-----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, bFjSs7x/r7od/18Hd8u796O5seehTqotwZOnEgZzswe0E6aUx7nhrGEnIuNAzugG ZOQ7v8QmmcqJ2xzbE0qr0g== 0000950131-94-001021.txt : 19940701 0000950131-94-001021.hdr.sgml : 19940701 ACCESSION NUMBER: 0000950131-94-001021 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 10 CONFORMED PERIOD OF REPORT: 19940331 FILED AS OF DATE: 19940621 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ARMOR ALL PRODUCTS CORP CENTRAL INDEX KEY: 0000797975 STANDARD INDUSTRIAL CLASSIFICATION: 2842 IRS NUMBER: 330178217 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-14946 FILM NUMBER: 94535018 BUSINESS ADDRESS: STREET 1: 6 LIBERTY DR CITY: ALISO VIEJO STATE: CA ZIP: 92656 BUSINESS PHONE: 7143620600 10-K 1 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, 1994 OR [_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the transition period from ____________________ to _____________________ Commission file number 0-14946 ----------- 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. [_] Aggregate market value of voting stock held by nonaffiliates of the Registrant at June 1, 1994: $185,977,580 Number of shares of common stock outstanding at June 1, 1994: 21,172,986 Documents Incorporated by Reference Portions of the Registrant's Annual Report to Stockholders for the fiscal year ended March 31, 1994 are incorporated by reference into Parts II and IV of this report. Portions of the Registrant's Proxy Statement for the Annual Meeting of Stockholders to be held on July 22, 1994 are incorporated by reference into Part III of this report. TABLE OF CONTENTS PART I ------
Item Pages - - - ---- ----- 1. Business............................................................. 1 2. Properties........................................................... 4 3. Legal Proceedings.................................................... 4 4. Submission of Matters to a Vote of Security Holders.................. 5 Executive Officers of the Registrant................................. 5 PART II ------- 5. Market for Registrant's Common Stock and Related Stockholder Matters 6 6. Selected Financial Data.............................................. 6 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.............................................. 6 8. Financial Statements and Supplementary Data.......................... 6 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure............................................... 6 PART III -------- 10. Directors and Executive Officers of the Registrant................... 7 11. Executive Compensation............................................... 7 12. Security Ownership of Certain Beneficial Owners and Management....... 7 13. Certain Relationships and Related Transactions....................... 7 PART IV ------- 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.... 8 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 appearance aftermarket. In January 1994, the Company began marketing a line of branded home care products. Prior to May 1993, McKesson Corporation ("McKesson") owned approximately 83% of the Company's outstanding shares of common stock. In May 1993, McKesson reduced its ownership level to approximately 57% through a sale of shares to the public. In March 1994, McKesson issued debentures which are exchangeable into additional shares of the Company's common stock owned by McKesson at a price of $25.94 per share at any time through February 2004, subject to McKesson's right to pay cash equal to the market price of the stock in lieu of making the exchange. If all such debentures were actually exchanged, McKesson's ownership level would be reduced to approximately 25%. PRODUCTS The Company develops and markets a broad line of automotive appearance chemicals under four brand names: Armor All/(R)/, Rain Dance/(R)/, Rally/(R)/ and No. 7/(R)/. The Company also markets home care products under the E-Z Deck Wash/ (R)/ and E-Z D/TM/ brand names. Armor All Brand The Company develops and markets protectants, waxes, washes and other cleaning aids under the Armor All name. The Company's principal product, Armor All/(R)/ Protectant, is designed to protect and beautify natural and synthetic polymer materials and is primarily used on automobile surfaces made of rubber, vinyl and plastic, such as dashboards, seats, vinyl tops, door panels, tire sidewalls and rubber bumpers. Sales of Armor All Protectant, including the new low-gloss version mentioned below, accounted for 68% and 70% of the Company's revenues in fiscal 1994 and 1993, respectively. Armor All/(R)/ Tire Foam/(R)/ Protectant, introduced in November 1991, is designed to clean, shine and protect tire sidewalls without wiping. Armor All/(R)/ Leather Care Protectant, also introduced in November 1991, is designed primarily for leather upholstery. The Company also markets a liquid car wax, a multi-purpose cleaner, and a car wash liquid concentrate under the Armor All name. In December 1993, the Company began shipping three new products under the Armor All brand name: Armor All Protectant Low-Gloss Natural Finish/TM/, a low-gloss version of Armor All Protectant designed to minimize dashboard glare for consumers who prefer a less shiny appearance; Armor All/(R)/ QuickSilver/TM/ Wheel Cleaner, a spray-on wheel cleaner designed for use on wheels, wheel covers and hubcaps; and Armor All /(R)/ Spot & Wash/TM/ Concentrate, a car wash product designed to remove bugs, tar residue and tree sap from car finishes. Rain Dance Brand The Company markets polishes, waxes and car wash products under the Rain Dance name. In November 1991, the Company introduced Rain Dance/(R)/ Advanced Formula/TM/ Car Polish, and in January 1993, the Company introduced two additional car polishes, Rain Dance/(R)/ Light Car Formula Polish and Rain Dance/(R)/ Dark Car Formula Polish, with different light reflectant characteristics. Liquid and paste car wax and a variety of car wash products are also marketed under the Rain Dance name. -1- Rally and No. 7 Brands The Company markets cream and liquid waxes under the Rally name. Under the No. 7 name, the Company markets a variety of polishing and rubbing compounds and other cleaning aids. E-Z Deck Wash and E-Z D Brands The Company acquired the E-Z Deck Wash and E-Z D brands on January 28, 1994. The E-Z Deck Wash product cleans and restores wood surfaces such as patio decks, siding and fences. Products in the E-Z D line include a vinyl wash, a paint preparation treatment, a roof wash , an aluminum wash and a mobile home/recreational vehicle wash. The E-Z Deck Wash and E-Z D products are being marketed under the Armor All name. GEOGRAPHIC MARKETS The Company's products are sold predominantly in the United States and Canada, with additional sales occurring in 70 other countries. In fiscal 1994, 86% of sales were in the United States, 6% in Canada and 8% in other foreign countries, principally Australia, Germany, Japan, Mexico and the United Kingdom. The Company does not have large fixed capital investments in its foreign operations. Foreign currency exchange fluctuations have not had a significant impact on the Company's operating results. SALES AND MARKETING In the United States and Canadian automotive appearance market, a sales force of 13 employees accounted directly for over 50% of the Company's revenues in fiscal 1994. In addition, the Company's sales force oversees 21 independent manufacturers' representative organizations that also market the Company's products. Primary customers include mass merchandise retailers, auto supply stores, warehouse clubs, hardware stores and other retail outlets. The Company believes that its automotive appearance products are sold at over 100,000 retail outlets. In the United States home care market, a sales force of 4 employees oversees 18 manufacturers' representative organizations that market the Company's products. Primary customers include home centers, warehouse clubs, mass merchandise retailers and hardware stores. In Canada, the Company licenses the distribution of its home care products to an independent sales agency. The Company's largest customers represent an increasing percentage of its revenues. Sales to the Company's 20 largest customers accounted for 65%, 63% and 59% of the Company's consolidated revenues in fiscal 1994, 1993 and 1992, respectively. Sales to the Company's two largest customers, Wal-Mart Stores, Inc. (and its affiliates) and Kmart Corporation (and its affiliates), accounted for the following respective percentages of the Company's revenues: 17% and 8% in fiscal 1994, 15% and 11% in fiscal 1993, and 12% and 11% in fiscal 1992. The Company's direct sales force works closely with the Company's largest customers on joint marketing and promotional activities. The Company also assists its customers with inventory management supported in certain cases, by electronic data interchange ("EDI") links between the Company and the customer. In addition, EDI provides the Company with valuable marketing information. Among other things, the Company uses EDI point-of-sale statistics to analyze geographic purchase patterns, measure the success of test marketing programs and monitor sales of holiday gift packs and other time-sensitive promotions. The Company's management assists in sales and marketing efforts by providing national advertising and promotional support and retail merchandising management assistance, including product information and sales training. The Company's promotional activities target both trade accounts and retail consumers. Over the past three years, the Company has increased the proportion of marketing funds which are offered to trade customers as fixed sums in return for specific promotional activities, as opposed to more general cooperative advertising arrangements. From time to time, the Company uses various retail sales incentive devices, such as coupons, rebates, "Bonus Packs" (e.g., 10 ounces for the price of 8), merchandise with attached free samples, and other special offers to stimulate retail sales. -2- Retail sales of the Company's products are seasonal and are highest between April and September. However, sales to the Company's customers are highest in its fourth fiscal quarter (from January through March). Consistent with industry practice, the Company offers extended payment terms in conjunction with its winter promotional activities. International sales are effected through sales offices in Canada and the United Kingdom, through foreign distributors, and through a marketing and distribution alliance with S. C. Johnson & Son, Inc. Under an agreement between the Company and S.C. Johnson, S. C. Johnson is the exclusive distributor of Armor All Protectant and certain of the Company's other products in Germany, Japan and Mexico, subject to agreement with the Company on annual business and marketing plans for each country. Under the agreement, S. C. Johnson pays virtually all selling and marketing expenses, and the Company and S.C. Johnson share in the profits or losses. The S.C. Johnson agreement expires in June 2001, with automatic five-year renewals unless either party provides 12 months' prior notice. The Company will have the right to terminate the agreement on a country-by-country basis if S.C. Johnson fails to meet certain revenue objectives over specified periods, subject to S.C. Johnson's right to avoid termination by compensating the Company for any shortfall. S. C. Johnson is also the exclusive distributor of Armor All Protectant in several Southeast Asian countries under separate agreements that do not involve profit or loss sharing. MANUFACTURING AND PACKAGING The Company's products are manufactured by contract packagers. The Company's relationships with its three most important packagers have lasted for 6, 9 and 21 years, respectively. Subject to contractual arrangements, the Company periodically reevaluates its selection of packagers and believes that other acceptable packagers are readily available. The Company avoids significant investments in inventory. In general, the Company's full-service packagers are responsible for purchasing product ingredients and approved component packaging materials. The Company negotiates the raw material supply arrangements on behalf of its packagers. The packagers blend, package and warehouse the finished product. With certain exceptions, the full-service packagers own all the raw materials and finished products in their possession and transfer title to the Company just prior to shipment to the Company's customers. In the case of Armor All Protectant and Armor All Tire Foam Protectant, the Company premixes a concentrate which it sells to the full- service packagers. For certain other products, the Company has title to raw materials and finished products and pays a manufacturing fee to the packager. The Company's products are manufactured in five principal locations in the United States, one location in Canada and one location in Australia. Protectants are manufactured at five of these locations, waxes at one location, and home care products at the other location. Management believes that the existing packagers can accommodate the Company's production needs for the foreseeable future. The Company has alternative sources for the ingredients used in, and packaging components for, all of its products. The Company has contracts with certain suppliers to provide a continued supply of the primary chemical ingredients and packaging components used in producing its products, which expire by their terms on various dates through March 1995. TRADEMARKS AND PATENTS The Company's principal trademarks are: . ARMOR ALL(R) . Symbol of a male VIKING figure surrounded by a rainbow design . Symbol of a male VIKING figure surrounded by a sunburst design . RAIN DANCE(R) . RALLY(R) . NO. 7(R) . E-Z DECK WASH(R) . E-Z D/TM/ The Company also owns other registered and unregistered trademarks. All of the principal trademarks are registered in the United States and Canada. The ARMOR ALL and VIKING trademarks are also registered in over 80 other countries. All of the other principal trademarks are also registered in at least several other countries. The Company believes it has taken all necessary steps to preserve the registration of its trademarks. -3- The Company also owns a process patent on ARMOR ALL Protectant and a patent on RAIN DANCE wax, and has applied for patents on ARMOR ALL QuickSilver Wheel Cleaner and ARMOR ALL Spot & Wash Concentrate. In addition, the Company owns a patent on an E-Z DECK WASH product and has other domestic and foreign E-Z DECK WASH patents pending. The Company's process patent on ARMOR ALL Protectant will expire in 1996. Management believes that the Company's trademarks are more important assets than its patents, and that the termination or invalidity of its patents would not have a materially adverse effect on the Company. COMPETITION In the domestic protectant market, the Company has two principal competitors, STP/(R)/ Son-of-a-Gun/(R)/ Protectant and Turtle Wax/(R)/ Formula 2001/(R)/, and several secondary competitors. Armor All Tire Foam Protectant has three principal competitors, Turtle Wax/(R)/ Formula 2001, STP/(R)/ Son-of- a-Gun/(R)/ Tire Care and No Touch/(R)/, and several secondary competitors. Armor All brand cleaner competes against many specialty automotive cleaner products. Armor All brand wax and wash products and all of the Rain Dance and Rally brand products compete with numerous wash, wax and polish products in the automotive aftermarket. The No. 7 brand products compete with many wash and specialty cleaning products. Competition in international markets varies by country. In the domestic home care products market, the E-Z Deck Wash and E-Z D brand products have two principal competitors, Thompson's/(R)/ Deck Wash and Olympic/(R)/ Deck Cleaner, and several secondary competitors. EMPLOYEES At March 31, 1994, the Company employed 128 persons. None are represented by unions. The Company believes its employee relations are good. ITEM 2. PROPERTIES The Company owns its headquarters facility located in Aliso Viejo, California. The facility, which was built in 1989, comprises 45,000 square feet of office space on a 4.6 acre site. The Company also leases approximately 17,000 square feet of warehouse space in Aliso Viejo, California. The facility is used primarily for warehousing certain components, finished goods and promotional items. The Company also mixes the Armor All Protectant and Armor All Tire Foam Protectant concentrates and performs various special product-packaging functions at this location. The Company utilizes limited space in various public warehouses in the United States and abroad for temporary inventory storage and shipping. The Company maintains sales offices in Tennessee, Canada and the United Kingdom, each with less than 2,000 square feet. It conducts its laboratory research and development activities at a leased facility of approximately 5,000 square feet located near the Company's headquarters in Aliso Viejo, California. The Company believes that these properties will be sufficient to meet its needs for the next several years. ITEM 3. LEGAL PROCEEDINGS In addition to commitments and obligations which arise in the ordinary course of business, the Company is subject to various claims, proceedings and legal actions from time to time involving contracts, competitive practices, advertising claims, trademark rights, product liability claims, tax assessments and other matters arising out of the conduct of the Company's business. Management believes that, based on current knowledge, the outcome of any such pending matters will not have a material adverse effect on the Company's financial position. -4- ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of security holders, through the solicitation of proxies or otherwise, during the quarter ended March 31, 1994. EXECUTIVE OFFICERS OF THE REGISTRANT The following table sets forth information concerning the executive officers of the Registrant as of June 1, 1994. There are no family relationships between any of the executive officers or directors of the Registrant. The executive officers are elected annually to serve until the first meeting of the Board of Directors following the next annual meeting of stockholders and until their successors are elected and have qualified, or until death, resignation or removal, whichever is sooner.
Name Age Position with Registrant and Business Experience - - - ------------------------------------------------------------------------------- David E. McDowell 51 Chairman of the Board since April 1992. President and Chief Operating Officer of McKesson since January 1992. Vice President and General Manager, Quality and Chief Information Officer of International Business Machines Corporation (IBM) from November 1990 until January 1992; President of IBM's National Service Division from July 1987 until November 1990. Chairman of the Compensation Committee and member of the Audit Committee of the Board. Service with the Company - 2 years. Kenneth M. Evans 52 President and Chief Executive Officer since April 1991; Group Vice President of the Do-it-Yourself Products Group of L. & F. Products, a subsidiary of Eastman Kodak from 1989 to April 1991. Service with the Company - 3 years. Mervyn J. McCulloch 50 Executive Vice President and Chief Financial Officer since March 1990; Partner of Deloitte & Touche, a public accounting firm, from 1972 to March 1990. Service with the Company - 4 years. Michael A. Caron 43 Senior Vice President since October 1991; President of Armor All International, a division of the Company, since August 1993; Senior Vice President - Marketing from October 1991 to August 1993; Senior Vice President, Marketing/Inter- national Operations from April 1989 to October 1991. Service with the Company - 9 years. Steven L. Kliff 36 Senior Vice President, Consumer Products, since August 1993; Vice President, Sales and Product Development from November 1991 to August 1993; Vice President, Product and Business Development from September 1991 to November 1991; From February 1986 to August 1991, held various positions with Blistex Incorporated, a manufacturer of over-the-counter topical medications, including Director of Marketing/Chief Marketing Officer and Director of Strategic Planning. Service with the Company - 3 years.
-5- PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS (A) MARKET INFORMATION The Company's Common Stock, par value of $0.01 per share, is traded in the over-the-counter market under the symbol ARMR. The high and low closing prices reported by the NASDAQ National Market System appear in financial note 12, "Quarterly Financial Information" (unaudited) on page 23 of the 1994 Annual Report to Stockholders, which information is incorporated by reference. (B) HOLDERS The approximate number of record holders of the Company's common stock as of May 15, 1994 was 350. The estimated number of beneficial holders was 2,500. (C) DIVIDENDS Dividend information is included in financial note 12, "Quarterly Financial Information" (unaudited) on page 23 of the 1994 Annual Report to Stockholders, which information is incorporated by reference. ITEM 6. SELECTED FINANCIAL DATA Selected financial data appear on page 1 of the 1994 Annual Report to Stockholders, which information is incorporated by reference. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Management's discussion and analysis of financial condition and results of operations appears in the section entitled "Financial Review" on pages 12 to 14 of the 1994 Annual Report to Stockholders, which information is incorporated by reference. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Financial statements appear on pages 15 to 24 of the 1994 Annual Report to Stockholders, which financial statements are incorporated herein by reference. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Not applicable. -6- PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Information with respect to Directors of the Company is incorporated by reference from the Registrant's 1994 Proxy Statement. Certain information relating to Executive Officers of the Company appears on page 5 of this Form 10- K Annual Report. The information with respect to this item required by Item 405 of Regulation S-K is incorporated by reference from the Company's 1994 Proxy Statement. ITEM 11. EXECUTIVE COMPENSATION Information with respect to this item is incorporated by reference from the Registrant's 1994 Proxy Statement. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Information with respect to this item is incorporated by reference from the Registrant's 1994 Proxy Statement. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Information with respect to certain transactions with McKesson and management is incorporated by reference from the Registrant's 1994 Proxy Statement. -7- PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (A) EXHIBITS AND FINANCIAL STATEMENT SCHEDULES The following consolidated financial statements of the Company, other financial information and independent auditors' report are contained in the 1994 Annual Report to Stockholders and are incorporated by reference.
Annual Report Page ------------- Consolidated Financial Statements Consolidated Balance Sheets at March 31, 1994 and 1993 15 Consolidated Statements of Income for the years ended March 31, 1994, 1993 and 1992 16 Consolidated Statements of Stockholders' Equity for the years ended March 31, 1994, 1993 and 1992 17 Consolidated Statements of Cash Flows for the years ended March 31, 1994, 1993 and 1992 18 Notes to Consolidated Financial Statements 19 Independent Auditors' Report 24 The following are included herein: 10-K Page ------------- Independent Auditors' Report 11 Consolidated Supplementary Financial Schedules for the years ended March 31, 1994, 1993 and 1992 II. Amounts Receivable from Related Parties and Underwriters, Promoters, and Employees (Other than Related Parties) 12 VIII. Valuation and Qualifying Accounts and Reserves 13 X. Supplementary Income Statement Information 14
Financial statements and schedules not included or incorporated by reference herein have been omitted because of the absence of conditions under which they are required or because the required information, where material, is shown in the financial statements, financial notes or supplementary financial information. See Exhibit Index on pages 15 and 16. The following exhibits listed on the Exhibit Index are included herein: (3)B By-Laws of the Company as amended through March 21, 1994. (10)A Services Agreement dated as of July 1, 1986 between the Company and McKesson, as amended through March 23, 1993. (10)E Form of Termination Agreement dated as of May 15, 1994 between the Company and certain executive officers. (10)N Armor All Products Corporation Supplemental Profit-Sharing Investment Plan adopted August 1, 1989. (10)P Letter Agreement dated November 4, 1993 amending the Distribution Agreement between S.C.Johnson & Son, Inc. and the Company (portions of which are not disclosed pursuant to the Company's request for confidential treatment). -8- (10)Q Asset Purchase and Sale Agreement dated January 26, 1994 between Agri-Products Special Markets, Inc. and the Company (portions of which are not disclosed pursuant to the Company's request for confidential treatment). (13) Portions of the Company's Annual Report to Stockholders for the fiscal year ended March 31, 1994. (21) Subsidiaries of the Registrant. (23) Independent Auditors' Consent. (B) REPORTS ON FORM 8-K There were no reports filed on Form 8-K during the quarter ended March 31, 1994. -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 17, 1994 ------------ By /s/Kenneth M. Evans -------------------------------------- Kenneth M. Evans President and Chief Executive Officer By /s/Mervyn J. McCulloch -------------------------------------- Mervyn J. McCulloch Executive Vice President and Chief Financial Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below on May 17, 1994 by the following persons on behalf of the Registrant and in the capacities indicated. s/William A. Armstrong /s/David E. McDowell - - - -------------------------------- ---------------------------------- William A. Armstrong, Director David E. McDowell, Chairman of the Board and Director /s/Jon S. Cartwright /s/Karen Gordon Mills - - - -------------------------------- ---------------------------------- Jon S. Cartwright, Director Karen Gordon Mills, Director /s/Kenneth M. Evans /s/Joseph A. Sasenick - - - -------------------------------- ---------------------------------- Kenneth M. Evans, President Joseph A. Sasenick, Director and Chief Executive Officer and Director /s/David L. Mahoney - - - -------------------------------- ---------------------------------- David L. Mahoney, Director Alan Seelenfreund, Director -10- INDEPENDENT AUDITORS' REPORT To the Board of Director and Stockholders of Armor All Products Corporation: We have audited the consolidated financial statements of Armor All Products Corporation and subsidiaries as of March 31, 1994 and 1993, and for each of the three years in the period ended March 31, 1994, and have issued our report thereon dated April 22, 1994; such consolidated financial statements and report are included in your 1994 Annual Report to Stockholders and are incorporated herein by reference. Our audits also included the consolidated financial statement schedules of Armor All Products Corporation, listed in Item 14(a). These consolidated financial statement schedules are the responsibility of the Corporation's management. Our responsibility is to express an opinion based on our audits. In our opinion, such consolidated financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly in all material respects the information set forth therein. DELOITTE & TOUCHE Costa Mesa, California April 22, 1994 -11- SCHEDULE II ARMOR ALL PRODUCTS CORPORATION AMOUNTS RECEIVABLE FROM RELATED PARTIES AND UNDERWRITERS, PROMOTERS, AND EMPLOYEES (OTHER THAN RELATED PARTIES) FOR THE YEARS ENDED MARCH 31, 1994, 1993 AND 1992 (IN THOUSANDS)
- - - -------------------------------------------------------------------------------------------------------------- Column A Column B Column C Column D Column E - - - -------------------------------------------------------------------------------------------------------------- Balances at End of Period ------------------------- Due Due Beginning Amounts Within After of Year Additions Collected One Year One Year --------- --------- --------- -------- -------- Name of Debtor - - - ------------------- Officers: Year Ended March 31, 1994 - - - ------------------------- Kenneth M. Evans $ 25 $ -0- $ (25) $ -0- $ -0- Steven L. Kliff(1) -0- 520 -0- -0- 520 Year Ended March 31, 1993 - - - ------------------------- Kenneth M. Evans 150 -0- (125) 25 -0- Steven L. Kliff 290 -0- (290) -0- -0- Year Ended March 31, 1992 - - - ------------------------- Kenneth M. Evans(2) -0- 550 (400) 125 25 Steven L. Kliff(3) -0- 290 -0- 290 -0-
- - - ------------------- NOTES: (1) Consists of a promissory note secured by real property in Southern California. The principal amount of the note is due on the earlier of the date the real property is sold or February 15, 1996. Interest is payable monthly at 3.875% through August 15, 1994 and at rates thereafter based on a specified market rate, subject to a maximum increase of 1.0% in any six-month period. (2) Includes a $450,000 loan used by the employee in connection with his purchase of real property in Southern California after beginning employment with the Company. The loan, which has been fully repaid, was unsecured and noninterest-bearing. (3) Represents a noninterest-bearing relocation loan which has been fully repaid. -12- SCHEDULE VIII ARMOR ALL PRODUCTS CORPORATION VALUATION AND QUALIFYING ACCOUNTS AND RESERVES FOR THE YEARS ENDED MARCH 31, 1994, 1993 AND 1992 (IN THOUSANDS)
- - - ------------------------------------------------------------------------------------------------------- Column A Column B Column C Column D Column E - - - ------------------------------------------------------------------------------------------------------- Addditions Reduction --------------------------- ----------------- Balance at Charged to Charged Account Balance Beginning Costs and Against Written Offer, at End Description of Year Expenses Revenues Net of Recoveries of Year - - - ------------- ---------- ----------- ----------- ------------------ --------- Year Ended March 31, 1994 - - - ------------------------- Reserves for: Cash discounts* $1,122 $-0- $2,980 $(2,796) $1,306 Doubtful accounts* 738 578 -0- 3 1,319 Year Ended March 31, 1993 - - - ------------------------- Reserves for: Cash discounts* 1,020 -0- 2,871 (2,769) 1,122 Doubtful accounts* 628 539 -0- (429) 738 Year Ended March 31, 1992 - - - ------------------------- Reserves for: Cash discounts* 1,058 -0- 2,669 (2,707) 1,020 Doubtful accounts* 1,732 385 -0- (1,489) 628
*Included as a reduction of Accounts Receivable in the consolidated balance sheets. SCHEDULE X -13- ARMOR ALL PRODUCTS CORPORATION SUPPLEMENTARY INCOME STATEMENT INFORMATION FOR THE YEARS ENDED MARCH 31, 1994, 1993 AND 1992 (IN THOUSANDS)
- - - --------------------------------------------------------------------------------------------- Column A Column B - - - --------------------------------------------------------------------------------------------- Charged to Selling, General and Administrative Expenses -------------------------------------------- Item 1994 1993 1992 - - - ----------------- -------------------------------------------- Advertising and promotion $43,331 $41,233 $38,595
All other items required by Rule 12-11 of Regulation S-X are omitted because they are disclosed in the consolidated financial statements or are less than 1% of total revenues. -14-
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 March 21, 1994. (10)A Services Agreement dated as of July 1, 1986 between the Company and McKesson, as amended through March 23, 1993. (10)B* Tax Allocation Agreement dated as of July 1, 1986 between the Company and McKesson (Exhibit 10.2 to Form S-1 Registration Statement No. 33-07506). (10)C* Indemnity Agreement with Directors of the Company (Exhibit 10.3 to Form S-1 Registration Statement No. 33-07506). (10)D* Form of Employment Agreement dated as of April 15, 1991 between the Company and its President and Chief Executive Officer. (Exhibit (10)D to Form 10-K Report for the fiscal year ended March 31, 1991). (10)E Form of Termination Agreement dated as of May 15, 1994 between the Company and certain corporate officers. (10)F* Form of Termination Agreement between the Company and its President and Chief Executive Officer. (Exhibit (10)F to Form 10-K Report for the fiscal year ended March 31, 1991). (10)G* Supply Contract for Raw Materials (portions of which are not disclosed pursuant to the Company's request for confidential treatment). (Exhibit (10)G to Form 10-K Report for the fiscal year ended March 31, 1992). (10)H* Contract Packaging Agreement (portions of which are not disclosed pursuant to the Company's request for confidential treatment). (Exhibit (10)H to Form 10-K Report for the fiscal year ended March 31, 1993). (10)I* Armor All Products Corporation 1986 Stock Option Plan as amended through January 21, 1993. (Exhibit (10)I to Form 10-K Report for the fiscal year ended March 31, 1993). (10)J* Armor All Products Corporation Deferred Compensation Administration Plan. (Exhibit (19)C to Form 10-Q Report for the quarter ended December 31, 1987). (10)K* Armor All Products Corporation 1988 Restricted Stock Plan as amended through July 23, 1993. (Exhibit (10) to Form 10-Q Report for the quarter ended June 30, 1993). (10)L* Armor All Products Corporation 1988 Long-Term Incentive Plan as amended through November 28, 1990. (Exhibit (10)N to Form 10-K Report for the fiscal year ended March 31, 1991). (10)M* Armor All Products Corporation 1989 Short-Term Incentive Plan. (Exhibit (10)P to Form 10-K Report for the fiscal year ended March 31, 1989). (10)N Armor All Products Corporation Supplemental Profit-Sharing Investment Plan adopted August 1, 1989. (10)O* Distribution Agreement between S.C. Johnson & Son, Inc. and Armor All Products Corporation dated April 1, 1991 (portions of which are not disclosed pursuant to the Company's request for confidential treatment). (Exhibit (10)N to Form 10-K Report for the fiscal year ended March 31, 1992).
* Document has heretofore been filed with the Commission and is incorporated by reference and made a part hereof. -15-
EXHIBIT INDEX EXHIBIT NUMBER DESCRIPTION - - - ------- ------------------------------------------------------------------ (10)P Letter Agreement dated November 4, 1993 amending the Distribution Agreement between S. C. Johnson & Son, Inc. and the Company (portions of which are not disclosed pursuant to the Company's request for confidential treatment). (10)Q Asset Purchase and Sale Agreement dated January 26, 1994 between Agri-Products Special Markets, Inc. and the Company (portions of which are not disclosed pursuant to the Company's request for confidential treatment). (13) Portions of the Company's Annual Report to Stockholders for the fiscal year ended March 31, 1994. (21) Subsidiaries of the Registrant. (23) Independent Auditors' Consent.
