<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, 1995 OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the transition period from to ____________________ 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. [X]
Aggregate market value of voting stock held by nonaffiliates of the Registrant
at June 1, 1995: $175,509,674
Number of shares of common stock outstanding at June 1, 1995: 21,274,635
Documents Incorporated by Reference
Portions of the Registrant's Annual Report to Stockholders for the fiscal year
ended March 31, 1995 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 31, 1995 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............................................. 5
3. Legal Proceedings...................................... 5
4. Submission of Matters to a Vote of Security Holders.... 5
Executive Officers of the Registrant................... 6
PART II
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5. Market for the Registrant's Common Stock and
Related Stockholder Matters.......................... 7
6. Selected Financial Data................................ 7
7. Management's Discussion and Analysis of
Financial Condition and Results of Operations........ 7
8. Financial Statements and Supplementary Data............ 7
9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure............... 7
PART III
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10. Directors and Executive Officers of the Registrant.... 8
11. Executive Compensation................................ 8
12. Security Ownership of Certain Beneficial Owners
and Management...................................... 8
13. Certain Relationships and Related Transactions........ 8
PART IV
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14. Exhibits, Financial Statement Schedules, and Reports
on Form 8-K............................................ 9
Signatures............................................... 10
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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 and home care markets. The Company
also sells certain of its automotive products to car wash operators and other
industrial users.
The Company's majority shareholder is McKesson Corporation ("McKesson").
Prior to May 1993, 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. McKesson subsequently
reduced its ownership level to approximately 55% through a donation of shares to
a charitable foundation. In addition, McKesson has outstanding debentures which
are exchangeable into 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 22%.
Products
The Company develops and markets a broad line of automotive appearance
chemicals under five brand names: Armor All/(R)/, Rain Dance/(R)/, Rally/(R)/,
No. 7/(R)/ and Wax Pax /TM/. The Company also markets home care products under
the Armor All/(R)/ and E-Z Deck Wash/(R)/ brand names.
Automotive Brands
The Company develops and markets protectants, washes and other cleaning
aids under the Armor All/(R)/ 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, vinyl tops, door panels, tire sidewalls and rubber bumpers. In
December 1993, the Company introduced Armor All/(R)/Protectant Low-Gloss Natural
Finish, a low-gloss version of Armor All Protectant designed to minimize
dashboard glare for consumers who prefer a less shiny appearance. Sales of Armor
All Protectant, including the low-gloss version, accounted for 59% and 68% of
the Company's revenues in fiscal 1995 and 1994, 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 to clean and protect leather upholstery. In December 1993, the
Company introduced 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. The Company also markets a
multi-purpose cleaner and a car wash liquid concentrate under the Armor All
name.
The Company markets polishes, paste and liquid waxes, and car wash
products under the Rain Dance name and paste 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. In December 1994, the Company
introduced Wax Pax/TM/ Instant Car Wax, an automotive wax that is applied as
the car is being washed.
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Home Care Brands
The Company entered the home care market in January 1994 with the
acquisition of the E-Z Deck Wash/(R)/ and E-Z D/TM/ brands. The E-Z Deck Wash
product is designed to clean and restore wood surfaces, such as patio decks,
siding and fences. The acquired E-Z D brand products include a vinyl wash, a
paint preparation treatment and a roof wash. The E-Z Deck Wash and E-Z D
products are now being marketed under the Armor All name.
In September 1994, the Company began marketing a vinyl and plastic
protectant for home use and a companion multi-purpose cleaner under the Armor
All name.
In February 1995, the Company introduced three new products under the Armor
All name. Armor All/(R)/ Deck Protector Waterproofing Sealer is designed to
restore the natural luster and sheen of wood and protects against water damage
on wood. Armor All/(R)/ Water Proofing Sealer can be used to protect against
water damage on most porous surfaces, including wood, brick, concrete, stucco
and masonry. Armor All/(R)/ Vinyl Siding Wash is designed to remove stains
caused by mold and mildew from vinyl siding without leaving a film.
Geographic Markets
The Company's products are sold predominantly in the United States and
Canada, with additional sales occurring in approximately 70 other countries. In
fiscal 1995, 87% of sales were in the United States, 5% 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 1995. In addition, the Company's sales force oversees 18 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 5 employees
oversees 17 manufacturers' representative organizations that market the
Company's products. Primary customers include home centers, do-it-yourself
warehouses, 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 72%, 65%
and 63% of the Company's consolidated revenues in fiscal 1995, 1994 and 1993,
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: 20% and 10%
in fiscal 1995, 17% and 8% in fiscal 1994, and 15% and 11% in fiscal 1993.
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 time-sensitive promotions.
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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 four 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.
Retail sales of the Company's products are seasonal and are highest between
April and September. However, sales to the Company's trade 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 has 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 Hong Kong under a
separate agreement that does not involve profit or loss sharing.
Manufacturing and Packaging
The Company's products are manufactured in six principal locations in the
United States, one location in Canada and one location in Australia. Protectants
are manufactured at four of these locations, aerosol products at one location,
waxes at one location and home care products at two locations. Management
believes that the existing packagers can accommodate the Company's production
needs for the foreseeable future.
The Company's products are manufactured by contract packagers. The
Company's relationships with its three most important automotive packagers have
lasted for 7, 10 and 22 years. Subject to contractual arrangements, the Company
periodically re-evaluates its selection of packagers and believes that other
acceptable packagers are readily available.
Products which comprise a majority of the Company's sales volume are
manufactured under full-service packaging agreements. 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 packagers.
For most of its other products, the Company purchases finished goods from
the contract packagers and warehouses them until shipment to a customer.
During fiscal year 1995, the Company reduced the percentage of its volume
which is manufactured under full-service arrangements. This reduction resulted
primarily from (a) the addition of several new products which are manufactured
by packagers other than those which serve as distribution centers and (b) a
change in certain packaging and distribution sites to achieve production and
operational efficiencies. The Company expects to maintain a mix of full-service
and other packaging arrangements in the future based on consideration of
production and transportation costs, unique manufacturing requirements and other
factors.
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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.
Trademarks and Patents
The Company's principal trademarks are:
. ARMOR ALL(R)
. Symbol of a male VIKING figure
. RAIN DANCE(R)
. RALLY(R)
. NO. 7(R)
. TIRE FOAM(R)
. QUICKSILVER/TM/
. SPOT & WASH(R)
. WAX PAX/TM/
. 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.
The Company 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, ARMOR ALL Spot & Wash Concentrate, WAX PAX Instant Car Wax and ARMOR
ALL Vinyl Siding Wash. The Company also owns a patent on an E-Z DECK WASH
product and has other domestic and foreign E-Z DECK WASH patents pending. In
addition, the Company has the exclusive right to use a supplier's patented
formula to produce ARMOR ALL Deck Protector. 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 material 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)/ Protectant. Armor All Tire Foam Protectant has four principal
competitors and Armor All QuickSilver Wheel Cleaner has three principal
competitors. Armor All brand cleaner competes against many specialty automotive
cleaner products. Armor All brand wash products and all of the Rain Dance, Rally
and Wax Pax 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 brand
product has two principal competitors, Thompson's/(R)/ Deck Wash and
Olympic/(R)/ Deck Cleaner and several secondary competitors. Armor All Deck
Protector and Water Proofing Sealer each compete against products marketed under
the Thompson's, Olympic and Behr brand names. There are no products directly
competitive to Armor All Vinyl Siding Wash.
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Employees
At March 31, 1995, the Company employed 143 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 space in various public warehouses in the
United States and abroad for temporary inventory storage and shipping.
The Company maintains automotive sales offices in Canada and the
United Kingdom, each with less than 2,000 square feet. It conducts its
principal automotive 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 conducts its principal home care marketing, sales and
research and development activities at two leased facilities in South Carolina
which aggregate less than 5,000 square feet. The Company plans to move its home
care division to larger leased facilities in South Carolina, aggregating less
than 15,000 square feet, during fiscal 1996.
The Company believes that the aforementioned 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,
employment claims 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.
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, 1995.
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Executive Officers of the Registrant
The following table sets forth information concerning the executive
officers of the Registrant as of June 1, 1995.
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.
Name Age Position with Registrant and Business Experience
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David E. McDowell 52 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 - 3 years.
Kenneth M. Evans 53 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 - 4 years.
Michael A. Caron 44 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 and Senior Vice President,
Marketing/International Operations from April 1989
to October 1991. Service with the Company - 10
years.
Steven L. Kliff 37 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 - 4 years.
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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 1995 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, 1995 was 315. The estimated number of beneficial holders was
1,800.
(c) Dividends
Dividend information is included in financial note 12, "Quarterly
Financial Information" (unaudited) on page 23 of the 1995 Annual Report to
Stockholders, which information is incorporated by reference.
ITEM 6. SELECTED FINANCIAL DATA
Selected financial data appears on page 1 of the 1995 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 1995 Annual Report to Stockholders, which information is incorporated
by reference.
