UNITED STATES 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 (FEE REQUIRED)
For the fiscal year ended May 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from ............... to ..............
Commission file number 0-10095
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AUTOCLAVE ENGINEERS, INC.
(Exact name of registrant as specified in its charter)
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Pennsylvania 25-0941759
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
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2930 West 22nd Street 16506
Erie, Pennsylvania (Zip Code)
(Address of principal
executive offices)
Registrant's telephone number,
including area code: (814) 838-5700
---------------
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.15 par value
(Title of each class)
Continued
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Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. X
-----
On August 1, 1995, 3,436,566 shares of the Corporation's
Common Stock, $.15 par value, were held by non-affiliates. The
aggregate market value of such shares, computed by reference to
the closing price of the Corporation's Common Stock on NASDAQ-
NMS on July 28, 1995, was $48,971,066.
4,259,650 shares of the Corporation's Common Stock, $.15 par
value, were outstanding on August 1, 1995.
DOCUMENTS INCORPORATED BY REFERENCE
None
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PART I
Item 1. Business.
GENERAL
Autoclave Engineers, Inc. (the "Company" or "Autoclave") was
incorporated in Pennsylvania in 1958 and is the successor in
interest, as the result of a merger, to Autoclave Engineers,
Inc., an Illinois corporation founded in 1946. From fiscal year
1986 through fiscal year 1995, the Company consisted of three
independent operating segments. One segment was comprised of
Burton Corblin, S.A., located in France, and Burton Corblin North
America, Inc., located in the USA, collectively Burton Corblin.
Burton Corblin designed and manufactured high pressure diaphragm
and piston compressors and associated equipment. In January
1995, the Company sold this segment. Autoclave Products was the
second business segment of the Company and was comprised of the
Autoclave Engineers Group and the Autoclave Engineers Europe
division, collectively Autoclave Engineers or AEG. Autoclave
Engineers designed, manufactured and marketed autoclaves,
compressors, valves, fittings and related systems, components and
accessories principally for elevated temperatures and/or pressure
applications. During the fourth quarter of fiscal 1995, the
Company formalized a plan for the disposition of AEG. On August
14, 1995, the Company entered into an agreement to sell AEG to
Snap-tite, Inc. The third, and only remaining business segment
of the Company, is the design and manufacture of mass flow
controllers ("MFC's") through the Company's Unit Instruments,
Inc. ("Unit") subsidiary. MFC's are precision devices that
control the flow of gases into wafer fabrication chambers that
are integral in the manufacture of integrated circuits, commonly
referred to as "ICs".
Autoclave maintains its principal executive offices at 2930
West 22nd Street, Erie, Pennsylvania 16506; but, intends to
relocate these offices to the facilities occupied by Unit
Instruments, Inc. in Yorba Linda, California.
DISCONTINUED OPERATIONS
In January, 1995 the Company sold Burton Corblin to James
Howden & Godfrey Overseas Limited ("Howden") for $9.1 million and
the forgiveness of certain debt. A gain on this divestiture has
been recorded in fiscal 1995 and the results of Burton Corblin's
operations through the date of sale have been accounted for as
income from discontinued operations. The Company's Autoclave
Engineers Europe ("AEE") division, which was located in certain
facilities of Burton Corblin in France, was not part of the sale
to Howden; but management concluded that without Burton Corblin's
administrative support for AEE, the continued operation of AEE
was not feasible. The AEE operation has been restructured for
sale; the cost of which has been charged against the results of
AEG's operations for the year.
Given the formalized plan for the disposition of AEG, this
operation also has been treated as a discontinued operation for
reporting purposes. The assets and liabilities relating to AEG
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have been classified on the balance sheet under the heading
"Assets of Discontinued Operations Held for Sale". In connection
with the fourth quarter 1995 decision to dispose of AEG, the
costs to restructure and dispose of AEE (previously included in
the third quarter gain on the sale of Burton Corblin) were
reclassified to AEG's results from discontinued operations.
Based upon the expected net proceeds from the pending sale of
AEG, a gain on sale, net of tax, is expected to be recognized in
the fiscal year ending May 31, 1996. Operating results of AEG
through the anticipated date of disposal are also expected to be
positive.
