-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, P0uzzSizvSdoXaqCGYBTom/aog/B42htihSTo3msv2SiTUf0cYi4imzfaGZ+l65Y 2mvutN9j2wH0C/H6jUBveA== 0000950172-98-000475.txt : 19980514 0000950172-98-000475.hdr.sgml : 19980514 ACCESSION NUMBER: 0000950172-98-000475 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980513 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: STANHOME INC CENTRAL INDEX KEY: 0000093542 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-MISCELLANEOUS NONDURABLE GOODS [5190] IRS NUMBER: 041864170 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-09267 FILM NUMBER: 98618710 BUSINESS ADDRESS: STREET 1: 333 WESTERN AVE CITY: WESTFIELD STATE: MA ZIP: 01085 BUSINESS PHONE: 4135623631 FORMER COMPANY: FORMER CONFORMED NAME: STANLEY HOME PRODUCTS INC DATE OF NAME CHANGE: 19820513 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q (Mark One) (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1998 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____ to _____ . Commission File Number 0-1349 Enesco Group, Inc. - ----------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Massachusetts 04-1864170 - ------------------------------------ ----------------------- (State or other jurisdiction of (I.R.S. Employee incorporation or organization) Identification No.) 333 Western Avenue, Westfield, Massachusetts 01085 - ----------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) 413-562-3631 - ----------------------------------------------------------------------- (Registrant's telephone number, including area code) Stanhome Inc. _______________________________________________________________________ (Former name, address and fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] March 31, 1998 1997 ---- ---- Shares Outstanding: Common Stock with 16,343,251 17,910,333 Associated Rights Total number of pages contained herein 69 Index to Exhibits is on page 22 PART I. FINANCIAL INFORMATION ------------------------------ ITEM 1. FINANCIAL STATEMENTS ENESCO GROUP, INC. CONSOLIDATED CONDENSED BALANCE SHEETS MARCH 31, 1998 and DECEMBER 31, 1997 (Unaudited) (In Thousands) March 31, December 31, 1998 1997 ---- ---- ASSETS CURRENT ASSETS: Cash and certificates of deposit $ 23,074 $ 35,724 Accounts receivable, net 97,216 101,731 Inventories 98,164 107,752 Prepaid expenses 3,047 2,482 -------- -------- Total current assets 221,501 247,689 -------- -------- PROPERTY, PLANT AND EQUIPMENT, at cost 83,098 82,414 Less - Accumulated depreciation and amortization 48,131 46,836 -------- -------- 34,967 35,578 -------- -------- OTHER ASSETS: Goodwill and other intangibles, net 88,688 89,596 Other 34,265 27,539 -------- -------- 122,953 117,135 -------- -------- $379,421 $400,402 ======== ======== The accompanying notes are an integral part of these condensed financial statements. ENESCO GROUP, INC. CONSOLIDATED CONDENSED BALANCE SHEETS MARCH 31, 1998 and DECEMBER 31, 1997 (Unaudited) (In Thousands)
March 31, December 31, 1998 1997 ---- ---- LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Notes and loans payable $ 34,007 $ 8,388 Accounts payable 32,936 43,576 Federal, state and foreign taxes on income 31,357 42,158 Accrued expenses-- Payroll and commissions 11,514 13,576 Royalties 8,510 6,767 Vacation, sick and postretirement benefits 5,008 4,853 Pensions and profit sharing 3,508 6,128 Other 26,504 24,958 -------- -------- Total current liabilities 153,344 150,404 -------- -------- LONG-TERM LIABILITIES: Postretirement benefits 21,367 21,084 -------- -------- Total long-term liabilities 21,367 21,084 -------- -------- SHAREHOLDERS' EQUITY: Common stock 3,154 3,154 Capital in excess of par value 47,173 46,858 Retained earnings 354,724 355,806 Accumulated other comprehensive income ( 1,417) ( 1,519) -------- -------- 403,634 404,299 Less - Shares held in treasury, at cost 198,924 175,385 -------- -------- Total shareholders' equity 204,710 228,914 -------- -------- $379,421 $400,402 ======== ======== The accompanying notes are an integral part of these condensed financial statements.
ENESCO GROUP, INC. CONSOLIDATED CONDENSED STATEMENTS OF INCOME AND RETAINED EARNINGS FOR THE THREE MONTHS ENDED MARCH 31, 1998 and 1997 (Unaudited) (In thousands, except per share amounts)
1998 1997 ---- ---- NET SALES $108,220 $102,060 COST OF SALES 57,452 52,633 -------- -------- GROSS PROFIT 50,768 49,427 SELLING, DISTRIBUTION, GENERAL AND ADMINISTRATIVE EXPENSES 43,317 43,225 -------- -------- OPERATING PROFIT 7,451 6,202 Interest expense ( 756) ( 1,886) Other expense, net ( 544) ( 399) -------- -------- INCOME BEFORE INCOME TAXES FROM CONTINUING OPERATIONS 6,151 3,917 Income taxes 2,645 1,724 -------- -------- INCOME OF CONTINUING OPERATIONS, NET OF TAXES 3,506 2,193 INCOME OF DISCONTINUED OPERATIONS, NET OF TAXES - 1,048 NET LOSS ON SALE OF DIRECT RESPONSE - ( 35,000) -------- -------- NET INCOME (LOSS) 3,506 ( 31,759) RETAINED EARNINGS, beginning of period 355,806 403,805 Cash dividends, $.28 per share in 1998 and 1997 ( 4,588) ( 5,014) -------- -------- RETAINED EARNINGS, end of period $354,724 $367,032 ======== ======== EARNINGS (LOSS) PER COMMON SHARE, BASIC: CONTINUING OPERATIONS $ .21 $ .12 DISCONTINUED OPERATIONS - .06 SALE OF DIRECT RESPONSE - ( 1.95) ----- ----- TOTAL $ .21 ($1.77) ===== ===== DILUTED: CONTINUING OPERATIONS $ .21 $ .12 DISCONTINUED OPERATIONS - .06 SALE OF DIRECT RESPONSE - ( 1.95) ----- ----- TOTAL $ .21 ($1.77) ===== ===== The accompanying notes are an integral part of these condensed financial statements.
ENESCO GROUP, INC. CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 1998 and 1997 (Unaudited) (In Thousands)
1998 1997 ---- ---- OPERATING ACTIVITIES: Net income (loss) $ 3,506 ($31,759) Less- Net income discontinued operations - ( 1,048) - Loss on sale of Direct Response - 35,000 Adjustments to reconcile continuing operations net income to net cash provided by operating activities ( 13,349) ( 3,672) Operating activities of discontinued operations - 2,291 ------- ------- Net cash provided (used) by operating activities ( 9,843) 812 ------- ------- INVESTING ACTIVITIES: Purchase of property, plant and equipment ( 622) ( 1,221) Proceeds from sales of property, plant and equipment 47 661 Payments for acquisition of businesses, net of cash acquired ( 6) ( 51) Investing activities of discontinued operations - ( 524) ------- ------- Net cash used by investing activities ( 581) ( 1,135) ------- ------- FINANCING ACTIVITIES: Cash dividends ( 4,588) ( 5,014) Exchanges and purchases of common stock ( 23,616) - Notes and loans payable 25,668 9,085 Exercise of stock options 33 - Other common stock issuance 360 173 Financing activities of discontinued operations - ( 76) ------- ------- Net cash provided (used) by financing activities ( 2,143) 4,168 ------- ------- Effect of exchange rate changes on cash and cash equivalents ( 83) ( 714) ------- ------- Increase/(decrease) in cash and cash equivalents ( 12,650) 3,131 Cash and cash equivalents, beginning of year 35,722 10,306 ------- ------- Cash and cash equivalents, end of quarter $23,072 $13,437 ======= ======= The accompanying notes are an integral part of these condensed financial statements.
ENESCO GROUP, INC. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS The consolidated condensed financial statements and related notes included herein have been prepared by the Company, without audit except for the December 31, 1997 condensed balance sheet, which was derived from the Company's Annual Report on Form 10-K for the year ended December 31, 1997, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. The information furnished reflects all normal recurring adjustments which are, in the opinion of management, necessary to a fair statement of the results for the interim periods. It is suggested that these condensed financial statements be read in conjunction with the financial statements and related notes to consolidated financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 1997. At its annual meeting in April 1998, the Company's shareholders approved a proposal to change its corporate name to "Enesco Group, Inc.", to reflect the Company's transformation into a singularly focused designer and marketer of branded gifts and collectibles. The Stanhome Inc. name was sold as part of the December 1997 agreement to sell the majority of the business of the Direct Selling discontinued operation. 1. ACCOUNTING POLICIES: The Company's financial statements for the three months ended March 31, 1998 have been prepared in accordance with the accounting policies described in Note 1 to the December 31, 1997 consolidated financial statements included in the Company's 1997 Annual Report on Form 10-K. The Company considers all highly liquid securities, including certificates of deposit with maturities of three months or less, when purchased, to be cash equivalents. Accounts receivable were net of reserves for uncollectible accounts, returns and allowances of $13,738,000 at March 31, 1998 and $11,146,000 at December 31, 1997. The Company recognizes revenue as merchandise is turned over to the shipper and a provision for anticipated merchandise returns and allowances is recorded based upon historical experience. Amounts billed to customers for shipping and handling orders and collector club subscriptions are netted against the associated costs. The Company paid cash for interest and taxes as follows (in thousands): Three Months Ended March 31 ------------------ 1998 1997 ---- ---- Interest $ 583 $ 1,512 Income taxes $11,077 $ 3,953 2. COMPREHENSIVE INCOME: In June 1997, the Financial Accounting Standards Board adopted a new standard on reporting comprehensive income, which established standards for reporting and display of comprehensive income (net income (loss) together with other non-owner changes in equity) and its components in a full set of general purpose financial statements. The standard became effective for the Company in 1998 and required reclassification of comparative financial statements for prior years. The other comprehensive income consists only of cumulative translation adjustments. Comprehensive income (loss) for the three months ended March 31, 1998 and 1997 was as follows (in thousands): Three Months Ended March 31 ------------------ 1998 1997 ---- ---- NET INCOME (LOSS) $ 3,506 ($31,759) ------- ------- OTHER COMPREHENSIVE INCOME: Cumulative translation adjustments 102 ( 5,576) ------- ------- TOTAL OTHER COMPREHENSIVE INCOME 102 ( 5,576) ------- ------- COMPREHENSIVE INCOME (LOSS) $ 3,608 ($37,335) ======= ======= 3. DISCONTINUED OPERATIONS: In 1997, the Company discontinued and sold the majority of the Hamilton Direct Response and Worldwide Direct Selling operations. In connection with the Hamilton sale, the Company recorded a $35 million after tax charge in the first quarter of 1997. Accordingly, the applicable financial statements and related notes present these two business segments as discontinued operations. Therefore, the net assets and operating results of these two business segments have been segregated and reported as discontinued operations in the Consolidated Balance Sheets, Statements of Income, and Statements of Cash Flow. Included in other assets at March 31, 1998 is $6.7 million of the original $11 million Direct Selling Sale escrow deposit that continues to be held in escrow after March 31, 1998 due to claims filed by Laboratoires de Biologie Vegetale Yves Rocher of France. The Company is in the process of gathering information and detail to assess the merits of the claim. 4. INVENTORY CLASSES: The major classes of inventories at March and December 3l were as follows (in thousands): March 31, December 31, 1998 1997 ---- ---- Raw materials and supplies $ 1,247 $ 1,719 Work in process 805 930 Finished goods in transit 9,804 14,865 Finished goods 86,308 90,238 -------- -------- $ 98,164 $107,752 ======== ======== 5. OTHER EXPENSE, NET: Other expense, net for the three months ended March 31, 1998 and 1997 consists of the following (in thousands): 1998 1997 ---- ---- Interest income $ 343 $ 691 Amortization of other assets ( 873) ( 957) Other, net ( 14) ( 133) ------ ------ ($ 544) ($ 399) ====== ====== 6. EARNINGS PER COMMON SHARE (BASIS OF CALCULATION): In February 1997, the Financial Accounting Standards Board adopted a new standard on accounting for earnings per share. The standard became effective for the Company at December 31, 1997 and required restatement of prior years' earnings per share. Basic earnings per common share are based on the average number of common shares outstanding during the period covered. Diluted earnings per common share assumes, in addition to the above, a dilutive effect of common share equivalents during the period. Common share equivalents represent dilutive stock options using the treasury stock method. For the first quarter basic computations, the average numbers of outstanding shares utilized were 16,595,000 shares for 1998 and 17,905,000 shares for 1997. For the first quarter diluted computations, the average numbers of shares utilized were 16,605,000 and 17,926,000 shares for 1998 and 1997, respectively, including common share equivalents of 10,000 in 1998 and 21,000 in 1997. The lower average number of shares for the first quarter of 1998 primarily resulted from the repurchase of shares as part of the Company's repurchase program. 7. FINANCIAL INSTRUMENTS: The Company operates globally with various manufacturing and distribution facilities and product sourcing locations around the world. The Company may reduce its exposure to fluctuations in foreign interest rates and exchange rates by creating offsetting positions through the use of derivative financial instruments. The Company currently does not use derivative financial instruments for trading or speculative purposes. The notional amount of forward exchange contracts and options is the amount of foreign currency bought or sold at maturity. The notional amount of interest rate swaps is the underlying principal amount used in determining the interest payments exchanged over the life of the swap. The notional amounts are not a direct measure of the Company's exposure through its use of derivatives. The Company periodically uses interest rate swaps to hedge portions of interest payable on debt. In addition, the Company may periodically employ interest rate caps to reduce exposure, if any, to increases in variable interest rates. In October 1996, the Company entered into a three year interest rate swap with a notional amount of $50 million to effectively convert variable interest on debt to a fixed rate of 6.12%. The Company may periodically hedge foreign currency royalties, net investments in foreign subsidiaries, firm purchase commitments, contractual foreign currency cash flows or obligations, including third-party and intercompany foreign currency transactions. The Company regularly monitors its foreign currency exposures and ensures that hedge contract amounts do not exceed the amounts of the underlying exposures. The Company enters into various short-term foreign exchange agreements during the year. The purpose of the Company's foreign currency hedging activities is to protect the Company from risk that the eventual settlement of foreign currency transactions will be adversely affected by changes in exchange rates. The Company's various subsidiaries import products in foreign currencies and from time to time will enter into agreements or build foreign currency deposits as a partial hedge against currency fluctuations on inventory purchases. Gains and losses on these agreements are deferred and recorded as a component of cost of sales when the related inventory is sold. At March 31, 1998, deferred amounts were not material. The Company makes short-term foreign currency intercompany loans to various international subsidiaries and utilizes agreements to fully hedge these transactions against currency fluctuations. The cost of these agreements is included in the interest charged to the subsidiaries and expensed monthly as the interest is accrued. The intercompany interest eliminates upon consolidation and any gains and losses on the agreements are recorded as a component of other income. The Company receives dividends, technical service fees, royalties and other payments from its subsidiaries and licensees. From time to time, the Company will enter into foreign currency forward agreements as a partial hedge against currency fluctuations on these current receivables. Gains and losses are recognized or the credit or debit offsets the foreign currency payables. As of March 31, 1998, net deferred amounts on outstanding agreements were not material. The outstanding agreement amounts (notional value) at March 31, 1998, are $6.5 million U.S. dollars. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ENESCO GROUP, INC. THREE MONTHS ENDED MARCH 31, 1998 The information set forth below should be read in conjunction with the unaudited condensed consolidated financial statements and notes thereto included in Part I - Item 1 of the Quarterly Report and the Company's Annual Report on Form 10-K for the year ended December 31, 1997 which contains the audited financial statements and notes thereto for the years ended December 31, 1997, 1996 and 1995 and Management's Discussion and Analysis of Financial Condition and Results of Operations for those respective periods. Forward-looking statements, in this Quarterly Report on Form 10-Q as well as in the Company's Annual Report on Form 10-K for the year ended December 31, 1997, are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Stockholders are cautioned that all forward-looking statements pertaining to the Company involve risks and uncertainties, including, without limitation, risks detailed from time to time in the Company's periodic reports and other information filed with the Securities and Exchange Commission. At the Company's Annual Meeting on April 23, 1998, the shareholders approved a resolution authorizing the Company to change its name from Stanhome Inc. to Enesco Group, Inc., to reflect the Company's transformation into a singularly focused designer and marketer of branded gifts and collectibles. Commencing on May 1, 1998, shares of the Company's common stock traded on the New York Stock Exchange and the Pacific Exchange under the symbol "ENC". RESULTS OF OPERATIONS: Net sales increased 6.0% in the first quarter of 1998, due primarily to unit volume growth in the United States. International sales increased slightly and represented 17.9% of total 1998 first quarter sales compared to 18.9% in 1997. The Precious Moments line represented 39.4% of the 1998 first quarter sales compared to 36.3% in 1997 and the Cherished Teddies line represented 20.9% of 1998 first quarter sales compared to 23.7% in 1997. In the United States, the Company is in the process of analyzing the total economic return for all of its product lines, with the objective of phasing out those product lines that do not cover their total cost of capital investment. As these lines are phased out during the next year, the absence of sales from these lines will reduce sales volumes. Gross profit increased 2.7% in the first quarter of 1998, due primarily to the increase in sales volume. Gross profit as a percentage of net sales was 46.9% in the first quarter of 1998, compared to 48.4% in 1997. The decrease in the gross profit percentage in 1998 was due primarily to sales mix and a greater percentage of products sold at less than normal margins in the United States. Selling, distribution, general and administrative expenses increased .2% in the first quarter of 1998 versus 1997 and represented 40.0% of first quarter 1998 sales, compared to 42.4% in 1997. The 1998 reduction in expenses as a percentage of sales was due primarily to lower general and administrative expenses in the United States. The reductions were from cost controls, the start of benefits from downsizing the Company's Westfield, MA corporate headquarters, and a reduction of compensation resulting from the expiration on December 31, 1997 of an executive officer's employment agreement that had entitled a bonus in an amount equal to five percent of Enesco's pre-tax income, with certain adjustments, less a base salary. During the first quarter of 1998, there was a net pre-tax expense of approximately one million dollars resulting from a workforce reduction in the United States. Operating profit increased 20% in the first quarter of 1998 compared to 1997 and represented 6.9% of sales in 1998 compared to 6.1% in 1997, due to the factors described above. Most of the operating profit improvement was in the United States. International operating profit increased slightly. INTERNATIONAL ECONOMIES AND CURRENCY: The value of the U.S. dollar versus international currencies where the Company conducts business impacts the results of these businesses. In addition to the currency risks, the Company's international operations, including sources of imported products, are subject to other risks of doing business abroad, including import or export restrictions and changes in economic and political climates. The fluctuations in net sales and operating profit margins from quarter to quarter are partially due to the seasonal characteristics of the Company's business. INTEREST EXPENSE, net of investment income, decreased in the first quarter of 1998 compared with 1997, from lower borrowing levels due to the utilization of cash proceeds from the sale of discontinued operations in 1997. Other expense, net is principally the amortization of goodwill and was less in the first quarter of 1998 compared to 1997 due to certain categories being fully amortized. THE PROVISION FOR INCOME TAXES of 43% in the first quarter of 1998 was lower than the 44% provision in 1997, due primarily to a higher percentage of total before tax income from the United States, which has a lower effective tax rate. DISCONTINUED OPERATIONS: In April 1997, the Company announced the sale of the majority of its Hamilton Direct Response business and a plan to sell its Direct Selling business. The majority of the Direct Selling business was sold in December 1997. The Company's Direct Selling Cosmhogar manufacturing subsidiary, located in Spain, was not sold. The Cosmhogar facility and certain other assets of the Direct Selling Group remain to be sold. The applicable financial statements and related notes present these two divested business segments as discontinued operations. Therefore, the net assets and operating results of these two divested business segments have been segregated and reported as discontinued operations in the Consolidated Balance Sheets, Statements of Income, and Statements of Cash Flows. Note 3, Discontinued Operations, to the Consolidated Condensed Financial Statements provides additional information on the two discontinued operations. 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 sources of funds in the first quarter of 1998 from operating activities for continuing operations were from net income, depreciation, amortization and lower levels of accounts receivable and inventories. Due to seasonal sales volume, accounts receivable were down from year-end 1997. Accounts receivable in the first quarter of 1998 decreased 12% compared to the first quarter of 1997. The decrease occurred, even though sales increased 6% in the first quarter 1998, due to the impact of the implementation of tighter credit controls and improved collection performance. Inventories decreased compared to year-end 1997 as progress was made in alleviating the high levels of inventory. Other assets increased at March 31, 1998 due primarily to $6.7 million of the $11 million Direct Selling sale escrow deposit continuing to be held in escrow after March 31, 1998. Accounts payable and accrued expenses decreased from year-end levels due to lower seasonal volumes. Taxes payable decreased due to seasonal volumes and payments of taxes related to the sale of the Direct Selling business. 1998 current liabilities, excluding loans payable, were higher than 1997 first quarter levels due to timing of payments and to the amounts remaining to be paid from the 1997 provision to downsize corporate headquarters and for payments due relating to the 1997 sales of discontinued operations. The major use of cash in investing activities in the first quarter of 1998 was for capital expenditures. Capital expenditure commitments for $10 million are forecasted for 1998. The level of changes of marketable securities from period to period principally represents investment alternatives versus certificates of deposit, time deposits, and intercompany loans. The major uses of cash in financing activities in the first quarter of 1998 were for dividends to shareholders and purchases of common stock, which were primarily financed with increased borrowings. During the first three months this year, the Company repurchased 872 thousand shares for $23.6 million. The Company has an authorized program to purchase shares of stock for the Company treasury from time to time in the open market or in private transactions, depending on market and business conditions, and may utilize funds for this purpose in the future. As of March 31, 1998, 1.3 million shares remained available for purchase under the program. The Company's earnings, cash flow, and available debt capacity have made and make stock repurchases, in the Company's view, one of its best investment alternatives. The major source of funds from financing activities was from higher seasonal borrowings. The aggregate exercise price of the total number of stock options outstanding was $92 million at March 31, 1998, and the Company could receive some or all of these funds in the future if the options are exercised. Fluctuations in the value of the U. S. dollar versus international currencies affect the U. S. dollar translation value of international currency denominated balance sheet items. The changes in the balance sheet dollar values due to international currency translation fluctuations are recorded as a component of accumulated comprehensive income in shareholders' equity. The Company currently believes that cash from operations and available financing alternatives are adequate to meet anticipated requirements for working capital, dividends, capital expenditures, the stock repurchase program and other needs. No liquidity problems are anticipated. PART II. OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS (a) The Annual Meeting of Stockholders was held on April 23, 1998. (c) The first matter voted upon at the meeting was the election of Directors. The members of Class III were standing for election to a three-year term expiring at the Annual Meeting in 2001. Upon motion duly made and seconded, it was voted to elect John F. Cauley, Jeffrey A. Hutsell, Homer G. Perkins and Anne-Lee Verville as Class III Directors for a three-year term expiring at the Annual Meeting in 2001 and until their successors are elected and qualified. The votes for each of the candidates were reported as follows: John F. Cauley For: 14,201,546 Withheld: 127,495 Jeffrey A. Hutsell For: 14,217,907 Withheld: 111,134 Homer G. Perkins For: 14,190,571 Withheld: 138,470 Anne-Lee Verville For: 14,206,465 Withheld: 122,576 The second matter voted upon at the meeting was the approval of amendments to the Restated Articles of Organization, as amended, of the Company. Upon motion duly made and seconded, it was voted to change the name and purpose of the Company and to provide that stockholders meetings may be held anywhere within the United States. The votes for the amendments were reported as follows: Amendments to Articles For: 13,067,133 Against: 80,331 Abstain: 149,325 Broker Non-Votes: 1,032,252 The third matter voted upon at the meeting was a stockholder proposal recommending the sale of the Company and its subsidiaries. Upon motion duly made and seconded, it was voted that the stockholder proposal not be approved. The votes for the above referenced stockholder proposal were reported as follows: Stockholder Proposal For: 1,419,786 Against: 11,429,371 Abstain: 447,630 Broker Non-Votes: 1,032,254 The fourth matter voted upon at the meeting was the approval and ratification of the Board's appointment of Arthur Andersen LLP as independent accountants for 1998. Upon motion duly made and seconded, it was voted that the appointment by the Board of Directors at its March 4, 1998 meeting of Arthur Andersen LLP, independent certified public accountants, as independent accountants for the Company for its fiscal year ending December 31, 1998 be ratified and approved. The votes for the independent accountants were reported as follows: Arthur Andersen LLP For: 14,191,839 Against: 109,295 Abstain: 27,907 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits - Restated Articles of Organization as amended - By-Laws as amended - Fourth Amendment to Stanhome Inc. Supplemental Pension Plan - Change in Control Agreement with Eugene Freedman - John J. Dur Release Agreement - Financial Data Schedule (b) Reports on Form 8-K No reports on Form 8-K were filed by the Company during the Quarter for which this report is filed. All other items hereunder are omitted because either such item is inapplicable or the response to it is negative. Signatures Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. STANHOME INC. (Registrant) Date: May 12, 1998 /s/ H. L. Tower ----------------------------------------- H.L. Tower Chairman and Chief Executive Officer Date: May 12, 1998 /s/ Allan G. Keirstead ----------------------------------------- Allan G. Keirstead Chief Administrative and Financial Officer EXHIBIT INDEX Reg. S-K Item 601 Exhibit 10-Q Page No. - --------- ------- ------------- 3(a) Restated Articles of Organization 23 as amended 3(b) By-Laws as amended 32 10(a) Fourth Amendment to Stanhome Inc. Supplemental Pension Plan 46 10(b) Change in Control Agreement with Eugene Freedman 48 10(c) John J. Dur Release Agreement 58 27 Financial Data Schedule 69 EX-3 2 EXHIBIT 3(A) EXHIBIT 3(a) [NOTE: THE FOLLOWING RESTATED ARTICLES OF ORGANIZATION HAVE BEEN FURTHER RESTATED, FOR PURPOSES OF FILING THE SAME WITH THE SECURITIES AND EXCHANGE COMMISSION ONLY, TO GIVE EFFECT TO ALL AMENDMENTS OF AND ADDITIONS TO THE RESTATED ARTICLES OF ORGANIZATION OF ENESCO GROUP, INC. FILED WITH THE SECRETARY OF THE COMMONWEALTH OF THE COMMONWEALTH OF MASSACHUSETTS PRIOR TO THE DATE THESE RESTATED ARTICLES OF ORGANIZATION ARE FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. SIGNATURES FROM THE ORIGINAL HAVE BEEN OMITTED.] FEDERAL IDENTIFICATION NO. 04-1864170 THE COMMONWEALTH OF MASSACHUSETTS WILLIAM FRANCIS GALVIN Secretary of the Commonwealth ONE ASHBURTON PLACE, BOSTON, MASSACHUSETTS 02108-1512 RESTATED ARTICLES OF ORGANIZATION General Laws, Chapter 156B, Section 74 This certificate must be submitted to the Secretary of the Commonwealth within sixty days after the date of the vote of stockholders adopting the restated articles of organization. The fee for filing this certificate is prescribed by General Laws, Chapter 156B, Section 114. Make check payable to the Commonwealth of Massachusetts. We, Jeffrey A. Hutsell , President Peter R. Johnson , Clerk of STANHOME INC. (Exact name of corporation) located at 333 Western Avenue, Westfield, Massachusetts 01085 (Street address of corporation in Massachusetts) do hereby certify that the following amendments to the restatement of the articles of organization of the corporation were duly adopted at a meeting held on April 23, 1998, by vote of: 13,067,133 shares of common stock of 16,417,653 shares outstanding, - ----------- --------------- ----------- (type, class & series, if any) being at least a majority of each type, class or series outstanding and entitled to vote thereon: 1. The name by which the corporation shall be known is: Enesco Group, Inc. 2. The purposes for which the corporation is formed are as follows: To manufacture, process, assemble, warehouse, buy, sell, distribute and otherwise engage in and carry on the business of marketing giftware and collectible products and other items, materials, articles, goods and merchandise and otherwise dealing in real, personal and intellectual or industrial property of all kinds and descriptions; to exercise all of the powers conferred upon business corporations by, and from time to time permitted to be exercised by business corporations under, the laws of the Commonwealth of Massachusetts; and to engage in and carry on any other lawful business or transaction which may now or hereafter be permitted under the laws of the Commonwealth of Massachusetts to be conducted, whether in that Commonwealth or elsewhere, by a business corporation organized under Chapter 156B of the Massachusetts General Laws. 3. The total number of shares and the par value, if any, of each class of stock which the corporation is authorized to issue is as follows: WITHOUT PAR VALUE WITH PAR VALUE CLASS OF STOCK NUMBER OF SHARES NUMBER OF SHARES PAR VALUE Preferred None None Common Stock None 80,000,000 $.125 4. If more than one class is authorized, a description of each of the different classes of stock with, if any, the preferences, voting powers, qualifications, special or relative rights or privileges as to each class thereof and any series now established: "Not Applicable". 5. The restrictions, if any, imposed by the articles of organization upon the transfer of shares of stock of any class are as follows: "None". 