<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-K
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended November 30, 1999
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 001-01416
SAMES CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE
(State of incorporation)
36-0808480
(I.R.S. Employer Identification No.)
9201 WEST BELMONT AVENUE
FRANKLIN PARK, ILLINOIS
(Address of principal executive offices)
60131
(Zip Code)
(847) 737-5970
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<CAPTION>
TITLE OF EACH CLASS NAME OF EXCHANGE ON WHICH REGISTERED
- ---------------------- ------------------------------------
<S> <C>
CAPITAL STOCK, $1.00 AMERICAN STOCK EXCHANGE
PAR VALUE PER SHARE CHICAGO STOCK EXCHANGE
CAPITAL STOCK AMERICAN STOCK EXCHANGE
PURCHASE RIGHTS CHICAGO STOCK EXCHANGE
</TABLE>
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 the 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. / /
The aggregate market value of the voting stock of the Registrant held by
non-affiliates was approximately $46,365,744 as of February 25, 2000 (based on
the closing sale price as reported by the American Stock Exchange as of such
date).
As of February 25, 1999, the Registrant had outstanding 2,931,735 shares of
Capital Stock.
DOCUMENTS INCORPORATED BY REFERENCE
<TABLE>
<S> <C>
Selected portions of the definitive Proxy Incorporated into Part III
Statement for the Registrant's Annual Meeting
of Stockholders to be held on April 25, 2000.
</TABLE>
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<PAGE>
PART I
ITEM 1. BUSINESS
GENERAL
Sames Corporation, a Delaware corporation incorporated on January 2, 1929 as
a successor to a business founded in 1890, and its subsidiaries (hereinafter
referred to collectively as the "Company" or "Sames") are engaged in the
manufacture and sale of electrostatic spray finishing and coating equipment. The
Company sells its products primarily to the automotive industry and general
industrial finishing and automotive refinishing markets.
The Company serves three primary geographic markets, North and South
America, Europe and the Pacific Rim, and presently generates over 72% of its
sales outside the United States. Please see the consolidated financial
statements and notes thereto of the Company included herewith for information
regarding the consolidated results of continuing operations of the Company
attributable to certain countries in each of the Company's geographic markets.
The Company divides its electrostatic products into two general groups:
general industrial products and automotive paint systems. General industrial
products consist of electrostatic spray guns and accessories. Automotive
products include automatic electrostatic paint application machines as well as
paint circulation equipment serving the global automotive market.
The standard products, or non-electrostatic, business (the "Binks
Business"), which included assets of the Company and its subsidiaries, was sold
to Illinois Tool Works Inc. ("ITW") on September 30, 1998. As a result of the
sale and transfer of assets, the remaining business of the Company focuses
solely on electrostatic products for automotive and general industry
applications.
PRODUCTS
Sames provides a complete line of liquid electrostatic and powder
application technology for the general industry and automotive markets on a
global basis. In addition, complimentary equipment to the application equipment
technology allows for providing complete paint and powder coating systems. The
complimentary equipment includes delivery and circulation systems, overhead and
side machines, reciprocators, powder spray booths and recovery systems and
control packages.
Electrostatic technology is the process of generating an electrical charge
that causes paint or powder particles to be attracted to a grounded surface. Due
to the electrical attraction of a charged particle to a grounded product, the
transfer efficiency of the coating material can be greatly improved. The
electrical charge can be generated by a power source or through frictional
contact known as tribocharging. The tribocharging process is limited to powder
coating materials. With over 50 years of experience and expertise in
electrostatic technology, Sames is recognized as a world leader in the
development of liquid and powder application equipment.
Sames liquid electrostatic application equipment ranges from manual
application spray guns to robot mounted spray guns and rotary atomizers to
sophisticated rotary atomizers developed specifically for the automotive
industry.
For example, the newly developed Accuspeed System designed and manufactured
by Sames offers automotive customers a technology that enables them to
robotically spray waterborne materials at very high line speeds, and the system
allows a spraying robot to change application devices very quickly. This
technology is already well known and being used in many automotive body shops
where robots change tools with different operations. This innovation allows for
the design of very flexible automatic paint processes.
1
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The main benefits of this technology are:
- Higher transfer efficiency than with conventional external change systems
- Very low paint waste during color change
- Easier maintenance
- Ability to quickly change applicators and atomizing devices
- Quick return on investment due to paint savings
Sames also continues to develop products for the growing general industry
market. Building on its success with the MIV manual liquid electrostatic spray
gun, Sames expects to shortly introduce the PIV automatic liquid electrostatic
spray gun, which is modeled after the MIV. In addition, Sames will also
introduce a general industry version of the successful PPH 607 used in the
automotive market. The PPH 308 will feature a magnetic turbine and improved
application performance.
Sames was also the first to develop electrostatic application technology for
powder coatings. The technology has evolved within Sames to a complete range of
applicators, including electrostatic and tribocharging technology. The
application of the powder coatings can be accomplished through a manual or
automatic spray gun, powder bell or disk.
The major remaining challenge for powder coating installations is to reduce
the length of time for a color change. Sames developed the PVV EasyColor powder
system that allows for a color change in 10 minutes, including the automatic
cleaning of the application equipment. The PVV powder booth is constructed of a
plastic and honeycomb composite to minimize powder accumulation on the booth
walls. Introduced during late 1999, the PVV is already selling at a rate of 12
systems per year.
As Sames looks to the future, product development will continue to focus on
the demands and needs of the marketplace. This includes matching the products
developed by Sames with the new developments of industry partners. As the
marketplace looks toward new coating materials, substrates, and finishing
processes, Sames will continue to be a technology leader. As part of its
strategy to penetrate the Japanese automotive market, the Company has developed
a breakthrough product that applies waterborne and solvent-borne paint on car
bodies with a significant reduction in paint waste as colors are changed. This
product is slated for testing in the near future with a global manufacturer.
RESEARCH AND DEVELOPMENT
The Company is continually engaged in experimental work on, including
research and development of, various coating and application systems and
technology. The Company spent approximately $3.7 million, $3.8 million and
$3.8 million during fiscal year 1999, 1998, and 1997, respectively, on
activities relating to research and development of products and services, none
of which was customer sponsored.
DISTRIBUTION AND MARKETING
The Company believes that it is a leading, worldwide supplier of automotive
and general industry products through a combination of direct sales, agents and
distributors. Its automotive products are sold directly to car manufacturers and
first tier suppliers, as well as to integrators, which provide "turnkey" paint
shop projects to the manufacturer. Its automotive products designed for robotic
application are often sold directly to the robot manufacturer. Sames North
America, Inc. is the Company's selling and servicing presence in North America;
similar functions are performed by Sames Scandinavia AB, Sames Japan and Sames,
S.A., in Grenoble, France. The Company also maintains a direct selling presence
in England, Germany and China.
2
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The Company sells its general industry products both directly and through
agents and distributors in over 40 countries throughout the world. The Company
currently is in negotiations to expand its distribution network in the Americas,
as well as in Japan. The Company has entered into a strategic alliance with
JBI, L.P., a leading manufacturer of paint spray booths in North America based
in Osseo, Wisconsin, which will both manufacture the Company's powder booths and
support the marketing of general industry products to a distributor network. The
Company is in continuing discussions with a leading distributor of powder spray
products for the general industry market in Japan.
COMPETITION
The Company believes that it is one of the largest suppliers of
electrostatic automotive paint applications systems and products (both liquid
and powder) and a significant presence in the general industry market for these
products as well. There are many other manufacturers of electrostatic
applications equipment that also engage in other lines of business, principally
Graco Incorporated, ITW, Nordson Corporation, Kremlin and Durr Behr.
EMPLOYEES
As of November 30, 1999, the Company employed a total of approximately 393
persons in the United States, Sweden, France and Japan.
CONCENTRATION
The amount of business conducted with particular customers varies
significantly from year to year. Sales to the automotive industry as a whole
(which includes several different manufacturers as well as different divisions
or facilities within some manufacturers) generally have accounted for between
70% and 80% of the Company's consolidated net sales in past years. No single
customer accounts for more than 10% of the Company's net sales.
BACKLOG OF ORDERS
The Company's backlog of orders as of November 30, 1999 was approximately
$23.7 million as compared to approximately $18.8 million as of November 30,
1998. The backlog at Sames S.A., the Company's primary manufacturing and
assembly subsidiary, had almost doubled to $21.4 million as of November 30, 1999
from $11.6 million as of November 30, 1998. All of the orders in backlog as of
November 30, 1999 are expected to be filled within fiscal 2000. The volume of
backlog at any given time is subject to significant variations depending upon
the number of orders received and the degree of completion of pending industrial
equipment products which, by their nature, are completed over a period of time
pursuant to sizable contracts. The difference in backlog between November 30,
1999 and November 30, 1998 is attributable to these factors. The business of the
Company is not materially affected by seasonal factors, and the Company's
backlog is not generally a result of such factors.
MATERIALS
The Company assembles essentially all of its products, with parts that are
manufactured by suppliers primarily located in Europe and North America. The
majority of the Company's products are component finished parts. The materials
and components purchased by the Company are readily available from a number of
suppliers in both areas.
Under a supply agreement with ITW, the Company has the right to purchase,
until September 30, 2000, at preferential prices, certain standard products
formerly manufactured by the Binks Business, which was sold to ITW.
3
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INTELLECTUAL PROPERTY
The Company owns a number of patents in the United States and other
countries pertaining to electrostatic spray equipment, as well as presently
pending applications for patents in the United States and other countries. The
Company does not consider its business to be materially dependent on any single
patent or group of patents, or any pending applications for patents. The Company
has registered its "Sames" trademark in the United States. The "Sames" trademark
is registered in numerous other countries as are ten other Sames product
trademarks. The Company also has a worldwide, non-exclusive license to use
certain patents owned by Behr Systems, Inc.
ENVIRONMENTAL
Federal, state, local and international provisions which have been enacted
or adopted regulating the discharge of materials into the environment, or
otherwise relating to the protection of the environment, have not materially
affected the Company's capital expenditures, earnings or competitive position.
ITEM 2. PROPERTIES
The Company's corporate headquarters are located in a leased facility
comprising 5,000 square feet in Franklin Park, Illinois. The Company also leases
its primary North American operational center, located in Livonia, Michigan.
This 45,000 square foot facility is a combined office, demonstration and
distribution center.
The Company's non-U.S. subsidiaries own and occupy manufacturing and office
facilities aggregating approximately 98,000 square feet, and lease property for
such purposes aggregating approximately 15,000 square feet.
The Company considers its manufacturing and physical properties to be in
good condition.
ITEM 3. LEGAL PROCEEDINGS
As of September 23, 1999, the Company reached agreement with ITW to resolve
its outstanding dispute relating to the purchase price adjustment associated
with the sale to ITW, effective September 30, 1998, of certain assets,
operations and subsidiaries that included specific standard or non-electrostatic
products comprising the Binks Business. Under the terms of the settlement, the
Company agreed to pay ITW approximately $6.1 million in sixteen equal quarterly
installments, without interest, of $385,458 each, which commenced on
September 30, 1999 and ends June 30, 2003.
As part of the original sale agreement with ITW, the Company assigned and
transferred to ITW all of its accounts receivable related to the Binks Business.
The sale agreement also provided for indemnification of ITW with respect to such
accounts receivable not collected within 180 days of the date of the agreement.
The Company and ITW have resolved certain disputes which arose regarding these
receivables. As a result, the Company paid approximately $1.0 million to ITW on
September 28, 1999, and ITW transferred back to the Company accounts receivable
in the aggregate amount of approximately $3.7 million. As of November 30, 1999,
the Company had collected $560,000 of these accounts receivable. It is
anticipated that any future collections below or above the paid amount will be
either charged or credited to loss from discontinued operations.
In October 1997, Robert Hashima, the former branch manager of Binks Japan
Limited, filed a lawsuit against the Company, claiming that he is entitled to
receive 145 million yen (approximately US$1.2 million) plus interest under his
retirement policy. The Company is responding vigorously to Mr. Hashima's claim
and in June 1998, the Company filed a counterclaim for damages in the amount of
172 million yen (approximately US$1.4 million) for various wrongdoings on the
part of Mr. Hashima. The case is pending in Tokyo, Japan.
4
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On February 24, 1997, Chester Baranowski, the former President of Binks
Canada, brought suit against the Company seeking US $4.55 million in damages
claiming wrongful dismissal, breach of contract and non-payment of certain
salary and employee benefits. The Company has denied all substantive allegations
and filed a counterclaim against Baranowski for breach of fiduciary duty and
conspiracy with Burke B. Roche to injure the Company on November 28, 1997. The
case went to trial in the Superior Court of Justice of Ontario at Toronto,
Canada and reasons for judgment were issued January 12, 2000. Both parties have
filed notices of appeal. After consulting with counsel, the Company has
determined that it is not possible at this time to estimate the amount of
damages, if any, that may ultimately be incurred.
On May 28, 1999, Burke B. Roche, former Chairman and CEO of the Company,
brought suit against the Company seeking a judgment in the amount of all
payments alleged to be due him under a retirement contract, presently
approximately $277,500, and that the court direct the Company to make remaining
installment payments allegedly due. Mr. Roche claims that payments of
approximately $18,500 per month are due for at least 76 more months or until
June 2006, and payments in this amount are due for an additional 60 months
thereafter, so long as Mr. Roche is living when each such monthly payment is
due. The Company is vigorously defending these claims and has filed a
counterclaim seeking damages in an amount to be determined alleging various
breaches of fiduciary duty by Mr. Roche.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of the Company's fiscal year ended November 30, 1999.
EXECUTIVE OFFICERS OF THE COMPANY
The executive officers of the Company are listed below (1).
ARNOLD H. DRATT, age 55, has been the President, CEO and a director of the
Company since October 1998. Mr. Dratt has served as the president of the
Dratt-Campbell Company, a management consulting firm, since he co-founded it in
1991. In such capacity, Mr. Dratt was a consultant to the Company from January
1998 until September 1998.
TODD A. VAUGHAN, age 41, has been an officer of the Company since April,
1997. Mr. Vaughan has been employed by the Company since 1992 and is presently
Vice President of the Company and General Manager of Sames North America, Inc.
(formerly Sames Electrostatic, Inc.).
G. BRUCE BRYAN, JR., age 44, has been Vice President since 1996. Mr. Bryan
joined the Company in 1993 as Manager of the North American Powder Systems Group
for the General Industrial Market.
RONALD A. KOLTZ, age 50, has been Vice President -- Controller Corporate
Accounting since January 1999. Mr. Koltz was employed by the Company from
October 1972 until September 1998. He served as Controller of the Company from
September 1994 until September 1998. He briefly held the same position at ITW
Binks, which purchased certain assets from the Company, from October 1998 until
January 1, 1999, when he rejoined the Company.
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Notes:
1. All officers' terms expire in 2000.
5
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PART II
ITEM 5. MARKET FOR THE COMPANY'S CAPITAL STOCK AND RELATED STOCKHOLDER MATTERS
The Company's capital stock is traded on the American and Chicago Stock
Exchanges. The Company did not pay dividends on its capital stock during 1998 or
1999. The high and low sales prices for each quarterly period within the two
most recent fiscal years, as reported by the American Stock Exchange with
respect to the capital stock of the Company are as follows:
<TABLE>
<CAPTION>
HIGH LOW
QUARTER ENDING -------- --------
<S> <C> <C>
February 28, 1998.................................. 48 3/4 27 7/8
May 31, 1998....................................... 50 41 1/4
August 31, 1998.................................... 44 24 3/8
November 30, 1998.................................. 25 5/8 11 1/4
February 28, 1999.................................. 18 7/8 12 7/8
May 31, 1999....................................... 19 15
August 31, 1999.................................... 24 1/4 16 3/4
November 30, 1999.................................. 22 3/8 14 1/2
</TABLE>
On February 25, 2000, the last reported sales price of the Company's capital
stock as reported on the American Stock Exchange was $16.00 per share. As of
February 25, 2000, there were approximately 770 holders of record of the
Company's capital stock, which is the only class of equity securities of the
Company outstanding. Harris Trust and Savings Bank, Chicago, Illinois, is the
transfer agent and registrar of the Company's capital stock.
