UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the fiscal year ended: Commission file number:
December 31, 1996 33-63914
STANT CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 35-1768429
(State of Incorporation) (I.R.S. Employer Identification No.)
425 Commerce Drive
Richmond, Indiana 47374
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (765) 962-6655
Securities registered pursuant to Section 12(b) of the
Act: None Securities registered pursuant to Section
12(g) of the Act:
Common Stock, par value $.01 per share
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934,
during the preceding 12 months (or for such shorter period that the Registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
As of March 14, 1997, 16,226,815 shares of Common Stock of the Registrant were
outstanding and the aggregate market value of the Common Stock of the Registrant
(based upon the last reported sale price of the Common Stock at that date by the
NASDAQ National Market System), excluding shares owned beneficially by
affiliates, was approximately $96,800,000.
Certain information required by Items 7 and 8 of Part II of this Form 10-K is
incorporated by reference (to the extent specific sections are referred to
herein) from the Registrant's Annual Report to Stockholders for the year ended
December 31, 1996. Certain information required by Items 10, 11, 12 and 13 of
Part III of this Form 10-K is incorporated by reference (to the extent specific
sections are referred to herein) from the Registrant's Proxy Statement for its
annual meeting of stockholders to be held April 30, 1997.
<PAGE>
Table of Contents
Page
PART I
Item 1. BUSINESS...................................................... 1
Item 2. PROPERTIES.................................................... 19
Item 3. LEGAL PROCEEDINGS............................................. 21
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS........... 21
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.................................. 22
Item 6. SELECTED FINANCIAL DATA....................................... 23
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.................. 24
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA................... 24
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.................. 24
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT........... 25
Item 11. EXECUTIVE COMPENSATION....................................... 25
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT........................................... 25
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS............... 25
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES,
AND REPORTS ON FORM 8-K.............................. 25
Copyright (C) 1997 Stant Corporation. All rights reserved.
The brand names mentioned in this Form 10-K -- Edelmann(R), Exact Fit(TM),
Global I(TM), Ideal(R), Lev-R-Vent(R), LubriMatic(R), Nu-Vision(R), Plews(R),
Pow'r Gear(R), Powercraft(R), Pre-Vent(R), Pro-Tuff(R), Roberk(R), Stant(R),
Superstat(R), Trico(R), Tru-Flate(R) and Weir-Stat(R) -- are trademarks of Stant
Corporation and its subsidiaries.
<PAGE>
PART I
Item 1. BUSINESS
General
Stant Corporation ("Stant") is a holding company which, through its
direct and indirect subsidiaries (Stant and such subsidiaries are referred to
collectively as the "Company"), is a leading designer, manufacturer and
distributor of a broad range of automotive parts and tools. The Company believes
that it is one of the world's largest manufacturers of automotive windshield
wiping systems and windshield wiper blades and refills, closure caps and engine
thermostats; and a leading North American manufacturer of a variety of other
automotive products, including hose clamps, heaters, grease guns and automotive
tools. The Company also manufactures and sells a number of products for
hardware, industrial and marine applications.
The Company's products are sold primarily for use as original equipment
by manufacturers of cars and trucks ("OEMs") and for use as replacement parts
for cars and trucks (the "Aftermarket"). The Company serves as either a direct
("tier one") or as an indirect ("tier two") supplier to Chrysler Corporation,
Ford Motor Company and General Motors Corporation, to most of the major foreign
OEMs which operate in the United States (including CAMMI, Honda, Isuzu, Mazda,
Mitsubishi, Nissan, NUMMI, Subaru, Suzuki, Toyota and Volkswagen) and to a
limited number of the foreign manufacturing or assembly plants of the OEMs. In
the Aftermarket, the Company believes that at least one of its products is sold
in the vast majority of wholesale and retail automotive parts and distribution
outlets in the United States, including the service departments of the OEMs ("OE
Service"). The Company's ten largest Aftermarket customers (measured by dollar
volume of sales in 1996) are listed below in alphabetical order:
Advance Auto Parts Four Seasons Manufacturing
AutoZone, Inc. General Motors Corporation*
Chrysler Corporation* National Automotive Parts Association (NAPA)
CSK Auto Inc. Pep Boys
Ford Motor Company* Wal-Mart Stores, Inc.
- -------------------
* Represents sales to OE Service only.
Stant is incorporated in Delaware and its principal executive offices
currently are located at 425 Commerce Drive, Richmond, Indiana 47374-2646.
Stant's telephone number is (765) 962-6655. In early 1997, Stant announced a
reorganization of its executive management team and the relocation of its
corporate headquarters to Chicago, Illinois. Information with respect to the
members of the new executive management team who have already joined the Company
is set forth under "Item 1. Business - Executive Officers of the Registrant" and
"- Business Experience of the Executive Officers" on pages 17 and 18.
<PAGE>
Products
Windshield Wiping Systems and Systems Components
The Company produces a wide range of high quality windshield wiping
systems and systems components, including arms, blades, linkage mechanisms and
modules. Management believes that front wiper blades and arms produced by the
Company were original equipment on more than 70% of the cars and light trucks
(gross vehicle weight of less than 8,500 pounds) produced in North America in
1996.
Modular Systems. The Company produces numerous types of modular
windshield wiping systems. These systems consist of the linkages, arms and
blades produced by the Company and motors, plastic housings, manifold assemblies
and other components purchased from third-party suppliers. These systems are
sold directly to the OEMs as ready-to-install modules and serve to unitize
traditional linkages to wiper motors, as well as incorporate other
non-traditional components such as hose assemblies. Currently, the Company sells
these systems to Ford Motor Company and Chrysler Corporation.
Wiper Blades. The Company produces a full range of wiper blades in
sizes ranging mainly from 11 to 24 inches. Wiper blades consist of a rubber
wiping component attached to a fabricated metal or plastic structure. Wiper
blades are sold primarily for use as original equipment or for installation as
replacement parts by OE Service. Wiper blades are also sold in the Aftermarket
under the "Trico," "Exact Fit," "Nu-Vision" and "Roberk" brand names, as well as
certain private label names.
Wiper Arms. The Company produces over 50 different types of wiper arms
in various lengths and designs. Wiper arms connect the linkage and the wiper
blade. These products are sold primarily for use as original equipment or for
installation as replacement parts by OE Service. These products are also sold in
the Aftermarket under the "Trico" brand.
Linkages. The Company produces over 25 different types of linkages
which are the intricate drive mechanisms that translate the rotary motion of the
wiper motor to the associated sweeps of the wiper arm. Depending upon the
particular design, vehicles may have one or two linkages. These products are
sold by the Company primarily for use as original equipment.
Other Products. The Company produces selected other related products,
such as rear wiper arms and blades for use as original equipment, and winter
blades and wiper blade refills for the Aftermarket.
Closure Caps and Fuel Valves
The Company designs, manufactures and sells fuel filler caps, radiator
caps and oil filler caps for both original equipment and Aftermarket
applications. The Company's original equipment fuel filler caps must meet the
design specifications of the OEMs and pass certain tests which ensure that
vehicles comply with crash safety requirements of the federal motor vehicle
safety standards promulgated by the United States National Highway Traffic
Safety Administration. Additionally, the design specifications of the OEMs for
fuel caps cover requirements and testing for emission control limitations
promulgated by the United States Environmental Protection Agency (the "EPA") and
state environmental protection authorities. Management believes that a fuel
filler cap manufactured by the Company was original equipment on more than 90%
of the cars and light trucks produced in North America in 1996. In addition,
management believes over 50% of those vehicles have as original equipment a
Company-manufactured radiator cap. The Company also designs, manufactures and
sells valves for fuel vapor control for installation as original equipment. In
the Aftermarket, the Company sells over 400 models of fuel and radiator caps,
which cover substantially all car and light truck models currently in use in
North America. The Company's closure cap products are sold under the "Stant,"
"Lev-R-Vent" and "Pre-Vent" trademarks, as well as certain private label names
in the Aftermarket.
<PAGE>
Engine Thermostats
The Company designs, manufactures and sells thermostats for car, light
truck and heavy duty (medium and heavy trucks, construction equipment and
off-road) engine cooling systems in the original equipment market and the
Aftermarket. Complex engine systems now rely heavily on closely maintained
coolant temperatures to insure proper emissions levels, fuel economy and heater
performance. Substantially all of the thermostats manufactured by the Company
for the Aftermarket meet the design specifications of the OEMs. Management
believes that a thermostat manufactured by the Company was original equipment on
more than 25% of the cars and light trucks produced in North America in 1996. In
the Aftermarket the Company's thermostats are sold under the "Stant,"
"Weir-stat" and "Superstat" brand names, as well as certain private label names.
Hose Clamps
The Company designs, manufactures and sells stainless and carbon steel
hose clamps, including worm gear hose clamps, used in cars and trucks in the
original equipment market and the Aftermarket, and in hardware, industrial and
marine applications. Clamps are designed and manufactured in a broad range of
sizes and for a variety of sealing applications, including heating and air
conditioning systems. The Company also manufactures no-hub couplings for the
construction industry. The Company's clamp products are sold under various
Company brand names, including "Ideal," "Pow'r Gear" and "Trico," and certain
private label names.
Automotive Heaters
The Company is a leading manufacturer of copper-brass and aluminum
heaters for the North American Aftermarket. The Company's heater product line,
which is sold under the Stant brand and a number of private label names, covers
both domestic and imported cars and light trucks. The Company believes that it
has the most extensive Aftermarket heater product line in North America and
recently began selling heater products to the automotive original equipment
market.
Automotive Tools
The Company designs, manufactures and sells Aftermarket automotive
tools in the following lines: "Plews" brand lubrication tools, including grease
guns, oilers, funnels and liquid transfer pumps; "Tru-Flate" brand tire hardware
and air accessories, including tire gauges, blowguns, tire repair materials and
pneumatic connector fittings; and "Plews" brand professional specialty mechanic
tools, including "Pro-Tuff" oil filter wrenches. The specialty tools product
line consists of tools designed for a specific application which the Company
manufactures or purchases and includes tools used for servicing brakes,
ignitions, engine components, exhaust parts and for tune-ups.
During the fourth quarter of 1996, the Company acquired the business of
manufacturing and selling "LubriMatic" brand grease guns, and selling
"LubriMatic" brand lubricating greases and oils and certain related equipment.
This business, which is expected to add approximately $30 million of revenue in
1997, complements the Company's existing line of "Plews" brand lubrication
tools, including grease guns and related equipment.
Other Products
The Company also designs and manufactures automotive fittings, power
steering hose and remanufactured power steering units, bellows and hazard
warning flashers. These products are sold principally to the Aftermarket under
various Company brand names, including "Edelmann," "Ideal" and "Powercraft," and
several private label names. The Company also distributes air compressors for
automotive use, Aftermarket steel brake lines, and automotive heating and
cooling products, including water outlets, heater control valves and fan
clutches, which are manufactured by third parties.
<PAGE>
Product Development
The Company believes that it is an industry leader in North America in
its engineering and design capabilities with respect to windshield wiping
systems, fuel and radiator caps, fuel valving components, automotive thermostats
and hose clamps. The Company emphasizes product development to take advantage of
marketing opportunities created by the frequent introduction by the OEMs of new
models, changes made to existing models and changes required by government
regulations. See "Markets" and "Competition" below.
The Company maintains development engineering and testing facilities at
each of its operating units. The Company has been expanding its product
engineering, design, and research and development functions to provide
value-added engineering and design services to the OEMs who have been increasing
their reliance upon their suppliers to assist in the design and development of
components and systems.
In the summer of 1996, the Company opened a new 81,000 square foot
technical and original equipment sales center for windshield wiping systems in
Rochester Hills, Michigan (the "Michigan Technical Center"). The Michigan
Technical Center, which is close to the engineering centers of the Company's
principal original equipment customers, is designed to be a "best-in-class"
technical center. It employs advanced computer aided design systems, including a
proprietary "knowledge based" engineering system, and contains hot and cold
weather and sound quality testing chambers to support the increasing design and
development requirements of the Company's original equipment customers.
Management believes that this facility enhances the Company's ability to be an
industry leader in the integration of windshield wiping systems into the
vehicles of an original equipment customer.
Operations at the Michigan Technical Center are divided into three
business units. Each unit has total responsibility for specific original
equipment customers and includes a cross-functional team which is capable of
handling new business development, customer satisfaction with respect to current
business, product engineering, program management, launch engineering, business
planning and strategy execution. The Michigan Technical Center was designed to
facilitate implementation of the business unit concept with a dedicated layout
based upon cross-functional team activities. Management believes that such teams
enable quick, accurate communication, decision making and response time, and
contribute to a reduction in the product development cycle time.
In June 1995 the Company established a development team composed of
engineers in the Company's technical centers in North America, the United
Kingdom and Australia, with the objective of developing a new family of
windshield wiper blades that would meet or exceed the increasing requirements of
the global original equipment market. Prototypes of the new blades, which the
Company refers to as "Global I," have already been demonstrated to a number of
original equipment customers. The "Global I" blades are the first products
developed by the Company using the combined talents of engineers on three
continents. Some of the design objectives given to this development team, all of
which are expected to be met or exceeded, are the following:
- Design a new wiper blade with a competitive cost of manufacture by
reducing the complexity of tooling, reducing the number of component
parts and utilizing extruded, rather than molded, rubber.
- Design a wiper blade which will achieve "best-in-class" performance in
each of the following categories:
<PAGE>
- Wipe Quality - Blade Life
- Wind Lift - Styling
- Durability - Ease of Installation
- Winter Performance - Smooth, Quiet Operation
- Warranty Performance - Conformance to Glass
- Improve customer satisfaction and warranty performance by reducing
rejects after twelve months in service from 20 per 1,000 to 4 per
1,000.
Management believes that when the design of the "Global I" blades is
finalized, it will demonstrate to the marketplace the Company's ability to
design a "best-in-class" wiper blade which fully addresses any perceived
inadequacies in the blades currently manufactured by the Company and its
principal competitors.
During 1996, the Company began to market its Exact Fit brand of wiper
blades on a national basis to the Aftermarket. As the name implies, Exact Fit
blades are designed to fit a specific wiper arm type without the use of an
adapter or the need to read complicated instructions. In addition, Exact Fit
blades look virtually identical to the original equipment blades which they
replace. The introduction of Exact Fit blades in 1996 was supported by a
national consumer advertising campaign which featured the ease of installation
of these blades. The Exact Fit product and the advertising line "They just click
on easy." has won the Company awards from several major Aftermarket customers.
In the first quarter of 1996, the Company opened a new "state of the
art" fuel system testing laboratory at its Connersville, Indiana facilities.
This new testing laboratory permits total fuel supply and vapor systems, and
even complete vehicles, to be subjected to extremes of heat and cold on a
year-round basis, a capability which the Company believes is unmatched currently
by any of the Company's competitors and even most of the OEMs. Engineers at the
Company's Connersville facilities are working on a number of new, and
improvements to existing, products which deal with fuel vapor management systems
and low leak emission requirements.
In response to stricter government standards concerning emissions of
hydrocarbons and on-board diagnostic systems for vehicles, the Company has
developed advanced fuel cap designs which reduce emissions to less than one cc
per minute (compared to prior caps which emitted more than ten cc's per minute)
and which contain positive quick-on features. Such quick-on, low emission fuel
caps manufactured by the Company will be on all 1998 model year cars and light
trucks produced by Ford Motor Company.
Federal law mandates that vehicle manufacturers install on-board
refueling vapor recovery ("ORVR") systems on cars and light trucks beginning
with cars in 1998. ORVR systems must be installed on 40% of new cars sold in the
United States in 1998, 80% in 1999 and 100% in 2000 and thereafter; and 40% of
new light trucks in 2001, 80% in 2002 and 100% in 2003 and thereafter. The
Company has worked with domestic OEMs for the past nine years in order to
develop products to serve this emerging market and will begin supplying ORVR
components to two domestic OEMs for certain models beginning with the 1998 model
year. Additionally, the Company currently is working with all the major Japanese
OEMs which operate in the United States and Toyoda Gosei Co. Ltd. (the Company's
fuel cap licensee in Japan) to develop ORVR components.
The Clean Air Act Amendments of 1990 require a variety of mobile (i.e.,
vehicle) source controls to help the States meet national ambient air quality
standards. The EPA has identified the evaporative emission control systems of
vehicles as a possible source of escaping fuel vapors. States can receive
credits for highway funding money by checking fuel caps to see if they are
within specification. In response to the need of the States to begin checking
fuel caps in a quick, accurate and efficient manner, during the fourth quarter
of 1996, the Company began to market a fuel cap tester. Management believes that
State testing of fuel caps will stimulate Aftermarket customers to demand higher
quality replacement fuel caps. Many states are beginning to test fuel caps as a
part of their automobile registration and inspection systems, as a way to
satisfy regulations promulgated by the EPA under the Clean Air Act. The Company
has also developed closure devices for fuel tanks which permit refueling without
removing the cap and which will be compatible with automatic refueling systems
which are currently being developed by a number of major oil companies. These
closure devices are being designed for both the Aftermarket and original
equipment applications. The Company anticipates that such products will be in
test markets in the United States Aftermarket during 1997.
<PAGE>
The Company's research and development expenses for 1996, 1995 and 1994
were $6,698,000, $6,272,000 and $3,218,000, respectively. These amounts are net
of the reimbursements by the OEMs for 1996, 1995 and 1994 of $699,000, $682,000
and $615,000, respectively.
Markets
The automotive parts industry is composed of the original equipment
market and the Aftermarket. The manufacture of individual components and systems
for cars, trucks and other vehicles which are installed by the vehicle
manufacturers as original equipment on new vehicles forms the original equipment
market. The Aftermarket is comprised of the parts and services used to maintain
and repair automobiles, trucks and other vehicles, as well as accessories not
supplied with such vehicles when manufactured. The Company sells its products
primarily to the automotive original equipment market and the Aftermarket. The
Company also sells clamps, bellows and certain other products to the industrial
market for use in the hardware, marine, appliance, construction and aviation
industries.
The following table classifies the Company's consolidated net sales by
its manufacturing and assembly operations in geographic areas. North America
includes the Company's manufacturing and assembly operations in the United
States, Canada and Mexico, while Foreign includes the Company's manufacturing
and assembly operations in the United Kingdom, Australia and Argentina.
<TABLE>
<CAPTION>
(in Millions)
- -------------------------------------------------------------------------------
Year Ended December 31, 1996 1995 1994
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
North America
Automotive Original Equipment Market $300.2 $279.2 $ 73.7
Automotive Aftermarket 261.5 240.1 176.8
Industrial Market 41.1 36.9 35.0
- -------------------------------------------------------------------------------
Subtotal 602.8 556.2 285.5
- -------------------------------------------------------------------------------
Foreign
Automotive Original Equipment Market 27.7 29.8 1.3
Automotive Aftermarket 26.6 26.4 1.1
- -------------------------------------------------------------------------------
Subtotal 54.3 56.2 2.4
- -------------------------------------------------------------------------------
TOTAL $657.1 $612.4 $287.9
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
Original Equipment Sales
As a tier one supplier, the Company sells its products directly to the
OEMs through a sales force of approximately 12 Company employees, as well as
through a select group of independent manufacturer's representative
organizations which are paid by commission. As a tier two supplier, the Company
sells its products through the Company's sales force to other automotive parts
manufacturers which combine the Company's products with those of their own or of
other automotive parts manufacturers and furnish to the OEMs a complete
sub-assembly or system. The Company's marketing efforts toward the original
equipment market are supported by engineering staffs and testing facilities at
the Company's operating units which provide design, development and prototyping
projects as a service to the engineering and platform groups at most North
American, Australian and European car manufacturers. See "Product Development"
above.
<PAGE>
The Company typically receives a purchase order from an OEM to produce
a particular product for one or more model years. However, a firm order is
created only when the Company receives a release under such a purchase order,
which authorizes the Company to produce and deliver specific quantities of the
product. OEMs issue releases for planning, raw material acquisition and
production purposes over varying periods in advance of anticipated delivery
dates. Once a purchase order is received by the Company from an OEM, the actual
volume of parts produced under the purchase order in any given year is dependent
upon the actual number of vehicles produced by the OEM. Actual production levels
may vary significantly from the estimates provided by the customer and
production may be delayed or canceled, all generally without any obligation on
the part of the customer to compensate the Company. See "Competition" below.
Aftermarket and Industrial Sales
In North America, Aftermarket and industrial sales and marketing
efforts are managed by a sales force of approximately 20 Company employees who
are supplemented by approximately 50 independent manufacturer's representative
organizations which are paid by commission. In a few geographic areas, one
manufacturer's representative is responsible for all of the Company's products.
However, in most areas separate manufacturer's representatives are responsible
for Aftermarket parts, automotive tools and industrial products.
In the Aftermarket, the Company's products reach the ultimate consumer
through a number of distribution channels, including automotive specialty retail
stores, mass merchandisers, OE Service, quick-lube outlets, traditional service
stations, warehouse distributors and jobbers. Certain of these channels of
distribution, such as the automotive specialty retail stores and mass
merchandisers, predominately sell to "do-it-yourself" consumers, while others,
such as OE Service and traditional service stations, involve professional
installation. In recent years, the relative importance and size of the
automotive specialty retail stores, mass merchandisers and buying groups has
increased, concentrating more buying power in the hands of fewer of the
Company's Aftermarket customers. As a result of buying power being concentrated
in fewer customers, as well as increased competition from abroad, price
competition in the Aftermarket has been severe and margins have declined.
Export Sales
Products which the Company manufactures in the United States are
marketed outside of the United States principally through export marketing
groups and a number of independent manufacturer's representative organizations
which are paid by commission. Export sales from the United States accounted for
approximately 3% of the Company's 1996 consolidated net sales, and were made
primarily to customers in Canada, Mexico, Japan, Germany and the United Kingdom.
Foreign Subsidiaries, Affiliates and Licenses
The Company has wholly owned subsidiaries in the United Kingdom and
Australia which design, manufacture and sell windshield wiping systems and
systems components, including arms, blades and linkage mechanisms, which are
fitted to a major percentage of all cars made in the United Kingdom and
Australia, and certain cars and light trucks in Europe and Japan. The Company
believes that it is the leading supplier of such products to OEMs in both the
United Kingdom and Australia. In South America, the Company is supporting
original equipment and Aftermarket sales of wiper products through its wholly
owned Argentine subsidiary, which assembles components manufactured in the
United States and the United Kingdom into arms, blades and linkage mechanisms.
Approximately 8% of the Company's 1996 consolidated net sales were represented
by the sales of its United Kingdom, Australian and Argentine subsidiaries and,
in the aggregate, sales of those subsidiaries are split approximately evenly
between the original equipment market and the Aftermarket.
<PAGE>
The Company has four wholly owned Mexican operating subsidiaries, all
of which are registered as maquiladora corporations and two of which are also
registered as national suppliers to the Mexican automobile industry. As
maquiladora corporations, these subsidiaries receive materials and parts in
bond, primarily from the Company's United States operating units, and assemble
them for delivery back into the United States. In addition, the Company has a
minority joint venture interest in Mexico to manufacture and distribute clamps,
and a minority joint venture interest in the Peoples Republic of China to
manufacture and distribute automotive thermostats.
Jidosha Denki Kogyo Company ("Jideco") of Japan and the Company have
signed a joint venture agreement for North America and a letter of intent to
create a European joint venture for the manufacture of front and rear windshield
wiper motors. Jideco is a world leader in the manufacture of fractional
horsepower motors for automotive applications and a tier one supplier of wiper
systems to several Japanese OEMs.
The Company has licensed a number of foreign companies to practice the
art embodied in certain of the Company's patents, and also maintains technical
exchange agreements with certain of these licensees. The Company does not
receive significant revenues from such agreements, individually or in the
aggregate. In addition, the Company has been granted licenses to practice the
art embodied in certain patents and technical know-how owned by third parties.
In the aggregate, the royalties and fees paid by the Company in respect of such
license grants are not material.
Major Customers
As a tier one or tier two supplier, sales of the Company's products for
use by Ford Motor Company, General Motors Corporation or Chrysler Corporation,
either as original equipment or for OE Service, represented approximately 22%,
15% and 10%, respectively, of the Company's 1996 consolidated net sales.
Competition
The automobile parts and tools business has been and continues to be
very competitive. In addition, as the automotive supply base becomes more
global, the Company expects to experience more competition in North America from
automotive parts suppliers who are based in Europe or the Far East. Among the
primary competitive factors affecting the Aftermarket and the industrial market
are price, product quality, breadth of product line, range of applications and
customer service. Among the primary competitive factors affecting the automotive
original equipment and certain portions of the industrial markets are the
ability to provide low cost sophisticated products, prototyping and design
assistance, systems capabilities, reliable product quality and on-time delivery.
Competition in the automotive original equipment market is also affected by the
extent to which OEMs produce their own parts.
In order to reduce costs and improve the quality of their products, the
OEMs are attempting to deal with fewer suppliers and to require that their
remaining suppliers assume additional responsibility for upfront product design,
engineering and project management services. To determine the suppliers with
whom they will continue to deal, the OEMs have tightened the standards
applicable to their suppliers for quality, cost reduction, delivery and service,
and say that they will give a preference to suppliers who can serve them on a
global basis. These actions by the OEMs have and will continue to reduce the
number of tier one suppliers, and may also lead to consolidation among
suppliers.
<PAGE>
As both a full system and component supplier, the Company competes for
original equipment business at the beginning of the development of a new system
or component, upon customer re-design of an existing system or component and
upon an OEM's decision to outsource captive system or component production.
Typically, new system or component development begins two to five years prior to
the marketing of the platform(s) containing such system or component to the
public. Once a supplier's design and prototype for a particular system or
component for a specified platform have been approved by the OEM, production
generally begins from 12 to 18 months later. The same supplier usually furnishes
that system or component throughout the life cycle of the system or component
(i.e., until the particular system or component on the specified platform is
changed). Life cycles of systems and components vary, but typically last from
two to eight years. Today, most systems and many components are sole sourced by
the OEMs. Competitive price bidding is the exception, with most awards of
original equipment business being made against target prices established by the
OEM's platform team.
Target prices typically decline over the life cycle of a system or
component so that a supplier is required, at a minimum, to offset the effects of
inflation through cost reduction and productivity improvement programs. The
Company has such arrangements with most of its original equipment customers and,
accordingly, the benefits of the Company's cost reduction and restructuring
programs have been and will continue to be shared with its original equipment
customers. In making such non-price competitive sourcing awards, management
believes that its original equipment customers weigh total supplier performance,
including prototyping and design assistance, systems capability, reliable
product quality and on-time delivery, and ability to meet or beat the customer's
target prices.
To the extent that the Company is unable to obtain significant new
business from the OEMs, the relatively long life cycles of the systems and
components which it manufactures will cause a greater negative impact on the
Company's financial condition than would be the case if the life cycles of such
systems and components were shorter. In addition, the Company's ability to
continue to meet the expectations of the OEMs with respect to quality, cost,
delivery, service and expanded engineering support will increasingly be
dependent on the Company's ability continuously to improve and sustain the
competitive technological advantage which management believes the Company
currently enjoys with respect to many of its product lines. Management believes
that the Company's competitive technological advantage relates not only to its
superiority in the areas of product engineering, design and research and
development activities, but also to the quality and cost competitiveness of its
plant operations. By year-end 1997, management expects that all of the Company's
plants which produce systems or components for original equipment applications
will be either QS 9000 or ISO 9000 certified.
Many of the Company's products have a significant market share in their
respective markets. While most of the markets for the Company's products are
served by a limited number of competitors, competition is intense. In some
cases, the competitors are substantially larger and more diversified than is the
Company.
Patents and Trademarks
The Company owns a number of patents relating to design features of a
number of its products including fuel caps and fuel vapor recovery valves,
windshield wiper blades and systems, thermostats and clamps, and also owns a
number of registered trademarks in the United States and owns several patents
and trademarks in foreign countries. Although in the aggregate these patents and
trademarks are of importance to the Company, no single patent or trademark or
group of patents or trademarks is material to its business as a whole, except
for the Stant, Ideal and Plews trademarks in the United States, and the Trico
trademark in the United States and United Kingdom.
Raw Materials and Inventory Management
The principal raw materials used by the Company are stainless steel,
cold-rolled steel, rubber, aluminum, copper, brass and plastic resins. The
Company manufactures many of the component parts used in assembling its
products. The Company also purchases certain components used in assembling its
products as well as packaging materials and finished products. The Company has
well-established supply sources for all major components it does not otherwise
manufacture, and for raw materials, including readily available substitute
sources of supply.
<PAGE>
The Company attempts to minimize its investment in inventory by
coordinating purchasing and production activities with anticipated customer
demands. In the automotive original equipment market, most of the customers
provide anticipated releases four to eight weeks prior to expected delivery
based on their estimated production schedules. In many cases, the Company is
connected with the customer through electronic data interchange which allows for
electronic ordering and, in some cases, periodic monitoring of the customers'
requirements. Most of the Company's original equipment and Aftermarket customers
have implemented the "Just In Time" delivery concept whereby the customer
requires that the product be delivered in smaller quantities just prior to its
need at the manufacturing plant or aftermarket distribution point.
Cyclical Industry, Backlog and Seasonality
The automobile industry in general, and the North American automotive
original equipment market in particular, is cyclical with new vehicle demand
tied closely to overall economic strength. A significant decline in the demand
for new automobiles could have an adverse effect on the Company. After attaining
a peak of 13.6 million units in 1985, North American production of cars and
light trucks fell to 11.4 million units in 1991. Since the low point in 1991,
production has recovered and amounted to 14.9 million units in 1995 and 15.0
million units in 1996.
Although opinions differ with respect to whether or not the Aftermarket
is cyclical, management is of the opinion that this market is less affected by
the strength or weakness of the overall economy than is the original equipment
market.
The Company sells a number of weather-sensitive products in the
Aftermarket (such as heaters, thermostats, windshield wiper blades and refills,
and radiator caps) and, accordingly, its results can be affected by the severity
of the weather. In addition, since approximately 50% of the Company's
consolidated net sales is derived from the automotive original equipment market,
the Company experiences seasonally weak results in the second quarter due to
model changeovers and plant idlings by the OEMs.
When supplying the original equipment market, the Company does not have
a firm order, and usually does not manufacture its products, until it has
received a production release which specifies the quantity ordered and a
delivery date. Generally such orders are shipped within four to eight weeks of
receipt of the production release. As a result, the Company does not maintain a
significant backlog of firm orders and believes that backlog is not material to
its business.
Environmental Compliance
The Company is subject to federal, state, local and foreign
environmental laws and regulations concerning the discharge, storage, handling
and disposal of hazardous or toxic substances. Such laws and regulations provide
for significant fines, penalties and liabilities, in certain cases without
regard to whether the owner or operator of the property, or the person who
generated hazardous or toxic substances disposed of on the property, knew of or
was responsible for the release or presence of such hazardous or toxic
substances. In addition, third parties may make claims for personal injuries and
property damage associated with releases of hazardous or toxic substances.
At some of its facilities, the Company utilizes or generates substances
that are classified as hazardous under the United States Comprehensive
Environmental Response, Compensation and Liability Act ("CERCLA"). Accordingly,
there can be no assurance that substantial liabilities, in addition to those
described below, will not be incurred by the Company in the future. In addition,
the United States Clean Air Act Amendments of 1990 may impose additional
emission control requirements on some of the equipment at certain of the
Company's facilities. The Company cannot predict what environmental legislation
or regulations will be enacted in the future or how existing or future laws or
regulations will be administered or interpreted, particularly because many of
the regulations implementing the existing laws have not been promulgated.
Nevertheless, the Company believes that as a general matter, its policies,
practices and procedures are properly designed and implemented to ensure the
Company's compliance with all current laws and regulations. While compliance
requires continuing management efforts and expenditures by the Company,
management believes that the costs associated with environmental compliance will
not have a material adverse effect on the Company's financial condition, results
of operations or cash flows, except that there could be such an effect on
results of operations or cash flows for a particular financial reporting period.
<PAGE>
The Company or one of its domestic subsidiaries has been identified as
a Potentially Responsible Party ("PRP") with respect to environmental matters
arising at eleven sites which are under the jurisdiction of either the EPA or a
state environmental department. The Company's exposure for material remediation
costs at seven of these sites is considered remote. The four remaining sites are
discussed below:
The Waltham, Massachusetts Facility
Following the acquisition of Standard-Thomson Corporation ("STC") by
the Company in 1988, the Company conducted a soil and groundwater investigation
at STC's facility in Waltham, Massachusetts (the "Waltham Facility"). The
investigation indicated the presence of volatile organic compounds and petroleum
hydrocarbons in the soil and groundwater at the site. The Company reported these
findings to the Massachusetts Department of Environmental Protection ("MDEP").
In 1992, MDEP authorized the Company to assess and remediate the hazardous
material contamination without its direct oversight. During 1996, the Company
completed a Phase II Comprehensive Site Assessment of the Waltham Facility, the
primary objectives of which were to evaluate the nature and extent of
contamination and potential risks to health, safety, public welfare and the
environment. The Phase II study identified potential sources of oil and
hazardous materials in the groundwater and soil and concluded that such
contamination was limited to areas on and down-gradient (south) of the Waltham
Facility, and a potential future risk to public welfare and the environment
exists due to the presence of non-aqueous phase liquid which exceeds the upper
concentration limits allowed by the applicable regulations issued by MDEP.
