hereinafter set forth, equal to
100 times the aggregate amount to be distributed per share to holders of shares
of Common Stock, or (2) to the holders of shares of stock ranking on a parity
(either as to dividends or upon liquidation, dissolution or winding up) with the
Series A Preferred Stock, except distributions made ratably on the Series A
Preferred Stock and all such parity stock in proportion to the total amounts to
which
7
<PAGE> 8
the holders of all such shares are entitled upon such liquidation, dissolution
or winding up. In the event the Corporation shall at any time declare or pay any
dividend on the Common Stock payable in shares of Common Stock, or effect a
subdivision or combination or consolidation of the outstanding shares of Common
Stock (by reclassification or otherwise than by payment of a dividend in shares
of Common Stock) into a greater or lesser number of shares of Common Stock, then
in each such case the aggregate amount to which holders of shares of Series A
Preferred Stock were entitled immediately prior to such event under the proviso
in clause (1) of the preceding sentence shall be adjusted by multiplying such
amount by a fraction the numerator of which is the number of shares of Common
Stock outstanding immediately after such event and the denominator of which is
the number of shares of Common Stock that were outstanding immediately prior to
such event.
VII. CONSOLIDATION, MERGER, ETC.
In case the Corporation shall enter into any consolidation, merger,
combination or other transaction in which the shares of Common Stock are
exchanged for or changed into other stock or securities, cash and/or any other
property, then in any such case each share of Series A preferred Stock shall at
the same time be similarly exchanged or changed into an amount per share,
subject to the provision for adjustment hereinafter set forth, equal to 100
times the aggregate amount of stock, securities, cash and/or any other property
(payable in kind), as the case may be, into which or for which each share of
Common Stock is changed or exchanged. In the event the Corporation shall at any
time declare or pay any dividend on the Common Stock payable in shares of Common
Stock, or effect a subdivision or combination or consolidation of the
outstanding shares of Common Stock (by reclassification or otherwise than by
payment of a dividend in shares of Common Stock) into a greater or lesser number
of shares of Common Stock, then in each such case the amount set forth in the
preceding sentence with respect to the exchange or change of shares of Series A
Preferred Stock shall be adjusted by multiplying such amount by a fraction, the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
8
<PAGE> 9
VIII. REDEMPTION
The shares of Series A Preferred Stock shall not be redeemable.
IX. RANK
The Series A Preferred Stock shall rank, with respect to the payment of
dividends and the distribution of assets, junior to all series of any other
class of the Corporation's Preferred Stock.
X. AMENDMENT
The Restated Certificate of Incorporation of the Corporation shall not
be amended in any manner which would materially alter or change the powers,
preferences or special rights of the Series A Preferred Stock so as to affect
them adversely without the affirmative vote of the holders of at least
two-thirds of the outstanding shares of Series A Preferred Stock, voting
together as a single series.
IN WITNESS WHEREOF, this Certificate of Designations is executed on
behalf of the Corporation by its President and attested by its Secretary this
27th day of March, 1987.
------------------------------------
President
Attest:
- ------------------------------
Secretary
9
<PAGE> 1
EXHIBIT 4.2(a)(2)
- --------------------------------------------------------------------------------
EKCO GROUP, INC.,
Issuer
THE GUARANTORS NAMED HEREIN
and
STATE STREET BANK AND TRUST COMPANY
(successor to FLEET NATIONAL BANK),
Trustee
--------------------
First Supplemental Indenture
Dated as of January 16, 1998
to
Indenture
Dated as of March 25, 1996
---------------------
$125,000,000
9 1/4 % Senior Notes due 2006
<PAGE> 2
FIRST SUPPLEMENTAL INDENTURE, dated as of January 16, 1998, among EKCO
GROUP, INC., a corporation duly organized and existing under the laws of the
State of Delaware (herein called "the Company") and having its principal office
at 98 Spit Brook Road, Nashua, New Hampshire 03062, the Guarantors whose
signatures appear below (each a "Subsidiary" and collectively the
"Subsidiaries"), and STATE STREET BANK AND TRUST COMPANY (successor to FLEET
NATIONAL BANK), as Trustee (herein called the "Trustee") to the INDENTURE, dated
as of March 25, 1996, among the Company, the Initial Guarantors described
therein and the Trustee (herein called the "Indenture").
RECITALS OF THE COMPANY
The Company, the Initial Guarantors and the Trustee have heretofore
executed and delivered the Indenture, pursuant to which the Company has duly
issued an aggregate of $125,000,000 principal amount of its 9 1/4 % Senior Notes
due 2006 (herein called the "Securities").
The Company, directly or indirectly, owns beneficially and of record
100% of the capital stock of each of APP Holding Corporation ("APP Holding") and
Aspen Pet Products, Inc. ("Aspen Pet Products", and together with APP Holding,
the "New Guarantors"). Each of the New Guarantors has derived and will derive
direct and indirect economic benefit from the issuance of the Securities;
accordingly, the New Guarantors have duly authorized the execution and delivery
of this Supplemental Indenture to provide for its guarantee with respect to the
Securities as set forth in the Indenture.
All things necessary to make this Supplemental Indenture a valid
agreement of the New Guarantors and the Guarantees of the New Guarantors, when
this Supplemental Indenture is executed by it, the valid obligations of the New
Guarantors in accordance with its terms, have been done.
NOW, THEREFORE, THIS SUPPLEMENTAL INDENTURE WITNESSETH:
For and in consideration of the premises and the terms and conditions
of the Indenture, it is mutually covenanted and agreed, for the equal
proportionate benefit of all Holders of the Securities, as follows:
2
<PAGE> 3
ARTICLE ONE
Subsidiary Guarantees
SECTION 1.01. SUBSIDIARY GUARANTEE.
Each of the New Guarantors by the execution of this Supplemental
Indenture, hereby covenants and agrees to be and become a Guarantor and to be
bound by all of the terms and conditions of the Indenture, including without
limitation the Guarantee of the Securities set forth in Article XI of the
Indenture, with the same force and effect as though each has been a signatory to
the Indenture and had executed and delivered its Subsidiary guarantee endorsed
on the Securities.
ARTICLE TWO
Definitions and Other Provisions
of General Application
SECTION 2.01 DEFINITIONS, INCORPORATION OF PROVISIONS.
Terms used herein without definition shall have the meaning prescribed
therefor in the Indenture. The provisions of Articles I and XI, both inclusive,
are incorporated herein with the same force and effect as though set forth
herein in their entirety.
SECTION 2.02. INDENTURE PROVISIONS.
Except as specifically amended by this Supplemental Indenture, the
Indenture shall remain in full force and effect.
SECTION 2.03 GOVERNING LAW.
This Supplemental Indenture shall be governed by and construed in
accordance with the laws of the State of New York.
3
<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed, all as of the day and year first above written.
EKCO GROUP, INC.
Attest: By: /s/ DONATO A. DENOVELLIS
-----------------------
Name: Donato A. DeNovellis
Title: Executive Vice President
/s/ JOHN JAY ALTHOFF Finance and Administration
- ------------------- and Chief Financial Officer
John Jay Althoff, Secretary
STATE STREET BANK AND TRUST COMPANY,
as Trustee
By: /s/ MICHAEL M. HOPKINS
---------------------
Name: Michael M. Hopkins
Title: Vice President
[Guarantors signatures on next page]
4
<PAGE> 5
GUARANTORS:
APP HOLDING CORPORATION EKCO MANUFACTURING OF OHIO, INC.
By: /s/ DONATO A. DENOVELLIS By: /s/ DONATO A. DENOVELLIS
------------------------ ------------------------
Name: Donato A. DeNovellis Name: Donato A. DeNovellis
Title: Vice President and Title: Vice President and
Chief Financial Officer Chief Financial Officer
ASPEN PET PRODUCTS, INC. WRIGHT-BERNET, INC.
By: /s/ DONATO A. DENOVELLIS By: /s/ DONATO A. DENOVELLIS
------------------------ ------------------------
Name: Donato A. DeNovellis Name: Donato A. DeNovellis
Title: Vice President and Title: Vice President and
Chief Financial Officer Chief Financial Officer
B. VIA INTERNATIONAL CLEANING SPECIALTY COMPANY
HOUSEWARES, INC.
By: /s/ DONATO A. DENOVELLIS By: /s/ DONATO A. DENOVELLIS
------------------------ ------------------------
Name: Donato A. DeNovellis Name: Donato A. DeNovellis
Title: Vice President and Title: Vice President and
Chief Financial Officer Chief Financial Officer
EKCO DISTRIBUTION EKCO HOUSEWARES, INC.
OF ILLINOIS, INC.
By: /s/ DONATO A. DENOVELLIS By: /s/ DONATO A. DENOVELLIS
------------------------ ------------------------
Name: Donato A. DeNovellis Name: Donato A. DeNovellis
Title: Vice President and Title: Sr. Vice President and
Chief Financial Officer Chief Financial Officer
KELLOGG BRUSH WOODSTREAM CORPORATION
MANUFACTURING CO.
By: /s/ DONATO A. DENOVELLIS By: /s/ DONATO A. DENOVELLIS
------------------------ ------------------------
Name: Donato A. DeNovellis Name: Donato A. DeNovellis
Title: Vice President and Title: Vice President and
Chief Financial Officer Chief Financial Officer
5
<PAGE> 1
EXHIBIT 10.2(a)
---------------
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) "BOARD MEMBER" means a member of the Board of
Directors.
(7) "CODE" means the United States Internal Revenue Code
of 1986, as amended.
(8) "CONSULTANT" means a person who has a relationship or
is otherwise affiliated with the Company as a
consultant.
(9) "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
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.
(10) "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).
(11) "OPTION" means a right or option granted under the
Plan.
(12) "OPTION AGREEMENT" means an agreement between the
Company and a Participant executed and delivered
pursuant to the Plan.
(02-10-98)
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<PAGE> 2
(13) "PARTICIPANT" means an Ekco Employee, Board Member or
Consultant to whom one or more Options are granted
under the Plan, or, where the context requires, his
legal representative.
(14) "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.
(15) "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, Board Members and Consultants in order to attract
such Ekco Employees, Board Members and Consultants, to induce
such Ekco Employees, Board Members and Consultants to remain
affiliated with the Company or an Affiliate and to provide
additional incentive for such Ekco Employees, Board Members
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 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 5,000,000 Shares (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 --
2
<PAGE> 3
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;
B. determine which Ekco Employees, Board Members or
Consultants 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 of the Company or of an
Affiliate, a Board Member or a Consultant at the time an
Option is granted.
The Administrator may at any time and from time to time grant
one or more Options to one or more Ekco Employees, Board
Members 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
expiration of 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.
Notwithstanding any of the foregoing provisions, the
Administrator may authorize the grant of an Option to a person
not then in the employ of the Company or of an Affiliate or
not yet a Board Member or Consultant. 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:
3
<PAGE> 4
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 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> 5
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, BOARD MEMBERSHIP OR
CONSULTANCY:
A participant who ceases to be an employee of the
Company or of an Affiliate or Board Member or
Consultant (for any reason other than death,
Disability with respect to Ekco Employees, or
termination by the Company or an Affiliate 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, Board membership 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 an Ekco Employee who subsequently becomes Disabled
or any Participant who dies after the termination of
employment, director status 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 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. An Ekco
Employee'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, Board membership or
consultancy is terminated 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
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<PAGE> 6
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:
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
either Board Members or Consultants.
H. DEATH:
In the event of the death of a Participant to whom an
Option has been granted while the Participant is an
Ekco Employee, Board Member or Consultant, 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;
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 Ekco
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<PAGE> 7
Employee, Board Member or Consultant.
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:
By its terms, an Option granted to a Participant
shall not be transferable by the Participant
otherwise than (i) by will or by the laws of descent
and distribution, or (ii) as otherwise determined by
the Administrator and set forth in the applicable
Option Agreement. The designation of a beneficiary of
an Option by a Participant shall not be deemed a
transfer prohibited by this Paragraph K. Except as
provided above, an Option 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
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<PAGE> 8
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 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 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
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<PAGE> 9
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 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, BOARD MEMBERSHIP OR CONSULTANCY RELATIONSHIP
Nothing herein contained shall be deemed to prevent the
Company or an Affiliate from terminating the employment, Board
membership or consultancy of a Participant, nor to prevent a
Participant from terminating the Participant's employment,
Board membership 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
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
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<PAGE> 10
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 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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<PAGE> 11
EXHIBIT A
INCENTIVE STOCK OPTION AGREEMENT
EKCO GROUP, INC.
AGREEMENT made this day of , 19 , between Ekco Group,
Inc. (the "Company"), a Delaware corporation having a principal place of
business in Nashua, New Hampshire, and of , an employee of the Company (the
"Employee").
WHEREAS, the Company desires to grant the Employee an Option to
purchase shares of its common stock of a par value of $.01 a share (the
"Shares") under and for the purposes of the 1987 Stock Option Plan of the
Company (the "Plan");
WHEREAS, the Company and the Employee understand and agree that any
terms used herein have the same meanings as in the Plan;
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
set forth and for other good and valuable consideration, the parties hereto
agree as follows:
1. GRANT OF OPTION
The Company hereby irrevocably grants to the Employee the right and
option to purchase all or any part of an aggregate of ( ) shares of its Common
Stock, $.01 par value, on the terms and conditions and subjects to all the
limitations set forth herein and in the Plan, which is incorporated herein by
reference. The Employee acknowledges receipt of a copy of the Plan.
2. PURCHASE PRICE
The purchase price of the Shares covered by the Option shall
be ($ ) per share.
3. EXERCISE OF OPTION
The Option granted hereby shall be exercisable as follows:
4. TERM OF OPTION
The Option shall terminate ten (10) years from the date of this
Agreement, but shall be subject to earlier termination as provided herein or in
the Plan.
If the Employee ceases to be an employee of the Company or an Affiliate
(for any reason other than death or Disability or termination by the Employee's
employer for cause), the Option may be exercised within three (3) months after
the date the Employee ceases to be an employee, or within ten (10) years from
the granting of the Option, whichever is earlier, but may not be exercised
thereafter. In such event, the Option shall be exercisable only to the extent
that the right to purchase shares under the Plan has accrued and is in effect at
the date of such cessation of employment.
In the event the Employee's employment is terminated by the Employee's
employer for "cause" (as defined in the Plan), the Employee's right to exercise
any unexercised portion of this Option shall cease forthwith, and this Option
shall thereupon terminate.
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<PAGE> 12
In the event of the Disability of the Employee (as determined by the
1987 Stock Option Plan Committee of the Company, and as to the fact and date of
which the employee is notified by that Committee in writing), the Option shall
be exercisable within (1) year after the date of such Disability or, if earlier,
the term originally prescribed by this Agreement. In such event, the Option
shall be exercisable:
(a) to the extent that the right to purchase the Shares
hereunder has accrued on the date the Employee
becomes Disabled and is in effect as of such
determination date; and
(b) 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
Employee not become Disabled prior to the end of the
particular accrual period. The proration shall not be
based upon the number of days the accrual period
during which the Employee was not Disabled.
In the event of the death of the Employee while an employee of the
Company or of an Affiliate, the Option:
(x) to the extent exercisable but not exercised as of the
date of death; and
(y) 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 Employee
not died prior to the end of the particular accrual
period;
may be exercised by the Employee's legal representatives and/or any person or
persons who acquired the Employee's rights to the Option by will or by the laws
of descent and distribution. The proration shall be based upon the number of
days during the accrual period prior to the Employee's death. In such event, the
Option must be exercised, if at all, within one (1) year after the date of death
of the Employee or, if earlier, within the originally prescribed term of the
Option.
5. NON-ASSIGNABILITY
The Option shall not be transferable by the Employee otherwise than by
will or by the laws of descent and distribution and shall be exercisable, during
the Employee's lifetime, only by the Employee. The 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
the Option or of any rights granted hereunder contrary to the provisions of this
Section 5, or the levy of any attachment or similar process upon the Option or
such rights, shall be null and void.
6. EXERCISE OF OPTION AND ISSUE OF SHARES
The Option may be exercised in whole or in part (to the extent that it
is exercisable in accordance with its terms) by giving written notice to the
Company, together with the tender of the Option price. 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, shall contain any warranty
required by Section 7 below and shall otherwise comply with the terms and
conditions of this Agreement and the Plan. The Company shall pay all original
issue taxes with respect to the issue of the Shares pursuant hereto and all
other fees and expenses necessarily incurred by the Company in connection
herein. Except as specifically set forth herein, the holder acknowledges that
any income or other taxes due from him with respect to this Option or the shares
issuable pursuant to this Option shall be the responsibility of the holder. The
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<PAGE> 13
holder of this Option shall have rights as a shareholder only with respect to
any Shares covered by the Option after due exercise of the Option and tender of
the full exercise price for the shares being purchased pursuant to such
exercise.
7. PURCHASE FOR INVESTMENT
Unless the offering and sale of the Shares to be issued upon
the particular exercise of the 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:
(a) The person(s) who exercise the Option shall warrant
to the Company, at the time of such exercise, that
such person(s) are acquiring such Shares for his or
her own account, for investment and not with a view
to, or for sale in connection with, the distribution
of any such Shares, in which event the person(s)
acquiring such Shares shall be bound by the
provisions of the following legend which shall 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."
(b) 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 completion of any action or obtaining of any consent, which
the Company deems necessary under any applicable law (including without
limitation state securities or "blue sky" laws).
8. NOTICES
Any notices required or permitted by the terms of this
Agreement or the Plan shall be given by registered or certified mail, return
receipt requested, addressed as follows:
To the Company: Ekco Group, Inc.
98 Spit Brook Road
Nashua, NH 03062
Attn:
To the Employee: ---------------
---------------
---------------
or to such other address or addresses of which notice in the same manner has
previously been given. Any such notice shall be deemed to have been given when
mailed in accordance with the foregoing provisions.
9. GOVERNING LAW
This Agreement shall be construed and enforced in accordance
with the law of the State of New Hampshire, except to the extent the law of the
State of Delaware may be applicable.
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<PAGE> 14
10. BENEFIT OF AGREEMENT
This Agreement shall be for the benefit of and shall be
binding upon the heirs, executors, administrators and successors of the parties
hereto.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed and its corporate seal to be hereto affixed by , its duly authorized
officer, and the Employee has hereunto set his or her hand and seal, all as of
the day and year first above written.
EKCO GROUP, INC.
By
--------------
----------------
Employee
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<PAGE> 15
EXHIBIT B
NON-QUALIFIED STOCK OPTION AGREEMENT
EKCO GROUP, INC.
AGREEMENT made this day of , 19 , between Ekco Group, Inc.
(the "Company"), a Delaware corporation having a principal place of business in
Nashua, New Hampshire, and of, an employee of the Company (the
"Employee").
WHEREAS, the Company desires to grant to the Employee an Option to
purchase shares of its common stock of a par value of $.01 a share (the
"Shares") under and for the purposes of the 1987 Stock Option Plan of the
Company (the "Plan") pursuant to Article XII thereof;
WHEREAS, the Company and the Employee understand and agree that any
terms used herein have the same meanings as in the Plan;
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
set forth and for other good and valuable consideration, the parties hereto
agree as follows:
1. GRANT OF OPTION
The Company hereby irrevocably grants to the Employee the rights and
option to purchase all or any part of an aggregate of_______ ( ) shares of its
Common Stock, $.01 par value, on the terms and conditions and subject to all the
limitations set forth herein and in the Plan, which is incorporated herein by
reference. The Employee acknowledges receipt of a copy of the Plan.
2. PURCHASE PRICE
The purchase price of the Shares by the Option shall be ($ )
per share.
3. EXERCISE OF OPTION
The Option granted hereby shall be exercisable as follows:
4. TERMS OF OPTION
The Option shall terminate [eleven (11)] years from the date
of this Agreement, but shall be subject to earlier termination as provided
herein or in the Plan.
If the Employee ceases to be an employee of the Company or of
an Affiliate (for any reason other than death or Disability or termination by
the Employee's employer for cause), the Option may be exercised within [three
(3)] months after the date the Employee ceases to be an employee, or within
[eleven(11)] years from the granting of the Option, whichever is earlier, but
may not be exercised thereafter. In such event, the Option shall be exercisable
only to the extent that the right to purchase shares under the Plan has accrued
and is in effect at the date of such cessation of employment.
In the event the Employee's employment is terminated by the
Employee's employer for "cause" (as defined in the Plan), the Employee's right
to exercise any unexercised portion of this Option shall cease forthwith, and
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<PAGE> 16
this Option shall thereupon terminate.
In the event of the Disability of the Employee (as determined
by the 1987 Stock Option Plan Committee of the Company, and as to the fact and
date of which the Employee is notified by that Committee in writing), the Option
shall be exercisable within (1) year after the date of such Disability or, if
earlier, the term originally prescribed by this Agreement. In such event, the
Option shall be exercisable:
(a) to the extent that the right to purchase the Shares
hereunder has accrued on the date the Employee
becomes Disabled and is in effect as of such
determination date; and
(b) 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
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 Employee was not Disabled.
In the event of the death of the Employee while an employee of
the Company or of an Affiliate, the Option:
(x) to the extent exercisable but not exercised as of the
date of death; and
(y) 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 Employee
not died prior to the end of the particular accrual
period;
may be exercised by the Employee's legal representatives and/or any person or
persons who acquired the Employee's rights to the Option by will or by the laws
of descent and distribution. The proration shall be based upon the number of
days during the accrual period prior to the Employee's death. In such event, the
Option must be exercised, if at all, within (1) year after the date of death of
the Employee or, if earlier, within the originally prescribed term of the
Option.
5. NON-ASSIGNABILITY
The Option shall not be transferable by the Employee otherwise
than by will or by the laws of descent and distribution and shall be
exercisable, during the Employee's lifetime, only by the Employee. The 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 the Option or of any rights granted hereunder contrary to
the provisions of this Section 5, or the levy of any attachment or similar
process upon the Option or such rights, shall be null and void.
6. EXERCISE OF OPTION AND ISSUE OF SHARES
The Option may be exercised in whole or in part (to the extent
that it is exercisable in accordance with its terms) by giving written notice to
the Company, together with the tender of the Option price. 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, shall contain any
warranty required by Section 7 below and shall otherwise comply with the terms
and conditions of this Agreement and the Plan. The Company shall pay all
original issue taxes with respect to the issue of the Shares pursuant hereto and
all other fees and expenses necessarily incurred by the Company in connection
herewith. Except as specifically set forth herein, the holder acknowledges that
any income or other taxes due from him with respect to this Option or the shares
issuable pursuant to this Option shall be the responsibility of the holder. The
holder of this Option shall have rights as a shareholder only with respect to
any Shares covered by the Option after due exercise of the Option and tender of
the full exercise price for the shares being purchased pursuant to such
exercise.
7. PURCHASE FOR INVESTMENT
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<PAGE> 17
Unless the offering and sale of the Shares to be issued upon
the particular exercise of the 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:
(a) The person(s) who exercise the Option shall warrant to the
Company, at the time of such exercise, that such person(s) are
acquiring such Shares for his or her own account, for
investment and not with a view to, or for sale in connection
with the distribution of any such Shares, in which event the
person(s) acquiring such shares shall be bound by the
provisions of the following legend which shall 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."
(b) 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 completion of any action or obtaining of any consent, which
the Company deems necessary under any applicable law (including without
limitation state securities or "blue sky" laws).
8. NOTICES
Any notices required or permitted by the terms of this
Agreement or the Plan shall be given by registered or certified mail, return
receipt requested, addressed as follows:
To the Company: Ekco Group, Inc.
98 Spit Brook Road
Nashua, NH 03062
Attn:
To the Employee:
-----------------
-----------------
-----------------
or to such other address or addresses of which notice in the same manner has
previously been given. Any such notice shall be deemed to have been given when
mailed in accordance with the foregoing provisions.
9. GOVERNING LAW
This Agreement shall be construed and enforced in accordance
with the law of the State of New Hampshire, except to the extent the of the
State of Delaware may be applicable.
10. BENEFIT OF AGREEMENT
This Agreement shall be for the benefit of and shall be
binding upon the heirs, executors, administrators and successors of the parties
hereto.
IN WITNESS WHEREOF, the Company has caused this Agreement to
be executed and its corporate seal to be hereto affixed by , its
duly authorized officer, and the Employee has hereunto set his or her
17
<PAGE> 18
hand and seal, all as of the day and year first above written.
EKCO GROUP, INC.
By
--------------
----------------
Employee
18
<PAGE> 1
EXHIBIT 10.2(b)(2)
------------------
SCHEDULE TO
FORM OF NON-QUALIFIED STOCK OPTION AND REPURCHASE AGREEMENT, AS AMENDED
EKCO GROUP, INC.
The following employees of the Company each have one or more Non-Qualified
Stock Option and Repurchase Agreements with the Company which are identical in
form to the foregoing Form of Non-Qualified Stock Option and Repurchase
Agreement, as amended, and the following information specifies the grant dates,
number of shares granted and exercise price of each option:
<TABLE>
<CAPTION>
NO OF SHARES
NAME AND POSITION GRANT DATE GRANTED EXERCISE PRICE
- --------------------------------------------- ---------- ------------ --------------
<S> <C> <C> <C>
John Jay Althoff, Vice President, Secretary & 10/14/97 15,000 $ 8.1875
General Counsel
Stuart B. Cohen, Vice President, Strategic 06/13/95 7,161 6.0625
Planning &Business Development 02/06/96 12,847 5.9375
02/04/97 6,424 4.2500
Donato A. DeNovellis, Executive Vice Presi- 07/14/93 30,000 10.0625
dent, Finance & Administration and Chief 01/24/94 20,000 7.4375
Financial Officer 01/03/95 24,538 6.5000
02/06/96 24,538 5.9375
02/04/97 12,269 4.2500
02/10/98 15,000 8.2500
John T. Haran, Vice President, Finance & 02/06/96 9,295 5.9375
Administration, Ekco Housewares, Inc.
Brian R. McQuesten, Vice President & 01/18/90 8,500 2.5625
Controller 01/13/92 9,500 10.0625
01/19/93 10,000 11.3125
01/24/94 8,500 7.4375
01/03/95 6,992 6.5000
02/06/96 8,401 5.9375
02/04/97 4,131 4.2500
Linda R. Millman, Associate General Counsel 02/06/96 3,000 5.9375
& Assistant Secretary
Paul S. Neustadt, Vice President & Chief Infor- 05/20/97 7,500 5.0625
mation Officer
Susan M. Scacchi, Treasurer 02/04/97 2,500 4.2500
Jeffrey A. Weinstein, Executive Vice President 01/18/90 22,000 2.5625
and President & Managing Director of Ekco 01/13/92 27,300 10.0625
International, Inc. 01/19/93 60,000 11.3125
01/24/94 22,000 7.4375
02/06/96 16,491 5.9375
02/04/97 8,246 4.2500
</TABLE>
<PAGE> 1
EXHIBIT 10.2(e)
---------------
NON-QUALIFIED STOCK OPTION AND REPURCHASE AGREEMENT
EKCO GROUP, INC.
AGREEMENT made as of the ____ day of ___________, 199_ (the
"Grant Date"), between Ekco Group, Inc. (the "Company"), a Delaware corporation
having a principal place of business in Nashua, New Hampshire, and [NAME AND
ADDRESS OF Optionee], a [BOARD MEMBER] ("[BOARD MEMBER]") of the Company. The
term the "[BOARD MEMBER]" as used in this Agreement shall include, where the
context so requires, the legal representatives of the [BOARD MEMBER], and/or any
person or persons who acquired the [BOARD MEMBER]'s rights hereunder by will or
by the laws of descent and distribution.
WHEREAS, the Company desires to grant to the [BOARD MEMBER] an
Option to purchase shares of its common stock of a par value of $.01 a share
(the "Shares") under and for the purposes of the Company's 1987 Stock Option
Plan, as amended (the "Plan") pursuant to Article XII thereof as a non-qualified
stock option;
WHEREAS, the Company and the [BOARD MEMBER] understand and
agree that any terms used herein have the same meanings as in the Plan;
NOW, THEREFORE, in consideration of the mutual covenants
hereinafter set forth and for other good and valuable consideration, the parties
hereto agree as follows:
1. GRANT OF OPTION
The Company hereby irrevocably grants to the [BOARD MEMBER]
the right and option to purchase at one time or from time to time all or any
part of an aggregate of _______________ (______) Shares, subject to adjustment
as provided in the Plan, on the terms and conditions and subject to all the
limitations set forth herein and in the Plan, which is incorporated herein by
reference. The [BOARD MEMBER] acknowledges receipt of a copy of the Plan.
2. PURCHASE PRICE
The purchase price of the Shares covered by this Option shall
be ___________ Dollars ($______) per Share, subject to adjustment as provided in
the Plan (the "Purchase Price").
3. EXERCISE OF OPTION
(a) The Option granted hereby shall be exercisable immediately,
within the term set forth in Section 4 below, subject to the provisions of this
Agreement.
(b) Notwithstanding the provisions of the foregoing Subsection (a)
and except as otherwise provided herein or in the Plan, if the [BOARD MEMBER]
ceases to be an [BOARD MEMBER] of the Company or of an Affiliate for any reason,
then if such termination occurs:
(i) during the period on or after the Grant Date and before the date
which is twelve months thereafter (the "First Anniversary Date") and
the [BOARD MEMBER] has theretofore exercised this Option for any
Shares, then the [BOARD MEMBER] shall sell to the Company and the
Company shall purchase from the [BOARD MEMBER] those Shares from the
[BOARD MEMBER] at the price paid by the [BOARD MEMBER] upon exercise;
(ii) during the period on or after the First Anniversary Date and
before the date which is twelve months thereafter (the "Second
Anniversary Date") and the [BOARD MEMBER] has theretofore exercised
this Option for more than [ONE THIRD OF THE NUMBER OF SHARES GRANTED]
( ) Shares, then the [BOARD MEMBER] shall sell to the Company and the
Company shall purchase from the [BOARD MEMBER] that number of Shares
equal to the amount by which the number of Shares purchased by the
[BOARD MEMBER] pursuant to this Option exceeds
<PAGE> 2
[ONE THIRD OF THE NUMBER OF SHARES GRANTED] ( ) Shares at the price
paid by the [BOARD MEMBER] upon exercise; or
(iii) during the period on or after the Second Anniversary Date and
before the date which is twelve months thereafter (the "Third
Anniversary Date") and the [BOARD MEMBER] has theretofore exercised
this Option for more than [TWO THIRDS OF THE NUMBER OF SHARES GRANTED]
( ) Shares, then the [BOARD MEMBER] shall sell to the Company and the
Company shall purchase from the [BOARD MEMBER] that number of Shares
equal to the amount by which the number of Shares purchased by the
[BOARD MEMBER] pursuant to this Option exceeds [TWO THIRDS OF THE
NUMBER OF SHARES GRANTED] ( ) Shares at the price paid by the [BOARD
MEMBER] upon exercise.
(c) Notwithstanding the foregoing, in the event the [BOARD MEMBER]
ceases to be a [BOARD MEMBER] of the Company as a result of death, the Purchase
Obligation (as hereinbelow defined) shall cease and terminate.
