__________________________________________________________________________
__________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________
FORM 10-K
_X_ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the year ended December 31, 1994
OR
___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ______________ to
________________.
Commission File Number 1-4704
GUARDSMAN PRODUCTS, INC.
(Exact name of registrant as specified in its charter)
Delaware 38-0593900
(State of incorporation) (I.R.S. Employer Identification No.)
3033 Orchard Vista Drive, S.E.
Suite 200
P.O. Box 1521
Grand Rapids, Michigan 49501
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (616) 957-2600
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
Common Stock, $1.00 par value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes _X__ No ____
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K (section 229.405 of this chapter) 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 Registrant's Common Stock, $1.00 par
value, held by non-affiliates of the Registrant* as of March 27, 1995, was
$105,171,897 based on the closing price on that date on the New York Stock
Exchange.
As of March 27, 1995, 9,486,199 shares of the Registrant's Common Stock,
$1.00 par value, were outstanding.
__________________________________________________________________________
__________________________________________________________________________
*FOR PURPOSES OF THIS COMPUTATION, IRWIN WAYNE URAN IS DEEMED TO BE A NON-
AFFILIATE OF THE REGISTRANT.
Page 1 of 140 pages
DOCUMENTS INCORPORATED BY REFERENCE
List hereunder the following documents if incorporated by
reference and the Part of the Form 10-K (e.g., Part I, Part II, etc.) into
which the document is incorporated: (1) Any annual report to security
holders; (2) Any proxy or information statement; and (3) Any prospectus
filed pursuant to Rule 424(b) or (c) under the Securities Act of 1933.
1. Registrant's 1994 Annual Report to Stockholders.
2. Registrant's Proxy Statement for the May 11, 1995 Annual Meeting
of Stockholders.
The parts of the Form 10-K Annual Report into which the foregoing
documents are incorporated are listed in the following Cross Reference
Sheet. Only those pages of the foregoing documents which are specifically
listed in the Cross Reference Sheet are incorporated by reference.
An Exhibit Index is located on page 16.
-2-
CROSS REFERENCE SHEET
Location of
Information*
PART I
ITEM 1. DESCRIPTION OF BUSINESS
(a) General Development of
Business. . . . . . . . . . . . . . . . . . . A83-86, A94-96
(b) Financial Information About
Industry Segments . . . . . . . . . . . . . A81-86, A109-110
(c) Narrative Description of
Business. . . . . . . . . . . . . . . . . . . . . . . A83-86
(d) Financial Information About Foreign
and Domestic Operations and Export
Sales . . . . . . . . . . . . . . . . . . . . .A85, A109-110
ITEM 2. DESCRIPTION OF PROPERTY . . . . . . . . . . . . . . . A85-86
ITEM 3. LEGAL PROCEEDINGS . . . . . . . . . . .A79-80, A86, A101-102
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS. . . . . . . . . . . . . . . . . . . . . **
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDERS MATTERS
(a) Market Information. . . . . . . . . . . . . . .A86, A114-115
(b) Holders . . . . . . . . . . . . . . . . . . . . . .A86, A115
(c) Dividends . . . . . . . . . . . . . . . . . . . . . . . A115
ITEM 6. SELECTED FINANCIAL DATA . . . . . . . . . . A81-82, A109-110
____________________
* All page references preceded by the letter "A" are to the page numbers
of the 1994 Annual Report to Stockholders incorporated herein by
reference at Exhibit 13-A, page references preceded by the letter "P"
refer to pages in the 1995 Proxy Statement, and other page references
refer to the sequential numbers on the original copy of the Form 10-K
filed with the Securities and Exchange Commission.
** Not applicable.
-3-
Location of
Information*
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
(a) Full Fiscal Years . . . . . . . . . . . . . . . . . . A76-80
(b) Interim Periods . . . . . . . . . . . . . . . . . . . . . **
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA
(a) Report of Independent Public Accountants. . . . . . . . A113
(b) Consolidated Balance Sheets--
December 31, 1994 and 1993. . . . . . . . . . . . . . A88-89
(c) Consolidated Statements of Income--
Years ended December 31, 1994, 1993 and 1992. . . . . . .A90
(d) Consolidated Statements of Stockholders'
Equity--Years ended December 31, 1994, 1993
and 1992. . . . . . . . . . . . . . . . . . . . . . . . .A91
(e) Consolidated Statements of Cash Flows--
Years ended December 31, 1994, 1993 and 1992. . . . . . .A92
(f) Notes to Consolidated Financial Statements--
December 31, 1994 . . . . . . . . . . . . . . . . . .A93-111
ITEM 9. CHANGES IN CERTIFYING ACCOUNTANTS
During 1993, the corporation's management and Audit Committee
obtained competitive proposals for audit services from a number of
prominent accounting firms, including the corporation's former
principal accountants. On August 12, 1993, the Board of Directors
approved the appointment of Arthur Andersen LLP as the corporation's
principal independent accountants for the fiscal year ending December
31, 1993, replacing Ernst & Young LLP, who previously served in this
role. The decisions to invite proposals and to select the proposal of
Arthur Andersen LLP were recommended by the Audit Committee.
____________________
* All page references preceded by the letter "A" are to the page numbers
of the 1994 Annual Report to Stockholders incorporated herein by
reference at Exhibit 13-A, page references preceded by the letter
"P" refer to pages in the 1995 Proxy Statement, and other page
references refer to the sequential numbers on the original copy
of the Form 10-K filed with the Securities and Exchange Commission.
** Not applicable.
-4-
The report of Ernst & Young LLP on the corporation's financial
statements for fiscal year 1992 did not contain an adverse opinion or
a disclaimer of opinion and was not qualified or modified as to
uncertainty, audit scope or accounting principles.
In connection with the audit of the corporation's financial
statements for fiscal year 1992 and in any subsequent interim period,
there were no disagreements with Ernst & Young LLP on any matters of
accounting principles or practices, financial statement disclosure, or
auditing scope or procedure which, if not resolved to the satisfaction
of Ernst & Young LLP, would have caused them to make reference to the
matter in their report.
The above information was included in a Form 8-K current report
filed by the registrant with the Securities and Exchange Commission on
August 19, 1993. The corporation delivered a copy of the Form 8-K to
Ernst & Young LLP. A letter to the Securities and Exchange Commission
from Ernst & Young LLP stating that Ernst & Young LLP agrees with the
above statements is filed as an exhibit to the Form 8-K.
Location of
Information*
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS
OF THE REGISTRANT
(a) Identification of Directors . . . . . . . . . . A116, P19-23
(b) Identification of Executive
Officers. . . . . . . . . . . . . . . . A86-87, A117, P19-24
(c) Identification of Certain
Significant Employees . . . . . . . . . . . . . . . . . . **
(d) Family Relationships. . . . . . . . . . . . . . . . . . . **
(e) Business Experience . . . . . . . . . . . . . . . . . P21-24
(f) Involvement in Certain Legal
Proceedings . . . . . . . . . . . . . .A79-80, A86, A101-102
(g) Promoters and Control Persons . . . . . . . . . . . . . . **
____________________
* All page references preceded by the letter "A" are to the page numbers
of the 1994 Annual Report to Stockholders incorporated herein by
reference at Exhibit 13-A, page references preceded by the letter
"P" refer to pages in the 1995 Proxy Statement, and other page
references refer to the sequential numbers on the original copy
of the Form 10-K filed with the Securities and Exchange Commission.
** Not applicable.
-5-
Location of
Information*
ITEM 11. EXECUTIVE COMPENSATION
(a) Summary Compensation Table. . . . . . . . . . . . . . P28-29
(b) Option Grants Table . . . . . . . . . . . . . . . . . . .P30
(c) Aggregated Option Exercises and
Fiscal Year-end Option Value Table. . . . . . . . . . . .P31
(d) Long-term Incentive Plan Awards Table . . . . . . . . . .P31
(e) Defined Benefit Plan Disclosure . . . . . . . . . . . P32-34
(f) Compensation of Directors . . . . . . . . . . . .P27-28, P44
(g) Employment Contracts. . . . . . . . . . . . . . . . . . .P29
(h) Additional Information with Respect
to Compensation Committee Interlocks and
Insider Participation in Compensation
Decisions . . . . . . . . . . . . . . . . . . . . . . . .P44
(i) Organization/Compensation Committee
Report on Executive Compensation. . . . . . . . . . . P34-39
(j) Performance Graphs. . . . . . . . . . . . . . . . . . P43-44
ITEM 12. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
(a) Security Ownership of Certain
Beneficial Owners . . . . . . . . . . . . . . . . . . P18-19
(b) Security Ownership of Management. . . . . . . . . . . P19-20
(c) Changes in Control. . . . . . . . . . . . . . . . . . . . **
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS
(a) Transactions With Management and Others . . . . . . . . . **
(b) Certain Business Relationships. . . . . . . P18-20, P25, P28
(c) Indebtedness of Management. . . . . . . . . . . . . . P29-30
(d) Transactions With Promoters . . . . . . . . . . . . . . . **
____________________
* All page references preceded by the letter "A" are to the page numbers
of the 1994 Annual Report to Stockholders incorporated herein by
reference at Exhibit 13-A, page references preceded by the letter
"P" refer to pages in the 1995 Proxy Statement, and other page
references refer to the stamped sequential numbers on the original
copy of the Form 10-K filed with the Securities and Exchange
Commission.
** Not applicable.
-6-
Location of
Information*
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT
SCHEDULE AND REPORTS ON FORM 8-K
(a) The following consolidated financial statements, financial
statement schedules and exhibits are filed as part of this
report:
1. Financial Statements. The consolidated financial statements
of Guardsman Products, Inc., and the report of independent
public accountants covering these financial statements,
included in the Company's 1994 Annual Report to Stockholders
are incorporated herein by reference and are listed in
Item 8 of this Cross Reference Sheet.
2. Financial Statement Schedule.** The following consolidated
financial statement schedule is included in Item 14(d) and
should be read in conjunction with the consolidated
financial statements of Guardsman Products, Inc.:
Report of Independent Public Accountants
on Financial Statement Schedule. . . . . . . . .Page 13
Schedule II - Valuation and
Qualifying Accounts. . . . . . . . . . . . . . Page 14
_________________________
* All page references preceded by the letter "A" are to the page numbers
of the 1994 Annual Report to Stockholders incorporated herein by
reference at Exhibit 13-A, page references preceded by the letter
"P" refer to pages in the 1995 Proxy Statement, and other page
references refer to the sequential numbers on the original copy
of the Form 10-K filed with the Securities and Exchange Commission.
** All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission are
either not required under the related instructions, are inapplicable
or equivalent disclosure has been made in the consolidated financial
statements and notes thereto, which are included in the Registrant's
1994 Annual Report to Stockholders, and are incorporated herein.
Therefore, these schedules have been omitted.
-7-
Location of
Information*
3. Exhibits. The exhibits included in Item 14(c) are listed on the
accompanying Exhibit Index on pages 16 to 19.
EXECUTIVE COMPENSATION PLANS AND ARRANGEMENTS
The following is a listing of executive compensation plans and
arrangements (also included in the accompanying Exhibit Index),
noting where a copy of each plan or arrangement can be found:
10-A Employment Agreement between the Registrant and Charles E.
Bennett - Form 10-Q for the quarter ended June 30, 1990,
Exhibit 10a.
10-B Employment Agreement between the Registrant and Edward D.
Corlett - Form 10-Q for the quarter ended June 30, 1990,
Exhibit 10b.
10-C Employment Agreement between the Registrant and Keith C.
Vander Hyde, Jr. - Form 10-Q for the quarter ended September
30, 1991, Exhibit 10b.
10-D Employment Agreement between the Registrant and Everette L.
Martin - Form 10-K for the year ended December 31, 1992,
Exhibit 10-E.
10-E Employment Agreement between the Registrant and Henry H.
Graham, Jr., Pages 20 to 30.
10-F Form of Guardsman Products, Inc., Supplemental Executive
Retirement Plan - Form 10-K for the year ended December 31,
1989, Exhibit 10-D.
10-G Amendments to Guardsman Products, Inc., Supplemental
Executive Retirement Plan - Form 10-K for the year ended
December 31, 1989, Exhibit 10-E.
10-H Guardsman Products, Inc., Retirement Plan for Directors,
with attached amendments - Form 10-K for the year ended
December 31, 1992, Exhibit 10-H.
10-I Guardsman Products, Inc. Pension Restoration Plan, Pages 31
to 39.
10-K Guardsman Products, Inc. 1980 Performance Award Plan - Form
10-K for the year ended December 31, 1983, Exhibit 10-B.
10-L Guardsman Products, Inc., 1984 Incentive Stock Option Plan,
with attached amendments - Form 10-K for the year ended
December 31, 1992, Exhibit 10-K.
-8-
Location of
Information*
10-M Guardsman Products, Inc., 1988 Stock Option Plan, with
attached amendments - Form 10-K for the year ended December
31, 1992, Exhibit 10-L.
10-N Guardsman Products, Inc., 1991 Stock Option Plan -Definitive
Proxy Statement filed April 3, 1991, Exhibit A.
(b) The Company has not filed any reports with the Securities and
Exchange Commission on Form 8-K during the last quarter of the
period covered by this report.
(c) Exhibits required to be filed in response to this portion of
Item 14 are submitted as a separate section of this report.
(d) Financial statement schedule required to be filed in response to
this portion of Item 14 is submitted as a separate section of
this report.
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . .Pages 10-11
_________________________
* All page references preceded by the letter "A" are to the page numbers
of the 1994 Annual Report to Stockholders incorporated herein by
reference at Exhibit 13-A, page references preceded by the letter
"P" refer to pages in the 1995 Proxy Statement, and other page
references refer to the sequential numbers on the original copy
of the Form 10-K filed with the Securities and Exchange Commission.
-9-
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
on Form 10-K to be signed on its behalf by the undersigned, thereunto duly
authorized.
GUARDSMAN PRODUCTS, INC.
(registrant)
Dated: March 29, 1995 By /s/ Henry H. Graham, Jr.
Henry H. Graham, Jr.
Vice President of Finance,
Chief Financial Officer
and Treasurer
Pursuant to the requirements of the Securities Exchange Act of
1934, this report on Form 10-K has been signed below on March 29, 1995 by
the following persons on behalf of the registrant and in the capacities
indicated:
/s/ Paul K. Gaston /s/ Charles E. Bennett
Paul K. Gaston* Charles E. Bennett
Chairman President, Chief Executive
Officer and Director
(Principal Executive Officer)
/s/ Henry H. Graham, Jr. /s/ J. Russell Fowler
Henry H. Graham, Jr. J. Russell Fowler*
Vice President of Finance Director
Chief Financial Officer and
Treasurer
(Principal Financial and
Accounting Officer)
/s/ K. Kevin Hepp /s/ George R. Kempton
K. Kevin Hepp* George R. Kempton*
Director Director
/s/ Winthrop C. Neilson /s/ Robert D. Tuttle
Winthrop C. Neilson* Robert D. Tuttle*
Director Director
-10-
/s/ James L. Sadler /s/ Robert W. Schult
James L. Sadler* Robert W. Schult*
Director Director
/s/ Grant C. Gentry *By/s/ Henry H. Graham, Jr.
Grant C. Gentry* Henry H. Graham, Jr.
Advisory Member Attorney-in-fact
-11-
ANNUAL REPORT ON FORM 10-K
ITEM 14(c) and (d)
FINANCIAL STATEMENT SCHEDULE
AND
CERTAIN EXHIBITS
YEAR ENDED DECEMBER 31, 1994
GUARDSMAN PRODUCTS, INC.
GRAND RAPIDS, MICHIGAN
-12-
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
ON FINANCIAL STATEMENT
SCHEDULE
To the Stockholders and Board of Directors of Guardsman Products, Inc.:
We have audited, in accordance with generally accepted auditing standards,
the consolidated financial statements as of December 31, 1994 and 1993, and
for the years then ended included in Guardsman Products, Inc.'s annual
report to stockholders incorporated by reference in this Form 10-K, and
have issued our report thereon dated January 26, 1995. Our report on the
consolidated financial statements includes an explanatory paragraph with
respect to the change in the method of accounting for income taxes in 1993
as explained in note 6 to the consolidated financial statements. Our audit
was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The schedule listed at Item 14(a)2 as of
December 31, 1994 and 1993, and for the years then ended are the
responsibility of the company's management and is presented for purposes of
complying with the Securities and Exchange Commission's rules and are not
part of the basic financial statements. The schedule has been subjected to
the auditing procedures applied in our audit of the basic financial
statements and, in our opinion, fairly states in all material respects the
financial data required to be set forth therein in relation to the basic
financial statements taken as a whole.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Grand Rapids, Michigan
January 26, 1995
-13-
<TABLE>
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
GUARDSMAN PRODUCTS, INC.
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
AMOUNTS IN THOUSANDS
<CAPTION>
_______________________________________________________________________________________________________
COL. A COL. B COL. C COL. D COL. E
_______________________________________________________________________________________________________
Additions
Charged
Balance at Charged to to other Balance
beginning costs and accounts-- Deductions-- at end
Description of period expenses describe describe of period
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1994:
Deducted from asset accounts:
Accumulated amortization of
goodwill $2,657 $ 669 $_______ $ 75<FC> $3,251
Accumulated amortization of
other intangible assets <FA> $4,003 $1,980 $_______ $ 609<FF> $5,374
Reserve for discontinued
operations $1,162 $_____ $_______ $1,162<FD> $_____
Year ended December 31, 1993:
Deducted from asset accounts:
Accumulated amortization of
goodwill $2,078 $ 518 $ 109<FB> $ 48<FC> $2,657
Accumulated amortization of
other intangible assets <FA> $3,565 $1,554 $ 38<FB> $1,154<FE> $4,003
Reserve for discontinued
operations $1,520 $_____ $_______ $ 358<FD> $1,162
Year ended December 31, 1992:
Deducted from asset accounts:
Accumulated amortization of
goodwill $1,709 $ 461 $_______ $ 92<FC> $2,078
Accumulated amortization of
other intangible assets <FA> $2,642 $ 923 $_______ $_____ $3,565
Reserve for discontinued
operations $2,341 $_____ $_______ $ 821<FD> $1,520
<FN>
Notes:
<FA> Other intangible assets include costs of formulas, patents, trademarks and other costs.
<FB> Additions charged to other accounts represent accumulated amortization amounts for Armorguard
Products, Inc., which was fully consolidated effective January 1, 1993.
<FC> Deductions from accumulated amortization of goodwill represent foreign currency translation
adjustments in 1994, 1993 and 1992.
-14-
<FD> Deductions from the reserve for discontinued operations represent the disposal of associated
assets during 1994, 1993 and 1992.
<FE> Deductions from accumulated amortization of other intangible assets for 1993 represent the
write-off of a fully amortized patent and an expired formula.
<FF> Deductions from accumulated amortization of other intangible assets for 1994 represent the
expiration of a trademark and noncompete covenant.
</FN>
</TABLE>
-15-
EXHIBIT INDEX
3-A Guardsman Products, Inc., Restated Certificate of Incorporation,
which was filed as an exhibit to the Registrant's Form 8-K
Current Report filed with the Securities and Exchange Commission
on December 20, 1988, is hereby incorporated by reference.
3-B Guardsman Products, Inc., Bylaws, which was filed as an exhibit
to the Registrant's Form 10-Q Quarterly Report filed with the
Securities and Exchange Commission on August 10, 1994, are hereby
incorporated by reference.
4-A An amendment to the existing Credit Agreement (and related
Revolving Credit Note), dated July 21, 1994, between Guardsman
Products, Inc. and Comerica Bank to increase the amount the
Company can borrow from $15,000,000 to $20,000,000, which was
filed as an exhibit to the Registrant's Form 10-Q Quarterly
Report filed with the Securities and Exchange Commission on
August 10, 1994, is hereby incorporated by reference.
4-B An amendment to the existing Credit Agreement (and related
Revolving Credit Note), dated November 9, 1993, between Guardsman
Products, Inc. and Comerica Bank to increase the amount the
Company can borrow from $10,000,000 to $15,000,000, which was
filed as an exhibit to the Registrant's Form 10-K Annual Report
filed with the Securities and Exchange Commission on March 22,
1994, is hereby incorporated by reference.
4-C $10,000,000 Credit Agreement (and Related Revolving Credit Note)
between Guardsman Products, Inc. and Comerica Bank, dated June 5,
1992, which was filed as an exhibit to the Registrant's Form 10-K
Annual Report filed with the Securities and Exchange Commission
on March 23, 1993, is hereby incorporated by reference.
4-D $20,000,000 Credit Agreement (and related Note) between Guardsman
Products, Inc. and The First National Bank of Chicago, dated July
15, 1994, which as filed as an exhibit to the Registrant's Form
10-Q Quarterly Report filed with the Securities and Exchange
Commission on August 10, 1994, is hereby incorporated by
reference.
4-E The Registrant also has other classes of long-term debt
instruments outstanding. The amount of debt outstanding on these
other long-term debt instruments at the date of this Form 10-K
Annual Report does not exceed 10% of the Registrant's total
consolidated assets. The Registrant agrees to furnish copies of
agreements pertaining to such long-term indebtedness to the
Securities and Exchange Commission upon request.
-16-
10-A Employment Agreement between the Registrant and Charles E.
Bennett, which was filed as an exhibit to the Registrant's
Form 10-Q Quarterly Report filed with the Securities and Exchange
Commission on August 13, 1990, is hereby incorporated by
reference.
10-B Employment Agreement between the Registrant and Edward D.
Corlett, which was filed as an exhibit to the Registrant's
Form 10-Q Quarterly Report filed with the Securities and Exchange
Commission on August 13, 1990, is hereby incorporated by
reference.
10-C Employment Agreement between the Registrant and Keith C. Vander
Hyde, Jr., which was filed as an exhibit to the Registrant's Form
10-Q Quarterly Report filed with the Securities and Exchange
Commission on November 13, 1991, is hereby incorporated by
reference.
10-D Employment Agreement between the Registrant and Everette C.
Martin, which was filed as an exhibit to the Registrant's Form
10-K Annual Report filed with the Securities and Exchange
Commission on March 23, 1993, is hereby incorporated by
reference.
10-E Employment Agreement between the Registrant and Henry H. Graham,
Jr. dated January 15, 1995, Pages 20 to 30.
10-F Form of Guardsman Products, Inc. Supplemental Executive
Retirement Plan between the Registrant and Charles E. Bennett,
Edward D. Corlett, Henry H. Graham, Jr., Everette L. Martin,
Keith C. Vander Hyde, Jr. and nine other current and former
employees, which was filed as an exhibit to the Registrant's
Form 10-K Annual Report for the year ended December 31, 1989, is
hereby incorporated by reference.
10-G Amendments to Guardsman Products, Inc. Supplemental Executive
Retirement Plan approved by Board of Directors on February 9,
1989, and November 14, 1989, which were filed as an exhibit to
the Registrant's Form 10-K Annual Report for the year ended
December 31, 1989, are hereby incorporated by reference.
10-H Guardsman Products, Inc. Retirement Plan for Directors, with
attached amendments, which was filed as an exhibit to the
Registrant's Form 10-K Annual Report filed with the Securities
and Exchange Commission on March 23, 1993, is hereby incorporated
by reference.
10-I Guardsman Products, Inc. Pension Restoration Plan, Pages 31 to
39.
-17-
10-J Form of Indemnity Agreement entered into by the Registrant with
the directors and executive officers of the Corporation, which
was filed as an exhibit to the Registrant's Form 10-K Annual
Report for the year ended December 31, 1986, is hereby
incorporated by reference.
10-K Guardsman Products, Inc. 1980 Performance Award Plan, which was
filed as an exhibit to the Registrant's Form 10-K Annual Report
for the year ended December 31, 1983, is hereby incorporated by
reference.
10-L Guardsman Products, Inc. 1984 Incentive Stock Option Plan, with
attached amendments, which was filed as an exhibit to the
Registrant's Form 10-K Annual Report filed with the Securities
and Exchange Commission on March 23, 1993, is hereby incorporated
by reference.
10-M Guardsman Products, Inc. 1988 Stock Option Plan, with attached
amendments, which was filed as an exhibit to the Registrant's
Form 10-K Annual Report filed with the Securities and Exchange
Commission on March 23, 1993, is hereby incorporated by
reference.
10-N Guardsman Products, Inc. 1991 Stock Option Plan, which was filed
as an exhibit to the Registrant's Definitive Proxy Statement
filed with the Securities and Exchange Commission on April 3,
1991, is hereby incorporated by reference.
10-O Guardsman Products, Inc. 1988 Dividend Reinvestment and Stock
Purchase Plan, which was filed as an exhibit to the Registrant's
Form 10-K Annual Report for the year ended December 31, 1988, is
hereby incorporated by reference.
10-P Consulting Agreement between the Registrant and Paul K. Gaston
dated January 1, 1994, Pages 40 to 47.
10-Q Non-Qualified Stock Option Agreement between the Registrant and
Paul K. Gaston dated November 10, 1994, Pages 48 to 51.
10-R Stockholder Agreement between the Registrant and James L. and
John H. Sadler dated August 31, 1994, Pages 52 to 66.
10-S Noncompetition Agreement between the Registrant and James L.
Sadler dated August 31, 1994, Pages 67 to 74.
11 Statement Re: Computation of Per Share Income, Page 75.
13-A Excerpts from 1994 Annual Report to Stockholders, Pages 76 to 119.
13-B Report of Prior Independent Auditors, Page 120.
-18-
16 Letter on change in certifying accountants, which was filed
as an exhibit to the Registrant's Form 8-K current report
filed with the Securities and Exchange Commission on August
19, 1993, is hereby incorporated by reference.
21 List of Subsidiaries, Page 121.
23-A Consent of Independent Public Accountants, Page 122.
23-B Consent of Prior Independent Auditors, Page 123.
24 Powers of Attorney, Pages 124 to 139.
27 Financial Data Schedule, Page 140.
-19-
EXHIBIT 10-E
EMPLOYMENT AGREEMENT
THIS IS AN AGREEMENT dated January 15, 1995 ("Agreement"),
between GUARDSMAN PRODUCTS, INC., 3033 Orchard Vista Drive, S.E., Suite
200, Post Office Box 1521, Grand Rapids, Michigan 49506 ("Guardsman"), and
Henry H. Graham, Jr. of P.O. Box 329, Pinewood South Carolina 29125
("Executive").
In view of Executive's substantial experience, knowledge, and
reputation, the Board of Directors of Guardsman believes the interests of
Guardsman are best served by the continued employment of Executive, and
desires to provide Executive with additional financial and job security.
This Agreement is intended to combine and supercede any agreements and
understandings which may have previously been entered into between
Guardsman and Executive, and to incorporate into a single document all
arrangements between Guardsman and Executive relating to the employment of
Executive by Guardsman.
THE PARTIES AGREE AS FOLLOWS:
1. Employment. Guardsman hereby employs Executive, and Executive
hereby accepts employment, on the terms and subject to the conditions set
forth herein.
2. Term of Agreement. The term of this Agreement shall commence as
of the date set forth above, for an initial term through May 11, 1995.
Executive's employment shall be annually renewed under the terms of
Paragraph 6 of this Agreement, unless and until terminated pursuant to
Paragraph 7 of this Agreement.
3. Compensation. During Executive's employment under this
Agreement, Executive shall be paid an annual salary, annual bonuses, and
other fringe benefits, as determined from time to time by the Board of
Directors of Guardsman, subject to the following:
(a) Salary. During 1995, Executive's salary hereunder shall be
not less than $120,000 on an annualized basis. Salary shall be paid
monthly unless otherwise determined by the Board of Directors of Guardsman.
(b) Bonus. Executive will participate in any bonus program or
other incentive compensation under Guardsman's present incentive
compensation plan and any other or additional such plan as may be adopted
hereafter, on the same basis as other executives holding positions
comparable in status to that of Executive, and in accordance with the terms
of such bonus or incentive programs.
-20-
(c) Benefit Programs. Executive will participate in all
benefit and compensation plans offered to Guardsman's salaried employees as
a group, and in any additional programs offered to executives holding
positions comparable in status to that of Executive. Executive's level of
benefits under such programs shall at least equal the level of benefits
granted to other salaried employees as a group or, if greater, the level of
benefits granted to executives holding positions comparable in status to
that of Executive.
