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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1994
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ____________ to ____________.
Commission File Number: 0-1349
STANHOME INC.
(Exact name of registrant as specified in its charter)
Massachusetts 04-1864170
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
333 Western Avenue, Westfield, Massachusetts 01085
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (413) 562-3631
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
Common Stock, par value $.125 New York Stock Exchange
per share, together with the The Pacific Stock Exchange
Associated Common Stock Purchase Rights
("Common Stock")
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes [X] No[_]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K (Section 229.405 of this chapter) is not
contained herein, and will not be contained, to the best of registrant's
knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this Form 10-K.
[X]
State the aggregate market value of the voting stock held by non-
affiliates of the registrant: $547,074,947 on January 31, 1995.
The number of shares outstanding of the registrant's Common Stock as
of March 15, 1995 was 18,919,430 Shares.
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Parts I, II, and IV of this Form 10-K incorporate by reference
certain information from the registrant's Annual Report to Stockholders for
fiscal year ended December 31, 1994. Part III of this Form 10-K
incorporates by reference certain information from the registrant's
definitive Proxy Statement dated March 17, 1995, for its Annual Meeting of
Stockholders to be held on April 27, 1995.
P A R T I
ITEM 1. BUSINESS.
Through its subsidiaries' operations, the Company is engaged in three
primary lines of business worldwide: (1) the design and sale to
independent retailers of collectible figurines and ornaments, action
musicals, decorative home accents, and other giftware, (2) the direct
response marketing and sale of collectible plates and dolls, jewelry, and
other giftware and non-giftware consumer products, and (3) the manufacture
or purchase, sale, and distribution principally through the direct selling
method known as the "Famous Stanley Hostess Party Plan" of home and
personal care products, giftware, and other items.
Giftware
The Company's Enesco Worldwide Giftware Group is led by Enesco
Corporation ("Enesco"), a subsidiary of the Company, with its new
headquarters located in Itasca, Illinois and its principal showroom, large
warehouse and distribution center complex located in nearby Elk Grove
Village, Illinois. Enesco is a leading importer and distributor of
creatively designed giftware items, including proprietary and licensed
lines and collectibles. Its products include diverse lines of porcelain
and cold cast figurines, musicals and music boxes, dolls, ornaments,
waterballs, decoupage, miniatures, jack-in-the-boxes, tinware, gift bags,
and other giftware primarily produced by independent manufacturers in the
Far East, with total production capacity in several cases being exclusively
devoted to Enesco products. As part of a previously announced
restructuring, the operations of Via Vermont Ltd. were transferred to Elk
Grove Village in January, 1995 and consolidated into Enesco's operations.
During 1994 the Enesco Worldwide Group also closed its retail store at the
Gurnee Mills Mall in Gurnee, Illinois, converted its Australian operations
into a distributorship, made preparations to take over the existing
operations of Hamilton (U.K.), and acquired all of the stock of both
Lilliput Group plc and Border Fine Arts Company Limited as well as
substantially all of the assets of Otagiri Mercantile Company, Inc.
Enesco sells its products through three separately managed divisions,
each with its own sales organization comprised of independent sales
representatives. The Designed Giftware and Gift Gallery divisions each
have approximately 200 independent sales representatives servicing defined
territories with their respective giftware lines. The newest division,
International Collections, is serviced by about 65 sales representatives
offering decorative accessories for the home from the product lines of each
of the Company's 1994 acquisitions, Lilliput, Otagiri, and Border Fine
Arts, as well as from Via Vermont. Enesco displays the Worldwide Giftware
Group products of the three divisions in fifteen showrooms located in the
U.S. as well as at periodic trade and private shows held in major U.S. and
foreign cities. These products are marketed principally in the U.S.
through more than 30,000 independent retail outlets, including gift stores,
greeting card and gift shops, national chains, mail order houses, and
department stores. Another newly established affiliate, Consumer
Appreciation, Inc., administers the Group's collectors clubs and
promotional advertising. Foreign affiliates and distributors of the Enesco
Worldwide Giftware Group are presently located in Australia, Brazil,
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Canada, Chile, Germany, Hong Kong, Italy, Japan, The Netherlands, People's
Republic of China, Philippines, Singapore, Taiwan, Thailand, and the United
Kingdom.
The product lines of the Worldwide Giftware Group are based partially
on Enesco's collection of proprietary designs and partially on products
produced under license from independent creative designers. Most of its
products, whether proprietary or produced under license, are protected by
trademark and/or copyright registrations in the U.S. and many foreign
countries. Principal product trademarks of the Enesco Worldwide Giftware
Group include ENESCO, TREASURED MEMORIES, GROWING UP, LAURA'S ATTIC, SUN
SHELLS, ENESCO SMALL WONDERS, SMALL WORLD OF MUSIC, ELUSIVE LEGEND, THE
ENESCO TREASURY OF CHRISTMAS ORNAMENTS, CHERISHED TEDDIES, MAGNAMARKER, VIA
VERMONT, SPORTS IMPRESSIONS, SANTA'S SPECIAL DEERLIVERY, COW KISSES, CUTE
AS A BUTTON, CORAL KINGDOM, MARY'S MOO MOOS, LILLIPUT LANE, BORDER FINE
ARTS, and OTAGIRI. Among its important licensed lines are PRECIOUS
MOMENTS, CHERISHED TEDDIES, GARFIELD, MEMORIES OF YESTERDAY, LUCY AND ME,
CHAPEAU NOELLE, CALICO KITTENS, BARBIE, PENNYWHISTLE LANE, A CELEBRATION OF
LIFE, SISTERS & BEST FRIENDS, MICKEY & CO./DISNEY, THE NORTH POLE VILLAGE,
COCA COLA, FROSTY THE SNOWMAN, CURRIER & IVES, GNOMES, THE WORLD OF
SINTERKLAAS, THE GOLDEN LEAGUE, SESAME STREET, McDONALD'S, RUDOLPH THE RED
NOSED REINDEER, IVORY CATS, MAUD HUMPHREY BOGART, BESSIE PEASE GUTMANN,
ROSE O'NEIL KEWPIE COLLECTION, ELVIS PRESLEY, THE BEATLES, STAR TREK,
WIZARD OF OZ, SANDMAN, VICTORIAN BELLES, COUNTRY HAMLET, PUREBRED PUPS, and
IN HIS NAME.
The internal development and licensing of innovative new product
designs lessens Enesco's dependency on existing trademarks or copyrighted
designs. Protection of all of the intellectual property is important to
the Company's business, and Enesco has maintained an aggressive and visible
program to identify and challenge companies and individuals who infringe
its registered trademarks and copyrighted designs. The rights with respect
to the licensed lines are materially important to Enesco because of the
substantial volume of sales represented by these products, especially the
PRECIOUS MOMENTS and CHERISHED TEDDIES product lines which accounted for
approximately 25% and 9% of the Company's consolidated revenue during 1994,
respectively.
Collectibles and giftware products sold in the Via Vermont, Lilliput,
and Border Fine Arts lines are supplied by manufacturing plants owned by
Stanhome's subsidiaries operating in Mexico, England, and Scotland,
respectively. Worldwide Giftware Group operations are supplied by these
manufacturing plants and by Enesco's affiliate in Hong Kong, Enesco
International (H.K.) Limited, which assists Enesco by ordering and
overseeing the production of collectibles and giftware products by
independent manufacturers, which are located principally in China, Hong
Kong, and Taiwan, and to a lesser extent in the Philippines, Indonesia, and
Thailand. In addition, this affiliate assists the Company's direct selling
operations in Europe and Latin America by sourcing premium items and
giftware manufactured in the Far East. N.C. Cameron & Sons Limited, a
subsidiary of the Company and a member of the Enesco Worldwide Giftware
Group located in Ontario, Canada, sources its products not only through
Enesco's manufacturing subsidiaries and Enesco International (H.K.) Limited
but also from other Far Eastern, European, and Canadian manufacturers.
Enesco and its affiliates require all manufacturing sources, whether
Company affiliates or contract manufacturers, to comply with quality
standards established and enforced by the Company and its subsidiaries.
Competition in the giftware business in North America, Europe, and
the Far East is highly fragmented among a diversity of collectible and
giftware product categories. The principal factors affecting success in
the marketplace are originality of product design, quality, sourcing
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marketing ability, customer service, and price. The Company believes that
Enesco is a significant factor in the U.S. giftware business among a small
number of sizable, and largely privately-held, competitors within the
industry, which businesses include Hallmark, Department 56, Lladro,
Silvestri, and Schmid, among others. With the addition of both Lilliput
Group plc and Border Fine Arts Company Limited, the Enesco European
Giftware Group has become the third largest quality giftware distributor in
the U.K., behind only Wedgwood and Royal Doulton. The Enesco Group's sales
tend to peak in the third and fourth quarters. As of the end of 1994, the
Enesco Worldwide Giftware Group had a backlog of firm orders totaling
$93,400,000, as compared to $91,800,000 as of the end of 1993. The Company
expects that substantially all of the existing order backlog will be
fulfilled during 1995. It is a standard practice within the giftware
industry, however, that orders are subject to amendment or cancellation by
customers prior to shipment. Because of the multiplicity of external
factors that can impact the status of unshipped orders at any particular
time, the comparison of backlog orders in a given year with those at the
same date in a prior year is not necessarily indicative of sales
performance for that year or for prospective sales results in future years.
Backlog orders can also be affected by various programs employed by the
Company to induce its customers to place orders and accept shipments at
specified times in the year. In addition, extended credit and payment
terms have been and will continue to be key marketing tools. The Enesco
Worldwide Giftware Group plans to utilize similar sales promotions in 1995
to those it employed in 1994 and 1993.
Over the years, there has been an ongoing issue in the U.S. as to the
classification of sales representatives as employees or independent
contractors, with resulting tax and other legal consequences to the worker
and company involved. The U.S. Internal Revenue Service and Congress have
expressed renewed interest in this area in general, and some states have
challenged from time to time the classification of positions within the
Enesco sales organizations. This will in all likelihood receive increased
attention from the federal and state governments in the future.
Direct Response
The Company's Hamilton Worldwide Direct Response Group is led by The
Hamilton Collection, Inc. ("Hamilton"), a subsidiary of the Company, which
has its headquarters and warehouse facilities located in Jacksonville,
Florida. Hamilton sells collectibles and giftware directly to consumers
through print advertising and direct mail marketing in the U.S., Canada,
and the United Kingdom. The Hamilton business in the U.K. became part of
the Enesco Worldwide Giftware Group effective January 1, 1995.
Hamilton's direct mail promotions and media advertisements offer
approximately 90 new products each year, primarily collectible plates,
dolls, and figurines. The artwork incorporated in these items is, for the
most part, licensed from well known artists and many feature television and
motion picture properties. In 1993, limited-edition dolls accounted for
38% of Hamilton's Worldwide Group sales. In 1994, its collectible plates,
hand-painted sculptures, and other non-doll product categories continued to
grow substantially as a percentage of sales and accounted for over 69% of
total sales of the Worldwide Direct Response Group. The principal
trademarks of Hamilton include THE HAMILTON COLLECTION.
Most of Hamilton's products are advertised and sold as part of a
collection series. Generally, the consumer is offered the opportunity to
purchase a single limited-edition item for which the Company has
anticipated related follow-up items. After the initial purchase, the
collector may be offered additional products over a period of time based
upon the same theme and utilizing the same artist as the first product
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purchased. Advertising costs total approximately 49% of all Worldwide
Direct Response Group sales. A key factor in achieving continued sales
growth for Hamilton, especially in the collectible plate category during
1994, has been the sale of product with no down payment and, particularly
in the case of dolls, sales on installment payments and subsequent
shipments in a collection series. The collector may typically purchase a
product with either little or no down payment and a small number of
interest-free installment payments, depending on the price of the product.
Hamilton sources its products in the U.S., Great Britain, Germany,
Italy, and the Far East from numerous contract manufacturers that comply
with quality standards established and enforced by the Company and its
subsidiaries. It has an expanding customer mailing list of over 1,200,000
buyers and collectors. Hamilton's principal licensed properties include:
PRECIOUS MOMENTS, THE WIZARD OF OZ, CHERISHED TEDDIES, STAR WARS, I LOVE
LUCY, THE GIFTED LINE, NASCAR, and STAR TREK. Well known artists include
Chuck Ren, Chuck Dehaan, Connie Walser Derek, Donald Zolan, Sandra Kuck,
Thomas Blackshear, Jim Lamb, Helen Kish, Samuel J. Butcher, and Ted Xaras.
The Hamilton Worldwide Direct Response Group is faced with
substantial competition in its North American markets. Competition in
direct response marketing exists with respect to price, product design and
innovation, licensing, quality, advertising and marketing ability, and
customer service. The Company believes that Hamilton is a growing factor
in the U.S. among the handful of prominent giftware and manufactured
collectibles companies whose products are sold to the public through direct
response media and mail. These industry leaders include Danbury Mint,
Franklin Mint, Bradford Exchange, and Lenox Collection, three of which have
significantly larger sales volumes than Hamilton. The volume of sales of
the Hamilton Worldwide Group peaks in the third and fourth quarters.
Many of Hamilton's direct response solicitations and most of its
product orders are shipped to customers through the U.S. Postal Service and
increases in the rates for this service, such as the increase effective
January 1, 1995, as well as recent increased media advertising and paper
costs, will have a substantial impact on Hamilton's operating profit
depending on the amount of the increases and its ability to introduce cost-
saving measures or pass along the increased costs to its customers.
Direct Selling
The Company's Stanhome Worldwide Direct Selling Group is now composed
of direct selling operations conducted by subsidiaries of the Company in
France, Italy, Mexico, Spain, and Venezuela. Some of these operations
manufacture, as well as distribute and sell, a broad line of home care
items and personal care and other products, including specialty chemical
products for household use, cleaning equipment, cosmetics, toiletries, and
general giftware. The Company is presently undergoing the divestiture of
its North American direct selling operations, known as Stanley Home
Products, which will result in the closing of all such operations in the
U.S. and Puerto Rico. For these operations, the Company has licensed the
products, trademarks, and business to CPAC, Inc. for continued direct
selling in these jurisdictions plus Canada until 2010. These changes
follow closely on the previously announced restructuring which led to the
consolidation of several facilities and operations and the elimination of
approximately ten percent of the Company's then worldwide work force.
Worldwide sales of home care items and personal care products to
consumers generally result from the direct selling method known as the
"Famous Stanley Hostess Party Plan". Under this method a homemaker, or
hostess, invites her friends and neighbors to her home to view a
demonstration of Stanhome products by an independent Stanhome dealer, in
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return for which she usually receives premium prizes or gifts. After the
demonstration, the dealer solicits orders from those present. In Italy and
France, the local affiliate of the Company sells the ordered products
directly to the consumer, pays a commission to the dealer on those sales,
and distributes the premiums to the hostess. In other countries, the
dealer purchases products at wholesale from the local affiliate of the
Company to fill her orders and resells the products at retail to the
consumers who placed the orders either at the home demonstration or through
catalog solicitations, door-to-door and other non-party sales, or over the
telephone. The dealer may also purchase premiums from the local affiliate
to distribute to the hostess as prizes or gifts for hosting the
demonstration. These premium prizes or gifts generally consist of cookware
and other useful or decorative household items that are purchased from
multiple independent suppliers located around the world.
The independent contractor relationship between the independent
Stanhome dealers and the Worldwide Direct Selling Group has proven
adaptable in most of the foreign jurisdictions in which the Company
conducts its direct selling business and in the past has been well
established in the U.S., where the Company has not been subject to either
social security or unemployment compensation tax with respect to them.
Government efforts to broaden social benefit coverage, as well as to impose
additional taxes on occupations including dealers, affects the local
affiliates' recruiting and marketing approach and results, in some cases,
in additional expense for them.
In Italy, the Company has previously reported that independent
dealers have received personal tax assessments in connection with the
distribution of hostess gifts as a part of the Stanhome Party Plan Sales
System. Some dealers have elected to use an amnesty settlement procedure
to resolve their pending claims. Because of the effect on dealer
recruitment and retention, Stanhome's Italian subsidiary is continuing to
assist dealers in the defense of their individual tax claims by making
payments of legal expenses, advancing amounts for tax deposits, and making
payments of settlements where this is more cost effective than potential
litigation costs. These payments have not been material. Stanhome S.p.A.
has recently received a favorable ruling from the Italian government
regarding certain tax consequences of the distribution of hostess gifts.
This ruling should lead to a favorable resolution of the ongoing dealer tax
litigation concerning these assessments. Separately, registration taxes
imposed by the Italian government continue to affect the dealer force.
Wholesale products sold in Mexico, Spain, and Venezuela are largely
supplied by manufacturing plants owned by Stanhome's subsidiaries operating
in those countries. The remaining foreign operations are supplied by these
manufacturing plants, and, in France, Italy, and Venezuela, partially by
independent local manufacturing licensees. All products of the Stanhome
Worldwide Direct Selling Group, whether manufactured by Company affiliates
or by contract manufacturers, comply with quality standards established and
enforced by the Company and its subsidiaries.
The Stanhome Worldwide Direct Selling Group also has license
arrangements in Brazil and, effective after March 1995, the U.S., Canada,
and Puerto Rico. Distribution arrangements are currently in effect with
independent distributors in the Caribbean area, Chile, Cyprus, Peru,
Portugal, Singapore, and Thailand.
The direct selling operations of the Company are faced with
substantial competition in all markets in which they are engaged.
Competition in direct selling worldwide exists not only with respect to
price and product performance, but also with respect to obtaining and
retaining an adequate number of dealers, which is of material importance to
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the success of the direct selling business. Like other direct selling
companies, there is a substantial turnover in dealers, particularly with
respect to individuals who engage in this independent business activity
only on a part-time and occasional basis. The recruiting process is
therefore a continuous one. The retention of key sales personnel is highly
dependent on interpersonal relationships and loyalties as well as on
competitive remuneration systems.
While adequate figures are not available for precise comparisons, the
Company believes that the Stanhome Worldwide Direct Selling Group is a
major factor among the large group of companies whose products are sold to
the public via the party plan sales method in those principal foreign
markets where affiliates of the Group are doing business. This is
particularly the case in Italy, where the Company's local subsidiary is
considered a major direct selling organization. While this operation
accounted for less than half of the Worldwide Direct Selling Group's total
1994 sales, it produced a substantial majority of the Group's 1994
operating profits. Sales for the direct selling subsidiaries tend to peak
in the fourth quarter and, to a lesser degree, in the second quarter.
The Company's direct selling trademarks are generally protected by
registrations in the U.S. and foreign countries where its product line is
marketed and by registrations of its major trademarks in many other
countries throughout the world. The principal trademark is the STANHOME
name and design. These marks play a substantial role in the identification
and acceptance of the Company's products by consumers. The Company's
direct selling business is not materially dependent on patents or patent
protection. Similarly, while the Company owns a large number of formulae
and regards many of its manufacturing processes as secret, it does not
believe that its business is materially dependent upon the maintenance of
secrecy with respect to such formulae or processes.
Other Information
By March 31, 1995, the Company plans to have discontinued
substantially all of the operations of its Stanley Home Products (U.S.)
Division and its Puerto Rican subsidiary. As part of the Company's
previously announced restructuring, certain assets of the Stanley Home
Products (U.S.) Division are planned to be sold to CPAC, Inc. and others
upon cessation of its operations.
As of December 31, 1994, the Company and its U.S. subsidiaries
employed approximately 1,640 persons on a full-time basis. There were also
approximately 24,160 Stanley Home Products (U.S.) dealers, group leaders,
and district managers and 470 Enesco sales representatives engaged in
selling the Company's products in the U.S., all of whom are treated as
independent contractors. As of the same date, the Company's foreign
subsidiaries employed approximately 3,300 persons on a full-time basis.
Additionally, there were approximately 49,350 Stanhome direct selling
dealers, most of whom are recognized as independent contractors.
For financial information about industry segments, including
financial information regarding foreign and domestic operations, see Note 5
of "Notes to Consolidated Financial Statements" included on pages 40 and 41
of the 1994 Annual Report to Stockholders, which is incorporated herein by
reference.
See also "Management's Discussion and Analysis of Financial Condition
and Results of Operations" commencing on page 21 of the 1994 Annual Report
to Stockholders, which is incorporated herein by reference, for a
comparison and discussion of the results of operations and operating profit
from foreign and domestic sources and a discussion of sales tax collection
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efforts by several states involving mail-order purchases.
ITEM 2. PROPERTIES.
The principal physical properties of the Company and its subsidiaries
in the United States, all of which are owned unless otherwise noted,
consist of the following: Corporate Headquarters - 333 Western Avenue,
Westfield, Massachusetts; a new headquarters offices of Enesco in Itasca,
Illinois; and showroom, warehouse, and distribution facilities for Enesco's
giftware business in Elk Grove Village, Illinois. The Enesco Group also
leases showrooms in various other locations in the U.S. for the display of
its products. The Hamilton Group Limited, Inc. leases office headquarters
and warehouse space in Jacksonville, Florida. In addition, a former office
of Stanley Home Products (U.S.), manufacturing, and warehouse facilities in
Easthampton, Massachusetts and three other former Stanley Home Products
direct selling warehouse and distribution centers situated across the U.S.
are still owned but are all currently being offered for sale as part of the
Company's ongoing worldwide restructuring.
Outside of the U.S., the principal physical properties of the
Company's Worldwide Direct Selling Group subsidiaries, all of which are
owned unless otherwise noted, consist of 8 major manufacturing and/or
distribution facilities located in France, Italy, Mexico, Spain, and
Venezuela. Some of these foreign manufacturing plants had, and continue to
have, additional capacity available. In addition, the various direct
selling foreign subsidiaries maintain numerous sales and administrative
offices as well as smaller distribution facilities, most of which are
leased. The principal physical properties relating to the foreign
subsidiaries of the Enesco Worldwide Giftware Group are for the most part
owned. These include Via Vermont, S.A. de C.V., which owns an assembly and
distribution facility in San Miguel de Allende, Guanajuato, Mexico;
Lilliput Group plc, which owns warehouse facilities in Penrith, Cumbria,
England, and manufacturing plants in Workington and Carlisle, England; and
Border Fine Arts Company Limited, which owns a manufacturing plant and
warehouse complex in Langholm, Dumfriesshire, Scotland and a manufacturing
facility in Carlisle, England. These manufacturing facilities are
generally operating at capacity.
ITEM 3. LEGAL PROCEEDINGS.
There are various legal proceedings pending against the Company and
its subsidiaries which have arisen during the course of business. While
Management cannot predict the eventual outcome of these proceedings, it
believes that none of these proceedings will have a material adverse impact
upon the consolidated financial statements of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
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EXECUTIVE OFFICERS OF THE REGISTRANT
Date First
Name Age Positions Elected
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G. William Seawright 53 Director 3/08/90
President and Chief
Executive Officer 11/09/93
Member of the Executive
Committee 4/22/93
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Prior to Mr. Seawright joining the Company in November, 1993, he was
President and Chief Executive Officer of The Paddington Corporation, an
importer of wines and spirits, in Fort Lee, New Jersey since 1990, after
having previously served as the President of Heublein International and a
Senior Vice President of Heublein, Inc. since 1986.
Allan G. Keirstead 50 Director 4/25/85
Executive Vice President
and Chief Administrative
Officer 4/28/88
Chief Financial Officer 4/28/83
Controller 12/02/81
Member of the Executive
Committee 4/25/85
Prior to Mr. Keirstead's election as Executive Vice President and
Chief Administrative Officer, he served as Financial Vice President from
January, 1983 to April, 1988. He served as Assistant Controller from
April, 1977 to December, 1981.
Eugene Freedman 70 Executive Vice President 4/28/88
President and CEO of Enesco
Worldwide Giftware Group 9/06/89
Mr. Freedman previously served as a Vice President of the Company
from January, 1984 to April, 1988. He also has served for many years as
President and Chief Executive Officer of Enesco Corporation.
James P. Smith, Jr. 51 Executive Vice President 1/26/94
President and CEO of Hamilton
Worldwide Direct Response Group 9/06/89
Mr. Smith previously served as Senior Vice President of the Company
from April, 1992 until January, 1994 and as a Vice President of the Company
from May, 1989 to April, 1992. He also has served for many years as
President and Chief Executive Officer of The Hamilton Collection, Inc.
John J. Dur 43 Vice President 2/01/95
President and CEO of Stanhome
Worldwide Direct Selling Group 1/16/95
Prior to Mr. Dur joining the Company in January, 1995, he was the
founding principal of Tozai Strategists, a consulting company specializing
in Asian market development. Previously, Mr. Dur served as President and
Chief Executive Officer for both Gilbey Canada, Inc. and Heublein Japan
from 1990 to 1994 and from 1981 to 1989, respectively, both of which are
indirect subsidiaries of Grand Metropolitan plc.
Bruce H. Wyatt 48 Vice President and
General Counsel 9/07/88
Clerk and Secretary 4/28/88
Prior to Mr. Wyatt's elections as Vice President and General Counsel,
and Clerk and Secretary, he served as Assistant General Counsel from April,
1985, Assistant Clerk from April, 1983, and Assistant Secretary from April,
1981.
Ronald R. Jalbert 56 Vice President 8/29/79
Mr. Jalbert joined the Company in August, 1979 as its Vice President
of Personnel and from April, 1982 until January, 1995 he served as Vice
President, Human Resources and Public Affairs. Since January, 1995, he has
served as Vice President, Human Resources.
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Thomas E. Evangelista 45 Vice President 12/07/88
Prior to Mr. Evangelista joining the Company in December, 1988, he
was a Marketing Consultant for Marketing Corporation of America in
Westport, Connecticut where he focused on business development strategies
primarily for consumer products and services clients. From December, 1988
until January, 1995 he served as Vice President, Strategic Planning and
Development. Since January, 1995, he has served as Vice President,
Corporate Development and Communications.
Carmen J. Mascaro 59 Treasurer 2/01/93
Prior to Mr. Mascaro's election as Treasurer, he served as Assistant
Treasurer from January, 1986 to February, 1993.
NOTE: All officers are elected for the ensuing year and until their
successors are duly elected and qualified.
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P A R T II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
Information required by this item is set forth in the Sections
entitled "Financial Highlights" and "Stock Market, Dividend and
Shareholder Information" appearing on page 1 of the 1994 Annual Report to
Stockholders, and is incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA.
Information required by this item is set forth in the Section
entitled "Financial Highlights Last Ten Years" appearing on pages 50 and
51 of the 1994 Annual Report to Stockholders, and is incorporated herein
by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION.
Information required by this item is set forth in the Section
entitled "Management's Discussion and Analysis of Financial Condition and
Results of Operations" appearing on pages 21 through 27 of the 1994 Annual
Report to Stockholders, and is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Information required by this item is set forth in the Financial
Statements together with Notes and the Report of Independent Public
Accountants appearing on pages 28 through 48 of the 1994 Annual Report to
Stockholders, and is incorporated herein by reference. Also incorporated
herein by reference are the Quarterly results (unaudited) during 1994,
1993 and 1992 set forth on page 49 of the 1994 Annual Report to
Stockholders.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
-10-
<PAGE>
P A R T III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Information required by this item regarding the directors of the
Company is set forth under the captions "Election of Directors" and
"Information as to Board of Directors and Nominees" in the Company's proxy
statement dated March 17, 1995, and is incorporated herein by reference.
Information required by this item regarding the executive officers of the
Company is included under a separate caption in Part I hereof, and is
incorporated herein by reference, in accordance with General Instruction
G(3) of Form 10-K and Instruction 3 to Item 401(b) of Regulation S-K.
ITEM 11. EXECUTIVE COMPENSATION.
Information required by this item is set forth under the captions
"Executive Compensation", "Compensation and Stock Option Committee Report
on Executive Compensation", "Performance Graph", and "Remuneration of Non-
Employee Directors" in the Company's proxy statement dated March 17, 1995,
and is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Information required by this item is set forth under the caption
"Voting Securities and Principal Holders Thereof" in the Company's proxy
statement dated March 17, 1995, and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Information required by this item is set forth under the captions
"Compensation Committee Interlocks and Insider Participation" and "Certain
Relationships and Related Transactions" in the Company's proxy statement
dated March 17, 1995, and is incorporated herein by reference.
P A R T IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a)(1) and (2) Financial Statements and Schedules. The financial
statements and schedules required by this item are listed in the Index to
Financial Statements and Schedules of Stanhome Inc. on page 14 of this Form
10-K.
(a)(3) Exhibits. The exhibits required by this item are listed in
the Exhibit Index on pages 17 - 18 of this Form 10-K. The management
contracts and compensatory plans or arrangements required to be filed as an
exhibit to this Form 10-K are listed as Exhibits 10(a) to 10(t) in the
Exhibit Index.