(d) Notwithstanding the foregoing provisions of this Section 3,
but subject to the other provisions of this Agreement and the Plan, the Purchase
Obligation shall cease and terminate in the event of, and immediately upon, a
Change of Control that occurs at any time before the [BOARD MEMBER] has ceased
to be a [BOARD MEMBER] of the Company. As used herein, a "Change of Control"
shall be deemed to have occurred (i) if any "person" (as such term is used in
Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended
[the "1934 Act"]) becomes the beneficial owner (within the meaning of Rule 13d-3
under the 1934 Act) of securities of the Company representing fifteen percent
(15%) or more of the combined voting power of the Company's then outstanding
securities; or (ii) if the stockholders of the Company approve any merger of, or
consolidation involving, the Company in which the Company's stock is converted
into securities of another corporation or into cash and such merger or
consolidation shall be consummated, or the stockholders of the Company approve
any plan of complete liquidation of the Company (whether or not in connection
with a sale of all or substantially all of the Company's assets) and such
liquidation is consummated, excluding in each case a transaction solely for the
purpose of reincorporating the Company in a different jurisdiction or
recapitalizing the Company's stock or a merger of the Company in which the
holders of the voting stock of the Company immediately prior to the merger have
the same proportionate ownership of voting stock of the surviving corporation
immediately after the merger.
(e) The obligation of the Company to purchase Shares pursuant to
this Section 3 is hereinafter referred to as the "Purchase Obligation" and such
Shares are hereinafter referred to as the "Purchase Stock."
(f) The [BOARD MEMBER] acknowledges that if he exercises this
Option and any of the Shares so purchased are subject to the Purchase
Obligation, then such Shares will be restricted shares and that the difference
between the fair market value of such Shares on the date the Purchase Obligation
lapses as to such Shares and the aggregate purchase price for such Shares will
be classified as compensation income, unless the [BOARD MEMBER] files an
election under Section 83(b) of the Internal Revenue Code of 1986, as amended,
with the Internal Revenue Service within thirty (30) days of the acquisition of
such Shares. If such election is filed, the difference between the fair market
value of such Shares and the aggregate purchase price of such Shares will be
treated as compensation income as of the date of purchase. This acknowledgment
should not be understood as a substitute for the [BOARD MEMBER] consulting with
his own tax advisors and the [BOARD MEMBER] is urged to do so prior to any
exercise of this Option.
4. TERM OF OPTION
(a) This Option shall terminate ten (10) years from the Grant Date
of this Option, but shall be subject to earlier termination as provided herein
or in the Plan.
(b) If the [BOARD MEMBER] ceases to be a [BOARD MEMBER] of the
Company or of an Affiliate (for any reason other than death or termination by
the Company or an Affiliate for cause), then the [BOARD MEMBER] may exercise
this Option (subject to the provisions herein and in the Plan regarding exercise
of the Option) but only within six (6) months and one (1) day after the date on
which the [BOARD MEMBER] ceased to be a [Board Member], provided, however, (i)
in no event may this Option be exercised any later than ten (10) years after the
Grant Date of this Option,
2
<PAGE> 3
and (ii) immediately upon the [BOARD MEMBER]'s ceasing to be a [BOARD MEMBER],
this Option shall cease to be exercisable for any number of Shares which if
purchased immediately following such termination would be subject to the
Company's Purchase Obligation. The provisions of this paragraph, and not the
provisions of Subsection 4(c), shall apply to the [BOARD MEMBER] if the [BOARD
MEMBER] subsequently dies after the termination of the [DIRECTORSHIP]; however,
in such case of the [BOARD MEMBER]'s death, the [BOARD MEMBER]'s Survivors may
exercise this Option within six (6) months after the date of the [BOARD
MEMBER]'s death, but in no event beyond ten (10) years after the Grant Date of
this Option.
If the [BOARD MEMBER]'s [DIRECTORSHIP] is terminated for "cause," the
[BOARD MEMBER] shall forthwith upon such termination cease to have any right to
exercise this Option. For purposes of this Subsection 4(b), "cause" shall be
deemed to include (but shall not be limited to) dishonesty with respect to the
Company or any Affiliate, substantial malfeasance or non-feasance of duty,
unauthorized disclosure of confidential information, or conduct substantially
prejudicial to the business or reputation of the company or any Affiliate.
5. NON-ASSIGNABILITY
This Option shall not be transferable by the [BOARD MEMBER]
otherwise than by will or by the laws of descent and distribution and shall be
exercisable, during the [BOARD MEMBER]'s lifetime, only by the [BOARD MEMBER]
(or his duly appointed legal representative). This Option shall not be assigned,
pledged or hypothecated in any way (whether by operation of law or otherwise)
and shall not be subject to execution, attachment or similar process. Any
attempted transfer, assignment, pledge, hypothecation or other disposition of
this Option or of any rights granted hereunder contrary to the provisions of
this Section 5, or the levy of any attachment or similar process upon this
Option or such rights, shall be null and void.
6. EXERCISE OF OPTION AND ISSUE OF SHARES
This Option may be exercised, in whole or in part, at one time
or from time to time (to the extent that it is exercisable in accordance with
its terms) by giving written notice to the Company. Such written notice shall be
signed by the person exercising this Option, shall state the number of Shares
with respect to which this Option is being exercised, shall contain any warranty
required by Section 7 below, and shall otherwise comply with the terms and
conditions of this Agreement and the Plan. Such notice must be received by the
Company within the relevant exercise period specified in Section 4 of this
Agreement. Such notice shall either: (i) be accompanied by payment of the full
purchase price of such Shares, in which event the Company, subject to the
provisions of Section 7, shall deliver a certificate or certificates
representing such Shares as soon as practicable after the notice shall be
received, or (ii) fix a date (not less than five nor more than ten business days
after such notice shall be received by the Company, which date must be within
the relevant exercise period specified in Section 4 of this Agreement) for the
payment of the full purchase price of such Shares against delivery subject to
the provisions of Section 7, of a certificate or certificates representing such
Shares. Payment of such purchase price shall, in either case, be made by check
payable to the order of the Company, or in such other manner as the Committee
shall permit. The certificate or certificates for the Shares as to which this
Option shall have been so exercised shall be registered in the name of the
person or persons so exercising this Option and shall be delivered as provided
above to the person or persons exercising this Option. All Shares that shall be
purchased upon the exercise of this Option as provided herein shall be fully
paid and non-assessable.
The Company shall pay all original issue taxes with respect to
the issue of the Shares pursuant hereto and all other fees and expenses
necessarily incurred by the Company in connection herewith. Except as
specifically set forth herein, the holder acknowledges that any income or other
taxes due from him with respect to this Option or the shares issuable pursuant
to this Option shall be the responsibility of the holder. The holder of this
Option shall have rights as a shareholder only with respect to any Shares
covered by this Option after due exercise of this Option and tender of the full
exercise price for the Shares being purchased pursuant to such exercise.
Pursuant to the Plan, the Company shall make delivery of the Shares against
payment of the Option price therefor.
7. RESTRICTIONS ON TRANSFER OF SHARES; DETAILS OF THE PURCHASE
OBLIGATION
3
<PAGE> 4
(a) Any Shares which are subject to the Purchase Obligation shall not
be transferred by the [BOARD MEMBER] except as permitted herein. Until the
termination of this Agreement, the Shares which are subject to the Purchase
Obligation may not be transferred by the [BOARD MEMBER] unless and until the
transferee agrees, in a form satisfactory to the Company, to be bound by this
Agreement and to sell any transferred Shares to the Company as herein provided.
(b) Within sixty (60) days following the date the [BOARD MEMBER] ceases
to be a [BOARD MEMBER] and if the [BOARD MEMBER] holds any Purchase Stock, then,
the Company shall give to the [BOARD MEMBER] a written notice specifying a date
for the Closing for the sale by the [BOARD MEMBER] and the purchase by the
Company of the Purchase Stock, which date shall be not more than ten (10)
business days after the giving of such notice. The Closing shall take place at
the Company's principal offices in New Hampshire, or such other location as the
Company may reasonably designate in such notice. If the company shall fail to
give the notice provided for above, within the specified period of time, then
the Closing shall be on the ninetieth (90th) day following the date the [BOARD
MEMBER] ceased to be a [BOARD MEMBER] or if not a business day, the next
business day.
(c) At the Closing, the [BOARD MEMBER] shall deliver the Purchase Stock
being purchased by the Company against the simultaneous delivery to the [BOARD
MEMBER] of the purchase price (by certified or bank cashier's check or in such
other form as mutually agreed to) for the number of shares of the Purchase Stock
then being purchased. In the event that the [BOARD MEMBER] fails so to deliver
the shares of Purchase Stock to be purchased, the Company may elect (i) to
establish a segregated account in the amount of the Purchase Price, such account
to be turned over to the [BOARD MEMBER] upon delivery of such shares of Purchase
Stock, and (ii) immediately to take such action as is appropriate to transfer
record title of such of the Purchase Stock from the [BOARD MEMBER] to the
Company and to treat the [BOARD MEMBER] and such shares of the Purchase Stock in
all respects as if delivery of such shares of the Purchase Stock had been made
as required by this Agreement. The [BOARD MEMBER] hereby irrevocably grants the
Company a power of attorney for the purpose of effectuating the terms of the
preceding sentence.
(d) If the Company shall pay a stock dividend or declare a stock split
on or with respect to any of the Company's Common Stock, or otherwise distribute
securities of the Company to the holders of its Common Stock, whether before or
after the exercise of this Option, the number of shares of stock or other
securities of the Company issued with respect to the Purchase Stock then subject
to the Purchase Obligation shall be added to the Purchase Stock then subject to
the Purchase Obligation without any change in the aggregate purchase price. If
the Company shall distribute to its stockholders shares of stock of another
corporation, the shares of stock of such other corporation distributed with
respect to the Purchase Stock then subject to the Purchase Obligation shall be
added to the Purchase Stock covered by the Purchase Obligation without any
change in the aggregate purchase price. Without limiting the generality of the
foregoing, the [BOARD MEMBER] shall be entitled to retain any and all cash
dividends paid by the Company on the Shares.
(e) If the outstanding shares of Common Stock of the Company shall be
subdivided into a greater number of shares or combined into a smaller number of
shares, or in the event of a reclassification of the outstanding shares of
Common Stock of the Company, or if the Company shall be a party to any capital
reorganization, whether before or after the exercise of this Obligation, there
shall be substituted for the Purchase Stock then covered by the Purchase
Obligation such amount and kind of securities as are issued in such subdivision,
combination, reclassification, or capital reorganization in respect of the
Purchase Stock subject to the Purchase Obligation immediately prior thereto,
without any change in the aggregate purchase price.
(f) If the Company shall be completely liquidated, then the Purchase
Obligation shall cease and terminate as of the date of such liquidation and the
[BOARD MEMBER] shall hold the Shares free of the Purchase Obligation.
(g) The Company shall not be required to transfer any Shares on its
books which shall have been sold, assigned or otherwise transferred in violation
of this Agreement, or to treat as owner of such Shares, or to accord the right
to vote as such owner or to pay dividends to, any person or organization to
which any such Shares shall have been sold, assigned or otherwise transferred,
from and after any sale, assignment or transfer of any Shares made in violation
of this Agreement.
4
<PAGE> 5
(h) All certificates representing any Shares to be issued to the [BOARD
MEMBER] pursuant to the exercise of this Option which are subject to the
Purchase Obligation shall have endorsed thereon a legend substantially as
follows:
"The shares represented by this certificate are subject to a Stock
Option and Repurchase Agreement dated as of ________, 1997 between the
Corporation and [NAME OF BOARD MEMBER], a copy of which Agreement is
available for inspection at the principal offices of the Company or
will be made available without charge upon request."
(i) This Article 7 shall not restrict the transfer by the [BOARD
MEMBER] of shares, if any, which are not acquired pursuant to the exercise of
this Option or which are not, or cease to be, subject to the Purchase Obligation
in accordance with the terms hereof.
8. PURCHASE FOR INVESTMENT
Unless the offering and sale of the Shares to be issued upon
the particular exercise of this Option shall have been effectively registered
under the Securities Act of 1933, as now in force or hereafter amended, or any
successor legislation (the "Act"), the Company shall be under no obligation to
issue the Shares covered by such exercise unless and until the following
conditions have been fulfilled:
(a) The person(s) who exercise this Option shall warrant to the
Company, at the time of such exercise, that such person(s) are
acquiring such Shares for his or her own account, for
investment and not with a view to, or for sale in connection
with, the distribution of any such Shares, in which event the
person(s) acquiring such Shares shall be bound by the
provisions of the following legend which shall in
substantially the following form be endorsed upon the
certificate(s) evidencing the option Shares issued pursuant to
such exercise:
"The shares represented by this certificate have been taken
for investment and they may not be sold or otherwise
transferred by any person, including a pledgee, in the absence
of an effective registration statement for the shares under
the Securities Act of 1933 or an opinion of counsel
satisfactory to the Company that an exemption from
registration is then available."
(b) 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 completion of any action or obtaining of any consent, which
the Company deems necessary under any applicable law (including without
limitation state securities or "blue sky" laws).
9. REGISTRATION RIGHTS
(a) In the event that the Company has an effective registration
statement covering the sale and resale of securities issued pursuant to the
Plan, then the [BOARD MEMBER] agrees to sign a waiver in substantially the
following form:
"For so long as a registration statement under the Securities Act of
1933, as amended, is in effect covering the sale and resale of
securities issued pursuant to the 1987 Stock Option Plan of Ekco Group,
Inc. (the "Company"), the undersigned [Board Member] waives his rights
to require the Company to file a registration statement pursuant to
Section 9 of the Non-Qualified Stock Option and Repurchase Agreement
dated as of October 28, 1997, between the undersigned [BOARD MEMBER]
and the Company."
(b) The [BOARD MEMBER] acknowledges that option agreements have
been executed by the Company with one hundred twenty one (121) employees of the
Company and its Affiliates of the Company and may be executed with other
employees, Board Members and Consultants (collectively "Other Holders"), each
containing or to contain a section substantially identical to this Section 9.
Subject to the terms hereinafter set forth, at any time after the Grant Date,
the
5
<PAGE> 6
holder shall have the right, by written notice to the Company, to require the
Company to file and use its best efforts to cause to become effective a
registration statement under the Securities Act of 1933, as amended (the "Act")
on Form S-8, Form S-2 or Form S-3 or other like form, if available, covering
such number of Shares acquired or to be acquired prior to the effective date of
such registration statement, subject to the limitations that (i) the Company
shall be required to file no more than an aggregate of two (2) registration
statements pursuant to such notices and/or pursuant to notices received from
Other Holders, and (ii) if, in the opinion of counsel to the Company, the holder
can then sell, subject to such limitations as to the number of Shares which may
be sold as may be imposed by Rule 144 under the Act or any successor rule,
Shares requested to be included in any such registration statement, without such
registration, the Company need not so register such Shares. In no event will the
Company be required to register Shares which are subject to the Purchase
Obligation. The Company agrees to promptly notify a holder in the event that it
receives notices from any of the Other Holders requiring it to file a
registration statement and to permit the holder to require the Company to
include Shares owned by the holder in such registration statement, subject to
the limitations set forth above.
(c) In connection with any registration statement pursuant to this
Section 9:
(i) the holder will furnish to the Company in writing such appropriate
information as the Company, or the Securities and Exchange Commission
(the "Commission") or any other regulatory authority may request;
(ii) the holder agrees to execute, deliver and/or file with or supply
to the Company, the Commission, any underwriters and/or any state or
other regulatory authority such information, documents,
representations, undertakings and/or agreements necessary to carry out
the provisions of the registration agreements contained in this
Agreement and/or to effect the registration or qualification of the
Shares under the Act and/or any of the laws and regulations of any
state or governmental instrumentality;
(iii) the Company will furnish to the holder of Shares included in the
registration statement such number of copies of such prospectus
(including each preliminary, amended or supplemental prospectus) as the
holder may reasonably request; and
(iv) in the event an offering of securities by the Company is pending,
the Company shall have the right to require that the holder delay any
offering of Shares for a period of ninety (90) days after the effective
date of such pending offering (upon the Company's having first
delivered to the holder the written opinion of its principal
underwriter, or if there be none, then from an officer of the Company
based upon a good faith resolution of the Board of Directors to the
effect that the offering of such Shares will have an adverse effect on
the marketing of such pending offering).
(d) The Company will pay all of its out-of-pocket expenses and
disbursements in connection with any registration statement filed under this
Section 9, including, without limitation, printing expenses, fees of the
Company's counsel and auditors, registration fees, blue sky fees and similar
costs to the extent permitted by state and regulatory authorities.
(e) The Company will be obligated to keep any registration statement
filed by it under this Section 9 effective under the Act for a period of ninety
(90) days after the actual effective date of such registration statement and to
prepare and file such supplements and amendments necessary to maintain an
effective registration statement for such period. As a condition to the
Company's obligation under this Subsection (e), the holder will execute and
deliver to the Company such written undertakings as the Company and its counsel
may reasonably require in order to assure full compliance with relevant
provisions of the Act.
(f) The Company will use its best efforts to register or qualify the
Shares covered by a registration statement filed pursuant hereto under such
securities or Blue Sky laws in such jurisdictions within the United States as
the holder may reasonably request, provided, however, that the Company reserves
the right, in its sole discretion, not to register or qualify such stock in any
jurisdiction where such stock does not meet with the requirements of such
jurisdiction or where the Company is required to qualify as a foreign
corporation to do business in such jurisdiction and is not so qualified therein
or is required to file any general consent to service of process.
6
<PAGE> 7
(g) In the event that a holder has not sold all of his Shares on or
prior to the expiration of the period specified in Subsection (e) above, the
holder hereby agrees that the Company may deregister by post-effective amendment
any of his Shares covered by the registration statement or notification but not
sold on or prior to such date. The Company agrees that it will notify the holder
of the filing and effective date of such post-effective amendment.
(h) The holder agrees that upon notification by the Company that the
prospectus in respect to any public offering covered by the provisions hereof is
in need of revision, the holder will immediately upon receipt of such
notification (i) cease to offer or sell any securities of the Company which must
be accompanied by such prospectus; (ii) return to the Company all such
prospectuses in the hands of the holder; and (iii) not offer or sell any
securities of the Company until the holder has been provided with a current
prospectus and the Company has given the holder notification permitting the
holder to resume offers and sales.
10. NOTICES
Any notices required or permitted by the terms of this
Agreement or the Plan shall be given by registered or certified mail, return
receipt requested, postage prepaid, addressed as follows:
To the Company: Ekco Group, Inc.
98 Spit Brook Road
Nashua, New Hampshire 03062
Attention: Associate General Counsel
To the [BOARD MEMBER]: To [BOARD MEMBER]'s last address in the
records of the Company
or to such other address as either party furnishes to the other by like notice.
Any such notice shall be deemed to have been given when mailed in accordance
with the foregoing provisions.
11. GOVERNING LAW
This Agreement shall be construed and enforced in accordance
with the law of the State of New Hampshire, except to the extent the law of the
State of Delaware may be applicable.
12. BENEFIT OF AGREEMENT
This Agreement shall be for the benefit of and shall be
binding upon the heirs, executors, administrators, legal representatives and
successors of the parties hereto, except as otherwise provided herein.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed and delivered by its duly authorized officer and its corporate seal to
be hereunto affixed and the [Board Member] has hereunto set his hand and seal
all as of the day and year first above written in duplicate originals.
EKCO GROUP, INC.
[SEAL]
BY
------------------------
TITLE
---------------------
--------------------------
[BOARD MEMBER]
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<PAGE> 8
SCHEDULE TO
FORM OF NON-QUALIFIED STOCK OPTION AND REPURCHASE AGREEMENT
EKCO GROUP, INC.
The following persons each have a Non-Qualified Stock Option and
Repurchase Agreement with the Company which is identical in form to the
foregoing Form of Non-Qualified Stock Option and Repurchase Agreement, and the
following information specifies the grant date, number of shares granted and
exercise price of each such option:
No. of Shares
NAME AND POSITION GRANT DATE GRANTED EXERCISE PRICE
- ----------------- ---------- ------------- --------------
George W. Carmany, III, Director 10-28-97 10,000 $ 6.46875
Michael G. Frieze, Director 10-28-97 10,000 6.46875
Avram J. Goldberg, Director 10-28-97 10,000 6.46875
T. Michael Long, Director 10-28-97 10,000 6.46875
Stuart B. Ross, Director 10-28-97 10,000 6.46875
Bill W. Sorenson, Director 10-28-97 10,000 6.46875
Herbert M. Stein, Director 10-28-97 10,000 6.46875
<PAGE> 1
EXHIBIT 10.2(f)
---------------
FORM OF
NON-QUALIFIED STOCK OPTION AGREEMENT
EKCO GROUP, INC.
AGREEMENT made as of the ____ of __________, 199__ (the "Grant Date"),
between Ekco Group, Inc. (the "Company"), a Delaware corporation having a
principal place of business in Nashua, New Hampshire, and [NAME AND ADDRESS OF
CONSULTANT], a Consultant ("Consultant") to the Company. The term the
"Consultant" as used in this Agreement shall include, where the context so
requires, the legal representatives of Consultant, and/or any person or persons
who acquired Consultant's rights hereunder by will or by the laws of descent and
distribution. WHEREAS, the Company desires to grant to Consultant an Option to
purchase shares of its common stock of a par value of $.01 a share (the
"Shares") under and for the purposes of the Company's 1987 Stock Option Plan, as
amended (the "Plan") pursuant to Article XII thereof as a non-qualified stock
option;
WHEREAS, the Company and Consultant understand and agree that any terms
used herein have the same meanings as in the Plan;
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
set forth and for other good and valuable consideration, the parties hereto
agree as follows:
1. GRANT OF OPTION
The Company hereby irrevocably grants to Consultant the right and
option to purchase at one time or from time to time all or any part of an
aggregate of [NUMBER OF SHARES] (______) Shares, subject to adjustment as
provided in the Plan, on the terms and conditions and subject to all the
limitations set forth herein and in the Plan, which is incorporated herein by
reference. Consultant acknowledges receipt of a copy of the Plan.
2. PURCHASE PRICE
The purchase price of the Shares covered by this Option shall be
[EXERCISE PRICE] Dollars ($_______) per Share, subject to adjustment as provided
in the Plan (the "Purchase Price").
3. EXERCISE OF OPTION
(a) Subject to the provisions of this Agreement, the Option granted
hereby shall be exercisable within the term set forth in Section 4 below as
follows:
(i) As to up to [20% OF THE SHARES] (______) Shares covered by this
1
<PAGE> 2
Option: at any time and from time to time on or after the first Award
Anniversary;
(ii) As to up to an additional [20% OF THE SHARES] (______) Shares
covered by this Option: at any time and from time to time on or after
the second Award Anniversary;
(iii) As to up to an additional [20% OF THE SHARES] (______) Shares
covered by this Option: at any time and from time to time on or after
the third Award Anniversary;
(iv) As to up to an additional [20% OF THE SHARES] (______) Shares
covered by this Option: at any time and from time to time on or after
the fourth Award Anniversary; and
(v) As to up to all Shares covered by this Option: at any time and
from time to time on or after the fifth Award Anniversary.
For purposes of this Subsection (a), the term "Award Anniversary" shall mean any
twelve month anniversary of the Grant Date.
Notwithstanding the foregoing and except as provided in Section
4 below providing for exercises under other circumstances, this Option may not
be exercised in whole or in part unless Consultant is then a Consultant of the
Company.
(b) Notwithstanding the provisions of the foregoing Subsection (a) and
except as otherwise provided herein or in the Plan, this Option, to the extent
not previously exercised, shall become fully exercisable to the same extent and
in the same manner as if it had become exercisable by the passage of time
specified in Subsection (a) above in the event of, and immediately upon, the
occurrence of:
(i) The termination of Consultant's consultancy as a result of death;
or
(ii) In the event of, and immediately upon, a Change of Control that
occurs at any time before Consultant has ceased to be a Consultant of
the Company. As used herein, a "Change of Control" shall be deemed to
have occurred (i) if any "person" (as such term is used in Sections
13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended
[the "1934 Act"]) becomes the beneficial owner (within the meaning of
Rule 13d-3 under the 1934 Act) of securities of the Company
representing fifteen percent (15%) or more of the combined voting
power of the Company's then outstanding securities; or (ii) if the
stockholders of the Company approve any merger of, or consolidation
involving, the Company in which the Company's stock is converted into
securities of another corporation or into cash and such merger or
consolidation shall be consummated, or the stockholders of the Company
approve any plan of complete liquidation of the Company (whether or
not in connection with a sale of all or substantially all of the
Company's assets) and such
2
<PAGE> 3
liquidation is consummated, excluding in each case a transaction
solely for the purpose of reincorporating the Company in a different
jurisdiction or recapitalizing the Company's stock or a merger of the
Company in which the holders of the voting stock of the Company
immediately prior to the merger have the same proportionate ownership
of voting stock of the surviving corporation immediately after the
merger.
4. TERM OF OPTION
(a) This Option shall terminate ten (10) years from the Grant Date of
this Option, but shall be subject to earlier termination as provided herein or
in the Plan.
(b) If Consultant ceases to be a Consultant of the Company (for any
reason other than death or termination by the Company for cause), then
Consultant may exercise this Option (subject to the provisions herein and in the
Plan regarding exercise of the Option) but only within six (6) months and one
(1) day after the date on which Consultant ceased to be a Consultant, provided,
however, in no event may this Option be exercised any later than ten (10) years
after the Grant Date of this Option, and may not be exercised thereafter. In
such event, this Option shall be exercisable only to the extent that the right
to purchase shares under the Plan has accrued and is in effect at the date of
such cessation of the consultancy. The provisions of this Subsection (b), and
not the provisions of Subsection (d) below, shall apply to Consultant if
Consultant subsequently dies after the termination of Consultant's consultancy;
however, in the case of Consultant's death, Consultant's Survivors may exercise
this Option within six (6) months after the date of Consultant's death, but in
no event beyond ten (10) years after the Grant Date of this Option.
(c) If Consultant's consultancy is terminated for "cause," Consultant
shall forthwith upon such termination cease to have any right to exercise this
Option. For purposes of this Subsection 4(b), "cause" shall be deemed to include
(but shall not be limited to) dishonesty with respect to the Company or any
Affiliate, substantial malfeasance or non-feasance of duty, unauthorized
disclosure of confidential information, or conduct substantially prejudicial to
the business or reputation of the Company or any Affiliate.
(d) In the event of the death of Consultant while a Consultant of the
Company, this Option may be exercised only by Consultant's legal representatives
and/or any person or persons who acquired Consultant's rights to this Option by
will or by the laws of descent and distribution. This Option must be exercised,
if at all, within one (1) year after the date of death of Consultant, or, if
earlier, within the originally prescribed term of this Option.
5. NON-ASSIGNABILITY
This Option shall not be transferable by Consultant otherwise
than by will or by the laws of descent and distribution and shall be
exercisable, during Consultant's lifetime, only by Consultant (or his duly
appointed legal
3
<PAGE> 4
representative). This Option shall not be assigned, pledged or hypothecated in
any way (whether by operation of law or otherwise) and shall not be subject to
execution, attachment or similar process. Any attempted transfer, assignment,
pledge, hypothecation or other disposition of this Option or of any rights
granted hereunder contrary to the provisions of this Section 5, or the levy of
any attachment or similar process upon this Option or such rights, shall be null
and void.
6. EXERCISE OF OPTION AND ISSUE OF SHARES
This Option may be exercised, in whole or in part, at one time
or from time to time (to the extent that it is exercisable in accordance with
its terms) by giving written notice to the Company. Such written notice shall be
signed by the person exercising this Option, shall state the number of Shares
with respect to which this Option is being exercised, shall contain any warranty
required by Section 7 below, and shall otherwise comply with the terms and
conditions of this Agreement and the Plan. Such notice must be received by the
Company within the relevant exercise period specified in Section 4 of this
Agreement. Such notice shall either: (i) be accompanied by payment of the full
purchase price of such Shares, in which event the Company, subject to the
provisions of Section 7, shall deliver a certificate or certificates
representing such Shares as soon as practicable after the notice shall be
received, or (ii) fix a date (not less than five nor more than ten business days
after such notice shall be received by the Company, which date must be within
the relevant exercise period specified in Section 4 of this Agreement) for the
payment of the full purchase price of such Shares against delivery subject to
the provisions of Section 7, of a certificate or certificates representing such
Shares. Payment of such purchase price shall, in either case, be made by check
payable to the order of the Company, or in such other manner as the Committee
shall permit. The certificate or certificates for the Shares as to which this
Option shall have been so exercised shall be registered in the name of the
person or persons so exercising this Option and shall be delivered as provided
above to the person or persons exercising this Option. All Shares that shall be
purchased upon the exercise of this Option as provided herein shall be fully
paid and non-assessable.
The Company shall pay all original issue taxes with respect to
the issue of the Shares pursuant hereto and all other fees and expenses
necessarily incurred by the Company in connection herewith. Except as
specifically set forth herein, the holder acknowledges that any income or other
taxes due from him with respect to this Option or the shares issuable pursuant
to this Option shall be the responsibility of the holder. The holder of this
Option shall have rights as a shareholder only with respect to any Shares
covered by this Option after due exercise of this Option and tender of the full
exercise price for the Shares being purchased pursuant to such exercise.
Pursuant to the Plan, the Company shall make delivery of the Shares against
payment of the Option price therefor.
7. PURCHASE FOR INVESTMENT
4
<PAGE> 5
Unless the offering and sale of the Shares to be issued upon
the particular exercise of this Option shall have been effectively registered
under the Securities Act of 1933, as now in force or hereafter amended, or any
successor legislation (the "Act"), the Company shall be under no obligation to
issue the Shares covered by such exercise unless and until the following
conditions have been fulfilled:
(a) The person(s) who exercise this Option shall warrant to the
Company, at the time of such exercise, that such person(s) are
acquiring such Shares for his or her own account, for investment
and not with a view to, or for sale in connection with, the
distribution of any such Shares, in which event the person(s)
acquiring such Shares shall be bound by the provisions of the
following legend which shall in substantially the following form
be endorsed upon the certificate(s) evidencing the option Shares
issued pursuant to such exercise:
"The shares represented by this certificate have been taken for
investment and they may not be sold or otherwise transferred by
any person, including a pledgee, in the absence of an effective
registration statement for the shares under the Securities Act of
1933 or an opinion of counsel satisfactory to the Company that an
exemption from registration is then available."
(b) 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 completion of any action or obtaining of any consent, which
the Company deems necessary under any applicable law (including without
limitation state securities or "blue sky" laws).
8. REGISTRATION RIGHTS
(a) In the event that the Company has an effective registration
statement covering the sale and resale of securities issued pursuant to the
Plan, then Consultant agrees to sign a waiver in substantially the following
form:
"For so long as a registration statement under the Securities Act of
1933, as amended, is in effect covering the sale and resale of
securities issued pursuant to the 1987 Stock Option Plan of Ekco Group,
Inc. (the "Company"), the undersigned Consultant waives his rights to
require the Company to file a registration statement pursuant to Section
8 of the Non-Qualified Stock Option and Repurchase Agreement dated as of
[DATE OF AGREEMENT], between the undersigned [NAME OF CONSULTANT] and
the Company."
