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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
(Mark One)
[X] Annual report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the fiscal year ended DECEMBER 31, 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 1-7200
WYNN'S INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 95-2854312
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
500 NORTH STATE COLLEGE BOULEVARD
SUITE 700
ORANGE, CALIFORNIA 92868
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (714) 938-3700
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Name of Each Exchange
Title of Each Class on Which Registered
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Common Stock, par value $.01 per share New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: None
Indicate by check mark whether the Registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
The aggregate market value of voting stock held by non-affiliates of the
Registrant was $292,277,096 as of March 11, 1999. All outstanding shares of
voting stock, except for shares held by executive officers and members of the
Board of Directors of Registrant, are deemed to be held by non-affiliates.
On March 11, 1999, Registrant had 18,795,413 shares of Common Stock
outstanding.
Parts I and II incorporate information by reference from the Annual
Report to Stockholders for the year ended December 31, 1998. Part III
incorporates information by reference from the Proxy Statement for the Annual
Meeting of Stockholders to be held on April 28, 1999.
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
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PART I
ITEM 1. BUSINESS
Wynn's International, Inc., through its subsidiaries, is engaged
primarily in the automotive and industrial components business and the specialty
chemicals business. The Company designs, produces and sells O-rings and other
seals and molded elastomeric and thermoplastic polymer products. The Company
also formulates, produces and sells specialty chemical products, service
programs and automotive service equipment and distributes, primarily in southern
California, locks and hardware products manufactured by others. Prior to the
sale in May 1996 of the principal operating assets of its wholly-owned
subsidiary, Wynn's Climate Systems, Inc. ("Wynn's Climate Systems"), the Company
designed, produced and sold automotive air conditioning systems and components.
In 1998, the Company also began selling vehicle service contract programs for
new and used automobiles and light trucks.
The Company markets its O-rings and other molded polymer products under
the trade name "Wynn's-Precision." The Company markets its specialty chemical
products, automotive service equipment, and vehicle service contract programs
under various trademarks, including WYNN'S(R), FRICTION PROOFING(R), X-TEND(R),
SPIT FIRE(R), CHARGE(R), DU-ALL(R), TRANSERVE(R), POWERFLUSH(TM), WYNN'S PRODUCT
WARRANTY(R), WYNN'S EXTENDED CARE(TM) and WYNN'S PLUS(TM).
The Company's executive offices are located at 500 North State College
Boulevard, Suite 700, Orange, California 92868. Its telephone number is (714)
938-3700. The terms "Wynn's International, Inc.," "Wynn's," "Company" and
"Registrant" as used in this report refer to Wynn's International, Inc. and its
subsidiaries unless the context indicates otherwise.
FINANCIAL INFORMATION BY BUSINESS SEGMENT AND GEOGRAPHIC DATA
The Company's operations are conducted in two industry segments:
Automotive and Industrial Components, and Specialty Chemicals. Financial
information relating to the Company's business segments for the three years
ended December 31, 1998 is incorporated by reference from Note 13 of "Notes to
Consolidated Financial Statements" on pages 37 and 38 of the Company's Annual
Report to Stockholders for the year ended December 31, 1998 (the "1998 Annual
Report").
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AUTOMOTIVE AND INDUSTRIAL COMPONENTS
The Automotive and Industrial Components Division consists of
Wynn's-Precision, Inc. ("Precision") and Robert Skeels & Company ("Skeels"). The
Automotive and Industrial Components Division also included Wynn's Climate
Systems prior to the sale of its principal operating assets in May 1996. During
1998, sales from continuing operations of the Automotive and Industrial
Components Division were $175,823,000, or 52% of the Company's total net sales,
as compared with $168,266,000 and 52% in 1997. The pretax profit from continuing
operations of the division in 1998 was $29,234,000, as compared with $26,446,000
in 1997. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Operating Segments and Related Information" on pages
17 through 23 and 37 through 38, respectively, of the 1998 Annual Report, which
are hereby incorporated by reference. See also "Other Factors Affecting the
Business" on page 6 below.
WYNN'S-PRECISION, INC.
(O-RINGS, ENGINEERED SEALS AND OTHER MOLDED ELASTOMERIC AND
THERMOPLASTIC POLYMER PRODUCTS)
PRODUCTS
Precision and its affiliated companies design, manufacture and market a
variety of static and dynamic sealing products. Precision's principal products
are O-rings, composite gaskets and seals, engineered seals, and convoluted
boots, bellows and seals that are reinforced with plastic, metal and fabric.
These products are made from elastomeric and thermoplastic polymers. The
products are used for a variety of sealing applications that include engines,
transmissions, steering pumps and assemblies, fuel handling, suspension/brake
systems, refrigeration and electronics. Precision's primary customers are
manufacturers of automobiles, trucks, off-highway vehicles, fluid handling
equipment, aircraft/aerospace components, and the military.
DISTRIBUTION
Precision sells its products primarily through a direct sales force to
original equipment manufacturer ("OEM") customers and component suppliers to
OEMs. Precision also markets its products throughout the United States through
independent distributors and through Company-operated regional service centers
located in California, Illinois, Indiana, Michigan, Minnesota, New York, North
Carolina, Ohio, Texas and Wisconsin. Precision's Canadian operation distributes
products principally through a direct sales force to OEM customers, through
independent distributors and through Precision-operated service centers in
Canada and England.
PRODUCTION
Precision's manufacturing facilities are located in Arizona, Kentucky,
Tennessee, Texas, Virginia and Ontario, Canada. Precision added a manufacturing
facility in China after entering into a joint venture with a Chinese company in
the fourth quarter of 1998. Precision's administrative headquarters are located
at the site of its main manufacturing facility in Lebanon, Tennessee. Also
located in Lebanon, Tennessee are Precision's own tool production facility and a
facility dedicated exclusively to injection molding. Over the past several
years, Precision has made significant investments in modern computerized
production equipment and facilities. In 1998, Precision continued to invest in
new
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production equipment, which expanded production capacity primarily in its
Tennessee, Virginia, and Kentucky facilities. In 1998, Precision also approved a
significant capital expenditure to build a technologically advanced rubber
mixing facility at its Lebanon, Tennessee production center. In 1996, Precision
purchased from Lawson Mardon Wheaton Inc. the operating assets of its automotive
plastics business located in Springfield, Kentucky. As a result of the
transaction, Precision acquired a 76,375 square foot manufacturing facility and
equipment dedicated to injection molding, injection blow molding and extrusion
blow molding of various thermoplastic polymers.
The principal raw materials used by Precision are elastomeric and
thermoplastic polymers. These raw materials generally have been available from
numerous suppliers in sufficient quantities to meet Precision's requirements.
Adequate supplies of raw materials were available in 1998 and are expected to
continue to be available in 1999.
ROBERT SKEELS & COMPANY
Skeels is a wholesale distributor of builders hardware products,
including lock sets and locksmith supplies.
Skeels' main facility is located in Compton, California. In addition,
Skeels has a leased satellite sales facility located in Fullerton, California.
Skeels supplies approximately 35,000 items to retail hardware, locksmith
and lumberyard outlets in southern California, Arizona, and Nevada. Skeels also
sells directly to large institutional customers. Most of Skeels' sales are
derived from replacement items used by industry, institutions and in-home
remodeling and repair.
Skeels has been a distributor of Schlage lock products since 1931.
Skeels also distributes other well-known brands such as Lawrence, Kwikset and
Master. Skeels' distributorship arrangements generally are cancelable by the
manufacturers without cause.
WYNN'S CLIMATE SYSTEMS, INC.
(AUTOMOTIVE AIR CONDITIONING SYSTEMS AND COMPONENTS)
Prior to the sale of its principal operating assets in May 1996, Wynn's
Climate Systems designed, manufactured and marketed automotive air conditioning
systems and components for both automotive OEMs and the automotive aftermarket.
Wynn's Climate Systems also operated installation centers in Arizona,
California, Colorado and North Carolina that installed air conditioners and
accessories for automobile dealers and retail customers.
Wynn's Climate Systems sold its air conditioning components to OEM
customers and distributors. It sold its air conditioning systems to OEM
customers and their distributors and dealers, and to distributors in the
automotive aftermarket. In addition, through its installation centers, Wynn's
Climate Systems sold air conditioning systems and accessories to automobile
dealers and retail customers.
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Wynn's Climate Systems manufactured its products in its 185,000 square
foot facility located in Fort Worth, Texas. Wynn's Climate Systems manufactured
many of the components that it used in the production of its air conditioning
systems. Outside vendors supplied certain finished components such as
compressors, accumulators and receiver/dryers.
SPECIALTY CHEMICALS
The Specialty Chemicals Division consists of Wynn Oil Company and its
subsidiaries ("Wynn Oil"). During 1998, net sales at Wynn Oil were $161,052,000,
or 48% of the Company's total net sales, as compared to $152,687,000 and 48% for
1997. The pretax profit of the division during 1998 was $17,736,000, compared
with $20,095,000 for 1997. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Operating Segments and
Related Information" on pages 17 through 23 and 37 through 38, respectively, of
the 1998 Annual Report, which are hereby incorporated by reference. See also
"Other Factors Affecting the Business" on page 6 below.
PRODUCTS
Wynn Oil develops, manufactures and markets a wide variety of specialty
chemical car care and industrial products and related service programs. These
products include professional chemical products, programs and equipment for
automobile service technicians and automobile chemical products for consumers.
Wynn Oil's premium product line is the Wynn's Product Warranty program. Wynn Oil
also sells chemical products for metalworking and machining operations.
Wynn Oil formulates its products to provide preventive or corrective
maintenance for various parts of an automobile, including the engine,
transmission, steering system, fuel system, differential, cooling system and
certain other parts. Wynn Oil also manufactures equipment designed to work with
Wynn Oil chemical products to assist automobile service technicians with routine
tasks, such as flushing cooling and transmission systems. For example, the
patented DU-ALL machine is a portable machine used with Wynn's chemicals to
flush and refill antifreeze in a vehicle and to recycle the used antifreeze. The
DU-ALL system has been approved by General Motors, Ford, DaimlerChrysler,
Nissan, Mitsubishi, Isuzu and Hyundai. The TRANSERVE, TRANSERVE II and TRANSERVE
II+ automatic transmission flush systems are portable machines used with Wynn
Oil chemicals to flush, refill and treat the transmission fluid in a vehicle.
The TRANSERVE II+ system has been approved by General Motors, Ford,
DaimlerChrysler, Nissan, Mitsubishi and Isuzu.
Wynn Oil's industrial specialty chemical products include forging
compounds, cleaners, release agents, lubricants, cutting and drawing fluids and
multipurpose coolants. These chemical products are used in precision metal
forming and machining operations. They are a mix of full synthetic,
semi-synthetic and petroleum-based fluids that address specific functions and
levels of operation severity.
Wynn Oil also markets the Wynn's Product Warranty program. The Wynn's
Product Warranty program consists of kits of a premium line of automotive
treatment products that are accompanied by a special product warranty. The kits
are typically sold through car dealers to purchasers of used automobiles and
light trucks. The kits contain proprietary treatment products that have been
specially formulated to help prevent damage to various internally lubricated
parts and systems of the automobile.
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The products include an engine oil treatment, a fuel system conditioner, a
transmission fluid treatment, a power steering supplement, a differential
treatment, a cooling system conditioner and an air conditioning system
treatment. The product warranty accompanying the products states, in effect,
that if the vehicle owner (i) treats the vehicle as directed, (ii) specified
components of the vehicle are damaged during the warranty period, and (iii) the
damage is the type of damage that the products are designed to help prevent,
then Wynn Oil will provide reimbursement for the damage, up to the limits of
liability and subject to certain conditions and exceptions. The items reimbursed
include the costs of certain parts and labor and, in some instances, the costs
of towing and a rental car. See "Other Factors Affecting the Business" on page 6
below.
In 1998, Wynn's Extended Care, Inc. ("Wynn's Extended Care"), a
wholly-owned subsidiary of Wynn Oil, launched the Wynn's Extended Care vehicle
service contract program. The program features vehicle service contracts that
cover virtually every major system of a car. Wynn's Extended Care sells its
vehicle service contracts through new and used car dealers to purchasers of new
and used cars. The Wynn's Extended Care program is backed by a contractual
liability insurance policy.
DISTRIBUTION
Wynn Oil's car care products are sold in the United States and in
approximately 100 foreign countries. See "Foreign Operations" on page 12 below.
Wynn Oil distributes its products through a wide range of distribution
channels. Domestically, Wynn Oil distributes its products primarily through
independent distributors and sales representatives. Wynn Oil also uses internal
sales management personnel to sell and distribute its products. In addition,
Wynn Oil distributes the Wynn's Product Warranty program through new and used
car dealers and, on a limited basis, certain auto auctions. Wynn Oil also
markets the Wynn's Product Warranty program in the United States and Canada
through cooperative arrangements with national and regional automobile finance
companies. Although these automobile finance companies have played an increasing
role in the marketing of the Wynn's Product Warranty program in recent years, in
1998 Wynn Oil experienced a decline in revenue generated by these arrangements.
No assurance can be given that such finance companies will continue to market
the Wynn's Product Warranty program. Wynn's Extended Care markets its service
contract programs in the United States through new and used car dealers, auto
auctions and national and regional finance companies. Foreign sales of Wynn Oil
products are made principally through wholly-owned subsidiaries, which sell
primarily through independent distributors, warehouse distributors or
manufacturers' representative organizations, with a direct sales force in France
and the Netherlands. Wynn Oil also engages in direct export sales from the U.S.
to independent distributors in Asia and Latin America, and from Belgium to
independent distributors in certain European countries, North Africa, the Middle
East and the former republics of the USSR. See "Other Factors Affecting the
Business" on page 6 below.
PRODUCTION
Wynn Oil has manufacturing facilities in California and Belgium. Other
foreign subsidiaries either purchase products directly from the Company's
manufacturing facilities in the United States and/or Belgium or have the
products manufactured locally by outside contract suppliers according to Wynn
Oil's specifications and formulae. Wynn Oil periodically reviews its production
and sourcing locations in light of fluctuating foreign currency rates in order
to ensure the best product cost and quality.
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Wynn Oil uses a large number of chemicals to produce its various
specialty chemical products. Primary raw materials necessary for the production
of these products, as well as the finished products, generally have been
available from several sources. An adequate supply of materials was available in
1998 and is expected to continue to be available for the foreseeable future.
OTHER FACTORS AFFECTING THE BUSINESS
COMPETITION
All phases of the Company's business have been and remain highly
competitive. The Company's products and services compete with those of numerous
companies, some of which have financial resources greater than those of the
Company. Sales by the Automotive and Industrial Components Division are in part
related to the sales of vehicles by its OEM customers.
Precision has a large number of competitors in the market for static and
dynamic sealing products, some of which competitors are substantially larger
than Precision. The markets in which Precision competes are also sensitive to
price changes. Requests for price reductions are not uncommon. Precision
attempts to work with its customers to identify ways to lower costs and prices.
Precision focuses on high technology, high quality sealing devices and has made
significant investments in advanced equipment and other means to raise
productivity. In 1998, Precision invested approximately $8.1 million in new
production equipment and facilities, which expanded its production capacity
primarily at its Tennessee, Virginia and Kentucky facilities. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations" on
pages 17 through 23 of the 1998 Annual Report, which is hereby incorporated by
reference. Precision's major focus is to be the low cost producer of superior
quality products within its industry. Precision believes it must expand into
additional areas of sealing technology in order to continue to be an effective
competitor.
Competition with respect to Wynn Oil's specialty chemical and equipment
products consists principally of other automotive aftermarket chemical, service
equipment and industrial fluid companies. Some major oil companies also market
their own additive products through retail service stations, independent dealers
and garages. Certain national retailers and car manufacturers market private
label brands of specialty chemical products. Wynn Oil's DU-ALL antifreeze
recycling equipment and chemicals compete against other antifreeze recycling
processes, some of which also have received OEM approval. Similarly, Wynn Oil's
TRANSERVE transmission fluid flush and fill equipment and chemicals compete
against other transmission flush equipment. The Wynn's Product Warranty program
competes with programs offered by other companies that feature lubricant kits
backed by product warranties. The Wynn's Product Warranty program and Wynn's
Extended Care also compete with service contract and extended warranty programs
offered by other service contract providers and insurance companies. The
principal methods of competition vary by geographic locale and by the relative
market share held by the Company compared to other competitors.
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Skeels continues to face intense price competition from numerous
cash-and-carry discount retailers. Skeels also has observed some manufacturers
selling directly to retailers to increase volume.
KEY CUSTOMERS
Sales to General Motors constituted approximately 10.0% of the total net
sales of the Company in 1998. No other customer represented more than 10% of
total net sales of the Company in 1998.
GOVERNMENT REGULATIONS
The number of governmental rules and regulations affecting the Company's
business and products continues to increase.
Wynn Oil markets the Wynn's Product Warranty program in forty-nine
states in the U.S. and also in Canada. Questions have been raised by certain
state and Canadian provincial regulators as to whether the product warranty that
accompanies the kit is in the nature of insurance or a regulated service
contract. Wynn Oil attempts to resolve these questions to the satisfaction of
each such regulator. On occasion, it has elected not to sell the Wynn's Product
Warranty program in certain jurisdictions. No assurance can be given that
governmental regulations will not significantly affect the marketing of the
Wynn's Product Warranty in the United States or other countries in the future.
Over the past few years, sales of the Wynn's Product Warranty program have
become an increasingly important element of Wynn Oil's domestic business.
Wynn's Extended Care markets the Wynn's Extended Care vehicle service
contract programs in approximately forty-six states in the U.S. Many states have
laws and regulations that govern the sale of vehicle service contracts. These
laws and regulations dictate, for example, the types of disclosures that must be
included in the Wynn's Extended Care service contracts, and in some cases
require that Wynn's Extended Care be licensed as a vehicle service contract
provider. Wynn's Extended Care endeavors to comply with these laws and
regulations. No assurance can be given that government laws and regulations will
not significantly affect the marketing of the Wynn's Extended Care contracts in
the future.
ENVIRONMENTAL MATTERS
The Company is involved in certain environmental proceedings and
potential proceedings principally arising out of the past or present use of
various substances that have been or may be deemed to be hazardous. At December
31, 1998, the Company had recorded consolidated accrued reserves of
approximately $9.4 million relating to environmental matters. In establishing
such reserves, the Company evaluates the nature and extent of the underlying
contamination to the extent known for each matter, the estimated cost of the
likely remedy, the number and financial strength of other potentially
responsible parties, and the evidence against the various potentially
responsible parties. During this evaluation process, the Company makes its best
estimate of its likely exposure with respect to each matter based on information
known to the Company at that time. Such estimates may involve a range of
exposures for each matter. The Company provides aggregate reserves for no less
than the minimum amount of the aggregate range of outcomes established by the
Company.
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The Company lacks sufficient information at this time to provide an
estimate of its "reasonably possible" (as such term is defined in Statement of
Financial Accounting Standard No. 5) potential liability from all environmental
matters. In establishing reserves for environmental matters, the Company assumes
that it has appropriately evaluated key factors, such as expected remedy costs,
the likely degree of responsibility and ability to pay of other potentially
responsible parties, and the Company's probable allocable share. It is
reasonably possible that regulatory or technical developments or subsequently
developed information could cause the Company to reevaluate its present range of
outcomes and to record additional liabilities for existing environmental
matters. However, based upon information presently known to the Company, the
Company believes that any such additional liabilities should not materially
affect the Company's consolidated financial position, annual results of
operations or cash flow. See Note 10 of "Notes to Consolidated Financial
Statements" on pages 34 and 35 of the 1998 Annual Report, which is hereby
incorporated by reference.
All potentially significant environmental matters presently known to the
Company are described below.
(a) In July 1990, Wynn Oil received a general notice letter from
the United States Environmental Protection Agency (the "EPA") stating
that it may be a potentially responsible party ("PRP") with respect to
the San Gabriel Valley, California Superfund Sites regional groundwater
problem. In March 1994, the EPA issued its Record of Decision ("ROD")
with respect to the Baldwin Park Operable Unit ("BPOU") of the San
Gabriel Valley Superfund Sites. Wynn Oil's Azusa facility (the "Azusa
Facility") is located within the BPOU. In the ROD, the EPA selected an
interim remedial action to treat the contaminated groundwater (the
"Interim Remedial Action") for the BPOU that is estimated to cost $47
million in capital and non-recurring costs and $4 million to $5 million
in annual operating costs.
On May 15, 1997, the EPA issued Special Notice letters to
nineteen companies and entities, including Wynn Oil, with respect to the
BPOU. The Special Notice letters initiated an administrative process in
which the recipients were given sixty days to submit a good faith offer
to undertake the requested work and another sixty days to reach
agreement with the EPA as to the terms of a consent decree. The EPA has
indicated that it considered Wynn Oil to be one of the four largest
contributors of volatile organic compounds to the regional groundwater
problem in the BPOU. Wynn Oil disagrees with the views expressed by the
EPA.
In early June 1997 pursuant to a newly developed test method,
perchlorates were detected in certain groundwater wells in the BPOU in
excess of the State of California provisional action level of 18 parts
per billion. Perchlorates are ions of ammonium perchlorate or potassium
perchlorate, which are most commonly associated with the manufacturing
of solid rocket fuel, fireworks and explosives. It is unclear whether
any present treatment technology can practicably remove perchlorate to
the State provisional action level, although two methods are under
evaluation. After the discovery of perchlorate and also using
newly-developed test methods, N-nitrosodimethylamine ("NDMA") was
discovered in the groundwater in the BPOU in quantities in excess of the
detection limit of 30 parts per trillion. NDMA is associated with the
manufacture of rocket fuel, among other processes. As a result of issues
arising from the discovery of perchlorate and NDMA in certain BPOU
groundwater wells, the EPA extended the deadline for submission of a
good faith offer to July 2, 1999.
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The discovery of perchlorate and NDMA in the BPOU caused the
shutdown of certain production wells, which led the local water
community to become more actively involved in the groundwater
contamination issues in the BPOU. Wynn Oil has been working with certain
other Special Notice recipients to negotiate a settlement, subject to
EPA approval, with the Main San Gabriel Basin Watermaster
("Watermaster"), a Court-appointed entity with responsibility to manage
the groundwater in the San Gabriel basin under the Court's jurisdiction.
Under the terms discussed, Watermaster would implement the Interim
Remedial Action in conjunction with its basin water management
activities with funding from multiple sources, including settling
Special Notice recipients, the Federal Bureau of Reclamation and others,
subject to negotiated reopeners and additional funding events. No
assurance can be given that a negotiated settlement reached with
Watermaster will be approved by EPA. Wynn Oil's ultimate share of the
total remedial costs cannot be estimated with certainty at this time. In
establishing appropriate reserves for this matter, the Company has
assumed that a negotiated settlement with Watermaster would be approved
by EPA and that the settling Special Notice recipients would pay minimal
EPA past costs.
(b) In September 1995, the California Regional Water Quality
Control Board-Los Angeles Region (the "RWQCB") sent letters to Wynn Oil
and certain other facilities in the BPOU asking them to submit remedial
action plans for vadose zone remediation at their respective facilities.
In December 1995, Wynn Oil's consultants responded to the RWQCB stating
that such remediation was neither warranted nor cost effective at the
Azusa Facility. In August 1997, Wynn Oil received a letter from the
RWQCB that did not dispute Wynn Oil's response with respect to
remediation of the shallow vadose zone at the Azusa Facility. The RWQCB
asked for additional monitoring well data before reaching a conclusion
as to the deep soil vapor at the Azusa Facility. Representatives of Wynn
Oil subsequently have met with representatives of the RWQCB to discuss
the issue further. Wynn Oil may at some later date elect or be required
to take specific remedial actions with respect to soils conditions at
the Azusa Facility.
(c) In February 1995, the owner (the "Property Owner") of certain
real property (the "Site") formerly leased by Alkid Corporation
("Alkid"), an inactive subsidiary of the Company, filed a lawsuit in
federal court against Alkid, Wynn's International, Inc. and Wynn Oil
(collectively the "Wynn Defendants") and another former lessee and its
principal. The complaint alleges that the defendants stored solid and
hazardous wastes at the Site and that the storage devices for the wastes
leaked, causing contamination of the soils and groundwater. The
complaint seeks relief under CERCLA, the Resource Conservation Recovery
Act of 1976 and common law, including an unspecified amount of damages
and an injunction to compel the defendants to clean up the Site. After
the Wynn Defendants were served with the lawsuit in June 1995, the
parties filed various cross-claims and counterclaims against each other.
Subsequent to the filing of the responsive pleadings, the Property Owner
and the Wynn Defendants agreed to fund a joint investigation of the Site
with each paying one-half of the cost. After this investigation was
completed, all parties to the litigation agreed to fund three rounds of
additional
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investigations of the Site with each paying one-third of the cost.
During the pendency of these investigations, the litigation, including
all discovery, has been stayed. The trial court has set a tentative
trial date of July 15, 1999 for this matter. In order to avoid
litigation costs and in expectation of ultimately reaching a settlement
of all claims, the parties have been negotiating an interim settlement
pursuant to which the litigation would be dismissed without prejudice,
the parties would fund certain additional technical work equally and the
parties would agree to certain non-binding alternative dispute
resolution mechanisms. No assurance can be given that such an interim
settlement will be reached. The Company does not have sufficient
information to estimate the cost of cleanup at the Site.
(d) In January 1991, Wynn's Climate Systems received a letter
from the Texas Natural Resource Conservation Commission (the "TNRCC")
alleging that soil adjacent to one of its leased manufacturing
facilities was contaminated with hazardous substances. The TNRCC
directed Wynn's Climate Systems to determine the extent of such
contamination and then take appropriate remedial measures. Wynn's
Climate Systems retained environmental consultants to conduct soil
sampling and otherwise comply with the directive of the TNRCC.
Performance of this work was completed in late 1991 and the consultants'
report was submitted to the TNRCC in February 1992. In 1994, Wynn's
Climate Systems received a request from the TNRCC for additional
information. Wynn's Climate Systems furnished the requested information
to the TNRCC and then voluntarily conducted additional investigation
activities at this facility. Wynn's Climate Systems' lease of this
facility expired in December 1994. Due to a dispute with the property
owner following expiration of the lease, Wynn's Climate Systems was
unable to perform any additional work at the site in 1995 or early 1996.
In April 1996, the property owner notified Wynn's Climate Systems that
it would grant access to Wynn's Climate Systems for further
investigation of the site. Thereafter, Wynn's Climate Systems submitted
a report to the TNRCC recommending a remedial action plan for the site
and met with the TNRCC to receive their comments. In 1998, the TNRCC
approved the remedial action plan for the site and the remedial work was
completed in the first quarter of 1999. Wynn's Climate Systems is now
preparing a final site closure report for submittal to the TNRCC.
(e) Wynn's Climate Systems is one of approximately 100 hazardous
waste generators that have been identified as potentially responsible
parties for the Chemical Recycling, Inc. ("CRI") site in Wylie, Texas
(the "CRI Site"). A PRP Steering Committee (the "CRI Committee") was
formed to negotiate with the EPA on behalf of its members an agreement
to take remedial measures voluntarily at the CRI Site. Approximately 85
PRPs, including Wynn's Climate Systems, have agreed to participate in
the CRI Committee and have signed Consent Agreements with the EPA with
respect to the CRI Site. Remediation efforts have begun at the CRI Site
under the guidance of the CRI Committee. No significant developments
occurred in 1998. As of March 1999, Wynn's Climate Systems'
proportionate share of the total volume of waste contributed to the CRI
Site by CRI Committee members was approximately two-tenths of one
percent (0.2%).
The foregoing "Environmental Matters" section and Note 10 of "Notes to
Consolidated Financial Statements" on pages 34 and 35 of the 1998 Annual Report
(which is incorporated by reference herein) contain various "forward looking
statements" within the meaning of Section 27A of the Securities Act of
10
<PAGE> 12
1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as
amended, which represent the Company's expectations or beliefs concerning future
events, including statements regarding estimates of the Company's liabilities
associated with identified environmental matters and the likelihood that any
liability in excess of reserves for such matters will not materially affect the
Company's financial position or annual results of operations or cash flows. The
Company cautions that these statements are further qualified by important
factors that could cause actual results to differ materially from those in the
forward looking statements, including, without limitation, the following: (i)
the actual nature and extent of the contamination, (ii) the remedial action
selected, (iii) the cleanup level required, (iv) changes in regulatory
requirements, (v) the identification or discovery of new contaminants of
concern, (vi) development of new or additional remedial technologies, (vii) with
respect to the San Gabriel Valley Superfund Sites, whether EPA will approve any
settlement reached with Watermaster to implement Interim Remedial Action and the
nature of reopeners and additional funding events in a settlement with
Watermaster, (viii) the amount of EPA past costs required to be paid by Wynn Oil
with respect to the San Gabriel Superfund Sites, (ix) the ability of other
potentially responsible parties, if any, to pay their respective shares, and (x)
any insurance recoveries. Results actually achieved thus may differ materially
from expected results included in these and any other forward looking statements
contained herein.
FOREIGN CURRENCY FLUCTUATIONS
In 1998, the United States dollar generally increased in value compared
to 1997 in the currencies of most countries in which the Company does business.
This increase in the value of the U.S. dollar caused aggregate foreign sales and
pretax profit to be translated into lower dollar values than what would have
been reported if exchange rates had remained the same as in 1997. Accumulated
Other Comprehensive Income on the Consolidated Balance Sheet includes equity
adjustments from foreign currency translation. In 1998, the equity adjustments
from foreign currency translation decreased by $67,000, which caused a
corresponding decrease in Total Stockholders' Equity. See "Foreign Operations"
on page 12 below.
PATENTS AND TRADEMARKS
The majority of the Specialty Chemicals Division's products are sold under
the WYNN'S and WYNN'S PRODUCT WARRANTY trademarks. The Company has registered
these and its other important trademarks in the relevant jurisdictions. The
Company knows of no material pending or threatened challenges to its trademarks.
See "Other Litigation" under "Item 3 - Legal Proceedings" on page 20 below for a
discussion of a lawsuit filed by Wynn Oil against an infringer on one of its
trademarks.
The Company holds a number of patents that are used in the operation of
its businesses. The Company is not aware of any pending or threatened challenges
to any of its patents which could have a material adverse effect on the
Company's business or results of operations.
SEASONALITY OF THE BUSINESS
Although sales at the Company's various businesses are somewhat
seasonal, the consolidated results of operations generally do not reflect
seasonality.
11
<PAGE> 13
RESEARCH AND DEVELOPMENT
Precision maintains research and engineering facilities in Tennessee,
Virginia, Kentucky and Canada. Research and development is an important aspect
of Precision's business as Precision has developed and continues to develop
numerous specialized compounds to meet the specific needs of its various
customers. Precision also has technical centers in Tennessee, Virginia, Kentucky
and Canada to design sealing solutions, construct prototype products and to
perform comprehensive testing of materials and products. Precision maintains
extensive research, development and engineering facilities to meet the needs of
its customers.
Wynn Oil maintains research and product performance centers in
California, Belgium, France and South Africa. The main activities of the
research staff are the development of new specialty chemicals and other
products, improvement of existing products, including finding new applications
for their use, evaluation of competitive products and performance of quality
control procedures.
FOREIGN OPERATIONS
The following table shows sales to foreign customers for the years 1998,
1997 and 1996:
<TABLE>
<CAPTION>
1998 1997 1996
--------------- -------------- --------------
<S> <C> <C> <C>
Total Sales Outside the United States: $126,366,000 $120,201,000 $113,609,000
Percent of Net Sales 37.5% 37.5% 39.4%
Sales by Foreign Subsidiaries $98,191,000 $96,184,000 $93,949,000
Percent of Net Sales 29.1% 30.0% 32.6%
Export Sales by Domestic Subsidiaries $28,175,000 $24,017,000 $19,660,000
Percent of Net Sales 8.4% 7.5% 6.8%
</TABLE>
Consolidated operating results are reported in United States dollars.
Because the Company's foreign subsidiaries conduct operations in the currencies
of the countries in which they are based, all financial statements of the
foreign subsidiaries must be translated into United States dollars. As the value
of the United States dollar increases or decreases relative to these foreign
currencies, the United States dollar value of items on the financial statements
of the foreign subsidiaries is reduced or increased, respectively. Consequently,
changes in dollar sales of the foreign subsidiaries from year to year are not
necessarily indicative of changes in actual sales recorded in local currency.
See Note 4 and Note 13 of "Notes to Consolidated Financial Statements" on page
30 and pages 37 and 38, respectively, of the 1998 Annual Report, which are
hereby incorporated by reference.
The value of any foreign currency relative to the United States dollar
is affected by a variety of factors. It is exceedingly difficult to predict what
such value may be at any time in the future. Consequently, the ability of the
Company to control the impact of foreign currency fluctuations is limited.
A material portion of the Company's business is conducted outside the
United States. Consequently, the Company's ability to continue such operations
or maintain their profitability is to some extent subject to control and
regulation by the United States government and foreign governments.
12
<PAGE> 14
EMPLOYEES
At December 31, 1998, the Company had 2,121 employees.
A majority of the production and maintenance employees at the Lebanon,
Tennessee plant of Precision are represented by a local lodge of the
International Association of Machinists and Aerospace Workers. The collective
bargaining agreement for this facility expired in April 1998. After a three-week
strike, Precision and the union reached a new collective bargaining agreement in
May 1998 that will expire in April 2001.
The production and maintenance employees at the Orillia, Ontario, Canada
plant of Precision are represented by a local unit of the Amalgamated
Steelworkers of America. The collective bargaining agreement for the unit will
expire in January 2000.
A majority of the production and maintenance employees at the Lynchburg,
Virginia plant of Dynamic Seals, Inc., an affiliate of Precision, are
represented by a local of the International Chemical Workers Union. In February
1999, Dynamic Seals and the union reached a new collective bargaining agreement
for this facility that will expire in February 2002.
A majority of the production and maintenance employees at the
Springfield, Kentucky plant of Precision are represented by a local unit of the
International United Paperworkers Union. Precision did not assume the collective
bargaining agreement for this facility when Precision acquired the plant in
1996. Precision recently concluded negotiations with the union for a new
collective bargaining agreement, which the employees approved. The collective
bargaining agreement will expire in March 2001.
The Company considers its relations with its employees to be good.
13
<PAGE> 15
EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of the Company, who are appointed annually, are
as follows:
<TABLE>
<CAPTION>
Executive
Officer Since Age
------------- -----
<S> <C> <C> <C>
James Carroll Chairman of the Board and Chief 1988 69
Executive Officer
John W. Huber President and Chief Operating Officer 1996 55
Seymour A. Schlosser Vice President-Finance and Chief 1989 53
Financial Officer
Gregg M. Gibbons Vice President-Corporate Affairs and 1986 46
General Counsel
</TABLE>
The principal occupations of Messrs. Carroll, Schlosser and Gibbons for
the past five years have been their current respective positions with the
Company. In addition, Mr. Gibbons was Secretary of the Company until December
1997. Mr. Huber was named President and Chief Operating Officer of the Company
in December 1996. For the five years immediately preceding his appointment as
President and Chief Operating Officer of the Company, Mr. Huber was President
and Chief Executive Officer of Wynn's-Precision, Inc., a wholly-owned subsidiary
of the Company. There is no arrangement or understanding between any executive
officer and any other person pursuant to which he was selected as an officer.
There is no family relationship between any executive officers of the Company.
14
<PAGE> 16
ITEM 2. PROPERTIES
The following is a summary description of the Company's facilities, all
of which the Company believes to be of adequate construction, as of March 11,
1999:
<TABLE>
<CAPTION>
Square If Lease,
Held in Fee Footage Year of
Location or by Lease (Approximate) Termination Present Use
-------- ----------- ------------- ----------- -----------
<S> <C> <C> <C> <C>
WYNN'S INTERNATIONAL, INC.
Orange, California Lease 6,894 2003 Administrative
AUTOMOTIVE AND INDUSTRIAL
COMPONENTS:
WYNN'S-PRECISION, INC.
Domestic
--------
Lebanon, Tennessee Fee 140,000 -- Manufacturing,
Warehouse,
Administrative
Lebanon, Tennessee Fee 78,000 -- Manufacturing
Lebanon, Tennessee Fee 35,000 -- Manufacturing
Lebanon, Tennessee Fee 2,650 -- Manufacturing
Livingston, Tennessee Fee 33,000 -- Manufacturing,
Warehouse
Tempe, Arizona Fee 32,572 -- Manufacturing,
Warehouse
Springfield, Kentucky Fee 80,000 -- Manufacturing,
Warehouse,
Administrative
Rancho Cucamonga, California Lease 2,880 1999 Warehouse
Huntley, Illinois Lease 4,400 2001 Warehouse
Peoria, Illinois Lease 10,000 2000 Warehouse
Indianapolis, Indiana Lease 1,800 2001 Warehouse
Bloomfield Hills, Michigan Lease 3,050 2003 Administrative
</TABLE>
15
<PAGE> 17
<TABLE>
<CAPTION>
Square If Lease,
Held in Fee Footage Year of
Location or by Lease (Approximate) Termination Present Use
-------- ----------- ------------- ----------- -----------
<S> <C> <C> <C> <C>
Wyoming, Michigan Lease 2,000 2000 Warehouse
Golden Valley, Minnesota Lease 3,800 1999 Warehouse
West Seneca, New York Lease 2,679 2000 Warehouse
Charlotte, North Carolina Lease 3,675 1999 Warehouse
Dayton, Ohio Lease 4,295 Month-to-Month Warehouse
Fort Worth, Texas Lease 3,600 1999 Warehouse
Milwaukee, Wisconsin Lease 2,700 1999 Warehouse
Foreign
-------
Orillia, Ontario, Canada Fee 48,000 -- Manufacturing,
Warehouse,
Administrative
Concord, Ontario, Canada Lease 3,455 1999 Warehouse
Edmonton, Alberta, Canada Lease 2,700 1999 Warehouse
Calgary, Alberta, Canada Lease 3,200 2001 Warehouse
Boucherville, Quebec, Canada Lease 3,403 1999 Warehouse
Aldershot, Hampshire, U.K. Lease 2,300 Month-to-Month Warehouse,
Administrative
DYNAMIC SEALS, INC.