(b) Reports on Form 8-K. During the fourth quarter of 1994, a Form
8-K dated October 14, 1994 was filed by the Company which reported the
acquisition of all but 5.83% of the allotted, called up and fully paid
shares of capital stock of Lilliput Group plc, a public limited company
organized and existing in the United Kingdom, with its principal place of
business located at Penrith, Cumbria, England, and the Company's offer to
acquire the remaining shares and all outstanding options for shares in
Lilliput as well. Total cash consideration for all of the shares and
options of Lilliput amounted to approximately (Pounds)37,334,356 in the
aggregate. Because no financial statements and pro forma financial
information were filed therewith, a Form 8-K/A dated December 14, 1994 was
also filed by the Company which reported the financial statements of
-11-
<PAGE>
businesses acquired and pro forma financial information on a consolidated
basis relating to the acquisition of all the shares and options of
Lilliput.
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, on the
29th day of March, 1995.
STANHOME INC.
(Registrant)
By:/s/G. William Seawright
G. William Seawright
President and Chief Executive Officer
By:/s/Allan G. Keirstead
Allan G. Keirstead
Executive Vice President,
Chief Administrative & Financial Officer
-12-
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below on the 29th day of March, 1995 by the
following persons on behalf of the registrant and in the capacities
indicated.
Signature Title
/s/H. L. Tower *
H. L. Tower Director
/s/Homer G. Perkins *
Homer G. Perkins Director
/s/Allan G. Keirstead
Allan G. Keirstead Director, Executive Vice
President, and Chief
Administrative & Financial
Officer
/s/John F. Cauley, Jr. *
John F. Cauley, Jr. Director
/s/G. William Seawright
G. William Seawright Director, President, and
Chief Executive Officer
/s/Thomas R. Horton *
Thomas R. Horton Director
/s/Anne-Lee Verville *
Anne-Lee Verville Director
/s/Judith R. Haberkorn *
Judith R. Haberkorn Director
/s/Janet M. Clarke *
Janet M. Clarke Director
/s/Charles W. Elliott *
Charles W. Elliott Director
*By:/s/G. William Seawright
G. William Seawright
Attorney-In-Fact
-13-
<PAGE>
STANHOME INC.
INDEX TO FINANCIAL STATEMENTS AND SCHEDULE
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS - Incorporated herein by
reference to "Report of Independent Public Accountants" on page 48
of Stanhome's 1994 Annual Report to Stockholders.
FINANCIAL STATEMENTS - All of which are incorporated herein by reference
to Stanhome's 1994 Annual Report to Stockholders.
Consolidated Balance Sheet - December 31, 1994 and 1993
Consolidated Statement of Income For the Years Ended December 31,
1994, 1993 and 1992
Consolidated Statement of Retained Earnings For the Years Ended
December 31, 1994, 1993 and 1992
Consolidated Statement of Cash Flows For the Years Ended December
31, 1994, 1993 and 1992
Notes to Consolidated Financial Statements - December 31, 1994,
1993 and 1992
Quarterly results (unaudited)
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULE
SCHEDULE SUPPORTING FINANCIAL STATEMENTS:
<TABLE>
<CAPTION>
Schedule
Number Description
<S> <C>
II Valuation and Qualifying Accounts and Reserves For
the Three Years Ended December 31, 1994
</TABLE>
NOTES:
(a) All other schedules are not submitted because they are not
applicable, not required or because the required information
is included in the consolidated financial statements or notes
thereto.
(b) Individual financial statements of the Company have been
omitted since (1) consolidated statements of the Company and
its subsidiaries are filed and (2) the Company is primarily an
operating company and all subsidiaries included in the
consolidated financial statements filed are wholly-owned and
do not have a material amount of debt to outside persons.
-14-
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULE
----------------------------------------------------
To Stanhome Inc.:
We have audited in accordance with generally accepted auditing
standards, the financial statements included in Stanhome Inc.'s annual
report to shareholders incorporated by reference in this Form 10-K, and
have issued our report thereon dated February 21, 1995. Our audit was made
for the purpose of forming an opinion on those statements taken as a whole.
The schedule listed in the accompanying index is the responsibility of the
Company's management and is presented for purposes of complying with the
Securities and Exchange Commission's rules and is not part of the basic
financial statements. This schedule has been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in
our opinion, fairly states in all material respects the financial data
required to be set forth therein in relation to the basic financial
statements taken as a whole.
/s/ Arthur Andersen LLP
Hartford, Connecticut
February 21, 1995
-15-
<PAGE>
SCHEDULE II
STANHOME INC.
-------------
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
----------------------------------------------
FOR THE THREE YEARS ENDED DECEMBER 31, 1994
--------------------------------------------
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
Additions
---------
Balance at Charged to Charged to Balance at
Beginning Costs and Other End of
Description of Period Expenses Accounts Deductions Period
----------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
For the year ended December 31, 1992
------------------------------------
Reserves which are deducted in the
balance sheet from assets to which
they apply -
Allowance for doubtful accounts $11,029,789 $8,452,492 $ - $7,077,330 $12,404,951
=========== ========== ======== ========== ===========
Accumulated amortization of
other assets $14,630,221 $2,215,827 $145,000(b) $ 108,116 $16,882,932
=========== ========== ======== ========== ===========
Other reserves $ 1,001,020 $ 576,998
=========== ===========
For the year ended December 31, 1993
------------------------------------
Reserves which are deducted in the
balance sheet from assets to which
they apply -
Allowance for doubtful accounts $12,404,951 $7,478,700 $ - $4,153,126 $15,730,525
=========== ========== ======== ========== ===========
Accumulated amortization of
other assets $16,882,932 $2,285,245 $ - $ 55,335 $19,112,842
=========== ========== ======== ========== ===========
Other reserves $ 576,998 $ 627,416
=========== ===========
For the year ended December 31, 1994
------------------------------------
Reserves which are deducted in the
balance sheet from assets to which
they apply -
Allowance for doubtful accounts $15,730,525 $7,919,917 $200,619(a) $8,602,247 $15,248,814
=========== ========== ======== ========== ===========
Accumulated amortization of
other assets $19,112,842 $2,782,503 $ - $ 56,984 $21,838,361
=========== ========== ======== ========== ===========
Other reserves $ 627,416 $ 548,594
=========== ===========
</TABLE>
Note:
(a) Represents recorded reserves at dates of acquisitions.
(b) Represents balance sheet reclassifications related to prior acquisitions.
-16-
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT INDEX
Reg. S-K
Item 601 EXHIBIT
<S> <C>
3(a)* Restated Articles of Organization as amended. (Exhibit 3 to
Form 10-Q filed for the period ended March 31, 1988.)
3(b)* By-Laws as amended. (Exhibit 3(ii) to Form 10-Q filed for
the period ended March 31, 1994.)
4(a)* Rights Agreement dated as of September 7, 1988, between
Stanhome Inc. and The Connecticut Bank and Trust Company,
N.A. as amended. (Exhibit 4(a) to Form 10-Q filed for the
period ended September 30, 1988 and Exhibit 1 to Form 8-K
filed on October 1, 1990.)
10(a) 1984 Stock Option Plan, as amended and restated through
March 1, 1995.
10(b) 1991 Stock Option Plan, as amended and restated through
March 1, 1995.
10(c)* Special Interim Chief Executive Officer Stock Option Plan.
(Exhibit 10(c) to Form 10-K filed for the period ended
December 31, 1993.)
10(d)* Outline of Deferred Compensation Plan for Non-employee
Directors, as amended. (Exhibit 10(e) to Form 10-K filed
for the period ended December 31, 1988.)
10(e)* Employment Contract, as amended, with E. Freedman. (Exhibit
10(e) and 10(i) to Form 10-K filed for the periods ended
December 31, 1983 and December 31, 1986 respectively,
Exhibit 19(a) to Form 10-Q filed for the period ended June
30, 1989, and Exhibit 19(e) to Form 10-K filed for the
period ended December 31, 1992.)
10(f)* Employment Agreement with James P. Smith, Jr. (Exhibit 10 to
Form 10-Q filed for the period ended September 30, 1993.)
10(g)* Employment Agreement with Alejandro Diaz Vargas. (Exhibit
10(g) to Form 10-K filed for the period ended December 31,
1993.)
10(h) Agreement with Alejandro Diaz Vargas made as of February 17,
1995.
10(i)* Employment Agreement with G. William Seawright. (Exhibit
10(h) to Form 10-K filed for the period ended December 31,
1993.)
10(j)* Management Incentive Plan, as amended and restated effective
January 1, 1994. (Exhibit 10(i) to Form 10-K filed for the
period ended December 31, 1993.)
10(k)* Retirement Agreement with G. William Seawright. (Exhibit
10(j) to Form 10-K filed for the period ended December 31,
1993.)
-17-
10(l) Supplemental Retirement Plan, as amended, with Allan G.
Keirstead.
10(m)* Agreement under Supplemental Pension Plan, as amended, with
Ronald R. Jalbert. (Exhibit 10(n) to Form 10-K filed for
the period ended December 31, 1993.)
10(n)* Form of Severance Agreement. Similar agreements exist with
Allan G. Keirstead, Bruce H. Wyatt, Ronald R. Jalbert, and
Thomas E. Evangelista. (Exhibit 19(d) to Form 10-K filed
for the period ended December 31, 1992.)
10(o)* Form of Change in Control Agreement. Similar agreements
exist with Allan G. Keirstead, Bruce H. Wyatt, Ronald R.
Jalbert, and Thomas E. Evangelista. (Exhibit 19(c) to Form
10-K filed for the period ended December 31, 1992.)
10(p)* Change in Control Agreement with G. William Seawright.
(Exhibit 10(r) to Form 10-K filed for the period ended
December 31, 1993.)
10(q)* Change in Control Agreement with certain corporate and
subsidiary non-executive officers. (Exhibit 19(c) to Form
10-K filed for the period ended December 31, 1991.)
10(r) Stanhome Inc. Supplemental Pension Plan effective May 1,
1994.
10(s) Stanhome Supplemental Investment Savings Plan effective May
1, 1994.
10(t) Hamilton Supplemental Investment Savings Plan effective
April 1, 1994.
10(u)* License Agreement between Precious Moments, Inc. and Enesco
Corporation. (Exhibit 10 to Form 10-Q filed for the period
ended June 30, 1993.)
13 Portions of the 1994 Annual Report to the Stockholders of
Stanhome Inc.
21 Subsidiaries of Stanhome Inc.
23 Consent of Arthur Andersen LLP
24 Power of Attorney
27 Financial Data Schedule
______________________________________________
*Incorporated Herein By Reference
</TABLE>
-18-
<PAGE> EXHIBIT 10(a)
STANHOME INC.
1984 Stock Option Plan, as amended
Through March 1, 1995
1. Purpose. The purpose of this 1984 Stock Option Plan (the "Plan") is
to advance the interests of Stanhome Inc. (the "Company") by encouraging key
management employees of the Company and its subsidiaries to acquire a
proprietary interest in the Company through ownership of common stock of the
Company. Such ownership will encourage the employees to remain with the Company
and will help attract other qualified persons to become employees.
2. Administration. The Plan shall be administered by the Compensation
and Stock Option Committee of the Board of Directors (the "Committee") which
shall be composed of not less than three directors of the Company elected or to
be elected as members of the Committee from time to time by the Board of
Directors of the Company. None of the Committee members shall be, during
service on the Committee, nor shall have been, during the one year prior to
service on the Committee, granted or awarded Shares or options to acquire Shares
under this Plan or any other plan maintained by Stanhome or any of Stanhome's
affiliates, other than any grant or award of options or other equity securities
of Stanhome pursuant to Section 9 of the Stanhome Inc. 1991 Stock Option Plan or
any other plan of Stanhome that would not result in such Committee member
failing to qualify as a 'disinterested person' under Rule 16b-3 of the
Securities Exchange Act of 1934, as amended, as in force from time to time.
Members of the Committee shall be subject to any additional restrictions
necessary to satisfy the requirements for disinterested administration under
Rule 16b-3 of the Securities Exchange Act of 1934, as amended, as in force from
time to time. Subject to the provisions of the Plan and the approval of the
Board of Directors of the Company, except that the Board of Directors shall have
no discretion with respect to the selection of officers within the meaning of
Rule 16a-1(f), directors or 10% or more shareholders ("Insiders") for
participation and decisions concerning the timing, pricing and amount of a grant
or award to such "Insiders", the Committee is authorized to grant options under
the Plan and to interpret the Plan and such options, to prescribe, amend and
rescind rules and regulations relating to the Plan and the options, and to make
other determinations necessary or advisable for the administration of the Plan,
all of which determinations shall be conclusive. The Committee shall act
pursuant to a majority vote or by unanimous written consent.
3. Types of Option. Options granted pursuant to the Plan may be either
incentive stock options under Section 422A of the Internal Revenue Code of 1954,
as amended, ("Incentive Stock Options") or options not qualifying under that
section ("Non-qualified Stock Options").
4. Eligibility. Options shall be granted under the Plan to such
selected key full-time salaried and commissioned employees (including officers
and directors if they are employees) of the Company or any of its subsidiaries
as the Committee shall determine from time to time.
5. Stock Subject to Options. The aggregate number of shares which may
be issued or sold under options granted pursuant to the Plan (the "Shares")
shall not exceed 1,500,000 shares of the Company's common stock $0.25 par value
each. Such Shares shall be either authorized but unissued shares of said common
stock or issued shares of said common stock which shall have been reacquired by
the Company. Such aggregate number of Shares may be adjusted under Section 10
below. If any outstanding option under the Plan expires or is terminated for
any reason, the Shares allocated to the unexercised portion of such option may
again be subjected to an option or options under the Plan.
<PAGE>
6. Allotment of Shares. The Committee shall determine the total number
of Shares to be offered to each optionee under the Plan.
7. Option Price. The Shares shall be offered from time to time under
the Plan at a price which shall be not less than 100 percent of their fair
market value on the date the option is granted, provided, however, that the
price shall be not less than 110 percent of such fair market value in the case
of shares offered under any Incentive Stock Option granted to an individual who,
at the time the option is granted, owns stock possessing more than 10 percent of
the total combined voting power of all classes of stock of the Company or of its
parent or subsidiary corporation.
8. Terms and Conditions of Options. The Committee shall have power,
subject to the limitations contained in the Plan, to prescribe the terms and
conditions of any option granted hereunder. Each such option shall be evidenced
by a certificate in such form as the Committee shall from time to time
determine, which certificate shall prescribe the following terms and conditions
and such other terms and conditions as the Committee may deem necessary or
advisable:
(a) Duration of Option. An Incentive Stock Option shall not be
exercisable after the expiration of ten years from the date it is granted,
provided, however, that any Incentive Stock Option granted to an individual who,
at the time the option is granted, owns stock possessing more than 10 percent of
the total combined voting power of all classes of stock of the Company or of its
parent or subsidiary corporation shall by its terms not be exercisable after the
expiration of five years from date of grant.
(b) Exercise of Option. Each option granted under the Plan may be
exercised only after one year of continued employment by the Company or one of
its subsidiaries immediately following the date the option is granted and only
during the continuance of the optionee's employment with the Company or one of
its subsidiaries and such additional period as may be provided in subsections
(e) and (f) below. No option shall be exercised for less than 10 Shares except
as a result of an adjustment under Section 10 below. No option can be exercised
at any time by anyone other than the optionee during his or her lifetime or the
optionee's legal representative(s) after the optionee's death under subsection
(f) below. No Incentive Stock Option granted after January 1, 1987 may be
exercised in any calendar year as to shares having an aggregate fair market
value (determined as of the time the option was granted) in excess of $100,000.
(c) Payment. The purchase price of each Share purchased upon the
exercise of any option shall be paid in full at the time of such purchase, and a
stock certificate representing Shares so purchased shall be delivered to the
person entitled thereto. Until the stock certificate for such Shares is issued
in the optionee's name, he or she shall have none of the rights of a
stockholder. Payment may be made in whole or in part in (i) cash or (ii) whole
shares of the Company's common stock acquired at least six months previously by
the optionee and evidenced by negotiable certificates, valued at their Fair
Market Value on the date preceding the date the option is exercised. If
certificates representing shares of common stock are used to pay all or part of
the purchase price of an option, separate certificates shall be delivered by the
Company representing the same number of shares as each certificate so used and
an additional certificate shall be delivered representing the additional shares
to which the option holder is entitled as a result of exercise of the option.
It shall be a condition to the performance of the Company's obligation to issue
or transfer Shares upon exercise of an option or options that the optionee pay,
or make provision satisfactory to the
<PAGE>
Company for the payment of, any taxes (other than stock transfer taxes) which
the Company is obligated to collect with respect to the issue or transfer upon
such exercise. With respect to the exercise of Non-qualified Stock Options
under this Plan, optionees may elect to have the Company withhold Shares
otherwise issuable upon the exercise of such stock options, or, in the case of
"Insider" optionees, to irrevocably commit at an acceptable time to surrender to
the Company shares of common stock to cover Federal and State tax obligations
incident to such exercise, or such lesser amount as may be determined by the
Committee.
(d) Nontransferability of Options. No option shall be transferable by
the optionee otherwise than (1) by will or the laws of descent and distribution
or (2) pursuant to a qualified domestic relations order as defined in Section
414(p) of the Internal Revenue Code of 1986, as amended, and each option shall
be exercisable, during his or her lifetime, only by the optionee or his or her
guardian or legal representative(s), except to the extent that options granted
hereunder are assigned pursuant to a qualified domestic relations order.
(e) Termination of Options. If the optionee's full-time employment by
the Company or any of its subsidiaries shall terminate for any reason other than
death or disability, his or her options shall terminate immediately upon such
termination, if not sooner terminated pursuant to their terms, except that,
subject to subsection (a) above, any option shall be exercisable during the
twelve-month period following such termination as to the number of Shares which
the optionee was entitled to purchase on the day preceding such termination
except that in the case of Incentive Stock Options, the period for such exercise
following such termination shall be limited to three months. Cessation of any
corporation's relationship with the Company as a subsidiary shall constitute a
"termination of employment" hereunder as to individuals employed by that
corporation, and options held by such individuals shall be terminated in
accordance with this subsection (e).
(f) Death or Disability of Employee. If the optionee's full-time
employment by the Company or any of its subsidiaries shall terminate by reason
of disability, his or her options shall terminate immediately upon such
termination of employment, if not sooner terminated pursuant to their terms,
except that, subject to subsection (a) above, any such options shall be
exercisable during the twelve-month period following any such termination of
employment by the optionee or his or her guardian or legal representative(s)
only as to the number of Shares which the optionee was entitled to purchase on
the day preceding such termination. If the optionee's full-time employment by
the Company or any of its subsidiaries shall terminate by reason of death, his
or her options shall terminate immediately upon such termination of employment,
if not sooner terminated pursuant to their terms, except that, subject to
subsection (a) above, any such options shall be exercisable, as of the time of
such optionee's death, to the extent such options were granted to such optionee
on or prior to the date which is one year prior to the date of such optionee's
death and any such options shall be exercisable during the twelve-month period
following any such termination of employment by the optionee's legal
representative(s). For purposes of subsection (e) above and of this subsection,
the meaning of the words "disability" and "disabled" shall be determined under
the provisions of Section 422A(c)(9) of the Internal Revenue Code of 1954, as
amended, or of any successor provisions.
(g) Prior Incentive Stock Options. Each Incentive Stock Option granted
prior to January 1, 1987 shall by its terms not be exercisable while there is
outstanding any Incentive Stock Option which was granted, before the granting of
such option, to the employee to purchase stock in the Company or in a
corporation which (at the time of granting such option)
<PAGE>
is a parent or subsidiary corporation of the Company or in a predecessor
corporation of any such corporations. An option shall be deemed outstanding for
purposes of this subsection (g) until such option is exercised in full or
expires by reason of lapse of time.
9. Fair Market Value. For purposes of this Plan, "Fair Market Value"
shall be the applicable day's closing sales price of the Company's common stock
as reflected on the consolidated tape of the principal exchange on which such
stock is traded, or, if there are no sales on such date, such price on the most
recent trading day prior thereto.
10. Changes in Stock. In the event of a stock dividend, split-up or
combination of shares, recapitalization, reclassification or merger in which the
Company is the surviving corporation, or other similar capital or corporate
structure change, the number and kind of shares of stock or securities of the
Company at the time of such change remaining subject to the Plan and to any
option granted or to be granted pursuant to the Plan, the option price and any
other relevant provisions shall be appropriately adjusted by the Board of
Directors of the Company, whose determination shall be binding on all persons.
In the event of a consolidation or merger in which the Company is not the
surviving corporation, or the complete liquidation of the Company, (i) each
option outstanding hereunder that is held by an "Insider" optionee shall become
immediately exercisable and (ii) each option outstanding hereunder that is held
by an optionee who is not an "Insider" shall terminate, provided that at least
twenty days prior to the effective date of any such consolidation or merger, the
Board of Directors of the Company shall do one of the following with respect to
options held by optionees who are not "Insiders": (1) make such options
immediately exercisable, (2) arrange to have the surviving or consolidated
corporation grant replacement options to the optionees involved, or (3) pay in
cash the difference between the exercise price of the unpurchased shares under
the options and the value of consideration receivable in the transaction by a
holder of the number of shares of common stock equal to the number subject to
the options. No adjustment provided for in this Section 10 shall require the
Company to issue or sell a fractional share under any option hereunder and any
fractional share resulting from any such adjustment shall be deleted from the
option involved.
Notwithstanding anything herein to the contrary, in the event of a
"Change in Control" as defined below, including certain consolidation or merger
events otherwise giving rise to the adjustments or alternatives described in the
above paragraph, all previously issued and outstanding options under this Plan
shall immediately become exercisable as of the date of the Change in Control.
As used herein, "Change in Control" means a Change in Control of a nature that
would, in the opinion of the Company counsel, be required to be reported in
response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the
Securities Exchange Act of 1934, as amended ("Exchange Act"); provided that,
without limitation, such a Change in Control shall be deemed to have occurred
if: (i) any "Person" (as such term is used in Sections 13(d) and 14(d) of the
Exchange Act (other than the Company or any subsidiary of the Company, any
trustee or fiduciary holding securities under an employee benefit plan of the
Company or any of its subsidiaries or a corporation owned, directly or
indirectly, by the stockholders of the Company in substantially the same
proportions as their ownership of the stock of the Company)) becomes the
"beneficial owner" (as defined in Rule 13d-3 of the Exchange Act), directly or
indirectly, of securities of the Company representing 25% or more of the
combined voting power of the Company's then outstanding securities; or (ii)
during any period of two consecutive years (not including any period prior
<PAGE>
to the effective date of this Plan), individuals who at the beginning of such
period constitute the Board of Directors and any new director (other than a
director designated by a Person who has entered into an agreement with the
Company to effect a transaction described in clause (i), (iii), or (iv) of this
paragraph) whose election by the Board of Directors or nomination for election
by the Company's stockholders was approved by a vote of at least two-thirds
(2/3) of the directors then still in office who either were directors at the
beginning of the period or whose election or nomination for election was
previously so approved cease for any reason to constitute a majority thereof; or
(iii) the stockholders of the Company approve a merger or consolidation of the
Company with any other corporation, other than (A) a merger or consolidation
which would result in the voting securities of the Company outstanding
immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of the surviving
entity), in combination with the ownership of any trustee or other fiduciary
holding securities under an employee benefit plan of the Company, at least 75%
of the combined voting power of the voting securities of the Company or such
surviving entity outstanding immediately after such merger or consolidation, or
(B) a merger or consolidation effected to implement a recapitalization of the
Company (or similar transaction) in which no Person acquires 25% or more of the
combined voting power of the Company's then outstanding securities; or (iv) the
stockholders of the Company approve a plan of complete liquidation of the
Company or an agreement for the sale or disposition by the Company of all or
substantially all the Company's assets.
No Change in Control shall be deemed to have occurred if the optionee is
a member of a management group which first announces a proposal which
constitutes a Potential Change in Control, unless otherwise determined by a
majority of the members of the Board of Directors who are not members of such
management group. A "Potential Change in Control" shall be deemed to have
occurred if the conditions set forth in any one of the following subsections
shall have been satisfied: (i) the Company enters into an agreement, the
consummation of which would result in the occurrence of a Change in Control;
(ii) the Company or any Person publicly announces an intention to take or to
consider taking actions, which if consummated, would constitute a Change in
Control; (iii) any Person who is or becomes the beneficial owner, directly or
indirectly, of securities of the Company representing 10% or more of the
combined voting power of the Company's then outstanding securities, increases
such Person's beneficial ownership of such securities by 5% or more over the
percentage so owned by such Person on the date hereof; or (iv) the Board of
Directors adopts a resolution to the effect that, for purposes of this Plan, a
Potential Change in Control has occurred.
11. Effective Date; Stockholder Approval; Term. The Plan was adopted by
the Board of Directors on March 7, 1984 and shall become effective on May 1,
1984 if the Plan is approved by the holders of a majority of the common stock
outstanding and entitled to vote at the Annual Meeting of Stockholders scheduled
for April 26, 1984. No option hereunder shall be granted after March 6, 1994 or
the earlier suspension or termination of the Plan in accordance with its terms.
The Plan shall terminate on March 6, 1994 or on such earlier date as it may be
suspended or terminated under the provisions of Section 12 below or as of which
all shares of stock subject to options authorized to be granted under the Plan
shall have been acquired by exercise of such options.
12. Amendment or Discontinuance of the Plan. The Board of Directors of
the Company may, insofar as permitted by law, at any time or from time to time,
suspend or terminate the Plan or revise or amend it in any respect whatsoever
except that, without appropriate approval of the stockholders of the common
stock, no such revision or amendment shall increase the maximum
<PAGE>
number of Shares subject to the Plan, change the designation of the class of
employees eligible to receive options, decrease the price at which options may
be granted or otherwise change the provisions of this Plan to the extent that
approval of the holders of the common stock of the Company is required under
applicable securities laws.
13. Applicable Laws or Regulations and Notification of Disposition. The
Company's obligation to sell and deliver Shares under an option is subject to
such compliance as the Company deems necessary or advisable with federal and
state laws, rules and regulations applying to the authorization, issuance,
listing or sale of securities. The Company may also require in connection with
any exercise of an Incentive Stock Option that the optionee agree to notify the
Company when making any disposition of the Shares whether by sale, gift, or
otherwise, within two years of the date of grant or within one year of the date
of exercise.
14. No Employment Right; No Obligation to Exercise Option. Nothing
contained in the Plan, or in any option granted under it, shall confer upon any
optionee any right to continued employment by the Company or any of its
subsidiaries or limit in any way the right of the Company or any subsidiary to
terminate the optionee's employment at any time. The granting of any option
hereunder shall impose no obligation upon the optionee to exercise such option.
<PAGE> EXHIBIT 10(b)
STANHOME INC.
1991 Stock Option Plan, as amended
Through March 1, 1995
1. Purpose. The purpose of this 1991 Stock Option Plan (the "Plan")
is to advance the interests of Stanhome Inc. (the "Company") by encouraging
key management employees of the Company and its subsidiaries and non-
employee directors of the Company to acquire a proprietary interest in the
Company through ownership of common stock of the Company. Such ownership
will encourage the optionees to remain with the Company and will help
attract other qualified persons to become employees and directors.
2. Administration. The Plan shall be administered by the
Compensation and Stock Option Committee of the Board of Directors (the
"Committee") which shall be composed of not less than three directors of
the Company elected or to be elected as members of the Committee from time
to time by the Board of Directors of the Company. None of the Committee
members shall be, during service on the Committee, nor shall have been,
during the one year prior to service on the Committee, granted or awarded
Shares or options to acquire Shares under this Plan or any other plan
maintained by Stanhome or any of Stanhome's affiliates, other than any
grant or award of options or other equity securities of Stanhome pursuant
to Section 9 of the Stanhome Inc. 1991 Stock Option Plan or any other plan
of Stanhome that would not result in such Committee member failing to
qualify as a 'disinterested person' under Rule 16b-3 of the Securities
Exchange Act of 1934, as amended, as in force from time to time. Members
of the Committee shall be subject to any additional restrictions necessary
to satisfy the requirements for disinterested administration under Rule 16b-
3 of the Securities Exchange Act of 1934, as amended, as in force from time
to time. Subject to the provisions of the Plan and the approval of the
Board of Directors of the Company, except that the Board of Directors shall
have no discretion with respect to the selection of officers within the
meaning of Rule 16a-1(f), directors or 10% or more shareholders
("Insiders") for participation and decisions concerning the timing, pricing
and amount of a grant or award to such "Insiders", the Committee is
authorized to grant options under the plan and to interpret the Plan and
such options, to prescribe, amend and rescind rules and regulations
relating to the Plan and the options, and to make other determinations
necessary or advisable for the administration of the Plan, all of which
determinations shall be conclusive. The Committee shall act pursuant to a
majority vote or by unanimous written consent.
3. Types of Options. Options granted pursuant to the Plan may be
either incentive stock options under Section 422 of the Internal Revenue
Code of 1986, as amended, ("Incentive Stock Options") or options not
qualifying under that section of the Code ("Non-qualified Stock Options").
