-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, COxzZ3YZNgzeWEVl4JpnMWJXdxsKbesoJJJ5+SjnvlICVxWmTwWaBhnC/S16pyfK K254Qndn0dC1CbG8r2LiQQ== 0000950135-96-003618.txt : 19960816 0000950135-96-003618.hdr.sgml : 19960816 ACCESSION NUMBER: 0000950135-96-003618 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960814 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: EKCO GROUP INC /DE/ CENTRAL INDEX KEY: 0000018827 STANDARD INDUSTRIAL CLASSIFICATION: METAL FORGING & STAMPINGS [3460] IRS NUMBER: 112167167 STATE OF INCORPORATION: DE FISCAL YEAR END: 0102 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-07484 FILM NUMBER: 96612588 BUSINESS ADDRESS: STREET 1: 98 SPIT BROOK RD CITY: NASHUA STATE: NH ZIP: 03062 BUSINESS PHONE: 6038881212 MAIL ADDRESS: STREET 1: 98 SPIT BROOK RD CITY: NASHUA STATE: NH ZIP: 03062 FORMER COMPANY: FORMER CONFORMED NAME: CENTRONICS CORP DATE OF NAME CHANGE: 19880504 FORMER COMPANY: FORMER CONFORMED NAME: CENTRONICS DATA COMPUTER CORP DATE OF NAME CHANGE: 19870304 10-Q 1 EKCO GROUP INC. FORM 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------------------- FORM 10-Q Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For quarterly period ended JUNE 30, 1996 ------------- Commission File Number 1-7484 ------ EKCO GROUP, INC. ------------------------------------------------------ (Exact name of registrant as specified in its charter) DELAWARE 11-2167167 - ------------------------------- ------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 98 SPIT BROOK ROAD, NASHUA, NEW HAMPSHIRE 03062 ------------------------------------------------- (Address of principal executive offices) (Zip Code) (603) 888-1212 ---------------------------------------------------- (Registrant's telephone number, including area code) 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 --- --- As of August 5, 1996, there were issued and outstanding 18,501,205 shares of common stock of the registrant. 2 EKCO GROUP, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
JUNE 30, DECEMBER 31, 1996 1995 -------- ------------ (UNAUDITED) ASSETS Current assets Cash and cash equivalents $ 220 $ 142 Accounts receivable, net 33,802 43,823 Inventories 61,284 47,565 Other current assets 11,208 6,719 Deferred income tax 4,361 4,361 -------- -------- Total current assets 110,875 102,610 Property and equipment, net 56,882 56,380 Property held for sale or lease, net 2,793 2,830 Other assets 6,980 5,955 Excess of cost over fair value of net assets acquired, net 134,382 136,600 -------- -------- Total assets $311,912 $304,375 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Current portion of long-term obligations $ 40 $ 18,079 Accounts payable 15,704 15,607 Accrued expenses 23,084 23,711 Income taxes -- 538 -------- -------- Total current liabilities 38,828 57,935 -------- -------- Long-term obligations, less current portion 127,245 96,700 -------- -------- Other long-term liability 10,062 9,859 -------- -------- Series B ESOP Convertible Preferred Stock, net; outstanding 1,466 shares and 1,488 shares, respectively, redeemable at $3.61 per share 3,788 3,458 -------- -------- Commitments and contingencies -- -- Minority interest 498 498 -------- -------- Stockholders' equity Common stock, $.01 par value; outstanding 18,487 shares and 18,414 shares, respectively 185 184 Capital in excess of par value 107,250 106,916 Cumulative translation adjustment 917 929 Retained earnings 28,697 33,614 Unearned compensation (3,810) (3,970) Pension liability adjustment (1,748) (1,748) -------- -------- 131,491 135,925 -------- -------- Total liabilities and stockholders' equity $311,912 $304,375 ======== ========
The accompanying notes are an integral part of the financial statements. 2 3 EKCO GROUP, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1996 AND JULY 2, 1995 (AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA) (UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED ------------------- ---------------------- 1996 1995 1996 1995 ------- ------- -------- -------- Net revenues $55,880 $61,691 $112,841 $120,423 ------- ------- -------- -------- Costs and expenses Cost of sales 39,344 43,229 80,433 83,954 Selling, general and administrative 13,890 12,398 27,249 25,683 Amortization of excess cost over fair value 1,109 1,108 2,218 2,217 ------- ------- -------- -------- 54,343 56,735 109,900 111,854 ------- ------- -------- -------- Income before interest and income taxes 1,537 4,956 2,941 8,569 ------- ------- -------- -------- Net interest expense Interest expense 3,161 3,410 6,187 6,843 Investment income (9) -- (99) (75) ------- ------- -------- -------- 3,152 3,410 6,088 6,768 ------- ------- -------- -------- Income (loss) before income taxes and extraordinary charge (1,615) 1,546 (3,147) 1,801 Income taxes (benefit) (1,080) 735 (1,621) 856 ------- ------- -------- -------- Income (loss) before extraordinary charge (535) 811 (1,526) 945 Extraordinary charge for early retirement of debt, net of tax benefit of $2,752 -- -- (2,595) -- ------- ------- -------- -------- Net income $ (535) $ 811 $ (4,121) $ 945 ======= ======= ======== ======== Earnings (loss) per common share: Income (loss) before extraordinary charge $ (0.03) $ 0.04 $ (0.08) $ 0.05 Extraordinary charge -- -- (0.14) -- ------- ------- -------- -------- Earnings (loss) per common share $ (0.03) $ 0.04 $ (0.22) $ 0.05 ======= ======= ======== ======== Weighted average number of shares used in computation of per share data 18,460 20,308 18,435 20,266 ======= ======= ======== ========
The accompanying notes are an integral part of the financial statements. 3 4 EKCO GROUP, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND JULY 2, 1995 (AMOUNTS IN THOUSANDS) (UNAUDITED)
1996 1995 --------- -------- Cash flows from operating activities Net income (loss) $ (4,121) $ 945 Adjustments to reconcile net income to net cash provided by (used for) operations Depreciation and amortization 4,966 4,901 Amortization of excess of cost over fair value 2,218 2,217 Amortization of deferred finance costs 233 265 Other amortization 3,086 2,744 Extraordinary charge 2,595 -- Other 124 (1) Change in certain assets and liabilities, net of effects from acquisition of business, affecting cash provided by (used in) operations: Accounts receivable 9,891 7,603 Inventories (13,722) (14,789) Prepaid marketing costs (1,637) (2,330) Other assets (2,163) (154) Accounts payable and accrued expenses (327) (1,000) Income taxes payable (537) (1,621) --------- -------- Net cash provided by (used in) operations 606 (1,220) --------- -------- Cash flows from investing activities Proceeds from sale of property, equipment and product line 32 236 Capital expenditures (5,501) (6,926) --------- -------- Net cash used in investing activities (5,469) (6,690) --------- -------- Cash flows from financing activities Proceeds from issuance of notes payable and long-term obligations 123,528 31,183 Proceeds from sale of investment held as collateral -- 3,600 Payment of dividends (796) (800) Payment of note and long-term obligations (118,005) (25,645) Other 213 (336) --------- -------- Net cash provided by financing activities 4,940 8,002 --------- -------- Effect of exchange rate changes on cash 1 1 --------- -------- Net increase in cash and cash equivalents 78 93 Cash and cash equivalents at beginning of year 142 129 --------- -------- Cash and cash equivalents at end of period $ 220 $ 222 ========= ======== Cash paid during the period for Interest $ 3,553 $ 5,940 Income taxes 47 2,379
The accompanying notes are an integral part of the financial statements. 4 5 EKCO GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED) (1) BASIS OF PRESENTATION AND OTHER MATTERS The consolidated condensed financial statements included herein have been prepared by Ekco Group, Inc. (the "Company"), without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. It is believed, however, that the disclosures are adequate to make the information presented not misleading. It is suggested that these condensed financial statements be read in conjunction with the financial statements and the notes thereto included in the Company's latest annual report on Form 10-K. The consolidated condensed financial statements include the accounts of the Company and its subsidiaries. All significant intercompany accounts and transactions have been eliminated. The condensed financial statements, in the opinion of management, reflect all adjustments necessary to fairly state the Company's financial position and the results of its operations. Such adjustments are of a normal recurring nature. A large part of the Company's business is seasonal. Historically, revenues in the last half of the calendar year have been greater than revenues in the first half of the year. Accordingly, the results for the entire year may not necessarily be the product of annualizing results for any interim period. (2) ACCOUNTS RECEIVABLE, NET Accounts receivable consisted of the following:
JUNE 30, 1996 DECEMBER 31, 1995 ------------- ----------------- (AMOUNTS IN THOUSANDS) Accounts receivable $34,897 $44,871 Allowance for doubtful accounts (1,095) (1,048) ------- ------- $33,802 $43,823 ======= =======
(3) INVENTORIES The components of inventory were as follows:
JUNE 30, 1996 DECEMBER 31, 1995 ------------- ----------------- (AMOUNTS IN THOUSANDS) Raw materials $11,022 $11,489 Work in process 6,886 3,097 Finished goods 43,376 32,979 ------- ------- $61,284 $47,565 ======= =======
5 6 EKCO GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED) (4) PROPERTY AND EQUIPMENT, NET Property and equipment consisted of the following:
JUNE 30, 1996 DECEMBER 31, 1995 ------------- ----------------- (AMOUNTS IN THOUSANDS) Property and equipment at cost Land, buildings and improvements $ 23,915 $22,856 Equipment, factory and other 76,202 71,922 -------- ------- 100,117 94,778 Less accumulated depreciation 43,235 38,398 -------- ------- $ 56,882 $56,380 ======== =======
(5) EXCESS OF COST OVER FAIR VALUE OF NET ASSETS ACQUIRED, NET Excess of cost over fair value of net assets acquired is net of accumulated amortization of $29,945 and $27,727 as of June 30, 1996 and December 31, 1995, respectively. (6) INCOME TAXES The Company's effective tax rate as reported in its latest annual report on Form 10-K was 50% for the year ended December 31, 1995 ("Fiscal 1995"). The difference between the Company's effective tax rate of 52% for the six months ended June 30, 1996 and the Fiscal 1995 rate results primarily from amortization of excess of cost over fair value of net assets acquired, which is not deductible for income taxes (being a higher percentage of earnings (loss) before income taxes). (7) SERIES B ESOP CONVERTIBLE PREFERRED STOCK Series B ESOP Convertible Preferred Stock, net, consisted of the following:
JUNE 30, 1996 DECEMBER 31, 1995 ------------- ----------------- (AMOUNTS IN THOUSANDS) Series B ESOP Convertible Preferred Stock, par value $.01, redeemable at $3.61 per share $ 5,293 $ 5,372 Unearned compensation (1,505) (1,914) ------- ------- $ 3,788 $ 3,458 ======= =======
6 7 EKCO GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED) (8) COMMON STOCK, $.01 PAR VALUE Share information regarding common stock consisted of the following:
