<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 001-13279
UNOVA, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 95-4647021
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
21900 BURBANK BLVD.
WOODLAND HILLS, CALIFORNIA 91367-7418
WWW.UNOVA.COM (Zip Code)
(Address of principal executive offices and internet site)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (818) 992-3000
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 [ ]
On October 29, 1999 there were 55,292,607 shares of Common Stock outstanding,
exclusive of treasury shares.
Page 1 of 14
<PAGE>
UNOVA, INC.
INDEX
REPORT ON FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
PAGE
NUMBER
------
<S> <C> <C> <C>
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
Consolidated Statements of Operations
Nine Months Ended September 30, 1999 and 1998 (unaudited)....................... 3
Consolidated Statements of Operations
Three Months Ended September 30, 1999 and 1998 (unaudited)...................... 4
Consolidated Balance Sheets
September 30, 1999 (unaudited) and December 31, 1998 (unaudited)................ 5
Consolidated Statements of Cash Flows
Nine Months Ended September 30, 1999 and 1998 (unaudited)....................... 6
Notes to Consolidated Financial Statements (unaudited)........................... 7
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations..................................... 10
PART II. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K................................................... 13
Signatures 14
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
UNOVA, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
--------------------------------------
1999 1998
------------------ -----------------
<S> <C> <C>
Sales and Service Revenues ....................... $ 1,491,198 $ 1,084,315
------------ ------------
Costs and Expenses
Cost of sales .............................. 1,058,809 705,496
Selling, general and administrative ........ 327,753 269,283
Depreciation and amortization .............. 49,717 41,982
Interest, net .............................. 27,872 16,345
------------ ------------
Total Costs and Expenses ................. 1,464,151 1,033,106
------------ ------------
Earnings before Taxes on Income .................. 27,047 51,209
Taxes on Income .................................. (10,819) (20,950)
------------ ------------
Net Earnings ..................................... $ 16,228 $ 30,259
============ ============
Basic and Diluted Earnings per Share ............. $ 0.29 $ 0.55
============ ============
Shares Used in Computing Basic
Earnings per Share ......................... 55,048,453 54,583,884
Shares Used in Computing Diluted
Earnings per Share ......................... 55,056,428 54,694,104
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
UNOVA, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
-------------------------------------
1999 1998
---------------- -----------------
<S> <C> <C>
Sales and Service Revenues ....................... $ 503,367 $ 405,688
------------ ------------
Costs and Expenses
Cost of sales ............................... 355,474 265,417
Selling, general and administrative ......... 106,317 94,185
Depreciation and amortization ............... 17,003 17,413
Interest, net ............................... 8,867 6,571
------------ ------------
Total Costs and Expenses .................. 487,661 383,586
------------ ------------
Earnings before Taxes on Income .................. 15,706 22,102
Taxes on Income .................................. (6,283) (8,841)
------------ ------------
Net Earnings ..................................... $ 9,423 $ 13,261
============ ============
Basic and Diluted Earnings per Share ............. $ 0.17 $ 0.24
============ ============
Shares Used in Computing Basic
Earnings per Share .......................... 55,253,246 54,726,511
Shares Used in Computing Diluted
Earnings per Share .......................... 55,271,824 54,734,899
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
UNOVA, INC.
CONSOLIDATED BALANCE SHEETS
(THOUSANDS OF DOLLARS)
(UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998
------------ ------------
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents ....................................... $ 3,237 $ 17,708
Accounts receivable, net ........................................ 630,595 662,885
Inventories, net of progress billings ........................... 317,846 336,005
Deferred tax assets ............................................. 147,875 141,773
Other current assets ............................................ 24,621 21,129
----------- -----------
Total Current Assets ........................................ 1,124,174 1,179,500
----------- -----------
Property, Plant and Equipment, at Cost ............................... 493,568 464,387
Less Accumulated Depreciation ........................................ (201,676) (178,216)
----------- -----------
Property, Plant and Equipment, Net .............................. 291,892 286,171
----------- -----------
Goodwill and Other Intangibles, Net .................................. 410,832 400,164
----------- -----------
Other Assets ......................................................... 118,519 113,381
----------- -----------
Total Assets ......................................................... $ 1,945,417 $ 1,979,216
=========== ===========
LIABILITIES AND SHAREHOLDERS' INVESTMENT
Current Liabilities
Accounts payable and accrued expenses ........................... $ 363,660 $ 456,812
Payroll and related expenses .................................... 95,240 93,199
Notes payable and current portion of long-term obligations ...... 258,166 237,276
----------- -----------
Total Current Liabilities ................................... 717,066 787,287
----------- -----------
Long-term Obligations ................................................ 366,311 366,487
----------- -----------
Deferred Tax Liabilities ............................................. 47,579 42,154
----------- -----------
Other Long-term Liabilities .......................................... 97,290 81,863
----------- -----------
Commitments and Contingencies
Shareholders' Investment
Common stock .................................................... 553 549
Additional paid-in capital ...................................... 649,215 645,054
Retained earnings ............................................... 77,900 61,672
Accumulated other comprehensive income -
cumulative currency translation adjustment ................... (10,497) (5,850)
----------- -----------
Total Shareholders' Investment .............................. 717,171 701,425
----------- -----------
Total Liabilities and Shareholders' Investment ....................... $ 1,945,417 $ 1,979,216
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
UNOVA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(THOUSANDS OF DOLLARS)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
------------------------------
1999 1998
------------- ------------
<S> <C> <C>
Cash and Cash Equivalents at Beginning of Period ..................... $ 17,708 $ 13,685
--------- ---------
Cash Flows from Operating Activities:
Net earnings .................................................... 16,228 30,259
Adjustments to reconcile net earnings to net
cash used in operating activities:
Depreciation and amortization .............................. 49,717 41,982
Proceeds from sale of accounts receivable .................. 84,000
Deferred taxes ............................................. 1,727 (14,550)
Increase in prepaid pension costs, net ..................... (11,901) (11,054)
Changes in operating assets and liabilities:
Accounts receivable ...................................... (54,451) (24,093)
Inventories .............................................. 16,616 (53,100)
Other current assets ..................................... (5,767) 13,571
Accounts payable and accrued expenses .................... (107,658) 7,927
Payroll and related expenses ............................. (5,696) 3,606
Other operating activities ................................. 9,714 4,217
--------- ---------
Net Cash Used in Operating Activities ................................ (7,471) (1,235)
--------- ---------
Cash Flows from Investing Activities:
Capital expenditures ............................................ (46,936) (56,075)
Changes in other assets......................... ................ 9,395 (2,578)
Proceeds from sale of property, plant and equipment ............. 2,869 6,186
Acquisition of businesses, net of cash acquired ................. (92,854)
Other investing activities ...................................... 3,784 2,850
--------- ---------
Net Cash Used in Investing Activities ................................ (30,888) (142,471)
--------- ---------
Cash Flows from Financing Activities:
Proceeds from borrowings ........................................ 93,885 426,779
Repayment of borrowings ......................................... (73,297) (271,066)
Other financing activities ...................................... 3,300 3,255
--------- ---------
Net Cash Provided by Financing Activities ............................ 23,888 158,968
--------- ---------
Resulting in Increase (Decrease) in Cash and Cash Equivalents ........ (14,471) 15,262
--------- ---------
Cash and Cash Equivalents at End of Period ........................... $ 3,237 $ 28,947
========= =========
Supplemental disclosure of cash flow information
Interest paid ................................................... $ 30,508 $ 16,958
Income taxes paid (refunded) .................................... $ 3,408 $ (5,034)
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE>
UNOVA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 30, 1999
(UNAUDITED)
1. UNOVA, Inc. ("UNOVA" or the "Company") became an independent public
company on October 31, 1997, when all of the UNOVA common stock was
distributed to holders of common stock of Western Atlas Inc. ("WAI") in
the form of a dividend. Every WAI shareholder of record on October 24,
1997 was entitled to receive one share of UNOVA common stock for each WAI
share of common stock held.