See Notes 1 and 2 of Notes to Consolidated Financial
Statements included in Item 8 of this Form 10-K for additional
information on these discontinued operations.
PRODUCTS
Unit designs and manufactures MFCs that are used to control
the flow of gases in the fabrication of semiconductor wafers.
These wafers are produced in process chambers that require the
introduction of various gases that are virtually contamination-
free and are precisely controlled as to flow rate and volume.
Unit produces two primary families of MFCs; Elastomeric and All-
Metal. The All-Metal MFCs are typically used in more demanding
process control environments and offer a higher level of
contamination-free gas delivery. MFCs represented over 85% of
Unit's sales for fiscal years 1995, 1994 and 1993.
Unit also produces a line of Pressure Controllers that
control the pressure of gas as it enters the fabrication chamber,
gas panels that integrate various flow components into a single
panel and, a Digital Power Supply, trade name DX-5, that can
control up to five Mass Flow Controllers or Meters. The Company
recently introduced a digital calibration device, SmartCable,
that plugs-in to existing analog MFCs and provides for automatic
calibration which improves gas delivery accuracy. Unit services
its customer base through four domestic service centers and
generates additional revenue from this service activity.
AEG has developed complete system capability with
accompanying instrumentation, sub-systems and components for use
in high pressure processes and research. AEG's products include
autoclaves, compressors, valves, fittings, tubing,
instrumentation, controllers and related accessories. AEG also
manufactures sophisticated bench-top chemical reaction systems
for process research. AEG provides both standard products and
specially engineered products for specific customer applications.
AEG participates in a 50/50 joint venture agreement with the
Swedish multi-national firm, ASEA Brown Boveri. The joint
venture, called ABB Pressure Systems AB, located in Columbus,
Ohio, markets worldwide hot and cold isostatic presses
manufactured by either AEG's facility in Erie, or ASEA's Quintas
Press Division in Sweden, depending upon the size and parameters
of the particular press system. The joint venture gives each
party access to the other's technology while providing the
financial strength that this continually advancing, leading-edge
technology demands.
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APPLICATIONS
Unit's products are sold principally to semiconductor
manufacturers. Unit's technology has potential application in
the petrochemical, fiber optic and other industries.
AEG's products are used in research and critical production
applications by a number of diverse industries, including the
chemical, petrochemical, materials forming, energy, aerospace,
defense and electronics industries.
DISTRIBUTION AND MARKETING
Unit distributes its products primarily through a direct
sales and application engineering team of 24 representatives
which is supplemented by several independent international
distributors. The Company actively employs several methods to
market its products, including regular participation in trade
shows, frequent advertisement in trade journals, submission of
demonstration products to selected Original Equipment
Manufacturers (OEMs) and end-users for evaluation and
participation in prototype development efforts by major customers
for "next" generation equipment.
Unit sells approximately 75% of its product to OEMs and the
balance to end-users. OEM customers and potential customers
include the world's leading manufacturers of semiconductor wafer
processing equipment including Applied Materials, Lam Research,
Tokyo Electron, Watkins-Johnson, Novellus and others. End-user
customers and potential customers include the world's leading
manufacturers of semiconductors including Intel, Motorola, IBM,
AMD, Samsung, Toshiba, and Siemens.
For fiscal year 1995, Applied Materials accounted for 37% of
the continuing Company's net sales and Lam Research accounted for
18% of net sales.
Approximately 10%, 10% and 14% of the Unit's net sales were
exported from the United States in fiscal 1995, 1994 and 1993,
respectively.
AEG's marketing activities in the United States and Canada
are handled by an employee field staff, the majority of whom are
sales engineers, operating out of its Erie location, a direct
sales office located in Texas and one sales office in Canada.
AEG also uses domestic independent sales agents and independent
distributors. Sales in foreign countries are presently handled
by one direct sales office in France and by independent sales
agents and independent distributors. The field sales activities
are supported by an administrative staff in Erie, Pennsylvania
including application engineers. AEG also markets certain of its
products domestically and abroad through manufacturers'
representatives.