JUNE 30, 1996 DECEMBER 31, 1995 ------------- ----------------- Authorized shares 60,000,000 60,000,000 ========== ========== Shares issued 27,906,868 27,854,441 Shares held in treasury 9,419,777 9,440,577 ---------- ---------- 18,487,091 18,413,864 ========== ==========
(9) NET INCOME PER COMMON SHARE Primary earnings per common share are based upon the weighted average of common stock and dilutive common stock equivalent shares outstanding during each period. Fully diluted earnings per share have been omitted since they are either the same as primary earnings per share or anti-dilutive. The weighted average number of shares used in computation of earnings per share consisted of the following for the periods presented:
THREE MONTHS ENDED SIX MONTHS ENDED --------------------------- ------------------------- JUNE 30, JULY 2, JUNE 30, JULY 2, -------- ------- -------- ------- 1996 1995 1996 1995 -------- ------- -------- ------- (AMOUNTS IN THOUSANDS) Weighted average shares of common stock outstanding during the period 18,460 18,343 18,435 18,273 Series B ESOP Convertible Preferred Stock anti- 1,533 anti- 1,551 dilutive dilutive Weighted average common equivalent shares due to stock options anti- anti- dilutive 432 dilutive 442 ------ ------ ------ ------ 18,460 20,308 18,435 20,266 ====== ====== ====== ======
(10) CONTINGENCIES LEGAL PROCEEDINGS The Company is a party to several pending legal proceedings and claims, including the matters described below. Although the outcome of such proceedings and claims cannot be determined with certainty, the Company's management is of the opinion that the expected final outcome should not have a material adverse effect on the Company's financial position, results of operations or liquidity. In April 1996, the U.S. District Court for the Northern District of Ohio ruled that certain insulated bakeware products manufactured by the Company infringed a patent held by a third-party plaintiff. The Company ceased manufacturing such products in December 1995. In July 1996, monetary damages were assessed by the Court. The Company is reviewing the damage assessment and will vigorously pursue an appeal as it deems appropriate. The Company and its counsel believe that the Company has meritorious grounds for appeal. The Company's management believes that the final outcome will not have a material adverse effect upon the Company's financial position, results of operations or liquidity. 7 8 EKCO GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED) ENVIRONMENTAL MATTERS From time to time, the Company has had claims asserted against it by regulatory agencies or private parties for environmental matters relating to the generation or handling of hazardous substances by the Company or its predecessors and has incurred obligations for investigations or remedial actions with respect to certain of such matters. While the Company does not believe that any such claims asserted or obligations incurred to date will result in a material adverse effect upon the Company's financial position, results of operations or liquidity, the Company is aware that at its facilities in Massillon and Hamilton, Ohio, Easthampton, Massachusetts, Lititz, Pennsylvania, Chicago, Illinois and at the previously owned facility in Hudson, New Hampshire, hazardous substances and oil have been detected and that additional investigation will be, and remedial action will or may be, required at such facilities. Operations at these and other facilities currently or previously owned or leased by the Company utilize, or in the past have utilized, hazardous substances. There can be no assurance that activities at these or any other facilities owned or operated by the Company or future facilities may not result in additional environmental claims being asserted against the Company or additional investigations or remedial actions being required. In connection with the acquisition of Kellogg Brush Manufacturing Co. and subsidiaries ("Kellogg") by the Company in 1993, the Company engaged environmental engineering consultants ("Consultants") to review potential environmental liabilities at all of Kellogg's properties. Such investigation and testing resulted in the identification of likely environmental remedial actions, operation, maintenance and ground water monitoring and the estimated costs thereof. Based upon such engineering studies, management originally estimated the total remediation and ongoing ground water monitoring costs to be approximately $6.0 million, including the effects of inflation and, accordingly, at that time, recorded a liability of approximately $3.8 million, representing the undiscounted costs of remediation and the net present value of future costs discounted at 6%. Based upon the most recent cost estimates provided by the Consultants, the Company believes the total remediation costs will be approximately $2.0 million and the expense for the ongoing operation, maintenance and ground water monitoring will be $50,000 for Fiscal 1996 and $25,000 for each of the 30 years thereafter. As of June 30, 1996, the Company has recorded a liability of approximately $3.4 million. The Company expects to pay approximately $325,000 of the remediation costs in the current year ("Fiscal 1996") with the balance being paid out in fiscal years 1997 and 1998. During the First Half of Fiscal 1996, the Company paid approximately $120,000 of such costs. The estimates may subsequently change should additional sites be identified or further remediation measures be required or undertaken or the interpretation of current laws or regulations be modified. The Company has not anticipated any insurance proceeds or third-party payments in arriving at the above estimates. (11) EXTRAORDINARY CHARGE On March 25, 1996, the Company sold $125.0 million of its 9.25% Senior Notes due 2006 at a price of 99.291% of face value in a private offering to institutional investors. The Company used the net proceeds of the Senior Note offering to (i) repurchase its outstanding 12.70% Notes due 1998 and 7.0% Convertible Subordinated Note due 2002 and (ii) to repay substantially all amounts outstanding under its revolving credit facility. Concurrently with closing the sale of the 9.25% Senior Notes, the Company entered into an amendment to its revolving credit facility, 8 9 EKCO GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED) which amendment consolidated the outstanding debt and borrowing capacity of the Company and its wholly-owned subsidiaries, Ekco Housewares, Inc. and Frem Corporation, and revised certain financial covenants (as so amended, the "Revolving Credit Facility"). Borrowings under the Revolving Credit Facility bear interest at the bank's prime rate, or at LIBOR plus 1.25% or 1.5%, depending on the Company's borrowing strategy and the ratio of total debt to cash flow. The Revolving Credit Facility provides for a commitment fee of three-eighths of one percent on the unused portion of the commitment amount and a $60,000 annual agency fee. Borrowings under the Revolving Credit Facility mature in December 1998. The Senior Notes, as well as the Revolving Credit Facility, contain certain financial covenants that may restrict the sale of assets, the incurrence of additional indebtedness and certain investments and acquisitions by the Company. The early extinguishment of the 12.70% Notes and 7% Convertible Subordinated Note resulted in an extraordinary charge of $2.6 million consisting of the following:
(Amounts in thousands) Premium on 12.70% Notes, due 1998 $ 6,511 Discount on prepayment of 7% Convertible Subordinated Note, due 2002 (3,218) Write-off of related unamortized financing costs 2,054 ------- Extraordinary charge before income tax benefit 5,347 Income tax benefit 2,752 ------- Net extraordinary charge $ 2,595 =======
9 10 EKCO GROUP, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION RESULTS OF OPERATIONS The following discussion and analysis of the consolidated results of operations for the thirteen week periods ended June 30, 1996 (the "Second Quarter of 1996") and July 2, 1995 (the "Second Quarter of 1995") and for the twenty six week periods ended June 30, 1996 (the "First Half of 1996") and July 2, 1995 (the "First Half of 1995") and the financial condition at June 30, 1996 should be read in conjunction with the Company's Consolidated Condensed Financial Statements and Notes thereto. Because of the seasonality of the Company's revenues, which have historically been concentrated in the second half of its fiscal year, the results of operations for any interim period and the balance sheet as of the end of any interim period are not indicative of either a full year's operations or the financial condition of the Company at the end of any fiscal year. NET REVENUES Net revenues for the Second Quarter and First Half of 1996 decreased approximately $5.8 million (9.4%) and $7.6 million (6.3%), respectively, from the comparable prior year periods. The decline in net revenues was primarily due to lower net revenues generated from sales of the Company's plastic and kitchen tool and gadget products, partially offset by $1.6 million (Second Quarter of 1996) and $3.7 million (Second Half of 1996), respectively, in net revenues from the Company's new line of VIA products. The revenue decline reflects the weakness in general merchandise sales that began toward the end of 1995 and which carried over into 1996. Last year's below average consumer spending created higher than anticipated levels of inventory for retailers who lowered their volume of re-orders in the First Half of 1996. In addition, sales of the Company's plastic products were adversely affected by significant price competition and delays in seasonal shipping. GROSS PROFIT The Company's gross profit margin for the second quarter periods remained constant at 30%, while for the six month periods there was a decline from 30% in the prior year to 29% for the First Half of 1996. This decline in gross margin was primarily due to continuation of increased promotional discounting, which was initiated in the fourth quarter of Fiscal 1995 to help stimulate consumer demand, and unabsorbed manufacturing costs due to a shortfall in planned volumes. SELLING, GENERAL AND ADMINISTRATIVE Selling, general and administrative expenses for the First Half of 1996 increased approximately $1.6 million from the comparable prior year period. Of this increase, $1.5 million occurred in the Second Quarter of 1996. The primary factors contributing to the increase were new product development and introduction costs, principally for the Company's new insulated bakeware products and Roach Magnet[TradeMark] and the growth of VIA and the Company's subsidiary in the United Kingdom. Additionally, the prior year period benefitted from the collection of receivables which had previously been written off. NET INTEREST EXPENSE Net interest expense decreased $258,000 and $680,000 from the Second Quarter of Fiscal 1995 level of $3.4 million and First Half of 1995 level of $6.8 million, respectively. The decline in net interest expense was primarily due to lower average borrowings. 