It is the intent of the Company that Non-qualified Stock Options granted
under the Plan not be classified as Incentive Stock Options, that the
Incentive Stock Options granted under the Plan be consistent with and
contain or be deemed to contain all provisions required under Section 422
and the other appropriate provisions of the Code and any implementing
regulations (and any successor provisions thereof), and that any
ambiguities in construction shall be interpreted in order to effectuate
such intent.
4. Eligibility. Options shall be granted under the Plan to such
selected key full-time salaried and commissioned employees (including
officers and directors if they are employees) of the Company or any of its
subsidiaries as the Committee shall determine from time to time. Options
shall also be granted under the Plan to the non-employee directors of the
Company (the "Non-employee Directors") pursuant to Section 9 hereof.
5. Stock Subject to Options. The aggregate number of shares which
may be issued or sold under options granted pursuant to the Plan (the
<PAGE>
"Shares") shall not exceed 2,000,000 shares of the Company's common stock
$0.125 par value each. Such Shares shall be either authorized but unissued
shares of said common stock or issued shares of said common stock which
shall have been reacquired by the Company. Such aggregate number of Shares
may be adjusted under Sections 9 and 10 below. If any outstanding option
under the Plan expires or is terminated for any reason, the Shares
allocated to the unexercised portion of such option may again be subjected
to an option or options under the Plan.
6. Allotment of Shares. Except as provided under Section 9 hereof,
the Committee shall determine the total number of Shares to be offered to
each optionee under the Plan.
7. Option Price. The Shares shall be offered from time to time
under the Plan at a price which shall be not less than the greater of (i)
100 percent of the Fair Market Value of the Company's common stock on the
date the option is granted, or (ii) the par value of the Company's common
stock subject to the option; provided, however, that the price shall be not
less than 110 percent of such Fair Market Value in the case of shares
offered under any Incentive Stock Option granted to an individual who, at
the time the option is granted, owns stock possessing more than 10 percent
of the total combined voting power of all classes of stock of the Company
or of its subsidiaries.
8. Terms and Conditions of Options. The Committee shall have power,
subject to the limitations contained in the Plan, to prescribe the terms
and conditions of any option granted hereunder. Each such option shall be
evidenced by a certificate in such form as the Committee shall from time to
time determine, which certificate shall prescribe the following terms and
conditions and such other terms and conditions as the Committee may deem
necessary or advisable:
(a) Duration of Options. Except as hereinafter otherwise provided,
options granted under the Plan shall be exercisable for such period of time
as the Committee shall determine. An Incentive Stock Option shall not be
exercisable after the expiration of ten years from the date it is granted;
provided, however, that any Incentive Stock Option granted to an individual
who, at the time the option is granted, owns stock possessing more than 10
percent of the total combined voting power of all classes of stock of the
Company or of its subsidiaries shall by its terms not be exercisable after
the expiration of five years from the date of grant.
(b) Exercise of Options. Except as hereinafter otherwise provided,
each option granted under the Plan may be exercised only after one year of
continued employment by the Company or one of its subsidiaries immediately
following the date the option is granted and only during the continuance of
the optionee's employment with the Company or one of its subsidiaries and
such additional period as may be provided in subsection (e) below. No
option shall be exercised for less than 10 Shares except as a result of an
adjustment under Sections 9 or 10 below.
(c) Payment. The purchase price of each Share purchased upon the
exercise of any option granted hereunder shall be paid in full at the time
of such purchase, and a stock certificate representing Shares so purchased
shall be delivered to the person entitled thereto. Until the stock
certificate for such Shares is issued in the optionee's name, he or she
shall have none of the rights of a stockholder. Payment may be made in
whole or in part in (i) cash or (ii) whole shares of the Company's common
stock acquired at least six months previously by the optionee and evidenced
by negotiable certificates, valued at their Fair Market Value on the date
preceding the date the option is exercised. If certificates representing
shares of common stock are used to pay all or part of the purchase price of
an option, separate certificates shall be delivered by the Company
<PAGE>
representing the same number of shares as each certificate so used and an
additional certificate shall be delivered representing the additional
shares to which the option holder is entitled as a result of exercise of
the option. It shall be a condition to the performance of the Company's
obligation to issue or transfer Shares upon exercise of an option or
options that the optionee pay, or make provision satisfactory to the
Company for the payment of, any taxes (other than stock transfer taxes)
which the Company is obligated to collect with respect to the issue or
transfer upon such exercise. With respect to the exercise of Non-qualified
Stock Options granted pursuant to this Section 8, optionees may elect to
have the Company withhold a designated number of Shares otherwise issuable
upon the exercise of such stock options, or, in the case of "Insider"
optionees, to commit irrevocably at a time acceptable under the provisions
of Section 16 of the Securities Exchange Act of 1934, as amended, to
surrender to the Company shares of common stock to cover Federal and State
tax obligations incident to such exercise, or such other maximum amounts as
may be determined by the Committee.
(d) Nontransferability of Options. No option shall be transferable
by the optionee otherwise than (1) by will or the laws of descent and
distribution or (2) pursuant to a qualified domestic relations order as
defined in Section 414(p) of the Internal Revenue Code of 1986, as amended,
and each option shall be exercisable, during his or her lifetime, only by
the optionee or his or her guardian or legal representative(s), except to
the extent that options granted hereunder are assigned pursuant to a
qualified domestic relations order.
(e) Termination of Options. If the optionee's full-time employment
by the Company or any of its subsidiaries shall terminate for any reason
other than death, his or her options shall terminate immediately upon such
termination of employment, if not sooner terminated pursuant to their
terms, except that, subject to subsection (a) above, any such options shall
be exercisable during the three year period following any such termination
of employment by the optionee or his or her guardian or legal
representative(s) only as to the number of Shares which the optionee was
entitled to purchase on the day preceding such termination, except further
that in the case of Incentive Stock Options the period for such exercise
following such termination shall be limited to three months, or, in the
case of a termination of employment by reason of disability, to twelve
months. If the optionee's full-time employment by the Company or any of
its subsidiaries shall terminate by reason of death, his or her options
shall terminate immediately upon such termination of employment, if not
sooner terminated pursuant to their terms, except that, subject to
subsection (a) above, any such options shall be exercisable, as of the time
of such optionee's death, to the extent such options were granted to such
optionee on or prior to the date which is one year prior to the date of
such optionee's death and any such options shall be exercisable during the
two year period following any such termination of employment by the
optionee's legal representative(s). Cessation of any corporation's
relationship with the Company as a subsidiary shall constitute a "termin
ation of employment" hereunder as to individuals employed by that
corporation, and options held by such individuals shall be terminated in
accordance with this subsection. For purposes of this subsection, the
meaning of the word "disability" shall be determined under the provisions
of Section 422(c)(7) of the Internal Revenue Code of 1986, as amended, or
any successor provisions thereof.
(f) Fair Market Value. For purposes of this Plan, "Fair Market
Value" shall be the applicable day's closing sales price of the Company's
common stock as reflected on the consolidated tape of the principal
exchange on which such stock is traded, or, if there are no sales on such
date, such price on the most recent trading day prior thereto.
<PAGE>
9. Non-employee Directors' Options. The Committee shall not have
any discretion with respect to the options granted to the Non-employee
Directors under the provisions of this Section 9. Except as hereinafter
otherwise provided, options granted pursuant to this Section 9 shall be
subject to the terms and conditions set forth in Section 8.
(a) Grant of Options. On the day following each of the 1991 through
and including the 1995 annual stockholders' meetings, each Non-employee
Director on that date shall automatically be granted an option to purchase
1,500 Shares. The maximum number of Shares for which options may be
granted to any Non-employee Director under the Plan shall be 7,500. All
such options shall be Non-qualified Stock Options. The price at which each
Share covered by such options shall be purchased shall be the greater of
(i) 100 percent of the Fair Market Value of the Company's common stock on
the date the option is granted, or (ii) the par value of the Company's
common stock subject to the option.
(b) Exercise of Options. Twenty-five percent of the total number of
the Shares subject to an option granted to the Non-employee Director shall
become exercisable on the later of (i) the next February 1 following the
date on which the option was granted or (ii) six months after the date on
which the option was granted and twenty-five percent on February 1 of each
of the next three consecutive calendar years. The right to purchase Shares
with respect to an option which has become exercisable shall be cumulative
during the term of the option. The option may be exercised by the Non-
employee Director or his or her guardian or legal representative(s) during
the period that the Non-employee Director remains a member of the Board of
Directors and for a period of three years thereafter, or a period of two
years thereafter in the case of the Non-employee Director's death while
serving as a member of the Board of Directors, provided that only those
options exercisable on the day preceding the date the Non-employee Director
ceases to be a member of the Board of Directors may be exercised during
said applicable period and, provided further, that in no event shall the
option be exercisable more than ten years after the date of grant. All
options that are not exercisable on the day preceding the date the Non-
employee Director ceases to be a member of the Board of Directors shall be
immediately terminated.
(c) Payment. An option granted to the Non-employee Director shall
be exercisable only upon payment to the Company in accordance with the
provisions of Section 8(c) of the full purchase price of the Shares with
respect to which the option is being exercised.
(d) Adjustment of Options. In the event of a stock dividend, split-
up or combination of shares, recapitalization, reclassification or merger
in which the Company is the surviving corporation, or other similar capital
or corporate structure change, the number of Shares at the time of such
change remaining subject to any option granted or to be granted pursuant to
the provisions of this Section 9 shall be increased or decreased, as the
case may be, in direct proportion to the increase or decrease in the number
of shares of common stock of the Company by reason of such change in
corporate structure, provided that the number of Shares shall always be a
whole number with any fractional Shares being deleted therefrom, and the
purchase price per Share of any outstanding options shall, in the case of
an increase in the number of Shares, be proportionately decreased, and in
the case of a decrease in the number of Shares, be proportionately
increased. In the event of a consolidation or merger in which the Company
is not the surviving corporation or of a "Change in Control" as defined in
Section 10, including, but not limited to, "Changes in Control" in which
the Company is the surviving corporation, and notwithstanding the preceding
sentence, each option outstanding under the provisions of this Section 9
shall thereupon terminate, provided that within ten days of the effective
<PAGE>
date of any such consolidation, merger, or "Change in Control", the Company
shall pay in cash the difference between the exercise price of the
unpurchased Shares under the options and the value of consideration
receivable in the transaction by a holder of the number of shares of common
stock equal to the number subject to the options.
10. Changes in Stock. In the event of a stock dividend, split-up or
combination of shares, recapitalization, reclassification or merger in
which the Company is the surviving corporation, or other similar capital or
corporate structure change, the number and kind of Shares at the time of
such change remaining subject to the Plan and to any option granted or to
be granted pursuant to the Plan, except for options granted or to be
granted pursuant to Section 9, the option price and any other relevant
provisions shall be appropriately adjusted by the Board of Directors of the
Company, whose determination shall be binding on all persons. In the event
of a consolidation or merger in which the Company is not the surviving
corporation, (i) each option outstanding hereunder that is held by an
"Insider" optionee and that is not outstanding under the provisions of
Section 9 shall become immediately exercisable and (ii) each option
outstanding hereunder that is held by an optionee who is not an "Insider"
shall terminate, provided that at least twenty days prior to the effective
date of any such consolidation or merger, the Board of Directors of the
Company shall do one of the following with respect to options held by
optionees who are not "Insiders": (1) make such options immediately
exercisable, (2) arrange to have the surviving or consolidated corporation
grant replacement options to the optionees involved, or (3) pay in cash the
difference between the exercise price of the unpurchased Shares under the
options and the value of consideration receivable in the transaction by a
holder of the number of shares of common stock equal to the number subject
to the options. No adjustment provided for in this Section 10 shall
require the Company to issue or sell a fractional share under any option
hereunder and any fractional share resulting from any such adjustment shall
be deleted from the option involved.
Notwithstanding anything herein to the contrary, in the event of a
"Change in Control" as defined below, including certain consolidation or
merger events otherwise giving rise to the adjustments or alternatives
described in the above paragraph, each option outstanding under this Plan
shall thereupon terminate, provided that within ten days of the effective
date of such Change in Control, the Company shall pay in cash the
difference between the exercise price of the unpurchased Shares under the
options and the value of consideration receivable in the transaction by a
holder of the number of shares of common stock equal to the number subject
to the options. As used herein, "Change in Control" means a Change in
Control of a nature that would, in the opinion of the Company counsel, be
required to be reported in response to Item 6(e) of Schedule 14A of
Regulation 14A promulgated under the Securities Exchange Act of 1934, as
amended ("Exchange Act"); provided that, without limitation, such a Change
in Control shall be deemed to have occurred if: (i) any "Person" (as such
term is used in Sections 13(d) and 14(d) of the Exchange Act (other than
the Company or any subsidiary of the Company, any trustee or fiduciary
holding securities under an employee benefit plan of the Company or any of
its subsidiaries or a corporation owned, directly or indirectly, by the
stockholders of the Company in substantially the same proportions as their
ownership of the stock of the Company)) becomes the "beneficial owner" (as
defined in Rule 13d-3 of the Exchange Act), directly or indirectly, of
securities of the Company representing 25% or more of the combined voting
power of the Company's then outstanding securities; or (ii) during any
period of two consecutive years (not including any period prior to the
effective date of this Plan), individuals who at the beginning of such
period constitute the Board of Directors and any new director (other than a
director designated by a Person who has entered into an agreement with the
<PAGE>
Company to effect a transaction described in clause (i), (iii), or (iv) of
this paragraph) whose election by the Board of Directors or nomination for
election by the Company's stockholders was approved by a vote of at least
two-thirds (2/3) of the directors then still in office who either were
directors at the beginning of the period or whose election or nomination
for election was previously so approved cease for any reason to constitute
a majority thereof; or (iii) the stockholders of the Company approve a
merger or consolidation of the Company with any other corporation, other
than (A) a merger or consolidation which would result in the voting
securities of the Company outstanding immediately prior thereto continuing
to represent (either by remaining outstanding or by being converted into
voting securities of the surviving entity), in combination with the
ownership of any trustee or other fiduciary holding securities under an
employee benefit plan of the Company, at least 75% of the combined voting
power of the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation, or (B) a merger
or consolidation effected to implement a recapitalization of the Company
(or similar transaction) in which no Person acquires 25% or more of the
combined voting power of the Company's then outstanding securities; or (iv)
the stockholders of the Company approve a plan of complete liquidation of
the Company or an agreement for the sale or disposition by the Company of
all or substantially all the Company's assets.
With respect to all optionees other than the Non-employee Directors,
no Change in Control shall be deemed to have occurred if the optionee is a
member of a management group which first announces a proposal which
constitutes a Potential Change in Control, unless otherwise determined by a
majority of the members of the Board of Directors who are not members of
such management group. A "Potential Change in Control" shall be deemed to
have occurred if the conditions set forth in any one of the following
subsections shall have been satisfied: (i) the Company enters into an
agreement, the consummation of which would result in the occurrence of a
Change in Control; (ii) the Company or any Person publicly announces an
intention to take or to consider taking actions, which if consummated,
would constitute a Change in Control; (iii) any Person who is or becomes
the beneficial owner, directly or indirectly, of securities of the Company
representing 10% or more of the combined voting power of the Company's then
outstanding securities, increases such Person's beneficial ownership of
such securities by 5% or more over the percentage so owned by such Person
on the date hereof; or (iv) the Board of Directors adopts a resolution to
the effect that, for purposes of this Plan, a Potential Change in Control
has occurred.
11. Effective Date; Stockholder Approval; Term. The Plan was
adopted by the Board of Directors on January 23, 1991 and shall become
effective on April 25, 1991 if the Plan is approved by the holders of a
majority of the common stock outstanding and entitled to vote at the Annual
Meeting of Stockholders scheduled for April 25, 1991. No option hereunder
shall be granted after January 23, 2001 or the earlier suspension or
termination of the Plan in accordance with its terms. The Plan shall
terminate on January 23, 2001 or on such earlier date as it may be
suspended or terminated under the provisions of Section 12 below or as of
which all Shares subject to options authorized to be granted under the Plan
shall have been acquired by exercise of such options.
12. Amendment or Discontinuance of the Plan. The Board of Directors
of the Company may, insofar as permitted by law, at any time or from time
to time, suspend or terminate the Plan or revise or amend it in any respect
whatsoever except that, without appropriate approval of the stockholders of
the common stock, no such revision or amendment shall increase the maximum
number of Shares subject to the Plan, change the designation of the class
of employees eligible to receive options, decrease the price at which
<PAGE>
options may be granted or otherwise change the provisions of this Plan to
the extent approval of the holders of the common stock of the Company is
required under applicable securities laws. Notwithstanding the preceding
sentence, amendments to change the provisions of Section 9(a) shall not be
made more frequently than once every six months other than to comply with
the Internal Revenue Code or the Employee Retirement Income Security Act.
13. Applicable Laws or Regulations and Notification of Disposition.
The Company's obligation to sell and deliver Shares under an option is
subject to such compliance as the Company deems necessary or advisable with
federal and state laws, rules and regulations applying to the
authorization, issuance, listing or sale of securities. The Company may
also require in connection with any exercise of an Incentive Stock Option
that the optionee agree to notify the Company when making any disposition
of the Shares, whether by sale, gift, or otherwise, within two years of the
date of grant or within one year of the date of exercise.
14. No Employment Right; No Obligation to Exercise Option. Nothing
contained in the Plan, or in any option granted under it, shall confer upon
any optionee any right to continued employment by the Company or any of its
subsidiaries or to continued membership on the Board of Directors of the
Company or limit in any way the right of the Company or any subsidiary to
terminate the optionee's employment at any time. The granting of any
option hereunder shall impose no obligation upon the optionee to exercise
such option.
<PAGE> EXHIBIT 10(h)
AGREEMENT
It is hereby agreed by and between Alejandro Diaz Vargas, a resident of
Longmeadow, Massachusetts, hereinafter referred to as "Associate", and Stanhome
Inc., a Massachusetts corporation having a principal place of business at
Westfield, Massachusetts, hereinafter referred to as the "Company", for good and
sufficient consideration more fully described below that:
1. Termination of Employment Status. Associate's employment with the
Company shall terminate on March 5, 1995 (the "Termination Date") under
Paragraph 4(e) of the Employment Agreement effective as of the 31st day of
August, 1993 between the Company and the Associate, a copy of which is attached
as Exhibit A hereto (the "Employment Agreement"). As provided under such
Paragraph 4(e), Associate shall receive (at the times such payments and benefits
would have been made or given had there not been a termination) all
compensation amounts that would otherwise have been paid or given to him for the
remaining term of the Employment Agreement under Paragraphs 3(a), 3(b) and 3(c),
except that no payments will be made for periods following Associate's death.
All such payments and benefits shall be paid or given to Associate as an
independent contractor. The portion of the Bonus provided under Paragraph
4(e)(ii) of the Employment Agreement is presently contingent on the future
financial performance of the Worldwide Direct Selling Group so that Associate
might receive no payment or the targeted amount, or more, under this clause
depending on such results. In lieu of such contingent payments, the Company
agrees that for the years 1995, 1996, 1997 and 1998, the bonus under such
Paragraph 4(e)(ii) shall be $120,000 for each such year, provided that the bonus
for 1998 shall be prorated at the amount of $80,000, and that in consideration
for the Company stipulating the bonus amounts in advance in lieu of such amounts
being determined based on future, actual financial results, Associate shall
provide consulting services to the Company as described in Paragraph 3 below.
Schedule A attached hereto sets forth all the payments and benefits due
Associate hereunder and the payment dates or provisions made therefor.
Associate shall remain available to perform such duties as may be requested by
the Company's President from the date hereof to the Termination Date. Both the
Company and Associate agree that the Employment Agreement including, but not by
way of limitation, Associate's obligations under Paragraph 5 Confidential
Information, Covenant Not to Compete and Non-Solicitation and Paragraph 6
Discoveries, shall remain in effect as contemplated therein, except that
Paragraphs 1 and 2 thereof shall have no force and effect after March 5, 1995.
2. Consideration. Under Paragraph 4(e) of the Employment Agreement,
in return for the payments to be made thereunder, the Associate agreed to
execute and deliver a Release in the form as deemed appropriate or necessary by
the Company and this Agreement, when duly executed and delivered by the
Associate, will fulfill that pre-condition to the continuation of the payments
under Paragraph 4(e) of the Employment Agreement as provided in Paragraph 1
above. In addition, the Company has agreed with Associate to a modification of
clause (ii) of Paragraph 4(e) of the Employment Agreement as set forth in
Paragraph 1 above.
3. Consulting Services. In return for the consideration set forth
above, Associate agrees to remain available for providing and to provide,
beginning March 6, 1995 and continuing for the remaining term of the Employment
Agreement, consulting services to the Company or its designees, as and when
reasonably requested, provided that such services shall not exceed forty (40)
business days each calendar year or portion thereof. The Company shall
reimburse Diaz for all ordinary and necessary expenses paid or incurred by him
in the course of the performance of his consulting services under this Paragraph
3 provided that such expenses are reviewed and agreed to by the Company in
advance. Associate's obligation to provide consulting services shall not
preclude him from taking vacations or otherwise travelling for periods of up to
one month from time to time.
<PAGE>
4. Release.
(a) In exchange for the consideration referred to in Paragraph 2 above and
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, Associate agrees that he, his representatives, heirs,
executors, administrators, agents, estate, successors and assigns release and
forever discharge the Company and/or its affiliates and/or their successors,
predecessors, assigns, directors, shareholders, officers, employees and/or
agents, both individually and in their official capacities with the Company
and/or its affiliates from any and all actions, causes of action, suits, claims,
demands, obligations, costs, judgments, complaints, contracts, agreements,
promises, debts, damages, and liabilities of whatever kind or nature, at law, in
equity or otherwise, whether existing or contingent, known or unknown, which
arise out of Associate's employment with or his termination of employment from
the Company; provided, however, that nothing contained in this Paragraph 4 shall
limit Associate's right to enforce this Agreement or Associate's right to
indemnification as a director and officer of the Company and/or its affiliates.
This release is intended by Associate to be all encompassing and to act as a
full and total release of any claims (other than to enforce this Agreement or to
seek indemnification as aforesaid) that Associate may have or has had against
the Company and/or its affiliates and/or their successors, predecessors,
assigns, directors, shareholders, officers, employees and/or agents, both
individually and in their official capacities with the Company and/or its
affiliates, including, but not limited to, claims arising under common law,
contract, implied contract, public policy, tort, personal injury, or any
federal, state or local statute, law, constitution, ordinance, regulation or
order, including but not limited to the Age Discrimination in Employment Act, as
amended, 29 U.S.C. Section 621, et seq., and/or any applicable employment
related federal, state or local statute, law, ordinance, regulation or order.
(b) Associate agrees and acknowledges the payments and benefits provided
for herein, together with payments and benefits previously provided to Associate
by the Company, are the only payments and benefits he will receive in connection
with his employment or its termination, except for his vested benefit amounts
under the Company's Pension Plan, Supplemental Retirement Agreement, Investment
Savings Plan, Supplemental Investment Savings Plan, PAYSOP, Flexible Spending
Account, and Stock Option grants.
5. Waiver of Rights and Claims Under the Age Discrimination in Employment
Act, as Amended. Associate has been informed that because he is over 40 years
of age or older, he has or might have specific rights and/or claims under the
Age Discrimination in Employment Act, as amended. In consideration for the
compensation and consideration described in Paragraphs 1 and 2 above, Associate
specifically waives such rights and/or claims to the extent that such rights
and/or claims arose prior to the date this Agreement was executed.
6. Company Files, Documents and Other Property. Associate warrants that
he will return to the Company all keys or other items, including all Company
files, reports, books, data and documents, that are in his possession or control
and that are the property of the Company by no later than March 5, 1995.
7. Representations and Governing Law.
(a) Associate is hereby advised by the Company to consult with an attorney
prior to executing this Agreement.
<PAGE>
(b) Associate was further advised, when he was presented with this
Agreement on January 26, 1995, that he had at least 21 days within which to
consider the Agreement, until the close of business on February 17, 1995.
(c) Except for the Employment Agreement which continues in effect as and
to the extent provided under Paragraph 1 above and the Supplemental Retirement
Agreement made July 27, 1988 between the Company and Associate, as amended
February 4, 1994, this Agreement represents a complete understanding between the
parties, supersedes any and all other agreements and understandings, whether
oral or written, and may not be modified, altered or changed except upon written
consent of the parties. If any of the provisions of this Agreement are
determined to be invalid or inoperative, such determination shall not affect the
efficacy of the remainder of this Agreement and any such invalid or inoperative
provisions shall be deemed severable.
(d) This Agreement shall be governed by and construed in accordance with
the laws of the Commonwealth of Massachusetts, without giving effect to the
principles of conflicts of law thereof.
(e) Associate represents that he has read the foregoing Agreement, fully
understands the terms and conditions of such Agreement, and is knowingly and
voluntarily executing the same without any duress or undue influence. In
entering into this Agreement, Associate does not rely on any representation,
promise or inducement made by the Company, with the exception of the
consideration referred to in this document.
8. Resignation. Associate confirms that he has previously resigned from
all positions held by him with the Company or any direct or indirect affiliated
company or organization, including but not limited to positions as an officer,
director and committee member.
9. Office. The Company shall provide Associate with an office at the
Company's headquarters, Westfield, Massachusetts, for a period of six months.
10. Independent Contractor Status. As a self-employed, independent
consultant, it is understood that no social security contributions or income tax
withholdings will be made by the Company with respect to the compensation and
consideration set forth above. Associate will participate in only those benefit
programs set forth on Schedule A.
11. Effective Date. Associate may revoke this Agreement for a period of
seven (7) days following its execution by him, and the Agreement shall not
become effective or enforceable until this revocation period has expired.
Executed this 17th day of February, 1995.
/s/Alejandro Diaz Vargas
Alejandro Diaz Vargas
STANHOME INC.
By:/s/G. William Seawright
G. William Seawright
President and Chief Executive
Officer
<PAGE>
SCHEDULE A TO AGREEMENT BETWEEN
ALEJANDRO DIAZ VARGAS AND STANHOME INC.,
EXECUTED FEBRUARY 17, 1995
Associate will continue to receive the following compensation, bonus and
benefits for the remaining term of the Employment Agreement, unless sooner
terminated in accordance with the provisions of this Agreement or his Employment
Agreement:
Compensation
$33,333.33 per month commencing March 15, 1995 (pro-rated from March 6,
the first five days being included under Associate's employee salary payment)
and by the fifteenth day of each succeeding month for the remaining term of the
Employment Agreement.
Bonus
For calendar years 1995, 1996, 1997 and 1998, Associate will receive on
or before the next succeeding March 15 the amount of $120,000 under each of
clauses (i) and (ii) of Paragraph 4(e) of the Employment Agreement in lieu of
any other formula set forth thereunder, for a total bonus payment of $240,000
for each such calendar year, provided that the bonus for calendar year 1998
shall be pro-rated at $80,000 under each of such clauses, for a total bonus
payment of $160,000 for calendar year 1998.
Benefits
1. Group medical coverage will continue as if Associate continued to be an
employee of Stanhome Inc., subject to changes that affect any other, then
currently active employee of Stanhome Inc., and will include his regular,
annual physical examination.
2. Accidental death and dismemberment coverage will continue during the term of
this Agreement in the amount of $800,000.
3. Life insurance coverage will continue during the term of this Agreement in
the amount of $800,000.
4. The auto allowance, in the amount of $2,500/month, will continue during the
term of this Agreement.
5. Reimbursement of financial estate planning, up to $5,000/year, will continue
during the term of this Agreement.
6. Each February, during the term of this Agreement, beginning in 1996,
Associate will be paid a $5,000 supplemental bonus.
7. The Company will pay the premium of the long-term disability policy to be
issued to Associate by the Paul Revere Insurance Company under his present
conversion rights during the remaining term of this Agreement. Any
benefits payable under that policy during such term shall reduce the
payments to be made under Paragraph 3(a) of the Employment Agreement. In
addition, if Associate becomes disabled within the meaning of such Paul
Revere policy during the remaining term of this Agreement, Stanhome Inc.
will pay Associate a monthly benefit of $15,000 commencing with the month
following the termination of this Agreement and ending with the earlier to
occur of the month prior to the Associate reaching age 55 or the month that
he is no longer deemed to be disabled under the Paul Revere Policy or the
date of his death, provided that the $15,000 monthly benefit payable by
Stanhome shall be reduced by amounts paid to Associate under the Paul
Revere policy during such period.
<PAGE>
8. In the event that Associate becomes a full time employee eligible to
participate in any group insurance plans of the type set forth under
Paragraphs 1, 2, 3 and 7 above, the benefits payable by Stanhome under its
plans shall be reduced by any benefits payable under the plans of his
employer.
