<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934.
For the fiscal year ended March 31, 1994 OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934.
For the transition period from ____________________ to _____________________
Commission file number 0-14946
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ARMOR ALL PRODUCTS CORPORATION
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(exact name of registrant as specified in its charter)
DELAWARE 33-0178217
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
6 Liberty, Aliso Viejo, California 92656
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(Address of principal executive offices) (Zip Code)
(714) 362-0600
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(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None.
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.01 Par Value
(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
---- ----
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K 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. [_]
Aggregate market value of voting stock held by nonaffiliates of the Registrant
at June 1, 1994: $185,977,580
Number of shares of common stock outstanding at June 1, 1994: 21,172,986
Documents Incorporated by Reference
Portions of the Registrant's Annual Report to Stockholders for the fiscal year
ended March 31, 1994 are incorporated by reference into Parts II and IV of this
report.
Portions of the Registrant's Proxy Statement for the Annual Meeting of
Stockholders to be held on July 22, 1994 are incorporated by reference into Part
III of this report.
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TABLE OF CONTENTS
PART I
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Item Pages
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1. Business............................................................. 1
2. Properties........................................................... 4
3. Legal Proceedings.................................................... 4
4. Submission of Matters to a Vote of Security Holders.................. 5
Executive Officers of the Registrant................................. 5
PART II
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5. Market for Registrant's Common Stock and Related Stockholder Matters 6
6. Selected Financial Data.............................................. 6
7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.............................................. 6
8. Financial Statements and Supplementary Data.......................... 6
9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure............................................... 6
PART III
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10. Directors and Executive Officers of the Registrant................... 7
11. Executive Compensation............................................... 7
12. Security Ownership of Certain Beneficial Owners and Management....... 7
13. Certain Relationships and Related Transactions....................... 7
PART IV
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14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.... 8
Signatures.......................................................... 10
</TABLE>
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PART I
ITEM 1. BUSINESS
Substantially all of the Company's operations are currently in one business
segment, marketing branded appearance enhancement products targeted primarily
for the do-it-yourself automotive appearance aftermarket. In January 1994, the
Company began marketing a line of branded home care products.
Prior to May 1993, McKesson Corporation ("McKesson") owned approximately
83% of the Company's outstanding shares of common stock. In May 1993, McKesson
reduced its ownership level to approximately 57% through a sale of shares to the
public. In March 1994, McKesson issued debentures which are exchangeable into
additional shares of the Company's common stock owned by McKesson at a price of
$25.94 per share at any time through February 2004, subject to McKesson's right
to pay cash equal to the market price of the stock in lieu of making the
exchange. If all such debentures were actually exchanged, McKesson's
ownership level would be reduced to approximately 25%.
PRODUCTS
The Company develops and markets a broad line of automotive appearance
chemicals under four brand names:
Armor All/(R)/, Rain Dance/(R)/, Rally/(R)/ and No. 7/(R)/. The Company also
markets home care products under the E-Z Deck Wash/ (R)/ and E-Z D/TM/ brand
names.
Armor All Brand
The Company develops and markets protectants, waxes, washes and other
cleaning aids under the Armor All name.
The Company's principal product, Armor All/(R)/ Protectant, is
designed to protect and beautify natural and synthetic polymer materials and is
primarily used on automobile surfaces made of rubber, vinyl and plastic, such as
dashboards, seats, vinyl tops, door panels, tire sidewalls and rubber bumpers.
Sales of Armor All Protectant, including the new low-gloss version mentioned
below, accounted for 68% and 70% of the Company's revenues in fiscal 1994 and
1993, respectively.
Armor All/(R)/ Tire Foam/(R)/ Protectant, introduced in November
1991, is designed to clean, shine and protect tire sidewalls without wiping.
Armor All/(R)/ Leather Care Protectant, also introduced in November 1991, is
designed primarily for leather upholstery. The Company also markets a liquid
car wax, a multi-purpose cleaner, and a car wash liquid concentrate under the
Armor All name.
In December 1993, the Company began shipping three new products under
the Armor All brand name: Armor All Protectant Low-Gloss Natural Finish/TM/, a
low-gloss version of Armor All Protectant designed to minimize dashboard glare
for consumers who prefer a less shiny appearance; Armor All/(R)/
QuickSilver/TM/ Wheel Cleaner, a spray-on wheel cleaner designed for use on
wheels, wheel covers and hubcaps; and Armor All /(R)/ Spot & Wash/TM/
Concentrate, a car wash product designed to remove bugs, tar residue and tree
sap from car finishes.
Rain Dance Brand
The Company markets polishes, waxes and car wash products under the
Rain Dance name. In November 1991, the Company introduced Rain Dance/(R)/
Advanced Formula/TM/ Car Polish, and in January 1993, the Company introduced two
additional car polishes, Rain Dance/(R)/ Light Car Formula Polish and Rain
Dance/(R)/ Dark Car Formula Polish, with different light reflectant
characteristics. Liquid and paste car wax and a variety of car wash products
are also marketed under the Rain Dance name.
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Rally and No. 7 Brands
The Company markets cream and liquid waxes under the Rally name.
Under the No. 7 name, the Company markets a variety of polishing and rubbing
compounds and other cleaning aids.
E-Z Deck Wash and E-Z D Brands
The Company acquired the E-Z Deck Wash and E-Z D brands on January 28,
1994. The E-Z Deck Wash product cleans and restores wood surfaces such as patio
decks, siding and fences. Products in the E-Z D line include a vinyl wash, a
paint preparation treatment, a roof wash , an aluminum wash and a mobile
home/recreational vehicle wash. The E-Z Deck Wash and E-Z D products are being
marketed under the Armor All name.
GEOGRAPHIC MARKETS
The Company's products are sold predominantly in the United States and
Canada, with additional sales occurring in 70 other countries. In fiscal 1994,
86% of sales were in the United States, 6% in Canada and 8% in other foreign
countries, principally Australia, Germany, Japan, Mexico and the United Kingdom.
The Company does not have large fixed capital investments in its foreign
operations. Foreign currency exchange fluctuations have not had a significant
impact on the Company's operating results.
SALES AND MARKETING
In the United States and Canadian automotive appearance market, a
sales force of 13 employees accounted directly for over 50% of the Company's
revenues in fiscal 1994. In addition, the Company's sales force oversees 21
independent manufacturers' representative organizations that also market the
Company's products. Primary customers include mass merchandise retailers, auto
supply stores, warehouse clubs, hardware stores and other retail outlets. The
Company believes that its automotive appearance products are sold at over
100,000 retail outlets.
In the United States home care market, a sales force of 4 employees
oversees 18 manufacturers' representative organizations that market the
Company's products. Primary customers include home centers, warehouse clubs,
mass merchandise retailers and hardware stores. In Canada, the Company licenses
the distribution of its home care products to an independent sales agency.
The Company's largest customers represent an increasing percentage of
its revenues. Sales to the Company's 20 largest customers accounted for 65%,
63% and 59% of the Company's consolidated revenues in fiscal 1994, 1993 and
1992, respectively. Sales to the Company's two largest customers, Wal-Mart
Stores, Inc. (and its affiliates) and Kmart Corporation (and its affiliates),
accounted for the following respective percentages of the Company's revenues:
17% and 8% in fiscal 1994, 15% and 11% in fiscal 1993, and 12% and 11% in fiscal
1992.
The Company's direct sales force works closely with the Company's
largest customers on joint marketing and promotional activities. The Company
also assists its customers with inventory management supported in certain cases,
by electronic data interchange ("EDI") links between the Company and the
customer. In addition, EDI provides the Company with valuable marketing
information. Among other things, the Company uses EDI point-of-sale statistics
to analyze geographic purchase patterns, measure the success of test marketing
programs and monitor sales of holiday gift packs and other time-sensitive
promotions.
The Company's management assists in sales and marketing efforts by
providing national advertising and promotional support and retail merchandising
management assistance, including product information and sales training. The
Company's promotional activities target both trade accounts and retail
consumers. Over the past three years, the Company has increased the proportion
of marketing funds which are offered to trade customers as fixed sums in return
for specific promotional activities, as opposed to more general cooperative
advertising arrangements. From time to time, the Company uses various retail
sales incentive devices, such as coupons, rebates, "Bonus Packs" (e.g., 10
ounces for the price of 8), merchandise with attached free samples, and other
special offers to stimulate retail sales.
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Retail sales of the Company's products are seasonal and are highest
between April and September. However, sales to the Company's customers are
highest in its fourth fiscal quarter (from January through March). Consistent
with industry practice, the Company offers extended payment terms in conjunction
with its winter promotional activities.
International sales are effected through sales offices in Canada and
the United Kingdom, through foreign distributors, and through a marketing and
distribution alliance with S. C. Johnson & Son, Inc. Under an agreement between
the Company and S.C. Johnson, S. C. Johnson is the exclusive distributor of
Armor All Protectant and certain of the Company's other products in Germany,
Japan and Mexico, subject to agreement with the Company on annual business and
marketing plans for each country. Under the agreement, S. C. Johnson pays
virtually all selling and marketing expenses, and the Company and S.C. Johnson
share in the profits or losses. The S.C. Johnson agreement expires in June
2001, with automatic five-year renewals unless either party provides 12 months'
prior notice. The Company will have the right to terminate the agreement on a
country-by-country basis if S.C. Johnson fails to meet certain revenue
objectives over specified periods, subject to S.C. Johnson's right to avoid
termination by compensating the Company for any shortfall. S. C. Johnson is
also the exclusive distributor of Armor All Protectant in several Southeast
Asian countries under separate agreements that do not involve profit or loss
sharing.
MANUFACTURING AND PACKAGING
The Company's products are manufactured by contract packagers. The
Company's relationships with its three most important packagers have lasted for
6, 9 and 21 years, respectively. Subject to contractual arrangements, the
Company periodically reevaluates its selection of packagers and believes that
other acceptable packagers are readily available.
The Company avoids significant investments in inventory. In general,
the Company's full-service packagers are responsible for purchasing product
ingredients and approved component packaging materials. The Company negotiates
the raw material supply arrangements on behalf of its packagers. The packagers
blend, package and warehouse the finished product. With certain exceptions, the
full-service packagers own all the raw materials and finished products in their
possession and transfer title to the Company just prior to shipment to the
Company's customers. In the case of Armor All Protectant and Armor All Tire
Foam Protectant, the Company premixes a concentrate which it sells to the full-
service packagers. For certain other products, the Company has title to raw
materials and finished products and pays a manufacturing fee to the packager.
The Company's products are manufactured in five principal locations in
the United States, one location in Canada and one location in Australia.
Protectants are manufactured at five of these locations, waxes at one location,
and home care products at the other location. Management believes that the
existing packagers can accommodate the Company's production needs for the
foreseeable future.
The Company has alternative sources for the ingredients used in, and
packaging components for, all of its products. The Company has contracts with
certain suppliers to provide a continued supply of the primary chemical
ingredients and packaging components used in producing its products, which
expire by their terms on various dates through March 1995.
TRADEMARKS AND PATENTS
The Company's principal trademarks are:
. ARMOR ALL(R)
. Symbol of a male VIKING figure surrounded by a rainbow design
. Symbol of a male VIKING figure surrounded by a sunburst design
. RAIN DANCE(R)
. RALLY(R)
. NO. 7(R)
. E-Z DECK WASH(R)
. E-Z D/TM/
The Company also owns other registered and unregistered trademarks.
All of the principal trademarks are registered in the United States and Canada.
The ARMOR ALL and VIKING trademarks are also registered in over 80 other
countries. All of the other principal trademarks are also registered in at
least several other countries. The Company believes it has taken all necessary
steps to preserve the registration of its trademarks.
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<PAGE>
The Company also owns a process patent on ARMOR ALL Protectant and a
patent on RAIN DANCE wax, and has applied for patents on ARMOR ALL QuickSilver
Wheel Cleaner and ARMOR ALL Spot & Wash Concentrate. In addition, the Company
owns a patent on an E-Z DECK WASH product and has other domestic and foreign E-Z
DECK WASH patents pending. The Company's process patent on ARMOR ALL Protectant
will expire in 1996. Management believes that the Company's trademarks are more
important assets than its patents, and that the termination or invalidity of its
patents would not have a materially adverse effect on the Company.
COMPETITION
In the domestic protectant market, the Company has two principal
competitors, STP/(R)/ Son-of-a-Gun/(R)/ Protectant and Turtle Wax/(R)/ Formula
2001/(R)/, and several secondary competitors. Armor All Tire Foam Protectant
has three principal competitors, Turtle Wax/(R)/ Formula 2001, STP/(R)/ Son-of-
a-Gun/(R)/ Tire Care and No Touch/(R)/, and several secondary competitors.
Armor All brand cleaner competes against many specialty automotive cleaner
products. Armor All brand wax and wash products and all of the Rain Dance and
Rally brand products compete with numerous wash, wax and polish products in the
automotive aftermarket. The No. 7 brand products compete with many wash and
specialty cleaning products. Competition in international markets varies by
country.
In the domestic home care products market, the E-Z Deck Wash and E-Z D
brand products have two principal competitors, Thompson's/(R)/ Deck Wash and
Olympic/(R)/ Deck Cleaner, and several secondary competitors.
EMPLOYEES
At March 31, 1994, the Company employed 128 persons. None are
represented by unions. The Company believes its employee relations are good.
ITEM 2. PROPERTIES
The Company owns its headquarters facility located in Aliso Viejo,
California. The facility, which was built in 1989, comprises 45,000 square feet
of office space on a 4.6 acre site.
The Company also leases approximately 17,000 square feet of warehouse
space in Aliso Viejo, California. The facility is used primarily for
warehousing certain components, finished goods and promotional items. The
Company also mixes the Armor All Protectant and Armor All Tire Foam Protectant
concentrates and performs various special product-packaging functions at this
location. The Company utilizes limited space in various public warehouses in
the United States and abroad for temporary inventory storage and shipping.
The Company maintains sales offices in Tennessee, Canada and the
United Kingdom, each with less than 2,000 square feet. It conducts its
laboratory research and development activities at a leased facility of
approximately 5,000 square feet located near the Company's headquarters in Aliso
Viejo, California.
The Company believes that these properties will be sufficient to meet
its needs for the next several years.
ITEM 3. LEGAL PROCEEDINGS
In addition to commitments and obligations which arise in the ordinary
course of business, the Company is subject to various claims, proceedings and
legal actions from time to time involving contracts, competitive practices,
advertising claims, trademark rights, product liability claims, tax assessments
and other matters arising out of the conduct of the Company's business.
Management believes that, based on current knowledge, the outcome of any such
pending matters will not have a material adverse effect on the Company's
financial position.
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders, through the
solicitation of proxies or otherwise, during the quarter ended March 31, 1994.
EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth information concerning the executive
officers of the Registrant as of June 1, 1994.
There are no family relationships between any of the executive
officers or directors of the Registrant. The executive officers are elected
annually to serve until the first meeting of the Board of Directors following
the next annual meeting of stockholders and until their successors are elected
and have qualified, or until death, resignation or removal, whichever is sooner.
<TABLE>
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Name Age Position with Registrant and Business Experience
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David E. McDowell 51 Chairman of the Board since April 1992.
President and Chief Operating Officer of McKesson
since January 1992. Vice President and General
Manager, Quality and Chief Information Officer of
International Business Machines Corporation (IBM)
from November 1990 until January 1992; President
of IBM's National Service Division from July 1987
until November 1990. Chairman of the Compensation
Committee and member of the Audit Committee of the
Board. Service with the Company - 2 years.
Kenneth M. Evans 52 President and Chief Executive Officer since April
1991; Group Vice President of the Do-it-Yourself
Products Group of L. & F. Products, a subsidiary
of Eastman Kodak from 1989 to April 1991. Service
with the Company - 3 years.
Mervyn J. McCulloch 50 Executive Vice President and Chief Financial
Officer since March 1990; Partner of Deloitte &
Touche, a public accounting firm, from 1972 to
March 1990. Service with the Company - 4 years.
Michael A. Caron 43 Senior Vice President since October 1991;
President of Armor All International, a division
of the Company, since August 1993; Senior Vice
President - Marketing from October 1991 to August
1993; Senior Vice President, Marketing/Inter-
national Operations from April 1989 to
October 1991. Service with the Company - 9 years.
Steven L. Kliff 36 Senior Vice President, Consumer Products,
since August 1993; Vice President, Sales and
Product Development from November 1991 to August
1993; Vice President, Product and Business
Development from September 1991 to November 1991;
From February 1986 to August 1991, held various
positions with Blistex Incorporated, a
manufacturer of over-the-counter topical
medications, including Director of Marketing/Chief
Marketing Officer and Director of Strategic
Planning. Service with the Company - 3 years.
</TABLE>
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<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
(A) MARKET INFORMATION
The Company's Common Stock, par value of $0.01 per share, is traded in
the over-the-counter market under the symbol ARMR. The high and low closing
prices reported by the NASDAQ National Market System appear in financial note
12, "Quarterly Financial Information" (unaudited) on page 23 of the 1994 Annual
Report to Stockholders, which information is incorporated by reference.
(B) HOLDERS
The approximate number of record holders of the Company's common stock
as of May 15, 1994 was 350. The estimated number of beneficial holders was
2,500.
(C) DIVIDENDS
Dividend information is included in financial note 12, "Quarterly
Financial Information" (unaudited) on page 23 of the 1994 Annual Report to
Stockholders, which information is incorporated by reference.
ITEM 6. SELECTED FINANCIAL DATA
Selected financial data appear on page 1 of the 1994 Annual Report to
Stockholders, which information is incorporated by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Management's discussion and analysis of financial condition and results
of operations appears in the section entitled "Financial Review" on pages 12 to
14 of the 1994 Annual Report to Stockholders, which information is incorporated
by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Financial statements appear on pages 15 to 24 of the 1994 Annual Report
to Stockholders, which financial statements are incorporated herein by
reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information with respect to Directors of the Company is incorporated by
reference from the Registrant's 1994 Proxy Statement. Certain information
relating to Executive Officers of the Company appears on page 5 of this Form 10-
K Annual Report. The information with respect to this item required by Item 405
of Regulation S-K is incorporated by reference from the Company's 1994 Proxy
Statement.
ITEM 11. EXECUTIVE COMPENSATION
Information with respect to this item is incorporated by reference from
the Registrant's 1994 Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information with respect to this item is incorporated by reference from
the Registrant's 1994 Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information with respect to certain transactions with McKesson and
management is incorporated by reference from the Registrant's 1994 Proxy
Statement.
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(A) EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
The following consolidated financial statements of the Company, other
financial information and independent auditors' report are contained in the 1994
Annual Report to Stockholders and are incorporated by reference.
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Annual Report
Page
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Consolidated Financial Statements
Consolidated Balance Sheets at March 31, 1994 and 1993 15
Consolidated Statements of Income for the years ended
March 31, 1994, 1993 and 1992 16
Consolidated Statements of Stockholders' Equity for the
years ended March 31, 1994, 1993 and 1992 17
Consolidated Statements of Cash Flows for the years
ended March 31, 1994, 1993 and 1992 18
Notes to Consolidated Financial Statements 19
Independent Auditors' Report 24
The following are included herein: 10-K Page
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Independent Auditors' Report 11
Consolidated Supplementary Financial Schedules
for the years ended March 31, 1994, 1993 and 1992
II. Amounts Receivable from Related Parties and
Underwriters, Promoters, and Employees
(Other than Related Parties) 12
VIII. Valuation and Qualifying Accounts and Reserves 13
X. Supplementary Income Statement Information 14
</TABLE>
Financial statements and schedules not included or incorporated by
reference herein have been omitted because of the absence of conditions under
which they are required or because the required information, where material, is
shown in the financial statements, financial notes or supplementary financial
information.
See Exhibit Index on pages 15 and 16.
The following exhibits listed on the Exhibit Index are included herein:
(3)B By-Laws of the Company as amended through March 21, 1994.
(10)A Services Agreement dated as of July 1, 1986 between the Company
and McKesson, as amended through March 23, 1993.
(10)E Form of Termination Agreement dated as of May 15, 1994 between
the Company and certain executive officers.
(10)N Armor All Products Corporation Supplemental Profit-Sharing Investment
Plan adopted August 1, 1989.
(10)P Letter Agreement dated November 4, 1993 amending the Distribution
Agreement between S.C.Johnson & Son, Inc. and the Company (portions
of which are not disclosed pursuant to the Company's request for
confidential treatment).
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(10)Q Asset Purchase and Sale Agreement dated January 26, 1994 between
Agri-Products Special Markets, Inc. and the Company (portions of
which are not disclosed pursuant to the Company's request for
confidential treatment).
(13) Portions of the Company's Annual Report to Stockholders for the fiscal
year ended March 31, 1994.
(21) Subsidiaries of the Registrant.
(23) Independent Auditors' Consent.
(B) REPORTS ON FORM 8-K
There were no reports filed on Form 8-K during the quarter ended
March 31, 1994.
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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.
ARMOR ALL PRODUCTS CORPORATION
Dated: May 17, 1994
------------
By /s/Kenneth M. Evans
--------------------------------------
Kenneth M. Evans
President and Chief Executive Officer
By /s/Mervyn J. McCulloch
--------------------------------------
Mervyn J. McCulloch
Executive Vice President and
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below on May 17, 1994 by the following persons on behalf
of the Registrant and in the capacities indicated.
s/William A. Armstrong /s/David E. McDowell
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William A. Armstrong, Director David E. McDowell, Chairman of the
Board and Director
/s/Jon S. Cartwright /s/Karen Gordon Mills
- - - -------------------------------- ----------------------------------
Jon S. Cartwright, Director Karen Gordon Mills, Director
/s/Kenneth M. Evans /s/Joseph A. Sasenick
- - - -------------------------------- ----------------------------------
Kenneth M. Evans, President Joseph A. Sasenick, Director
and Chief Executive
Officer and Director
/s/David L. Mahoney
- - - -------------------------------- ----------------------------------
David L. Mahoney, Director Alan Seelenfreund, Director
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INDEPENDENT AUDITORS' REPORT
To the Board of Director and Stockholders
of Armor All Products Corporation:
We have audited the consolidated financial statements of Armor All Products
Corporation and subsidiaries as of March 31, 1994 and 1993, and for each of the
three years in the period ended March 31, 1994, and have issued our report
thereon dated April 22, 1994; such consolidated financial statements and report
are included in your 1994 Annual Report to Stockholders and are incorporated
herein by reference. Our audits also included the consolidated financial
statement schedules of Armor All Products Corporation, listed in Item 14(a).
These consolidated financial statement schedules are the responsibility of the
Corporation's management. Our responsibility is to express an opinion based on
our audits. In our opinion, such consolidated financial statement schedules,
when considered in relation to the basic consolidated financial statements taken
as a whole, present fairly in all material respects the information set forth
therein.
DELOITTE & TOUCHE
Costa Mesa, California
April 22, 1994
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SCHEDULE II
ARMOR ALL PRODUCTS CORPORATION
AMOUNTS RECEIVABLE FROM RELATED PARTIES AND UNDERWRITERS,
PROMOTERS, AND EMPLOYEES (OTHER THAN RELATED PARTIES)
FOR THE YEARS ENDED MARCH 31, 1994, 1993 AND 1992
(IN THOUSANDS)
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Column A Column B Column C Column D Column E
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Balances at End of Period
-------------------------
Due Due
Beginning Amounts Within After
of Year Additions Collected One Year One Year
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<S> <C> <C> <C> <C> <C>
Name of Debtor
- - - -------------------
Officers:
Year Ended March 31, 1994
- - - -------------------------
Kenneth M. Evans $ 25 $ -0- $ (25) $ -0- $ -0-
Steven L. Kliff(1) -0- 520 -0- -0- 520
Year Ended March 31, 1993
- - - -------------------------
Kenneth M. Evans 150 -0- (125) 25 -0-
Steven L. Kliff 290 -0- (290) -0- -0-
Year Ended March 31, 1992
- - - -------------------------
Kenneth M. Evans(2) -0- 550 (400) 125 25
Steven L. Kliff(3) -0- 290 -0- 290 -0-
</TABLE>
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NOTES: (1) Consists of a promissory note secured by real property in
Southern California. The principal amount of the note is due on the
earlier of the date the real property is sold or February 15, 1996.
Interest is payable monthly at 3.875% through August 15, 1994 and at
rates thereafter based on a specified market rate, subject to a
maximum increase of 1.0% in any six-month period.
(2) Includes a $450,000 loan used by the employee in connection with his
purchase of real property in Southern California after beginning
employment with the Company. The loan, which has been fully repaid,
was unsecured and noninterest-bearing.
(3) Represents a noninterest-bearing relocation loan which has been
fully repaid.
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SCHEDULE VIII
ARMOR ALL PRODUCTS CORPORATION
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FOR THE YEARS ENDED MARCH 31, 1994, 1993 AND 1992
(IN THOUSANDS)
<TABLE>
<CAPTION>
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Column A Column B Column C Column D Column E
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<S> <C> <C> <C> <C> <C>
Addditions Reduction
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Balance at Charged to Charged Account Balance
Beginning Costs and Against Written Offer, at End
Description of Year Expenses Revenues Net of Recoveries of Year
- - - ------------- ---------- ----------- ----------- ------------------ ---------
Year Ended March 31, 1994
- - - -------------------------
Reserves for:
Cash discounts* $1,122 $-0- $2,980 $(2,796) $1,306
Doubtful accounts* 738 578 -0- 3 1,319
Year Ended March 31, 1993
- - - -------------------------
Reserves for:
Cash discounts* 1,020 -0- 2,871 (2,769) 1,122
Doubtful accounts* 628 539 -0- (429) 738
Year Ended March 31, 1992
- - - -------------------------
Reserves for:
Cash discounts* 1,058 -0- 2,669 (2,707) 1,020
Doubtful accounts* 1,732 385 -0- (1,489) 628
</TABLE>
*Included as a reduction of Accounts Receivable in the consolidated balance
sheets.
SCHEDULE X
-13-
<PAGE>
ARMOR ALL PRODUCTS CORPORATION
SUPPLEMENTARY INCOME STATEMENT INFORMATION
FOR THE YEARS ENDED MARCH 31, 1994, 1993 AND 1992
(IN THOUSANDS)
<TABLE>
<CAPTION>
- - - ---------------------------------------------------------------------------------------------
Column A Column B
- - - ---------------------------------------------------------------------------------------------
Charged to
Selling, General and Administrative Expenses
--------------------------------------------
Item 1994 1993 1992
- - - ----------------- --------------------------------------------
<S> <C> <C> <C>
Advertising and promotion $43,331 $41,233 $38,595
</TABLE>
All other items required by Rule 12-11 of Regulation S-X are omitted because
they are disclosed in the consolidated financial statements or are less than 1%
of total revenues.
-14-
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
- - - ------- ------------------------------------------------------------------
<S> <C>
(3)A* Certificate of Incorporation of the Company (Exhibit 3.1 to Form
S-1 Registration Statement No. 33-07506).
(3)B By-Laws of the Company as amended through March 21, 1994.
(10)A Services Agreement dated as of July 1, 1986 between the Company
and McKesson, as amended through March 23, 1993.
(10)B* Tax Allocation Agreement dated as of July 1, 1986 between the
Company and McKesson (Exhibit 10.2 to Form S-1 Registration
Statement No. 33-07506).
(10)C* Indemnity Agreement with Directors of the Company (Exhibit
10.3 to Form S-1 Registration Statement No. 33-07506).
(10)D* Form of Employment Agreement dated as of April 15, 1991
between the Company and its President and Chief Executive
Officer. (Exhibit (10)D to Form 10-K Report for the fiscal
year ended March 31, 1991).
(10)E Form of Termination Agreement dated as of May 15, 1994
between the Company and certain corporate officers.
(10)F* Form of Termination Agreement between the Company and its
President and Chief Executive Officer. (Exhibit (10)F
to Form 10-K Report for the fiscal year ended March 31, 1991).
(10)G* Supply Contract for Raw Materials (portions of which are not
disclosed pursuant to the Company's request for confidential
treatment). (Exhibit (10)G to Form 10-K Report for the fiscal
year ended March 31, 1992).
(10)H* Contract Packaging Agreement (portions of which are not
disclosed pursuant to the Company's request for confidential
treatment). (Exhibit (10)H to Form 10-K Report for the fiscal
year ended March 31, 1993).
(10)I* Armor All Products Corporation 1986 Stock Option Plan as amended
through January 21, 1993. (Exhibit (10)I to Form 10-K Report for
the fiscal year ended March 31, 1993).
(10)J* Armor All Products Corporation Deferred Compensation
Administration Plan. (Exhibit (19)C to Form 10-Q Report for
the quarter ended December 31, 1987).
(10)K* Armor All Products Corporation 1988 Restricted Stock Plan as
amended through July 23, 1993. (Exhibit (10) to Form 10-Q
Report for the quarter ended June 30, 1993).
(10)L* Armor All Products Corporation 1988 Long-Term Incentive Plan
as amended through November 28, 1990. (Exhibit (10)N to
Form 10-K Report for the fiscal year ended March 31, 1991).
(10)M* Armor All Products Corporation 1989 Short-Term Incentive Plan.
(Exhibit (10)P to Form 10-K Report for the fiscal year ended
March 31, 1989).
(10)N Armor All Products Corporation Supplemental Profit-Sharing
Investment Plan adopted August 1, 1989.
(10)O* Distribution Agreement between S.C. Johnson & Son, Inc. and
Armor All Products Corporation dated April 1, 1991 (portions
of which are not disclosed pursuant to the Company's request
for confidential treatment). (Exhibit (10)N to Form 10-K
Report for the fiscal year ended March 31, 1992).
</TABLE>
* Document has heretofore been filed with the Commission and is incorporated by
reference and made a part hereof.
-15-
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
- - - ------- ------------------------------------------------------------------
<S> <C>
(10)P Letter Agreement dated November 4, 1993 amending the Distribution
Agreement between S. C. Johnson & Son, Inc. and the Company
(portions of which are not disclosed pursuant to the Company's
request for confidential treatment).
(10)Q Asset Purchase and Sale Agreement dated January 26, 1994 between
Agri-Products Special Markets, Inc. and the Company (portions of
which are not disclosed pursuant to the Company's request for
confidential treatment).
(13) Portions of the Company's Annual Report to Stockholders for the
fiscal year ended March 31, 1994.
(21) Subsidiaries of the Registrant.
(23) Independent Auditors' Consent.
</TABLE>
-16-
<PAGE>
Executive Compensation Plans and Arrangements
---------------------------------------------
Armor All Products Corporation 1986 Stock Option Plan as amended through
January 21, 1993 - Exhibit (10)I to Form 10-K Report for the fiscal year ended
March 31, 1993.
Armor All Products Corporation Deferred Compensation Administration Plan -
Exhibit (19)C to Form 10-Q Report for the quarter ended December 31, 1987.
Armor All Products Corporation 1988 Restricted Stock Plan as amended through
July 23, 1993 - Exhibit (10) to Form 10-Q Report for the quarter ended June 30,
1993.
Armor All Products Corporation 1988 Long-Term Incentive Plan as amended through
November 28, 1990 - Exhibit (10)N to Form 10-K Report for the fiscal year ended
March 31, 1991.
Armor All Products Corporation 1989 Short-Term Incentive Plan - Exhibit (10)P
to Form 10-K Report for the fiscal year ended March 31, 1989.
Armor All Products Corporation Supplemental Profit-Sharing Investment Plan -
Exhibit (10)N to Form 10-K Report for the fiscal year ended March 31, 1994.
Form of Employment Agreement dated as of April 15, 1991 between the Company and
its President and Chief Executive Officer - Exhibit (10)D to Form 10-K Report
for the fiscal year ended March 31, 1991.
Form of Termination Agreement between the Company and its President and Chief
Executive Officer - Exhibit (10)F to Form 10-K Report for the fiscal year ended
March 31, 1991.
Form of Termination Agreement between the Company and certain executive
officers - Exhibit (10)E to Form 10-K Report for the fiscal year ended March
31, 1994.