Lynchburg, Virginia Fee 129,000 -- Manufacturing,
Warehouse,
Administrative
Houston, Texas Lease 14,000 2000 Manufacturing,
Warehouse,
Administrative
Houston, Texas Lease 14,000 2000 Warehouse
</TABLE>
16
<PAGE> 18
<TABLE>
<CAPTION>
Square If Lease,
Held in Fee Footage Year of
Location or by Lease (Approximate) Termination Present Use
-------- ----------- ------------- ----------- -----------
<S> <C> <C> <C> <C>
ROBERT SKEELS & COMPANY
Compton, California Fee 59,019 -- Warehouse,
Administrative
Fullerton, California Lease 1,600 Month-to-Month Warehouse,
Administrative
SPECIALTY CHEMICALS:
WYNN OIL COMPANY
Domestic
--------
Azusa, California Fee 122,630 -- Manufacturing,
Warehouse,
Administrative
Foreign
-------
Frenchs Forest, Lease 24,224 1999 Warehouse,
New South Wales, Australia Administrative
Carrington, New South Wales, Lease 13,175 1999 Warehouse,
Australia Administrative
St. Niklaas, Belgium Fee 82,600 -- Manufacturing,
Warehouse,
Administrative
Mississauga, Ontario, Canada Lease 32,798 2001 Warehouse,
Administrative
Mississauga, Ontario, Canada Lease 2,536 2002 Service Center
Reading, Berkshire, U.K. Lease 3,154 2004 Administrative
Strasbourg, France Lease 557 1999 Administrative
Paris, France Lease 9,513 2001 Administrative
Cestas, France Lease 18,669 1999 Warehouse,
Administrative
Lyon, France Lease 465 2000 Administrative
</TABLE>
17
<PAGE> 19
<TABLE>
<CAPTION>
Square If Lease,
Held in Fee Footage Year of
Location or by Lease (Approximate) Termination Present Use
-------- ----------- ------------- ----------- -----------
<S> <C> <C> <C> <C>
Abbeville, France Lease 660 1999 Administrative
Thiers, France Lease 465 1999 Administrative
Toulouse, France Lease 485 1999 Administrative
Ratingen, Germany Lease 1,808 1999 Administrative
Chennai, India Lease 6,456 Month-to-Month Manufacturing,
Warehouse,
Administrative
Mexico City, Mexico Lease 2,500 1999 Warehouse,
Administrative
Wynberg, Sandton, Fee 32,280 -- Warehouse,
South Africa Administrative
Edenvale, Transvaal, Fee 10,921 -- Leased to Third Party
South Africa
Caracas, Venezuela Lease 1,615 Month-to-Month Administrative
Zoeterwoude, Netherlands Lease 4,917 2003 Administrative
</TABLE>
The Company believes that all of its operating properties are adequately
maintained, fully utilized and suitable for the purposes for which they are
used. With respect to those leases expiring in 1999 and 2000, the Company
believes it will be able to renew such leases on acceptable terms or find
suitable alternate facilities.
ITEM 3. LEGAL PROCEEDINGS
Various claims and actions, considered normal to Registrant's business,
have been asserted and are pending against Registrant and its subsidiaries.
Registrant believes that such claims and actions should not have any material
adverse effect upon the consolidated results of operations, cash flows or the
financial position of Registrant based on information presently known to
Registrant. See also "Environmental Matters" at pages 7 through 11 above, and
Note 10 of "Notes to Consolidated Financial Statements" on pages 34 and 35 of
the 1998 Annual Report, which is hereby incorporated by reference.
Toxic Tort Litigation
Since late July 1997, eight toxic tort lawsuits have been filed against
certain local water producers and industrial companies (including Wynn Oil)
located in San Gabriel Valley, California. The lawsuits are captioned (i)
Santamaria, et. al v. Suburban Water Systems, Inc., et. al (Superior Court of
18
<PAGE> 20
California for the County of Los Angeles, Case No. KC 025-995), (ii) Adler, et.
al v. Southern California Water Company, et. al (Superior Court of the State of
California for the County of Los Angeles, Case No. BC 169892), (iii) Boswell,
et. al v. Suburban Water System, et. al (Superior Court of the State of
California for the County of Los Angeles, Case No. KC 027318), (iv) Celi, et. al
v. San Gabriel Valley Water Company, et. al (Superior Court of the State of
California for the County of Los Angeles, Case No. GC 020622), (v) Criner, et.
al v. San Gabriel Valley Water Company, et. al (Superior Court of the State of
California for the County of Los Angeles, Case No. GC 021658), (vi) Demciuc, et.
al v. Suburban Water Systems, et. al (Superior Court of the State of California
for the County of Los Angeles, Case No. KC 028732), (vii) Dominguez, et. al v.
Southern California Water Company, et. al (Superior Court of the State of
California for the County of Los Angeles, Case No. GC 021657, and (viii)
Anderson, et. al v. Suburban Water Systems et. al (Superior Court of the State
of California for the County of Los Angeles, Case No. KC O2854).
The lawsuits, which collectively include hundreds of plaintiffs, allege
that the plaintiffs received contaminated drinking water and suffered personal
injury and property damage as a consequence thereof. The plaintiffs are seeking
an unspecified amount of compensatory and punitive damages and other relief.
Several defendants moved to stay or dismiss these cases on the grounds that
primary jurisdiction for these matters rests with the California Public
Utilities Commission ("PUC"). The issue was first argued in the Boswell case and
the court stayed the case pending the outcome of the PUC investigation described
below. The plaintiffs have sought appellate court review of the trial court's
decision in Boswell. In the Santamaria case, the court dismissed the plaintiffs'
complaint as to the regulated water utilities only and not as to the
non-regulated defendants such as Wynn Oil. The plaintiffs and the non-regulated
defendants are appealing that decision. After some legal maneuvering and
stipulations between the parties, the remaining cases are now stayed pending the
hearing before and the ruling of the California Court of Appeals.
As a result of these cases and other toxic tort cases filed elsewhere in
the State of California, on March 12, 1998, the PUC announced an Order
Initiating Investigation into drinking water quality in California. Several
industrial companies, including Wynn Oil, have filed intervention petitions with
the PUC in order to participate in the PUC's proceedings. The PUC's
investigation is scheduled to be completed in the fall of 1999.
The Company has reported these cases to its insurers and intends to
defend these actions vigorously.
Proposition 65 Claims
In the first quarter of 1999, the Company received two 60-day notices
under California's Proposition 65. The first 60-day notice alleged that the
Company, through its subsidiary, engaged in the distribution of builder's
hardware products, failed to provide required warning notices in connection with
the sale of brass keys and brass key blanks, thus allegedly exposing persons to
impermissible levels of lead. The second 60-day notice alleges that Wynn Oil
violated the provisions of Proposition 65 in connection with the alleged
discharge of listed chemicals to the groundwater. This notice was sent by one of
the law firms involved in certain of the toxic tort cases described above. If
lawsuits are filed after expiration of the 60-day notice periods, the Company
and Wynn Oil intend to defend the claims vigorously.
19
<PAGE> 21
Other Litigation
In 1994, the United States District Court for the Eastern District of
Michigan, Southern Division, in the case of Wynn Oil Company v. American Way
Service Corporation and Thomas A. Warmus, Case No. 89-CV-71777-DT, awarded Wynn
Oil approximately $3.2 million in damages and attorneys' fees in an action
brought by Wynn Oil in 1989 asserting trademark infringement by the defendants.
Subsequently, the defendants filed a timely appeal to the United States Court of
Appeals for the Sixth Circuit, but did not file a bond to stay execution of the
judgment. Between May and December 1994, Wynn Oil sought out assets of the
defendants to satisfy the judgment. Prior to Wynn Oil executing upon the
defendants' assets, the defendants filed bankruptcy petitions in late 1994 in
Florida. The bankruptcy filings resulted in an automatic stay of all pending
collection efforts. In July 1995, the Court of Appeals upheld the District
Court's finding of liability, but held that the District Court erred in the
calculation of certain portions of the damages award and remanded the case to
the District Court for a final determination of the damage award. On remand, the
District Court awarded Wynn Oil total damages and attorneys' fees of
approximately $2.4 million. The defendants did not appeal the revised judgment
of the District Court. To date, Wynn Oil has received from the trustees for the
bankruptcy estates interim distributions of approximately $615,000, which
reduced the balance of the uncollected judgment to approximately $1.8 million.
Wynn Oil and its counsel are continuing to work through the bankruptcy
proceedings in Florida to maximize Wynn Oil's ultimate recovery against the
defendants. No portion of the balance of the uncollected judgment has been
included in the results of operations of the Company and all of the Company's
costs relating to this case have been expensed as incurred.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during the
fourth quarter of 1998.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The information appearing under "Common Stock Prices and Cash Dividends
Per Share: 1998-1997" on page 41 of the 1998 Annual Report and "Number of
Stockholders" and "Stock Exchange Listing" on page 41 of the 1998 Annual Report
is hereby incorporated by reference.
On February 10, 1999, the Board of Directors of Registrant declared a
cash dividend of $0.07 per share payable March 31, 1999 to stockholders of
record on March 11, 1999.
Registrant currently expects that it will continue to pay dividends in
the future, in amounts per share at least comparable to dividends paid during
the past two years.
20
<PAGE> 22
Registrant has not sold any unregistered securities during the past
three years.
ITEM 6. SELECTED FINANCIAL DATA
Incorporated by reference from page 16 of the 1998 Annual Report.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Incorporated by reference from pages 17 through 23 of the 1998 Annual
Report.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Incorporated by reference from page 20 of the 1998 Annual Report.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Consolidated financial statements of Registrant at December 31, 1998 and
1997 and for each of the three years in the period ended December 31, 1998
(including unaudited supplementary data) and the report of independent auditors
thereon are incorporated by reference from pages 24 through 40 of the 1998
Annual Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information on Registrant's directors appearing on pages 9 and 10,
and the information appearing under "Stock Ownership of Directors and Executive
Officers" on pages 13 and 14 of Registrant's definitive proxy statement for the
Annual Meeting of Stockholders to be held on April 28, 1999 ("Registrant's 1999
Proxy Statement") is hereby incorporated by reference. Information regarding
Registrant's executive officers is provided on page 14 of this report.
21
<PAGE> 23
ITEM 11. EXECUTIVE COMPENSATION
The information appearing under "Board of Directors and Committees of
the Board--Compensation of Directors" on pages 11 and 12 and "Executive
Compensation" on pages 14 through 17 of Registrant's 1999 Proxy Statement is
hereby incorporated by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information appearing under "Security Ownership of Certain
Beneficial Owners and Management" on pages 12 through 14 of Registrant's 1999
Proxy Statement is hereby incorporated by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information appearing under "Board of Directors and Committees of
the Board--Certain Relationships and Related Transactions" on page 12 of
Registrant's 1999 Proxy Statement is hereby incorporated by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) (1) See Index to Financial Statements and Financial Statement
Schedule Covered By Report of Independent Auditors.
(2) See Index to Financial Statements and Financial Statement
Schedule Covered By Report of Independent Auditors.
(3) See Index to Exhibits.
(b) No Reports on Form 8-K were filed by Registrant during the last
quarter of 1998.
22
<PAGE> 24
WYNN'S INTERNATIONAL, INC.
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT
SCHEDULE COVERED BY REPORT OF INDEPENDENT AUDITORS
(ITEM 14(a))
<TABLE>
<CAPTION>
Page References
---------------------------------
1998 Annual
Form 10-K Report
---------------- ------------
<S> <C> <C>
Consolidated Statements of Income for each of the
Three years in the period ended December 31, 1998............ 24
Consolidated Balance Sheets at December 31, 1998 and 1997........ 25
Consolidated Statements of Stockholders' Equity for each
of the three years in the period ended December 31, 1998..... 26
Consolidated Statements of Cash Flows for each of
the three years in the period ended December 31, 1998........ 27
Notes to Consolidated Financial Statements....................... 28 - 39
Consolidated schedule for each of the three years in the period
ended December 31, 1998:
VIII -- Valuation and Qualifying Accounts................. F-2
</TABLE>
All other schedules are omitted since the required information is not
present or is not present in amounts sufficient to require submission of the
schedule, or because the information required is included in the consolidated
financial statements, including the notes thereto.
The consolidated financial statements listed in the above index, which
are included in the 1998 Annual Report, are hereby incorporated by reference.
With the exceptions of the pages listed in the above index and the items
referred to in Items 1, 5, 6, 7 and 8, the 1998 Annual Report is not deemed to
be filed as part of this report.
F-1
<PAGE> 25
WYNN'S INTERNATIONAL, INC.
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
THREE YEARS ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
Allowance for
doubtful accounts
deducted from Balance at Charged to
accounts beginning costs and Deductions Other Balance at
receivable of year expenses (1) (2) end of year
- ------------------- ------------ ------------ ------------ -------- -----------
<S> <C> <C> <C> <C> <C>
1998 $959,000 $281,000 $(336,000) $ -- $904,000
======== ======== ========= ======== ========
1997 $870,000 $307,000 $(218,000) $ -- $959,000
======== ======== ========= ======== ========
1996 $710,000 $312,000 $(256,000) $104,000 $870,000
======== ======== ========= ======== ========
</TABLE>
- --------------------
(1) Represents accounts written off against the reserve.
(2) Acquisition of business.
F-2
<PAGE> 26
POWER OF ATTORNEY
Each person whose signature appears below hereby authorizes each of James
Carroll, John W. Huber, Seymour A. Schlosser and Gregg M. Gibbons as
attorney-in-fact to sign on his behalf, individually and in each capacity stated
below, and to file all amendments and/or supplements to this Annual Report on
Form 10-K.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on March 25, 1999.
WYNN'S INTERNATIONAL, INC.
By: /s/ JAMES CARROLL
------------------------------
James Carroll
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Date
----
March 25, 1999 By: /s/ JAMES CARROLL
------------------------------
James Carroll
Chairman of the Board
Chief Executive Officer
Director
March 25, 1999 By: /s/ SEYMOUR A. SCHLOSSER
------------------------------
Seymour A. Schlosser
Vice President-Finance
(Principal Financial and
Accounting Officer)
II-1
<PAGE> 27
Date
----
March 25, 1999 By: /s/ BARTON BEEK
------------------------------
Barton Beek
Director
March 25, 1999 By: /s/ BRYAN L. HERRMANN
------------------------------
Bryan L. Herrmann
Director
March 25, 1999 By: /s/ ROBERT H. HOOD, JR.
------------------------------
Robert H. Hood, Jr.
Director
March 25, 1999 By: /s/ RICHARD L. NELSON
------------------------------
Richard L. Nelson
Director
March 25, 1999 By: /s/ DONALD C. TRAUSCHT
------------------------------
Donald C. Trauscht
Director
March 25, 1999 By: /s/ JAMES D. WOODS
------------------------------
James D. Woods
Director
II-2
<PAGE> 28
WYNN'S INTERNATIONAL, INC.
INDEX TO EXHIBITS
(Item 14(a))
<TABLE>
<CAPTION>
Exhibit
Number Description
-------- -----------
<S> <C>
3.1 Certificate of Incorporation, as amended, of Registrant (incorporated
herein by reference to Exhibit 3.1 to Registrant's Report on Form 10-K
for the fiscal year ended December 31, 1997)
3.2 Certificate of Amendment to Certificate of Incorporation of
Registrant, dated April 30, 1998
3.3 Certificate of Designations of Junior Participating Preferred Stock
(incorporated herein by reference to Exhibit 4.2 to Registrant's
Report on Form 8-K dated March 3, 1989)
3.4 By-Laws, as amended, of Registrant (incorporated herein by reference
to Exhibit 3.3 to Registrant's Report on Form 10-K for the fiscal year
ended December 31, 1996)
4.1 Shareholder Rights Agreement, dated as of March 3, 1989, between
Registrant and First Interstate Bank of California, as Rights Agent
(incorporated by reference to Exhibit 4.1 to Registrant's Report on
Form 8-K dated March 3, 1989)
4.2 Amendment No. 1 to Shareholder Rights Agreement, dated June 11, 1990
(incorporated by reference to Exhibit 28.2 to Registrant's Report on
Form 8-K dated June 11, 1990)
4.3 Letter Agreement, dated March 24, 1997, between Registrant and
ChaseMellon Shareholder Services, L.L.C. as successor Rights Agent,
amending the Shareholder Rights Agreement (incorporated herein by
reference to Exhibit 4.3 to Registrant's Report on Form 10-K for the
fiscal year ended December 31, 1997)
4.4 Second Amended Rights Agreement, dated as of October 22, 1998, by and
between Registrant and ChaseMellon Shareholder Services, L.L.C., as
Rights Agent (incorporated herein by reference to Exhibit 2.1 to
Amendment No. 2 on Form 8-A/A dated November 5, 1998)
</TABLE>
II-3
<PAGE> 29
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<S> <C>
10.1 Employment Agreement, dated January 1, 1999, between Registrant and
James Carroll
10.2 Employment Agreement, dated December 10, 1997, between Registrant and
James Carroll (incorporated herein by reference to Exhibit 10.1 to
Registrant's Report on Form 10-K for the fiscal year ended December
31, 1997)
10.3 Employment Agreement, dated January 1, 1999, between Registrant and
John W. Huber
10.4 Employment Agreement, dated December 11, 1996, between Registrant and
John W. Huber (incorporated herein by reference to Exhibit 10.2 to
Registrant's Report on Form 10-K for the fiscal year ended December
31, 1996)
10.5 Employment Agreement, dated January 1, 1999, between Registrant and
Seymour A. Schlosser
10.6 Employment Agreement, dated January 1, 1997, between Registrant and
Seymour A. Schlosser (incorporated herein by reference to Exhibit 10.3
to Registrant's Report on Form 10-K for the fiscal year ended December
31, 1996)
10.7 Employment Agreement, dated January 1, 1999, between Registrant and
Gregg M. Gibbons
10.8 Employment Agreement, dated January 1, 1997, between Registrant and
Gregg M. Gibbons (incorporated herein by reference to Exhibit 10.4 to
Registrant's Report on Form 10-K for the fiscal year ended December
31, 1996)
10.9 Wynn's International, Inc. Amended and Restated 1980 Stock Option and
Appreciation Rights Plan (incorporated herein by reference to Exhibit
4.1 to Registrant's Registration Statement on Form S-8, Registration
No. 2-68157)
10.10 Wynn's International, Inc. Amended and Restated 1982 Incentive Stock
Option Plan (incorporated herein by reference to Exhibit 4.2 to
Registrant's Registration Statement on Form S-8, Registration
No. 2-68157)
</TABLE>
II-4
<PAGE> 30
<TABLE>
<CAPTION>
Exhibit
Number Description
------ ------------
<S> <C>
10.11 Wynn's International, Inc. Stock-Based Incentive Award Plan
(incorporated herein by reference to Exhibit 28.1 to Registrant's
Registration Statement on Form S-8, Registration No. 33-30296)
10.12 Amendment No. 1 to Wynn's International, Inc. Stock-Based Incentive
Award Plan (incorporated herein by reference to Exhibit 28.2 to
Registrant's Registration Statement on Form S-8, Registration
No. 33-64090)
10.13 Amendment 1996-1 to Wynn's International, Inc. Stock-Based Incentive
Award Plan (incorporated herein by reference to Exhibit 10.8 to
Registrant's Report on Form 10-K for the fiscal year ended December
31, 1996)
10.14 Amendment 1997-1 to Wynn's International, Inc. Stock-Based Incentive
Award Plan (incorporated herein by reference to Exhibit 4.4 to
Registrant's Registration Statement on Form S-8, Registration No.
333-39045)
10.15 Wynn's International, Inc. 1999 Corporate Management Incentive Plan
10.16 Executive Deferred Compensation Agreement, dated February 18, 1997,
between Registrant and James Carroll (incorporated herein by reference
to Exhibit 10.10 to Registrant's Report on Form 10-K for the fiscal
year ended December 31, 1996)
10.17 First Amendment to Executive Deferred Compensation Agreement, dated
December 1, 1997, between Registrant and James Carroll (incorporated
herein by reference to Exhibit 10.13 to Registrant's Report on Form
10-K for the fiscal year ended December 31, 1997)
10.18 Second Amendment to Executive Deferred Compensation Agreement, dated
February 26, 1998, between Registrant and James Carroll (incorporated
herein by reference to Exhibit 10.14 to Registrant's Report on Form
10-K for the fiscal year ended December 31, 1997)
10.19 Third Amendment to Executive Deferred Compensation Agreement, dated
January 6, 1999, between Registrant and James Carroll
10.20 Form of Indemnification Agreement between Registrant and a director of
Registrant (incorporated herein by reference to Exhibit 10.11 to
Registrant's Report on Form 10-K for the fiscal year ended December
31, 1993)
</TABLE>
II-5
<PAGE> 31
<TABLE>
<CAPTION>
Exhibit
Number Description
------- ------------
<S> <C>
10.21 Form of Indemnification Agreement between Registrant and an officer of
Registrant (incorporated herein by reference to Exhibit 10.12 to
Registrant's Report on Form 10-K for the fiscal year ended December
31, 1996)
10.22 Wynn's International, Inc. Non-Employee Directors' Stock Option Plan
(incorporated herein by reference to Exhibit C of Registrant's
Definitive Proxy Statement relating to its Annual Meeting of
Stockholders held on May 11, 1994, filed with the Commission on March
25, 1994)
10.23 1998 Supplemental Retirement Income Plan of Wynn's International, Inc. and
Subsidiaries
10.24 The CORPORATEplan for Retirement Select Plan Deferred Compensation Plan of
Wynn's International, Inc.
10.25 Amendment No. 1 to The CORPORATEplan for Retirement Select Plan Deferred
Compensation Plan of Wynn's International, Inc.
10.26 Amendment 1996-1 to Wynn's International, Inc. Non-Employee Directors'
Stock Option Plan (incorporated herein by reference to Exhibit 10.14
to Registrant's Report on Form 10-K for the fiscal year ended December
31, 1996)
10.27 Asset Purchase Agreement, dated as of May 23, 1996, by and between
Moog Automotive, Inc. and Wynn's Climate Systems, Inc., Wynn's Climate
Equipment Company and Wynn's (UK) Limited (incorporated herein by
reference to Exhibit 2.1 to Registrant's Current Report on Form 8-K
dated May 23, 1996)
11 Computation of Net Income Per Common Share - Basic and Assuming Dilution
13 Portions of Registrant's Annual Report to Stockholders for the fiscal
year ended December 31, 1998 that have been expressly incorporated by
reference as a part of this Annual Report on Form 10-K
21 Subsidiaries of Registrant
23 Consent of Independent Auditors
27 Financial Data Schedule for Fiscal Year ended December 31, 1998
</TABLE>
II-6
<PAGE> 1
EXHIBIT 3.2
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
WYNN'S INTERNATIONAL, INC.
WYNN'S INTERNATIONAL, INC., a corporation organized and existing
under and by virtue of the General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY THAT:
FIRST: The Board of Directors of Wynn's International, Inc., at a
meeting held on February 11, 1998, duly adopted resolutions setting forth a
proposed amendment to the Certificate of Incorporation of said corporation,
declaring such amendment to be advisable and authorizing the submission of such
amendment to the stockholders of said corporation for consideration thereof at
the Annual Meeting of Stockholders to be held on April 29, 1998. The resolution
setting forth the proposed amendment is as follows:
WHEREAS, it has been proposed that this Corporation reduce the par value
of its Common Stock from $1.00 to $0.01 per share; and
WHEREAS, it is deemed to be in the best interests of this Corporation
and its stockholders that such proposal be adopted and approved;
NOW, THEREFORE, BE IT RESOLVED, that the proposal to reduce the par
value of this Corporation's Common Stock from $1.00 to $0.01 per share
be, and it hereby is, adopted and approved.
RESOLVED FURTHER, that such proposal be submitted to the stockholders of
this Corporation for approval at the next annual meeting to be held on
April 29, 1998.
RESOLVED FURTHER, that upon stockholder approval of such proposal, the
officers of this Corporation be, and each of them hereby is, authorized
and empowered, in the name and on behalf of this Corporation, to file
with the Secretary of State of the State of Delaware a certificate of
amendment to the Certificate of Incorporation of this Corporation to
effect such reduction in par value.
RESOLVED FURTHER, that the officers of this Corporation be, and each of
them hereby is, authorized and empowered, in the name and on behalf of
this Corporation, to take such further actions, and to execute, deliver
and file such additional documents, as they may deem
<PAGE> 2
necessary or appropriate to effect the foregoing resolutions, the taking
of such actions or the execution, delivery and filing of such documents
to be conclusive evidence of the necessity or appropriateness thereof.
SECOND: That such amendment is as follows:
"FOURTH: The corporation shall be authorized to issue two classes
of shares of stock to be designated, respectively, 'Common' and
'Preferred,' the total number of shares which the corporation
shall have authority to issue shall be forty million five hundred
thousand (40,500,000); the total number of shares of Common Stock
shall be forty million (40,000,000) and the par value of each
share of Common Stock shall be one cent ($0.01); and the total
number of shares of Preferred Stock shall be five hundred
thousand (500,000) and the par value of each share of Preferred
Stock shall be one dollar ($1.00).
"The Preferred Stock may be issued from time to time in one or
more series. The Board of Directors is hereby expressly vested
with authority to fix by resolution or resolutions the
designations and the powers, preferences and relative,
participating, optional or other special rights, and
qualifications, limitations or restrictions thereof, including,
without limitation, the voting powers, if any, the dividend rate,
conversion rights, redemption price, or liquidation preference,
of any series of Preferred Stock, and to fix the number of shares
constituting any such series, and to increase or decrease the
number of shares of any such series (but not below the number of
shares thereof then outstanding). In case the number of shares of
any such series shall be so decreased, the shares constituting
such decrease shall resume the status which they had prior to the
adoption of the resolution or resolutions originally fixing the
number of shares of such series. The number of authorized shares
of any class or classes of stock may be increased or decreased
(but not below the number of shares thereof then outstanding) by
the affirmative vote of the holders of a majority of the stock of
the corporation entitled to vote."
THIRD: Thereafter, at the Annual Meeting of Stockholders held on
April 29, 1998, which meeting was duly held upon notice in accordance with
Section 222 of the General Corporation Law of the State of Delaware, the
necessary number of shares as required by statute were voted in favor of the
amendment.
2
<PAGE> 3
FOURTH: Said amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
IN WITNESS WHEREOF, Wynn's International, Inc. has caused this
Certificate to be signed by Seymour A. Schlosser, its Vice President-Finance and
Chief Financial Officer, and attested by Wendy K. K. Nishikawa, its Secretary,
this 30th day of April, 1998.
WYNN'S INTERNATIONAL, INC.
By: /s/ Seymour A. Schlosser
-------------------------------
Seymour A. Schlosser
Vice President-Finance and
Chief Financial Officer
ATTEST:
By: /s/ Wendy K. K. Nishikawa
---------------------------
Wendy K. K. Nishikawa
Secretary
3
<PAGE> 1
EXHIBIT 10.1
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into as
of the 1st day of January, 1999, by and between WYNN'S INTERNATIONAL, INC., a
Delaware corporation with its principal offices in Orange, California
("Corporation"), and JAMES CARROLL, an individual residing in Lebanon, Tennessee
("Executive").
W I T N E S S E T H :
WHEREAS, Executive presently serves as Chairman of the Board and Chief
Executive Officer of Corporation pursuant to an employment agreement dated as of
December 10, 1997 between Corporation and Executive (the "Prior Employment
Agreement"); and
WHEREAS, Corporation desires to continue to retain the services of
Executive, whose experience, knowledge and abilities with respect to the
business and affairs of Corporation and its subsidiaries are extremely valuable
to Corporation; and
WHEREAS, the Board of Directors of Corporation (the "Board of
Directors") and the Compensation Committee (the "Committee") of the Board of
Directors recognize that the continuing possibility of an unsolicited tender
offer or other takeover bid for Corporation is unsettling to Executive and other
senior executives of Corporation and, therefore, to enhance the value of
Corporation for the benefit of its stockholders, desire to make arrangements to
help assure the continuing dedication by Executive to Executive's duties to
Corporation, notwithstanding the occurrence of a tender offer or takeover bid;
and
WHEREAS, in particular, the Board of Directors and the Committee believe
it is important, should Corporation receive proposals from third parties with
respect to its future, to enable Executive, without being influenced by the
uncertainties of Executive's own situation, to assess and advise the Board of
Directors whether such proposals would be in the best interests of Corporation
and its stockholders, and to take such other action regarding such proposals as
the Board of Directors might determine to be appropriate; and
WHEREAS, the Board of Directors and the Committee also wish to
demonstrate to Executive and other senior executives of Corporation that
Corporation is concerned with the welfare of its executives and intends to see
that loyal executives are treated fairly; and
WHEREAS, in view of the foregoing and in further consideration of
Executive's employment with Corporation, the Board of Directors and the
Committee have determined that it is in the best interests of Corporation and
its stockholders for
<PAGE> 2
Corporation to agree to pay Executive termination compensation in the event
Executive should leave the employ of Corporation under certain circumstances;
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements and promises of the parties set forth below, the parties hereby agree
as follows:
1. Duties.
(a) Corporation hereby continues to employ Executive as Chairman
of the Board and Chief Executive Officer of Corporation during the term
of this Agreement, with powers and duties consistent with such
positions. Executive, during the term of this Agreement, shall perform
such additional or different duties, and accept the election or
appointment to such other offices or positions, as may be mutually
agreeable to Executive and the Board of Directors. Executive agrees to
serve in such executive offices and directorships in other subsidiaries
or affiliated companies of Corporation as he may be requested to do
throughout the term of this Agreement without additional fixed
compensation.
(b) Executive shall be employed at Corporation's headquarters in
Orange County, California, and shall devote substantially his full time
and efforts to perform his duties faithfully, diligently and to the best
of his ability to advance the interests of Corporation; subject,
however, to reasonable working hours, conditions and vacations as are
consistent with his position and with due regard to the preservation of
his good health. Nothing herein shall be deemed to preclude or prohibit
Executive from performing during regular business hours services within
the business and civic community which are customary for persons in
similar capacities, including, without limitation, serving on boards of
other companies, advisory groups, committees and panels, but only in
furtherance of and not to the detriment of his principal duties
hereunder. Further, Corporation shall give Executive a reasonable
opportunity to perform his duties and shall not expect Executive to
devote more time hereunder, nor assign duties or functions to Executive,
other than as may be customary and reasonable for an executive in
Executive's position.
2. Compensation.
(a) Effective as of January 1, 1999, and during the entire term
of this Agreement, Corporation shall pay to Executive an annual salary
of not less than Six Hundred Thousand Dollars ($600,000.00), payable in
equal installments on Corporation's regular payroll dates, for any and
all services which Executive may render to Corporation.
(b) The Board of Directors annually shall review the amount of
Executive's salary, and shall, when the Board of Directors in its sole
judgment deems it appropriate, make adjustments in the amount of such
salary. Any such
2
<PAGE> 3
adjustments shall take effect on the date established by the Board of
Directors. Nothing herein shall be construed to authorize or empower any
reduction of Executive's salary below his then current rate of salary by
the Board of Directors or otherwise during the term of this Agreement.
The Committee, in accordance with customary policy, shall make such
recommendations to the Board of Directors as it believes are appropriate
with respect to salary adjustments hereunder.
3. Expenses. Corporation will reimburse Executive for all usual,
reasonable and necessary expenses paid or incurred by him in the performance of
his duties hereunder, subject to the right of Corporation at any time to place
reasonable limitations on expenses thereafter to be incurred or reimbursed.
4. Employee Benefits. Executive shall be entitled to and shall receive
all other benefits of employment generally available to other executives of
Corporation, including, among other things, participation in any hospital,
surgical, medical or other group health and accident benefit plans, life
insurance benefits, and Corporation's annual vacation plan. In addition,
Executive will be entitled to participate in all incentive compensation, stock
option, profit sharing, pension, retirement or bonus plans as from time to time
may be in existence during the term of this Agreement in accordance with their
respective terms and provisions, but, to the extent participation or the amount
of participation is at the discretion of the Board of Directors or any committee
thereof, then Executive's participation shall likewise be solely subject to such
discretion.
5. Term and Termination.
(a) The term of this Agreement shall commence on the date hereof and
shall terminate upon the first to occur of the following events:
(i) December 31, 2001 (the "Last Day of the Stated Term");
(ii) The death or permanent disability of Executive;
(iii) The 30th day following written notice from Corporation
to Executive; or
(iv) Executive is discharged for Cause.
(b) If Executive dies or becomes permanently disabled during the
term of this Agreement, this Agreement shall terminate on the last day
of the month during which his death or permanent disability, as the case
may be, occurred. Commencing thirty (30) days after the date of such
termination, there shall be paid to Executive or Executive's
representative in the event of permanent disability, or to his executor
or estate in the event of death, an amount equal to one year of
Executive's then current salary, payable in twelve (12) equal monthly
installments. If Executive is absent from employment or unable to render
services
3
<PAGE> 4
hereunder on a full-time basis by reason of physical or mental illness
or disability for six (6) months or more in the aggregate in any twelve
(12) month period during the term of this Agreement, Executive shall be
considered permanently disabled.
(c) If Corporation should terminate this Agreement pursuant to
Section 5(a)(iii):
(i) Executive shall immediately cease to be Chairman of
the Board and Chief Executive Officer of Corporation, and each
other office or position Executive then holds, and if requested
by a majority of the Board of Directors of Corporation, shall
immediately resign from the Board of Directors and from any of
the Boards of Directors of any of Corporation's subsidiaries of
which Executive may be a member.
(ii) Corporation shall be obligated and shall continue to
pay Executive an amount equal to his then current salary but at a
rate of not less than Six Hundred Thousand Dollars ($600,000.00)
per annum from the date of such termination until the Last Day of
the Stated Term. Such payments shall be made in installments
payable as provided in Section 2(a) hereof. Corporation also
immediately shall pay Executive in a lump sum an amount equal to
the amount of the remaining unpaid portion of any yearly
incentive compensation award, and the amount, if any, of any
forfeiture of Executive's interest in any profit sharing plan in
which Executive is a participant.
(iii) For the purposes of participation in any hospital,
surgical, medical or other group health and accident insurance
and group life insurance plans maintained by Corporation,
Executive shall continue to be an employee of Corporation through
the Last Day of the Stated Term. Except for such purposes, unless
the Board of Directors otherwise determines by resolution,
Executive shall not continue to be an employee of Corporation for
any other purposes and shall not be entitled to continue to
participate in Corporation's Retirement Plan or 401(k) Plan, or
in any other plans, programs and benefits of Corporation;
provided, however, nothing herein shall preclude Executive from
any vested rights or benefits he may have in such plans on the
effective date of termination. If a contrary determination is
made by the Board of Directors, the duties of Executive shall be
only as mutually agreed upon by Executive and Corporation, and
may be refused by Executive without penalty hereunder.
(iv) If termination shall be without Cause under Section
5(a)(iii), all stock options granted to Executive prior to the
date of this Agreement under any stock option plan of Corporation
(other than Corporation's Employee Stock Purchase Plan),
notwithstanding the
4
<PAGE> 5
provisions of any stock option plan or agreement, shall vest
immediately and become exercisable by Executive. Nothing herein
shall otherwise affect the obligations of Corporation or
Executive under the terms of such stock option agreement, which,
except for the provisions hereof, shall be otherwise enforceable
in accordance with its terms.
(v) Any benefits of indemnification provided by the
By-Laws of Corporation or in any Indemnification Agreement
between Corporation and Executive shall be continued for the
benefit of Executive, and any officers' and directors' liability
insurance which may be maintained by Corporation and outstanding
on the date of termination shall be continued for the benefit of
Executive for such reasonable period of time as may be determined
by the Board of Directors to afford protection to Executive.
(d) Corporation agrees that its obligations for the continuation
of Executive's salary and other benefits in accordance with Sections
5(c)(ii) through 5(c)(v) above shall be absolute and unconditional, and
the amounts due under Sections 5(c)(ii) and 5(c)(iii) above or Section
15 shall not be subject to offset, reduction or mitigation for any
reason whatsoever; provided, however, that if Executive should breach
any other provision of this Agreement while he is receiving benefits
pursuant to Sections 5(c)(ii) through 5(c)(v) above, all obligations of
Corporation hereunder shall cease to be effective on the actual date of
such breach.
(e) "Cause" as used in Section 5(a)(iv) shall mean only gross
negligence, dishonesty, incompetence, a willful breach of this
Agreement, or violation of any reasonable rule or regulation of the
Board of Directors, the violation of which results in significant damage
to Corporation and with respect to which, except in the case of
incompetence or dishonesty, Executive fails to correct or make
reasonable efforts to correct within a reasonable time after receipt of
written notice thereof. "Cause" shall be determined only by the
affirmative vote of a majority of the authorized number of the Board of
Directors (excluding, for this purpose, Executive) at a meeting for
which notice has been given that it is proposed to consider the issue of
"Cause" or at a meeting occurring not less than seven (7) days after a
meeting at which one or more directors indicate an intention to present
a motion to such effect.
(f) If Corporation should terminate this Agreement pursuant to
Section 5(a)(iv), this Agreement shall terminate immediately or at such
later date as shall be designated by the Board of Directors and all of
Executive's rights hereunder shall terminate effective upon such
termination. Except as otherwise specified in any notice of termination,
Executive shall not continue thereafter to be an employee of Corporation
for any purpose and all rights Executive might thereafter have as an
employee pursuant to any plan or understanding shall cease.
5
<PAGE> 6
6. Confidential Information. Executive agrees that he will not at any
time, both during and after the term of this Agreement, divulge, furnish or make
accessible to any party (except to an entity which shall succeed to the business
of Corporation or its subsidiaries, and except as may be required in the conduct
of the regular course of business of Corporation or its subsidiaries, or as
specifically authorized by the Board of Directors or as may be required by law)
any trade secrets, patents, patent applications, inventions or customers of
Corporation or of any subsidiary of Corporation until such time as such
information has been disclosed to the public otherwise than by Executive.
7. Restrictive Covenant During Term. Executive agrees that until the
Last Day of the Stated Term, he will neither directly nor indirectly engage in a
business competing with any of the businesses conducted by Corporation or any of
its subsidiaries, nor without the prior written consent of the Board of
Directors, directly or indirectly, have any interest in, own, manage, operate,
control, be connected with as a stockholder, joint venturer, officer, employee,
partner or consultant, or otherwise engage, invest or participate in any
business which shall be competitive with any of the businesses conducted by
Corporation, or by any subsidiary of Corporation; provided, however, nothing
contained in this Section 7 shall prevent Executive from investing or trading in
stocks, bonds, commodities, securities, real estate, or other forms of
investment for his own benefit (directly or indirectly), so long as such
investment activities do not significantly interfere with Executive's services
to be rendered hereunder and, to the extent that such investment activities
would, but for this proviso, be prohibited hereby, would not be material either
to Executive or the concern in which such investment is made.