During 1997, the Company will develop a Phase III Remedial Action Plan to
evaluate appropriate response actions for residual soil and ground water
contamination which may cause risk to the public.
In June 1996, the Company was notified by Raytheon Company ("Raytheon")
pursuant to the Massachusetts Oil and Hazardous Material Release Prevention and
Response Act (the "Massachusetts Act") of the Company's potential liability for
groundwater contamination at Raytheon's property (the "Raytheon Site") which
adjoins the south property line of the Waltham Facility. In that notice,
Raytheon stated that (i) it had already expended in excess of $2.5 million in
connection with the investigation and remediation of ground water at its
property, (ii) future costs associated with the remediation of its property may
exceed $4 million, and (iii) the total of all past and future investigation and
remediation costs could total about $7 million. In the notice, Raytheon proposed
that the Company pay 50% of all such investigation and remediation costs.
In addition, Raytheon is a defendant in an action brought by Barry
Wright Corporation ("Barry Wright") in the Superior Court of the Commonwealth of
Massachusetts in which action Barry Wright alleges that contaminated ground
water is migrating from the Raytheon Site south onto property owned by a Barry
Wright affiliate (the "Barry Wright Site"). In that action Barry Wright is
seeking approximately $1 million in response costs from Raytheon. Barry Wright
and Raytheon have both indicated their intention to name the Company as a
defendant in that action.
In July 1996, the Company was notified by Barry Wright pursuant to the
Massachusetts Act of the Company's potential joint and several liability with
Raytheon for reimbursement of response costs and for damage to property
allegedly resulting from the migration of releases of hazardous materials at the
Waltham Facility to property owned by Raytheon, where the Company's releases
have become indivisibly mixed with releases from the Raytheon Site, forming a
plume of contaminated ground water which has migrated and is migrating onto the
Barry Wright Site. Barry Wright demanded approximately $200,000 for costs
already incurred and approximately $700,000 for estimated future costs. Barry
Wright also demanded any future amounts that must be spent by it to treat
contaminated inflows beyond the existing ground water contamination at the Barry
Wright Site, as well as certain additional costs, not yet known, which may
become necessary for dealing with mid-depth ground water contamination at the
Barry Wright Site. In that notice, Barry Wright did not suggest an apportionment
of liability between Raytheon and the Company. Recent communications with Barry
Wright indicate that further investigation has revealed that there may in fact
be no future costs at the Barry Wright Site and that the demand against the
Company may be reduced to past costs only.
<PAGE>
A voluminous number of documents and technical data which are in the
possession of Raytheon and/or Barry Wright and which relate to either the
Raytheon Site or the Barry Wright Site have not yet been reviewed by the
Company. Accordingly, the Company is not able to make a fully informed judgment
as to whether, and to what extent, the Company is liable to either Raytheon or
Barry Wright for investigation or remediation costs associated with the ground
water contamination at the Raytheon and Barry Wright Sites. However, based upon
the facts of which management is aware at this time, management does not believe
that the resolution of these matters will have a material adverse effect on the
Company's financial condition, results of operations or cash flows, except that
there could be such an effect on cash flows for a particular reporting period.
Pfohl Brothers Landfill
In April 1992, the New York Department of Environmental Conservation
(the "NYDEC") notified the Company and a number of other companies that the
NYDEC considered all such entities to be PRPs pursuant to certain sections of
the New York State Environmental Conservation Law ("NYECL") and certain sections
of CERCLA with respect to a privately owned landfill in Cheektowaga, New York
(the "Pfohl Brothers Landfill"). The NYDEC has prepared a remedial action plan
for the Pfohl Brothers Landfill which outlines the remediation approach selected
by the NYDEC. Such approach consists of capping, containment, and ground water
pumping and treatment. The NYDEC estimates the cost of its remediation approach
to be approximately $53,000,000, but independent parties believe that the cost
could be as much as $60,000,000. An alternative remediation approach has been
presented to the NYDEC which is estimated to cost approximately $35,000,000.
Whichever remediation approach ultimately is implemented, the NYDEC is expected
to attempt to recover its entire cost and other costs associated with its effort
at the Pfohl Brothers Landfill from among more than 30 PRPs.
The Company has entered into a preliminary participation agreement with
23 other companies (collectively the "Pfohl Brothers PRPs") to negotiate jointly
with the NYDEC and to pursue jointly non-participating parties. The Pfohl
Brothers PRPs currently are negotiating with the NYDEC respecting the
appropriate remediation approach to be implemented. At this time, the Pfohl
Brothers PRPs have not determined the allocated share of liability for each of
the Pfohl Brothers PRPs, but based upon factual submissions of the Pfohl
Brothers PRPs, the Company estimates that, as among the Pfohl Brothers PRPs, its
allocated share of liability will be between 4% and 5%. It is anticipated that
the allocation process will be completed in the second quarter of 1997. However,
the allocation process has in the past, and could again in the future, be
delayed for a number of reasons, including additional companies agreeing to
become participating PRPs.
Based upon the information obtained to date, management believes that
any liability which the Company may have with respect to the Pfohl Brothers
Landfill will not have a material adverse effect on the Company's financial
condition, results of operations or cash flows, except that there could be such
an effect on cash flows for a particular interim reporting period.
Roblin Steel Site
In early 1990, the EPA notified the Company that the EPA considered the
Company to be a PRP pursuant to certain sections of CERCLA with respect to a
site in Tonawanda, New York (the "Envirotek II Site"). Approximately 300 PRPs,
including the Company, subsequently entered into a consent order with the EPA to
perform a removal action at the Envirotek II Site which was completed for an
aggregate cost of approximately $2.5 million (the Company's negotiated share was
approximately $60,000). The Envirotek II Site received a "certificate of
completion" of the removal work from the EPA, and the PRP group has paid the
EPA's demand for reimbursement of oversight costs, thus completing all
activities required under the consent order.
<PAGE>
Based on the removal phase of the work at the Envirotek II Site, the
Company and a number of the other Envirotek II PRPs received a demand from the
NYDEC in July 1993 pursuant to certain sections of NYECL and CERCLA for a
remedial investigation and feasibility study ("RI/FS"), and eventual
remediation, with respect to a site which adjoins the Envirotek II Site (the
"Roblin Steel Site"). Approximately 150 PRPs (the "Roblin Steel PRPs"),
including the Company, have joined in a participation agreement and negotiated
with NYDEC an agreed scope of work for the RI/FS (supplementing work already
performed as part of the Envirotek II Removal Action). The terms of a consent
order for the implementation of the RI/FS have been negotiated, but the consent
order has not yet been executed. The estimated cost of the RI/FS is $300,000 and
the Company's assessed share is approximately 4 1/2%. Efforts are underway to
increase the number of Roblin Steel PRPs from the current participation, which
is approximately 150, to the number of persons who were PRPs at the Envirotek II
Site, approximately 300 persons. A consultant to the Roblin Steel PRPs has
estimated that "reasonable" remediation alternatives for the site would cost
approximately $2 to $3 million.
Based upon the information obtained to date, management believes that
any liability which the Company may have with respect to the Roblin Steel Site
will not have a material adverse effect on the Company's financial condition,
results of operations or cash flows.
Booth Oil Site
In March 1994, the Company was notified by the NYDEC that the NYDEC
considered the Company to be one of approximately 20 PRPs pursuant to certain
sections of NYECL and CERCLA for past costs incurred by the NYDEC and for future
remediation costs involving a former solvent and petroleum processing facility
located in North Tonawanda, New York (the "Booth Oil Site"). Prior to notifying
the PRPs, the NYDEC investigated the Booth Oil Site, performed removal actions
and issued a record of decision (the "Record of Decision") prescribing future
remediation activities. The Record of Decision would require on-site
incineration of remaining hazardous wastes at an estimated cost of $20,000,000.
The PRPs have recommended to the NYDEC alternative remediation activities with
an estimated cost of approximately $5,000,000. Although the NYDEC has not yet
agreed to amend or reinterpret the Record of Decision, during 1996 the NYDEC did
allow the PRPs to perform a supplemental remedial investigation to better define
the extent and nature of contamination at the Booth Oil Site. Although the
supplemental remedial investigation has been completed, a report has not yet
been prepared. The PRPs also performed an initial allocation of liability among
themselves to apportion the costs of the supplemental remedial investigation.
The amount of the Company's allocation was 1.3%.
Based upon the information obtained to date, management believes that
any liability which the Company may have with respect to the Booth Oil Site will
not have a material adverse effect on the Company's financial condition, results
of operations or cash flows.
Third Party Claims
The remediation efforts at the Pfohl Brothers Landfill (see discussion
above) have generated a number of lawsuits in which the plaintiffs seek recovery
either for personal injury as a result of exposure to hazardous materials
deposited in the Pfohl Brothers Landfill or for property damage as a result of
the proximity of their land to the Pfohl Brothers Landfill. The Company, a
majority of the other Pfohl Brothers PRPs and a number of other corporations
currently are defendants in twelve such cases, seven of which are pending in New
York State Supreme Court, Erie County and five of which are pending in the
United States District Court for the Western District of New York. These
lawsuits involve more than 90 plaintiffs, many of whom are seeking punitive
damages in addition to compensatory damages. Additional lawsuits are expected to
be filed against the Company and a number of other defendants in the coming
months, in part as a result of the publicity received by the pending lawsuits.
In each of the pending lawsuits the Company is either being defended or expects
to be defended on a joint defense basis by counsel selected by the Pfohl
Brothers PRPs. The Company intends to defend each of these lawsuits vigorously
and believes that it has meritorious defenses to all claims.
Based upon the information obtained to date, management does not
believe that the outcome of any of these matters, or all of them in the
aggregate, will have a material adverse effect on the Company's financial
condition, results of operations or cash flows, except that there could be such
an effect on cash flows for a particular interim reporting period.
<PAGE>
Employees
At December 31, 1996, the Company had approximately 7,700 employees, of
whom approximately 6,000 were engaged in production and distribution and
approximately 325 were employed on a part time or temporary basis. Approximately
3,450 of the Company's employees were employed in the United States and of such
employees approximately 880 were covered by agreements with domestic labor
organizations pursuant to six separate contracts expiring between April 1, 1997
and June 30, 2000. Approximately 4,280 of the Company's employees are employed
outside the United States, including approximately 860 in Wales, Australia and
Argentina and approximately 3,420 in Mexico. Substantially all of the Company's
Mexican employees are represented by labor unions sponsored by the Mexican
government. The Company considers its relations with its employees to be
satisfactory.
Executive Officers of the Registrant
Name Age Position
- ------------------------ --- -------------------------------------------------
John P. "Jack" Reilly 53 Director, President and Chief Executive Officer
Thomas K. Erwin 47 Senior Vice President and Chief Financial Officer
W. Thomas Margetts 60 Senior Vice President - Corporate Development
Thomas F. Plocinik 55 President of Trico
Robert W. Priebe 63 Senior Vice President - International
William S. Wade, Jr. 49 Senior Vice President - Sales & Marketing
Anthony W. Graziano, Jr. 55 Vice President and General Counsel; Secretary
Business Experience of Executive Officers
John P. "Jack" Reilly has been a Director and President and Chief Executive
Officer of Stant since January 1997. From January 1995 until January 1997, he
served as Chief Executive Officer of Figgie International Inc. ("Figgie") and
also served as its President from February 1995 until he joined the Company.
Figgie is a manufacturer of guidance and navigation systems, life support and
air purifying products and self-propelled aerial work platforms. From 1993 to
1994, Mr. Reilly was President and Chief Operating Officer of Brunswick
Corporation ("Brunswick"), a world leader in marine power, pleasure boating and
recreation equipment; and from 1987 to 1993 he was President and Chief Executive
Officer of Tenneco Automotive, a producer of automotive components.
Thomas K. Erwin has been Senior Vice President and Chief Financial Officer of
Stant since February 10, 1997. Prior thereto he was associated with Brunswick in
various executive capacities for 18 years, including serving as Corporate
Controller of Brunswick from 1988 until 1996.
W. Thomas Margetts has been Senior Vice President - Corporate Development
of Stant since October 1994. He served Stant as Senior Vice President - Human
Resources and Legal from 1991 until October 1994. Mr. Margetts also served Stant
as Secretary from July 1993 until October 1994.
Thomas F. Plocinik, a certified public accountant, has been President of Trico
since April 1995. From 1991 until August 1995, he served as Senior Vice
President - Finance and Chief Financial Officer of Stant and from 1989 to 1991,
he held executive positions at STC.
<PAGE>
Robert W. Priebe has been Senior Vice President - International of Stant since
July 1994. He served Stant as Senior Vice President - Original Equipment Sales
and International from 1991 until July 1994.
William S. Wade, Jr. will join the Company as Senior Vice President - Sales &
Marketing on April 1, 1997. From May 1995 until March 1997, Mr. Wade was
President and Chief Executive Officer of FAG Bearings Corp., the third largest
bearing company in the world and a subsidiary of FAG Kugelfisdner (Germany).
Prior thereto, Mr. Wade served for more than eight years as President of CR
Services, a manufacturer and distributor of seals, bearings and heavy truck
accessories.
Anthony W. Graziano, Jr. has been Vice President and General Counsel, and
Secretary of Stant since October 1994. From April 1993 until June 1994, he was
Executive Vice President and General Counsel of Triarc Companies, Inc., which at
that time was engaged, through its subsidiaries, in fast food, soft drinks,
textiles and liquefied petroleum gas. From its formation in January 1989 until
April 1993, Mr. Graziano was Senior Vice President Legal Affairs of Trian Group,
Limited Partnership, which provided investment banking and management services
for entities controlled by Nelson Peltz and Peter W. May.
On February 5, 1997, the Company announced the relocation of its
corporate headquarters from Richmond, Indiana to the Greater Chicago Area. That
action constituted an Event of Termination as defined in the Employment
Agreements between the Company and Messrs. Margetts and Graziano and entitled
them either to (i) accept a relocation of their place of work or (ii) terminate
their employment effective April 5, 1997 and receive payment of their then
current base salary for one year. To date, neither Mr. Margetts nor Mr. Graziano
has agreed to the relocation of his place of work.
<PAGE>
Item 2. PROPERTIES
The following table sets forth certain information concerning the Company's
principal physical properties as of December 31, 1996:
<TABLE>
<CAPTION>
Approx.
Square Nature of
Location Primary Use (Principal Product) Footage Occupancy
- -------- ------------------------------- ------- ---------
<S> <C> <C> <C>
Richmond, Indiana Corporate and Administration 9,200 Leased
Brownsville, Texas Manufacturing (Wipers) and 340,000 Owned (2)
Administration
Buffalo, New York Manufacturing (Wipers) 698,000 Owned
and Engineering
Buffalo, New York Manufacturing (Heaters), 155,000 Owned (1)
Administration and Engineering
Columbia, Missouri Manufacturing (Clamps) 127,800 Owned (1)
Connersville, Indiana Manufacturing (Caps and Valves), 280,000 Owned (1)
Administration and Engineering
Dixon, Illinois Manufacturing (Power Steering 331,800 Owned (1)
Hose and Fittings) and
Distribution (Tools)
Granite Falls, Minnesota Manufacturing (Tools) 130,000 Owned (1)
and Engineering
Pine Bluff, Arkansas Manufacturing (Caps) 227,000 Owned (1)
St. Augustine, Florida Manufacturing (Clamps), 144,000 Owned (1)
Administration and Engineering
Spencer, Iowa Manufacturing and Distribution (Grease 114,400 Owned
Guns and Fittings)
Vanceboro, North Carolina Manufacturing (Wipers) 44,750 Owned (1)
<PAGE>
Approx.
Square Nature of
Location Primary Use (Principal Product) Footage Occupancy
- -------- ------------------------------- ------- ---------
Waltham, Massachusetts Manufacturing (Thermostats and 180,000 Owned (1)
Bellows), Administration and
Engineering
Buenos Aires, Argentina Manufacturing (Wipers), 20,000 Leased
Administration and Engineering
Pontypool, Wales Manufacturing (Wipers), 180,000 Owned
Administration and Engineering
Springvale, Australia Manufacturing (Wipers), 55,000 Owned
Administration and Engineering
Telford, England Manufacturing (Linkages) 15,000 Leased
Juarez, Mexico Assembly (Grease Guns and Tools) 60,000 Owned (3)
Matamoros, Mexico Assembly (Clamps, Flashers) 66,000 Owned (3)
Matamoros, Mexico Assembly (Wipers) 365,000 Owned
Tijuana, Mexico Assembly (Remanufactured 29,000 Owned (3)
Power Steering Units)
Brownsville, Texas Distribution (Wipers) 100,000 Leased
Chula Vista, California Distribution (Remanufactured Power 10,000 Leased
Steering Units)
Fort Erie, Ontario, Canada Distribution (Wipers) 12,500 Leased
Rochester Hills, Michigan Engineering and OEM Sales Office (Wipers) 81,000 Leased
Buffalo, New York Subsidiary Office (Trico) 7,500 Leased
Buffalo Grove, Illinois Division Office (Plews/Edelmann 12,100 Leased
Division)
Heston, England Sales Office (Wipers) 4,000 Leased
Southfield, Michigan OEM Sales Office (Caps) 2,000 Leased
</TABLE>
Certain of the Company's manufacturing locations also have distribution
facilities. The Company believes that its physical properties taken as a whole
are suitable and adequate to maintain current and projected manufacturing and
distribution needs. A significant portion of the wiper facility which the
Company owns in Buffalo, New York is surplus to the Company's present and
anticipated future needs, and approximately 80,500 square feet of office space
in that facility is currently leased to an unaffiliated third party. The Company
continues to evaluate its options concerning this facility.
- -----------------------------
(1) Subject to mortgages and liens securing indebtedness under the Company's
Credit Agreement with a syndicate of banks.
(2) The building is owned but the real estate is leased.
(3) The underlying land is legally owned by the Government of Mexico and is held
in trust with a maquiladora corporation owned by
the Company as beneficiary.
<PAGE>
Item 3. LEGAL PROCEEDINGS
In addition to the environmental matters referred to under "Item 1.
Business-Environmental Compliance," the Company is involved in various legal
proceedings incident to the normal conduct of its business. Although the outcome
of any pending legal proceeding cannot be predicted with any certainty, the
Company estimates the range of loss for all pending legal proceedings to be from
$8.0 million to $13.0 million and, at December 31, 1996, had accrued
approximately $11.3 million for these matters. In part because of this accrual,
and based upon the information obtained to date, management believes that such
legal proceedings, individually and in the aggregate, will not have a material
adverse effect on the Company's financial condition, results of operations or
cash flows, except that there could be such an effect on cash flows for a
particular interim financial reporting period.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during
the quarter ended December 31, 1996.
<PAGE>
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
Since the initial public offering of Stant's common stock in July 1993,
shares of Stant's common stock have traded on the NASDAQ Stock Market under the
symbol "STNT." On March 14, 1997, the number of record and beneficial holders of
Stant's common stock was approximately 245 and 1,225, respectively (excluding
individuals who only hold shares of common stock as a result of employer
contributions to the Company's 401(k) plan). Information with respect to the
high and low sale prices of Stant's common stock, as reported by the NASDAQ
Stock Market, and dividends declared and paid per share, during 1996 and 1995
are set forth below.
<TABLE>
<CAPTION>
1996 Stock Price and Dividends Paid 1995 Stock Price and Dividends Paid
- -------------------------------------- ----------------------------------------
High Low Dividends High Low Dividends
- -------------------------------------- ----------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1st Qtr. $12.25 $9.25 $.02 1st Qtr. $16.25 $12.50 $.02
- -------------------------------------- ----------------------------------------
2nd Qtr. 12.00 9.75 .02 2nd Qtr. 14.00 10.00 .02
- -------------------------------------- ----------------------------------------
3rd Qtr. 11.75 9.50 .02 3rd Qtr. 11.75 9.25 .02
- -------------------------------------- ----------------------------------------
4th Qtr. 15.75 9.75 .02 4th Qtr. 10.50 8.50 .02
- -------------------------------------- ----------------------------------------
</TABLE>
Although the agreement pursuant to which the Company has incurred
certain long-term debt restricts the payment of dividends, such agreement does
not restrict the payment of dividends at the current quarterly rate. See Note 7
of Notes to Consolidated Financial Statements on pages 35, 36 and 37 of the 1996
Annual Report.
<PAGE>
Item 6. SELECTED FINANCIAL DATA
<TABLE>
($ In Thousands, Except Share Data)
<CAPTION>
Year Ended December 31,
- ---------------------------------------------------------------------------------------------------------
Selected Income Statement Data 1996 * 1995 1994 * 1993 1992
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Sales $657,067 $612,358 $287,946 $253,567 $234,368
Cost of Sales 490,103 464,460 189,349 164,219 153,785
- ---------------------------------------------------------------------------------------------------------
Gross Margin 166,964 147,898 98,597 89,348 80,583
Operating Expenses 110,320 100,270 67,193 62,012 55,091
- ---------------------------------------------------------------------------------------------------------
Income From Operations 56,644 47,628 31,404 27,336 25,492
Interest Expense and Other Charges 17,875 20,817 3,129 5,694 9,235
- ---------------------------------------------------------------------------------------------------------
Income Before Income Taxes, Extraordinary
Loss and Cumulative Effect of
Accounting Changes 38,769 26,811 28,275 21,642 16,257
Income Taxes 17,350 12,152 11,876 9,653 7,564
- ---------------------------------------------------------------------------------------------------------
Income Before Extraordinary Loss and
Cumulative Effect of Accounting Changes 21,419 14,659 16,399 11,989 8,693
Extraordinary Loss -- -- (435) (3,322) --
Cumulative Effect of Accounting Changes -- -- (418) (7,105) --
- ---------------------------------------------------------------------------------------------------------
Net Income 21,419 14,659 15,546 1,562 8,693
Preferred Dividends -- -- -- (1,276) (1,956)
- ---------------------------------------------------------------------------------------------------------
Net Income Applicable to Common Stock $ 21,419 $ 14,659 $ 15,546 $ 286 $ 6,737
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
Selected Per Share Data
- ---------------------------------------------------------------------------------------------------------
Income Before Extraordinary Loss and
Cumulative Effect of Accounting Changes
Primary Basis $ 1.28 $ 0.88 $ 0.97 $ 0.80 $ 0.65
Fully Diluted Basis 1.26 0.88 0.97 0.78 0.65
Net Income
Primary Basis 1.28 0.88 0.92 0.02 0.65
Fully Diluted Basis 1.26 0.88 0.92 0.02 0.65
Cash Dividend per Share (Post Offering) 0.08 0.08 0.08 0.04
- ---------------------------------------------------------------------------------------------------------
Selected Balance Sheet Data
- ---------------------------------------------------------------------------------------------------------
Total Assets $581,571 $573,536 $584,026 $241,908 $240,718
Total Debt 222,984 250,383 260,190 35,639 115,755
Preferred Stock -- -- -- -- 17,536
- ---------------------------------------------------------------------------------------------------------
Selected Statement of Cash Flow Data
- ---------------------------------------------------------------------------------------------------------
Cash Flows Provided By (Used in)Operating Activities $ 70,884 $ 22,106 $ 27,319 $ 20,402 $ 11,739
- ---------------------------------------------------------------------------------------------------------
Net Sales by Market
- ---------------------------------------------------------------------------------------------------------
North America:
Original Equipment $300,192 $279,240 $ 73,720 $ 58,097 $ 52,717
Aftermarket 261,465 240,059 176,753 165,878 152,066
Industrial 41,073 36,895 35,035 29,592 29,585
- ---------------------------------------------------------------------------------------------------------
Total North America 602,730 556,194 285,508 253,567 234,368
- ---------------------------------------------------------------------------------------------------------
Foreign:
Original Equipment 27,712 29,795 1,287 -- --
Aftermarket 26,625 26,369 1,151 -- --
- ---------------------------------------------------------------------------------------------------------
Total Foreign 54,337 56,164 2,438 -- --
- ---------------------------------------------------------------------------------------------------------
Total $657,067 $612,358 $287,946 $253,567 $234,368
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
</TABLE>
* Reflects the acquisition of the Lubrimatic Division on November 1, 1996;
FEDCO Automotive Components Company, Inc. on September 1, 1994; and Trico
Products Corporation on December 13, 1994.
<PAGE>
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The information required by Item 7 is incorporated herein by reference
to pages 20 through 27 of the 1996 Annual Report.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by Item 8 is incorporated herein by reference
to pages 28 through 47 of the 1996 Annual Report.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
Not Applicable.
<PAGE>
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Except to the extent included in PART I under "Item 1 - Business
Executive Officers of the Registrant" and "Item 1 - Business - Business
Experience of Executive Officers," the information required by Item 10 is
incorporated herein by reference to the material captioned "Nominees for
Directors" on pages 2 and 3 in the Company's Proxy Statement for its annual
meeting of stockholders to be held Wednesday, April 30, 1997 (the "1997 Proxy
Statement"). The 1997 Proxy Statement was filed with the Securities and Exchange
Commission ("SEC") at the time of the mailing of the Proxy Statement to Stant's
stockholders.
Item 11. EXECUTIVE COMPENSATION
The information required by Item 11 is incorporated herein by reference
to the material captioned "Compensation of Executive Officers" on pages 7
through 15 in the 1997 Proxy Statement.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The information required by Item 12 is incorporated herein by reference
to the material captioned "Security Ownership of Certain Beneficial Owners and
Management" on pages 5 and 6 in the 1997 Proxy Statement.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by Item 13 is incorporated herein by reference
to the material captioned "Certain Transactions" on page 7 in the 1997 Proxy
Statement.
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES,
AND REPORTS ON FORM 8-K
a. Documents Filed as Part of this Report:
1. Financial Statements - The following financial statements
are incorporated herein by reference to pages 28 through 47 of
the 1996 Annual Report:
o Consolidated Balance Sheets as of December 31, 1996
and 1995
o Consolidated Statements of Income for the
years ended December 31, 1996, 1995 and 1994
o Consolidated Statements of Stockholders' Equity for the years
ended December 31, 1996, 1995 and 1994
o Consolidated Statements of Cash Flows for the years ended
December 31, 1996, 1995 and 1994
o Notes to the Consolidated Financial Statements
o Independent Auditors' Report
2. Financial Statement Schedule - The following financial
statement schedule and Independent Auditors' Report
thereon are included in this Form 10-K:
Schedule Page
-------- ----
o Independent Auditors' Report ............................S-1
o Schedule II - Valuation and Qualifying Accounts..........S-2
3. Exhibits - See "Exhibit Index" beginning on page 27.
b. Report on Form 8-K:
o None
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT INDEX
Exhibit
Exhibit Page
Number Description Number
- ------- ----------- -------
<S> <C> <C>
3.1 Certificate of Incorporation of the Registrant *
is incorporated by reference to Exhibit No. 3.1
of Stant's Registration Statement on Form S-1,
SEC File No. 33-63914 (the "Form S-1").
3.2 By-Laws of the Registrant are incorporated by *
reference to Exhibit No. 3.2 of the Form S-1.
4.1 Form of Common Stock Certificate of the Registrant *
is incorporated by reference to Exhibit No. 4.1
of the Form S-1.
10.1 $325 million Credit Agreement, dated December 12, 1994 *
(the "Credit Agreement"), among Stant, various lending
institutions and Chemical Bank, as agent is incorporated
by reference to Amendment No. 2, dated December 13, 1994,
to Stant's Schedule 14D-1/13D dated November 8, 1994,
relating to the acquisition of Trico, SEC File No. 0-870
(the "Schedule 14D-1/13D")
10.2 First Amendment, dated as of June 27, 1995, to the *
Credit Agreement is incorporated by reference to
Exhibit 10.2 of Stant's Annual Report on Form 10-K
for the year ended December 31, 1995 (the "1995
Form 10-K").
10.3 Second Amendment, dated as of December 20, 1995, *
to the Credit Agreement is incorporated by reference
to Exhibit 10.3 of the 1995 Form 10-K.
10.4 Third Amendment, dated as of October 31, 1996, E-1
to the Credit Agreement.
10.5 Employment Agreement, dated January 23, 1997, E-9
between Stant and J.P. Reilly.
10.6 Employment Agreement, dated February 10, 1997, E-25
between Stant and Thomas K. Erwin.
10.7 Form of Employment Agreement, dated October 31, 1996, E-42
between Stant and certain executive officers of Stant.
10.8 Stant Pension Restoration Plan, effective *
December 5, 1990, as revised December 15, 1993 is
incorporated by reference to Exhibit 10.4 of Stant's
Annual Report on Form 10-K for the year ended
December 31, 1993 (the "1993 Form 10-K").
10.9 Management Advisory Services Agreement, dated *
July 1, 1993, between Stant and Bessemer Partners, L.P.
(the "Management Agreement") is incorporated by reference
to Exhibit 10.11 of the Form S-1.
10.10 Assignment to Bessemer Partners & Co. of the Management *
Agreement is incorporated by reference to Exhibit 10.6
of the 1993 Form 10-K.
10.11 Amendment to the Management Agreement, dated *
December 12, 1994, is incorporated by reference to
Exhibit 10.11 of Stant's Annual Report on Form 10-K
for the year ended December 31, 1994 (the "1994
Form 10-K").
10.12 Form of the 1987, 1988, 1990 and 1991 Non-Qualified *
Stock Option Agreements is incorporated by reference
to Exhibits 4.2, 4.3, 4.4, 4.5, 4.6, 4.7 and 4.8 of the
Form S-1.
10.13 1993 Stock Option Plan for Key Employees of Stant and *
its Subsidiaries is incorporated by reference to Exhibit
No. 10.15 of the Form S-1.
10.14 Stock Option Plan for Directors (1993) is incorporated *
by reference to Exhibit 10.14 of the 1994 Form 10-K.
11 Statement Regarding Computation of Per Share Earnings E-59
13 1996 Annual Report to Stockholders, pages 20 through 47 E-60
21 Subsidiaries of the Registrant E-89
23 Consent of Deloitte & Touche LLP to the incorporation by E-90
reference in Stant's S-8 Registration Statement
(No. 33-91812) of that firm's reports, dated February 12,
1997.
27 Financial Data Schedule
</TABLE>
* Incorporated by reference.
<PAGE>
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Stant Corporation
Date: March 27, 1997
By J.P.Reilly
----------
J.P. Reilly
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below on March 27, 1997 by the following persons on behalf of
the Registrant in the capacities indicated:
Signature Title
J.P. Reilly
- ------------------------------ Director, President and
(J.P. Reilly) Chief Executive Officer
(Principal Executive Officer)
Thomas K. Erwin
- ------------------------------ Senior Vice President and
(Thomas K. Erwin) Chief Financial Officer
(Principal Financial and
Accounting Officer)
Ward W. Woods
- ------------------------------ Chairman of the Board and Director
(Ward W. Woods)
Ogden M. Phipps
- ------------------------------ Director
(Ogden M. Phipps)
Robert D. Lindsay
- ------------------------------ Director
(Robert D. Lindsay)
Edward O. Gaylord
- ------------------------------ Director
(Edward O. Gaylord)
A. William Reynolds
- ------------------------------ Director
(A. William Reynolds)
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders of Stant Corporation:
We have audited the consolidated financial statements of Stant Corporation and
subsidiaries as of December 31, 1996 and 1995, and for each of the three years
in the period ended December 31, 1996, and have issued our report thereon dated
February 12, 1997; such financial statements and report are included in your
1996 Annual Report to Stockholders and are incorporated herein by reference. Our
audits also included the financial statement schedule of Stant Corporation and
subsidiaries, listed in Item 14. This financial statement schedule is the
responsibility of the Company's management. Our responsibility is to express an
opinion based on our audits. In our opinion, such financial statement schedule,
when considered in relation to the basic consolidated financial statements taken
as a whole, presents fairly in all material respects the information set forth
therein.
DELOITTE & TOUCHE LLP
Cincinnati, Ohio
February 12, 1997
S-1
<PAGE>
<TABLE>
SCHEDULE II
STANT CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
Allowance for Doubtful Accounts Receivable
For the Years Ended December 31, 1996, 1995, 1994
($ in Thousands)
<CAPTION>
Balance at Balance
Beginning Charged to Deductions - Other at End of
of Year Expense Net Changes(1) Year
---------- ---------- ------------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Year Ended December 31, 1996........... $2,193 $1,518 $1,831 $157 $2,037
------ ------ ------ ----- ------
------ ------ ------ ----- ------
Year Ended December 31, 1995........... $1,828 $2,164 $1,671 ($128) $2,193
------ ------ ------ ----- ------
------ ------ ------ ----- ------
Year Ended December 31, 1994........... $1,109 $ 312 $ 330 $737 $1,828
------ ------ ------ ----- ------
------ ------ ------ ----- ------
</TABLE>
- ----------------------------
(1) Reflects additions or adjustments related to acquired businesses.
S-2
Exhibit Number 10.4
Third Amendment to Credit Agreement
E-1
<PAGE>
THIRD AMENDMENT AND WAIVER
THIRD AMENDMENT AND WAIVER (this "Amendment"), dated as of
October 31, 1996, among Stant Corporation (the "Borrower") and the lending
institutions party to the Credit Agreement referred to below (the "Banks"). All
capitalized terms used herein and not otherwise defined shall have the
respective meanings provided such terms in the Credit Agreement referred to
below.
