SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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 No.)
333 Western Avenue, Westfield, Massachusetts 01085
___________________________________________________________________________
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 413-562-3631
___________________________________________________________________________
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 [_]
March 31,
1996 1995
____ ____
Shares Outstanding:
Common Stock with
Associated Rights 18,403,186 18,808,715
Total number of pages
contained herein 40
Index to Exhibits is
on page 19
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<TABLE>
PART I. FINANCIAL INFORMATION
------------------------------
STANHOME INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
MARCH 31, 1996 and DECEMBER 31, 1995
(Unaudited)
<CAPTION>
March 31, December 31,
1996 1995
---- ----
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and certificates of deposit $ 18,386,143 $ 23,053,926
Notes and accounts receivable, net 155,176,985 158,572,959
Inventories 122,869,950 114,294,928
Prepaid advertising 37,082,995 39,665,306
Other prepaid expenses 9,271,693 6,784,465
------------ ------------
Total current assets 342,787,766 342,371,584
------------ ------------
PROPERTY, PLANT AND EQUIPMENT, at cost 130,692,939 131,795,141
Less - Accumulated depreciation and
amortization 70,933,379 70,947,871
------------ ------------
59,759,560 60,847,270
------------ ------------
OTHER ASSETS:
Goodwill and other intangibles, net 119,865,243 119,826,382
Other 10,352,710 11,420,987
------------ ------------
130,217,953 131,247,369
------------ ------------
$532,765,279 $534,466,223
============ ============
<FN>
The accompanying notes are an integral part of these condensed financial
statements.
</TABLE>
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<TABLE>
STANHOME INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
MARCH 31, 1996 and DECEMBER 31, 1995
(Unaudited)
<CAPTION>
March 31, December 31,
1996 1995
---- ----
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes and loans payable $ 91,194,441 $ 74,864,065
Accounts payable 52,977,804 64,880,028
Federal, state and foreign taxes
on income 30,877,123 28,758,277
Accrued expenses--
Payroll and commissions 8,516,247 13,658,026
Royalties 7,879,132 8,587,986
Vacation, sick and postretirement
benefits 7,726,399 6,979,623
Pensions and profit sharing 5,355,379 8,610,616
Other 36,773,513 36,106,020
------------ ------------
Total current liabilities 241,300,038 242,444,641
------------ ------------
LONG-TERM LIABILITIES:
Foreign employee severance obligations 12,330,670 12,482,097
Postretirement benefits 12,335,857 12,749,258
------------ ------------
Total long-term liabilities 24,666,527 25,231,355
------------ ------------
SHAREHOLDERS' EQUITY:
Common stock 3,153,530 3,153,530
Capital in excess of par value 44,419,723 43,098,856
Retained earnings 384,204,976 385,008,394
Cumulative translation adjustments ( 28,219,302) ( 27,409,482)
------------ ------------
403,558,927 403,851,298
Less - Shares held in treasury, at cost 136,760,213 137,061,071
------------ ------------
Total shareholders' equity 266,798,714 266,790,227
------------ ------------
$532,765,279 $534,466,223
============ ============
<FN>
The accompanying notes are an integral part of these condensed financial
statements.
</TABLE>
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<TABLE>
STANHOME INC.
CONSOLIDATED CONDENSED STATEMENTS OF INCOME AND RETAINED EARNINGS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 and 1995 (Unaudited)
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
NET SALES $183,039,727 $184,869,162
COST OF SALES 78,092,565 77,425,988
------------ ------------
GROSS PROFIT 104,947,162 107,443,174
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSE 94,552,037 93,673,069
------------ ------------
OPERATING PROFIT 10,395,125 13,770,105
Interest expense ( 1,846,058) ( 1,342,297)
Other expense, net ( 799,725) ( 157,467)
------------ ------------
INCOME BEFORE INCOME TAXES 7,749,342 12,270,341
Income taxes 3,679,010 5,820,000
------------ ------------
NET INCOME 4,070,332 6,450,341
RETAINED EARNINGS, beginning of
period 385,008,394 362,946,840
Cash dividends, $.265 per share in
1996 and 1995 ( 4,873,750) ( 5,028,695)
------------ ------------
RETAINED EARNINGS, end of period $384,204,976 $364,368,486
============ ============
EARNINGS PER COMMON SHARE:
Primary and fully diluted $ .22 $ .34
===== =====
<FN>
The accompanying notes are an integral part of these condensed financial
statements.
