SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For quarter ended June 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission file number 0-14946
ARMOR ALL PRODUCTS CORPORATION
- ------------------------------------------------------------------
(Exact Name of Registrant as specified in its charter
DELAWARE 33-0178217
- ------------------------------- --------------------
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification No.)
6 Liberty, Aliso Viejo, California 92656
- ------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(714) 362-0600
- ------------------------------------------------------------------
(Registrant's telephone number, including area code)
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 the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at June 30, 1996
- ----------------------------- -------------------------------
Common stock, $0.01 par value 21,333,222 shares
<PAGE> 2
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
==============================
Page
----
Consolidated Balance Sheets
June 30, 1996 and March 31, 1996 3
Consolidated Statements of Income
Three months ended June 30, 1996 and 1995 4
Consolidated Statements of Cash Flows
Three months ended June 30, 1996 and 1995 5
Financial Notes 6 - 7
Financial Review 8
PART II. OTHER INFORMATION
===========================
Item
- ----
4 Submission of Matters to a Vote of Security Holders 9
6 Exhibits and Reports on Form 8-K 9
<PAGE> 3
PART 1. FINANCIAL INFORMATION
===============================
ARMOR ALL PRODUCTS CORPORATION
CONSOLIDATED BALANCE SHEETS
(unaudited)
June 30, March 31,
1996 1996
-------- --------
(in thousands)
ASSETS
- ------
Current Assets
Cash and cash equivalents $ 47,508 $ 20,894
Accounts receivable 44,923 72,009
Inventories 8,966 12,643
Deferred taxes 2,555 2,770
Prepaid expenses 6,953 1,462
------- -------
Total current assets 110,905 109,778
Property - net 9,106 9,414
Goodwill 25,112 25,394
Patents and Trademarks 13,995 14,297
------- -------
Total assets $159,118 $158,883
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current Liabilities
Accounts payable $ 11,483 $ 13,654
Payable to McKesson 1,343 2,224
Accrued selling expenses 9,514 9,503
Accrued compensation 1,847 1,495
Income and other taxes payable 2,665 591
Dividends payable 3,413 3,411
Other liabilities 4,214 4,458
------- -------
Total current liabilities 34,479 35,336
------- -------
Deferred Income Taxes 570 572
------- -------
Stockholders' Equity
Common stock 213 213
Other capital 61,925 61,739
Unearned compensation - restricted stock (1,190) (1,230)
Retained earnings 63,747 62,871
Cumulative translation adjustment (626) (618)
------- -------
Total stockholders' equity 124,069 122,975
------- -------
Total liabilities and
stockholders' equity $159,118 $158,883
======= =======
See accompanying financial notes.
<PAGE> 4
ARMOR ALL PRODUCTS CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
Three Months Ended June 30
--------------------------
1996 1995
-------- --------
(in thousands except
per share amounts)
REVENUES $ 55,308 $ 50,224
------- -------
COSTS AND EXPENSES:
Cost of sales 24,926 24,394
Selling, general and administrative 22,651 19,508
Amortization of intangibles 617 613
------- -------
Total costs and expenses 48,194 44,515
------- -------
OPERATING INCOME 7,114 5,709
INTEREST INCOME 281 251
------- -------
INCOME BEFORE INCOME TAXES 7,395 5,960
INCOME TAXES 3,106 2,503
------- -------
NET INCOME $ 4,289 $ 3,457
======= =======
EARNINGS PER COMMON SHARE $.20 $.16
=== ===
DIVIDENDS PER COMMON SHARE $.16 $.16
=== ===
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 21,332 21,276
====== ======
See accompanying financial notes.
<PAGE> 5
ARMOR ALL PRODUCTS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Three Months Ended June 30
--------------------------
1996 1995
-------- --------
(in thousands)
Operating Activities
Net income $ 4,289 $ 3,457
Adjustments to reconcile net income to
net cash provided by operating activities
Depreciation and amortization 1,024 980
Deferred income taxes 213 201
Other 40 97
------- -------
Total 5,566 4,735
------- -------
Effect of changes in
Accounts receivable 27,086 45,793
Inventories 3,677 (3,467)
Prepaid expenses (5,491) (12,593)
Accounts payable (2,171) (8,381)
Accrued selling expenses 11 (3,607)
Accrued compensation 352 (959)
Income and other taxes payable 2,074 (3,899)
Other liabilities (244) (905)
------- -------
Total 25,294 11,982
------- -------
Net cash provided by
operating activities 30,860 16,717
------- -------
Investing Activities
Capital expenditures (99) (174)
Other (41) 51
------- -------
Net cash used by
investing activities (140) (123)
------- -------
Financing Activities
Payable to McKesson (881) (912)
Issuance of common stock 186 137
Dividends paid (3,411) (3,404)
------- -------
Net cash used by
financing activities (4,106) (4,179)
------- -------
Net increase in cash and cash equivalents 26,614 12,415
Cash and cash equivalents at
beginning of period 20,894 22,249
------- -------
Cash and cash equivalents at end of period $ 47,508 $ 34,664
======= =======
See accompanying financial notes.
<PAGE> 6
ARMOR ALL PRODUCTS CORPORATION
FINANCIAL NOTES
1. BASIS OF PRESENTATION
The accompanying consolidated financial statements present the
financial position and results of operations of Armor All Products
Corporation and its subsidiaries (the "Company"). In the opinion
of the Company, these unaudited consolidated financial statements
include all adjustments necessary for a fair presentation of its
financial position as of June 30, 1996 and the results of its
operations and its cash flows for the three-month periods ended
June 30, 1996 and 1995. Such adjustments were of a normal
recurring nature.
