UNITED STATES
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
For the fiscal year ended December 31, 1997
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 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]
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State the aggregate market value of the voting stock held by non-
affiliates of the registrant: $437,665,428 on January 31, 1998.
The number of shares outstanding of the registrant's Common Stock as of
March 18, 1998 was 16,385,992 Shares.
Parts I, II, and IV of this Form 10-K incorporate by reference certain
information from the registrant's Annual Report to Stockholders for the
fiscal year ended December 31, 1997 (the "1997 Annual Report"). Part III
of this Form 10-K incorporates by reference certain information from the
registrant's definitive Proxy Statement dated March 13, 1998 (the "Proxy
Statement"), for its Annual Meeting of Stockholders to be held on April 23,
1998.
P A R T I
ITEM 1. BUSINESS.
Through its Enesco Giftware Group subsidiaries' or their licensed
distributors, the Company sells quality designed and licensed collectible
figurines and ornaments, action musicals, decorative home accessories and
other giftware, principally at wholesale, to independent retailers, mass
marketers, catalogers and other direct response distributors. As described
in more detail below, during 1997, the Company sold most of its former
Hamilton Direct Response Group and Stanhome Direct Selling Group businesses
as part of a major corporate and operational restructuring. In April,
1997, the Company announced a series of strategic initiatives that resulted
in the reclassification of the Stanhome Direct Selling Group and Hamilton
Direct Response Group businesses as discontinued operations. The Company
has now completed the initial stages of its transformation into a
singularly focused designer and marketer of branded gifts and collectibles
and is in the process of selling its corporate headquarters facility and
relocating those operations from Massachusetts to Illinois.
DISCONTINUED OPERATIONS
On May 22, 1997, the Company completed the previously announced sale of
its United States Hamilton Direct Response businesses to The Crestley
Collection, Ltd., an affiliate of The Bradford Group, for approximately
$48.3 million, including repayment of $30.8 million of intercompany debt,
subject to certain conditions. In connection with the sale, the Company
recorded in the first quarter of 1997 a $35 million after-tax charge
consisting mainly of the write-down of goodwill, current assets and
associated transaction and severance costs. The Company is in the process
of closing Hamilton's foreign operations. Under the sale agreement, until
May 22, 2000 (in most cases), the Company agreed to indemnify Bradford for
damages (up to a maximum of $10 million) suffered by Bradford resulting
from certain breaches by the Company and any unpaid taxes for which no
applicable financial reserve existed. As part of the transaction, Bradford
and Enesco Corporation ("Enesco"), a wholly owned subsidiary of the
Company, entered into two license agreements pursuant to which Enesco will
license certain proprietary and licensed lines of products to Bradford for
an initial five-year period.
On December 18, 1997, the Company completed the previously announced sale
of the majority of the operations comprising its Worldwide Direct Selling
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Group to Laboratoires de Biologie Vegetale Yves Rocher of France. Subject
to certain conditions, the sale price was approximately $68.4 million in
cash ($44 million after taxes and transaction fees) for the stock and
assets sold in connection with the sale. The Company recorded in the
fourth quarter of 1997 a $6 million after-tax charge, primarily to write
down assets that were not part of the sale. Under the sale agreement,
until December 18, 2000 (in most cases), the Company agreed to indemnify
Yves Rocher for damages (in amounts up to $20.9 million) suffered by Yves
Rocher resulting from certain breaches by the Company. As part of the
transaction, Stanhome's manufacturing subsidiary, Cosmhogar S.A., located
in Spain, entered into a supply agreement and related license agreement
with Yves Rocher for terms of one year for cosmetics and personal care
products and five years for household care products. The Cosmhogar
facility and other retained assets of the Group remain to be sold. Also,
as part of the agreement, the Stanhome name was sold to Yves Rocher with
the business of the Worldwide Direct Selling Group.
CONTINUING GIFTWARE OPERATIONS
Wholesale sales of branded gifts and collectibles products by the
Company's Enesco Giftware Group are led by Enesco, with its headquarters
located in Itasca, Illinois and its principal showroom, 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 of collectibles.
Its products include diverse lines of branded porcelain bisque, cold cast,
and resin figurines, cottages, musicals, music boxes, ornaments,
waterballs, miniatures, tableware, sculpture, general home accessories 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.
Enesco sells its products through a nationwide sales organization
comprised of independent sales representatives. Approximately 400
independent sales representatives service defined territories with the
Company's gifts and collectibles lines. Enesco displays the Giftware Group
products in twelve 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 approximately 30,000
independent retail outlets, including gift stores, greeting card and gift
shops, national chains, mail order houses and department stores. Consumer
Appreciation, Inc., an Enesco affiliate, administers the Group's U.S.-based
collectors clubs and their related promotional advertising. During 1997,
there was a significant downward trend in memberships for each of the
Precious Moments Collector and Birthday Clubs, which the Company is
addressing in 1998 by offering increased promotions, including a special
series of nationwide marketing events scheduled to celebrate the 20th
Anniversary of the Precious Moments product line. Foreign affiliates or
distributors of the Enesco Giftware Group are presently located in
Australia, Brazil, Canada, Ecuador, France, Germany, Hong Kong, Japan,
Mexico, The Netherlands, The People's Republic of China, Philippines,
Singapore, South Korea, Taiwan, Thailand and the United Kingdom.
The product lines of the Giftware Group are based partially on Enesco's
collection of proprietary designs and partially on licenses Enesco has from
independent creative designers. Most of its products, whether or not
produced under license, are protected by trademark and/or copyright
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registrations in the U.S. and many foreign countries. Principal product
trademarks of the Enesco Giftware Group include ENESCO, GROWING UP, MARY'S
HEN HOUSE, THIS LITTLE PIGGY, SMALL WORLD OF MUSIC, CHERISHED TEDDIES,
CALICO KITTENS, VIA VERMONT, TEDDY TOMPKINS, MOOSE CREEK CROSSING, FRIENDS
OF THE FEATHER, CUTE AS A BUTTON, MARY'S MOO MOOS, DOMINIQUE GAULT,
LILLIPUT LANE and BORDER FINE ARTS. Among its important licensed lines are
PRECIOUS MOMENTS, CHERISHED TEDDIES, PRETTY AS A PICTURE, MEMORIES OF
YESTERDAY, LUCY & ME, CALICO KITTENS, BARBIE, MY BLUSHING BUNNIES, MICKEY &
CO./DISNEY, MICKEY UNLIMITED /DISNEY, COCA COLA, DAVID WINTER COTTAGES,
PRISCILLA'S MOUSE TALES, McDONALD'S, WIZARD OF OZ, ALL THAT JAZZ, IN HIS
NAME, MAHOGANY PRINCESS, GONE WITH THE WIND, BEATRIX POTTER, SNOW FOLKS,
and DOWN PETTICOAT LANE.
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 Company's intellectual property (whether owned or
licensed) 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 36.0% and 20.4%, respectively, of
the Company's consolidated revenue from continuing operations during 1997.
Gifts and collectibles products sold within the Via Vermont, Lilliput,
and Border Fine Arts branded lines are supplied by manufacturing plants
owned by the Company's subsidiaries operating in Mexico, England and
Scotland, respectively. Enesco branded lines are supplied directly by
independent manufacturers in the Far East and indirectly through Enesco's
affiliate in Hong Kong, Enesco International (H.K.) Limited, which also
assists by ordering and overseeing the production of gifts and collectibles
products by independent manufacturers located principally in The People's
Republic of China (P.R.C.), Hong Kong and Taiwan, and to a lesser extent in
the Philippines, Indonesia, and Thailand. In 1997, the Company's purchases
from its two largest contract manufacturer sources accounted for
approximately 16% and 15%, respectively, of its net sales, with no other
single supplier location accounting for more than 10% of that amount. While
the Company believes that there are other available manufacturing sources
for its gifts and collectibles product lines, any loss or substantial
reduction of sourcing capability from one or more of the predominant
manufacturing sources could have a significant short-term adverse effect on
its importing and distribution operations. Moreover, approximately 75% of
the Company's total product purchases during 1997 came from manufacturing
sources located in the P.R.C., which currently enjoys most-favored nation
status. Should the P.R.C.'s status be revoked by the U.S. President and
Congress, the cost of importing products from the P.R.C. would increase
significantly. The Company could suffer a resulting short-term adverse
effect until it established satisfactory alternative sourcing arrangements.
N.C. Cameron & Sons Limited, a subsidiary of the Company and a member of
the Enesco Giftware Group located in Mississauga, 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. In addition to selling various product
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lines itself in the U.K. and several other European countries, Enesco
European Giftware Group Limited, a subsidiary of the Company, with its
headquarters located in Carlisle, Cumbria, England, oversees the
distribution operations of affiliated companies located in Germany and
France and administers the Group's collectors clubs that are based outside
of North America.
Competition in the gifts and collectibles business in North America,
Europe, and the Far East is highly fragmented among a diversity of gifts
and collectibles product categories. The principal factors affecting
success in the marketplace are originality of product design, quality,
sourcing, marketing ability, customer service and price. The Company
believes that Enesco is a significant factor in the U.S. gifts and
collectibles business among a small number of sizable, and largely
privately-held, competitors within the industry, which businesses include
Hallmark, Department 56, Lladro, Cast Art, Boyd's Bears and Midwest
Imports, among others. Enesco European Giftware Group Limited, which
manages businesses in the United Kingdom, France, and Germany under the
brand names of Lilliput Lane, Border Fine Arts, and Enesco, is the third
largest quality giftware distributor in the U.K., behind only Wedgwood and
Royal Doulton. It maintains an employed sales organization based in the
United Kingdom along with a network of distributors and multiple
independent sales agents throughout continental Europe.
The Enesco Giftware Group's sales normally tend to peak in the third and
fourth quarters, although in 1997 most sales occurred during the second and
third quarters. As of the end of 1997, the Enesco Giftware Group had a
backlog of firm orders totaling $87,000,000, as compared to $80,000,000 as
of the end of 1996. 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 incentivize 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. During 1997,
however, particularly in the third and fourth quarters, the Company
tightened its credit controls which had a significant negative impact on
sales results.
There has been a long-standing issue in the U.S. as to the appropriate
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
periodically have expressed interest in this area in general, and some
states have challenged from time to time the classification of positions
within the Enesco sales organization, successfully in two jurisdictions, as
well as other contracted service providers. While the Company received a
determination from the U.S. Equal Employment Opportunity Commission as to
the independent contractor status of a former Enesco sales representative
in 1997, the federal government is continuing to review this issue based
upon other requests and management expects increased attention on the
status of workers from both federal and state governments in the future.
- 5 -
Other Information
As of December 31, 1997, the Company and its U.S. subsidiaries employed
approximately 1,120 persons on a full-time basis. As of the same date,
there were also approximately 400 independent contractor sales
representatives engaged in selling Enesco's product lines in the U.S.
As of the same date, the Company's foreign subsidiaries employed
approximately 1,380 persons on a full-time basis.
For financial information about geographic areas in which the Company
conducts its businesses, including financial information regarding foreign
and domestic operations, see Note 7 of "Notes to Consolidated Financial
Statements" included on page 31 of the 1997 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 6 of the 1997 Annual Report,
which is incorporated herein by reference, for a comparison and discussion
of the results of operations and operating profit from foreign and domestic
sources within the Enesco Giftware Group.
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; headquarters offices of Enesco in Itasca, Illinois; and
showroom, warehouse and distribution facilities for Enesco's giftware
business in Elk Grove Village, Illinois. Enesco also leases showrooms in
eight other major market locations in the U.S. for the display of its
products. The Corporate Headquarters property is currently being offered
for sale as part of the Company's ongoing worldwide restructuring.
Outside of the U.S., the principal physical property of the Company's
remaining Direct Selling Group subsidiaries consists of a major
manufacturing and distribution facility owned in Spain. The principal
physical properties relating to the foreign subsidiaries of the Enesco
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; and Enesco European Giftware Group
Limited, which owns manufacturing plants and warehouse facilities in
Penrith, Workington, and Carlisle, Cumbria, England, and Langholm,
Dumfriesshire, Scotland. These manufacturing facilities are generally
operating at or near to capacity.
ITEM 3. LEGAL PROCEEDINGS.
In the ordinary course of the Company's business, there have arisen
various legal proceedings pending against the Company and its subsidiaries.
While the Company 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
H. L. Tower 65 Director 2/04/78
Chairman of the Board 4/22/82
President and Chief
Executive Officer 9/04/97
Chairman of the Executive
Committee 4/27/78
Mr. Tower also served as President from March, 1978 to April, 1982 and
again from January, 1985 to April, 1988. He served as Chief Executive
Officer from March, 1978 to August, 1990. He served as interim President
and Chief Executive Officer from August, 1993 to November, 1993.
Allan G. Keirstead 53 Director 4/25/85
Vice Chairman 10/22/97
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 73 Director 9/04/97
Vice Chairman 10/22/97
Executive Vice President 4/28/88
Chairman and CEO of Enesco
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, a subsidiary
of the Company, of which Mr. Freedman was a founder in 1959.
John J. Dur 46 Vice President 2/01/95
President and CEO of
Stanhome 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 Diageo plc.
Jeffrey A. Hutsell 44 Director 9/04/97
Vice President 1/22/97
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President and COO of
Enesco Giftware Group 1/20/97
Prior to Mr. Hutsell's elections as Director and Vice President of the
Company and as President and Chief Operating Officer of Enesco Corporation,
a subsidiary of the Company, he served as Enesco's Executive Vice
President, Worldwide Creative from January, 1992 to January, 1997, Vice
President, Creative from January, 1989 until December, 1991, as Vice
President, Art from April, 1986 until December, 1988, and as Vice
President, Product Development from August, 1985 to April, 1986.
Bruce H. Wyatt 51 Vice President and
General Counsel 9/07/88
Secretary 4/28/88
Prior to Mr. Wyatt's elections as Vice President and General Counsel,
and as Secretary, he served as Assistant General Counsel from April, 1985
to September 1988 and Assistant Secretary from April, 1981 to April, 1988.
He also served as Assistant Clerk from April, 1983 to April, 1988 and Clerk
from April, 1988 to March, 1998.
Thomas E. Evangelista 48 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 to
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 62 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.
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 Section
entitled "Stock Market, Dividend and Shareholder Information" appearing on
page 1 of the 1997 Annual Report 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 40 and
41 of the 1997 Annual Report and is incorporated herein by reference.
- 8 -
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 6 through 11 of the 1997 Annual
Report 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 the accompanying Notes and Report of Independent
Public Accountants, appearing on pages 12 through 36 of the 1997 Annual
Report and is incorporated herein by reference. Also incorporated herein
by reference are the Quarterly results (unaudited) during 1997, 1996 and
1995 set forth on pages 38 and 39 of the 1997 Annual Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
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 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. Information required by
this item regarding reporting compliance is included under the caption
"Section 16(a) Beneficial Ownership Reporting Compliance" in the Company's
Proxy Statement and is incorporated herein by reference.
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 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 and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Information required by this item is set forth under the caption
"Compensation Committee Interlocks and Insider Participation" in the
Company's Proxy Statement and is incorporated herein by reference.
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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 12 of this Form
10-K.
(a)(3) Exhibits. The exhibits required by this item are listed in
the Exhibit Index on pages 15 - 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(ff) in the
Exhibit Index.
(b) Reports on Form 8-K. A Current Report on Form 8-K dated
December 18, 1997 was filed by Stanhome Inc. with the Securities and
Exchange Commission on December 31, 1997 reporting under Item 2 and Item 7
regarding the disposition of the majority of the Company's Direct Selling
Group operations and certain related supply and license agreements together
with the associated pro forma condensed consolidated balance sheet dated
September 30, 1997 and pro forma condensed consolidated statements of
income for the nine months ended September 30, 1997 and for the year ended
December 31, 1996.
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
27th day of March, 1998.
STANHOME INC.
(Registrant)
By:/s/ H. L. Tower
________________________
H. L. Tower
Chairman, President and Chief
Executive Officer
By:/s/ Allan G. Keirstead
_________________________
Allan G. Keirstead
Vice Chairman, Executive Vice
President and Chief Administrative
& Financial Officer
- 10 -
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below on the 27th day of March, 1998 by the
following persons on behalf of the registrant and in the capacities
indicated.
Signature Title
/s/ H. L. Tower
_________________________
H. L. Tower Chairman of the Board,
President and Chief
Executive Officer and
Director
/s/ Homer G. Perkins *
_________________________
Homer G. Perkins Director
/s/ Allan G. Keirstead
_________________________
Allan G. Keirstead Vice Chairman, Executive
Vice President and Chief
Administrative and
Financial Officer and
Director
/s/ John F. Cauley *
________________________
John F. Cauley Director
/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/ Charles W. Elliott *
_________________________
Charles W. Elliott Director
/s/ Eugene Freedman
________________________
Eugene Freedman Vice Chairman, Executive
Vice President and Director
/s/ Jeffrey A. Hutsell
________________________
Jeffrey A. Hutsell Vice President and Director
*By:/s/ H. L. Tower
____________________
H. L. Tower
Attorney-In-Fact
- 11 -
STANHOME INC.
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS - Incorporated herein by
reference to "Report of Independent Public Accountants" on page 36 of
Stanhome's 1997 Annual Report to Stockholders.
FINANCIAL STATEMENTS - All of which are incorporated herein by reference to
Stanhome's 1997 Annual Report to Stockholders.
Consolidated Balance Sheets as of December 31, 1997 and 1996
Consolidated Statements of Income For the Years Ended December 31, 1997,
1996 and 1995
Consolidated Statements of Retained Earnings For the Years Ended
December 31, 1997, 1996 and 1995
Consolidated Statements of Cash Flows For the Years Ended December 31,
1997, 1996 and 1995
Notes to Consolidated Financial Statements as of December 31, 1997, 1996
and 1995
Quarterly results (unaudited)
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULE
SCHEDULE SUPPORTING FINANCIAL STATEMENTS:
Schedule
Number Description
II Valuation and Qualifying Accounts and Reserves For
Each of the Three Years Ended December 31, 1997(a)
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.
- 12 -
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 23, 1998. 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 23, 1998
-13-
<TABLE>
<CAPTION>
SCHEDULE II
STANHOME INC.
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FOR EACH OF THE THREE YEARS ENDED DECEMBER 31, 1997(a)
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
----------- ---------- ---------- --------- ---------- ----------
For the year ended December 31, 1995
- ------------------------------------
Reserves which are deducted in the balance
sheet from assets to which they apply -
Reserves for uncollectible accounts,
<S> <C> <C> <C> <C> <C>
returns and allowances $ 8,011,748 $ 1,397,299 $ - $ 1,544,214 $ 7,864,833
=========== =========== ====== =========== ===========
Accumulated amortization of other assets $18,652,864 $ 3,527,135 $ - $ 61,688 $22,118,311
=========== =========== ====== =========== ===========
Other reserves $ 175,647 $ 220,493
=========== ===========
For the year ended December 31, 1996
- ------------------------------------
Reserves which are deducted in the balance
sheet from assets to which they apply -
Reserves for uncollectible accounts,
returns and allowances $ 7,864,833 $ 6,134,148 $ 17,277(b) $ 4,125,459 $ 9,890,799
=========== =========== =========== =========== ===========
Accumulated amortization of other assets $22,118,311 $ 3,843,526 $ - $ (57,347)(c) $26,019,184
=========== =========== =========== =========== ===========
Other reserves $ 220,493 $ -
=========== ===========
For the year ended December 31, 1997
- ------------------------------------
Reserves which are deducted in the balance
sheet from assets to which they apply -
Reserves for uncollectible accounts,
returns and allowances $ 9,890,799 $ 5,892,540 $ - $ 4,636,992 $11,146,347
=========== =========== ========== =========== ===========
Accumulated amortization of other assets $26,019,184 $ 3,479,053 $ - $ 2,653,172 $26,845,065
=========== =========== ========== =========== ===========
</TABLE>
Note:
(a) The figures for 1996 and 1995 have been restated to exclude
discontinued operations.
(b) Represents recorded reserve at date of acquisition.
(c) Includes currency translation losses.
EXHIBIT INDEX
Reg. S-K
Item 601 EXHIBIT
2(a)* Agreement of Purchase and Sale dated April 22, 1997 by
and among The Crestley Collection, Ltd., The Bradford
Exchange, Ltd. (with respect to Section 12(p) therein only)
and Stanhome Inc. (Exhibit 2.1 to Form 8-K filed on June 5,
1997.)
2(b)* Stock and Asset Purchase Agreement dated as of November
24, 1997 by and between Stanhome Inc. and Laboratoires De
Biologie Vegetale Yves Rocher. (Exhibit 2.1 to Form 8-K
filed on December 31, 1997.)
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
December 4, 1996. (Exhibit 10 (a) to Form 10-K filed for
the period ended December 31, 1996.)
10 (b)* 1991 Stock Option Plan, as amended and restated through
December 4, 1996. (Exhibit 10 (b) to Form 10-K filed for
the period ended December 31, 1996.)
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)* 1996 Stock Option Plan, as amended and restated through
June 4, 1996. (Exhibit 10 to Form 10-Q filed for the period
ended June 30, 1996.)
10 (e) 1997 President and Chief Executive Officer Stock Option
Plan.
10 (f)* Non-Employee Director Stock Plan. (Exhibit 10 to Form
10-Q filed for the period ended March 31, 1995.)
10 (g)* 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 (h)* Management Incentive Plan, as amended and restated
effective January 1, 1996. (Exhibit 10 (f) to Form 10-K
filed for the period ended December 31, 1995.)
10 (i) Supplemental Retirement Contract with Homer G. Perkins,
as amended and restated through February 9, 1988.
10 (j) Supplemental Retirement Contract with H. L. Tower, as
amended and restated through June 5, 1997.
10 (k) Amendment of Retirement Agreement with Allan G.
Keirstead.
10 (l)* Supplemental Retirement Contract, as amended, with
Allan G. Keirstead. (Exhibit 10 (1) to Form 10-K filed for
the period ended December 31, 1994.)
10 (m)* Amendment of Allan G. Keirstead Supplemental Retirement
Contract. (Exhibit 10 (c) to Form 10-Q filed for the period
ended June 30, 1997.)
10 (n) Description of Relocation Benefits for Allan G.
Keirstead.
10 (o)* Thomas E. Evangelista Agreement. (Exhibit 10 (e) to
Form 10-Q filed for the period ended June 30, 1997.)
10 (p)* Carmen J. Mascaro Agreement. (Exhibit 10 (f) to Form
10-Q filed for the period ended June 30, 1997.)
10 (q)* Bruce H. Wyatt Retirement Agreement. (Exhibit 10 (g)
to Form 10-Q filed for the period ended June 30, 1997.)
10 (r) Amendment of Bruce H. Wyatt Retirement Agreement.
10 (s) Bruce H. Wyatt Release Agreement.
10 (t) Ronald R. Jalbert Release Agreement.
10 (u)* Form of Severance Agreement. Substantially identical
agreements exist with Allan G. Keirstead, Bruce H. Wyatt,
and Thomas E. Evangelista. (Exhibit 19 (d) to Form 10-K
filed for the period ended December 31, 1992.)
10 (v)* John J. Dur Separation Letter Agreement. (Exhibit 10
(h) to Form 10-Q filed for the period ended June 30, 1997.)
10 (w) First Amendment to John J. Dur Separation Letter
Agreement.
10 (x) Second Amendment to John J. Dur Separation Letter
Agreement.
10 (y)* Form of Retention Benefits Plan as described in the
Estimated Termination Benefits Summary Letters dated June
16, 1997 for Stanhome Inc. Corporate Headquarters Exempt
Employees. Similar plans exist with Allan G. Keirstead,
Bruce H. Wyatt, Thomas Evangelista, and Carmen J. Mascaro.