</TABLE>
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<TABLE>
STANHOME INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 and 1995 (Unaudited)
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
OPERATING ACTIVITIES:
Net cash used by operating activities ($16,555,248) ($16,375,129)
----------- -----------
INVESTING ACTIVITIES:
Purchase of property, plant and equipment ( 2,046,210) ( 3,142,870)
Proceeds from sales of property, plant and
equipment 2,304,153 500,339
Payments for acquisition of businesses,
net of cash acquired ( 1,200,000) ( 208,042)
Other, principally marketable securities - ( 416,052)
----------- -----------
Net cash used by investing activities ( 942,057) ( 3,266,625)
----------- -----------
FINANCING ACTIVITIES:
Cash dividends ( 4,873,750) ( 5,028,695)
Exchanges and purchases of common stock - ( 10,301,359)
Notes and loans payable 16,044,359 46,537,740
Exercise of stock options 1,429,364 265,299
Other common stock issuance 192,361 239,185
----------- -----------
Net cash provided by financing activities 12,792,334 31,712,170
----------- -----------
Effect of exchange rate changes on cash
and cash equivalents 37,188 44,638
----------- -----------
Increase/(decrease) in cash and
cash equivalents ( 4,667,783) 12,115,054
Cash and cash equivalents,
beginning of year 23,051,926 19,349,839
----------- -----------
Cash and cash equivalents, end of quarter $18,384,143 $31,464,893
=========== ===========
SUPPLEMENTAL CASH FLOW DATA
Cash paid for:
Interest $ 1,238,572 $ 763,854
Income taxes $ 1,608,128 $12,558,705
<FN>
The accompanying notes are an integral part of these condensed financial
statements.
</TABLE>
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STANHOME INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
The consolidated condensed financial statements and related notes
included herein have been prepared by the Company, without audit except for
the December 31, 1995 condensed balance sheet, which was derived from the
Annual Report on Form 10-K, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations, although the
Company believes that the disclosures are adequate to make the information
presented not misleading. The information furnished reflects all normal
recurring adjustments which are, in the opinion of management, necessary to
a fair statement of the results for the interim periods. It is suggested
that these condensed financial statements be read in conjunction with the
financial statements and related notes to consolidated financial statements
included in the Company's Annual Report on Form 10-K for the year ended
December 31, 1995.
1. ACCOUNTING POLICIES:
The Company's financial statements for the three months ended March
31, 1996 have been prepared in accordance with the accounting policies
described in Note 1 to the December 31, 1995 consolidated financial
statements included in the Company's 1995 Annual Report on Form 10-K. The
Company considers all highly liquid securities, including certificates of
deposit with maturities of three months or less, when purchased, to be cash
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<PAGE>
equivalents. Notes and accounts receivable were net of reserves for
uncollectible accounts, returns and allowances of $20,903,000 at March 31,
1996 and $20,741,000 at December 31, 1995.
The Company recognizes revenue as merchandise is turned over to the
shipper and a provision for anticipated merchandise returns and allowances
is recorded based upon historical experience. Amounts billed to customers
for shipping and handling orders are netted against the associated costs.
2. INVENTORY CLASSES:
The major classes of inventories at March and December 3l were as
follows (in thousands):
March 31, December 31,
1996 1995
---- ----
Raw materials and supplies $ 7,358 $ 7,312
Work in process 693 1,237
Finished goods in transit 14,372 16,215
Finished goods 100,447 89,531
-------- --------
$122,870 $114,295
======== ========
3. OTHER EXPENSE, NET:
Other expense, net for the three months ended March 31, 1996 and 1995
consists of the following (in thousands):
1996 1995
---- ----
Interest income $ 493 $ 745
Amortization of other assets ( 1,153) ( 1,009)
Other, net ( 140) 106
------ ------
($ 800) ($ 158)
====== ======
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4. EARNINGS PER COMMON SHARE (BASIS OF CALCULATION):
Earnings per common share are based on the average number of common
shares outstanding and common share equivalents for the period covered.
For both years, there was no difference in earnings per share between
primary and fully diluted earnings per share computations. For the first
quarter fully diluted computation, the average number of shares utilized
was 18,479,861 and 19,033,574 shares for 1996 and 1995, respectively,
including common share equivalents of 122,818 in 1996 and 19,174 in 1995.