(d) Insurance and Other Fringe Benefits. Executive shall
during his employment under this Agreement be furnished such insurance and
other fringe benefits as are afforded to other key executives of Guardsman,
including, but not limited to, life insurance, group health insurance, and
club memberships. Such insurance and fringe benefits will not be less
favorable, in the aggregate, than the package of such benefits enjoyed
by Executive at the time this Agreement was executed.
(e) Vacation. Executive will be entitled to vacation time
consistent with the vacation policy of Guardsman applicable to Executive
as in effect from time to time.
4. Duties. Executive shall be employed as an executive of
Guardsman, with duties, responsibilities, and title consistent with
Executive's status as an executive officer. During the period of his
employment by Guardsman, Executive shall devote substantially his entire
business time and energy to the business and affairs of Guardsman and will
use his reasonable best efforts to perform his duties as an executive of
Guardsman. During the period of Executive's employment pursuant to this
Agreement, Executive shall not be required to relocate or to spend any
substantial amount of time outside of the area of Grand Rapids, Michigan,
except for travel not substantially in excess of Executive's present
business travel obligations.
5. Loyalty and Confidentiality. Executive agrees that during his
employment pursuant to this Agreement he will not, without the prior
approval of the Board of Directors of Guardsman, either for himself or on
behalf of any other person, firm or corporation, directly or indirectly
intentionally divert or attempt to divert from Guardsman any business
opportunity or business whatsoever, or attempt to negatively influence any
Guardsman customers or potential Guardsman customers with whom Executive
may have dealings. Executive shall be loyal to Guardsman during his
employment, and shall forever hold in strictest confidence and shall not
use or disclose any information, technique, process, development, or
experimental work, trade secret, customer lists, or other secret and
confidential matter relating to the products, services, sales, employees,
or business of Guardsman, except as such disclosure or use may be required
in connection with Executive's work for Guardsman. Upon termination of his
employment with Guardsman, Executive shall deliver to Guardsman any and all
materials relating to Guardsman's business including, without limitation,
all customer lists, keys, financial information, business notes, business
plans, credit cards, memoranda, specifications, and documents. Executive
shall not retain any photocopies or other facsimiles of such materials.
-21-
6. Renewal. At the end of the initial period of employment provided
in Paragraph 2 of this Agreement, such period of employment shall be
automatically extended for regular periods of one year each (commencing at
the end of the previous period whether it be the initial period or one of
the one-year extension periods) unless either Guardsman or Executive shall
notify the other in writing no later than ninety (90) days prior to the end
of the period then current (whether it is the initial period or one of the
extension periods) that it or he does not choose to extend this period of
employment.
7. Termination. Notwithstanding the terms of Paragraph 6 of this
Agreement, Executive's employment may be terminated as follows:
(a) Death. If Executive, while in the employ of Guardsman,
shall die prior to the expiration of the term of employment, this Agreement
shall terminate upon Executive's death, which for purposes of this
Agreement shall be deemed to have occurred on the last day of the month in
which his death occurs. Guardsman shall continue to pay compensation at
the rate then in effect pursuant to Paragraph 3 (a) above, for a period of
three (3) months following the date of death.
(b) Disability. If Executive shall be unable to substantially
perform the duties described in Paragraph 4 above for a period of nine (9)
successive months by reason of illness or other similar incapacity or
disability, this Agreement may be terminated as of the end of any calendar
month following such nine months by Guardsman, based upon a determination
that Executive is disabled and by notice in writing to that effect to
Executive. Executive can terminate this Agreement in the same
circumstances by presenting his resignation in writing to Guardsman. Any
determination as to whether Executive is disabled shall be made by a
licensed physician selected by agreement of Guardsman and Executive or, if
they cannot agree upon a physician, then by a majority of a panel of three
(3) licensed physicians, one selected by Guardsman, one selected by
Executive, and the third selected by the first two. If this Agreement is
terminated by Guardsman pursuant to this Subparagraph 7(b), the
compensation provided in Paragraph 3 of this Agreement shall continue for
such period as the Board of Directors of Guardsman shall in its sole
discretion deem appropriate. If this Agreement is terminated by Executive
pursuant to this Subparagraph 7(b), the compensation provided in Paragraph
3 of this Agreement shall continue for such period as the Board of
Directors of Guardsman shall deem appropriate, but not less than the period
provided in Guardsman's employee disability policy in effect at the time of
the termination.
(c) Termination for Cause. Guardsman shall have the right to
terminate Executive's employment for "Cause." For purposes of this
agreement, "Cause" shall be limited to:
(i) the willful and continued failure by Executive to
substantially perform assigned duties consistent with Paragraph 4
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above (other than any failure resulting from an illness or other
similar incapacity or disability), after a demand for substantial
performance is delivered to Executive on behalf of the Board of
Directors of Guardsman which specifically identifies the manner
in which it is alleged that Executive has not substantially
performed his duties; or
(ii) the willful engaging by Executive in misconduct
which is materially injurious to Guardsman, monetarily or
otherwise.
For purposes of this subparagraph (c), no act or failure to act on
Executive's part shall be considered "willful" unless done, or omitted to
be done, by Executive not in good faith and without reasonable belief that
his action or omission was in the best interests of Guardsman.
Notwithstanding the foregoing, Executive shall not be deemed to have been
terminated for Cause unless and until: there shall have been delivered to
him a copy of a notice of termination on behalf of the Board of Directors
of Guardsman; and after reasonable notice to him and an opportunity for
him, together with counsel, to be heard before the Board, at least two-
thirds of the entire Board of Directors finds, in their reasonable
opinions, that Executive was guilty of conduct set forth above in clause
(i) or (ii) and specifying the particulars thereof in detail.
(d) Termination by Executive for Good Reason. Executive shall
have the right to terminate his employment with Guardsman for "Good Reason"
by providing written notice of the termination to Guardsman. For purposes
of this Agreement, "Good Reason" shall mean:
(i) without Executive's express written consent, the
assignment to Executive of duties materially inconsistent with
Executive's present positions, duties, responsibilities and
status with Guardsman, except in connection with the termination
of Executive's employment by Executive other than for Good
Reason, by Guardsman due to the death of Executive, the
disability of Executive as determined under Subparagraph 7(b)
above, or Cause as determined under Subparagraph 7(c) above.
(ii) a reduction by Guardsman in Executive's monthly
salary as in effect on the date of this Agreement or as the same
may be increased from time to time;
(iii) a reduction or termination by Guardsman of
Executive's Officer Bonus Plan or Performance Award Plan
compensation formulas, or their replacement with other plans or
formulas unless such repayment plans and formulas shall be at
least as favorable to Executive as the plans and formulas in
effect as of the date of this Agreement or in effect as of the
date of a change in control of Guardsman;
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(iv) the relocation of Guardsman's principal executive
offices to a location outside Kent County, Michigan, or
Guardsman's requiring Executive to be based anywhere other than
Guardsman's principal executive offices except for required
travel on Guardsman's business to an extent substantially
consistent with Executive's present business travel obligations;
(v) the failure by Guardsman to continue in effect any
benefit or compensation plan, pension plan, supplemental
executive retirement plan, life insurance plan, health and
accident plan, or disability plan in which Executive is
participating (or plans providing Executive with substantially
similar benefits), the taking of any action by Guardsman which
would adversely affect Executive's participation in or materially
reduce Executive's benefits under any of such plans, or deprive
Executive of any material fringe benefit enjoyed by Executive, or
the failure by Guardsman to provide Executive with the number of
paid vacation days to which Executive is them entitled on the
basis of years of service with Guardsman in accordance with
Guardsman's normal vacation policy in effect on the date of this
Agreement;
(vi) the failure of Guardsman to obtain the agreement
of any successor to assume and perform this Agreement as
contemplated in Paragraph 12 hereof; or
(vii) the failure of Guardsman to fulfill any of
its obligations under this Agreement.
(e) Termination by Notice. Guardsman and Executive shall each
have the right to terminate their employment relationship for reasons other
than those provided in this Paragraph 7 by giving thirty (30) days' written
notice to the other party specifying the date of termination.
8. Severance Pay.
(a) Term of Severance Pay After Change In Control. If within
three (3) years after a change in control of Guardsman has occurred,
Executive's employment shall be involuntarily terminated by Guardsman
pursuant to Subparagraph 7(e) of this Agreement or terminated by Executive
pursuant to Subparagraph 7(d) of this Agreement, Executive shall be
entitled to receive Severance Pay for the period remaining between the date
of such termination and thirty-six (36) months after the change in control
of Guardsman ("Compensation Period"). For purposes of this paragraph 8, a
change in control of Guardsman shall mean a change in control of a nature
that would be required to be reported in response to Item 5(f) of Schedule
14A of Regulation 14a promulgated under the Securities Exchange Act of
1934, as amended ("Exchange Act"), provided that, without limitation, such
a change in control shall be deemed to have occurred if during any period
of two (2) consecutive years, individuals who at the beginning of such
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period constitute the Board of Directors cease for any reason to constitute
a least a majority thereof (unless the election or nomination for election
by Guardsman's stockholders of each new director was approved by a vote of
at least two-thirds (2/3) of the directors then still in office who were
directors at the beginning of the period).
(b) Term of Severance Pay After Termination By Notice or For
"Good Reason". If Executive's employment shall be terminated by the
provision of thirty (30) days' written notice under Subparagraph 7(e) of
this Agreement, or by the provision of ninety (90) days' written notice of
intent not to renew Executive's employment under Paragraph 6 of this
Agreement, or if Executive's employment is terminated by Executive under
Subparagraph 7(d) of this Agreement but not within three (3) years after a
change in control of Guardsman as that term is defined in Subparagraph 8(a)
above, Executive shall be entitled to receive Severance Pay for the
remainder of the period of employment in effect at the time of the
termination. For the purposes of this Subparagraph 8(b), Severance Pay
shall not include the benefits described in Subparagraphs 8(c) (iii) and
8(c) (viii) below.
(c) Description of Severance Pay. Severance Pay shall be the
following:
(i) monthly severance payments which shall continue
for the term of the Compensation Period. The amount of each
monthly payment shall be equal to Executive's monthly salary for
the last full month immediately preceding his termination, plus
one-twelfth (1/12) of Executive's average annual bonus pursuant
to Guardsman's present Officer Bonus Plan and Performance Award
Plan, and under any other or additional plans as may be adopted
hereafter, for the two (2) calendar years immediately preceding
his termination;
(ii) continued treatment as an "employee" under any
stock option, employee benefit or other long-term compensation
arrangement for the term of the Compensation Period. In the event
Executive's participation in any such plan or program is barred
or otherwise prevented, Guardsman shall provide Executive with
benefits substantially similar to an not less favorable than the
benefits which Executive would otherwise be entitled to receive
under such plan or program;
(iii) reimbursement of the Executive for the cost
of reasonable outplacement services selected by Executive;
(iv) maintenance by Guardsman in full force and effect
for the continued benefit of Executive, of the hospital/medical
insurance coverage under Guardsman's current group health
insurance policy, or the coverage under any subsequent group
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insurance policy or plan as furnished to Guardsman's management
personnel, or the equivalent of such benefit furnished directly
to Executive;
(v) maintenance by Guardsman in full force and
effect, for the continued benefit of Executive, of each employee
welfare benefit plan (as such term is defined in the Employment
Retirement Income Security Act of 1974, as amended) in which
Executive was entitled to participate immediately prior to the
date of his termination. In the event Executive's participation
in any such plan is barred or otherwise prevented, Guardsman
shall provide Executive with benefits substantially similar to and
not less favorable than the benefits which Executive would
otherwise be entitled to receive under such plan;
(vi) a supplemental retirement benefit to be paid by
Guardsman (the "Supplemental Benefit") to be paid in addition to
the retirement benefits, if any, to which Executive is entitled
under Guardsman's Non-Bargaining Employees' Retirement Income
Plan, as amended from time to time or any successor or
predecessor plan (the "Pension Plan"). The Supplemental Benefit,
subject to the reduction described below, shall be determined in
accordance with and payable in the form and at the times provided
in the Pension Plan, assuming Executive is fully vested under the
Pension Plan and has credited service under the Pension Plan for
full-time employment for the remainder of the Compensation
Period, except that the Supplemental Benefit under this Agreement
shall be calculated without the reduction provided in the Pension
Plan for early retirement payments received prior to age 64 or
vested benefit payments received prior to age 65. Furthermore,
the amount of the Supplemental Benefit shall be based upon the
greater of Executive's average monthly compensation under the
Pension Plan at the time of termination or Executive's average
monthly compensation determined by including and crediting the
compensation paid Executive under Subparagraph 8(b) (i) above.
The Supplemental Benefit payable to Executive, or on his behalf,
shall be offset by the amount of the benefit actually payable
from the Pension Plan, if any, after any reduction required under
the Pension Plan for early retirement or vested benefit payments.
For purposes of this Subparagraph, the term "retirement benefit"
shall include any benefit payable under the Pension Plan
including any death benefit, disability benefit, survivors
benefit or other benefit payable to Executive or with respect to
Executive's participation in the Pension Plan;
(vii) the benefit payable in accordance with
Subparagraph 3(a) of the Supplemental Executive Retirement Plan
("SERP") dated as of January 15, 1995 between Executive and
Guardsman, whether or not Executive has met the eligibility
requirements under Paragraph 2 of the SERP, and without reduction
-26-
for termination of employment with less than 180 months of
employment as otherwise provided under Subparagraph 3(b) of the
SERP.
(viii) payment by Guardsman to Executive for all
reasonable legal fees and expenses incurred by Executive,
regardless of Executive's choice of counsel, as a result of his
termination of employment with Guardsman. These fees and
expenses shall include any fees and expenses incurred in
contesting or disputing such termination of employment or in
seeking to enforce any right or benefit provided by this
Agreement. On the request of Executive, Guardsman shall
establish an irrevocable letter of credit drawn on a bank
reasonably acceptable to Executive for the payment of fees and
expenses as provided in this Subparagraph 8(b)(viii). This
payment shall be made to Executive or, at Executive's option,
directly to his counsel; and
(ix) Guardsman's enabling Executive to immediately
exercise in full all stock options, stock appreciation rights,
or similar rights or options, notwithstanding the fact that such
options might not be exercisable in full at that time under their
terms, or under the terms of any plan, agreement or similar
arrangement under which they were granted.
(d) Mitigation of Severance Benefits. Executive shall not
be required to mitigate the amount of any payments of severance benefits
provided in this Paragraph 8 by seeking other employment or otherwise, nor
shall the amount of any payment provided in this Paragraph 8 be reduced by
any compensation earned by Executive as a result of his employment with
another employer after termination, or otherwise.
9. Covenant Not to Compete. Recognizing that his skill,
experience, and knowledge are unique and are a material inducement to
Guardsman to enter into this Agreement, Executive agrees that during his
employment pursuant to this Agreement, Executive will not participate
directly or indirectly, in the ownership, management, financing or control
of any business which is the same as or similar to the present or future
businesses of Guardsman or its subsidiaries. Executive shall also not
provide consulting services or serve as an officer or director for any such
business during his employment pursuant to this Agreement. Executive is
not prohibited by this Paragraph, however, from owning an insignificant
amount of stock of any corporation whose shares are publicly traded on any
national or regional stock exchange or over the counter, so long as that
ownership is in no case more than five percent (5%) of such shares of the
corporation.
10. Executive Liability Insurance Coverage and Indemnification.
Nothing in this Agreement shall deprive Executive, both during and
subsequent to the termination of his employment pursuant to this Agreement,
of the benefits of Guardsman's existing or hereafter obtained executive
liability insurance coverage, subject to the terms and conditions of such
coverage, nor of any right to indemnification under Guardsman's Restated
-27-
Certificate of Incorporation and Bylaws or under any indemnification
agreement between Guardsman and Executive, subject to the limitations on
indemnification set forth therein.
11. Parachute Payments. Executive shall have the right, in his sole
discretion, to adjust any payments to be made to Executive pursuant to
Paragraph 8 of this Agreement. These adjustments shall only be made to avoid
excise taxes payable by the Executive on any such payment that would be a
"parachute payment" as defined in Section 280G(b) (2) of the Internal Revenue
Code. The adjustments permitted under this Paragraph 11 shall include the
elimination
of payments, the reduction of the amount of any payments, and the extension
of the date upon which the payments would otherwise be due to reduce the
present value of such payments. In the event of a dispute over whether any
payments constitute "parachute payments," the opinion of Executive's
attorneys or certified public accountants shall be conclusive and binding
on the parties.
12. Successors. Guardsman shall require any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all
or substantially all of the business and/or assets of Guardsman, by
agreement in form and substance satisfactory to Executive, to expressly
assume and agree to perform this Agreement in the same manner and to the
same extent that Guardsman would be required to perform it if no such
succession had taken place. Failure of Guardsman to obtain such agreement
prior to the effectiveness of any succession shall be a breach of this
Agreement and shall entitle Executive to compensation from Guardsman in the
same amount and on the same terms as Executive would be entitled hereunder
if Executive terminated his employment for Good Reason, except that for
purposes of implementing the foregoing, the date on which any such
succession becomes effective shall be deemed the date of termination. As
used in this Agreement, "Guardsman" shall mean Guardsman and any successor
to Guardsman's business and/or assets as aforesaid which executed and
delivers the agreement provided for in this Paragraph 12 or which otherwise
becomes bound by all the terms and provisions of this Agreement by
operation of law.
13. Binding Agreement. This Agreement shall inure to the benefit of
and be enforceable by Executive's personal or legal representatives,
executors, administrators, successors, heirs distributees and devisees. If
Executive should die while any amount would still be payable to him
hereunder if he had continued to live, all such amounts, unless otherwise
provided herein, shall be paid in accordance with the terms of this
Agreement to the beneficiary designated by Executive in a writing delivered
to Guardsman, or if there be no such designated beneficiary, to his estate.
14. Notice. For the purpose of this Agreement, notices and all
other communications provided for in the Agreement shall be in writing and
shall be deemed to have been duly given when delivered or mailed by United
States registered mail, return receipt requested, postage prepaid, addressed to
Executive at the address set forth on the first page of this Agreement, or to
Guardsman at its principal executive offices to the attention of the President
of Guardsman witha copy to the Secretary of Guardsman, or to such other address
-28-
as either party may have furnished to the other in writing in accordance
herewith,except that notice of change of address shall be effective only upon
receipt.
15. Modification or Waiver. No provisions of this Agreement may be
amended, modified, waived, or discharged unless such waiver, modification,
or discharge is agreed to in writing signed by Executive and such officer
as may be specifically designated by the Board of Directors of Guardsman.
No waiver by either party to this Agreement at any time of any breach by
the other party hereto of any condition or provision of this Agreement to
be performed by such other party, nor any compliance with any such
condition or provision by the party not required to so perform, shall be
deemed a waiver of similar or dissimilar provisions or conditions at the
time or at any prior or subsequent time. Failure to insist upon strict
compliance with any of the terms, covenants or conditions of this Agreement
shall not be deemed a waiver of such term, covenant or condition, nor shall
any waiver or relinquishment of any right or power hereunder at any one or
more times be deemed waiver or relinquishment of such right or power at any
other time.
16. Governing Law. This Agreement was entered into in the State of
Michigan and shall be construed and interpreted in accordance with the laws
of the State of Michigan as applied to contracts made and to be performed
in the State of Michigan. Any action arising out of or to enforce this
Agreement must be brought in courts in the State of Michigan. The parties
consent to the jurisdiction of the courts in the State of Michigan and to
service of process by registered mail, return receipt requested, or by any
other manner provided by law.
17. Validity. The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of any
other provision of this Agreement, which shall remain in full force and
effect.
18. Miscellaneous. No agreements or representations, oral or
otherwise, express or implied, with respect to the specific subject matter
hereof have been made by either party which are not set forth expressly in
this Agreement.
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IN WITNESS WHEREOF, Guardsman has caused this Agreement to be executed
by a duly authorized corporate officer and Executive has executed this
Agreement as of the date and year first above written.
GUARDSMAN PRODUCTS, INC.
By /s/ Charles E. Bennett
Charles E. Bennett
President/CEO
/s/ Henry H. Graham, Jr.
Henry H. Graham, Jr.
"Executive"
-30-
EXHIBIT 10-I
___________________________________________________________________________
GUARDSMAN PRODUCTS, INC.
PENSION RESTORATION PLAN
___________________________________________________________________________
-31-
GUARDSMAN PRODUCTS, INC.
PENSION RESTORATION PLAN
ARTICLE 1
Establishment of Plan
1.1 Establishment of Plan.
Guardsman Products, Inc. ("Guardsman") hereby adopts the Guardsman
Products, Inc. Pension Restoration Plan, a supplemental nonqualified plan
for a select group of management personnel employed by Guardsman and any
subsidiary of Guardsman. This plan is intended to be a plan described in
Sections 201(2), 301(a)(3), and 401(a)(1) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"). This plan is a nonqualified
supplemental executive retirement program that is not subject to
limitations in the Internal Revenue Code of 1986, as amended ("Code")
applicable to benefits provided through a qualified, tax-exempt employee
benefit plan established under Section 401(a) of the Code.
1.2 Effective Date.
The "Effective Date" of this plan is January 1, 1994, unless a
provision of this plan specifies a different effective date. Each plan
provision applies until the effective date of an amendment of that
provision.
1.3 Application to Former Participants.
Except to the extent it amends a provision of the plan that applies to
former Participants or expressly states that it is applicable to former
Participants, an amendment to this plan (including changes included in any
restatement of the plan) shall not apply to a former Participant. If a
former Participant returns to employment with the Employer after the
effective date of an amendment and is designated as eligible to participate
by Guardsman, the Participant's rights under the plan shall be determined
by the plan provisions as amended and in effect at that time.
-32-
ARTICLE 2
Definitions
2.1 Defined Terms.
Defined terms are found at the following locations:
<TABLE>
<CAPTION>
Term Location
<S> <C> <C>
Administrator 2.2
Agent for Service of Process 2.3
Beneficiary 2.4
Code 1.1
Effective Date 1.2
Employee 2.5
Employer 2.6
ERISA 1.1
Guardsman 1.1
Normal Retirement Age 2.7
Normal Retirement Date 2.7
Participant 3.1
Plan Year 2.8
Retirement Plan 2.9
</TABLE>
2.2 Administrator.
"Administrator" means Guardsman Products, Inc.
2.3 Agent for Service of Process.
"Agent for Service of Process" means the Administrator or the
individual designated by the Administrator to accept service of process on
behalf of the plan.
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2.4 Beneficiary.
"Beneficiary" means the individual, trust, or other entity designated
by the Participant or deemed the beneficiary of the Participant pursuant to
the Retirement Plan.
2.5 Employee.
"Employee" means an individual employed by the Employer who receives
compensation for personal services performed for the Employer that is
subject to withholding for federal income tax purposes.
2.6 Employer.
"Employer" means Guardsman and any subsidiary of Guardsman.
2.7 Normal Retirement Date.
"Normal Retirement Date" means the "normal retirement date" pursuant
to the Retirement Plan.
2.8 Plan Year.
"Plan Year" means the 12-month period beginning each January 1.
2.9 Retirement Plan.
"Retirement Plan" means the Guardsman Products, Inc. Non-Bargaining
Employees' Retirement Income Plan, a qualified, tax-exempt defined benefit
pension plan established and maintained by Guardsman under Code Section 401
(a).
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ARTICLE 3
Participation
3.1 Designation as Participant.
Only management and highly compensated Employees whose Compensation
exceeds the limits of Section 401(a)(17) of the Code shall be eligible to
participate in this plan. The participants in this plan ("Participants")
shall be selected eligible Employees of Guardsman who are specifically
designated as Participants by resolution of Guardsman's Board of Directors,
and with whom Guardsman enters into a Participant Agreement in the form of
attached Exhibit A.
3.2 Termination of Participation.
A Participant's status as a Participant shall continue until the
earlier of termination of employment or termination of the Participant's
status as a Participant by Guardsman. A former Participant may resume
participation in the plan only upon redesignation as a Participant and as
of the date specified by Guardsman. Transfer of employment to Guardsman or
a subsidiary of Guardsman shall not be treated as termination of
employment, and participation in this plan shall continue unless the
Participant's status as a Participant is terminated by Guardsman.
ARTICLE 4
Amount of Benefits
4.1 Determination of Benefit.
The amount of the benefit to which each Participant is entitled is
calculated by first determining the amount of the Participant's benefit
payable under the Retirement Plan, without reduction for any provisions of
the Code that directly or indirectly limit benefits payable from qualified
plans, including Section 401(a)(17) and Section 415. From this amount, the
amount of the Participant's actual benefit payable under the Retirement
Plan will be subtracted to arrive at the benefit payable under this plan.
-35-
4.2 Date of Determination.
All benefit calculations shall be made at the time the Participant's
employment terminates or, if later, such other event that causes payment of
the benefit as stated in Section 6.1.
4.3 Duplication of Benefits.
There shall be no duplication of benefits between this plan and the
Retirement Plan. If the Retirement Plan should be amended to provide
additional benefits that are substantially the same as benefits under this
plan, this plan shall abate or terminate to that extent, and the
Participants shall have the additional benefits under the Retirement Plan
in lieu of the corresponding benefits provided under this plan.
ARTICLE 5
Vesting
5.1 Vesting Requirement.
The benefit provided with respect to a Participant under this plan
shall become nonforfeitable at the same time the Participant's benefits
under the Retirement Plan become nonforfeitable.
5.2 Forfeiture for Cause.
Notwithstanding Section 5.1, if a Participant is discharged or resigns
for cause, any benefit provided with respect to the Participant under this
plan shall be forfeited. The Participant shall be deemed to have been
discharged or to have resigned for cause if the Participant's employment
with the Employer terminates due to or in conjunction with the commission
of any criminal act injurious to the Employer, any act evidencing fraud or
dishonesty on the part of the Participant, or any intentional damaging of
the property, assets, and/or business reputation of the Employer.
The existence of cause shall be established by the Administrator. The
determination by the Administrator shall be subject to a claims procedure
substantially the same as the claims procedure available under the
Retirement Plan. If the existence of cause, as defined in the preceding
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paragraph, is determined by the Administrator subsequent to termination of
the Participant's employment, such termination of employment retroactively
shall be deemed to have been discharge or resignation for cause and to
result in total forfeiture of all benefits with respect to the Participant.
In such event, benefits that are being paid, if any, shall terminate, and
Guardsman shall be entitled to recover back from the Participant, the
Participant's Beneficiary, and/or the Participant's estate, legal
representatives, heirs, and assigns the full amount of the benefits that
were paid, plus interest thereon.
ARTICLE 6
Payment of Benefits
6.1 Events of Distribution.
Benefit payments under this plan shall begin at the time and in the
manner specified in Article 5 of the Retirement Plan.
6.2 Form, Manner, and Time of Payment.
The form, manner, and time of payment of benefits under this plan
shall be the same as the form, manner, and time of payment of a
Participant's Accrued Benefit on the Participant's Normal Retirement Date
under the Retirement Plan.
ARTICLE 7
General Provisions
7.1 Amendment; Termination.
Guardsman's Board of Directors shall have the right at any time to
amend this plan prospectively or retroactively, or to terminate this plan,
provided that an amendment or termination may not reduce or revoke the
accrued benefits of Participants as of the end of the Plan Year preceding
the Plan Year in which the amendment or termination is adopted.
Upon termination of this plan, the accrued benefits of affected
Participants shall become nonforfeitable. Each Participant's vested
accrued benefits shall be distributed in accordance with the provisions of
this plan.
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7.2 Employment Relationship.
Nothing in this plan shall be construed as creating a contract oil
employment between the Employer and any Participant or otherwise conferring
upon any Participant or other person a legal right to continuation of
employment or any rights other than those specified in this plan. This
plan shall not limit or affect the right of the Employer to discharge or
retire a Participant.
7.3 Rights Not Assignable.
Except for designation of a Beneficiary, amounts promised under this
plan shall not be subject to assignment, conveyance, transfer,
anticipation, pledge, alienation, sale, encumbrance, or charge, whether
voluntary or involuntary, by the Participant or any Beneficiary of the
Participant, even if directed under a qualified domestic relations order or
other divorce order. An interest in an amount promised shall not provide
collateral or security for a debt of a Participant or Beneficiary or be
subject to garnishment, execution, assignment, levy, or to another form of
judicial or administrative process or to the claim of a creditor of a
Participant or Beneficiary, through legal process or otherwise. Any
attempt to assign, convey, transfer, anticipate, pledge, alienate, sell,
encumber, charge, or otherwise dispose of benefits payable, before actual
receipt of the benefits, or a right to receive benefits, shall be void and
shall not be recognized.