8. Approval by Corporation. This Agreement has been approved by the
Board of Directors in accordance with the authority granted and restrictions
imposed by action of the Board of Directors. It shall be executed by the
President and Chief Operating Officer or other duly qualified officer.
9. Waiver or Modification. Any waiver, alteration or modification of any
of the provisions of this Agreement or cancellation or replacement of this
Agreement shall not be valid unless made in writing and signed by the parties
hereto.
10. Construction. Except as to matters of internal corporate policy and
regulation, which shall be governed by the laws of the State of Delaware (the
state of incorporation of Corporation), this Agreement shall be governed by the
laws of the State of California. If any litigation shall occur between Executive
and Corporation which litigation arises out of or as a result of this Agreement
or the acts of the parties hereto pursuant to this Agreement, or which seeks an
interpretation of this Agreement, the prevailing party shall be entitled to
recover all costs and expenses of such litigation, including reasonable
attorneys' fees and costs.
6
<PAGE> 7
11. Binding Effect.
(a) The rights and obligations of Corporation under this
Agreement shall be binding upon any successor or assigns of Corporation.
In the event of any consolidation or merger of Corporation into or with
another corporation, such other corporation shall assume this Agreement
and shall become obligated to perform all of the terms and conditions
hereof, and Executive's obligations hereunder shall continue in favor of
such other corporation.
(b) If Corporation shall adopt a plan of liquidation or be or
become a party to any action which has the substantive effect of finally
terminating its business and affairs, all sums which would have been
payable to Executive during the remaining term of this Agreement
(assuming the continuation of Executive's then salary through the Last
Day of the Stated Term) shall become due and payable to Executive not
later than the effective date of such plan or action; except in the case
of a liquidation of Corporation into an acquiring company or subsidiary
of such acquiring company after a consolidation or merger of Corporation
into or with another corporation, and the rights and obligations of
Corporation under this Agreement are expressly assumed by the acquiring
company as part of the plan of liquidation.
(c) This Agreement supersedes all prior and contemporaneous
agreements, amendments, memoranda or understandings, express or implied
and written or oral, between Corporation and Executive.
12. Waiver. Waiver by either party of a breach of any provision of this
Agreement shall not operate or be construed as a waiver of any subsequent breach
of any other provision of this Agreement.
13. Counterparts. This Agreement may be executed in any number of
identical counterparts, each of which shall be construed as an original for all
purposes, but all of which taken together shall constitute one and the same
Agreement.
14. Notices. Any notice required or permitted to be given under this
Agreement shall be in writing and shall be deemed to be effective (i) upon
receipt if delivered in person, (ii) upon receipt if sent by registered or
certified United States mail, return receipt requested and postage and fees
prepaid, to the addresses of the parties set forth below, or such other address
as shall be furnished by notice hereunder by any such party or (iii) twenty-four
hours after having been sent by Federal Express or other overnight delivery
service to such address:
Corporation: 500 North State College Boulevard
Suite 700
Orange, California 92868
7
<PAGE> 8
Executive: 680 Palmer Road
Lebanon, Tennessee 37090
No failure or refusal to accept delivery of any envelope containing such notice
shall affect the validity of such notice or the giving thereof.
15. Termination After Change in Control.
(a) Cumulative to any other provision of this Agreement, if,
within two years after a change in control of Corporation, Executive's
employment with Corporation terminates for any reason, either
voluntarily or involuntarily, other than by death, permanent disability
or retirement at or after Executive's normal retirement date under
Corporation's Retirement Plan, Corporation promptly will pay Executive,
upon Executive's request, as termination compensation, a lump sum
amount, determined as provided in subsection (b) of this Section 15, and
such other amounts as are provided in subsection (c) of this Section 15.
For purposes of this Section, a "change in control of Corporation" shall
mean a change in control of a nature that would 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 of Corporation shall be deemed to have occurred if (i) any
"person" (as such term is used in Sections 13(d) and 14(d)(2) of the
Exchange Act) is or becomes the beneficial owner, directly or
indirectly, of securities of Corporation representing 40% or more of the
combined voting power of Corporation's then outstanding securities; or
(ii) during any period of two consecutive years, individuals who at the
beginning of such period constitute the Board of Directors of
Corporation cease for any reason to constitute at least a majority
thereof unless the election of each new director was approved by a vote
of at least two-thirds of the directors then still in office who were
directors at the beginning of the period.
(b) The lump sum compensation payable to Executive (the
"Severance Payment") shall be equal to the average annual compensation
(including salary and bonuses under the Corporate Management Incentive
Compensation Plan or any predecessor or successor annual incentive
compensation plan) paid or payable by Corporation to Executive during
the five most recent calendar years ending before the date of the change
in control of Corporation (the "Base Amount") multiplied by 2.99;
provided, however, if Executive voluntarily terminates his employment
with Corporation, except after (i) any material adverse change in
Executive's duties, location of employment or benefits, or (ii) any
material adverse change to Executive in the application of the formula
of the Corporate Management Incentive Compensation Plan or any
modification in Corporation's accounting methods or practices materially
adverse to Executive, including the assessment of a management fee, then
the Severance Payment shall be equal to the highest annual compensation
(including salary and bonuses under the
8
<PAGE> 9
Corporate Management Incentive Compensation Plan or any successor
annual incentive compensation plan) paid or payable by Corporation to
Executive for services rendered in any one of the three calendar years
ending with the year of such termination.
(c) In addition, if Executive's employment with Corporation so
terminates within two (2) years after such a change in control of
Corporation:
(i) any bonus awards previously made to Executive and not
previously paid immediately shall vest upon such termination and
shall be paid;
(ii) Executive's participation in, and terminating
distributions and vested rights under, any applicable retirement
plan, profit sharing plan and stock incentive plan of Corporation
or any of its subsidiaries shall be governed by the terms of
those respective plans; and
(iii) In the event of termination of employment under the
circumstances described in subsection (a) of this Section 15, the
arrangements provided for by this Section 15, by any stock option
or other agreement between Corporation and Executive in effect at
the time and by any other applicable plan of Corporation shall
constitute the entire obligation of Corporation to Executive and
performance thereof shall constitute full settlement of any claim
that Executive might otherwise assert against Corporation on
account of such termination, provided, however, that this
provision and this Agreement shall have no impact on the
obligations of Corporation under that certain Indemnification
Agreement dated August 4, 1993 between Corporation and Executive.
(d) Notwithstanding any provision in this Agreement to the
contrary, in the event that any payment or benefit received or to be
received by Executive in connection with a change in control of
Corporation or the termination of Executive's employment, whether
payable pursuant to the terms of this Agreement or any other plan,
arrangement or agreement with Corporation (collectively the "Total
Payments"), would not be deductible (in whole or part) as a result of
Section 280G of the Code, the Severance Payment shall be reduced until
no portion of the Total Payments is not deductible as a result of
Section 280G of the Code, or the Severance Payment is reduced to zero.
For purposes of this limitation, (i) no portion of the Total Payments,
the receipt or enjoyment of which Executive shall have effectively
waived in writing prior to the date of payment of the Severance Payment,
shall be taken into account, (ii) no portion of the Total Payments shall
be taken into account which, in the opinion of tax counsel selected by
Corporation's independent auditors and acceptable to Executive, does not
constitute a "parachute payment" within the meaning of Section
280G(b)(2) of the Code, (iii) the Severance Payment shall be reduced
only to the extent necessary so
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that the Total Payments (excluding payments referred to in clause
(i) or (ii)) in their entirety constitute reasonable compensation for
services actually rendered within the meaning of Section 280G(b)(4) of
the Code, in the opinion of the tax counsel referred to in clause (ii);
and (iv) the value of any non-cash benefit or any deferred payment or
benefit included in the Total Payments shall be determined by
Corporation's independent auditors in accordance with the principles of
Sections 280G(d)(3) and (4) of the Code.
16. Cancellation of Prior Employment Agreement. Corporation and
Executive agree that the Prior Employment Agreement hereby is canceled as of the
date hereof and shall be of no further force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
CORPORATION:
WYNN'S INTERNATIONAL, INC.
By: /s/ John W. Huber
-------------------------------------
John W. Huber
President and Chief Operating Officer
EXECUTIVE:
/s/ James Carroll
-----------------------------------------
JAMES CARROLL
10
<PAGE> 1
EXHIBIT 10.3
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into as
of the 1st day of January, 1999, by and between WYNN'S INTERNATIONAL, INC., a
Delaware corporation with its principal offices in Orange, California
("Corporation"), and JOHN W. HUBER, an individual residing in Coto de Caza,
California ("Executive").
W I T N E S S E T H :
WHEREAS, Executive presently serves as President and Chief Operating
Officer of Corporation pursuant to an employment agreement dated as of December
11, 1996 between Corporation and Executive (the "Prior Employment Agreement");
and
WHEREAS, Corporation desires to continue to retain the services of
Executive, whose experience, knowledge and abilities with respect to the
business and affairs of Corporation and its subsidiaries are extremely valuable
to Corporation; and
WHEREAS, the Board of Directors of Corporation (the "Board of
Directors") and the Compensation Committee (the "Committee") of the Board of
Directors recognize that the continuing possibility of an unsolicited tender
offer or other takeover bid for Corporation will be unsettling to Executive and
other senior executives of Corporation and, therefore, to enhance the value of
Corporation for the benefit of its stockholders, desire to make arrangements to
help assure the dedication by Executive to Executive's duties to Corporation,
notwithstanding the occurrence of a tender offer or takeover bid; and
WHEREAS, in particular, the Board of Directors and the Committee believe
it is important, should Corporation receive proposals from third parties with
respect to its future, to enable Executive, without being influenced by the
uncertainties of Executive's own situation, to assess and advise the Board of
Directors whether such proposals would be in the best interests of Corporation
and its stockholders, and to take such other action regarding such proposals as
the Board of Directors might determine to be appropriate; and
WHEREAS, the Board of Directors and the Committee also wish to
demonstrate to Executive and other senior executives of Corporation that
Corporation is concerned with the welfare of its executives and intends to see
that loyal executives are treated fairly; and
WHEREAS, in view of the foregoing and in further consideration of
Executive's employment with Corporation, the Board of Directors and the
Committee have determined that it is in the best interests of Corporation and
its stockholders for Corporation to agree to pay Executive termination
compensation in the event Executive should leave the employ of Corporation under
certain circumstances;
<PAGE> 2
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements and promises of the parties set forth below, the parties hereby agree
as follows:
1. Duties.
(a) Corporation hereby employs Executive as President and Chief
Operating Officer of Corporation during the term of this Agreement, with
powers and duties consistent with such positions. Executive, during the
term of this Agreement, shall perform such additional or different
duties, and accept the election or appointment to such other offices or
positions, as may be mutually agreeable to Executive and the Board of
Directors. Executive agrees to serve in such executive offices and
directorships in other subsidiaries or affiliated companies of
Corporation as he may be requested to do throughout the term of this
Agreement without additional fixed compensation.
(b) Executive shall be employed at Corporation's headquarters in
Orange County, California, and shall devote substantially his full time
and efforts to perform his duties faithfully, diligently and to the best
of his ability to advance the interests of Corporation; subject,
however, to reasonable working hours, conditions and vacations as are
consistent with his position and with due regard to the preservation of
his good health. Nothing herein shall be deemed to preclude or prohibit
Executive from performing during regular business hours services within
the business and civic community which are customary for persons in
similar capacities, including, without limitation, serving on boards of
other companies, advisory groups, committees and panels, but only in
furtherance of and not to the detriment of his principal duties
hereunder. Further, Corporation shall give Executive a reasonable
opportunity to perform his duties and shall not expect Executive to
devote more time hereunder, nor assign duties or functions to Executive,
other than as may be customary and reasonable for an executive in
Executive's position.
2. Compensation.
(a) Effective as January 1, 1999, and during the entire term of
this Agreement, Corporation shall pay to Executive an annual salary of
not less than Three Hundred Eighty-Six Thousand Nine Hundred Dollars
($386,900.00), payable in equal installments on Corporation's regular
payroll dates, for any and all services which Executive may render to
Corporation.
(b) The Board of Directors annually shall review the amount of
Executive's salary, and shall, when the Board of Directors in its sole
judgment deems it appropriate, make adjustments in the amount of such
salary. Any such adjustments shall take effect on the date established
by the Board of Directors. Nothing herein shall be construed to
authorize or empower any reduction of Executive's salary below his then
current rate of salary by the Board of Directors
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<PAGE> 3
or otherwise during the term of this Agreement. The Committee, in
accordance with customary policy, shall make such recommendations to the
Board of Directors as it believes are appropriate with respect to salary
adjustments hereunder.
3. Expenses. Corporation will reimburse Executive for all usual,
reasonable and necessary expenses paid or incurred by him in the performance of
his duties hereunder, subject to the right of Corporation at any time to place
reasonable limitations on expenses thereafter to be incurred or reimbursed.
4. Employee Benefits. Executive shall be entitled to and shall receive
all other benefits of employment generally available to other executives of
Corporation, including, among other things, participation in any hospital,
surgical, medical or other group health and accident benefit plans, life
insurance benefits, and Corporation's annual vacation plan. In addition,
Executive will be entitled to participate in all incentive compensation, stock
option, profit sharing, pension, retirement or bonus plans as from time to time
may be in existence during the term of this Agreement in accordance with their
respective terms and provisions, but, to the extent participation or the amount
of participation is at the discretion of the Board of Directors or any committee
thereof, then Executive's participation shall likewise be solely subject to such
discretion.
5. Term and Termination.
(a) The term of this Agreement shall commence on the date hereof
and shall terminate upon the first to occur of the following events:
(i) December 31, 2001 (the "Last Day of the Stated
Term");
(ii) The death or permanent disability of Executive;
(iii) The 30th day following written notice from
Corporation to Executive; or
(iv) Executive is discharged for Cause.
(b) If Executive dies or becomes permanently disabled during the
term of this Agreement, this Agreement shall terminate on the last day
of the month during which his death or permanent disability, as the case
may be, occurred. Commencing thirty (30) days after the date of such
termination, there shall be paid to Executive or Executive's
representative in the event of permanent disability, or to his executor
or estate in the event of death, an amount equal to one year of
Executive's then current salary, payable in twelve (12) equal monthly
installments. If Executive is absent from employment or unable to render
services hereunder on a full-time basis by reason of physical or mental
illness or disability for six (6) months or more in the aggregate in any
twelve (12) month period
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<PAGE> 4
during the term of this Agreement, Executive shall be considered
permanently disabled.
(c) If Corporation should terminate this Agreement pursuant to
Section 5(a)(iii):
(i) Executive shall immediately cease to be President and
Chief Operating Officer of Corporation, and such other office or
position Executive then holds, and if requested by a majority of
the Board of Directors of Corporation, shall immediately resign
from the Board of Directors and from any of the Boards of
Directors of any of Corporation's subsidiaries of which Executive
may be a member.
(ii) Corporation shall be obligated and shall continue to
pay Executive an amount equal to his then current salary but at a
rate of not less than Three Hundred Eighty-Six Thousand Nine
Hundred Dollars ($386,900.00) per annum from the date of such
termination until the Last Day of the Stated Term. Such payments
shall be made in installments payable as provided in Section 2(a)
hereof. Corporation also immediately shall pay Executive in a
lump sum an amount equal to the amount of the remaining unpaid
portion of any yearly incentive compensation award, and the
amount, if any, of any forfeiture of Executive's interest in any
profit sharing plan in which Executive is a participant.
(iii) For the purposes of participation in any hospital,
surgical, medical or other group health and accident insurance
and group life insurance plans maintained by Corporation,
Executive shall continue to be an employee of Corporation through
the Last Day of the Stated Term. Except for such purposes, unless
the Board of Directors otherwise determines by resolution,
Executive shall not continue to be an employee of Corporation for
any other purposes and shall not be entitled to continue to
participate in Corporation's Retirement Plan or 401(k) Plan, or
in any other plans, programs and benefits of Corporation;
provided, however, nothing herein shall preclude Executive from
any vested rights or benefits he may have in such plans on the
effective date of termination. If a contrary determination is
made by the Board of Directors, the duties of Executive shall be
only as mutually agreed upon by Executive and Corporation, and
may be refused by Executive without penalty hereunder.
(iv) If termination shall be without Cause under Section
5(a)(iii), all stock options granted to Executive prior to the
date of this Agreement under any stock option plan of Corporation
(other than Corporation's Employee Stock Purchase Plan),
notwithstanding the provisions of any stock option plan or
agreement, shall vest immediately and become exercisable by
Executive. Nothing herein shall otherwise
4
<PAGE> 5
affect the obligations of Corporation or Executive under the
terms of such stock option agreement, which, except for the
provisions hereof, shall be otherwise enforceable in accordance
with its terms.
(v) Any benefits of indemnification provided by the
By-Laws of Corporation or in any Indemnification Agreement
between Corporation and Executive shall be continued for the
benefit of Executive, and any officers' and directors' liability
insurance which may be maintained by Corporation and outstanding
on the date of termination shall be continued for the benefit of
Executive for such reasonable period of time as may be determined
by the Board of Directors to afford protection to Executive.
(d) Corporation agrees that its obligations for the continuation
of Executive's salary and other benefits in accordance with Sections
5(c)(ii) through 5(c)(v) above shall be absolute and unconditional, and
the amounts due under Sections 5(c)(ii) and 5(c)(iii) above or Section
15 shall not be subject to offset, reduction or mitigation for any
reason whatsoever; provided, however, that if Executive should breach
any other provision of this Agreement while he is receiving benefits
pursuant to Sections 5(c)(ii) through 5(c)(v) above, all obligations of
Corporation hereunder shall cease to be effective on the actual date of
such breach.
(e) "Cause" as used in Section 5(a)(iv) shall mean only gross
negligence, dishonesty, incompetence, a willful breach of this
Agreement, or violation of any reasonable rule or regulation of the
Board of Directors, the violation of which results in significant damage
to Corporation and with respect to which, except in the case of
incompetence or dishonesty, Executive fails to correct or make
reasonable efforts to correct within a reasonable time after receipt of
written notice thereof. "Cause" shall be determined only by the
affirmative vote of a majority of the authorized number of the Board of
Directors (excluding, for this purpose, Executive) at a meeting for
which notice has been given that it is proposed to consider the issue of
"Cause" or at a meeting occurring not less than seven (7) days after a
meeting at which one or more directors indicate an intention to present
a motion to such effect.
(f) If Corporation should terminate this Agreement pursuant to
Section 5(a)(iv), this Agreement shall terminate immediately or at such
later date as shall be designated by the Board of Directors and all of
Executive's rights hereunder shall terminate effective upon such
termination. Except as otherwise specified in any notice of termination,
Executive shall not continue thereafter to be an employee of Corporation
for any purpose and all rights Executive might thereafter have as an
employee pursuant to any plan or understanding shall cease.
6. Confidential Information. Executive agrees that he will not at any
time, both during and after the term of this Agreement, divulge, furnish or make
accessible to
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<PAGE> 6
any party (except to an entity which shall succeed to the business of
Corporation or its subsidiaries, and except as may be required in the conduct of
the regular course of business of Corporation or its subsidiaries, or as
specifically authorized by the Board of Directors or as may be required by law)
any trade secrets, patents, patent applications, inventions or customers of
Corporation or of any subsidiary of Corporation until such time as such
information has been disclosed to the public otherwise than by Executive.
7. Restrictive Covenant During Term. Executive agrees that until the
Last Day of the Stated Term, he will neither directly nor indirectly engage in a
business competing with any of the businesses conducted by Corporation or any of
its subsidiaries, nor without the prior written consent of the Board of
Directors, directly or indirectly, have any interest in, own, manage, operate,
control, be connected with as a stockholder, joint venturer, officer, employee,
partner or consultant, or otherwise engage, invest or participate in any
business which shall be competitive with any of the businesses conducted by
Corporation, or by any subsidiary of Corporation; provided, however, nothing
contained in this Section 7 shall prevent Executive from investing or trading in
stocks, bonds, commodities, securities, real estate, or other forms of
investment for his own benefit (directly or indirectly), so long as such
investment activities do not significantly interfere with Executive's services
to be rendered hereunder and, to the extent that such investment activities
would, but for this proviso, be prohibited hereby, would not be material either
to Executive or the concern in which such investment is made.
8. Approval by Corporation. This Agreement has been approved by the
Board of Directors in accordance with the authority granted and restrictions
imposed by action of the Board of Directors. It shall be executed by the Chief
Executive Officer or other duly qualified officer.
9. Waiver or Modification. Any waiver, alteration or modification of any
of the provisions of this Agreement or cancellation or replacement of this
Agreement shall not be valid unless made in writing and signed by the parties
hereto.
10. Construction. Except as to matters of internal corporate policy and
regulation, which shall be governed by the laws of the State of Delaware (the
state of incorporation of Corporation), this Agreement shall be governed by the
laws of the State of California. If any litigation shall occur between Executive
and Corporation which litigation arises out of or as a result of this Agreement
or the acts of the parties hereto pursuant to this Agreement, or which seeks an
interpretation of this Agreement, the prevailing party shall be entitled to
recover all costs and expenses of such litigation, including reasonable
attorneys' fees and costs.
11. Binding Effect.
(a) The rights and obligations of Corporation under this
Agreement shall be binding upon any successor or assigns of Corporation.
In the event of any consolidation or merger of Corporation into or with
another corporation, such
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<PAGE> 7
other corporation shall assume this Agreement and shall become
obligated to perform all of the terms and conditions hereof, and
Executive's obligations hereunder shall continue in favor of such other
corporation.
(b) If Corporation shall adopt a plan of liquidation or be or
become a party to any action which has the substantive effect of finally
terminating its business and affairs, all sums which would have been
payable to Executive during the remaining term of this Agreement
(assuming the continuation of Executive's then salary through the Last
Day of the Stated Term) shall become due and payable to Executive not
later than the effective date of such plan or action; except in the case
of a liquidation of Corporation into an acquiring company or subsidiary
of such acquiring company after a consolidation or merger of Corporation
into or with another corporation, and the rights and obligations of
Corporation under this Agreement are expressly assumed by the acquiring
company as part of the plan of liquidation.
(c) This Agreement supersedes all prior and contemporaneous
agreements, amendments, memoranda or understandings, express or implied
and written or oral, between Corporation and Executive.
12. Waiver. Waiver by either party of a breach of any provision of this
Agreement shall not operate or be construed as a waiver of any subsequent breach
of any other provision of this Agreement.
13. Counterparts. This Agreement may be executed in any number of
identical counterparts, each of which shall be construed as an original for all
purposes, but all of which taken together shall constitute one and the same
Agreement.
14. Notices. Any notice required or permitted to be given under this
Agreement shall be in writing and shall be deemed to be effective (i) upon
receipt if delivered in person, (ii) upon receipt if sent by registered or
certified United States mail, return receipt requested and postage and fees
prepaid, to the addresses of the parties set forth below, or such other address
as shall be furnished by notice hereunder by any such party or (iii) twenty-four
hours after having been sent by Federal Express or other overnight delivery
service to such address:
Corporation: 500 North State College Boulevard
Suite 700
Orange, California 92868
Executive: 7 Canada Oaks
Coto de Caza, CA 92679
No failure or refusal to accept delivery of any envelope containing such notice
shall affect the validity of such notice or the giving thereof.
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<PAGE> 8
15. Termination After Change in Control.
(a) Cumulative to any other provision of the Employment
Agreement, if, within two years after a change in control of
Corporation, Executive's employment with Corporation terminates for any
reason, either voluntarily or involuntarily, other than by death,
permanent disability or retirement at or after Executive's normal
retirement date under Corporation's Retirement Plan, Corporation
promptly will pay Executive, upon Executive's request, as termination
compensation, a lump sum amount, determined as provided in subsection
(b) of this Section 15, and such other amounts as are provided in
subsection (c) of this Section 15. For purposes of this Section, a
"change in control of Corporation" shall mean a change in control of a
nature that would 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 of Corporation shall be deemed to
have occurred if (i) any "person" (as such term is used in Sections
13(d) and 14(d)(2) of the Exchange Act) is or becomes the beneficial
owner, directly or indirectly, of securities of Corporation representing
40% or more of the combined voting power of Corporation's then
outstanding securities; or (ii) during any period of two consecutive
years, individuals who at the beginning of such period constitute the
Board of Directors of Corporation cease for any reason to constitute at
least a majority thereof unless the election of each new director was
approved by a vote of at least two-thirds of the directors then still in
office who were directors at the beginning of the period.
(b) The lump sum compensation payable to Executive (the
"Severance Payment") shall be equal to the average annual compensation
(including salary and bonuses under the Corporate Management Incentive
Compensation Plan or any predecessor or successor annual incentive
compensation plan) paid or payable by Corporation to Executive during
the five most recent calendar years ending before the date of the change
in control of Corporation (the "Base Amount") multiplied by 2.99;
provided, however, if Executive voluntarily terminates his employment
with Corporation, except after (i) any material adverse change in
Executive's duties, location of employment or benefits, or (ii) any
material adverse change to Executive in the application of the formula
of the Corporate Management Incentive Compensation Plan or any
modification in Corporation's accounting methods or practices materially
adverse to Executive, including the assessment of a management fee, then
the Severance Payment shall be equal to the highest annual compensation
(including salary and bonuses under the Corporate Management Incentive
Compensation Plan or any successor annual incentive compensation plan)
paid or payable by Corporation to Executive for services rendered in any
one of the three calendar years ending with the year of such
termination.
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<PAGE> 9
(c) In addition, if Executive's employment with Corporation so
terminates within two (2) years after such a change in control of
Corporation:
(i) any bonus awards previously made to Executive and not
previously paid immediately shall vest upon such termination and
shall be paid;
(ii) Executive's participation in, and terminating
distributions and vested rights under, any applicable retirement
plan, profit sharing plan and stock incentive plan of Corporation
or any of its subsidiaries shall be governed by the terms of
those respective plans; and
(iii) In the event of termination of employment under the
circumstances described in subsection (a) of this Section 15, the
arrangements provided for by this Section 15, by any stock option
or other agreement between Corporation and Executive in effect at
the time and by any other applicable plan of Corporation shall
constitute the entire obligation of Corporation to Executive and
performance thereof shall constitute full settlement of any claim
that Executive might otherwise assert against Corporation on
account of such termination, provided, however, that this
provision and this Agreement shall have no impact on the
obligations of Corporation under that certain Indemnification
Agreement dated as of the date hereof between Corporation and
Executive.
(d) Notwithstanding any provision in this Agreement to the
contrary, in the event that any payment or benefit received or to be
received by Executive in connection with a change in control of
Corporation or the termination of Executive's employment, whether
payable pursuant to the terms of this Agreement or any other plan,
arrangement or agreement with Corporation (collectively the "Total
Payments"), would not be deductible (in whole or part) as a result of
Section 280G of the Code, the Severance Payment shall be reduced until
no portion of the Total Payments is not deductible as a result of
Section 280G of the Code, or the Severance Payment is reduced to zero.
For purposes of this limitation, (i) no portion of the Total Payments,
the receipt or enjoyment of which Executive shall have effectively
waived in writing prior to the date of payment of the Severance Payment,
shall be taken into account, (ii) no portion of the Total Payments shall
be taken into account which, in the opinion of tax counsel selected by
Corporation's independent auditors and acceptable to Executive, does not
constitute a "parachute payment" within the meaning of Section
280G(b)(2) of the Code, (iii) the Severance Payment shall be reduced
only to the extent necessary so that the Total Payments (excluding
payments referred to in clause (i) or (ii)) in their entirety constitute
reasonable compensation for services actually rendered within the
meaning of Section 280G(b)(4) of the Code, in the opinion of the tax
counsel referred to in clause (ii); and (iv) the value of any non-cash
benefit or any deferred payment or benefit included in the Total
Payments shall be determined
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<PAGE> 10
by Corporation's independent auditors in accordance with the principles
of Sections 280G(d)(3) and (4) of the Code.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
CORPORATION:
WYNN'S INTERNATIONAL, INC.
By /s/ James Carroll
--------------------------------------
James Carroll
Chairman of the Board and Chief
Executive Officer
EXECUTIVE:
/s/ John W. Huber
-----------------------------------------
John W. Huber
10
<PAGE> 1
EXHIBIT 10.5
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into as of
the 1st day of January, 1999, by and between WYNN'S INTERNATIONAL, INC., a
Delaware corporation with its principal offices in Orange, California
("Corporation"), and SEYMOUR A. SCHLOSSER, an individual residing in Costa Mesa,
California ("Executive").
W I T N E S S E T H :
WHEREAS, Executive presently serves as Vice President-Finance and Chief
Financial Officer of Corporation pursuant to an employment agreement dated
January 1, 1997 between Corporation and Executive (the "Prior Employment
Agreement"); and
WHEREAS, Corporation desires to continue to retain the services of
Executive, whose experience, knowledge and abilities with respect to the
business and affairs of Corporation and its subsidiaries are extremely valuable
to Corporation; and
WHEREAS, the Board of Directors of Corporation (the "Board of Directors")
and the Compensation Committee (the "Committee") of the Board of Directors
recognize that the continuing possibility of an unsolicited tender offer or
other takeover bid for Corporation is unsettling to Executive and other senior
executives of Corporation and, therefore, to enhance the value of Corporation
for the benefit of its stockholders, desire to make arrangements to help assure
the continuing dedication by Executive to Executive's duties to Corporation,
notwithstanding the occurrence of a tender offer or takeover bid; and
WHEREAS, in particular, the Board of Directors and the Committee believe it
is important, should Corporation receive proposals from third parties with
respect to its future, to enable Executive, without being influenced by the
uncertainties of Executive's own situation, to assess and advise the Board of
Directors whether such proposals would be in the best interests of Corporation
and its stockholders, and to take such other action regarding such proposals as
the Board of Directors might determine to be appropriate; and
WHEREAS, the Board of Directors and the Committee also wish to demonstrate
to Executive and other senior executives of Corporation that Corporation is
concerned with the welfare of its executives and intends to see that loyal
executives are treated fairly; and
WHEREAS, in view of the foregoing and in further consideration of
Executive's employment with Corporation, the Board of Directors and the
Committee have determined that it is in the best interests of Corporation and
its stockholders for Corporation to agree to pay Executive termination
compensation in the event Executive should leave the employ of Corporation under
certain circumstances;
<PAGE> 2
NOW, THEREFORE, in consideration of the foregoing and the mutual agreements
and promises of the parties set forth below, the parties hereby agree as
follows:
1. Duties.
(a) Corporation hereby continues to employ Executive as Vice
President-Finance and Chief Financial Officer of Corporation during the
term of this Agreement, with powers and duties consistent with such
positions. Executive, during the term of this Agreement, shall perform such
additional or different duties, and accept the election or appointment to
such other offices or positions, as may be mutually agreeable to Executive
and the Board of Directors. Executive agrees to serve in such executive
offices and directorships in other subsidiaries or affiliated companies of
Corporation as he may be requested to do throughout the term of this
Agreement without additional fixed compensation.
(b) Executive shall be employed at Corporation's headquarters in
Orange County, California, and shall devote substantially his full time and
efforts to perform his duties faithfully, diligently and to the best of his
ability to advance the interests of Corporation; subject, however, to
reasonable working hours, conditions and vacations as are consistent with
his position and with due regard to the preservation of his good health.
Nothing herein shall be deemed to preclude or prohibit Executive from
performing during regular business hours services within the business and
civic community which are customary for persons in similar capacities,
including, without limitation, serving on boards of other companies,
advisory groups, committees and panels, but only in furtherance of and not
to the detriment of his principal duties hereunder. Further, Corporation
shall give Executive a reasonable opportunity to perform his duties and
shall not expect Executive to devote more time hereunder, nor assign duties
or functions to Executive, other than as may be customary and reasonable
for an executive in Executive's position.
2. Compensation.
(a) Effective as of January 1, 1999, and during the entire term of
this Agreement, Corporation shall pay to Executive an annual salary of not
less than Two Hundred Seventy-Five Thousand One Hundred Seventy-Six Dollars
($275,176.00), payable in equal installments on Corporation's regular
payroll dates, for any and all services which Executive may render to
Corporation.
(b) The Board of Directors annually shall review the amount of
Executive's salary, and shall, when the Board of Directors in its sole
judgment deems it appropriate, make adjustments in the amount of such
salary. Any such adjustments shall take effect on the date established by
the Board of Directors. Nothing herein shall be construed to authorize or
empower any reduction of Executive's salary below his then current rate of
salary by the Board of Directors
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or otherwise during the term of this Agreement. The Committee, in
accordance with customary policy, shall make such recommendations to the
Board of Directors as it believes are appropriate with respect to salary
adjustments hereunder.
3. Expenses. Corporation will reimburse Executive for all usual,
reasonable and necessary expenses paid or incurred by him in the performance of
his duties hereunder, subject to the right of Corporation at any time to place
reasonable limitations on expenses thereafter to be incurred or reimbursed.
4. Employee Benefits. Executive shall be entitled to and shall receive
all other benefits of employment generally available to other executives of
Corporation, including, among other things, participation in any hospital,
surgical, medical or other group health and accident benefit plans, life
insurance benefits, and Corporation's annual vacation plan. In addition,
Executive will be entitled to participate in all incentive compensation, stock
option, profit sharing, pension, retirement or bonus plans as from time to time
may be in existence during the term of this Agreement in accordance with their
respective terms and provisions, but, to the extent participation or the amount
of participation is at the discretion of the Board of Directors or any committee
thereof, then Executive's participation shall likewise be solely subject to such
discretion.
5. Term and Termination.
(a) The term of this Agreement shall commence on the date hereof and
shall terminate upon the first to occur of the following events:
(i) December 31, 2001 (the "Last Day of the Stated Term");
(ii) The death or permanent disability of Executive;
(iii) The 30th day following written notice from Corporation to
Executive; or
(iv) Executive is discharged for Cause.
(b) If Executive dies or becomes permanently disabled during the term
of this Agreement, this Agreement shall terminate on the last day of the
month during which his death or permanent disability, as the case may be,
occurred. Commencing thirty (30) days after the date of such termination,
there shall be paid to Executive or Executive's representative in the event
of permanent disability, or to his executor or estate in the event of
death, an amount equal to one year of Executive's then current salary,
payable in twelve (12) equal monthly installments. If Executive is absent
from employment or unable to render services hereunder on a full-time basis
by reason of physical or mental illness or disability for six (6) months or
more in the aggregate in any twelve (12) month period
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<PAGE> 4
during the term of this Agreement, Executive shall be considered
permanently disabled.
(c) If Corporation should terminate this Agreement pursuant to
Section 5(a)(iii):
(i) Executive shall immediately cease to be Vice
President-Finance and Chief Financial Officer of Corporation, and such
other office or position Executive then holds, and if requested by a
majority of the Board of Directors of Corporation, shall immediately
resign from the Board of Directors and from any of the Boards of
Directors of any of Corporation's subsidiaries of which Executive may
be a member.
(ii) Corporation shall be obligated and shall continue to pay
Executive an amount equal to his then current salary but at a rate of
not less than Two Hundred Seventy-Five Thousand One Hundred
Seventy-Six Dollars ($275,176.00) per annum from the date of such
termination until the Last Day of the Stated Term. Such payments shall
be made in installments payable as provided in Section 2(a) hereof.
Corporation also immediately shall pay Executive in a lump sum an
amount equal to the amount of the remaining unpaid portion of any
yearly incentive compensation award, and the amount, if any, of any
forfeiture of Executive's interest in any profit sharing plan in which
Executive is a participant.
(iii) For the purposes of participation in any hospital,
surgical, medical or other group health and accident insurance and
group life insurance plans maintained by Corporation, Executive shall
continue to be an employee of Corporation through the Last Day of the
Stated Term. Except for such purposes, unless the Board of Directors
otherwise determines by resolution, Executive shall not continue to be
an employee of Corporation for any other purposes and shall not be
entitled to continue to participate in Corporation's Retirement Plan
or 401(k) Plan, or in any other plans, programs and benefits of
Corporation; provided, however, nothing herein shall preclude
Executive from any vested rights or benefits he may have in such plans
on the effective date of termination. If a contrary determination is
made by the Board of Directors, the duties of Executive shall be only
as mutually agreed upon by Executive and Corporation, and may be
refused by Executive without penalty hereunder.
(iv) If termination shall be without Cause under Section
5(a)(iii), all stock options granted to Executive prior to the date of
this Agreement under any stock option plan of Corporation (other than
Corporation's Employee Stock Purchase Plan), notwithstanding the
provisions of any stock option plan or agreement, shall vest
immediately
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<PAGE> 5
and become exercisable by Executive. Nothing herein shall otherwise
affect the obligations of Corporation or Executive under the terms of
such stock option agreement, which, except for the provisions hereof,
shall be otherwise enforceable in accordance with its terms.
(v) Any benefits of indemnification provided by the By-Laws of
Corporation or in any Indemnification Agreement between Corporation
and Executive shall be continued for the benefit of Executive, and any
officers' and directors' liability insurance which may be maintained
by Corporation and outstanding on the date of termination shall be
continued for the benefit of Executive for such reasonable period of
time as may be determined by the Board of Directors to afford
protection to Executive.
(d) Corporation agrees that its obligations for the continuation of
Executive's salary and other benefits in accordance with Sections 5(c)(ii)
through 5(c)(v) above shall be absolute and unconditional, and the amounts
due under Sections 5(c)(ii) and 5(c)(iii) above or Section 15 shall not be
subject to offset, reduction or mitigation for any reason whatsoever;
provided, however, that if Executive should breach any other provision of
this Agreement while he is receiving benefits pursuant to Sections 5(c)(ii)
through 5(c)(v) above, all obligations of Corporation hereunder shall cease
to be effective on the actual date of such breach.
(e) "Cause" as used in Section 5(a)(iv) shall mean only gross
negligence, dishonesty, incompetence, a willful breach of this Agreement,
or violation of any reasonable rule or regulation of the Board of
Directors, the violation of which results in significant damage to
Corporation and with respect to which, except in the case of incompetence
or dishonesty, Executive fails to correct or make reasonable efforts to
correct within a reasonable time after receipt of written notice thereof.