Recent Developments
- -------------------
Revenues in the first quarter of fiscal 1996 are expected to be below
last year's first quarter revenues due to a decline in automotive division
shipments. Unusually wet and cool spring weather conditions have contributed to
lower consumer spending in the entire automotive appearance chemical category at
the retail level in many parts of the country. In addition, a change in the
purchasing policy of a major customer of the Company, intended to reduce
system-wide inventories, has further dampened first quarter sales. First quarter
profit margins will be lower due to product mix changes, with a greater
proportion of revenues coming from new products, and the absorption of fixed
costs over lower volume. The combination of these factors is expected to have an
adverse impact on earnings in the first quarter.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Financial statements appear on pages 15 to 23 of the 1995 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 1995 Proxy Statement. Certain information
relating to Executive Officers of the Company appears on page 6 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 Registrant's 1995 Proxy
Statement.
ITEM 11. EXECUTIVE COMPENSATION
Information with respect to this item is incorporated by reference from
the Registrant's 1995 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 1995 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 1995 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
1995 Annual Report to Stockholders and are incorporated by reference.
<TABLE>
<CAPTION>
Annual Report
Page
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<S> <C>
Consolidated Financial Statements
Consolidated Balance Sheets at March 31, 1995 and 1994 15
Consolidated Statements of Income for the years
ended March 31, 1995, 1994 and 1993 16
Consolidated Statements of Stockholders' Equity
for the years ended March 31, 1995, 1994 and 1993 17
Consolidated Statements of Cash Flows for the years
ended March 31, 1995, 1994 and 1993 18
Notes to Consolidated Financial Statements 19
Independent Auditors' Report 24
The following are included herein: 10-K Page
-----------
Independent Auditors' Report 11
Consolidated Supplementary Financial
Schedules for the years ended March 31, 1995,
1994 and 1993
II. Valuation and Qualifying Accounts and Reserves 12
</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 13 and 14.
The following exhibits listed on the Exhibit Index are included herein:
(3)B By-Laws of the Company as amended through July 22, 1994.
(10)L Armor All Products Corporation 1988 Long Term Incentive Plan as
amended through December 1, 1994.
(10)R Separation Agreement dated February 13, 1995 between the Company and
its former Executive Vice President and Chief Financial Officer.
(13) Portions of the Company's Annual Report to Stockholders for the
fiscal year ended March 31, 1995.
(21) Subsidiaries of the Registrant.
(23) Independent Auditors' Consent.
(27) Financial Data Schedule
(b) Reports on Form 8-K
There were no reports filed on Form 8-K during the quarter ended March 31,
1995.
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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 16, 1995
-------------
By /s/Kenneth M.Evans
-------------------------------------
Kenneth M. Evans
President and Chief Executive Officer
By /s/Mark D. Krikorian
-------------------------------------
Mark D. Krikorian
Vice President and Controller
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below on May 16, 1995 by the following persons on behalf
of the Registrant and in the capacities indicated.
/s/William A. Armstrong
- ------------------------ ---------------------------------------
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/Alan Seelenfreund
- ------------------- ----------------------------------------
Kenneth M. Evans, President and Chief Alan Seelenfreund, Director
Executive Officer and Director
/s/David L. Mahoney
- -------------------
David L. Mahoney, Director
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INDEPENDENT AUDITORS' REPORT
To the Board of Directors 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, 1995 and 1994, and for each of
the three years in the period ended March 31, 1995 and have issued our report
thereon dated April 20, 1995; such consolidated financial statements and
report are included in your 1995 Annual Report to Stockholders and are
incorporated herein by reference. Our audits also included the consolidated
financial statement schedule of Armor All Products Corporation, listed in
Item 14(a). This consolidated financial statement schedule is 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 schedule, when considered in relation to the basic
consolidated financial statements, taken as a whole, presents fairly, in all
material respects, the information set forth therein.
/s/ Deloitte & Touche
DELOITTE & TOUCHE LLP
Costa Mesa, California
April 20, 1995
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Schedule II
ARMOR ALL PRODUCTS CORPORATION
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FOR THE YEARS ENDED MARCH 31, 1995, 1994 AND 1993
(in thousands)
<TABLE>
<CAPTION>
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Column A Column B Column C Column D Column E
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Additions Reductions
--------- ----------
Accounts
Balance at Charged to Written Off, Balance
Beginning Revenues Net of at End
Description of Year and Expenses Recoveries of Year
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<S> <C> <C> <C> <C>
Year Ended March 31, 1995
- ---------------------------
Reserves for:
Doubtful accounts
and cash discounts* $2,625 $3,555 $(3,839) $2,341
Year Ended March 31, 1994
- -------------------------
Reserves for:
Doubtful accounts
and cash discounts* 1,860 3,558 (2,793) 2,625
Year Ended March 31, 1993
- -------------------------
Reserves for:
Doubtful accounts
and cash discounts* 1,648 3,410 (3,198) 1,860
</TABLE>
* Included as a reduction of Accounts Receivable in the consolidated
balance sheets.
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EXHIBIT INDEX
Exhibit
Number Description
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(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 July 22, 1994.
(10)A* Services Agreement dated as of July 1, 1986 between the
Company and McKesson, as amended through March 23, 1993.
(Exhibit (10)A to Form 10-K Report for the fiscal year ended
March 31, 1994).
(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.
(Exhibit (10)E to Form 10-K Report for the fiscal year
ended March 31, 1994).
(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).
* Document has heretofore been filed with the Commission and is incorporated
by reference and made a part hereof.
-13-
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
------ ----------------------------------------------------------
(10)L Armor All Products Corporation 1988 Long-Term Incentive
Plan as amended through December 1, 1994.
(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. (Exhibit (10)N to
Form 10-K Report for the fiscal year ended March 31, 1994).
(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).
(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).
(Exhibit (10)P to Form 10-K Report for the fiscal year ended
March 31, 1994).
(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). (Exhibit (10)
Q to Form 10-K Report for the fiscal year ended March 31,
1994).
(10)R Separation Agreement dated February 13, 1995 between the
Company and its former Executive Vice President and Chief
Financial Officer.
(13) Portions of the Company's Annual Report to Stockholders for
the fiscal year ended March 31, 1995.
(21) Subsidiaries of the Registrant.
(23) Independent Auditors' Consent.
(27) Financial Data Schedule
* Document has heretofore been filed with the Commission and is incorporated by
reference and made a part hereof.
-14-
<PAGE>
EXECUTIVE COMPENSATION PLANS AND ARRANGEMENTS
---------------------------------------------
1. 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.
2. Armor All Products Corporation Deferred Compensation Administration Plan -
Exhibit (19)C to Form 10-Q Report for the quarter ended December 31, 1987.
3. 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.
4. Armor All Products Corporation 1988 Long-Term Incentive Plan as amended
through December 1, 1994 -Exhibit (10)L to Form 10-K Report for the fiscal
year ended March 31, 1995.
5. 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.
6. 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.
7. 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.
8. 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.
9. 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.
-15-
<PAGE>
Exhibit (3)B
BYLAWS
OF
ARMOR ALL PRODUCTS CORPORATION
a Delaware Corporation
(as amended through July 22, 1994)
<PAGE>
TABLE OF CONTENTS
ARMOR ALL PRODUCTS CORPORATION
BYLAWS
<TABLE>
<C> <S> <C>
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
</TABLE>
<PAGE>
<TABLE>
<C> <S> <C>
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
</TABLE>
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.
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
<PAGE>
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 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.
2
<PAGE>
(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.
(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
3
<PAGE>
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.
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
4
<PAGE>
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 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
5
<PAGE>
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 seven (7). 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 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
6
<PAGE>
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 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.
7
<PAGE>
(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 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
8
<PAGE>
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 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.
9
<PAGE>
(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 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.
10
<PAGE>
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.
(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.
11
<PAGE>
(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 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
12
<PAGE>
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.
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,
13
<PAGE>
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 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
14
<PAGE>
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.
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
15
<PAGE>
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.
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
16
<PAGE>
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 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
17
<PAGE>
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.
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
18
<PAGE>
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 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.
19
<PAGE>
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.
20
<PAGE>
Exhibit (10)L
1988 LONG-TERM INCENTIVE PLAN
OF ARMOR ALL PRODUCTS CORPORATION
(Effective as of April 1, 1988, as amended through
December 1, 1994)
1. Name and Purpose.
The name of this plan is the Armor All Products Corporation Long-Term
Incentive Plan (the "Plan"). Its purpose is to advance and promote the
interests of the stockholders of Armor All Products Corporation, a Delaware
corporation (the "Company"), by attracting and retaining key officers who strive
for excellence, and to motivate those key officers to set and achieve above-
average financial objectives by providing competitive compensation for those who
contribute most to the operating progress and earning power of the Company, its
subsidiaries and affiliates.
2. Regulations.
The Board of Directors of the Company shall have the power to adopt
eligibility and other rules and regulations (the "Regulations") not inconsistent
with the provisions of the Plan for the administration thereof, and to alter,
amend or revoke any Regulations so adopted.
