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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
January 31, 1998 Commission File No. 1-13026
BLYTH INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 36-2984916
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
100 Field Point Road
Greenwich, Connecticut 06830
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (203) 661-1926
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of exchange on which registered
Common Stock, $0.02 par value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
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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 April 13, 1998, the aggregate market value of the voting stock held
by non-affiliates of the registrant was approximately $1,187,039,777, based on
the closing price of the registrant's Common Stock on the New York Stock
Exchange on such date and based on the assumption, for purposes of this
computation only, that all of the registrant's directors and executive officers
are affiliates.
As of April 13, 1998, there were outstanding 49,120,027 shares of Common
Stock, $0.02 par value.
DOCUMENTS INCORPORATED BY REFERENCE
(1) Portions of the registrant's annual report to shareholders for the year
ended January 31, 1998 (Incorporated into Part II)
(2) Portions of the registrant's definitive proxy statement issued in
connection with the annual meeting of shareholders to be held on June 9,
1998 (Incorporated into Part III)
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TABLE OF CONTENTS
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PART I
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Item 1. Business.............................................................................................. 1
Item 2. Properties............................................................................................ 13
Item 3. Legal Proceedings..................................................................................... 13
Item 4. Submission of Matters to a Vote of Security Holders................................................... 14
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PART II
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Item 5. Market for Registrant's Common Equity and Related Stockholder Matters................................. 14
Item 6. Selected Financial Data............................................................................... 14
Item 7. Management's Discussion and Analysis of Financial Condition and Results of
Operations........................................................................................... 14
Item 8. Financial Statements and Supplementary Data........................................................... 14
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure........................................................................................... 15
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PART III
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Item 10. Directors and Executive Officers of the Registrant.................................................... 15
Item 11. Executive Compensation................................................................................ 15
Item 12. Security Ownership of Certain Beneficial Owners and Management........................................ 15
Item 13. Certain Relationships and Related Transactions........................................................ 15
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PART IV
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Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K....................................... 16
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PART I
Item 1. Business
Blyth Industries, Inc. ("Blyth" or the "Company") designs, manufactures,
markets and distributes an extensive line of candles and home fragrance
products, including scented candles, outdoor citronella candles, potpourri
and environmental fragrance products, and markets a broad range of related
candle accessories and decorative gift bags and tags. These products are sold
under various brand names, including the names Colonial Candle of Cape
Cod-Registered Trademark-, PartyLite Gifts-Registered Trademark-, Carolina
Designs-TM-, Ambria-TM-, Canterbury-TM-, Florasense-Registered Trademark-,
Jeanmarie-Registered Trademark- and FilterMate-TM-. The Company is also a
leading producer of portable heating fuel products sold under the
Sterno-Registered Trademark- and Handy Fuel-Registered Trademark- brand
names. The Company markets its products through a wide variety of
distribution channels, including a network of sales representatives and home
party plan independent sales consultants serving the consumer market, and
independent sales representatives and distributors serving the institutional
market. Consumable products, which include candles, scented candles, outdoor
citronella candles, potpourri, other fragrance products, portable heating
fuels and decorative gift bags and tags, account for approximately 60% of the
Company's net sales and candle accessories account for the balance of net
sales. The Company believes that it is a leading supplier in the natural home
fragrance industry based on net sales and the breadth of distribution
channels served.
The Company's net sales have grown substantially in the last five years,
with internal growth and acquisitions contributing approximately 85% and 15%,
respectively, to such growth. Internal growth has been generated by increased
sales to the consumer market (including increased sales of acquired product
lines), the introduction of new products and product line extensions and
geographic expansion. The Company has successfully integrated numerous
acquisitions and investments into its operations since its formation in 1977.
In May 1997, the Company acquired Endar Corp., a manufacturer of potpourri,
scented candles and other fragrance products. The Company issued 1,900,786
shares of its Common Stock in the transaction. In late December 1997, the
Company acquired the Sterno-Registered Trademark- and Handy Fuel-Registered
Trademark- portable heating fuels product lines, including related
manufacturing and distribution facilities, for $65.0 million.
The business strategy of the Company has evolved into a strategy focusing
on the broad category of home fragrance and candle products. This strategy flows
from the Company's belief that customers "wardrobe" their homes through the use
of candles, potpourri and other fragrance products in different fragrances,
colors and forms. As a result, the Company believes that candles and potpourri
are replacing scented air-freshener products. The Company's strategy is to sell
high-quality fragrance and candle products, with a primary focus on the global
consumer markets, which provide greater opportunities for growth and product
differentiation and higher profit margins than does the institutional market.
The Company believes that increased expenditures on the home and garden,
increased emphasis on home entertaining and home fragrance and the gain in
popularity of traditional, natural and now scented, products have resulted in
growth in demand for candles and related products and, recently, scented
products. The Company's operating strategy has been, and will continue to be (1)
to focus on the consumer market, (2) to grow through new product development and
geographic expansion, (3) to market its products through all major domestic
distribution channels with product offerings tailored to the requirements of
each channel, (4) to emphasize customer service, (5) to realize efficiencies and
cost improvements in manufacturing and distribution and (6) to grow through
international expansion and acquisitions. The Company has been successful in
identifying new product opportunities to balance its sales and operating results
throughout the fiscal year. The Company has identified international expansion
as a key opportunity for future growth, and has recently completed construction
of a
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manufacturing facility in Cumbria, England. The Company also recently commenced
distribution from a leased facility in the Netherlands, and has commenced
construction of an owned European distribution facility in the Netherlands.
Strategy
Consumer Market Focus
The Company focuses on the consumer market, which provides greater
opportunities for growth and product differentiation and higher profit margins
than do other markets for the Company's products. Sales to the consumer market
represented over 90% of the Company's net sales for fiscal 1998. The Company
expects that, as in recent years, its future growth will be generated primarily
by sales of products sold into the faster growing consumer market in North
America and Europe, rather than the domestic institutional market which has
grown more slowly and which the Company expects will continue to do so.
Growth Through New Product Development
The Company continuously introduces new products to satisfy changing
consumer tastes. The Company introduces new product offerings each year,
which new products have typically accounted for at least 15% of the Company's
net sales in the first full year following introduction. Examples of new
products introduced by the Company in 1997 include the introduction of
aromatherapy candles under good, better and best brand names, the
introduction of self-adhesive gift tags by Jeanmarie-Registered
Trademark-, the expansion of the Canterbury-TM- brand to an expanding base of
food, drug and mass merchants and the Company's new brand, Fragrance
Originals-TM-, a coordinated line of high-end candles, aromatherapy candles
and potpourri.
Marketing Presence in All Major Domestic Distribution Channels
The Company markets its products in the consumer market through sales to
department and gift stores, specialty chains and mass merchandisers and direct
sales to consumers through its home party plan. The Company also markets its
products to distributors and retailers serving the institutional market. The
Company tailors its products, designs, packaging and price to satisfy the
varying demands of its customers within each distribution channel. The Company
believes that its presence in all major distribution channels provides a
competitive advantage with respect to the successful introduction of new
products that appeal to customers in more than one distribution channel. The
Company plans to increase penetration of distribution channels in those
geographic areas in North America where it believes opportunities exist. For
example, the Company's strategic partnering arrangement with Hallmark Cards,
Incorporated has allowed the Company to market several of the Company's key
brands through many of the various stores that carry Hallmark products.
Emphasis on Customer Service
The Company has developed systems to insure that the desired finished
products are available for timely shipment to its wide variety of customers with
different product needs and purchasing patterns. The Company seeks to maintain
its inventory at levels sufficient to fill completely all customer orders. For
its department and gift store and specialty chain customers, the Company has
developed a pick
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and pack system that allows it to ship small shipments containing a variety
of products to a large number of customers. For its mass merchant and
institutional customers, the Company offers just-in-time delivery through an
interactive electronic data interchange program, and has developed programs
and standards to improve and measure customer service. For home party plan
customers, the Company has focused on timely and complete shipments of
individual customer orders. This is achieved, in part, through the use of a
pick and pack system. Daily and monthly measures of turnaround time, percent
on-time delivery and percent of product back ordered are monitored in order
to continuously improve customer service.
Efficiencies and Cost Improvements in Manufacturing and Distribution
The Company is continuously engaged in efforts to reduce its costs
through more efficient production and distribution methods and technological
advancements. The Company has consolidated and rationalized acquired
equipment and facilities and invested in new, more advanced equipment in
order to lower manufacturing costs, improve product quality and significantly
increase manufacturing capacity to meet sales growth. To this end, the
Company has more than doubled its manufacturing and distribution capacity in
recent years. Acquired manufacturing operations have historically been
integrated into the Company's existing operations based on manufacturing
process. In fiscal 1998, the Company completed construction of a 100,000
square foot owned manufacturing facility in Cumbria, England, and a 400,000
square foot owned distribution facility in Elkin, North Carolina, and opened
a 350,000 square foot leased distribution facility in Carol Stream, Illinois.
As part of the acquisition of Endar, Endar's various leased manufacturing and
distribution facilities, aggregating over 500,000 square feet, became
available to the Company. Also, the Company acquired the 120,000 square foot
Sterno-Registered Trademark- and Handy Fuel-Registered
Trademark-manufacturing and distribution facility in December 1997. Finally,
the Company has purchased land and commenced construction of a European
distribution facility of approximately 300,000 square feet in the Netherlands
which is expected to be operational in mid-1999.
Growth Through International Expansion
Since 1990, the Company's international business has grown at a faster rate
than sales in the United States, and international net sales (excluding sales by
Colony Gifts, which is not a consolidated subsidiary) now represent over 15% of
the Company's net sales. The international operations of the Company include (1)
exports of branded products sold through Company sales managers and independent
sales agents, competing in the candle markets of Canada, Europe, Latin America
and the Pacific Rim, to distributors, department and gift stores, mass
merchandisers and food service distributors, (2) sales by PartyLite independent
sales consultants of branded products directly to consumers in Canada and
certain European countries, and (3) sales by Colony Gifts, Fragrant Memories and
Eclipse Candles throughout Europe and elsewhere. The Company currently plans to
continue to expand internationally through the establishment of foreign-based
marketing and distribution operations and through continued expansion of its
home party plan activities. In particular, the Company's home party plan
activities have been successful in gaining entry in selected countries. As noted
above, in order to further support its international sales, the Company has
recently completed a 100,000 square foot manufacturing facility in England and
has commenced construction of a European distribution facility of approximately
300,000 square feet in the Netherlands.
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Growth Through Acquisitions
The Company regularly evaluates acquisition opportunities in light of
the anticipated impact on current new products, the Company's planned growth
rate and the complementary nature of the prospective acquired business. There
can be no assurance that the Company will be able to continue to identify
suitable acquisition candidates, to consummate acquisitions on terms
favorable to the Company, to finance acquisitions or successfully to
integrate acquired operations. In May 1997, the Company acquired Endar Corp.,
a manufacturer of potpourri, scented candles and other fragrance products. In
December 1997, the Company acquired the Sterno-Registered Trademark- and
Handy Fuel-Registered Trademark- portable heating fuels product lines,
including related manufacturing and distribution facilities, from
Colgate-Palmolive Company.
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Products
Below is a summary of the Company's principal products and the brand names
under which they are sold:
Key to Brands
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A - Colonial Candle of Cape Cod-Registered Trademark- G - Canterbury-TM- N - Eternalux-Registered Trademark-
B - PartyLite Gifts-Registered Trademark- H - Florasense-Registered Trademark- O - FilterMate-TM-
C - Fragrance Originals-TM- I - Old Harbor-Registered Trademark- P - FanMate-Registered Trademark-
D - Original Recipe-TM- J - Colony-Registered Trademark-(UK)* Q - New Ideas-TM-
E - Carolina Designs-TM- K - Eclipse-TM-(UK)* R - Sterno-Registered Trademark-
F - Ambria-TM- L - Jeanmarie-Registered Trademark- S - Handy Fuel-Registered
M - Candle Corporation of America-TM- Trademark-
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B R A N D S
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PRODUCTS A B C D E F G H I J K L M N O P Q R S
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Candles X X X X X X X X X X X X X
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Candle Accessories X X X X X X X X X
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Aromatherapy Candles X X X X X X X X X
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Potpourri Products X X X X X X X
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Citronella Products X X X X X X X
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Air Fresheners & Sprays X X X X X X X X
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Lamps, Food Warmers & Portable X X X X X X
Heating Fuel
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Decorative Gift Bags and Tags X
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* The Colony-Registered Trademark- and Eclipse Candles-TM- trademarks are
registered in the United Kingdom and other countries outside of the
United States. Blyth's products under the Colony-Registered Trademark-
and Eclipse Candles-TM- marks are offered and sold only outside of the
United States, and are not available in the United States.
Colony-Registered Trademark- and Eclipse Candles-TM- brand products sold
in the United States are in no way associated with Blyth, and are made
and sold by another company.
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Sales Method - Generally
Sales in the consumer market are made to the retail customer through
independent sales representatives, Company sales managers and distributors. The
Company utilizes independent sales consultants in direct selling to the
consumer. Sales in the institutional market are made through independent food
service distributors, Company sales managers and independent sales
representatives.
The Company markets its products through a variety of distribution
channels, and tailors its products, designs, packaging and prices to satisfy the
varying demands of its customers within each distribution channel. The Company's
consumer products consist of products for everyday use and products for seasonal
use.
Consumer Market
Sales to the consumer market accounted for over 90% of the Company's net
sales in fiscal 1998. The Company seeks to serve the needs of a broad range of
consumers by marketing different products and different brand names at different
price points to department stores, gift stores, specialty chains, direct sales
customers and mass merchants. The Company believes that its success in selling
to the broad consumer market is the result of a line of competitive and broad
product offerings, the perceived value of its products and name brands, name
recognition, product innovation and a reputation for dependable customer
service. The Company also sells various candles, including votives and
filled-glass containers for devotional use in the home, to the religious segment
of the consumer market in the United States and Puerto Rico.
Institutional Market
The Company believes that it is a leading supplier of tapers, filled-glass
candles, tealights, food warmers, portable heating fuels and liquid wax lamps
and replacement cartridges for such lamps to the domestic institutional
industry, which includes restaurants and other institutional customers.
New Product Development
The Company continuously develops and introduces new products to satisfy
changing consumer tastes. The new product development process is managed on a
Company-wide basis by a team comprised of brand managers, product managers,
designers, foreign sourcing personnel, laboratory technicians, manufacturing
engineers and sales managers. New product concepts are directed to the marketing
departments from all areas within the Company and from the Company's independent
sales representatives. The new product development process, including market
research, comparative analysis, engineering specifications, feasibility studies,
testing and evaluation, can require from 3 to 18 months to complete.
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Sales and Marketing
The Company maintains sales offices throughout North America and Europe
utilizing full-time sales and sales training managers who call on customers,
independent sales representative organizations and distributors. The Company
also has marketing staffs located in various offices in North America and Europe
engaged in developing strategies relating to new product development, pricing,
distribution, advertising and sales promotion. The Company's marketing staff is
organized around product brands.
United States Consumer Market
The Company markets its products to department and gift stores, specialty
chains and mass merchandisers through a network of independent sales
representatives and Company sales managers. The Company supports these
independent sales representatives by providing them with comprehensive product
catalogues and samples to market the Company's regular and seasonal product
lines. The Company believes that its competitive position in these markets is
enhanced by its ability to respond quickly to new orders and its ability to
assist customers through inventory management and control and to satisfy
delivery requirements through on-line ordering. The Company has effectively
utilized just-in-time product delivery, through an interactive electronic data
interchange ("EDI") program implemented with many customers. EDI allows the
Company to track and respond to certain customers' direct orders on a continuous
basis.
In order to increase its sales to the consumer market, the Company develops
comprehensive merchandising programs for department and gift stores and
specialty chains and mass merchandisers. The Company develops merchandising
programs targeted to specific chains, including in-store display fixtures,
cooperative advertising programs and planograms for improving turnover of the
Company's products. The Company also affixes tags, tickets, bar codes and other
merchandising aids to products to certain customers' specifications.
The Company sells its products through a network of over 20,000 active
independent sales consultants (in the United States alone) through the home
party plan method of selling. The PartyLite independent sales consultants
identify hostesses for parties, who invite their friends to attend, and the
hostess, in return, receives gifts of, and discounts on, Company merchandise.
The independent sales consultants receive gross earnings based on sales of the
Company's products at parties organized by them. No products are inventoried by
independent sales consultants, other than samples that are not for resale. Since
many of the Company's home party plan sales are seasonal or tied to promotional
programs, the demand for these products varies by the strength of the season and
the programs, with October, November and December typically being the highest
selling months.
The Company sells its products through distributors and retailers serving
the consumer market for devotional candles for use in the home. These
distributors, in turn, sell to a wide variety of retail establishments,
including national and regional food store chains and independent local stores.
The Eternalux-TM- brand name is supported with product catalogues and other
promotional programs. Some of the Company's sales are made directly to
retailers.
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International Consumer Market
The Company markets its products outside the U.S. to department and gift
stores, specialty chains, and mass merchandisers through a network of
independent sales representatives and sales managers, including
representatives and managers of Colony Gift Corporation Limited and Eclipse
Candles, Ltd. Similar to its practices in the U.S., the Company supports its
marketing efforts with comprehensive product catalogues and training
programs. The Company also sells its products through a network of
independent sales consultants through the home party plan method of selling.
Institutional Market
A significant majority of the Company's sales to the domestic institutional
market are made through a network of independent institutional dealers. The
dealers, in turn, sell to a wide variety of institutional establishments,
including national and regional hotel chains, national restaurant chains and
individually-owned hotels and restaurants. The Company's dealer network sells
the Company's products to institutions utilizing the Company's comprehensive
product catalogue. Company sales managers assist in the training of dealers and
work closely with the dealers to promote the Company's products and provide
direct assistance to food service establishments in determining their wax,
liquid wax and portable heating fuel product needs. Certain of the Company's
institutional sales are made directly by Company salespersons to major users of
candles, liquid wax lamps and portable heating fuel products, such as restaurant
and hotel chains. Finally, the Company also markets to independent institutional
dealers through independent sales representatives.
Institutional customers require timely delivery of a broad range of items,
and the Company believes that its leading position in the institutional
distribution channel is the result, in part, of the breadth of its product
offerings, its strategically located manufacturing facilities and related
full-line distribution centers and its close working relationship with dealers.
In order to encourage institutional dealers to carry a larger number of Company
products, the Company utilizes program selling, which involves unit sales of set
groups of products. The Company believes that its installed base of products at
institutions provides the Company with a competitive advantage in this market.
Customers
The customers for the Company's products include department and gift stores
and specialty chains, mass merchandisers, distributors serving the institutional
market and individual consumers (through the home party plan network). No single
customer accounts for 10% or more of the Company's sales. In each of the
channels of distribution in which the Company does business, its five largest
customers have been customers of the Company for at least five years.
Manufacturing and Distribution
The Company manufactures virtually all of its candle and fragrance
products. The Company is continuously engaged in efforts to reduce its
manufacturing costs and to improve quality through more efficient production
methods and technological advancements. The Company employs industrial engineers
whose responsibilities include improving and upgrading the Company's
manufacturing facilities, equipment and processes, as well as engineering new
products and implementing the large
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number of changes continuously being made to the Company's product designs,
sizes and shapes. The manufacture of the Company's products involves the use of
various highly automated processes and technologies, as well as certain hand
crafting and finishing. During recent years, the Company has invested in new
automated machinery that the Company believes has resulted, and will continue to
result, in significant cost savings and capacity expansion.
The Company sources candle accessories and its decorative gift bags and
tags from independent third parties in the Pacific Rim, Europe and Mexico, as
well as in the United States, and maintains purchasing offices in Hong Kong and
Taiwan for Pacific Rim sourcing.
To maximize distribution efficiencies, the Company operates stand-alone
distribution facilities in addition to distribution facilities in its
manufacturing plants. The Company has expanded its manufacturing and
distribution capabilities in order to support its anticipated growth. The
Company anticipates adding additional distribution facilities and production
equipment in fiscal 1999 to meet current and anticipated volume level.
All of the raw materials used by the Company, principally petroleum-based
wax, have historically been available in adequate supply from multiple sources.
However, for certain raw materials, there may be temporary shortages due to
weather or other factors, including disruptions in supply caused by raw material
transportation or production delays. Such shortages have not previously had, and
are not expected to have, a material adverse effect on the Company's operations.
Competition
The Company's business is highly competitive, with the principal
competitive factors being product quality, delivery time, customer service and
price. The candle and fragrance products industry is highly fragmented, with
numerous suppliers serving one or more of the distribution channels served by
the Company. The Company believes that it is the only supplier of candles
serving the breadth of distribution channels that it serves. Candle Lite (a unit
of Lancaster Colony Corporation), S.C. Johnson & Co., Inc., Dial Corporation,
The Yankee Candle Company, Inc., Lamplight Farms, Aromatique, Tsumura
International, Inc. and Seasons, Inc. are the significant suppliers of candles
and home fragrance products to the consumer retail market. The Company's
competitors in the institutional market are comprised mostly of smaller
manufacturers of a special or narrow range of products. Because there are
relatively low barriers to entry to the candle and fragrance product industry,
the Company may face future competition from other companies, which may have
substantially greater financial and marketing resources than those available to
the Company. From time to time during the year-end holiday season, the Company
experiences competition from candles manufactured in foreign countries,
particularly China. In addition, certain of the Company's competitors focus on a
particular geographic or single-product market and attempt to gain or maintain
market share solely on the basis of price.
Employees
As of March 31, 1998, the Company had approximately 3,000 full-time
employees. Of those, approximately 200 are non-salaried, hourly workers in the
Company's Chicago, Illinois and Brooklyn, New York facilities represented by
Local 777 of the Teamsters and Local 422-S of the AFL-CIO, respectively, under
contracts that will expire in June 2000 and June 1999, respectively. The
remaining
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employees are salaried and non-salaried non-unionized employees. The Company
believes that its employee relations are good. Since its formation in 1977, the
Company has never experienced a work stoppage.
Trademarks
The Company owns numerous United States trademark registrations and has
numerous United States trademark applications pending in the United States
Patent and Trademark Office with respect to certain of its products. In
addition, the Company from time to time registers certain of its trademarks in
certain foreign countries. All of the Company's United States trademark
registrations can be maintained and renewed provided that the trademarks are
still in use for the goods and services covered by such registrations. The
Company regards its trademarks as valuable assets. Although the Company owns
certain patents which it considers valuable, its business is not dependent upon
any single patent or group of patents.
Year 2000 Matters
The Company continues to assess the impact of the Year 2000 on its
information systems, including the Year 2000 readiness of those it conducts
business with, and is developing and implementing a Year 2000 compliance
strategy. The Company expects increased spending to bring its systems into Year
2000 compliance, but Year 2000 related expenses are not expected to be material
to the Company's results of operations and financial position and are being
expensed as incurred. However, if modifications and conversions by the Company
and those it conducts business with are not completed in a timely manner, the
Year 2000 issue may have a material adverse affect on the Company's business,
results of operations and financial position.
Other Information
The Company is including the following cautionary statement in this Report
to make applicable, and to take advantage of, the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995 for any forward-looking
statements made by, or on behalf of, the Company. Forward-looking statements
include statements concerning plans, objectives, goals, strategies, future
events or performance and underlying assumptions and other statements which are
other than statements of historical facts. From time to time, the Company and
its representatives may publish or otherwise make available forward-looking
statements of this nature. All such forward-looking statements, whether written
or oral, and whether made by or on behalf of the Company, are expressly
qualified by the following cautionary statements. Forward-looking statements
involve risks and uncertainties which would cause actual results or outcomes to
differ materially from those expressed in the forward-looking statements. Such
forward-looking statements are expected to be based on various assumptions, many
of which are based, in turn, upon further assumptions. There can be no assurance
that management's expectations, beliefs or projections will occur or be achieved
or accomplished. In addition to other factors and matters discussed elsewhere in
this Report and the Company's other public filings and statements, the following
are important factors that, in the view of the Company, could cause actual
results to differ materially from those discussed in the Company's
forward-looking statements. The
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Company disclaims any obligation to update any forward-looking statements, or
the following factors, to reflect events or circumstances after the date of this
Report.
Risk of Inability to Maintain Growth Rate
The Company has grown substantially in recent years. The Company expects
that its future growth will continue to be generated primarily by sales to the
faster growing consumer market, rather than the institutional market, which has
grown more slowly than the consumer market and which the Company expects will
continue to do so. The Company believes that its ability to continue to grow
will depend on continuing market acceptance of its existing products, the
successful development and introduction of new products, the increase in
production and distribution capacity to meet demand and the continued successful
implementation of its strategy. The candle industry is driven by consumer
tastes. Accordingly, there can be no assurance that the Company's existing or
future products will maintain or achieve market acceptance. Although the
Company's strategy has been successful to date, the Company expects that, as the
Company grows, its rate of growth will be less than its historic growth rate. In
addition, the Company has grown in part through acquisitions and there can be no
assurance that the Company will be able to continue to identify suitable
acquisition candidates, to consummate acquisitions on terms favorable to the
Company, to finance acquisitions or successfully to integrate acquired
operations.
Ability to Respond to Increased Product Demand
The Company's continuing and significant internal growth has necessitated
increases in personnel, expansion of its production and distribution facilities
and enhancement of its management information systems. The Company's ability to
meet future demand for its products in a timely and efficient manner will be
dependent upon its success in (1) training, motivating and managing new
employees, including a number of new senior managers, (2) bringing new
production and distribution facilities on line in a timely manner, (3) improving
management information systems in order to continue to be able to respond
promptly to customer orders and (4) improving its ability to forecast
anticipated product demand in order to continue to fill customer orders
promptly. If the Company were unable to meet future demand for its products in a
timely and efficient manner, its operating results could be materially adversely
affected.
Risks Associated with International Sales and Foreign-Sourced Products.
The Company sources a portion of its candle accessories and decorative gift
bags from independent manufacturers in the Pacific Rim, Europe and Mexico. In
addition, since 1990, the Company's international business has grown at a faster
rate than sales in the United States. The Company is subject to the following
risks inherent in foreign sales and manufacturing: fluctuations in currency
exchange rates; economic and political instability; transportation delays;
difficulty in maintaining quality control; restrictive actions by foreign
governments; nationalizations; the laws and policies of the United States
affecting importation of goods (including duties, quotas and taxes); and trade
and foreign tax laws.
Dependence on Key Management Personnel
The Company's success depends to a significant degree upon the continued
contributions of its key management personnel, particularly its Chairman, Chief
Executive Officer and President, Robert B. Goergen. The Company does not have
employment contracts with any of its key management
11
<PAGE>
personnel, nor does the Company maintain any key person life insurance policies.
The loss of any of the Company's key management personnel could have a material
adverse effect on the Company.
Competition
The Company's business is highly competitive, both in terms of price and
new product introductions. The candle and fragrance products industry is highly
fragmented, with numerous suppliers serving one or more of the distribution
channels served by the Company. Because there are relatively low barriers to
entry to the candle and fragrance products industry, the Company may face
increased future competition from other companies, some of which may have
substantially greater financial and marketing resources than those available to
the Company. From time to time during the year-end holiday season, the Company
experiences competition from candles manufactured in foreign countries,
particularly China. In addition, certain of the Company's competitors focus on a
particular geographic or single-product market and attempt to gain or maintain
market share solely on the basis of price.