The results of operations for the three-month periods ended
June 30, 1996 and 1995 are not necessarily indicative of the
results for the full years. It is suggested that these
consolidated financial statements be read in conjunction with the
consolidated financial statements and related notes thereto
included in the Company's Annual Report to Shareholders for the
year ended March 31, 1996. That report has previously been filed
with the Securities and Exchange Commission as an exhibit to the
Annual Report on Form 10-K.
2. CASH MANAGEMENT
Pursuant to an agreement with McKesson Corporation
("McKesson"), which owns 55% of the company's stock, 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
unrestricted 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 for cash management program transactions.
Included in cash and cash equivalents in the accompanying
consolidated balance sheets are the following amounts invested in
the cash management program: $43,698,000 at 5.4% on June 30, 1996
and $17,359,000 at 5.3% on March 31, 1996.
<PAGE> 7
ARMOR ALL PRODUCTS CORPORATION
FINANCIAL NOTES
3. INVENTORIES
Inventories are comprised of the following:
June 30, March 31,
1996 1996
------ ------
(in thousands)
Finished goods $ 8,170 $11,714
Raw materials 796 929
------ ------
Total $ 8,966 $12,643
====== ======
4. PREPAID EXPENSES
Prepaid expenses at June 30, 1996 include $6,580,000 of
payments related to media advertising. The Company allocates the
annual media advertising expense among interim periods in
proportion to estimated annual sales volume.
5. INTEREST INCOME
Interest income is comprised of the following:
Three Months Ended June 30
--------------------------
1996 1995
------ ------
(in thousands)
Interest income - McKesson $ 247 $ 208
Interest income - other 34 43
---- ----
Interest income $ 281 $ 251
==== ====
<PAGE> 8
ARMOR ALL PRODUCTS CORPORATION
FINANCIAL REVIEW
Results of Operations
- ---------------------
Revenues increased $5.1 million or 10.1% in the quarter ended June
30, 1996 in comparison with the prior year's quarter. The increase
was primarily attributable to higher shipments of Automotive
products in the United States and Canada. The principal
contributors to this increase were shipments of two new products
launched in December 1995 - Armor All(R) Armor Plate(R) Paint
Protectant and Armor All(R) FlashBlack Tire Shine - as well as
higher shipments of the Company's flagship Armor All(R) Protectant.
The automotive revenue comparison benefited from the timing of
spring promotional shipments. Home Care revenues were lower
primarily because the prior year's shipments included a large new
customer's order to fill initial retail inventory requirements. In
addition, the current quarter has been adversely affected by
cautious retailer buying due to a weather-related slow start to the
spring season. International revenues were higher, mainly
reflecting increased shipments to Europe and Latin America.
Cost of sales as a percentage of revenues was 45.1% and 48.6% in
the quarters ended June 30, 1996 and 1995, respectively. The lower
cost percentage in the current year was due to several factors,
including a favorable product mix, lower raw materials costs,
reduced inventory carrying costs, and a selling price increase on
certain Automotive products in November 1995. In addition, fixed
manufacturing and distribution costs were absorbed over the higher
volume.
Selling, general and administrative expense as a percentage of
revenues was 41.0% and 38.8% in the quarters ended June 30, 1996
and 1995, respectively. The increase in the current quarter was
primarily due to a higher rate of accrual for fixed advertising
costs, which are expensed over interim periods in proportion to
estimated annual sales volume. In addition, there were higher
costs associated with spring Automotive promotions in the current
quarter due to the timing of shipments, as discussed above.
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 the Company's winter sales
promotional activities. Cash inflow is strongest during the summer
months as these receivables are collected. This pattern resulted
in cash flow from operations of $30.9 million and $16.7 million in
the three-month periods ended June 30, 1996 and 1995, respectively,
as accounts receivable were reduced from March 31 levels. The
higher cash inflow in the first quarter of fiscal 1997 was
primarily due to lower payments for media advertising, changes in
the timing of payments for certain payables and accrued
liabilities, successful inventory reduction measures, and higher
net income. These factors were partially offset by lower
collections of accounts receivable due to a lower accounts
receivable balance at the beginning of the current fiscal year than
at the beginning of the prior fiscal year.
As long as the Company continues to participate in the McKesson
cash management program, McKesson will make available to the
Company the amount of cash necessary to provide the Company with
sufficient funds to meet its needs, as defined in its annual
capital and operating plans.
<PAGE> 9
PART II. OTHER INFORMATION
===========================
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
The Company's Annual Meeting of Stockholders was held on
July 26, 1996. The Board of Directors' nominees for director as
listed in the proxy statement were each elected to serve for a
one-year term by the following vote:
Votes For Votes Withheld
---------- --------------
William A. Armstrong 19,828,620 40,681
Jon S. Cartwright 19,832,569 36,732
Kenneth M. Evans 19,830,436 38,865
David L. Mahoney 19,828,245 41,056
David E. McDowell 19,827,380 41,921
Karen Gordon Mills 19,832,646 36,655
Alan Seelenfreund 19,627,401 241,900
The proposal to amend the Company's 1986 stock Option
Plan to increase the number of shares authorized for the grant of
stock options under the Plan by 800,000 shares to a total of
2,100,000 shares, and to extend the duration of the Plan until such
time as it is terminated by action of the Board of Directors, was
approved by the following vote: 19,350,465 votes for; 477,342
votes against; 23,097 votes abstaining; and 18,397 broker
non-votes.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
10(A) Armor All Products Corporation 1988 Restricted
Stock Plan, as amended through July 26, 1996.