The amounts included in this report are unaudited; however, in the
opinion of management, all adjustments necessary for a fair presentation
of results of operations, financial position and cash flows for the
stated periods have been included. These adjustments are of a normal
recurring nature. It is suggested that these consolidated financial
statements be read in conjunction with the audited financial statements
and notes thereto included in the Company's Annual Report on Form 10-K
for the year ended December 31, 1998. The results of operations for the
interim periods presented are not necessarily indicative of operating
results for the entire year.
2. Inventories, net of progress billings consisted of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998
------------------------------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Raw materials and work in process ........... $ 298,608 $ 285,470
Finished goods .............................. 55,267 85,797
Less progress billings ...................... (36,029) (35,262)
--------- ---------
Inventories, net of progress billings ....... $ 317,846 $ 336,005
========= =========
</TABLE>
3. Interest, net was composed of the following:
<TABLE>
<CAPTION>
NINE MONTHS ENDED THREE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1999 1998 1999 1998
------------------------- -------------------------
(THOUSANDS OF DOLLARS) (THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C>
Interest expense ........ $ 28,571 $ 18,289 $ 9,052 $ 7,267
Interest income ......... (699) (1,944) (185) (696)
-------- -------- -------- --------
Interest, net ........... $ 27,872 $ 16,345 $ 8,867 $ 6,571
======== ======== ======== ========
</TABLE>
4. For the nine and three months ended September 30, 1999, basic earnings
per share was calculated using the weighted average number of common
shares outstanding for the periods while diluted earnings per share was
computed on the basis of the weighted average number of common shares
outstanding plus the weighted average dilutive effect of stock options
outstanding during the period using the "treasury stock" method.
7
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. (continued)
Shares used for basic and diluted earnings per share were computed as
follows:
<TABLE>
<CAPTION>
NINE MONTHS ENDED THREE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1999 1998 1999 1998
---------------------------- ----------------------------
<S> <C> <C> <C> <C>
Weighted average common shares - Basic ...... 55,048,453 54,583,884 55,253,246 54,726,511
Dilutive effect of stock options ............ 7,975 110,220 18,578 8,388
---------- ---------- ---------- ----------
Weighted average shares - Diluted ........... 55,056,428 54,694,104 55,271,824 54,734,899
========== ========== ========== ==========
</TABLE>
At September 30, 1999, UNOVA employees and directors held options to
purchase 4,203,000 shares of Company common stock that were antidilutive
to the diluted earnings per share computation. These options could become
dilutive in future periods if the average market price of the Company's
common stock exceeds the exercise price of the outstanding options.
5. The Company's comprehensive income was computed as follows:
<TABLE>
<CAPTION>
NINE MONTHS ENDED THREE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1999 1998 1999 1998
------------------------- ------------------------
(THOUSANDS OF DOLLARS) (THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C>
Net earnings ..................................... $ 16,228 $ 30,259 $ 9,423 $ 13,261
Foreign currency translation adjustments,
net of taxes ................................ (4,647) 999 3,318 (419)
-------- -------- -------- --------
Comprehensive income ............................. $ 11,581 $ 31,258 $ 12,741 $ 12,842
======== ======== ======== ========
</TABLE>
The 1999 nine and three month periods presented above include an income
tax benefit of $0.7 million.
6. The Company manages and reports its operations in two business segments:
the Automated Data Systems segment and the Industrial Automation Systems
segment. The Company uses operating profit, which is defined as earnings
before taxes on income, net interest expense, and corporate and other
amounts, to evaluate performance. Corporate and other amounts include
corporate operating costs and currency transaction gains and losses.
There were no material intersegment transactions.
OPERATIONS BY BUSINESS SEGMENT
(MILLIONS OF DOLLARS)
<TABLE>
<CAPTION>
NINE MONTHS INDUSTRIAL AUTOMATED CORPORATE
ENDED AUTOMATION DATA AND OTHER
SEPTEMBER 30, SYSTEMS SYSTEMS AMOUNTS TOTAL
------------- ---------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Sales................................ 1999 $ 860.4 $ 630.8 $ 1,491.2
1998 485.3 599.0 1,084.3
Operating profit (loss)............ 1999 61.9 15.2 $ (22.2) 54.9
1998 46.6 37.7 (16.7) 67.6
</TABLE>
8
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. (continued)
<TABLE>
<CAPTION>
THREE MONTHS INDUSTRIAL AUTOMATED CORPORATE
ENDED AUTOMATION DATA AND OTHER
SEPTEMBER 30, SYSTEMS SYSTEMS AMOUNTS TOTAL
------------- ---------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Sales................................ 1999 $ 291.0 $ 212.3 $ 503.3
1998 188.7 217.0 405.7
Operating profit (loss)............ 1999 27.8 4.9 $ (8.1) 24.6
1998 20.5 12.2 (4.0) 28.7
</TABLE>
7. In June 1999, a financing subsidiary of UNOVA entered into an
agreement to sell undivided interests in a revolving pool of the
Company's trade accounts receivable to a financial institution which
issues its short-term debt backed by receivables acquired in similar
transactions. The financing subsidiary purchased these receivables,
irrevocably and without recourse, from the Company under a separate
agreement. Under the terms of these agreements, UNOVA is entitled to
receive up to $100.0 million of proceeds from the sale of undivided
interests in the receivables. At September 30, 1999, net proceeds
from these agreements were approximately $84.0 million and have been
reflected as a reduction of accounts receivable on the consolidated
balance sheet. Unamortized costs and discounts associated with these
agreements were $1.1 million and $1.0 million for the nine and three
month periods ended September 30, 1999 and have been classified as
selling, general and administrative expenses.