7.4 Unsecured Obligation.
The right to a benefit under this plan constitutes merely the
unsecured promise of Guardsman to pay benefits from Guardsman's general
assets. Nothing contained in this plan, and no action taken pursuant to
the provisions of this plan, shall create or be construed to create a trust
of any kind, a fund, or any fiduciary relationship between Guardsman and
any Participant, Beneficiary, or any other person. Any reserve or fund
established by Guardsman in connection with this plan shall be and shall
remain, until paid to any Participant or Beneficiary, solely the property
and rights of Guardsman, subject to the rights and claims of Guardsman's
general creditors. No Participant, Beneficiary, or any other person other
than Guardsman shall have any right, title, or interest in or to such funds
or other assets. Any right to a benefit under this plan shall be no
greater than the claim of any other unsecured general creditor of
Guardsman.
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7.5 No Trust or Fiduciary Relationship.
Nothing contained in this plan shall be deemed to create a trust or
fiduciary relationship of any kind for the benefit of any Participant or
Beneficiary.
7.6 Construction; Interpretation.
The singular includes the plural, and the plural includes the
singular, unless the context clearly indicates the contrary. Capitalized
terms (except those at the beginning of a sentence or part of a heading)
have the meaning specified in this plan. If a capitalized term is not
defined in this plan, the term shall have, for purposes of this plan, the
stated definition of that term in the Retirement Plan as amended from time
to time.
All questions or issues regarding interpretation or application of the
provisions of this plan, including, but not limited to, questions of
eligibility for benefits, the amount of benefits, and forfeiture, payment,
or termination of benefits, will be resolved by Guardsman's Board of
Directors, whose determination shall be final and binding, unless arbitrary
or capricious.
7.7 Governing Law.
This plan shall be interpreted, construed, enforced, and performed in
accordance with applicable federal law and, to the extent not preempted by
federal law, in accordance with the laws of the State of Michigan.
7.8 Unfunded Plan.
This shall be an unfunded plan within the meaning of ERISA. Benefits
provided herein constitute only an unsecured contractual promise to pay in
accordance with the terms of this plan by the Employer.
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EXHIBIT 10-P
AGREEMENT
THIS CONSULTING AGREEMENT (the "Agreement") is made as of the lst
day of January, 1994, by and between GUARDSMAN PRODUCTS, INC.
("Guardsman"), and PAUL K. GASTON ("Mr. Gaston").
PREAMBLE
Since his graduation from law school in 1959, Mr. Gaston has
engaged in the private practice of law specializing in corporate law and
serving as an advisor to his corporate clients on varied subjects,
including operational and financial issues. Mr. Gaston has served as a
member of the Board of Directors of Guardsman since 1986. As a result of
his service to Guardsman and other companies and his experience, Mr. Gaston
has acquired knowledge and developed expertise concerning Guardsman, the
industry in which Guardsman operates and Guardsman's Board of Directors.
Recognizing the merits of an experienced outside director serving as
Chairman of the Board of Directors and consistent with Guardsman's desire
to maintain a pro-active Board of Directors, Guardsman desires to retain
the services of Mr. Gaston to serve as a consultant to the Board of
Directors and, if so elected by the stockholders or Board, in the capacity
of Board Chairman; and Mr. Gaston has agreed to enter into a consulting
agreement with Guardsman upon the terms and conditions set forth in this
Agreement.
ACCORDINGLY, THE PARTIES AGREE AS FOLLOWS:
1. Duties of Mr. Gaston. Mr. Gaston agrees to serve Guardsman, if
so elected by the stockholders or Board of Directors of Guardsman, as a
Director and as Chairman of the Board of Directors of Guardsman. As
Chairman, Mr. Gaston agrees to preside over meetings of the Board of
Directors and stockholders and to participate on any committees of the
Board of Directors to which he may be appointed. He will serve as the
communication link between management and the Board and the Chief Executive
Officer will report to him as the Board's representative.
Mr. Gaston also agrees to serve Guardsman by providing Guardsman
with his advise and counsel with respect to the formulation of policy and
business strategy for Guardsman. He shall promote constructive relations
between Guardsman and its stockholders and shall participate with the
President and Chief Executive Officer in the general oversight of the
business and operations of Guardsman to the extent requested by the
President and Chief Executive Officer or the Board of Directors. Mr.
Gaston shall report to the Board of Directors. Mr. Gaston agrees to use
his reasonable best efforts to discharge all his responsibilities
hereunder. The amount of time devoted by Mr. Gaston to his duties shall be
within the discretion of Mr. Gaston.
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2. Term of Agreement. The term of this agreement shall be reviewed
annually by the parties but unless modified or extended by mutual
agreement, or terminated in accordance with Section 4 hereof, will continue
for a period of three (3) years (it being acknowledged that Mr. Gaston
resigned his position as a partner in his law firm on the understanding
that the arrangement would continue for a period of three (3) to five (5)
years).
3. Consulting Fee. In consideration of Mr. Gaston's engagement
hereunder, Mr. Gaston shall receive an annual consulting fee in the amount
of One Hundred Seventy Thousand Dollars ($170,000). A portion of the
annual consulting fee shall be paid in the form of cash compensation and a
portion of the annual consulting fee shall be paid in the form of deferred
compensation. At its annual meeting in November, the
Organization/Compensation Committee of the Board of Directors shall
determine the portion of annual consulting fee to be allocated to cash
compensation and the portion to be allocated to deferred compensation for
the subsequent year, for so long as this Agreement remains in effect. The
allocation of the consulting fee between cash compensation and deferred
compensation for 1994 is set forth below.
3.1 Cash Compensation. Cash compensation shall be payable
in equal monthly installments on or before the last day of each
month. Mr. Gaston's base compensation for 1994 shall be in the
amount of Ninety Thousand Dollars ($90,000).
3.2 Deferred Compensation.
3.2.1 Amount of Deferred Compensation. Deferred
compensation shall be credited and paid in accordance
with this Section 3.2. Except as otherwise provided in
the event of early termination under Section 4, Mr.
Gaston's deferred compensation for 1994 shall be in the
amount of Eighty Thousand Dollars ($80,000).
3.2.2 Crediting of Deferred Compensation.
Deferred compensation amounts shall be credited to a
deferred compensation account established by Guardsman
for such purpose in equal monthly installments on or by
the last day of each month. Amounts credited to the
deferred compensation account and not yet paid to Mr.
Gaston shall earn, and Guardsman shall credit the
deferred compensation account on or by the last day of
each month, with a monthly compounded rate of return
equal to the greater of seven percent (7%) or the
published rate of return for United States Government
30-year Treasury Bonds, until such time as the balance
of all deferred compensation has been paid to Mr.
Gaston. Guardsman may set aside or segregate assets
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for the purpose of crediting the account, or funding
the payment of deferred compensation hereunder, but
shall not be required to segregate any assets for this
purpose or for any other purpose. The deferred
compensation amounts shall not be represented by any
specific assets of Guardsman, but shall merely be an
unsecured promise by Guardsman to make future payments
to Mr. Gaston, as set forth herein.
3.2.3 Payment of Deferred Compensation.
Guardsman and Mr. Gaston agree that the payment of all
deferred compensation shall be deferred and paid in
accordance with this Agreement and that Mr. Gaston
shall have no right to receive any deferred
compensation in advance of the payment schedule set
forth in this Agreement. Upon the expiration of the
term of this Agreement, Guardsman shall pay Mr. Gaston
the balance of the deferred compensation account in
equal monthly installments on or by the last day of
each month. Guardsman shall have the option to make
monthly payments of deferred compensation over a period
of no less than thirty-six (36) months and no more than
sixty (60) months.
3.3 Director Compensation. In addition to the consulting
fee provided for in this Section 3, all regular compensation
related to Mr. Gaston's continued participation as a member of
Guardsman's Board of Directors and related committees shall
continue, including but not limited to annual retainer, board of
director meeting fees and committee meeting fees.
4. Termination of Engagement. This Agreement and Mr. Gaston's
engagement by Guardsman may be terminated prior to the expiration of the
stated term of this Agreement as follows:
4.1 Automatic Termination Upon Death. This Agreement shall
terminate automatically upon the death of Mr. Gaston. For
purposes of this Agreement, Mr. Gaston's death shall be deemed to
have occurred on the last day of the month in which his death
occurs. Guardsman shall continue to pay compensation pursuant to
Paragraph 3 above, for the period of three (3) months following
the date of death. Guardsman shall have the option to remit
unpaid deferred compensation in one payment or in monthly
installments over a period of no less than thirty-six (36) months
and no more than sixty (60) months.
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4.2 Termination by Mr. Gaston or Guardsman for Disability.
If Mr. Gaston shall be unable to substantially perform the duties
described in Paragraph 1 above for a period of four (4)
successive months by reason of illness or other similar
incapacity or disability, this Agreement may be terminated as of
the end of any calendar month following such four months by
Guardsman, based upon a determination that Mr. Gaston is disabled
and by notice in writing to that effect to Mr. Gaston. Mr.
Gaston can terminate this Agreement in the same circumstances by
presenting his resignation in writing to Guardsman. Any
determination as to whether Mr. Gaston is disabled shall be made
by a licensed physician selected by agreement of Guardsman and
Mr. Gaston or, if they cannot agree upon a physician, then by a
majority of a panel of three (3) licensed physicians, one
selected by Guardsman, one selected by Mr. Gaston, and the third
selected by the first two.
4.3 Termination by Mr. Gaston or Guardsman by Notice.
While it is the general understanding of the Parties that service
hereunder will continue for a period of three (3) to five (5)
years from the date hereof, either Mr. Gaston or Guardsman may
terminate this Agreement by providing sixty (60) days' written
notice to the other. Termination of this Agreement by Guardsman
under this Section 4.3 may be at will, with or without cause.
Upon termination under this Section 4.3 by Guardsman, Guardsman
shall pay Mr. Gaston all earned and unpaid cash and deferred
compensation in accordance with Section 3 and a lump sum
severance equal to one year's consulting fee ($170,000). All
rights of Mr. Gaston to receive any further compensation or
benefits from Guardsman under this Agreement shall thereupon
terminate.
4.4 Termination by Guardsman for Cause. The Board of
Directors may terminate this Agreement and Mr. Gaston's
engagement at any time for "cause". For purposes of this
Agreement, cause shall mean the following: (i) any material
breach by Mr. Gaston of any material provision of this Agreement,
which breach continues for thirty (30) days after written notice
to Mr. Gaston specifying the breach and demanding substantial
performance by Mr. Gaston; or (ii) any wilful action by Mr.
Gaston, that is intended to have a materially adverse effect on
the best interests of Guardsman. Upon termination under this
Section 4.4, Guardsman shall pay Mr. Gaston any earned and unpaid
base compensation forthwith and all unpaid deferred compensation
when due as provided herein.
For purposes of this Section 4.4, no act or failure to
act on Mr. Gaston's part shall be considered "wilful" unless
done, or omitted to be done, by Mr. Gaston not in good faith and
without reasonable belief that his action or omission was in the
best interests of Guardsman. Notwithstanding the foregoing, Mr.
Gaston shall not be deemed to have been terminated for Cause
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unless and until: there shall have been delivered to him a copy
of a notice of termination on behalf of the Board of Directors of
Guardsman; and after reasonable notice to him and an opportunity
for him, together with counsel, to be heard before the Board, and
at least two-thirds of the entire Board of Directors finds, in
their reasonable opinions, that Mr. Gaston was guilty of conduct
set forth above in clause (i) or (ii) and specifying the
particulars thereof in detail.
5. Certain Undertakings Upon Termination. Upon the termination of
Mr. Gaston's engagement with Guardsman, either by expiration of the term of
this Agreement or by termination pursuant to Section 4, Mr. Gaston shall
deliver to Guardsman all materials (including without limitation product
formulations or information, customer and price information, sales and
manufacturing information, business plans, memoranda, specifications and
drawings, and all other documents or information) relating to Guardsman as
are in Mr. Gaston's possession. Mr. Gaston agrees that, forever afterward,
he will not disclose to any third party any secret or confidential
information concerning Guardsman. In addition, Mr. Gaston shall not, on
behalf of himself or any other third party, solicit or approach any
employee of Guardsman for the purpose of attempting to induce such employee
to terminate his or her employment. The obligations of Mr. Gaston under
this Section 5 shall survive the Termination of this Agreement.
6. Director Benefits Not Affected. Notwithstanding anything herein
to the contrary, termination of this Agreement shall not affect Mr.
Gaston's status as a Director or his Director benefits including his
Director's retirement plan and any unexercised stock options he may hold.
7. Representations and Covenants of Mr. Gaston. Mr. Gaston
represents and covenants and agrees to perform and abide by the following
covenants for a period coinciding with the term of this Agreement:
7.1 No Conflicts. Mr. Gaston represents that he is not a
party to any agreement or under any obligation that will conflict
with the terms of this Agreement or prevent him from carrying out
Mr. Gaston's responsibilities under this Agreement.
7.2 Confidential Information. Mr. Gaston further covenants
and agrees that he shall not, from the date of this Agreement and
forever afterward, without the prior approval of Guardsman, use
or disclose to any person, firm, corporation or other entity any
proprietary, secret or confidential information of Guardsman,
including, but not limited to product formulations or
information, customer and price information, sales and
manufacturing information, business plans, memoranda,
specifications and drawings and all other documents or
information, but excluding information within the public domain
or which comes within the public domain in the future through no
act or fault of Mr. Gaston.
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8. Independent Contractor. Mr. Gaston and Guardsman agree that Mr.
Gaston is an independent contractor, is not an employee of Guardsman and
shall not be entitled to any employee benefits. As an independent
contractor, Mr. Gaston shall be responsible for the following so long as
this Agreement remains in effect: (i) maintaining his own records of
expenses; (ii) paying self-employment taxes, income taxes and other
applicable taxes and assessments; and (iii) complying with all applicable
local, state and federal laws relating to any of Mr. Gaston's duties under
this Agreement.
9. Reimbursement of Expenses. Guardsman will reimburse Mr. Gaston
for all out-of-pocket expenses reasonably incurred by Mr. Gaston in the
performance of his duties under this Agreement, in accordance with
Guardsman's expense reimbursement policy, upon receipt of a signed itemized
accounting of expenditures from Mr. Gaston containing such information as
Guardsman may reasonably require. Reimbursable expenses shall include only
those that are
incurred solely to benefit Guardsman, such as trips taken exclusively for
the business purposes of Guardsman. Except for Mr. Gaston's membership
dues for the Rotary Club of Grand Rapids and the Economic Club of Grand
Rapids, or such other membership dues as approved by the Board of Directors
in accordance with Guardsman's best interest, which Guardsman agrees to
reimburse, Guardsman will have no obligation to reimburse Mr. Gaston for
any club membership dues or fees. Mr. Gaston may hire employees to assist
with Mr. Gaston's duties under this Agreement or otherwise but any such
employees will not be employees of Guardsman but rather will be employees
of Mr. Gaston and Guardsman will have no obligation to reimburse Mr. Gaston
for any costs associated with employees hired by Mr. Gaston.
10. Designation of Beneficiary. Mr. Gaston shall from time to time
designate primary and successor beneficiaries by an executed document
delivered to the Secretary of Guardsman. If no such written beneficiary
designation is in existence, or if the designated beneficiaries predecease
Mr. Gaston, any payments hereunder shall be made to the personal
representative of Mr. Gaston.
11. No Assignment of Deferred Compensation. The right to receive any
deferred compensation under this Agreement may not be sold, assigned,
transferred, pledged, or encumbered by Mr. Gaston, Mr. Gaston's
beneficiaries, or any other person.
12. No Fiduciary Relationship. Nothing contained in this Agreement
and no action taken pursuant to the provisions of this Agreement shall be
construed as creating a trust of any kind, an escrow agreement of any kind,
or a fiduciary relationship between Guardsman and Mr. Gaston, or Mr.
Gaston's beneficiaries. Mr. Gaston or his beneficiary shall have no
greater rights with respect to this Agreement than those of a general
unsecured creditor of Guardsman.
13. Governing Law. This Agreement shall be construed and enforced in
accordance with the laws of the State of Michigan applicable to contracts
made and to be performed in the State of Michigan.
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14. Binding Effect; Benefits. All of the terms of this Agreement
shall be binding upon, inure to the benefit of and be enforceable by and
against the beneficiaries, heirs and legal representatives of Mr. Gaston
and the successors and authorized assigns of Guardsman. Nothing in this
Agreement, express or implied, is intended to confer upon any other person
any rights or remedies under or by reason of this Agreement except as
expressly indicated herein.
15. Entire Agreement. This Agreement sets forth the entire agreement
and understanding of Mr. Gaston and Guardsman in respect of the matters set
forth herein and supersedes all prior agreements, arrangements and
understandings relating to the subject matter hereof or to Mr. Gaston's
engagement with Guardsman. No representation, promise, inducement or
statement of intention has been made by Guardsman or Mr. Gaston that is not
embodied in this Agreement or in the documents referred to in this
Agreement and neither Guardsman or Mr. Gaston shall be bound by or liable
for any alleged representation, promise, inducement or statement of
intention not so set forth.
16. Amendment and Waiver. This Agreement may be amended, modified,
superseded or canceled and any of the terms hereof may be waived only by a
written instrument executed by Mr. Gaston and Guardsman and approved by
Guardsman's Board of Directors. The failure of Guardsman at any time to
require performance of any provision of this Agreement shall in no manner
affect the right of Guardsman at a later time to enforce the same. No
waiver of any condition or the breach of any term contained in this
Agreement, in any one or more instances, shall be deemed to be or construed
as a further or continuing waiver of that condition or the breach of that
term or any other term set forth herein.
17. Severability. Any provision or clause hereof which shall be
found to be contrary to law or otherwise unenforceable shall not affect the
remaining terms of this Agreement, which shall be construed in such event
as if the unenforceable provision, or clause hereof, were absent from this
Agreement.
18. Headings. The headings of the sections and paragraphs of this
Agreement have been inserted for convenience of reference only and shall in
no way restrict or otherwise modify any of the terms or provisions of this
Agreement.
19. Notices. All notices, requests, demands or other communications
hereunder shall be in writing and shall be deemed to have been duly given
when and if personally delivered or mailed by registered or certified mail,
postage prepaid, return receipt requested, by Federal Express or other
overnight courier or by telecopy, and properly addressed as follows:
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To Guardsman: Chairman - Organization/Compensation Committee
c/o Guardsman Products, Inc.
3033 Orchard Vista Drive
P.O. Box 1521
Grand Rapids, Michigan 49501
With a Copy to
Guardsman: Guardsman Products, Inc.
3033 Orchard Vista Drive, S.E.
Post Office Box 1521
Grand Rapids, Michigan 49501
Attention: President and Chief Executive Officer
To Mr. Gaston: Paul K. Gaston
256 Gracewood Drive, S.E.
Grand Rapids, Michigan 49506
or at such other address as any party may by like notice designate to the
other in writing.
IN WITNESS WHEREOF, the parties have executed this Agreement as
of the day and year first above written.
GUARDSMAN PRODUCTS, INC.
By /s/ K. Kevin Hepp
K. Kevin Hepp
Director and Chairman of the
Organization/Compensation Committee of
the Board of Directors
"Guardsman"
And by /s/ Paul K. Gaston
Paul K. Gaston
"Mr. Gaston"
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EXHIBIT 10-Q
Price Per Share: $10.875 November 10, 1994 Number of Shares: 50,000
GUARDSMAN PRODUCTS, INC.
and
PAUL K. GASTON
NON-QUALIFIED STOCK OPTION AGREEMENT
This Non-Qualified Stock Option Agreement ("Agreement") is made
as of November 10, 1994, between GUARDSMAN PRODUCTS, INC., a Delaware
corporation ("Guardsman"), and PAUL K. GASTON ("Gaston"). This Agreement
is implemented to provide Gaston with an incentive to contribute to the
long-term growth and success of Guardsman through stock ownership.
Pursuant to the recommendation of the Stock Option Committee of
Guardsman's Board of Directors (the "Committee") and upon action of
Guardsman's Board of Directors, Guardsman hereby grants stock options to
Gaston and Gaston accepts these options, subject to the terms, conditions,
and provisions contained in this Agreement.
1. Grant. Guardsman grants to Gaston an option to purchase up to
50,000 shares of Guardsman's common stock, $1 par value, at the exercise
price set forth above, which is the fair market value on the date of grant.
This option is not an incentive stock option as defined in Section 422 of
the Internal Revenue Code of 1986, as amended.
2. Term and Delayed Vesting. The right to exercise this option, in
whole or in part up to a total of 50,000 shares, shall commence on December
31, 1994, and proceed as follows: 10,000 on December 31, 1994; an
additional 10,000 shares on each December 31, thereafter, unless vesting
terminates by reason of termination of Gaston's position as Chairman of the
Board as provided in this Agreement. After vesting, either as scheduled or
by reason of acceleration, the options shall remain exercisable for a
period of 10 years. If an option is not exercised during the ten-year
period of exercisability, the unexercised portion shall lapse.
3. Exercise. Gaston shall exercise this option by giving Guardsman
a written notice of the exercise of this option. The notice shall set
forth the number of shares to be purchased, and the options shall be deemed
exercised in the order of vesting. The notice shall be effective when
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received by the Secretary or Treasurer at Guardsman's main office,
accompanied by full payment (as set forth below) of the option price.
Guardsman will deliver to Gaston a certificate or certificates for such
shares of stock; provided, however, that the time of delivery may be
postponed for such period as may be required for Guardsman with reasonable
diligence to comply with any registration requirements under the Securities
Act of 1933, the Securities Exchange Act of 1934, any requirements under
any other law or regulation applicable to the issuance, listing or transfer
of such shares, or any agreement or regulation of the New York Stock
Exchange and the Pacific Stock Exchange. If Gaston fails to accept
delivery of and pay for all or any part of the number of shares specified
in the notice upon tender or delivery of the shares, Gaston's right to
exercise the option with respect to such undelivered shares shall
terminate.
4. Payment by Gaston. When exercising this stock option, Gaston
shall pay Guardsman in cash or, if the Committee consents, in shares of
Guardsman's common stock (including common stock to be received upon a
simultaneous exercise) or other consideration substantially equivalent to
cash. The Committee, in its discretion, may permit payment of all or a
portion of the exercise price in the form of a promissory note or
installments, with or without security, according to terms approved by the
Committee.
5. Transferability. Without the prior written consent of Guardsman,
this option is not transferable by Gaston except by will or according to
the laws of descent and distribution. If any assignment, pledge, or
transfer of this option shall be made or attempted, or if any attachment,
execution, garnishment, or lien shall be issued against or placed upon the
same, this option shall be void and of no further effect. Guardsman may,
in the event it deems the same desirable to assure compliance with
applicable federal and state securities laws, place an appropriate
restrictive legend upon any certificate representing shares issued pursuant
to the exercise of this option, and may also issue appropriate stop
transfer instructions to its transfer agent with respect to such shares.
6. Termination of Status. In the event of Gaston's death or
disability all vested options may be exercised by Gaston's personal
representative or other successor in interest throughout their terms, but
only to the extent Gaston was entitled to exercise the options on the date
of death or disability, whichever occurred first, subject to accelerated
vesting as provided below. If Gaston's directorship is terminated for
cause, Gaston shall have no further right to exercise the options.
7. Accelerated Vesting. If Gaston dies or becomes disabled during
the terms of the options with any unvested options, then the options which
would have become exercisable during the year of death or disability shall
become exercisable upon death or disability, and all other unvested options
shall lapse. If substantially all of Guardsman's stock or assets are sold,
all unvested outstanding options shall become immediately exercisable one
day prior to such sale. If Gaston's Consulting Agreement with Guardsman
dated January 1, 1994, or any extension or amendment of such agreement, is
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terminated by Guardsman without cause, then the shares which would have
vested during the remaining term of any such agreement shall be immediately
exercisable.
8. Intent to Serve. Gaston hereby states that Gaston intends to
continue to serve as a director and as Chairman of the Board of Guardsman
during the term of his Consulting Agreement, and for an extension of two
additional years with the consent of Guardsman.
9. Corporate Changes. In the event of any stock dividend, stock
split, recapitalization, merger, consolidation, combination, exchange of
shares, or any other change in Guardsman's corporate structure or shares,
the number and class of shares covered by this option and the exercise
price shall be appropriately adjusted. No fractional shares shall be
issued, and any fractional shares resulting from adjustments shall be
eliminated, with an appropriate cash adjustment for any fractional shares
eliminated.
10. Stockholder Rights. Gaston shall have no rights as a stockholder
with respect to any shares covered by this option until exercise of the
option and payment for such shares.
11. Directorship. The grant of this option shall not impose upon
Guardsman or any subsidiary any obligation to retain Gaston as Chairman of
the Board for any given period or upon any specific terms.
12. Certifications. Gaston acknowledges that he has been furnished
and has read the most recent Annual Report to Stockholders of Guardsman.
Gaston hereby represents and warrants that Gaston is acquiring the option
granted under this Agreement for Gaston's own account and investment and
without any intent to resell or distribute the shares upon exercise of the
option. Gaston shall not resell or distribute the shares received upon
exercise of the option except in compliance with such conditions as
Guardsman may reasonably specify to ensure compliance with federal and
state securities laws.
13. Withholding. If any aspects of this option should, under tax
laws now or in the future, subject Guardsman to withholding obligations
from Gaston's compensation, Guardsman shall be entitled to (a) withhold and
deduct from Gaston's future compensation (or from other amounts that may be
due and owing to Gaston from Guardsman or a subsidiary), or make other
arrangements for the collection of, all legally required amounts necessary
to satisfy any and all applicable federal, state, and local withholding and
other tax requirements, if any, attributable to the options granted under
this Agreement, including, without limitation, the grant, exercise, or
vesting of the options; or (b) require Gaston promptly to remit the amount
of such withholding to Guardsman or a subsidiary before taking any action
with respect to the option. Unless the Committee provides otherwise,
withholding may be satisfied by withholding common stock to be received or
by delivery to Guardsman or a subsidiary of previously owned common stock
of Guardsman.
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14. Effective Date. This option shall be effective as of the date
first set forth above.
15. Amendment. This option shall not be modified except in a writing
executed by the parties hereto.
ATTEST: GUARDSMAN PRODUCTS, INC.
/s/ Winthrop C. Neilson /s/ Charles E. Bennett
Winthrop C. Neilson, Member, Stock Charles E. Bennett, President
Option Committee
Grantee:
/s/ Paul K. Gaston
Paul K. Gaston
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EXHIBIT 10-R
STOCKHOLDER AGREEMENT
PARTIES: Guardsman Products, Inc., a Delaware corporation (the
"Issuer" or "Guardsman"), with John H. Sadler and James L.
Sadler (the "Stockholders").
DATE: August 31, 1994.
PREAMBLE: The Stockholders are acquiring Shares (as herein defined),
pursuant to the terms of a certain Agreement and Plan of
Merger, dated as of July 15, 1994 (the "Merger Agreement")
by and among the Issuer and its wholly owned subsidiary,
Guardsman Illinois, Inc., a Delaware corporation, with
Moline Paint Manufacturing Co., a Nevada corporation, and
the Stockholders. This Agreement is executed in connection
with the Merger Agreement in order to grant Stockholders
certain securities registration rights and to set forth
certain mutually agreeable terms concerning the voting and
sale of the Shares issued to Stockholders as part of the
Merger Consideration (as defined in the Merger Agreement).
The Stockholders acknowledge that following completion of
the merger transaction, the Stockholders will each own a
significant percentage of the issued and outstanding voting
common stock of the issuer and that the terms governing
voting of the Shares contained in this Agreement are both
reasonable and in the best interest of the Issuer and its
stockholders in general.
CONSIDERATION: Mutual covenants of the parties set forth in the Merger
Agreement and as hereinafter set forth and other good and
valuable consideration, the receipt and sufficiency of which
are hereby acknowledged.
TERMS:
1. Definitions.
1.1 "Commission" means the Securities and Exchange Commission.
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1.2 "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
1.3 "Public Offering" means any offering by the Issuer of its
equity securities to the public pursuant to an effective registration
statement under the Securities Act or any comparable statement under
any comparable federal statute then in effect.
1.4 "Registration Expenses" is defined in Section 6 of this
Agreement.