6
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ITEM 6. SELECTED FINANCIAL DATA
FIVE YEARS ENDED NOVEMBER 30, 1999 -- CONTINUING OPERATIONS
(Not covered by Independent Auditors' Report. In thousands, except per share
amounts.)
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net sales.................................. $92,959 122,370 97,297 140,530 110,275
Cost of goods sold......................... 57,345 83,719 61,029 95,641 72,960
Selling, general and administrative
expenses................................. 27,298 29,578 28,916 29,968 27,695
Research and development costs............. 3,686 3,760 3,793 2,978 2,558
Litigation settlement costs (a)............ -- 10, 675 -- -- --
------- -------- -------- -------- --------
Operating income (loss).................... 4,630 (5,362) 3,559 11,943 7,062
Interest expense........................... 863 759 783 1,090 899
Other (income) expense..................... (848) (299) (1,147) (9) (179)
------- -------- -------- -------- --------
Income (loss) before income taxes.......... 4,615 (5,822) 3,923 10,862 6,342
Income tax expense (benefit)............... 1,475 (2,564) 1,744 4,563 2,644
------- -------- -------- -------- --------
Income (loss)--continuing operations....... $ 3,140 (3,258) 2,179 6,299 3,698
======= ======== ======== ======== ========
Income (loss) per diluted share--continuing
operations............................... $ 1.05 (1.10) .70 2.04 1.20
======= ======== ======== ======== ========
Cash dividends per share................... $ -- -- .30 .40 .50
======= ======== ======== ======== ========
Average number of shares--diluted.......... 2,980 2,965 3,102 3,092 3,089
======= ======== ======== ======== ========
Total assets............................... $77,116 80,964 94,005 183,806 194,012
======= ======== ======== ======== ========
</TABLE>
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(a) During fiscal 1998, the Company recorded costs and expenses related to the
settlement of patent infringement litigation, which amounted to $10.7
million ($6.2 million, net of tax benefits).
7
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
1998 SALE OF BUSINESS
On August 31, 1998, the Company announced it had signed a definitive
agreement with Illinois Tool Works, Inc. ("ITW") to sell certain of the
Company's domestic divisions, foreign subsidiaries, and standard product lines.
On September 30, 1998, the Company completed the sale transaction.
Under the terms of the sale, ITW purchased all assets related to the
manufacture and distribution of Binks standard products in the U.S., including a
leased manufacturing facility in Longmont, Colorado; the Poly-Craft Systems
division in Cottage Grove, Oregon; the research and development facility in
Boulder, Colorado; and certain domestic branches and warehouses. International
operations included in the sale were businesses in the U.K., Belgium, Germany,
Australia and a portion of the Canadian operation. All employees of the acquired
businesses became employees of ITW upon closing of the transaction (the "Binks
Business"). As part of the agreement, ITW assumed certain liabilities of the
acquired portion of the businesses. The above operations were classified as
discontinued operations in the Company's consolidated financial statements.
The Company recorded a net gain on the sale of $7.7 million. No income tax
provision was recorded because operating losses of the discontinued operations
offset the taxable gain. For purposes of determining the gain on the sale and
the results of discontinued operations, the Company had estimated the amount of
the post-closing adjustment required under the sale agreement.
1999 ITW SETTLEMENT AGREEMENT
On September 23, 1999, the Company reached agreement with ITW to resolve an
outstanding dispute relating to the purchase price adjustment associated with
the sale. Under terms of the settlement, the Company agreed to pay ITW
approximately $6.1 million in sixteen quarterly installments. The initial
payment was made on September 30, 1999 in the amount of $385,458, and the final
payment will be made on June 30, 2003. As a result of the agreement, the Company
recorded a charge of $1.2 million to discontinued operations in the third
quarter ended August 31, 1999, after discounting the settlement and considering
the pre-existing accrual. As part of the initial sale agreement with ITW, the
Company assigned and transferred to ITW all of the accounts receivable related
to the Binks Business. The sale agreement required the Company to repurchase
such accounts receivable, which were not collected within 180 days. On
September 23, 1999, the Company agreed to repurchase certain receivables for
approximately $1.0 million, which was paid on September 28, 1999. As of
November 30, 1999, the Company had collected $560,000 of such accounts
receivable. It is anticipated that any future collections below or above the
paid amount will be either charged to or credited to loss from discontinued
operations.
COMPARISON OF RESULTS OF OPERATIONS FOR THE YEAR ENDED NOVEMBER 30, 1999 WITH
THE YEAR ENDED NOVEMBER 30, 1998
NET SALES. Net sales for the year ended November 30, 1999 of $93 million
decreased $29 million from $122 million for the year ended November 30, 1998.
Approximately 40% of net sales were recorded on the basis of the estimated
percentage of completion of individual contracts determined under the
cost-to-cost method. During 1999, the sales mix of Sames S.A. has been more
heavily weighted toward lower volume, higher margin standard equipment and spare
part sales. The sales volume decline, relative to the prior year, was
anticipated as the backlog and stages of completion of large automotive
installations resulted in unusually strong revenue recognition throughout 1998.
The remaining sales decline was attributable to lower sales levels in the
Company's other foreign locations and by a decrease in the value of the French
franc against the U.S. dollar.
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GROSS PROFIT. Gross profit for the year ended November 30, 1999 of
$35.6 million decreased 8% from $38.7 million for 1998. Gross profit was 38.3%
and 31.6% of net sales for 1999 and 1998, respectively. The increase in 1999
over 1998 was due primarily to the higher margin sales in standard and spare
part sales and the impact of the Company's cost control programs and favorable
sales mix as experienced mainly at Sames S.A.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
("SG&A") expense decreased to $27.3 million for the year ended November 30, 1999
compared to $29.6 million in 1998 and represented 29.4% and 24.2% of sales,
respectively. The higher percentage in 1999 reflects primarily selling and
promotional activities as the Company expanded its sales distribution network.
General and administrative expenses declined by approximately 14%. In the second
quarter and fourth quarter of 1999, the Company recorded charges of $.4 million
and $.5 million, respectively, for severance costs. Excluding these charges, the
Company's 1999 expenses would have decreased by an additional 1%. The Company
has continued to emphasize cost controls to achieve higher profitability levels
and expects reduced expenses in proportion to revenue in future years.
RESEARCH AND DEVELOPMENT. Research and development ("R&D") expense for the
year ended November 30, 1999 was $3.7 million compared to $3.8 million in 1998
and represented 4% and 3% of sales, respectively, in each year. The expenses
were incurred solely at Sames S.A. and reflect the effort on the Company's part
to continually experiment and improve on various paint and powder coating
systems.
INTEREST EXPENSE. Interest expense was $.9 million for the year ended
November 30, 1999 compared to $.8 million for the comparable 1998 period.
Interest expense increased during the period due to increased borrowing levels.
OTHER INCOME, NET. Other income, net includes foreign currency exchange
gains and losses, interest income, gains on sales of fixed assets, and
miscellaneous income and expense. Other income was $.9 million in fiscal 1999
versus $.3 million in fiscal 1998. Most of the increase in other income was
attributable to foreign exchange gains recorded in 1999 for affiliated sales
transactions billed in French francs and miscellaneous income recorded by Sames
S.A.
INCOME TAXES. Income tax expense was $1.5 million on pretax income of
$4.6 million for the fiscal year ended November 30, 1999, compared to an income
tax benefit of $2.6 million on a pretax loss of $5.8 million in fiscal 1998.
Most of the expense was attributable to taxable income in Sames S.A.
As a result of the factors discussed above, the Company's fiscal 1999 income
from continuing operations was $3.1 million ($1.05 per diluted share), compared
to a loss from continuing operations of $3.3 million ($1.10 per diluted share)
in fiscal 1998.
COMPARISON OF RESULTS OF CONTINUING OPERATIONS FOR THE YEAR ENDED NOVEMBER 30,
1998 WITH THE YEAR ENDED NOVEMBER 30, 1997
NET SALES. The Company had net sales of $122.4 million in fiscal 1998, an
increase of $25.1 million, or 26%, from net sales of $97.3 million reported for
fiscal 1997. Sales growth would have been $28.1 million, or 29%, if prevailing
fiscal 1997 currency exchange rates had remained in effect during fiscal 1998.
Contributing to the growth in sales was a significant increase in the sale of
large automotive installations during the year by Sames S.A. and Sames North
America.
GROSS PROFIT. Gross profit increased to $38.7 million, up $2.4 million or
7%, compared to $36.3 million reported in fiscal 1997. This included an
unfavorable impact on gross profit of nearly $1.0 million related to changes in
currency translation rates. The overall increases in gross profit were primarily
attributable to sales growth. In fiscal 1998, the gross profit margin was 32%
compared to 37% attained in fiscal 1997. The decline in gross profit margin was
reflective of the increased contribution of higher
9
<PAGE>
volume, lower margin automotive installation contract sales to the product sales
mix in fiscal 1998 as compared to fiscal 1997.
SELLING, GENERAL AND ADMINISTRATIVE. For fiscal 1998, SG&A expense was
$29.6 million, an increase of $.7 million or 2%, versus $28.9 million for fiscal
1997. The relatively small increase in selling, general and administrative
expenses is indicative of management's efforts to improve operating margins of
the Company.
RESEARCH AND DEVELOPMENT. R&D cost, primarily associated with Sames S.A.,
was $3.8 million in both fiscal 1998 and fiscal 1997.
PATENT LITIGATION SETTLEMENT COSTS. Patent litigation settlement costs of
$10.7 million ($6.2 million, net of tax benefits) were incurred in fiscal 1998
to resolve patent infringement litigation.
INTEREST EXPENSE. Interest expense was $.8 million in both fiscal 1998 and
fiscal 1997. This reflects similar average levels of borrowing and interest
rates during the fiscal year.
OTHER INCOME, NET. Other income, net includes interest income, foreign
currency exchange gains and losses, gains on sales of fixed assets, and
miscellaneous income and expense. Other income was $.3 million in fiscal 1998
versus $1.1 million in fiscal 1997. A majority of the decline in other income
was related to differences in foreign currency exchange gains and miscellaneous
income recorded by Sames S.A.
INCOME TAXES. Income tax benefit was $2.6 million on a pretax loss of
$5.8 million in fiscal 1998, compared to income tax expense of $1.7 million on
pretax income of $3.9 million in fiscal 1997.
As a result of the factors discussed above, the Company's fiscal 1998 loss
from continuing operations was $3.3 million ($1.10 per diluted share), compared
to income from continuing operations of $2.2 million ($.70 per diluted share) in
fiscal 1997.
LIQUIDITY AND CAPITAL RESOURCES
Cash flows from operations are the primary source of the Company's
liquidity. Short-term funds are also provided for current operations through
lines of credit and overdraft facilities. In October 1998, the Company entered
into a $10 million, prime rate, multi-year revolving line of credit agreement
with the CIT Group/Business Credit, Inc. to support the Company's operations and
growth in the North American automotive and general industry markets. Together
with other credit facilities, the Company has aggregate lines of credit and
overdraft facilities of $17.7 million. At November 30, 1999, borrowing under the
facilities were $7.0 million; unused lines of credit and overdraft facilities
were $10.7 million.
For the years ended November 30, 1999 and November 30, 1998, cash provided
by operations was $2.1 million and cash used in operations was $2.5 million,
respectively. Cash provided by operations in 1999 primarily represents cash
generated from working capital changes plus non-cash charges for depreciation
and amortization and partially offset by changes in deferred compensation. Cash
used by operations in 1998 primarily reflects the after tax costs of
$6.2 million related to the patent infringement litigation that was settled
during the year.
During the years ended November 30, 1999 and 1998, the Company invested
$1.4 million and $.5 million, respectively, in equipment and facilities.
During 1999, the Company obtained additional sources of funds of
$6.0 million as a result of $6.2 million of long-term and short-term borrowings,
less principal payments on long-term debt of $.2 million.
On September 15, 1999 the Company announced a share repurchase program
authorizing the Company to repurchase up to 150,000 shares of its outstanding
Common Stock. Through November 30, 1999, the Company repurchased a total of
18,200 shares at a cost of $.3 million.
10
<PAGE>
In the twelve months ended November 30, 1999, cash of $5.5 million was used
by discontinued operations, including $2.4 million disbursed in February 1999
under a settlement agreement with a real estate developer relating to litigation
associated with a lease cancellation for what was to be the Company's corporate
headquarters facility in Vernon Hills, IL.
Cash flows related to financing activities in fiscal 1998 include the
payment of $66.5 million of debt using the proceeds from the ITW transaction.
Such debt had included $59.0 million outstanding at November 30, 1997 and
additional $6.5 million of debt that had been borrowed in fiscal 1998, during
the period prior to the completion of the ITW transaction.
IMPACT OF NEW ACCOUNTING STANDARDS
In June 1999, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 137, "Accounting for
Derivative Instruments and Hedging Activities -- Deferral of the Effective Date
of FASB Statement No. 133 -- an amendment of FASB Statement No. 133". SFAS 133
establishes accounting and reporting standards requiring that every derivative
instrument (including certain derivative instruments embedded in other
contracts) be recorded in the balance sheet as either an asset or liability
measured at its fair value. SFAS 133 requires that changes in the derivative's
fair value be recognized currently in earnings unless specific hedge accounting
criteria are met. Special accounting for qualifying hedges allows a derivative's
gains and losses to offset related results on the hedged item in the income
statement, and requires that a company must formally document, designate, and
assess the effectiveness of transactions that receive hedge accounting. The
Company is required to comply with SFAS No. 133 in fiscal 2001. The Company
generally does not use derivative financial instruments to manage currency
exchange rate risks and no such instruments were outstanding as of November 30,
1999.
YEAR 2000 COMPLIANCE
The Company developed a phased Year 2000 readiness plan for the current
versions of its products. The plan included development of corporate awareness,
assessment, implementation, validation testing, and contingency planning. The
Company responded to customer concerns about prior versions of its products on a
case-by-case basis.
The Company completed all phases of the plan with respect to the current
versions of all its products. All products (software and hardware, including
micro-processors and micro-controllers) manufactured by the Company have been
verified and modified. All products sold today comply with Year 2000
requirements.
The transition to the year 2000 was uneventful for the Company. There were
no disruptions from external forces such as utility or transportation companies
or any other related service interruptions. Vendors that are critical to the
Company's supply chain experienced no interruptions in their respective
businesses and consequently, the Company's results of operations, liquidity and
financial condition were unaffected.
The Company's internal systems include both information technology ("IT")
and non-IT systems. Outside consultants were contracted to provide assistance
and assurances in assessing the Company's IT and non-IT systems. The Company
spent a total of approximately $250,000 in connection with Year 2000 compliance
projects. These funds are considered immaterial to the Company and were funded
from operating cash flows. The Company does not expect any future costs in
connection with the Year 2000 transition.
NEW FISCAL YEAR
On January 31, 2000, the Board of Directors of the Company approved the
change in the Company's fiscal year from November 30 to December 31. The Company
intends to include information covering the transition period from December 1,
1999 to December 31, 1999 in its first quarterly report for its new fiscal year
on Form 10-Q for the quarter ending March 31, 2000 and for its new fiscal year
on Form 10-K for the year ending December 31, 2000.