-17-
<PAGE>
DATA STATED IN MILLIONS
ARMOR ALL PRODUCTS CORPORATION
VOLUNTARY SCHEDULE - CERTAIN FINANCIAL INFORMATION
<TABLE>
<CAPTION>
YEAR YEAR YEAR
TO DATE TO DATE TO DATE
ENDED ENDED ENDED
REGULATION NUMBER STATEMENT CAPTION 3/31/94 3/31/93 3/31/92
- - - ---------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
5-02-(1) Cash and cash items $ 26.3 $ 33.9 $ 15.7
5-02(2) Marketable securities
5-02(3)(a)(1) Accounts receivable - trade
5-02(3)(b)(1) Notes receivable trade
5-02(4) Allowance for doubtful accounts
5-02(5) Unearned income
5-02(6)a(1) Finished goods
5-02(9) Total current assets 99.2 93.4 68.5
5-02(18) Total assets 151.8 140.6 119.8
5-02(21) Total current liabilities 34.9 33.1 22.3
5-02(22) Bonds mortgages & similar debts
5-02(23) Indebtedness to related parties
5-02(24) Other liabilities
5-02(28) Preferred stock-mandatory redemption
5-02(29) Preferred stock-no mandatory redemption
5-02(30) Common stock .2 .2 .2
5-02(31)(a)(1) Additional paid in capital 58.2 57.3 58.0
5-02(31)(a)(2) Additional capital other (0.8) (0.2) (0.2)
5-02(31)(1)(3)(i) Retained earnings - appropriated
5-02(31)(1)(3)(ii) Retained earnings - unappropriated 58.4 49.3 40.3
5-03(b)(1)(a) Net sales tangible products 182.3 168.4 145.9
5-03(b)(1)(b) Operating revenues utilities & others
5-03(b)(1)(c) Income from rentals
5-03(b)(1)(d) Revenues from services
5-03(b)(1)(e) Other revenues
5-03(b)(2)(a) Cost of tangible goods sold
5-03(b)(2)(b) Operating expenses utilities & others
5-03(b)(2)(c) Cost of income from rentals
5-03(b)(2)(d) Cost of services
5-03(b)(2)(e) Cost of other revenues
5-03(b)(8) Interest & amortization of debt discount
5-03(b)(10) Income before taxes and other items 39.6 33.4 22.5
5-03(b)(11) Income tax expenses 17.0 14.2 9.6
5-03(b)(14) Income/loss from continuing operations
5-03(b)(15) Discontinued operations
5-03(b)(17) Extraordinary items
5-03(b)(18) Cumulative effect-chngs in acctg. prin.
5-03(b)(19) Net income or loss 22.6 19.2 12.9
</TABLE>
<PAGE>
EXHIBIT (3)B
BYLAWS
OF
ARMOR ALL PRODUCTS CORPORATION
a Delaware Corporation
(as amended through March 21, 1994)
<PAGE>
TABLE OF CONTENTS
ARMOR ALL PRODUCTS CORPORATION
BYLAWS
ARTICLE I Offices. . . . .. . . . . . . . . . . . . . . 1
Section 1. Registered Office . . . . . . . . . . . . . . 1
Section 2. Other Offices . . . . . . . . . . . . . . . . 1
ARTICLE II Stockholders' Meetings. . . . . . . . . . . . 1
Section 1. Place of Meetings . . . . . . . . . . . . . . 1
Section 2. Annual Meetings . . . . . . . . . . . . . . . 1
Section 3. Special Meetings. . . . . . . . . . . . . . . 1
Section 4. Notice of Meetings. . . . . . . . . . . . . . 2
Section 5. Quorum. . . . . . . . . . . . . . . . . . . . 3
Section 6. Voting Rights . . . . . . . . . . . . . . . . 3
Section 7. Voting Procedures and Inspectors
of Election . . . . . . . . . . . . . . . 4
Section 8. List of Stockholders. . . . . . . . . . . . . 5
Section 9. Action Without Meeting. . . . . . . . . . . . 6
ARTICLE III Directors . . . . . . . . . . . . . . . . . . 6
Section 1. Number and Term of Office . . . . . . . . . . 6
Section 2. Powers. . . . . . . . . . . . . . . . . . . . 6
Section 3. Vacancies.. . . . . . . . . . . . . . . . . . 7
Section 4. Resignations and Removals . . . . . . . . . . 7
Section 5. Meetings. . . . . . . . . . . . . . . . . . . 7
Section 6. Quorum and Voting . . . . . . . . . . . . . . 8
Section 7. Action Without Meeting. . . . . . . . . . . . 9
Section 8. Fees and Compensation . . . . . . . . . . . . 9
Section 9. Committees. . . . . . . . . . . . . . . . . . 9
ARTICLE IV Officers. . . . . . . . . . . . . . . . . . . 11
Section 1. Officers Designated . . . . . . . . . . . . . 11
Section 2. Tenure and Duties of Officers . . . . . . . . 11
ARTICLE V Execution of Corporate Instruments and Voting
of Securities Owned by the Corporation . . 12
Section 1. Execution of Corporate Instruments. . . . . . 12
i
<PAGE>
Section 2. Voting of Securities Owned by the
Corporation. . . . . . . . . . . . . . . . 13
ARTICLE VI Shares of Stock . . . . . . . . . . . . . . . 13
Section 1. Form and Execution of Certificates. . . . . . 13
Section 2. Lost Certificates . . . . . . . . . . . . . . 14
Section 3. Transfers . . . . . . . . . . . . . . . . . . 14
Section 4. Fixing Record Dates . . . . . . . . . . . . . 14
Section 5. Registered Stockholders . . . . . . . . . . . 15
ARTICLE VII Other Securities of the Corporation . . . . . 15
ARTICLE VIII Corporate Seal. . . . . . . . . . . . . . . . 16
ARTICLE IX Indemnification of Officers, Directors,
Employees and Agents . . . . . . . . . . . 16
Section 1. Right to Indemnification. . . . . . . . . . . 16
Section 2. Right of Claimant to Bring Suit . . . . . . . 17
Section 3. Non-Exclusivity of Rights . . . . . . . . . . 18
Section 4. Insurance . . . . . . . . . . . . . . . . . . 18
ARTICLE X Notices . . . . . . . . . . . . . . . . . . . 18
ARTICLE XI Amendments. . . . . . . . . . . . . . . . . . 20
ii
<PAGE>
BYLAWS
OF
ARMOR ALL PRODUCTS CORPORATION
ARTICLE I
---------
Offices
-------
Section 1. Registered Office. The registered
office of the Corporation in the State of Delaware shall be in
the City of Dover, County of Kent.
Section 2. Other Offices. The Corporation shall
also have and maintain an office or principal place of business
at 6 Liberty Drive, Aliso Viejo, California 92656, and may also
have offices at such other places, both within and without the
State of Delaware as the Board of Directors may from time to time
determine or the business of the Corporation may require.
ARTICLE II
----------
Stockholders' Meetings
----------------------
Section 1. Place of Meetings. Meetings of the
stockholders of the Corporation shall be held at such place,
either within or without the State of Delaware, as may be
designated from time to time by the Board of Directors, or, if
not so designated, then at the office of the Corporation required
to be maintained pursuant to Section 2 of Article I hereof.
Section 2. Annual Meetings. The annual meetings
of the stockholders of the Corporation, commencing with the year
l987, for the purpose of election of directors and for such other
business as may lawfully come before it, shall be held on such
date and at such time as may be designated from time to time by
the Board of Directors, or, if not so designated, then at 2:00
p.m. on the fourth Friday in July in each year if not a legal
holiday, and, if a legal holiday, at the same hour and place on
the next succeeding day not a holiday.
<PAGE>
Section 3. Special Meetings. Special Meetings of
the stockholders of the Corporation may be called, for any
purpose or purposes, by the Chairman of the Board or the
President or the Board of Directors at any time. Upon written
request of any stockholder or stockholders holding in the
aggregate one-fifth of the voting power of all stockholders
delivered in person or sent by registered mail to the Chairman of
the Board, President or Secretary of the Corporation, the
Secretary shall call a special meeting of stockholders to be held
at the office of the Corporation required to be maintained
pursuant to Section 2 of Article I hereof at such time as the
Secretary may fix, such meeting to be held not less than ten nor
more than sixty days after the receipt of such request, and if
the Secretary shall neglect or refuse to call such meeting,
within seven days after the receipt of such request, the
stockholder making such request may do so.
Section 4. Notice of Meetings.
(a) Except as otherwise provided by law or the
Certificate of Incorporation, written notice of each meeting of
stockholders, specifying the place, date and hour and purpose or
purposes of the meeting, shall be given not less than ten nor
more than sixty days before the date of the meeting to each
stockholder entitled to vote thereat, directed to his address as
it appears upon the books of the Corporation; except that where
the matter to be acted on is a merger or consolidation of the
Corporation or a sale, lease or exchange of all or substantially
all of its assets, such notice shall be given not less than
twenty (20) nor more than sixty (60) days prior to such meeting.
(b) If at any meeting action is proposed to be
taken which, if taken, would entitle stockholders fulfilling the
requirements of Section 262(d) of the Delaware General
Corporation Law to an appraisal of the fair value of their
shares, the notice of such meeting shall contain a statement of
that purpose and to that effect and shall be accompanied by a
copy of that statutory section.
(c) When a meeting is adjourned to another time
or place, notice need not be given of the adjourned meeting if
the time and place thereof are announced at the meeting at which
the adjournment is taken unless the adjournment is for more than
thirty days, or unless after the adjournment a new record date is
fixed for the adjourned meeting, in which event a notice of the
adjourned meeting shall be given to each stockholder of record
entitled to vote at the meeting.
(d) Notice of the time, place and purpose of any
meeting of stockholders may be waived in writing, either before
or after such meeting, and to the extent permitted by law, will
2
<PAGE>
be waived by any stockholder by his attendance thereat, in person or by proxy.
Any stockholder so waiving notice of such meeting shall be bound by the
proceedings of any such meeting in all respects as if due notice thereof had
been given.
(e) Unless and until voted, every proxy shall be revocable at the pleasure
of the person who executed it or of his legal representatives or assigns, except
in those cases where an irrevocable proxy permitted by statute has been given.
Section 5. Quorum. At all meetings of stockholders, except where otherwise
provided by law, the Certificate of Incorporation, or these Bylaws, the
presence, in person or by proxy duly authorized, of the holders of a majority of
the outstanding shares of stock entitled to vote shall constitute a quorum for
the transaction of business. Shares, the voting of which at said meeting has
been enjoined, or which for any reason cannot be lawfully voted at such meeting,
shall not be counted to determine a quorum at said meeting.
In the absence of a quorum any meeting of stockholders may be adjourned,
from time to time, by vote of the holders of a majority of the shares
represented thereat, but no other business shall be transacted at such meeting.
At such adjourned meeting at which a quorum is present or represented any
business may be transacted which might have been transacted at the original
meeting. The stockholders present at a duly called or convened meeting, at which
a quorum is present, may continue to transact business until adjournment,
notwithstanding the withdrawal of enough stockholders to leave less than a
quorum. Except as otherwise provided by law, the Certificate of Incorporation or
these Bylaws, all action taken by the holders of a majority of the voting power
represented at any meeting at which a quorum is present shall be valid and
binding upon the Corporation.
Section 6. Voting Rights.
(a) Except as otherwise provided by law, only persons in whose names shares
entitled to vote stand on the stock records of the Corporation on the record
date for determining the stockholders entitled to vote at said meeting shall be
entitled to vote at such meeting. Shares standing in the names of two or more
persons shall be voted or represented in accordance with the determination of
the majority of such persons, or, if only one of such persons is present in
person or represented by proxy, such person shall have the right to vote such
shares and such shares shall be deemed to be represented for the purpose of
determining a quorum.
3
<PAGE>
(b) Every person entitled to vote or execute consents shall have the right
to do so either in person or by an agent or agents authorized by a written proxy
executed by such person or his duly authorized agent, which proxy shall be filed
with the Secretary of the Corporation at or before the meeting at which it is to
be used. Said proxy so appointed need not be a stockholder. No proxy shall be
voted on after three years from its date unless the proxy provides for a longer
period.
(c) Without limiting the manner in which a stockholder may authorize
another person or persons to act for him as proxy pursuant to subsection (b) of
this Section, the following shall constitute a valid means by which a
stockholder may grant such authority:
(1) A stockholder may execute a writing authorizing another person or
persons to act for him as proxy. Execution may be accomplished by the
stockholder or his authorized officer, director, employee or agent signing such
writing or causing his or her signature to be affixed to such writing by any
reasonable means including, but not limited to, by facsimile signature.
(2) A stockholder may authorize another person or persons to act for him as
proxy by transmitting or authorizing the transmission of a telegram, cablegram,
or other means of electronic transmission to the person who will be the holder
of the proxy or to a proxy solicitation firm, proxy support service organization
or like agent duly authorized by the person who will be the holder of the proxy
to receive such transmission, provided that any such telegram, cablegram or
other means of electronic transmission must either set forth or be submitted
with information from which it can be determined that the telegram, cablegram or
other electronic transmission was authorized by the stockholder. If it is
determined that such telegrams, cablegrams or other electronic transmissions are
valid, the inspectors or, if there are no inspectors, such other persons making
that determination shall specify the information upon which they relied.
(d) Any copy, facsimile telecommunication or other reliable reproduction of
the writing or transmission created pursuant to subsection (c) of this Section
may be substituted or used in lieu of the original writing or transmission for
any and all purposes for which the original writing or transmission could be
used, provided that such copy, facsimile telecommunication or other reproduction
shall be a complete reproduction of the entire original writing or transmission.
4
<PAGE>
Section 7. Voting Procedures and Inspectors of Elections.
(a) The Corporation shall, in advance of any meeting of stockholders,
appoint one or more inspectors to act at the meeting and make a written report
thereof. The Corporation may designate one or more persons as alternate
inspectors to replace any inspector who fails to act. If no inspector or
alternate is able to act at a meeting of stockholders, the person presiding at
the meeting shall appoint one or more inspectors to act at the meeting. Each
inspector, before entering upon the discharge of his duties, shall take and sign
an oath faithfully to execute the duties of inspector with strict impartiality
and according to the best of his ability.
(b) The inspectors shall (i) ascertain the number of shares outstanding and
the voting power of each, (ii) deter-mine the shares represented at a meeting
and the validity of proxies and ballots, (iii) count all votes and ballots, (iv)
determine and retain for a reasonable period a record of the disposition of any
challenges made to any determination by the inspectors, and (v) certify their
determination of the number of shares represented at the meeting, and their
count of all votes and ballots. The inspectors may appoint or retain other
persons or entities to assist the inspectors in the performance of the duties of
the inspectors.
(c) The date and time of the opening and the closing of the polls for each
matter upon which the stockholders will vote at a meeting shall be announced at
the meeting. No ballot, proxies or votes, nor any revocations thereof or changes
thereto, shall be accepted by the inspectors after the closing of the polls
unless the Court of Chancery upon application by a stockholder shall determine
otherwise.
(d) In determining the validity and counting of proxies and ballots, the
inspectors shall be limited to an examination of the proxies, any envelopes
submitted with those proxies, any information provided in accordance with
Section 212(c)(2) of the Delaware General Corporation Law, ballots and the
regular books and records of the Corporation, except that the inspectors may
consider other reliable information for the limited purpose of reconciling
proxies and ballots submitted by or on behalf of banks, brokers, their nominees
or similar persons which represent more votes than the holder of a proxy is
authorized by the record owner to cast or more votes than the stockholder holds
of record. If the inspectors consider other reliable information for the limited
purpose permitted herein, the inspectors at the time they make their
certification pursuant to subsection (b)(v) of this Section shall specify the
precise information considered by them including the person or persons from whom
they obtained the information, when the information was
5
<PAGE>
obtained, the means by which the information was obtained and the basis for the
inspectors' belief that such information is accurate and reliable.
Section 8. List of Stockholders. The officer who has charge of the stock
ledger of the Corporation shall prepare and make, at least ten (l0) days before
every meeting of stockholders, a complete list of the stockholders entitled to
vote at said meeting, arranged in alphabetical order, showing the address of and
the number of shares registered in the name of each stockholder. Such list shall
be open to the examination of any stockholder, for any purpose germane to the
meeting, during ordinary business hours, for a period of at least ten (10) days
prior to the meeting, either at a place within the city where the meeting is to
be held and which place shall be specified in the notice of the meeting, or, if
not specified, at the place where said meeting is to be held, and the list shall
be produced and kept at the time and place of meeting during the whole time
thereof, and may be inspected by any stockholder who is present.
Section 9. Action Without Meeting. Unless otherwise provided in the
Certificate of Incorporation, any action required by statute to be taken at any
annual or special meeting of stockholders of a Corporation, or any action which
may be taken at any annual or special meeting of such stockholders, may be taken
without a meeting, without prior notice and without a vote, if a consent in
writing, setting forth the action so taken, is signed by the holders of
outstanding stock having not less than the minimum number of votes that would be
necessary to authorize such action at a meeting at which all shares entitled to
vote thereon were present and voted. Prompt notice of the taking of the
corporate action without a meeting by less than unanimous written consent shall
be given to those stockholders who have not consented in writing.
ARTICLE III
-----------
Directors
---------
Section 1. Number and Term of Office. The number of directors which shall
constitute the whole of the Board of Directors shall be eight (8). With the
exception of the first Board of Directors, which shall be elected by the
incorporators, and except as provided in Section 3 of this Article III, the
directors shall be elected by a plurality vote of the shares represented in
person or by proxy, at the stockholders annual
6
<PAGE>
meeting in each year and shall hold office until the next annual meeting and
until their successors shall be duly elected and qualified. Directors need not
be stockholders. If, for any cause, the Board of Directors shall not have been
elected at an annual meeting, they may be elected as soon thereafter as
convenient at a special meeting of the stockholders called for that purpose in
the manner provided in these Bylaws.
Section 2. Powers. The powers of the Corporation shall be exercised, its
business conducted and its property controlled by or under the direction of the
Board of Directors.
Section 3. Vacancies. Vacancies and newly created directorships resulting
from any increase in the authorized number of directors may be filled by a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director, and each director so elected shall hold office for the
unexpired portion of the term of the director whose place shall be vacant, and
until his successor shall have been duly elected and qualified. A vacancy in the
Board of Directors shall be deemed to exist under this section in the case of
the death, removal or resignation of any director, or if the stockholders fail
at any meeting of stockholders at which directors are to be elected (including
any meeting referred to in Section 4 below) to elect the number of directors
then constituting the whole Board.
Section 4. Resignations and Removals.
(a) Any director may resign at any time by delivering his written
resignation to the Secretary, such resignation to specify whether it will be
effective at a particular time, upon receipt by the Secretary or at the pleasure
of the Board of Directors. If no such specification is made it shall be deemed
effective at the pleasure of the Board of Directors. When one or more directors
shall resign from the Board, effective at a future date, a majority of the
directors then in office, including those who have so resigned, shall have power
to fill such vacancy or vacancies, the vote thereon to take effect when such
resignation or resignations shall become effective, and each director so chosen
shall hold office for the unexpired portion of the term of the director whose
place shall be vacated and until his successor shall have been duly elected and
qualified.
(b) At a special meeting of stockholders called for the purpose in the
manner hereinabove provided, the Board of Directors, or any individual director,
may be removed from office, with or without cause, and a new director or
directors
7
<PAGE>
elected by a vote of stockholders holding a majority of the outstanding shares
entitled to vote at an election of directors.
Section 5. Meetings.
(a) The annual meeting of the Board of Directors shall be held immediately
after the annual stockholders' meeting and at the place where such meeting is
held or at the place announced by the Chairman at such meeting. No notice of an
annual meeting of the Board of Directors shall be necessary and such meeting
shall be held for the purpose of electing officers and transacting such other
business as may lawfully come before it.
(b) Except as hereinafter otherwise provided, regular meetings of the Board
of Directors shall be held in the office of the Corporation required to be
maintained pursuant to Section 2 of Article I hereof. Regular meetings of the
Board of Directors may also be held at any place within or without the State of
Delaware which has been designated by resolutions of the Board of Directors or
the written consent of all directors.
(c) Special meetings of the Board of Directors may be held at any time and
place within or without the State of Delaware whenever called by the Chairman of
the Board or a majority of the directors.
(d) Written notice of the time and place of all regular and special
meetings of the Board of Directors shall be delivered personally to each
director or sent by telegram or facsimile transmission at least 48 hours before
the start of the meeting, or sent by first class mail at least 120 hours before
the start of the meeting. Notice of any meeting may be waived in writing at any
time before or after the meeting and will be waived by any director by
attendance thereat.
Section 6. Quorum and Voting.
(a) A quorum of the Board of Directors shall consist of a majority of the
exact number of directors fixed from time to time in accordance with Section 1
of Article III of these Bylaws, but not less than one; provided, however, at any
meeting whether a quorum be present or otherwise, a majority of the directors
present may adjourn from time to time until the time fixed for the next regular
meeting of the Board of Directors, without notice other than by announcement at
the meeting.
(b) At each meeting of the Board at which a quorum is present all questions
and business shall be determined by a vote of a majority of the directors
present, unless a
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<PAGE>
different vote be required by law, the Certificate of Incorporation, or these
Bylaws.
(c) Any member of the Board of Directors, or of any committee thereof, may
participate in a meeting by means of conference telephone or similar
communication equipment by means of which all persons participating in the
meeting can hear each other, and participation in a meeting by such means shall
constitute presence in person at such meeting.
(d) The transactions of any meeting of the Board of Directors, or any
committee thereof, however called or noticed, or wherever held, shall be as
valid as though had at a meeting duly held after regular call and notice, if a
quorum be present and if, either before or after the meeting, each of the
directors not present shall sign a written waiver of notice, or a consent to
holding such meeting, or an approval of the minutes thereof. All such waivers,
consents or approvals shall be filed with the corporate records or made a part
of the minutes of the meeting.
Section 7. Action Without Meeting. Unless otherwise restricted by the
Certificate of Incorporation or these Bylaws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if all members of the Board or of such
committee, as the case may be, consent thereto in writing, and such writing or
writings are filed with the minutes of proceedings of the Board or committee.
Section 8. Fees and Compensation. Directors shall not receive any stated
salary for their services as directors but by resolution of the Board, a fixed
fee, with or without expense of attendance, may be allowed for attendance at
each meeting and at each meeting of any committee of the Board of Directors.
Nothing herein contained shall be construed to preclude any director from
serving the Corporation in any other capacity as an officer, agent, employee, or
otherwise, and receiving compensation therefor.
Section 9. Committees.
(a) Executive Committee: The Board of Directors may, by resolution passed
by a majority of the whole Board, appoint an Executive Committee of not less
than one member, each of whom shall be a director. The Executive Committee, to
the extent permitted by law, shall have and may exercise when the Board of
Directors is not in session all powers of the Board in
9
<PAGE>
the management of the business and affairs of the Corporation, including,
without limitation, the power and authority to declare a dividend or to
authorize the issuance of stock, except such committee shall not have the power
or authority to amend the Certificate of Incorporation, to adopt an agreement of
merger or consolidation, to recommend to the stockholders the sale, lease or
exchange of all or substantially all of the Corporation's property and assets,
to recommend to the stockholders of the Corporation a dissolution of the
Corporation or a revocation of a dissolution, or to amend these Bylaws.
(b) Other Committees: The Board of Directors may, by resolution passed by a
majority of the whole Board, from time to time appoint such other committees as
may be permitted by law. Such other committees appointed by the Board of
Directors shall have such powers and perform such duties as may be prescribed by
the resolution or resolutions creating such committee, but in no event shall any
such committee have the powers denied to the Executive Committee in these
Bylaws.
(c) Term: The members of all committees of the Board of Directors shall
serve a term coexistent with that of the Board of Directors which shall have
appointed such committee. The Board, subject to the provisions of subsections
(a) or (b) of this Section 9, may at any time increase or decrease the number of
members of a committee or terminate the existence of a committee; provided, that
no committee shall consist of less than one member. The membership of a
committee member shall terminate on the date of his death or voluntary
resignation, but the Board may at any time for any reason remove any individual
committee member and the Board may fill any committee vacancy created by death,
resignation, removal or increase in the number of members of the committee. The
Board of Directors may designate one or more directors as alternate members of
any committee, who may replace any absent or disqualified member at any meeting
of the committee, and, in addition, in the absence or disqualification of any
member of a committee, the member or members thereof present at any meeting and
not disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member.
(d) Meetings: Unless the Board of Directors shall otherwise provide,
regular meetings of the Executive Committee or any other committee appointed
pursuant to this Section 9 shall be held at such times and places as are
determined by the Board of Directors, or by any such committee, and when notice
thereof has been given to each member of such committee, no further notice of
such regular meetings need be given thereafter; special meetings of any such
committee may be held at the principal office of the Corporation required to be
maintained pursuant to Section 2 of Article I hereof; or at any place which has
been designated from
10
<PAGE>
time to time by resolution of such committee or by written
consent of all members thereof, and may be called by any director
who is a member of such committee, upon written notice to the
members of such committee of the time and place of such special
meeting given in the manner provided for the giving of written
notice to members of the Board of Directors of the time and place
of special meetings of the Board of Directors. Notice of any
special meeting of any committee may be waived in writing at any
time after the meeting and will be waived by any director by
attendance thereat. A majority of the authorized number of
members of any such committee shall constitute a quorum for the
transaction of business, and the act of a majority of those
present at any meeting at which a quorum is present shall be the
act of such committee.
ARTICLE IV
----------
Officers
--------
Section 1. Officers Designated. The officers of
the Corporation shall be a Chairman of the Board of Directors and
a President, each of whom shall be a member of the Board of
Directors, and one or more Vice Presidents, a Secretary, and a
Treasurer. The order of the seniority of the Vice Presidents
shall be in the order of their nomination, unless otherwise
determined by the Board of Directors. The Board of Directors or
the Chairman of the Board or the President may also appoint one
or more assistant secretaries, assistant treasurers, and such
other officers and agents with such powers and duties as it or he
shall deem necessary. The Board of Directors may assign such
additional titles to one or more of the officers as they shall
deem appropriate. Any one person may hold any number of offices
of the Corporation at any one time unless specifically prohibited
therefrom by law. The salaries and other compensation of the
officers of the Corporation shall be fixed by or in the manner
designated by the Board of Directors.
Section 2. Tenure and Duties of Officers.
(a) General: All officers shall hold office at
the pleasure of the Board of Directors and until their successors
shall have been duly elected and qualified, unless sooner
removed. Any officer elected or appointed by the Board of
Directors may be removed at any time by the Board of Directors.
If the office of any officer becomes vacant for any reason, the
vacancy may be filled by the Board of Directors. Nothing in
these Bylaws shall be construed as creating any kind of
contractual right to employment with the Corporation.
11
<PAGE>
(b) Duties of the Chairman of the Board of
Directors: The Chairman of the Board of Directors (if there be
such an officer appointed), when present, shall preside at all
meetings of the stockholders and the Board of Directors. The
Chairman of the Board of Directors shall perform such other
duties and have such other powers as the Board of Directors shall
designate from time to time.
(c) Duties of President: The President shall be
the chief executive officer of the Corporation and shall preside
at all meetings of the stockholders and at all meetings of the
Board of Directors, unless the Chairman of the Board of Directors
has been appointed and is present. The President shall perform
such other duties and have such other powers as the Board of
Directors shall designate from time to time.
(d) Duties of Vice Presidents: The Vice
Presidents, in the order of their seniority, may assume and
perform the duties of the President in the absence or disability
of the President or whenever the office of the President is
vacant. The Vice President shall perform such other duties and
have such other powers as the Board of Directors or the President
shall designate from time to time.
(e) Duties of Secretary: The Secretary shall
attend all meetings of the stockholders and of the Board of
Directors and any committee thereof, and shall record all acts
and proceedings thereof in the minute book of the Corporation.
The Secretary shall give notice, in conformity with these Bylaws,
of all meetings of the stockholders, and of all meetings of the
Board of Directors and any Committee thereof requiring notice.
The Secretary shall perform such other duties and have such other
powers as the Board of Directors shall designate from time to
time. The President may direct any Assistant Secretary to assume
and perform the duties of the Secretary in the absence or
disability of the Secretary, and each Assistant Secretary shall
perform such other duties and have such other powers as the Board
of Directors or the President shall designate from time to time.
(f) Duties of Treasurer: The Treasurer shall
keep or cause to be kept the books of account of the Corporation
in a thorough and proper manner, and shall render statements of
the financial affairs of the Corporation in such form and as
often as required by the Board of Directors or the President.
The Treasurer, subject to the order of the Board of Directors,
shall have the custody of all funds and securities of the
Corporation. The Treasurer shall perform all other duties
commonly incident to his office and shall perform such other
duties and have such other powers as the Board of Directors or
the President shall designate from time to time. The President
may direct any Assistant Treasurer to assume and perform the
duties of the Treasurer in the absence or disability of the
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<PAGE>
Treasurer, and each Assistant Treasurer shall perform such other
duties and have such other powers as the Board of Directors or
the President shall designate from time to time.
ARTICLE V
----------
Execution of Corporate Instruments, and
Voting of Securities Owned by the Corporation
---------------------------------------------
Section 1. Execution of Corporate Instruments.
(a) The Board of Directors may, in its
discretion, determine the method and designate the signatory
officer or officers, or other person or persons, to execute any
corporate instrument or document, or to sign the corporate name
without limitation, except where otherwise provided by law, and
such execution or signature shall be binding upon the
Corporation.
(b) Unless otherwise specifically determined by
the Board of Directors or otherwise required by law, formal
contracts of the Corporation, promissory notes, deeds of trust,
mortgages and other evidences of indebtedness of the Corporation,
and other corporate instruments or documents and certificates of
shares of stock owned by the Corporation, shall be executed,
signed or endorsed by the President and Chief Executive Officer,
any Executive Vice President, or any Vice President. All other
instruments and documents requiring the corporate signature, may
be executed as aforesaid or in such other manner as may be
directed by the Board of Directors.
(c) All checks and drafts drawn on banks or other
depositaries on funds to the credit of the Corporation, or in
special accounts of the Corporation, shall be signed by such
person or persons as the Board of Directors shall authorize so to
do.
Section 2. Voting of Securities Owned by
Corporation. All stock and other securities of other corporations
owned or held by the Corporation for itself, or for other parties
in any capacity, shall be voted, and all proxies with respect
thereto shall be executed, by the person authorized so to do by
resolution of the Board of Directors or, in the absence of such
authorization, by the Chairman of the Board (if there be such an
officer appointed), or by the President, or by any Vice
President.
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<PAGE>
ARTICLE VI
----------
Shares of Stock
---------------
Section 1. Form and Execution of Certificates.
Certificates for the shares of stock of the Corporation shall be
in such form as is consistent with the Certificate of
Incorporation and applicable law. Every holder of stock in the
Corporation shall be entitled to have a certificate signed by, or
in the name of the Corporation by, the Chairman of the Board (if
there be such an officer appointed), or by the President or any
Vice President and by the Treasurer or Assistant Treasurer or the
Secretary or Assistant Secretary, certifying the number of shares
owned by him in the Corporation. Any or all of the signatures on
the certificate may be a facsimile. In case any officer,
transfer agent, or registrar who has signed or whose facsimile
signature has been placed upon a certificate shall have ceased to
be such officer, transfer agent, or registrar before such
certificate is issued, it may be issued with the same effect as
if he were such officer, transfer agent, or registrar at the date
of issue. If the Corporation shall be authorized to issue more
than one class of stock or more than one series of any class, the
powers, designations, preferences and relative, participating,
optional or other special rights of each class of stock or series
thereof and the qualifications, limitations or restrictions of
such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate which the
Corporation shall issue to represent such class or series of
stock, provided that, except as otherwise provided in Section 202
of the General Corporation Law of Delaware, in lieu of the
foregoing requirements, there may be set forth on the face or
back of the certificate which the Corporation shall issue to
represent such class or series of stock, a statement that the
Corporation will furnish without charge to each stockholder who
so requests the powers, designations, preferences and relative,
participating, optional or other special rights of each class of
stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights.
Section 2. Lost Certificates. The Board of
Directors may direct a new certificate or certificates to be
issued in place of any certificate or certificates theretofore
issued by the Corporation alleged to have been lost or destroyed,
upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost or destroyed. When
authorizing such issue of a new certificate or certificates, the
Board of Directors may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such lost
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<PAGE>
or destroyed certificate or certificates, or his legal
representative, to indemnify the Corporation in such manner as it
shall require and/or to give the Corporation a surety bond in
such form and amount as it may direct as indemnity against any
claim that may be made against the Corporation with respect to
the certificate alleged to have been lost or destroyed.
Section 3. Transfers. Transfers of record of
shares of stock of the Corporation shall be made only upon its
books by the holders thereof, in person or by attorney duly
authorized, and upon the surrender of a certificate or
certificates for a like number of shares, properly endorsed.