1.5 "Securities Act" means the Securities Act of 1933, as
amended.
1.6 "Shares" means any shares of the Issuer's Common Stock,
$1.00 par value per share, which were, or are to be, issued to the
Stockholders pursuant to the terms of the Merger Agreement; provided,
however, that Shares shall not include any of such shares which have
been sold pursuant to a previous registration by the Issuer pursuant
to the Securities Act or which have been sold to the public pursuant
to Rule 144 of the Commission under the Securities Act or otherwise
sold by the Stockholders.
2. Registration, for Underwritten Public Offering, Private Placement
or Repurchase of Shares. The Issuer agrees that during the eight (8) years
following the Merger Date, the Issuer shall be obligated, within the time
periods set forth herein, use reasonable efforts to register the Shares and
pay the Registration Expenses in connection therewith as provided in this
Agreement. Such registrations may be effected by a separate registration
statement or the Shares can be included in a Piggyback Registration (as
hereinafter defined). The Issuer shall have the right to designate the
managing underwriter or managing underwriters in respect of such
registrations of Shares which are underwritten. At any time following the
expiration of one (1) year from the date hereof, the Stockholders may
jointly notify Issuer that each of the Stockholders wish to register not
less than 100% of their Shares for the purpose of making an underwritten
public offering in the manner set forth herein. Issuer shall, within sixty
(60) days of receipt of notice, take all actions reasonably required to
register such shares. In the event that the Issuer fails to so register
such shares pursuant to this Section, then, on receipt of Stockholders'
subsequent written notice of intent to sell such Shares as have not been
registered hereunder, the Issuer must, within sixty (60) days of receipt of
such notice, at its option:
(a) register all of the Shares; and/or
(b) request that Issuer's investment bankers privately place all
or any part of the Shares pursuant to one or more exemptions from
registration under the Securities Act to parties approved by the
Issuer, in which case the Issuer guarantees that the shares will be
placed at a price no less than the average trading price per share of
Issuer's stock for the two calendar week (14 day) period prior to the
date of the private placement; and/or
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(c) repurchase all or any part of the Shares otherwise qualified
hereunder for registration, in which case the repurchase price per
share shall be set at the average trading price per share of Issuer's
stock for the two calendar week (14 day) period prior to the date of
repurchase.
3. Conditions to Issuer's Option. Notwithstanding Issuer's
obligations as set forth above, the Issuer may request Stockholders'
consent to postpone the filing or the effectiveness of any registration
statement for up to 90 days if the Issuer's Board of Directors, acting in
good faith, reasonably determines that any such registration would have a
materially adverse effect on the Issuer, including, without limitation, the
determination that any such registration would have an adverse effect on
any proposal or plan by the Issuer or any of its subsidiaries to engage in
any acquisition of assets (other than in the ordinary course of business),
acquisition of stock, or any merger, consolidation, financing, other
registration of its equity securities under the Securities Act (for itself
or for third parties), tender offer or other significant transaction. The
Stockholders shall not unreasonably withhold their permission with respect
to any such request.
4. Piggyback Registration. Whenever the Issuer proposes to register
any of its Shares of Common Stock under the Securities Act (other than
pursuant to a registration of shares hereunder) in an underwritten
registration and the registration form to be used may be used for the
registration of the Shares (a "Piggyback Registration"), the Issuer shall
give prompt written notice to the Stockholders of its intention to effect
such a registration and shall include in such registration all Shares (in
accordance with the priority set forth below) with respect to which the
Issuer has received written requests for inclusion within fifteen (15) days
after the receipt of the Issuer's notice. The Stockholders shall waive
their right to register any Shares previously issued to the Stockholders
which the Stockholders do not request to be included in such Piggyback
Registration. Anything to the contrary contained herein notwithstanding,
the Issuer shall be entitled to exclude the Stockholders from participating
in any Piggyback Registration, or may restrict the number of Stockholders'
shares to be so registered, if the Board of Directors of the Issuer, in its
exclusive judgment, acting in good faith, deems such exclusion or
restriction to be necessary in the best interests of the Issuer and its
stockholders. If a Piggyback Registration is an underwritten Registration
and the managing underwriter advises the Issuer in writing that in its
opinion the number of securities requested by the Issuer to be included in
such registration exceeds the number which can be sold in such offering,
the Issuer will include in such registration (i) first, any securities that
the Issuer proposes to sell, and (ii) then, the securities the Stockholders
and any other holders of Common Stock (or securities convertible into or
exchangeable for Common Stock) who have been granted piggyback registration
rights, in proportion, as nearly as practicable, to the respective amounts
of shares which they had requested to be included in such registration at
the time of filing the registration statement.
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5. Holdback Agreement. Each Stockholder agrees not to effect any
public sale or distribution of equity securities of the Issuer, or any
securities convertible into or exchangeable or exercisable for such
securities, including a sale pursuant to Rule 144 under the Securities Act,
during the 14-day period prior to and the 180-day period beginning on the
effective date of any underwritten registration (except as part of such
registration), or for such additional period as deemed by the Board of
Directors of the Issuer, in its exclusive judgment, acting in good faith,
to be necessary in the best interests of the Issuer and its stockholders,
including without limitation, any underwritten Piggyback Registration in
which Shares are included, unless the underwriters managing the registered
public offering otherwise agree, which agreement shall not be unreasonably
withheld. Notwithstanding the foregoing, in the event that any "Control
Persons" or "Affiliates" of the Issuer (as such terms are defined in the
Securities Act) participate in any sale or distribution of securities (of
the same type and class as held by the Stockholders) during any holdback
period (as provided in this Section 5), the Stockholders shall likewise be
permitted to participate in such sale or distribution in proportion equal
to the percentage such Control Persons' and/or Affiliates' securities to be
sold or distributed represent as against the total securities owned by such
participating Control Persons and/or Affiliates.
6. Registration Procedures. Whenever any Shares are to be
registered pursuant to this Agreement, the Issuer will use reasonable
efforts to effect the registration and sale of such Shares in accordance
with the intended method of disposition thereof and, pursuant thereto, the
Issuer will:
(a) Prepare and file with the Commission a registration
statement with respect to such Shares and use reasonable efforts to
cause such registration statement to become effective;
(b) Prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus(es) used
in connection therewith as may be necessary to keep such registration
statement effective for a period of not less than six (6) months and
comply with the provisions of the Securities Act with respect to the
disposition of all securities covered by such registration statement
during such period in accordance with the intended methods of
disposition by the sellers thereof set forth in such registration
statement;
(c) Furnish to each Stockholder such number of copies of such
registration statement, each amendment and supplement thereto, the
prospectus(es) included in such registration statement (including each
preliminary prospectus) and such other documents as such Stockholder
may reasonably request in order to facilitate the disposition of the
Shares owned by such Stockholder;
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(d) Use reasonable efforts to register or qualify such Shares
under such other securities laws of such state as either Stockholder
reasonably requests and do any and all other acts and things which may
be reasonably necessary or advisable to enable such Stockholder to
consummate the disposition in such jurisdictions of the Shares owned
by such Stockholder (provided that the Issuer will not be required to
(i) qualify generally to do business in any jurisdiction where it
would not otherwise be required to qualify but for this subparagraph,
(ii) subject itself to taxation in any such jurisdiction, or
(iii) consent to general service of process in any such jurisdiction);
(e) Notify the Stockholders, at any time when a prospectus
relating thereto is required to be delivered under the Securities Act,
of the happening of any event as a result of which the prospectus
included in such registration statement contains an untrue statement
of a material fact or omits any fact necessary to make the statements
therein not misleading, and, at the request of any such Stockholder,
the Issuer will prepare a supplement or amendment to such prospectus
so that, as thereafter delivered to the purchasers of such Shares,
such prospectus will not contain any untrue statement of a material
fact or omit to state any fact necessary to make the statements
therein not misleading;
(f) Advise the Stockholders, promptly after they shall receive
notice or obtain knowledge thereof, of the issuance of any stop order
by the Commission suspending the effectiveness of such registration
statement or the initiation or threatening of any proceeding for such
purpose and promptly use all reasonable efforts to prevent the
issuance of any stop order or to obtain its withdrawal if such stop
order should be issued; and
(g) At the request of either Stockholder in connection with an
underwritten offering, furnish on the date or dates provided for in
the underwriting agreement: (i) an opinion of counsel, addressed to
the underwriters, covering such matters as such underwriters may
reasonably request, including such matters as are customarily
furnished in connection with an underwritten offering; and (ii) a
letter or letters from the independent certified public accountants of
the Issuer addressed to the underwriters, covering such matters as
such underwriters may reasonably request, in which letter(s) such
accountants shall state, without limiting the generality of the
foregoing, that they are independent certified public accountants
within the meaning of the Securities Act and that in their opinion the
financial statements and other financial data of the Issuer included
in the registration statement, the prospectus(es), or any amendment or
supplement thereto, comply in all material respects with the
applicable accounting requirements of the Securities Act.
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7. Shelf Registration of Shares. As an alternative to proceeding
with a registration of the Shares pursuant to a registration statement
contemplating a prompt single underwritten public offering of the Shares as
described in Section 2, Stockholders may jointly notify Guardsman that
Stockholders request that Guardsman register their entire holdings of the
Shares on a Form S-3 or other "shelf" registration statement appropriate
pursuant to Rule 415 (or similar rule that may be adopted by the Commission
for delayed or continuous offerings) under the Securities Act. Such
request may be made by the Stockholders at any time on or after ten (10)
months after the Merger Date, it being the intention of the parties that if
such notice is provided to Guardsman ten (10) months after the Merger Date,
Guardsman shall use its best efforts to cause such Registration Statement
to be declared effective on the first anniversary of the Merger Date, and
to use its best efforts to cause such Registration Statement to remain
continuously in effect until four (4) years from the Merger Date unless the
Stockholders otherwise consent or unless Stockholders complete the sale of
more than ninety percent (90%) of the Shares. Sales made pursuant to a
shelf registration shall be subject to the registration expense allocation
provisions of this Agreement set forth in Section 8, the indemnification
provisions of this Agreement set forth in Section 9, and all other
applicable provisions of this Agreement, and must be completed in a manner
so as to effect a broad public distribution of the Shares; provided,
however, that in the event Stockholders elect to require Guardsman to
register the Shares pursuant to this Section 7, Guardsman consents that
following registration sales may be made by brokers in transactions not
involving an underwritten public offering during the second year following
the Merger Date in amounts not exceeding 50,000 Shares per calendar quarter
for each Stockholder and provided further that sales may be made by brokers
in transactions not involving an underwritten public offering during the
third and fourth years following the Merger Date in amounts not greater
than the amounts permitted under Rule 144 (all such sales by brokers to be
effected in a manner intended to achieve a broad public distribution of the
Shares).
8. Registration Expenses. All expenses incident to the Issuer's
performance of or compliance with this Agreement, including without
limitation all registration and filing fees, fees and expenses of
compliance with securities or blue sky laws, printing expenses, messenger
and delivery expenses, and fees and disbursements of counsel for the Issuer
and all independent certified public accountants, underwriters (excluding
underwriting or sales discounts, commissions, transfer taxes, and excluding
any portion of the fees or disbursements of any counsel retained by the
Stockholders in connection with the registration of his Shares) and other
persons retained by the Issuer (all such expenses being herein called
"Registration Expenses"), will be borne by the Issuer. Stockholders shall
pay and bear the direct selling fees, disbursements and expenses, including
without limitation all underwriters' discounts, commissions and expenses,
transfer taxes, and fees and disbursements of counsel retained by either of
the Stockholders.
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9. Indemnification.
9.1 The Issuer agrees to indemnify, to the extent permitted by
law, the Stockholders against all losses, claims, damages, liabilities
and expenses (including without limitation, attorney's fees) caused by
any untrue or alleged untrue statement of material fact contained in
any registration statement, prospectus or preliminary prospectus, or
any amendment thereof or supplement thereto, or any omission or
alleged omission of a material fact required to be stated therein or
necessary to make the statements therein not misleading, except
insofar as the same are caused by or contained in any information
furnished to the Issuer by the Stockholder expressly for use therein
or by such Stockholder's failure to deliver a copy of the registration
statement or prospectus or any amendments or supplements thereto after
the Issuer has furnished such holder with a sufficient number of
copies of the same.
9.2 In connection with any registration statement in which the
Stockholders are participating, the Stockholders will furnish to the
Issuer in writing such information and affidavits as the Issuer
reasonably requests for use in connection with any such registration
statement or prospectus and, to the extent permitted by law, will
indemnify the Issuer, its directors and officers and each person who
controls the Issuer (within the meaning of the Securities Act) against
any losses, claims, damages, liabilities and expenses resulting from
any untrue or alleged untrue statement of material fact contained in
the registration statement, prospectus or preliminary prospectus, or
any amendment thereof or supplement thereto, or any omission or
alleged omission of a material fact required to be stated therein or
necessary to make the statements therein not misleading, but only to
the extent that such untrue statement or omission is contained in any
information or affidavit so furnished in writing by the Stockholder in
connection with any information and affidavits furnished to Issuer by
Stockholders subsequent to the date hereof; provided that the
obligation to indemnify will be joint and several among such
Stockholders.
9.3 Any person entitled to indemnification hereunder will
(i) give prompt written notice to the indemnifying party of any claim
with respect to which it seeks indemnification, and (ii) permit such
indemnifying party to assume the defense of such claim with counsel
reasonably satisfactory to the indemnified party. If such defense is
assumed, the indemnifying party will not be subject to any liability
for any settlement made by the indemnified party without its consent
(but such consent will not be unreasonably withheld). An indemnifying
party who is not entitled to, or elects not to, assume the defense of
a claim will not be obligated to pay the fees and expenses of more
than one counsel for all parties indemnified by such indemnifying
party with respect to such claim.
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10. Participation in Underwritten Registrations. The Stockholders
may not participate in any registration of Shares hereunder which is
underwritten unless they (i) agree to sell their securities on the basis
provided in any underwriting arrangements approved by Guardsman, and
(ii) complete and execute all questionnaires, powers of attorney, custody
agreements, indemnities, underwriting agreements and other documents
required under the terms of such underwriting arrangements.
11. Voting of Shares. For a period of eight (8) years following the
Merger Date (as defined in the Merger Agreement), each Stockholder agrees
to vote his Shares in the same manner and in the same proportions as voted
by all other voting stockholders of the Issuer on all matters submitted to
stockholders for approval or for a vote in accordance with the Certificate
of Incorporation and Bylaws of the Issuer and with applicable law (thus, if
voting stockholders of the Issuer, other than the Stockholders, vote to
approve the Board of Director's nominees for election as directors with 90%
voting to approve and 10% voting to withhold authority, then the
Stockholders by agreement shall each vote 90% of their Shares to approve
and 10% of their Shares to withhold authority). The Stockholders shall not
be required to vote Shares in accordance with this Agreement or may abstain
from voting only upon providing a written opinion of legal counsel stating
(i) that the specific matter presented for a stockholder vote involves a
conflict of interest or interested transaction between the Stockholder and
the Issuer; (ii) that a Stockholder's abstention is required under
applicable law or regulation; or (iii) during such time that an Event of
Default remains unremedied in accordance with Section 14 herein. For
purposes of effecting the voting agreement set forth in this Section 11,
each Stockholder, on or before the Closing Date (as defined in the Merger
Agreement) shall execute and deliver to the Issuer an Irrevocable Proxy, in
the form of Exhibit A, for purposes of authorizing the Issuer to vote the
Shares in accordance with the terms of this Agreement.
12. Manner of Sale. The parties acknowledge and agree that it is the
desire and intent of the parties that the Shares will be sold in a manner
intended to effect a broad public distribution. Accordingly, Stockholders
agree that the Shares shall be sold by them only as follows without the
prior written consent of Guardsman: (i) pursuant to a Piggyback
Registration or in an underwritten registration intended to effect a broad
public distribution with an underwriter approved by Guardsman as provided
in this Agreement; (ii) pursuant to a private placement under one or more
exemptions from registration under the Securities Act to a party or parties
approved by the Issuer in writing in advance; or (iii) pursuant to Rule 144
under the Securities Act, as the rule may be amended from time to time,
subject to the volume limitations set forth in such rule; provided,
however, that subsequent to four (4) years from the date of this Agreement,
the parties agree that the volume and other limitations of Rule 144 shall
be inapplicable, and sales may be made in excess of such volume limitations
so long as such sales are made to effect a broad public distribution rather
than a "block" sale; or (iv) in a redemption transaction with the Issuer.
Any transfer or attempted transfer except as set forth in this Section 12
shall be void and of no effect and will not be recognized by Issuer as
valid.
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13. Specific Performance. In the event that either Stockholder
defaults or breaches any of the terms set forth in Section 11 or Section
12, each Stockholder acknowledges that such default or breach shall cause
irreparable harm to the Issuer and that the Issuer's remedies at law shall
be inadequate. Accordingly, the Stockholders agree that the Issuer shall
be entitled to the remedies of specific performance and injunctive relief,
without the requirement of posting or providing any security, in addition
to any and all other remedies and rights at law or in equity, and those
rights and remedies shall be cumulative.
14. Default. In the event Issuer shall fail to pay any amounts due
and owing to either Stockholder pursuant to the Noncompetition Agreements
of even date with this Agreement or in the event Issuer fails to perform
any material obligations for the benefit of the Stockholders under this
Agreement (collectively an "Event of Default"), and Issuer shall fail to
remedy such Event of Default following twenty (20) days' written notice of
the occurrence of an Event of Default from either Stockholder, the
Stockholders shall be relieved from voting requirements set forth in
Section 10 of this Agreement for so long as the Event of Default shall
continue. Immediately at such time as Issuer remedies all Events of
Default for which written notice has been provided, the voting requirements
set forth in Section 10 of this Agreement shall automatically review in
full force and effect.
15. Issuer Common Stock. Stockholders hereby acknowledge and agree
that all shares of common stock delivered by Issuer to Stockholders as
consideration for the transactions contemplated in the Agreement and Plan
of Merger of even date with this Agreement will not be registered under the
Federal securities laws or under any State securities laws and may not be
sold without registrations or exemptions from applicable federal and state
securities laws. Stockholders further acknowledge and agree that each
stock certificate representing shares of common stock of the Issuer
transferred as consideration to Stockholders shall bear an appropriate
restrictive legend summarizing applicable restrictions on transfer of the
shares.
16. Transfers to Family Members or Trusts. Each Stockholder may
transfer all or any of his Shares without consideration to his spouse,
children or other descendants, or to a trust for his or their benefit.
However, as a condition to such transfer, the transferee must agree in
writing to be bound by all terms of this Agreement relating to manner of
sale, and the transferee and Guardsman shall also be bound by the terms and
conditions set forth in the Agreement and Plan of Merger relating to the
Shares. Such transferee's Shares shall be deemed to be owned by the donor
Stockholder for all purposes of this Agreement, except that any purchase
price for Shares payable in accordance with this Agreement shall be paid to
the transferee and not the donor Stockholder.
17. Negotiations Between Parties. The parties shall attempt in good
faith to resolve any dispute arising out of or relating to this Agreement
promptly by negotiation. Any party may give the other party written notice
of any dispute not resolved in the normal course of business. Within
fifteen (15) days after delivery of the notice, the receiving party shall
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submit to the other a written response. The notice and the response shall
include (a) a statement of each party's position and a summary of arguments
supporting that position, and (b) the name and title of the executive or
other person who will represent that party and of any other person who will
accompany them. Within thirty (30) days after delivery of the disputing
party's notice, the representatives of both parties shall meet at a
mutually acceptable time and place, and thereafter as often as they
reasonably deem necessary, to attempt to resolve the dispute. All
reasonable requests for information made by one party to the other will be
honored. If the matter has not been resolved within sixty (60) days of the
disputing party's notice, or if the parties fail to meet within thirty (30)
days, either party may initiate mediation of the controversy or claim as
provided hereinafter. All negotiations pursuant to this clause are
confidential and shall be treated as compromise and settlement negotiations
for purposes of the Federal Rules of Evidence and state rules of evidence.
18. Mediation or Minitrial. If the dispute has not been resolved by
negotiation as provided herein, the parties shall endeavor to settle the
dispute by mediation under the then current Center for Public Resources
("CPR") Model Procedure for Mediation of Business Disputes. The neutral
third party will be selected from the CPR Panels of Neutrals, with the
assistance of CPR, unless the parties agree otherwise. If any party to
this Agreement initiates mediation in accordance with this Section, the
other parties agree to participate in good faith in such mediation and
further agree, with respect to matters subject to mediation, not to
commence any lawsuit, other legal proceeding, or other form of alternate
dispute resolution until the conclusion of the mediation in accordance with
this Section.
19. Mediation and Litigation Expenses. In any controversy, claim
or dispute arising out of, or relating to, this Agreement or any ancillary
Agreements hereto or the method and manner of performance thereof or the
breach thereof, the prevailing party in any litigation, mediation or other
proceeding shall be entitled and awarded, in addition to any other relief,
a reasonable sum as dispute resolution expenses. If neither party wholly
prevails, then each party shall bear its own dispute resolution expenses.
In determining what is a reasonable sum for dispute resolution expenses,
the actual amount of attorneys' fees the prevailing party is obligated to
pay its attorney or attorneys shall be presumed to be reasonable, which
presumption is rebuttable, and the actual expenses incurred in the
proceeding, including but not limited to travel expenses and loss of time
of a party, shall be presumed to be reasonable, which presumption is
rebuttable.
20. Miscellaneous.
20.1 No Inconsistent Agreements. Neither the Issuer nor either
Stockholder will hereafter enter into any agreement which is
inconsistent with this Agreement.
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20.2 Severability. If any provision of this Agreement, or the
application of such provision to any person or circumstance, shall be
held invalid, the remainder of this Agreement, or the application of
such provision to other persons or circumstances, shall not be
affected thereby.
20.3 Successors. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors,
assigns, heirs, administrators, executors and legal representatives,
provided, however, that neither Stockholder may assign any of his
rights or obligations hereunder without the prior written consent of
the Issuer.
20.4 Final Agreement; Amendment. This Agreement constitutes the
final and entire agreement of the parties hereto with respect to the
subject matter hereof and may be modified or amended only by an
instrument signed by all of the parties hereto. This Agreement
supersedes any and all other prior or contemporaneous agreements and
understandings, either oral or in writing, among the parties hereto
with respect to the subject matter hereof.
20.5 Governing Law. This Agreement shall be governed by the
laws of the State of Michigan, without giving effect to its conflict
of laws provisions.
20.6 Captions. The captions used in this Agreement are included
for convenience of reference only and shall not affect the
construction or interpretation of any provision hereof.
20.7 Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, but all of
which shall constitute one and the same instrument.
20.8 Notices. All notices and demands required or permitted
under this Agreement shall be deemed properly given and effective upon
receipt (or, if refused, upon the date of such refusal) if in writing
and sent by U.S. first class mail, postage prepaid, overnight air
courier, facsimile transmission or personal delivery to the parties at
their addresses set forth below. Any party may specify a different
address by notifying the other parties in writing of such different
address.
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If to the Issuer: Guardsman Products, Inc.
3033 Orchard Vista Drive, S.E.
Suite 200
Post Office Box 1521
Grand Rapids, Michigan 49501
Attention: President
If to John H. Sadler: John H. Sadler
5402 24th Avenue Drive
Moline, Illinois 61265
If to James L. Sadler: James L. Sadler
7310 37th Avenue
Moline, Illinois 61265
IN WITNESS WHEREOF, the parties hereto have executed and
delivered this Stockholder Agreement on the date first above written.
ATTEST: GUARDSMAN PRODUCTS, INC.
/s/ Edward D. Corlett By /s/ Charles E. Bennett
Edward D. Corlett Charles E. Bennett
Secretary President and Chief Executive Officer
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WITNESS: STOCKHOLDER
/s/ Harvey A. Levin /s/ John H. Sadler
Harvey A. Levin John H. Sadler
WITNESS: STOCKHOLDER
/s/ Harvey A. Levin /s/ James L. Sadler
Harvey A. Levin James L. Sadler
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EXHIBIT A
SAMPLE IRREVOCABLE PROXY
The undersigned is the holder of 750,000 shares of Common Stock
(the "Stock") issued by GUARDSMAN PRODUCTS, INC., a Delaware corporation
("Guardsman").
The undersigned hereby designates and appoints Guardsman and such
officers as its Board of Directors may appoint to act as his proxy, agent,
and attorney in fact to take all steps which it deems necessary or
desirable on behalf of the undersigned in connection with the Stock,
vesting in Guardsman and its agents, without limitation, the authority to
vote the Stock at any and all stockholder meetings in accordance with the
Stockholder Agreement between Guardsman and the undersigned dated as of
August 31, 1994.
It is acknowledged that this proxy is coupled with an interest
and is intended to be irrevocable as provided in Section 212 of the
Delaware General Corporation Law, except as set forth in the Agreement and
Plan of Merger between Moline Paint Manufacturing Co. and Guardsman
Illinois, Inc. and joined in by Guardsman, John H. Sadler and the
undersigned, dated as of July 15, 1994.
Dated: August 31, 1994 ________________________________________
James L. Sadler
STATE OF ILLINOIS
COUNTY OF ROCK ISLAND
On August 31, 1994, before me personally appeared James L.
Sadler, to me personally known, who acknowledged that he subscribed to and
executed this Irrevocable Proxy as his free act and deed.
________________________________________
Pamela Savala, Notary Public
Rock Island County, Illinois
My commission expires: October 15, 1996
[The effective date of this irrevocable proxy is September 1, 1995]
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EXHIBIT A
(Continued)
SAMPLE IRREVOCABLE PROXY
The undersigned is the holder of 750,000 shares of Common Stock
(the "Stock") issued by GUARDSMAN PRODUCTS, INC., a Delaware corporation
("Guardsman").
The undersigned hereby designates and appoints Guardsman and such
officers as its Board of Directors may appoint to act as his proxy, agent,
and attorney in fact to take all steps which it deems necessary or
desirable on behalf of the undersigned in connection with the Stock,
vesting in Guardsman and its agents, without limitation, the authority to
vote the Stock at any and all stockholder meetings in accordance with the
Stockholder Agreement between Guardsman and the undersigned dated as of
August 31, 1994.
It is acknowledged that this proxy is coupled with an interest
and is intended to be irrevocable as provided in Section 212 of the
Delaware General Corporation Law, except as set forth in the Agreement and
Plan of Merger between Moline Paint Manufacturing Co. and Guardsman
Illinois, Inc. and joined in by Guardsman, James L. Sadler and the
undersigned, dated as of July 15, 1994.
Dated: August 31, 1994 ________________________________________
John H. Sadler
STATE OF ILLINOIS
COUNTY OF ROCK ISLAND
On August 31, 1994, before me personally appeared John H. Sadler,
to me personally known, who acknowledged that he subscribed to and executed
this Irrevocable Proxy as his free act and deed.
________________________________________
Pamela Savala, Notary Public
Rock Island County, Illinois
My commission expires: October 15, 1996
[The effective date of this irrevocable proxy is September 1, 1995]
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EXHIBIT 10-S
NONCOMPETITION AGREEMENT
This is an AGREEMENT entered into effective August 31, 1994 (the
"Agreement"), between MOLINE PAINT MANUFACTURING CO. ("Moline"), a Delaware
corporation, maintaining its principal offices in Moline, Illinois, as the
surviving corporation of the merger between Guardsman Illinois, Inc., a
newly formed Delaware corporation and Moline Paint Manufacturing Co., a
Nevada corporation ("Predecessor Company"), and JAMES L. SADLER ("Mr.
Sadler").
The parties hereto have entered into an Agreement and Plan of
Merger ("Merger Agreement") pursuant to which the Predecessor Company will
be merged with and into Guardsman Illinois, Inc., the wholly owned
subsidiary of Guardsman Products, Inc., a Delaware corporation
("Guardsman") which joins in this Agreement. Mr. Sadler is one of two
shareholders of the Predecessor Company and this Agreement is entered into
in connection with the Merger Agreement.
To induce Guardsman and Moline to enter into the Merger Agreement
and to consummate the transactions contemplated thereby, and to protect and
preserve the business and goodwill of Predecessor Company to be acquired by
Moline, Mr. Sadler has agreed not to compete with Moline for the period
specified in this Agreement. Mr. Sadler acknowledges and agrees that the
restrictive covenants assumed by Mr. Sadler in this Agreement are
reasonable and essential to the business and goodwill of Predecessor
Company to be acquired by Moline and the other benefits contemplated by the
Merger Agreement.