10 11 EKCO GROUP, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION (CONTINUED) EXTRAORDINARY CHARGE The extraordinary charge was due to the early extinguishment of the 12.7% Notes and 7% Convertible Subordinated Note. See Note 11 of Notes to Consolidated Condensed Financial Statements. LIQUIDITY AND CAPITAL RESOURCES During the First Half of Fiscal 1996, the Company generated $606,000 in cash from operations. This amount, together with net proceeds of $2.5 million from the refinancing of debt, seasonal borrowings of $3.0 million and net issuances of common stock of $200,000, were used for capital expenditures of approximately $5.5 million and dividend payments of approximately $800,000. On March 25, 1996, the Company sold $125.0 million of its 9.25% Senior Notes due 2006 ("Senior Notes") at a price of 99.291% of face value in a private offering to institutional investors. The Company used net proceeds of the Senior Note offering to (i) repurchase its outstanding 12.7% Notes due 1998 and 7.0% Convertible Subordinated Note due 2002 and (ii) to repay substantially all amounts outstanding under its revolving credit facility. Concurrently with closing the sale of the 9.25% Senior Notes, the Company entered into an amendment to its revolving credit facility, which amendment consolidated the outstanding debt and borrowing capacity of the Company and its wholly-owned subsidiaries, Ekco Housewares, Inc. and Frem Corporation, and revised certain financial covenants (as so amended, the "Revolving Credit Facility"). Borrowings under the Revolving Credit Facility bear interest at the bank's prime rate, or at LIBOR plus 1.25% or 1.5%, depending on the Company's borrowing strategy and the ratio of total debt to cash flow. The Revolving Credit Facility provides for a commitment fee of three-eighths of one percent on the unused portion of the commitment amount and a $60,000 annual agency fee. Borrowings under the Revolving Credit Facility mature in December 1998. The Senior Notes, as well as the Revolving Credit Facility, contain certain financial covenants that will restrict the sale of assets, the incurrence of additional indebtedness and certain investments and acquisitions by the Company. The Company believes that the net proceeds from the Senior Note offering, together with borrowing capacity under the Revolving Credit Facility will provide sufficient borrowing capacity to finance its ongoing operations for the foreseeable future. The Company may, however, require additional funds to finance any future acquisitions. The Company's properties held for sale include a former manufacturing facility located in Chicago, Illinois and a warehouse located in Lititz, Pennsylvania. The Company is actively pursuing the sale or lease of these properties, and has leased the Lititz warehouse facility. The Company plans to sell these properties within the next two years. The aggregate carrying values of such properties, $2.8 million at June 30, 1996, are periodically reviewed and are stated at the lower of cost or market. The Company has provided approximately $3.4 million for environmental remediation and ongoing operation, maintenance and ground water monitoring costs associated with facilities owned or occupied by the Company's cleaning products business. The Company believes the provision is adequate, but will continue to monitor and adjust the provision, as appropriate, should additional sites be identified or further remediation measures be required or undertaken or interpretation of current laws or regulations be modified. 11 12 EKCO GROUP, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION (CONTINUED) BUSINESS OUTLOOK This Quarterly Report, including "Management's Discussion and Analysis of Results of Operations and Financial Condition," contains forward-looking statements within the meaning of the "safe-harbor" provisions of the Private Securities Litigation Reform Act of 1995. Such statements are based on management's current expectations and are subject to a number of factors and uncertainties which could cause actual results to differ materially from those described in the forward-looking statements. Such factors and uncertainties include, but are not limited to: the timely introduction of new products, the impact of competitive products and pricing, certain assumptions related to consumer purchasing patterns, the impact of the level of the Company's indebtedness; restrictive covenants contained in the Company's various debt documents; the seasonal nature of the Company's business; and the impact of federal, state and local environmental requirements (including the impact of current or future environmental claims against the Company). As a result, the Company's operating results may fluctuate, especially when measured on a quarterly basis. 12 13 EKCO GROUP, INC. AND SUBSIDIARIES PART II OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS. The Company is a party to several pending legal proceedings and claims, including the matters described below. Although the outcome of such proceedings and claims cannot be determined with certainty, the Company's management is of the opinion that the expected final outcome should not have a material adverse effect on the Company's financial position, results of operations or liquidity. In April 1996, the U.S. District Court for the Northern District of Ohio ruled that certain insulated bakeware products manufactured by the Company infringed a patent held by a third-party plaintiff. The Company ceased manufacturing such products in December 1995. In July 1996, monetary damages were assessed by the Court. The Company is reviewing the damage assessment and will vigorously pursue an appeal as it deems appropriate. The Company and its counsel believe that the Company has meritorious grounds for appeal. The Company's management believes that the final outcome will not have a material adverse effect upon the Company's financial position, results of operations or liquidity. ENVIRONMENTAL REGULATION AND CLAIMS From time to time, the Company has had claims asserted against it by regulatory agencies or private parties for environmental matters relating to the generation or handling of hazardous substances by the Company or its predecessors and has incurred obligations for investigations or remedial actions with respect to certain of such matters. While the Company does not believe that any such claims asserted or obligations incurred to date will result in a material adverse effect upon the Company's financial position, results of operations or liquidity, the Company is aware that at its facilities in Massillon (more fully described below) and Hamilton, Ohio, Easthampton, Massachusetts (more fully described in Note 10 of Notes to Consolidated Condensed Financial Statements hereinabove), Lititz, Pennsylvania, Chicago, Illinois and at its previously owned facility in Hudson, New Hampshire, hazardous substances and oil have been detected and that additional investigation will be, and remedial action will or may be, required at such facilities. Operations at these and other facilities currently or previously owned or leased by the Company utilize, or in the past have utilized, hazardous substances. There can be no assurance that activities at these or any other facilities owned or operated by the Company or future facilities may not result in additional environmental claims being asserted against the Company or additional investigations or remedial actions being required. Prior to the Company's acquisition of Ekco Housewares, Inc. ("Housewares") in 1987, Housewares' Massillon, Ohio steel bakeware manufacturing facility was the subject of administrative proceedings before the United States Environmental Protection Agency by issuance of an administrative complaint alleging violations of the Resource Conservation and Recovery Act resulting from operation of a wastewater lagoon at the facility. American Home Products Corporation ("AHP"), a former owner of Housewares, pursuant to an indemnity agreement (the "Indemnity Agreement") with Housewares relating to acts occurring prior to September 7, 1984, assumed the costs of remediation measures in addition to the defense of the administrative proceedings with federal and state environmental protection agencies, as well as preparation of closure plans and other plans called for as a result of these proceedings. While AHP has acknowledged its full responsibility under the Indemnity Agreement with respect to the wastewater lagoon, it has asserted that Housewares should contribute to the cost of a remediation study and certain remediation measures to the extent that Housewares exacerbated contamination at the facility since September 7, 1984. Housewares has denied that it has exacerbated contamination at the facility since such date. AHP and Housewares have agreed to allocate such costs in proportion to their respective responsibilities based on the results of an engineering study but in no event will Housewares' share with respect 13 14 EKCO GROUP, INC. AND SUBSIDIARIES PART II OTHER INFORMATION (CONTINUED) ENVIRONMENTAL REGULATION AND CLAIMS (CONTINUED) to the wastewater lagoon exceed the lesser of 25% of the total cost or $750,000. The Company is unable to determine to what extent, if any, it will be responsible to contribute to such costs but the Company does not believe that any such contribution that it may be required to make will have a material adverse effect on its financial position, results of operations or liquidity. In June 1992, the United States filed an action in the U.S. District Court for the Northern District of Ohio against Housewares seeking penalties and injunctive relief and alleging violations as a result of an alleged failure to provide certain closure and post-closure financial assurances with respect to the Massillon, Ohio site. Pursuant to the Indemnity Agreement and a confirmatory letter from AHP to Housewares on December 19, 1988 (the "Indemnity Documents"), AHP conducted and controlled all matters relating to such financial assurances and the defense of the action filed in June 1992. In January 1994, the court entered judgment against Housewares in the amount of $4.6 million in the lawsuit. AHP filed a notice of appeal on behalf of Housewares. In August 1995, the Court of Appeals affirmed in part and reversed in part the penalty imposed on Housewares and remanded the redetermination of civil penalties for certain periods of time. The penalty affirmed by the Court of Appeals amounted to $2,858,000, and, pursuant to the Indemnity Documents, AHP paid that amount, plus applicable interest, on Housewares' behalf. With respect to the penalty reversed and remanded by the Court of Appeals, the United States has agreed in principle to a stipulated judgment that would resolve the remaining claims in the case for $400,000. While such stipulated judgment has not yet been finalized and entered by the Court, AHP, by letter dated May 6, 1996, notified Housewares that if such judgment is entered AHP intends to pay that amount on Housewares' behalf and will not seek reimbursement from the Company of the amounts AHP has paid or will pay on Housewares' behalf in this litigation. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. At the Annual Meeting of Stockholders held on May 21, 1996 in Boston, Massachusetts, each of the persons nominated for election as a director of the Company were elected by the votes shown below. Each director will hold office until the next annual meeting of stockholders and until his successor is duly chosen and qualified or until his earlier resignation or removal.