Section 4. Fixing Record Dates. In order that
the Corporation may determine the stockholders entitled to notice
of or to vote at any meeting of stockholders or any adjournment
thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend
or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or
exchange of stock or for the purpose of any other lawful action,
the Board of Directors may fix, in advance, a record date, which
shall not be more than sixty nor less than ten days before the
date of such meeting, nor more than sixty days prior to any such
action. If no record date is fixed: (1) the record date for
determining stockholders entitled to notice of or to vote at a
meeting of stockholders shall be at the close of business on the
day next preceding the day on which notice is given, or, if
notice is waived, at the close of business on the day next
preceding the day on which the meeting is held; (2) the record
date for determining stockholders entitled to express consent to
corporate action in writing without a meeting, when no prior
action by the Board of Directors is necessary, shall be the day
on which the first written consent is expressed; (3) the record
date for determining stockholders for any other purpose shall be
at the close of business on the day on which the Board of
Directors adopts the resolution relating thereto. A
determination of stockholders of record entitled to notice of or
to vote at a meeting of stockholders shall apply to any
adjournment of the meeting; provided, however, that the Board of
Directors may fix a new record date for the adjourned meeting.
Section 5. Registered Stockholders. The
Corporation shall be entitled to recognize the exclusive right of
a person registered on its books as the owner of shares to
receive dividends, and to vote as such owner, and shall not be
bound to recognize any equitable or other claim to or interest in
such share or shares on the part of any other person, whether or
not it shall have express or other notice thereof, except as
otherwise provided by the laws of Delaware.
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<PAGE>
ARTICLE VII
-----------
Other Securities of the Corporation
-----------------------------------
All bonds, debentures and other corporate securities of the Corporation,
other than stock certificates, may be signed by the Chairman of the Board (if
there be such an officer appointed), or the President or any Vice President or
such other person as may be authorized by the Board of Directors and the
corporate seal impressed thereon or a facsimile of such seal imprinted thereon
and attested by the signature of the Secretary or an Assistant Secretary, or the
Treasurer or an Assistant Treasurer; provided, however, that where any such
bond, debenture or other corporate security shall be authenticated by the manual
signature of a trustee under an indenture pursuant to which such bond, debenture
or other corporate security shall be issued, the signature of the persons
signing and attesting the corporate seal on such bond, debenture or other
corporate security may be the imprinted facsimile of the signatures of such
persons. Interest coupons appertaining to any such bond, debenture or other
corporate security, authenticated by a trustee as aforesaid, shall be signed by
the Treasurer or an Assistant Treasurer of the Corporation, or such other person
as may be authorized by the Board of Directors, or bear imprinted thereon the
facsimile signature of such person. In case any officer who shall have signed or
attested any bond, debenture or other corporate security, or whose facsimile
signature shall appear thereon or before the bond, debenture or other corporate
security so signed or attested shall have been delivered, such bond, debenture
or other corporate security nevertheless may be adopted by the Corporation and
issued and delivered as though the person who signed the same or whose facsimile
signature shall have been used thereon had not ceased to be such officer of the
Corporation.
ARTICLE VIII
------------
Corporate Seal
--------------
The corporate seal shall consist of a die bearing the name of the
Corporation and the state and date of its incorporation. Said seal may be used
by causing it or a facsimile thereof to be impressed or affixed or reproduced or
otherwise.
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ARTICLE IX
----------
Indemnification of
Officers, Directors, Employees and Agents
-----------------------------------------
Section 1. Right to Indemnification. Each person who was or is made a party
or is threatened to be made a party to or is involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "proceeding"), by reason of the fact that he or she, or a person
of whom he or she is the legal representative, is or was a director, officer,
employee or agent of the Corporation or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another corporation or
of a partnership, joint venture, trust or other enterprise, including service
with respect to employee benefit plans, whether the basis of such proceeding is
alleged action in an official capacity as a director, officer, employee or agent
or in any other capacity while serving as a director, officer, employee or
agent, shall be indemnified and held harmless by the Corporation to the fullest
extent authorized by the Delaware General Corporation Law, as the same exists or
may hereafter be amended (but, in the case of any such amendment, only to the
extent that such amendment permits the Corporation to provide broader
indemnification rights than said Law permitted the Corporation to provide prior
to such amendment), against all expenses, liability and loss (including
attorneys' fees, judgments, fines, ERISA excise taxes or penalties and amounts
paid or to be paid in settlement) reasonably incurred or suffered by such person
in connection therewith and such indemnification shall continue as to a person
who has ceased to be a director, officer, employee or agent and shall inure to
the benefit of his or her heirs, executors and administrators; provided,
however, that except as provided in Section 2 hereof, the Corporation shall
indemnify any such person seeking indemnification in connection with a
proceeding (or part thereof) initiated by such person only if such proceeding
(or part thereof) was authorized by the Board of Directors of the Corporation.
The right to indemnification conferred in this Section shall be a contract right
and shall include the right to be paid by the Corporation the expenses incurred
in defending any such proceeding in advance of its final disposition; provided,
however, that, if the Delaware General Corporation Law requires, the payment of
such expenses incurred by a director or officer in his or her capacity as a
director or officer (and not in any other capacity in which service was or is
rendered by such person while a director or officer, including, without
limitation, service to an employee benefit plan) in advance of the final
disposition of such proceeding, shall be made only upon delivery to the
Corporation of an undertaking, by or on behalf of such
17
<PAGE>
director or officer, to repay all amounts so advanced if it should be determined
ultimately that such director or officer is not entitled to be indemnified under
this Section or otherwise.
Section 2. Right of Claimant to Bring Suit. If a claim under Section 1 is
not paid in full by the Corporation within ninety days after a written claim has
been received by the Corporation, the claimant may at any time thereafter bring
suit against the Corporation to recover the unpaid amount of the claim and, if
successful in whole or in part, the claimant shall be entitled to be paid also
the expense of prosecuting such claim. It shall be a defense to any such action
(other than an action brought to enforce a claim for expenses incurred in
defending any proceeding in advance of its final disposition where the required
undertaking, if any if required, has been tendered to the Corporation) that the
claimant has not met the standards of conduct which make it permissible under
the Delaware General Corporation Law for the Corporation to indemnify the
claimant for the amount claimed, but the burden of proving such defense shall be
on the Corporation. Neither the failure of the Corporation (including its Board
of Directors, independent legal counsel, or its stockholders) to have made a
determination prior to the commencement of such action that indemnification of
the claimant is proper in the circumstances because he or she has met the
applicable standard of conduct set forth in the Delaware General Corporation
Law, nor an actual determination by the Corporation (including its Board of
Directors, independent legal counsel, or its stockholders) that the claimant had
not met such applicable standard of conduct, shall be a defense to the action or
create a presumption that claimant had not met the applicable standard of
conduct.
Section 3. Non-Exclusivity of Rights. The right to indemnification and the
payment of expenses incurred in defending a proceeding in advance of its final
disposition conferred in this Article shall not be exclusive of any other right
which such person may have or hereafter acquire under any statute, provision of
the Certificate of Incorporation, bylaw, agreement, vote of stockholders or
disinterested directors or otherwise.
Section 4. Insurance. The Corporation may maintain insurance, at its
expense, to protect itself and any director, officer, employee or agent of the
Corporation or another corporation, partnership, joint venture, trust or other
enterprise against any such expense, liability or loss, whether or not the
Corporation would have the power to indemnify such person against such expense,
liability or loss under the Delaware General Corporation Law.
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<PAGE>
ARTICLE X
---------
Notices
-------
Whenever, under any provisions of these Bylaws, notice is required to be
given to any stockholder, the same shall be given in writing, timely and duly
deposited in the United States Mail, postage prepaid, and addressed to his last
known post office address as shown by the stock record of the Corporation or its
transfer agent. Any notice required to be given to any director may be given by
the method hereinabove stated, or by telegram or other means of electronic
transmission, except that such notice other than one which is delivered
personally, shall be sent to such address or (in the case of facsimile
telecommunication) facsimile telephone number as such director shall have filed
in writing with the Secretary of the Corporation, or, in the absence of such
filing, to the last known post office address of such director. If no address of
a stockholder or director be known, such notice may be sent to the office of the
Corporation required to be maintained pursuant to Section 2 of Article I hereof.
An affidavit of mailing, executed by a duly authorized and competent employee of
the Corporation or its transfer agent appointed with respect to the class of
stock affected, specifying the name and address or the names and addresses of
the stockholder or stockholders, director or directors, to whom any such notice
or notices was or were given, and the time and method of giving the same, shall
be conclusive evidence of the statements therein contained. All notices given by
mail, as above provided, shall be deemed to have been given as at the time of
mailing and all notices given by telegram or other means of electronic
transmission shall be deemed to have been given as at the sending time recorded
by the telegraph company or other electronic transmission equipment operator
transmitting the same. It shall not be necessary that the same method of giving
be employed in respect of all directors, but one permissible method may be
employed in respect of any one or more, and any other permissible method or
methods may be employed in respect of any other or others. The period or
limitation of time within which any stockholder may exercise any option or
right, or enjoy any privilege or benefit, or be required to act, or within which
any director may exercise any power or right, or enjoy any privilege, pursuant
to any notice sent him in the manner above provided, shall not be affected or
extended in any manner by the failure of such a stockholder or such director to
receive such notice. Whenever any notice is required to be given under the
provisions of the statutes or of the Certificate of Incorporation, or of these
Bylaws, a waiver thereof in writing signed by the person or persons entitled to
said notice, whether before or after the time stated therein, shall be deemed
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<PAGE>
equivalent thereto. Whenever notice is required to be given, under any provision
of law or of the Certificate of Incorporation or Bylaws of the Corporation, to
any person with whom communication is unlawful, the giving of such notice to
such person shall not be required and there shall be no duty to apply to any
governmental authority or agency for a license or permit to give such notice to
such person. Any action or meeting which shall be taken or held without notice
to any such person with whom communication is unlawful shall have the same force
and effect as if such notice had been duly given. In the event that the action
taken by the Corporation is such as to require the filing of a certificate under
any provision of the Delaware General Corporation Law, the certificate shall
state, if such is the fact and if notice is required, that notice was given to
all persons entitled to receive notice except such persons with whom
communication is unlawful.
ARTICLE XI
----------
Amendments
----------
These Bylaws may be repealed, altered or amended or new Bylaws adopted by
written consent of stockholders in the manner authorized by Section 8 of Article
II, or at any meeting of the stockholders, either annual or special, by the
affirmative vote of a majority of the stock entitled to vote at such meeting.
The Board of Directors shall also have the authority to repeal, alter or amend
these Bylaws or adopt new Bylaws (including, without limitation, the amendment
of any Bylaws setting forth the number of directors who shall constitute the
whole Board of Directors) by unanimous written consent or at any annual,
regular, or special meeting by the affirmative vote of a majority of the whole
number of directors, subject to the power of the stockholders to change or
repeal such Bylaws and provided that the Board of Directors shall not make or
alter any Bylaws fixing the qualifications, classifications, term of office or
compensation of directors.
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EXHIBIT (10)A
SERVICES AGREEMENT
BETWEEN
McKESSON CORPORAT10N
AND
ARMOR ALL PRODUCTS CORPORAT10N
As amended through March 23, 1993
<PAGE>
THIS SERVICES AGREEMENT, dated as of July 1, 1986 is between
McKesson Corporation, a Maryland corporation ("McKesson"), and
Armor All Products Corporation, a Delaware corporation ("Armor
All").
INTRODUCTION
A. McKesson and Armor All have entered into an Acquisition
Agreement dated as of July 1, 1986 (the "Acquisition Agreement").
Unless otherwise defined herein, capitalized terms used herein
shall have the same meaning assigned to them in the Acquisition
Agreement.
B. Pursuant to Section 11 of the Acquisition Agreement,
McKesson has agreed, as of the Closing Date, to provide Armor All
with certain services and Armor All has agreed to purchase
certain services from McKesson.
ACCORDINGLY, the parties hereto agree as follows:
SECTION 1. Certain Management-Related Services
1.1 Continuing Services. Commencing on the Closing Date,
and for the period provided for under Section 6, McKesson agrees
to make available to Armor All and Armor All agrees to purchase
the following (individually a "Service" and collectively the
"Services"):
(a) Its internal accounting and auditing staff for
auditing, accounting, payroll and bookkeeping advice and
services.
(b) Its internal legal staff for legal advice and
services, including, without limitation, assistance with respect
to claims which may be or have been asserted or are the subject
of litigation, the preparation and review of documents involving
loans, financing transactions, contractual documents and
disclosure documents relating to reporting requirements under the
federal securities laws and consultation related to legal and
administrative proceedings.
(c) Its internal tax staff for tax advice and
services, including, without limitation, assistance in the
preparation of federal, state, local and foreign tax returns.
(d) Its controllers staff for accounting services
related to financial reporting and assistance in the preparation
of financial statements and disclosure documents relating to
reporting requirements under the federal securities laws.
2
<PAGE>
(e) Its corporate secretary staff for assistance in
organizational matters associated with shareholders meetings and
meetings of the board of directors.
(f) Its treasury staff for financial advice and
services, including, without limitation, assistance with respect
to the raising of additional capital, cash management, treasury
and risk management.
(g) Its corporate relations staff for assistance in
preparation of certain public documents, including without
limitation, preparation of annual reports.
(h) Its personnel staff for advice and services,
including, without limitation, wage and salary administration,
employee relations, the administration of employee insurance
plans, pension plans and other employee benefits plans.
1.2 Periodic Services. Commencing on the Closing Date, and
for the period provided for under Section 6, Armor All may
request and McKesson may agree to make available to Armor All the
following (individually a "Service" and collectively the
"Services"):
(a) Its marketing, advertising and promotional staff
for assistance with marketing projects, consumer studies and
other information gathering or promotional activities.
(b) Its information services staff and equipment for
supplemental data processing telecommunications, computer
programming and other computer services.
(c) Its other staff, equipment, office space and
facilities for such other advice as requested by Armor All from
time to time.
1.3 Limitation on Services. Notwithstanding anything else
contained in this Section 1:
(a) McKesson need not make available any Service to
the extent that doing so would unreasonably (i) interfere with
the performance of services for McKesson by any employee of
McKesson or otherwise cause unreasonable burden to McKesson; or
(ii) interfere with the use of or access to any equipment, office
space or facility by McKesson or otherwise cause unreasonable
burden to McKesson.
(b) The provisions of Subsections 1.1 and 1.2 shall
only apply to Services related to or arising out of or in
connection with matters McKesson is in a position to provide by
reason of past participation, involvement or familiarity with
3
<PAGE>
such matters and, in addition, which Armor All has a reasonable
requirement to obtain.
SECTION 2. Cost of Services
2.1 Price and Billing for Continuing Services. Armor All
shall be billed for Services provided by McKesson under Section
1.1 at the rate specified in Schedule 1. The rate represents an
approximation of the cost incurred by McKesson for providing such
Services. The cost incurred by McKesson for providing such
Services shall be determined by considering a variety of relevant
factors, including, without limitation, the number of hours
required, the hourly cost of the person providing such Services,
and the cost of materials, overhead and capital consumed in
providing the Services requested. Where similar charges are
assessed against internal divisions of McKesson, the price billed
to Armor All shall be determined on the same basis as the cost
assessed against internal divisions of McKesson. The charges
specified in Schedule 1 may be modified annually to reflect any
change in the cost to McKesson of providing such Services.
Amounts billed shall be payable to McKesson within ten working
days of presentation of an invoice for such Services.
2.2 Price and Billing for Periodic Services. Armor All
shall be billed for Services provided by McKesson under Section
1.2 at a rate equal to the cost incurred by McKesson for
providing such Services. The cost incurred by McKesson for
providing such Services shall be determined by considering a
variety of relevant factors, including, without limitation, the
number of hours required, the hourly cost of the person providing
such Services, and the cost of materials, overhead and capital
consumed in providing the Services requested. Where similar
charges are assessed against internal divisions of McKesson, the
price billed to Armor All shall be determined on the same basis
as the cost assessed against internal divisions of McKesson.
Amounts billed shall be payable to McKesson within ten working
days of presentation of an invoice for such Services.
2.3 Expenses. In addition to the amounts to be billed to
Armor All pursuant to Subsections 2.1 and 2.2, McKesson shall be
entitled to receive from Armor All, upon the presentation of
invoices therefor, payment for reasonable out-of-pocket expenses
incurred by McKesson in providing such Services.
2.4 Outside Professional Services. In addition to amounts
to be billed to Armor All pursuant to Subsections 2.1, 2.2 and
2.3, McKesson shall be entitled to receive from Armor All within
ten working days of presentation of invoices therefor, payment
for all reasonable expenses for outside professional services
incurred by McKesson for the benefit of Armor All, including,
4
<PAGE>
without limitation, public accounting, outside legal services and
outside marketing services.
SECTION 3. Employee Benefit Plans
3.1 Retirement Plan. McKesson agrees that Armor All
employees shall be eligible to participate in the McKesson
Corporation Retirement Plan on the same terms and conditions as
employees of McKesson, and Armor All agrees to pay McKesson costs
of contribution and administration attributable to participating
Armor All employees at the same rate as charged to McKesson
divisions (currently this accrual rate is 2% of covered payroll
for all McKesson units included in the McKesson Retirement Plan).
3.2 McKesson PAYSOP and ESOP. McKesson agrees that Armor
All employees shall be eligible to participate in the PAYSOP and
ESOP elements of the McKesson Profit-Sharing Investment Plan on
the same terms and conditions as employees of McKesson, and Armor
All agrees to pay McKesson costs of contribution and
administration attributable to participating Armor All employees.
Armor All shall make a contribution to the ESOP for each plan
year determined according to the following formula:
Aggregate Aggregate
compensation compensation Total ESOP
during the plan during the plan contribution Armor All
year of Armor / year for all X required for = contribution
All employees employees plan year
participating participating in
in the ESOP the ESOP
3.3 Profit-Sharing Investment Plan. Armor All employees
shall remain participants in the McKesson Profit-Sharing
Investment Plan ("McKesson PSIP") until Armor All establishes a
Profit-Sharing Investment Plan for its employees ("Armor All
PSIP"). Armor All agrees to pay McKesson costs of contribution
and administration attributable to Armor All employees
participating in the McKesson PSIP. Upon establishment, McKesson
shall administer the Armor All PSIP on behalf of Armor All.
Armor All agrees to pay McKesson for direct administrative costs
attributable to the Armor All PSIP, and for general
administrative costs attributable to the Armor All PSIP at the
same rate as charged to McKesson divisions.
3.4 Stock Option Plan. Armor All shall establish a Stock
Option Plan for its employees which shall be administered by
McKesson on behalf of Armor All. Armor All shall not be charged
for administrative costs attributable to such Stock Option Plan.
5
<PAGE>
SECTION 4. Insurance
4.1 Property and Casualty Insurance. McKesson agrees to provide the
following insurance coverages on an interim basis to Armor All on substantially
the same terms and conditions as provided to other subsidiaries and divisions of
McKesson except for a maximum limit of coverage of $25 million and subject to
the deductibles shown below.
(a) Workers' Compensation insurance for full statutory benefits
and Employer's Liability for a limit of $25 million per occurrence with no
deductible.
(b) Comprehensive General Liability insurance, including broad
form vendors coverage and contractual liability coverage for a combined single
limit of $25 million per occurrence ($25 million products liability aggregate)
with a deductible of $500,000 per occurrence.
(c) Comprehensive Automobile Liability insurance, including
owned and non-owned vehicles for a combined single limit of $25 million per
occurrence with a deductible of $500,000 per occurrence.
(d) All Risk Property insurance insuring real and personal
property for replacement cost and business interruption and extra expense for
actual loss sustained with a deductible of $10,000 per occurrence.
(e) Employee Dishonesty Coverage for a limit of $10 million per
occurrence with a deductible of $75,000 per occurrence.
4.2 Employee Benefits Insurance. McKesson agrees to provide the
following insurance coverages to Armor All employees on the same terms and
conditions as provided to employees of other subsidiaries and divisions of
McKesson.
(a) Comprehensive health insurance including medical and dental
insurance and covering active and retired employees.
(b) Life insurance.
(c) Accidental Death or Dismemberment insurance.
(d) Long-term Disability insurance.
(e) Travel Accident insurance.
4.3 Price and Billing. Armor All shall be billed for insurance
provided by McKesson at substantially the same rate and on substantially the
same terms as internal units of McKesson,
6
<PAGE>
subject to adjustment due to differences in levels of coverage and deductibles,
and except that in situations where McKesson must pre-pay insurance premiums
Armor All shall be billed on a pre-paid basis its allocated share. Amounts
billed shall be payable to McKesson within ten working days of presentation of
an invoice for such insurance.
4.4 Self-Insurance and Deductibles. It is understood that because of
McKesson's size and diversification certain risks are prudently self-insured or
subject to policy deductibles. All references to the term "insurance" contained
in this Section 4 are intended to include both insurance and self-insured
programs. Where it is the practice of McKesson to require its internal divisions
and units to self-insure losses up to a pre-determined amount, Armor All will be
required to self-insure in the amounts specified in Section 4.1.
4.5 Alternative Insurance. Notwithstanding anything else contained
in this Section 4, it is the understanding of the parties that Armor All will
attempt to find, with the assistance of McKesson, alternative sources for
insurance other than insurance provided pursuant to Section 4.2 above. Should
Armor All be able to locate other insurance at a reasonable cost, Armor All will
procure insurance directly from such alternative suppliers rather than through
McKesson. It is further understood by the parties that McKesson may not be able
to make available directors and officers liability insurance to Armor All. Nor
shall McKesson be obligated to provide surety bonds under terms that require
McKesson to guarantee obligations of Armor All to the surety.
SECTION 5. Cash Management Services
5.1 Cash Management Operation. McKesson shall assist Armor All in
establishing its own cash management system. McKesson will manage this system on
Armor All's behalf. Funds of Armor All will not be commingled with funds of
McKesson. Armor All shall receive interest on funds in its cash management
system at a rate equal to the monthly Federal Reserve composite rate for 7-day
commercial paper (the "composite rate") less ten basis points or pay interest at
a rate equal to the composite rate plus fifty basis points.
5.2 Funds Available. McKesson will make available to Armor All that
amount of cash necessary to provide Armor All with sufficient funds to meet its
needs as defined in the annual capital plan and annual operating projection
approved by the board of directors of Armor All. McKesson shall receive a credit
facility fee of $25,000 per annum from Armor All for maintaining the
availability of cash in accordance with the preceding sentence.
7
<PAGE>
SECTION 6. Term and Termination
6.1 Term. This Agreement shall become effective, without further
action, on the date first above written and shall remain in effect until March
31, 1989 and thereafter shall be automatically renewed for successive one-year
renewal terms unless terminated in accordance with Subsection 6.2.
6.2 Termination. This Agreement and the obligation of McKesson to
provide Services pursuant to Section I and other assistance pursuant to Sections
3, 4 and 5 shall terminate on the earliest of (a) the date which is 120 days
from the receipt of written notice by one party of the other party's intention
to terminate this Agreement, (b) the date on which the ownership by McKesson of
the outstanding voting stock of Armor All shall be less than fifty percent of
the then outstanding voting capital stock of Armor All, or (c) such earlier date
as the parties may mutually agree to in writing.
SECTION 7. Access to Information and Witnesses
Subsequent to the Closing Date, each of McKesson and Armor All may
have in its possession or under its control (or the control of persons or firms
which have rendered services to or otherwise done business with it) books,
records, contracts, instruments, data and other information (collectively,
"Information") which may prove necessary or desirable to the other in connection
with the other's business. Accordingly, at all times subsequent to the Closing
Date, (a) McKesson agrees to provide to Armor All and Armor All agrees to
provide to McKesson, upon the other's written request, at all reasonable times,
full and complete access to (including access to persons or firms possessing
information) and duplication rights with respect to, any and all such
information as the other may reasonably request and require in the conduct of
its business and (b) McKesson agrees to use its best efforts to make available
to Armor All and Armor All agrees to use its best efforts to make available to
McKesson, upon the other's written request, their respective officers,
directors, employees and agents as witnesses to the extent that such persons may
reasonably be required in connection with any legal, administrative or other
proceedings in which McKesson or Armor All, as the case may be, may from time to
time be involved. Information shall include, without limitation, information
sought for audit, accounting, claims, litigation and tax purposes as well as for
purposes of fulfilling disclosure and reporting obligations under the federal
securities laws. The party providing information or making available witnesses
shall be entitled to receive from the other party, upon the presentation of
invoices therefor, payment for its reasonable out-of-pocket expenses incurred in
connection therewith (but not
8
<PAGE>
the labor cost thereof), but shall not be entitled to receive any other payment
with respect thereto.
SECTION 8. Mail, Etc.
Subsequent to the Closing Date, each of McKesson and Armor All may
receive mail, telegrams, packages and other communications property belonging to
the other. Accordingly, at all times subsequent to the Closing Date, each of
McKesson and Armor All authorizes the other to receive and open all mail,
telegrams, packages and other communications received by it and not
unambiguously intended for the other party or any of the other party's officers
and/or directors specifically in their capacities as such, and to retain the
same to the extent that they relate to the business of the receiving party or,
to the extent that they relate to the business of the receiving party and do
relate to the business of the other party, or to the extent that they relate to
both businesses, the receiving party shall promptly contact the other party by
telephone for delivery instructions and such mail, telegrams, packages or other
communications (or, in case the same relate to both businesses, copies thereof)
shall promptly be forwarded to the other party in accordance with its delivery
instructions. The foregoing provisions of this Section 8 shall constitute full
authorization to the postal authorities, all telegraph and express companies and
all other persons to make deliveries to McKesson or Armor All, as the case may
be, addressed to either of them or to any of their officers and/or directors
specifically in their capacities as such. The provisions of this Section 8 are
not intended to and shall not be deemed to constitute an authorization by either
McKesson or Armor All to permit the other to accept services of process on its
behalf, and neither party is or shall be deemed to be the agent of the other for
service of process purposes.
SECTION 9. Limitation of Liability
The liability of McKesson to Armor All for any loss or damage,
whether direct or indirect, arising in connection with providing the Services or
other assistance to Armor All pursuant to Sections 1, 3, 4 and 5 shall not
exceed the total amount billed or billable to Armor All for the particular
Service or assistance or part thereof which gave rise to the loss or damage. IN
NO EVENT WILL McKESSON BE LIABLE TO ARMOR ALL FOR INDIRECT, CONSEQUENTIAL OR
INCIDENTAL DAMAGES, INCLUDING WITHOUT LIMITATION, LOSS OR PROFITS OR DAMAGE TO
OR LOSS OF USE OF ANY PROPERTY.
9
<PAGE>
SECTION 10. Force Majeure
McKesson shall be excused for failure to provide the Services or
other assistance pursuant to Sections 1, 3, 4 and 5 to the extent that such
failure is directly or indirectly caused by an occurrence commonly known as
force majeure, including, without limitation, delays arising out of acts of God,
acts or orders of a government, agency or instrumentality thereof (whether of
fact or law), acts of public enemy, riots, embargoes, strikes or other concerted
acts of workmen (whether of McKesson or other persons), casualties or accidents,
deliveries of materials, transportation or shortage of cars, trucks, fuel,
power, labor or materials, or any other causes, circumstances or contingencies
within or without the United States of America, which are beyond the reasonable
control of McKesson. Notwithstanding any events operating to excuse the
performance by McKesson, this Agreement shall continue in full force for the
remainder of its term and any renewals thereof.
SECTION 11. Confidentiality
Except as otherwise required under applicable law, McKesson and
Armor All agree to maintain as confidential and not to disclose to any third
party any and all information provided by one party to the other or otherwise
obtained by one party in the performance of this Agreement.
SECTION 12. Miscellaneous
12.1 Notice. Any notice, request, instruction, consent, approval or
other communication required or permitted hereunder shall be made in writing and
shall be delivered personally, sent by certified or registered mail, postage
prepaid, telegraphed, sent by facsimile transmission or by telex, and shall be
deemed given when so delivered personally, telegraphed, telexed, sent by
facsimile transmission or, if mailed, four days after the date of deposit in the
United States mails, as follows:
To McKesson: McKesson Corporation
One Post Street
San Francisco, CA 94104
Attn: Vice President and General Counsel
To Armor All: Armor All Products Corporation
6 Liberty
Aliso Viejo, CA 92656
Attn: President
10
<PAGE>
12.2 Governing Law. The validity, interpretation, enforceability and
performance of this Agreement shall be governed by and construed and enforced in
accordance with the law of the State of California.
12.3 Entire Agreement. The parties intend that the terms of this
Agreement shall be the final expression of their agreement with respect to the
subject matter hereof and may not be contradicted by evidence of any prior or
contemporaneous agreement. The parties further intend that this Agreement shall
constitute the complete and exclusive statement of its terms and that no
extrinsic evidence whatsoever may be introduced in any judicial, administrative,
or other legal proceeding involving this Agreement. This Agreement constitutes
the entire agreement between the parties and supersedes all prior negotiations,
undertakings, representations and agreements, if any, of the parties hereto.
This Agreement may not be amended orally but may be amended only by a written
instrument signed by all of the parties hereto.
12.4. Amendments and Waivers. This Agreement may not be amended
except upon the written consent of all parties. By an instrument in writing,
either party may waive compliance by the other party with any term or provision
of this Agreement that such other party was or is obligated to comply with or
perform, provided, however that such waiver shall not operate as a waiver of, or
estoppel with respect to, any other or subsequent failure. No failure to
exercise and no delay in exercising any right, remedy, or power hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right, remedy, or power hereunder preclude any other or further exercise thereof
or the exercise of any other right, remedy, or power provided herein or by law
or in equity. The waiver of any party of the time for performance of any act or
condition hereunder does not constitute a waiver of the act or condition itself.
12.5 Severability. If any provision of this Agreement, or the
application thereof to any person, place, or circumstance, shall be held by a
court of competent jurisdiction to be invalid, unenforceable, or void, the
remainder of this Agreement and such provisions as applied to other persons,
places, and circumstances shall remain in full force and effect.
12.6. Counterparts. This Agreement may be executed in counterparts,
each of which shall constitute one and the same instrument.
12.7 Interpretation of Agreement. This section and other headings
used in this Agreement are for reference purposes only and shall not constitute
a part hereof or affect the meaning or interpretation of this Agreement. The
term "person" shall include any individual, partnership, joint venture,
corporation,
11
<PAGE>
unincorporated organization, any other business entity and any government or any
department or agency thereof, whether acting in an individual, fiduciary, or
other capacity. Whenever the context so requires, the use of the singular shall
be deemed to include the plural and vice versa.
12.8. Further Assurances. Subject to the terms and conditions
hereof, each party agrees to use its best efforts to do, or cause to be done,
all things necessary, proper, or advisable under applicable laws and regulations
to consummate the transactions contemplated by this Agreement as expeditiously
as practicable, including, without limitation, the performance of such further
acts or the execution and delivery of any additional instruments or documents as
any party may reasonably request in order to carry out the purposes of this
Agreement and the transactions contemplated hereby.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the day and year first above written.
McKESSON CORPORATION
By: /s/ Garret A. Scholz
-------------------------------
Title: Vice President and Treasurer
ARMOR ALL PRODUCTS CORPORATION
By: /s/ John F. Schueller
------------------------------
Title: Executive Vice President
By: /s/ Lorraine E. Peetz
-------------------------------
Title: Assistant Secretary
12
<PAGE>
SCHEDULE 1
McKESSON CHARGES TO ARMOR ALL
<TABLE>
<CAPTION>
- - - -----------------------------------------------------------------------------------
Annual
Amount
===================================================================================
<S> <C>
Controller-(Accounting Services related to financial
reporting, SEC documentation, filings, etc.)............................. $ 40,000
- - - -----------------------------------------------------------------------------------
Law Dept.-Outside legal (supported by invoices).......................... *
-Internal....................................................... 200,000
- - - -----------------------------------------------------------------------------------
Audit-Internal audit..................................................... 20,000
- - - -----------------------------------------------------------------------------------
Mktg. Services-Advertising & Promotional Services, Mkt.