"Cause" shall be determined only by the affirmative vote of a majority of
the authorized number of the Board of Directors (excluding, for this
purpose, Executive) at a meeting for which notice has been given that it is
proposed to consider the issue of "Cause" or at a meeting occurring not
less than seven (7) days after a meeting at which one or more directors
indicate an intention to present a motion to such effect.
(f) If Corporation should terminate this Agreement pursuant to
Section 5(a)(iv), this Agreement shall terminate immediately or at such
later date as shall be designated by the Board of Directors and all of
Executive's rights hereunder shall terminate effective upon such
termination. Except as otherwise specified in any notice of termination,
Executive shall not continue thereafter to be an employee of Corporation
for any purpose and all rights Executive might thereafter have as an
employee pursuant to any plan or understanding shall cease.
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<PAGE> 6
6. Confidential Information. Executive agrees that he will not at any
time, both during and after the term of this Agreement, divulge, furnish or make
accessible to any party (except to an entity which shall succeed to the business
of Corporation or its subsidiaries, and except as may be required in the conduct
of the regular course of business of Corporation or its subsidiaries, or as
specifically authorized by the Board of Directors or as may be required by law)
any trade secrets, patents, patent applications, inventions or customers of
Corporation or of any subsidiary of Corporation until such time as such
information has been disclosed to the public otherwise than by Executive.
7. Restrictive Covenant During Term. Executive agrees that until the Last
Day of the Stated Term, he will neither directly nor indirectly engage in a
business competing with any of the businesses conducted by Corporation or any of
its subsidiaries, nor without the prior written consent of the Board of
Directors, directly or indirectly, have any interest in, own, manage, operate,
control, be connected with as a stockholder, joint venturer, officer, employee,
partner or consultant, or otherwise engage, invest or participate in any
business which shall be competitive with any of the businesses conducted by
Corporation, or by any subsidiary of Corporation; provided, however, nothing
contained in this Section 7 shall prevent Executive from investing or trading in
stocks, bonds, commodities, securities, real estate, or other forms of
investment for his own benefit (directly or indirectly), so long as such
investment activities do not significantly interfere with Executive's services
to be rendered hereunder and, to the extent that such investment activities
would, but for this proviso, be prohibited hereby, would not be material either
to Executive or the concern in which such investment is made.
8. Approval by Corporation. This Agreement has been approved by the Board
of Directors in accordance with the authority granted and restrictions imposed
by action of the Board of Directors. It shall be executed by the Chief Executive
Officer or other duly qualified officer.
9. Waiver or Modification. Any waiver, alteration or modification of any
of the provisions of this Agreement or cancellation or replacement of this
Agreement shall not be valid unless made in writing and signed by the parties
hereto.
10. Construction. Except as to matters of internal corporate policy and
regulation, which shall be governed by the laws of the State of Delaware (the
state of incorporation of Corporation), this Agreement shall be governed by the
laws of the State of California. If any litigation shall occur between Executive
and Corporation which litigation arises out of or as a result of this Agreement
or the acts of the parties hereto pursuant to this Agreement, or which seeks an
interpretation of this Agreement, the prevailing party shall be entitled to
recover all costs and expenses of such litigation, including reasonable
attorneys' fees and costs.
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11. Binding Effect.
(a) The rights and obligations of Corporation under this Agreement
shall be binding upon any successor or assigns of Corporation. In the event
of any consolidation or merger of Corporation into or with another
corporation, such other corporation shall assume this Agreement and shall
become obligated to perform all of the terms and conditions hereof, and
Executive's obligations hereunder shall continue in favor of such other
corporation.
(b) If Corporation shall adopt a plan of liquidation or be or become
a party to any action which has the substantive effect of finally
terminating its business and affairs, all sums which would have been
payable to Executive during the remaining term of this Agreement (assuming
the continuation of Executive's then salary through the Last Day of the
Stated Term) shall become due and payable to Executive not later than the
effective date of such plan or action; except in the case of a liquidation
of Corporation into an acquiring company or subsidiary of such acquiring
company after a consolidation or merger of Corporation into or with another
corporation, and the rights and obligations of Corporation under this
Agreement are expressly assumed by the acquiring company as part of the
plan of liquidation.
(c) This Agreement supersedes all prior and contemporaneous
agreements, amendments, memoranda or understandings, express or implied and
written or oral, between Corporation and Executive.
12. Waiver. Waiver by either party of a breach of any provision of this
Agreement shall not operate or be construed as a waiver of any subsequent breach
of any other provision of this Agreement.
13. Counterparts. This Agreement may be executed in any number of
identical counterparts, each of which shall be construed as an original for all
purposes, but all of which taken together shall constitute one and the same
Agreement.
14. Notices. Any notice required or permitted to be given under this
Agreement shall be in writing and shall be deemed to be effective (i) upon
receipt if delivered in person, (ii) upon receipt if sent by registered or
certified United States mail, return receipt requested and postage and fees
prepaid, to the addresses of the parties set forth below, or such other address
as shall be furnished by notice hereunder by any such party or (iii) twenty-four
hours after having been sent by Federal Express or other overnight delivery
service to such address:
Corporation: 500 North State College Boulevard
Suite 700
Orange, California 92868
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<PAGE> 8
Executive: 1839 Tanager Drive
Costa Mesa, California 92626
No failure or refusal to accept delivery of any envelope containing such notice
shall affect the validity of such notice or the giving thereof.
15. Termination After Change in Control.
(a) Cumulative to any other provision of the Employment Agreement,
if, within two years after a change in control of Corporation, Executive's
employment with Corporation terminates for any reason, either voluntarily
or involuntarily, other than death, permanent disability or retirement at
or after Executive's normal retirement date under Corporation's Retirement
Plan, Corporation promptly will pay Executive, upon Executive's request, as
termination compensation, a lump sum amount, determined as provided in
subsection (b) of this Section 15, and such other amounts as are provided
in subsection (c) of this Section 15. For purposes of this Section, a
"change in control of Corporation" shall mean a change in control of a
nature that would 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 of Corporation shall be deemed to have
occurred if (i) any "person" (as such term is used in Sections 13(d) and
14(d)(2) of the Exchange Act) is or becomes the beneficial owner, directly
or indirectly, of securities of Corporation representing 40% or more of the
combined voting power of Corporation's then outstanding securities; or (ii)
during any period of two consecutive years, individuals who at the
beginning of such period constitute the Board of Directors of Corporation
cease for any reason to constitute at least a majority thereof unless the
election of each new director was approved by a vote of at least two-thirds
of the directors then still in office who were directors at the beginning
of the period.
(b) The lump sum compensation payable to Executive (the "Severance
Payment") shall be equal to the average annual compensation (including
salary and bonuses under the Corporate Management Incentive Compensation
Plan or any predecessor or successor annual incentive compensation plan)
paid or payable by Corporation to Executive during the five most recent
calendar years ending before the date of the change in control of
Corporation (the "Base Amount") multiplied by 2.99; provided, however, if
Executive voluntarily terminates his employment with Corporation, except
after (i) any material adverse change in Executive's duties, location of
employment or benefits, or (ii) any material adverse change to Executive in
the application of the formula of the Corporate Management Incentive
Compensation Plan or any modification in Corporation's accounting methods
or practices materially adverse to Executive, including the assessment of a
management fee, then the Severance Payment shall be equal to the highest
annual compensation (including salary and bonuses under the
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<PAGE> 9
Corporate Management Incentive Compensation Plan or any successor annual
incentive compensation plan) paid or payable by Corporation to Executive
for services rendered in any one of the three calendar years ending with
the year of such termination.
(c) In addition, if Executive's employment with Corporation so
terminates within two (2) years after such a change in control of
Corporation:
(i) any bonus awards previously made to Executive and not
previously paid immediately shall vest upon such termination and shall
be paid;
(ii) Executive's participation in, and terminating distributions
and vested rights under, any applicable retirement plan, profit
sharing plan and stock incentive plan of Corporation or any of its
subsidiaries shall be governed by the terms of those respective plans;
and
(iii) In the event of termination of employment under the
circumstances described in subsection (a) of this Section 15, the
arrangements provided for by this Section 15, by any stock option or
other agreement between Corporation and Executive in effect at the
time and by any other applicable plan of Corporation shall constitute
the entire obligation of Corporation to Executive and performance
thereof shall constitute full settlement of any claim that Executive
might otherwise assert against Corporation on account of such
termination, provided, however, that this provision and this Agreement
shall have no impact on the obligations of Corporation under that
certain Indemnification Agreement dated August 4, 1993 between
Corporation and Executive.
(d) Notwithstanding any provision in this Agreement to the contrary,
in the event that any payment or benefit received or to be received by
Executive in connection with a change in control of Corporation or the
termination of Executive's employment, whether payable pursuant to the
terms of this Agreement or any other plan, arrangement or agreement with
Corporation (collectively the "Total Payments"), would not be deductible
(in whole or part) as a result of Section 280G of the Code, the Severance
Payment shall be reduced until no portion of the Total Payments is not
deductible as a result of Section 280G of the Code, or the Severance
Payment is reduced to zero. For purposes of this limitation, (i) no portion
of the Total Payments, the receipt or enjoyment of which Executive shall
have effectively waived in writing prior to the date of payment of the
Severance Payment, shall be taken into account, (ii) no portion of the
Total Payments shall be taken into account which, in the opinion of tax
counsel selected by Corporation's independent auditors and acceptable to
Executive, does not constitute a "parachute payment" within the meaning of
Section 280G(b)(2) of the Code, (iii) the Severance Payment shall be
reduced only to the extent necessary so
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<PAGE> 10
that the Total Payments (excluding payments referred to in clause (i) or
(ii)) in their entirety constitute reasonable compensation for services
actually rendered within the meaning of Section 280G(b)(4) of the Code, in
the opinion of the tax counsel referred to in clause (ii); and (iv) the
value of any non-cash benefit or any deferred payment or benefit included
in the Total Payments shall be determined by Corporation's independent
auditors in accordance with the principles of Sections 280G(d)(3) and (4)
of the Code.
16. Cancellation of Prior Employment Agreement. Corporation and Executive
agree that the Prior Employment Agreement hereby is canceled as of the date
hereof and shall be of no further force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
CORPORATION:
WYNN'S INTERNATIONAL, INC.
By /s/ James Carroll
-------------------------------
James Carroll
Chairman of the Board and Chief
Executive Officer
EXECUTIVE:
/s/ Seymour A. Schlosser
----------------------------------
Seymour A. Schlosser
10
<PAGE> 1
EXHIBIT 10.7
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into as of
the 1st day of January, 1999, by and between WYNN'S INTERNATIONAL, INC., a
Delaware corporation with its principal offices in Orange, California
("Corporation"), and GREGG M. GIBBONS, an individual residing in Anaheim,
California ("Executive").
W I T N E S S E T H :
WHEREAS, Executive presently serves as Vice President-Corporate Affairs and
General Counsel of Corporation pursuant to an employment agreement dated as of
January 1, 1997 between Corporation and Executive (the "Prior Employment
Agreement"); and
WHEREAS, Corporation desires to continue to retain the services of
Executive, whose experience, knowledge and abilities with respect to the
business and affairs of Corporation and its subsidiaries are extremely valuable
to Corporation; and
WHEREAS, the Board of Directors of Corporation (the "Board of Directors")
and the Compensation Committee (the "Committee") of the Board of Directors
recognize that the continuing possibility of an unsolicited tender offer or
other takeover bid for Corporation is unsettling to Executive and other senior
executives of Corporation and, therefore, to enhance the value of Corporation
for the benefit of its stockholders, desire to make arrangements to help assure
the continuing dedication by Executive to Executive's duties to Corporation,
notwithstanding the occurrence of a tender offer or takeover bid; and
WHEREAS, in particular, the Board of Directors and the Committee believe it
is important, should Corporation receive proposals from third parties with
respect to its future, to enable Executive, without being influenced by the
uncertainties of Executive's own situation, to assess and advise the Board of
Directors whether such proposals would be in the best interests of Corporation
and its stockholders, and to take such other action regarding such proposals as
the Board of Directors might determine to be appropriate; and
WHEREAS, the Board of Directors and the Committee also wish to demonstrate
to Executive and other senior executives of Corporation that Corporation is
concerned with the welfare of its executives and intends to see that loyal
executives are treated fairly; and
WHEREAS, in view of the foregoing and in further consideration of
Executive's employment with Corporation, the Board of Directors and the
Committee have determined that it is in the best interests of Corporation and
its stockholders for
<PAGE> 2
Corporation to agree to pay Executive termination compensation in the event
Executive should leave the employ of Corporation under certain circumstances;
NOW, THEREFORE, in consideration of the foregoing and the mutual agreements
and promises of the parties set forth below, the parties hereby agree as
follows:
1. Duties.
(a) Corporation hereby continues to employ Executive as Vice
President-Corporate Affairs and General Counsel of Corporation during the
term of this Agreement, with powers and duties consistent with such
positions. Executive, during the term of this Agreement, shall perform such
additional or different duties, and accept the election or appointment to
such other offices or positions, as may be mutually agreeable to Executive
and the Board of Directors. Executive agrees to serve in such executive
offices and directorships in other subsidiaries or affiliated companies of
Corporation as he may be requested to do throughout the term of this
Agreement without additional fixed compensation.
(b) Executive shall be employed at Corporation's headquarters in
Orange County, California, and shall devote substantially his full time and
efforts to perform his duties faithfully, diligently and to the best of his
ability to advance the interests of Corporation; subject, however, to
reasonable working hours, conditions and vacations as are consistent with
his position and with due regard to the preservation of his good health.
Nothing herein shall be deemed to preclude or prohibit Executive from
performing during regular business hours services within the business and
civic community which are customary for persons in similar capacities,
including, without limitation, serving on boards of other companies,
advisory groups, committees and panels, but only in furtherance of and not
to the detriment of his principal duties hereunder. Further, Corporation
shall give Executive a reasonable opportunity to perform his duties and
shall not expect Executive to devote more time hereunder, nor assign duties
or functions to Executive, other than as may be customary and reasonable
for an executive in Executive's position.
2. Compensation.
(a) Effective as of January 1, 1999, and during the entire term of
this Agreement, Corporation shall pay to Executive an annual salary of not
less than Two Hundred Sixty-Eight Thousand One Hundred Eighty Dollars
($268,180.00), payable in equal installments on Corporation's regular
payroll dates, for any and all services which Executive may render to
Corporation.
(b) The Board of Directors annually shall review the amount of
Executive's salary, and shall, when the Board of Directors in its sole
judgment deems it appropriate, make adjustments in the amount of such
salary. Any such
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<PAGE> 3
adjustments shall take effect on the date established by the Board of
Directors. Nothing herein shall be construed to authorize or empower any
reduction of Executive's salary below his then current rate of salary by
the Board of Directors or otherwise during the term of this Agreement. The
Committee, in accordance with customary policy, shall make such
recommendations to the Board of Directors as it believes are appropriate
with respect to salary adjustments hereunder.
3. Expenses. Corporation will reimburse Executive for all usual,
reasonable and necessary expenses paid or incurred by him in the performance of
his duties hereunder, subject to the right of Corporation at any time to place
reasonable limitations on expenses thereafter to be incurred or reimbursed.
4. Employee Benefits. Executive shall be entitled to and shall receive
all other benefits of employment generally available to other executives of
Corporation, including, among other things, participation in any hospital,
surgical, medical or other group health and accident benefit plans, life
insurance benefits, and Corporation's annual vacation plan. In addition,
Executive will be entitled to participate in all incentive compensation, stock
option, profit sharing, pension, retirement or bonus plans as from time to time
may be in existence during the term of this Agreement in accordance with their
respective terms and provisions, but, to the extent participation or the amount
of participation is at the discretion of the Board of Directors or any committee
thereof, then Executive's participation shall likewise be solely subject to such
discretion.
5. Term and Termination.
(a) The term of this Agreement shall commence on the date hereof and
shall terminate upon the first to occur of the following events:
(i) December 31, 2001 (the "Last Day of the Stated Term");
(ii) The death or permanent disability of Executive;
(iii) The 30th day following written notice from Corporation to
Executive; or
(iv) Executive is discharged for Cause.
(b) If Executive dies or becomes permanently disabled during the term
of this Agreement, this Agreement shall terminate on the last day of the
month during which his death or permanent disability, as the case may be,
occurred. Commencing thirty (30) days after the date of such termination,
there shall be paid to Executive or Executive's representative in the event
of permanent disability, or to his executor or estate in the event of
death, an amount equal to one year of Executive's then current salary,
payable in twelve (12) equal monthly installments. If Executive is absent
from employment or unable to render services
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<PAGE> 4
hereunder on a full-time basis by reason of physical or mental illness or
disability for six (6) months or more in the aggregate in any twelve (12)
month period during the term of this Agreement, Executive shall be
considered permanently disabled.
(c) If Corporation should terminate this Agreement pursuant to
Section 5(a)(iii):
(i) Executive shall immediately cease to be Vice
President-Corporate Affairs and General Counsel of Corporation, and
such other office or position Executive then holds, and if requested
by a majority of the Board of Directors of Corporation, shall
immediately resign from the Board of Directors and from any of the
Boards of Directors of any of Corporation's subsidiaries of which
Executive may be a member.
(ii) Corporation shall be obligated and shall continue to pay
Executive an amount equal to his then current salary but at a rate of
not less than Two Hundred Sixty-Eight Thousand One Hundred Eighty
Dollars ($268,180.00) per annum from the date of such termination
until the Last Day of the Stated Term. Such payments shall be made in
installments payable as provided in Section 2(a) hereof. Corporation
also immediately shall pay Executive in a lump sum an amount equal to
the amount of the remaining unpaid portion of any yearly incentive
compensation award, and the amount, if any, of any forfeiture of
Executive's interest in any profit sharing plan in which Executive is
a participant.
(iii) For the purposes of participation in any hospital,
surgical, medical or other group health and accident insurance and
group life insurance plans maintained by Corporation, Executive shall
continue to be an employee of Corporation through the Last Day of the
Stated Term. Except for such purposes, unless the Board of Directors
otherwise determines by resolution, Executive shall not continue to be
an employee of Corporation for any other purposes and shall not be
entitled to continue to participate in Corporation's Retirement Plan
or 401(k) Plan, or in any other plans, programs and benefits of
Corporation; provided, however, nothing herein shall preclude
Executive from any vested rights or benefits he may have in such plans
on the effective date of termination. If a contrary determination is
made by the Board of Directors, the duties of Executive shall be only
as mutually agreed upon by Executive and Corporation, and may be
refused by Executive without penalty hereunder.
(iv) If termination shall be without Cause under Section
5(a)(iii), all stock options granted to Executive prior to the date of
this Agreement under any stock option plan of Corporation (other than
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<PAGE> 5
Corporation's Employee Stock Purchase Plan), notwithstanding the
provisions of any stock option plan or agreement, shall vest
immediately and become exercisable by Executive. Nothing herein shall
otherwise affect the obligations of Corporation or Executive under the
terms of such stock option agreement, which, except for the provisions
hereof, shall be otherwise enforceable in accordance with its terms.
(v) Any benefits of indemnification provided by the By-Laws of
Corporation or in any Indemnification Agreement between Corporation
and Executive shall be continued for the benefit of Executive, and any
officers' and directors' liability insurance which may be maintained
by Corporation and outstanding on the date of termination shall be
continued for the benefit of Executive for such reasonable period of
time as may be determined by the Board of Directors to afford
protection to Executive.
(d) Corporation agrees that its obligations for the continuation of
Executive's salary and other benefits in accordance with Sections 5(c)(ii)
through 5(c)(v) above shall be absolute and unconditional, and the amounts
due under Sections 5(c)(ii) and 5(c)(iii) above or Section 15 shall not be
subject to offset, reduction or mitigation for any reason whatsoever;
provided, however, that if Executive should breach any other provision of
this Agreement while he is receiving benefits pursuant to Sections 5(c)(ii)
through 5(c)(v) above, all obligations of Corporation hereunder shall cease
to be effective on the actual date of such breach.
(e) "Cause" as used in Section 5(a)(iv) shall mean only gross
negligence, dishonesty, incompetence, a willful breach of this Agreement,
or violation of any reasonable rule or regulation of the Board of
Directors, the violation of which results in significant damage to
Corporation and with respect to which, except in the case of incompetence
or dishonesty, Executive fails to correct or make reasonable efforts to
correct within a reasonable time after receipt of written notice thereof.
"Cause" shall be determined only by the affirmative vote of a majority of
the authorized number of the Board of Directors (excluding, for this
purpose, Executive) at a meeting for which notice has been given that it is
proposed to consider the issue of "Cause" or at a meeting occurring not
less than seven (7) days after a meeting at which one or more directors
indicate an intention to present a motion to such effect.
(f) If Corporation should terminate this Agreement pursuant to
Section 5(a)(iv), this Agreement shall terminate immediately or at such
later date as shall be designated by the Board of Directors and all of
Executive's rights hereunder shall terminate effective upon such
termination. Except as otherwise specified in any notice of termination,
Executive shall not continue thereafter to be an employee of Corporation
for any purpose and all rights Executive might thereafter have as an
employee pursuant to any plan or understanding shall cease.
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<PAGE> 6
6. Confidential Information. Executive agrees that he will not at any
time, both during and after the term of this Agreement, divulge, furnish or make
accessible to any party (except to an entity which shall succeed to the business
of Corporation or its subsidiaries, and except as may be required in the conduct
of the regular course of business of Corporation or its subsidiaries, or as
specifically authorized by the Board of Directors or as may be required by law)
any trade secrets, patents, patent applications, inventions or customers of
Corporation or of any subsidiary of Corporation until such time as such
information has been disclosed to the public otherwise than by Executive.
7. Restrictive Covenant During Term. Executive agrees that until the Last
Day of the Stated Term, he will neither directly nor indirectly engage in a
business competing with any of the businesses conducted by Corporation or any of
its subsidiaries, nor without the prior written consent of the Board of
Directors, directly or indirectly, have any interest in, own, manage, operate,
control, be connected with as a stockholder, joint venturer, officer, employee,
partner or consultant, or otherwise engage, invest or participate in any
business which shall be competitive with any of the businesses conducted by
Corporation, or by any subsidiary of Corporation; provided, however, nothing
contained in this Section 7 shall prevent Executive from investing or trading in
stocks, bonds, commodities, securities, real estate, or other forms of
investment for his own benefit (directly or indirectly), so long as such
investment activities do not significantly interfere with Executive's services
to be rendered hereunder and, to the extent that such investment activities
would, but for this proviso, be prohibited hereby, would not be material either
to Executive or the concern in which such investment is made.
8. Approval by Corporation. This Agreement has been approved by the Board
of Directors in accordance with the authority granted and restrictions imposed
by action of the Board of Directors. It shall be executed by the Chief Executive
Officer or other duly qualified officer.
9. Waiver or Modification. Any waiver, alteration or modification of any
of the provisions of this Agreement or cancellation or replacement of this
Agreement shall not be valid unless made in writing and signed by the parties
hereto.
10. Construction. Except as to matters of internal corporate policy and
regulation, which shall be governed by the laws of the State of Delaware (the
state of incorporation of Corporation), this Agreement shall be governed by the
laws of the State of California. If any litigation shall occur between Executive
and Corporation which litigation arises out of or as a result of this Agreement
or the acts of the parties hereto pursuant to this Agreement, or which seeks an
interpretation of this Agreement, the prevailing party shall be entitled to
recover all costs and expenses of such litigation, including reasonable
attorneys' fees and costs.
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11. Binding Effect.
(a) The rights and obligations of Corporation under this Agreement
shall be binding upon any successor or assigns of Corporation. In the event
of any consolidation or merger of Corporation into or with another
corporation, such other corporation shall assume this Agreement and shall
become obligated to perform all of the terms and conditions hereof, and
Executive's obligations hereunder shall continue in favor of such other
corporation.
(b) If Corporation shall adopt a plan of liquidation or be or become
a party to any action which has the substantive effect of finally
terminating its business and affairs, all sums which would have been
payable to Executive during the remaining term of this Agreement (assuming
the continuation of Executive's then salary through the Last Day of the
Stated Term) shall become due and payable to Executive not later than the
effective date of such plan or action; except in the case of a liquidation
of Corporation into an acquiring company or subsidiary of such acquiring
company after a consolidation or merger of Corporation into or with another
corporation, and the rights and obligations of Corporation under this
Agreement are expressly assumed by the acquiring company as part of the
plan of liquidation.
(c) This Agreement supersedes all prior and contemporaneous
agreements, amendments, memoranda or understandings, express or implied and
written or oral, between Corporation and Executive.
12. Waiver. Waiver by either party of a breach of any provision of this
Agreement shall not operate or be construed as a waiver of any subsequent breach
of any other provision of this Agreement.
13. Counterparts. This Agreement may be executed in any number of
identical counterparts, each of which shall be construed as an original for all
purposes, but all of which taken together shall constitute one and the same
Agreement.
14. Notices. Any notice required or permitted to be given under this
Agreement shall be in writing and shall be deemed to be effective (i) upon
receipt if delivered in person, (ii) upon receipt if sent by registered or
certified United States mail, return receipt requested and postage and fees
prepaid, to the addresses of the parties set forth below, or such other address
as shall be furnished by notice hereunder by any such party or (iii) twenty-four
hours after having been sent by Federal Express or other overnight delivery
service to such address:
Corporation: 500 North State College Boulevard
Suite 700
Orange, California 92868
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<PAGE> 8
Executive: 451 Peralta Hills Drive
Anaheim, California 92807
No failure or refusal to accept delivery of any envelope containing such notice
shall affect the validity of such notice or the giving thereof.
15. Termination After Change in Control.
(a) Cumulative to any other provision of the Employment Agreement,
if, within two years after a change in control of Corporation, Executive's
employment with Corporation terminates for any reason, either voluntarily
or involuntarily, other than by death, permanent disability or retirement
at or after Executive's normal retirement date under Corporation's
Retirement Plan, Corporation promptly will pay Executive, upon Executive's
request, as termination compensation, a lump sum amount, determined as
provided in subsection (b) of this Section 15, and such other amounts as
are provided in subsection (c) of this Section 15. For purposes of this
Section, a "change in control of Corporation" shall mean a change in
control of a nature that would 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 of Corporation shall be
deemed to have occurred if (i) any "person" (as such term is used in
Sections 13(d) and 14(d)(2) of the Exchange Act) is or becomes the
beneficial owner, directly or indirectly, of securities of Corporation
representing 40% or more of the combined voting power of Corporation's then
outstanding securities; or (ii) during any period of two consecutive years,
individuals who at the beginning of such period constitute the Board of
Directors of Corporation cease for any reason to constitute at least a
majority thereof unless the election of each new director was approved by a
vote of at least two-thirds of the directors then still in office who were
directors at the beginning of the period.
(b) The lump sum compensation payable to Executive (the "Severance
Payment") shall be equal to the average annual compensation (including
salary and bonuses under the Corporate Management Incentive Compensation
Plan or any predecessor or successor annual incentive compensation plan)
paid or payable by Corporation to Executive during the five most recent
calendar years ending before the date of the change in control of
Corporation (the "Base Amount") multiplied by 2.99; provided, however, if
Executive voluntarily terminates his employment with Corporation, except
after (i) any material adverse change in Executive's duties, location of
employment or benefits, or (ii) any material adverse change to Executive in
the application of the formula of the Corporate Management Incentive
Compensation Plan or any modification in Corporation's accounting methods
or practices materially adverse to Executive, including the assessment of a
management fee, then the Severance Payment shall be equal to the highest
annual compensation (including salary and bonuses under the
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<PAGE> 9
Corporate Management Incentive Compensation Plan or any successor annual
incentive compensation plan) paid or payable by Corporation to Executive
for services rendered in any one of the three calendar years ending with
the year of such termination.
(c) In addition, if Executive's employment with Corporation so
terminates within two (2) years after such a change in control of
Corporation:
(i) any bonus awards previously made to Executive and not
previously paid immediately shall vest upon such termination and shall
be paid;
(ii) Executive's participation in, and terminating distributions
and vested rights under, any applicable retirement plan, profit
sharing plan and stock incentive plan of Corporation or any of its
subsidiaries shall be governed by the terms of those respective plans;
and
(iii) In the event of termination of employment under the
circumstances described in subsection (a) of this Section 15, the
arrangements provided for by this Section 15, by any stock option or
other agreement between Corporation and Executive in effect at the
time and by any other applicable plan of Corporation shall constitute
the entire obligation of Corporation to Executive and performance
thereof shall constitute full settlement of any claim that Executive
might otherwise assert against Corporation on account of such
termination, provided, however, that this provision and this Agreement
shall have no impact on the obligations of Corporation under that
certain Indemnification Agreement dated August 4, 1993 between
Corporation and Executive.
(d) Notwithstanding any provision in this Agreement to the contrary,
in the event that any payment or benefit received or to be received by
Executive in connection with a change in control of Corporation or the
termination of Executive's employment, whether payable pursuant to the
terms of this Agreement or any other plan, arrangement or agreement with
Corporation (collectively the "Total Payments"), would not be deductible
(in whole or part) as a result of Section 280G of the Code, the Severance
Payment shall be reduced until no portion of the Total Payments is not
deductible as a result of Section 280G of the Code, or the Severance
Payment is reduced to zero. For purposes of this limitation, (i) no portion
of the Total Payments, the receipt or enjoyment of which Executive shall
have effectively waived in writing prior to the date of payment of the
Severance Payment, shall be taken into account, (ii) no portion of the
Total Payments shall be taken into account which, in the opinion of tax
counsel selected by Corporation's independent auditors and acceptable to
Executive, does not constitute a "parachute payment" within the meaning of
Section 280G(b)(2) of the Code, (iii) the Severance Payment shall be
reduced only to the extent necessary so
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<PAGE> 10
that the Total Payments (excluding payments referred to in clause (i) or
(ii)) in their entirety constitute reasonable compensation for services
actually rendered within the meaning of Section 280G(b)(4) of the Code, in
the opinion of the tax counsel referred to in clause (ii); and (iv) the
value of any non-cash benefit or any deferred payment or benefit included
in the Total Payments shall be determined by Corporation's independent
auditors in accordance with the principles of Sections 280G(d)(3) and (4)
of the Code.
16. Cancellation of Prior Employment Agreement. Corporation and Executive
agree that the Prior Employment Agreement hereby is canceled as of the date
hereof and shall be of no further force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
CORPORATION:
WYNN'S INTERNATIONAL, INC.
By /s/ James Carroll
-------------------------------
James Carroll
Chairman of the Board and Chief
Executive Officer
EXECUTIVE:
/s/ Gregg M. Gibbons
----------------------------------
Gregg M. Gibbons
10
<PAGE> 1
EXHIBIT 10.15
WYNN'S INTERNATIONAL, INC.
1999 CORPORATE MANAGEMENT INCENTIVE PLAN
Section 1. The purpose of this 1999 Corporate Management Incentive Plan
(the "1999 Plan") is to provide a reward for performance and an incentive for
the future endeavors of the Corporate Management Employees who contribute to the
success of the enterprise by their ability, industry, loyalty, or exceptional
service, through making them participants in that success.
Section 2.
(a) Wynn's International, Inc. (the "Company") shall establish a reserve
for bonus payments for Corporate Management Employees for the year 1999 (the
"Corporate Bonus Pool") with a corresponding charge to income for the year 1999
in an amount which the independent public accountants of the Company verify and
report to be equal to ten percent (10%) of the amount by which the Consolidated
Pretax Earnings of the Company exceed a twenty percent (20%) return on Beginning
Equity, provided, however, that (i) the maximum amount of the Corporate Bonus
Pool shall be Two Million Dollars ($2,000,000), and (ii) no amounts shall be
earned hereunder if the Consolidated Pretax Earnings of the Company for the year
ended December 31, 1999 are less than Thirty-Eight Million One Hundred Thirty
Thousand Dollars ($38,130,000).
(b) Before the payment of bonus awards for the year 1999, the independent
accountants of the Company shall verify and report to the Board of Directors of
the Company (the "Board") the total amount of the Corporate Bonus Pool. Bonus
awards to be paid shall not exceed the Corporate Bonus Pool as verified and
reported by the independent public accountants. Bonus awards under the 1999 Plan
shall be charged to income for 1999.
Section 3.
(a) The term "Consolidated Pretax Earnings" as used in the 1999 Plan shall
mean, for calendar year 1999, the Company's income before taxes based on income
as shown on the Consolidated Statements of Income section of the Company's 1999
Consolidated Financial Statements after making adequate provision for the
Corporate Bonus Pool in the 1999 Consolidated Financial Statements.
(b) The term "Beginning Equity" shall mean the total stockholders' equity
of the Company and subsidiaries at December 31, 1998, as reported in the
Consolidated Balance Sheets section of the Company's 1999 Consolidated Financial
Statements.
(c) The term "1999 Consolidated Financial Statements" as used in the 1999
Plan shall mean those financial statements of the Company and its subsidiaries
contained in the Company's annual report to stockholders for the year ended
December 31, 1999 and upon which an opinion has been expressed by the
independent public accountants of the Company.
<PAGE> 2
(d) The term "Corporate Management Employee" shall mean any person
employed as Chairman of the Board and Chief Executive Officer, President and
Chief Operating Officer, Vice President-Finance and Chief Financial Officer,
Vice President-Corporate Affairs and General Counsel, Secretary and Assistant
General Counsel, Treasurer and Controller, Assistant Secretary, Tax Manager,
Employee Benefits and Risk Manager, Corporate Counsel and any other management
employees of the Company designated by the Chief Executive Officer.
Section 4. Full power and authority to construe, interpret, and
administer the 1999 Plan shall be vested in the Board as from time to time
constituted pursuant to the By-Laws of the Company. Decisions of the Board shall
be final, conclusive, and binding. The Board shall rely upon and be bound by the
amount of Consolidated Pretax Earnings, Beginning Equity and the Corporate Bonus
Pool, all as verified and reported by the independent public accountants of the
Company. The foregoing shall include, but shall not be limited to, all
determinations by the Board as to (i) the eligibility of a Corporate Management
Employee for consideration for a bonus, and (ii) the amount, if any, of the
bonus award paid to a Corporate Management Employee. Any person who accepts any
benefit hereunder agrees to accept as final, conclusive, and binding, the
determinations of the Board.
Section 5. The Board shall have discretion with respect to the
determination of individual bonus awards to the executive officers of the
Company. Individual bonus awards to other Corporate Management Employees shall
be at the discretion of the Chief Executive Officer of the Company. The total
Corporate Bonus Pool shall be distributed to the 1999 Plan participants, subject
to the following two limitations. First, the total Corporate Bonus Pool shall
not be distributed if such distribution would cause the limits on the maximum
amounts payable to executive officers set forth Section 6 to be exceeded.
Second, regardless of whether such limits on bonus awards to executive officers
are reached, the balance of the Corporate Bonus Pool need not be distributed to
Corporate Management Employees who are not executive officers. The
recommendations for bonus awards under the 1999 Plan for executive officers of
the Company shall be made to the Compensation Committee of the Board (the
"Committee") by the Chief Executive Officer under such procedure as may from
time to time be approved by the Board, except that no such recommendations shall
be made with respect to the Chief Executive Officer, but such bonus shall be
dealt with exclusively by the Committee under such procedures as it may
determine. Nothing contained herein shall entitle any Corporate Management
Employee to any bonus award or to a bonus award for any specific amount, as a
matter of right, for services rendered in 1999.
Section 6. Notwithstanding the provisions of Sections 2 and 5, the
Committee shall have the authority to recommend to the Board, and the Board
shall have the power to authorize in accordance with the recommendations of the
Committee, the payment of additional bonus awards to any or all executive
officers for outstanding performance in 1999, provided, however, that the amount
of any such additional bonus award, together
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<PAGE> 3
with any amounts paid pursuant to Sections 2 and 5, shall not exceed one hundred
percent (100%) of such executive officer's base salary in 1999.
Section 7. Bonus awards under the 1999 Plan will be paid to each
recipient no later than March 31, 2000 in one installment in cash, restricted
stock of the Company, or any combination thereof. Any award of the Company's
restricted stock is subject to the approval of the Committee.
Section 8. Upon termination of a Corporate Management Employee's
employment during the calendar year 1999 other than by death, such participant
shall not be entitled as a matter of right to any bonus award for services
rendered in 1999, provided, however, the Board may award a bonus as a matter of
discretion pursuant to Section 9 below.
Section 9. Notwithstanding Section 8 above, a Corporate Management
Employee whose employment terminates during the year or who is granted a leave
of absence during the year, and who at the time of such termination of
employment or granting of leave is eligible for consideration of a bonus, may,
at the discretion of the Board, and under such rules as the Board may from time
to time approve, be awarded a bonus with respect to the period of his/her
services during the year 1999.
Section 10. Upon the death of a Corporate Management Employee during
1999, there shall be paid (as a death benefit and in lieu of any payment
pursuant to Section 5 which would otherwise have been payable after the death of
such Corporate Management Employee) to such beneficiaries as the Corporate
Management Employee shall have designated in writing and on forms prescribed by
and filed with the Board, or, if no such designation of beneficiaries has been
made, to such Corporate Management Employee's legal representatives or to the
persons entitled thereto as determined by a court of competent jurisdiction, an
amount equal to the bonus award, if any, that would have been paid to the
deceased Corporate Management Employee had such participant remained employed by
the Company through December 31, 1999. Any bonus which may be awarded to such
deceased participant shall be paid at the time awards are paid to other
participants pursuant to the 1999 Plan.
Section 11. The 1999 Plan and all determinations made and actions taken
pursuant hereto shall be governed by the laws of the State of Delaware and
construed accordingly.
Section 12. The 1999 Plan is effective as of January 1, 1999.