W I T N E S S E T H :
WHEREAS, the Borrower, the Banks and The Chase Manhattan Bank
as Agent are parties to the Credit Agreement, dated as of December 12, 1994 (as
amended, modified or supplemented to the date hereof, the "Credit Agreement");
WHEREAS, the Borrower has requested that the Banks agree to
waive and/or amend certain provisions of the Credit Agreement, and the Banks are
willing to amend such provisions, subject to and on the terms and conditions set
forth herein;
NOW THEREFORE, it is agreed:
1. It is hereby agreed that
(a) Section 7.16 is waived to the extent necessary to permit
Stant, through Epicor Industries, Inc., a Wholly Owned Subsidiary of
Stant, to purchase from Witco Corporation or its wholly owned
subsidiary, Southwest Petro-Chem, Inc., the business of (i) selling
LubriMatic brand lubricating greases and oils and certain related
equipment, (ii) manufacturing and selling LubriMatic brand and
private-label hand-operated grease guns and certain related equipment
and (iii) selling private label greases packaged in cartridges for use
with such hand-operated grease guns, without filing UCC financing
statements to perfect the Collateral Agent's security interests in any
such newly acquired inventory and equipment located anywhere other than
in the newly acquired plant in Spencer, Iowa, provided that, no later
than 90 days after such acquisition is consummated, all such newly
acquired inventory or equipment is transferred to a location in which
Stant or any of its Subsidiaries, as the case may be, keep assets in
which the Collateral Agent has an existing, perfected security
interest;
(b) Section 8.05 of the Credit Agreement is waived to
the extent necessary to permit the Borrower and its Subsidiaries
to transfer up to U.S.$10,000,000 in value of inventory to Trico
Canada; and
(c) Section 8.10 of the Credit Agreement is waived to the
extent necessary to permit Trico and Trico Technologies Corporation to
prepay all principal and interest on, and fees owing in respect of, the
Indebtedness owing by it to the CIT Group and listed as items D and G
on Annex VI to the Credit Agreement.
<PAGE>
2. The Credit Agreement is hereby amended as follows:
(a) Section 8.02 is amended by (x) deleting the "and" at the
end of clause (iv) thereof; (y) inserting a ";" in lieu of the period
at the end of clause (v) thereof; and inserting new clauses (vi) and
(vii) to read:
"(vi) The Canadian wholly owned Foreign Subsidiary of the
Borrower ("Trico Canada") may incur indebtedness to the
Borrower and the Subsidiary Guarantors in connection with the
transfer of up to U.S. $10,000,000 of inventory from the
Borrower and its Subsidiaries to Trico Canada; and
(vii) Trico Latinoamericana S.A. ("Trico LA"), a wholly
owned Foreign Subsidiary of the Borrower, may incur
Indebtedness for working capital and capital expenditure
purposes from time to time pursuant to one or more revolving
credit or similar agreements, provided that (A) the aggregate
principal amount of such Indebtedness at any time outstanding
pursuant to this clause (vii), when aggregated with
Indebtedness of Trico LA constituting Foreign Intercompany
Loans, shall not exceed $6,000,000, (B) such Indebtedness may
be secured, but only with the assets of Trico LA and (C) no
Person other than Trico LA and either the Borrower or a
Subsidiary Guarantor shall have guaranteed or be contingently
liable for the repayment of such Indebtedness.";
(b)Section 8.05 is amended by (x) deleting the "and" after
clause (x) thereof; (y) inserting a "; and" in lieu of the period at
the end of clause (xi) thereof; and (z) inserting a new clause (xii) to
read:
"(xii) the Borrower and the Subsidiary Guarantors may
transfer assets among themselves.";
(c) Section 8.06(i)(B) is amended by (i) inserting an "and" in
lieu of the semicolon preceding subclause (y) and (ii) inserting a new
subclause (y) in lieu of subclauses (y) and (z) to read:
"(y) the indebtedness evidenced thereby is permitted by
Section 8.02;";
(d) Section 8.14(ii) is amended by changing the references
to "clause (i)(y)" therein to read "clause (i)"; and
(e) Section 10 of the Credit Agreement is amended by
inserting in the appropriate alphabetical order the following new
definitions:
"Trico Canada" shall have the meaning provided in Section 8.02(vi).
"Trico LA" shall have the meaning provided in Section 8.02(vii).
3. In order to induce the Banks to enter into this Amendment,
the Borrower hereby represents and warrants that (x) no Default or Event of
Default exists on the Effective Date (as defined below), both before and after
giving effect to this Amendment and (y) all of the representations and
warranties contained in the Credit Documents shall be true and correct in all
material respects on the Effective Date both before and after giving effect to
this Amendment, with the same effect as though such representations and
warranties had been made on and as of the Effective Date (it being understood
that any representation or warranty made as of a specific date shall be true and
correct in all material respects as of such specific date).
<PAGE>
4. This Amendment is limited as specified and shall not
constitute a modification, acceptance or waiver of any other provision of the
Credit Agreement or any other Credit Document.
5. This Amendment may be executed in any number of
counterparts and by the different parties hereto on separate counterparts, each
of which counterparts when executed and delivered shall be an original, but all
of which shall together constitute one and the same instrument. A complete set
of counterparts shall be lodged with the Borrower and the Agent.
6. This Amendment and the rights and obligations of the
parties hereunder shall be construed in accordance with and governed by the laws
of the State of New York.
7. This Amendment shall become effective as of the date (the
"Effective Date") when each of the Borrower and the Required Banks shall have
duly executed a copy hereof (whether the same or different copies) and shall
have delivered (including by way of facsimile transmission) the same to the
Agent at its Notice Office.
8. From and after the Effective Date, all references to the
Credit Agreement in the Credit Agreement and the other Credit Documents shall be
deemed to be references to such Credit Agreement as modified hereby.
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused a
counterpart of this Agreement to be duly executed and delivered as of the date
first above written.
Address: STANT CORPORATION
By Thomas E. Schmitt
---------------------------
Name: Thomas E. Schmitt
Title: Senior Vice President -
Finance and Chief
Financial Officer
THE CHASE MANHATTAN BANK,
Individually and as Agent
By Rosemary Bradley
--------------------------
Name: Rosemary Bradley
Title: Vice President
BANK OF AMERICA ILLINOIS
By Michael G. Healy
--------------------------
Name: Michael G. Healy
Title: Vice President
BANK OF TOKYO-MITSUBISHI
TRUST COMPANY
By Paul P. Malecki
--------------------------
Name: Paul P. Malecki
Title: Vice President
<PAGE>
BANQUE PARIBAS
By Joli A. Biesel
---------------------------
Name: Joli A. Biesel
Title: Asst. Vice President
By Peter Toal
---------------------------
Name: Peter Toal
Title: General Manager
COMERICA BANK
By Philip A. Coosaia
---------------------------
Name: Philip A. Coosaia
Title: Vice President
CREDIT LYONNAIS CHICAGO
BRANCH
By Michel Buysschaert
---------------------------
Name: Michel Buysschaert
Title: Vice President
HARRIS TRUST AND SAVINGS BANK
By Peter Krawchuk
---------------------------
Name: Peter Krawchuk
Title: Vice President
MANUFACTURERS AND TRADERS
TRUST COMPANY
By Geoffrey R. Fenn
--------------------------
Name: Geoffrey R. Fenn
Title: Vice President
MARINE MIDLAND BANK
By Hugh McLean
---------------------------
Name: Hugh McLean
Title: Vice President
MELLON BANK, N.A.
By Reginald T. Overton
---------------------------
Name: Reginald T. Overton
Title: First Vice President
NATIONAL CITY BANK
By Kevin J. Storlie
---------------------------
Name: Kevin J. Storlie
Title: Assistant Vice President
NBD BANK, N.A.
By Sandra L. Jackson
---------------------------
Name: Sandra L. Jackson
Title: Assistant Vice President
SOCIETE GENERALE
By May I. Mallouh
---------------------------
Name: May I. Mallouh
Title: Vice President
STAR BANK, N.A.
By Douglas V. Wyatt
---------------------------
Name: Douglas V. Wyatt
Title: Vice President
THE BOATMEN'S NATIONAL BANK
OF ST. LOUIS
By Stephen J. Miles
---------------------------
Name: Stephen J. Miles
Title: Corporate Banking Officer
THE FIRST NATIONAL BANK OF
BOSTON
By Christopher M. Holtz
---------------------------
Name: Christopher M. Holtz
Title: Vice President
THE LONG-TERM CREDIT BANK OF
JAPAN, LTD.
By Brady S. Sadek
---------------------------
Name: Brady S. Sadek
Title: Vice President and Deputy
General Manager
UNITED STATES NATIONAL BANK
OF OREGON
By Chris J. Karlin
---------------------------
Name: Chris J. Karlin
Title: Vice President
Exhibit Number 10.5
Employment Agreement between Stant and J.P. Reilly
E-9
<PAGE>
Conformed Copy
EMPLOYMENT AGREEMENT (this "Agreement")
dated as of January 21, 1997, between STANT
CORPORATION, a Delaware corporation (the "Company"),
and JOHN P. REILLY, an individual residing at 644
East Spruce Avenue, Lake Forest, Illinois 60045
("Executive").
WHEREAS the Company desires to retain the services of Executive as its
President and Chief Executive Officer, and Executive has indicated his
willingness to provide his services in such position on the terms and conditions
set forth herein.
NOW, THEREFORE, in consideration of the covenants and the agreements
herein contained, the parties agree as follows:
1. Services, Authority and Place of Employment. During the
Term of Employment (as defined in Section 3(a)), the Company shall employ
Executive as its President and Chief Executive Officer, and Executive hereby
accepts such employment. In his capacity as the Company's President and Chief
Executive Officer, Executive shall devote substantially all his business time,
attention, skill and efforts to the faithful performance of his duties hereunder
and shall have the usual powers and duties vested in the office of President and
Chief Executive Officer of a corporation of the size, stature and nature of the
Company, responsible only to the Board of Directors of the Company (the "Board")
and its stockholders. Executive shall have sufficient authority to accomplish
the objectives and goals set for him by the Board of Directors. Upon
commencement of the Term of Employment, the Executive shall be appointed to fill
a vacancy on the Board. The Executive shall at all times conduct himself in
conformity with the policies of the Company.
The principal place of employment shall be the Greater Chicago
Area which is defined as that area which is with fifty (50) miles of the main
post office of Chicago. Executive may move the executive offices of the Company
from Richmond, Indiana, to a location in the Greater Chicago Area selected by
Executive and approved by the Board.
2. Compensation. For all services to be rendered by Executive
in any capacity hereunder, during the Term of Employment the Company shall pay
or provide to Executive the following amounts and benefits:
(a) Base Salary. The Company shall pay to Executive in cash in
accordance with its regular payroll practices (but not less frequently than
monthly) a base salary (the "Base Salary") at the initial annual rate of
$500,000, which rate shall be reviewed by the Compensation Committee of the
Board (the "Committee") on or about January 1, 1998, and annually thereafter.
Such salary may be increased, but not decreased, from time-to-time at the
discretion of the Committee to reflect both merit and cost of living increases,
and upon any such increase in the annual rate of Executive's base salary, such
increased amount shall become the "Base Salary".
(b) Incentive Compensation. Executive shall participate in an
annual incentive compensation plan for executives to be adopted by the Committee
whereby Executive shall have the opportunity each year to earn a cash bonus in
an amount of up to 100% of the Base Salary for such year, based upon the
attainment of the Company's budgeted results which are realistically obtainable
and other agreed objectives. Executive acknowledges that such compensation will
be intended to qualify as performance-based compensation under Section 162
(m)(4)(C) of the Internal Revenue Code of 1986, as amended (the "Tax Code"). The
cash bonus provided for in this Section 2(b) shall be paid on or before the 30th
day following the date of the auditor's opinion on the financial statements of
the Company for the year to which the bonus relates and in no event later than
six (6) months after the close of the fiscal year to which they relate. If
Executive does not achieve his assigned objectives or fails to meet or exceed
high job performance expectations, no payment (or a reduced payment) shall be
made for this bonus component.
<PAGE>
By January 31 of each year during the Term of Employment,
Executive may irrevocably elect, by notice in writing to the Company, to receive
all or a stated percentage of his incentive compensation, if any, for such
fiscal year in the form of stock options to be issued by the Company pursuant to
a plan to be established by the Board. The exercise price, vesting and
exercisability conditions and valuation of such options shall be as set forth in
the Company's Stock Option Plan for Directors (1993).
(c) Insurance; Pension Benefits. Executive shall participate
in all insurance (including life, travel and accident, medical and dental
insurance), pension, pension restoration, deferred compensation, disability,
profit-sharing, retirement and other employee welfare and benefit plans
maintained from time to time by the Company for its executives or salaried
employees, to the extent that such executives or salaried employees participate,
in accordance with their respective terms, except as may otherwise be provided
herein, and provided Executive satisfies any applicable eligibility requirements
therefor. The Company reserves the right to change any such welfare or benefit
plan in the future, but no such change shall be applied retroactively or
adversely affect benefits already accrued. Executive further acknowledges that
the Company may wish to maintain insurance on his life for its benefit and
agrees to submit to any physical examination which may be required in order to
obtain such insurance.
(d) Fringe benefits: Vacation. Executive shall participate in
the Company's automobile program and all other fringe benefits to the same
extent as other senior executives of the Company. Executive shall be entitled to
a number of paid vacation days each year as allowed under the Company's vacation
policy as currently in effect which shall be no less than four (4) weeks.
(e) Business Travel and Other Expenses. The Company shall pay
or reimburse Executive for all reasonable business travel and other business
expenses incurred by Executive in the course of performing his duties under this
Agreement, provided that such expenses are incurred and accounted for in
accordance with the policies and procedures established by the Board from time
to time.
(f) Disability. The Company shall provide Executive with a
disability arrangement (the "Disability Arrangement") that will provide
Executive, in the event he becomes disabled, with payments to be made in equal
monthly installments of not less than 60% of the Executive's average total
salary compensation (Base Salary and incentive compensation) actually earned for
the three calendar years preceding the date of disability (assuming, to the
extent relevant, that Executive's total salary compensation for each of calendar
years 1994, 1995 and 1996 was $1,000,000); such payments to commence on the date
disability is determined and end on the date of which Executive recovers from
the disability, dies or attains age sixty-five (65), whichever first occurs.
Such payments shall be offset by any other disability payments received by
Executive under the Company's regular short-term disability program, regular
long-term disability program and the Social Security Disability benefits
program.
<PAGE>
(g) Signing Bonus. The Company shall pay to Executive a
signing bonus of $1,200,000, such amount to be paid in amounts, on dates and in
a manner to be agreed between the Company and Executive, and any amount thereof
not paid within thirty (30) days after commencement of employment shall bear
interest at the rate of eight percent (8%); provided, however, that such amount
shall be paid in full no later than twelve (12) months after Executive's
termination of employment hereunder and shall be structured in a manner that to
the greatest extent possible the payment is tax deductible to the Company.
(h) Stock Options. On the date of execution of this Agreement,
the Company shall grant to Executive under the Company's 1993 Stock Option Plan
for Key Employees, as amended from time to time (as so amended, the "1993 Stock
Option Plan"), non-qualified options covering 300,000 shares of common stock of
the Company. Such options shall vest in equal installments on the first, second
and third anniversaries of the date of grant and shall be exercisable for 10
years, subject in all cases to the terms of the 1993 Stock Option Plan. Each
such option shall have a "Fair Market Value" (determined in accordance with the
1993 Stock Option Plan) as of January 21, 1997. The Company shall not announce
publicly that it is entering into this contract with Executive until after the
close of trading of the stock of the Company on January 21, 1997.
(i) Deferred Benefits. Upon commencement of the Term of
Employment, the Company shall credit $250,000 to an account established on
Executive's behalf (the "Account"). The Account shall be hypothetically invested
in a mutual fund or funds to be designated in writing by Executive (the "Funds")
until the Termination Date (as defined in Section 3(a)), and credited or debited
with the income, gains or losses of the Fund before the Termination Date. As
soon as reasonably practicable after the Termination Date, Executive shall
receive a lump sum, cash distribution of the amount credited to the Account as
of the Termination Date. Executive shall have no right to receive any amount
credited to the Account until the Termination Date and shall be an unsecured
creditor of the Company with respect to any amount credited to the Account on
his behalf.
3. Term of Employment and Termination. (a) Term of Employment.
The Term of Employment shall be the period of time which begins on January 22,
1997, or ninety (90) days thereafter if the current employer of Executive does
not waive its ninety (90) day termination clause, and ends on the date (the
"Termination Date") that is the earliest of (i) the date of Executive's death,
(ii) January 31, 2000 (provided that such date shall automatically be extended
for successive one year periods unless at least 60 days prior to January 31,
2000, or any successive January 31, the Company or Executive gives written
notice to the other of its or his desire that the Term of Employment expire on
such January 31), and (iii) the effective date of any termination of the Term of
Employment as provided for in this Agreement.
(b) Termination by the Company for Good Cause. The Company may
terminate the Term of Employment at any time for Good Cause (as defined in
Section 3(c)). The Company shall notify (the "Good Cause Notice") Executive in
writing at least 30 days in advance of any proposed termination for Good Cause
(which Good Cause Notice shall state the Good Cause for which Executive is
proposed to be dismissed in such detail as to permit a reasonable assessment by
Executive of the bona fides thereof). During such notice period Executive shall
have the opportunity to cure any breach if the same is capable of being cured.
(c) Definition of Good Cause. For purposes of this Agreement,
the term "Good Cause" shall mean:
(i) a material breach by Executive of his obligations under
this Agreement,
(ii) material misconduct by Executive in respect of such
obligations,
<PAGE>
(iii) Executive's engaging in conduct that is immoral or
illegal or that brings Executive or the Company or any of its direct or
indirect subsidiaries (collectively, the "Stant Group") into disrepute
or otherwise damages the business of the Stant Group (as determined in
the good faith judgment of the Board of Directors), or
(iv) Executive's commission of an act of dishonesty or a felony,
which in any event is not cured by Executive prior to the effective date of the
termination of the Term of Employment referred to in the Good Cause Notice;
provided, however, that Good Cause shall not include (a) bad judgment or
negligence, (b) any act or failure to act by Executive believed in good faith by
him to have been in or not opposed to the interests of the Stant Group, and (c)
any act or failure to act by Executive in respect of which a determination could
properly be made that Executive met the applicable standard of conduct described
for indemnification or reimbursement or payment of expenses under the Delaware
Corporation Law, or the By-laws or Restated Certificate of Incorporation of the
Company, or the Company's directors' and officers' liability insurance.
(d) Termination by the Company for Convenience. Subject to the
Company's obligations to pay or provide certain amounts and benefits pursuant to
Section 4(b), the Company may terminate the Term of Employment at any time for
its convenience by written notice to Executive.
(e) Termination by Executive for Convenience. Executive may
terminate the Term of Employment at any time for Executive's convenience,
including his election to retire at any time, upon a minimum of 90 days' prior
written notice to the Company. The Company shall have the option of waiving all
or part of Executive's services during all or part of such notice period;
provided, however, that until the end of such notice period (i) the Company
shall continue to pay or provide to Executive the amounts and benefits described
in Section 2 and (ii) Executive shall continue to be an "employee" of the
Company or one of its subsidiaries and shall not commence active employment with
another employer.
In the event a purported termination of the Term of Employment
by Executive because of an Event of Termination is, for any reason, found to be
invalid, erroneous or incorrect, such termination shall be treated as a
termination by Executive for Executive's convenience pursuant to this Section
3(e).
(f) Termination for Disability. In the event of Executive's
Disability (as defined below), his employment with the Company shall be deemed
terminated for purposes of this Agreement as of the end of the calendar month in
which such Disability occurs. For purposes of this Agreement, "Disability" shall
be deemed to have occurred if (i) Executive shall be unable to perform his
duties on an active full-time basis by reason of disability or impairment of
health for a period of at least 180 consecutive calendar days or (ii) the
Company shall have received a certificate from a physician reasonably acceptable
to both the Company and the Executive (or his representative) to the effect that
the Executive is incapable of reasonably performing services under this
Agreement in accordance with past practices.
(g) Termination by Executive for Good Reason. Executive may
terminate his employment under this Agreement for Good Reason, in which event
the Company shall still have the same obligations to Executive under this
Agreement as provided for in Section 4(b).
"Good Reason" shall mean:
(a) Without Executive's express written consent, the
assignment to Executive of any duties inconsistent
with his positions, duties, responsibilities and
status with the Company set forth in this Agreement,
or a change in his reporting responsibilities, title
or offices set forth in this Agreement, or any
removal of Executive from or any failure to re-elect
him to any of such positions, except in connection
with the termination of his employment;
<PAGE>
(b) A reduction in Executive's Base Salary or
material reduction in benefits or a material breach
of the Company's obligations undertaken in this
Agreement (after the Company has received written
notice of such breach and a reasonable opportunity to
cure);
(c) In the event of the occurrence of a Change in
Control, upon the occurrence thereafter of one or
more of the following events:
(i) Any termination by the Company for
convenience of the employment of Executive pursuant
to Section 3(d) within three (3) years after a Change
in Control; or
(ii) The occurrence of any of the following
events within three (3) years after a Change in
Control:
(A) Failure to elect or re-elect Executive,
or removal of Executive , as a Director of the
Company (or any successor thereto),
(B) A significant adverse change in the
nature or scope of the authorities, powers,
functions, responsibilities or duties attached to the
position with the Company which Executive had
immediately prior to the Change in Control, a
reduction in the aggregate of Executive's Base Pay
and Incentive Pay received from the Company, or the
termination of Executive's rights to any Executive
Benefits to which he was entitled immediately prior
to the Change in Control or a reduction in scope or
value thereof without the prior written consent of
Executive, any of which is not remedied within ten
(10) calendar days after receipt by the Company of
written notice from Executive of such change,
reduction or termination, as the case may be;
(C) A determination by Executive made in
good faith that as a result of a Change in Control
and a change in circumstances thereafter
significantly affecting his position, he has been
rendered substantially unable to carry out, or has
been substantially hindered in the performance of,
any of the authorities, powers, functions,
responsibilities or duties attached to his position
immediately prior to the Change of Control, which
situation is not remedied within ten (10) calendar
days after receipt by the Company of written notice
from Executive of such determination; or
(D) The liquidation, dissolution, merger,
consolidation or reorganization of the Company or
transfer of all or a significant portion of its
business and/or assets unless the successor or
successors (by liquidation, merger, consolidation,
reorganization or otherwise) to which all or a
significant portion of its business and/or assets
have been transferred directly or by operation of
law) shall have assumed all duties and obligations of
the Company under this agreement; or
(d) Subsequent to a Change in Control of the Company,
the failure by the Company to obtain the assumption
of the obligation to perform the Agreement by any
successor as contemplated herein or otherwise.
<PAGE>
Change in Control. For purposes of this Agreement, a "Change in
Control" shall have occurred if at any time during the term of Executive's
employment hereunder, any of the following events shall occur:
(i) The Company is merged, or consolidated, or reorganized
into or with another corporation or other legal person, and as a result
of such merger, consolidation or reorganization less than 51% of the
combined voting power of the then-outstanding securities of such
corporation or person immediately after such transaction are held in
the aggregate by the holders of voting securities of the Company
immediately prior to such transaction;
(ii) Company sells all or substantially all of its assets or
any other corporation or other legal person and thereafter, less than
51% of the combined voting power of the then-outstanding voting
securities of the acquiring or consolidated entity are held in the
aggregate by the holders of voting securities of the Company
immediately prior to such sale;
(iii) There is a report filed after the date of this Agreement
on Schedule 13D or Schedule 14D-1 (or any successor schedule, form or
report), each as promulgated pursuant to the Securities Exchange Act of
1934 (the "Exchange Act") disclosing that any person (as the term
"person" is used in Section 13(d)(3) or Section 14(d)(2) of the
Exchange Act), other than Bessemer Capital Partners L.P. ("BCP") or any
person affiliated with BCP (BCP and all such persons being,
collectively, "Bessemer"), has become the beneficial owner (as the term
"beneficial owner" is defined under Rule 13d-3 or any successor rule or
regulation promulgated under the Exchange Act) representing both (a)
30% or more of the combined voting power of the then-outstanding voting
securities of the Company and (b) a greater percentage of the combined
voting power of the then outstanding voting securities of the Company
held by Bessemer;
(iv) The Company shall file a report or proxy statement with
the Securities and Exchange Commission pursuant to the Exchange Act
disclosing in response to item 1 of Form 8-K thereunder (or any
successor schedule, form or report or item therein) that the change in
control of the Company has or may have occurred or will or may occur in
the future pursuant to any then-existing contract or transaction; or
(v) During any period of two consecutive years, individuals
who at the beginning of any such period constitute the directors of the
Company cease for any reason to constitute at least a majority thereof
unless the election to the nomination for election by the Company's
shareholders of each director of the company first elected during such
period was approved by a vote of at least two-thirds of the directors
of the Company then still in office who were directors of the Company
at the beginning of such period.
4. Payments upon Termination of Term of Employment. When the
Term of Employment terminates, Executive shall be entitled to the amounts and
benefits provided in this Section 4 and no others:
(a) Termination by Company for Good Cause or by Executive for
His Convenience or Expiration. If the Term of Employment is terminated by the
Company for Good Cause pursuant to Section 3(b) or by Executive for his
convenience pursuant to Section 3(f) or if the Term of Employment expires
pursuant to Section 3(a)(ii), the Company shall:
(i) continue to pay or provide to Executive the amounts and
benefits described in Section 2 until the Termination Date;
<PAGE>
(ii) not later than the fifth business day following the
Termination Date, pay Executive in cash an amount equal to any accrued
but unpaid vacation pay;
(iii) as soon as such amount can be computed and, in any
event, not later than the 60th business day following the Termination
Date, pay Executive in cash an amount equal to any earned but unpaid
compensation under any incentive compensation plan in which Executive
participated during the Term of Employment for all calendar years ended
during the Term of Employment;
(iv) provide any rights or benefits to which Executive may be
entitled under COBRA; and
(v) provide, in accordance with the terms of any such plan,
any rights or benefits to which Executive may be entitled under any tax
qualified or non-tax qualified welfare or retirement plan of the Stant
Group, including the Company's Pension Restoration Plan.
(b) Termination by Company for Its Convenience or by Executive
for Good Reason. If the Term of Employment is terminated by the Company for its
convenience pursuant to Section 3(e) or by Executive for Good Reason pursuant to
Section 3(g), the Company shall:
(i) continue to pay or provide to Executive the amounts and
benefits described in Section 2 until the Termination Date;
(ii) not later than the fifth business day following the
Termination Date, pay Executive in cash an amount equal to any accrued
and unpaid vacation pay;
(iii) as soon as such amount can be computed and, in any
event, not later than the 60th business day following the Termination
Date, pay Executive in cash an amount equal to any earned but unpaid
compensation under any incentive compensation plan in which Executive
participated during the Term of Employment for all calendar years ended
during the Term of Employment;
(iv) provide any rights or benefits to which Executive may be
entitled under COBRA;
(v) provide, in accordance with the terms of any such plan,
any rights or benefits to which Executive may be entitled under any
tax-qualified or nontax-qualified welfare or retirement plan of the
Stant Group, including the Company's Pension Restoration Plan; and
vi) pay Executive the Base Salary in effect at the Termination
Date (payable not less frequently than monthly) from the Termination
Date through the last day of the 24th complete calendar month following
the Termination Date (the "Twenty-Four Month Benefit Termination
Date"); provided, however, that the amount payable pursuant to this
clause (vi) shall be subject to dollar-for-dollar reduction for base
salary earned from any other employer (Executive being under no
obligation to mitigate these payments).
<PAGE>
(c) Limitation of Amounts/Benefits. The amounts and benefits
to be paid or provided to Executive pursuant to Section 4(b) (the "Severance
Benefit") shall be reduced as described below if the Company would, by reason of
Section 280G of the Tax Code, not be entitled to deduct for federal income tax
purposes any part of the Severance Benefit or any part of any other payment or
benefit to which Executive is entitled under any plan or program. For the
purposes of this Agreement, the Company's independent auditors shall determine
the value of any deferred payments or benefits in accordance with the principles
of Section 280G of the Tax Code, and tax counsel selected by the Company's
independent auditors and acceptable to the Company shall determine the
deductibility of payments and benefits to which Executive is entitled. The
Severance Benefit shall be reduced only to the extent required, in the opinion
of such tax counsel, to prevent such nondeductibility for Federal income tax
purposes of any part of the remaining Severance Benefit and other payments and
benefits to which Executive is entitled. The Company shall determine which
elements of the Severance Benefit shall be reduced to conform to the provisions
of this Section 4(c). Any determination made by the Company's independent
auditors or by tax counsel pursuant to this Section 4(c) shall be conclusive and
binding on Executive. Notwithstanding the foregoing, there shall be no reduction
in the Severance Benefit except to the extent that the Company determines (based
upon advice of independent auditors or tax counsel, and after consultation with
and concurrence by Executive) that such reduction shall increase the after-tax
amount of the Severance Benefit to Executive.
(d) Death. In the event of termination of Executive's
employment by reason of Executive's death, and in addition to its obligations
under any plan or program offered to Executive that provides for payments or
benefits after his death, the Company shall:
(i) continue to pay the Base Salary through the last day of
the second month following the month in which Executive's death occurs
(the "Second Month Benefit Termination Date");
(ii) as soon as such amount can be computed and, in any event,
not later than the 60th business day after the Termination Date, pay
any earned but unpaid incentive compensation under any plan for all
calendar years ended during the Term of Employment plus earned but
unpaid compensation under such plan for the year in which Executive's
death occurs;
(iii) continue to provide to the members of the immediate
family of the deceased Executive medical and dental insurance coverage
on the same basis that such coverage was provided immediately prior to
the Executive's death until the Second Month Benefit Termination Date;
and
(iv) provide any rights or benefits to which members of
Executive's immediate family may be entitled under COBRA, it being the
intent of the parties to this Agreement that any such rights and
benefits shall relate to the period of time immediately subsequent to
the Second Month Benefit Termination Date.
The payments to be made under this Section 4(d) shall be made
to the person or persons last designated as recipients of such payments by
Executive in written notice filed with the Company or, absent such designation,
to Executive's estate.
(e) Disability. In the event of termination of Executive's
employment by reason of Disability, Executive shall be entitled to continuation
of the Base Salary until the earlier of (i) the date six months following the
date Executive became disabled and (ii) the date benefits to Executive commence
under the Company's Long Term Disability Plan (or would have commenced if
Executive had elected to participate in such plan). In addition to the
foregoing, Executive shall also receive under this Section 4(e) his prorated
annual bonus through the date Disability is determined.
<PAGE>
(f) Death During Separation Period. In the event Executive
dies while receiving or entitled to any amount or benefit under Section 4(a) or
4(b), all payments thereunder shall immediately cease.
(g) No Duty to Seek Employment. Executive shall not be under
any duty or obligation to seek or accept employment at any time subsequent to
the Termination Date, and except as specifically provided under Section 4(b), no
such other employment, if obtained, or compensation or benefits payable in
connection therewith, shall reduce any amounts or benefits to which Executive is
entitled hereunder.
(h) Notice of New Employment. If Executive commences full time
employment any employer other then a member of the Stant Group prior to the
Twenty-Four Month Benefit Termination Date, then Executive shall provide the
Company with written notice of such employment no later than the first day of
the calendar month immediately following the date on which Executive commences
such employment.
5. No Other Severance; General Release of the Stant Group.
In consideration for the amounts and benefits due Executive under Section 4,
and as a condition of receiving any such amounts or benefits, Executive shall:
(a) not be entitled to any payments or benefits under any
severance policy of general application to executives or salaried employees of
the Company; and
(b) deliver to the Company a general release (the "General
Release") releasing each member of the Stant Group and the present and former
directors, officers, employees and assigns of any such person (collectively the
"Releasees") from any and all liability which the Releasees or any one or more
of them had or have or may in the future have to Executive or Executive's
successors, heirs, executors and administrators with respect to any and all
actions, suits, contracts, agreements, damages and claims of any kind
whatsoever, in law or in equity, including any and all claims arising out of or
relating in any way whatsoever to the employment of Executive by any of the
Releasees; provided, however, that the General Releases shall not release the
Company from any of its obligations under this Agreement. The General Release
shall be in such different or other form as the Company in its reasonable
discretion shall consider necessary or appropriate to ensure the full
enforceability of the General Release under applicable Federal, state and local
laws.
6. Trade Secrets. Executive recognizes that, by reason of his
employment hereunder, he may have acquired or shall in the future acquire
confidential information which belongs to or concerns one or more members of the
Stant Group ("Confidential Information"). Accordingly, Executive agrees that he
shall not, directly or indirectly, except to the extent required by law or after
obtaining the written consent of the Board, disclose, or use for his own
benefit, any Confidential Information that Executive has learned by reason of
his association with the Stant Group or use any such information to the
detriment of the Stant Group. For purposes of this Section 6, the term
"Confidential Information" shall include all information not publicly available
relating to the activities, operations, finances, products and services of the
Stant Group, including plans, processes, research, programs, ideas, marketing
and sale of product information, customer information, costs, pricing, trade
secrets and other intellectual property. Executive shall deliver to the Company
at the termination of the Term of Employment, or at any other time the Company
may request, all memoranda, notes, plans, records, financial data and
projections, reports and other documents (and copies thereof) relating to the
business of the Stant Group which he may then possess or have under his control.
The agreement of Executive as set forth in this Section 6 shall survive the
termination of this Agreement.