1. Covenant Not to Compete. Mr. Sadler covenants and agrees to
perform and abide by the following covenants for a period of twelve (12)
years from the date of this Agreement, Mr. Sadler shall have no investment
(except as permitted below), involvement, or other connection whatsoever,
directly or indirectly with any corporation, partnership, proprietorship,
individual, or other business entity, that, during all or any part of the
period in which Mr. Sadler has such investment, involvement, or other
connection, manufactures, sells or distributes products competitive with or
similar to those sold or in development by Predecessor Company at the
Merger Date, or sold by Moline after the Merger Date ("Competitor") in any
part of the Restricted Area, as defined below. Without limiting the
generality of the foregoing, Mr. Sadler agrees that he shall not be or
become a shareholder, partner, or other investor in, nor an officer,
employee, consultant, adviser, or director of, nor a sales or other agent
(whether independent or otherwise) or distributor for, a Competitor. Mr.
Sadler further agrees that he shall not, either for himself or on behalf of
a Competitor, directly or indirectly, divert or attempt to divert any
business from Moline, solicit any current or past customer of Moline, or
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attempt to influence any customer of Moline to divert business from Moline.
Mr. Sadler acknowledges that Moline will manufacture and distribute the
products of the Predecessor Company and sell such products throughout the
Restricted Area, and that the restrictive covenant hereby assumed by Mr.
Sadler is essential to the business of the Company, its goodwill, and the
other benefits contemplated by the Merger Agreement. Nothing contained in
this Agreement shall prohibit Mr. Sadler from acquiring not more than five
percent (5%) of the outstanding shares of any equity security of a
Competitor listed for trading in the New York Stock Exchange, the American
Stock Exchange, or quoted on the National Association of Securities Dealers
Automated Quotation System. In this Agreement, "Restricted Area" means the
United States, Canada and Mexico.
If any court of competent jurisdiction shall at any time deem the
foregoing time periods too lengthy or the scope of the covenants too broad,
the restrictive time period shall be deemed to be the longest period
permissible by law, and the scope shall be deemed to comprise the largest
scope permissible by law under the circumstances. In such event, it is the
parties' intent to protect and preserve the business and goodwill of the
Predecessor Company acquired by Moline pursuant to the Merger Agreement and
thus the parties agree and direct that the time period and scope of the
foregoing covenants shall be the maximum permissible duration or scope. It
is understood and agreed by Moline that the noncompete covenants of this
Agreement are personal to Mr. Sadler, and shall not be binding upon any of
Mr. Sadler's heirs or legal representatives.
2. Noncompete Consideration. In consideration for the covenant not
to compete set forth in this Agreement, Guardsman or Moline shall pay to
Mr. Sadler the amount of Three Hundred Seventy Four Thousand Three Hundred
Fifty Dollars ($374,350) per year during the first four (4) years of this
Agreement, payable in equal monthly installments of approximately Thirty
One Thousand One Hundred Ninety Six Dollars ($31,196) on the last day of
each month during the first four (4) years of this Agreement, less any
withholdings required by law or authorized by Mr. Sadler. In further
consideration for the covenant not to compete set forth in this Agreement,
Guardsman or Moline shall pay Mr. Sadler compensation at a rate of Two
Hundred Ninety Two Thousand Seven Hundred Fifty Dollars ($292,750) per year
during the final eight (8) years of this Agreement, payable in equal
monthly installments of approximately Twenty Four Thousand Three Hundred
Ninety Six Dollars ($24,396) on the last day of each month during the final
eight (8) years of this Agreement, less any withholdings required by law or
authorized by Mr. Sadler.
3. Remedies. In the event that Mr. Sadler defaults in or breaches
any of the covenants set forth in Section 1 of this Agreement (either
actual or threatened), Guardsman or Moline shall be entitled to one or more
of the following remedies, which shall be cumulative: (a) damages in an
amount equal to the greater of (i) actual compensation wrongfully earned by
Mr. Sadler as a result of such breach, or (ii) subject to the qualification
set forth below, the value of consideration paid to Mr. Sadler as
referenced in Section 2 or Section 5 of this Agreement; (b) injunctive or
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other equitable relief prohibiting Mr. Sadler from continuing to engage in
such activities; (c) rights of set off against any amounts owed by
Guardsman or Moline to Mr. Sadler under the Merger Agreement or otherwise;
and (d) other legal and equitable remedies (including, without limitation,
reimbursement of reasonable attorneys' fees) as may be available under law.
Mr. Sadler recognizes and acknowledges that in the event of any default in,
or breach of any of, the terms, conditions, or provisions of this Agreement
(either actual or threatened) by Mr. Sadler, Guardsman's and Moline's
remedies at law shall be inadequate. Accordingly, Mr. Sadler agrees that
in the event of such a default, Guardsman or Moline shall be entitled to
the remedies of specific performance and injunctive relief in addition to
any and all other remedies and rights at law or in equity, and those rights
and remedies shall be cumulative.
4. Loyalty and Secrecy. Mr. Sadler agrees that during the term of
this Agreement, without prior approval of the President of Moline and the
President of Guardsman:
(a) Mr. Sadler shall not, either for himself or on behalf of any
other person, firm or corporation directly or indirectly, divert or
attempt to divert from Guardsman or any of its subsidiaries any
business whatsoever or attempt to so influence any customers of
Guardsman or its affiliates with whom Mr. Sadler may have dealings;
(b) Mr. Sadler shall not solicit or approach any employee of
Guardsman or Moline or its affiliates for the purpose of inducing such
employee to terminate his employment;
(c) Mr. Sadler shall deliver to Guardsman or Moline and not keep
or deliver to anyone else, any and all materials relating to Moline's,
the Predecessor Company's or Guardsman's business including without
limitation all customer lists, drawings, formulas, blueprints, notes,
memoranda, specifications, devices and documents; and
(d) Mr. Sadler agrees that during the term of this Agreement and
forever thereafter, Mr. Sadler shall hold in strictest confidence, and
not disclose to any person, firm, or corporation any information,
manufacturing technique, process, formula, development or experimental
work, work in process, business, trade secret, or any other secret or
confidential matter relating to the products, sales or business of
Moline, the Predecessor Company or Guardsman.
5. Health Insurance. Guardsman and Moline agree to provide Mr.
Sadler and his immediate family, at Guardsman's or Moline's expense, with
health (including both medical and dental) insurance during the fifteen
(15) years following the date of this Agreement. Such health insurance
shall (at the option of Guardsman) consist of coverage under the Moline or
Guardsman group health insurance program, or consist of health coverage
benefits essentially equivalent to the benefits granted to employees of
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Guardsman under the Guardsman health insurance program. In addition,
during the fifteen (15) years following the date of this Agreement,
Guardsman agrees to reimburse Mr. Sadler for reasonable expenses, up to an
annual limit of Three Thousand Dollars ($3,000), incurred in connection
with an annual physical examination for Mr. Sadler and his spouse at the
Mayo Clinic consistent with past physical examinations at the Mayo Clinic
to the extent such expenses are not covered by the above-described medical
insurance.
6. Unemployment Compensation. Mr. Sadler agrees not to claim
unemployment compensation benefits against Moline or Guardsman during the
term of this Agreement or at any time thereafter. If Mr. Sadler does claim
unemployment compensation benefits against Moline or Guardsman, it is
agreed that Moline or Guardsman may offset the amount of the unemployment
benefits paid to him against payments which are to be provided to
Mr. Sadler pursuant to this Agreement.
7. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Michigan as applicable to
contracts made and to be performed in the State of Michigan. Mr. Sadler
irrevocably agrees and consents to the jurisdiction of the Circuit Courts
for Kent County, Michigan, and the United States District Court for the
Western District of Michigan incorporating Kent County for the resolution
of claims, disputes, and controversies under this Agreement. Mr. Sadler
hereby irrevocably waives any objection that he may now have or hereafter
acquire to the laying of venue of any such action or proceeding brought in
any of such courts and any claim that any action or proceeding brought in
any such court has been brought in an inconvenient forum. Mr. Sadler
further agrees that a final judgment in any such action or proceeding
brought in any such court shall be conclusive and binding upon him and may
be enforced in any competent court located elsewhere.
8. Binding Effect; Benefits. All of the terms of this Agreement
shall be binding upon, inure to the benefit of and be enforceable by and
against the heirs and legal representatives of Mr. Sadler (except as
otherwise provided herein) and the successors and authorized assigns of
Guardsman and Moline. Nothing in this Agreement, express or implied, is
intended to confer upon any other person any rights or remedies under or by
reason of this Agreement except as expressly indicated herein. All
obligations of Guardsman and Moline set forth in this Agreement are joint
and several.
9. Notice. Notices and all other communications provided for in
this Agreement shall be in writing and shall be deemed to have been duly
given when delivered or mailed by United States registered mail, return
receipt requested, postage prepaid:
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If to Moline:
3033 Orchard Vista Drive, S.E.
Suite 200
Post Office Box 1521
Grand Rapids, Michigan 49501-1521
Attention: President
If to Mr. Sadler:
Mr. James L. Sadler
7310 37th Avenue
Moline, Illinois 61265
10. Waiver. Any of the terms of this Agreement may be waived only in
a written agreement signed and authorized as described in Section 14 below.
The failure of Guardsman or Moline at any time to require performance of
any provision of this Agreement shall in no manner affect the right of
Guardsman or Moline at a later time to enforce the same. No waiver of any
condition or of any breach of any term contained in this Agreement, in any
one or more instances, shall be deemed to be or construed as a further or
continuing waiver of the condition or breach of the term or any other term
set forth herein.
11. Severability. Subject to the provisions of the last paragraph of
Section 1 of this Agreement, any provision or clause of this Agreement
which shall be found to be contrary to Michigan law or otherwise
unenforceable, in whole or in part, shall not effect the remaining terms of
this Agreement, which shall be construed in such event as if the
unenforceable provision or clause were absent from this Agreement. To
protect the goodwill of Predecessor Company acquired by Moline, it is the
intent of the parties that this Agreement be construed as broadly as
possible.
12. Assignment. This Agreement may not be assigned by either party;
provided, however, that Moline may assign this Agreement to Guardsman.
13. Headings. The headings of the sections and paragraphs of this
Agreement have been inserted for convenience of reference only and shall in
no way restrict or otherwise modify any of the terms or provisions of this
Agreement.
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14. Entire Agreement, Modification. This Agreement contains the
entire agreement between the parties and supersedes any prior employment or
other agreements between the parties or between Mr. Sadler and the
Predecessor Company, whether written or oral, and any and all such
agreements are hereby terminated. This Agreement may not be changed
orally, but only by an agreement in writing, signed by the party against
whom enforcement of any change is sought. Mr. Sadler understands and
agrees that no officer or agent of Moline or Guardsman has any authority to
make any amendment to this Agreement, or to agree to any additional or
different term or condition of employment except by agreement in writing
signed by an officer of Moline or Guardsman, with the approval of the Board
of Directors.
15. Termination. The Company may not terminate this Agreement for
any reason, specifically including the death or disability of Mr. Sadler.
In the event of the death of Mr. Sadler, the Company shall continue to make
payments under Section 2 and Section 5 to Mr. Sadler's beneficiaries in the
same manner and at the same times as such payments would have been made to
Mr. Sadler. The term "beneficiaries" means the following persons or
classes of persons, with the priority and in the order named, of which
there shall be a member or members living on the respective dates that the
payments are due and payable (herein called "Mr. Sadler's beneficiaries"):
- the beneficiary or beneficiaries designated by Mr.
Sadler to receive payments pursuant to this Agreement by written
documents delivered to Guardsman;
- Mr. Sadler's surviving spouse;
- Mr. Sadler's children; provided, however, that the then
living issue of any deceased child shall be deemed a survivor and
shall take their parent's share by right of representation;
- the estate of Mr. Sadler.
16. Negotiations Between Parties. The parties shall attempt in good
faith to resolve any dispute arising out of or relating to this Agreement
promptly by negotiation. Any party may give the other party written notice
of any dispute not resolved in the normal course of business. Within
fifteen (15) days after delivery of the notice, the receiving party shall
submit to the other a written response. The notice and the response shall
include (a) a statement of each party's position and a summary of arguments
supporting that position, and (b) the name and title of the executive or
other person who will represent that party and of any other person who will
accompany them. Within thirty (30) days after delivery of the disputing
party's notice, the representatives of both parties shall meet at a
mutually acceptable time and place, and thereafter as often as they
reasonably deem necessary, to attempt to resolve the dispute. All
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reasonable requests for information made by one party to the other will be
honored. If the matter has not been resolved within sixty (60) days of the
disputing party's notice, or if the parties fail to meet within thirty (30)
days, either party may initiate mediation of the controversy or claim as
provided hereinafter. All negotiations pursuant to this clause are
confidential and shall be treated as compromise and settlement negotiations
for purposes of the Federal Rules of Evidence and state rules of evidence.
17. Mediation. If the dispute has not been resolved by negotiation
as provided herein, the parties shall endeavor to settle the dispute by
mediation under the then current Center for Public Resources ("CPR") Model
Procedure for Mediation of Business Disputes. The neutral third party will
be selected from the CPR Panels of Neutrals, with the assistance of CPR,
unless the parties agree otherwise. If any party to this Agreement
initiates mediation in accordance with this Section, the other parties
agree to participate in good faith in such mediation and further agree,
with respect to matters subject to mediation, not to commence any lawsuit,
other legal proceeding, or other form of alternate dispute resolution until
the conclusion of the mediation in accordance with this Section.
18. Mediation and Litigation Expenses. In any controversy, claim
or dispute arising out of, or relating to, this Agreement or any ancillary
Agreements hereto or the method and manner of performance thereof or the
breach thereof, the prevailing party in any litigation, mediation or other
proceeding shall be entitled and awarded, in addition to any other relief,
a reasonable sum as dispute resolution expenses. If neither party wholly
prevails, then each party shall bear its own dispute resolution expenses.
In determining what is a reasonable sum for dispute resolution expenses,
the actual amount of attorneys' fees the prevailing party is obligated to
pay its attorney or attorneys shall be presumed to be reasonable, which
presumption is rebuttable, and the actual expenses incurred in the
proceeding, including but not limited to travel expenses and loss of time
of a party, shall be presumed to be reasonable, which presumption is
rebuttable.
IN WITNESS WHEREOF, the parties have duly executed this Agreement
as of the day and year first above written.
ATTEST: MOLINE PAINT MANUFACTURING
CO.
By/s/ Edward D. Corlett By/s/ Charles E. Bennett
Edward D. Corlett Charles E. Bennett
Secretary President and Chief Executive Officer
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WITNESS:
/s/ Harvey A. Levin /s/ James L. Sadler
Harvey A. Levin James L. Sadler
ATTEST: GUARDSMAN PRODUCTS, INC.
By /s/ Edward D. Corlett By /s/ Charles E. Bennett
Edward D. Corlett Charles E. Bennett
Secretary President and Chief Executive Officer
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EXHIBIT 11
STATEMENT RE: COMPUTATION OF PER SHARE INCOME
GUARDSMAN PRODUCTS, INC.
<TABLE>
<CAPTION>
Year Ended December 31,
1994 1993 1992
(Amounts in thousands,
except per share data)
<S> <C> <C> <C>
Weighted average shares outstanding 8,465 7,849 7,433
Increase in dilutive incremental
shares issuable upon exercise
of stock options as computed
by maximum dilutive methods 46 101 40
8,511 7,950 7,473
Income
Continuing operations before
cumulative effect of change
in accounting principle $5,903 $4,521 $1,978
Cumulative effect of change
in accounting principle 150
Net income $5,903 $4,671 $1,978
Fully diluted income per share
Continuing operations before
cumulative effect of change in
accounting principle $ .69 $ .57 $ .26
Cumulative effect of change
in accounting principle .02
Net income $ .69 $ .59 $ .26
</TABLE>
NOTE: The income per share amounts for 1994, 1993 and 1992 noted above
differ from the net income per share of $.70 per share, $.60 per
share and $.27 per share, respectively, reported in the
consolidated financial statements. These differences result from
the inclusion of outstanding stock options using maximum dilutive
methods in the above calculations, which were excluded from the
earnings per share reported in the consolidated financial
statements because they were not materially dilutive (i.e., less
than 3%).
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EXHIBIT 13-A
Management's Discussion and Analysis of Financial Condition and Results of
Operations
1994 Compared To 1993
Net sales increased 13.5% to $201,888,000 in 1994 from $177,806,000 in
1993. Coatings Group sales, including inter-segment sales, increased
$22,751,000 (17.1%) to $155,967,000 due primarily to increases in unit
volume. The Group's liquid and powder coatings product lines realized an
increase in net sales of $20,718,000, representing a 13.0% volume increase
as well as an increase in average selling prices. Included in the Group's
1994 sales were $12,938,000 of sales for Moline Paint Manufacturing Co.,
which was acquired on August 31, 1994. The Group's resin product lines
experienced an increase in net sales of $2,027,000 representing a 30.0%
volume increase due primarily to increased customer demand. The Consumer
Products Group's net sales, including inter-segment sales, increased
$1,424,000 (3.2%) to $46,042,000 led by growth in sales in the Group's
United Kingdom, Household and Atlanta Sundries divisions. This growth
offsets the decline in automotive after-market products, which were
unusually strong in 1993 due to special purchasing programs of a certain
automotive account not repeated in 1994.
Consolidated gross profit as a percentage of sales was 34.2% in 1994
compared to 34.3% in 1993. Despite significant increases in the cost of
raw materials, the Coatings Group reported a gross profit margin in 1994
which approximated the 1993 level, due primarily to a change in product
mix. The Consumer Products Group reported an increase in their gross
profit rate in 1994, primarily due to a shift in product mix away from
automotive after-market products.
Operating expenses increased between the two periods reflecting the
increased sales levels and the acquisition of Moline, including
amortization expenses associated with the acquisition. Nonetheless,
selling, general and administrative expenses, as a percentage of sales,
decreased to 28.9% in 1994 from 29.6% in 1993.
Operating profit before corporate expenses increased 13.5% to $14,271,000
in 1994 from $12,577,000 in 1993. Operating profit in the Coatings Group
increased $1,685,000 (23.9%) primarily due to sales growth and the
acquisition of Moline. The Consumer Products Group's operating profit
before corporate expenses rose slightly but was comparable with 1993.
Increases in the Consumer Products Group's operating profit due to sales
growth and an increase in gross profit, as a percentage of sales, were
mainly offset by transition expenses associated with Altanta Sundries,
Inc., which was acquired by the Consumer Products Group in December 1993.
Interest expense increased from $991,000 in 1993 to $1,188,000 in 1994 due
to increases in average borrowings outstanding and variable interest rates.
The increase in borrowings resulted primarily from debt associated with
acquisitions of businesses in 1994 and the latter part of 1993. Interest
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rates rose during 1994 and, as a result, interest expense as a percentage
of average debt outstanding increased to 6.0% in 1994 compared to 5.5% in
1993.
Also included as a charge to 1993 income is $529,000 of non-recurring costs
associated with the acquisition of Atlanta Sundries, Inc. These costs were
reflected as current period expenses since the acquisition was accounted
for as a pooling of interests. For additional information, see Note 2 to
the Consolidated Financial Statements.
The Company's effective tax rate during 1994 was 40.0% compared to an
effective rate of 35.6% during 1993. The increase in the effective tax
rate for 1994 was due primarily to a one-time benefit taken in 1993 for the
deduction of losses associated with the Company's investment in Armorguard
Products, Inc. The effective tax rates for both periods, before the 1993
one-time deduction, were influenced by the relationship of permanent
differences to estimated taxable income.
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes." The
implementation of SFAS No. 109 resulted in a one-time benefit of $150,000
or $.02 per share recorded as "Cumulative Effect of Change in Accounting
Principle." Also effective January 1, 1993, the Company adopted SFAS No.
106, "Accounting for Postretirement Benefits Other Than Pensions." The
adoption of this standard did not have a material effect on the Company's
results of operations or financial position.
Net income totaled $5,903,000 for 1994 compared to $4,671,000 for 1993, an
increase of approximately 26%. Net income per share increased
approximately 17% to $.70 per share in 1994 compared to $.60 per share in
1993. There were an average of 8% more shares outstanding during 1994 than
there were in 1993, resulting primarily from the acquisition of Moline.
1993 Compared To 1992
Net sales increased 16.8% to $177,806,000 in 1993 from $152,197,000 in
1992. Coatings Group sales, including inter-segment sales, increased
$16,448,000 (14.1%) to $133,216,000 due primarily to increases in unit
sales volume. The Group's liquid industrial coatings product lines
realized a 21.7% increase in unit sales volume, which was offset by a
slight decrease in average selling prices. Approximately 55% of the sales
increase represented incremental revenue from businesses acquired during
1993 and 1992. The Group's resin product lines experienced a 17.3% volume
decrease due to a reduction in the number of resin products offered for
sale. This reduction was part of a plan to restructure resin operations,
effective March 1, 1993, to focus primarily on developing and producing
proprietary resins for the Group's internal long-term requirements. A
decrease in average selling prices of the resin products was caused by the
resultant change in product mix. The Consumer Products Group's net sales,
including inter-segment sales, increased $9,138,000 (25.8%) to $44,618,000
led by increases in sales of after-market automotive maintenance products,
household products and growth in sales in the Group's United Kingdom
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subsidiary. Approximately 46% of the sales increase represented
incremental revenue from Atlanta Sundries, Inc.
Gross profit margin as a percentage of sales increased to 34.3% in 1993
from 32.4% in 1992. The increase in the gross margin rate was primarily
attributable to a shift in product mix within the Coatings Group as resin
sales, which carry lower margins than the Group's liquid industrial
coatings, represented a smaller portion of total sales. In addition, the
resin operations reported a substantial improvement in gross margin as a
percentage of sales, which was caused by refocused sales efforts toward
higher margin products and lower manufacturing costs resulting from cost
containment measures and increased efficiency. Offsetting these positive
variances was a decrease in the gross margin rate for the Consumer Products
Group due primarily to a change in product mix.
Selling and research and development costs increased between the two
periods reflecting the increased sales levels and the Company's continued
investment in sales and technical personnel initiated in the latter part of
1992. Amortization expenses associated with acquisitions since the second
quarter of 1992 also contributed to the increase. Nonetheless, selling,
general and administrative expenses, as a percentage of sales, were
comparable between 1993 and 1992.
Operating profit before corporate expenses increased 51.6% to $12,577,000
in 1993 from $8,296,000 in 1992. Operating profit in the Coatings Group
increased $3,080,000 (77.5%) primarily due to sales growth and the
improvement in the gross margin rate discussed above. The Consumer
Products Group's operating profit before corporate expenses increased
$1,201,000 (27.8%) with $488,000 of this increase resulting from the
inclusion of the operating profit of Atlanta Sundries, Inc. The remainder
of the increase in the Group's operating profit is due to sales growth and
a decrease in operating expenses, as a percentage of sales.
Interest expense increased from $703,000 in 1992 to $991,000 in 1993 due to
an increase in average borrowings outstanding offset by a decline in
variable interest rates. The increase in borrowings resulted primarily
from debt associated with acquisitions of businesses in 1993 and the latter
part of 1992. Due to declines in variable interest rates, interest expense
as a percentage of average debt outstanding decreased to 5.5% in 1993
compared to 6.2% in 1992.
The Company's effective tax rate during 1993 was 35.6% compared to an
effective rate of 41.0% during 1992. The decrease in the effective tax
rate for 1993 was due primarily to a one-time benefit for the deduction of
losses associated with the Company's investment in Armorguard Products,
Inc. The effective tax rates for both periods, before the 1993 one-time
deduction, were influenced by the relationship of permanent differences to
estimated taxable income.
Net income totaled $4,671,000 for 1993 compared to $1,978,000 for 1992, an
increase of approximately 136%. Net income per share increased to $.60 per
share in 1993 compared to $.27 per share in 1992.
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Liquidity, Capital Resources and Financial Condition
During 1994, the Company's operations generated net cash flows of
$6,590,000. During the same period, the Company made cash payments of
$5,712,000 associated with the purchase of Moline, invested $3,410,000 in
fixed assets and other investments and paid dividends of $2,787,000.
During the year, borrowings increased by $5,695,000. Stock issued under
employee and stockholder plans totaled $671,000.
During 1994, accounts receivable, inventory and accounts payable increased
$2,101,000, $4,373,000 and $1,171,000, respectively. These increases as
well as increases in substantially all other balance sheet accounts,
including an increase of approximately $13,000,000 in goodwill, reflect the
acquisition of Moline. Working capital increased 25.4% to $42,373,000 at
the end of 1994. The current ratio was 2.4 to 1 at December 31, 1994 and
2.5 to 1 at December 31, 1993. Debt as a percentage of capitalization was
30.2% at December 31, 1994 compared to 29.6% at the end of 1993.
Management believes that internally generated funds will be adequate to
finance future property and equipment additions and meet existing
obligations under its long-term borrowing agreements. The Company
anticipates that any business acquisitions in the future will be financed
with cash flows from operations or by the issuance of long-term debt or
common stock.
Guardsman has short-term lines of credit which provide for unsecured
borrowings up to $6,069,000. There were no amounts outstanding under these
agreements during 1994. In addition, the Company has three revolving
credit agreements which are classified as long-term. During 1994, the
Company increased its available long-term borrowings under its two domestic
revolving lines of credit from $25 million to $40 million. At year-end,
$27,700,000 of the total $41,069,000 available under long-term borrowing
arrangements was outstanding. The long-term debt agreements include
certain restrictive covenants with which the Company was in compliance
throughout the year. At December 31, 1994, $14,898,000 of stockholders'
equity was available for payment of cash dividends and redemption of
capital stock as provided by the debt agreements. For additional
information regarding credit arrangements and long-term debt, see Note 7 to
the Consolidated Financial Statements.
Like other companies in its industry, Guardsman is subject to existing and
evolving standards related to the protection of the environment. As a
result, it is the Company's policy to establish reserves for site
restoration costs and related claims where it is probable a liability
exists and the amount can be reasonably estimated. These reserves are
adjusted as information becomes available upon which a more accurate
estimate of eventual costs can be made. Such estimates are subject to
numerous variables, the effects of which are difficult to measure,
including the stage of the investigations, the nature of potential
remedies, the joint and several liability with other potentially
responsible parties, availability of insurance and government funds and
other issues. Accordingly, the ultimate cost of these matters cannot be
-79-
determined at this time and may not be resolved for a number of years. The
reserves represent the Company's best estimate of probable exposures at
this time. Based upon information currently available, it is not
anticipated that the outcome of these environmental matters will materially
affect the Company's consolidated financial position. The ultimate effect
of these matters on the Company's results of operations cannot be predicted
because any such effect depends on the amount and timing of charges to
operations resulting from new information as it becomes available. For
additional information regarding environmental obligations, see Note 9 to
the Consolidated Financial Statements.