12
<PAGE>
Item 2. Properties
The following table sets forth the location and approximate square footage
of the Company's major manufacturing and distribution facilities:
<TABLE>
<CAPTION>
Approximate Square Feet
-----------------------
Location Use Owned Leased
<S> <C> <C> <C>
Batavia, Illinois............... Manufacturing 120,000 --
Brooklyn, New York.............. Distribution -- 30,000
Carol Stream, Illinois.......... Distribution -- 492,000
Carson, California.............. Manufacturing and -- 38,000
related distribution
Chicago, Illinois............... Manufacturing and 167,900 --
related distribution
Cumbria, England................ Manufacturing 100,000 --
Diessen, Netherlands............ Distribution -- 78,000
Elkin, North Carolina........... Manufacturing and 690,000 --
related distribution
Heidelberg, Germany............. Distribution -- 37,000
Hialeah, Florida................ Manufacturing and 22,300 --
related distribution
Hyannis, Massachusetts.......... Manufacturing 69,000 --
Monterrey, Mexico............... Manufacturing -- 85,000
Montgomery, Illinois............ Distribution -- 238,000
Plymouth, Massachusetts......... Distribution 58,700 --
Temecula, California............ Manufacturing and -- 316,000
related distribution
Texarkana, Texas................ Manufacturing and 120,000 --
related distribution
Thomasville, Georgia............ Manufacturing and 66,000 --
related distribution
Tijuana, Mexico................. Manufacturing -- 120,000
Tulsa, Oklahoma................. Distribution 98,000 59,400
Weston-Super-Mare, England...... Manufacturing and -- 50,000
related distribution
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
</TABLE>
The Company's executive offices, administrative offices and outlet stores
are generally located in leased space (except for certain offices located in
owned space aggregating approximately 100,000 square feet). All of the Company's
properties are currently being utilized for their intended purpose. The Company
has commenced construction of a European distribution facility of approximately
300,000 square feet in Tilburg, Netherlands, which is expected to be operational
in mid-1999.
Item 3. Legal Proceedings
The Company is involved in litigation arising in the ordinary course of its
business. In the opinion of the Company's management, existing litigation will
not have a material adverse effect on the Company's financial position or
results of operations.
13
<PAGE>
Item 4. Submission of Matters to a Vote of Security Holders
The Company's 1998 annual meeting of stockholders will be held on June 9,
1998. No matter was submitted to a vote of security holders in the fourth
quarter of the fiscal year ended January 31, 1998.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
The information required by this Item is incorporated herein by reference
to page 1 of the Company's Annual Report to Shareholders for the fiscal year
ended January 31, 1998. The referenced page of such annual report has been filed
as part of Exhibit 13 to this report. Such information is incorporated herein by
reference, pursuant to General Instruction G(2).
During the fourth quarter of the fiscal year ended January 31, 1998, the
Company issued the following securities in transactions that were not registered
under the Securities Act of 1933, as amended (the "Securities Act"):
(1) During January, 1998, the Company issued an aggregate of 522 shares of
Common Stock to 132 employees as part of a one-time stock bonus program. The
issuance of Common Stock as part of the stock bonus was not registered on the
basis that the award of stock as a one-time bonus to employees does not require
registration because no "offer" or "sale" is deemed to occur.
Item 6. Selected Financial Data
The information required by this Item is incorporated herein by reference
to page 10 of the Company's Annual Report to Shareholders for the fiscal year
ended January 31, 1998. The referenced page of such annual report has been filed
as part of Exhibit 13 to this report. Such information is incorporated herein by
reference, pursuant to General Instruction G(2).
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The information required by this Item is incorporated herein by reference
to pages 11 through 17 of the Company's Annual Report to Shareholders for the
fiscal year ended January 31, 1998. The referenced pages of such annual report
have been filed as part of Exhibit 13 to this report. Such information is
incorporated herein by reference, pursuant to General Instruction G(2).
Item 8. Financial Statements and Supplementary Data
The information required by this Item is incorporated herein by reference
to pages 18 through 31 of the Company's Annual Report to Shareholders for the
fiscal year ended January 31, 1998. The referenced pages of such annual report
have been filed as part of Exhibit 13 to this report. Such information is
incorporated herein by reference, pursuant to General Instruction G(2).
14
<PAGE>
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
On April 8, 1997, the Board of Directors of the Company, acting upon the
recommendation of its Audit Committee, appointed Coopers & Lybrand L.L.P. as the
independent accountants of the Company for the fiscal year ended January 31,
1998, and determined not to engage Grant Thornton LLP ("Grant Thornton") as the
independent certified public accountants of the Company for the fiscal year
ended January 31, 1998. Grant Thornton had been previously engaged to audit the
Company's financial statements for seven years, including the fiscal year ended
January 31, 1997. Grant Thornton's report on the financial statements of the
Company for the fiscal years ended January 31, 1996 and January 31, 1997 did not
contain any adverse opinion or disclaimer of opinion and was not qualified or
modified as to uncertainty, audit scope or accounting principles. There were no
disagreements with Grant Thornton on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or procedure, which
disagreements, if not resolved to Grant Thornton's satisfaction, would have
caused Grant Thornton to make reference to the subject matter of the
disagreement(s) in connection with its reports on the Company's financial
statements. Pursuant to a letter from Grant Thornton to the Securities and
Exchange Commission (the "SEC"), dated May 2, 1997, a copy of which is attached
as Exhibit 16 to Blyth's Current Report on Form 8-K/A filed on the same date
with the SEC, Grant Thornton agrees with the above statements.
PART III
Item 10. Directors and Executive Officers of the Registrant
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management
Item 13. Certain Relationships and Related Transactions
The information required by Items 10 through 13 is included in the
Company's definitive proxy statement dated April 29, 1998, on pages 3 through
11. Such information is incorporated herein by reference, pursuant to General
Instruction G(3).
15
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a)(1). Financial Statements
The following consolidated financial statements are contained on the
indicated pages of this report:
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
Report of Independent Accountants............................... *
Report of Independent Certified Public Accountants.............. *
Statements:
Consolidated Balance Sheets................................ *
Consolidated Statements of Earnings........................ *
Consolidated Statements of Stockholders' Equity............ *
Consolidated Statements of Cash Flows...................... *
Notes to Consolidated Financial Statements................. *
</TABLE>
- ----------
* Incorporated herein by reference to the appropriate portions of the
Company's Annual Report to Shareholders for the fiscal year ended January
31, 1998. (See Part II.)
(a)(2). Financial Statement Schedules
The following financial statement schedule is contained on the indicated
pages of this report:
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
Report of Independent Accountants............................... S-1
Report of Independent Certified Public Accountants.............. S-2
Allowance for Doubtful Receivables.............................. S-3
</TABLE>
All other schedules are omitted because they are inapplicable or the
requested information is shown in the consolidated financial statements or
related notes.
(a)(3). Exhibits
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit
----------- ----------------------
<S> <C>
3.1* Restated Certificate of Incorporation of the Registrant
3.2* Restated By-laws of the Registrant
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit
----------- ----------------------
<S> <C>
4.1+ Amended and Restated 1994 Employee Stock Option Plan of the
Registrant (incorporated by reference to Exhibit 4.1 to the
Registrant's Quarterly Report on Form 10-Q for the fiscal quarter
ended July 31, 1996)
4.1(a)+ Form of Proposed Amended and Restated 1994 Employee Stock Option
Plan of the Registrant (incorporated by reference to Exhibit 4.1
to the Registrant's Current Report on Form 8-K/A filed April 20,
1998)
4.2+ Form of Nontransferable Incentive Stock Option Agreement under
the Amended and Restated 1994 Employee Stock Option Plan of the
Registrant (incorporated by reference to Exhibit 4.2 to the
Registrant's Quarterly Report on Form 10-Q for the fiscal quarter
ended July 31, 1996)
4.3+ Form of Nontransferable Non-Qualified Stock Option Agreement
under the Amended and Restated 1994 Employee Stock Option Plan of
the Registrant (incorporated by reference to Exhibit 4.3 to the
Registrant's Quarterly Report on Form 10-Q for the fiscal quarter
ended July 31, 1996)
4.4+ 1994 Stock Option Plan for Non-Employee Directors of the
Registrant (incorporated by reference to Exhibit 4.4 to the
Registrant's Quarterly Report on Form 10-Q for the fiscal quarter
ended July 31, 1996)
4.5*+ Form of Stock Option Agreement under the 1994 Stock Option Plan
for Non-Employee Directors of the Registrant
10.1 Credit Agreement, dated as of October 17, 1997, among the
Registrant, the Banks listed therein, Morgan Guaranty Trust
Company of New York, as documentation agent, and Bank of America
National Trust and Savings Association, as administrative agent
(incorporated by reference to Exhibit 10.1 to the Registrant's
Quarterly Report on Form 10-Q for the fiscal quarter ended
October 31, 1997)
10.2 Note Purchase Agreement, dated July 7, 1995 (the "Note Purchase
Agreements"), relating to the 7.54% Senior Notes due June 30,
2005, among Candle Corporation Worldwide, Inc., Candle
Corporation of America, and PartyLite Gifts, Inc., as Issuers,
the Registrant, as guarantor, and the Purchasers named therein
(incorporated by reference to Exhibit 10.2 to the Registrant's
Quarterly Report on Form 10-Q for the fiscal quarter ended July
31, 1995)
10.2(a) Fourth Amendment, dated as of October 17, 1997, to Note Purchase
Agreements (incorporated by reference to Exhibit 10.2 to the
Registrant's Quarterly Report on Form 10-Q for the fiscal quarter
ended October 31, 1997)
10.2(b) Assumption Agreement, dated as of October 17, 1997, of Note
Purchase Agreements, among Candle Corporation Worldwide, Inc.,
Candle Corporation of America, and PartyLite Gifts, Inc., as
assignors, and the Registrant, as assignee (incorporated by
reference to Exhibit 10.3 to the Registrant's Quarterly Report on
Form 10-Q for the fiscal quarter ended October 31, 1997)
10.2(c) Guaranty Agreement, dated as of October 17, 1997, by Candle
Corporation Worldwide, Inc. (incorporated by reference to Exhibit
10.4 to the Registrant's Quarterly Report on Form 10-Q for the
fiscal quarter ended October 31, 1997)
10.2(d) Form of 7.54% Senior Notes due June 30, 2005 (incorporated by
reference to Exhibit 10.5 to the Registrant's Quarterly Report on
Form 10-Q for the fiscal quarter ended October 31, 1997)
10.3 Master Equipment Lease Agreement between MetLife Capital, Limited
Partnership, as lessor, and Candle Corporation of America, as
lessee (incorporated by reference to Exhibit 10.21 to the
Registrant's Annual Report on Form 10-K for the fiscal year ended
January 31, 1995)
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit
----------- ----------------------
<S> <C>
10.4* Standard Form Industrial Lease dated April 22, 1993, between
Carol Point Builders I General Partnership and PartyLite Gifts,
Inc.
10.4(a) First Amendment, dated August 21, 1995, between ERI-CP, Inc., a
Delaware corporation, as successor to Carol Point Builders I
General Partnership, and PartyLite Gifts, Inc., to Standard Form
Industrial Lease dated April 22, 1993, between Carol Point
Builders II General Partnership and PartyLite Gifts, Inc.
(incorporated by reference to Exhibit 10.4(a) to the Registrant's
Annual Report on Form 10-K for the fiscal year ended January 31,
1996)
10.5** Lease Agreement, dated June 25, 1997, between Carol Stream I
Development Company, as landlord, PartyLite Gifts, Inc., as
tenant, and the Registrant, as guarantor (schedules omitted - to
be furnished to the Securities and Exchange Commission upon
request)
10.6*+ Form of Indemnity Agreement between the Registrant and each of
its directors
10.7*+ Amended and Restated Stock Appreciation Unit Agreement originally
dated as of September 10, 1992, between the Registrant and Thomas
K. Kreilick
10.8**+ Promissory Note, dated March 17, 1995, payable by Elwood L. La
Forge, Jr. and Mary G. La Forge to the Registrant
10.9**+ Mortgage, dated March 17, 1995, between Elwood L. La Forge, Jr.
and Mary G. La Forge, as mortgagor, to the Registrant, as
mortgagee
13.** Annual Report to Shareholders for the fiscal year ended January
31, 1998 (Pages 1 and 9 through 31)
21.** List of Subsidiaries
23.1** Consent of Coopers & Lybrand L.L.P., independent accountants
23.2** Consent of Grant Thornton LLP, independent certified public
accountants
24.1** Power of Attorney
24.2** Certified Resolutions of the Board of Directors of the Registrant
27.1** Financial Data Schedule (restated to reflect the adoption of FASB
Statement No. 128, "Earnings per Share", the historical operations
of Endar Corp. acquired in a pooling of interests transaction on
May 20, 1997 and the June 1997 three-for-two stock split effected
as a stock dividend).
27.2** Financial Data Schedule (restated to reflect the adoption of FASB
Statement No. 128, "Earnings per Share", the historical operations
of Endar Corp. acquired in a pooling of interests transaction on
May 20, 1997 and the June 1997 three-for-two stock split effected
as a stock dividend).
27.3** Financial Data Schedule (restated to reflect the adoption of FASB
Statement No. 128, "Earnings per Share", the historical operations
of Endar Corp. acquired in a pooling of interests transaction on
May 20, 1997 and the June 1997 three-for-two stock split effected
as a stock dividend).
</TABLE>
- ----------
* Included as an exhibit to the Registrant's Registration Statement on Form
S-1 (No. 33-77458) and incorporated herein by reference.
** Filed herewith.
+ Management contract or compensatory plan required to be filed by Item 14(c)
of this report.
(b) Reports on Form 8-K
The following reports on Form 8-K were filed during the fourth quarter of
the fiscal year ended January 31, 1998:
(i) Current Report on Form 8-K, dated December 2, 1997, attaching earnings
press release.
(ii) Current Report on Form 8-K dated December 31, 1997, reporting the
consummation of the acquisition of the Sterno-Registered Trademark- and Handy
Fuel-Registered Trademark- assets.
18
<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.
Date: April 29, 1998
BLYTH INDUSTRIES, INC.
By:/s/ Robert B. Goergen
----------------------------------------------
Robert B. Goergen
Chairman, Chief Executive Officer and President
19
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Robert B. Goergen Chairman, Chief Executive Officer and President; April 29, 1998
- ---------------------- Director (Principal Executive Officer)
Robert B. Goergen
/s/ Richard T. Browning Vice President and Chief Financial Officer April 29, 1998
- ----------------------- (Principal Financial and Accounting Officer)
Richard T. Browning
/s/ Howard E. Rose Vice Chairman and Director April 29, 1998
- -----------------------
Howard E. Rose
/s/ Roger A. Anderson Director April 29, 1998
- ----------------------
Roger A. Anderson
/s/ John W. Burkhart Director April 29, 1998
- ----------------------
John W. Burkhart
/s/ Pamela M. Goergen Director April 29, 1998
- ----------------------
Pamela M. Goergen
/s/ Neal I. Goldman Director April 29, 1998
- ----------------------
Neal I. Goldman
/s/ Roger H. Morley Director April 29, 1998
- ----------------------
Roger H. Morley
/s/ John E. Preschlack Director April 29, 1998
- -----------------------
John E. Preschlack
/s/ Frederick H. Stephens, Jr. Director April 29, 1998
- ------------------------------
Frederick H. Stephens, Jr.
</TABLE>
20
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
Board of Directors and Stockholders
Blyth Industries, Inc.
Our report on the consolidated financial statements of Blyth Industries, Inc.
and Subsidiaries has been incorporated by reference in this form 10-K from page
30 of the 1998 Annual Report to Shareholders of Blyth Industries, Inc. In
connection with our audit of such financial statements, we have also audited the
related financial statement schedule listed in the index at Item 14(A)(2) of
this Form 10-K.
In our opinion, the financial statement referred to above, when considered in
relation to the basic financial statements taken as a whole, presents fairly, in
all material respects, in all material respects, the information required to be
included herein.
/s/ Coopers & Lybrand L.L.P.
COOPERS & LYBRAND L.L.P.
Chicago, Illinois
March 25, 1998
S-1
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Stockholders
Blyth Industries, Inc.
In connection with our audit of the consolidated financial statements of Blyth
Industries, Inc. and Subsidiaries referred to in our report dated March 28,
1997, which is included in the Annual Report to the Shareholders and
incorporated by reference in Part IV of this Form 10-K, we have also audited
Schedule II for each of the two years in the period ended January 31, 1997. In
our opinion, this schedule presents fairly, in all material respects the
information required to be set forth therein.
/s/ Grant Thornton LLP
-----------------------
GRANT THORNTON LLP
Chicago, Illinois
March 28, 1997
S-2
<PAGE>
Blyth Industries, Inc.
SCHEDULE II - ALLOWANCE FOR DOUBTFUL
RECEIVABLES For the years ended January 31,
1996, 1997 and 1998
(In thousands)
<TABLE>
<CAPTION>
Balance at Charged to Balance at
Beginning Costs and End of
Description of Period Expenses Deductions Period
----------- --------- -------- ---------- ----------
<S> <C> <C> <C> <C>
1996................... $ 419 $ 768 $ 560 $ 627
1997................... 627 1,483 1,056 1,054
1998................... 1,054 3,514 3,215 1,353
</TABLE>
S-3
<PAGE>
Exhibit 10.5
CAROL STREAM I
CAROL STREAM, ILLINOIS
- --------------------------------------------------------------------------------
LEASE AGREEMENT
Between
CAROL STREAM I DEVELOPMENT COMPANY
("Landlord")
and
PARTYLITE GIFTS, INC.
("Tenant")
with a Guaranty provided by:
BLYTH INDUSTRIES INC.
- --------------------------------------------------------------------------------
<PAGE>
LEASE SUMMARY
<TABLE>
<S> <C>
A. Date of Execution of Lease: June 25, 1997
Landlord: Carol Stream I Development Company
C. Address of Landlord: Suite 1900
250 East Broad Street
Columbus, Ohio 43215
Attn: Richard C. Daley
D. Tenant: Partylite Gifts, Inc.
E. Address of Tenant: 59 Armstrong Road
P.O. Box 976
Plymouth Massachusetts 02360
F. Billing Address of Tenant: --------------------------------
--------------------------------
G. Land: The approximately 15.8 acre
parcel of land located at Schmale
and Tower Roads in Carol Stream,
Illinois.
H. Building: The 357,697 square foot building located
on the Land and known as Building #1.
I. Leased Premises: The entire Building containing 357,697
square feet of rentable space and
the Land.
J. Permitted Use: General office, warehouse and distribution
use.
K. Lease Term: Ten years commencing on the Commencement
Date and terminating on the Termination
Date.
L. Commencement Date: July 1, 1997 (subject to deferral
per Section 9 of the Lease).
M. Termination Date: Tenth anniversary of Commencement Date.
N. Base Rent: First 60 months of Lease Term: $107,309.10
per month ($3.60 prsf per year)
Last 60 months of Lease Term: $121,619.98
per month ($4.08 prsf per year)
Due: First months rent due on or before
Tenant's possession of any portion of
Leased Premises. Rent due on the first
day of each calendar month. Late after ten
days after due date; 5% charge for past
due rent.
O. Tenant's Proportionate Share
of Operating Expenses: 100%.
P. Initial Estimated Operating
Expense Payment: $31,894.65 per month ($1.07 prsf per year)
- subject to adjustment per Section 2 of
the Lease.
Q. Leasehold Improvements: $100,000 (see Exhibit D attached hereto).
R. Renewals: Two (2) renewal term(s) of five (5) years
not more than 18 and not less
than 12 months prior to scheduled
expiration of lease term (see Exhibit F).
S. Guarantor: Blyth Industries, Inc.
T. Guarantor's Address: 100 Field Point Road
Greenwich, Connecticut 06830-6442
Attention: Bruce Kreiger, General Counsel
</TABLE>
The following exhibits are attached to and made a part of the Lease:
Exhibit A - Description of Leased Premises
Exhibit B - Examples of Operating Expenses
Exhibit C - Rules and Regulations
Exhibit D - Leasehold Improvements
Exhibit E - Agency Disclosure Statement
Exhibit F - Special Terms
THE PROVISIONS OF THIS LEASE SUMMARY ARE INCORPORATED BY THIS REFERENCE
INTO THE LEASE.
<PAGE>
LEASE AGREEMENT
Landlord hereby leases the Leased Premises to Tenant for the duration of
the Lease Term. The leasing of the Leased Premises to Tenant will be upon the
terms and conditions set forth in this Lease.
Section 1. Base Rent. For each month of the Lease Term, Tenant will pay
Base Rent in an amount equal to the monthly installment set forth in the Lease
Summary.
Section 2. Operating Expense Payment. Tenant will pay its Proportionate
Share of all Operating Expenses incurred by Landlord during the Lease Term in
connection with the operation, management, maintenance and repair of the Land
and the Building. Illustrative examples of those expenses which are included
within the definition of "Operating Expenses" are set forth in Exhibit B.
Tenant's Proportionate Share of such Operating Expenses will be paid by Tenant
monthly in advance based upon Landlord's reasonable estimate of the actual
Operating Expenses which will be incurred during each calendar year during the
Lease Term. The Estimated Operating Expense Payment for the first such calendar
year is set forth in the Lease Summary. The Estimated Operating Expense Payment
for each calendar year thereafter will be adjusted based upon Landlord's
reasonable estimate of its Operating Expenses for such calendar year. Landlord
will endeavor to notify Tenant by December 1 of each year during the Lease Term
of any adjustment in the monthly Estimated Operating Expense Payment for the
upcoming calendar year.
As soon as reasonably practicable after the end of each calendar year (but
in no event later than April 30 of each such calendar year), Landlord will
deliver to Tenant a written statement showing its actual Operating Expenses for
such calendar year and Tenant's actual Proportionate Share thereof. If the sum
of the Estimated Operating Expense Payments paid by Tenant during such calendar
year exceeds Tenant's Proportionate Share of the actual Operating Expenses
incurred during such year, then Landlord will apply the excess toward the next
succeeding monthly Estimated Operating Expense Payment(s) due from Tenant. If
the sum of the Estimated Operating Expense Payments paid by Tenant during such
calendar year is less than Tenant's Proportionate Share of the actual Operating
Expenses incurred during such year, then Tenant will pay the deficiency to
Landlord within 20 days after Tenant's receipt of Landlord's written demand for
the payment thereof.
Section 3. Manner and Timing of Rent Payments. The first monthly
installment of Base Rent and Estimated Operating Expense Payments will be paid
by Tenant on or before the date on which Tenant first takes possession of any
portion of the Leased Premises for the purposes of installing its racking or
fixtures therein. Thereafter, monthly installments of Base Rent and Estimated
Operating Expense Payments will be due and payable in advance on or before the
first day of each calendar month during the Lease Term. Each such installment
will be paid to Landlord at its address set forth in the Lease Summary (or such
other address as Landlord may designate from time to time). If the Lease Term
commences on a day other than the first day of the month or terminates on a day
other than the last day of the month, then the installments of Base Rent and
Estimated Operating Expense Payments for such month(s) will be adjusted
accordingly. If any installment of Base Rent or any Estimated Operating Expense
Payment is not received by Landlord within ten days after its due date, then a
late payment charge of 5% of such past due amount will be immediately due and
payable from Tenant. In addition, all past-due installments of Base Rent and
Estimated Operating Expense Payments will bear interest from the date such
payments were due until paid at the corporate rate of interest announced by
American National Bank, plus two percent, not to exceed the highest amount
permitted by law ("Delinquent Rate"). All installments of Base Rent and
Estimated Operating Expense Payments will be paid by Tenant without demand and
without any rights of reduction, counterclaim or offset, except as specifically
provided herein. Tenant hereby agrees to pay as additional rent any sales, use
or other tax (other than income tax, excess profits or revenue tax, excise or
inheritance tax, gift tax, franchise tax, corporation tax, capital levy
transfer, estate or succession tax) now or hereafter imposed by any governmental
authority upon the rent and other sums payable by Tenant hereunder. Landlord's
acceptance of any payment which constitutes less than all of the balance then
owed to it by Tenant hereunder will be treated as its receipt of a payment "on
account" and not as an accord and satisfaction and Landlord may accept any such
payment (regardless of the existence of any endorsement or statement to the
contrary
1
<PAGE>
contained in a check or letter accompanying such payment) without prejudice to
Landlord's right to recover the balance of the amount owed to it or pursue any
other remedy provided for in this Lease.
Section 4. Utilities. Landlord represents and warrants to Tenant that all
utility services, including, without limitation, those listed below, are
presently (or will be no later than the Commencement Date) connected to and
available at the Building. Tenant will pay all costs associated with the
provision of all utility services to the Leased Premises, including, without
limitation, telephone, gas, electricity, water and sewer service. All utility
services will be separately metered to the Leased Premises and placed in
Tenant's name. Landlord will not be liable to Tenant, nor will Tenant be
relieved of any obligation hereunder if any utility service to the Leased
Premises is interrupted for any reason.
Section 5. Maintenance and Repair. Tenant will at its sole expense maintain
the Leased Premises in the same condition as existed as of the Commencement
Date, reasonable wear and tear and damage by fire and casualty excepted.
Tenant's maintenance obligation will extend to and include the repair (but not
the replacement) of all structural and non-structural elements and mechanical
systems located within the Leased Premises. Notwithstanding anything to the
contrary contained herein, Landlord (and not Tenant), at Landlord's sole cost,
will be responsible for repairing all structural and non-structural elements and
mechanical systems located within the Leased Premises to the extent such repair
is necessitated as a result of construction defects in materials or workmanship
with respect to Landlord's initial construction of the Building or the
Improvements. In addition, Landlord (and not Tenant), at Landlord's sole cost,
will be responsible for the making of any repairs to the Leased Premises which
are covered by enforceable construction warranties or guaranties. Landlord
represents and warrants that the HVAC system in the Building was designed to be
adequate to maintain a consistent ambient temperature within the Building of 68
degrees Fahrenheit. Tenant will provide and maintain, at Tenant's sole cost and
expense, maintenance contracts on a quarterly basis for all air-conditioning,
heating and ventilating systems serving the Leased Premises. Such HVAC
maintenance will be provided by companies and pursuant to contracts and programs
satisfactory to Landlord. Copies of all maintenance and service contracts will
be delivered to Landlord on or before the Commencement Date. Any repairs made to
the Leased Premises by Tenant pursuant to this Section 5 will be made in a
workmanlike manner with materials at least equal in quality and grade to those
originally contained within the Leased Premises. Tenant will also contract for
its own janitorial and trash removal services and will promptly pay all costs
associated with such services.
Landlord will maintain the foundation, floor, roof and exterior walls of
the Building and all common areas serving the Building in a first-class
condition and order of repair and will be responsible for replacing (but not
repairing) all structural elements and mechanical systems located within the
Leased Premises; provided, however, that Tenant (and not Landlord) will be
responsible for the payment of all costs associated with Landlord's
maintenance and repair of the same if the need therefore arises due to the
fault or negligence of Tenant or its agents, employees, licensees or
invitees. Except as otherwise expressly provided above and in Exhibit C, all
costs incurred by Landlord in connection with the maintenance and repair (but
not the replacement) of such structural elements, mechanical systems, roof,
exterior walls or common areas will be considered Operating Expenses and
Tenant will pay its Proportionate Share thereof pursuant to Section 2. Except
as otherwise expressly provided in this Section 5, Landlord will not at any
time during the Lease Term be required to make any improvements, repairs,
replacements or alterations to the Leased Premises.
Section 6. Use of Premises. Tenant will use the Leased Premises solely for
the Permitted Use. Tenant will not cause or permit any waste or damage to the
Leased Premises, the Building or the Land and will not occupy or use the Leased
Premises for any business or purpose which is unlawful, hazardous, unsanitary,
noxious or offensive. If Tenant's use or occupancy of the Leased Premises
changes after the Commencement Date and any such change causes an increase in
Landlord's insurance premiums over and above those in effect as of the
Commencement Date, then Tenant will pay the resulting increase within 20 days
after its receipt of a statement from Landlord setting forth the amount thereof.
Tenant will comply with the Rules and Regulations which are set forth in Exhibit
C (and any reasonable modifications thereto which are consistent with the
provisions of this Lease).