11
<PAGE>
CONVERSION TO THE EURO
On January 1, 1999, eleven European Union member states adopted the euro as
their common national currency. From that date until January 1, 2002 (the
transition period), either the euro or a participating country's present
currency will be accepted as legal tender. Beginning on January 1, 2002,
euro-denominated bills and coins will be issued, and by July 1, 2002, only euro
currency will be used.
The Company will evaluate the strategic, financial, legal, and systems
issues related to the various phases of transition. While the Company does not
believe the ultimate costs of conversion will be material to its results of
operations, cash flow, or financial position, efforts will be made to address
customer and business needs on a timely basis and anticipate and prevent any
complications during the transition period. There can be no assurance, however,
that all problems will be foreseen and corrected, or that no material disruption
of the Company's business will occur, nor can the Company anticipate the
competitive implications on its future pricing and marketing strategies. Any
conversion costs realized will be expensed as incurred.
EFFECT OF INFLATION
The Company attempts to minimize the effect of inflation on earnings by
controlling its operating costs and the selling prices of its products and
services. During the past three years, the rate of inflation has not, in the
opinion of management, had a material impact on the Company's results of
operations.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
This report contains certain statements regarding the Company's future plans
and expectations, operating performance, product development and distribution
and strategic alternatives and alliances, constitute "forward-looking
statements" within the meaning of Section 21E of the Securities exchange Act of
1934. Although the Company believes that the expectations reflected in such
forward-looking statements are reasonable, there can be no assurance that such
expectations will prove to be correct. Important factors that could cause actual
results to differ materially from the Company's expectations include, without
limitation, adverse changes in the economy or the overall market generally,
increased competition relating to the Company's products and services both
within the United States and globally, lower than expected sales of the
Company's products and services, the Company's inability to successfully
implement manufacturing and cost-reduction programs, adverse results of the
testing of the Company's products and validation programs or the failure of such
products or programs to gain wide market acceptance, the inability of the
Company to enter into or secure new or anticipated strategic alliances, the
inability of the Company to timely or completely fulfill the orders represented
in its year-end backlog, continuing losses resulting from discontinued
operations relating to the resolution and conclusion of the matters relating to
the sale of the Binks business, fluctuation in sales revenues caused in part by
currency fluctuations and translations, uncertainty relating to economic and
political conditions in the countries and international markets in which the
Company operates and competes, and changes in accounting pinciples, policies and
guidelines. Further information concerning the Company and its business
including additional factors that could materially affect the Company's
financial results, is included in the Company's filings with the Securities and
Exchange Commission.
12
<PAGE>
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
A substantial portion of the Company's non-U.S. transactions is denominated
in French francs. Although Sames, S.A. is not typically subject to significant
foreign exchange transaction gains or losses, its financial statements are
translated into U.S. dollars as part of the Company's consolidated financial
reporting. Fluctuations in the French franc/U.S. dollar exchange rate therefore
will affect the Company's consolidated balance sheets and statements of
operations. At November 30, 1999, the French franc had depreciated by
approximately 14% compared to the prior year-end while the average French
franc/U.S. dollar exchange rate was approximately 3% higher in the twelve months
ended November 30, 1999 compared to the comparable 1998 period. The Company also
has operations in Japan and Sweden, where transactions are denominated in
Japanese yen and Swedish krona.
In the twelve months ended November 30, 1999, the net change in the
cumulative foreign currency translation adjustment, which is a component of
accumulated other comprehensive income, was an unrealized loss of $1 million. An
unrealized foreign currency translation gain of $.3 million was recorded in the
twelve months ended November 30, 1998 and an unrealized foreign currency
translation loss of $3.0 million was recorded in the twelve months ended
November 30, 1997.
FOREIGN CURRENCY TRANSACTIONS AND TRANSLATION OF FINANCIAL STATEMENTS
Foreign currency exchange transactions have not typically resulted in
significant periodic gains or losses, although Sames North America recorded a
gain of approximately $.7 million during the twelve months ended November 30,
1999. The gain was recorded due to the combination of a relatively high
intercompany payable to Sames, S.A., denominated in French francs, and the
depreciation of the French franc, mentioned above, relative to the U.S. dollar
during the period. The Company generally does not use derivative financial
instruments to manage currency exchange risks and no such instruments were
outstanding at November 30, 1999.
QUARTERLY FLUCTUATIONS
The Company has experienced significant quarterly fluctuations in operating
results and anticipates that those fluctuations will continue. The fluctuations
have been caused primarily by periodic changes in the components of the
Company's sale mix. In particular, the Company's sales of large automotive
installations can fluctuate substantially and they generally result in
relatively lower gross profit margins. Sales of standard products and spare
parts typically generate relatively higher gross margins. The Company therefore
believes that quarter-to-quarter comparisons of its results of operations are
not necessarily meaningful and should not be relied upon as indications of
future performance.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See index to Financial Information on page F-1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
13
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
(a) Directors. The information required in response to this item regarding
directors of the Company will be contained in the Company's definitive Proxy
Statement (the "Proxy Statement") for its Annual Meeting of Stockholders to be
held on April 25, 2000 under the caption "Election of Directors" and is
incorporated herein by reference.
(b) Executive Officers of the Company. The information required in response
to this item regarding executive officers of the Company is contained in Part I
of this report and is incorporated herein by reference.
(c) Section 16(a) Compliance. The information concerning compliance with
Section 16(a) of the Exchange Act required under this item is incorporated
herein by reference to the Proxy Statement under the caption "Section 16(a)
Beneficial Ownership Reporting Compliance".
ITEM 11. EXECUTIVE COMPENSATION
The information required in response to this item will be contained in the
Proxy Statement under the captions "Executive Compensation" and "Information
Regarding Directors and Executive Officers" and is incorporated herein by
reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required in response to this item will be contained in the
Proxy Statement under the captions "Election of Directors" and "Voting
Securities" and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required in response to this item will be contained in the
Proxy Statement under the caption "Election of Directors" and is incorporated
herein by reference.
14
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Documents filed as part of this report:
1., 2. Financial Statements and Schedules
See Index to Financial Information on page F-1.
3. Exhibits
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
--------------------- ------------------------------------------------------------
<S> <C>
3.1 Restated Certificate of Incorporation.(1)
3.2 Certificate of Amendment of Restated Certificate of
Incorporation.(2)
3.3 Certificate of Amendment of Restated Certificate of
Incorporation.(16)
3.4 Amended and Restated By-laws, as of October 28, 1998.(12)
4.1 Amended and Restated Rights Agreement, dated as of
February 2, 1990 and amended and restated as of
January 21, 1991, between the Company and Harris Trust and
Savings Bank, as successor rights agent.(4)
4.2 Second Amendment to Rights Agreement dated as of August 28,
1998, by and between the Company and Harris Trust and
Savings Bank.(10)
10.1(a)* Form of Executive Retirement Income Contracts between the
Company and certain key employees.(5)
10.1(b)* Form of Amendment to Executive Retirement Income Contract
for Doran J. Unschuld.(1)
10.2* Forms of Employment Security Agreements between the Company
and certain key employees.(1)
10.3* Form of Insurance Maintenance Agreement between the Company
and each of its directors and officers.(1)
10.4* Sames Corporation Amended and Restated 1996 Stock Option
Plan.(3)
10.5 Form of Bonus Agreements between the Company and certain
executive officers and key employees.(7)
10.6 Settlement Agreement and Mutual Releases dated June 11,
1998, by and among the Company, Continental Partners
Group, Inc. and Schiff, Hardin & Waite.(8)
10.7 Patent License and Settlement Agreement dated as of
July 10, 1998 by and among the Company, Sames, S.A., Sames
Electrostatic, Inc., Behr Systems, Inc. and Durr Systems,
GmbH.(8)
10.8* Consulting Agreement dated as of October 1, 1998 by and
between the Company and The Dratt-Campbell Company.(9)
10.9 Agreement of Purchase and Sale of Assets and Stock dated
August 31, 1998, by and between the Company and Illinois
Tool Works Inc.(10)
10.10 Amendment to Agreement of Purchase and Sale of Assets and
Stock dated as of September 30, 1998, by and between the
Company and Illinois Tool Works Inc.(11)
10.11 Settlement Agreement and Mutual Release dated as of
February 12, 1999 by and between the Company and CWA
Investment Company, L.L.C.(12)
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
--------------------- ------------------------------------------------------------
<S> <C>
10.12 Financing Agreement dated as of October 21, 1998 by and
between The CIT Group/Business Credit, Inc. and Sames
Electrostatic, Inc.(12)
10.13 Guaranty Agreement dated as of October 21, 1998 by and
between The CIT Group/Business Credit, Inc. and the
Company.(12)
10.14 Stock Pledge Agreement dated February 19, 1999 by and
between The CIT Group/Business Credit, Inc. and the
Company.(12)
10.15 Letter Agreement dated February 19, 1999 by and between The
CIT Group/ Business Credit, Inc. and the Company.(12)
10.16 First Amendment to Consulting Agreement dated as of
March 30, 1999 by and between the Company and the
Dratt-Campbell Company.(13)
10.17 Amended and Restated Product Supply Agreement between
Sames, S.A., Sames North America, Inc., the Company and
Fanuc Robotics North America, Inc., dated April 29,
1999.(14)
10.18 First Amendment to Financing Agreement between The CIT
Group/Business Credit, Inc. and Sames Electrostatic, Inc.,
dated May 25, 1999.(14)
10.19 Settlement Agreement, dated September 23, 1999, by and
between Illinois Tool Works Inc. and the Company.(15)
10.20 Assignment of Accounts Receivable, dated as of
September 23, 1999, by and between Illinois Tool
Works Inc. and the Company.(15)
10.21* Sames Employee Stock Purchase Plan.(16)
21.1 List of subsidiaries.(3)
23.1 Consent of KPMG LLP.(3)
27.1 Financial Data Schedule.(3)
</TABLE>
- ------------------------
* Management contract or compensatory plan, contract or arrangement required
to be filed as an exhibit pursuant to Item 14(c) of Form 10-K.
(1) Filed as an exhibit to the Company's Form 10-K for its fiscal year ended
November 30, 1993 and incorporated herein by reference.
(2) Filed as Exhibit 4.1 to the Company's registration statement on Form S-8
(File no. 333-30191) and incorporated herein by reference.
(3) Filed herewith.
(4) Filed as an exhibit to the Company's Form 10-K for its fiscal year ended
November 30, 1993 and incorporated herein by reference.
(5) Filed as an exhibit to the Company's Form 10-K for its fiscal year ended
November 30, 1995 and incorporated herein by reference.
(6) Filed as an exhibit to the Company's registration statement on Form S-8
(File no. 333-30191) and incorporated herein by reference.
(7) Filed as an exhibit to the Company's Form 10-Q for the period ended
February 28, 1998 and incorporated herein by reference.
(8) Filed as an exhibit to the Company's Form 10-Q for the period ended
May 31, 1998 and incorporated herein by reference.
16
<PAGE>
(9) Filed as an exhibit to the Company's Form 10-Q for the period ended
August 31, 1998 and incorporated herein by reference.
(10) Filed as an exhibit to the Company's Current Report on Form 8-K dated
September 2, 1998 and incorporated herein by reference.
(11) Filed as an exhibit to the Company's Current Report on Form 8-K dated
September 30, 1998 and incorporated herein by reference.
(12) Filed as an exhibit to the Company's Form 10-K for its fiscal year ended
November 30, 1998 and incorporated herein by reference.
(13) Filed as an exhibit to the Company's Form 10-Q for the period ended
February 28, 1999 and incorporated herein by reference.
(14) Filed as an exhibit to the Company's Form 10-Q for the period ended
May 31, 1999 and incorporated herein by reference.
(15) Filed as an exhibit to the Company's Form 10-Q for the period ended
August 31, 1999 and incorporated herein by reference.
(16) Filed as an exhibit to the Company's registration statement on Form S-8
(file No. 333-92993) and incorporated herein by reference.
(b) Reports on Form 8-K
None.
17
<PAGE>
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.
<TABLE>
<S> <C> <C>
SAMES CORPORATION
February 28, 2000 By: /s/ ARNOLD H. DRATT
-----------------------------------------
Arnold H. Dratt
PRESIDENT AND CHIEF EXECUTIVE OFFICER
</TABLE>
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ ARNOLD H. DRATT President, Chief Executive February 28, 2000
------------------------------------------- Officer and Director
Arnold H. Dratt
(Principal Executive Officer)
/s/ RONALD A. KOLTZ Vice President--Controller February 28, 2000
------------------------------------------- Corporate Accounting
Ronald A. Koltz
(Principal Financial and Accounting Officer)
/s/ DR. WAYNE F. EDWARDS Chairman of the Board February 28, 2000
-------------------------------------------
Dr. Wayne F. Edwards
/s/ PHILIPPE VUILLERME Director February 28, 2000
-------------------------------------------
Philippe Vuillerme
/s/ CLIFFORD J. VAUGHAN Director February 28, 2000
-------------------------------------------
Clifford J. Vaughan
/s/ LLEWELLYN SCOTT FLAIG Director February 28, 2000
-------------------------------------------
Llewellyn Scott Flaig
</TABLE>
<PAGE>
SAMES CORPORATION
AND CONSOLIDATED SUBSIDIARIES
INDEX TO FINANCIAL INFORMATION
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Independent Auditors' Report................................ F-2
Financial Statements:
Consolidated Balance Sheets, November 30, 1999 and 1998... F-3
Consolidated Statements of Operations, years ended
November 30, 1999, 1998, and 1997....................... F-5
Consolidated Statements of Stockholders' Equity, years
ended November 30, 1999, 1998, and 1997................. F-6
Consolidated Statements of Cash Flows, years ended
November 30, 1999, 1998, and 1997....................... F-7
Notes to Consolidated Financial Statements................ F-8
</TABLE>
Financial Statement Schedules:
All schedules are omitted as the required information is not applicable, or
the information is presented in the accompanying consolidated financial
statements or related notes.
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
and Stockholders
Sames Corporation:
We have audited the accompanying consolidated balance sheets of Sames
Corporation (the Company) and consolidated subsidiaries as of November 30, 1999
and 1998, and the related consolidated statements of operations, stockholders'
equity, and cash flows for each of the years in the three-year period ended
November 30, 1999. These consolidated financial statements are the
responsibility of the Company'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, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Sames
Corporation and consolidated subsidiaries as of November 30, 1999 and 1998, and
the results of their operations and their cash flows for each of the years in
the three-year period ended November 30, 1999 in conformity with generally
accepted accounting principles.