10(B) Armor All Products Corporation 1986 Stock
Option Plan, as amended through July 26, 1996.
27 Financial Data Schedule
(b) Reports
No reports on Form 8-K were filed during the quarter
ended June 30, 1996.
<PAGE> 10
S I G N A T U R E
=================
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
ARMOR ALL PRODUCTS CORPORATION
(Registrant)
Dated: August 12, 1996 By /s/Michael G. McCafferty
-----------------------------
Michael G. McCafferty
Executive Vice President
and Chief Financial Officer
(Principal Financial
and Accounting Officer)
<PAGE> 11
EXHIBIT INDEX
=============
Exhibit
Number Description
- ------- ----------------------------------------------
10(A) Armor All Products Corporation 1988 Restricted
Stock Plan, as amended through July 26, 1996
10(B) Armor All Products Corporation 1986 Stock Option
Plan, as amended through July 26, 1996
27 Financial Data Schedule
Exhibit 10(A)
ARMOR ALL PRODUCTS CORPORATION
1988 RESTRICTED STOCK PLAN
(As Amended through July 26, 1996)
I. GENERAL
1. Definitions. Whenever used herein, the following terms
shall have the meanings set forth below:
(a) "Approved Retirement" shall mean any termination
of employment with the Corporation after attainment of age 65
(except termination for cause) or any retirement before age 65
with the approval of the Board.
(b) "Board" means the Board of Directors of the
Corporation.
(c) "Committee" means the Compensation Committee of
the Board, which shall consist of two or more members of the
Board who shall be appointed by and serve at the pleasure of the
Board, provided, however, that in the case of awards to executive
officers and directors of the Corporation, if the Committee does
not comply with the requirements of Rule 16b-3 of the General
Rules and Regulations under the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), the Committee shall mean the
full Board of Directors. No person who is a Participant may be a
member of said Committee, and any person who is appointed a
member of said Committee and who accepts such appointment shall,
by virtue thereof, be ineligible thereafter to be granted a
Restricted Stock Grant under the Plan.
(d) "Corporation" means Armor All Products
Corporation, a Delaware corporation.
(e) "Disability" or "Disabled" shall mean (1) a
physical or mental condition which, in the judgment of the
Committee based on competent medical evidence satisfactory to the
Committee, including, if required by the Committee, medical
evidence obtained by an examination conducted by a physician
selected by the Committee, renders an individual unable to engage
in any substantial gainful activity for the Corporation and which
impairment is likely to result in death or to be of long
continued and indefinite duration, or (2) a judicial declaration
of incompetence.
(f) "Eligible Employee" means any employee of the
Corporation or any Subsidiary (including employees who are
directors and/or officers) who, as determined by the Committee in
its sole discretion, has and exercises management functions and
responsibilities.
(g) "Participant" means an individual to whom a
Restricted Stock Grant is granted under the Plan.
(h) "Plan" means the 1988 Restricted Stock Plan of the
Corporation as described herein.
(i) "Restricted Stock Grant" or "Grant" means a grant
described in Part II of the Plan which is made by the Corporation
and approved by the Committee under and pursuant to the Plan.
(j) "Stock" means the Common Stock, $0.01 par value,
of the Corporation.
(k) "Subsidiary" means a subsidiary of the Corporation
or an unincorporated organization controlled, directly or
indirectly, by either voting or equity control, by the
Corporation, including subsidiaries or unincorporated
organizations which may be created or acquired while the Plan is
in effect.
2. Purpose. The purpose of the Plan is to aid the
Corporation and its Subsidiaries in attracting, retaining and
motivating management employees with outstanding ability,
competence and potential. The Plan provides such employees with
a proprietary interest in the Corporation's success and progress
by granting to them shares of Stock in accordance with the terms
and conditions set forth below.
3. Administration. The Plan shall be administered by the
Committee. Subject to all the applicable provisions of the Plan,
the Committee is authorized to approve Restricted Stock Grants in
accordance with the Plan, to construe and interpret the Plan, to
prescribe, amend, and rescind rules and regulations relating to
the Plan, and to make all determinations and to take all actions
necessary or advisable for the Plan's administration. The
Committee shall act by vote or written consent of a majority of
its members. Whenever the Plan authorizes or requires the
Committee to take any action, make any determination or decision,
or form any opinion, then any such action, determination,
decision or opinion by or of the Committee shall be in the
absolute discretion of the Committee and shall be final and
binding upon all persons in interest, including the Corporation,
its shareholders, and all Eligible Employees.
4. Shares of Stock Under the Plan. There may be granted
under the Plan an aggregate of not more than 220,000 shares of
Stock, subject to adjustment as provided in Section 3 of Part III
of the Plan. Shares of Stock granted under the Plan may be
either treasury shares or authorized and unissued shares, or any
combination thereof. If, on or before termination of the Plan,
any shares of Stock shall be reacquired by the Corporation
pursuant to the termination provisions described in Section 1 of
Part II of the Plan or in the instruments evidencing the making
of Restricted Stock Grants, such shares may again be granted
under the Plan. Prior to the making of Restricted Stock Grants,
the Corporation shall be under no obligation to reserve or retain
in its treasury any particular number of shares of Stock at any
time, and no particular shares of Stock, whether issued or held
as treasury Stock, shall be identified as being available for
future Restricted Stock Grants under the Plan.