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EXHIBIT 10.19
THIRD AMENDMENT TO
EXECUTIVE DEFERRED COMPENSATION AGREEMENT
WHEREAS, Wynn's International, Inc. (the "Company") and James Carroll
(the "Executive") entered into an executive deferred compensation agreement in
February 1997 (the "Revised Agreement") which superseded a series of prior
deferred compensation agreements (the "Prior Agreements") pursuant to which the
Executive elected to defer certain portions of his compensation from the
Company; and
WHEREAS, the Company and the Executive amended the Revised Agreement on
December 1, 1997 (the "First Amendment"); and
WHEREAS, the Company and the Executive amended the Revised Agreement on
February 26, 1998 (the "Second Amendment"); and
WHEREAS, the Company and the Executive desire to amend the Revised
Agreement again to reflect their agreement with respect to the contribution and
investment of amounts deferred by Executive; and
WHEREAS, the Executive has no ability at the present time to demand
payment of any amounts pursuant to the Revised Agreement or any Amendment
thereto; and
WHEREAS, the Company believes that the adoption of this Amendment is in
the best interests of the Company;
NOW, THEREFORE, it is hereby declared as follows:
1. Section 1 of the Revised Agreement is amended to read in its entirety
as follows:
"1. AMOUNT OF DEFERRALS.
The Deferrals under this Agreement shall consist of (i)
$1,465,141.26 representing the sum of Executive's compensation deferrals
under the Prior Agreements, plus interest thereon through December 31, 1996,
(ii) any compensation deferred by Executive for services rendered after
December 31, 1996 but before the Effective Date (as hereafter defined) plus
interest thereon pursuant to the terms of this Agreement, (iii) amounts
deferred by Executive after the Effective Date and (iv) gains or losses from
Executive's allocation of Deferrals to investments as of and after the
Effective Date pursuant to the provisions of Section 2."
<PAGE> 2
2. Section 2 of the Revised Agreement is amended to read in its entirety
as follows:
"2. INVESTMENT OF DEFERRALS.
(a) Executive's Deferrals made prior to the Effective Date shall
bear interest at the lesser of (i) the rate of 15% per annum, or (ii) the
prime rate as quoted by Bank of America, NT&SA on the last business day of
each calendar quarter, as follows:
(1) The Deferrals made prior to January 1, 1997 shall bear
interest from January 1, 1997 to the Effective Date; and
(2) Any Deferrals made after December 31, 1996 but before
the Effective Date of this Agreement shall bear interest from the date
the deferral is credited to the account of Executive through the
Effective Date.
(b) On or about the Effective Date, Company shall calculate the
value of all then existing Deferrals and interest accrued thereon (the
"Effective Date Account Balance"). Executive shall allocate the full amount
of the Effective Date Account Balance among the investment options offered
pursuant to the Fidelity Corporate plan for Retirement Select Plan (the
"Plan"). Executive's account balance as of any future measurement date shall
be the net realizable value of the Effective Date Account Balance and any
subsequent Deferrals plus or minus gains or losses, as of such measurement
date, from investments designated by Executive pursuant to the Plan as
reflected on the statement for such measurement date described in Section
6(b) below (the "Total Deferral Balance")."
3. Section 4 of the Revised Agreement is amended to read in its entirety
as follows:
"4. DISTRIBUTION.
(a) The Total Deferral Balance shall be paid to the
Executive in a single lump sum.
(b) Payment of the Total Deferral Balance shall be made
within ninety (90) days after the later of (i) the occurrence or event
which results in the Executive no longer serving as the Chairman of the
Board of the Company (including, but not limited to, the death,
disability, resignation, retirement, or termination of the Executive),
or (ii) the date of execution of this Agreement.
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(c) In the event that the Executive dies prior to the
payment of the Total Deferral Balance pursuant to the terms of this
Agreement, payment of the remaining amount shall be made at the time and
in the form set forth above to the Executive's spouse (as of his date of
death, if she is then living). If the Executive has no living spouse at
such time, payment shall be made at the time and in the manner set forth
above to the Executive's estate."
4. Section 6 of the Revised Agreement is amended to read in its entirety
as follows:
6. "STATEMENTS.
(a) Prior to the Effective Date, Company shall furnish
Executive (or, in the event of the Executive's death, his spouse or
estate) a statement with respect to his Deferrals on a quarterly basis
as of each March 31, June 30, September 30 and December 31. Such
statement shall set forth the balance of the Deferrals held by the
Company for the Executive's account for the quarter then ending, and any
interest credited or payments made with respect to such Deferrals during
that quarter.
(b) After the Effective Date, Company shall furnish
Executive with such statements of Executive's Total Deferral Balance as
of periodic measurement dates as may be provided pursuant to the Plan.
Such statements shall be presumed to be correct and complete."
5. Section 7 of the Revised Agreement is amended to read in its entirety
as follows:
7. "GENERAL CREDITOR.
(a) Prior to the Effective Date, Executive and his
beneficiaries (including his spouse and his estate), heirs, successors,
and assigns shall have no legal or equitable rights, claims, or interest
in any specific property or assets of the Company. No assets of the
Company shall be held under any trust, or held in any way as collateral
security for the fulfilling of the obligations of the Company under this
Plan. Any and all of the Company's assets shall be, and remain, the
general unpledged, unrestricted assets of the Company. Company's
obligation under this Plan shall be merely that of an unfunded and
unsecured promise of the Company to pay money in the future, and the
rights of the Executive and his beneficiaries shall be no greater than
those of unsecured general creditors.
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(b) As of the Effective Date, Company agrees to fund an
irrevocable rabbi trust for the benefit of Executive and other Plan
participants, if any (the "Trust"), with Fidelity Management Trust
Company acting as Trustee of the Trust pursuant to the Plan. The Trust
shall be funded by the Company within ninety (90) days of the Effective
Date in an amount equal to the Effective Date Account Balance. The
Trustee of the Trust shall invest the amount of the Effective Date
Account Balance as designated by Executive pursuant to Section 2. The
Trust shall provide that the assets in the Trust are held for the sole
purpose of paying amounts due to Plan participants, subject only to the
general creditors of the Company should the Company become bankrupt or
insolvent. In the event of bankruptcy or insolvency, Executive (or his
spouse or estate) and other Plan participants, if any, shall have no
greater right with respect to the Trust assets than that of a general,
unsecured creditor of the Company."
6. Except as expressly amended in this Third Amendment, the provisions
of the Revised Agreement, as amended by the First Amendment and the Second
Amendment, shall remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement in
the County of Orange, California as of the 6th day of January, 1999 (the
"Effective Date").
WYNN'S INTERNATIONAL, INC.
By: Seymour A. Schlosser
-----------------------------------
Its: Vice President-Finance
----------------------------------
JAMES CARROLL
/s/ James Carroll
----------------------------------------
4
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EXHIBIT 10.23
1998 SUPPLEMENTAL RETIREMENT INCOME PLAN
OF
WYNN'S INTERNATIONAL, INC. AND SUBSIDIARIES
The undersigned, Wynn's International, Inc., a corporation organized and
doing business under the laws of the State of Delaware, does hereby institute
and adopt the following 1998 Supplemental Retirement Income Plan of Wynn's
International, Inc. and Subsidiaries.
This Plan is intended to be an unfunded plan of deferred compensation
for selected executive officers and other key employees of the Company. All
benefits payable hereunder shall be payable solely from the general assets of
the Company. No amounts shall be set aside for, credited to the account of, or
otherwise made payable to any Participant.
ARTICLE I
DEFINITIONS
When used herein and capitalized, the following words shall have the
following meanings unless the context clearly indicates otherwise.
Section 1.1 "Accrued Benefit" on any date shall mean the value of the
Normal Retirement Benefit to which a Participant would be entitled, determined
under Article V, expressed in the form of an annual benefit commencing at Normal
Retirement Date.
Section 1.2 "Actuarial Equivalent" shall mean the equivalent amount of a
single-life annuity commencing at Normal Retirement Date, determined in
accordance with the reasonable actuarial assumptions adopted by the Enrolled
Actuary for the Wynn's International, Inc. Retirement Plan for the purpose of
determining actuarial equivalents thereunder at the time the determination is
made.
Section 1.3 "Age" for any specified year shall be deemed to have been
attained at the arrival of the birthday of the number of years in question.
Section 1.4 "Board of Directors" means the Board of Directors of Wynn's
International, Inc., a Delaware corporation.
Section 1.5 "Code" means the Internal Revenue Code of 1986, as amended
from time to time.
<PAGE> 2
Section 1.6 "Committee" means the Compensation Committee of the Board of
Directors.
Section 1.7 "Company" or "Employer" means Wynn's International, Inc., a
Delaware corporation, and all of its wholly-owned subsidiary corporations.
Section 1.8 "Compensation" means the Participant's base salary expressed
on an annualized basis, and excludes any compensation from (i) Participant's
participation in any incentive compensation plan of Company, (ii) Participant's
exercise of nonqualified stock options, (iii) Participant's receipt or vesting
of restricted stock grants or performance shares, (iv) Participant's
disqualifying disposition of an incentive stock option, or (v) relocation
expenses paid to Participant.
Section 1.9 "Effective Date" of this Plan shall mean August 5, 1998.
Section 1.10 "Employee" means any person now or hereafter in the employ
of the Company, but excluding directors who are not in the employ of the Company
in any other capacity.
Section 1.11 "Enrolled Actuary" shall mean a person who is enrolled by
the Joint Board for the Enrollment of Actuaries under ERISA and who has been
engaged by the Committee to make all necessary actuarial assumptions, opinions
and determinations and to prepare valuations, statements, and reports under the
Plan as required by ERISA.
Section 1.12 "ERISA" means the Employee Retirement Income Security Act
of 1974, as amended from time to time.
Section 1.13 "Fiduciary" shall be construed as including the term 'Named
Fiduciary' as defined in ERISA, and any and all other persons or entities to the
extent that they:
(a) Exercise any discretionary authority or discretionary control
respecting management or disposition of this Plan's assets;
(b) Render investment advice for fee or other compensation, direct or
indirect, with respect to any monies or other property of this
Plan, or have any authority or responsibility to do so; or
(c) Have any discretionary authority or discretionary responsibility
in the administration of this Plan.
Section 1.14 "Final Compensation" shall mean a Vested Participant's
highest Compensation during any of such Participant's last three years of
employment with the Company.
Section 1.15 "Normal Retirement Age" shall mean the attainment of age
sixty-five (65).
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Section 1.16 "Normal Retirement Benefit" shall mean the Retirement
Benefit under this Plan to which a Vested Participant may be entitled,
commencing at Normal Retirement Age.
Section 1.17 "Participant" means any Employee who has been designated to
become a Participant under this Plan.
Section 1.18 "Plan" means the written 1998 Supplemental Retirement
Income Plan of Wynn's International, Inc. and Subsidiaries set forth in this
document and all subsequent amendments thereto.
Section 1.19 "Plan Administrator" means the Committee, which shall also
be the Named Fiduciary with respect to this Plan.
Section 1.20 "Plan Year" means the consecutive twelve (12) month period
commencing the first day of January of each year and ending the last day of
December of each year.
Section 1.21 "Retirement Benefit" means the retirement income benefits
provided under this Plan to Participants.
Section 1.22 "Total Disability" shall mean the total and permanent
incapacity of a Participant to perform the usual duties of the position within
the Company most recently held by the Participant, determined by the Committee
in its sole discretion, after receiving a written report from a reputable,
licensed physician or physicians approved by the Committee, who has or have
examined the Participant after the occurrence of the sickness, accident, health
or other physical or mental problem which is the basis of the disability.
Section 1.23 "Vested Participant" means any Participant who has (i)
completed ten (10) Years of Service or (ii) attained Normal Retirement Age.
Section 1.24 "Year of Service" means a calendar year during which the
Participant completes 1,000 or more Hours of Service with the Company. For this
purpose, Hours of Service shall be calculated based upon guidelines and methods
established by the Committee, and applied on a consistent basis.
Section 1.25 The masculine gender shall include the feminine, and the
singular shall include the plural.
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ARTICLE II
COMMITTEE
Section 2.1 Appointment of Committee
The Committee shall consist of at least three (3) members appointed by
the Board of Directors. Any director of the Company is eligible to serve as a
member of the Committee.
Section 2.2 General Administrative Authority
The Committee shall be the "Named Fiduciary" and administrator of the
Plan, and except as otherwise provided, shall have the authority to control and
manage the operation and administration of the Plan. The Committee shall make
such rules, regulations, interpretations and computations, and shall take such
other action to administer the Plan as the Committee may deem appropriate. The
Committee may retain an Enrolled Actuary in order to assist the Company in
estimating its future liability to Participants for benefits under this Plan.
The Committee shall have full discretion to construe and interpret the terms and
provisions of this Plan, which interpretation and construction shall be final
and binding on all parties, including but not limited to the Company, any
Participant and any other person claiming benefits hereunder, except as
otherwise provided by law. The Committee shall administer such terms and
provisions in accordance with any and all laws applicable to the Plan.
Section 2.3 Conflict of Interest of Committee Members
In any matter affecting any member of the Committee in his individual
capacity as a Participant hereunder, separate and apart from his status as a
member of the group of Participants, such interested member shall have no
authority or vote in the determination of such matter as a member of the
Committee, but the Committee shall determine such matter as if the interested
member were not a member of the Committee; provided, however, that this shall
not be deemed to take from such interested member any of his rights hereunder as
a Participant. In the event that the remaining members of the Committee should
be unable to agree on any matter so affecting an interested member because of an
equal division of voting, the Board of Directors shall appoint a temporary
member of the Committee in order to create an odd number of voting members.
Section 2.4 Records of Committee
The Committee shall keep a record of all its proceedings and shall keep
or cause to be kept all such books of account, records and other data as may be
necessary or advisable in its judgment for the administration of this Plan and
properly to reflect the affairs thereof, and to determine the amount of vested
and/or forfeitable interest of the respective Participants and the amount of all
retirement benefits or other benefits
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<PAGE> 5
hereunder. Any person dealing with the Committee may rely on and shall incur no
liability in relying on a certificate or memorandum in writing, signed by the
secretary of the Committee or by a majority of the members of the Committee, as
evidence of any action taken or resolution adopted by the Committee.
Section 2.5 Bonding
No bond or other security shall be required of the members of the
Committee, unless otherwise specified by state or Federal law.
Section 2.6 Indemnity of Committee
Except to the extent imposed by law, neither the Committee nor any
Fiduciary with respect to this Plan shall have the duty to question whether any
other Fiduciary is fulfilling all of the legal responsibilities imposed upon
such other Fiduciary and neither shall the Committee nor any other Fiduciary
with respect to this Plan have any liability for breach of a fiduciary
responsibility of another Fiduciary with respect to this Plan unless:
(a) He participates knowingly in, or knowingly undertakes to conceal,
an act or omission of such other Fiduciary, knowing such act or
omission is a breach of duty; or
(b) By his failure to comply with the fiduciary obligations imposed
upon him in the administration of his specific responsibility as
a Fiduciary, he has enabled another Fiduciary to commit a breach
of duty; or
(c) He has knowledge of a breach by such other Fiduciary, and he does
not make reasonable efforts under the circumstances to remedy
such breach.
The members of the Committee shall receive such compensation as may be
approved by the Board of Directors from time to time for their services
hereunder. The Committee is authorized at the expense of the Company to employ
such legal counsel as it may deem advisable to assist in the performance of its
duties hereunder. To the extent permitted by applicable state law, the Company
shall indemnify and save harmless the Committee and each member thereof and any
delegate of the Committee who is an employee of the Company against any and all
expenses, liabilities and claims, including legal fees to defend against such
liabilities and claims arising out of their discharge in good faith of
responsibilities under or incident to the Plan, other than expenses and
liabilities arising out of willful misconduct. This indemnity shall not preclude
such further indemnities as may be available under insurance purchased by the
Company or provided by the Company under any bylaw, agreement or otherwise, as
such indemnities are permitted under state law.
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<PAGE> 6
ARTICLE III
PARTICIPATION OF EMPLOYEES
Section 3.1 Board of Directors to Determine Participants
(a) Any executive officer or other key employee whose continued
service to the Company is considered to be essential to its
productivity and continued financial success shall be eligible
for consideration as a Participant under this Plan.
(b) The Board of Directors shall convene at least annually to
designate the executive officers and key employees who shall
become Participants under this Plan. The Board of Directors shall
give full consideration to the recommendations of the Chief
Executive Officer of the Company in determining Participants
hereunder, but such determination shall nevertheless be within
the sole discretion of the Board of Directors.
(c) All Employees of the Company who are hereafter designated as
Participants shall participate in this Plan effective as of the
first day of the first calendar month coincident with or next
following such designation, unless otherwise provided in the
designation.
Section 3.2 Termination of Participation
A Participant, once designated, shall continue to participate in this
Plan until his death, Total Disability, retirement or other termination of
employment, or unless sooner removed from participation by the Board of
Directors; provided, however, any such removal from participation shall not
result in the loss of any benefits which are fully vested in accordance with
Section 5.6(a) as of the date of such removal.
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<PAGE> 7
ARTICLE IV
RETIREMENT DATES
Section 4.1 Retirement Dates
A Participant's Retirement Date shall be the date of his actual
retirement which may be his Normal, Early or Postponed Retirement Date,
whichever is applicable.
Section 4.2 Normal Retirement Date
The Normal Retirement Date for each Vested Participant shall be the
first day of the month coincident with or next following his attainment of age
sixty-five (65) (his Normal Retirement Age), and on such date or at any time
after such date, the Participant shall be entitled to retire.
Section 4.3 Early Retirement Date
A Participant may take Early Retirement prior to his Normal Retirement
Date upon (i) the completion of ten (10) Years of Service with the Company and
(ii) the attainment of age fifty-five (55). The date of such actual retirement
shall be his Early Retirement Date.
Section 4.4 Postponed Retirement Date
If a Participant continues in the employment of the Company beyond his
Normal Retirement Date, the first day of the month coincident with or next
following his actual retirement after his Normal Retirement Date shall be his
Postponed Retirement Date. The Participant's benefit shall be calculated based
on his Years of Service through his Postponed Retirement Date.
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<PAGE> 8
ARTICLE V
AMOUNT OF BENEFITS
Section 5.1 Normal Retirement Benefit
(a) Retirement Benefit Formula:
A Vested Participant, upon retiring at or after his Normal
Retirement Date, shall be entitled to receive, subject to
Sections 5.7 and 5.9, a supplemental Normal Retirement Benefit
equal to the "Executive Service Benefit" (determined under
Subsection (b) below), minus the "Benefit Offset Adjustment"
(determined under subsection (c) below).
(b) "Executive Service Benefit" shall be equal to one and eight
tenths percent (1.8%) of Final Compensation for each Year of
Service, provided that such Executive Service Benefit shall not
exceed fifty percent (50%) of Final Compensation.
(c) "Benefit Offset Adjustment" shall be equal to the sum of:
(i) the Vested Participant's employer-derived retirement
benefit accrued under the Wynn's International, Inc.
Retirement Plan and/or the Wynn's-Precision, Inc. Salaried
Employees Pension Plan in its normal form of a single life
annuity;
(ii) the Vested Participant's employer-derived retirement
benefit accrued under (A) the Wynn's 401(k) Plan and (B)
the Wynn's International, Inc. Employees Savings and
Investment Plan, including any benefit from the Prior Wynn
Oil Account as defined in Section 2.30 of said Plan, each
converted to a single life annuity which is the Actuarial
Equivalent of such employer-derived retirement benefit;
(iii) the primary social security amount actually paid to the
Vested Participant under Title II of the Social Security
Act, in effect at the time benefits first become payable
to the Vested Participant under this Plan, and from time
to time thereafter. It is the intent of this provision
that if the Social Security amounts actually paid to a
Vested Participant thereafter are modified (e.g. through
the provision of periodic cost of living adjustments or
the disallowance of Participant's eligibility for social
security benefits), the Benefit Offset Adjustment
hereunder to a Vested Participant shall be correspondingly
increased or decreased; and
8
<PAGE> 9
(iv) employer-derived benefits previously paid or payable to
the Vested Participant under any other nonqualified
retirement plan of the Company converted to a single life
annuity payable at Normal Retirement Age which is the
Actuarial Equivalent of all such amounts previously paid
or payable under all other plans.
Section 5.2 Early Retirement Benefit
(a) While it is not contemplated that a Vested Participant will
retire before his Normal Retirement Date, if a Vested Participant
takes Early Retirement under the provisions of Section 4.3 of
this Plan, then such Vested Participant shall be entitled to
receive, subject to Section 5.9, the Executive Service Benefit
calculated in accordance with Section 5.1, reduced, prior to
reduction for the Benefit Offset Adjustment, in accordance with
the schedule set forth below, less the Benefit Offset Adjustment
set forth in Section 5.2(b):
<TABLE>
<CAPTION>
Age at Time of Percentage of Executive
Early Retirement Service Benefit Payable
---------------- -----------------------
<S> <C>
55 65%
56 70%
57 75%
58 80%
59 85%
60 90%
61 92%
62 94%
63 96%
64 98%
65 100%
</TABLE>
(b) If a Vested Participant retires before his Normal Retirement
Date, the Benefit Offset Adjustment set forth in Section 5.1(c)
shall be calculated as follows:
9
<PAGE> 10
(i) The employer-derived retirement benefit accrued under the
Wynn's International, Inc. Retirement Plan and/or the
Wynn's-Precision, Inc. Salaried Employees Pension Plan
will be calculated using the factors set forth in the
respective plans as if the Vested Participant had retired
and begun collecting benefits on his Early Retirement Date
in the form of a single life annuity;
(ii) the Vested Participant's employer-derived retirement
benefit accrued under the Wynn's International, Inc.
Employees Savings and Investment Plan, including any
benefit from the Prior Wynn Oil Account shall be converted
to a single life annuity which is the Actuarial Equivalent
of such employer-derived retirement benefit and reduced
for early retirement utilizing reasonable actuarial
assumptions adopted by the Enrolled Actuary;
(iii) the Benefit Offset Adjustment will include only amounts
actually collected under Title II of the Social Security
Act (e.g. if the Vested Participant's early retirement
benefit commences prior to the date his benefits under
Title II of the Social Security Act commence, the Benefit
Offset Adjustment attributable to such benefits shall
initially be zero, and shall increase when the payments
under Title II of the Social Security Act commence, which
shall correspondingly cause a decrease in the amount of
monthly benefits under this Plan); and
(iv) employer-derived benefits previously paid or payable to
the Vested Participant under any other nonqualified
retirement plan of the Company shall be converted to a
single life annuity payable at Normal Retirement Age which
is the Actuarial Equivalent of all such amounts previously
paid or payable under all such plans and reduced for early
retirement utilizing reasonable actuarial assumptions
adopted by the Enrolled Actuary.
(c) If a Vested Participant retires before his Normal Retirement Date
at the request of the Board of Directors, then the Board of
Directors in its sole discretion may elect to award to the Vested
Participant so retiring, the Retirement Benefit calculated in
accordance with Section 5.1 without reduction to account for the
commencement of benefits prior to the Vested Participant's Normal
Retirement Date. The Benefit Offset Adjustment applicable to such
Vested Participant shall be as described in Section 5.2(b).
Section 5.3 Postponed Retirement Benefit
A Vested Participant who retires on a Postponed Retirement Date pursuant
to Section 4.4 shall be entitled to receive, subject to Section 5.9, the
Retirement Benefit
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<PAGE> 11
calculated in accordance with Section 5.1, which has accrued as of his Postponed
Retirement Date, including Years of Service performed after his Normal
Retirement Date, without actuarial adjustment to account for the commencement of
benefits after the Normal Retirement Date.
Section 5.4 Disability Benefit
(a) If the Committee determines, within its sole discretion, based
upon competent medical advice, that a Vested Participant has
incurred a Total Disability, within the meaning of Section 1.22,
then such disabled Vested Participant shall be entitled to
receive, subject to Sections 5.7 and 5.9, a Disability Benefit
equal to one of the following:
(i) If the Total Disability is incurred at or after the
disabled Vested Participant has attained age 55, the
Executive Service Benefit calculated in accordance with
Section 5.1(b) which has accrued as of the date of such
Total Disability, without reduction for commencement of
benefits before his Normal Retirement Date, less (i) the
Benefit Offset Adjustment calculated in accordance with
Section 5.2(b) and (ii) any long-term disability benefits
provided in whole or in part, directly or indirectly, by
the Company expressed as an annual benefit for such period
of time as such long-term disability benefits are paid to
such disabled Vested Participant. Such Disability Benefit
shall become payable as provided in Section 6.2.
(ii) If the Total Disability occurs before the disabled Vested
Participant has attained age 55, the Executive Service
Benefit calculated in accordance with Section 5.1(b),
which has accrued as of the date of such Total Disability,
without reduction for commencement of benefits before his
Normal Retirement Date, less (i) the Benefit Offset
Adjustment calculated in accordance with Section 5.2(b)
and (ii) any long-term disability benefits provided in
whole or in part, directly or indirectly, by the Company
expressed as an annual benefit for such period of time as
such long-term disability benefits are paid to such
disabled Vested Participant. Such Disability Benefit shall
become payable on the first day of the month following
such Vested Participant's fifty-fifth (55th) birthday or
at such earlier date as may be approved by the Board of
Directors in its sole discretion.
(b) If a Vested Participant who has incurred a Total Disability later
recovers and again becomes employed by the Company, the
Disability Benefit of such Vested Participant shall cease as of
the date he is reemployed by the Company. Subject to Section 3.2
he shall again become a Participant and
11
<PAGE> 12
his Retirement Benefit under this Plan shall be reduced by an
amount equal to the Actuarial Equivalent of amounts paid to him
as a Disability Benefit.
Section 5.5 Death Benefits
If a Vested Participant dies after having attained age 55 while in the
active employment of the Company and is survived by his spouse, it shall be
presumed that the Vested Participant retired at the request of the Company
pursuant to subsection (b) of Section 5.2 on the first day of the month of
Vested Participant's death and that the Committee had approved a conversion of
the life annuity to an Actuarial Equivalent joint and survivor annuity providing
for a 100% continuation of income to the surviving spouse. The Committee, at its
discretion, may approve another Actuarial Equivalent form of Retirement Benefit
to the surviving spouse. If a Vested Participant dies before attaining age fifty
five (55), no amounts shall be payable under this Plan, except as may be
approved by the Board of Directors in its sole discretion.
Section 5.6 Termination of Employment
(a) When Vested. If a Participant's employment is terminated, either
voluntarily or involuntarily, prior to his Normal Retirement
Date, other than by reason of his death or Total Disability, and
provided that (i) such Participant has completed at least ten
(10) Years of Service and (ii) if eligible, such Participant does
not take Early Retirement pursuant to Section 4.3, such
Participant shall be entitled, based on Years of Service
completed and Compensation earned through his last day of
employment, to receive either:
(i) Commencing on such Participant's Normal Retirement Date,
his Normal Retirement Benefit calculated pursuant to
Section 5.1 as if such Participant had retired on his
Normal Retirement Date; or
(ii) commencing on the first day of any month coincident with
or following such Participant's 55th birthday, his Early
Retirement Benefit calculated pursuant to Section 5.2 as
if the date specified by such Participant for the
commencement of benefits hereunder were his Early
Retirement Date.
(b) When Not Vested. A Participant whose employment is terminated,
either voluntarily or involuntarily, prior to his Normal
Retirement Date and prior to his completion of ten (10) Years of
Service shall cease to be a Participant and his Accrued Benefit,
if any, shall be canceled and forfeited immediately, and he shall
not be entitled to any other benefits hereunder.
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<PAGE> 13
Section 5.7 Benefits Upon Plan Termination
If this Plan is terminated by the Board of Directors pursuant to Section
7.1, then benefits hereunder shall be determined as follows:
(a) If a Participant has completed ten (10) or more Years of Service
prior to the date this Plan is terminated, then such Vested
Participant shall be entitled to receive the Retirement Benefit
calculated in accordance with Section 5.1, which has accrued to
the date of Plan termination.
(b) If such Participant incurs a Total Disability prior to the
termination of this Plan, the Disability Benefit provided under
Section 5.4 shall be payable.
(c) As to all other Participants, no benefits shall be payable
hereunder, and such Participants shall immediately forfeit any
and all interests under this Plan.
Section 5.8 Service for Retirement Benefit Purposes
For purposes of determining a Participant's Years of Service under this
Article, all Years of Service following the effective date of a Participant's
commencement of employment with the Company and prior to his removal from
Participation under Section 3.2 (should such removal occur) shall be taken into
account, including Years of Service rendered to a predecessor Company, if and to
the extent granted by the Board of Directors in its sole discretion.
Section 5.9 Acts Materially Detrimental to Company
In the event that the Committee reasonably determines that a Participant
including a Vested Participant who is otherwise entitled to receive benefits
under this Plan, is acting or has acted in a manner which is materially
detrimental, materially harmful, or otherwise materially unfavorable to the
interests of the Company, then the Committee may terminate all further
participation of such Participant under this Plan, may terminate all further
benefit payments to or entitlements to benefit payment of such Participant under
this Plan, and may forfeit any and all interests of such Vested Participant
under this Plan, whether vested or unvested.
Acts which may be considered materially detrimental, harmful or
otherwise unfavorable to the interests of the Company shall include, but shall
not be limited to any act of unfair competition; any use, divulgence or
furnishing of material confidential information, trade secrets, or processes of
the Company; any unauthorized use, disclosure or furnishing of any lists of
customers or suppliers or information relating to customers or suppliers of the
Company which is materially detrimental to the Company; any material
unauthorized disclosure, divulgence, or furnishing of material information
relating to any operation, process, business, program, properties, or employees
of the Company; any illegal or unauthorized act or conduct which interferes with
or disrupts any relationship
13
<PAGE> 14
between the Company and its customers, suppliers, employees or any other persons
having business dealings with the Company; or any act or conduct which
materially and adversely affects the business reputation of the Company or its
standing in the community.
14
<PAGE> 15
ARTICLE VI
DISTRIBUTIONS
Section 6.1 Normal Form of Benefit Payments
Unless an alternative form of benefit is elected by the Participant and
approved by the Committee pursuant to Section 6.4, a retired Vested Participant
shall be entitled to receive the annual Retirement Benefit as determined under
Section 5.1, 5.2 or 5.3, whichever is applicable, payable monthly in the form of
a life annuity, commencing within sixty (60) days of his Normal Retirement Date,
Postponed Retirement Date or Early Retirement Date, whichever is applicable; and
terminating with the last monthly payment due prior to the death of the retired
Vested Participant.
Section 6.2 Disability Benefit Payments
Unless an alternative form of benefit is elected by the Vested
Participant and approved by the Committee pursuant to Section 6.4, in the case
of a disabled Vested Participant who is entitled to receive the Disability
Benefit determined under Section 5.4, such Disability Benefit shall be payable
monthly in the form of a life annuity, commencing within sixty (60) days of the
date of Total Disability; and terminating with the last monthly payment due
prior to the death of the disabled Vested Participant, his reemployment by the
Company as provided in Section 5.4(b), or his reemployment by any other company,
unless the Committee, in its sole discretion, determines to continue such
payments after his employment by any other company.
Section 6.3 Death Benefit Payments
Unless an alternative form of benefit is elected by the surviving spouse
and approved by the Committee, pursuant to Section 6.4, in the case of a
surviving spouse who is entitled to receive the Death Benefit determined under
Section 5.5, such Death Benefit shall be payable monthly in the form of a life
annuity, commencing within sixty (60) days of the date of death of the Vested
Participant; and terminating with the last monthly payment due prior to the
death of the surviving spouse.
Section 6.4 Alternative Forms of Benefit Payments
In lieu of the forms of benefits provided for in Sections 6.1, 6.2, or
6.3, a Vested Participant or surviving spouse (in the case of the death of a
Vested Participant) may elect to convert the form of benefit into any other
alternative form of benefit (other than a lump sum benefit), which is the
Actuarial Equivalent of the benefit otherwise payable.
To be effective, the election of an alternative form of benefit must be
approved by the Committee. An alternative form of benefit must be elected by a
Vested Participant (or surviving spouse) at least thirty (30) days prior to the
first payment of benefits, by the
15
<PAGE> 16
proper application of the Vested Participant (or surviving spouse), subject to
such rules and conditions uniformly and consistently applied as the Committee
may provide. In the discretion of the Committee, the election may be made at any
later date, if the Vested Participant furnishes evidence of good health
satisfactory to the Committee.
16
<PAGE> 17
ARTICLE VII
TERMINATION AND AMENDMENT OF PLAN
Section 7.1 Plan Termination
It is the expectation of the Company that it will continue this Plan
indefinitely, but the continuance of this Plan is not assumed as a contractual
obligation by the Company, and the right is reserved to the Company by action of
the Board of Directors to discontinue this Plan at any time. In the event of
termination of this Plan, the provisions of Section 5.7 shall apply, with
respect to the amount of benefits payable, if any, upon Plan termination.
Payment of benefits which are determined to be payable shall commence within
sixty (60) days of his Normal Retirement Date, Postponed Retirement Date or
Early Retirement Date, whichever is applicable; and terminating with the last
monthly payment due prior to the death of the retired Vested Participant.
Section 7.2 Continuance of Plan by Successor Business
(a) In the event of the dissolution or liquidation of the Company,
the sale by the Company of all or substantially all its assets,
or the reorganization, merger or consolidation as a result of
which the Company is not the surviving entity, the resulting
successor person or persons, firm or corporation may continue
this Plan by adoption of the same by resolution of its board of
directors and by executing a proper adoption of this Agreement.
If, within ninety (90) days from the effective date of such
dissolution or sale of assets, such successor does not adopt this
Plan as provided herein, this Plan shall automatically be
terminated.
(b) If, upon the occurrence of an event described in Section 7.2 (a)
the obligations to Vested Participants under this Plan are not
assumed by the resulting successor person or persons, firm or
corporation, then, prior to such event, each Vested Participant
shall be paid a lump sum cash benefit equal to the Actuarial
Equivalent of the benefit to which such Vested Participant is
entitled, taking into account the Vested Participant's Years of
Service, Compensation, Age and other relevant factors as they
exist on the date of such event.
Section 7.3 Amendments
The Company, by action of the Board of Directors, may at any time and
from time to time amend this Plan, provided however that no changes may be made
to a Participant's accrued benefits which have vested prior to the date of such
amendment.
17
<PAGE> 18
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Right of Company to Dismiss Employees
Neither the action of the Company in establishing this Plan, nor any
action taken by it or the Committee under the provisions hereof, not any
provision of this Plan, shall be construed as giving to any Employee of the
Company the right to be retained in its employ or any right to any payment
whatsoever, except to the extent of the benefits provided for by this Plan. The
Company expressly reserves the rights at any time to dismiss any Employee or
Participant without any liability for any claim or for any payment whatsoever,
except to the extent provided for or under this Plan or any written employment
agreement between Company and Employee or Participant.
Section 8.2 Notices of Participants to be Filed With Committee
When provision is made herein that requires or permits a Participant to
exercise any option or to make any selection, designation or determination, the
action of each Participant shall be evidenced by a written notice thereof,
signed by the Participant and any other necessary party, on a form, if any,
furnished by the Committee for such purpose, and filed with the Committee, which
shall not be effective until received by the Committee.
Section 8.3 Context to Control
The headings of Articles and Sections are included solely for
convenience of reference, and if there be any conflict between such headings and
the text of this Plan, the text shall control.
Section 8.4 Claims and Review Procedures
(a) Claims Procedure:
A Participant or Beneficiary making a claim for benefits under
this Plan shall make such claim in writing to the Committee on
forms provided by the Committee. The claim shall be presented to
the Committee at the address of the principal offices of the
Company given in its last annual report.
If the Committee denies a claim in whole or in part, it shall
notify the Participant in writing of such denial within ninety
(90) days after receipt of the claim. Such notice shall be
written in a manner calculated to be understood by the
Participant and shall include:
(1) The specific reason or reasons for the denial;
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<PAGE> 19
(2) Specific references to pertinent Plan provisions on which
the denial is based;
(3) Description of any additional material or intermission
necessary for the Participant to perfect the claim and
explanation of why such material or information is
necessary; and
(4) Appropriate information as to the steps to be taken if the
Participant wishes to submit his claim for review.
(b) Review Procedure
The Committee shall establish a procedure by which a Participant
or other person shall have an opportunity for a full and fair
review of his claim for benefits and denial. The Named Fiduciary
for purposes of review of denied claims shall be the Committee.
Any person, or his duly authorized representative, whose claim
for benefits under the Plan has been denied, in whole or in part,
may request the Committee to review the claim. Such request must
be made in writing on a form furnished by the Committee for such
purpose, and shall include:
(1) A request for review of the denied claim;
(2) The grounds upon which the request for review is based and
any facts in support thereof; and
(3) Any other issues or comments which the requesting party
deems pertinent to the review.
Such written request for review must be submitted to the
Committee within sixty (60) days after the requesting party has
received written notice of denial of his claim. The requesting
party shall have the opportunity to review all documents
pertinent to his claim and request for review.
The Committee shall make such review and render its decision in
writing within sixty (60) days after receipt of a written request
for review. The Committee's written decision on review shall
include specific reasons for the decision, written in a manner
calculated to be understood by the claimant, with specific
references to pertinent provisions of the Plan on which the
decision is based.
Under special circumstances, an extension of time may be required
by the Committee, in which case its decision shall be rendered as
soon as possible, but not later than 120 days after receipt of a
written request for review. Prior to the commencement of the
extension of time, the
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<PAGE> 20
Committee shall notify the requesting party that an extension of
time is required. If the decision on review is not furnished to
the claimant within the appropriate time period, then the claim
shall be considered denied on review.
Section 8.5 Law Governing and Severability
(a) Except as specifically provided by Federal law, this Plan shall
be construed, regulated and administered under the laws of the
State of California, and the Committee shall be liable to account
only in the courts of that State.
(b) In the event any provisions of this Plan shall be held illegal or
invalid for any reason, such illegality or invalidity shall not
affect the remaining provisions of this Plan, which shall be
fully severable, and this Plan shall be construed and enforced as
if such illegal or invalid provisions had never been inserted.
This 1998 Supplemental Retirement Income Plan of Wynn's International,
Inc. and its Subsidiaries shall be effective as of August 5, 1998.
WYNN'S INTERNATIONAL, INC.
By /s/ James Carroll
------------------------------------
James Carroll
Chairman of the Board and Chief
Executive Officer
By /s/ Wendy K. K. Nishikawa
------------------------------------
Wendy K. K. Nishikawa
Secretary
Dated at Orange, California, this 5th day of August 1998.
20
<PAGE> 1
EXHIBIT 10.24
The CORPORATEplan for Retirement Select Plan
of
Wynn's International, Inc.
<PAGE> 2
PREAMBLE
It is the intention of the Employer to establish herein an unfunded plan
maintained solely for the purpose of providing deferred compensation for a
select group of management or highly compensated employees for purposes of Title
I of ERISA.