6. Other lawful provision, if any, for the conduct and regulation of the business and affairs of the corporation, for its voluntary dissolution, or for limiting, defining, or regulating the powers of the corporation, or of its directors or stockholders, or of any class of stockholders: ARTICLE 6A A. In addition to any affirmative vote required by law or these Restated Articles of Organization or the By-laws of the Corporation, and except as otherwise expressly provided in Section B of this Article 6A, a Business Combination (as hereinafter defined) with, or proposed by or on behalf of, any Interested Stockholder (as hereinafter defined) or any Affiliate or Associate (as hereinafter defined) of any Interested Stockholder or any person who thereafter would be an Affiliate or Associate of such Interested Stockholder shall require the affirmative vote of not less than eighty percent (80%) of the votes entitled to be cast by the holders of all the then outstanding shares of Voting Stock (as hereinafter defined), voting together as a single class. Such affirmative vote shall be required notwithstanding the fact that no vote may be required, or that a lesser percentage or separate class vote may be specified, by law or in any agreement with any national securities exchange or otherwise. B. The provisions of Section A of this Article 6A shall not be applicable to any particular Business Combination, and such Business Combination shall require only such affirmative vote, if any, as is required by law or by any other provision of these Restated Articles of Organization or the By-laws of the Corporation, or any agreement with any national securities exchange, if the Business Combination shall have been approved, either specifically or as a transaction which is within an approved category of transactions, by a majority (whether such approval is made prior to or subsequent to the acquisition of, or announcement or public disclosure of the intention to acquire, beneficial ownership of the Voting Stock that caused the Interested Stockholder to become an Interested Stockholder) of the Continuing Directors (as hereinafter defined). C. The following definitions shall apply with respect to this Article 6A: 1. The term "Business Combination" shall mean: a. any merger or consolidation of the Corporation or any Subsidiary (as hereinafter defined) with (i) any Interested Stockholder or (ii) any other company (whether or not itself an Interested Stockholder) which is or after such merger or consolidation would be an Affiliate or Associate of an Interested Stockholder; or b. any sale, lease, exchange, mortgage, pledge, transfer or other disposition or security arrangement, investment, loan, advance, guarantee, agreement to purchase, agreement to pay, extension of credit, joint venture participation or other arrangement (in one transaction or a series of transactions) with or for the benefit of any Interested Stockholder or any Affiliate or Associate of any Interested Stockholder involving any assets, securities or commitments of the Corporation, any Subsidiary or any Interested Stockholder or any Affiliate or Associate of any Interested Stockholder which (except for any arrangement, whether as employee, consultant or otherwise, other than as a director, pursuant to which any Interested Stockholder or any Affiliate or Associate thereof shall, directly or indirectly, have any control over or responsibility for the management of any aspect of the business or affairs of the Corporation, with respect to which arrangements the value tests set forth below shall not apply), together with all other such arrangements (including all contemplated future events), has a aggregate Fair Market Value and/or involves aggregate commitments of $10,000,000 or more or constitutes more than 5 percent of the book value of the total assets (in the case of transactions involving assets or commitments other than capital stock) or 5 percent of the stockholders' equity (in the case of transactions involving assets or commitments other than capital stock) or 5 percent of the stockholders' equity (in the case of transactions in capital stock) of the entity in question (the "Substantial Part"), as reflected in the most recent fiscal year-end consolidated balance sheet of such entity existing at the time the stockholders of the Corporation would be required to approve or authorize the Business Combination involving the assets, securities and/or commitments constituting any Substantial Part; or c. the adoption of any plan or proposal for the liquidation or dissolution of the Corporation or for any amendment to the Corporation's By-laws; or d. any reclassification of securities (including any reverse stock split), or recapitalization of the Corporation, or any merger or consolidation of the Corporation with any of its Subsidiaries or any other transaction (whether or not with or otherwise involving an Interested Stockholder) that has the effect, directly or indirectly, of increasing the proportionate share of any class or series of Capital Stock, or any securities convertible into Capital Stock or into equity securities of any Subsidiary, that is beneficially owned by any Interested Stockholder or any Affiliate or Associate of any Interested Stockholder; or e. any agreement, contract or other arrangement providing for any one or more of the actions specified in the foregoing clauses (a) to (d). 2. The term "Capital Stock" shall mean all capital stock of the Corporation authorized to be issued from time to time under Article 3 of these Restated Articles of Organization, and the term `Voting Stock' shall mean all Capital Stock which by its terms may be voted on all matters submitted to stockholders of the Corporation generally. 3. The term "person" shall mean any individual, firm, company or other entity and shall include any group comprised of any person and any other person with whom such person or any Affiliate or Associate of such person has any agreement, arrangement or understanding, directly or indirectly, for the purpose of acquiring, holding, voting or disposing of Capital Stock. 4. The term "Interested Stockholder" shall mean any person (other than the Corporation or any Subsidiary and other than any profit-sharing, employee stock ownership or other employee benefit plan of the Corporation or any Subsidiary or any trustee of or fiduciary with respect to any such plan when acting in such capacity) who (a) after June 26, 1986, becomes or announces or publicly discloses a plan or intention to become the beneficial owner of Voting Stock representing ten percent (10%) or more of the votes entitled to be cast by the holders of all then outstanding shares of Voting Stock, except any person who becomes such a 10% holder solely as the result of Corporate action; or (b) is an Affiliate or Associate of the Corporation and at any time after June 26, 1986 and within the two-year period immediately prior to the date in question has become the beneficial owner of Voting Stock representing ten percent (10%) or more of the votes entitled to be cast by the holders of all then outstanding shares of Voting Stock, unless such Affiliate or Associate has become such a 10% holder solely as a result of Corporate action. 5. A person shall be a "beneficial owner" of any Capital Stock (a) which such person or any of its Affiliates or Associates beneficially owns, directly or indirectly; (b) which such person or any of its Affiliates or Associates has, directly or indirectly, (i) the right to acquire (whether such right is exercisable immediately or subject only to the passage of time), pursuant to any agreement, arrangement or understanding or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise, or (ii) the right to vote pursuant to any agreement, arrangement or understanding, except a revocable proxy given in response to a public proxy or consent solicitation made pursuant to, and in accordance with, the applicable provisions of the Securities Exchange Act of 1934 and the rules and regulations thereunder (the "Act") (or any subsequent provisions replacing such Act, rules or regulations); or (c) which is beneficially owned, directly or indirectly, by any other person with which such person or any of its Affiliates or Associates has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of any shares of Capital Stock. For the purposes of determining whether a person is an Interested Stockholder pursuant to Paragraph 4 of this Section C, the number of shares of Capital Stock deemed to be outstanding shall include shares deemed beneficially owned by such person through application of this Paragraph 5 of Section C, but shall not include any other shares of Capital Stock that may be issuable pursuant to any agreement, arrangement or understanding, or upon exercise of conversion rights, warrants or options, or otherwise. 6. The terms "Affiliate" and "Associate" shall have the respective meanings ascribed to such terms in Rule 12b-2 under the Securities Exchange Act of 1934, as amended and the rules and regulations thereunder (the "Act"), as in effect on date of amendment (the term "registrant" in said Rule 12b-2 meaning in this case the Corporation). 7. The term "Subsidiary" means any company of which a majority of any class of equity security is beneficially owned by the Corporation; provided, however, that for the purposes of the definition of Interested Stockholder set forth in Paragraph 4 of this Section C, the term "Subsidiary" shall mean only a company of which a majority of each class of equity security is beneficially owned by the Corporation. 8. The term "Continuing Director" means any member of the Board of Directors of the Corporation (the "Board of Directors"), while such person is a member of the Board of Directors, who is not an Affiliate or Associate or representative of the Interested Stockholder and was a member of the Board of Directors prior to the time that the Interested Stockholder became an Interested Stockholder, and any successor of a Continuing Director while such successor is a member of the Board of Directors, who is not an Affiliate or Associate or representative of the Interested Stockholder and is recommended or elected to succeed the Continuing Director by a majority of Continuing Directors. 9. The term "Fair Market Value" means (a) in the case of cash, the amount of such cash; (b) in the case of stock, the highest closing sale price during the 30-day period immediately preceding the date in question of a share of such stock on the Composite Tape for New York Stock Exchange Listed Stocks, or, if such stock is not quoted on the Composite Tape, on the New York Stock Exchange, or, if such stock is not listed on such Exchange, on the principal United States securities exchange registered under the Act on which such stock is listed, or, if such stock is not listed on any such exchange, the highest last quoted price or, if not so quoted, the highest average of the high bid and low asked prices in the over-the-counter market with respect to a share of such stock during the 30-day period preceding the date in question on the National Association of Securities Dealers, Inc. Automated Quotations System or any similar system then in use, or if no such quotations are available, the fair market value on the date in question of a share of such stock as determined by a majority of the Continuing Directors in good faith; and (c) in the case of property other than cash or stock, the fair market value of such property on the date in question as determined in good faith by a majority of the Continuing Directors. D. A majority of the Continuing Directors shall have the power and duty to determine for the purposes of this Article 6A, on the basis of information known to them after reasonable inquiry, all questions arising under this Article 6A, including, without limitation, (a) whether a person is an Interested Stockholder, (b) the number of shares of Capital Stock or other securities beneficially owned by any person, (c) whether a person is an Affiliate or Associate of another, (d) whether a Proposed Action is with, or proposed by, or on behalf of an Interest Stockholder or an Affiliate or Associate of an Interested Stockholder, (e) whether the assets that are the subject of any Business Combination have, or the consideration to be received for the issuance or transfer of securities by the Corporation or any Subsidiary in any Business Combination has, an aggregate Fair Market Value of $10,000,000 or more, and (f) whether the assets or securities that are the subject of any Business Combination constitute a Substantial Part. Any such determination made in good faith shall be binding and conclusive on all parties. E. Nothing contained in this Article 6A shall be construed to relieve any Interested Stockholder from any fiduciary obligation imposed by law. F. This Article 6A shall not be exclusive with respect to its subject matter. G. Except as otherwise provided in the Restated Articles of Organization or as otherwise required by law, any merger or consolidation or sale, lease or exchange of all or substantially all of the Corporations assets, including its goodwill, which would otherwise require a vote of stockholders of this Corporation pursuant to Chapter 156B of the General Laws of the Commonwealth of Massachusetts shall require the affirmative vote of a majority of the shares of each class of stock of this Corporation outstanding and entitled to vote on the question. H. For the purposes of this Article 6A, a Business Combination or any proposal to amend, repeal or adopt any provision of these Restated Articles of Organization inconsistent with this Article 6A (collectively, "Proposed Action") is presumed to have been proposed by, or on behalf of, an Interested Stockholder or an Affiliate or Associate of an Interested Stockholder or a person who thereafter would become such if (1) after the Interested Stockholder became such, the Proposed Action is proposed following the election of any director of the Corporation who with respect to such Interested Stockholder, would not qualify to serve as a Continuing Director or (2) such Interested Stockholder, Affiliate, Associate or person votes for or consents to the adoption of any such Proposed Action, unless as to such Interested Stockholder, Affiliate, Associate or person a majority of the Continuing Directors makes a good faith determination that such Proposed Action is not proposed by or on behalf of such Interested Stockholder, Affiliate, Associate or person, based on information known to them after reasonable inquiry. I. Notwithstanding any other provisions of these Restated Articles of Organization or the By-laws of the Corporation (and notwithstanding the fact that a lesser percentage or separate class vote may be specified by law, these Restated Articles of Organization or the By-laws of the Corporation), any proposal to amend, repeal or adopt any provision of these Articles of Organization inconsistent with this Article 6A which is proposed by or on behalf of an Interested Stockholder or an Affiliate or Associate of an Interested Stockholder shall require the affirmative vote of the holders of not less than eighty percent (80%) of the votes entitled to be cast by the holders of all the then outstanding shares of Voting Stock, voting together as a single class; provided, however, that this Section H shall not apply to, and such eighty percent (80%) vote shall not be required for, any amendment, repeal or adoption unanimously recommended by the Board of Directors if all of such directors are persons who would be eligible to serve as Continuing Directors within the meaning of Section C, Paragraph 8 of this Article 6A. ARTICLE 6B The business and affairs of the Corporation shall be managed by or under the direction of a Board of Directors consisting of not less than three nor more than eighteen directors, the exact number of directors to be determined from time to time by resolution adopted by affirmative vote of a majority of the entire Board of Directors. The directors shall be divided into three classes, designated Class I, Class II and Class III. Each class shall consist, as nearly as may be possible, of one-third of the total number of directors constituting the entire Board of Directors. If the number of directors is changed, any increase or decrease shall be apportioned among the classes so as to maintain the number of directors in each class as nearly equal as possible, and any additional director of any class elected to fill a vacancy resulting from an increase in such class shall hold office for a term that shall coincide with the remaining term of that class, but in no case will a decrease in the number of directors shorten the term of any incumbent director. A director shall hold office until the annual meeting for the year in which his term expires and until his successor shall be elected and shall qualify, subject, however, to prior death, resignation, retirement, disqualification or removal from office. Any vacancy on the Board of Directors that results from an increase in the number of directors may only be filled by a majority of the Board of Directors then in office, provided that a quorum is present, and any other vacancy occurring in the Board of Directors may only be filled by a majority of the directors then in office, even if less than a quorum, or by a sole remaining director. Any director elected to fill a vacancy not resulting from an increase in the number of directors shall have the same remaining term as that of his predecessor. Nominations for the election of directors at an annual meeting may be made by the Board of Directors or a committee appointed by the Board of Directors or by any stockholder entitled to vote generally in the election