-16- Executive Compensation Plans and Arrangements --------------------------------------------- Armor All Products Corporation 1986 Stock Option Plan as amended through January 21, 1993 - Exhibit (10)I to Form 10-K Report for the fiscal year ended March 31, 1993. Armor All Products Corporation Deferred Compensation Administration Plan - Exhibit (19)C to Form 10-Q Report for the quarter ended December 31, 1987. Armor All Products Corporation 1988 Restricted Stock Plan as amended through July 23, 1993 - Exhibit (10) to Form 10-Q Report for the quarter ended June 30, 1993. Armor All Products Corporation 1988 Long-Term Incentive Plan as amended through November 28, 1990 - Exhibit (10)N to Form 10-K Report for the fiscal year ended March 31, 1991. Armor All Products Corporation 1989 Short-Term Incentive Plan - Exhibit (10)P to Form 10-K Report for the fiscal year ended March 31, 1989. Armor All Products Corporation Supplemental Profit-Sharing Investment Plan - Exhibit (10)N to Form 10-K Report for the fiscal year ended March 31, 1994. Form of Employment Agreement dated as of April 15, 1991 between the Company and its President and Chief Executive Officer - Exhibit (10)D to Form 10-K Report for the fiscal year ended March 31, 1991. Form of Termination Agreement between the Company and its President and Chief Executive Officer - Exhibit (10)F to Form 10-K Report for the fiscal year ended March 31, 1991. Form of Termination Agreement between the Company and certain executive officers - Exhibit (10)E to Form 10-K Report for the fiscal year ended March 31, 1994. -17- DATA STATED IN MILLIONS ARMOR ALL PRODUCTS CORPORATION VOLUNTARY SCHEDULE - CERTAIN FINANCIAL INFORMATION
YEAR YEAR YEAR TO DATE TO DATE TO DATE ENDED ENDED ENDED REGULATION NUMBER STATEMENT CAPTION 3/31/94 3/31/93 3/31/92 - - - --------------------------------------------------------------------------------------------- 5-02-(1) Cash and cash items $ 26.3 $ 33.9 $ 15.7 5-02(2) Marketable securities 5-02(3)(a)(1) Accounts receivable - trade 5-02(3)(b)(1) Notes receivable trade 5-02(4) Allowance for doubtful accounts 5-02(5) Unearned income 5-02(6)a(1) Finished goods 5-02(9) Total current assets 99.2 93.4 68.5 5-02(18) Total assets 151.8 140.6 119.8 5-02(21) Total current liabilities 34.9 33.1 22.3 5-02(22) Bonds mortgages & similar debts 5-02(23) Indebtedness to related parties 5-02(24) Other liabilities 5-02(28) Preferred stock-mandatory redemption 5-02(29) Preferred stock-no mandatory redemption 5-02(30) Common stock .2 .2 .2 5-02(31)(a)(1) Additional paid in capital 58.2 57.3 58.0 5-02(31)(a)(2) Additional capital other (0.8) (0.2) (0.2) 5-02(31)(1)(3)(i) Retained earnings - appropriated 5-02(31)(1)(3)(ii) Retained earnings - unappropriated 58.4 49.3 40.3 5-03(b)(1)(a) Net sales tangible products 182.3 168.4 145.9 5-03(b)(1)(b) Operating revenues utilities & others 5-03(b)(1)(c) Income from rentals 5-03(b)(1)(d) Revenues from services 5-03(b)(1)(e) Other revenues 5-03(b)(2)(a) Cost of tangible goods sold 5-03(b)(2)(b) Operating expenses utilities & others 5-03(b)(2)(c) Cost of income from rentals 5-03(b)(2)(d) Cost of services 5-03(b)(2)(e) Cost of other revenues 5-03(b)(8) Interest & amortization of debt discount 5-03(b)(10) Income before taxes and other items 39.6 33.4 22.5 5-03(b)(11) Income tax expenses 17.0 14.2 9.6 5-03(b)(14) Income/loss from continuing operations 5-03(b)(15) Discontinued operations 5-03(b)(17) Extraordinary items 5-03(b)(18) Cumulative effect-chngs in acctg. prin. 5-03(b)(19) Net income or loss 22.6 19.2 12.9
EX-3.B 2 BYLAWS EXHIBIT (3)B BYLAWS OF ARMOR ALL PRODUCTS CORPORATION a Delaware Corporation (as amended through March 21, 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 2 be waived by any stockholder by his attendance thereat, in person or by proxy. Any stockholder so waiving notice of such meeting shall be bound by the proceedings of any such meeting in all respects as if due notice thereof had been given. (e) Unless and until voted, every proxy shall be revocable at the pleasure of the person who executed it or of his legal representatives or assigns, except in those cases where an irrevocable proxy permitted by statute has been given. Section 5. Quorum. At all meetings of stockholders, except where otherwise provided by law, the Certificate of Incorporation, or these Bylaws, the presence, in person or by proxy duly authorized, of the holders of a majority of the outstanding shares of stock entitled to vote shall constitute a quorum for the transaction of business. Shares, the voting of which at said meeting has been enjoined, or which for any reason cannot be lawfully voted at such meeting, shall not be counted to determine a quorum at said meeting. In the absence of a quorum any meeting of stockholders may be adjourned, from time to time, by vote of the holders of a majority of the shares represented thereat, but no other business shall be transacted at such meeting. At such adjourned meeting at which a quorum is present or represented any business may be transacted which might have been transacted at the original meeting. The stockholders present at a duly called or convened meeting, at which a quorum is present, may continue to transact business until adjournment, notwithstanding the withdrawal of enough stockholders to leave less than a quorum. Except as otherwise provided by law, the Certificate of Incorporation or these Bylaws, all action taken by the holders of a majority of the voting power represented at any meeting at which a quorum is present shall be valid and binding upon the Corporation. Section 6. Voting Rights. (a) Except as otherwise provided by law, only persons in whose names shares entitled to vote stand on the stock records of the Corporation on the record date for determining the stockholders entitled to vote at said meeting shall be entitled to vote at such meeting. Shares standing in the names of two or more persons shall be voted or represented in accordance with the determination of the majority of such persons, or, if only one of such persons is present in person or represented by proxy, such person shall have the right to vote such shares and such shares shall be deemed to be represented for the purpose of determining a quorum. 3 (b) Every person entitled to vote or execute consents shall have the right to do so either in person or by an agent or agents authorized by a written proxy executed by such person or his duly authorized agent, which proxy shall be filed with the Secretary of the Corporation at or before the meeting at which it is to be used. Said proxy so appointed need not be a stockholder. No proxy shall be voted on after three years from its date unless the proxy provides for a longer period. (c) Without limiting the manner in which a stockholder may authorize another person or persons to act for him as proxy pursuant to subsection (b) of this Section, the following shall constitute a valid means by which a stockholder may grant such authority: (1) A stockholder may execute a writing authorizing another person or persons to act for him as proxy. Execution may be accomplished by the stockholder or his authorized officer, director, employee or agent signing such writing or causing his or her signature to be affixed to such writing by any reasonable means including, but not limited to, by facsimile signature. (2) A stockholder may authorize another person or persons to act for him as proxy by transmitting or authorizing the transmission of a telegram, cablegram, or other means of electronic transmission to the person who will be the holder of the proxy or to a proxy solicitation firm, proxy support service organization or like agent duly authorized by the person who will be the holder of the proxy to receive such transmission, provided that any such telegram, cablegram or other means of electronic transmission must either set forth or be submitted with information from which it can be determined that the telegram, cablegram or other electronic transmission was authorized by the stockholder. If it is determined that such telegrams, cablegrams or other electronic transmissions are valid, the inspectors or, if there are no inspectors, such other persons making that determination shall specify the information upon which they relied. (d) Any copy, facsimile telecommunication or other reliable reproduction of the writing or transmission created pursuant to subsection (c) of this Section may be substituted or used in lieu of the original writing or transmission for any and all purposes for which the original writing or transmission could be used, provided that such copy, facsimile telecommunication or other reproduction shall be a complete reproduction of the entire original writing or transmission. 4 Section 7. Voting Procedures and Inspectors of Elections. (a) The Corporation shall, in advance of any meeting of stockholders, appoint one or more inspectors to act at the meeting and make a written report thereof. The Corporation may designate one or more persons as alternate inspectors to replace any inspector who fails to act. If no inspector or alternate is able to act at a meeting of stockholders, the person presiding at the meeting shall appoint one or more inspectors to act at the meeting. Each inspector, before entering upon the discharge of his duties, shall take and sign an oath faithfully to execute the duties of inspector with strict impartiality and according to the best of his ability. (b) The inspectors shall (i) ascertain the number of shares outstanding and the voting power of each, (ii) deter-mine the shares represented at a meeting and the validity of proxies and ballots, (iii) count all votes and ballots, (iv) determine and retain for a reasonable period a record of the disposition of any challenges made to any determination by the inspectors, and (v) certify their determination of the number of shares represented at the meeting, and their count of all votes and ballots. The inspectors may appoint or retain other persons or entities to assist the inspectors in the performance of the duties of the inspectors. (c) The date and time of the opening and the closing of the polls for each matter upon which the stockholders will vote at a meeting shall be announced at the meeting. No ballot, proxies or votes, nor any revocations thereof or changes thereto, shall be accepted by the inspectors after the closing of the polls unless the Court of Chancery upon application by a stockholder shall determine otherwise. (d) In determining the validity and counting of proxies and ballots, the inspectors shall be limited to an examination of the proxies, any envelopes submitted with those proxies, any information provided in accordance with Section 212(c)(2) of the Delaware General Corporation Law, ballots and the regular books and records of the Corporation, except that the inspectors may consider other reliable information for the limited purpose of reconciling proxies and ballots submitted by or on behalf of banks, brokers, their nominees or similar persons which represent more votes than the holder of a proxy is authorized by the record owner to cast or more votes than the stockholder holds of record. If the inspectors consider other reliable information for the limited purpose permitted herein, the inspectors at the time they make their certification pursuant to subsection (b)(v) of this Section shall specify the precise information considered by them including the person or persons from whom they obtained the information, when the information was 5 obtained, the means by which the information was obtained and the basis for the inspectors' belief that such information is accurate and reliable. Section 8. List of Stockholders. The officer who has charge of the stock ledger of the Corporation shall prepare and make, at least ten (l0) days before every meeting of stockholders, a complete list of the stockholders entitled to vote at said meeting, arranged in alphabetical order, showing the address of and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten (10) days prior to the meeting, either at a place within the city where the meeting is to be held and which place shall be specified in the notice of the meeting, or, if not specified, at the place where said meeting is to be held, and the list shall be produced and kept at the time and place of meeting during the whole time thereof, and may be inspected by any stockholder who is present. Section 9. Action Without Meeting. Unless otherwise provided in the Certificate of Incorporation, any action required by statute to be taken at any annual or special meeting of stockholders of a Corporation, or any action which may be taken at any annual or special meeting of such stockholders, may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, is signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize such action at a meeting at which all shares entitled to vote thereon were present and voted. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing. ARTICLE III ----------- Directors --------- Section 1. Number and Term of Office. The number of directors which shall constitute the whole of the Board of Directors shall be eight (8). With the exception of the first Board of Directors, which shall be elected by the incorporators, and except as provided in Section 3 of this Article III, the directors shall be elected by a plurality vote of the shares represented in person or by proxy, at the stockholders annual 6 meeting in each year and shall hold office until the next annual meeting and until their successors shall be duly elected and qualified. Directors need not be stockholders. If, for any cause, the Board of Directors shall not have been elected at an annual meeting, they may be elected as soon thereafter as convenient at a special meeting of the stockholders called for that purpose in the manner provided in these Bylaws. Section 2. Powers. The powers of the Corporation shall be exercised, its business conducted and its property controlled by or under the direction of the Board of Directors. Section 3. Vacancies. Vacancies and newly created directorships resulting from any increase in the authorized number of directors may be filled by a majority of the directors then in office, although less than a quorum, or by a sole remaining director, and each director so elected shall hold office for the unexpired portion of the term of the director whose place shall be vacant, and until his successor shall have been duly elected and qualified. A vacancy in the Board of Directors shall be deemed to exist under this section in the case of the death, removal or resignation of any director, or if the stockholders fail at any meeting of stockholders at which directors are to be elected (including any meeting referred to in Section 4 below) to elect the number of directors then constituting the whole Board. Section 4. Resignations and Removals. (a) Any director may resign at any time by delivering his written resignation to the Secretary, such resignation to specify whether it will be effective at a particular time, upon receipt by the Secretary or at the pleasure of the Board of Directors. If no such specification is made it shall be deemed effective at the pleasure of the Board of Directors. When one or more directors shall resign from the Board, effective at a future date, a majority of the directors then in office, including those who have so resigned, shall have power to fill such vacancy or vacancies, the vote thereon to take effect when such resignation or resignations shall become effective, and each director so chosen shall hold office for the unexpired portion of the term of the director whose place shall be vacated and until his successor shall have been duly elected and qualified. (b) At a special meeting of stockholders called for the purpose in the manner hereinabove provided, the Board of Directors, or any individual director, may be removed from office, with or without cause, and a new director or directors 7 elected by a vote of stockholders holding a majority of the outstanding shares entitled to vote at an election of directors. Section 5. Meetings. (a) The annual meeting of the Board of Directors shall be held immediately after the annual stockholders' meeting and at the place where such meeting is held or at the place announced by the Chairman at such meeting. No notice of an annual meeting of the Board of Directors shall be necessary and such meeting shall be held for the purpose of electing officers and transacting such other business as may lawfully come before it. (b) Except as hereinafter otherwise provided, regular meetings of the Board of Directors shall be held in the office of the Corporation required to be maintained pursuant to Section 2 of Article I hereof. Regular meetings of the Board of Directors may also be held at any place within or without the State of Delaware which has been designated by resolutions of the Board of Directors or the written consent of all directors. (c) Special meetings of the Board of Directors may be held at any time and place within or without the State of Delaware whenever called by the Chairman of the Board or a majority of the directors. (d) Written notice of the time and place of all regular and special meetings of the Board of Directors shall be delivered personally to each director or sent by telegram or facsimile transmission at least 48 hours before the start of the meeting, or sent by first class mail at least 120 hours before the start of the meeting. Notice of any meeting may be waived in writing at any time before or after the meeting and will be waived by any director by attendance thereat. Section 6. Quorum and Voting. (a) A quorum of the Board of Directors shall consist of a majority of the exact number of directors fixed from time to time in accordance with Section 1 of Article III of these Bylaws, but not less than one; provided, however, at any meeting whether a quorum be present or otherwise, a majority of the directors present may adjourn from time to time until the time fixed for the next regular meeting of the Board of Directors, without notice other than by announcement at the meeting. (b) At each meeting of the Board at which a quorum is present all questions and business shall be determined by a vote of a majority of the directors present, unless a 8 different vote be required by law, the Certificate of Incorporation, or these Bylaws. (c) Any member of the Board of Directors, or of any committee thereof, may participate in a meeting by means of conference telephone or similar communication equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting by such means shall constitute presence in person at such meeting. (d) The transactions of any meeting of the Board of Directors, or any committee thereof, however called or noticed, or wherever held, shall be as valid as though had at a meeting duly held after regular call and notice, if a quorum be present and if, either before or after the meeting, each of the directors not present shall sign a written waiver of notice, or a consent to holding such meeting, or an approval of the minutes thereof. All such waivers, consents or approvals shall be filed with the corporate records or made a part of the minutes of the meeting. Section 7. Action Without Meeting. Unless otherwise restricted by the Certificate of Incorporation or these Bylaws, any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting, if all members of the Board or of such committee, as the case may be, consent thereto in writing, and such writing or writings are filed with the minutes of proceedings of the Board or committee. Section 8. Fees and Compensation. Directors shall not receive any stated salary for their services as directors but by resolution of the Board, a fixed fee, with or without expense of attendance, may be allowed for attendance at each meeting and at each meeting of any committee of the Board of Directors. Nothing herein contained shall be construed to preclude any director from serving the Corporation in any other capacity as an officer, agent, employee, or otherwise, and receiving compensation therefor. Section 9. Committees. (a) Executive Committee: The Board of Directors may, by resolution passed by a majority of the whole Board, appoint an Executive Committee of not less than one member, each of whom shall be a director. The Executive Committee, to the extent permitted by law, shall have and may exercise when the Board of Directors is not in session all powers of the Board in 9 the management of the business and affairs of the Corporation, including, without limitation, the power and authority to declare a dividend or to authorize the issuance of stock, except such committee shall not have the power or authority to amend the Certificate of Incorporation, to adopt an agreement of merger or consolidation, to recommend to the stockholders the sale, lease or exchange of all or substantially all of the Corporation's property and assets, to recommend to the stockholders of the Corporation a dissolution of the Corporation or a revocation of a dissolution, or to amend these Bylaws. (b) Other Committees: The Board of Directors may, by resolution passed by a majority of the whole Board, from time to time appoint such other committees as may be permitted by law. Such other committees appointed by the Board of Directors shall have such powers and perform such duties as may be prescribed by the resolution or resolutions creating such committee, but in no event shall any such committee have the powers denied to the Executive Committee in these Bylaws. (c) Term: The members of all committees of the Board of Directors shall serve a term coexistent with that of the Board of Directors which shall have appointed such committee. The Board, subject to the provisions of subsections (a) or (b) of this Section 9, may at any time increase or decrease the number of members of a committee or terminate the existence of a committee; provided, that no committee shall consist of less than one member. The membership of a committee member shall terminate on the date of his death or voluntary resignation, but the Board may at any time for any reason remove any individual committee member and the Board may fill any committee vacancy created by death, resignation, removal or increase in the number of members of the committee. The Board of Directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee, and, in addition, in the absence or disqualification of any member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member. (d) Meetings: Unless the Board of Directors shall otherwise provide, regular meetings of the Executive Committee or any other committee appointed pursuant to this Section 9 shall be held at such times and places as are determined by the Board of Directors, or by any such committee, and when notice thereof has been given to each member of such committee, no further notice of such regular meetings need be given thereafter; special meetings of any such committee may be held at the principal office of the Corporation required to be maintained pursuant to Section 2 of Article I hereof; or at any place which has been designated from 10 time to time by resolution of such committee or by written consent of all members thereof, and may be called by any director who is a member of such committee, upon written notice to the members of such committee of the time and place of such special meeting given in the manner provided for the giving of written notice to members of the Board of Directors of the time and place of special meetings of the Board of Directors. Notice of any special meeting of any committee may be waived in writing at any time after the meeting and will be waived by any director by attendance thereat. A majority of the authorized number of members of any such committee shall constitute a quorum for the transaction of business, and the act of a majority of those present at any meeting at which a quorum is present shall be the act of such committee. ARTICLE IV ---------- Officers -------- Section 1. Officers Designated. The officers of the Corporation shall be a Chairman of the Board of Directors and a President, each of whom shall be a member of the Board of Directors, and one or more Vice Presidents, a Secretary, and a Treasurer. The order of the seniority of the Vice Presidents shall be in the order of their nomination, unless otherwise determined by the Board of Directors. The Board of Directors or the Chairman of the Board or the President may also appoint one or more assistant secretaries, assistant treasurers, and such other officers and agents with such powers and duties as it or he shall deem necessary. The Board of Directors may assign such additional titles to one or more of the officers as they shall deem appropriate. Any one person may hold any number of offices of the Corporation at any one time unless specifically prohibited therefrom by law. The salaries and other compensation of the officers of the Corporation shall be fixed by or in the manner designated by the Board of Directors. Section 2. Tenure and Duties of Officers. (a) General: All officers shall hold office at the pleasure of the Board of Directors and until their successors shall have been duly elected and qualified, unless sooner removed. Any officer elected or appointed by the Board of Directors may be removed at any time by the Board of Directors. If the office of any officer becomes vacant for any reason, the vacancy may be filled by the Board of Directors. Nothing in these Bylaws shall be construed as creating any kind of contractual right to employment with the Corporation. 11 (b) Duties of the Chairman of the Board of Directors: The Chairman of the Board of Directors (if there be such an officer appointed), when present, shall preside at all meetings of the stockholders and the Board of Directors. The Chairman of the Board of Directors shall perform such other duties and have such other powers as the Board of Directors shall designate from time to time. (c) Duties of President: The President shall be the chief executive officer of the Corporation and shall preside at all meetings of the stockholders and at all meetings of the Board of Directors, unless the Chairman of the Board of Directors has been appointed and is present. The President shall perform such other duties and have such other powers as the Board of Directors shall designate from time to time. (d) Duties of Vice Presidents: The Vice Presidents, in the order of their seniority, may assume and perform the duties of the President in the absence or disability of the President or whenever the office of the President is vacant. The Vice President shall perform such other duties and have such other powers as the Board of Directors or the President shall designate from time to time. (e) Duties of Secretary: The Secretary shall attend all meetings of the stockholders and of the Board of Directors and any committee thereof, and shall record all acts and proceedings thereof in the minute book of the Corporation. The Secretary shall give notice, in conformity with these Bylaws, of all meetings of the stockholders, and of all meetings of the Board of Directors and any Committee thereof requiring notice. The Secretary shall perform such other duties and have such other powers as the Board of Directors shall designate from time to time. The President may direct any Assistant Secretary to assume and perform the duties of the Secretary in the absence or disability of the Secretary, and each Assistant Secretary shall perform such other duties and have such other powers as the Board of Directors or the President shall designate from time to time. (f) Duties of Treasurer: The Treasurer shall keep or cause to be kept the books of account of the Corporation in a thorough and proper manner, and shall render statements of the financial affairs of the Corporation in such form and as often as required by the Board of Directors or the President. The Treasurer, subject to the order of the Board of Directors, shall have the custody of all funds and securities of the Corporation. The Treasurer shall perform all other duties commonly incident to his office and shall perform such other duties and have such other powers as the Board of Directors or the President shall designate from time to time. The President may direct any Assistant Treasurer to assume and perform the duties of the Treasurer in the absence or disability of the 12 Treasurer, and each Assistant Treasurer shall perform such other duties and have such other powers as the Board of Directors or the President shall designate from time to time. ARTICLE V ---------- Execution of Corporate Instruments, and Voting of Securities Owned by the Corporation --------------------------------------------- Section 1. Execution of Corporate Instruments. (a) The Board of Directors may, in its discretion, determine the method and designate the signatory officer or officers, or other person or persons, to execute any corporate instrument or document, or to sign the corporate name without limitation, except where otherwise provided by law, and such execution or signature shall be binding upon the Corporation. (b) Unless otherwise specifically determined by the Board of Directors or otherwise required by law, formal contracts of the Corporation, promissory notes, deeds of trust, mortgages and other evidences of indebtedness of the Corporation, and other corporate instruments or documents and certificates of shares of stock owned by the Corporation, shall be executed, signed or endorsed by the President and Chief Executive Officer, any Executive Vice President, or any Vice President. All other instruments and documents requiring the corporate signature, may be executed as aforesaid or in such other manner as may be directed by the Board of Directors. (c) All checks and drafts drawn on banks or other depositaries on funds to the credit of the Corporation, or in special accounts of the Corporation, shall be signed by such person or persons as the Board of Directors shall authorize so to do. Section 2. Voting of Securities Owned by Corporation. All stock and other securities of other corporations owned or held by the Corporation for itself, or for other parties in any capacity, shall be voted, and all proxies with respect thereto shall be executed, by the person authorized so to do by resolution of the Board of Directors or, in the absence of such authorization, by the Chairman of the Board (if there be such an officer appointed), or by the President, or by any Vice President. 13 ARTICLE VI ---------- Shares of Stock --------------- Section 1. Form and Execution of Certificates. Certificates for the shares of stock of the Corporation shall be in such form as is consistent with the Certificate of Incorporation and applicable law. Every holder of stock in the Corporation shall be entitled to have a certificate signed by, or in the name of the Corporation by, the Chairman of the Board (if there be such an officer appointed), or by the President or any Vice President and by the Treasurer or Assistant Treasurer or the Secretary or Assistant Secretary, certifying the number of shares owned by him in the Corporation. Any or all of the signatures on the certificate may be a facsimile. In case any officer, transfer agent, or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent, or registrar before such certificate is issued, it may be issued with the same effect as if he were such officer, transfer agent, or registrar at the date of issue. If the Corporation shall be authorized to issue more than one class of stock or more than one series of any class, the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights shall be set forth in full or summarized on the face or back of the certificate which the Corporation shall issue to represent such class or series of stock, provided that, except as otherwise provided in Section 202 of the General Corporation Law of Delaware, in lieu of the foregoing requirements, there may be set forth on the face or back of the certificate which the Corporation shall issue to represent such class or series of stock, a statement that the Corporation will furnish without charge to each stockholder who so requests the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights. Section 2. Lost Certificates. The Board of Directors may direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the Corporation alleged to have been lost or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost or destroyed. When authorizing such issue of a new certificate or certificates, the Board of Directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost 14 or destroyed certificate or certificates, or his legal representative, to indemnify the Corporation in such manner as it shall require and/or to give the Corporation a surety bond in such form and amount as it may direct as indemnity against any claim that may be made against the Corporation with respect to the certificate alleged to have been lost or destroyed. Section 3. Transfers. Transfers of record of shares of stock of the Corporation shall be made only upon its books by the holders thereof, in person or by attorney duly authorized, and upon the surrender of a certificate or certificates for a like number of shares, properly endorsed. Section 4. Fixing Record Dates. In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than sixty nor less than ten days before the date of such meeting, nor more than sixty days prior to any such action. If no record date is fixed: (1) the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held; (2) the record date for determining stockholders entitled to express consent to corporate action in writing without a meeting, when no prior action by the Board of Directors is necessary, shall be the day on which the first written consent is expressed; (3) the record date for determining stockholders for any other purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. Section 5. Registered Stockholders. The Corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Delaware. 