8. In October 1998, UNOVA acquired the machine tool business of Cincinnati
Milacron, which was renamed Cincinnati Machine, a UNOVA Company
("Cincinnati Machine") for approximately $187.3 million in cash. During
the second quarter of 1999, the Company recorded adjustments to the
preliminary allocation of the purchase price among the fair value of the
acquired assets and liabilities. These adjustments, which were offset to
goodwill, included approximately $19.8 million of additional liabilities
for costs to exit certain activities and to terminate employees at
Cincinnati Machine's domestic and foreign locations and $4.1 million for
additional postretirement obligations and pension liabilities. Cincinnati
Machine is currently in the process of exiting these activities and
terminating employees and expects to substantially complete this process
by the end of the year. At September 30, 1999, accounts payable and
accrued expenses included approximately $9.7 million of exit and
termination costs.
9. The Company leases executive offices that are located in a building owned
by the UNOVA Master Trust, an entity which holds the assets of the
Company's primary U.S. pension plans. The ten-year operating lease, which
was approved by the Department of Labor under the provisions of the
Employee Retirement Income Security Act of 1974, commenced on February 1,
1999. The lease provides for fixed monthly rental payments subject to
certain indexed escalation clauses. Rental expense under the provisions
of this lease was not material for the nine and three month periods ended
September 30, 1999.
9
<PAGE>
UNOVA, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Sales and service revenues and segment operating profit for the nine and three
months ended September 30, 1999 and 1998 are summarized below:
<TABLE>
<CAPTION>
NINE MONTHS ENDED THREE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1999 1998 1999 1998
--------------------------- ---------------------------
(THOUSANDS OF DOLLARS) (THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C>
SALES AND SERVICE REVENUES
Industrial Automation Systems ............ $ 860,437 $ 485,357 $ 291,032 $ 188,713
Automated Data Systems ................... 630,761 598,958 212,335 216,975
---------- ---------- ---------- ----------
Total Sales and Service Revenues ......... $1,491,198 $1,084,315 $ 503,367 $ 405,688
========== ========== ========== ==========
SEGMENT OPERATING PROFIT
Industrial Automation Systems ............ $ 61,932 $ 46,608 $ 27,754 $ 20,505
Automated Data Systems ................... 15,170 37,722 4,855 12,183
---------- ---------- ---------- ----------
Total Segment Operating Profit ........... $ 77,102 $ 84,330 $ 32,609 $ 32,688
========== ========== ========== ==========
</TABLE>
Total sales and service revenues increased $406.9 million or 38% for the nine
months ended September 30, 1999 compared with the corresponding prior period.
Total segment operating profit decreased $7.2 million or 9% for the nine months
ended September 30, 1999 compared with the corresponding prior period.
Total sales and service revenues increased $97.7 million or 24% for the three
months ended September 30, 1999 compared with the corresponding prior period.
Total segment operating profit for the three months ended September 30, 1999 was
consistent with the corresponding prior period.
Industrial Automation Systems ("IAS") segment sales increased $375.1 million
or 77% and related operating profit increased $15.3 million or 33% for the
nine months ended September 30, 1999 compared with the corresponding prior
period. For the three months ended September 30, 1999, IAS revenues increased
$102.3 million or 54% and related operating profit increased $7.2 million or
35%, compared with the corresponding prior period. The increase in revenues
is primarily due to the acquisitions of Cincinnati Machine in October 1998
and R&B Machine Tool in July 1998 and the increase in activity at the
automotive-related manufacturing systems operations. The increase in
operating profit was due to the increase in activity for the
automotive-related manufacturing systems and operating profits contributed by
acquisitions partially offset by costs associated with product and
operational process problems at Honsberg Lamb in Germany. Operating profits
as a percentage of sales decreased due to lower margin rates at Cincinnati
Machine and Honsberg Lamb. IAS backlog was $835.8 million at September 30,
1999.
In October 1998, UNOVA acquired the machine tool business of Cincinnati
Milacron, which was renamed Cincinnati Machine, a UNOVA Company ("Cincinnati
Machine") for approximately $187.3 million in cash. During the second quarter
of 1999, the Company recorded adjustments to the preliminary allocation of
the purchase price among the fair value of the acquired assets and
liabilities. These adjustments, which were offset to goodwill, included
approximately $19.8 million of additional liabilities for costs to exit
certain activities and to terminate employees at Cincinnati Machine's
domestic and foreign locations and $4.1 million for additional postretirement
obligations and pension liabilities. Cincinnati Machine is currently in the
process of exiting these activities and terminating employees and expects to
substantially complete this process by the end of the year. At September 30,
1999, accounts payable and accrued expenses included approximately $9.7
million of exit and termination costs.
10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
Automated Data System ("ADS") segment sales increased $31.8 million or 5% while
related operating profit decreased $22.6 million or 60% for the nine months
ended September 30, 1999 compared with the corresponding prior period. For the
three months ended September 30, 1999, ADS revenues decreased $4.6 million or 2%
and related operating profit decreased $7.3 million or 60%, compared with the
corresponding prior period. The year-to-date sales increase is due primarily to
the acquisition of Amtech Systems in May 1998 while the decrease in third
quarter sales is due primarily to order declines for new mobile computing
systems due to our customers' focus on internal Year 2000 issues. The decrease
in operating profit was the result of additional operating expenses related to
the implementation of a new management information system at Intermec's main
production facility and the mobile computing order delays.
Cost of sales as a percentage of sales increased from 65% to 71% from the nine
months ended September 30, 1998 to the nine months ended September 30, 1999,
while selling, general and administrative expense as a percentage of sales
decreased from 25% to 22% for the same periods. For the three months ended
September 30, cost of sales as a percentage of sales increased from 65% to 71%
from 1998 to 1999, while selling, general and administrative expense as a
percentage of sales decreased from 23% to 21% for the same periods. These
fluctuations are attributable to the change in the business mix of the Company
that resulted from the acquisitions in the IAS segment and an increase in the
activity of this segment. IAS sales increased as a percentage of total Company
sales from 45% for the nine months ended September 30, 1998 to 58% for the nine
months ended September 30, 1999, while ADS sales decreased from 55% to 42% for
the same periods. For the three months ended September 30, IAS sales increased
as a percentage of total Company sales from 47% to 58% from 1998 to 1999, while
ADS sales decreased from 53% to 42% for the same periods. The IAS businesses
typically carry higher cost of sales ratios and lower selling, general and
administrative expense ratios compared to the ADS businesses.
Depreciation and amortization increased from $42.0 million to $49.7 million from
the nine months ended September 30, 1998 to the nine months ended September 30,
1999. This increase is primarily due to additional depreciation from
acquisitions and an increase in the level of fixed assets over the prior year
period.