(Exhibit 10 (i) to Form 10-Q filed for the period ended
June 30, 1997.)
10 (z)* Form of Change in Control Agreement. Substantially
identical agreements exist with Allan G. Keirstead, Bruce
H. Wyatt, John J. Dur, and Thomas E. Evangelista. (Exhibit
19 (c) to Form 10-K filed for the period ended December 31,
1992.)
10 (aa)* Form of Change in Control Agreement with certain other
executive officers and non-executive officers.
Substantially identical agreements exist with Carmen J.
Mascaro and Jeffrey A. Hutsell. (Exhibit 19 (c) to Form
10-K filed for the period ended December 31, 1991.)
10 (bb)* Second Amendment to Stanhome Inc. Supplemental Pension
Plan, as amended and restated through December 16, 1996.
(Exhibit 10 (s) to Form 10-K filed for the period ended
December 31, 1996 and Exhibit 10 (j) to Form 10-Q filed for
the period ended June 30, 1997.)
10 (cc) Third Amendment to Stanhome Inc. Supplemental Pension
Plan.
10 (dd)* Enesco Corporation Supplemental Profit Sharing Plan
effective January 1, 1994. (Exhibit 10 to Form 10-Q filed
for the period ended September 30, 1996.)
10 (ee)* Stanhome Supplemental Investment Savings Plan, as
amended and restated effective January 1, 1997. (Exhibit 10
(k) to Form 10-Q filed for the period ended June 30, 1997.)
10 (ff) First Amendment to Stanhome Supplemental Investment
Savings Plan.
10 (gg)* License Agreement between Precious Moments, Inc. and
Enesco Corporation. (Exhibit 10 to Form 10-Q filed for the
period ended June 30, 1993.)
10 (hh) First Amendment to License Agreement between Precious
Moments, Inc. and Enesco Corporation.
13 Portions of the 1997 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
99 Cautionary Statement for Purposes of the "Safe Harbor"
Provisions of the Private Securities Litigation Reform Act
of 1995, as amended and restated through March 27, 1998.
*Incorporated Herein By Reference
EXHIBIT 10(e)
STANHOME INC.
WESTFIELD, MASSACHUSETTS
1997 PRESIDENT AND CHIEF EXECUTIVE OFFICER
STOCK OPTION PLAN
CERTIFICATE OF GRANT OF NON-QUALIFIED
STOCK OPTION
Date of Grant: November 14, 1997
Total Number of Shares: 100,000
Price per Share: $27.3125
To: H. L. Tower
50 Wallace Road
Stony Creek, CT 06405
Dear Bill:
This letter is a certificate formally granting you a Non-qualified
Stock Option with respect to the number of shares of Stanhome Inc. Common
Stock, $0.125 par value each indicated above and subject to the conditions
set forth below. The stock option exercise price will be $27.3125 per
share. Your option will vest in increments of 12,500 shares as of the last
day of each month in which you have served, during any portion thereof, as
the Company's President and Chief Executive Officer beginning with
November, 1997. If you cease serving as the Company's President and Chief
Executive Officer at any time before June 1, 1998, the incremental shares
under this option for those months following such cessation of service in
those capacities will not vest. All unvested increments of shares under
this option at the time of your cessation of service in those capacities
will be forfeited by you and will terminate forthwith.
Your option is not exercisable during the first six (6) months
following the date of grant. After May 14, 1998, your option will become
exercisable as to all shares vested as of that date. The stock option
granted under this certificate is not to be treated as an incentive stock
option under the Internal Revenue Code of 1986, as amended.
You may exercise your right to purchase all or any of the shares
included in any vested increment after May 14, 1998 but, in any event, not
later than November 13, 2007. In order to exercise, you must forward a
completed Stock Option Exercise Order together with payment in full to the
Treasurer, Stanhome Inc., 333 Western Avenue, Westfield, Massachusetts
01085, for the shares which you elect to purchase. You can elect to make
your purchase in cash, Stanhome stock, or a combination of cash and
Stanhome stock. Please be advised that the Company will accept shares
acquired under a Stock Option program of the Company in payment for new
option shares only if the shares tendered have been held by you for a
period of at least six months.
No purchase can be made of fewer than ten shares at any one time. Any
exercise of the option will be effective on the date when payment is
received in the office of the Treasurer, except that no payment will be
accepted which is received after November 13, 2007. You will receive a
stock certificate representing shares for which you have made payment.
Under existing law, the difference between the price paid for any
shares purchased under this option and their market value on the date or
dates the option is exercised will be subject to federal income tax at
ordinary rates, to social security tax, and to the usual withholding
requirements. The payment of all such taxes is of course your personal
responsibility. However, the Company is also responsible for meeting the
withholding requirements and in order to do so will retain the required
number of shares purchased under the option unless you elect to deposit
with it an amount equal to any required withholding.
This option is exercisable during your lifetime only by you and is not
transferable by you. In the event of your death, your legal
representatives may, at any time after May 14, 1998 and before November 13,
2007, pay for and receive any shares which were vested as of the date of
your death. Any attempted transfer or other disposition of the option by
you will be void and will constitute valid grounds for its cancellation by
the Company.
The Compensation and Stock Option Committee of the Board of Directors
will administer this grant in its discretion and pursuant to its
interpretation of the changes in stock section and other provisions of the
Company's 1991 Stock Option Plan, a copy of which is attached for your
convenience, deemed by it to be applicable.
This option will be of no force or effect and no rights will exist
under it after November 13, 2007.
We would appreciate your signing the enclosed acknowledgment
confirming your receipt of this Certificate of Grant and returning it in
the enclosed envelope.
STANHOME INC.
/s/ Bruce H. Wyatt
______________________
Bruce H. Wyatt
Secretary
Enclosures
CONFIRMATION OF RECEIPT
OF
NON-QUALIFIED STOCK OPTION
I hereby acknowledge that I have received my Certificate of Grant of a
Non-qualified Stock Option dated November 14, 1997.
______________________________________
(Signature of Optionee)
Date:__________________________________
Name:_________________________________
(Printed)
Address:_______________________________
STANHOME INC.
1991 Stock Option Plan, as amended
Through December 4, 1996
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
"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 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 by the optionee or his or her guardian or legal
representative(s) during the three-year period following any such
termination of employment as to the number of Shares which the optionee
was entitled to purchase on the day preceding such termination and, if
specified in the certificate of grant or other instrument evidencing a
Non- qualified Stock Option, such additional number of Shares which the
optionee would have become entitled to purchase during such three-year
period (including by reason of Section 10 below) if the optionee's
employment had not so terminated, 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
"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. 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.
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 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 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
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.
EXHIBIT 10(i)
AGREEMENT
AGREEMENT made December 7, 1978 between Stanley Home Products, Inc.,
a Massachusetts corporation with its principal place of business at 333
Western Avenue, Westfield, Massachusetts ("Stanley") and Homer G. Perkins
of 205 Main Street, Easthampton, Massachusetts ("Employee").
In consideration of the mutual agreements hereinafter contained, the
parties agree as follows:
l. Normal Retirement.
(a) Subject to the provisions of paragraph 9 below, if Employee
retires on or after October 23, 1981 Stanley 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 nonqualified
plan maintained by Stanley (excluding the portion, if any, of such benefit
based on Employee's contributions to such plan) commencing at such time as
Employee first becomes eligible to receive such benefit, provided, however,
that any such reduction attributable to the Stanley Home Products, Inc.
Pension Plan shall be in an amount such that Perkins and his spouse, if she
survives him, will each receive the same benefit under this Contract and
the Pension Plan in combination as he or she would have received 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 Stanley's contributions thereto, e.g. a
profit-sharing plan, 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, Stanley 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
Stanley 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 the purposes of subparagraph 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.
(d) In determining the value of the retirement benefit which Employee
is entitled to receive from Stanley's profit sharing retirement plan for
purposes of subparagraph 1(b), any shares of Stanley Common Stock Non-
Voting purchased at his option for his account using funds in his vested
interest in such plan shall be deemed to have a value equal to the average
of the mean of the closing "bid" and "asked" prices of the Company's Common
Stock (Non-Voting) as reported on the National Association of Securities
Dealers Automated Quotation System ("NASDAQ") on the 7 business days,
excluding any business day for which no quotation appears on NASDAQ,
immediately preceding the valuation date used to determine the value of the
amount which he is entitled to receive from the plan upon termination of
employment.
2. Early Retirement. Subject to the provisions of subparagraph 2(c)
and paragraph 9 below,
(a) if Employee's employment terminates before October 23, 1981 for
any reason other than a discharge for cause, Stanley will pay him each
month for the duration of his life the benefit which would be payable if
the provisions of paragraph l above were applied as of the date of such
termination, provided that the portion of the benefit determined under
paragraph l (a) 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) During the period from his termination date to age 65, 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.
(c) 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 l 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 Stanley 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.
4. Survivors Benefit.
(a) In the event that Employee dies after age 55 while still employed
by Stanley, Stanley will pay his surviving spouse, subject to clause (c)
below, a monthly amount equal to 50% of the monthly benefit that would have
been paid to Employee under paragraph 1 or subparagraph 2(a), whichever is
applicable, had he retired on the day immediately prior to the date of his
death.
(b) In the event that Employee's employment by Stanley terminates
after age fifty-five (55) and he subsequently dies while receiving payments
hereunder, Stanley will pay his surviving spouse, subject to subparagraph
(c) below, a monthly amount for the remainder of her life equal to 50% of
the monthly benefit he would have received had he continued living,
excluding any amounts being paid to Employee under subparagraphs 2(b) and
3(b). 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 Stanley except
to the extent such benefits remain payable to such spouse following
Employee's death.
(c) 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 l year period ending
on Employee's date of death. Further, if the age of the Employee at the
date of his death exceeds the age of his surviving spouse on such date by
more than 5 years, the benefits 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.
(d) 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 Employee, or in the absence of his
designation, by his surviving spouse, in writing to Stanley, 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 purposes hereunder shall include total wage,
salary and commission payments received by Employee from the Company
including base pay, overtime and bonuses but not including Company
contributions under the Company's Employees' Profit-Sharing 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.
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 Stanley 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.
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 Stanley 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 Stanley or any of its affiliated
companies without Stanley's written consent in advance nor will he do
anything to interfere, directly or indirectly with the business of Stanley
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, clubs 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.
9. Forfeiture of Payments. Stanley 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, Stanley shall give him
written notice thereof and if, within 15 days of such notice, Employee
gives Stanley 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 Stanley and any such successor shall be
deemed substituted for Stanley 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 Stanley.
12. Not an Employment Agreement. This agreement is not an employment
agreement and Stanley reserves the right to discharge Employee with or
without cause. The agreement in no way affects his rights under the Stanley
Home Products, Inc. Employees' Profit-Sharing Retirement Plan or under any
Stanley group or other insurance policy.
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 205 Main
Street, Easthampton, MA or in the case of Stanley, to its principal office
at 333 Western Avenue, Westfield, Massachusetts, Attn: Secretary. 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 the Stanley of a breach of any
provision 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 supersedes an earlier agreement
dated March 4, 1977 between the parties in its entirety and 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 Stanley 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.
"STANLEY": STANLEY HOME PRODUCTS, INC.
BY: /s/ H. L. Tower
------------------------
Its President
Attest:
/s/ Robert C. Alsop
- -----------------------
Secretary
"EMPLOYEE": /s/ Homer G. Perkins
---------------------------
Homer G. Perkins
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
EXHIBIT 10(j)
AGREEMENT
AGREEMENT made December 23, 1981 between Stanley Home Products, Inc.,
a Massachusetts corporation with its principal place of business at 333
Western Avenue, Westfield, Massachusetts ("Stanley") and H.L. Tower, of 250
Halladay Avenue, Suffield, Connecticut ("Employee").
In consideration of the mutual agreements hereinafter contained, the
parties agree as follows:
l. Normal Retirement.
(a) Subject to the provisions of paragraph 9 below, if Employee
retires on or after July 16, 1997, Stanley will pay him each month for the
duration of his life deferred compensation equal to 1/12 of (i) fifty
percent (50%) of the average annual compensation received by him in the
five most highly compensated years of his final ten years of employment, as
determined under paragraph 5 below, less (ii) fifty percent (50%) of his
annual Primary Social Security Benefit, as determined in paragraph 6 below.
(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 Stanley (excluding the portion, if any, of such benefit
based on Employee's contributions to such plan) commencing at such time as
Employee first becomes eligible to receive such benefit, provided, however,
that any such reduction attributable to the Stanley Home Products, Inc.
Pension Plan shall be in an amount such that Tower and his spouse, if she
survives him, will each receive the same benefit under this Contract and
the Pension Plan in combination as he or she would have received 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 Stanley's contributions thereto, e.g. a
profit-sharing plan, 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, Stanley 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.
2. Early Retirement. Subject to the provisions of subparagraph 2(d)
and paragraph 9 below,
(a) if Employee's employment terminates during the period from July
16, 1987 to July 16, 1997, Stanley will pay him each month for the duration
of his life the benefit which would be payable if the provisions of
paragraph l above were applied as of the date of such termination, provided
that the portion of the benefit determined under subparagraph l(a) 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 before July 16, 1987, then,
(i) if such termination is involuntary for any reason other than
for cause, he shall be entitled to receive the benefit
determined under subparagraph 2(a) above as if he had
reached age fifty-five (55) on the date of his termination,
provided that such benefit shall not be payable until his
fifty-fifth (55th) birthday.
(ii) if such termination is voluntary, he shall be entitled to
receive an annual retirement benefit commencing on his
fifty-fifth (55th) birthday, and payable for the remainder
of his life equal to the amount by which (A) the product of
the number of years of employment by Stanley multiplied by
$3,000 exceeds (B) the sum of the annual retirement benefits
received by Employee from any other qualified or
non-qualified plan maintained by Stanley, provided that the
annual benefit payable under this clause (ii) shall not
exceed $50,000. For the purposes hereof, the annual
retirement benefit of any amount which Employee is entitled
to receive from a defined contribution plan, e.g. a profit
sharing plan, shall be the annuity value of such amount
based on the U.S. Life and Actuarial Tables set forth in the
Internal Revenue Service Federal Estate Tax Regulations then
currently in effect.
(c) During the period commencing on the latter to occur of his fifty-
fifth (55th) birthday or termination date, and ending on his sixty-fifth
(65th) birthday, or if different by law such other age as then entitles
Employee to receive his actual, unreduced Primary Social Security Benefit,
Stanley 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 fifty-
five (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 l that would have been payable to him if
he had remained employed until retirement at age sixty-five (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 Stanley 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 (sixty-five) 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.
4. Survivors Benefit.
(a) If Employee's employment is involuntarily terminated prior to age
fifty-five (55) for any reason other than cause, and he dies subsequent to
such termination, Stanley 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 that would have been
paid to Employee commencing on his fifty-fifth (55th) birthday, pursuant to
clause (i) of subparagraph 2(b).
(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 the 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 subparagraphs
(a), (b), or (c) above unless she shall have survived Employee for a period
of thirty (30) days and shall have been married to him throughout the one
year period ending on Employee's date of death. Further, if the age of the
Employee at the date of his death exceeds the age of his surviving spouse
on such date by more than five 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 five 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 Employee, or in the absence of his
designation, by his surviving spouse, in writing to Stanley, provided that
in the event no beneficiary has been designated or the designated
beneficiary does not survive such spouse for a period of thirty (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 purposes hereunder, shall include total wage,
salary and commission payments received by Employee from the Company,
including base pay, overtime, bonuses, and cash dividend equivalency
payments made to him under Section 2(d)(ii) of the March 15, 1978,
Employment Agreement between Employee and Stanley, but not including
Stanley contributions under Stanley's Employees' Profit Sharing Retirement
Plan, Pension Plan, or under any group life insurance or other qualified or
non-qualified employee retirement or benefit plan or any payment designated
by Stanley as an allowance for Employee's business expenses. 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 Stanley'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 Stanley shall pay Employee an additional lump sum to
adjust for any underpayment to Employee and Employee shall refund to
Stanley any overpayment.
If Employee has been employed for less than ten (10) years at the time
of his termination, his compensation shall be based on the five most highly
compensated years of the years employed, or if employed for less than five
years, based on such lesser number of years employed.
6. Primary Social Security Benefit. Employee's Primary Social
Security Benefit shall be determined on the day prior to the date on which
Employee's employment with Stanley 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 sixty-five (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.
(a) 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.
(b) Notwithstanding any otherwise applicable provision of this
agreement to the contrary, the retirement benefits due to Tower (or his
beneficiary) under this Agreement, if any, shall be paid in a lump sum upon
the occurrence of a Change in Control (as defined in Annex A attached
hereto) of the Company. Such lump-sum payment shall be the present value
of the benefit payable to Tower hereunder using the Pension Benefit
Guaranty Corporation immediate annuity interest rate as is in effect for
the month in which the payment is mad and the mortality table based on the
UP-1984 Table, all as in accordance with generally acceptable actuarial
principles.
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 Stanley 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 Stanley or any of its affiliated
companies, without Stanley's written consent in advance, nor will he do
anything to interfere, directly or indirectly, with the business of Stanley
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.
9. Forfeiture of Payments. Stanley 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, Stanley shall give him
written notice thereof, and if, within 15 days of such notice, Employee
gives Stanley 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 Stanley and any such successor shall be
deemed substituted for Stanley 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 Stanley.
12. Not an Employment Agreement. This Agreement is not an employment
agreement and Stanley reserves the right to discharge Employee with or
without cause. The Agreement in no way affects his rights under the
Stanley Home Products, Inc. Employee's Profit Sharing Retirement Plan or
Pension Plan or under any Stanley group or other insurance policy.
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 250
Halladay Avenue, Suffield, Connecticut, or, in the case of Stanley, to its
principal office at 333 Western Avenue, Westfield, Massachusetts,
Attention: Secretary. 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 Stanley of a breach of any
provision 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
between the parties, and supercedes the retirement benefits provided under
subparagraph 2(c) of the Employment Agreement as of March 15, 1978, between
Employee and Stanley. It may not be changed orally but only by an
agreement in writing signed by Employee and for Stanley by an officer duly
authorized to enter into said amendment by the Board of Directors.
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 INC.
BY:/s/ G.W. Seawright
-----------------------
/s/ H.L.Tower
---------------------
H.L. Tower Attest:
/s/ Bruce H. Wyatt
-------------------------
Secretary
EXHIBIT "A"
Life Annuity Value
Age
Male Female Value of $1. payable annually for
life, with first payment 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
ANNEX A
Change In Control:
As used herein, a "Change in Control" means a Change in Control of a
nature that would, in the opinion of 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 (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 under the Exchange Act), directly or indirectly, of
securities of the Company representing twenty-five percent (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 execution of this Agreement), individuals who at
the beginning of such period constitute the Board and any new
director (other than a director designated by a Person who had
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 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.
EXHIBIT 10(k)
AMENDMENT OF RETIREMENT AGREEMENT
WITH ALLAN G. KEIRSTEAD
Agreement made as of December 30, 1997 by Stanhome Inc., a
Massachusetts corporation, with its principal place of business at 333
Western Avenue, Westfield, Massachusetts 01085 (the "Company") and Allan G.
Keirstead, 26 Longfellow Road, Holyoke, Massachusetts 01040 ("Keirstead").
Whereas, the Company and Keirstead have previously entered into a
Retirement Agreement as amended (the "Agreement");
Whereas, the Agreement provides for a reduction of the monthly
retirement benefit payable to Keirstead thereunder by the value of the
benefit which Keirstead is entitled to receive from any other qualified or
non-qualified plan maintained by the Company and further provides that the
value of the benefit in the case of a defined contribution plan shall be
determined by reference to an annuity table set forth in Exhibit A to the
Agreement;
Whereas, since the Company Employees' Profit-Sharing Retirement Plan
has been terminated as of September 3, 1997 and there will not be any
further changes in the account balances thereunder, it will no longer be
appropriate to determine the Profit-Sharing offset under the Agreement by
reference to Exhibit A thereto; and
Whereas, the Company and Keirstead agree that the offset to the
benefit under the Agreement should, in the case of the Profit-Sharing Plan,
henceforth simply be determined by using the same offset method as used in
the Company's Pension Plan;
NOW, THEREFORE, in consideration of the premises and mutual agreements
hereinafter maintained, the parties do amend the Agreement as set forth
below, effective as of the date hereof;
The second paragraph of Section 1(b) of the Agreement is amended: (i)
to substitute the words "Subdivision 18 of Article 1 of the Stanhome Inc.
Pension Plan as in effect on the date hereof" for the words "the annuity
table set forth in Exhibit A attached" after the phrase "by reference to"
in the fourth line thereof; (ii) to delete the last two sentences of the
paragraph; and (iii) to delete Exhibit A to the Agreement.
IN WITNESS WHEREOF the parties have executed this Amendment effective
as of the date first written above.
STANHOME INC.
/s/ Allan G. Keirstead By: /s/ H. L. Tower
---------------------- ------------------------
Allan G. Keirstead H. L. Tower
Chairman, President and CEO
ATTEST:
/s/ Mark I. Cohen
- ----------------------
Assistant Secretary
Exhibit 10(n)
DESCRIPTION OF RELOCATION BENEFITS
FOR ALLAN G. KEIRSTEAD
The Compensation and Stock Option Committee of the Board of Directors of
Stanhome Inc. (the "Company") recently approved and ratified relocation
benefits (the "Relocation Benefits") for Allan G. Keirstead to continue as
the Company's Vice Chairman, Executive Vice President and Chief
Administrative and Financial Officer, which Relocation Benefits were
offered to him in the form of a letter agreement summarizing certain
continuing compensation matters and employee benefits, as well as providing
for the Relocation Benefits, certain of which are subject to adjustment in
the event of a voluntary termination of employment by Mr. Keirstead. The
Relocation Benefits principally consist of certain supplemental benefits to
be received by Mr. Keirstead in the event he relocates his place of
business to Illinois at the request of the Company, including the following
benefits to which he may be entitled in connection with his termination of
employment with the Company, whether voluntary or involuntary, during a
period of two years following the date of his relocation: monthly severance
payments (including without limitation a "retention benefit") as provided
for in the Company's existing Severance Policy and a letter dated June 16,
1997 to him; pension benefits in accordance with Mr. Keirstead's Retirement
Contract, as amended, starting at age 55, subject to Board approval in the
event of a voluntary termination prior to age 55; continuation of medical and
life insurance benefits for up to 36 months; and continued vesting of stock
options for a three-year period. Mr. Keirstead is also eligible to receive
relocation and related reimbursements.
EXHIBIT 10(r)
AMENDMENT OF RETIREMENT AGREEMENT
WITH BRUCE H. WYATT
Agreement made as of December 15, 1997 by Stanhome Inc., a
Massachusetts corporation, with its principal place of business at 333
Western Avenue, Westfield, Massachusetts 01085 (the "Company") and
Bruce H. Wyatt, 11 Bittersweet Lane, Wilbraham, Massachusetts 01095
("Wyatt").