(b) Consultant acknowledges that option agreements have been executed by
the Company with [NO. OF EMPLOYEES) (____) employees of the Company and its
5
<PAGE> 6
Affiliates and [NO. OF BOARD MEMBERS] (____) Board Members and may be executed
with other employees, Board Members and Consultants (collectively "Other
Holders"), each containing or to contain a section substantially identical to
this Section 8. Subject to the terms hereinafter set forth, at any time after
the Grant Date, the holder shall have the right, by written notice to the
Company, to require the Company to file and use its best efforts to cause to
become effective a registration statement under the Securities Act of 1933, as
amended (the "Act") on Form S-8, Form S-2 or Form S-3 or other like form, if
available, covering such number of Shares acquired or to be acquired prior to
the effective date of such registration statement, subject to the limitations
that (i) the Company shall be required to file no more than an aggregate of two
(2) registration statements pursuant to such notices and/or pursuant to notices
received from Other Holders, and (ii) if, in the opinion of counsel to the
Company, the holder can then sell, subject to such limitations as to the number
of Shares which may be sold as may be imposed by Rule 144 under the Act or any
successor rule, Shares requested to be included in any such registration
statement, without such registration, the Company need not so register such
Shares. In no event will the Company be required to register Shares which are
subject to the Purchase Obligation. The Company agrees to promptly notify a
holder in the event that it receives notices from any of the Other Holders
requiring it to file a registration statement and to permit the holder to
require the Company to include Shares owned by the holder in such registration
statement, subject to the limitations set forth above.
(c) In connection with any registration statement pursuant to this
Section 8:
(i) the holder will furnish to the Company in writing such appropriate
information as the Company, or the Securities and Exchange Commission
(the "Commission") or any other regulatory authority may request;
(ii) the holder agrees to execute, deliver and/or file with or supply
to the Company, the Commission, any underwriters and/or any state or
other regulatory authority such information, documents,
representations, undertakings and/or agreements necessary to carry out
the provisions of the registration agreements contained in this
Agreement and/or to effect the registration or qualification of the
Shares under the Act and/or any of the laws and regulations of any
state or governmental instrumentality;
(iii) the Company will furnish to the holder of Shares included in the
registration statement such number of copies of such prospectus
(including each preliminary, amended or supplemental prospectus) as the
holder may reasonably request; and
(iv) in the event an offering of securities by the Company is pending,
the Company shall have the right to require that the holder delay any
offering of Shares for a period of ninety (90) days after the effective
date of such pending offering (upon the Company's having first
delivered to the holder the written opinion of its principal
underwriter, or if there be none, then from an officer of the Company
based upon a good
6
<PAGE> 7
faith resolution of the Board of Directors to the effect that the
offering of such Shares will have an adverse effect on the marketing
of such pending offering).
(d) The Company will pay all of its out-of-pocket expenses and
disbursements in connection with any registration statement filed under this
Section 8, including, without limitation, printing expenses, fees of the
Company's counsel and auditors, registration fees, blue sky fees and similar
costs to the extent permitted by state and regulatory authorities.
(e) The Company will be obligated to keep any registration statement
filed by it under this Section 8 effective under the Act for a period of ninety
(90) days after the actual effective date of such registration statement and to
prepare and file such supplements and amendments necessary to maintain an
effective registration statement for such period. As a condition to the
Company's obligation under this Subsection (e), the holder will execute and
deliver to the Company such written undertakings as the Company and its counsel
may reasonably require in order to assure full compliance with relevant
provisions of the Act.
(f) The Company will use its best efforts to register or qualify the
Shares covered by a registration statement filed pursuant hereto under such
securities or Blue Sky laws in such jurisdictions within the United States as
the holder may reasonably request, provided, however, that the Company reserves
the right, in its sole discretion, not to register or qualify such stock in any
jurisdiction where such stock does not meet with the requirements of such
jurisdiction or where the Company is required to qualify as a foreign
corporation to do business in such jurisdiction and is not so qualified therein
or is required to file any general consent to service of process.
(g) In the event that a holder has not sold all of his Shares on or
prior to the expiration of the period specified in Subsection (e) above, the
holder hereby agrees that the Company may deregister by post-effective amendment
any of his Shares covered by the registration statement or notification but not
sold on or prior to such date. The Company agrees that it will notify the holder
of the filing and effective date of such post-effective amendment.
(h) The holder agrees that upon notification by the Company that the
prospectus in respect to any public offering covered by the provisions hereof is
in need of revision, the holder will immediately upon receipt of such
notification (i) cease to offer or sell any securities of the Company which must
be accompanied by such prospectus; (ii) return to the Company all such
prospectuses in the hands of the holder; and (iii) not offer or sell any
securities of the Company until the holder has been provided with a current
prospectus and the Company has given the holder notification permitting the
holder to resume offers and sales.
9. NOTICES
Any notices required or permitted by the terms of this Agreement
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<PAGE> 8
or the Plan shall be given by registered or certified mail, return
receipt requested, postage prepaid, addressed as follows:
To the Company: Ekco Group, Inc.
98 Spit Brook Road
Nashua, New Hampshire 03062
Attention: Associate General Counsel
To Consultant: To Consultant's last address in the records
of the Company
or to such other address as either party furnishes to the other by like notice.
Any such notice shall be deemed to have been given when mailed in accordance
with the foregoing provisions.
10. GOVERNING LAW
This Agreement shall be construed and enforced in accordance
with the law of the State of New Hampshire, except to the extent the law of the
State of Delaware may be applicable.
11. BENEFIT OF AGREEMENT
This Agreement shall be for the benefit of and shall be
binding upon the heirs, executors, administrators, legal representatives and
successors of the parties hereto, except as otherwise provided herein.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed and delivered by its duly authorized officer and its corporate seal to
be hereunto affixed and the Consultant has hereunto set his hand and seal all as
of the day and year first above written in duplicate originals.
EKCO GROUP, INC.
[SEAL]
By_________________________________________
Title______________________________________
___________________________________________
, Consultant
8
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Schedule of Exercises
---------------------
Number of Shares
Purchased Pursuant Consideration Date of Notation
to this option Received purchase Made By
- ------------------ ------------- -------- --------
9
<PAGE> 10
EKCO GROUP, INC.
SCHEDULE TO
FORM OF NON-QUALIFIED STOCK OPTION AGREEMENT
The following Consultant of the Company has a Non-Qualified Stock
Option Agreement with the Company which is identical in form to the foregoing
Form of Non-Qualified Stock Option Agreement, except as to the date, the number
of shares and the exercise price:
No. of
Date of Shares Exercise
Name Agreement Granted Price
- ---- --------- ------- --------
Kenneth J. Novack 10-28-97 15,000 $6.4688
10
<PAGE> 1
EXHIBIT 10.4
------------
EKCO GROUP, INC.
1988 DIRECTORS' 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 1988 Directors' Stock Option
Plan, have the following meanings:
(1) "COMPANY" means Ekco Group, Inc.
(2) "PLAN" means this 1988 Directors' Stock Option Plan.
(3) "BOARD OF DIRECTORS" means the Board of Directors of the Company,
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 owns at least fifty percent
(50%) of the outstanding capital stock of the Company, directly
or indirectly, or a corporation in which the Company or an
Affiliate, directly or indirectly, owns at least fifty (50%) of
the outstanding capital stock of such corporation.
(5) "OUTSIDE DIRECTOR" means any Director of the Company who is not
an employee of the Company or of an Affiliate at the time of the
grant of the Option, who has not been an employee of the Company
or of an Affiliate at any time within one (1) year prior to such
time of grant and who has been elected to serve as a Director by
the Company's stockholders.
(6) "OPTION" means a right or option granted under the Plan.
(7) "OPTION AGREEMENT" means an agreement between the Company and a
Participant executed and delivered pursuant to the Plan.
(8) "PARTICIPANT" means an Outside Director to whom an Option is
granted under the Plan, or, where the context requires, his or
her legal representative.
(Rev. 03-19-98)
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<PAGE> 2
(9) "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.
(10) "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. PURPOSES OF THE PLAN:
The Plan is intended to encourage ownership of shares by Outside
Directors in order to attract such Outside Directors, to induce
such Outside Directors to remain as Directors of the Company and
to provide additional incentive for such Outside Directors to
promote the success of the Company.
II. SHARES SUBJECT TO THE PLAN
The aggregate number of Shares as to which Options may be granted from time
to time shall be 600,000 Shares as of the date of adoption of this Plan
(and the equivalent of 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 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 stockholders 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. ELIGIBILITY FOR PARTICIPATION
Each Participant must be an Outside Director of the Company at the time an
Option is granted. Upon the later of the approval of this Plan by the Board
of Directors of the Company or the date on which he or she becomes an
Outside Director (the "Grant Date"), each Outside Director shall be
automatically granted an Option with an exercise price equal to the fair
market value of a Share determined as set forth in subparagraph A(2) of
Article IV below and for that number of Shares as is determined
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<PAGE> 3
by dividing (i) $100,000 by (ii) the fair market value of a Share
determined as set forth in subparagraph A(2) of Article IV, rounded to the
nearest whole Share, but in no event to be greater than 50,000 Shares. No
Outside Director shall be entitled to be granted more than one Option
pursuant to this Plan.
IV. TERMS AND CONDITIONS OF OPTIONS
Each Options shall be set forth in an Option Agreement substantially in the
form hereto annexed and marked Exhibit A, duly executed on behalf of the
Company and by the Participant to whom such Option is granted. No 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. EXERCISE PRICE:
(1) The exercise price (per share) of the Shares covered by each Option
shall be the "fair market value" as hereinafter defined (per share) of
the Shares, determined as of the Grant Date.
(2) For purpose of the foregoing subparagraph (1), fair market value shall
be determined as follows. If such Shares are then listed on any
national securities exchange, the fair market value shall be the mean
between the high and low sales prices, if any, on the largest such
exchange on which such prices were reported for the Grant Date, or, if
none, on the most recent trade date thirty (30) days or less prior to
the Grant Date for which such prices are reported. 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 Grant
Date, or if none, on the most recent trade date thirty (30) days or
less prior to the Grant Date 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 Grant Date,
or if none, for the most recent trade date thirty (30) days or less
prior to the Grant Date 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 Board of
Directors.
B. NUMBER OF SHARES:
Each Option shall be for that number of Shares as is determined by
dividing (i) $100,000 by (ii) the fair market value determined as set
forth in subparagraph A(2) of Article IV above, rounded to the
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<PAGE> 4
nearest whole Share, but in no event to be greater than 50,000 Shares.
C. TERM OF OPTION:
Each Option shall terminate ten (10) years from the Grant Date
thereof, and shall be subject to earlier termination as herein
provided.
D. DATE OF EXERCISE:
Each Option shall become exercisable immediately upon grant, within
its prescribed term subject to the provisions of Paragraphs G, H and
I below.
E. REPURCHASE RIGHTS:
(1) Notwithstanding the provisions of the forgoing Paragraph D and except
as otherwise provided herein or in the Option Agreement, if a
Participant ceases to be a Director of the Company for any reason,
then the provisions set forth below in this Paragraph E shall apply to
the Shares purchased by the Participant pursuant to his or her Option.
If such termination occurs:
(i) during the period on or after the Grant Date for such Option
and before the date which is twelve months thereafter (the "First
Anniversary Date") and the Participant has theretofore exercised
the Option for any Shares, then the Company shall purchase those
Shares from the Participant at the price by him or her upon
exercise;
(ii) during the period on or after the First Anniversary Date and
before the Date which is twelve months thereafter (the "Second
Anniversary Date") and the Participant has theretofore exercised
the Option for more than one-third (1/3) of the number of Shares
which may be purchased pursuant to such Option, the Company shall
purchase any excess over such amount of Shares so determined from
the Participant at the price paid by him or her upon exercise;
and
(iii) during the period on or after the Second Anniversary Date
and before the date which is twelve months thereafter (the "Third
Anniversary Date") and the Participant has heretofore exercised
the Option for more than two-thirds (2/3) of the number of Shares
which may be purchased pursuant to such Option, the Company shall
purchase any excess over such amount of Shares so determined from
the Participant at the price paid by him or her upon exercise.
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(2) Notwithstanding the foregoing, in the event the Participant ceases to
be a Director of the Company as a result of death, the Purchase
Obligation (as hereinbelow defined) shall cease and terminate.
(3) Notwithstanding the foregoing provisions of this Paragraph E, but
subject to the other provisions of this Plan, the Purchase Obligation
shall cease and terminate in the event of, and immediately upon, a
Change of Control that occurs at any time before the Participant has
ceased to be a director of the Company. As used herein, a "Change of
Control" shall be deemed to have occurred (i) if any "person" (as such
term is used in Sections 13(d) and 14(d)(2) of the Securities Exchange
Act of 1934, as amended) becomes the beneficial owner (within the
meaning of Rule 13d-3 under the Securities Exchange Act of 1934, as
amended) of securities of the Company representing thirty percent
(30%) or more of the combined voting power of the Company's then
outstanding securities; or (ii) if the stockholders of the company
approve any merger of, or consolidation involving, the Company in
which the Company's stock is converted into securities of another
corporation or into cash and such merger or consolidation shall be
consummated, or the stockholders of the Company approve any plan of
complete liquidation of the Company (whether or not in connection with
a sale of all or substantially all of the Company's assets) and such
liquidation is consummated, excluding in each case a transaction
solely for the purpose of reincorporating the Company in a different
jurisdiction or recapitalizing the Company's stock or a merger of the
Company in which the holders of the voting stock of the Company
immediately prior to the merger have the same proportionate ownership
of voting stock of surviving corporation immediately after the merger.
(4) The obligation of the Company to purchase Shares pursuant to this
Paragraph E is hereinafter referred to as the "Purchase Obligation"
and such Shares are hereinafter referred to as the "Purchase Stock."
F. MEDIUM OF PAYMENT:
The Option price shall be payable upon the exercise of the Option by
check payable to the Company or by cash.
G. TERMINATION OF DIRECTORSHIP:
A Participant who ceases to be a Director of the Company (for any
reason other than death or termination for cause) may exercise any
Option granted to such Participant, but only within six (6) months and
one (1) day after the date on
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which the Participant ceased to be a Director, provided, however, (i)
in no event may the Option be exercised any later than the prescribed
term of the Option, and (ii) immediately upon such Participant ceasing
to be a Director such Participant's Option shall cease to be
exercisable for any number of Shares which if purchased immediately
following such termination would be subject to the Company's Purchase
Obligation. The provisions of this paragraph, and not the provisions
of Paragraph H of this Article IV, shall apply to a Participant who
subsequently dies after the termination of his or her Directorship;
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 the prescribed term
of the Option.
A Participant whose Directorship is terminated 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 the
Company or any Affiliate, substantial malfeasance or non-feasance of
duty, unauthorized disclosure of confidential information, or conduct
substantially prejudicial to the business or reputation of the Company
of any Affiliate. The determination of the Board of Directors as to
the existence of cause, after notice to the Participant and an
opportunity to be heard, shall be conclusive on the Participant and
the Company.
H. DEATH:
In the event of the death of a Participant to whom an Option has been
granted while the Participant is a Director of the Company, such
Option, to the extent not exercised by the Participant's Survivor's,
if at all, within one (1) year after the date of death of such
Participant or, if earlier, within the 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 a Director of the
Company.
I. EXERCISE OF OPTION AND ISSUE OF SHARES:
An Option may 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
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<PAGE> 7
notice, the Company shall give notice to the person exercising the
Option of a date for delivery of the Option Shares to such person,
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 STOCKHOLDER:
No Participant to whom an Option has been granted nor any of
Participant's Survivors shall have rights as a stockholder with
respect to any 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:
By its terms, an Option granted to a Participant shall not be
transferable by the Participant otherwise than (i) by will or by the
laws of descent and distribution in accordance with the foregoing
Paragraphs G and H of this Article IV, or (ii) as otherwise determined
by the Board of Directors and set forth in the applicable Option
Agreement. The designation of a beneficiary of an Option by a
Participant shall not be deemed a transfer prohibited by this
Paragraph K. Except as provided above, an Option shall be exercisable,
during the Participant's lifetime, only by such Participant (or his or
her legal representative). No Option shall be assigned, pledged or
hypothecated in any way (whether by operation of law or otherwise) and
no Option shall 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.
V. RESTRICTIONS ON TRANSFER OF SHARES; DETAILS OF THE PURCHASE OBLIGATION
(1) Any Shares which are subject to a Purchase Obligation shall not be
transferred by the Participant except as permitted herein. Until the
termination of the Option Agreement, the Shares which are subject to a
Purchase Obligation may not be
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transferred by the Participant unless and until the transferee agrees,
in a form satisfactory to the Company, to be bound by the Option
Agreement and to sell any transferred Shares to the Company as
provided herein and in the Option Agreement.
(2) If a Participant ceases to be a Director and such Participant holds
any Purchase Stock, then within sixty (60) days following the date a
Participant ceases to be a Director, the Company shall give to each
Participant a written notice specifying a date for the Closing for the
purchase by the Company of the Purchase Stock, which date shall not be
more than ten (10) business days after the giving of such notice. The
Closing shall take place at the Company's principal offices in New
Hampshire, or such other location as the Company may reasonably
designate in such notice. If the Company shall fail to give the notice
provided for above within the specified period of time, then the
Closing shall be on the ninetieth (90th) day following the date the
Participant ceased to be a director or if not a business day, the next
business day.
(3) At the Closing, the Participant shall deliver the Purchase Stock being
purchased by the Company against the simultaneous delivery to the
Participant of the purchase price (by certified or bank cashier's
check or in such other form as mutually agreed to) for the number of
shares of the Purchase Stock then being purchased. In the event that
the Participant fails so to deliver the shares of Purchase Stock to be
purchased, the Company may elect (a) to establish a segregated account
in the amount of the purchase price, such account to be turned over to
the Participant upon delivery of such shares of Purchase Stock, and
(b) immediately to take such action as is appropriate to transfer
record title of such of the Purchase Stock from the Participant to the
Company and to treat the Participant and such shares of the Purchase
Stock in all respects as if delivery of such shares of the Purchase
Stock had been made as required by this Plan and the Option Agreement.
The Participant shall be entering into the Option Agreement
irrevocably grant the Company a power of attorney for the purpose of
effectuating the terms of the preceding sentence.
(4) If the Company shall pay a stock dividend or declare a stock split on
or with respect to any of the Company's Shares, or otherwise
distribute securities of the Company to the holders of its Shares,
whether before or after the exercise of an Option, the number of
shares of stock or other securities of the Company issued with respect
to the Purchase Stock then subject to the Purchase Obligation shall be
added to the Purchase Stock then subject to the Purchase
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Obligation without any change in the aggregate purchase price. If the
Company shall distribute to its stockholders shares of stock of
another corporation, the shares of stock of such other corporation
distributed with respect to the Purchase Stock then subject to the
Purchase Obligation shall be added to the Purchase Stock covered by
the Purchase Obligation without any change in the aggregate purchase
price. Without limiting the generality of the foregoing, a Participant
shall be entitled to retain any and all cash dividends paid by the
Company on the Shares.
(5) If the Company's Shares shall be subdivided into a greater number of
shares or combined into a smaller number of shares, or in the event of
a reclassification of the Company's Shares, or if the Company shall be
a party to any capital reorganization, whether before or after the
exercise of an Option, there shall be substituted for the Purchase
Stock then covered by the Purchase Obligation such amount and kind of
securities as are issued in such subdivision, combination,
reclassification, or capital reorganization in respect of the Purchase
Stock subject to the Purchase Obligation immediately prior thereto,
without any change in the aggregate purchase price.
(6) If the Company shall be completely liquidated, then the Purchase
Obligation shall cease and terminate as of the date of such
liquidation and the Participant shall hold the shares free of the
Purchase Obligation.
(7) The Company shall not be required to transfer any Shares on its books
which shall have been sold, assigned or otherwise transferred in
violation of this Plan or an Option Agreement, or to treat as owner of
such Shares, or to accord the right to vote as such owner or to pay
dividends to, any person or organization to which any such Shares
shall have been sold, assigned or otherwise transferred, from and
after any sale, assignment or transfer of any Shares made in violation
of this Plan or an Option Agreement.
(8) All certificates representing any Shares to be issued to a Participant
pursuant to the exercise of an Option which are subject to a Purchase
Obligation shall have endorsed thereon a legend substantially as
follows: "The shares represented by this certificate are subject to a
Director's Stock Option and Repurchase Agreement dated between
the Corporation and , a copy of which Agreement is available for
inspection at the principal offices of the Company or will be made
available without charge upon request."
(9) This Article V shall not restrict the transfer by a
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Participant of shares, if any, which are not acquired pursuant to the
exercise of an Option or which are not, or cease to be, subject to the
Purchase Obligation in accordance with the terms hereof and the terms
of the Option Agreement.
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 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 in substantially the
following form 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 completion of any reasonable action or
obtaining of any consent, which the Company deems reasonably necessary
under any applicable law (including without limitation state securities or
"blue sky" laws).
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 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,
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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 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 Board of Directors may make other
adjustments in outstanding Options if such adjustment is appropriate to
prevent dilution or enlargement of rights.
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 his or her legal representatives) 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 February 28, 2008. The Plan may be 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 the stockholders of the Company; or it may be
amended by the Board of Directors, provided such amendment is approved by
the stockholders within twelve (12) months before or after such action by
the Board of Directors if such amendment would (i) materially increase the
benefits accruing to Participants under the Plan; (ii) increase the number
of securities which may be issued under the Plan; (iii) materially modify
the requirements as to eligibility for participation in the Plan; (iv)
modify the method for determining the number of Shares as to which Options
may be granted to any Participant, the exercise price for such Options or
the aggregate dollar amount; or (v) extend the term during which Options
may be exercised or extend the term of the Plan. No amendment shall affect
any Options theretofore granted or any Option Agreements theretofore
executed by the Company and a Participant, unless such amendment shall
expressly so provide and unless any Participant to whom an Option has been
granted who would adversely affected by such amendment consents in writing
thereto.
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XI. RELATIONSHIP WITH THE COMPANY
Nothing herein contained shall be deemed to prevent the Company from
terminating the Directorship of a Participant, nor to prevent a Participant
from terminating the Participant's Directorship with the Company.
XII. EFFECTIVE DATE
This Plan shall become effective upon adoption by the Board of Directors;
provided, however, that the effectiveness of the Plan and the effectiveness
of grants of any Options pursuant to the Plan shall be subject to approval
to the holders of at least a majority of the issued and outstanding shares
of capital stock of the Company entitling such holders to a right to vote
and be present or represented or by written consent of the holders to a
right to vote and be present or represented at a meeting of the
stockholders duly convened or by the written consent of the holders of at
least a majority of the issued and outstanding shares of capital stock
entitling holders to a right to vote, within twelve (12) months either
before or after the adoption by the Board of Directors for such a
resolution. Until such time as this Plan is effective, no Option may be
granted pursuant hereto, unless a resolution to the effect of the
immediately preceding sentence shall have been adopted by the Board of
Directors. If any Options are so granted, then such Option may not be
exercised until all conditions to the effectiveness for this Plan shall
have been satisfied.
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EXHIBIT A
---------
FORM OF
DIRECTORS' STOCK OPTION AND REPURCHASE AGREEMENT, AS AMENDED
EKCO GROUP, INC.
----------------
AGREEMENT made as of the [DATE] (the "Grant Date") between Ekco Group, Inc.
(the "Company"), a Delaware corporation having a principal place of business in
Nashua, New Hampshire, and [NAME AND ADDRESS OF OUTSIDE Director], an Outside
Director of the Company (the "Director"). The term the "Director" as used in
this Agreement shall include, where the context so requires, the legal
representatives of the Director, and/or any person or persons who acquired the
Director's rights hereunder by will or by the laws of descent and distribution.
WHEREAS, the Company desires to grant to the Director an Option to purchase
shares of its common stock of a par value of $.01 a share (the "Shares") under
and for the purposes of the 1988 Directors' Stock Option Plan of the Company
(the "Plan"); and
WHEREAS, the Company and the Director understand and agree that any terms
used herein have the same meanings as in the Plan.
NOW, THEREFORE, in consideration of the mutual covenants hereinafter set
forth and for other good and valuable consideration, the parties hereto agree as
follows:
1. GRANT OF OPTION
The Company hereby irrevocably grants to the Director the right and
option to purchase at one time or from time to time all or any part of an
aggregate of [NO. OF SHARES]( ) Shares, subject to adjustment as provided in
the Plan, on the terms and conditions and subject to all the limitations set
forth herein and in the Plan, which is incorporated herein by reference. The
Director acknowledges receipt of a copy of the Plan.
2. PURCHASE PRICE
The purchase price of the Shares covered by this Option shall be
[PURCHASE PRICE]($ ) per share, subject to adjustment as provided in the Plan.
3. EXERCISE OF OPTION
3.1 The Option granted hereby shall be exercisable immediately, within
the term set forth in Section 4 below, subject to the provisions of this
Agreement.
3.2 Notwithstanding the provisions of the foregoing Subsection
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3.1 and except as otherwise provided herein or in the Plan, if the Director
ceases to be a director of the Company for any reason, then if such termination
occurs:
(i) during the period on or after the Grant Date and before the date
which is twelve months thereafter (the "First Anniversary Date") and the
Director has theretofore exercised the Option for any Shares, then the
Director shall sell to the Company and the Company shall purchase from the
Director those Shares from the Director at the price paid by the Director
upon exercise;
(ii) during the period on or after the First Anniversary Date and
before the date which is twelve months thereafter (the "Second Anniversary
Date") and the Director has theretofore exercised the Option for more than
[ONE-THIRD THE NO. OF SHARES]( ) Shares, then the Director shall sell to
the Company and the Company shall purchase from the Director that number of
Shares equal to the amount by which the number of Shares purchased by the
Director pursuant to this Option exceeds [ONE-THIRD THE NO. OF SHARES]
( ) shares at the price paid by the Director upon exercise; and
(iii) during the period on or after the Second Anniversary Date and
before the date which is twelve months thereafter (the "Third Anniversary
Date") and the Director has theretofore exercised the Option for more than
[TWO-THIRDS THE NO. OF SHARES]( ) Shares, then the Director shall sell to
the Company and the Company shall purchase from the Director that number of
Shares equal to the amount by which the number of Shares purchased by the
Director pursuant to this Option exceeds [TWO-THIRDS THE NO. OF shares]
( ) Shares at the price paid by the Director upon exercise.
3.3 Notwithstanding the foregoing, in the event the Director ceases to
be a director of the Company as a result of death, the Purchase Obligation (as
hereinbelow defined) shall cease and terminate.
3.4 Notwithstanding the foregoing provisions of this Section 3, but
subject to the other provisions of this Agreement and the Plan, the Purchase
Obligation shall cease and terminate in the event of, and immediately upon, a
Change of Control that occurs at any time before the Director has ceased to be a
director of the Company. As used herein, a "Change of Control" shall be deemed
to have occurred (i) if any "person" (as such term is used in Sections 13(d) and
14(d)(2) of the Securities Exchange Act of 1934, as amended [the "1934 Act"])
becomes the beneficial owner (within the meaning of Rule 13d-3 under the 1934
Act) of securities of the Company representing thirty percent (30%) or more of
the combined voting power of the Company's then outstanding securities; or (ii)
if the stockholders of the Company approve any merger of, or consolidation
involving, the Company in which the Company's stock is converted into securities
of another corporation or into cash and such merger or consolidation shall be
consummated, or the stockholders of the Company approve any plan of complete
liquidation of the Company (whether or not in connection with a sale of all or
substantially all of the Company's
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assets) and such liquidation is consummated, excluding in each case a
transaction solely for the purpose of reincorporating the Company in a different
jurisdiction or recapitalizing the Company's stock or a merger of the Company in
which the holders of the voting stock of the Company immediately prior to the
merger have the same proportionate ownership of voting stock of the surviving
corporation immediately after the merger.
3.5 The obligation of the Company to purchase Shares pursuant to this
Section 3 is hereinafter referred to as the "Purchase Obligation" and such
Shares are hereinafter referred to as the "Purchase Stock."
3.6 The Director acknowledges that if he or she exercises this Option
and any of the Shares so purchased are subject to the Purchase Obligation, then
such Shares will be restricted shares and that the difference between the fair
market value of such Shares on the date the Purchase Obligation lapses as to
such Shares and the aggregate purchase price for such Shares will be classified
as compensation income, unless the Director files an election under Section
83(b) of the Internal Revenue Code of 1986, as amended, with the Internal
Revenue Service within thirty (30) days of the acquisition of such Shares. If
such election is filed, the difference between the fair market value of such
Shares and the aggregate purchase price of such Shares will be treated as
compensation income as of the date of purchase. This acknowledgment should not
be understood as a substitute for the Director consulting with his or her own
tax advisors and the Director is urged to do so prior to any exercise of this
Option.
3.7 Notwithstanding the foregoing, this Option may not be exercised
until and unless all conditions to the effectiveness of the Plan, as set forth
in Article XI thereof, have been satisfied, including, without limitation,
approval by the Company's shareholders.
4. TERM OF OPTION
4.1 This Option shall terminate ten (10) years from the Grant Date of
this Option, but shall be subject to earlier termination as provided herein or
in the Plan.
4.2 If the Director ceases to be a director of the Company (for any
reason other than death or termination for cause), then the Director may
exercise this Option, but only within six (6) months and one (1) day after the
date on which the Director ceased to be a Director, provided, however, (i) in no
event may this Option be exercised any later than ten (10) years after the Grant
Date of this Option, and (ii) immediately upon the Director's ceasing to be a
director, this Option shall cease to be exercisable for any number of Shares
which if purchased immediately following such termination would be subject to
the Company's Purchase Obligation. The provisions of this paragraph, and not the
provisions of Subsection 4.3, shall apply to the Director if the Director
subsequently dies after the termination of the directorship; however, in such
case of the Director's death, the Director's Survivors may exercise this Option
within six (6) months after the date of the Director's death, but in no event
beyond ten (10) years after the Grant Date
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of this Option.
If the Director's directorship is terminated for "cause," the Director
shall forthwith upon such termination cease to have any right to exercise this
Option. For purposes of this Subsection 4.2, "cause" shall be deemed to include
(but shall not be limited to) dishonesty with respect to the Company or any
Affiliate, substantial malfeasance or non-feasance of duty, unauthorized
disclosure of confidential information, or conduct substantially prejudicial to
the business or reputation of the Company or any Affiliate.
4.3 In the event of the death of the Director while the Director is a
director of the Company, this Option, to the extent not exercised as of the date
of death, may be exercised by the Director's Survivors. Such Option must be
exercised by the Director's Survivors, if at all, within one (1) year after the
date of death of the Director or, if earlier, within the ten (10) years after
the Grant Date of this Option, notwithstanding that the decedent might have been
able to exercise this Option as to some or all of the Shares on a later date if
the Director were alive and had continued to be a director of the Company.
5. NON-ASSIGNABILITY
This Option shall not be transferable by the Director otherwise than
by will or by the laws of descent and distribution and shall be exercisable,
during the Director's lifetime, only by the Director (or his or her legal
representative). This Option shall not be assigned, pledged or hypothecated in
any way (whether by operation of law or otherwise) and shall not be subject to
execution, attachment or similar process. Any attempted transfer, assignment,
pledge, hypothecation or other disposition of this Option or of any rights
granted hereunder contrary to the provisions of this Section 5, or the levy of
any attachment or similar process upon this Option or such rights, shall be null
and void.