-80-
<TABLE>
Selected Financial Information
<CAPTION>
Year Ended December 31 1994 1993 1992 1991 1990 1989 1988 1987
Summary of Continuing
Operations
(In Thousands, Except
Per Share Amounts)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales $ 201,888 $ 177,806 $ 152,197 $ 140,927 $ 139,053 $ 141,989 $ 108,056 $ 98,047
Income, net of income
taxes 5,903 4,671 1,978 956 2,766 6,487 5,557 5,842
Income per common share .70 .60 .27 .13 .38 .91 .81 .86
Cash dividends per
common share .32 .32 .41 .50 .50 .40 .36 .30
Summary of Financial
Position
(In Thousands)
Total assets $137,052 $96,954 $83,494 $79,777 $94,069 $91,321 $74,512 $55,211
Long-term debt, net of
current maturities 27,805 19,013 14,464 9,568 18,665 14,070 9,703 1,126
Stockholders' equity 64,426 45,362 42,200 44,002 47,437 48,581 40,722 35,636
Working capital 42,373 33,796 28,818 25,112 29,553 27,639 23,700 15,917
Other Supplemental
Information
Number of employees 1,109 860 791 757 987 963 936 813
Average shares
outstanding 8,464,639 7,849,101 7,433,416 7,370,900 7,301,717 7,099,768 6,837,227 6,788,804
INDUSTRY SEGMENT
OPERATIONS (Audited)
and In Thousands)
Net Sales From Con-
tinuing Operations
Coatings Group $155,967 $133,216 $116,768 $107,131 $109,718 $116,885 $82,657 $75,485
Consumer Products Group 46,042 44,618 35,480 33,906 29,367 25,134 25,421 22,582
202,009 177,834 152,248 141,037 139,085 142,019 108,078 98,067
Inter-segment sales (121) (28) (51) (110) (32) (30) (22) (20)
Consolidated net sales $201,888 $177,806 $152,197 $140,927 $139,053 $141,989 $108,056 $98,047
Operating Profit From
Continuing Operations
-81-
Coatings Group $8,738 $7,053 $3,973 $1,895 $5,640 $10,533 $7,546 $9,328
Consumer Products Group 5,533 5,524 4,323 4,502 2,884 3,384 3,732 3,113
14,271 12,577 8,296 6,397 8,524 13,917 11,278 12,441
Corporate expenses-net (3,618) (4,417) (4,611) (3,931) (3,284) (2,695) (2,705) (2,432)
Interest expense (1,188) (991) (703) (1,026) (1,475) (1,267) (419) (216)
Costs of pooling of
interests (529)
Investment income 374 376 372 425 425 344 201 198
Income from continuing
operations before
income taxes $9,839 $7,016 $3,354 $1,865 $4,190 $10,299 $8,355 $9,991
Identifiable Assets
Coatings Group $102,593 $66,642 $56,141 $53,980 $55,842 $58,467 $49,570 $30,485
Consumer Products
Group 25,475 20,092 16,165 16,079 14,768 13,284 10,960 9,892
Corporate 8,984 10,220 11,188 9,718 8,218 6,730 4,524 5,625
Discontinued operations ________ _______ _______ _______ 15,241 12,840 9,458 9,209
Total $137,052 $96,954 $83,494 $79,777 $94,069 $91,321 $74,512 $55,211
</TABLE>
-82-
PERTINENT BUSINESS AND FINANCIAL INFORMATION
GENERAL DEVELOPMENT OF THE BUSINESS
During 1994, the Company purchased Moline Paint Manufacturing Co., an
industrial coatings manufacturer focusing on the agricultural/construction
equipment and general industrial markets. In addition, the Company
acquired the rights to market certain Bio Zapp paint odor elminator
products as well as signed a definitive agreement to purchase the business
and certain assets of Soil Shield International, Inc., a producer and
distributor of retail-applied fabric protection products.
During 1993, the Company purchased Atlanta Sundries, Inc., the maker of
Goof-Off, a latex paint remover, and the liquid industrial coatings
business and certain assets of Mar-Lak Products Company. During 1992, the
Company acquired in separate purchases the liquid industrial coatings
businesses and certain assets of The Stulb Company and Reliable Coatings,
Inc. The Company also acquired a small franchise organization in the
United Kingdom during 1992. For additional information regarding
acquisitions, see Note 2 to the Consolidated Financial Statements.
During 1991, the Company sold its contract aerosol packaging plant and
discontinued the operation of its Solidex solid-surface business.
NARRATIVE DESCRIPTION OF THE BUSINESS
Industry Segments
The Company operates in two primary industries: Coatings and Consumer
Products. Financial information for each of the Company's segments is
presented on pages 81-82 of this report and in Note 14 to the Consolidated
Financial Statements.
Principal Products
Coatings Group
The Company was founded in 1915 in the coatings manufacturing business,
which remains the Company's most significant industry segment. In 1994,
Coatings Group revenues accounted for 77% of the Company's total sales.
This Group develops and produces industrial coatings primarily for sale to
manufacturers of wood and metal products. Coatings products include
paints, varnishes, enamels and lacquers which are used to finish wood
household furniture, metal office furniture, appliances,
agricultural/construction equipment, wood paneling, kitchen cabinets and a
variety of other products. Coatings are sold primarily to durable goods
manufacturers. Additionally, the Group manufactures resins for internal use
and for external sales.
Consumer Products Group
The Company's Consumer Products Group markets and distributes a broad line
of home care products such as One-Wipe and Mighty Duster(registered
trademark) Dust Cloths, One-Wipe Bathroom Cleaner, Guardsman Furniture
Polish, Afta Cleaning Products, Fabri-Coate Fabric Protection Products,
-83-
Mister Plumber Drain Opener, Scrunge(registered trademark) Scrubber
Sponges, Chip Clip Products and Goof-Off Latex Paint Remover. In addition,
this Group manufactures and distributes a variety of proprietary after-
market automotive maintenance products and industrial lubricants.
New Products
The Company's Coatings and Consumer Products Groups are engaged in research
and development on several products not yet in the production stage. New
product introductions have not required the investment of a material amount
of total Company assets. See the discussion of research and development
expenditures on page 85 for additional information.
Raw Materials
Raw materials are procured from a number of suppliers, chiefly by purchase
from domestic sources. Many of the raw materials used in the Company's
coatings business are derived from petroleum. All of these materials are
generally available on the open market, although prices and availability
are subject to fluctuation from time to time. Despite incurring cost
increases related to petroleum sensitive raw materials during 1990 and in
early 1991, the Company has not experienced any significant difficulty in
obtaining raw materials.
Patents and Trademarks
Company trademarks or trade names include, but are not limited to,
Guardsman, One-Wipe, Fabri-Coate, Carpet Guard(registered trademark),
Heritage, Afta, Dri-Slide(registered trademark), Mister Plumber,
Enviro+Plus, Chip Clip, Scrunge, Goof-Off, Guardsman WoodPro (trademark)
and Company Logo. From time to time, the Company will and has sought
patent protection on inventions deemed significant.
Seasonality
The Company does not experience significant seasonal fluctuations in the
industries in which it operates.
Working Capital
The practices of the Company and the industries in which it operates do not
create any unusual working capital requirements that would be material to
an understanding of the business taken as a whole.
Customers
In the opinion of management, the loss of any single customer, or group of
a few customers, would not have a materially adverse affect on the Company.
Backlog
There is no information concerning the Company's sales backlog which would
be material to an understanding of the business as a whole or the Company's
industry segments.
Government Contracts
The Company has no material government contracts in either industry
segment.
-84-
Competition
In the United States and Canada there are numerous manufacturers of
industrial coatings and resins. The industry is very competitive and
includes national and small regional firms. While Guardsman is among the
largest manufacturers of industrial coatings in North America, some of the
Company's competitors have greater financial resources than the Company.
Price competition is keen and, among the larger manufacturers, competitive
advantage depends upon the manufacturer's ability to purchase the necessary
raw materials in economic quantities, to keep pace with technological
developments, to develop industrial coatings meeting the specific and
changing requirements of a variety of customers, to adhere to strict
quality control standards in manufacturing and to make timely deliveries.
The Consumer Products industry in which the Company operates is also
extremely competitive. There are numerous competitors, many of which have
greater financial resources than the Company, and no one competitor nor any
small number of competitors is dominant. The principal methods of
competition in this industry are price, quality, performance and service.
Research and Development
Guardsman devotes significant effort and financial resources to
company-sponsored research and development, primarily within the Coatings
Group. The Company's research and development has been responsible for
continuing refinements in the quality of its wood and metal coatings,
advances in technology that lower emissions into the atmosphere from
customers' production processes and refinement and development of new
products for the Coatings and Consumer Products Groups. The Company spent
$6.9 million for research and development in 1994, $5.9 million in 1993 and
$5.5 million in 1992. Within the Coatings Group, research and development
expenditures amounted to 4.4% of net sales in 1994, 4.3% in 1993 and 4.5%
in 1992.
Environmental Regulations
Compliance with federal, state and local laws and regulations governing
discharges into the environment is not expected to have a material effect
upon the capital expenditures and competitive position of the Company. For
additional information regarding the effect of environmental obligations on
results of operations and financial position, see Note 9 to the
Consolidated Financial Statements.
Foreign Operations
While the Company maintains foreign operations in Canada and the United
Kingdom, there are no unusual risks attendant to these operations and
neither of the Company's industry segments are primarily dependent upon
such operations.
Properties
The following table shows the location and floor space of the principal
plants owned by the Company. Also included is the industry segment in
which each plant is primarily utilized. Each plant contains facilities for
manufacturing, research, warehousing and office space. The Company also
leases administrative office space as well as warehouse space in various
locations throughout North America and the United Kingdom.
-85-
<TABLE>
<CAPTION>
Floor Space in
Location Square Feet Industry Segment
____________________________________________________________
<S> <C> <C> <C>
Grand Rapids, MI 231,500 Coatings
Moline, IL 76,400 Coatings
Cornwall, ONT, Canada 68,000 Coatings
High Point, NC 59,400 Coatings
Rocky Hill, CT 57,100 Coatings
South Gate, CA 40,900 Coatings
Little Rock, AR 32,400 Coatings
Seattle, WA 29,500 Coatings
Tulsa, OK 28,200 Coatings
Fremont, MI 10,000 Consumer Products
</TABLE>
Legal Proceedings
The Company is involved in legal proceedings and litigation arising in the
ordinary course of business. In the opinion of management, the outcome of
such proceedings and litigation currently pending will not materially
affect the Company's consolidated financial statements. Guardsman is also
subject to existing and evolving standards related to the protection of the
environment. See Note 9 to the Consolidated Financial Statements for
additional information.
Market Price Of The Company's Common Stock And Related Stockholder Matters
The Company's common stock is traded on the New York Stock Exchange. The
low and high sales prices for the Company's common stock and dividends paid
by quarter for the last two fiscal years appear on page 115 of this report.
<TABLE>
<CAPTION>
Approximate Number
Title of Class of Record Holders
<S> <C>
Common Stock, $1.00 Par Value . . . . . . 1,780
Preferred Stock, $1.00 Par Value . . . . None
</TABLE>
Executive Officers of the Company
The following table shows the name, age and position for each executive
officer of the Company during 1994, with the addition of Henry H. Graham,
Jr. effective January 1995. The officers are elected to serve until the
Board of Directors' meeting immediately following the next Annual Meeting
of Stockholders. Each person has served as an officer since the date
indicated. The principal occupation and employment of each officer with
the Company is also set forth below.
-86-
<TABLE>
<CAPTION>
Name Age Positions and Office(s)
Office(s) Held Since
<S> <C> <C> <C>
Charles E. Bennett 48 President, 1985 <F1>
Chief Executive Officer
and Director
Edward D. Corlett 41 Vice President, 1990 <F2>
Metal Coatings Group
Henry H. Graham, Jr. 44 Vice President of Finance, 1995 <F3>
Chief Financial Officer
and Treasurer
Everette L. Martin 59 Vice President, 1992 <F4>
Wood Coatings Group
Keith C. Vander Hyde, Jr. 37 Vice President, 1992 <F5>
Consumer Products Group
<FN>
<F1> Mr. Bennett was elected President and Chief Executive Officer
effective January 1, 1993. He served as President and Chief Operating
Officer from 1990 to 1992 and has served on the Board of Directors since
1989. He was Vice President-Finance, Treasurer and Secretary from 1988 to
1989. In addition, he was Vice President-Coatings Group from 1985 to 1988.
He served as a Group Officer in the capacity of Vice President-West Coast
Operations from 1983 to 1985 and was the Company's Corporate Controller
from 1980 to 1983.
<F2> Mr. Corlett was elected Corporate Vice President, Metal Coatings
Group in 1994. He served as Chief Financial Officer from 1991 to 1994 and
Vice President, Secretary and Treasurer from 1990 to 1994. He joined the
Company as Director of Finance in 1988.
<F3> Mr. Graham joined the Company as Vice President of Finance, Chief
Financial Officer and Treasurer in January 1995.
<F4> Mr. Martin was elected Corporate Vice President, Wood Coatings
Group in 1994. He served as Corporate Vice President, Coatings Group from
1992 to 1994. He also served as Vice President/General Sales Manager, Wood
Coatings from 1991 to 1992; Coatings Group Director of Sales, Eastern
Region from 1990 to 1991; and General Manager - High Point, North Carolina
Division from 1982 to 1990.
<F5> Mr. Vander Hyde, Jr. was elected Corporate Vice President,
Consumer Products Group in 1992. He served as Vice President, Consumer
Products Group from 1989 to 1992 and Vice President, International
Operations in 1989. In addition, he served as Director of International
Development from 1988 to 1989 and as Manager of International Operations
from 1986 to 1988.
</FN>
</TABLE>
-87-
<TABLE>
Consolidated Balance Sheets
<CAPTION>
December 31 (In Thousands, Except Share Amounts) 1994 1993
<S> <C> <C>
Assets
Current assets
Cash and cash equivalents $ 5,630 $ 4,472
Accounts receivable, less allowances 29,517 23,289
Inventories 31,324 22,893
Deferred income taxes 1,866 1,642
Other current assets 5,224 4,725
Total current assets 73,561 57,021
Property, plant and equipment - net 27,977 22,284
Goodwill, less accumulated amortization
of $3,251 in 1994 and $2,657 in 1993 20,336 7,828
Other intangibles, less accumulated amortization
of $5,374 in 1994 and $4,003 in 1993 12,587 6,473
Deferred income taxes 1,405
Other assets 2,591 1,943
$137,052 $96,954
</TABLE>
-88-
<TABLE>
Consolidated Balance Sheets
<CAPTION>
December 31 (In Thousands, Except Share Amounts) 1994 1993
<S> <C> <C>
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable $ 19,286 $16,102
Accrued compensation 4,142 1,858
Other accrued expenses 7,157 4,627
Income taxes 510 553
Current maturities of long-term debt 93 85
Total current liabilities 31,188 23,225
Long-term debt 27,805 19,013
Deferred compensation and pension costs 7,041 5,447
Other liabilities 6,592 3,907
Stockholders' equity
Preferred stock, $1 par value, terms to be
determined when issued - authorized and
unissued - 1,000,000 shares
Common stock, $1 par value
authorized - 15,000,000 shares
issued and outstanding - 9,482,199
shares in 1994, 7,913,121 shares
in 1993 9,482 7,913
Additional paid-in capital 46,560 31,737
Retained earnings 9,949 6,894
Cumulative translation adjustments (1,565) (1,182)
Total stockholders' equity 64,426 45,362
$137,052 $96,954
</TABLE>
The accompanying notes are an integral part of these financial statements.
-89-
<TABLE>
Consolidated Statements of Income
<CAPTION>
Year ended December 31 (In Thousands,
Except Per Share Amounts) 1994 1993 1992
<S> <C> <C> <C>
Net sales $201,888 $177,806 $152,197
Cost of sales 132,984 116,943 102,917
68,904 60,863 49,280
Selling, general and administrative
expenses 58,251 52,703 45,595
Interest expense 1,188 991 703
Costs of pooling of interests transaction 529
Investment income (374) (376) (372)
Income from continuing operations
before income taxes and cumulative effect
of change in accounting principle 9,839 7,016 3,354
Income taxes 3,936 2,495 1,376
Income from continuing operations
before cumulative effect of change
in accounting principle 5,903 4,521 1,978
Cumulative effect of change
in accounting principle 150
Net income $ 5,903 $ 4,671 $ 1,978
Income per common share:
Before cumulative effect of change in
accounting principle $ .70 $ .58 $ .27
Cumulative effect of change
in accounting principle ____ .02 ____
Net income $ .70 $ .60 $ .27
</TABLE>
-90-
<TABLE>
Consolidated Statements of Stockholders' Equity
<CAPTION>
Additional Cumulative
Common paid-in Retained translation
(In Thousands, Except Per Share Amounts) stock capital earnings adjustments
<S> <C> <C> <C> <C>
Balance at December 31, 1991 $7,389 $30,480 $ 5,596 $ 537
Net income for 1992 1,978
Cash dividends - $.41 per share (3,048)
Stock issued under employee
and stockholder plans 64 559 (89)
Foreign currency translation _____ _____ _____ (1,266)
Balance at December 31, 1992 7,453 31,039 4,437 (729)
Net income for 1993 4,671
Cash dividends - $.32 per share (2,400)
Stock issued under employee
and stockholder plans 101 1,057 (223)
Stock issued for business acquired
under pooling of interests 359 (359) 409
Foreign currency translation _____ _____ _____ (453)
Balance at December 31, 1993 7,913 31,737 6,894 (1,182)
Net income for 1994 5,903
Cash dividends - $.32 per share (2,787)
Stock issued under employee
and stockholder plans 69 663 (61)
Stock issued for business acquired 1,500 14,160
Foreign currency translation _____ _____ _____ (383)
Balance at December 31, 1994 $9,482 $46,560 $ 9,949 $(1,565)
</TABLE>
The accompanying notes are an integral part of these financial statements.
-91-
<TABLE>
Consolidated Statements of Cash Flows
<CAPTION>
Year ended December 31 (In Thousands) 1994 1993 1992
<S> <C> <C> <C>
Operations
Net income $ 5,903 $ 4,671 $ 1,978
Adjustments to reconcile net income
to cash provided by operations
Depreciation and amortization 5,489 4,674 3,647
Deferred income taxes (credits) (634) (864) 171
Deferred compensation and pension costs 804 575 (73)
Other - net 518 720 325
Changes in certain working capital items
Accounts receivable (2,101) (3,630) (1,128)
Inventories (4,373) (3,282) 362
Other current assets (231) 693 (903)
Accounts payable 1,171 2,880 1,433
Accrued expenses 44 250 (367)
Cash provided by operations 6,590 6,687 5,445
Investing Activities
Purchase of businesses (5,712) (3,359) (4,403)
Additions to property, plant and equipment (3,410) (3,230) (1,574)
Proceeds from sale of fixed assets 329
Other - net 141 (803) (1,190)
Cash used by investing activities (8,981) (7,392) (6,838)
Financing Activities
Cash dividends paid (2,787) (2,400) (3,048)
Proceeds from revolving lines of credit and
other long-term debt 38,586 34,437 40,900
Payments on revolving lines of credit and
other long-term debt (32,891) (30,429) (36,591)
Stock issued under employee and
stockholder plans 671 935 534
Cash provided by financing activities 3,579 2,543 1,795
Effect of foreign currency rate changes on cash (30) (208) (562)
Increase (decrease) in cash and cash equivalents 1,158 1,630 (160)
Cash and cash equivalents at beginning of year 4,472 2,842 3,002
Cash and cash equivalents at end of year $ 5,630 $ 4,472 $ 2,842
</TABLE>
The accompanying notes are an integral part of these financial statements.
-92-
GUARDSMAN PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1
Summary of Significant Accounting Policies
Principles of Consolidation and Foreign Exchange
The consolidated financial statements include the accounts of Guardsman
Products, Inc. and its wholly-owned subsidiaries (Guardsman or the Company).
All significant intercompany transactions and accounts are eliminated.
Assets and liabilities of foreign subsidiaries are translated into U.S. dollars
at exchange rates in effect at the end of the year. The unrealized gains or
losses that result from this process are shown in the cumulative translation
adjustments section of stockholders' equity. Revenues and expenses are
translated using average exchange rates that prevailed during the year.
Financial Statement Reclassification and Presentation
Certain reclassifications have been made to prior years' financial statements to
conform to the 1994 presentation.
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with an original
maturity of three months or less to be cash equivalents. Cash equivalents are
recorded at cost, which approximates current market value.
Income Taxes
Income taxes are based on income reported for financial statement purposes. At
December 31, 1994 and 1993, deferred income tax balances represent the tax
effect of temporary differences between the financial reporting basis and the
tax basis of certain assets and liabilities. In 1992, the provision for
deferred income taxes represented the tax effect of income and expense items
reported in one period for financial statement purposes and in another period
for tax reporting purposes.
Research and Development
Research and development expenditures, primarily in the Coatings Group, are
charged to income as incurred. Research and development expenditures amounted
to $6,860,000 in 1994, $5,932,000 in 1993 and $5,521,000 in 1992.
Goodwill and Other Intangible Assets
Goodwill represents the amount by which the cost of businesses purchased exceeds
the fair value of the net assets acquired. Goodwill and other intangible assets
-93-
are amortized over periods ranging from 5 to 40 years using the straight-line
method. The Company continually evaluates whether events and circumstances have
occurred that indicate the remaining estimated useful life of goodwill and other
intangible assets may warrant revision or that the remaining balance may not be
recoverable. When factors indicate that the asset should be evaluated for
possible impairment, the Company uses an estimate of the related business
segment's undiscounted net cash flows over the remaining life of the asset in
measuring whether the asset is recoverable. Such adjustments were not
significant in 1994, 1993 and 1992. Other intangible assets in the accompanying
balance sheet include, among other things, formulas totaling $9,928,000 and
$2,746,000 at December 31, 1994 and 1993, respectively.
Income per Common Share
Income per common share is based on the weighted average number of shares of
common stock outstanding. Shares available for purchase under stock incentive
plans are not reflected in the computation of income per common share since the
effect would not be material.
NOTE 2
Acquisitions of Businesses
On August 31, 1994, the Company purchased 100% of the stock of Moline Paint
Manufacturing Co. (Moline). The consideration for the stock of Moline included
1.5 million shares of Guardsman Common Stock valued at $10.44 per share,
approximately $6,000,000 in cash and the assumption of approximately $3,100,000
in outstanding debt of Moline. Moline is an industrial coatings manufacturer
focusing on the agricultural/construction equipment and general industrial
markets. Management intends to continue Moline's operations along substantially
the same lines of business.
The purchase agreement provides for certain contingent payments including a
contingent adjustment for stock price. In the event that the price of Guardsman
Common Stock does not equal or exceed $18 per share during the four year period
subsequent to the acquisition date, based on the highest trading price on any
twenty days during this period, then Guardsman shall pay the sellers the
difference between the highest trading price, as defined, and $18 per share
multiplied by the 1.5 million shares issued pursuant to the acquisition.
In addition, the sellers entered into non-competition agreements valued at
$5,013,664, which represents the present value discounted at 7.75% of payments
totaling $7,678,800 to be paid over a period of twelve years. The Company will
recognize the cost ratably over the term of the agreements.
The acquisition of Moline was accounted for as a purchase. Accordingly, the
purchase price was allocated to the net assets acquired based upon their
estimated fair market values. The excess of the purchase price over the
estimated fair value of net assets acquired amounted to approximately $13
million, which has been accounted for as goodwill and is being amortized over 40
years using the straight line method. This allocation was based on preliminary
estimates and may be revised at a later date.
-94-
The accompanying consolidated statements of income reflect the operating results
of Moline since the effective date of the acquisition. Pro forma unaudited
consolidated operating results of the Company and Moline for the years ended
December 31, 1994 and 1993, assuming the acquisition had been made as of January
1, 1994 and 1993, are summarized below:
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
Net sales $227,346 $210,150
Net income 4,656 4,680
Earnings per share .49 .50
</TABLE>
These pro forma results have been prepared for comparative purposes only and
include certain adjustments such as additional depreciation expense as a result
of a step-up in the basis of fixed assets, additional amortization expense as a
result of goodwill and other intangible assets and increased interest expense on
acquisition debt. They do not purport to be indicative of the results of
operations which actually would have resulted had the combination been in effect
on January 1, 1994, and 1993 or of future results of operations of the
consolidated entities.
During 1994, the Company also acquired the rights to market certain Bio Zapp
paint odor eliminator products. The acquisition of these rights did not have a
material effect on Guardsman's financial statements. In addition, the Company
signed a definitive agreement to purchase the business and certain assets of
Soil Shield International, Inc., a producer and distributor of retail-applied
fabric protection products. The acquisition of Soil Shield, which is scheduled
to become effective on January 30, 1995, is not expected to have a material
effect on Guardsman's future results of operations or financial position.
In December 1993, the Company exchanged approximately 359,000 shares of its
common stock valued at $15 per share for all the outstanding shares of Atlanta
Sundries, Inc., the maker of Goof Off latex paint remover and other related
consumer products. The acquisition was accounted for as a pooling of interests.
Since the acquisition did not have a material effect on periods prior to 1993,
they have not been restated.
The Company purchased the coatings business and certain assets from Mar-Lak
Products Company, which was located near Los Angeles, California, in April 1993.
The business involves the manufacture and sale of distributor trade sales
lacquers and general industrial wood coatings. The Company is servicing the
former Mar-Lak customers from its existing facilities.
In 1992, the Company purchased the industrial coatings businesses and certain
assets of The Stulb Company of Allentown, Pennsylvania and Reliable Coatings,
Inc. of Jackson, Tennessee. The businesses involve the manufacture and sale of
general industrial, high-solids and other metal coatings. Manufacturing of
these products was moved to the Company's existing manufacturing facilities.
-95-
The Company also acquired, in late October 1992, a franchise organization
specializing in furnishings, upholstery and carpet cleaning in the United
Kingdom.
Except for Atlanta Sundries, Inc., these acquisitions have been accounted for as
purchases, and accordingly, the results of operations of the acquired businesses
have been included in the Consolidated Statements of Income since the effective
dates of the respective acquisitions. The Company's aggregate acquisition cost
for these businesses totaled $3,359,000 in 1993 and $4,403,000 in 1992.
Financing for the acquisitions was provided by cash flows from operations and
long-term borrowings under the Company's revolving lines of credit.
NOTE 3
Accounts Receivable Allowances
Details of the accounts receivable allowances are as follows (in thousands):
<TABLE>
<CAPTION>
Doubtful
Balance at Additions accounts
beginning charged to charged to Balance at
of year costs and expenses allowance end of year
<S> <C> <C> <C> <C>
1994 $859 $329 $380 $808
1993 514 629 284 859
1992 762 270 518 514
</TABLE>
NOTE 4
Inventories
Inventories are stated at the lower of cost or market, using the first-in,
first-out method, except for approximately 14% of raw materials and 14% of
finished products, which are valued at the lower of cost, determined by the
last-in, first-out (LIFO) method, or market. The use of the LIFO method did not
have a material effect on inventory.
<TABLE>
Inventories are summarized below (in thousands):
<CAPTION>
December 31
1994 1993
<S> <C> <C>
Finished products $16,680 $11,572
Raw materials and work in process 14,644 11,321
$31,324 $22,893
</TABLE>
-96-
NOTE 5
Property, Plant and Equipment
Property, plant and equipment are stated at cost. Depreciation of plant and
equipment is provided on the straight-line method based upon the estimated
useful lives of the assets as follows: buildings, 10 to 40 years and machinery
and equipment, 3 to 20 years.
<TABLE>
Property, plant and equipment is summarized below (in thousands):
<CAPTION>
December 31
1994 1993
<S> <C> <C>
Land $ 2,559 $ 1,619
Buildings 15,920 14,354
Machinery and equipment 27,469 22,556
Construction in progress 718 242
46,666 38,771
Less accumulated depreciation 18,689 16,487
$27,977 $22,284
</TABLE>
Depreciation expense was $2,840,000 in 1994, $2,602,000 in 1993 and $2,264,000
in 1992.
NOTE 6
Income Taxes
Effective January 1, 1993, the Company adopted Statement of Financial Accounting
Standards No. 109 (SFAS No. 109), "Accounting for Income Taxes." SFAS No. 109
required companies to change the method of accounting for income taxes from the
deferred method to the liability method. Under the new method, the benefit of
certain tax credits and carryforwards has been recognized as of the date of
adoption as opposed to the previous method which recognized these benefits at
the time they were actually realized. This change resulted in a one-time
additional net tax benefit of $150,000 or $.02 per share at January 1, 1993.
This benefit is recorded under the caption "Cumulative Effect of Change in
Accounting Principle" in the accompanying Consolidated Statements of Income.