KPMG LLP
Chicago, Illinois
February 16, 2000
F-2
<PAGE>
SAMES CORPORATION
AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
NOVEMBER 30, 1999 AND 1998
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 6,171 5,204
Receivables, net.......................................... 43,171 44,795
Inventories............................................... 15,584 16,465
Income taxes receivable................................... 1,523 2,502
Deferred income taxes..................................... 2,270 2,050
Other current assets...................................... 593 675
Net assets of discontinued operations..................... 1,301 1,569
------- -------
Total current assets................................ 70,613 73,260
------- -------
Other noncurrent assets:
Intangible assets......................................... 2,358 2,442
Deferred income taxes..................................... 138 213
Other assets.............................................. 542 1,892
------- -------
Total other noncurrent assets....................... 3,038 4,547
------- -------
Property, plant, and equipment, at cost:
Land...................................................... 627 682
Buildings................................................. 3,883 4,263
Machinery and equipment................................... 6,428 7,752
------- -------
10,938 12,697
Less accumulated depreciation............................. 6,172 7,971
------- -------
Net property, plant, and equipment.................... 4,766 4,726
------- -------
$78,417 82,533
======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
SAMES CORPORATION
AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
NOVEMBER 30, 1999 AND 1998
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Bank overdrafts and notes payable......................... $ 7,032 6,014
Current maturities of long-term debt...................... 1,511 196
Accounts payable.......................................... 27,881 30,316
Accrued expenses:
Salaries and wages...................................... 4,932 6,617
Taxes, other than income taxes.......................... 521 466
Other................................................... 5,527 9,002
------- -------
Total current liabilities........................... 47,404 52,611
Deferred compensation..................................... 6,426 7,366
Note payable, net of discount of $964..................... 3,500 --
Deferred income taxes..................................... 76 85
Long-term debt, less current maturities................... 2,767 1,238
------- -------
Total liabilities................................... 60,173 61,300
------- -------
Stockholders' equity:
Capital stock, $1 par value. Authorized 12,000,000 shares;
issued
and outstanding 2,966,837 shares in 1999 and 2,964,837
shares in 1998........................................ 2,967 2,965
Additional paid-in-capital................................ 19,677 19,652
Accumulated deficit....................................... (2,069) (300)
Accumulated other comprehensive loss...................... (2,035) (1,084)
------- -------
18,540 21,233
Treasury stock, at cost, 18,200 shares in 1999............ (296) --
------- -------
Total stockholders' equity.......................... 18,244 21,233
------- -------
$78,417 82,533
======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
SAMES CORPORATION
AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED NOVEMBER 30, 1999, 1998, AND 1997
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1999 1998 1997
-------- --------- ---------
<S> <C> <C> <C>
Net sales................................................... $ 92,959 122,370 97,297
Cost of goods sold.......................................... 57,345 83,719 61,029
-------- --------- ---------
Gross profit............................................ 35,614 38,651 36,268
Selling, general, and administrative expenses............... 27,298 29,578 28,916
Research and development costs.............................. 3,686 3,760 3,793
Patent litigation settlement costs.......................... -- 10,675 --
-------- --------- ---------
Operating income (loss)................................. 4,630 (5,362) 3,559
-------- --------- ---------
Other expense (income):.....................................
Interest expense.......................................... 863 759 783
Other income, net......................................... (848) (299) (1,147)
-------- --------- ---------
15 460 (364)
-------- --------- ---------
Income (loss) from continuing operations before income
taxes................................................. 4,615 (5,822) 3,923
Income tax expense (benefit)................................ 1,475 (2,564) 1,744
-------- --------- ---------
Income (loss) from continuing operations, net of tax.... 3,140 (3,258) 2,179
Loss from discontinued operations, net of tax............... (4,909) (10,375) (42,259)
-------- --------- ---------
Net loss................................................ $ (1,769) (13,633) (40,080)
======== ========= =========
Income (loss) per share--basic:
Continuing operations..................................... $ 1.06 (1.10) 0.71
Discontinued operations................................... (1.66) (3.50) (13.78)
-------- --------- ---------
Net loss.................................................. $ (0.60) (4.60) (13.07)
======== ========= =========
Income (loss) per share--diluted:
Continuing operations..................................... $ 1.05 (1.10) 0.70
Discontinued operations................................... (1.65) (3.50) (13.62)
-------- --------- ---------
Net loss.................................................. $ (0.60) (4.60) (12.92)
======== ========= =========
Average number of shares:
Common shares outstanding................................. 2,966 2,965 3,066
Equivalent shares on outstanding stock options............ 14 -- 36
-------- --------- ---------
Shares applicable to diluted earnings..................... 2,980 2,965 3,102
======== ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
SAMES CORPORATION
AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED NOVEMBER 30, 1999, 1998, AND 1997
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
ACCUMULATED
ADDITIONAL RETAINED OTHER COMMON TOTAL
CAPITAL PAID-IN EARNINGS COMPREHENSIVE STOCK IN STOCKHOLDERS'
STOCK CAPITAL (DEFICIT) INCOME (LOSS) TREASURY EQUITY
-------- ---------- --------- ------------- -------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance at November 30, 1996.... $ 3,089 24,504 54,327 1,607 -- 83,527
Comprehensive loss:
Net loss...................... -- -- (40,080) -- -- (40,080)
Other comprehensive loss...... (2,988) (2,988)
--------
Total comprehensive loss........ (43,068)
Repurchase and retirement of
125,000 shares of capital
stock......................... (125) (4,875) -- -- -- (5,000)
Cash dividends ($.30 per
share)........................ -- -- (914) -- -- (914)
------- ------ ------- ------- ------- --------
Balance at November 30, 1997.... 2,964 19,629 13,333 (1,381) -- 34,545
Comprehensive loss:
Net loss...................... (13,633) (13,633)
Other comprehensive income.... 297 297
--------
Total comprehensive loss........ (13,336)
Stock options exercised......... 1 23 -- -- -- 24
------- ------ ------- ------- ------- --------
Balance at November 30, 1998.... 2,965 19,652 (300) (1,084) -- 21,233
Comprehensive loss:
Net loss...................... (1,769) (1,769)
Other comprehensive loss...... (951) (951)
--------
Total comprehensive loss........ (2,720)
Treasury stock purchases 18,200
shares of capital stock....... (296) (296)
Stock options exercised......... 2 25 -- -- -- 27
------- ------ ------- ------- ------- --------
Balance at November 30, 1999.... $ 2,967 19,677 (2,069) (2,035) (296) 18,244
======= ====== ======= ======= ======= ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
SAMES CORPORATION
AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED NOVEMBER 30, 1999, 1998, AND 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Continuing operations:
Income (loss) from continuing operations.................. $ 3,140 (3,258) 2,179
Adjustments to reconcile income (loss) to net cash
provided (used) by operating activities:
Depreciation and amortization:.......................... 991 853 1,719
Deferred compensation, net of payments.................. (890) 122 (272)
Deferred income taxes................................... (49) (575) 433
Other, net.............................................. (136) (5) 14
Cash provided by (used in) changes in:
Receivables........................................... (3,767) 4,724 (903)
Inventories........................................... 73 7,869 2,385
Other current assets.................................. (26) 471 2,406
Accounts payable...................................... 5,795 (15,049) 15,152
Accrued expenses...................................... (4,580) 1,891 338
Income taxes.......................................... 1,515 478 (2,280)
------- ------- -------
Net cash provided (used) by continuing operations... 2,066 (2,479) 21,171
Cash flows from investing activities:
Purchases of property, plant, and equipment............... (1,454) (482) (1,169)
Proceeds from sale of property, plant, and equipment...... -- -- 40
Other investments and assets.............................. 157 35 1,366
Proceeds from sale of business............................ -- 79,873 --
------- ------- -------
Net cash provided (used) by investing activities.... (1,297) 79,426 237
------- ------- -------
Cash flows from financing activities:
Cash dividends paid....................................... -- -- (914)
Proceeds from borrowings.................................. 4,149 7,469 17,000
Net increase (decrease) in short-term borrowings.......... 2,039 6,141 (4,990)
Repurchase of capital stock............................... (296) -- (5,000)
Stock options exercised................................... 27 23 --
Debt repaid with proceeds from sale of business........... -- (66,469) --
Principal payments on debt................................ (185) (4,958) (13,863)
------- ------- -------
Net cash provided (used) by financing activities.... 5,734 (57,794) (7,767)
------- ------- -------
Net cash used by discontinued operations.................... (5,501) (19,148) (16,543)
------- ------- -------
Effect of exchange rate changes on cash..................... (35) (411) (564)
------- ------- -------
Net increase (decrease) in cash and cash
equivalents....................................... 967 (406) (3,466)
Cash and cash equivalents at beginning of year.............. 5,204 5,610 9,076
------- ------- -------
Cash and cash equivalents at end of year.................... $ 6,171 5,204 5,610
======= ======= =======
Supplemental cash flow disclosures--cash paid for:
Interest................................................ $ 704 382 432
Income taxes (refunds), net............................. (258) (437) 3,730
======= ======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-7
<PAGE>
SAMES CORPORATION
AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 30, 1999, 1998, AND 1997
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION AND REPORT PREPARATION
The consolidated financial statements include the accounts of the Company
and consolidated subsidiaries in the U.S., France, Japan, and Sweden. All
material intercompany balances and transactions have been eliminated in
consolidation.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make certain
estimates and assumptions which affect reported results of operations,
financial position, and various disclosures. Actual results could differ
from those estimates.
CURRENCY TRANSLATION
The results of operations for non-U.S. subsidiaries are translated from
local currencies into U.S. dollars using average exchange rates during each
period; assets and liabilities are translated using exchange rates at the
end of each period. At November 30, 1999, the French franc had depreciated
by approximately 14% compared to the prior year-end while the average
French franc/ U.S. dollar exchange rate was approximately 3% higher in the
twelve months ended November 30, 1999 compared to the comparable 1998
period. Adjustments resulting from the translation process are reported in
a separate component of stockholders' equity, and are not included in the
determination of the results of operations.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash on hand and amounts due from banks
with original maturities of three months or less.
INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out) or market
(net realizable value).
PROPERTY, PLANT, AND EQUIPMENT
Depreciation of property, plant, and equipment is computed by the
straight-line method. Estimated lives range from 25 to 40 years for
buildings and from 4 to 12 years for machinery and equipment.
INTANGIBLE ASSETS
Intangible assets are comprised of goodwill and patents. Goodwill
represents excess costs of acquired companies over the fair values of their
net tangible assets. All intangibles are amortized by the straight line
method, with goodwill amortized over 40 years, and patents over their
respective useful lives.
F-8
<PAGE>
SAMES CORPORATION
AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOVEMBER 30, 1999, 1998, AND 1997
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
IMPAIRMENT OF LONG-LIVED ASSETS
In the event that facts and circumstances indicate that the carrying
amounts of long-lived assets may be impaired, an evaluation of
recoverability would be performed. If an evaluation is required, the
estimated future undiscounted cash flows associated with the asset would be
compared to the asset's carrying amount to determine if a writedown is
required. If this review indicates that the assets will not be recoverable,
the carrying value of the Company's assets would be reduced to their
estimated market value.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value approximates the carrying value for all financial
instruments, with the exception of long-term debt, for which the fair value
is less than the carrying value by an amount which is immaterial to the
consolidated financial statements.
REVENUE RECOGNITION
Revenues on long-term equipment production and installation contracts are
recorded on the basis of the estimated percentage of completion of
individual contracts determined under the cost-to-cost method. Estimated
losses on long-term contracts are recognized in the period in which a loss
becomes apparent. Revenue from sales of the Company's general industry and
non-robotic automotive products are recorded at the time the goods are
shipped and title passes. The Company provides appropriate provisions for
uncollectible accounts and credit for returns.
RESEARCH AND DEVELOPMENT EXPENSES
Research and development costs are charged to expense when incurred.
ADVERTISING EXPENSES
Advertising costs are charged to expense when incurred. Advertising costs
were $.8 million, $.5 million, and $.6 million in fiscal 1999, 1998, and
1997, respectively.
INCOME TAXES
The asset and liability method is used in accounting for income taxes.
Under this method, deferred tax assets and liabilities are recognized for
operating loss and tax credit carryforwards and for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective
tax bases. Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. The effect
on deferred tax assets and liabilities of a change in tax rates is
recognized in the results of operations in the period that includes the
enactment date. A valuation allowance is recorded to reduce the carrying
amounts of deferred tax assets unless it is more likely than not that such
assets will be realized.
F-9
<PAGE>
SAMES CORPORATION
AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOVEMBER 30, 1999, 1998, AND 1997
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
STOCK-BASED COMPENSATION
In 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 123, "Accounting for Stock-Based
Compensation." The Company has elected to continue to apply the principles
of Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued
to Employees," as discussed in note 12 to the consolidated financial
statements.
NET INCOME (LOSS) PER SHARE
Basic earnings per share are based upon the weighted-average number of
common shares outstanding. Diluted earnings per share assumes the exercise
of all options which are dilutive, whether exercisable or not.
IMPACT OF NEWLY ISSUED ACCOUNTING STANDARDS
The Company adopted SFAS No. 130, "Reporting Comprehensive Income," in
fiscal 1999. Comprehensive income is defined as "all changes in
stockholders' equity exclusive of transactions with owners." All
transactions representing comprehensive income during the years ended
November 30, 1999, 1998 and 1997 are presented in the Consolidated
Statements of Stockholders' Equity. Prior year financial statements have
been changed to conform to the SFAS 130 requirements.
(2) DISCONTINUED OPERATIONS
On August 31, 1998, the Company announced it had signed a definitive
agreement with Illinois Tool Works (ITW) to sell certain of the Company's
domestic divisions, foreign subsidiaries, and standard products lines. On
September 30, 1998, the Company completed the sale transaction.
Under the terms of the sale, ITW purchased all assets related to the
manufacture and distribution of Binks standard products in the U.S.,
including a leased manufacturing facility in Longmont, Colorado; the
Poly-Craft Systems division in Cottage Grove, Oregon; the research and
development facility in Boulder, Colorado; and certain domestic branches
and warehouses. All employees of the acquired businesses became employees
of ITW upon closing the transaction. International operations included in
the sale were businesses in the U.K., Belgium, Germany, Australia and a
portion of the Canadian operation. The sale price was approximately $80
million in cash plus ITW assumed certain liabilities of the acquired
portion of the businesses.
Under a separate agreement entered into in October 1998, the Company sold
one additional business that had been part of its Binks operations. The
sale was closed in January, 1999 and the Company has recorded no gain on
the sale. All of the above operations have been classified as discontinued
operations in the Company's consolidated financial statements.
On September 23, 1999, the Company reached agreement with ITW to resolve an
outstanding dispute relating to the purchase price adjustment associated
with the sale. Under terms of the
F-10
<PAGE>
SAMES CORPORATION
AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOVEMBER 30, 1999, 1998, AND 1997
(2) DISCONTINUED OPERATIONS (CONTINUED)
settlement, the Company agreed to pay ITW approximately $6.1 million in
sixteen quarterly installments, without interest. The initial payment was
made on September 30, 1999 and the final payment will be made on June 30,
2003. As a result of the agreement the Company recorded a charge of $1.2
million to discontinued operations in the third quarter ended August 31,
1999, after discounting the settlement and considering the pre-existing
accrual. The settlement was discounted at prevailing market interest rates.
There is currently $4.8 million outstanding, net of discount, as of
November 30, 1999, of which $1.3 million is classified as short-term.
The 1999 loss from discontinued operations, net of tax, includes primarily
the $1.2 million sale price adjustment with ITW and other costs associated
with the sale of the Binks business. The 1998 loss from discontinued
operations, net of tax, includes the gain on the sale of the Binks business
of $7.7 million.
As part of the original sale agreement with ITW, the Company assigned and
transferred to ITW all of the accounts receivable related to the "Binks
Business". The agreement required the Company to repurchase such accounts
receivable, which were not collected within 180 days. On September 23,
1999, the Company agreed to repurchase certain receivables for
approximately $1.0 million, which was paid on September 28, 1999. As of
November 30, 1999, the Company had collected $560,000 of the accounts
receivable. It is anticipated that any future collections below or above
the paid amount will be either charged or credited to loss from
discontinued operations.
Not included in the sale to ITW, and representing the continuing operations
of the Company, are: the Company's largest subsidiary, Sames, S.A. (Sames,
France) based in Grenoble, France; Sames North America, Inc. headquartered
in Livonia, Michigan; the North American.powder systems division and
subsidiaries in Japan and Sweden.
In January 1998, the Company notified the developer and landlord of a site
in Vernon Hills, Illinois, which had been expected to serve as the
Company's headquarters, that the Company wanted to terminate the project.
The Company had previously entered into a 20-year lease agreement for the
Vernon Hills site. In February 1999, the Company entered into a settlement
agreement with the developer relating to litigation associated with the
lease cancellation. The settlement agreement was for $2.4 million which was
paid by the Company on February 22, 1999. The settlement is classified as a
component of discontinued operations in the Company's fiscal 1998
consolidated financial statements.