The lower average number of shares for 1996 primarily resulted from the
repurchase of shares in the latter part of 1995 as part of the Company's
repurchase program.
5. 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 March 31, 1996, 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
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<PAGE>
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 March 31, 1996 are to
hedge intercompany loans. The Company receives dividends, technical
service fees, royalties and other payments from its subsidiaries and
licensees. 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 March 31, 1996, net
deferred amounts on outstanding agreements were not material. The
outstanding agreement amounts (notional value) at March 31, 1996, are as
follows (in thousands):
Canada $ 6,621
Germany 4,070
U.S. 875
-------
Total $11,566
=======
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<PAGE>
STANHOME INC.
THREE MONTHS ENDED MARCH 31, 1996
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
BUSINESS SEGMENTS of the Company's operations are summarized on Page
16. A discussion and analysis of the segments follows:
GIFTWARE
Giftware Group sales decreased 6% in the first quarter from lower
sales in the United States and in international markets due principally to
soft retail environments. International sales represented 16% of total
1996 first quarter sales compared to 17% in 1995. The Precious Moments
line represented 42% of total 1996 sales compared to 48% in 1995 and the
Cherished Teddies line represented 16% of total sales in 1996 compared to
13% in 1995. Operating profit as a percentage of sales was 8% in 1996
compared to 10.9% in 1995. The decrease was due to higher cost of sales
(approximately 2%) from an unfavorable product mix with less sales of
collectible lines and to a higher percentage of selling, general and
administrative expenses resulting from the impact of lower sales on fixed
expenses.
DIRECT RESPONSE
Direct Response Group sales increased 15%, in a very competitive
market, due to unit volume growth from increased product offerings
primarily in the figural categories. Doll sales decreased to 19% of 1996
sales compared to 31% in 1995 and plate sales decreased to 36% of 1996
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sales compared to 48% in 1995. International sales decreased and operating
losses increased. International sales represented 7% of total 1996 first
quarter Group sales compared to 10% in 1995. The Precious Moments line
represented 13% of 1996 sales compared to 10% in 1995 and the Cherished
Teddies line represented 12% of 1996 sales compared to 13% in 1995.
Operating profit improved to 1.9% of sales compared to a slight loss in
1995 due principally to a lower percentage of advertising expense to sales
in 1996 of 47% compared to 51% in 1995. The lower advertising percent
benefited from a more favorable product mix and a higher percentage of
sales from existing customer lists. Partially offsetting the improved
advertising ratio was a higher cost of sales due to product mix and a
higher level of selling, general and administrative expenses.
DIRECT SELLING
European sales for the first quarter increased 1% and represented 90%
of total 1996 Direct Selling sales. European operating profit increased
3% and represented 98% of total 1996 Direct Selling operating profit.
Operating profit benefited from a lower cost of sales due to a more
favorable product mix. The Italian government has introduced new social
benefit taxes that are planned to become effective during the second
quarter of 1996. This additional tax burden is expected to unfavorably
impact the Italian subsidiary's independent Dealer force and its ability
to recruit and retain Dealers. European local currency sales and
operating profit translated at 1995 average exchange rates would have
resulted in a 3% sales decrease and a 2% operating profit decrease. Sales
in the first quarter for the Mexican and Venezuelan Group decreased 7% and
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<PAGE>
operating profit decreased 81% due to the Mexican peso and Venezuelan
bolivar currency devaluations and the resulting unfavorable local economic
impacts.
UNALLOCATED EXPENSES increased in the first quarter due to
higher compensation, benefits and general expenses consistent with the
Company's programs. Unallocated expenses are corporate expenses and other
items not directly related to the operations of the Groups.
INTERNATIONAL ECONOMIES AND CURRENCY
The Latin American operations in Mexico and Venezuela 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 favorably impacted
by higher currency translation rates in 1996 compared to 1995. 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 other
risks of doing business abroad, including import or export restrictions and
changes in economic and political climates.
The fluctuations in net sales and operating profit margins from
quarter to quarter are partially due to the seasonal characteristics of the
Company's business segments.