3. Administration of the Plan.
The Plan shall be administered by a committee (the "Committee")
consisting of at least three directors of the Company, to be appointed by the
Board of Directors. No member of the Committee shall be eligible to participate
in the benefits of the Plan. The Committee shall have full power and authority
to interpret, construe and administer the Plan in accordance with the
Regulations as delegated by the Board of Directors. All decisions,
determinations and interpretations of the Committee shall be final and binding
on all Plan participants.
4. Eligibility.
Participation in the Plan shall be limited to those full-time, salaried key
officers of the Company, its subsidiaries and affiliates who are selected from
time to time by the Committee in accordance with the Regulations. Participants
in the Plan shall have agreed not to disclose any trade secret data or any other
confidential information of the Company acquired by the participant during such
participant's employment by the Company or one of its subsidiaries or
affiliates, or after the termination of employment or retirement. Participants
in the Plan are also eligible to
<PAGE>
participate in any other incentive plan of the Company. Participation in the
Plan during any incentive period does not entitle a participant to be included
as a participant during any subsequent incentive period nor does participation
affect any right of the Company, or any subsidiaries or affiliates, to
terminate, with or without cause, the participant's employment at any time.
5. Calculation of Awards.
The Plan is designed to reward participants with annual benefits which
reflect the performance level of the Company over an incentive period. Each
incentive period shall be a three (3) year period, with a new incentive period
beginning each year. Target awards, expressed as a percentage of each
participant's base salary, shall be established at the beginning of each
incentive period. At the end of an incentive period, target awards may be
adjusted upward or downward based upon the performance level of the Company.
The Company's performance over an incentive period will be measured by the
following formula:
Profit Before Tax plus Amortization Expense in excess of 25% of Return
on Assets Employed
The award amount actually paid to a participant for an incentive period
will range between 0% and 150% of his or her target award. At the beginning of
each incentive period, the Compensation Committee will determine the minimum
Company performance level which must be achieved in order for a participant to
receive an award.
In no event shall the amount actually paid to a participant pursuant to an
award during any incentive period exceed 125% of the participant's base salary
as of the beginning of the incentive period.
Notwithstanding anything in this Plan to the contrary, the period beginning
April 1, 1993 and ending March 31, 1996 (the "Special Incentive Period") shall
constitute an incentive period for all purposes of this Plan. The target awards
for the Special Incentive Period shall be 25% of base salary for the President
and CEO of the Company, and 20% of base salary for the Vice Presidents of the
Company. The Company's performance over the Special Incentive Period shall be
determined according to the same formula set forth above as applicable to other
incentive periods. The minimum Company performance levels which must be
achieved with respect to the Special Incentive Period shall be those established
by the board of directors of the Company at its meeting on December 1, 1994.
<PAGE>
6. Payment of Awards.
All awards to participants pursuant to the Plan shall be paid in cash,
provided, however, that, at the participant's election, receipt of all or part
of an award may be deferred by having the same paid into the Company's Deferred
Compensation Administration Plan under the Regulations.
Notwithstanding anything in this Plan to the contrary, awards to
participants pursuant to the Plan with respect to the Special Incentive Period
shall be paid 50% in cash, in accordance with the terms of the Plan, and 50% in
a Restricted Stock Grant made under the Company's 1988 Restricted Stock Plan.
Restrictions on such Grant shall lapse at a rate of one-third (33.33%) on each
of the first three anniversaries of the Grant.
A participant shall have no right to receive payment of any award unless he
or she has been in the continuous employ of the Company or one of its
subsidiaries or affiliates throughout a given incentive period, except in the
case of death, retirement or total disability, as those terms are defined in the
McKesson Corporation Retirement and Long-Term Disability Plans. In the event of
a participant's death, retirement or total disability prior to the end of a
given incentive period, the Committee may, in its sole and absolute discretion,
prorate the award which the participant would otherwise have received for such
period, according to the fraction of the incentive period during which he or she
remained employed.
In the event of a change in control of the Company or its parent, McKesson
Corporation (each of which is referred to herein as "Company"), the Committee
shall prorate and pay the award which the participant would otherwise have
received for such period, according to the fraction of the incentive period
prior to the happening of such event.
For purposes of this Plan, a Change in Control shall occur if any of the
following occurs:
(a) any "person" (as defined in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934 (the "Act")) (other than McKesson Corporation)
shall become the "beneficial owner" (as defined in Rule 13d-3 under the 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;
(b) there shall be consummated:
(i) any consolidation or merger of the Company in which the
Company is not the continuing or surviving corporation or
pursuant to which shares of the Company's stock would be
converted into cash, securities or other property, other
than a merger of the Company in which the holders of the
Company's stock
<PAGE>
immediately prior to the merger have the same proportionate
ownership of common stock of the surviving corporation
immediately after the merger, or
(ii) any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all, or
substantially all, of the assets of the Company;
(c) the stockholders of the Company approve a plan or proposal for
the liquidation or dissolution of the Company; or
(d) during any period of two consecutive years, individuals who at
the beginning of such period constitute the board of directors and any new
director 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.
Provided, however, that none of the foregoing events shall be deemed to be
a Change in Control if the event or events shall have been determined by the
affirmative vote of at least a majority of the members of the board of directors
in office immediately prior to such event or events not to be a Change in
Control for purposes of the Plan.
7. Transferability.
Awards made pursuant to the Plan are not transferable or assignable by the
participant other than by will or the laws of descent and distribution, and
payment thereunder during the participant's lifetime shall be made only to the
participant or to the guardian or legal representative of a participant.
Payments which are due to a deceased participant pursuant to the Plan shall be
paid to the person or persons to whom such right to payment shall have been
transferred by will or the laws of descent and distribution.
8. Withholding Taxes.
Whenever the payment of an award is made, such payment shall be net of an
amount sufficient to satisfy federal, state and local withholding tax
requirements and authorized deductions.
<PAGE>
9. Funding.
No provision of the Plan, or Regulations adopted hereunder, shall require
the Company, for the purpose of satisfying any obligations under the Plan, to
purchase assets or segregate or place any assets in a trust or other entity to
which contributions are made.
10. Amendment and Construction.
The Plan may be amended or revised by the Board of Directors of the Company
by the affirmative vote of a majority of the directors in office. Any amendment
to or revision of the Plan made by the Board of Directors may be altered,
changed or repealed by the stockholders of the Company.
11. Effective Date and Termination.
The Plan shall become effective as of April 1, 1988. No incentive period
under the Plan may commence subsequent to March 31, 1998 (the termination date);
provided, however, that the Plan may be sooner terminated by resolution of the
Board of Directors of the Company by the affirmative vote of a majority of the
directors in office. Such termination shall not affect any incentive award
which shall have been granted prior to such termination.
<PAGE>
Exhibit (10)R
SEPARATION AND GENERAL RELEASE AGREEMENT
This Separation and General Release Agreement (the "Agreement") is entered
into as of February 13, 1995, by and between Mervyn J. McCulloch ("Executive"),
an individual, and Armor All Products Corporation, a Delaware corporation (the
"Company").
In consideration of the covenants undertaken and the release contained in
this Separation Agreement and for other good and valuable consideration,
Executive and the Company agree as follows:
1. Termination of Employment.
-------------------------
Executive's employment with the Company will terminate effective January
31, 1995, (the "Separation Date"). As of that date, except as expressly
provided herein, all compensation, benefit coverage and other perquisites
of employment will cease.
2. Separation Payments and Settlement Payments.
-------------------------------------------
Executive asserts claims for personal injuries and emotional distress which
the Company denies. Without admitting liability, any wrongdoing or fault,
Company agrees to make the following payments:
a. For a period of three months from the Separation Date,
Executive will receive Separation Payments equal to his regular bi-weekly
salary of $7,134.62, on the Company's usual payroll dates, less applicable
federal and state withholding and other payroll taxes and deductions.
-1-
<PAGE>
b. In full and final settlement of all Executive's alleged
personal injury and emotional distress claims against the Company and
allocable solely to such personal injury and emotional distress claims, and
in consideration of the general release in favor of the Company and
McKesson Corporation given herein, Company agrees to make Settlement
Payments to Executive in the gross amount of $210,000.00. $70,000.00 of
such amount shall be payable in a lump sum as soon as practicable following
the execution of this Separation Agreement. The remaining $140,000.00
shall be payable in four quarterly installments of $35,000.00, subject to
the following. Executive shall receive the first two installments on or
about April 30, 1995, and July 31, 1995, respectively. Thereafter,
Executive shall receive the remaining two installments on or about October
31, 1995, and January 31, 1996, respectively; provided, however, that such
-------- -------
remaining two installments shall be reduced by any salary, bonus,
commissions or other compensation received by Executive from any other
employer during the preceding quarter. No withholding or other taxes or
other deductions shall be paid from such Settlement Payments and no IRS
Form W-2, 1099 or other tax reporting form or filing shall be made with
respect to such amounts.