AEG maintains distribution warehouses for standard valves
and fittings in Houston, Texas and Burlington, Canada.
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The Company's standard warranty on its products covers
repair and replacement of defective products for a period of one
year from the date of shipment. The Company employs full-time
field service personnel to provide repair, maintenance and
warranty services for domestic and foreign customers.
BACKLOG
The Company's backlog for continuing operations at May 31,
1995 was approximately $3.3 million, compared to backlog at May
31, 1994 of approximately $2.4 million, General industry
practice allows for orders to be rescheduled or canceled without
significant penalty. Most customer orders in backlog are
deliverable within one to four weeks and, accordingly, the
Company's backlog at any given date is not necessarily indicative
of actual sales for any succeeding period.
INVENTORY AND WORKING CAPITAL
Unit is required to carry significant amounts of inventory
to meet the rapid delivery requirements of its customers and to
buffer against extended leadtimes for certain raw materials. The
Company does not provide extended payment terms to its domestic
customers, but does selectively extend payments terms to certain
international customers. Returns for customer convenience are
not allowed by the Company.
PRODUCT DEVELOPMENT
Unit is a leader in the development of mass flow controllers
and peripheral accessories. The Company commits substantial
resources toward enhancing existing products and developing new
products that establish industry standards for performance,
reliability and pricing.
For fiscal 1995, 1994 and 1993, Unit spent $1,874,000,
$1,067,000 and $762,000, respectively, for research and
development activities.
INTELLECTUAL PROPERTY
The Company has a policy to aggressively seek patents on new
products and improvements when appropriate. Unit currently holds
14 U.S. patents and has applied for 6 additional U.S. patents.
In addition, Unit has 8 foreign patents and 14 pending
applications. Although the Company believes its patents have
value and could potentially provide a competitive advantage, it
believes the success of the business depends on innovation,
technical expertise and know-how of its personnel, along with
other factors.
<PAGE>
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COMPETITION
The market for Unit's mass flow controllers is highly
competitive. Significant competitive factors include product
quality, performance and capabilities, price, delivery leadtimes,
customer service and support, breadth of product offering, size
of installed base and historical relationship with the customer.
The Company believes that it competes favorably with respect to
these competitive factors, with the primary exception of being
predominantly a one-product supplier, i.e. mass flow controllers.
Unit has three major domestic competitors and two Japanese
competitors. Unit has a small manufacturing facility in Japan to
support and augment its efforts to penetrate the Japanese market;
and while some market share penetration has occurred, it is still
limited. For Unit to maintain and enhance its competitive
position, significant investments in engineering, manufacturing
process improvements, marketing, customer service and support
will be required in the future.
Although AEG is not aware of any other single company which
markets its full line of products, AEG's business is subject to
intense competition. Many of AEG's competitors (including
customers who may elect to manufacture high pressure systems or
catalytic reaction systems for internal use) have financial,
marketing and other resources greater than those of AEG. There
are a number of companies that specialize in a limited number of
the products manufactured by AEG.
The most significant competitive factors with respect to
AEG's products are technical performance, quality control and the
engineering and sales service support experience of its
personnel. Certain products sold by AEG's competitors are less
expensive than comparable products sold by AEG, thereby
subjecting these products to intense price competition.
MANUFACTURING AND SUPPLIERS
Unit designs, manufactures and assembles precision
components at its own facilities but also relies on third-party
suppliers for various machined parts and subassemblies. All
final assembly activity is performed in cleanrooms. Unit has
three manufacturing facilities: the main facility in Yorba
Linda, California; and two smaller facilities in Japan and
Ireland. Customers are increasingly seeking reductions in
leadtimes, increases in quality and higher price/performance
levels. To meet and exceed customer expectations, several
manufacturing strategies have been implemented, including TQM and
team benchmarking. The Company is in the process of implementing
ISO 9001 certification for its Yorba Linda facility and expects
this to be accomplished during fiscal year 1996.