Whereas, the Company and Wyatt have previously entered into a
Retirement Agreement made June 5, 1997 (the "Agreement");
Whereas, the Agreement provides for a reduction of the monthly
retirement benefit payable to Wyatt thereunder by the value of the
benefit which Wyatt is entitled to receive from any other qualified or
non-qualified plan maintained by the Company and further provides that
the value of the benefit in the case of a defined contribution plan
shall be determined by reference to an annuity table set forth in
Exhibit A to the Agreement;
Whereas, since the Company Employees' Profit-Sharing Retirement
Plan has been terminated as of September 3, 1997 and there will not be
any further changes in the account balances thereunder, it will no
longer be appropriate to determine the Profit-Sharing offset under the
Agreement by reference to Exhibit A thereto; and
Whereas, the Company and Wyatt agree that the offset to the
benefit under the Agreement should, in the case of the Profit-Sharing
Plan, henceforth simply be determined by using the same offset method
as used in the Company's Pension Plan;
NOW, THEREFORE, in consideration of the premises and mutual
agreements hereinafter maintained, the parties do amend the Agreement
as set forth below, effective as of the date hereof;
The second paragraph of Section 1(b) of the Agreement is amended:
(i) to substitute the words "Subdivision 18 of Article 1 of the
Stanhome Inc. Pension Plan as in effect on the date hereof" for the
words "the annuity table set forth in Exhibit A attached" after the
phrase "by reference to" in the fourth line thereof; (ii) to delete
the last two sentences of the paragraph; and (iii) to delete Exhibit A
to the Agreement.
IN WITNESS WHEREOF the parties have executed this Amendment
effective as of the date first written above.
STANHOME INC.
/s/ Bruce H. Wyatt By:/s/ H. L. Tower
- ---------------------- ----------------------------
Bruce H. Wyatt H. L. Tower
Chairman, President and CEO
ATTEST:
/s/ Mark I. Cohen
- ----------------------
Assistant Secretary
EXHIBIT 10(s)
RELEASE AGREEMENT
This Release Agreement is entered into by and between Bruce H.
Wyatt, a resident of 11 Bittersweet Lane, Wilbraham, Massachusetts
(hereinafter referred to as "Associate"), and Stanhome Inc., a
Massachusetts corporation having a principal place of business at 333
Western Avenue, Westfield, Massachusetts (hereinafter referred to as the
"Company").
In consideration of the promises, conditions and representations set
forth herein, the severance payments being provided to Associate by the
Company as set forth below, and other good and valuable consideration,
the receipt and sufficiency of which hereby are acknowledged by Associate
and the Company (hereinafter sometimes referred to collectively as the
"Parties"), the Parties hereby agree as follows:
1. Termination Date. Associate's employment with the Company shall
terminate involuntarily without cause as of the close of business on
March 31, 1998 (the "Termination Date").
2. Continuation of Salary and Benefits After Termination. Prior to
the Termination Date, Associate's salary and his participation in all
compensation and benefit plans and programs in which he currently is a
participant or from which he currently receives benefits will remain in
effect on the same terms as are in effect as of the effective date of
this Agreement.
As of the Termination Date, Associate's salary and any other
compensation and benefits he receives from the Company will terminate,
other than compensation and/or benefits to which he continues to be
entitled (a) pursuant to the terms of this Agreement, (b) as a matter of
federal or state law, (c) pursuant to the agreements between the Parties
to this Agreement listed below, including but not limited to a certain
Retirement Agreement entered into between the Parties dated June 5, 1997,
as amended December 15, 1997, (the "Retirement Agreement"), or (d)
pursuant to the terms of the compensation or benefit plans or programs in
which he continues to be a participant or has a right to receive such
compensation or benefits after the Termination Date listed below.
The agreements and compensation and benefit plans and programs
referred to herein are as follows:
o Medical and Life Employee Group Insurance Plan under Policy
#2232182 issued by Connecticut General Life Insurance Company to
Stanhome Inc.
o Accidental Death and Dismemberment Group Insurance Plan under
policy issued by AIG Insurance Company to Stanhome Inc.
o Retirement Agreement dated June 5, 1997, as amended December 15,
1997 and related Trust Agreement dated March 1, 1988, as amended
o Stanhome Pension Plan and related Trust Agreement dated January
1, 1980, as amended
o Stanhome Supplemental Pension Plan and related Trust Agreement
dated January 1, 1995, as amended
o Stanhome Investment Savings Plan and related Trust Agreement
dated January 1, 1993, as amended
o Stanhome Supplemental Investment Savings Plan and related Trust
Agreement dated January 1, 1995, as amended
o Stanhome Profit Sharing Plan and related Trust Agreement dated
October 1, 1992, as amended
o Stanhome Paysop Plan and related Trust Agreement dated October
15, 1985, as amended
o Stanhome Inc. 1984 Stock Option Plan
o Stanhome Inc. 1991 Stock Option Plan
o Stanhome Inc. 1996 Stock Option Plan
o Management Incentive Plan
o Change in Control Agreement effective January 1, 1992
o Stanhome Matching Gifts Program
With respect to those Company compensation and benefit plans and programs
in which Associate will continue to participate subsequent to the
Termination Date, Associate's participation in such compensation and
benefit plans and programs will be on terms no less favorable than in
effect as of the effective date of this Agreement. Furthermore, the
Company and Associate agree that after his Termination Date he will not
become entitled to any increased benefits under such compensation and
benefit plans and programs, but the benefits payable by the Company to
Associate thereunder shall be based upon his length of service and
compensation level as of the Termination Date.
3. Consideration.
A. Severance Payments. Following the Termination Date, and for a
period of thirty-six (36) consecutive months commencing April 1, 1998 and
ending on March 31, 2001 (the "Severance Period"), Associate will receive
severance payments equal to $17,666.67 per month. Payment will be made
on the 15th day of each such month, commencing April 15, 1998. Such
payments, based on Associate's current base salary, are in addition to
anything of value to which Associate is already entitled or provided
pursuant to this Agreement, any other agreement between the Parties or
other Company plan or program. Moreover, such severance payments are not
intended to include any unused, accrued vacation time to which Associate
may be entitled or any other accrued but unpaid compensation or benefit
to which Associate may be entitled under any Company compensation or
benefit plan or program.
B. Stock Options. Upon the Termination Date, the Company will
promptly deliver to Associate appropriate amendments to Associate's
Certificates of Grant relating to the Company's 1984 and 1991 Stock
Option Plans providing that the options under such plans shall be
exercisable by the Associate or his guardian or legal representative(s)
during the three-year period following his termination of employment as
to the additional number of shares of the Company's common stock, par
value $.125 per share, which the Associate would have become entitled
to purchase during such three-year period if the Associate's employment
had not terminated.
C. Additional Payments. During the Severance Period, Associate
will be paid an additional $2,233.33 each month of said period at the
same time as he is paid the Severance Payments provided for in paragraph
3.A of this Agreement, which additional payments represent the
Associate's present car allowance ($1,400 per month), plus Associate's
present annual $5,000. medical supplementary bonus and annual $5,000
financial planning bonus converted for those purposes to a monthly rate
($833.33 per month).
D. Bonus. In the event that the criteria are met for a bonus award
to Associate under (i) the 1997 Management Incentive Plan, Associate will
be paid the bonus award by March 15, 1998, and (ii) the 1998 Management
Incentive Plan, Associate will be paid the pro-rata portion of the bonus
award (for January, February and March of 1998) by March 15, 1999.
E. Insurance. Associate will continue to be covered by the group
medical insurance coverage as set forth in the Stanhome Group Insurance
Plan booklet dated December, 1994 (the "Plan") under the policy issued by
Connecticut General Life Insurance Company (Policy #2232182) regardless
of the location of Associate's eventual residence within the United
States and regardless of his coverage by any other medical insurance
plans. Should the Plan be terminated in the future, the Company and its
successors and assigns, as applicable, agree to provide Associate with
coverage that is substantially the same as provided in the Plan.
Associate's coverage will cease when he qualifies for Medicare.
Dependent coverage will be continued as to his spouse until Associate's
spouse qualifies for Medicare and as to his other dependents until that
dependent reaches age 23. However, if coverage has not otherwise already
ended, then coverage shall end for Associate's spouse and other
dependents when Associate reaches his 71st birthday or, in the event of
Associate's death before he reaches age 71, the date when Associate would
have reached his 71st birthday, it being intended that coverage for
Associate's spouse and other dependents shall continue until the date
when Associate would have reached his 71st birthday.
During the Severance Period, the Company, its successors and assigns,
will contribute 80% of the cost of the personal and dependent coverage and
Associate will contribute 20% of such cost, which percentages shall be
adjusted as necessary to be the same percentages as may be in effect for
the cost of medical coverage of active employees of the Company and its
successors and assigns. Upon expiration of the Severance Period, the
Company and its successors and assigns, as applicable, will contribute up
to $400 per month towards the cost of Associate's personal and dependent
coverage. Once the cost to Associate of the personal and dependent
coverage exceeds $400 per month, the Company will share with him equally
the increase in cost over that amount on a 50/50 basis. The continued
medical coverage, as set forth in the Plan and the guaranteed
contributions outlined above toward both personal coverage and dependent
coverage, is binding upon and may not be revoked by the Company or any of
its successors or assigns and will continue until coverage ceases as
outlined above provided that Associate has paid his portion of the
premium. In the event that Associate fails to pay his portion of the
premium on time, the Company will pay the full premium and notify
Associate of his failure to make timely payment. Associate shall have ten
(10) days from his receipt of such notice to cure his failure to pay by
repaying to the Company the amount advanced by the Company on his behalf,
and the Company shall not allow his insurance coverage to be cancelled or
to lapse until such ten-day period shall have expired.
The Company, its successors and assigns, shall continue to provide at
its sole expense the life insurance ($424,000 Death Benefit) and
accidental death and dismemberment employee insurance coverage, as
presently in effect, to the Associate during the Severance Period.
The Termination Date shall be treated as an event under the
Consolidated Budget Reconciliation Act of 1985 (COBRA), and Associate will
receive COBRA information under separate cover.
F. Outplacement. The Company also will provide Associate with
outplacement services as mutually agreed upon between the Parties,
provided such outplacement services commence within 12 months following
the Termination Date.
G. Moving Expenses. The Company shall reimburse Associate for
relocation expenses in accordance with present Company Relocation
Guidelines issued September, 1996, incurred by Associate within eighteen
months of the Termination Date unless such expenses are reimbursed to
Associate by a new employer, if any.
H. References. The Company will provide references for Associate in
accordance with its policy.
I. Taxes. Applicable taxes on all payments, transfers and other
consideration referred to herein will be the sole responsibility of
Associate, provided that the Company shall deduct applicable federal and
state withholding income taxes on the payments provided herein.
J. Vacation and Vacation Pay. Any accrued, unused vacation for
calendar year 1998 will be paid to Associate in a lump sum on the
Termination Date. It is agreed that in addition to the four weeks of
vacation accrued for 1998 as of January 1, 1998, Associate will be
entitled also to a paid vacation commencing March 16, 1998 and continuing
through March 31, 1998.
4. Retirement Agreement and Qualified Pension Plan. The Retirement
Agreement between the Parties entered into on June 5, 1997, as amended
December 15, 1997, shall remain in full force and effect, and the
retirement benefit to which Associate is entitled to receive pursuant to
that agreement shall be calculated in accordance with the methodology
illustrated in a memorandum from G. W. Tower to Associate dated June 5,
1997 and attached hereto as Appendix A. In addition, Associate's benefits
from the Qualified Pension Plan and Supplemental Pension Plan shall be
based upon the methodology illustrated in a memorandum from G. W. Tower to
Associate dated July 21, 1997 and attached hereto as Appendix B. It is
agreed that Associate's termination under this Agreement is an involuntary
termination without cause under Paragraph 2(b) of said Retirement
Agreement and also under said Qualified Pension Plan and Supplemental
Pension Plan.
5. Release.
A. From Associate to the Company. In exchange for the compensation
described in Paragraph 2 and other good and valuable consideration,
Associate hereby agrees that he, his representatives, heirs, executors,
administrators, agents, estate, successors and assigns release and forever
discharge the Company and its affiliates and 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, relating to any matter, cause, or thing
whatsoever arising on or prior to the date of this Agreement, including
but not limited to rights or claims relating in any way to Associate's
employment with or his termination of employment from the Company,
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., Title VII of the Civil Rights
Act, The Americans with Disabilities Act, The Massachusetts Fair
Employment Practices Act and/or any other applicable employment related
federal, state or local statute, law, ordinance, regulation or order;
provided, however, that nothing contained in this Paragraph 5 shall limit
Associate's right to enforce the terms or sue for breach of (i) this
Agreement, any agreement listed in Paragraph 2 of this Agreement, or any
other agreement whatsoever unrelated to compensation and severance matters
between the Parties hereto whether or not such agreement is listed in
Paragraph 2 of this Agreement, (ii) any compensation or benefit plan or
program in which he remains a participant or beneficiary beyond the
Termination Date in accordance with the provisions of Paragraph 2, or
(iii) Associate's right to indemnification as an officer or director of
the Company and/or its affiliates. This release is intended by Associate
to be a general release as to the claims described herein.
B. From the Company to Associate. In exchange for Associate's
release of the Company and the covenants made by Associate in Paragraph 9
hereof, the Company hereby agrees that it and its affiliates and
subsidiaries, and their successors, predecessors, assigns, directors,
shareholders, officers, employees and agents, both individually and in
their official capacities with the Company and its affiliates, attorneys,
and agents release and forever discharge Associate, his representatives,
heirs, executors, administrators, agents, attorneys, estate, successors
and assigns, 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, relating to any matter, cause, or thing whatsoever arising on or
prior to the date of this Agreement, including but not limited to rights
or claims relating in any way to Associate's employment with or his
termination of employment from the Company or his representation of the
Company in his capacity as legal counsel, provided, however, that nothing
contained in this Paragraph 5 shall limit the Company's right to enforce
the terms or sue for breach of (i) this Agreement, any agreement listed in
Paragraph 2 of this Agreement, or any other agreement whatsoever unrelated
to compensation and severance matters between the Parties hereto whether
or not such agreement is listed in Paragraph 2 of this Agreement, or (ii)
any compensation or benefit plan or program in which he remains a
participant or beneficiary beyond the Termination Date in accordance with
the provisions of Paragraph 2. This release is intended by the Company to
be a general release as to the claims described herein.
6. Indemnification. To the extent that Associate is not otherwise
indemnified under a Company by-law or insurance policy, the Company will
indemnify and hold harmless Associate against all liabilities and
expenses, including amounts paid in satisfaction of judgments, in
compromise or as fines and penalties, and counsel fees, reasonably
incurred by Associate in connection with the defense or disposition of any
action, suit or other proceeding, whether civil or criminal, in which
Associate may be involved or which Associate may be threatened arising out
of actions taken by Associate in his capacity as an officer, director,
employee, agent, representative of, or legal counsel to, the Company or a
direct or indirect subsidiary of the Company or, at the Company's request,
another organization, or in any capacity with any employee benefit plan of
the Company, or such a subsidiary or organization, or in connection with
the prosecution of any action, suit or proceeding, whether civil or
criminal, in which Associate may be acting for or on behalf of the
Company, with the exception of actions by him with respect to which a
court of competent jurisdiction determines that Associate did not act in
good faith in the reasonable belief that his action was in the best
interest of the Company, or to the extent such claim relates to his
service with respect to an employee benefit plan, in the best interests of
the participants or beneficiaries of such employee benefit plan, without
regard of the date when such claim is brought. Expenses, including
without limitation counsel fees, reasonably incurred by Associate in
connection with the defense or disposition of any such action, suit or
other proceeding shall be paid from time to time by the Company in advance
of the final disposition thereof upon receipt of an undertaking by
Associate to repay to the Company the amounts previously advanced if it
shall be adjudicated that indemnification for such expenses is not
authorized hereunder.
7. 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, he has or might have specific rights and/or
claims under the Age Discrimination in Employment Act, as amended. In
consideration for the compensation described hereunder, 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.
Associate acknowledges that he has been provided such information or
materials as is required by law in connection with this waiver.
8. Company Files, Documents and Other Property. Associate warrants
that he will return to the Company upon its request 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 and not his personal files, reports, books, data and documents.
9. Representations.
A. Associate is hereby advised by the Company to consult with an
attorney prior to executing this Agreement.
B. Associate was further advised, when he was presented with this
Agreement on or before January 27, 1998 that he had at least 45 days
within which to consider the Agreement, until the close of business on
March 13, 1998.
C. 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.
D. The terms of this Agreement are contractual in nature and not a
mere recital. Captions herein are inserted for convenience, do not
constitute a part of this Agreement, and shall not be admissible for the
purpose of proving the intent of the parties.
E. Associate represents that he has read this Agreement, fully
understands the terms and conditions of such Agreement, and is knowingly
and voluntarily executing the same without any duress or undue influence.
10. Resignations and Stock Transfers. Upon the Termination Date,
Associate agrees to (i) resign from any position 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, committee
member, or any other position, (ii) take any action necessary to transfer
shares of stock held in his name or for his benefit on behalf of the
Company in any direct or indirect affiliate of the Company, as requested
by the Company, to the Company or a designee of the Company, and (iii)
take any action and execute anything as may be necessary to accomplish the
foregoing.
11. Change in Control. Associate's Change in Control Agreement
effective as of January 1, 1992 (the "Change in Control Agreement") shall
remain in effect up to and including the Termination Date, and subsequent
to the Termination Date in the event that an agreement with the Company to
effectuate a Change in Control, as defined in the Change of Control
Agreement, is entered into prior to the Termination Date. It is agreed
that Associate's termination under this Agreement is (i) for reasons other
than those set forth under Paragraphs 1(a) and 1(b) of the Change in
Control Agreement and (ii) at the direction of the person (as defined in
Paragraph 4(a)(i) of the Change in Control Agreement) who has entered into
such an agreement with the Company to effectuate such a Change in Control
as described under and subject to said Paragraph 1(b). To the extent that
any payments made to Associate under the Change in Control Agreement are
made for the same purpose as the severance amounts specified above in
Paragraphs 3.A and 3.D (without giving effect to the Gross-Up Payment in
Paragraph 1(c) of the Change in Control Agreement for these purposes),
such Change in Control payments shall be in substitution for such
severance amounts except to the extent that any bonus shall be due and
payable with respect to any year preceding that in which the Change in
Control occurs. To the extent the amounts specified in Paragraphs 3.A and
3.D are greater than those paid under the Change in Control Agreement, the
amount by which such amounts and benefits in Paragraphs 3.A and 3.D exceed
the amounts paid under the Change in Control Agreement shall be paid in
accordance with the terms of this Agreement. If Associate is paid all
amounts due him under the Change in Control Agreement in the event of a
Change in Control, then Associate shall not be paid any amounts due him
under Paragraph 3.C for the remaining term of this Agreement.
If a Change in Control, as defined in the Change in Control
Agreement, occurs after the Termination Date, the payments to be made to
Associate under Paragraphs 3.A, 3.C and 3.D shall be paid in a lump sum
upon the occurrence of such Change in Control.
If any of the payments and benefits under this Agreement are subject
to the Excise Tax imposed under Section 4999 of the Internal Revenue Code
of 1986, as amended (the "Code") (the "Excise Tax"), such payments and
benefits shall be deemed to be "...other payments or benefits received or
to be received by the Employee in connection with a Change of Control or
the Employee's termination of employment..." under Paragraph 1(c) of the
Change of Control Agreement and the Company shall pay Associate the Gross-
Up Payment as shall be determined in accordance with said Paragraph 1(c)
as if it had remained in effect.
Except as provided under this paragraph, all amounts and benefits to
be paid or provided under this Agreement shall be so paid or provided as
set forth herein without regard to the Change in Control Agreement.
12. Binding Effect. This Agreement shall be binding upon and inure
to the benefit of any successor or assigns of the Company, and any such
successor or assign shall be deemed substituted for the Company under the
terms of this Agreement, and as a condition thereof, such successor and
assign shall expressly assume in writing the rights, duties and
obligations of the Company. As used in the Agreement, the term "successor
or assign" or "successors or assigns" shall include any person, firm,
corporation, or other entity which at any time, whether by merger,
consolidation, purchase, or otherwise, acquires all or substantially all
of the assets, capital stock or business of the Company. The rights and
obligations of Associate under this Agreement, including his right to
exercise vested stock options, shall inure to the benefit of, be binding
upon, be exercisable by and be enforceable by Associate's personal or
legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. If Associate should die while any
amount would still be payable to him hereunder if he had continued to
live, all such amounts, unless otherwise provided herein, shall be paid in
accordance with the terms of this Agreement to his devisee, legatee or
other designee or if there is no such designee, to his estate.
13. Amendment or Modification. This Agreement may not be amended,
modified, altered or changed except upon written consent of the Parties.
14. Severability. The invalidity or unenforceability of any
particular provision of this Agreement shall not affect the other
provisions but the obligation to be fulfilled under such invalid or
unenforceable provision shall automatically be reduced to the limit of
validity or enforceability prescribed by law, and this Agreement shall be
construed in all respects as if such invalid or unenforceable provision
were omitted.
15. Validity. If any of the provision of this Agreement are
declared or determined by any court of competent jurisdiction to be
illegal, invalid or inoperative, such determination shall not affect the
validity or efficacy of the remaining parts, terms or provisions of this
Agreement and any such illegal, invalid or inoperative part, term or
provision shall be deemed severable and not to be a part of this
Agreement.
16. Waiver. No waiver of any provision of this Agreement shall be
effective unless made in writing and signed by the waiving party. The
waiver of any breach of this Agreement by either party or the failure of
either party to require the performance of any term or obligation of this
Agreement, in whole or in part, in any one instance shall not constitute a
waiver of or prevent any subsequent enforcement of such term or obligation
in another instance or be deemed a waiver of any subsequent breach.
17. Entire Agreement. Associate and the Company agree that this
Agreement contains and constitutes the entire understanding and agreement
between the Parties hereto respecting the terms of Associate's termination
from the Company and supersedes and cancels the Severance Agreement
effective as of June 1, 1992, as well as all previous written or verbal
negotiations, agreements, commitments, and writings in connection with
severance or compensation arrangements, including the Letter Agreement
dated June 16, 1997, between Associate and the Company, and Addendum to
such Letter Agreement dated September 15, 1997 regarding Retiree Medical
Insurance. This Agreement expressly does not supersede or cancel the
Retirement Agreement, a certain Change of Control Agreement effective
January 1, 1992, any compensation and benefit agreements, plans and
programs listed in Paragraph 2 of this Agreement or any other agreements
whether or not listed in Paragraph 2 of this Agreement not referred to in
the preceding sentence.
18. Execution. This Agreement may be executed in two or more
duplicate counterparts, each of which shall be treated as an original, but
all of which together shall constitute one and the same instrument, and in
pleading or proving any provision of this Agreement it shall not be
necessary to produce more than one such counterpart.
19. Notice. Any notice required under this Agreement shall be in
writing and shall be delivered by certified mail, return receipt
requested, overnight delivery or telecopy to the following addresses:
a. All notices to Associate shall be addressed to him as follows:
Mr. Bruce H. Wyatt
11 Bittersweet Lane
Wilbraham, Massachusetts 01095
b. All notices to the Company shall be addressed to it as follows:
Mr. Allan G. Keirstead
Vice Chairman, Executive Vice President,
Chief Administrative and Financial Officer
Stanhome Inc.
333 Western Avenue
Westfield, Massachusetts 01085
Either Party may change the address to which notices are to be sent
by providing notice in writing to the other Party in accordance with the
terms hereof.
20. 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 the date upon which this
revocation period has expired (the "Effective Date"). If the Effective
Date is later than the Termination Date, all payments that would have been
made prior to such date shall be paid as of the Effective Date.
Executed this 28th day of January, 1998.
/s/ Bruce H. Wyatt
------------------------------
Bruce H. Wyatt
STANHOME INC.
By: /s/ Allan G. Keirstead
--------------------------
Allan G. Keirstead
Vice Chairman, Executive Vice President,
Chief Administrative & Financial Officer
EXHIBIT 10(t)
RELEASE AGREEMENT
This Release Agreement is entered into by and between Ronald R.