Section 7. Governmental Requirements. On or before the Commencement Date,
Landlord will deliver to Tenant a certificate from an AIA certified architect
confirming that, as of the Commencement Date, the Leased Premises will be in
compliance with all applicable laws, rules, regulations and ordinances,
including, without limitation, the Americans
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with Disabilities Act. During the Lease Term, Landlord, at Landlord's cost, will
keep the Leased Premises in compliance with all applicable laws, rules
regulations and ordinances which are now or hereinafter in effect, with the
exception that Tenant will, at its sole expense, comply with all laws and other
governmental requirements which are now or hereafter in force pertaining solely
to Tenant's specific occupancy and use of the Leased Premises, including,
without limitation, the Americans with Disabilities Act, the Comprehensive
Environmental Response, Compensation and Liability Act the Clean Air Act, the
Hazardous Materials Transportation Act, the Resource Conservation and Recovery
Act and the Water Pollution Control Act.
Section 8. Signs. Tenant will not place any sign or other advertising
material on the exterior or interior of the Leased Premises or the Building,
without the prior written consent of Landlord, which consent will not be
unreasonably withheld.
Section 9. Leasehold Improvements. Attached to this Lease as Exhibit D are
the preliminary specifications for the base building improvements and the
improvements to be made to the office area of the Leased Premises
("Improvements"), as well as a tenant improvement allowance for the improvement
to be made to the office area. Landlord, at Landlord's cost (but, with respect
to the office area Improvements only, as a charge against any tenant improvement
allowance being given to Tenant) will proceed with the preparation of the final
architectural and engineering drawings, plans and specifications for the
Improvements. Once those drawings, plans and specifications are completed,
Landlord will deliver a full set thereof to Tenant for its review and approval.
The approved final drawings, plans and specifications ("Final Plans") are
incorporated herein by this reference.
If the actual cost of constructing the office area Improvements in
accordance with the approved Final Plans (as reasonably determined by Landlord's
general contractor) exceeds the amount of the tenant improvement allowance set
forth in Exhibit D, then, unless Landlord and Tenant otherwise agree to amortize
any such excess costs through a mutually acceptable Base Rent increase, Tenant
will pay any such excess costs within 20 days after Landlord's written demand
for the payment thereof. If, following the approval of the Final Plans, Tenant
expresses a desire to make any revisions thereto, Tenant will so notify Landlord
and Landlord will then ask its general contractor to prepare a cost estimate for
the making of such changes. Landlord will promptly notify Tenant of any
increased costs or savings resulting from such changes and Tenant will have the
right to require Landlord to cause such a change to be made to the Final Plans;
provided, however, that such changes will not unreasonably affect the structural
integrity or value of the Building. If the aggregate of all such changes results
in a net increase in the cost of the construction of the Improvements, (net of
any savings), then Tenant will pay such net increase to Landlord within 20 days
after Landlord's written demand for the payment thereof.
Landlord, at Landlord's cost, unless a tenant improvement allowance is
designated above and Tenant exceeds such allowance, will cause the
Improvements to be constructed in accordance with the Final Plans. Landlord
will use its good faith diligent efforts to substantially complete
construction of the Improvements on or before September 2, 1997, subject to
delays caused by the occurrence of events beyond its reasonable control,
including, without limitation, labor troubles, inability to procure
materials, restrictive governmental laws and pronouncements, acts of God,
unseasonable weather, Tenant's failure to timely respond to any matter
submitted for its review, Tenant's requested change orders and Tenant's
making of various installations in the Leased Premises pursuant to Paragraph
3 of Exhibit F to this Lease, if the making of any such installations
unreasonably interferes with Landlord's construction of the
Improvements("Delay Events"). Tenant agrees that it will review and either
approve or specify its objections to any documents or drawings submitted to
it for its review and approval hereunder within five days after its receipt
of the same.
The Commencement Date of this Lease shall be July 1, 1997 provided that on
or before July 1, 1997 (i) there exists commercially reasonable ingress and
egress to the Building for the purpose of permitting Tenant to install its
racking in the Building (with Tenant hereby acknowledging that such commercially
reasonable ingress and egress will exist if Center Road and Tower Road extending
from Center Road to the front entryway to the Building, are paved and available
for use by Tenant), (ii) the construction of the improvements are such that
Tenant can install all of its racking in the Building, and (iii) Landlord has
obtained the necessary governmental approvals, if any, to permit Tenant's
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occupancy of the Building for the limited purpose of installing its racking. If
the July 1, 1997 deadline is not met, the Commencement Date of this Lease shall
be the actual date on which items (i), (ii) and (iii) are satisfied. In the
event Landlord has met the July 1, 1997 deadline, but subsequent construction
progress and approvals are not forthcoming such that Tenant cannot begin to
bring its product into the Building on or before July 7, 1997, then, unless the
failure to meet such July 7, 1997 deadline is attributable solely to those
Tenant-caused delays referred to in the immediately succeeding paragraph,
notwithstanding the commencement of the Lease Term, Base Rent and Estimated
Operating Expense Payments shall abate until such time as Tenant can begin to
bring its product into the Building and, if Tenant has prepaid Base Rent and
Estimated Operating Expense Payments, Tenant shall be entitled to a pro rata
credit against the immediately succeeding installments of Base Rent and
Estimated Operating Expense Payments based upon the number of days from July 7,
1997 to the date Tenant can begin to bring its product into the Building.
If construction of the improvements to the Leased Premises is not
substantially complete on or before September 2, 1997 (except as otherwise
provided with respect to those Tenant-caused delays referred to in the
immediately succeeding sentence of this paragraph), then Base Rent and
Estimated Operating Expense Payments shall abate as of September 2, 1997
until such time as the Leased Premises is substantially completed and, if
Tenant has prepaid Base Rent and Estimated Operating Expense Payments, Tenant
shall be entitled to a pro rata credit against the immediately succeeding
installments of Base Rent and Estimated Operating Expense Payments based upon
the number of days from September 2, 1997 to the date the Leased Premises is
substantially completed. Notwithstanding anything to the contrary contained
herein, if Landlord's inability to substantially complete the improvements on
or before September 2, 1997 is attributable solely to Tenant-caused delays
after the date hereof (including, without limitation, Tenant's failure to
timely respond to any matter submitted for its review, delays caused by
Tenant's requested change orders, as verified by Landlord's general
contractor, and Tenant's making of installations in the Leased Premises
pursuant to Exhibit F, Paragraph 3 thereof (provided the making of any such
installations unreasonably interferes with Landlord's construction of the
Improvements), then, notwithstanding the fact that the Improvements are not
yet substantially completed, Tenant will continue to have an obligation to
pay Base Rent and Estimated Operating Expense Payments and perform all of its
other obligations and duties set forth in this Lease. For the purposes of
this Lease, the Improvements will be deemed substantially completed on the
date on which the following events have occurred: (a) Landlord's architect
issues a certificate of substantial completion for the Building in accordance
with the requirements of AIA Document A201, 1987 edition (expressly
excluding, however, any requirement as to the subsequent completion of
landscaping or external paving which is not necessary for Tenant's use and
occupancy of the Leased Premises for its intended use); (b) a temporary
approval (at least permitting Tenant to occupy, store and ship product) or
permanent certificate of occupancy is issued by the appropriate governmental
authority; and (c) Tenant has commercially reasonable ingress and egress to
the Building for the purpose of permitting Tenant to ship its product from
the Leased Premises and otherwise use and occupy the Leased Premises for its
intended purpose. Notwithstanding anything to the contrary contained in the
immediately preceding sentence, if Tenant's failure to complete the
installation of its racking or its other installations, if any, (and not
Landlord's construction of any improvements required to be constructed by it
under the terms of this Lease) prevent the appropriate governmental
authorities from issuing the required temporary approval or permanent
certificate of occupancy for the Leased Premises, then, in such event, the
requirement in the immediately preceding sentence that a temporary approval
or permanent certificate of occupancy be issued for the Leased Premises will
be eliminated from the test of when "substantial completion" has occurred.
The floors of the Building will be deemed "complete" for the purposes of this
Lease when they are fully cured, such that the installation of racks and
equipment can commence immediately.
Unless, as of the date of substantial completion of the Leased Premises,
the construction of the Improvements is 100% complete and a permanent
certificate of occupancy has been issued, then Landlord and Tenant agree that
promptly after the date the Leased Premises is substantially completed, they
will prepare a punchlist and Landlord will have an additional 30 days from the
date the Leased Premises is substantially completed to complete the punchlist
items and to obtain the permanent certificate of occupancy (or such longer
period of time as may be required to complete any punchlist items which are
weather sensitive - e.g., landscaping and exterior paving). If Landlord and
Tenant cannot agree on the punchlist items, then Tenant will promptly select an
architect and notify Landlord of the architect so selected. Tenant's architect
and Landlord's architect will determine the punchlist items and will report in
writing to Landlord and Tenant the punchlist items. If the two architects do not
agree on the punchlist items, a third
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architect (mutually acceptable to Landlord's architect and Tenant's architect)
will be selected within the following five days. In such event, the third
architect will determine the punchlist items within five days after his or her
selection and will report in writing to Landlord and Tenant the punchlist items.
All architects will be members in good standing with the American Institute of
Architects and will have previous experience in making evaluations of industrial
buildings in the metropolitan Chicago real estate market. Landlord and Tenant
will each pay the charges of its own architect and one-half of the charges of
the third architect. Notwithstanding anything contained herein to the contrary,
if Landlord has not 100% completed the punchlist items and the improvements
(including, without limitation, the landscaping and exterior paving) and
obtained a permanent certificate of occupancy by October 1, 1997 for any reason
other than the occurrence of a Tenant-caused delay, then Tenant may complete the
punchlist items and the improvements and deduct the cost thereof reasonably
incurred by Tenant from the immediately succeeding installments of Base Rent and
Estimated Operating Expense Payments; provided, however, that if Tenant's use
and occupancy of the Leased Premises is interrupted by any governmental
authority at any time thereafter, including, without limitation, during the
course of Tenant completing the punchlist items and the improvements, due to the
fact that a permanent certificate of occupancy has not been issued, then Base
Rent and Estimated Operating Expense Payments shall abate until such time as
Tenant's use and occupancy is restored by governmental authority.
To the extent the Improvements shown in the approved Final Plans are more
user-specific than customarily anticipated for warehouse space in the Building,
Landlord will specifically identify those Improvements which are more
user-specific in a notice sent by Landlord to Tenant at the time of Landlord's
preparation of the Final Plans and, unless Tenant agrees to alter the Final
Plans to eliminate such user-specific improvements), Tenant will thereafter be
obligated, at its expense, to remove all such greater than customary
improvements upon the expiration or sooner termination of the Lease Term.
Section 10. Alterations. Except for "Minor Alterations" (as that term is
hereafter defined). Tenant may not at any time prior to or during the Lease Term
make any alterations, additions or improvements to the Leased Premises without
the prior written consent of Landlord. Tenant may, with prior notice to
Landlord, but without the prior consent of Landlord, make Minor Alterations to
the Leased Premises during the Lease Term. For the purposes of this Section 10,
"Minor Alterations" will mean any alteration, addition or improvement to the
Leased Premises which costs less than $25,000, and which does not alter the
exterior aesthetics of the Building or impact the structural components of the
Building or any of the mechanical systems contained therein. All improvements,
alterations and additions made at one time in connection with any one job will
be aggregated for the purposes of determining whether the $25,000 limit has been
exceeded. Any alterations, addition or improvement made to the Leased Premises
in accordance with this Section 10 will at all times remain the property of
Landlord (excluding Tenant's racking and trade fixtures, even if affixed to the
Building). If Landlord consents to any proposed alteration, addition or
improvement, the same will be made by Tenant at Tenant's sole expense. At the
time Landlord gives its consent to any proposed alteration, addition or
improvement, Landlord will specify whether such alteration, addition or
improvement must be removed by Tenant upon the expiration of the Lease Term,
with Tenant being responsible for repairing any damage to the Leased Premises
caused by such removal.
Section 11. Mechanics Liens. Tenant will indemnify and hold Landlord
harmless from any liability or expense associated with its construction of any
alteration, addition or improvement to the Leased Premises. Tenant will
discharge, within 30 days, any mechanics lien filed against the Leased Premises,
the Building or the Land in connection with any work performed by or at the
request of Tenant; provided, however, that Tenant may contest any such lien upon
Tenant bonding or otherwise insuring over the lien to the reasonable
satisfaction of Landlord.
Section 12. Assignment and Subletting. Except as otherwise expressly
provided in this Lease, Tenant will not assign this Lease or sublet all or any
part of the Leased Premises without the prior written consent of Landlord, which
consent will not be unreasonably withheld. For the purposes of this section,
Landlord will be deemed to be unreasonably withholding its consent to any
proposed assignment or sublease if Landlord fails to respond within 15 days of
Tenant's request for Landlord's consent to any proposed assignment or sublease,
which request will be accompanied by all information reasonably requested by
Landlord concerning the proposed assignment or sublease, including, without
limitation, information concerning the identity of the proposed assignee or
sublessee, the type of
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business to be conducted in the Leased Premises by the proposed sublessee or
assignee and the proposed sublesse's or assignee's current financial statements.
Landlord shall not be deemed to have unreasonably withheld its consent if, in
the judgment of Landlord: (i) the assignee or sublessee is of a character or
engaged in a business which is not keeping with the standards or criteria used
by Landlord in leasing the building; (ii) the financial condition of the
sublessee or assignee is such that it may not be able to perform its obligations
in connection with this Lease; (iii) the assignee or sublessee is a tenant or
negotiating for space in the Building; (iv) the assignee or sublessee is a
governmental unit; (v) Tenant is in default under this Lease; (vi) in the
reasonable judgment of Landlord, such an assignment or subleasing would violate
any term, condition, covenant or agreement of the Landlord involving the
Building or any other tenant's lease within it; or (vii) any other basis which
Landlord reasonably deems appropriate. In the event of an assignment or
sublease, Landlord and Tenant agree to share the monthly profit, if any,
equally. In determining whether there is a profit, Tenant will be first allowed
to recover expenses incurred by Tenant in connection with such assignment or
sublease. Notwithstanding the above, Tenant may assign this Lease, or any part
thereof, without Landlord's prior consent, to any successor-in-interest of
Tenant in connection with a reorganization, merger, consolidation or sale of all
or substantially all of the stock or assets of Tenant, so long as Tenant's
successor-in-interest expressly assumes all of Tenant's obligations hereunder.
Section 13. Subordination. Tenant's rights and interests under this Lease
will be subordinate to all mortgages and other encumbrances now or hereafter
affecting any portion of the Building or the Land. In the event of the
foreclosure of any mortgage or other encumbrance, Tenant will, upon request of
any person succeeding to the interest of Landlord, attorn to and automatically
become the tenant of such successor-in-interest without change in the terms or
conditions of this Lease; provided, however, that such successor-in-interest
will not be liable for any act or omission of any prior landlord or subject to
any offsets or defenses which Tenant may have against any such prior landlord.
Within 15 days after its receipt of Landlord's request therefor, Tenant will
execute and deliver to Landlord a certificate confirming such subordination and
attornment and setting forth such information as Landlord shall reasonably
request concerning the current status and facts related to this Lease and
Tenant's occupancy of the Leased Premises. Additionally, Tenant hereby agrees
that it will fully cooperate with Landlord and provide all information in
Tenant's possession in order to help Landlord complete any disclosure form for
the Leased Premises required by the Illinois Responsible Property Transfer Act.
Tenant's subordination as set forth in this section is contingent upon Landlord
providing to Tenant a non-disturbance agreement from Landlord's mortgagee of
ground lessor, on terms and conditions reasonably acceptable to such mortgagee
of ground lessor and Tenant, which in essence provides that, if Tenant is not
then in default under this Lease, then Tenant's occupancy and all other rights
granted to Tenant hereunder will not be disturbed by such mortgagee and such
mortgagee's enforcement of its mortgage.
Section 14. Limitation of Landlord's Personal Liability. Tenant will look
solely to Landlord's interest in the Leased Premises, the Building and the Land
for the recovery of any judgment against Landlord; it being the express intent
of the parties hereto that neither Landlord, nor any of its shareholders,
directors, officers or employees will ever be personally liable for any such
judgment.
Section 15. Indemnification and Insurance. Landlord will not be liable for
and Tenant will indemnify and hold Landlord harmless from any liability or
expense associated with any damage or injury to any person or property
(including any person or property of Tenant or any one claiming under Tenant)
which arises directly or indirectly in connection with the Leased Premises or
Tenant's use or occupancy thereof; provided, however, that Tenant will not be
obligated to indemnify Landlord as to any liability or expense occasioned by the
negligence or intentional misconduct of Landlord.
All property stored or placed by Tenant in or about the Leased Premises
will be so stored or placed at the sole risk of Tenant. Tenant will at its sole
expense maintain in full force and effect at all times during the Lease Term:
(a) comprehensive public liability insurance for personal injury and property
damage with liability limits of not less than $5,000,000 for injury to one
person, $10,000,000 for injury from one occurrence and $2,000,000 for property
damage; (b) extended coverage insurance on all property stored or placed by
Tenant in or about the Leased Premises in an amount equal to the full
replacement value thereof; (c) insurance against abatement or loss of rent in
case of fire or other casualty in an amount at least equal to the Base Rent and
Estimated Operating Expense Payments to be paid
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by Tenant during the two years next ensuing as reasonably determined by
Landlord; and (d) worker's compensation and employer's liability insurance
covering all Tenant's employees working in the Leased Premises. Landlord will
maintain in full force and effect at all times during the Lease Term: (a)
comprehensive public liability insurance for personal injury and property damage
with liability limits of not less than $5,000,000 for injury to one person,
$10,000,000 for injury from one occurrence and $2,000,000 for property damage;
and (b) fire and extended coverage insurance on the Building in an amount equal
to the full replacement cost of the Building (excluding foundations). Each
insurance policy maintained by any party hereunder (other than the fire and
extended coverage insurance policy maintained on the Building by Landlord) will
be primary as respects to any claims, losses or liabilities and will name the
other party as an additional insured thereunder. Each insurance policy required
to be maintained by any party hereunder will specifically provide that such
insureds policy cannot be terminated without giving at least 30 days prior
written notice to the other party. Each party will furnish certificates
evidencing such insurance coverage to such other party on or before the
Commencement Date and thereafter within 30 days prior to the expiration of each
such certificate. All insurance required under this Section 15 will include
provisions denying to the insurer acquisition by subrogation of rights against
the other party. Subject to compliance with the requirements set forth in the
immediately preceding sentence, each party waives any rights of recovery against
the other for loss or injury, to the extent of any amount recovered by reason of
insurance.
Section 16. Hazardous Substances. Tenant will not itself, nor permit others
to use, store, generate, treat or dispose of any Hazardous Substance (as that
term is hereafter defined) on or about the Leased Premises, except for
immaterial amounts that are exempt from or do not give rise to any violation of
applicable law. Notwithstanding the above, Tenant will not be responsible for
the migration on to the Land of Hazardous Substances used, stored, generated,
treated or disposed of on any property located adjacent to the Land.
Landlord will retain responsibility for any remediation required by law in
connection with any Hazardous Substance found on or about the Land or the
Building as of the Commencement Date, except for immaterial amounts that are
exempt from or do not give rise to any violation of applicable law.
Notwithstanding the above, Landlord will not be responsible for the migration
onto the Land of Hazardous Substances used, stored, generated, treated or
disposed of on any property located adjacent to the Land. For the purposes of
this Section 16, the term "Hazardous Substance" means any "hazardous substance",
"toxic substance" (as those terms are defined in the Comprehensive Environmental
Response, Compensation and Liability Act), "hazardous waste" (as that term is
defined in the Resource Conservation Recovery Act), polychlorinated biphenyls,
asbestos, radioactive material or any other pollutant, contaminant or hazardous,
dangerous or toxic material or substance which is regulated by any federal,
state or local law, regulation, ordinance or requirement.
Section 17. Surrender of Premises. Upon the termination of Tenant's
right of possession under this Lease, Tenant will immediately surrender
possession of the Leased Premises to Landlord in the same condition as
existed as of the Commencement Date, reasonable wear and tear and fire and
casualty excepted. Tenant will at the same time remove all of its movable
trade fixtures from the Leased Premises and any alterations, additions and
improvements which Landlord requests be removed pursuant to Section 9 and
Section 10 hereof. Tenant will promptly repair any damage caused to the
Leased Premises by the removal of any of such movable trade fixtures,
alterations, additions or improvements.
Section 18. Casualty. If the Leased Premises are damaged by fire or other
casualty, Landlord shall promptly give written notice to Tenant whether the
Leased Premises can reasonably be repaired within 180 days after the date of the
occurrence of such fire or other casualty. If Landlord notifies Tenant that it
does not believe that the Leased Premises can reasonably be repaired within such
180-day period, then Tenant will have the option of terminating this Lease by
giving written notice thereof to Landlord at any time within 30 days after the
date of Tenant's receipt of the aforementioned notice from Landlord. If Landlord
determines that the Leased Premises can reasonably be repaired within such
180-day period or if Tenant does not elect to terminate this Lease despite the
fact that Landlord has determined that the Leased Premises cannot be reasonably
repaired within such 180-day period, then Landlord will proceed to repair the
Leased Premises at its sole expense; provided, however, that Landlord will in no
event be required to repair any improvements previously made to or any fixtures
previously installed in the Leased Premises by Tenant. If the Leased Premises
are rendered untenantable in whole or in part as a result of a fire or other
casualty, then all rent
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accruing after the occurrence of any such fire or other casualty and prior to
the completion of the repair of the Leased Premises will be equitably and
proportionately abated to reflect the untenantable portion of the Leased
Premises. Landlord will not be liable to Tenant for any inconvenience or
interruption to Tenant's business occasioned by such fire or other casualty or
the concomitant repair of the Leased Premises. If Landlord notifies Tenant that
it believes that the Leased Premises can reasonably be repaired within 180 days
after the occurrence of such fire or other casualty or if Tenant does not elect
to terminate this Lease, notwithstanding the fact that the projected repair
period is longer than 180 days, and if Landlord thereafter fails to complete the
repairs within the longer of (i) 180 days after the date of the occurrence of
such fire or other casualty or (ii) such longer repair period as is identified
as the projected repair period in Landlord's initial notice to Tenant under this
Section 18 (in the event Tenant does not elect to terminate the Lease,
notwithstanding the length of such projected repair period) ("Applicable Repair
Period") for any reason other than the occurrence of a Delay Event (but in no
event will the occurrence of any Delay Event permit an extension of the time
period for the completion of such repairs by more than 90 days beyond the last
day of the Applicable Repair Period), then Tenant may elect to terminate this
Lease by delivery of written notice delivered to Landlord within 30 days after
the expiration of the Applicable Repair Period (as extended, if applicable, for
no more than 90 days for the occurrence of any Delay Event). Notwithstanding
anything to the contrary contained herein, if at least 50% of the rentable
square footage contained within the Building is rendered wholly untenantable as
a result of the occurrence of any fire or other casualty within the last 12
months of the Lease Term (or any extension thereof), then either Landlord or
Tenant may terminate this Lease by giving written notice to the other party
within 30 days after the date of the occurrence of such fire or other casualty.
Section 19. Condemnation. If all of the Leased Premises is taken by or
under threat of condemnation, then this Lease will automatically terminate as of
the date of the transfer of possession of the Leased Premises to the condemning
authority. If a substantial portion of the Leased Premises is taken by or under
threat of condemnation and Tenant, in its reasonable judgment, determines that
it cannot conduct its business in the remaining portion of the Leased Premises,
then, at the option of Tenant, this Lease will terminate as of the date of the
transfer of possession of the Leased Premises to the condemning authority. If
Tenant does not so terminate this Lease or if any taking is of less than a
substantial portion of the Leased Premises, then, in either such event, this
Lease will continue in full force and effect in accordance with its terms,
except that the Base Rent and Tenant's Proportionate Share will be adjusted to
fairly reflect the portion of the Leased Premises which was so taken and
Landlord will promptly restore the balance of the Leased Premises to a secure,
self-contained facility. Landlord will not be liable to Tenant for any
inconvenience or interruption to Tenant's business occasioned by any such
taking. Landlord will be entitled to receive the entire award made by the
condemning authority for any such taking, with the exception that Tenant will be
entitled to any separate award made by the condemning authority which is
expressly attributed to the value of Tenant's trade fixtures or equipment, loss
of business and relocation and moving expenses, so long as such separate award
does not diminish the amount of Landlord's award from the condemning authority.
Section 20. Holding Over. Tenant will not hold over in its occupancy of the
Leased Premises after the expiration of the Lease Term, without the prior
written consent of Landlord. If Tenant holds over without the prior written
consent of Landlord, then Tenant will pay double the Base Rent and Estimated
Operating Expense Payment then in effect for each month during the entire
holdover term. Any holding over with the consent of Landlord will constitute
this Lease as a lease from month-to-month.
Section 21. Default. If Tenant fails to pay any installment of Base Rent,
any Estimated Operating Expense Payment or any other sum payable by it hereunder
on or before ten days after the date when due, or if Tenant defaults in the
performance of any of its other obligations under this Lease and such default
continues for 30 days after written notice thereof is given to Tenant (unless
the nature of the default is such that it cannot be cured within 30 days, in
which case Tenant will not be deemed in default if Tenant commences to cure
within 30 days and diligently pursues the cure to completion within 90 days
after written notice of such default is given to Tenant) except in the case of
an emergency, in which event such non-performance will be cured as quickly as
practicable, then, in addition to any other legal rights and remedies available
to Landlord at law or in equity, Landlord may: (a) terminate this Lease and
declare immediately due and payable from Tenant the sum of all then delinquent
installments of Base Rent, Estimated Operating Expense Payments and other sums
payable under this Lease, and the excess, if any, of the present value of
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all Base Rent and Estimated Operating Expense Payments due for the remainder of
the Lease Term over the present value of the fair rental value of the Leased
Premises during the same period, both of which sums will be discounted at a rate
equal to 8%; (b) re-enter and attempt to relet the Leased Premises without
terminating this Lease, in which event Tenant will remain obligated to pay to
Landlord any deficiency between all sums payable by Tenant pursuant to this
Lease and any sums collected by Landlord from any reletting of the Leased
Premises (net of any sums paid by Landlord in connection with such reletting,
including, without limitation, leasing commissions, attorneys' fees and costs of
improvements to the Leased Premises); or (c) cure any such default by Tenant,
with any sums expended by Landlord in connection with such cure becoming
immediately due and payable from Tenant, with interest thereon until paid at the
Delinquent Rate. To the extent required by applicable law, Landlord will relet
the Leased Premises or any part thereof. If Landlord elects to relet the Leased
Premises, Landlord may change the locks to the Leased Premises and may
redecorate, repair and alter the Building and the Leased Premises in such a
manner as is deemed reasonably necessary or appropriate by Landlord. Any
reletting costs incurred by Landlord will be paid by Tenant within 30 days after
Tenant's receipt of written demand for the payment thereof, together with
interest thereon at the Delinquent Rate. If Landlord exercises any of the rights
and remedies provided herein or otherwise at law or in equity which involves its
reentering the Leased Premises, Landlord may do so and remove all occupants and
property from the Leased Premises, in accordance with applicable law and without
the use of force, without any liability, and without being deemed guilty of
trespass, eviction or forcible entry and detainer. Any property of Tenant
removed from the Leased Premises by Landlord pursuant to any provisions of this
Lease or by law shall be stored by Landlord, at Tenant's sole cost and expense,
and Landlord, upon storage of such property, will in no event be responsible for
the value, preservation or safekeeping thereof. Tenant will pay Landlord for all
reasonable expenses incurred by Landlord in connection with such removal and
(provided Landlord provides access to Tenant for this limited purpose) for
reasonable storage charges for Tenant's property. Any property of Tenant not
removed from the Leased Premises or retaken from storage by Tenant within 45
days after the expiration or earlier termination of the Lease Term (or of
Tenant's right to possess the Leased Premises) will be conclusively deemed to
have been conveyed by Tenant to Landlord as by bill of sale, without further
payment or credit by Landlord to Tenant.