6. EXERCISE OF OPTION AND ISSUE OF SHARES
This Option may be exercised, in whole or in part, at one time or from
time to time, (to the extent that it is exercisable in accordance with its
terms) by giving written notice to the Company. Such written notice shall be
signed by the person exercising this Option, shall state the number of Shares
with respect to which this Option is being exercised, shall contain any warranty
required by Section 8 below and shall otherwise comply with the terms and
conditions of this Agreement and the Plan. Such notice must be received by the
Company within the relevant exercise period specified in Section 4 of this
Agreement. Such notice shall either: (i) be accompanied by payment of the full
purchase price of such Shares, in which event the Company, subject to the
provisions of Section 8, shall deliver a certificate or certificates
representing such Shares as soon as practicable after the notice shall be
received, or (ii) fix a date (not less than five nor more than ten business days
after such notice shall be received by the Company, which date must be within
the relevant exercise period specified in Section 4 of this Agreement) for the
payment of the full purchase price of such Shares against delivery subject to
the provisions of Section 8, of a certificate
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or certificates representing such Shares. Payment of such purchase price shall,
in either case, be made by check payable to the order of the Company. The
certificate or certificates for the Shares as to which this Option shall have
been so exercised shall be registered in the name of the person or persons so
exercising this Option and shall be delivered as provided above to the person or
persons exercising this Option. All Shares that shall be purchased upon the
exercise of this Option as provided herein shall be fully paid and
non-assessable.
The Company shall pay all original issue taxes with respect to the issue of
the Shares pursuant hereto and all other fees and expenses necessarily incurred
by the Company in connection herewith. Except as specifically set forth herein,
the holder acknowledges that any income or other taxes due from him or her with
respect to this Option or the shares issuable pursuant to this Option shall be
the responsibility of the holder. The holder of this Option shall have rights as
a shareholder only with respect to any Shares covered by this Option after due
exercise of this Option and tender of the full exercise price for the shares
being purchased pursuant to such exercise. Pursuant to the Plan, the Company
shall make delivery of the Shares against payment of the Option price therefor.
7. RESTRICTIONS ON TRANSFER OF SHARES; DETAILS OF THE PURCHASE OBLIGATION
7.1 Any Shares which are subject to the Purchase Obligation shall not
be transferred by the Director except as permitted herein. Until the termination
of this Agreement, the Shares which are subject to the Purchase Obligation may
not be transferred by the Director unless and until the transferee agrees, in a
form satisfactory to the Company, to be bound by this Agreement and to sell any
transferred Shares to the Company as herein provided.
7.2 Within sixty (60) days following the date Director ceases to be a
director and if the Director holds any Purchase Stock, then, the Company shall
give to the Director a written notice specifying a date for the Closing for the
sale by the Director and the purchase by the Company of the Purchase Stock,
which date shall be not more than ten (10) business days after the giving of
such notice. The Closing shall take place at the Company's principal offices in
New Hampshire, or such other location as the Company may reasonably designate in
such notice. If the Company shall fail to give the notice provided for above,
within the specified period of time, then the Closing shall be on the ninetieth
(90th) day following the date Director ceased to be a director or if not a
business day, the next business day.
7.3 At the Closing, the Director shall deliver the Purchase Stock
being purchased by the Company against the simultaneous delivery to the Director
of the purchase price (by certified or bank cashier's check or in such other
form as mutually agreed to) for the number of shares of the Purchase Stock then
being purchased. In the event that the Director fails so to deliver the shares
of Purchase Stock to be purchased, the Company may elect (a) to establish a
segregated account in the amount of the Purchase Price,
17
<PAGE> 18
such account to be turned over to the Director upon delivery of such shares of
Purchase Stock, and (b) immediately to take such action as is appropriate to
transfer record title of such of the Purchase Stock from the Director to the
Company and to treat the Director and such shares of the Purchase Stock in all
respects as if delivery of such shares of the Purchase Stock had been made as
required by this Agreement. The Director hereby irrevocably grants to the
Company a power of attorney for the purpose of effectuating the terms of the
preceding sentence.
7.4 If the Company shall pay a stock dividend or declare a stock split
on or with respect to any of the Company's Common Stock, or otherwise distribute
securities of the Company to the holders of its Common Stock, whether before or
after the exercise of this Option, the number of shares of stock or other
securities of the Company issued with respect to the Purchase Stock then subject
to the Purchase Obligation shall be added to the Purchase Stock then subject to
the Purchase Obligation without any change in the aggregate purchase price. If
the Company shall distribute to its stockholders shares of stock of another
corporation, the shares of stock of such other corporation distributed with
respect to the Purchase Stock then subject to the Purchase Obligation shall be
added to the Purchase Stock covered by the Purchase Obligation without any
change in the aggregate purchase price. Without limiting the generality of the
foregoing, the Director shall be entitled to retain any and all cash dividends
paid by the Company on the Shares.
7.5 If the outstanding shares of Common Stock of the Company shall be
subdivided into a greater number of shares or combined into a smaller number of
shares, or in the event of a reclassification of the outstanding shares of
Common Stock of the Company, or if the Company shall be a party to any capital
reorganization, whether before or after the exercise of this Option, there shall
be substituted for the Purchase Stock then covered by the Purchase Obligation
such amount and kind of securities as are issued in such subdivision,
combination, reclassification, or capital reorganization in respect of the
Purchase Stock subject to the Purchase Obligation immediately prior thereto,
without any change in the aggregate purchase price.
7.6 If the Company shall be completely liquidated, then the Purchase
Obligation shall cease and terminate as of the date of such liquidation and the
Director shall hold the Shares free of the Purchase Obligation.
7.7 The Company shall not be required to transfer any Shares on its
books which shall have been sold, assigned or otherwise transferred in violation
of this Agreement, or to treat as owner of such Shares, or to accord the right
to vote as such owner or to pay dividends to, any person or organization to
which any such Shares shall have been sold, assigned or otherwise transferred,
from and after any sale, assignment or transfer of any Shares made in violation
of this Agreement.
7.8 All certificates representing any Shares to be issued to the
Director pursuant to the exercise of the Option which are subject to the
Purchase Obligation shall have endorsed thereon a legend substantially as
18
<PAGE> 19
follows:
"The shares represented by this certificate are subject to a Director's
Stock Option and Repurchase Agreement dated as of [DATE] between the
Corporation and [NAME OF DIRECTOR], a copy of which Agreement is available
for inspection at the principal offices of the Company or will be made
available without charge upon request."
7.9 This Article 7 shall not restrict the transfer by the Director of
shares, if any, which are not acquired pursuant to the exercise of this Option
or which are not, or cease to be, subject to the Purchase Obligation in
accordance with the terms hereof.
8. PURCHASE FOR INVESTMENT
Unless the offering and sale of the Shares to be issued upon the
particular exercise of this Option shall have been effectively registered under
the Securities Act of 1933, as now in force or hereafter amended, or any
successor legislation (the "Act"), the Company shall be under no obligation to
issue the Shares covered by such exercise unless and until the following
conditions have been fulfilled:
(a) The person(s) who exercise this Option shall warrant to the Company,
at the time of such exercise, that such person(s) are acquiring such
Shares for his or her own account, for investment and not with a view
to, or for sale in connection with, the distribution of any such
Shares, in which event the person(s) acquiring such Shares shall be
bound by the provisions of the following legend which shall in
substantially the following form be endorsed upon the certificate(s)
evidencing the option Shares issued pursuant to such exercise:
"The shares represented by this certificate have been taken for
investment and they may not be sold or otherwise transferred by any
person, including a pledgee, in the absence of an effective
registration statement for the shares under the Securities Act of 1933
or an opinion of counsel satisfactory to the Company that an exemption
from registration is then available."
(b) 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 completion of any action or obtaining of any consent, which
the Company deems necessary under any applicable law (including without
limitation state securities or "blue sky" laws).
9. REGISTRATION RIGHTS
19
<PAGE> 20
(a) In the event that the Company has an effective registration
statement covering the sale and resale of securities issued pursuant to the
Plan, then the Director agrees to sign a waiver in substantially the following
form:
"For so long as a registration statement under the Securities Act of 1933,
as amended, is in effect covering the sale and resale of securities issued
pursuant to the 1988 Directors' Stock Option Plan of Ekco Group. Inc. (the
"Company"), the undersigned waives his/her rights to require the Company to
file a registration statement pursuant to Section 9 of the Directors' Stock
Option and Repurchase Agreement dated [DATE OF AGREEMENT], between the
undersigned and the Company."
(b) The Director acknowledges that option agreements have been
executed by the Company with [NO. OF EMPLOYEE-OPTIONEES] employees, [NO. OF
EMPLOYEE-DIRECTORS] employee-directors, [NO. OF DIRECTORS] Directors and may be
executed with other employees and Directors (collectively, "Other Holders"),
each containing or to contain a section substantially identical to this Section
9. Subject to the terms hereinafter set forth, at any time after the Grant Date,
the holder shall have the right, by written notice to the Company, to require
the Company to file and use its best efforts to cause to become effective a
registration statement under the Securities Act of 1933, as amended (the "Act")
on Form S-8, Form S-2 and Form S-3 or other like form, if available, covering
such number of Shares acquired or to be acquired prior to the effective date of
such registration statement, subject to the limitations that (i) the Company
shall be required to file no more than an aggregate of two (2) registration
statements pursuant to such notices and/or pursuant to notices received from
Other Holders, and (ii) if, in the opinion of counsel to the Company, the holder
can then sell, subject to such limitations as to the number of Shares which may
be sold as may be imposed by Rule 144 under the Act or any successor rule,
Shares requested to be included in any such registration statement, without such
registration, the Company need not so register such Shares. In no event will the
Company be required to register Shares which are subject to the Purchase Option.
The Company agrees to promptly notify a holder in the event that it receives a
notice from any of the Other Holders requiring it to file a registration
statement and to permit the holder to require the Company to include Shares
owned by the holder in such registration statement, subject to the limitations
set forth above.
(c) In connection with any registration statement pursuant to this
Section 9:
(i) the holder will furnish to the Company in writing such
appropriate information as the Company, or the Securities and Exchange
Commission (the "Commission") or any other regulatory authority may
request;
20
<PAGE> 21
(ii) the holder agrees to execute, deliver and/or file with or
supply to the Company, the Commission, any underwriters and/or any
state or other regulatory authority such information, documents,
representations, undertakings and/or agreements necessary to carry out
the provisions of the registration agreements contained in this
Agreement and/or to effect the registration or qualification of the
Shares under the Act and/or any of the laws and regulations of any
state or governmental instrumentality;
(iii) the Company will furnish to the holder of Shares included
in the registration statement such number of copies of such prospectus
(including each preliminary, amended or supplemental prospectus) as
the holder may reasonably request; and
(iv) in the event an offering of securities by the Company is
pending, the Company shall have the right to require that the holder
delay any offering of Shares for a period of ninety (90) days after
the effective date of such pending offering (upon the Company's having
first delivered to the holder the written opinion of its principal
underwriter, or if there be none, then from an officer of the Company
based upon a good faith resolution of the Board of Directors to the
effect that the offering of such Shares will have an adverse effect on
the marketing of such pending offering).
(d) The Company will pay all of its out-of-pocket expenses and
disbursements in connection with any registration statements filed under this
Section 9, including, without limitation, printing expenses, fees of the
Company's counsel and auditors, registration fees, blue sky fees and similar
costs to the extent permitted by state and regulatory authorities.
(e) The Company will be obligated to keep any Registration Statement
filed by it under this Section 9 effective under the Act for a period of ninety
(90) days after the actual effective date of such registration statement and to
prepare and file such supplements and amendments necessary to maintain an
effective registration statement for such period. As a condition to the
Company's obligation under this Subsection (e), the holder will execute and
deliver to the Company such written undertakings as the Company and its counsel
may reasonably require in order to assure full compliance with relevant
provisions of the Act.
(f) The Company will use its best efforts to register or qualify the
Shares covered by a registration statement filed pursuant hereto under such
securities or Blue Sky laws in such jurisdictions within the United States as
the holder may reasonably request, provided, however, that the Company reserves
the right, in its sole discretion, not to register or qualify such stock in any
jurisdiction where such stock does not meet with the requirements of such
jurisdiction or where the Company is required to qualify as a foreign
corporation to do business in such jurisdiction and is not so qualified therein
or is required to file any general consent to service of
21
<PAGE> 22
process.
(g) In the event that a holder has not sold all of his or her Shares
on or prior to the expiration of the period specified in Subsection (d) above,
the holder hereby agrees that the Company may deregister by post-effective
amendment any of his or her Shares covered by the registration statement or
notification but not sold on or prior to such date. The Company agrees that it
will notify the holder of the filing and effective date of such post-effective
amendment.
(h) The holder agrees that upon notification by the Company that the
prospectus in respect to any public offering covered by the provisions hereof is
in need of revision, the holder will immediately upon receipt of such
notification (i) cease to offer or sell any securities of the Company which must
be accompanied by such prospectus; (ii) return to the Company all such
prospectuses in the hands of the holder; and (iii) not offer or sell any
securities of the Company until the holder has been provided with a current
prospectus and the Company has given the holder notification permitting the
holder to resume offers and sales.
10. NOTICES
Any notices required or permitted by the terms of this Agreement or
the Plan shall be given by registered or certified mail, return receipt
requested, postage prepaid, addressed as follows:
To the Company: Ekco Group, Inc.
98 Spit Brook Road
Nashua, NH 03062
Attn: General Counsel
To the Director: [ADDRESS OF DIRECTOR]
or to such other address or addresses of which notice in the same manner has
previously been given. Any such notice shall be deemed to have been given when
mailed in accordance with the foregoing provisions.
11. GOVERNING LAW
This Agreement shall be construed and enforced in accordance with the
law of the State of New Hampshire, except to the extent the law of the
State of Delaware may be applicable.
12. BENEFIT OF AGREEMENT
This Agreement shall be for the benefit of and shall be binding upon
the heirs, executors, administrators and successors of the parties hereto,
except as otherwise provided herein.
22
<PAGE> 23
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed and its corporate seal to be hereto affixed by Robert Stein, its
duly authorized officer, and the Director has hereunto set his hand and
seal, all as of the day and year first above written in duplicate
originals.
EKCO GROUP, INC.
By:
-------------------------
-------------------------
DIRECTOR
Form dated: 03/19/98
23
<PAGE> 24
SCHEDULE OF EXERCISES
Number of Shares
Purchased Pursuant Consideration Date of Notation
to this Option Received Purchase Made By
- ----------------- ------------- -------- --------
24
<PAGE> 25
EKCO GROUP, INC.
SCHEDULE TO
FORM OF DIRECTORS' STOCK OPTION AND REPURCHASE AGREEMENT
Each of the following Outside Directors of the Company currently has a
Directors' Stock Option and Repurchase Agreement, as amended, with the Company
which is substantially similar in form to the foregoing Form of Directors' Stock
Option and Repurchase Agreement, as amended, except as to the date, the number
of shares and the exercise price:
<TABLE>
<CAPTION>
No. of
Date of Shares Exercise
Name Agreement Granted Price
- ---- --------- ------- --------
<S> <C> <C> <C>
George W. Carmany, III 05-20-97 19,753 $ 5.0625
Michael G. Frieze 05-20-97 19,753 $ 5.0625
Avram J. Goldberg 05-20-97 19,753 $ 5.0625
T. Michael Long 05/18/93 9,040 $11.0625
Stuart B. Ross 05/19/89 31,373 $ 3.1875
Malcolm L. Sherman 05/25/95 16,162 $ 6.1875
Bill W. Sorenson 10/13/88 45,714 $ 2.1875
Herbert M. Stein 10/13/88 45,714 $ 2.1875
</TABLE>
25
<PAGE> 1
EXHIBIT 10.11(b)
----------------
AMENDMENT AGREEMENT
THIS AMENDMENT AGREEMENT is made as of November 14, 1997 by and between
Ekco Housewares, Inc., a Delaware corporation with its principal place of
business in Franklin Park, Illinois (the "Company"), and Robert Varakian (the
"Executive").
WHEREAS, the Company and Executive are party to that certain employment
agreement dated as of September 25, 1996 (the "Employment Agreement"); and
WHEREAS, Executive and the Company desire to amend the Employment
Agreement as hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants set forth
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:
1. AMENDMENT OF EMPLOYMENT AGREEMENT. The Employment Agreement is hereby
amended as follows:
1.1 TITLE. Section 1 of the Employment Agreement is amended by
deleting all references therein to the title "Senior Vice President, Sales and
Marketing" and inserting in place of all such references the title "President."
1.2 BASE SALARY. Section 3.1.1 of the Employment Agreement is
amended by deleting it in its entirety and inserting in its place the following
language:
"For the remainder of 1997 and for each of the calendar years 1998 and
1999, Executive shall be paid salary at the annual rate of Three Hundred
and Seventy-Five Thousand Dollars ($375,000) (the "Base Rate"), payable
in equal installments in accordance with the Company's pay policy and in
any event not less frequently than once a month. For all years after
1999 during the Term, Executive's salary will be as determined by the
Board of Directors, provided that in each such year Executive's salary
shall be at least 5% higher than his salary in the preceding year."
1.3 BONUS. Section 3.1.2 of the Employment Agreement is amended by
deleting clauses C and D thereof in their entirety and inserting in their place
the following language:
"C. FOR ALL YEARS AFTER 1997.
(i) ELIGIBILITY; TARGET BONUS; COMPENSATION COMMITTEE APPROVAL;
PAYMENT. Beginning with respect to the year ending December 31,
1998 and for each subsequent year during the Term, if Actual
EBIT (as defined below) for any such year is greater than 85% of
Budgeted EBIT (as defined below) for such year,
-1-
<PAGE> 2
Executive shall be eligible for a cash bonus determined in
accordance with this Section 3.1.2(C). If Actual EBIT for any
such year is equal to or less than 85% of Budgeted EBIT for such
year, Executive shall not be eligible for any bonus in
accordance with this Section 3.1.2(C). Executive's target bonus
in any such year shall be 50% of Executive's base salary for
such year (the "Target Bonus"). All bonus calculations shall be
submitted to Group's Compensation Committee for final review and
approval, such approval to be conclusive as to the amount of
bonus due for such year to Executive. Any bonus due to Executive
shall be paid on or before March 1 of the year following the
year in which such bonus was earned.
(ii) BONUS NOT DISCRETIONARY. If Actual EBIT equals 100% of
Budgeted EBIT for such year, Executive shall receive 100% of his
Target Bonus. If Actual EBIT is greater than or less than
Budgeted EBIT for such year, the amount of Executive's Target
Bonus that Executive shall be eligible to receive shall be
adjusted as set forth in clause (iii) below.
(iii) ADJUSTMENTS BASED ON ACTUAL EBIT. If Actual EBIT is less
than Budgeted EBIT, the amount of Bonus earned by Executive in
such year shall be reduced pro rata on the basis of a one-third
(1/3) reduction in Bonus for each 5% negative deviation of
Actual EBIT from Budgeted EBIT. If Actual EBIT is greater than
Budgeted EBIT, the amount of Bonus for which Executive shall be
eligible shall be increased pro rata on the basis of a one-third
(1/3) increase in Bonus for each 5% positive deviation of Actual
EBIT from Budgeted EBIT. There shall be no cap on the amount of
increase of Bonus resulting from Actual EBIT exceeding Budgeted
EBIT.
(iv) CERTAIN DEFINITIONS. For the purposes of this Agreement,
(x) "Housewares Division" means the businesses comprising the
EKCO Housewares Division as detailed on Exhibit A hereto; (y)
"Actual EBIT" means actual earnings before interest and taxes of
the Housewares Division for such year after deducting all
estimated bonuses for bonus eligible employees of the Housewares
Division (including Executive) and making equitable adjustments
to reflect acquisitions and divestitures and extraordinary items
(as defined by generally accepted accounting principles) to the
extent such adjustments are approved by the chief executive
officer of Group and Group's Compensation Committee, such
approval to be conclusive; and (z) "Budgeted EBIT" means
projected earnings before interest and taxes of the Housewares
Division included in the applicable year's budget as submitted
to Group's Board of Directors."
1.4 EXHIBIT A. The Original Agreement is amended by adding thereto
Exhibit A in the form attached hereto as Exhibit A.
-2-
<PAGE> 3
2. STOCK OPTIONS. Group shall grant to Executive options to purchase 75,000
shares of Common Stock, par value $.01 per share, of Group (the "Common Stock"),
at an exercise price of $6.875 per share, which represents the average of the
high and low price for one share of Common Stock on the date hereof, with such
other terms and conditions as set forth in the definitive Stock Option Agreement
entered into by Group and Executive simultaneously herewith.
3. MISCELLANEOUS. Terms defined in the Employment Agreement and used herein
are used as defined in the Employment Agreement unless otherwise defined herein.
This Amendment Agreement constitutes the entire agreement between the parties
with respect to the subject matter hereof. Except as expressly provided for
herein, the Employment Agreement is hereby ratified and confirmed and shall
continue in full force and effect. The Employment Agreement as amended by this
Amendment Agreement shall hereinafter be referred to as the Employment
Agreement. This Amendment Agreement shall be construed under and be governed in
all respects by the laws of the State of New Hampshire. This Amendment Agreement
may be executed in any number of counterparts, and each such counterpart hereof
shall be deemed to be an original instrument, but all such counterparts together
shall constitute but one agreement.
IN WITNESS WHEREOF, the parties have caused this Amendment Agreement to
be executed and delivered by its duly authorized officer and its corporate seal
to be hereunto affixed and Executive has herein to set his hand and seal as of
the day and year first above written.
EKCO HOUSEWARES, INC.
By: /s/ DONATO A. DENOVELLIS
------------------------------
EKCO GROUP, INC.
By: /s/ DONATO A. DENOVELLIS
------------------------------
Robert Varakian
/s/ ROBERT VARAKIAN
----------------------------------
-3-
<PAGE> 4
EXHIBIT A
The Ekco Housewares Division is comprised of the Bakeware Business Unit, the
Kitchenware Business Unit, the Total Cleaning Business Unit and B. Via
International, Inc.
-4-
<PAGE> 1
EXHIBIT 10.12
1995 RESTATEMENT
INCENTIVE COMPENSATION PLAN FOR EXECUTIVE EMPLOYEES OF
EKCO GROUP, INC. AND ITS SUBSIDIARIES
AS AMENDED AND IN EFFECT AS OF JULY 29, 1997
- -------------------------------------------------------------------------------
1. Purpose.
The Compensation Committee has determined it appropriate and desirable to amend
and restate the Incentive Compensation Plan for Executive Employees of Ekco
Group, Inc. and its Subsidiaries (the "Plan"). The purpose of the Plan continues
to be to attract and to retain highly qualified executive employees, to obtain
from each the best possible performance, and to underscore the importance to
them of achieving particular business objectives established for Ekco Group,
Inc. and its operating units for both the short and long term.
2. Definitions.
For the purposes of the Plan, the following terms shall have the following
meanings. Terms related to the finances of the Corporation shall be defined by
reference to the consolidated financial statements of the Corporation as
reported periodically to the Securities and Exchange Commission, adjusted to
omit the effects of extraordinary items, discontinued operations, changes in
accounting and to reflect such other adjustments as are deemed appropriate by
the Committee.
2.1 Average Invested Capital. In any year the Average Invested
Capital is the sum of stockholders' equity in the Corporation
plus interest-bearing debt determined on average by referring
to these amounts at the last day of the preceding year and at
the end of each calendar quarter in the current year.
2.2 Awards. The Awards which are awarded under this Plan: Annual
Incentive Compensation Awards (Bonus or Bonuses) and Long Term
Incentive Awards (Stock Options and Restricted Stock).
2.3 Base Compensation. Base Compensation is the annual base salary
amount payable to an Executive in any calendar year.
2.4 Board of Directors. The Board of Directors of the Corporation.
2.5 Closing Date. The date on which an Executive pays any price
required to purchase Shares under a Restricted Stock Purchase
Plan of the Corporation and as of which date the Shares are
issued by the Corporation.
2.6 Committee. The Compensation Committee of the Board of
Directors or any successor thereto.
2.7 Common Stock or Stock or Shares. The Common Stock of the
Corporation or such other Stock into which the Common Stock
may be changed as a result of splits, recapitalizations,
reclassifications and the like. Whenever necessary to
determine the price of Shares, the closing price on the
principal exchange on which the Shares are traded will be
used, unless a different definition is required under the
terms of any Stock Option or Restricted Stock Purchase Plan
under which the shares are issued.
2.8 Corporation. Ekco Group, Inc. or Ekco Group, Inc. and its
subsidiaries, as the context requires.
(Rev. 07-29-97)
<PAGE> 2
2.9 Employee. An individual who is on the active salaried payroll
of the Corporation or a subsidiary of the Corporation at any
time during the period for which an Award is made.
2.10 Executive / Senior Executive Employee / Other Executive
Employee. The term "Executives" includes both Senior Executive
Employees and Other Executive Employees. When named for
participation in the Plan, an Executive will be designated in
the Appendix as a Senior Executive Employee or as an Other
Executive Employee.
2.11 Operating Budget. The operating budget as approved by the
Board of Directors.
2.12 Pre-Tax Operating Profit. Consolidated Operating Profit
(revenues less cost of goods sold and selling, general and
administrative expenses) but before interest expense,
amortization of goodwill and income taxes.
2.13 Return On Capital. The percentage determined by dividing the
Pre-Tax Operating Profit for a fiscal year by the Average
Invested Capital for the same year.
2.14 Target Return On Capital. The Return On Capital which the
Committee has determined appropriate for the fiscal year and
as referenced in the Appendix.
2.15 Target Bonus Amount. The bonus potential established for the
Executives by the Committee.
3. Effective Dates.
This Restated Plan will become effective as of January 1, 1995. This Restated
Plan has been amended and restated effective July 29, 1997.
4. Eligibility to Participate.
4.1 Each year, the Committee shall designate the Executives whose
Base Compensation and Awards will be determined under this
Plan.
4.2 At the sole discretion of the Committee, Awards may be made to
Executives who retired or whose employment terminated after
the beginning of the period for which an Award is made, or to
the designee or estate of an Executive who died during such
period.
4.3 The Executives named to participate in the Plan Employees are
listed in the Appendix. Changes in participation will be
reflected by additions to the Appendix.
5. Determination of Base Compensation.
5.1 The Committee will determine the Base Compensation under the
Plan for each Executive upon the recommendation of the Chief
Executive Officer when he deems adjustment to Base
Compensation to be appropriate, and such amount shall in no
event be less than provided for in any employment contract
with the Executive. The Chief Executive Officer will determine
the Base Compensation of any Other Executive Employee who does
not have an employment contract.
5.2 The Base Compensation amounts for the Executives who currently
participate in the Plan are listed in the Appendix. Future
changes in Base Compensation will be similarly scheduled.
5.3 Beginning in 1997 the Executive may decide whether any
percentage up to 20% of his Base Compensation will be paid
under the payment choices in Section 6.5 below.
2
<PAGE> 3
6. Annual Incentive Compensation Awards (Bonuses).
6.1 As of the last day of each calendar year, Executives will be
allocated Awards in accordance with the terms of this
Paragraph 6.
6.2 Awards, if any, will be determined as follows:
(a) Prior to the start of each year the Committee will
determine a Target Bonus Amount for each Executive.
Target Bonus Amounts for Executives who participate
in the Plan for 1997 are shown in the Appendix and
future changes will be similarly scheduled.
(b) A maximum of sixty percent (60%) of the Target Bonus
Amount for each Executive shall be payable as
follows: If the Budgeted Profit is fully achieved,
then the full sixty percent (60%) of the Target Bonus
Amount for each Executive will be payable. For every
variance of 5% above or below Budgeted Profit,
payment will be increased or decreased, as the case
may be, by one-third of this portion of the Target
Bonus Amount, with no upper limit in the bonus to be
earned from achievement of actual profit in excess of
Budgeted Profit and no Target Bonus Amount to be
payable at eighty five percent (85%) or less of
Budgeted Profit.
(c) Provided that actual achieved profit exceeds eighty
five percent (85%) of Budgeted Profit, a maximum of
forty percent (40%) of the Target Bonus may be
allocated to eligible Executives by the Committee in
its discretion taking into account individual efforts
(whether made singularly or as part of a group) as
follows: Up to a maximum of twenty percent (20%) from
the successful accomplishment of goals and objectives
specific to the individual Executive as approved by
the Executive's supervisor and the Chief Executive
Officer, and up to a maximum of twenty percent (20%)
to be discretionary with the review and approval of
the Chief Executive Officer.
6.4 Beginning in 1997 the Executive may decide whether any
percentage up to one hundred percent (100%) of his Bonus will
be paid under the payment choices in Section 6.5 below.
6.5 As provided in Sections 6.4 and 6.5 with respect to years
beginning with 1997, increases of up to a maximum of twenty
percent (20%) of the Executive's Base Compensation and one
hundred percent (100%) of Bonuses, if any, will be paid under
either of the payment choices listed below or a combination of
the two of them.
(a) All or a portion in taxable cash.
(b) All or a portion in not currently taxable deferred
compensation, pursuant to an Executive election under
which payment is deferred until a specific date or
time, and pursuant to which the Corporation agrees to
invest in one or more accounts which bear interest at
market rates and scheduled in the Appendix.
7. Long Term Incentive Awards (Restricted Stock)--for 1995 Through July
28, 1997 Only.
7.1 For the period beginning January 1, 1995 through July 28,
1997, effective as of the date when an Executive is named for
participation in this Restated Plan or at such other dates as
the Committee determines appropriate, the Committee will grant
Shares of Stock to the Executive attributable to a performance
cycle which it designates. The first such performance cycle
under this Restated Plan is the 5-year period from 1995
through 1999. There will be no performance cycles for any year
after 1999.
3
<PAGE> 4
7.2 Restricted Shares are to be issued (pro rata to Executives)
first under the terms of the 1984 Restricted Stock Plan of
Ekco Group, Inc. until all of that plan's authorized Shares
have been issued. Thereafter, they shall be issued in the
Committee's discretion under the terms of the 1985 Restricted
Stock Plan of Ekco Group, Inc. until all of that plan's
authorized Shares have been issued.
7.3 Each Executive's grant will be apportioned into a number of
blocks equal to the number of years in the performance cycle
(e.g. 5 blocks in the case of the Executives named to
participate in the Plan as of January 1, 1995 for the 5 year
performance cycle from 1995 through 1999). For purposes of
this Plan, each block will be designated with the name of one
of the years in the performance cycle (e.g. 1995 block, 1996
block, 1997 block, 1998 block and 1999 block). The grants for
each Executive are to be scheduled in the Appendix.
7.4 The lapsing of restrictions with respect to the Shares
purchased by Executive pursuant to the Restricted Stock
Purchase Plan will be determined under whichever of the
following rules is most favorable to the Executive:
(a) Restrictions will lapse in the event of the
occurrence of any of the following accelerated
lapsing events provided for in the Restricted Stock
Purchase Plan pursuant to which the Shares are
issued: disability, death or change of control.
(b) Restrictions will lapse as to all the Shares in a
block if the Executive is employed for at least ten
years following the Closing Date for the Shares in
the block.
EXAMPLE: An Executive is awarded the right to
purchase 10,000 shares at the price required by the
1984 and 1985 Restricted Stock Plans of Ekco Group,
Inc. and the shares are allocated to performance
blocks for the years 1995 through 1999. On January
30, 1995 he completes the purchase of the restricted
Shares in all performance blocks, so January 30, 1995
is designated as the Closing Date for the Shares. He
remains employed until January 30, 2005. Restrictions
lapse on all Shares in all blocks at that time.