Research billed by Mktg. to AA based on agreed upon requested
projects and work........................................................ *
- - - -----------------------------------------------------------------------------------
Insurance................................................................ **
- - - -----------------------------------------------------------------------------------
Info. Services-Any charges for specific systems development
projects (currently none)................................................ *
- - - -----------------------------------------------------------------------------------
Secretary's Dept.-Billing for subsidiary filing fees, Board
expenses, etc............................................................ 20,000
- - - -----------------------------------------------------------------------------------
Tax Dept.-Tax return preparation charges (Federal, State,
payroll, etc.)........................................................... 30,000
-Tax sharing agreement to be negotiated
- - - -----------------------------------------------------------------------------------
Treasury Dept.-Charges for Cash Mgmt. System & Insurance
admin.................................................................... 30,000
- - - -----------------------------------------------------------------------------------
Corp. Relations-Direct expenses for subsidiary annual report............. 30,000
- - - -----------------------------------------------------------------------------------
Personnel-Allocated expenses for Employee Benefits Admin. &
Employee Relations....................................................... 30,000
- - - -----------------------------------------------------------------------------------
Planning Dept.- ........................................................ 50,000
--------
- - - -----------------------------------------------------------------------------------
Total Annual Charge..................................... $450,000
========
- - - -----------------------------------------------------------------------------------
</TABLE>
[FN]
- - - -------------
* Charges to be based on specifically requested services.
** Self-insurance charges based on a schedule which takes into
consideration the amounts of coverage and deductibles applicable to
Armor All and as based upon McKesson's current cost for such coverage.
13
<PAGE>
EXHIBIT (10) E
TERMINATION AGREEMENT
THIS TERMINATION AGREEMENT, dated as of May 15, 1994 is
made and entered into by and between ARMOR ALL PRODUCTS
CORPORATION, a Delaware corporation with its principal office at
6 Liberty, Aliso Viejo, California (the "Company"), and
- - - --------------------------------------------("Executive").
R E C I T A L S
A. Company desires to enter into an agreement with
Executive whereby severance benefits will be paid to Executive
on change in control of the Company and consequent actual or
constructive termination of Executive's employment.
B. This Agreement sets forth the severance benefits which
the Company agrees that it will pay to the Executive if
Executive's employment with the Company terminates under one of
the circumstances described herein following a Change in Control
of the Company.
NOW, THEREFORE, in consideration of the foregoing premises
and the mutual covenants contained herein, the parties hereto
agree as follows:
1. Term of Agreement. This Agreement shall be effective
immediately on the date hereof and shall continue in effect
through December 31, 1994; provided, however, that commencing on
January 1, 1995 and each January 1 thereafter, the term of this
Agreement shall automatically be extended for one additional
year unless not later than September 30 of the preceding year,
the Company shall have given notice that it does not wish to
extend this Agreement; provided, further, that notwithstanding
any such notice by the Company not to extend, this Agreement
shall automatically be extended for 24 months beyond the term
provided herein if a Change in Control, as defined in Section 3
of this Agreement has occurred during the term of this
Agreement.
2. Effect on Employment Rights. This Agreement is not
part of any employment agreement that the Company and Executive
may have entered into. Nothing in this Agreement shall confer
upon Executive any right to continue in the employ of the
Company or interfere with or restrict in any way the rights of
the Company, which are hereby expressly reserved, to terminate
Employee's employment at any time prior to a Change in Control
for any reason, with or without cause.
Executive agrees that, subject to the terms and conditions
of this Agreement, in the event of a potential change in control
of the Company (as defined below), Executive will remain in the
employ of the Company during the pendency of any such potential
change in control and for a period of one year after the occur-
<PAGE>
rence of an actual Change in Control. For this purpose, a
"potential change in control of the Company" shall be deemed to
have occurred if (a) the Company enters into an agreement, the
consummation of which would result in the occurrence of a Change
in Control, (b) any person publicly announces an intention to
take or consider taking action which if consummated would
constitute a Change in Control or (c) the Board of Directors of
the Company (the "Board") adopts a resolution to the effect that
a potential change in control of the Company has occurred.
3. Change in Control. For purposes of this Agreement, a
"Change in Control" of the Company shall be deemed to have
occurred if any of the events set forth in any one of the
following paragraphs shall occur:
(a) any "person" (as defined in section 3(a)(9)
of the Securities Exchange Act of 1934, as amended
(the "Exchange Act") and as such term is modified in
sections 13(d) and 14(d) of the Exchange Act),
excluding McKesson Corporation, the Company or any of
their respective subsidiaries, a trustee or any
fiduciary holding securities under an employee benefit
plan of the Company or any of its subsidiaries, an
underwriter temporarily holding securities pursuant to
an offering of such securities or a corporation owned,
directly or indirectly, by stockholders of the Company
in substantially the same proportions as their
ownership of the Company, is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities
of the Company representing 30% or more of the
combined voting power of the Company's then
outstanding securities; or
(b) during any period of not more than two
consecutive years, individuals who at the beginning of
such period constitute the Board and any new director
(other than a director designated by a Person who has
entered into an agreement with the Company to effect a
transaction described in clause (a), (c) or (d) of
this paragraph) whose election by the Board or
nomination for election by the Company's stockholders
was approved by a vote of at least two-thirds (2/3) of
the directors then still in office who either were
directors at the beginning of the period or whose
election or nomination for election was previously so
approved, cease for any reason to constitute a
majority thereof; or
2
<PAGE>
(c) the shareholders of the Company approve a
merger or consolidation of the Company with any other
corporation, other than (i) a merger or consolidation
which would result in the voting securities of the
Company outstanding immediately prior thereto
continuing to represent (either by remaining
outstanding or by being converted into voting
securities of the surviving entity), in combination
with the ownership of any trustee or other fiduciary
holding securities under an employee benefit plan of
the Company, at least 50% of the combined voting power
of the voting securities of the Company or such
surviving entity outstanding immediately after such
merger or consolidation, or (ii) a merger or
consolidation effected to implement a recapitalization
of the Company (or similar transaction) in which no
person acquires more than 50% of the combined voting
power of the Company's then outstanding securities; or
(d) the shareholders of the Company approve a
plan of complete liquidation of the Company or an
agreement for the sale or disposition by the Company
of all or substantially all of the Company's assets.
4. Termination of Employment Following a Change in
Control. Executive shall be entitled to the benefits provided
in Section 5 hereof upon the subsequent termination of
Executive's employment by the Company within two years after a
Change in Control which occurs during the term of this
Agreement, provided such termination is (a) by the Company other
than for Cause, as defined below, or (b) by Executive for Good
Reason, as defined below. Executive shall not be entitled to
the benefits of Section 5, any other provision of the Plan to
the contrary notwithstanding, if Executive's employment
terminates: (i) pursuant to a mandatory retirement policy in
effect prior to the Change in Control, (ii) by reason of
Executive's death or (iii) by reason of Executive's total and
permanent disability. As used herein, "total and permanent
disability" means a condition which prevents Executive from
performing to a significant degree the essential duties of his
or her position and is expected to be of long-term duration or
result in death. A determination of total and permanent
disability must be based on competent medical evidence.
(a) Cause.
(i) Definition. Termination by the Company of
Executive's employment for Cause shall mean
termination upon Executive's willful engaging in
misconduct which is demonstrably and materially
injurious to the Company and its subsidiaries taken as
a whole. No act, or failure to act, on Executive's
part shall be considered "willful" unless done, or
omitted to be done, by Executive not in good faith and
without reasonable belief that Executive's action or
omission was in the best interest of the Company or
3
<PAGE>
its subsidiaries. Notwithstanding the foregoing,
Executive shall not be deemed to have been terminated
for Cause unless and until there shall have been
delivered to Executive a copy of a resolution duly
adopted by the affirmative vote of not less than three
quarters of the entire membership of the Board at a
meeting of the Board called and held for the purpose
of making a determination of whether Cause for
termination exists (after reasonable notice to
Executive and an opportunity for Executive to be heard
before the Board), finding that in the good faith
opinion of the Board Executive was guilty of
misconduct as set forth above in this subsection
4(a)(i) and specifying the particulars thereof in
detail.
(ii) Remedy by Executive. If the Company gives
Executive a Notice of Termination which states that
the basis for terminating Executive's employment is
Cause, Executive shall have ten days after receipt of
such Notice to remedy the facts and circumstances
which provided Cause. The Board (or any duly
authorized Committee thereof) shall make a good faith
reasonable determination immediately after such
ten-day period whether such facts and circumstances
have been remedied and shall communicate such
determination in writing to Executive. If the Board
determines that adequate remedy has not occurred, then
the initial Notice of Termination shall remain in
effect.
(b) Good Reason. After a Change in Control,
Executive may terminate employment with the Company at
any time during the term of this Agreement if Execu-
tive has made a good faith reasonable determination
that Good Reason exists for this termination.
(i) Definition. For purposes of this
Agreement, "Good Reason" shall mean any of the
following actions, if taken without the express
written consent of Executive:
A. any material change by the Company in
Executive's functions, duties, or responsi-
bilities which change would cause Executive's
position with the Company to become of less
dignity, responsibility, importance, or scope
from the position and attributes that applied to
Executive immediately prior to the Change in
Control;
B. any significant reduction in Executive's
base salary, other than a reduction effected as
part of an across-the-board reduction affecting
all executive employees of the Company;
4
<PAGE>
C. any material failure by the Company to
comply with any of the provisions of this
Agreement (or of any employment agreement between
the parties);
D. the Company's requiring Executive to be
based at any office or location more than 25
miles from the office at which Executive is based
on the date immediately preceding the Change in
Control, except for travel reasonably required in
the performance of Executive's responsibilities
and commensurate with the amount of travel
required of Executive prior to the Change in
Control; or
E. any failure by the Company to obtain the
express assumption of this Agreement by any
successor or assign of the Company.
Executive's right to terminate employment
for Good Reason pursuant to this subsection
4(b)(i) shall not be affected by Executive's
incapacity due to physical or mental illness.
(ii) Remedy by Company. If Executive gives
the Company a Notice of Termination which states
that the basis for Executive's termination of
employment is Good Reason, the Company shall have
ten days after receipt of such Notice to remedy
the facts and circumstances which provided Good
Reason. Executive shall make a good faith
reasonable determination immediately after such
ten-day period whether such facts and
circumstances have been remedied and shall
communicate such determination in writing to the
Company. If Executive determines that adequate
remedy has not occurred, then the initial Notice
of Termination shall remain in effect.
(iii) Determination by Executive Presumed
Correct. Any determination by Executive pursuant
to this Section 4(b) that Good Reason exists for
Executive's termination of employment and that
adequate remedy has not occurred shall be
presumed correct and shall govern unless the
party contesting the determination shows by a
clear preponderance of the evidence that it was
not a good faith reasonable determination.
(iv) Severance Payment Made Notwithstanding
Dispute. Notwithstanding any dispute concerning
whether Good Reason exists for termination of
employment or whether adequate remedy has
occurred, the Company shall immediately pay to
Executive, as specified in Section 5, any amounts
otherwise due under this Agreement. Executive
5
<PAGE>
may be required to repay such amounts to the
Company if any such dispute is finally determined
adversely to Executive.
(c) Notice of Termination. Any termination of
Executive's employment by the Company or by Executive
hereunder shall be communicated by a Notice of
Termination to the other party hereto. For purposes
of this Agreement, a "Notice of Termination" shall
mean a written notice which shall indicate the
specific termination provisions in this Agreement
relied upon and which sets forth (i) in reasonable
detail the facts and circumstances claimed to provide
a basis for termination of Executive's employment
under the provision so indicated and (ii) the date of
Executive's termination of employment, which shall be
no earlier than 10 days after such Notice is received
by the other party. Any purported termination of the
Executive's employment by the Company which is not
effected pursuant to a Notice of Termination
satisfying the requirements of this Agreement shall
not be effective. In the case of a termination for
Cause, the Notice of Termination shall also satisfy
the requirements set forth in Section 4(a)(i).
5. Severance Payment Upon Termination of Employment. If
Executive's employment with the Company is terminated during the
term of this Agreement and after a Change in Control (a) by the
Company other than for Cause, or (b) by Executive for Good
Reason, then the Company shall immediately pay to Executive in a
cash lump sum an amount equal to (i) 2.99 multiplied by
Executive's "base amount" determined pursuant to Section 280G of
the Internal Revenue Code of 1986, as amended (the "Code"), less
(ii) any other amount which constitutes a "parachute payment" to
Executive as defined in Section 280G(b)(2) of the Code.
6. Section 280G Cap. It is the intent of the parties
hereto that no amount payable pursuant to the terms of this
Agreement shall cause any payment or transfer by the Company to
or for the benefit of Executive, whether paid or payable (or
transferred or transferable) pursuant to the terms of this
Agreement or otherwise (a "Payment"), to be subject to taxation
under Section 4999 of the Code and as an "excess parachute
payment" as defined in Section 280G of the Code. In the event
that the last independent auditors selected by the Board prior
to the termination of Executive under this Agreement (the
"Auditors") determine that any such item constitutes an "excess
parachute payment," and that the limitation of this Section 6
would result in a larger after-tax benefit to Executive, then
Executive may (but is not required to) irrevocably elect to
relinquish or not exercise any payments or benefits available to
Executive under any plan, contract or program before the payment
or enjoyment thereof in order to limit such payments or benefits
for the purpose of (i) eliminating any "excess parachute
payment" or (ii) causing Executive to become eligible to receive
all or any portion of the cash payment that would be made
6
<PAGE>
pursuant to Section 5 of this Agreement if Executive had no
"parachute payments" as defined in Section 280G(b)(2) of the
Code. For purposes of these calculations, (i) all amounts
received in connection with Executive's employment by the
Company or to be received by Executive in connection with a
change in the ownership or effective control of the Company, or
a change in the ownership of a substantial portion of the assets
of the Company (including but not limited to payments or
benefits that Executive becomes entitled to in connection with a
"Change in Control" as defined in Section 3 hereof) shall be
treated as "parachute payments" within the meaning of Section
280G(b)(2) of the Code, except to the extent that such amounts
are (A) relinquished pursuant to the preceding sentence or
(B) identified in the written opinion of independent tax counsel
selected by the Auditors and approved by Executive (which
approval shall not be unreasonably withheld) as not constituting
parachute payments or excess parachute payments (in whole or in
part), or as representing reasonable compensation for personal
services to be rendered or actually rendered before the Change
in Control in excess of the base amount, within the meaning of
Section 280G(b)(4)(B) of the Code, and (ii) the value of any
non-cash benefit or any deferred cash payment included in the
calculations shall be determined by the Auditors in accordance
with the principles of Section 280G(d)(3) and (4) of the Code.
The Company shall bear the expense of obtaining the opinion of
the independent tax counsel referred to in the preceding
sentence.
7. Damages. Executive shall not be required to mitigate
damages with respect to the amount of any payment provided under
this Agreement by seeking other employment or otherwise, nor
shall the amount of any payment provided under this Agreement be
reduced by retirement benefits, deferred compensation or any
compensation earned by Executive as a result of employment by
another employer.
8. Successor to Company. The Company shall require any
successor or assign (whether direct or indirect, by purchase,
merger, consolidation or otherwise) to all or substantially all
of the business and/or assets of the Company, by agreement in
form and substance satisfactory to Executive, expressly,
absolutely and unconditionally to assume and agree to perform
this Agreement in the same manner and to the same extent that
the Company would be required to perform it if no such
succession or assignment had taken place. As used in this
Agreement, "Company" shall mean the Company as hereinbefore
defined and any successor or assign to its business and/or
assets as aforesaid which executes and delivers the agreement
provided for in this section or which otherwise becomes bound by
all the terms and provisions of this Agreement by operation of
law.
9. Heirs of Executive. This Agreement shall inure to the
benefit of and be enforceable by Executive's personal and legal
representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. If Executive should die
7
<PAGE>
while any amounts are still payable to Executive hereunder, all
such amounts, unless otherwise provided herein, shall be paid in
accordance with the terms of this Agreement to Executive's
devisee, legatee, or other designee or, if there be so such
designee, to Executive's estate.
10. Arbitration. Any dispute, controversy or claim
arising under or in connection with this Agreement, or the
breach hereof, shall be settled exclusively by arbitration in
accordance with the Rules of the American Arbitration
Association then in effect. Judgment upon the award rendered by
the arbitrator(s) may be entered in any court of competent
jurisdiction. Any arbitration held pursuant to this section in
connection with Executive's termination of employment shall take
place in Los Angeles, California at the earliest possible date.
If any proceeding is necessary to enforce or interpret the terms
of this Agreement, or to recover damages for breach thereof, the
prevailing party shall be entitled to reasonable attorneys fees
and necessary costs and disbursements, not to exceed in the
aggregate one percent (1%) of the net worth of the other party,
in addition to any other relief to which he or it may be
entitled.
11. Notice. For purposes of this Agreement, notices and
all other communications provided for in this Agreement shall be
in writing and shall be deemed to have been duly given when
delivered by messenger or in person, or when mailed by United
States registered mail, return receipt requested, postage
prepaid, as follows:
If to
the Company: Armor All Products Corporation
6 Liberty
Aliso Viejo, California 92656
Attention: Office of the General Counsel
If to
the Executive: -----------------------
c/o Armor All Products
6 Liberty
Aliso Viejo, California 92656
or such other address as either party may have furnished to the
other in writing in accordance herewith, except that notices of
change of address shall be effective only upon receipt.
12. Legal Costs. The Company shall pay to Executive all
reasonable attorneys' fees and necessary costs and disbursements
incurred by or on behalf of Executive as a result of any dispute
arising out of this Agreement. Such fees shall be either paid
directly by the Company or reimbursed to Executive as soon as
reasonably practicable after Executive has provided the Company
with satisfactory evidence that Executive has incurred liability
8
<PAGE>
for and paid such fees. To the extent of any conflict, this
section shall supersede the last sentence of Section 10 of this
Agreement.
13. General Provisions.
(a) Executive's rights and obligations under this
Agreement shall not be transferable by assignment or otherwise,
nor shall Executive's rights be subject to encumbrance or
subject to the claims of the Company's creditors. Nothing in
this Agreement shall prevent the consolidation of the Company
with, or its merger into, any other corporation, or the sale by
the Company of all or substantially all of its properties or
assets; and this Agreement shall inure to the benefit of, be
binding upon and be enforceable by, any successor surviving or
resulting corporation, or other entity to which such assets
shall be transferred. This Agreement shall not be terminated by
the voluntary or involuntary dissolution of the Company.
(b) This Agreement constitutes the entire agreement
between the parties hereto in respect to the rights and
obligations of the parties following a Change in Control. This
Agreement supersedes and replaces all prior oral and written
agreements, understandings, commitments, and practices between
the parties (whether or not fully performed by Executive prior
to the date hereof), which shall be of no further force or
effect.
(c) The provisions of this Agreement shall be regarded as
divisible, and if any of said provisions or any part thereof are
declared invalid or unenforceable by a court of competent
jurisdiction, the validity and enforceability of the remainder
of such provisions or parts thereof and the applicability
thereof shall not be affected thereby.
(d) This Agreement may not be amended or modified except
by a written instrument executed by the Company and Executive.
9
<PAGE>
(e) This Agreement and the rights and obligations
hereunder shall be governed by and construed in accordance with
the laws of the State of California.
IN WITNESS WHEREOF, the parties have executed this
Agreement as of the date first above written.
ARMOR ALL PRODUCTS CORPORATION
A Delaware corporation
By --------------------------
Nancy A. Miller
Vice President
Attest:
By -----------------------
Assistant Secretary
By the authority of the -----------------------------
Compensation Committee of Executive
the Board of Directors of
Armor All Products Corporation
on March 21, 1994.
10
<PAGE>
EXHIBIT (10)N
ARMOR ALL PRODUCTS CORPORATION
SUPPLEMENTAL PSIP
Effective August 1, 1989
Adopted on August 1, 1989
<PAGE>
TABLE OF CONTENTS
Page
----
A. PURPOSE . . . . . . . . . . . . . . . . . . . . . . . . . .1
B. ERISA PLAN. . . . . . . . . . . . . . . . . . . . . . . . .1
C. PARTICIPATION . . . . . . . . . . . . . . . . . . . . . . .1
1. Eligibility to Participate . . . . . . . . . . . . . .1
2. Election to Participate by Eligible
Executives and Deferral Election. . . . . . . . .1
3. Notification of Participants . . . . . . . . . . . . .2
4. Relation to Other Plans. . . . . . . . . . . . . . . .2
a. DCAP. . . . . . . . . . . . . . . . . . . . . . .2
b. Other Plans . . . . . . . . . . . . . . . . . . .2
D. AMOUNTS OF DEFERRAL . . . . . . . . . . . . . . . . . . . .3
1. PSIP Supplement. . . . . . . . . . . . . . . . . . . .3
2. Amount of Deferrals. . . . . . . . . . . . . . . . . .3
E. COMPANY MATCH . . . . . . . . . . . . . . . . . . . . . . .3
1. Eligibility for Match. . . . . . . . . . . . . . . . .3
2. Amount of Match. . . . . . . . . . . . . . . . . . . .4
F. PAYMENT OF DEFERRED COMPENSATION. . . . . . . . . . . . . .4
1. Book Account and Interest Credit . . . . . . . . . . .4
2. Vesting. . . . . . . . . . . . . . . . . . . . . . . .4
3. Method of Payment of Benefits. . . . . . . . . . . . .5
4. Date Payment Occurs. . . . . . . . . . . . . . . . . .5
G. BENEFITS ON DEATH . . . . . . . . . . . . . . . . . . . . .5
1. Date Payments Occur and Method
of Payment. . . . . . . . . . . . . . . . . . . .5
2. Designation of Beneficiary . . . . . . . . . . . . . .5
H. SOURCE OF PAYMENT . . . . . . . . . . . . . . . . . . . . .5
I. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . .6
1. Withholding. . . . . . . . . . . . . . . . . . . . . .6
2. No Assignment. . . . . . . . . . . . . . . . . . . . .6
3. Applicable Law; Severability . . . . . . . . . . . . .6
4. No Right to Continued Employment, Etc. . . . . . . . .6
J. ADMINISTRATION OF THE PLAN. . . . . . . . . . . . . . . . .7
1. In General . . . . . . . . . . . . . . . . . . . . . .7
2. Elections and Notices. . . . . . . . . . . . . . . . .7
i
<PAGE>
Page
----
K. AMENDMENT OR TERMINATION OF THE PLAN. . . . . . . . . . . .7
L. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . .7
EXECUTION . . . . . . . . . . . . . . . . . . . . . . . . .9
APPENDIX A - Examples of Deferrals Under Plan . . . . . .A-1
ii
<PAGE>
ARMOR ALL PRODUCTS CORPORATION
SUPPLEMENTAL PSIP
A. PURPOSE
This Plan is established to allow certain Company executives
to elect to defer compensation which cannot be deferred under the
Armor All Products Profit-Sharing Investment Plan ("PSIP")
because of limitations of tax laws, and to provide for a Company
Match on those deferrals at a rate equivalent to the PSIP's
"Matching Employer Contribution".
B. ERISA PLAN
This Plan is an unfunded deferred compensation program for a
select group of management employees of the Company. The Plan
therefore is covered by Title I of ERISA except that it is exempt
from Parts 2, 3, and 4 of Title I of ERISA.
C. PARTICIPATION
1. Eligibility to Participate
The Administrator may, at his discretion, and at any
time, and from time to time, select Company executives who may
elect to participate in this Plan ("Eligible Executives").
Selection of Eligible Executives may be evidenced by the terms of
the executive's employment contract with the Company, or by
inclusion among the persons specified in writing by the
Administrator.
The Administrator may, at his discretion, and at any time,
and from time to time, provide that executives previously
designated are no longer Eligible Executives. If the
Administrator determines that an executive is no longer an
Eligible Executive, he or she shall remain a Participant in the
Plan until all amounts credited to his or her Account prior to
such determination are paid out under the terms of the Plan (or
until death, if earlier).
2. Election to Participate by Eligible Executives and
Deferral Election
Each Eligible Executive may become a Participant in the
Plan by electing to defer Compensation in accordance with the
terms of this Plan. However, no Eligible Executive shall defer
any Compensation under this Plan for the first Plan Year in which
the Eligible Executive becomes eligible to make deferrals under
this Plan unless his "Basic Contributions" under the PSIP made
with respect to Compensation earned before November 1 of the Plan
1
<PAGE>
Year are limited by Code section 402(g). If the Eligible
Executive's "Basic Contributions" under the PSIP are not so
limited by November 1 of the first Plan Year in which the
Eligible Executive becomes eligible to elect deferrals under this
Plan, then the Eligible Executive's deferral election for that
Plan Year shall be void. An election to defer shall be in
writing and shall be made at the time and in the form specified
by the Administrator. As a condition of electing to defer
Compensation under this Plan for a Plan Year, the Eligible
Executive shall agree not to change (either by increasing or
decreasing) the rate at which the Eligible Executive's
compensation is reduced under the PSIP to make "Basic
Contributions" under PSIP. On electing to defer Compensation
under this Plan, the Eligible Executive shall be deemed to accept
all other terms and conditions of this Plan.
All elections to defer amounts under this Plan shall be
irrevocable and shall be made pursuant to an election executed
and filed with the Administrator before the amounts so deferred
are earned. All elections to defer 1989 Compensation shall apply
only to Compensation earned after the election is filed with the
Administrator and shall be executed and filed with the
Administrator no later than August 30, 1989. An election to
defer Compensation earned in later Years shall be made prior to
the beginning of any such Year. However, if an executive is
first selected to be an Eligible Executive after the beginning of
a Year, he may make an election to defer Compensation for that
Year no later than 30 days after the date he becomes an Eligible
Executive, and such election shall apply only to Compensation
earned after the election is filed with the Administrator.
3. Notification of Participants
The Administrator shall annually notify each Eligible
Executive that he or she may participate in the Plan for the next
Year.
4. Relation to Other Plans
a. DCAP
An Eligible Executive may participate in this Plan
and may also participate in the Armor All Products Corporation
Deferred Compensation Administration Plan ("DCAP"). However, no
amounts may be deferred under this Plan which have been deferred
under the DCAP or any other plan of the Company.
b. Other Plans
For all other benefit programs maintained by the
Company, amounts deferred by an Eligible Executive under this
2
<PAGE>
Plan shall, to the extent relevant, be treated in the same manner
as amounts deferred under the DCAP.
D. AMOUNTS OF DEFERRAL
1. PSIP Supplement
This Plan allows an Eligible Executive to defer
Compensation, and receive credit for a Company Match, to the
extent that such deferrals (and corresponding Company Match)
cannot be made under the PSIP because of the limitations in Code
section 402(g) (limiting annual elective deferrals under the PSIP
to $7,000, as adjusted from time to time under the Code).
2. Amount of Deferrals
As illustrated in Appendix A, an Eligible Executive may
elect to defer under this Plan up to an amount equal to (a) minus
(b), where:
(a) is the maximum rate of deferral for "Basic
Contributions" under the PSIP multiplied by the Eligible
Executive's Compensation, and
(b) is the maximum amount that the Eligible Executive
is able to defer as a "Basic Contribution" under the PSIP, taking
into account the limits of Code section 402(g).
E. COMPANY MATCH
1. Eligibility for Match
a. For any Year, a Company Match shall be credited
only to the Accounts of Eligible Executives who actually defer
Compensation under this Plan for such Year and who are employed
by the Company on the March 31 following such Year.
b. The requirement of employment on March 31 shall
not apply to any Eligible Executive who terminates his employment
with the Company (i) on or after attaining age 55 and completing
ten "Years of Service" under the PSIP, (ii) due to retirement
under the terms of the McKesson Corporation Retirement Plan,
(iii) on or after attaining age 65, or (iv) due to permanent and
total disability as determined under the PSIP. In this case, any
Company Match for the year of such Eligible Executive's
termination of employment shall not be credited to an Account
hereunder but shall be paid (to the extent vested) in a single
sum to him or his beneficiaries as soon as practicable after the
amount of that match is determined by the Company.
3
<PAGE>
2. Amount of Match
The amount of the Company Match credited to the Account
of an Eligible Executive who is a Participant for any Year shall
be a percentage of the Eligible Executive's deferrals under this
Plan for the Year. This percentage shall be the same percentage
as the "Matching Employer Contribution" (as defined in the PSIP)
percentage that would have been credited to the Eligible
Executive's PSIP account if his deferrals under this Plan had
been made under the PSIP. In determining this amount, the
Administrator shall take into account, as illustrated in example
3 in Appendix A, the different "Matching Employer Contribution"
rates that may apply under PSIP during a Plan Year.
F. PAYMENT OF DEFERRED COMPENSATION
1. Book Account and Interest Credit
Both Compensation deferred by a Participant and any
Company Match for the benefit of a Participant shall be credited
to a separate bookkeeping account maintained for such Participant
(the "Account"). Earnings shall be credited to each Account
(both on the Participant's deferrals and on any Company Match
credited to his Account hereunder) at a rate equal to the amount
earned during that same period by amounts invested under the
PSIP's Guaranteed Principal and Interest investment option.
Interest shall be credited to each Account as of the end of each
month.
2. Vesting.
a. A participant shall be 100% vested at all times in
the value of his elective deferrals and earnings thereon credited
to his Account.
b. A Participant shall vest in the amounts of Company
Match and earnings thereon credited to his Account at the same
time and in the same manner as if these amounts were "Matching
Employer Contributions" under the PSIP and if the rules of the
PSIP concerning vesting applied to such amounts. For this
purpose, any Company Match shall be deemed to be credited to an
Account as of the March 31 with respect to which such Company
Match is determined. Any amounts that would be forfeited under
the rules of the PSIP applicable to "Matching Employer
Contributions" under that plan shall be forfeited hereunder. Any
forfeiture under this Plan of any portion of the Company Match
credited to a Participant's Account shall eliminate any
obligation of the Company to pay the forfeited amount hereunder.
4
<PAGE>
3. Method of Payment of Benefits
The value of the vested amounts credited to a
Participant's Account as of the date of his Payment Event shall
be paid to him in a single lump sum. (If any Company Match is
payable under Section E.l.b. hereunder, that amount may be paid
separately and at a later date as provided in such section.)
4. Date Payment Occurs
Payment shall be made as soon as practicable after the
earliest Payment Event occurs.
G. BENEFITS ON DEATH
1. Date Payment Occurs and Method of Payment
If a Participant dies before distribution of the amount
credited to his or her Account, such distribution shall be paid
to his or her Beneficiary in a single lump sum as soon as
practicable after the death of the Participant.
2. Designation of Beneficiary
A Participant may designate any person or entity as his
or her Beneficiary, but may not designate more than one person or
any person that is not a natural person without the approval of
the Administrator. Designation shall be in writing and shall
become effective only when filed with (and, if appropriate,
approved by) the Administrator. Such filing must occur before
the Participant's death. A Participant may change the
Beneficiary, from time to time, by filing a new written
designation with (and, if appropriate, approved by) the
Administrator. If the Participant is married, any Beneficiary
designation which does not designate the Participant's spouse to
receive at least one-half of the Participant's Account shall only
become effective when approved in writing by the Participant's
spouse.
If the Participant fails to effectively designate a
Beneficiary in accordance with the Administrator's procedures or
the person designated by the Participant is not living at the
time the distribution is to be made, then his or her Beneficiary
shall be his beneficiary under the PSIP.
H. SOURCE OF PAYMENT
Amounts paid under this Plan shall be paid from the general
funds of the Company, and each Participant and his or her
Beneficiaries shall be no more than unsecured general creditors
of the Company with no special or prior right to any assets of
the Company for payment of any obligations hereunder. Nothing
5
<PAGE>
contained in this Plan shall be deemed to create a trust of any
kind for the benefit of any Participant or Beneficiary, or create
any fiduciary relationship between the Company and any
Participant or Beneficiary with respect to any assets of the
Company.
I. MISCELLANEOUS
1. Withholding
Each Participant and Beneficiary shall make appropriate
arrangements with the Company for the satisfaction of any
federal, state, or local income tax withholding requirements and
Social Security or other employment tax requirements applicable
to the payment of benefits under this Plan. If no other
arrangements are made, the Company may provide, at its
discretion, for such withholding and tax payments as may be
required.
2. No Assignment
The benefits provided under this Plan may not be
alienated, assigned, transferred, pledged, or hypothecated by any
person, at any time. These benefits shall be exempt from the
claims of creditors or other claimants and from all orders,
decrees, levies, garnishments or executions.
3. Applicable Law: Severability
The Plan hereby created shall be construed,
administered, and governed in all respects in accordance with
ERISA and the laws of the State of California to the extent that
the latter are not preempted by ERISA. If any provision of this
instrument shall be held by a court of competent jurisdiction to
be invalid or unenforceable, the remaining provisions hereunder
shall continue to be effective.