<PAGE>
Exhibit A
EMPLOYMENT AGREEMENT
AGREEMENT effective as of the 31st day of August, 1993 between STANHOME
INC., a Massachusetts corporation ("Corporation"), and Alejandro Diaz Vargas
("Diaz").
WHEREAS, Diaz has been employed by the Corporation for twenty years, most
recently as its President and Chief Executive Officer;
WHEREAS, the Corporation has asked Diaz to resign his post as President
and Chief Executive Officer in order to devote his full time and efforts as
President and Chief Executive Officer of the Corporation's Worldwide Direct
Selling Group;
WHEREAS, the Corporation desires by this agreement to provide for Diaz's
continued employment by it, and;
WHEREAS, Diaz has agreed to the above upon condition of entering into
this employment agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
undertakings set forth below, the parties agree as follows:
1. Employment. The Corporation hereby employs Diaz, and Diaz agrees to be
employed by the Corporation, upon the terms and subject to the conditions
hereinafter set forth. Diaz resigns as President and Chief Executive
Officer effective August 31, 1993.
2. Duties. Diaz shall be employed by the Corporation to serve as an Executive
Vice President with operating responsibility for the Worldwide Direct
Selling Group serving as its President and Chief Executive Officer, or in
such other capacity or capacities connected with the Corporation's business
as the Board of Directors of the Corporation shall determine, and in
connection therewith shall report to the President and Chief Executive
Officer of the Corporation. During his employment, Diaz agrees to
faithfully and diligently perform the duties of his office on a full time
basis in the best interests of the Corporation.
3. Compensation. While employed by the Corporation during the term of this
agreement, Diaz will receive the following compensation for services:
(a) Base Salary. A base annual salary, payable in equal monthly
installments, of $400,000.00 (Four Hundred Thousand Dollars) subject
to increase from time to time in the discretion of the Board of
Directors.
(b) Bonus. Diaz shall continue to participate in the Corporation's
Management Incentive Plan ("MIP") with the same percentage target
bonus of 60% of his base annual salary. His objectives for the period
from September 1, 1993 to December 31, 1993 are attached hereto as
Exhibit A, and his objectives thereafter shall be determined under the
usual procedures of the MIP. All future amendments and modifications
to the MIP shall be applicable to Diaz as well, provided such
amendments and
<PAGE>
modifications are applicable to all persons eligible to participate.
(c) Supplemental Benefits. Diaz shall be entitled to participate in
all standard insurance and other benefit programs maintained by the
Corporation for its employees. In addition, during the period of
employment hereunder, the Corporation shall provide to Diaz a company-
owned or leased automobile of a quality equal to that provided to Diaz
by the Corporation immediately preceding September 1, 1993 and pay the
expenses related to the use and upkeep thereof.
(d) Expenses. The Corporation shall reimburse Diaz for all ordinary
and necessary expenses paid or incurred by him in the course of the
performance of his duties pursuant to this agreement, subject to the
Corporation's requirements with respect to the manner of reporting
such expenses.
(e) Vacation and Sick Days. Diaz shall be entitled to paid sick and
personal leave and paid vacation days in accordance with the general
policies, procedures and guidelines existing at the Corporation.
4. Term of Employment and Termination. The term of employment shall commence
on the date hereof and end on August 31, 1998 unless sooner terminated as
hereinafter provided:
(a) Termination by the Corporation for Cause. The Corporation may
terminate this agreement and Diaz's employment hereunder by giving ten
(10) days' prior written notice to Diaz upon its determination of:
(i) Dishonesty or willful misconduct involving moral turpitude
by Diaz in the performance of his duties under this agreement
(the term "misconduct" includes, without limitation, any
material and willful breach by Diaz of the terms of Paragraph 5
hereof), or
(ii) Material disregard of, and material failure to comply
with, the written instructions, policies or guidelines
established by the Corporation's Board of Directors, or
material failure to perform his duties hereunder.
In the event of termination of this agreement under this Paragraph
4(a), Diaz shall be entitled to all amounts due him under Paragraph 3
accrued to the date of termination, excluding the bonus for the
fractional portion of the year of termination under Paragraph 3(b)
above.
(b) Termination Upon Death of Diaz. Upon the death of Diaz during
the term of this agreement, his estate shall be entitled to receive
all amounts due under Paragraph 3 accrued to the date of death,
including, without limitation, the bonus pro-rated for the fractional
portion of the year of death.
<PAGE>
(c) Termination Upon Total Disability of Diaz. If, at any time
during the term of this agreement, Diaz becomes unable to perform his
duties hereunder due to illness or physical or mental incapacity for a
continuous period of one hundred and eighty (180) days, the
Corporation, may, at or after the expiration of such one hundred and
eighty (180) day period and provided that Diaz's incapacity is then
continuing, elect to terminate Diaz's employment under this agreement.
During such one hundred and eighty (180) day period and until the
Corporation so terminates his employment, Diaz shall be entitled to
all amounts payable or accrued under Paragraph 3 above until the date
of termination, including, without limitation, the bonus pro-rated for
the fractional portion of the year of termination.
(d) Other Benefits Unaffected. Life or disability insurance benefits
which may otherwise be payable are not affected by the provisions of
Paragraphs 4(b) and 4(c) above.
(e) Termination by Corporation Other Than For Cause or Diaz's Total
Disability. If the Corporation shall terminate Diaz's employment
other than for cause under Paragraph 4(a) above or for Total
Disability under Paragraph 4(c) above, and his employment has not
terminated by reason of his death under Paragraph 4(b) above, Diaz
shall receive (at the times such payments would have been made had
there not been a termination) all amounts that would otherwise have
been paid to him for the remaining term of this agreement under
Paragraphs 3(a), 3(b) and 3(c) had Diaz' employment not been
terminated except that no payments will be made for periods following
his death. For purposes of the Bonus payment made for any year under
this provision: (i) the Individual Portion will be 50% of the target
bonus (on the expectation that all individual objectives would have
been fully performed), and (ii) the Corporation's Matching Portion
will match the Individual Portion in accordance with the matching
formula in effect for each such year. In return for payments to be
made under this Subparagraph (e), Diaz agrees to execute and deliver
to the Corporation a Release in the form as deemed appropriate or
necessary by the Corporation.
(f) Termination by Diaz. Diaz may terminate this agreement and his
employment hereunder at any time by giving six (6) months' prior
written notice to the Corporation or such lesser notice period as the
Corporation may accept. In the event of a termination of this
agreement under this Paragraph 4(f), Diaz shall be entitled to all
amounts due to him under Paragraph 3 to the date of termination,
including, without limitation, the bonus pro-rated for the fractional
portion of the year of termination.
(g) Change in Control. The amount payable to Diaz under Paragraph
4(e) of this Agreement shall be reduced on a proportionate basis (over
the remaining term of this Agreement) by any amount paid to Diaz under
the Change in Control Agreement between Diaz and the Corporation,
dated January 1, 1992, without giving effect to the gross-up payment
under Paragraph 1(c) thereof for this purpose.
<PAGE>
(h) Survival of Rights and Obligations. Any obligation or right of
either party provided or referred to hereunder, which by its terms may
or is to be performed, exercised or observed after either the
expiration or termination of this Agreement, shall survive such
expiration or termination. Except to such extent, neither party shall
have any right, claim, or action against, or obligation or
responsibility to, the other party arising out of, or resulting from
termination of employment.
5. Confidential Information, Covenant Not to Compete and Non-Solicitation.
(a) Diaz agrees that he will not use or disclose to anyone (other
than for the benefit of the Corporation) either during the term of his
employment or at any time thereafter, any Confidential Information
obtained by him or made known to him while employed by the
Corporation, and will make all reasonable, necessary and appropriate
efforts to safeguard all such Confidential Information from disclosure
to anyone other than as permitted hereby. As used herein
"Confidential Information" includes, but is not limited to, trade
secrets, business and sales policies, methods, plans and customer
lists, including any lists written or other of such persons or
entities, whether of the Corporation or any other organization
associated or affiliated with or owned by or owning the Corporation,
but shall not include information which becomes generally available to
the public other than as a result of disclosure by Diaz.
(b) In consideration of Diaz's continued employment in accordance
with the terms of this Agreement, Diaz agrees that he will not, for
two years after he ceases to be employed by the Corporation or for
such longer period of time as payments are made pursuant to this
Agreement, either alone or in conjunction with any individual, firm,
corporation, association or other entity (except for the benefit of
the Corporation), either as principal, agent, officer, employee,
director, investor, consultant, shareholder, associate or in any other
capacity whatsoever:
(i) carry on, participate in, or be engaged in, concerned
with, or interested in, directly or indirectly, any undertaking
which is in whole or in part competitive with any of the direct
selling businesses carried on by the Corporation within the
respective territories in which such businesses are then
carried on (except for any equity share investment in a public
company whose shares are listed on a recognized stock exchange
or reported in NASDAQ where such share investment does not in
the aggregate exceed 5% of the issued equity shares of such
company);
(ii) attempt to solicit any suppliers, customers, employees or
independent dealers away from the Corporation;
(iii) carry on, participate in, or be engaged in, concerned
with, or interested in, directly or indirectly, any undertaking
which bears any name similar to that of the Corporation; or
<PAGE>
(iv) take any act as a result of which the relations between
the Corporation and its suppliers, customers, employees or
others may be impaired or which may otherwise be detrimental to
the business of the Corporation.
Competition shall be deemed to include (i) any dealings with the
Corporation's direct selling sales employees or independent dealers,
and (ii) the use in any way of the Corporation's customer or mailing
lists. The reference to Corporation in this Paragraph 5 shall include
all subsidiaries and affiliated entities of the Corporation. Diaz
agrees that the remedy at law for breach by him of the foregoing
covenant will be inadequate and that the Corporation shall be entitled
to injunctive relief.
6. Discoveries. Diaz will promptly disclose in writing to the Corporation when
requested, each improvement, discovery, idea and invention relating to the
business of the Corporation made or conceived by him from and after the date
hereof either alone or in conjunction with others and while employed by the
Corporation (whether or not patentable, whether or not made or conceived (i)
at the request of or upon the suggestion of the Corporation, (ii) during his
usual hours of work, or (iii) in or about the premises of the Corporation
and whether or not prior or subsequent to the execution hereof). He will
not disclose any such improvement, discovery, idea or invention to any
person, except the Corporation. Each such improvement, discovery, idea and
invention shall be the sole and exclusive property of, and is hereby
assigned to, the Corporation, and at the request of the Corporation, Diaz
will assist and cooperate with the Corporation and any person or persons
from time to time designated by the Corporation to obtain for the
Corporation the grant of any letters patent in the United States and/or such
other country or countries as may be designated by the Corporation, covering
any such improvement, discovery, idea or invention and will, in connection
therewith, execute such applications, statements, assignments or other
documents, furnish such information and data and take all such other actions
(including, without limitation, the giving of testimony) as the Corporation
may from time to time reasonably request.
7. Applicable Law. This agreement shall be construed in accordance with the
laws of the Commonwealth of Massachusetts.
8. Notices. Any notice or other writing required or permitted to be given
hereunder or for the purposes hereof (hereinafter in this Paragraph 8 called
a "notice") to any party shall be sufficiently given if delivered
personally, if sent by prepaid registered mail or if transmitted by telex or
facsimile communication tested prior to transmission to such party:
(a) in the case of notice to Diaz to him at:
15 Williamsburg Lane
Longmeadow, MA 01106
<PAGE>
(b) in the case of a notice to the Corporation to it at:
Stanhome Inc.
333 Western Avenue
Westfield, MA 01085
Attention: General Counsel
or at such other address as the party to whom such writing is to be given
shall have last notified the party giving the same in the manner provided in
this paragraph. Any notice delivered to the party to whom it is addressed
as hereinbefore provided shall be deemed to have been given and received on
the day it is so delivered at such address, provided that if such day is not
a Business Day (Monday through Friday excluding federal and state holidays)
then the notice shall be deemed to have been given and received on the
Business Day next following such day. Any notice mailed as aforesaid shall
be deemed to have been given and received on the seventh Business Day next
following the date of its mailing. Any notice transmitted by telex or
facsimile communication shall be deemed given and received on the first
Business Day after its transmission.
9. Entirety of Agreement and Amendment. This agreement supersedes any
severance policies as may be applicable to executives of the
Company and any previous employment arrangements between the
parties, (including the Severance Agreement, effective June 1, 1992,
between the Corporation and Diaz, which is terminated effective as
of the date hereof, but not including the Change in Control
Agreement effective January 1, 1992, and the Supplemental Retirement
Agreement dated July 27, 1988, between the Corporation and Diaz which
continue in full force and effect), whether written or oral, and constitutes
the entire agreement between the parties and no amendment, waiver,
alteration or modification of this agreement shall be valid unless in each
instance such amendment, waiver, alteration or modification is agreed to in
writing by all of the parties.
10.Assignment. Neither party may assign this agreement or any of the rights or
duties hereunder, except that the Corporation may assign its rights,
obligations and responsibilities under this agreement to (i) a successor or
assignee of all or substantially all of its business or assets, or (ii) any
corporation with which it merges or with which it may be consolidated.
Subject to the foregoing, this agreement shall inure to the benefit of and
be binding upon the Corporation and Diaz and their respective successors,
assigns, heirs and legal representatives.
11.Invalidity of any Provision. If any provision of this agreement or the
application thereof to any party or circumstance is held invalid or
unenforceable, the remaining provisions of this Agreement and the
application of such provisions to the other party or circumstances will not
be affected thereby, the provisions of this Agreement being severable in any
such instance.
<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed on this 24th day of
November, 1993 by a duly authorized Officer of the Corporation and by Diaz.
STANHOME INC.
By:/s/G. William Seawright
G. William Seawright
President and CEO
/s/Alejandro Diaz Vargas
Alejandro Diaz Vargas
<PAGE> EXHIBIT 10(l)
AGREEMENT
AGREEMENT made May 23, 1985 (as amended January 2, 1987; January 12,
1988; February 8, 1988; and February 4, 1994) between Stanhome Inc., a
Massachusetts corporation with its principal place of business at 333
Western Avenue, Westfield, Massachusetts ("Stanhome") and Allan G.
Keirstead of 26 Longfellow Road, Holyoke, Massachusetts ("Employee").
In consideration of the mutual agreements hereinafter contained, the
parties agree as follows:
1. Normal Retirement.
(a) Subject to the provisions of paragraph 9 below, if Employee
retires on or after November 17, 2009 Stanhome will pay him each month for
the duration of his life deferred compensation equal to 1/12 of (i) 50% of
the average annual compensation received by him in the 5 most highly
compensated years of his final 10 years of employment, as determined under
paragraph 5 below, less (ii) 50% of his annual Primary Social Security
Benefit, as hereinafter defined.
(b) The monthly benefit determined under subparagraph (a) above
shall be reduced by the value of the monthly retirement benefit, if any,
which Employee is entitled to receive from any other qualified or non-
qualified plan maintained by Stanhome (excluding (i) the portion, if any,
of such benefit based on Employee's contributions to such plan, and (ii)
employer contributions to any 401(k) Plan) commencing at such time as
Employee first becomes eligible to receive such benefit, provided, however,
that any such reduction attributable to the Stanhome Inc. Pension Plan
shall be in an amount such that Employee and his spouse, if she survives
him, will each receive no less benefit under this Contract and the Pension
Plan in combination than he or she would have received under the Pension
Plan above or under the Contract alone before the Pension Plan was adopted.
For purposes hereof, the value of the monthly retirement benefit of
any amount which Employee is entitled to receive from a defined
contribution plan based on Stanhome's contributions thereto, shall be
determined as of the time of Employee's termination by reference to the
annuity table set forth in Exhibit A attached. It is recognized by the
parties that prior to Employee's termination there may be changes of
sufficient importance in one or more of the assumptions upon which this
table is based to make appropriate the use of an alternative table. In
such case, Stanhome may substitute an alternative table but only upon the
written recommendation of an independent nationally recognized firm of
compensation consultants, as may be selected by it, and after written
notice to the Employee.
(c) In the event that any portion of an annual contribution made
by Stanhome to its profit-sharing plan on the Employee's behalf has been
used to purchase a life insurance policy or policies for the Employee's
benefit, then for purposes of sub-paragraph 1(b) the value of the
retirement benefit which Employee is entitled to receive from such plan
shall be deemed to be the amount he would have been entitled to receive
assuming such contribution instead had been invested in the same manner and
charged with the same expenses as the remainder of such annual
contribution.
2. Early Retirement. Subject to the provisions of subparagraph 2(d)
and paragraph 9 below:
(a) If Employee's employment terminates on or after November
17, 1999 and before November 17, 2009, for any reason other than a
discharge for cause, Stanhome will pay him each month for the duration of
his life the benefit which would be payable if the provisions of paragraph
<PAGE>
1 above were applied as of the date of such termination, provided that the
portion of the benefit determined under paragraph 1 shall be reduced by the
following percentages based on Employee's age at his termination date (to
be adjusted on a daily pro-rata basis if Employee retires on a day other
than his birthday):
Age at Termination Percentage
62-64 0%
61 2%
60 4%
59 9%
58 14%
57 19%
56 24%
55 29%
(b) If Employee's employment terminates involuntarily before
November 17, 1999 for any reason other than cause, he shall be entitled to
receive the benefit determined under subparagraph 2(a) as if he had reached
age fifty-five (55) on the date of his termination, but such benefit shall
not be payable until his fifty-fifth (55th) birthday.
(c) During a period beginning on the later to occur of his 55th
birthday and his termination date and ending on his 65th birthday, or if
different by law such other age as then entitles Employee to receive his
actual, unreduced Primary Social Security benefit, the Company shall pay
him an additional monthly amount equal to his Primary Social Security
Benefit.
(d) If Employee's employment terminates by reason of discharge
for cause, neither he nor his wife shall be entitled to receive payment of
any kind under this agreement; "cause" hereunder shall mean dishonesty,
misconduct, insubordination or any activity which would cause a forfeiture
of rights under paragraph 9 below if it occurred following termination of
employment.
3. Disability.
(a) In the event Employee becomes disabled after reaching age 55
but while still employed by Stanley, he shall receive, commencing with the
month following the commencement of his disability, a monthly amount
determined under paragraph 1 that would have been payable to him if he had
remained employed until retirement at age 65 at the annual rate of
compensation in effect at the time of his disability, provided that the
amount payable hereunder shall be reduced by the monthly value of any
benefit paid to Employee under a sick leave policy or long-term disability
income plan maintained by Stanhome for so long as such benefits remain
payable.
(b) If Employee applies for payment of a social security
disability benefit prior to age 65 and his application is denied, the
Company shall also pay Employee an additional amount equal to his Primary
Social Security Benefit for as long as Employee remains ineligible to
receive such social security disability benefit prior to age 65, or if
different by law the then age at which Employee then becomes entitled to
receive his actual Primary Social Security Benefit.
For purposes hereof, an Employee shall be deemed to be disabled when
he is rendered incapable of performing the work for which he was employed
by a medically determinable physical or mental condition which is likely to
result in death or to be of long-continued and indefinite duration.
<PAGE>
4. Survivors Benefit.
(a) In the event that Employee dies while employed by Stanhome
prior to reaching age fifty-five (55), or in the event that Employee's
employment by Stanhome is involuntarily terminated prior to age fifty-five
(55) for any reason other than cause, and he dies subsequent to such
termination, Stanhome will pay his surviving spouse, subject to
subparagraph (d) below, commencing on the date that Employee would have
been fifty five (55) had he lived, a monthly amount for the remainder of
her life equal to fifty percent (50%) of the benefit which would have been
paid to Employee commencing on his fifty-fifth (55) birthday pursuant to
subparagraphs 2(b) and 2(c) above, provided however that supplemental
social security payments pursuant to subparagraph 2(c) of this contract to
a spouse shall not be subject to actuarial reduction under subparagraph (d)
below, shall not be payable to her unless or until she reaches the age of
fifty-five (55) and shall only continue until she reaches the age of 65, or
if different by law such other age as then entitles her to receive her
actual, unreduced Primary Social Security benefit.
(b) In the event that Employee dies after age fifty-five (55)
while still employed by Stanhome, Stanhome will pay his surviving spouse,
subject to subparagraph (d) below, a monthly amount for the remainder of
her life equal to fifty percent (50%) of the monthly benefit that would
have been paid to Employee under paragraph 1 or subparagraphs 2(a) and (c),
whichever is applicable, had he retired on the day immediately prior to the
date of his death, provided however that supplemental social security
payments pursuant to paragraph 2(c) of this contract to a spouse shall not
be subject to actuarial reduction under subparagraph (d) below, shall not
be payable to her unless and until she reaches the age of fifty-five (55)
and shall only continue until she reaches the age of sixty-five (65), or if
different by law such other age as then entitles her to receive her actual
unreduced Primary Social Security benefit.
(c) In the event that Employee's employment by Stanhome
terminates after age fifty-five (55) and he subsequently dies while
receiving payments hereunder, Stanhome will pay his surviving spouse,
subject to subparagraph (d) below, a monthly amount for the remainder of
her life equal to fifty percent (50%) of the monthly benefit he was
receiving at the time of his death, provided however that supplemental
social security payments pursuant to paragraph 2(c) of this contract to a
spouse shall not be subject to actuarial reduction under subparagraph (d)
below, shall not be payable to her unless and until she reaches the age of
fifty-five (55) and shall only continue until she reaches the age of sixty-
five (65), or if different by law such other age as then entitles her to
receive her actual unreduced Primary Social Security benefit. In the event
Employee was disabled and had been receiving a benefit under paragraph 3,
the surviving spouse shall be entitled to receive fifty percent (50%) of
the benefit payable under paragraph 3 without reduction thereunder for any
benefits being paid to Employee under a sick leave policy or a long-term
disability income plan maintained by Stanhome except to the extent such
benefits remain payable to such spouse following Employee's death, provided
however that supplemental social security payments, pursuant to
subparagraph 3(b) of this contract to a spouse shall not be subject to
actuarial reduction under subparagraph (d) below, shall not be payable to
her unless and until she reaches the age of fifty-five (55) and shall only
continue until she reaches age sixty-five (65), or, if different by law,
such other age as then entitles her to receive her actual unreduced Primary
Social Security benefit.
(d) No amounts shall be paid a surviving spouse under
subparagraph (a) or (b) above unless she shall have survived Employee for a
period of 30 days and shall have been married to him throughout the 1 year
period ending on Employee's date of death. Further, if the age of Employee
<PAGE>
at the date of his death exceeds the age of his surviving spouse on such
date by more than 5 years, the benefit payable to such spouse hereunder
shall be actuarially reduced in a manner calculated to reflect the
difference in her actual life expectancy at the time of his retirement and
her life expectancy if she were 5 years younger than Employee.
(e) If the sum of $20,000 exceeds the total amount paid to the
surviving spouse at time of her death, such excess shall be paid to a
beneficiary to be designated by the Employee, or in the absence of his
designation, by his surviving spouse, in writing to Stanhome, provided that
in the event no beneficiary has been designated or the designated
beneficiary does not survive such spouse for a period of 30 days, such
excess shall be paid to the personal representative of the surviving
spouse.
5. Annual Compensation. For purposes hereof, Employee will be deemed
to have been employed for the entire calendar month during which his
employment terminates and his annual compensation shall be measured on the
basis of twelve month periods ending with the last day of such month.
"Compensation" for the purposes hereunder shall include total wage,
salary and commission payments received by Employee from Stanhome including
base pay, overtime and bonuses but not including Company contributions
under the Stanhome Employees' Profit-Sharing Retirement Plan or under any
group life insurance or other qualified or non-qualified employee
retirement or benefit plan or any payment designated by the Company as an
allowance for Employee's business expenses (except for the personal use
portion of any Company car allowance up to 70% of such allowance).
Compensation shall not be reduced by the amount of any elective
contributions by Employee under any 401(k) plan of Stanhome. Management
Incentive Plan bonuses which are normally awarded in the first half of
March of each year if the Plan criteria are met, shall be deemed to have
been received, whether or not payment is deferred, in the calendar year
with respect to which such bonus is earned, allocated thereto on a monthly
basis. Other compensation whose receipt is deferred by Employee shall be
deemed to have been received for the purposes hereof at the time such
compensation would have been received, if there had been no such deferral.
In the event Employee's compensation for the last twelve-month period
cannot be determined by the time the first payment becomes due hereunder,
e.g., due to a bonus payable on the results of the Company's operations for
a year in which Employee retires prior to the end of such year, then the
first payments due hereunder shall be based on the estimated amount that
Employee will be entitled to actually receive. The exact amount due
Employee shall be determined as soon as practicable, provided that
following such determination and corresponding adjustment in the monthly
payment to Employee the Company shall pay Employee an additional lump sum
to adjust for any underpayment to Employee and Employee shall refund to
Company any overpayment.
6. Primary Social Security Benefit. An Employee's Primary Social
Security Benefit shall be determined on the day prior to the date on which
Employee's employment with Stanhome terminates and shall be equal to the
estimated old age retirement benefit Employee will be entitled to receive
under the federal Social Security Act at age 65 (or if different by law
such other age as may then entitle a person to receive his social security
retirement benefits based on his unreduced "primary insurance amount" under
the Social Security Act as then in effect) based on his earnings up to the
day preceding his termination date.
7. Payment. Amounts payable under the above paragraphs will be paid
on or about the end of the month to which the payment relates. Payment
will be made for the full month in which Employee's death occurs.
<PAGE>
8. Confidential Information and Covenant Not to Compete.
(a) Employee agrees that following termination of employment he
will not disclose any trade secrets or any confidential information nor do
anything detrimental to Stanhome or any of its affiliated companies.
(b) Employee will neither engage nor assist during his life,
directly or indirectly, in work for or with any business organization using
any direct selling sales method in the sale of merchandise nor in any
activity competitive, directly or indirectly, with Stanhome or any of its
affiliated companies without Stanhome's written consent in advance nor will
he do anything to interfere, directly or indirectly, with the business of
Stanhome or of any of its affiliated companies. "Direct Selling Sales
Method" shall mean the selling or offering to sell either through employee
sales personnel or through or by independent salespersons to consumer
purchasers or prospective consumer purchasers at their residences or at
other places not under the control of the seller. This includes but is not
limited to party plan or home demonstration, club demonstration and door-to-
door selling.
(c) Employee's obligations under the foregoing subparagraphs of
this paragraph 8 shall continue notwithstanding the termination of his
rights to receive any payments hereunder.
(d) Subparagraph (b) of this paragraph 8 does not apply to the
affiliation of Employee with any financial organization which includes
among its clients a business organization described in that subparagraph.
Employee agrees that in the event of such affiliation he will not
participate directly or indirectly in matters affecting any such client.
9. Forfeiture of Payments. Stanhome may discontinue payments
hereunder and have no further liability under this agreement in the event
that Employee fails to observe any of the terms of this agreement,
provided, however, that if his failure to observe is limited to the terms
of subparagraph 8(b) above and is his first failure, Stanhome shall give
him written notice thereof and if, within 15 days of such notice, Employee
gives Stanhome written notice of his discontinuance of the activity
complained of, payments hereunder shall be reinstituted.
10. Assignment. Neither Employee nor his wife shall have any
right to commute, encumber, or dispose of the right to receive payments
hereunder, which payments and the right thereto are expressly declared to
be nonassignable and nontransferable. All rights under the Contract are
merely unsecured contractual rights of Employee or Employee's spouse
against Stanhome. Employee and Employee's spouse are unsecured general
creditors of Stanhome. Stanhome intends to set aside certain assets in a
trust for the payment of benefits under this Contract. In the event of the
insolvency or bankruptcy of Stanhome, any assets set aside in such trust
shall at all times be subject to the claims of Stanhome's general creditors
as if such assets were general assets of Stanhome.
11. Binding Effect. This agreement shall be binding upon and
inure to the benefit of any successor of Stanhome and any such successor
shall be deemed substituted for Stanhome under the terms of this agreement.
As used in this agreement, the term "successor" shall include any person,
firm, corporation, or other business entity which at any time whether by
merger, purchase, or otherwise, acquires all or substantially all of the
assets or business of Stanhome.
12. Not an Employment Agreement. This agreement is not an
employment agreement and Stanhome reserves the right to discharge Employee
with or without cause. The agreement in no way affects his rights under
the Stanhome Inc. Employees' Profit-Sharing Plan or under any Stanhome
group or other insurance policy.
<PAGE>
13. Notices. Any notice required or permitted to be given under
this agreement shall be sufficient if in writing, and if sent by registered
mail, or delivered, to his residence in the case of Employee, at 26
Longfellow Road, Holyoke, MA., or in the case of Stanhome, to its principal
office at 333 Western Avenue, Westfield, Massachusetts, Attn: President.
Either party may change the address to which notices are to be addressed by
notice in writing given to the other in accordance with the terms hereof.
14. Waiver of Breach. The waiver by Stanhome of a breach of any
provisions of this agreement by Employee shall not operate or be construed
as a waiver of any subsequent breach by Employee.