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Most materials used in Unit's products are standard items
that are available from multiple sources. However, certain
machined parts and raw materials are obtained from a single
source or a limited number of suppliers. In addition, selected
raw materials have an extended leadtime. Although the Company
seeks to limit its dependency on sole or limited source suppliers
and to reduce leadtimes for raw materials, the partial or
complete loss of these suppliers or an abrupt change in leadtimes
for raw material could have a material adverse effect on the
Company's results of operations.
The principal material used by AEG in manufacturing
autoclaves, valves, fittings and related parts and equipment is
stainless steel, which is purchased in a variety of shapes and is
produced by AEG's raw materials suppliers in accordance with
rigid chemical and physical specifications established by AEG.
AEG purchases other metals such as inconel, nickel, monel,
hastelloy and titanium that are used in the production of
autoclaves. AEG also purchases forgings, magnets, pumps,
compressors, controls and instruments.
AEG has not experienced and does not foresee any
availability problems with respect to components of such products
beyond periodic shortages created by changing economic
conditions.
REGULATION
In the U.S.A., most states require high pressure systems to
comply with specifications established by the American Society of
Mechanical Engineers Code ("ASME Code"), which provides technical
guidelines for designing, manufacturing and quality control of
the systems. Some states have additional safety code
requirements for high pressure systems. Equipment used in
commercial nuclear facilities is subject to quality control and
quality assurance procedures established by the Nuclear
Regulatory Commission. Foreign governments regulate the sale,
installation and use of high pressure systems in their
jurisdictions and many of their regulations vary from the ASME
Code. The Corporation believes it has obtained all applicable
regulatory approvals for its products.
ENVIRONMENTAL COMPLIANCE
The Company's facilities are subject to federal, state and
local environmental control regulations. To date, compliance
with environmental regulations has not had a material effect on
the Company's earnings nor has it required the Company to expend
significant capital expenditures. See Note 12D of Notes to
Consolidated Financial Statements.
INSURANCE
Because some of the products of AEG are subject to extreme
pressures and temperatures, there are potential exposures to
personal injury as well as property damage, particularly if
operated without regard to the design limits of the systems and
components.
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AEG endeavors to minimize its product liability exposure and
insurance costs by engineering safety devices for its products,
carefully monitoring incidents involving its products to
determine areas where safety improvements may be made, and
encouraging its customers to carry out necessary maintenance and
training programs in connection with its products. Although the
Company believes that it maintains adequate product liability
insurance coverage obtained through various insurance companies,
there is no assurance that its coverage will be sufficient to
cover future claims against the Company.
EMPLOYEES
As of May 31, 1995, Unit had a total of 365 full-time and
temporary employees, of which 294 were in manufacturing and
service support, 24 in marketing, sales and applications
engineering, 24 in product development, and 23 in finance and
administration. In addition, the Company had 181 employees in
its Autoclave Engineers Group. All current employees of AEG will
be offered employment by the proposed purchaser of AEG, with the
exception of approximately 6 employees involved primarily in
corporate administrative functions. None of the Company's
employees are represented by a union or other collective
bargaining group, and the Company considers its relationship with
its employees to be good.
EXECUTIVE OFFICERS OF THE COMPANY
The following table sets forth the names of all executive
officers of the Company, their ages and their positions with the
Company
Name Age Positions with Corporation
James C. Levinson 67 Chairman of the Board of
Directors
William F. Schilling 53 Director; President and Chief
Executive Officer; President
of Autoclave Engineers Group
Michael J. Doyle 42 Director; President and
Chief Executive Officer
of Unit Instruments, Inc.
Thomas C. Guelcher 55 Vice President, Corporate
Development and Chief
Financial Officer
John G. Sontag 46 Treasurer, Secretary and
Corporate Controller
* * *
Mr. Levinson has served as a director of the Company since
1961 and was President and Chief Executive Officer from 1966
until April 30, 1992.
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Dr. Schilling joined AEG in June 1989 as assistant to the
President of AEG. He became Executive Vice President of AEG in
April 1990 and was named President of AEG, effective June 1,
1991. On April 30, 1992, he was named President and Chief
Executive Officer of the Company.