5. Participants. From time to time the Committee shall,
in its sole discretion, but subject to all of the provisions of
the Plan, determine which Eligible Employees will be granted
Restricted Stock Grants under the Plan and the number of shares
of Stock to be granted to each Participant and the terms,
conditions and restrictions of each such Restricted Stock Grant.
In making such determinations, the Committee shall take into
account the nature of services rendered and to be rendered by the
respective recipients, their present and potential contribution
to the Corporation's success and such other factors as the
Committee in its discretion deems relevant to the accomplishment
of the purposes of the Plan. In any year, the Committee may
approve the grant to any Eligible Employee of Restricted Stock
Grants subject to differing terms and conditions. The
Committee's decision to approve the grant of a Restricted Stock
Grant to an employee in any year shall not require the Committee
to approve the grant of a Restricted Stock Grant to that employee
in any other year or to any other employee in any year; nor shall
the Committee's decision with respect to the number of shares of
Stock or the terms, conditions and restrictions applicable to any
Restricted Stock Grant to be made to an employee in any year,
require the Committee to approve the grant of the same number of
shares of Stock or of Restricted Stock Grants with the same
terms, conditions and restrictions to that employee in any other
year or to any other employee in any year. The Committee shall
not be precluded from approving the grant of a Restricted Stock
Grant to any Eligible Employee solely because such employee
previously may have been granted a Restricted Stock Grant under
the Plan.
6. Rights with Respect to Shares of Stock. An Employee to
whom a Restricted Stock Grant has been made shall be notified of
the Grant. Upon written acceptance of the Grant by the Eligible
Employee, including the restrictions and other terms and
conditions described in the Plan and in the instrument evidencing
such Grant, the Corporation shall cause to be issued or
transferred to the name of the Eligible Employee a certificate or
certificates for the number of shares of Stock granted, subject
to the provisions of Part II hereof (including those related to
custody arrangements that may be established). The date of issue
or transfer of such shares of Stock on the books of the
Corporation shall be deemed to be the date of grant (hereinafter,
"date of grant") of the Restricted Stock Grant for all purposes
of the Plan. From and after the date of grant, the Eligible
Employee shall be a Participant and shall have absolute ownership
of such shares of Stock, including the right to vote and to
receive dividends thereon, subject to the terms, conditions and
restrictions described in the Plan and in the instrument
evidencing the grant of such Restricted Stock Grant.
7. Employment. In the absence of any specific agreement
to the contrary, no grant of a Restricted Stock Grant to a
Participant under the Plan shall affect any right of the
Corporation or any Subsidiary to terminate, with or without
cause, the Participant's employment at any time.
II. RESTRICTED STOCK
Each Restricted Stock Grant made under the Plan shall
contain the following terms, conditions and restrictions and such
additional terms, conditions and restrictions as may be
determined by the Committee; provided, however, that no
Restricted Stock Grant shall be subject to additional terms,
conditions and restrictions which are more favorable to a
Participant than the terms, conditions and restrictions set forth
elsewhere in this Plan.
1. Restrictions. Until the restrictions imposed on any
Restricted Stock Grant shall lapse, shares of Stock granted to a
Participant pursuant to a Restricted Stock Grant:
(a) shall not be sold, assigned, transferred, pledged,
hypothecated, or otherwise disposed of, and
(b) shall, if the Participant's continuous employment
with the Corporation or any Subsidiary shall terminate for any
reason, except as provided in Section 3 of this Part II, be
returned to the Corporation forthwith, and all the rights of the
Participant to such shares shall immediately terminate; provided,
that if the Committee, in its sole discretion, shall within
ninety (90) days of such termination of employment, notify the
Participant in writing of its decision not to terminate the
Participant's rights in such shares, then the Participant shall
continue to be the owner of shares of Stock subject to such
continuing restrictions as the Committee may prescribe in such
notice. If the Participant's interests in the shares of Stock
granted pursuant to a Restricted Stock Grant shall be terminated,
such Participant shall forthwith deliver or cause to be delivered
to the Secretary or any Assistant Secretary of the Corporation
the certificate(s), if any, previously delivered to the
Participant for such shares of Stock, accompanied by such
endorsement(s) and/or instrument(s) of transfer as may be
required by the Secretary or any Assistant Secretary of the
Corporation.
2. Lapse of Restrictions. Subject to the provisions of
this Plan and the award agreements, the restrictions imposed on
any Restricted Stock Grant shall commence with the date of grant
and continue during a period set by the Committee. Within these
limits, the Committee may provide for the lapse of such
restrictions in installments where deemed appropriate.
3. Termination of Employment by Reason of Death,
Disability or Approved Retirement. Any provisions of Section 1
of this Part II to the contrary notwithstanding, if a Participant
who has been in the continuous employment of the Corporation or a
Subsidiary since the date of grant of a Restricted Stock Grant to
such Participant shall, while in such employment, be terminated
as a result of death, Disability or Approved Retirement, then
(a) in the case of awards with time-based vesting restrictions,
the restrictions imposed on any Restricted Stock Grant shall
lapse as to all shares of Stock granted to such Participant
pursuant to such Restricted Stock Grant on the date of such
event; and (b) in the case of awards with performance-based
vesting restrictions, the Participant's participation shall
continue for the duration of each of the applicable performance
periods in effect as of the date of such event, and if applicable
corporate performance objectives are met during such periods, a
pro-rata distribution of shares to the Participant shall occur
based upon the number of years and full months in which he or she
was employed during each of such respective periods.