15 ARTICLE VII ----------- Other Securities of the Corporation ----------------------------------- All bonds, debentures and other corporate securities of the Corporation, other than stock certificates, may be signed by the Chairman of the Board (if there be such an officer appointed), or the President or any Vice President or such other person as may be authorized by the Board of Directors and the corporate seal impressed thereon or a facsimile of such seal imprinted thereon and attested by the signature of the Secretary or an Assistant Secretary, or the Treasurer or an Assistant Treasurer; provided, however, that where any such bond, debenture or other corporate security shall be authenticated by the manual signature of a trustee under an indenture pursuant to which such bond, debenture or other corporate security shall be issued, the signature of the persons signing and attesting the corporate seal on such bond, debenture or other corporate security may be the imprinted facsimile of the signatures of such persons. Interest coupons appertaining to any such bond, debenture or other corporate security, authenticated by a trustee as aforesaid, shall be signed by the Treasurer or an Assistant Treasurer of the Corporation, or such other person as may be authorized by the Board of Directors, or bear imprinted thereon the facsimile signature of such person. In case any officer who shall have signed or attested any bond, debenture or other corporate security, or whose facsimile signature shall appear thereon or before the bond, debenture or other corporate security so signed or attested shall have been delivered, such bond, debenture or other corporate security nevertheless may be adopted by the Corporation and issued and delivered as though the person who signed the same or whose facsimile signature shall have been used thereon had not ceased to be such officer of the Corporation. ARTICLE VIII ------------ Corporate Seal -------------- The corporate seal shall consist of a die bearing the name of the Corporation and the state and date of its incorporation. Said seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise. 16 ARTICLE IX ---------- Indemnification of Officers, Directors, Employees and Agents ----------------------------------------- Section 1. Right to Indemnification. Each person who was or is made a party or is threatened to be made a party to or is involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter a "proceeding"), by reason of the fact that he or she, or a person of whom he or she is the legal representative, is or was a director, officer, employee or agent of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, whether the basis of such proceeding is alleged action in an official capacity as a director, officer, employee or agent or in any other capacity while serving as a director, officer, employee or agent, shall be indemnified and held harmless by the Corporation to the fullest extent authorized by the Delaware General Corporation Law, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than said Law permitted the Corporation to provide prior to such amendment), against all expenses, liability and loss (including attorneys' fees, judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered by such person in connection therewith and such indemnification shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of his or her heirs, executors and administrators; provided, however, that except as provided in Section 2 hereof, the Corporation shall indemnify any such person seeking indemnification in connection with a proceeding (or part thereof) initiated by such person only if such proceeding (or part thereof) was authorized by the Board of Directors of the Corporation. The right to indemnification conferred in this Section shall be a contract right and shall include the right to be paid by the Corporation the expenses incurred in defending any such proceeding in advance of its final disposition; provided, however, that, if the Delaware General Corporation Law requires, the payment of such expenses incurred by a director or officer in his or her capacity as a director or officer (and not in any other capacity in which service was or is rendered by such person while a director or officer, including, without limitation, service to an employee benefit plan) in advance of the final disposition of such proceeding, shall be made only upon delivery to the Corporation of an undertaking, by or on behalf of such 17 director or officer, to repay all amounts so advanced if it should be determined ultimately that such director or officer is not entitled to be indemnified under this Section or otherwise. Section 2. Right of Claimant to Bring Suit. If a claim under Section 1 is not paid in full by the Corporation within ninety days after a written claim has been received by the Corporation, the claimant may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim and, if successful in whole or in part, the claimant shall be entitled to be paid also the expense of prosecuting such claim. It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in defending any proceeding in advance of its final disposition where the required undertaking, if any if required, has been tendered to the Corporation) that the claimant has not met the standards of conduct which make it permissible under the Delaware General Corporation Law for the Corporation to indemnify the claimant for the amount claimed, but the burden of proving such defense shall be on the Corporation. Neither the failure of the Corporation (including its Board of Directors, independent legal counsel, or its stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he or she has met the applicable standard of conduct set forth in the Delaware General Corporation Law, nor an actual determination by the Corporation (including its Board of Directors, independent legal counsel, or its stockholders) that the claimant had not met such applicable standard of conduct, shall be a defense to the action or create a presumption that claimant had not met the applicable standard of conduct. Section 3. Non-Exclusivity of Rights. The right to indemnification and the payment of expenses incurred in defending a proceeding in advance of its final disposition conferred in this Article shall not be exclusive of any other right which such person may have or hereafter acquire under any statute, provision of the Certificate of Incorporation, bylaw, agreement, vote of stockholders or disinterested directors or otherwise. Section 4. Insurance. The Corporation may maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the Corporation or another corporation, partnership, joint venture, trust or other enterprise against any such expense, liability or loss, whether or not the Corporation would have the power to indemnify such person against such expense, liability or loss under the Delaware General Corporation Law. 18 ARTICLE X --------- Notices ------- Whenever, under any provisions of these Bylaws, notice is required to be given to any stockholder, the same shall be given in writing, timely and duly deposited in the United States Mail, postage prepaid, and addressed to his last known post office address as shown by the stock record of the Corporation or its transfer agent. Any notice required to be given to any director may be given by the method hereinabove stated, or by telegram or other means of electronic transmission, except that such notice other than one which is delivered personally, shall be sent to such address or (in the case of facsimile telecommunication) facsimile telephone number as such director shall have filed in writing with the Secretary of the Corporation, or, in the absence of such filing, to the last known post office address of such director. If no address of a stockholder or director be known, such notice may be sent to the office of the Corporation required to be maintained pursuant to Section 2 of Article I hereof. An affidavit of mailing, executed by a duly authorized and competent employee of the Corporation or its transfer agent appointed with respect to the class of stock affected, specifying the name and address or the names and addresses of the stockholder or stockholders, director or directors, to whom any such notice or notices was or were given, and the time and method of giving the same, shall be conclusive evidence of the statements therein contained. All notices given by mail, as above provided, shall be deemed to have been given as at the time of mailing and all notices given by telegram or other means of electronic transmission shall be deemed to have been given as at the sending time recorded by the telegraph company or other electronic transmission equipment operator transmitting the same. It shall not be necessary that the same method of giving be employed in respect of all directors, but one permissible method may be employed in respect of any one or more, and any other permissible method or methods may be employed in respect of any other or others. The period or limitation of time within which any stockholder may exercise any option or right, or enjoy any privilege or benefit, or be required to act, or within which any director may exercise any power or right, or enjoy any privilege, pursuant to any notice sent him in the manner above provided, shall not be affected or extended in any manner by the failure of such a stockholder or such director to receive such notice. Whenever any notice is required to be given under the provisions of the statutes or of the Certificate of Incorporation, or of these Bylaws, a waiver thereof in writing signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed 19 equivalent thereto. Whenever notice is required to be given, under any provision of law or of the Certificate of Incorporation or Bylaws of the Corporation, to any person with whom communication is unlawful, the giving of such notice to such person shall not be required and there shall be no duty to apply to any governmental authority or agency for a license or permit to give such notice to such person. Any action or meeting which shall be taken or held without notice to any such person with whom communication is unlawful shall have the same force and effect as if such notice had been duly given. In the event that the action taken by the Corporation is such as to require the filing of a certificate under any provision of the Delaware General Corporation Law, the certificate shall state, if such is the fact and if notice is required, that notice was given to all persons entitled to receive notice except such persons with whom communication is unlawful. ARTICLE XI ---------- Amendments ---------- These Bylaws may be repealed, altered or amended or new Bylaws adopted by written consent of stockholders in the manner authorized by Section 8 of Article II, or at any meeting of the stockholders, either annual or special, by the affirmative vote of a majority of the stock entitled to vote at such meeting. The Board of Directors shall also have the authority to repeal, alter or amend these Bylaws or adopt new Bylaws (including, without limitation, the amendment of any Bylaws setting forth the number of directors who shall constitute the whole Board of Directors) by unanimous written consent or at any annual, regular, or special meeting by the affirmative vote of a majority of the whole number of directors, subject to the power of the stockholders to change or repeal such Bylaws and provided that the Board of Directors shall not make or alter any Bylaws fixing the qualifications, classifications, term of office or compensation of directors. 20 EX-10.A 3 SERVICES AGREEMENT EXHIBIT (10)A SERVICES AGREEMENT BETWEEN McKESSON CORPORAT10N AND ARMOR ALL PRODUCTS CORPORAT10N As amended through March 23, 1993 THIS SERVICES AGREEMENT, dated as of July 1, 1986 is between McKesson Corporation, a Maryland corporation ("McKesson"), and Armor All Products Corporation, a Delaware corporation ("Armor All"). INTRODUCTION A. McKesson and Armor All have entered into an Acquisition Agreement dated as of July 1, 1986 (the "Acquisition Agreement"). Unless otherwise defined herein, capitalized terms used herein shall have the same meaning assigned to them in the Acquisition Agreement. B. Pursuant to Section 11 of the Acquisition Agreement, McKesson has agreed, as of the Closing Date, to provide Armor All with certain services and Armor All has agreed to purchase certain services from McKesson. ACCORDINGLY, the parties hereto agree as follows: SECTION 1. Certain Management-Related Services 1.1 Continuing Services. Commencing on the Closing Date, and for the period provided for under Section 6, McKesson agrees to make available to Armor All and Armor All agrees to purchase the following (individually a "Service" and collectively the "Services"): (a) Its internal accounting and auditing staff for auditing, accounting, payroll and bookkeeping advice and services. (b) Its internal legal staff for legal advice and services, including, without limitation, assistance with respect to claims which may be or have been asserted or are the subject of litigation, the preparation and review of documents involving loans, financing transactions, contractual documents and disclosure documents relating to reporting requirements under the federal securities laws and consultation related to legal and administrative proceedings. (c) Its internal tax staff for tax advice and services, including, without limitation, assistance in the preparation of federal, state, local and foreign tax returns. (d) Its controllers staff for accounting services related to financial reporting and assistance in the preparation of financial statements and disclosure documents relating to reporting requirements under the federal securities laws. 2 (e) Its corporate secretary staff for assistance in organizational matters associated with shareholders meetings and meetings of the board of directors. (f) Its treasury staff for financial advice and services, including, without limitation, assistance with respect to the raising of additional capital, cash management, treasury and risk management. (g) Its corporate relations staff for assistance in preparation of certain public documents, including without limitation, preparation of annual reports. (h) Its personnel staff for advice and services, including, without limitation, wage and salary administration, employee relations, the administration of employee insurance plans, pension plans and other employee benefits plans. 1.2 Periodic Services. Commencing on the Closing Date, and for the period provided for under Section 6, Armor All may request and McKesson may agree to make available to Armor All the following (individually a "Service" and collectively the "Services"): (a) Its marketing, advertising and promotional staff for assistance with marketing projects, consumer studies and other information gathering or promotional activities. (b) Its information services staff and equipment for supplemental data processing telecommunications, computer programming and other computer services. (c) Its other staff, equipment, office space and facilities for such other advice as requested by Armor All from time to time. 1.3 Limitation on Services. Notwithstanding anything else contained in this Section 1: (a) McKesson need not make available any Service to the extent that doing so would unreasonably (i) interfere with the performance of services for McKesson by any employee of McKesson or otherwise cause unreasonable burden to McKesson; or (ii) interfere with the use of or access to any equipment, office space or facility by McKesson or otherwise cause unreasonable burden to McKesson. (b) The provisions of Subsections 1.1 and 1.2 shall only apply to Services related to or arising out of or in connection with matters McKesson is in a position to provide by reason of past participation, involvement or familiarity with 3 such matters and, in addition, which Armor All has a reasonable requirement to obtain. SECTION 2. Cost of Services 2.1 Price and Billing for Continuing Services. Armor All shall be billed for Services provided by McKesson under Section 1.1 at the rate specified in Schedule 1. The rate represents an approximation of the cost incurred by McKesson for providing such Services. The cost incurred by McKesson for providing such Services shall be determined by considering a variety of relevant factors, including, without limitation, the number of hours required, the hourly cost of the person providing such Services, and the cost of materials, overhead and capital consumed in providing the Services requested. Where similar charges are assessed against internal divisions of McKesson, the price billed to Armor All shall be determined on the same basis as the cost assessed against internal divisions of McKesson. The charges specified in Schedule 1 may be modified annually to reflect any change in the cost to McKesson of providing such Services. Amounts billed shall be payable to McKesson within ten working days of presentation of an invoice for such Services. 2.2 Price and Billing for Periodic Services. Armor All shall be billed for Services provided by McKesson under Section 1.2 at a rate equal to the cost incurred by McKesson for providing such Services. The cost incurred by McKesson for providing such Services shall be determined by considering a variety of relevant factors, including, without limitation, the number of hours required, the hourly cost of the person providing such Services, and the cost of materials, overhead and capital consumed in providing the Services requested. Where similar charges are assessed against internal divisions of McKesson, the price billed to Armor All shall be determined on the same basis as the cost assessed against internal divisions of McKesson. Amounts billed shall be payable to McKesson within ten working days of presentation of an invoice for such Services. 2.3 Expenses. In addition to the amounts to be billed to Armor All pursuant to Subsections 2.1 and 2.2, McKesson shall be entitled to receive from Armor All, upon the presentation of invoices therefor, payment for reasonable out-of-pocket expenses incurred by McKesson in providing such Services. 2.4 Outside Professional Services. In addition to amounts to be billed to Armor All pursuant to Subsections 2.1, 2.2 and 2.3, McKesson shall be entitled to receive from Armor All within ten working days of presentation of invoices therefor, payment for all reasonable expenses for outside professional services incurred by McKesson for the benefit of Armor All, including, 4 without limitation, public accounting, outside legal services and outside marketing services. SECTION 3. Employee Benefit Plans 3.1 Retirement Plan. McKesson agrees that Armor All employees shall be eligible to participate in the McKesson Corporation Retirement Plan on the same terms and conditions as employees of McKesson, and Armor All agrees to pay McKesson costs of contribution and administration attributable to participating Armor All employees at the same rate as charged to McKesson divisions (currently this accrual rate is 2% of covered payroll for all McKesson units included in the McKesson Retirement Plan). 3.2 McKesson PAYSOP and ESOP. McKesson agrees that Armor All employees shall be eligible to participate in the PAYSOP and ESOP elements of the McKesson Profit-Sharing Investment Plan on the same terms and conditions as employees of McKesson, and Armor All agrees to pay McKesson costs of contribution and administration attributable to participating Armor All employees. Armor All shall make a contribution to the ESOP for each plan year determined according to the following formula: Aggregate Aggregate compensation compensation Total ESOP during the plan during the plan contribution Armor All year of Armor / year for all X required for = contribution All employees employees plan year participating participating in in the ESOP the ESOP 3.3 Profit-Sharing Investment Plan. Armor All employees shall remain participants in the McKesson Profit-Sharing Investment Plan ("McKesson PSIP") until Armor All establishes a Profit-Sharing Investment Plan for its employees ("Armor All PSIP"). Armor All agrees to pay McKesson costs of contribution and administration attributable to Armor All employees participating in the McKesson PSIP. Upon establishment, McKesson shall administer the Armor All PSIP on behalf of Armor All. Armor All agrees to pay McKesson for direct administrative costs attributable to the Armor All PSIP, and for general administrative costs attributable to the Armor All PSIP at the same rate as charged to McKesson divisions. 3.4 Stock Option Plan. Armor All shall establish a Stock Option Plan for its employees which shall be administered by McKesson on behalf of Armor All. Armor All shall not be charged for administrative costs attributable to such Stock Option Plan. 5 SECTION 4. Insurance 4.1 Property and Casualty Insurance. McKesson agrees to provide the following insurance coverages on an interim basis to Armor All on substantially the same terms and conditions as provided to other subsidiaries and divisions of McKesson except for a maximum limit of coverage of $25 million and subject to the deductibles shown below. (a) Workers' Compensation insurance for full statutory benefits and Employer's Liability for a limit of $25 million per occurrence with no deductible. (b) Comprehensive General Liability insurance, including broad form vendors coverage and contractual liability coverage for a combined single limit of $25 million per occurrence ($25 million products liability aggregate) with a deductible of $500,000 per occurrence. (c) Comprehensive Automobile Liability insurance, including owned and non-owned vehicles for a combined single limit of $25 million per occurrence with a deductible of $500,000 per occurrence. (d) All Risk Property insurance insuring real and personal property for replacement cost and business interruption and extra expense for actual loss sustained with a deductible of $10,000 per occurrence. (e) Employee Dishonesty Coverage for a limit of $10 million per occurrence with a deductible of $75,000 per occurrence. 4.2 Employee Benefits Insurance. McKesson agrees to provide the following insurance coverages to Armor All employees on the same terms and conditions as provided to employees of other subsidiaries and divisions of McKesson. (a) Comprehensive health insurance including medical and dental insurance and covering active and retired employees. (b) Life insurance. (c) Accidental Death or Dismemberment insurance. (d) Long-term Disability insurance. (e) Travel Accident insurance. 4.3 Price and Billing. Armor All shall be billed for insurance provided by McKesson at substantially the same rate and on substantially the same terms as internal units of McKesson, 6 subject to adjustment due to differences in levels of coverage and deductibles, and except that in situations where McKesson must pre-pay insurance premiums Armor All shall be billed on a pre-paid basis its allocated share. Amounts billed shall be payable to McKesson within ten working days of presentation of an invoice for such insurance. 4.4 Self-Insurance and Deductibles. It is understood that because of McKesson's size and diversification certain risks are prudently self-insured or subject to policy deductibles. All references to the term "insurance" contained in this Section 4 are intended to include both insurance and self-insured programs. Where it is the practice of McKesson to require its internal divisions and units to self-insure losses up to a pre-determined amount, Armor All will be required to self-insure in the amounts specified in Section 4.1. 4.5 Alternative Insurance. Notwithstanding anything else contained in this Section 4, it is the understanding of the parties that Armor All will attempt to find, with the assistance of McKesson, alternative sources for insurance other than insurance provided pursuant to Section 4.2 above. Should Armor All be able to locate other insurance at a reasonable cost, Armor All will procure insurance directly from such alternative suppliers rather than through McKesson. It is further understood by the parties that McKesson may not be able to make available directors and officers liability insurance to Armor All. Nor shall McKesson be obligated to provide surety bonds under terms that require McKesson to guarantee obligations of Armor All to the surety. SECTION 5. Cash Management Services 5.1 Cash Management Operation. McKesson shall assist Armor All in establishing its own cash management system. McKesson will manage this system on Armor All's behalf. Funds of Armor All will not be commingled with funds of McKesson. Armor All shall receive interest on funds in its cash management system at a rate equal to the monthly Federal Reserve composite rate for 7-day commercial paper (the "composite rate") less ten basis points or pay interest at a rate equal to the composite rate plus fifty basis points. 5.2 Funds Available. McKesson will make available to Armor All that amount of cash necessary to provide Armor All with sufficient funds to meet its needs as defined in the annual capital plan and annual operating projection approved by the board of directors of Armor All. McKesson shall receive a credit facility fee of $25,000 per annum from Armor All for maintaining the availability of cash in accordance with the preceding sentence. 7 SECTION 6. Term and Termination 6.1 Term. This Agreement shall become effective, without further action, on the date first above written and shall remain in effect until March 31, 1989 and thereafter shall be automatically renewed for successive one-year renewal terms unless terminated in accordance with Subsection 6.2. 6.2 Termination. This Agreement and the obligation of McKesson to provide Services pursuant to Section I and other assistance pursuant to Sections 3, 4 and 5 shall terminate on the earliest of (a) the date which is 120 days from the receipt of written notice by one party of the other party's intention to terminate this Agreement, (b) the date on which the ownership by McKesson of the outstanding voting stock of Armor All shall be less than fifty percent of the then outstanding voting capital stock of Armor All, or (c) such earlier date as the parties may mutually agree to in writing. SECTION 7. Access to Information and Witnesses Subsequent to the Closing Date, each of McKesson and Armor All may have in its possession or under its control (or the control of persons or firms which have rendered services to or otherwise done business with it) books, records, contracts, instruments, data and other information (collectively, "Information") which may prove necessary or desirable to the other in connection with the other's business. Accordingly, at all times subsequent to the Closing Date, (a) McKesson agrees to provide to Armor All and Armor All agrees to provide to McKesson, upon the other's written request, at all reasonable times, full and complete access to (including access to persons or firms possessing information) and duplication rights with respect to, any and all such information as the other may reasonably request and require in the conduct of its business and (b) McKesson agrees to use its best efforts to make available to Armor All and Armor All agrees to use its best efforts to make available to McKesson, upon the other's written request, their respective officers, directors, employees and agents as witnesses to the extent that such persons may reasonably be required in connection with any legal, administrative or other proceedings in which McKesson or Armor All, as the case may be, may from time to time be involved. Information shall include, without limitation, information sought for audit, accounting, claims, litigation and tax purposes as well as for purposes of fulfilling disclosure and reporting obligations under the federal securities laws. The party providing information or making available witnesses shall be entitled to receive from the other party, upon the presentation of invoices therefor, payment for its reasonable out-of-pocket expenses incurred in connection therewith (but not 8 the labor cost thereof), but shall not be entitled to receive any other payment with respect thereto. SECTION 8. Mail, Etc. Subsequent to the Closing Date, each of McKesson and Armor All may receive mail, telegrams, packages and other communications property belonging to the other. Accordingly, at all times subsequent to the Closing Date, each of McKesson and Armor All authorizes the other to receive and open all mail, telegrams, packages and other communications received by it and not unambiguously intended for the other party or any of the other party's officers and/or directors specifically in their capacities as such, and to retain the same to the extent that they relate to the business of the receiving party or, to the extent that they relate to the business of the receiving party and do relate to the business of the other party, or to the extent that they relate to both businesses, the receiving party shall promptly contact the other party by telephone for delivery instructions and such mail, telegrams, packages or other communications (or, in case the same relate to both businesses, copies thereof) shall promptly be forwarded to the other party in accordance with its delivery instructions. The foregoing provisions of this Section 8 shall constitute full authorization to the postal authorities, all telegraph and express companies and all other persons to make deliveries to McKesson or Armor All, as the case may be, addressed to either of them or to any of their officers and/or directors specifically in their capacities as such. The provisions of this Section 8 are not intended to and shall not be deemed to constitute an authorization by either McKesson or Armor All to permit the other to accept services of process on its behalf, and neither party is or shall be deemed to be the agent of the other for service of process purposes. SECTION 9. Limitation of Liability The liability of McKesson to Armor All for any loss or damage, whether direct or indirect, arising in connection with providing the Services or other assistance to Armor All pursuant to Sections 1, 3, 4 and 5 shall not exceed the total amount billed or billable to Armor All for the particular Service or assistance or part thereof which gave rise to the loss or damage. IN NO EVENT WILL McKESSON BE LIABLE TO ARMOR ALL FOR INDIRECT, CONSEQUENTIAL OR INCIDENTAL DAMAGES, INCLUDING WITHOUT LIMITATION, LOSS OR PROFITS OR DAMAGE TO OR LOSS OF USE OF ANY PROPERTY. 9 SECTION 10. Force Majeure McKesson shall be excused for failure to provide the Services or other assistance pursuant to Sections 1, 3, 4 and 5 to the extent that such failure is directly or indirectly caused by an occurrence commonly known as force majeure, including, without limitation, delays arising out of acts of God, acts or orders of a government, agency or instrumentality thereof (whether of fact or law), acts of public enemy, riots, embargoes, strikes or other concerted acts of workmen (whether of McKesson or other persons), casualties or accidents, deliveries of materials, transportation or shortage of cars, trucks, fuel, power, labor or materials, or any other causes, circumstances or contingencies within or without the United States of America, which are beyond the reasonable control of McKesson. Notwithstanding any events operating to excuse the performance by McKesson, this Agreement shall continue in full force for the remainder of its term and any renewals thereof. SECTION 11. Confidentiality Except as otherwise required under applicable law, McKesson and Armor All agree to maintain as confidential and not to disclose to any third party any and all information provided by one party to the other or otherwise obtained by one party in the performance of this Agreement. SECTION 12. Miscellaneous 12.1 Notice. Any notice, request, instruction, consent, approval or other communication required or permitted hereunder shall be made in writing and shall be delivered personally, sent by certified or registered mail, postage prepaid, telegraphed, sent by facsimile transmission or by telex, and shall be deemed given when so delivered personally, telegraphed, telexed, sent by facsimile transmission or, if mailed, four days after the date of deposit in the United States mails, as follows: To McKesson: McKesson Corporation One Post Street San Francisco, CA 94104 Attn: Vice President and General Counsel To Armor All: Armor All Products Corporation 6 Liberty Aliso Viejo, CA 92656 Attn: President 10 12.2 Governing Law. The validity, interpretation, enforceability and performance of this Agreement shall be governed by and construed and enforced in accordance with the law of the State of California. 12.3 Entire Agreement. The parties intend that the terms of this Agreement shall be the final expression of their agreement with respect to the subject matter hereof and may not be contradicted by evidence of any prior or contemporaneous agreement. The parties further intend that this Agreement shall constitute the complete and exclusive statement of its terms and that no extrinsic evidence whatsoever may be introduced in any judicial, administrative, or other legal proceeding involving this Agreement. This Agreement constitutes the entire agreement between the parties and supersedes all prior negotiations, undertakings, representations and agreements, if any, of the parties hereto. This Agreement may not be amended orally but may be amended only by a written instrument signed by all of the parties hereto. 12.4. Amendments and Waivers. This Agreement may not be amended except upon the written consent of all parties. By an instrument in writing, either party may waive compliance by the other party with any term or provision of this Agreement that such other party was or is obligated to comply with or perform, provided, however that such waiver shall not operate as a waiver of, or estoppel with respect to, any other or subsequent failure. No failure to exercise and no delay in exercising any right, remedy, or power hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any right, remedy, or power hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, or power provided herein or by law or in equity. The waiver of any party of the time for performance of any act or condition hereunder does not constitute a waiver of the act or condition itself. 12.5 Severability. If any provision of this Agreement, or the application thereof to any person, place, or circumstance, shall be held by a court of competent jurisdiction to be invalid, unenforceable, or void, the remainder of this Agreement and such provisions as applied to other persons, places, and circumstances shall remain in full force and effect. 12.6. Counterparts. This Agreement may be executed in counterparts, each of which shall constitute one and the same instrument. 12.7 Interpretation of Agreement. This section and other headings used in this Agreement are for reference purposes only and shall not constitute a part hereof or affect the meaning or interpretation of this Agreement. The term "person" shall include any individual, partnership, joint venture, corporation, 11 unincorporated organization, any other business entity and any government or any department or agency thereof, whether acting in an individual, fiduciary, or other capacity. Whenever the context so requires, the use of the singular shall be deemed to include the plural and vice versa. 12.8. Further Assurances. Subject to the terms and conditions hereof, each party agrees to use its best efforts to do, or cause to be done, all things necessary, proper, or advisable under applicable laws and regulations to consummate the transactions contemplated by this Agreement as expeditiously as practicable, including, without limitation, the performance of such further acts or the execution and delivery of any additional instruments or documents as any party may reasonably request in order to carry out the purposes of this Agreement and the transactions contemplated hereby. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. McKESSON CORPORATION By: /s/ Garret A. Scholz ------------------------------- Title: Vice President and Treasurer ARMOR ALL PRODUCTS CORPORATION By: /s/ John F. Schueller ------------------------------ Title: Executive Vice President By: /s/ Lorraine E. Peetz ------------------------------- Title: Assistant Secretary 12 SCHEDULE 1 McKESSON CHARGES TO ARMOR ALL
- - - ----------------------------------------------------------------------------------- Annual Amount =================================================================================== Controller-(Accounting Services related to financial reporting, SEC documentation, filings, etc.)............................. $ 40,000 - - - ----------------------------------------------------------------------------------- Law Dept.-Outside legal (supported by invoices).......................... * -Internal....................................................... 200,000 - - - ----------------------------------------------------------------------------------- Audit-Internal audit..................................................... 20,000 - - - ----------------------------------------------------------------------------------- Mktg. Services-Advertising & Promotional Services, Mkt. Research billed by Mktg. to AA based on agreed upon requested projects and work........................................................ * - - - ----------------------------------------------------------------------------------- Insurance................................................................ ** - - - ----------------------------------------------------------------------------------- Info. Services-Any charges for specific systems development projects (currently none)................................................ * - - - ----------------------------------------------------------------------------------- Secretary's Dept.-Billing for subsidiary filing fees, Board expenses, etc............................................................ 20,000 - - - ----------------------------------------------------------------------------------- Tax Dept.-Tax return preparation charges (Federal, State, payroll, etc.)........................................................... 30,000 -Tax sharing agreement to be negotiated - - - ----------------------------------------------------------------------------------- Treasury Dept.-Charges for Cash Mgmt. System & Insurance admin.................................................................... 30,000 - - - ----------------------------------------------------------------------------------- Corp. Relations-Direct expenses for subsidiary annual report............. 30,000 - - - ----------------------------------------------------------------------------------- Personnel-Allocated expenses for Employee Benefits Admin. & Employee Relations....................................................... 30,000 - - - ----------------------------------------------------------------------------------- Planning Dept.- ........................................................ 50,000 -------- - - - ----------------------------------------------------------------------------------- Total Annual Charge..................................... $450,000 ======== - - - -----------------------------------------------------------------------------------