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<PAGE>
INTEREST EXPENSE AND OTHER INCOME, NET
Interest expense increased due to higher interest rates and borrowing
levels. Notes and loans payable going into 1996 were approximately $35.9
million higher than at the start of 1995. Other assets amortization
of goodwill increased due to the continuing impact from the 1994
acquisitions. The amortization for Giftware in 1996 was $1.0 million
compared to $.8 million in 1995 and the amortization for Direct Response
was $.2 million in 1996 and $.2 million in 1995.
THE EFFECTIVE TAX RATE of 47% was the same as 1995 despite higher non
deductible goodwill in 1996. This was due principally to earnings mix
with a lower ratio of foreign income to United States income, which has a
lower rate.
FINANCIAL CONDITION
The Company has historically satisfied its capital requirements with
internally generated funds and short-term loans. Working capital
requirements have seasonal variations during the year and are generally
greatest during the third quarter.
The major sources of funds from operating activities in the first
quarter of 1996 were from net income, depreciation, amortization, lower
net accounts receivable (from lower sales) and prepaid expense (from less
spending in the media) and higher accrued tax levels (due to timing of
payments). The major uses were increased inventories from lower sales and
lower accounts payable and accrued expenses due principally to lower sales
and to timing and the payment of year end payrolls and benefits. The
first quarter 1996 increases in receivables and inventories compared to
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<PAGE>
the first quarter of 1995 reflect timing differences and increases to
support higher levels of sales.
The major use of cash in investing activities in the first quarter of
1996 was for capital expenditures and the acquisition of a small French
giftware company. The acquisition was accounted for using the purchase
method with basically all of the purchase pricing allocated to goodwill.
The Company has an acquisition program, and may utilize funds for this
purpose in the future. Capital expenditure commitments for $19 million
are forecasted for 1996. Proceeds from the sale of property, plant and
equipment was primarily from the sale of a distribution center in
Charlotte, North Carolina. As of March 31, 1996, two other distribution
centers in the United States with a book value of $622 thousand remain to
be sold. 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 from period to
period principally represents investment alternatives versus certificates
of deposit, time deposits, and intercompany loans.
The major use of cash in financing activities in the first quarter of
1996 was for dividends to shareholders. 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 conditions, and may utilize
funds for this purpose in the future. As of March 31, 1996, 1.3 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 was from
higher seasonal borrowings. Total stock options outstanding at the
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<PAGE>
exercise price amounted to $77 million at March 31, 1996 and the Company
could receive these funds in the future if the options are exercised.
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. International currency
fluctuations of $810,000 increased the cumulative translation component
which reduced the shareholders' equity increase in the first three months
of 1996. The translation adjustments to the March 31, 1996 balance sheet
that produced the 1996 change in the cumulative translation component of
shareholders' equity were increases in working capital by $520,000;
decreases in net property, plant and equipment and other assets by
$1,156,000; and increases in long-term liabilities by $174,000. 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.
The Company currently believes that cash from operations and available
financing alternatives are adequate to meet anticipated requirements for
working capital, dividends, capital expenditures, the stock repurchase
program and other needs. No liquidity problems are anticipated.
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<TABLE>
STANHOME INC.
SALES AND OPERATING PROFIT BY BUSINESS SEGMENT
FOR THE FIRST THREE MONTHS ENDED MARCH 31, 1996 AND 1995 (Unaudited)
(In Thousands)
<CAPTION>
1996 1995 Percent
Actual Actual Change
------ ------ -------
<S> <C> <C> <C>
Net Sales:
Giftware $ 99,612 $105,955 ( 6%)
Direct Response 36,687 31,806 15
Direct Selling 47,648 47,759 -
Eliminations ( 907) ( 651)
-------- --------
Total Net Sales $183,040 $184,869 ( 1%)
======== ========
Operating Profit:
Giftware $ 8,010 $ 11,499 (30%)
Direct Response 707 ( 16)
Direct Selling 4,503 4,749 ( 5)
Unallocated Expense ( 2,825) ( 2,462) (15)
-------- --------
Total Operating Profit $ 10,395 $ 13,770 (25%)
======== ========
</TABLE>
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<PAGE>
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The Annual Meeting of Stockholders was held on April 25, 1996.
(c) The first matter voted upon at the meeting was the election of
Directors. The members of Class I were standing for election
to a three-year term expiring at the Annual Meeting in 1999.