4. Change in Control. In the event of a Change in Control
of the Corporation, or of its parent, McKesson Corporation (each
of which is referred to herein as "Corporation"), all
restrictions on outstanding Restricted Stock Grants shall
immediately lapse.
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 Exchange Act shall become the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Corporation representing 30% or
more of the combined voting power of the Corporation's then
outstanding securities;
(b) there shall be consummated:
(i) any consolidation or merger of the
Corporation in which the Corporation is not the continuing or
surviving corporation or pursuant to which shares of the
Corporation's Stock would be converted into cash, securities or
other property, other than a merger of the Corporation in which
the holders of the Corporation's Stock 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 Corporation;
(c) the stockholders of the Corporation approve a plan
or proposal for the liquidation or dissolution of the
Corporation; or
(d) during any period of two consecutive years,
individuals who at the beginning of such period constitute the
Board and any new director whose election by the Board or
nomination for election by the Corporation'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 in office immediately prior
to such event or events not to be a Change in Control for
purposes of the Plan.
5. Agreement by Participant Regarding Withholding Taxes.
Each Participant granted a Restricted Stock Grant shall be
subject to the following rules (as modified by the provisions of
Section 6 of this Part II):
(a) No later than the date as to which the
restrictions imposed on any Restricted Stock Grant shall lapse,
such Participant must pay to the Corporation, or make
arrangements satisfactory to the Committee regarding payment of
any federal, state or local taxes of any kind required by law to
be withheld with respect to the shares of Stock subject to the
Restricted Stock Grant.
(b) The Corporation and its Subsidiaries shall, to the
extent permitted by law, have the right to deduct from any
payment of any kind otherwise due to the Participant any federal,
state or local taxes of any kind required by law to be withheld
with respect to the shares of Stock subject to the Restricted
Stock Grant.
(c) A Participant may make an election to have the
Corporation retain some portion of the Restricted Stock Grant to
satisfy tax withholding requirements. The election must be made
in accordance with the following conditions:
(i) The election is made prior to the date on
which the amount to be withheld is determined;
(ii) The election is subject to the approval of
the Committee;
(iii) The election is made on or after August 1,
1992.
If a qualifying election is made, then upon the lapse of
restrictions, the Corporation will retain the number of shares of
stock having a value equal to the amount necessary to satisfy any
withholding requirements. Calculation of the number of shares to
be withheld shall be made based on the fair market value of the
Corporation's common Stock. Such fair market value shall be the
mean between the lowest reported bid price and the highest
reported asked price of the Stock in the over-the-counter market
on the date the restrictions lapse, as reported by any
publication of general circulation selected by the Corporation
which regularly reports the market price of the Stock in such
market. In no event, however, shall the Corporation be required
to issue fractional shares of Stock.
The Committee shall be authorized to establish such rules,
forms and procedures as it deems necessary to implement the
foregoing.
6. Election to Recognize Gross Income in the Year of
Grant. If any Participant properly elects within thirty (30)
days of the date of grant, to include in gross income for federal
income tax purposes an amount equal to the fair market value of
the shares of Stock granted on the date of grant, such
Participant shall pay to the Corporation, or make arrangements
satisfactory to the Committee to pay to the Corporation in the
year of such grant, any federal, state or local taxes required to
be withheld with respect to such shares. If such Participant
shall fail to make such payments, the Corporation and its
Subsidiaries shall, to the extent permitted by law, have the
right to deduct from any payment of any kind otherwise due to the
Participant any federal, state or local taxes of any kind
required by law to be withheld with respect to such shares of
Stock.
7. Restrictive Legend; Certificates May be Held in
Custody. Each certificate evidencing shares of Stock granted
pursuant to a Restricted Stock Grant may bear an appropriate
legend referring to the terms, conditions and restrictions
described in the Plan and in the instrument evidencing the
Restricted Stock Grant. Any attempt to dispose of such shares of
Stock in contravention of such terms, conditions and restrictions
shall be invalid. As provided in Section 6 of Part I, the
Committee may enact rules which provide that the certificates
evidencing such shares may be held in custody by a bank or other
institution, or that the Corporation may itself hold such shares
in custody, until restrictions thereon shall have lapsed.
8. Assignability. Except as provided in Section 9 of this
Part II, no benefit payable under or interest in the Plan shall
be subject in any manner to anticipation, alienation, sale,
transfer, assignment, pledge, encumbrance or charge, and any such
attempted action shall be void and no such benefit or interest
shall be in any manner liable for or subject to debts, contracts,
liabilities, engagements, or torts of any Participant or
beneficiary. If any Participant or beneficiary shall become
bankrupt or shall attempt to anticipate, alienate, sell,
transfer, assign, pledge, encumber or charge any benefit payable
under or interest in the Plan, then the Committee in its
discretion may hold or apply such benefit or interests or any
part thereof to or for the benefit of such Participant or his
beneficiary, his spouse, children, blood relatives, or other
dependents, or any of them, in such manner and in such
proportions as the Committee may consider proper.
9. Designation of Beneficiary. Each Participant who shall
be granted a Restricted Stock Grant under the Plan may designate
a beneficiary or beneficiaries and may change such designation
from time to time by filing a written designation of
beneficiaries with the Committee on a form to be prescribed by
it; provided, that no such designation shall be effective unless
received prior to the death of such Participant.