Net interest expense increased from $16.3 million to $27.9 million from the nine
months ended September 30, 1998 to the nine months ended September 30, 1999 and
from $6.6 million to $8.9 million from the three months ended September 30, 1998
to the three months ended September 30, 1999. The increase is attributable to an
increase in outstanding debt incurred to finance the 1998 acquisitions of
Cincinnati Machine, R&B Machine Tool, and Amtech Systems and the normal capital
expenditures and working capital needs of the operations.
LIQUIDITY AND CAPITAL RESOURCES
Cash and marketable securities decreased from $17.7 million at December 31, 1998
to $3.2 million at September 30, 1999.
Total debt increased from $603.8 million at December 31, 1998 to $624.5
million at September 30, 1999. Additional borrowings were used for the normal
capital expenditures and working capital needs of the operations.
The Company has unsecured committed credit facilities with banks from which
it may borrow up to $500.0 million. Under these credit facilities, the
Company may borrow at the prime rate or at rates based on the London Inter
Bank Offered Rate, rates borne by certificates of deposit or other rates that
are mutually acceptable to the banks and the Company. At October 29, 1999,
$250 million of these credit facilities was available for the Company's
general use.
In June 1999, a financing subsidiary of UNOVA entered into an agreement to
sell undivided interests in a revolving pool of the Company's trade accounts
receivable to a financial institution which issues its short-term debt backed
by receivables acquired in similar transactions. The financing subsidiary
purchased these receivables, irrevocably and without recourse, from the
Company under a separate agreement. Under the terms of these agreements,
UNOVA is entitled to receive up to $100.0 million of proceeds from the sale
of undivided interests in the receivables. At September 30, 1999, net
proceeds from these agreements were approximately $84.0 million and have been
reflected as a reduction of accounts receivable on the consolidated balance
sheet. Unamortized costs and discounts associated with these agreements were
$1.1 million and $1.0 million for the nine and three month periods ended
September 30, 1999 and have been classified as selling, general and
administrative expenses.
The Company expects that cash flow from operations, along with available
borrowing capacity, will be adequate to meet working capital and capital
expenditure requirements for the next twelve months.
11
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
YEAR 2000
The Year 2000 issue is the result of computer programs designed to define a
year using two digits rather than four. As such, a date sensitive field using
"00" could be recognized as the year 1900 rather than the year 2000,
potentially causing a system failure or other business disruption.
The operating segments of the Company formed internal review teams that are
monitored on an ongoing basis by executive management. The Company's Year
2000 efforts are divided into three primary phases: assessment,
implementation, and testing. During the assessment phase, the Company
identified significant information technology and non-information technology
systems that required modification to achieve Year 2000 compliance. With
respect to significant information technology systems, the Company has
completed the implementation phase and is conducting test procedures. For
non-information technology systems, the implementation and testing phases are
performed concurrently. Internal and external resources are being used to
make the required modifications and test Year 2000 compliance. Although there
can be no assurance that the Company will identify and correct every Year
2000 problem, the Company believes that it has in place a comprehensive
program to identify and correct any such problems. The Company plans to
complete all phases of its Year 2000 plan prior to December 31, 1999.
UNOVA is also actively working with its significant suppliers and customers to
assess their Year 2000 compliance efforts and the Company's exposure from them.
While the Company currently does not anticipate problems related to third party
Year 2000 issues, the Company will continue to assess potential risk from third
parties. However, there can be no assurance that Year 2000 problems originating
with a supplier or other third party will not occur.
The Company has also assessed the capability of its products to determine
whether they are Year 2000 compliant. The Company believes that all of its
current products are Year 2000 compliant. UNOVA has not tested products that are
no longer sold by the Company and the Company does not believe it is legally
responsible for costs incurred by customers related to ensuring their Year 2000
capability. However, the Company is providing customer support services related
to Year 2000 issues. UNOVA defines "Year 2000 compliant" as a product that, when
used properly and in conformity with the product information provided by the
Company, will accurately convey data between the twentieth and twenty-first
centuries, including leap year calculations, provided that all other technology
used in combination with the product properly exchanges data with the UNOVA
product.
In addition, the Company continues to assess, expand and modify its
contingency plans to address potential problem areas with internal systems
and third parties. Finalization of these contingency plans will be prior to
December 31, 1999.
The Company estimates that the total cost of these Year 2000 compliance
activities will be approximately $10.1 million. Of these costs, it is
estimated that approximately $1.5 million are expense items and the remaining
$8.6 million are capitalizable. As of September 30, 1999, the Company has
incurred approximately $8.7 million of Year 2000 cumulative costs of which
approximately $1.2 million was expensed and approximately $7.5 million was
capitalized. These costs and the date on which the Company plans to complete
the Year 2000 modifications are based on management's best estimates, which
were derived utilizing numerous assumptions of future events. However, there
can be no guarantee that these estimates will be achieved and actual results
could differ from those plans. Based on currently available information,
management does not believe that Year 2000 issues will have a material
adverse impact on the Company's financial condition or results of operations.
However, the Year 2000 problem has many aspects and potential consequences,
some of which are not reasonably foreseeable, and there can be no assurance
that unforeseen consequences will not arise.
12
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Reports on Form 8-K: No reports on Form 8-K have been filed by the
Registrant during the quarter ended September 30, 1999.
(b) See Exhibit Index included herein on page E-1.
13
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
UNOVA, INC.
(Registrant)
By /s/ Michael E. Keane
----------------------------
Michael E. Keane
Senior Vice President and
Chief Financial Officer
November 12, 1999
14
<PAGE>
UNOVA, INC.
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
<S> <C>
2.1 Amended and Restated Purchase and Sale Agreement dated August 20,
1998, between UNOVA, Inc., UNOVA Industrial Automation Systems,
Inc., and UNOVA UK Limited, on the one hand, and Cincinnati
Milacron Inc., on the other hand, filed on October 2, 1998 as
Exhibit 2 to the Company's Current Report on Form 8-K, and
incorporated herein by reference.
3.1 Certificate of Incorporation of UNOVA, Inc., filed on October 22,
1997 as Exhibit 3A to Amendment No. 2 to the Company's
Registration Statement on Form 10 No. 001-13279, and incorporated
herein by reference.
3.2 By-laws of UNOVA, Inc., as amended on February 5, 1999, filed as
Exhibit 3.2 to the Company's 1998 Annual Report on Form 10-K, and
incorporated herein by reference.
4.1 $400,000,000 Credit Agreement dated September 24, 1997, among
UNOVA, Inc., the Banks listed therein, and Morgan Guaranty Trust
Company of New York, as Agent, filed on October 1, 1997 as Exhibit
10M to Amendment No. 1 to the Company's Registration Statement on
Form 10 No. 001-13279, and incorporated herein by reference.
