-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, H2CzsDDE50AgcC//ih7O4INkueZVIqtOFtj6VWDCuWo7WoSqqVx96KVkaIJ7u7Cj DX9KEefJdQ2aW7GLEEmWLw== 0000950109-95-002527.txt : 199506290000950109-95-002527.hdr.sgml : 19950629 ACCESSION NUMBER: 0000950109-95-002527 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19950331 FILED AS OF DATE: 19950628 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: ARMOR ALL PRODUCTS CORP CENTRAL INDEX KEY: 0000797975 STANDARD INDUSTRIAL CLASSIFICATION: SPECIALTY CLEANING, POLISHING AND SANITATION PREPARATIONS [2842] IRS NUMBER: 330178217 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 000-14946 FILM NUMBER: 95550315 BUSINESS ADDRESS: STREET 1: 6 LIBERTY DR CITY: ALISO VIEJO STATE: CA ZIP: 92656 BUSINESS PHONE: 7143620600 10-K405 1 ANN. REPORT ON FORM 10-K 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 --------------- 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 Identification No.) incorporation or organization) 6 Liberty, Aliso Viejo, California 92656 - ------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (714) 362-0600 - ------------------------------------------------------------------------------- (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. TABLE OF CONTENTS PART I ------ Item Pages - ---- ----- 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 ------- 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 -------- 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 ------- 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K............................................ 9 Signatures............................................... 10 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. -1- 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. -2- 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. -3- 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. -4- 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. -5- 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 - -------------------------------------------------------------------------------- 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. -6- 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. -7- 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. -8- 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.
Annual Report Page ------------- 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
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. -9- 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 -10- 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 -11- Schedule II ARMOR ALL PRODUCTS CORPORATION VALUATION AND QUALIFYING ACCOUNTS AND RESERVES FOR THE YEARS ENDED MARCH 31, 1995, 1994 AND 1993 (in thousands)
================================================================================ - -------------------------------------------------------------------------------- Column A Column B Column C Column D Column E - -------------------------------------------------------------------------------- Additions Reductions --------- ---------- Accounts Balance at Charged to Written Off, Balance Beginning Revenues Net of at End Description of Year and Expenses Recoveries of Year - --------------------------- ---------- ------------ ------------ ------- 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
* Included as a reduction of Accounts Receivable in the consolidated balance sheets. -12- EXHIBIT INDEX Exhibit Number Description ------ ---------------------------------------------------------- (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- 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- 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- EX-3.B 2 BYLAWS OF ARMOR ALL Exhibit (3)B BYLAWS OF ARMOR ALL PRODUCTS CORPORATION a Delaware Corporation (as amended through July 22, 1994) TABLE OF CONTENTS ARMOR ALL PRODUCTS CORPORATION BYLAWS ARTICLE I Offices.................................................... 1 Section 1. Registered Office ......................................... 1 Section 2. Other Offices ............................................. 1 ARTICLE II Stockholders' Meetings .................................... 1 Section 1. Place of Meetings ......................................... 1 Section 2. Annual Meetings ........................................... 1 Section 3. Special Meetings .......................................... 1 Section 4. Notice of Meetings ........................................ 2 Section 5. Quorum .................................................... 3 Section 6. Voting Rights ............................................. 3 Section 7. Voting Procedures and Inspectors of Election ............................................ 4 Section 8. List of Stockholders. 5 Section 9. Action Without Meeting. 6 ARTICLE III Directors ................................................. 6 Section 1. Number and Term of Office ................................. 6 Section 2. Powers .................................................... 6 Section 3. Vacancies ................................................. 7 Section 4. Resignations and Removals ................................. 7 Section 5. Meetings .................................................. 7 Section 6. Quorum and Voting ......................................... 8 Section 7. Action Without Meeting .................................... 9 Section 8. Fees and Compensation ..................................... 9 Section 9. Committees ................................................ 9 ARTICLE IV Officers................................................... 11 Section 1. Officers Designated ........................... 11 Section 2. Tenure and Duties of Officers ............................. 11 ARTICLE V Execution of Corporate Instruments and Voting of Securities Owned by the Corporation ................. 12 Section 1. Execution of Corporate Instruments ........................ 12 i
Section 2. Voting of Securities Owned by the Corporation ............................................ 13 ARTICLE VI Shares of Stock ........................................... 13 Section 1. Form and Execution of Certificates ........................ 13 Section 2. Lost Certificates ......................................... 14 Section 3. Transfers ................................................. 14 Section 4. Fixing Record Dates ....................................... 14 Section 5. Registered Stockholders ................................... 15 ARTICLE VII Other Securities of the Corporation ....................... 15 ARTICLE VIII Corporate Seal ............................................ 16 ARTICLE IX Indemnification of Officers, Directors, Employees and Agents ................................... 16 Section 1. Right to Indemnification .................................. 16 Section 2. Right of Claimant to Bring Suit ........................... 17 Section 3. Non-Exclusivity of Rights ................................. 18 Section 4. Insurance ................................................. 18 ARTICLE X Notices ................................................... 18 ARTICLE XI Amendments ................................................ 20
ii 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 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 (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 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 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 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 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 (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 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 (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 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 (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 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 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 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 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 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 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 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 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 EX-10.L 3 LONG-TERM INCENTIVE PLAN 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 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. 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 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. 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. EX-10.R 4 SEPARATION/RELEASE AGMT. 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- 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- 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- 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- 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- 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- 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- 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- 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- 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- 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- 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- 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- 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- 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- 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- 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- 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- EX-13 5 ANNUAL REPORT Armor All Products Corporation Selected Financial Data
- ------------------------------------------------------------------------------------------------------------------------------------ Years Ended March 31 (in thousands except per share amounts) 1995 1994 1993 1992 1991 1990 - ------------------------------------------------------------------------------------------------------------------------------------ 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 ===============================================================================
/1/Net income divided by monthly average equity.