7. Inventions. (a) Assignment of Inventions. Executive
will assign and hereby does assign to the Company his entire right, title and
interest in the following inventions and developments, whether patentable or
unpatentable, which Executive makes or conceives or reduces to practice,
solely or jointly with others:
<PAGE>
(i) inventions and developments made or conceived or reduced
to practice at any time during Executive's employment by any member of
the Stant Group, whether during working hours or not, which relate in
any way to products manufactured or business conducted by any member of
the Stant Group at any time during the period of Executive's employment
or which in any other way relate to any subject matter with which
Executive's work for any member of the Stant Group is concerned;
(ii) inventions and developments made or conceived or reduced
to practice at any time during, before or after Executive's employment
by any member of the Stant Group that were made or conceived or reduced
to practice with the use of the time, materials or facilities of any
member of the Stant Group; and
(iii) inventions and developments made or conceived or reduced
to practice by Executive during the six month period following the
Termination Date and that directly or indirectly result from work
initiated, conducted, observed or contemplated during Executive's
employment by any member of the Stant Group.
(b) Disclosure of Inventions. Executive will promptly disclose
in writing to the Company each invention and development of the type set forth
in Section 7(a).
(c) Assistance. Both during and after Executive's employment
by the Stant Group, and without charge to the Stant Group but at the Stant
Group's expense, Executive shall do all such acts and execute, acknowledge and
deliver all papers considered by the Stant Group to be reasonably necessary or
advisable for obtaining patents in the United States and any other country for
inventions and developments of the type described in Section 8(a) and for
vesting or evidencing title to such inventions and developments and to such
patents in the Company or its nominee. Executive shall also give all reasonable
assistance to the Stant Group in any litigation or controversy involving such
inventions; provided, however, that should such services be rendered after the
Term of Employment, reasonable compensation shall be paid to Executive upon a
per diem basis.
8. Noncompete. If the Term of Employment is terminated by the
Executive pursuant to Section 3(e) or by the Company pursuant to Section 3(b),
for a period of six (6) months after the Termination Date, Executive shall not:
(i) directly or indirectly engage in any business substantially similar to the
business conducted by the Stant Group in any geographical area in which the
Stant Group conducts such business; (ii) participate in the sale to any customer
of the Stant Group of products which are substantially similar to those sold to
such customer by the Stant Group; (iii) have any significant interest, directly
or indirectly, in any such business; provided, however, that nothing herein will
prevent Executive from owning in the aggregate not more than 5% of the
outstanding stock of any class of a corporation that is publicly traded, so long
as Executive has no participation in the management of such corporation; or (iv)
directly or indirectly solicit or induce any employee of the Stant Group to
terminate his or her employment with the Stant Group or otherwise interfere with
such employee's employment relationship with the Stant Group.
9. Tax Preparation and Legal Fees. The Company shall provide
Executive with tax preparation services annually and shall reimburse Executive
his reasonable legal fees for the negotiation and enforcement of this agreement.
10. Representations and Warranties.Executive hereby represents
and warrants that he is not prohibited from either entering into this Agreement
or fully performing any or all of his obligations hereunder.
11. Assignment and Delegation. Executive may not without the
Company's written consent thereto assign, transfer or convey his rights or
obligations under this Agreement. This Agreement and all the Company's rights
and obligations hereunder may be assigned or transferred by it, in whole but not
in part, to and shall be binding upon and inure to the benefit of any successor
of the Company, but such assignment by the Company shall not relieve it of any
of its obligations hereunder. As used herein, the term "successor" shall mean
any business entity that at any time by merger, consolidation or otherwise shall
have acquired all or substantially all the business and assets of the Stant
Group.
<PAGE>
12. Amendments. No alteration, amendment, change or addition
hereto shall be binding or effective unless the same is set forth in a writing
that is signed by each party hereto.
13. Partial Invalidity. If the final judgment of a court of
competent jurisdiction declares, after the expiration of the time within which
judicial review (if permitted) of such judgment may be perfected, that any term
or provision hereof is invalid or unenforceable, (a) the remaining terms and
provisions hereof shall be unimpaired and (b) the invalid or unenforceable term
or provision shall be deemed replaced by a term or provision that is valid and
enforceable and that comes closest to expressing the intention of the invalid or
unenforceable term or provision.
14. Notices. All communications, notices and consents provided
for herein shall be in writing and be given in person or by means of facsimile
or other means of wire transmission (with request for assurance of receipt in a
manner typical with respect to communications of that type) or by mail or
overnight delivery service, and shall become effective (i) on delivery if given
to a person, (ii) on the date of transmission if sent by facsimile or other
means of wire transmission, or (iii) four business days after being deposited in
the United States mails, with proper postage and documentation, for first-class
registered or certified mail, prepaid. Notices shall be addressed as follows:
(a) if to Executive, to:
John P. Reilly
644 East Spruce Avenue
Lake Forest, Illinois 60045
Facsimile number: (847) 234-4239
(b) if to the Company, to:
Stant Corporation
425 Commerce Drive
Richmond, Indiana 47374
Attention of Anthony W. Graziano, Vice President and
General Counsel, and Secretary
Facsimile number: (317) 962-0314
provided, however, that if any party shall have designated a different address
by notice given in accordance with this Section 13 to the other party to this
Agreement, then the last address so designated shall control.
15. Waivers. A waiver by either party of any breach of any
provision of this Agreement shall not be deemed to constitute a waiver of any
preceding or subsequent breach of the same or any other provision of this
Agreement.
16. Governing Law. All matters respecting this Agreement,
including the validity thereof, are to be governed by, and interpreted,
construed and enforced in accordance with, the internal (and not conflict) laws
of the State of Indiana.
<PAGE>
17. Consent to Jurisdiction: Availability of Temporary
Restraining Orders and Injunctions. Executive hereby expressly and irrevocably
(i) agrees that the Company may bring any action, whether at law or in equity,
arising out of or based upon this Agreement in the State of Indiana or in any
Federal court therein, (ii) consents to personal jurisdiction in any such court
and to accept service of process in accordance with the provisions of the laws
of the State of Indiana, or of the State of Illinois and (iii) agrees that in
addition to any other remedy provided at law or in equity, the Company shall be
entitled to a temporary restraining order and both preliminary and permanent
injunctions restraining Executive from violating any of the provisions of
Section 6, 7 or 8.
18. Supersedes Prior Agreements: Entire Agreement. This
Agreement automatically terminates, supersedes and replaces any and all other
agreements, promises, understandings and arrangements, whether written or oral,
express or implied, between Executive and any member of the Stant Group relating
to Executive's employment or conditions of employment (except any pre-existing
contractual obligations of Executive concerning confidentiality or assignment of
patents, inventions, ideas or intellectual property). This instrument contains
the entire agreement between the parties with respect to the subject matter
hereof. This Agreement may not be changed orally but only by agreement in
writing signed on behalf of the Company by the President.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this agreement, as
of the date and year first above written.
STANT CORPORATION
By Ward W. Woods
--------------
Chairman, Board of Directors
EXECUTIVE
John P. Reilly
-----------------
John P. Reilly
Exhibit Number 10.6
Employment Agreement between Stant and Thomas K. Erwin
E-25
<PAGE>
Conformed Copy
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made in Richmond,
Indiana as of February 10, 1997, by and between Stant Corporation, a Delaware
corporation with its principal place of business at 425 Commerce Drive,
Richmond, IN 47374 (the "Company"), and Thomas K. Erwin, an individual residing
at 316 Redfield Ct., Park Ridge, IL 60068, ("Executive").
WITNESSETH:
WHEREAS, the Company desires to retain the services of Executive as its
Senior Vice President and Chief Financial Officer, and Executive has indicated
his willingness to provide his services in such position on the terms and
conditions set forth herein;
NOW THEREFORE, in consideration of the covenants and the agreements
herein contained, the parties agree as follows:
1. Services
During the Term of Employment (as defined in Subsection 3(a) below),
the Company hereby employs Executive as its Senior Vice President and Chief
Financial Officer, and Executive hereby accepts such employment. In his capacity
as the Company's Senior Vice President and Chief Financial Officer, Executive
shall devote substantially all his business time, attention, skill and efforts
to the faithful performance of his duties hereunder and shall have the usual
powers and duties vested in the office of the Senior Vice President and Chief
Financial Officer of a corporation of the size, stature and nature of the
Company. Executive shall report directly to the President and Chief Executive
Officer of the Company (the "President"). As such Senior Vice President and
Chief Financial Officer the Executive shall have sufficient authority to
accomplish the objectives and goals set for him by the President of the Company.
The principal place of employment shall be the Greater Chicago Area
which is defined as that area which is within fifty (50) miles of the main post
office of Chicago. However, initially Executive shall perform this agreement at
the present executive offices of the Company at Richmond, Indiana, with the
Company reimbursing Executive the reasonable expenses of his subsistence in the
Richmond, Indiana, area.
2. Compensation. For all services to be rendered by Executive in any
capacity hereunder, during the Term of Employment the Company shall pay or
provide to Executive, and Executive shall accept, the following amounts and
benefits:
(a) Base Salary. The Company shall pay to Executive in cash in
accordance with its regular payroll practices (but not less frequently than
monthly) a base salary (the "Base Salary") at the initial annual rate of
$250,000, which rate shall be reviewed by the President on or about January 1,
1998 and annually thereafter. Such salary may be increased, but not decreased,
from time-to-time at the discretion of the President, subject to such
limitations as may be set from time to time by the Compensation Committee (the
"Committee") of the Board of Directors of the Company (the "Board of
Directors"), to reflect both merit and cost of living increases, and upon any
such increase in the annual rate of Executive's base salary, such increased
amount shall become the "Base Salary" for the remainder of the Term of
Employment.
<PAGE>
(b) Incentive Compensation. Executive shall participate in an annual
incentive compensation plan for executives to be adopted by the Committee
whereby Executive shall have the opportunity each year to earn a cash bonus in
an amount of up to 50% of the Base Salary for such year based upon the
attainment of financial targets which are realistically obtainable established
for the Company and achievement of individual personal objectives, with the
opportunity each year to earn a cash bonus in an amount in excess of 50% of the
Base Salary for attainment of extraordinary results. The cash bonus provided for
in this Subsection 2(b) shall be paid on or before the thirtieth (30th) day
following the date of the Auditor's Opinion on the financial statements of the
Company for the year to which the bonus relates and in no event later than six
(6) months after the close of the fiscal year to which they relate.
Notwithstanding any other provision in this plan, 10% of Executive's bonus shall
be based on satisfactory individual performance by Executive. If Executive does
not achieve his assigned objectives or fails to meet or exceed high job
performance expectations, no payment (or a reduced payment) will be made for
this bonus component. In such event the unpaid amount will be credited to a
bonus pool which will then be allocated by the Committee, upon the
recommendation of the President, to one or more bonus plan participants whose
job performance has been outstanding.
By January 31 of each year during the Term of Employment, Executive may
irrevocably elect, by notice in writing to the Company, to receive all or a
stated percentage of his incentive compensation, if any, for such fiscal year in
the form of stock options to be issued by the Company pursuant to a plan to be
established by the Board. The exercise price, vesting and exercisability
conditions and valuation of such options shall be as set forth in the Company's
Stock Option Plan for Directors (1993).
(c) Insurance: Pension Benefits. Executive shall participate to the
extent eligible in all insurance (including, without limitation, life, travel
and accident, medical and dental insurance), pension, pension restoration,
deferred compensation, disability, profit-sharing, retirement and other employee
welfare and benefit plans maintained from time to time by the Company for its
executives or salaried employees, to the extent that such executives or salaried
employees participate, in accordance with their respective terms, except as may
otherwise be provided herein. The Company reserves the right to change any such
welfare or benefit plan in the future, but no such change shall be applied
retroactively or adversely affect benefits already accrued.
(d) Stock Option. At the next meeting of the Stock Option Committee of
the Board of Directors ("Stock Option Committee"), the Company shall propose
that the Stock Option Committee grant Executive a non-incentive stock option
covering 30,000 shares of the Company's common stock at the market price on the
day of the grant. Such option shall vest at the first anniversary of the date of
grant, or sooner if, and thirty (30) days after a Change of Control, as is
defined in Article 6, occurs prior thereto, and shall be exercisable for 10
years, subject in all cases to the terms of the 1993 Stock Option Plan. The
grant is contingent upon approval by the Stock Option Committee of the grant and
approval by the Stockholders of the Company of an appropriate increase in the
number of shares available for grant under the Company's current Stock Option
Plan.
(e) Fringe benefits; Vacation. Executive shall participate in the
Company's automobile program and all other fringe benefits to the same extent as
other senior executives of the Company. Executive shall be entitled to a number
of paid vacation days each year as allowed under the Company's vacation policy
as currently in effect which shall be no less than four (4) weeks.
<PAGE>
(f) Business Travel and Other Expenses. The Company shall pay or
reimburse Executive for all reasonable business travel and other business
expenses incurred by Executive in the course of performing his duties under this
Agreement, upon presentation by Executive of an itemized account of such
expenses.
(g) Disability. The Company shall provide Executive with a disability
arrangement (the "Disability Arrangement") that will provide Executive, in the
event he becomes disabled, with payments to be made in equal monthly
installments of not less than 60% of the Executive's average total salary
compensation (Base Salary and incentive compensation) actually earned for the
three calendar years preceding the date of disability (assuming, to the extent
relevant, that Executive's total salary compensation for each of calendar years
1994, 1995 and 1996 was $250,000); such payments to commence on the date
disability is determined and end on the date of which Executive recovers from
the disability, dies or attains age sixty-five (65), whichever first occurs.
Such payments shall be offset by any other disability payments received by
Executive under the Company's regular short-term disability program, regular
long-term disability program and the Social Security Disability benefits
program.
3. Term of Employment and Termination.
(a) Term of Employment. The Term of Employment shall be the period of
time which begins on February 10, 1997 and ends on the date (the "Termination
Date") which is the earlier of (i) the day of Executive's death, (ii) the day
Executive reaches age 65 and (iii) the effective date of any termination of the
Term of Employment as provided for in this Agreement.
(b) Termination by the Company for Good Cause. The Company may
terminate the Term of Employment at any time for Good Cause (as defined in
Subsection 3(c) below). The Company shall notify (the "Good Cause Notice")
Executive in writing at least thirty (30) days in advance of any proposed
termination for Good Cause (which Good Cause Notice shall state the Good Cause
for which Executive is proposed to be dismissed in such detail as to permit a
reasonable assessment by Executive of the bona fides thereof). During such
notice period Executive shall have the opportunity to cure any breach if the
same is capable of being cured.
(c) Definition of Good Cause. For purposes of this Agreement, the
term "Good Cause" shall mean:
(i) a material breach by Executive of his obligations under this
Agreement,
(ii) material misconduct by Executive in respect of such obligations,
(iii) Executive's engaging in conduct which is immoral or illegal or
which brings Executive or the Company or any of its direct or
indirect subsidiaries (collectively the "Stant Group") into
disrepute or otherwise damages the business of the Stant Group
(as determined in the good faith judgment of the Board of
Directors), or
(iv) Executive's commission of an act of dishonesty or a felony,
which in any event is not cured by Executive prior to the effective date of the
termination of the Term of Employment referred to in the Good Cause Notice;
provided. however, that Good Cause shall not include: (a) bad judgment or
negligence, (b) any act or failure to act by Executive believed in good faith by
him to have been in or not opposed to the interests of the Stant Group, and (c)
any act or failure to act by Executive in respect of which a determination could
properly be made that Executive met the applicable standard of conduct described
for indemnification or reimbursement or payment of expenses under the Delaware
Corporation Law, or the By-laws or Restated Certificate of Incorporation of the
Company, or the Company's directors' and officers' liability insurance.
<PAGE>
(d) Termination by the Company for Convenience. Subject to the
Company's obligations to pay or provide certain amounts and benefits pursuant to
Subsections 4(b) or (c) below, the Company may terminate the Term of Employment
at any time for its convenience upon a minimum of sixty (60) days' prior written
notice to Executive. In such event, the Company shall have the option of waiving
Executive's services during all or part of such notice period; provided,
however, that during such notice period the Company shall continue to pay or
provide to Executive the amounts and benefits described in Section 2 above.
(e) Events of Termination. The following shall constitute Events
of Termination:
(i) A reduction in (x) the Base Salary or (y) the percentage of
Base Salary which Executive may earn as an annual cash bonus
pursuant to Subsection 2(b) above;
(ii) A material reduction in the benefits available to Executive
under the Company's pension and/or pension restoration plans;
(iii) A material adverse change in Executive's duties and
responsibilities or position; and
(iv) An ordered relocation of Executive's place of employment which
results in his commutation increasing by more than fifty (50)
miles round trip (notwithstanding his right to be reimbursed
for all expenses in connection with such relocation).
The occurrence of any such event shall be treated as a termination of the Term
of Employment for the convenience of the Company pursuant to Subsection 3(d)
above, and the sixty (60) day notice period required by Subsection 3(d) above
shall be deemed to have commenced on the date Executive receives written notice
from the Company (the "Reduction Notice") of the proposed effective date of the
reduction, change or relocation to which Executive does not consent; provided,
however, that if Executive fails to notify the Company, in writing as elsewhere
provided herein, of Executive's objection to the proposed reduction, change or
relocation within ten (10) business days of his receipt of the Reduction Notice,
such failure to notify shall be conclusive evidence that Executive consented to
such reduction, change or relocation and waived any right to assert that such
reduction, change or relocation constitutes a breach of this Agreement or an
Event of Termination.
If the Term of Employment is terminated because of an Event of Termination, the
Company shall pay or provide to Executive all of the amounts and benefits
specified in Subsection 4(b) or (c) below.
(f) Termination by Executive for Convenience. Executive may terminate
the Term of Employment at any time for Executive's convenience, including his
election to retire at any time, upon a minimum of sixty (60) days' prior written
notice to the Company. The Company shall have the option of waiving all or part
of Executive's services during all or part of such notice period; provided,
however, that until the end of such notice period (i) the Company shall continue
to pay or provide to Executive the amounts and benefits described in Section 2
above and (ii) Executive shall continue to be an "employee" of the Company or
one of its subsidiaries and shall not commence active employment with another
employer.
In the event a purported termination of the Term of Employment by Executive
because of an Event of Termination is, for any reason, found to be invalid,
erroneous or incorrect, such termination shall be treated as a termination by
Executive for Executive's convenience pursuant to this Subsection 3(f).
<PAGE>
(g) Termination for Disability. In the event of Executive's Disability
(as defined below), his employment with the Company shall be deemed terminated
for purposes of this Agreement as of the end of the calendar month in which such
Disability occurs. For purposes of this Agreement, "Disability" shall be deemed
to have occurred if (i) Executive shall be unable to perform his duties on an
active full-time basis by reason of disability or impairment of health for a
period of at least 180 consecutive calendar days or (ii) the Company shall have
received a certificate from a physician reasonably acceptable to both the
Company and the Executive (or his representative) to the effect that the
Executive is incapable of reasonably performing services under this Agreement in
accordance with past practices.
(h) Termination by Executive for Good Reason. Executive may terminate
his employment under this Agreement for Good Reason, in which event the Company
shall still have the same obligations to Executive under this Agreement as
provided for in Section 4(b).
"Good Reason" shall mean:
(a) Without Executive's express written consent, the
assignment to Executive of any duties inconsistent
with his positions, duties, responsibilities and
status with the Company set forth in this Agreement,
or a change in his reporting responsibilities, title
or offices set forth in this Agreement, or any
removal of Executive from or any failure to re-elect
him to any of such positions, except in connection
with the termination of his employment;
(b) A reduction in Executive's Base Salary or
material reduction in benefits or a material breach
of the Company's obligations undertaken in this
Agreement (after the Company has received written
notice of such breach and a reasonable opportunity to
cure);
(c) In the event of the occurrence of a Change in
Control, upon the occurrence thereafter of one or
more of the following events:
(i) Any termination by the Company for
convenience of the employment of Executive pursuant
to Section 3(d) within three (3) years after a Change
in Control; or
(ii) The occurrence of any of the following
events within three (3) years after a Change in
Control:
(A) A significant adverse change in the
nature or scope of the authorities, powers,
functions, responsibilities or duties attached to the
position with the Company which Executive had
immediately prior to the Change in Control, a
reduction in the aggregate of Executive's Base Pay
and Incentive Pay received from the Company, or the
termination of Executive's rights to any Executive
Benefits to which he was entitled immediately prior
to the Change in Control or a reduction in scope or
value thereof without the prior written consent of
Executive, any of which is not remedied within ten
(10) calendar days after receipt by the Company of
written notice from Executive of such change,
reduction or termination, as the case may be;
<PAGE>
(B) A determination by Executive made in
good faith that as a result of a Change in Control
and a change in circumstances thereafter
significantly affecting his position, he has been
rendered substantially unable to carry out, or has
been substantially hindered in the performance of,
any of the authorities, powers, functions,
responsibilities or duties attached to his position
immediately prior to the Change of Control, which
situation is not remedied within ten (10) calendar
days after receipt by the Company of written notice
from Executive of such determination; or
(C) The liquidation, dissolution, merger,
consolidation or reorganization of the Company or
transfer of all or a significant portion of its
business and/or assets unless the successor or
successors (by liquidation, merger, consolidation,
reorganization or otherwise) to which all or a
significant portion of its business and/or assets
have been transferred directly or by operation of
law) shall have assumed all duties and obligations of
the Company under this agreement; or
(d) Subsequent to a Change in Control of the Company,
the failure by the Company to obtain the assumption
of the obligation to perform the Agreement by any
successor as contemplated herein or otherwise.
Change in Control. For purposes of this Agreement, a
"Change in Control" is as defined in Article 6 hereof.
4. Payments upon Termination of Term of Employment.
When the Term of Employment terminates, Executive shall be entitled to
the amounts and benefits provided in this Section 4 and no others:
(a) Termination by Company for Good Cause or by Executive for His
Convenience. If the term of Employment is terminated by the
Company for Good Cause pursuant to Subsection 3(b) above or by
Executive for his convenience pursuant to Subsection 3(f)
above, the Company shall:
(i) Continue to pay or provide to Executive the amounts and
benefits described in Section 2 above until the last day of
the Term of Employment (the "Termination Date").
(ii) Not later than the fifth (5th) business day following the
Termination Date, pay Executive in cash an amount equal to any
accrued but unpaid vacation pay.
(iii) As soon as such amount can be computed and, in any event, not
later than the sixtieth (60th) business day following the
Termination Date, pay Executive in cash an amount equal to any
earned but unpaid compensation under any incentive
compensation plan in which Executive participated during the
Term of Employment for all fiscal years completed during the
Term of Employment.
<PAGE>
(iv) Provide any rights or benefits to which Executive may be
entitled under COBRA, and upon the expiration of any rights or
benefits to which Executive is entitled under COBRA, provide
to Executive the opportunity to continue to participate in all
of the Company's group medical and dental insurance programs
for the remainder of his life, provided Executive shall be
obligated to pay the entire cost of his participation in any
such program.
(v) Provide, in accordance with the terms of any such plan, any
rights or benefits to which Executive may be entitled under
any tax qualified or non-tax qualified welfare or retirement
plan of the Stant Group, including the Company's Pension
Restoration Plan.
(b) Termination Prior to a Change of Control by Company for its
Convenience, by the Executive for Good Reason or due to an
Event of Termination. If, prior to a Change of Control (as
defined in Section 6 below), the Term of Employment is
terminated by the Company for its convenience pursuant to
Subsection 3 (d) above, as a result of an Event of Termination
pursuant to Subsection 3(e) above or by the Executive for Good
Reason pursuant to Subsection 3(h) above, the Company shall:
(i) Continue to pay or provide to Executive the amounts and
benefits described in Section 2 above until the Termination
Date.
(ii) Not later than the fifth (5th) business day following the
Termination Date, pay Executive in cash an amount equal to any
accrued and unpaid vacation pay.
(iii) As soon as such amount can be computed and, in any event, not
later than the sixtieth (60th) business day following the
Termination Date, pay Executive in cash an amount equal to any
earned but unpaid compensation under any incentive
compensation plan in which Executive participated during the
Term of Employment for all fiscal years completed during the
Term of Employment.
(iv) Provide any rights or benefits to which Executive may be
entitled under COBRA, it being the intent of the parties to
this Agreement that any such rights and benefits shall
relate to the period of time immediately subsequent to the
Twelve Month Benefit Termination Date (as defined in clause
(vi) of this Subsection 4(b)); and upon the expiration of
any rights or benefits to which Executive is entitled under
COBRA, provide to Executive the opportunity to continue to
participate in all of the Company's group medical and
dental insurance programs for the remainder of his life,
provided Executive shall be obligated to pay the entire
cost of his participation in any such program.
(v) Provide, in accordance with the terms of any such plan, any
rights or benefits to which Executive may be entitled under
any tax qualified or non-tax qualified welfare or retirement
plan of the Stant Group, including the Company's Pension
Restoration Plan.
(vi) Pay Executive the Base Salary (payable not less frequently
than twice monthly) from the Termination Date through the last
day of the twelfth (12th) month following the Termination Date
(the "Twelve Month Benefit Termination Date"); provided,
however, that the amount payable pursuant to this clause (vi)
shall be subject to dollar for dollar reduction for base
salary paid by any other employer to Executive for this same
period or any part thereof; however, Executive is under no
obligation to mitigate these payments.
<PAGE>
(vii) Pay Executive in cash any unpaid compensation under any
incentive compensation plan in which Executive participated
during the Term of Employment (assuming full achievement of
personal targets, whether or not actually achieved or
established) with respect to the year in which the Term of
Employment ends; provided, however, that the amount of any
such compensation shall (a) be pro-rated to reflect the fact
that the Term of Employment ended prior to the end of the
period of time to which such incentive compensation relates
and (b) reflect fully the attainment or lack of attainment of
any financial targets incorporated into the plan.
(viii) Either:
(a) Provide Continued Participation under all insurance programs
and welfare plans referred to in Subsection 2(c) above until
the earlier of (i) the day Executive completes the eligibility
waiting period under another employer's substantially
equivalent insurance programs and welfare plans and (ii) the
Twelve Month Benefit Termination Date, or
(b) In the event the Company is unable, despite using its best
efforts, to arrange or permit Executive's Continued
Participation in any such program or plan as provided in
clause (viii)(a) above, pay Executive a cash amount equal to
the cost to Executive of obtaining benefits comparable to
those which would have been provided to Executive pursuant to
clause (viii)(a) above, such cash payment to be made to
Executive in installments on the last day of each calendar
month, each such installment to cover such costs as have been
incurred by Executive for the preceding month.
For purposes of this Agreement, "Continued Participation" in an insurance
program or welfare or benefit plan means the providing of benefits comparable to
or greater than the benefits that would have been provided to or for the benefit
of Executive had Executive continued to be a full time employee of the Stant
Group.
(ix) As to each defined benefit plan qualified under the Internal
Revenue Code of 1986, as amended (the "Tax Code") in which
Executive was participating sixty (60) days prior to the
Termination Date (the "Measurement Date"), pay Executive
in cash an amount equal to the value of the additional plan
benefit which would have accrued to Executive if Executive's
employment with the Stant Group had continued until the Twelve
Month Benefit Termination Date, to the extent that Executive
would have been vested in such benefit if Executive's
employment with the Stant Group had continued until the Twelve
Month Benefit Termination Date. Any payments to be made to
Executive under this clause (ix) shall be in addition to any
benefits due to Executive under the terms of such plans and
shall be made within six(6) months after the Termination Date.
Calculation of the value of any such benefit shall be made on
the basis of the actuarial assumptions in use under such plan
on the Measurement Date.
(x) As to each defined contribution plan qualified under the Tax
Code in which Executive was participating on the Measurement
Date, pay Executive in cash an amount equal to the value of
any additional contribution which would have been made to such
plan by the Stant Group for Executive's account if Executive's
employment with the Stant Group had continued until the Twelve
Month Benefit Termination Date, to the extent Executive would
have been vested in such benefit if Executive's employment
with the Stant Group had continued until the Twelve Month
Benefit Termination Date.
<PAGE>
Payments under this clause (x) shall be calculated as if
Executive had made all required plan contributions at the
maximum rate and had continued to receive annual compensation
at a rate equal to the Measurement Amount (as defined in
clause (vi) of Subsection 4(c) below). Any payments to be made
to Executive under this clause (x) shall be in addition to any
benefits due to Executive under the terms of such plans and
shall be made within six (6) months after the Termination
Date.
(xi) As to any non-qualified pension plan of the Company, provide
full credit for vesting and benefit accrual purposes (to the
extent that compensation and years of service are relevant in
computing benefits thereunder) until the Twelve Month Benefit
Termination Date based upon the assumption that during such
period Executive had continued to receive annual compensation
at a rate equal to the Measurement Amount.
(xii) Provide outplacement services to Executive at a firm of
Executive's choosing satisfactory to the Company.
(c) Termination After a Change of Control by the Company for its
Convenience or due to Event of Termination. If, after a Change of Control, the
Term of Employment is terminated by the Company for its convenience pursuant to
Subsection 3(d) above or as a result of an Event of Termination pursuant to
Subsection 3(e) above, the Company shall:
(i) Continue to pay or provide to Executive the amounts and
benefits described in Section 2 above until the Termination
Date.
(ii) Not later than the fifth (5th) business day following the
Termination Date, pay Executive in cash an amount for any
accrued and unpaid vacation pay.
(iii) Within five (5) business days after the Termination Date, pay
Executive an amount in cash equal to any earned but unpaid
compensation under any incentive compensation plan in which
Executive participated during the Term of Employment for all
fiscal years completed during the Term of Employment.
(iv) Provide any rights or benefits to which Executive may be
entitled under COBRA, it being the intent of the parties to
this Agreement that any such rights and benefits shall
relate to the period of time immediately subsequent to the
Twenty-Four Month Benefit Termination Date (as defined in
clause (viii) of Subsection 4(c) below); and upon the
expiration of any rights or benefits to which Executive is
entitled under COBRA, provide to Executive the opportunity
to continue to participate in all of the Company's group
medical and dental insurance programs for the remainder of
his life, provided Executive shall be obligated to pay the
entire cost of his participation in any such program.
(v) Provide, in accordance with the terms of any such plan, any
rights or benefits to which Executive may be entitled under
any tax qualified or non-tax qualified welfare or retirement
plan of the Stant Group.
(vi) Within five (5) business days after the Termination Date, pay
Executive in cash an amount equal to two (2) times the sum of
(a) the annual Base Salary in effect on the Measurement Date
and (b) the maximum amount Executive could have earned for a
full fiscal year under any incentive compensation plan in
which Executive was participating on the Measurement Date
(assuming full achievement of financial and personal targets,
whether or not actually achieved or established) with respect
to the year in which the Term of Employment ends (such sum
being the "Measurement Amount").
<PAGE>
(vii) Pay Executive in cash any unpaid compensation under any
incentive compensation plan in which Executive participated
during the Term of Employment (assuming full achievement of
financial and personal targets, whether or not actually
achieved or established) with respect to the year in which the
Term of Employment ends.
(viii) Either:
(a) Provide Continued Participation under all insurance programs
and welfare plans referred to in Subsection 2(c) above until
the earlier of (i) the day Executive completes the eligibility
waiting period under another employer's substantially
equivalent insurance programs and welfare plans and (ii) the
last day of the twenty-fourth (24th) month following the
Termination Date (the "Twenty-Four Month Benefit Termination
Date"), or
(b) In the event the Company is unable, despite using its best
efforts, to arrange or permit Executive's Continued
Participation in any such program or plan as provided in
clause (viii)(a) above, pay Executive a cash amount equal to
the cost to Executive of obtaining benefits comparable to
those which would have been provided to Executive pursuant to
clause (viii)(a) above, such cash payment to be made to
Executive in installments on the last day of each calendar
month, each such installment to cover such costs as have been
incurred by Executive for the preceding month.
(ix) As to each defined benefit plan qualified under the
Tax Code in which Executive was participating on the
Measurement Date, pay Executive in cash an amount equal to
the value of the additional plan benefit which would have
accrued to Executive if Executive's employment with the
Stant Group had continued until the Twenty-Four Month Benefit
Termination Date, to the extent that Executive would have been
vested in such benefit if Executive's employment with the
Stant Group had continued until the Twenty-Four Month Benefit
Termination Date. Any payments to be made to Executive under
this clause (ix) shall be in addition to any benefits
due to Executive under the terms of such plans and shall be
made within five(5) business days after the Termination Date.
Calculation of the value of any such benefit shall be made on
the basis of the actuarial assumptions in use under such plan
on the Measurement Date.
(x) As to each defined contribution plan qualified under the Tax
Code in which Executive was participating on the Measurement
Date, pay Executive in cash an amount equal to the value of
any additional contribution which would have been made to such
plan by the Stant Group for Executive's account if Executive's
employment with the Stant Group had continued until the
Twenty-Four Month Benefit Termination Date, to the extent
Executive would have been vested in such benefit if
Executive's employment with the Stant Group had continued
until the Twenty-Four Month Benefit Termination Date.
Payments under this clause (x) shall be calculated as if
Executive had made all required plan contributions at the
maximum rate and had continued to receive annual compensation
at a rate equal to the Measurement Amount. Any payments to be
made to Executive under this clause (x) shall be in addition
to any benefits due to Executive under the terms of such plans
and shall be made within five (5) business days after the
Termination Date.
<PAGE>
(xi) As to any non-qualified pension plan of the Company, provide
full credit for vesting and benefit accrual purposes (to the
extent that compensation and years of service are relevant in
computing benefits thereunder) until the Twenty-Four Month
Benefit Termination Date based upon the assumption that during
such period Executive had continued to receive annual
compensation at a rate equal to the Measurement Amount.