15. Governing Law. This agreement shall be deemed made in the
Commonwealth of Massachusetts, and its form, execution, validity,
construction and performance shall be construed in accordance with the laws
of said Commonwealth.
16. Entire Agreement. This agreement constitutes the entire
agreement of the parties. It may not be changed orally but only by an
agreement in writing signed by Employee and for Stanhome by its Chief
Executive Officer.
17. Severability. In the event that any of the terms or
provisions of this agreement or any portion of such terms or provisions
shall be determined to be invalid or inoperative, such determination shall
not affect the efficacy of the balance of the agreement and any such
invalid or inoperative term or provision shall be deemed severable.
IN WITNESS WHEREOF the parties have executed this agreement.
"STANHOME": STANHOME INC.
BY/s/H.L. Tower
Its President
Attest:
/s/Robert C. Alsop
Secretary
"EMPLOYEE": /s/Allan G. Keirstead
Allan G. Keirstead
<PAGE>
EXHIBIT A
Life Annuity Value
Age Value of $1. payable annually
for life, with first payment
Male Female at age shown on left
49 55 11.7932
50 56 11.6405
51 57 11.4831
52 58 11.3209
53 59 11.1537
54 60 10.9814
55 61 10.8037
56 62 10.6203
57 63 10.4301
58 64 10.2325
59 65 10.0274
60 66 9.8156
61 67 9.5977
62 68 9.3737
63 69 9.1434
64 70 8.9066
65 71 8.6649
66 72 8.4198
67 73 8.1739
68 74 7.9286
69 75 7.6846
70 76 7.4421
<PAGE> EXHIBIT 10(r)
STANHOME INC.
SUPPLEMENTAL PENSION PLAN
(Effective May 1, 1994)
WHEREAS, Stanhome Inc., a Massachusetts corporation (the
"Company"), has for many years maintained the Stanhome Inc. Pension Plan (the
"Qualified Plan") for the benefit of its employees and employees of certain of
its subsidiaries which have, with the consent of the Company, elected to
participate in the Qualified Plan (the "Employers");
WHEREAS, section 401(a)(17) of the Internal Revenue Code of 1986,
as amended (the "Code") limits the amount of annual compensation which may be
taken into account under the Qualified Plan to $150,000 (as adjusted for
increases in the cost of living) (the "Compensation Limit");
WHEREAS, section 415 of the Code requires that the maximum pension
payable to a participant be limited to $90,000, subject to adjustment for
increases in the cost of living and in certain other respects (the "Section 415
Limit"); and
WHEREAS, the Company and the Employers desire to adopt an "excess
benefit plan" as defined in section 3(36) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA") and to provide benefits to "a select
group of management or highly compensated employees," within the meaning of
ERISA, equal to the benefits which, but for sections 401(a)(17)and 415 of the
Code, would have been payable to such participants under the Qualified Plan.
NOW, THEREFORE, the Company and the Employers hereby agree as
follows:
1. Definitions. All capitalized terms used herein shall have
the respective meanings assigned to such terms by the Qualified Plan, except as
otherwise set forth in the preamble to or text of this Plan or below:
(a) Plan. This Stanhome Inc. Supplemental Pension Plan, as from
time to time amended.
(b) Trust. A trust entered into between the Employers and the
trustee for the purpose of administering assets of the Company to
be used for the purpose of satisfying the Employers' obligations
under the Plan. Any such trust shall be established in such
manner so as to be a "grantor trust" of which the Employers are
the grantors, within the meaning of section 671 et. seq. of the
Code.
(c) Cause. (i) The willful and continued failure by a Participant
to substantially perform the Participant's duties with the Company
or an Employer (other than any such failure resulting from the
Participant's incapacity due to physical or mental illness) after
a written demand for substantial performance is delivered to the
Participant, by his or her employer, which demand specifically
identifies the manner in which the Participant has not
substantially performed his or her duties, or (ii) the willful
engaging by the Participant in conduct which is demonstrably and
materially injurious to the
<PAGE>
Company or its subsidiaries, monetarily or otherwise. For purposes
of clauses (i) and (ii) of this definition, no act, or failure to
act, on the Participant's part shall be deemed "willful" unless
done, or omitted to be done, by the Participant not in good faith
and without reasonable belief that such act, or failure to act,
was in the best interest of the Company or an Employer.
2. Amount of Benefits. If upon the termination of employment
of any Participant, (a) the Pension payable under Section 5.2 (relating to
normal or deferred retirement), 5.3 (relating to early retirement) or 5.6
(relating to vested termination) of the Qualified Plan, as the case may be, is
less than (b) the Pension so determined but without regard to
(i) the penultimate three sentences of subdivision (11) of
Article 2 of the Qualified Plan, relating to the Compensation
Limit, and
(ii) Section 8.1 of the Qualified Plan, relating to the
Section 415 Limit,
then such Participant shall be entitled to receive from his or her Employer a
Pension (the "Supplemental Pension") equal to the excess of the Pension
described in clause (b) over the Pension described in clause (a) above, except
that a Participant shall not be entitled to a Supplemental Pension if the
Participant's employment was terminated involuntarily for Cause.
3. Time and Manner of Payment. If the Participant's Pension
under the Qualified Plan is payable in a form of Pension other than the Pension
described in Section 5.2 (a single life annuity) of the Qualified Plan, the
Supplemental Pension shall be paid in the same form and at the same time, with
any survivor's benefit payable to the same Beneficiary, as the Pension payable
to the Participant under the Qualified Plan. A Pension payable in a form other
than that described in Section 5.2 (describing a single life annuity) of the
Qualified Plan shall be the actuarial equivalent thereof, computed using the
actuarial methods and factors then in effect under the Qualified Plan.
Notwithstanding the foregoing, in any case in which the lump sum Actuarial
Equivalent of the benefit payable to or on behalf of a Participant would be less
than $3,500, the Committee may, in its discretion, direct payment of such
benefit in a lump sum.
4. Survivors' Benefits. If a Participant who at the time of his
or her termination of employment, including termination of employment on account
of his or her death, is entitled to receive a Pension under Section 5.2, 5.3 or
5.6 of the Qualified Plan shall die prior to his Pension Starting Date, and if
such Participant would have been entitled to a Supplemental Pension pursuant to
Section 2 of this Plan had such Participant retired and elected to have his or
her Pension commence immediately before his or her death, then the Participant's
spouse, if such spouse was married to the Participant on the date of his or her
death, shall be entitled to receive a Pension (the "Supplemental Survivor's
Pension") from the Participant's Employer. The amount of such Supplemental
Survivor's Pension shall be equal to:
(a) in the case of (i) a Participant who dies after his or her
termination of employment or (ii) who dies while employed by an
Employer but before attaining age 55, the amount which would
<PAGE>
have been payable to such surviving spouse had the Participant
terminated employment immediately before his or her death and
elected to have his or her Pension begin as of the date such
Supplemental Survivor's Pension is to commence (as described
below), in the form described in Section 6.1(b) of the Qualified
Plan (relating to a 50% joint and survivor's annuity); or
(b) in the case of a Participant who dies while in the employ of
an Employer and after attaining age 55, one-half of the
Supplemental Pension that would have been payable to such
Participant under Section 2 determined as if the Participant had
terminated his or her employment immediately before his or her
death and elected to have his or her Pension begin as of the date
such Supplemental Survivor's Pension is to commence (as described
below), in the form of Option 1 set forth in Section 6.2 of the
Qualified Plan (relating to single life annuities).
The Supplemental Survivor's Pension shall commence on the first day of any month
following the Participant's death as the surviving spouse shall designate by 30
days advance written notice, but not before the date on which the Participant
would have attained age 55, nor after April 1 of the year following the year in
which the Participant would have attained age 70-1/2, had he or she survived.
Notwithstanding the foregoing, no Supplemental Survivor's Benefit shall be
payable in respect of a Participant whose Pension under the Qualified Plan would
have been payable under Section 5.6 thereof (relating to vested termination) and
whose employment was involuntarily terminated for Cause.
5. Amendment and Termination. This Plan shall be subject to
the same reserved powers of amendment and termination as the Qualified Plan
(without regard to any limitations imposed on such powers by the Code or ERISA),
except that no such amendment or termination shall reduce or otherwise adversely
affect the rights of Participants or Beneficiaries in respect of amounts accrued
hereunder as of the date of such amendment or termination.
6. Application of ERISA. This Plan is intended to be an
"excess benefit plan" within the meaning of section 3(36) of ERISA and an
unfunded plan maintained primarily for the purpose of providing deferred
compensation to a select group of management or highly compensated employees
within the meaning of sections 201(2), 301(a)(3) and 401(a)(1) of ERISA and
Department of Labor Regulation Section 2520.104-23. This Plan shall not be a
funded plan, and the Company and the Employers shall be under no obligation to
set aside any funds for the purpose of making payments under this Plan. Any
payments hereunder shall be made out of the general assets of the Company and
the Employers.
7. Administration. The Committee shall be charged with the
administration of this Plan and shall have the same powers and duties, and shall
be subject to the same limitations, as are described in the Qualified Plan. The
provisions of Article 11 of the Qualified Plan (other than Section 11.3,
relating to qualified domestic relations orders) are hereby incorporated herein
by reference, and shall be applicable as if such provisions were set forth
herein.
<PAGE>
8. Nonassignment of Benefits. Notwithstanding anything
contained in the Qualified Plan to the contrary, it shall be a condition of the
payment of benefits under this Plan that neither such benefits nor any portion
thereof shall be assigned, alienated or transferred to any person voluntarily or
by operation of any law, including any assignment, division or awarding of
property under state domestic relations law (including community property law).
If any person shall endeavor or purport to make any such assignment, alienation
or transfer, the amount otherwise provided hereunder which is the subject of
such assignment, alienation or transfer shall cease to be payable to any person.
9. No Guaranty of Employment. Nothing contained in this Plan
shall be construed as a contract of employment between any Employer and any
employee or as conferring a right on any employee to be continued in the
employment of any Employer.
10. Adoption By Employers. Any corporation which is or becomes
an "Employer" under the Qualified Plan may, with the consent of the Company,
become an Employer in this Plan by delivery to the Company of a resolution of
its board of directors or duly authorized committee to such effect, which
resolution shall specify the first Plan Year under the Qualified Plan for which
this Plan shall be effective in respect of the employees of such corporation.
11. Trust. The Company (and the Employers) shall establish the
Trust and shall at least annually contribute to the Trust such assets as the
Committee determines, in its sole discretion, are necessary to provide for the
Employers' future liabilities created with respect to the amounts credited to
the Accounts established hereunder. The existence of the Trust shall not
relieve the Company or the Employers of their liabilities under the Plan, but
the obligations of the Company and the Employers under the Plan shall be deemed
satisfied to the extent paid from the Trust.
12. Miscellaneous. (a) Certain Qualified Plan Provisions.
Except as otherwise provided herein, the miscellaneous provisions contained in
Sections 14.5 (relating to gender and plurals) and 14.6 (relating to applicable
law) are hereby incorporated herein by reference, and shall be applicable as if
such provisions were set forth herein.
(b) Expenses. All costs and expenses incurred in administering
the Plan, including the expenses of the Committee, the fees of counsel and any
agents of the Committee and other administrative expenses shall be paid by the
Company and the Employers. The Committee, in its sole discretion, having regard
to the nature of a particular expense, shall determine the portion of such
expense which is to be borne by the Company or a particular Employer.
(c) FICA Taxes. If for each calendar year, a Participant accrues
a benefit hereunder, the Participant's employer shall withhold from the payments
of compensation to the Participant the taxes imposed upon such Participant
pursuant to section 3121 of the Code in respect of the amount of such accrual.
<PAGE>
(d) Successors and Assigns. The provisions of this Plan shall
bind and inure to the benefit of the Company and each Employer and its
successors and assigns, as well as each Participant and his or her Beneficiaries
and successors.
IN WITNESS WHEREOF, the Company has caused this instrument to be
executed and its corporate seal to be hereunder affixed this 10th day of May,
1994.
STANHOME INC.
By: /s/G.W. Seawright
Title: President and C.E.O.
ATTEST:
/s/Mark I. Cohen
Title: Assistant Secretary
<PAGE> EXHIBIT 10(s)
STANHOME SUPPLEMENTAL INVESTMENT SAVINGS PLAN
(Effective May 1, 1994)
WHEREAS, Stanhome Inc., a Massachusetts corporation (the
"Company"), has for many years maintained the Stanhome Investment Savings
Plan (the "Qualified Plan") for the benefit of its employees and employees
of certain of its subsidiaries which have, with the consent of the Company,
elected to participate in the Qualified Plan (the "Employers");
WHEREAS, section 401(a)(17) of the Internal Revenue Code of
1986, as amended (the "Code") limits the amount of annual compensation
which may be taken into account under the Qualified Plan to $150,000 (as
adjusted for increases in the cost of living) (the "Compensation Limit");
WHEREAS, section 402(g) of the Code limits the contributions to
a participant's Salary Reduction Contribution Account under the Qualified
Plan to $7,000 (adjusted for increases in the cost of living) (the "Dollar
Limit");
WHEREAS, section 401(k) of the Code (the "Before-Tax
Contribution Limit") may limit the amount of contributions which may be
allocated to the Salary Reduction Contribution Accounts of certain highly
compensated participants under the Qualified Plan;
WHEREAS, section 415 of the Code requires that allocations to
participants' accounts under the Qualified Plan generally be limited to the
lesser of $30,000 (adjusted for increases in the cost of living) and 25% of
a participant's compensation in certain other respects (the "Section 415
Limit"); and
WHEREAS, the Company and the Employers desire to adopt an
"excess benefit plan" within the meaning of section 3(36) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") and to provide
benefits to "a select group of management or highly compensated employees,"
within the meaning of ERISA equal to the contributions which, but for
sections 401(a)(17), 401(k), 402(g) and 415 of the Code, would be provided
to such participants under the Qualified Plan.
NOW, THEREFORE, the Company and the Employers hereby agree as
follows:
1. Definitions. All capitalized terms used herein shall
have the respective meanings assigned to such terms by the Qualified Plan,
except as otherwise set forth in the preamble to or text of this Plan or
below:
(a) Plan. This Stanhome Supplemental Investment Savings
Plan, as from time to time amended.
(b) Key Associate. For any Plan Year, an employee of the
Company or an Employer who is a Participant in
<PAGE>
the Qualified Plan for a Plan Year and who either is (i) an
officer of the Company or any Employer, or (ii) is classified
by the Committee as a "key associate" who shall elect to
participate in this Plan for a calendar year. An election to
participate in this Plan for a calendar year shall be made
(i) for the calendar year in which the Plan is adopted, or for
the calendar year in which an employee first becomes designated
as eligible to participate in the Plan, within 30 days after
such adoption or designation, as the case may be, and (ii) for
each subsequent calendar year, by December 31 of the preceding
calendar year. A person shall cease to be Key Associate upon
the complete distribution of his or her Accounts under the
Plan.
(c) Account. An account established on behalf of a Key
Associate pursuant to the Plan.
(d) Valuation Date. The date as of which earnings (or
losses) are credited to an Account pursuant to paragraph 3 of
the Plan.
(e) Trust. A trust entered into between the Company, the
Employers and the trustee for the purpose of administering
assets of the Company to be used for the purpose of satisfying
the obligations of the Company and the Employers under the
Plan. Any such trust shall be established in such manner so as
to be a "grantor trust" of which the Company and the Employers
are the grantors, within the meaning of section 671 et. seq. of
the Code.
2. Accounts. There shall be established on the books of the
Company and of each Employer an Employee Account in the name and on behalf
of each employee thereof who is a Key Associate and who, during any Plan
Year beginning after December 31, 1993, would have been entitled, based on
the election made by such Key Associate under Section 3.2 of the Qualified
Plan as in effect on the first day of such Plan Year (or in the case of the
first Plan Year for which an employee is eligible to participate in this
Plan based on a separate written election pursuant to this Plan to defer a
percentage of pay earned after the date of such election, to make
contributions to his or her Salary Reduction Contribution Account in excess
of the amount that would have been so allocated but for the application of:
(a) The penultimate three sentences of subdivision (12) of
Article 2 of the Qualified Plan, relating to the Compensation
Limit;
(b) Section 4.2 of the Qualified Plan, relating to the Dollar
Limit;
(c) Section 4.4 of the Qualified Plan, relating to the Before-
Tax Contribution Limit; and
<PAGE>
(d) Section 7.5 of the Qualified Plan relating to the
Section 415 Limit.
The compensation otherwise payable by the Company or an
Employer to such Key Associate shall be reduced, and each Employee Account
shall be credited with, such amounts, and at such time and in such manner,
as shall be necessary so that the wages subject to withholding under
section 3402 of the Code of such Key Associate shall not be greater than if
the contributions to his or her Salary Reduction Contribution Account were
not subject to any of the above-described limits. Notwithstanding anything
herein to the contrary, the amount to be credited by the Company or an
Employer to the Employee Account of each such Key Associate for any Plan
Year shall not exceed the elected percentage of the Key Associate's
Compensation for such Plan Year (determined without regard to the
Compensation Limit) in effect under Section 4.1(a) of the Qualified Plan on
the first day of such Plan Year (or, in the case of the first year for
which a Key Associate is eligible to participate in this Plan, the maximum
such percentage allowed under Section 4.1(a) of the Qualified Plan, less
the amount contributed on behalf of such Key Associate for such Plan Year
pursuant to Section 4.1 (a) of the Qualified Plan.
3. Earnings on Accounts. As of the close of each business
day, the Company and each Employer shall credit to or charge against, as
the case may be, each Account established on its books pursuant to
paragraph 2 of this Plan, an amount representing investment gains or losses
in respect of the balance of such Account. The amount of such gains or
losses in respect of the Account of any Participant shall be determined by
the Committee to be equal to the net gain or loss that would have been
earned on an amount equal to the balance of such Participant's Account as
of the close of the preceding business day, as adjusted for any credits,
withdrawals or distributions, based on the hypothetical investment
elections made by the Key Associate, as described below. Each Key
Associate shall be entitled to elect to have the earnings in respect of his
or her Plan Account determined as if an amount equal to the balance thereof
were invested among the investment funds available from time to time under
the Qualified Plan except the Stanhome Stock Fund and the Putnam Stable
Value Fund. Such elections shall be subject to the same provisions
regarding the time, manner and portion of the account subject to such
election as are applicable from time to time under the Qualified Plan.
4. Vesting. Amounts credited to a Key Associate's Account
pursuant to the terms of this Plan shall be fully vested and not subject to
forfeiture for any reason.
5. Hardship Withdrawals. If a Key Associate experiences an
"unforeseeable financial emergency," as defined below, he or she may
request the Committee to (i) suspend any further reductions in compensation
pursuant to Section 2 above, (ii) receive a complete or partial
distribution of the Key Associate's Accounts under the Plan or (iii) do
both (i) and (ii) above. The amount of any distribution pursuant to this
Section 5 shall not exceed the lesser of (i) the balance of the Key
Associate's Accounts under the Plan, determined as of the Valuation Date
next following the date of such request, and (ii) the amount reasonably
<PAGE>
necessary to satisfy such unforeseeable financial emergency. For purposes
of this Section 5, "unforeseeable financial emergency" shall mean an
unanticipated emergency that is caused by an event beyond the control of
the Participant that would result in severe financial hardship to the Key
Associate resulting from (i) a sudden and unexpected illness or accident of
the Key Associate or a dependent of the Key Associate, (ii) a loss of the
Key Associate's property due to casualty or (iii) such other extraordinary
and unforeseeable circumstances arising as a result of events beyond the
control of the Key Associate, all as determined in the sole discretion of
the Committee.
6. Distributions. The distribution of a Key Associate's
Accounts under this Plan shall be made at the same time and in the same
manner as distributions are made to the Key Associate under the Qualified
Plan. Such distribution shall be based on the balance of the Key
Associate's Accounts as of the Valuation Date coinciding with or next
following the valuation date used to determine the amount to be distributed
to or on behalf of the Key Associate under the Qualified Plan.
7. Beneficiaries. If a Key Associate shall die while any
amount remains credited to the Accounts established on his behalf pursuant
to paragraph 2 of this Plan, such amount shall be distributed as provided
in paragraph 6 of this Plan to the beneficiary or beneficiaries as the Key
Associate may, from time to time, designate in writing delivered to the
Committee. A Key Associate may revoke or change his or her beneficiary
designation at any time in writing delivered to the Committee. If a Key
Associate does not designate a beneficiary under this Plan, or if no
designated beneficiary survives the Key Associate, the balance of his or
her Account shall be distributed to the person or persons entitled to his
or her account under Section 8.5 of the Qualified Plan (or who would be so
entitled if there were then an amount remaining unpaid under the Qualified
Plan).
8. Amendment and Termination. This Plan shall be subject to
the same reserved powers of amendment and termination as the Qualified Plan
(without regard to any limitations imposed on such powers by the Code or
ERISA), except that no such amendment or termination shall reduce or
otherwise adversely affect the rights of Key Associates or Beneficiaries in
respect of amounts credited to their Accounts as of the date of such
amendment or termination.
9. Application of ERISA. This Plan is intended to be an
"excess benefit plan" within the meaning of section 3(36) of ERISA and an
unfunded plan maintained primarily for the purpose of providing deferred
compensation to a select group of management or highly compensated
employees within the meaning of sections 201(2), 301(a)(3) and 401(a)(1) of
ERISA and Department of Labor Regulation Section 2520.104-23. This Plan
shall not be a funded plan, and the Company and the Employers shall be
under no obligation to set aside any funds for the purpose of making
payments under this Plan. Any payments hereunder shall be made out of the
general assets of the Company and the Employers.
<PAGE>
10. Administration. The Committee shall be charged with the
administration of this Plan and shall have the same powers and duties, and
shall be subject to the same limitations, as are described in the Qualified
Plan. The provisions of Article 10 of the Qualified Plan (other than
Section 10.3, relating to qualified domestic relations orders) are hereby
incorporated herein by reference, and shall be applicable as if such
provisions were set forth herein.
11. Nonassignment of Benefits. Notwithstanding anything
contained in the Qualified Plan to the contrary, it shall be a condition of
the payment of benefits under this Plan that neither such benefits nor any
portion thereof shall be assigned, alienated or transferred to any person
voluntarily or by operation of any law, including any assignment, division
or awarding of property under state domestic relations law (including
community property law). If any person shall endeavor or purport to make
any such assignment, alienation or transfer, the amount otherwise provided
hereunder which is the subject of such assignment, alienation or transfer
shall cease to be payable to any person.
12. No Guaranty of Employment. Nothing contained in this
Plan shall be construed as a contract of employment between any Employer
and any employee or as conferring a right on any employee to be continued
in the employment of any Employer.
13. Adoption By Employers. Any corporation which is or
becomes an "Employer" under the Qualified Plan may, with the consent of the
Company, become an Employer in this Plan by delivery to the Company of a
resolution of its board of directors or duly authorized committee to such
effect, which resolution shall specify the first Plan Year under the
Qualified Plan for which this Plan shall be effective in respect of the
employees of such corporation.
14. Trust. The Company (and the Employers) shall establish
the Trust and shall at least annually contribute to the Trust such assets
as the Committee determines, in its sole discretion, are necessary to
provide for the Employers' future liabilities created with respect to the
amounts credited to the Accounts established hereunder. The existence of
the Trust shall not relieve the Employers of their liabilities under the
Plan, but the Employers' obligations under the Plan shall be deemed
satisfied to the extent paid from the Trust.
14. Miscellaneous.
(a) Certain Qualified Plan Provisions. Except as otherwise
provided herein, the miscellaneous provisions contained in Sections 13.6
(relating to gender and plurals), 13.7 (relating to applicable law) and
13.8 (relating to severability) are hereby incorporated herein by
reference, and shall be applicable as if such provisions were set forth
herein.
(b) Expenses. All costs and expenses incurred in
administering the Plan, including the expenses of the Committee, the fees
<PAGE>
of counsel and any agents of the Committee and other administrative
expenses shall be charged against the Accounts in such amounts and at such
time and in such manner as the Committee, in its sole discretion, shall
determine.
(c) FICA Taxes. For each calendar year in which a Key
Associate's compensation is reduced pursuant to this Plan, his or her
employer shall withhold from that portion of the Key Associate's payments
of compensation the taxes imposed upon the Key Associate pursuant to
section 3121 of the Code in respect of the amount by which the Key
Associate's compensation is reduced.
(d) Successors and Assigns. The provisions of this Plan shall
bind and inure to the benefit of each Employer and its successors and
assigns, as well as each Key Associate and his or her beneficiaries and
successors.
IN WITNESS WHEREOF, the Company has caused this instrument to
be executed and its corporate seal to be hereunder affixed this 10th day of
May, 1994.
STANHOME INC.
By: /s/G.W. Seawright
Title: President
ATTEST:
/s/Mark I. Cohen
Title: Assistant Secretary
<PAGE> EXHIBIT 10(t)
HAMILTON SUPPLEMENTAL INVESTMENT SAVINGS PLAN
(Effective April 1, 1994)
WHEREAS, Hamilton Group Limited, Inc., a Florida corporation
(the "Company"), has for many years maintained the Hamilton Investment
Savings Plan (the "Qualified Plan") for the benefit of its employees and
employees of certain of its subsidiaries which have, with the consent of
the Company, elected to participate in the Qualified Plan (the
"Employers");
WHEREAS, section 401(a)(17) of the Internal Revenue Code of
1986, as amended (the "Code") limits the amount of annual compensation
which may be taken into account under the Qualified Plan to $150,000 (as
adjusted for increases in the cost of living) (the "Compensation Limit");
WHEREAS, section 402(g) of the Code limits the contributions to
a participant's Salary Reduction Contribution Account under the Qualified
Plan to $7,000 (adjusted for increases in the cost of living) (the "Dollar
Limit");
WHEREAS, section 401(k) of the Code (the "Before-Tax
Contribution Limit") may limit the amount of contributions which may be
allocated to the Salary Reduction Contribution Accounts of certain highly
compensated participants under the Qualified Plan;
WHEREAS, section 415 of the Code requires that allocations to
participants' accounts under the Qualified Plan generally be limited to the
lesser of $30,000 (adjusted for increases in the cost of living) and 25% of
a participant's compensation in certain other respects (the "Section 415
Limit"); and
WHEREAS, the Company and the Employers desire to adopt an
"excess benefit plan" within the meaning of section 3(36) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") and to provide
benefits to "a select group of management or highly compensated employees,"
within the meaning of ERISA equal to the contributions which, but for
sections 401(a)(17), 401(k), 402(g) and 415 of the Code, would be provided
to such participants under the Qualified Plan.
NOW, THEREFORE, the Company and the Employers hereby agree as
follows:
1. Definitions. All capitalized terms used herein shall
have the respective meanings assigned to such terms by the Qualified Plan,
except as otherwise set forth in the preamble to or text of this Plan or
below:
(a) Plan. This Hamilton Supplemental Investment Savings
Plan, as from time to time amended.
(b) Key Associate. For any Plan Year, an employee of the
Company or an Employer who is a Participant in
<PAGE>
the Qualified Plan for a Plan Year and who either is (i) an
officer of the Company or any Employer, or (ii) is classified
by the Committee as a "key associate" who shall elect to
participate in this Plan for a calendar year. An election to
participate in this Plan for a calendar year shall be made
(i) for the calendar year in which the Plan is adopted, or for
the calendar year in which an employee first becomes designated
as eligible to participate in the Plan, within 30 days after
such adoption or designation, as the case may be, and (ii) for
each subsequent calendar year, by December 31 of the preceding
calendar year. A person shall cease to be Key Associate upon
the complete distribution of his or her Accounts under the
Plan.
(c) Account. An account established on behalf of a Key
Associate pursuant to the Plan.
(d) Valuation Date. The date as of which earnings (or
losses) are credited to an Account pursuant to paragraph 3 of
the Plan.
(e) Trust. A trust entered into between the Company, the
Employers and the trustee for the purpose of administering
assets of the Company to be used for the purpose of satisfying
the obligations of the Company and the Employers under the
Plan. Any such trust shall be established in such manner so as
to be a "grantor trust" of which the Company and the Employers
are the grantors, within the meaning of section 671 et. seq. of
the Code.
2. Accounts. There shall be established on the books of the
Company and of each Employer an Employee Account in the name and on behalf
of each employee thereof who is a Key Associate and who, during any Plan
Year beginning after December 31, 1993, would have been entitled, based on
the election made by such Key Associate under Section 3.2 of the Qualified
Plan as in effect on the first day of such Plan Year (or in the case of the
first Plan Year for which an employee is eligible to participate in this
Plan based on a separate written election pursuant to this Plan to defer a
percentage of pay earned after the date of such election to make
contributions to his or her Salary Reduction Contribution Account in excess
of the amount that would have been so allocated but for the application of:
(a) The penultimate three sentences of subdivision (12) of
Article 2 of the Qualified Plan, relating to the Compensation
Limit;
(b) Section 4.1(a) of the Qualified Plan, relating to
Participant Contributions.