10. Restrictions Upon Making of Restricted Stock Grants.
The registration or qualification under any federal or state law
of any shares of Stock to be granted pursuant to Restricted Stock
Grants or the resale or other disposition of any such shares of
Stock by or on behalf of the Participants receiving such shares
may be necessary or desirable as a condition of or in connection
with such Restricted Stock Grants, and, in any such event, if the
Committee in its sole discretion so determines, delivery of the
certificates for such shares of Stock shall not be made until
such registration or qualification shall have been completed.
11. Restrictions Upon Resale of Stock. If the shares of
Stock that have been granted to a Participant pursuant to the
terms of the Plan are not registered under the Securities Act of
1933, as amended ("Securities Act"), pursuant to an effective
registration statement, such Participant, if the Committee shall
deem it advisable, may be required to represent and agree in
writing (i) that any shares of Stock acquired by such Participant
pursuant to the Plan will not be sold except pursuant to an
effective registration statement under the Securities Act, or
pursuant to an exemption from registration under said Act and
(ii) that such Participant is acquiring such shares of Stock for
his or her own account and not with a view to the distribution
thereof.
III. MISCELLANEOUS
1. Effective Date of the Plan. The Plan shall become
effective upon its adoption by the Board, subject to the approval
thereof by the stockholders of the Corporation having at least a
majority of the voting power of all stock of the Corporation
present in person or represented by proxy and entitled to be
voted thereon at the Annual Meeting of Stockholders of the
Corporation to be held on July 29, 1988 or any reconvened
sessions thereof. Notwithstanding the provisions of Section 6 of
Part I, Participants shall not have the right to vote or receive
dividends on shares of Stock granted pursuant to Restricted Stock
Grants until the stockholders of the Corporation have approved
the Plan. Should the stockholders of the Corporation fail to
approve the Plan, the Plan and all outstanding Restricted Stock
Grants thereunder shall be null and void.
2. Duration of Plan. The Plan shall remain in effect from
the effective date until terminated by the Board of Directors of
the Corporation. Termination of the Plan shall not affect any
Restricted Stock Grants previously granted pursuant thereto,
which shall remain in effect until their restrictions shall have
lapsed, all in accordance with their terms.
3. Adjustments Upon Changes in Capitalization. If there
shall be any change in the Stock subject to the Plan or the Stock
subject to any Restricted Stock Grant granted hereunder, through
merger, consolidation, reorganization, recapitalization,
reincorporation, stock split, stock dividend (in excess of 2%),
or other change in the corporate structure of the Corporation,
appropriate adjustments shall be made by the Committee in the
aggregate number of shares subject to the Plan and the number of
shares subject to outstanding Restricted Stock Grants in order to
preserve, but not to increase, the benefits of the Participant.
If the Corporation shall not be the surviving corporation in any
merger, consolidation, or reorganization, shares of Stock which
are converted into common stock or other securities of the
surviving corporation shall be subject to the same terms,
conditions and restrictions as applicable to such shares of Stock
immediately prior to conversion, unless such terms, conditions
and restrictions have lapsed pursuant to Section 3 of Part II
hereof.
For purposes of the foregoing, a change in the Stock subject
to the Plan or the Common Stock subject to any Restricted Stock
Grant granted hereunder shall include an extraordinary dividend
or other extraordinary distribution (whether in cash, property,
securities or any combination thereof) with respect to such
Stock. Notwithstanding the first sentence of this Section 3, if
the Committee determines that a change (as hereinabove described)
shall have occurred in the Stock subject to the Plan or the Stock
subject to any Restricted Stock Grant granted hereunder, and that
adjustments in the aggregate number of shares subject to the Plan
and in the number of shares subject to outstanding Restricted
Stock Grants will not adequately preserve the benefits of the
Participant, then the Committee shall make such other adjustments
or arrangements (including providing for the issuance of cash,
property and/or securities in addition to or in lieu of shares of
Stock following such change) as in its sole judgment will be
adequate for such purpose.
4. Expenses of Plan. The expenses of the Plan shall be
borne by the Corporation.
5. Amendment or Termination. The Board may, by
resolution, amend or terminate the Plan at any time; provided,
however, that, subject to the provisions of Section 3 of this
Part III, the Board may not, without approval by the holders of a
majority of the shares of Stock represented at a meeting of
stockholders called for that purpose, increase the number of
shares of Stock which may be granted under the Plan, change the
class of management employees eligible to participate in the
Plan, or otherwise materially increase the benefits accruing to
Participants under the Plan or materially modify the requirements
with respect to eligibility for participation in the Plan. In
the event that a Restricted Stock Grant has been made to a
Participant, then no amendment of the Plan after the date as of
which such Restricted Stock Grant was made, shall adversely
affect any right of such Participant with respect to such
Restricted Stock Grant without the written consent of such
Participant.
IV. RESTRICTED INCENTIVE STOCK
The Committee is authorized to approve Restricted Incentive
Stock Grants ("RIS Grants") to Eligible Employees with respect to
nonqualified stock options granted to them by the Corporation on
or after the date the stockholders of the Corporation have
approved the Plan ("Stock Options"). The Committee, in its
discretion, shall grant RIS Grants to optionees in order to
encourage them to hold shares of Stock following exercise of
Stock Options. RIS Grants shall be issued in accordance with the
provisions of the Plan applicable to Restricted Stock Grants and
shall have the same terms, conditions and restrictions as
Restricted Stock Grants (except for the provisions of Section 2
of Part II of the Plan). In addition, RIS Grants shall have the
following terms, conditions and restrictions:
1. On the date of exercise of a Stock Option (the
"Exercise Date"), the optionee who is the recipient of an RIS
Grant shall designate to the Secretary or Assistant Secretary of
the Corporation the number of Stock Option shares (the "Option
Shares") with respect to which he or she desires to receive
shares of Stock pursuant to the RIS Grant.