of directors. However, any stockholder may nominate one or more persons for election as directors at an annual meeting only if written notice of such stockholders intent to make such nomination or nominations has been given, either by personal delivery or by United States mail, postage prepaid, to the Secretary not later than forty-five days prior to the anniversary of the date of the immediately preceding annual meeting. Each such notice shall set forth: (a) the name and address of the stockholder who intends to make the nomination and of the person or persons to be nominated; (b) a representation that the stockholder is a holder of record of this Corporation entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice; (c) a description of all arrangements or understandings between the stockholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by the stockholder; (d) such other information regarding each nominee proposed by such stockholder as would be required to be included in a proxy statement filed pursuant to the proxy rules of the Securities and Exchange Commission; and (e) the consent of each nominee to serve as a director if so elected. The presiding officer of the meeting may refuse to acknowledge the nomination of any person not made in compliance with the foregoing procedure. A director may not be removed from office without cause, and may be removed for cause only after a reasonable notice and opportunity to be heard before the body proposing to remove him. Notwithstanding any other provision of these Restated Articles of Organization, the affirmative vote of holders of 80% of the shares entitled to vote at an election of directors shall be required to amend, alter, change or repeal, or to adopt any provision as part of these Restated Articles of Organization inconsistent with the purpose and intent of, this Article 6B. ARTICLE 6C Except as otherwise provided herein or required by law, the Corporation may authorize, at a meeting of stockholders duly called for the purpose, by a vote of a majority of each class of stock outstanding and entitled to vote thereon, any amendment of these Restated Articles of Organization. ARTICLE 6D The Board of Directors shall have the power to make, amend or repeal the Bylaws of the Corporation in whole or in part. ARTICLE 6E Directors of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for any breach of fiduciary duty as a Director occurring on or after April 24, 1987 notwithstanding any provision of law imposing such liability; provided, however, that the foregoing provision shall not be deemed to eliminate or limit any liability of a Director (i) for any breach of the Director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section Sixty-one or Sixty-two of the Business Corporation Law of the Commonwealth or (iv) for any transaction from which the Director derived an improper personal benefit. ARTICLE 6F Meetings of the stockholders of the Corporation shall be held anywhere within the United States, as determined by the Board of Directors of the Corporation, as permitted by the provisions of the Massachusetts Business Corporation Law. We further certify that the foregoing restated articles of organization effect no amendments to the articles of organization of the corporation as heretofore amended. (*If there are no such amendments, state "None".) These Restated Articles of Organization shall become effective on April 30, 1998 at 5:00 P.M. IN WITNESS WHEREOF AND UNDER THE PENALTIES OF PERJURY, we have hereto signed our names this 24th day of April in the year 1998. /s/ Jeffrey A. Hutsell President /s/ Peter R. Johnson Clerk EX-3 3 EXHIBIT 3(B) EXHIBIT 3(b) AMENDED AND RESTATED BY-LAWS OF ENESCO GROUP, INC. As Amended Through May 1, 1998 AMENDED AND RESTATED BY-LAWS OF ENESCO GROUP, INC. TABLE OF CONTENTS ARTICLE PAGE I OFFICES.......................................................1 Sec. 1 Principal Office.......................................1 Sec. 2 Other Offices..........................................1 II MEETINGS OF STOCKHOLDERS......................................1 Sec. 1 Place of Meetings......................................1 Sec. 2 Quorum.................................................1 Sec. 3 Annual Meetings........................................1 Sec. 4 Special Meetings.......................................2 Sec. 5 Notices................................................2 Sec. 6 Adjournments...........................................2 III DIRECTORS.....................................................2 Sec. 1 Number and Term........................................2 Sec. 2 Annual Meetings........................................2 Sec. 3 Regular Meetings.......................................2 Sec. 4 Special Meetings.......................................3 Sec. 5 Waiver of Notice.......................................3 Sec. 6 Quorum.................................................3 Sec. 7 Action without Meeting.................................3 Sec. 8 Powers.................................................3 Sec. 9 Execution of Corporation Documents and Instruments.....3 Sec. 10 Committees of the Board of Directors..................4 Sec. 11 Remuneration of Outside Directors.....................4 IV OFFICERS......................................................4 Sec. 1 Election of Officers...................................4 Sec. 2 Terms of Office........................................4 Sec. 3 Compensation of Officers, Employees and Agents.........5 Sec. 4 Vacancies..............................................5 CHAIRMAN OF THE BOARD Sec. 5........................................................5 Sec. 6........................................................5 PRESIDENT Sec. 7........................................................5 Sec. 8........................................................5 VICE-PRESIDENTS Sec. 9........................................................6 TREASURER Sec. 10.......................................................6 Sec. 11.......................................................6 Sec. 12.......................................................6 Sec. 13.......................................................6 ASSISTANT TREASURERS Sec. 14.......................................................7 SECRETARY Sec. 15.......................................................7 ASSISTANT SECRETARIES Sec. 16.......................................................7 CLERK Sec. 17.......................................................7 ASSISTANT CLERKS Sec. 18.......................................................8 BONDS Sec. 19.......................................................8 V INDEMNIFICATION OF OFFICERS AND DIRECTORS.....................8 VI STOCK.........................................................9 Sec. 1 Holders to be Recognized...............................9 Sec. 2 Form of Stock Certificates.............................9 Sec. 3 Replacement of Certificates Lost, Etc..................9 Sec. 4 Fixing Date for Determination of Stockholders of Record...........................................10 Sec. 5 Restrictions on Transfer..............................10 Sec. 6 Massachusetts Control Share Acquisition Act...........10 VII SEAL AND FISCAL YEAR.........................................10 Sec. 1 Seal..................................................10 Sec. 2 Fiscal Year...........................................11 VIII AMENDMENT OF BY-LAWS.........................................11 Sec. 1.......................................................11 Sec. 2.......................................................11 AMENDED AND RESTATED BY-LAWS OF ENESCO GROUP, INC. ARTICLE I OFFICES Sec. 1. Principal Office. The location of the principal office of the Corporation in the Commonwealth of Massachusetts shall be in the City of Westfield, unless such location shall at any time be changed as permitted by law. Sec. 2. Other Offices. The Corporation may also have offices in such other places within and without the Commonwealth of Massachusetts as the business of the Corporation may require. ARTICLE II MEETINGS OF STOCKHOLDERS Sec. 1. Place of Meetings. Meetings of the stockholders of the Corporation shall be held anywhere within the United States, as determined by the Board of Directors of the Corporation, as permitted by the provisions of the Massachusetts Business Corporation Law. Sec. 2. Quorum. A majority of the stock issued, outstanding and entitled to vote on the matters to be presented, which is represented by the holders thereof, either in person or by proxy, shall be a quorum at any meeting of stockholders. Sec. 3. Annual Meetings. The annual meeting of the stockholders shall be held on the fourth Thursday of April in each year at 10:00 A.M. unless by order of the Board of Directors the notice of the annual meeting shall designate some other hour on such date. At each annual meeting the stockholders entitled to vote thereat on the matter shall elect the class of Directors whose term of office is expiring, in accordance with the provisions of Article 6B of the Restated Articles of Organization of the Corporation, as amended. At each annual meeting the stockholders entitled to vote thereat on the matter shall have placed before them for ratification the name of the Auditor appointed by the Board of Directors in accordance with law. Sec. 4. Special Meetings. Special meetings of stockholders may be called by the President, or by the Directors, or in any other manner specifically authorized by law; provided, however, that if one or more stockholders request the special meeting, the holders of at least ninety percent in interest of the capital stock entitled to vote at the meeting must submit written application therefor. Sec. 5. Notices. Notice of any meeting of stockholders shall, at least seven days prior to the date thereof, be mailed by the Clerk or an Assistant Clerk or delivered by either to each stockholder entitled to vote on any of the matters to be presented at his address as the same appears on the stock records of the Corporation or so mailed or delivered to his residence or to his usual place of business. Sec. 6. Adjournments. Any meeting of the stockholders may be adjourned to any other time and place by the stockholders present or represented by proxy at the meeting and entitled to vote on the matters to be presented, although less than a quorum, and it shall not be necessary to notify any stockholder of any such adjournment. Any business which could have been transacted at any meeting of stockholders as originally called may be transacted at any such adjournment thereof. ARTICLE III DIRECTORS Sec. 1. The business and affairs of the Corporation shall be managed by or under the direction of a Board of Directors as set forth in Article 6B of the Restated Articles of Organization of the Corporation, as amended. Each Director shall be a voting stockholder or shall become such prior to acting as a director. Sec. 2. Annual Meetings. Following each annual meeting of stockholders and at the place thereof, if a quorum of the Board of Directors is present thereat, the annual meeting of the Board of Directors shall proceed thereafter without notice; but if a quorum of the Board is not present thereat, or, if present, does not so proceed to hold such meeting, the annual meeting of such Board shall be called in the manner hereinafter provided with respect to the call of a special meeting of the Board. Sec. 3. Regular Meetings. Regular meetings of the Board of Directors may be held at such times and places within or without the Commonwealth of Massachusetts as shall from time to time be fixed by the Board, and no notice need be given of regular meetings held at times and places so fixed. Sec. 4. Special Meetings. Special meetings of the Board of Directors may be called at any time by the Chairman of the Board or the President, and the Secretary or an Assistant Secretary shall give notice of any special meeting so called to all Directors stating the time and place within or without the Commonwealth of Massachusetts, and such notice shall be sufficient if given either (i) by mailing the same postage prepaid forty-eight hours before the date of the meeting addressed to each Director at his usual place of business or residence, or (ii) by delivery thereof in hand or by telegram dispatched prepaid not less than twenty-four hours before the date of the meeting, or (iii) orally or by telephone not less than twenty-four hours before the date of the meeting. Sec. 5. Waiver of Notice. Any requirement of notice of any meeting of the Board of Directors shall be deemed satisfied as to any Director who waives the same or whose attendance at such meeting constitutes a waiver under the law. Sec. 6. Quorum. A majority of the Board of Directors in office shall constitute a quorum for the transaction of business, and a meeting of the Board, whether a quorum be present or not, may be adjourned by those present without the necessity of notifying any Director of any such adjournment. Any business which could legally be transacted at any meeting of the Board of Directors may be transacted at any adjournment thereof without any new notification. Sec. 7. Action without Meeting. Any action required or permitted to be taken at any meeting of the Board of Directors may be taken without a meeting if all Directors consent in writing to such action. Such written consent shall be filed with the minutes of the Board of Directors. Sec. 8. Powers. The Board of Directors shall manage the business of the Corporation and shall have all the powers of the Corporation, except such as by law, the Articles of Organization or by the By-Laws of the Corporation are conferred upon or reserved to the stockholders. Sec. 9. Execution of Corporation Documents and Instruments. The Board of Directors shall designate the persons, in addition to those specifically authorized elsewhere in these By-Laws, who shall be empowered on behalf of the Corporation to sign checks, contracts, bids, deeds, releases, securities devices, notes and other documents and instruments of the Corporation, as well as the terms and conditions, if any, of such signing. Sec. 10. Committees of the Board of Directors. The Board of Directors may establish such committees, including an Executive Committee, consisting of members elected by it from among its number as it deems advisable in the conduct of the business of the Corporation and may delegate such functions and duties to such committees from time to time as may be permitted by law. Sec. 11. Remuneration of Outside Directors. Any Director who is entitled to compensation from the Corporation as an officer or employee thereof shall not receive any additional compensation for his services as a director. The Board of Directors may provide for remuneration of all other Directors in such amounts and in such manner as the Board may from time to time deem advisable. ARTICLE IV OFFICERS Sec. 1. Election of Officers. The Officers of the Corpora- tion shall be elected by the Directors and shall include a President, a Treasurer, and a Clerk, and, when deemed desirable by the Board of Directors, a Chairman of the Board, one or more Vice-Presidents, one or more Assistant Treasurers, a Secretary and one or more Assistant Secretaries, one or more Assistant Clerks and such other officers as the Board of Directors may, from time to time, deem necessary or advisable for the management of the affairs of the Corporation. The President, Treasurer and Clerk shall be elected at the Annual Meeting of Directors. All other officers may be elected at such annual meeting or at any regular or special meeting of the Board of Directors. Sec. 2. Terms of Office. The President, the Treasurer and the Clerk shall (unless sooner removed in accordance with law) holder office until the next annual meeting of the Board of Directors and until their respective successors are elected. All other officers shall (unless sooner removed in accordance with law) hold their respective offices until the next annual meeting and the election of the first mentioned officers thereat. Sec. 3. Compensation of Officers, Employees and Agents. The officers, employees and agents of the Corporation shall receive such compensation and upon such terms as the Board of Directors may from time to time determine. The determination of such compensation may be delegated by the Board of Directors to (i) a Compensation Committee composed of members of the Board who are elected to that Committee by it or appointed under is authorization except that the determination of the compensation of the members of the Compensation Committee cannot be delegated to that Committee, and (ii) to such other individuals or committees to the extent and in the manner permitted by the law. Sec. 4. Vacancies. If any corporate office specified in this Article becomes vacant for any reason, including resignation, the Board of Directors may elect a successor who shall hold office for the unexpired term unless sooner removed in accordance with law. CHAIRMAN OF THE BOARD Sec. 5. The Chairman of the