-97-
The provision for income taxes attributable to continuing operations is
summarized below (in thousands):
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Currently payable:
Federal $ 3,048 $1,986 $ 773
State 481 418 94
Foreign 1,127 670 338
4,656 3,074 1,205
Deferred expense (credit):
Federal (624) (615) 153
State (88) (70) 18
Foreign (8) 106 ____
(720) (579) 171
Total $ 3,936 $2,495 $1,376
</TABLE>
<TABLE>
The components of income before income taxes are (in thousands):
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Domestic $7,259 $4,732 $2,450
Foreign 2,580 2,284 904
$9,839 $7,016 $3,354
</TABLE>
A reconciliation of income taxes attributable to continuing operations
calculated at the applicable federal statutory rate of 34% to the provision for
income taxes follows (in thousands):
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Tax at federal statutory rate $ 3,345 $ 2,385 $ 1,140
Adjustments to taxes at statutory rate:
State income taxes, net of
federal income tax reduction 259 249 74
Nondeductible losses of subsidiaries
and other investments 109 193
Benefit of tax deduction from U.S. subsidiary (417)
Nondeductible amortization of intangible assets 215 200 196
Utilization of foreign operating
loss carryforwards (205)
Other 117 (31) (22)
Income taxes $ 3,936 $ 2,495 $ 1,376
Effective income tax rate 40.0% 35.6% 41.0%
</TABLE>
-98-
The following represents the components of deferred tax assets and liabilities
at December 31, 1994 and 1993 (in thousands):
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
Deferred tax assets:
Deferred compensation and pension costs $2,626 $2,004
Environmental obligations 1,775 795
Reserves for self-insured losses 656 465
Inventory valuation reserves 646 500
Intangible assets 468
Warranty reserves 427 398
Reserves for discontinued operations 425
Other items 816 601
Total deferred tax assets 7,414 5,188
Deferred tax liabilities:
Basis difference in acquired assets 2,975
Property, plant and equipment 2,499 2,036
Other items 74 105
Total deferred tax liabilities 5,548 2,141
Net deferred tax assets $1,866 $3,047
</TABLE>
The components of the deferred income tax provision for the year ended December
31, 1992 are set forth below (in thousands):
<TABLE>
<CAPTION>
1992
<S> <C>
Depreciation $(12)
Deferred compensation 86
Environmental and legal obligations 19
Inventory valuations (9)
Charges against reserves for discontinued operations 178
Other (91)
Total expense $171
</TABLE>
Income and remittance taxes have not been recorded on $3.72 million of
undistributed earnings of foreign subsidiaries, either because any taxes on
dividends would be offset substantially by foreign tax credits or because the
Company considers these earnings indefinitely reinvested in the foreign
operations. For those earnings which are indefinitely reinvested, it is not
practical to determine the amount of additional tax liabilities that would be
incurred if such earnings were repatriated.
Income tax payments, net of refunds, amounted to $5,535,000, $3,050,000 and
$1,343,000 in 1994, 1993 and 1992, respectively.
-99-
NOTE 7
Credit Arrangements and Long-Term Debt
The Company has two short-term revolving credit agreements. The Company may
borrow up to $5 million under a domestic agreement at substantially the same
rates available under the long-term revolving lines of credit discussed below.
The Company's Canadian subsidiary has an operating credit facility which permits
borrowings up to $1,500,000 Canadian at the same rates available under the
Canadian long-term facility described below. There were no amounts outstanding
under these agreements during 1994, 1993 and 1992.
The Company has three revolving credit agreements which are classified as
long-term. During 1994, the Company increased its available long-term
borrowings under two domestic revolving lines of credit, which expire in June
and July 1997, from $25 million to $40 million. The interest rate options
generally utilized by the Company under the agreements include 5/8% over the
Federal Funds Rate and transaction rates, which are determined at the date of
borrowing on balances which mature in one to twenty-nine days. A revolving term
credit arrangement through the Canadian subsidiary, which expires January 1,
1997, provides for borrowings up to $1,500,000 Canadian at the prime interest
rate, Base Rate Canada or 3/4% above London Interbank Offered Rate (LIBOR).
Long-term debt consisted of the following at December 31 (in thousands):
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
Revolving lines of credit $27,700 $18,800
Other long-term debt 198 298
27,898 19,098
Less current maturities 93 85
Long-term debt $27,805 $19,013
</TABLE>
Maturities of long-term debt during the next five years are set forth below (in
thousands):
<TABLE>
<CAPTION>
<S> <C> <C>
1995 $93
1996 49
1997 27,736
1998 20
1999 0
</TABLE>
The debt agreements include certain restrictive covenants with which the Company
was in compliance throughout the year. At December 31, 1994, $14,898,000 of
stockholders' equity was available for payment of cash dividends and redemption
of capital stock as provided by the debt agreements.
-100-
During 1989, the Company entered into an interest rate swap agreement to reduce
the impact of changes in interest rates on its floating rate long-term debt.
This agreement effectively changed the interest rate on $3,000,000 of the
Company's floating rate notes to a fixed 9.36%. In January 1994, this
arrangement was replaced at no cost to the Company by a new interest rate swap
agreement. Under the terms of the new agreement, which has a notional amount of
$6,000,000 and an expiration date of January 1999, the Company pays a fixed rate
of 5.74% and receives a floating rate based on LIBOR. The counterparties to
these agreements are high credit quality financial institutions.
Payments of interest due under the Company's borrowings amounted to $1,174,000
in 1994, $978,000 in 1993 and $750,000 in 1992.
NOTE 8
Leases
The Company has noncancelable operating leases covering certain machinery and
equipment, automobiles and buildings which expire at various dates through 1999.
Certain leases contain purchase and renewal options.
Rental expense under all operating leases was $1,529,000, $1,349,000 and
$1,116,000 in 1994, 1993 and 1992, respectively. At December 31, 1994, future
minimum rental payments under noncancelable operating leases are due as follows
(in thousands):
<TABLE>
<CAPTION>
<S> <C> <C>
1995 $ 988
1996 568
1997 473
1998 442
1999 423
Thereafter 7
Total $2,901
</TABLE>
NOTE 9
Contingencies
Like other companies in its industry, Guardsman is subject to existing and
evolving standards related to the protection of the environment. As a result,
it is the Company's policy to establish reserves for site restoration costs and
related claims where it is probable a liability exists and the amount can be
reasonably estimated. These reserves are adjusted as information becomes
available upon which a more accurate estimate of eventual costs can be made.
Such estimates are subject to numerous variables, the effects of which are
difficult to measure, including the stage of the investigations, the nature of
potential remedies, the joint and several liability with other potentially
-101-
responsible parties, availability of insurance and government funds and other
issues. Accordingly, the ultimate cost of these matters cannot be determined at
this time and may not be resolved for a number of years. The net reserves of
$4,765,000, of which $640,000 and $4,125,000 are included in other accrued
expenses and other liabilities, respectively, at December 31, 1994, represent
the Company's best estimate of probable exposures at this time. The net
reserves include approximately $2,100,000 for estimated environmental
liabilities of Moline which were assumed by Guardsman. Based upon information
currently available, it is not anticipated that the outcome of these
environmental matters will materially affect the Company's consolidated
financial position. The ultimate effect of these matters on the Company's
results of operations cannot be predicted because any such effect depends on the
amount and timing of charges to operations resulting from new information as it
becomes available.
Approximately $416,000 is included as an offset to these net reserves at
December 31, 1994. This amount represents estimated reimbursements from a state
government agency for costs expended and to be expended for site restoration of
an area formerly containing underground storage tanks.
The Company is also involved in legal proceedings and litigation arising in the
ordinary course of business. In the opinion of management, the outcome of such
proceedings and litigation currently pending will not materially affect the
Company's consolidated financial statements.
NOTE 10
Pension Plans
The Company has four noncontributory primary defined benefit pension plans
covering substantially all of its employees. A plan covering non-union
employees provides pension benefits based upon a retiree's earnings of the five
consecutive calendar years during employment in which the retiree received the
highest level of compensation. Plans covering union employees provide pension
benefits at stated amounts for each year of service. The Company's policy is to
fund the minimum actuarially computed annual contribution required under ERISA.
Effective with the acquisition of Moline, the Company assumed sponsorship of a
defined benefit pension plan covering substantially all employees of Moline,
whose plan assets exceed accumulated plan benefits.
-102-
The following table sets forth the funded status and amounts recognized in the
Consolidated Balance Sheets for the Company's primary defined benefit pension
plans at December 31.
<TABLE>
<CAPTION>
1994 1993
Plans whose Plan whose Plan whose
assets exceed accumulated assets exceed
accumulated benefits accumulated
benefits exceed assets benefits
<S> <C> <C> <C>
Pension assets at fair value $20,076 $3,287 $24,120
Actuarial present value of accumulated
plan benefits:
Vested 14,931 3,740 17,009
Non-vested 715 97 1,017
15,646 3,837 18,026
Effect of estimated future increases in
compensation 5,506 _____ 3,723
Projected benefit obligation of service
rendered to date 21,152 3,837 21,749
Plan assets in excess of (less than)
projected benefit obligation (1,076) (550) 2,371
Accrued pension costs
recognized
in the balance sheet 5,199 208 3,507
Adjustment to recognize minimum
liability _____ 342 _____
Unrecognized net pension assets $ 4,123 $ 0 $ 5,878
</TABLE>
-103-
<TABLE>
<CAPTION>
1994 1993
Plans whose Plan whose Plan whose
assets exceed accumulated assets exceed
accumulated benefits accumulated
benefits exceed assets benefits
<S> <C> <C> <C>
Components of unrecognized net pension
assets:
Net experience gains $ 4,644 $ 438 $ 7,122
Transition assets (liabilities) 333 (187) 153
Prior service costs (854) (593) (1,397)
Adjustment to recognize minimum
liability _____ 342 _____
$ 4,123 $ 0 $ 5,878
</TABLE>
At December 31, 1994, plan assets of the four primary defined benefit plans were
invested in listed common stocks (48%), fixed income securities (33%), Guardsman
common stock (10%) with a market value of $2,271,000, life insurance contracts
(3%) and short-term investments (6%).
In addition to the four primary defined benefit pension plans, the Company also
has a supplemental executive retirement plan (the SERP) and a directors'
retirement plan, both of which are unfunded defined benefit plans. In addition,
an unfunded pension restoration plan was adopted in 1994. The actuarial present
value of accumulated plan benefits related to the Company's SERP, pension
restoration plan and directors' retirement plan totaled $1,493,000 and
$1,583,000 at December 31, 1994 and 1993, respectively. Accrued pension costs
of $1,878,000 and $1,872,000 related to these three plans were recorded at
December 31, 1994 and 1993, respectively.
The assumptions used in accounting for defined benefit plans for the three years
presented are set forth below:
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Weighted-average assumed discount rates 8.25% 7.75% 8.5%
Rates of compensation increase 5.0% 5.0% 6.0%
Weighted-average expected long-term rate
of return on plan assets 8.5% 8.5% 8.5%
</TABLE>
Guardsman also maintains defined contribution plans covering the employees of
its Canadian and United Kingdom subsidiaries and a 401(k) plan for all of its
non-bargaining domestic employees. The following is a summary of pension
expense recognized by the Company (in thousands):
-104-
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Defined benefit plans:
Service cost - benefits earned during
the period $1,090 $ 945 $ 706
Interest cost on projected benefit
obligation 1,950 1,805 1,703
Actual loss (return) on plan assets 1,013 (2,698) (383)
Net amortization (deferral) (3,244) 598 (1,725)
Net pension cost of defined benefit
plans 809 650 301
Defined contribution plans 198 146 125
Total pension expense $1,007 $ 796 $ 426
</TABLE>
NOTE 11
Postretirement Benefits Other Than Pensions
Substantially all domestic employees of the Company, other than employees of
Moline, are eligible upon retirement for certain healthcare and life insurance
benefits. The postretirement healthcare plans are unfunded contributory plans
and contain other cost-sharing features such as deductibles, life-time benefit
limits and coinsurance.
The following table sets forth amounts recognized in the Consolidated Balance
Sheets at December 31 (in thousands):
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
Actuarial present value of
accumulated postretirement benefit obligation:
Retirees $1,277 $ 960
Fully eligible active participants 572 435
Other active participants 154 132
Unfunded status 2,003 1,527
Unrecognized net transition obligation (1,286) (1,357)
Unrecognized net loss (436) (76)
Accrued post retirement benefit cost $ 281 $ 94
</TABLE>
-105-
The following is a summary of postretirement benefit cost recognized by the
Company (in thousands):
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
Service cost $ 19 $ 16
Interest cost 130 119
Net amortization 77 71
Net periodic postretirement benefit cost $226 $206
</TABLE>
During 1992, the cost of providing these benefits totaled approximately $83,000
and was recognized as an expense in the year the benefits were paid.
The transitional liability upon implementation of Statement of Financial
Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions" in 1993 of $1,430,000 is being accrued ratably over a 20
year period. The discount rate assumed in determining the actuarial value of
the plans' postretirement benefit obligation was 8.25% at December 31, 1994 and
7.75% at December 31, 1993. The annual assumed rate of increase in the per
capita cost of covered benefits, or healthcare cost trend rate, will be 11.5% in
1995, uniformly decreasing to 5.75% in 2003 and thereafter. A 1% increase in
the assumed healthcare cost trend rate would not have a material effect on the
postretirement benefit obligation or the periodic cost of the plans.
NOTE 12
Employee Incentive Plans
The Company's 1992 Employee Stock Purchase Plan provides eligible employees the
option to purchase the Company's common stock at a price equal to 85% of the
market price at the date of purchase. During 1994, the Board of Directors
eliminated the limitation of 5,000 shares per quarter available for purchase
under the plan.
The Company has set aside 519,923 shares of common stock under its 1984
Incentive Stock Option Plan for the grant of options to directors and key
management employees. In addition, the Company has reserved 330,000 and 360,000
shares of common stock for granting of stock options to directors and key
management employees under its 1988 and 1991 Stock Option Plans, respectively.
Certain of these options qualify as nontaxable under the Internal Revenue Code.
-106-
Stock option activity under the various plans is presented below (in
thousands, except per share amounts):
<TABLE>
<CAPTION> 1994 1993 1992
<S> <C> <C> <C>
Shares under Employee Stock Purchase Plan:
Outstanding at beginning of year 5 23 21
Granted 19 20 21
Exercised (17) (17) (19)
Cancelled (21)
Outstanding and exercisable at
end of year 7 5 23
Available for grant at end of year 66 85 5
Purchase price per share of options $ 7.86 to $10.31 to $ 7.33 to
exercised <FA> $10.68 $13.81 $10.04
Market price per share of options $ 9.25 to $12.13 to $ 8.63 to
exercised <FA> $12.56 $16.25 $11.81
1994 1993 1992
Shares under Performance Award Plan
and Stock Option Plans:
Outstanding at beginning of year 428 478 435
Granted 205 125 126
Exercised (44) (100) (45)
Terminated (128) (75) (38)
Outstanding at end of year 461 428 478
Exercisable at end of year 386 401 406
Available for grant at end of year 243 385 435
Purchase price per share of options:
Outstanding <FB> $ 9.13 to $ 7.82 to $ 7.82 to
$14.75 $14.75 $14.75
Exercised <FA> $ 7.82 to $ 8.28 to $ 7.31 to
$14.75 $14.75 $11.75
Market price per share of options $11.50 to $10.75 to $10.25 to
exercised <FA> $16.50 $16.38 $13.50
<FN>
<FA> At date of exercise.
<FB> Market value at date of grant.
</FN>
</TABLE>
-107-
In addition, 50,000 shares of common stock have been reserved for issuance
under a one-time grant in November 1994 of stock options to the Chairman of
the Board of the Company. These shares, which were granted at the fair
market value of the stock at the date of grant, are exercisable ratably
over a five year period.
The Company has a performance award plan under which performance award
units may be granted to key management employees. Performance award units
include a performance allotment expressed in dollars and options to
purchase common stock. Performance allotments aggregating $353,000,
$222,000 and $300,000 were granted under the plan in 1994, 1993 and 1992,
respectively. Such allotments are payable in 1997, 1996 and 1995,
respectively, if specified performance levels, measured in terms of income
before income taxes, are achieved by the Company during the three year
period subsequent to the grant.
Distributions, payable in cash, to key employees under various bonus plans
are based primarily upon sales and income before income taxes. Expense
incurred under the plans was $2,523,000, $1,928,000 and $1,147,000 for
1994, 1993 and 1992, respectively.
NOTE 13
Stock Rights Plan
On December 31, 1994, the Company had outstanding 9,482,199 Series A
Preferred Stock Purchase Rights (Rights). The Rights were originally
issued in August 1986 as a dividend to holders of the Company's common
stock at the rate of one Right for each share of common stock outstanding.
Each Right entitles the holder thereof, until August 27, 1996, to buy one
one-hundredth (1/100) of a share of Series A Preferred Stock at an exercise
price of $60.00. The exercise price and the number of shares of Series A
Preferred Stock issuable upon the exercise of the Rights are subject to
adjustment in certain cases to prevent dilution. The Rights are evidenced
by common stock certificates and are not exercisable or transferable apart
from the common stock until ten days after a person (exclusive of persons
holding 20% or more of the Company's common stock on August 8, 1986)
acquires 20% or more or makes a tender or exchange offer for 30% or more of
the common stock. If, after a person acquires 20% or more of the common
stock, the Company is acquired in a merger or other business combination
transaction (including one in which the Company is the surviving
corporation), or if certain other conditions are met, each Right will
entitle its holder to purchase, at the then current exercise price of the
Right, that number of shares of common stock of either the acquiring
company or Guardsman, as the case may be, which at the time of such
transaction would have a market value of two times the exercise price of
the Right. The Rights do not have any voting rights and are redeemable, at
the option of the Company, at a price of $0.05 per Right prior to any
person acquiring beneficial ownership of at least 20% of the common stock.
The Rights expire on August 27, 1996. So long as the Rights are not
separately transferable, the Company will issue one Right with each new
share of common stock issued.
-108-
NOTE 14
Business Segments and Foreign Operations
The Company operates in two industries, Coatings and Consumer Products.
Coatings involves the production and distribution of industrial paints,
varnishes, enamels and lacquers primarily for sale to manufacturers of wood
and metal products. Additionally, the Group manufactures resins for
internal use and external sales. Consumer Products includes the
distribution of furniture polishes, wood treatments, dust cloths, cleaning
fluids, paint sundries and other household products to retailers. Consumer
Products also manufactures and distributes a variety of proprietary
after-market automotive maintenance products and industrial lubricants.
As summarized in the segment information below and on pages 81-82, identifiable
assets are those assets that are used by each of the Company's industry
segments and foreign operations presented. Capital expenditures exclude
the cost of capital assets acquired in business combinations. Corporate
assets are principally cash, marketable securities, prepaid expenses,
deferred income tax assets and corporate fixed assets. Operating profit
does not include general corporate expenses, interest expense and income
taxes. Sales between segments are at cost plus a small percentage markup.
Business segment financial information follows (in thousands):
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Capital expenditures
Coatings $2,686 $2,582 $ 916
Consumer Products 627 622 512
Corporate 97 26 146
$3,410 $3,230 $1,574
Depreciation and amortization
Coatings $4,350 $3,428 $2,548
Consumer Products 982 1,068 923
Corporate 157 178 176
$5,489 $4,674 $3,647
</TABLE>
-109-
Financial information by geographic area is set forth below (in thousands):
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Net sales
United States $175,665 $156,662 $135,079
Canada 19,424 15,687 12,535
Europe 6,799 5,457 4,583
Consolidated $201,888 $177,806 $152,197
Operating profit
United States $ 11,050 $ 9,894 $ 6,783
Canada 1,395 1,177 215
Europe 1,826 1,506 1,298
Operating profit 14,271 12,577 8,296
Corporate expenses - net (3,618) (4,417) (4,611)
Interest expense (1,188) (991) (703)
Costs of pooling of interests (529)
Investment income 374 376 372
Income before income taxes $ 9,839 $ 7,016 $ 3,354
Identifiable assets
United States $107,298 $ 68,098 $ 59,197
Canada 14,102 12,866 10,752
Europe 4,964 3,351 2,357
Corporate 10,688 12,639 11,188
Total $137,052 $ 96,954 $ 83,494
</TABLE>
-110-
NOTE 15
Summarized Quarterly Operating Results (Unaudited)
Selected quarterly financial data is summarized as follows (in thousands,
except share and per share data):
<TABLE>
<CAPTION>
1994 Quarters
First Second Third Fourth Total
<S> <C> <C> <C> <C> <C>
Net sales $44,950 $48,946 $51,102 $56,890 $201,888
Gross profit 15,719 17,220 17,441 18,524 68,904
Net income 1,165 1,831 1,682 1,225 5,903
Net income per common
share $.15 $.23 $.20 $.13 $.70
Weighted average shares
outstanding 7,940,876 7,956,326 8,470,159 9,474,283 8,464,639
</TABLE>
<TABLE>
<CAPTION>
1993 Quarters
First Second Third Fourth Total
<S> <C> <C> <C> <C> <C>
Net sales $43,412 $45,680 $45,594 $43,120 $177,806
Gross profit 14,414 15,424 15,954 15,071 60,863
Income before cumulative effect
of change in accounting principle 942 1,297 1,256 1,026 4,521
Cumulative effect of change in
accounting principle 150 150
Net income $ 1,092 $ 1,297 $ 1,256 $ 1,026 $ 4,671
Income per common share:
Before cumulative effect of
change in accounting principle $.12 $.17 $.16 $.13 $.58
Cumulative effect of change in
accounting principle .02 .02
Net income $.14 $.17 $.16 $.13 $.60
</TABLE>
-111-
RESPONSIBILITIES FOR FINANCIAL STATEMENTS
Management is responsible for the integrity of the financial data reported
by Guardsman and its subsidiaries. This responsibility requires preparing
financial statements in accordance with generally accepted accounting
principles and reporting data which, using management's best judgment,
fairly reflects Guardsman's financial position and results of operations.
To gather and control financial data, the Company establishes and maintains
accounting systems adequately supported by internal controls. Management
believes that a high level of internal control is maintained by the
selection and training of qualified personnel, by the establishment and
communication of accounting and business policies and by internal audits.
Arthur Andersen LLP, independent public accountants, are engaged to audit
and to render an opinion as to whether management's financial statements,
considered in their entirety, present fairly Guardsman's consolidated
financial position and operating results. Their audit was conducted in
accordance with generally accepted auditing standards, and their report is
included herein.
The Audit Committee of the Board of Directors, composed of five outside
directors, meets regularly with management, the internal auditor and the
independent public accountants to review the activities of each.
/s/ Charles E. Bennett /s/ Henry H. Graham, Jr.
Charles E. Bennett Henry H. Graham, Jr.
President and Vice President of Finance and
Chief Executive Officer Chief Financial Officer
January 26, 1995
-112-
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
Stockholders and Board of Directors
Guardsman Products, Inc.
We have audited the accompanying consolidated balance sheets of Guardsman
Products, Inc. and subsidiaries as of December 31, 1994 and 1993, and the
related consolidated statements of income, stockholders' equity and cash
flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits. The
consolidated financial statements of Guardsman Products, Inc. for the year
ended December 31, 1992, were audited by other auditors whose report dated
January 27, 1993, expressed an unqualified opinion on those statements.
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 1994 and 1993 financial statements referred to above
present fairly, in all material respects, the financial position of
Guardsman Products, Inc. and subsidiaries at December 31, 1994 and 1993,
and the results of their operations and their cash flows for the years then
ended in conformity with generally accepted accounting principles.
As explained in note 6 to the consolidated financial statements, in 1993,
the Company changed its method of accounting for income taxes to adopt the
provisions of Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes."
/s/ Arthur Andersen LLP
Grand Rapids, Michigan
January 26, 1995
-113-
Stockholder Information
10-K Information
Upon written request of any stockholder, management will provide, at no
charge, a copy of the Form 10-K as filed with the Securities and Exchange
Commission, less exhibits. Send your request to Mr. Jeffrey M. Suerth,
Secretary of the Company, Guardsman Products, Inc., P.O. Box 1521, Grand
Rapids, Michigan 49501-1521.
Common Stock
The Common Stock of the Company is listed on the New York Stock Exchange
(Symbol: GPI).
Transfer Agent and Registrar
Chemical Bank
Corporate Trust Department
450 W. 33rd Street
New York, New York 10001
(800) 851-9677
1995 Stockholders' Meeting
May 11, 1995, at 10:30 a.m.
Gillett Auditorium
Old Kent Bank Building
Monroe Avenue at Lyon Street
Grand Rapids, Michigan 49503
-114-
Dividend Reinvestment and Stock Purchase Plan
Guardsman offers a dividend reinvestment plan which permits participating
stockholders of record to reinvest dividends in Guardsman common stock
without paying brokerage commissions or service charges. Participating
stockholders may also invest up to $3,000 in additional funds each quarter
for the purchase of additional shares. A copy of the dividend reinvestment
plan prospectus and authorization form may be requested from:
Chemical Bank
Dividend Reinvestment Department
P.O. Box 24850
Church Street Station
New York, New York 10249
(800) 851-9677
Additional Information
<TABLE>
<CAPTION>
December 31,
1994 1993
<S> <C> <C>
Number of Stockholders of Record 1,780 1,366
Income (per Common Share)
First Quarter $.15 $.14
Second Quarter .23 .17
Third Quarter .20 .16
Fourth Quarter .13 .13
Year Ended December 31 $.70 $.60
Dividends (per Common Share)
First Quarter $.08 $.08
Second Quarter .08 .08
Third Quarter .08 .08
Fourth Quarter .08 .08
Year Ended December 31 $.32 $.32
Stock Prices (Low & High)
First Quarter $12 1/8 - 16 5/8 $10 1/2 - 14
Second Quarter $ 9 - 12 3/4 $10 7/8 - 13 5/8
Third Quarter $ 9 - 12 3/8 $12 - 13 3/4
Fourth Quarter $10 1/8 - 12 7/8 $12 3/4 - 16 5/8
</TABLE>
-115-
An Equal Opportunity Employer
It is the policy of Guardsman to recruit, hire, employ and promote the best
qualified employees and applicants for employment without regard to race,
color, religion, national origin or sex. Positive action will be taken and
continued to ensure the fulfillment of this policy.
Directors and Officers
Directors
*Paul K. Gaston
Chairman of the Board of the Corporation
Charles E. Bennett
President and
Chief Executive Officer of the Corporation
*John Russell Fowler
Retired Chairman of the Board
Jacobson Stores, Inc.
**Grant C. Gentry
Chairman of the Board
Bromar, Inc.
K. Kevin Hepp
Retired Senior Vice President
Owens-Illinois, Inc.
*George R. Kempton
Chairman of the Board and Chief Executive Officer
Kysor Industrial Corporation
*Winthrop C. Neilson
Managing Director
Neilson/Hetrick Consulting Group
James L. Sadler
Retired President and Chief Operating Officer
Moline Paint Manufacturing Co.
Robert W. Schult
President
Nestle Food Company
*Robert D. Tuttle
Retired Chairman of the Board
SPX Corporation
*Member of the Audit Committee
**Advisory member of the Board of Directors
-116-
Corporate Officers
Charles E. Bennett
President and
Chief Executive Officer
Edward D. Corlett
Vice President,
Metal Coatings Group
Henry H. Graham, Jr.
Vice President of Finance,
Chief Financial Officer and
Treasurer
Everette L. Martin
Vice President,
Wood Coatings Group
Keith C. Vander Hyde, Jr.
Vice President,
Consumer Products Group
Administrative Officers
Glenn A. Belter
Vice President, Information Services
Grant J. Carter
Vice President, Marketing and
Business Development
Robert H. Ripley
Vice President, Corporate Environmental
and Technical Affairs
Jeffrey M. Suerth
Vice President, Communications
and Public Relations
and Secretary
Facility Locations
Corporate Offices
3033 Orchard Vista SE
P.O. Box 1521
Grand Rapids, MI 49501
(616) 957-2600
FAX (616) 957-1236
-117-
Consumer Products
2960 Lucerne SE
P.O. Box 88010
Grand Rapids, MI 49518
(616) 940-2900
FAX (616) 956-8010
Cornwall
1915 Second Street W
Cornwall, ONT K6H 5T1
Canada
(613) 932-8960
FAX (613) 932-4439
Fremont
411 Darling Avenue N
Fremont, MI 49412
(616) 924-3950
FAX (616) 924-2085
Grand Rapids
1350 Steele Avenue SE
Grand Rapids, MI 49507
(616) 452-5181
FAX (616) 241-3624
High Point
2147 Brevard Road
P.O. Box 1029
High Point, NC 27261
(919) 889-6344
FAX (919) 841-6790
Little Rock
1900 E 145th Street
Little Rock, AR 72206
(501) 897-4356
FAX (501) 897-4902
Los Angeles
9845 Miller Way
South Gate, CA 90280
(213) 927-5501
FAX (213) 927-1800
Moline
5400 23rd Avenue
Moline, IL 61265
(309) 762-7546
FAX (309) 762-9604
-118-
Rocky Hill
145 Dividend Road
P.O. Box 918
Rocky Hill, CT 06067
(203) 563-2811
FAX (203) 721-9832
Seattle
13535 Monster Road
Seattle, WA 98178
(206) 772-6550
FAX (206) 772-3050
Specialty Coatings
2960 Lucerne SE
Grand Rapids, MI 49518
(616) 940-2900
FAX (616) 956-8010
Tulsa
5111 East 36th Street North
Tulsa, OK 74115
(918) 428-2506
FAX (918) 425-8523
United Kingdom
152 Milton Park
Abingdon
Oxfordshire OX14 4SD
England
44 (0235) 833009
FAX 01144-235-553058
-119-
EXHIBIT 13-B
REPORT OF PRIOR INDEPENDENT AUDITORS
Stockholders and Board of Directors
Guardsman Products, Inc.