4.2 Amendment No. 1 to the $400,000,000 Credit Agreement, dated
January 15, 1998, filed as Exhibit 4.4 to the Company's 1997
Annual Report on Form 10-K, and incorporated herein by reference.
4.3 Amendment No. 2 to the $400,000,000 Credit Agreement, dated May
15, 1998, filed as Exhibit 4.7 to the Company's June 30, 1998
Quarterly Report on Form 10-Q, and incorporated herein by
reference.
4.4 Amendment No. 3 to the $400,000,000 Credit Agreement, dated
September 24, 1998, filed as Exhibit 4.8 to the Company's
September 30, 1998 Quarterly Report on Form 10-Q, and incorporated
herein by reference.
4.5 Rights Agreement dated September 24, 1997, between UNOVA, Inc. and
The Chase Manhattan Bank, as Rights Agent, to which is annexed the
form of Right Certificate as Exhibit A, filed on October 22, 1997
as Exhibit 3C to Amendment No. 2 to the Company's Registration
Statement on Form 10 No. 001-13279, and incorporated herein by
reference.
4.6 Indenture dated as of March 11, 1998 between the Company and The
First National Bank of Chicago, Trustee, providing for the
issuance of securities in series, filed as Exhibit 4.5 to the
Company's 1997 Annual Report on Form 10-K, and incorporated herein
by reference.
4.7 Form of 6.875% Notes due March 15, 2005 issued by the Company
under such indenture, filed as Exhibit 4.6 to the Company's 1997
Annual Report on Form 10-K, and incorporated herein by reference.
</TABLE>
E-1
<PAGE>
INDEX TO EXHIBITS (CONTINUED)
<TABLE>
<S> <C>
4.8 Form of 7.00% Notes due March 15, 2008 issued by the Company under
such indenture, filed as Exhibit 4.7 to the Company's 1997 Annual
Report on Form 10-K, and incorporated herein by reference.
4.9 $100,000,000 Credit Agreement dated January 13, 1999, among UNOVA,
Inc., the Banks listed therein, and Morgan Guaranty Trust Company
of New York, as Agent, filed as Exhibit 4.9 to the Company's 1998
Annual Report on Form 10-K, and incorporated herein by reference.
4.10 Transfer and Administration Agreement dated June 18, 1999, among
Enterprise Funding Corporation, as Company, KCH Funding, L.L.C.,
as Transferor, UNOVA, Inc., Individually and as Servicer, and
Nationsbank, N.A., as Lead Arranger, Agent and Bank Investor,
filed as Exhibit 4.10 to the Company's June 30, 1999 Quarterly
Report on Form 10-Q, and incorporated herein by reference.
4.11 Receivables Purchase Agreement dated June 18, 1999, between UNOVA,
Inc., as Seller, and KCH Funding, L.L.C., as Purchaser, filed as
Exhibit 4.11 to the Company's June 30, 1999 Quarterly Report on
Form 10-Q, and incorporated herein by reference.
4.12 Originator Receivables Purchase Agreement dated June 18, 1999,
among UNOVA Industrial Automation Systems, Inc. and Intermec
Technologies Corporation, as Sellers, and UNOVA, Inc., as
Purchaser, filed as Exhibit 4.12 to the Company's June 30, 1999
Quarterly Report on Form 10-Q, and incorporated herein by
reference.
4.13 Instruments defining the rights of holders of other long-term debt
of the Company are not filed as exhibits because the amount of
debt authorized under any such instrument does not exceed 10% of
the total assets of the Company and its consolidated subsidiaries.
The Company hereby undertakes to furnish a copy of any such
instrument to the Commission upon request.
10.1 Distribution and Indemnity Agreement dated October 31, 1997,
between Western Atlas Inc. and UNOVA, Inc, filed as Exhibit 10.1
to the Company's September 30, 1997 Quarterly Report on Form 10-Q,
and incorporated herein by reference.
10.2 Tax Sharing Agreement dated October 31, 1997, between Western
Atlas Inc., and UNOVA, Inc., filed as Exhibit 10.2 to the
Company's September 30, 1997 Quarterly Report on Form 10-Q, and
incorporated herein by reference.
10.3 Employee Benefits Agreement dated October 31, 1997, between
Western Atlas Inc., and UNOVA, Inc., filed as Exhibit 10.3 to the
Company's September 30, 1997 Quarterly Report on Form 10-Q, and
incorporated herein by reference.
10.4 Intellectual Property Agreement dated October 31, 1997, between
Western Atlas Inc., and UNOVA, Inc., filed as Exhibit 10.4 to the
Company's September 30, 1997 Quarterly Report on Form 10-Q, and
incorporated herein by reference.
10.5 Form of Change of Control Employment Agreements with Alton J.
Brann, Larry D. Brady, Michael E. Keane, Norman L. Roberts and
certain other officers of the Company, filed as Exhibit 10.5
to the Company's September 30, 1997 Quarterly Report on Form 10-Q,
and incorporated herein by reference.
</TABLE>
E-2
<PAGE>
INDEX TO EXHIBITS (CONTINUED)
<TABLE>
<S> <C>
10.6 Employment Agreement between Intermec Corporation and Michael
Ohanian, dated May 18, 1995, as amended, filed on August 18, 1997
as exhibit 10J to the Company's Registration Statement on Form 10
No. 001-13279 and incorporated herein by reference.
10.7 Amendment No. 1 to Employment Agreement between Intermec
Corporation and Michael Ohanian, dated February 28, 1997, filed as
Exhibit 10.18 to the Company's 1997 Annual Report on Form 10-K,
and incorporated herein by reference.
10.8 Amendment No. 2 to Employment Agreement between Intermec
Technologies Corporation and Michael Ohanian, dated February 28,
1998, filed as Exhibit 10.19 to the Company's 1997 Annual Report
on Form 10-K, and incorporated herein by reference.
10.9 Amendment No. 3 to Employment Agreement between Intermec
Technologies Corporation and Michael Ohanian, dated May 20, 1998,
filed as Exhibit 10.9 to the Company's 1998 Annual Report on Form
10-K, and incorporated herein by reference.
10.10 Amendment No. 4 to Employment Agreement between Intermec
Technologies Corporation and Michael Ohanian, dated February 28,
1999, filed as Exhibit 10.10 to the Company's 1998 Annual Report
on Form 10-K, and incorporated herein by reference.
10.11 Amendment No. 5 to Employment Agreement between Intermec
Technologies Corporation and Michael Ohanian, dated May 18, 1999,
filed as Exhibit 10.11 to the Company's June 30, 1999 Quarterly
Report on Form 10-Q, and incorporated herein by reference.
10.12 UNOVA, Inc. Director Stock Option and Fee Plan, filed as Exhibit
10.7 to the Company's September 30, 1997 Quarterly Report on Form
10-Q, and incorporated herein by reference.