(c) Section 4.2 of the Qualified Plan, relating to the Dollar
Limit;
<PAGE>
(d) Section 4.5 of the Qualified Plan, relating to the Before-
Tax Contribution Limit; and
(e) Section 6.5 of the Qualified Plan relating to the
Section 415 Limit.
The compensation otherwise payable by the Company or an
Employer to such Key Associate shall be reduced, and each Employee Account
shall be credited with, such amounts, and at such time and in such manner,
as shall be necessary so that the wages subject to withholding under
section 3402 of the Code of such Key Associate shall not be greater than if
the contributions to his or her Salary Reduction Contribution Account were
not subject to any of the above-described limits. Notwithstanding anything
herein to the contrary, the amount to be credited by the Company or an
Employer to the Employee Account of each such Key Associate for any Plan
Year shall not exceed the elected percentage of the Key Associate's
Compensation for such Plan Year (determined without regard to the
Compensation Limit) in effect under Section 4.1(a) of the Qualified Plan on
the first day of such Plan Year (or, in the case of the first year for
which a Key Associate is eligible to participate in this Plan, the maximum
such percentage allowed for such Plan Year under Section 4.1(a) of the
Qualified Plan less the amount contributed on behalf of such Key Associate
for such Plan Year pursuant to Section 4.1 (a) of the Qualified Plan.
3. Earnings on Accounts. As of the close of each business
day, the Company and each Employer shall credit to or charge against, as
the case may be, each Account established on its books pursuant to
paragraph 2 of this Plan, an amount representing investment gains or losses
in respect of the balance of such Account. The amount of such gains or
losses in respect of the Account of any Participant shall be determined by
the Committee to be equal to the net gain or loss that would have been
earned on an amount equal to the balance of such Participant's Account as
of the close of the preceding business day, as adjusted for any credits,
withdrawals or distributions, based on the investment return of the Key
Associates Account under the Qualified Plan.
4. Vesting. Amounts credited to a Key Associate's Account
pursuant to the terms of this Plan shall be fully vested and not subject to
forfeiture for any reason.
5. Hardship Withdrawals. If a Key Associate experiences an
"unforeseeable financial emergency," as defined below, he or she may
request the Committee to (i) suspend any further reductions in compensation
pursuant to Section 2 above, (ii) receive a complete or partial
distribution of the Key Associate's Accounts under the Plan or (iii) do
both (i) and (ii) above. The amount of any distribution pursuant to this
Section 5 shall not exceed the lesser of (i) the balance of the Key
Associate's Accounts under the Plan, determined as of the Valuation Date
next following the date of such request, and (ii) the amount reasonably
necessary to satisfy such unforeseeable financial emergency. For purposes
of this Section 5, "unforeseeable financial emergency" shall mean an
unanticipated emergency that is caused by an event beyond the control of
<PAGE>
the Participant that would result in severe financial hardship to the Key
Associate resulting from (i) a sudden and unexpected illness or accident of
the Key Associate or a dependent of the Key Associate, (ii) a loss of the
Key Associate's property due to casualty or (iii) such other extraordinary
and unforeseeable circumstances arising as a result of events beyond the
control of the Key Associate, all as determined in the sole discretion of
the Committee.
6. Distributions. The distribution of a Key Associate's
Accounts under this Plan shall be made at the same time and in the same
manner as distributions are made to the Key Associate under the Qualified
Plan. Such distribution shall be based on the balance of the Key
Associate's Accounts as of the Valuation Date coinciding with or next
following the valuation date used to determine the amount to be distributed
to or on behalf of the Key Associate under the Qualified Plan.
7. Beneficiaries. If a Key Associate shall die while any
amount remains credited to the Accounts established on his behalf pursuant
to paragraph 2 of this Plan, such amount shall be distributed as provided
in paragraph 6 of this Plan to the beneficiary or beneficiaries as the Key
Associate may, from time to time, designate in writing delivered to the
Committee. A Key Associate may revoke or change his or her beneficiary
designation at any time in writing delivered to the Committee. If a Key
Associate does not designate a beneficiary under this Plan, or if no
designated beneficiary survives the Key Associate, the balance of his or
her Account shall be distributed to the person or persons entitled to his
or her account under Section 8.5 of the Qualified Plan (or who would be so
entitled if there were then an amount remaining unpaid under the Qualified
Plan).
8. Amendment and Termination. This Plan shall be subject to
the same reserved powers of amendment and termination as the Qualified Plan
(without regard to any limitations imposed on such powers by the Code or
ERISA), except that no such amendment or termination shall reduce or
otherwise adversely affect the rights of Key Associates or Beneficiaries in
respect of amounts credited to their Accounts as of the date of such
amendment or termination.
9. Application of ERISA. This Plan is intended to be an
"excess benefit plan" within the meaning of section 3(36) of ERISA and an
unfunded plan maintained primarily for the purpose of providing deferred
compensation to a select group of management or highly compensated
employees within the meaning of sections 201(2), 301(a)(3) and 401(a)(1) of
ERISA and Department of Labor Regulation Section 2520.104-23. This Plan
shall not be a funded plan, and the Company and the Employers shall be
under no obligation to set aside any funds for the purpose of making
payments under this Plan. Any payments hereunder shall be made out of the
general assets of the Company and the Employers.
10. Administration. The Committee shall be charged with the
administration of this Plan and shall have the same powers and duties, and
shall be subject to the same limitations, as are described in the Qualified
<PAGE>
Plan. The provisions of Article 10 of the Qualified Plan (other than
Section 10.3, relating to qualified domestic relations orders) are hereby
incorporated herein by reference, and shall be applicable as if such
provisions were set forth herein.
11. Nonassignment of Benefits. Notwithstanding anything
contained in the Qualified Plan to the contrary, it shall be a condition of
the payment of benefits under this Plan that neither such benefits nor any
portion thereof shall be assigned, alienated or transferred to any person
voluntarily or by operation of any law, including any assignment, division
or awarding of property under state domestic relations law (including
community property law). If any person shall endeavor or purport to make
any such assignment, alienation or transfer, the amount otherwise provided
hereunder which is the subject of such assignment, alienation or transfer
shall cease to be payable to any person.
12. No Guaranty of Employment. Nothing contained in this
Plan shall be construed as a contract of employment between any Employer
and any employee or as conferring a right on any employee to be continued
in the employment of any Employer.
13. Adoption By Employers. Any corporation which is or
becomes an "Employer" under the Qualified Plan may, with the consent of the
Company, become an Employer in this Plan by delivery to the Company of a
resolution of its board of directors or duly authorized committee to such
effect, which resolution shall specify the first Plan Year under the
Qualified Plan for which this Plan shall be effective in respect of the
employees of such corporation.
14. Trust. The Company (and the Employers) shall establish
the Trust and shall at least annually contribute to the Trust such assets
as the Committee determines, in its sole discretion, are necessary to
provide for the Employers' future liabilities created with respect to the
amounts credited to the Accounts established hereunder. The existence of
the Trust shall not relieve the Employers of their liabilities under the
Plan, but the Employers' obligations under the Plan shall be deemed
satisfied to the extent paid from the Trust.
15. Miscellaneous.
(a) Certain Qualified Plan Provisions. Except as otherwise
provided herein, the miscellaneous provisions contained in Sections 13.6
(relating to gender and plurals), 13.7 (relating to applicable law) and
13.8 (relating to severability) are hereby incorporated herein by
reference, and shall be applicable as if such provisions were set forth
herein.
(b) Expenses. All costs and expenses incurred in
administering the Plan, including the expenses of the Committee, the fees
of counsel and any agents of the Committee and other administrative
<PAGE>
expenses shall be charged against the Accounts in such amounts and at such
time and in such manner as the Committee, in its sole discretion, shall
determine.
(c) FICA Taxes. For each calendar year in which a Key
Associate's compensation is reduced pursuant to this Plan, his or her
employer shall withhold from that portion of the Key Associate's payments
of compensation the taxes imposed upon the Key Associate pursuant to
section 3121 of the Code in respect of the amount by which the Key
Associate's compensation is reduced.
(d) Successors and Assigns. The provisions of this Plan shall
bind and inure to the benefit of each Employer and its successors and
assigns, as well as each Key Associate and his or her beneficiaries and
successors.
IN WITNESS WHEREOF, the Company has caused this instrument to
be executed and its corporate seal to be hereunder affixed this first day
of April, 1994.
HAMILTON GROUP LIMITED, INC.
By: /s/A. Marinatos
Title: Executive V.P.
ATTEST:
/s/John F. Conderman
Title: Assistant Treasurer
<PAGE> EXHIBIT 13
<TABLE>
<CAPTION>
Stock Market, Dividend and Shareholder Information
1993
Market Price
------------
Quarter Dividend High Low
-------------------------------------------
<S> <C> <C> <C>
First $.25 $34.63 $31.50
Second .25 31.63 26.88
Third .25 30.25 25.88
Fourth .25 34.75 27.25
</TABLE>
<TABLE>
<CAPTION>
1994
Market Price
------------
Quarter Dividend High Low
-------------------------------------------
<S> <C> <C> <C>
First $.25 $37.00 $31.75
Second .25 35.88 32.38
Third .265 35.88 31.88
Fourth .265 34.63 28.75
</TABLE>
Stanhome's Common Stock is traded on the New York and Pacific stock
exchanges (Symbol: STH). The table shows for the indicated periods dividends
paid and the high and low price range. (Source: New York Stock Exchange
Composite Tape.) As of December 31, 1994, there were 3,652 record holders of
the Common Stock.
<PAGE>
<TABLE>
<CAPTION>
BUSINESS SEGMENT
SALES
In Million Dollars
(Graphic Material Omitted)
<S> <C> <C> <C> <C>
WORLDWIDE WORLDWIDE
WORLDWIDE DIRECT DIRECT
Year GIFTWARE RESPONSE SELLING TOTAL
1990 $302 $ 65 $309 $676
1991 329 79 302 710
1992 348 96 300 744
1993 366 130 255 751
1994 415 134 241 790
</TABLE>
<TABLE>
<CAPTION>
BUSINESS SEGMENT
OPERATING PROFIT
In Million Dollars
(Graphic Material Omitted also includes the following Corporate column
information which is not separately identified therein)
<S> <C> <C> <C> <C> <C>
WORLDWIDE WORLDWIDE
WORLDWIDE DIRECT DIRECT
Year GIFTWARE RESPONSE SELLING CORPORATE TOTAL
1990 $49 $ 5 $41 $ (7) $88
1991 49 6 31 (7) 79
1992 52 7 32 (8) 83
1993 53 10 10 (7) 66
1994 65 8 21 (13) 81
</TABLE>
<TABLE>
<CAPTION>
STANHOME INC.
Percentage
Increase
FINANCIAL HIGHLIGHTS 1993 1994 (Decrease)
(In millions, except per share amounts)
<S> <C> <C> <C>
Net sales $751 $790 5%
Restructuring cost 17 - -
Operating profit 66 81 23%
Net income before taxes 66 81 22%
Net income after taxes 33 44 33%
Working capital 159 102 (36%)
Total assets 430 512 19%
Shareholders' equity 254 269 6%
Return on average shareholders' equity 13% 17%
Per share data:
Net income fully diluted $1.67 $2.25 35%
Dividends declared $1.00 $1.03 3%
Shareholders' equity at December 31 $13.12 $14.07 7%
Average number of shares fully diluted 19.79 19.54 ( 1%)
Number of shares outstanding at December 31 19.39 19.15 ( 1%)
</TABLE>
<TABLE>
<CAPTION>
SALES
In Million Dollars
(Graphic Material Omitted)
<S> <C> <C>
Year 1990 $676
1991 710
1992 744
1993 751
1994 790
</TABLE>
<TABLE>
<CAPTION>
OPERATING PROFIT
In Million Dollars
(Graphic Material Omitted)
<S> <C> <C>
Year 1990 $88
1991 79
1992 83
1993 66
1994 81
</TABLE>
<TABLE>
<CAPTION>
EARNINGS PER SHARE
FULLY DILUTED
NET INCOME
(Graphic Material Omitted)
<S> <C> <C>
Year 1990 $2.54
1991 2.21
1992 2.32
1993 1.67
1994 2.25
</TABLE>
<TABLE>
<CAPTION>
RETURN ON EQUITY
Percent
(Graphic Material Omitted)
<S> <C> <C>
Year 1990 27%
1991 20%
1992 19%
1993 13%
1994 17%
</TABLE>
-1-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion gives more depth on Stanhome's financial condition
and results of operations. You will probably find it helpful to have first read
the financial statements, accompanying notes and the financial highlights of
recent years.
SEGMENT SALES AND OPERATING PROFIT
GIFTWARE
Enesco Worldwide Giftware Group sales increased 14% in 1994 due to
acquisitions of new businesses and to continued unit volume growth from the
Precious Moments and Cherished Teddies collectible lines. Sales recorded from
new businesses acquired during 1994 were $9 million. The total 1994 annual
sales of the new businesses acquired were $46 million. The Precious Moments
line represented 45% of 1994 sales compared to 46% in 1993 and the Cherished
Teddies line represented 15% of sales in 1994 compared to 11% in 1993.
International operations represent 12% of sales in 1994 and 1993. Excluding the
new acquisitions, international sales declined due to significantly lower sales
from Australia. The Australian company was sold to a distributor in April 1994,
and the close-out costs were provided for in the 1993 restructuring. In 1994,
the Australian company recorded $.3 million in sales and no loss compared to
sales of $2.5 million and an operating loss of $1.1 million in 1993. Excluding
Australia and the new acquisitions, international sales and operating profit
increased. Total Group operating profit increased for 1994 led by the United
States and benefited from a lower percentage of selling, general and
administrative expenses principally due to the favorable impact of the sales
increase on fixed costs combined with the benefits from the 1993 restructuring.
The total benefits from the restructuring for 1994 improved operating profit by
approximately $2.2 million and the 1995 benefit is expected to be approximately
$.8 million. The impact of the new acquisitions during the fourth quarter
reduced total operating profit due principally to the cost to move and
assimilate the Otagiri business into the Enesco U.S. operations and the start-up
costs to develop a separate sales force and marketing effort for the new
International Collections Division which will sell and market the new
acquisition lines in the U.S. These costs were the primary reason that fourth
quarter operating profit increased at a lower rate than sales.
Enesco Worldwide Giftware Group sales increased 5% in 1993 due to new
product introductions and continued growth in collectible licensed lines. The
Precious Moments product line continued to be Giftware's most important line and
accounted for 46% of sales in 1993 versus 49% in 1992. A 6% sales increase in
the United States, which represents 88% of total group 1993 sales, was partially
reduced by a sales decrease from international operations, due principally to
unfavorable currency translation rates versus 1992. Giftware incurred a
restructuring charge of $4 million in 1993 to turn the Australian subsidiary
into a distributorship and to consolidate into the Elk Grove Village, Illinois
location certain other U.S. operations in order to improve service and
efficiencies. Excluding the 1993 Giftware restructuring, operating profit
increased 9% and benefited from a lower percentage of selling, general and
administrative expenses in the United States and Canada. Operating results from
Europe and Australia decreased on the lower sales volume and caused total cost
of sales of the Group to increase slightly as a percentage of sales in 1993
versus 1992. The fourth quarter Giftware percentage increase in sales and
operating profit was higher than the third quarter due to seasonality and due to
delivery of collectible products from the Far East. Giftware's sales mix has
been shifting to more collectible
-21-
<PAGE>
licensed lines which are generally on back order and shipped when received
versus shipped from existing inventory. As such, quarterly results can be
impacted by delays and/or improvement in deliveries. Effective July 1, 1993, a
new license agreement with Precious Moments, Inc. commenced, which extended the
term of the license and increased the royalty rates of Precious Moments licensed
product sales. The percentage royalty rate increases between 1993 and 1996
totaling approximately 3% of licensed sales are expected to be recovered through
price increases and cost reductions.
DIRECT RESPONSE
Hamilton Worldwide Direct Response Group sales increased 4% in very
competitive market conditions due principally to unit volume increases in plates
and figurines. Doll sales decreased to 31% of sales in 1994 compared to 38% in
1993. International sales decreased and operating losses increased.
International sales accounted for 9% of sales in 1994 compared to 10% in 1993.
Total operating profit benefited from a 1% decrease in cost of sales due to
sales mix. Selling, general and administrative expenses increased to 63% of
sales in 1994 compared to 60% in 1993 due to higher advertising expenses.
Advertising expense increased to 49% of sales versus 46% in 1993 due to lower
sales response rates in 1994 reflecting the very competitive market conditions.
Higher advertising expense was also the cause for the operating margin decline
for the fourth quarter.
Hamilton Worldwide Direct Response Group sales increased 35% in 1993 due
principally to unit volume increases in plates in the United States, which
benefited from exceptional response to new licensed lines and to the expansion
of ship-on-credit programs which have a much higher net sales response rate.
Plate sales represented 51% of sales in 1993 and 38% in 1992. Operating profit
increased 42% and increased as a percentage of sales due to a lower percentage
of selling, general and administrative expenses which benefited from the impact
of higher sales on fixed costs. Cost of sales increased as a percentage of
sales due to sales mix. International results which account for 10% of 1993
sales decreased compared to 1992 due principally to unfavorable currency
translation rates versus 1992.
In the United States, sales taxes are only collected in those states where
Hamilton has a physical presence. Following a U.S. Supreme Court decision
supporting this principle, several states have increased efforts to collect
sales tax from their residents on out-of-state mail order purchases and
legislation has been introduced in the U.S. Senate to override the Supreme
Court's decision on this issue. If Hamilton had to collect sales taxes in all
states, it would result in increased administrative cost of doing business.
DIRECT SELLING
Worldwide Direct Selling Group sales for 1994 decreased 6% due to closed
operations from the restructuring program, sluggish European economies,
unfavorable foreign currency translation rates, and lower sales in the United
States. Excluding the 1993 restructuring of $13 million, operating profit
decreased 11% due to the lower sales and higher selling and marketing expenses
that did not generate the expected sales results. Higher selling and marketing
expenses were also the cause of the operating profit margin decline during the
fourth quarter. Total year sales of operations that have been discontinued as a
result of the restructuring program were $.9 million in 1994 and $5 million in
1993, and there were minor operating losses in 1994 compared to an operating
loss in 1993 of $1.8 million. In addition, the restructuring program has
resulted in cost reductions of approximately $4.4 million in 1994 compared to
1993, and the 1995 benefit is expected to be approximately $.8 million.
-22-
<PAGE>
European Direct Selling sales, which represented 72% of the total Group
1994 sales, decreased 4% due to local currency declines, unfavorable currency
translation rates in 1994 compared to 1993, and to discontinued operations in
Germany and Portugal which had 1993 sales of $1.1 million and operating losses
of $.9 million. Excluding the 1993 restructuring, operating profit decreased
4%. European local currency 1994 sales and operating profit translated at 1993
average exchange rates would have resulted in a 3% sales and operating profit
decrease. Excluding the restructuring impact for 1993 and 1994, the operating
profit percentage decline exceeded the sales decline due to significantly higher
levels of spending that did not generate the expected sales results. The
Company has previously reported that its Italian subsidiary, Stanhome S.p.A.,
has been assisting its independent Dealers in the defense of personal tax
assessments made against them in connection with the distribution of hostess
gifts as part of the Stanhome Party Plan System, by paying legal expenses,
advancing amounts for tax deposits, or making settlement payments where this is
more cost effective than potential litigation costs, so as to protect its Dealer
force and its ability to recruit and retain future Dealers. These payments have
not been material. Stanhome S.p.A. has received, during 1994, a favorable
ruling from the Italian government regarding certain tax consequences of the
distribution of the hostess gifts. This ruling should lead to a favorable
resolution of the ongoing Dealer tax litigation concerning these assessments.
To the extent necessary, the Italian subsidiary will continue to assist Dealers
in the defense of these assessments.
Latin American sales and operating profit increased due to unit volume
increases despite the maxi devaluations in Mexico and Venezuela during 1994.
Latin American sales and operating profit in 1994 represented 14% of Group sales
and 19% of operating profit. The currency devaluations and resulting local
economic impacts in Mexico and Venezuela could significantly impact U.S. dollar
results in 1995, particularly if the local companies are unable to increase
prices.
Sales in 1994 for U.S. Direct Selling decreased 10% and the operating loss
increased to over $3 million, despite cost reductions resulting from the
restructuring program. Significantly higher spending did not generate sales
increases. Due to the disappointing results despite vigorous efforts to turn
the U.S. business around, the U.S. Direct Selling business, including Puerto
Rico, will be closed in 1995 and the Stanley Home Products brand name will be
licensed in the United States, Puerto Rico and Canada. Sales and operating
losses for the business in 1994 were $36 million and $3.5 million, respectively.
The assets of these companies will be disposed of during 1995 and virtually all
of the associates will be terminated. The severance and other exit costs are
expected to approximate $6 million, and to be offset by gains on the sale of
assets of the business.
Worldwide Direct Selling Group sales decreased 15% due to lower unit
volumes and unfavorable currency translation rates in 1993 compared to 1992.
During 1993, Direct Selling incurred a restructuring charge of $13 million to
close losing operations and to take advantage of consolidation opportunities
principally in the distribution and administrative functions to achieve, when
completed, cost savings of an expected $8 million. As a result of
restructuring, the last six months of 1993 compared to 1992 reflected improved
operating profit of approximately $.6 million. Excluding the Direct Selling
restructuring charge of $13 million, operating profit decreased 27%, reflecting
the impact of lower sales on fixed costs combined with a higher percentage of
selling, general and administrative expense.
-23-
<PAGE>
European Direct Selling sales, which represent 71% of the total group 1993
sales, decreased 20% due to local currency declines, reflecting the poor
economic conditions, and to unfavorable currency translation rates in 1993
compared to 1992. European local currency 1993 sales and operating profit
translated at 1992 average exchange rates would have resulted in a 5% sales
decrease and a 15% operating profit decrease. Italian value-added sales tax
and, in some cases, income tax issues concerning the Italian independent
Dealers, as well as registration taxes imposed by the government which affect
the Dealer force, have caused Dealers to leave and potential recruits to decline
to join. During 1993, these conditions persisted as Dealers continued to
receive personal tax assessments. The European operations incurred a
restructuring charge in 1993 to close subsidiaries in Germany and Portugal,
eliminate three distribution centers and to reduce work force levels. The 1993
combined sales and operating losses of Germany and Portugal were $1.1 million
and $.9 million, respectively.
Excluding the 1992 results of the Brazilian subsidiary, which was sold
during the third quarter of 1992, Latin American Direct Selling sales and
operating profit increased during 1993. For 1992, Brazilian sales were $1.9
million with an operating loss of $1.1 million.
Sales in 1993 for the U.S. Direct Selling operations decreased and an
operating loss was recorded prior to restructuring. The United States
operations incurred a restructuring charge to close the Industrial Division, the
Gift Gallery Division, two distribution centers, to eliminate self-manufacturing
and to reduce work force levels. The 1993 combined sales and operating loss of
the Gift Gallery and the Industrial Divisions were $3.9 million and $.9 million,
respectively.
GENERAL CORPORATE EXPENSES increased in 1994 due to a $3.5 million charge for
contract obligations for officers leaving the Company and due to higher
compensation and benefits consistent with the Company's programs.
INTEREST EXPENSE AND OTHER INCOME, NET
Interest expense in 1994 increased for the fourth quarter and year due to
international borrowings for acquisitions during the fourth quarter. Interest
income decreased in 1994 due to lower levels of investments. The 1994 gains on
the sale of assets were principally from the sales of the Company's Direct
Selling Zanesville, Ohio Customer Care Center in the first quarter and Puerto
Rico Distribution Center in the third quarter. The amortization of goodwill
increased due to the impact from the fourth quarter acquisitions.
Interest income and interest expense in 1993 and 1992 both decreased from
the prior year due to lower rates, to lower levels of investments in Europe and
to lower levels of borrowings in the United States. Other assets amortization
increased in 1993 and 1992 due to higher goodwill amortization resulting from
acquisitions. Net gains on the sale of assets in 1992 was principally from a
gain of $1.7 million, net of anticipated relocation and restructuring charges,
from the sale of the Company's Direct Selling Brazilian manufacturing, warehouse
and distribution facility in the first quarter of 1992 and the subsequent sale
in August of the Brazilian company's stock for a nominal value but at a loss.
The book value of the sold facility was $1.8 million. On the stock sale, total
assets sold approximated the liabilities. The book value of assets sold was
$1.8 million, comprised of $1.3 million of working capital and $.5 million of
net plant and equipment and other assets.
-24-
<PAGE>
INCOME TAXES
The effective tax rates for 1994 were lower than 1993, excluding the impact
of the restructuring charge, due to a favorable earnings mix with a lower ratio
of foreign income to United States income, which has a lower rate.
The effective tax rate for 1993 increased to 50% due to the impact of the
restructuring charge. The tax benefit of $5.5 million, or 32% of the $17
million restructuring charge, was limited by the inability to fully receive tax
benefits for all of the charges in certain international locations. Excluding
the restructuring charge, the effective tax rate was 46%, the same as 1992.
Increased statutory rates in 1993 for the United States and international were
offset by a favorable earnings mix with a higher ratio of United States income
which has a lower rate.
INFLATION, CHANGING PRICES AND ECONOMIC CONDITIONS
Although the Company's operations are affected by general economic trends,
inflation and changing prices did not have a material impact on 1994 and 1993
results compared to prior years for operations in Europe and North America.
Operations in Latin America, particularly Venezuela and most recently Mexico,
have experienced highly inflationary economies with rapidly changing prices in
local currencies. These conditions, with the resulting adverse impact on local
economies, have made it difficult for operations in these locations to achieve
adequate operating margins. In addition, the strengthening of the dollar versus
Latin American currencies has resulted in lower U.S. dollar results for these
operations. European operations were not significantly impacted by translation
rates in total for 1994. European operations were unfavorably impacted by lower
currency translation rates in 1993 compared to 1992. The value of the U.S.
dollar versus international currencies where the Company conducts business will
continue to impact the future results of these businesses. In addition to the
currency risks, the Company's international operations, including sources of
imported products, are subject to the risks of doing business abroad including
import or export restrictions and changes in economic and political climates.
FINANCIAL CONDITION
The Company has historically satisfied its capital requirements with
internally generated funds and short-term loans. Working capital requirements
fluctuate during the year and are generally greatest during the third quarter
and lowest at the beginning of the first quarter.
The major source of funds from operating activities was net income. Net
accounts receivable increased 14% in 1994 and 15% in 1993 due to increased sales
volumes, extended credit in giftware to provide customers better service and
competitive terms, and to a higher percentage of direct response products,
particularly plates, sold on credit. The allowance for losses on accounts
receivable decreased as a percentage of accounts receivable primarily due to the
deletion of non-paying accounts sooner in 1994 compared to 1993. Extended
credit terms to customers has been a very effective means to increase sales and
profits and will continue to be utilized in the future. Inventories increased
22% in 1994 due to the inventories of businesses acquired, to
-25-
<PAGE>
support the higher level of sales to product mix in Giftware and to lower than
expected sales from Direct Selling. Inventories decreased 21% in 1993 following
the Company's effort to improve inventory turns and customer deliveries. Lower
currency translation rates in 1993 versus 1992 represented 3% of the inventory
reduction. Prepaid expense increased 30% in 1994 due to a higher level of
advertising. Prepaid advertising expense increased 28% in 1993 due to
continuing market efforts in support of higher sales for the Direct Response
Group. Total current liabilities increased 42% in 1994 due principally to the
liabilities of the businesses acquired, higher level of sales, the short-term
debt increase to acquire the businesses and to timing difference of payments
versus 1993. Total current liabilities increased 13% in 1993 due principally to
the restructuring accrual and an increase in the acquisition accrual following
the Hamilton Direct Response profit increase.
The major use of cash in investing activities for 1994 was for the
acquisition of businesses which included $9.5 million for the final earn out
payment for The Hamilton Group Limited, Inc. All of the acquisitions were
accounted for using the purchase method. The allocation to goodwill in 1994
from acquisitions was $63 million and is being amortized on a straight-line
basis over forty years. The assets of the three businesses acquired were
accounts receivable $10.7 million, inventories $6.2 million, property, plant and
equipment $4.8 million and other $.4 million. The sources of funds for all
expenditures were from cash and investments, and short-term loans. Capital
expenditures of $25 million are planned for 1995. The Company has an
acquisition program and may utilize funds for this purpose in the future.
Proceeds from the sale of property in the United States and Puerto Rico were
primarily from the sale of distribution facilities. Marketable securities have
principally consisted of Italian treasury bills and commercial paper. The
Italian subsidiary invests excess cash in short-term investments which change
from time to time based on availability and rates. The level of changes of
marketable securities among the years principally represents investment
alternatives versus certificates of deposit and time deposits.