(c) If the Target Return on Capital is attained for the
year for which the block is designated, the
restrictions will lapse as to 20% of the Shares in
the block for each full year of employment following
the later of (A) January 1 of the year designated for
the block or (B) the Closing Date for the Shares in
the block.
EXAMPLE: Assume that the Closing Date for Shares in
all blocks is February 1, 1995. If the Target Return
On Capital is attained in 1995 and not attained in
1996 and if Executive voluntarily terminates
employment on February 1, 1997, restrictions will
have lapsed as to 40% of the 1995 block; the
remainder of the 1995 block and the 1996 through 1999
blocks will remain restricted subject to the
Committee's right not to repurchase such shares
pursuant to the Restricted Stock Purchase Plan.
(d) A block of Shares which would have lapsed under the
20% per year rule in Section 7.4(c) but did not so
qualify (because Target Return On Capital was not
attained) will retroactively qualify for that 20%
lapse rate whenever the amount in (X) is equal to or
4
<PAGE> 5
greater than the amount in (Y) where (X) is the
cumulative total of actual Pre-Tax Operating Profits
for the designated year for the block and each
following year and (Y) is the cumulative total of
Pre-Tax Operating Profits which would have been
earned if Target Returns on Capital had been achieved
for the designated year for the block and each
following year.
Example: Assume that the Closing Date for Shares in
all blocks is February 1, 1995. If Target Returns on
Capital are not achieved in 1995 and 1996 but
cumulative Pre-Tax Operating Profits in 1995 through
1997 equal or exceed the total Target Returns on
Capital for those 3 years, the 1995 through 1997
blocks qualify for the lapsing of restrictions at the
20% per year rate.
At December 31, 1997 restrictions would have lapsed
as to 40% of the 1995 and 1996 blocks and as to 20%
of the 1997 block. At February 1, 1998, restrictions
would lapse with respect to an additional 20% of the
1995 block. Regardless of post 1997 Returns on
Capital, restrictions would continue to lapse at the
rate of 20% per year for Shares in the 1995 through
1997 blocks.
8. Long Term Incentive Awards (Stock Options).
8.1 For 1995 and 1996, effective as of the date when an Executive
is named for participation in this Restated Plan, or at such
other dates as the Committee determines appropriate, the
Committee will designate a target amount of Stock Options to
be granted to him as of the first trading day of each year in
the performance cycle referenced in Section 7.1. The target
number of Option grants for 1995 and 1996 is scheduled in the
Appendix.
8.2 For 1995 and 1996, the Executive will be granted the target
number of Stock Options at the first day of each year in the
performance cycle and the exercise price for an Option will be
the Stock price at the date of grant. Stock Options expire if
not exercised within ten years and one month of grant.
8.3 For 1997, the Executive will be granted fifty percent (50%) of
the target number of Stock Options specified for 1996 at the
first day of 1997 and the exercise price for an Option will be
the Stock price at the date of grant. Stock Options expire if
not exercised within ten years and one month of grant. The
target number of Option grants for 1997 is scheduled in the
Appendix.
8.4 Beginning in 1998, Stock Options will be awarded, if at all,
pursuant to the recommendation of the Chief Executive Officer
as approved by the Committee.
8.5 Stock Options will be granted under the terms of the Ekco
Group, Inc. 1987 Stock Option Plan.
8.6 Stock Options will be immediately exercisable but will be
subject to a right of the Corporation to repurchase any
acquired Shares for the price paid at exercise if employment
terminates before the Corporation's right expires. The
Corporation's right to repurchase Shares at exercise price
lapses at the rate of 33 1/3% for each full year of employment
following an Option award, (with full lapse of the right in
the event of disability (as defined), death or a change of
control (as defined) to
5
<PAGE> 6
the extent permitted by the Agreement pursuant to which Stock
Options are granted under the Stock Option Plan).
9. Accelerated Payment for Change of Control or Other Events.
9.1 Unpaid Annual Incentive Compensation amounts shall be
immediately payable, notwithstanding anything to the contrary
in the Plan, in the event of a change of control as defined in
the Executive's employment contract or other agreement, or if
there is no such contract or agreement in effect for the
Executive as defined in the 1985 Ekco Group, Inc. Restricted
Stock Plan.
9.2 In the event of a change of control (as defined under the
terms of the Stock Option Agreement or Restricted Stock Plan
under which Stock Options or Shares have been issued
hereunder) Stock Options shall be fully exercisable and
restrictions will lapse on Restricted Stock to the extent
therein provided.
10. Amendment and Interpretation of the Plan.
10.1 The Committee shall have the right to amend this Restated Plan
from time to time or to repeal it entirely or to direct the
discontinuance of Awards either temporarily or permanently;
provided, however, that no amendment of this Restated Plan
shall operate to annul, without the consent of the Executive,
any Award already made, or an Award which is earnable in the
current fiscal year, which has as a component the achievement
of a goal or goals any of which has at the time of the
attempted amendment or termination already been attained.
10.2 The decision of the Committee with respect to any questions
arising in connection with the administration or
interpretation of this Restated Plan shall be final,
conclusive and binding. In the event of a conflict between the
terms and conditions of the Executive's employment agreement
and this Restated Plan the provision of such employment
agreement shall control and this Restated Plan shall not be
interpreted so as to contravene any provision of such
employment agreement.
10.3 In making a decision with respect to eligibility for Plan
participation, the amounts of Awards, and other matters the
Committee may take into account the recommendations of the
Chief Executive Officer (for all Executives other than
himself) although the decisions of the Committee will be
final. The Committee delegates authority to the Chief
Executive Officer to determine the base salaries and amounts
of Awards for any Executive named to participate in this
Restated Plan who is not a Senior Executive.
11. Miscellaneous.
11.1 When an Award is made in cash or in Common Stock, the
Corporation shall cause the cash to be paid or the
certificates for the Common Stock to be delivered to the
individual to whom the Award is made at the time or times
specified by the Committee or, if no time or times is
specified, as soon as practicable after the Award is made.
11.2 When circumstances are deemed justifiable by the Committee, it
may, upon agreement with the Employee or the Employee's estate
or designee, authorize an immediate lump sum payment in
cancellation of all or any part of any outstanding deferred
Award, authorize a change in the number of installments in
which a deferred Award is to be paid or authorize a change in
the time of payment of any unpaid installments. Any such lump
sum payments shall be equal to the amount of the unpaid
installments canceled plus any amounts attributable to accrued
interest or declared and unpaid dividends.
6
<PAGE> 7
11.3 All expenses and costs in connection with the operation of the
Plan shall be borne by the Corporation.
11.4 All Awards under the Plan are subject to withholding, when
applicable, for federal, state and local taxes. Executives are
solely responsible for tax obligations and the Corporation is
not responsible if a taxing authority disagrees with the
effectiveness of a deferral election or the tax treatment
associated with receipt of an equity form of compensation.
11.5 For purposes of any other benefit plan which provides benefits
with reference to "Compensation" or "Base Compensation" and to
the extent permitted by the Internal Revenue Code or, when
relevant, any insurer underwriting risk under the employee
benefit plan, an Executive whose Compensation or Base
Compensation is paid partly in the form of deferred cash (or
in the form of Stock Options or Restricted Stock for 1995
and/or 1996) will still be treated as if he received all Base
Compensation or Compensation in cash and on a non-deferred
basis.
11.6 In the event of any Stock dividends, split-ups,
recapitalizations, reclassifications or the like, or in the
event of any offer to holders of Common Stock generally
relating to the acquisition of all or any part of their
Shares, the Committee shall make such adjustments as it deems
to be equitable in the number of Shares of Common Stock
covered by any outstanding deferred Awards or in the terms of
payment of any deferred Common Stock Awards, such actions not
to be inconsistent with the terms of any Restricted Stock
Purchase Plan or Stock Option Agreement under which Restricted
Stock or Stock Options were issued.
11.7 Nothing contained in this Restated Plan shall prohibit the
Corporation or any of its subsidiaries from granting special
performance or recognition Awards, under such conditions, and
in such form and manner as they see fit, to Executives for
meritorious service of any nature. In addition, nothing
contained in this Restated Plan shall prohibit the Corporation
or any of its subsidiaries from establishing other incentive
compensation plans providing for the payment of incentive
compensation to Employees, provided, however, that a Senior
Executive Employee who receives an Award under this Restated
Plan for a fiscal year shall not be entitled to receive an
Award for such fiscal year under any such plan without the
approval of the Committee.
11.8 Whenever this Restated Plan calls for issuance of Awards in
the form of Stock Options or Restricted Shares, such Options
or Shares shall be issued exclusively under the terms of the
following shareholder-approved plans of the Corporation: the
Ekco Group, Inc. 1987 Stock Option Plan, the 1984 Restricted
Stock Plan of Ekco Group, Inc., or the 1985 Restricted Stock
Plan of Ekco Group, Inc. and Awards shall be limited to Shares
authorized for issuance thereunder.
Compensation Committee
Ekco Group, Inc.
/s/ Avram J. Goldberg
-----------------------
Avram J. Goldberg
/s/ Stuart B. Ross
-----------------------
Stuart B. Ross
/s/ Bill W. Sorenson
-----------------------
Bill W. Sorenson
7
<PAGE> 1
EXHIBIT 10.16(a)
----------------
[AMERICAN HOME PRODUCTS CORPORATION LETTERHEAD]
SENIOR VICE PRESIDENT - FINANCE
February 8, 1985
The Ekco Group, Inc.
9234 W. Belmont Ave.
Franklin Park, Illinois 60131
Gentlemen:
Reference is made to that certain Purchase Agreement by and between the
Ekco Group, Inc. ("Ekco") and American Home Products Corporation ("AHP"), dated
September 7, 1984 (the "Purchase Agreement"). All capitalized terms not defined
herein shall have the respective meanings assigned to them in the Purchase
Agreement.
You and AHP have agreed to a full and final settlement of the
"Post-Closing Adjustment" to the Purchase Price pursuant to Section 1.7 of the
Purchase Agreement. Upon the signing of this letter AHP shall pay Ekco Group the
amount of $3,042,532.04 which represents the principal amount of $2,900,000.00
and interest thereon from September 7, 1984 to this date in the amount of
$142,532.04 as calculated and computed pursuant to the provisions of 1.7 of the
Purchase Agreement.
In connection with this settlement of the "Post-Closing Adjustment" to the
Purchase Price, we have agreed, and this letter will confirm our agreement, that
AHP hereby assumes all Loss and Expense arising out of all events occurring on
or prior to September 7, 1984 which were covered, in whole or in part, on such
date under AHP's self-insurance program. For the purposes hereof, such program
is understood to be comprised of (i) workers' compensation insurance, (ii)
vehicle insurance, (iii) comprehensive general liability insurance and (iv)
product liability insurance. In addition, AHP shall be responsible for all of
the lawsuits set forth on Schedule 2.15 of the Purchase Agreement, whether or
not the subject matter thereof would otherwise be within the coverage of clauses
(i) through (iv) of the preceding sentence (the "Lawsuits").
With regard to the Lawsuits, it is understood that the defense of the
Lawsuits shall be handled by Ekco (or its subsidiaries) pursuant to Section 9.5
of the Purchase Agreement, all of the terms of which Section 9.5 shall be
applicable thereto except that (x) AHP shall have the right to assume control of
any such Lawsuits by notice to Ekco given within fifteen (15) business days
after the date of this letter and (y) AHP shall not have the right to approve or
disapprove the settlement of any Lawsuit for an amount not in excess of $500.00
up to an aggregate amount of $10,000.00. Ekco shall promptly notify AHP when the
$10,000 amount has been reached and thereafter AHP shall have the right to
approve or disapprove all settlements.
<PAGE> 2
-2-
The parties recognize that Ekco has incurred Loss and Expense prior to the
date hereof for which AHP is hereby agreeing to reimburse Ekco, including (but
not limited to) Loss and Expense in connection with certain of the Lawsuits. A
schedule is attached setting forth these Losses and Expenses. AHP will promptly
reimburse Ekco for the amount of all such Loss and Expense in accordance with
this schedule subject to the provisions of Section 9.3 descried in the following
paragraph and AHP shall promptly pay or reimburse Ekco for all legal costs and
other expenses incurred in connection therewith for which invoices have not yet
been received by Ekco.
The Loss and Expense assumed by AHP herein is subject to the provisions of
Section 9.3 of the Purchase Agreement (relating to tax effect, present value of
money, etc.). In addition, AHP shall have no liability for any Loss or Expense
covered hereunder (other than the Lawsuits)as to which notice is not provided by
Ekco as provided in Section 9.4 of the Purchase Agreement (unless such Loss or
Expense arises out of a claim brought directly against AHP). The parties
recognize that Ekco has received claims prior to the date hereof and which AHP
has hereby agreed to assume. As promptly as possible after the date of this
letter Ekco shall supply AHP with the appropriate notice of these claims.
Except as expressly provided herein and except for the provisions of
Section 9.1 all other terms and conditions of the Purchase Agreement remain in
full force and effect.
If you are in agreement with the foregoing, please indicate your
acceptance of the terms hereof by signing the enclosed copy of this letter and
forwarding same to me.
Sincerely,
AMERICAN HOME PRODUCTS CORPORATION
By /s/ ROBERT G. BLOUNT
--------------------------------
Robert G. Blount
Accepted and Agreed:
THE EKCO GROUP, INC.
By: /s/ KENNETH J. PETRINE
------------------------
Kenneth J. Petrine,
Vice President
<PAGE> 1
EXHIBIT 10.16(b)
----------------
October , 1987
The Ekco Group, Inc.
9234 West Belmont Avenue
Franklin Park, Illinois 60131
Centronics Corporation
10 Tara Boulevard, Suite 202
Nashua, New Hampshire 03062
Ekco Acquisition Corp.
c/o Centronics Corporation
10 Tara Boulevard, Suite 202
Nashua, New Hampshire 03062
Gentlemen:
Reference is made to the Purchase Agreement by and between the Ekco Group,
Inc. ("Ekco") and American Home Products Corporation ("AHP") dated September 7,
1984 (the "AHP - Ekco Agreement") and the letter from AHP to Ekco dated February
8, 1985 relating to the AHP - Ekco Agreement (the "1985 Letter"). All
capitalized terms not defined herein, expressly or by reference, shall have the
respective meanings assigned to them in the AHP - Ekco Agreement.
Further reference is made to the Agreement of Purchase and Sale of Stock by
and among The Fulcrum Partnership, AHP, certain other stockholders of Ekco
(collectively, the "Sellers"), Ekco, Centronics Corporation ("Centronics") and
Ekco Acquisition Corp. ("EAC") dated October , 1987 (the "Ekco - Centronics
Agreement").
Under the Ekco - Centronics Agreement, EAC has agreed to acquire from the
Sellers, and the Sellers have agreed to sell to EAC, not less than ninety
percent of the outstanding shares of common stock of Ekco on the terms and
conditions provided for in the Ekco - Centronics Agreement. Among the conditions
to the obligations of Centronics and
<PAGE> 2
The Ekco Group, Inc..
Centronics Corporation
Ekco Acquisition Corp.
September , 1987
Page 2
EAC to consummate the transactions contemplated by the Ekco - Centronics
Agreement written assurances from AHP provided for in Sections 10(i), (j) and
(k) of the Ekco - Centronics Agreement.
Accordingly:
1. AHP confirms that the 1985 Letter is now, and will remain after the
Closing, full force and effect. AHP further agrees that, pursuant to the third
paragraph of the 1985 Letter and not by way of limitation thereof, AHP has
assumed and will continue to assume all Loss and Expense arising out of the
matters set forth on Schedule A to this letter, except to the extent that it
shall have been finally determined or agreed that any such Loss or Expense shall
have arisen out of events occurring after September 7, 1984. Without limiting
the generality of the foregoing or in any way the provisions of the AHP - Ekco
Agreement, the 1985 Letter or the Ekco - Centronics Agreement, AHP acknowledges
that AHP has undertaken, and will continue to undertake, to indemnify, hold
harmless and defend you from and against the matters set forth on Schedule B
hereto.
2. AHP hereby confirms that its note financing of Ekco under the Note
Agreement dated September 7, 1984 (the "Note Agreement") is, and will remain
after the Closing, in full force and effect in accordance with the terms of the
Note Agreement, that, to AHP's best knowledge, no breach of the Note Agreement
or otherwise of such note financing has occurred, and that no event has occurred
or circumstance exists which, with the passage of time or otherwise, will
constitute such a breach. AHP further understands that Ekco will pay in full at
the time of the permanent financing of the Ekco - Centronics transaction the
Subordinated Promissory Note, Series A, dated September 7, 1984, in the
principal amount of $10,000,000.
3. AHP confirms that the representations and warranties in Section 2.14 of
the AHP - Ekco Agreement were true and correct as and through the closing of the
transactions provided for in the AHP - Ekco Agreement.
<PAGE> 3
The Ekco Group, Inc..
Centronics Corporation
Ekco Acquisition Corp.
September , 1987
Page 3
AHP agrees that, in satisfaction of the conditions of Section 10(i), (j)
and (k) of the Ekco - Centronics Agreement, it will deliver to Centronics and
EAC at the Closing a certificate certifying as of the Closing that the
confirmations, representations and warranties in this letter remain true and
correct in all respects.
AHP further confirms that, to AHP's best knowledge, no breach of the AHP -
Ekco Agreement by Ekco presently exists.
Except as expressly provided herein and in the 1985 Letter, all other terms
and conditions of the AHP - Ekco Agreement and of the Ekco - Centronics
Agreement remain in full force and effect.
If you are in agreement with the foregoing, please indicate your acceptance
of the terms hereof by signing the enclosed copy of this letter and forwarding
same to the undersigned. The acknowledgement of the Fulcrum Partnership, on
behalf of all of the Sellers, shall constitute their acknowledgement of and
agreement to the foregoing.
Sincerely,
AMERICAN HOME PRODUCTS CORPORATION
By /s/ ROBERT G. BLOUNT
-----------------------------
Robert G. Blount
Accepted and Agreed to:
THE EKCO GROUP, INC.
By /s/ JOSEPH R. DUNBECK
--------------------------
<PAGE> 4
The Ekco Group, Inc..
Centronics Corporation
Ekco Acquisition Corp.
September , 1987
Page 4
CENTRONICS CORPORATION
By /s/ ROBERT STEIN
--------------------------
EKCO ACQUISITION CORP.
By /s/ ROBERT STEIN
--------------------------
Acknowledged and Agreed to:
THE FULCRUM PARTNERSHIP
(for itself and the other Sellers)
By GIBBONS, GREEN, VON AMERONGEN
By /s/ [Illegible]
--------------------------
a general partner,
duly authorized
<PAGE> 1
EXHIBIT 10.18(b)
----------------
FIRST AMENDMENT TO
AMENDED AND RESTATED CREDIT AGREEMENT
This Amendment ("First Amendment") is entered into as of December 15, 1997
among EKCO GROUP, INC., a Delaware Corporation (the "Borrower"), FLEET NATIONAL
BANK a national banking association, as Agent (the "Agent") and Fleet National
Bank ("Fleet") as Lender.
WHEREAS, the Borrower, the Agent and Fleet are parties to an Amended and
Restated Credit Agreement dated as of July 8, 1997 (the "Credit Agreement") and
have agreed to amend the Credit Agreement;
NOW THEREFORE, the parties hereby agree as follows:
1. SECTION 1.1. DEFINITIONS is amended by adding the following:
"Term Loan" shall mean the term loan credit facility in favor of
Borrower.
"Term Loan Commitment" shall mean, as to any Lender in respect to the
Term Loan, the amount set forth below such Lender's name on the execution page
hereof as its Term Loan Commitment.
"Term Loan Notes" shall mean the term notes executed by the Borrower
in favor of each Lender evidencing the Indebtedness of the Borrower under the
Term Loan. Each Term Note shall be substantially in the form of Exhibit A to the
First Amendment.
2. SECTION 1.1. DEFINITIONS. The following definitions are amended as
indicated:
(a) "Maximum Revolving Credit Amount" is increased from "35,000,000"
to $55,000,000."
(b) Revolving Credit Termination Date is extended from "April 30,
2000" to "November 30, 2002."
(c) "Consolidated Cash Flow" is amended in its entirety to read as
follows:
"CONSOLIDATED CASH FLOW" shall mean for any period for any
Person the sum of (i) Consolidated EBITDA, MINUS (ii) Capital
Expenditures of Borrower and its Subsidiaries made or incurred
during such period which are not financed by long term
Borrowed Funds Indebtedness (as (i) and (ii) are determined in
accordance with GAAP) MINUS (iii) all federal, state and other
taxes actually paid or required to be paid during such period
1
<PAGE> 2
(excluding any accrued, but not paid taxes, or taxes deferred
in accordance with applicable tax law).
(d) "Consolidated Fixed Charges" is amended in its entirety to read as
follows:
"CONSOLIDATED FIXED CHARGES" shall mean any period for any
Person the sum of (i) Consolidated Cash Interest Expense, plus
(ii) the aggregate amount of scheduled payments of principal
by such Person and its Subsidiaries on Borrowed Funds
Indebtedness for such period, including payments of principal
at maturity unless such Indebtedness is paid at maturity or
renewed, extended or refinanced in compliance with the terms
of this Agreement, plus (iii) all Capital Lease Obligations
scheduled to be paid during such period by such Person and its
Subsidiaries, plus (iv) any dividends paid during such period
by such Person and its Subsidiaries.
(d) "Borrowing Base" is amended by adding the following at the end of
the first sentence:
"; PROVIDED, HOWEVER, that the amount of Borrowing Base
attributable to Eligible Inventory shall not exceed
$35,000,000."
3. Article 2. THE CREDITS. The introduction is amended in its entirety to
read as follows:
"Subject to the terms and conditions hereof, and in reliance on the
representations and warranties contained herein, each of the Lenders hereby
establishes credit facilities in favor of the Borrower in the respective
principal amounts of each Lender's Revolving Credit Commitment and Term Loan
Commitment. The aggregate Revolving Credit Commitments are $55,000,000 and the
aggregate Term Loan Commitments are $10,000,000.
4. SECTION 2.1. THE REVOLVING CREDIT FACILITIES. Subparagraph (a) is
amended in its entirety to read as follows:
"(a) Subject to the terms and conditions of this Agreement and so long
as there exists no Default, at any time prior to the Revolving Credit
Termination Date or the earlier acceleration of the Revolving Credit Notes, each
Lender shall severally make such Advances to the Borrower as the Borrower may
from time to time request, by notice to the Agent in accordance with Section
2.2, in an aggregate amount (i) as to each Lender, not to exceed at any time the
amount of such Lender's Revolving Credit Commitment, and (ii) as to all of the
Lenders, not to exceed an amount determined by subtracting (A) the aggregate
outstanding balance of all Advances theretofore made by the Lenders with respect
to such Revolving Credit Facility PLUS the aggregate amount available to be
drawn under all Letters of Credit issued by the Agent for the account of the
Borrower in accordance with Section 2.11 hereof, PLUS the amount of any
unreimbursed draws under Letters of Credit from (B) the lesser of (x) the
Borrowing Base or (y) the Maximum
2
<PAGE> 3
Revolving Credit Amount from time to time in effect. Concurrently with the
execution of the First Amendment, the Borrower will execute and deliver to the
Lenders the Revolving Credit Notes to evidence the Advances."
5. SECTION 2.5. FEES is amended by adding the following:
(d) AGENCY FEE. If Fleet assigns, pursuant to Section 12.2 to one or
more financial institutions a portion of its rights and obligations in
connection with the Credit Agreement, for so long as such institution holds such
rights and obligations, the Borrower shall pay an agency fee to the Agent on the
effective date of such assignment and on each yearly anniversary date of such
assignment during the term of this Agreement in the amount of $10,000, which fee
shall be fully earned on the date due and not subject to rebate in the event of
termination of this Agreement.
6. SECTION 2.11.1 ISSUING LETTERS OF CREDIT. Subsection (a) is amended by
deleting the following: "the aggregate face amount of all outstanding Letters of
Credit shall not at any time exceed $17,500,000" and substituting
"the face amount of the Letter of Credit would be available
as an Advance under Section 2.1(a)"
7. The following is added:
SECTION 2.12 THE TERM LOAN
(a) AMOUNT. On the effective date of the First Amendment, each Lender
shall severally fund the Term Loan in the amount of such Lender's Term Loan
Commitment.
(b) TERM NOTES. The amounts owed by the Borrower with respect to the
Term Loan shall be evidenced by the Term Notes. The principal of the Term Loan
shall be repaid in quarterly installments of $357,142.80 on the last day of each
March, June, September and December commencing March 31, 1998, with the
remaining principal balance due in full on the Revolving Credit Termination
Date. The Term Loan may be prepaid in whole or in part at any time without
premium or penalty, except that any portion of the Term Loan earning interest
based upon the Applicable LIBOR Rate may be prepaid only at the end of an
applicable Interest Period.
(c) INTEREST. The Term Loan shall bear interest at the same rates as
Advances under the Revolving Credit Facility and shall be subject to conversion
from the Applicable Base Rate to the Applicable LIBOR Rate on the same terms and
in the same manner as provided in Section 2.2(a) for Advances.
8. ARTICLE 7. FINANCIAL RESTRICTIONS is amended in its entirety to read
as follows:
3
<PAGE> 4
On and after the date hereof, until all of the Lender Obligations
shall have been paid in full and the Borrower shall have no further right to
borrow hereunder, the Borrower shall observe the following covenants.
Section 7.1. CONSOLIDATED FIXED CHARGE COVERAGE RATIO. The ratio of
Borrower's Consolidated Cash Flow to Consolidated Fixed Charges shall at no time
be less than the ratios set forth below during the periods indicated, as
measured at the end of each fiscal quarter on the basis of the fiscal quarter
ending on such date and the three immediately preceding fiscal quarters:
Period Ratio
------ -----
Through September 30, 1997 1.0:1.0
December 31, 1997 and thereafter 1.25:1.0
Section 7.2 MINIMUM NET WORTH. The Consolidated Net Worth of Borrower,
as measured at the end of such fiscal quarter, shall be not less than:
Period Amount
------ ------
Through September 30, 1998 $ 95,000,000
December 31, 1998 and thereafter $105,000,000
9. This First Amendment shall become effective upon funding of the
Term Loan, which shall occur upon satisfaction of the following conditions:
(a) Completion of the acquisition of APP Holding Corporation
substantially in accordance with the terms of the Stock Purchase and Sale
Agreement by and between APP Holding Corporation and the Borrower dated as of
December 15, 1997.
(b) Absence of material litigation which might have a Material
Adverse Effect upon the credit worthiness of the Borrower.
(c) Absence of a material adverse change in the business,
operations, properties, assets or liabilities of the Borrower.
(d) The Agent shall have received each of the following in form
and substance satisfactory to the Agent and its counsel:
(1) NOTES. Revolving Credit Notes and Term Notes duly
executed by the Borrower;
(2) GUARANTEES AND SECURITY DOCUMENTS. Guaranty Agreements
and Security Agreements duly executed by each acquired entity;
4
<PAGE> 5
(3) CERTIFICATE OF CORPORATE ACTION BY THE BORROWER. A
certificate of the Clerk or Secretary of the Borrower, dated the Closing
Date, certifying the names and true signatures of the officers of the
Borrower authorized to sign this Agreement, the Notes and the other Lender
Agreements to which the Borrower is a party;
(4) OFFICER'S CERTIFICATES. A certificate regarding places
of business and locations of collateral of each acquired entity in the form
attached to the Credit Agreement as EXHIBIT G;
(5) RESOLUTIONS. Copies of all resolutions of the Executive
Committee of, or the Board of Directors of, the Borrower and each of the
Guarantors, certified by the Secretary or Clerk of the Borrower and the
applicable Guarantor, as being contained in the minutes of each such
Committee or Board of Directors, and all such other documents, similarly
certified, evidencing all other necessary corporate actions by the Borrower
and the Guarantors, duly authorizing the execution, delivery and
performance by the Borrower and each Guarantor of the Lender Agreements to
which each of them is a party and all other transactions contemplated
hereby and thereby;
(6) CERTIFICATES OF CORPORATE ACTION BY GUARANTORS. A
certificate of the Secretary or Clerk of each Guarantor, dated the Closing
Date, certifying the names and true signatures of the officers of the
Guarantor authorized to sign the Guaranty Agreements and the other Lender
Agreements to which such Guarantor is a party;
(7) OPINION OF COUNSEL TO BORROWER AND GUARANTORS. The
opinion of Messrs. Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.,
counsel to the Borrower and the Guarantors, dated the Closing Date;
(8) OTHER DOCUMENTS. Such other documents, certificates and
opinions as the Agent may reasonably request.
(e) REPRESENTATIONS AND WARRANTIES. The representations and
warranties herein and those made by or on behalf of the Borrower or any
Subsidiary in any other Lender Agreement shall be true and correct as of the
date of such finding.
(f) NO DEFAULT, ETC. There shall exist no Default or any other
condition which, after the passage of time or giving of notice or both, would
result in a Default upon the making of the Advances or the issuance of the
Letters of Credit.
(g) LEGALITY. The making of the Advances and the issuance of the
Letters of Credit shall not be prohibited by any law or governmental order or
regulation applicable to the Lenders, the Agent or to the Borrower, and all
necessary consents, approvals and authorizations of any Person for all the
credits made pursuant to this Agreement shall have been obtained.
5
<PAGE> 6
(h) AMENDMENT FEE. The Borrower shall have paid to the Agent for
its own account an amendment fee in an amount set forth in a proposal letter
dated October 30, 1997.
9. Except as set forth in this First Amendment, the Credit Agreement
remains in full force and effect.
IN WITNESS WHEREOF, the Borrower, the Agent and the Lenders have caused
this Credit Agreement to be executed by their duly authorized officers as of the
date first above written.
BORROWER:
EKCO GROUP, INC.
By: /s/ SUSAN M. SCACCHI
-----------------------------------------
Name: Susan M. Scacchi
Title: Treasurer
AGENT:
FLEET NATIONAL BANK, as Agent
By: /s/ RUBEN V. KLEIN
-----------------------------------------
Name: Ruben V. Klein
Title: Vice President
6
<PAGE> 7
LENDERS:
FLEET NATIONAL BANK
By: /s/ RUBEN V. KLEIN
-----------------------------------------
Name: Ruben V. Klein
Title: Vice President
Address: Fleet National Bank
One Federal Street
Boston, Massachusetts 02110
Attn: Ruben V. Klein, Vice President
Telefax: (617) 346-4741
Revolving Credit Commitment Percentage: 100%
Revolving Credit Commitment: $55,000,000
Term Loan Commitment: $10,000,000
7
<PAGE> 1
EXHIBIT 13
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data of the Company shown below for the
five-year period ended December 28, 1997 are derived from the consolidated
financial statements of the Company audited by independent certified public
accountants. The information set forth below is qualified in its entirety by the
more detailed financial statements and the notes thereto included elsewhere
herein. The following table should be read in conjunction with Management's
Discussion and Analysis of Results of Operations and Financial Condition and the
Company's audited Consolidated Financial Statements and Notes thereto appearing
elsewhere herein.