3. Tax Liability.
-------------
Executive agrees and covenants to be fully responsible for and to pay any
and all taxes that may become due and owing
-2-
<PAGE>
on the Settlement Payments described in paragraph 2. Should any
governmental entity make any claim or assessment against Company for any
amount the entity contends should have been deducted from these payments or
paid as tax on these payments, including but not limited to, any deductions
under FICA (Social Security), federal unemployment tax, federal
withholding, or any other law, state or federal, requiring deductions from
the payment of wages, (but not including the employer portion of such
taxes), Executive expressly agrees to fully indemnify and hold harmless
Company from any such amount and any costs, assessments, fines, penalties,
interest, additions to tax, attorneys' fees or other damages or expenses
incurred by Company in connection with such claim or assessment.
4. Short-Term Incentive Plan Award.
-------------------------------
Executive shall receive the cash equivalent of an award under the Company's
1989 Short-Term Incentive Plan ("STIP") for the fiscal year ending March
31, 1995, in the amount of $64,925.00. Such payment shall be made as soon
as practicable following the execution of this Separation Agreement.
5. Long-Term Incentive Plan Award.
------------------------------
Executive shall receive the cash equivalent of an award under the Company's
1988 Long-Term Incentive Plan ("LTIP") for the three-year incentive period
ending March 31, 1995, in the amount of $53,125.00. Such payment shall be
made as
-3-
<PAGE>
soon as practicable following the execution of this Separation Agreement.
6. Benefits Coverage.
-----------------
Effective on the day after the Separation Date, Executive's present medical
coverage under the McKesson Corporation Health Plan will cease and
Executive will be given an opportunity to elect continuation coverage in
accordance with applicable law. Provided that Executive elects
continuation coverage, Company will pay the premiums for such coverage
until the earlier of January 31, 1996, or the date on which Executive
obtains coverage through a successor employer. Executive shall also
receive any accrued vacation pay as of the Separation Date. Executive
shall be entitled to receive any fully vested benefits in accordance with
the terms of the McKesson Corporation Retirement Plan, the Company and
McKesson Corporation Profit-Sharing Investment Plans ("PSIPs"), the
Supplemental PSIP, and any other deferred compensation plan in which
Executive participated prior to the Separation Date. Executive will not be
a participant in, or otherwise be entitled to coverage or benefits under,
the Company's or McKesson Corporation's disability plans, Life Insurance
Plan, PSIPs or Supplemental PSIP, Retirement Plan, STIP, LTIP, or any other
benefit plan or policy provision at any time subsequent to the Separation
Date, and his accrual and coverage under all other Company and McKesson
plans and policies shall cease as of the
-4-
<PAGE>
Separation Date, except as expressly enumerated in this Separation
Agreement.
7. Stock Options.
-------------
Executive presently holds options to purchase shares of Company common
stock under the Company's 1986 Stock Option Plan. A complete and accurate
summary of the options currently held by Executive is attached hereto and
designated as Attachment A. Company will recommend to the Compensation
Committee of its Board of Directors that Executive be granted an extension
of time until February 21, 1995, within which to exercise those options
that are vested as of his Separation Date.
8. Restricted Stock.
----------------
Executive presently holds shares of restricted stock granted to him under
the Company's 1988 Restricted Stock Plan. A complete and accurate summary
of Executive's Restricted Stock Grants is attached hereto and designated as
Attachment B. Company will recommend to the Compensation Committee of its
Board of Directors that Executive's rights with respect to the Restricted
Stock Grant made on February 21, 1991, not be terminated as of the
Separation Date, but that Executive continue to be the owner of the shares
until the restrictions on such shares lapse on February 21, 1995.
Executive's rights with respect to all other Restricted Stock Grants shall
terminate as of the Separation Date.
-5-
<PAGE>
9. Payments to Spouse.
------------------
In the event of Executive's death during the term of this Separation
Agreement, any remaining payments or benefits to which Executive would have
been entitled hereunder shall be made to his wife, Jennifer McCulloch.
10. Outplacement Services.
---------------------
At Executive's election, Company shall provide appropriate outplacement
services to Executive, to be rendered by a firm selected by Company and
which is reasonably acceptable to Executive.
11. Termination Agreement.
---------------------
The Termination Agreement dated May 15, 1994, between the Company and
Executive shall be terminated as of the Separation Date, and the Executive
shall not retain any rights arising out of the Termination Agreement.
12. Litigation Cooperation.
----------------------
Executive agrees to make himself reasonably available to cooperate in any
actual or anticipated litigation or arbitration matter in which Company
reasonably requests his assistance based upon his duties with the Company
during the period for which he receives payments under paragraph 2. Once
such payments have ended, Company shall pay Executive a daily consulting
fee for such assistance in the amount of $750.00, subject to a one-half day
minimum, and shall reimburse Executive for his reasonable out-of-pocket
expenses in connection with any such assistance.
-6-
<PAGE>
13. Termination.
-----------
Company may terminate this Agreement in the event of Executive's breach of
the covenants set forth in paragraphs 17, 18, 19, 20 or 21 below, or if he
accepts a position as an employee or an independent contractor with a
competitor of Company. For purposes of this Agreement, "Competitor" shall
mean a start-up company or a company now participating in the major product
categories in which the Company competes internationally or in the United
States, or categories which the Company plans to enter and which are known
to the Executive. The President of Company shall have sole discretion to
reasonably determine whether a company is a Competitor, and such
determination shall be final and binding. Notice of termination shall be
in writing and shall be effective upon delivery. Upon termination of this
Agreement in accordance with this paragraph, all of Executive's Separation
Payments and other payments and benefits under this Agreement shall cease,
and Company shall have no further obligation to make such Separation
Payments or other payments or provide such benefits to Executive.
14. General Release.
---------------
In consideration of the payments and other consideration set forth in this
Separation Agreement, Executive on his own behalf and on behalf of his
heirs, dependents, assigns and successors, hereby releases the Company and
McKesson Corporation and each of their respective past and present
-7-
<PAGE>
subsidiaries, affiliates, directors, officers, agents, employees,
representatives, assigns and successors ("Related Parties") from any and
all actions, charges, suits, grievances, damages, costs, expenses or other
claims or liabilities of any kind or nature, (including, but not limited
to, claims under ERISA, the Age Discrimination in Employment Act, or the
Civil Rights Acts of 1964 and 1991) whether known or unknown, suspected or
unsuspected, which Executive has, has had, may have, or may hereafter have,
either in his own name, in a representative capacity or as a shareholder of
Armor All Products Corporation or McKesson Corporation, arising out of, or
by reason of, any cause, matter or thing whatsoever existing as of the date
of execution of this Separation Agreement including, without limitation,
any claims arising out of or related in any way to Executive's employment.
Excepted from this release are this Separation Agreement and any rights or
obligations under it.
Company and McKesson Corporation, each on its own behalf and on behalf of
its successors, administrators and assigns, parent, subsidiary and
affiliate organizations, agents and stockholders hereby releases Executive
and his Related Parties from all rights, claims and actions which Company
and McKesson Corporation have, have had, may have, or may hereafter have,
arising out of, or by reason of, any cause,
-8-
<PAGE>
matter or thing whatsoever existing as of the date of execution of this
Separation Agreement, including, without limitation, any claims arising out
of or related in any way to Executive's employment. Excepted from this
release are this Separation Agreement and any rights or obligations under
it.
15. Effect of Release; Complete Waiver.
----------------------------------
Executive, Company and McKesson understand that they are waiving all
claims, whether known or unknown to them, and whether or not they suspect
that those claims exist or might exist at this time. The parties
acknowledge that they are familiar with Section 1542 of the California
Civil Code, which provides that:
A GENERAL RELEASE DOES NOT EXTEND
TO CLAIMS WHICH THE CREDITOR DOES
NOT KNOW OR SUSPECT TO EXIST IN HIS
FAVOR AT THE TIME OF EXECUTING THE
RELEASE, WHICH IF KNOWN BY HIM MUST
HAVE MATERIALLY AFFECTED HIS
SETTLEMENT WITH THE DEBTOR.
EXECUTIVE, COMPANY AND MCKESSON BEING AWARE OF THIS PROVISION AND ITS
EFFECT UPON THEIR RESPECTIVE RIGHTS, EXPRESSLY WAIVE ANY RIGHTS THEY MAY
HAVE UNDER SECTION 1542 OR UNDER ANY STATUTES OR COMMON LAW PRINCIPLES OF
SIMILAR EFFECT.
16. Confidentiality.
---------------
Executive, Company and McKesson each covenant and agree not to disclose any
information relating to the existence and terms of this Separation
Agreement and shall take every
-9-
<PAGE>
precaution to prevent disclosure of such information to third parties other
than, with respect to Executive, members of his immediate family and his
personal financial and legal advisors, unless such disclosure is required
by law, including, but not limited to, future SEC filings of the Company,
and, with respect to Company and McKesson, their executives who need to
know and their respective financial and legal advisors, unless such
disclosure is required by law. Executive, Company and McKesson acknowledge
that violation of this covenant would constitute a material breach of this
Separation Agreement.