(xii) Provide Executive all fringe benefits which the Company was
providing to Executive on the Measurement Date until the
Twenty-Four Month Benefit Termination Date.
(xiii) Provide outplacement services to Executive at a firm of
Executive's choosing satisfactory to the Company.
(d) Limitation of Amounts/benefits. The amounts and benefits to be paid
or provided to Executive pursuant to Subsection 4(c) above, excluding any vested
stock options Executive might be eligible to exercise, (the "Severance Benefit")
shall be reduced as described below if the Company would, by reason of section
280G of the Tax Code, not be entitled to deduct for federal income tax purposes
any part of the Severance Benefit or any part of any other payment or benefit to
which Executive is entitled under any plan or program. For the purposes of this
Agreement, the Company's independent auditors shall determine the value of any
deferred payments or benefits in accordance with the principles of section 280G
of the Tax Code, and tax counsel selected by the Company's independent auditors
and acceptable to the Company shall determine the deductibility of payments and
benefits to which Executive is entitled. The Severance Benefit shall be reduced
only to the extent required, in the opinion of such tax counsel, to prevent such
nondeductibility for federal income tax purposes of any part of the remaining
Severance Benefit and other payments and benefits to which Executive is
entitled. The Company shall determine which elements of the Severance Benefit
shall be reduced to conform to the provisions of this Subparagraph. Any
determination made by the Company's independent auditors or by tax counsel
pursuant to this paragraph shall be conclusive and binding on Executive.
Notwithstanding the foregoing, there shall be no reduction in the Severance
Benefit except to the extent that the Company determines (based upon advice of
independent auditors or tax counsel, and after consultation with and concurrence
by Executive) that such reduction shall increase the after tax amount of the
Severance Benefit to Executive.
(e) Death. In the event of Executive's death during the Term of
Employment, and in addition to its obligations under any plan or program offered
to Executive which provides for payments or benefits after his death, the
Company shall:
(i) Continue to pay the Base Salary through the last day of the
second (2nd) month following the month in which Executive's
death occurs (the "Second Month Benefit Termination Date").
(ii) As soon as such amount can be computed and, in any event, not
later than the sixtieth (60th) business day after the
Termination Date, pay any earned but unpaid incentive
compensation under any plan for completed fiscal years plus
earned but unpaid compensation under such plan for the year in
which Executive's death occurs.
(iii) Continue to provide to the members of the immediate family of
the deceased Executive medical and dental insurance coverage
on the same basis that such coverage was provided immediately
prior to the Executive's death until the Second Month Benefit
Termination Date.
(iv) Provide any rights or benefits to which members of Executive's
immediate family may be entitled under COBRA, it being the
intent of the parties to this Agreement that any such rights
and benefits shall relate to the period of time immediately
subsequent to the Second Month Benefit Termination Date.
<PAGE>
The payments to be made under this Subsection 4(e) shall be made to the person
or persons last designated as recipients of such payments by Executive in
written notice filed with the Company or, absent such designation, to
Executive's estate.
(f) Disability. If Executive becomes totally disabled, as defined below
in this Subsection, during the Term of Employment, Executive shall be entitled
to continuation of the Base Salary until the earlier of (i) the date six (6)
months following the date Executive became totally disabled and (ii) the date
benefits to Executive commence under the Company's Long Term Disability Plan (or
would have commenced if Executive had elected to participate in such plan).
In addition to the foregoing, Executive shall also receive under this Subsection
4(f) his prorated annual bonus through the date disability is determined and any
deferred vested annual bonuses. During the period of his disability, Executive
shall be entitled to continued participation in all Company employee benefit
plans (other than life insurance plans) including, but not limited to, continued
accrual of retirement benefits and coverage under the Company's medical and
hospitalization plans. The determination of disability shall be in accordance
with the Company's long-term disability program or in accordance with some other
acceptable definition.
(g) Death During Separation Period. In the event Executive dies while
receiving or entitled to any amount or benefit under Subsections 4(a), (b) or
(c) above, Executive's legal representative shall be entitled to receive the
amounts and benefits due Executive for the remainder of any periods specified in
such Subsections.
(h) No Duty to Seek Employment. Executive shall not be under any duty
or obligation to seek or accept employment at any time subsequent to the
Termination Date, and, except as specifically provided under Subsections 4(b)
and 4(c) above, no such other employment, if obtained, or compensation or
benefits payable in connection therewith, shall reduce any amounts or benefits
to which Executive is entitled hereunder.
(i) Notice of New Employment. If Executive commences full time
employment with any employer other than a member of the Stant Group prior to (i)
the Twelve Month Benefit Termination Date if the Term of Employment is
terminated pursuant to Subsections 3(d) or (e) above prior to a Change in
Control or (ii) the Twenty-Four Month Benefit Termination Date if the Term of
Employment is terminated pursuant to Subsections 3(d) or (e) after a Change in
Control, then Executive shall provide the Company with written notice of such
employment no later than the first day of the calendar month immediately
following the date on which Executive commences such employment.
5. No Other Severance; General Release of the Stant Group.
In consideration for the amounts and benefits due Executive under
Section 4 above, and as a condition of receiving any such amounts or benefits,
Executive shall
(a) not be entitled to any payments or benefits under any
severance policy of general application to executives or salaried employees
of the Company, and
(b) deliver to the Company a general release (the "General Release")
releasing each member of the Stant Group and the present and former directors,
officers, employees and assigns of any such person (collectively the
"Releasees") from any and all liability which the Releasees or any one or more
of them had or have or may in the future have to Executive or Executive's
successors, heirs, executors and administrators with respect to any and all
actions, suits, contracts, agreements, damages and claims of any kind
whatsoever, in law or in equity, from the beginning of the world until the date
of the General Release, including without limiting the generality of the
foregoing any and all claims arising out of or relating in any way whatsoever to
the employment of Executive by any of the Releasees; provided, however, that the
General Release shall not release the Company from any of its obligations under
this Agreement. The General Release shall be in the form of Exhibit A to this
Agreement or in such different or other form as the Company in its reasonable
discretion shall consider necessary or appropriate to ensure the full
enforceability of the General Release under applicable federal, state and local
laws.
<PAGE>
6. Change of Control: Attorney's Fees Following a Change of Control.
The term "Change of Control" means (i) the acquisition by any Person
(as such term is defined in Section 13(d) of the Exchange Act) of 20% or more of
the combined voting power of the Company's outstanding securities entitled to
vote generally in the election of Directors (the "Voting Securities") or (ii) a
majority of the Directors of the Company are individuals who were not nominated
by the Board of Directors; provided, however, that (y) the acquisition or
disposition of any portion of the combined voting power of the Voting Securities
by Bessemer Capital Partners LP ("BCP") and/or by any Person affiliated with BCP
(BCP and all such Persons being, collectively, the "Bessemer Group") shall in no
event constitute a Change of Control and (z) the acquisition by any person who
is not a member of the Bessemer Group of 20% or more of the combined voting
power of the Voting Securities shall not constitute a Change of Control so long
as during the entire time such Person possesses 20% or more of such voting power
the Bessemer Group has the power to vote 50% or more of such voting power. In
any dispute or controversy arising under this Agreement following a Change of
Control, the Company agrees to pay the reasonable fees and expenses of one legal
counsel for Executive; provided, however, that Executive acts in good faith and
in the reasonable belief of the merit of Executive's position.
7. Trade Secrets
Executive recognizes that by reason of his employment hereunder he may
have acquired or will in the future acquire confidential information which
belongs to or concerns one or more members of the Stant Group ("Confidential
Information"). Accordingly, Executive agrees that he will not, directly or
indirectly, except to the extent required by law or after obtaining the written
consent of the Board of Directors, disclose, or use for his own benefit, any
Confidential Information that Executive has learned by reason of his association
with the Stant Group or use any such information to the detriment of the Stant
Group. For purposes of this Section 7, the term "Confidential Information" shall
include all information not publicly available relating to the activities,
operations, finances, products and services of the Stant Group, including but
not limited to plans, processes, research, programs, ideas, marketing and sale
of product information, customer information, costs, pricing, trade secrets and
other intellectual property. In the event of a violation of this provision by
Executive, the Company shall be entitled, in addition to any other right or
remedy it may have, to an injunction, without the posting of any bond or other
security, enjoining or restraining Executive from any violation or threatened
violation of this provision. Executive shall deliver to the Company at the
termination of the Term of Employment or at any other time the Company may
request, all memoranda, notes, plans, records, financial data and projections,
reports and other documents (and copies thereof) relating to the business of the
Stant Group which he may then possess or have under his control. The agreement
of Executive as set forth in this Section 7 shall survive the termination of
this Agreement.
8. Inventions.
(a) Assignment of Inventions. Executive will assign and hereby does
assign to the Company his entire right, title and interest in the following
inventions and developments, whether patentable or unpatentable, which Executive
makes or conceives or reduces to practice, solely or jointly with others:
(i) Inventions and developments made or conceived or reduced to
practice at any time during Executive's employment by any
member of the Stant Group, whether during working hours or
not, which relate in any way to products manufactured or
business conducted by any member of the Stant Group at any
time during the period of Executive's employment or which in
any other way relate to any subject matter with which
Executive's work for any member of the Stant Group is
concerned;
(ii) Inventions and developments made or conceived or reduced to
practice at any time during, before or after Executive's
employment by any member of the Stant Group which were made or
conceived or reduced to practice with the use of the time,
materials or facilities of any member of the Stant Group; and
<PAGE>
(iii) Inventions and developments made or conceived or reduced to
practice by Executive during the six month period following
the Termination Date and which directly or indirectly result
from work initiated, conducted, observed or contemplated
during Executive's employment by any member of the Stant
Group.
(b) Disclosure of Inventions. Executive will promptly disclose in
writing to the Company each invention and development of the type set forth in
Subsection 8(a) above.
(c) Assistance. Both during and after Executive's employment by the
Stant Group, and without charge to the Stant Group but at the Stant Group's
expense, Executive will do all such acts and execute, acknowledge and deliver
all papers considered by the Stant Group to be reasonably necessary or advisable
for obtaining patents in the United States and any other country for inventions
and developments of the type described in Subsection 8(a) above and for vesting
or evidencing title to such inventions and developments and to such patents in
the Company or its nominee. Executive will also give all reasonable assistance
to the Stant Group in any litigation or controversy involving said inventions;
provided, however, that should such services be rendered after the Term of
Employment, a reasonable compensation shall be paid to Executive upon a per diem
basis.
9. Noncompete
If the Term of Employment is terminated by the Executive pursuant to
Subsection 3(f) above or by the Company pursuant to Subsection 3(b) above, for a
period of twelve (12) months after the Termination Date, Executive shall not (i)
directly or indirectly engage in any business substantially similar to the
business conducted by the Stant Group in any geographical area in which the
Stant Group conducts such business, (ii) participate in the sale to any customer
of the Stant Group of products which are substantially similar to those sold to
such customer by the Stant Group, (iii) have any significant interest, directly
or indirectly, in any such business; provided, however, that nothing herein will
prevent Executive from owning in the aggregate not more than five (5) percent of
the outstanding stock of any class of a corporation which is publicly traded, so
long as Executive has no participation in the management of such corporation, or
(iv) directly or indirectly solicit or induce any employee of the Stant Group to
terminate his or her employment with the Stant Group or otherwise interfere with
such employee's employment relationship with the Stant Group.
10. Tax Preparation and Legal Fees
The Company shall provide Executive with tax preparation services
annually and shall reimburse Executive his reasonable legal fees for the
negotiation and enforcement of this agreement.
11. Representations and Warranties
Executive hereby represents and warrants that he is not prohibited from
either entering into this Agreement or fully performing any or all of his
obligations hereunder.
12. Assignment and Delegation
Executive may not without the Company's written consent thereto assign,
transfer or convey his rights or obligations under this Agreement. This
Agreement and all of the Company's rights and obligations hereunder may be
assigned or transferred by it, in whole but not in part, to and shall be binding
upon and inure to the benefit of any successor of the Company, but such
assignment by the Company shall not relieve it of any of its obligations
hereunder. As used herein, the term "successor" shall mean any business entity
which at any time by merger, consolidation or otherwise shall have acquired all
or substantially all of the business and assets of the Stant Group.
<PAGE>
13. Amendments
No alteration, amendment, change or addition hereto shall be binding or
effective unless the same is set forth in a writing that is signed by each party
hereto.
14. Partial Invalidity
If the final judgment of a court of competent jurisdiction declares,
after the expiration of the time within which judicial review (if permitted) of
such judgment may be perfected, that any term or provision hereof is invalid or
unenforceable, (a) the remaining terms and provisions hereof shall be unimpaired
and (b) the invalid or unenforceable term or provision shall be deemed replaced
by a term or provision that is valid and enforceable and that comes closest to
expressing the intention of the invalid or unenforceable term or provision.
15. Notices
All communications, notices and consents provided for herein shall be
in writing and be given in person or by means of facsimile or other means of
wire transmission (with request for assurance of receipt in a manner typical
with respect to communications of that type) or by mail or overnight delivery
service, and shall become effective (i) on delivery if given to a person, (ii)
on the date of transmission if sent by facsimile or other means of wire
transmission, or (iii) four business days after being deposited in the United
States mails, with proper postage and documentation, for First-Class Registered
or Certified mail, prepaid. Notices shall be addressed as follows:
(a) if to Executive, to: Thomas K. Erwin
316 S. Redfield Ct.
Park Ridge, IL 60068
Facsimile number: (847) 692-4469
(b) if to the Company, to: Stant Corporation
425 Commerce Drive
Richmond, IN 47374
Attn: John P. Reilly, President
Facsimile number: (317) 962-0314
provided, however, that if any party shall have designated a different address
by notice given in accordance with this Section 14 to the other party to this
Agreement, then the last address so designated shall control.
16. Waivers
A waiver by either party of any breach of any provision of this
Agreement shall not be deemed to constitute a waiver of any preceding or
subsequent breach of the same or any other provision of this Agreement.
17. Governing Law
All matters respecting this Agreement, including the validity thereof,
are to be governed by, and interpreted, construed and enforced in accordance
with the internal (and not conflict) laws of the State of Indiana.
18. Consent to Jurisdiction: Availability of Temporary Restraining
Orders and Injunctions Executive hereby expressly and irrevocably (i) agrees
that the Company may bring any action, whether at law or in equity, arising out
of or based upon this Agreement in the State of Indiana or in any federal court
therein, (ii) consents to personal jurisdiction in any such court and to accept
service of process in accordance with the provisions of the laws of the
State of Indiana, or of the State of Illinois and (iii) agrees that in addition
to any other remedy provided at law or in equity, the Company shall be
entitled to a temporary restraining order and both preliminary and permanent
injunctions restraining Executive from violating any of the provisions of
Sections 7, 8 or 9 above.
<PAGE>
19. Supersedes Prior Agreements; Entire Agreement
This Agreement automatically terminates, supersedes and replaces any
and all other agreements, promises, understandings and arrangements, whether
written or oral, express or implied, between Executive and any member of the
Stant Group relating to Executive's employment or conditions of employment
(except any pre-existing contractual obligations of Executive concerning
confidentiality or assignment of patents, inventions, ideas or intellectual
property). This instrument contains the entire agreement between the parties
with respect to the subject matter hereof. This Agreement may not be changed
orally but only by agreement in writing signed on behalf of the Company by the
President.
IN WITNESS WHEREOF, the parties hereto have executed this agreement, as
of the date and year first above written.
STANT CORPORATION
Attest
Anthony W. Graziano, Jr. By: J.P. Reilly
- ------------------------ -----------
Anthony W. Graziano, Jr. J.P. Reilly
Secretary President and Chief Executive Officer
EXECUTIVE
Witness
M. B. Murtaugh Thomas K. Erwin
- -------------- ---------------
Thomas K. Erwin
Exhibit Number 10.7
Form of Employment Agreement
E-42
<PAGE>
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made in Richmond,
Indiana as of __________, ____, by and between Stant Corporation, a Delaware
corporation with its principal place of business at 425 Commerce Drive,
Richmond, IN 47374 (the "Company"), and ______________, an individual residing
at __________________, ("Executive").
WITNESSETH:
WHEREAS, the Company desires to continue to retain the services of
Executive as its ______________, and Executive has indicated his willingness to
continue to provide his services in such position on the terms and conditions
set forth herein;
NOW THEREFORE, in consideration of the covenants and the agreements
herein contained, the parties agree as follows:
1. Services
During the Term of Employment (as defined in Subsection 3(a)
below), the Company hereby employs Executive as its ______________, and
Executive hereby accepts such employment. In his capacity as the Company's
______________, Executive shall devote substantially all his business time,
attention, skill and efforts to the faithful performance of his duties hereunder
and shall have the usual powers and duties vested in the office of the
______________ of a corporation of the size, stature and nature of the Company.
Executive shall report directly to the President and Chief Executive Officer of
the Company (the "President").
2. Compensation. For all services to be rendered by Executive
in any capacity hereunder, during the Term of Employment the Company shall
pay or provide to Executive, and Executive shall accept, the following
amounts and benefits:
(a) Base Salary. The Company shall pay to Executive in cash in
accordance with its regular payroll practices a base salary (the "Base Salary")
at the initial annual rate of $_______, which rate shall be reviewed by the
President on or about _________, ____ and annually thereafter. Such salary may
be increased, but not decreased, from time-to-time at the discretion of the
President, subject to such limitations as may be set from time to time by the
Compensation Committee (the "Committee") of the Board of Directors of the
Company (the "Board of Directors"), to reflect both merit and cost of living
increases, and upon any such increase in the annual rate of Executive's base
salary, such increased amount shall become the "Base Salary" for the remainder
of the Term of Employment.
(b) Incentive Compensation. Executive shall participate in an annual
incentive compensation plan for executives to be adopted by the Committee
whereby Executive shall have the opportunity each year to earn a cash bonus in
an amount of up to 50% of the Base Salary for such year based upon the
attainment of financial targets established for the Company and achievement of
individual personal objectives, with the opportunity each year to earn a cash
bonus in an amount in excess of 50% of the Base Salary for attainment of
extraordinary results. The cash bonus provided for in this Subsection 2(b) shall
be paid on or before the thirtieth (30th) day following the date of the
Auditor's Opinion on the financial statements of the Company for the year to
which the bonus relates. Notwithstanding any other provision in this plan, 10%
of Executive's bonus shall be based on satisfactory individual performance by
Executive. If Executive does not achieve his assigned objectives or fails to
meet or exceed high job performance expectations, no payment (or a reduced
payment) will be made for this bonus component. In such event the unpaid amount
will be credited to a bonus pool which will then be allocated by the Committee,
upon the recommendation of the President, to one or more bonus plan participants
whose job performance has been outstanding.
<PAGE>
(c) Insurance; Pension Benefits. Executive shall participate to the
extent eligible in all insurance (including, without limitation, life, travel
and accident, medical and dental insurance), pension, deferred compensation,
disability, profit-sharing, retirement and other employee welfare and benefit
plans maintained from time to time by the Company for its executives or salaried
employees, to the extent that such executives or salaried employees participate,
in accordance with their respective terms, except as may otherwise be provided
herein. The Company reserves the right to change any such welfare or benefit
plan in the future, but no such change shall be applied retroactively or
adversely effect benefits already accrued. To the extent that years of service
are relevant to the vesting of benefits under any pension or retirement benefit
plan of the Company, Executive shall receive vesting credit thereunder for all
his years of service at the Company, any direct or indirect subsidiary of the
Company, and any predecessor of any of the foregoing.
(d) Fringe Benefits; Vacation. Executive shall participate in the
Company's automobile program and all other fringe benefits to the same extent as
other senior executives of the Company. Executive shall be entitled to a number
of paid vacation days each year as allowed under the Company's vacation policy
as currently in effect.
(e) Business Travel and Other Expenses. The Company shall pay or
reimburse Executive for all reasonable business travel and other business
expenses incurred by Executive in the course of performing his duties under this
Agreement, upon presentation by Executive of an itemized account of such
expenses.
3. Term of Employment and Termination.
(a) Term of Employment. The Term of Employment shall be the period of
time which begins on __________, ____ and ends on the date (the "Termination
Date") which is the earlier of (i) the day of Executive's death, (ii) the day
Executive reaches age 65 and (iii) the effective date of any termination of the
Term of Employment as provided for in this Agreement.
(b) Termination by the Company for Good Cause. The Company may
terminate the Term of Employment at any time for Good Cause (as defined in
Subsection 3(c) below). The Company shall notify (the "Good Cause Notice")
Executive in writing at least thirty (30) days in advance of any proposed
termination for Good Cause (which Good Cause Notice shall state the Good Cause
for which Executive is proposed to be dismissed in such detail as to permit a
reasonable assessment by Executive of the bonafides thereof). During such notice
period Executive shall have the opportunity to cure any breach if the same is
capable of being cured.
(c) Definition of Good Cause. For purposes of this Agreement, the
term "Good Cause" shall mean:
(i) a material breach by Executive of his obligations under this
Agreement,
(ii) material misconduct by Executiv in respect of such
obligations,
(iii) Executive's engaging in conduct which is immoral or illegal or
which brings Executive or the Company or any of its direct or
indirect subsidiaries (collectively the "Stant Group") into
disrepute or otherwise damages the business of the Stant Group
(as determined in the good faith judgment of the Board of
Directors), or
(iv) Executive's commission of an act of dishonesty or a felony,
<PAGE>
which in any event is not cured by Executive prior to the effective date of the
termination of the Term of Employment referred to in the Good Cause Notice;
provided, however, that Good Cause shall not include: (a) bad judgment or
negligence, (b) any act or failure to act by Executive believed in good faith by
him to have been in or not opposed to the interests of the Stant Group, and (c)
any act or failure to act by Executive in respect of which a determination could
properly be made that Executive met the applicable standard of conduct described
for indemnification or reimbursement or payment of expenses under the Delaware
Corporation Law, or the By-laws or Restated Certificate of Incorporation of the
Company, or the Company's directors' and officers' liability insurance.
(d) Termination by the Company for Convenience. Subject to the
Company's obligations to pay or provide certain amounts and benefits pursuant to
Subsections 4(b) or (c) below, the Company may terminate the Term of Employment
at any time for its convenience upon a minimum of sixty (60) days' prior written
notice to Executive. In such event, the Company shall have the option of waiving
Executive's services during all or part of such notice period; provided,
however, that during such notice period the Company shall continue to pay or
provide to Executive the amounts and benefits described in Section 2 above.
(e) Events of Termination. The following shall constitute Events
of Termination:
(i) A reduction in (x) the Base Salary or (y) the percentage of
Base Salary which Executive may earn as an annual cash bonus
pursuant to Subsection 2(b) above;
(ii) A material reduction in the benefits available to Executive
under the Company's pension and/or pension restoration plans;
(iii) A material adverse change in Executive's duties and
responsibilities or position; and
(iv) An ordered relocation of Executive's place of employment which
results in his commutation increasing by more than fifty (50)
miles round trip (notwithstanding his right to be reimbursed
for all expenses in connection with such relocation).
The occurrence of any such event shall be treated as a termination of the Term
of Employment for the convenience of the Company pursuant to Subsection 3(d)
above, and the sixty (60) day notice period required by Subsection 3(d) above
shall be deemed to have commenced on the date Executive receives written notice
from the Company (the "Reduction Notice") of the proposed effective date of the
reduction, change or relocation to which Executive does not consent; provided,
however, that if Executive fails to notify the Company, in writing as elsewhere
provided herein, of Executive's objection to the proposed reduction, change or
relocation within ten (10) business days of his receipt of the Reduction Notice,
such failure to notify shall be conclusive evidence that Executive consented to
such reduction, change or relocation and waived any right to assert that such
reduction, change or relocation constitutes a breach of this Agreement or an
Event of Termination.
If the Term of Employment is terminated because of an Event of Termination, the
Company shall pay or provide to Executive all of the amounts and benefits
specified in Subsection 4(b) or (c) below.
(f) Termination by Executive for Convenience. Executive may terminate
the Term of Employment at any time for Executive's convenience, including his
election to retire at any time, upon a minimum of sixty (60) days' prior written
notice to the Company. The Company shall have the option of waiving all or part
of Executive's services during all or part of such notice period; provided,
however, that until the end of such notice period (i) the Company shall continue
to pay or provide to Executive the amounts and benefits described in Section 2
above and (ii) Executive shall continue to be an "employee" of the Company or
one of its subsidiaries and shall not commence active employment with another
employer.
<PAGE>
In the event a purported termination of the Term of Employment by Executive
because of an Event of Termination is, for any reason, found to be invalid,
erroneous or incorrect, such termination shall be treated as a termination by
Executive for Executive's convenience pursuant to this Subsection 3(f).
4. Payments upon Termination of Term of Employment.
When the Term of Employment terminates, Executive shall be entitled to
the amounts and benefits provided in this Section 4 and no others:
(a) Termination by Company for Good Cause or by Executive for His
Convenience. If the Term of Employment is terminated by the Company for Good
Cause pursuant to Subsection 3(b) above or by Executive for his convenience
pursuant to Subsection 3(f) above, the Company shall:
(i) Continue to pay or provide to Executive the amounts and
benefits described in Section 2 above until the last day of
the Term of Employment (the "Termination Date").
(ii) Not later than the fifth (5th) business day following the
Termination Date, pay Executive in cash an amount equal to any
accrued but unpaid vacation pay.
(iii) As soon as such amount can be computed and, in any event, not
later than the sixtieth (60th) business day following the
Termination Date, pay Executive in cash an amount equal to any
earned but unpaid compensation under any incentive
compensation plan in which Executive participated during the
Term of Employment for all fiscal years completed during the
Term of Employment.
(iv) Provide any rights or benefits to which Executive may be
entitled under COBRA, and upon the expiration of any rights or
benefits to which Executive is entitled under COBRA, provide
to Executive the opportunity to continue to participate in all
of the Company's group medical and dental insurance programs
for the remainder of his life, provided Executive shall be
obligated to pay the entire cost of his participation in any
such program.
(v) Provide, in accordance with the terms of any such plan, any
rights or benefits to which Executive may be entitled under
any tax qualified or non-tax qualified welfare or retirement
plan of the Stant Group.
(b) Termination Prior to a Change of Control by Company for its
Convenience or due to an Event of Termination. If, prior to a Change of Control
(as defined in Section 6 below), the Term of Employment is terminated by the
Company for its convenience pursuant to Subsection 3(d) above or as a result of
an Event of Termination pursuant to Subsection 3(e) above, the Company shall:
(i) Continue to pay or provide to Executive the amounts and
benefits described in Section 2 above until the Termination
Date.
(ii) Not later than the fifth (5th) business day following the
Termination Date, pay Executive in cash an amount equal to any
accrued and unpaid vacation pay.
(iii) As soon as such amount can be computed and, in any event, not
later than the sixtieth (60th) business day following the
Termination Date, pay Executive in cash an amount equal to any
earned but unpaid compensation under any incentive
compensation plan in which Executive participated during the
Term of Employment for all fiscal years completed during the
Term of Employment.
<PAGE>
(iv) Provide any rights or benefits to which Executive may be
entitled under COBRA, it being the intent of the parties to
this Agreement that any such rights and benefits shall
relate to the period of time immediately subsequent to the
Twelve Month Benefit Termination Date (as defined in clause
(vi) of this Subsection 4(b)); and upon the expiration of
any rights or benefits to which Executive is entitled under
COBRA, provide to Executive the opportunity to continue to
participate in all of the Company's group medical and
dental insurance programs for the remainder of his life,
provided Executive shall be obligated to pay the entire
cost of his participation in any such program.
(v) Provide, in accordance with the terms of any such plan, any
rights or benefits to which Executive may be entitled under
any tax qualified or non-tax qualified welfare or retirement
plan of the Stant Group, including the Company's Pension
Restoration Plan.
(vi) Pay Executive the Base Salary (payable not less frequently
than twice monthly) from the Termination Date through the last
day of the twelfth (12th) month following the Termination Date
(the "Twelve Month Benefit Termination Date"); provided,
however, that the amount payable pursuant to this clause (vi)
shall be subject to dollar for dollar reduction for base
salary earned from any other employer (Executive being under
no obligation to mitigate these payments).
(vii) Pay Executive in cash any unpaid compensation under any
incentive compensation plan in which Executive participated
during the Term of Employment (assuming full achievement of
personal targets, whether or not actually achieved or
established) with respect to the year in which the Term of
Employment ends; provided, however, that the amount of any
such compensation shall (a) be pro-rated to reflect the fact
that the Term of Employment ended prior to the end of the
period of time to which such incentive compensation relates
and (b) reflect fully the attainment or lack of attainment of
any financial targets incorporated into the plan.
(viii) Either:
(a) Provide Continued Participation under all insurance programs
and welfare plans referred to in Subsection 2(c) above until
the earlier of (i) the day Executive completes the eligibility
waiting period under another employer's substantially
equivalent insurance programs and welfare plans and (ii) the
Twelve Month Benefit Termination Date, or
(b) In the event the Company is unable, despite using its best
efforts, to arrange or permit Executive's Continued
Participation in any such program or plan as provided in
clause (viii)(a) above, pay Executive a cash amount equal to
the cost to Executive of obtaining benefits comparable to
those which would have been provided to Executive pursuant to
clause (viii)(a) above, such cash payment to be made to
Executive in installments on the last day of each calendar
month, each such installment to cover such costs as have been
incurred by Executive for the preceding month.
For purposes of this Agreement, "Continued Participation" in an insurance
program or welfare or benefit plan means the providing of benefits comparable to
or greater than the benefits that would have been provided to or for the benefit
of Executive had Executive continued to be a full time employee of the Stant
Group.
<PAGE>
(ix) As to each defined benefit plan qualified under the Internal
Revenue Code of 1986, as amended (the "Tax Code") in which
Executive was participating sixty (60) days prior to the
Termination Date (the "Measurement Date"), pay Executive
in cash an amount equal to the value of the additional plan
benefit which would have accrued to Executive if Executive's
employment with the Stant Group had continued until the
Twelve Month Benefit Termination Date, to the extent that
Executive would have been vested in such benefitif Executive's
employment with the Stant Group had continued until the Twelve
Month Benefit Termination Date. Any payments to be made
to Executive under this clause (ix) shall be in addition to
any benefits due to Executive under the terms of such plans
and shall be made within six (6) months after the Termination
Date.
Calculation of the value of any such benefit shall be made on
the basis of the actuarial assumptions in use under such plan
on the Measurement Date.
(x) As to each defined contribution plan qualified under the Tax
Code in which Executive was participating on the Measurement
Date, pay Executive in cash an amount equal to the value of
any additional contribution which would have been made to such
plan by the Stant Group for Executive's account if Executive's
employment with the Stant Group had continued until the Twelve
Month Benefit Termination Date, to the extent Executive would
have been vested in such benefit if Executive's employment
with the Stant Group had continued until the Twelve Month
Benefit Termination Date.
Payments under this clause (x) shall be calculated as if
Executive had made all required plan contributions at the
maximum rate and had continued to receive annual compensation
at a rate equal to the Measurement Amount (as defined in
clause (vi) of Subsection 4(c) below). Any payments to be made
to Executive under this clause (x) shall be in addition to any
benefits due to Executive under the terms of such plans and
shall be made within six (6) months after the Termination
Date.
(xi) As to any non-qualified pension plan of the Company, provide
full credit for vesting and benefit accrual purposes (to the
extent that compensation and years of service are relevant in
computing benefits thereunder) until the Twelve Month Benefit
Termination Date based upon the assumption that during such
period Executive had continued to receive annual compensation
at a rate equal to the Measurement Amount.
(c) Termination After a Change of Control by the Company for its
Convenience or due to Event of Termination. If, after a Change of Control, the
Term of Employment is terminated by the Company for its convenience pursuant to
Subsection 3(d) above or as a result of an Event of Termination pursuant to
Subsection 3(e) above, the Company shall:
(i) Continue to pay or provide to Executive the amounts and
benefits described in Section 2 above until the
Termination Date.
(ii) Not later than the fifth (5th) business day following the
Termination Date, pay Executive in cash an amount for any
accrued and unpaid vacation pay.
<PAGE>
(iii) Within five (5) business days after the Termination Date, pay
Executive an amount in cash equal to any earned but unpaid
compensation under any incentive compensation plan in which
Executive participated during the Term of Employment for all
fiscal years completed during the Term of Employment.
(iv) Provide any rights or benefits to which Executive may be
entitled under COBRA, it being the intent of the parties to
this Agreement that any such rights and benefits shall
relate to the period of time immediately subsequent to the
Twenty-Four Month Benefit Termination Date (as defined in
clause (viii) of Subsection 4(c) below); and upon the
expiration of any rights or benefits to which Executive is
entitled under COBRA, provide to Executive the opportunity
to continue to participate in all of the Company's group
medical and dental insurance programs for the remainde of
his life, provided Executive shall be obligated to pay the
entire cost of his participation in any such program.
(v) Provide, in accordance with the terms of any such plan, any
rights or benefits to which Executive may be entitled under
any tax qualified or non-tax qualified welfare or retirement
plan of the Stant Group.
(vi) Within five (5) business days after the Termination Date, pay
Executive in cash an amount equal to two (2) times the sum of
(a) the Base Salary in effect on the Measurement Date and (b)
the maximum amount Executive could have earned for a full
fiscal year under any incentive compensation plan in which
Executive was participating on the Measurement Date (assuming
full achievement of financial and personal targets, whether or
not actually achieved or established) with respect to the year
in which the Term of Employment ends (such sum being the
"Measurement Amount").