10.13 Amendment No. 1 to the UNOVA, Inc. Director Stock Option and
Fee Plan. *
10.14 UNOVA, Inc. Restoration Plan, filed on August 18, 1997 as Exhibit
10I to the Company's Registration Statement on Form 10 No.
001-13279 and incorporated herein by reference.
10.15 UNOVA, Inc. Supplemental Executive Retirement Plan, filed on
October 1, 1997 as Exhibit 10H to Amendment No. 1 to the Company's
Registration Statement on Form 10 No. 001-13279 and incorporated
herein by reference.
10.16 Amendment No. 1 to UNOVA, Inc. Supplemental Executive Retirement
Plan, dated September 23, 1998, filed as Exhibit 10.22 to the
Company's September 30, 1998 Quarterly Report on Form 10-Q, and
incorporated herein by reference.
10.17 Amendment No. 2 to UNOVA, Inc. Supplemental Executive Retirement
Plan, dated March 11, 1999, filed as Exhibit 10.15 to the
Company's 1998 Annual Report on Form 10-K, and incorporated herein
by reference.
10.18 Supplemental Retirement Agreement between UNOVA, Inc. and Alton J.
Brann, filed on October 1, 1997 as Exhibit 10L to Amendment No. 1
to the Company's Registration Statement on Form 10 No. 001-13279
and incorporated herein by reference.
</TABLE>
E-3
<PAGE>
INDEX TO EXHIBITS (CONTINUED)
<TABLE>
<S> <C>
10.19 Amendment No. 1 to Supplemental Retirement Agreement between
UNOVA, Inc. and Alton J. Brann, dated September 23, 1998, filed as
Exhibit 10.21 to the Company's September 30, 1998 Quarterly Report
on Form 10-Q, and incorporated herein by reference.
10.20 Amendment No. 2 to Supplemental Executive Retirement Agreement
between UNOVA, Inc. and Alton J. Brann, dated March 11, 1999,
filed as Exhibit 10.18 to the Company's 1998 Annual Report on Form
10-K, and incorporated herein by reference.
10.21 Employment Agreement dated August 1997, between UNOVA, Inc., and
Clayton A. Williams, filed on October 1, 1997 as Exhibit 10K to
Amendment No. 1 to the Company's Registration Statement on Form 10
No. 001-13279 and incorporated herein by reference.
10.22 Amendment No. 1 to Employment Agreement between UNOVA, Inc. and
Clayton A. Williams, dated March 24, 1998, filed as Exhibit 10.20
to the Company's 1997 Annual Report on Form 10-K, and incorporated
herein by reference.
10.23 Amendment No. 2 to Employment Agreement between UNOVA, Inc. and
Clayton A. Williams, dated May 18, 1998, filed as Exhibit 10.21 to
the Company's 1998 Annual Report on Form 10-K, and incorporated
herein by reference.
10.24 UNOVA, Inc. 1997 Stock Incentive Plan, filed as Exhibit 10.12 to
the Company's September 30, 1997 Quarterly Report on Form 10-Q,
and incorporated herein by reference.
10.25 UNOVA, Inc. Executive Severance Plan, filed as Exhibit 10.13 to
the Company's September 30, 1997 Quarterly Report on Form 10-Q,
and incorporated herein by reference.
10.26 Form of Promissory Notes in favor of the Company given by certain
officers and key employees, filed as Exhibit 10.14 to the
Company's September 30, 1997 Quarterly Report on Form 10-Q, and
incorporated herein by reference.
10.27 Board resolution dated September 24, 1997 establishing the UNOVA,
Inc. Incentive Loan Program, filed as Exhibit 10.15 to the
Company's September 30, 1997 Quarterly Report on Form 10-Q, and
incorporated herein by reference.
10.28 UNOVA, Inc. Management Incentive Compensation Plan, filed as
Exhibit 10.16 to the Company's 1997 Annual Report on Form 10-K,
and incorporated herein by reference.
10.29 UNOVA, Inc. Executive Survivor Benefit Plan, filed as Exhibit
10.17 to the Company's 1997 Annual Report on Form 10-K, and
incorporated herein by reference.
10.30 UNOVA, Inc. 1999 Stock Incentive Plan, filed as Annex A to the
Company's definitive Proxy Statement relating to the Annual
Meeting of Shareholders to be held on May 7, 1999 (the "1999 Proxy
Statement"), and incorporated herein by reference.
10.31 UNOVA, Inc. Management Incentive Compensation Plan, filed as Annex
B to the Company's 1999 Proxy Statement, and incorporated herein
by reference.
</TABLE>
E-4
<PAGE>
INDEX TO EXHIBITS (CONTINUED)
<TABLE>
<S> <C>
10.32 UNOVA, Inc. Executive Medical Benefit Plan, filed as Exhibit 10.30
to the Company's 1998 Annual Report on Form 10-K, and incorporated
herein by reference.
10.33 Letter Offering Employment to Larry D. Brady as President and
Chief Operating Officer of UNOVA, Inc., as accepted by Mr. Brady
on June 16, 1999, filed as Exhibit 10.32 to the Company's June 30,
1999 Quarterly Report on Form 10-Q, and incorporated herein by
reference.
10.34 Restricted Stock Agreement between UNOVA, Inc. and Larry D.
Brady. *
27 Financial Data Schedule (filed only electronically with the
Securities and Exchange Commission). *
* Copies of these documents have been included in this Quarterly
Report on Form 10-Q filed with the Securities and Exchange
Commission.
</TABLE>
E-5
<PAGE>
EXHIBIT 10.13
AMENDMENT NO. 1 TO THE
UNOVA, INC. DIRECTOR STOCK OPTION AND FEE PLAN
WHEREAS, this Board of Directors deems it appropriate and advisable that an
amendment, designated as Amendment No. 1, be made to the UNOVA, Inc. Director
Stock Option and Fee Plan to appropriately cover all stock-based employee
incentive plans approved or to be approved by shareholders of the Corporation,
including the 1999 Stock Incentive Plan approved at the Annual Meeting of
Shareholders on May 7, 1999;
NOW, THEREFORE, BE IT RESOLVED, that the UNOVA, Inc. Director Stock Option and
Fee Plan (the "Plan") be amended as follows:
Subsection (b), SUBSEQUENT GRANTS, of Section 7, STOCK OPTIONS, of the Plan
shall be amended to read in its entirety as follows:
"(b) SUBSEQUENT GRANTS. Each person who first becomes a Director after the
Distribution Date shall be granted an option to purchase 25,000 shares of Common
Stock as of the date such person is elected or is appointed as a Director,
PROVIDED that no such grant shall be made to any Director who either (i)
received a stock option grant under the Company's principal stock-based employee
incentive plan which provides for awards in the form of stock options, stock
appreciation rights, restricted stock, or other types of stock-based awards
during the two-year period immediately preceding the date of such election or
appointment to the Board or (ii) was an employee of the Company or a subsidiary
of the Company at any time during the two-year period referred to in (i) above.