The major use of cash in financing activities was for dividends to
shareholders and purchases of common stock. Purchases of common stock included
shares repurchased by the Company and shares received from optionees to pay for
the exercise price of options. Note 3 to the Financial Statements provides a
detailed summary of treasury stock activity. The Company has an authorized
program to purchase shares of stock for the Company treasury from time to time
in the open market, depending on market and business conditions, and may utilize
funds for this purpose in the future. As of December 31, 1994, 1.0 million
shares remained available for purchase under the program. The Company's
earnings, cash flow, and available debt capacity have made and make stock
repurchases, in the Company's view, one of its best investment alternatives.
The major source of funds from financing activities continued to be from the
exercise of stock options. Total stock options outstanding at the exercise
price amounted to $71 million at December 31, 1994 and the Company could receive
these funds in the future if the options are exercised.
Annually, the Company makes provisions to record its obligation to pay, in
the future, insurance premiums for postretirement benefits to eligible
employees, and severance allowances to eligible employees of certain foreign
subsidiaries upon their voluntary or involuntary separation. These obligations
are not funded because there is not a financial benefit to fund them.
-26-
<PAGE>
Fluctuations in the value of the U.S. dollar versus international
currencies affect the U.S. dollar translation value of international currency
denominated balance sheet items. The changes in the balance sheet dollar values
due to international currency translation fluctuations are recorded as a
component of shareholders' equity. Shareholders' equity in 1994 decreased $.3
million due to international currency fluctuations impacting the cumulative
translation component of shareholders' equity. The translation adjustments to
the December 31, 1994 balance sheet that produced the 1994 change in the
cumulative translation component of shareholders' equity were a decrease in
working capital by $.3 million; but an increase in net property, plant and
equipment and other assets by $.5 million; and long-term liabilities by $.5
million. The Company depends upon its international operations to pay dividends
and to make other payments to the Company. The Company's international
operations are subject to the risks of doing business abroad including currency,
economic and political.
As of December 31, 1994, the Company and its subsidiaries had approximately
$145 million of unused formal and informal lines of credit. With the level of
funds generated from operations, the level of working capital and the unused
lines of credit, no liquidity problems are anticipated.
-27-
<PAGE>
CONSOLIDATED BALANCE SHEET
December 31, 1994 and 1993
STANHOME INC.
<TABLE>
<CAPTION>
ASSETS
1994 1993
---- ----
<S> <C> <C>
CURRENT ASSETS:
Cash (including interest bearing
demand deposits)........................ $ 14,027,093 $ 20,870,000
Certificates of deposit and time deposits. 5,322,746 32,463,754
Marketable securities, at cost
(which approximates market value)....... 2,000 7,392,380
Notes and accounts receivable, net........ 140,696,603 123,018,073
Inventories............................... 116,015,060 94,877,441
Prepaid advertising....................... 40,099,913 30,946,289
Other prepaid expenses.................... 6,513,723 4,783,884
------------ ------------
Total current assets............ 322,677,138 314,351,821
------------ ------------
PROPERTY, PLANT AND EQUIPMENT, at cost:
Land and improvements..................... 6,802,354 6,854,447
Buildings and improvements................ 53,263,633 42,099,109
Machinery and equipment................... 26,445,094 26,931,332
Furniture and fixtures.................... 34,893,535 28,348,373
Transportation equipment.................. 4,591,010 3,618,538
------------ ------------
125,995,626 107,851,799
Less - Accumulated depreciation
and amortization........................ 68,036,607 63,177,270
------------ ------------
57,959,019 44,674,529
------------ ------------
OTHER ASSETS:
Goodwill and other intangibles, net....... 121,586,984 61,749,461
Other..................................... 9,899,491 8,954,915
------------ ------------
131,486,475 70,704,376
------------ ------------
$512,122,632 $429,730,726
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
-28-
<PAGE>
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
1994 1993
---- ----
<S> <C> <C>
CURRENT LIABILITIES:
Notes and loans payable.............. $ 39,022,890 $ 834,197
Accounts payable..................... 63,072,000 51,166,414
Federal, state and
foreign taxes on income............ 37,062,510 21,598,997
Accrued expenses -
Payroll and commissions............ 17,423,516 12,844,332
Vacation, sick and
postretirement benefits.......... 9,435,495 9,074,991
Pensions and profit sharing........ 9,055,259 5,094,628
Royalties.......................... 7,974,606 7,319,675
Restructuring...................... 4,904,447 10,840,975
Acquisitions....................... 208,042 9,125,000
Other.............................. 32,058,755 27,153,269
------------ ------------
Total current liabilities... 220,217,520 155,052,478
------------ ------------
LONG-TERM LIABILITIES:
Foreign employee severance obligations 13,207,097 12,869,999
Pensions............................. 9,302,239 7,442,344
------------ ------------
Total long-term liabilities. 22,509,336 20,312,343
------------ ------------
COMMITMENTS AND CONTINGENCIES (Note 11)
SHAREHOLDERS' EQUITY:
Common stock, par value $.125--
Authorized 80,000,000 shares
Issued 25,228,240 shares........... 3,153,530 3,153,530
Capital in excess of par value....... 37,376,690 34,015,110
Retained earnings.................... 362,946,840 338,753,939
Cumulative translation adjustments... ( 27,660,727) ( 27,405,455)
------------ ------------
375,816,333 348,517,124
Less - Shares held in treasury, at cost-
Common stock, 6,077,397 shares in
1994 and 5,836,617 in 1993....... 106,420,557 94,151,219
------------ ------------
Total shareholders' equity.. 269,395,776 254,365,905
------------ ------------
$512,122,632 $429,730,726
============ ============
</TABLE>
-29-
<PAGE>
CONSOLIDATED STATEMENT OF INCOME
For the Years Ended December 31, 1994, 1993 and 1992
<TABLE>
<CAPTION>
STANHOME INC.
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
NET SALES.................. $790,176,497 $750,662,776 $744,072,178
COST OF SALES.............. 324,988,902 304,659,476 295,118,460
------------ ------------ ------------
GROSS PROFIT............... 465,187,595 446,003,300 448,953,718
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSE... 384,635,879 363,451,535 365,520,560
RESTRUCTURING CHARGE....... - 17,000,000 -
------------ ------------ ------------
OPERATING PROFIT........... 80,551,716 65,551,765 83,433,158
Interest expense......... ( 2,019,272) ( 2,010,964) ( 3,351,435)
Other income, net........ 2,206,760 2,598,911 6,910,383
------------ ------------ ------------
INCOME BEFORE INCOME TAXES. 80,739,204 66,139,712 86,992,106
Income taxes............. 36,683,643 33,007,035 40,275,836
------------ ------------ ------------
NET INCOME................. $ 44,055,561 $ 33,132,677 $ 46,716,270
============ ============ ============
EARNINGS PER COMMON SHARE:
Primary.................. $ 2.26 $ 1.68 $ 2.32
Fully diluted............ $ 2.25 $ 1.67 $ 2.32
</TABLE>
CONSOLIDATED STATEMENT OF RETAINED EARNINGS
For the Years Ended December 31, 1994, 1993 and 1992
<TABLE>
<CAPTION>
<S> <C> <C> <C>
BALANCE, beginning of year. $338,753,939 $325,241,068 $297,474,456
Net income............... 44,055,561 33,132,677 46,716,270
Cash dividends, $1.03 per
share in 1994, $1.00 per
share in 1993 and $.96
per share in 1992....... ( 19,862,660) ( 19,619,806) ( 18,949,658)
------------ ------------ ------------
BALANCE, end of year....... $362,946,840 $338,753,939 $325,241,068
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
-30-
<PAGE>
CONSOLIDATED STATEMENT OF CASH FLOWS
For the Years Ended December 31, 1994, 1993 and 1992
STANHOME INC.
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income......................... $44,055,561 $33,132,677 $46,716,270
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation and amortization
of property, plant and
equipment....................... 7,657,414 8,354,026 8,396,192
Allowance for losses on
accounts receivable ( 481,711) 3,325,574 1,375,162
Amortization of other assets..... 2,782,503 2,285,245 2,215,827
Gains on sale of capital assets.. ( 1,270,990) ( 14,042) ( 1,348,354)
Changes in assets and liabilities,
net of effects from
acquisition of businesses:
Notes and accounts receivable.. ( 5,967,513) ( 22,606,637) ( 9,670,399)
Inventories.................... ( 14,922,629) 21,845,489 ( 12,020,004)
Prepaid expenses............... ( 10,422,429) ( 7,446,253) ( 8,800,142)
Other assets................... ( 603,181) ( 708,612) ( 465,747)
Accounts payable and accrued
expenses...................... 9,596,362 20,834,829 6,043,281
Taxes on income................ 14,774,597 ( 435,117) ( 1,303,172)
Foreign employee
severance obligations......... ( 185,798) 3,650 975,603
Long-term pensions............. 1,859,895 728,405 827,236
----------- ----------- -----------
Net cash provided by
operating activities.............. 46,872,081 59,299,234 32,941,753
----------- ----------- -----------
INVESTING ACTIVITIES:
Purchase of property,
plant and equipment............... ( 16,755,519) ( 6,511,449) ( 6,873,397)
Acquisition of businesses,
net of cash acquired,
including additional
contingent cash payments.......... ( 78,674,108) ( 199,858) ( 316,469)
Proceeds from sale of property,
plant and equipment............... 4,022,600 572,110 3,823,213
Other, principally
marketable securities............. 7,816,024 ( 811) ( 4,753)
----------- ----------- -----------
Net cash used by
investing activities.............. ( 83,591,003) ( 6,140,008) ( 3,371,406)
----------- ----------- -----------
FINANCING ACTIVITIES:
Cash dividends..................... ( 19,862,660) ( 19,619,806) ( 18,949,658)
Exchanges and purchases
of common stock................... ( 12,884,838) ( 12,232,407) ( 9,104,261)
Notes and loans payable............ 31,647,562 ( 260,780) ( 9,472,177)
Exercise of stock options.......... 3,668,231 870,676 5,812,857
Other common stock issuance........ 308,849 327,144 290,768
----------- ----------- -----------
Net cash provided/(used) by
financing activities.............. 2,877,144 ( 30,915,173) ( 31,422,471)
----------- ----------- -----------
Effect of exchange rate changes on
cash and cash equivalents......... ( 142,137) ( 2,703,535) ( 5,688,688)
----------- ----------- -----------
Increase/(decrease) in cash and
cash equivalents.................. ( 33,983,915) 19,540,518 ( 7,540,812)
Cash and cash equivalents,
beginning of year................. 53,333,754 33,793,236 41,334,048
----------- ----------- -----------
Cash and cash equivalents,
end of year....................... $19,349,839 $53,333,754 $33,793,236
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-31-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1994, 1993 and 1992
1. ACCOUNTING POLICIES:
-------------------
The accompanying consolidated financial statements include the accounts of
Stanhome Inc. and its subsidiaries. All significant intercompany transactions
have been eliminated in the consolidated financial statements. Certain
reclassifications have been made in the 1993 and 1992 financial statements to
conform to the 1994 presentation.
The carrying amount of cash and certificates of deposit and notes and loans
payable approximate fair value.
The Company considers all highly liquid securities, including certificates
of deposit, with maturities of three months or less, when purchased, to be cash
equivalents. Marketable securities have consisted primarily of treasury bills
and commercial paper maturing as follows (in thousands):
Maturity Dates 1994 1993
-------------- ---- ----
Three months or less................. $ - $ -
Over three months.................... 2 7,392
------- -------
$ 2 $ 7,392
======= =======
The Company recognizes revenue as merchandise is turned over to the
shipper. Sales by certain International direct selling subsidiaries are
transacted at retail prices. However, these sales are reflected in the
consolidated financial statements at equivalent wholesale selling prices.
Notes and accounts receivable were net of allowance for doubtful accounts
of $15,249,000 and $15,731,000 at December 31, 1994 and 1993, respectively.
Inventories are valued at the lower of cost or market. Cost components
include labor, manufacturing overhead and amounts paid to suppliers of
materials. The Company values raw materials and certain manufactured and
purchased items in the United States and Italy utilizing the last-in, first-out
method while the first-in, first-out method is used for substantially all other
inventories. The cost on a first-in, first-out basis over the carrying amount
of inventories as reflected in the accompanying consolidated balance sheet was
$1,971,000 and $1,232,000 at December 31, 1994 and 1993, respectively.
The major classes of inventories were as follows (in thousands):
1994 1993
---- ----
Raw materials and supplies........... $ 7,071 $ 6,710
Work in process...................... 818 644
Finished goods in transit............ 9,949 8,762
Finished goods....................... 98,177 78,761
-------- --------
$116,015 $ 94,877
======== ========
The Company incurs prepaid advertising expense in connection with the
marketing of certain of its direct response products. Such expense is amortized
over the life of the associated product programs which is generally
-32-
<PAGE>
one year. The impact of adopting the AICPA's Statement of Position 93-7
("Reporting on Advertising Costs") was immaterial to the Company as the Company
was already in compliance with all the Statement's accounting provisions.
Depreciation is provided over the estimated useful lives of the assets
utilizing straight-line and declining balance methods. The methods for
financial statement and income tax purposes differ in some circumstances,
resulting in deferred income taxes.
The estimated useful lives of the various classes of assets are:
Range in Years
--------------
Land improvements.................... 10-15
Buildings and improvements........... 15-40
Machinery and equipment.............. 5-12
Furniture and fixtures............... 5-10
Transportation equipment............. 3-8
Intangible assets, primarily goodwill, result from the allocation of the
excess cost of acquisitions over net tangible assets acquired. Intangible
assets are amortized using the straight-line method principally over 20 to 40
years. Intangible assets were net of accumulated amortization of $21,838,000
and $19,113,000 at December 31, 1994 and 1993, respectively. Business segment
amortization was as follows (in thousands):
1994 1993 1992
---- ---- ----
Giftware......................... $2,108 $1,702 $1,725
Direct Response.................. 666 574 477
Direct Selling................... 9 9 14
------ ------ ------
Total Consolidated............... $2,783 $2,285 $2,216
====== ====== ======
Total interest paid was $1,860,000 in 1994, $2,015,000 in 1993 and
$3,418,000 in 1992. The weighted average interest rate on short-term loans
outstanding was 6.5% and 8.1% at December 31, 1994 and 1993, respectively.
The Company accrues appropriate U.S. and foreign income taxes on earnings
of subsidiary companies which are intended to be remitted to the parent company
in the near future. The cumulative amount of unremitted earnings of
subsidiaries which has been, or is intended to be, permanently reinvested,
aggregated approximately $16,264,000 at December 31, 1994. Had such reinvested
unremitted earnings been distributed during 1994, applicable income taxes would
have amounted to approximately $3,742,000 representing primarily taxes which
would be withheld by foreign countries.
Primary earnings per common share are based on the average number of common
shares outstanding and common share equivalents during the year. Common share
equivalents represent dilutive stock options using the treasury stock method.
Fully diluted earnings per common share assumes, in addition to the above, an
additional dilutive effect of stock options.
-33-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1994, 1993 and 1992
The number of shares used in the earnings per common share computation for
1994, 1993 and 1992 were as follows:
1994 1993 1992
---- ---- ----
Primary
Average common shares outstanding 19,322,799 19,634,230 19,753,290
Stock options.................... 202,277 114,621 398,976
---------- ---------- ----------
Average shares primary........... 19,525,076 19,748,851 20,152,266
Fully diluted
Additional dilutive effect of
stock options................... 16,655 41,729 8,125
---------- ---------- ----------
Average shares fully diluted..... 19,541,731 19,790,580 20,160,391
2. EMPLOYEE BENEFIT PLANS:
----------------------
The Company and some of its subsidiaries have several employee benefit
plans covering most of their full time U.S. employees. The benefits under these
plans are based primarily on years of service and compensation rates near
retirement. The plans are funded in conformity with Federal tax and actuarial
regulations. The figures for the domestic plans include nonqualified
supplemental plans.
Pension expense for the domestic plans includes the following components
(in thousands):
1994 1993 1992
---- ---- ----
Service cost during the period..... $ 2,151 $ 1,236 $ 1,629
Interest cost on the projected
benefit obligation............... 2,620 2,492 2,250
Actual return on plan assets....... ( 48) ( 1,300) ( 894)
Net amortization of prior service
cost, net transition liability
and net loss ( 1,675) 45 ( 407)
------- ------- -------
Pension expense.................... $ 3,048 $ 2,473 $ 2,578
======= ======= =======
The following table sets forth the plans' funded status and amounts
recognized in the Company's balance sheet at December 31, 1994 and 1993 (in
thousands):
1994 1993
---- ----
Actuarial present value of benefit obligations:
Vested benefits.............................. $27,508 $28,632
Nonvested benefits........................... 967 1,551
------- -------
Accumulated benefit obligation............... 28,475 30,183
Additional obligation for future
salary increases............................. 7,232 7,102
------- -------
Projected benefit obligation................... 35,707 37,285
Fair value of plan assets, primarily
marketable securities........................ ( 22,697) ( 22,247)
------- -------
Unfunded excess of projected benefit obligation
over plan assets............................. 13,010 15,038
Unrecognized net transition asset/(liability),
being recognized over 15 years............... ( 848) ( 1,190)
Unrecognized prior service costs............... 803 216
Unrecognized net gain/(loss)................... ( 2,939) ( 4,843)
------- -------
Pension liability recognized in
the balance sheet............................ $10,026 $ 9,221
======= =======
-34-
<PAGE>
The weighted average discount rate used to measure the projected benefit
obligation ranges from 5% to 8%, the rate of increase in future compensation
levels ranges from 5% to 7% and the expected long-term rate of return on assets
is 8%.
Certain foreign subsidiaries are required to pay a severance allowance to
eligible employees upon voluntary or involuntary separation. Provision is made
annually for all eligible employees. Generally, such payments are based upon
years of service and level of compensation.
Severance expense for the combined foreign subsidiary severance allowance
programs includes the following components (in thousands):
1994 1993 1992
---- ---- ----
Service cost during the period... $ 1,213 $ 1,624 $ 1,911
Interest cost on the projected
benefit obligation............. 1,129 1,691 1,773
Actual return on plan assets..... ( 44) ( 31) ( 50)
Net amortization of prior service
cost, net transition liability
and net loss................... 344 262 132
------- ------- -------
Severance expense................ $ 2,642 $ 3,546 $ 3,766
======= ======= =======
The following table sets forth the programs' funded status and amounts
recognized in the subsidiaries' balance sheets at December 31, 1994 and 1993 (in
thousands):
1994 1993
Actuarial present value of
benefit obligations:
Vested benefits........................ $ 8,681 $ 9,563
Nonvested benefits..................... 1,055 1,855
------- -------
Accumulated benefit obligation......... 9,736 11,418
Additional obligation for future
salary increases....................... 3,241 7,254
------- -------
Projected benefit obligation............. 12,977 18,672
Fair value of plan assets................ ( 156) ( 209)
------- -------
Unfunded excess of projected benefit
obligation over plan assets............ 12,821 18,463
Unrecognized net transition asset/
(liability), being recognized
over 17 years.......................... ( 746) ( 1,132)
Unrecognized net gain/(loss)............. 1,132 ( 4,461)
------- -------
Severance liability recognized in the
balance sheet.......................... $13,207 $12,870
======= =======
-35-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1994, 1993 and 1992
The discount rates used to measure the foreign projected benefit obligation
range from 5% to 13.5%, the rate of increase in future compensation levels
ranges from 1.2% to 11.5% and funding is not significant.
In addition to providing pension benefits, the Company and its subsidiaries
sponsor a single-employer defined benefit postretirement health care and life
insurance plan. Substantially all of the U.S. direct selling and corporate
employees may become eligible for the benefits under this plan if they reach
allowable retirement age while working for the Company or its subsidiaries.
Those benefits are provided principally through insurance companies whose
premiums are based on the anticipated benefits to be paid. The total costs for
such retired employee benefits were principally accrued during their active
employment.
Effective January 1993, the Company adopted Statement No. 106 of the
Financial Accounting Standards Board and formalized its funding policy for the
plan. Under that policy, the Company pays premiums to insurance companies who
provide the postretirement benefits. The effect of adopting the statement in
1993 was not material to the Company.
Net periodic postretirement benefit expense includes the following
components (in thousands):
1994 1993
---- ----
Service cost......................... $ 280 $ 310
Interest cost on accumulated
postretirement benefit obligation.. 170 180
Actual return on plan assets......... - -
Amortization of net
transition liability............... - -
Net amortization and deferral........ - -
------- -------
Net periodic postretirement
benefit expense $ 450 $ 490
======= =======
The following table sets forth the funded status of the plan reconciled
with the amount shown in the Company's balance sheet at December 31, 1994 and
1993 (in thousands):
1994 1993
---- ----
Accumulated postretirement
benefit obligation:
Retirees........................... $ 2,652 $ 1,762
Fully eligible active
plan participants................ 459 933
Other active plan participants..... 2,085 2,657
------- -------
5,196 5,352
Plan assets at fair value............ - -
------- -------
Accumulated postretirement benefit
obligation in excess of plan assets 5,196 5,352
Unrecognized net gain/(loss)
from differences between past
experience and that assumed........ - -
Unrecognized prior service cost...... - -
Unrecognized net transition
asset/(liability).................. - -
------- -------
Accrued postretirement benefit
liability recognized
in the balance sheet............... $ 5,196 $ 5,352
======= =======
-36-
<PAGE>
A 25% annual rate of increase in the per capita cost of covered health care
benefits was assumed for 1995. The cost trend rate was assumed to decrease
gradually but still remain at double digit rates until 2020. After 2020, the
rate was assumed to drop to and stabilize at 8%. Increasing the assumed health
care expense trend rates by one percentage point in each year would increase the
accumulated postretirement benefit obligation as of December 31, 1994 by
$460,000 and the aggregate of the service and interest cost components of the
net postretirement benefit expense for the year then ended by $140,000.
The weighted-average discount rate used in determining the accumulated
postretirement benefit obligation was 6%.
In addition, provisions have been made for unfunded anticipated retirement
benefits for certain Officers. Also, certain subsidiaries have established
funded profit sharing and defined contribution retirement plans. Total
consolidated pension, severance allowance, profit sharing and retirement plan
expense amounted to $10,846,000 in 1994, $9,561,000 in 1993 and $9,614,000 in
1992.
In January 1995, the Company entered into an agreement with a third party
to license the domestic operations of its Worldwide Direct Selling Group (See
Note 10). As a result, approximately 350 participants of the qualified pension
plan will be retired or terminated in 1995. The impact of the plan curtailment
is an estimated gain of $477,000. However, as part of this termination,
affected participants were given an enhanced retirement benefit. The total cost
of these enhancements was approximately $1.2 million.
3. SHAREHOLDERS' EQUITY:
--------------------
In 1988, the Company's Board of Directors adopted a Stockholder Rights Plan
in which common stock purchase rights were distributed to shareholders at the
rate of one right for each share of common stock creating common stock together
with the associated common stock purchase rights ("common stock"). The rights
are exercisable at $85 per share and will expire on September 19, 1998.
In 1991, the shareholders approved a new Stock Option Plan previously
adopted by the Board of Directors which provides for both incentive and
nonqualified stock options. Options for up to 2,000,000 shares of common stock
may be granted under the 1991 Plan. The plan provides that nonqualified options
for 1,500 shares of common stock be granted annually from 1991 through 1995 to
each non-employee Director then serving. The Company also has a 1984 Stock
Option Plan, which provides for both incentive and nonqualified stock options,
under which options for up to 3,000,000 shares of common stock may be granted.
Both plans provide for the granting to selected key employees, and non-employee
Directors in the case of the 1991 Plan, of options to acquire shares of such
stock at a price not less than their fair market value at the time of grant.
Other option terms are determined at the time of grant, but normally options are
exercisable only after a one year waiting period in four equal annual
installments, and expire ten years from the date of grant.
In 1993, the Board of Directors approved a Special Interim Chief Executive
Officer Stock Option Plan which provided for a special one-time grant of
nonqualified stock options to the Company's Interim Chief Executive Officer in
lieu of cash compensation. These options vested fully in increments of 10,000
during each month in which he served in that capacity, are exercisable six
months after the date of grant, and expire ten years from the date of grant.
-37-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1994, 1993 and 1992
Stock option activity under all plans is summarized as follows:
Number
of Option
Shares Price
------ ------
Outstanding at December 31, 1991.... 1,381,760 $ 4.47-$41.12
Granted........................... 378,000 33.75- 33.88
Exercised......................... ( 245,583) 4.47- 28.50
Cancelled......................... ( 114,700) 20.13- 33.75
---------
Outstanding at December 31, 1992.... 1,399,477 4.97- 41.12
Granted........................... 499,200 26.88- 33.25
Exercised......................... ( 50,713) 4.97- 27.13
Cancelled......................... ( 97,350) 26.88- 33.88
---------
Outstanding at December 31, 1993.... 1,750,614 8.94- 41.12
Granted........................... 743,700 31.88- 35.50
Exercised......................... ( 140,052) 8.94- 33.75
Cancelled......................... ( 51,600) 20.13- 41.12
---------
Outstanding at December 31, 1994.... 2,302,662 $ 8.94-$41.12
=========
At December 31, 1994, there were 1,103,612 options vested and exercisable
and 753,850 shares available for future grants.
An analysis of treasury stock transactions for the years ended December 31,
1994, 1993 and 1992 is as follows:
Common
------
Shares Cost
------ ----
Balance, December 31, 1991.............. 5,437,446 $ 73,839,421
Purchases............................... 163,200 5,318,506
Stock option exchanges.................. 107,998 3,785,755
Exercise of stock options............... ( 245,583) ( 774,825)
Issue of PAYSOP shares.................. ( 5,596) ( 16,732)
Investment Savings Plan - 401(k) issues. ( 3,041) ( 9,466)
--------- ------------
Balance, December 31, 1992.............. 5,454,424 82,142,659
Purchases............................... 435,800 11,984,127
Stock option exchanges.................. 7,336 248,280
Exercise of stock options............... ( 50,713) ( 186,853)
Issue of PAYSOP shares.................. ( 5,790) ( 20,844)
Investment Savings Plan - 401(k) issues. ( 4,440) ( 16,150)
--------- ------------
Balance, December 31, 1993.............. 5,836,617 94,151,219
Purchases............................... 385,250 12,731,100
Stock option exchanges.................. 4,561 153,738
Exercise of stock options............... ( 140,052) ( 578,416)
Issue of PAYSOP shares.................. ( 5,598) ( 23,120)
Investment Savings Plan - 401(k) issues. ( 3,381) ( 13,964)
--------- ------------
Balance, December 31, 1994.............. 6,077,397 $106,420,557
========= ============
-38-
<PAGE>
In 1985, the Company approved a Payroll-Based Stock Ownership Plan
("PAYSOP") which provides common stock to eligible employees and allows the
Company a Federal income tax deduction equal to the market value of the issued
stock. In 1987, the Company introduced an Investment Savings Plan in accordance
with Section 401(k) of the Internal Revenue Code. One of the features of this
retirement savings plan provides common stock to eligible employees and allows
the Company a Federal income tax deduction equal to the market value of the
issued stock.
The change in capital in excess of par value resulted from the exercise of
stock options, including the related income tax benefit ($3,089,815, $683,823
and $5,038,032 in 1994, 1993 and 1992, respectively), issuance of PAYSOP shares
($172,605, $173,085 and $168,670 in 1994, 1993 and 1992, respectively) and
issuance of 401(k) Plan shares ($99,160, $117,065 and $95,900 in 1994, 1993 and
1992, respectively) noted above.
An analysis of the change in shareholders' equity from the cumulative
translation adjustment component for the years ended December 31, 1994, 1993 and
1992 is as follows (in thousands):
Cumulative Translation Adjustments
----------------------------------
Balance, December 31, 1991................... $13,453
Adjustment for 1992.......................... 8,884
-------
Balance, December 31, 1992................... 22,337
Adjustment for 1993.......................... 5,068
-------
Balance, December 31, 1993................... 27,405
Adjustment for 1994.......................... 256
-------
Balance, December 31, 1994................... $27,661
=======
4. OTHER INCOME, NET:
-----------------
Other income, net consists of the following (in thousands):
1994 1993 1992
---- ---- ----
Investment income........ $ 3,738 $ 4,207 $ 6,714
Gains on the sale of
capital assets and
other, net............. 1,302 54 1,759
Exchange transaction/
translation gains/
(losses), net.......... ( 51) 623 653
Other assets amortization ( 2,783) ( 2,285) ( 2,216)
------- ------- -------
$ 2,206 $ 2,599 $ 6,910
======= ======= =======
-39-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1994, 1993 and 1992
5. GEOGRAPHIC INFORMATION AND BUSINESS SEGMENTS:
--------------------------------------------
The Company operates predominately in two major geographic areas and three
business segments. The direct selling segment is engaged in the manufacture,
sale and distribution of household cleaning, personal grooming and related
products. The giftware segment imports and distributes creatively designed
giftware and collectibles to a diverse group of retailers. The direct response
segment markets collectibles and giftware to consumers and retailers.