Upon motion duly made and seconded, it was voted to elect
Judith R. Haberkorn, Thomas R. Horton, and H. L. Tower as Class
I Directors for a three-year term expiring at the Annual
Meeting in 1999 and until their successors are elected and
qualified. The votes for each of the candidates were reported
as follows:
Judith R. Haberkorn For: 14,573,141
Withheld: 267,177
Thomas R. Horton For: 14,550,018
Withheld: 290,300
H. L. Tower For: 14,385,991
Withheld: 454,327
The second matter voted upon at the meeting was the
ratification of the Board's appointment of Arthur Andersen LLP
as independent accountants for 1996. Upon motion duly made and
seconded, it was voted that the appointment by the Board of
Directors at its March 6, 1996 meeting of Arthur Andersen LLP,
independent certified public accountants, as independent
accountants for the Company for its fiscal year ending December
31, 1996 be ratified and approved. The votes for the
independent accountants were reported as follows:
Arthur Andersen LLP For: 14,709,111
Against: 62,186
Abstain: 69,021
The third matter voted upon at the meeting was the approval of
the Stanhome Inc. 1996 Stock Option Plan. Upon motion duly
made and seconded, it was voted that the 1996 Stock Option Plan
adopted by the Board of Directors at its January 24, 1996
meeting be approved. The votes for the approval of the 1996
Stock Option Plan were reported as follows:
1996 Stock Option Plan For: 8,850,285
Against: 4,197,367
Abstain: 859,481
ITEM 5. OTHER INFORMATION
In connection with the "safe harbor" provision of the Private
Securities Litigation Reform Act of 1995, the Company is hereby
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<PAGE>
filing cautionary statements identifying some of the important
factors that could cause the Company's actual results to differ
materially from those projected in forward-looking statements
made by or on behalf of the Company.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
- Stanhome Supplemental Investment Savings Plan, as amended and
restated through April 23, 1996
- 1996 Stock Option Plan
- John J. Dur Severance Arrangement, as amended and restated
through May 7, 1996
- Financial Data Schedule
- Cautionary Statement for Purposes of the "Safe Harbor"
Provisions of the Private Securities Litigation Reform Act of
1995
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Company during the
Quarter for which this report is filed.
All other items hereunder are omitted because either such item is
inapplicable or the response to it is negative.
Signatures
Pursuant to the requirements 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.
STANHOME INC.
(Registrant)
Date: May 14, 1996 /s/G. William Seawright
_____________________________________
G. William Seawright
President and Chief Executive Officer
Date: May 14, 1996 /s/Allan G. Keirstead
_____________________________________
Allan G. Keirstead
Chief Administrative and Financial
Officer
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EXHIBIT INDEX
<TABLE>
<CAPTION>
Reg. S-K
Item 601 Exhibit 10-Q Page No.
_________ _______ _____________
<S> <C> <C>
10(a) Stanhome Supplemental Investment 20
Savings Plan, as amended and restated
through April 23, 1996
10(b) 1996 Stock Option Plan 31
10(c) John J. Dur Severance Arrangement, 38
as amended and restated through
May 7, 1996
27 Financial Data Schedule 39
99 Cautionary Statement for Purposes 40
of the "Safe Harbor" Provisions
of the Private Securities Litigation
Reform Act of 1995
</TABLE>
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<PAGE> EXHIBIT 10(a)
STANHOME SUPPLEMENTAL INVESTMENT SAVINGS PLAN
AS AMENDED AND RESTATED THROUGH APRIL 23, 1996
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
<PAGE>
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 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.
<PAGE>
(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. (a) Credits with Respect to Employee
Contributions. 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
(d) Section 7.5 of the Qualified Plan relating to the
Section 415 Limit.
In lieu of the election provided for above, Key
Associates may elect to defer their compensation for such year
pursuant to this Plan in lieu of periodic salary reduction
<PAGE>
contributions pursuant to Section 4.1 of the Qualified Plan.
Notwithstanding the foregoing, an election pursuant to the
preceding sentence shall be deemed to be an election under
Section 4.1 of the Qualified Plan for the maximum contribution
allowable thereunder for such calendar year in respect of the
compensation deferred pursuant to this Plan for such year.
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 an election pursuant to
the second paragraph of this Section 2(a) or 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.