Grants under this Section 7(b) shall be in addition to any annual grants of
options under Section 7(c) hereof."
<PAGE>
EXHIBIT 10.34
UNOVA, INC.
1999 STOCK INCENTIVE PLAN
RESTRICTED STOCK AGREEMENT
This Restricted Stock Agreement ("Agreement") is made this 2nd day of
August, 1999, between UNOVA, Inc., a Delaware corporation (the "Company"), and
Larry D. Brady (the "Grantee").
WHEREAS, the UNOVA, Inc. 1999 Stock Incentive Plan (the "1999 Plan") was
adopted by the Board of Directors of the Company on March 11, 1999, and was
approved by the shareholders of the Company on May 7, 1999; and
WHEREAS, as an inducement to the Grantee to accept employment with the
Company in the capacity of President and Chief Operating Officer, and to
increase the Grantee's proprietary interest in the business of the Company
through stock ownership, the Company desires to award the Grantee shares of
Restricted Stock (as that term is defined in the 1999 Plan) in accordance with
the terms and conditions of this Agreement;
NOW THEREFORE, in consideration of the premises, the mutual covenants
hereinafter set forth, and other good and valuable consideration, the Company
and the Grantee hereby agree as follows:
1. The Company hereby grants the Grantee, as a matter of separate
inducement and Agreement, and not in lieu of salary or other compensation for
services, an Award in the form of Restricted Stock comprising 109,585 shares of
the Common Stock, par value $.01 per share, of the Company on the terms and
conditions hereinafter set forth, such number of shares to be subject to
adjustment as provided in Section 3 of the 1999 Plan.
2. The 1999 Plan, a copy of which is attached hereto, is incorporated
herein by reference and is made part of this Agreement as if fully set forth
herein. Capitalized terms used in this Agreement which are not defined herein
shall have the meaning assigned to such terms in the 1999 Plan, it being
understood that the term "Restricted Stock" shall mean and refer only to those
shares of Restricted Stock granted pursuant to this Agreement. This Agreement is
subject to, and the Company and the Grantee agree to be bound by, all of the
terms and conditions of the 1999 Plan as the same exist at the time this
Agreement became effective. The 1999 Plan shall control in the event there is
any expressed conflict between the 1999 Plan and the terms hereof and with
respect to such matters as are not expressly covered in this Agreement.
Subsequent amendments to the 1999 Plan shall not adversely affect the Grantee's
rights under this Agreement without the Grantee's written consent, except such
an amendment made to cause the 1999 Plan to qualify for the exemption provided
by Rule 16b-3.
-1-
<PAGE>
3. The Restricted Stock awarded under this Agreement shall be evidenced by
a stock certificate or certificates registered in the name of the Grantee
bearing a legend in the following form:
The transferability of the shares of stock represented by this
certificate is subject to the terms and conditions (including
forfeiture) of the UNOVA, Inc. 1999 Stock Incentive Plan and a
Restricted Stock Agreement entered into between the Company and the
Grantee dated August 2, 1999. Copies of such Plan and Agreement are on
file at the principal executive offices of UNOVA, Inc.
4. The stock certificate or certificates representing such Restricted Stock
shall be retained in the custody of the Secretary of the Company until the
restrictions on the shares represented by any such certificate or certificates
shall have lapsed. Simultaneously with the execution and delivery of this
Agreement by the parties, the Grantee shall execute and deliver to the Company a
stock power relating to each certificate representing Restricted Stock, endorsed
in blank, substantially in the form of Exhibit A to this Agreement.
5. Subject to the provisions of Section 7 of this Agreement, there shall be
a Restriction Period beginning on the date of this Agreement with respect to the
shares of Restricted Stock awarded hereunder. With respect to 36,528 of such
shares, the Restriction Period shall expire on the third anniversary of the date
of this Agreement; with respect to 36,528 of such shares, the Restriction Period
shall expire on the fourth anniversary of the date of this Agreement; and with
respect to 36,529 of such shares, the Restriction Period shall terminate on the
fifth anniversary of the date of this Agreement. Except as otherwise provided in
this Agreement, in the event of the Grantee's Termination of Employment during
the Restriction Period, all shares still subject to restriction on the date of
Grantee's Termination of Employment shall be forfeited by the Grantee.
6. Until the earlier of (i) the expiration of the Restriction Period with
respect to any of the shares granted hereunder or (ii) the vesting of such
shares in accordance with the provisions of this Agreement or the 1999 Plan, the
Grantee shall not be permitted to sell, assign, transfer, pledge, or otherwise
encumber shares of Restricted Stock; provided that the foregoing shall not
prevent the Grantee from pledging Restricted Stock as security for a loan, the
sole purpose of which is to provide funds to pay the option price for stock
options granted to the Grantee under the 1999 Plan or any successor plan of the
Company.
7. Notwithstanding any other provision of this Agreement, all shares of
Restricted Stock granted hereunder still subject to restriction shall become
fully vested and transferable and become free of all restrictions and deferral
limitations to the full extent of the original grant upon the occurrence of any
of the following events:
(a) the Termination of Employment of the Grantee by reason of the
Grantee's death;
(b) the Termination of Employment of the Grantee by reason of the
Grantee's Disability;
-2-
<PAGE>
(c) the occurrence of a Change in Control as defined in Section 8(b) of
the 1999 Plan; or
(d) the Termination of Employment of the Grantee as a result of a Special
Severance.
For purposes of this Agreement, a Special Severance of the Grantee shall
mean the Grantee's Termination of Employment under the following circumstances:
(i) the Grantee shall have served as President and Chief Operating Officer of
the Company continuously from the date hereof until the first anniversary of the
date of this Agreement; (ii) within the period of 30 days following the first
anniversary of the date of this Agreement the Grantee (if not therefore elected,
appointed, or otherwise designated Chief Executive Officer of the Company) shall
fail to be elected, appointed, or otherwise designated Chief Executive Officer
of the Company; and (iii) within the period of 30 days from and after the 30-day
period specified in clause (ii), either the Company or the Grantee shall have
given the other party written notice of such party's intention that the
employment of the Grantee by the Company shall terminate.
Notwithstanding the foregoing, a Special Severance of the Grantee will not
be deemed to have occurred if, at any time prior to the date which is 30 days
following the first anniversary of this Agreement, the Grantee's employment
shall have been terminated for Cause. For purposes of this Agreement, "Cause"
shall mean:
(i) the willful and continued failure of the Grantee to perform
substantially the Grantee's duties with the Company or one of its Affiliates
(other than any such failure resulting from incapacity due to physical or mental
illness), after a written demand for substantial performance is delivered to the
Grantee by the Board or the Chief Executive Officer of the Company which
specifically identifies the manner in which the Board or Chief Executive Officer
believes that the Grantee has not substantially performed the Grantee's duties,
or
(ii) the willful engaging by the Grantee in illegal conduct or gross
misconduct which is materially and demonstrably injurious to the Company.