ARTICLE 1. ADOPTION AGREEMENT.
ARTICLE 2. DEFINITIONS.
2.01 DEFINITIONS.
(a) Wherever used herein, the following terms have the meanings set forth
below, unless a different meaning is clearly required by the context:
(1) "Account" means an account established on the books of the
Employer for the purpose of recording amounts credited on
behalf of a Participant and any income, expenses, gains or
losses included thereon.
(2) "Administrator" means the Employer adopting this Plan, or
other person designated by the Employer in Section 1.01(b).
(3) "Adoption Agreement" means Article 1 under which the
Employer establishes and adopts or amends the Plan and
designates the optional provisions selected by the Employer.
The provisions of the Adoption Agreement shall be an integral
part of the Plan.
(4) "Beneficiary" means the person or persons entitled under
Section 7.02 to receive benefits under the Plan upon the death
of a Participant.
(5) "Code" means the Internal Revenue Code of 1986, as amended
from time to time.
(6) "Compensation" shall mean for purposes of Article 4
(Contributions) wages as defined in Section 3401(a) of the
Code and all other payments of compensation to an employee by
the employer (in the course of the employer's trade or
business) for which the employer is required to furnish the
employee a written statement under Section 6041(d) and
6051(a)(3) of the Code, excluding any items elected by the
Employer in Section 1.04, reimbursements or other expense
allowances, fringe benefits (cash and non-cash), moving
expenses, deferred compensation and welfare benefits, but
including amounts that are not includable in the gross income
of the Participant under a salary reduction agreement by
reason of the application of Sections 125, 402(a)(8), 402(h),
or 403(b) of the Code. Compensation must be determined without
regard
<PAGE> 3
to any rules under Section 3401(a) of the Code that limit the
remuneration included in wages based on the nature or location
of the employment or the services performed (such as the
exception for agricultural labor in Section 3401(a)(2) of the
Code).
Compensation shall generally be based on the amount
that would have been actually paid to the Participant during
the Plan Year but for an election under Section 4.01.
In the case of any Self-Employed Individual or an
Owner-Employee Compensation shall mean the Individual's Earned
Income.
(7) "Earned Income" means the net earnings of a Self-Employed
Individual derived from the trade or business with respect to
which the Plan is established and for which the personal
services of such individual are a material income-providing
factor, excluding any items not included in gross income and
the deductions allocated to such items, except that for
taxable years beginning after December 31, 1989 net earnings
shall be determined with regard to the deduction allowed under
Section 164(f) of the Code, to the extent applicable to the
Employer. Net earnings shall be reduced by contributions of
the Employer to any qualified plan, to the extent a deduction
is allowed to the Employer for such contributions under
Section 404 of the Code.
(8) "Employee" means any employee of the Employer,
Self-Employed Individual or Owner-Employee.
(9) "Employer" means the employer named in Section 1.02(a) and
any Related Employers designated in Section 1.02(b).
(10) "Employment Commencement Date" means the date on which
the Employee first performs an Hour of Service.
(11) "ERISA" means the Employee Retirement Income Security Act
of 1974, as from time to time amended.
(12) "Fidelity Fund" means any Registered Investment Company
which is made available to plans utilizing the CORPORATEplan
for Retirement Select Plan.
(13) "Fund Share" means the share, unit, or other evidence of
ownership in a Fidelity Fund.
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<PAGE> 4
(14) "Hour of Service" means, with respect to any Employee,
(A) Each hour for which the Employee is directly or
indirectly paid, or entitled to payment, for the
performance of duties for the Employer or a Related
Employer, each such hour to be credited to the
Employee for the computation period in which the
duties were performed;
(B) Each hour for which the Employee is directly or
indirectly paid, or entitled to payment, by the
Employer or Related Employer (including payments made
or due from a trust fund or insurer to which the
employer contributes or pays premiums) on account of
a period of time during which no duties are performed
(irrespective of whether the employment relationship
has terminated) due to vacation, holiday, illness,
incapacity, disability, layoff, jury duty, military
duty, or leave of absence, each such hour to be
credited to the Employee for the Eligibility
Computation Period in which such period of time
occurs, subject to the following rules:
(i) No more that 501 Hours of Service shall be
credited under this paragraph (B) on account of
any single continuous period during which the
Employee performs no duties;
(ii) Hours of Service shall not be credited under
this paragraph (B) for a payment which solely
reimburses the Employee for medically-related
expenses, or which is made or due under a plan
maintained solely for the purpose of complying
with applicable workmen's compensation,
unemployment compensation or disability insurance
laws; and
(iii) If the period during which the Employee
performs no duties falls within two or more
computation periods and if the payment made on
account of such period is not calculated on the
basis of units of time, the Hours of Service
credited with respect to such period shall be
allocated between not more than the first two such
computation periods on any reasonable basis
consistently applied with respect to similarly
situated Employees; and
(C) Each hour not counted under paragraph (A) or (B)
for which back pay, irrespective of mitigation of
damages, has been either awarded or agreed to be paid
by the Employer or a Related Employer, each such hour
to be credited to the Employee for the computation
period to which the award or agreement pertains
rather than the computation period in which the award
agreement or payment is made.
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<PAGE> 5
For purposes of determining Hours of
Service, Employees of the Employer and of all Related
Employers will be treated as employed by a single
employer. For purposes of paragraphs (B) and (C)
above, Hours of Service will be calculated in
accordance with the provisions of Section
2530.200b-2(b) of the Department of Labor
regulations, which are incorporated herein by
reference.
Solely for purposes of determining whether a
break in service for participation purposes has
occurred in a computation period, an individual who
is absent from work for maternity or paternity
reasons shall receive credit for the hours of service
that otherwise would have been credited to such
individual but for such absence, or in any case in
which such hours cannot be determined, 8 hours of
service per day of such absence. For purposes of this
paragraph, an absence from work for maternity reasons
means an absence (1) by reason of the pregnancy of
the individual, (2) by reason of a birth of a child
of the individual, (3) by reason of the placement of
a child with the individual in connection with the
adoption of such child by such individual, or (4) for
purposes of caring for such child for a period
beginning immediately following such birth or
placement. The hours of service credited under this
paragraph shall be credited (1) in the computation
period in which the absence begins if the crediting
is necessary to prevent a break in service in that
period, or (2) in all other cases in the following
computation period.
(15) "Normal Retirement Age" means the normal retirement age
specified in Section 1.06(a) of the Adoption Agreement.
(16) "Owner-Employee" means, if the Employer is a sole
proprietorship, the individual who is the sole proprietor, or
if the Employer is a partnership, a partner who owns more than
10 percent of either the capital interest or the profits
interest of the partnership.
(17) "Participant" means any Employee who participates in the
Plan in accordance with Article 3 hereof.
(18) "Plan" means the plan established by the Employer as set
forth herein as a new plan or as an amendment to an existing
plan, by executing the Adoption Agreement, together with any
and all amendments hereto.
(19) "Plan Year" means the 12-consecutive month period
designated by the Employer in Section 1.01(d).
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<PAGE> 6
(20) "Registered Investment Company" means any one or more
corporations, partnerships or trusts registered under the
Investment Company Act of 1940 for which Fidelity Management
and Research Company serves as investment advisor.
(21) "Related Employer" means any employer other than the
Employer named in Section 1.02(a), if the Employer and such
other employer are members of a controlled group of
corporations (as defined in Section 414(b) of the Code) or an
affiliated service group (as defined in Section 414(m)), or
are trades or businesses (whether or not incorporated) which
are under common control (as defined in Section 414(c)), or
such other employer is required to be aggregated with the
Employer pursuant to regulations issued under Section 414(o).
(22) "Self-Employed Individual" means an individual who has
Earned Income for the taxable year from the Employer or who
would have had Earned Income but for the fact that the trade
or business had no net profits for the taxable year.
(23) "Trust" means the trust created by the Employer.
(24) "Trust Agreement" means the agreement between the
Employer and the Trustee, as set forth in a separate
agreement, under which assets are held, administered, and
managed subject to the claims of the Employer's creditors in
the event of the Employer's insolvency, until paid to Plan
Participants and their Beneficiaries as specified in the Plan.
(25) "Trust Fund" means the property held in the Trust by the
Trustee.
(26) "Trustee" means the corporation or individuals appointed
by the Employer to administer the Trust in accordance with the
Trust Agreement.
(27) "Years of Service for Vesting" means, with respect to any
Employee, the number of whole years of his periods of service
with the Employer or a Related Employer (the elapsed time
method to compute vesting service), subject to any exclusions
elected by the Employer in Section 1.07(b). An Employee will
receive credit for the aggregate of all time period(s)
commencing with the Employee's Employment Commencement Date
and ending on the date a break in service begins, unless any
such years are excluded by Section 1.07(b). An Employee will
also receive credit for any period of severance of less than
12 consecutive months. Fractional periods of a year will be
expressed in terms of days.
In the case of a Participant who has 5 consecutive
1-year breaks in service, all years of service after such
breaks in service will be disregarded for the purpose of
vesting the Employer-derived account balance that
5
<PAGE> 7
accrued before such breaks, but both pre-break and post-break
service will count for the purposes of vesting the
Employer-derived account balance that accrues after such
breaks. Both accounts will share in the earnings and losses of
the fund.
In the case of a Participant who does not have 5
consecutive 1-year breaks in service, both the pre-break and
post-break service will count in vesting both the pre-break
and post-break employer-derived account balance.
A break in service is a period of severance of at
least 12 consecutive months. Period of severance is a
continuous period of time during which the Employee is not
employed by the Employer. Such period begins on the date the
Employee retires, quits or is discharged, or if earlier, the
12-month anniversary of the date on which the Employee was
otherwise first absent from service.
In the case of an individual who is absent from work
for maternity or paternity reasons, the 12-consecutive month
period beginning on the first anniversary of the first date of
such absence shall not constitute a break in service. For
purposes of this paragraph, an absence from work for maternity
or paternity reasons means an absence (1) by reason of the
pregnancy of the individual, (2) by reason of the birth of a
child of the individual, (3) by reason of the placement of a
child with the individual in connection with the adoption of
such child by such individual or (4) for purposes of caring
for such child for a period beginning immediately following
such birth or placement.
If the Plan maintained by the Employer is the plan of
a predecessor employer, an Employee's Years of Service for
Vesting shall include years of service with such predecessor
employer. In any case in which the Plan maintained by the
Employer is not the plan maintained by a predecessor employer,
service for such predecessor shall be treated as service for
the Employer to the extent provided in Section 1.08.
(b) Pronouns used in the Plan are in the masculine gender but include the
feminine gender unless the context clearly indicates otherwise.
ARTICLE 3. PARTICIPATION.
3.01. DATE OF PARTICIPATION. An eligible Employee (as set forth in Section
1.03(a)) will become a Participant in the Plan on the first Entry Date after
which he becomes an eligible Employee if he has filed an election pursuant to
Section 4.01. If the eligible Employee does not file an election pursuant to
Section 4.01 prior to his first Entry Date, then the eligible Employee will
become a Participant in the Plan as of the first day of a Plan Year for which he
has filed an election.
6
<PAGE> 8
3.02. RESUMPTION OF PARTICIPATION FOLLOWING RE-EMPLOYMENT. If a Participant
ceases to be an Employee and thereafter returns to the employ of the Employer he
will again become a Participant as of an Entry Date following the date on which
he completes an Hour of Service for the Employer following his re-employment, if
he is an eligible Employee as defined in Section 1.03(a), and has filed an
election pursuant to Section 4.01.
3.03 CESSATION OR RESUMPTION OF PARTICIPATION FOLLOWING A CHANGE IN STATUS. If
any Participant continues in the employ of the Employer or Related Employer but
ceases to be an eligible Employee as defined in Section 1.03(a), the individual
shall continue to be a Participant until the entire amount of his benefit is
distributed; however, the individual shall not be entitled to make Deferral
Contributions or receive an allocation of Matching contributions during the
period that he is not an eligible Employee. Such Participant shall continue to
receive credit for service completed during the period for purposes of
determining his vested interest in his Accounts. In the event that the
individual subsequently again becomes an eligible Employee, the individual shall
resume full participation in accordance with Section 3.01.
ARTICLE 4. CONTRIBUTIONS.
4.01. DEFERRAL CONTRIBUTIONS. Each Participant may elect to execute a salary
reduction agreement with the Employer to reduce his Compensation by a specified
percentage not exceeding the percentage set forth in Section 1.05(a) and equal
to a whole number multiple of one (1) percent. Such agreement shall become
effective on the first day of the period as set forth in the Participant's
election. The election will be effective to defer Compensation relating to all
services performed in a Plan Year subsequent to the filing of such an election.
An election once made will remain in effect until a new election is made. A new
election will be effective as of the first day of the following Plan Year and
will apply only to Compensation payable with respect to services rendered after
such date. Amounts credited to a Participant's account prior to the effective
date of any new election will not be affected and will be paid in accordance
with that prior election. The Employer shall credit an amount to the account
maintained on behalf of the Participant corresponding to the amount of said
reduction. Under no circumstances may a salary reduction agreement be adopted
retroactively. A Participant may not revoke a salary reduction agreement for a
Plan year during that year.
4.02. MATCHING CONTRIBUTIONS. If so provided by the Employer in Section 1.05(b),
the Employer shall make a Matching Contribution to be credited to the account
maintained on behalf of each Participant who had Deferral Contributions made on
his behalf during the year and who meets the requirement, if any, of Section
1.05(b)(3). The amount of the Matching Contribution shall be determined in
accordance with Section 1.05(b).
4.03. TIME OF MAKING EMPLOYER CONTRIBUTIONS. The Employer will from time to time
make a transfer of assets to the Trustee for each Plan Year. The Employer shall
provide the Trustee with information on the amount to be credited to the
separate account of each Participant maintained under the Trust.
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<PAGE> 9
ARTICLE 5. PARTICIPANTS' ACCOUNTS.
5.01. INDIVIDUAL ACCOUNTS. The Administrator will establish and maintain an
Account for each Participant which will reflect Matching and Deferral
Contributions credited to the Account on behalf of the Participant and earnings,
expenses, gains and losses credited thereto, and deemed investments made with
amounts in the Participant's Account. The Administrator will establish and
maintain such other accounts and records as it decides in its discretion to be
reasonably required or appropriate in order to discharge its duties under the
Plan. Participants will be furnished statements of their Account values at least
once each Plan Year.
ARTICLE 6. INVESTMENT OF CONTRIBUTIONS.
6.01. MANNER OF INVESTMENT. All amounts credited to the Accounts of Participants
shall be treated as though invested and reinvested only in eligible investments
selected by the Employer in Section 1.11(b).
6.02. INVESTMENT DECISIONS. Investments in which the Accounts of Participants
shall be treated as invested and reinvested shall be directed by the Employer or
by each Participant, or both, in accordance with the Employer's election in
Section 1.11(a).
(a) All dividends, interest, gains and distributions of any nature earned
in respect of Fund Shares in which the Account is treated as
investing shall be credited to the Account as though reinvested in
additional shares of that Fidelity Fund.
(b) Expenses attributable to the acquisition of investments shall be
charged to the Account of the Participant for which such investment
is made.
ARTICLE 7. RIGHT TO BENEFITS.
7.01 NORMAL OR EARLY RETIREMENT. If provided by the Employer in Section 1.07(d),
each Participant who attains his Normal Retirement Age or Early Retirement Age
will have a nonforfeitable interest in his Account in accordance with the
vesting schedule elected in Section 1.07. If a Participant retires on or after
attainment of Normal or Early Retirement Age, such retirement is referred to as
a normal retirement. On or after his normal retirement, the balance of the
Participant's Account, plus any amounts thereafter credited to his Account,
subject to the provisions of Section 7.06, will be distributed to him in
accordance with Article 8.
If provided by the Employer in Section 1.06, a Participant who
separates from service before satisfying the age requirements for early
retirement, but has satisfied the service requirement will be entitled to the
distribution of his Account, subject to the provisions of Section 7.06, in
accordance with Article 8, upon satisfaction of such age requirement.
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<PAGE> 10
7.02 DEATH. If a Participant dies before the distribution of his Account has
commenced, or before such distribution has been completed, his Account shall
become vested in accordance with the vesting schedule elected in Section 1.07
and his designated Beneficiary or Beneficiaries will be entitled to receive the
balance or remaining balance of his Account, plus any amounts thereafter
credited to his Account, subject to the provisions of Section 7.06. Distribution
to the Beneficiary or Beneficiaries will be made in accordance with Article 8.
A Participant may designate a Beneficiary or Beneficiaries, or change
any prior designation of Beneficiary or Beneficiaries by giving notice to the
Administrator on a form designated by the Administrator. If more than one person
is designated as the Beneficiary, their respective interests shall be as
indicated on the designation form.
A copy of the death notice or other sufficient documentation must be
filed with and approved by the Administrator. If upon the death of the
Participant there is, in the opinion of the Administrator, no designated
Beneficiary for part or all of the Participant's Account, such amount will be
paid to his surviving spouse or, if none, to his estate (such spouse or estate
shall be deemed to be the Beneficiary for purposes of the Plan). If a
Beneficiary dies after benefits to such Beneficiary have commenced, but before
they have been completed, and, in the opinion of the Administrator, no person
has been designated to receive such remaining benefits, then such benefits shall
be paid to the deceased Beneficiary's estate.
7.03 OTHER TERMINATION OR EMPLOYMENT. If provided by the Employer in Section
1.06, if a Participant terminates his employment for any reason other than death
or normal retirement, he will be entitled to a termination benefit equal to (i)
the vested percentage(s) of the value of the Matching Contributions to his
Account, as adjusted for income, expense, gain, or loss, such percentage(s)
determined in accordance with the vesting schedule(s) selected by the Employer
in Section 1.07, and (ii) the value of the Deferral Contributions to his Account
as adjusted for income, expense, gain or loss. The amount payable under this
Section 7.03 will be subject to the provisions of Section 7.06 and will be
distributed in accordance with Article 8.
7.04 SEPARATE ACCOUNT. If a distribution from a Participant's Account has been
made to him at a time when he has a nonforfeitable right to less than 100
percent of his Account, the vesting schedule in Section 1.07 will thereafter
apply only to amounts in his Account attributable to Matching Contributions
allocated after such distribution. The balance of his Account immediately after
such distribution will be transferred to a separate account which will be
maintained for the purpose of determining his interest therein according to the
following provisions.
At any relevant time prior to a forfeiture of any portion thereof under
Section 7.05, a Participant's nonforfeitable interest in his Account held in a
separate account
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<PAGE> 11
described in the preceding paragraph will be equal to P (AB + (RxD)) - (RxD),
where P is the nonforfeitable percentage at the relevant time determined under
Section 7.05; AB is the account balance of the separate account at the relevant
time; D is the amount of the distribution; and R is the ratio of the account
balance at the relevant time to the account balance after distribution.
Following a forfeiture of any portion of such separate account under Section
7.05 below, any balance in the Participant's separate account will remain fully
vested and nonforfeitable.
7.05 FORFEITURES. If a Participant terminates his employment, any portion of his
Account (including any amounts credited after his termination of employment) not
payable to him under Section 7.03 will be forfeited by him. For purposes of this
paragraph, if the value of a Participant's vested account balance is zero, the
Participant shall be deemed to have received a distribution of his vested
interest immediately following termination of employment. Such forfeitures will
be applied to reduce the contributions of the Employer under the Plan (or
administrative expenses of the Plan).
7.06 ADJUSTMENT FOR INVESTMENT EXPERIENCE. If any distribution under this
Article 7 is not made in a single payment, the amount remaining in the Account
after the distribution will be subject to adjustment until distributed to
reflect the income and gain or loss on the investments in which such amount is
treated as invested and any expenses properly charged under the Plan and Trust
to such amounts.
7.07 HARDSHIP WITHDRAWALS. Subject to the provisions of Article 8, a Participant
shall not be permitted to withdraw his Account (and earnings thereon) prior to
retirement or termination of employment, except if permitted under Section 1.09,
a Participant may apply to the Administrator to withdraw some or all of his
Account if such withdrawal is made on account of a hardship as determined by the
Employer.
ARTICLE 8. DISTRIBUTION OF BENEFITS PAYABLE AFTER TERMINATION OF SERVICE.
8.01 DISTRIBUTION OF BENEFITS TO PARTICIPANTS AND BENEFICIARIES.
(a) Distributions under the Plan to a Participant or to the Beneficiary
of the Participant shall be made in a lump sum in cash or, if elected
by the Employer in Section 1.10 and specified in the Participant's
deferral election, under a systematic withdrawal plan
(installment(s)) not exceeding 10 years upon retirement, death or
other termination of employment.
(b) Distributions under a systematic withdrawal plan must be made in
substantially equal annual, or more frequent, installments, in cash,
over a period certain which does not extend 10 years. The period
certain specified in a Participant's first deferral election
specifying distribution under a systematic withdrawal plan shall
apply to all subsequent elections of distributions under a systematic
withdrawal plan made by the Participant.
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<PAGE> 12
8.02 DETERMINATION OF METHOD OF DISTRIBUTION. The Participant will determine the
method of distribution of benefits to himself and the method of distribution to
his Beneficiary. Such determination will be made at the time the Participant
makes a deferral election. If the Participant does not determine the method of
distribution to him or his Beneficiary, the method shall be a lump sum.
8.03 NOTICE TO TRUSTEE. The Administrator will notify the Trustee in writing
whenever any Participant or Beneficiary is entitled to receive benefits under
the Plan. The Administrator's notice shall indicate the form, amount and
frequency of benefits that such Participant or Beneficiary shall receive.
8.04 TIME OF DISTRIBUTION. In no event will distribution to a Participant be
made later than the date specified by the Participant in his salary reduction
agreement.
ARTICLE 9. AMENDMENT AND TERMINATION.
9.01 AMENDMENT BY EMPLOYER. The Employer reserves the authority to amend the
Plan by filing with the Trustee an amended Adoption Agreement, executed by the
Employer only, on which said Employer has indicated a change or changes in
provisions previously elected by it. Such changes are to be effective on the
effective date of such amended Adoption Agreement. Any such change
notwithstanding, no Participant's Account shall be reduced by such change below
the amount to which the Participant would have been entitled if he had
voluntarily left the employ of the Employer immediately prior to the date of the
change. The Employer may from time to time make any amendment to the Plan that
may be necessary to satisfy the Code or ERISA. The Employer's board of directors
or other individual specified in the resolution adopting this Plan shall act on
behalf of the Employer for purposes of this Section 9.01.
9.02 RETROACTIVE AMENDMENTS. An amendment made by the Employer in accordance
with Section 9.01 may be made effective on a date prior to the first day of the
Plan Year in which it is adopted if such amendment is necessary or appropriate
to enable the Plan and Trust to satisfy the applicable requirements of the Code
or ERISA or to conform the Plan to any change in federal law or to any
regulations or ruling thereunder. Any retroactive amendment by the Employer
shall be subject to the provisions of Section 9.01.
9.03 TERMINATION. The Employer has adopted the Plan with the intention and
expectation that contributions will be continued indefinitely. However, said
Employer has no obligation or liability whatsoever to maintain the Plan for any
length of time and may discontinue contributions under the Plan or terminate the
Plan at any time by written notice delivered to the Trustee without any
liability hereunder for any such discontinuance or termination.
9.04 DISTRIBUTION UPON TERMINATION OF THE PLAN. Upon termination of the Plan, no
further Deferral Contributions or Matching Contributions shall be made under the
Plan, but Accounts of Participants maintained under the Plan at the time of
termination shall continue to be governed by the terms of the Plan until paid
out in accordance with the terms of the Plan.
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ARTICLE 10. MISCELLANEOUS.
10.01. COMMUNICATION TO PARTICIPANTS. The Plan will be communicated to all
Participants by the Employer promptly after the Plan is adopted.
10.02. LIMITATION OF RIGHTS. Neither the establishment of the Plan and the
Trust, nor any amendment thereof, nor the creation of any fund or account, nor
the payment of any benefits, will be construed as giving to any Participant or
other person any legal or equitable right against the Employer, Administrator or
Trustee, except as provided herein; and in no event will the terms of employment
or service of any Participant be modified or in any way affected hereby.
10.03. NONALIENABILITY OF BENEFITS. The benefits provided hereunder will not be
subject to alienation, assignment, garnishment, attachment, execution or levy of
any kind, either voluntarily or involuntarily, and any attempt to cause such
benefits to be so subjected will not be recognized, except to such extent as may
be required by law.
10.04. FACILITY OF PAYMENT. In the event the Administrator determines, on the
basis of medical reports or other evidence satisfactory to the Administrator,
that the recipient of any benefit payments under the Plan is incapable of
handling his affairs by reason of minority, illness, infirmity or other
incapacity, the Administrator may direct the Trustee to disburse such payments
to a person or institution designated by a court which has jurisdiction over
such recipient or a person or institution otherwise having the legal authority
under State law for the care and control of such recipient. The receipt by such
person or institution of any such payments shall be complete acquittance
therefor, and any such payment to the extent thereof, shall discharge the
liability of the Trust for the payment of benefits hereunder to such recipient.
10.05. INFORMATION BETWEEN EMPLOYER AND TRUSTEE. The Employer agrees to furnish
the Trustee, and the Trustee agrees to furnish the Employer, with such
information relating to the Plan and Trust as may be required by the other in
order to carry out their respective duties hereunder, including without
limitation information required under the Code or ERISA and any regulations
issued or forms adopted thereunder.
10.06. NOTICES. Any notice or other communication in connection with this Plan
shall be deemed delivered in writing if addressed as provided below and if
either actually delivered at said address or, in the case of a letter, three
business days shall have elapsed after the same shall have been deposited in the
United States mail, first-class postage prepaid and registered or certified.
(a) If to the Employer or Administrator, to it at the address set
forth in the Adoption Agreement, to the attention of the person
specified to receive notice in the Adoption Agreement;
(b) If to the Trustee, to it at the address set forth in the Trust
Agreement;
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<PAGE> 14
or, in each case at such other address as the addressee shall have specified by
written notice delivered in accordance with the foregoing to the addressor's
then effective notice address.
10.07. GOVERNING LAW. The Plan and the accompanying Adoption Agreement will be
construed, administered and enforced according to ERISA, and to the extent not
preempted thereby, the laws of the Commonwealth of Massachusetts.
ARTICLE 11. PLAN ADMINISTRATION.
11.01 POWERS AND RESPONSIBILITIES OF THE ADMINISTRATOR. The Administrator has
the full power and the full responsibility to administer the Plan in all of its
details, subject, however, to the applicable requirements of ERISA. The
Administrator's powers and responsibilities include, but are not limited to, the
following:
(a) To make and enforce such rules and regulations as it deems necessary
or proper for the efficient administration of the Plan;
(b) To interpret the Plan, its interpretation thereof in good faith to be
final and conclusive on all persons claiming benefits under the Plan;
(c) To decide all questions concerning the Plan and the eligibility of
any person to participate in the Plan;
(d) To administer the claims and review procedures specified in Section
11.03;
(e) To compute the amount of benefits which will be payable to any
Participant, former Participant or Beneficiary in accordance with the
provisions of the Plan;
(f) To determine the person or persons to whom such benefits will be
paid;
(g) To authorize the payment of benefits;
(h) To comply with the reporting and disclosure requirements of Part 1 of
Subtitle B of Title I of ERISA;
(i) To appoint such agents, counsel, accountants, and consultants as may
be required to assist in administering the Plan;
(j) By written instrument, to allocate and delegate its responsibilities,
including the formation of an Administrative Committee to administer
the Plan;
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11.02 NONDISCRIMINATORY EXERCISE OF AUTHORITY. Whenever, in the administration
of the Plan, any discretionary action by the Administrator is required, the
Administrator shall exercise its authority in a nondiscriminatory manner so that
all persons similarly situated will receive substantially the same treatment.
11.03 CLAIMS AND REVIEW PROCEDURES.
(a) Claims Procedure. If any person believes he is being denied any
rights or benefits under the Plan, such person may file a claim in
writing with the Administrator. If any such claim is wholly or
partially denied, the Administrator will notify such person of its
decision in writing. Such notification will contain (i) specific
reasons for the denial, (ii) specific reference to pertinent Plan
provisions, (iii) a description of any additional material or
information necessary for such person to perfect such claim and an
explanation of why such material or information is necessary, and
(iv) information as to the steps to be taken if the person wishes to
submit a request for review. Such notification will be given within
90 days after the claim is received by the Administrator (or within
180 days, if special circumstances require an extension of time for
processing the claim, and if written notice of such extension and
circumstances is given to such person within the initial 90-day
period). If such notification is not given within such period, the
claim will be considered denied as of the last day of such period and
such person may request a review of his claim.
(b) Review Procedure. Within 60 days after the date on which a person
receives a written notice of a denied claim (or, if applicable,
within 60 days after the date on which such denial is considered to
have occurred), such person (or his duly authorized representative)
may (i) file a written request with the Administrator for a review of
his denied claim and of pertinent documents and (ii) submit written
issues and comments to the Administrator. The Administrator will
notify such person of its decision in writing. Such notification will
be written in a manner calculated to be understood by such person and
will contain specific reasons for the decision as well as specific
references to pertinent Plan provisions. The decision on review will
be made within 60 days after the request for review is received by
the Administrator (or within 120 days, if special circumstances
require an extension of time for processing the request, such as an
election by the Administrator to hold a hearing, and if written
notice of such extension and circumstances is given to such person
within the initial 60-day period). If the decision on review is not
made within such period, the claim will be considered denied.
11.04 COSTS OF ADMINISTRATION. Unless some or all costs and expenses are paid by
the Employer, all reasonable costs and expenses (including legal, accounting,
and employee communication fees) incurred by the Administrator and the Trustee
in administering the Plan and Trust will be paid first from the forfeitures (if
any) resulting under Section 7.05, then from the remaining Trust Fund. All such
costs and expenses paid from the Trust Fund will, unless allocable to the
Accounts of particular Participants, be charged against the Accounts of all
Participants on a prorata basis or in such other reasonable manner as may be
directed by the Employer.
14
<PAGE> 1
EXHIBIT 10.25
AMENDMENT NO. 1
TO
THE CORPORATEplan FOR RETIREMENT SELECT PLAN
This Amendment No. 1 to The CORPORATEplan for Retirement Select Plan
(the "Plan") as adopted by Wynn's International, Inc. (the "Company") is made as
of January 6, 1999.
W I T N E S S E T H
WHEREAS, on August 5, 1998, the Board of Directors of the Company
approved the adoption of the Plan in accordance with the terms set forth in the
Basic Plan and Adoption Agreement;
WHEREAS, the Board of Directors of the Company specifically authorized,
with the consent of James Carroll ("Mr. Carroll"), the contribution of amounts
previously deferred by Mr. Carroll pursuant to the Executive Deferred
Compensation Agreement dated as of February 18, 1997, as subsequently amended
(the "Deferred Compensation Agreement"), to the Plan;
WHEREAS, the Company and Mr. Carroll entered into a Third Amendment to
the Deferred Compensation Agreement dated as of January 6, 1999 (the "Third
Amendment") pursuant to which Mr. Carroll authorized the Company to contribute
to the Plan amounts previously deferred by Mr. Carroll;
WHEREAS, the Plan needs to be amended to reflect the provisions of the
Third Amendment; and
WHEREAS, the Plan needs to be amended to reflect certain other
modifications to the Basic Plan and Adoption Agreement;
NOW, THEREFORE, the Plan is amended as follows:
1. Pursuant to the terms of the Third Amendment, the Company is
authorized to contribute, and the Plan Trustee is authorized to receive, amounts
previously deferred by Mr. Carroll. Upon the completion of enrollment forms, Mr.
Carroll shall have investment control over the amounts contributed by the
Company pursuant to the Third Amendment.
2. Article 4.01 shall be amended in its entirety to read as follows:
"4.01. Deferral Contributions. Each Participant may elect to execute a
salary and/or a bonus reduction agreement with the Employer to reduce
his Compensation by a specified percentage not exceeding the percentage
set forth in Section 1.05(a) and equal to a whole number multiple of
one (1) percent. Such agreement shall become effective on the first day
of the period as set forth in the Participant's election. The election
will be effective to defer Compensation relating to services performed
in a Plan Year subsequent to the filing of such
<PAGE> 2
election. An election once made will remain in effect until a new
election is made. A new election will be effective as of the first day
of a period not less than three months from the last such election in
such Plan Year and will only apply to Compensation payable with respect
to services rendered after such date. Amounts credited to a
Participant's account prior to the effective date of any new election
will not be affected and will be paid in accordance with that prior
election. The Employer shall credit an amount to the account maintained
on behalf of the Participant corresponding to the amount of said
reduction. Under no circumstances may a salary reduction agreement be
adopted retroactively.
A Participant may revoke a salary and/or bonus reduction agreement for
a Plan Year during that year. Amounts credited to a Participant's
account prior to the effective date of such revocation will not be
affected and will be paid in accordance with the prior election. If a
Participant revokes a salary and/or bonus reduction agreement during a
Plan Year, any new election by such Participant will become effective
no earlier than the first day of the following Plan Year."
3. Except as expressly amended herein, the provisions of the Plan shall
continue in full force and effect.
IN WITNESS WHEREOF, this Amendment No. 1 is executed as of the date
above.
WYNN"S INTERNATIONAL, INC.
By: /s/ Seymour A. Schlosser
------------------------
Seymour A. Schlosser
Vice President-Finance
2
<PAGE> 1
EXHIBIT 11
WYNN'S INTERNATIONAL, INC.
COMPUTATION OF NET INCOME PER COMMON SHARE - BASIC
<TABLE>
<CAPTION>
Year ended December 31
------------------------------------------------------
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Income from continuing operations $27,290,000 $25,894,000 $21,301,000
Discontinued operations:
Income from operations -- -- 16,000
Income (loss) on disposal -- 319,000 (879,000)
----------- ----------- -----------
Net income $27,290,000 $26,213,000 $20,438,000
=========== =========== ===========
Weighted average number of shares
Outstanding 19,109,308 19,649,234 20,462,702
=========== =========== ===========
Income per common share:
Continuing operations $ 1.43 $ 1.32 $ 1.04
Discontinued operations:
Income from operations -- -- --
Income (loss) on disposal -- .01 (.04)
----------- ----------- -----------
Net income per common share $ 1.43 $ 1.33 $ 1.00
=========== =========== ===========
</TABLE>
<PAGE> 2
EXHIBIT 11
(Continued)
COMPUTATION OF NET INCOME PER COMMON SHARE -
ASSUMING DILUTION
<TABLE>
<CAPTION>
Year ended December 31
-----------------------------------------------------
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Income from continuing operations $27,290,000 $25,894,000 $21,301,000
Discontinued operations:
Income from operations -- -- 16,000
Income (loss) on disposal -- 319,000 (879,000)
----------- ----------- -----------
Net income $27,290,000 $26,213,000 $20,438,000
=========== =========== ===========
Weighted average number of shares
outstanding 19,109,308 19,649,234 20,462,702
Net shares assumed issued using the
treasury stock method for stock
options outstanding during each
period based on average market
price 562,258 648,065 654,037
Net shares assumed issued for
performance shares pending
issuance based on satisfaction
of vesting requirements 6,932 7,634 --
----------- ----------- -----------
Diluted shares 19,678,498 20,304,933 21,116,739
=========== =========== ===========
Income per common share:
Continuing operations $ 1.39 $ 1.28 $ 1.01
Discontinued operations:
Income from operations -- -- --
Income (loss) on disposal -- .01 (.04)
----------- ----------- ----------
Net income $ 1.39 $ 1.29 $ .97
=========== =========== ==========
</TABLE>
Note: The above calculations reflect for all periods the three-for-two stock
splits to stockholders of record in December 1997 and December 1996.
<PAGE> 1
EXHIBIT 13
This exhibit consists of the following portions of the 1998 Annual Report
to Stockholders of Wynn's International, Inc.: the Report of Independent
Auditors on page 40, the consolidated financial statements of Registrant on
pages 24 through 39, the Selected Financial Data section on page 16, the
Management's Discussion and Analysis of Financial Condition and Results of
Operations section on pages 17 through 23, and the information appearing under
"Common Stock Prices and Cash Dividends Per Share: 1998-1997" on page 41 and
"Number of Stockholders" and "Stock Exchange Listing" on page 41.
<PAGE> 2
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Five years ended December 31, 1998
---------------------------------------------------------
(Dollars in thousands, except per share amounts) 1998 1997 1996 1995 1994
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
CONTINUING Net sales $336,875 $320,953 $288,531 $262,584 $234,659
OPERATIONS ---------------------------------------------------------
Income before taxes based
on income 42,641 41,233 33,918 26,500 20,843
Provision for taxes based
on income 15,351 15,339 12,617 9,799 8,461
---------------------------------------------------------
Income from continuing
operations 27,290 25,894 21,301 16,701 12,382
- ------------------------------------------------------------------------------------------------------------
DISCONTINUED Income (loss) from
OPERATIONS discontinued operations,
net of income tax -- -- 16 (1,258) (561)
Income (loss) on disposal of
discontinued operations,
net of income tax -- 319 (879) -- --
- ------------------------------------------------------------------------------------------------------------
NET INCOME $ 27,290 $ 26,213 $ 20,438 $ 15,443 $ 11,821
============================================================================================================
DILUTED EARNINGS From continuing operations $1.39 $1.28 $1.01 $.81 $.62
PER SHARE OF Discontinued operations:
COMMON STOCK(a) Income (loss) from
operations -- -- -- (.06) (.03)
Income (loss) on disposal -- .01 (.04) -- --
---------------------------------------------------------
$1.39 $1.29 $ .97 $.75 $.59
============================================================================================================
WEIGHTED AVERAGE 19,678,498 20,304,933 21,116,739 20,735,385 20,526,277
COMMON SHARES
OUTSTANDING
(DILUTED)
============================================================================================================
CASH DIVIDENDS $.24 $.2133 $.1778 $.1541 $.1304
PER COMMON SHARE
============================================================================================================
SELECTED BALANCE Current assets $163,882 $147,883 $149,552 $128,565 $116,022
SHEET ITEMS Current liabilities 66,425 61,386 56,942 47,837 54,056
Working capital 97,457 86,497 92,610 80,728 61,966
Current ratio 2.47 to 1 2.41 to 1 2.63 to 1 2.69 to 1 2.15 to 1
Total assets $225,596 $207,091 $205,105 $177,822 $176,472
Long-term debt due
after one year -- -- -- 75 14,948
Stockholders' equity 140,850 127,523 132,952 116,233 95,440
Book value per
common share $7.49 $6.63 $6.48 $5.71 $5.08
- ------------------------------------------------------------------------------------------------------------
NUMBER OF Continuing Operations 2,121 2,073 1,962 1,769 1,729
EMPLOYEES
============================================================================================================
</TABLE>
(a) See Note 1 of Notes to Consolidated Financial Statements for certain per
share information. All per share amounts have been adjusted to reflect the
3 for 2 stock splits effected in 1997, 1996 and 1995.