NO. OF NO. OF SHARES VOTED SHARES FOR WITHHELD -------------------------------------------------------------------------------------- T. Michael Long 14,747,808 644,653 Stuart B. Ross 14,898,258 494,203 Malcolm L. Sherman 14,744,635 647,826 Bill W. Sorenson 14,895,858 496,603 Herbert M. Stein 14,681,955 710,506 Robert Stein 14,707,591 684,870 Jeffrey A. Weinstein 14,722,513 669,948
14 15 EKCO GROUP, INC. AND SUBSIDIARIES PART II OTHER INFORMATION (CONTINUED) ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K: Exhibits: 10.9(b) Amendment dated as of May 17, 1996 to Amended and Restated Employment Agreement with Donato A. DeNovellis. 10.12(b) First Amendment dated as of June 20, 1996 to 1995 Restatement of the Incentive Compensation Plan for Executive Employees of Ekco Group, Inc. and Subsidiaries. 10.15 Employment Agreement dated as of February 6, 1996 with John T. Haran. 27 Financial Data Schedule. 15 16 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. EKCO GROUP, INC. ------------------------------- (Registrant) Date: August 12, 1996 By: /s/ ROBERT STEIN ------------------------- --------------------------- Robert Stein President and Chief Executive Officer By: /s/ DONATO A. DENOVELLIS ---------------------------- Donato A. DeNovellis Executive Vice President, Finance and Administration, and Chief Financial Officer 16 17 INDEX TO EXHIBITS FILED WITH FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1996 EXHIBIT NO. DESCRIPTION ----------- ----------- 10.9(b) Amendment dated as of May 17, 1996 to Amended and Restated Employment Agreement with Donato A. DeNovellis. 10.12(b) First Amendment dated as of June 20, 1996 to 1995 Restatement of the Incentive Compensation Plan for Executive Employees of Ekco Group, Inc. and Subsidiaries. 10.15 Employment Agreement dated as of February 6, 1996 with John T. Haran. 27 Financial Data Schedule. 17 EX-10.9B 2 AMENDED & RESTATED EMPLOYMENT AGREEMENT 1 EXHIBIT 10.9(b) --------------- AMENDMENT AGREEMENT AMENDMENT AGREEMENT made as of the 17th day of May 1996 by and between Ekco Group, Inc. (hereinafter "Group") and Donato A. DeNovellis (hereinafter "Executive"). WHEREAS, a certain employment agreement was entered into between Group and Executive as of May 25, 1995 (the "Agreement"); and WHEREAS, the Executive and Group desire to amend the Agreement as hereinafter set forth. NOW, THEREFORE, in consideration of the mutual covenants set forth herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. The Agreement is hereby amended as follows: 1.1 Deleting Section 5.5.3.1 in its entirety and inserting in its the following: "5.5.3.1 Amounts at the rate of the Adjusted Cash Salary in effect at the date of such termination, payable in the manner specified in Section 3.1.1, for a period of thirty-six (36) months following the date of such termination at the rate of one-twelfth of such Adjusted Cash Salary per month, LESS the amount of any disability insurance proceeds actually paid to or for the benefit of Executive (or his Estate) with respect to such thirty-six (36) months following the date of termination under any disability policy the premiums for which have been paid by Group or any Affiliate. During such thirty-six (36) months following termination of this Agreement as a result of Executive's permanent and total disability, Group shall maintain at Group's sole expense the life insurance policies referred to in the second sentence of Section 3.1.3. and in Section 5.4.1.3 and, in the event of Executive's death during the thirty-six (36) months following such termination, shall pay the death benefit provided for in Section 5.4.1.3 notwithstanding the prior termination of this Agreement as a result of Executive's total and permanent disability, in addition to the life insurance benefits payable to the beneficiaries of the policies referred to in Section 3.1.3 which shall be payable in the event of Executive's death during such period of thirty-six (36) months;" 2 2. The Agreement as amended hereby is hereinafter referred to as the "Employment Agreement." 3. This Amendment Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof. 4. Except as expressly provided for herein, the Employment Agreement is hereby ratified and confirmed and shall continue in full force and effect. 5. This Amendment Agreement may be executed in any number of counterparts, and each such counterpart hereof shall be deemed to be an original instrument, but all such counterparts together shall constitute but one agreement. IN WITNESS WHEREOF, the parties have caused this Amendment Agreement to be executed and delivered by its duly authorized officer and its corporate seal to be hereunto affixed and Executive has hereunto set his hand and seal as of the day and year first above written in duplicate originals. EKCO GROUP, INC. [Seal] By:/S/ROBERT STEIN ------------------------------- Title: President and CEO ---------------------------- /S/DONATO A. DeNOVELLIS ---------------------------------- EXECUTIVE EX-10.12B 3 RESTATEMENT OF THE INCENTIVE COMP.PLAN 1 EXHIBIT 10.12(b) ---------------- EKCO GROUP, INC. FIRST AMENDMENT TO 1995 RESTATEMENT OF THE INCENTIVE COMPENSATION PLAN FOR EXECUTIVE EMPLOYEES OF EKCO GROUP, INC. AND SUBSIDIARIES The 1995 Restatement of the Incentive Compensation Plan for Executive Employees of Ekco Group, Inc. and Subsidiaries (the "Incentive Compensation Plan") is hereby amended as follows: 1. Section 6.4 is deleted in its entirety and the following is inserting in its place: "6.4 For 1995 and for 1997 and subsequent years the Committee shall decide and for 1996 the Executive may decide (provided he files a written irrevocable election with the Committee at least six months before the start of 1996) whether any increases over the Executive's 1994 Base Compensation level will be paid under any of the payment choices in Section 6.6 or a combination of two or more of them. The Committee decisions with respect to the manner in which 1995 Base Compensation increases will be paid is scheduled in the Appendix." 2. Section 6.5 is deleted in its entirety and the following is inserting in its place: "6.5 For 1995 and 1996 the Executive may decide (provided he files a written irrevocable election with the Committee before the start of the year to which his Bonus relates) and for subsequent years the Committee will decide whether any percentage up to one hundred percent (100%) of his Bonus will be paid under any of the payment choices in Section 6.6 or a combination of two or more of them." 3. Except as expressly provided for herein, the Incentive Compensation Plan is hereby ratified and confirmed and shall continue in full force and effect. 4. This First Amendment may be executed in any number of counterparts, and each such counterpart hereof shall be deemed to 2 First Amendment to Incentive Compensation Plan (continued) be an original instrument, but all such counterparts together shall constitute but one agreement. Dated as of June 20, 1996. Compensation Committee of the Board of Directors /S/T. MICHAEL LONG ----------------------------------- T. Michael Long /S/STUART B. ROSS ----------------------------------- Stuart B. Ross /S/BILL W. SORENSON ----------------------------------- Bill W. Sorenson -2- EX-10.15 4 EMPLOYMENT AGREEMENT 1 EXHIBIT 10.15 ------------- EMPLOYMENT AGREEMENT BETWEEN EKCO GROUP, INC. AND JOHN T. HARAN AS OF February 6, 1996 SECTION PAGE - ------- ---- 1. Employment 1 2. Principal Location 1 3. Compensation 2 4. Reimbursement of Expenses 3 5. Term and Termination 3 6. Services Furnished 10 7. Additional Insurance at Group's Option 10 8. Gross-Up Payments 11 9. Confidentiality and Non-Competition 11 10. Definitions 14 11. Arbitration 19 12. General 20 2 EXHIBIT - ------- Example of Calculation of Severance Payment A EMPLOYMENT AGREEMENT AGREEMENT made as of the 6th day of February, 1996, (the "Effective Date") by and between Ekco Group, Inc., a Delaware corporation ("Group") with its principal place of business in Nashua, New Hampshire and John Haran("Executive"), of 170 West Old Mill Road, Lake Forest, Illinois 60045. WHEREAS, Executive desires to be employed by Group and Group desires to employ Executive all on the terms and conditions recited herein; NOW, THEREFORE, in consideration of the mutual promises and agreements herein contained, the parties covenant and agree as follows: 1. EMPLOYMENT. Group hereby employs Executive and Executive hereby accepts employment as an executive employee of Group to perform such executive and managerial services as may be assigned to him by or under the authority of the Board of Directors (such term, and all other capitalized terms not otherwise defined in this Agreement shall have the meaning set forth in Section 10 of this Agreement), consistent with such status as an executive employee. Executive agrees to use his best efforts, skills and abilities faithfully to promote the interests of Group and to perform such services as may be required of him by Group from time to time consistent with his status, to the reasonable satisfaction of the Board of Directors. Without limiting the generality of the foregoing, Executive agrees to serve as Vice President and Treasurer, of Group (if and so long as he is elected to that office by the Board of Directors) and to serve without additional compensation as a director, executive officer or executive employee of such Affiliates as Group may from time to time reasonably request. Executive agrees to work exclusively for Group and such Affiliates as his full-time employment during the term of 2 3 this Agreement, except as Group and Executive may otherwise agree in writing from time to time. 2. PRINCIPAL LOCATION. Executive presently performs the duties of his office generally in Nashua, New Hampshire and shall be obligated to take such trips outside of the Nashua, New Hampshire or metropolitan Boston, Massachusetts area as shall be reasonably necessary in connection with his duties, and Group will pay all reasonable costs of travel and living expenses incurred in connection therewith. Executive recognizes that his duties hereunder may require significant travel. Executive, subject to his rights under Section 5.3.4, agrees to relocate to any other location in the United States of America at which Group or an Affiliate has offices or operations, provided that Executive's job at such new location involves compensation no less than his existing compensation and comparable duties. In the event of any such relocation, Group shall pay Executive all reasonable expenses incurred by Executive in relocating to such new area. 3. Compensation. ------------ 3.1 Except as otherwise provided in this Agreement, for his services and agreements hereunder Executive shall receive from Group the following compensation: 3.1.1 Salary at the annual rate of One Hundred and Forty Thousand Dollars ($140,000) (the "Base Salary"), payable in equal installments in accordance with Group's pay policy and in any event not less frequently than monthly. The Base Salary shall be subject to increase from time to time as determined by the Board of Directors or the Compensation Committee in its sole discretion pursuant to a review of Executive's performance by the Board of Directors or the Compensation Committee, which review shall be conducted at such time as the Board of Directors or the Compensation Committee shall determine, but in any event at least once during each twelve (12) months of the term of this Agreement. The Base Salary as from time to time increased is referred to herein as the "Adjusted Cash Salary." 3 4 3.1.2 Such other monetary compensation by way of bonus or otherwise, if any, as may be determined from time to time by the Board of Directors or the Compensation Committee in its sole discretion; 3.1.3 Such fringe benefits (including, without limitation, vacation time, group life, long term and short term disability, medical, dental and other insurance, retirement, including, pension, profit-sharing and similar plans) as Group may provide from time to time for its executive employees, whether or not the category of such benefits is addressed in this Agreement, it being understood that Executive shall be entitled to the greater of each benefit addressed in this Agreement and that provided by Group for its executive employees generally. Group shall in any event, whether or not such coverage is provided for other executive employees, provide Executive group life or other life insurance at its expense with a death benefit equal to at least four (4) times Executive's Adjusted Salary, in addition to any other life insurance payable to Executive or his beneficiaries under Section 5.4.1.3 below or any life insurance for which Executive pays premiums; and 3.1.4 Such other compensation pursuant to such executive bonus plans, restricted stock purchase plans, stock option plans or other stock plans, available to executive employees of Group from time to time, as the Board of Directors or the Compensation Committee may in its sole discretion determine. 