F-11
<PAGE>
SAMES CORPORATION
AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOVEMBER 30, 1999, 1998, AND 1997
(3) RECEIVABLES
Net receivables are comprised of the following at November 30 (in
thousands):
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Trade..................................................... $ 36,918 44,270
Costs and estimated earnings in excess of billings on
uncompleted contracts................................... 6,074 957
Other..................................................... 1,406 1,235
-------- ------
44,398 46,462
Less allowance for doubtful receivables................... 1,227 1,667
-------- ------
$ 43,171 44,795
======== ======
</TABLE>
(4) INVENTORIES
Inventories at November 30 are summarized as follows (in thousands):
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Finished goods and service parts.......................... $ 9,930 11,288
Work in process........................................... 4,859 4,445
Raw material.............................................. 795 732
-------- ------
$ 15,584 16,465
======== ======
</TABLE>
(5) CREDIT FACILITIES AND DEBT
LINES OF CREDIT AND OVERDRAFT FACILITIES
On October 21, 1998, the Company entered into a $10 million, prime rate,
asset-based, three year revolving line of credit agreement with The CIT
Group to support the Company's operations and continued growth in the North
American automotive and general industrial finishing markets. Borrowings
under the line of credit are collateralized by substantially all of the
assets of Sames North America, as well as a pledge of its stock. The line
of credit agreement contains, among other restrictive covenants, a covenant
requiring the maintenance of a minimum level of net worth of Sames North
America, which level was exceeded as of November 30, 1999.
Together with other credit facilities, the Company has aggregate lines of
credit and overdraft facilities of $17.7 million at November 30, 1999,
against which the Company has overdrafts and notes payable to banks of $7.0
million. The remaining unused lines of credit of $10.7 million are
available to support the Company's U.S. operations ($1.0 million) and
non-U.S. operations ($9.7 million).
F-12
<PAGE>
SAMES CORPORATION
AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOVEMBER 30, 1999, 1998, AND 1997
(5) CREDIT FACILITIES AND DEBT (CONTINUED)
LONG-TERM DEBT
Consolidated long-term debt consists of the following at November 30 (in
thousands):
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Loans maturing at various dates through 2001
weighted average interest rate of 5.5% in 1999
and 2.8% in 1998.......................................... $4,278 1,424
Less current maturities..................................... 1,511 196
------ -----
Long-term debt, less current maturities..................... $2,767 1,238
====== =====
</TABLE>
The aggregate maturities of long-term debt due in fiscal years 2000, 2001,
2002 and 2003 are $1.5 million, $1.4 million, $.9 million and $.4 million,
respectively. No long-term debt is scheduled to mature in 2004.
(6) INCOME TAXES
The Company files a consolidated Federal income tax return which includes
all U.S. subsidiaries. Federal income taxes for each U.S. subsidiary are
computed separately and are payable to the Company.
No provision is made for U.S. Federal income taxes which would be payable
if undistributed earnings of non-U.S. subsidiaries were paid as dividends
to the Company. If such earnings, which aggregate $11.5 million at
November 30, 1999, were to be distributed, the resulting U.S. Federal
income taxes would be largely offset by net operating loss carryforwards.
Foreign tax credit carryforwards at November 30, 1999 totaled $1.2 million
and expire in fiscal 2000.
The Internal Revenue Service has completed its examination of the Company's
Federal income tax returns through November 30, 1989.
F-13
<PAGE>
SAMES CORPORATION
AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOVEMBER 30, 1999, 1998, AND 1997
(6) INCOME TAXES (CONTINUED)
Income tax expense (benefit) is comprised as follows (in thousands):
<TABLE>
<CAPTION>
STATE
U.S. AND
FEDERAL NON-U.S. LOCAL TOTAL
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Fiscal 1999:
Current.................................. $ -- 1,466 58 1,524
Deferred................................. -- (49) -- (19)
------- ------- ----- ------
$ -- 1,417 58 1,475
======= ======= ===== ======
Fiscal 1998:
Current.................................. (351) (1,891) 253 (1,989)
Deferred................................. -- (575) -- (575)
------- ------- ----- ------
$ (351) (2,466) 253 (2,564)
======= ======= ===== ======
Fiscal 1997:
Current.................................. -- 1,205 106 1,311
Deferred................................. 209 224 -- 433
------- ------- ----- ------
$ 209 1,429 106 1,744
======= ======= ===== ======
</TABLE>
Actual income tax expense differed from the amounts computed by applying
the U.S. Federal income tax rate of 34% to pretax income (loss) as a result
of the following (in thousands):
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Computed "expected" tax expense (benefit)......... $ 1,569 (1,979) 1,334
Difference between U.S. and non-U.S. tax rates.... 183 (302) 354
Nondeductible expenses............................ 72 75 82
State and local income taxes, net of Federal
income tax benefit.............................. 38 168 70
Refund of prior years' Federal income taxes....... -- (351) --
Change in the valuation allowance for deferred tax
assets.......................................... -- -- (929)
Foreign tax credits less than U.S. taxes on
dividends from foreign subsidiaries............. -- -- 833
Other............................................. (387) (175) --
------- ------- -------
Income tax expense (benefit)...................... $ 1,475 (2,564) 1,744
======= ======= =======
</TABLE>
F-14
<PAGE>
SAMES CORPORATION
AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOVEMBER 30, 1999, 1998, AND 1997
(6) INCOME TAXES (CONTINUED)
The tax effects of net operating loss carryforwards, foreign tax credit
carryforwards, and temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at
November 30, 1999 and 1998 are presented below (in thousands):
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Deferred tax assets attributable to:
Deferred compensation................................... $ 2,254 2,659
Inventories............................................. 681 606
Allowance for doubtful receivables...................... 62 40
Foreign tax credit carryforwards........................ 1,199 2,390
Nondeductible liabilities............................... 2,010 2,544
Net operating loss carryforwards........................ 9,952 9,753
Other................................................... 688 590
------- -------
Total gross deferred tax assets..................... 16,846 18,582
Less valuation allowance................................ 14,434 16,235
------- -------
Total deferred tax assets........................... 2,412 2,347
------- -------
Deferred tax liabilities attributable to:
Plant and equipment, principally due to differences in
depreciation.......................................... 149 126
Other................................................... 36 43
------- -------
Total gross deferred liabilities.................... 185 169
------- -------
Net deferred tax assets............................. $ 2,227 2,178
======= =======
</TABLE>
The net change in the total valuation allowance for the fiscal years ended
1999, 1998, and 1997 was a decrease of $1.8 million, a decrease of
$1.8 million, and a decrease of $.9 million, respectively. The remaining
net deferred tax assets represent amounts that will more likely than not be
realized. At November 30, 1999, the Company has net operating loss
carryforwards of $26 million, which expire primarily in 2011 and 2012.
Earnings (loss) before income taxes of non-U.S. subsidiaries were $2,549,
$(6,358), and $4,090 for fiscal years 1999, 1998 and 1997, respectively.
F-15
<PAGE>
SAMES CORPORATION
AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOVEMBER 30, 1999, 1998 AND 1997
(7) EMPLOYEE BENEFITS
The Company maintains a voluntary savings plan covering all domestic
employees. Eligible employees may elect to contribute up to 18% of their
salaries subject to certain limitations. The Company contributes an amount
equal to 50% of the first 3% of the employee's salary that the employee
contributes subject to certain limitations. Additionally, the Company
maintains deferred compensation plans for certain present and former
officers and key employees. The deferred compensation plan benefits are
determined by a formula which considers the employee's average salary and
years of service with the Company. The total expense relating to these
plans was $.6 million in 1999, $1.2 million in fiscal 1998, and $1.2
million in fiscal 1997. Through November 30, 1998, the Company maintained a
defined contribution profit sharing plan. The Company contributed to the
plan the lesser of 15% of the participants' compensation, 18% of the
Company's adjusted net income as defined in the plan, or six times the
total of the participants' contributions made for the year. Effective as of
December 1, 1997, the Company was no longer required to make contributions
to the profit sharing plan. In April 1999, the Company fully paid its
obligation due to the participants under the plan.
(8) QUARTERLY FINANCIAL DATA (UNAUDITED AND IN THOUSANDS, EXCEPT PER SHARE
DATA)
<TABLE>
<CAPTION>
QUARTER ENDED
---------------------------------------------------
FISCAL 1999 FEBRUARY 28 MAY 31 AUGUST 31 NOVEMBER 30
- ----------- ------------ -------- ---------- ------------
<S> <C> <C> <C> <C>
Net sales........................... $17,776 22,900 24,522 27,761
======= ====== ====== ======
Gross profit........................ $ 8,094 7,867 9,074 10,579
======= ====== ====== ======
Income from continuing operations,
net of tax........................ $ 604 327 565 1,644
Loss from discontinued operations... (1,190) (472) (1,710) (1,537)
------- ------ ------ ------
Net income (loss)................... $ (586) (145) (1,145) 107
======= ====== ====== ======
Weighted average shares:
Basic EPS......................... 2,964 2,965 2,966 2,966
Effect of stock options........... 8 9 32 12
------- ------ ------ ------
Diluted EPS....................... 2,972 2,974 2,998 2,978
======= ====== ====== ======
Basic income (loss) per share:
Continuing operations............. $ .20 .11 .19 .56
Discontinued operations........... (.40) (.16) (.58) (.52)
Net income (loss)................. $ (.20) (.05) (.39) .04
Diluted income (loss) per share:
Continuing operations............. $ .20 .11 .19 .55
Discontinued operations........... (.40) (.16) (.57) (.52)
Net income (loss)................. $ (.20) (.05) (.38) .03
</TABLE>
F-16
<PAGE>
SAMES CORPORATION
AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOVEMBER 30, 1999, 1998 AND 1997
(8) QUARTERLY FINANCIAL DATA (UNAUDITED AND IN THOUSANDS, EXCEPT PER SHARE
DATA) (CONTINUED)
<TABLE>
<CAPTION>
QUARTER ENDED
---------------------------------------------------
FISCAL 1998 FEBRUARY 28 MAY 31 AUGUST 31 NOVEMBER 30
- ----------- ------------ -------- ---------- ------------
<S> <C> <C> <C> <C>
Net sales.......................... $ 31,954 28,410 25,155 36,851
======== ======= ======= =======
Gross profit....................... $ 7,723 9,505 8,912 12,511
======== ======= ======= =======
Income (loss) from continuing
operations, net of tax........... $ 79 (4,776) 237 1,202
Loss from discontinued
operations....................... (3,738) (4,153) (1,469) (1,015)
-------- ------- ------- -------
Net income (loss).................. $ (3,659) (8,929) (1,232) 187
======== ======= ======= =======
Weighted average shares:
Basic EPS........................ 2,964 2,964 2,965 2,965
Effect of stock options.......... 40 -- 37 13
-------- ------- ------- -------
Diluted EPS...................... 3,004 2,964 3,002 2,978
======== ======= ======= =======
Basic income (loss) per share:
Continuing operations............ $ .03 (1.61) .08 .40
Discontinued operations.......... (1.26) (1.40) (.50) (.34)
Net income (loss)................ $ (1.23) (3.01) (.42) .06
Diluted income (loss) per share:
Continuing operations............ $ .03 (1.61) .08 .40
Discontinued operations.......... (1.24) (1.40) (.49) (.34)
Net income (loss)................ $ (1.21) (3.01) (.41) .06
</TABLE>
(9) OPERATING LEASES
The Company occupies certain offices and uses certain equipment under
operating lease arrangements. Rent expense under such arrangements was $1.4
million, $1.7 million, and $1.5 million in fiscal years 1999, 1998, and
1997, respectively.
The future minimum rental payments required under operating leases that
have initial or remaining noncancelable lease terms in excess of one year
as of November 30, 1999 are $.9 million, $.8 million, $.6 million,
$.1 million, and zero in 2000 through 2004, respectively.
It is expected that in the normal course of business most leases that
expire will be renewed or replaced by leases on the same or similar
properties; thus, it is anticipated that future annual rent expense will
not be materially less than the amount shown for 1999.
F-17
<PAGE>
SAMES CORPORATION
AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOVEMBER 30, 1999, 1998 AND 1997
(10) CONTINGENCIES
The Company has certain contingent liabilities resulting from litigation
and claims incident to the ordinary course of business. Management believes
that the probable resolution of such contingencies will not materially
affect the financial position or results of operations of the Company.
In October 1997, Robert Hashima, the former branch manager of Binks Japan
Limited, filed a lawsuit against the Company, claiming that he is entitled
to receive 145 million yen (approximately $1.2 million) plus interest under
his retirement policy. The Company is responding vigorously to
Mr. Hashima's claim and in June 1998, the Company filed a counterclaim for
damages in the amount of 172 million yen (approximately $1.4 million) for
various wrongdoings on the part of Mr. Hashima. The case is pending in
Tokyo, Japan.
On February 24, 1997, Chester Baranowski, the former President of Binks
Canada, brought suit against the Company seeking US $4.55 million in
damages claiming wrongful dismissal, breach of contract and non-payment of
certain salary and employee benefits. The Company has denied all
substantive allegations and filed a counterclaim against Baranowski for
breach of fiduciary duty and conspiracy with Burke B. Roche to injure the
Company on November 28, 1997. The case went to trial in the Superior Court
of Justice of Ontario at Toronto, Canada and reasons for judgment were
issued January 12, 2000. Both parties have filed notices of appeal. After
consulting with counsel, the Company has determined that it is not possible
at this time to estimate the amount of damages, if any, that may ultimately
may be incurred. Accordingly, no provision has been made in the
accompanying consolidated financial statements.
On May 28, 1999, Burke B. Roche, former Chairman and CEO of the Company,
brought suit against the Company seeking a judgment in the amount of all
payments alleged to be due him under a retirement contract, presently
approximately $277,500, and that the court direct the Company to make
remaining installment payments allegedly due. Mr. Roche claims that
payments of approximately $18,500 per month are due for at least 76 more
months or until June 2006, and payments in this amount are due for an
additional 60 months thereafter, so long as Mr. Roche is living when each
such monthly payment is due. The Company is vigorously defending these
claims and has filed a counterclaim seeking damages in an amount to be
determined alleging various breaches of fiduciary duty by Mr. Roche.
There is no probable determination regarding the outcomes of any of the
above-described and other legal actions.
(11) REPURCHASE AND RETIREMENT OF CAPITAL STOCK
On September 15, 1999 the Company announced a share repurchase program
authorizing the Company to repurchase up to 150,000 shares of its
outstanding Common Stock. The shares will be repurchased from time to time
in the open market as market conditions warrant. Under the terms of the
repurchase program, the shares may be reissued to employees under the
Company's stock option and proposed employee stock purchase plan. Through
November 30, 1999, the Company repurchased a total of 18,200 shares at a
cost of $.3 million.
F-18
<PAGE>
SAMES CORPORATION
AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOVEMBER 30, 1999, 1998, AND 1997
(12) STOCK OPTION PLAN
During fiscal 1996, the Company established a stock option plan. The plan
provides for the granting of stock options to key employees and directors
to purchase a maximum of 300,000 shares of the Company's capital stock. All
options are granted at the fair market value at the date of grant and
generally have a ten-year term and vest at the rate of 25% per year.
Outstanding options become fully vested upon a change in control as defined
in the plan agreement.
Certain officers and directors of the Company were granted options to
purchase 125,000 shares at exercise prices ranging from $12.13 to $17.25
per share. These options became fully vested on September 28, 1998, the
date of grant. These options were granted under the authority of the Board
of Directors of the Company apart from the Company's 1996 stock option
plan.