17. Limited Rights Against Company.
------------------------------
Executive agrees that he will not seek, in any way, any payments or
benefits based upon his employment with the Company, his separation from
employment and/or conduct prior to the execution of this Separation
Agreement, other than as expressly set forth in this Separation Agreement.
Executive waives any and all right or entitlement to any such payments or
benefits. Executive further agrees that he will not file any charge or
action, whether based on tort, express or implied contract, or any federal,
state or local law, statute or regulation (including, but not limited to,
ERISA, the Age Discrimination in Employment Act or the Civil Rights Acts of
1964 and 1991) relating to his employment, his eligibility for benefits, or
the termination or terms and conditions of his employment. Executive
agrees that this
-10-
<PAGE>
Agreement may be pleaded as a complete bar to any action or suit before any
court or administrative body with respect to any claim relating to his
employment with, or termination from, Company.
18. Protection of "Proprietary Information".
---------------------------------------
Executive acknowledges that, in the course of his work as an employee of
the Company, he has had and may have access to Proprietary Information (as
defined below) concerning the Company, its products, customers and methods
of doing business. Executive acknowledges that the Company has developed,
compiled and otherwise obtained, often at great expense, this information,
which has great value to the Company's business. Executive agrees to hold
in strict confidence and not disclose any Proprietary Information, directly
or indirectly, to anyone outside of the Company, or use, copy, publish,
summarize, or remove from Company premises such information. Executive
agrees to deliver promptly to Company all tangible Proprietary Information
which is in his possession or under his control.
19. "Proprietary Information" Defined.
---------------------------------
For purposes of this Separation Agreement, the reference to "Proprietary
Information" means all information and any idea in whatever form, tangible
or intangible, whether disclosed to or learned or developed by Executive,
pertaining to or affecting the business of the Company or its parent or
other affiliated companies or their clients, consultants, or
-11-
<PAGE>
business associates unless: (a) the information is or becomes publicly
known through lawful means not requiring the permission or license of the
Company or McKesson; (b) the information was rightfully in Executive's
possession or part of his general knowledge prior to his employment by the
Company or by virtue of his activities not related to his employment by the
Company; (c) the information is disclosed to Executive without confidential
or proprietary restriction by a third party who rightfully possesses the
information (without confidential or proprietary restriction for the
benefit of the Company) and did not learn it, directly or indirectly, from
the Company on a confidential basis. Executive and the Company further
agree that the following information is included, without limitation, in
the definition of Proprietary Information if the same is encompassed by the
preceding sentence: (i) processes, trade secrets, electronic codes,
computer software, source codes, proprietary techniques, inventions,
improvements and research projects; (ii) information about costs, budgets,
profits, markets, employees, sales and lists of customers or vendors; (iii)
plans for future development and new product concepts and marketing; and
(iv) all documents, books, papers, drawings, models, sketches, studies,
consultant's reports and other data of any kind and description, including
electronic data recorded or retrieved by any means, that have been or will
be given to Executive by the
-12-
<PAGE>
Company or its parent or other affiliated companies, as well as written or
oral instructions or comments.
20. Solicitation of Employees.
-------------------------
Executive agrees that he will not solicit or assist in the solicitation of
any employees of Company from the date of this Separation Agreement until
the Separation Date or for the twelve (12) month period following the
Separation Date.
21. No Disparagement.
----------------
Executive covenants and agrees that he will in no way disparage Company or
its products, services, employees, or business reputation, to any person or
entity whether or not said person or entity is a current or prospective
supplier, customer or employee of Company. Executive further covenants and
agrees that he will not otherwise engage in conduct which is not in good
faith and which disrupts, damages, impairs or interferes with the business,
reputation or employees of Company or McKesson. Company and McKesson agree
not to make or publish, either orally or in writing, any disparaging
statements concerning Executive, including his termination with the
Company, his services with the Company and matters relating to his
employment.
22. References.
----------
The Company agrees to provide Executive with a favorable letter of
reference, in a form agreed to by both parties, and to support the letter
with comments consistent therewith in the case of inquiries by prospective
employers and
-13-
<PAGE>
others. All such inquiries shall be directed to the Vice President, Human
Resources of the Company.
23. Indemnification.
---------------
Company shall indemnify Executive to the same extent he is entitled to
indemnification as of the Separation Date as a result of his being a former
officer of the Company under its Bylaws and shall take no action to limit
such indemnification.
24. Absence of Reliance.
-------------------
Executive acknowledges that, in agreeing to the terms of this Separation
Agreement, he has not relied in any way upon any representations or
statements of the Company or McKesson Corporation regarding the subject
matter hereof, or the basis or effect of this Separation Agreement other
than those representations or statements set forth in this Separation
Agreement.
25. No Representations.
------------------
This Agreement expresses the full settlement terms upon which Executive and
Company sever their employment relation-ship. There are no other
representations or terms relating to the employment relationship and/or its
severance that have not been identified in writing in this Agreement.
26. Entire Agreement; Amendment.
---------------------------
This instrument contains the entire agreement and under-standing concerning
Executive's employment with the Company and separation of employment and
the other subject matters
-14-
<PAGE>
addressed herein between the parties, and supersedes all prior negotiations
and all agreements proposed or other-wise, whether written or oral,
concerning the subject matters thereof. This Separation Agreement may be
amended or modified only by a written document executed by all of the
parties hereto.
27. Severability.
------------
If any provision of this Separation Agreement or the application thereof is
held invalid, the invalidity shall not affect other provisions or
applications of this Separation Agreement which can be given effect without
the invalid provisions or applications. To this end, the provisions of
this Separation Agreement are declared to be severable.
28. Governing Law.
-------------
This Separation Agreement and all transactions hereunder shall be governed
by, interpreted and enforced in accordance with the laws of the State of
California without reference to principles of conflict of laws.
29. Forum Selection.
---------------
Any and all litigation relating to state law causes of action arising out
of this Separation Agreement shall be heard exclusively in California state
courts. To that end, the parties to this Separation Agreement consent to
-15-
<PAGE>
jurisdiction in California state courts and waive any defense of lack of
personal jurisdiction.
Any and all litigation relating to federal law causes of action arising out
of this Separation Agreement shall be heard exclusively in California
federal courts. The parties also consent to jurisdiction in California
federal courts and waive any defense of lack of personal jurisdiction.
30. Counterparts.
------------
This Separation Agreement may be executed in counterparts with the same
force and effect as if all signatures were set forth in a single
instrument.
31. Headings.
--------
Headings of sections in this Separation Agreement have been included solely
for convenience and reference and are not part of the Agreement.
32. Voluntary Agreement.
-------------------
It is understood and agreed that both the Company and Executive are
voluntarily entering into this Separation Agreement as a way of severing
the employment relationship existing between the parties. Executive
acknowledges that he has been informed by the Company that he should
consult with legal counsel concerning the contents of this Separation
Agreement. This Separation Agreement is not to be construed as an
allegation or admission on the part of
-16-
<PAGE>
either party that either has violated any order, ruling, law, statute,
regulation, contract or covenant, express or implied.
33. Attorney's Fees and Costs.
-------------------------
If any action at law or in equity is necessary to enforce or interpret the
terms of this Separation Agreement, the prevailing party shall be entitled
to reasonable attorneys' fees, costs, and necessary disbursements in
addition to any other relief to which that party may be entitled.
34. Period for Review and Revocation.
--------------------------------
Executive confirms that he has had at least twenty-one (21) days to review
and consider the waiver and release provisions of this Agreement, including
but not limited to such provisions concerning claims (if any) under the Age
Discrimination in Employment Act ("ADEA"). The parties agree that
Executive shall have a period of seven (7) days following his execution of
this Agreement to revoke said ADEA waiver, and that such waiver is neither
effective nor enforceable until the expiration of such seven-day period.
Date of
Execution:February 13, 1995 /s/ Mervyn J. McCulloch
------------------ ----------------------------
Mervyn J. McCulloch
-17-
<PAGE>
ARMOR ALL PRODUCTS CORPORATION
Date of
Execution:February 15, 1995
------------------
By: /s/ Kenneth M. Evans
--------------------------
Kenneth M. Evans
*McKESSON CORPORATION
Date of
Execution: February 22, 1995 By: /s/ William A. Armstrong
----------------- --------------------------
William A. Armstrong
*McKesson Corporation shall be bound only by paragraphs 14, 15, 16 and 21 of
this Separation Agreement.