4. No Right to Continued Employment, Etc.
Neither the establishment or maintenance of the Plan
nor the crediting of any amount to any Participant's Account, nor
the designation of an executive as an Eligible Executive, shall
confer upon any individual any right to be continued as an
employee of the Company or shall affect the right of the Company
to terminate any executive's employment or change any terms of
his employment at any time.
6
<PAGE>
J. ADMINISTRATION OF THE PLAN
1. In General
The Plan Administrator shall be the Vice President,
Personnel of McKesson Corporation, a Delaware corporation. If
the Vice President, Personnel is a Participant, any discretionary
action taken as Administrator which directly affects him or her
as a Participant shall be specifically approved by the
Compensation Committee. The Compensation Committee shall have
authority and responsibility to interpret the Plan and shall
adopt such rules and regulations for carrying out the Plan as it
may deem necessary or appropriate. Decisions of the Compensation
Committee shall be final and binding on all parties who have or
claim any interest in the Plan.
2. Elections and Notices
All elections and notices made under this Plan shall be
in writing and filed with the Administrator at the time and in
the manner specified by him or her. All elections to defer under
this Plan shall be irrevocable.
K. AMENDMENT OR TERMINATION OF THE PLAN
A majority of the Outside Directors may at any time,
and from time to time, amend the Plan. Such action shall be
prospective only and shall not adversely affect the rights of any
Participant or Beneficiary to any benefit previously earned under
the Plan. A majority of the Outside Directors may increase or
decrease the interest rate credited to Compensation previously
deferred but the rate shall not be reduced for periods prior to
such action. A majority of the Outside Directors may at any time
terminate the Plan; thereupon all amounts credited to the
Participant's Account for periods preceding the termination date,
plus interest credited thereon, shall promptly be paid, on
termination, in single sums to the respective Participants or
Beneficiaries entitled thereto.
L. DEFINITIONS
For purposes of the Plan, the following terms shall
have the meanings indicated:
1. "Account" means the Account specified in
Section F.l.
2. "Administrator" shall mean the person specified in
Section J.l.
3. "Beneficiary" shall mean the person or entity
described by Section G.2.
7
<PAGE>
4. "Board" shall mean the Board of Directors of Armor All Products
Corporation, a Delaware corporation.
5. "Code" shall mean the Internal Revenue Code of 1986, as amended.
6. "Company" shall mean Armor All Products Corporation, a Delaware
corporation.
7. "Company Match" shall mean, with respect to a Plan Year, the amount
credited to the Account of an Eligible Employee in accordance with Section E.
8. "Compensation" shall mean, with respect to a Plan Year, all
"Compensation", as defined in the PSIP, earned during that Plan Year except that
the annual limit under the PSIP established by Code section 401(a)(17) shall not
apply.
9. "Compensation Committee" shall mean the Compensation Committee of
the Board.
10. "DCAP" shall mean the Armor All Products Corporation Deferred
Compensation Administration Plan.
11. "Eligible Executive" shall mean an employee of the Company
selected as being eligible to participate in this Plan under Section C.
12. "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
13. "Outside Directors" shall mean those members of the Board who are
not employees of the Company and who have not deferred under this Plan
Compensation earned as an employee.
14. "Participant" shall be any Company executive for whom amounts are
credited to an Account under this Plan. Upon his or her death, his or her
Beneficiary shall be a Participant until all amounts are paid out of his or her
Account.
15. "Payment Event":
(a) For any Participant shall mean the earliest of the following:
retirement from the Company, death, other termination of employment with the
Company, or permanent and total disability as determined under the PSIP;
(b) With respect to every Participant shall mean a "Change in
Control" as determined under DCAP.
16. "Plan" shall mean the Armor All Products Corporation Supplemental
PSIP.
8
<PAGE>
17. "Plan Year" or "Year" shall mean the calendar year.
18. "PSIP" shall mean the Armor All Products Profit-Sharing Investment
Plan, as amended from time to time.
Adopted on August 1, 1989, in the City and County of San Francisco,
State of California.
ARMOR ALL PRODUCTS CORPORATION
By /s/Jeffrey M. Sherman
------------------------------
Its President and Chief
Executive Officer
------------------------------
August 1, 1989
9
<PAGE>
EXHIBIT (10)P
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR ALL BRACKETED
PORTIONS OF THIS EXHIBIT AND SUCH PORTIONS HAVE BEEN OMITTED AND
FILED SEPARATELY WITH THE COMMISSION
November 4, 1993
Mr. Michael Caron
President, International Operations
Armor All Products Corporation
Six Liberty Street
Aliso Viejo, CA 92656
Dear Michael:
Chuck Allison asked me to send to you this confirmation of the verbal agreements
between Armor All and Johnson, reached in person and by telephone in September,
1993. The delay in getting this confirmation to you resulted from my absence
from the office during the greater part of the last three weeks and the earlier
periodic absences of both Chuck Allison and myself. Again, this letter is to
confirm that both Johnson and Armor All have agreed to the following
modifications and amendments to the master distribution agreement between the
parties effective from the first day of April, 1991 ("Agreement"). Unless
otherwise stated below, all modifications are to be effective from July 1, 1993.
Capitalized terms are as defined in the Agreement.
1. Scope.
1.1 All non-activated countries are removed from the Territory, with the
exception of South Africa.
1.2 Germany, Japan and Mexico will continue as part of the Territory.
1.3 At Johnson's option, distributor or phase out status would apply to
Venezuela, Taiwan and Thailand. It has now been decided that Venezuela and
Thailand will definitely phase out of the Agreement while a decision on Taiwan
is still pending.
1.4 Hong Kong, Philippines, Singapore/Malaysia will have distributor status
retroactive to July 1, 1993 (see point 2.2 below), pending completion of an
agreeable distribution agreement.
2. Functionals/Minimum Annual Statistical Cases.
<PAGE>
Mr. Michael Caron
November 4, 1993
Page 2
2.1 The current Markup mechanism will remain in effect for Germany, Japan
and Mexico. [-----], Johnson's deemed functional expenses in calculating the
Markup will be [-----]. Effective [-----], the deemed functional expenses in
making such calculation would be [-----], contingent on the minimum annual
statistical cases for Mexico and Japan, in the aggregate, [----] per annum in
Contract Years 4 and 5 versus the minimum annual statistical cases in those
countries for Contract Year 3. Alternatively, the deemed functional expenses
would remain at [-----] if Johnson elects [-----] per annum in the minimum
annual statistical cases for Japan and Mexico, in the aggregate, for Contract
Years 4 and 5, versus the [-----] referenced in the immediately preceding
sentence. (See the following paragraph.)
For Mexico and Japan, the minimum annual statistical cases for Contract
Year 3 (July 1, 1993 - June 30, 1994) will be [-----] versus the Contract Year 2
(July 1, 1992 - June 30, 1993) actual statistical cases in each country. The
minimum annual statistical cases for Japan and Mexico, in the aggregate, for
Contract Years 4 and 5 would [-----] per annum from the prior Contract Year
minimum annual statistical cases unless Johnson elects [-----] for those two
Contract Years of [-----] per annum rather than [-----] per annum.
The minimum annual statistical cases for Germany would [-----].
Minimum annual statistical cases are based on all Products, including
any private label or contract manufactured products (see Section 3 below).
2.2 Retroactive to July 1, 1993, a distribution agreement replaces the
Agreement for Hong Kong, Singapore/Malaysia and, perhaps, Taiwan, subject to
completion of a mutually satisfactory agreement. The distributor agreement would
cover the Products. You have provided to us a suggested draft of that agreement
which we are reviewing internally, including with our General Managers in the
relevant countries. We will sent you our comments during the week of November
15.
Retroactive to July 1, 1993, the Philippines will be covered by a
concentrate supply agreement and, to the extent necessary, a continuing license
agreement. No further royalties would be payable to Armor All.
The suggested markups set forth in your letter dated September 29, 1993
are acceptable. We would prefer that a markup of [-----] of your standard
product cost, net of any rebates or
<PAGE>
Mr. Michael Caron
November 4, 1993
Page 3
discounts from your suppliers, be applied to Hong Kong and Singapore/Malaysia
rather than having different markups for the individual countries.
Concerning the "phase out" countries of Venezuela, Thailand and,
perhaps, Taiwan, the Markup mechanism under the Agreement terminated effective
July 1, 1993. No further orders are being placed in the phase out countries and
Johnson affiliates in those countries will sell out remaining inventories of
Product. By mutual agreement, the phase out countries should be removed from the
Agreement on December 31, 1993 and, at Armor All's option, Armor All should
purchase or have purchased any remaining inventory of Products or authorize the
local Johnson affiliate to sell off any remaining inventory. The parties will
mutually assist in the orderly transition of the business to Armor All or its
designee.
According to our records, the status of the outstanding payments owed
by Johnson affiliates to Armor All, as of July 1, 1993, are as follows :
Philippines [-----] Payment has been made and
apparently received by Armor All.
Hong Kong [-----] Paid to Armor All on October 28,
1993.
Taiwan [-----] Johnson has suggested that payment
be made upon depletion of the
existing inventory (in
approximately 3 months). This
matter has been referred to Mark
Moore and we are awaiting a
response.
Singapore [-----] Payment was made on October 29,
1993.
Venezuela [-----] We are following up as we have not
received any information from
Venezuela.
Japan [-----] Johnson Japan has advised Mark
Moore that it intends to remit the
payment to Armor All. We are
following up with Japan Johnson on
this point.
<PAGE>
Mr. Michael Caron
November 4, 1993
Page 4
Mexico [-----] We understand that Armor All will
adjust the Markup to accommodate
the outstanding payment.
Thailand [-----] We believe that Armor All has made
payment to Johnson Thailand.
Please note that I have no independent verification that these amounts
are correct and they may be subject to change.
Except for Japan and Mexico, the above-mentioned countries have been
removed from the Markup mechanism set forth in the Agreement effective July 1,
1993. Any Products shipped to those countries after July 1, 1993 should be
priced, retroactively and prospectively, on a cost plus basis.
2.3 Germany, Japan and Mexico will be revisited in 12-18 months to
determine whether the Markup mechanism provided for in the Agreement should be
replaced by a cost plus mechanism.
3. Multi-purposes Automotive Products.
In Mexico, Johnson is permitted to distribute product or products
positioned primarily as multi-purpose automotive products under a Johnson owned
or controlled trademark provided that (i) a different price segmentation
strategy is utilized and (ii) Armor All supplies or manufactures such product
either directly or through a subcontractor. Johnson Mexico could act as a sub-
contractor of Armor All, and, in that case, Armor All would render technical
assistance and formulae to Johnson Mexico on a sub-contractor basis. Such
products would be deemed to be Products for purposes of the Markup mechanism in
the Agreement. This does not affect Johnson's continuing right to market, sell
and distribute multi-purpose protectants in accordance with Section 29.01(a) of
the Agreement.
Principally, this agreement also applies to Germany and Japan, subject to
your final confirmation.
4. Interface.
4.1 In Japan, Germany and Mexico, Johnson management will determine
frequency of visits by Armor All management as circumstances require, but
directionally target for quarterly meetings. At such meetings, Armor All
management should help facilitate long term marketing plans and better transfer
Armor All's experience and sales and marketing materials to Johnson.
<PAGE>
Mr. Michael Caron
November 4, 1993
Page 5
5. Miscellaneous.
Johnson agreed to confirm, in writing, our understandings and both parties
will proceed in accordance with these agreements.
Please acknowledge our agreement by signing where indicated below on behalf of
Armor All Products Corporation and returning one signed copy to my attention. At
a later date, it may be helpful to prepare a restated and amended master
distribution agreement between S.C. Johnson and Armor All in lieu of the
Agreement. However, until then, this letter agreement shall act as an amendment
to the Agreement. Both Armor All and Johnson shall cause similar amendments to
the local country Addendum and the amended Agreement shall control in the event
of any conflict in terms in the Addendum.
Very truly yours,
/s/ Thomas S. Simpson
Thomas S. Simpson
Senior Counsel
Acknowledged and agreed
this 13th day of
December, 1993.
Armor All Products Corporation
by: /s/ Michael Caron
-------------------------
Michael Caron
cc: E.R. Rossini
A.H. Adad
C.F. Allison
<PAGE>
EXHIBIT (10)Q
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR ALL BRACKETED
PORTIONS OF THIS EXHIBIT AND SUCH PORTIONS HAVE BEEN OMITTED AND
FILED SEPARATELY WITH THE COMMISSION
ASSET PURCHASE AND SALE AGREEMENT
among
AGRI-PRODUCTS SPECIAL MARKETS, INC.
and
ARMOR ALL PRODUCTS CORPORATION
<PAGE>
ASSET PURCHASE AND SALE AGREEMENT
This Asset Purchase and Sale Agreement ("Agreement"), dated
as of January 26, 1994, among AGRI-PRODUCTS SPECIAL MARKETS,
INC., a Florida corporation ("Seller") and a majority-owned
subsidiary of AGRI-PRODUCTS, INC., a Florida corporation ("API"),
and ARMOR ALL PRODUCTS CORPORATION, a Delaware corporation ("Pur-
chaser").
WHEREAS, Seller wishes to sell to Purchaser and Purchaser
wishes to purchase from Seller, on the terms and for the
consideration hereinafter provided, substantially all of the
assets and business of Seller comprising the E-Z D(R) and E-Z Deck
Wash(R) brand deck and other home surfaces wash/cleaner business as
heretofore conducted by Seller (the "Business");
NOW, THEREFORE, in consideration of the mutual premises and
agreements contained in this Agreement, the parties agree as
follows:
1. PURCHASE AND SALE OF ASSETS
1.1 Purchase and Sale of Assets. Upon and subject to the
terms and conditions contained in this Agreement, and, except as
excluded by Section 1.2, Purchaser shall purchase from Seller and
Seller shall sell, convey, assign, transfer and deliver to
Purchaser, the following assets, properties and rights of Seller
related to the Business (collectively, the "Acquired Assets"), as
the same exist as of the Closing Date (as hereafter defined):
(a) Inventories. All saleable inventories of E-Z D(R)
and E-Z Deck Wash(R) brand home surface care products listed on
Schedule 1.1-A (the "Products") that are actually on hand as of
the Closing Date, whether within Seller's warehouse or any public
warehouse utilized by Seller, at packagers' facilities or
warehouses, on trucks or on consignment at customers' locations;
all useable inventory of parts, labels, raw materials, unfinished
goods in-process and testing materials; and all advertising,
promotional and sales materials, including materials reflecting
price and promotional terms (the "Inventories").
(b) Fixed Assets. Seller's equipment and furniture
listed on Schedule 2.14 and utilized for trade shows (the "Fixed
Assets").
(c) Books and Records. All books, papers and
records in Seller's care, custody, or control, including, without
limitation, the following: product specifications, customer
files, data and billing records, and marketing program and sales
records; all records related to the selection, clearance, first
usage, registration, opposition and cancellation of trademarks;
toxicity and product general health and safety information;
environmental control records; market research and development
Page 1
<PAGE>
project reports and records; personnel records with regard to
Hired Employees (as defined in Section 9.7); and evaluation
records relating to competitors.
(d) Patents and Trademarks and Other Intellectual
Property. All patents, trademarks, copyrights, trade secrets,
inventions, technology, ideas and know-how, and all
registrations, applications and other rights related to the
foregoing and listed in Schedule 2.13, and all capitalized legal
expenses with respect thereto (the "Intellectual Property").
(e) Prepaid Expenses. All of Seller's deposits and
prepaid expenses related to trade shows and listed in Schedule
2.11 (the "Prepaid Expenses").
(f) Other Intangibles. The following intangible
assets to the extent transferable (the "Intangible Assets"):
(i) supplier contracts, purchase orders and
rights; quotations and bids; customer
contracts, purchase orders and rights;
manufacturing, sales, distribution and
service agreements; promotional
contracts; the Covenant Not to Compete
(as defined in Section 2.18); and any
other contracts and agreements related to
the Business as listed in Schedule 1.1-F
(the "Assigned Contracts");
(ii) claims, interests and rights with respect
to the Acquired Assets (including rights
against suppliers under warranties);
(iii) customer and supplier lists together with
the goodwill associated therewith; and
Seller's means of distribution utilized
in the Business; and
(iv) licenses, permits, filings,
authorizations, consents or approvals, as
issued by any governmental branch,
department, commission, board, bureau,
agency or other instrumentality, to the
extent transferable.
1.2 Excluded Assets. Notwithstanding anything, express
or implied, to the contrary contained in Section 1.1, Schedule
1.2 describes certain properties, assets, and rights which are
excluded from the Acquired Assets (the "Excluded Assets").
1.3 Assumption of Liabilities.
(a) Subject to the terms and conditions of this
Agreement, effective as of and contingent upon the Closing,
Page 2
<PAGE>
Purchaser shall assume, pay and perform the following liabilities
or obligations arising out of the conduct of the Business and no
other liabilities or obligations:
(i) accrued, unpaid trade payables related to
Inventory as of the Closing Date related
to operations of the Business incurred in
the ordinary course of business and set
forth or reserved against on the Schedule
of Net Assets (as defined in Section
1.5);
(ii) obligations of Seller under the Assigned
Contracts which have not become due for
performance at the Closing Date but not
any additional liability or obligation of
Seller (x) which results or arises from a
breach by Seller of any representation,
warranty or agreement contained in such
Assigned Contracts or (y) any additional
liability or obligation resulting from a
default by Seller prior to the Closing
Date under such Assigned Contracts; and
(iii) obligations of Seller assumed in this
Agreement.
Nothing in this Section 1.3, however, shall restrain or limit
Purchaser from contesting or asserting defenses against third
parties with respect to any such liabilities or obligations
subject to Section 9.1(c)(ii).
(b) Without limiting the generality of Section 1.3(a)
hereof, and regardless of whether any of the following may be
disclosed to Purchaser pursuant to Section 2 hereof or whether
Purchaser may otherwise have knowledge of the same, Purchaser
shall not assume, and Seller shall retain sole responsibility for
any claim, liability, potential liability or obligation:
(i) relating to environmental, health and
safety matters arising or resulting from
any activity or omission of Seller prior
to the Closing Date, including but not
limited to, any liability of Seller as a
generator of Hazardous Material (as
defined below), an owner or operator of a
facility at the time of disposal or
release of a Hazardous Material, or as
one who transported to, or arranged for
treatment or disposal of, Hazardous
Material at a facility. As used herein
the term "Hazardous Material" means any
hazardous or toxic substance, material or
waste which is or becomes regulated by
Page 3
<PAGE>
any state or local government authority
in a state or locality in which Seller is
doing or has done business or by the
United States Government, including,
without limitation, any material or
substance which is (1) petroleum, (2)
asbestos, (3) designated as a "hazardous
substance" under Section 311 of the
Federal Water Pollution Control Act, 33
U.S.C. Section 1317, (4) defined as a
"hazardous waste" under Section 1004 of
the Federal Resource Conservation and
Recovery Act, 42 U.S.C. Section 6901 et
seq., or (5) defined as a "hazardous
substance" under Section 101 of the
Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C.
Section 9601 et seq., as amended;
(ii) for federal, state or local taxes of
Seller based on or measured by net
income, or any interest, penalties or
additions to tax with respect thereto
(including without limitation any tax
liability of Seller arising out of or
resulting from the consummation of the
transactions contemplated hereby);
(iii) resulting from matters which are the
subject of any lawsuits, proceedings or
claims, whether or not listed or
described on Seller's Disclosure Schedule
(as hereafter defined) and arising or
resulting from matters occurring prior to
the Closing Date;
(iv) arising out of, based upon or resulting
from the conduct of any business of
Seller other than the acquired Business;
(v) arising out of or based upon claims of
negligence, breach of warranty, consumer
product labeling violation or product
liability in respect of products
manufactured by James Austin Company
("Austin");
(vi) respecting accrued or future benefits
under any Employee Plans (as hereafter
defined), whether or not any employees of
Seller, or workers leased by the
Corporation, are offered employment by,
or become employees of, Purchaser. As
used herein, the term "Employee Plan"
Page 4
<PAGE>
includes all present and prior (including
terminated and transferred) plans,
programs, agreements, arrangements, and
methods of contributions or compensation
(including all amendments to and
components of the same, such as a trust
with respect to a plan) providing any
remuneration or benefits, other than
current cash compensation, to any current
or former employee of the Corporation, or
workers leased by the Corporation, or to
any other person who provides services to
the Corporation, whether or not such plan
or plans, programs, agreements, arrange-
ments, and methods of contribution or
compensation are subject to the Employee
Retirement Income Security Act of 1974,
as amended ("ERISA"), and whether or not
such plan or plans, programs, agreements,
arrangements and methods of contribution
or compensation are qualified under the
IRC. The term Employee Plan includes,
but is not limited to, pension, retire-
ment, profit sharing, stock option, stock
bonus and nonqualified deferred compen-
sation plans. The term Employee Plan
also includes, but is not limited to,
disability, medical, dental, workers
compensation, health insurance, life
insurance or other death benefits,
incentive, severance plans, vacation
benefits, and fringe benefits. The term
Employee Plan also includes any employee
plan that is a multiemployer plan as
defined in Section 3(37) of ERISA. For
purposes of this Section 1.3(b)(vi), the
term "Corporation" means Seller, any
member of a controlled group (within the
meaning of Section 414(b) of the Internal
Revenue Code of 1986, as amended (the
"IRC")) of which Seller is a member, all
trades or businesses under common control
(within the meaning of IRC Section
414(c)) of which Seller is a member, and
all affiliated service groups (within the
meaning of IRC Section 414(m)) of which
Seller is a member.
(vii) any other obligation related to Seller's
employment of Seller's employees or to
hire employees of Seller, or Seller's
agreement to lease employees. Seller
shall be solely responsible for and shall
satisfy all of Seller's obligations to
Page 5
<PAGE>
its employees and workers leased by the
Corporation on account of their
relationship with Seller, including,
without limitation, any liability for
employment agreements, accrued wages
(including salaries and commissions),
severance benefits, "COBRA" benefits,
vacation pay, pension and profit sharing
contributions, seniority rights or other
forms of benefits of any type or nature
on account of said person's relationship
with Seller.
The liabilities retained and/or assumed by Seller under this
Section 1.3(b) are hereinafter referred to collectively as the
"Retained Liabilities".
1.4 Purchase Price. The purchase price (the "Purchase
Price") for the Acquired Assets to be acquired by Purchaser
pursuant to this Agreement shall be an amount equal to the sum of
Five Million Two Hundred Fifty Thousand Dollars ($5,250,000) plus
the "Net Asset Amount" reflected on the Final Schedule of Net
Assets (as defined in Section 1.5). Purchaser and Seller agree
that the Estimated Purchase Price shall be allocated in accor-
dance with Schedule 1.4. The allocation, as adjusted, will be
used by the parties for all tax purposes, including, but not
limited to, any reporting form, such as Form 8594 (Asset
Acquisition Statement under Section 1060) and will be agreed upon
in connection with Section 1.5(c).
1.5 Payment of Purchase Price.
(a) Seller and Purchaser have cooperated in
preparing an Estimated Schedule of Net Assets (the "Estimated
Schedule of Net Assets"), a copy of which is attached hereto as
Schedule 1.5-A, on which basis Purchaser shall make the Closing
Payment (as hereafter defined). The Estimated Schedule of Net
Assets shall reflect an estimated net asset amount (the
"Estimated Net Asset Amount") determined in accordance with the
accounting policies described in the Valuation Memorandum
attached hereto as Schedule 1.5-B (the "Accounting Policies").
On the Closing Date, Seller shall pay to Purchaser, by wire
transfer, bank draft or cashier's check, the amount of $5,090,000
($5,250,000 less $160,000) plus fifty percent (50%) of the
Estimated Net Asset Amount (the "Closing Payment"). The amount
of $160,000 (the "Six-month Holdback"), representing the balance
of the Purchase Price, shall be paid by Purchaser to Seller six
(6) months following the Closing Date, subject to Purchaser's
right of setoff provided in Section 9.5.
(b) Immediately following the Closing on the Closing
Date, Seller will conduct a physical count of the Inventories
utilizing Seller's personnel. Purchaser's personnel may observe
the conduct of the physical count of the Inventories and may
Page 6
<PAGE>
otherwise review the work done (including, without limitation,
any relevant work papers) during the preparation of a final
schedule of net assets (the "Final Schedule of Net Assets").
Seller shall prepare and submit to Purchaser the Final Schedule
of Net Assets as soon as practicable but no later than five (5)
days following the Closing, reflecting the Net Asset Amount
determined in accordance with the Accounting Policies.
(c) In the event that Purchaser does not agree with
the Final Schedule of Net Assets, within five (5) days of receipt
of Seller's Final Schedule of Net Assets, Purchaser shall give
Seller a "Dispute Notice" setting forth in reasonable detail the
basis of its disagreement, and Purchaser and Seller shall, within
twenty (20) days after receipt by Seller of such Dispute Notice,
attempt to resolve such Dispute and agree in writing upon the
Final Schedule of Net Assets. In the event that Seller and
Purchaser are unable to resolve any such Dispute within the
twenty-day resolution period, then a qualified principal of the
certified public accounting firm of Price Waterhouse, Atlanta
office, or such other accounting firm or office as may be
mutually agreed upon (the "Arbitrator") shall be employed as
arbitrator hereunder to settle such dispute as soon as
practicable. The parties hereto shall give the Arbitrator access
to all documents, facilities and personnel within their
respective control necessary to perform its function as
arbitrator. The parties agree that the Arbitrator shall decide
only matters involving differences as to the application of the
Accounting Policies, and not any non-accounting matters involving
the construction or interpretation of this Agreement. Any
arbitration pursuant to this Section 1.5(c) shall be conducted
exclusively in Atlanta, Georgia. The arbitrator shall render a
decision within thirty (30) days from submission of all facts by
both parties.
(d) (i) In the event that the Net Asset Amount on
the Final Schedule of Net Assets is equal
to the Estimated Net Asset Amount,
Purchaser shall pay Seller the unpaid
balance of the Estimated Net Asset Amount
not paid at the Closing (the "Asset
Holdback Amount"). In case the Net Asset
Amount on the Final Schedule of Net
Assets is not equal to the Estimated Net
Asset Amount, a payment including an
adjustment of this difference shall be
made by one party to the other, as
follows:
(1) In case the Net Asset Amount is
greater than the Estimated Net Asset
Amount, an amount equal to the
excess of the Net Asset Amount over
the Estimated Net Asset Amount plus
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<PAGE>
the Asset Holdback Amount shall be
paid by Purchaser to Seller;
(2) In case the Net Asset Amount is
greater than the Asset Holdback
Amount but lower than the Estimated
Net Asset Amount, an amount equal to
the Net Asset Amount less 50% of the
Estimated Net Asset Amount shall be
paid by Purchaser to Seller; and
(3) In case the Net Asset Amount is
lower than the Asset Holdback
Amount, an amount equal to 50% of
the Estimated Net Asset Amount less
the Net Asset Amount shall be paid
by Seller to Purchaser.
(ii) All payments pursuant to this Section
1.5(d) will be made within five (5) days
of agreement thereon.
1.6 Transfer of the Purchased Assets. Seller shall
deliver to Purchaser, where necessary, consents authorizing the
transfer and assignment by Seller to Purchaser of all the
Acquired Assets. Without limiting any other rights of Purchaser
under this Agreement, to the extent any of the Acquired Assets
are not assignable to Purchaser or if any necessary consent to
such assignment shall not have been obtained by Seller, Seller
shall hold in trust for the benefit of Purchaser all Seller's
right, title and interest to such Acquired Asset and, insofar as
permissible, from time to time assign such interest to Purchaser.
Purchaser and Seller shall cooperate in any reasonable
arrangement to the end that Purchaser shall be provided the use
and benefits of such Acquired Asset, provided Purchaser has
assumed all liabilities and obligations related thereto as if
they had been assigned. Nothing in this Section 1.6, however,
shall release Seller from its obligation to defend, indemnify and
hold Purchaser harmless from any loss, liability or damage
suffered by Purchaser resulting from any failure by Seller to
transfer and assign the Acquired Assets as required by this
Agreement. This Agreement shall not constitute an agreement to
assign any Acquired Asset if the attempted assignment thereof
would constitute a breach thereof.
1.7 Non Compete Agreements. At the Closing, API, Timothy
B. Dutcher, Kenneth L. Ellis and H. Ross Arnold III, each being a
direct or indirect substantial shareholder of Seller (the
"Substantial Shareholders") shall each enter into a covenant not
to compete agreement (the "Non Compete Agreements") with
Purchaser in the form attached hereto as Exhibits G, H, I and M.
In consideration thereof, Seller shall pay by wire transfer, bank
draft , or cashier's check at the Closing, the following
respective amounts to the following persons:
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<PAGE>
(a) Timothy B. Dutcher. . . . . . . . . .$ 250,000
(b) Kenneth L. Ellis . . . . . . . . . .$ 1,000,000
(c) H. Ross Arnold III. . . . . . . . . .$ 1,000,000
2. REPRESENTATIONS AND WARRANTIES OF SELLER
Except as disclosed or excepted in the schedules delivered
concurrently with the execution and delivery of this Agreement
and made a part hereof (collectively, the "Disclosure Schedule"),
and as a material inducement to Purchaser to enter into and
perform its obligations under this Agreement, Seller represents
and warrants to Purchaser that as of the date hereof:
2.1 Authorization; Enforceability of Agreement. Seller
has full corporate right and power to enter into this Agreement
and to carry out the transactions contemplated hereby; the
execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby have been
duly authorized by all requisite corporate action of the Seller;
and this Agreement is the legal, valid and binding obligation of
the Seller, enforceable in accordance with its terms except as
the enforceability thereof may be limited by general principles
of equity and by bankruptcy, reorganization, insolvency or other
similar laws affecting the enforcement of creditors' rights
generally, and by general equitable principles (regardless of
whether the issue of enforceability is considered in a proceeding
in equity or at law). Seller may execute, deliver and perform
this Agreement without the necessity of obtaining any consent,
approval, authorization or waiver or giving any notice to or from
any person, other than consents, approvals, authorizations or
waivers which have been, or prior to the Closing Date will be,
obtained and on the Closing Date will be in full force and
effect, and such notices which have been or prior to the Closing
Date will be duly given.
2.2 Organization; Power. Seller is a corporation duly
organized, validly existing and in good standing under the laws
of the State of Florida. Seller is qualified to transact
Business as a foreign corporation and is in good standing in each
jurisdiction where the Seller does business, owns property or is
otherwise required by law to be so qualified except for those
jurisdictions in which the absence of such qualification would
not have a material adverse effect on the Acquired Assets or
Business. Seller has all requisite corporate power and authority
to own, lease and operate its properties and assets and to carry
on its business as now being conducted. Seller has heretofore
delivered to Purchaser complete and correct copies of Seller's
corporate charter and bylaws, as amended and in effect on the
date hereof.
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2.3 No Conflict. The transactions contemplated by this
Agreement will not violate in any material respect or be in
conflict with, in any material respect, (a) any existing
provision of applicable law, or any existing order, rule,
regulation, judgment or decree of any court, arbitrator or agency
of government, or (b) any existing provision of the Articles of
Incorporation or Bylaws of the Seller, nor will those
transactions as of the Closing Date (i) in any material respect,
violate, be in conflict with, result in a breach of, or
constitute (with or without notice or lapse of time or both) a
default under any material agreement or other instrument to which
Seller is a party or by which the Seller or the Business is
bound, or (ii) result in the creation or imposition of any lien,
charge or encumbrance upon any of the Acquired Assets.
2.4 Title to the Acquired Assets. Seller has good and
marketable title to all the Acquired Assets. Except as set forth
in the Disclosure Schedule, all the Acquired Assets are free and
clear of mortgages, liens, pledges, charges, encumbrances,
equities, claims, covenants, conditions, or other restrictions.
Except as set forth in the Disclosure Schedule, neither any
officer, director, employee or independent contractor of Seller,
nor any spouse, child or other relative of any of such persons,
owns, or has any interest, directly or indirectly, in any of the
Intellectual Property.
2.5 Litigation and Claims; Compliance with Law.
(a) Except as set forth in the Disclosure Schedule,
there is no action, suit, proceeding, claim or investigation in
any court or arbitration or before or by any federal, state or
other governmental department, commission, bureau, agency or
instrumentality, domestic or foreign, pending or, to the best
knowledge of Seller, threatened against Seller which could
adversely affect the Business or the Acquired Assets or their
condition (financial or otherwise), earnings, business assets,
properties, liabilities, operations or prospects or the
transactions contemplated by this Agreement; and there is no
factual or legal basis which could give rise in the future to the
pendency or threat of any such action, suit, proceeding, claim or
investigation which would adversely affect any of the same.