Board shall preside at all meetings of the stockholders and of the Board of Directors. Sec. 6. The Chairman of the Board shall have the power, on behalf of the Corporation, to sign contracts, deeds and releases and, with the Treasurer or Assistant Treasurer, to sign or endorse security devices, notes, and, when authorized by the Board of Directors, to sign or endorse such other documents and instruments as the Board of directors may specify. The Chairman of the Board shall also have such additional powers and duties as the Board of Directors may from time to time assign him. PRESIDENT Sec. 7. In the absence or disability of the Chairman of the Board or at his request, or if his office be vacant, the President shall preside at all meetings of the stockholders and of the Board of Directors. Sec. 8. The President shall have the power on behalf of the Corporation (i) to sign contracts, deeds and releases and (ii) with the Treasurer or Assistant Treasurer, to sign or endorse certificates of stock, security devices, notes, and (iii) when authorized by the Board of Directors, to sign or endorse such other documents and instruments as the Board of Directors may specify. The President shall have also such additional powers and duties as the Board of Directors may from time to time assign to him. VICE PRESIDENTS Sec. 9. Each of the Vice-Presidents shall bear such title and shall have such powers and duties as may be assigned to him from time to time by the Board of Directors. TREASURER Sec. 10. The Treasurer shall have the custody of the money, funds and securities of the Corporation and shall have charge of its books and keeping of its accounts. He shall make financial and accounting reports to the Board of Directors at least quarterly and more often when requested by it, and shall make a report at the annual meeting of stockholders. He shall keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation and shall deposit all monies and other valuable effects in the name and to the credit of the Corporation in such depositories as may be designated from time to time by the Board of Directors. Sec. 11. The Treasurer shall, with the President or a duly authorized Vice-President, sign all certificates of stock, and with the Chairman of the Board or the President or a duly authorized Vice-President, sign or endorse security devices and notes and, when authorized by the Board of Directors, sign or endorse such other documents and instruments as the Board may specify. Sec. 12. The Treasurer shall also keep books for the recording of stock and transfers thereof and the names and addresses of stockholders and shall be transfer agent of the Corporation for the transfer of all certificates of stock; provided that the Board of Directors may, with respect to the transfer of shares of any class of the capital stock of the Corporation, appoint any other person or corporation to act as transfer agent, and, when the Board deems it desirable, any person or corporation to act as registrar thereof. Sec. 13. The Treasurer also shall have such additional powers and duties as may be assigned to him from time to time by the Board of Directors. ASSISTANT TREASURERS Sec. 14. In the absence or disability of the Treasurer, or if his office be vacant, the Assistant Treasurers, in the order of the seniority of their election, shall have the powers and duties appertaining to the office of Treasurer set forth in Sections 10 and 12 above and when duly authorized by the Board of Directors shall perform all or any part of the duties set forth in Sections 11 and 13 above. In addition to the foregoing, each of the Assistant Treasurers shall have such other powers and duties as may be assigned to him from time to time by the Board of Directors. SECRETARY Sec. 15. The Secretary shall attend all meetings of the Board of Directors and the Executive Committee and shall record all votes and minutes of all proceedings thereat in books to be kept for that purpose. When required by law or these By-Laws, proper notice of meetings of the Board of Directors shall be given by him. In addition to the foregoing, the Secretary shall have such other powers and duties as may be assigned to him from time to time by the Board of Directors. ASSISTANT SECRETARIES Sec. 16. In the absence or disability of the Secretary or at his request, or if his office be vacant, the Assistant Secretaries, in the order of the seniority of their elections, shall perform the duties herein assigned to the Secretary. In addition to the foregoing, each Assistant Secretary shall have such other powers and duties as may be assigned to him from time to time by the Board of Directors. CLERK Sec. 17. The Clerk shall be a resident of the Commonwealth of Massachusetts unless the Board of Directors shall appoint a Resident Agent as permitted by law. He shall attend all meetings of stockholders and act as clerk thereof and shall record all votes and minutes of all proceedings thereat in books to be kept for that purpose. Such books shall be kept as provided by law. When required by law or these By-Laws, proper notice shall be given by him of all meetings of stockholders. In addition to the foregoing, the Clerk shall have such other powers and duties as may be assigned to him from time to time by the Board of Directors. ASSISTANT CLERKS Sec. 18. In the absence or disability of the Clerk or at his request, or if his office be vacant, the Assistant Clerks, in the order of the seniority of their election, shall perform the duties herein assigned to the Clerk. In addition to the foregoing, each Assistant Clerk shall have such other powers and duties as may be assigned to him from time to time by the Board of Directors. BONDS Sec. 19. Any officer of the Corporation may be required to give a bond for the faithful performance of his duties in such form and with such sureties as the Board of Directors may direct. ARTICLE V INDEMNIFICATION In order to induce directors, officers, employees and other agents of the Corporation to serve as such and as partial consideration for such service, the Corporation shall, to the fullest extent and under the circumstances permitted by Massachusetts law, as amended from time to time, indemnify any person serving or who has served as a director or officer of the Corporation or a President or Vice President of any division of the Corporation or any person serving or who has served at the Corporation's request (1) as director or officer of a direct or indirect subsidiary of the Corporation or another organization or (2) in any capacity with respect to any employee benefit plan of the Corporation, and the Board of Directors may, to the extent legally permissible, indemnify any person serving or who has served as an employee or other agent of the Corporation or as an employee or other agent or in any capacity with respect to any employee benefit plan of a direct or indirect subsidiary of the Corporation or another organization, against all liabilities and expenses, including amounts paid in satisfaction of judgments, in compromise or as fines and penalties, and counsel fees, reasonably incurred by him or her in connection with the defense or disposition of any action, suit or other proceeding, whether civil or criminal, in which he or she may be involved or with which he or she may be threatened, while serving or thereafter, by reason of his or her being or having been such a director, officer, trustee, partner, person serving with respect to an employee benefit plan, employee or agent, except (unless other- wise permitted by Massachusetts law) with respect to any matter as to which he or she shall have been adjudicated in any proceeding not have acted in good faith in the reasonable belief that his or her action was in the best interest of the Corporation or, to the extent such matter relates to service with respect to an employee benefit plan, in the best interests of the participants or beneficiaries of such employee benefit plan. Expenses, including without limitation counsel fees, reasonably incurred by any such director, officer, person serving with respect to any employee benefit plan, employee or agent in connection with the defense or disposition of any such action, suit or other proceeding may be paid from time to time by the Corporation in advance of the final disposition thereof upon receipt of an undertaking by such individual to repay the amounts so paid to the Corporation if it shall be adjudicated that indemnification for such expenses is not authorized under this Article. The right of indemnification hereby provided shall not be exclusive of or affect any other rights to which any such director, officer, person serving with respect to any employee benefit plan, employee or agent may be entitled. Nothing contained in this Article shall affect any other rights to indemnification to which such directors, officers, persons serving with respect to an employee benefit plan, employees or agents may be entitled by contract or otherwise under law. The Board of Directors is authorized to enter into agreements regarding indemnification which are not inconsistent with the provisions of this Article. ARTICLE VI STOCK Sec. 1. Holders to be Recognized. The Corporation shall be entitled to treat the record holder of any share or shares of stock as the holder in fact thereof and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person except as may be otherwise expressly provided by law. Sec. 2. Form of Stock Certificates. All certificates of stock shall be in such form and contain such information as shall be required by law and be signed, either manually or by facsimile, as hereinbefore provided. Sec. 3. Replacement of Certificates Lost, Etc. In case of the alleged loss, destruction, mutilation, or wrongful taking of a certificate of stock, a new certificate may be issued in place thereof, upon such terms and conditions as the Board of Directors may prescribe. Sec. 4. Fixing Date for Determination of Stockholders of Record. The Board of Directors may fix in advance a time, which shall be not more than sixty days before the date of any meeting of stockholders or the date for the payment of any dividend or the making of any distribution to stockholders or the last day on which the consent or dissent of stockholders may be effectively expressed for any purpose, as the record date for determining the stockholders having the right to notice of and to vote at such meeting and any adjournment thereof or the right to receive such dividend or distribution or the right to give such consent or dissent, and in such case only stockholders of record on such record date shall have such right, notwithstanding any transfer of stock on the books of the Corporation after the record date; or without fixing such record date the Board of Directors may for any of such purposes close the transfer books for all or any part of such period. Sec. 5. Restrictions on Transfer. The Board of Directors may impose restrictions on transfer of securities of the Corporation pursuant to the Rights Agreement dated as of September 7, 1988 by and between the Corporation and The Connecticut Bank and Trust Company, N.A. (East Hartford, Connecticut), as and to the extent required by such Rights Agreement, as amended from time to time. Sec. 6. Massachusetts Control Share Acquisition Act. Until such time as this Section 6, Article VI shall be repealed or the By-Laws otherwise shall be amended to provide otherwise, in each case in accordance with Article VIII of the By-Laws, the provisions of Chapter 110D of the Massachusetts General Laws ("Chapter 110D") shall not apply to "control share acquisitions" of the Corporation within the meaning of Chapter 110D. ARTICLE VII SEAL AND FISCAL YEAR Sec. 1. Seal. The seal of the Corporation shall have inscribed thereon the name of the Corporation and the words "INCORPORATED 1931 MASSACHUSETTS". The corporate seal may be used by causing it or a facsimile thereof to be impressed or affixed to any document. Sec. 2. Fiscal Year. The fiscal year of the Corporation shall begin on the first day of January of each year and end on the thirty-first day of December. ARTICLE VIII AMENDMENT OF BY-LAWS Sec. 1. Any of these By-Laws may be added to, altered, amended or repealed by the stockholders of the Corporation entitled to vote on the matter at any annual or special meeting of stockholders. The nature or substance of the proposed addition, alteration, amendment or repeal shall be stated in the notice of the meeting. Sec. 2. The Board of Directors shall also have the power to make, amend or repeal the By-Laws of the Corporation in whole or in part subject to amendment or repeal by stockholders as provided by law. EX-10 4 EXHIBIT 10(A) EXHIBIT 10(a) FOURTH AMENDMENT TO STANHOME INC. SUPPLEMENTAL PENSION PLAN WHEREAS, Stanhome Inc., a Massachusetts corporation (the "Company"), has heretofore adopted and maintains a supplemental pension plan for the benefit of certain of its employees designated the "Stanhome Inc. Supplemental Pension Plan" (the "Plan"); and WHEREAS, the Company desires to amend the Plan in certain respects; NOW, THEREFORE, pursuant to the power of amendment contained in Section 5 of the Plan, the Plan is amended effective January 1, 1998 in the following respects: 1. Section 2 of the Plan is amended to substitute the word "terms" for the phrase "penultimate three sentences" as such phrase appears three times therein. 2. A new section is added at the end of the Plan to read as follows: 13. Termination of Qualified Plan. In the event the Qualified Plan is terminated by the Company, all references in this Plan to the Qualified Plan shall be treated as references to such plan as in effect immediately prior to its termination. In addition, the following special provisions shall apply: (i) Notwithstanding the first paragraph of Section 3 of this Plan, a Participant's Supplemental Pension shall be paid, subject to the second paragraph of Section 3 of this Plan, in the same form and at the same time, with any survivor benefit payable to the same Beneficiary, as the Pension payable to the Participant under the annuity contract purchased to satisfy the obligation to provide benefits to the Participant under the Qualified Plan. (ii) For purposes of Section 7 of this Plan, the "Committee" shall be comprised of the individuals who constituted the Committee immediately prior to the termination of the Qualified Plan. Thereafter, subject to the second paragraph of Section 7 of the Plan (relating to composition of the Committee upon the occurrence of a Change in Control), the board of directors of the Company shall have the same power to remove or appoint members of the Committee, and to fill vacancies thereon, as described in Section 11.1 of the Qualified Plan (as in effect immediately prior to the termination thereof). IN WITNESS WHEREOF, the Company has caused this instrument to be executed by its duly authorized officers this 6th day of April, 1998. STANHOME INC. By: /s/ Allan Keirstead ---------------------------- Title: Executive Vice President Chief Administrative and Financial Officer ATTEST: /s/ Mark I. Cohen - --------------------------- Title: Assistant Secretary EX-10 5 EXHIBIT 10(B) EXHIBIT 10(b) CHANGE IN CONTROL AGREEMENT AGREEMENT, effective as of January 1, 1998 (the "Effective Date") between Stanhome Inc., a Massachusetts corporation (the "Company") and Eugene Freedman (the "Employee"). WHEREAS, the Employee has been employed by Enesco Corporation, a wholly-owned subsidiary of the Company, since 1959 and is, as of the effective date of this Agreement, the Chairman and Chief Executive Officer of Enesco Corporation (the "Employer"); and WHEREAS, the parties deem it to be in the best interest of both the Employee, the Employer and the Company for the Company to continue (as in his recently expired employment agreement dated June 1, 1983, as amended) to provide a severance payment in the event his employment terminates under certain circumstances hereinafter described, NOW, THEREFORE, in consideration of the mutual promises, covenants and conditions and of the agreements hereinafter contained, the Company and the Employee agree as follows: 1. Severance Benefit. (a) Upon the termination of the Employee's employment by the Employer for any reason other than death, Disability, termination for Substantial Cause, or voluntary termination without Good Reason within two years or less after a Change in Control as defined below, the Company will pay him as a severance benefit an amount equal to three times the annual rate of his Total Compensation at the time of such termination. (b) The Employee's employment is deemed to be terminated following a Change in Control if the Employee's employment terminates prior to a Change in Control at the direction of a person (as defined in paragraph 4(a)(i) below) who has entered into an agreement with the Company to effectuate a Change in Control and such employment terminates for any other reason other than death, Disability, termination for Substantial Cause, or voluntary termination without Good Reason