(b) Matching Credits. There shall be established an Employer
Account on behalf of each Key Associate for whom an Employer Account is
<PAGE>
established pursuant to Section 2(a). As of each date on which matching
contributions pursuant to Section 4.3 are delivered to the trustee under
the Qualified Plan, the Employer Account of each Key Associate shall be
credited with an amount equal to any matching contributions that would have
been made as of such date pursuant to Section 4.3 of the Qualified Plan if
the amounts credited to the Key Associate's Employee Account pursuant to
Section 2(a) for the period to which such matching contributions relate had
been made under Section 4.1 of the Qualified Plan.
(c) Transfers to Qualified Plan. As soon as practicable
following the end of a calendar year for which elections were made pursuant
to the second paragraph of Section 2(a), the Company shall determine the
maximum amount of contributions that could have been made under Section 4.1
of the Qualified Plan for such calendar year (after taking into account the
limitations contained in Section 4.4) on behalf of each Key Associate who
made such an election (the "Maximum Qualified Elective Contribution"). As
soon as is practicable thereafter (i) the Employee Account of each such Key
Associate shall be debited and reduced by an amount equal to the lesser of
the Maximum Qualified Elective Contribution and the amount credited to such
account (reduced by any losses charged thereto pursuant to Section 3) for
such year pursuant to Section 2(a) and the Company shall contribute to the
Qualified Plan cash in an amount equal to such debit, and (ii) the Employer
Account shall be debited and reduced by the amount of matching
contributions made pursuant to Section 4.3 of the Qualified Plan for such
calendar on account of the contributions made pursuant to clause (i) of
this sentence.
<PAGE>
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
<PAGE>
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
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
<PAGE>
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 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
<PAGE>
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
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.
<PAGE>
(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.
<PAGE> EXHIBIT 10(b)
STANHOME INC.
1996 Stock Option Plan
1. Purpose. The purpose of this 1996 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. Each member of the
Committee shall be a "disinterested person" within the meaning of Rule 16b-
3 under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and an "outside director" within the meaning of Section 162(m) of
the Internal Revenue Code of 1986, as amended (the "Code"). 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 Code ("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
"Shares") shall not exceed 1,500,000 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.
<PAGE>
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; provided, however, that no optionee may be
granted options which exceed 300,000 Shares 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 six months
of continued employment by the Company or one of its subsidiaries
immediately following the date the option is granted, or the date of
Stockholder approval under Section 11 below if later, 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. Subject to the
foregoing and to the limitations set forth under subsection 8(e) below,
each option granted under the provisions of this Section 8 may be exercised
at any time after six months from the date the option is granted or, if
later, six months after the date of approval of the Plan by the
Stockholders of the Company,(1) as to 50% of the Shares subject to the
option if the Fair Market Value of the common stock is at or above 125% of
the Option Price on each of at least ten consecutive Trading Days, (2) as
to the remaining 50% of the Shares subject to the option if, at any time at
or after the initial 50% of said Shares becomes exercisable, the Fair
Market Value of the common stock is at or above 150% of the Option Price on
each of at least ten consecutive Trading Days, or (3) after the eighth
anniversary of the date the option is granted.
(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, for which
<PAGE>
the optionee has good title, free and clear of all liens and encumbrances,
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
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 Exchange Act to have the Company withhold whole 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 pursuant to beneficiary designation procedures approved by
the Committee, (2) as otherwise permitted under Rule 16b-3 under the
Exchange Act from time to time and allowed by the Committee, or (3)
pursuant to a qualified domestic relations order as defined in Section
414(p) of the Code. Except to the extent permitted by the foregoing
sentence, each option shall be exercisable, during his or her lifetime,
only by the optionee or his or her guardian or legal representative(s).
(e) Termination of Options. (i) Disability, Retirement at or after
age 55, Termination without Substantial Cause, or Death. If the optionee's
employment with the Company terminates by reason of Disability, retirement
at or after age 55, termination by the Company without Substantial Cause,
death, or for any other reason not set forth under clauses (ii) and (iii)
below, if not sooner terminated pursuant to their terms and subject to
subsections (a) and (b) above, all outstanding options then held by the
optionee 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), 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; (ii) Termination by Voluntary
Resignation or Retirement before reaching age 55. If the optionee's
employment with the Company is terminated either by voluntary resignation
or retirement before reaching age 55, all outstanding options then held by
the optionee shall be exercisable during the three month period following
any such termination of employment by the optionee or his or her guardian
or legal representative(s); (iii) Termination for Substantial Cause. If
the optionee's employment with the Company is terminated for Substantial
Cause, all outstanding options then held by the optionee shall thereupon be
forfeited by the optionee and canceled by the Company; and (iv) Termination
within Six Months of Grant. Notwithstanding the foregoing, upon the
optionee's employment with the Company or any subsidiary terminating at any
time for any reason, all outstanding options granted within the last six
months prior to the optionee's termination shall thereupon be forfeited by
the optionee and canceled by the Company.