4. REIMBURSEMENT OF EXPENSES. Group shall reimburse Executive for travel, entertainment and other business expenses reasonably incurred by him in connection with the business of Group and its Affiliates to the extent and in a manner consistent with then Group policy. 4 5 5. Term and Termination. -------------------- 5.1. TERM. The term of this Agreement and Executive's employment hereunder shall commence on the Effective Date and continue until terminated as hereinafter set forth. For the purposes of this Agreement, the date of termination shall be the effective date of termination of Executive, rather than the date of notice thereof. 5.2. Termination by Executive. ------------------------ 5.2.1 Executive's employment may be terminated at any time by Executive by written notice of at least three (3) months to Group, which time period may be waived, in whole or in part, by Group in its discretion in which event Executive's employment shall end on such earlier date as agreed by Group and Executive. 5.2.2 Except as provided in Section 5.2.3, if Executive's employment is terminated pursuant to Section 5.2.1, Executive shall not be entitled as of the date of termination to any further compensation under this Agreement of any kind or nature, except for Accrued and Unpaid Salary and Expenses. 5.2.3 However, if such notice is given after six (6) months after but within twenty four (24) months after a Change of Control (a "Change of Control Notice"), unless such Change of Control shall have been approved by a resolution adopted by the Board of Directors with at least two-thirds (2/3) of the then serving Group directors who are Group directors as of the date hereof voting in favor, then upon such termination by Executive pursuant to Section 5.2.1, Group shall provide and Executive (or his Estate) shall be entitled to receive: 5.2.3.1 Within thirty (30) days of the date of such termination a two (2) year Lump Sum Payment Amount; 5.2.3.2 A Gross-Up Payment as set forth in Section 8 of this Agreement; 5 6 5.2.3.3 Continuation of all fringe benefits referred to in Section 3.1.3, including, but not limited to, Medical, Dental and Life Insurance Coverage Continuation for a period of two (2) years from the date of termination; 5.2.3.4 Accrued and Unpaid Salary and Expenses; 5.2.3.5 Outplacement Benefits; and 5.2.3.6 In the event of termination as provided in this Section 5.2.3, Executive shall not be entitled to payments under both this Section 5.2.3 and Section 5.3.4.2. Any compensation payable under this Section 5.2.3 shall be paid notwithstanding Executive's total and permanent disability or death occurring after termination of his employment hereunder. In the event Executive dies or becomes totally and permanently disabled after the date of any such notice but prior to the date of termination of his employment under this Section 5.2.3, the provisions of this Section 5.2.3 and not the provisions of Section 5.4 or 5.5 shall apply, provided that in the event of Executive's total and permanent disability during such time, Executive shall also be entitled to each benefit that Group then provides to its executive employees upon and during the continuance of total and permanent disability to the extent such benefit exceeds those specified in this Section 5.2.3. 5.3. Termination by Group; Change of Control; and Constructive Termination. --------------------------------------------------------------------- 5.3.1 Executive's employment may be terminated at any time by Group, with or without Good Cause, by written notice to Executive, effective immediately unless otherwise stated in such notice. 5.3.2 TERMINATION BY GROUP WITH GOOD CAUSE. In the event Group shall terminate Executive's employment for Good Cause, then Executive shall not be entitled as of the date of termination to any further compensation under this Agreement of any kind or nature, except for Accrued and Unpaid Salary and Expenses. 6 7 5.3.3 Termination by Group Without Good Cause Prior to a Change of ------------------------------------------------------------ Control. ------- 5.3.3.1 In the event Executive's employment hereunder is terminated by Group without Good Cause prior to a Change of Control, then subject to Section 5.3.3.2 Group shall provide and Executive (or his Estate) shall be entitled to the following: 5.3.3.1.1 A one half (1/2) year Lump Sum Payment Amount if the termination occurs on or prior to August 7, 1996 and if the date of termination occurs thereafter a one (1) year Lump Sum Payment Amount, each payable within thirty (30) days of the date of termination; 5.3.3.1.2 On and after August 7, 1996 and thereafter during the term of this Agreement Executive shall, immediately upon termination, pursuant to this Section 5.3.3 have the unconditional, unencumbered and free right, title and interest in all shares of stock of Group which were granted, sold or optioned (subject, if Executive elects to exercise unexercised rights, to his obligation to pay the option exercise price or other purchase price to the extent theretofore not paid) to Executive by Group at any time prior to the date of termination as if all restrictions imposed by Group had lapsed and all events necessary to vest in Executive such rights, including the lapsing of time, had occurred, and Group shall take all such actions as may be necessary to release any then existing restrictions imposed by Group and waive any rights to repurchase such shares; 5.3.3.1.3 Medical, Dental and Life Insurance Coverage Continuation for a period of six (6) months from the date of termination if the date of termination is on or before August 7, 1996 and thereafter one (1) year from the date of termination; 5.3.3.1.4 Accrued and Unpaid Salary and Expenses; 5.3.3.1.5 On and after August 7, 1996 and thereafter during the term of this Agreement, Outplacement Benefits; and 7 8 5.3.3.1.6 Gross-Up Payment 5.3.3.2 Any compensation payable under this Section 5.3.3 shall be paid notwithstanding Executive's total and permanent disability or death subsequent to Group's notice of termination. In the case of termination of his employment under this Section 5.3.3, Executive shall not be entitled as of the date of termination to any other compensation under this Agreement, except as provided in this Section 5.3.3, provided that in the event of Executive's total and permanent disability at such time, Executive shall also be entitled to all of the benefits Group then provides to its executive employees upon and during the continuance of total and permanent disability. 5.3.4 CHANGE OF CONTROL; CONSTRUCTIVE TERMINATION; SUBSEQUENT TERMINATION BY GROUP WITHOUT GOOD CAUSE. 5.3.4.1 Immediately upon a Change of Control while Executive is employed hereunder, and without regard to whether or not Executive's employment is terminated, whether a Constructive Termination occurs at such time or thereafter or the manner of any subsequent termination of Executive's employment, Executive shall immediately have the unconditional, unencumbered and free right, title and interest in all shares of stock of Group which were granted, sold or optioned (subject, if Executive elects to exercise unexercised rights, to his obligation to pay the option exercise price or other purchase price to the extent theretofore not paid) to Executive by Group at any time prior to the Change of Control as if all restrictions imposed by Group had lapsed and all events necessary to vest in Executive such rights, including the lapsing of time, had occurred, and Group shall take all such actions as may be necessary to release any then existing restrictions imposed by Group and waive any rights to repurchase such shares. 5.3.4.2 If following a Change of Control there shall be either an event of Constructive Termination or termination by Group of Executive's employment without Good Cause, 8 9 then Group shall provide and Executive (or his Estate) shall be entitled to the following: 5.3.4.2.1 Within ten (10) days of such event a two (2) year Lump-Sum Payment Amount. For the purposes of this Section 5.3.4, the time when a Constructive Termination occurs shall be the day any event occurs which is included in the definition of Constructive Termination; 5.3.4.2.2 Executive shall immediately upon termination pursuant to this Section 5.3.4 have the unconditional, unencumbered and free right, title and interest in all shares of stock of Group which were granted, sold or optioned (subject, if Executive elects to exercise unexercised rights, to his obligation to pay the option exercise price or other purchase price to the extent theretofore not paid) to Executive by Group at any time prior to the date of termination as if all restrictions imposed by Group had lapsed and all events necessary to vest in Executive such rights, including the lapsing of time, had occurred, and Group shall take all such actions as may be necessary to release any then existing restrictions imposed by Group and waive any rights to repurchase such shares; 5.3.4.2.3 Medical, Dental and Life Insurance Coverage Continuation for a period of two (2) years from the date of termination; 5.3.4.2.4 Accrued and Unpaid Salary and Expenses; 5.3.4.2.5 Outplacement Benefits; and 5.3.4.2.6 Gross-Up Payment. 5.4. Termination upon Death. ---------------------- 5.4.1 This Agreement, except for the provisions of Sections 8, 9, 11 and 12, shall terminate upon the death of Executive, provided that Executive's Estate shall have the right to receive, and Group shall be obligated to pay or provide to Executive's Estate the following: 9 10 5.4.1.1 Executive's Estate shall immediately upon such termination have the unconditional, unencumbered and free right, title and interest in all shares of stock of Group which were granted, sold or optioned (subject, if Executive's Estate elects to exercise unexercised rights, to the obligation to pay the option exercise price or other purchase price to the extent theretofore not paid) to Executive by Group at any time prior to his death as if all restrictions imposed by Group had lapsed and all events necessary to vest in Executive such rights, including the lapsing of time, had occurred, and Group shall take all such actions as may be necessary to release any then existing restrictions imposed by Group and waive any rights to repurchase such shares; 5.4.1.2 All of the benefits Group provides to its executive employees as provided in Section 3.1.3 to the extent such benefits are greater than those specified in this Agreement; 5.4.1.3 A lump-sum payment equal to the Adjusted Salary in effect at the date of death payable no later than sixty (60) days after the date of death. To secure such payment, Group may in its discretion maintain life insurance on Executive's life payable to his Estate or other beneficiary, which life insurance coverage shall be in addition to the amount provided for pursuant to the provisions of Section 3.1.3 above (or any life insurance for which Executive pays premiums), and to the extent benefits are paid pursuant to such insurance coverage maintained by Group under this Section 5.4.1.3, Group's commitment under this Section 5.4.1.3 shall be satisfied; and 5.4.1.4 Accrued and Unpaid Salary and Expenses. 5.5. Termination upon Disability. --------------------------- 5.5.1 This Agreement shall terminate if, by virtue of total and permanent disability, Executive is unable to perform his duties hereunder, provided that Executive's (or his legal representative's) right to receive, and 10 11 Group's obligations to pay, amounts as a result of such termination shall survive any such termination. 