Mr. Doyle has served as a director of the Company since
1984. Mr. Doyle was a co-founder of Unit in 1980 and has served
since that date as Unit's President and Chief Executive Officer.
Mr. Guelcher joined the Company in 1989. Prior to that he
held various managerial positions during his 23 years of service
at International Paper, formerly Hammermill Paper Co., the last
being Treasurer.
Mr. Sontag has been Treasurer since 1982, Secretary since
1985 and Corporate Controller since 1989.
* * *
Each officer holds office until his successor is elected or
until his death, resignation or removal.
Mr. Levinson is the husband of Marilyn G. Levinson, a
director of the Company. There are no other family relationships
between any officers and directors.
Item 2 - Properties
Unit leases an 80,000 square foot facility in Yorba Linda,
California for manufacturing and support activities. This lease
expires in 2001 but provides for renewal options. Unit owns a
4,000 square foot manufacturing facility in Dublin, Ireland;
leases a 2,850 square foot manufacturing facility in Tokyo,
Japan; and has four leased service centers in San Jose,
California; Tempe, Arizona; Dallas and Austin, Texas.
The Company owns a 60,000 square foot building in Erie,
Pennsylvania and also owns, or leases under a long-term capital
lease from the Erie County Industrial Development Authority,
other contiguous buildings with approximately 40,000 square feet.
The lease with Erie County Industrial Development Authority
expires in 1998. Under terms of this lease, the Company has the
right to purchase for a nominal sum the property to which this
lease is related at the lease expiration date. The Company also
owns a 12,000 square foot facility in Oxford, Pennsylvania that
is being leased to a third party. The Company will transfer its
interest in the above property to the buyer of AEG.
The Company's domestic manufacturing operations are being
utilized generally on one full shift and partial second and third
shifts, while the foreign operations operate on a single shift.
Management believes that the Company's existing facilities will
be adequate for its immediate needs.
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Item 3. Legal Proceedings.
Unit is not a party to any claims or legal proceedings.
AEG is involved in a number of claims and legal proceedings
of a nature considered normal to its business, principally
product liability matters. Certain of these cases seek damages
which, if awarded, would require sizeable payments. While it is
not feasible to predict the outcome of these actions
with certainty, management of the Company, based upon available
information, believes that any liability that may arise from
these proceedings will not have a material adverse effect on the
consolidated financial condition or projected results of
operations of the Company.
Item 4. Submission of Matters to a Vote of Security Holders.
During the fourth quarter of the fiscal year covered by this
report, no matter was submitted to a vote of security holders of
the Company.
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PART II
Item 5. Market for the Company's Common Equity and Related
Stockholder Matters.
Common Equity Market Data
The Common Stock of Autoclave Engineers, Inc. is traded in the
over-the-counter market through the National Association of
Securities Dealers Automated Quotation National Market System
(NASDAQ-NMS). The Company's NASDAQ-NMS symbol is ACLV. High and
low closing prices for the Company's Common Stock, as reported on
NASDAQ-NMS, and cash dividends paid per share, for the fiscal
quarters indicated, were as follows:
Period High Low Dividends Paid
1994 First Quarter $ 8.00 $ 7.00 $.06
Second Quarter 10.00 7.375 .06
Third Quarter 9.75 7.25 .06
Fourth Quarter 8.75 6.00 .06
1995 First Quarter $ 9.25 $ 7.375 $.06
Second Quarter 9.50 8.50 .06
Third Quarter 10.00 8.00 .06
Fourth Quarter 13.625 8.75 .06
The Company had 414 holders of record of its Common Stock on
May 31, 1995.
Under the covenants of one the Company's term debt agreements,
the aggregate amount of dividends that can be paid in any fiscal
year cannot exceed $1,100,000, subject to renegotiation in the
event of an additional stock issuance. (See Note 6 of Notes to
Consolidated Financial Statements.)
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<TABLE>
<CAPTION>
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Item 6. Selected Financial Data - (in thousands, except per share
data)
The following table provides a comparison of financial results for each of
the five fiscal years in the period ended May 31, 1995.