(vii) Pay Executive in cash any unpaid compensation under any
incentive compensation plan in which Executive participated
during the Term of Employment (assuming full achievement of
financial and personal targets, whether or not actually
achieved or established) with respect to the year in which the
Term of Employment ends.
(viii) Either:
(a) Provide Continued Participation under all insurance programs
and welfare plans referred to in Subsection 2(c) above until
the earlier of (i) the day Executive completes the eligibility
waiting period under another employer's substantially
equivalent insurance programs and welfare plans and (ii) the
last day of the twenty-fourth (24th) month following the
Termination Date (the "Twenty-Four Month Benefit Termination
Date"), or
(b) In the event the Company is unable, despite using its best
efforts, to arrange or permit Executive's Continued
Participation in any such program or plan as provided in
clause (viii)(a) above, pay Executive a cash amount equal to
the cost to Executive of obtaining benefits comparable to
those which would have been provided to Executive pursuant to
clause (viii)(a) above, such cash payment to be made to
Executive in installments on the last day of each calendar
month, each such installment to cover such costs as have been
incurred by Executive for the preceding month.
<PAGE>
(ix) As to each defined benefit plan qualified under the
Tax Code in which Executive was participating on the
Measurement Date, pay Executive in cash an amount equal to
the value of the additional plan benefit which would have
accrued to Executive if Executive's employment with the
Stant Group had continued until the Twenty-Four Month Benefit
Termination Date, to the extent that Executive would have been
vested in such benefit if Executive's employment with the
Stant Group had continued until the Twenty-Four Month
Benefit Termination Date. Any payments to be made to Executive
under this clause (ix) shall be in addition to any benefits
due to Executive under the terms of such plans and shall be
made within five(5) business days after the Termination Date.
Calculation of the value of any such benefit shall be made on
the basis of the actuarial assumptions in use under such plan
on the Measurement Date.
(x) As to each defined contribution plan qualified under the Tax
Code in which Executive was participating on the Measurement
Date, pay Executive in cash an amount equal to the value of
any additional contribution which would have been made to such
plan by the Stant Group for Executive's account if Executive's
employment with the Stant Group had continued until the
Twenty-Four Month Benefit Termination Date, to the extent
Executive would have been vested in such benefit if
Executive's employment with the Stant Group had continued
until the Twenty-Four Month Benefit Termination Date.
Payments under this clause (x) shall be calculated as if
Executive had made all required plan contributions at the
maximum rate and had continued to receive annual compensation
at a rate equal to the Measurement Amount. Any payments to be
made to Executive under this clause (x) shall be in addition
to any benefits due to Executive under the terms of such plans
and shall be made within five (5) business days after the
Termination Date.
(xi) As to any non-qualified pension plan of the Company, provide
full credit for vesting and benefit accrual purposes (to the
extent that compensation and years of service are relevant in
computing benefits thereunder) until the Twenty-Four Month
Benefit Termination Date based upon the assumption that during
such period Executive had continued to receive annual
compensation at a rate equal to the Measurement Amount.
(xii) Provide Executive all fringe benefits which the Company was
providing to Executive on the Measurement Date until the
Twenty-Four Month Benefit Termination Date.
(d) Limitation of Amounts/Benefits. The amounts and benefits to be paid
or provided to Executive pursuant to Subsection 4(c) above (the "Severance
Benefit") shall be reduced as described below if the Company would, by reason of
section 280G of the Tax Code, not be entitled to deduct for federal income tax
purposes any part of the Severance Benefit or any part of any other payment or
benefit to which Executive is entitled under any plan or program. For the
purposes of this Agreement, the Company's independent auditors shall determine
the value of any deferred payments or benefits in accordance with the principles
of section 280G of the Tax Code, and tax counsel selected by the Company's
independent auditors and acceptable to the Company shall determine the
deductibility of payments and benefits to which Executive is entitled. The
Severance Benefit shall be reduced only to the extent required, in the opinion
of such tax counsel, to prevent such nondeductibility for federal income tax
purposes of any part of the remaining Severance Benefit and other payments and
benefits to which Executive is entitled. The Company shall determine which
elements of the Severance Benefit shall be reduced to conform to the provisions
of this Subparagraph. Any determination made by the Company's independent
auditors or by tax counsel pursuant to this paragraph shall be conclusive and
binding on Executive.
<PAGE>
(e) Death. In the event of Executive's death during the Term of
Employment, and in addition to its obligations under any plan or program offered
to Executive which provides for payments or benefits after his death, the
Company shall:
(i) Continue to pay the Base Salary through the last day of the
second (2nd) month following the month in which Executive's
death occurs (the "Second Month Benefit Termination Date").
(ii) As soon as such amount can be computed and, in any event, not
later than the sixtieth (60th) business day after the
Termination Date, pay any earned but unpaid incentive
compensation under any plan for completed fiscal years plus
earned but unpaid compensation under such plan for the year in
which Executive's death occurs.
(iii) Continue to provide to the members of the immediate family of
the deceased Executive medical and dental insurance coverage
on the same basis that such coverage was provided immediately
prior to the Executive's death until the Second Month Benefit
Termination Date.
(iv) Provide any rights or benefits to which members of Executive's
immediate family may be entitled under COBRA, it being the
intent of the parties to this Agreement that any such rights
and benefits shall relate to the period of time immediately
subsequent to the Second Month Benefit Termination Date.
The payments to be made under this Subsection 4(e) shall be made to the person
or persons last designated as recipients of such payments by Executive in
written notice filed with the Company or, absent such designation, to
Executive's estate.
(f) Disability. If Executive becomes totally disabled, as defined below
in this Subsection, during the Term of Employment, Executive shall be entitled
to continuation of the Base Salary until the earlier of (i) the date six (6)
months following the date Executive became totally disabled and (ii) the date
benefits to Executive commence under the Company's Long Term Disability Plan (or
would have commenced if Executive had elected to participate in such plan).
In addition to the foregoing, Executive shall also receive under this Subsection
4(f) his prorated annual bonus through the date disability is determined and any
deferred vested annual bonuses. During the period of his disability, Executive
shall be entitled to continued participation in all Company employee benefit
plans (other than life insurance plans) including, but not limited to, continued
accrual of retirement benefits and coverage under the Company's medical and
hospitalization plans. The determination of disability shall be in accordance
with the Company's long-term disability program or in accordance with some other
acceptable definition.
(g) Death During Separation Period. In the event Executive dies while
receiving or entitled to any amount or benefit under Subsections 4(a), (b) or
(c) above, Executive's legal representative shall be entitled to receive the
amounts and benefits due Executive for the remainder of any periods specified in
such Subsections.
(h) No Duty to Seek Employment. Executive shall not be under any duty
or obligation to seek or accept employment at any time subsequent to the
Termination Date and, except as specifically provided under Subsections 4(b) and
4(c) above, no such other employment, if obtained, or compensation or benefits
payable in connection therewith, shall reduce any amounts or benefits to which
Executive is entitled hereunder.
(i) Notice of New Employment. If Executive commences full time
employment with any employer other than a member of the Stant Group prior to (i)
the Twelve Month Benefit Termination Date if the Term of Employment is
terminated pursuant to Subsections 3(d) or (e) above prior to a Change in
Control or (ii) the Twenty-Four Month Benefit Termination Date if the Term of
Employment is terminated pursuant to Subsections 3(d) or (e) after a Change in
Control, then Executive shall provide the Company with written notice of such
employment no later than the first day of the calendar month immediately
following the date on which Executive commences such employment.
<PAGE>
5. No Other Severance; General Release of the Stant Group.
In consideration for the amounts and benefits due Executive under
Section 4 above, and as a condition of receiving any such amounts or benefits,
Executive shall
(a) not be entitled to any payments or benefits under any severance
policy of general application to executives or salaried employees of the
Company, and
(b) deliver to the Company a general release (the "General Release")
releasing each member of the Stant Group and the present and former directors,
officers, employees and assigns of any such person (collectively the
"Releasees") from any and all liability which the Releasees or any one or more
of them had or have or may in the future have to Executive or Executive's
successors, heirs, executors and administrators with respect to any and all
actions, suits, contracts, agreements, damages and claims of any kind
whatsoever, in law or in equity, from the beginning of the world until the date
of the General Release, including without limiting the generality of the
foregoing any and all claims arising out of or relating in any way whatsoever to
the employment of Executive by any of the Releasees; provided, however, that the
General Release shall not release the Company from any of its obligations under
this Agreement. The General Release shall be in the form of Exhibit A to this
Agreement or in such different or other form as the Company in its reasonable
discretion shall consider necessary or appropriate to ensure the full
enforceability of the General Release under applicable federal, state and local
laws.
6. Change of Control; Attorney's Fees Following a Change of Control.
The term "Change of Control" means (i) the acquisition by any Person
(as such term is defined in Section 13(d) of the Exchange Act) of 20% or more of
the combined voting power of the Company's outstanding securities entitled to
vote generally in the election of Directors (the "Voting Securities") or (ii) a
majority of the Directors of the Company are individuals who were not nominated
by the Board of Directors; provided, however, that (y) the acquisition or
disposition of any portion of the combined voting power of the Voting Securities
by Bessemer Capital Partners LP ("BCP") and/or by any Person affiliated with BCP
(BCP and all such Persons being, collectively, the "Bessemer Group") shall in no
event constitute a Change of Control and (z) the acquisition by any person who
is not a member of the Bessemer Group of 20% or more of the combined voting
power of the Voting Securities shall not constitute a Change of Control so long
as during the entire time such Person possesses 20% or more of such voting power
the Bessemer Group has the power to vote 50% or more of such voting power. In
any dispute or controversy arising under this Agreement following a Change of
Control, the Company agrees to pay the reasonable fees and expenses of one legal
counsel for Executive; provided, however, that Executive acts in good faith and
in the reasonable belief of the merit of Executive's position.
<PAGE>
7. Trade Secrets
Executive recognizes that by reason of his employment hereunder and his
prior employment with one or more members of the Stant Group, he may have
acquired or will in the future acquire confidential information which belongs to
or concerns one or more members of the Stant Group ("Confidential Information").
Accordingly, Executive agrees that he will not, directly or indirectly, except
to the extent required by law or after obtaining the written consent of the
Board of Directors, disclose, or use for his own benefit, any Confidential
Information that Executive has learned by reason of his association with the
Stant Group or use any such information to the detriment of the Stant Group. For
purposes of this Section 7, the term "Confidential Information" shall include
all information not publicly available relating to the activities, operations,
finances, products and services of the Stant Group, including but not limited to
plans, processes, research, programs, ideas, marketing and sale of product
information, customer information, costs, pricing, trade secrets and other
intellectual property. In the event of a violation of this provision by
Executive, the Company shall be entitled, in addition to any other right or
remedy it may have, to an injunction, without the posting of any bond or other
security, enjoining or restraining Executive from any violation or threatened
violation of this provision. Executive shall deliver to the Company at the
termination of the Term of Employment or at any other time the Company may
request, all memoranda, notes, plans, records, financial data and projections,
reports and other documents (and copies thereof) relating to the business of the
Stant Group which he may then possess or have under his control. The agreement
of Executive as set forth in this Section 7 shall survive the termination of
this Agreement.
8. Inventions.
(a) Assignment of Inventions. Executive will assign and hereby does
assign to the Company his entire right, title and interest in the following
inventions and developments, whether patentable or unpatentable, which Executive
makes or conceives or reduces to practice, solely or jointly with others:
(i) Inventions and developments made or conceived or reduced to
practice at any time during Executive's employment by any
member of the Stant Group, whether during working hours or
not, which relate in any way to products manufactured or
business conducted by any member of the Stant Group at any
time during the period of Executive's employment or which in
any other way relate to any subject matter with which
Executive's work for any member of the Stant Group is
concerned;
(ii) Inventions and developments made or conceived or reduced to
practice at any time during, before or after Executive's
employment by any member of the Stant Group which were made or
conceived or reduced to practice with the use of the time,
materials or facilities of any member of the Stant Group; and
(iii) Inventions and developments made or conceived or reduced to
practice by Executive during the six month period following
the Termination Date and which directly or indirectly result
from work initiated, conducted, observed or contemplated
during Executive's employment by any member of the Stant
Group.
(b) Disclosure of Inventions. Executive will promptly disclose in
writing to the Company each invention and development of the type set forth in
Subsection 8(a) above.
(c) Assistance. Both during and after Executive's employment by the
Stant Group, and without charge to the Stant Group but at the Stant Group's
expense, Executive will do all such acts and execute, acknowledge and deliver
all papers considered by the Stant Group to be reasonably necessary or advisable
for obtaining patents in the United States and any other country for inventions
and developments of the type described in Subsection 8(a) above and for vesting
or evidencing title to such inventions and developments and to such patents in
the Company or its nominee. Executive will also give all reasonable assistance
to the Stant Group in any litigation or controversy involving said inventions;
provided, however, that should such services be rendered after the Term of
Employment, a reasonable compensation shall be paid to Executive upon a per diem
basis.
<PAGE>
9. Noncompete
If the Term of Employment is terminated by the Executive pursuant to
Subsection 3(f) above or by the Company pursuant to Subsection 3(b) above, for a
period of twelve (12) months after the Termination Date, Executive shall not (i)
directly or indirectly engage in any business substantially similar to the
business conducted by the Stant Group in any geographical area in which the
Stant Group conducts such business, (ii) participate in the sale to any customer
of the Stant Group of products which are substantially similar to those sold to
such customer by the Stant Group, (iii) have any significant interest, directly
or indirectly, in any such business; provided, however, that nothing herein will
prevent Executive from owning in the aggregate not more than five (5) percent of
the outstanding stock of any class of a corporation which is publicly traded, so
long as Executive has no participation in the management of such corporation, or
(iv) directly or indirectly solicit or induce any employee of the Stant Group to
terminate his or her employment with the Stant Group or otherwise interfere with
such employee's employment relationship with the Stant Group.
10. Representations and Warranties
Executive hereby represents and warrants that he is not prohibited from
either entering into this Agreement or fully performing any or all of his
obligations hereunder.
11. Assignment and Delegation
Executive may not without the Company's written consent thereto assign,
transfer or convey his rights or obligations under this Agreement. This
Agreement and all of the Company's rights and obligations hereunder may be
assigned or transferred by it, in whole but not in part, to and shall be binding
upon and inure to the benefit of any successor of the Company, but such
assignment by the Company shall not relieve it of any of its obligations
hereunder. As used herein, the term "successor" shall mean any business entity
which at any time by merger, consolidation or otherwise shall have acquired all
or substantially all of the business and assets of the Stant Group.
12. Amendments
No alteration, amendment, change or addition hereto shall be binding or
effective unless the same is set forth in a writing that is signed by each party
hereto.
13. Partial Invalidity
If the final judgment of a court of competent jurisdiction declares,
after the expiration of the time within which judicial review (if permitted) of
such judgment may be perfected, that any term or provision hereof is invalid or
unenforceable, (a) the remaining terms and provisions hereof shall be unimpaired
and (b) the invalid or unenforceable term or provision shall be deemed replaced
by a term or provision that is valid and enforceable and that comes closest to
expressing the intention of the invalid or unenforceable term or provision.
14. Notices
All communications, notices and consents provided for herein shall be
in writing and be given in person or by means of facsimile or other means of
wire transmission (with request for assurance of receipt in a manner typical
with respect to communications of that type) or by mail or overnight delivery
service, and shall become effective (i) on delivery if given to a person, (ii)
on the date of transmission if sent by facsimile or other means of wire
transmission, or (iii) four business days after being deposited in the United
States mails, with proper postage and documentation, for First-Class Registered
or Certified mail, prepaid. Notices shall be addressed as follows:
<PAGE>
(a) if to Executive, to:
Facsimile number: (317) 962-0314
(b) if to the Company, to: Stant Corporation
425 Commerce Drive
Richmond, IN 47374
Attn: J. P. Reilly, President
Facsimile number: (317) 962-0314
provided, however, that if any party shall have designated a different address
by notice given in accordance with this Section 14 to the other party to this
Agreement, then the last address so designated shall control.
15. Waivers
A waiver by either party of any breach of any provision of this
Agreement shall not be deemed to constitute a waiver of any preceding or
subsequent breach of the same or any other provision of this Agreement.
16. Governing Law
All matters respecting this Agreement, including the validity thereof,
are to be governed by, and interpreted, construed and enforced in accordance
with, the internal (and not conflict) laws of the State of Indiana.
17. Consent to Jurisdiction; Availability of TROs and Injunctions.
Executive hereby expressly and irrevocably (i) agrees that the Company
may bring any action, whether at law or in equity, arising out of or based upon
this Agreement in the State of Indiana or in any federal court therein, (ii)
consents to personal jurisdiction in any such court and to accept service of
process in accordance with the provisions of the laws of the State of Indiana,
and (iii) agrees that in addition to any other remedy provided at law or in
equity, the Company shall be entitled to a temporary restraining order and both
preliminary and permanent injunctions restraining Executive from violating any
of the provisions of Sections 7, 8 or 9 above.
18. Supersedes Prior Agreements; Entire Agreement
This Agreement automatically terminates, supersedes and replaces any
and all other agreements, promises, understandings and arrangements, whether
written or oral, express or implied, between Executive and any member of the
Stant Group relating to Executive's employment or conditions of employment
(except any pre-existing contractual obligations of Executive concerning
confidentiality or assignment of patents, inventions, ideas or intellectual
property). This instrument contains the entire agreement between the parties
with respect to the subject matter hereof. This Agreement may not be changed
orally but only by agreement in writing signed on behalf of the Company by the
President.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this agreement, as
of the date and year first above written.
STANT CORPORATION
Attest
By:
- -------------------------- -----------------------
Secretary President and Chief Executive Officer
EXECUTIVE
Witness
- -------------------------- -------------------------
(Typed Name of Executive)
<TABLE>
Exhibit 11
STANT CORPORATION AND SUBSIDIARIES
COMPUTATION OF INCOME PER SHARE
($ in Thousands, Except Per Share Data)
<CAPTION>
Year Ended December 31,
-------------------------------
1996 1995 1994
------- ------- --------
<S> <C> <C> <C>
Income Before Extraordinary Loss and Cumulative Effect of
Accounting Change $21,419 $14,659 $16,399
Extraordinary Loss on Extinguishment of Debt (Net of Tax Benefit
of $315) -- -- (435)
Cumulative Effect of Accounting Changes (Net of Tax Benefit
of $303) -- -- (418)
------- ------- --------
Net Income Applicable to Common Stock $21,419 $14,659 $15,546
------- ------- --------
------- ------- --------
Primary Income Per Share of Common Stock
Income Before Extraordinary Loss and Cumulative Effect of
Accounting Change $ 1.28 $ 0.88 $ 0.97
Extraordinary Loss -- -- (0.03)
Cumulative Effect of Accounting Change -- -- (0.02)
------- ------- --------
Net Income $ 1.28 $ 0.88 $ 0.92
------- ------- --------
------- ------- --------
Weighted Average Common Shares Outstanding 16,227 16,227 16,227
Common Stock Equivalents-Effects of Exercise of Stock Options 434 459 727
------- ------- --------
Average Common Stock and Equivalents Outstanding 16,661 16,686 16,954
------- ------- --------
------- ------- --------
Fully Diluted Income Per Share of Common Stock:
Income Before Extraordinary Loss and Cumulative Effect of
Accounting Change $ 1.26 $ 0.88 $ 0.97
Extraordinary Loss -- -- (0.03)
Cumulative Effect of Accounting Change -- -- (0.02)
------- ------- --------
Net Income $ 1.26 $ 0.88 $ 0.92
------- ------- --------
------- ------- --------
Weighted Average Common Shares Outstanding 16,227 16,227 16,227
Common Stock Equivalents-Effect of Exercise of Stock Options 783 464 727
------- -------- -------
Average Common Stock and Equivalents Outstanding 17,010 16,691 16,954
------- -------- -------
------- -------- -------
</TABLE>
E-59
Exhibit Number 13
1996 Annual Report to Stockholders, pages 20 through 47
E-60
<PAGE>
Mangement's Review of Operations
and Financial Conditions
OVERVIEW
Many of the statements in Management's Review of Operations and Financial
Condition are 'forward-looking statements' which set forth management's current
expectations with respect to present or future trends or factors affecting the
operations, markets and products of Stant Corporation and its consolidated
subsidiaries (the 'Company'). These statements involve certain risks and
uncertainties and could be subject to change based on a variety of market,
industry and competitive factors discussed more fully under Item 1 Business - in
the Company's report on Form 10-K for the year ended December 31, 1996.
Industry - The Company's products are sold primarily to the automotive parts
industry, either for use as original equipment by automobile manufacturers
('OEMs') or as replacement parts in the automotive aftermarket (the
'aftermarket'). The Company also sells products to the industrial market for use
in the hardware, marine, appliance, construction and aviation industries.
Consolidated sales in 1996 include 50% sold to the original equipment market
(the 'OE market'), 44% to the aftermarket and 6% to the industrial market. In
the OE market, the Company serves as either a direct (tier one) or as an
indirect (tier two) supplier. In the aftermarket, the Company's products reach
the consumer through a number of distribution channels, including automotive
specialty retail stores, mass merchandisers, service departments of the OEMs,
traditional service stations, warehouse distributors and jobbers.
In the OE market, North American combined production of cars and light
trucks was relatively flat for 1996, following a 2% drop in 1995 from the 1994
level. Expectations are that in 1997, the combined production level may be
slightly higher. Many OEMs have adopted a strategy of reducing the number of
suppliers with whom they deal and requiring their remaining suppliers to assume
additional responsibility for upfront product design, engineering and project
management services. To determine the suppliers with whom they will continue to
deal, the OEMs have tightened supplier standards and stated they will give a
preference to suppliers who can serve them on a global basis. These actions by
the OEMs have and will continue to reduce the number of tier one suppliers, and
may lead to consolidation among suppliers. Today, most systems and many
components are sole sourced by the OEMs. Competitive price bidding is the
exception, with most awards of original equipment business being made against
target prices established by the OEM's platform team.
The aftermarket rebounded in 1996 after experiencing one of its worst years
in decades in 1995. The reduction in aftermarket demand in 1995 compared with
1994 resulted from several measurable factors, such as the fact that the winter
of 1993/1994 was severe while the winter of 1994/1995 was mild and the economy
was slower in 1995 than it was in 1994, as well as less measurable factors such
as a continuing improvement in the quality and a lengthening of the service life
of OE parts. Demand in the aftermarket improved in 1996, due in part to more
normal weather during the winter of 1995/1996 and a return to normalized
inventory levels. The mild winter of 1994/1995 resulted in higher than normal
customer inventories throughout most of 1995. Intense competition, which placed
pressure on the Company's margins in 1995 as well as on the margins of its
aftermarket customers (leading to credit difficulties for certain customers),
continued in 1996 and is contributing to the trend of consolidation of
aftermarket distribution channels.
Acquisitions - In late 1996, the Company purchased certain assets and the
rights to sell LubriMatic brand lubricating greases and oils ('Lubrimatic') and
certain related lubrication equipment. While the acquisition did not have a
material effect on the Company's financial results for 1996, it is expected that
this acquisition will contribute approximately $30 million in revenue during
1997. In late 1994, the Company completed two acquisitions that had a
significant impact on the Company's financial results for 1995 as compared with
1994. On September 1, 1994, the Company purchased FEDCO Automotive Components
Company, Inc. ('Fedco'), a manufacturer and distributor of automotive heaters,
principally for the aftermarket. On December 13, 1994, the Company purchased
Trico Products Corporation ('Trico'), a global manufacturer of automotive
windshield wiping systems and windshield wiper blades and refills, primarily to
the OE market. With the acquisition of Trico, the Company added operations in
the United Kingdom, Australia and Argentina, which are herein described as
'foreign entities'. Primarily as a result of the acquisition of Trico, the
percentage of the Company's consolidated net sales derived from the OE market
increased to 50% in 1996 and 1995 from 26% in 1994.
<PAGE>
Financial - The Company recorded record sales and earnings in 1996, as increased
sales volume in all markets, coupled with continued emphasis on cost reduction
programs, efficient utilization of manufacturing facilities and effective asset
management, produced sales growth, improved margins and strong cash generation.
The resulting cash flow allowed for debt reductions and reduced interest
expense, in spite of increased capital expenditures and the Lubrimatic
acquisition. For the year ended December 31, 1996 ('1996'), net sales were
$657.1 million, an increase of $44.7 million, or 7%, from the $612.4 million
reported for the year ended December 31, 1995 ('1995'). Net income increased 46%
to $21.4 million in 1996, compared with $14.7 million in 1995. Income per share
of $1.28 ($1.26 on a fully-diluted basis) also increased 46% from $.88 in 1995.
Net income in 1995 included a restructuring charge of $.05 per share ($.9
million net of tax) related to the consolidation of two of its operations.
A Look Ahead - Although 1996 showed significant improvement in relation to a
depressed 1995, the Company believes that major opportunities exist which should
enable the Company to strengthen its businesses and improve its profitability.
In North America, the Company maintains a strong market share for a number of
products both with the OEMs and in the aftermarket. However, the Company's
foreign operations currently account for a very small percentage of revenues and
management will strive to increase the Company's international business
significantly. To date, the Company has attacked the cost structure of its
various acquisitions on an individual basis, but will now focus on integrating
its manufacturing capabilities. In rationalizing the entire business, the
Company will continue to seek cost reduction opportunities, synergy of
operations, capacity realignments and future acquisitions to complement its core
areas. Significant projects are also underway (and there will be more during the
course of the year) directed at cost savings in personnel, manufacturing and
distribution facilities, administrative headquarters and general spending. In
early 1997, the Company announced a reorganization of the executive management
team and the relocation of its corporate headquarters from Richmond, Indiana to
Lincolnshire, Illinois. While the total amount has not yet been quantified, it
is expected that certain costs, primarily severance and other compensation costs
related to the management reorganization and costs associated with other actions
to increase the efficiency of the operations, will be reflected in the financial
results for the first quarter of 1997. The remaining charges will be recorded as
the Company's plans are finalized and quantified.
RESULTS OF OPERATIONS
Net Sales - The Company is one of the world's largest manufacturers of
automotive windshield wiping systems and windshield wiper blades and refills,
closure caps and engine thermostats; and a leading North American manufacturer
of a variety of other automotive products, including hose clamps, heaters,
grease guns and automotive tools. As a supplier to the automotive parts
industry, the Company operates within one business segment. The following table
classifies the Company's consolidated net sales by market within geographic
areas. North America includes the Company's manufacturing and assembly
operations in the United States and Mexico, while Foreign includes the United
Kingdom, Australia and Argentina. ($ in millions)
<TABLE>
<CAPTION>
Year ended December 31, 1996 1995 1994
- --------------------------------------------------------------------
<S> <C> <C> <C>
North America
Original equipment $ 300.2 $ 279.2 $ 73.7
Aftermarket 261.5 240.1 176.8
Industrial 41.1 36.9 35.0
- --------------------------------------------------------------------
Total North American 602.8 556.2 285.5
- --------------------------------------------------------------------
Foreign
Original equipment 27.7 29.8 1.3
Aftermarket 26.6 26.4 1.1
- --------------------------------------------------------------------
Total Foreign 54.3 56.2 2.4
- --------------------------------------------------------------------
Total $ 657.1 $ 612.4 $ 287.9
- --------------------------------------------------------------------
- --------------------------------------------------------------------
</TABLE>
<PAGE>
In 1996, total North American sales were $602.8 million, an increase of
$46.6 million, or 8%, compared with 1995. On a percentage basis, OE market sales
increased 8%, aftermarket sales increased 9% and industrial sales increased 11%
in North America. These increases are primarily a result of a higher volume of
Company products sold; the effect of acquisitions and pricing during 1996 on
total North American sales was not significant.
The Company's sales in the OE market reached a record $300.2 million in
1996, up from $279.2 million in 1995. Although North American production of cars
and light trucks was relatively flat for 1996, the Company's OE sales were
strong, predominately the result of a higher content of products supplied by the
Company for certain vehicle platforms. Increased content and new business more
than offset any price decreases and lost business. North American aftermarket
sales increased to $261.5 million in 1996, as demand recovered from the
unusually low levels experienced in 1995, particularly in the first half of the
year. Severe winter weather encountered by many areas of the country early in
1996 spurred sales of the Company's weather-sensitive products. In addition, the
success of new products and programs such as Exact-Fit(TM) wiper blades and
Superstat(R) thermostats and the Lubrimatic acquisition also contributed to
increased aftermarket sales of wipers, thermostats and lubrication equipment and
related products which increased 20%, 8%, and 12%, respectively. Sales to the
North American industrial market increased $4.2 million from 1995, primarily a
result of increased sales of no-hub clamps. Foreign entity sales decreased $1.9
million, or 3%, primarily due to lost business. The impact of foreign currency
fluctuations on net sales for 1996 was not significant.
In 1995, total North American sales were $556.2 million, an increase of
$270.7 million, or 95%, compared with 1994. North American OE sales of $279.2
million increased significantly in 1995, largely due to the Trico acquisition.
The Company's historical operations, which exclude Trico and Fedco, experienced
a modest 3% increase in OE sales. Decreased OE sales resulting from a slowdown
in 1995 automotive production were more than offset through new business capture
and new product offerings, including run/loss valves and eighth turn fuel caps.
North American aftermarket sales increased $63.3 million, or 36%. Incremental
aftermarket sales from the inclusion of Trico and Fedco were partially offset by
an 8% decrease in aftermarket sales from the Company's historical operations;
due primarily to the discontinuation of the mirror and antenna product line in
late 1994, a shortfall in the sale of weather-sensitive products and a reduction
in unit sales of caps and clamps. The mild winter of 1994/1995 resulted in
higher than normal customer inventories throughout most of 1995 and weakened the
demand for the Company's weather-sensitive products such as wipers, thermostats
and automotive heaters, particularly in the first half of the year. Aftermarket
sales of these products rebounded in the latter part of 1995, in part due to the
more normal winter weather. North American industrial market sales in 1995
increased $1.9 million, or 5%, due in large part to sales increases in the first
part of the year of clamps used in the construction industry. Foreign entity
sales increased $53.8 million, due entirely to the incremental sales of Trico's
foreign operations.
Gross Margin - Gross margin was $167.0 million in 1996 compared with $147.9
million in 1995 and $98.6 million in 1994. Gross margin as a percentage of sales
improved in 1996 to 25.4% from 24.2% in 1995. Gross margin as a percentage of
sales was 34.2% in 1994. The change in the gross margin percentage from 1994 was
due to the inclusion of Trico, whose sales are predominately to the OE market.
Sales to the OE market typically carry a lower gross margin percentage than do
sales to the aftermarket.
In 1996, higher production volumes, better capacity utilization, more
favorable material pricing and cost reduction programs contributed to the gross
margin improvement. In 1995, the dollar increase in gross margin resulting from
the inclusion of Trico and Fedco was partially offset by a decrease in gross
margin by the Company's historical operations. Contributing to the decrease were
lower sales and production volumes, price competition, and increased material
costs, partially offset by cost reduction programs. In addition, a slightly
higher sales mix of OE market versus aftermarket sales impacted the gross margin
in 1995. The devaluation of the Peso in late 1994 and throughout 1995 provided a
short-term cost benefit in 1995 related to Peso denominated labor and material
purchases.
<PAGE>
Selling, General and Administrative Expense - Selling, general and
administrative expense ('SG&A') was $104.3 million, $93.1 million and $62.3
million in 1996, 1995 and 1994, respectively. The increase in dollar amounts for
1996 and 1995 is due primarily to the inclusion of Trico and Fedco. Research and
development ('R&D') expense of $6.7 million and $6.3 million in 1996 and 1995,
respectively, increased from $3.2 million in 1994, largely due to the increase
in OE business resulting from the inclusion of Trico. R&D expense will likely
remain a significant component of SG&A expense due to the proportion of OE
market sales and the demands of the OEMs for more product development and
engineering design by their suppliers. SG&A expense in 1996 also included a $1.6
million provision for environmental remediation at one of its manufacturing
facilities, as discussed more fully in Note 13 of the Notes to Consolidated
Financial Statements. SG&A expense for 1995 included a historically high amount
of charges, $ 2.2 million, for potentially uncollectible receivables resulting
from credit difficulties experienced by certain of the Company's aftermarket and
industrial customers. Bad debt expense was $1.5 million in 1996 and $.3 million
in 1994.
SG&A expense as a percentage of net sales decreased to 15.9% in 1996 and
15.2% in 1995, from 21.6% in 1994. The decrease from 1994 was primarily due to
the inclusion of Trico and Fedco whose operations have lower SG&A expenses as a
percentage of sales than the Company's historical operations.
Income from Operations - Income from operations was $56.6 million in 1996, a 19%
increase from $47.6 million in 1995 and an 80% increase from $31.4 million in
1994. Included in income from operations for 1995 were certain nonrecurring
charges. The Company continually strives to reduce manufacturing and operating
expenses in order to remain competitive and maintain profitability and, in 1995
and late 1994, initiated several cost reduction programs. During 1995, the
Company completed the consolidation of two of its historical operations, the
Plews and Edelmann divisions, along with other restructuring efforts, and
recorded restructuring charges totaling $1.5 million ($.9 million net of tax or
$. 05 per share). The restructuring charges were comprised of termination
benefits of $1.1 million for approximately 110 salaried and hourly employees,
and other associated costs. Also included in SG&A expense for 1995 were charges
of $.8 million ($.4 million net of tax or $.03 per share) for the relocation of
equipment, inventory and personnel and related travel expenses associated with
consolidation efforts. In December 1994, the Company decided to discontinue its
mirror and antenna product line and recorded a charge to operations in 1994 of
$1.7 million ($1.0 million net of tax or $.06 per share). Although the
termination of this product line reduced net sales in 1995 by $3.9 million
compared with 1994, it had little effect on the results of operations for 1995
due to the low profitability of this product line.