Jalbert, a resident of Naples, Florida (hereinafter referred to as
"Associate"), and Stanhome Inc., a Massachusetts corporation having a
principal place of business at 333 Western Avenue, Westfield,
Massachusetts (hereinafter referred to as the "Company").
In consideration of the promises, conditions and representations set
forth herein, the severance payments being provided to Associate by the
Company as set forth below, and other good and valuable consideration, the
receipt and sufficiency of which hereby are acknowledged by Associate and
the Company (hereinafter sometimes referred to collectively as the
"Parties"), the Parties hereby agree as follows:
1. Termination Date. Associate's employment with the Company shall
terminate involuntarily without cause as of the close of business on
December 31, 1997 (the "Termination Date").
2. Continuation of Salary and Benefits After Termination. Prior to
the Termination Date, Associate's salary and his participation in all
compensation and benefit plans and programs in which he currently is a
participant or from which he currently receives benefits will remain in
effect on the same terms as are in effect as of the effective date of this
Agreement.
As of the Termination Date, Associate's salary and any other
compensation and benefits he receives from the Company will terminate,
other than compensation and/or benefits to which he continues to be
entitled (a) pursuant to the terms of this Agreement, (b) as a matter of
federal or state law, (c) pursuant to the agreements between the Parties
to this Agreement listed below, including but not limited to a certain Mid
Career Agreement entered into between the Parties dated March 5, 1986, as
amended March 28, 1988 and June 5, 1997, (the "Mid Career Agreement"), or
(d) pursuant to the terms of the compensation or benefit plans or programs
in which he continues to be a participant or have a right to receive such
compensation or benefits after the Termination Date listed below.
The agreements and compensation and benefit plans and programs
referred to herein are as follows:
o Medical and Life Employee Group Insurance Plan under Policy
#2232182 issued by Connecticut General Life Insurance Company to
Stanhome Inc.
o Accidental Death and Dismemberment Group Insurance Plan under
policy issued by AIG Insurance Company to Stanhome Inc.
o Mid Career Agreement dated March 5, 1986, as amended March 28,
1988 and June 5, 1997 and related Trust Agreement dated March 1,
1988, as amended
o Stanhome Pension Plan and related Trust Agreement dated January 1,
1980, as amended
o Stanhome Supplemental Pension Plan and related Trust Agreement
dated January 1, 1995, as amended
o Stanhome Investment Savings Plan and related Trust Agreement
dated January 1, 1993, as amended
o Stanhome Supplemental Investment Savings Plan and related Trust
Agreement dated January 1, 1995, as amended
o Stanhome Profit Sharing Plan and related Trust Agreement dated
October 1, 1992, as amended
o Stanhome Paysop Plan and related Trust Agreement dated October 15,
1985, as amended
o Stanhome Inc. 1984 Stock Option Plan
o Stanhome Inc. 1991 Stock Option Plan
o Stanhome Inc. 1996 Stock Option Plan
o Management Incentive Plan
o Change in Control Agreement effective January 1, 1992
o Stanhome Matching Gifts Program
With respect to those Company compensation and benefit plans and programs
in which Associate will continue to participate subsequent to the
Termination Date, Associate's participation in such compensation and
benefit plans and programs will be on terms no less favorable than in
effect as of the effective date of this Agreement. Furthermore, the
Company and Associate agree that after his Termination Date he will not
become entitled to any increased benefits under such compensation and
benefit plans and programs, but the benefits payable by the Company to
Associate thereunder shall be based upon his length of service and
compensation level as of the Termination Date.
3. Consideration.
A. Severance Payments. Following the Termination Date, and for a
period of thirty-six (36) consecutive months commencing January 1, 1998
and ending on December 31, 2000 (the "Severance Period"), Associate will
receive severance payments equal to $15,333.34 per month. Payment will be
made on the 15th day of each such month, commencing January 15, 1998.
Such payments, based on Associate's current base salary, are in addition
to anything of value to which Associate is already entitled or provided
pursuant to this Agreement, any other agreement between the Parties or
other Company plan or program. Moreover, such severance payments are not
intended to include any unused, accrued vacation time to which Associate
may be entitled or any other accrued but unpaid compensation or benefit to
which Associate may be entitled under any Company compensation or benefit
plan or program.
B. Stock Options. Upon the Termination Date, the Company will
promptly deliver to Associate appropriate amendments to Associate's
Certificates of Grant relating to the Company's 1984 and 1991 Stock Option
Plans providing that the options under such plans shall be exercisable by
the Associate or his guardian or legal representative(s) during the three-
year period following his termination of employment as to the additional
number of shares of the Company's common stock, par value $.125 per share,
which the Associate would have become entitled to purchase during such
three-year period if the Associate's employment had not terminated.
C. Additional Payments. During the Severance Period, Associate will
be paid an additional $2,233.33 each month of said period at the same time
as he is paid the Severance Payments provided for in paragraph 3.A of this
Agreement, which additional payments represent the Associate's present car
allowance ($1,400 per month), plus Associate's present annual $5,000.
medical supplementary bonus and annual $5,000 financial planning bonus
converted for those purposes to a monthly rate ($833.33 per month).
D. Bonus. In the event that the criteria are met for a bonus award
to Associate under the 1997 Management Incentive Plan, which is attached
as Appendix A, Associate will be paid the bonus award by March 15, 1998.
E. Insurance. Associate will continue to be covered by the group
medical insurance coverage as set forth in the Stanhome Group Insurance
Plan booklet dated December, 1994 (the "Plan") under the policy issued by
Connecticut General Life Insurance Company (Policy #2232182) regardless of
the location of Associate's eventual residence within the United States
and regardless of his coverage by any other medical insurance plans.
Should the Plan be terminated in the future, the Company and its
successors and assigns, as applicable, agree to provide Associate with
coverage that is substantially the same as provided in the Plan.
Associate's coverage will cease when he qualifies for Medicare. Dependent
coverage will be continued as to his spouse until Associate's spouse
qualifies for Medicare and as to his other dependents until that dependent
reaches age 23. However, if coverage has not otherwise already ended,
then coverage shall end for Associate's spouse and other dependents when
Associate reaches his 71st birthday or, in the event of Associate's death
before he reaches age 71, the date when Associate would have reached his
71st birthday, it being intended that coverage for Associate's spouse and
other dependents shall continue until the date when Associate would have
reached his 71st birthday.
During the Severance Period, the Company, its successors and assigns,
will contribute 80% of the cost of the personal and dependent coverage and
Associate will contribute 20% of such cost, which percentages shall be
adjusted as necessary to be the same percentages as may be in effect for
the cost of medical coverage of active employees of the Company and its
successors and assigns. Upon expiration of the Severance Period, the
Company and its successors and assigns, as applicable, will contribute up
to $400 per month towards the cost of Associate's personal and dependent
coverage. Once the cost to Associate of the personal and dependent
coverage exceeds $400 per month, the Company will share with him equally
the increase in cost over that amount on a 50/50 basis. The continued
medical coverage, as set forth in the Plan and the guaranteed
contributions outlined above toward both personal coverage and dependent
coverage, is binding upon and may not be revoked by the Company or any of
its successors or assigns and will continue until coverage ceases as
outlined above provided that Associate has paid his portion of the
premium. In the event that Associate fails to pay his portion of the
premium on time, the Company will pay the full premium and notify
Associate of his failure to make timely payment. Associate shall have ten
(10) days from his receipt of such notice to cure his failure to pay by
repaying to the Company the amount advanced by the Company on his behalf
and the Company shall not allow his insurance coverage to be cancelled or
to lapse until such ten-day period shall have expired.
The Company, its successors and assigns, shall continue to provide at
its sole expense the life insurance ($368,000 Death Benefit) and
accidental death and dismemberment employee insurance coverage, as
presently in effect, to the Associate during the Severance Period.
The Termination Date shall be treated as an event under the
Consolidated Budget Reconciliation Act of 1985 (COBRA), and Associate will
receive COBRA information under separate cover.
F. Outplacement. The Company also will provide Associate with
outplacement services as mutually agreed upon between the Parties.
G. References. The Company will provide references for Associate in
accordance with its policy.
H. Taxes. Applicable taxes on all payments, transfers and other
consideration referred to herein will be the sole responsibility of
Associate, provided that the Company shall deduct applicable federal and
state withholding income taxes on the payments provided herein.
4. Release.
A. From Associate to the Company. In exchange for the compensation
described in Paragraph 2 and other good and valuable consideration,
Associate hereby agrees that he, his representatives, heirs, executors,
administrators, agents, estate, successors and assigns release and forever
discharge the Company and its affiliates and 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, relating to any matter, cause, or thing
whatsoever arising on or prior to the date of this Agreement, including
but not limited to rights or claims relating in any way to Associate's
employment with or his termination of employment from the Company,
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., Title VII of the Civil Rights
Act, The Americans with Disabilities Act, The Massachusetts Fair
Employment Practices Act, The Connecticut Human Rights and Opportunities
Law, Section 448 of Title XXXI of the Florida Statutes, and/or any other
applicable employment related federal, state or local statute, law,
ordinance, regulation or order; provided, however, that nothing contained
in this Paragraph 5 shall limit Associate's right to enforce the terms or
sue for breach of (i) this Agreement, any agreement listed in Paragraph 2
of this Agreement, or any other agreement whatsoever unrelated to
compensation and severance matters between the Parties hereto whether or
not such agreement is listed in Paragraph 2 of this Agreement, (ii) any
compensation or benefit plan or program in which he remains a participant
or beneficiary beyond the Termination Date in accordance with the
provisions of Paragraph 2, or (iii) Associate's right to indemnification
as an officer or director of the Company and/or its affiliates. This
release is intended by Associate to be a general release as to the claims
described herein.
B. From the Company to Associate. In exchange for Associate's
release of the Company and the covenants made by Associate in Paragraph 9
hereof, the Company hereby agrees that it and its affiliates and
subsidiaries, and their successors, predecessors, assigns, directors,
shareholders, officers, employees and agents, both individually and in
their official capacities with the Company and its affiliates, attorneys,
and agents release and forever discharge Associate, his representatives,
heirs, executors, administrators, agents, attorneys, estate, successors
and assigns, 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, relating to any matter, cause, or thing whatsoever arising on or
prior to the date of this Agreement, including but not limited to rights
or claims relating in any way to Associate's employment with or his
termination of employment from the Company, provided, however, that
nothing contained in this Paragraph 5 shall limit the Company's right to
enforce the terms or sue for breach of (i) this Agreement, any agreement
listed in Paragraph 2 of this Agreement, or any other agreement whatsoever
unrelated to compensation and severance matters between the Parties hereto
whether or not such agreement is listed in Paragraph 2 of this Agreement,
or (ii) any compensation or benefit plan or program in which he remains a
participant or beneficiary beyond the Termination Date in accordance with
the provisions of Paragraph 2. This release is intended by the Company to
be a general release as to the claims described herein.
5. Indemnification. To the extent that Associate is not otherwise
indemnified under a Company by-law or insurance policy, the Company will
indemnify and hold harmless Associate against all liabilities and
expenses, including amounts paid in satisfaction of judgments, in
compromise or as fines and penalties, and counsel fees, reasonably
incurred by Associate in connection with the defense or disposition of any
action, suit or other proceeding, whether civil or criminal, in which
Associate may be involved or which Associate may be threatened arising out
of actions taken by Associate in his capacity as an officer, director,
employee, agent, representative of, or legal counsel to, the Company or a
direct or indirect subsidiary of the Company or, at the Company's request,
another organization, or in any capacity with any employee benefit plan of
the Company, or such a subsidiary or organization, with the exception of
actions by him with respect to which a court of competent jurisdiction
determines that Associate did not act in good faith in the reasonable
belief that his action was in the best interest of the Company, or to the
extent such claim relates to his service with respect to an employee
benefit plan, in the best interests of the participants or beneficiaries
of such employee benefit plan, without regard of the date when such claim
is brought. Expenses, including without limitation counsel fees,
reasonably incurred by Associate in connection with the defense or
disposition of any such action, suit or other proceeding shall be paid
from time to time by the Company in advance of the final disposition
thereof upon receipt of an undertaking by Associate to repay to the
Company the amounts previously advanced if it shall be adjudicated that
indemnification for such expenses is not authorized hereunder.
6. 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, he has or might have specific rights and/or
claims under the Age Discrimination in Employment Act, as amended. In
consideration for the compensation described hereunder, 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.
Associate acknowledges that he has been provided such information or
materials as is required by law in connection with this waiver.
7. Company Files, Documents and Other Property. Associate warrants
that he will return to the Company upon its request 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 and not his personal files, reports, books, data and documents.
8. Representations.
A. Associate is hereby advised by the Company to consult with an
attorney prior to executing this Agreement.
B. Associate was further advised, when he was presented with this
Agreement on or before December 19, 1997, that he had at least 45 days
within which to consider the Agreement, until the close of business on
February 2, 1998.
C. 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.
D. The terms of this Agreement are contractual in nature and not a
mere recital. Captions herein are inserted for convenience, do not
constitute a part of this Agreement, and shall not be admissible for the
purpose of proving the intent of the parties.
E. Associate represents that he has read this Agreement, fully
understands the terms and conditions of such Agreement, and is knowingly
and voluntarily executing the same without any duress or undue influence.
9. Resignations and Stock Transfers. Upon the Termination Date,
Associate agrees to (i) resign from any position 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, committee
member, or any other position, (ii) take any action necessary to transfer
shares of stock held in his name or for his benefit on behalf of the
Company in any direct or indirect affiliate of the Company, as requested
by the Company, to the Company or a designee of the Company, and (iii)
take any action and execute anything as may be necessary to accomplish the
foregoing.
10. Binding Effect. This Agreement shall be binding upon and inure
to the benefit of any successor or assigns of the Company, and any such
successor or assign shall be deemed substituted for the Company under the
terms of this Agreement, and as a condition thereof, such successor and
assign shall expressly assume in writing the rights, duties and
obligations of the Company. As used in the Agreement, the term "successor
or assign" or "successors or assigns" shall include any person, firm,
corporation, or other entity which at any time, whether by merger,
consolidation, purchase, or otherwise, acquires all or substantially all
of the assets, capital stock or business of the Company. The rights and
obligations of Associate under this Agreement, including his right to
exercise vested stock options, shall inure to the benefit of, be binding
upon, be exercisable by and be enforceable by Associate's personal or
legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. If Associate should die while any
amount would still be payable to him hereunder if he had continued to
live, all such amounts, unless otherwise provided herein, shall be paid in
accordance with the terms of this Agreement to his devisee, legatee or
other designee or if there is no such designee, to his estate.
11. Amendment or Modification. This Agreement may not be amended,
modified, altered or changed except upon written consent of the Parties.
12. Severability. The invalidity or unenforceability of any
particular provision of this Agreement shall not affect the other
provisions but the obligation to be fulfilled under such invalid or
unenforceable provision shall automatically be reduced to the limit of
validity or enforceability prescribed by law, and this Agreement shall be
construed in all respects as if such invalid or unenforceable provision
were omitted.
13. Validity. If any of the provisions of this Agreement are
declared or determined by any court of competent jurisdiction to be
illegal, invalid or inoperative, such determination shall not affect the
validity or efficacy of the remaining parts, terms or provisions of this
Agreement and any such illegal, invalid or inoperative part, term or
provision shall be deemed severable and not to be a part of this
Agreement.
14. Waiver. No waiver of any provision of this Agreement shall be
effective unless made in writing and signed by the waiving party. The
waiver of any breach of this Agreement by either party or the failure of
either party to require the performance of any term or obligation of this
Agreement, in whole or in part, in any one instance shall not constitute a
waiver of or prevent any subsequent enforcement of such term or obligation
in another instance or be deemed a waiver of any subsequent breach.
15. Entire Agreement. Associate and the Company agree that this
Agreement contains and constitutes the entire understanding and agreement
between the Parties hereto respecting the terms of Associate's termination
from the Company and supersedes and cancels the Severance Agreement
effective as of June 1, 1992, as well as all previous written or verbal
negotiations, agreements, commitments, and writings in connection with
severance or compensation arrangements, including the Letter Agreement
dated June 16, 1997, between Associate and the Company. This Agreement
expressly does not supersede or cancel the Mid Career Agreement, a certain
Change of Control Agreement effective January 1, 1992, any compensation
and benefit agreements, plans and programs listed in Paragraph 2 of this
Agreement or any other agreements whether or not listed in Paragraph 2 of
this Agreement not referred to in the preceding sentence.
16. Execution. This Agreement may be executed in two or more
duplicate counterparts, each of which shall be treated as an original, but
all of which together shall constitute one and the same instrument, and in
pleading or proving any provision of this Agreement it shall not be
necessary to produce more than one such counterpart.
17. Change in Control. If a Change in Control, as defined in the
Associate's Change in Control Agreement effective January 1, 1992, (the
"Change in Control Agreement"), occurs after the Termination Date, the
payments to be made to Associate under Paragraphs 3.A, 3.C and 3.D shall
be paid in a lump sum upon the occurrence of such Change in Control.
If any of the payments and benefits under this Agreement are subject
to the Excise Tax imposed under Section 4999 of the Internal Revenue Code
of 1986, as amended (the "Code") (the "Excise Tax"), such payments and
benefits shall be deemed to be "....other payments or benefits received or
to be received by the Employee in connection with a Change in Control or
the Employee's termination of employment...." under Paragraph 1(c) of the
Change in Control Agreement and the Company shall pay Associate the Gross-
Up Payment as shall be determined in accordance with said Paragraph 1(c)
as if it had remained in effect.
18. Notice. Any notice required under this Agreement shall be in
writing and shall be delivered by certified mail, return receipt
requested, overnight delivery or telecopy to the following addresses:
a. All notices to Associate shall be addressed to him as follows:
Mr. Ronald R. Jalbert
253 Via Perignon
Naples, FL 34119
b. All notices to the Company shall be addressed to it as follows:
Mr. Allan G. Keirstead
Vice Chairman,
Executive Vice President, Chief Administrative & Financial Officer
Stanhome Inc.
333 Western Avenue
Westfield, Massachusetts 01085
Either Party may change the address to which notices are to be sent
by providing notice in writing to the other Party in accordance with the
terms hereof.
19. 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 the date upon which this
revocation period has expired (the "Effective Date"). If the Effective
Date is later than the Termination Date, all payments that would have been
made prior to such date shall be paid as of the Effective Date.
Executed this 19th day of December, 1997.
/s/ Ronald R. Jalbert
-----------------------------
Ronald R. Jalbert
STANHOME INC.
By: /s/ Allan G. Keirstead
----------------------------
Allan G. Keirstead
Vice Chairman,
Executive Vice President,
Chief Administrative & Financial Officer
EXHIBIT 10(w)
[LOGO] STANHOME INC.
November 13, 1997
Mr. John J. Dur
Stanhome Worldwide Direct Selling Group, Inc.
Tour Cofonca
6, rue Jean Jaures
92807 Puteaux
FRANCE
Dear John:
I deeply apologize for the needless exasperation over the handling of the
amendments to your July 9, 1997 Agreement. Your position has been very
fair and reasonable.
As we agreed, the amendments to the July 9, 1997 Agreement are as follows:
1. All references to December 31, 1997 will be changed to February
28, 1998.
2. Unused vacation pay will include 1997 and 1998.
3. If Board approves sale on or before February 28, 1998, the Special
MIP will be paid by March 31, 1998 or at the actual closing, if
later.
4. If sale is not approved on or before February 28, 1998, you will
be eligible for a 1997 and pro rata 1998 MIP bonus based solely on
achievement of 1997 and 1998 financial targets for the WWDSGroup. The
1997 targets were outlined in the July 9, 1997 agreement. The 1998
targets are to be determined.
5. Regardless of when an MIP is paid, if it is considered
compensation for French tax purposes such French taxes will be
covered by the Company's Expatriate Policy.
6. For Pension Plan purposes, the 1997 and 1998 MIP bonuses or the
Special MIP bonus will be included in the Final Average Earnings
calculation on an accrued basis.
All other terms of the July 9 letter remain as stated therein. Please
confirm your concurrence with this amendment by signing below and return it
to me at your earliest convenience. The counterpart letter may be retained
for your files.
Sincerely,
/s/ Allan G. Keirstead
Allan G. Keirstead
Executive Vice President
Chief Administrative & Financial Officer
AGREED:
/s/ John J. Dur
------------------------
Date Nov. 18, 1997
------------------
cc H. L. Tower
EXHIBIT 10(x)
[LOGO] STANHOME INC.
February 6, 1998
Mr. John J. Dur
Stanhome Worldwide Direct Selling Group, Inc.
Tour Confonca
6, rue Jean Jaures
92807 Puteaux
FRANCE
Dear John:
Confirming our recent telephone conversations, we are amending your
July 9, 1997 Agreement, as amended on November 13, 1997, to extend
your Termination Date to March 31, 1998.
All other terms of the Agreement remain as amended on November 13, 1997.
Sincerely,
/s/ Allan G. Keirstead
Allan G. Keirstead
AGK/nmd
AGREED:
/s/ John J. Dur
----------------------------
Feb. 16, 1998
----------------------------
(date)
cc: H. L. Tower
EXHIBIT 10(cc)
THIRD AMENDMENT TO
STANHOME INC. SUPPLEMENTAL PENSION PLAN
WHEREAS, Stanhome Inc., a Massachusetts corporation (the
"Company"), has heretofore adopted and maintains a supplemental pension
plan for the benefit of certain of its employees designated the "Stanhome
Inc. Supplemental Pension Plan" (the "Plan"); and
WHEREAS, the Company desires to amend the Plan in certain
respects;
NOW, THEREFORE, pursuant to the power of amendment contained in
Section 5 of the Plan, the Plan is amended effective August 1, 1997 in the
following respects:
1. Section 1 of the Plan is amended to add a new subsection at
the end thereof to read as follows:
(d) Change in Control. A change in control of a nature that
would, in the opinion of 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 (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 under 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,
individuals who at the beginning of such period constitute
the Board 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 or nomination for election by the Company's
stockholders was approved by a vote of at least two-thirds
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.
2. Section 2 of the Plan is amended to add a new paragraph
at the end thereof to read as follows:
Notwithstanding any provision of this Plan to the contrary,
in the event of a Change in Control of the Company, no
Supplemental Pension shall be payable to any individual unless
such individual was entitled to a Supplemental Pension under this
Plan immediately prior to the date of such Change in Control (or
would have been so entitled had the individual terminated
employment before such date).
3. The second paragraph of Section 3 of the Plan is amended
to substitute the phrase "Change in Control" for the phrase "Change in
Control (as defined in the Change in Control Agreement)" as it appears
therein.
4. Section 7 of the Plan is amended to add a new paragraph at
the end thereof to read as follows:
Notwithstanding any provision of this Plan to the
contrary, following the date on which a Change in Control of
the Company occurs, the "Committee" for purposes of this Section
shall be comprised of the individuals who are members of the
Committee immediately prior to such Change in Control. After such
date, an individual need not be an Employee in order to be a
member of the Committee, and any vacancies on the Committee that
may arise during such period shall be filled by the remaining
members of the Committee.
IN WITNESS WHEREOF, the Company has caused this instrument to be
executed by its duly authorized officers this 24 day of December, 1997.
STANHOME INC.