Section 22. Prevailing Party's Fees. If any legal action is commenced by
either Landlord or Tenant, to enforce its rights hereunder, then all attorneys'
fees and other expenses incurred by the prevailing party in such action shall be
promptly paid by the non-prevailing party.
Section 23. Successors and Assigns. This Lease shall be binding upon and
inure to the benefit of the successors and assigns of Landlord and the
successors and permitted assigns of Tenant.
Section 24. No Waiver. No waiver of any covenant or condition of this Lease
by either party will be deemed to constitute a future waiver of the same or any
other covenant or condition of this Lease. In order to be effective, any such
waiver must be in writing and must be delivered to the other party to this
Lease.
Section 25. Brokerage Commissions. Each of Landlord and Tenant hereby
represents and warrants that it has not dealt or consulted with any real estate
broker or agent in connection with this Lease other than those real estate
brokers and agents specifically identified in the Agency Disclosure Statement
attached hereto as Exhibit E. Each of Landlord and Tenant agrees to indemnify
and hold the other harmless from and against any liability or expense occasioned
by a breach of the foregoing representation.
Section 26. Reasonableness of Consent. Landlord will not unreasonably
withhold or condition any consent or approval which is required to be given by
it pursuant to the terms of this Lease.
Section 27. Amendment. This Lease may not be amended except by a written
instrument signed by both Landlord and Tenant.
Section 28. Governing Law. This Lease will be governed by and construed in
accordance with the laws of the State of Illinois.
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Section 29. Notices. All notices required or permitted under this Lease
must be in writing and must be delivered to Landlord and Tenant at their
addresses set forth in the Lease Summary (or such other address as may hereafter
be designated by such party). Any such notice must be personally delivered or
sent by either registered or certified mail or overnight courier and will be
deemed sufficiently served upon delivery, with signed receipts evidencing same,
if personally delivered or sent by overnight courier, or two days after the date
of mailing thereof, if mailed.
Section 30. Entire Agreement. This Lease sets forth all the covenants,
promises, agreements, conditions and understandings between Landlord and Tenant
concerning the Leased Premises. There are no covenants, promises, agreements,
conditions or understandings, whether oral or written, between the parties,
except as are specifically set forth herein. Except as otherwise provided
herein, no subsequent alteration, amendment, change or addition to this Lease
will be binding upon Landlord or Tenant, unless expressed in writing and
executed by both parties hereto.
Section 31. Time Period. TIME IS OF THE ESSENCE FOR EACH AND EVERY
PROVISION HEREOF.
Section 32. Financial Statements. [Intentionally Omitted]
Section 33. Special Terms. Exhibit F sets forth those special provisions,
if any, which supplement the provisions of this Lease.
[Signatures and Acknowledgements Appear on Next Page]
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SIGNATURES AND ACKNOWLEDGEMENTS
Landlord and Tenant have executed this Lease as of the date specified in
the Lease Summary.
LANDLORD:
CAROL STREAM I DEVELOPMENT COMPANY
By Pizzuti Equities Inc.
By /s/ Richard C. Daley
--------------------------------
Richard C. Daley, Vice President
TENANT:
PARTYLITE GIFTS, INC.
By /s/ Frank P. Mineo
--------------------------------
Frank P. Mineo, Vice President
STATE OF OHIO
COUNTY OF FRANKLIN: SS
Before me, a notary public in and for said state and county, personally
appeared Richard C. Daley, the Vice President of Pizzuti Equities Inc., the duly
authorized representative of the Landlord in the foregoing Lease, who
acknowledged the signing of the Lease to be his free act and deed on behalf of
the Landlord.
Date: 6/25/97 /s/ Nova S. White
----------------------------------
Notary Public
STATE OF CONNECTICUT
COUNTY OF FAIRFIELD: SS
Before me, a notary public in and for said state and county, personally
appeared Frank P. Mineo, the Vice President of PartyLite Gifts, Inc. the Tenant
in the foregoing Lease, who acknowledged the signing of the Lease to be his free
act and deed on behalf of Tenant.
Date:6/20/97 /s/ Christina Kaufman
-----------------------------------
Notary Public
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EXHIBIT A
DESCRIPTION OF LEASED PREMISES
See legal description, site plan, parking plan, building plan and floor
plan attached hereto as Schedule 1. The address of the Building is
_______________________.
Initialed and Approved by Tenant:
---------------------------------
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EXHIBIT B
ILLUSTRATIVE EXAMPLES OF OPERATING EXPENSES
The following are illustrative examples of some of the expenses which are
included within the definition of "Operating Expenses":
1. Costs of all required maintenance and repair (but not replacement) of the
foundation, floor, roof and exterior walls of the Building and all common
areas serving the Building;
2. Real estate taxes and assessments on the Building and the Land;
3. Insurance premiums for liability and extended coverage insurance policies
maintained by Landlord on the Building and the Land;
4. Costs of maintaining and repairing the landscaping and irrigation system
which serves the Land and the cost of snow plowing and snow removal from
those areas of the Land covered by pavement;
5. Costs related to the provision of water, sewer, gas, telephone, electricity
and other utility services to or for the benefit of the Building, unless
such utility services are separately metered and placed in the name of a
tenant;
6. [Intentionally Omitted]
7. A reasonable property management fee (not to exceed 2% of Base Rent, so
long as Tenant occupies 100% of all rentable space contained within the
Building;
8. Costs of maintaining and repairing the fire protection and life safety
systems for the Buildings;
9. Accounting, legal (with any legal costs only being related to the contest
of any imposition of real estate taxes or assessments against the Building
and the Land) and other professional services rendered in connection with
the operation, management and maintenance of the Building and the Land (not
to exceed .75% of Base Rent); and
10. Except as otherwise specifically provided herein, all other costs and
expenses incurred by Landlord related to the operation, management,
maintenance and repair of the Building and the Land, which are considered
"operating expenses" (and not "capital expenditures") under generally
accepted accounting principles.
The following are those expenses which are excluded from the definition of
"Operating Expenses":
1. Landlord's lease payments or debt service on any financing related to the
Building or the Land;
2. Franchise, excess profits or revenue tax, excise tax, inheritance tax, gift
tax, franchise tax, corporation tax, capital levy transfer, state successor
or income taxes payable by Landlord;
3. Salaries, benefits and related costs of Landlord's off-site administrative
personnel;
4. Costs of all tenant improvements;
5. Leasing commissions;
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6. Costs of utility usage for utility services separately metered in the name
of Tenant;
7. Costs of the initial construction of the Building and the common areas and
any capital improvements made after the substantial completion of the same,
except as otherwise permitted above, in the examples of expenses included
in Operating Expenses;
8. Costs associated with abatement of environmental hazards existing as of the
Commencement Date, except to the extent, if any, caused or contributed to
by the acts or omissions of Tenant, its employees, agents, contractors or
invitees;
9. Costs associated with the failure of the Leased Premises, the Building or
the Land to be in compliance with any statute, ordinance, rule or
regulation applicable thereto as of the Commencement Date, except in the
event that such noncompliance is the result of any act or omission of
Tenant, its employees, agents, contractors or invitees;
10. Expenses in the nature of interest (except as otherwise specifically
provided in this Exhibit), fines or penalties, except to the extent
incurred as a result of acts or omissions of Tenants, its employees,
agents, contractors or invitees;
11. Costs of repairs, alterations or replacements caused by casualty losses to
the extent of any insurance proceeds related thereto;
12. Costs of repairs, alterations or replacements caused by the exercise of
rights of eminent domain;
13. Costs of any special services rendered or costs reimbursed to another
tenant which are not generally reimbursed or rendered to other tenants in
the Building;
14. Amounts paid to any person or entity related to or affiliated with Landlord
to the extent that the same exceed the reasonable and customary cost
thereof; and
15. Costs of correcting defects in the initial construction of any of the
improvements on the Land made by Landlord, including, without limitation,
the Building; and any costs directly or indirectly associated with the
initial development of the Land and the Building, including, without
limitation, annexation fees, utility tap-in fees, and legal fees.
Operating Expenses will be computed for each calendar year during the Lease Term
based upon the accrual method of accounting. If the Building is ever less than
95% occupied, then Operating Expenses shall be calculated as if the Buildings
had been 95% occupied and the results will constitute Landlord's Operating
Expenses for such calendar year for all purposes of this Lease.
Initialed and Approved by Tenant:
---------------------------------
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EXHIBIT D
LEASEHOLD IMPROVEMENTS
The Base Building improvements to be provided by Landlord, at Landlord's sole
cost, will be consistent with the Project Specifications attached hereto as
Schedule 1. Landlord will provide a tenant improvement allowance of $100,000 for
the construction of the Improvements to the office portion of the Leased
Premises (presently anticipated to consist of 2,500 rentable square feet,
although Tenant may elect to increase the size of the office portion of the
Leased Premises, without, however, any concomitant increase in the amount of the
aforementioned tenant improvement allowance for the construction of the
improvements to such office portion of the Leased Premises). The final plans for
such office Improvements are attached hereto as Schedule 2. If the cost of the
construction of the office Improvements ultimately approved by Landlord and
Tenant exceeds the amount of the aforementioned tenant improvement allowance,
then such excess cost will be paid by Tenant in accordance with the provisions
of Section 9 of the Lease.
Initialed and Approved by Tenant:
---------------------------------
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EXHIBIT E
AGENCY DISCLOSURE STATEMENT
The following are the only real estate agents and brokers involved in the
leasing transition between Landlord and Tenant:
- Representative of Landlord
---------------------
Commission to be paid by
------------------------
- Representative of Tenant
---------------------
Commission to be paid by
-------------------------
Initialed and Approved by Tenant:
---------------------------------
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EXHIBIT F
SPECIAL TERMS
The following special terms modify and supplement the provisions of the Lease
Agreement between Landlord and Tenant. All capitalized terms used but not
defined in this Exhibit F will have the meanings attributed thereto in the Lease
Agreement. In the event of a conflict between the provisions of the other
portions of this Lease and this Exhibit F, the provisions of this Exhibit F will
control.
1. Renewal Option. Tenant will have the option to renew this Lease for two
consecutive renewal terms of five years each. Each such renewal option must be
exercised, if at all, by Tenant's delivery of written notice of exercise to
Landlord not more than 18, nor less than 12, months prior to the scheduled
expiration of the Lease Term. Tenant's right to renew this Lease will be
conditioned upon the Lease being in full force and effect, without any uncured
default on the part of Tenant, both at the time of Tenant's exercise of such
option and at the time of the scheduled commencement of such renewal term. Each
such renewal term will be upon all of the same terms and conditions set forth in
this Lease with respect to the initial Lease Term, except that the Base Rent for
each such renewal term will be 95% of the fair market rent, as of the date of
Tenant's exercise of each such renewal term, for comparable space in comparable
light industrial/warehouse buildings in the DuPage County Illinois market.
Landlord will furnish Tenant with Landlord's determination of such fair market
rent within 30 days after Tenant's exercise of its renewal option. If Tenant
does not agree with Landlord's determination of such fair market rent and if
Landlord and Tenant cannot otherwise reach agreement upon such fair market rent
within 45 days after Tenant's receipt of Landlord's written determination of
such fair market rent, then, in either such event, Tenant may give notice to
Landlord prior to expiration of such latter 45-day period revoking Tenant's
exercise of such renewal option. If Tenant does not send a revocation notice to
Landlord within such 45 day period, then, except as otherwise expressly provided
herein, the fair market rent will in all events be determined in accordance with
the appraisal procedure hereinafter set forth in this Paragraph 1. If the
aforementioned 45 day period expires without Tenant sending a revocation notice
to Landlord, then, within seven days after the expiration of such 45 day period,
Landlord and Tenant shall each promptly select an appraiser and notify the other
of the appraiser so selected. The two appraisers shall determine the fair market
rental within ten days after their selection and shall report in writing to the
Landlord and Tenant the fair market rental. If the two appraisers cannot agree
on the fair market rental within such ten day period, a third appraiser shall be
selected within the following ten days by the Illinois chapter of the American
Institute of Real Estate Appraisers (or any successor organization thereto). All
three appraisers shall then determine the fair market rental within ten days
after the selection of a third appraiser and shall report in writing to Landlord
and Tenant the fair market rental. In case of a disagreement among the three
appraisers on the fair market rental, the average of the two appraisals closest
in amount shall control; provided, however, that the fair market rental of the
third appraiser shall not be greater than the higher of the other two
appraisals, nor be less than the lower of such two appraisals. All appraisers
shall be members in good standing of the American Institute of Real Estate
Appraisers and shall have previous experience in making appraisals of leasehold
interests in commercial warehouse buildings in the greater Chicago, Illinois
area. Landlord and Tenant shall each pay the charges of its own appraiser and
one half of the charges of any third appraiser selected in the aforesaid manner.
Notwithstanding the foregoing, (i) in no event shall the annual Base Rent per
square foot during each year of any renewal term be lower than the annual Base
Rent per square foot payable by Tenant during the last year of the immediately
preceding term of the Lease (be it the initial lease term or the first renewal
term); and (ii) if for any reason the foregoing procedures fail to establish,
through no fault of Landlord, the amount of the fair market rental applicable to
the subject renewal term at least 210 days prior to the scheduled expiration of
the Lease Term, then, at Landlord's option, Tenant's exercise of its renewal
option shall be deemed ineffective and of no force and effect. With respect
solely to the first such renewal term, Landlord will also provide Tenant with an
allowance of up to $75,000 to make cosmetic improvements to the Leased Premises
(excluding, however, for this purpose, the acquisition of any furniture or
equipment), such allowance to be paid by Landlord to Tenant upon Tenant's
completion of such improvements and Tenant's presentation to Landlord of
reasonably detailed invoices supporting the costs incurred by Tenant in
connection with the making of such improvements (in an amount up to but not
exceeding $75,000). Tenant's exercise of its renewal option will apply to all
space which it is leasing at the time of such exercise (including, the Expansion
Space
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if then being leased by Tenant pursuant to Paragraph 4, below). If the
Expansion Space has been leased to Tenant at the time of Tenant's exercise of
its first renewal option, then the tenant improvement allowance referred to
earlier in this P. 1 will be increased by $.21 for each rentable square foot
contained within the Expansion Space.
2. Early Occupancy. To the extent permitted by the applicable local
governmental authorities, Landlord will use its reasonable efforts to provide
Tenant with access to 50% of the rentable square feet contained within the
Leased Premises by June 15, 1997 and access to the remaining 50% of the
rentable square feet contained within the Leased Premises by no later than
June 30, 1997. Such access will be granted to Tenant pursuant to a letter
from Landlord to Tenant stating that the floor is complete and authorizing
Tenant to begin installing its racking and other fixtures and otherwise
preparing the Leased Premises for its occupancy; provided, however, that
Tenant's pre-Commencement Date activities in the Leased Premises will not
unreasonably interfere with Landlord's construction of the Improvements to
the Leased Premises. If Landlord is unable to provide such access to Tenant
by the dates first set forth above for any reason, then Landlord will pay a
penalty to Tenant equal to $2,000 per day for every day of the delay in its
providing of the requisite access to Tenant hereunder (which penalty will be
credited against Base Rent). If Landlord provides Tenant with access to the
entire Leased Premises for the purpose of installing all of its racking by no
later than June 1, 1997, then Tenant will, within thirty days after such
access is granted to Tenant, pay a $50,000 incentive bonus to Landlord. For
the purpose of this Paragraph 3, access to space within the Leased Premises
will be deemed to have been granted to Tenant if the floors in the affected
portion of the Leased Premises are "complete" within the meaning of ss.9 of
the Lease Agreement.
3. Expansion Option. Upon the terms and subject to the conditions hereinafter
set forth, Tenant will have the right to expand the Leased Premises by leasing
approximately an additional 157,000 square feet of space to be constructed by
Landlord, at Landlord's cost, either as an attached addition to the existing
Building or as an adjacent but free-standing structure ("Expansion Space").
Landlord agrees to use all reasonable efforts to construct the Expansion Space
as an attached addition to the east side of the Building and on the same grade,
so long as such construction would comply with all applicable governmental laws,
regulations, rules and ordinances. The Expansion Space will include 15
additional docks with 40,000 pound levelers and restrooms per building code for
100 employees, and will also include three cut-outs to the Expansion Space and
employee parking for 100 cars. To the extent Tenant requires more than 15 docks
in the Expansion Space, Landlord will endeavor to make sure additional docks
available at a maximum cost of $10,000 each. Landlord will provide a tenant
improvement allowance of $40 per rentable square foot for 1,500 rentable square
feet of office improvements to the Expansion Space, with the preparation and
approval of the plans and specifications for such office improvements to be
governed by the same terms as apply to the preparation or approval of plans and
specifications for the office improvements to the initial Leased Premises. If
the Expansion Space is constructed as an attached addition to the existing
Building, then Tenant acknowledges and agrees that its office improvements will
be located in the glassed area located in the southeast corner of the existing
Building. The truck apron for the Expansion Space will match specifications for
the main Building along the entire south elevation of the same. The
architectural design and the construction plans and specifications for the
Expansion Space will otherwise generally be consistent with the architectural
design and construction plans and specifications for the Building (as
illustrated in Schedule 1 to Exhibit D of this Lease). Landlord's obligation to
construct the Expansion Space will be subject to its preparation and approval of
all construction plans and specifications associated with the Expansion Space,
as well as the final review and approval of such construction plans and
specifications by the Village of Carol Stream and the final review and approval
by Tenant of the construction plans and specifications for the tenant
improvements to be made to the Expansion Space (being the 1,500 rentable square
feet of office improvements and any improvements to be made to the warehouse
portion of the Expansion Space, which are above and beyond those improvements to
be made to the warehouse space in accordance with the requirements set forth
above in this paragraph 3) ("Expansion Space Tenant Improvements").
The commencement date of Tenant's leasing of the Expansion Space (and,
hence, the commencement of Tenant's obligation to pay Base Rent and Estimated
Operating Expense Payments for the Expansion Space) shall be March 2, 1998,
provided that on or before March 2, 1998 (i) there exists commercially
reasonable ingress and egress to the Expansion Space (which, for this purpose,
will include access to the Expansion Space through an overhead service door to
be located at the rear of the Expansion Space)), (ii) the construction of the
improvements to the
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Expansion Space are such that Tenant can begin installing and testing of all of
its trade fixturing (including, without limitation, its automatic distributor
equipment) in the Expansion Space, and (iii) Landlord has obtained the necessary
governmental approvals, if any, to permit Tenant's occupancy of the Expansion
Space for the limited purpose of beginning the installation and testing of its
trade fixturing. If the March 2, 1998 deadline is not met, then the commencement
date of Tenant's leasing of the Expansion Space shall be the actual date on
which items (i), (ii) and (iii) are satisfied. Notwithstanding the above, if the
commencement date of Tenant's leasing of the Expansion Space has not occurred by
April 1, 1998 (for any reason other than Tenant-caused delays or the failure,
through no fault of Landlord, to achieve the milestones by the applicable
milestone dates hereinafter set forth in this paragraph 3), then Landlord shall
incur a penalty of $2,000 each day from April 1, 1998, to the commencement date
of Tenant's leasing of the Expansion Space, which penalty, if any, shall be
credited against the immediately succeeding installments of Base Rent and
Estimated Operating Expense Payments for the Expansion Space. In the event
Landlord has met the March 2, 1998 deadline, but subsequent construction
progress and approvals are not forthcoming such that Tenant cannot begin to
bring its product into the Expansion Space on or before June 1, 1998, then,
notwithstanding the commencement of Tenant's leasing of the Expansion Space,
Base Rent and Estimated Operating Expense Payments shall abate until such time
as Tenant can begin to bring its product into the Building and, if Tenant has
prepaid Base Rent and Estimated Operating Expense Payments for the Expansion
Space, Tenant shall be entitled to a pro rata credit against the immediately
succeeding installments of Base Rent and Estimated Operating Expense Payments
for the Expansion Space based upon the number of days from June 1, 1998 to the
date Tenant can begin to bring its product into the Expansion Space.
If construction of the improvements to the Expansion Space is not
substantially complete (as that term is defined in Section 9 of the Lease) on or
before July 1, 1998, then Base Rent and Estimated Operating Expense Payments for
the Expansion Space shall abate as of July 1, 1998, until such time as the
Expansion Space is substantially completed and, if Tenant has prepaid Base Rent
and Estimated Operating Expense Payments for the Expansion Space, Tenant shall
be entitled to a pro rata credit against the immediately succeeding installments
of Base Rent and Estimated Operating Expense Payments for the Expansion Space
based upon the number of days from July 1, 1998 to the date the Expansion Space
is substantially completed.
In the event the Expansion Space is not substantially completed by July
1, (other than solely due to Tenant- caused delays or the failure, through no
fault of Landlord, to achieve the milestones by the applicable milestone
dates hereinafter set forth in this paragraph 3 Landlord shall incur a
penalty of $2,000 per day from July 1 to the date the Expansion Space is
substantially completed or such earlier date as Tenant provides written
notice to Landlord that Tenant is exercising its self-help remedy under the
third to the last grammatical paragraph of this Paragraph 3, which penalty,
if any, shall be credited against the immediately succeeding installments of
Base Rent and Estimated Operating Expense Payments for the Expansion Space.
The following are those milestones and milestone dates referred to in the
immediately preceding paragraph of this paragraph 3:
- Execution and delivery by Tenant of an indemnification agreement,
indemnifying Landlord (upon terms and conditions reasonably acceptable to
Landlord and Tenant), against any monetary liabilities incurred by Landlord
(i.e., liabilities which are reasonably necessary to incur prior to Tenant
exercising the Expansion Option in order for Landlord to meet the deadlines set
forth herein) in connection with the design and construction of the Expansion
Space prior to Tenant's formal exercise of its expansion option hereunder - June
20, 1997;
- Exercise of Expansion Option by Tenant - July 1, 1997;
- Final approval by Tenant of construction plans and specifications for the
Expansion Space Tenant Improvements within ten business days after the date of
delivery of such construction plans and specifications by Landlord to Tenant;
- Final approval of construction plans and specifications for the Expansion
Space by the Village of Carol Stream (including the issuance of a building
permit for the construction of the Expansion Space) - August 29, 1997;
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Notwithstanding anything to the contrary contained herein, if the
Village of Carol Stream has not given its final approval of construction
plans and specifications for the Expansion Space and issued a building permit
for the construction of the Expansion Space by December 1, 1997, then Tenant
will have the right, exercisable by its delivery of written notice of
termination to Landlord on or before December 31, 1997, to rescind and
terminate the exercise of its Expansion Option under this Paragraph 3 and
Tenant shall thereafter be relieved of all obligations with respect to the
Expansion Space, including, without limitation, all obligations under the
indemnity agreement executed on June 12, 1997 by Tenant for the benefit of
Landlord. Tenant acknowledges and agrees that, except for the termination
right set forth in the immediately preceding sentence and the self-help
rights provided for below, its exclusive remedies with respect to any delays
associated with the construction and delivery to it of the Expansion Space
will be as set forth in this Paragraph 3 and except for such termination
rights with respect to the Expansion Space, Tenant will in no event have any
right to terminate this Lease as it relates to the initial Leased Premises or
the Expansion Space for any failure to timely construct and deliver the
Expansion Space to Tenant in the manner contemplated hereunder.
In the event the substantial completion of the Expansion Space occurs and
the construction of the Expansion Space is not 100% complete or a permanent
certificate of occupancy has not been issued, then Landlord and Tenant will
promptly prepare a punchlist and Landlord will have an additional 30 days from
the substantial completion date for the Expansion Space to complete the
punchlist items and to obtain the permanent certificate of occupancy (or such
longer period of time as may be required to complete any punchlist items which
are weather sensitive - e.g., landscaping and exterior paving). If Landlord and
Tenant cannot agree on the punchlist items, then Tenant will promptly select an
architect and notify Landlord of the architect so selected. Tenant's architect
and Landlord's architect will determine the punchlist items and will report in
writing to Landlord and Tenant the punchlist items. If the two architects do not
agree on the punchlist items, a third architect (mutually acceptable to
Landlord's architect and Tenant's architect) will be selected within the
following five days. In such event, the third architect will determine the
punchlist items within five days after his or her selection and will report in
writing to Landlord and Tenant the punchlist items. All architects will be
members in good standing with the American Institute of Architects and will have
previous experience in making evaluations of industrial buildings in the
metropolitan Chicago real estate market. Landlord and Tenant will each pay the
charges of its own architect and one-half of the charges of the third architect.
Notwithstanding anything contained herein to the contrary, if Landlord has not
100% completed the punchlist items and the improvements (including, without
limitation, the landscaping and exterior paving) and obtained a permanent
certificate of occupancy by August 3, 1998, for any reason other than the
occurrence of a Tenant-caused delay, then Tenant may, following its delivery of
written notice to Landlord that it is exercising its self-help remedy hereunder,
proceed to complete the punchlist items and improvements and deduct the cost
thereof reasonably incurred by Tenant from the immediately succeeding
installments of Base Rent and Estimated Operating Expense Payments; provided,
however, that if Tenant's use and occupancy of the Leased Premises is
interrupted by any governmental authority at any time thereafter, including,
without limitation, during the course of Tenant completing the punchlist items
and the improvements, due to the fact that a permanent certificate of occupancy
has not been issued, then Base Rent and Estimated Operating Expense Payments
shall abate until such time as Tenant's use and occupancy is restored by
governmental authority.
Notwithstanding anything to the contrary contained herein, if Landlord's
inability to meet any of the various time deadlines set forth in this paragraph
3 (that is, the March 2, 1998, June 1, 1998 and July 1, 1998 deadlines) is
attributable solely to a Tenant-caused delay (which, for the purposes of this
Paragraph 3, will include Tenant's failure to timely respond to any matter
submitted for its review, delays caused by Tenant's requested change orders, as
verified by Landlord's general contractor, Tenant's making of installations in
the Expansion Space, provided that the making of any such installations
unreasonably interferes with Landlord's construction of the improvements, and
Tenant's failure, through no fault of Landlord, to achieve the first three
milestones referred to in this Paragraph 3 by the appropriate milestone dates
set forth above), then Tenant's obligation to commence paying Base Rent and
Estimated Operating Expense Payments will commence and continue unabated in the
same manner as would be required hereunder if such Tenant-caused delay had not
occurred and Landlord had accordingly met the applicable time deadline.
Tenant's expansion option will be exercised, if at all, by Tenant's
delivery of written notice of the exercise of the same on or before July 1,
1997. Except as otherwise provided above with respect to the scope of and
20
<PAGE>
improvements to the Expansion Space, Tenant's leasing of such Expansion Space
will be upon all of the same terms and conditions as are applicable to its
leasing of the initial Lease Premises (including, without limitation, the
termination date of its leasing of the Expansion Space, which termination
date will be co-terminus with its leasing of the Leased Premises), except
that: (i) the commencement date of its leasing of the Expansion Space will be
the date specified above in this Paragraph 3; and (ii) all provisions of the
Lease Agreement which are expressly tied to the square footage contained in
the space being leased by Tenant hereunder (for example, the description in
the Leases Summary of the Leased Premises, Base Rent, Tenant's Proportionate
Share of Operating Expenses and the Initial Estimated Operating Expense
Payments), will be modified to reflect Tenant's leasing of both the Expansion
Space and the Leased Premises; and (iii) the annual Base Rent payable by
Tenant during the last 60 months of its leasing of the Expansion Space will
be $4.08 per rentable square foot contained within the Expansion Space, with
the annual Base Rent for the prior period of Tenant's leasing of the
Expansion Space being $3.60 per rentable square foot contained within the
Leased Premises.
4. Sale of Building. Tenant acknowledges that it is Landlord's intention to sell
the Building and the land on which it is situated (as well as any Expansion
Space and associated land) to the Prudential Insurance Company of America. If
the Prudential Insurance Company of America thereafter decides to market for
sale the Building and Expansion Space and any associated land, The Prudential
Insurance Company of America will give Tenant prior notification that it is
contemplating such a marketing effort and The Prudential Insurance Company of
America will entertain Tenant's bids for the purchase of the Building and
Expansion Space and any associated land for 15 days after Tenant's receipt of
such notification from The Prudential Insurance Company of America.