<S> <C> <C> <C> <C> <C>
Fiscal Year Ended May 31
1995 1994 1993 1992 1991
Net sales(1) $48,256 $33,141 $23,965 $21,500 $23,511
Income(loss) from
continuing operations
before cumulative
effect of accounting
change(1) 705 (212) (1,610) (696) (706)
Discontinued operations
Income, net 1,334 1,186 1,715 1,971 (274)
Gain on disposal, net 963 -- -- -- --
Net income(loss) 3,002 1,198 105 1,275 (980)
Earnings per share:
Income(loss) from
continuing operations
before cumulative
effect of accounting
change(1) .16 (.05) (.38) (.16) (.17)
Discontinued opera-
tions .53 -- -- -- --
Net income(loss) .69 .28 .02 .30 (.23)
Cash dividends
declared per share .24 .24 .24 .30 .24
Average shares used in
computing earnings
per share 4,340 4,268 4,233 4,243 4,178
Working capital $27,573 $25,128 $26,210 $26,605 $26,716
Total assets 51,902 58,250 61,823 61,292 63,845
Long-term debt 453 952 1,417 3,152 3,623
Shareholders' equity 38,478 37,721 38,087 38,894 38,623
</TABLE>
(1)Reclassified to reflect continuing operations. See Notes 1 and
2 of Notes to Consolidated Financial Statements for information
on discontinued operations.
During fiscal 1993, the Company changed its method of valuing
certain inventories from the last-in, first-out method to the
first-in, first-out method. The selected financial data for the
fiscal years 1991 and 1992 have been restated to reflect this
change in accounting principle. The impact on net earnings for
each of the restated years was: a decrease of $235,000, or $.06
per share in 1992 and a decrease of $460,000, or $.11 per share
in 1991.
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In fiscal 1994, the Company changed the method of accounting for
overhead costs in certain inventories. Prior to 1994, costs
related to material processing and handling activities were
applied to production as a function of direct labor incurred;
however, effective in 1994, they were applied based on their
relationship to material costs incurred. The cumulative effect
of adopting this change as of June 1, 1993 is included in the net
income and net income per share for the fiscal year ended May 31,
1994. Prior years' financial data have not been restated.
<TABLE>
<CAPTION>
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
(Amounts in thousands, except share data)
The following discussion and analysis should be read in conjunction
with the Company's consolidated financial statements and notes related
thereto. All information is based on Autoclave Engineers' fiscal year.
Results of Operations
The following table sets forth, for the periods indicated: (i)
certain income and expense items expressed as a percentage of the Company's
sales from continuing operations; and (ii) the percentage change in the
dollar amounts of such items from year to year:
<S> <C> <C> <C> <C> <C>
Year-to-Year
Percentage of Net Sales Increase(Decr)
----------------------- --------------
1995 1994 1993 94-95 93-94
---- ---- ---- ----- -----
Sales 100.0% 100.0% 100.0% 45.6% 38.3%
Cost of Sales 64.3 65.1 68.0 43.8 32.3
Selling and administration
expenses 27.6 30.1 38.7 33.4 7.6
Restructuring costs 2.5 -- -- N/M --
Research and
development expenses 3.9 3.2 3.2 75.6 40.0
Income(loss) before income taxes 1.9 0.6 (8.5) N/M N/M
Income(loss) from continuing
operations 1.5 -- (6.7) N/M N/M
N/M - Not Meaningful
</TABLE>
1995 Compared to 1994
Sales from continuing operations increased 46% to $48,256
for fiscal year 1995 reflecting, in part, the continuation of the
strong upturn in the semiconductor equipment market that began in
1993. The Company introduced two new metal seal mass flow
controller ("MFC") models in fiscal 1994 that gained excellent
market acceptance during the current fiscal year. These new
products accounted for the majority of the sales increase for the
year. In addition, average selling prices were generally higher
for the current fiscal period as compared to the prior year
period. The Company's older model MFCs recorded lower unit sales
for the year but favorable mix and high average selling prices
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resulting in stable revenue for the current period. Sales from
the Company's offshore operations were also stable for the fiscal
year.