By: /s/ H. L. Tower
------------------------------
Title: President and CEO
---------------------------
ATTEST:
/s/ Mark I. Cohen
----------------------------
Title: Assistant Secretary
---------------------
EXHIBIT 10(ff)
FIRST AMENDMENT TO
STANHOME SUPPLEMENTAL INVESTMENT SAVINGS PLAN
WHEREAS, Stanhome Inc., a Massachusetts corporation (the
"Company"), has heretofore adopted and maintains a supplemental defined
contribution plan for the benefit of certain of its employees designated
the "Stanhome Supplemental Investment Savings Plan" (the "Plan"); and
WHEREAS, the Company has amended and restated the Plan effective
January 1, 1997; and
WHEREAS, the Company desires to further amend the Plan in certain
respects;
NOW, THEREFORE, pursuant to the power of amendment contained in
Section 8 of the Plan, the Plan is amended effective August 1, 1997 in the
following respects:
1. Section 1(b) of the Plan is amended to add a new paragraph
at the end thereof to read as follows:
Notwithstanding the foregoing, upon the occurrence of a Change in
Control (as defined in Appendix A hereto), participation in this Plan
shall be limited to those Employees who were Participants in this
Plan as of the date of such Change in Control.
2. Section 10 the Plan is amended to add a new paragraph at the
end thereof to read as follows:
Notwithstanding any provision of this Plan to the contrary,
following the date on which a Change in Control (as defined in
Appendix A hereto) occurs, the "Committee" for purposes of this
Section shall be comprised of the individuals who are members of the
Committee immediately prior to such Change in Control. After such
date, an individual need not be an Employee in order to be a member
of the Committee, and any vacancies on the Committee that may arise
shall be filled by the remaining members of the Committee.
IN WITNESS WHEREOF, the Company has caused this instrument to be
executed by its duly authorized officers this 24 day of December, 1997.
STANHOME INC.
By: /s/ H. L. Tower
----------------------------------
Title: President and CEO
------------------------------
ATTEST:
/s/ Mark I. Cohen
-------------------------------
Title: Assistant Secretary
------------------------
EXHIBIT 10(hh)
FIRST AMENDMENT TO LICENSE AGREEMENT
This is a First Amendment to the July 1, 1993 License Agreement
("Agreement") by and between PRECIOUS MOMENTS, INC. ("PMI"), an Illinois
corporation with principal offices in St. Charles, Illinois; and ENESCO
CORPORATION ("Enesco"), an Ohio corporation with principal offices in
Itasca, Illinois.
RECITAL OF FACT
Having over the years worked ever more closely together to build a
partnership based on sharing, honesty and trust, PMI and Enesco believe
that by extending their partnership into the next Millennium, they can
achieve their mission to "touch the hearts of people in a personal way by
spreading goodness throughout the world" and to expand and perpetuate the
message and meaning behind PRECIOUS MOMENTS, even now one of the world's
best selling and most beloved properties.
To enhance and further their relationship, PMI and Enesco agree to
amend their Agreement as follows:
I. Paragraph 3 of the Agreement is hereby amended to read as follows:
3. TERM. The Term of this Agreement shall be for an original period
to commence on the effective date hereof, as specified in Paragraph 18
hereof, and to continue through the 31st day of December, 2007, and
shall thereafter be renewed automatically for additional five-year
renewal periods, unless, a party hereto shall give the other party
Notice of Termination at least three years prior to the end of the
original and any renewal period, or unless terminated sooner in
accordance with the provisions of Paragraphs 4(d) and 13 herein.
II. Paragraph 4(a) of the Agreement is hereby amended to read as follows:
4. ROYALTIES.
(a) Actual Percentage Royalties. Enesco shall pay PMI as actual
percentage royalties a sum equal to the percentages of the
"Net Wholesale Sales Price", "Net Retail Sales Price" and
"FOB Sales Price", as defined in paragraph 4(e), of all
Licensed Products sold under this Agreement during the
following time periods, by either Enesco or by any
sublicensee or distributor of Enesco, during the Term of
this Agreement:
Percentages for Wholesale Sales
<TABLE>
<CAPTION>
Jan. 1, 1998 to Jan. 1, 1999 to Jan. 1, 2000 to
Dec. 31, 1998 Dec. 31, 1999 Dec. 31, 2007
--------------- --------------- ----------------
<S> <C> <C> <C>
Porcelain Bisque Products 12.50% 12.75% 13.00%
Plush Products 10.00% 10.00% 10.00%
All Other Licensed Products 12.50% 12.50% 12.50%
</TABLE>
Percentages for Direct Response Sales
<TABLE>
<CAPTION>
Jan. 1, 1998 to Jan. 1, 1999 to Jan. 1, 2000 to
Dec. 31, 1998 Dec. 31, 1999 Dec. 31, 2007
--------------- --------------- ---------------
<S> <C> <C> <C>
Porcelain Bisque Products 6.25% 6.375% 6.50%
Plush Products 5.00% 5.000% 5.00%
All Other Licensed Products 6.25% 6.250% 6.25%
</TABLE>
Percentages for F.O.B. Sales
----------------------------
Jan. 1, 1998 to
Dec. 31, 2007
---------------
All Licensed Products 14.00%
III. Subparagraph 4(b) of the Agreement is hereby amended to read as
follows:
(b) Notwithstanding any other provision of this Agreement, the
percentage royalty for Precious Moments Collectors' Club(R) "Members
Only" figurines shall be one-half the percentage royalties stated
in Paragraph 4(a); and the percentage royalties payable for the
existing Abbeville published book entitled: "Precious Moments Last
Forever" (Paragraph H. Books, No. 3), shall be 7.5%.
IV. Subparagraph 4(c) of the Agreement shall be amended to read as
follows:
4(c) Guaranteed Minimum Royalties. It is the intent of the
parties to provide herein for a three year minimum guarantee of
Forty-Five Million Dollars ($45,000,000) in royalties to PMI,
beginning January 1, 1998, which three year guarantee shall roll-
over automatically for the Term of the Agreement. Accordingly, in
the event that the total of the royalties due to PMI from Enesco,
pursuant to Paragraphs 4(a) and 4(b) hereof, during any calendar
year (starting with the calendar year 1998) during the Term of
this Agreement is less than Fifteen Million Dollars ($15,000,000)
(hereinafter the "Annual Minimum Royalty"), Enesco agrees to pay
PMI the difference between the Annual Minimum Royalty and the
total of the royalties (hereinafter the "Difference Payment") due
for the prior calendar year. Any such Difference Payment is due
and owing no later than ninety (90) days after the last day of
December of the prior calendar year.
V. Subparagraph 4(e) of the Agreement shall be amended to read as
follows:
4(e) Net Wholesale Sales Price, Net Retail Sales Price and F.O.B.
Sales Price.
(i) The term "Net Wholesale Sales Price", as used in this
Agreement, shall mean the actual billing price of Licensed
Products sold to wholesale customers of Enesco, or of its
sublicensees or distributors, less customer discounts and
allowances allowed and less any returns and transportation
charges allowed on returns.
(ii) The term "Net Retail Sales Price", as used in this
Agreement, shall mean the actual billing price of Licensed
Products sold via retail or direct response sales directly
to consumer customers of Enesco or of its sublicensee, The
Bradford Exchange, Ltd. and its affiliates (hereinafter
jointly "Bradford"), less sales taxes (including VAT), any
shipping and handling charges separately itemized on the
customer's invoice, credits for returns for which the
customer is given credit, and credits for non-payment by
customers (up to but not exceeding a maximum of 10.0%) to be
calculated separately for each program.
(iii) The term "F.O.B. Sales Price", as used in this Agreement,
shall mean the actual billing price for Licensed Products
sold on an F.O.B. price basis non-U.S.A. factory or non-U.S.A.
port.
(iv) All royalties due PMI shall accrue upon the sale of the
Licensed Products sold, regardless of the time of collection
by Enesco or its sublicensees or distributors. For purposes
of this Agreement, Licensed Products shall be considered
"sold" upon the date when such Licensed Products are billed
or invoiced, shipped or paid for, whichever event occurs
first. If any Licensed Products are consigned to a
distributor by either Enesco or its sublicensees, the
Licensed Products shall be considered "sold" by Enesco or by
its sublicensees upon the date on which the distributor
bills, invoices, ships or receives payment for the Licensed
Product, whichever event occurs first. Royalties on sales
by Enesco to Bradford shall be based on Bradford's Net
Retail Sales Price and shall be payable when the Licensed
Products are sold by Bradford. For the purpose of the
Bradford sublicense, a Licensed Product shall be considered
as "sold" upon the date when Bradford ships the Licensed
Product.
VI. The first sentence of Subparagraph 4(l) of the Agreement shall be
amended to read as follows:
(l) Accounting. No later than thirty (30) days after the last
day of March, June, September and December of each year
during the Term of this Agreement, Enesco shall furnish PMI
with complete and accurate statements showing, on a product
by product basis, the number, description and the actual
billing price, itemized deductions from the actual billing
price, and the Net Wholesale Sales Price, the Net Retail
Sales Price or the F.O.B. Sales Price, as the case may be,
of the Licensed Products sold by Enesco or its sublicensees
or distributors during the three (3) months calendar quarter
immediately preceding such thirty (30) day period.
VII. Paragraph 4 of the Agreement shall be amended by adding thereto new
Subparagraph (p) which reads as follows:
(p) Royalty Adjustments.
The parties agree that no royalties shall be due (i) on Licensed
Products which are donated by Enesco to a recognized charitable
organization; (ii) on figurines which are shipped free of charge
by Enesco to collectors' club members who have redeemed points
authenticated by Authorized Retailers under a program known as
Precious Rewards, which Program has been established for frequent
buyers of porcelain bisque Licensed Products; (iii) on Licensed
Products which Enesco sells exclusively to any Precious Moments
Chapel related company for resale in or near the Precious Moments
Chapel; and/or (iv) on Licensed Products sold directly to Butcher
and/or PMI for any reason.
VIII. Exhibit A of the Agreement is hereby amended to add the following
trademarks:
20. Precious Collectibles
21. Sammy's Circus
22. Little Moments
23. Little Moments Mean A Lot
24. Precious Rewards
25. Tender Tails
IX. Exhibit B-1 of the Agreement shall be amended as follows to add the
following to the list of Enesco Core Products:
43. Underglaze sculpted perfume bottles
44. Underglaze sculpted functional tea cups and saucers
45. Underglaze sculpted 4" flower pots
46. Two tier cookie plates
47. Sculpted kitchen molds
48. Sculpted napkin holders
49. Sculpted functional cream and sugar sets
50. Sculpted functional teapots
51. Underglaze figurative clocks
52. Sculpted porcelain alarm clocks
53. Sculpted canister sets
54. Sculpted spice jar sets
55. Sculpted tissue holders
56. Sculpted wastebaskets
57. Sculpted toothbrush holders
58. Sculpted cups
59. Sculpted soap dishes
60. Porcelain and glass canisters
61. Sculpted soda glasses
62. Sculpted ice cream dishes
63. Sculpted syrup pitchers
64. Stoneware sculpted cookie jars
65. Porcelain pomanders
66. Pitcher and bowl
67. Sculpted tree toppers
68. Sculpted ring box/holders
69. Sculpted porcelain 3-d lamps
70. Diecast porcelain trivets
71. Sculpted serving platters
72. Place card name plates
73. Underglaze sculpted salt and pepper shakers
74. Decal ring boxes
75. Sculpted wedding invitation holders
76. Porcelain coasters
77. Wood and porcelain salt and pepper displayer
78. Underglaze porcelain musical hanging ornaments
79. Stoneware toothpick holder
80. Ceramic casserole dish
81. Decal: tape dispenser, pencil cups, letter holder, desk
organizer, letter opener, paperweight, pen holder and pen
82. Porcelain Mugs with candy
83. Sculpted Pie plates
84. Candles: 3-d character, sculpted
85. Wood nutcrackers
86. Resin Products:
Resin and Lucite magnetic photo frames
Sculpted photo frames
Lamp finials
Sculpted large keepsake boxes
Sculpted atomizers
Sculpted bookmarks
Lapel pins
Goebel miniature resin/bronze figurines
"Merry Dreams" glass ball containing resin figurine ornaments
Sculpted ring holders
Figurines
Sculpted earrings
Sculpted lamps
Sculpted clocks
Sculpted switch plate covers
Sculpted cross
Musicals
Banks
Plaques
Votive figurines
X. Exhibit B-2 of the Agreement is amended as follows to add the
following new non-exclusive product categories and products:
D. Glassware Products
2. Perfume bottles
3. Vases with attachments in coldcast or resin
4. Bottles with attachments in coldcast or resin
5. Covered boxes in coldcast or resin
6. Paperweights
7. Glass/brass plaques
E. Baby Accessories Line
3. Plastic baby wall decor
4. Frame/brush set
5. Baby cup with silver utensils
6. Bank with silver frame
7. Cross plaque with silver frame
8. Bank with rattle
F. Miscellaneous Products
22. Fabric gift pillows with porcelain attachments
23. Toy trains
24. Electric ceramic/porcelain potpourri burners
25. Outdoor hanging flags (non-exclusive/mass market)
26. Large and small garden stakes (mass market)
27. Jewelry gold electroplate (14k and 14k filled)
and sterling (excluding cloisonne or cloisonne -like);
rings, earrings, pendants, necklaces, charms and bracelets)
28. Vinyl growth chart
29. Paper-wrapped jewelry box
30. Artificial rose w/message attached
31. Fabric heart shaped sachet with porcelain attachment
32. Candles, votive
33. Antimony pins
34. Plastic inkflow; keychains, ornaments, frame magnets
35. Plastic boxes with candy
36. Flower pots with plant stakes and seeds
37. Glazed flower pots on wooden shelf hangers
38. Resin sculpted gardening line (terra cotta look);
birdhouses, birdfeeders, planters, watering cans,
birdbaths, plant stakes, flower pots, wall plaque
planter, water can statue, garden fountain, garden
magnet, hummingbird feeder, garden pot with seeds,
thermometer, sundial, wind chimes, pot huggers, utensil
rack, and signs.
H. Books
3. "Precious Moments Last Forever" (Abbeville Press)
I. Wood Products
13. Wood and plastic clocks
14. Recipe box
15. Chalkboard
16. Erasers
J. Brassware Products
8. Votive candle holders
9. Photo etched candle attachments
10. Photo etches hanging ornaments
M. Decoupage Products
3. Drawer scenters
Q. Potpourri Products
11. Basket with potpourri
U. Plush Products
V. Vinyl squeeze toys
XI. FAILURE TO EXPLOIT LICENSED PRODUCT RIGHTS.
With the exception of Core Products, rights to all other Licensed
Products shall be conditioned upon Enesco's exploitation of such
rights as follows:
New Non-Exclusive Licensed Products. If Enesco shall fail to
introduce any new non-exclusive Licensed Product within one (1) year
of the execution of this Amendment, or if following introduction,
Enesco shall fail to make more than token or nominal sales of any
Licensed Products for a period of two (2) calendar years, PMI shall
notify Enesco in writing that it has a six (6) month period from date
of notification to broadly distribute the product or forfeit its
rights to that Licensed Product.
New Exclusive Licensed Product Categories. Prior to being granted
additional exclusive product rights, Enesco shall provide PMI with a
marketing plan including but not limited to Enesco's projected annual
sales of each additional proposed exclusive Licensed Product category.
Assuming exclusive rights are then granted, Enesco shall forfeit its
exclusive rights to that Licensed Product category if the projected
annual sales are not realized within two (2) consecutive years of
marketing Licensed Products in such category.
XII. PREMIUMS.
Notwithstanding the other provisions of this Agreement, Enesco agrees
that the manufacture of any exclusive Licensed Product under the
Agreement, other than the Core Products, for distribution and sale by
another PMI PRECIOUS MOMENTS licensee as a "premium item", shall not
constitute an infringement of Enesco's rights under this Agreement so
long as Enesco is given a right of first refusal to meet the terms
offered to such other PMI PRECIOUS MOMENTS licensee for manufacturing
that "premium item" Licensed Product, which right of first refusal may
be exercised by Enesco within fifteen (15) days of Enesco's receipt
thereof.
XIII. TRANSSHIPMENT POLICY.
The parties agree that during the term of this Agreement, they shall
maintain the mutually agreed upon procedures, as set forth in Exhibit
A attached hereto or as subsequently amended, to endeavor to prevent
the authorized transshipment of Licensed Products into the United
States. Subject to compliance with the applicable foreign law, Enesco
further agrees that it shall enter into contractual agreements with
its foreign subsidiaries, its foreign affiliates and its foreign sub-
licensees that will expressly preclude them from exporting Licensed
Products to the United States.
XIV. EFFECTIVE DATE.
The effective date of this First Amendment shall be January 1, 1998.
XV. RATIFICATION.
All other terms and conditions of the Agreement are ratified and
confirmed and shall continue to remain in full force and effect.
IN WITNESS WHEREOF, the parties have, through their duly authorized
officers, set their hands and seals as of the 29 day of December, 1997.
WITNESS PRECIOUS MOMENTS, INC.
an Illinois Corporation
/s/ Geraldine M. Briguglio By: /s/ Jon Butcher
--------------------------- --------------------------------
Jon Butcher, President
WITNESS: ENESCO CORPORATION
an Ohio Corporation
/s/ Donna J. Thompson By: /s/ Jeffrey A. Hutsell
--------------------------- --------------------------------
Jeffrey A. Hutsell, President
and Chief Operating Officer
CERTIFICATE OF ACKNOWLEDGMENT
STATE OF ILLINOIS )
)
COUNTY OF COOK )
This Certificate of Acknowledgment is being made and executed pursuant
to the Uniform Recognition of Acknowledgment Act, as amended, by me, a
Notary Public commissioned in and for the County of Cook, State of
Illinois.
I Certify that the foregoing First Amendment to License Agreement was
acknowledged before me this 23 day of December, 1997, by Jeffrey A.
Hutsell, President and Chief Operating Officer of ENESCO CORPORATION, an
Ohio corporation, on behalf of that corporation.
/s/ Donna J. Thompson
----------------------------------
Notary Public
My Commission expires: 11-19-2001
CERTIFICATE OF ACKNOWLEDGMENT
STATE OF ILLINOIS )
)
COUNTY OF KANE )
This Certificate of Acknowledgment is being made and executed pursuant
to the Uniform Recognition of Acknowledgment Act, as amended, by me, a
Notary Public commissioned in and for the County of Kane, State of
Illinois.
I Certify that the foregoing First Amendment to License Agreement was
acknowledged before me this 29 day of December, 1997, by Jon Butcher,
President of PRECIOUS MOMENTS, INC., an Illinois corporation, on behalf of
that corporation.
/s/ Geraldine M. Briguglio
----------------------------------
Notary Public
My Commission expires: 2-9-98
9
EXHIBIT A
POLICY
Subject: Transshipping of Precious Moments Porcelain Bisque products
Date Issued:
Issued by: ENESCO Corporation
I. Purpose
The purpose of this policy is to state that the Enesco Corporation
will not tolerate transshipping of Precious Moments Porcelain Bisque
products. Further, to emphasize to retailers and sales
representatives, the Precious Moments Authorized Dealer Agreement
that states, in part:
"2. Dealer's responsibilities are to:
B. Sell P recious Moments Porcelain Bisque products only under the
name and location listed above. Not sell any Precious Moments
Porcelain Bisque product at any location not approved by ENESCO
Corporation. Additionally, not transfer or transship, for resale or
further distribution, Precious Moments Porcelain Bisque products to
any unauthorized location or act as an agent for third parties in the
sale of Precious Moments Porcelain Bisque products without specific,
written approval from ENESCO Corporation."
II. Policy
The Enesco Corporation will take the following steps to minimize the
incidence of transshipping:
1. Annually, each facility that produces Precious Moments Porcelain
Bisque products will be asked to attest to their agreement to
maintain exclusive production/shipping only to the Enesco Corporation
and its authorized affiliates and distributors.
2. Conduct background investigations on potential international
customers who are interested in Precious Moments Porcelain Bisque
products. This due diligence process will assist in identifying a
potential international customer's suitability to market Precious
Moments Porcelain Bisque products.
3. Agreements will be maintained and updated for every Precious
Moments Authorized Dealer and Distributor.
4. Require retail sales reports from international affiliates and
distributors to evaluate their purchases versus reported retail
sales.
5. Covertly mark Precious Moments Porcelain Bisque products ordered
by, and shipped to international customers. Said marks will be
applied by either the production facilities overseas or by the Enesco
distribution center in Elk Grove Village, Illinois.
6. Covertly mark Precious Moments Porcelain Bisque products ordered
by, and shipped to selected domestic customers. Said marks will be
applied by either the production facilities overseas or by the Enesco
distribution center in Elk Grove Village, Illinois.
7. The Sales Team will be reminded of their obligation to report any
suspected or confirmed incidence of transshipping. Their annual
contract will be the document that defines this important
responsibility.
8. The Enesco Corporation will take whatever other actions required
to minimize transhipping.
III. Penalty
The Enesco Corporation will take the following steps in the event that
a customer's transshipping activities are discovered and verified:
1. With regard to domestic customers, the Precious Moments
Authorized Dealer Agreement states, in part:
"2. Dealer's responsibilities are to:
H. Understand that violation of any terms of this Agreement will
result in the loss if our Authorized Dealer status and current
Precious Moments Porcelain Bisque products subscription dollar
allocation."
2. With regard to international distributors, the International
Giftware Distribution Agreement states, in part:
"1(d) Distributor shall refrain from actively soliciting,
directly or indirectly, any customer outside the Territory for
the sale of Products and shall refrain from selling products to
any customer within the Territory if it knows or has reason to
know that such Products will be resold outside the Territory."
3. With regard to Enesco Associates, Sales Representatives and
Affiliates:
Per Mr. Eugene Freedman's January 24, 1996 letter to the Personnel of
Enesco, it Sales Representatives, and its Affiliates:
"Enesco Corporation and it affiliated companies will not accept any
employee or sales representative activity associated with or in
support of distribution of sales of its product, which results in
diversion or transshipments to unauthorized dealers, retailers,
catalog companies or secondary marketers."
IV. Responsibility
It is the responsibility of Enesco's Vice President/General Manager,
Precious Moments or other designee of Enesco's Chairman or President
to ensure that the identified steps are continuously implemented and
monitored.
Signed this 29th day of December, 1997.
/s/ Jeffrey A. Hutsell /s/ Jon Butcher
---------------------------- -----------------------------
Jeffrey A. Hutsell Jon Butcher
President & COO President
Enesco Corporation Precious Moments, Inc.
EXHIBIT 13
STANHOME INC.
<TABLE>
<CAPTION>
Percentage
Increase
FINANCIAL HIGHLIGHTS 1997 1996 (Decrease)
(In millions, except per share amounts)
<S> <C> <C> <C>
Net sales $ 476 $ 515 (8%)
Operating profit 31 70 (56%)
Income before taxes from continuing
operations 21 58 (64%)
Income after taxes from continuing
operations 11 33 (68%)
Net income (loss) (28) 38
Working capital 97 40 141%
Total assets 400 479 (16%)
Shareholders' equity 229 279 (18%)
Return on average shareholders' equity (11%) 15%
Per share data:
Net income diluted ($1.60) $2.12
Dividends declared $ 1.12 $1.09 3%
Shareholders' equity at December 31 $13.31 $15.57 (15%)
Average number of shares diluted 17.66 18.09 (2%)
Number of shares outstanding at December 31 17.20 17.90 (4%)
</TABLE>
These Financial Highlights have been reclassified as set forth in Note 1,
Accounting Policies, to the accompanying Financial Statements.
Stock Market, Dividend and Shareholder Information
1997
Market Price
------------
Quarter Dividend High Low
- ---------------------------------------------------------------
First $.28 $27.50 $24.50
Second .28 33.63 24.00
Third .28 35.31 28.88
Fourth .28 31.00 22.25
1996
Market Price
------------
Quarter Dividend High Low
- ---------------------------------------------------------------
First $.265 $32.63 $26.25
Second .265 32.00 26.50
Third .28 29.00 25.38
Fourth .28 29.50 25.63
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, 1997, there were 3,162 record
holders of the Common Stock.