5. Installation of Fixtures. Tenant may use its own licensed contractors for the
installation of its fixtures and racking, provided that the activities of such
contractors do not unreasonably interfere with Landlord's efforts to complete
construction of the Building and Tenant Improvements.
6. Exterior Signage. All exterior building signs identifying Tenant will be
installed by Landlord at Tenant's sole cost and expense. Tenant will be
responsible for maintaining and repairing all such exterior building signs.
Initialed and Approved by Tenant:
---------------------------------
The Prudential Insurance Company of America is signing this Exhibit F for the
limited purpose of acknowledging its obligation under Paragraph 4 of this
Exhibit F.
The Prudential Insurance Company
of America
By
------------------------------
(Name) (Title)
21
<PAGE>
EXHIBIT C
RULES AND REGULATIONS
1. Landlord will provide Tenant with two sets of keys to the Leased
Premises. Tenant may obtain additional keys to the Leased Premises at Tenant's
sole expense. Tenant will provide only its authorized agents and employees with
copies of such keys. Upon termination of the Lease, Tenant will return all keys
to Landlord.
2. Tenant will not alter or add locks or bolts on doors providing ingress
and egress to the Leased Premises, without the prior written consent of
Landlord.
3. Tenant will lock the Leased Premises before leaving the Leased Premises
each day.
4. [Intentionally omitted]
5. Tenant will place garbage and refuse only in trash containers approved
by Landlord. Such containers will be kept outside the Leased Premises in such
areas as are designated by Landlord in the Final Plans (which Final Plans
include locations for pads for garbage containers). Landlord must approve the
trash collection and disposal service utilized to empty and haul away such
garbage and refuse and the times and days of the week such containers will be
emptied. Tenant will pay for the cost of the containers and the periodic trash
collection and disposal charges.
6. No aerials, antennae, satellite dishes or other communication
equipment will be placed by Tenant on or about the Building without the prior
consent of Landlord which consent will not be unreasonably withheld. Tenant
may, however, place aerials, antennae, satellite dishes or other
communication equipment on the Land (but not on the Building) without the
consent of Landlord. Landlord shall not, for itself or any third party,
install or construct aerials, antennae, satellite dishes or other
communication equipment on or about the Leased Premises without first
obtaining the prior written consent of Tenant, which consent will not be
unreasonably withheld. Any aerials, antennae, satellite dishes or other
communication equipment installed on the Land or the Building in accordance
with this Paragraph 6 will be so installed in compliance with all applicable
laws. If any aerial, antennae, satellite dish or other communication
equipment installed on or about the Leased Premises by Landlord at any time
interferes with the signal of any such items placed on or about the Leased
Premises by Tenant, then, promptly following its receipt of written notice
from Tenant that such signal interference is occurring, Landlord will, at its
expense, remove such aerial, antennae, satellite dish or other communication
from the Leased Premises. Within 30 days after the expiration or sooner
termination of the Lease Term, Tenant, at its sole cost, will remove all
antennae, satellite dishes or other communication equipment installed by it
under this Paragraph 6 and will repair all damage caused by any such removal.
7. [Intentionally omitted]
8. Tenant will not use the plumbing facilities serving the Leased Premises
for the disposal of refuse or any other improper use. Tenant will, at its sole
expense repair any damage to such plumbing facilities caused by any such misuse.
9. No animals or birds will be allowed in or about the Leased Premises.
10. Tenant will not store any personal property outside the Leased
Premises.
11. Tenant will not burn or incinerate trash, refuse or any other items in
or outside the Leased Premises.
12. Tenant will not allow anyone to reside or sleep in the Leased Premises.
22
<PAGE>
13. Landlord will not be responsible for any loss, theft or disappearance
of personal property from the Leased Premises, unless due to Landlord's
negligence or intentional misconduct.
14. Tenant will not cover all or any part of any window or door to the
Leased Premises without obtaining the prior written consent of Landlord.
15. Tenant will not conduct or permit to be conducted any auction or public
sale on or about the Leased Premises, without the prior written consent of
Landlord.
16. Tenant will maintain the inside of the Leased Premises at a temperature
sufficiently high to prevent freezing of water, pipes, fixtures and fire
protection systems inside the Leased Premises.
17. Tenant will not overload the floors of the building and the Leased
Premises beyond the stated maximum capacity thereof, which is 4000 psi.
18. Tenant will not cause or permit any unusual or objectionable odors to
be produced upon or permeated from the Leased Premises.
19. The sidewalk, entrances, passages, halls and parking areas will not be
obstructed or encumbered by Tenant or used for any purpose other than ingress or
egress to and from the Leased Premises.
20. Tenant will not create or maintain any nuisance (including without
limitation, loud noises, bright lights, smoke or dust) which will be visible
from the exterior of the Leased Premises.
21. Tenant will not conduct any noxious or offensive trade or activity at
the Leased Premises.
22. All deliveries and shipments will be made only at Tenant's loading
dock(s) or other areas reasonably designated by Landlord.
23. [Intentionally omitted]
24. [Intentionally omitted]
25. [Intentionally omitted]
26. Tenant shall not load any vehicle beyond the weight limits established
by the state and will be responsible for any damage caused to the common areas
by overweight vehicles making deliveries to or transporting goods from the
Leased Premises.
27. Tenant agrees to cooperate and assist Landlord in the prevention of
canvassing, soliciting and peddling within the Building.
28. [Intentionally omitted].
29 It is Landlord's desire to maintain the Building and the Park with the
highest standard of dignity and good taste consistent with comfort and
convenience for tenants. Landlord reserves the right to make such other and
further reasonable rules and regulations as in its judgment may from time to
time be necessary for the safety, care and cleanliness of the Leased Premises,
the Building and the Park and the preservation of good order therein.
23
<PAGE>
These Rules and Regulations (and any amendments hereto which are consistent with
the Lease) are intended to supplement the terms and provisions of the Lease and
shall be applied and interpreted in a manner which is consistent with the terms
and provisions of the Lease. In the event of a conflict between the Lease and
these Rules and Regulations (or any amendments thereto), the Lease will govern.
Initialed and Approved by Tenant:
---------------------------------
24
<PAGE>
GUARANTY
June 20, 1997
This Guaranty is made as of the date first set forth above by Blyth Industries,
Inc. ("Guarantor"). This Guaranty is being given by Guarantor to Carol Stream I
Development Company, its successors and assigns (together with all successor
owners of the Building, "Landlord") for the purpose of inducing Landlord to
lease space in its building known as Carol Stream #1 in Carol Stream, Illinois
("Building") to Partylite Gifts, Inc. ("Tenant"). Tenant's lease of space in the
Building (the "Premises") will be governed by a Lease Agreement ("Lease") which
will be entered into by Tenant and Landlord contemporaneously with Guarantor's
execution and delivery of this Guaranty to Landlord.
In consideration of Landlord's execution and delivery of the Lease and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Guarantor hereby agrees as follows:
1. Guarantor hereby absolutely, unconditionally and irrevocably guaranties
to Landlord the due and punctual payment of each installment of rent
and other charges payable under the Lease (whether by acceleration or
otherwise) and the prompt and complete performance by Tenant of all
other covenants, conditions and provisions of the Lease which are
required to be performed by Tenant (collectively, the "Liabilities").
Guarantor will pay to Landlord all reasonable costs (including, without
limitation, attorney's and paralegal's fees) incurred by Landlord in
seeking to enforce the Lease or Guarantor's obligations hereunder,
regardless whether legal action is formally instituted against Tenant
or Guarantor.
2. This Guaranty is a present, absolute, continuing and unlimited guaranty
of payment and performance and not merely a guaranty of collection and
Landlord will not be required to take any action against Tenant or to
realize upon any security for Tenant's performance under the Lease or
give any notice to Guarantor (unless otherwise expressly required under
the Lease) as a condition precedent to demanding performance hereunder
by Guarantor or otherwise exercising its rights under the Guaranty.
This Guaranty and the liability of the Guarantor hereunder will not be
impaired or affected by any assignment of the Lease or any subletting
of Tenant's space in the Building (unless Guarantor is expressly
released by a written instrument signed by Landlord at the time of any
such assignment or subletting), nor by any extension, forbearance or
delay in enforcing any of the terms, conditions, covenants or
provisions of the Lease, nor by any amendment, modification or revision
of the Lease, nor by: (i) any transfer, waiver, compromise, settlement,
modification, surrender or release of Tenant's obligations under the
Lease; (ii) the existence of any defenses to enforcement of the Lease;
(iii) any failure, omission, delay or inadequacy, whether entire or
partial, of Landlord to exercise any right, power or remedy regarding
the Lease or to enforce or realize upon (or to make any guarantor a
party to the enforcement or realization upon) any of Landlord's
security for the Lease, including, but not limited to, any impairment
or release of such security by Landlord; (iv) the existence of any
setoff, claim or counterclaim or the reduction or diminution of the
Liabilities, or any defense of any kind or nature, which Guarantor may
have against Tenant or which any party has against Landlord; (v) the
application of payments received from any source to the payment of any
obligation other than the Liabilities, even though Landlord might
lawfully have elected to apply such payments to any part or all of the
Liabilities; (vi) the addition or release of any and all other
guarantors, obligors and other persons liable for the payment of the
Liabilities, and the acceptance or release of any and all other
security for the payment of the Liabilities; or (vii) any distress or
reentry by Landlord or dispossession of Tenant or any action or remedy
taken by Landlord under the Lease, or any failure to notify Guarantor
of any default by Tenant (unless otherwise expressly required under the
Lease); whether or not Guarantor shall have had notice or knowledge of
any act or omission referred to in the foregoing clauses (i) through
(vii) inclusive of this Paragraph.
3. No action or proceeding brought or instituted against Guarantor under
this Guaranty (nor any recovery with respect thereto) will be a bar or
defense to any further action or proceeding which may be brought under
this Guaranty.
<PAGE>
4. The liability of Guarantor will not be deemed to be waived, released,
discharged, impaired or affected by reason of the release or discharge
of the Tenant in any creditor, receivership, bankruptcy (including
Chapter VII or Chapter XI bankruptcy proceedings or other
reorganization proceedings under the Bankruptcy Act) or other
proceeding, or the rejection or disaffirmance of the Lease in any such
proceeding. Guarantor agrees that, if at any time all or any part of
any payment theretofore applied by Landlord to any Liabilities is
rescinded or returned by Landlord due to the insolvency, bankruptcy,
liquidation or reorganization of any party), such Liabilities shall,
for the purposes of this Guaranty, be deemed to have continued in
existence to the extent of such payment, notwithstanding such
application by Landlord, and this Guaranty shall continue to be
effective or be reinstated, as the case may be, as to such Liabilities,
all as though such application by Landlord had not been made. Guarantor
does hereby further agree that with respect to any payments made by
Guarantor hereunder, Guarantor shall not have any rights based on
suretyship, subrogation or otherwise to stand in the place of Landlord
so as to compete with Landlord as a creditor of Tenant, and Guarantor
hereby waives all such rights to the fullest extent permitted b y law.
5. Guarantor expressly waives: (i) notice of the acceptance by Landlord of
this Guaranty; (ii) notice of the existence, creation, payment or
nonpayment of the Liabilities; (iii) presentment, demand, notice of
dishonor, protest and all other notices whatsoever, unless otherwise
expressly required under the Lease; and (iv) any failure by Landlord to
inform Guarantor of any facts Landlord may now or hereafter know about
Tenant, the Lease or the Premises, it being understood and agreed that
Guarantor has and will maintain personal knowledge of and is familiar
with Tenant's financial condition and business affairs and has the
ability to influence Tenant's decision-making processes, and that
Landlord has no duty so to inform, and that Guarantor is fully
responsible for being and remaining informed by, Tenant of all
circumstances bearing on the Lease and this Guaranty. No modification
or waiver of any of the provisions of this Guaranty will be binding
upon Landlord except as expressly set forth in a writing duly signed
and delivered on behalf of Landlord.
6. There will be no modification of the provisions of this Guaranty unless
the same are in writing and signed by Guarantor and Landlord.
7. Guarantor will submit a current and accurate financial statement to
Landlord on or before the first day of April of each calendar year.
8. All of the terms, agreements and conditions of this Guaranty are joint
and several, and will extend to and be binding upon the undersigned
(and both of them jointly and severally, if more than one), their
heirs, executors, administrators, and assigns, and will inure to the
benefit of Landlord, its successors and assigns, and to any future
owner of the fee of the Building.
9. Guarantor acknowledges that Landlord's entry into the Lease is in
reliance upon and would not have been made but for Guarantor's
execution of this Guaranty and the truth, accuracy and completeness of
all financial information which has been furnished to Landlord by
Guarantor. In the event that such financial information or any
subsequent financial information furnished by Guarantor is found to be
untrue or inaccurate in any material respect, or in the event that
Guarantor has misrepresented in any material respect Guarantor's
financial condition, then the same shall constitute a default under the
Lease, entitling Landlord to exercise any and all rights and remedies
authorized or permitted to be exercised in the event of such a default,
including, without limitation, the recourse available to Landlord under
this Guaranty. Guarantor agrees that, to the extent it ceases to be a
publicly-traded corporation over a nationally-recognized stock exchange
(and, therefore, its annual financial statements are no longer
available in the public domain), Guarantor will provide its most recent
financial statements (including a balance sheet and income and loss
statement) to Landlord within five months after the end of each of
Guarantor's fiscal years during the Lease Term.
<PAGE>
Guarantor has executed this Guaranty on June 20, 1997.
Signed and acknowledged in GUARANTOR:
the presence of: BLYTH INDUSTRIES, INC.
/s/ Sarah Scova
- ------------------------------
- ------------------------------ By: /s/ Bruce Kreiger
--------------------------------
(Name) (Title)
Vice President
STATE OF Connecticut
-----------------------
COUNTY OF Fairfield
---------------------
The foregoing instrument was sworn to and acknowledged before me on
June 20, 1997 by Bruce Kreiger.
/s/ Christina Kaufman
--------------------------------
Notary Public
<PAGE>
Exhibit 10.8
PROMISSORY NOTE
$350,000.00 March 17, 1995
FOR VALUE RECEIVED, ELWOOD L. LA FORGE, JR. AND MARY G. LA FORGE
(individually and collectively, the "Maker"), having an address at 51 Southridge
Court, Ridgefield, Connecticut 06877 jointly and severally promise to pay to the
order of BLYTH INDUSTRIES, INC. (the "Holder" or "holder", which term shall also
include all subsequent holders of this Note) the principal amount of THREE
HUNDRED FIFTY THOUSAND DOLLARS AND NO CENTS ($350,000.00), together with
interest thereon as provided for below. Such principal amount shall be payable
by the Maker in seven (7) consecutive annual payments, commencing on March 1,
1997 and continuing on March 1 of each year thereafter with the final seventh
payment due on March 1, 2003 ("the Final Maturity Date") with each such payment
to be in the amount of $50,000. All payments shall be in such coin or currency
of the United States of America as at the time of payment shall be legal tender
therein for the payment of public and private debts. Maker shall pay interest in
arrears at the rate provided for below on the unpaid principal balance hereof
outstanding from time to time until paid in full. Interest shall commence to
accrue on the date hereof. Interest shall be payable by the Maker, annually, in
arrears, commencing on March 1, 1996 and continuing on each succeeding March 1
thereafter until the principal hereunder is paid in full.
The Maker hereby represents that they are applying the proceeds of the loan
evidenced by this Note for the purchase by the Maker of a principal residence in
Ridgefield, Connecticut.
The rate of interest hereunder shall be equal to 5 percent (5%) per annum
(the "Interest Rate"). After the Final Maturity Date and during any period in
which any other Event of Default (as hereinafter defined) is continuing, the
rate of interest hereunder shall be increased, at the option of the holder
hereof, to a rate of two percent (2%) in excess of the rate that would otherwise
be charged hereunder. Anything contained in this Note to the contrary
notwithstanding, the holder does not intend to charge and the Maker shall not be
required to pay interest in excess of the maximum permitted under applicable law
and any interest paid in excess of such maximum shall be either refunded to the
Maker or credited against principal hereunder.
All payments of principal of and interest on this Note shall be made to the
holder hereof at such address as the holder specifies.
Payment of this Note is secured by a certain Mortgage, of even date
herewith, from the Maker to the Holder, with respect to the property located at
51 Southridge Court, Ridgefield, Connecticut 06877 (the "Mortgage").
<PAGE>
Each of the following should constitute an Event of Default hereunder:
(a) Default in the payment or prepayment when due of any principal of
or interest on this Note and such default shall continue for a
period of at least ten (10) days after the holder hereof shall
have given the Maker notice of such default; or
(b) The Maker shall become insolvent or admit in writing his or her
inability to pay his or her debts as they mature; or the Maker
applies for, consents to, or acquiesces in the appointment of, a
trustee or receiver for the Maker or any property thereof, or
makes a general assignment for the benefit of creditors; or, in
the absence of such application, consent or acquiescence, a
trustee or receiver is appointed for the Maker or for a
substantial part of the property of the Maker and is not
discharged within 60 days; or
(c) Any bankruptcy, reorganization, debt arrangement, or other case or
proceeding under any bankruptcy or insolvency law, or any
dissolution or liquidation proceeding is instituted by or against
the Maker and is consented to or acquiesced in by the Maker or
remains for 60 days undismissed; or
(d) Death of Elwood L. La Forge, Jr. or
(e) Any termination (with or without cause) of the employment of
Elwood L. La Forge, Jr. with Blyth Industries, Inc., its
subsidiaries, or any of its affiliates.
Upon the occurrence and anytime during the continuance of any Event of
Default, the holder hereof shall have the right, upon written notice to the
Maker, to declare the entire unpaid principal and interest hereunder and any
other indebtedness owed by the Maker to the holder to be immediately due and
payable and upon such declaration such principal, interest and other
indebtedness shall become immediately due and payable; provided, however,
that in the case of any Event of Default under clauses (b) and (c) above,
such principal and interest hereunder and other indebtedness shall become
immediately due and payable without any such declaration or notice; provided,
further, that in the case of any Event of Default under clause (d), the
holder hereof shall have the right any time after the day of death, upon
written notice to the Maker or Maker's representatives, to declare the entire
unpaid principal and interest hereunder and any other indebtedness owed by
the Maker to the holder to be due and payable on any date (the "selected
date") which is at least seventy-five (75) days after the day of death and if
such notice is given, such principal, interest and other indebtedness shall
become due and payable on the selected date; provided, further, that in the
case of any Event of Default under clause (e), the holder hereof shall have
the right any time on or after the date of termination of employment, upon
notice to the Maker, to declare the entire unpaid principal
2
<PAGE>
hereunder and any other indebtedness owed by the Maker to the holder to be
due and payable one year after the date such notice is given and if such
notice is given, such principal, interest and other indebtedness shall become
due and payable one year after the date such notice is given. The Mortgage
provides for additional events upon which the principal of this Note may be
accelerated and the Holder shall have the right to accelerate the principal
of this Note, whether the right to accelerate is given under this Note or the
Mortgage.
Any written notice hereunder shall be by: (i) registered mail, return
receipt requested, postage prepaid, to the Maker and, in such case, shall be
deemed given three (3) days after mailed or (ii) by Federal Express or other
nationally recognized overnight courier to the Maker, and, in such case, shall
be deemed given two (2) days after sent, or (iii) hand delivery and, in such
case, shall be deemed given when delivered or (iv) such method of notice as
shall be permitted under the Mortgage. Any notices by the holder to the Maker
shall be made sent notice address set forth in the first paragraph of this Note
(or such other address as the Maker may designate by notice to the holder by
notice sent by any of the methods referred to in clauses (i), (ii), (iii) or
(iv) of the prior sentence.
No course of dealing between the Maker and the holder hereof or any delay
on the part of the holder hereof in exercising any rights hereunder shall
operate as a waiver of any rights of the holder hereof.
The Maker and any endorsers, guarantors, and sureties hereof, for
themselves and their respective representatives, heirs, successors and assigns
expressly (a) waive, to the fullest extent permitted under law, presentment,
demand, protest, notice of dishonor, notice of non-payment, notice of
acceptance, notice of maturity, notice of default, notice of protest, notice of
demand and all other notices to which each of them may otherwise be entitled,
and (b) consent that the Holder may release or surrender, exchange or substitute
any property now held or which may hereafter be held as security for the payment
of this Note, may add any property as security, or may extend the time for
payment or otherwise modify the terms of payment of any part of or the whole of
the debt evidenced hereby, all without releasing the obligations of any such
party for the payment of this Note. The holder may release any such party from
the obligations without in any way affecting the obligations of any such other
party(ies). This Note shall be binding upon the Maker and Maker's successors,
assigns, heirs and representatives and shall inure to the benefit of the holder
and its successors, assigns, heirs and representatives.
Maker shall have the right to prepay, in whole or in part, without penalty,
the principal or any interest hereunder. Unless waived by the Holder, all
prepayments of principal (whether mandatory or voluntary) shall be accompanied
by the simultaneous payment of the interest accrued in the amount prepaid. All
payments shall be applied as follows: first to costs and expenses of collection
and enforcement of holder's rights under this Note, second to accrued and unpaid
interest, and third to the outstanding principal hereunder. All prepayments of
principal shall, unless the holder otherwise agrees, be applied in inverse order
of maturity.
3
<PAGE>
The Maker agrees to reimburse the holder for all costs and expenses,
including reasonable attorneys' fees and court costs, incurred by the holder of
this Note in collecting or otherwise enforcing this Note or otherwise protecting
the interests of the holder hereof. This Note shall be governed by, and
construed in accordance with, the laws of the State of Connecticut. Maker hereby
submits to the non-exclusive personal jurisdiction of the courts of the State of
Connecticut with respect to any suit or action relating to this Note or the
Mortgage.
Nothing contained herein shall be construed to (1) constitute an employment
contract (whether express or implied) or (2) restrict, limit or otherwise
interfere with the right of Blyth Industries, Inc., its subsidiaries or
affiliates to at any time terminate the employment of Elwood L. La Forge, Jr.
WITNESS:
/s/ Claudia K. St. John /s/ Elwood L. LaForge, Jr.
- ------------------------ --------------------------
Claudia K. St. John Elwood L. La Forge, Jr.
/s/ Claudia K. St. John /s/ Mary G. LaForge
- ------------------------ ----------------------------
Claudia K. St. John Mary G. La Forge
4
<PAGE>
Exhibit 10.9
MORTGAGE
THIS MORTGAGE is made this 17th day of March 1995 between the Mortgagor
ELWOOD L. LA FORGE, JR. and MARY G. LA FORGE jointly and severally (herein
"Borrower", and the Mortgagee BLYTH INDUSTRIES, INC. a corporation organized and
existing under the laws of the State of Delaware whose address is Two Greenwich
Plaza, Greenwich, Connecticut 06830 (herein "Lender").
BORROWER, in consideration of the indebtedness herein recited, grants and
conveys to Lender and Lender's successors and assigns the following described
property, buildings and other, located in the Town of Ridgefield, State of
Connecticut:
See Schedule A attached hereto and made a part hereof
+ buildings and other
which has the address of 51 Southridge Court, Ridgefield, Connecticut 06877
(herein "Property Address");
TO HAVE AND TO HOLD such property unto Lender and Lender's successors and
assigns, forever, together with all the improvements now or hereafter erected on
the property, and all easements, rights, appurtenances and rents, all of which
shall be deemed to be and remain a part of the property covered by this
Mortgage; and all of the foregoing, together with said property (or the
leasehold estate if this Mortgage is on a leasehold) are hereinafter referred to
as the "Property;"
TO SECURE to Lender on condition of the repayment of the indebtedness
evidenced by Borrower's note dated March 17, 1995 and extensions and renewals
thereof (herein "Note"), in the principal sum of U.S. $350,000 with interest
thereon, such Note having a final maturity date of March 1, 2003; the payment of
all other sums, with interest thereon, advanced in accordance herewith to
protect the security of this Mortgage; and the performance of the covenants and
agreements of Borrower herein contained.
Borrower covenants that Borrower is lawfully seised of the estate hereby
conveyed and has the right to grant and convey the Property, and that the
Property is unencumbered, except for encumbrances set forth on Schedule A.
Borrower covenants that Borrower warrants and will defend generally the title to
the Property against all claims and demands, subject to encumbrances of record.
<PAGE>
SCHEDULE A
ALL THOSE CERTAIN pieces of parcels of land, with the improvements thereon,
situated in the Town of Ridgefield, County of Fairfield and State of Connecticut
shown and designated as Lot 10, Parcel A, and Parcel C as shown on that certain
map entitled "Subdivision Map of Southridge Ridgefield, Connecticut Date = May
13, 1985, Scale 1" = 100' Area 30.007 AC.Zone: R-AA Revised August 29, 1985,
September 30, 1985 and Nov. 6, 1985" which map is certified "Substantially
Correct" by Robert H. Bergendorff and is on file in the Office of the Town Clerk
of Ridgefield as Map No. 7175.
Said premises are also shown and described on a certain map entitled
"Parcel #10 Map Prepared For Elwood L. La Forge, Jr. and Mary G. La Forge
Ridgefield, Connecticut R-"AA" Residence Zone Survey Date Nov. 9, 1994 by RKW
Land Surveying New Canaan, CT Lawrence R. Rizzo Lic. No. 12060" which map is on
file in the Office of the Town Clerk of Ridgefield as Map No. 8140.
TOGETHER WITH a right of way over "Parcel B 0.1221 AC." on Map No. 7175 for
the benefit of Lots 8, 9 and 10 as shown on said map.
TOGETHER WITH any rights and/or privileges as conveyed by the Town of
Ridgefield in and to certain easements as recorded in Volume 335 at Page 169 and
in Volume 335 at Page 332 of the Ridgefield Land Records.
Subject to:
1. Limitations of use imposed by governmental authority which do not
impair the use of the premises as a single family residence.
2. Taxes of the Town of Ridgefield hereafter due and payable.
3. The effect, if any, of notations and conditions on Maps 4709 and 7175.
4. The effect, if any, of a pedestrian easement from Scandia Construction
& Development Corporation to the Town of Ridgefield, dated November 12,
1985 and recorded in Volume 334 at page 908.
5. Riparian rights of others in and to any brook or stream flowing on or
across said premises.
6. The effect, if any, of an easement from the Town of Ridgefield to
Scandia Construction & Development Corporation recorded in Volume 335
at Page 169 of the Ridgefield Land Records.
7. The effect, if any, of an easement recorded in Volume 335 at Page 332 of the
Ridgefield Land Records.
<PAGE>
8. Easement to Connecticut Light & Power Company dated April 4, 1986 and
recorded in Volume 343 at Page 922 of the Ridgefield Land Records.
9. Easements in favor of Lots 8 and 9 across Parcels A and C more
particularly set forth in instruments recorded in Volume 472 at Page
598 and in Volume 505 at Page 148 of the Ridgefield Land Records.
10. Rights, if any, of the owner of Parcel #9 (being the same piece of land
as Lot #9 as shown on Ridgefield Map No. 7175) regarding the conditions
depicted on Ridgefield Map No. 8140 with respect to the driveway and
lawn area.
11. Mortgage from Elwood L. La Forge, Jr. and Mary G. La Forge to the
Village Bank and Trust Company in the principal amount of $250,000.00
dated March 17, 1995 and recorded in the Ridgefield Land Records on
March 20, 1995.
<PAGE>
UNIFORM COVENANTS. Borrower and Lender covenant and agree as follows:
1. Payment of Principal and Interest. Borrower shall promptly pay when due
the principal and interest indebtedness evidenced by the Note and late charges,
if any, as provided in the Note.
2. [Omitted]
3. Application of Payments. Unless applicable law provides otherwise, all
payments received by Lender under the Note and paragraphs 1 hereof shall be
applied by Lender first to interest payable on the Note, and then to the
principal of the Note.