Changes in options outstanding are summarized as follows:
<TABLE>
<CAPTION>
WEIGHTED-
RANGE OF EXERCISE AVERAGE
OPTIONS PRICES EXERCISE PRICES
-------- ----------------- ---------------
<S> <C> <C> <C>
Granted - fiscal 1996.................. 93,500 $23.375 $23.375
-------
Balance, November 30, 1996............. 93,500 23.375 23.375
Granted - fiscal 1997.................. 32,550 40.375-43.00 42.52
Forfeited - fiscal 1997................ (4,000) 23.375 23.375
-------
Balance, November 30, 1997............. 122,050 23.375-43.00 28.47
Granted - fiscal 1998.................. 155,100 12.125-45.25 17.70
Exercised - fiscal 1998................ (1,000) 23.375 23.375
Forfeited - fiscal 1998................ (46,050) 23.375-45.25 32.63
-------
Balance, November 30, 1998............. 230,100 12.125-44.625 20.40
Granted - fiscal 1999.................. 35,500 14.875-18.125 17.40
Exercised - fiscal 1999................ (2,000) 12.125-14.875 13.50
Forfeited - fiscal 1999................ (24,700) 12.125-43.00 22.44
-------
Balance, November 30, 1999............. 238,900 12.125-44.625 19.80
=======
</TABLE>
Of the options outstanding at November 30, 1999, options on 204,075 shares
were exercisable at a weighted average price of $19.94 per share. At
November 30, 1998, options on 204,500 shares were exercisable at a weighted
average price of $19.54 per share. At November 30, 1999, there were
F-19
<PAGE>
SAMES CORPORATION
AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOVEMBER 30, 1999, 1998, AND 1997
(12) STOCK OPTION PLAN (CONTINUED)
184,100 shares available for future grants under the 1996 Plan. The
following table summarizes information regarding stock options outstanding
and exercisable at November 30, 1999:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
- ----------------------------------------------------------------------- -----------------------------
WEIGHTED AVERAGE WEIGHTED WEIGHTED
RANGE OF OPTIONS REMAINING LIFE AVERAGE OPTIONS AVERAGE
EXERCISE PRICES OUTSTANDING (IN YEARS) EXERCISE PRICES EXERCISABLE EXERCISE PRICES
- --------------------- ----------- ---------------- --------------- ----------- ---------------
<S> <C> <C> <C> <C> <C>
$12.13-23.38 225,000 9.0 $18.39 191,125 $18.40
$40.38-44.63 13,900 7.9 42.57 12,950 42.54
------- --- ------ ------- ------
Total options 238,900 8.7 19.80 204,075 19.94
======= === ====== ======= ======
</TABLE>
Using the Black-Scholes model and the following assumptions, the estimated
weighted average fair value of options granted in fiscal 1999, 1998, and
1997 were $7.42, $8.85 and $13.15, respectively.
<TABLE>
<CAPTION>
1998 1998
-------- --------
<S> <C> <C>
Risk-free interest rate............................... 5.4% 5.7%
Expected dividend yield............................... 0.0% 0.0%
Expected volatility................................... 41.9% 57.4%
Estimated lives of options (in years)................. 5.0 5.0
==== ====
</TABLE>
The Company has adopted the disclosure provisions of SFAS No. 123.
Accordingly, no compensation expense has been recognized for the stock
option activity. Had compensation expense for the Company's stock option
activity been calculated under the provisions of SFAS No. 123, the
Company's income from continuing operations would have decreased and net
loss for fiscal 1999 would have increased by $1.4 million, respectively.
The net income per diluted share for continuing operations would have
decreased and the net loss per diluted share would have increased by $0.46
per share, respectively. The Company's loss from continuing operations and
net loss for fiscal 1998 would have increased by $1.2 million ($0.40 per
share). During the phase-in period of SFAS No. 123, the estimation of
compensation costs reflects only a partial vesting of options. In future
years, the estimated pro forma compensation costs may be higher depending
upon, among other factors, the number of options granted.
(13) STOCKHOLDER RIGHTS PLAN
On February 2, 1990, the Company declared a dividend distribution of one
Right for each outstanding share of Capital Stock of the Company to the
stockholders of record on February 13, 1990. Certain terms of the Rights
were amended on January 21, 1991. Each Right, when exercisable, entitled
the registered holder to purchase the Company's Capital Stock at below
market price. It is not the Company's intention to renew the Stockholder
Rights Plan, as amended, which expired on the close of business on February
2, 2000.
F-20
<PAGE>
SAMES CORPORATON
AND CONSOLIDATED SUBSIDIARIEIS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOVEMBER 30, 1999, 1998, AND 1997
(14) PATENT LITIGATION SETTLEMENT COSTS
During fiscal 1998, the Company recorded specific costs and expenses that
were not directly related to the normal course of business of the
continuing operations of the Company. These costs and expenses related to
the settlement of a patent infringement lawsuit and associated litigation
expenses. Total costs were $10.7 million ($6.2 million, net of income tax
benefits).
(15) SEGMENT AND GEOGRAPHIC INFORMATION
The Company operates in one segment, the manufacture and distribution of
electrostatic spray finishing and coating application equipment. The
Company's products are sold to customers in North America, South America,
Europe, Asia, Africa, and Australia. U.S. exports to third-party customers
are less than 10% of U.S. sales. No single customer accounts for more than
10% of the Company's net sales.
The table below presents the Company's consolidated continuing operations
by country: United States; France; and Japan. Sales are presented by
originating area. Interarea transfers comprise transactions among the
Company and its subsidiaries in different geographic areas; these transfers
are eliminated in consolidation.
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Sales to unaffiliated customers (includes
exports):
United States................................... $25,883 33,718 25,238
France.......................................... 62,395 81,810 66,114
Japan........................................... 4,681 6,843 5,944
Interarea transfers from:
United States................................... -- 118 43
France.......................................... 12,921 16,099 8,075
Eliminations.................................... (12,921) (16,218) (8,117)
------- ------- ------
Total......................................... $92,959 122,370 97,297
======= ======= ======
Operating income (loss) including nonrecurring
charges:
United States................................... $ 123 (10) (72)
France.......................................... 5,268 (4,261) 3,389
Japan........................................... (761) (1,091) 242
------- ------- ------
Total......................................... $ 4,630 (5,362) 3,559
======= ======= ======
Identifiable assets of continuing operations at
November 30:
United States................................... $24,630 30,833 26,918
France.......................................... 47,633 45,490 62,586
Japan........................................... 4,853 4,641 4,501
------- ------- ------
Total......................................... $77,116 80,964 94,005
======= ======= ======
</TABLE>
F-21
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- --------------------- ------------------------------------------------------------
<S> <C>
3.1 Restated Certificate of Incorporation.(1)
3.2 Certificate of Amendment of Restated Certificate of
Incorporation.(2)
3.3 Certificate of Amendment of Restated Certificate of
Incorporation.(16)
3.4 Amended and Restated By-laws, as of October 28, 1998.(12)
4.1 Amended and Restated Rights Agreement, dated as of
February 2, 1990 and amended and restated as of
January 21, 1991, between the Company and Harris Trust and
Savings Bank, as successor rights agent.(4)
4.2 Second Amendment to Rights Agreement dated as of August 28,
1998, by and between the Company and Harris Trust and
Savings Bank.(10)
10.1(a)* Form of Executive Retirement Income Contracts between the
Company and certain key employees.(5)
10.1(b)* Form of Amendment to Executive Retirement Income Contract
for Doran J. Unschuld.(1)
10.2* Forms of Employment Security Agreements between the Company
and certain key employees.(1)
10.3* Form of Insurance Maintenance Agreement between the Company
and each of its directors and officers.(1)
10.4* Sames Corporation Amended and Restated 1996 Stock Option
Plan.(3)
10.5 Form of Bonus Agreements between the Company and certain
executive officers and key employees.(7)
10.6 Settlement Agreement and Mutual Releases dated June 11,
1998, by and among the Company, Continental Partners
Group, Inc. and Schiff, Hardin & Waite.(8)
10.7 Patent License and Settlement Agreement dated as of
July 10, 1998 by and among the Company, Sames, S.A., Sames
Electrostatic, Inc., Behr Systems, Inc. and Durr Systems,
GmbH.(8)
10.8* Consulting Agreement dated as of October 1, 1998 by and
between the Company and The Dratt-Campbell Company.(9)
10.9 Agreement of Purchase and Sale of Assets and Stock dated
August 31, 1998, by and between the Company and Illinois
Tool Works Inc.(10)
10.10 Amendment to Agreement of Purchase and Sale of Assets and
Stock dated as of September 30, 1998, by and between the
Company and Illinois Tool Works Inc.(11)
10.11 Settlement Agreement and Mutual Release dated as of
February 12, 1999 by and between the Company and CWA
Investment Company, L.L.C.(12)
10.12 Financing Agreement dated as of October 21, 1998 by and
between The CIT Group/ Business Credit, Inc. and Sames
Electrostatic, Inc.(12)
10.13 Guaranty Agreement dated as of October 21, 1998 by and
between The CIT Group/ Business Credit, Inc. and the
Company.(12)
10.14 Stock Pledge Agreement dated February 19, 1999 by and
between The CIT Group/ Business Credit, Inc. and the
Company.(12)
10.15 Letter Agreement dated February 19, 1999 by and between The
CIT Group/Business Credit, Inc. and the Company.(12)
10.16 First Amendment to Consulting Agreement dated as of
March 30, 1999 by and between the Company and the
Dratt-Campbell Company.(13)
10.17 Amended and Restated Product Supply Agreement between
Sames, S.A., Sames North America, Inc., the Company and
Fanuc Robotics North America, Inc., dated April 29,
1999.(14)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- --------------------- ------------------------------------------------------------
<S> <C>
10.18 First Amendment to Financing Agreement between The CIT
Group/Business Credit, Inc. and Sames
Electrostatic, Inc., dated May 25, 1999.(14)
10.19 Settlement Agreement, dated September 23, 1999, by and
between Illinois Tool Works Inc. and the Company.(15)
10.20 Assignment of Accounts Receivable, dated as of
September 23, 1999, by and between Illinois Tool
Works Inc. and the Company.(15)
10.21* Sames Employee Stock Purchase Plan.(16)
21.1 List of subsidiaries.(3)
23.1 Consent of KPMG LLP.(3)
27.1 Financial Data Schedule.(3)
</TABLE>
- ------------------------
* Management contract or compensatory plan, contract or arrangement required
to be filed as an exhibit pursuant to Item 14(c) of Form 10-K.
(1) Filed as an exhibit to the Company's Form 10-K for its fiscal year ended
November 30, 1993 and incorporated herein by reference.
(2) Filed as Exhibit 4.1 to the Company's registration statement on Form S-8
(File no. 333-30191) and incorporated herein by reference.
(3) Filed herewith.
(4) Filed as an exhibit to the Company's Form 10-K for its fiscal year ended
November 30, 1993 and incorporated herein by reference.
(5) Filed as an exhibit to the Company's Form 10-K for its fiscal year ended
November 30, 1995 and incorporated herein by reference.
(6) Filed as an exhibit to the Company's registration statement on Form S-8
(File no. 333-30191) and incorporated herein by reference.
(7) Filed as an exhibit to the Company's Form 10-Q for the period ended
February 28, 1998 and incorporated herein by reference.
(8) Filed as an exhibit to the Company's Form 10-Q for the period ended
May 31, 1998 and incorporated herein by reference.
(9) Filed as an exhibit to the Company's Form 10-Q for the period ended
August 31, 1998 and incorporated herein by reference.
(10) Filed as an exhibit to the Company's Current Report on Form 8-K dated
September 2, 1998 and incorporated herein by reference.
(11) Filed as an exhibit to the Company's Current Report on Form 8-K dated
September 30, 1998 and incorporated herein by reference.
(12) Filed as an exhibit to the Company's Form 10-K for its fiscal year ended
November 30, 1998 and incorporated herein by reference.
(13) Filed as an exhibit to the Company's Form 10-Q for the period ended
February 28, 1999 and incorporated herein by reference.
(14) Filed as an exhibit to the Company's Form 10-Q for the period ended
May 31, 1999 and incorporated herein by reference.
(15) Filed as an exhibit to the Company's Form 10-Q for the period ended
August 31, 1999 and incorporated herein by reference.
(16) Filed as an exhibit to the Company's registration statement on Form S-8
(file No. 333-92993) and incorporated herein by reference.
<PAGE>
SAMES CORPORATION
AMENDED AND RESTATED
1996 STOCK OPTION PLAN
ARTICLE 1.
ESTABLISHMENT, OBJECTIVES, AND DURATION
1.1 ESTABLISHMENT OF THE PLAN. SAMES CORPORATION, a Delaware
corporation (formerly known as Binks Sames Corporation) (hereinafter referred to
as the "Company"), has previously established an incentive compensation plan
known as the Binks Sames Corporation Amended and Restated 1996 Stock Option Plan
(hereinafter referred to as the "Plan"), effective as of October 24, 1996 (the
"Effective Date").
The Company now desires to further amend and restate the Plan as
provided herein. Subject to approval by the Company's stockholders, the Plan as
amended and restated herein shall become effective as of April 25, 2000, and
shall remain in effect as provided in Section 1.3 hereof.
1.2 PURPOSE OF THE PLAN. The purpose of this Plan is to benefit the
Company and its subsidiaries and affiliated companies by enabling the Company to
offer to certain present and future executives, key personnel, consultants and
non-employee directors stock based incentives in the Company, thereby giving
them a stake in the growth and prosperity of the Company and encouraging the
continuance of their services with the Company or subsidiaries or affiliated
companies.
1.3. DURATION OF THE PLAN. The Plan shall commence on the Effective
Date and shall remain in effect, subject to the right of the Board of Directors
to amend or terminate the Plan at any time pursuant to Article 16 hereof, until
all Shares subject to it shall have been purchased or acquired according to the
Plan's provisions. However, in no event may an Award be granted under the Plan
on or after October 24, 2006.
ARTICLE 2.
DEFINITIONS
Whenever used in the Plan, the following terms shall have the meanings
set forth below, and when the meaning is intended, the initial letter of the
word shall be capitalized:
"AWARD" means, individually or collectively, a grant under this Plan of
Nonqualified Stock Options or Incentive Stock Options.
<PAGE>
"AWARD AGREEMENT" means a writing provided by the Company to each
Participant setting forth the terms and provisions applicable to Awards granted
under this Plan. The Participant's acceptance of the terms of the Award
Agreement shall be evidenced by his or her continued employment without written
objection before any exercise or payment of the Award. If the Participant
objects in writing, the grant of the Award shall be revoked.
"BENEFICIAL OWNER" or "BENEFICIAL OWNERSHIP" shall have the meaning
ascribed to such term in Rule 13d-3 of the General Rules and Regulations under
the Exchange Act.
"BOARD" or "BOARD OF DIRECTORS" means the Board of Directors of the
Company.
"CAUSE" shall mean, with respect to termination of a Participant's
employment or directorship, the occurrence of any one or more of the following,
as determined by the Committee, in the exercise of good faith and reasonable
judgment:
(i) In the case where there is no employment, change in control or
similar agreement in effect between the Participant and the
Company or a Subsidiary at the time of the grant of the Award,
or where there is such an agreement but the agreement does not
define "cause" (or similar words) or a "cause" termination
would not be permitted under such agreement at that time
because other conditions were not satisfied, the termination
of an employment or consulting arrangement due to the willful
and continued failure or refusal by the Participant to
substantially perform assigned duties (other than any such
failure resulting from the Participant's Disability), the
Participant's dishonesty or theft, the Participant's violation
of any obligations or duties under any employee agreement, or
the Participant's gross negligence or willful misconduct; or
(ii) In the case where there is an employment, change in control or
similar agreement in effect between the Participant and the
Company or a Subsidiary at the time of the grant of the Award
that defines "cause" (or similar words) and a "cause"
termination would be permitted under such agreement at that
time, the termination of an employment or consulting
arrangement that is or would be deemed to be for "cause" (or
similar words) as defined in such agreement.