- 1 -
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
STANHOME INC.
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.
DISCONTINUED OPERATIONS:
On May 22, 1997, the Company completed the previously announced
sale of the Company's United States Hamilton Direct Response businesses to
The Crestley Collection, Ltd., an affiliate of The Bradford Group, for
approximately $48.3 million, including repayment of $30.8 million of
intercompany debt, subject to certain conditions. In connection with the
sale, the Company recorded in the first quarter of 1997 a $35 million after
tax charge consisting mainly of the write down of goodwill, current assets
and associated transaction and severance costs. The Company is in the
process of closing Hamilton's foreign operations. Under the sale agreement,
until May 22, 2000, in most cases, the Company agreed to indemnify Bradford
for damages (up to a maximum of $10 million) suffered by Bradford resulting
from certain breaches by the Company and any unpaid taxes for which no
applicable financial reserve existed. As part of the transaction, Bradford
and Enesco Corporation, a wholly-owned subsidiary of Stanhome, entered into
two license agreements pursuant to which Enesco will license certain
proprietary and licensed lines of products to Bradford for an initial
five-year period.
On December 18, 1997, the Company completed the previously
announced sale of the majority of the operations comprising its Worldwide
Direct Selling Group to Laboratoires de Biologie Vegetale Yves Rocher of
France. Subject to certain conditions, the sale price was approximately
$68.4 million in cash ($44 million after taxes and transaction fees) for
the stock and assets sold in connection with the sale. The Company recorded
in the fourth quarter of 1997 a $6 million after tax charge, primarily to
write down assets that were not part of the sale. Under the sale agreement,
until December 18, 2000, in most cases, the Company agreed to indemnify
Yves Rocher for damages (in amounts up to $20.9 million) suffered by Yves
Rocher resulting from certain breaches by the Company. As part of the
transaction, Stanhome's manufacturing subsidiary, Cosmhogar S.A., located
in Spain, entered into a supply agreement and related license agreement
with Yves Rocher for terms of one year for cosmetics and personal care
products and five years for household care products. The Cosmhogar facility
and other retained assets of the Group remain to be sold. Also, as part of
the agreement, the Stanhome name was sold with the business of the
Worldwide Direct Selling Group.
Accordingly, the applicable financial statements and related notes
have been reclassified to present these two divested business segments as
discontinued operations. Therefore, the net assets and operating results of
these two divested business segments have been segregated and reported as
discontinued operations in the Consolidated Balance Sheets, Statements of
Income, and Statements of Cash Flows.
- 6 -
At its annual meeting in April, the Company will submit for
shareholder approval, a proposal to change its corporate name to "Enesco
Group, Inc.", to reflect the Company's transformation into a singularly
focused designer and marketer of branded gifts and collectibles.
Note 2, Discontinued Operations, to the Consolidated Financial
Statements provides additional information on the two discontinued
operations.
Continuing Giftware Operations
1997 Compared with 1996
Sales decreased 7.6% in 1997 primarily due to lower unit volumes
in the United States. Sales in the United States decreased due to a
reduction in customer orders, in part due to tightening retail inventories
and to credit controls, with increased numbers of customers at their credit
limit. International sales increased 5.4% and amounted to 19.4% of 1997
sales compared to 17.0% in 1996. Sales from a new business acquired in
France at the end of the first quarter 1996 accounted for 35% of the total
year international sales increase. The Precious Moments line represented
36.0% of total 1997 sales compared to 40.0% in 1996 and the Cherished
Teddies line represented 20.4% of total 1997 sales compared to 17.8% in
1996. Also, in the case of the Precious Moments Collector and Birthday
Clubs, there has been a significant downward membership trend from 1996 to
1997. During the past few years, the Company has been able to increase the
available supply of products, particularly the Precious Moments line, to
retailers. Consequently, retailers have not ordered as much product in
advance, and the Company's inventory has increased. Total unfilled orders
at year-end 1997 amounted to $87 million, an 8% increase compared to
year-end 1996.
Gross profit decreased in 1997 due to the impact of lower sales
and to a higher cost of sales percentage compared to 1996. Cost of sales
increased to 54.4% of sales in 1997 compared to 52.8% in 1996, due
primarily to sales mix, which included a higher percentage for royalties
and a greater percentage of products sold at less than normal margins.
Higher cost of sales was the primary reason for the 1997 decrease in
international operating profit.
Selling, distribution, general and administrative expenses include
a third quarter 1997 $18 million pre-tax charge ($11.2 million after tax)
to downsize the Westfield, Massachusetts corporate headquarters. The charge
did not include any future operating expenses or future systems
enhancements. The charge included $10.6 million for severance, $5.7 million
for pension and retirement, $1.4 million for insurance and $.3 million for
outplacement. The charge included the cost associated with the resignation
of the Company's then President and CEO. When completed, this downsizing is
expected to reduce future overhead expenses substantially. The Westfield
facility has a book value of approximately $.8 million and is for sale.
Excluding the $18 million downsizing charge, selling,
distribution, general and administrative expenses for 1997 decreased 3%,
but represented 35.4% of sales in 1997 compared to 33.7% in 1996. The 1997
expenses were a higher percentage of sales due primarily in the United
States to the impact of lower sales on fixed costs, a higher level of
spending, inflationary cost increases and a higher provision for bad debts
to reflect the impact of tighter credit controls.
- 7 -
Due to the factors described above, operating profit decreased
56.1% in 1997 and represented 6.4% of sales compared to 13.5% in 1996. The
fourth quarter percentage decrease in sales and operating profit was
greater than the full year due primarily to the impact of the
implementation of tighter credit controls combined with efforts to
alleviate the high levels of inventory at retailers. As of year-end 1997,
good progress was achieved in improving customer credit and inventory
levels.
1996 Compared with 1995
Sales increased 4.9% in 1996 primarily due to unit volume growth
in the United States. Sales from a new business acquired in France during
the first quarter of 1996 accounted for approximately .7% of the sales
increase for the year and the fourth quarter of 1996. The Precious Moments
line represented 40.0% of the 1996 sales compared to 44.3% in 1995 and the
Cherished Teddies line represented 17.8% of 1996 sales compared to 14.4% in
1995. Sales for 1996 in North America benefited from an expansion of the
Company's program of extended accounts receivable terms. International
sales increased 3.2% and, including the new French acquisition, amounted to
17.0% of 1996 sales compared to 17.2% in 1995. The total value of unfilled
orders at year-end 1996 were approximately at the same level as 1995.
Gross profit increased 3.1% in 1996 due to the sales increase.
Cost of sales increased to 52.8% of sales in 1996 compared to 52.0% in 1995
due principally to product mix and lower margins in Europe.
Selling, distribution, general and administrative expenses
amounted to 33.7% of sales in 1996 compared to 34.0% in 1995 and decreased
due to improvement in North America from the benefit of the sales increase
on fixed costs. Partially offsetting this improvement was higher spending
in Europe, including costs for a key management change.
Due to the factors described above, operating profit increased
0.9% in 1996 and represented 13.5% of sales, compared to 14.1% in 1995. The
fourth quarter Giftware percentage increase in sales and operating profit
was greater than the full year due to seasonality and timing of delivery of
products from the Far East.
Interest Expense and Other Expense
Interest expense, net of investment income, decreased in 1997 due
to lower borrowing levels in 1997 compared to 1996 and to the utilization
of cash proceeds from the sale of discontinued operations, particularly in
the fourth quarter. Other assets amortization of goodwill decreased due to
certain categories being fully amortized. The other net expense decreased
in 1997 due to lower net losses on the disposal of fixed assets.
Interest expense, net of investment income, increased in 1996 due
to higher borrowing levels for general working capital and for stock
buybacks. 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 of recent acquisitions. The
increase in other net expense in 1996 primarily represented higher net
losses on the disposal of fixed assets.
- 8 -
Income Taxes
The effective tax rate for 1997 for continuing operations of 49.4%
was higher than the 1996 and 1995 effective tax rates of 44% due primarily
to a lower percentage of total before tax income from the United States,
which has a lower effective tax rate and to the impact of the amortization
of goodwill, which does not receive a tax benefit. The 1996 and 1995 44%
effective rates were higher than the expected statutory U.S. rates due
primarily to the impact of goodwill which is not deductible.
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
1997 and 1996 income statement results compared to prior years.
International operations in total were not materially impacted by
translation rates for 1997 and 1996. 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. 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.
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 1997 major sources of funds from operating activities for
continuing operations were from net income, depreciation, amortization,
lower net accounts receivable and higher accounts payable, taxes and
accrued expenses. Accounts receivable decreased primarily due to lower 1997
fourth quarter sales. Accounts payable and accrued expenses increased due
to timing of payments and to the amounts remaining to be paid of
approximately $12.8 million from the third quarter provision to downsize
corporate headquarters and approximately $8.3 million for payments due
relating to the 1997 sales of discontinued operations. These amounts were
partially offset by decreases in normal accruals due to the lower 1997
operating results. Taxes payable increased in 1997 due to the timing of
payments compared to 1996 and to the $17.3 million taxes payable resulting
from the sale of the majority of the Worldwide Direct Selling operations.
The 1997 major use of funds from continuing operations was higher
inventories in the United States, which resulted from sales that were lower
than anticipated and efforts to alleviate inventory levels at retailers.
Other assets in 1997 were increased by higher levels of funded retirement
benefits and an escrow deposit related to the sale of discontinued
operations. Long-term postretirement benefits increased due to enhanced
benefits relating to the Corporate downsizing and sales of discontinued
operations. Net receivables from discontinued operations and net assets of
discontinued operations decreased principally due to the impact from the
sales of the discontinued operations.
- 9 -
The 1996 major sources of funds from operating activities for
continuing operations were from net income, depreciation, amortization and
higher accounts payable, accrued expenses and taxes. The increase in
payables and accruals primarily related to the high fourth quarter 1996
sales volume versus 1995 and to timing differences of payments versus 1995.
The 1996 major uses of funds from continuing operations were higher net
accounts receivable and other assets. Net accounts receivable increased 24%
in 1996 due to higher sales volumes and marketing programs including the
expansion of the Company's program of extended accounts receivable. Days
sales outstanding increased to 83 days as of year-end 1996 versus 76 days
in 1995. The increase in other assets in 1996 reflects higher levels of
funded retirement benefits and higher levels of net goodwill.
A major use of cash in investing activities has been for capital
expenditures for capacity expansion, information systems, equipment and
office replacements. Also, new acquisitions and subsequent payments for
acquisitions have been a major use of cash in investing activities. The
total purchase price for the French acquisition in 1996 was $2.3 million
with payments of $1.4 million in 1996. The sources of funds for all
expenditures were from cash and investments, and short-term loans. Capital
expenditures of $10 million are planned for 1998. Proceeds from the sales
of property, plant and equipment were primarily from sales in the United
States of assets of businesses licensed to a third party in 1995. Proceeds
from the sale of discontinued operations are from the sale of the Hamilton
United States Direct Response businesses and the sale of the majority of
the operations of the Worldwide Direct Selling business. Part of the
proceeds of both sales are being held in escrow, with up to $11 million
payable to the Company on or after March 31, 1998 and up to $3.8 million
payable to the Company on or after May 23, 2000, subject to certain
conditions.
The major uses of cash in financing activities were 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 5 to the Financial
Statements provides a detailed summary of Treasury Stock activity. The
Company has an authorized program to purchase shares of common stock for
the Company Treasury from time to time in the open market or in private
transactions, depending on market and business conditions, and may utilize
funds for this purpose in the future. As of December 31, 1997, 2.2 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. During the month of January 1998, the Company purchased 783
thousand shares of common stock for $21.148 million. A source of funds from
financing activities continued to be from the exercise of stock options.
The value of total stock options outstanding at the exercise price amounted
to $96 million at December 31, 1997 and the Company could receive these
funds in the future if the options are exercised. The 1997 decrease in
notes and loans payable was due to the proceeds from the sales of
discontinued operations.
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 subsidiaries upon their voluntary or involuntary separation. These
obligations are not funded because there is not a financial benefit to fund
them.
- 10 -
In August 1995, the Company entered into a five-year $200 million
multicurrency revolving credit agreement with various banks, which can be
used for working capital, investing and financing activities. The agreement
has an annual facility and agency fee as well as a margin supplement for
Eurocurrency rate loans where more than one-third of the commitment is
utilized. The agreement contains financial covenants that include
requirements, as defined, for minimum net worth, interest coverage and
maximum borrowings. None of these covenants are expected to have an adverse
effect on the Company's ability to operate in the future. The Company
currently believes that funds 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.
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. The majority of these
changes were related to the Worldwide Direct Selling Group, the majority of
which was sold in the fourth quarter of 1997. The balances as of December
31, 1997 relate to the continuing operations.
- 11 -
Quarterly results (unaudited):
(In thousands, except per share amounts)
STANHOME INC.
The following table sets forth information with respect to the
consolidated quarterly results of operations for 1997, 1996 and 1995. 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.
<TABLE>
<CAPTION>
For the Three Months Ended
-----------------------------------------------
March 31, June 30, Sept. 30, Dec. 3l,
1997 1997 1997 1997
-------- -------- -------- ------
<S> <C> <C> <C> <C>
Net sales........................ $102,060 $137,002 $128,261 $108,860
Cost of sales.................... 52,633 73,203 72,570 60,691
-------- -------- -------- --------
Gross profit..................... 49,427 63,799 55,691 48,169
Selling, distribution, general
and administrative expenses.... 43,225 43,901 55,951 43,391
-------- -------- -------- --------
Operating profit (loss).......... $ 6,202 $ 19,898 ($ 260) $ 4,778
======== ======== ======== ========
Income (loss) of continuing
operations, net of taxes....... $ 2,193 $ 9,759 ($ 2,752) $ 1,345
Income (loss) of discontinued
operations, net of taxes....... 1,048 1,810 ( 700) -
Net loss on sale of discontinued
operations..................... ( 35,000) - - ( 6,000)
-------- -------- -------- --------
Net income (loss)................ ($ 31,759) $ 11,569 ($ 3,452) ($ 4,655)
======== ======== ======== ========
Earnings (loss) per common share,
Basic and diluted:
Continuing operations.......... $ .12 $ .55 ($ .16) $ .07
Discontinued operations........ .06 .10 ( .04) -
Sale of discontinued operations 1.95) - - ( .34)
-------- -------- -------- --------
Total.......................... $ 1.77) $ .65 ($ .20) ($ .27)
======== ======== ======== ========
For the Three Months Ended
-------------------------------------------------
March 31, June 30, Sept. 30, Dec. 3l,
1996 1996 1996 1996
-------- -------- -------- ------
Net sales........................ $ 99,612 $130,823 $144,756 $140,257
Cost of sales.................... 54,196 69,103 76,958 71,923
-------- -------- -------- --------
Gross profit..................... 45,416 61,720 67,798 68,334
Selling, distribution, general
and administrative expenses.... 39,831 42,456 42,771 48,498
-------- -------- -------- --------
Operating profit................. $ 5,585 $ 19,264 $ 25,027 $ 19,836
======== ======== ======== ========
Income of continuing
operations, net of taxes....... $ 1,812 $ 9,320 $ 12,190 $ 9,294
Income (loss) of discontinued
operations, net of taxes....... 2,258 1,631 ( 737) 2,669
-------- -------- -------- --------
Net income....................... $ 4,070 $ 10,951 $ 11,453 $ 11,963
======== ======== ======== ========
Earnings per common share,
Basic and diluted:
Continuing operations.......... $ .10 $ .51 $ .68 $ .52
Discontinued operations........ .12 .09 ( .04) .15
-------- -------- -------- --------
Total.......................... $ .22 $ .60 $ .64 $ .67
======== ======== ======== ========
For the Three Months Ended
------------------------------------------------
March 31, June 30, Sept. 30, Dec. 3l,
1995 1995 1995 1995
-------- -------- -------- ------
Net sales........................ $105,955 $122,126 $138,150 $124,965
Cost of sales.................... 55,656 64,869 71,583 63,174
-------- -------- -------- --------
Gross profit..................... 50,299 57,257 66,567 61,791
Selling, distribution, general
and administrative expenses.... 40,887 39,615 43,239 43,080
-------- -------- -------- --------
Operating profit................. $ 9,412 $ 17,642 $ 23,328 $ 18,711
======== ======== ======== ========
Income of continuing
operations, net of taxes....... $ 4,532 $ 8,725 $ 11,913 $ 8,720
Income (loss) of discontinued
operations, net of taxes....... 1,918 2,444 ( 45) 3,693
-------- -------- -------- --------
Net income....................... $ 6,450 $ 11,169 $ 11,868 $ 12,413
======== ======== ======== ========
Earnings per common share,
Basic and diluted:
Continuing operations.......... $ .24 $ .46 $ .64 $ .47
Discontinued operations........ .10 .13 ( .01) .20
-------- -------- -------- --------
Total.......................... $ .34 $ .59 $ .63 $ .67
======== ======== ======== ========
</TABLE>
CONSOLIDATED BALANCE SHEETS
(In thousands)
December 31, 1997 and 1996
STANHOME INC.
ASSETS
1997 1996
---- ----
CURRENT ASSETS:
Cash and certificates of deposit (including
interest bearing demand deposits).............. $ 35,724 $ 10,308
Accounts receivable, net......................... 101,731 127,987
Inventories...................................... 107,752 84,018
Prepaid expenses................................. 2,482 3,500
-------- --------
Total current assets................... 247,689 225,813
-------- --------
PROPERTY, PLANT AND EQUIPMENT, at cost:
Land and improvements............................ 4,355 4,378
Buildings and improvements....................... 38,543 39,217
Machinery and equipment.......................... 13,949 13,911
Furniture and fixtures........................... 25,057 22,766
Transportation equipment......................... 510 541
-------- --------
82,414 80,813
Less - Accumulated depreciation and amortization. 46,836 43,626
-------- --------
35,578 37,187
-------- --------
OTHER ASSETS:
Goodwill and other intangibles, net.............. 89,596 101,327
Other............................................ 22,540 13,053
-------- --------
112,136 114,380
-------- --------
NET RECEIVABLES FROM DISCONTINUED OPERATIONS....... - 26,463
-------- --------
NET ASSETS OF DISCONTINUED OPERATIONS.............. 4,999 74,866
-------- --------
$400,402 $478,709
======== ========
The accompanying notes are an integral part of these financial statements.
- 12 -
LIABILITIES AND SHAREHOLDERS' EQUITY
1997 1996
---- ----
CURRENT LIABILITIES:
Notes and loans payable.......................... $ 8,388 $ 78,577
Accounts payable................................. 43,576 33,270
Federal, state and foreign taxes on income....... 42,158 20,831
Accrued expenses -
Payroll and commissions........................ 13,576 8,843
Royalties...................................... 6,767 9,725
Pensions and profit sharing.................... 6,128 7,716
Vacation, sick and postretirement benefits..... 4,853 4,241
Other.......................................... 24,958 22,294
-------- --------
Total current liabilities............... 150,404 185,497
-------- --------
LONG-TERM LIABILITIES:
Postretirement benefits.......................... 21,084 14,384
-------- --------
Total long-term liabilities............. 21,084 14,384
-------- --------
COMMITMENTS AND CONTINGENCIES (Note 10)
SHAREHOLDERS' EQUITY:
Common stock, par value $.125--
Authorized 80,000 shares
Issued 25,228 shares........................... 3,154 3,154
Capital in excess of par value................... 46,858 44,862
Retained earnings................................ 355,806 403,805
Cumulative translation adjustments............... ( 1,519) ( 21,121)
-------- --------
404,299 430,700
Less - Shares held in treasury, at cost-
Common stock, 8,027 shares in
1997 and 7,325 in 1996....................... 175,385 151,872
-------- --------
Total shareholders' equity.............. 228,914 278,828
-------- --------
$400,402 $478,709
======== ========
- 13 -
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
For the Years Ended December 31, 1997, 1996 and 1995
STANHOME INC.
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
NET SALES ..................................... $ 476,183 $ 515,448 $ 491,196
COST OF SALES ................................. 259,097 272,180 255,282
--------- --------- ---------
GROSS PROFIT .................................. 217,086 243,268 235,914
SELLING, DISTRIBUTION, GENERAL
AND ADMINISTRATIVE EXPENSES ................. 186,468 173,556 166,821
--------- --------- ---------
OPERATING PROFIT .............................. 30,618 69,712 69,093
Interest expense ............................ (6,783) (8,196) (7,302)
Other expense, net .......................... (3,005) (3,274) (1,273)
--------- --------- ---------
INCOME BEFORE INCOME TAXES FROM
CONTINUING OPERATIONS ....................... 20,830 58,242 60,518
Income taxes ................................ 10,285 25,626 26,628
--------- --------- ---------
INCOME OF CONTINUING OPERATIONS, NET OF TAXES.. 10,545 32,616 33,890
INCOME OF DISCONTINUED OPERATIONS, NET OF TAXES 2,158 5,821 8,010
NET LOSS ON SALE OF DISCONTINUED OPERATIONS ... (41,000) -- --
--------- --------- ---------
NET INCOME (LOSS) ............................. ($ 28,297) $ 38,437 $ 41,900
========= ========= =========
EARNINGS (LOSS) PER COMMON SHARE,
BASIC: Continuing Operations ............. $ .60 $ 1.81 $ 1.81
Discontinued Operations ........... .12 .32 .42
Sale of Discontinued Operations ... (2.33) -- --
--------- --------- ---------
Total ............................. ($ 1.61) $ 2.13 $ 2.23
========= ========= =========
DILUTED: Continuing Operations ............. $ .60 $ 1.80 $ 1.80
Discontinued Operations ........... .12 .32 .42
Sale of Discontinued Operations ... (2.32) -- --
--------- --------- ---------
Total ............................. ($ 1.60) $ 2.12 $ 2.22
========= ========= =========
</TABLE>
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
For the Years Ended December 31, 1997, 1996 and 1995
(In thousands, except per share amounts)
<TABLE>
<S> <C> <C> <C>
BALANCE, beginning of year..................... $403,805 $385,008 $362,947
Net income................................... ( 28,297) 38,437 41,900
Cash dividends, $1.12 per share in 1997,
$1.09 per share in 1996 and $1.06 per
share in 1995............................... ( 19,702) ( 19,640) ( 19,839)
-------- -------- --------
BALANCE, end of year........................... $355,806 $403,805 $385,008
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
- 14 -
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
For the Years Ended December 31, 1997, 1996 and 1995
STANHOME INC.