5.5.2 The determination that, by virtue of total and permanent disability, Executive is unable to perform his duties hereunder shall be made by a physician chosen by Group and reasonably satisfactory to Executive (or his legal representative). The cost of such examination shall be borne by Group. Without limiting the generality of the foregoing, unless otherwise agreed, Executive shall be conclusively presumed to be totally and permanently disabled hereunder if for reasons involving mental or physical illness or physical injury he fails to perform such duties for a period of one hundred and eighty (180) consecutive calendar days or for any periods aggregating one hundred and eighty (180) days or more in any twelve (12) month period. For purposes of this Section 5.5, the date of termination in the event of such total and permanent disability shall be the earlier of the date of such physician's examination pursuant to which such determination is made or the first business day after which such 180-day period has expired. 5.5.3 In the event of such a termination as a result of Executive's total and permanent disability, all compensation hereunder shall terminate, Executive shall immediately upon such termination have the unconditional, unencumbered and free right, title and interest in all shares of stock of Group which were granted, sold or optioned (subject, if Executive or his Estate elects to exercise unexercised rights, to his obligation to pay the option exercise price or other purchase price to the extent theretofore not paid) to Executive by Group at any time prior to the effective date of termination as if all restrictions had lapsed and all events necessary to vest in Executive such rights, including the lapsing of time, had occurred, and Executive shall be entitled to and Group shall pay to Executive the following: 11 12 5.5.3.1 Amounts at the rate of the Adjusted Cash Salary in effect at the date of such termination, payable in the manner specified in Section 3.1.1, for a period of twelve (12) months following the date of such termination at the rate of one-twelfth of such Adjusted Cash Salary per month, LESS the amount of any disability insurance proceeds actually paid to or for the benefit of Executive (or his Estate) with respect to such twelve (12) months following the date of termination under any disability policy the premiums for which have been paid by Group or any Affiliate. During such twelve (12) months following termination of this Agreement as a result of Executive's permanent and total disability, Group shall maintain at Group's sole expense the life insurance policies referred to in the second sentence of Section 3.1.3. and in Section 5.4.1.3 if then in force and, in the event of Executive's death during the twelve (12) months following such termination, shall pay the death benefit provided for in Section 5.4.1.3 notwithstanding the prior termination of this Agreement as a result of Executive's total and permanent disability, in addition to the life insurance benefits payable to the beneficiaries of the policies referred to in Section 3.1.3 which shall be payable in the event of Executive's death during such period of twelve (12) months; 5.5.3.2 Medical, Dental and Life Insurance Coverage Continuation for a period of one (1) year from the date of termination; 5.5.3.3 Accrued and Unpaid Salary and Expenses; 5.5.3.4 Continuation of each of the medical, dental and other benefits which Group provides to its permanently disabled executive employees in accordance with Group's then existing policy to the extent each benefit is greater than that specified in this Section 5.5; and 5.5.3.5 Outplacement Benefits. 12 13 6. SERVICES FURNISHED. Group shall furnish Executive with office space, secretarial assistance, and such other facilities and services at Group's facility to which Executive may be assigned, as shall be suitable to the Executive's position and adequate for the performance of his duties as set forth herein. 7. ADDITIONAL INSURANCE AT GROUP'S OPTION. Group, in its sole discretion, may apply for and procure in its own name (whether or not for its own benefit) policies of insurance insuring the life of Executive in such amounts as Group may deem advisable, in addition to insurance policies contemplated by Section 3.1.3 and Section 5.4.1.3. Executive shall have no right, title, or interest in any such policies of insurance, except to the extent his Estate or other persons are specifically named as beneficiaries thereof. Executive agrees to submit to any medical or other examination and to execute and deliver any applications or other instrument in writing, reasonably necessary to effectuate such insurance. 8. "GROSS-UP" PAYMENTS. Executive shall be paid an additional amount ("Gross Up Payment") if any payments ("Payment Amounts") made to him (or his Estate) by Group or any of its Affiliates, under this Agreement or otherwise, are subject to the excise tax imposed by Internal Revenue Code Section 4999 or any successor Internal Revenue Code Section (the "Section 4999 Tax"). The Gross Up Payment shall be computed so that Executive (or his Estate) retains a net amount equal to the Payment Amounts after deduction of any Section 4999 Tax on the Payment Amounts and any Federal, state or local tax (including any Section 4999 Tax) on the Gross Up Payment. For the purposes of determining the amount of the Gross Up Payment, Executive shall be deemed to pay Federal, State and local income taxes at the highest marginal rate of taxation in the calendar year in which the Payment Amounts are taxable to him under Code Section 4999. State and local income taxes shall be calculated based upon the state and locality of Executive's domicile in said calendar year. 13 14 The determination of the amount of the Section 4999 Tax and whether such Section 4999 Tax is payable shall be made by tax counsel selected and paid for by Group and approved by Executive. The Gross Up Payment shall be paid within thirty (30) days of such computation and in no event (without written consent of Executive) later than the last day of the calendar year with respect to which the Section 4999 Tax is imposed. If such determination is not finally accepted by the Internal Revenue Service upon audit, then tax counsel (selected and paid for under the above procedure) shall represent Executive in any such audit or appeal process thereafter and compute appropriate adjustments and additional Gross Up Payments as provided above, after which Group shall pay Executive such adjustment, and Group shall reimburse Executive for interest and other tax penalties, if applicable. 9. Confidentiality, Inventions and Non-Competition. ----------------------------------------------- 9.1 Executive's agreements set forth in this Section 9 shall survive the expiration or termination of this Agreement and the termination of his employment with Group for any reason. 9.2 Executive acknowledges that irreparable injury would be caused to Group by his breach of any of the provisions of this Section 9, and agrees that in the event of any such breach, Group and any of its Affiliates, in addition to such other rights and remedies as may exist in its favor, may apply to any court of law or equity having jurisdiction to enforce the specific performance of the provisions of this Section 9 and may apply for injunctive relief against any act which would violate any such provisions. 9.3 Executive recognizes that he now has knowledge of and/or may hereafter gain knowledge of, confidential information, trade secrets, confidential processes, confidential patentable or unpatentable inventions or confidential "know how", including, without limitation, techniques, formulae, designs, developments, projects, technical information and manufacturing process and distribution methods, relating to, or concerned with the business of Group and its Affiliates 14 15 prior to the termination of this Agreement and their respective suppliers, customers, stockholders, licensors, licensees, and other persons or entities with which Group or its Affiliates has, has had, or may in the future have any commercial, scientific or technical relationship. During the term of this Agreement and at all times following the termination of Executive's employment for any reason, Executive will not, directly or indirectly, divulge, furnish or make accessible to anyone (other than as required in the regular course of his employment by Group or with the consent of the Board of Directors) such information. The prohibitions contained in this Section 9.3 shall not apply to information which is (a) within the domain of the general public; (b) generally known within the industry or industries in which Group or its Affiliates is involved; or (c) independently developed by Executive without utilization of confidential information gained while in the employ of Group; provided that Executive shall not have disclosed such information in violation of this Agreement. All documents, records, apparatus, equipment and other physical property furnished to Executive by Group or any Affiliate of Group or produced by Executive or others in connection with his services to Group or any such Affiliate shall be and remain the sole property of Group. Executive will return and deliver such property to Group as and when requested by Group. Copies of documents and records may be kept, but shall be kept completely confidential to the same extent as other confidential information of Group. Executive shall return and deliver all such property upon termination of his employment for any reason, and Executive will not take with him any such property or any reproduction of such property upon such termination. 9.4 Any work or research or the results thereof, made or developed by Executive, alone or in conjunction with others during the term of his employment, including but without limitation, any designs, patents, inventions, processes, know-how or formulae created, invented or conceived during the period of his employment by Group, whether during or out of the usual hours of work, which arise out of or are related to the business, research, or development work or field of operation of Group, or any of its Affiliates, shall to the extent of Executive's interest therein be the sole 15 16 and exclusive property of Group, shall be disclosed in writing to Group and to no other person, unless so directed in writing by the Board of Directors, and Executive hereby assigns to Group all and any rights which he has or may acquire in the same. To this end, both during the period of Executive's employment and at all times thereafter, Executive agrees to execute all necessary papers, instruments and documents properly required to effect such assignment to Group or its nominee, to make application through Group's patent attorney or general counsel at the expense of Group, for such United States and foreign patents as may be specified from time to time by Group on inventions, processes, or formulae which are or become the property of Group hereunder, and to execute assignments upon Group's request, for Executive's entire interest in all such applications to Group or to its nominee without compensation (other than his usual compensation as an employee of Group) and Executive agrees to give Group and its patent attorney or general counsel all reasonable assistance in preparing such applications, descriptions, and illustrations of each such invention, process, or formula and in connection with proceedings relating thereto or to such other applications or patents resulting therefrom; and further agrees to execute all lawful papers considered necessary by Group and do all that Group reasonably requests in order to protect Group's rights in said inventions, processes, and formulae or to obtain patents thereon, including, without limitation, continuations, reissues, renewals, and extensions. It is further agreed that Executive's obligations specified hereunder shall not expire with the termination of this Agreement or his employment, but Group agrees to pay Executive a reasonable amount for any time that Executive spends in such work at Group's request after the termination of this Agreement or his employment hereunder and agrees to reimburse Executive for expenses reasonably or necessarily incurred in connection with such work. 9.5 In consideration of his continued employment by Group, and the other benefits accruing to him hereunder, and subject to the fulfillment by Group of its obligations to Executive hereunder, either directly or through draw-down under the letter(s) of credit or other device established pursuant to Section 6, Executive agrees that during the term hereof and 16 17 for a period of twelve (12) months following the date of termination of Executive's employment pursuant to Section 5 provided that Executive has received and is continuing to receive all payments and benefits required to be paid and provided to him pursuant to this Agreement (such period of employment and twelve (12) month period being referred to in this Agreement as the "Non-Competition Period"), he will not engage or participate, directly or indirectly, within the United States of America or Canada either as principal, agent, employee, employer, consultant, stockholder, partner or in any other individual or representative capacity whatever, in the conduct or management of, or own any stock or other proprietary interest in, or debt of, any business which shall be competitive with any business which is or was conducted by Group or any Affiliate of Group, while Executive was an employee of Group, unless he shall have obtained the prior written consent of the Board of Directors, and which consent shall make express reference to this Agreement. Notwithstanding any other provision in this Section 9, Executive shall be free without such consent to make investments, directly or indirectly, in the securities of any publicly-owned entity if his ownership thereof is limited to not more than three percent (3%) of the issued and outstanding securities of any class of securities of such entity. Executive acknowledges that his skills and experience are such that he can anticipate finding employment at an executive level in a wide variety of industries and represents and agrees that the restrictions imposed by this Section 9 on employment are necessary for the protection of the legitimate interests and competitive position of Group and do not impose undue hardships on Executive. 