Cessation of any corporation's relationship with the Company as a
subsidiary shall constitute a "termination without Substantial Cause"
hereunder as to individuals employed by that corporation, and options held
by such individuals shall be terminated in accordance with paragraph (i)
<PAGE>
above. For purposes of this subsection, the meaning of the word
"disability" shall be determined under the provisions of Section 422(c)(7)
of the Code or any successor provisions thereof.
(f) Fair Market Value. Fair Market Value shall mean the closing
transaction price of a share of common stock as reported in the New York
Stock Exchange Composite Transactions on the date as of which such value is
being determined, or, if the common stock is not listed on the New York
Stock Exchange, the closing transaction price of a share of common stock on
the principal national stock exchange on which the common stock is traded
on the date as of which such value is being determined; or, if there shall
be no reported transaction for such date, on the next preceding date for
which a transaction was reported; provided, however, that if Fair Market
Value for any date cannot be so determined, Fair Market Value shall be
determined by the Committee by whatever means or method as the Committee,
in the good faith exercise of its sole discretion, shall at such time deem
appropriate.
(g) "Trading Day". A Trading Day shall be a day on which the
Company's common stock may be traded on a stock exchange or, if the
Company's common stock is not listed on any exchange, in the Over The
Counter market.
(h) "Substantial Cause". Substantial Cause shall mean (1) the
willful and continued failure by optionee to perform substantially the
optionee's duties with the Company or a subsidiary (other than any such
failure resulting from the optionee's incapacity due to physical or mental
illness) after a written demand for substantial performance is delivered to
the optionee by the Board, which demand specifically identifies the manner
in which the Board believes that the optionee has not substantially
performed the optionee's duties or (2) the willful engagement by the
optionee in conduct which is demonstrably and materially injurious to the
Company or its subsidiaries, monetarily or otherwise. For purposes of
clauses (1) and (2) of this definition, no act or failure to act by a
optionee shall be deemed "willful" unless done, or omitted to be done, by
the optionee not in good faith and without reasonable belief that the
optionee's act or failure to act was in the best interests of the Company.
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 1996 through
and including the 1998 annual stockholders' meetings, each person who is a
Non-employee Director immediately after such meeting 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 4,500. 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. (i) Except as hereinafter otherwise
provided, an option granted to the Non-employee Director may be exercised
only after six months of continued service as a Director of the Company
following the date the option is granted, or the date of Stockholder
approval under Section 11 below if later, and only during the continuance
of the optionee serving on the Board of Directors and such additional
period as is provided for below. 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, subject to subsection
<PAGE>
8(a) and the conditions of exercise set forth below in this subsection 9(b)
and, provided further, that in no event shall the option be exercisable
more than ten years after the date of grant. Subject to the foregoing,
each option granted to the Non-employee Directors under the provisions of
this Section 9 may be exercised at any time after six months from the date
the option is granted or, if later, six months after the date of approval
of the Plan by the Stockholders of the Company, (1) as to 50% of the Shares
subject to the option if the Fair Market Value of the common stock is at
or above 125% of the Option Price on each of at least ten consecutive
Trading Days, (2) as to the remaining 50% of the Shares subject to the
option if, at any time at or after the initial 50% of said Shares becomes
exercisable, the Fair Market Value of the common stock is at or above 150%
of the Option Price on each of at least ten consecutive Trading Days, or
(3) after the eighth anniversary of the date the option is granted; and
(ii) Notwithstanding the foregoing, upon the Non-employee Director's
service as a Director of the Company terminating at any time for any
reason, all outstanding options granted within the last six months prior to
the Non-employee Director's termination shall thereupon be forfeited by the
Non-employee Director and canceled by the Company.