- ------------------------------------------------------------------------------------------------------------------------------------ March 31 (in thousands) 1995 1994 1993 1992 1991 1990 - ------------------------------------------------------------------------------------------------------------------------------------ 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 - ------------------------------------------------------------------------------------------------------------------------------------
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 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:
- -------------------------------------------------------------------------------- Years Ended March 31 (in millions) 1995 1994 1993 - -------------------------------------------------------------------------------- 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% - --------------------------------------------------------------------------------
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:
- -------------------------------------------------------------------------------- Years Ended March 31 1995 1994 1993 - -------------------------------------------------------------------------------- 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% =================================
12 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 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 Armor All Products Corporation Consolidated Balance Sheets
- --------------------------------------------------------------------------------------------------------------------- March 31 (in thousands except share and per share amounts) 1995 1994 - --------------------------------------------------------------------------------------------------------------------- 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 =============================
See accompanying notes to consolidated financial statements. 1995 ANNUAL REPORT 15 Armor All Products Corporation Consolidated Statements of Income
- ------------------------------------------------------------------------------------------------------------------------- Years Ended March 31 (in thousands except per share amounts) 1995 1994 1993 - ------------------------------------------------------------------------------------------------------------------------- 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 ==========================================
See accompanying notes to consolidated financial statements. 16 Armor All Products Corporation Consolidated Statements of Stockholders' Equity
- --------------------------------------------------------------------------------------------------------------------------------- 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 - --------------------------------------------------------------------------------------------------------------------------------- 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 =======================================================================================
See accompanying notes to consolidated financial statements. 1995 ANNUAL REPORT 17 Armor All Products Corporation Consolidated Statements of Cash Flows
- --------------------------------------------------------------------------------------------------------------------------------- Years Ended March 31 (in thousands) 1995 1994 1993 - --------------------------------------------------------------------------------------------------------------------------------- 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 ===============================================
See accompanying notes to consolidated financial statements. 18 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 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:
- -------------------------------------------------------------------------------- Years Ended March 31 (in thousands) 1995 1994 1993 - -------------------------------------------------------------------------------- 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 =================================
4. Inventories Inventories are summarized as follows:
- -------------------------------------------------------------------------------- March 31 (in thousands) 1995 1994 - -------------------------------------------------------------------------------- Finished goods $10,338 $3,514 Raw materials 2,357 668 ------------------- Total $12,695 $4,182 ===================
5. Property Property is summarized as follows:
- -------------------------------------------------------------------------------- March 31 (in thousands) 1995 1994 - -------------------------------------------------------------------------------- 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 =======================
6. Intangible Assets Intangible assets consist of the following:
- -------------------------------------------------------------------------------- March 31 (in thousands) 1995 1994 - -------------------------------------------------------------------------------- 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 ========================
20 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:
- -------------------------------------------------------------------------------- Years Ended March 31 (in thousands) 1995 1994 1993 - -------------------------------------------------------------------------------- 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 ==================================
The reconciliations between the Company's effective tax rate and the statutory federal income tax rate follow:
- -------------------------------------------------------------------------------- Years Ended March 31 1995 1994 1993 - -------------------------------------------------------------------------------- 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% ===============================
Deferred income taxes in the accompanying consolidated balance sheets are comprised of the following:
- -------------------------------------------------------------------------------- March 31 (in thousands) 1995 1994 - -------------------------------------------------------------------------------- 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) =====================
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 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:
- -------------------------------------------------------------------------------- Years Ended March 31 1995 1994 1993 - -------------------------------------------------------------------------------- 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 - --------------------------------------------------------------------------------
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:
- -------------------------------------------------------------------------------- Years Ended March 31 (in thousands) 1995 1994 1993 - -------------------------------------------------------------------------------- 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 ===================================
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 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)
- ----------------------------------------------------------------------------------------------------------------------------------- First Second Third Fourth Years Ended March 31 (in thousands except per share amounts) Quarter Quarter Quarter Quarter(a) Year - ----------------------------------------------------------------------------------------------------------------------------------- 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 - -----------------------------------------------------------------------------------------------------------------------------------
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 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 EX-21 6 SUBSIDIARIES 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:
Jurisdiction of Organization --------------- Armor All Products GmbH...................................... Germany Armor All Products of Canada, Inc............................ Canada
-16- EX-23 7 CONSENT 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- EX-27 8 FINANCIAL DATA SCHEDULE
5 1,000 YEAR MAR-31-1995 APR-01-1994 MAR-31-1995 22,249 0 87,206 (2,341) 12,695 121,566 14,813 (5,440) 172,850 43,384 0 213 0 0 128,772 172,850 216,789 216,789 93,103 93,103 0 3,555 0 42,072 17,544 0 0 0 0 24,528 1.16 1.16
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