9.6 During the Non-Competition Period, Executive shall not, directly or indirectly, solicit any officer, director, executive, employee or consultant of Group or any Affiliate of Group to leave such employment or terminate such position. 10. Definitions. ----------- As used in this Agreement, the following terms shall have the following meanings: 17 18 10.1 "Accrued and Unpaid Salary and Expenses" shall mean such portion of Executive's Adjusted Cash Salary as has accrued by virtue of Executive's employment during the period prior to the date of termination and has not yet been paid, together with any amounts for expense reimbursement, vacation accruals and similar items which have been properly incurred or accrued in accordance with the provisions of this Agreement prior to the date of termination and have not yet been paid. 10.2 "Adjusted Salary" shall mean the Adjusted Cash Salary plus an amount equal to the amount of any salary increase(s), if any, provided in the form of restricted stock or stock options. 10.3 "Adjusted Cash Salary" shall have the meaning set forth in Section 3.1.1. 10.4 "Affiliate" shall mean any corporation, joint venture, or other business enterprise, whether incorporated or unincorporated, which Group directly, or indirectly through one or more intermediaries, controls or is controlled by, or is under common control with. 10.5 "Agreement" shall mean this Employment Agreement. 10.6 "Base Salary" shall have the meaning set forth in Section 3.1.1. 10.7 "Board of Directors" shall mean the Board of Directors of Group. 10.8 "Change of Control" shall mean and shall be deemed to have occurred (i) if any "person" (as such term is used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended), other than Group or any employee stock plan of Group, is or becomes the beneficial owner, directly or indirectly, of securities of Group representing fifteen percent (15%) or more of the outstanding Common Stock of Group, or (ii) ten (10) days following the commencement of, or announcement of an intention to make, a tender offer or exchange offer the consummation of which would result in the beneficial ownership by any "person" of fifteen percent 18 19 (15%) or more of the outstanding Common Stock of Group, provided, however, that at the conclusion of such ten (10) day period such person has not discontinued or rescinded his intention to make such a tender or exchange offer or (iii) if during any consecutive twelve (12) month period beginning on or after the date hereof individuals who at the beginning of such period were directors of Group cease, for any reason, to constitute at least a majority of the Board of Directors of Group; or (iv) if a merger of, or consolidation involving, Group in which Group's stock is converted into securities of another corporation or into cash shall be consummated, or a plan of complete liquidation of Group (whether or not in connection with a sale of all or substantially all of Group's assets) shall be adopted and consummated, or substantially all of Group's operating assets are sold (whether or not a plan of liquidation shall be adopted or a liquidation occurs), excluding in each case a transaction solely for the purpose of reincorporating Group in a different jurisdiction or recapitalizing Group's stock. 10.9 "Change of Control Notice" shall have the meaning set forth in Section 5.2.3. 10.10 "Compensation Committee" shall mean the Compensation Committee of the Board of Directors. 10.11 "Constructive Termination" shall be deemed to have occurred if and when (i) Executive's Adjusted Salary is decreased below the level in effect on the date of the last amendment of this Agreement, or the aggregate Adjusted Salary and incentive compensation or benefits available to be earned by Executive is directly or indirectly reduced or eliminated, or the bonus percentage applicable to Executive's participation in any compensation or bonus plan or arrangement is reduced, without Executive's consent, provided, however, that nothing herein shall be construed to guarantee Executive's bonus awards if performance is below applicable targets, or (ii) the importance of Executive's job responsibilities is reduced without Executive's consent, or (iii) a proposal is made to relocate Executive to a location other than Nashua, New Hampshire or the greater Boston, Massachusetts metropolitan area without his consent. 19 20 10.12 "Effective Date" shall have the meaning set forth in the first paragraph of this Agreement. 10.13 "ESOP" shall mean the Ekco Group, Inc. Employees' Stock Ownership Plan. 10.14 "Estate" shall mean Executive's estate, legal representative or beneficiaries as the context so requires. 10.15 "Executive" shall mean the individual defined as such in the first paragraph of this Agreement, and shall include the Estate of such individual where the context so requires. 10.16 "Good Cause" shall include, but not be limited to, repeated or serious neglect of duty, dishonesty, conviction of a felony, breach of this Agreement or repeated or serious violations of corporate rules or regulations. Notwithstanding the foregoing, following a Change of Control, "Good Cause" shall not be deemed to have occurred unless (a) the conduct which is the basis for breach is material and is either willful or intentionally unlawful and (b) Executive shall not have ceased such conduct and cured the effect thereof, if curable, so that such breach shall no longer be material within thirty (30) days after Executive shall have received written notice from Group of Group's intention to terminate Executive's employment for Good Cause, which notice shall specify in detail the basis therefor. 10.17 "Gross-Up Payment" shall have the meaning set forth in Section 8. 10.18 "Group" shall mean Ekco Group, Inc., and its successors and permitted assigns. 10.19 "Lump Sum Payment Amount" shall mean a cash amount payable in a lump sum equal to the sum of (a) the Adjusted Salary in effect immediately prior to the date of such termination, plus (b) the maximum amount payable to Executive including all cash and the value of all equity based options and grants of stock except for equity based options and grants of stock issued pursuant to Section 6.6 of the 1995 Plan (as defined below) (the value of each stock 20 21 option to be determined as of the grant date thereof and the value of each grant of restricted stock to be determined as of the date described hereinbelow by applying the Black-Scholes model where applicable or another recognized form of valuation if the Black-Scholes model is not applicable, with the value ascribed by Group to each such stock option and grant of restricted stock as of the aforementioned dates to be conclusively presumed to be the value thereof) under all compensation and bonus plans and arrangements identified in Sections 3.1.2, 3.1.3 and 3.1.4 for the fiscal year in which the date of the termination occurs, plus (c) the value of the securities, cash or other property which were allocated to Executive's account in the ESOP for the fiscal year immediately preceding the fiscal year in which the date of termination occurs (which shall be in addition to any distribution from the ESOP to which he is entitled thereunder), which sum shall be multiplied by the number of years specified in Sections 5.2.3.1, 5.2.4.1., 5.3.3.1.1 and 5.3.4.2.1, respectively. For purposes of calculating the amount of clause (b), the maximum payable under any plan shall generally be the maximum amount actually allocated to Executive, or if no such allocation was made, the amount, if any, specifically targeted for Executive. However, for purposes of calculating the maximum payable under the 1995 Restatement of Incentive Compensation Plan for Executive Employees of Ekco Group, Inc. and its Subsidiaries (the "1995 Plan") for purposes of clause (b), (i) the annual bonus amount shall be the greatest of (x) the target award for the current fiscal year, (y) the target award for the prior fiscal year and (z) the amount of the award paid or payable with respect to the prior fiscal year, and (ii) the number of shares of restricted stock awarded as long-term incentive awards shall be equal to the number of such shares most recently awarded to Executive as a long-term grant pursuant to the 1995 Plan divided by the number of blocks in such grant. Such shares shall be valued as of the date utilized by Group to calculate the number of shares issued to Executive, or if such date is not readily ascertainable, the date of issuance of the shares. Attached hereto and incorporated herein as Exhibit A is an example ("Example") detailing the calculation of the Lump Sum Amount utilizing certain stated assumptions and including other severance payments. The Example defines the manner and method for 21 22 this calculation and for other severance payments and shall be followed in making severance payments hereunder. 10.20 "Medical, Dental and Life Insurance Coverage Continuation" shall mean the continuation of the medical, dental and life insurance coverage which Executive (including his family) shall have been receiving from Group as of the earlier of the date of Executive's termination and the date of notice of termination by either Group or Executive, from the date of termination until the earlier of (x) Executive's full-time employment by a third party who offers Executive at least comparable benefits in the particular benefit category or (y) the number of years or months specified in Sections 5.2.3.3, 5.3.3.1.3, 5.3.4.2.3 and 5.5.3.2, respectively, following such date of termination. If and to the extent Group is not able to continue the applicable coverage of Executive under the terms of such group policies or other policies providing coverage for Executive, Group shall cooperate with Executive in any actions which may be necessary to allow Executive, to the extent possible, either (i) to buy such policy or (ii) to continue insurance coverage with the insurer writing Group's applicable group policy outside of Group's group plan or a substitute reasonably satisfactory to Executive, and in such event, Group shall pay to Executive 140% of the cost of such insurance coverage, but in no event more than twice the cost of such coverage allocable to Executive under the group or other policy covering him prior to termination. 10.21 "Non-Competition Period" shall have the meaning set forth in Section 9.5. 10.22 "Payment Amount shall have the meaning set forth in Section 8. 10.23 "Outplacement Benefits" shall mean outplacement services by a professional outplacement firm of Executive's choosing at the expense of Group, who shall engage such firm directly on behalf of Executive, provided, however, that Group's liability with respect to providing such services will be limited to one-half of Executive's Adjusted Salary. 