(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
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
<PAGE>
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, and without regard
to subsections 8(e)(iv) and 9(b)(ii) and clauses 1, 2 and 3 of subsections
8(b) and 9(b), 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 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 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.
<PAGE>
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 24, 1996 and shall become
effective as of January 24, 1996 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, 1996. No option
hereunder shall be granted after January 23, 2006 or the earlier suspension
or termination of the Plan in accordance with its terms. The Plan shall
terminate on January 23, 2006 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
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 laws, rules or regulations. 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 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(c)
JOHN J. DUR SEVERANCE ARRANGEMENT
AS AMENDED AND RESTATED THROUGH MAY 7, 1996
John J. Dur has an agreement with the Company which provides for the
payment of from six months up to twenty-four months of severance, based
upon his then current base annual salary, depending upon the particular
circumstances of his termination of employment at that time and various
subsequent events following the completion or other conclusion of his
present assignment.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5 EXHIBIT 27
<S> <C> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 18,386,143
<SECURITIES> 0
<RECEIVABLES> 176,079,899
<ALLOWANCES> 20,902,914
<INVENTORY> 122,869,950
<CURRENT-ASSETS> 342,787,766
<PP&E> 130,692,939
<DEPRECIATION> 70,933,379
<TOTAL-ASSETS> 532,765,279
<CURRENT-LIABILITIES> 241,300,038
<BONDS> 0
0
0
<COMMON> 3,153,530
<OTHER-SE> 263,645,184
<TOTAL-LIABILITY-AND-EQUITY> 532,765,279
<SALES> 183,039,727
<TOTAL-REVENUES> 183,039,727
<CGS> 78,092,565
<TOTAL-COSTS> 78,092,565
<OTHER-EXPENSES> 94,389,720
<LOSS-PROVISION> 162,317
<INTEREST-EXPENSE> 1,846,058
<INCOME-PRETAX> 7,749,342
<INCOME-TAX> 3,679,010
<INCOME-CONTINUING> 4,070,332
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,070,332
<EPS-PRIMARY> .22
<EPS-DILUTED> .22
</TABLE>
<PAGE> EXHIBIT 99
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR"
PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
From time to time, the Company and its representatives may make
statements about the Company which constitute or contain "forward-looking"
information as that term is defined in the Private Securities Litigation
Reform Act of 1995 (the "Act") or by the Securities and Exchange Commission
in its rules, regulations, and releases. Any such forward-looking
statements that are made by or on behalf of the Company by a person as
referred to in the Act, whether written or oral, are not guarantees of
future performance and actual results may differ materially from those
contained in the forward-looking statements. The following list contains
some of the important factors that could cause actual results of the
Company to differ materially from the estimates and other projections
contained in the Company's forward-looking statements:
the pattern of the Company's sales, including variations in sales volume
within periods;
the ability of the Company to develop, renew, and maintain competitive
product licensing arrangements with third-party artists and other
licensors;
vigorous competition within the Company's product markets, including
pricing, promotions, and other advertising and marketing activities
intended to preserve or gain market share;
development of new products and the inherent risks associated with new
product introductions, including uncertainty of trade and customer
acceptance and competitive reaction;
development and protection of brand identity and consumer awareness of
intellectual property of the Company, including registered trademarks,
patents, copyrights, and other proprietary material;
the costs and effects of unanticipated legal and administrative
proceedings;
impacts of domestic federal and state tax changes, including direct
response jurisdictional nexus and giftware worker classification issues;
impacts of unusual items resulting from ongoing evaluations of business
strategies, asset valuations, and organizational structure;
the ability of the direct selling operations of the Company to recruit
and retain independent dealers in competitive markets;
the condition of the industries and overall economies in the countries
in which the Company conducts business, including the effects of
weather, customer sales volume and profitability in the retail trade,
and general consumer demand; and
the possibility of one or more international markets in which the
Company competes and achieves approximately one third of its sales being
impacted by variations in political, economic, or other factors,
including fluctuations in currency exchange rates, inflation rates,
recessionary or expansive trends, tax changes, legal and regulatory
changes, or other external factors over which the Company has no
control.
The Company undertakes no obligation to release publicly the result
of any revisions to such forward-looking statements which may be made from
time to time to reflect conditions or circumstances existing after the date
thereof or to reflect the subsequent occurrence of unanticipated events.