-18-
<PAGE>
Armor All Products Corporation
Selected Financial Data
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Years Ended March 31
(in thousands except per share amounts) 1995 1994 1993 1992 1991 1990
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Income Statement Data
Revenues $216,789 $182,257 $168,400 $145,910 $133,804 $165,447
-------------------------------------------------------------------------------
Increase (decrease) from prior year 18.9% 8.2% 15.4% 9.0% (19.1%) 1.6%
Costs and expenses
Cost of sales 93,103 74,360 68,841 59,709 57,980 68,118
Selling, general and administrative 80,960 66,950 63,670 60,465 58,133 60,654
Amortization of intangibles 2,457 2,684 3,768 4,314 4,315 4,357
-------------------------------------------------------------------------------
Total costs and expenses 176,520 143,994 136,279 124,488 120,428 133,129
-------------------------------------------------------------------------------
Increase (decrease) from prior year 22.6% 5.7% 9.5% 3.4% (9.5%) 13.5%
Operating income 40,269 38,263 32,121 21,422 13,376 32,318
Interest income (expense) -- net 1,803 1,377 1,245 1,080 (704) (677)
-------------------------------------------------------------------------------
Income before income taxes 42,072 39,640 33,366 22,502 12,672 31,641
Income taxes 17,544 17,067 14,214 9,638 5,829 12,820
-------------------------------------------------------------------------------
Net income $ 24,528 $ 22,573 $ 19,152 $ 12,864 $ 6,843 $ 18,821
===============================================================================
Increase (decrease) from prior year 8.7% 17.9% 48.9% 88.0% (63.6%) (30.6%)
Earnings per common share $ 1.16 $ 1.07 $ .91 $ .61 $ .33 $ .90
===============================================================================
Increase (decrease) from prior year 8.4% 17.6% 49.2% 84.8% (63.3%) (30.8%)
Return on average stockholders' equity/1/ 20.6% 21.0% 19.3% 13.9% 7.1% 19.6%
===============================================================================
Cash dividends per common share $ .64 $ .64 $ .48 $ .48 $ .64 $ .64
===============================================================================
</TABLE>
/1/Net income divided by monthly average equity.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
March 31 (in thousands) 1995 1994 1993 1992 1991 1990
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance Sheet Data
Working capital $ 78,182 $ 64,349 $ 60,373 $ 46,149 $ 38,825 $ 40,615
Current assets 121,566 99,225 93,429 68,485 65,788 90,267
Total assets 172,850 151,826 140,560 119,823 121,731 150,069
Total debt -- -- -- -- 6,549 28,688
Stockholders' equity 128,985 116,029 106,555 96,326 93,307 99,321
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Revenues Earnings Per Share
(millions of dollars) (dollars)
[GRAPH APPEARS HERE] [GRAPH APPEARS HERE]
Net Income Return on Equity
(millions of dollars) (percent)
[GRAPH APPEARS HERE] [GRAPH APPEARS HERE]
1995 ANNUAL REPORT
1
<PAGE>
Armor All Products Corporation
Financial Review
Results of Operations
The Company's operating results improved for the fourth consecutive year in
fiscal 1995, as revenues increased 19% and net income increased 9% from fiscal
1994. The revenue growth was primarily attributable to shipments of new products
and continued international expansion. Earnings increased at a slower rate than
revenues principally because of the costs associated with (1) the introduction
of new automotive and home care products and (2) a market share building
strategy for the Company's flagship protectant product. In addition, the Company
incurred a $1.0 million pretax charge for the cost of replacing certain aerosol
units of Armor All QuickSilver Wheel Cleaner with new cans containing an
improved spray actuator.
Revenues
The following table sets forth a summary of revenues by major geographic region:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Years Ended March 31 (in millions) 1995 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
United States $187.9 $156.5 $148.6
International 28.9 25.8 19.8
--------------------------------
Total $216.8 $182.3 $168.4
================================
Percentage change from prior year 19% 8%
- --------------------------------------------------------------------------------
</TABLE>
The $31.4 million increase (20%) in the Company's U.S. revenues in fiscal 1995
was primarily attributable to higher sales of Armor All QuickSilver Wheel
Cleaner, which since its introduction in December 1993 has become the leader in
its category. Another significant factor was higher sales of the Company's line
of home care products, including the E-Z Deck Wash line acquired in January 1994
and new products introduced under the Armor All brand name during fiscal 1995:
Deck Protector, WaterProofing Sealer, Vinyl Siding Wash, a home care protectant
and a home care multipurpose cleaner. Also contributing to the revenue growth
were initial sales of Wax Pax Instant Car Wax, introduced in December 1994, and
higher sales of Armor All Spot & Wash Concentrate, introduced in December 1993.
Sales of the Company's line of protectant products, which includes Armor All
Protectant, Armor All Protectant Low-Gloss Natural Finish, and Armor All Tire
Foam Protectant, were approximately the same as in the prior year. Sales of the
Company's line of waxes and washes were lower than in the prior year, generally
consistent with the decline in national wax/wash category consumer purchases.
Since there were no price increases during fiscal 1995 or 1994, all of the
revenue growth represents higher volume of products shipped.
The $3.1 million increase (12%) in international revenues in fiscal 1995
reflects higher shipments in all of the Company's principal geographic markets,
including Asia, Australia, Canada, Europe and Latin America.
The $7.9 million increase (5%) in the Company's U.S. revenues in fiscal 1994 was
primarily due to increased sales of the Company's line of protectant products.
Initial sales of Armor All QuickSilver Wheel Cleaner and Armor All Spot & Wash
Concentrate were another significant factor. Initial sales of E-Z Deck Wash and
the other E-Z D brand product lines 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.
Of the $6.0 million increase (30%) in international revenues in fiscal 1994,
approximately half was attributable to higher sales in Canada. The growth in
Canadian sales resulted from several factors, including initial sales of three
new products introduced in December 1993, continued higher sales of Armor All
Tire Foam Protectant, and increased purchases by the Company's largest Canadian
customer. The remaining increase in international revenues reflects higher
shipments to virtually all of the Company's other markets, particularly Mexico
and those areas served by the Company's European Office.
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 1995 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues 100.0% 100.0% 100.0%
Cost of sales 42.9 40.8 40.9
Selling, general and administrative 37.3 36.7 37.8
Amortization of intangibles 1.2 1.5 2.2
---------------------------------
Operating income 18.6% 21.0% 19.1%
=================================
</TABLE>
12
<PAGE>
Cost of sales as a percentage of revenues in fiscal 1995 increased from fiscal
1994 due to a combination of several factors. Sales in fiscal 1995 were
comprised of a higher proportion of new automotive and home care products, which
had lower margins due to start-up costs, and certain promotional items. In
addition, the Company experienced higher costs of raw materials and components
in connection with an improvement in the Armor All Protectant formula and
general inflation in certain chemical and paper markets. The cost of the
Company's QuickSilver Wheel Cleaner replacement program, in which retailers'
inventories of certain aerosol units were replaced with new cans containing an
improved spray actuator, resulted in a $1.0 million reduction in gross margin
during the fourth quarter of fiscal 1995.
Cost of sales as a percentage of revenues in fiscal 1994 decreased slightly from
fiscal 1993 due to the effects of a 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 and higher shipments of certain promotional
items.
Selling, general and administrative (SG&A) expenses as a percentage of revenues
in fiscal 1995 increased from fiscal 1994 primarily due to increases in selling
and marketing expenses in the United States automotive and home care operations.
Automotive promotional expenses increased due to the initiation of a market
share building strategy for Armor All Protectant and the launch of several new
products. Home care expenses were higher mainly due to the costs involved in the
launch of the aforementioned new products and promotion of the E-Z Deck Wash
business. Partially offsetting these increases were the absorption of fixed
administrative expenses over a higher sales volume and a reduction in the
provision for bad debts due to a decrease in account write-offs.
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 and to a reduction in
consumer coupon expenses. Partially offsetting these factors were promotional
expenses associated with new products, increased research and development
activity, and start-up costs relating to the Company's new home care products
division.
Amortization expense principally relates to intangible assets associated with
the acquisition of the Company by McKesson in 1979, the Company's acquisition of
several wax and wash brands in September 1988, and the Company's acquisition of
two home care brands in January 1994. Amortization expense decreased by $0.2
million in fiscal 1995 and $1.1 million in fiscal 1994 as certain of the assets
acquired in September 1988 became fully amortized; these declines more than
offset the amortization of the new home care assets.
Interest income increased by $0.4 million in fiscal 1995 and $0.1 million in
fiscal 1994 over the respective prior years. The increase in fiscal 1995 was
primarily due to higher interest rates earned during the year, while the
increase in fiscal 1994 primarily reflects higher cash balances during the
majority of the year.
The Company's effective income tax rates were 41.7%, 43.1% and 42.6% in fiscal
1995, 1994 and 1993, respectively. The lower tax rate in fiscal 1995 is
primarily attributable to lower foreign taxes incurred on certain international
operations. 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.
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, 1995, the Company had $22.2 million of cash and cash
equivalents and no short-term or long-term debt.
The Company has historically minimized 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. Although this full service arrangement is still used for products
which constitute the majority of the Company's sales volume, the Company's
inventories
1995 ANNUAL REPORT
13
<PAGE>
increased by $8.5 million during fiscal 1995 due to an increase in the number of
products which the Company purchases from packagers upon the completion of
production. This increase resulted primarily from (a) the addition of several
new products which are manufactured by packagers other than those which serve as
distribution centers and (b) a change in certain packaging and distribution
sites to achieve production and operational efficiencies.