2. On the Exercise Date, an optionee shall be awarded,
pursuant to a RIS Grant, one share of Stock for every eight
Option Shares.
3. The Corporation shall hold certificates evidencing
shares of Stock granted pursuant to an RIS Grant and the related
Option Shares.
4. The restrictions imposed on any RIS Grant shall lapse
on the third anniversary of the Exercise Date provided that the
related Option Shares have not been sold, assigned, transferred,
pledged, hypothecated, or otherwise disposed of prior to such
third anniversary. If the related Option Shares have been so
disposed of, then all rights to the shares granted pursuant to
the RIS Grant shall immediately terminate.
Exhibit 10(B)
ARMOR ALL PRODUCTS CORPORATION
1986 STOCK OPTION PLAN
(As Amended through July 26, 1996)
1. Establishment, Purpose and Definitions.
(a) There is hereby adopted the Armor All Products
Corporation (the "Company") 1986 Stock Option Plan (the "Plan").
(b) The purpose of the Plan is to provide a means
whereby key employees and directors of the Company and its
affiliates and members of the Board of Directors of the Company
who are not employed as regular salaried officers or employees of
the Company or any affiliate of the Company (collectively,
"Nonemployee Directors," or singly, "Nonemployee Director"), may
be given an opportunity to purchase shares of the Common Stock
($.01 par value) of the Company (the "Stock") pursuant to
options.
(c) The term "affiliates" as used in the Plan means
parent or subsidiary corporations, as defined in Section 425 of
the Internal Revenue Code (but substituting "Company" for
"employer corporation"), including parents or subsidiaries which
become such after adoption of the Plan. The term "key employee"
or "key employees" shall mean one or more employees of the
Company or of its affiliates who render those types of services
which tend to contribute materially to the success of the Company
or of an affiliate or which may reasonably be anticipated to
contribute materially to the future success of the Company or of
an affiliate.
2. Stock Subject to the Plan.
(a) Options may be granted under the Plan from time to
time to purchase an aggregate of not more than 2,100,000 shares
of Stock. As the Committee (as hereinafter defined) may
determine from time to time, the shares may consist either in
whole or in part of shares of authorized but unissued Stock, or
shares of authorized and issued Stock reacquired by the Company
and held in its treasury. If an option is surrendered for cash
or for any other reason (except surrender for shares of Stock)
ceases to be exercisable in whole or in part, the shares which
were subject to such option but as to which the option had not
been exercised shall continue to be available under the Plan.
(b) If there shall be any change in the Stock subject
to the Plan or the Stock subject to any option granted hereunder,
through merger, consolidation, reorganization, recapitalization,
reincorporation, stock split, stock dividend (in excess of 2%),
or other change in the corporate structure of the Company,
appropriate adjustments shall be made by the Committee in the
aggregate number of shares subject to the Plan and the number of
shares and the price per share subject to outstanding options in
order to preserve, but not to increase, the benefits of the
optionee. If the Company shall not be the surviving corporation
in any merger, consolidation, or reorganization, every option
outstanding hereunder shall be assumed by the surviving
corporation.
3. Eligibility.
Persons who shall be eligible to have granted to them
the options provided for by the Plan shall be (i) such bona fide
key employees and directors (other than Nonemployee Directors) of
the Company or its affiliates as the Committee, in its
discretion, shall designate from time to time and (ii)
Nonemployee Directors.
4. Administration of the Plan.
(a) The Plan shall be administered by a committee (the
"Committee") consisting of two or more directors of the Company
to be appointed by the Board of Directors, provided, however,
that in the case of grants to executive officers and directors of
the Corporation, if the Committee does not comply with the
requirements of Rule 16b-3 of the General Rules and Regulations
under the Securities Exchange Act of 1934, as amended, the
Committee shall mean the full Board of Directors. The Board of
Directors may from time to time remove members from, or add
members to, the Committee. Vacancies on the Committee, howsoever
caused, shall be filled by the Board of Directors. No member of
the Committee other than a Nonemployee Director shall be
eligible, nor shall have been eligible at any time within one
year prior to his appointment as a member of the Committee, to
receive an option under the Plan. The Committee shall select one
of its members as chairman, and shall hold meetings at such times
and places as it may determine. A majority of the Committee
shall constitute a quorum and acts of the Committee at which a
quorum is present, or acts reduced to or approved in writing by
all the members of the Committee, shall be the valid acts of the
Committee.
(b) The Committee may from time to time determine
which key employees and directors of the Company or of any
affiliate shall be granted options under the Plan, the terms
thereof, and the number of shares for which an option or options
shall be granted to an optionee.
(c) The Committee shall report to the Board of
Directors the names of employees granted options, the number of
shares covered by each option, and the terms and conditions of
each such option.
(d) The Committee shall have the sole authority, in
its absolute discretion, to adopt, amend, and rescind such rules
and regulations as, in its opinion, may be advisable in the
administration of the Plan, to construe and interpret the Plan,
the rules and regulations, and the instruments evidencing options
granted under the Plan and to make all other determinations
deemed necessary or advisable for the administration of the Plan.