No act or failure to act on a Participant's part shall be considered willful
unless done, or omitted to be done, by the Participant not in good faith and
without reasonable belief that his action or omission was in the best interest
of the Company.
"CHANGE OF CONTROL" of the Company shall mean:
(a) The Company is merged or consolidated or reorganized into or
with another corporation or other legal person (an "Acquiror")
and as a result of such merger, consolidation or
reorganization less than 50% of the outstanding voting
securities
2
<PAGE>
or other capital interests of the surviving, resulting or
acquiring corporation or other legal person are owned in the
aggregate by the stockholders of the Company, directly or
indirectly, immediately prior to such merger, consolidation or
reorganization, other than by the Acquiror or any corporation
or other legal person controlling, controlled by or under
common control with the Acquiror;
(b) The Company sells all or substantially all of its business
and/or assets to an Acquiror, of which less than 50% of the
outstanding voting securities or other capital interests are
owned in the aggregate by the stockholders of the Company,
directly or indirectly, immediately prior to such sale, other
than by any corporation or other legal person controlling,
controlled by or under common control with the Acquiror;
(c) There is a report filed on Schedule 13D or Schedule 14D-1 (or
any successor schedule, form or report), each as promulgated
pursuant to the Exchange Act, or other public announcement
disclosing that any person or group (as the terms "person" and
"group" are used in Section 13(d)(3) or Section 14(d)(2) of
the Exchange Act and the rules and regulations promulgated
thereunder) has become the beneficial owner (as the term
"beneficial owner" is defined under Rule 13d-3 or any
successor rule or regulation promulgated under the Exchange
Act) of 15% or more of the issued and outstanding shares of
voting securities of Company, other than (i) a trustee or
other fiduciary holding securities under any employee benefit
plan of the Company or any Subsidiary, (ii) a corporation
owned directly or indirectly by the stockholders of the
Company in substantially the same proportion as their
ownership of stock in the Company, (iii) Burke B. Roche, his
spouse or any of their descendants or any spouse of their
descendants, William B. Roche, his spouse or any of their
descendants or any spouse of their descendants, any trust or
other arrangement for the benefit of Burke B. Roche, William
B. Roche, the spouse of either of them, or any of their
descendants or the spouse of any such descendants (Burke B.
Roche, William B. Roche and such other individuals, trusts or
other arrangements, collectively, the "Roche Family"), or (iv)
any group which includes the Roche Family if a majority of the
voting securities of the Company beneficially owned by such
group are beneficially owned by the Roche Family; or
(d) Individuals who are members of the Incumbent Board cease to
constitute a majority of the Board of Directors of the
Company. For this purpose, "Incumbent Board" means (i) the
members of the Board of Directors of the Company on the
Effective Date and (ii) any individual who becomes a member of
the Board of Directors of the Company after the Effective
Date, if such individual's election or nomination for election
as a Director was approved by the affirmative vote of the then
Incumbent Board.
3
<PAGE>
"CODE" means the Internal Revenue Code of 1986, as amended from time to
time, or any successor legislation thereto.
"COMMITTEE" means the Committee as specified in Article 3 herein
appointed by the Board to administer the Plan with respect to grants of Awards.
"COMMON STOCK" means the common stock, $1.00 par value per share, of
the Company.
"COMPANY" means Binks Manufacturing Company, a Delaware corporation, as
well as any successor to such entity as provided in Article 13 herein.
"DIRECTOR" means any individual who is a member of the Board of
Directors of the Company.
"DISABILITY" shall have the meaning ascribed to such term in the
Participant's governing long-term disability plan. If no long term disability
plan is in place with respect to a Participant, then with respect to that
Participant, Disability shall have the same meaning ascribed to such term under
Section 22(e)(3) of the Code.
"EARLY RETIREMENT" means the Participant's termination of employment
with the Company and all Subsidiaries (for reasons other than Cause) on or after
attaining age 55 having completed five or more years of employment with the
Company or Subsidiaries.
"EFFECTIVE DATE" shall have the meaning ascribed to such term in
Section 1.1 hereof.
"EMPLOYEE" means any employee of the Company or any Subsidiary, or any
consultant who provides services to the Company or any Subsidiary; provided,
that for purposes hereof, references to periods of employment or termination of
employment shall be deemed, in the case of a consultant, to be references to his
or her consulting arrangement with the Company or any Subsidiary. Non-Employee
Directors shall not be considered Employees under this Plan unless specifically
designated otherwise.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended
from time to time, or any successor act thereto.
"FAIR MARKET VALUE" shall mean, as of any date, the closing sales price
of the Common Stock on the American Stock Exchange Composite Tape (as reported
in THE WALL STREET JOURNAL, Midwest Edition) on such date (or if the date is not
a trading day, on the trading day next preceding the date of exercise).
"INCENTIVE STOCK OPTION" or "ISO" means an option to purchase Shares
granted under Article 6 herein and which is designated as an Incentive Stock
Option and which is intended to meet the requirements of Code Section 422.
4
<PAGE>
"NON-EMPLOYEE DIRECTOR" means, as of a given date, an individual who is
a Director but who is not an Employee of the Company or any Subsidiary, and
since the date of the most recent annual meeting of stockholders at which he or
she was elected a Director (or, if he or she was not elected at an annual
meeting, the date the individual was first elected to the Board of Directors)
has not been an Employee.
"NONQUALIFIED STOCK OPTION" or "NQSO" means an option to purchase
Shares granted under Article 6 herein and which is not intended to meet the
requirements of Code Section 422.
"OPTION" means an Incentive Stock Option or a Nonqualified Stock
Option, as described in Article 6 herein.
"OPTION PRICE" means the price at which a Share may be purchased by a
Participant pursuant to an Option.
"PARTICIPANT" means an individual who has outstanding an Award granted
under the Plan.
"PERSON" shall have the meaning ascribed to such term in Section
3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d) thereof,
including a group as defined in Section 13(d) thereof.
"RETIREMENT" means the Participant's termination of employment with the
Company or its Subsidiaries (for reasons other than Cause) on or after the date
the Participant attains age 65, or, in the case of Non-Employee Directors, shall
mean the termination of his or her directorship (for reasons other than Cause)
on or after attaining age 55.
"SHARES" means shares of Common Stock, $1 par value per share, of the
Company.
"SUBSIDIARY" means any corporation, partnership, joint venture,
affiliate, or other entity in which the Company is the direct or indirect
beneficial owner of not less than 20% of all issued and outstanding equity
interests.
ARTICLE 3.
ADMINISTRATION
3.1 THE COMMITTEE. The Plan shall be administered by the Board, or by
the Compensation Committee of the Board, or by any other Committee appointed by
the Board. The functions of the Committee may be exercised by the full Board.
3.2 AUTHORITY OF THE COMMITTEE. Except as limited by law or by the
Certificate of Incorporation or Bylaws of the Company, and subject to the
provisions herein, the Committee shall have full power to select Employees and
consultants who shall participate in the Plan;
5
<PAGE>
determine the sizes and types of Awards; determine the terms and conditions of
Awards in a manner consistent with the Plan; construe and interpret the Plan and
any agreement or instrument entered into under the Plan; establish, amend, or
waive rules and regulations for the Plan's administration; and (subject to the
provisions of Article 11 herein) amend the terms and conditions of any
outstanding Award to the extent such terms and conditions are within the
discretion of the Committee as provided in the Plan. Further, the Committee
shall make all other determinations which may be necessary or advisable for the
administration of the Plan. As permitted by law, the Committee may delegate the
authority granted to it herein.
3.3 DECISIONS BINDING. All determinations and decisions made by the
Committee pursuant to the provisions of the Plan and all related orders and
resolutions of the Board shall be final, conclusive and binding on all persons,
including the Company, its stockholders, Employees, Participants, and their
estates and beneficiaries.
ARTICLE 4.
SHARES SUBJECT TO THE PLAN AND MAXIMUM AWARDS
4.1 SHARES AVAILABLE FOR AWARDS. The aggregate number of Shares which
may be issued or used for reference purposes under this Plan or with respect to
which Awards may be granted shall not exceed 300,000 Shares (subject to
adjustment as provided in Section 4.3), which may be either authorized and
unissued Shares or Shares held in or acquired for the treasury of the Company.
Of the aggregate number of Shares, up to all of such Shares may be issued with
respect to Incentive Stock Option Awards. Upon:
(a) a cancellation, termination, expiration, forfeiture, or lapse
for any reason of any Award; or
(b) payment of an Option Price and/or payment of any taxes arising
upon exercise of an Option with previously acquired Shares or
by withholding Shares which otherwise would be acquired on
exercise or issued upon such payout,
then the number of Shares underlying any such Award which were not issued as a
result of any of the foregoing actions shall again be available for the purposes
of Awards under the Plan.
4.2 INDIVIDUAL PARTICIPANT LIMITATIONS. Subject to adjustment as
provided in Section 4.3 herein, the maximum aggregate number of Shares with
respect to which Options may be granted in any one fiscal year to a Participant
shall be 50,000.
4.3 ADJUSTMENTS IN AUTHORIZED SHARES. In the event of any change in
corporate capitalization, such as a stock split, or a corporate transaction,
such as any merger, consolidation, separation, including a spin-off, or other
distribution of stock or property of the Company, any
6
<PAGE>
reorganization (whether or not such reorganization comes within the definition
of such term in Code Section 368) or any partial or complete liquidation of the
Company, such adjustment shall be made in the number and class of Shares
available for Awards, the number and class of and/or price of Shares subject to
outstanding Awards granted under the Plan and the number of Shares set forth in
Sections 4.1 and 4.2, as may be determined to be appropriate and equitable by
the Committee, in its sole discretion, to prevent dilution or enlargement of
rights; provided, however, that the number of Shares subject to any Award shall
always be a whole number.
ARTICLE 5.
ELIGIBILITY AND PARTICIPATION
5.1 ELIGIBILITY. Persons eligible to participate in this Plan include
all Employees of the Company and its Subsidiaries, as determined by the
Committee, including Employees who are Directors and Employees who reside in
countries other than the United States of America. Non-Employee Directors shall
also be eligible to receive Awards of Nonqualified Stock Options under the Plan.
5.2 ACTUAL PARTICIPATION. Subject to the provisions of the Plan, the
Committee may, from time to time, select from all eligible Employees, those to
whom Awards shall be granted and shall determine the nature and amount of each
Award.
ARTICLE 6.
STOCK OPTIONS
6.1 GRANT OF OPTIONS. Subject to the terms and provisions of the Plan,
Options may be granted to Employees at any time and from time to time as
determined by the Committee in its sole discretion. The Committee, in its sole
discretion, shall determine the number of Shares subject to each Option,
provided that during any Fiscal Year, no Participant shall be granted Options
covering more than 50,000 Shares. The Committee may grant Incentive Stock
Options, Nonqualified Stock Options, or a combination thereof.
6.2 AWARD AGREEMENT. Each Option shall be evidenced by an Award
Agreement that shall specify the Exercise Price, the expiration date of the
Option, the number of Shares to which the Option pertains, any conditions to
exercise of the Option, and such other terms and conditions as the Committee, in
its discretion, shall determine. The Award Agreement shall specify whether the
Option is intended to be an Incentive Stock Option or Nonqualified Stock Option.
6.3 EXERCISE PRICE. Subject to the provisions of this Section 6.3, the
Exercise Price for each Option shall be determined by the Committee in its sole
discretion.
7
<PAGE>
(a) NONQUALIFIED STOCK OPTIONS. In the case of a Nonqualified
Stock Option, the Exercise Price shall be not less than the
Fair Market Value of a Share on the Grant Date.
(b) INCENTIVE STOCK OPTIONS. In the case of an Incentive Stock
Option, the Exercise Price shall be not less than one
hundred percent (100%) of the Fair Market Value of a Share
on the Grant Date; provided, however, that if on the Grant
Date, the Employee (together with persons whose stock
ownership is attributed to the Employee pursuant to Section
424(d) of the Code) owns stock possessing more than 10% of
the total combined voting power of all classes of stock of
the Company or any of its Subsidiaries, the Exercise Price
shall be not less than one hundred and ten percent (110%)
of the Fair Market Value of a Share on the Grant Date.
(c) SUBSTITUTE OPTIONS. Notwithstanding the provisions of
Sections 6.3(a) and 6.3(b), in the event that the Company
or a Subsidiary consummates a transaction described in
Section 424(a) of the Code (E.G., the acquisition of
property or stock from an unrelated corporation), persons
who become Employees on account of such transaction may be
granted Options in substitution for options granted by
their former employer. If such substitute Options are
granted, the Committee, in its sole discretion and
consistent with Section 424(a) of the Code, shall determine
the Exercise Price of such substitute Options.
6.4 EXPIRATION OF OPTIONS. Subject to the provisions of Section 6.8,
Options granted pursuant to this Article 6 shall expire in accordance with this
Section 6.4.
(a) EXPIRATION DATES. Each Option granted pursuant to this
Article 6 shall terminate no later than the first to occur
of the following events:
(i) The date for termination of the Option set forth in
the written Award Agreement; or
(ii) The expiration of ten (10) years from the Grant
Date; or
(iii) The expiration of one (1) month from the date of the
Participant's termination of employment for a reason
other than the Participant's death, Disability,
Retirement, Early Retirement (under circumstances
described in Section 6.4(b) below relating to
retirement from the industry) or for Cause; or
(iv) The expiration of three (3) years from the date of
the Participant's termination of employment by
reason of death or Disability; or
8
<PAGE>
(v) The date of termination of employment in the event
of a termination for Cause.
(b) EFFECT OF DEATH, DISABILITY, RETIREMENT AND EARLY
RETIREMENT. Notwithstanding Section 6.4(a):
(i) Upon the death or Disability of the Participant,
each Option held by the Participant shall become
exercisable in full (without regard to any
installment or other vesting provisions thereof) and
shall be exercisable thereafter until the first to
occur of the dates set forth in Section 6.4(a)(i),
(ii) or (iv).
(ii) Upon Retirement, each Option held by the Participant
shall become exercisable in full (without regard to
any installment or other vesting provisions thereof)
and shall be exercisable by the Participant until
the earlier of the date of termination of the Option
set forth in the Award Agreement or the expiration
of ten (10) years from the Grant Date of the Option.
(iii) Upon Early Retirement, each Option held by a
Participant who from such Early Retirement retires
and remains retired from the industry (a "sunset
arrangement") shall remain outstanding and, to the
extent not then exercisable, shall become
exercisable in accordance with the installment or
other vesting provisions thereof as if the
Participant continued as an Employee of the Company
or a Subsidiary during such sunset arrangement. The
Options, to the extent exercisable at Early
Retirement or which become exercisable during the
sunset arrangement shall remain exercisable by the
Participant until the earlier of the date of
termination of the Option set forth in the Award
Agreement or the expiration of ten (10) years from
the Grant Date. In the event the Participant does
not remain so retired in accordance with the sunset
arrangement, then the Participant shall be deemed to
have terminated employment under circumstances
described in Section 6.4(a)(iii) above as of such
date he or she fails to be so retired and his or her
Options shall terminate on the first to occur of the
dates set forth in Section 6.4(a)(i), (ii) or (iii).
9
<PAGE>
(iv) In the event of the death of the Participant after
his Retirement or Early Retirement, but prior to the
expiration of his or her Options, then his or her
Options shall be exercisable in full by his or her
beneficiaries until the earlier of the date such
Options would have expired had the Participant
survived until such date or the expiration of three
(3) years for the date of the Participant's death.