The above Selected Financial Data for the five years ended December 31, 1998 is
not reported upon herein by independent auditors. See Management's Discussion
and Analysis of Financial Condition and Results of Operations.
16
<PAGE> 3
Management's Discussion and Analysis
of Financial Condition and Results of Operations
- --------------------------------------------------------------------------------
Wynn's International, Inc.
RESULTS OF CONTINUING OPERATIONS
1998 COMPARED TO 1997
Net sales in 1998 were $336.9 million compared to $321.0 million in 1997,
an increase of 5 percent. Sales increased 5 percent at the Specialty Chemicals
Division in 1998 compared to 1997. Sales increased 4 percent at the Automotive
and Industrial Components Division, which is comprised of Wynn's-Precision, Inc.
("Precision"), a Lebanon, Tennessee-based supplier of O-rings, seals and molded
rubber products, and Robert Skeels & Company ("Skeels"), a small regional
wholesale distributor of builders hardware products.
Precision recorded a 5 percent increase in sales in 1998. Precision's
growth in sales was due primarily to higher sales to the U.S. automotive
original equipment manufacturers ("OEMs") and the introduction of new products.
Precision's composite gaskets product line posted another strong increase in
1998 compared to the prior year, and Precision expects this trend to continue.
Precision's sales growth in 1998 was negatively impacted by a three-week labor
strike at two of its major plants in Tennessee during the second quarter of
1998. Precision's sales were also impacted by the eight-week labor strike at
General Motors, Precision's largest customer, in the summer of 1998. Precision
continued to receive requests in 1998 for price freezes or price reductions from
customers in many markets that it serves. Precision expects this trend to
continue in 1999. Higher revenues at Precision generally resulted from an
increase in the number of units sold as opposed to price increases. Skeels'
sales increased 2 percent in 1998 compared to 1997.
Sales at the Specialty Chemicals Division, consisting principally of car
care products, increased 5 percent on a worldwide basis in 1998 compared to
1997. Reported sales were adversely affected by changes in foreign exchange
rates in 1998 compared to 1997. Excluding the impact of foreign exchange rate
fluctuations, total revenues in 1998 would have increased 8 percent compared to
1997. The revenue increase was due principally to increased sales in the U.S.,
France, Belgium and U.K. In the U.S., revenues in 1998 increased 9 percent
compared to 1997, mainly due to growth in sales to the U.S. professional market
and higher sales from the division's product warranty and newly launched vehicle
service contract programs. Export sales from the U.S. to Latin American
distributors increased slightly in 1998 compared to 1997, but sales to Asian
distributors decreased substantially during the same period. Foreign subsidiary
sales increased 3 percent in 1998 over 1997, but would have increased 7 percent
if foreign exchange rates in 1998 had remained unchanged from 1997 rates. Sales
increased in France, Belgium, U.K., Canada and Mexico, but sales declined in
Australia, New Zealand, South Africa, Germany and Venezuela.
Interest income in 1998 was $2.4 million compared to $2.1 million in 1997.
The increase was due to higher average cash and cash equivalent balances in 1998
than in the prior year, partially offset by lower average interest yields.
On a consolidated basis, total cost of sales in 1998 was 61.5 percent of
sales compared to 62.3 percent in 1997. The Specialty Chemicals Division and
Precision achieved higher gross margins due to the higher sales volumes and a
change in sales mix. Precision's gross margin increased principally due to
higher sales at its Tennessee operation, which manufactures and sells primarily
O-rings. The increase in gross margin at the Specialty Chemicals Division was
due primarily to the growth in sales of product warranty and new vehicle service
contract programs.
17
<PAGE> 4
Management's Discussion and Analysis
of Financial Condition and Results of Operations
- --------------------------------------------------------------------------------
Wynn's International, Inc.
Selling, general and administrative ("SG&A") expenses increased in 1998 to
$89.3 million, or 26.5 percent of sales, compared to $81.5 million, or 25.4
percent of sales. The increase during 1998 in SG&A expenses was mainly due to
higher selling costs associated with product warranty programs and vehicle
service contracts at the Specialty Chemicals Division and the higher sales at
Precision, partially offset by lower corporate expenses. As a percentage of
sales, SG&A expenses increased at the Specialty Chemicals Division due primarily
to a change in sales mix, but remained approximately the same at Precision.
Corporate expenses decreased in 1998 compared to 1997 due primarily to lower
executive incentive compensation expenses. In 1998, environmental-related
expenses included in total SG&A decreased compared to 1997. The Company closely
monitors legal and factual developments in the environmental area to evaluate
the adequacy of present reserves.
Income before taxes from continuing operations was $42.6 million in 1998
compared to $41.2 million in 1997. In the Automotive and Industrial Components
Division, pretax profit increased 11 percent in 1998 due to Precision's higher
revenue levels. Precision's profitability is sensitive to changes in volume.
Pretax profit increased slightly at Skeels in 1998 compared to 1997 due to the
higher revenues and improved gross margins. Pretax profit of the Specialty
Chemicals Division decreased 12 percent in 1998 compared to 1997 due to weak
results in the U.S., Asia/Pacific area, France, Belgium and Latin America,
partially offset by improvements in the U.K., South Africa and Canada. Despite
the revenue growth, pretax profit in the U.S. declined 13 percent due to the
higher level of SG&A expenses. Excluding the impact of foreign exchange rate
changes, the Specialty Chemicals Division's pretax profit would have decreased
only 8 percent in 1998.
The effective tax rate in 1998 was 36.0 percent, down from the 37.2 percent
tax rate in the prior year. The decline in the effective tax rate was due
primarily to changes in estimated provisions for the repatriation of foreign
earnings.
Income from continuing operations in 1998 was $27.3 million compared to
$25.9 million in 1997. The improvement in 1998 compared to 1997 was attributable
primarily to the higher pretax profit at Precision and lower corporate expenses,
partially offset by the lower pretax profit at the Specialty Chemicals Division.
Basic earnings per share from continuing operations in 1998 was $1.43
compared to $1.32 in 1997. Diluted earnings per share from continuing operations
in 1998 was $1.39 compared to $1.28 in 1997. The increase in per share results
in 1998 was due to the increase in net income and a 3 percent decrease in shares
outstanding. The number of shares outstanding decreased primarily as a result of
the repurchase in April 1997 of 1,650,000 shares of the Company's outstanding
stock pursuant to a Dutch Auction self-tender offer and repurchases of the
Company's outstanding stock during 1998 pursuant to the Company's share
repurchase program. This decrease in outstanding shares was partially offset by
the exercise of stock options to purchase 136,152 shares of common stock.
FINANCIAL CONDITION
Working capital at December 31, 1998 was $97.5 million compared to $86.5
million at December 31, 1997. The current ratio was 2.47 to 1 at December 31,
1998 compared to 2.41 to 1 at December 31, 1997. The Company has adequate cash
and cash equivalents and lines of credit to meet foreseeable working capital
requirements.
18
<PAGE> 5
Management's Discussion and Analysis
of Financial Condition and Results of Operations
- --------------------------------------------------------------------------------
Wynn's International, Inc.
Cash and cash equivalents were $46.5 million at December 31, 1998 compared
to $43.3 million at December 31, 1997. The increase in cash and cash equivalents
was primarily due to cash provided by all operating activities of $27.1 million
and $1.1 million of proceeds from the exercise of stock options, partially
offset by capital expenditures of $9.9 million, dividends paid of $4.5 million
and $10.8 million used for repurchases of the Company's common stock.
Accounts receivable increased $8.5 million to $64.9 million at December 31,
1998 from $56.4 million at December 31, 1997. This increase was due principally
to the higher sales at Precision and the Specialty Chemicals Division in the
fourth quarter of 1998 compared to the quarter ended December 31, 1997 and the
offering during the year of extended terms to certain large customers of the
Specialty Chemicals Division. Inventories were $34.3 million at the end of 1998,
an increase of $3.3 million from $31.0 million at December 31, 1997. The
increase in inventories was due to higher inventory levels at the Specialty
Chemicals Division, primarily service equipment for sale by the U.S.
professional products division, and higher raw material inventories at
Precision.
Total current liabilities increased $5.0 million to $66.4 million at
December 31, 1998 from $61.4 million at December 31, 1997. The increase was due
primarily to an increase in accounts payable and higher accruals for product
warranty programs, partially offset by a decrease in the amount payable for
taxes based on income, salaries and other compensation, and other accrued
liabilities. Income taxes paid in 1998 were $16.4 million, approximately the
same as in 1997.
Net property, plant and equipment increased $1.9 million to $50.2 million
in 1998, consisting of $9.9 million in additions (principally at Precision and
the Specialty Chemicals Division), offset by an annual depreciation charge of
$7.9 million, as well as retirements and foreign exchange adjustments.
At December 31, 1998, the Company had two separate $15.0 million unsecured
domestic committed bank lines of credit, which permit borrowings through June
2000 and June 2001, respectively, and one uncommitted domestic line of credit.
The Company also has various other foreign uncommitted credit lines. At December
31, 1998, no borrowings were outstanding under any of these lines.
The Company believes that additional lines of credit could be obtained if
necessary. Under present circumstances, neither additional lines of credit nor
additional long-term financing is required to supplement working capital
requirements.
Stockholders' equity at the end of 1998 was $140.9 million compared to
$127.5 million at the end of 1997. The increase of $13.3 million is attributable
primarily to net income of $27.3 million and $1.4 million from the exercise of
stock options, including the related tax benefits, reduced by $10.8 million of
repurchases of the Company's common stock and dividends declared of $4.6
million.
In December 1998, the Company's Board of Directors approved a new
three-year, $15 million open market share repurchase program to begin January
1999. This new repurchase program replaces the Company's three-year, $15 million
share repurchase program that expired December 31, 1998.
The Company expects total capital expenditures in 1999 to be approximately
$16 million, which will be funded from current operations. As previously
announced, the Company is continuing to explore possible niche acquisitions.
19
<PAGE> 6
Management's Discussion and Analysis
of Financial Condition and Results of Operations
- --------------------------------------------------------------------------------
Wynn's International, Inc.
YEAR 2000 MATTERS
The Company recognizes the need to ensure its operations will not be
adversely impacted by Year 2000 software failures. In 1996, the Company began
the necessary change-over of computer systems at its major locations, and now
believes the changes to be substantially completed. Certain smaller foreign
locations are also presently working toward timely implementation of necessary
changes. The costs incurred thus far, and expected to be incurred in the future,
are not significant. The Company is also working with customers and vendors to
determine their ability to make the necessary conversions. Management presently
expects that the necessary corrections will be completed before the Year 2000
with no significant effect on customers or disruption to business operations.
See Forward-Looking Statements. The Company currently has no contingency plans
in place in the event certain necessary corrections are not fully completed by
the Company or its customers and vendors before the year 2000. During 1999, the
Company plans to evaluate the need for contingency plans based on future
information received from its major business units, customers and vendors.
IMPACT OF CHANGING PRICES ON SALES AND INCOME
The Company attempts to minimize the impact of inflation on production and
operating costs through cost control programs and productivity improvements.
Over the past three years the inflation rate has been relatively low.
Nonetheless, the Company has continued to face increases in the cost of labor
and some materials, despite requests for price reductions from many customers.
Due to intense competition, the Company in 1998 generally was not able to raise
prices to its customers to pass along the cost increases experienced.
MARKET RISKS
The Company conducts a significant portion of its operations in foreign
jurisdictions. Because the Company's foreign subsidiaries conduct operations in
the currencies of the countries in which they are based, all financial
statements of the foreign subsidiaries must be translated into U.S. dollars. As
a result, the Company's reported financial results could be significantly
affected by changes in foreign currency exchange rates. The Company's financial
results could also be affected by other factors including weak economic
conditions in the foreign markets in which the Company operates. The Company's
future operating results are exposed primarily to changes in the Euro currency
("Euro"), a common currency shared by 11 European nations, the Australian
dollar, the South African rand, the Canadian dollar and the British pound. The
Company currently does not hedge any significant amounts related to its foreign
subsidiaries' budgeted sales, results of operations or net investments.
The Company's interest income is most sensitive to changes in the general
level of U.S. short-term interest rates and to some extent foreign short-term
interest rates, especially in France, Belgium and Australia. Changes in U.S. and
foreign interest rates affect the interest earned on the Company's cash and cash
equivalents. The Company generally maintains its investments in short-term
securities, which have maturities of three months or less, and does not hedge
the potential effect from changes in interest rates. The Company's policy is to
maintain and ultimately use its cash in excess of operating requirements for
planned expansions, potential acquisitions and share repurchases.
20
<PAGE> 7
Management's Discussion and Analysis
of Financial Condition and Results of Operations
- --------------------------------------------------------------------------------
Wynn's International, Inc.
EURO CURRENCY CONVERSION
The Euro was introduced on January 1, 1999, and the 11 participating
European Monetary Union member countries established irrevocable fixed
conversion rates between their local currencies and the Euro. However, the local
currencies in those countries will continue to be used as legal tender through
January 1, 2002. Thereafter, the local currencies will be canceled and Euro
bills and coins will be used for cash transactions in the participating
countries. From January 1, 1999 to December 31, 2001, companies will be allowed
to transact noncash transactions in either Euro or the local currency.
The Company and certain of its European subsidiaries are currently
evaluating the Euro conversion and the potential impact on their operations. At
the present time, the Company believes the necessary changes and costs incurred
thus far, and expected to be incurred in the future, are not significant. See
Forward-Looking Statements.
FORWARD-LOOKING STATEMENTS
Certain statements contained in this Annual Report may be "forward-looking
statements" within the meaning of Section 27A of the Securities Exchange Act of
1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as
amended, in that they express the Company's expectations or beliefs concerning
future events. The statements include the following: the expected continued
growth in sales of Precision's composite gasket product line; the demand by
Precision's customers for price freezes or price reductions; the sufficiency of
working capital; the availability of new lines of credit if needed by the
Company; the anticipated level of capital expenditures; the lack of impact of
the Year 2000 problem and Euro conversion on the Company's business operations;
and the effect of potential changes in market risks.
The Company cautions that these statements are further qualified by
important factors that could cause actual results to differ materially from
those in the forward-looking statements, including the following: sales of new
and used cars in the U.S.; automotive and off-road construction vehicle
production rates in North America; currency exchange rates relative to the U.S.
dollar; short-term domestic and international interest rates; the impact of
competitive products and pricing; attempts by state governments to regulate the
product warranty program; termination of one or more of the product warranty
division's alliances with automobile finance companies or a significant slowdown
in the business of these companies; regulatory or technical developments or
subsequently developed information causing an increase in the Company's
estimated liability for environmental matters; the ability of the Company's
vendors and customers to successfully resolve any Year 2000 and Euro currency
conversion issues in their respective businesses; and general economic
conditions, especially in North America and Western Europe.
The Company's actual results thus may differ materially from the expected
results expressed or implied by the forward-looking statements.
RESULTS OF CONTINUING OPERATIONS
1997 COMPARED TO 1996
Net sales in 1997 were $321.0 million compared to $288.5 million in 1996,
an increase of 11 percent. Sales increased 20 percent at the Automotive and
Industrial Components Division and 3 percent at the Specialty Chemicals Division
in 1997 compared to 1996.
Precision recorded a 20 percent increase in sales in 1997. Precision's
growth was primarily due to higher sales to the U.S. automotive OEMs and the
off-road construction
21
<PAGE> 8
Management's Discussion and Analysis
of Financial Condition and Results of Operations
- --------------------------------------------------------------------------------
Wynn's International, Inc.
industry and the introduction of new products. Precision's sales in 1997 also
increased relative to 1996 due to the September 30, 1996 acquisition of an
automotive plastic sealing business. Excluding this acquisition, Precision's
sales increased 12 percent in 1997 over 1996. Sales of Precision's innovative
composite gaskets continued to grow in 1997 compared to the prior year, and
Precision expected this trend to continue as new applications were developed and
approved by major automotive OEMs and other vehicle manufacturers. Higher
revenues at Precision generally resulted from an increase in the number of units
sold as opposed to price increases.
Skeels' sales increased 3 percent in 1997 compared to 1996, principally due
to improved economic conditions in the southern California building industry.
Sales at the Specialty Chemicals Division, principally car care products,
increased 3 percent on a worldwide basis compared to 1996. Reported sales were
adversely affected by changes in foreign exchange rates in 1997 compared to
1996. Excluding the impact of foreign exchange rate fluctuations, total revenues
in 1997 would have increased 9 percent compared to 1996. The revenue increase
was due principally to increased sales in the U.S., Canada and Belgium. In the
U.S., revenues in 1997 increased 7 percent compared to 1996, mainly due to
growth in sales by the Division's Azusa, California-based operations to the U.S.
professional market and growth in export sales to Asian and Latin American
distributors. Sales from the Wynn's product warranty division increased 6
percent in 1997, which was below the growth rate experienced in each of the four
years preceding 1997. The lower growth rate was due to the general slowdown in
used car sales in 1997, primarily caused by subprime lenders being more
selective in granting new credit for auto loans. A significant portion of sales
by the Wynn's product warranty division are through relationships established
with certain subprime lenders. Foreign subsidiary sales in 1997 were slightly
higher than 1996, but would have increased 11 percent if foreign exchange rates
in 1997 had remained unchanged from 1996 rates. On a local currency basis, sales
grew in all major foreign subsidiary operations. The most significant sales
growth in local currency occurred in Belgium, France and Canada.
Interest income in 1997 was $2.1 million compared to $1.8 million in 1996.
The increase was due to higher average cash and cash equivalent balances in 1997
than in the prior year.
On a consolidated basis, total cost of sales in 1997 was 62.3 percent of
sales compared to 60.5 percent in 1996. Both Precision and the Specialty
Chemicals Division generated higher gross profit due to the higher sales
volumes, but gross margins declined as a percentage of sales. Precision's gross
margin declined due to higher sales of its lower margin plastics products and
general price pressures. The decrease in gross margin at the Specialty Chemicals
Division was due primarily to the growth in sales of product warranty programs
and the professional equipment product line, which generally have lower gross
margins than other products of the Division.
Selling, general and administrative expenses decreased in 1997 to $81.5
million, or 25.4 percent of sales, compared to $81.7 million, or 28.3 percent of
sales. The significant decline during 1997 in SG&A expenses as a percentage of
sales was mainly due to the growth in sales at Precision, which traditionally
has a lower level of operating expenses as a percentage of sales than the
Specialty Chemicals Division. Both Precision and the Specialty Chemicals
Division were able to reduce SG&A expenses as a percentage of their respective
sales due to the higher sales volumes achieved and constant
22
<PAGE> 9
Management's Discussion and Analysis
of Financial Condition and Results of Operations
- --------------------------------------------------------------------------------
Wynn's International, Inc.
monitoring of costs. The 1997 SG&A expenses at the Specialty Chemicals Division
also benefited from $.5 million of proceeds from the partial recovery of a
judgment in a trademark infringement lawsuit and the nonrecurrence of certain
1996 expenses for relocation and severance costs at two foreign locations.
Corporate expenses decreased in 1997 compared to 1996 due to lower accruals for
retirement benefit programs, partially offset by higher expenses due to the
addition of one senior executive position and higher incentive compensation
costs. In 1997, environmental-related expenses included in total SG&A increased
compared to 1996. The Company closely monitors legal and factual developments in
the environmental area to evaluate the adequacy of present reserves.
Income before taxes from continuing operations was $41.2 million in 1997
compared to $33.9 million in 1996. In the Automotive and Industrial Components
Division, pretax profit increased 14 percent in 1997 due to Precision's higher
revenue levels. Precision's profitability is sensitive to changes in volume.
Pretax profit of the Specialty Chemicals Division increased 22 percent in 1997
due to the small increase in revenues and lower operating costs as a percentage
of sales. Excluding the impact of foreign exchange rate changes, the Specialty
Chemicals Division's pretax profit would have increased 29 percent in 1997.
The effective tax rate in 1997 was 37.2 percent, unchanged from the prior
year.
Income from continuing operations in 1997 was $25.9 million compared to
$21.3 million in 1996. The improvement in 1997 compared to 1996 was primarily
attributable to the higher pretax profit at both the Specialty Chemicals
Division and Precision.
Basic earnings per share from continuing operations in 1997 was $1.32
compared to $1.04 in 1996. Diluted earnings per share from continuing operations
in 1997 was $1.28 compared to $1.01 in 1996. The Company adopted Statement of
Financial Accounting Standards No. 128, Earnings per Share, in December 1997.
See Note 2 of Notes to Consolidated Financial Statements for a discussion of the
3 for 2 stock splits in 1997 and 1996. The increase in per share results in 1997
was due to the increase in net income and the decrease in shares outstanding.
The number of shares outstanding decreased primarily as a result of the
repurchase in April 1997 of 1,650,000 shares of the Company's outstanding stock
pursuant to a Dutch Auction self-tender offer. This decrease was partially
offset by the exercise of stock options to purchase 439,699 shares of common
stock.
RESULTS OF DISCONTINUED OPERATIONS
1997 COMPARED TO 1996
On May 23, 1996, the Company sold the principal operating assets of Wynn's
Climate Systems, Inc., ("WCS"), the automotive air conditioning subsidiary which
was formerly part of the Automotive and Industrial Components Division.
The results of operations for WCS and the income (loss) on disposal of WCS'
principal net operating assets have been classified on the statements of income
as discontinued operations. Revenues from discontinued operations for the period
January 1 to May 23, 1996 were $20,353,000. The loss on disposal of the
principal operating assets of WCS for the year ended December 31, 1996 included
a $2.6 million tax benefit attributable to the deductibility of goodwill
associated with the original acquisition of WCS in 1978. Such goodwill had been
previously expensed for financial statement purposes with no tax benefit.
In 1997, income on disposal of discontinued operations was attributable to
adjustments to certain estimated reserves arising from the May 1996 sale.
23
<PAGE> 10
Consolidated Statements of Income
- --------------------------------------------------------------------------------
Wynn's International, Inc.
<TABLE>
<CAPTION>
Year ended December 31
--------------------------------------
(Dollars in thousands, except per share amounts) 1998 1997 1996
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUES Net sales $336,875 $320,953 $288,531
Interest income 2,356 2,106 1,763
------------------------------------------------------------------------------
339,231 323,059 290,294
- --------------------------------------------------------------------------------------------------
COSTS AND Cost of sales 207,088 200,069 174,440
EXPENSES Selling, general and administrative 89,252 81,520 81,719
Interest expense 250 237 217
------------------------------------------------------------------------------
296,590 281,826 256,376
- --------------------------------------------------------------------------------------------------
INCOME FROM Income from continuing operations
CONTINUING before taxes based on income 42,641 41,233 33,918
OPERATIONS Provision for taxes based on income 15,351 15,339 12,617
------------------------------------------------------------------------------
Income from continuing operations 27,290 25,894 21,301
- --------------------------------------------------------------------------------------------------
DISCONTINUED Discontinued operations, net of income
OPERATIONS taxes (benefits) of $195 and
$(4,629), respectively -- 319 (863)
- --------------------------------------------------------------------------------------------------
NET INCOME $ 27,290 $ 26,213 $ 20,438
==================================================================================================
EARNINGS (LOSS) Basic:
PER SHARE OF Continuing operations $1.43 $1.32 $1.04
COMMON STOCK Discontinued operations -- .01 (.04)
------------------------------------------------------------------------------
Total $1.43 $1.33 $1.00
==============================================================================
Diluted:
Continuing operations $1.39 $1.28 $1.01
Discontinued operations -- .01 (.04)
------------------------------------------------------------------------------
Total $1.39 $1.29 $ .97
==================================================================================================
</TABLE>
See accompanying notes.
24
<PAGE> 11
Consolidated Balance Sheets
- --------------------------------------------------------------------------------
Wynn's International, Inc.
<TABLE>
<CAPTION>
December 31
- --------------------------------------------------------------------------------------------------
(Dollars in thousands, except per share amounts) 1998 1997
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS Current assets:
Cash and cash equivalents $ 46,511 $ 43,266
Accounts receivable, less $904 allowance
for doubtful accounts ($959 in 1997) 64,880 56,355
Inventories 34,347 31,045
Prepaid expenses and other current assets
(including deferred tax assets of $12,162 in
1998 and $12,208 in 1997) 18,144 17,217
------------------------------------------------------------------------------
Total current assets 163,882 147,883
Property, plant and equipment, at cost less
accumulated depreciation and amortization 50,197 48,341
Costs in excess of fair value of net assets of
businesses acquired, less accumulated
amortization of $2,121 ($1,975 in 1997) 2,902 3,049
Other assets 8,615 7,818
- --------------------------------------------------------------------------------------------------
$225,596 $207,091
==================================================================================================
LIABILITIES Current liabilities:
AND Accounts payable $ 23,360 $ 20,696
STOCKHOLDERS' Dividends payable 1,129 1,030
EQUITY Taxes based on income 100 1,264
Accrued liabilities:
Product warranty programs 19,094 14,407
Salaries and other compensation 9,719 10,282
Other 13,023 13,707
------------------------------------------------------------------------------
Total current liabilities 66,425 61,386
Deferred taxes based on income 7,607 7,825
Other liabilities 10,714 10,357
Commitments and contingencies
Stockholders' equity:
Preferred stock, $1 par value; 500,000 shares
authorized, none issued -- --
Common stock, $0.01 par value; 40,000,000
shares authorized, 21,898,335 shares
issued (21,860,511 in 1997) 219 219
Capital in excess of par value 24,286 23,965
Retained earnings 160,170 137,457
Accumulated other comprehensive income (5,100) (5,033)
Unearned compensation (56) (58)
Common stock held in treasury 3,095,809 shares,
at cost (2,623,087 in 1997) (38,669) (29,027)
------------------------------------------------------------------------------
Total stockholders' equity 140,850 127,523
------------------------------------------------------------------------------
$225,596 $207,091
==================================================================================================
</TABLE>
See accompanying notes.
25
<PAGE> 12
Consolidated Statements of Stockholders' Equity
- --------------------------------------------------------------------------------
Wynn's International, Inc.
<TABLE>
<CAPTION>
Three years ended December 31, 1998
- -----------------------------------------------------------------------------------------------------------------------------------
Accumulated Common
Common stock Capital in other stock
(Dollars in thousands, --------------------- excess of Retained comprehensive Unearned held in
except per share amounts) Shares Amount par value earnings income compensation treasury Total
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1996 21,520,764 $215 $22,523 $ 98,619 $(1,170) $(373) $(3,581) $116,233
Net income -- -- -- 20,438 -- -- -- 20,438
Adjustments from foreign
currency translation, net -- -- -- -- (815) -- -- (815)
-------
Comprehensive income -- -- -- -- -- -- -- 19,623
-------
Cash dividends -- -- -- (3,639) -- -- -- (3,639)
Purchase of treasury stock
at cost -- -- -- -- -- -- (1,767) (1,767)
Stock options exercised,
including tax benefits 298,851 3 2,076 -- -- -- 37 2,116
Restricted stock issued
to employee -- -- 107 -- -- (152) 45 --
Amortization of unearned
compensation -- -- -- -- -- 386 -- 386
- ----------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1996 21,819,615 218 24,706 115,418 (1,985) (139) (5,266) 132,952
Net income -- -- -- 26,213 -- -- -- 26,213
Adjustments from foreign
currency translation, net -- -- -- -- (3,048) -- -- (3,048)
-------
Comprehensive income -- -- -- -- -- -- -- 23,165
-------
Cash dividends -- -- -- (4,174) -- -- -- (4,174)
Purchase of treasury stock
at cost -- -- -- -- -- -- (28,056) (28,056)
Stock options exercised,
including tax benefits 40,896 1 (741) -- -- (92) 4,295 3,463
Amortization of unearned
compensation -- -- -- -- -- 173 -- 173
- ----------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1997 21,860,511 219 23,965 137,457 (5,033) (58) (29,027) 127,523
Net income -- -- -- 27,290 -- -- -- 27,290
Adjustments from foreign
currency translation, net -- -- -- -- (67) -- -- (67)
-------
Comprehensive income -- -- -- -- -- -- -- 27,223
-------
Cash dividends -- -- -- (4,577) -- -- -- (4,577)
Purchase of treasury stock
at cost -- -- -- -- -- -- (10,752) (10,752)
Stock options exercised,
including tax benefits 37,824 -- 321 -- -- (19) 1,110 1,412
Amortization of unearned
compensation -- -- -- -- -- 21 -- 21
- ----------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1998 21,898,335 $219 $24,286 $160,170 $(5,100) $ (56) $(38,669) $140,850
==================================================================================================================================
</TABLE>
See accompanying notes.
26
<PAGE> 13
Consolidated Statements of Cash Flows
- --------------------------------------------------------------------------------
Wynn's International, Inc.
<TABLE>
<CAPTION>
Year ended December 31
------------------------------
(Dollars in thousands) 1998 1997 1996
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATING Income from continuing operations $27,290 $25,894 $21,301
ACTIVITIES Adjustments:
Depreciation and amortization 8,365 8,283 7,405
Provision for uncollectible accounts 281 307 312
Amortization of stock compensation 21 173 386
Gain on fixed asset disposals (31) (1) (11)
Provision (benefit) for deferred income taxes (207) 18 (3,381)
Change in operating assets and liabilities:
Accounts receivable-net (8,811) (8,289) (2,721)
Inventories (3,302) (105) (1,492)
Prepaid expenses and other current assets (973) (327) (883)
Other assets (1,102) (611) (540)
Accounts payable 2,664 2,559 (116)
Product warranty program reserves 4,687 1,973 3,259
Taxes based on income (879) (848) 1,754
Accrued liabilities (1,247) 2,279 3,504
Other liabilities 357 2,886 713
-----------------------------------------------------------------------------------------
Net cash provided by continuing operations 27,113 34,191 29,490
-----------------------------------------------------------------------------------------
Net cash provided by (used in)
discontinued operations -- 319 (1,132)
-----------------------------------------------------------------------------------------
Net cash provided by all operating activities 27,113 34,510 28,358
- -------------------------------------------------------------------------------------------------------------
INVESTING Additions to property, plant and equipment (9,935) (11,811) (9,059)
ACTIVITIES Acquisition of business -- -- (8,255)
Net proceeds from disposition of net assets
of discontinued operations -- 254 23,631
Other cash receipts-net 78 79 73
-----------------------------------------------------------------------------------------
Net cash provided by (used in) investing activities (9,857) (11,478) 6,390
- -------------------------------------------------------------------------------------------------------------
FINANCING Dividends paid (4,478) (4,060) (3,512)
ACTIVITIES Proceeds from exercise of stock options 1,127 1,882 1,627
Purchase of treasury stock (10,752) (28,056) (1,767)
Other cash disbursements-net -- (73) (101)
-----------------------------------------------------------------------------------------
Net cash used in financing activities (14,103) (30,307) (3,753)
- -------------------------------------------------------------------------------------------------------------
NET CHANGE Effect of exchange rate changes 92 (2,763) (818)
IN CASH -----------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 3,245 (10,038) 30,177
Cash and cash equivalents at beginning of year 43,266 53,304 23,127
-----------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $46,511 $43,266 $53,304
=============================================================================================================
</TABLE>
Supplemental disclosure of interest and income taxes paid:
Interest paid in 1998, 1997 and 1996 was $76,000, $108,000 and $107,000,
respectively. Income taxes paid in 1998, 1997 and 1996 were $16,437,000,
$16,364,000 and $9,615,000, respectively.
See accompanying notes.
27
<PAGE> 14
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
Wynn's International, Inc.
1. SUMMARY OF PRINCIPAL ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying consolidated financial statements include the accounts of
Wynn's International, Inc. ("Wynn's" or the "Company") and its wholly-owned
subsidiaries and two majority-owned subsidiaries. All significant intercompany
transactions have been eliminated. Certain reclassifications have been made to
the prior years' amounts to conform with the 1998 presentation. On May 23, 1996,
the Company sold the principal operating assets of Wynn's Climate Systems, Inc.
("WCS"), a manufacturer and marketer of automotive air conditioning systems and
components. The results of operations for WCS and the income (loss) on disposal
of WCS' principal net operating assets have been classified on the statements of
income as discontinued operations.
The preparation of financial statements in conformity with generally
accepted accounting principles requires the use of estimates and assumptions
that affect the amounts reported in the financial statements and accompanying
notes. Actual results could differ from those estimates.
PAR VALUE AND STOCK SPLITS
On April 29, 1998, the Company's stockholders approved an amendment to the
Company's Certificate of Incorporation to reduce the par value of the Company's
Common Stock from $1.00 per share to $0.01 per share. All share amounts have
been adjusted retroactively for the reduction in par value.
The Company effected a 3 for 2 stock split in the fourth quarter of 1997
and a similar 3 for 2 stock split in the fourth quarter of 1996. All share and
per share amounts have been adjusted retroactively for both stock splits. See
Note 2.
EARNINGS PER SHARE
Basic earnings per share is computed by dividing net income by the weighted
average number of shares outstanding during the year. Diluted earnings per share
is calculated by dividing net income by the weighted average number of diluted
shares outstanding during the year and assumes the exercise of stock options.
The weighted average number of shares outstanding used to calculate earnings per
share in 1998, 1997 and 1996 for basic purposes were 19,109,308, 19,649,234 and
20,462,702, respectively, and for diluted purposes were 19,678,498, 20,304,933
and 21,116,739, respectively. (See Note 2 for a discussion of the stock splits
effected in 1997 and 1996.)
CASH AND CASH EQUIVALENTS
The Company's policy is to invest cash in excess of operating requirements
in short-term interest bearing investments. Cash equivalents of $44,507,000 in
1998 and $39,368,000 in 1997 include commercial paper, guaranteed investment
contracts, certificates of deposit, municipal securities and money market
accounts which have maturities of three months or less when purchased and are
stated at cost, which approximates fair market value.
CONCENTRATIONS OF CREDIT RISK
The Company places its temporary cash investments in high credit quality
financial institutions and investment grade short-term investments and limits
the amount of credit exposure to any one entity. Substantially all of the
Company's accounts receivable are due from customers in the original equipment
and aftermarket automotive industries, both in the U.S. and internationally. The
Company performs periodic credit evaluations of its customers and generally does
not require collateral. The Company does not believe significant credit risks
exist at December 31, 1998 with respect to its temporary cash investments or
accounts receivable.
INVENTORIES
Inventories are stated at the lower of cost (principally first-in,
first-out) or market.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization of property, plant and equipment are
calculated principally using the straight-line method over the estimated useful
lives of the respective assets. See Note 7.
COSTS IN EXCESS OF FAIR VALUE OF NET ASSETS OF BUSINESSES ACQUIRED
Costs in excess of fair value of net assets of businesses acquired are
amortized using the straight-line method over a period of ten to forty years.
28
<PAGE> 15
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
Wynn's International, Inc.
LONG-LIVED ASSETS
The Company reviews long-lived assets and certain identifiable intangibles
held and used by the Company for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. Based upon the Company's analysis, the Company believes that no
impairment of the carrying value of its long-lived assets existed at December
31, 1998.
INCOME TAXES
The Company provides for income taxes utilizing the liability method and
provides taxes on the undistributed earnings of all foreign subsidiaries.
OTHER LIABILITIES
Noncurrent other liabilities consist primarily of accrued reserves for
environmental matters, pension liabilities and post employment benefits. Total
noncurrent reserves for environmental matters at December 31, 1998 are $8.2
million. (See Note 10 for a discussion of contingencies.)
FOREIGN CURRENCY TRANSLATION
Gains and losses resulting from balance sheet translation of foreign
operations where a foreign currency is the functional currency are included as a
component of comprehensive income in the statements of stockholders' equity and
as accumulated other comprehensive income in stockholders' equity.
FOREIGN EXCHANGE CONTRACTS
The Company enters into foreign exchange contracts to hedge certain
intercompany transactions with its foreign subsidiaries. These contracts reduce
currency risk from exchange rate movements. Gains and losses are deferred and
accounted for as part of the underlying transactions. The contractual amounts
and related deferred gains and losses from these contracts are immaterial.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, Accounting for Derivative Instruments
and Hedging Activities. Statement 133 standardizes the accounting for derivative
instruments by requiring that an entity recognize those items as assets or
liabilities in the balance sheet and measure them at fair market value. Under
certain conditions, an entity may elect to designate a derivative instrument as
a hedge of certain commitments, forecasted transactions and net investments in
foreign operations. Statement 133 is effective for quarterly financial
statements for fiscal years beginning after June 15, 1999, and therefore the
Company will adopt the new requirements beginning January 1, 2000. The Company
is in the process of evaluating the impact of Statement 133 on the Company's
financial statements.
STOCK-BASED COMPENSATION
The Company accounts for stock-based compensation using the intrinsic value
method. Accordingly, compensation cost for stock options is measured as the
excess, if any, of the quoted market price of the Company's stock at the date of
the grant over the amount an employee must pay to acquire the stock.
Compensation cost for performance shares is recorded over the vesting period
from the date the underlying stock options are exercised based on the fair
market value of the Company's stock.
COMPREHENSIVE INCOME
As of January 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130, Reporting Comprehensive Income. Statement 130
establishes new rules for the reporting and display of comprehensive income and
its components; however, the adoption of this statement had no impact on the
Company's net income or stockholders' equity. Statement 130 requires equity
adjustments from foreign currency translation to be reported as accumulated
other comprehensive income on the Company's Consolidated Balance Sheets. The
statement also requires foreign currency translation adjustments to be reported
as a component of comprehensive income. The Company reports comprehensive income
in its Consolidated Statements of Stockholders' Equity. Prior years' amounts
have been reclassified to conform to the requirements of Statement 130.
29
<PAGE> 16
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
Wynn's International, Inc.