All decisions, determinations, and interpretations of the
Committee shall be binding on all optionees.
(e) Until such time as the Committee is appointed, the
Board of Directors shall serve as the Committee and shall have
all of the Committee's rights and powers.
5. The Option Price.
The exercise price of the Stock covered by each option
shall not be less than 85 percent of the fair market value of
such Stock on the date the option is granted as to options
granted to key employees, and not less than 100% of the fair
market value as to options granted to Nonemployee Directors.
Such fair market value shall be the closing price of the Stock on
the date the option is granted, (i) in the over-the-counter
market, if the Stock is not listed or admitted to trading on any
stock exchange, as reported by any publication of general
circulation selected by the Company which regularly reports the
market price of the Stock in such market, or, (ii) on the
principal stock exchange on which the Stock is then listed or
admitted to trading. Such price shall be subject to adjustment
as provided in paragraph 2(b) hereof.
6. Terms and Conditions of Options.
(a) Each option granted pursuant to the Plan shall be
evidenced by a written stock option grant agreement executed by
the Company and the person to whom such option is granted.
(b) The term of each option shall be for no more than
ten years.
(c) The stock option grant agreement may contain such
other terms, provisions, and conditions as may be determined by
the Committee not inconsistent with this Plan.
7. Use of Proceeds.
Proceeds realized from the sale of Stock pursuant to
options granted under the Plan shall constitute general funds of
the Company.
8. Granting of Options to Nonemployee Directors.
Notwithstanding any restrictions contained elsewhere in
the Plan, each Nonemployee Director (i) commencing or continuing
his or her term on the Board of Directors at the Company's annual
meeting of stockholders on July 29, 1988 or (ii) who is elected
to the Board of Directors for the first time by the stockholders
of the Company at any special or annual meeting of the
stockholders, will automatically receive, on such date, an option
to purchase 5,000 shares of Stock (subject to adjustment as
provided in paragraph 2(b) above), which option shall be
immediately exercisable in full but shall expire in 1,000 share
installments on the date of each of the next five succeeding
annual meetings of stockholders. On the date of each annual
meeting of stockholders subsequent to the meeting on July 29,
1988, each continuing Nonemployee Director (i.e., a director not
elected by stockholders for the first time) will automatically
receive, on such date, an option to purchase 1,000 shares of
Stock (subject to adjustment as provided in paragraph 2(b)
above), which option shall be immediately exercisable in full and
shall expire on the date of the fifth annual meeting of
stockholders next succeeding the date of grant. The approval by
the Company's stockholders on July 29, 1988, of the granting of a
limited number of options to the Nonemployee Directors under this
Plan shall constitute the only action required to determine the
Nonemployee Directors to whom stock options may be granted under
this Plan and the number of shares of Stock which may be covered
by Stock options granted to such Nonemployee Directors; no
further action being required of the Company's Board of
Directors. Subject to the aforementioned expiration provisions,
the term of each option shall be five years. All such options
shall be designated as Nonqualified Stock Options. Subject to
the foregoing, all provisions of the Plan not inconsistent with
the foregoing shall apply to options granted to Nonemployee
Directors, except that with respect to an option granted to a
Nonemployee Director, (a) any requirement for employment with the
Corporation or a subsidiary shall be deemed to be a requirement
for service as a director, (b) any requirement of continuous
employment shall be deemed to be a requirement of continuous
service as a director, (c) any reference to termination of
employment shall be deemed to mean termination of service as a
director, and (d) all unexercised options held by a nonemployee
director who retires from the Board after attaining age 70 shall
become fixed and be immediately exercisable on the date of his or
her retirement.
9. Amendment, Suspension or Termination of the Plan.
The Board of Directors may at any time suspend or
terminate the Plan, and may amend it from time to time in such
respects as the Board may deem advisable; provided, however,
that, except as provided in paragraph 2(b) hereof, the Board of
Directors shall not amend the Plan in the following respects
without the consent of stockholders then sufficient to approve
the Plan in the first instance:
(a) To increase the maximum number of shares subject
to the Plan;
(b) To change the designation or class of individuals
eligible to receive options under the Plan.
No option may be granted during any suspension or after
the termination of the Plan, and no amendment, suspension or
termination of the Plan shall, without the optionee's consent,
alter or impair any rights or obligations under any option
theretofore granted to him under the Plan. This Plan shall
remain in effect from the effective date until terminated by the
Board of Directors of the Corporation.
(c) To change the provisions of the Plan relating to
Nonemployee Directors in a way that would require stockholder
approval under Rule 16b-3.
10. Assignability.
Each option granted pursuant to this Plan shall, during
optionee's lifetime, be exercisable only by him, and neither the
option nor any right thereunder (including any stock appreciation
right) shall be transferable by optionee by operation of law or
otherwise other than by will or the laws of descent and
distribution.
11. Payment Upon Exercise.
Payment of the purchase price upon exercise of any
option granted under this Plan shall be made in cash; provided,
however, that the Committee, in its sole discretion, may permit
an option holder to pay the option price, in whole or in part, by
tendering to the Company shares of Armor All Products Corporation
common stock owned by the optionholder, and having a fair market
value equal to the option price. The fair market value of such
stock shall be determined by the Committee as it deems
appropriate, or as may be required in order to comply with any
applicable law or regulation.
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