(c) COMMITTEE DISCRETION. Subject to the limits of Section
6.4(a) and (b) above, the Committee, in its sole discretion
shall provide in each Award Agreement when each Option
expires and becomes unexercisable. In the event the Award
Agreement does not set forth such provisions, then the
Option evidenced thereby shall expire and become
unexercisable in accordance with the provisions of Section
6.4(a) and (b) above.
6.5 EXERCISABILITY OF OPTIONS. Options granted under the Plan shall be
exercisable at such times and be subject to such restrictions and conditions as
the Committee shall determine in its sole discretion and prescribe in the Award
Agreement. In the event that the Award Agreement does not set forth times with
respect to the exercisability of Options, then each such Option granted to an
Employee shall become exercisable on the first anniversary of the Grant Date to
the extent of one-fourth (25%) of the Shares which may be purchased under the
Option (rounded down to the nearest whole number), and on each of the second,
third and fourth anniversary of the Grant Date to the extent of an additional
one-fourth (25%) of such Shares. After an Option is granted, the Committee, in
its sole discretion, may accelerate the exercisability of the Option.
Notwithstanding the foregoing, upon a Change in Control, any and all Options
granted under this Article 6 shall become immediately exercisable in full.
6.6 PAYMENT. Options shall be exercised by the Participant's delivery
of a written notice of exercise to the Secretary of the Company (or its
designee), setting forth the number of Shares with respect to which the Option
is to be exercised, accompanied by full payment for the Shares.
Upon the exercise of any Option, the Exercise Price shall be payable to
the Company in full in cash or its equivalent. The Committee, in its sole
discretion, also may permit exercise (a) by tendering previously acquired Shares
having an aggregate Fair Market Value at the time of exercise equal to the total
Exercise Price, or (b) by any other means which the Committee, in its sole
discretion, determines to both provide legal consideration for the Shares, and
to be consistent with the purposes of the Plan.
As soon as practicable after receipt of a written notification of
exercise and full payment for the Shares purchased, the Company shall deliver to
the Participant (or the Participant's designated broker), Share certificates
(which may be in book entry form) representing such Shares.
10
<PAGE>
6.7 RESTRICTIONS ON SHARE TRANSFERABILITY. The Committee may impose
such restrictions on any Shares acquired pursuant to the exercise of an Option
as it may deem advisable, including, but not limited to, restrictions related to
applicable Federal securities laws, the requirements of any national securities
exchange or system upon which Shares are then listed or traded, or any blue sky
or state securities laws.
6.8 CERTAIN ADDITIONAL PROVISIONS FOR INCENTIVE STOCK OPTIONS.
(a) EXERCISABILITY. The aggregate Fair Market Value (determined
on the Grant Date(s)) of the Shares with respect to which
Incentive Stock Options are exercisable for the first time
by any Employee during any calendar year (under all plans
of the Company and its Subsidiaries) shall not exceed
$100,000, provided, however, that in the event that
acceleration of the exercisability of an Incentive Stock
Option would cause such $100,000 limitation to be exceeded,
then those Incentive Stock Options up to such $100,000
limitation (determined in the order such Options were
granted) shall continue to be Incentive Stock Options and
the remainder shall be Nonqualified Stock Options.
(b) TERMINATION OF EMPLOYMENT. No Incentive Stock Option may be
exercised more than three (3) months after the
Participant's termination of employment with the Company
and all Subsidiaries for any reason other than Disability
or death (in which case the Incentive Stock Option may be
exercised until the expiration of one (1) year from the
date of death or disability), unless (i) the Participant
dies during such three-month period, in which case the
Incentive Stock Option may be exercised by his or her
beneficiaries until the expiration of one (1) year from the
date of death (this Section 6.8(b)(i) is not applicable to
Awards granted to employees of Sames S.A.), or (ii) the
Award Agreement or the Committee permits later exercise,
provided that if the Incentive Stock Option is not
exercised within such three (3) month or one (1) year
periods, whichever is applicable, then such Incentive Stock
Option shall become a Nonqualified Stock Option.
(c) EMPLOYEES ONLY. Incentive Stock Options may be granted only
to individuals who are Employees (other than consultants)
on the Grant Date.
(d) EXPIRATION. No Incentive Stock Option may be exercised
after the expiration of ten (10) years from the Grant Date;
provided, however, that if the Option is granted to an
Employee who, together with persons whose stock ownership
is attributed to the Employee pursuant to section 424(d) of
the Code, owns stock possessing more than 10% of the total
combined voting power of all classes of the stock of the
Company or any of its
11
<PAGE>
Subsidiaries, the Option may not be exercised after the
expiration of five (5) years from the Grant Date.
ARTICLE 7.
NON-EMPLOYEE DIRECTORS
7.1 GRANTING OF OPTIONS.
(a) INITIAL AWARDS. Each Non-Employee Director who (i) is a
Non-Employee Director on the Effective Date of the Plan or
(b) first becomes a Non-Employee Director after the
Effective Date of the Plan shall be granted a Nonqualified
Stock Option to purchase 3,000 Shares. Such Option shall be
granted on either the Effective Date of the Plan, or the
date such person first becomes a Non-Employee Director, as
the case may be.
(b) ANNUAL AWARDS. Thereafter, for so long as the Non-Employee
Director remains such, he or she annually shall be granted
an Option for an additional 2,000 Shares. Each such Option
shall be granted on the date of each Annual Meeting of
Stockholders, commencing with the 1997 Annual Meeting of
Stockholders, but only if the Non-Employee Director will
continue to serve as a Director after such Annual Meeting.
(c) OTHER AWARDS. The Board of Directors may in its discretion
increase the number of Shares subject to an initial Award
or annual Award in recognition of significant additional
duties and responsibilities assumed by a Non-Employee
Director in connection with his or her service as chairman
of the Board of Directors or other positions on the Board
of Directors.
(d) NON-EMPLOYEE DIRECTORS OF SAMES S.A. All Non-Employee
Directors of Sames S.A. are excluded from the scope of this
Article 7.
7.2 TERMS OF OPTIONS.
(a) OPTION AGREEMENT. Each Option granted pursuant to this
Article 7 shall be evidenced by an Award Agreement which
shall be executed by the Participant and the Company.
12
<PAGE>
(b) EXERCISE PRICE. The Exercise Price for the Shares subject
to each Option granted pursuant to this Article 7 shall be
100% of the Fair Market Value of such Shares on the Grant
Date.
(c) EXERCISABILITY. Each initial Award granted pursuant to
Section 7.1(a) shall become exercisable on the first
anniversary of the Grant Date to the extent of one-fourth
(25%) of the Shares which may be purchased under the Option
(rounded down to the nearest whole number), and on each of
the second, third and fourth anniversary of the Grant Date
to the extent of an additional one-fourth (25%) of such
Shares. After an Option is granted, the Committee, in its
sole discretion, may accelerate the exercisability of the
Option. Notwithstanding the foregoing, upon a Change in
Control, any and all Options granted under this Article 7
shall become immediately exercisable in full. Each annual
Award granted pursuant to Section 7.1(b) shall become
exercisable in full on the first anniversary of the Grant
Date.
(d) EXPIRATION OF OPTIONS. Each Option granted under this
Article 7 shall terminate upon the first to occur of the
following events:
(i) The expiration of ten (10) years from the Grant
Date; or
(ii) The expiration of one (1) month from the date of the
termination of the Participant's service as a
Director for a reason other than death, Disability,
Retirement or Cause; or
(iii) The expiration of three (3) years from the date of
the termination of the Participant's service as a
Director by reason of death or Disability; or
(iv) The date of termination of the Participant's service
as a Director for Cause.
(e) EFFECT OF DEATH, DISABILITY OR RETIREMENT.
(i) Upon the death or Disability of the Participant,
each Option granted under this Article 7 held by the
Participant shall become exercisable in full
(without regard to any installment or other vesting
provisions thereof) and shall be exercisable
thereafter until the first to occur of the dates set
forth in Section 7.2(d)(i) or (iii).
(ii) Upon Retirement, each Option granted under this
Article 7 held by the Participant shall become
exercisable in full (without regard to any
installment or other vesting provisions thereof) and
shall be
13
<PAGE>
exercisable by the Participant until the expiration
of ten (10) years from the Grant Date of the Option.
(iii) In the event of the death of the Participant after
his or her Retirement, but prior to the expiration
of his or her Options granted under this Article 7,
such Options shall be exercisable in full by his or
her beneficiaries until the earlier of the date such
Options would have expired had the Participant
survived until such date or the expiration of three
(3) years from the date of the Participant's death.
(f) OTHER TERMS. All provisions of the Plan not inconsistent
with this Article 7 shall apply to Options granted to
Non-Employee Directors.
ARTICLE 8.
BENEFICIARY DESIGNATION
Each Participant under the Plan may, from time to time, name any
beneficiary or beneficiaries (who may be named contingently or successively) to
whom any benefit under the Plan is to be paid in case of his or her death before
he or she receives any or all of such benefit. Each such designation shall
revoke all prior designations by the same Participant, shall be in a form
prescribed by the Company, and will be effective only when filed by the
Participant in writing with the Secretary of the Company during the
Participant's lifetime. In the absence of any such designation, benefits
remaining unpaid at the Participant's death shall be paid to the Participant's
estate. Provided, however, Awards granted to employees of Sames S.A. shall be
excluded from this Article 8.
ARTICLE 9.
DEFERRALS
The Committee may permit a Participant to defer such Participant's
receipt of the delivery of Shares that would otherwise be due to such
Participant upon the exercise of any Option.
ARTICLE 10.
LIMITED TRANSFERABILITY
The Committee may, in its discretion, authorize all or a portion of the
Options (other than Incentive Stock Options) granted to a Participant to be on
terms which permit transfer by such Participant to (a) the spouse, children or
grandchildren of the Participant ("Immediate Family Members"), (b) a trust or
trusts for the exclusive benefit of such Immediate Family Members, or (c) a
partnership in which such Immediate Family Members are the only partners,
provided that (i) there may be no consideration for any such transfer, (ii) the
Award Agreement pursuant to
14
<PAGE>
which such Options are granted expressly provides for transferability in a
manner consistent with this Article 10, and (iii) subsequent transfers of
transferred Options shall be prohibited except those in accordance with Article
8. Following transfer, any such Options shall continue to be subject to the same
terms and conditions as were applicable immediately prior to transfer, provided
that for purposes of Article 8 hereof the term "Participant" shall be deemed to
refer to the transferee. The provisions of Articles 6 and 7 relating to the
period of exercisability and expiration of the Option shall continue to be
applied with respect to the original Participant, and the Options shall be
exercisable by the transferee only to the extent, and for the periods, set forth
in said Articles 6 and 7.
15
<PAGE>
ARTICLE 11.
AMENDMENT, MODIFICATION, AND TERMINATION
11.1 AMENDMENT, MODIFICATION, AND TERMINATION. The Board may at any
time and from time to time, alter, amend, suspend or terminate the Plan in whole
or in part; subject to any requirement of stockholder approval imposed by
applicable law, rule or regulation.
11.2 AWARDS PREVIOUSLY GRANTED. No termination, amendment, or
modification of the Plan shall adversely affect in any material way any Award
previously granted under the Plan, without the written consent of the
Participant holding such Award.
ARTICLE 12.
WITHHOLDING
12.1 TAX WITHHOLDING. The Company shall have the power and the right to
deduct or withhold, or require a Participant to remit to the Company, an amount
sufficient to satisfy Federal, state, and local taxes, domestic or foreign,
required by law or regulation to be withheld with respect to any taxable event
arising as a result of the Plan.
12.2 SHARE WITHHOLDING. With respect to withholding required upon the
exercise of Options, or upon any other taxable event arising as a result of
Awards granted hereunder, Participants may elect to satisfy the withholding
requirement, in whole or in part, by having the Company withhold Shares having a
Fair Market Value on the date the tax is to be determined equal to the minimum
statutory total tax which would be imposed on the transaction. All such
elections shall be irrevocable, made in writing, signed by the Participant, and
shall be subject to any restrictions or limitations that the Committee, in its
sole discretion, deems appropriate.
ARTICLE 13.
SUCCESSORS
All obligations of the Company under the Plan with respect to Awards
granted hereunder shall be binding on any successor to the Company, whether the
existence of such successor is the result of a direct or indirect merger,
consolidation, purchase of all or substantially all of the business and/or
assets of the Company or otherwise.
ARTICLE 14.
LEGAL CONSTRUCTION
16
<PAGE>
14.1 GENDER AND NUMBER. Except where otherwise indicated by the
context, any masculine term used herein also shall include the feminine; the
plural shall include the singular and the singular shall include the plural.
14.2 SEVERABILITY. In the event any provision of the Plan shall be held
illegal or invalid for any reason, the illegality or invalidity shall not affect
the remaining parts of the Plan, and the Plan shall be construed and enforced as
if the illegal or invalid provision had not been included.
14.3 REQUIREMENTS OF LAW. The granting of Awards and the issuance of
Shares under the Plan shall be subject to all applicable laws, rules, and
regulations, and to such approvals by any governmental agencies or national
securities exchanges as may be required.
14.4 GOVERNING LAW. To the extent not preempted by Federal law, the
Plan, and all agreements hereunder, shall be construed in accordance with and
governed by the laws of the State of Delaware.
ARTICLE 15.
COMMITTEE DISCRETION IN CONNECTION
WITH AWARDS TO FOREIGN EMPLOYEES
Notwithstanding any provision of this Plan to the contrary, with
respect to the grant of any Award to an individual employed in a foreign
country, the Committee in its sole discretion may provide in the Award Agreement
for such Awards terms and provisions as the Committee shall deem necessary or
appropriate to enable such Award to comply with applicable foreign law,
provided, however, that except for Awards granted pursuant to Section 6.3(c) of
the Plan, in no event shall the exercise price of any award be less than Fair
Market Value as of the Grant Date.
17
<PAGE>
EXHIBIT 21.1
SAMES CORPORATION
SUBSIDIARIES
1. Sames, S.A.
2. Sames Scandinavia
3. Sames Corporation (Japan)
4. Sames North America, Inc.
<PAGE>
EXHIBIT 23.1
CONSENT OF KPMG LLP
The Board of Directors
Sames Corporation:
We consent to the incorporation by reference in Registration Statements
Nos. 333-92993 and 333-30191 on Form S-8 of Sames Corporation of our report
dated February 16, 2000 relating to the consolidated balance sheets of Sames
Corporation and consolidated subsidiaries as of November 30, 1999 and 1998, and
the related consolidated statements of operations, stockholders' equity, and
cash flows for each of the years in the three-year period ended November 30,
1999, which report appears in the November 30, 1999 annual report on Form 10-K
of Sames Corporation.
KPMG LLP
Chicago, Illinois
February 25, 2000
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<PAGE>
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<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-30-1999
<PERIOD-START> DEC-01-1998
<PERIOD-END> NOV-30-1999
<CASH> 6,171
<SECURITIES> 0
<RECEIVABLES> 43,171
<ALLOWANCES> 0
<INVENTORY> 15,584
<CURRENT-ASSETS> 70,613
<PP&E> 10,938
<DEPRECIATION> 6,172
<TOTAL-ASSETS> 78,417
<CURRENT-LIABILITIES> 47,404
<BONDS> 2,767
0
0
<COMMON> 2,967
<OTHER-SE> 15,277
<TOTAL-LIABILITY-AND-EQUITY> 78,417
<SALES> 92,959
<TOTAL-REVENUES> 92,959
<CGS> 57,345
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<OTHER-EXPENSES> 38,136
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<INTEREST-EXPENSE> 863
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<INCOME-TAX> 1,475
<INCOME-CONTINUING> 3,140
<DISCONTINUED> (4,909)
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