4. Prior Mortgages and Deeds of Trust; Charges; Liens. Borrower shall
perform all of Borrower's obligations under any mortgage, deed of trust or other
security agreement with a lien which has priority over this Mortgage, including
Borrower's covenants to make payments when due. Borrower shall pay or cause to
be paid all taxes, assessments and other charges, fines and impositions
attributable to the Property which may attain a priority over this Mortgage, and
leasehold payments or ground rents, if any.
5. Hazard Insurance. Borrower shall keep the improvements now existing or
hereafter erected on the Property insured against loss by fire, hazards included
within the term "extended coverage", and such other hazards as Lender may
require and in such amounts and for such periods as Lender may require.
The insurance carrier providing the insurance shall be chosen by Borrower
subject to approval by Lender; provided, that such approval shall not be
unreasonably withheld. All insurance policies and renewals thereof shall be in a
form acceptable to Lender and shall include a standard mortgage clause in favor
of and in a form acceptable to Lender. Lender shall have the right to hold the
policies and renewals thereof, subject to the terms of any mortgage, deed of
trust or other security agreement with a lien which has priority over this
Mortgage.
In the event of loss, Borrower shall give prompt notice to the insurance
carrier and Lender. Lender may make proof of loss if not made promptly by
Borrower.
If the Property is abandoned by Borrower, or if Borrower fails to respond
to Lender within 30 days from the date notice is mailed by Lender to Borrower
that the insurance carrier offers to settle a claim for insurance benefits,
Lender is authorized to collect and apply the insurance proceeds at Lender's
option either to restoration or repair of the Property or to the sums secured by
this Mortgage.
6. Preservation and Maintenance of Property; Leaseholds; Condominiums;
Planned Unit Developments. Borrower shall keep the Property in good repair and
shall not commit waste or permit impairment; or deterioration of the Property
and shall comply with the provisions of any lease if this Mortgage is on a
leasehold. If this Mortgage is on a unit in a
<PAGE>
condominium or a planned unit development, Borrower shall perform all of
Borrower's obligations under the declaration or covenants creating or governing
the condominium or planned unit development, the by-laws and regulations of the
condominium or planned unit development, and constituent documents.
7. Protection of Lender's Security. If Borrower fails to perform the
covenants and agreements contained in this Mortgage, or if any action or
proceeding is commenced which materially affects Lender's interest in the
Property, then Lender, at Lender's option, upon notice to Borrower, may make
such appearances, disburse such sums, including reasonable attorneys' fees, and
take such action as is necessary to protect Lender's interest. If Lender
required mortgage insurance as a condition of making the loan secured by this
Mortgage, Borrower shall pay the premiums required to maintain such insurance in
effect until such time as the requirement for such insurance terminates in
accordance with Borrower's and Lender's written agreement or applicable law.
Any amounts disbursed by Lender pursuant to this paragraph 7, with interest
thereon, at the Note rate, shall become additional indebtedness of Borrower
secured by this Mortgage. Unless Borrower and Lender agree to other terms of
payment, such amounts shall be payable upon notice from Lender to Borrower
requesting payment thereof. Nothing contained in this paragraph 7 shall require
Lender to incur any expense or take any action hereunder.
8. Inspection. Lender may make or cause to be made reasonable entries upon
and inspections of the Property, provided that Lender shall give Borrower notice
prior to any such inspection specifying reasonable cause therefor related to
Lender's interest in the Property.
9. Condemnation. The proceeds of any award or claim for damages, direct or
consequential, in connection with any condemnation or other taking of the
Property, or part thereof, or for conveyance in lieu of condemnation, are hereby
assigned and shall be paid to Lender, subject to the terms of any mortgage, deed
of trust or other security agreement with a lien which has priority over this
Mortgage.
10. Borrower Not Released: Forbearance by Lender Not a Waiver. Extension of
the time for payment or modification or amortization of the sums secured by this
Mortgage granted by Lender to any successor in interest of Borrower shall not
operate to release, in any manner, the liability of the original Borrower and
Borrower's successors in interest. Lender shall not be required to commence
proceedings against such successor or refuse to extend time for payment or
otherwise modify amortization of the sums secured by this Mortgage by reason of
any demand made by the original Borrower and Borrower's successors in interest.
Any forbearance by Lender in exercising any right or remedy hereunder, or
otherwise afforded by applicable law, shall not be a waiver of or preclude the
exercise of any such right or remedy.
11. Successors and Assigns Bound; Joint and Several Liability; Co-signers.
The covenants and agreements herein contained shall bind, and the rights
hereunder shall inure to, the respective successors and assigns of Lender and
Borrower, subject to the provisions of paragraph 16 hereof. All covenants and
agreements of Borrower shall be joint and several.
<PAGE>
12. Notice. Except for any notice required under applicable law to be given
in another manner, (a) any notice to Borrower provided for in this Mortgage
shall be given by delivering it or by mailing such notice by certified mail
addressed to Borrower at the Property Address or at such other address as
Borrower may designate by notice to Lender as provided herein or by any method
referred to in the attached Note, and (b) any notice to Lender shall be given by
certified mail to Lender's address stated herein or to such other address as
Lender may designate by notice to Borrower as provided herein. Any notice
provided for in this Mortgage shall be deemed to have been given to Borrower or
Lender when given in the manner designated herein.
13. Governing Law; Severability. The state and local laws applicable to
this Mortgage shall be the laws of the jurisdiction in which the Property is
located. The foregoing sentence shall not limit the applicability of Federal law
to this Mortgage. In the event that any provision or clause of this Mortgage or
the Note conflicts with applicable law, such conflict shall not affect other
provisions of this Mortgage or the Note which can be given effect without the
conflicting provision, and to this end the provisions of this Mortgage and the
Note are declared to be severable. As used herein, "costs", "expenses" and
"attorneys' fees" include all sums to the extent not prohibited by applicable
law or limited herein.
14. Borrower's Copy. Borrower acknowledges having received a conformed copy
of the Note and of this Mortgage at the time of execution or after recordation
hereof.
15. Rehabilitation Loan Agreement. Borrower shall fulfill all of Borrower's
obligations under any home rehabilitation, improvement, repair, or other loan
agreement which Borrower enters into with Lender. Lender, at Lender's option,
may require Borrower to execute and deliver to Lender, in a form acceptable to
Lender, an assignment of any rights, claims or defenses which Borrower may have
against parties who supply labor, materials or services in connection with
improvements made to the Property.
16. Transfer of the Property or a Beneficial Interest in Borrower. If all
or any part of the Property or any interest in it is sold or transferred (or if
a beneficial interest in Borrower is sold or transferred and Borrower is not a
natural person) without Lender's prior written consent, Lender may, at its
option, require immediate payment in full of all sums secured by this Mortgage.
However, this option shall not be exercised by Lender if exercise is prohibited
by federal law as of the date of this Mortgage.
If Lender exercises this option, Lender shall give Borrower notice of
acceleration. The notice shall provide a period of not less than 30 days from
the date the notice is delivered or mailed within which Borrower must pay all
sums secured by this Mortgage. If Borrower fails to pay these sums prior to the
expiration of this period, Lender may invoke any remedies permitted by this
Mortgage without further notice or demand on Borrower.
<PAGE>
NON-UNIFORM COVENANTS. Borrower and Lender further covenant and agree as
follows:
17. Acceleration; Remedies. Except as provided in paragraph 16 hereof, upon
Borrower's breach of any covenant or agreement of Borrower in this Mortgage,
including the covenants to pay when due any sums secured by this Mortgage,
Lender prior to acceleration shall give notice to Borrower as provided in
paragraph 12 hereof specifying: (1) the breach; (2) the action required to cure
such breach; (3) a date, not less than 10 days from the date the notice is
mailed to Borrower, by which such breach must be cured; and (4) that failure to
cure such breach on or before the date specified in the notice may result in
acceleration of the sums secured by this Mortgage and sale of Property. The
notice shall further inform Borrower of the right to reinstate after
acceleration and the right to bring a court action to assert the nonexistence of
a default or any other defense of Borrower to accelerate and sale. If the breach
is not cured on or before the date specified in the notice. Lender at Lender's
option may declare all of the sums secured by this Mortgage to be immediately
due and payable without further demand (the Lender shall also have the right to
accelerate as provided in the Note) and may upon such declaration or upon
acceleration under the Note invoke the power of sale and any other remedies
permitted by applicable law. Lender shall be entitled to collect all reasonable
costs and expenses incurred in pursuing the remedies provided in this paragraph
17 or under the Note, including, but not limited to, reasonable attorneys' fees.
18. Borrower's Right to Reinstate. Notwithstanding Lender's acceleration of
the sums secured by this Mortgage due to Borrower's breach, Borrower shall have
the right to have any proceedings begun by Lender to enforce this Mortgage
discontinued at any time prior to the earlier to occur of (i) the fifth day
before sale of the Property pursuant to the power of sale contained in the
Mortgage or (ii) entry of a judgment enforcing the Mortgage if; (a) Borrower
pays Lender all sums which would be then due under this Mortgage and the Note
had no acceleration occurred; (b) Borrower cures all breaches of any other
covenants or agreements of Borrower contained in this Mortgage; (c) Borrower
pays all reasonable expenses incurred by Lender in enforcing the covenants and
agreements of Borrower contained in this Mortgage, and in enforcing Lender's
remedies as provided in paragraph 17 hereof; including, but not limited to,
reasonable attorneys' fees; and (d) Borrower takes such action as Lender may
reasonably require to assure that the lien of this Mortgage, Lender's interest
in the Property and the Borrower's obligation to pay the sums secured by this
Mortgage shall continue unimpaired. Upon such payment and cure by Borrower, this
Mortgage and the obligations secured hereby shall remain in full force and full
effect if no acceleration had occurred.
19. Assignment of Rents; Appointment of Receiver; Lender in Possession. As
additional security hereunder, Borrower hereby assigns to Lender the rents of
the Property, provided that Borrower shall, prior to acceleration under
paragraph 16 hereof or abandonment of the Property, have the right to collect
and retain such rents as they become due and payable.
<PAGE>
Upon acceleration under paragraph 17 hereof or abandonment of the Property,
Lender, in person, by agent or by judicially appointed receiver, shall be
entitled to enter upon, take possession of and manage the Property and to
collect the rents of the Property including those past due. All rents collected
by Lender or the receiver shall be applied first to payment of the costs of
management of the Property and collections of rents, including, but not limited
to, receiver's fees, premiums on receiver's bonds and reasonable attorneys'
fees, and then to the sums secured by this Mortgage. Lender and the receiver
shall be liable to account only for those rents actually received.
20. Release. Upon payment of all sums secured by this Mortgage, this
Mortgage shall become null and void and Lender shall release this Mortgage
without charge to Borrower. Borrower shall pay all costs of recordation, if any.
REQUEST FOR NOTICE OF DEFAULT
AND FORECLOSURE UNDER SUPERIOR
MORTGAGES OR DEEDS OF TRUST
Borrower and Lender request the holder of any mortgage, deed of trust or
other encumbrance with a lien which has priority over this Mortgage to give
Notice to Lender, at Lender's address set forth on page one of this Mortgage, of
any default under the superior encumbrance and of any sale or other foreclosure
action.
IN WITNESS WHEREOF, Borrower has executed this Mortgage.
Signed, sealed and delivered in the presence of:
/s/ Edward A. Weiss /s/ Elwood L. La Forge, Jr.
- -------------------------------- ---------------------------
Edward A. Weiss (as to both) Elwood L. La Forge, Jr.
Borrower
/s/ Edward S. Rimer, Jr. /s/ Mary G. La Forge
- -------------------------------- ----------------------------
Edward S. Rimer, Jr. (as to him) Mary G. La Forge
Borrower
STATE OF CONNECTICUT Fairfield County ss:
The foregoing instrument was acknowledged before me this 17th day of March,
1995 by Elwood L. La Forge, Jr. and Mary G. La Forge as their free act and deed
(person acknowledging)
/s/ Edward S. Rimer, Jr.
----------------------------------
Commissioner of the Superior Court
My Commission expires:
<PAGE>
Record and Return To:
Harold B. Finn III, Esq.
Finn Dixon & Herling
One Landmark Square
Stamford, Connecticut 06901
REC'D. FOR RECORD Mar 20, 1995 AT 11:54 AM
Attest /s/ Doris Cassivechia
---------------------
Town Clerk
Mortgage Deed
Elwood L. La Forge, Jr
Mary G. La Forge
to
Blyth Industries, Inc.
Date: 3/17/95
Property:
51 Southridge Court
Ridgefield, CT
Return to:
Ed Weiss, Esq.
Finn, Dixon & Herling
One Landmark Square
Suite 600
Stamford, CT 06801
RIDGEFIELD LAND RECORDS
REC'D. March 20 1995
AT 11:54 AM
VOL. 505 PAGE 1025
/s/ Doris Cassivechia
- ----------------------
TOWN CLERK
<PAGE>
EXHIBIT 13
Financial Highlights 1
Financial Highlights
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Years ended January 31, %
(In thousands, except per share data) 1997 1998 Increase
- --------------------------------------------------------------------------------
Operating Results
Net Sales $531,480 $687,474 29%
Gross Profit > 287,402 388,912 35%
Operating Profit 74,047 98,774 33%
Net Earnings 42,757 54,590(1) 28%
Diluted Net Earnings Per Common and
Common Equivalent Share(2) $ 0.88 $ 1.10(1) 25%
Diluted Weighted Average Number of
Common Shares Outstanding(2) 48,476 49,543
Financial Position
Total Assets $303,879 $447,390
Total Debt 44,704 120,630
Total Stockholders' Equity 189,403 246,832
Market for Common Stock(2)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The price range for the Company's Common Stock on the New York Stock Exchange as
reported by the New York Stock Exchange was as follows:
Fiscal 1997
(ended January 31, 1997)
High Low
- --------------------------------------------------------------------------------
First Quarter $26.50 $18.75
Second Quarter $33.17 $26.25
Third Quarter $33.83 $24.67
Fourth Quarter $31.08 $22.42
Fiscal 1998
(ended January 31, 1998)
High Low
- --------------------------------------------------------------------------------
First Quarter $26.25 $21.08
Second Quarter $38.44 $24.17
Third Quarter $39.13 $23.25
Fourth Quarter $31.25 $22.63
Fiscal 1999
(ended January 31, 1999)
High Low
- --------------------------------------------------------------------------------
First Quarter (through April 9, 1998) $35.94 $28.81
(1) Net Earnings and Diluted Net Earnings Per Common and Common Equivalent
Share, excluding one-time non-recurring transaction costs incurred by Endar
Corp. prior to its acquisition by Blyth, increased 35% and 33%, respectively,
over the prior year.
(2) Reflects the June 1997 three-for-two stock split effected as a stock
dividend.
Net Sales
(In Millions)
Fiscal 1994 $167.8
Fiscal 1995 229.6
Fiscal 1996 356.7
Fiscal 1997 531.5
Fiscal 1998 687.5
Operating Profit
(In Millions)
Fiscal 1994 $14.9
Fiscal 1995 23.7
Fiscal 1996 43.7
Fiscal 1997 74.0
Fiscal 1998 98.8
Net Earnings
(In Millions)
Fiscal 1994 $ 8.0
Fiscal 1995 13.6
Fiscal 1996 25.2
Fiscal 1997 42.8
Fiscal 1998 54.6
<PAGE>
- --------------------------------------------------------------------------------
9
- --------------------------------------------------------------------------------
Financial Review
Selected Consolidated Financial Data 10
Management's Discussion and Analysis 11
Consolidated Balance Sheets 18
Consolidated Statements of Earnings 19
Consolidated Statements of Stockholders' Equity 19
Consolidated Statements of Cash Flows 20
Notes to Consolidated Financial Statements 21
Report of Independent Accountants 30
Report of Independent Certified Public Accountants 31
Directors and Officers 32
Shareholder Information 33
[PHOTO OMITTED]
Opposite: Fragrance Originals-Aromatherapy
This page: Fragrance Originals-Aromatherapy votives
<PAGE>
- --------------------------------------------------------------------------------
10 Financial Review
- --------------------------------------------------------------------------------
Selected Consolidated Financial Data
Set forth below are selected summary consolidated financial and operating data
of the Company for fiscal years 1994 through 1998, which have been derived from
the Company's audited financial statements for those years. The information
presented below should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the Company's
consolidated financial statements, including the notes thereto, appearing
elsewhere in this Annual Report to Shareholders.
<TABLE>
<CAPTION>
Years ended January 31,
======================================================================================
1994 1995 1996 1997 1998
(In thousands, except per share and percent data)
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Statement of Earnings Data:
Net sales $167,773 $229,617 $356,702 $531,480 $687,474
Gross profit 77,848 113,528 185,369 287,402 388,912
Operating profit 14,866 23,659 43,682 74,047 98,774
Interest expense 1,750 1,240 2,662 3,554 4,816
Earnings before income taxes
and minority interest 13,255 22,752 42,474 71,939 89,930
Earnings before
minority interest 8,009 13,605 25,552 42,951 54,862
Net earnings 8,009 13,605 25,175 42,757 54,590
Basic earnings per
common share(1) 0.21 0.32 0.56 0.89 1.11
Diluted earnings per
common share(1) 0.21 0.32 0.55 0.88 1.10
Basic weighted average number
of common shares outstanding(1) 37,972 42,040 45,089 47,974 49,063
Diluted weighted average number
of common shares outstanding(1) 37,972 42,208 45,373 48,476 49,543
Operating Data:
Gross profit margin 46.4% 49.4% 52.0% 54.1% 56.6%
Operating profit margin 8.9% 10.3% 12.2% 13.9% 14.4%
Capital expenditures $6,998 $ 10,448 $ 35,878 $ 50,526 $ 62,481
Depreciation and amortization 2,519 2,890 4,683 8,778 12,396
Balance Sheet Data:
Working capital $ 15,101 $ 42,494 $110,538 $113,177 $140,101
Total assets 70,861 102,591 223,469 303,879 447,390
Total debt 31,583 9,837 36,662 44,704 120,630
Total stockholders' equity 16,651 61,196 141,879 189,403 246,832
- --------------------------------------------------------------------------------------
</TABLE>
(1) Restated for a December 1995 two-for-one stock split and a June 1997
three-for-two stock split, each of which was effected as a stock dividend.
Earnings per common share for fiscal 1995, fiscal 1996, and fiscal 1997 reflects
the issuance of 6,000,000 shares of Common Stock as part of the Company's
initial pubic offering in May 1994, the issuance of 3,600,000 shares of Common
Stock in a secondary offering in October 1995, and the issuance of 993,745
shares of Common Stock in connection with the acquisition of New Ideas
International, Inc. in December 1996, respectively. Earnings per common share
for all periods gives effect to the issuance of 2,999,808 shares of Common Stock
upon conversion of certain convertible notes in April 1994 and the issuance of
1,900,786 shares of Common Stock in connection with the acquisition of Endar
Corp. in May 1997. Earnings per common share for the applicable periods also
includes the Company's equity in earnings from its investments in Colony Gift
Corporation Ltd. in September 1993 and March 1995, results of operations of
Jeanmarie Creations, Inc., 88% owned, of which 80% was acquired in April 1995,
4% was acquired in May 1996, and 4% was acquired in May 1997, the results of
operations from the Company's acquisition of 75% ownership in Eclipse Candles,
Ltd. in July 1995 and October 1996, the results of operations of New Ideas
International, Inc., which was acquired in December 1996, and the December 1997
acquisition of the Sterno and Handy Fuel assets, none of which had a material
effect on the Company's results of operations in the period during which they
occurred, or thereafter, and also includes the results of operations of Endar
Corp., which was acquired through a pooling of interests in May 1997 (the
Company's results have been restated to include the historical results of
operations of Endar Corp.).
<PAGE>
- --------------------------------------------------------------------------------
Financial Review 11
- --------------------------------------------------------------------------------
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Results of Operations
The following table sets forth, for the periods indicated, the percentage
relationship to net sales, and the percentage increase, of certain items
included in the Company's consolidated statements of earnings:
Increase from Prior Period
--------------------------
Percentage of Net Sales Fiscal 1997 Fiscal 1998
Years Ended January 31 Compared Compared
-------------------------- to Fiscal to Fiscal
1996 1997 1998 1996 1997
- --------------------------------------------------------------------------------
Net sales 100.0% 100.0% 100.0% 49.0% 29.4%
Cost of goods sold 48.0 45.9 43.4 42.5 22.3
Gross profit 52.0 54.1 56.6 55.0 35.3
Selling and shipping 30.3 30.9 32.9 51.7 37.7
Administrative 9.3 9.1 9.2 45.6 30.5
Operating profit 12.2 13.9 14.4 69.5 33.4
Net earnings 7.1 8.0 7.9 69.8 27.6
Fiscal 1998 Compared to Fiscal 1997
Net sales increased $156.0 million, or 29.4%, from $531.5 million in fiscal 1997
to $687.5 million in fiscal 1998, which percentage increase is consistent with
the Company's annual net sales growth goal of 25% for the next two fiscal years.
Virtually all of these increases were attributable to unit growth in sales of
the Company's consumer everyday and seasonal holiday products, particularly
scented candles and accessories. In particular, two areas of the business
experienced the highest growth rate for fiscal 1998: PartyLite Gifts, our party
plan direct seller in the United States; and International, particularly Europe
and Canada. Several factors contributed to the increase in unit sales. The
increase in sales to new domestic customers was attributable to improved
penetration of select channels of distribution and to geographic expansion in
the United States, particularly by the Company's direct selling activities.
International sales, including sales in Canada, grew at a faster rate than the
Company as a whole, and accounted for approximately 25% of the net sales
increase. International sales accounted for over 15% of the total net sales for
fiscal 1998. The Company's results were restated to include the historical
results of operations of Endar Corp. (which was acquired in a pooling of
interests transaction in May 1997). The acquisition of the Sterno and Handy Fuel
assets on December 31, 1997 did not have a material impact on the Company's
results of operations.
Sales of scented candles, which are typically higher gross profit margin
products, also continued to grow at a substantially faster rate than unscented
products. Consumable products (which consist of candles, potpourri, home
fragrance products, portable heating fuels and decorative gift bags and tags)
accounted for approximately 60% of the Company's net sales for fiscal 1998.
Candle accessories continued to account for the balance of net sales.
<PAGE>
- --------------------------------------------------------------------------------
12 Financial Review
- --------------------------------------------------------------------------------
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Results of Operations (continued)
Gross profit increased $101.5 million, or 35.3%, from $287.4 million in fiscal
1997 to $388.9 million in fiscal 1998. Gross profit margin increased from 54.1%
for fiscal 1997 to 56.6% for fiscal 1998. Such increases were due, in
substantial part, to the continued increased direct sales of the Company's
products, such as scented candles and candle accessories; these products
generally carry higher gross profit margins than other of the Company's
products. The increase in gross profit margin was also attributable to increased
international sales and to cost savings from the recent implementation of two
automated pick and pack systems, which have lower operational costs than the
manual processes historically used. As in fiscal 1997, the Company experienced
cost benefits from continuing capital investments in process and technology
improvements.
Selling and shipping expense increased $61.9 million, or 37.7%, from
$164.0 million in fiscal 1997 (30.9% of net sales), to $225.9 million in fiscal
1998 (32.9% of net sales). Selling and shipping expense consists of advertising,
sales commissions, printed promotional materials and business development costs,
all of which were higher due to increased sales to the consumer market,
particularly sales through the Company's direct selling activities in which
sales expenses, as a percentage of sales, are relatively higher. In addition,
the Company's consumer products generally require a higher level of product
development and sales and marketing expense than the Company's institutional
products. Finally, the increase in selling and shipping expense as a percentage
of net sales was also attributable, in part, to bad debt write-offs of $2.1
million (principally related to the bankruptcy of one customer) and to
non-recurring one-time costs incurred during and after the United Parcel Service
strike of approximately $2.0 million.
Administrative expense increased $14.8 million, or 30.5%, from $48.5
million in fiscal 1997 (9.1% of net sales) to $63.3 million in fiscal 1998 (9.2%
of net sales). Such increases were a result of increases in personnel (from
approximately 388 administrative employees at January 31, 1997 to approximately
451 administrative employees at January 31, 1998) and the incurrence of
approximately $1.1 million in transition expenses due to the shutdown of
duplicative facilities. In connection with anticipated growth in its consumer
product sales, which generally require somewhat greater administrative
expenditures, the Company expects further increases in administrative expenses
due to expected increases in the number of employees. Additionally, the Company
expects increased spending to bring its computer systems into Year 2000
compliance. See "--Year 2000 Compliance" below.
Endar Corp. incurred one-time, non-recurring transaction costs of
approximately $5.2 million prior to its acquisition by the Company. These
one-time, non-recurring transaction costs consisted of a non-cash exercise of
options, payment of bonuses and payment of legal and professional fees.
Interest expense increased $1.2 million, or 33.3%, from $3.6 million in
fiscal 1997 to $4.8 million in fiscal 1998. Such increase was attributable to
increased borrowing to fund working capital requirements, capital expenditures
and the acquisition of the Sterno and Handy Fuel assets.
<PAGE>
- --------------------------------------------------------------------------------
Financial Review 13
- --------------------------------------------------------------------------------
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Results of Operations (continued)
Income tax expense increased $6.1 million, or 21.0%, from $29.0 million in
fiscal 1997 to $35.1 million in fiscal 1998. The effective income tax rate
decreased from approximately 40.0% for fiscal 1997 to approximately 39.0% for
fiscal 1998 due to growth in sales in countries with lower tax rates than U.S.
tax rates.
As a result of the foregoing, net earnings increased $11.8 million, or
27.6%, from $42.8 million in fiscal 1997 to $54.6 million in fiscal 1998.
Excluding the one-time non-recurring transaction costs incurred by Endar prior
to the date of acquisition, the net earnings for fiscal 1998 increased 35.1%
compared to the prior year.
Basic earnings per share based upon the weighted average number of shares
outstanding were $1.11 compared to $0.89 for the same period last year. Diluted
earnings per share based upon the potential dilution that could occur if options
to issue common stock were exercised or converted were $1.10 compared to $0.88
for the same period last year. Earnings per share have been restated for a
3-for-2 stock split effected as a stock dividend in June 1997 and to include the
shares issued in connection with the acquisition of Endar Corp.
Fiscal 1997 Compared to Fiscal 1996
Net sales increased $174.8 million, or 49.0%, from $356.7 million in fiscal 1996
to $531.5 million in fiscal 1997. Virtually all of this increase was
attributable to unit growth in sales of the Company's consumer scented candles
and candle accessories in the United States, Canada and Europe. Several factors
contributed to the increase in unit sales. Sales to new customers continued to
represent at least 15% of the net sales increase. The increase in sales to new
domestic customers was attributable to improved penetration of existing channels
of distribution and to geographic expansion in the United States, particularly
by the Company's direct selling activities. In addition, the Company was able to
increase sales to existing customers, particularly mass merchandisers and
specialty chains, and to a lesser extent, department and gift stores.
Sales of the Ambria brand, the Company's new line of coordinated home
fragrance and decorative lighting products, contributed to the increase in
sales. This coordinated line replaced certain single product lines such as Old
Harbor and Aromatic's, while generally increasing sales in the same shelf space.
Sales to Hallmark Gold Crown Stores also contributed, to a lesser extent, to the
increase in domestic sales. In fiscal 1996, the Company did not have a strategic
partnering arrangement with Hallmark Cards, Incorporated. For fiscal 1997,
international net sales (which accounted for 14% of net sales, compared to 10%
in fiscal 1996) continued to grow at a substantially higher rate than domestic
sales.
Sales of scented candles and accessories also continued to grow at a
substantially faster rate than unscented products. Consumable products accounted
for approximately 65% of the Company's net sales for fiscal 1997, down from 70%
of net sales in fiscal 1996. Candle accessories continued to account for the
balance of net sales.