<TABLE>
<CAPTION>
FISCAL YEARS
-----------------------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA
Current assets $150,142 $139,377 $139,425 $145,290 $124,220
Total assets 300,805 292,076 301,058 312,518 303,332
Current liabilities 49,674 49,734 54,618 45,973 59,595
Long-term obligations, less current portion 124,270 124,182 96,700 124,460 111,820
Series B ESOP Convertible Preferred Stock, net 4,399 4,098 3,458 3,096 2,686
Stockholders' equity 109,994 102,515 135,925 129,116 116,864
Common shares outstanding 19,066 18,580 18,414 18,069 17,844
CONSOLIDATED STATEMENT OF OPERATIONS DATA
Net revenues from continuing operations $270,536 $249,870 $247,004 $233,527 $215,145
Cost of sales 181,307 164,505 160,933 148,935 139,736
Selling, general and administrative expenses 60,915 59,737 49,152 48,286 45,847
Special charges (1) 783 9,877 -- -- 11,000
EBITDA before special charges (2) 40,875 39,609 50,896 48,511 40,730
Amortization of excess of cost over fair value 3,631 3,636 3,636 3,637 3,394
Net interest expense 11,636 12,416 13,493 12,491 12,206
Income (loss) from continuing operations before
income taxes 12,264 (301) 19,790 20,178 2,962
Income taxes 6,247 2,370 9,828 9,102 2,637
Income (loss) from continuing operations before
extraordinary charges and cumulative effect of
accounting changes (3)(4) 6,017 (2,671) 9,962 11,076 325
Earnings (loss) from continuing operations per
common share before extraordinary charges
and cumulative effect of accounting changes (3)(4)(5)
Basic .32 (.14) .54 .62 .02
Diluted .29 (.14) .49 .54 .01
Cash dividends per common share and Series B ESOP
Convertible Preferred share -- .02 .08 -- --
</TABLE>
<PAGE> 2
(1) See Note 17 of Notes to Consolidated Financial Statements for information
on special charges.
(2) EBITDA before special charges represents earnings from continuing
operations before special charges, interest, taxes, depreciation,
amortization of excess of cost over fair value and other amortization.
(3) During Fiscal 1996, the Company recorded an extraordinary charge of $3.2
million (net of income taxes of $2.1 million) for the early extinguishment
of long-term obligations.
(4) During Fiscal 1993, the Company recorded a charge of $3.2 million (net of
income taxes of $2.0 million) to reflect the cumulative effect of changes
in the method of accounting for post-retirement and post-employment
benefits.
(5) In December 1997 retroactive to January 1, 1997, the Company adopted
Financial Accounting Standards Board Statement No. 128, "Earnings Per
Share" ("FAS 128"). All previously reported earnings per share information
has been restated to reflect the impact of adopting FAS 128.
2
<PAGE> 3
COMMON STOCK PRICE RANGE AND DIVIDENDS
The Company's common stock, $.01 par value per share ("Common Stock"), is
traded on the New York Stock Exchange under the ticker symbol "EKO". The
following table sets forth the high and low sale prices per share as reported on
the New York Stock Exchange Composite Tape during the calendar periods
indicated:
<TABLE>
<CAPTION>
LOW HIGH
<S> <C> <C> <C> <C>
1997
First Quarter 3 7/8 6 1/8
Second Quarter 4 5/8 5 7/8
Third Quarter 5 9/16 8 1/8
Fourth Quarter 6 1/16 8 1/4
1996
First Quarter 5 5/8 6 1/4
Second Quarter 5 1/8 6 3/8
Third Quarter 4 5/8 5 7/8
Fourth Quarter 3 1/4 4 7/8
</TABLE>
On February 25, 1998, the Company had 1,987 stockholders of record. The
Company has suspended the payment of a quarterly dividend and does not
anticipate paying cash dividends for the foreseeable future. In order for the
Company to pay a dividend, its arrangement with holders of its 9.25% Senior
Notes due 2006 ("Senior Notes") would need to be amended and the payment of the
dividend would have to be permitted under certain covenants in its bank credit
facility.
3
<PAGE> 4
EKCO GROUP AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
The following discussion of the consolidated results of operations for the
fiscal years ended December 28, 1997 ("Fiscal 1997"), December 29, 1996 ("Fiscal
1996"), and December 31, 1995 ("Fiscal 1995") and the discussion of financial
condition at December 28, 1997 should be read in conjunction with the Company's
Consolidated Financial Statements and Notes thereto.
The Company is a manufacturer and marketer of multiple categories of
branded housewares for everyday home use. The following table summarizes the
changes in the components of the Company's net revenues from continuing
operations by product category over the last three fiscal years:
<TABLE>
<CAPTION>
FISCAL 1997 FISCAL 1996 FISCAL 1995
----------- ----------- -----------
(AMOUNTS IN THOUSANDS, EXCEPT PERCENTAGES)
<S> <C> <C> <C> <C> <C> <C>
Bakeware ................................ $ 85,206 31.5% $ 84,537 33.8% $ 81,261 32.9%
Kitchenware.............................. 80,003 29.6% 65,846 26.4% 73,006 29.6%
Cleaning products........................ 56,043 20.7% 54,248 21.7% 55,191 22.3%
Pest control and small animal
care and control products.............. 35,564 13.1% 34,617 13.9% 34,034 13.8%
VIA products............................. 13,720 5.1% 10,622 4.2% 3,512 1.4%
-------- ----- -------- ----- -------- -----
Total net revenues.............. $270,536 100.0% $249,870 100.0% $247,004 100.0%
======== ===== ======== ===== ======== =====
</TABLE>
FISCAL 1997 VS. FISCAL 1996
NET REVENUES
Net revenues for Fiscal 1997 increased approximately $20.7 million (8.3%)
from the prior year. The increase was primarily due to higher sales of
kitchenware and growth of the Company's line of VIA(TM) products. The increase
in kitchenware net revenues was principally due to the rollout of new
plan-o-grams at several key customers and a high level of acceptance of new
products introduced during Fiscal 1996 and 1997. The growth in VIA(TM) products
sales includes $2.3 million of bakeware sold under the Farberware(R) brand name.
In Fiscal 1996, net revenues for pest control and small animal care and control
products included approximately $3.6 million of net revenues from the Company's
wireforming business, which was divested in the fourth quarter of Fiscal 1996.
Without including the wireforming business' revenues for Fiscal 1996, Fiscal
1997 net revenues from the Company's pest control and small animal care and
control products increased approximately $4.5 million (14.7%) from the prior
year. This increase was principally the result of increased sales of the
Company's Victor(R) pest control products, which were largely driven by sales of
newer products, including Roach Magnet(TM), quick set mousetraps and glue trays,
and increases in sales to key customers.
GROSS PROFIT
The Company's gross profit margin declined from 34.2% in Fiscal 1996 to
33.0% in Fiscal 1997. The decline in gross profit margin from the prior year
level was primarily due to costs associated with the consolidation of the
Company's cleaning products manufacturing facilities (approximately $2.4
million), costs associated with increased levels of inventory and the effect of
intensive competition across all of the Company's product lines.
4
<PAGE> 5
EKCO GROUP AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses for Fiscal 1997 increased
approximately $1.2 million (2.0%) from the prior year. The increase in selling,
general and administrative expenses was due primarily to increased investment in
new packaging, costs associated with new display fixtures, increased costs of
maintaining current customers and acquiring new distribution in a competitive
marketplace, and increased expenditures associated with the growth of the
Company's subsidiary in the United Kingdom. In addition, selling expenses
increased as a result of higher year-over-year sales volume.
SPECIAL CHARGES
The special charge for Fiscal 1997 relates to the exercise of stock
appreciation rights granted to the Company's former chief executive officer
pursuant to a December 1996 severance arrangement.
The special charges of $9.9 million in Fiscal 1996 relate to the following:
the adjustment to the carrying value of certain real property located in
Chicago, Illinois ($2.0 million) recorded in the third quarter; the severance
arrangement for the Company's former chief executive officer ($3.0 million)
recorded in the fourth quarter; and the consolidation of the Company's cleaning
products manufacturing facilities ($4.9 million) recorded in the fourth quarter.
This consolidation was completed in 1997 and combined the cleaning products
manufacturing operations located in Easthampton, Massachusetts with the cleaning
products manufacturing facility in Hamilton, Ohio. Additional expenses of
approximately $2.4 million associated with the transition of manufacturing
activities to the Hamilton, Ohio facility was included in cost of sales for
Fiscal 1997. The estimated annualized pre-tax savings from this consolidation is
expected to be approximately $2.3 million.
NET INTEREST EXPENSE
Net interest expense for Fiscal 1997 declined to $11.6 million from the
Fiscal 1996 level of $12.4 million. The decline in net interest expense was
primarily due to higher average invested cash.
INCOME TAXES
The effective income tax rate decreased to 50.9% in Fiscal 1997 from 787%
in Fiscal 1996. The Fiscal 1997 effective rate is essentially the same as the
Fiscal 1995 rate (50%). The unusual effective rate for Fiscal 1996 occurred
primarily because amortization of goodwill and certain special charges, which
are not deductible for income tax purposes, represented a significant percentage
of income from continuing operations before income taxes. See Note 7 of Notes to
Consolidated Financial Statements for the reconciliation of the provision for
income taxes from continuing operations to the statutory income tax rate applied
to income from continuing operations before income taxes.
5
<PAGE> 6
EKCO GROUP AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
EXTRAORDINARY CHARGE
On March 25, 1996, the Company sold $125.0 million of its 9.25% Senior
Notes due 2006 ("Senior Notes") at a price of 99.291% of face value in a private
offering to institutional investors. The Company used the net proceeds of the
Senior Note offering to (i) repurchase its outstanding 12.7% Notes due 1998 and
7.0% Convertible Subordinated Note due 2002 and (ii) repay substantially all
amounts outstanding under its credit facility. The early extinguishment of the
12.7% Notes and 7% Convertible Subordinated Note resulted in an extraordinary
pre-tax charge of $5.3 million and an after tax charge of $3.2 million.
FISCAL 1996 VS. FISCAL 1995
NET REVENUES
Net revenues from continuing operations for Fiscal 1996 increased
approximately $2.9 million (1.2%) from the prior year. The increase was
primarily due to sales of the Company's new insulated bakeware and growth of the
Company's new line of VIA(TM) products. This increase was substantially offset
by a decline in sales of the Company's kitchenware and cleaning products. Sales
of kitchenware were heavily affected earlier in Fiscal 1996 by the high year-end
inventories held by the Company's retail customers and weak consumer demand in a
category that is highly dependent on impulse purchases. In addition, the
Company's net revenues were negatively affected by: (i) its strategic decision
to re-focus the J-Hook program to improve profitability, (ii) the loss of
kitchenware sales to customer-direct import programs and (iii) a reduction in
customer shelf space allotted for the Company's products.
GROSS PROFIT
The Company's gross profit margin of 34.2% for Fiscal 1996 was slightly
lower than the Fiscal 1995 level of 34.8%. The gross margin decline was
primarily attributable to manufacturing inefficiencies in the Company's bakeware
products line as a result of customer demand for the new insulated bakeware
products which significantly exceeded expectations and a shift in customer mix
for cleaning products, with more sales to home-center customers where margins
are typically lower.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses for Fiscal 1996 increased
approximately $10.6 million (21.5%) from the prior year. The increase was
primarily due to increased expenditure on product development of $3.3 million
and higher levels of advertising and promotion in expectation of additional
sales which did not materialize. In addition, the Fiscal 1995 results included
the favorable impact from the collection of a previously written off receivable
($1.1 million) relating to a 1987 real estate transaction. The remainder of the
increase relates to a number of individually insignificant items, including
severance unrelated to severance of the Company's former chief executive
officer, legal and professional fees and expenditures associated with the growth
of the Company's VIA(TM) product line.
NET INTEREST EXPENSE
Net interest expense for Fiscal 1996 declined to $12.4 million from the
Fiscal 1995 level of $13.5 million. The decline in net interest expense was
primarily due to lower average interest rates.
6
<PAGE> 7
EKCO GROUP AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
DISCONTINUED OPERATIONS
Discontinued operations consisted of the following:
<TABLE>
<CAPTION>
FISCAL 1996 FISCAL 1995
----------- -----------
(AMOUNTS IN THOUSANDS)
<S> <C> <C>
Loss from operations $26,648 $3,851
Income tax benefits 1,928 1,934
------- ------
Net loss from operations $24,720 $1,917
======= ======
Loss on disposal, net of income
taxes ($1,925) $ 3,575 $ --
======= ======
</TABLE>
The Company recorded a $5.5 million pre-tax charge in the fourth quarter of
Fiscal 1996 for the estimated costs associated with its decision to dispose of
its molded plastics business operations. The fourth quarter charge included a
pre-tax provision of $1.2 million for anticipated operating losses in Fiscal
1997 until the estimated date of disposition, a $3.3 million estimated loss on
the disposition of the molded plastics business operations and a provision for
other disposal costs of $1.0 million. In the third quarter of Fiscal 1996 the
Company recorded a pre-tax charge of approximately $22.7 million to reduce the
carrying value of the molded plastics business assets (principally goodwill). As
this goodwill is not deductible for income tax purposes, there was no related
tax benefit.
LIQUIDITY AND CAPITAL RESOURCES
During Fiscal 1997, the Company sold all of the assets of its molded
plastic products business for cash proceeds of approximately $17.6 million and a
$2.0 million promissory note. The Company has reported the results of the
operations of the molded plastic products business and the loss on disposal as
discontinued operations.
The $17.6 million in cash generated from the sale of the assets of the
Company's molded plastic products business along with a portion of the $15.7
million of cash on hand at December 29, 1996 was used to fund capital
expenditures of approximately $8.6 million and operations, including an increase
of $26.7 million in the Company's inventories, resulting in a $14.6 million cash
balance at December 28, 1997. The inventory growth was principally due to a
planned increase in inventories to facilitate higher service levels, an
accumulation of safety stock relating to the consolidation of the Company's
cleaning products manufacturing facilities and an increase in new products.
On January 16, 1998, the Company completed the acquisition (the
"Acquisition") of all of the outstanding equity securities of APP Holding
Corporation ("APP"), the parent corporation and sole stockholder of Aspen Pet
Products, Inc. ("Aspen"), a marketer of dog and cat supplies and accessories, as
well as other pet products. Pursuant to the Stock Purchase and Sale Agreement,
the Company paid approximately $24.5 million in cash and refinanced APP's
outstanding bank debt of approximately $9.1 million. In addition, if Aspen
achieves certain predetermined financial results during fiscal 1998, 1999, 2000,
2001 and 2002, the Company will make additional annual payments to certain
former APP stockholders equal, in the aggregate, to 25% of the amount by which
Aspen's Gross Profit (as defined) of each such year exceeds the Base Profit
Amount (as defined). The
7
<PAGE> 8
EKCO GROUP AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
Acquisition will be accounted for under the purchase method of accounting and
goodwill of approximately $24 million will be amortized over 40 years. At
December 31, 1997, APP's total assets were $21 million and total liabilities
were $12 million. For the year ended December 31, 1997, APP had net sales of
approximately $30 million and operating income of approximately $3 million.
On December 15, 1997, the Company and its lender bank agreed to certain
modifications to its amended and restated credit agreement (as so amended, the
"Credit Facility"). Effective upon the consummation of the Acquisition, the
Credit Facility was increased to include a maximum revolving credit line of $55
million, up from a level of $35 million under the previous agreement, and an
additional $10 million was made available under a term loan credit facility. The
principal of the term loan is required to be repaid at the rate of approximately
$357,000 on the last day of each quarter, commencing March 31, 1998. The maximum
outstanding balance of the revolving credit line may not exceed 80% of eligible
accounts receivable and 50% of eligible inventory, provided that the amount
attributable to eligible inventory may not exceed $35 million, as determined at
the end of each calendar month. The Credit Facility provides for a commitment
fee of three-eighths of one percent on the unused portion of the commitment.
Borrowings under the Credit Facility bear interest at the bank's prime rate or
at LIBOR plus 1.25% or 1.5%, depending on the Company's borrowing strategy and
the ratio of total debt to cash flow, as defined. Borrowings under the Credit
Facility mature in November 2002 and are collateralized by substantially all of
the assets of the Company. The Credit Facility contains certain financial and
operating covenants, of which the most restrictive requires the Company to
maintain a minimum level of cash flow. The Senior Notes, as well as the Credit
Facility, contain certain financial covenants that may restrict the sale of
assets, payment of dividends, the incurrence of additional indebtedness and
certain investments and acquisitions by the Company. The Company has suspended
the payment of quarterly dividends and does not anticipate paying cash dividends
for the foreseeable future. In order for the Company to pay a dividend, its
arrangements with holders of its Senior Notes would need to be amended and the
payment of the dividend would have to be permitted under certain covenants of
the Credit Facility. On January 16, 1998 the Company used its cash balance plus
proceeds from the $10 million term loan and borrowings of approximately $4.6
million to fund the acquisition of Aspen. After the acquisition of Aspen, $38.2
million was available for general corporate purposes under the Credit Facility,
less approximately $12.2 million in outstanding letters of credit.
The Company believes it has sufficient borrowing capacity to finance its
ongoing operations for the foreseeable future. The Company, however, may require
additional funds to finance acquisitions.
The Company has a recorded liability of approximately $2.8 million for
environmental remediation and ongoing operation, maintenance and ground water
monitoring costs associated with facilities owned or occupied by the Company's
cleaning products operations. The Company believes the provision is adequate but
will continue to monitor and adjust the provision, as appropriate, should
additional sites be identified or further remediation measures be required or
undertaken or interpretation of current laws or regulations be modified.
8
<PAGE> 9
EKCO GROUP, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION (CONTINUED)
In June 1997, The Financial Accounting Standards Board ("FASB") issued
Financial Accounting Standard No. 130 "Reporting Comprehensive Income" ("FAS
130") that establishes standards for reporting and display of comprehensive
income and its components in a full set of general purpose financial statements.
The Company will adopt FAS 130 commencing with the first quarter of fiscal 1998.
Also in June 1997, the FASB issued Financial Accounting Standards No. 131
"Disclosure about Segments of an Enterprise and Related Information" ("FAS 131")
that requires companies to determine segments based on how management makes
decisions about allocating resources to the segments and measuring their
performance. The Company will adopt FAS 131 in fiscal 1998.
YEAR 2000 DATE CONVERSION
The Company's management has initiated a company-wide program to prepare
the Company's computer systems for the year 2000. A comprehensive review of the
Company's computer systems has been conducted to identify the systems that could
be affected by this issue. An implementation plan to resolve this issue is
currently being developed and implemented. The Company presently believes that
with modifications to existing software and the conversion to new software, the
year 2000 problem will not pose a significant operational problem to the
Company. The Company expects the year 2000 modifications and conversions to be
completed on a timely basis and to cost approximately $300,000 to $500,000,
which will be expensed in 1998. However, there can be no assurance that the
systems of other parties upon which the Company's business also relies,
including, but not limited to, the Company's customers and suppliers, will be
converted on a timely basis. The Company's business, financial condition, or
results of operations could be materially adversely affected by the failure of
its systems and applications of those operated by other parties to properly
operate or manage dates beyond 1999.
INFLATION
Inflation in general was not considered to be a significant factor in the
Company's operations during the periods discussed above.
BUSINESS OUTLOOK
This Annual Report, including "Letter to Shareholders" and "Management's
Discussion and Analysis of Results of Operations and Financial Condition,"
contains forward-looking statements within the meaning of the safe harbor
provision of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. Such statements are based on management's
current expectations and are subject to a number of factors and uncertainties
which could cause actual results to differ materially from those described in
the forward-looking statements. Such factors and uncertainties include, but are
not limited to: the impact of the level of the Company's indebtedness;
restrictive covenants contained in the Company's various debt documents; general
economic conditions and conditions in the retail environment; the Company's
dependence on a few large customers; price fluctuations in the raw materials
used by the Company; competitive conditions in the Company's markets; the timely
introduction of new products; the impact of competitive products and pricing;
certain assumptions related to consumer purchasing patterns; the seasonal nature
of the Company's business; and the impact of federal, state and local
environmental requirements (including the impact of current or future
9
<PAGE> 10
EKCO GROUP, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION (CONTINUED)
environmental claims against the Company). As a result, the Company's operating
results may fluctuate, especially when measured on a quarterly basis. These
forward-looking statements represent the Company's best estimate as of the date
of this Annual Report. The Company assumes no obligation to update such
estimates except as required by the rules and regulations of the Securities and
Exchange Commission.
10
<PAGE> 11
EKCO GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 28, DECEMBER 29,
1997 1996
----------- --------
(AMOUNTS IN THOUSANDS,
EXCEPT PER SHARE DATA)
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 14,565 $ 15,706
Accounts receivable, net of allowance for
doubtful accounts of $957 and $760, respectively 45,529 42,182
Inventories 74,150 47,422
Prepaid expenses and other current assets 9,021 6,180
Deferred income taxes 6,877 10,857
Net assets of discontinued operations -- 17,030
-------- --------
Total current assets 150,142 139,377
Property and equipment, net 35,678 34,998
Other assets 7,563 6,569
Excess of cost over fair value of net assets acquired,
net of accumulated amortization of $32,321 and $28,690,
respectively 107,422 111,132
-------- --------
Total assets $300,805 $292,076
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 14,040 $ 18,395
Accrued expenses 29,290 28,688
Income taxes 6,344 2,651
-------- --------
Total current liabilities 49,674 49,734
-------- --------
Long-term obligations, less current portion 124,270 124,182
-------- --------
Other long-term liabilities 11,974 11,052
-------- --------
Series B ESOP Convertible Preferred Stock, net;
outstanding 1,315 shares and 1,439 shares,
respectively, redeemable at $3.61 per share 4,399 4,098
-------- --------
Commitments and contingencies -- --
-------- --------
Minority interest 494 495
-------- --------
Stockholders' equity
Common stock, $.01 par value; outstanding
19,066 shares and 18,580 shares, respectively 191 186
Capital in excess of par value 109,462 107,622
Cumulative translation adjustment 636 869
Retained earnings (deficit) 4,665 (1,352)
Unearned compensation (2,787) (2,963)
Pension liability adjustment (2,173) (1,847)
-------- --------
109,994 102,515
-------- --------
Total liabilities and stockholders' equity $300,805 $292,076
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
11
<PAGE> 12
EKCO GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
DECEMBER 28, DECEMBER 29, DECEMBER 31,
1997 1996 1995
----------- ----------- -----------
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Net revenues $270,536 $249,870 $247,004
-------- -------- --------
Costs and expenses
Cost of sales 181,307 164,505 160,933
Selling, general and administrative 60,915 59,737 49,152
Special charges 783 9,877 --
Amortization of excess of cost over fair value 3,631 3,636 3,636
-------- -------- --------
246,636 237,755 213,721
-------- -------- --------
Income before interest and income taxes 23,900 12,115 33,283
-------- -------- --------
Net interest expense
Interest expense 12,446 12,565 13,590
Investment income (810) (149) (97)
-------- -------- --------
11,636 12,416 13,493
-------- -------- --------
Income (loss) from continuing operations
before income taxes and extraordinary charges 12,264 (301) 19,790
Income taxes 6,247 2,370 9,828
-------- -------- --------
Income (loss) from continuing operations
before extraordinary charge 6,017 (2,671) 9,962
Discontinued operations
Loss from operations of discontinued
operations, net of tax benefits of
$1,928, and $1,934, respectively -- (24,720) (1,917)
Loss on disposal, net of tax
benefit of $1,925 -- (3,575) --
-------- -------- --------
Income (loss) before extraordinary charge 6,017 (30,966) 8,045
Extraordinary charge for early retirement
of debt, net of tax benefit of $2,139 -- (3,208) --
-------- -------- --------
Net income (loss) $ 6,017 $(34,174) $ 8,045
======== ======== ========
</TABLE>
12
<PAGE> 13
EKCO GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
DECEMBER 28, DECEMBER 29, DECEMBER 31,
1997 1996 1995
----------- ----------- -----------
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Earnings (loss) per common share Basic:
Income (loss) from continuing operations
before extraordinary charge $ .32 $ (.14) $ .54
Loss from operations of discontinued operations -- (1.34) (.10)
Loss on disposal of business -- (.19) --
------ ------ ------
Income (loss) before extraordinary charge .32 (1.67) .44
Extraordinary charge -- (.18) --
------ ------ ------
Earnings (loss) per common share $ .32 $(1.85) $ .44
====== ====== ======
Diluted:
Income (loss) from continuing operations before
extraordinary charge $ .29 $ (.14) $ .49
Loss from operations of discontinued operations -- (1.34) (.09)
Loss on disposal of business -- (.19) --
------ ------ ------
Income (loss) before extraordinary charge .29 (1.67) .40
Extraordinary charge -- (.18) --
------ ------ ------
Earnings (loss) per common share $ .29 $(1.85) $ .40
====== ====== ======
Weighted average number of shares
used in computation of per share data
Basic 18,907 18,489 18,354
====== ====== ======
Diluted 20,849 18,489 22,413
====== ====== ======
</TABLE>
See accompanying notes to consolidated financial statements.
13
<PAGE> 14
EKCO GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON CAPITAL IN CUMULATIVE RETAINED PENSION
STOCK, PAR EXCESS OF TRANSLATION EARNINGS UNEARNED LIABILITY
SHARES VALUE $.01 PAR VALUE ADJUSTMENT (DEFICIT) COMPENSATION ADJUSTMENT
------ ---------- ---------- ----------- --------- ------------ ----------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Beginning balance, January 1, 1995 18,069 $181 $105,448 $771 $27,172 $(2,968) $(1,488)
Shares issued under common stock purchase
and option plans and dividend re-
investment plan 226 2 769 -- -- -- --
Net shares issued under restricted common
stock purchase plans 243 2 1,515 -- -- (1,437) --
Income tax reductions relating to stock
plans -- -- 74 -- -- -- --
Shares issued upon preferred stock
conversion 80 1 288 -- -- -- --
Purchases of treasury stock (204) (2) (1,178) -- -- -- --
Net income for the year -- -- -- -- 8,045 -- --
Dividends paid -- -- -- -- (1,603) -- --
Foreign currency translation adjustment -- -- -- 158 -- -- --
Amortization of unearned compensation -- -- -- -- -- 435 --
Pension liability adjustment -- -- -- -- -- -- (260)
------ ---- -------- ---- ------- ------- -------
Balance, December 31, 1995 18,414 184 106,916 929 33,614 (3,970) (1,748)
Shares issued under employee common
stock purchase and option plans and
dividend reinvestment plan 90 1 360 -- -- -- --
Net shares issued under restricted
common stock purchase plans 27 -- 171 -- -- (168) --
Shares issued upon preferred stock
conversion 49 1 175 -- -- -- --
Net loss for the year -- -- -- -- (34,174) -- --
Dividends paid -- -- -- -- (792) -- --
Foreign currency translation adjustment -- -- -- (60) -- -- --
Amortization of unearned compensation -- -- -- -- -- 1,175 --
Pension liability adjustment -- -- -- -- -- -- (99)
------ ---- -------- ---- ------- ------- -------
Balance, December 29, 1996 18,580 186 107,622 869 (1,352) (2,963) (1,847)
</TABLE>
14
<PAGE> 15
EKCO GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON CAPITAL IN CUMULATIVE RETAINED PENSION
STOCK, PAR EXCESS OF TRANSLATION EARNINGS UNEARNED LIABILITY
SHARES VALUE $.01 PAR VALUE ADJUSTMENT (DEFICIT) COMPENSATION ADJUSTMENT
------ ---------- ---------- ----------- --------- ------------ ----------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Shares issued under common stock
purchase and option plans and
dividend reinvestment plan 372 4 1,005 -- -- -- --
Net shares issued under restricted
common stock purchase plans 3 -- 19 -- -- (18) --
Shares issued upon preferred stock
conversion 111 1 400 -- -- -- --
Compensatory options issued -- -- 50 -- -- (50) --
Income tax reductions relating to
stock plans -- -- 366 -- -- -- --
Net income for the year -- -- -- -- 6,017 -- --
Foreign currency translation adjustment -- -- -- (233) -- -- --
Amortization of unearned compensation -- -- -- -- -- 244 --
Pension liability adjustment -- -- -- -- -- -- (326)
------ ---- -------- ----- ------ ------- -------
Balance, December 28, 1997 19,066 $191 $109,462 $ 636 $4,665 $(2,787) $(2,173)
====== ==== ======== ===== ====== ======= =======
</TABLE>
See accompanying notes to consolidated financial statements
15
<PAGE> 16
EKCO GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
DECEMBER 28, DECEMBER 29, DECEMBER 31,
1997 1996 1995
----------- ----------- -----------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C>
Cash flows from operating activities
Net income (loss) $ 6,017 $(34,174) $ 8,045
Adjustments to reconcile net income (loss)
to net cash provided by operations
Depreciation 7,197 7,374 7,018
Amortization of excess of cost over fair value 3,631 3,636 3,636
Amortization of deferred finance costs 578 517 590
Other amortization 5,364 6,607 6,959
Special charges 783 9,877 --
Loss from discontinued operations, net -- 28,295 1,917
Extraordinary charges, net -- 3,208 --
Deferred income taxes 5,666 (5,837) 3,388
Other 651 82 (201)
Change in certain assets and liabilities, net
of effects from acquisition and dispositions of
businesses, affecting cash provided by operations
Accounts receivable (3,612) (3,704) 895
Inventories (26,853) (6,364) 504
Prepaid marketing costs (5,548) (4,413) (4,877)
Other assets (725) 506 (908)
Accounts payable and accrued expenses (7,622) 7,636 (2,871)
Income taxes payable 3,686 2,114 (3,395)
------- -------- --------
Net cash provided by (used in) operating activities
Continuing operations (10,787) 15,360 20,700
Discontinued operations (570) 4,823 1,020
------- -------- --------
Net cash provided by (used in) operating activities (11,357) 20,183 21,720
------- -------- --------
Cash flows from investing activities
Proceeds from sale of property and equipment
Proceeds from sale of property and equipment 148 3,306 3,300
Capital expenditures for continuing operations (8,567) (8,320) (8,566)
Proceeds from sale of discontinued operations 17,600 -- --
Capital expenditures for discontinued operations -- (1,490) (4,086)
------- -------- --------
Net cash provided(used in) investing activities 9,181 (6,504) (9,352)
------- -------- --------
Cash flows from financing activities
Proceeds from issuance of note payable and
long--term obligations -- 125,101 35,183
Proceeds from sale of investment held as collateral -- -- 3,600
Payments of dividends -- (792) (1,603)
Purchases of treasury stock -- -- (1,180)
Payments of note and long--term obligations -- (122,781) (48,627)
Other 1,042 361 259
------- -------- --------
Net cash provided by (used in)financing activities 1,042 1,889 (12,368)
Effect of exchange rate changes on cash (7) (4) 13
------- -------- --------
Net increase (decrease) in cash and cash equivalents (1,141) 15,564 13
Cash and cash equivalents at beginning of year 15,706 142 129
------- -------- --------
Cash and cash equivalents at end of year $14,565 $ 15,706 $ 142
======= ======== ========
Cash paid during the year for
Interest $ 5,942 $ 9,851 $ 12,557
Income taxes (3,479) 184 7,912
</TABLE>
See accompanying notes to consolidated financial statements.
16
<PAGE> 17
EKCO GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its subsidiaries (the "Company"). The Company's principal operating
subsidiaries are wholly-owned Ekco Housewares, Inc. ("Housewares"), wholly-owned
Ekco Cleaning, Inc. and subsidiaries ("Cleaning"), and majority-owned Woodstream
Corporation ("Woodstream"). All significant intercompany accounts and
transactions have been eliminated.