2. STOCK SPLITS; ACQUISITION; DISCONTINUED OPERATIONS
STOCK SPLITS
On December 10, 1997, the Board of Directors authorized a 3 for 2 stock
split effected in the form of a stock dividend payable to stockholders of record
on December 22, 1997. Previously, on December 11, 1996, the Board of Directors
authorized a 3 for 2 stock split also effected in the form of a stock dividend
payable to stockholders of record on December 23, 1996. All references in the
consolidated financial statements to average number of shares outstanding and
related prices, per share amounts and stock option plan data have been restated
retroactively to reflect both of the stock splits.
ACQUISITION
On September 30, 1996, the Company purchased substantially all of the
assets of the automotive plastics business of Lawson Mardon Wheaton Inc. The
purchase price was $8,255,000. The acquisition has been accounted for using the
purchase method of accounting. Operating results from the business are included
in the Automotive and Industrial Components Division beginning in the fourth
quarter of 1996.
DISCONTINUED OPERATIONS
On May 23, 1996, the Company sold the principal operating assets of Wynn's
Climate Systems, Inc. Revenues from discontinued operations for the period
January 1 to May 23, 1996 were $20,353,000.
3. INVENTORIES
Inventories consist of the following at December 31, 1998 and 1997:
<TABLE>
<CAPTION>
(In thousands) 1998 1997
- ---------------------------------------------------------
<S> <C> <C>
Finished goods $21,922 $19,821
Raw materials and work in process 12,425 11,224
- ---------------------------------------------------------
$34,347 $31,045
=========================================================
</TABLE>
4. FOREIGN OPERATIONS
Condensed combined financial information of Wynn's foreign subsidiaries
(the operations of which are located in Australia, Belgium, Canada, France,
Germany, Holland, India, Mexico, New Zealand, South Africa, Spain, U.K. and
Venezuela) at December 31, 1998 and 1997 and for the three years ended December
31, 1998 before eliminations of intercompany balances and profits and any
provision for taxes on repatriation of foreign earnings, is as follows:
<TABLE>
<CAPTION>
(In thousands) 1998 1997
- ---------------------------------------------------------------
<S> <C> <C>
Assets:
Current assets $52,819 $47,289
Property, plant and equipment 4,767 4,856
Other noncurrent assets 2,794 2,822
- ---------------------------------------------------------------
$60,380 $54,967
===============================================================
Liabilities and stockholders' equity:
Current liabilities $25,108 $22,392
Deferred taxes based on income 612 659
Stockholders' equity 34,660 31,916
- ---------------------------------------------------------------
$60,380 $54,967
===============================================================
</TABLE>
<TABLE>
<CAPTION>
(In thousands) 1998 1997 1996
- -----------------------------------------------------
<S> <C> <C> <C>
Net sales $98,191 $96,184 $93,949
=====================================================
Net income $ 5,857 $ 6,508 $ 5,357
=====================================================
</TABLE>
Transaction gains and losses resulting from changes in foreign currency
exchange rates have been charged to operations and are immaterial.
30
<PAGE> 17
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
Wynn's International, Inc.
5. TAXES BASED ON INCOME
The provision for taxes based on income from continuing operations consists
of the following elements for the three years ended December 31, 1998:
<TABLE>
<CAPTION>
(In thousands) 1998 1997 1996
- ----------------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal $10,408 $11,137 $ 9,535
State 2,029 1,714 1,488
Foreign 3,520 3,691 3,845
- ----------------------------------------------------------------
Total current 15,957 16,542 14,868
- ----------------------------------------------------------------
Deferred:
Federal (362) (1,133) (650)
State (1) (120) (373)
Foreign (243) 50 (1,228)
- ----------------------------------------------------------------
Total deferred (606) (1,203) (2,251)
- ----------------------------------------------------------------
Total $15,351 $15,339 $12,617
================================================================
</TABLE>
Pretax income from continuing operations for domestic and foreign
operations for the three years ended December 31, 1998 is as follows:
<TABLE>
<CAPTION>
(In thousands) 1998 1997 1996
- --------------------------------------------------
<S> <C> <C> <C>
Domestic $34,830 $32,369 $26,444
Foreign 7,811 8,864 7,474
- --------------------------------------------------
$42,641 $41,233 $33,918
==================================================
</TABLE>
A reconciliation of the statutory federal income tax rate to the effective
tax rate, as a percentage of income from continuing operations before taxes
based on income for the three years ended December 31, 1998, follows:
<TABLE>
<CAPTION>
1998 1997 1996
- --------------------------------------------------------------------
<S> <C> <C> <C>
Statutory federal
income tax rate 35.0% 35.0% 35.0%
State taxes, net of
federal tax benefit 3.1 2.5 2.1
Other-net (2.1) (0.3) 0.1
- --------------------------------------------------------------------
Effective tax rate 36.0% 37.2% 37.2%
====================================================================
</TABLE>
At December 31, 1998, the Company had the following carryforwards for tax
purposes available for future utilization with the indicated expiration periods
(in thousands):
<TABLE>
<CAPTION>
Foreign Net
Year Operating Loss
- ------------------------------------------
<S> <C>
2001 $ 34
2002 61
2003 39
2004 37
2005 74
2006 46
2007 1
2008 30
Unlimited 1,060
- -------------------------------------------
$1,382
===========================================
</TABLE>
A valuation allowance of $1,596,000 has been recognized to offset these and
other deferred tax assets. The valuation allowance against deferred tax assets
decreased by $17,000 during 1998 due to a net decrease in tax attribute
carryovers.
Significant components of the Company's deferred tax assets and liabilities
as of December 31, 1998 and 1997 are as follows:
<TABLE>
<CAPTION>
(In thousands) 1998 1997
- -----------------------------------------------------------------
<S> <C> <C>
Deferred tax liabilities:
Foreign earnings $ 1,906 $ 2,019
Accelerated depreciation
and amortization 3,589 3,166
Pension plan 1,339 1,260
Other 2,933 3,525
- -----------------------------------------------------------------
Total deferred tax liabilities 9,767 9,970
- -----------------------------------------------------------------
Deferred tax assets:
Accrued expenses 13,907 13,733
Inventory valuation 629 834
Tax attributes carryover 1,382 1,399
- -----------------------------------------------------------------
Subtotal 15,918 15,966
Valuation allowances (1,596) (1,613)
- -----------------------------------------------------------------
Total deferred tax assets 14,322 14,353
- -----------------------------------------------------------------
Net deferred tax assets $ 4,555 $ 4,383
=================================================================
</TABLE>
The provisions (benefits) for income taxes for discontinued operations in
1996 differ from those amounts computed by applying the statutory federal income
tax rates due principally to deductible goodwill and federal tax credits.
31
<PAGE> 18
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
Wynn's International, Inc.
6. LINES OF CREDIT
The Company has two domestic committed unsecured lines of credit for $15.0
million each which permit borrowings through June 2000 and June 2001,
respectively, and various domestic and foreign uncommitted credit lines. The
lines provide for borrowings at interest rates of prime (7.75% at December 31,
1998) and/or various other prevailing rates. One of the domestic committed
credit lines also includes a $4.0 million unsecured multicurrency and trade
finance facility which provides for standby and commercial letters of credit.
The Company is required to pay a commitment fee varying from 0.125% to 0.15% per
annum on its committed lines of credit. At December 31, 1998, the Company had no
outstanding amounts under any of these lines of credit.
7. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following at December 31,
1998 and 1997:
<TABLE>
<CAPTION>
(In thousands) 1998 1997
- --------------------------------------------------------------------
<S> <C> <C>
Land and land improvements $ 1,520 $ 1,500
Buildings and improvements 25,873 24,305
Equipment, furniture and fixtures 79,776 72,314
- --------------------------------------------------------------------
107,169 98,119
Less accumulated depreciation
and amortization (56,972) (49,778)
- --------------------------------------------------------------------
$50,197 $48,341
====================================================================
</TABLE>
Estimated useful lives used to calculate depreciation and amortization of
property, plant and equipment are as follows:
Land improvements 10 - 20 years
Buildings and improvements 10 - 40 years
Equipment, furniture and fixtures 3 - 10 years
- -------------------------------------------------
8. RETIREMENT PLANS
As of January 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 132, Employers' Disclosures about Pensions and Other
Postretirement Benefits. This Statement revises employers' disclosures about
pensions and other postretirement benefit plans by requiring additional
information on changes in benefit obligations and fair values of plan assets.
This Statement does not change the measurement or recognition requirements of
those plans.
Wynn's and its domestic subsidiaries have four qualified defined benefit
retirement plans, which cover substantially all of their U.S. employees. One
plan is a compulsory noncontributory defined benefit pension plan that covers
the employees of the parent company and two domestic subsidiaries. Another plan
is a contributory defined benefit plan that covers the salaried employees of one
domestic subsidiary. Two other plans, which were collectively bargained with the
unions, cover hourly employees of one domestic subsidiary. Substantially all
domestic employees are eligible to participate in one of the plans. Benefits
under these plans are based on employees' earnings and length of service with
the Company. The funding policy for these plans is to make the annual
contribution required by applicable regulations, which are intended to provide
only for benefits attributed to service-to-date.
During 1998, Wynn's adopted an unfunded non-qualified supplemental
retirement plan for certain key executives of the Company. Benefits under this
plan are based upon the participants' base compensation and years of service
with the Company. Benefits under the supplemental retirement plan are reduced by
employer-provided benefits under Wynn's qualified defined benefit and defined
contribution plans and social security benefits.
32
<PAGE> 19
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
Wynn's International, Inc.
Net periodic pension costs (income) for the three years ended December 31,
1998 included the following components:
<TABLE>
<CAPTION>
(In thousands) 1998 1997 1996
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost $ 971 $ 766 $ 808
Interest cost 1,632 1,503 1,464
Expected return on assets (2,631) (2,232) (2,015)
Amortization of transition
assets (249) (249) (249)
Amortization of prior
service cost 211 167 172
Amortization of gain (164) (89) (77)
- ----------------------------------------------------------------------------
$ (230) $ (134) $ 103
============================================================================
</TABLE>
The above table includes net periodic pension costs charged to discontinued
operations of $56,000 in 1996.
All of the qualified pension plans have plan assets that exceed accumulated
benefit obligations. Plan assets include government bonds and securities, money
market accounts, mutual funds, corporate bonds and corporate stocks. The
following tables set forth the plans' funded status and amounts recognized in
the Company's consolidated balance sheets at December 31, 1998 and 1997 and
provide a reconciliation of the changes in projected benefit obligations and
plan assets for the two years ended December 31, 1998 for the Company's U.S.
pension plans:
<TABLE>
<CAPTION>
(In thousands) 1998 1997
- ---------------------------------------------------------------------
Funded Status
- ---------------------------------------------------------------------
<S> <C> <C>
Accumulated benefit
obligation $(23,146) $(19,079)
=====================================================================
Projected benefit obligation $(26,604) $(22,397)
Plan assets at fair market value 31,008 29,542
- ---------------------------------------------------------------------
Plan assets in excess of projected
benefit obligation 4,404 7,145
Unrecognized transition assets
amortized over various
periods of time (641) (890)
Unrecognized prior service cost 2,245 1,248
Unrecognized net gain (2,730) (4,470)
- ---------------------------------------------------------------------
Prepaid pension cost $ 3,278 $ 3,033
=====================================================================
</TABLE>
<TABLE>
<CAPTION>
(In thousands) 1998 1997
- ---------------------------------------------------------------
Change in Projected
Benefit Obligation
- ---------------------------------------------------------------
<S> <C> <C>
Projected benefit obligation
at January 1 $(22,397) $(20,421)
Service cost (928) (732)
Interest cost (1,627) (1,502)
Employee contributions (151) (150)
Plan amendments (1,208) --
Assumption change (1,057) (369)
Losses (955) (945)
Benefits paid 1,719 1,722
- ---------------------------------------------------------------
Projected benefit obligation
at December 31 $(26,604) $(22,397)
===============================================================
</TABLE>
<TABLE>
<CAPTION>
(In thousands) 1998 1997
- ---------------------------------------------------------------
Change in Plan Assets
- ---------------------------------------------------------------
<S> <C> <C>
Fair market value of plan
assets at January 1 $ 29,542 $ 25,049
Actual return on plan assets 3,140 6,067
Employer contributions 14 107
Employee contributions 151 150
Benefits paid (1,719) (1,722)
Plan expenses (120) (109)
- ---------------------------------------------------------------
Fair market value of plan
assets at December 31 $ 31,008 $ 29,542
===============================================================
</TABLE>
Assumptions used as of December 31, 1998, 1997 and 1996 were:
<TABLE>
<CAPTION>
1998 1997 1996
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Discount or settlement rate 6.75% 7.25% 7.5%
Rate of increase in
compensation level 4.5% 5.0% 5.0%
Expected long-term rate
of return on assets 9.0% 9.0% 9.0%
==============================================================================
</TABLE>
Non-U.S. employees are generally enrolled in pension plans in their country
of domicile. The effect of the Company's foreign plans is considered to be
immaterial and has not been included in the above tables. Applicable expenses
for these plans have been included in consolidated net income. The Company
believes that these plans are adequately funded in accordance with local
actuarial principles and laws.
The Company has a defined contribution plan for all full-time U.S. based
employees with at least six months of consecutive service. Eligible employees
are entitled to contribute from 1% to 10% of their base pay into an investment
trust, and the Company
33
<PAGE> 20
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
Wynn's International, Inc.
matches, at the rate of $.50 for each $1.00 contributed, up to 3% of the
employee's base pay. In addition, eligible employees at December 31 each year
receive an additional 1% of their base pay contributed by the Company into the
plan. The Company's total contributions into this plan for 1998, 1997 and 1996
were $504,000, $443,000 and $408,000, respectively.
The Company provides postretirement medical benefits for certain retired
employees at the U.S. operations of Wynn's-Precision, Inc. At January 1, 1993,
the accumulated postretirement benefit obligation (before tax benefit) was $3.2
million, which the Company elected to amortize over 20 years as part of the
annual benefit cost. The net periodic postretirement benefit costs were
$119,000, $145,000 and $124,000 in 1998, 1997 and 1996, respectively. The
Company does not prefund this benefit program. No additional benefits are being
earned with respect to this program by any active employees. The following
tables set forth the program's status and amounts recognized in the Company's
consolidated balance sheets at December 31, 1998 and 1997 and provide a
reconciliation of the changes in accumulated postretirement benefit obligation
for the two years ended December 31, 1998:
<TABLE>
<CAPTION>
(In thousands) 1998 1997
- --------------------------------------------------------------------
Program Status
- --------------------------------------------------------------------
<S> <C> <C>
Unfunded accumulated post-
retirement benefit obligation $(1,439) $(1,436)
Unrecognized net gain (resulting
from reduction in estimated
health care cost trend rates) (1,260) (1,453)
Unrecognized net transition
obligation 2,240 2,400
- --------------------------------------------------------------------
Accrued postretirement benefit cost $ (459) $ (489)
====================================================================
</TABLE>
<TABLE>
<CAPTION>
(In thousands) 1998 1997
- ---------------------------------------------------------------
Change in Accumulated
Benefit Obligation
- ---------------------------------------------------------------
<S> <C> <C>
Accumulated benefit obligation
at January 1 $(1,436) $(1,519)
Interest cost (98) (108)
Benefits paid 150 121
Actuarial gain (loss) (55) 70
- ---------------------------------------------------------------
Accumulated benefit obligation
at December 31 $(1,439) $(1,436)
================================================================
</TABLE>
The weighted average discount rates used to determine the accumulated
postretirement benefit obligation for 1998 and 1997 were 6.75% and 7.25%,
respectively. The assumed annual health care cost trend rate was 8.5% for 1999,
gradually decreasing to 4.5% in 2007 and remaining at that level thereafter. If
the health care cost trend rate were increased or decreased 1%, the accumulated
postretirement benefit obligation would increase $67,000 or decrease $61,000,
respectively, and the aggregate of the service and interest cost components of
the net periodic postretirement benefit cost would increase $5,000 or decrease
$4,000, respectively.
9. COMMITMENTS
Wynn's rents certain facilities and equipment under various noncancellable
operating leases. Rental commitments under these leases, exclusive of property
taxes and insurance, are as follows:
<TABLE>
<CAPTION>
Year (In thousands)
- -----------------------------------------------
<S> <C>
1999 $1,851
2000 1,118
2001 795
2002 417
2003 129
2004 and after 92
- -----------------------------------------------
Total $4,402
===============================================
</TABLE>
Rental expenses for all operating leases were $2,589,000 in 1998
($2,296,000 in 1997 and $2,236,000 in 1996).
10. CONTINGENCIES
Various claims and actions, considered normal to the Company's business,
have been asserted and are pending against the Company and its subsidiaries. The
Company believes that such claims and actions should not have any material
adverse effect upon the consolidated results of operations, cash flows, or the
financial position of the Company based upon information presently known to the
Company.
34
<PAGE> 21
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
Wynn's International, Inc.
The Company is also involved in certain proceedings and potential
proceedings relating to environmental matters. At December 31, 1998, included in
current other accrued liabilities and noncurrent other liabilities are
consolidated accrued reserves of approximately $9.4 million relating to
environmental matters. In establishing such reserves, the Company evaluates to
the extent known for each matter the nature and extent of the underlying
contamination, the estimated cost of the likely remedy, the number and financial
strength of other potentially responsible parties, and the evidence against the
various potentially responsible parties. During this evaluation process, the
Company makes its best estimate of its likely exposure with respect to each
matter based on information known to the Company at that time. Such estimates
may involve a range of exposures for each matter. The Company provides aggregate
reserves for no less than the minimum amount of the aggregate range of outcomes
established by the Company.
The Company lacks sufficient information at this time to provide an
estimate of its "reasonably possible" (as such term is defined in Statement of
Financial Accounting Standards No. 5) potential liability from all environmental
matters. In establishing reserves for environmental matters, the Company assumes
that it has appropriately evaluated key factors, such as expected remedy costs,
the likely degree of responsibility and ability to pay of other potentially
responsible parties, and the Company's probable allocable share. It is
reasonably possible that regulatory or technical developments or subsequently
developed information could cause the Company to reevaluate its present range of
outcomes and to record additional liabilities for existing environmental
matters. However, based upon information presently known to the Company, the
Company believes that any such additional liabilities should not materially
affect the Company's consolidated annual results of operations, cash flows, or
financial position.
11. STOCK PLANS
The Company has two stock-based plans pursuant to which current grants of
options to purchase common stock of Wynn's may be made. The Stock-Based
Incentive Award Plan ("1989 Plan") authorizes the grant of nonqualified stock
options, incentive stock options, stock appreciation rights, restricted stock
and performance shares to officers and key employees of the Company. The
Non-Employee Directors' Stock Option Plan ("1994 Plan") provides for the grant
of nonqualified stock options to non-employee directors of the Company. In
addition, the 1982 Incentive Stock Option Plan ("1982 Plan"), which expired in
April 1992, authorized the grant of incentive stock options. Under the 1982
Plan, the aggregate number of options granted could not exceed 1,012,500 shares.
Under the 1989 and 1994 Plans, the aggregate number of stock related awards may
not exceed 2,039,062 shares. At December 31, 1998, the aggregate number of
options available for future grants was 191,495. All options granted under the
three plans have been made at prices not less than 100% of the fair market value
of the stock at the date of grant. Options granted under the three plans are
exercisable at various dates over a ten-year period. However, under the three
plans, no options may be exercised until at least one year after the date of
grant.
During 1996, 11,250 shares of restricted stock were awarded under the 1989
Plan. The restricted stock award vested over a one-year period. Recipients of
restricted stock grants are entitled to cash dividends and voting rights on
their respective shares. Restrictions limit the sale or transfer of shares
during the vesting period. Unearned compensation of $152,000 was recorded at the
date of the award in 1996 based on the market value of shares. Unearned
compensation was amortized to expense over the vesting period.
The Company grants performance shares in connection with certain stock
options granted to officers and other key employees. Performance shares are
issuable to recipients of these grants who exercise the underlying stock
options, hold the shares of stock received for a three-year vesting period and
remain continuously employed by the Company during the vesting period. The
Company records unearned compensation at the date of exercise of the underlying
stock options based on the market value of the performance shares. Unearned
compensation is amortized to expense over the three-year vesting period.
During 1998, 26,200 performance shares were granted under the 1989 Plan. At
December 31, 1998,
35
<PAGE> 22
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
Wynn's International, Inc.
grants for 98,070 performance shares were outstanding, including 6,666 shares
pending issuance based on satisfaction of vesting requirements. No shares of the
Company's common stock have been issued pursuant to performance share grants. No
stock appreciation rights were outstanding at December 31, 1998. The following
tabulation summarizes certain information related to options for common stock:
<TABLE>
<CAPTION>
Weighted
Average
Exercise
Options Price
- ------------------------------------------------------------------------
<S> <C> <C>
Outstanding options at
January 1, 1996 1,507,950 $ 4.80
Granted during the year 137,250 10.68
Surrendered, forfeited or expired (41,516) 8.47
Exercised (258,971) 5.23
- ------------------------------------------------------------------------
Outstanding at December 31, 1996 1,344,713 5.20
Granted during the year 80,625 13.74
Surrendered, forfeited or expired (17,063) 13.22
Exercised (398,764) 3.95
- ------------------------------------------------------------------------
Outstanding at December 31, 1997 1,009,511 6.24
Granted during the year 172,875 21.96
Surrendered, forfeited or expired (16,139) 15.05
Exercised (98,284) 6.85
- ------------------------------------------------------------------------
Outstanding at December 31, 1998 1,067,963 $ 8.60
========================================================================
</TABLE>
Exercisable options outstanding at December 31, 1998, 1997 and 1996 and the
related weighted average exercise prices were 856,654, 866,784 and 1,136,663 and
$5.86, $5.50 and $4.56, respectively.
The following tabulation summarizes certain information concerning
outstanding and exercisable options at December 31, 1998:
<TABLE>
<CAPTION>
Range of Exercise Prices
- -------------------------------------------------------------------------------------
$3.46 $5.35 $ 9.72
to to to
$4.87 $6.89 $22.31
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Outstanding options:
Number outstanding 346,783 407,551 313,629
Weighted average
exercise price $3.65 $6.09 $17.33
Weighted average
remaining contractual
life in years 2.1 4.4 8.5
Exercisable options:
Number exercisable 346,783 398,771 111,100
Weighted average
exercise price $3.65 $6.08 $11.93
</TABLE>
If the Company had elected to recognize compensation cost based on the fair
value of the options granted at the grant date, net income and earnings per
share would have been reduced to the pro forma amounts shown below:
<TABLE>
<CAPTION>
(In thousands, except
per share amounts) 1998 1997 1996
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Pro forma:
Net income $26,629 $25,913 $20,266
Earnings per share:
Basic $1.39 $1.32 $.99
Diluted $1.35 $1.28 $.96
===============================================================================
</TABLE>
The fair value of each option grant was estimated on the date of grant
using the Black-Scholes option pricing model using the following weighted
average assumptions:
<TABLE>
<CAPTION>
1998 1997 1996
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Risk free interest rate 5.48% 6.22% 5.38%
Expected life in years 4.5 4.5 4.5
Expected volatility .276 .276 .274
Expected dividend yield 1.10% 1.56% 1.70%
=============================================================================
</TABLE>
The weighted average fair value of options granted during 1998, 1997 and
1996 was $6.40, $3.98 and $2.91 per share, respectively.
The Company has an Employee Stock Purchase Plan (the "Plan") under which
there are authorized and available for sale to employees, at a 15% discount, an
aggregate of 1,350,000 shares of the Company's common stock. For the Plan year
ended December 31, 1998, 32,830 shares were issued at $18.06 per share in
January 1999. At December 31, 1998, 1,189,524 shares were available under the
Plan for future sales to employees.
12. SHAREHOLDER RIGHTS PLAN
The Company maintains a Shareholder Rights Plan. The plan provides for a
dividend distribution of rights (the "Rights") with respect to outstanding
shares of common stock of the Company issued prior to the earliest of March 3,
2009, the redemption date of the Rights or certain takeover events. In the event
the Company is acquired under certain circumstances in a merger in which the
Company is not the surviving corporation, the Rights become rights to purchase
the
36
<PAGE> 23
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
Wynn's International, Inc.
acquiring company's common stock at a 50% discount (the "flip-over feature"). In
the event of certain acquisitions of 25% or more of the Company's common stock,
the Rights become rights to purchase the Company's common stock at a 50%
discount (the "flip-in feature"). The flip-in feature does not apply to tender
or exchange offers for all outstanding common stock determined by nonmanagement
directors of the Company to be fair and in the best interests of the Company and
its stockholders (a "Qualified Offer"). The flip-over feature does not apply to
a merger following a Qualified Offer which provided the same or a higher value
to the remaining stockholders. The Rights may be redeemed by the Company at a
nominal price under certain circumstances. The Rights will expire on March 3,
2009 or on such later date to which the Rights may be extended by the Company,
unless earlier redeemed.
13. OPERATING SEGMENTS AND RELATED INFORMATION
During 1998, the Company adopted Statement of Financial Accounting
Standards No. 131, Disclosures about Segments of an Enterprise and Related
Information. The Statement requires the Company to report certain information
about operating segments based on the way management organizes the segments
within the Company for making operating decisions and assessing performance. The
Statement also requires the Company to report certain information about its
products and services, the geographic areas in which the Company operates and
the Company's major customers. The adoption of Statement 131 did not affect the
Company's results of operations or financial position, but does affect the
disclosure of segment information. The disclosure amounts for 1997 and 1996 have
been reclassified to conform with Statement 131 disclosure requirements.
The Company has two reportable segments, Automotive and Industrial
Components and Specialty Chemicals. These reportable segments are each managed
separately because they manufacture and distribute distinct products with
different production processes and distribution channels. Operations in the
Automotive and Industrial Components segment involve the development,
manufacturing and marketing of O-rings and other static and dynamic seals
principally for the automotive industry. In addition, operations for Robert
Skeels & Company, which are not significant, are included in the Automotive and
Industrial Components Segment. Operations in the Specialty Chemicals segment
involve the development, production and marketing of a wide variety of car care
products, automotive chemicals for the consumer, specialty chemicals and
equipment for professional automotive service centers and product warranty
programs for automotive dealerships, as well as industrial coolants, specialty
fluids and cutting fluids used in metal-working. The Corporate and Other segment
includes business activities for corporate operations.
The Company evaluates segment performance based on pretax profit or loss
from operations, including intercompany interest income and expense allocations
and other intercompany charges, but excluding certain expenses for goodwill
amortization, litigation and environmental matters and nonrecurring gains and
losses. Excluded items are generally considered part of corporate activities.
Segment assets are those assets used in the operations of each segment and
include amounts for intercompany cash advances, accounts receivable and notes
receivable. The Company does not allocate certain items to its segments, such as
various goodwill and tax assets. Assets included in the Corporate and Other
category include corporate assets which are principally cash and cash
equivalents, prepaid expenses, other receivables and intercompany cash advances,
accounts receivable and notes receivable. Assets exclude investments in
consolidated subsidiaries.
Sales to the largest customer of the Automotive and Industrial Components
segment were 10.0% of consolidated net sales during 1998 (10.1% in 1997 and
1996). Net sales included in the geographic information are attributed to
countries based on the location of the business unit reporting the sales. The
Company does not have any significant intersegment sales.
37
<PAGE> 24
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
Wynn's International, Inc.
13. OPERATING SEGMENTS AND RELATED INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Automotive
and Industrial Specialty Corporate Segment Consolidated
(In thousands) Components Chemicals and Other Totals Eliminations Totals
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1998 Net sales $175,823 $161,052 $ -- $336,875 $ -- $336,875
Interest income 223 980 1,789 2,992 (636) 2,356
Interest expense 12 73 801 886 (636) 250
Depreciation and
amortization 6,583 1,739 43 8,365 -- 8,365
Pretax profit (loss) 29,234 17,736 (4,329) 42,641 -- 42,641
Assets 106,281 101,971 34,916 243,168 (17,572) 225,596
Expenditures for
long-lived assets 8,745 1,673 17 10,435 -- 10,435
- ---------------------------------------------------------------------------------------------------------------------------------
1997 Net sales $168,266 $152,687 $ -- $320,953 $ -- $320,953
Interest income 149 730 1,604 2,483 (377) 2,106
Interest expense 3 105 506 614 (377) 237
Depreciation and
amortization 6,562 1,681 40 8,283 -- 8,283
Pretax profit (loss) 26,446 20,095 (5,308) 41,233 -- 41,233
Assets 100,051 87,258 37,434 224,743 (17,652) 207,091
Expenditures for
long-lived assets 9,896 1,850 65 11,811 -- 11,811
- ---------------------------------------------------------------------------------------------------------------------------------
1996 Net sales $140,513 $148,018 $ -- $288,531 $ -- $288,531
Interest income 144 963 1,230 2,337 (574) 1,763
Interest expense 3 124 664 791 (574) 217
Depreciation and
amortization 5,628 1,743 34 7,405 -- 7,405
Pretax profit (loss) 23,170 16,442 (5,694) 33,918 -- 33,918
Assets 88,007 83,382 51,803 223,192 (18,087) 205,105
Expenditures for
long-lived assets 7,920 1,527 17 9,464 -- 9,464
=================================================================================================================================
</TABLE>
Interest income and expense eliminations include amounts for intercompany
interest. Asset eliminations primarily include amounts for intercompany accounts
receivable and notes receivable, and the reclassification of current deferred
tax liabilities against current deferred tax assets.
The following table presents net sales by country based on the location of
the subsidiary:
(In thousands) 1998 1997 1996
- -------------------------------------------------------------
United States $238,684 $224,769 $194,582
France 41,334 38,710 40,750
Other foreign 56,857 57,474 53,199
- -------------------------------------------------------------
Total $336,875 $320,953 $288,531
=============================================================
The following table presents long-lived assets by country based on the
location of the assets:
(In thousands) 1998 1997 1996
- -------------------------------------------------------------
United States $54,153 $51,530 $47,516
Foreign 7,561 7,678 8,037
- -------------------------------------------------------------
Total $61,714 $59,208 $55,553
=============================================================
38
<PAGE> 25
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
Wynn's International, Inc.
14. QUARTERLY INFORMATION (UNAUDITED)
Quarterly information is as follows for the two years ended December 31,
1998:
<TABLE>
<CAPTION>
First Second Third Fourth Total
(Dollars in thousands, except per share amounts) Quarter Quarter Quarter Quarter Year
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1998 Net sales $85,809 $85,589 $79,835 $85,642 $336,875
Gross profit 33,683 33,864 30,350 31,890 129,787
Net income 7,494 7,149 6,124 6,523 27,290
Earnings per share:
Basic $.39 $.37 $.32 $.35 $1.43
Diluted $.38 $.36 $.31 $.34 $1.39
- -------------------------------------------------------------------------------------------------------------------------
1997 Net sales $77,887 $81,040 $79,356 $82,670 $320,953
Gross profit 30,272 30,776 29,512 30,324 120,884
Income from continuing
operations 6,302 6,499 6,416 6,677 25,894
Income from discontinued
operations -- 319 -- -- 319
Net income 6,302 6,818 6,416 6,677 26,213
Earnings per share:
Continuing operations:
Basic $.31 $.33 $.33 $.35 $1.32
Diluted $.30 $.32 $.32 $.34 $1.28
Discontinued operations:
Basic -- $.02 -- -- $ .01
Diluted -- $.02 -- -- $ .01
Net income:
Basic $.31 $.35 $.33 $.35 $1.33
Diluted $.30 $.34 $.32 $.34 $1.29
=========================================================================================================================
</TABLE>
The total of the quarterly per share amounts may not equal the total earnings
per share for the year because the calculations are based on the weighted
average number of shares outstanding during the periods.
The above tables reflect retroactively the 3 for 2 stock split effected in 1997.
See Note 2.
39
<PAGE> 26
Report of Independent Auditors
- --------------------------------------------------------------------------------
The Board of Directors and Stockholders, Wynn's International, Inc.
We have audited the accompanying consolidated balance sheets of Wynn's
International, Inc. as of December 31, 1998 and 1997, and the related
consolidated statements of income, stockholders' equity and cash flows for each
of the three years in the period ended December 31, 1998. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Wynn's
International, Inc. at December 31, 1998 and 1997, and the consolidated results
of its operations and its cash flows for each of the three years in the period
ended December 31, 1998, in conformity with generally accepted accounting
principles.
/s/ Ernst & Young LLP
Los Angeles, California
January 27, 1999
40
<PAGE> 27
Corporate Information
- --------------------------------------------------------------------------------
Wynn's International, Inc.
NUMBER OF
STOCKHOLDERS
There were 844 stockholders of
record at March 8, 1999.
STOCK EXCHANGE
LISTING
New York Stock Exchange
Ticker Symbol: WN
COMMON STOCK PRICES AND
CASH DIVIDENDS PER SHARE: 1998-1997
The stock price and cash dividends of the Company's Common Stock for the past
two years are shown in the following table:
<TABLE>
<CAPTION>
Quarter 1st 2nd 3rd 4th
- --------------------------------------------------------------------
<S> <C> <C> <C> <C>
1998 High $25 3/4 $25 1/16 $20 3/8 $22 3/4
Low 20 18 11/16 15 5/8 15 1/16
Dividends $.06 $.06 $.06 $.06
- --------------------------------------------------------------------
1997 High $16 1/16 $19 5/16 $23 1/4 $24 1/8
Low 12 13/16 14 3/4 17 15/16 20 7/16
Dividends $.0533 $.0533 $.0533 $.0533
- --------------------------------------------------------------------
</TABLE>
The above table reflects retroactively the 3 for 2 stock split effected in 1997.
See Note 2.
41
<PAGE> 1
EXHIBIT 21
WYNN'S INTERNATIONAL, INC.
SUBSIDIARIES OF REGISTRANT
<TABLE>
<CAPTION>
State or other
Jurisdiction of
Name Incorporation
- ---- ---------------
<S> <C>
Wynn Oil Company............................................. California
Medallion Warranty Services, Inc....................... California
WECI Warranty Services, Inc............................ Florida
Wynn's Extended Care, Inc.............................. California
Wynn's Australia Pty. Limited.......................... Australia
Wynn's Belgium N.V..................................... Belgium
Wynn's Mekuba India Private Limited............... India
Wynn's Nederland B.V.............................. Netherlands
Wynn's Canada, Ltd..................................... Canada
Wynn's Deutschland GmbH................................ Germany
Wynn's Espana, S.A..................................... Spain
Wynn's France, S.A..................................... France
Wynn's Automotive France Consumer................. France
Wynn's Automotive France Professional............. France
Wynn's Reseau................................ France
Wynn's Industrie.................................. France
Wynn's Friction Proofing de Mexico S.A. de C.V......... Mexico
Wynn Oil (N.Z.) Limited................................ New Zealand
Wynn Oil (South Africa) (Pty.) Limited................. South Africa
Wynn Oil (U.K.) Limited................................ England
Wynn Oil Venezuela, S.A................................ Venezuela
Wynn's Export, Inc........................................... U.S. Virgin Islands
Alkid Corporation............................................ California
Robert Skeels & Company...................................... California
Wynn's Climate Systems, Inc.................................. Texas
Lone Star Manufacturing Co., Inc....................... Texas
Guidedetail Limited.......................................... England
Wynn's (UK) Limited.......................................... England
Wynn's Fluid Power, Inc...................................... Delaware
Wynn's-Precision, Inc.................................. Delaware
PRPC, Inc......................................... Tennessee
Wynn's-Precision Canada Ltd....................... Canada
Wynn's-Precision (U.K.) Ltd.................. England
PRP Seals, Ltd............................... Canada
Dynamic Seals, Inc..................................... Delaware
</TABLE>
Except for Wynn Oil Venezuela, S.A. ("Wynn's Venezuela") and Wynn's
Mekuba India Private Limited ("Wynn's India"), all of the above-named
subsidiaries are 100% owned by Registrant. Wynn's Venezuela and Wynn's India are
each 51% owned by Registrant.
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Annual Report
(Form 10-K) of Wynn's International, Inc. of our report dated January 27, 1999,
included in the 1998 Annual Report to Stockholders of Wynn's International, Inc.
Our audits also included the financial statement schedule of Wynn's
International, Inc. in Item 14(a). This schedule is the responsibility of the
Company's management. Our responsibility is to express an opinion based on our
audits. In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic consolidated financial statements taken as a
whole, presents fairly in all material respects the information set forth
therein.
We also consent to the incorporation by reference in the Registration
Statement (Form S-8 No. 2-68157) pertaining to the Amended and Restated 1980
Stock Option and Appreciation Rights Plan and the 1982 Incentive Stock Option
Plan of Wynn's International, Inc., the Registration Statements (Form S-8 Nos.
33-30296, 33-64090 and 333-39045) pertaining to the Wynn's International, Inc.
Stock-Based Incentive Award Plan, the Registration Statement (Form S-8 No.
33-53917) pertaining to the Wynn's International, Inc. Non-Employee Directors'
Stock Option Plan, the Registration Statement (Form S-8 No. 33-53921) pertaining
to the Wynn's International, Inc. Employee Stock Purchase Plan, and in the
related Prospectuses of our report dated January 27, 1999, with respect to the
consolidated financial statements incorporated herein by reference, and our
report included in the preceding paragraph with respect to the financial
statement schedule included in the Annual Report (Form 10-K) of Wynn's
International, Inc. for the year ended December 31, 1998.
/s/ ERNST & YOUNG LLP
Los Angeles, California
March 25, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS CONTAINED IN FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 46,511
<SECURITIES> 0
<RECEIVABLES> 65,784
<ALLOWANCES> 904
<INVENTORY> 34,347
<CURRENT-ASSETS> 163,882
<PP&E> 107,169
<DEPRECIATION> 56,972
<TOTAL-ASSETS> 225,596
<CURRENT-LIABILITIES> 66,425
<BONDS> 0
0
0
<COMMON> 219
<OTHER-SE> 140,631
<TOTAL-LIABILITY-AND-EQUITY> 225,596
<SALES> 336,875
<TOTAL-REVENUES> 339,231
<CGS> 207,088
<TOTAL-COSTS> 207,088
<OTHER-EXPENSES> 88,971
<LOSS-PROVISION> 281
<INTEREST-EXPENSE> 250
<INCOME-PRETAX> 42,641
<INCOME-TAX> 15,351
<INCOME-CONTINUING> 27,290
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 27,290
<EPS-PRIMARY> 1.43
<EPS-DILUTED> 1.39
</TABLE>