<PAGE>
- --------------------------------------------------------------------------------
14 Financial Review
- --------------------------------------------------------------------------------
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Results of Operations (continued)
Gross profit increased $102.0 million, or 55.0%, from $185.4 million in
fiscal 1996 to $287.4 million in fiscal 1997. Gross profit margin increased from
52.0% for fiscal 1996 to 54.1% for fiscal 1997. Such increases were due, in
substantial part, to increased sales of the Company's products to the consumer
market, as well as to the continued shift in the mix of the Company's products
for the consumer market to a greater percentage of higher gross profit margin
products, such as scented candles and candle accessories.
Selling and shipping expense increased $55.9 million, or 51.7%, from
$108.1 million in fiscal 1996 (30.3% of net sales), to $164.0 million in fiscal
1997 (30.9% of net sales).
Administrative expense increased $15.2 million, or 45.6%, from $33.3
million in fiscal 1996 (9.3% of net sales) to $48.5 million in fiscal 1997 (9.1%
of net sales). Such increases were a result of increases in personnel,
substantially improved information and data processing capabilities (including
increases in order processing personnel) and increases in leased and owned
office space.
Interest expense increased $0.9 million, or 33.3%, from $2.7 million in
fiscal 1996 to $3.6 million in fiscal 1997. Interest expense was generally
higher as a result of the issuance of $25.0 million aggregate principal amount
of Senior Notes in July 1995. See "--Liquidity and Capital Resources."
Income tax expense increased $12.1 million, or 71.6%, from $16.9 million
in fiscal 1996 to $29.0 million in fiscal 1997. The effective income tax rate
was approximately 40.0% for fiscal 1996 and fiscal 1997.
As a result of the foregoing, net earnings increased $17.6 million, or
69.8%, from $25.2 million in fiscal 1996 to $42.8 million in fiscal 1997.
Seasonality
Approximately 43% of the Company's annual net sales typically occur in the first
and second fiscal quarters of the fiscal year, with the larger balance
experienced in the third and fourth fiscal quarters, generally due to consumer
buying patterns. The Company's net sales are strongest in the third and fourth
fiscal quarters due to increased shipments to meet year-end holiday season
demand for the Company's products. In addition, during the third and fourth
fiscal quarters, the mix of products shipped by the Company shifts to a greater
percentage of higher gross profit margin products. Operating profit largely
follows these patterns, although a somewhat larger portion of the Company's
annual operating profit is earned in the second half of the fiscal year.
<PAGE>
Financial Review 15
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Liquidity and Capital Resources
Operating assets and liabilities increased from January 31, 1997 to January 31,
1998 due to the Company's internally generated growth and from the Company's
acquisition of Endar Corp. and the Sterno and Handy Fuel assets. During fiscal
1998, the Company increased its inventory to meet increases in current and
anticipated demand and expects to continue to manage its inventory in the
ordinary course for the coming fiscal year. Inventory increased from $112.4
million at January 31, 1997 to $135.5 million at January 31, 1998. However,
measured in terms of number of days' worth of cost of goods sold, inventory
decreased slightly from 165 days' worth of inventory at the end of fiscal 1997
to 163 days' worth of inventory at the end of fiscal 1998. Accounts receivable
increased $11.4 million, or 28.1%, from $40.6 million at the end of fiscal 1997
to $52.0 million at the end of fiscal 1998. Accounts payable and accrued
expenses increased $7.1 million, or 11.5%, from $61.6 million at the end of
fiscal 1997 to $68.7 million at the end of fiscal 1998. The increases in
accounts receivable and in accounts payable and accrued expenses are
attributable to the increases in operating assets and the Company's overall
growth. The increase in the Company's outstanding balance under its revolving
credit facility at January 31, 1998 is attributable to working capital
requirements, capital expenditures and the acquisition of the Sterno and Handy
Fuel assets.
Capital expenditures for property, plant and equipment were $62.5 million
in fiscal 1998. The Company anticipates total capital spending of approximately
$40.0 million for fiscal 1999, of which approximately $20.0 million will be used
for a new European distribution facility in The Netherlands, with the balance of
approximately $20.0 million to be used for upgrades to machinery and equipment
in existing facilities, improvements to leased facilities, and computer hardware
and software.
The Company has grown in part through acquisitions and, as part of its
growth strategy, the Company expects to continue from time to time in the
ordinary course of its business to evaluate and pursue opportunities to acquire
other companies, assets and product lines that either complement or expand its
existing business. The Company currently has no arrangements, agreements or
understandings with respect to such acquisitions. The Company paid $65.0 million
in connection with the December 1997 acquisition of the Sterno and Handy Fuel
assets. In May 1997, the Company acquired Endar Corp., a manufacturer of
potpourri, scented candles and other fragrance products. The Company issued
1,900,786 shares of its Common Stock in the Endar transaction.
In October 1997, the Company refinanced most of its existing term loans
and credit facility under a new revolving credit facility (the "Credit
Facility") arranged by J.P. Morgan Securities, Inc. with participation by a
syndicate of eight banks (together with J.P. Morgan, the "Banks") maturing
October 17, 2002. Under the new agreement, the Company has substantially
improved the terms and pricing of its Credit Facility. Pursuant to the Credit
Facility, the Banks have agreed, subject to certain conditions, to provide an
unsecured revolving credit facility to the Company in an aggregate amount of up
to $140.0 million, and the Banks have agreed to provide under certain
circumstances an additional $35.0 million, to fund ongoing working capital
requirements, letter of credit requirements
<PAGE>
- --------------------------------------------------------------------------------
16 Financial Review
- --------------------------------------------------------------------------------
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Liquidity and Capital Resources (continued)
and general corporate purposes of the Company. Amounts which may be outstanding
under the Credit Facility bear interest, at the Company's option, at Bank of
America's prime rate (8.50% at January 31, 1998) or at the Eurocurrency rate
plus a credit spread ranging from 0.25% to 0.50% based on a pre-defined
financial ratio, for a weighted average interest rate of 6.48% at January 31,
1998. The Credit Facility is guaranteed by certain of the Company's subsidiaries
and contains, among other provisions, requirements to maintain certain financial
ratios and limitations on certain payments. At January 31, 1998, the Company was
in compliance with such covenants. The Company does not believe that such
covenants will have a material effect on its operations.
The $25.0 million of 7.54% Senior Notes are obligations of the Company and
are guaranteed by certain of the Company's subsidiaries. The Note Purchase
Agreement governing the sale of such Senior Notes contains standard covenants,
including maintenance of certain financial ratios. The Company does not believe
that such covenants will have a material adverse effect on its operations. A
significant portion of the proceeds of the Senior Notes was used to finance a
portion of the Company's facilities expansion.
Net cash provided by operating activities amounted to $43.6 million in
fiscal 1998 compared to $31.6 million in fiscal 1997, an improvement of $12.0
million. At January 31, 1998, $95.9 million (including outstanding letters of
credit) was outstanding under the Credit Facility.
The Company's primary capital requirements are for working capital to fund
the increased inventory and accounts receivable to sustain the Company's sales
growth and for capital expenditures (including capital expenditures related to
planned facilities expansion). The Company is building its inventory to meet
increased demand. The Company believes that its cash from operations and
available borrowings under the Credit Facility will be sufficient to fund its
operating requirements, capital expenditures and all other obligations for
fiscal 1999 and fiscal 2000.
Impact of Adoption of Recently Issued Accounting Standards
In June 1997, the Financial Accounting Standards Board ("FASB") issued Statement
No. 130 ("SFAS 130"), "Reporting Comprehensive Income." This statement,
effective for fiscal years beginning after December 15, 1997, would require the
Company to report components of comprehensive income in a financial statement
that is displayed with the same prominence as other financial statements.
Comprehensive income is defined by Concepts Statement No. 8, Elements of
Financial Statements, as the change in equity of a business enterprise during a
period from transactions and other events and circumstances from non-owner
sources. It includes all changes in equity during a period except those
resulting from investments by owners and distributions to owners. SFAS 130 is
not expected to have a significant impact on the Company's financial statement
disclosures.
<PAGE>
- --------------------------------------------------------------------------------
Financial Review 17
- --------------------------------------------------------------------------------
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Impact of Adoption of Recently Issued Accounting Standards (continued)
Also, in June 1997, the FASB issued Statement No. 131 ("SFAS 131"),
"Disclosures about Segments of an Enterprise and Related Information." This
statement, effective for financial statements for periods beginning after
December 15, 1997, requires that a public business enterprise report financial
and descriptive information about its reportable operating segments. Generally,
financial information is required to be reported on the basis that it is used
internally for evaluating segment performance and deciding how to allocate
resources to segments. The Company is evaluating the effects of this
pronouncement, and intends to make appropriate disclosures upon its adoption of
SFAS 131.
Year 2000 Compliance
The Company continues to assess the impact of the Year 2000 on its information
systems, including the Year 2000 readiness of those it conducts business with,
and is developing and implementing a Year 2000 compliance strategy. The Company
expects increased spending to bring its systems into Year 2000 compliance, but
Year 2000 related expenses are not expected to be material to the Company's
results of operations and financial position and are being expensed as incurred.
However, if modifications and conversions by the Company and those it conducts
business with are not completed in a timely manner, the Year 2000 issue may have
a material adverse affect on the Company's business, results of operations and
financial position.
Forward-looking and Cautionary Statements
Certain statements contained in this Annual Report may constitute
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. These statements involve a number of risks,
uncertainties and other factors that could cause actual results to differ
materially, as discussed more fully elsewhere in this Annual Report and in the
Company's filings with the Securities and Exchange Commission, including the
Company's Form 10-K for fiscal 1998 to be filed on or about April 29, 1998.
<PAGE>
- --------------------------------------------------------------------------------
18 Financial Review
- --------------------------------------------------------------------------------
Consolidated Balance Sheets
January 31, (in thousands, except share data) 1997 1998
- ------------------------------------------------------------------------------
ASSETS
Current assets:
Cash and cash equivalents $ 27,832 $ 21,273
Accounts receivable, less allowance for doubtful
receivables of $1,054 in 1997 and $1,353 in 1998 40,558 51,980
Inventories 112,427 135,524
Prepaid expenses 323 612
Deferred income taxes 1,000 2,442
- ------------------------------------------------------------------------------
Total current assets 182,140 211,831
Property, plant and equipment, at cost:
Land and buildings 25,951 63,745
Leasehold improvements 3,220 5,038
Machinery and equipment 67,987 115,635
Office furniture and data processing equipment 17,924 26,541
Construction in progress 20,300 1,500
- ------------------------------------------------------------------------------
135,382 212,459
Less accumulated depreciation and amortization 30,532 41,749
- ------------------------------------------------------------------------------
104,850 170,710
Other assets:
Investment 4,991 6,438
Excess of cost over fair value of assets acquired,
net of accumulated amortization of $1,493 in 1997
and $2,417 in 1998 11,146 57,419
Deposits 752 992
- ------------------------------------------------------------------------------
16,889 64,849
- ------------------------------------------------------------------------------
$303,879 $447,390
==============================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Bank line of credit $ 4,440 $ --
Current maturities of long-term debt 1,985 1,013
Accounts payable 36,358 39,138
Accrued expenses 25,265 29,574
Income taxes 915 2,005
- ------------------------------------------------------------------------------
Total current liabilities 68,963 71,730
Deferred income taxes 4,900 7,100
Long-term debt, less current maturities 38,279 119,617
Excess of fair value over cost of assets acquired, net
of accumulated amortization of $571 in 1997 and $691
in 1998 833 713
Minority interest 1,501 1,398
Commitments and Contingencies
Stockholders' equity:
Preferred stock - authorized, 10,000,000 shares of
$0.01 par value; no shares issued and outstanding -- --
Common stock - authorized, 100,000,000 shares of $0.02
par value; issued and outstanding, 48,921,518 shares
in 1997 and 49,100,953 shares in 1998 651 982
Additional contributed capital 89,522 92,357
Retained earnings 99,230 153,493
- ------------------------------------------------------------------------------
189,403 246,832
- ------------------------------------------------------------------------------
$303,879 $447,390
==============================================================================
The accompanying notes are an integral part of these financial statements.
<PAGE>
- --------------------------------------------------------------------------------
Financial Review 19
- --------------------------------------------------------------------------------
Consolidated Statements of Earnings
<TABLE>
<CAPTION>
January 31, (in thousands, except per share data) 1996 1997 1998
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $356,702 $531,480 $687,474
Cost of goods sold 171,333 244,078 298,562
- --------------------------------------------------------------------------------------
Gross profit 185,369 287,402 388,912
Selling and shipping 108,114 164,019 225,933
Administrative 33,348 48,500 63,257
Amortization of goodwill 225 836 948
- --------------------------------------------------------------------------------------
141,687 213,355 290,138
- --------------------------------------------------------------------------------------
Operating profit 43,682 74,047 98,774
Other expense (income):
Interest expense 2,662 3,554 4,816
Interest income (805) (872) (486)
Equity in earnings of investees (649) (574) (659)
Non-recurring transaction costs of acquired company -- -- 5,173
- --------------------------------------------------------------------------------------
1,208 2,108 8,844
- --------------------------------------------------------------------------------------
Earnings before income taxes and minority interest 42,474 71,939 89,930
Income tax expense 16,922 28,988 35,068
- --------------------------------------------------------------------------------------
Earnings before minority interest 25,552 42,951 54,862
Minority interest 377 194 272
- --------------------------------------------------------------------------------------
Net earnings $ 25,175 $ 42,757 $ 54,590
======================================================================================
Basic:
Net earnings per common share $ 0.56 $ 0.89 $ 1.11
Weighted average number of shares outstanding 45,089 47,974 49,063
======================================================================================
Diluted:
Net earnings per common share $ 0.55 $ 0.88 $ 1.10
Weighted average number of shares outstanding 45,373 48,476 49,543
======================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
Consolidated Statements of Stockholders' Equity
<TABLE>
<CAPTION>
January 31, (in thousands, except share data)
- -----------------------------------------------------------------------------------------------------
Common stock
------------------ Additional
Number contributed Retained
of shares Amount capital earnings Total
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at February 1, 1995 44,039,981 $305 $33,218 $ 27,673 $ 61,196
Net earnings for the year -- -- -- 25,175 25,175
Common stock issued in connection
with acquisition 149,712 1 1,403 -- 1,404
Common stock issued in connection
with exercise of stock options 24,000 1 131 -- 132
Common stock issued upon completion
of secondary public offering 3,600,000 23 53,949 -- 53,972
Common stock issued in connection with
2-for-1 stock split in the form of a
dividend -- 307 -- (307) --
- -----------------------------------------------------------------------------------------------------
Balance at January 31, 1996 47,813,693 637 88,701 52,541 141,879
Net earnings for the year -- -- -- 42,757 42,757
Common stock issued in connection with
acquisition 993,745 13 -- 3,932 3,945
Common stock issued in connection with
exercise of stock options and other 114,080 1 821 -- 822
- -----------------------------------------------------------------------------------------------------
Balance at January 31, 1997 48,921,518 651 89,522 99,230 189,403
Net earnings for the year -- -- -- 54,590 54,590
Endar options exercised prior to Endar
acquisition 108,713 2 2,296 -- 2,298
Common stock issued in connection with
exercise of stock options 70,722 2 539 -- 541
Common stock issued in connection with
3-for-2 stock split in the form of a dividend -- 327 -- (327) --
- -----------------------------------------------------------------------------------------------------
Balance at January 31, 1998 49,100,953 $982 $92,357 $153,493 $246,832
=====================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
- --------------------------------------------------------------------------------
20 Financial Review
- --------------------------------------------------------------------------------
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
January 31, (in thousands) 1996 1997 1998
=================================================================================
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings $ 25,175 $ 42,757 $ 54,590
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization 4,683 8,778 12,396
Deferred income taxes 1,100 1,500 758
Equity in earnings of investees (649) (574) (659)
Minority interest 377 194 272
Changes in operating assets and liabilities,
net of effect of business acquisitions:
Accounts receivable (923) (9,944) (11,422)
Inventories (35,475) (31,123) (19,961)
Prepaid expenses (253) 69 (289)
Other assets (366) 303 (240)
Accounts payable 4,063 14,107 2,780
Accrued expenses 5,394 4,086 4,309
Income taxes 387 1,453 1,090
- --------------------------------------------------------------------------------
Total adjustments (21,662) (11,151) (10,966)
- --------------------------------------------------------------------------------
Net cash provided by operating activities 3,513 31,606 43,624
Cash flows from investing activities:
Purchases of property, plant and equipment (35,878) (50,526) (62,481)
Investments in investees (3,270) -- (814)
Purchase of businesses, net of cash acquired (7,116) (7,435) (65,652)
- --------------------------------------------------------------------------------
Net cash used in investing activities (46,264) (57,961) (128,947)
Cash flows from financing activities:
Proceeds from issuance of common stock 54,106 758 541
Borrowings from bank line of credit 44,015 30,963 81,500
Repayments on bank line of credit (44,247) (28,395) (85,940)
Proceeds from issuance of long-term debt 26,991 5,000 107,993
Payments on long-term debt (686) (648) (25,330)
- --------------------------------------------------------------------------------
Net cash provided by financing activities 80,179 7,678 78,764
- --------------------------------------------------------------------------------
Net increase (decrease) in cash and cash
equivalents 37,428 (18,677) (6,559)
Cash and cash equivalents at beginning of year 9,081 46,509 27,832
- --------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 46,509 $ 27,832 $ 21,273
================================================================================
Supplemental disclosure of cash flow
information:
Cash paid during the year for:
Interest $ 2,487 $ 3,313 $ 4,082
Income taxes, net of refunds 15,989 24,968 31,567
</TABLE>
See Note 2 for non-cash investing and financing activities.
The accompanying notes are an integral part of these financial statements.
<PAGE>
- --------------------------------------------------------------------------------
Financial Review 21
- --------------------------------------------------------------------------------
Notes to Consolidated Financial Statements
Note 1: Summary of Significant Accounting Policies
The Company, which operates in a single industry, designs, manufactures, markets
and distributes an extensive line of candles and home fragrance products
including scented candles, outdoor citronella candles, potpourri, and
environmental fragrance products, and markets a broad range of related candle
accessories and decorative gift bags and tags. It is also a leading producer of
portable heating fuel products.
A summary of the significant accounting policies applied in the
preparation of the accompanying consolidated financial statements follows:
Principles of Consolidation
The consolidated financial statements include the accounts of Blyth Industries,
Inc. and its wholly-owned subsidiaries, including Candle Corporation Worldwide,
Inc. and its direct and indirect subsidiaries. All significant intercompany
accounts and transactions have been eliminated. Investments in companies which
are not majority owned are reported using the equity method and are recorded in
other assets.
Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and 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.
Credit Concentration
The Company's credit sales are principally to department and gift stores, mass
merchandisers and distributors who purchase the Company's products for resale.
The Company performs ongoing credit evaluations of its customers and generally
does not require collateral. The Company makes provisions for estimated credit
losses.
Foreign Currency Translation
All balance sheet accounts of foreign operations are translated into U.S.
dollars at the year-end rate of exchange, and statement of earnings items are
translated at the weighted average exchange rates for the period. The effect of
the foreign currency translation on the financial statements presented was not
material.
Derivatives and Other Financial Instruments
The Company uses forward foreign exchange contracts to hedge the impact of
foreign currency fluctuations on certain committed capital expenditures and on
Canadian operations. The Company does not hold or issue derivative financial
instruments for trading purposes.
With regard to commitments for machinery and equipment in foreign
currencies, upon payment of each commitment the underlying forward contract is
closed and the corresponding gain or loss is included in the measurement of the
cost of the acquired asset. With regard to forward exchange contracts used to
hedge Canadian operations, gain or loss on such hedges is recognized in income
in the period in which the underlying hedged transaction occurs. If a hedging
instrument is sold or terminated prior to maturity, gains and losses are
deferred until the hedge item is settled. However, if the hedged item is no
longer likely to occur, the resultant gain or loss on the terminated hedge is
recognized into income.
For consolidated financial statement presentation, net cash flows from
such hedges are classified in the categories of the cash flow with the items
being hedged. There were an immaterial amount of outstanding forward contracts
at January 31, 1997 and 1998.
Fair Value of Financial Instruments
The Company's financial instruments include long-term debt. Management believes
the carrying value of the long-term debt approximates their estimated fair
values.
Cash Equivalents
The Company considers all highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents.
Inventories
Inventories are valued at the lower of cost or market. Cost is determined by the
first-in, first-out method. The elements of cost are material, labor and factory
overhead.
<PAGE>
- --------------------------------------------------------------------------------
22 Financial Review
- --------------------------------------------------------------------------------
Notes to Consolidated Financial Statements
Note 1: Summary of Significant Accounting Policies (continued)
Property, Plant and Equipment
Property, plant and equipment are stated at cost, less accumulated depreciation
and amortization. Depreciation and amortization are provided principally by use
of the straight-line method for financial reporting purposes. The straight-line
method and accelerated methods are used for income tax reporting purposes.
Leasehold improvements are amortized over the lives of the respective leases or
the service lives of the improvements, whichever is shorter.
The principal estimated lives used in determining depreciation and amortization
are as follows:
Buildings ....................................................... 27 to 40 years
Leasehold improvements .......................................... 5 to 10 years
Machinery and equipment ......................................... 5 to 12 years
Office furniture and data processing equipment .................. 5 to 7 years
Excess of Cost Over Fair Value of Assets Acquired
The excess of costs of the acquisitions over the value of identifiable assets
acquired less liabilities assumed is being amortized on a straight line basis
ranging from 15 to 40 years. On an ongoing basis, management reviews the
valuation of the intangible assets to determine possible impairment by comparing
the carrying value to the undiscounted future cash flows of the related assets.
Excess of Fair Value Over Cost of Assets Acquired
The excess of fair value of assets acquired over their cost is amortized on a
straight line basis over 12 years.
Income Taxes
The Company accounts for income taxes in accordance with the Financial
Accounting Standards Board ("FASB") Statement No. 109, "Accounting for Income
Taxes". Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for financial
reporting purposes and income tax purposes, based upon enacted tax rates in
effect for the periods the taxes are expected to be recoverable (payable).
Revenue Recognition
Revenue is recognized at the time of shipment of the Company's products.
Earnings per Common and Common Equivalent Share
In December 1995, the Company effected a two-for-one stock split and in June
1997, the Company effected a three-for-two stock split both in the form of a
stock dividend. All share quantities, per share amounts, and option data have
been retroactively restated to reflect these stock splits.
Earnings per common and common equivalent share are computed based upon
the weighted average number of shares outstanding during each year, which
includes outstanding options for common stock, when dilutive.
Note 2: Business Acquisitions
In April 1995, the Company acquired 80% of the issued and outstanding capital
stock of Jeanmarie Creations, Inc., a decorative gift bag company, for
approximately $7.1 million (net of cash acquired). During May 1996 and May 1997,
the Company increased its investment by an additional 4% each year. Under the
purchase and sale agreement, the Company has the option to acquire, and in
certain circumstances, may be required to acquire, the remaining 12% of common
stock at prices set forth in the agreements. The results of operations prior to
acquisition were not material.
In July 1995, the Company acquired 50% of the issued and outstanding
capital stock of Eclipse Candles, Ltd., an European candle manufacturer, for
approximately $1.5 million in cash. In October 1996, the Company increased its
investment by an additional 25%. The results of operations prior to acquisition
were not material.
In February 1996, the Company purchased from Hallmark Cards, Incorporated
the Canterbury candle product line and related candle manufacturing equipment
for approximately $8.4 million in cash. Under the terms of the purchase
agreement, the Company will work jointly with Hallmark as a preferred vendor in
the merchandising and distribution of the Company's candles and candle
accessories through various outlets which carry Hallmark products. The results
of operations prior to acquisition were not material.
In December 1997, the Company acquired the Sterno and Handy Fuel assets
from a division of the Colgate-Palmolive Company for $65.0 million in cash. The
excess of the purchase price over the estimated fair value of assets acquired
approximated $47.0 million and is being amortized over 40 years.
<PAGE>
- --------------------------------------------------------------------------------
Financial Review 23
- --------------------------------------------------------------------------------
Notes to Consolidated Financial Statements
Note 2: Business Acquisitions (continued)
The following unaudited pro forma consolidated results of operations have
been prepared as if the acquisition of Sterno and Handy Fuel assets had occurred
as of February 1, 1996 and therefore includes an estimate of incremental
operating expenses, interest expense, amortization of goodwill and income tax
expense:
(In thousands, except per share amounts) 1997 1998
- --------------------------------------------------------------------------------
Net sales $580,292 $734,410
Net earnings 43,901 55,722
Net earnings per common share
Basic $ 0.92 $ 1.14
Diluted 0.91 1.12
The unaudited pro forma results do not purport to represent what the Company's
results of operations or financial condition actually would have been had the
acquisition been consummated as of February 1, 1996.
The foregoing acquisitions have been recorded under the purchase method of
accounting and, accordingly, the results of the acquired businesses are included
in the consolidated financial statements since the date of acquisition.
In December 1996, the Company issued 993,745 shares of its common stock in
exchange for all of the outstanding capital stock of New Ideas International,
Inc. ("New Ideas"), a manufacturer of home and auto fragrance products. This
transaction was accounted for as a pooling of interests. Since the aggregated
historical operations of New Ideas prior to the date of combination were not
material to the Company's consolidated results of operations and financial
position, prior period financial statements have not been restated.
On May 20, 1997, the Company issued 1,900,786 shares of its common stock
in exchange for all of the outstanding capital stock of Endar Corp. ("Endar"), a
manufacturer of potpourri, scented candles and other fragrance products. The
transaction was accounted for as a pooling of interests. All of the accompanying
consolidated financial statements and footnotes have been restated to include
the historical results of operations and financial position of Endar prior to
the acquisition.
The accompanying financial statements contain information for the period
of February 1, 1997 to May 20, 1997 and for the fiscal years ended 1997 and 1996
which were prior to the acquisition. All such information was derived from the
separate statements of the Company and Endar. The net sales and net earnings for
the individual entities for the periods preceding the merger were as follows:
Company Endar Combined
- --------------------------------------------------------------------------------
Period ended May 20, 1997 (unaudited)
Net sales (unaudited) $196,229 $ 9,540 $205,769
Net earnings (loss) (unaudited) 14,674 (2,857) 11,817
Year ended January 31, 1997
Net sales 495,702 35,778 531,480
Net earnings 40,137 2,620 42,757
Year ended January 31, 1996
Net sales 331,341 25,361 356,702
Net earnings 24,024 1,151 25,175
The net earnings of Endar for the period ended May 20, 1997 include one-time
non-recurring transaction costs of $3.1 million net of income taxes.
<PAGE>
- --------------------------------------------------------------------------------
24 Financial Review
- --------------------------------------------------------------------------------
Notes to Consolidated Financial Statements
Note 3: Geographic Information
Information about the Company's operations in different geographic areas follows
(in thousands):
Years ended January 31, United States International Total
- --------------------------------------------------------------------------------
Net sales
1996 $321,686 $ 35,016 $356,702
1997 457,418 74,062 531,480
1998 573,214 114,260 687,474
Net earnings
1996 24,512 663 25,175
1997 40,757 2,000 42,757
1998 50,599 3,991 54,590
Identifiable assets
1996 214,160 9,309 223,469
1997 275,046 28,833 303,879
1998 397,162 50,228 447,390
- --------------------------------------------------------------------------------
Note 4: Inventories
The major components of inventories are as follows (in thousands):
1997 1998
- --------------------------------------------------------------------------------
Raw materials $16,919 $19,988
Work in process 3,352 2,263
Finished goods 92,156 113,273
- --------------------------------------------------------------------------------
$112,427 $135,524
================================================================================
Note 5: Accrued Expenses
Accrued expenses consist of the following (in thousands):
1997 1998
- --------------------------------------------------------------------------------
Compensation and certain benefits $7,712 $10,330
Deferred revenue 6,268 6,015
Promotional expenses 3,453 5,217
Taxes, other than income 4,704 4,707
Other 3,128 3,305
- --------------------------------------------------------------------------------
$25,265 $29,574
================================================================================
Note 6: Bank Lines of Credit
As of January 31, 1997 Endar had a $9.0 million line of credit agreement with a
financial institution of which $4.4 million was outstanding at January 31, 1997.