and the circumstances constituting Good Reason occur at the direction of such person. (c) Notwithstanding any other provisions of this Agreement, in the event that any payment or benefit received by an Employee in connection with a Change in Control or the termination of the Employee's employment (whether pursuant to the terms of this or any other plan, arrangement or agreement with the Company, the Employer, any Person (as defined in Section 4(a)(i) of this Agreement) whose actions result in a Change in Control or any Person affiliated with the Company or such Person) (all such payments and benefits, including the severance benefit, being hereinafter called "Total Payments") would be subject (in whole or in part), to the excise tax imposed under Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code") (the "Excise Tax"), then the severance benefit under this Agreement shall be reduced to the extent necessary so that no portion of the Total Payments is subject to the Excise Tax (after taking into account any reduction in the Total Payments provided by reason of Section 280G of the Code in such other plan, arrangement or agreement) if (i) the net amount of such Total Payments, as so reduced, (and after deduction of the net amount of federal, state and local income tax on such reduced Total Payments) is greater than (ii) the excess of (A) the net amount of such Total Payments, without reduction (but after deduction of the net amount of federal, state and local income tax on such Total Payments), over (B) the amount of Excise Tax to which the Employee would be subject in respect of such Total Payments. For purposes of determining whether and the extent to which the Total Payments will be subject to the Excise Tax, (A) no portion of the Total Payments, the receipt or enjoyment of which the Employee shall have effectively waived in writing prior to the date of termination of the Employee's employment, shall be taken into account, (B) no portion of the Total Payments shall be taken into account which in the opinion of tax counsel selected by the Company and reasonably acceptable to the Employee does not constitute a "parachute payment" within the meaning of Section 280G(b) (2) of the Code, (including by reason of Section 280G(b) (4) (A) of the Code) and, in calculating the Excise Tax, no portion of such Total Payments shall be taken into account which constitutes reasonable compensation for services actually rendered, within the meaning of Section 280G(b) (4) (B) of the Code, in excess of the base amount (within the meaning of Section 280G(b) (3) of the Code) allocable to such reasonable compensation, and (C) the value of any non-cash benefit or any deferred payment or benefit included in the Total Payments shall be determined by the Company in accordance with the principles of Sections 280G(d) (3) and (4) of the Code. Prior to the payment date set forth in subsection 1(a) hereof, the Company shall provide the Employee with its calculation of the amounts referred to in this subsection and such supporting materials as are reasonably necessary for the Employee to evaluate the Company's calculations. If the Employee objects to the Company's calculations, the Company shall pay to the Employee such portion of the severance benefit (up to 100% thereof) as the Employee determines is necessary to result in the Employee receiving the greater of clauses (i) and (ii) of this subsection. 2. Payment. The severance benefit shall be payable in a lump sum on or before the date of the Employee's termination. 3. Term. The term of this Agreement shall be a period beginning on the Effective Date and ending on the first to occur of (i) the Employee's death, disability, retirement, termination for substantial cause or voluntary termination without good reason; or (ii) three years after written notification by the Employer of its intention to terminate. All obligations and rights arising under paragraph 1 at the time of the termination of this Agreement shall survive such termination. 4. Change In Control; Potential Change In Control (a) As used herein, "Change in Control" of the Company means a Change in Control of a nature that would, in the opinion of Company counsel, be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"); provided that, without limitation, such a Change in Control shall be deemed to have occurred if (i) any "Person" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) (other than the Company or any subsidiary of the Company, any trustee or fiduciary holding securities under an employee benefit plan of the Company or any of its subsidiaries or a corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of the stock of the Company) becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing twenty-five percent (25%) or more of the combined voting power of the Company's then outstanding securities; or (ii) during any period of two consecutive years (not including any period prior to the execution of this Agreement), individuals who at the beginning of such period constitute the Board of Directors of the Company and any new director (other than a director designated by a Person who has entered into an agreement with the Company to effect a transaction described in Clause (i), (iii) or (iv) of this paragraph) whose election by the Board or nomination for election by the Company's stockholders was approved by a vote of at least two-thirds (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. Notwithstanding the foregoing, no Change in Control of the Company shall be deemed to have occurred if Employee 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 Board of Directors who are not members of such management group. (b) A "Potential Change in Control" shall be deemed to have occurred if the conditions set forth in any one of the following paragraphs 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 Agreement, a Potential Change in Control has occurred. 5. Total Compensation. As used herein, "Total Compensation" means the Employee's annual base salary rate at the time of termination plus any bonus to which he is entitled under the Company's Management Incentive Plan, or its successor or substitute plan or policy. For purposes of the calculation to be made under paragraph 1(a) above, the Employee's annual base salary shall be the rate at the time of termination but not less than the rate in effect immediately prior to the Change in Control, and the bonus shall be equal to 100% of the target bonus payable to the Employee under the Company's Management Incentive Plan for the year in which his termination occurs, but not less than 100% of the target bonus for the year in which the Change of Control occurred. 6. Disability. As used herein, "Disability" means a medically determinable physical or mental condition which renders the Employee incapable of performing the work for which he was employed at his normal place of employment for at least six consecutive months. A termination by reason of Disability shall not be deemed to have occurred unless the Employee fails to return to work at his normal place of employment within thirty (30) days after receiving written notice of termination from the Employer. 7. Substantial Cause. As used herein, "Substantial Cause" means (i) the willful and continued failure by the Employee to substantially perform the Employee's duties with the Employer (other than any such failure resulting from the Employee's incapacity due to physical or mental illness or any such actual or anticipated failure after the issuance of a notice of termination for Good Reason by the Employee) after a written demand for substantial performance is delivered to the Employee by the Board, which demand specifically identifies the manner in which the Board believes that the Employee has not substantially performed the Employee's duties, or (ii) the willful engaging by the Employee 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 Employee's part shall be deemed "willful" unless done, or omitted to be done, by the Employee not in good faith and without reasonable belief that the Employee's act, or failure to act, was in the best interest of the Company and the Employer. 8. Good Reason. A voluntary termination under any of the following circumstances shall be considered to be for "Good Reason": (a) assignment to the Employee of duties or title inconsistent with his status as an officer, or removal of the Employee from involvement in management decision-making functions consistent with his prior experience with the Employer; (b) failure to continue the Employee's participation in the Company's Management Incentive Plan or in any successor or substitute plan or policy and, if such termination follows a Change in Control, equivalent to the management incentive plan as in effect immediately prior to the Change in Control; (c) failure to pay when due the Employee's base salary, or any installment of deferred compensation when due, or a reduction in the Employee's base salary, or a failure to continue in effect for the Employee's benefit fringe benefits in which he now participates, including retirement plans, health and insurance plans, vacation plans, and automobile programs, or the taking of any action which materially reduces such benefits, provided that, unless such reduction in base salary or failure to continue benefits occurs within two years after a Change in Control, it will not be considered Good Reason if taken in connection with a general reduction applicable to all officers; (d) assignment of the Employee to any location other than within fifty (50) miles of his present office location; or (e) within two years after a Change in Control, a requirement that the Employee travel away from his office location more than 25% of the working days in the year, provided that Employee may be required to increase his travel by 10% of his working days if the Employee had been travelling more than 15% of his working days at the time of the Change in Control. Working days for these purposes shall exclude vacation days. 9. Fringe Benefits. For a period of thirty six (36) months (the "Extended Period") following any termination giving rise to benefits under this Agreement, the Employee shall continue to participate fully in those fringe benefits of the Employer in which he is a participant prior to such termination, including the group insurance programs (i.e. medical insurance, including dependent coverage; life insurance; accidental death and dismemberment insurance), but excluding the Employer's automobile program; provided, however, that if the Employee is barred from participating in a particular plan or arrangement under such program's terms, the Company shall arrange to provide the Employee for the Extended Period with a substitute benefit substantially equivalent to the affected plan or arrangement. The coverage set forth in the preceding sentence shall be subject only to such periodic review as may be required by the group insurance carrier to determine whether he has become a participant in a comparable program of another employer, in which case continuance or discontinuance of coverage will be determined in accordance with the terms and conditions of the group insurance policy and the benefits payable under this provision will be secondary to the comparable program of the other employer. All benefits covered by this paragraph 9 shall be provided at no cost to the Employee and subject to the benefit limitation provision of paragraph 1. 10. Legal Fees. In the event legal fees and expenses must be incurred by the Employee in seeking to obtain or enforce any right or benefit provided by this Agreement, the Company shall reimburse the Employee for such cost, provided, however, that fees and expenses incurred in connection with that portion of a claim that is determined by a court or arbitrator to be frivolous shall not be paid by the Company. 11. Mitigation. Inasmuch as the severance benefit provided for in this Agreement is in recognition of past services rendered to the Employer, the Employee will not be required to mitigate the amount of any payment provided for by this Agreement by seeking other employment nor shall the amount of any payment so provided be reduced by any compensation earned by the Employee as the result of employment by another employer after the date of termination or otherwise. 12. Other Compensation. The lump sum severance benefit payable pursuant to this Agreement shall be in addition to and not in substitution for any amounts of compensation accrued in favor of the Employee up to the date of termination, including a pro-rated portion of any incentive compensation to which he is entitled, based upon the number of days of employment during such year prior to such termination date, and shall also be in addition to and not in substitution for any amount or benefit to which the Employee may otherwise be entitled under any insurance policy, profit-sharing plan, employee stock ownership plan, stock option plan or written employment contract between the Employee and the Employer, or the Company, or any regular or supplemental retirement plan or contract maintained by the Employer or the Company on the Employee's behalf. Notwithstanding the foregoing, the benefits payable hereunder shall be in substitution for any account or benefit to which the Employee may otherwise be entitled under (i) the Employer's regular severance policy; or (ii) any other severance agreement between the Employee and the Employer. 13. Confidential Information. The Employee agrees that he will not use or disclose to anyone (other than for the benefit of the Employer or the Company) either during the term of his employment or at any time thereafter, any confidential information obtained by or made known to him while employed by the Employer. As used herein, "Confidential Information" includes, but is not limited to, trade secrets of the Employer or the Company or of any other organization associated or affiliated with or owned by or owning the Employer or the Company. 14. Covenant Not to Proselyte. For a period of thirty-six (36) months after termination giving rise to benefits under this Agreement, the Employee agrees that he will not attempt, directly or indirectly, to induce any employee of the Employer or the Company to terminate his or her employment with the Employer or the Company. 15. Entirety of Agreement and Amendment. This Agreement 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 both parties. Mere delay by the Employee in exercising any rights under this Agreement will in no event be deemed a waiver of such rights. This Agreement supersedes all previous severance agreements that may have been made between the Company or the Employer and the Employee. 16. Notices and Statements. All notices and statements hereunder shall be in writing, and, if directed to the Company, shall be deemed given if deposited postage prepaid in the U.S. Mail or delivered to the Company, Attention: President at 333 Western Avenue, Westfield, Massachusetts, 01085, or, if directed to the Employee, shall be deemed given if delivered to him personally or deposited postage prepaid in the U.S. Mail addressed to him at his then current personal residence as it appears on the Company records, or to such other addresses as either party may hereafter designate in writing for the purpose. Written notice of termination of employment by the Employer or the Employee after a Change in Control must specify the provision(s) in the Agreement relied upon and detail the facts and circumstances alleged as the basis for termination of employment. Any such notice shall be effective thirty (30) days after receipt by the appropriate party (except for termination for Substantial Cause). 17. Applicable Law. To the extent permitted by law, this Agreement shall be deemed to have been made in the Commonwealth of Massachusetts, and its validity, construction and performance shall be determined in accordance with the laws of said Commonwealth. 18. Assignment. Neither party may assign this Agreement or any of the rights or duties hereunder, except that the Company may assign any of its rights and duties under this Agreement to (1) a successor or assignee of all or substantially all of the business or assets of the Company, or (2) any corporation with which the Company merges or with which the Company may be consolidated, provided that any such successor or assignee or surviving entity of a merger or consolidation must expressly assume in writing such rights, duties and obligations of the Company, and except further that the rights and obligations of the Employee under this Agreement shall inure to the benefit of and be enforceable by the Employee's personal or legal representative, executor, etc. 19. Not an Employment Contract. The parties agree that this Agreement is not intended as, and is not, an employment contract with the Company or the Employer. The Employer may terminate the Employee's employment at any time during the term of this Agreement subject to providing such benefits as may be specified in the Agreement. 