Seller has provided Purchaser with true, accurate and complete
copies of all correspondence, memoranda and notifications
concerning, or relating to, complaints or expressions of
dissatisfaction with the products, services or personnel of the
Business. Seller has not experienced any single paid claim or
series of paid claims aggregating more than $8,000 during each of
calendar years 1992 and 1993 with respect to any allegedly
defective, damaged or unsatisfactory E-Z Deck Wash(R) or E-Z D(R)
brand product, nor, to Seller's knowledge, are there any
outstanding unpaid claims greater than $10,000. Any matters set
forth in the Disclosure Schedule, if decided adversely to Seller,
are not reasonably expected by Seller to result in an adverse
change in the earnings, business, assets, or condition (financial
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or other), operations or prospects of the Business or Seller.
Seller is not presently engaged in any legal action to recover
monies due to it or damages sustained by it in connection with
the conduct of the Business.
(b) The Business has been conducted, and the
Acquired Assets operated, in compliance in all material respects
with all laws, ordinances, regulations, rules and court orders or
decrees applicable thereto (including, but not limited to, all
environmental protection laws and laws regulating the labeling of
consumer products) and Seller has duly filed all reports required
to be filed by it with governmental authorities and has obtained
all governmental consents, approvals and authorizations, which,
if not obtained or filed, would have a material adverse effect on
the Business or operation of the Acquired Assets and there are no
such governmental licenses, permits, authorizations, consents and
approvals. The Business is not conducted under any restriction
imposed upon Seller but not generally imposed upon other persons
conducting similar businesses or operating similar assets for
similar purposes by any zoning, antipollution, health or other
law, ordinance, regulation, restrictive covenant, injunction or
decree.
2.6 Financial Information. Seller's books and records
are correct and complete, reflect fairly the income, expenses,
assets and liabilities of the Business and provide a fair basis
for the preparation of Seller's financial statements of the
Business. Seller has heretofore furnished to Purchaser the
unaudited balance sheets of the Business as of November 30, 1993,
and the audited balance sheets of the Business as of July 31,
1993 and 1992, and the related statements of income for the four
(4) months and the fiscal year, respectively, ended on such dates
(collectively, the "Financial Statements"). The Financial
Statements, copies of which are attached as Schedule 2.6, are in
agreement with Seller's books and records and present fairly
Seller's financial position at the respective dates of such
balance sheets, present fairly the results of operations for the
respective periods covered, and have been prepared on a
consistent basis throughout the periods involved.
2.7 Product Warranties; Advertising Claims; Labeling.
Except as set forth in the Disclosure Schedule and for warranties
implied by law, there are no express product or service
warranties granted by Seller applicable to the E-Z Deck Wash(R) or
E-Z D(R) brand home surface care products or the Business. All
product claims and other statements which currently appear in
Seller's advertising and promotional materials or on product
packaging and labeling are true and correct. All such material
claims are supported by laboratory test results, copies of which
have been furnished to Purchaser.
2.8 Absence of Certain Changes. Except as set forth in
the Disclosure Schedule, since November 30, 1993, the Business
has been operated only in the ordinary course and, without
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limiting the generality of the foregoing, Seller has not with
respect to the Business:
(a) Sustained any damage, destruction or loss, by
reason of fire, explosion, earthquake, casualty, labor trouble,
requisition or taking of property by any government or agency
thereof, windstorm, embargo, riot, act of God or public enemy,
flood, accident, revocation of license or right to do business,
total or partial termination, suspension, default or modification
of contract, governmental restriction or regulation, other
calamity, or other similar or dissimilar event (whether or not
covered by insurance), materially and adversely affecting its
condition (financial or otherwise), earnings, business, assets,
liabilities, properties, operations or prospects;
(b) Executed, created, amended or terminated any
contract, agreement or license to which it is a party or by which
its properties are bound, except in the ordinary course of
business;
(c) Waived or released any right or claim or
canceled any debts or claims or voluntarily suffered any
extraordinary losses;
(d) Paid any obligation or liability (fixed,
contingent or otherwise), or discharged or satisfied any lien or
encumbrance, or settled any liability, claim, dispute,
proceeding, suit, or appeal, pending or threatened against it or
any of its assets or properties, except for current liabilities
included in the balance sheet dated November 30, 1993 in the
Financial Statements, and current liabilities incurred since said
date in the ordinary and usual course of its business;
(e) Had any material adverse change in its condition
(financial or otherwise), earnings, business, assets, properties,
liabilities, operations or prospects;
(f) Received notice that any customer or group of
customers which individually or in the aggregate represented more
than $20,000 in annual revenues during the preceding calendar
year will no longer be doing business with Seller;
(g) Mortgaged, pledged, otherwise encumbered or
subjected to lien any of the Acquired Assets, tangible or
intangible;
(h) Sold, assigned, transferred, conveyed, leased,
licensed or otherwise disposed of any asset or property, tangible
or intangible, except in the ordinary and usual course of
business, or discontinued any material product line or the
manufacture, sale or other disposition of any of its products or
services;
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(i) Changed its accounting principles, methods,
practices regarding significant estimates (including, without
limitation, any change in depreciation or amortization policies
or rates), except as set forth in the Accounting Policies, or
revalued any of its assets;
(j) Had any other event of any character that has or
is reasonably expected to have a material adverse effect on the
condition (financial or otherwise), earnings, business, assets,
liabilities, properties, operations or prospects of the Business
or the Acquired Assets; or
(k) Agreed, committed or entered into any other
understanding to do any of the things described in the preceding
subsections (a) through (j).
2.9 Taxes. Except as set forth in the Disclosure
Schedule, Seller has, or on or before the Closing Date will have,
paid and discharged all material federal, state, local and
foreign taxes, interest, penalties, additions to tax or other
amounts required to be paid on or before the Closing Date, and
Seller has, or prior to the Closing Date will have, duly,
accurately and completely prepared and filed all such tax reports
and returns required to be filed by Seller on or before the
Closing Date. Seller has not received notice of any tax
deficiency or proposed tax deficiency. Seller has not executed
any waiver of any statute of limitations on the assessment or
collection of any tax or filed with the Internal Revenue Service
or any other taxing authority or executed any agreement now in
effect extending the period for assessment or collection of any
taxes. There are no tax liens upon, pending against or, to the
best knowledge of Seller, threatened against any of the Acquired
Assets.
2.10 Inventories. Schedule 1.1-A lists all of the
products of Seller's Business. Schedule 2.10 contains a summary
by class of items included in the Inventories as of November 30,
1993 to be sold to Purchaser pursuant to Section 1.1. The
Inventories consist of items of good and merchantable quality and
quantity, free from defects, and usable and saleable in the
normal course of business within six (6) months at present levels
of Business operations, and include all Inventories utilized
primarily in the Business except for obsolete and slow-moving
items and materials below standard quality which have been
written down on Seller's books in accordance with the Accounting
Policies and which are not being purchased by Purchaser (the
"Excluded Inventories"). All items included in such Inventories
are owned by Seller. No items included in the Inventories bear a
label, coupon or other consumer incentive which entitles the
purchaser at retail ("Consumer") to a rebate or any other thing
of value. No items included in the Inventories have been pledged
as collateral or are held by Seller on consignment from others.
Seller is not under any obligation with respect to the return of
inventory or products in the possession of others. All
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Inventories are based on quantities determined by physical count
on November 30, 1993 and are valued at the lower of cost (first-
in, first-out) or market and on a basis consistent with that of
prior periods.
2.11 Prepaid Expenses. Schedule 2.11 contains an accurate
list of Prepaid Expenses. The Prepaid Expenses arose from bona
fide transactions in the ordinary course of business and are not
and will not be subject to any counterclaims or setoffs.
2.12 Contracts.
(a) Schedule 2.12 lists all Assigned Contracts that
are not freely cancelable on 30 days' notice without cause and
that are to be assigned to Purchaser pursuant to Section 1.1.
Seller has previously provided to Purchaser a true and complete
copy of all Assigned Contracts.
(b) Each Assigned Contract is valid and in full
force and effect and constitutes the legal, valid and binding
obligation of Seller and the other party or parties thereto;
there are no existing material defaults thereunder, and no
material event, act or omission has occurred which (with or
without notice, lapse of time or the happening or occurrence of
any other event) would result in a default thereunder. No
material default exists or will exist under any of the Assigned
Contracts as a result of the execution and delivery or
performance of this Agreement. The Disclosure Schedule lists any
Assigned Contract which (i) is in excess of the normal, ordinary
and usual requirements of the Business as conducted by Seller or
at an excessive term or price; (ii) is not cancelable following
the Closing on 90 days' notice or less and without liability,
penalty or premium; (iii) restricts Seller from carrying on the
Business anywhere in the world; (iv) contains a power-of-
attorney; or (v) except for orders in process from customers or
to suppliers entered in the ordinary course of business in arms-
length transactions, involves the payment by any party to such
Assigned Contract over the term thereof of more than $10,000 for
any single contract or $50,000 in the aggregate for all such
contracts.
2.13 Intellectual Property; Intangible Assets.
(a) Schedule 2.13 sets forth a true and complete
list of all Intellectual Property to be assigned to Purchaser
pursuant to Section 1.1.
(b) Seller is the record owner of the Intellectual
Property and Intangible Assets. Except as set forth in the
Disclosure Schedule, all Intellectual Property and Intangible
Assets are valid and subsisting, free and clear of any
encumbrances or rights of third parties which would restrict
Purchaser's exclusive right to use such Intellectual Property and
Intangible Assets in the manner in which they are now used by
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Seller. Except as set forth in the Disclosure Schedule, no claim
by third parties with regard to any Intellectual Property and
Intangible Assets is pending or threatened, nor, to Seller's
knowledge, is there any basis for any such claim. To Seller's
knowledge, none of the Intellectual Property and Intangible
Assets is being used or infringed by others. Except as set forth
in the Disclosure Schedule there are no licenses or sublicense
agreements now in effect regarding the Intellectual Property or
Intangible Assets.
2.14 Fixed Assets. Schedule 2.14 contains a complete list
by type, location and book value of all Fixed Assets to be
assigned to Purchaser pursuant to Section 1.1. Except as stated
in the Disclosure Schedule, all Fixed Assets are in good
condition and repair and no Fixed Asset used by Seller in connec-
tion with the Business is held under any lease, security
agreement, conditional sales contract, or other title retention
or security arrangement, or is located other than in the
possession of Seller.
2.15 Labor Matters; Employees.
(a) Except as set forth in the Disclosure Schedule,
Seller has no employees, nor any obligation to employ or engage
any agent, consultant, employee, officer, director or
shareholder, or to provide bonuses or other current cash
compensation. Except as disclosed in the Disclosure Schedule,
Seller has no union contracts or collective bargaining agreements
with, or any other obligations to, employee organizations or
groups, nor is Seller currently engaged in any labor negotiations
excepting minor grievances not involving any employee
organization or group, nor is Seller the subject of any union
organization effort. There is no actual pending or threatened
labor dispute, strike or work stoppage affecting the Business.
(b) Schedule 2.15-B(1) contains a true and complete
list of the names of all of Seller's leased employees and
contract workers utilized in the Business employees as of
December 31, 1993.
(c) Seller has complied with all applicable federal
and state laws relating to the employment of labor, including but
not limited to, the provisions thereof relating to equal
employment opportunity, wages, hours and the payment of social
security taxes, and is not liable for any arrears of wages or any
tax or penalties for failure to comply with any of the foregoing.
(d) Seller has fewer than fifty (50) leased
employees utilized in connection with the Business and therefore
Seller does not intend to serve notice in advance of the Closing
Date pursuant to The Worker Adjustment and Retraining
Notification Act ("WARN") 102 Stat. 890, 29 U.S.C. (SS)2102 et seq.
(1988). There are no similar statutes under state or local law
relating to employees, former employees or leased employees, of
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Seller affected by the purchase and sale of the Acquired Assets
and Business.
2.16 Customer Commitments; Sales Matters.
(a) Except as set forth in the Disclosure Schedule,
Seller has not granted any customer payment terms in excess of 30
days and/or cash discounts in excess of 2 percent. Except as set
forth in the Disclosure Schedule, Seller is not under any
obligation to any of its customers with respect to any rebate or
other consumer promotional program or for the payment of any
discount, rebate, advertising or promotional allowance or any
other similar consideration or promotional allowance. Schedule
2.16-A contains copies of each of Seller's marketing and sales
incentive programs relating to customers. Except as set forth in
the Disclosure Schedules, Seller is not under any obligation
with respect to any outstanding consumer rebate or coupon
programs.
(b) Schedule 2.16-B sets forth information,
organized by customer, as to all sales of inventory made by
Seller during its fiscal year ended July 31, 1993, and for the
five (5)-month period ended December 31, 1993, for all customers
to whom sales, in the aggregate, exceeded ninety percent (90%) of
Seller's total sales for the respective period. Said information
is true, complete and correct in all material respects. Seller
has no information, nor is it aware of any facts, indicating that
any of such customers intends to cease doing business with Seller
or alter the amount of the business that it is presently doing
with Seller.
2.17 Brokers. Other than fees to Quest Capital Corp.,
Seller has not incurred, nor will it incur, nor has it caused,
nor will it cause, Purchaser to incur, any liability to any
person for brokerage or finder's fees or agent's commissions in
connection with this Agreement and the transactions contemplated
hereby.
2.18 Related Party Disclosures. Seller has disclosed all
material facts concerning this Agreement to Mr. Timothy B.
Dutcher, a minority shareholder of Seller, and to all of the
parties other than Seller to that certain Agreement entitled
"Covenant Not to Compete" dated March 12, 1992 (the "Covenant Not
to Compete), such parties being Messrs. G. Todd Taylor, R. M.
Saunders, Charlie Aycock and W. Mark Spence who are hereinafter
collectively referred to as the "Covenantors."
2.19 Accuracy and Completeness of Representations and
Warranties. No representation or warranty made by Seller in this
Agreement and the schedules thereto contains or will contain any
untrue statement of a material fact, or omits or will omit to
state a material fact necessary to make the statements contained
herein or therein, in light of the circumstances under which they
were made, not misleading.
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3. REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to Seller that as of the
date hereof:
3.1 Authorization, Enforceability of Agreement.
Purchaser has full corporate right and power to enter into this
Agreement and to carry out the transactions contemplated hereby;
the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby have been
duly authorized by all requisite corporate action of Purchaser;
and this Agreement is the legal, valid and binding obligation of
Purchaser, enforceable in accordance with its terms, except as
the enforceability thereof may be limited by general principles
of equity and by bankruptcy, reorganization, insolvency or other
similar laws affecting the enforcement of creditors' rights
generally, and by general equitable principles (regardless of
whether the issue of enforceability is considered in a proceeding
in equity or at law). Purchaser may execute, deliver and perform
this Agreement without the necessity of obtaining any
governmental or other consent, approval, authorization or waiver
or giving any notice to or from any person, other than consents,
approvals, authorizations or waivers which have been, or prior to
the Closing Date will be, obtained and on the Closing Date will
be in full force and effect, and such notices which have been or
prior to the Closing Date will be duly given.
3.2 Organization; Power. Purchaser is a corporation duly
organized, validly existing and in good standing under the laws
of the State of Delaware and has all requisite corporate power
and authority to own, lease and operate its properties and assets
and to carry on its business as now being conducted.
3.3 No Conflict. The transactions contemplated by this
Agreement will not violate in any material respect or be in
conflict with, in any material respect, (a) any existing
provision of applicable law, or any existing order, rule,
regulation, judgment or decree of any court, arbitrator or agency
of government, or (b) any existing provision of the Articles of
Incorporation or Bylaws of the Purchaser, nor will those
transactions as of the Closing Date in any material respect,
violate, be in conflict with, result in a breach of, or
constitute (with or without notice or lapse of time or both) a
default under any material agreement or other instrument to which
Purchaser is a party or by which the Purchaser or the Business is
bound.
3.4 Litigation and Claim. There is no action, suit,
proceeding, claim or investigation in any court or arbitration or
before or by any federal, state or other governmental department,
commission, bureau, agency or instrumentality, domestic or
foreign, pending or, to the best knowledge of Purchaser,
threatened against Purchaser which could materially adversely
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affect the consummation of the transactions contemplated by this
Agreement.
3.5 Brokers. Purchaser has not incurred, nor will it
incur, nor has it caused, nor will it cause, Purchaser to incur,
any liability to any person for brokerage or finder's fees or
agent's commissions in connection with this Agreement and the
transactions contemplated hereby.
3.6 Accuracy and Completeness of Representations and
Warranties. No representation or warranty made by Purchaser in
this Agreement and the schedules thereto contains or will contain
any untrue statement of a material fact, or omits or will omit to
state a material fact necessary to make the statements contained
herein or therein, in light of the circumstances under which they
were made, not misleading.
4. COVENANTS OF SELLER
Seller agrees that, except as otherwise agreed in writing by
Purchaser, from the date hereof to the Closing Date:
4.1 Access to Information. Seller, upon reasonable
notice, shall (a) give or cause to be given to Purchaser and to
its accountants, counsel and other representatives, during
regular business hours access to all of the properties, documents
and records of Seller related to the Business, and (b) provide or
cause to be provided to Purchaser at its expense such copies or
extracts of Seller's documents and records related to the
Business as Purchaser may request.
4.2 Conduct of Business in Normal Course. Seller shall
carry on the Business and its activities lawfully, diligently and
in the same manner as they previously have been carried on, and
shall not make or institute any unusual or novel methods of pur-
chase, sale, lease, management, accounting or operation that will
vary from the methods used by Seller as of the date of this
Agreement, and, without limiting the generality of the foregoing,
Seller agrees to undertake collection of Accounts Receivable only
as consistent with past practices.
4.3 Consents and Notices. Seller will obtain, and
Purchaser will use its best efforts to cooperate with and assist
Seller in obtaining, all consents, waivers, amendments,
modifications, approvals, authorizations, permits and licenses of
third parties, and governmental and regulatory authorities, if
any, which may be necessary to effectuate this Agreement and to
transfer the Acquired Assets to Purchaser. Seller shall give all
notices to third parties (with copies to Purchaser) required to
be given by it in contemplation and as a result of the
transactions contemplated under this Agreement.
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4.4 Preservation of Business and Relationships. Seller
shall, without making any commitments on behalf of Purchaser,
preserve its business organization intact, and use its best
efforts to keep available its present employees, and to preserve
its present relationships with suppliers, customers, and others
having business relationships with it.
4.5 Maintenance of Insurance. Seller shall continue to
carry its existing insurance.
4.6 Leased Employees and Compensation. Seller shall not
do, or agree to do, any of the following acts: (i) make any
change in salaries payable; or (ii) change benefits payable under
any bonus or pension plan or other contract or commitment.
Seller shall permit Purchaser to contact its leased employees at
all reasonable times for the purpose of discussing with such
leased employees prospective employment by Purchaser on or after
the Closing Date, and Seller shall use its best efforts to
encourage all leased employees to accept any employment offered
by Purchaser pursuant to Section 9.7. Seller shall seek from
each leased employee of Seller listed on Schedule 4.6 a severance
agreement, containing proprietary information and confidentiality
covenants in the form of Exhibit L (the "Severance Agreements").
4.7 New Transactions. Seller shall not enter into any
contract, commitment, or transaction related to the Business not
in the usual and ordinary course of business without first
obtaining Purchaser's prior written consent.
4.8 No-shop Agreement. Seller will not sell, or place on
the market for sale to any person or entity other than Purchaser,
the Business or the stock or assets comprising the Business, nor
shall Seller solicit, encourage or respond to, directly or
indirectly, any inquiries, discussions or proposals for, or
provide any person or entity with information relating to, the
sale of the Business or the stock or assets comprising the
Business.
4.9 [-----]
4.10 Related Party Obligations. Seller will comply fully
with all of the provisions of Section 4 of the Covenant Not to
Compete and will satisfy all obligations to Mr. Dutcher and the
Covenantors.
4.11 Certain Tax Matters. Seller will make a federal tax
deposit with an authorized federal depository in the amount of
$15,000. At the Closing, Seller shall furnish a copy of the
related deposit coupon referencing Fiscal 1993 taxes and a
receipt from the depository institution.
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4.12 Representations and Warranties True at Closing.
Seller agrees that, except as otherwise agreed in writing by
Purchaser, from the date hereof until the Closing Date, Seller
shall assure that all representations and warranties of Seller
set forth in this Agreement and in any schedules attached hereto
will also be true and correct in all material respects as of the
Closing Date as if made on that date and that all conditions
precedent to Closing shall have been met. In the event that
there exists or occurs any condition which would make untrue any
representation or warranty herein made by Seller, Seller shall
promptly give Purchaser notice of the existence or occurrence of
such condition; provided, however, no such notice shall relieve
Seller of its obligations hereunder.
5. COVENANTS OF PURCHASER
Purchaser agrees that, except as otherwise agreed in writing
by Seller, from the date hereof until the Closing Date,
Purchaser shall assure that all representations and warranties of
Purchaser set forth in this Agreement and in any schedules
attached hereto will also be true and correct in all material
respects as of the Closing Date as if made on that date and that
all conditions precedent to Closing shall have been met. In the
event that there exists or occurs any condition which would make
untrue any representation or warranty herein made by Purchaser,
Purchaser shall promptly give Seller notice of the existence or
occurrence of such condition; provided, however, no such notice
shall relieve Purchaser of its obligations hereunder. Purchaser
hereby waives compliance by Seller with all bulk sales laws
applicable to the transactions under this Agreement, subject to
Purchaser's right of indemnity pursuant to Section 9.1 hereof.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER
The obligation of Purchaser to consummate the transactions
contemplated by this Agreement is subject, at Purchaser's option,
to the satisfaction at or prior to the Closing Date of each of
the following conditions:
6.1 Representations and Warranties; Covenants; Changes.
All representations and warranties of Seller contained in this
Agreement or in any document delivered at the Closing shall be
true in all material respects at and as of the Closing Date as
though made at and as of such time, and Seller shall have
performed and complied with all covenants, obligations and
conditions required by this Agreement to be performed or complied
with by Seller prior to or on the Closing Date; and Purchaser
shall have received certificates of an officer of Seller dated
the Closing Date, to that effect. Purchaser shall not have
become aware of any fact of which Purchaser had no knowledge as
of the date of this Agreement which, in the reasonable judgment
of Purchaser, has or is expected to have, individually or
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collectively, a material adverse effect on the financial
condition, business, assets, liabilities, net assets, properties,
licenses, franchises, results of operations, value or prospects
of the Business.
6.2 Opinion of Counsel to Seller. Purchaser shall have
received a favorable opinion of Carr, Tabb and Pope, and Gorman
and Matthew, P.A., counsel to Seller, substantially in the form
of Exhibit C attached hereto.
6.3 Absence of Litigation. No action, suit, or
proceeding before any court or any governmental body or
authority, pertaining to the transactions contemplated by this
Agreement or to its consummation, shall have been instituted or
clearly indicated on or before the Closing Date.
6.4 Consents. All material consents, waivers, approvals,
licenses and authorizations of third parties (including without
limitation customers if required), and of governmental
authorities, if any, and all amendments or modifications to
existing material agreements with third parties, required to
consummate the transactions contemplated hereunder and to
transfer to Purchaser without impairment the Acquired Assets
shall have been obtained and shall be reasonably satisfactory in
form and substance to Purchaser. The foregoing covenant shall
not apply to the consent of any customer which Seller has not
obtained following a best efforts attempt to obtain consent in
writing. Seller shall have received, in form and substance
satisfactory to Purchaser, all documents and releases related to
Seller's agreements with Tim Dutcher, the Covenant Not To Compete
and the Barnett Bank of Tallahassee.
6.5 Condition of Assets. The Acquired Assets shall not
have been materially and adversely affected in any way as a
result of any fire, accident, storm or other casualty or labor or
civil disturbance or act of God.
6.6 Certain Written Agreements. Purchaser shall have
received from each Substantial Shareholder a Non Compete
Agreement. Seller shall not have, by action or omission,
impaired the assignability of the benefits of Seller's Covenant
Not To Compete with the Covenantors. Seller shall have received
from each leased employee listed on Schedule 4.6 a Severance
Agreement in the form of Exhibit L. Purchaser shall have
received from API a Guaranty in the Form of Exhibit E (the
"Shareholder Guaranty") guaranteeing the performance of Seller's
obligations under this Agreement.
6.7 Incumbency Certificate. Purchaser shall have
received an incumbency certificate dated the Closing Date
certifying the incumbency of each officer of Seller who has
signed this Agreement or any instrument delivered in connection
with this Agreement, which certificate shall contain specimens of
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the signatures of each of the officers whose incumbency is
certified.
6.8 Warehousing Agreement. Purchaser and API shall have
entered into a warehousing agreement in the form of Exhibit F
(the "Warehousing Agreement") for the Madison, Florida,
warehouse.
6.9 Other Deliveries. Purchaser shall have received in
form and substance reasonably satisfactory to Purchaser all other
deliveries required to be delivered to Purchaser at the Closing
as specified in Section 8.3 of this Agreement.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER
The obligation of the Seller to consummate the transactions
contemplated by this Agreement is subject, at Seller's option, to
the satisfaction at or prior to the Closing Date of each of the
following conditions:
7.1 Representations and Warranties; Covenants. All
representations and warranties of Purchaser contained in this
Agreement or in any document delivered at Closing shall be true
in all material respects at and as of the Closing Date as though
made at and as of such time, and Purchaser shall have performed
and complied with all material covenants, obligations and
conditions required by this Agreement to be performed or complied
with by Purchaser prior to or on the Closing Date; and Seller
shall have received Certificates of an officer of Purchaser,
dated the Closing Date, to that effect.
7.2 Opinion of Counsel to Purchaser. Seller shall have
received a favorable opinion of Leonard M. Patterson, counsel to
Purchaser, substantially in the form of Exhibit K attached
hereto.
7.3 Absence of Litigation. No action, suit, or
proceeding before any court or any governmental body or
authority, pertaining to the transaction contemplated by this
Agreement or to its consummation, shall have been instituted or
clearly indicated on or before the Closing Date.
7.4 Consents. All material consents, waivers, approvals,
licenses and authorizations of third parties (including without
limitation customers if required), and of governmental
authorities, if any, and all amendments or modifications to
existing material agreements with third parties, required to
consummate the transactions contemplated hereunder and to
transfer to Purchaser without impairment the Acquired Assets
shall have been obtained and shall be reasonably satisfactory in
form and substance to Seller. Seller shall have received, in
form and substance satisfactory to Seller, all documents and
releases related to Purchaser's agreements with Tim Dutcher, the
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Covenant Not To Compete and the Barnett Bank of Tallahassee.
Seller shall have received from each leased employee listed on
Schedule 4.6 a Severance Agreement in the form of Exhibit L.
7.5 Incumbency Certificate. Seller shall have received
an incumbency certificate dated the Closing Date certifying the
incumbency of each officer of Purchaser who has signed this
Agreement or any instrument delivered in connection with this
Agreement, which certificate shall contain specimens of the
signatures of each of the officers whose incumbency is certified.
7.6 Other Deliveries. Seller shall have received in form
and substance reasonably satisfactory to Seller all other
deliveries required to be delivered to Seller at the Closing as
specified in Section 8.4 of this Agreement.
8. CLOSING
8.1 Closing Date. The closing of the purchase and sale
of the Acquired Assets (the "Closing") shall take place at the
offices of Purchaser, Aliso Viejo, California, effective on
January 28, 1994 (the "Closing Date") at 12:01 a.m., or at such
other time and place prior to February 2, 1994 as the parties may
agree.
8.2 Right of Termination. This Agreement may be
terminated and the proposed transaction abandoned at any time
prior to the Closing by notice given as provided below in Section
10.3:
(a) by mutual consent of the parties;
(b) by either party if a condition to that party's
obligations pursuant to this Agreement shall not have been
satisfied at or prior to the Closing in accordance with the terms
of this Agreement; or
(c) by either party if the Closing shall not have
taken place within four (4) business days of the date of this
Agreement.
Nothing in this Section 8.2 shall excuse a party from exercising
good faith and its reasonable best efforts toward the
satisfaction of the conditions to such party's obligations under
this Agreement. Termination of this Agreement shall not
adversely affect any rights or remedies of either party
hereunder, and the terms and conditions of the Confidentiality
Agreement dated September 13, 1993, shall survive any such
termination.
8.3 Seller Deliveries. At the Closing, Seller shall
deliver or cause to be delivered to Purchaser:
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(a) An executed counterpart Instrument of Assignment
and Assumption in the form of Exhibit A, for all of the Acquired
Assets other than Inventory and Fixed Assets;
(b) An executed Bill of Sale in the form of Exhibit
B, for the Inventory and Fixed Assets;
(c) The opinion of counsel to Seller in the form of
Exhibit C;
(d) Certified resolutions of the shareholders and
board of directors of Seller authorizing consummation of the
transactions contemplated by this Agreement;
(e) Officers' certificate in the form of Exhibit D;
(f) Consents and approvals set forth in the
Disclosure Schedule;
(g) Charter and Good Standing Certificate of Seller
and API certified by the Florida Secretary of State;
(h) Shareholder Guaranty in the form of Exhibit E;
(i) Incumbency Certificate;
(j) Evidence that Seller has paid and discharged
certain federal taxes as described in Section 4.11;
(k) Warehousing Agreement in the form of Exhibit F;
(l) UCC termination statements or amendments
releasing any liens of record affecting the Acquired Assets; and
(m) Non Compete Agreements in the form of Exhibits
G, H, I and M executed by the Substantial Shareholders of Seller
in accordance with Section 1.7.
Simultaneously with the consummation of the transfer, Seller,
through its officers, agents, and employees, shall put Purchaser
into full possession and enjoyment of all the Acquired Assets to
be conveyed and transferred by this Agreement.
8.4 Purchaser Deliveries. At the Closing, Purchaser
shall deliver to Seller the following instruments and documents:
(a) Wire transfer, cashier's check or bank draft in
the amount of the Closing Payment;
(b) An executed counterpart of an Instrument of
Assignment and Assumption in the form executed by Seller; and
(c) Officer's certificate in the form of Exhibit J.
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(d) The opinion of counsel to Purchaser in the form
of Exhibit K;
(e) Certified resolutions of the board of directors
of Purchaser authorizing consummation of the transactions
contemplated by this Agreement;
(f) Charter and Good Standing Certificate of
Purchaser certified by the Delaware Secretary of State;
(g) Incumbency Certificate;
(h) Warehousing Agreement in the form of Exhibit F.
9. POST CLOSING AGREEMENTS
9.1 Indemnification by Seller.
(a) Subject to the provisions of Section 9.4, Seller
agrees to defend, indemnify and hold Purchaser and each of its
subsidiaries, affiliates and parent companies and the respective
officers, directors and employees of Purchaser and such
subsidiaries, affiliates and parent companies (collectively, the
"Indemnified Parties") harmless from and against any and all
liabilities, obligations, damages, losses, claims, demands,
recoveries, deficiencies, costs or expenses (including, without
limitation, interest, penalties, additions to tax and reasonable
attorneys' fees and expenses) connected with, resulting from or
arising out of any of the following:
(i) any untruth or error in or breach of any
representation or warranty contained in
this Agreement or in any schedule
included in the Disclosure Schedule and
any certificate, exhibit or other
instrument delivered by Seller at the
Closing of the transactions under this
Agreement;
(ii) any failure by Seller to perform, carry
out or comply with its obligations under
this Agreement, including the exhibits
hereto;
(iii) any and all Retained Liabilities and
other debts, liabilities or obligations
of Seller, direct or indirect, fixed,
contingent or otherwise, whether existing
at or as of the Closing Date or which
arise after the Closing Date, but which
are based upon or arise from any act,
transaction, circumstance, sale of goods
or services, state of facts or other
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condition which occurred or existed on or
before the Closing Date, whether or not
then known, due or payable, except as
otherwise specifically provided herein;
(iv) any brokers fees claimed by Quest Capital
Corp.;
(v) failure of Seller to comply with any
applicable bulk sales law in connection
with the transactions contemplated by
this Agreement;
(vi) actions or decisions, directly or
indirectly affecting the employment of
employees or former employees of Seller,
that are implemented by Seller either (a)
in connection with, incident to or as a
result of the sale, or (b) prior to or
including the Closing Date;
(vii) any employment termination, layoff or
reduction in hours occurring in
connection with, incident to or as a
result of, the sale, or prior to or
including the Closing Date affecting
employees, or former employees, of
Seller;
(viii) any decisions or actions taken or
implemented by Seller affecting
employees, or former employees, of
Seller, in connection with, incident to
or as a result of Seller's agreement or
dealings with any labor organizations or
employees;
(ix) any liability of Seller pursuant to the
Multiemployer Pension Plan Amendment Act
of 1980, as amended.