[FN] - - - ------------- * Charges to be based on specifically requested services. ** Self-insurance charges based on a schedule which takes into consideration the amounts of coverage and deductibles applicable to Armor All and as based upon McKesson's current cost for such coverage. 13 EX-10.E 4 TERMINATION AGREEMENT EXHIBIT (10) E TERMINATION AGREEMENT THIS TERMINATION AGREEMENT, dated as of May 15, 1994 is made and entered into by and between ARMOR ALL PRODUCTS CORPORATION, a Delaware corporation with its principal office at 6 Liberty, Aliso Viejo, California (the "Company"), and - - - --------------------------------------------("Executive"). R E C I T A L S A. Company desires to enter into an agreement with Executive whereby severance benefits will be paid to Executive on change in control of the Company and consequent actual or constructive termination of Executive's employment. B. This Agreement sets forth the severance benefits which the Company agrees that it will pay to the Executive if Executive's employment with the Company terminates under one of the circumstances described herein following a Change in Control of the Company. NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants contained herein, the parties hereto agree as follows: 1. Term of Agreement. This Agreement shall be effective immediately on the date hereof and shall continue in effect through December 31, 1994; provided, however, that commencing on January 1, 1995 and each January 1 thereafter, the term of this Agreement shall automatically be extended for one additional year unless not later than September 30 of the preceding year, the Company shall have given notice that it does not wish to extend this Agreement; provided, further, that notwithstanding any such notice by the Company not to extend, this Agreement shall automatically be extended for 24 months beyond the term provided herein if a Change in Control, as defined in Section 3 of this Agreement has occurred during the term of this Agreement. 2. Effect on Employment Rights. This Agreement is not part of any employment agreement that the Company and Executive may have entered into. Nothing in this Agreement shall confer upon Executive any right to continue in the employ of the Company or interfere with or restrict in any way the rights of the Company, which are hereby expressly reserved, to terminate Employee's employment at any time prior to a Change in Control for any reason, with or without cause. Executive agrees that, subject to the terms and conditions of this Agreement, in the event of a potential change in control of the Company (as defined below), Executive will remain in the employ of the Company during the pendency of any such potential change in control and for a period of one year after the occur- rence of an actual Change in Control. For this purpose, a "potential change in control of the Company" shall be deemed to have occurred if (a) the Company enters into an agreement, the consummation of which would result in the occurrence of a Change in Control, (b) any person publicly announces an intention to take or consider taking action which if consummated would constitute a Change in Control or (c) the Board of Directors of the Company (the "Board") adopts a resolution to the effect that a potential change in control of the Company has occurred. 3. Change in Control. For purposes of this Agreement, a "Change in Control" of the Company shall be deemed to have occurred if any of the events set forth in any one of the following paragraphs shall occur: (a) any "person" (as defined in section 3(a)(9) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") and as such term is modified in sections 13(d) and 14(d) of the Exchange Act), excluding McKesson Corporation, the Company or any of their respective subsidiaries, a trustee or any fiduciary holding securities under an employee benefit plan of the Company or any of its subsidiaries, an underwriter temporarily holding securities pursuant to an offering of such securities or a corporation owned, directly or indirectly, by stockholders of the Company in substantially the same proportions as their ownership of the Company, is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 30% or more of the combined voting power of the Company's then outstanding securities; or (b) during any period of not more than two consecutive years, individuals who at the beginning of such period constitute the Board and any new director (other than a director designated by a Person who has entered into an agreement with the Company to effect a transaction described in clause (a), (c) or (d) of this paragraph) whose election by the Board or nomination for election by the Company's stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof; or 2 (c) the shareholders of the Company approve a merger or consolidation of the Company with any other corporation, other than (i) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity), in combination with the ownership of any trustee or other fiduciary holding securities under an employee benefit plan of the Company, at least 50% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation, or (ii) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no person acquires more than 50% of the combined voting power of the Company's then outstanding securities; or (d) the shareholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company's assets. 4. Termination of Employment Following a Change in Control. Executive shall be entitled to the benefits provided in Section 5 hereof upon the subsequent termination of Executive's employment by the Company within two years after a Change in Control which occurs during the term of this Agreement, provided such termination is (a) by the Company other than for Cause, as defined below, or (b) by Executive for Good Reason, as defined below. Executive shall not be entitled to the benefits of Section 5, any other provision of the Plan to the contrary notwithstanding, if Executive's employment terminates: (i) pursuant to a mandatory retirement policy in effect prior to the Change in Control, (ii) by reason of Executive's death or (iii) by reason of Executive's total and permanent disability. As used herein, "total and permanent disability" means a condition which prevents Executive from performing to a significant degree the essential duties of his or her position and is expected to be of long-term duration or result in death. A determination of total and permanent disability must be based on competent medical evidence. (a) Cause. (i) Definition. Termination by the Company of Executive's employment for Cause shall mean termination upon Executive's willful engaging in misconduct which is demonstrably and materially injurious to the Company and its subsidiaries taken as a whole. No act, or failure to act, on Executive's part shall be considered "willful" unless done, or omitted to be done, by Executive not in good faith and without reasonable belief that Executive's action or omission was in the best interest of the Company or 3 its subsidiaries. Notwithstanding the foregoing, Executive shall not be deemed to have been terminated for Cause unless and until there shall have been delivered to Executive a copy of a resolution duly adopted by the affirmative vote of not less than three quarters of the entire membership of the Board at a meeting of the Board called and held for the purpose of making a determination of whether Cause for termination exists (after reasonable notice to Executive and an opportunity for Executive to be heard before the Board), finding that in the good faith opinion of the Board Executive was guilty of misconduct as set forth above in this subsection 4(a)(i) and specifying the particulars thereof in detail. (ii) Remedy by Executive. If the Company gives Executive a Notice of Termination which states that the basis for terminating Executive's employment is Cause, Executive shall have ten days after receipt of such Notice to remedy the facts and circumstances which provided Cause. The Board (or any duly authorized Committee thereof) shall make a good faith reasonable determination immediately after such ten-day period whether such facts and circumstances have been remedied and shall communicate such determination in writing to Executive. If the Board determines that adequate remedy has not occurred, then the initial Notice of Termination shall remain in effect. (b) Good Reason. After a Change in Control, Executive may terminate employment with the Company at any time during the term of this Agreement if Execu- tive has made a good faith reasonable determination that Good Reason exists for this termination. (i) Definition. For purposes of this Agreement, "Good Reason" shall mean any of the following actions, if taken without the express written consent of Executive: A. any material change by the Company in Executive's functions, duties, or responsi- bilities which change would cause Executive's position with the Company to become of less dignity, responsibility, importance, or scope from the position and attributes that applied to Executive immediately prior to the Change in Control; B. any significant reduction in Executive's base salary, other than a reduction effected as part of an across-the-board reduction affecting all executive employees of the Company; 4 C. any material failure by the Company to comply with any of the provisions of this Agreement (or of any employment agreement between the parties); D. the Company's requiring Executive to be based at any office or location more than 25 miles from the office at which Executive is based on the date immediately preceding the Change in Control, except for travel reasonably required in the performance of Executive's responsibilities and commensurate with the amount of travel required of Executive prior to the Change in Control; or E. any failure by the Company to obtain the express assumption of this Agreement by any successor or assign of the Company. Executive's right to terminate employment for Good Reason pursuant to this subsection 4(b)(i) shall not be affected by Executive's incapacity due to physical or mental illness. (ii) Remedy by Company. If Executive gives the Company a Notice of Termination which states that the basis for Executive's termination of employment is Good Reason, the Company shall have ten days after receipt of such Notice to remedy the facts and circumstances which provided Good Reason. Executive shall make a good faith reasonable determination immediately after such ten-day period whether such facts and circumstances have been remedied and shall communicate such determination in writing to the Company. If Executive determines that adequate remedy has not occurred, then the initial Notice of Termination shall remain in effect. (iii) Determination by Executive Presumed Correct. Any determination by Executive pursuant to this Section 4(b) that Good Reason exists for Executive's termination of employment and that adequate remedy has not occurred shall be presumed correct and shall govern unless the party contesting the determination shows by a clear preponderance of the evidence that it was not a good faith reasonable determination. (iv) Severance Payment Made Notwithstanding Dispute. Notwithstanding any dispute concerning whether Good Reason exists for termination of employment or whether adequate remedy has occurred, the Company shall immediately pay to Executive, as specified in Section 5, any amounts otherwise due under this Agreement. Executive 5 may be required to repay such amounts to the Company if any such dispute is finally determined adversely to Executive. (c) Notice of Termination. Any termination of Executive's employment by the Company or by Executive hereunder shall be communicated by a Notice of Termination to the other party hereto. For purposes of this Agreement, a "Notice of Termination" shall mean a written notice which shall indicate the specific termination provisions in this Agreement relied upon and which sets forth (i) in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executive's employment under the provision so indicated and (ii) the date of Executive's termination of employment, which shall be no earlier than 10 days after such Notice is received by the other party. Any purported termination of the Executive's employment by the Company which is not effected pursuant to a Notice of Termination satisfying the requirements of this Agreement shall not be effective. In the case of a termination for Cause, the Notice of Termination shall also satisfy the requirements set forth in Section 4(a)(i). 5. Severance Payment Upon Termination of Employment. If Executive's employment with the Company is terminated during the term of this Agreement and after a Change in Control (a) by the Company other than for Cause, or (b) by Executive for Good Reason, then the Company shall immediately pay to Executive in a cash lump sum an amount equal to (i) 2.99 multiplied by Executive's "base amount" determined pursuant to Section 280G of the Internal Revenue Code of 1986, as amended (the "Code"), less (ii) any other amount which constitutes a "parachute payment" to Executive as defined in Section 280G(b)(2) of the Code. 6. Section 280G Cap. It is the intent of the parties hereto that no amount payable pursuant to the terms of this Agreement shall cause any payment or transfer by the Company to or for the benefit of Executive, whether paid or payable (or transferred or transferable) pursuant to the terms of this Agreement or otherwise (a "Payment"), to be subject to taxation under Section 4999 of the Code and as an "excess parachute payment" as defined in Section 280G of the Code. In the event that the last independent auditors selected by the Board prior to the termination of Executive under this Agreement (the "Auditors") determine that any such item constitutes an "excess parachute payment," and that the limitation of this Section 6 would result in a larger after-tax benefit to Executive, then Executive may (but is not required to) irrevocably elect to relinquish or not exercise any payments or benefits available to Executive under any plan, contract or program before the payment or enjoyment thereof in order to limit such payments or benefits for the purpose of (i) eliminating any "excess parachute payment" or (ii) causing Executive to become eligible to receive all or any portion of the cash payment that would be made 6 pursuant to Section 5 of this Agreement if Executive had no "parachute payments" as defined in Section 280G(b)(2) of the Code. For purposes of these calculations, (i) all amounts received in connection with Executive's employment by the Company or to be received by Executive in connection with a change in the ownership or effective control of the Company, or a change in the ownership of a substantial portion of the assets of the Company (including but not limited to payments or benefits that Executive becomes entitled to in connection with a "Change in Control" as defined in Section 3 hereof) shall be treated as "parachute payments" within the meaning of Section 280G(b)(2) of the Code, except to the extent that such amounts are (A) relinquished pursuant to the preceding sentence or (B) identified in the written opinion of independent tax counsel selected by the Auditors and approved by Executive (which approval shall not be unreasonably withheld) as not constituting parachute payments or excess parachute payments (in whole or in part), or as representing reasonable compensation for personal services to be rendered or actually rendered before the Change in Control in excess of the base amount, within the meaning of Section 280G(b)(4)(B) of the Code, and (ii) the value of any non-cash benefit or any deferred cash payment included in the calculations shall be determined by the Auditors in accordance with the principles of Section 280G(d)(3) and (4) of the Code. The Company shall bear the expense of obtaining the opinion of the independent tax counsel referred to in the preceding sentence. 7. Damages. Executive shall not be required to mitigate damages with respect to the amount of any payment provided under this Agreement by seeking other employment or otherwise, nor shall the amount of any payment provided under this Agreement be reduced by retirement benefits, deferred compensation or any compensation earned by Executive as a result of employment by another employer. 8. Successor to Company. The Company shall require any successor or assign (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company, by agreement in form and substance satisfactory to Executive, expressly, absolutely and unconditionally to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession or assignment had taken place. As used in this Agreement, "Company" shall mean the Company as hereinbefore defined and any successor or assign to its business and/or assets as aforesaid which executes and delivers the agreement provided for in this section or which otherwise becomes bound by all the terms and provisions of this Agreement by operation of law. 9. Heirs of Executive. This Agreement shall inure to the benefit of and be enforceable by Executive's personal and legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If Executive should die 7 while any amounts are still payable to Executive hereunder, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to Executive's devisee, legatee, or other designee or, if there be so such designee, to Executive's estate. 10. Arbitration. Any dispute, controversy or claim arising under or in connection with this Agreement, or the breach hereof, shall be settled exclusively by arbitration in accordance with the Rules of the American Arbitration Association then in effect. Judgment upon the award rendered by the arbitrator(s) may be entered in any court of competent jurisdiction. Any arbitration held pursuant to this section in connection with Executive's termination of employment shall take place in Los Angeles, California at the earliest possible date. If any proceeding is necessary to enforce or interpret the terms of this Agreement, or to recover damages for breach thereof, the prevailing party shall be entitled to reasonable attorneys fees and necessary costs and disbursements, not to exceed in the aggregate one percent (1%) of the net worth of the other party, in addition to any other relief to which he or it may be entitled. 11. Notice. For purposes of this Agreement, notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when delivered by messenger or in person, or when mailed by United States registered mail, return receipt requested, postage prepaid, as follows: If to the Company: Armor All Products Corporation 6 Liberty Aliso Viejo, California 92656 Attention: Office of the General Counsel If to the Executive: ----------------------- c/o Armor All Products 6 Liberty Aliso Viejo, California 92656 or such other address as either party may have furnished to the other in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt. 12. Legal Costs. The Company shall pay to Executive all reasonable attorneys' fees and necessary costs and disbursements incurred by or on behalf of Executive as a result of any dispute arising out of this Agreement. Such fees shall be either paid directly by the Company or reimbursed to Executive as soon as reasonably practicable after Executive has provided the Company with satisfactory evidence that Executive has incurred liability 8 for and paid such fees. To the extent of any conflict, this section shall supersede the last sentence of Section 10 of this Agreement. 13. General Provisions. (a) Executive's rights and obligations under this Agreement shall not be transferable by assignment or otherwise, nor shall Executive's rights be subject to encumbrance or subject to the claims of the Company's creditors. Nothing in this Agreement shall prevent the consolidation of the Company with, or its merger into, any other corporation, or the sale by the Company of all or substantially all of its properties or assets; and this Agreement shall inure to the benefit of, be binding upon and be enforceable by, any successor surviving or resulting corporation, or other entity to which such assets shall be transferred. This Agreement shall not be terminated by the voluntary or involuntary dissolution of the Company. (b) This Agreement constitutes the entire agreement between the parties hereto in respect to the rights and obligations of the parties following a Change in Control. This Agreement supersedes and replaces all prior oral and written agreements, understandings, commitments, and practices between the parties (whether or not fully performed by Executive prior to the date hereof), which shall be of no further force or effect. (c) The provisions of this Agreement shall be regarded as divisible, and if any of said provisions or any part thereof are declared invalid or unenforceable by a court of competent jurisdiction, the validity and enforceability of the remainder of such provisions or parts thereof and the applicability thereof shall not be affected thereby. (d) This Agreement may not be amended or modified except by a written instrument executed by the Company and Executive. 9 (e) This Agreement and the rights and obligations hereunder shall be governed by and construed in accordance with the laws of the State of California. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. ARMOR ALL PRODUCTS CORPORATION A Delaware corporation By -------------------------- Nancy A. Miller Vice President Attest: By ----------------------- Assistant Secretary By the authority of the ----------------------------- Compensation Committee of Executive the Board of Directors of Armor All Products Corporation on March 21, 1994. 10 EX-10.N 5 SUPPLEMENTAL PSIP EXHIBIT (10)N ARMOR ALL PRODUCTS CORPORATION SUPPLEMENTAL PSIP Effective August 1, 1989 Adopted on August 1, 1989 TABLE OF CONTENTS Page ---- A. PURPOSE . . . . . . . . . . . . . . . . . . . . . . . . . .1 B. ERISA PLAN. . . . . . . . . . . . . . . . . . . . . . . . .1 C. PARTICIPATION . . . . . . . . . . . . . . . . . . . . . . .1 1. Eligibility to Participate . . . . . . . . . . . . . .1 2. Election to Participate by Eligible Executives and Deferral Election. . . . . . . . .1 3. Notification of Participants . . . . . . . . . . . . .2 4. Relation to Other Plans. . . . . . . . . . . . . . . .2 a. DCAP. . . . . . . . . . . . . . . . . . . . . . .2 b. Other Plans . . . . . . . . . . . . . . . . . . .2 D. AMOUNTS OF DEFERRAL . . . . . . . . . . . . . . . . . . . .3 1. PSIP Supplement. . . . . . . . . . . . . . . . . . . .3 2. Amount of Deferrals. . . . . . . . . . . . . . . . . .3 E. COMPANY MATCH . . . . . . . . . . . . . . . . . . . . . . .3 1. Eligibility for Match. . . . . . . . . . . . . . . . .3 2. Amount of Match. . . . . . . . . . . . . . . . . . . .4 F. PAYMENT OF DEFERRED COMPENSATION. . . . . . . . . . . . . .4 1. Book Account and Interest Credit . . . . . . . . . . .4 2. Vesting. . . . . . . . . . . . . . . . . . . . . . . .4 3. Method of Payment of Benefits. . . . . . . . . . . . .5 4. Date Payment Occurs. . . . . . . . . . . . . . . . . .5 G. BENEFITS ON DEATH . . . . . . . . . . . . . . . . . . . . .5 1. Date Payments Occur and Method of Payment. . . . . . . . . . . . . . . . . . . .5 2. Designation of Beneficiary . . . . . . . . . . . . . .5 H. SOURCE OF PAYMENT . . . . . . . . . . . . . . . . . . . . .5 I. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . .6 1. Withholding. . . . . . . . . . . . . . . . . . . . . .6 2. No Assignment. . . . . . . . . . . . . . . . . . . . .6 3. Applicable Law; Severability . . . . . . . . . . . . .6 4. No Right to Continued Employment, Etc. . . . . . . . .6 J. ADMINISTRATION OF THE PLAN. . . . . . . . . . . . . . . . .7 1. In General . . . . . . . . . . . . . . . . . . . . . .7 2. Elections and Notices. . . . . . . . . . . . . . . . .7 i Page ---- K. AMENDMENT OR TERMINATION OF THE PLAN. . . . . . . . . . . .7 L. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . .7 EXECUTION . . . . . . . . . . . . . . . . . . . . . . . . .9 APPENDIX A - Examples of Deferrals Under Plan . . . . . .A-1 ii ARMOR ALL PRODUCTS CORPORATION SUPPLEMENTAL PSIP A. PURPOSE This Plan is established to allow certain Company executives to elect to defer compensation which cannot be deferred under the Armor All Products Profit-Sharing Investment Plan ("PSIP") because of limitations of tax laws, and to provide for a Company Match on those deferrals at a rate equivalent to the PSIP's "Matching Employer Contribution". B. ERISA PLAN This Plan is an unfunded deferred compensation program for a select group of management employees of the Company. The Plan therefore is covered by Title I of ERISA except that it is exempt from Parts 2, 3, and 4 of Title I of ERISA. C. PARTICIPATION 1. Eligibility to Participate The Administrator may, at his discretion, and at any time, and from time to time, select Company executives who may elect to participate in this Plan ("Eligible Executives"). Selection of Eligible Executives may be evidenced by the terms of the executive's employment contract with the Company, or by inclusion among the persons specified in writing by the Administrator. The Administrator may, at his discretion, and at any time, and from time to time, provide that executives previously designated are no longer Eligible Executives. If the Administrator determines that an executive is no longer an Eligible Executive, he or she shall remain a Participant in the Plan until all amounts credited to his or her Account prior to such determination are paid out under the terms of the Plan (or until death, if earlier). 2. Election to Participate by Eligible Executives and Deferral Election Each Eligible Executive may become a Participant in the Plan by electing to defer Compensation in accordance with the terms of this Plan. However, no Eligible Executive shall defer any Compensation under this Plan for the first Plan Year in which the Eligible Executive becomes eligible to make deferrals under this Plan unless his "Basic Contributions" under the PSIP made with respect to Compensation earned before November 1 of the Plan 1 Year are limited by Code section 402(g). If the Eligible Executive's "Basic Contributions" under the PSIP are not so limited by November 1 of the first Plan Year in which the Eligible Executive becomes eligible to elect deferrals under this Plan, then the Eligible Executive's deferral election for that Plan Year shall be void. An election to defer shall be in writing and shall be made at the time and in the form specified by the Administrator. As a condition of electing to defer Compensation under this Plan for a Plan Year, the Eligible Executive shall agree not to change (either by increasing or decreasing) the rate at which the Eligible Executive's compensation is reduced under the PSIP to make "Basic Contributions" under PSIP. On electing to defer Compensation under this Plan, the Eligible Executive shall be deemed to accept all other terms and conditions of this Plan. All elections to defer amounts under this Plan shall be irrevocable and shall be made pursuant to an election executed and filed with the Administrator before the amounts so deferred are earned. All elections to defer 1989 Compensation shall apply only to Compensation earned after the election is filed with the Administrator and shall be executed and filed with the Administrator no later than August 30, 1989. An election to defer Compensation earned in later Years shall be made prior to the beginning of any such Year. However, if an executive is first selected to be an Eligible Executive after the beginning of a Year, he may make an election to defer Compensation for that Year no later than 30 days after the date he becomes an Eligible Executive, and such election shall apply only to Compensation earned after the election is filed with the Administrator. 3. Notification of Participants The Administrator shall annually notify each Eligible Executive that he or she may participate in the Plan for the next Year. 4. Relation to Other Plans a. DCAP An Eligible Executive may participate in this Plan and may also participate in the Armor All Products Corporation Deferred Compensation Administration Plan ("DCAP"). However, no amounts may be deferred under this Plan which have been deferred under the DCAP or any other plan of the Company. b. Other Plans For all other benefit programs maintained by the Company, amounts deferred by an Eligible Executive under this 2 Plan shall, to the extent relevant, be treated in the same manner as amounts deferred under the DCAP. D. AMOUNTS OF DEFERRAL 1. PSIP Supplement This Plan allows an Eligible Executive to defer Compensation, and receive credit for a Company Match, to the extent that such deferrals (and corresponding Company Match) cannot be made under the PSIP because of the limitations in Code section 402(g) (limiting annual elective deferrals under the PSIP to $7,000, as adjusted from time to time under the Code). 2. Amount of Deferrals As illustrated in Appendix A, an Eligible Executive may elect to defer under this Plan up to an amount equal to (a) minus (b), where: (a) is the maximum rate of deferral for "Basic Contributions" under the PSIP multiplied by the Eligible Executive's Compensation, and (b) is the maximum amount that the Eligible Executive is able to defer as a "Basic Contribution" under the PSIP, taking into account the limits of Code section 402(g). E. COMPANY MATCH 1. Eligibility for Match a. For any Year, a Company Match shall be credited only to the Accounts of Eligible Executives who actually defer Compensation under this Plan for such Year and who are employed by the Company on the March 31 following such Year. b. The requirement of employment on March 31 shall not apply to any Eligible Executive who terminates his employment with the Company (i) on or after attaining age 55 and completing ten "Years of Service" under the PSIP, (ii) due to retirement under the terms of the McKesson Corporation Retirement Plan, (iii) on or after attaining age 65, or (iv) due to permanent and total disability as determined under the PSIP. In this case, any Company Match for the year of such Eligible Executive's termination of employment shall not be credited to an Account hereunder but shall be paid (to the extent vested) in a single sum to him or his beneficiaries as soon as practicable after the amount of that match is determined by the Company. 3 2. Amount of Match The amount of the Company Match credited to the Account of an Eligible Executive who is a Participant for any Year shall be a percentage of the Eligible Executive's deferrals under this Plan for the Year. This percentage shall be the same percentage as the "Matching Employer Contribution" (as defined in the PSIP) percentage that would have been credited to the Eligible Executive's PSIP account if his deferrals under this Plan had been made under the PSIP. In determining this amount, the Administrator shall take into account, as illustrated in example 3 in Appendix A, the different "Matching Employer Contribution" rates that may apply under PSIP during a Plan Year. F. PAYMENT OF DEFERRED COMPENSATION 1. Book Account and Interest Credit Both Compensation deferred by a Participant and any Company Match for the benefit of a Participant shall be credited to a separate bookkeeping account maintained for such Participant (the "Account"). Earnings shall be credited to each Account (both on the Participant's deferrals and on any Company Match credited to his Account hereunder) at a rate equal to the amount earned during that same period by amounts invested under the PSIP's Guaranteed Principal and Interest investment option. Interest shall be credited to each Account as of the end of each month. 2. Vesting. a. A participant shall be 100% vested at all times in the value of his elective deferrals and earnings thereon credited to his Account. b. A Participant shall vest in the amounts of Company Match and earnings thereon credited to his Account at the same time and in the same manner as if these amounts were "Matching Employer Contributions" under the PSIP and if the rules of the PSIP concerning vesting applied to such amounts. For this purpose, any Company Match shall be deemed to be credited to an Account as of the March 31 with respect to which such Company Match is determined. Any amounts that would be forfeited under the rules of the PSIP applicable to "Matching Employer Contributions" under that plan shall be forfeited hereunder. Any forfeiture under this Plan of any portion of the Company Match credited to a Participant's Account shall eliminate any obligation of the Company to pay the forfeited amount hereunder. 4 3. Method of Payment of Benefits The value of the vested amounts credited to a Participant's Account as of the date of his Payment Event shall be paid to him in a single lump sum. (If any Company Match is payable under Section E.l.b. hereunder, that amount may be paid separately and at a later date as provided in such section.) 4. Date Payment Occurs Payment shall be made as soon as practicable after the earliest Payment Event occurs. G. BENEFITS ON DEATH 1. Date Payment Occurs and Method of Payment If a Participant dies before distribution of the amount credited to his or her Account, such distribution shall be paid to his or her Beneficiary in a single lump sum as soon as practicable after the death of the Participant. 2. Designation of Beneficiary A Participant may designate any person or entity as his or her Beneficiary, but may not designate more than one person or any person that is not a natural person without the approval of the Administrator. Designation shall be in writing and shall become effective only when filed with (and, if appropriate, approved by) the Administrator. Such filing must occur before the Participant's death. A Participant may change the Beneficiary, from time to time, by filing a new written designation with (and, if appropriate, approved by) the Administrator. If the Participant is married, any Beneficiary designation which does not designate the Participant's spouse to receive at least one-half of the Participant's Account shall only become effective when approved in writing by the Participant's spouse. If the Participant fails to effectively designate a Beneficiary in accordance with the Administrator's procedures or the person designated by the Participant is not living at the time the distribution is to be made, then his or her Beneficiary shall be his beneficiary under the PSIP. H. SOURCE OF PAYMENT Amounts paid under this Plan shall be paid from the general funds of the Company, and each Participant and his or her Beneficiaries shall be no more than unsecured general creditors of the Company with no special or prior right to any assets of the Company for payment of any obligations hereunder. Nothing 5 contained in this Plan shall be deemed to create a trust of any kind for the benefit of any Participant or Beneficiary, or create any fiduciary relationship between the Company and any Participant or Beneficiary with respect to any assets of the Company. I. MISCELLANEOUS 1. Withholding Each Participant and Beneficiary shall make appropriate arrangements with the Company for the satisfaction of any federal, state, or local income tax withholding requirements and Social Security or other employment tax requirements applicable to the payment of benefits under this Plan. If no other arrangements are made, the Company may provide, at its discretion, for such withholding and tax payments as may be required. 2. No Assignment The benefits provided under this Plan may not be alienated, assigned, transferred, pledged, or hypothecated by any person, at any time. These benefits shall be exempt from the claims of creditors or other claimants and from all orders, decrees, levies, garnishments or executions. 3. Applicable Law: Severability The Plan hereby created shall be construed, administered, and governed in all respects in accordance with ERISA and the laws of the State of California to the extent that the latter are not preempted by ERISA. If any provision of this instrument shall be held by a court of competent jurisdiction to be invalid or unenforceable, the remaining provisions hereunder shall continue to be effective. 4. No Right to Continued Employment, Etc. Neither the establishment or maintenance of the Plan nor the crediting of any amount to any Participant's Account, nor the designation of an executive as an Eligible Executive, shall confer upon any individual any right to be continued as an employee of the Company or shall affect the right of the Company to terminate any executive's employment or change any terms of his employment at any time. 6 J. ADMINISTRATION OF THE PLAN 1. In General The Plan Administrator shall be the Vice President, Personnel of McKesson Corporation, a Delaware corporation. If the Vice President, Personnel is a Participant, any discretionary action taken as Administrator which directly affects him or her as a Participant shall be specifically approved by the Compensation Committee. The Compensation Committee shall have authority and responsibility to interpret the Plan and shall adopt such rules and regulations for carrying out the Plan as it may deem necessary or appropriate. Decisions of the Compensation Committee shall be final and binding on all parties who have or claim any interest in the Plan. 2. Elections and Notices All elections and notices made under this Plan shall be in writing and filed with the Administrator at the time and in the manner specified by him or her. All elections to defer under this Plan shall be irrevocable. K. AMENDMENT OR TERMINATION OF THE PLAN A majority of the Outside Directors may at any time, and from time to time, amend the Plan. Such action shall be prospective only and shall not adversely affect the rights of any Participant or Beneficiary to any benefit previously earned under the Plan. A majority of the Outside Directors may increase or decrease the interest rate credited to Compensation previously deferred but the rate shall not be reduced for periods prior to such action. A majority of the Outside Directors may at any time terminate the Plan; thereupon all amounts credited to the Participant's Account for periods preceding the termination date, plus interest credited thereon, shall promptly be paid, on termination, in single sums to the respective Participants or Beneficiaries entitled thereto. L. DEFINITIONS For purposes of the Plan, the following terms shall have the meanings indicated: 1. "Account" means the Account specified in Section F.l. 2. "Administrator" shall mean the person specified in Section J.l. 3. "Beneficiary" shall mean the person or entity described by Section G.2. 