BASIS OF PRESENTATION
The Company uses a 52-53 week fiscal year ending on the Sunday nearest
December 31. Accordingly, the accompanying consolidated financial statements
include the fiscal years ended December 28, 1997 ("Fiscal 1997"), December 29,
1996 ("Fiscal 1996"), and December 31, 1995 ("Fiscal 1995").
CASH AND CASH EQUIVALENTS
The Company considers all short-term investments which have an original
maturity of 90 days or less to be cash equivalents.
MARKET EXPANSION PROGRAMS AND ADVERTISING COSTS
The Company incurs certain costs in connection with maintaining and
expanding its market position. These costs are deferred and amortized using the
straight-line method over the lesser of the period of benefit or the program
period. Program periods currently range from one to three years. It is the
Company's policy to periodically review and evaluate whether the benefits
associated with these costs are expected to be realized and that continued
deferral and amortization is justified. Approximately $4.1 and $2.9 million of
these costs are included in prepaid expenses at December 28, 1997 and December
29, 1996, respectively.
The Company expenses all advertising costs as incurred.
INVENTORIES
Inventories are stated at the lower of cost or market. Cost is determined
on a first-in, first-out ("FIFO") basis for all subsidiaries except for
Cleaning, whose cost is determined on a last-in, first-out ("LIFO") basis.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. The Company provides for
depreciation and amortization over the estimated useful lives of assets or terms
of capital leases on the straight-line method. Improvements are capitalized,
while repair and maintenance costs are charged to operations. When assets are
retired or disposed of, the cost and accumulated depreciation thereon are
removed from the accounts, and gains or losses, if any, are included in
operations.
INTANGIBLE ASSETS
The excess of cost over fair value of net assets acquired ("goodwill") is
being amortized over 30 to 40 year periods. It is the Company's policy to
periodically review and evaluate the recoverability of goodwill by assessing
long-term trends of profitability and undiscounted cash flows and to determine
whether the amortization of goodwill over its remaining life can be recovered
through expected future results of operations and cash flows.
17
<PAGE> 18
Favorable lease rights included in other assets are being amortized over
the life of the lease. Deferred financing costs included in other assets are
debt issuance costs which have been deferred and are being amortized over the
terms of the respective financing arrangements.
INCOME RECOGNITION
Revenues from product sales are recognized at the time the product is
shipped. Investment income is accrued as earned.
TRANSLATION OF FOREIGN CURRENCY
The assets and liabilities of the Company's foreign subsidiaries are
translated at year-end exchange rates. Income and expenses are translated at
exchange rates prevailing during the year. The resulting net translation
adjustment for each year is included as a separate component of stockholders'
equity.
INCOME TAXES
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect, if any, on
deferred tax assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date. Provision for U.S. income
taxes on the undistributed earnings of foreign subsidiaries is made only on
those amounts in excess of the funds considered to be permanently reinvested.
EARNINGS PER COMMON SHARE
In December 1997, the Company adopted Financial Accounting Standards Board
Statement No. 128, "Earnings Per Share" ("FAS 128"). All previously reported
earnings per share information has been restated to reflect the impact of
adopting FAS 128.
USE OF ESTIMATES
The preparation of financial statements, in conformity with generally
accepted accounting principles, requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
RECENT ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board has recently issued Statement of
Financial Accounting Standards No. 130 "Reporting Comprehensive Income" and
Statement of Financial Accounting Standards No. 131 "Disclosure about Segments
of an Enterprise and Related Information". The Company intends on making the
required disclosures based on each statement in fiscal 1998.
(2) DISCONTINUED OPERATIONS
On January 31, 1997, the Company's Board of Directors approved management's
plan to dispose of the Company's molded plastic products business. Accordingly,
the Company reported the results of the operations of the molded plastic
products business and the loss on disposal as discontinued operations. During
Fiscal 1997, the Company sold all of the assets of its molded plastics products
business for cash proceeds of approximately $17.6 million and a $2.0 million
promissory note, which is included in other assets at December 28, 1997.
18
<PAGE> 19
Net assets of discontinued operations classified separately in the
consolidated balance sheets as of December 29, 1996 are as follows: (Amounts in
thousands)
<TABLE>
<S> <C>
Accounts receivable, net $ 4,210
Inventories 6,138
Prepared expenses and other current assets 67
Property and equipment, net 16,743
Excess of cost over fair value --
Accounts payable (2,416)
Accrued expenses (2,212)
Loss on disposal (5,500)
-------
$17,030
=======
</TABLE>
Certain information with respect to statements of operations from
discontinued operations is summarized as follows:
<TABLE>
<CAPTION>
Fiscal 1996 Fiscal 1995
----------- -----------
(Amounts in thousands)
<S> <C> <C>
Net revenues $ 26,764 $30,991
-------- -------
Cost of sales 26,758 30,410
Selling, general and administrative 3,325 3,631
Special charges 22,728 --
Goodwill amortization 601 801
-------- -------
53,412 34,842
-------- -------
Loss before income taxes (26,648) (3,851)
Income tax benefit (1,928) (1,934)
-------- -------
Loss from discontinued operations $(24,720) $(1,917)
======== =======
</TABLE>
The special charge of $22.7 million (principally goodwill) was a reduction
in the third quarter of Fiscal 1996 of the carrying value of the molded plastic
products business. Under the provisions of Statement of Financial Accounting
Standard No. 121, which establishes accounting standards for the impairment of
long-lived assets, certain identifiable intangibles and goodwill related to
those assets, the Company determined in the third quarter of Fiscal 1996 that an
adjustment to the carrying value of the molded plastic products business was
required.
The charge in Fiscal 1996 for loss on disposal of the molded plastic
business includes the following: (Amounts in thousands)
<TABLE>
<S> <C>
Carrying value of net assets in excess of
anticipated proceeds $3,300
Expenses of asset disposal and anticipated
operating loss for the period December 29, 1996
through the estimated date of disposal 2,200
------
Loss on disposal before taxes 5,500
Income tax benefit 1,925
------
Loss on disposal $3,575
======
</TABLE>
19
<PAGE> 20
(3) INVENTORIES
Inventories consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 28, 1997 DECEMBER 29, 1996
----------------- -----------------
(AMOUNTS IN THOUSANDS)
<S> <C> <C>
Raw materials $12,984 $ 9,628
Work in process 3,811 3,253
Finished goods 57,355 34,541
------- -------
$74,150 $47,422
======= =======
</TABLE>
At December 28, 1997, and December 29, 1996, inventories carried under the
LIFO method represented approximately 22.2% and 21.8%, respectively, of total
year-end inventories. The effect of using LIFO for these inventories for Fiscal
1997 and Fiscal 1996 was immaterial to the financial position and results of
operations of the Company.
(4) PROPERTY AND EQUIPMENT, NET
Property and equipment consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 28, 1997 DECEMBER 29, 1996
----------------- ----------------
(AMOUNTS IN THOUSANDS)
<S> <C> <C>
Property and equipment at cost
Land, buildings and improvements $14,598 $14,623
Equipment, furniture and fixtures 60,624 58,963
------- -------
75,222 73,586
Less accumulated depreciation and
amortization 39,544 38,588
------- -------
$35,678 $34,998
======= =======
</TABLE>
(5) LONG-TERM OBLIGATIONS AND OTHER LONG-TERM LIABILITIES
Long-term obligations consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 28, 1997 DECEMBER 29, 1996
----------------- ----------------
(AMOUNTS IN THOUSANDS)
<S> <C> <C>
Credit Facility $ -- $ --
9.25% Senior Notes, due 2006 (net
of unamortized discount of $730
and $818) 124,270 124,182
-------- --------
$124,270 $124,182
======== ========
Other long-term liabilities consisted of the following:
Accrued pension cost (see Note 8) $ 2,553 $ 2,327
Deferred income taxes 3,710 2,028
Other long-term liabilities 5,711 6,697
------- -------
$11,974 $11,052
======= =======
</TABLE>
20
<PAGE> 21
On March 25, 1996, the Company sold $125.0 million of its 9.25% Senior
Notes due 2006 ("Senior Notes") at a price of 99.291% of face value in a private
offering to institutional investors. Interest on the Senior Notes is payable
semi-annually on April 1 and October 1 of each year. The Company used the net
proceeds of the Senior Note offering to (i) repurchase its outstanding 12.70%
Notes due 1998 and 7.0% Convertible Subordinated Note due 2002 and (ii) to repay
substantially all amounts outstanding under its revolving credit facility.
Concurrently with closing the sale of the Senior Notes, the Company entered into
an amendment to its revolving credit facility, which amendment consolidated the
outstanding debt and borrowing capacity of the Company and its wholly-owned
subsidiaries, and revised certain financial covenants. In July 1997, the Company
and its lender bank amended and restated the credit agreement, which revised
certain financial covenants and reduced the number of lender banks to one. On
December 15, 1997, the Company and its lender bank agreed to certain
modifications to its amended and restated credit agreement (as amended, the
"Credit Facility"). Effective with the acquisition of APP Holding Corporation
(see Note 19), the Credit Facility was increased to include a maximum revolving
credit line of $55 million, up from a level of $35 million under the previous
agreement and an additional $10 million was made available under a term loan
credit facility. The maximum outstanding balance of the revolving credit line
may not exceed to 80% of eligible accounts receivable and 50% of eligible
inventory, provided that the amount attributable to eligible inventory may not
exceed $35 million, as determined at the end of each calendar month. The Credit
Facility provides for a commitment fee of three-eighths of one percent on the
unused portion of the commitment. Borrowings under the Credit Facility bear
interest at the bank's prime rate, or at LIBOR plus 1.25% or 1.5%, depending on
the Company's borrowing strategy and the ratio of total debt to cash flow, as
defined. Borrowings under the Credit Facility mature in November 2002 and are
collateralized by substantially all of the assets of the Company. The Credit
Facility contains certain financial and operating covenants, of which the most
restrictive requires the Company to maintain a minimum level of cash flow. The
Senior Notes, as well as the Credit Facility, contain certain financial
covenants that may restrict the sale of assets, payment of dividends, the
incurrence of additional indebtedness and certain investments and acquisitions
by the Company.
The Company has suspended the payment of quarterly dividends and does not
anticipate paying cash dividends for the foreseeable future. In order for the
Company to pay a dividend, its arrangements with holders of its Senior Notes
would need to be amended and the payment of the dividend would have to be
permitted under certain covenants of the Credit Facility.
The early extinguishment of the 12.7% Notes and 7% Convertible Subordinated
Note resulted in an extraordinary charge of $3.2 million consisting of the
following:
<TABLE>
(Amounts in thousands)
<S> <C>
Premium on 12.70% Notes, due 1998 $ 6,511
Discount on prepayment of 7% Convertible
Subordinated Note, due 2002 (3,218)
Write-off of related unamortized financing
costs 2,054
-------
Extraordinary charge before income tax benefit 5,347
Income tax benefit 2,139
-------
Net extraordinary charge $ 3,208
=======
</TABLE>
21
<PAGE> 22
Certain information with respect to credit agreements follows:
<TABLE>
<CAPTION>
FISCAL 1997 FISCAL 1996 FISCAL 1995
----------- ----------- -----------
(AMOUNTS IN THOUSANDS, EXCEPT PERCENTAGES)
<S> <C> <C> <C>
Average interest rate of borrowings
outstanding at end of year N/A N/A 7.48%
Maximum amount of borrowings
outstanding at any month-end $1,242 $31,909 $56,533
Average aggregate borrowings during
the year $ 176 $ 9,390 $43,392
Weighted average interest rate
during the year 8.5% 7.68% 8.08%
</TABLE>
(6) ACCRUED EXPENSES
Accrued expenses consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 28, 1997 DECEMBER 29, 1996
----------------- -----------------
(AMOUNTS IN THOUSANDS)
<S> <C> <C>
Payroll $ 2,464 $ 5,033
Compensated absences 1,651 1,755
Sales and promotional allowances 9,470 6,393
Provisions related to consolidation of
cleaning business - 1,697
Interest and non-income taxes 4,168 4,326
Insurance 3,241 2,516
Professional fees 575 715
Provision for environmental matters 1,738 1,782
Other 5,983 4,471
------- -------
$29,290 $28,688
======= =======
</TABLE>
(7) INCOME TAXES
Total income tax expense (benefit) for Fiscal 1997, Fiscal 1996 and Fiscal
1995 was allocated as follows:
<TABLE>
<CAPTION>
FISCAL 1997 FISCAL 1996 FISCAL 1995
----------- ----------- -----------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C>
Income (loss) from continuing operations $6,247 $ 2,370 $ 9,828
Income (loss) from discontinued operations -- (1,928) (1,934)
Income (loss) from disposal of discontinued
operations -- (1,925) --
Extraordinary charge for early retirement
of debt -- (2,139) --
Stockholders' equity, for compensation
expense for tax purposes in excess of
amounts recognized for financial reporting
purposes (366) -- (74)
------ ------- -------
$5,881 $(3,622) $ 7,820
====== ======= =======
</TABLE>
A reconciliation of the provision for income taxes from continuing
operations to the statutory income tax rate applied to combined domestic and
foreign income before income taxes for Fiscal 1997, Fiscal 1996 and Fiscal 1995
was as follows:
22
<PAGE> 23
<TABLE>
<CAPTION>
FISCAL 1997 FISCAL 1996 FISCAL 1995
----------- ----------- -----------
(AMOUNTS IN THOUSANDS, EXCEPT PERCENTAGES)
<S> <C> <C> <C>
Income (loss) from continuing operations
before income taxes
Domestic $13,704 $ (19) $20,408
Foreign (1,440) (282) (618)
------- ----- -------
$12,264 $(301) $19,790
======= ===== =======
Federal income tax (credit) at normal rates 35% (35%) 35%
State income taxes, net of federal benefit 7% 141% 5%
Difference between foreign and
federal effective rates -- 30% 1%
Amortization of excess of cost over fair value 10% 423% 6%
Special charges -- 227% --
Other (1%) 1% 3%
------- ----- -------
51% 787% 50%
======= ===== =======
</TABLE>
The components of the provision for income taxes for continuing
operations were as follows:
<TABLE>
<CAPTION>
FEDERAL STATE FOREIGN TOTAL
------ ------ ----- ------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C>
FISCAL 1997
- -----------
Current $ 550 $ 165 $(130) $ 585
Deferred 4,565 1,243 (146) 5,662
------ ------ ----- ------
$5,115 $1,408 $(276) $6,247
====== ====== ===== ======
FISCAL 1996
- -----------
Current $4,189 $1,688 $ (8) $5,869
Deferred (2,608) (891) - (3,499)
------ ------ ----- ------
$1,581 $ 797 $ (8) $2,370
====== ====== ===== ======
FISCAL 1995
- -----------
Current $5,986 $ 993 $(41) $6,938
Deferred 2,562 312 16 2,890
------ ------ ----- ------
$8,548 $1,305 $(25) $9,828
====== ====== ===== ======
</TABLE>
The significant components of deferred income tax expense attributable to
income from continuing operations for Fiscal 1997, Fiscal 1996 and Fiscal 1995
were as follows:
23
<PAGE> 24
<TABLE>
<CAPTION>
FISCAL 1997 FISCAL 1996 FISCAL 1995
----------- ----------- -----------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C>
Depreciation $(1,078) $ (644) $1,713
Inventory (1,594) 516 193
Benefit plans 406 (167) (72)
Accruals, provisions and other liabilities 8,520 (4,461) 1,414
Other (592) 1,257 (358)
------- ------- ------
$ 5,662 $(3,499) $2,890
======= ======= ======
</TABLE>
The tax effects of temporary differences and carry forwards that give rise
to significant portions of net deferred tax asset (liability) consisted of the
following:
<TABLE>
<CAPTION>
DECEMBER 28, 1997 DECEMBER 29, 1996
----------------- -----------------
(AMOUNTS IN THOUSANDS)
<S> <C> <C>
Receivables $ 962 $ 244
Inventory 2,440 846
Benefit plans 3,166 3,572
Accruals, provisions and other liabilities 1,526 10,046
Depreciation (3,927) (5,005)
Other (1,000) (874)
------- -------
$ 3,167 $ 8,829
======= =======
</TABLE>
The Company's federal income tax returns for all years subsequent to
December 1987 are subject to review by the Internal Revenue Service.
(8) RETIREMENT PLANS, POST-RETIREMENT AND POST-EMPLOYMENT BENEFITS
The Company and certain of its subsidiaries have various pension plans
which cover certain of their employees and provide for periodic payments to
eligible employees upon retirement. Benefits for non-union employees are
generally based upon earnings and years of service prior to 1989 and certain
non-union employees receive benefits from allocated accounts under a defined
contribution plan. Benefits for certain union employees are based upon dollar
amounts attributed to each year of credited service; certain other union
employees receive benefits from allocated accounts under a defined contribution
plan and from prior contributions to a multi-employer plan. The Company's policy
is to make contributions to these plans sufficient to meet the minimum funding
requirements of applicable laws and regulations, plus such amounts, if any, as
the Company's actuarial consultants determine to be appropriate. The Company
also provides supplemental retirement benefits for certain management personnel
based on earnings and years of service.
At December 28, 1997, and December 29, 1996, the Company reported, as a
separate component of stockholders' equity, the amount of the additional
liability in excess of the unrecognized prior service costs of its pension
plans.
24
<PAGE> 25
Net pension expense consisted of the following:
<TABLE>
<CAPTION>
FISCAL 1997 FISCAL 1996 FISCAL 1995
----------- ----------- -----------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C>
U.S. defined benefit plans
Service cost-benefits earned during the period $ 205 $ 232 $ 211
----- ----- -----
Interest accrued on projected benefit obligation 561 607 597
----- ----- -----
Expected return on assets
Actual return (566) (516) (582)
Unrecognized gain (loss) 4 (32) 69
----- ----- -----
(562) (548) (513)
Amortization of prior service cost and
unrecognized loss 108 390 110
Settlement loss 30 38 89
----- ----- -----
U.S. defined benefit plans, net 342 719 494
Canadian defined benefit plan 2 2 (2)
U.S. defined contribution plans 125 150 113
----- ----- -----
Total net pension expense $ 469 $ 871 $ 605
===== ===== =====
</TABLE>
The following sets forth the funded status of the Company's defined
benefit pension plans and amounts recognized in the consolidated balance sheets:
<TABLE>
<CAPTION>
DECEMBER 28, 1997 DECEMBER 29, 1996
----------------- ---------------------------
PLANS WITH PLANS WITH PLANS WITH
ACCUMULATED ASSETS ACCUMULATED
BENEFITS EXCEEDING BENEFITS
EXCEEDING ACCUMULATED EXCEEDING
ASSETS BENEFITS ASSETS
----------------- ----------- ----------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C>
Accumulated benefit obligation
Vested $(8,464) $(1,708) $(7,294)
Nonvested (111) (2) (87)
------- ------- -------
Total (8,575) (1,710) (7,381)
Effect of projected
compensation increases (454) (259) --
------- ------- -------
Projected benefit obligation (9,029) (1,969) (7,381)
Plan assets 6,693 2,510 5,001
------- ------- -------
Plan assets in excess of (less than)
projected benefit obligations (2,336) 541 (2,380)
Unrecognized actuarial net gain (losses) 1,905 (107) 1,865
Unrecognized prior service cost 51 99 35
Additional liability (2,173) -- (1,847)
------- ------- -------
Prepaid (accrued) pension cost included
in consolidated balance sheet $(2,553) $ 533 $(2,327)
======= ======= =======
</TABLE>
25
<PAGE> 26
Plan assets are invested primarily in pooled funds maintained by insurance
companies. The projected benefit obligation was determined using an assumed
discount rate of 7.0% for Fiscal 1997 and 7.5% for Fiscal 1996. The nature of
the domestic pension plans is such that an estimate of future compensation
increases is not required. The assumed long-term rate of return on plan assets
was 9%. At December 28, 1997, the various plans held an aggregate of 11,410
shares of the Company's common stock.
The Company sponsors defined benefit post-retirement health and life
insurance plans that cover certain retired and active employees. The Company
expects to continue these benefits indefinitely, but reserves the right to amend
or discontinue all or any part of the plans at any time.
In accordance with Statement of Financial Accounting Standards No. 106,
"Employers' Accounting for Post-retirement Benefits Other Than Pensions" ("FAS
106"), the cost of these benefits are recognized in the financial statements
during the employees' active working lives. The Company's funding policy for
these plans is on a pay-as-you-go basis.
The following sets forth the amounts recognized in the consolidated balance
sheets for the Company's post-retirement benefit plans:
<TABLE>
<CAPTION>
DECEMBER 28, 1997 DECEMBER 29, 1996
----------------- -----------------
(AMOUNTS IN THOUSANDS)
<S> <C> <C>
Accumulated post-retirement benefit obligation
Fully eligible active employees $ 397 $ 765
Retirees 1,445 1,035
Other active employees 483 649
------ ------
2,325 2,449
Plan assets - -
Unrecognized net (gain) loss 301 137
------ ------
Accrued post-retirement benefit cost $2,626 $2,586
====== ======
<CAPTION>
Post-retirement benefit expense consisted of the following:
FISCAL 1997 FISCAL 1996 FISCAL 1995
----------- ----------- -----------
(AMOUNTS IN THOUSANDS)
<S> <C> <C>
Service cost (benefits attributed to
employee services during the year) $ 30 $ 51 $ 43
Interest expense on the accumulated
post-retirement benefit obligation 159 172 182
Amortization of gain (22) - -
---- ---- ----
Net periodic post-retirement benefit
Expense $167 $223 $225
==== ==== ====
</TABLE>
The discount rates used in determining the accumulated post-retirement
benefit obligation as of December 28, 1997 was 7.0% and as of December 29, 1996
was 7.5%. The Company subsidy is a defined dollar amount and will not increase
in the future; therefore, no medical trend rate has been assumed and the results
of the calculation of the plan liabilities will not be affected by future
medical cost trends. The pay-as-you-go expenditures for post-retirement benefits
were $127,000, $147,000, and $484,000 for Fiscal 1997, Fiscal 1996 and Fiscal
1995, respectively.
In accordance with Statement of Financial Accounting Standards No. 112,
"Employers' Accounting for Post-employment Benefits" ("FAS 112"), the Company
accrues benefits provided to former or inactive employees after employment but
before retirement. The ongoing impact of FAS 112 does not have a material effect
on earnings.
26
<PAGE> 27
(9) EMPLOYEE STOCK OWNERSHIP PLAN
On February 23, 1989, the Company's Board of Directors adopted the Ekco
Group, Inc. Employees' Stock Ownership Plan (the "ESOP") for non-union United
States employees of the Company and subsidiaries designated by the Company's
Board of Directors as participants in the ESOP. The ESOP holds Company preferred
and common stock.
SERIES B ESOP CONVERTIBLE PREFERRED STOCK
The Company sold 1.8 million shares of the Series B ESOP Convertible
Preferred Stock at a price of $3.61 per share to the ESOP trust in 1989. At
December 28, 1997, approximately 1.3 million shares of the Company's common
stock were reserved for conversion of Series B ESOP Convertible Preferred Stock.
An unearned ESOP compensation amount is reported as an offset to the Series
B ESOP Convertible Preferred Stock amount in the consolidated balance sheets.
The unearned compensation is being amortized as shares in the Series B ESOP
Convertible Preferred Stock are allocated to employees. Shares are allocated
ratably over the life of the ESOP Loan (as defined below) or, if less, the
actual period of time over which the indebtedness is repaid. The allocation of
shares is based upon a formula equal to a percentage of the Company's payroll
costs. The percentage is determined by the Company's Board of Directors annually
and may require principal prepayments. The Company's Board of Directors approved
principal prepayments of $511,000, $522,000, and $567,000 for Fiscal 1997,
Fiscal 1996 and Fiscal 1995 to be paid in 1998, 1997 and 1996, respectively. For
Fiscal 1997, Fiscal 1996 and Fiscal 1995, $740,000, $816,000, and $652,000,
respectively, has been charged to operations. The actual cash contributions,
excluding the above mentioned prepayments, to the ESOP by the Company during
Fiscal 1997, Fiscal 1996 and Fiscal 1995 were $402,000, $402,000, and $302,000,
respectively.
Upon retirement or termination from the Company, each employee has the
option to either convert the vested Series B ESOP Convertible Preferred Stock
into common stock of the Company or redeem the Series B ESOP Convertible
Preferred Stock for cash at a price of $3.61 per share. The change in the
principal amount of the Series B ESOP Convertible Preferred Stock from year to
year is solely due to redemptions and conversions by vested employees retiring
or leaving the Company. The Series B ESOP Convertible Preferred Stock pays a
dividend equal to any dividend on the Company's common stock.
Series B ESOP Convertible Preferred Stock, net, consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 28, 1997 DECEMBER 29, 1996
----------------- -----------------
(AMOUNTS IN THOUSANDS)
<S> <C> <C>
Series B ESOP Convertible Preferred Stock,
par value $.01 $4,757 $ 5,196
Unearned compensation (358) (1,098)
----- -------
$4,399 $ 4,098
====== =======
</TABLE>
ESOP COMMON STOCK
In October 1990, the Company's Board of Directors authorized the Trustee of
the ESOP to purchase up to 1.0 million shares of the Company's common stock. The
Company financed the purchase through a 20-year 10% loan from the Company to the
ESOP (the "ESOP Loan"). The ESOP has purchased, in open market transactions, a
total of 1.0 million shares of the Company's common stock at a total cost of
approximately $3.3 million. Unearned compensation equal to such cost (included
as a component of stockholders' equity) is being amortized as shares of the
Company's common stock are allocated to employee accounts. Shares are allocated
ratably over the life of the loan or, if less, the actual period of time over
which the indebtedness is repaid, subject to a minimum
27
<PAGE> 28
allocation of 50,000 shares each year. For each of Fiscal 1997, Fiscal 1996 and
Fiscal 1995, 50,000 shares were allocated to employees' accounts. For each of
Fiscal 1997, Fiscal 1996 and Fiscal 1995, $165,000 has been charged to
operations.
(10) MINORITY INTEREST
Minority interest consists of 5% cumulative preferred stock of Woodstream
Corporation, $50 par value (redeemable at Woodstream's option at $52 per share).
Dividends on the 5% cumulative preferred stock are included in interest expense.
(11) STOCKHOLDERS' EQUITY
PREFERRED STOCK, $.01 PAR VALUE
On February 12, 1987, the Company's stockholders authorized a class of 20
million shares of preferred stock which may be divided and issued in one or more
series having such relative rights and preferences as may be determined by the
Company's Board of Directors.
PREFERRED STOCK RIGHTS
In 1987, the Board of Directors of the Company declared a dividend payable
to stockholders of record as of April 9, 1987, of one preferred share purchase
right ("Right") for each outstanding share of common stock. In 1988, 1989 and
1992, the Company's Board of Directors amended the preferred share purchase
rights plan and in March 1997 amended and restated the plan. The amended and
restated plan provides that each Right, when exercisable, will entitle the
holder thereof until April 9, 2007, to purchase one one-hundredth of a share of
Series A Junior Participating Preferred Stock, par value $.01 per share, at an
exercise price of $30, subject to certain anti-dilution adjustments. The Rights
will not be exercisable or transferable apart from shares of common stock until
the earlier of (i) the day on which there is a public announcement that a person
or group has acquired beneficial ownership of 15% or more of the outstanding
shares of common stock (an "Acquiring Person") or (ii) the tenth business day
after a person commences, or announces an intention to commence, a tender or
exchange offer for 15% or more of the outstanding shares of common stock. The
Rights are redeemable by the Company at $.01 per Right at any time prior to the
time that a person or group becomes an Acquiring Person. At any time after a
person becomes an Acquiring Person, the Company's Board of Directors may
exchange all or any part of the Rights for common shares at an exchange ratio of
one common share per Right. This option is extinguished when any person becomes
the beneficial owner of 50% or more of the common shares outstanding.
In the event that the Company is a party to a merger or other business
combination transaction in which the Company is not the surviving entity, each
Right will entitle the holder to purchase, at the exercise price of the Right,
that number of shares of the common stock of the acquiring company which, at the
time of such transaction, would have a market value of two times the exercise
price of the Right. In addition, if a person or group becomes an Acquiring
Person, each Right not owned by such person or group would become exercisable
for the number of shares of common stock which, at that time, would have a
market value of two times the exercise price of the Right.
COMMON STOCK, $.01 PAR VALUE
Share information regarding Common Stock consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 28, 1997 DECEMBER 29, 1996
----------------- -----------------
<S> <C> <C>
Authorized shares 60,000,000 60,000,000
========== ==========
Shares issued 28,481,788 27,996,648
Shares held in treasury 9,415,361 9,417,004
---------- ----------
Shares outstanding 19,066,427 18,579,644
========== ==========
</TABLE>
28
<PAGE> 29
TREASURY STOCK
During Fiscal 1995, the Company purchased approximately 205,000 shares of
its common stock in open-market transactions at a cost of approximately $1.2
million.
STOCK COMPENSATION PLANS
At December 28, 1997, the Company had five stock based compensation plans
which are described below. The Company applies Accounting Principle Board
Opinion No. 25 "Accounting for Stock Issued to Employees" ("APB 25") and related
Interpretations in accounting for its employee stock compensation plans.
Accordingly, no compensation has been recognized for its stock option plans and
its employee stock purchase plan for options issued to employees. Compensation
costs for its restricted stock purchase plans and 1996 Performance Unit Rights
Award Plan are described below. Since the Company accounts for compensation
plans under APB 25, certain pro forma information regarding net income and
earnings per share is required by Statement of Financial Accounting Standards
Board No. 123 "Accounting for Stock Based Compensation" ("FASB 123") as if the
Company had accounted for its compensation plans under the fair value approach
of this statement. For the purposes of the pro forma disclosures, the estimated
fair value of the compensation plans is amortized to expense over the option
vesting period. The Company's pro forma information is as follows:
<TABLE>
<CAPTION>
FISCAL 1997 FISCAL 1996 FISCAL 1995
----------- ----------- -----------
(amounts in thousands except for per share data)
<S> <C> <C> <C>
Net income (loss) As reported $6,017 $(34,174) $8,045
Pro forma $4,961 $(35,891) $7,869
Basic earnings (loss)
per share As reported $ .32 $ (1.85) $ .44
Pro forma $ .26 $ (1.94) $ .43
Diluted earnings
(loss) per share As reported $ .29 $ (1.85) $ .40
Pro forma $ .24 $ (1.94) $ .39
</TABLE>
The fair value of the Company's stock option plans and 1996 Performance
Unit Rights Award Plan was estimated at the grant date using a Black-Scholes
option pricing model. The estimated weighted average assumptions under that
model for Fiscal 1997 were: volatility factor of the expected market price of
the Company's stock of 0.40; zero future dividend yield and risk free interest
rates of 5.64%, 5.66%, 5.71%, and 5.80%, based on one, two, three and six year
strip yields of U.S. Treasury Securities at December 28, 1997. It was also
assumed that the stock options have a weighted average expected life of six
years and eleven months. The estimated weighted average assumptions under that
model for Fiscal 1996 and Fiscal 1995 were: volatility factor of the expected
market price of the Company's stock of 0.45; zero future dividend yield and risk
free interest rates of 5.6%, 5.89%, 6.05% and 6.22%, based on one, two, three
and six year strip yields of U.S. Treasury Securities at December 29, 1996. It
was also assumed that the stock options had a weighted average expected life of
five years and nine months and the Performance Unit Rights Awards had a weighted
average expected life of two years and three months.