We have audited the consolidated balance sheet of Guardsman Products, Inc.
and subsidiaries as of December 31, 1992, and the related consolidated
statements of income, stockholders' equity and cash flows for the year then
ended. Our audit also included the financial statement schedule listed in
Item 14(a)2 of this 1994 Annual Report (Form 10-K). These financial
statements and the schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and the schedule based on our audit.
We conducted our audits in accordance with generally accepted auditing
standards. These standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Guardsman
Products, Inc. and subsidiaries at December 31, 1992, and the consolidated
results of their operations and their cash flows for the year then ended in
conformity with generally accepted accounting principles. Also, in our
opinion, the related financial statement schedule, when considered in
relation to the basic financial statements taken as a whole, presents
fairly, in all material respects, the information set forth therein.
/s/ Ernst & Young LLP
Grand Rapids, Michigan
January 27, 1993
-120-
EXHIBIT 21
SUBSIDIARIES OF GUARDSMAN PRODUCTS, INC.
1. Guardsman Products Limited, an Ontario, Canada corporation
(wholly owned).
2. G.C.I. Insurance Company, Limited, a Bermuda corporation (wholly
owned).
3. Guardsman UK Limited, a United Kingdom corporation (wholly
owned).
4. Armorguard Products, Inc., a New Jersey Corporation (wholly
owned).
5. Altanta Sundries, Inc., a Georgia Corporation (wholly owned).
6. Guardsman Chemical International, Limited, a Virgin Islands
Corporation (wholly owned).
7. Moline Paint Manufacturing Co., an Illinois Corporation
(wholly owned).
8. Moline Paint Manufacturing Co.-Tulsa, an Oklahoma Corporation
(wholly owned subsidiary of Moline Paint Manufacturing Co.).
-121-
EXHIBIT 23-A
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Guardsman Products, Inc.:
As independent public accountants, we hereby consent to the incorporation
of our reports incorporated by reference in this Form 10-K, into the
Company's previously filed Form S-8 Registration Statements, as amended,
File Numbers 2-72787, 2-92445, 33-20034, 33-25483, 33-46778, 33-46780, 33-
46781 and Form S-3 Registration Statements, as amended, File Numbers 33-
19908 and 33-78606.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Grand Rapids, Michigan
March 28, 1995
-122-
EXHIBIT 23-B
CONSENT OF PRIOR INDEPENDENT AUDITORS
We consent to the use of our report dated January 27, 1993, in this 1994
Annual Report (Form 10-K) of Guardsman Products, Inc. and subsidiaries.
We also consent to the incorporation by reference of our report dated
January 27, 1993, with respect to the consolidated financial statements
incorporated herein by reference and schedule included in this 1994 Annual
Report (Form 10-K) of Guardsman Products, Inc. and subsidiaries as of
December 31, 1992 and for the year then ended, in the following
registration statements:
- Post-Effective Amendment Number Two to Registration Statement
(Form S-8 No. 2-72787) dated April 22, 1983, pertaining to the
1980 Performance Award Plan.
- Registration Statement (Form S-8 No. 2-92445) dated July 26,
1984, pertaining to the 1984 Incentive Stock Option Plan.
- Registration Statement (Form S-8 No. 33-20034) dated February 8,
1988, pertaining to the 1987 Employee Stock Purchase Plan.
- Registration Statement (Form S-8 No. 33-25483) dated November 14,
1988, pertaining to the 1988 Stock Option Plan.
- Post-Effective Amendment Number One to Registration Statement
(Form S-3 No. 33-19908) dated July 12, 1990, pertaining to the
1988 Dividend Reinvestment and Stock Purchase Plan.
- Registration Statement (Form S-8 No. 33-46778) dated March 20,
1992, pertaining to the 1992 Employee Stock Purchase Plan.
- Registration Statement (Form S-8 No. 33-46780) dated March 20,
1992, pertaining to the 1991 Employee Stock Option Plan.
- Registration Statement (Form S-8 No. 33-46781) dated March 20,
1992, pertaining to the Security Builder Plan.
- Registration Statement (Form S-3 No. 33-78606) dated June 6,
1994, pertaining to the registration of common stock in
conjunction with the acquisition of Atlanta Sundries, Inc.
/s/ Ernst & Young LLP
Grand Rapids, Michigan
March 28, 1995
-123-
EXHIBIT 24
POWER OF ATTORNEY
The undersigned, George R. Kempton, does hereby appoint Paul K.
Gaston, Charles E. Bennett, and Henry H. Graham, Jr., and any one of them
severally, his true and lawful attorney or attorneys to execute in his
name, place and stead, in his capacity as a director or officer, or both,
as the case may be, of Guardsman Products, Inc. (the "Company"), the
following:
- The Annual Report on Form 10-K for the year ended December
31, 1994, and any and all amendments to said report on Form
10-K;
- A post-effective amendment to the Form S-8 Registration
Statement regarding the shares of the Company's Common
Stock, $1 par value, to be issued pursuant to the Guardsman
Products, Inc. Performance Award Plan;
- A post-effective amendment to the Form S-3 Registration
Statement regarding the shares of the Company's Common
Stock, $1 par value, to be issued pursuant to the Guardsman
Products, Inc. Dividend Reinvestment and Stock Purchase
Plan;
- A post-effective amendment to the Form S-8 Registration
Statement regarding the shares of the Company's Common
Stock, $1 par value, to be issued pursuant to the Guardsman
Products, Inc. 1988 Stock Option Plan;
- A post-effective amendment to the Form S-8 Registration
Statement regarding the shares of the Company's Common
Stock, $1 par value, to be issued pursuant to the Guardsman
Products, Inc. Security Builder Plan or Section 401(k)
Plan, and interests in the Plan;
- A post-effective amendment to the Form S-8 Registration
Statement regarding the shares of the Company's Common
Stock, $1 par value, to be issued pursuant to the Guardsman
Products, Inc. 1991 Stock Option Plan;
- A post-effective amendment to the Form S-8 Registration
Statement regarding the shares of the Company's Common
Stock, $1 par value, to be issued pursuant to the Guardsman
Products, Inc. 1992 Employee Stock Purchase Plan;
- A Form S-8 Registration Statement and/or a post-effective
amendment to the Form S-8 Registration Statement regarding
the shares of the Company's common stock $1 par value, to
be issued pursuant to the Guardsman Products, Inc. 1995
Long-Term Incentive Plan;
-124-
- A Form S-8 Registration Statement and/or a post-effective
amendment to the Form S-8 Registration Statement regarding
the shares of the Company's common stock $1 par value, to
be issued pursuant to the Moline Paint Manufacturing Co.
401(k) Profit Sharing Plan, and interests in the Plan.
and to file the same with the Securities and Exchange Commission and with
the New York Stock Exchange. Each of said attorneys shall have full power
and authority to do and perform in the name and on behalf of the
undersigned, in any and all capacities, every act whatsoever requisite or
necessary to be done as fully as each of the undersigned might or could do
in person, hereby ratifying and approving the act of said attorneys and
each of them.
Dated: February 28, 1995
/s/ George R. Kempton
George R. Kempton
Director
-125-
POWER OF ATTORNEY
The undersigned, John Russell Fowler, does hereby appoint Paul K.
Gaston, Charles E. Bennett, and Henry H. Graham, Jr., and any one of them
severally, his true and lawful attorney or attorneys to execute in his
name, place and stead, in his capacity as a director or officer, or both,
as the case may be, of Guardsman Products, Inc. (the "Company"), the
following:
- The Annual Report on Form 10-K for the year ended December
31, 1994, and any and all amendments to said report on Form
10-K;
- A post-effective amendment to the Form S-8 Registration
Statement regarding the shares of the Company's Common
Stock, $1 par value, to be issued pursuant to the Guardsman
Products, Inc. Performance Award Plan;
- A post-effective amendment to the Form S-3 Registration
Statement regarding the shares of the Company's Common
Stock, $1 par value, to be issued pursuant to the Guardsman
Products, Inc. Dividend Reinvestment and Stock Purchase
Plan;
- A post-effective amendment to the Form S-8 Registration
Statement regarding the shares of the Company's Common
Stock, $1 par value, to be issued pursuant to the Guardsman
Products, Inc. 1988 Stock Option Plan;
- A post-effective amendment to the Form S-8 Registration
Statement regarding the shares of the Company's Common
Stock, $1 par value, to be issued pursuant to the Guardsman
Products, Inc. Security Builder Plan or Section 401(k)
Plan, and interests in the Plan;
- A post-effective amendment to the Form S-8 Registration
Statement regarding the shares of the Company's Common
Stock, $1 par value, to be issued pursuant to the Guardsman
Products, Inc. 1991 Stock Option Plan;
- A post-effective amendment to the Form S-8 Registration
Statement regarding the shares of the Company's Common
Stock, $1 par value, to be issued pursuant to the Guardsman
Products, Inc. 1992 Employee Stock Purchase Plan;
- A Form S-8 Registration Statement and/or a post-effective
amendment to the Form S-8 Registration Statement regarding
the shares of the Company's common stock $1 par value, to
be issued pursuant to the Guardsman Products, Inc. 1995
Long-Term Incentive Plan;
- A Form S-8 Registration Statement and/or a post-effective
amendment to the Form S-8 Registration Statement regarding
-126-
the shares of the Company's common stock $1 par value, to
be issued pursuant to the Moline Paint Manufacturing Co.
401(k) Profit Sharing Plan, and interests in the Plan.
and to file the same with the Securities and Exchange Commission and with
the New York Stock Exchange. Each of said attorneys shall have full power
and authority to do and perform in the name and on behalf of the
undersigned, in any and all capacities, every act whatsoever requisite or
necessary to be done as fully as each of the undersigned might or could do
in person, hereby ratifying and approving the act of said attorneys and
each of them.
Dated: February 23, 1995
/s/ John Russell Fowler
John Russell Fowler
Director
-127-
POWER OF ATTORNEY
The undersigned, K. Kevin Hepp, does hereby appoint Paul K. Gaston,
Charles E. Bennett, and Henry H. Graham, Jr., and any one of them
severally, his true and lawful attorney or attorneys to execute in his
name, place and stead, in his capacity as a director or officer, or both,
as the case may be, of Guardsman Products, Inc. (the "Company"), the
following:
- The Annual Report on Form 10-K for the year ended December
31, 1994, and any and all amendments to said report on Form
10-K;
- A post-effective amendment to the Form S-8 Registration
Statement regarding the shares of the Company's Common
Stock, $1 par value, to be issued pursuant to the Guardsman
Products, Inc. Performance Award Plan;
- A post-effective amendment to the Form S-3 Registration
Statement regarding the shares of the Company's Common
Stock, $1 par value, to be issued pursuant to the Guardsman
Products, Inc. Dividend Reinvestment and Stock Purchase
Plan;
- A post-effective amendment to the Form S-8 Registration
Statement regarding the shares of the Company's Common
Stock, $1 par value, to be issued pursuant to the Guardsman
Products, Inc. 1988 Stock Option Plan;
- A post-effective amendment to the Form S-8 Registration
Statement regarding the shares of the Company's Common
Stock, $1 par value, to be issued pursuant to the Guardsman
Products, Inc. Security Builder Plan or Section 401(k)
Plan, and interests in the Plan;
- A post-effective amendment to the Form S-8 Registration
Statement regarding the shares of the Company's Common
Stock, $1 par value, to be issued pursuant to the Guardsman
Products, Inc. 1991 Stock Option Plan;
- A post-effective amendment to the Form S-8 Registration
Statement regarding the shares of the Company's Common
Stock, $1 par value, to be issued pursuant to the Guardsman
Products, Inc. 1992 Employee Stock Purchase Plan;
- A Form S-8 Registration Statement and/or a post-effective
amendment to the Form S-8 Registration Statement regarding
the shares of the Company's common stock $1 par value, to
be issued pursuant to the Guardsman Products, Inc. 1995
Long-Term Incentive Plan;
- A Form S-8 Registration Statement and/or a post-effective
amendment to the Form S-8 Registration Statement regarding
-128-
the shares of the Company's common stock $1 par value, to
be issued pursuant to the Moline Paint Manufacturing Co.
401(k) Profit Sharing Plan, and interests in the Plan.
and to file the same with the Securities and Exchange Commission and with
the New York Stock Exchange. Each of said attorneys shall have full power
and authority to do and perform in the name and on behalf of the
undersigned, in any and all capacities, every act whatsoever requisite or
necessary to be done as fully as each of the undersigned might or could do
in person, hereby ratifying and approving the act of said attorneys and
each of them.
Dated: February 23, 1995
/s/ K. Kevin Hepp
K. Kevin Hepp
Director
-129-
POWER OF ATTORNEY
The undersigned, Winthrop C. Neilson, III, does hereby appoint Paul
K. Gaston, Charles E. Bennett, and Henry H. Graham, Jr., and any one of
them severally, his true and lawful attorney or attorneys to execute in his
name, place and stead, in his capacity as a director or officer, or both,
as the case may be, of Guardsman Products, Inc. (the "Company"), the
following:
- The Annual Report on Form 10-K for the year ended December
31, 1994, and any and all amendments to said report on Form
10-K;
- A post-effective amendment to the Form S-8 Registration
Statement regarding the shares of the Company's Common
Stock, $1 par value, to be issued pursuant to the Guardsman
Products, Inc. Performance Award Plan;
- A post-effective amendment to the Form S-3 Registration
Statement regarding the shares of the Company's Common
Stock, $1 par value, to be issued pursuant to the Guardsman
Products, Inc. Dividend Reinvestment and Stock Purchase
Plan;
- A post-effective amendment to the Form S-8 Registration
Statement regarding the shares of the Company's Common
Stock, $1 par value, to be issued pursuant to the Guardsman
Products, Inc. 1988 Stock Option Plan;
- A post-effective amendment to the Form S-8 Registration
Statement regarding the shares of the Company's Common
Stock, $1 par value, to be issued pursuant to the Guardsman
Products, Inc. Security Builder Plan or Section 401(k)
Plan, and interests in the Plan;
- A post-effective amendment to the Form S-8 Registration
Statement regarding the shares of the Company's Common
Stock, $1 par value, to be issued pursuant to the Guardsman
Products, Inc. 1991 Stock Option Plan;
- A post-effective amendment to the Form S-8 Registration
Statement regarding the shares of the Company's Common
Stock, $1 par value, to be issued pursuant to the Guardsman
Products, Inc. 1992 Employee Stock Purchase Plan;
- A Form S-8 Registration Statement and/or a post-effective
amendment to the Form S-8 Registration Statement regarding
the shares of the Company's common stock $1 par value, to
be issued pursuant to the Guardsman Products, Inc. 1995
Long-Term Incentive Plan;
-130-
- A Form S-8 Registration Statement and/or a post-effective
amendment to the Form S-8 Registration Statement regarding
the shares of the Company's common stock $1 par value, to
be issued pursuant to the Moline Paint Manufacturing Co.
401(k) Profit Sharing Plan, and interests in the Plan.
and to file the same with the Securities and Exchange Commission and with
the New York Stock Exchange. Each of said attorneys shall have full power
and authority to do and perform in the name and on behalf of the
undersigned, in any and all capacities, every act whatsoever requisite or
necessary to be done as fully as each of the undersigned might or could do
in person, hereby ratifying and approving the act of said attorneys and
each of them.
Dated: February 23, 1995
/s/ Winthrop C. Neilson, III
Winthrop C. Neilson, III
Director
-131-
POWER OF ATTORNEY
The undersigned, Robert D. Tuttle, does hereby appoint Paul K.
Gaston, Charles E. Bennett, and Henry H. Graham, Jr., and any one of them
severally, his true and lawful attorney or attorneys to execute in his
name, place and stead, in his capacity as a director or officer, or both,
as the case may be, of Guardsman Products, Inc. (the "Company"), the
following:
- The Annual Report on Form 10-K for the year ended December
31, 1994, and any and all amendments to said report on Form
10-K;
- A post-effective amendment to the Form S-8 Registration
Statement regarding the shares of the Company's Common
Stock, $1 par value, to be issued pursuant to the Guardsman
Products, Inc. Performance Award Plan;
- A post-effective amendment to the Form S-3 Registration
Statement regarding the shares of the Company's Common
Stock, $1 par value, to be issued pursuant to the Guardsman
Products, Inc. Dividend Reinvestment and Stock Purchase
Plan;
- A post-effective amendment to the Form S-8 Registration
Statement regarding the shares of the Company's Common
Stock, $1 par value, to be issued pursuant to the Guardsman
Products, Inc. 1988 Stock Option Plan;
- A post-effective amendment to the Form S-8 Registration
Statement regarding the shares of the Company's Common
Stock, $1 par value, to be issued pursuant to the Guardsman
Products, Inc. Security Builder Plan or Section 401(k)
Plan, and interests in the Plan;
- A post-effective amendment to the Form S-8 Registration
Statement regarding the shares of the Company's Common
Stock, $1 par value, to be issued pursuant to the Guardsman
Products, Inc. 1991 Stock Option Plan;
- A post-effective amendment to the Form S-8 Registration
Statement regarding the shares of the Company's Common
Stock, $1 par value, to be issued pursuant to the Guardsman
Products, Inc. 1992 Employee Stock Purchase Plan;
- A Form S-8 Registration Statement and/or a post-effective
amendment to the Form S-8 Registration Statement regarding
the shares of the Company's common stock $1 par value, to
be issued pursuant to the Guardsman Products, Inc. 1995
Long-Term Incentive Plan;
- A Form S-8 Registration Statement and/or a post-effective
amendment to the Form S-8 Registration Statement regarding
-132-
the shares of the Company's common stock $1 par value, to
be issued pursuant to the Moline Paint Manufacturing Co.
401(k) Profit Sharing Plan, and interests in the Plan.
and to file the same with the Securities and Exchange Commission and with
the New York Stock Exchange. Each of said attorneys shall have full power
and authority to do and perform in the name and on behalf of the
undersigned, in any and all capacities, every act whatsoever requisite or
necessary to be done as fully as each of the undersigned might or could do
in person, hereby ratifying and approving the act of said attorneys and
each of them.
Dated: February 24, 1995
/s/ Robert D. Tuttle
Robert D. Tuttle
Director
-133-
POWER OF ATTORNEY
The undersigned, James L. Sadler, does hereby appoint Paul K.
Gaston, Charles E. Bennett, and Henry H. Graham, Jr., and any one of them
severally, his true and lawful attorney or attorneys to execute in his
name, place and stead, in his capacity as a director or officer, or both,
as the case may be, of Guardsman Products, Inc. (the "Company"), the
following:
- The Annual Report on Form 10-K for the year ended December
31, 1994, and any and all amendments to said report on Form
10-K;
- A post-effective amendment to the Form S-8 Registration
Statement regarding the shares of the Company's Common
Stock, $1 par value, to be issued pursuant to the Guardsman
Products, Inc. Performance Award Plan;
- A post-effective amendment to the Form S-3 Registration
Statement regarding the shares of the Company's Common
Stock, $1 par value, to be issued pursuant to the Guardsman
Products, Inc. Dividend Reinvestment and Stock Purchase
Plan;
- A post-effective amendment to the Form S-8 Registration
Statement regarding the shares of the Company's Common
Stock, $1 par value, to be issued pursuant to the Guardsman
Products, Inc. 1988 Stock Option Plan;
- A post-effective amendment to the Form S-8 Registration
Statement regarding the shares of the Company's Common
Stock, $1 par value, to be issued pursuant to the Guardsman
Products, Inc. Security Builder Plan or Section 401(k)
Plan, and interests in the Plan;
- A post-effective amendment to the Form S-8 Registration
Statement regarding the shares of the Company's Common
Stock, $1 par value, to be issued pursuant to the Guardsman
Products, Inc. 1991 Stock Option Plan;
- A post-effective amendment to the Form S-8 Registration
Statement regarding the shares of the Company's Common
Stock, $1 par value, to be issued pursuant to the Guardsman
Products, Inc. 1992 Employee Stock Purchase Plan;
- A Form S-8 Registration Statement and/or a post-effective
amendment to the Form S-8 Registration Statement regarding
the shares of the Company's common stock $1 par value, to
be issued pursuant to the Guardsman Products, Inc. 1995
Long-Term Incentive Plan;
- A Form S-8 Registration Statement and/or a post-effective
amendment to the Form S-8 Registration Statement regarding
-134-
the shares of the Company's common stock $1 par value, to
be issued pursuant to the Moline Paint Manufacturing Co.
401(k) Profit Sharing Plan, and interests in the Plan.
and to file the same with the Securities and Exchange Commission and with
the New York Stock Exchange. Each of said attorneys shall have full power
and authority to do and perform in the name and on behalf of the
undersigned, in any and all capacities, every act whatsoever requisite or
necessary to be done as fully as each of the undersigned might or could do
in person, hereby ratifying and approving the act of said attorneys and
each of them.
Dated: February 23, 1995
/s/ James L. Sadler
James L. Sadler
Director
-135-
POWER OF ATTORNEY
The undersigned, Robert W. Schult, does hereby appoint Paul K.
Gaston, Charles E. Bennett, and Henry H. Graham, Jr., and any one of them
severally, his true and lawful attorney or attorneys to execute in his
name, place and stead, in his capacity as a director or officer, or both,
as the case may be, of Guardsman Products, Inc. (the "Company"), the
following:
- The Annual Report on Form 10-K for the year ended December
31, 1994, and any and all amendments to said report on Form
10-K;
- A post-effective amendment to the Form S-8 Registration
Statement regarding the shares of the Company's Common
Stock, $1 par value, to be issued pursuant to the Guardsman
Products, Inc. Performance Award Plan;
- A post-effective amendment to the Form S-3 Registration
Statement regarding the shares of the Company's Common
Stock, $1 par value, to be issued pursuant to the Guardsman
Products, Inc. Dividend Reinvestment and Stock Purchase
Plan;
- A post-effective amendment to the Form S-8 Registration
Statement regarding the shares of the Company's Common
Stock, $1 par value, to be issued pursuant to the Guardsman
Products, Inc. 1988 Stock Option Plan;
- A post-effective amendment to the Form S-8 Registration
Statement regarding the shares of the Company's Common
Stock, $1 par value, to be issued pursuant to the Guardsman
Products, Inc. Security Builder Plan or Section 401(k)
Plan, and interests in the Plan;
- A post-effective amendment to the Form S-8 Registration
Statement regarding the shares of the Company's Common
Stock, $1 par value, to be issued pursuant to the Guardsman
Products, Inc. 1991 Stock Option Plan;
- A post-effective amendment to the Form S-8 Registration
Statement regarding the shares of the Company's Common
Stock, $1 par value, to be issued pursuant to the Guardsman
Products, Inc. 1992 Employee Stock Purchase Plan;
- A Form S-8 Registration Statement and/or a post-effective
amendment to the Form S-8 Registration Statement regarding
the shares of the Company's common stock $1 par value, to
be issued pursuant to the Guardsman Products, Inc. 1995
Long-Term Incentive Plan;
- A Form S-8 Registration Statement and/or a post-effective
amendment to the Form S-8 Registration Statement regarding
-136-
the shares of the Company's common stock $1 par value, to
be issued pursuant to the Moline Paint Manufacturing Co.
401(k) Profit Sharing Plan, and interests in the Plan.
and to file the same with the Securities and Exchange Commission and with
the New York Stock Exchange. Each of said attorneys shall have full power
and authority to do and perform in the name and on behalf of the
undersigned, in any and all capacities, every act whatsoever requisite or
necessary to be done as fully as each of the undersigned might or could do
in person, hereby ratifying and approving the act of said attorneys and
each of them.
Dated: February 24, 1995
/s/ Robert W. Schult
Robert W. Schult
Director
-137-
POWER OF ATTORNEY
Each of the undersigned, does hereby appoint Paul K. Gaston,
Charles E. Bennett, and Henry H. Graham, Jr., and any one of them
severally, his true and lawful attorney or attorneys to execute in his
name, place and stead, in his capacity as a director or officer, or both,
as the case may be, of Guardsman Products, Inc. (the "Company"), the
following:
- The Annual Report on Form 10-K for the year ended December
31, 1994, and any and all amendments to said report on Form
10-K;
- A post-effective amendment to the Form S-8 Registration
Statement regarding the shares of the Company's Common
Stock, $1 par value, to be issued pursuant to the Guardsman
Products, Inc. Performance Award Plan;
- A post-effective amendment to the Form S-8 Registration
Statement regarding the shares of the Company's Common
Stock, $1 par value, to be issued pursuant to the Guardsman
Products, Inc. 1992 Employee Stock Purchase Plan;
- A post-effective amendment to the Form S-3 Registration
Statement regarding the shares of the Company's Common
Stock, $1 par value, to be issued pursuant to the Guardsman
Products, Inc. Dividend Reinvestment and Stock Purchase
Plan;
- A post-effective amendment to the Form S-8 Registration
Statement regarding the shares of the Company's Common
Stock, $1 par value, to be issued pursuant to the Guardsman
Products, Inc. 1988 Stock Option Plan;
- A post-effective amendment to the Form S-8 Registration
Statement regarding the shares of the Company's Common
Stock, $1 par value, to be issued pursuant to the Guardsman
Products, Inc. Security Builder Plan or Section 401(k)
Plan, and interests in the Plan;
- A post-effective amendment to the Form S-8 Registration
Statement regarding the shares of the Company's Common
Stock, $1 par value, to be issued pursuant to the Guardsman
Products, Inc. 1991 Stock Option Plan;
- A Form S-8 Registration Statement and/or a post-effective
amendment to the Form S-8 Registration Statement regarding
the shares of the Company's common stock $1 par value, to
be issued pursuant to the Guardsman Products, Inc. 1995
Long-Term Incentive Plan;
- A Form S-8 Registration Statement and/or a post-effective
amendment to the Form S-8 Registration Statement regarding
-138-
the shares of the Company's common stock $1 par value, to
be issued pursuant to the Moline Paint Manufacturing Co.
401(k) Profit Sharing Plan, and interests in the Plan.
and to file the same with the Securities and Exchange Commission and with
the New York Stock Exchange. Each of said attorneys shall have full power
and authority to do and perform in the name and on behalf of the
undersigned, in any and all capacities, every act whatsoever requisite or
necessary to be done as fully and purposes as each of the undersigned might
or could do in person, hereby ratifying and approving the act of said
attorneys and each of them.
Dated: March 6, 1995
/s/ Paul K. Gaston /s/ Charles E. Bennett
Paul K. Gaston Charles E. Bennett
Chairman and Director President, Chief Executive Officer
and Director
/s/ Henry H. Graham, Jr.
Henry H. Graham, Jr.
Vice President of Finance, Chief Financial Officer
and Treasurer
-139-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE 1994 ANNUAL REPORT TO STOCKHOLDERS AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
<MULTIPLIER> 1,000
<S> <C>
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<PERIOD-TYPE> 12-MOS
<CASH> 5,630
<SECURITIES> 0
<RECEIVABLES> 30,325
<ALLOWANCES> 808
<INVENTORY> 31,324
<CURRENT-ASSETS> 73,561
<PP&E> 46,666
<DEPRECIATION> 18,689
<TOTAL-ASSETS> 137,052
<CURRENT-LIABILITIES> 31,188
<BONDS> 27,805
0
0
<COMMON> 9,482
<OTHER-SE> 54,944
<TOTAL-LIABILITY-AND-EQUITY> 137,052
<SALES> 201,888
<TOTAL-REVENUES> 201,888
<CGS> 132,984
<TOTAL-COSTS> 132,984
<OTHER-EXPENSES> 57,922
<LOSS-PROVISION> 329
<INTEREST-EXPENSE> 1,188
<INCOME-PRETAX> 9,839
<INCOME-TAX> 3,936
<INCOME-CONTINUING> 5,903
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,903
<EPS-PRIMARY> 0.70
<EPS-DILUTED> 0.00
</TABLE>