Interest Expense - Interest expense of $18.5 million in 1996 decreased $3.5
million from $22.0 million in 1995. Interest expense was $3.9 million in 1994.
Lower debt levels and, to a lesser extent, lower interest rates in 1996 versus
1995 resulted in lower interest expense for 1996. The increase in 1995 versus
1994 reflects significantly higher borrowings resulting from the Fedco and Trico
acquisitions late in 1994 and, to a much lesser extent, higher interest rates in
1995.
Income Taxes - Income tax rates for 1996, 1995 and 1994 were 44.8%, 45.3% and
42.0%, respectively. The increase in the effective tax rate for 1996 and 1995
versus 1994 primarily resulted from a higher amount of permanent differences
versus earnings.
Accounting Method Changes - The Company adopted Statement of Financial
Accounting Standards ('SFAS') No. 121, 'Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of', which requires
that long-lived assets and certain identifiable intangibles and goodwill amounts
related to those assets be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amounts of these assets may not be
recoverable. The adoption of SFAS No. 121 did not have a material effect on the
Company's consolidated financial statements.
The Company also adopted SFAS No. 123, 'Accounting for Stock-Based
Compensation', which encourages, but does not require, companies to record
compensation cost for stock-based employee compensation plans at fair value. The
Company has elected to continue to account for such transactions under
Accounting Principles Board Opinion ('APB') No. 25, 'Accounting for Stock Issued
to Employees', and related Interpretations. Accordingly, compensation cost for
stock options is measured as the excess of the quoted market price of the
Company's stock at the date of grant over the exercise price. The Company is
required under the provisions of SFAS No. 123 to disclose on a proforma basis,
if material, net income and earnings per share as if the fair value based method
of accounting had been applied.
The Company adopted SFAS No. 112, 'Employers' Accounting for Postemployment
Benefits' in 1994. SFAS No. 112 had the cumulative effect of reducing 1994 net
income by $.4 million (net of tax benefits of $.3 million).
<PAGE>
FINANCIAL CONDITION
Liquidity and Capital Resources - The Company's liquidity needs, primarily to
fund working capital requirements and capital expenditures, are met through a
combination of cash generated by operations and the Company's revolving credit
facilities. Cash flows provided by operating activities were strong in 1996,
totaling $70.9 million, compared with $22.1 million in 1995 and $27.3 million in
1994. In 1996, increased net income, adjusted for non-cash charges for
depreciation and amortization, provided significant operating cash flows. Also
contributing to the improvement in operating cash flows is the emphasis
management is placing on working capital and asset management. Despite increased
sales in the fourth quarter of 1996 as compared with 1995, the Company reduced
the level of receivables outstanding at year-end. In contrast to 1996, operating
cash flows for 1995 reflected the use of significant cash to fund
acquisition-related expenditures. Approximately $14.0 million was paid in 1995
related to the Fedco and Trico acquisitions, principally for the payment of
outstanding Trico shares tendered in early 1995, and an additional $9.0 million
was paid to satisfy preacquisition contingent liabilities of Trico. Working
capital management has been, and will continue to be, a focus of management .
Cash flows utilized by investing activities during 1996 were $33.0 million,
compared with $9.3 million in 1995 and $194.6 million in 1994. Capital
expenditures, excluding capital leases, totaled $22.7 million, $21.2 million and
$8.8 million for 1996, 1995 and 1994, respectively. The higher capital
expenditure levels in 1996 and 1995 reflect the addition of Trico and Fedco. In
1996 the Company also recorded a capital lease obligation of $8.6 million for a
new wiper system technology center to support research and development as well
as certain sales functions of Trico. The Company currently anticipates that in
1997 capital expenditures, including capital leases, will total between $25
million and $30 million. Investing activities for 1996 also include $10.7
million used for the Lubrimatic acquisition. In 1994, $185.8 million was
expended for the acquisition of Trico and Fedco, with an additional $2.9 million
expended in 1995 for additional Fedco consideration and for the purchase of the
remaining interest in Trico's joint venture in Argentina. Included in investing
activities for 1995 is approximately $14.5 million in net proceeds received from
the sale of Trico's former U.K. manufacturing facility and a domestic
distribution/administration facility which became available for sale as a result
of the Company's restructuring efforts.
Cash flows utilized by financing activities during 1996 totaled $38.1
million, as compared with $11.8 million used in 1995 and $168.4 million provided
in 1994. Financing activities in 1996 and 1995 include a net reduction in total
debt of $40.2 million and $10.5 million, respectively, of which $22.5 million
and $7.5 million represented payments for such years on the Company's term loan
discussed below. Financing activities in 1996 also include $11.1 million in net
payments on the Company's revolving loans, a $6.6 million reduction of other
debt and new borrowings of $3.4 million used to finance a portion of the
purchase of a previously leased manufacturing facility located in Pontypool,
Wales. In 1994, financing activities reflect a high level of borrowings as the
Company executed a new term loan and revolving credit facility, discussed below,
primarily to finance the acquisition of Trico. Financing activities for 1994
also included $34.5 million of debt payments for acquired companies and $5.3
million in expenditures related to executing the new credit facility.
<PAGE>
The Company entered into a Credit Agreement (the 'Agreement') with a group
of banks, on December 12, 1994 and used borrowings under the Agreement to
finance the acquisition of Trico and other Company financing needs. The
Agreement originally provided for up to $325 million of borrowing capacity,
including $200 million, $115 million and $10 million for Term, Revolver and
Swing Line loans, respectively. The maximum available under the Term loan
declines as principal payments are made, and at December 31, 1996, totaled $170
million. A total of $29.2 million was outstanding at December 31, 1996 under the
Revolver and Swing Line loans, plus an additional $4.3 million in letters of
credit. The Company had unused borrowing capacity under the Agreement of $91.5
million at December 31, 1996. The Company entered into interest rate caps on
$100 million of the term debt, as required in the Agreement. The cost of the two
year, 10% caps was expensed as interest. As a result of the Agreement, deferred
financing costs of $.4 million (net of tax benefit of $.3 million) associated
with the prior credit facility were written off as an extraordinary charge in
1994.
The Company expects that, absent additional significant acquisitions, cash
flows from operating activities will be sufficient to fund working capital
needs, capital expenditures and debt reductions in 1997. Revolving credit
borrowings under the Agreement are also available to meet temporary working
capital requirements as well as for future acquisitions.
Environmental and Legal Matters - There are certain environmental and other
potential or actual legal claims pending against the Company, the most
significant of which were assumed in the acquisition of Trico. The Company or
one of its subsidiaries has been identified as a potentially responsible party
('PRP') with respect to environmental matters arising at eleven sites which are
under the jurisdiction of the United States Environmental Protection Agency
('EPA') or a State environmental department. The Company's potential exposure
for remediation costs at seven of these sites is considered immaterial. The four
remaining sites, three of which relate to Trico, are discussed more fully in
Note 13 of the Notes to the Consolidated Financial Statements.
Liabilities for environmental remediation costs are recorded when
environmental assessments or remediations are probable and the related costs can
be reasonably estimated. For third party landfills, the Company records a
liability for its share of costs when it has been named as a PRP and when an
assessment or clean-up plan has been developed. The Company estimates the range
of loss exposure for all environmental and legal contingencies to be from $8.0
million to $13.0 million, of which approximately $11.3 million has been accrued
at December 31, 1996. The final outcome of these contingencies is not expected
to have a material adverse effect on the Company's financial position, results
of operations or cash flows; however, the resolution of certain contingencies
could have a material effect on the Company's cash flows for an interim
reporting period.
EFFECTS OF INFLATION
Inflation generally affects the Company by increasing the interest expense of
variable rate debt and by increasing the cost of labor, equipment and raw
materials. Management believes that inflation did not have a material effect on
the Company's business over the last three years. In 1997, management believes
the cost of certain raw materials, such as copper, brass, steel and plastic
resins, is expected to be comparable to 1996. Additionally, since the Trico
acquisition, the Company has significant operations in Mexico which operate as
integral components of the Company's U.S. operations. While the significant
devaluation of the Peso, which began in late 1994, increased the rate of
inflation in Mexico in the last two years, it has also provided a short-term
cost benefit related to Peso denominated labor and material purchases.
<PAGE>
<TABLE>
STANT CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
($ In Thousands, Except Share Data)
<CAPTION>
December 31,
- --------------------------------------------------------------------------------------------------------
1996 1995
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Current Assets
Cash $ 3,293 $ 3,258
Accounts receivable:
Trade, less allowance for doubtful accounts
of $2,037 and $2,193,respectively 112,872 116,155
Other 4,920 6,189
Inventory 95,359 92,135
Prepaid expenses 6,504 7,014
Deferred income taxes 1,735 1,413
- --------------------------------------------------------------------------------------------------------
Total current assets 224,683 226,164
- --------------------------------------------------------------------------------------------------------
Property, Plant And Equipment, Net 187,252 174,211
- --------------------------------------------------------------------------------------------------------
Other Assets
Intangible assets, net 164,036 166,470
Deferred financing costs, net 3,793 4,746
Other 1,807 1,945
- --------------------------------------------------------------------------------------------------------
Total other assets 169,636 173,161
- --------------------------------------------------------------------------------------------------------
Total Assets $581,571 $573,536
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
Liabilities And Stockholders' Equity
Current Liabilities
Current portion of long-term debt and notes payable $ 35,451 $ 29,620
Accounts payable 54,463 48,850
Accrued liabilities 50,043 46,949
Income taxes payable 6,158 5,027
- --------------------------------------------------------------------------------------------------------
Total current liabilities 146,115 130,446
- --------------------------------------------------------------------------------------------------------
Long-Term Liabilities
Long-term debt 187,533 220,763
Deferred income taxes 11,629 7,396
Accrued pension and other benefit liabilities 26,109 27,622
Other 9,623 9,213
- --------------------------------------------------------------------------------------------------------
Total long-term liabilities 234,894 264,994
- --------------------------------------------------------------------------------------------------------
Stockholders' Equity
Preferred stock, at $100 per share liquidation value, $.01 par value,
820,000 shares authorized, none issued or outstanding -- --
Common stock, $.01 par value, 21,000,000 shares
authorized and 16,226,815 shares issued and outstanding 162 162
Additional paid-in capital 155,349 155,349
Foreign currency translation adjustment 831 (825)
Minimum pension liability adjustment (1,072) (1,761)
Retained earnings 45,292 25,171
- --------------------------------------------------------------------------------------------------------
Total stockholders' equity 200,562 178,096
- --------------------------------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity $581,571 $573,536
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<TABLE>
STANT CORPORATION AND SUBSIDIARIES
Consolidated Statements Of Income
($ In Thousands, Except Share Data)
<CAPTION>
Year Ended December 31,
- -----------------------------------------------------------------------------------------------------------
1996 1995 1994
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Sales $657,067 $612,358 $287,946
Cost of Sales 490,103 464,460 189,349
- -----------------------------------------------------------------------------------------------------------
Gross Margin 166,964 147,898 98,597
- -----------------------------------------------------------------------------------------------------------
Operating Expenses
Selling, general and administrative 104,259 93,065 62,256
Amortization of intangible assets 5,211 4,875 2,787
Management fee and expenses 850 850 500
Restructuring charges -- 1,480 --
Termination of product line -- -- 1,650
- -----------------------------------------------------------------------------------------------------------
Total operating expenses 110,320 100,270 67,193
- -----------------------------------------------------------------------------------------------------------
Income From Operations 56,644 47,628 31,404
- -----------------------------------------------------------------------------------------------------------
Other Charges (Credits)
Interest expense 18,516 21,952 3,916
Other (641) (1,135) (787)
- -----------------------------------------------------------------------------------------------------------
Total other charges (credits) 17,875 20,817 3,129
- -----------------------------------------------------------------------------------------------------------
Income Before Income Taxes, Extraordinary Loss
and Cumulative Effect of Accounting Change 38,769 26,811 28,275
Provision for Income Taxes 17,350 12,152 11,876
- -----------------------------------------------------------------------------------------------------------
Income Before Extraordinary Loss and
Cumulative Effect of Accounting Change 21,419 14,659 16,399
Extraordinary Loss on Extinguishment of Debt (Net of Tax
Benefit of $315) -- -- (435)
Cumulative Effect of Accounting Change (Net of Tax
Benefit of $303) -- -- (418)
- -----------------------------------------------------------------------------------------------------------
Net Income $ 21,419 $ 14,659 $ 15,546
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
Primary Income per Share of Common Stock
Income before extraordinary loss and cumulative effect of
accounting change $ 1.28 $ 0.88 $ 0.97
Extraordinary loss -- -- (0.03)
Cumulative effect of accounting change -- -- (0.02)
- -----------------------------------------------------------------------------------------------------------
Net Income $ 1.28 $ 0.88 $ 0.92
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
Average Common Stock and Equivalents Outstanding 16,661 16,686 16,954
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
Fully Diluted Income per Share of Common Stock
Income before extraordinary loss
and cumulative effect of
accounting change $ 1.26 $ 0.88 $ 0.97
Extraordinary loss -- -- (0.03)
Cumulative effect of accounting change -- -- (0.02)
- -----------------------------------------------------------------------------------------------------------
Net Income $ 1.26 $ 0.88 $ 0.92
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
Average Common Stock and Equivalents Outstanding 17,010 16,691 16,954
- -----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<TABLE>
STANT CORPORATION AND SUBSIDIARIES
Consolidated Statements Of Stockholders' Equity
($ In Thousands, Except Share Data)
<CAPTION>
Foreign Minimum
Additional Management Currency Pension Retained Total
Common Paid-in Notes Translation Liability Earnings Stockholders'
Stock Capital Receivable Adjustment Adjustment (Deficit) Equity
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1994 $162 $155,349 ($15) ($58) ($617) ($2,436) $152,385
- ----------------------------------------------------------------------------------------------------------------------------------
Net Income -- -- -- -- -- 15,546 15,546
Translation Adjustment -- -- -- (408) -- -- (408)
Minimum Pension Liability Adjustment
(Net of Deferred Taxes of $589) -- -- -- -- (238) -- (238)
Management Notes Repaid -- -- 15 -- -- -- 15
Common Stock Dividends Declared
$ .08 Per Share -- -- -- -- -- (1,298) (1,298)
- ----------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1994 162 155,349 -- (466) (855) 11,812 166,002
- ----------------------------------------------------------------------------------------------------------------------------------
Net Income -- -- -- -- -- 14,659 14,659
Translation Adjustment -- -- -- (359) -- -- (359)
Minimum Pension Liability Adjustment
(Net of Deferred Taxes of $620) -- -- -- -- (906) -- (906)
Common Stock Dividends Declared
$ .08 Per Share -- -- -- -- -- (1,300) (1,300)
- ----------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1995 162 155,349 -- (825) (1,761) 25,171 178,096
- ----------------------------------------------------------------------------------------------------------------------------------
Net Income -- -- -- -- -- 21,419 21,419
Translation Adjustment -- -- -- 1,656 -- -- 1,656
Minimum Pension Liability Adjustment
(Net of Deferred Taxes of $447) -- -- -- -- 689 -- 689
Common Stock Dividends Declared
$ .08 Per Share -- -- -- -- -- (1,298) (1,298)
- ----------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1996 $162 $155,349 -- $831 ($1,072) $45,292 $200,562
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
STANT CORPORATION AND SUBSIDIARIES
Consolidated Statements Of Cash Flows
($ In Thousands)
<CAPTION>
Year Ended December 31,
- ------------------------------------------------------------------------------------------------------------------------------------
1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash Flows From Operating Activities:
Net income $21,419 $14,659 $15,546
Adjustments to reconcile net income to net cash
provided by operating activities
Cumulative effect of accounting change -- -- 418
Extraordinary loss on extinguishment of debt -- -- 435
Termination of product line -- -- 1,650
Depreciation and amortization of intangible assets 27,484 24,372 11,806
Provision for losses on accounts receivable 1,518 2,164 312
Amortization of debt issuance costs 771 762 194
Loss on sale of fixed assets 722 221 102
Provision for deferred taxes 3,663 5,958 3,767
Changes in assets and liabilities, net of effect of acquisitions
Decrease (increase) in accounts receivable 5,876 (13,372) 4,035
Decrease (increase) in inventories 1,121 7,186 (3,301)
Decrease (increase) in prepaid expenses and other current assets 529 (1,901) 159
Increase (decrease) in accounts payable and accrued liabilities 8,034 (12,711) (7,869)
Decrease (increase) in other assets 1,500 (1,689) (611)
Increase (decrease) in other liabilities (1,753) (3,543) 676
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 70,884 22,106 27,319
- ------------------------------------------------------------------------------------------------------------------------------------
Cash Flows From Investing Activities:
Acquisitions, net of cash acquired (10,738) (2,880) (185,768)
Capital expenditures (22,667) (21,229) (8,840)
Proceeds from sale of fixed assets 356 14,779 35
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (33,049) (9,330) (194,573)
- ------------------------------------------------------------------------------------------------------------------------------------
Cash Flows From Financing Activities:
Proceeds from issuance of long-term debt 3,420 -- 200,000
Repayment of term loans (27,764) (10,842) (16,141)
Net borrowings (repayments) on revolving loans (12,436) 371 25,550
Repayment of debt of acquired companies -- -- (34,450)
Cost to acquire debt -- -- (5,320)
Payment of dividends (1,298) (1,300) (1,298)
Management notes repaid -- -- 15
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash (used in) provided by financing activities (38,078) (11,771) 168,356
- ------------------------------------------------------------------------------------------------------------------------------------
Effect of Exchange Rate Changes on Cash 278 736 --
- ------------------------------------------------------------------------------------------------------------------------------------
Net Increase in Cash 35 1,741 1,102
Cash:
Beginning of year 3,258 1,517 415
- ------------------------------------------------------------------------------------------------------------------------------------
End of year $3,293 $3,258 $1,517
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
NOTE 1.
ORGANIZATION AND SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Principles of Consolidation - The accompanying consolidated
financial statements include the accounts of Stant Corporation and its
majority-owned domestic and foreign subsidiaries (the 'Company'). The Company's
investments in less than majority-owned entities, which are not material, are
included in the accompanying financial statements on the equity method of
accounting. All significant intercompany accounts and transactions with
consolidated subsidiaries have been eliminated in consolidation.
Bessemer Capital Partners, L.P. ('Bessemer') is the majority owner of the
Company. Since the Company's initial public offering in 1993, Bessemer has owned
approximately 56.9% of the Company's Common Stock. In the years ended December
31, 1996, 1995 and 1994, the Company paid an affiliate of Bessemer annual
management fees of $850,000, $850,000 and $500,000 respectively, plus expenses,
in exchange for general corporate, financial and administrative advice.
Additionally, during 1994 the Company paid an affiliate of Bessemer $1,800,000
for its acquisition and debt financing related services rendered to the Company
in connection with the acquisition of Trico Products Corporation ('Trico').
Business Description - The Company is one of the world's largest
manufacturers of automotive windshield wiping systems and windshield wiper
blades and refills, closure caps and engine thermostats. The Company is also a
leading North American manufacturer of a variety of other automotive products,
including hose clamps, heaters, grease guns and automotive tools. During 1996,
products produced in North America, principally the United States and Mexico,
include 50% sold to the automotive original equipment market, 43% to the
automotive aftermarket, and 7% to the industrial market. Products produced in
foreign markets, principally the United Kingdom, Australia and Argentina, were
sold evenly to the automotive original equipment market and the automotive
aftermarket.
Revenue Recognition - Product sales are recorded when such products are shipped
to customers.
Translation of Foreign Currencies - The financial statements of the Company's
United Kingdom, Australia and Argentina subsidiaries are measured using the
local currency as the functional currency. Assets and liabilities are translated
into U.S. dollars at the rate of exchange existing at year-end. Income statement
amounts are translated at the average of the monthly exchange rates. The
resulting translation adjustments are recorded directly into a separate
component of stockholders' equity. Gains and losses resulting from actual
foreign currency transactions are recognized currently in results of operations.
The functional currency of the Company's subsidiaries in Mexico, which operate
as integral components of the U.S. operations, is the U.S. dollar. Gains and
losses resulting from remeasurement of monetary assets and liabilities are
recognized currently in results of operations. Translation gains of
approximately $250,000, $642,000 and $800,000 are included in other income for
the years ended December 31, 1996, 1995 and 1994, respectively.
<PAGE>
Derivative Financial Instruments - The Company uses foreign exchange forward
contracts to manage the impact of exchange rates on certain intercompany foreign
currency-denominated receivables and payables and to hedge certain foreign
currency-denominated transactions and firm purchase commitments. The amounts
receivable and payable on these contracts are offset in the accompanying
consolidated balance sheets. Gains and losses on foreign currency-denominated
receivables and payables are reported currently in income. Gains or losses on
contracts used to hedge foreign currency-denominated transactions and firm
purchase commitments are not material. The Company does not hold or issue
financial instruments for trading purposes.
Use of Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management of the Company to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Inventories - Inventories are valued at the lower of cost or market using the
last-in, first-out (LIFO) cost method for 84% of the inventory and the first-in,
first-out (FIFO) cost method for 16% of the inventory. (Note 3)
Property, Plant and Equipment - Property, plant and equipment are stated at
cost. Improvements are capitalized and expenditures for maintenance, repairs and
minor tooling are charged to operations as incurred. Provisions for depreciation
of property, plant and equipment have been computed on the straight-line method
for financial reporting purposes based on estimated useful lives of the assets
as follows: land improvements - 5 to 20 years; buildings and improvements - 6 to
40 years; and equipment - 3 to 20 years. (Note 4)
Effective January 1, 1996, the Company adopted Statement of Financial
Accounting Standards ('SFAS') No. 121, 'Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of', which requires
that long-lived assets and certain identifiable intangibles and goodwill amounts
related to those assets be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amounts of these assets may not be
recoverable. The adoption of SFAS No. 121 did not have a material effect on the
Company's consolidated financial statements.
Research and Development - Research and development costs, which are included in
selling, general and administrative expense, are charged to expense as incurred
and totaled $6,698,000, $6,272,000 and $3,218,000 for the years ended December
31, 1996, 1995 and 1994, respectively.
Advertising - Advertising costs, which are included in selling, general and
administrative expense, are charged to expense as incurred and totaled
$7,791,000, $7,454,000 and $6,410,000 for the years ended December 31, 1996,
1995 and 1994, respectively.
Intangibles - Intangible assets include goodwill, patents, trademarks and other
intangible assets. Goodwill represents the excess of the cost of businesses
acquired over identifiable net assets at the dates of acquisition and is being
amortized on a straight-line basis over periods not exceeding 40 years. All
other intangible assets are recorded at cost, less accumulated amortization, and
are being amortized on a straight-line basis over their assigned lives ranging
from 3 to 40 years. The carrying value of goodwill is evaluated periodically as
events and circumstances indicate a possible inability to recover its carrying
amount. Such evaluation is based on profitability projections and involves
significant management judgment to evaluate the performance of an acquired
business. Historically, the Company has generated returns from acquired
businesses sufficient to recover the cost of their intangible assets.
Deferred Financing Costs - Deferred financing costs consist of fees associated
with the borrowings incurred in connection with refinancing activities and are
amortized over the life of the related debt.
<PAGE>
Environmental Remediation Liabilities - Liabilities for environmental
remediation costs are recorded when environmental assessments or remediations
are probable and the related costs can reasonably be estimated. For third party
landfills, the Company records a liability for its estimated share of costs when
it has been named as a potentially responsible party ('PRP') and when an
assessment or cleanup plan has been developed. The Company records the gross
amount of environmental remediation obligations and costs of future expenditures
are not discounted to their present value. The accruals for such costs are
reviewed on a periodic basis and adjusted as further information develops or
circumstances change. (Note 13)
Earnings Per Share - The computation of earnings per share is based on net
income divided by the sum of the weighted average number of common shares and
common stock equivalents, principally stock options, outstanding during the
periods.
Stock-Based Compensation - SFAS No. 123, 'Accounting for Stock-Based
Compensation', encourages, but does not require, companies to record
compensation cost for stock-based employee compensation plans at fair value. The
Company has elected to continue to account for such transactions under
Accounting Principles Board Opinion ('APB') No. 25 'Accounting for Stock Issued
to Employees' and related Interpretations. Accordingly, compensation cost for
stock options is measured as the excess, if any, of the quoted market price of
the Company's stock at the date of grant over the exercise price. The Company is
required under the provisions of SFAS No. 123 to disclose on a pro forma basis,
if material, net income and earnings per share as if the fair value based method
of accounting had been applied. (Note 11)
Restructuring - During 1995, the Company recorded restructuring charges of
approximately $1,480,000 ($.05 per share net of tax) to consolidate certain of
the Company's operations. The restructuring charges were comprised of
termination benefits of $1,148,000 for approximately 110 salaried and hourly
individuals, and other associated costs, substantially all of which had been
paid at December 31, 1995.
In December 1994, the Company decided to discontinue its mirror and antenna
product line and recorded a charge to operations of $1,650,000 ($.06 per share
net of tax), principally for the write off of certain inventory and
manufacturing equipment related to these product lines.
<PAGE>
NOTE 2.
ACQUISITIONS
On November 1, 1996, the Company purchased certain assets and the rights to sell
LubriMatic brand lubricating greases and oils and certain related lubrication
equipment from Witco Corporation for a cash purchase price of approximately
$10,700,000. The acquisition has been accounted for by the purchase method of
accounting and the operating results are included in the Company's Consolidated
Statements of Income beginning on November 1, 1996. The cost of the acquisition
has been allocated on the basis of the fair market value of assets acquired and
liabilities assumed, resulting in goodwill of approximately $3,478,000 which is
being amortized over 20 years.
On December 7, 1995, the Company purchased an additional 70 percent interest
in its joint venture in Argentina for $327,000, bringing total ownership to 100
percent. This investment had previously been accounted for by the equity method.
The proforma full year effect of the 1996 and 1995 acquisitions is not
material.
On September 1, 1994, the Company purchased all of the outstanding stock of
FEDCO Automotive Components Company, Inc. ('Fedco') for approximately
$23,600,000. Fedco manufactures and distributes automotive heaters, principally
for the automotive aftermarket. On December 13, 1994, the Company purchased all
of the outstanding stock of Trico, one of the world's largest manufacturers of
automotive windshield wiping systems and windshield wiper blades and refills for
approximately $165,400,000. The operating results for both acquisitions, which
were accounted for by the purchase method of accounting, are included in the
Company's Consolidated Financial Statements from the date of their respective
acquisition.
NOTE 3.
INVENTORY
<TABLE>
Inventories at December 31, 1996 and 1995 consist of the following ($000's):
<CAPTION>
1996 1995
- ---------------------------------------------------------------------------
<S> <C> <C>
Raw materials $13,341 $12,295
Work in process and components 40,313 41,697
Finished goods 43,113 40,069
- ---------------------------------------------------------------------------
Total valued on first-in, first-out (FIFO) basis 96,767 94,061
Less reduction to last-in, first-out (LIFO) cost (1,408) (1,926)
- ---------------------------------------------------------------------------
Total $95,359 $92,135
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
</TABLE>
At December 31, 1996 and 1995, approximately $79,725,000 and $76,521,000,
respectively, of inventories were valued using the LIFO method. Approximate
replacement cost of inventories valued using the LIFO method totaled $81,133,000
and $78,447,000 at December 31, 1996 and 1995, respectively.
<PAGE>
NOTE 4.
PROPERTY, PLANT
AND EQUIPMENT
<TABLE>
Property, plant and equipment at December 31, 1996 and 1995 consist of the
following ($000's):
<CAPTION>
1996 1995
- -----------------------------------------------------------------
<S> <C> <C>
Land and improvements $ 11,479 $ 8,945
Buildings and improvements 75,193 60,507
Equipment 173,697 156,482
- -----------------------------------------------------------------
Total property, plant and equipment 260,369 225,934
Accumulated depreciation and amortization (73,117) (51,723)
- -----------------------------------------------------------------
Property, plant and equipment, net $187,252 $174,211
- -----------------------------------------------------------------
- -----------------------------------------------------------------
</TABLE>
Depreciation expense, which includes the amortization of capital leases,
totaled $22,165,000, $19,389,000 and $8,911,000 for the years ended December 31,
1996, 1995 and 1994, respectively.
NOTE 5.
INTANGIBLE ASSETS
<TABLE>
Intangible assets at December 31, 1996 and 1995 consist of the following
($000's):
<CAPTION>
1996 1995
- --------------------------------------------------------------------------
<S> <C> <C>
Goodwill $172,217 $169,440
Patents, trademarks and other intangible assets 16,577 16,577
- --------------------------------------------------------------------------
Total 188,794 186,017
Less accumulated amortization (24,758) (19,547)
- --------------------------------------------------------------------------
Intangible assets, net $164,036 $166,470
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
</TABLE>
<PAGE>
NOTE 6.
ACCRUED AND OTHER
LONG-TERM LIABILITIES
<TABLE>
Accrued and other long-term liabilities at December 31, 1996 and 1995
consist of the following ($000's):
<CAPTION>
1996 1995
- --------------------------------------------------------------
<S> <C> <C>
Accrued liabilities:
Wages and vacation pay $10,643 $ 6,532
Pension and other benefit liabilities 8,733 9,068
Litigation and environmental 3,156 2,192
Other 27,511 29,157
- --------------------------------------------------------------
Total accrued liabilities $50,043 $46,949
- --------------------------------------------------------------
- --------------------------------------------------------------
Other long-term liabilities:
Litigation and environmental $ 8,186 $ 7,949
Other 1,437 1,264
- --------------------------------------------------------------
Total other long-term liabilities $ 9,623 $ 9,213
- --------------------------------------------------------------
- --------------------------------------------------------------
</TABLE>
NOTE 7.
DEBT
<TABLE>
Long-term debt at December 31, 1996 and 1995 consists of the following ($000's):
<CAPTION>
1996 1995
- -----------------------------------------------------------------
<S> <C> <C>
Revolver and swing line loans $ 29,250 $ 40,375
Term loan 170,000 192,500
Industrial revenue bonds 4,891 5,082
Capitalized lease obligations 10,445 2,432
Other term loans and notes payable:
U.S. term debt and notes payable 1,344 5,362
Foreign term debt and notes payable 7,054 4,632
- -----------------------------------------------------------------
Total 222,984 250,383
Less current portion (35,451) (29,620)
- -----------------------------------------------------------------
Total long-term debt $187,533 $220,763
- -----------------------------------------------------------------
- -----------------------------------------------------------------
</TABLE>
<PAGE>
The Company entered into a Credit Agreement (the 'Agreement') on December
12, 1994 with a group of banks which originally provided for a seven year,
$325,000,000 facility and includes Term, Revolver and Swing Line loans. The
maximum borrowings for the Term, Revolver and Swing Line loans were
$200,000,000, $115,000,000 and $10,000,000, respectively. The maximum available
under the Term loan declines as principal payments are made and at December 31,
1996 totaled $170,000,000. The term loan is to be repaid quarterly with
$30,000,000 due in 1997 and $35,000,000 due each year thereafter through
December, 2001. Revolver and Swing Line advances must be repaid by December,
2001.
Under the terms of the Agreement, interest on the Term, Revolver and Swing
Line loans is payable at either prime (8.25% at December 31, 1996 and 8.5% at
December 31, 1995) or the LIBOR rate (5.6% and 5.8% at December 31, 1996 and
1995, respectively) plus in each case the applicable margin. The applicable
margin will vary between 0% and .25% for prime borrowings and between .50% and
1.25% for LIBOR advances, depending upon the ability of the Company to meet
certain interest coverage and leverage ratios. The applicable margin at December
31, 1996 and 1995 was .25% for prime borrowings and 1.25% for LIBOR advances.
Interest is generally payable quarterly.
In addition, the Agreement requires a commitment fee for the unused portion
of the facility and a letter of credit fee on outstanding letters of credit.
Letters of credit outstanding at December 31, 1996 totaled $4,294,000. The
commitment fee can vary from .25% to .375% and the letter of credit fee from
.75% to 1.5% depending upon the ability of the Company to meet certain interest
coverage and leverage ratio tests. The commitment fee was .375% and the letter
of credit fee was 1.5% at December 31, 1996. The total amount of the fees for
1996 and 1995 was $410,000 and $361,000, respectively, and is included in
interest expense. The Company entered into interest rate caps on $100,000,000 of
the Term loan as required in the Agreement. The cost of the two year 10% caps
was $149,000 and is included in interest expense in 1995. The Agreement
restricts certain corporate acts and contains required minimum financial ratios
and other covenants. Under the Agreement, at December 31, 1996 the maximum
dividend allowable under the most restrictive debt covenant was $.08 per share
per year plus an additional $3,570,000 in the aggregate. Loans under the
Agreement are secured by certain assets of the Company.
In conjunction with executing the Agreement, the Company refinanced a prior
credit agreement dated July 28, 1993 and recorded an extraordinary loss in 1994
of $435,000, net of tax benefit of $315,000, or $.03 per share, related to the
write off of unamortized deferred financing costs.