7 4. "Board" shall mean the Board of Directors of Armor All Products Corporation, a Delaware corporation. 5. "Code" shall mean the Internal Revenue Code of 1986, as amended. 6. "Company" shall mean Armor All Products Corporation, a Delaware corporation. 7. "Company Match" shall mean, with respect to a Plan Year, the amount credited to the Account of an Eligible Employee in accordance with Section E. 8. "Compensation" shall mean, with respect to a Plan Year, all "Compensation", as defined in the PSIP, earned during that Plan Year except that the annual limit under the PSIP established by Code section 401(a)(17) shall not apply. 9. "Compensation Committee" shall mean the Compensation Committee of the Board. 10. "DCAP" shall mean the Armor All Products Corporation Deferred Compensation Administration Plan. 11. "Eligible Executive" shall mean an employee of the Company selected as being eligible to participate in this Plan under Section C. 12. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended. 13. "Outside Directors" shall mean those members of the Board who are not employees of the Company and who have not deferred under this Plan Compensation earned as an employee. 14. "Participant" shall be any Company executive for whom amounts are credited to an Account under this Plan. Upon his or her death, his or her Beneficiary shall be a Participant until all amounts are paid out of his or her Account. 15. "Payment Event": (a) For any Participant shall mean the earliest of the following: retirement from the Company, death, other termination of employment with the Company, or permanent and total disability as determined under the PSIP; (b) With respect to every Participant shall mean a "Change in Control" as determined under DCAP. 16. "Plan" shall mean the Armor All Products Corporation Supplemental PSIP. 8 17. "Plan Year" or "Year" shall mean the calendar year. 18. "PSIP" shall mean the Armor All Products Profit-Sharing Investment Plan, as amended from time to time. Adopted on August 1, 1989, in the City and County of San Francisco, State of California. ARMOR ALL PRODUCTS CORPORATION By /s/Jeffrey M. Sherman ------------------------------ Its President and Chief Executive Officer ------------------------------ August 1, 1989 9 EX-10.P 6 VERBAL AGREEMENTS EXHIBIT (10)P CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR ALL BRACKETED PORTIONS OF THIS EXHIBIT AND SUCH PORTIONS HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION November 4, 1993 Mr. Michael Caron President, International Operations Armor All Products Corporation Six Liberty Street Aliso Viejo, CA 92656 Dear Michael: Chuck Allison asked me to send to you this confirmation of the verbal agreements between Armor All and Johnson, reached in person and by telephone in September, 1993. The delay in getting this confirmation to you resulted from my absence from the office during the greater part of the last three weeks and the earlier periodic absences of both Chuck Allison and myself. Again, this letter is to confirm that both Johnson and Armor All have agreed to the following modifications and amendments to the master distribution agreement between the parties effective from the first day of April, 1991 ("Agreement"). Unless otherwise stated below, all modifications are to be effective from July 1, 1993. Capitalized terms are as defined in the Agreement. 1. Scope. 1.1 All non-activated countries are removed from the Territory, with the exception of South Africa. 1.2 Germany, Japan and Mexico will continue as part of the Territory. 1.3 At Johnson's option, distributor or phase out status would apply to Venezuela, Taiwan and Thailand. It has now been decided that Venezuela and Thailand will definitely phase out of the Agreement while a decision on Taiwan is still pending. 1.4 Hong Kong, Philippines, Singapore/Malaysia will have distributor status retroactive to July 1, 1993 (see point 2.2 below), pending completion of an agreeable distribution agreement. 2. Functionals/Minimum Annual Statistical Cases. Mr. Michael Caron November 4, 1993 Page 2 2.1 The current Markup mechanism will remain in effect for Germany, Japan and Mexico. [-----], Johnson's deemed functional expenses in calculating the Markup will be [-----]. Effective [-----], the deemed functional expenses in making such calculation would be [-----], contingent on the minimum annual statistical cases for Mexico and Japan, in the aggregate, [----] per annum in Contract Years 4 and 5 versus the minimum annual statistical cases in those countries for Contract Year 3. Alternatively, the deemed functional expenses would remain at [-----] if Johnson elects [-----] per annum in the minimum annual statistical cases for Japan and Mexico, in the aggregate, for Contract Years 4 and 5, versus the [-----] referenced in the immediately preceding sentence. (See the following paragraph.) For Mexico and Japan, the minimum annual statistical cases for Contract Year 3 (July 1, 1993 - June 30, 1994) will be [-----] versus the Contract Year 2 (July 1, 1992 - June 30, 1993) actual statistical cases in each country. The minimum annual statistical cases for Japan and Mexico, in the aggregate, for Contract Years 4 and 5 would [-----] per annum from the prior Contract Year minimum annual statistical cases unless Johnson elects [-----] for those two Contract Years of [-----] per annum rather than [-----] per annum. The minimum annual statistical cases for Germany would [-----]. Minimum annual statistical cases are based on all Products, including any private label or contract manufactured products (see Section 3 below). 2.2 Retroactive to July 1, 1993, a distribution agreement replaces the Agreement for Hong Kong, Singapore/Malaysia and, perhaps, Taiwan, subject to completion of a mutually satisfactory agreement. The distributor agreement would cover the Products. You have provided to us a suggested draft of that agreement which we are reviewing internally, including with our General Managers in the relevant countries. We will sent you our comments during the week of November 15. Retroactive to July 1, 1993, the Philippines will be covered by a concentrate supply agreement and, to the extent necessary, a continuing license agreement. No further royalties would be payable to Armor All. The suggested markups set forth in your letter dated September 29, 1993 are acceptable. We would prefer that a markup of [-----] of your standard product cost, net of any rebates or Mr. Michael Caron November 4, 1993 Page 3 discounts from your suppliers, be applied to Hong Kong and Singapore/Malaysia rather than having different markups for the individual countries. Concerning the "phase out" countries of Venezuela, Thailand and, perhaps, Taiwan, the Markup mechanism under the Agreement terminated effective July 1, 1993. No further orders are being placed in the phase out countries and Johnson affiliates in those countries will sell out remaining inventories of Product. By mutual agreement, the phase out countries should be removed from the Agreement on December 31, 1993 and, at Armor All's option, Armor All should purchase or have purchased any remaining inventory of Products or authorize the local Johnson affiliate to sell off any remaining inventory. The parties will mutually assist in the orderly transition of the business to Armor All or its designee. According to our records, the status of the outstanding payments owed by Johnson affiliates to Armor All, as of July 1, 1993, are as follows : Philippines [-----] Payment has been made and apparently received by Armor All. Hong Kong [-----] Paid to Armor All on October 28, 1993. Taiwan [-----] Johnson has suggested that payment be made upon depletion of the existing inventory (in approximately 3 months). This matter has been referred to Mark Moore and we are awaiting a response. Singapore [-----] Payment was made on October 29, 1993. Venezuela [-----] We are following up as we have not received any information from Venezuela. Japan [-----] Johnson Japan has advised Mark Moore that it intends to remit the payment to Armor All. We are following up with Japan Johnson on this point. Mr. Michael Caron November 4, 1993 Page 4 Mexico [-----] We understand that Armor All will adjust the Markup to accommodate the outstanding payment. Thailand [-----] We believe that Armor All has made payment to Johnson Thailand. Please note that I have no independent verification that these amounts are correct and they may be subject to change. Except for Japan and Mexico, the above-mentioned countries have been removed from the Markup mechanism set forth in the Agreement effective July 1, 1993. Any Products shipped to those countries after July 1, 1993 should be priced, retroactively and prospectively, on a cost plus basis. 2.3 Germany, Japan and Mexico will be revisited in 12-18 months to determine whether the Markup mechanism provided for in the Agreement should be replaced by a cost plus mechanism. 3. Multi-purposes Automotive Products. In Mexico, Johnson is permitted to distribute product or products positioned primarily as multi-purpose automotive products under a Johnson owned or controlled trademark provided that (i) a different price segmentation strategy is utilized and (ii) Armor All supplies or manufactures such product either directly or through a subcontractor. Johnson Mexico could act as a sub- contractor of Armor All, and, in that case, Armor All would render technical assistance and formulae to Johnson Mexico on a sub-contractor basis. Such products would be deemed to be Products for purposes of the Markup mechanism in the Agreement. This does not affect Johnson's continuing right to market, sell and distribute multi-purpose protectants in accordance with Section 29.01(a) of the Agreement. Principally, this agreement also applies to Germany and Japan, subject to your final confirmation. 4. Interface. 4.1 In Japan, Germany and Mexico, Johnson management will determine frequency of visits by Armor All management as circumstances require, but directionally target for quarterly meetings. At such meetings, Armor All management should help facilitate long term marketing plans and better transfer Armor All's experience and sales and marketing materials to Johnson. Mr. Michael Caron November 4, 1993 Page 5 5. Miscellaneous. Johnson agreed to confirm, in writing, our understandings and both parties will proceed in accordance with these agreements. Please acknowledge our agreement by signing where indicated below on behalf of Armor All Products Corporation and returning one signed copy to my attention. At a later date, it may be helpful to prepare a restated and amended master distribution agreement between S.C. Johnson and Armor All in lieu of the Agreement. However, until then, this letter agreement shall act as an amendment to the Agreement. Both Armor All and Johnson shall cause similar amendments to the local country Addendum and the amended Agreement shall control in the event of any conflict in terms in the Addendum. Very truly yours, /s/ Thomas S. Simpson Thomas S. Simpson Senior Counsel Acknowledged and agreed this 13th day of December, 1993. Armor All Products Corporation by: /s/ Michael Caron ------------------------- Michael Caron cc: E.R. Rossini A.H. Adad C.F. Allison EX-10.Q 7 ASSET PURCHASE/SALE AGMT EXHIBIT (10)Q CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR ALL BRACKETED PORTIONS OF THIS EXHIBIT AND SUCH PORTIONS HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION ASSET PURCHASE AND SALE AGREEMENT among AGRI-PRODUCTS SPECIAL MARKETS, INC. and ARMOR ALL PRODUCTS CORPORATION ASSET PURCHASE AND SALE AGREEMENT This Asset Purchase and Sale Agreement ("Agreement"), dated as of January 26, 1994, among AGRI-PRODUCTS SPECIAL MARKETS, INC., a Florida corporation ("Seller") and a majority-owned subsidiary of AGRI-PRODUCTS, INC., a Florida corporation ("API"), and ARMOR ALL PRODUCTS CORPORATION, a Delaware corporation ("Pur- chaser"). WHEREAS, Seller wishes to sell to Purchaser and Purchaser wishes to purchase from Seller, on the terms and for the consideration hereinafter provided, substantially all of the assets and business of Seller comprising the E-Z D(R) and E-Z Deck Wash(R) brand deck and other home surfaces wash/cleaner business as heretofore conducted by Seller (the "Business"); NOW, THEREFORE, in consideration of the mutual premises and agreements contained in this Agreement, the parties agree as follows: 1. PURCHASE AND SALE OF ASSETS 1.1 Purchase and Sale of Assets. Upon and subject to the terms and conditions contained in this Agreement, and, except as excluded by Section 1.2, Purchaser shall purchase from Seller and Seller shall sell, convey, assign, transfer and deliver to Purchaser, the following assets, properties and rights of Seller related to the Business (collectively, the "Acquired Assets"), as the same exist as of the Closing Date (as hereafter defined): (a) Inventories. All saleable inventories of E-Z D(R) and E-Z Deck Wash(R) brand home surface care products listed on Schedule 1.1-A (the "Products") that are actually on hand as of the Closing Date, whether within Seller's warehouse or any public warehouse utilized by Seller, at packagers' facilities or warehouses, on trucks or on consignment at customers' locations; all useable inventory of parts, labels, raw materials, unfinished goods in-process and testing materials; and all advertising, promotional and sales materials, including materials reflecting price and promotional terms (the "Inventories"). (b) Fixed Assets. Seller's equipment and furniture listed on Schedule 2.14 and utilized for trade shows (the "Fixed Assets"). (c) Books and Records. All books, papers and records in Seller's care, custody, or control, including, without limitation, the following: product specifications, customer files, data and billing records, and marketing program and sales records; all records related to the selection, clearance, first usage, registration, opposition and cancellation of trademarks; toxicity and product general health and safety information; environmental control records; market research and development Page 1 project reports and records; personnel records with regard to Hired Employees (as defined in Section 9.7); and evaluation records relating to competitors. (d) Patents and Trademarks and Other Intellectual Property. All patents, trademarks, copyrights, trade secrets, inventions, technology, ideas and know-how, and all registrations, applications and other rights related to the foregoing and listed in Schedule 2.13, and all capitalized legal expenses with respect thereto (the "Intellectual Property"). (e) Prepaid Expenses. All of Seller's deposits and prepaid expenses related to trade shows and listed in Schedule 2.11 (the "Prepaid Expenses"). (f) Other Intangibles. The following intangible assets to the extent transferable (the "Intangible Assets"): (i) supplier contracts, purchase orders and rights; quotations and bids; customer contracts, purchase orders and rights; manufacturing, sales, distribution and service agreements; promotional contracts; the Covenant Not to Compete (as defined in Section 2.18); and any other contracts and agreements related to the Business as listed in Schedule 1.1-F (the "Assigned Contracts"); (ii) claims, interests and rights with respect to the Acquired Assets (including rights against suppliers under warranties); (iii) customer and supplier lists together with the goodwill associated therewith; and Seller's means of distribution utilized in the Business; and (iv) licenses, permits, filings, authorizations, consents or approvals, as issued by any governmental branch, department, commission, board, bureau, agency or other instrumentality, to the extent transferable. 1.2 Excluded Assets. Notwithstanding anything, express or implied, to the contrary contained in Section 1.1, Schedule 1.2 describes certain properties, assets, and rights which are excluded from the Acquired Assets (the "Excluded Assets"). 1.3 Assumption of Liabilities. (a) Subject to the terms and conditions of this Agreement, effective as of and contingent upon the Closing, Page 2 Purchaser shall assume, pay and perform the following liabilities or obligations arising out of the conduct of the Business and no other liabilities or obligations: (i) accrued, unpaid trade payables related to Inventory as of the Closing Date related to operations of the Business incurred in the ordinary course of business and set forth or reserved against on the Schedule of Net Assets (as defined in Section 1.5); (ii) obligations of Seller under the Assigned Contracts which have not become due for performance at the Closing Date but not any additional liability or obligation of Seller (x) which results or arises from a breach by Seller of any representation, warranty or agreement contained in such Assigned Contracts or (y) any additional liability or obligation resulting from a default by Seller prior to the Closing Date under such Assigned Contracts; and (iii) obligations of Seller assumed in this Agreement. Nothing in this Section 1.3, however, shall restrain or limit Purchaser from contesting or asserting defenses against third parties with respect to any such liabilities or obligations subject to Section 9.1(c)(ii). (b) Without limiting the generality of Section 1.3(a) hereof, and regardless of whether any of the following may be disclosed to Purchaser pursuant to Section 2 hereof or whether Purchaser may otherwise have knowledge of the same, Purchaser shall not assume, and Seller shall retain sole responsibility for any claim, liability, potential liability or obligation: (i) relating to environmental, health and safety matters arising or resulting from any activity or omission of Seller prior to the Closing Date, including but not limited to, any liability of Seller as a generator of Hazardous Material (as defined below), an owner or operator of a facility at the time of disposal or release of a Hazardous Material, or as one who transported to, or arranged for treatment or disposal of, Hazardous Material at a facility. As used herein the term "Hazardous Material" means any hazardous or toxic substance, material or waste which is or becomes regulated by Page 3 any state or local government authority in a state or locality in which Seller is doing or has done business or by the United States Government, including, without limitation, any material or substance which is (1) petroleum, (2) asbestos, (3) designated as a "hazardous substance" under Section 311 of the Federal Water Pollution Control Act, 33 U.S.C. Section 1317, (4) defined as a "hazardous waste" under Section 1004 of the Federal Resource Conservation and Recovery Act, 42 U.S.C. Section 6901 et seq., or (5) defined as a "hazardous substance" under Section 101 of the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. Section 9601 et seq., as amended; (ii) for federal, state or local taxes of Seller based on or measured by net income, or any interest, penalties or additions to tax with respect thereto (including without limitation any tax liability of Seller arising out of or resulting from the consummation of the transactions contemplated hereby); (iii) resulting from matters which are the subject of any lawsuits, proceedings or claims, whether or not listed or described on Seller's Disclosure Schedule (as hereafter defined) and arising or resulting from matters occurring prior to the Closing Date; (iv) arising out of, based upon or resulting from the conduct of any business of Seller other than the acquired Business; (v) arising out of or based upon claims of negligence, breach of warranty, consumer product labeling violation or product liability in respect of products manufactured by James Austin Company ("Austin"); (vi) respecting accrued or future benefits under any Employee Plans (as hereafter defined), whether or not any employees of Seller, or workers leased by the Corporation, are offered employment by, or become employees of, Purchaser. As used herein, the term "Employee Plan" Page 4 includes all present and prior (including terminated and transferred) plans, programs, agreements, arrangements, and methods of contributions or compensation (including all amendments to and components of the same, such as a trust with respect to a plan) providing any remuneration or benefits, other than current cash compensation, to any current or former employee of the Corporation, or workers leased by the Corporation, or to any other person who provides services to the Corporation, whether or not such plan or plans, programs, agreements, arrange- ments, and methods of contribution or compensation are subject to the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and whether or not such plan or plans, programs, agreements, arrangements and methods of contribution or compensation are qualified under the IRC. The term Employee Plan includes, but is not limited to, pension, retire- ment, profit sharing, stock option, stock bonus and nonqualified deferred compen- sation plans. The term Employee Plan also includes, but is not limited to, disability, medical, dental, workers compensation, health insurance, life insurance or other death benefits, incentive, severance plans, vacation benefits, and fringe benefits. The term Employee Plan also includes any employee plan that is a multiemployer plan as defined in Section 3(37) of ERISA. For purposes of this Section 1.3(b)(vi), the term "Corporation" means Seller, any member of a controlled group (within the meaning of Section 414(b) of the Internal Revenue Code of 1986, as amended (the "IRC")) of which Seller is a member, all trades or businesses under common control (within the meaning of IRC Section 414(c)) of which Seller is a member, and all affiliated service groups (within the meaning of IRC Section 414(m)) of which Seller is a member. (vii) any other obligation related to Seller's employment of Seller's employees or to hire employees of Seller, or Seller's agreement to lease employees. Seller shall be solely responsible for and shall satisfy all of Seller's obligations to Page 5 its employees and workers leased by the Corporation on account of their relationship with Seller, including, without limitation, any liability for employment agreements, accrued wages (including salaries and commissions), severance benefits, "COBRA" benefits, vacation pay, pension and profit sharing contributions, seniority rights or other forms of benefits of any type or nature on account of said person's relationship with Seller. The liabilities retained and/or assumed by Seller under this Section 1.3(b) are hereinafter referred to collectively as the "Retained Liabilities". 1.4 Purchase Price. The purchase price (the "Purchase Price") for the Acquired Assets to be acquired by Purchaser pursuant to this Agreement shall be an amount equal to the sum of Five Million Two Hundred Fifty Thousand Dollars ($5,250,000) plus the "Net Asset Amount" reflected on the Final Schedule of Net Assets (as defined in Section 1.5). Purchaser and Seller agree that the Estimated Purchase Price shall be allocated in accor- dance with Schedule 1.4. The allocation, as adjusted, will be used by the parties for all tax purposes, including, but not limited to, any reporting form, such as Form 8594 (Asset Acquisition Statement under Section 1060) and will be agreed upon in connection with Section 1.5(c). 1.5 Payment of Purchase Price. (a) Seller and Purchaser have cooperated in preparing an Estimated Schedule of Net Assets (the "Estimated Schedule of Net Assets"), a copy of which is attached hereto as Schedule 1.5-A, on which basis Purchaser shall make the Closing Payment (as hereafter defined). The Estimated Schedule of Net Assets shall reflect an estimated net asset amount (the "Estimated Net Asset Amount") determined in accordance with the accounting policies described in the Valuation Memorandum attached hereto as Schedule 1.5-B (the "Accounting Policies"). On the Closing Date, Seller shall pay to Purchaser, by wire transfer, bank draft or cashier's check, the amount of $5,090,000 ($5,250,000 less $160,000) plus fifty percent (50%) of the Estimated Net Asset Amount (the "Closing Payment"). The amount of $160,000 (the "Six-month Holdback"), representing the balance of the Purchase Price, shall be paid by Purchaser to Seller six (6) months following the Closing Date, subject to Purchaser's right of setoff provided in Section 9.5. (b) Immediately following the Closing on the Closing Date, Seller will conduct a physical count of the Inventories utilizing Seller's personnel. Purchaser's personnel may observe the conduct of the physical count of the Inventories and may Page 6 otherwise review the work done (including, without limitation, any relevant work papers) during the preparation of a final schedule of net assets (the "Final Schedule of Net Assets"). Seller shall prepare and submit to Purchaser the Final Schedule of Net Assets as soon as practicable but no later than five (5) days following the Closing, reflecting the Net Asset Amount determined in accordance with the Accounting Policies. (c) In the event that Purchaser does not agree with the Final Schedule of Net Assets, within five (5) days of receipt of Seller's Final Schedule of Net Assets, Purchaser shall give Seller a "Dispute Notice" setting forth in reasonable detail the basis of its disagreement, and Purchaser and Seller shall, within twenty (20) days after receipt by Seller of such Dispute Notice, attempt to resolve such Dispute and agree in writing upon the Final Schedule of Net Assets. In the event that Seller and Purchaser are unable to resolve any such Dispute within the twenty-day resolution period, then a qualified principal of the certified public accounting firm of Price Waterhouse, Atlanta office, or such other accounting firm or office as may be mutually agreed upon (the "Arbitrator") shall be employed as arbitrator hereunder to settle such dispute as soon as practicable. The parties hereto shall give the Arbitrator access to all documents, facilities and personnel within their respective control necessary to perform its function as arbitrator. The parties agree that the Arbitrator shall decide only matters involving differences as to the application of the Accounting Policies, and not any non-accounting matters involving the construction or interpretation of this Agreement. Any arbitration pursuant to this Section 1.5(c) shall be conducted exclusively in Atlanta, Georgia. The arbitrator shall render a decision within thirty (30) days from submission of all facts by both parties. (d) (i) In the event that the Net Asset Amount on the Final Schedule of Net Assets is equal to the Estimated Net Asset Amount, Purchaser shall pay Seller the unpaid balance of the Estimated Net Asset Amount not paid at the Closing (the "Asset Holdback Amount"). In case the Net Asset Amount on the Final Schedule of Net Assets is not equal to the Estimated Net Asset Amount, a payment including an adjustment of this difference shall be made by one party to the other, as follows: (1) In case the Net Asset Amount is greater than the Estimated Net Asset Amount, an amount equal to the excess of the Net Asset Amount over the Estimated Net Asset Amount plus Page 7 the Asset Holdback Amount shall be paid by Purchaser to Seller; (2) In case the Net Asset Amount is greater than the Asset Holdback Amount but lower than the Estimated Net Asset Amount, an amount equal to the Net Asset Amount less 50% of the Estimated Net Asset Amount shall be paid by Purchaser to Seller; and (3) In case the Net Asset Amount is lower than the Asset Holdback Amount, an amount equal to 50% of the Estimated Net Asset Amount less the Net Asset Amount shall be paid by Seller to Purchaser. (ii) All payments pursuant to this Section 1.5(d) will be made within five (5) days of agreement thereon. 1.6 Transfer of the Purchased Assets. Seller shall deliver to Purchaser, where necessary, consents authorizing the transfer and assignment by Seller to Purchaser of all the Acquired Assets. Without limiting any other rights of Purchaser under this Agreement, to the extent any of the Acquired Assets are not assignable to Purchaser or if any necessary consent to such assignment shall not have been obtained by Seller, Seller shall hold in trust for the benefit of Purchaser all Seller's right, title and interest to such Acquired Asset and, insofar as permissible, from time to time assign such interest to Purchaser. Purchaser and Seller shall cooperate in any reasonable arrangement to the end that Purchaser shall be provided the use and benefits of such Acquired Asset, provided Purchaser has assumed all liabilities and obligations related thereto as if they had been assigned. Nothing in this Section 1.6, however, shall release Seller from its obligation to defend, indemnify and hold Purchaser harmless from any loss, liability or damage suffered by Purchaser resulting from any failure by Seller to transfer and assign the Acquired Assets as required by this Agreement. This Agreement shall not constitute an agreement to assign any Acquired Asset if the attempted assignment thereof would constitute a breach thereof. 1.7 Non Compete Agreements. At the Closing, API, Timothy B. Dutcher, Kenneth L. Ellis and H. Ross Arnold III, each being a direct or indirect substantial shareholder of Seller (the "Substantial Shareholders") shall each enter into a covenant not to compete agreement (the "Non Compete Agreements") with Purchaser in the form attached hereto as Exhibits G, H, I and M. In consideration thereof, Seller shall pay by wire transfer, bank draft , or cashier's check at the Closing, the following respective amounts to the following persons: Page 8 (a) Timothy B. Dutcher. . . . . . . . . .$ 250,000 (b) Kenneth L. Ellis . . . . . . . . . .$ 1,000,000 (c) H. Ross Arnold III. . . . . . . . . .$ 1,000,000 2. REPRESENTATIONS AND WARRANTIES OF SELLER Except as disclosed or excepted in the schedules delivered concurrently with the execution and delivery of this Agreement and made a part hereof (collectively, the "Disclosure Schedule"), and as a material inducement to Purchaser to enter into and perform its obligations under this Agreement, Seller represents and warrants to Purchaser that as of the date hereof: 2.1 Authorization; Enforceability of Agreement. Seller has full corporate right and power to enter into this Agreement and to carry out the transactions contemplated hereby; the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by all requisite corporate action of the Seller; and this Agreement is the legal, valid and binding obligation of the Seller, enforceable in accordance with its terms except as the enforceability thereof may be limited by general principles of equity and by bankruptcy, reorganization, insolvency or other similar laws affecting the enforcement of creditors' rights generally, and by general equitable principles (regardless of whether the issue of enforceability is considered in a proceeding in equity or at law). Seller may execute, deliver and perform this Agreement without the necessity of obtaining any consent, approval, authorization or waiver or giving any notice to or from any person, other than consents, approvals, authorizations or waivers which have been, or prior to the Closing Date will be, obtained and on the Closing Date will be in full force and effect, and such notices which have been or prior to the Closing Date will be duly given. 2.2 Organization; Power. Seller is a corporation duly organized, validly existing and in good standing under the laws of the State of Florida. Seller is qualified to transact Business as a foreign corporation and is in good standing in each jurisdiction where the Seller does business, owns property or is otherwise required by law to be so qualified except for those jurisdictions in which the absence of such qualification would not have a material adverse effect on the Acquired Assets or Business. Seller has all requisite corporate power and authority to own, lease and operate its properties and assets and to carry on its business as now being conducted. Seller has heretofore delivered to Purchaser complete and correct copies of Seller's corporate charter and bylaws, as amended and in effect on the date hereof. Page 9 2.3 No Conflict. The transactions contemplated by this Agreement will not violate in any material respect or be in conflict with, in any material respect, (a) any existing provision of applicable law, or any existing order, rule, regulation, judgment or decree of any court, arbitrator or agency of government, or (b) any existing provision of the Articles of Incorporation or Bylaws of the Seller, nor will those transactions as of the Closing Date (i) in any material respect, violate, be in conflict with, result in a breach of, or constitute (with or without notice or lapse of time or both) a default under any material agreement or other instrument to which Seller is a party or by which the Seller or the Business is bound, or (ii) result in the creation or imposition of any lien, charge or encumbrance upon any of the Acquired Assets. 2.4 Title to the Acquired Assets. Seller has good and marketable title to all the Acquired Assets. Except as set forth in the Disclosure Schedule, all the Acquired Assets are free and clear of mortgages, liens, pledges, charges, encumbrances, equities, claims, covenants, conditions, or other restrictions. Except as set forth in the Disclosure Schedule, neither any officer, director, employee or independent contractor of Seller, nor any spouse, child or other relative of any of such persons, owns, or has any interest, directly or indirectly, in any of the Intellectual Property. 2.5 Litigation and Claims; Compliance with Law. (a) Except as set forth in the Disclosure Schedule, there is no action, suit, proceeding, claim or investigation in any court or arbitration or before or by any federal, state or other governmental department, commission, bureau, agency or instrumentality, domestic or foreign, pending or, to the best knowledge of Seller, threatened against Seller which could adversely affect the Business or the Acquired Assets or their condition (financial or otherwise), earnings, business assets, properties, liabilities, operations or prospects or the transactions contemplated by this Agreement; and there is no factual or legal basis which could give rise in the future to the pendency or threat of any such action, suit, proceeding, claim or investigation which would adversely affect any of the same. Seller has provided Purchaser with true, accurate and complete copies of all correspondence, memoranda and notifications concerning, or relating to, complaints or expressions of dissatisfaction with the products, services or personnel of the Business. Seller has not experienced any single paid claim or series of paid claims aggregating more than $8,000 during each of calendar years 1992 and 1993 with respect to any allegedly defective, damaged or unsatisfactory E-Z Deck Wash(R) or E-Z D(R) brand product, nor, to Seller's knowledge, are there any outstanding unpaid claims greater than $10,000. Any matters set forth in the Disclosure Schedule, if decided adversely to Seller, are not reasonably expected by Seller to result in an adverse change in the earnings, business, assets, or condition (financial Page 10 or other), operations or prospects of the Business or Seller. Seller is not presently engaged in any legal action to recover monies due to it or damages sustained by it in connection with the conduct of the Business. (b) The Business has been conducted, and the Acquired Assets operated, in compliance in all material respects with all laws, ordinances, regulations, rules and court orders or decrees applicable thereto (including, but not limited to, all environmental protection laws and laws regulating the labeling of consumer products) and Seller has duly filed all reports required to be filed by it with governmental authorities and has obtained all governmental consents, approvals and authorizations, which, if not obtained or filed, would have a material adverse effect on the Business or operation of the Acquired Assets and there are no such governmental licenses, permits, authorizations, consents and approvals. The Business is not conducted under any restriction imposed upon Seller but not generally imposed upon other persons conducting similar businesses or operating similar assets for similar purposes by any zoning, antipollution, health or other law, ordinance, regulation, restrictive covenant, injunction or decree. 