Cost of sales, as a percent of sales, decreased slightly to
64% from the prior year's 65%. This decrease was attributable to
marginally lower overhead, as a percent of sales, at the
Company's main manufacturing facility in Yorba Linda, California
because of significantly higher volume levels. This improvement
was partially offset by higher expenses at the Company's facility
in Japan.
Selling and administration expenses and restructuring costs
increased $4,564 or 46% over the prior fiscal year. Unit
recorded higher expenses because of increased volume levels but
these expenses, as a percent of sales, decreased over the prior
year period. These expenses were $1,841 higher for the fiscal
year because of certain expenses associated with the
restructuring of the Company's corporate office activities,
including $1,230 in severance and related costs recorded in the
fourth quarter of 1995, which are expected to be paid in the
second quarter of 1996. The Company anticipates that corporate
expenses will decrease in the subsequent fiscal year as Unit
assumes these functions and certain cost savings are realized.
Research and development expenses increased 75% over the
prior year and increased as a percent of sales to 3.9% in fiscal
1995 from 3.2% for fiscal 1994. These higher expenses represent
additional staffing and increased development activity directed
toward product enhancements and new products.
Interest income increased to $230 in 1995 compared to $66 in
1994. The increase in interest income was attributable to higher
cash balances generated from the sale of Burton Corblin in 1995
which were offset, to a limited extent, by generally lower
interest rates. Interest expense decreased to $339 from $448
because of lower average borrowings outstanding and lower
interest rates on these borrowings.
The effective rate for income tax provided in 1995 was
approximately 25% compared to a 199% rate in the prior year.
The prior year rate was adversely impacted because of low pre-tax
income, the inclusion, for tax purposes, of nondeductible foreign
losses and other expense items, including goodwill and business
meal expenses, the adjustment of prior accruals, and the adoption
of Statement of Financial Accounting Standards (SFAS) No. 109 -
Accounting for Income Taxes.
Effective June 1, 1993, the Company adopted prospectively
SFAS No. 109. This Statement required the Company to change its
method of accounting for income taxes from the deferred method to
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the liability method which requires the recognition of deferred
tax assets and liabilities for the estimated future taxes payable
or recoverable, arising from temporary differences between the
tax bases of assets and liabilities and their financial statement
bases. The effect of adopting SFAS No. 109 was an increase to
the provision for income tax on continuing operations of
approximately $162 and a decrease on discontinued operations of
$25.
The Company's results of operations may be affected in the
future by a variety of factors including: the dependency of
sales on a few large customers, product mix, new product
introductions by the Company and the Company's competitors,
operating expenses and the scheduling of orders by customers. In
addition, the Company's results could be affected by demand for
semiconductor equipment, which has experienced strong growth the
past two years, and technology changes in the market.
During the third quarter of fiscal 1995, the Company sold
its compressor operations in the United States and France and
recorded a gain on disposal of this business segment. During the
fourth quarter, the Company recorded additional reserves for this
discontinued operation. Under the terms of the sale agreement,
the Company has retained certain known product warranty exposures
and has provided a commitment for the realization of purchased
assets, primarily accounts receivable. The current estimate of
these costs is $225,000 which has been provided for in 1995.
Approximately $365,000 of the proceeds from the sale remain in
escrow until settlement or realization of these contingencies.
In the fourth quarter of fiscal 1995, the Company developed
a plan for the disposition of its Autoclave Engineers Group
("AEG") business segment. Accordingly, this operation has been
accounted for as a discontinued operation for year-end reporting
purposes. A definitive agreement for sale has since been
executed, and based upon management's estimation of net proceeds
from the sale of AEG and associated costs relating to this sale,
a gain on disposal is probable and will be recorded when
realized, expected to be during the second quarter of fiscal
1996.
1994 Compared to 1993
Sales from continuing operations increased 38% to $33,141
for fiscal year 1994 as compared to the prior year's sales of
$23,965. Sales of MFCs were favorably impacted by a strong
upturn in the semiconductor equipment market and the introduction
of two new metal seal MFC models that received good market
acceptance. Sales into the Japanese market recovered modestly
<PAGE>
-17-
over the prior year because of increased activity in the
semiconductor market as did sales into the European market
through the Company's subsidiary in Ireland.