For purposes of this provision, no act or failure to act, on the part of
the Grantee, shall be considered "willful" unless it is done, or omitted to be
done, by the Grantee in bad faith or without reasonable belief that the
Grantee's action or omission was in the best interests of the Company. Any act,
or failure to act, based upon authority given pursuant to a resolution duly
adopted by the Board upon the instructions of the Chief Executive Officer or a
senior officer of the Company or based upon the advice of counsel for the
Company shall be conclusively presumed to be done, or omitted to be done, by the
Grantee in good faith and in the best interests of the Company. The cessation of
employment of the Grantee shall not be deemed to be for Cause unless and until
there shall have been delivered to the Grantee 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 such
purpose (after reasonable notice is provided to the Grantee and the Grantee is
given an opportunity, together with counsel, to be heard before the Board),
finding that, in the good faith opinion of the Board, the Grantee is guilty of
the conduct described in subparagraph (i) or (ii) above, and specifying the
particulars thereof in detail.
-3-
<PAGE>
In the case of the Termination of Employment of the Grantee as a result of
a Special Severance but not in the case of the occurrence of the events
specified in clauses (a), (b), and (c) above, the Company may, in lieu of
issuing unlegended shares for the Restricted Stock which has vested, pay to the
Grantee cash in the amount of the Fair Market Value of such Restricted Stock on
the date on which it vests, which shall be the Grantee's final day as a
full-time employee of the Company.
In the case of a Special Severance effected by action of the Company, it
shall be a condition of the vesting of Restricted Stock that the Grantee have
executed and delivered to the Company a waiver in form and substance
satisfactory to the Company of all claims against the Company or any subsidiary
or Affiliate which the Grantee may have as a result of the termination of the
Grantee's employment by the Company.
8. If and when the Restriction Period expires as to any shares of
Restricted Stock awarded hereunder without a prior forfeiture of the Restricted
Stock, or if and when Restricted Stock vests pursuant to the provisions of
Section 7 hereof, unlegended certificates or other evidence of ownership of such
shares shall be delivered to the Grantee and the legended certificates which
previously represented such shares shall be delivered to the Company's Transfer
Agent for cancellation.
9. Except as otherwise provided in this Agreement or the 1999 Plan, the
Grantee shall have all rights of a stockholder with respect to the shares of
Restricted Stock awarded hereunder, including the right to vote such shares and
the right to receive any cash dividends which may be declared on the Company's
Common Stock. Dividends payable in Common Stock shall be paid in the form of
additional shares of Restricted Stock and shall be held subject to the same
Restriction Period and vesting provisions applicable to the shares of Restricted
Stock on which such dividends were paid.
10. No later than the date as of which an amount first becomes includable
in the gross income of the Grantee for federal income tax purposes with respect
to any Restricted Stock granted by this Agreement, the Grantee shall pay to the
Company, or make arrangements satisfactory to the Company regarding the payment
of, any federal, state, local, or foreign taxes of any kind required by law to
be withheld by the Company with respect to such amount. Unless otherwise
determined by the Committee, withholding obligations may be settled with Stock,
including shares of the Restricted Stock that gives rise to the withholding
requirement. The obligations of the Company under the 1999 Plan shall be
conditional on such payment or arrangements, and the Company, and its
subsidiaries and its Affiliates shall, to the extent permitted by law, have the
right to deduct any such taxes from any payment otherwise due to the Grantee.
11. The grant of Restricted Stock to the Grantee in any year shall give the
Grantee neither any right to similar grants in future years nor any right to be
retained in the employ of the Company or its subsidiaries or Affiliates, such
employment being terminable to the same extent as if the 1999 Plan and this
Agreement were not in effect. The right and power of the Company, its
subsidiaries and Affiliates to dismiss or discharge the Grantee is specifically
and unqualifiedly unimpaired by this Agreement.
12. Each notice relating to this Agreement shall be in writing and
delivered in person or by mail to the Company at its office, 21900 Burbank
Boulevard, Woodland
-4-
<PAGE>
Hills, California 91367-7418, to the attention of the Company's Secretary or at
such other address as the Company may specify in writing to the Grantee by a
notice delivered in accordance with this paragraph. All notices to the Grantee
shall be delivered to the Grantee at the Grantee's address specified below or at
such other address as the Grantee may specify in writing to the Secretary of the
Company by a notice delivered in accordance with this paragraph.
13. This Agreement, including the provisions of the 1999 Plan incorporated
by reference herein, comprises the whole Agreement between the parties hereto
with respect to the subject matter hereof, and shall be governed by and
construed in accordance with the laws of the State of Delaware, without
reference to principles of conflicts of law. The Committee may amend the terms
of this Agreement at any time, prospectively or retroactively, but no such
amendment shall impair the rights of the Grantee without the Grantee's written
consent, except such an amendment made to cause this Agreement and the
Restricted Stock granted hereby to qualify for the exemption provided by Rule
16b-3. This Agreement shall become effective when it has been executed by the
Company and the Grantee.
14. This Agreement shall inure to the benefit of and be binding upon each
successor of the Company and, to the extent specifically provided herein and in
the 1999 Plan, shall inure to the benefit of and shall be binding upon the
Grantee's heirs, legal representatives, and successors.
IN WITNESS WHEREOF, this Agreement is executed by the Grantee and by the
Company through its duly authorized officer or officers as of the day and year
first above written.
UNOVA, INC.
By
--------------------------------
GRANTEE:
----------------------------------
Signature
----------------------------------
Address
----------------------------------
----------------------------------
Social Security Number
-5-
<PAGE>
EXHIBIT A
STOCK POWER
FOR VALUE RECEIVED the undersigned does hereby sell, assign, and transfer unto
______________________, in accordance with that certain Restricted Stock
Agreement (the "Agreement") dated as of the date hereof, between the undersigned
and UNOVA, Inc., ______ shares of UNOVA, Inc. Common Stock awarded to the
undersigned under the Agreement and the UNOVA, Inc. 1999 Stock Incentive Plan
subject to the restrictions of the Agreement and does hereby irrevocably
constitute and appoint the Secretary of UNOVA, Inc. as Attorney to transfer the
said stock on the books of UNOVA, Inc., with full power of substitution in the
premises.
DATED: August 2, 1999
-----------------------------
Larry D. Brady
-6-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 3,237
<SECURITIES> 0
<RECEIVABLES> 630,595
<ALLOWANCES> 0
<INVENTORY> 317,846
<CURRENT-ASSETS> 1,124,174
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0
0
<COMMON> 553
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<CGS> 1,058,809
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</TABLE>