Transfers between geographic areas and segments are made at the market
value of the merchandise transferred. The eliminations in the identifiable
assets are for intercompany receivables and profit in inventory. Corporate
assets have consisted principally of certificates of deposit, time deposits,
marketable securities and corporate receivables.
The following tables summarize the Company's operations by geographic area
and business segment for 1994, 1993 and 1992 (in thousands):
GEOGRAPHIC AREAS
1994 1993 1992
---- ---- ----
Net sales
United States........... $517,281 $480,258 $427,687
Europe.................. 204,418 205,326 250,885
Other International and
Eliminations.......... 68,477 65,079 65,500
-------- -------- --------
Total consolidated.. $790,176 $750,663 $744,072
======== ======== ========
Operating profit*
United States........... $ 61,497 $ 50,852 $ 54,790
Europe.................. 22,711 17,840 32,670
Other International and
Eliminations.......... 9,126 4,455 3,693
-------- -------- --------
Operating profit
before corporate
expense............. 93,334 73,147 91,153
General corporate
expense............. ( 12,782) ( 7,595) ( 7,720)
-------- -------- --------
Total consolidated.. $ 80,552 $ 65,552 $ 83,433
======== ======== ========
Identifiable assets
United States........... $324,802 $298,014 $275,989
Europe.................. 173,460 81,646 108,842
Other International and
Eliminations.......... 6,084 18,759 24,313
-------- -------- --------
Identifiable assets.. 504,346 398,419 409,144
Corporate assets..... 7,777 31,312 6,474
-------- -------- --------
Total consolidated.. $512,123 $429,731 $415,618
======== ======== ========
*Operating profit for 1993 includes restructuring charges of $10,110 for the
United States, $5,140 for Europe and $1,750 for other international locations.
-40-
<PAGE>
BUSINESS SEGMENTS
1994 1993 1992
---- ---- ----
Net sales
Giftware.................. $417,685 $367,531 $349,250
Direct Response........... 134,389 129,366 95,535
Direct Selling............ 240,996 255,120 300,058
Eliminations.............. ( 2,894) ( 1,354) ( 771)
-------- -------- --------
Total consolidated........ $790,176 $750,663 $744,072
======== ======== ========
Operating profit*
Giftware.................. $ 64,800 $ 52,593 $ 52,140
Direct Response........... 7,996 10,391 7,340
Direct Selling............ 20,538 10,163 31,673
-------- -------- --------
Operating profit before
corporate expense........ 93,334 73,147 91,153
General corporate expense. ( 12,782) ( 7,595) ( 7,720)
-------- -------- --------
Total consolidated........ $ 80,552 $ 65,552 $ 83,433
======== ======== ========
Depreciation and amortization
Giftware.................. $ 5,330 $ 5,261 $ 5,236
Direct Response........... 1,605 1,354 1,114
Direct Selling............ 3,248 3,761 4,048
-------- -------- --------
Depreciation and
amortization............. 10,183 10,376 10,398
Corporate depreciation and
amortization............. 257 263 214
-------- -------- --------
Total consolidated........ $ 10,440 $ 10,639 $ 10,612
======== ======== ========
Capital expenditures
Giftware.................. $ 12,032 $ 2,299 $ 2,493
Direct Response........... 1,192 1,105 852
Direct Selling............ 3,326 2,787 3,211
-------- -------- --------
Capital expenditures...... 16,550 6,191 6,556
Corporate capital
expenditures............. 206 320 317
-------- -------- --------
Total consolidated........ $ 16,756 $ 6,511 $ 6,873
======== ======== ========
Identifiable assets
Giftware.................. $474,174 $346,309 $315,092
Direct Response........... 108,688 90,890 69,239
Direct Selling............ 92,719 91,210 119,647
Eliminations.............. ( 171,235) ( 129,990) ( 94,834)
-------- -------- --------
Identifiable assets....... 504,346 398,419 409,144
Corporate assets.......... 7,777 31,312 6,474
-------- -------- --------
Total consolidated........ $512,123 $429,731 $415,618
======== ======== ========
*Operating profit for 1993 includes restructuring charges of $4,000 for Giftware
and $13,000 for Direct Selling.
-41-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1994, 1993 and 1992
6. INCOME TAXES (in thousands):
------------
Effective January 1993, the Company adopted Statement No. 109 of the
Financial Accounting Standards Board. Prior year financial statements have not
been restated for the effect of this statement. The effect of adopting the
statement in 1993 on net income was not material.
The domestic and foreign components of the net deferred tax liability on
income consist of the following:
Deferred Tax Benefit(Liability)
-------------------------------
1994 1993
---- ----
United States
Federal--
Prepaid advertising............ ($12,437) ($ 9,743)
Acquisition step-up
amortization adjustment....... ( 4,195) ( 4,213)
Accelerated depreciation....... ( 1,453) ( 1,463)
Inventory reserve.............. 5,328 4,170
Deferred compensation.......... 4,333 2,844
Bad debt reserve............... 2,581 1,914
Postretirement benefits........ 1,756 1,742
Returns and allowances reserve. 1,183 1,006
Other items, net............... 2,236 1,993
------- -------
( 668) ( 1,750)
------- -------
State--
Prepaid advertising............ ( 2,236) ( 1,759)
Acquisition step-up
amortization adjustment....... ( 902) ( 906)
Accelerated depreciation....... ( 307) ( 307)
Inventory reserve.............. 1,113 868
Deferred compensation.......... 924 602
Bad debt reserve............... 493 361
Postretirement benefits........ 378 375
Returns and allowances reserve. 254 215
Other items, net............... 508 456
------- -------
225 ( 95)
------- -------
Foreign
Accelerated depreciation....... ( 2,374) ( 2,686)
Other items, net............... 1,583 1,025
------- -------
( 791) ( 1,661)
------- -------
Total ($ 1,234) ($ 3,506)
======= =======
The domestic and foreign components of income before income taxes are as
follows:
1994 1993 1992
---- ---- ----
Domestic.............. $50,039 $46,198 $55,404
Foreign............... 30,700 19,942 31,588
------- ------- -------
$80,739 $66,140 $86,992
======= ======= =======
-42-
<PAGE>
The provision for income taxes consists of the following:
1994 1993 1992
---- ---- ----
Currently payable:
United States Federal..... $18,733 $15,658 $15,325
United States State....... 4,963 4,585 4,081
Foreign................... 15,259 13,459 20,968
------- ------- -------
38,955 33,702 40,374
------- ------- -------
Deferred:
United States Federal..... ( 1,082) 345 959
United States State....... ( 320) ( 9) 118
Foreign................... ( 870) ( 1,031) ( 1,175)
------- ------- -------
( 2,272) ( 695) ( 98)
------- ------- -------
$36,683 $33,007 $40,276
======= ======= =======
A reconciliation of the total effective tax rate to the statutory Federal
income tax rate is as follows:
1994 1993 1992
---- ---- ----
Statutory income tax rate........ 35.0% 35.0% 34.0%
State taxes, net of
Federal income tax effect...... 3.7 5.0 3.2
Impact of foreign tax
rates and credits.............. 4.2 4.4 5.6
Restructuring impact............. - 3.6 -
Foreign subsidiaries in
loss position receiving
little or no tax benefit....... .5 1.1 1.9
Impact of nondeductible expenses. 2.3 1.0 1.7
Other items, net................. ( .3) ( .2) ( .1)
---- ---- ----
Total effective income tax rate.. 45.4% 49.9% 46.3%
==== ==== ====
The Company made income tax payments of $21,909,000 in 1994, $33,442,000 in
1993 and $41,579,000 in 1992.
7. RESTRUCTURING PROGRAM:
---------------------
In the second quarter of 1993, the Company incurred a restructuring
charge of $17 million pre-tax, $11.5 million after tax, or $.58 per share. The
restructuring charge did not include any future operating expenses or future
systems enhancements. The tax benefit of $5.5 million, or 32%, was limited by
the inability to fully receive tax benefits for all of the charges in certain
international locations. The charge included $9.7 million for severance pay
related expenses, $4.8 million for facilities closing and moving, $1.7 million
write down of current assets, and $.8 million write down of net fixed assets.
There has not been any material change in the major components of the charges.
The restructuring charge was $13 million for Worldwide Direct Selling and $4
million for Enesco Worldwide Giftware. No additional charges are anticipated to
complete the restructuring program. The restructuring program takes advantage
of consolidation opportunities principally in the distribution and
administrative functions within the
-43-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1994, 1993 and 1992
Company to achieve future operating efficiencies and savings. The restructuring
included the closing of the Gift Gallery and Industrial Divisions in the United
States and the closing of subsidiary operations in Australia, Germany and
Portugal.
As of December 31, 1994, the restructuring program is virtually completed,
and has resulted in a reduction of approximately 460 employees worldwide. The
remaining restructuring accrual on the balance sheet as of December 31, 1994, is
$4.9 million, principally consisting of severance payments.
8. FINANCIAL INSTRUMENTS:
---------------------
The Company enters into various short-term foreign exchange agreements
during the year, all of which are held for purposes other than trading. The
purpose of the Company's foreign currency hedging activities is to protect the
Company from risk that the eventual settlement of foreign currency transactions
will be adversely affected by changes in exchange rates. The Company's various
subsidiaries import products in foreign currencies and from time to time will
enter into agreements or build foreign currency deposits as a partial hedge
against currency fluctuations on inventory purchases. Gains and losses on these
agreements are deferred and recorded as a component of cost of sales when the
related inventory is sold. At December 31, 1994, there were no open inventory
purchase agreements and deferred amounts were not material. The Company makes
short-term foreign currency intercompany loans to various international
subsidiaries and utilizes agreements to fully hedge these transactions against
currency fluctuations. The cost of these agreements is included in the interest
charged to the subsidiaries and expensed monthly as the interest is accrued.
The intercompany interest eliminates upon consolidation and any gains and losses
on the agreements are recorded as a component of other income. All of the
outstanding agreements as of December 31, 1994 are to hedge intercompany loans.
The Company receives dividends, technical service fees, royalties and other
payments from its subsidiaries. From time to time, the Company will enter into
foreign currency forward agreements as a partial hedge against currency
fluctuations on these current receivables. Gains and losses are recognized or
the credit or debit offsets the foreign currency payables. As of December 31,
1994, net deferred amounts on outstanding agreements were not material. The
outstanding agreement amounts (notional value) at December 31, 1994, are as
follows (in thousands):
United Kingdom $21,754
Italy 8,013
Canada 6,060
Germany 4,130
France 2,060
U.S. 1,750
-------
Total $43,767
=======
-44-
<PAGE>
9. ACQUISITION:
-----------
In September 1994, the Company announced an all cash tender offer to
acquire 100% of the shares of Lilliput Group plc ("Lilliput"), a U.K.-based
manufacturer and distributor of family giftware. Lilliput's products are sold
to a diverse group of retailers in the U.K. and United States, and through
export to 48 countries. Its primary product line is hand-painted miniature
cottages sold under the "Lilliput Lane" brand name.
As of December 31, 1994, the Company has acquired all of the outstanding
shares of Lilliput. The acquisition has been accounted for as a purchase, with
the purchase price in 1994 amounting to $62.5 million including broker and
related acquisition costs, with $.2 million of these acquisition costs payable
in the first quarter of 1995. Funds used for the purchase were provided from
the liquidation of the Company's short-term investments and incurrence of short-
term bank loans.
The purchase price was allocated to net assets acquired based upon their
fair values. The excess of the aggregate purchase price over the fair value of
net assets acquired of $54.8 million has been assigned to goodwill and will be
amortized on a straight-line basis over 40 years.
The Company's consolidated financial statements for 1994 reflect the
acquisition and the operating results since October of Lilliput.
The following unaudited pro forma combined results of operations for the
years ended December 31, 1994 and 1993, give effect to the acquisition of
Lilliput as though it had occurred at the beginning of the year. The pro forma
results are based on historical results of operations adjusted for acquisition
costs, and in the opinion of management, are not necessarily indicative of what
the results would have been had the Company operated
Lilliput since the beginning of 1993.
Pro Forma (Unaudited)
Year Ended December 31,
(in thousands, except
per share amounts)
----------------------
1994 1993
---- ----
Net sales $806,243 $773,719
Net income 42,520 32,376
Earnings per common share:
Primary $2.18 $1.64
Fully diluted $2.18 $1.64
Average shares of common
stock outstanding:
Primary 19,525 19,749
Fully diluted 19,542 19,791
-45-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1994, 1993 and 1992
10. SUBSEQUENT EVENT:
----------------
In January 1995, the Company entered into an agreement with a third party
to license the domestic operations of its Worldwide Direct Selling Group. The
business to be licensed, known as Stanley Home Products ("SHP"), markets home
care, personal care and cosmetic items to consumers through direct selling
programs. SHP, with net sales of approximately $36 million in 1994, has
produced operating losses for the past several years. It represents
approximately 14% of the Worldwide Direct Selling Group's 1994 net sales and
less than 5% of the Company's consolidated net sales. For 1994, SHP's operating
loss in the U.S. and Puerto Rico was approximately $3.5 million.
The agreement calls for the third party to license the trademarks and
formulas of SHP for use in the U.S., Puerto Rico and Canada, and remit to the
Company royalties based on sales of the related products.
The transfer of the SHP business is to be completed by the second quarter
of 1995. In connection with this agreement, the Company will close
administrative and distribution facilities in the U.S. and Puerto Rico during
the first quarter of 1995. Management believes that the total costs to exit the
SHP operations, including employee severance benefits, will be offset in 1995 by
a comparable amount of gains, approximately $6 million, primarily from the sale
of SHP's distribution facilities. The costs to exit the SHP operations are
therefore not expected to have a material adverse impact on the Company's future
operating results or financial condition. As of December 31, 1994 the net book
value of assets of the business to be disposed of were accounts receivable of
$1.8 million, net inventories of $6.4 million and net property, plant and
equipment of $1.9 million. In accordance with Emerging Issues Task Force Issue
94-3, exit costs were not recorded in 1994.
11. COMMITMENTS AND CONTINGENCIES:
-----------------------------
The Company and its subsidiaries incurred rental expense under operating
leases of $8,010,000 in 1994, $6,019,000 in 1993 and $7,616,000 in 1992.
The minimum rental commitments under noncancelable operating leases as of
December 31, 1994 are as follows (in thousands):
Period Aggregate Amount
------ ----------------
1995..................... $ 5,779
1996..................... 4,345
1997..................... 2,462
1998..................... 2,093
1999..................... 1,932
Later years................. 2,432
-------
Total minimum future rentals........ $19,043
=======
-46-
<PAGE>
The Company and its subsidiaries have entered into various licensing
agreements requiring royalty payments ranging from .5% to 15.5% of specified
product sales. Royalty expense under these licensing agreements totaled
$31,100,000 in 1994, $28,100,000 in 1993 and $23,900,000 in 1992. Pursuant to
the various licensing agreements, the future minimum guaranteed royalty payments
are $13,500,000 in 1995, $13,700,000 in 1996 and $12,100,000 in 1997.
At December 31, 1994, the Company had formal and informal unused lines of
credit of approximately $145,000,000.
There are various legal proceedings pending against the Company and its
subsidiaries which have arisen during the normal course of business. Management
does not believe that the ultimate outcome of those legal proceedings will have
a material adverse impact upon the consolidated financial condition of the
Company.
-47-
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
To the Shareholders and Board of Directors of Stanhome Inc.:
We have audited the accompanying consolidated balance sheet of Stanhome
Inc. (a Massachusetts corporation) and subsidiaries as of December 31, 1994 and
1993, and the related consolidated statements of income, retained earnings and
cash flows for each of the three years in the period ended December 31, 1994.
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 financial position of Stanhome Inc. and
subsidiaries as of December 31, 1994 and 1993, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1994 in conformity with generally accepted accounting principles.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Hartford, Connecticut
February 21, 1995
-48-
<PAGE>
QUARTERLY RESULTS (UNAUDITED):
-----------------
(In thousands, except per share amounts)
The following table sets forth information with respect to the consolidated
quarterly results of operations for 1994, 1993 and 1992. The amounts are
unaudited, but in the opinion of management include all adjustments necessary to
present fairly the results of operations for the periods indicated.
For the Three Months Ended
---------------------------------------------
March 31, June 30, Sept. 30, Dec. 3l,
1994 1994 1994 1994
-------- -------- -------- --------
Net sales.................. $171,769 $188,592 $193,255 $236,560
Cost of sales.............. 69,806 74,486 85,032 95,664
-------- -------- -------- --------
Gross profit............... 101,963 114,106 108,223 140,896
Selling, general and
administrative expense... 86,983 93,272 86,245 118,136
-------- -------- -------- --------
Operating profit........... $ 14,980 $ 20,834 $ 21,978 $ 22,760
======== ======== ======== ========
Net income................. $ 8,133 $ 11,608 $ 13,117 $ 11,198
======== ======== ======== ========
Earnings per common share:
Primary and fully diluted $ .41 $ .59 $ .67 $ .58
======== ======== ======== ========
For the Three Months Ended
---------------------------------------------
March 31, June 30, Sept. 30, Dec. 3l,
1993 1993 1993 1993
-------- -------- -------- --------
Net sales.................. $164,490 $187,236 $182,481 $216,456
Cost of sales.............. 65,200 72,871 77,698 88,891
-------- -------- -------- --------
Gross profit............... 99,290 114,365 104,783 127,565
Selling, general and
administrative expense... 87,407 95,646 83,354 97,044
Restructuring.............. - 17,000 - -
-------- -------- -------- --------
Operating profit........... $ 11,883 $ 1,719 $ 21,429 $ 30,521
======== ======== ======== ========
Net income................. $ 6,267 ($ 1,223) $ 11,900 $ 16,189
======== ======== ======== ========
Earnings per common share:
Primary and fully diluted $ .31 ($ .06) $ .60 $ .83
======== ======== ======== ========
For the Three Months Ended
---------------------------------------------
March 31, June 30, Sept. 30, Dec. 3l,
1992 1992 1992 1992
-------- -------- -------- --------
Net sales.................. $168,825 $184,817 $182,150 $208,280
Cost of sales.............. 66,710 70,478 76,540 81,390
-------- -------- -------- --------
Gross profit............... 102,115 114,339 105,610 126,890
Selling, general and
administrative expense... 88,142 93,902 85,038 98,439
-------- -------- -------- --------
Operating profit........... $ 13,973 $ 20,437 $ 20,572 $ 28,451
======== ======== ======== ========
Net income................. $ 8,200 $ 11,422 $ 11,718 $ 15,376
======== ======== ======== ========
Earnings per common share:
Primary and fully diluted $ .41 $ .57 $ .58 $ .76
======== ======== ======== ========
-49-
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS LAST TEN YEARS
(In thousands, except per share amounts)
STANHOME INC.
1994 1993a. 1992
<S> <C> <C> <C>
Net sales...................................... $790,176 $750,663 $744,072
Cost of sales.................................. 324,988 304,660 295,118
-------- -------- --------
Gross profit................................... 465,188 446,003 448,954
Selling, general and administrative expense.... 384,636 380,451 365,521
-------- -------- --------
Operating profit............................... 80,552 65,552 83,433
Interest expense............................... ( 2,019) ( 2,011) ( 3,351)
Other income, net.............................. 2,206 2,599 6,910
-------- -------- --------
Income before income taxes..................... 80,739 66,140 86,992
Income taxes................................... 36,683 33,007 40,276
-------- -------- --------
Net income..................................... $ 44,056 $ 33,133 $ 46,716
======== ======== ========
Earnings per common share fully diluted:
Net income.................................... $ 2.25 $ 1.67 $ 2.32
======== ======== ========
Average shares of common stock fully diluted... 19,542 19,791 20,160
Shares of common stock outstanding at year end. 19,151 19,392 19,774
Market value per common share at year end...... $ 31.63 $ 33.88 $ 34.75
Cash dividends paid or provided for............ $ 19,863 $ 19,620 $ 18,950
Dividends per common share..................... $ 1.03 $ 1.00 $ .96
Capital expenditures........................... $ 16,756 $ 6,511 $ 6,873
Depreciation................................... $ 7,657 $ 8,354 $ 8,396
Working capital................................ $102,460 $159,299 $160,977
Total assets................................... $512,123 $429,731 $415,618
Total long-term liabilities.................... $ 22,509 $ 20,312 $ 21,393
Shareholders' equity........................... $269,396 $254,366 $256,956
Book value per common share.................... $ 14.07 $ 13.12 $ 12.99
Return on average shareholders' equity......... 17% 13% 19%
</TABLE>
Note:
a. Includes a restructuring operating charge of $17 million pre-tax,
$11.5 million after tax or $.58 per share.
The financial data set forth above should be read in connection
with the financial statements, accompanying notes and Management's
Discussion on the preceding pages.
-50-
<PAGE>
<TABLE>
<CAPTION>
1991 1990 1989 1988 1987 1986 1985
<C> <C> <C> <C> <C> <C> <C>
$710,208 $675,665 $571,380 $480,374 $433,154 $380,501 $327,888
281,668 264,609 222,612 187,095 165,645 148,029 137,272
-------- -------- -------- -------- -------- -------- --------
428,540 411,056 348,768 293,279 267,509 232,472 190,616
349,404 323,547 268,478 219,094 202,774 180,133 154,732
-------- -------- -------- -------- -------- -------- --------
79,136 87,509 80,290 74,185 64,735 52,339 35,884
( 5,016) ( 5,394) ( 5,945) ( 8,142) ( 6,146) ( 3,378) ( 3,771)
7,019 8,143 5,305 5,756 3,847 1,587 2,630
-------- -------- -------- -------- -------- -------- --------
81,139 90,258 79,650 71,799 62,436 50,548 34,743
36,086 39,191 35,026 31,159 29,725 24,900 16,684
-------- -------- -------- -------- -------- -------- --------
$ 45,053 $ 51,067 $ 44,624 $ 40,640 $ 32,711 $ 25,648 $ 18,059
======== ======== ======== ======== ======== ======== ========
$ 2.21 $ 2.54 $ 2.23 $ 1.96 $ 1.58 $ 1.17 $ .86
======== ======== ======== ======== ======== ======== ========
20,355 20,112 20,037 20,710 20,677 21,841 21,097
19,791 19,550 19,365 19,953 19,585 18,975 21,225
$ 37.00 $ 33.75 $ 25.88 $ 18.38 $ 15.00 $ 11.38 $ 6.88
$ 18,134 $ 16,172 $ 13,727 $ 11,994 $ 9,106 $ 8,367 $ 6,345
$ .92 $ .83 $ .71 $ .605 $ .47 $ .40 $ .30
$ 7,821 $ 10,925 $ 5,067 $ 5,137 $ 6,741 $ 11,051 $ 7,136
$ 7,940 $ 7,649 $ 6,725 $ 6,660 $ 5,771 $ 5,521 $ 4,768
$138,913 $112,716 $ 71,508 $ 76,290 $ 46,993 $ 17,990 $ 32,765
$419,319 $391,822 $335,154 $275,525 $244,267 $202,200 $186,967
$ 23,506 $ 21,691 $ 17,682 $ 11,319 $ 11,743 $ 9,163 $ 7,354
$241,074 $211,457 $170,399 $158,169 $130,755 $100,768 $109,742
$ 12.18 $ 10.82 $ 8.80 $ 7.93 $ 6.68 $ 5.31 $ 5.17
20% 27% 29% 29% 28% 23% 18%
</TABLE>
-51-
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF STANHOME INC.
<TABLE>
<CAPTIONS>
Other Names
Jurisdiction Under Which
Name of Organization Business is Conducted
<S> <C> <C>
Border Fine Arts Company Limited Scotland
Border Fine Arts (Ireland) Ltd. N. Ireland
Collector Appreciation, Inc. Delaware
Consumer Products Group, Inc. Florida
Cosmhogar, S.A. Spain
Enesco Corporation Ohio The Back Door Store
Treasure Chest
Enesco European Giftware Group
Limited England
Enesco Import GmbH Germany
Enesco International Ltd. Delaware
Enesco International (H.K.) Limited Hong Kong
Enesco Limited United Kingdom
Enesco Worldwide Holdings, Inc. Delaware
Heinz Deichert GmbH Germany
Lilliput Lane Limited England
Lilliput Incorporated Maryland
N.C. Cameron & Sons Limited Ontario, Canada
Sports Impressions, Inc. Delaware
Stanhome Capital, Inc. Delaware
Stanhome de Mexico, S.A. de C.V. Mexico
Stanhome European Development
Center, S.A. Spain
Stanhome Iberia, S.A. Spain
Stanhome Inter-American Corporation Delaware
Stanhome Panamericana, C.A. Venezuela
Stanhome plc England
Stanhome S.A. France
Stanhome, S.A. Spain
<PAGE>
Stanhome S.p.A. Italy
Stanhome Trading Company Ltd. Slovenia
Stanhome West Germany Limited Delaware
The Hamilton Group Limited, Inc. Florida
The Hamilton Collection, Inc. Florida
Via Vermont Ltd. Delaware
Via Vermont, S.A. de C.V. Mexico
</TABLE>
All of the above-listed subsidiaries are included in the Company's consolidated
financial statements for all of both 1993 and 1994, except for Border Fine Arts
Company Limited, which was acquired in November, 1994; Border Fine Arts
(Ireland) Ltd., which was acquired in November, 1994; Collector Appreciation,
Inc., which began operations in February, 1994; Consumer Products Group, Inc.,
which began operations in May, 1993; Enesco European Giftware Group Limited
(previously Lilliput Group plc), which was acquired in October, 1994; Lilliput
Lane Limited, which was acquired in October, 1994; Lilliput Incorporated, which
was acquired in October, 1994; Stanhome European Development Center, S.A., which
was incorporated in October, 1993; and Stanhome plc, which was incorporated in
June, 1994.
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
------------------------------------------
As independent public accountants, we hereby consent to the
incorporation of our reports included in this Form 10-K, into the Company's
previously filed Registration Statements File No. 2-97934, No. 33-11415, No. 33-
42974 and No. 33-50723.
/s/ Arthur Andersen LLP
Hartford, Connecticut
March 28, 1995
<PAGE>
EXHIBIT 24
POWER OF ATTORNEY
Each of the undersigned Directors of Stanhome Inc. whose signature
appears below constitutes and appoints G. William Seawright and Bruce H. Wyatt,
and each of them, his/her true and lawful attorneys-in-fact and agents, with
full power of substitution and resubstitution, for him/her and in his/her name,
place and stead, in any and all capacities, to sign an annual report on Form 10-
K for the fiscal year ended December 31, 1994 with the Securities and Exchange
Commission under the Securities Exchange Act of 1934, as amended, 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 in and about the
premises, 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, or their substitute or substitutes, may lawfully do or cause to be done
by virtue hereof.
March 1, 1995 By: /s/H.L. Tower
H.L. Tower
Director, Chairman of the Board
March 1, 1995 By: /s/Homer G. Perkins
Homer G. Perkins
Director
March 29, 1995 By: /s/Allan G. Keirstead
Allan G. Keirstead
Director, Executive Vice President and
Chief Administrative & Financial Officer
March 1, 1995 By: /s/John F. Cauley, Jr.
John F. Cauley, Jr.
Director
March 1, 1995 By: /s/G.W. Seawright
G. William Seawright
Director, President and Chief Executive
Officer
March 1, 1995 By: /s/Thomas R. Horton
Thomas R. Horton
Director
March 1, 1995 By: /s/Anne-Lee Verville
Anne-Lee Verville
Director
March 1, 1995 By: /s/Judith R. Haberkorn
Judith R. Haberkorn
Director
March 1, 1995 By: /s/Janet M. Clarke
Janet M. Clarke
Director
March 1, 1995 By: /s/Charles W. Elliott
Director
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<PAGE>
EXHIBIT 27
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 19,349,839
<SECURITIES> 2,000
<RECEIVABLES> 155,945,417
<ALLOWANCES> 15,248,814
<INVENTORY> 116,015,060
<CURRENT-ASSETS> 322,677,138
<PP&E> 125,995,626
<DEPRECIATION> 68,036,607
<TOTAL-ASSETS> 512,122,632
<CURRENT-LIABILITIES> 220,217,520
<BONDS> 0
0
0
<COMMON> 3,153,530
<OTHER-SE> 266,242,246
<TOTAL-LIABILITY-AND-EQUITY> 512,122,632
<SALES> 790,176,497
<TOTAL-REVENUES> 790,176,497
<CGS> 324,988,902
<TOTAL-COSTS> 324,988,902
<OTHER-EXPENSES> 384,635,879
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,019,272
<INCOME-PRETAX> 80,739,204
<INCOME-TAX> 36,683,643
<INCOME-CONTINUING> 44,055,561
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 44,055,561
<EPS-PRIMARY> 2.26
<EPS-DILUTED> 2.25
</TABLE>