2.6 Financial Information. Seller's books and records are correct and complete, reflect fairly the income, expenses, assets and liabilities of the Business and provide a fair basis for the preparation of Seller's financial statements of the Business. Seller has heretofore furnished to Purchaser the unaudited balance sheets of the Business as of November 30, 1993, and the audited balance sheets of the Business as of July 31, 1993 and 1992, and the related statements of income for the four (4) months and the fiscal year, respectively, ended on such dates (collectively, the "Financial Statements"). The Financial Statements, copies of which are attached as Schedule 2.6, are in agreement with Seller's books and records and present fairly Seller's financial position at the respective dates of such balance sheets, present fairly the results of operations for the respective periods covered, and have been prepared on a consistent basis throughout the periods involved. 2.7 Product Warranties; Advertising Claims; Labeling. Except as set forth in the Disclosure Schedule and for warranties implied by law, there are no express product or service warranties granted by Seller applicable to the E-Z Deck Wash(R) or E-Z D(R) brand home surface care products or the Business. All product claims and other statements which currently appear in Seller's advertising and promotional materials or on product packaging and labeling are true and correct. All such material claims are supported by laboratory test results, copies of which have been furnished to Purchaser. 2.8 Absence of Certain Changes. Except as set forth in the Disclosure Schedule, since November 30, 1993, the Business has been operated only in the ordinary course and, without Page 11 limiting the generality of the foregoing, Seller has not with respect to the Business: (a) Sustained any damage, destruction or loss, by reason of fire, explosion, earthquake, casualty, labor trouble, requisition or taking of property by any government or agency thereof, windstorm, embargo, riot, act of God or public enemy, flood, accident, revocation of license or right to do business, total or partial termination, suspension, default or modification of contract, governmental restriction or regulation, other calamity, or other similar or dissimilar event (whether or not covered by insurance), materially and adversely affecting its condition (financial or otherwise), earnings, business, assets, liabilities, properties, operations or prospects; (b) Executed, created, amended or terminated any contract, agreement or license to which it is a party or by which its properties are bound, except in the ordinary course of business; (c) Waived or released any right or claim or canceled any debts or claims or voluntarily suffered any extraordinary losses; (d) Paid any obligation or liability (fixed, contingent or otherwise), or discharged or satisfied any lien or encumbrance, or settled any liability, claim, dispute, proceeding, suit, or appeal, pending or threatened against it or any of its assets or properties, except for current liabilities included in the balance sheet dated November 30, 1993 in the Financial Statements, and current liabilities incurred since said date in the ordinary and usual course of its business; (e) Had any material adverse change in its condition (financial or otherwise), earnings, business, assets, properties, liabilities, operations or prospects; (f) Received notice that any customer or group of customers which individually or in the aggregate represented more than $20,000 in annual revenues during the preceding calendar year will no longer be doing business with Seller; (g) Mortgaged, pledged, otherwise encumbered or subjected to lien any of the Acquired Assets, tangible or intangible; (h) Sold, assigned, transferred, conveyed, leased, licensed or otherwise disposed of any asset or property, tangible or intangible, except in the ordinary and usual course of business, or discontinued any material product line or the manufacture, sale or other disposition of any of its products or services; Page 12 (i) Changed its accounting principles, methods, practices regarding significant estimates (including, without limitation, any change in depreciation or amortization policies or rates), except as set forth in the Accounting Policies, or revalued any of its assets; (j) Had any other event of any character that has or is reasonably expected to have a material adverse effect on the condition (financial or otherwise), earnings, business, assets, liabilities, properties, operations or prospects of the Business or the Acquired Assets; or (k) Agreed, committed or entered into any other understanding to do any of the things described in the preceding subsections (a) through (j). 2.9 Taxes. Except as set forth in the Disclosure Schedule, Seller has, or on or before the Closing Date will have, paid and discharged all material federal, state, local and foreign taxes, interest, penalties, additions to tax or other amounts required to be paid on or before the Closing Date, and Seller has, or prior to the Closing Date will have, duly, accurately and completely prepared and filed all such tax reports and returns required to be filed by Seller on or before the Closing Date. Seller has not received notice of any tax deficiency or proposed tax deficiency. Seller has not executed any waiver of any statute of limitations on the assessment or collection of any tax or filed with the Internal Revenue Service or any other taxing authority or executed any agreement now in effect extending the period for assessment or collection of any taxes. There are no tax liens upon, pending against or, to the best knowledge of Seller, threatened against any of the Acquired Assets. 2.10 Inventories. Schedule 1.1-A lists all of the products of Seller's Business. Schedule 2.10 contains a summary by class of items included in the Inventories as of November 30, 1993 to be sold to Purchaser pursuant to Section 1.1. The Inventories consist of items of good and merchantable quality and quantity, free from defects, and usable and saleable in the normal course of business within six (6) months at present levels of Business operations, and include all Inventories utilized primarily in the Business except for obsolete and slow-moving items and materials below standard quality which have been written down on Seller's books in accordance with the Accounting Policies and which are not being purchased by Purchaser (the "Excluded Inventories"). All items included in such Inventories are owned by Seller. No items included in the Inventories bear a label, coupon or other consumer incentive which entitles the purchaser at retail ("Consumer") to a rebate or any other thing of value. No items included in the Inventories have been pledged as collateral or are held by Seller on consignment from others. Seller is not under any obligation with respect to the return of inventory or products in the possession of others. All Page 13 Inventories are based on quantities determined by physical count on November 30, 1993 and are valued at the lower of cost (first- in, first-out) or market and on a basis consistent with that of prior periods. 2.11 Prepaid Expenses. Schedule 2.11 contains an accurate list of Prepaid Expenses. The Prepaid Expenses arose from bona fide transactions in the ordinary course of business and are not and will not be subject to any counterclaims or setoffs. 2.12 Contracts. (a) Schedule 2.12 lists all Assigned Contracts that are not freely cancelable on 30 days' notice without cause and that are to be assigned to Purchaser pursuant to Section 1.1. Seller has previously provided to Purchaser a true and complete copy of all Assigned Contracts. (b) Each Assigned Contract is valid and in full force and effect and constitutes the legal, valid and binding obligation of Seller and the other party or parties thereto; there are no existing material defaults thereunder, and no material event, act or omission has occurred which (with or without notice, lapse of time or the happening or occurrence of any other event) would result in a default thereunder. No material default exists or will exist under any of the Assigned Contracts as a result of the execution and delivery or performance of this Agreement. The Disclosure Schedule lists any Assigned Contract which (i) is in excess of the normal, ordinary and usual requirements of the Business as conducted by Seller or at an excessive term or price; (ii) is not cancelable following the Closing on 90 days' notice or less and without liability, penalty or premium; (iii) restricts Seller from carrying on the Business anywhere in the world; (iv) contains a power-of- attorney; or (v) except for orders in process from customers or to suppliers entered in the ordinary course of business in arms- length transactions, involves the payment by any party to such Assigned Contract over the term thereof of more than $10,000 for any single contract or $50,000 in the aggregate for all such contracts. 2.13 Intellectual Property; Intangible Assets. (a) Schedule 2.13 sets forth a true and complete list of all Intellectual Property to be assigned to Purchaser pursuant to Section 1.1. (b) Seller is the record owner of the Intellectual Property and Intangible Assets. Except as set forth in the Disclosure Schedule, all Intellectual Property and Intangible Assets are valid and subsisting, free and clear of any encumbrances or rights of third parties which would restrict Purchaser's exclusive right to use such Intellectual Property and Intangible Assets in the manner in which they are now used by Page 14 Seller. Except as set forth in the Disclosure Schedule, no claim by third parties with regard to any Intellectual Property and Intangible Assets is pending or threatened, nor, to Seller's knowledge, is there any basis for any such claim. To Seller's knowledge, none of the Intellectual Property and Intangible Assets is being used or infringed by others. Except as set forth in the Disclosure Schedule there are no licenses or sublicense agreements now in effect regarding the Intellectual Property or Intangible Assets. 2.14 Fixed Assets. Schedule 2.14 contains a complete list by type, location and book value of all Fixed Assets to be assigned to Purchaser pursuant to Section 1.1. Except as stated in the Disclosure Schedule, all Fixed Assets are in good condition and repair and no Fixed Asset used by Seller in connec- tion with the Business is held under any lease, security agreement, conditional sales contract, or other title retention or security arrangement, or is located other than in the possession of Seller. 2.15 Labor Matters; Employees. (a) Except as set forth in the Disclosure Schedule, Seller has no employees, nor any obligation to employ or engage any agent, consultant, employee, officer, director or shareholder, or to provide bonuses or other current cash compensation. Except as disclosed in the Disclosure Schedule, Seller has no union contracts or collective bargaining agreements with, or any other obligations to, employee organizations or groups, nor is Seller currently engaged in any labor negotiations excepting minor grievances not involving any employee organization or group, nor is Seller the subject of any union organization effort. There is no actual pending or threatened labor dispute, strike or work stoppage affecting the Business. (b) Schedule 2.15-B(1) contains a true and complete list of the names of all of Seller's leased employees and contract workers utilized in the Business employees as of December 31, 1993. (c) Seller has complied with all applicable federal and state laws relating to the employment of labor, including but not limited to, the provisions thereof relating to equal employment opportunity, wages, hours and the payment of social security taxes, and is not liable for any arrears of wages or any tax or penalties for failure to comply with any of the foregoing. (d) Seller has fewer than fifty (50) leased employees utilized in connection with the Business and therefore Seller does not intend to serve notice in advance of the Closing Date pursuant to The Worker Adjustment and Retraining Notification Act ("WARN") 102 Stat. 890, 29 U.S.C. (SS)2102 et seq. (1988). There are no similar statutes under state or local law relating to employees, former employees or leased employees, of Page 15 Seller affected by the purchase and sale of the Acquired Assets and Business. 2.16 Customer Commitments; Sales Matters. (a) Except as set forth in the Disclosure Schedule, Seller has not granted any customer payment terms in excess of 30 days and/or cash discounts in excess of 2 percent. Except as set forth in the Disclosure Schedule, Seller is not under any obligation to any of its customers with respect to any rebate or other consumer promotional program or for the payment of any discount, rebate, advertising or promotional allowance or any other similar consideration or promotional allowance. Schedule 2.16-A contains copies of each of Seller's marketing and sales incentive programs relating to customers. Except as set forth in the Disclosure Schedules, Seller is not under any obligation with respect to any outstanding consumer rebate or coupon programs. (b) Schedule 2.16-B sets forth information, organized by customer, as to all sales of inventory made by Seller during its fiscal year ended July 31, 1993, and for the five (5)-month period ended December 31, 1993, for all customers to whom sales, in the aggregate, exceeded ninety percent (90%) of Seller's total sales for the respective period. Said information is true, complete and correct in all material respects. Seller has no information, nor is it aware of any facts, indicating that any of such customers intends to cease doing business with Seller or alter the amount of the business that it is presently doing with Seller. 2.17 Brokers. Other than fees to Quest Capital Corp., Seller has not incurred, nor will it incur, nor has it caused, nor will it cause, Purchaser to incur, any liability to any person for brokerage or finder's fees or agent's commissions in connection with this Agreement and the transactions contemplated hereby. 2.18 Related Party Disclosures. Seller has disclosed all material facts concerning this Agreement to Mr. Timothy B. Dutcher, a minority shareholder of Seller, and to all of the parties other than Seller to that certain Agreement entitled "Covenant Not to Compete" dated March 12, 1992 (the "Covenant Not to Compete), such parties being Messrs. G. Todd Taylor, R. M. Saunders, Charlie Aycock and W. Mark Spence who are hereinafter collectively referred to as the "Covenantors." 2.19 Accuracy and Completeness of Representations and Warranties. No representation or warranty made by Seller in this Agreement and the schedules thereto contains or will contain any untrue statement of a material fact, or omits or will omit to state a material fact necessary to make the statements contained herein or therein, in light of the circumstances under which they were made, not misleading. Page 16 3. REPRESENTATIONS AND WARRANTIES OF PURCHASER Purchaser represents and warrants to Seller that as of the date hereof: 3.1 Authorization, Enforceability of Agreement. Purchaser has full corporate right and power to enter into this Agreement and to carry out the transactions contemplated hereby; the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by all requisite corporate action of Purchaser; and this Agreement is the legal, valid and binding obligation of Purchaser, enforceable in accordance with its terms, except as the enforceability thereof may be limited by general principles of equity and by bankruptcy, reorganization, insolvency or other similar laws affecting the enforcement of creditors' rights generally, and by general equitable principles (regardless of whether the issue of enforceability is considered in a proceeding in equity or at law). Purchaser may execute, deliver and perform this Agreement without the necessity of obtaining any governmental or other consent, approval, authorization or waiver or giving any notice to or from any person, other than consents, approvals, authorizations or waivers which have been, or prior to the Closing Date will be, obtained and on the Closing Date will be in full force and effect, and such notices which have been or prior to the Closing Date will be duly given. 3.2 Organization; Power. Purchaser is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has all requisite corporate power and authority to own, lease and operate its properties and assets and to carry on its business as now being conducted. 3.3 No Conflict. The transactions contemplated by this Agreement will not violate in any material respect or be in conflict with, in any material respect, (a) any existing provision of applicable law, or any existing order, rule, regulation, judgment or decree of any court, arbitrator or agency of government, or (b) any existing provision of the Articles of Incorporation or Bylaws of the Purchaser, nor will those transactions as of the Closing Date in any material respect, violate, be in conflict with, result in a breach of, or constitute (with or without notice or lapse of time or both) a default under any material agreement or other instrument to which Purchaser is a party or by which the Purchaser or the Business is bound. 3.4 Litigation and Claim. There is no action, suit, proceeding, claim or investigation in any court or arbitration or before or by any federal, state or other governmental department, commission, bureau, agency or instrumentality, domestic or foreign, pending or, to the best knowledge of Purchaser, threatened against Purchaser which could materially adversely Page 17 affect the consummation of the transactions contemplated by this Agreement. 3.5 Brokers. Purchaser has not incurred, nor will it incur, nor has it caused, nor will it cause, Purchaser to incur, any liability to any person for brokerage or finder's fees or agent's commissions in connection with this Agreement and the transactions contemplated hereby. 3.6 Accuracy and Completeness of Representations and Warranties. No representation or warranty made by Purchaser in this Agreement and the schedules thereto contains or will contain any untrue statement of a material fact, or omits or will omit to state a material fact necessary to make the statements contained herein or therein, in light of the circumstances under which they were made, not misleading. 4. COVENANTS OF SELLER Seller agrees that, except as otherwise agreed in writing by Purchaser, from the date hereof to the Closing Date: 4.1 Access to Information. Seller, upon reasonable notice, shall (a) give or cause to be given to Purchaser and to its accountants, counsel and other representatives, during regular business hours access to all of the properties, documents and records of Seller related to the Business, and (b) provide or cause to be provided to Purchaser at its expense such copies or extracts of Seller's documents and records related to the Business as Purchaser may request. 4.2 Conduct of Business in Normal Course. Seller shall carry on the Business and its activities lawfully, diligently and in the same manner as they previously have been carried on, and shall not make or institute any unusual or novel methods of pur- chase, sale, lease, management, accounting or operation that will vary from the methods used by Seller as of the date of this Agreement, and, without limiting the generality of the foregoing, Seller agrees to undertake collection of Accounts Receivable only as consistent with past practices. 4.3 Consents and Notices. Seller will obtain, and Purchaser will use its best efforts to cooperate with and assist Seller in obtaining, all consents, waivers, amendments, modifications, approvals, authorizations, permits and licenses of third parties, and governmental and regulatory authorities, if any, which may be necessary to effectuate this Agreement and to transfer the Acquired Assets to Purchaser. Seller shall give all notices to third parties (with copies to Purchaser) required to be given by it in contemplation and as a result of the transactions contemplated under this Agreement. Page 18 4.4 Preservation of Business and Relationships. Seller shall, without making any commitments on behalf of Purchaser, preserve its business organization intact, and use its best efforts to keep available its present employees, and to preserve its present relationships with suppliers, customers, and others having business relationships with it. 4.5 Maintenance of Insurance. Seller shall continue to carry its existing insurance. 4.6 Leased Employees and Compensation. Seller shall not do, or agree to do, any of the following acts: (i) make any change in salaries payable; or (ii) change benefits payable under any bonus or pension plan or other contract or commitment. Seller shall permit Purchaser to contact its leased employees at all reasonable times for the purpose of discussing with such leased employees prospective employment by Purchaser on or after the Closing Date, and Seller shall use its best efforts to encourage all leased employees to accept any employment offered by Purchaser pursuant to Section 9.7. Seller shall seek from each leased employee of Seller listed on Schedule 4.6 a severance agreement, containing proprietary information and confidentiality covenants in the form of Exhibit L (the "Severance Agreements"). 4.7 New Transactions. Seller shall not enter into any contract, commitment, or transaction related to the Business not in the usual and ordinary course of business without first obtaining Purchaser's prior written consent. 4.8 No-shop Agreement. Seller will not sell, or place on the market for sale to any person or entity other than Purchaser, the Business or the stock or assets comprising the Business, nor shall Seller solicit, encourage or respond to, directly or indirectly, any inquiries, discussions or proposals for, or provide any person or entity with information relating to, the sale of the Business or the stock or assets comprising the Business. 4.9 [-----] 4.10 Related Party Obligations. Seller will comply fully with all of the provisions of Section 4 of the Covenant Not to Compete and will satisfy all obligations to Mr. Dutcher and the Covenantors. 4.11 Certain Tax Matters. Seller will make a federal tax deposit with an authorized federal depository in the amount of $15,000. At the Closing, Seller shall furnish a copy of the related deposit coupon referencing Fiscal 1993 taxes and a receipt from the depository institution. Page 19 4.12 Representations and Warranties True at Closing. Seller agrees that, except as otherwise agreed in writing by Purchaser, from the date hereof until the Closing Date, Seller shall assure that all representations and warranties of Seller set forth in this Agreement and in any schedules attached hereto will also be true and correct in all material respects as of the Closing Date as if made on that date and that all conditions precedent to Closing shall have been met. In the event that there exists or occurs any condition which would make untrue any representation or warranty herein made by Seller, Seller shall promptly give Purchaser notice of the existence or occurrence of such condition; provided, however, no such notice shall relieve Seller of its obligations hereunder. 5. COVENANTS OF PURCHASER Purchaser agrees that, except as otherwise agreed in writing by Seller, from the date hereof until the Closing Date, Purchaser shall assure that all representations and warranties of Purchaser set forth in this Agreement and in any schedules attached hereto will also be true and correct in all material respects as of the Closing Date as if made on that date and that all conditions precedent to Closing shall have been met. In the event that there exists or occurs any condition which would make untrue any representation or warranty herein made by Purchaser, Purchaser shall promptly give Seller notice of the existence or occurrence of such condition; provided, however, no such notice shall relieve Purchaser of its obligations hereunder. Purchaser hereby waives compliance by Seller with all bulk sales laws applicable to the transactions under this Agreement, subject to Purchaser's right of indemnity pursuant to Section 9.1 hereof. 6. CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER The obligation of Purchaser to consummate the transactions contemplated by this Agreement is subject, at Purchaser's option, to the satisfaction at or prior to the Closing Date of each of the following conditions: 6.1 Representations and Warranties; Covenants; Changes. All representations and warranties of Seller contained in this Agreement or in any document delivered at the Closing shall be true in all material respects at and as of the Closing Date as though made at and as of such time, and Seller shall have performed and complied with all covenants, obligations and conditions required by this Agreement to be performed or complied with by Seller prior to or on the Closing Date; and Purchaser shall have received certificates of an officer of Seller dated the Closing Date, to that effect. Purchaser shall not have become aware of any fact of which Purchaser had no knowledge as of the date of this Agreement which, in the reasonable judgment of Purchaser, has or is expected to have, individually or Page 20 collectively, a material adverse effect on the financial condition, business, assets, liabilities, net assets, properties, licenses, franchises, results of operations, value or prospects of the Business. 6.2 Opinion of Counsel to Seller. Purchaser shall have received a favorable opinion of Carr, Tabb and Pope, and Gorman and Matthew, P.A., counsel to Seller, substantially in the form of Exhibit C attached hereto. 6.3 Absence of Litigation. No action, suit, or proceeding before any court or any governmental body or authority, pertaining to the transactions contemplated by this Agreement or to its consummation, shall have been instituted or clearly indicated on or before the Closing Date. 6.4 Consents. All material consents, waivers, approvals, licenses and authorizations of third parties (including without limitation customers if required), and of governmental authorities, if any, and all amendments or modifications to existing material agreements with third parties, required to consummate the transactions contemplated hereunder and to transfer to Purchaser without impairment the Acquired Assets shall have been obtained and shall be reasonably satisfactory in form and substance to Purchaser. The foregoing covenant shall not apply to the consent of any customer which Seller has not obtained following a best efforts attempt to obtain consent in writing. Seller shall have received, in form and substance satisfactory to Purchaser, all documents and releases related to Seller's agreements with Tim Dutcher, the Covenant Not To Compete and the Barnett Bank of Tallahassee. 6.5 Condition of Assets. The Acquired Assets shall not have been materially and adversely affected in any way as a result of any fire, accident, storm or other casualty or labor or civil disturbance or act of God. 6.6 Certain Written Agreements. Purchaser shall have received from each Substantial Shareholder a Non Compete Agreement. Seller shall not have, by action or omission, impaired the assignability of the benefits of Seller's Covenant Not To Compete with the Covenantors. Seller shall have received from each leased employee listed on Schedule 4.6 a Severance Agreement in the form of Exhibit L. Purchaser shall have received from API a Guaranty in the Form of Exhibit E (the "Shareholder Guaranty") guaranteeing the performance of Seller's obligations under this Agreement. 6.7 Incumbency Certificate. Purchaser shall have received an incumbency certificate dated the Closing Date certifying the incumbency of each officer of Seller who has signed this Agreement or any instrument delivered in connection with this Agreement, which certificate shall contain specimens of Page 21 the signatures of each of the officers whose incumbency is certified. 6.8 Warehousing Agreement. Purchaser and API shall have entered into a warehousing agreement in the form of Exhibit F (the "Warehousing Agreement") for the Madison, Florida, warehouse. 6.9 Other Deliveries. Purchaser shall have received in form and substance reasonably satisfactory to Purchaser all other deliveries required to be delivered to Purchaser at the Closing as specified in Section 8.3 of this Agreement. 7. CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER The obligation of the Seller to consummate the transactions contemplated by this Agreement is subject, at Seller's option, to the satisfaction at or prior to the Closing Date of each of the following conditions: 7.1 Representations and Warranties; Covenants. All representations and warranties of Purchaser contained in this Agreement or in any document delivered at Closing shall be true in all material respects at and as of the Closing Date as though made at and as of such time, and Purchaser shall have performed and complied with all material covenants, obligations and conditions required by this Agreement to be performed or complied with by Purchaser prior to or on the Closing Date; and Seller shall have received Certificates of an officer of Purchaser, dated the Closing Date, to that effect. 7.2 Opinion of Counsel to Purchaser. Seller shall have received a favorable opinion of Leonard M. Patterson, counsel to Purchaser, substantially in the form of Exhibit K attached hereto. 7.3 Absence of Litigation. No action, suit, or proceeding before any court or any governmental body or authority, pertaining to the transaction contemplated by this Agreement or to its consummation, shall have been instituted or clearly indicated on or before the Closing Date. 7.4 Consents. All material consents, waivers, approvals, licenses and authorizations of third parties (including without limitation customers if required), and of governmental authorities, if any, and all amendments or modifications to existing material agreements with third parties, required to consummate the transactions contemplated hereunder and to transfer to Purchaser without impairment the Acquired Assets shall have been obtained and shall be reasonably satisfactory in form and substance to Seller. Seller shall have received, in form and substance satisfactory to Seller, all documents and releases related to Purchaser's agreements with Tim Dutcher, the Page 22 Covenant Not To Compete and the Barnett Bank of Tallahassee. Seller shall have received from each leased employee listed on Schedule 4.6 a Severance Agreement in the form of Exhibit L. 7.5 Incumbency Certificate. Seller shall have received an incumbency certificate dated the Closing Date certifying the incumbency of each officer of Purchaser who has signed this Agreement or any instrument delivered in connection with this Agreement, which certificate shall contain specimens of the signatures of each of the officers whose incumbency is certified. 7.6 Other Deliveries. Seller shall have received in form and substance reasonably satisfactory to Seller all other deliveries required to be delivered to Seller at the Closing as specified in Section 8.4 of this Agreement. 8. CLOSING 8.1 Closing Date. The closing of the purchase and sale of the Acquired Assets (the "Closing") shall take place at the offices of Purchaser, Aliso Viejo, California, effective on January 28, 1994 (the "Closing Date") at 12:01 a.m., or at such other time and place prior to February 2, 1994 as the parties may agree. 8.2 Right of Termination. This Agreement may be terminated and the proposed transaction abandoned at any time prior to the Closing by notice given as provided below in Section 10.3: (a) by mutual consent of the parties; (b) by either party if a condition to that party's obligations pursuant to this Agreement shall not have been satisfied at or prior to the Closing in accordance with the terms of this Agreement; or (c) by either party if the Closing shall not have taken place within four (4) business days of the date of this Agreement. Nothing in this Section 8.2 shall excuse a party from exercising good faith and its reasonable best efforts toward the satisfaction of the conditions to such party's obligations under this Agreement. Termination of this Agreement shall not adversely affect any rights or remedies of either party hereunder, and the terms and conditions of the Confidentiality Agreement dated September 13, 1993, shall survive any such termination. 8.3 Seller Deliveries. At the Closing, Seller shall deliver or cause to be delivered to Purchaser: Page 23 (a) An executed counterpart Instrument of Assignment and Assumption in the form of Exhibit A, for all of the Acquired Assets other than Inventory and Fixed Assets; (b) An executed Bill of Sale in the form of Exhibit B, for the Inventory and Fixed Assets; (c) The opinion of counsel to Seller in the form of Exhibit C; (d) Certified resolutions of the shareholders and board of directors of Seller authorizing consummation of the transactions contemplated by this Agreement; (e) Officers' certificate in the form of Exhibit D; (f) Consents and approvals set forth in the Disclosure Schedule; (g) Charter and Good Standing Certificate of Seller and API certified by the Florida Secretary of State; (h) Shareholder Guaranty in the form of Exhibit E; (i) Incumbency Certificate; (j) Evidence that Seller has paid and discharged certain federal taxes as described in Section 4.11; (k) Warehousing Agreement in the form of Exhibit F; (l) UCC termination statements or amendments releasing any liens of record affecting the Acquired Assets; and (m) Non Compete Agreements in the form of Exhibits G, H, I and M executed by the Substantial Shareholders of Seller in accordance with Section 1.7. Simultaneously with the consummation of the transfer, Seller, through its officers, agents, and employees, shall put Purchaser into full possession and enjoyment of all the Acquired Assets to be conveyed and transferred by this Agreement. 