(x) [-----]
(such matters listed in clauses (i) through (x) above being
herein referred to collectively as "Claims" and singly as
"Claim"). Notwithstanding anything herein to the contrary, no
Claim shall consist of any matter described in Section 9.4. Any
such Claim shall be adjusted to take into account any tax benefit
to, or tax burden on, the Indemnified Parties incident to the
matter giving rise to such Claim or to the indemnification
payment hereunder.
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(b) If the Indemnified Parties shall incur or
receive notice of the existence of any Claim (liquidated or
unliquidated, accrued or contingent), Purchaser shall promptly
give written notice thereof to Seller. Purchaser shall furnish
to Seller in reasonable detail such information as Indemnified
Parties may have with respect thereto (including in any lawsuit,
copies of any summons, complaint or other pleading which may have
been served on it and any written claim, demand, invoice, billing
or other document evidencing or asserting the same); provided,
however, that no failure or delay by Purchaser in the performance
of the foregoing shall reduce or otherwise affect the obligation
of Seller to indemnify and hold the Indemnified Parties harmless,
except to the extent that such failure or delay shall have
materially prejudiced Seller's ability to defend against, settle
or satisfy such Claim.
(c) The right of indemnification contained in this
Section 9.1 with respect to any Claims resulting from the
assertion of liability by third parties shall be subject to the
following terms and conditions:
(i) Except for matters involving the
Indemnified Parties' tax filings, Seller,
at its expense, shall have the right to
pay, compromise, settle or otherwise
dispose of any such Claims. Unless
Purchaser otherwise agrees, however, no
such settlement shall limit, restrict or
otherwise affect the right of any of the
Indemnified Parties to carry on or
conduct its business (then or in the
future), or require any payment to be
made by any of the Indemnified Parties
(except as may be paid or reimbursed by
Seller), or limit, restrict, make more
expensive or less profitable or otherwise
adversely affect the manner in which any
of the Indemnified Parties carries on or
conducts its business (then or in the
future). In addition, no settlement
shall be entered into which does not
include the delivery by the settling
third party of a full and final release
of the Indemnified Parties from all
liability in respect of such Claim.
(ii) Except for matters involving the
Indemnified Parties' tax filings, Seller,
at its expense, shall be entitled to
participate in and to the extent they
wish, to direct the defense (including
the selection of counsel reasonably
satisfactory to Purchaser) of any such
Claims. Purchaser shall at all times
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have the right to participate in the
defense of any Claim and to employ its
own counsel, but the fees and expenses of
such counsel shall be Purchaser's own
expense unless the employment of such
counsel shall have been authorized by
Seller in connection with the defense of
any such Claims, or unless and so long as
Seller shall not have employed counsel to
have charge of the defense of any such
Claims within a reasonable period after
notice thereof, in either of which events
such fees and expenses shall be borne by
Seller.
(iii) Notwithstanding anything in this Section
9.1 to the contrary, if there is a
reasonable probability that any of the
Claims may materially and adversely
affect Purchaser or any of the other
Indemnified Parties, other than as a
result of money damages or other money
payments, Purchaser or such other
Indemnified Party shall have the right,
at its own cost and expense, to defend,
compromise or settle such Claim,
provided, that Seller shall not be liable
for any payment in settlement of such
Claim without its prior consent and shall
be reimbursed for any payment Seller has
made to Purchaser pursuant to Section
9.10 or otherwise incurred in connection
with such Claim.
(iv) No Claim hereunder shall give rise to a
right of indemnification unless and until
the total value of all Claims shall
exceed the aggregate amount of $10,000
whereupon Purchaser may seek indemnity
for each and every Claim, including those
Claims comprising the initial $10,000
thereof. Seller's indemnity hereunder is
limited to a maximum aggregate amount of
$1,250,000; provided, however, no
indemnity for any Claim under Section
9.1(a)(x) shall be applied against this
limit, nor shall this limit affect any
indemnity for any Claim under Section
9.1(a)(x).
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9.2 Indemnification by Purchaser.
(a) Purchaser agrees to defend, indemnify and hold
Seller and each of its subsidiaries, affiliates and parent
companies and the respective officers, directors and employees of
Seller and such subsidiaries, affiliates and parent companies
(collectively, the "Purchaser-Indemnified Parties") harmless from
and against any and all liabilities, obligations, damages,
losses, claims, demands, recoveries, deficiencies, costs or
expenses (including, without limitation, interest, penalties,
additions to tax and reasonable attorneys' fees and expenses)
connected with, resulting from or arising out of any of the
following:
(i) any untruth or error in or breach of any
representation or warranty contained in
this Agreement or in any certificate,
exhibit or other instrument delivered by
Purchaser at the Closing of the
transactions under this Agreement;
(ii) any failure by Purchaser to perform,
carry out or comply with the liabilities
of the Business expressly assumed by
Purchaser in Section 1.3 and its other
obligations under this Agreement,
including the exhibits hereto;
(iii) any and all debt, liabilities or
obligations of Purchaser, direct or
indirect, fixed, contingent or otherwise
arising out of Purchaser's conduct of the
Business following the Closing or the
conduct of any other business of
Purchaser prior to or after Closing;
(iv) any decisions or actions taken or
implemented by Purchaser prior to the
Closing affecting Purchaser's business.
(such matters listed in clauses (i) through (iv) above being
herein referred to collectively as "Claims" and singly as
"Claim"). Any such Claim shall be adjusted to take into account
any tax benefit to, or tax burden on, the Purchaser-Indemnified
Parties incident to the matter giving rise to such Claim or to
the indemnification payment hereunder.
(b) If the Purchaser-Indemnified Parties shall incur
or receive notice of the existence of any Claim (liquidated or
unliquidated, accrued or contingent), Seller shall promptly give
written notice thereof to Purchaser. Seller shall furnish to
Purchaser in reasonable detail such information as Purchaser-
Indemnified Parties may have with respect thereto (including in
any lawsuit, copies of any summons, complaint or other pleading
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which may have been served on it and any written claim, demand,
invoice, billing or other document evidencing or asserting the
same); provided, however, that no failure or delay by Seller in
the performance of the foregoing shall reduce or otherwise affect
the obligation of Purchaser to indemnify and hold the Purchaser-
Indemnified Parties harmless, except to the extent that such
failure or delay shall have materially prejudiced Purchaser's
ability to defend against, settle or satisfy such Claim.
(c) The right of indemnification contained in this
Section 9.2 with respect to any Claims resulting from the
assertion of liability by third parties shall be subject to the
following terms and conditions:
(i) Except for matters involving the
Purchaser-Indemnified Parties' tax
filings, Purchaser, at its expense, shall
have the right to pay, compromise, settle
or otherwise dispose of any such Claims.
Unless Seller otherwise agrees, however,
no such settlement shall limit, restrict
or otherwise affect the right of any of
the Purchaser-Indemnified Parties to
carry on or conduct its business (then or
in the future), or require any payment to
be made by any of the Purchaser-
Indemnified Parties (except as may be
paid or reimbursed by Purchaser), or
limit, restrict, make more expensive or
less profitable or otherwise adversely
affect the manner in which any of the
Purchaser-Indemnified Parties carries on
or conducts its business (then or in the
future). In addition, no settlement
shall be entered into which does not
include the delivery by the settling
third party of a full and final release
of the Purchaser-Indemnified Parties from
all liability in respect of such Claim.
(ii) Except for matters involving the
Purchaser-Indemnified Parties' tax
filings, Purchaser, at its expense, shall
be entitled to participate in and to the
extent they wish, to direct the defense
(including the selection of counsel
reasonably satisfactory to Seller) of any
such Claims. Seller shall at all times
have the right to participate in the
defense of any Claim and to employ its
own counsel, but the fees and expenses of
such counsel shall be Seller's own
expense unless the employment of such
counsel shall have been authorized by
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Purchaser in connection with the defense
of any such Claims, or unless and so long
as Purchaser shall not have employed
counsel to have charge of the defense of
any such Claims within a reasonable
period after notice thereof, in either of
which events such fees and expenses shall
be borne by Purchaser.
(iii) Notwithstanding anything in this Section
9.2 to the contrary, if there is a
reasonable probability that any of the
Claims may materially and adversely
affect Seller or any of the other
Purchaser-Indemnified Parties, other than
as a result of money damages or other
money payments, Seller or such other
Indemnified Party shall have the right,
at its own cost and expense, to defend,
compromise or settle such Claim,
provided, that Purchaser shall not be
liable for any payment in settlement of
such Claim without its prior consent.
(iv) No Claim hereunder shall give rise to a
right of indemnification unless and until
the total value of all Claims shall
exceed the aggregate amount of [----]
whereupon Seller may seek indemnity for
each and every Claim, including those
Claims comprising the initial [----]
thereof. Purchaser's indemnity hereunder
is limited to a maximum amount of [----]
9.3 Non Compete Agreement.
(a) Seller and API will restrict their activities so
that Purchaser's reasonable expectations with respect to the
goodwill, business reputation, employee relations and prospects
connected with the Acquired Assets will not be impaired. In
furtherance of, but not in limitation of, this general
obligation, Seller and API agree that neither Seller nor API
will, at any time within the 5-year period immediately following
the Closing Date, (i) participate, engage or have any interest
in, directly or indirectly, any person, firm, corporation, or
business (whether as an investor, employee, officer, director,
agent, controlling security holder, creditor, or consultant, or
in any other capacity which calls for the rendering of personal
services, advice, acts of management, operation or control) which
carries on any business or activity, competitive with, similar
to, or an outgrowth of, the Business as heretofore engaged in by
Seller anywhere in the United States, and Canada and anywhere
else in the world, in which Seller did Business prior to the
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consummation of the transactions hereunder; provided, however,
that this restriction shall not apply to Seller's activities
pursuant to Section 9.4.
(b) The parties intend that the covenant contained
in Section 9.3(a) shall be construed as a series of separate
covenants, one for each separate legal jurisdiction in which such
covenant applies. If, in any judicial proceeding, a court shall
refuse to enforce any of the separate covenants included herein,
then such unenforceable covenant shall be deemed eliminated from
these provisions for the purpose of those proceedings to the
extent necessary to permit the remaining separate covenants to be
enforced. Notwithstanding the foregoing, it is the intent and
agreement of Purchaser and Seller that these covenants be given
the maximum force, effect and application permissible under
applicable law.
(c) During the period specified in Section 9.3(a) of
this Agreement, neither Seller nor API shall (i) divulge,
communicate, use to the detriment of Purchaser or for the benefit
of any other person or persons, or misuse in any way, any
confidential information or trade secrets of the Business,
including personnel information, secret processes or processes
for which a patent is pending, know-how, computer programs,
customer lists, price lists or pricing data, formulas, or other
technical data; or (ii) divert or attempt to divert any business
of the kind comprising the Business.
(d) Seller and API have knowledge of the affairs,
trade secrets, customers, potential customers and other
proprietary information of the Business, and Seller and API
acknowledge and agree that compliance with the covenants
contained in this Section 9.3 is necessary for the protection of
the goodwill and other proprietary interests of the Business
which Purchaser is acquiring. Seller and API acknowledge and
agree that in the event of a breach of such covenants, neither
the Purchaser nor any successors or assigns would have an
adequate remedy at law, and Purchaser and any successor or assign
shall be entitled to injunctive relief in addition to any other
remedies which may be available to it hereunder.
9.4 Product Returns; Defective Product.
(a) Seller and Purchaser will cooperate in handling
Products manufactured prior to the Closing Date which are deemed
defective or unsaleable, or returned to Purchaser or Seller by a
consumer or former customers of Seller after the Closing Date, as
follows:
(i) [-----]
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(ii) [-----]
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<PAGE>
(iii) [-----]
(b) [-----]
(c) [-----]
(d) [-----]
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9.5 Right of Offset; Sales in Excess of Forecast.
(a) Either party's obligation to pay to the other
party any amounts owing under this Agreement, or any other
agreement delivered pursuant to this Agreement, is in each case
subject to any right of offset which such party may have against
the other. Without limiting the foregoing, such right of offset
shall apply to the amount of the Six-month Holdback.
(b) In the event Seller's sales during the period
from December 1, 1993 to the Closing Date exceed $350,000, Seller
shall promptly credit all or any portion of the amount of such
difference to Seller's accounts receivable identified by
Purchaser. Seller shall give to Purchaser the right to rebill
such balance. Purchaser shall reimburse Seller the amount of
Seller's acquisition cost of the corresponding Product. In the
event Purchaser does not choose to accept and rebill accounts in
the total amount of such difference, Purchaser may make a Claim
for indemnity in the amount of the difference between unaccepted
accounts receivable and Seller's cost of such Product.
9.6 Transition Assistance.
(a) Immediately following the Closing, Seller shall
supply to Purchaser duplicate copies of letters addressed to
customers advising them of the sale, signed by an officer of
Seller, in a form prepared by Purchaser and reasonably
satisfactory to Seller. Purchaser shall receive a sufficient
quantity of such executed letters on Seller's stationery,
together with Seller's envelopes and three sets of self-adhesive
pre-addressed customer labels, including name and address, to
enable Purchaser to mail the letters to all customers immediately
following the Closing.
(b) For a period of ninety (90) days following the
Closing Date, Seller agrees to use best efforts to retain the
services of Bret Buhler and Ken Ellis, and for a period of up to
sixty (60) days, as requested by Purchaser as set forth below,
following the Closing Date, Seller agrees to use best efforts to
retain the services of Dean Hill. As requested by Purchaser,
Seller shall make available to Purchaser during such ninety (90)
day period the services of either Ken Ellis or Bret Buhler, as
may reasonably be requested by Seller upon reasonable advance
notice, for up to fifteen (15) days. In addition, Seller shall
make available to Purchaser during such sixty (60) day period the
services of Dean Hill on a full-time basis during the initial
thirty (30) days of such period and thereafter, Seller shall make
available to Purchaser the services of Mr. Hill on a full-time
basis for individual periods of five (5) working days each,
subject to termination by Purchaser upon fourteen (14) days'
advance notice. Purchaser shall be under no obligation to
reimburse Seller for any costs of salary, vacation or other
benefits for the services of Messrs. Ellis and Buhler. Purchaser
shall pay Seller for the services of Dean Hill the aggregate
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amount of $2,500 for five (5) working days of service and no
other costs of salary, vacation or other benefits. Payment shall
be made to Seller, when due to Seller's employee leasing company.
Expense reimbursement shall be in accordance with Purchaser's
policies and agreed to in advance. Seller shall also make
available to Purchaser free-of-charge during such period office
space and copies, telephones and other equipment at Seller's
offices in Tallahassee, Florida for use by Seller's employees and
any leased employees of Seller providing transition assistance to
Purchaser. Purchaser shall reimburse Seller for the actual cost
of Purchaser's long distance telephone, copying and facsimile
charges. All other charges will be agreed in advance.
(c) Through July 1, 1994, Seller hereby grants to
Purchaser the right to manufacture product and use labels
included in the Acquired Assets and bearing Seller's address,
phone numbers, trademarks and other identifying information.
Seller shall cooperate with Purchaser, referring to Purchaser's
attention all correspondence and other inquiries made to
Purchaser. At Closing, Seller will assign to Purchaser, at
Purchaser's cost, Seller's 800 telephone number.
9.7 Hired Employees. On the Closing Date, Purchaser
shall offer employment to Dan Solway (Western Regional Manager),
Ken Miller (Eastern Regional Manager), and Debby Cusack (Customer
Service) for a minimum of 180 days from the Closing Date. If any
of these employees voluntarily resigns during or refuses any
requested relocation during such 180 day period, compensation and
benefits shall be discontinued immediately. In the event
Purchaser requires an employee to relocate, the employee shall be
eligible for Purchaser's Employee Relocation Program. Nothing
herein shall be construed to restrict Purchaser from making
offers of employment on or after the Closing Date to Seller's
leased employees not designated herein by Purchaser. Any
employee of the Business offered a position with Purchaser who
accepts such offer shall be deemed a "Hired Employee." Seller
will cause its employee leasing Company to terminate the
employment of all Hired Employees of the Business, effective as
of 12:01 a.m. on the Closing Date, and will give such notices and
perform such other obligations as may be required in connection
therewith and the transactions contemplated by this Agreement.
It is understood and agreed that employment by, or an offer of
employment to, Seller's leased employees by Purchaser shall not
constitute any commitment, contract, obligation or understanding
(express or implied) on the part of Purchaser to a post-Closing
Date employment relationship of any fixed term or duration in
excess of 180 days or to any terms or conditions other than those
Purchaser may establish. Subject to Purchaser's obligation to
employ the above-designated individuals for a term of 180 days,
any employment with Purchaser may be terminated by Purchaser at
any time for any reason. Purchaser agrees to provide benefits to
all Hired Employees after the Closing Date in accordance with its
medical and other benefit plans.
Page 36
<PAGE>
9.8 Sales, Use and Transfer Taxes. All applicable state
and local sales, use and transfer taxes, filing and recording
fees, and other similar expenses payable in connection with the
transactions contemplated by this Agreement shall be paid fifty
percent (50%) by Purchaser and fifty percent (50%) by Seller.
Purchaser shall prepare and file all appropriate returns and
reports.
9.9 Further Assurances; Access to Books and Records.
(a) Seller, at any time after the Closing Date,
shall execute, acknowledge, and deliver any further assignments,
conveyances, and other assurances, documents, and instruments of
transfer reasonably requested by Purchaser and shall take any
other action consistent with the terms of this Agreement that may
reasonably be requested by Purchaser for the purpose of
assigning, transferring, granting, conveying, and confirming to
Purchaser, or reducing to possession, any or all of the Acquired
Assets. If requested by Purchaser, Seller further agrees to
prosecute or otherwise enforce in its own name for the benefit of
Purchaser any claims, rights, or benefits that are transferred to
Purchaser by this Agreement and that require prosecution or
enforcement in Seller's name.
(b) If requested by Seller, for a period of seven
(7) years following the Closing Date, Purchaser shall preserve
all books and records acquired hereunder as Seller may reasonably
request and give Seller access at Purchaser's location to all
books and records included in the Acquired Assets.
9.10 [-----]
9.11 [-----]
Page 37
<PAGE>
10. MISCELLANEOUS
10.1 Fees and Expenses. Each party hereto shall pay all
of its expenses incurred in connection with the negotiation,
preparation, execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby, including
the fees and expenses of its counsel, accountants and other
experts.
10.2 Survival of Representations. The representations and
warranties of the parties contained in this Agreement and in any
certificate delivered or to be delivered pursuant to this
Agreement and in connection with the consummation of the
transactions contemplated hereby shall survive the Closing for a
period of two (2) years from the Closing Date.
10.3 Notices. All notices, consents or other
communications shall be in writing, and shall be deemed to have
been duly given when delivered personally or by messenger, or
when mailed by registered or certified mail, return receipt re-
quested, postage prepaid, or when received via telecopy, telex or
other electronic transmission, in all cases addressed to the
party for whom intended at its address set forth below:
If to Purchaser:
Armor All Products Corporation
6 Liberty
Aliso Viejo, CA 92656
Attn: Office of the President
with a copy to:
McKesson Corporation
One Post Street
San Francisco, CA 94104
Attn: Vice President & General Counsel
If to Seller:
Agri-Products, Inc.
P.O. Box 12728
Tallahassee, FL 32317
Attn: Ken Ellis
with a copy to:
Judy Tabb, Esq.
Carr, Tabb & Pope
1355 Peachtree, Suite 2000
Atlanta, GA 30309
Page 38
<PAGE>
10.4 Successors and Assigns. All covenants, promises and
agreements by or on behalf of the parties contained in this
Agreement shall be binding upon and shall inure to the benefit of
the "Permitted Assigns" (as hereafter defined) of the parties;
but nothing in this Agreement, express or implied, is intended to
confer on any party the right to assign its rights or obligations
hereunder before Closing, which assignment (by operation of law
or otherwise) is prohibited. "Permitted Assigns" shall include
any entity controlled by, or under common control with, any such
party. Notwithstanding the foregoing, the covenants and
agreements set forth in Section 9.3 are freely assignable by
Purchaser without the consent of Seller and shall inure to the
benefit of Purchaser's successors and assigns.
10.5 No Third Party Rights. Nothing in this Agreement,
whether express or implied, is intended to confer any rights or
remedies under or by reason of this Agreement on any persons
other than the parties to it and their respective successors and
assigns, nor is anything in this Agreement intended to relieve or
discharge the obligation or liability of any third persons to any
party to this Agreement, nor shall any provision give any third
persons any right of subrogation or action over or against any
party to this Agreement.
10.6 Amendments, Supplements, Waivers. No amendment,
supplement or waiver of any provision of this Agreement shall be
effective unless the same shall be in writing and signed by
authorized officers of all parties in the case of an amendment or
supplement and by the waiving party in the case of a waiver.
10.7 Recovery of Litigation Costs. In any legal action or
any arbitration or other proceeding arising out of or related to,
or for the enforcement of this Agreement, or misrepresentation in
connection with this Agreement, the successful or prevailing
party or parties shall be entitled to recover reasonable
attorneys' fees and other costs incurred in that action or
proceeding, in addition to any other relief to which it or they
may be entitled.
10.8 Entire Agreement. Except for the Confidentiality
Agreement dated September 13, 1993 which shall survive until the
Closing, this Agreement sets forth the entire agreement of the
parties hereto with regard to the subject matter hereof and
supersedes and replaces all prior agreements, understandings and
representations, oral or written, with regard to such matters,
including, without limitation, the Letter Agreement between the
parties dated December 15, 1993, as amended.
10.9 Headings. Headings in this Agreement are for
reference purposes only and shall not be deemed to have any
substantive effect.
10.10 Publicity. All publicity relating to this Agreement
and the transactions contemplated hereby shall be released
Page 39
<PAGE>
jointly with the approval of each of the parties hereto, except
as otherwise required by applicable law or regulation.
10.11 Counterparts. This Agreement may be executed
concurrently in two or more counterparts, each of which shall be
deemed an original, but all of which together shall constitute
one and the same instrument.
10.12 Governing Law.
(a) This Agreement shall be construed in accordance
with the internal laws of the State of California, without regard
to conflict of laws principles.
(b) Any dispute arising out of or related to this
Agreement which is related to the Intellectual Property, or any
action to enforce, defend or determine any rights or obligations
related to the Intellectual Property under this Agreement, shall
be litigated exclusively in the state or federal court located in
Memphis, Tennessee. The parties expressly waive any right to a
jury trial in such litigation. The parties hereto consent to the
jurisdiction, and waive any right to object to that venue.
(c) Any controversy or claim not related to the
Intellectual Property arising out of or relating to this
Agreement or any action to enforce, defend or determine any
rights or obligations not related to the Intellectual Property
under this Agreement shall be settled by arbitration. The
arbitration shall be conducted by a panel of three arbitrators,
one of which shall be selected by Seller, a second by Purchaser
and the third of which shall be selected by the two arbitrators
selected by the parties. The arbitration shall be held in
Memphis, Tennessee, and conducted in accordance with the then
obtaining Rules of the American Arbitration Association. This
Agreement shall be enforceable and judgment upon any award
//
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//
//
//
//
//
//
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Page 40
<PAGE>
rendered by all or a majority of the arbitrators may be entered
in any court having jurisdiction, or application may be made to
such court for a judicial acceptance of the award and an order of
enforcement, as the case may be.
IN WITNESS WHEREOF, the parties have caused this Agreement
to be duly executed as of the date first above written.
ARMOR ALL PRODUCTS CORPORATION
By /s/ Mervyn J. McCulloch
---------------------------------
Title Executive Vice President and
Chief Financial Officer
--------------------------------
AGRI-PRODUCTS SPECIAL MARKETS, INC.
By /s/ Kenneth L. Ellis
--------------------------------
Title President
--------------------------------
Page 41
<PAGE>
<TABLE>
<CAPTION>
Selected Financial Data
- - - --------------------------------------------------------------------------------------------------------------------------
Years Ended March 31
(in thousands except per share amounts) 1994 1993 1992 1991 1990 1989
- - - --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Income Statement Data
Revenues $182,257 $168,400 $145,910 $133,804 $165,447 $162,780
-----------------------------------------------------------------
Increase (decrease) from prior year 8.2% 15.4% 9.0% (19.1%) 1.6% 28.8%
Costs and expenses
Cost of sales 74,360 68,841 59,709 57,980 68,118 63,578
Selling, general and administrative 66,950 63,670 60,465 58,133 60,654 50,985
Amortization of intangibles 2,684 3,768 4,314 4,315 4,357 2,760
-----------------------------------------------------------------
Total costs and expenses 143,994 136,279 124,488 120,428 133,129 117,323
-----------------------------------------------------------------
Increase (decrease) from prior year 5.7% 9.5% 3.4% (9.5%) 13.5% 32.2%
Operating income 38,263 32,121 21,422 13,376 32,318 45,457
Interest income (expense)--net 1,377 1,245 1,080 (704) (677) 511
-----------------------------------------------------------------
Income before income taxes. 39,640 33,366 22,502 12,672 31,641 45,968
Income taxes 17,067 14,214 9,638 5,829 12,820 18,855
-----------------------------------------------------------------
Net income $ 22,573 $ 19,152 $ 12,864 $ 6,843 $ 18,821 $ 27,113
=================================================================
Increase (decrease) from prior year 17.9% 48.9% 88.0% (63.6%) (30.6%) 21.7%
Earnings per common share $ 1.07 $ .91 $ .61 $ .33 $ .90 $ 1.30
=================================================================
Increase (decrease) from prior year 17.6% 49.2% 84.8% (63.3%) (30.8%) 21.5%
Return on average stockholders' equity/1/ 21.0% 19.3% 13.9% 7.1% 19.6% 32.5%
=================================================================
Cash dividends per common share $ .64 $ .48 $ .48 $ .64 $ .64 $ .52
=================================================================
/1/Net income divided by monthly average equity
- - - --------------------------------------------------------------------------------------------------------------------------
March 31
(in thousands) 1994 1993 1992 1991 1990 1989
- - - --------------------------------------------------------------------------------------------------------------------------
Balance Sheet Data
Working capital $ 64,349 $ 60,373 $ 46,149 $ 38,825 $ 40,615 $ 36,310
Current assets 99,225 93,429 68,485 65,788 90,267 90,516
Total assets 151,826 140,560 119,823 121,731 150,069 150,364
Total debt -- -- -- 6,549 28,688 26,141
Stockholders' equity 116,029 106,555 96,326 93,307 99,321 93,763
- - - --------------------------------------------------------------------------------------------------------------------------
</TABLE>
[FOUR GRAPHS APPEAR HERE]
<PAGE>
Armor All Products Corporation
Financial Review
Results of Operations
The Company's operating results improved for the third consecutive year in
fiscal 1994, as revenues increased 8% and net income increased 18% from fiscal
1993. The revenue growth came largely from new product introductions and
continued international expansion, while the earnings growth was primarily
attributable to higher revenues, increased promotional and administrative cost
efficiencies, and lower amortization of intangibles.
Revenues
The following table sets forth a summary of revenues by major geographic region:
<TABLE>
<CAPTION>
- - - --------------------------------------------------------------
Years Ended March 31 (in millions) 1994 1993 1992
- - - --------------------------------------------------------------
<S> <C> <C> <C>
United States $156.5 $148.6 $126.6
International 25.8 19.8 19.3
------------------------
Total $182.3 $168.4 $145.9
========================
Percentage change from prior year 8% 15%
- - - --------------------------------------------------------------
</TABLE>
The $7.9 million increase in U.S. revenues in fiscal 1994 was primarily
attributable to increased sales of the Company's line of protectant products,
which includes Armor All Protectant (with the additional-sunscreen formula
noted below) as well as Armor All Protectant Low-Gloss Natural Finish,
introduced in December 1993, and Armor All Tire Foam Protectant, introduced in
November 1991. Another significant factor was the initial sales of Armor All
QuickSilver Wheel Cleaner and Armor All Spot & Wash Concentrate, two new
products which were introduced in December 1993. Initial sales of E-Z Deck Wash
and the other E-Z D brand products acquired by the Company in January 1994 made
a small contribution to the total U.S. revenue growth. Sales of the Company's
line of waxes and washes decreased from the prior year, though at a lower rate
than the decline in national wax/wash category consumer purchases.
The substantial majority of the $22.0 million increase in U.S. revenues in
fiscal 1993 was due to higher sales of the Company's line of protectant
products. Shipments of Armor All Tire Foam Protectant increased significantly as
this product became the leader in the tire care category within the first year
following its introduction. Sales of Armor All Protectant increased in fiscal
1993 in part because of category and share growth in the mass merchandiser
channel and because trade customers were still reducing their retail inventory
levels during the first half of fiscal 1992. Additionally, in January 1993 the
Company changed the formula of Armor All Protectant to include additional
sunscreen and concurrently implemented a 5% price increase on that product.
Sales of the Company's line of waxes and washes rose moderately in fiscal 1993,
mainly due to higher sales of Rain Dance Advanced Formula Car Polish, which was
introduced in November 1991, and initial sales of Rain Dance Dark Car Formula
Polish and Rain Dance Light Car Formula Polish, which were introduced in January
1993.
Approximately half of the $6.0 million increase in International revenues in
fiscal 1994 was attributable to higher sales in Canada. The growth in Canadian
sales resulted from several factors, including initial sales of the three new
products introduced in December 1993, continued higher sales of Armor All Tire
Foam Protectant, and higher purchases by the Company's largest Canadian
customer. The remaining increase in International revenues reflects higher sales
to virtually all of the Company's other markets, particularly Mexico and those
areas served by the Company's European Office.
The relatively small $0.5 million increase in International revenues in fiscal
1993 reflects the net result of several factors. The inception of the
distribution agreement with S.C. Johnson & Son, Inc. in Germany in that year was
one significant factor (agreements with S.C. Johnson in Japan and Mexico were
initiated in fiscal 1992). Under the agreement, the Company's sales to S.C
Johnson are at lower prices than to other customers, but S.C. Johnson is
responsible for incurring virtually all associated selling and marketing
expenses previously borne by the Company. The net effect is that the Company
records lower revenues and selling and marketing expenses. Offsetting the S.C.
Johnson impact, International revenues in fiscal 1993 benefitted from increased
shipments to Canada, Asia, Latin America and the United Kingdom.
12
<PAGE>
Operating Expenses
The following table sets forth the percentage relationships of operating
expenses and operating income to revenues for the fiscal years indicated:
<TABLE>
<CAPTION>
- - - ------------------------------------------------------------
Years Ended March 31 1994 1993 1992
- - - ------------------------------------------------------------
<S> <C> <C> <C>
Revenues 100.0% 100.0% 100.0%
Cost of sales 40.8 40.9 40.9
Selling, general and administrative 36.7 37.8 41.4
Amortization of intangibles 1.5 2.2 3.0
---------------------
Operating income 21.0% 19.1% 14.7%
=====================
</TABLE>
Cost of sales as a percentage of revenues in fiscal 1994 decreased slightly from
fiscal 1993 due to the effects of the 5% selling price increase on Armor All
Protectant in January 1993, partially offset by increases in the cost percentage
due to changes in the product mix, higher shipments of certain promotional
items, and the higher cost of the additional-sunscreen formula for Armor All
Protectant.
Cost of sales as a percentage of revenues in fiscal 1993 was unchanged from
fiscal 1992, reflecting several offsetting factors. The cost percentage
decreased due to the absorption of fixed manufacturing and distribution costs
over a higher sales volume. However, the cost percentage was increased by
changes in the product mix and higher sales of certain promotional items.
Additionally, gross margins were lower in the markets served by S.C. Johnson due
to the billing method described above.
Selling, general and administrative (SG&A) expenses as a percentage of revenues
in fiscal 1994 decreased from fiscal 1993 principally due to the absorption of
media advertising and fixed administrative expenses over a higher sales volume,
as well as to a reduction in consumer coupon expenses. Partially offsetting
these factors were promotional expenses associated with the three new products,
increased research and development activity, and start-up costs relating to the
Company's new home care products division.