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) .................................... ($ 28,297) $ 38,437 $ 41,900
Less - Net income discontinued operations ............ (2,158) (5,821) (8,010)
- Net loss on sale of discontinued operations ... 41,000 -- --
Adjustments to reconcile continuing operations net
income to net cash provided by operating activities:
Depreciation and amortization of property,
plant and equipment ............................... 5,701 5,744 5,288
Allowance for losses on accounts receivable ........ 1,255 2,026 583
Amortization of other assets ....................... 3,479 3,843 3,527
(Gains)/losses on sale of capital assets ........... 1 355 225
Changes in assets and liabilities, net of effects
from acquisition of businesses:
Notes and accounts receivable .................... 24,871 (29,576) (8,114)
Inventories ...................................... (25,171) 358 (1,111)
Prepaid expenses ................................. 994 (536) (981)
Other assets ..................................... (8,820) (2,666) (2,015)
Accounts payable and accrued expenses ............ 13,930 2,755 (18,943)
Taxes on income .................................. 22,086 8,635 (4,508)
Long-term postretirement benefits ................ 6,700 1,634 3,447
Operating activities of discontinued operations .. (5,072) 9,564 11,120
--------- --------- ---------
Net cash provided by operating activities ............ 50,499 34,752 22,408
--------- --------- ---------
INVESTING ACTIVITIES:
Purchase of property, plant and equipment ............ (4,944) (5,095) (9,829)
Payments for acquisition of businesses,
net of cash acquired ................................ -- (1,563) (1,861)
Proceeds from sales of discontinued operations ....... 85,939 -- --
Proceeds from sales of property, plant and equipment . 759 1,014 552
Investing activities of discontinued operations ...... (1,181) (1,137) (89)
--------- --------- ---------
Net cash provided/(used) by investing activities ..... 80,573 (6,781) (11,227)
--------- --------- ---------
FINANCING ACTIVITIES:
Cash dividends ....................................... (19,702) (19,640) (19,838)
Exchanges and purchases of common stock .............. (23,906) (15,178) (31,649)
Notes and loans payable .............................. (69,737) 2,373 36,522
Exercise of stock options ............................ 2,144 1,814 6,315
Other common stock issuance .......................... 245 316 416
Financing activities of discontinued operations ...... 6,071 (549) 11
--------- --------- ---------
Net cash used by financing activities ................ (104,885) (30,864) (8,223)
--------- --------- ---------
Effect of exchange rate changes on cash and
cash equivalents .................................... (771) 340 (195)
--------- --------- ---------
Increase/(decrease) in cash and cash equivalents ..... 25,416 (2,553) 2,763
Cash and cash equivalents, beginning of year ......... 10,306 12,859 10,096
--------- --------- ---------
Cash and cash equivalents, end of year ............... $ 35,722 $ 10,306 $ 12,859
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
- 15 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997, 1996 and 1995
1. Accounting policies:
The accompanying consolidated financial statements include the
accounts of Stanhome Inc. and its subsidiaries (the "Company"). All
significant intercompany transactions have been eliminated in the
consolidated financial statements. The preparation of financial statements
in conformity with generally accepted accounting principles requires the
use of Management's estimates. Actual results could differ from those
estimates. Certain reclassifications have been made in the 1996 and 1995
financial statements to conform to the 1997 presentation, which reflects
certain operations that were discontinued in 1997 and are described in Note
2. The continuing operations, which operate in a single industry, design,
manufacture primarily through third parties located in the Pacific Rim, and
market a wide variety of licensed and proprietary branded gifts and
collectibles to retail stores primarily throughout the United States,
Canada and Europe.
Assets and liabilities of the Company's foreign subsidiaries are
translated at the exchange rate on the balance sheet date, while statement
of income items are translated at the average exchange rates for the year.
Translation gains and losses are reported as a component of shareholders'
equity. Transaction gains and losses are reported in the statement of
income.
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, except for $2,000 of deposits in 1997
and 1996, respectively, with terms in excess of three months. Cash includes
$11 million in an escrow account due to be received March 31, 1998, subject
to certain conditions.
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 and collector club subscriptions are
netted against the associated costs.
Accounts receivable were net of reserves for uncollectible
accounts, returns and allowances of $11,146,000 and $9,891,000 at December
31, 1997 and 1996, respectively.
Inventories are valued at the lower of cost or market. Cost
components include labor, manufacturing overhead and amounts paid to
suppliers of materials and products. The Company values all inventories
utilizing the first-in, first-out method.
- 16 -
The major classes of inventories were as follows (in thousands):
1997 1996
---- ----
Raw materials and supplies........... $ 1,719 $ 1,678
Work in process...................... 930 959
Finished goods in transit............ 14,865 14,299
Finished goods....................... 90,238 67,082
-------- --------
$107,752 $ 84,018
======== ========
Concentration of risk for the Company exists in revenue from major
product lines, sources of supply of inventory, markets and geographic
areas, and trade receivables. The majority of product sales are under
licensed rights from third parties. The two largest licensed lines
represented approximately 56% of the Company's total sales for 1997. A
large portion of acquired inventory is sourced from the Far East,
principally China. A significant portion of the Company's operations is
located in Europe. Extended credit terms are offered to customers. The
Company continually monitors and manages the risks associated with all
these activities.
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 the value of net tangible assets
acquired. Intangible assets are amortized using the straight-line method
principally over 20 to 40 years. The Company periodically evaluates whether
events or circumstances have occurred indicating that the net book value of
goodwill has been impaired. When factors indicate that goodwill should be
evaluated for possible impairment, the Company uses an estimate of the
acquired business' undiscounted future net cash flows compared to the
carrying value of goodwill to determine if a write-off is necessary.
Intangible assets were net of accumulated amortization of $26,845,000 and
$26,019,000 at December 31, 1997 and 1996, respectively.
- 17 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997, 1996 and 1995
In February 1997, the Financial Accounting Standards Board adopted
a new standard on accounting for earnings per share (EPS). This new
standard replaced the presentation of primary EPS with a presentation of
basic EPS and changed the fully diluted terminology to diluted. It also
requires dual presentation of basic and diluted EPS on the face of the
income statement. The standard became effective for the Company at December
31, 1997 and required restatement of prior years' EPS.
Basic earnings per common share are based on the average number of
common shares outstanding during the year. Diluted earnings per common
share assumes, in addition to the above, a dilutive effect of common share
equivalents during the year. Common share equivalents represent dilutive
stock options using the treasury stock method. The number of shares used in
the earnings per common share computation for 1997, 1996 and 1995 were as
follows (in thousands):
1997 1996 1995
---- ---- ----
Basic
Average common shares outstanding.... 17,577 18,080 18,773
Diluted
Stock options........................ 84 12 78
------ ------ ------
Average shares diluted............... 17,661 18,092 18,851
In June 1997, the Financial Accounting Standards Board adopted a
new standard on reporting comprehensive income, which established standards
for reporting and display of comprehensive income (net income (loss)
together with other non-owner changes in equity) and its components in a
full set of general purpose financial statements. The standard will become
effective for the Company in 1998 and will require reclassification of
comparative financial statements for prior years. The other comprehensive
income in this statement will consist only of cumulative translation
adjustments.
2. Discontinued Operations:
On May 22, 1997, the Company completed the previously announced
sale of the Company's United States Hamilton Direct Response businesses to
The Crestley Collection, Ltd., an affiliate of The Bradford Group for
approximately $48.3 million, including the repayment of $30.8 million of
intercompany debt, subject to certain conditions. $3.8 million of the sale
proceeds are being held in escrow in other assets, and are recoverable with
interest May 23, 2000, subject to certain conditions. In connection with
the sale, the Company recorded in the first quarter of 1997 a $35 million
after tax charge consisting mainly of the write down of goodwill, current
assets and associated transaction and severance costs. The Company is in
the process of closing Hamilton's foreign operations. Under the sales
agreement, until May 22, 2000, in most cases, the Company agreed to
indemnify Bradford for damages (up to a maximum of $10 million) suffered by
Bradford resulting from certain breaches by the Company and any unpaid
taxes for which no
- 18 -
applicable financial reserve existed. As part of the agreement, Bradford and
Enesco Corporation, a wholly-owned subsidiary of Stanhome, entered into two
license agreements pursuant to which Enesco will license certain proprietary
and licensed lines of products to Bradford for an initial five-year period.
On December 18, 1997, the Company completed the previously
announced sale of the majority of the operations comprising its Worldwide
Direct Selling Group to Laboratoires de Biologie de Vegetale Yves Rocher of
France. Subject to certain conditions, the sale price was approximately
$68.4 million in cash ($44 million after taxes and transaction fees) for
the businesses and assets sold in connection with the sale. $11 million of
the sale proceeds are being held in escrow in the cash account, and are
recoverable with interest March 31, 1998, subject to certain conditions.
The Company recorded in the fourth quarter of 1997 a $6 million after tax
charge, primarily to write down assets that were not part of the sale.
Under the sale agreement, until December 18, 2000, in most cases, the
Company agreed to indemnify Yves Rocher for damages (in amounts up to $20.9
million) suffered by Yves Rocher resulting from certain breaches by the
Company. As part of the agreement, Stanhome's manufacturing facility,
Cosmhogar S.A., located in Spain, entered into a supply agreement and
related license agreement with Yves Rocher for terms of one year for
cosmetics and personal care products and five years for household care
products. The Cosmhogar facility and other remaining assets of the Group
remain to be sold. Also, as part of the agreement, the Stanhome name will
remain with the Worldwide Direct Selling Group.
Accordingly, the applicable financial statements and related notes
have been reclassified to present these two divested business segments as
discontinued operations. Therefore, the net assets and operating results of
these two divested business segments have been segregated and reported as
discontinued operations in the Consolidated Balance Sheets, Statements of
Income, and Statements of Cash Flows.
The approximate components of the discontinued operations charge
were as follows (in thousands):
Direct Response
Loss on sale - Hamilton U.S.(principally
the write down of goodwill)................ ( $23,500)
Provision for closing costs (principally
international operations) and
termination benefits....................... ( 8,500)
Write down of international current assets
due to anticipated proceeds being less
than carrying value........................ ( 3,000)
Transaction fees............................. ( 2,000)
-------
Before tax charge............................ ( 37,000)
Anticipated tax benefit...................... 2,000
-------
After tax charge............................. ($35,000)
=======
- 19 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997, 1996 and 1995
The anticipated income tax benefits are limited, since most of the
international closing costs and write down of assets are not expected to
receive a tax benefit and the United States capital loss is limited due to
loss disallowance rules.
Direct Selling
Gain on sale of Direct Selling operations.... $24,300
Write down of assets of remaining Direct
Selling operations due to anticipated
net proceeds being less than carrying
value...................................... ( 6,000)
Provision for disposition costs of
remaining operations including severance... ( 2,300)
Transaction fees............................. ( 4,000)
-------
Before tax gain.............................. 12,000
Anticipated tax provision.................... ( 18,000)
-------
After tax loss............................... ($ 6,000)
=======
The anticipated taxes are higher than the gain since most of the
disposition costs and write down of assets are not expected to receive a
tax benefit, the benefit in the United States of utilizing foreign taxes
due on the sale is limited, and the United States tax basis of the
companies sold was less than book value.
The above charges reflect the Company's best estimate at this time
of the value of remaining assets and anticipated closing costs. The amounts
that the Company will ultimately realize could differ materially.
The 1997 operating results of discontinued operations include three
months of Direct Response and nine months of Direct Selling. These
operating results are summarized as follows (in thousands):
Year Ended December 31,
-------------------------------
1997 1996 1995
---- ---- ----
Net sales of discontinued operations....... $151,128 $331,740 $342,026
======== ======== ========
Income before income taxes from
discontinued operations.................. $ 4,632 $11,037 $15,821
Income taxes............................... 2,474 5,216 7,811
------- ------- -------
Net income of discontinued operations...... $ 2,158 $ 5,821 $ 8,010
======= ======= =======
Loss on sale of discontinued operations
before income taxes...................... ($25,000) $ - $ -
Income tax charge.......................... ( 16,000) - -
------- ------- -------
Net loss on sale of discontinued operations ($41,000) $ - $ -
======= ======= =======
- 20 -
Net assets of discontinued operations were as follows (in thousands):
December 31,
------------
1997 1996
---- ----
Cash and certificates of deposit............ $ 1,457 $17,154
Accounts receivable, net.................... 5,418 44,237
Inventories................................. 2,911 37,382
Prepaid expenses............................ 285 32,885
Net property, plant and equipment........... - 21,468
Other assets................................ 12 24,046
Net intercompany payables................... - ( 26,463)
Notes and loans payable..................... - ( 107)
All other current liabilities............... ( 5,084) ( 62,994)
Long-term liabilities....................... - ( 12,742)
------- -------
Net assets of discontinued operations....... $ 4,999 $74,866
======= =======
- 21 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997, 1996 and 1995
Cash flows from (for) discontinued operations as shown in the
Consolidated Statement of Cash Flows are comprised of the following (in
thousands):
<TABLE>
<CAPTION>
For the Year Ended
------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Operating Activities:
Net income from operations of
discontinued segments.......... $ 2,158 $ 5,821 $ 8,010
Net loss on sale of discontinued
segments....................... ( 41,000) - -
Depreciation and amortization,
losses on accounts receivable
and (gains) losses on sale of
capital assets................. 2,837 3,679 9,186
Increase (decrease) in
operating activities........... 30,933 64 ( 6,076)
------- ------- -------
Net cash from (for) operating
activities of discontinued
operations..................... ($ 5,072) $ 9,564 $11,120
======= ======= =======
Investing Activities:
Purchase of property, plant
and equipment.................. ($ 1,407) ($ 4,172) ($ 3,635)
Proceeds from sale of property,
plant and equipment............ 226 3,035 3,549
Other, net....................... - - ( 3)
------- ------- -------
Net cash (for) investing
activities of discontinued
operations..................... ($ 1,181) ($ 1,137) ($ 89)
======= ======= =======
Financing Activities:
Notes and loans payable.......... $ 6,071 ($ 549) $ 11
------- ------- -------
Net cash from (for) financing
activities of discontinued
operations..................... $ 6,071 ($ 549) $ 11
======= ======= =======
</TABLE>
- 22 -
3. Notes and loans payable:
Notes and loans payable and weighted-average interest rates at
December 31, 1997 and 1996 are as follows (in thousands):
1997 1996
---- ----
Interest Interest
Balance Rate Balance Rate
------- -------- ------- --------
Notes under uncommitted
bank lines............... $ 8,388 4.5% $28,577 6.3%
Notes under committed
bank lines............... - - 50,000 5.9%
------- ---- ------- ----
Total................. $ 8,388 4.5% $78,577 6.1%
======= ==== ======= ====
Total interest paid was $6,475,000 in 1997, $7,959,000 in 1996 and
$6,925,000 in 1995.
In August 1995, the Company entered into a five year $200 million
multicurrency revolving credit agreement with various banks which can be
used for working capital, investing and financing activities. The agreement
has an annual facility and agency fee as well as a margin supplement for
Eurocurrency rate loans where more than one-third of the commitment is
utilized. The agreement contains financial covenants that include
requirements, as defined, for minimum net worth, interest coverage and
maximum borrowings. At December 31, 1997 the Company was in compliance with
the covenants and there were no open borrowings under the revolving credit
agreement.
At December 31, 1997, the Company had formal and informal unused
lines of credit of approximately $325 million.
4. Employee benefit plans:
The Company has an employee defined benefit plan covering its
employees. The benefits under this plan 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 Company has various non-qualified supplemental retirement
plans. Benefits from these supplemental plans will be paid from the
Company's assets. The Company has established grantor trusts to provide
funding for some of these benefits. The trusts are irrevocable and assets
contributed can only be used to pay such benefits with certain exceptions.
The assets held in these trusts at December 31, 1997 and 1996 consist of
fixed income securities accounted for at the lower of cost or market and
amounted to $17.5 million and $12.2 million, respectively. These assets are
included in other assets.
- 23 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997, 1996 and 1995
Pension expense for the domestic plans includes the following
components (in thousands):
1997 1996 1995
---- ---- ----
Service cost during the period........... $ 5,356 $ 818 $ 2,263
Interest cost on the projected
benefit obligation..................... 2,696 2,382 2,639
Actual return on plan assets............. ( 5,256) ( 2,855) ( 4,601)
Net amortization of prior service cost,
net transition liability and net loss.. 3,137 715 2,751
Curtailment and settlement charges....... 836 - -
Special termination benefits enhancement. - - 888
------- ------- -------
Pension expense.......................... $ 6,769 $ 1,060 $ 3,940
======= ======= =======
The following table sets forth the plans' funded status and amounts
recognized in the Company's balance sheet at December 31, 1997 and 1996 (in
thousands):
1997 1996
---- ----
Actuarial present value of benefit obligations:
Vested benefits................................... $15,611 $35,393
Nonvested benefits................................ - -
------- -------
Accumulated benefit obligation.................... 15,611 35,393
Additional obligation for future salary increases... 4,430 5,286
------- -------
Projected benefit obligation........................ 20,041 40,679
Fair value of plan assets, primarily
marketable securities............................. ( 855) (27,541)
------- -------
Unfunded excess of projected benefit obligation
over plan assets.................................. 19,186 13,138
Unrecognized net transition asset/(liability),
being recognized over 15 years.................... - ( 103)
Unrecognized prior service costs.................... - ( 1,502)
Unrecognized net gain............................... 6 2,078
------- -------
Pension liability recognized in the balance sheet... $19,192 $13,611
======= =======
The above schedules include various non-qualified supplemental
retirement plans. The weighted-average discount rate used to measure the
projected benefit obligation and the rate of increase in future
compensation levels both range from 5% to 7% and the expected long-term
rate of return on assets is 9%.
The qualified pension plan was frozen for all participants on
December 31, 1997 and an annuity was purchased from the Hartford Life
Insurance Company as a settlement under FASB Statement No. 88. The impact
of the plan curtailment and settlement was an expense of $836,000.
- 24 -
In addition to providing pension benefits, the Company sponsors a
defined benefit postretirement health care and life insurance plan.
Employees may become eligible for the benefits under this plan if they
reach allowable retirement age while working for the Company. 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.
Net periodic postretirement benefit expense includes the following
components (in thousands):
1997 1996 1995
---- ---- ----
Service cost.......................... $ 85 $ 100 $ 90
Interest cost on accumulated
postretirement benefit obligation... 55 70 60
------ ------ ------
Net periodic postretirement
benefit expense.................... $ 140 $ 170 $ 150
====== ====== ======
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, 1997 and 1996 (in thousands):
1997 1996
---- ----
Accumulated postretirement benefit obligation:
Retirees....................................... $ 1,617 $ 2,252
Fully eligible active plan participants........ 802 83
Other active plan participants................. 720 1,117
------- -------
3,139 3,452
Plan assets at fair value........................ - -
------- -------
Accumulated postretirement benefit obligation
in excess of plan assets....................... 3,139 3,452
Unrecognized net loss, prior service cost
and net transition liability................... - -
------- -------
Accrued postretirement benefit liability
recognized in the balance sheet................ $ 3,139 $ 3,452
======= =======
A 15% annual rate of increase in the per capita cost of covered
health care benefits was assumed for 1998. 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, 1997 by $100,000 and the aggregate of the service and interest
cost components of the net postretirement benefit expense for the year then
ended by $30,000.
- 25 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997, 1996 and 1995
The weighted-average discount rate used in determining the
accumulated postretirement benefit obligation was 6%.
In addition, certain subsidiaries have established funded profit
sharing and defined contribution retirement plans. Total consolidated
pension, profit sharing and retirement plan expense amounted to $9,700,000
in 1997, $6,824,000 in 1996 and $8,399,000 in 1995.
In February 1998, the Financial Accounting Standards Board adopted
a new standard on disclosures about pensions and other postretirement
benefits. The standard will become effective for the Company at year-end
1998 and will require restatement of pension and other postretirement
benefit disclosures for prior years.
5. 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 1996, the shareholders approved a new Stock Option Plan
previously adopted by the Board of Directors which provides for both
incentive and non-qualified stock options. Options for up to 1,500,000
shares of common stock may be granted under the 1996 Plan. The plan
provides that non-qualified options for 1,500 shares of common stock be
granted annually from 1996 through 1998 to each non-employee Director then
serving. The Company also has 1991 and 1984 Stock Option Plans, which
provide for both incentive and non-qualified stock options, under which
options for up to 2,000,000 and 3,000,000 shares of common stock,
respectively, may be granted. No further options may be granted under the
1984 Plan. All three plans provide for the granting to selected key
employees, and non-employee Directors in the case of the 1996 and 1991
Plans, of options to acquire shares of common 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 under the 1984 and 1991 Plans
options have been exercisable only after a one year waiting period with
vesting in four equal annual installments, and expire ten years from the
date of grant. Under the 1996 Plan, options become exercisable only after a
six month waiting period and upon the Company's achievement of certain
stock value performance criteria at any time during the first eight years
after the date of the grant. On the eighth anniversary of the grant, all
outstanding options granted under the 1996 Plan will become exercisable.
Options granted under the 1996 Plan will expire ten years from the date of
grant.
- 26 -
In 1993 and 1997, the Board of Directors approved a Special Interim
Chief Executive Officer Stock Option Plan and a 1997 President and Chief
Executive Officer Stock Option Plan, respectively, which provided for
special grants of non-qualified stock options to the Company's then Chief
Executive Officer. The 1993 options vested fully in increments of 10,000
shares during each of the three months in which he served in that capacity.
The 1997 grant of 100,000 options vest fully in increments of 12,500 shares
each month during which he serves in that capacity. Both the 1993 and 1997
options become exercisable six months from the date of grant, and expire
ten years from the date of grant.
At December 31, 1997, the Company has five stock-based compensation
(fixed option) plans, which are described above. The Company applies the
intrinsic value based method allowed under APB Opinion No. 25 and related
Interpretations in accounting for its plans. Accordingly, no compensation
cost has been recognized for its fixed stock option plans. Had compensation
cost for option grants since 1994 under the Company's five stock-based
compensation plans been determined applying the fair value based method
provided for in FASB Statement No. 123, which became effective in 1996, the
Company's net income and earnings per common share for 1997, 1996 and 1995
would have been reduced to the pro forma amounts indicated below (in
thousands, except per share amounts):
1997 1996 1995
---- ---- ----
Net income (loss)....... As reported ($28,297) $38,437 $41,900
....... Pro forma ($29,181) $37,690 $41,444
Earnings (loss) per
common share diluted... As reported ($1.60) $2.12 $2.22
... Pro forma ($1.65) $2.08 $2.19
The options granted in 1997 were under the 1997 President and Chief
Executive Officer, 1996 and 1991 Plans, in 1996 were under the 1996 and
1991 Plans, and in 1995 were under the 1991 Plan. The fair value of each
option grant in 1997, 1996 and 1995 was estimated at the time of grant
using the Black-Scholes option pricing model with the
following weighted-average assumptions:
1997 1996 1995
---- ---- ----
Dividend yield yearly................ 4.0% 4.0% 4.0%
Expected volatility.................. 25% 20% 23%
Risk free interest rate.............. 5.98% 6.43% 6.97%
Expected life (years)................ 6.8 7.2 4.0
Weighted-average grant-date
fair value of options granted
during the year, per share.......... $6.63 $6.21 $5.56
- 27 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997, 1996 and 1995
Stock option status and activity under the Company's five
stock-based compensation (fixed option) plans is summarized as follows:
Weighted-
Average
Shares Exercise
Fixed Options (000's) Price
------------- ------- --------
Outstanding at December 31, 1994............ 2,303 $30.93
Granted................................... 825 27.96
Exercised................................. ( 230) 26.16
Forfeited................................. ( 245) 33.29
-----
Outstanding at December 31, 1995............ 2,653 30.20
Granted................................... 395 29.50
Exercised................................. ( 78) 21.18
Forfeited................................. ( 155) 30.60
-----
Outstanding at December 31, 1996............ 2,815 30.33
Granted................................... 566 28.81
Exercised................................. ( 84) 23.40
Forfeited................................. ( 116) 30.46
-----
Outstanding at December 31, 1997............ 3,181 $30.23
=====
1997 1996 1995
Shares Shares Shares
Fixed Options (000's) (000's) (000's)
------------- ------- ------- -------
Options exercisable at year-end............. 1,787 1,862 1,213
A summary of information about fixed stock options outstanding at
December 31, 1997 is as follows:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
---------------------------------------- --------------------------
Weighted-
Number Average Weighted- Number Weighted-
Range of Outstanding Remaining Average Exercisable Average
Exercise at 12/31/97 Contractual Exercise at 12/31/97 Exercise
Prices (000's) Life Price (000's) Price
- -------- ----------- ----------- -------- ----------- --------
<C> <C> <C> <C> <C> <C>
$20 to $21........ 41 .6 years $20.13 41 $20.13
$26 to $30........ 2,014 7.0 28.19 829 27.57
$31 to $36........ 1,126 5.7 34.26 917 34.29
$20 to $36........ 3,181 6.5 30.23 1,787 30.85
</TABLE>
- 28 -
An analysis of treasury stock transactions for the years ended
December 31, 1997, 1996 and 1995 is as follows (in thousands):
Common
------
Shares Cost
------ ----
Balance, December 31, 1994......................... 6,077 $106,421
Purchases.......................................... 1,061 31,544
Stock option exchanges............................. 4 105
Exercise of stock options.......................... ( 230) ( 949)
Issue of PAYSOP shares............................. ( 6) ( 27)
Investment Savings Plan - 401(k) issues............ ( 6) ( 26)
Non-employee Director Stock Plan issues............ ( 2) ( 7)
----- --------
Balance, December 31, 1995......................... 6,898 137,061
Purchases.......................................... 515 15,160
Stock option exchanges............................. 1 18
Exercise of stock options.......................... ( 78) ( 321)
Issue of PAYSOP shares............................. ( 6) ( 24)
Investment Savings Plan - 401(k) issues............ ( 3) ( 15)
Non-employee Director Stock Plan issues............ ( 2) ( 7)
----- --------
Balance, December 31, 1996......................... 7,325 151,872
Purchases.......................................... 793 23,830
Stock option exchanges............................. 2 76
Exercise of stock options.......................... ( 84) ( 354)
Issue of PAYSOP shares............................. ( 6) ( 26)
Investment Savings Plan - 401(k) issues............ ( 1) ( 6)
Non-employee Director Stock Plan issues............ ( 2) ( 7)
----- --------
Balance, December 31, 1997......................... 8,027 $175,385
===== ========
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. In 1995, the shareholders approved a
Non-Employee Director Stock Plan previously recommended by the Board of
Directors which provides an annual grant of 200 shares of common stock to
each then serving non-employee Director over a five year period ending
December 31, 1999. The maximum number of shares reserved for this plan is
15,000.