8.4 Purchaser Deliveries. At the Closing, Purchaser shall deliver to Seller the following instruments and documents: (a) Wire transfer, cashier's check or bank draft in the amount of the Closing Payment; (b) An executed counterpart of an Instrument of Assignment and Assumption in the form executed by Seller; and (c) Officer's certificate in the form of Exhibit J. Page 24 (d) The opinion of counsel to Purchaser in the form of Exhibit K; (e) Certified resolutions of the board of directors of Purchaser authorizing consummation of the transactions contemplated by this Agreement; (f) Charter and Good Standing Certificate of Purchaser certified by the Delaware Secretary of State; (g) Incumbency Certificate; (h) Warehousing Agreement in the form of Exhibit F. 9. POST CLOSING AGREEMENTS 9.1 Indemnification by Seller. (a) Subject to the provisions of Section 9.4, Seller agrees to defend, indemnify and hold Purchaser and each of its subsidiaries, affiliates and parent companies and the respective officers, directors and employees of Purchaser and such subsidiaries, affiliates and parent companies (collectively, the "Indemnified Parties") harmless from and against any and all liabilities, obligations, damages, losses, claims, demands, recoveries, deficiencies, costs or expenses (including, without limitation, interest, penalties, additions to tax and reasonable attorneys' fees and expenses) connected with, resulting from or arising out of any of the following: (i) any untruth or error in or breach of any representation or warranty contained in this Agreement or in any schedule included in the Disclosure Schedule and any certificate, exhibit or other instrument delivered by Seller at the Closing of the transactions under this Agreement; (ii) any failure by Seller to perform, carry out or comply with its obligations under this Agreement, including the exhibits hereto; (iii) any and all Retained Liabilities and other debts, liabilities or obligations of Seller, direct or indirect, fixed, contingent or otherwise, whether existing at or as of the Closing Date or which arise after the Closing Date, but which are based upon or arise from any act, transaction, circumstance, sale of goods or services, state of facts or other Page 25 condition which occurred or existed on or before the Closing Date, whether or not then known, due or payable, except as otherwise specifically provided herein; (iv) any brokers fees claimed by Quest Capital Corp.; (v) failure of Seller to comply with any applicable bulk sales law in connection with the transactions contemplated by this Agreement; (vi) actions or decisions, directly or indirectly affecting the employment of employees or former employees of Seller, that are implemented by Seller either (a) in connection with, incident to or as a result of the sale, or (b) prior to or including the Closing Date; (vii) any employment termination, layoff or reduction in hours occurring in connection with, incident to or as a result of, the sale, or prior to or including the Closing Date affecting employees, or former employees, of Seller; (viii) any decisions or actions taken or implemented by Seller affecting employees, or former employees, of Seller, in connection with, incident to or as a result of Seller's agreement or dealings with any labor organizations or employees; (ix) any liability of Seller pursuant to the Multiemployer Pension Plan Amendment Act of 1980, as amended. (x) [-----] (such matters listed in clauses (i) through (x) above being herein referred to collectively as "Claims" and singly as "Claim"). Notwithstanding anything herein to the contrary, no Claim shall consist of any matter described in Section 9.4. Any such Claim shall be adjusted to take into account any tax benefit to, or tax burden on, the Indemnified Parties incident to the matter giving rise to such Claim or to the indemnification payment hereunder. Page 26 (b) If the Indemnified Parties shall incur or receive notice of the existence of any Claim (liquidated or unliquidated, accrued or contingent), Purchaser shall promptly give written notice thereof to Seller. Purchaser shall furnish to Seller in reasonable detail such information as Indemnified Parties may have with respect thereto (including in any lawsuit, copies of any summons, complaint or other pleading which may have been served on it and any written claim, demand, invoice, billing or other document evidencing or asserting the same); provided, however, that no failure or delay by Purchaser in the performance of the foregoing shall reduce or otherwise affect the obligation of Seller to indemnify and hold the Indemnified Parties harmless, except to the extent that such failure or delay shall have materially prejudiced Seller's ability to defend against, settle or satisfy such Claim. (c) The right of indemnification contained in this Section 9.1 with respect to any Claims resulting from the assertion of liability by third parties shall be subject to the following terms and conditions: (i) Except for matters involving the Indemnified Parties' tax filings, Seller, at its expense, shall have the right to pay, compromise, settle or otherwise dispose of any such Claims. Unless Purchaser otherwise agrees, however, no such settlement shall limit, restrict or otherwise affect the right of any of the Indemnified Parties to carry on or conduct its business (then or in the future), or require any payment to be made by any of the Indemnified Parties (except as may be paid or reimbursed by Seller), or limit, restrict, make more expensive or less profitable or otherwise adversely affect the manner in which any of the Indemnified Parties carries on or conducts its business (then or in the future). In addition, no settlement shall be entered into which does not include the delivery by the settling third party of a full and final release of the Indemnified Parties from all liability in respect of such Claim. (ii) Except for matters involving the Indemnified Parties' tax filings, Seller, at its expense, shall be entitled to participate in and to the extent they wish, to direct the defense (including the selection of counsel reasonably satisfactory to Purchaser) of any such Claims. Purchaser shall at all times Page 27 have the right to participate in the defense of any Claim and to employ its own counsel, but the fees and expenses of such counsel shall be Purchaser's own expense unless the employment of such counsel shall have been authorized by Seller in connection with the defense of any such Claims, or unless and so long as Seller shall not have employed counsel to have charge of the defense of any such Claims within a reasonable period after notice thereof, in either of which events such fees and expenses shall be borne by Seller. (iii) Notwithstanding anything in this Section 9.1 to the contrary, if there is a reasonable probability that any of the Claims may materially and adversely affect Purchaser or any of the other Indemnified Parties, other than as a result of money damages or other money payments, Purchaser or such other Indemnified Party shall have the right, at its own cost and expense, to defend, compromise or settle such Claim, provided, that Seller shall not be liable for any payment in settlement of such Claim without its prior consent and shall be reimbursed for any payment Seller has made to Purchaser pursuant to Section 9.10 or otherwise incurred in connection with such Claim. (iv) No Claim hereunder shall give rise to a right of indemnification unless and until the total value of all Claims shall exceed the aggregate amount of $10,000 whereupon Purchaser may seek indemnity for each and every Claim, including those Claims comprising the initial $10,000 thereof. Seller's indemnity hereunder is limited to a maximum aggregate amount of $1,250,000; provided, however, no indemnity for any Claim under Section 9.1(a)(x) shall be applied against this limit, nor shall this limit affect any indemnity for any Claim under Section 9.1(a)(x). Page 28 9.2 Indemnification by Purchaser. (a) Purchaser agrees to defend, indemnify and hold Seller and each of its subsidiaries, affiliates and parent companies and the respective officers, directors and employees of Seller and such subsidiaries, affiliates and parent companies (collectively, the "Purchaser-Indemnified Parties") harmless from and against any and all liabilities, obligations, damages, losses, claims, demands, recoveries, deficiencies, costs or expenses (including, without limitation, interest, penalties, additions to tax and reasonable attorneys' fees and expenses) connected with, resulting from or arising out of any of the following: (i) any untruth or error in or breach of any representation or warranty contained in this Agreement or in any certificate, exhibit or other instrument delivered by Purchaser at the Closing of the transactions under this Agreement; (ii) any failure by Purchaser to perform, carry out or comply with the liabilities of the Business expressly assumed by Purchaser in Section 1.3 and its other obligations under this Agreement, including the exhibits hereto; (iii) any and all debt, liabilities or obligations of Purchaser, direct or indirect, fixed, contingent or otherwise arising out of Purchaser's conduct of the Business following the Closing or the conduct of any other business of Purchaser prior to or after Closing; (iv) any decisions or actions taken or implemented by Purchaser prior to the Closing affecting Purchaser's business. (such matters listed in clauses (i) through (iv) above being herein referred to collectively as "Claims" and singly as "Claim"). Any such Claim shall be adjusted to take into account any tax benefit to, or tax burden on, the Purchaser-Indemnified Parties incident to the matter giving rise to such Claim or to the indemnification payment hereunder. (b) If the Purchaser-Indemnified Parties shall incur or receive notice of the existence of any Claim (liquidated or unliquidated, accrued or contingent), Seller shall promptly give written notice thereof to Purchaser. Seller shall furnish to Purchaser in reasonable detail such information as Purchaser- Indemnified Parties may have with respect thereto (including in any lawsuit, copies of any summons, complaint or other pleading Page 29 which may have been served on it and any written claim, demand, invoice, billing or other document evidencing or asserting the same); provided, however, that no failure or delay by Seller in the performance of the foregoing shall reduce or otherwise affect the obligation of Purchaser to indemnify and hold the Purchaser- Indemnified Parties harmless, except to the extent that such failure or delay shall have materially prejudiced Purchaser's ability to defend against, settle or satisfy such Claim. (c) The right of indemnification contained in this Section 9.2 with respect to any Claims resulting from the assertion of liability by third parties shall be subject to the following terms and conditions: (i) Except for matters involving the Purchaser-Indemnified Parties' tax filings, Purchaser, at its expense, shall have the right to pay, compromise, settle or otherwise dispose of any such Claims. Unless Seller otherwise agrees, however, no such settlement shall limit, restrict or otherwise affect the right of any of the Purchaser-Indemnified Parties to carry on or conduct its business (then or in the future), or require any payment to be made by any of the Purchaser- Indemnified Parties (except as may be paid or reimbursed by Purchaser), or limit, restrict, make more expensive or less profitable or otherwise adversely affect the manner in which any of the Purchaser-Indemnified Parties carries on or conducts its business (then or in the future). In addition, no settlement shall be entered into which does not include the delivery by the settling third party of a full and final release of the Purchaser-Indemnified Parties from all liability in respect of such Claim. (ii) Except for matters involving the Purchaser-Indemnified Parties' tax filings, Purchaser, at its expense, shall be entitled to participate in and to the extent they wish, to direct the defense (including the selection of counsel reasonably satisfactory to Seller) of any such Claims. Seller shall at all times have the right to participate in the defense of any Claim and to employ its own counsel, but the fees and expenses of such counsel shall be Seller's own expense unless the employment of such counsel shall have been authorized by Page 30 Purchaser in connection with the defense of any such Claims, or unless and so long as Purchaser shall not have employed counsel to have charge of the defense of any such Claims within a reasonable period after notice thereof, in either of which events such fees and expenses shall be borne by Purchaser. (iii) Notwithstanding anything in this Section 9.2 to the contrary, if there is a reasonable probability that any of the Claims may materially and adversely affect Seller or any of the other Purchaser-Indemnified Parties, other than as a result of money damages or other money payments, Seller or such other Indemnified Party shall have the right, at its own cost and expense, to defend, compromise or settle such Claim, provided, that Purchaser shall not be liable for any payment in settlement of such Claim without its prior consent. (iv) No Claim hereunder shall give rise to a right of indemnification unless and until the total value of all Claims shall exceed the aggregate amount of [----] whereupon Seller may seek indemnity for each and every Claim, including those Claims comprising the initial [----] thereof. Purchaser's indemnity hereunder is limited to a maximum amount of [----] 9.3 Non Compete Agreement. (a) Seller and API will restrict their activities so that Purchaser's reasonable expectations with respect to the goodwill, business reputation, employee relations and prospects connected with the Acquired Assets will not be impaired. In furtherance of, but not in limitation of, this general obligation, Seller and API agree that neither Seller nor API will, at any time within the 5-year period immediately following the Closing Date, (i) participate, engage or have any interest in, directly or indirectly, any person, firm, corporation, or business (whether as an investor, employee, officer, director, agent, controlling security holder, creditor, or consultant, or in any other capacity which calls for the rendering of personal services, advice, acts of management, operation or control) which carries on any business or activity, competitive with, similar to, or an outgrowth of, the Business as heretofore engaged in by Seller anywhere in the United States, and Canada and anywhere else in the world, in which Seller did Business prior to the Page 31 consummation of the transactions hereunder; provided, however, that this restriction shall not apply to Seller's activities pursuant to Section 9.4. (b) The parties intend that the covenant contained in Section 9.3(a) shall be construed as a series of separate covenants, one for each separate legal jurisdiction in which such covenant applies. If, in any judicial proceeding, a court shall refuse to enforce any of the separate covenants included herein, then such unenforceable covenant shall be deemed eliminated from these provisions for the purpose of those proceedings to the extent necessary to permit the remaining separate covenants to be enforced. Notwithstanding the foregoing, it is the intent and agreement of Purchaser and Seller that these covenants be given the maximum force, effect and application permissible under applicable law. (c) During the period specified in Section 9.3(a) of this Agreement, neither Seller nor API shall (i) divulge, communicate, use to the detriment of Purchaser or for the benefit of any other person or persons, or misuse in any way, any confidential information or trade secrets of the Business, including personnel information, secret processes or processes for which a patent is pending, know-how, computer programs, customer lists, price lists or pricing data, formulas, or other technical data; or (ii) divert or attempt to divert any business of the kind comprising the Business. (d) Seller and API have knowledge of the affairs, trade secrets, customers, potential customers and other proprietary information of the Business, and Seller and API acknowledge and agree that compliance with the covenants contained in this Section 9.3 is necessary for the protection of the goodwill and other proprietary interests of the Business which Purchaser is acquiring. Seller and API acknowledge and agree that in the event of a breach of such covenants, neither the Purchaser nor any successors or assigns would have an adequate remedy at law, and Purchaser and any successor or assign shall be entitled to injunctive relief in addition to any other remedies which may be available to it hereunder. 9.4 Product Returns; Defective Product. (a) Seller and Purchaser will cooperate in handling Products manufactured prior to the Closing Date which are deemed defective or unsaleable, or returned to Purchaser or Seller by a consumer or former customers of Seller after the Closing Date, as follows: (i) [-----] Page 32 (ii) [-----] Page 33 (iii) [-----] (b) [-----] (c) [-----] (d) [-----] Page 34 9.5 Right of Offset; Sales in Excess of Forecast. (a) Either party's obligation to pay to the other party any amounts owing under this Agreement, or any other agreement delivered pursuant to this Agreement, is in each case subject to any right of offset which such party may have against the other. Without limiting the foregoing, such right of offset shall apply to the amount of the Six-month Holdback. (b) In the event Seller's sales during the period from December 1, 1993 to the Closing Date exceed $350,000, Seller shall promptly credit all or any portion of the amount of such difference to Seller's accounts receivable identified by Purchaser. Seller shall give to Purchaser the right to rebill such balance. Purchaser shall reimburse Seller the amount of Seller's acquisition cost of the corresponding Product. In the event Purchaser does not choose to accept and rebill accounts in the total amount of such difference, Purchaser may make a Claim for indemnity in the amount of the difference between unaccepted accounts receivable and Seller's cost of such Product. 9.6 Transition Assistance. (a) Immediately following the Closing, Seller shall supply to Purchaser duplicate copies of letters addressed to customers advising them of the sale, signed by an officer of Seller, in a form prepared by Purchaser and reasonably satisfactory to Seller. Purchaser shall receive a sufficient quantity of such executed letters on Seller's stationery, together with Seller's envelopes and three sets of self-adhesive pre-addressed customer labels, including name and address, to enable Purchaser to mail the letters to all customers immediately following the Closing. (b) For a period of ninety (90) days following the Closing Date, Seller agrees to use best efforts to retain the services of Bret Buhler and Ken Ellis, and for a period of up to sixty (60) days, as requested by Purchaser as set forth below, following the Closing Date, Seller agrees to use best efforts to retain the services of Dean Hill. As requested by Purchaser, Seller shall make available to Purchaser during such ninety (90) day period the services of either Ken Ellis or Bret Buhler, as may reasonably be requested by Seller upon reasonable advance notice, for up to fifteen (15) days. In addition, Seller shall make available to Purchaser during such sixty (60) day period the services of Dean Hill on a full-time basis during the initial thirty (30) days of such period and thereafter, Seller shall make available to Purchaser the services of Mr. Hill on a full-time basis for individual periods of five (5) working days each, subject to termination by Purchaser upon fourteen (14) days' advance notice. Purchaser shall be under no obligation to reimburse Seller for any costs of salary, vacation or other benefits for the services of Messrs. Ellis and Buhler. Purchaser shall pay Seller for the services of Dean Hill the aggregate Page 35 amount of $2,500 for five (5) working days of service and no other costs of salary, vacation or other benefits. Payment shall be made to Seller, when due to Seller's employee leasing company. Expense reimbursement shall be in accordance with Purchaser's policies and agreed to in advance. Seller shall also make available to Purchaser free-of-charge during such period office space and copies, telephones and other equipment at Seller's offices in Tallahassee, Florida for use by Seller's employees and any leased employees of Seller providing transition assistance to Purchaser. Purchaser shall reimburse Seller for the actual cost of Purchaser's long distance telephone, copying and facsimile charges. All other charges will be agreed in advance. (c) Through July 1, 1994, Seller hereby grants to Purchaser the right to manufacture product and use labels included in the Acquired Assets and bearing Seller's address, phone numbers, trademarks and other identifying information. Seller shall cooperate with Purchaser, referring to Purchaser's attention all correspondence and other inquiries made to Purchaser. At Closing, Seller will assign to Purchaser, at Purchaser's cost, Seller's 800 telephone number. 9.7 Hired Employees. On the Closing Date, Purchaser shall offer employment to Dan Solway (Western Regional Manager), Ken Miller (Eastern Regional Manager), and Debby Cusack (Customer Service) for a minimum of 180 days from the Closing Date. If any of these employees voluntarily resigns during or refuses any requested relocation during such 180 day period, compensation and benefits shall be discontinued immediately. In the event Purchaser requires an employee to relocate, the employee shall be eligible for Purchaser's Employee Relocation Program. Nothing herein shall be construed to restrict Purchaser from making offers of employment on or after the Closing Date to Seller's leased employees not designated herein by Purchaser. Any employee of the Business offered a position with Purchaser who accepts such offer shall be deemed a "Hired Employee." Seller will cause its employee leasing Company to terminate the employment of all Hired Employees of the Business, effective as of 12:01 a.m. on the Closing Date, and will give such notices and perform such other obligations as may be required in connection therewith and the transactions contemplated by this Agreement. It is understood and agreed that employment by, or an offer of employment to, Seller's leased employees by Purchaser shall not constitute any commitment, contract, obligation or understanding (express or implied) on the part of Purchaser to a post-Closing Date employment relationship of any fixed term or duration in excess of 180 days or to any terms or conditions other than those Purchaser may establish. Subject to Purchaser's obligation to employ the above-designated individuals for a term of 180 days, any employment with Purchaser may be terminated by Purchaser at any time for any reason. Purchaser agrees to provide benefits to all Hired Employees after the Closing Date in accordance with its medical and other benefit plans. Page 36 9.8 Sales, Use and Transfer Taxes. All applicable state and local sales, use and transfer taxes, filing and recording fees, and other similar expenses payable in connection with the transactions contemplated by this Agreement shall be paid fifty percent (50%) by Purchaser and fifty percent (50%) by Seller. Purchaser shall prepare and file all appropriate returns and reports. 9.9 Further Assurances; Access to Books and Records. (a) Seller, at any time after the Closing Date, shall execute, acknowledge, and deliver any further assignments, conveyances, and other assurances, documents, and instruments of transfer reasonably requested by Purchaser and shall take any other action consistent with the terms of this Agreement that may reasonably be requested by Purchaser for the purpose of assigning, transferring, granting, conveying, and confirming to Purchaser, or reducing to possession, any or all of the Acquired Assets. If requested by Purchaser, Seller further agrees to prosecute or otherwise enforce in its own name for the benefit of Purchaser any claims, rights, or benefits that are transferred to Purchaser by this Agreement and that require prosecution or enforcement in Seller's name. (b) If requested by Seller, for a period of seven (7) years following the Closing Date, Purchaser shall preserve all books and records acquired hereunder as Seller may reasonably request and give Seller access at Purchaser's location to all books and records included in the Acquired Assets. 9.10 [-----] 9.11 [-----] Page 37 10. MISCELLANEOUS 10.1 Fees and Expenses. Each party hereto shall pay all of its expenses incurred in connection with the negotiation, preparation, execution and delivery of this Agreement and the consummation of the transactions contemplated hereby, including the fees and expenses of its counsel, accountants and other experts. 10.2 Survival of Representations. The representations and warranties of the parties contained in this Agreement and in any certificate delivered or to be delivered pursuant to this Agreement and in connection with the consummation of the transactions contemplated hereby shall survive the Closing for a period of two (2) years from the Closing Date. 10.3 Notices. All notices, consents or other communications shall be in writing, and shall be deemed to have been duly given when delivered personally or by messenger, or when mailed by registered or certified mail, return receipt re- quested, postage prepaid, or when received via telecopy, telex or other electronic transmission, in all cases addressed to the party for whom intended at its address set forth below: If to Purchaser: Armor All Products Corporation 6 Liberty Aliso Viejo, CA 92656 Attn: Office of the President with a copy to: McKesson Corporation One Post Street San Francisco, CA 94104 Attn: Vice President & General Counsel If to Seller: Agri-Products, Inc. P.O. Box 12728 Tallahassee, FL 32317 Attn: Ken Ellis with a copy to: Judy Tabb, Esq. Carr, Tabb & Pope 1355 Peachtree, Suite 2000 Atlanta, GA 30309 Page 38 10.4 Successors and Assigns. All covenants, promises and agreements by or on behalf of the parties contained in this Agreement shall be binding upon and shall inure to the benefit of the "Permitted Assigns" (as hereafter defined) of the parties; but nothing in this Agreement, express or implied, is intended to confer on any party the right to assign its rights or obligations hereunder before Closing, which assignment (by operation of law or otherwise) is prohibited. "Permitted Assigns" shall include any entity controlled by, or under common control with, any such party. Notwithstanding the foregoing, the covenants and agreements set forth in Section 9.3 are freely assignable by Purchaser without the consent of Seller and shall inure to the benefit of Purchaser's successors and assigns. 10.5 No Third Party Rights. Nothing in this Agreement, whether express or implied, is intended to confer any rights or remedies under or by reason of this Agreement on any persons other than the parties to it and their respective successors and assigns, nor is anything in this Agreement intended to relieve or discharge the obligation or liability of any third persons to any party to this Agreement, nor shall any provision give any third persons any right of subrogation or action over or against any party to this Agreement. 10.6 Amendments, Supplements, Waivers. No amendment, supplement or waiver of any provision of this Agreement shall be effective unless the same shall be in writing and signed by authorized officers of all parties in the case of an amendment or supplement and by the waiving party in the case of a waiver. 10.7 Recovery of Litigation Costs. In any legal action or any arbitration or other proceeding arising out of or related to, or for the enforcement of this Agreement, or misrepresentation in connection with this Agreement, the successful or prevailing party or parties shall be entitled to recover reasonable attorneys' fees and other costs incurred in that action or proceeding, in addition to any other relief to which it or they may be entitled. 10.8 Entire Agreement. Except for the Confidentiality Agreement dated September 13, 1993 which shall survive until the Closing, this Agreement sets forth the entire agreement of the parties hereto with regard to the subject matter hereof and supersedes and replaces all prior agreements, understandings and representations, oral or written, with regard to such matters, including, without limitation, the Letter Agreement between the parties dated December 15, 1993, as amended. 10.9 Headings. Headings in this Agreement are for reference purposes only and shall not be deemed to have any substantive effect. 10.10 Publicity. All publicity relating to this Agreement and the transactions contemplated hereby shall be released Page 39 jointly with the approval of each of the parties hereto, except as otherwise required by applicable law or regulation. 10.11 Counterparts. This Agreement may be executed concurrently in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 10.12 Governing Law. (a) This Agreement shall be construed in accordance with the internal laws of the State of California, without regard to conflict of laws principles. (b) Any dispute arising out of or related to this Agreement which is related to the Intellectual Property, or any action to enforce, defend or determine any rights or obligations related to the Intellectual Property under this Agreement, shall be litigated exclusively in the state or federal court located in Memphis, Tennessee. The parties expressly waive any right to a jury trial in such litigation. The parties hereto consent to the jurisdiction, and waive any right to object to that venue. (c) Any controversy or claim not related to the Intellectual Property arising out of or relating to this Agreement or any action to enforce, defend or determine any rights or obligations not related to the Intellectual Property under this Agreement shall be settled by arbitration. The arbitration shall be conducted by a panel of three arbitrators, one of which shall be selected by Seller, a second by Purchaser and the third of which shall be selected by the two arbitrators selected by the parties. The arbitration shall be held in Memphis, Tennessee, and conducted in accordance with the then obtaining Rules of the American Arbitration Association. This Agreement shall be enforceable and judgment upon any award // // // // // // // // // // // // // // // // // // // Page 40 rendered by all or a majority of the arbitrators may be entered in any court having jurisdiction, or application may be made to such court for a judicial acceptance of the award and an order of enforcement, as the case may be. IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as of the date first above written. ARMOR ALL PRODUCTS CORPORATION By /s/ Mervyn J. McCulloch --------------------------------- Title Executive Vice President and Chief Financial Officer -------------------------------- AGRI-PRODUCTS SPECIAL MARKETS, INC. By /s/ Kenneth L. Ellis -------------------------------- Title President -------------------------------- Page 41 EX-13 8 FINANCIALS
Selected Financial Data - - - -------------------------------------------------------------------------------------------------------------------------- Years Ended March 31 (in thousands except per share amounts) 1994 1993 1992 1991 1990 1989 - - - -------------------------------------------------------------------------------------------------------------------------- Income Statement Data Revenues $182,257 $168,400 $145,910 $133,804 $165,447 $162,780 ----------------------------------------------------------------- Increase (decrease) from prior year 8.2% 15.4% 9.0% (19.1%) 1.6% 28.8% Costs and expenses Cost of sales 74,360 68,841 59,709 57,980 68,118 63,578 Selling, general and administrative 66,950 63,670 60,465 58,133 60,654 50,985 Amortization of intangibles 2,684 3,768 4,314 4,315 4,357 2,760 ----------------------------------------------------------------- Total costs and expenses 143,994 136,279 124,488 120,428 133,129 117,323 ----------------------------------------------------------------- Increase (decrease) from prior year 5.7% 9.5% 3.4% (9.5%) 13.5% 32.2% Operating income 38,263 32,121 21,422 13,376 32,318 45,457 Interest income (expense)--net 1,377 1,245 1,080 (704) (677) 511 ----------------------------------------------------------------- Income before income taxes. 39,640 33,366 22,502 12,672 31,641 45,968 Income taxes 17,067 14,214 9,638 5,829 12,820 18,855 ----------------------------------------------------------------- Net income $ 22,573 $ 19,152 $ 12,864 $ 6,843 $ 18,821 $ 27,113 ================================================================= Increase (decrease) from prior year 17.9% 48.9% 88.0% (63.6%) (30.6%) 21.7% Earnings per common share $ 1.07 $ .91 $ .61 $ .33 $ .90 $ 1.30 ================================================================= Increase (decrease) from prior year 17.6% 49.2% 84.8% (63.3%) (30.8%) 21.5% Return on average stockholders' equity/1/ 21.0% 19.3% 13.9% 7.1% 19.6% 32.5% ================================================================= Cash dividends per common share $ .64 $ .48 $ .48 $ .64 $ .64 $ .52 ================================================================= /1/Net income divided by monthly average equity - - - -------------------------------------------------------------------------------------------------------------------------- March 31 (in thousands) 1994 1993 1992 1991 1990 1989 - - - -------------------------------------------------------------------------------------------------------------------------- Balance Sheet Data Working capital $ 64,349 $ 60,373 $ 46,149 $ 38,825 $ 40,615 $ 36,310 Current assets 99,225 93,429 68,485 65,788 90,267 90,516 Total assets 151,826 140,560 119,823 121,731 150,069 150,364 Total debt -- -- -- 6,549 28,688 26,141 Stockholders' equity 116,029 106,555 96,326 93,307 99,321 93,763 - - - --------------------------------------------------------------------------------------------------------------------------
[FOUR GRAPHS APPEAR HERE] Armor All Products Corporation Financial Review Results of Operations The Company's operating results improved for the third consecutive year in fiscal 1994, as revenues increased 8% and net income increased 18% from fiscal 1993. The revenue growth came largely from new product introductions and continued international expansion, while the earnings growth was primarily attributable to higher revenues, increased promotional and administrative cost efficiencies, and lower amortization of intangibles. Revenues The following table sets forth a summary of revenues by major geographic region:
- - - -------------------------------------------------------------- Years Ended March 31 (in millions) 1994 1993 1992 - - - -------------------------------------------------------------- United States $156.5 $148.6 $126.6 International 25.8 19.8 19.3 ------------------------ Total $182.3 $168.4 $145.9 ======================== Percentage change from prior year 8% 15% - - - --------------------------------------------------------------
The $7.9 million increase in U.S. revenues in fiscal 1994 was primarily attributable to increased sales of the Company's line of protectant products, which includes Armor All Protectant (with the additional-sunscreen formula noted below) as well as Armor All Protectant Low-Gloss Natural Finish, introduced in December 1993, and Armor All Tire Foam Protectant, introduced in November 1991. Another significant factor was the initial sales of Armor All QuickSilver Wheel Cleaner and Armor All Spot & Wash Concentrate, two new products which were introduced in December 1993. Initial sales of E-Z Deck Wash and the other E-Z D brand products acquired by the Company in January 1994 made a small contribution to the total U.S. revenue growth. Sales of the Company's line of waxes and washes decreased from the prior year, though at a lower rate than the decline in national wax/wash category consumer purchases. The substantial majority of the $22.0 million increase in U.S. revenues in fiscal 1993 was due to higher sales of the Company's line of protectant products. Shipments of Armor All Tire Foam Protectant increased significantly as this product became the leader in the tire care category within the first year following its introduction. Sales of Armor All Protectant increased in fiscal 1993 in part because of category and share growth in the mass merchandiser channel and because trade customers were still reducing their retail inventory levels during the first half of fiscal 1992. Additionally, in January 1993 the Company changed the formula of Armor All Protectant to include additional sunscreen and concurrently implemented a 5% price increase on that product. Sales of the Company's line of waxes and washes rose moderately in fiscal 1993, mainly due to higher sales of Rain Dance Advanced Formula Car Polish, which was introduced in November 1991, and initial sales of Rain Dance Dark Car Formula Polish and Rain Dance Light Car Formula Polish, which were introduced in January 1993. Approximately half of the $6.0 million increase in International revenues in fiscal 1994 was attributable to higher sales in Canada. The growth in Canadian sales resulted from several factors, including initial sales of the three new products introduced in December 1993, continued higher sales of Armor All Tire Foam Protectant, and higher purchases by the Company's largest Canadian customer. The remaining increase in International revenues reflects higher sales to virtually all of the Company's other markets, particularly Mexico and those areas served by the Company's European Office. The relatively small $0.5 million increase in International revenues in fiscal 1993 reflects the net result of several factors. The inception of the distribution agreement with S.C. Johnson & Son, Inc. in Germany in that year was one significant factor (agreements with S.C. Johnson in Japan and Mexico were initiated in fiscal 1992). Under the agreement, the Company's sales to S.C Johnson are at lower prices than to other customers, but S.C. Johnson is responsible for incurring virtually all associated selling and marketing expenses previously borne by the Company. The net effect is that the Company records lower revenues and selling and marketing expenses. Offsetting the S.C. Johnson impact, International revenues in fiscal 1993 benefitted from increased shipments to Canada, Asia, Latin America and the United Kingdom. 12 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 1994 1993 1992 - - - ------------------------------------------------------------ Revenues 100.0% 100.0% 100.0% Cost of sales 40.8 40.9 40.9 Selling, general and administrative 36.7 37.8 41.4 Amortization of intangibles 1.5 2.2 3.0 --------------------- Operating income 21.0% 19.1% 14.7% =====================