Capital leases include a long-term capital lease in the amount of $8,558,000
entered into during 1996 for a new wiper system technology center to support
research and development as well as certain sales functions of one of the
Company's wholly-owned subsidiaries. The agreement provides for aggregate annual
payments, including interest, of approximately $1,000,000, payable monthly,
through July, 2016. At December 31, 1996, future minimum payments for the
initial term of the lease were $18,448,000, including $9,997,000 representing
interest. The Company's obligations under all capital leases carry an average
interest rate of 9.2%.
Industrial Revenue Bonds have a face value of $5,700,000. The book value of
$4,891,000 at December 31, 1996 reflects an unamortized discount of $809,000.
The discount is being amortized over the life of the bonds using the effective
interest method. Interest is payable semi-annually at an annual rate of 6.9% of
the face value (the effective rate is 10.8%). Principal payments are due
annually in the amount of $300,000 on June 1 of each year through 2003, with a
final payment of $3,600,000 due on June 1, 2004.
Other U.S. term loans and notes payable consist of debt assumed in the
Trico acquisition and at December 31, 1996 is comprised of a $1,344,000 term
loan which is payable in monthly installments through 2000 at an average
interest rate of 7.8%. The term loan is secured by machinery and equipment.
Foreign indebtedness is primarily comprised of a $3,276,000 factoring facility
that provides up to $7,706,000 in borrowings and a note payable in the amount of
$3,742,000 which is payable in quarterly installments through 2006, both at an
interest rate of 1.5% over the British base rate. The British base rate was 6.0%
and 6.25% at December 31, 1996 and 1995, respectively.
<PAGE>
Future minimum principal payments to be made as of December 31, 1996 are as
follows ($000's):
<TABLE>
<S> <C>
1997 $ 35,451
1998 36,381
1999 36,133
2000 36,648
2001 65,180
Thereafter 14,000
- ------------------------------------------------
Subtotal 223,793
Less total unamortized discount 809
- ------------------------------------------------
Total $222,984
- ------------------------------------------------
- ------------------------------------------------
</TABLE>
NOTE 8.
INCOME TAXES
<TABLE>
Foreign components of pre-tax income for the year ended December 31, 1994 were
not material to the Company's Consolidated Financial Statements. Components for
the years ended December 31, 1996 and 1995 consist of the following ($000's):
<CAPTION>
1996 1995
- -------------------------------------------------------
<S> <C> <C>
United States $33,945 $21,121
Foreign 4,824 5,690
- --------------------------------------------------------
Total $38,769 $26,811
- --------------------------------------------------------
- --------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
Deferred tax assets (liabilities) at December 31, 1996 and 1995 consist of
the following ($000's):
<CAPTION>
1996 1995
- ----------------------------------------------------------------------------
<S> <C> <C>
Current deferred tax asset:
Reserves not currently deductible $ 13,491 $ 13,182
Valuation allowance (311) (660)
- ----------------------------------------------------------------------------
Subtotal 13,180 12,522
- ----------------------------------------------------------------------------
Current deferred tax liability:
Inventory (11,415) (10,970)
Other (30) (139)
- ----------------------------------------------------------------------------
Subtotal (11,445) (11,109)
- ----------------------------------------------------------------------------
Net current deferred tax asset $ 1,735 $ 1,413
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
Noncurrent deferred tax asset:
U.S. tax credits $ 1,846 $ 4,556
Mexico tax credits 504 --
U.K. loss carryover 10,539 9,193
Pension and other benefit liabilities 11,386 13,278
Environmental and legal reserves 3,259 3,456
Other 447 404
Valuation allowance (10,616) (9,021)
- ---------------------------------------------------------------------------
Subtotal 17,365 21,866
- ---------------------------------------------------------------------------
Noncurrent deferred tax liability:
Fixed assets (22,474) (23,524)
Intangibles (6,155) (5,105)
Other (365) (633)
- ---------------------------------------------------------------------------
Subtotal (28,994) (29,262)
- ---------------------------------------------------------------------------
Net noncurrent deferred tax liability $(11,629) $(7,396)
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
</TABLE>
<TABLE>
The provision for income taxes for the years ended December 31, 1996, 1995 and
1994 consists of the following ($000's):
<CAPTION>
- --------------------------------------------------------------------
1996 1995 1994
- --------------------------------------------------------------------
<S> <C> <C> <C>
Current provision:
U.S. federal $ 9,562 $ 3,356 $ 5,987
U.S. state and local 3,052 1,041 1,504
Foreign 1,073 1,797 618
- --------------------------------------------------------------------
Total current provision $13,687 $ 6,194 $ 8,109
- --------------------------------------------------------------------
Deferred provision:
U.S. federal $ 2,818 $ 5,189 $ 3,827
U.S. state and local 121 806 379
Foreign 724 (37) (439)
- --------------------------------------------------------------------
Total deferred provision 3,663 5,958 3,767
- --------------------------------------------------------------------
Provision for income taxes $17,350 $2,152 $11,876
- --------------------------------------------------------------------
- --------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
The difference between the tax provision calculated using the U.S. statutory
federal income tax rate and the actual provision for the years ending December
31, 1996, 1995 and 1994 is reconciled as follows ($000's):
<CAPTION>
1996 1995 1994
- -------------------------------------------------------------------------------------------------------------
Amount % Amount % Amount %
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
U.S. statutory federal income tax provision $13,569 35.0 $ 9,384 35.0 $ 9,896 35.0
Net tax effect of foreign earnings 109 .3 (231) (.8) -- --
U.S. state income tax, net of U.S. federal tax benefit 2,063 5.3 1,201 4.4 1,441 5.1
Permanent differences,
primarily goodwill amortization 1,343 3.5 1,424 5.3 567 2.0
Other 266 -- .7 374 1.4 (28) (.1)
- -------------------------------------------------------------------------------------------------------------
Provision for income taxes $17,350 44.8 $12,152 45.3 $11,876 42.0
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
</TABLE>
No provision was made in 1996 for U.S. income taxes on the undistributed
earnings of the foreign subsidiaries as it is the Company's intention to utilize
the earnings in the foreign operations for an indefinite period of time or
repatriate such earnings only when it is tax effective to do so. At December 31,
1996 undistributed earnings of the foreign subsidiaries amounted to $19,423,000.
It is not practicable to determine the amount of tax that would be payable upon
the remittance of the foreign earnings.
The Company reduced goodwill by $698,000 and $1,020,000 in 1996 and 1995,
respectively, as a result of the utilization of certain acquired net operating
loss carryovers for which a valuation allowance had been established.
At December 31, 1996, the Company had unused U.S. alternative minimum tax
credits of $1,846,000 which have an unlimited carryforward period and U.K. net
operating and capital losses of $31,937,000 which also have an unlimited
carryforward period. A valuation allowance has been recorded at December 31,
1996, for all deferred tax assets of the U.K. subsidiary, including those
related to the loss carryforwards, since it is uncertain that such deferred tax
assets will be realized.
NOTE 9.
FINANCIAL
INSTRUMENTS
The Company has only limited involvement with derivative financial instruments
and does not use them for trading or speculative purposes. The purpose of the
Company's foreign currency hedging activities is to protect the Company from the
risk of being adversely affected by changes in foreign currency exchange rates.
The Company is exposed to credit risk in the event of nonperformance by the
counterparty; however, the Company anticipates the counterparty will be able to
satisfy its obligations under the contracts. No collateral is held in relation
to the contracts. At December 31, 1996 and 1995, the Company had foreign
exchange forward contracts maturing in January 1997 and 1996, respectively, as
follows ($000's):
<PAGE>
<TABLE>
<CAPTION>
Notional U.S.
Dollar Equivalent 1996 1995
- -----------------------------------------------
<S> <C> <C>
Buy:
Pound sterling $1,969 $ --
Japanese yen 675 532
Australian dollar 656 669
Sell:
Canadian dollar $1,361 $1,796
Pound sterling -- 3,261
</TABLE>
The carrying value and fair value of the Company's foreign exchange forward
contracts are not material. Given the variable nature of the interest rates on
the Company's long-term debt, its carrying value is a reasonable estimate of its
fair value. For foreign currency forward contracts, the fair value generally
reflects the estimated amount the Company would receive or pay to terminate the
contract on the reporting date, thereby taking into account the current
unrealized gains or losses on open contracts.
Concentration of Credit Risk - As a tier one or tier two supplier to original
equipment manufacturers, the Company had three major customers at December 31,
1996 and 1995 which accounted for more than 10% of the Company's consolidated
accounts receivable at those dates. Accounts receivable from Customer A was
$13,669,000 in 1996 and $16,394,000 in 1995. Accounts receivable from Customer B
was $11,760,000 in 1996 and $11,982,000 in 1995. Accounts receivable from
Customer C was $11,220,000 in 1996 and $12,009,000 in 1995.
NOTE 10.
EMPLOYEE
BENEFIT PLANS
Pension Plans - The Company maintains defined benefit pension plans covering
certain salaried and hourly employees in the U.S., U.K. and Australia. Pension
benefits under the salaried plans are based principally on an employee's years
of service and either the highest average earnings over a period of years or on
career-average compensation near retirement with stated amounts for each year of
service. Pension benefits under the hourly plans are stated amounts for each
year of service. Assets of certain of the Company's defined benefit pension
plans are managed by Bessemer Trust Company, N.A., an associated company of the
majority limited partner of Bessemer. The pension fund assets consist of equity
investments, bond investments, general account assets of insurance companies and
cash and cash equivalents.
<PAGE>
Net pension expense for the years ended December 31, 1996, 1995 and 1994
includes the following components ($000's):
<TABLE>
<CAPTION>
1996 1995 1994
- ---------------------------------------------------------------------
<S> <C> <C> <C>
Service cost $ 2,653 $ 1,855 $ 1,020
Interest cost 9,359 9,841 2,542
Return on assets (13,167) (17,800) 1,122
Net amortization and deferrals 4,419 9,687 (3,214)
Employee contributions -- -- (85)
- ---------------------------------------------------------------------
Net pension expense $ 3,264 $ 3,583 $ 1,385
- ---------------------------------------------------------------------
- ---------------------------------------------------------------------
</TABLE>
The Company generally follows the policy of funding the actuarially computed
minimum contribution. The following table reconciles the funded status of the
plans with amounts recognized in the Company's Consolidated Balance Sheets
($000's):
<TABLE>
<CAPTION>
December 31, 1996 December 31, 1995
- ----------------------------------------------------------------------------------------------------------
Assets Exceed Accumulated Assets Exceed Accumulated
Accumulated Benefit Accumulated Benefit
Benefit Exceeds Assets Benefit Exceeds Assets
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Accumulated benefit obligation:
Vested $17,276 $105,467 $1,514 $121,410
Nonvested 816 1,145 347 1,252
- ----------------------------------------------------------------------------------------------------------
Subtotal 18,092 106,612 1,861 122,662
Effect of projected pay increases 3,768 757 897 4,841
- ----------------------------------------------------------------------------------------------------------
Projected benefit obligation 21,860 107,369 2,758 127,503
Plan assets at fair value 19,560 90,015 2,971 99,509
- ----------------------------------------------------------------------------------------------------------
Projected benefit obligation in excess
of (less than) plan assets 2,300 17,354 (213) 27,994
Unrecognized net gain (loss) (1,443) 1,931 (113) (5,461)
Unrecognized prior service costs 180 (823) -- (612)
Transition obligation -- (4) -- (4)
Adjustments for minimum liability -- 2,559 -- 3,405
- ----------------------------------------------------------------------------------------------------------
Accrued (prepaid) pension cost recognized
in the Consolidated Balance Sheet $ 1,037 $ 21,017 $ (326) $ 25,322
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
Accounting assumptions used were as follows:
<CAPTION>
1996 1995 1994
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
Discount rates:
U.S. 7.5% 7.5% 8.5%
Non-U.S. 7.5% 8.0%-8.5% 8.5%-9.0%
Rates of increase in compensation levels:
U.S. 4.0%-5.0% 4.0%-5.0% 5.0%-5.5%
Non-U.S. 6.0% 6.0% 5.5%-6.0%
Expected long-term rates of return on assets:
U.S. 9.0% 9.0% 8.5%-9.0%
Non-U.S. 9.0% 9.0% 9.5%
</TABLE>
The Company also maintains defined contribution plans covering certain
salaried and hourly employees. Contributions to these plans are determined
annually at the discretion of management. Expense for contributions to these
plans was $1,721,000, $1,797,000 and $1,211,000 for the years ended December 31,
1996, 1995 and 1994, respectively.
Postretirement Benefits Other Than Pension Plans - The Company provides life
insurance and health care benefits to certain U.S. salaried and hourly employees
after retirement. The cost of postretirement benefits is determined under SFAS
No. 106.
<TABLE>
The following table reconciles the accumulated postretirement benefit
obligation with amounts recognized in the Company's Consolidated Balance Sheets
at December 31, 1996 and 1995 ($000's):
<CAPTION>
1996 1995
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees $5,756 $5,709
Fully eligible actives 694 855
Other actives 691 578
- --------------------------------------------------------------------------------------------------------
Subtotal 7,141 7,142
Unrecognized net loss (265) (427)
Unrecognized prior service costs 125 137
- --------------------------------------------------------------------------------------------------------
Accrued postretirement benefit cost recognized in the Consolidated Balance Sheet $7,001 $6,852
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
Postretirement benefit cost for the years ended December 31, 1996, 1995 and 1994
includes the following components ($000's):
<CAPTION>
1996 1995 1994
- ------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost $ 74 $ 44 $ 45
Interest cost 514 520 228
Net amortization and deferrals (3) (9) 12
- ------------------------------------------------------------------------
Net postretirement benefit cost $585 $555 $285
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
</TABLE>
The assumed health care cost trend rate used in measuring the accumulated
postretirement benefit obligation was 10% for 1996, decreasing linearly each
successive year until it reaches 5% in 2001 after which it remains constant. A
one percentage-point increase in the assumed health care cost trend rate for
each year would increase the accumulated postretirement benefit obligation as of
December 31, 1996 and net postretirement health care cost as of January 1, 1996
by approximately 4%. The assumed discount rate used in determining the
accumulated postretirement benefit obligation was 7.5%, 7.5% and 8.5% at
December 31, 1996, 1995 and 1994, respectively.
Postemployment Benefits - Effective January 1, 1994, the Company adopted
SFAS No. 112, 'Employers' Accounting for Postemployment Benefits,' which
prescribes accrual accounting methods for employers who provide certain benefits
to former or inactive employees after employment but before retirement. The
cumulative effect of adopting SFAS No. 112 was $418,000 (net of tax benefit of
$303,000), or $.02 per share, which has been included in the Company's
Consolidated Statement of Income for the year ended December 31, 1994.
NOTE 11.
STOCK OPTIONS
The Company has two plans under which stock options for the purchase of Common
Stock may be granted: the Stant Corporation Stock Option Plan for Directors (the
'Directors Option Plan') and the 1993 Stock Option Plan for Key Employees of
Stant Corporation and its subsidiaries (the 'Stock Option Plan'). The maximum
number of shares of Common Stock that may currently be granted under the
Directors Option Plan and the Stock Option Plan is 50,000 and 700,000 shares,
respectively. The Board of Directors has adopted, subject to stockholders
approval at the Company's annual meeting on April 30, 1997, amendments to the
Directors Option Plan and the Stock Option Plan to increase the maximum number
of shares of Common Stock that may be granted under such plans to 150,000 and
1,600,000 shares, respectively.
The Directors Option Plan permits nonemployee Directors to elect to have any
or all of their retainer and Board and Committee meeting fees paid in the form
of stock options, rather than in cash. The Stock Option Plan provides for the
granting of nonqualified options to key employees. With the exception of the
Directors Option Plan, options to purchase common stock have been granted at
prices not less than fair market value at the date of grant. The Company
recognized $131,000 , $138,900 and $103,000 as compensation expense related to
the granting of options under the Directors Option Plan in the years ended
December 31, 1996, 1995 and 1994, respectively. The weighted-average fair value
of options granted under the Directors Option Plan during 1996 and 1995 was
$13.88 and $7.88, respectively. Option shares generally become exercisable upon
one year from the grant date and expire at the end of ten years from the date of
grant. In years prior to 1993, the Company granted nonqualified options to
certain key employees providing for the purchase of 1,457,602 shares of Common
Stock, all of which are fully vested.
<PAGE>
<TABLE>
Information regarding the Company's stock option plans for the years ended
December 31, 1996, 1995 and 1994 is as follows (shares 000's):
<CAPTION>
1996 1995 1994
- -----------------------------------------------------------------------------------------------------
Weighted- Weighted- Weighted-
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year 2,072 $10.63 1,980 $10.51 1,923 $10.41
Granted 248 $10.90 128 $13.92 61 $14.22
Exercised -- -- -- -- -- --
Cancelled (2) $14.66 (36) $16.17 (4) $17.60
- -----------------------------------------------------------------------------------------------------
Outstanding at end of year 2,318 $10.65 2,072 $10.63 1,980 $10.51
- -----------------------------------------------------------------------------------------------------
Options exercisable at end of year 2,054 $10.57 1,778 $ 9.61 1,617 $ 8.90
- -----------------------------------------------------------------------------------------------------
Weighted-average fair value of
options granted during the year $5.72 $ 7.85 --
- -----------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
Information regarding options outstanding at December 31, 1996 is as follows
(shares 000's):
<CAPTION>
Options Outstanding Options Exercisable
- -----------------------------------------------------------------------------------------
Weighted- Weighted- Weighted-
Remaining Average Average
Contractual Exercise Exercise
Range of Exercise Prices Number Life Price Number Price
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ .25 - $2.50 61 6 years $ 1.60 47 $ 1.32
$ 5.00 - $14.50 1,342 5 years $ 8.92 1,109 $ 8.39
$15.00 - $20.00 574 7 years $17.16 557 $17.15
$ 8.00 - $8.50 341 10 years $ 8.15 341 $ 8.15
or more
</TABLE>
The Company has adopted the disclosure-only provisions of SFAS No. 123 and
applies APB Opinion 25 and related Interpretations in accounting for its stock
option plans. Accordingly, except for the Directors Option Plan discussed above,
no compensation cost has been recognized related to the Company's stock option
plans. Consistent with the provisions of SFAS No. 123, had compensation cost for
the Stock Option Plan been determined based on the fair value at the grant date
for awards in 1996 and 1995, the effect on the Company's net income and net
income per share for such years would not be material.
<PAGE>
<TABLE>
The fair value of each option grant is estimated on the date of the grant
using the Black-Scholes option-pricing model with the following weighted average
assumptions.
<CAPTION>
1996 1995
- ------------------------------------------------------------
<S> <C> <C>
Expected volatility 35% 31.2%
Risk-free interest rate 6.27% - 6.32% 7.74%
Expected term of options 7 years 7 years
Expected dividend yield .7% .5%
</TABLE>
NOTE 12.
SUPPLEMENTAL
CASH FLOW INFORMATION
<TABLE>
Supplemental information related to the Consolidated Statements of Cash Flows is
as follows ($000's):
<CAPTION>
1996 1995 1994
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash paid during year for:
Interest $17,099 $19,964 $ 2,996
Income taxes 11,539 4,922 13,818
Noncash investing and financing activities:
Liabilities assumed in acquisitions $ 2,525 $ -- $160,644
Capital lease obligations 9,273 556 --
</TABLE>
NOTE 13.
COMMITMENTS
AND CONTINGENCIES
The Company leases certain facilities and equipment under operating leases. All
real estate leases provide for payment by the lessee of costs applicable to
operating the leased premises (inclusive of real estate taxes) in addition to
the minimum rental payments. Minimum rentals for future periods under operating
leases in effect at December 31, 1996 are $4,423,000 for 1997, $2,696,000 for
1998, $1,597,000 for 1999, $897,000 for 2000, $286,000 for 2001 and $367,000 for
all years thereafter. Rental expense charged to operations for all operating
leases totaled $5,921,000, $6,647,000 and $1,901,000 for the years ended
December 31, 1996, 1995 and 1994, respectively.
There are certain environmental matters and other potential or actual legal
claims pending against the Company, the most significant of which are described
below. Based on the information obtained to date, at December 31, 1996 the
Company estimates the range of loss exposure for all such matters to be from
$8,000,000 to $13,000,000 and accrued approximately $11,340,000 at December 31,
1996 for these matters. In part due to such accrual, the Company believes the
ultimate resolution of all such matters, in the aggregate, will not have a
material adverse effect on its financial position, results of operations or cash
flows, except that there could be such an effect on cash flows for a particular
interim reporting period.
<PAGE>
In April 1992, the New York State Department of Environmental Conservation
('NYDEC') notified the Company and a number of other companies that all such
entities were PRPs pursuant to certain sections of the New York State
Conservation Law ('NYSCL') and the United States Comprehensive Environmental
Response, Compensation and Liability Act ('CERCLA') with respect to a privately
owned landfill in Cheektowaga, New York (the 'Pfohl Landfill'). The NYDEC
originally proposed a remediation approach that the NYDEC estimated would cost
approximately $53,000,000, but independent parties' estimates were as much as
$60,000,000. An alternative remediation approach has been presented to the NYDEC
which is estimated to cost approximately $35,000,000. The Company has entered
into a preliminary participation agreement with approximately 23 other companies
(collectively the 'Pfohl Brothers PRPs') to negotiate jointly with the NYDEC and
to pursue jointly non-participating parties. The Pfohl Brothers PRPs currently
are negotiating with the NYDEC respecting the appropriate remediation approach
to be implemented. At this time, the Pfohl Brothers PRPs have not determined the
allocated share of liability for each of the Pfohl Brothers PRPs, but based upon
factual submissions, the Company estimates that its allocated share of liability
will be between 4% and 5%. To date, the remediation efforts at the Pfohl
Landfill have generated twelve lawsuits involving more than 90 plaintiffs who
seek recovery either for personal injury as a result of exposure to hazardous
materials in the Pfohl Landfill or for property damage as a result of the
proximity of their land to the Pfohl Landfill, as well as punitive damages.
In July 1993, NYDEC issued a demand to the Company and a number of other
companies for a remedial investigation and feasibility study ('RI/FS'), and
eventual remediation, for a site in Tonawanda, New York ('Roblin Steel Site').
Approximately 150 PRPs, including the Company, have joined in a participation
agreement and negotiated with NYDEC an agreed scope of work for the RI/FS. The
estimated cost of the RI/FS is $300,000 and the Company's allocated share is
approximately 4.5%.
In March 1994, the Company was notified by NYDEC that the Company was one of
approximately 20 PRPs pursuant to NYSCL and CERCLA responsible for past costs
incurred and for future remediation costs involving a former solvent and
petroleum processing facility in North Tonawanda, New York (the 'Booth Oil
Site'). Prior to notifying the PRPs, NYDEC investigated the Booth Oil Site,
performed removal actions and issued a Record of Decision which would require
on-site incineration of remaining hazardous wastes at an estimated cost of
$20,000,000. The PRPs have recommended to NYDEC alternative remediation
activities that will reduce the cost of the required site remediation. Although
NYDEC has not yet agreed to amend the Record of Decision, during 1996 the NYDEC
did allow the PRPs to perform a supplemental remedial investigation to better
define the extent and nature of contamination at the Booth Oil Site. Although
the supplemental remedial investigation has been completed, the report has not
yet been prepared. The PRPs also performed an initial allocation of liability
among themselves to apportion the costs of the supplemental remedial
investigation and the Company's allocation was 1.3%.
In 1988, the Company conducted an investigation at its Waltham,
Massachusetts facility which indicated the presence of volatile organic
compounds and petroleum hydrocarbons in the soil and groundwater, which the
Company reported to the Massachusetts Department of Environmental Protection.
During 1996, the Company completed a Phase II Comprehensive Site Assessment ,
the primary objectives of which were to evaluate the nature and extent of
contamination and potential risks to health, safety, public welfare and the
environment. During 1997, the Company will develop a Phase III Remedial Action
Plan to evaluate appropriate response actions. During 1996, the Company was
notified by Raytheon Company ('Raytheon') of the Company's potential liability
for groundwater contamination at Raytheon's property (the 'Raytheon Site') which
adjoins the south property line of the Waltham facility, and was notified by
Barry Wright Corporation ('Barry Wright') of the Company's potential joint and
several liability with Raytheon for groundwater contamination at property owned
by Barry Wright (the 'BW Site') which is south of the Raytheon Site. Raytheon
has alleged that it has already spent in excess of $2,500,000 to investigate and
remediate groundwater at the Raytheon Site and that the total of all past and
future investigation and remediation costs could total approximately $7,000,000.
Raytheon has proposed that the Company pay 50% of all such investigation and
remediation costs. Barry Wright has alleged that it has already spent
approximately $200,000 and will spend an additional $700,000 in the future to
investigate and remediate groundwater at the BW Site. Barry Wright has not
suggested an apportionment of liability between Raytheon and the Company. Recent
communications with Barry Wright indicate that there may in fact be no future
costs at the BW Site and that any demand by Barry Wright against the Company may
be reduced to participating in past costs only.
<PAGE>
NOTE 14.
QUARTERLY
FINANCIAL DATA (Unaudited)
<TABLE>
The following is a condensed summary of quarterly results of operations for the
years ended December 31, 1996 and 1995 ($000's except per share data):
<CAPTION>
Quarter First Second Third Fourth
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1996:
Net sales $163,787 $156,691 $161,203 $175,386
Gross margin $ 40,443 $ 38,860 $ 41,994 $ 45,667
Income from operations $ 14,260 $ 12,296 $ 14,495 $ 15,593
Net income $ 5,542 $ 4,340 $ 5,635 $ 5,902
Primary income per share $ .33 $ .26 $ .34 $ .35
- -----------------------------------------------------------------------------------------------------------
1995:
Net sales $160,638 $144,240 $144,911 $162,569
Gross margin $ 38,219 $ 33,782 $ 35,768 $ 40,129
Income from operations $ 12,237 $ 9,036 $ 11,741 $ 14,614
Net income $ 4,162 $ 1,471 $ 3,607 $ 5,419
Primary income per share $ .25 $ .09 $ .22 $ .33
- -----------------------------------------------------------------------------------------------------------
</TABLE>
Results for 1995 include restructuring charges of $972,000, $589,000 and
$24,000 for the first, second and third quarters, respectively, and a credit to
restructuring charges of $105,000 for the fourth quarter.
Earnings per common share were based on the weighted average number of
shares outstanding for each period, and the sum of the quarters do not
necessarily equal the full year earnings per common share amount.
NOTE 15.
SEGMENT INFORMATION
The Company and its wholly-owned subsidiaries, as worldwide suppliers of
automotive parts and automotive related products, are engaged in only one
business segment. Geographic areas of operation are the United States (U.S.),
United Kingdom, Australia, Mexico and Argentina. Amounts for the U.S. include
those of the Company's Mexican subsidiaries which operate as an integral part of
the U.S. operations. Geographic distribution of operating data for the years
ended December 31, 1996, 1995 and 1994 are as follows ($000's):
<PAGE>
<TABLE>
<CAPTION>
U.S. Foreign Elimination Consolidated
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1996:
Sales to unaffiliated customers $602,730 $54,337 $ -- $657,067
Transfers between geographic areas 1,670 15,806 (17,476) --
- ---------------------------------------------------------------------------------------------
Net sales $604,400 $70,143 $(17,476) $657,067
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
Income before income taxes $36,384 $ 2,159 $ 226 $ 38,769
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
Identifiable assets $546,949 $45,980 $(11,358) $581,571
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
1995:
Sales to unaffiliated customers $556,194 $56,164 $ -- $612,358
Transfers between geographic areas 1,408 10,339 (11,747) --
- ----------------------------------------------------------------------------------------------
Net sales $557,602 $66,503 $(11,747) $612,358
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
Income before income taxes $ 24,262 $ 3,188 $ (639) $ 26,811
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
Identifiable assets $546,238 $34,881 $ (7,583) $573,536
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
1994:
Sales to unaffiliated customers $285,508 $ 2,438 $ -- $287,946
Transfers between geographic areas 34 192 (226) --
- ----------------------------------------------------------------------------------------------
Net sales $285,542 $ 2,630 $ (226) $287,946
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
Income before income taxes,
extraordinary loss and cumulative
effect of accounting change $ 28,157 $ 59 $ 59 $ 28,275
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
Identifiable assets $541,312 $50,198 $ (7,484) $584,026
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
</TABLE>
As a tier one or tier two supplier, sales of the Company's products for use
by three automotive manufacturers, either as original equipment or as
replacement parts, accounted for more than 10% of consolidated net sales for the
years ended December 31, 1996 and 1995. Sales to Customer A totaled $146,743,000
and $132,330,000, respectively, or 22%. Sales to Customer B totaled $95,336,000
and $95,910,000, or 15% and 16%, respectively. Sales to Customer C totaled
$66,336,000 and $58,376,000, respectively, or 10%. No one customer represented
more than 10% of the Company's consolidated net sales for 1994.
<PAGE>
To the Stockholders of Stant Corporation:
The Company maintains accounting and related internal control systems which are
intended to provide reasonable assurance that assets are safeguarded from loss
or unauthorized use and to produce records necessary for the preparation of
financial information. There are limits inherent in all systems of internal
control, and the cost of the systems should not exceed the expected benefits.
Through the use of a program of internal audits and through discussions with and
recommendations from its independent auditors the Company periodically reviews
these systems and controls and compliance therewith.
The Audit Committee of the Board of Directors, comprised entirely of
nonemployee directors, meets regularly with management, the internal auditors,
and the independent auditors to review the results of their work and to satisfy
itself that their responsibilities are being properly discharged. The internal
auditors and independent auditors have full and free access to the Audit
Committee and have discussions regarding appropriate matters, with and without
management present.
The primary responsibility for the integrity of financial information rests
with management. Certain valuations contained herein result, of necessity, from
estimates and judgments of management. The accompanying consolidated financial
statements, notes thereto, and other related information were prepared in
conformity with generally accepted accounting principles applied on a consistent
basis.
JACK P. REILLY THOMAS K. ERWIN
President and Senior Vice President
Chief Executive Officer and Chief Financial Officer
To the Board of Directors and Stockholders of Stant Corporation:
We have audited the accompanying consolidated balance sheets of Stant
Corporation and subsidiaries as of December 31, 1996 and 1995, and the related
consolidated statements of income, stockholders' equity and cash flows for each
of the three years in the period ended December 31, 1996. 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.
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, such consolidated financial statements present fairly, in
all material respects, the financial position of Stant Corporation and
subsidiaries as of December 31, 1996 and 1995, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1996 in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Cincinnati, Ohio
February 12, 1997
40
<TABLE>
Exhibit 21
DIRECT AND INDIRECT SUBSIDIARIES
OF
STANT CORPORATION
----------------------------
<CAPTION>
Jurisdiction of
Name % of Ownership Incorporation
- ---- -------------- ---------------
<S> <C> <C>
Epicor Industries, Inc. 100 Delaware
Aplicadores Mexicanos, S.A. de C.V. 100 Mexico
Auto Industrial de Partes, S.A. de C.V. 100 Mexico
Edelmann, S.A. de C.V. 100 Mexico
Fedco Automotive Components Company, Inc. 100 Delaware
Standard-Thomson Corporation 100 Delaware
Thomson International Corporation 100 Delaware
Stant Manufacturing Inc. 100 Delaware
Trico Products Corporation 100 New York
Trico Latinoamericana S.A. 100 Argentina
Trico Holding Corporation 100 Delaware
Trico Technologies Corporation 100 Delaware
Trico Componentes, S.A. de C.V. 100 Mexico
Trico International Limited 100 Guam
Trico Limited 100 U.K.
Trico Developments Co. Ltd. 100 U.K.
Trico Products Ltd. 100 U.K.
Trico Pty. Ltd. 100 Australia
</TABLE>
E-89
Exhibit 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement No.
33-91812 of Stant Corporation on Form S-8 of our reports dated February 12,
1997, appearing in and incorporated by reference in this Annual Report on Form
10-K of Stant Corporation for the year ended December 31, 1996.
DELOITTE & TOUCHE LLP
March 26, 1997
Cincinnati, Ohio
E-90
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> This information contains summary financial
information extracted from Stant Corporation's
annual report on Form 10-K for the year ended
12-31-96 and is qualified in its entirety by
reference to such Form 10-K
</LEGEND>
<CIK> 0000906523
<NAME> Stant Corporation
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-mos
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-START> Jan-1-1996
<PERIOD-END> Dec-31-1996
<CASH> 3,293
<SECURITIES> 0
<RECEIVABLES> 112,872
<ALLOWANCES> 0
<INVENTORY> 95,359
<CURRENT-ASSETS> 224,683
<PP&E> 260,369
<DEPRECIATION> 73,117
<TOTAL-ASSETS> 581,571
<CURRENT-LIABILITIES> 146,115
<BONDS> 187,533
0
0
<COMMON> 162
<OTHER-SE> 200,400
<TOTAL-LIABILITY-AND-EQUITY> 581,571
<SALES> 657,067
<TOTAL-REVENUES> 657,067
<CGS> 490,103
<TOTAL-COSTS> 490,103
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 18,516
<INCOME-PRETAX> 38,769
<INCOME-TAX> 17,350
<INCOME-CONTINUING> 21,419
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 21,419
<EPS-PRIMARY> 1.28
<EPS-DILUTED> 1.26
</TABLE>