The change in capital in excess of par value resulted from the
exercise of stock options, including the related income tax benefit
($1,790,000, $1,493,000 and $5,366,000 in 1997, 1996 and 1995,
respectively), issuance of PAYSOP shares ($136,000 in 1997, $141,000 in
1996 and $154,000 in 1995), issuance of 401(k) Plan shares ($29,000,
$90,000 and $163,000 in 1997, 1996 and 1995, respectively) and issuance of
Non-Employee Director Stock Plan shares ($41,000 in 1997 and $39,000 each
in 1996 and 1995) noted above.
- 29 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997, 1996 and 1995
An analysis of the change in shareholders' equity from the
cumulative translation adjustment component for the years ended December
31, 1997, 1996 and 1995 is as follows (in thousands):
Cumulative Translation Adjustments
Balance, December 31, 1994......................... $27,661
Adjustment for 1995................................ ( 252)
-------
Balance, December 31, 1995......................... 27,409
Adjustment for 1996................................ ( 6,288)
-------
Balance, December 31, 1996......................... 21,121
Adjustment for 1997................................ ( 19,602)
-------
Balance, December 31, 1997......................... $ 1,519
=======
6. Other income (expense), net:
Other income (expense), net consists of the following (in
thousands):
1997 1996 1995
---- ---- ----
Investment income................ $ 1,456 $ 1,577 $ 2,756
Other assets amortization........ ( 3,479) ( 3,843) ( 3,527)
Other items, net................. ( 982) ( 1,008) ( 502)
------- ------- -------
($ 3,005) ($ 3,274) ($ 1,273)
======= ======= =======
- 30 -
7. Geographic information:
The Company operates predominately in two major geographic areas.
Transfers between geographic areas are made at the market value of
the merchandise transferred. Geographic areas are net of intercompany
sales. The eliminations in the identifiable assets are for intercompany
receivables and profit in inventory.
The following tables summarize the Company's operations by
geographic area for 1997, 1996 and 1995 (in thousands):
Geographic Areas
1997 1996 1995
---- ---- ----
Net sales
United States................ $383,982 $427,992 $406,482
Europe....................... 61,988 57,453 55,631
Other International.......... 30,213 30,003 29,083
-------- -------- --------
Total consolidated....... $476,183 $515,448 $491,196
======== ======== ========
Operating profit
United States................ $ 24,054 $ 62,030 $ 58,581
Europe....................... 3,298 3,289 6,448
Other International.......... 3,266 4,393 4,064
-------- -------- --------
Total consolidated....... $ 30,618 $ 69,712 $ 69,093
======== ======== ========
Identifiable assets
United States................ $271,947 $250,075 $239,334
Europe....................... 113,050 114,352 96,396
Other International and
Eliminations............... 10,406 12,953 12,874
-------- -------- --------
Identifiable assets....... 395,403 377,380 348,604
Discontinued operations
assets................... 4,999 101,329 100,715
-------- -------- --------
Total consolidated....... $400,402 $478,709 $449,319
======== ======== ========
Foreign net assets(liabilities)
Europe....................... ($ 1,651) ($ 3,595) ($ 2,280)
Other........................ 16,057 14,458 10,956
-------- -------- --------
Total foreign............ $ 14,406 $ 10,863 $ 8,676
======== ======== ========
- 31 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997, 1996 and 1995
8. Income taxes (in thousands):
The domestic and foreign components of the net deferred tax
benefit/(liability) on income consist of the following:
Deferred Tax Benefit(Liability)
-------------------------------
1997 1996
---- ----
United States
Federal--
Acquisition step-up amortization adjustment.. ($ 4,048) ($ 4,135)
Accelerated depreciation..................... ( 1,228) ( 1,290)
Deferred compensation........................ 7,036 5,368
Inventory reserve............................ 4,539 4,292
Bad debt reserve............................. 1,870 1,334
Postretirement benefits...................... 1,087 1,188
Returns and allowances reserve............... 929 1,169
Other items, net............................. 4,685 2,665
------- -------
14,870 10,591
------- -------
State--
Acquisition step-up amortization adjustment.. ( 1,005) ( 889)
Accelerated depreciation..................... ( 303) ( 277)
Deferred compensation........................ 1,513 1,154
Inventory reserve............................ 1,109 909
Bad debt reserve............................. 462 284
Postretirement benefits...................... 234 256
Returns and allowances reserve............... 222 251
Other items, net............................. 1,042 573
------- -------
3,274 2,261
------- -------
Foreign
Accelerated depreciation..................... ( 501) ( 608)
Other items, net............................. 842 648
------- -------
341 40
------- -------
Total $18,485 $12,892
======= =======
The United States net deferred tax benefits are expected to become
realizable in future years with future United States taxable income
exclusive of reversing temporary differences, consistent with the Company's
history.
The domestic and foreign components of income before income taxes
are as follows:
1997 1996 1995
---- ---- ----
Domestic.......................... $11,581 $46,516 $48,044
Foreign........................... 9,249 11,726 12,474
------- ------- -------
$20,830 $58,242 $60,518
======= ======= =======
- 32 -
The provision for continuing operations income taxes consists of the
following:
1997 1996 1995
---- ---- ----
Currently payable:
United States Federal................. $ 9,023 $22,163 $19,587
United States State................... 2,583 4,857 3,676
Foreign............................... 4,272 ( 662) 1,619
------- ------- -------
15,878 26,358 24,882
------- ------- -------
Deferred:
United States Federal................. ( 4,279) ( 919) 1,029
United States State................... ( 1,013) ( 198) 214
Foreign............................... ( 301) 385 503
------- ------- -------
( 5,593) ( 732) 1,746
------- ------- -------
$10,285 $25,626 $26,628
======= ======= =======
A reconciliation of the total effective tax rate to the statutory
Federal income tax rate is as follows:
1997 1996 1995
---- ---- ----
Statutory income tax rate...................... 35.0% 35.0% 35.0%
State taxes, net of Federal income tax effect.. 4.9 5.2 4.9
Impact of foreign tax rates and credits........ 2.8 .2 .9
Foreign subsidiaries in loss position
receiving little or no tax benefit........... - .2 .3
Impact of nondeductible expenses............... 6.7 3.4 3.1
Other items, net............................... - - ( .2)
---- ---- ----
Total effective income tax rate................ 49.4% 44.0% 44.0%
==== ==== ====
The Company made income tax payments of $6,477,000 in 1997,
$17,114,000 in 1996 and $32,055,000 in 1995.
9. Financial Instruments:
The Company operates globally with various manufacturing and
distribution facilities and product sourcing locations around the world.
The Company may reduce its exposure to fluctuations in foreign interest
rates and exchange rates by creating offsetting positions through the use
of derivative financial instruments. The Company currently does not use
derivative financial instruments for trading or speculative purposes.
The notional amount of forward exchange contracts and options is
the amount of foreign currency bought or sold at maturity. The notional
amount of interest rate swaps is the underlying principal amount used in
determining the interest payments exchanged over the life of the swap. The
notional amounts are not a direct measure of the Company's exposure through
its use of derivatives.
- 33 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997, 1996 and 1995
The Company periodically uses interest rate swaps to hedge
portions of interest payable on debt. In addition, the Company may
periodically employ interest rate caps to reduce exposure, if any, to
increases in variable interest rates. In October 1996, the Company entered
into a three year interest rate swap with a notional amount of $50 million
to effectively convert variable interest on debt to a fixed rate of 6.12%.
The Company may periodically hedge foreign currency royalties, net
investments in foreign subsidiaries, firm purchase commitments, contractual
foreign currency cash flows or obligations, including third-party and
intercompany foreign currency transactions. The Company regularly monitors
its foreign currency exposures and ensures that hedge contract amounts do
not exceed the amounts of the underlying exposures.
The Company enters into various short-term foreign exchange
agreements during the year. 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, 1997, 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. 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
December 31, 1997, net deferred amounts on outstanding agreements were not
material. The outstanding agreement amounts (notional value) at December
31, 1997, are $7.8 million U.S. dollars.
10. Commitments and contingencies:
The Company and its subsidiaries incurred rental expense under
operating leases of $6,480,000 in 1997, $6,527,000 in 1996 and $4,771,000
in 1995.
- 34 -
The minimum rental commitments under noncancelable operating leases
as of December 31, 1997 are as follows (in thousands):
Period Aggregate Amount
------ ----------------
1998.............................. $ 4,701
1999.............................. 3,352
2000.............................. 2,197
2001.............................. 1,573
2002.............................. 1,051
Later years.......................... 299
-------
Total minimum future rentals................. $13,173
=======
The Company and its subsidiaries have entered into various
licensing agreements requiring royalty payments ranging from 1.5% to 16% of
specified product sales. Royalty expenses which are charged to cost of
sales under these licensing agreements totaled $32,600,000 in 1997,
$34,000,000 in 1996 and $30,800,000 in 1995. Pursuant to the various
licensing agreements, the future minimum guaranteed royalty payments are
$16,100,000 in 1998, $16,500,000 in 1999 and $15,600,000 in 2000.
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 or results of operations of the Company.
- 35 -
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors of Stanhome Inc.:
We have audited the accompanying consolidated balance sheets of
Stanhome Inc. (a Massachusetts corporation) and subsidiaries as of December
31, 1997 and 1996, and the related consolidated statements of income,
retained earnings and cash flows for each of the three years in the period
ended December 31, 1997. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Stanhome Inc.
and subsidiaries as of December 31, 1997 and 1996, and the results of their
operations and their cash flows for each of the three years in the period
ended December 31, 1997 in conformity with generally accepted accounting
principles.
/s/ Arthur Andersen LLP
Hartford, Connecticut
February 23, 1998
- 36 -
FINANCIAL HIGHLIGHTS LAST TEN YEARS
(In thousands, except per share amounts)
STANHOME INC.
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Net sales........................................ $476,183 $515,448 $491,196
Cost of sales.................................... 259,097 272,180 255,282
-------- -------- --------
Gross profit..................................... 217,086 243,268 235,914
Selling, distribution, general
and administrative expenses..................... 186,468 173,556 166,821
-------- -------- --------
Operating profit................................. 30,618 69,712 69,093
Interest expense................................. ( 6,783) ( 8,196) ( 7,302)
Other income (expense), net...................... ( 3,005) ( 3,274) ( 1,273)
-------- -------- --------
Income before income taxes from
continuing operations........................... 20,830 58,242 60,518
Income taxes..................................... 10,285 25,626 26,628
-------- -------- --------
Income of continuing operations, net of taxes.... 10,545 32,616 33,890
Income of discontinued operations, net of taxes.. 2,158 5,821 8,010
Net loss on sale of discontinued operations...... ( 41,000) - -
-------- -------- --------
Net income (loss)................................ ($ 28,297) $ 38,437 $ 41,900
======== ======== ========
Earnings (loss) per common share:
Basic: Continuing operations................. $ .60 $ 1.81 $ 1.81
Discontinued operations............... .12 .32 .42
Sale of discontinued operations....... ( 2.33) - -
-------- -------- --------
Total................................. ($ 1.61) $ 2.13 $ 2.23
======== ======== ========
Diluted: Continuing operations................. $ .60 $ 1.80 $ 1.80
Discontinued operations............... .12 .32 .42
Sale of discontinued operations....... ( 2.32) - -
-------- -------- --------
Total................................. ($ 1.60) $ 2.12 $ 2.22
======== ======== ========
Average shares of common stock outstanding....... 17,577 18,080 18,773
Average shares of common stock diluted........... 17,661 18,092 18,851
Shares of common stock outstanding at year end... 17,201 17,904 18,330
Market value per common share at year end........ $ 25.69 $ 26.50 $ 29.13
Cash dividends paid or provided for.............. $ 19,702 $ 19,640 $ 19,838
Dividends per common share....................... $ 1.12 $ 1.09 $ 1.06
Capital expenditures............................. $ 4,944 $ 5,095 $ 9,829
Depreciation..................................... $ 5,701 $ 5,744 $ 5,288
Working capital.................................. $ 97,285 $ 40,316 $ 33,930
Total assets..................................... $400,402 $478,709 $449,319
Total long-term liabilities...................... $ 21,084 $ 14,384 $ 12,749
Shareholders' equity............................. $228,914 $278,828 $266,790
Book value per common share...................... $ 13.31 $ 15.57 $ 14.55
Return on average shareholders' equity........... (11%) 15% 16%
</TABLE>
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.
- 40 -
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
1994 1993 1992 1991 1990 1989 1988
---- ---- ---- ---- ---- ---- ----
$417,685 $367,531 $349,250 $329,527 $302,497 $263,639 $213,951
216,743 188,196 176,025 162,843 145,597 124,026 102,828
-------- -------- -------- -------- -------- -------- --------
200,942 179,335 173,225 166,684 156,900 139,613 111,123
144,124 133,237 127,705 124,066 114,565 99,201 76,970
-------- -------- -------- -------- -------- -------- --------
56,818 46,098 45,520 42,618 42,335 40,412 34,153
( 1,736) ( 1,145) ( 1,903) ( 3,343) ( 3,807) ( 4,186) ( 2,837)
736 ( 55) ( 797) ( 957) ( 193) 36 ( 463)
-------- -------- -------- -------- -------- -------- --------
55,818 44,898 42,820 38,318 38,335 36,262 30,853
24,560 21,102 18,413 16,477 16,484 15,593 12,650
-------- -------- -------- -------- -------- -------- --------
31,258 23,796 24,407 21,841 21,851 20,669 18,203
12,798 9,337 22,309 23,212 29,216 23,955 22,437
- - - - - - -
-------- -------- -------- -------- -------- -------- --------
$ 44,056 $ 33,133 $ 46,716 $ 45,053 $ 51,067 $ 44,624 $ 40,640
======== ======== ======== ======== ======== ======== ========
$ 1.62 $ 1.21 $ 1.24 $ 1.11 $ 1.12 $ 1.07 $ .92
.66 .48 1.13 1.18 1.50 1.23 1.14
- - - - - - -
-------- -------- -------- -------- -------- -------- --------
$ 2.28 $ 1.69 $ 2.37 $ 2.29 $ 2.62 $ 2.30 $ 2.06
======== ======== ======== ======== ======== ======== ========
$ 1.60 $ 1.21 $ 1.21 $ 1.08 $ 1.09 $ 1.03 $ .88
.66 .47 1.11 1.14 1.46 1.20 1.09
- - - - - - -
-------- -------- -------- -------- -------- -------- --------
$ 2.26 $ 1.68 $ 2.32 $ 2.22 $ 2.55 $ 2.23 $ 1.97
======== ======== ======== ======== ======== ======== ========
19,323 19,634 19,753 19,681 19,459 19,421 19,761
19,525 19,749 20,152 20,295 20,040 20,024 20,664
19,151 19,392 19,774 19,791 19,550 19,365 19,953
$ 31.63 $ 33.88 $ 34.75 $ 37.00 $ 33.75 $ 25.88 $ 18.38
$ 19,863 $ 19,620 $ 18,950 $ 18,134 $ 16,172 $ 13,727 $ 11,994
$ 1.03 $ 1.00 $ .96 $ .92 $ .83 $ .71 $ .605
$ 12,238 $ 2,619 $ 2,810 $ 3,575 $ 4,859 $ 1,813 $ 1,893
$ 3,479 $ 3,450 $ 3,726 $ 3,140 $ 2,968 $ 2,895 $ 2,832
$ 53,115 $107,306 $105,820 $ 85,769 $ 69,681 $ 43,328 $ 59,235
$409,002 $338,557 $318,759 $309,428 $287,293 $242,442 $199,770
$ 9,302 $ 7,442 $ 6,714 $ 5,887 $ 4,981 $ 4,526 -
$269,396 $254,366 $256,956 $241,074 $211,457 $170,399 $158,169
$ 14.07 $ 13.12 $ 12.99 $ 12.18 $ 10.82 $ 8.80 $ 7.93
17% 13% 19% 20% 27% 29% 29%
</TABLE>
- 41 -
EXHIBIT 21
SUBSIDIARIES OF STANHOME INC.
<TABLE>
<CAPTION>
<S> <C> <C>
Jurisdiction Other Names Under
Name of Organization Which Business is Conducted
Collector Appreciation, Inc. Delaware
Cosmhogar, S.A. Spain
Enesco Corporation Ohio The Back Door Store
Via Vermont
Enesco European Giftware Group
Limited England
Enesco France, S.A. France
Enesco Import GmbH Germany
Enesco International Ltd. Delaware
Enesco International (H.K)
Limited Hong Kong
Enesco Worldwide Holdings, Inc. Delaware
N.C. Cameron & Sons Limited Ontario, Canada
Stanhome Capital, Inc. Delaware
Stanhome European Development
Center, S.A. Spain
Stanhome plc England
Stanhome Worldwide Direct
Selling Group, Inc. 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 1996 and 1997, except
for Enesco France, S.A.(previously Permis de Construire S.A.), which was
acquired in March, 1996.
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,
No. 33-50723, No. 33-58633 and No. 333-11501.
/s/ Arthur Andersen LLP
Hartford, Connecticut
March 27, 1998
EXHIBIT 24
POWER OF ATTORNEY
Each of the undersigned Directors of Stanhome Inc. whose signature
appears below constitutes and appoints H. L. Tower, Allan G. Keirstead, and
Bruce H. Wyatt, each of them, his or her true and lawful attorneys-in-fact
and agents, with full power of substitution and resubstitution, for him or
her and in his or 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,
1997 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 4, 1998 By: /s/ H. L. Tower
--------------------------------------------
H. L. Tower
Chairman of the Board, President and Chief
Executive Officer and Director
March 4, 1998 By: /s/ Homer G. Perkins
--------------------------------------------
Homer G. Perkins
Director
March 27, 1998 By: /s/Allan G. Keirstead
--------------------------------------------
Allan G. Keirstead
Vice Chairman, Executive Vice President and
Chief Administrative & Financial Officer and
Director
March 4, 1998 By: /s/ John F. Cauley
--------------------------------------------
John F. Cauley
Director
March 4, 1998 By: /s/ Thomas R. Horton
--------------------------------------------
Thomas R. Horton
Director
March 4, 1998 By: /s/Anne-Lee Verville
--------------------------------------------
Anne-Lee Verville
Director
March 4, 1998 By: /s/ Judith R. Haberkorn
--------------------------------------------
Judith R. Haberkorn
Director
March 4, 1998 By: /s/ Charles W. Elliott
--------------------------------------------
Charles W. Elliott
Director
March 4, 1998 By: /s/ Eugene Freedman
--------------------------------------------
Eugene Freedman
Vice Chairman, Executive Vice President
and Director
March 4, 1998 By: /s/ Jeffrey A. Hutsell
--------------------------------------------
Jeffrey A. Hutsell
Vice President and Director
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000
<S> <C> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1996 DEC-31-1995
<PERIOD-END> DEC-31-1997 DEC-31-1996 DEC-31-1995
<CASH> 35,724 10,308 0
<SECURITIES> 0 0 0
<RECEIVABLES> 112,877 137,878 0
<ALLOWANCES> 11,146 9,891 0
<INVENTORY> 107,752 84,018 0
<CURRENT-ASSETS> 247,689 225,813 0
<PP&E> 82,414 80,813 0
<DEPRECIATION> 46,836 43,626 0
<TOTAL-ASSETS> 400,402 478,709 0
<CURRENT-LIABILITIES> 150,404 185,497 0
<BONDS> 0 0 0
0 0 0
0 0 0
<COMMON> 3,154 3,154 0
<OTHER-SE> 225,760 275,674 0
<TOTAL-LIABILITY-AND-EQUITY> 400,402 478,709 0
<SALES> 476,183 515,448 491,196
<TOTAL-REVENUES> 476,183 515,448 491,196
<CGS> 259,097 272,180 255,282
<TOTAL-COSTS> 259,097 272,180 255,282
<OTHER-EXPENSES> 185,213 171,530 166,238
<LOSS-PROVISION> 1,255 2,026 583
<INTEREST-EXPENSE> 6,783 8,196 7,302
<INCOME-PRETAX> 20,830 58,242 60,518
<INCOME-TAX> 10,285 25,626 26,628
<INCOME-CONTINUING> 10,545 32,616 33,890
<DISCONTINUED> (38,842) 5,821 8,010
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> (28,297) 38,437 41,900
<EPS-PRIMARY> (1.61) 2.13 2.23<FN>
<EPS-DILUTED> (1.60) 2.12 2.22
<FN>
NOTE* AS PER FASB STATEMENT NO. 128, EARNINGS PER
SHARE, "PRIMARY" IS NOW "BASIC".
</TABLE>
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:
o the pattern of the Company's sales, including variations in sales
volume within periods;
o the ability of the Company to develop, renew, and maintain competitive
product licensing arrangements with third-party artists and other
licensors;
o vigorous competition within the Company's product markets, including
pricing, promotions, and other advertising and marketing activities
intended to preserve or gain market share;
o development of new products and the inherent risks associated with new
product introductions, including uncertainty of trade and customer
acceptance and competitive reaction;
o development and protection of brand identity and consumer awareness of
intellectual property of the Company, including registered trademarks,
patents, copyrights, and other proprietary material;
o the costs and effects of unanticipated legal and administrative
proceedings;
o impacts of domestic federal and state tax changes, including worker
classification issues;
o impacts of unusual items resulting from ongoing evaluations of
business strategies, asset valuations, and organizational structure;
o the ability of the Company to develop, renew, and maintain
relationships with reliable, quality third-party manufacturers and
other sources for products;
o 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
o the possibility of one or more international markets in which the
Company competes and achieves a significant portion 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.