20. Arbitration. At the election of either the Company or the Employee, all controversies in connection with, or related to, any alleged breach of this Agreement or any of its provisions requiring ongoing action or interpretation, including, without limitation, injunctive relief, shall be settled by binding arbitration in Boston, Massachusetts in accordance with the rules of the American Arbitration Association then in effect. Company or Employee may demand arbitration upon ten (10) days notice to the other. The arbitration panel shall consist of three (3) members, one to be the Employee's nominee, one to be the Company's nominee and a third to be selected by the other two. In the event the two arbitrators cannot agree on a third within seven (7) days after the demand for arbitration, the third shall be chosen by the American Arbitration Association in Boston, Massachusetts pursuant to its rules and regulations. In the event of the death or incapacity of Employee, his duly authorized executor or representative or its nominee shall be or choose one arbitrator in his stead. Judgment upon any award, including injunctive relief, rendered may be entered in any court having jurisdiction thereof. The fees and expenses of the arbitrators shall be borne by the parties hereto in proportion to the questions answered adversely to their several questions and interpretations, as determined by the arbitrators, and the parties agree that the findings of a majority of such three (3) arbitrators shall be conclusive on them, and their respective heirs, successors and assigns, executors, administrators, and personal representatives. 21. Invalidity of any Provision. If any provision of this Agreement or the application thereof to any party or circumstance is held invalid or unenforceable, in whole or in part, 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 or modifiable in any such instance. IN WITNESS WHEREOF, this Agreement has been executed by a duly authorized officer of the Company and by the Employee. Dated: May 1, 1998 STANHOME INC. by /s/ H. L. Tower _____________________ H. L. Tower Chairman and C.E.O. /s/ Eugene Freedman _______________________ (Employee) EX-10 6 EXHIBIT 10(C) EXHIBIT 10(c) RELEASE AGREEMENT This Release Agreement is entered into by and between John J. Dur, a resident of Henniker, New Hampshire (hereinafter referred to as "Associate"), and Stanhome Inc., a Massachusetts corporation having a principal place of business at 333 Western Avenue, Westfield, Massachusetts (hereinafter referred to as the "Company"). In consideration of the promises, conditions and representations set forth herein, the severance payments being provided to Associate by the Company as set forth below, and other good and valuable consideration, the receipt and sufficiency of which hereby are acknowledged by Associate and the Company (hereinafter sometimes referred to collectively as the "Parties"), the Parties hereby agree as follows: 1. Termination Date. Associate's employment with the Company and its subsidiaries shall terminate involuntarily without cause as of the close of business on April 30, 1998 (the "Termination Date"). 2. Continuation of Salary and Benefits After Termination. Prior to the Termination Date, Associate's salary and his participation in all compensation and benefit plans and programs in which he currently is a participant or from which he currently receives benefits will remain in effect on the same terms as are in effect as of the effective date of this Agreement. As of the Termination Date, Associate's salary and any other compensation and benefits he receives from the Company will terminate, other than compensation and/or benefits to which he continues to be entitled (a) pursuant to the terms of this Agreement, (b) as a matter of U.S. federal or state law, (c) pursuant to the agreements between the Parties to this Agreement listed below, or (d) pursuant to the terms of the compensation or benefit plans or programs in which he continues to be a participant or has a right to receive such compensation or benefits after the Termination Date listed below. The agreements and compensation and benefit plans and programs referred to herein are as follows: o Medical and Life Employee Group Insurance Plan under Policy #2232182 issued by Connecticut General Life Insurance Company to Stanhome Inc. o Accidental Death and Dismemberment Group Insurance Plan under policy issued by AIG Insurance Company to Stanhome Inc. o Stanhome Pension Plan and related Trust Agreement dated January 1, 1980, as amended o Stanhome Supplemental Pension Plan and related Trust Agreement dated January 1, 1995, as amended o Stanhome Investment Savings Plan and related Trust Agreement dated January 1, 1993, as amended o Stanhome Supplemental Investment Savings Plan and related Trust Agreement dated January 1, 1995, as amended o Stanhome Paysop Plan and related Trust Agreement dated October 15, 1985, as amended o Stanhome Inc. 1991 Stock Option Plan o Stanhome Inc. 1996 Stock Option Plan o Management Incentive Plan o Change in Control Agreement effective January 1, 1996 o Stanhome Matching Gifts Program With respect to those Company compensation and benefit plans and programs in which Associate will continue to participate subsequent to the Termination Date, Associate's participation in such compensation and benefit plans and programs will be on terms no less favorable than in effect as of the effective date of this Agreement. Furthermore, the Company and Associate agree that after his Termination Date he will not become entitled to any increased benefits under such compensation and benefit plans and programs, but the benefits payable by the Company to Associate thereunder shall be based upon his length of service and compensation level as of the Termination Date. The payments described in this Agreement are made in recognition of the Associate's efforts on behalf of the Company and shall not be reduced in the event the Associate is paid any compensation by a purchaser or by any payments to Tozai Strategists by the Company. 3. Consideration. A. Severance Payments. Following the Termination Date, and for a period of twenty-four (24) consecutive months commencing May 1, 1998 and ending on April 30, 2000 (the "Severance Period"), Associate will receive severance payments equal to $23,800.00 per month. Payment will be made on the 15th day of each such month, commencing May 15, 1998. Such payments, based on Associate's current base salary, are in addition to anything of value to which Associate is already entitled or provided pursuant to this Agreement, any other agreement between the Parties or other Company plan or program. Moreover, such severance payments are not intended to include any unused, accrued vacation time to which Associate may be entitled or any other accrued but unpaid compensation or benefit to which Associate may be entitled under any Company compensation or benefit plan or program. B. Stock Options. Upon the Termination Date, the Company will promptly deliver to Associate appropriate amendments to Associate's Certificates of Grant relating to the Company's 1991 Stock Option Plans providing that the options under such plan shall be exercisable by the Associate or his guardian or legal representative(s) during the three-year period following his termination of employment as to the additional number of shares of the Company's common stock, par value $.125 per share, which the Associate would have become entitled to purchase during such three-year period if the Associate's employment had not terminated. C. Additional Payments. During the Severance Period, Associate will be paid an additional $1,400. each month of said period at the same time as he is paid the Severance Payments provided for in paragraph 3.A of this Agreement. These additional payments represent the Associate's present car allowance ($1,400. per month). Associate's present annual $5,000. medical supplementary bonus and annual $5,000. financial planning bonus will be paid in February 1999 and February 2000. D. Bonus. Associate acknowledges receipt of payment by the Company to him of the Special MIP bonus payment due him under Paragraph 2(A) of the Letter Agreement dated July 9, 1997 between the Company and Associate in full satisfaction of the Company's obligation to Associate under said Paragraph. In the event that the criteria are met for a bonus award to Associate under the 1998 Management Incentive Plan, Associate will be paid the pro-rata portion of the bonus award (for January through April of 1998) by March 15, 1999. The Special MIP bonus and 1998 MIP bonus, if any, will be included in the Final Average Earnings calculation for the Supplemental Pension Plan. In addition, if the Special MIP bonus or 1998 MIP Bonus are considered compensation for French tax purposes, such French taxes will be covered by the Company's Expatriate Policy. E. Insurance. Associate will continue to be covered by the group medical insurance coverage as set forth in the Stanhome Group Insurance Plan booklet dated December, 1994 (the "Plan") under the policy issued by Connecticut General Life Insurance Company (Policy #2232182) regardless of the location of Associate's eventual residence. Should the Plan be terminated in the future, the Company and its successors and assigns, as applicable, agree to provide Associate with coverage that is substantially the same as provided in the Plan. This group medical insurance coverage will cease effective April 30, 2000, or at such earlier time as Associate becomes eligible for coverage under a new employer's medical plan. During the Severance Period, the Company, its successors and assigns, will contribute 80% of the cost of the personal and dependent coverage and Associate will contribute 20% of such cost, which percentages shall be adjusted as necessary to be the same percentages as may be in effect for the cost of medical coverage of active employees of the Company and its successors and assigns. The continued medical coverage, as set forth in the Plan and the guaranteed contributions outlined above toward both personal coverage and dependent coverage, is binding upon and may not be revoked by the Company or any of its successors or assigns and will continue until coverage ceases as outlined above provided that Associate has paid his portion of the premium. In the event that Associate fails to pay his portion of the premium on time, the Company will pay the full premium and notify Associate of his failure to make timely payment. Associate shall have ten (10) days from his receipt of such notice to cure his failure to pay by repaying to the Company the amount advanced by the Company on his behalf, and the Company shall not allow his insurance coverage to be cancelled or to lapse until such ten-day period shall have expired. The Company, its successors and assigns, shall continue to provide at its sole expense the life insurance ($572,000. Death Benefit) and accidental death and dismemberment employee insurance coverage, as presently in effect, to the Associate during the Severance Period, or until Associate becomes eligible for a new employer's insurance coverage, if earlier. The Termination Date shall be treated as an event under the Consolidated Budget Reconciliation Act of 1985 (COBRA), and Associate will receive COBRA information under separate cover. F. Outplacement. The Company also will provide Associate with outplacement services as mutually agreed upon between the Parties, provided such outplacement services commence within twelve months from the Termination Date. G. Repatriation. The Associate, having repatriated to the United States prior to the Termination Date, remains entitled to any benefits under the Company Relocation Program, which have not been paid as of the date of this Agreement. H. References. The Company will provide references for Associate in accordance with its policy. I. Taxes. Tax issues relating to the Associate's employment as an Expatriate will be the responsibility of the Company in accordance with the Company's Expatriate Policy; but applicable taxes on all payments made to the Associate or his estate following the Termination Date (except for any 1998 MIP bonus to the extent considered part of 1998 compensation for French tax purposes) will be the sole responsibility of Associate (provided that the Company shall deduct applicable federal and state withholding income taxes on such payments) and will not be tax equalized. The Company will pay for Associate's tax preparation and advice for calendar years 1997 and 1998 and Associate will be entitled to any foreign tax credits that remain unused after the final tax equalization payment is made. J. Vacation and Vacation Pay. Your unused vacation for calendar years 1997 and 1998 was paid to you in a lump sum on March 15, 1998. K. French Termination Benefits. Any severance payments or other benefits required to be paid to Associate under the applicable laws or regulations of France by reason of Associate's termination from the Company or any of its affiliated companies shall be deducted from the payments and benefits to be paid or provided to Associate pursuant to this Agreement. L. Pension. Associate's pension will be calculated as of his Termination Date and will include the additional five years of service and five years of age as part of the previously announced Stanhome restructuring initiative. The Final Average Earnings on which Associate's pension will be determined will include his 1997 and 1998 MIP award (if any). The incremental pension benefit generated by the inclusion of the 1997 and any 1998 MIP award will be made a part of his non-qualified pension. M. Resignation from French Branch. The Associate declares that he has submitted his written resignation from the French branch of Stanhome Worldwide Direct Selling Group, Inc. effective on February 27, 1998, a copy of which is attached as Annex A. 4. Release. A. From Associate to the Company. In exchange for the compensation described in Paragraph 2 and other good and valuable consideration, Associate hereby agrees that he, his representatives, heirs, executors, administrators, agents, estate, successors and assigns release and forever discharge the Company and its affiliates and their successors, predecessors, assigns, directors, shareholders, officers, employees and/or agents, both individually and in their official capacities with the Company and/or its affiliates from any and all actions, causes of action, suits, claims, demands, obligations, costs, judgments, complaints, contracts, agreements, promises, debts, damages, and liabilities of whatever kind or nature, at law, in equity or otherwise, whether existing or contingent, known or unknown, relating to any matter, cause, or thing whatsoever arising on or prior to the date of this Agreement, including but not limited to rights or claims relating in any way to Associate's employment with or his termination of employment from the Company, including but not limited to claims arising under common law, contract, implied contract, public policy, tort, personal injury, or any federal, state or local statute, law, constitution, ordinance, regulation or order, including but not limited to the Age Discrimination in Employment Act, as amended, 29 U.S.C. Section 621, et seq., Title VII of the Civil Rights Act, The Americans with Disabilities Act, The Massachusetts Fair Employment Practices Act (Ch. 151C of MA statutes), the New Hampshire Employment Law (Ch. 275 of NH statutes), and/or any other applicable employment related foreign or U.S. federal, state or local statute, law, ordinance, regulation or order; provided, however, that nothing contained in this Paragraph 4 shall limit Associate's right to enforce the terms or sue for breach of (i) this Agreement, any agreement listed in Paragraph 2 of this Agreement, or any other agreement whatsoever unrelated to compensation and severance matters between the Parties hereto whether or not such agreement is listed in Paragraph 2 of this Agreement, (ii) any compensation or benefit plan or program in which he remains a participant or beneficiary beyond the Termination Date in accordance with the provisions of Paragraph 2, or (iii) Associate's right to indemnification as an officer or director of the Company and/or its affiliates. This release is intended by Associate to be a general release as to the claims described herein. B. From the Company to Associate. In exchange for Associate's release of the Company and the covenants made by Associate in Paragraph 8 hereof, the Company hereby agrees that it and its affiliates and subsidiaries, and their successors, predecessors, assigns, directors, shareholders, officers, employees and agents, both individually and in their official capacities with the Company and its affiliates, attorneys, and agents release and forever discharge Associate, his representatives, heirs, executors, administrators, agents, attorneys, estate, successors and assigns, from any and all actions, causes of action, suits, claims, demands, obligations, costs, judgments, complaints, contracts, agreements, promises, debts, damages and liabilities of whatever kind or nature, at law, in equity or otherwise, whether existing or contingent, known or unknown, relating to any matter, cause, or thing whatsoever arising on or prior to the date of this Agreement, including but not limited to rights or claims relating in any way to Associate's employment with or his termination of employment from the Company (other than those involving fraud, gross negligence or gross willful misconduct) disclosed on the books or records of the Worldwide Direct Selling Group or disclosed to the Company's representatives during preparation for the Company's sale of that Group, provided, however, that nothing contained in this Paragraph 4 shall limit the Company's right to enforce the terms or sue for breach of (i) this Agreement, any agreement listed in Paragraph 2 of this Agreement, or any other agreement whatsoever unrelated to compensation and severance matters between the Parties hereto whether or not such agreement is listed in Paragraph 2 of this Agreement, or (ii) any compensation or benefit plan or program in which he remains a participant or beneficiary beyond the Termination Date in accordance with the provisions of Paragraph 2. This release is intended by the Company to be a general release as to the claims described herein. 