Cost of sales as a percentage of revenues in fiscal 1994 decreased slightly from fiscal 1993 due to the effects of the 5% selling price increase on Armor All Protectant in January 1993, partially offset by increases in the cost percentage due to changes in the product mix, higher shipments of certain promotional items, and the higher cost of the additional-sunscreen formula for Armor All Protectant. Cost of sales as a percentage of revenues in fiscal 1993 was unchanged from fiscal 1992, reflecting several offsetting factors. The cost percentage decreased due to the absorption of fixed manufacturing and distribution costs over a higher sales volume. However, the cost percentage was increased by changes in the product mix and higher sales of certain promotional items. Additionally, gross margins were lower in the markets served by S.C. Johnson due to the billing method described above. Selling, general and administrative (SG&A) expenses as a percentage of revenues in fiscal 1994 decreased from fiscal 1993 principally due to the absorption of media advertising and fixed administrative expenses over a higher sales volume, as well as to a reduction in consumer coupon expenses. Partially offsetting these factors were promotional expenses associated with the three new products, increased research and development activity, and start-up costs relating to the Company's new home care products division. SG&A expenses decreased as a percentage of revenues in fiscal 1993 from fiscal 1992 primarily due to more efficient trade promotion practices. Beginning in late fiscal 1992, the Company implemented a new trade promotion approach in which the Company offers its trade customers fixed sums in return for specific promotional activities. Also contributing to the decrease was the spreading of fixed administrative expenses over a higher sales volume. The S.C. Johnson agreement reduced fiscal 1993 SG&A expenses, as noted above. Amortization expense, principally relating to intangible assets associated with the Company's acquisition of several brands in September 1988, decreased by $1.1 million in fiscal 1994 as certain of such assets became fully amortized. Interest income increased by $0.1 million in fiscal 1994 and $0.2 million in fiscal 1993 over the respective prior years due to higher cash balances during the first three quarters of fiscal 1994 and all of fiscal 1993. Cash balances increased primarily as a result of profitable operations without significant investments in noncurrent assets or working capital until the fourth quarter of fiscal 1994. In that period, the Company incurred higher cash outflows due to the factors mentioned under "Financial Resources and Liquidity" below. The Company's effective income tax rates were 43.1%, 42.6% and 42.8% in fiscal 1994, 1993 and 1992, respectively. The higher tax rate in fiscal 1994 principally reflects the Omnibus Budget Reconciliation Act of 1993, which increased the federal corporate income tax rate from 34% to 35% retroactive to January 1993. Approximately 0.3% of the increase in the annual effective rate represents the additional taxes which will be paid for the fiscal year ended March 31, 1993 due to the retroactive provision of the Act. The effect of the Act was partially offset by slightly lower effective rates for state and foreign taxes, as well as to a reduction in the portion of the Company's expenses represented by nondeductible intangible asset amortization. 13 Financial Resources and Liquidity The Company's working capital requirements fluctuate during the year, traditionally peaking in the spring due to extended payment terms offered in connection with winter promotional activities. Cash inflow is strongest during the summer months as these receivables are collected. Despite these seasonal factors, at March 31, 1994, the Company had a $26.3 million balance of cash and cash equivalents and no short-term or long-term debt. The Company does not have substantial investments in inventory as its contract packagers generally own the raw materials and finished goods in their possession and transfer title to the Company just prior to shipment to the Company's customers. The Company's use of contract packagers also permits it to avoid significant investments in machinery and other fixed assets. During fiscal 1994 and 1993, cash flow from operations was $15.6 million and $24.7 million, respectively. The decrease in fiscal 1994 is primarily related to an increase in accounts receivable, reflecting a change in the timing of shipments and the granting of normal extended seasonal dating terms to certain additional customers this year. In addition, cash payments were higher in fiscal 1994 due to the timing of payments related to income taxes and certain accrued consumer coupon and employee compensation programs. During fiscal 1994, there was a net cash outflow of $7.6 million whereas in fiscal 1993 there was a net cash inflow of $18.2 million. In addition to the operational cash flow factors mentioned above, cash outflows in fiscal 1994 were higher than in the prior year primarily due to the payment of $7.4 million to acquire the E-Z Deck Wash and E-Z D brands, an increase in the dividend rate and a reduction in the short-term payable to McKesson. The Company's sources of liquidity at March 31, 1994 included a $22.1 million balance under a cash management program administered by McKesson, $4.2 million of other cash balances, and a $3.0 million (Canadian) line of credit with a Canadian bank that is renewable annually. In addition, as long as the Company continues to participate in the cash management program, McKesson will make available the cash necessary to provide the Company with sufficient funds to meet its needs as defined in its annual capital and operating plans. There are no advance notification requirements or other limitations on the Company's access to cash under the program. Participation in the program is provided as part of a Services Agreement with McKesson. Amounts deposited under the cash management program are deposited in a separate bank account in the Company's name. In the event that the Company ceases to participate in the cash management program, the Company believes that it would be able to obtain a line of credit from other sources at competitive terms. At March 31, 1994, the Company had a payable to McKesson of $1,526,000, consisting of payroll, freight and other expenses paid by McKesson on the Company's behalf. The Company believes that its current sources of liquidity, combined with cash flow from operations, will be sufficient to meet its needs for the foreseeable future. 14 Armor All Products Corporation Consolidated Balance Sheets
- - - -------------------------------------------------------------------------------------- March 31 (in thousands except share and per share amounts) 1994 1993 - - - -------------------------------------------------------------------------------------- Assets Current Assets Cash and cash equivalents $ 26,251 $ 33,858 Accounts receivable (less allowance for doubtful accounts and cash discounts: 1994, $2,625 and 1993, $1,860) 67,963 54,074 Inventories 4,182 4,715 Deferred income taxes 765 242 Prepaid expenses 64 540 ------------------- Total Current Assets 99,225 93,429 Property - Net 8,699 8,451 Intangible Assets - Net 43,902 38,680 ------------------- Total Assets $151,826 $140,560 =================== Liabilities and Stockholders' Equity Current Liabilities Accounts payable $ 10,923 $ 9,433 Payable to McKesson 1,526 3,204 Accrued selling expenses 8,802 9,073 Accrued compensation 2,669 3,131 Income and other taxes payable 4,282 3,485 Dividends payable 3,386 2,527 Other liabilities 3,288 2,203 ------------------- Total Current Liabilities 34,876 33,056 ------------------- Deferred Income Taxes 921 949 ------------------- Stockholders' Equity Preferred stock, $0.01 par value; 10,000,000 shares authorized; no shares outstanding Common stock, $0.01 par value; 40,000,000 shares authorized; 21,165,486 and 21,084,759 shares outstanding in 1994 and 1993 212 211 Other capital 59,323 57,968 Unearned compensation - restricted stock (1,101) (664) Retained earnings 58,388 49,333 Cumulative translation adjustment (793) (293) ------------------- Total Stockholders' Equity 116,029 106,555 ------------------- Total Liabilities and Stockholders' Equity $151,826 $140,560 ===================
See accompanying notes to consolidated financial statements. 15 Armor All Products Corporation Consolidated Statements of Income
- - - -------------------------------------------------------------------------------------------- Years Ended March 31 (in thousands except per share amounts) 1994 1993 1992 - - - -------------------------------------------------------------------------------------------- Revenues $182,257 $168,400 $145,910 Costs and expenses Cost of sales 74,360 68,841 59,709 Selling, general and administrative 66,950 63,670 60,465 Amortization of intangibles 2,684 3,768 4,314 ---------------------------- Total costs and expenses 143,994 136,279 124,488 ---------------------------- Operating income 38,263 32,121 21,422 Interest income--net 1,377 1,245 1,080 ---------------------------- Income before income taxes 39,640 33,366 22,502 Income taxes 17,067 14,214 9,638 ---------------------------- Net income $ 22,573 $ 19,152 $ 12,864 ============================ Earnings per common share $ 1.07 $ .91 $ .61 ============================ Weighted average common shares outstanding 21,121 21,024 20,953 ============================
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, 1991 20,950 $209 $56,087 $ (266) $ 37,464 $(187) $ 93,307 Exercise of stock options 8 94 94 Issuance of restricted stock 17 1 182 (183) 0 Cancellation of restricted stock (3) (52) 27 (25) Amortization of restricted stock cost 100 100 Net income 12,864 12,864 Dividends declared ($.48 per share) (10,055) (10,055) Translation adjustment 41 41 ------------------------------------------------------------------------------ Balances, March 31, 1992 20,972 210 56,311 (322) 40,273 (146) 96,326 Exercise of stock options 78 1 1,079 1,080 Issuance of restricted stock 27 472 (472) 0 Redemption of common stock (6) (6) Amortization of restricted stock cost 130 130 Issuance of shares to profit-sharing plan 8 112 112 Net income 19,152 19,152 Dividends declared ($.48 per share) (10,092) (10,092) Translation adjustment (147) (147) ------------------------------------------------------------------------------ Balances, March 31, 1993 21,085 211 57,968 (664) 49,333 (293) 106,555 Exercise of stock options 44 1 647 648 Issuance of restricted stock 36 704 (704) 0 Redemption of common stock (1) (27) (27) Amortization of restricted stock cost 267 267 Issuance of shares to profit-sharing plan 1 31 31 Net income 22,573 22,573 Dividends declared ($.64 per share) (13,518) (13,518) Translation adjustment (500) (500) ------------------------------------------------------------------------------ Balances, March 31, 1994 21,165 $212 $59,323 $(1,101) $ 58,388 $(793) $116,029 ==============================================================================
See accompanying notes to consolidated financial statements. 17 Armor All Products Corporation Consolidated Statements of Cash Flows
- - - -------------------------------------------------------------------------------------- Years Ended March 31 (in thousands) 1994 1993 1992 - - - -------------------------------------------------------------------------------------- Operating Activities Net income $ 22,573 $ 19,152 $ 12,864 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 4,085 5,068 5,497 Provision for losses on receivables 578 539 385 Deferred income taxes (551) (34) (115) ------------------------------ Total 26,685 24,725 18,631 ------------------------------ Effect of changes in operating assets, net of the effects of business acquisition: Accounts receivable (14,467) (9,305) 8,539 Inventories 595 1,959 (279) Prepaid expenses 485 (165) 750 Accounts payable 1,474 (146) 538 Accrued selling expenses (271) 2,432 1,212 Accrued compensation (462) 1,568 964 Taxes payable and other liabilities 1,537 3,649 46 ------------------------------ Total (11,109) (8) 11,770 ------------------------------ Net cash provided by operating activities 15,576 24,717 30,401 ------------------------------ Investing Activities Cash paid for acquisition of E-Z Deck Wash and E-Z D brands (7,438) - - Capital expenditures (1,377) (679) (757) Other (683) (199) ( 19) ------------------------------ Net cash used in investing activities (9,498) (878) (776) ------------------------------ Financing Activities Payable to McKesson (1,678) 3,204 - Decrease in short-term debt - - (6,549) Issuance of common stock 652 1,186 94 Dividends paid (12,659) (10,079) (10,893) ------------------------------ Net cash used in financing activities (13,685) ( 5,689) (17,348) ------------------------------ Net increase (decrease) in cash and cash equivalents (7,607) 18,150 12,277 Cash and cash equivalents at beginning of year 33,858 15,708 3,431 ------------------------------ Cash and cash equivalents at end of year $ 26,251 $ 33,858 $ 15,708 ==============================
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 consumer products primarily to retailers and wholesalers in the automotive appearance chemical aftermarket. In January 1994, the Company began marketing a line of branded home care products to retailers and wholesalers. Relationship with McKesson Corporation: Prior to May 1993, McKesson Corporation ("McKesson") owned approximately 83% of the Company's outstanding shares of common stock. In May 1993, McKesson reduced its ownership level to approximately 57% through a sale of shares to the public. In March 1994, McKesson issued debentures which are exchangeable into additional shares of the Company's common stock owned by McKesson at a price of $25.94 per share at any time through February 2004, subject to McKesson's right to pay cash equal to the market price of the stock in lieu of making the exchange. If all such debentures were actually exchanged, McKesson's ownership level would be reduced to approximately 25%. Transactions with McKesson: Certain expenses, principally payroll and employee benefits, are paid on behalf of and charged to the Company by McKesson. The Company uses certain resources and administrative staff of McKesson, including financial, treasury, legal, investor relations, corporate secretary, tax, audit and accounting advice, and employee benefit, personnel and payroll services. The Company is charged a fee for these and other services including insurance premiums at an amount based on actual time or costs incurred. These charges, which are included in selling, general and administrative expenses, were $669,000, $687,000, and $648,000 in fiscal 1994, 1993 and 1992, respectively. The Company believes that these expenses would not have been materially different if the Company operated on a stand-alone basis. The Company also participates in a cash management program administered by McKesson, as described in Note 2. Sales to divisions of McKesson were $747,000, $1,111,000 and $889,000 in fiscal 1994, 1993 and 1992, respectively. Foreign Currency Translation: Assets and liabilities of the Company's foreign affiliates are translated at current exchange rates, while revenue and expenses are translated at average rates prevailing during the year. Translation adjustments of those affiliates for which the local currency is the functional currency are reported as a component of stockholders' equity. Translation adjustments of affiliates for which the U.S. dollar is the functional currency are included in net income. All gains and losses on foreign currency transactions are also included in net income. Foreign currency exchange fluctuations did not have a material effect on the consolidated financial statements in fiscal 1994, 1993 or 1992. Revenues are recognized when products are shipped to customers. Income taxes are accounted for in accordance with Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes", which requires the liability method of accounting for deferred taxes. Cash equivalents include all highly liquid investments purchased with a maturity of three months or less. Inventories are stated at the lower of first-in, first-out cost or market. Property is stated at cost and depreciated on the straight-line method over estimated useful lives of 3 to 30 years. Intangible assets include (1) goodwill from the excess of McKesson's cost of the Company over the fair value of net assets acquired, which is being amortized over 40 years, (2) patents, trademarks, goodwill and other intangibles arising from the purchase of the Rain Dance, Rally and No. 7 brand product lines in September 1988, which are being amortized over various periods ranging from 4 to 25 years, (3) patents and trademarks arising from the purchase of the E-Z Desk Wash and E-Z D brand product lines in January 1994 (see Note 11), which are being amortized over 15 years, and (4) other patents and trademarks that are being amortized over various periods ranging from 5 to 20 years. Amortization of intangible assets is recorded on a straight-line basis. Accrued selling expenses include media advertising related to new product introductions, cooperative advertising, volume rebates, coupon redemption liabilities and sales commissions. Earnings per common share are computed based on the weighted average number of shares of common stock outstanding during the year. The dilutive effect of stock options, which are considered to be common stock equivalents, is immaterial. Reclassifications: Certain prior year amounts have been reclassified to conform with the fiscal 1994 presentation. 19 2. Cash Management Pursuant to an agreement with McKesson, the Company's U.S. operations participate daily in a cash management program administered by McKesson. Under this arrangement, the Company invests any excess cash in the cash management program and has access to such invested cash to fund disbursements. If the Company needs additional cash above the amount invested, such cash requirements are met through borrowings from McKesson. Prior to March 23, 1993, the Company invested excess cash directly with McKesson. Commencing on March 23, 1993, all amounts invested in the cash management program with McKesson were deposited in a separate bank account in the Company's name, which is used by the Company for cash management program transactions. The Company receives interest under the program through McKesson on funds deposited in the separate bank account, or pays interest to McKesson on funds received, at a rate equal to the monthly Federal Reserve Composite Rate for 7-day commercial paper less 0.1% for funds deposited under the program and plus 0.5% for funds borrowed from McKesson. The agreement provides that McKesson will make available that amount of cash necessary to provide the Company with sufficient funds to meet its needs as defined in its annual capital and operating budget, and that the Company will pay McKesson an annual credit facility fee of $25,000. Included in cash and cash equivalents in the accompanying consolidated balance sheets are the following amounts invested in the cash management program and the interest rates earned thereon: $22,076,000 at 3.4% on March 31, 1994 and $30,025,000 at 3.1% on March 31, 1993. The payable to McKesson of $1,526,000 and $3,204,000 at March 31, 1994 and 1993, respectively, consists of payroll, freight and other expenses paid by McKesson on behalf of the Company. Such amounts were reimbursed to McKesson in the first quarter of the respective subsequent fiscal years. The Company also has a $3,000,000 (Canadian) line of credit with a Canadian bank that is renewable annually and expires on March 31, 1995. Borrowings under this line of credit bear interest at the Canadian prime rate (6.3% at March 31, 1994). There were no outstanding borrowings under the line of credit at March 31, 1994 or 1993. 3. Interest Income--Net Interest income--net, which approximates interest received and paid, is comprised of the following:
- - - ---------------------------------------------------------------------------- Years Ended March 31 (in thousands) 1994 1993 1992 - - - ---------------------------------------------------------------------------- Net interest income--McKesson (Note 2) $1,219 $1,113 $ 764 Interest income--other 158 140 318 Interest expense--other -- (8) (2) --------------------------- Total $1,377 $1,245 $1,080 =========================== 4. Inventories Inventories are summarized as follows: - - - ---------------------------------------------------------------------------- March 31 (in thousands) 1994 1993 - - - ---------------------------------------------------------------------------- Finished goods $3,514 $3,837 Raw materials 668 878 ----------------- Total $4,182 $4,715 ================= 5. Property Property is summarized as follows: - - - ---------------------------------------------------------------------------- March 31 (in thousands) 1994 1993 - - - ---------------------------------------------------------------------------- Land $ 2,439 $ 2,439 Building 3,810 3,810 Furniture and fixtures 1,684 1,636 Machinery and equipment 4,935 4,231 Leasehold improvements 78 79 ------------------ Total 12,946 12,195 Accumulated depreciation (4,247) (3,744) ------------------ Property--net $ 8,699 $ 8,451 ================== 6. Intangible Assets Intangible assets consist of the following: - - - ---------------------------------------------------------------------------- March 31 (in thousands) 1994 1993 - - - ---------------------------------------------------------------------------- Goodwill $ 43,865 $ 43,865 Patents and trademarks 20,513 12,607 Other intangibles 11,090 11,090 ------------------- Total 75,468 67,562 Accumulated amortization (31,566) (28,882) ------------------- Intangible assets--net $ 43,902 $ 38,680 ===================
7. Income Taxes Through May 12, 1993, the Company will be included in the consolidated federal income tax returns of McKesson. On that date, as a result of the public stock offering described in 20 Note 1, McKesson's ownership of the Company fell below the 80% level required for the Company to qualify for inclusion in such consolidated tax returns. Accordingly, the Company will file a separate federal income tax return for the remaining portion of fiscal 1994. For the majority of its state income taxes, the Company continues to be included in McKesson's combined tax returns for all of fiscal 1994. This will occur in the tax returns related to those states where the required ownership percentage is only 50% . The Company files separate income tax returns in other states and in foreign countries. The Company's aggregate income tax payments, including payments made to McKesson and payments made directly to the applicable government taxing authorities, amounted to $16,970,000, $13,822,000 and $10,229,000 in fiscal 1994, 1993 and 1992, respectively. Accrued income taxes owed to McKesson for the Company's share of taxes reported on the consolidated and combined tax returns were not significant at March 31, 1994 and amounted to $2,689,000 at March 31, 1993; these liabilities are included in income and other taxes payable in the accompanying consolidated balance sheets. The Company's provisions for income taxes, which have been computed as if the Company filed its tax returns as a separate entity in all periods, consist of the following components:
- - - ------------------------------------------------------------ Years Ended March 31 (in thousands) 1994 1993 1992 - - - ------------------------------------------------------------ Current Federal $13,084 $10,772 $7,813 State 2,988 2,475 1,753 Foreign 1,546 1,001 187 -------------------------- Total current 17,618 14,248 9,753 -------------------------- Deferred Federal (457) (28) (95) State (94) (6) (20) -------------------------- Total deferred (551) (34) (115) -------------------------- Total provision $17,067 $14,214 $9,638 ==========================-
The reconciliations between the Company's effective tax rate and the statutory federal income tax rate follow:
- - - -------------------------------------------------------------- Years Ended March 31 1994 1993 1992 - - - -------------------------------------------------------------- Statutory federal income tax rate 35.0% 34.0% 34.0% State income taxes, net of federal benefit 4.8 5.0 5.1 Foreign operations 1.8 2.2 1.6 Retroactive effect of tax legislation 0.3 - - Amortization of certain intangible assets 1.2 1.4 2.1 ----------------------- Total 43.1% 42.6% 42.8% =======================
Deferred income taxes in the accompanying consolidated balance sheets at March 31, 1994 and 1993 are comprised of the following:
- - - ----------------------------------------------- March 31 (in thousands) 1994 1993 - - - ----------------------------------------------- Deferred tax assets $ 1,780 $ 1,105 Deferred tax liabilities (1,936) (1,812) ----------------- Net deferred tax liability $ (156) $ (707) ================= Net current $ 765 $ 242 Net non-current (921) (949) ----------------- Net deferred tax liability $ (156) $ (707) =================
Deferred tax assets consist primarily of temporary differences related to allowances for doubtful receivables, inventory reserves, employee benefits and accrued selling expenses. Deferred tax liabilities consist primarily of temporary differences related to accumulated depreciation and amortization. The Company has not provided for U.S. federal income and foreign withholding taxes on $4,759,000 of its Canadian subsidiaries' undistributed earnings as of March 31, 1994 because such earnings are intended to be reinvested indefinitely. If these earnings were distributed, foreign tax credits would become available under current U.S. law to reduce the effect on the Company's overall tax liability. 8. Employee Benefit Plans The Company's employees are eligible to participate in McKesson's health care, retirement and certain other employee benefit plans. In addition, substantially all employees are eligible to participate in the Company's profit-sharing investment plan. The Company's contributions to the profit-sharing plan in fiscal 1994 consisted of a cash payment and 1,637 shares of its common stock. In fiscal 1993, the Company contributed 8,482 shares of its common stock to the plan and in fiscal 1992 made a cash payment. Compensation expense related to the McKesson and profit-sharing plans amounted to $879,000, $766,000 and $645,000 in fiscal 1994, 1993 and 1992, respectively. The 1986 Stock Option Plan provides for the granting of nonqualified options to eligible key employees and non-employee directors of the Company to purchase up to an aggregate of 1,300,000 shares of common stock. The exercise price of the stock covered by each option may not be less than 21 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 1994 1993 1992 - - - ------------------------------------------------------------------------------ Option shares: Outstanding at beginning of year 802,950 667,600 483,000 Granted 100,950 250,150 226,100 Exercised (44,238) (78,025) (7,775) Cancelled (37,350) (36,775) (33,725) ------------------------------------ Outstanding at year-end 822,312 802,950 667,600 ==================================== Exercisable at year-end 422,157 270,900 301,725 ==================================== Available for future grants at year--end 341,650 405,250 618,625 ==================================== For outstanding options at year--end: Range of exercise prices $10.19- $10.19- $10.19- $22.63 $22.63 $22.63 Aggregate exercise price $12,413,000 $11,542,000 $8,660,000 Aggregate market value $15,830,000 $15,256,000 $8,011,000 - - - ------------------------------------------------------------------------------
The 1988 Restricted Stock Plan provides for the granting of up to an aggregate of 220,000 shares of the Company's common stock to key employees. As of March 31, 1994, there were 103,150 shares which remained available for future grants. During fiscal 1994, 1993 and 1992, respectively, 36,200, 27,000, and 17,200 common shares were granted. In connection with the granting of these shares, unearned compensation--restricted stock was recorded in the amount of $704,000, $472,000 and $183,000 in fiscal 1994, 1993 and 1992, respectively. These amounts represent the fair market value of the shares on the respective dates of grant. Recipients of restricted shares have all of the rights of common stockholders except that the shares are held in custody by the Company and cannot be disposed of until the restrictions have lapsed, which is generally four years after the grant date. In addition, certain of the grants made in fiscal 1994 and all of the grants made in fiscal year 1993 provide that the restrictions will lapse only if specified performance goals are met during the four-year period. The fair market value of the shares on the grant date is amortized to compensation expense over the vesting period. If a plan participant's employment terminates during the vesting period, except under certain specified conditions, the shares are cancelled and any amounts previously amortized are credited to expense. 9. Geographic Segments The Company's foreign operations consist of offices and certain other facilities in Canada and Europe. The Company exports products from the United States to other geographic areas, principally Australia, Japan and Mexico. Information for the Company's geographic operations is as follows:
- - - ------------------------------------------------------------------- Years Ended March 31 (in thousands) 1994 1993 1992 - - - ------------------------------------------------------------------- Revenues United States $156,429 $148,576 $126,639 Export 8,523 6,735 5,239 Foreign 17,305 13,089 14,032 ---------------------------- Total $182,257 $168,400 $145,910 ============================ Operating Income United States and export $ 35,053 $ 30,615 $ 20,736 Foreign 3,210 1,506 686 ---------------------------- Total $ 38,263 $ 32,121 $ 21,422 ============================ Identifiable Assets at Year-End United States and export $141,108 $131,265 $108,521 Foreign 10,718 9,295 11,302 ---------------------------- Total $151,826 $140,560 $119,823 ============================
Sales to the Company's two largest customers accounted for the following percentages of consolidated revenues: 17% and 8% in fiscal 1994, 15% and 11% in fiscal 1993, and 12% and 11% in fiscal 1992. 22 10. Commitments In addition to commitments and obligations which arise in the ordinary course of business, the Company is subject to various claims, proceedings, tax assessments and legal actions from time to time arising out of the conduct of the Company's business. Management believes that, based on current knowledge, the outcome of any such pending matters will not have a material adverse effect on the Company's financial position. The Company leases equipment and certain warehouse, laboratory and office facilities under operating leases that expire on various dates through March 1997. Rent expense included in operations, which primarily consists of contingent rental payments based on the number of cases stored at independent warehouses, was $983,000, $990,000, and $1,494,000 in fiscal 1994, 1993 and 1992, respectively. As of March 31, 1994, minimum lease payments under operating leases with remaining noncancellable lease terms in excess of one year were as follows: $287,000 in fiscal 1995, $262,000 in fiscal 1996, and $155,000 in fiscal 1997. 11. Acquisition of E-Z Deck Wash and E-Z D Brands On January 28, 1994, the Company purchased the E-Z Deck Wash and E-Z D brands of home care products for $7,598,000, of which $7,438,000 was paid in cash and $160,000 is payable in July 1994, subject to the resolution of certain contingencies. This acquisition was accounted for using the purchase method. Substantially all of the cost was allocated to patents and trademarks, with a minor amount assigned to inventory and various other assets and liabilities. Had this business been acquired at the beginning of fiscal 1993, the pro-forma inclusion of its operating results would not have had a significant effect on the reported consolidated revenues and net income in either fiscal 1993 or 1994.
12. Quarterly Financial Information (unaudited) - - - --------------------------------------------------------------------------------------------------------------------------------- First Second Third Fourth Years Ended March 31 (in thousands except per share amounts) Quarter Quarter Quarter Quarter Year - - - --------------------------------------------------------------------------------------------------------------------------------- 1994 Revenues $47,722 $36,232 $33,407 $64,896 $182,257 Gross profit 28,469 21,260 19,537 38,631 107,897 Net income 5,456 4,030 3,622 9,465 22,573 Earnings per common share $ .26 $ .19 $ .17 $ .45 $ 1.07 Cash dividends per common share $ .16 $ .16 $ .16 $ .16 $ .64 Market prices per common share High $18-3/4 $19-1/4 $20-1/2 $21-3/4 $ 21-3/4 Low 15 16-1/2 16-1/2 18-3/4 15 ================================================================================================================================= 1993 Revenues $42,288 $35,198 $30,927 $59,987 $168,400 Gross profit 25,078 20,863 17,982 35,636 99,559 Net income 4,434 3,547 3,141 8,030 19,152 Earnings per common share $ .21 $ .17 $ .15 $ .38 $ .91 Cash dividends per common share $ .12 $ .12 $ .12 $ .12 $ .48 Market prices per common share High $16-5/8 $17-3/4 $ 21 $19 $ 21 Low 11 11-1/2 12 16-1/4 11 - - - ---------------------------------------------------------------------------------------------------------------------------------
Due to the seasonal nature of the Company's business, revenues, gross profit and net income are not generated evenly by quarter during the year. Sales activity generally peaks in the fourth quarter of the fiscal year. 23 Independent Auditors' Report To the Board of Directors and Stockholders of Armor All Products Corporation: We have audited the accompanying consolidated balance sheets of Armor All Products Corporation and subsidiaries as of March 31, 1994 and 1993, and the related consolidated statements of income, stockholders' equity and cash flows for each of the three years in the period ended March 31, 1994. These consolidated financial statements are the responsibility of the Corporation's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Armor All Products Corporation and subsidiaries as of March 31, 1994 and 1993, and the results of their operations and their cash flows for each of the three years in the period ended March 31, 1994, in conformity with generally accepted accounting principles. /s/ Deloitte & Touche DELOITTE & TOUCHE Costa Mesa, California [LOGO OF DELOITTE & TOUCHE] April 22, 1994 Management's Responsibility for Financial Statements Armor All Products Corporation is responsible for the preparation and accuracy of the financial statements and other information included in this report. The financial statements have been prepared in conformity with generally accepted accounting principles using, where appropriate, management's best estimates and judgments. In meeting its responsibility for the reliability of the financial statements, management has developed and relies on the Company's system of internal accounting control. The system is designed to provide reasonable assurance that assets are safeguarded and that transactions are executed as authorized and are properly recorded. The system is augmented by written policies and procedures. The Board of Directors reviews the financial statements and reporting practices of the Company through its Audit Committee. The Committee meets regularly with the independent auditors, internal auditors and management to discuss audit scope and results and to consider internal control and financial reporting matters. Both the independent and internal auditors have unrestricted access to the Audit Committee. /s/ Kenneth M. Evans /s/ Mervyn J. McCulloch Kenneth M. Evans Mervyn J. McCulloch President and Chief Executive Officer Executive Vice President and Chief Financial Officer 24 GRAPHICS APPENDIX LIST PAGE WHERE DESCRIPTION OF GRAPHIC OR CROSS-REFERENCE GRAPHIC APPEARS ================================================================================ Armor All Form 10-K Four graphs appear illustrating the results shown in the Exhibit (13)-p. 1 table above for each of: Revenues; Earnings Per Share; Net Income; and Return on Equity, for the 3 fiscal years 1992, 1993 and 1994. EX-21 9 SUBSIDIARIES EXHIBIT (21) SUBSIDIARIES OF THE REGISTRANT The parent of the Company is a wholly-owned subsidiary of McKesson Corporation. The following is a listing of the significant subsidiaries of the Company: Jurisdiction of Organization --------------- Armor All Products GmbH. . . . . . . . . . . . . . . . . .Germany Armor All Products of Canada, Inc. . . . . . . . . . . . . Canada EX-23 10 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 22, 1994, appearing in and incorporated by reference in this Annual Report on Form 10-K of Armor All Products Corporation for the year ended March 31, 1994. DELOITTE & TOUCHE Costa Mesa, California June 17, 1994 -----END PRIVACY-ENHANCED MESSAGE-----