The Company's use of contract packagers permits it to avoid significant
investments in machinery and other fixed assets.
During fiscal 1995, 1994 and 1993, cash flow from operations was $9.2 million,
$15.6 million, and $24.7 million, respectively. The decrease in fiscal 1995 was
mainly attributable to higher accounts receivable arising in connection with
growth in the Company's sales volume as well as to the aforementioned increase
in the Company's inventories. The decrease in fiscal 1994 was 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 in that 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.
Cash flows during fiscal 1994 were also affected by 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 short-term borrowings from McKesson.
The Company's sources of liquidity at March 31, 1995 included an $18.2 million
balance under a cash management program administered by McKesson, $4.0 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.
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) 1995 1994
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Current Assets
Cash and cash equivalents $ 22,249 $ 26,251
Accounts receivable (less allowance for doubtful accounts
and cash discounts: 1995, $2,341 and 1994, $2,625) 84,865 67,963
Inventories 12,695 4,182
Deferred income taxes 956 765
Prepaid expenses 801 64
-----------------------------
Total Current Assets 121,566 99,225
Property -- Net 9,373 8,699
Intangible Assets -- Net 41,911 43,902
-----------------------------
Total Assets $172,850 $151,826
=============================
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable $ 17,385 $ 10,923
Payable to McKesson 2,595 1,526
Accrued selling expenses 8,590 8,802
Accrued compensation 2,513 2,669
Income and other taxes payable 5,429 4,282
Dividends payable 3,404 3,386
Other liabilities 3,468 3,288
-----------------------------
Total Current Liabilities 43,384 34,876
-----------------------------
Deferred Income Taxes 481 921
-----------------------------
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;
21,272,035 and 21,165,486 shares outstanding in 1995 and 1994 213 212
Other capital 61,157 59,323
Unearned compensation -- restricted stock (980) (1,101)
Retained earnings 69,338 58,388
Cumulative translation adjustment (743) (793)
-----------------------------
Total Stockholders' Equity 128,985 116,029
-----------------------------
Total Liabilities and Stockholders' Equity $172,850 $151,826
=============================
</TABLE>
See accompanying notes to consolidated financial statements.
1995 ANNUAL REPORT
15
<PAGE>
Armor All Products Corporation
Consolidated Statements of Income
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Years Ended March 31 (in thousands except per share amounts) 1995 1994 1993
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues $216,789 $182,257 $168,400
------------------------------------------
Costs and expenses
Cost of sales 93,103 74,360 68,841
Selling, general and administrative 80,960 66,950 63,670
Amortization of intangibles 2,457 2,684 3,768
------------------------------------------
Total costs and expenses 176,520 143,994 136,279
------------------------------------------
Operating income 40,269 38,263 32,121
Interest income -- net 1,803 1,377 1,245
------------------------------------------
Income before income taxes 42,072 39,640 33,366
Income taxes 17,544 17,067 14,214
------------------------------------------
Net income $ 24,528 $ 22,573 $ 19,152
==========================================
Earnings per common share $ 1.16 $ 1.07 $ .91
==========================================
Weighted average common shares outstanding 21,214 21,121 21,024
==========================================
</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, 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) --
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 ($.48 per share) (10,092) (10,092)
Translation adjustment (147) (147)
---------------------------------------------------------------------------------------
Balances, March 31, 1993 21,085 211 57,968 (664) 49,333 (293) 106,555
Exercise of stock options 44 1 647 648
Issuance of restricted stock 36 704 (704) --
Redemption of common stock (1) (27) (27)
Amortization of restricted
stock cost 267 267
Issuance of shares to
profit-sharing plan 1 31 31
Net income 22,573 22,573
Dividends declared ($.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
Exercise of stock options 95 1 1,486 1,487
Issuance of restricted stock 16 337 (337) --
Cancellation of restricted stock (12) (135) 75 (60)
Redemption of common stock (1) (25) (25)
Amortization of restricted
stock cost 383 383
Issuance of shares to
profit-sharing plan 9 171 171
Net income 24,528 24,528
Dividends declared ($.64 per share) (13,578) (13,578)
Translation adjustment 50 50
---------------------------------------------------------------------------------------
Balances, March 31, 1995 21,272 $213 $61,157 $(980) $69,338 $(743) $128,985
=======================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
1995 ANNUAL REPORT
17
<PAGE>
Armor All Products Corporation
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Years Ended March 31 (in thousands) 1995 1994 1993
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating Activities
Net income $24,528 $22,573 $19,152
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation and amortization 4,068 4,085 5,068
Deferred income taxes (631) (551) (34)
-----------------------------------------------
Total 27,965 26,107 24,186
-----------------------------------------------
Effect of changes in operating assets and liabilities,
net of the effects of business acquisition:
Accounts receivable (16,902) (13,889) (8,766)
Inventories (8,513) 595 1,959
Prepaid expenses (737) 485 (165)
Accounts payable 6,462 1,474 (146)
Accrued selling expenses (212) (271) 2,432
Accrued compensation (156) (462) 1,568
Taxes payable and other liabilities 1,327 1,537 3,649
-----------------------------------------------
Total (18,731) (10,531) 531
-----------------------------------------------
Net cash provided by operating activities 9,234 15,576 24,717
-----------------------------------------------
Investing Activities
Cash paid for acquisition of
E-Z Deck Wash and E-Z D brands -- (7,438) --
Capital expenditures (1,962) (1,377) (679)
Other (419) (683) (199)
-----------------------------------------------
Net cash used in investing activities (2,381) (9,498) (878)
-----------------------------------------------
Financing Activities
Payable to McKesson 1,069 (1,678) 3,204
Issuance of common stock 1,638 652 1,186
Dividends paid (13,562) (12,659) (10,079)
-----------------------------------------------
Net cash used in financing activities (10,855) (13,685) ( 5,689)
-----------------------------------------------
Net increase (decrease) in cash and cash equivalents (4,002) (7,607) 18,150
Cash and cash equivalents at beginning of year 26,251 33,858 15,708
-----------------------------------------------
Cash and cash equivalents at end of year $22,249 $26,251 $33,858
===============================================
</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 appearance enhancement products targeted
primarily for the do-it-yourself automotive and home care consumer markets. The
Company's principal customers are large mass merchandisers, automotive supply
stores, warehouse clubs, home centers, hardware stores and wholesalers.
Relationship with McKesson Corporation: McKesson Corporation ("McKesson") owned
approximately 55% of the Company's outstanding shares of common stock as of
March 31, 1995. McKesson has outstanding debentures which are exchangeable into
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 of
such debentures were actually exchanged, McKesson's ownership level would be
reduced to approximately 22%.
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, 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 $620,000, $669,000, and
$687,000 in fiscal 1995, 1994 and 1993, 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, and files certain
combined tax returns with McKesson, as described in Note 7.
Sales to divisions of McKesson were $803,000, $747,000, and $1,111,000 in fiscal
1995, 1994 and 1993, 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 1995, 1994 or 1993.
Revenue is recognized when products are shipped to customers.
Media advertising production costs are charged to expense in the period in which
the advertising first takes place.
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 Deck
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 and other trade incentive
programs, 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.
1995 ANNUAL REPORT
19
<PAGE>
Reclassifications: Certain prior year amounts have been reclassified to conform
with the fiscal 1995 presentation.
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. All amounts invested in the cash
management program with McKesson are 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 borrowed, 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: $18,182,000 at 6.0% on March 31, 1995 and
$22,076,000 at 3.4% on March 31, 1994.
The Payable to McKesson of $2,595,000 and $1,526,000 at March 31, 1995 and 1994,
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, 1996. Borrowings under this
line of credit bear interest at the Canadian prime rate (9.8% at March 31,
1995). There were no outstanding borrowings under the line of credit at March
31, 1995 or 1994.
3. Interest Income -- Net
Interest income -- net, which approximates interest received, is comprised of
the following:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Years Ended March 31 (in thousands) 1995 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Net interest income -- McKesson
(Note 2) $1,656 $1,219 $1,113
Interest income -- other 147 158 140
Interest expense -- other -- -- (8)
---------------------------------
Total $1,803 $1,377 $1,245
=================================
</TABLE>
4. Inventories
Inventories are summarized as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
March 31 (in thousands) 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C>
Finished goods $10,338 $3,514
Raw materials 2,357 668
-------------------
Total $12,695 $4,182
===================
</TABLE>
5. Property
Property is summarized as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
March 31 (in thousands) 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C>
Land $ 2,439 $ 2,439
Building 3,810 3,810
Furniture and fixtures 1,786 1,684
Machinery and equipment 6,700 4,935
Leasehold improvements 78 78
-----------------------
Total 14,813 12,946
Accumulated depreciation (5,440) (4,247)
-----------------------
Property -- net $ 9,373 $ 8,699
=======================
</TABLE>
6. Intangible Assets
Intangible assets consist of the following:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
March 31 (in thousands) 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C>
Goodwill $43,865 $43,865
Patents and trademarks 20,980 20,513
Other intangibles 11,090 11,090
------------------------
Total 75,935 75,468
Accumulated amortization (34,024) (31,566)
------------------------
Intangible assets -- net $41,911 $43,902
========================
</TABLE>
20
<PAGE>
7. Income Taxes
Through May 12, 1993, the Company was included in the consolidated federal
income tax returns of McKesson. On that date, as a result of a public stock
offering, 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 filed a separate federal income tax return for the
remaining portion of fiscal 1994 and will file a separate federal income tax
return for fiscal 1995.