5. Indemnification. To the extent that Associate is not otherwise indemnified under a Company by-law or insurance policy, the Company will indemnify and hold harmless Associate against all liabilities and expenses, including amounts paid in satisfaction of judgments, in compromise or as fines and penalties, and counsel fees, reasonably incurred by Associate in connection with the defense or disposition of any action, suit or other proceeding, whether civil or criminal, in which Associate may be involved or which Associate may be threatened arising out of actions taken by Associate in his capacity as an officer, director, employee, agent or representative of the Company or a direct or indirect subsidiary of the Company or, at the Company's request, another organization, or in any capacity with any employee benefit plan of the Company, or such a subsidiary or organization, with the exception of actions by him with respect to which a court of competent jurisdiction determines that Associate did not act in good faith in the reasonable belief that his action was in the best interest of the Company, or to the extent such claim relates to his service with respect to an employee benefit plan, in the best interests of the participants or beneficiaries of such employee benefit plan, without regard of the date when such claim is brought. Expenses, including without limitation counsel fees, reasonably incurred by Associate in connection with the defense or disposition of any such action, suit or other proceeding shall be paid from time to time by the Company in advance of the final disposition thereof upon receipt of an undertaking by Associate to repay to the Company the amounts previously advanced if it shall be adjudicated that indemnification for such expenses is not authorized hereunder. 6. Waiver of Rights and Claims Under the Age Discrimination in Employment Act, as Amended. Associate has been informed that because he is over 40 years of age, he has or might have specific rights and/or claims under the Age Discrimination in Employment Act, as amended. In consideration for the compensation described hereunder, Associate specifically waives such rights and/or claims to the extent that such rights and/or claims arose prior to the date this Agreement was executed. Associate acknowledges that he has been provided such information or materials as is required by law in connection with this waiver. 7. Company Files, Documents and Other Property. Associate warrants that he will return to the Company upon its request all keys or other items, including all Company files, reports, books, data and documents, that are in his possession or control and that are the property of the Company and not his personal files, reports, books, data and documents. 8. Representations. A. Associate is hereby advised by the Company to consult with an attorney prior to executing this Agreement. B. Associate was further advised, when he was presented with this Agreement on or before April 8, 1998 that he had at least 45 days within which to consider the Agreement, until the close of business on May 23, 1998. C. This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts, without giving effect to the principles of conflicts of law thereof. D. The terms of this Agreement are contractual in nature and not a mere recital. Captions herein are inserted for convenience, do not constitute a part of this Agreement, and shall not be admissible for the purpose of proving the intent of the Parties. E. Associate represents that he has read this Agreement, fully understands the terms and conditions of such Agreement, and is knowingly and voluntarily executing the same without any duress or undue influence. 9. Resignations and Stock Transfers. Upon the Termination Date, Associate agrees to (i) resign from any position held by him with the Company or any direct or indirect affiliated company or organization, including but not limited to positions as an officer, director, committee member, or any other position, except for his position as Chairman of the Board of Directors of Cosmhogar, S.A. and a Director of Stanhome European Development Center, S.A., (ii) take any action necessary to transfer shares of stock held in his name or for his benefit on behalf of the Company in any direct or indirect affiliate of the Company, as requested by the Company, to the Company or a designee of the Company, and (iii) take any action and execute anything as may be necessary to accomplish the foregoing. 10. Change in Control. Associate's Change in Control Agreement effective as of January 1, 1996 (the "Change in Control Agreement") shall remain in effect up to and including the Termination Date, and subsequent to the Termination Date in the event that an agreement with the Company to effectuate a Change in Control, as defined in the Change of Control Agreement, is entered into prior to the Termination Date. It is agreed that Associate's termination under this Agreement is (i) for reasons other than those set forth under Paragraphs 1(a) and 1(b) of the Change in Control Agreement and (ii) at the direction of the person (as defined in Paragraph 4(a)(i) of the Change in Control Agreement) who has entered into such an agreement with the Company to effectuate such a Change in Control as described under and subject to said Paragraph 1(b). To the extent that any payments made to Associate under the Change in Control Agreement are made for the same purpose as the severance amounts specified above in Paragraphs 3.A and 3.D (without giving effect to the Gross-Up Payment in Paragraph 1(c) of the Change in Control Agreement for these purposes), such Change in Control payments shall be in substitution for such severance amounts except to the extent that any bonus shall be due and payable with respect to any year preceding that in which the Change in Control occurs. To the extent the amounts specified in Paragraphs 3.A and 3.D are greater than those paid under the Change in Control Agreement, the amount by which such amounts and benefits in Paragraphs 3.A and 3.D exceed the amounts paid under the Change in Control Agreement shall be paid in accordance with the terms of this Agreement. If Associate is paid all amounts due him under the Change in Control Agreement in the event of a Change in Control, then Associate shall not be paid any amounts due him under Paragraph 3.C for the remaining term of this Agreement. If a Change in Control, as defined in the Change in Control Agreement, occurs after the Termination Date, the payments to be made to Associate under Paragraphs 3.A, 3.C and 3.D shall be paid in a lump sum upon the occurrence of such Change in Control. If any of the payments and benefits under this Agreement are subject to the Excise Tax imposed under Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code") (the "Excise Tax"), such payments and benefits shall be deemed to be "...other payments or benefits received or to be received by the Employee in connection with a Change in Control or the Employee's termination of employment..." under Paragraph 1(c) of the Change in Control Agreement and the Company shall pay Associate the Gross-Up Payment as shall be determined in accordance with said Paragraph 1(c) as if it had remained in effect. Except as provided under this paragraph, all amounts and benefits to be paid or provided under this Agreement shall be so paid or provided as set forth herein without regard to the Change in Control Agreement. 11. Non-Disclosure and Non-Competition Covenants. A. Associate agrees that he will not use or disclose to anyone (other than for the benefit of the Worldwide Direct Selling Group), at any time hereafter, any confidential information obtained by Associate or made known to Associate while he was employed by the Worldwide Direct Selling Group. As used herein, "confidential information" includes but is not limited to trade secrets and the names and addresses of employees, dealers, customers, suppliers and vendors, including any and all employee dealer, customer, supplier and vendor lists of it or any affiliate. B. Unless expressly permitted in writing by the Company, for a period of twelve months following the Termination Date, Associate will not, directly or indirectly, alone, as a member of a partnership, or as an officer, agent, employee, director, stockholder, member, investor, consultant or associate of any limited liability company or corporation own, manage, operate, join, control or participate in the ownership, management, operation, or control of, or work for or be connected in any capacity with, any business that does (i) bear or use the names "Stanhome" or "Stanley Home Products" or any name similar to that of Stanhome Inc., (ii) compete with the direct selling business of the Worldwide Direct Selling Group or (iii) attempt to induce any employee of the Company and/or one or more of its affiliates to terminate his or her employment relationship, nor will Associate directly or indirectly employ any such person so induced. C. Paragraphs 11.A and 11.B do not have any application with respect to Associate's position as an employee, consultant or advisor to Laboratoires de Biologie de Vegetale Yves Rocher or any of its subsidiaries. 12. Binding Effect. This Agreement shall be binding upon and inure to the benefit of any successor or assigns of the Company, and any such successor or assign shall be deemed substituted for the Company under the terms of this Agreement, and as a condition thereof, such successor and assign shall expressly assume in writing the rights, duties and obligations of the Company. As used in the Agreement, the term "successor or assign" or "successors or assigns" shall include any person, firm, corporation, or other entity which at any time, whether by merger, consolidation, purchase, or otherwise, acquires all or substantially all of the assets, capital stock or business of the Company. The rights and obligations of Associate under this Agreement, including his right to exercise vested stock options, shall inure to the benefit of, be binding upon, be exercisable by and be enforceable by Associate's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If Associate should die while any amount would still be payable to him hereunder if he had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to his devisee, legatee or other designee or if there is no such designee, to his estate. 13. Amendment or Modification. This Agreement may not be amended, modified, altered or changed except upon written consent of the Parties. 14. Severability. The invalidity or unenforceability of any particular provision of this Agreement shall not affect the other provisions but the obligation to be fulfilled under such invalid or unenforceable provision shall automatically be reduced to the limit of validity or enforceability prescribed by law, and this Agreement shall be construed in all respects as if such invalid or unenforceable provision were omitted. 15. Validity. If any of the provisions of this Agreement are declared or determined by any court of competent jurisdiction to be illegal, invalid or inoperative, such determination shall not affect the validity or efficacy of the remaining parts, terms or provisions of this Agreement and any such illegal, invalid or inoperative part, term or provision shall be deemed severable and not to be a part of this Agreement. 16. Waiver. No waiver of any provision of this Agreement shall be effective unless made in writing and signed by the waiving party. The waiver of any breach of this Agreement by either party or the failure of either party to require the performance of any term or obligation of this Agreement, in whole or in part, in any one instance shall not constitute a waiver of or prevent any subsequent enforcement of such term or obligation in another instance or be deemed a waiver of any subsequent breach. 17. Entire Agreement. Associate and the Company agree that this Agreement contains and constitutes the entire understanding and agreement between the Parties hereto respecting the terms of Associate's termination from the Company and supersedes all previous written or verbal negotiations, agreements, commitments, and writings in connection with severance or compensation arrangements, including the Letter Agreement dated July 9, 1997, between Associate and the Company, and addendum to such Letter Agreement dated November 13, 1997. This Agreement expressly does not supersede or cancel the Change in Control Agreement effective January 1, 1996, any compensation and benefit agreements, plans and programs listed in Paragraph 2 of this Agreement or any other agreements whether or not listed in Paragraph 2 of this Agreement not referred to in the preceding sentence. 18. Execution. This Agreement may be executed in two or more duplicate counterparts, each of which shall be treated as an original, but all of which together shall constitute one and the same instrument, and in pleading or proving any provision of this Agreement it shall not be necessary to produce more than one such counterpart. 19. Notice. Any notice required under this Agreement shall be in writing and shall be delivered by certified mail, return receipt requested, overnight delivery or telecopy to the following addresses: a. All notices to Associate shall be addressed to him as follows: Mr. John J. Dur P.O. Box 590 16 French Pond Road Henniker, NH 03242 b. All notices to the Company shall be addressed to it as follows: Mr. Allan G. Keirstead Vice Chairman, Executive Vice President, Chief Administrative and Financial Officer Stanhome Inc. 333 Western Avenue Westfield, Massachusetts 01085 Either Party may change the address to which notices are to be sent by providing notice in writing to the other Party in accordance with the terms hereof. 20. Effective Date. Associate may revoke this Agreement for a period of seven (7) days following its execution by him, and the Agreement shall not become effective or enforceable until the date upon which this revocation period has expired (the "Effective Date"). If the Effective Date is later than the Termination Date, all payments that would have been made prior to such date shall be paid as of the Effective Date. Executed this 8 day of April, 1998. /s/ John J. Dur ------------------------------------------- John J. Dur STANHOME INC. By: /s/ Allan G. Keirstead ---------------------------------------- Allan G. Keirstead Vice Chairman, Executive Vice President, Chief Administrative & Financial Officer ANNEX A 6, rue Jean Jaures Tour Cofonca 92807 Puteaux Cedex, France H. L. Tower Chairman and Chief Executive Officer Stanhome Worldwide Direct Selling Group, Inc. Suite 1300 1105 North Market Street Wilmington, Delaware 19899 U.S.A. Paris, February 27, 1998 Dear Bill: I hereby communicate to you my resignation as employee with regard to all functions I exercised in the French branch of Stanhome Worldwide Direct Selling Group, Inc. as of February 27, 1998. I request that you waive and release me from my obligation to work during the notice period and I hereby renounce any compensatory notice period indemnity. Sincerely, /s/ John J. Dur ---------------------------- John J. Dur EX-27 7 EXHIBIT 27 - FINANCIAL DATA SCHEDULE
5 1,000 3-MOS 3-MOS DEC-31-1998 DEC-31-1997 MAR-31-1998 MAR-31-1997 23,074 0 0 0 110,954 0 13,738 0 98,164 0 221,501 0 83,098 0 48,131 0 379,421 0 153,344 0 0 0 0 0 0 0 3,154 0 201,556 0 379,421 0 108,220 0 108,220 0 57,452 0 57,452 0 40,725 0 2,592 0 756 0 6,151 0 2,645 0 3,506 0 0 0 0 0 0 0 3,506 0 .21 (1.77) .21 (1.77) NOTE* AS PER FASB STATEMENT NO. 128, EARNINGS PER SHARE, "PRIMARY" IS NOW "BASIC".
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