STOCK OPTION PLANS
At December 28, 1997, approximately 450,000 shares of the Company's stock
were available for grants of options to employees, directors and consultants
under the Company's stock option plans. Options granted under the plans are
granted at prices not less than 100% of the fair market value (as defined) on
the dates the options are granted. Accordingly, under APB 25 no compensation
cost is recognized for options issued to employees. During Fiscal 1997 an option
to purchase 15,000 shares of the Company's common stock was granted to a
consultant for services rendered. Total compensation to be expensed over a five
year period will be $50,000. The pro forma net income impact under FASB 123 is
$1,029,000 for Fiscal 1997, $1,183,000 for Fiscal
29
<PAGE> 30
1996 and $136,000 for Fiscal 1995. Options must be exercised within the period
described by the respective stock option plan agreements, but not later than 10
years for certain options and 11 years for others.
A summary of the Company's stock option activity, and related information
for Fiscal 1997 and 1996 follows:
<TABLE>
<CAPTION>
FISCAL 1997 FISCAL 1996
--------------------- ---------------------
WEIGHTED WEIGHTED
AVERAGE AVERAGE
OPTION OPTION
PRICE PRICE
SHARES PER SHARE SHARES PER SHARE
------ --------- ------ ---------
<S> <C> <C> <C> <C>
(amounts in thousands except for per share information)
Outstanding at beginning of year 2,809 $5.04 2,551 $6.36
Options granted 869 4.86 1,208 4.02
Options exercised (308) 2.43 (25) 2.38
Options canceled (119) 8.21 (925) 7.42
------ ------
Options outstanding
at end of year 3,251 5.12 2,809 5.04
====== ======
Options exercisable at
end of year 2,987 4.96 1,840 5.11
====== ======
Weighted-average fair
value of options
granted during the year $ 2.46 $ 2.02
</TABLE>
30
<PAGE> 31
Exercise prices for options outstanding as of December 28, 1997 ranged from
$2.13 to $11.31. The weighted-average remaining contractual life of those
options is 6.9 years.
Changes in options and option shares under the plans during the respective
fiscal years were as follows:
<TABLE>
<CAPTION>
FISCAL 1997 FISCAL 1996 FISCAL 1995
------------------------- --------------------------- ---------------------------
OPTION PRICE NUMBER OF OPTION PRICE NUMBER OF OPTION PRICE NUMBER OF
PER SHARE SHARES PER SHARE SHARES PER SHARE SHARES
------------ --------- ------------ --------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
Options outstanding,
beginning of year $2.13-$11.31 2,809,805 $2.13-$11.31 2,551,436 $2.13-$11.31 2,593,093
Options granted $4.13-$ 8.19 868,977 $3.38-$ 5.94 1,207,792 $6.06-$ 6.56 340,895
Options exercised $2.13-$ 6.31 (308,266) $2.25-$ 2.63 (24,700) $2.19-$ 3.38 (150,814)
Options canceled $5.94-$11.31 (119,721) $3.69-$11.31 (924,723) $2.63-$11.31 (231,738)
--------- --------- ---------
Options outstanding,
end of year $2.13-$11.31 3,250,795 $2.13-$11.31 2,809,805 $2.13-$11.31 2,551,436
========= ========= =========
Options exercisable,
end of year $2.13-$11.31 2,986,657 $2.13-$11.31 1,840,305 $2.13-$11.31 2,047,779
========= ========= =========
Shares reserved for
future grants 446,906 1,196,162
========= =========
</TABLE>
31
<PAGE> 32
<TABLE>
<CAPTION>
OPTION PRICE AND MARKET VALUE AT DATE OF GRANT
----------------------------------------------
NUMBER
OF SHARES PER SHARE AMOUNT
---------- ----------- ---------
<S> <C> <C> <C>
Options outstanding at December 28, 1997,
which were granted during fiscal years:
1987 150,000 $ 3.69 $ 553,125
1988 241,428 $2.13-$ 2.25 519,999
1989 31,373 $ 3.19 100,001
1990 57,500 $ 2.56 147,344
1991 32,600 $ 2.63 85,575
1992 177,700 $7.50-$10.06 1,754,044
1993 245,740 $7.44-$11.31 2,659,574
1994 177,000 $7.31-$ 7.56 1,326,063
1995 167,044 $6.06-$ 6.50 1,059,659
1996 1,101,433 $3.38-$ 5.94 4,219,446
1997 868,977 $4.13-$ 8.19 4,220,485
--------- -----------
3,250,795 $16,645,315
========= ===========
</TABLE>
Of the options outstanding at December 28, 1997, options to acquire
1,605,911 shares at a weighted average exercise price of $5.10 per share became
exercisable on the grant date. Under certain circumstances, a portion of the
shares purchased pursuant to the exercise of such options are subject to
repurchase by the Company within three years of the date of grant of the option
at the option exercise price. At December 28, 1997, 324,201 of such shares were
subject to such repurchase. Additionally, outstanding and exercisable at
December 28, 1997 were options to acquire 900,000 shares at an exercise price of
$3.38 per share.
The remaining options outstanding at December 28, 1997, which cover the
acquisition of 744,884 shares at a weighted average exercise price of $7.27 per
share, become exercisable in five equal annual installments beginning on the
first anniversary of the date of grant.
RESTRICTED STOCK PURCHASE PLANS
Under the Company's restricted stock purchase plans, the Company may offer
to sell shares of common stock to employees of the Company and its subsidiaries
at a price per share of not less than par value ($.01) and not more than 10% of
market value on the date the offer is approved, and on such other terms as
deemed appropriate. Shares are awarded in the name of the employee, who has all
rights of a stockholder, subject to certain repurchase provisions. Restrictions
on the disposition of shares for the shares purchased expire annually, over a
period not to exceed five years, if certain performance targets are achieved,
otherwise they lapse on the tenth anniversary. Common stock reserved for future
grants under these plans aggregated approximately 700,000 shares at December 28,
1997. The following table summarizes the activity of the restricted stock
purchase plans during the respective fiscal years (fair market value determined
at date of purchase).
32
<PAGE> 33
<TABLE>
<CAPTION>
FISCAL 1997 FISCAL 1996 FISCAL 1995
------------------ ----------------- -----------------
NUMBER FAIR NUMBER FAIR NUMBER FAIR
OF MARKET OF MARKET OF MARKET
SHARES VALUE SHARES VALUE SHARES VALUE
------ ----- ------ ----- ------ -----
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Unvested shares outstanding,
beginning of year 132 $827 257 $ 1,660 51 $ 312
Shares issued 3 19 40 232 288 1,824
Shares repurchased - - (13) (61) (45) (297)
Shares vested (7) (61) (152) (1,004) (37) (179)
--- ---- ---- ------- --- ------
Unvested shares outstanding,
end of year 128 $785 132 $ 827 257 $1,660
=== ==== ==== ======= === ======
</TABLE>
The difference between the issue price and the fair market value of the
shares at the date of issuance is accounted for as unearned compensation and
amortized to expense over the lapsing of restrictions. During Fiscal 1997,
Fiscal 1996 and Fiscal 1995, unearned compensation charged to operations was
$78,000, $1.0 million (including a special charge of $482,000 pursuant to a
severance arrangement with the Company's former chief executive officer), and
$270,000, respectively. To the extent the amount deductible for income taxes
exceeds the amount charged to operations for financial statement purposes, the
related tax benefits are credited to additional paid-in-capital when realized.
The pro forma net income impact under FASB 123 is not material.
EMPLOYEE STOCK PURCHASE PLAN
The Company has an employee stock purchase plan (the "Plan") that permits
employees to purchase up to a maximum of 500 shares per quarter of the Company's
common stock at a 15% discount from market value. During Fiscal 1997, Fiscal
1996 and Fiscal 1995, employees purchased 62,015 shares, 56,983 shares, and
72,844 shares, respectively, for a total of approximately $248,000, $255,000,
and $376,000, respectively. At December 28, 1997, approximately 1.0 million
shares were reserved for future issuances under the Plan. Under APB 25, there
have been no charges to income in connection with the Plan other than incidental
expenses. The pro forma net income impact under FASB 123 is not material.
1996 PERFORMANCE UNIT RIGHTS AWARD PLAN
In September 1996, the Company's Board of Directors approved the 1996
Performance Unit Rights Award Plan whereby selected key employees and directors
may receive performance unit rights ("Rights") which are rights to receive an
amount based on the appreciated value of the Company's common stock over an
established base price. The maximum number of Rights that may be granted under
the plan as amended is 2,000,000. On December 4, 1996 the Company issued 525,718
Rights at a weighted average base price of $4.26 per Right with a cap on the
value of the common stock underlying the Rights on the exercise date of $6.63
per Right under a severance arrangement with the Company's former CEO. A
provision of $256,000 for Fiscal 1996 was included in special charges for these
Rights. The pro forma net income impact under FASB 123 for Fiscal 1996 was
estimated to be $507,000 in additional compensation expense. During Fiscal 1997
the Rights were fully exercised and a provision of $783,000 was included in
special charges.
INCOME TAX BENEFITS
Income tax benefits relating to stock option plans, restricted stock plans
and employee stock purchase plan credited to additional paid-in-capital as
realized in Fiscal 1997 and Fiscal 1995 were $366,000 and $74,000, respectively.
33
<PAGE> 34
(12) EARNINGS (LOSS) PER COMMON SHARE
Basic earnings (loss) per common share is based upon the weighted average
common stock outstanding during each period. Diluted earnings (loss) per common
share is based upon the weighted average of common stock and dilutive common
stock equivalent shares, including Series B ESOP Convertible Preferred Stock,
outstanding during each period. The weighted average number of shares used in
computation of diluted earnings per share consisted of the following for the
periods presented:
<TABLE>
<CAPTION>
FISCAL FISCAL FISCAL
1997 1996 1995
------ ------ -----
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C>
Weighted average shares of common stock
outstanding during the year 18,907 18,489 18,354
Weighted average common equivalent anti-
shares due to stock options 558 dilutive 426
Shares of common stock from conversion
of convertible debt -- -- 2,095
Series B ESOP Convertible anti-
Preferred Stock 1,384 dilutive 1,538
------ -------- ------
20,849 18,489 22,413
====== ======== ======
</TABLE>
The income used in determining diluted earnings per share consisted of the
following for the periods presented:
<TABLE>
<CAPTION>
FISCAL FISCAL FISCAL
1997 1996 1995
------ ------ -----
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C>
Income (loss) from continuing operations used
in calculating basic earnings per share $6,017 $(2,671) $ 9,962
Interest savings from conversion of
convertible debt -- -- 1,541
Effect of deferred financing costs -- -- 107
Tax effect at 40% -- -- (659)
------ ------- -------
Income (loss) from continuing operations used
in calculating diluted earnings per share $6,017 $(2,671) $10,951
====== ======= =======
</TABLE>
(13) COMMITMENTS AND CONTINGENCIES
EMPLOYMENT CONTRACTS
The Company has employment agreements and arrangements with its executive
officers and certain management personnel. The agreements generally continue
until terminated by the executive or the Company, and provide for severance
payments under certain circumstances. The majority of the agreements and
arrangements provide the employees with certain additional rights after a Change
of Control (as defined) of the Company occurs. A portion of the Company's
obligations under certain agreements are secured by letters of credit. The
agreements include a covenant against competition with the Company, which
extends for a period of time after termination for any reason. As of December
28, 1997, if all of the employees under contract were to be terminated by the
Company without good cause (as defined) under these contracts, the Company's
liability would be approximately $4.3 million ($7.5 million following a Change
of Control).
SEVERANCE POLICY
The Board of Directors of the Company has adopted a severance policy for
all exempt employees of the Company. In the event of a Change of Control (as
defined),
34
<PAGE> 35
each exempt employee of the Company whose employment is terminated, whose duties
or responsibilities are substantially diminished, or who is directed to relocate
within 12 months after such Change of Control, will receive, in addition to all
other severance benefits accorded to similarly situated employees, salary
continuation benefits for a period of months determined by dividing his or her
then yearly salary by $10,000, limited to not more than 12 months. This policy
does not apply to any exempt employee of the Company who is a party to a
contractual commitment with the Company which provides him or her with greater
than 12 months salary, severance payment or salary continuation upon his or her
termination in the event of a Change of Control. This policy may be rescinded at
any time by the Company's Board of Directors prior to a Change of Control.
LEASES
The Company leases offices, warehouse facilities, vehicles and equipment
under operating and capital leases. The terms of certain leases provide for
payment of minimum rent, real estate taxes, insurance and maintenance. Rents of
approximately $3.0 million, $2.6 million and $3.4 million, were charged to
operations for Fiscal 1997, Fiscal 1996 and Fiscal 1995, respectively. The
Company received rental income from properties held for sale in Fiscal 1996 and
Fiscal 1995. Rental income included in selling, general and administrative
expenses was approximately $96,000, and $154,000, for Fiscal 1996 and Fiscal
1995, respectively.
Minimum rental payments required under leases that had initial or remaining
noncancellable lease terms in excess of one year as of December 28, 1997, were
as follows (amounts in thousands):
<TABLE>
FISCAL YEAR
<S> <C>
1998 $2,851
1999 2,312
2000 1,771
2001 1,635
2002 905
</TABLE>
LEGAL PROCEEDINGS
The Company is a party to several pending legal proceedings and claims.
Although the outcome of such proceedings and claims cannot be determined with
certainty, the Company's management, after consultation with outside legal
counsel, is of the opinion that the expected final outcome should not have a
material adverse effect on the Company's financial position, results of
operations or liquidity.
ENVIRONMENTAL MATTERS
From time to time, the Company has had claims asserted against it by
regulatory agencies or private parties for environmental matters relating to the
generation or handling of hazardous substances by the Company or its
predecessors and has incurred obligations for investigations or remedial actions
with respect to certain of such matters. While the Company does not believe that
any such claims asserted or obligations incurred to date will result in a
material adverse effect upon the Company's financial position, results of
operations or liquidity, the Company is aware that at its facilities at
Massillon and Hamilton, Ohio; Easthampton, Massachusetts; Chicago, Illinois;
Lititz, Pennsylvania and at the previously owned facility in Hudson, New
Hampshire hazardous substances and oil have been detected and that additional
investigation will be, and remedial action will or may be, required. Operations
at these and other facilities currently or previously owned or leased by the
Company utilize, or in the past have utilized, hazardous substances. There can
be no assurance that activities at these or any other facilities owned or
operated by the Company or future facilities may not result in additional
environmental claims being asserted against the Company or additional
investigations or remedial actions being required.
35
<PAGE> 36
In connection with the acquisition of Cleaning by the Company in 1993, the
Company engaged environmental engineering consultants ("Consultants") to review
potential environmental liabilities at all of Cleaning's properties. Such
investigation and testing resulted in the identification of likely environmental
remedial actions, operation, maintenance and ground water monitoring and the
estimated costs thereof. Management, based upon the engineering studies,
originally estimated the total remediation and ongoing ground water monitoring
costs to be approximately $6.0 million, including the effects of inflation, and
accordingly at that time, recorded a liability of approximately $3.8 million,
representing the undiscounted costs of remediation and the net present value of
future costs discounted at 6%. Based upon the most recent cost estimates
provided by the Consultants, the Company believes the total remaining
remediation and compliance costs will be approximately $1.1 million and the
expense for the ongoing operation, maintenance and ground water monitoring will
be approximately $20,500 for fiscal 1998 and for each of the thirty years
thereafter. As of December 28, 1997, the liability recorded by the Company was
approximately $2.8 million. Although the current estimated costs of remediation
are less than the liability recorded at December 28, 1997, the Company does not
consider any further adjustment to be prudent at this time given the inherent
uncertainties involved in completing the remediation processes. The Company
expects to pay approximately $145,000 of the remediation costs in fiscal 1998
with the balance being paid out in fiscal 1999. During Fiscal 1997, the Company
paid approximately $23,000 of such costs. The estimates may subsequently change
should additional sites be identified or further remediation measures be
required or undertaken or interpretation of current laws or regulations be
modified. The Company has not anticipated any insurance proceeds or third-party
payments in arriving at the above estimates.
CONCENTRATIONS OF CREDIT RISK
Financial instruments which subject the Company to concentrations of credit
risk consist primarily of trade receivables. Mass merchandisers comprise a
significant portion of the Company's customer base. The Company had trade
receivables of approximately $12.7 million and $12.9 million from mass
merchandisers at December 28, 1997 and December 29, 1996, respectively. Although
the Company's exposure to credit risk associated with non-payment by mass
merchandisers is affected by conditions or occurrences within the retail
industry, trade receivables from mass merchandisers were current at December 28,
1997 and one mass merchandiser accounted for 13% of the Company's receivables at
that date while no other retailer accounted for more than 10% of receivables.
(14) INDUSTRY AND GEOGRAPHIC AREA INFORMATION
The Company is a manufacturer and marketer of multiple categories of
branded housewares products for everyday home use. The Company operates in one
industry segment, with revenues derived from sales in four principal product
categories: (i) bakeware, (ii) kitchenware, (iii) cleaning products, and (iv)
pest control and small animal care and control products. Sales and marketing
operations outside the United States are conducted principally through
subsidiaries in Canada and the United Kingdom and by direct sales. One customer
accounted for net revenues from continuing operations of approximately $35.9
million (13.3%), $27.5 million (11.0%), and $30.5 million (12.3%) for Fiscal
1997, Fiscal 1996 and Fiscal 1995, respectively.
36
<PAGE> 37
The following table shows information by geographic area from continuing
operations:
<TABLE>
<CAPTION>
UNAFFILIATED INCOME BEFORE
NET REVENUES INCOME TAXES TOTAL ASSETS
------------ ------------ ------------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C>
FISCAL 1997
-----------
United States $254,040 $13,842 $293,398
Canada 13,679 (729) 9,348
United Kingdom 2,817 (711) 3,678
Eliminations -- (138) (5,619)
-------- ------- --------
Consolidated $270,536 $12,264 $300,805
======== ======= ========
FISCAL 1996
-----------
United States $236,901 $ 6 $288,259
Canada 12,969 (282) 9,104
Eliminations -- (25) (5,287)
-------- ------- --------
Consolidated $249,870 $ (301) $292,076
======== ======= ========
FISCAL 1995
-----------
United States $235,642 $20,512 $298,579
Canada 11,362 (618) 7,742
Eliminations -- (104) (5,263)
-------- ------- --------
Consolidated $247,004 $19,790 $301,058
======== ======= ========
</TABLE>
United States revenues include approximately $12.1 million, $10.9 million,
and $9.1 million of export sales to unaffiliated customers for Fiscal 1997,
Fiscal 1996 and Fiscal 1995, respectively.
(15) SUPPLEMENTARY INFORMATION
The following amounts were charged to costs and expenses:
<TABLE>
<CAPTION>
FISCAL 1997 FISCAL 1996 FISCAL 1995
----------- ----------- -----------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C>
Advertising $6,784 $6,971 $5,751
====== ====== ======
Provision for doubtful accounts $ 183 $ 130 $ (290)
====== ====== ======
Amortization of excess of cost over fair value $3,631 $3,636 $3,636
====== ====== ======
Amortization of deferred finance costs $ 578 $ 517 $ 590
====== ====== ======
Other amortization
Prepaid marketing costs $4,308 $5,025 $5,799
Unearned compensation 983 1,509 1,087
Favorable lease rights 73 73 73
------ ------ ------
$5,364 $6,607 $6,959
====== ====== ======
</TABLE>
37
<PAGE> 38
(16) QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The following table presents the unaudited quarterly results of operations
for Fiscal 1997 and Fiscal 1996:
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH TOTAL
QUARTER QUARTER QUARTER QUARTER YEAR
-------- -------- -------- -------- ---------
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
FISCAL 1997
- -----------
CONTINUING OPERATIONS
Net revenues $ 53,888 $ 57,510 $ 81,818 $ 77,320 $ 270,536
Gross profit 17,018 18,352 29,184 24,675 89,229
Special charges (294) (320) (169) -- (783)
Income (loss) before taxes (1,950) (578) 8,986 5,806 12,264
Income (loss) (1,008) (297) 4,536 2,786 6,017
Basic earnings (loss) per share (.05) (.02) .24 .15 .32
Diluted earnings (loss) per share (.05) (.02) .22 .13 .29
FISCAL 1996
- -----------
CONTINUING OPERATIONS
Net revenues $ 51,090 $ 50,606 $ 73,116 $ 75,058 $ 249,870
Gross profit 15,639 16,033 27,273 26,420 85,365
Special charges -- -- (2,000) (7,877) (9,877)
Income (loss) before taxes (775) (1,333) 5,065 (3,258) (301)
Income (loss) (31) (329) 1,579 (3,890) (2,671)
Basic earnings (loss) per share -- (.02) .09 (.21) (.14)
Diluted earnings (loss) per share -- (.02) .08 (.21) (.14)
DISCONTINUED OPERATIONS
Net revenues 5,871 5,274 10,344 5,275 26,764
Gross profit 233 503 284 (1,014) 6
Special charges -- -- (22,728) -- (22,728)
Loss before taxes (757) (282) (23,657) (1,952) (26,648)
(Loss) (347) (206) (22,909) (1,258) (24,720)
Loss per share (.02) (.01) (1.24) (.07) (1.34)
Loss on disposal net of taxes -- -- -- (3,575) (3,575)
Loss on disposal per share -- -- -- (.19) (.19)
EXTRAORDINARY CHARGE
Charge before tax benefit (5,347) -- -- -- (5,347)
Net extraordinary charge per
share (3,208) -- -- -- (3,208)
Extraordinary charge per share (.18) -- -- -- (.18)
NET LOSS (3,586) (535) (21,330) (8,723) (34,174)
Basic net loss per share (.19) (.03) (1.15) (.47) (1.85)
Diluted net loss per share (.19) (.03) (1.05) (.47) (1.85)
</TABLE>
38
<PAGE> 39
(17) SPECIAL CHARGES
The special charge for Fiscal 1997 relates to the exercise of stock
appreciation rights granted to the Company's former chief executive officer
("CEO") pursuant to a December 1996 severance arrangement.
The special charges in Fiscal 1996 consisted of the following (amounts in
thousands):
<TABLE>
<S> <C>
Writedown of the carrying value of
certain real property to fair market value $2,000
Severance arrangement of the Company's former CEO 2,956
Consolidation of the Company's cleaning products
manufacturing activities 4,921
------
$9,877
======
</TABLE>
The components of the pre-tax charge set out above for consolidation of the
Company's cleaning products manufacturing activities are as follows (amounts in
thousands):
<TABLE>
<S> <C>
Severance and other personnel related costs $1,806
Write-off of equipment 499
Write-down of real property to fair market value 2,424
Other 192
------
$4,921
======
</TABLE>
(18) FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of cash, accounts receivable, accounts payable, and
accrued expenses approximate fair value because of the short maturity of these
items.
The carrying amount of the debt issued pursuant to the Company's bank
credit agreement approximates fair value because the interest rates change with
market interest rates.
The Senior Notes are not actively traded and there was no quoted market
price at December 28, 1997. The estimated per note market price is $103.50
resulting in an aggregate fair value of $129.4 million at December 28, 1997.
There are no quoted market prices for the Series B ESOP Preferred Stock.
Each share of Series B ESOP Preferred Stock is redeemable at a price of $3.61
per share or convertible into one share of the Company's common stock. Assuming
all shares were allocated and all employees were fully vested, the redemption
value of the ESOP Preferred Stock would be $4.7 million. Given these same
assumptions the shares could be converted into common stock having a market
value of $9.5 million at December 28, 1997.
These fair value estimates are subjective in nature and involve
uncertainties and matters of significant judgment and therefore, cannot be
determined with precision. Changes in assumptions could significantly affect
these estimates.
39
<PAGE> 40
(19) SUBSEQUENT EVENT
On January 16, 1998, the Company completed the acquisition (the
"Acquisition") of all of the outstanding equity securities of APP Holding
Corporation ("APP"), the parent corporation and sole stockholder of Aspen Pet
Products, Inc. ("Aspen"), a marketer of dog and cat supplies and accessories as
well as other pet products. Pursuant to the Stock Purchase and Sale Agreement,
the Company paid approximately $24.5 million in cash and refinanced APP's
outstanding bank debt of approximately $9.1 million. In addition, if Aspen
achieves certain predetermined financial results during the five fiscal years
ending December 31, 1998, 1999, 2000, 2001, and 2002, the Company will make
additional annual payments to certain former APP stockholders equal, in the
aggregate, to 25% of the amount by which Aspen's Gross Profit (as defined) of
each such year exceeds the Base Profit Amount (as defined). The Acquisition will
be accounted for under the purchase method of accounting and goodwill of
approximately $24 million will be amortized over 40 years. At December 29, 1997,
APP's total assets were $21 million and total liabilities were $12 million.
For the year ended December 31, 1997, APP had net sales of approximately
$30 million and operating income of approximately $3 million.
40
<PAGE> 41
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Stockholders
Ekco Group, Inc.
We have audited the accompanying consolidated balance sheets of Ekco Group,
Inc. and subsidiaries as of December 28, 1997 and December 29, 1996, and the
related consolidated statements of operations, stockholders' equity and cash
flows for each of the fiscal years in the three-year period ended December 28,
1997. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Ekco Group,
Inc. and subsidiaries as of December 28, 1997 and December 29, 1996, and the
results of their operations and their cash flows for each of the fiscal years in
the three-year period ended December 28, 1997, in conformity with generally
accepted accounting principles.
Boston, Massachusetts /s/ KPMG PEAT MARWICK
January 29, 1998 LLP
41
<PAGE> 1
EXHIBIT 21
----------
SUBSIDIARIES OF EKCO GROUP, INC.
The following are the subsidiaries of the registrant, all of which are
wholly-owned except for Woodstream Corporation, which is majority-owned:
Jurisdiction of
Subsidiary Name Incorporation
- --------------- ---------------
OPERATING SUBSIDIARIES
Aspen Pet Products, Inc. Delaware
B. VIA International Housewares, Inc. Delaware
Cleaning Specialty Co. Tennessee
EKCO Canada Inc. Ontario, Canada
EKCO Cleaning, Inc. Massachusetts
EKCO Distribution of Illinois, Inc. Delaware
EKCO International Housewares Limited United Kingdom
EKCO International, Inc. Delaware
EKCO Housewares, Inc. Delaware
EKCO Manufacturing of Ohio, Inc. Delaware
Woodstream Corporation Pennsylvania
Wright-Bernet, Inc. Ohio
INACTIVE SUBSIDIARIES
APP Holding Corporation Delaware
Delhi Manufacturing Corporation Delaware
EKCO Capital Enterprises, Inc. Delaware
EKCO Wood Products Co. Delaware
Fenwick California
FPI, Inc. Washington
Trappe of Aspen, Inc. Pennsylvania
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
Board of Directors and Stockholders
Ekco Group, Inc.
We consent to incorporation by reference in the Registration Statement
on Form S-8 (File No. 33-42785) pertaining to the 1984 and 1985 Restricted Stock
Purchase Plans of Ekco Group, Inc., in the Registration Statement on Form S-8
(File No. 33-50800) pertaining to the 1984 Employee Stock Purchase Plan of Ekco
Group, Inc., in the Registration Statement on Form S-8 (File No. 33-50802)
pertaining to the 1987 Stock Option Plan of Ekco Group, Inc., in the
Registration Statement on Form S-8 (File No. 33-29448) pertaining to the 1988
Directors' Stock Option Plan of Ekco Group, Inc., and in the Registration
Statement on Form S-3 (File No. 33-58319) pertaining to the Dividend
Reinvestment and Stock Purchase Plan of Ekco Group, Inc., of our report dated
January 29, 1998 relating to the consolidated balance sheets of Ekco Group, Inc.
and subsidiaries as of December 28, 1997 and December 29, 1996, and the related
consolidated statements of operations, stockholders' equity and cash flows for
each of the fiscal years in the three-year period ended December 28, 1997, which
report is included in the December 28, 1997 Annual Report on Form 10-K of Ekco
Group, Inc.
/s/ KPMG Peat Marwick LLP
Boston, Massachusetts
March 19, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-28-1997
<PERIOD-START> DEC-30-1996
<PERIOD-END> DEC-28-1997
<CASH> 14,565
<SECURITIES> 0
<RECEIVABLES> 46,486
<ALLOWANCES> 957
<INVENTORY> 74,150
<CURRENT-ASSETS> 150,142
<PP&E> 75,222
<DEPRECIATION> 39,544
<TOTAL-ASSETS> 300,805
<CURRENT-LIABILITIES> 49,674
<BONDS> 124,270
4,399
0
<COMMON> 191
<OTHER-SE> 109,803
<TOTAL-LIABILITY-AND-EQUITY> 300,805
<SALES> 270,536
<TOTAL-REVENUES> 270,536
<CGS> 181,307
<TOTAL-COSTS> 243,005
<OTHER-EXPENSES> 3,631
<LOSS-PROVISION> 183
<INTEREST-EXPENSE> 12,446
<INCOME-PRETAX> 12,264
<INCOME-TAX> 6,247
<INCOME-CONTINUING> 6,017
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,017
<EPS-PRIMARY> .32
<EPS-DILUTED> .29
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-29-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-29-1996
<CASH> 15,706
<SECURITIES> 0
<RECEIVABLES> 42,942
<ALLOWANCES> 760
<INVENTORY> 47,422
<CURRENT-ASSETS> 139,377
<PP&E> 73,586
<DEPRECIATION> 38,588
<TOTAL-ASSETS> 292,076
<CURRENT-LIABILITIES> 49,734
<BONDS> 124,182
4,098
0
<COMMON> 186
<OTHER-SE> 102,329
<TOTAL-LIABILITY-AND-EQUITY> 292,076
<SALES> 249,870
<TOTAL-REVENUES> 249,870
<CGS> 164,505
<TOTAL-COSTS> 234,119
<OTHER-EXPENSES> 3,636
<LOSS-PROVISION> 130
<INTEREST-EXPENSE> 12,565
<INCOME-PRETAX> (301)
<INCOME-TAX> 2,370
<INCOME-CONTINUING> (2,671)
<DISCONTINUED> (28,295)
<EXTRAORDINARY> (3,208)
<CHANGES> 0
<NET-INCOME> (34,174)
<EPS-PRIMARY> (1.85)
<EPS-DILUTED> (1.85)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-02-1995
<PERIOD-END> DEC-31-1995
<CASH> 142
<SECURITIES> 0
<RECEIVABLES> 39,538
<ALLOWANCES> 948
<INVENTORY> 40,989
<CURRENT-ASSETS> 139,425
<PP&E> 69,992
<DEPRECIATION> 31,916
<TOTAL-ASSETS> 301,058
<CURRENT-LIABILITIES> 54,618
<BONDS> 96,700
3,458
0
<COMMON> 184
<OTHER-SE> 135,741
<TOTAL-LIABILITY-AND-EQUITY> 301,058
<SALES> 247,004
<TOTAL-REVENUES> 247,004
<CGS> 160,933
<TOTAL-COSTS> 210,085
<OTHER-EXPENSES> 3,636
<LOSS-PROVISION> (290)
<INTEREST-EXPENSE> 13,590
<INCOME-PRETAX> 19,790
<INCOME-TAX> 9,828
<INCOME-CONTINUING> 9,962
<DISCONTINUED> (1,917)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,045
<EPS-PRIMARY> 0.44
<EPS-DILUTED> 0.40
</TABLE>