For the majority of its state income taxes, the Company continues to be included
in McKesson's combined tax returns. Such inclusion occurs in the tax returns for
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 $16,768,000, $16,970,000 and $13,822,000 in fiscal 1995, 1994 and
1993, respectively. Accrued income taxes owed to McKesson for the unpaid portion
of the Company's share of taxes reported on the consolidated and combined tax
returns amounted to $1,656,000 and $752,000 at March 31, 1995 and 1994,
respectively. These liabilities are included in income and other taxes payable
on 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) 1995 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Current
Federal $14,115 $13,084 $10,772
State 3,176 2,988 2,475
Foreign 884 1,546 1,001
----------------------------------
Total current 18,175 17,618 14,248
----------------------------------
Deferred
Federal (526) (457) (28)
State (105) (94) (6)
----------------------------------
Total deferred (631) (551) (34)
----------------------------------
Total provision $17,544 $17,067 $14,214
==================================
</TABLE>
The reconciliations between the Company's effective tax rate and the statutory
federal income tax rate follow:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Years Ended March 31 1995 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Statutory federal income tax rate 35.0% 35.0% 34.0%
State income taxes, net of
federal benefit 4.8 4.8 5.0
Foreign operations 0.8 1.8 2.2
Retroactive effect of tax legislation -- 0.3 --
Amortization of certain
intangible assets 1.1 1.2 1.4
-------------------------------
Total 41.7% 43.1% 42.6%
===============================
</TABLE>
Deferred income taxes in the accompanying consolidated balance sheets are
comprised of the following:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
March 31 (in thousands) 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets $2,431 $1,780
Deferred tax liabilities (1,956) (1,936)
---------------------
Net deferred tax asset (liability) $ 475 $ (156)
=====================
Net current $ 956 $ 765
Net non-current (481) (921)
---------------------
Net deferred tax asset (liability) $ 475 $ (156)
=====================
</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 $4,865,000 of its Canadian subsidiary's undistributed earnings as of
March 31, 1995 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
1995 ANNUAL REPORT
21
<PAGE>
profit-sharing investment plan. The Company's contributions to the profit-
sharing plan consisted of the following: 8,869 shares of its common stock in
fiscal 1995, a cash payment and 1,637 shares of its common stock in fiscal 1994,
and 8,482 shares of its common stock in fiscal 1993. Compensation expense
related to the McKesson and profit-sharing plans amounted to $995,000, $879,000
and $766,000 in fiscal 1995, 1994 and 1993, respectively.
The 1986 Stock Option Plan provides for the granting of non-qualified 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 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 1995 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Option shares:
Outstanding at beginning
of year 822,312 802,950 667,600
Granted 183,800 100,950 250,150
Exercised (94,563) (44,238) (78,025)
Cancelled (32,737) (37,350) (36,775)
-------------------------------------
Outstanding at year-end 878,812 822,312 802,950
=====================================
Exercisable at year-end 478,144 422,157 270,900
=====================================
Available for future grants
at year-end 190,587 341,650 405,250
=====================================
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 $14,579,000 $12,413,000 $11,542,000
Aggregate market value $18,894,000 $15,830,000 $15,256,000
- --------------------------------------------------------------------------------
</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, 1995, there were 87,450 shares which remained available for future grants.
During fiscal 1995, 1994 and 1993, respectively, 15,700, 36,200, and 27,000
common shares were granted. In connection with the granting of these shares,
unearned compensation -- restricted stock was recorded in the amount of
$337,000, $704,000 and $472,000 in fiscal 1995, 1994 and 1993, 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, the majority of the grants made in fiscal 1995, 1994
and 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) 1995 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues
United States $187,868 $156,429 $148,576
Export 9,911 8,523 6,735
Foreign 19,010 17,305 13,089
-----------------------------------
Total $216,789 $182,257 $168,400
===================================
Operating Income
United States and export $ 36,906 $ 35,053 $ 30,615
Foreign 3,363 3,210 1,506
-----------------------------------
Total $ 40,269 $ 38,263 $ 32,121
===================================
Identifiable Assets at Year-End
United States and export $160,130 $141,108 $131,265
Foreign 12,720 10,718 9,295
-----------------------------------
Total $172,850 $151,826 $140,560
===================================
</TABLE>
Sales to the Company's two largest customers accounted for the following
percentages of consolidated revenues: 20% and 10% in fiscal 1995, 17% and 8% in
fiscal 1994, and 15% and 11% in fiscal 1993.
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 rental
payments based on the number of cases stored at independent warehouses, was
$1,879,000, $983,000, and $990,000 in fiscal 1995, 1994, and 1993, respectively.
As of March 31, 1995, minimum lease payments under operating leases with
remaining noncancellable lease terms in excess of one year were as follows:
$282,000 in fiscal 1996 and $156,000 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 approximately $7,500,000. 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.
12. Quarterly Financial Information (unaudited)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
First Second Third Fourth
Years Ended March 31 (in thousands except per share amounts) Quarter Quarter Quarter Quarter(a) Year
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1995
Revenues $56,568 $41,135 $39,244 $79,842 $216,789
Gross profit 32,567 23,809 22,144 45,166 123,686
Net income 6,359 4,459 4,000 9,710 24,528
Earnings per common share $ .30 $ .21 $ .19 $ .46 $ 1.16
Cash dividends per common share $ .16 $ .16 $ .16 $ .16 $ .64
Market prices per common share
High $ 22 $23 1/4 $ 24 $23 3/8 $ 24
Low 18 1/4 20 1/2 18 18 3/4 18
===================================================================================================================================
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
- -----------------------------------------------------------------------------------------------------------------------------------
</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.
(a) In the fourth quarter of fiscal 1995, gross profit and earnings per share
were reduced by approximately $1,000,000 and $.03, respectively, by a
provision for the cost of the Company's program to replace retailers'
inventories of certain aerosol units of QuickSilver Wheel Cleaner with new
cans containing an improved actuator. Earnings per share for that quarter
were increased by $.01 due to the retroactive effect of revising the annual
effective tax rate from 42.7% to 41.7%.
1995 ANNUAL REPORT
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, 1995 and 1994, and the
related consolidated statements of income, stockholders' equity, and cash flows
for each of the three years in the period ended March 31, 1995. These 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, 1995 and 1994, and the results of their operations
and their cash flows for each of the three years in the period ended March 31,
1995, in conformity with generally accepted accounting principles.
/s/ Deloitte & Touche LLP [LOGO APPEARS HERE]
DELOITTE & TOUCHE LLP
Costa Mesa, California
April 20, 1995
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/ Mark D. Krikorian
Kenneth M. Evans Mark D. Krikorian
President and Chief Executive Officer Vice President and Controller
24
<PAGE>
Exhibit (21)
SUBSIDIARIES OF THE REGISTRANT
The parent of the Company is a wholly-owned subsidiary of McKesson Corporation.
The following is a list of the significant subsidiaries of the Company:
<TABLE>
<CAPTION>
Jurisdiction of
Organization
---------------
<S> <C>
Armor All Products GmbH...................................... Germany
Armor All Products of Canada, Inc............................ Canada
</TABLE>
-16-
<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 20, 1995, 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, 1995.
/s/Deloitte & Touche
DELOITTE & TOUCHE LLP
Costa Mesa, California
June 21, 1995
-17-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1995
<PERIOD-START> APR-01-1994
<PERIOD-END> MAR-31-1995
<CASH> 22,249
<SECURITIES> 0
<RECEIVABLES> 87,206
<ALLOWANCES> (2,341)
<INVENTORY> 12,695
<CURRENT-ASSETS> 121,566
<PP&E> 14,813
<DEPRECIATION> (5,440)
<TOTAL-ASSETS> 172,850
<CURRENT-LIABILITIES> 43,384
<BONDS> 0
<COMMON> 213
0
0
<OTHER-SE> 128,772
<TOTAL-LIABILITY-AND-EQUITY> 172,850
<SALES> 216,789
<TOTAL-REVENUES> 216,789
<CGS> 93,103
<TOTAL-COSTS> 93,103
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 3,555
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 42,072
<INCOME-TAX> 17,544
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 24,528
<EPS-PRIMARY> 1.16
<EPS-DILUTED> 1.16
</TABLE>