11. Arbitration. ----------- 22 23 Except with respect to the provisions of Section 9, any dispute or disagreement arising under or relating to the provisions of this Agreement, or any breach thereof, including, without limitation, relating to Section 1 hereof or to whether a termination of Executive's employment was with Good Cause, shall be resolved by binding arbitration in accordance with the Commercial Rules of the American Arbitration Association or its successor (except as set forth herein), and judgment upon the award rendered by the arbitrator or arbitrators may be entered in any court having jurisdiction thereof. The decision of the arbitrators shall be made by majority vote and be final and absolute. In any such arbitration, one arbitrator shall be selected by Group and one arbitrator shall be selected by Executive. Each party shall have thirty (30) days from the receipt by one party of a notice from the other party of submission to arbitration to choose an arbitrator. A third arbitrator shall be selected by the two (2) so chosen within ten (10) days of the selection of the most recently selected of the two arbitrators so chosen. Failing action within any of such periods by any party or the arbitrators, any unappointed arbitrator or arbitrators shall be appointed by the American Arbitration Association (or its successor) upon application of any party or arbitrator. The parties shall promptly furnish to the arbitrators such information as the arbitrators may reasonably request. The expenses of any arbitration proceeding shall be paid by Group (including Executive's attorney's fees and expenses) if Executive recovers any amount or otherwise obtains relief in such proceeding and by Executive (including Group's attorney's fees and expenses) if Executive initiated arbitration and there is a specific finding that Executive's claim was frivolous. In all other circumstances, the expenses of such arbitration proceeding (not including attorney's fees and expenses, each party to bear such party's own attorney's fees and expenses) shall be divided equally. Arbitration shall take place in Nashua, New Hampshire, or such other place on which the parties shall agree. This Agreement and any arbitration proceeding are subject to N.H.R.S.A. ch. 542. 12. General. ------- 23 24 12.1 This Agreement is personal and shall in no way be subject to assignment by Executive. 12.2 This Agreement shall be binding upon and shall inure to the benefit of Group and its successors and assigns either by merger, operation of law, consolidation, assignment, purchase or otherwise of a controlling interest in the business of Group and Executive, his heirs, executors, administrators, legal representatives, and permitted assigns. Group agrees that a successor in interest by merger, operation of law, consolidation, assignment, purchase or otherwise of a controlling interest in the business of Group will be informed prior to such event of the existence of this Agreement. Group shall require any successor (whether direct or indirect, by purchase, merger, operation of law, consolidation, assignment or otherwise of a controlling interest in the business, stock or other assets of Group) to assume expressly and agree to perform this Agreement. Failure of Group to obtain such assumption and agreement prior to the effectiveness of any such succession shall be a breach of this Agreement and shall entitle Executive to such compensation and benefits in the same amount and on the same terms as he would be entitled hereunder in the event of a termination without Good Cause after a Change of Control, except that, for the purposes of implementation hereof, the date on which any such succession becomes effective shall be deemed to be the date on which Executive becomes entitled to such compensation and benefits from Group. 12.3 The parties intend this Agreement to be enforced as written. However, (i) if any portion or provision of this Agreement shall to any extent be declared illegal or unenforceable by a duly authorized court of competent jurisdiction, then the remainder of this Agreement, or the application of such portion or provision in circumstances other than those as to which it is so declared illegal or unenforceable, shall not be affected thereby, and each portion and provision of this Agreement shall be valid and be enforceable to the fullest extent permitted by law; and (ii) if any provision, or any part thereof, is held to be unenforceable because of the duration of such provision or the area covered thereby, Group and Executive agree that the court making such 24 25 determination shall have the power to reduce the duration and/or area of such provision, and/or to delete specific words and phrases ("blue-pencilling") and in its reduced or blue-pencilled form such provision shall then be enforceable and shall be enforced. 12.4 All notices and communications required or permitted to be given hereunder shall be duly given by delivering the same in hand, by reputable overnight delivery service or by depositing such notice or communication in the mail, sent by certified or registered mail, return receipt requested, postage prepaid, as follows: If sent to Group: Ekco Group, Inc. 98 Spit Brook Road Nashua, New Hampshire 03062 Attention: Executive Vice President, Secretary and General Counsel If sent to Executive: To Executive's last address in the records of Group or such other address as either party furnishes to the other by like notice. 12.5 This Agreement constitutes the entire agreement and understanding between the parties in relation to the subject matter hereof. There are no promises, representations, conditions, provisions or terms related thereto other than those set forth in this Agreement. This Agreement supersedes all previous understandings, agreements and representations between Group and Executive regarding Executive's employment by Group, written or oral. 12.6 All captions in this Agreement are intended solely for the convenience of the parties, and none shall be deemed to affect the meaning or construction of any provision hereof. Any references in this Agreement to a section shall be deemed to include all subsections of that section unless specifically excluded. 25 26 12.7 No failure of Group or Executive to exercise any power reserved to it or him, respectively, by this Agreement, or to insist upon strict compliance by Executive or Group, respectively, with any obligation or condition hereunder, and no custom or practice of the parties at variance with the terms hereof, shall constitute a waiver of Group's or Executive's right, as the case may be, to demand exact compliance with any of the terms hereof. Waiver by either party of any particular default by the other party hereto shall not affect or impair the waiving party's rights with respect to any subsequent default of the same, similar or different nature, nor shall any delay, forbearance or omission of either party to exercise any power or right arising out of any breach or default by the other party of any of the terms, provisions or covenants hereof, affect or impair its or his right to exercise the same, nor shall such constitute a waiver by Group or Executive, as the case may be, of any right hereunder, or the right to declare any subsequent breach or default and to terminate this Agreement prior to the expiration of its term. 12.8 This is a New Hampshire contract and shall be construed under and be governed in all respects by the law of the State of New Hampshire. 12.9 Executive shall not be required to mitigate the amount of any payment provided for in this Agreement by seeking other employment or otherwise, nor shall the amount of any payment provided for herein be reduced by any compensation earned by Executive as the result of employment by another employer or by retirement benefits after the date of termination or otherwise, except as specifically set forth herein. 12.10 No amendment or modification to this Agreement shall be effective unless in writing and signed by both parties hereto. This Agreement may be executed in any number of counterparts, and each such counterpart hereof shall be deemed to be an original instrument, but all such counterparts together shall constitute but one agreement. 26 27 IN WITNESS WHEREOF, Group has caused this Agreement to be executed and delivered by its duly authorized officer and its corporate seal to be hereunto affixed and Executive has hereunto 27 28 set his hand and seal as of the day and year first written above in duplicate originals. EKCO GROUP, INC. By /S/DONATO A. DeNOVELLIS -------------------------------- /S/JOHN T. HARAN ----------------------------------- Executive 28 29 JOHN T. HARAN EXHIBIT A - ------------------------------------------------------------------------------------------------- ASSUMPTIONS: - ------------
Termination on July 15, 1996. 1x or 2x severance benefit, as defined. Current market value of common stock $ 15.000 -------- Adjusted cash salary $120,000 Less: car allowance ($7,000) 1995 salary increase 7,000 Adjusted Salary 120,000 -------- Bonus: Current year target award $ 50,000 Target award for prior fiscal year 25,000 Amount paid or payable for prior year 5,000 Note: Executive elected to take 5% of bonus in cash, 50% in Restricted Stock and the balance in stock options. Relocation - Executive is partially relocated when terminated. Other: Executive participates in the Supplemental Executive Retirement Plan. Executive is granted stock options and is offered and purchases Restricted Stock Executive participates in Employee Stock Purchase Plan, 401k and ESOP. - -------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------- TERMINATION BY GROUP WITHOUT GOOD CAUSE - ---------------------------------------
LUMP SUM PAYMENT AMOUNT: 1X 2X -------- -------- ADJUSTED SALARY $120,000 $240,000 MAXIMUM PAYABLE UNDER 3.1.2 Greatest of this year's target, last year's target or last year's actual award $50,000 50,000 100,000 Other-completion of relocation per company policy 3,500 3,500 - -------------------------------------------------------------------------------------------------
29 30 - ------------------------------------------------------------------------------------------------------------ MAXIMUM PAYABLE UNDER 3.1.3 Supplemental Executive Retirement Plan: MAXIMUM PAYABLE UNDER 3.1.4 Other compensation: Other Executive bonus plans 0 0 Restricted stock purchase plans: 1995 grant 16,000 Number of years in cycle 5 Annualized grant 3,200 Market value on date of grant $ 7.500 ------- Value of restricted stock 24,000 24,000 48,000 ------- 1996 grant 5,000 Number of years in cycle 5 Annualized grant 1,000 Market value on date of grant $ 8.000 ------- Value of restricted stock 8,000 8,000 16,000 Stock option plans: Grant this fiscal year 9,000 Black Scholes value at date of grant $ 3.50 Value of option 31,500 31,500 63,000 Other-Employee Stock Purchase Plan: # shares purchased this fiscal year 1,000 Current market value $15.000 ------- Value of stock 15,000 ------- benefit (15% discount from market) 2,250 2,250 4,500 Value of securities allocated to ESOP account in previous fiscal year Common shares allocated 863 Preferred shares allocated 1,423 Allocation of unvested forfeited shares 14 ------- Total shares allocated 2,300 Current market value $15.000 ------- Value of ESOP shares allocated 34,500 Dividends received not reflected above 184 ------- Total value of ESOP securities allocated 34,684 34,684 69,368 - ------------------------------------------------------------------------------------------------------------
30 31 - ------------------------------------------------------------------------------------------------------------ OTHER PAYMENTS: Unpaid salary to date of termination 2,308 2,308 Accrued vacation-weeks 5 Weekly rate 2,308 ----- Total 11,538 11,538 Unreimbursed expenses (if applicable) Gross up payment (if applicable) Total payment $287,780 $558,214 ======== ======== - ------------------------------------------------------------------------------------------------------------
31 EX-27 5 FINANCIAL DATA SCHEDULE WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
5 1,000 U.S. DOLLARS 6-MOS DEC-31-1996 JAN-01-1996 JUN-30-1996 1 220 0 34,897 1,095 61,284 110,875 100,117 43,235 311,912 38,828 127,285 185 3,788 0 131,306 311,912 112,841 112,841 80,433 107,682 2,218 126 6,187 (3,147) (1,621) (1,526) 0 (2,595) 0 (4,121) (.22) (.22)
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