SG&A expenses decreased as a percentage of revenues in fiscal 1993 from fiscal
1992 primarily due to more efficient trade promotion practices. Beginning in
late fiscal 1992, the Company implemented a new trade promotion approach in
which the Company offers its trade customers fixed sums in return for specific
promotional activities. Also contributing to the decrease was the spreading of
fixed administrative expenses over a higher sales volume. The S.C. Johnson
agreement reduced fiscal 1993 SG&A expenses, as noted above.
Amortization expense, principally relating to intangible assets associated with
the Company's acquisition of several brands in September 1988, decreased by $1.1
million in fiscal 1994 as certain of such assets became fully amortized.
Interest income increased by $0.1 million in fiscal 1994 and $0.2 million in
fiscal 1993 over the respective prior years due to higher cash balances during
the first three quarters of fiscal 1994 and all of fiscal 1993. Cash balances
increased primarily as a result of profitable operations without significant
investments in noncurrent assets or working capital until the fourth quarter of
fiscal 1994. In that period, the Company incurred higher cash outflows due to
the factors mentioned under "Financial Resources and Liquidity" below.
The Company's effective income tax rates were 43.1%, 42.6% and 42.8% in fiscal
1994, 1993 and 1992, respectively. The higher tax rate in fiscal 1994
principally reflects the Omnibus Budget Reconciliation Act of 1993, which
increased the federal corporate income tax rate from 34% to 35% retroactive to
January 1993. Approximately 0.3% of the increase in the annual effective rate
represents the additional taxes which will be paid for the fiscal year ended
March 31, 1993 due to the retroactive provision of the Act. The effect of the
Act was partially offset by slightly lower effective rates for state and foreign
taxes, as well as to a reduction in the portion of the Company's expenses
represented by nondeductible intangible asset amortization.
13
<PAGE>
Financial Resources and Liquidity
The Company's working capital requirements fluctuate during the year,
traditionally peaking in the spring due to extended payment terms offered in
connection with winter promotional activities. Cash inflow is strongest during
the summer months as these receivables are collected. Despite these seasonal
factors, at March 31, 1994, the Company had a $26.3 million balance of cash and
cash equivalents and no short-term or long-term debt.
The Company does not have substantial investments in inventory as its contract
packagers generally own the raw materials and finished goods in their possession
and transfer title to the Company just prior to shipment to the Company's
customers. The Company's use of contract packagers also permits it to avoid
significant investments in machinery and other fixed assets.
During fiscal 1994 and 1993, cash flow from operations was $15.6 million and
$24.7 million, respectively. The decrease in fiscal 1994 is primarily related to
an increase in accounts receivable, reflecting a change in the timing of
shipments and the granting of normal extended seasonal dating terms to certain
additional customers this year. In addition, cash payments were higher in fiscal
1994 due to the timing of payments related to income taxes and certain accrued
consumer coupon and employee compensation programs.
During fiscal 1994, there was a net cash outflow of $7.6 million whereas in
fiscal 1993 there was a net cash inflow of $18.2 million. In addition to the
operational cash flow factors mentioned above, cash outflows in fiscal 1994 were
higher than in the prior year primarily due to the payment of $7.4 million to
acquire the E-Z Deck Wash and E-Z D brands, an increase in the dividend rate
and a reduction in the short-term payable to McKesson.
The Company's sources of liquidity at March 31, 1994 included a $22.1 million
balance under a cash management program administered by McKesson, $4.2 million
of other cash balances, and a $3.0 million (Canadian) line of credit with a
Canadian bank that is renewable annually. In addition, as long as the Company
continues to participate in the cash management program, McKesson will make
available the cash necessary to provide the Company with sufficient funds to
meet its needs as defined in its annual capital and operating plans. There are
no advance notification requirements or other limitations on the Company's
access to cash under the program. Participation in the program is provided as
part of a Services Agreement with McKesson. Amounts deposited under the cash
management program are deposited in a separate bank account in the Company's
name. In the event that the Company ceases to participate in the cash management
program, the Company believes that it would be able to obtain a line of credit
from other sources at competitive terms. At March 31, 1994, the Company had a
payable to McKesson of $1,526,000, consisting of payroll, freight and other
expenses paid by McKesson on the Company's behalf.
The Company believes that its current sources of liquidity, combined with cash
flow from operations, will be sufficient to meet its needs for the foreseeable
future.
14
<PAGE>
Armor All Products Corporation
Consolidated Balance Sheets
<TABLE>
<CAPTION>
- - - --------------------------------------------------------------------------------------
March 31 (in thousands except share and per share amounts) 1994 1993
- - - --------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Current Assets
Cash and cash equivalents $ 26,251 $ 33,858
Accounts receivable (less allowance for doubtful accounts
and cash discounts: 1994, $2,625 and 1993, $1,860) 67,963 54,074
Inventories 4,182 4,715
Deferred income taxes 765 242
Prepaid expenses 64 540
-------------------
Total Current Assets 99,225 93,429
Property - Net 8,699 8,451
Intangible Assets - Net 43,902 38,680
-------------------
Total Assets $151,826 $140,560
===================
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable $ 10,923 $ 9,433
Payable to McKesson 1,526 3,204
Accrued selling expenses 8,802 9,073
Accrued compensation 2,669 3,131
Income and other taxes payable 4,282 3,485
Dividends payable 3,386 2,527
Other liabilities 3,288 2,203
-------------------
Total Current Liabilities 34,876 33,056
-------------------
Deferred Income Taxes 921 949
-------------------
Stockholders' Equity
Preferred stock, $0.01 par value; 10,000,000 shares authorized;
no shares outstanding
Common stock, $0.01 par value; 40,000,000 shares authorized;
21,165,486 and 21,084,759 shares outstanding in 1994 and 1993 212 211
Other capital 59,323 57,968
Unearned compensation - restricted stock (1,101) (664)
Retained earnings 58,388 49,333
Cumulative translation adjustment (793) (293)
-------------------
Total Stockholders' Equity 116,029 106,555
-------------------
Total Liabilities and Stockholders' Equity $151,826 $140,560
===================
</TABLE>
See accompanying notes to consolidated financial statements.
15
<PAGE>
Armor All Products Corporation
Consolidated Statements of Income
<TABLE>
<CAPTION>
- - - --------------------------------------------------------------------------------------------
Years Ended March 31 (in thousands except per share amounts) 1994 1993 1992
- - - --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues $182,257 $168,400 $145,910
Costs and expenses
Cost of sales 74,360 68,841 59,709
Selling, general and administrative 66,950 63,670 60,465
Amortization of intangibles 2,684 3,768 4,314
----------------------------
Total costs and expenses 143,994 136,279 124,488
----------------------------
Operating income 38,263 32,121 21,422
Interest income--net 1,377 1,245 1,080
----------------------------
Income before income taxes 39,640 33,366 22,502
Income taxes 17,067 14,214 9,638
----------------------------
Net income $ 22,573 $ 19,152 $ 12,864
============================
Earnings per common share $ 1.07 $ .91 $ .61
============================
Weighted average common shares outstanding 21,121 21,024 20,953
============================
</TABLE>
See accompanying notes to consolidated financial statements.
16
<PAGE>
Armor All Products Corporation
Consolidated Statements of Stockholders' Equity
<TABLE>
<CAPTION>
- - - ----------------------------------------------------------------------------------------------------------------------------
Common Stock Unearned Total
------------------- Compensation-- Cumulative Stock-
Outstanding Other Restricted Retained Translation holders'
(in thousands except per share amounts) Shares Amount Capital Stock Earnings Adjustment Equity
- - - ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances, March 31, 1991 20,950 $209 $56,087 $ (266) $ 37,464 $(187) $ 93,307
Exercise of stock options 8 94 94
Issuance of restricted stock 17 1 182 (183) 0
Cancellation of restricted stock (3) (52) 27 (25)
Amortization of restricted stock cost 100 100
Net income 12,864 12,864
Dividends declared ($.48 per share) (10,055) (10,055)
Translation adjustment 41 41
------------------------------------------------------------------------------
Balances, March 31, 1992 20,972 210 56,311 (322) 40,273 (146) 96,326
Exercise of stock options 78 1 1,079 1,080
Issuance of restricted stock 27 472 (472) 0
Redemption of common stock (6) (6)
Amortization of restricted stock cost 130 130
Issuance of shares to profit-sharing plan 8 112 112
Net income 19,152 19,152
Dividends declared ($.48 per share) (10,092) (10,092)
Translation adjustment (147) (147)
------------------------------------------------------------------------------
Balances, March 31, 1993 21,085 211 57,968 (664) 49,333 (293) 106,555
Exercise of stock options 44 1 647 648
Issuance of restricted stock 36 704 (704) 0
Redemption of common stock (1) (27) (27)
Amortization of restricted stock cost 267 267
Issuance of shares to profit-sharing plan 1 31 31
Net income 22,573 22,573
Dividends declared ($.64 per share) (13,518) (13,518)
Translation adjustment (500) (500)
------------------------------------------------------------------------------
Balances, March 31, 1994 21,165 $212 $59,323 $(1,101) $ 58,388 $(793) $116,029
==============================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
17
<PAGE>
Armor All Products Corporation
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
- - - --------------------------------------------------------------------------------------
Years Ended March 31 (in thousands) 1994 1993 1992
- - - --------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating Activities
Net income $ 22,573 $ 19,152 $ 12,864
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 4,085 5,068 5,497
Provision for losses on receivables 578 539 385
Deferred income taxes (551) (34) (115)
------------------------------
Total 26,685 24,725 18,631
------------------------------
Effect of changes in operating assets, net
of the effects of business acquisition:
Accounts receivable (14,467) (9,305) 8,539
Inventories 595 1,959 (279)
Prepaid expenses 485 (165) 750
Accounts payable 1,474 (146) 538
Accrued selling expenses (271) 2,432 1,212
Accrued compensation (462) 1,568 964
Taxes payable and other liabilities 1,537 3,649 46
------------------------------
Total (11,109) (8) 11,770
------------------------------
Net cash provided by operating activities 15,576 24,717 30,401
------------------------------
Investing Activities
Cash paid for acquisition of
E-Z Deck Wash and E-Z D brands (7,438) - -
Capital expenditures (1,377) (679) (757)
Other (683) (199) ( 19)
------------------------------
Net cash used in investing activities (9,498) (878) (776)
------------------------------
Financing Activities
Payable to McKesson (1,678) 3,204 -
Decrease in short-term debt - - (6,549)
Issuance of common stock 652 1,186 94
Dividends paid (12,659) (10,079) (10,893)
------------------------------
Net cash used in financing activities (13,685) ( 5,689) (17,348)
------------------------------
Net increase (decrease) in cash and cash equivalents (7,607) 18,150 12,277
Cash and cash equivalents at beginning of year 33,858 15,708 3,431
------------------------------
Cash and cash equivalents at end of year $ 26,251 $ 33,858 $ 15,708
==============================
</TABLE>
See accompanying notes to consolidated financial statements.
18
<PAGE>
Armor All Products Corporation
Notes to Consolidated Financial Statements
1. Organization and Significant Accounting Policies
Basis of Presentation: The accompanying consolidated financial statements
include the accounts of Armor All Products Corporation and all of its
subsidiaries ("the Company"). All significant intercompany balances and
transactions have been eliminated.
Business: Substantially all of the Company's operations are currently in one
business segment, marketing branded consumer products primarily to retailers and
wholesalers in the automotive appearance chemical aftermarket. In January 1994,
the Company began marketing a line of branded home care products to retailers
and wholesalers.
Relationship with McKesson Corporation: Prior to May 1993, McKesson Corporation
("McKesson") owned approximately 83% of the Company's outstanding shares of
common stock. In May 1993, McKesson reduced its ownership level to approximately
57% through a sale of shares to the public. In March 1994, McKesson issued
debentures which are exchangeable into additional shares of the Company's common
stock owned by McKesson at a price of $25.94 per share at any time through
February 2004, subject to McKesson's right to pay cash equal to the market price
of the stock in lieu of making the exchange. If all such debentures were
actually exchanged, McKesson's ownership level would be reduced to approximately
25%.
Transactions with McKesson: Certain expenses, principally payroll and employee
benefits, are paid on behalf of and charged to the Company by McKesson. The
Company uses certain resources and administrative staff of McKesson, including
financial, treasury, legal, investor relations, corporate secretary, tax, audit
and accounting advice, and employee benefit, personnel and payroll services. The
Company is charged a fee for these and other services including insurance
premiums at an amount based on actual time or costs incurred. These charges,
which are included in selling, general and administrative expenses, were
$669,000, $687,000, and $648,000 in fiscal 1994, 1993 and 1992, respectively.
The Company believes that these expenses would not have been materially
different if the Company operated on a stand-alone basis. The Company also
participates in a cash management program administered by McKesson, as described
in Note 2.
Sales to divisions of McKesson were $747,000, $1,111,000 and $889,000 in fiscal
1994, 1993 and 1992, respectively.
Foreign Currency Translation: Assets and liabilities of the Company's foreign
affiliates are translated at current exchange rates, while revenue and expenses
are translated at average rates prevailing during the year. Translation
adjustments of those affiliates for which the local currency is the functional
currency are reported as a component of stockholders' equity. Translation
adjustments of affiliates for which the U.S. dollar is the functional currency
are included in net income. All gains and losses on foreign currency
transactions are also included in net income. Foreign currency exchange
fluctuations did not have a material effect on the consolidated financial
statements in fiscal 1994, 1993 or 1992.
Revenues are recognized when products are shipped to customers.
Income taxes are accounted for in accordance with Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes", which requires
the liability method of accounting for deferred taxes.
Cash equivalents include all highly liquid investments purchased with a maturity
of three months or less.
Inventories are stated at the lower of first-in, first-out cost or market.
Property is stated at cost and depreciated on the straight-line method over
estimated useful lives of 3 to 30 years.
Intangible assets include (1) goodwill from the excess of McKesson's cost of the
Company over the fair value of net assets acquired, which is being amortized
over 40 years, (2) patents, trademarks, goodwill and other intangibles arising
from the purchase of the Rain Dance, Rally and No. 7 brand product lines in
September 1988, which are being amortized over various periods ranging from 4 to
25 years, (3) patents and trademarks arising from the purchase of the E-Z Desk
Wash and E-Z D brand product lines in January 1994 (see Note 11), which are
being amortized over 15 years, and (4) other patents and trademarks that are
being amortized over various periods ranging from 5 to 20 years. Amortization of
intangible assets is recorded on a straight-line basis.
Accrued selling expenses include media advertising related to new product
introductions, cooperative advertising, volume rebates, coupon redemption
liabilities and sales commissions.
Earnings per common share are computed based on the weighted average number of
shares of common stock outstanding during the year. The dilutive effect of stock
options, which are considered to be common stock equivalents, is immaterial.
Reclassifications: Certain prior year amounts have been reclassified to conform
with the fiscal 1994 presentation.
19
<PAGE>
2. Cash Management
Pursuant to an agreement with McKesson, the Company's U.S. operations
participate daily in a cash management program administered by McKesson. Under
this arrangement, the Company invests any excess cash in the cash management
program and has access to such invested cash to fund disbursements. If the
Company needs additional cash above the amount invested, such cash requirements
are met through borrowings from McKesson. Prior to March 23, 1993, the Company
invested excess cash directly with McKesson. Commencing on March 23, 1993, all
amounts invested in the cash management program with McKesson were deposited in
a separate bank account in the Company's name, which is used by the Company for
cash management program transactions. The Company receives interest under the
program through McKesson on funds deposited in the separate bank account, or
pays interest to McKesson on funds received, at a rate equal to the monthly
Federal Reserve Composite Rate for 7-day commercial paper less 0.1% for funds
deposited under the program and plus 0.5% for funds borrowed from McKesson. The
agreement provides that McKesson will make available that amount of cash
necessary to provide the Company with sufficient funds to meet its needs as
defined in its annual capital and operating budget, and that the Company will
pay McKesson an annual credit facility fee of $25,000.
Included in cash and cash equivalents in the accompanying consolidated balance
sheets are the following amounts invested in the cash management program and
the interest rates earned thereon: $22,076,000 at 3.4% on March 31, 1994 and
$30,025,000 at 3.1% on March 31, 1993.
The payable to McKesson of $1,526,000 and $3,204,000 at March 31, 1994 and 1993,
respectively, consists of payroll, freight and other expenses paid by McKesson
on behalf of the Company. Such amounts were reimbursed to McKesson in the first
quarter of the respective subsequent fiscal years.
The Company also has a $3,000,000 (Canadian) line of credit with a Canadian bank
that is renewable annually and expires on March 31, 1995. Borrowings under this
line of credit bear interest at the Canadian prime rate (6.3% at March 31,
1994). There were no outstanding borrowings under the line of credit at March
31, 1994 or 1993.
3. Interest Income--Net
Interest income--net, which approximates interest received and paid, is
comprised of the following:
<TABLE>
<CAPTION>
- - - ----------------------------------------------------------------------------
Years Ended March 31 (in thousands) 1994 1993 1992
- - - ----------------------------------------------------------------------------
<S> <C> <C> <C>
Net interest income--McKesson
(Note 2) $1,219 $1,113 $ 764
Interest income--other 158 140 318
Interest expense--other -- (8) (2)
---------------------------
Total $1,377 $1,245 $1,080
===========================
4. Inventories
Inventories are summarized as follows:
- - - ----------------------------------------------------------------------------
March 31 (in thousands) 1994 1993
- - - ----------------------------------------------------------------------------
Finished goods $3,514 $3,837
Raw materials 668 878
-----------------
Total $4,182 $4,715
=================
5. Property
Property is summarized as follows:
- - - ----------------------------------------------------------------------------
March 31 (in thousands) 1994 1993
- - - ----------------------------------------------------------------------------
Land $ 2,439 $ 2,439
Building 3,810 3,810
Furniture and fixtures 1,684 1,636
Machinery and equipment 4,935 4,231
Leasehold improvements 78 79
------------------
Total 12,946 12,195
Accumulated depreciation (4,247) (3,744)
------------------
Property--net $ 8,699 $ 8,451
==================
6. Intangible Assets
Intangible assets consist of the following:
- - - ----------------------------------------------------------------------------
March 31 (in thousands) 1994 1993
- - - ----------------------------------------------------------------------------
Goodwill $ 43,865 $ 43,865
Patents and trademarks 20,513 12,607
Other intangibles 11,090 11,090
-------------------
Total 75,468 67,562
Accumulated amortization (31,566) (28,882)
-------------------
Intangible assets--net $ 43,902 $ 38,680
===================
</TABLE>
7. Income Taxes
Through May 12, 1993, the Company will be included in the consolidated federal
income tax returns of McKesson. On that date, as a result of the public stock
offering described in
20
<PAGE>
Note 1, McKesson's ownership of the Company fell below the 80% level required
for the Company to qualify for inclusion in such consolidated tax returns.
Accordingly, the Company will file a separate federal income tax return for the
remaining portion of fiscal 1994.
For the majority of its state income taxes, the Company continues to be included
in McKesson's combined tax returns for all of fiscal 1994. This will occur in
the tax returns related to those states where the required ownership percentage
is only 50% . The Company files separate income tax returns in other states and
in foreign countries.
The Company's aggregate income tax payments, including payments made to McKesson
and payments made directly to the applicable government taxing authorities,
amounted to $16,970,000, $13,822,000 and $10,229,000 in fiscal 1994, 1993 and
1992, respectively. Accrued income taxes owed to McKesson for the Company's
share of taxes reported on the consolidated and combined tax returns were not
significant at March 31, 1994 and amounted to $2,689,000 at March 31, 1993;
these liabilities are included in income and other taxes payable in the
accompanying consolidated balance sheets.
The Company's provisions for income taxes, which have been computed as if the
Company filed its tax returns as a separate entity in all periods, consist of
the following components:
<TABLE>
<CAPTION>
- - - ------------------------------------------------------------
Years Ended March 31 (in thousands) 1994 1993 1992
- - - ------------------------------------------------------------
<S> <C> <C> <C>
Current
Federal $13,084 $10,772 $7,813
State 2,988 2,475 1,753
Foreign 1,546 1,001 187
--------------------------
Total current 17,618 14,248 9,753
--------------------------
Deferred
Federal (457) (28) (95)
State (94) (6) (20)
--------------------------
Total deferred (551) (34) (115)
--------------------------
Total provision $17,067 $14,214 $9,638
==========================-
</TABLE>
The reconciliations between the Company's effective tax rate and the statutory
federal income tax rate follow:
<TABLE>
<CAPTION>
- - - --------------------------------------------------------------
Years Ended March 31 1994 1993 1992
- - - --------------------------------------------------------------
<S> <C> <C> <C>
Statutory federal income tax rate 35.0% 34.0% 34.0%
State income taxes, net of
federal benefit 4.8 5.0 5.1
Foreign operations 1.8 2.2 1.6
Retroactive effect of tax legislation 0.3 - -
Amortization of certain
intangible assets 1.2 1.4 2.1
-----------------------
Total 43.1% 42.6% 42.8%
=======================
</TABLE>
Deferred income taxes in the accompanying consolidated balance sheets at March
31, 1994 and 1993 are comprised of the following:
<TABLE>
<CAPTION>
- - - -----------------------------------------------
March 31 (in thousands) 1994 1993
- - - -----------------------------------------------
<S> <C> <C>
Deferred tax assets $ 1,780 $ 1,105
Deferred tax liabilities (1,936) (1,812)
-----------------
Net deferred tax liability $ (156) $ (707)
=================
Net current $ 765 $ 242
Net non-current (921) (949)
-----------------
Net deferred tax liability $ (156) $ (707)
=================
</TABLE>
Deferred tax assets consist primarily of temporary differences related to
allowances for doubtful receivables, inventory reserves, employee benefits and
accrued selling expenses. Deferred tax liabilities consist primarily of
temporary differences related to accumulated depreciation and amortization.
The Company has not provided for U.S. federal income and foreign withholding
taxes on $4,759,000 of its Canadian subsidiaries' undistributed earnings as of
March 31, 1994 because such earnings are intended to be reinvested indefinitely.
If these earnings were distributed, foreign tax credits would become available
under current U.S. law to reduce the effect on the Company's overall tax
liability.
8. Employee Benefit Plans
The Company's employees are eligible to participate in McKesson's health care,
retirement and certain other employee benefit plans. In addition, substantially
all employees are eligible to participate in the Company's profit-sharing
investment plan. The Company's contributions to the profit-sharing plan in
fiscal 1994 consisted of a cash payment and 1,637 shares of its common stock.
In fiscal 1993, the Company contributed 8,482 shares of its common stock to the
plan and in fiscal 1992 made a cash payment. Compensation expense related to the
McKesson and profit-sharing plans amounted to $879,000, $766,000 and $645,000
in fiscal 1994, 1993 and 1992, respectively.
The 1986 Stock Option Plan provides for the granting of nonqualified options to
eligible key employees and non-employee directors of the Company to purchase up
to an aggregate of 1,300,000 shares of common stock. The exercise price of the
stock covered by each option may not be less than
21
<PAGE>
85% of the fair market value of such stock on the date the option is granted.
Option information is as follows:
<TABLE>
<CAPTION>
- - - ------------------------------------------------------------------------------
Years Ended March 31 1994 1993 1992
- - - ------------------------------------------------------------------------------
<S> <C> <C> <C>
Option shares:
Outstanding at beginning of year 802,950 667,600 483,000
Granted 100,950 250,150 226,100
Exercised (44,238) (78,025) (7,775)
Cancelled (37,350) (36,775) (33,725)
------------------------------------
Outstanding at year-end 822,312 802,950 667,600
====================================
Exercisable at year-end 422,157 270,900 301,725
====================================
Available for future grants
at year--end 341,650 405,250 618,625
====================================
For outstanding options
at year--end:
Range of exercise prices $10.19- $10.19- $10.19-
$22.63 $22.63 $22.63
Aggregate exercise price $12,413,000 $11,542,000 $8,660,000
Aggregate market value $15,830,000 $15,256,000 $8,011,000
- - - ------------------------------------------------------------------------------
</TABLE>
The 1988 Restricted Stock Plan provides for the granting of up to an aggregate
of 220,000 shares of the Company's common stock to key employees. As of March
31, 1994, there were 103,150 shares which remained available for future grants.
During fiscal 1994, 1993 and 1992, respectively, 36,200, 27,000, and 17,200
common shares were granted. In connection with the granting of these shares,
unearned compensation--restricted stock was recorded in the amount of $704,000,
$472,000 and $183,000 in fiscal 1994, 1993 and 1992, respectively. These amounts
represent the fair market value of the shares on the respective dates of grant.
Recipients of restricted shares have all of the rights of common stockholders
except that the shares are held in custody by the Company and cannot be disposed
of until the restrictions have lapsed, which is generally four years after the
grant date. In addition, certain of the grants made in fiscal 1994 and all of
the grants made in fiscal year 1993 provide that the restrictions will lapse
only if specified performance goals are met during the four-year period. The
fair market value of the shares on the grant date is amortized to compensation
expense over the vesting period. If a plan participant's employment terminates
during the vesting period, except under certain specified conditions, the shares
are cancelled and any amounts previously amortized are credited to expense.
9. Geographic Segments
The Company's foreign operations consist of offices and certain other facilities
in Canada and Europe. The Company exports products from the United States to
other geographic areas, principally Australia, Japan and Mexico.
Information for the Company's geographic operations is as follows:
<TABLE>
<CAPTION>
- - - -------------------------------------------------------------------
Years Ended March 31 (in thousands) 1994 1993 1992
- - - -------------------------------------------------------------------
<S> <C> <C> <C>
Revenues
United States $156,429 $148,576 $126,639
Export 8,523 6,735 5,239
Foreign 17,305 13,089 14,032
----------------------------
Total $182,257 $168,400 $145,910
============================
Operating Income
United States and export $ 35,053 $ 30,615 $ 20,736
Foreign 3,210 1,506 686
----------------------------
Total $ 38,263 $ 32,121 $ 21,422
============================
Identifiable Assets at Year-End
United States and export $141,108 $131,265 $108,521
Foreign 10,718 9,295 11,302
----------------------------
Total $151,826 $140,560 $119,823
============================
</TABLE>
Sales to the Company's two largest customers accounted for the following
percentages of consolidated revenues: 17% and 8% in fiscal 1994, 15% and 11% in
fiscal 1993, and 12% and 11% in fiscal 1992.
22
<PAGE>
10. Commitments
In addition to commitments and obligations which arise in the ordinary course of
business, the Company is subject to various claims, proceedings, tax assessments
and legal actions from time to time arising out of the conduct of the Company's
business. Management believes that, based on current knowledge, the outcome of
any such pending matters will not have a material adverse effect on the
Company's financial position.
The Company leases equipment and certain warehouse, laboratory and office
facilities under operating leases that expire on various dates through March
1997. Rent expense included in operations, which primarily consists of
contingent rental payments based on the number of cases stored at independent
warehouses, was $983,000, $990,000, and $1,494,000 in fiscal 1994, 1993 and
1992, respectively. As of March 31, 1994, minimum lease payments under operating
leases with remaining noncancellable lease terms in excess of one year were as
follows: $287,000 in fiscal 1995, $262,000 in fiscal 1996, and $155,000 in
fiscal 1997.
11. Acquisition of E-Z Deck Wash and E-Z D Brands
On January 28, 1994, the Company purchased the E-Z Deck Wash and E-Z D brands
of home care products for $7,598,000, of which $7,438,000 was paid in cash and
$160,000 is payable in July 1994, subject to the resolution of certain
contingencies. This acquisition was accounted for using the purchase method.
Substantially all of the cost was allocated to patents and trademarks, with a
minor amount assigned to inventory and various other assets and liabilities. Had
this business been acquired at the beginning of fiscal 1993, the pro-forma
inclusion of its operating results would not have had a significant effect on
the reported consolidated revenues and net income in either fiscal 1993 or 1994.
<TABLE>
<CAPTION>
12. Quarterly Financial Information (unaudited)
- - - ---------------------------------------------------------------------------------------------------------------------------------
First Second Third Fourth
Years Ended March 31 (in thousands except per share amounts) Quarter Quarter Quarter Quarter Year
- - - ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1994
Revenues $47,722 $36,232 $33,407 $64,896 $182,257
Gross profit 28,469 21,260 19,537 38,631 107,897
Net income 5,456 4,030 3,622 9,465 22,573
Earnings per common share $ .26 $ .19 $ .17 $ .45 $ 1.07
Cash dividends per common share $ .16 $ .16 $ .16 $ .16 $ .64
Market prices per common share
High $18-3/4 $19-1/4 $20-1/2 $21-3/4 $ 21-3/4
Low 15 16-1/2 16-1/2 18-3/4 15
=================================================================================================================================
1993
Revenues $42,288 $35,198 $30,927 $59,987 $168,400
Gross profit 25,078 20,863 17,982 35,636 99,559
Net income 4,434 3,547 3,141 8,030 19,152
Earnings per common share $ .21 $ .17 $ .15 $ .38 $ .91
Cash dividends per common share $ .12 $ .12 $ .12 $ .12 $ .48
Market prices per common share
High $16-5/8 $17-3/4 $ 21 $19 $ 21
Low 11 11-1/2 12 16-1/4 11
- - - ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Due to the seasonal nature of the Company's business, revenues, gross profit and
net income are not generated evenly by quarter during the year. Sales activity
generally peaks in the fourth quarter of the fiscal year.
23
<PAGE>
Independent Auditors' Report
To the Board of Directors and Stockholders of
Armor All Products Corporation:
We have audited the accompanying consolidated balance sheets of Armor All
Products Corporation and subsidiaries as of March 31, 1994 and 1993, and the
related consolidated statements of income, stockholders' equity and cash flows
for each of the three years in the period ended March 31, 1994. These
consolidated financial statements are the responsibility of the Corporation's
management. Our responsibility is to express an opinion on these consolidated
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, such consolidated financial statements present fairly, in all
material respects, the financial position of Armor All Products Corporation and
subsidiaries as of March 31, 1994 and 1993, and the results of their operations
and their cash flows for each of the three years in the period ended March 31,
1994, in conformity with generally accepted accounting principles.
/s/ Deloitte & Touche
DELOITTE & TOUCHE
Costa Mesa, California [LOGO OF DELOITTE & TOUCHE]
April 22, 1994
Management's Responsibility for Financial Statements
Armor All Products Corporation is responsible for the preparation and accuracy
of the financial statements and other information included in this report. The
financial statements have been prepared in conformity with generally accepted
accounting principles using, where appropriate, management's best estimates and
judgments.
In meeting its responsibility for the reliability of the financial statements,
management has developed and relies on the Company's system of internal
accounting control. The system is designed to provide reasonable assurance that
assets are safeguarded and that transactions are executed as authorized and are
properly recorded. The system is augmented by written policies and procedures.
The Board of Directors reviews the financial statements and reporting practices
of the Company through its Audit Committee. The Committee meets regularly with
the independent auditors, internal auditors and management to discuss audit
scope and results and to consider internal control and financial reporting
matters. Both the independent and internal auditors have unrestricted access to
the Audit Committee.
/s/ Kenneth M. Evans /s/ Mervyn J. McCulloch
Kenneth M. Evans Mervyn J. McCulloch
President and Chief Executive Officer Executive Vice President and Chief
Financial Officer
24
<PAGE>
GRAPHICS APPENDIX LIST
PAGE WHERE DESCRIPTION OF GRAPHIC OR CROSS-REFERENCE
GRAPHIC
APPEARS
================================================================================
Armor All Form 10-K Four graphs appear illustrating the results shown in the
Exhibit (13)-p. 1 table above for each of: Revenues; Earnings Per Share;
Net Income; and Return on Equity, for the 3 fiscal years
1992, 1993 and 1994.
<PAGE>
EXHIBIT (21)
SUBSIDIARIES OF THE REGISTRANT
The parent of the Company is a wholly-owned subsidiary of McKesson
Corporation. The following is a listing of the significant subsidiaries of the
Company:
Jurisdiction of
Organization
---------------
Armor All Products GmbH. . . . . . . . . . . . . . . . . .Germany
Armor All Products of Canada, Inc. . . . . . . . . . . . . Canada
<PAGE>
EXHIBIT (23)
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement No. 33-
52075-01 of Armor All Products Corporation on Form S-3 and Registration
Statement Nos. 33-16181, 33-33096 and 33-43987 of Armor All Products
Corporation on Form S-8, and of our reports dated April 22, 1994, appearing in
and incorporated by reference in this Annual Report on Form 10-K of Armor All
Products Corporation for the year ended March 31, 1994.
DELOITTE & TOUCHE
Costa Mesa, California
June 17, 1994
