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