The line of credit balance outstanding at May 20, 1997 was repaid and the
agreement was terminated effective upon the acquisition of Endar by the Company.
An unsecured $50.0 million revolving credit facility, with no outstanding
borrowings, was terminated in 1997 in conjunction with the Company's debt
refinancing (See Note 7).
<PAGE>
- --------------------------------------------------------------------------------
Financial Review 25
- --------------------------------------------------------------------------------
Notes to Consolidated Financial Statements
Note 7: Long-Term Debt
Long-term debt consists of the following (in thousands):
1997 1998
================================================================================
7.54% Senior Notes $25,000 $25,000
Term loan 5,000 --
Credit facility -- 93,557
Senior subordinated notes 3,050 --
Junior subordinated notes 2,619 --
Capital lease obligation 788 246
Other 3,807 1,827
- --------------------------------------------------------------------------------
40,264 120,630
Less current maturities (1,985) (1,013)
- --------------------------------------------------------------------------------
$38,279 $119,617
================================================================================
In July 1995, the Company privately placed $25.0 million aggregate principal
amount of 7.54% Senior Notes due 2005. Such Senior Notes are guaranteed by
certain of the Company's subsidiaries and contain, among other provisions,
requirements for maintaining certain financial ratios and net worth. At January
31, 1998, the Company was in compliance with such covenants. The notes are
payable in seven annual installments beginning June 30, 1999.
In December 1996, the Company entered into a Term Credit Agreement for an
amount up to $20.0 million of which $5.0 million was outstanding at January 31,
1997 at an interest rate of 6.10%. The Term Credit Agreement was repaid in 1997
subsequent to the Company's debt refinancing.
On October 17, 1997, the Company refinanced most of its term loans and
credit facility under a new revolving credit facility ("Credit Facility")
maturing October 17, 2002. Pursuant to the Credit Facility, the lending
institutions have agreed, subject to certain conditions, to provide an unsecured
revolving credit facility to the Company in an aggregate amount of up to $140.0
million and to provide, under certain circumstances, an additional $35.0
million. Amounts outstanding under the Credit Facility bear interest, at the
Company's option, at Bank of America's prime rate (8.50% at January 31, 1998) or
at the Eurocurrency rate plus a credit spread ranging from 0.25% to 0.50%, based
on a pre-defined financial ratio, for a weighted average interest rate of 6.48%
at January 31, 1998. At January 31, 1998, approximately $93.6 million was
outstanding under the Credit Facility. The Credit Facility is guaranteed by
certain of the Company's subsidiaries and contains, among other provisions,
requirements for maintaining certain financial ratios and limitations on certain
payments. At January 31, 1998, the Company was in compliance with such
covenants.
At January 31, 1997 Endar had Senior and Junior Subordinated Notes
outstanding in the amounts of approximately $3.1 million and $2.6 million,
respectively. The Senior and Junior Notes were repaid on May 20, 1997.
Maturities under debt obligations and future minimum lease payments under the
capital lease obligation are as follows (in thousands):
Capital
Debt Lease
Obligations Obligation
================================================================================
For the years ending January 31,
1999 $767 $253
2000 4,631 --
2001 3,571 --
2002 3,571 --
2003 97,128 --
Thereafter 10,716 --
- --------------------------------------------------------------------------------
$120,384 253
Less amounts representing interest (7)
- --------------------------------------------------------------------------------
Present value of net minimum lease payments $246
================================================================================
<PAGE>
- --------------------------------------------------------------------------------
26 Financial Review
- --------------------------------------------------------------------------------
Notes to Consolidated Financial Statements
Note 8: Employee Benefit Plans
The Company has defined contribution employee benefit plans covering
substantially all eligible non-union employees. The Company is primarily
required to contribute $100 for each participating employee; additional
contributions are discretionary. Expense related to the plans for the years
ended January 31, 1996, 1997 and 1998 was $872,000, $1,182,000 and $1,426,000,
respectively.
Note 9: Commitments
The Company utilizes leases for a portion of its operating facilities and
equipment. Generally, the leases provide that the Company pay taxes,
maintenance, insurance and other occupancy expenses applicable to leased
premises. Certain leases provide for renewal for various periods at stipulated
rates.
The minimum future rental commitments under operating leases are as follows (in
thousands):
For the years ending January 31,
1999 $ 9,873
2000 9,532
2001 8,529
2002 6,263
2003 5,066
Thereafter 11,798
- --------------------------------------------------------------------------------
Total minimum payments required $51,061
================================================================================
Rent expense for the years ended January 31, 1996, 1997 and 1998 was $4,743,000,
$6,325,000 and $8,072,000, respectively.
Note 10: Income Taxes
Earnings before provision for income taxes
(in thousands):
1996 1997 1998
================================================================================
United States $39,553 $67,146 $81,334
Foreign 2,921 4,793 8,596
- --------------------------------------------------------------------------------
$42,474 $71,939 $89,930
================================================================================
Income tax expense consists of the following
(in thousands):
1996 1997 1998
================================================================================
Current income tax expense:
Federal $12,158 $21,433 $25,271
State 2,375 4,123 5,430
Foreign 1,289 1,932 3,609
- --------------------------------------------------------------------------------
15,822 27,488 34,310
Deferred income tax expense:
Federal 950 1,275 644
State 150 225 114
- --------------------------------------------------------------------------------
1,100 1,500 758
- --------------------------------------------------------------------------------
$16,922 $28,988 $35,068
================================================================================
<PAGE>
- --------------------------------------------------------------------------------
Financial Review 27
- --------------------------------------------------------------------------------
Notes to Consolidated Financial Statements
Note 10: Income Taxes (continued)
Significant components of the Company's deferred tax assets and liabilities are
as follows (in thousands):
1997 1998
================================================================================
Current deferred tax assets:
Accrued compensation $ 550 $ 1,557
Allowance for doubtful receivables 330 117
Accrued expenses 120 408
Other -- 360
- --------------------------------------------------------------------------------
$ 1,000 $ 2,442
================================================================================
Non-current deferred tax liabilities:
Depreciation $(4,900) $(7,100)
================================================================================
A reconciliation of the provision for income taxes to the amounts computed at
the federal statutory rate is as follows (in thousands):
1996 1997 1998
================================================================================
Tax provision at statutory rate $14,866 $25,179 $31,471
Tax effect of:
State income taxes, net of federal
benefit 2,135 3,419 3,530
Other, net (79) 390 67
- --------------------------------------------------------------------------------
$16,922 $28,988 $35,068
================================================================================
Note 11: Employee Stock Option Plans
At January 31, 1998, the Company had two stock-based compensation plans, which
are described below. In accordance with the provisions of Statement of Financial
Accounting Standards (SFAS) No. 123, "Accounting for Stock-Based Compensation,"
the Company has elected to continue to account stock-based compensation under
the intrinsic value based method of accounting described by Accounting
Principles Board (APB) Opinion No. 25, "Accounting for Stock Issued to
Employees." Under APB No. 25, generally, no cost is recorded for stock options
issued to employees unless the option price is below market at the time options
are granted. The following pro forma net earnings and net earnings per common
share are presented for informational purposes and have been computed using the
fair value method of accounting for stock-based compensation as set forth in
SFAS No. 123:
(In thousands, except per share data) 1997 1998
================================================================================
Net earnings:
As reported $42,757 $54,590
Pro forma 42,426 54,320
Net earnings per common share:
As reported
Basic $0.89 $1.11
Diluted 0.88 1.10
Pro forma
Basic $0.88 $1.11
Diluted 0.88 1.10
The fair value of each option is estimated on the date of grant, using the
Black-Scholes option pricing model with the following weighted-average
assumptions used for grants in 1997 and 1998, respectively: expected volatility
of 42.5 percent for both years, risk-free interest rates at 6.14 to 6.85 percent
for 1997 and 5.69 to 6.99 percent for 1998, expected life of 7 years for both
years and no dividend payments.
<PAGE>
- --------------------------------------------------------------------------------
28 Financial Review
- --------------------------------------------------------------------------------
Notes to Consolidated Financial Statements
Note 11: Employee Stock Option Plans (continued)
The Company has adopted the Amended and Restated 1994 Employee Stock Option Plan
(the "Employee Option Plan"), which provides for the grant to officers and
employees of both "incentive stock options" and stock options that are
non-qualified for Federal income tax purposes. The total number of shares of
common stock for which options may be granted pursuant to the Employee Option
Plan is 1,380,000.
The exercise price of incentive stock options granted under the Employee
Option Plan may not be less than 100% of the fair market value of the common
stock at the time of grant, and the term of any option may not exceed 10 years.
Options generally become exercisable over a five-year period. With respect to
any employee who owns stock representing more than 10% of the voting power of
the outstanding capital stock of the Company, the exercise price of any
incentive stock option may not be less than 110% of the fair market value of
such shares at the time of grant, and the term of such option may not exceed
five years.
The Company has also adopted the 1994 Stock Option Plan for Non-Employee
Directors (the "Non-Employee Director Plan"). A total of 120,000 shares of
common stock may be issued through the exercise of options granted pursuant to
the Non-Employee Director Plan. No option may be granted under the Non-Employee
Director Plan after ten years following May 18, 1994.
Each Non-Employee Director who is elected to office for the first time
after March 1, 1994 will, upon such date, automatically be granted an option to
acquire 3,000 shares of common stock. Each Non-Employee Director who is in
office on November 15 of any year thereafter will, on the immediately succeeding
January 1, automatically be granted an option to acquire 1,500 shares of common
stock. The price of shares that may be purchased upon exercise of an option is
the fair market value of the common stock on the date of grant. Options granted
pursuant to the Non-Employee Director Plan become exercisable in full on the
first anniversary of the date of the grant.
Transactions involving stock options are summarized as follows:
Option Weighted Average
Shares Exercise Price
- --------------------------------------------------------------------------------
Outstanding at February 1, 1995 414,000 $ 6.01
Options granted 396,000 12.28
Options exercised (24,000) 5.50
- --------------------------------------------------------------------------------
Outstanding at January 31, 1996 786,000 9.17
Options granted 274,500 26.17
Options exercised (68,100) 6.99
Options cancelled (25,500) 8.47
- --------------------------------------------------------------------------------
Outstanding at January 31, 1997 966,900 19.23
Options granted 279,000 25.65
Options exercised (70,201) 8.08
Options cancelled (40,800) 19.63
- --------------------------------------------------------------------------------
Outstanding at January 31, 1998 1,134,899 17.17
================================================================================
At January 31, 1997 and 1998, options to purchase 170,700 and 308,999 shares,
respectively, were exercisable.
Options outstanding and exercisable as of January 31, 1998, by price range:
<TABLE>
<CAPTION>
Weighted Average Outstanding Exercisable
Range of Remaining Weighted Average Weighted Average
Exercise Price Shares Contractual Life Exercise Price Shares Exercise Price
- -------------- ------ ---------------- -------------- ------ --------------
<S> <C> <C> <C> <C> <C>
$5.50 - $10.00 475,800 6.62 $ 7.71 192,600 $ 7.39
14.33 - 24.83 443,100 8.54 21.78 85,500 19.15
25.58 - 31.75 215,999 9.11 28.56 30,899 29.26
</TABLE>
The weighted average fair value of options granted during the years ended
January 31, 1997 and 1998 was $14.81 and $14.13, respectively.
<PAGE>
- --------------------------------------------------------------------------------
Financial Review 29
- --------------------------------------------------------------------------------
Notes to Consolidated Financial Statements
Note 12: Selected Quarterly Financial Data (Unaudited)
A summary of selected quarterly information for the years ended January 31 is as
follows:
1997 Quarter Ended
------------------------------------------------------
(In thousands, except per share data)
April 30 July 31 October 31 January 31 Total
- ----------------------------------------------------------------------------
Net sales $112,684 $107,106 $153,522 $158,168 $531,480
Gross profit 61,072 58,430 82,972 84,928 287,402
Net earnings 7,457 6,707 15,411 13,182 42,757
Net earnings per
common and common
equivalent share:
Basic $0.16 $0.14 $0.32 $0.27 $0.89
Diluted 0.15 0.14 0.32 0.27 0.88
============================================================================
1998 Quarter Ended
------------------------------------------------------
(In thousands, except per share data)
April 30 July 31 October 31 January 31 Total
- ----------------------------------------------------------------------------
Net sales $155,060 $137,709 $192,457 $202,248 $687,474
Gross profit 85,863 77,334 106,605 119,110 388,912
Net earnings 11,314 6,419 19,626 17,231 54,590
Net earnings per
common and common
equivalent share:
Basic $0.23 $0.13 $0.40 $0.35 $1.11
Diluted 0.22 0.13 0.40 0.35 1.10
============================================================================
Note 13: Earnings Per Share
During fiscal year 1998, the Company adopted FASB Statement No. 128, "Earnings
per Share". This new accounting pronouncement eliminates the measure of
performance called "primary" earnings per share and replaces it with "basic"
earnings per share. The essential difference between the two calculations is
that the dilutive effects of stock options are not considered in the basic
computation. The pronouncement also changed the measure previously reported as
"fully dilutive" earnings per share to "diluted" earnings per share. All periods
have been restated to conform to this new pronouncement.
The computation of basic and diluted earnings per share is as follows (in
thousands):
1996 1997 1998
- --------------------------------------------------------------------------------
Net earnings $25,175 $42,757 $54,590
- --------------------------------------------------------------------------------
Weighted average number of common
shares outstanding:
Basic 45,089 47,974 49,063
Dilutive effect of stock options 284 502 480
- --------------------------------------------------------------------------------
Weighted average number of common
shares outstanding:
Diluted 45,373 48,476 49,543
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
30 Report of Independent Accountants
- --------------------------------------------------------------------------------
Board of Directors and Stockholders
Blyth Industries, Inc.
We have audited the accompanying consolidated balance sheet of Blyth Industries,
Inc. and Subsidiaries (the "Company") as of January 31, 1998, and the related
consolidated statements of earnings, stockholders' equity and cash flows for the
year then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Blyth Industries,
Inc. and Subsidiaries as of January 31, 1998, and the consolidated results of
their operations and cash flows for the year then ended, in conformity with
generally accepted accounting principles.
Chicago, Illinois /s/ Coopers & Lybrand L.L.P.
March 25, 1998 Coopers & Lybrand L.L.P.
<PAGE>
Report of Independent Certified Public Accountants 31
Board of Directors and Stockholders
Blyth Industries, Inc.
We have audited the accompanying consolidated balance sheet of Blyth Industries,
Inc. and Subsidiaries as of January 31, 1997, and the related consolidated
statements of earnings, stockholders' equity, and cash flows for each of the two
years in the period ended January 31, 1997. 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, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Blyth Industries,
Inc. and Subsidiaries as of January 31, 1997, and the consolidated results of
their operations and their consolidated cash flows for each of the two years in
the period ended January 31, 1997, in conformity with generally accepted
accounting principles.
Chicago, Illinois /s/ GRANT THORNTON LLP
March 28, 1997 GRANT THORNTON LLP
<PAGE>
Exhibit 21
Subsidiaries of Blyth Industries, Inc.
<TABLE>
<CAPTION>
Name Jurisdiction of Organization
---- ----------------------------
<S> <C>
1. Candle Corporation Worldwide, Inc. Delaware
2. PartyLite Gifts, Inc. Delaware
3. Candle Corporation of America New York
4. Aromatic Industries, Inc. California
5. PartyLite Gifts Ltd. Canada
6. Candle Corporation of America Hong Kong Limited Hong Kong
7. PartyLite Ireland Limited Ireland
8. PartyLite GMBH Germany
9. JMC Holdings, Inc. Delaware
10. Jeanmarie Creations, Inc. Oklahoma
11. Blyth Industries, Ltd. Barbados
12. PartyLite U.K., Ltd. England
13. FVB, Inc. Delaware
14. Fabrica de Velas Borinquen, Inc. Illinois
15. New Ideas International, Inc. Delaware
16. CCW Manufacturing Limited England
17. Eclipse Candles Limited England
18. PartyLite SA Switzerland
19. PartyLite Trading SA Switzerland
20. PartyLite BV Netherlands
21. PartyLite Handelsgesellschaft m.b.H. Austria
22. Endar de Mexico SA Mexico
23. Endar Corp. California
</TABLE>
Blyth Industries, Inc. also owns 50% of the capital stock of Colony Gift
Corporation Limited, a corporation organized under the laws of England.
<PAGE>
Exhibit 23.1
[Letterhead]
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Registration Statement of
Blyth Industries, Inc. on Form S-8 (No. 33-91954 and 333-50011) and Form S-3
(No. 333-37659) of our report dated March 25, 1998, on our audit of the
consolidated financial statements and financial statement schedule of Blyth
Industries, Inc. and Subsidiaries as of January 31, 1998, and for the year
then ended, which report is included in this Annual Report on Form 10-K.
/s/ COOPERS & LYBRAND L.L.P.
Chicago, Illinois
April 27, 1998
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the incorporation by reference in the Registration Statements
of Blyth Industries, Inc. and Subsidiaries on Form S-8 (Nos. 33-91954 and
333-50011) and Form S-3 (No. 333-37659) of our report dated March 28, 1997, on
our audits of the consolidated financial statements and financial statement
schedule of Blyth Industries, Inc. and Subsidiaries as of January 31, 1997 and
1996 and for each of the two years in the period ended January 31, 1997 which
report is included in the Annual Report on Form 10-K for the year ended January
31, 1998.
/s/ Grant Thornton LLP
-----------------------
GRANT THORNTON LLP
Chicago, Illinois
April 29, 1998
<PAGE>
Exhibit 24.1
POWER OF ATTORNEY
FORM 10-K ANNUAL REPORT FOR FISCAL 1998
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Robert B. Goergen, Howard E. Rose, Richard T.
Browning and Bruce D. Kreiger, and each of them, until July 31, 1998, his or her
true and lawful attorneys-in-fact and agents, with full power of substitution
and revocation, for him or her and in his or her name, place and stead, in any
and all capacities, to sign the Form 10-K Annual Report of Blyth Industries,
Inc. for the fiscal year ended January 31, 1998, and any amendments thereto, and
to file the same with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents full power and authority to do and perform each and
every act and thing requisite and necessary to be done, as fully to all intents
and purposes as he or she might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents may lawfully do or cause
to be done by virtue hereof.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Robert B. Goergen Chairman, Chief Executive Officer April 29, 1998
- ------------------------ and President, Director
Robert B. Goergen (Principal Executive Officer)
/s/ Richard T. Browning Vice President and Chief April 29, 1998
- ------------------------ Financial Officer
Richard T. Browning (Principal Financial and
Accounting Officer)
/s/ Howard E. Rose Vice Chairman and Director April 29, 1998
- ---------------------
Howard E. Rose
/s/ Roger A. Anderson Director April 29, 1998
- ----------------------
Roger A. Anderson
/s/ John W. Burkhart Director April 29, 1998
- -----------------------
John W. Burkhart
/s/ Pamela M. Goergen Director April 29, 1998
- ------------------------
Pamela M. Goergen
/s/ Neal I. Goldman Director April 29, 1998
- ------------------------
Neal I. Goldman
/s/ Roger H. Morley Director April 29, 1998
- ----------------------
Roger H. Morley
/s/ John E. Preschlack Director April 29, 1998
- ------------------------
John E. Preschlack
/s/ Frederick H. Stephens, Jr. Director April 29, 1998
- -------------------------------
Frederick H. Stephens, Jr.
</TABLE>
<PAGE>
Exhibit 24.2
BLYTH INDUSTRIES, INC.
CERTIFICATION
I, the undersigned Secretary of BLYTH INDUSTRIES, INC., a Delaware
corporation, certify that the attached is a true copy of resolutions adopted by
the Board of Directors of Blyth Industries, Inc. on April 8, 1998, at a meeting
throughout which a quorum was present, and that the same is still in full force
and effect.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal of
Blyth Industries, Inc. this 29th day of April, 1998.
/s/ Bruce D. Kreiger
------------------------
Name: Bruce D. Kreiger
Title: Secretary
BLYTH INDUSTRIES, INC.
Board of Directors Resolution
April 8, 1998
* * *
FORM 10-K ANNUAL REPORT
RESOLVED, that the form, terms, and provisions of the Annual Report on Form
10-K (the "Form 10-K") in substantially the draft form presented to this Board,
are approved and that Robert B. Goergen, Howard E. Rose and Richard T. Browning
be, and each of them with full power to act without the other hereby is,
authorized (i) to sign the Form 10-K on behalf of the Corporation and any
amendments thereto as either of them may approve on behalf of the Corporation,
in such form as the officer executing the Form 10-K or any such amendment may
approve, with any changes from the form presented to this meeting as he may
approve, such execution to be conclusive evidence of such approval, and (ii) to
file the Form 10-K with the Securities and Exchange Commission (the
"Commission");
RESOLVED, that each of the directors, the Chairman, President and Chief
Executive Officer, the Vice Chairman and the Vice President and Chief Financial
Officer, of Blyth Industries, Inc. are each hereby authorized to execute in
their respective capacities, a power of attorney in favor of Robert B. Goergen,
Howard E. Rose, Richard T. Browning and Bruce D. Kreiger designating each of
them as the true and lawful attorneys-in-fact and agents of the signatory with
full power and authority to execute and to cause to be filed with the Securities
and Exchange Commission the Form 10-K Annual Report for fiscal 1998 with all
exhibits and other documents in connection therewith as such attorneys-in-fact,
or any one of them, may deem necessary or desirable; and to do and perform each
and every act and thing necessary or desirable to be done in and about the
premises as fully to all intents and purposes as such officers and directors
could do themselves.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AT 1/31/98 AND THE CONSOLIDATED STATEMENTS
OF EARNINGS, STOCKHOLDERS' EQUITY AND CASH FLOWS FOR THE 12 MONTHS ENDED
1/31/98, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-START> FEB-01-1997
<PERIOD-END> JAN-31-1998
<CASH> 21,273
<SECURITIES> 0
<RECEIVABLES> 53,333
<ALLOWANCES> 1,353
<INVENTORY> 135,524
<CURRENT-ASSETS> 211,831
<PP&E> 212,459
<DEPRECIATION> 41,749
<TOTAL-ASSETS> 447,390
<CURRENT-LIABILITIES> 71,730
<BONDS> 0
0
0
<COMMON> 982
<OTHER-SE> 245,850
<TOTAL-LIABILITY-AND-EQUITY> 447,390
<SALES> 687,474
<TOTAL-REVENUES> 687,474
<CGS> 298,562
<TOTAL-COSTS> 298,562
<OTHER-EXPENSES> 286,869
<LOSS-PROVISION> 3,269
<INTEREST-EXPENSE> 4,816
<INCOME-PRETAX> 89,930
<INCOME-TAX> 35,068
<INCOME-CONTINUING> 54,862
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 54,590
<EPS-PRIMARY> 1.11
<EPS-DILUTED> 1.10
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS RESTATED SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AT 4/30/96, 7/31/96, 10/31/96 AND 1/31/97 AND THE
CONSOLIDATED STATEMENTS OF EARNINGS, STOCKHOLDERS' EQUITY AND CASH FLOWS FOR THE
3, 6, 9 AND 12 MONTHS ENDED 4/30/96, 7/31/96, 10/31/96 AND 1/31/97 RESPECTIVELY
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS 9-MOS 12-MOS
<FISCAL-YEAR-END> JAN-31-1997 JAN-31-1997 JAN-31-1997 JAN-31-1997
<PERIOD-START> FEB-01-1996 FEB-01-1996 FEB-01-1996 FEB-01-1996
<PERIOD-END> APR-30-1996 JUL-31-1996 OCT-31-1996 JAN-31-1997
<CASH> 10,464 3,627 11,335 14,523
<SECURITIES> 34,110 12,457 0 13,309
<RECEIVABLES> 33,547 33,999 67,548 41,612
<ALLOWANCES> 770 651 802 1,054
<INVENTORY> 89,937 110,782 114,758 112,427
<CURRENT-ASSETS> 168,654 161,019 193,646 182,140
<PP&E> 88,249 97,568 111,022 135,382
<DEPRECIATION> 23,522 25,401 27,322 30,532
<TOTAL-ASSETS> 251,976 251,812 294,369 303,879
<CURRENT-LIABILITIES> 63,149 56,235 82,916 68,963
<BONDS> 0 0 0 0
0 0 0 0
0 0 0 0
<COMMON> 637 638 638 651
<OTHER-SE> 149,070 156,039 171,485 188,752
<TOTAL-LIABILITY-AND-EQUITY> 251,976 251,812 294,369 303,879
<SALES> 112,684 219,790 373,312 531,480
<TOTAL-REVENUES> 112,684 219,790 373,312 531,480
<CGS> 51,612 100,288 170,838 244,078
<TOTAL-COSTS> 51,612 100,288 170,838 244,078
<OTHER-EXPENSES> 48,104 94,509 150,180 211,951
<LOSS-PROVISION> 198 458 860 1,404
<INTEREST-EXPENSE> 806 1,603 2,616 3,554
<INCOME-PRETAX> 12,482 23,768 49,930 71,939
<INCOME-TAX> 5,023 9,574 20,109 28,967
<INCOME-CONTINUING> 7,459 14,194 29,821 42,951
<DISCONTINUED> 0 0 0 0
<EXTRAORDINARY> 0 0 0 0
<CHANGES> 0 0 0 0
<NET-INCOME> 7,457 14,164 29,575 42,757
<EPS-PRIMARY> 0.16 0.30 0.62 0.89
<EPS-DILUTED> 0.15 0.29 0.61 0.88
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS RESTATED SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AT 4/30/97, 7/31/97 AND 10/31/97 AND THE
CONSOLIDATED STATEMENTS OF EARNINGS, STOCKHOLDERS' EQUITY AND CASH FLOWS FOR THE
3, 6 AND 9 MONTHS ENDED 4/30/97, 7/31/97 AND 10/31/97 RESPECTIVELY AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS 9-MOS
<FISCAL-YEAR-END> JAN-31-1998 JAN-31-1998 JAN-31-1998
<PERIOD-START> FEB-01-1997 FEB-01-1997 FEB-01-1997
<PERIOD-END> APR-30-1997 JUL-31-1997 OCT-31-1997
<CASH> 7,240 8,880 16,244
<SECURITIES> 14,599 350 0
<RECEIVABLES> 45,013 37,459 74,213
<ALLOWANCES> 1,313 1,017 1,034
<INVENTORY> 121,027 139,899 136,900
<CURRENT-ASSETS> 189,161 188,826 229,054
<PP&E> 148,921 178,003 193,764
<DEPRECIATION> 33,012 35,818 38,817
<TOTAL-ASSETS> 322,375 348,684 417,072
<CURRENT-LIABILITIES> 76,743 69,082 72,069
<BONDS> 0 0 0
0 0 0
0 0 0
<COMMON> 651 654 981
<OTHER-SE> 200,116 209,432 228,751
<TOTAL-LIABILITY-AND-EQUITY> 322,375 348,684 229,732
<SALES> 155,060 292,769 485,226
<TOTAL-REVENUES> 155,060 292,769 485,226
<CGS> 69,197 129,572 215,424
<TOTAL-COSTS> 69,197 129,572 215,424
<OTHER-EXPENSES> 66,056 126,232 198,924
<LOSS-PROVISION> 319 667 1,052
<INTEREST-EXPENSE> 904 1,999 3,577
<INCOME-PRETAX> 18,892 29,338 61,929
<INCOME-TAX> 7,616 11,618 24,316
<INCOME-CONTINUING> 11,276 17,733 37,613
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 11,314 17,733 37,359
<EPS-PRIMARY> 0.23 0.36 0.76
<EPS-DILUTED> 0.22 0.35 0.75
</TABLE>