Cost of sales, as a percent of sales, decreased to 65% from
the prior year's 68%. This decrease in cost of sales resulted
from several factors: the absorption of fixed overhead costs at
the Company's main manufacturing facility in Yorba Linda over
significantly higher sales volume; increases in manufacturing
efficiencies; and, the favorable impact of new pricing
arrangements on certain long-term contracts. Lower cost of sales
at the Company's facility in Japan also contributed to the
overall improvement in the current fiscal year.
Selling and administration expenses increased $705 or 8%
over fiscal year 1993 but declined dramatically, as a percent of
sales, to 30% from almost 39% the prior year. Unit recorded
higher expenses for sales commissions and sales support
activities because of higher sales levels while Corporate
expenses declined marginally, reflecting the impact of tight
expense controls.
Research and development expenses increased 40% over the
prior year but remained constant, as a percent of sales, at 3.2%.
These higher expenses were directed toward a new model
development, product enhancements and continued work on advanced
sensor technology.
Interest income declined compared to the prior year because
of lower interest rates and a decrease in average cash balances
available for investment. Interest expense rose slightly because
of higher average borrowings outstanding during the fiscal year.
Other income dropped for the fiscal year to $70 from $563 the
prior year because of lower foreign currency exchange gains and
the recording, in fiscal 1993, of a $263 pre-tax gain on the sale
of stock in Autoclave Toll Services Limited.
Income taxes were provided for at a 199% rate in 1994 as
compared to 21% benefit in fiscal 1993. The 1994 rate was
adversely impacted by the factors previously mentioned. See Note
7 of Notes to Consolidated Financial Statements for a
reconciliation of the effective tax rate for each fiscal year to
the normal federal statutory rate of 34%.
<PAGE>
-18-
Liquidity and Capital Resources
Cash and short-term investments increased by $3,648 to
$9,384 at May 31, 1995. During the third quarter, the Company
sold its Burton Corblin subsidiary and received cash proceeds of
$8,312. Accounts receivable and inventory balances at Unit
increased approximately $4.6 million during the year in support
of rapidly increasing sales. This trend is expected to continue
during fiscal 1996.
Unit's capital expenditures were approximately $2.8 million
in the current fiscal year and are projected to be in the four to
five million dollar range over the next several years. These
expenditures are primarily required to augment manufacturing
capacities and capabilities in the production of MFCs. At May
31, 1995, the Company was not committed to any significant plant
or equipment contracts except $850 for construction of an
additional clean room at the Yorba Linda, California facility.
For fiscal 1995, research and development expenditures
totaled $1,874 which was a 76% increase over the prior year. The
Company anticipates that research and development charges will
increase by approximately 50% in the coming fiscal year and will
remain at a relatively high level for the foreseeable future.
In addition to the $9,384 cash and cash equivalents balances
at year-end, the Company had approximately $5.7 million available
under domestic credit facilities at May 31, 1995. In addition,
the Company expects to realize approximately $13 million in cash
from the sale of AEG during the second fiscal quarter of 1996.
The Company believes that these cash resources are adequate to
meet its near-term financing needs.
<PAGE>
-19-
Item 8. Financial Statements and Supplementary Data.
Report of Independent Accountants
To the Shareholders and the
Board of Directors of Autoclave Engineers, Inc.
In our opinion, the consolidated financial statements listed in
the accompanying index appearing under item 14(a) 1 and 2 on page
56 present fairly, in all material respects, the financial
position of Autoclave Engineers, Inc. and its subsidiaries at May
31, 1995 and 1994, and the results of their operations and their
cash flows for each of the three years in the period ended May
31, 1995, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of
the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with
generally accepted auditing standards which 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, assessing the accounting principles used and
significant estimates made by management, and evaluating the
overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed
above.
As discussed in Note 4 to these Consolidated Financial
Statements, the Company changed its method of accounting for
overhead costs in certain inventories in fiscal 1994.
Price Waterhouse LLP
600 Grant Street
Pittsburgh, Pennsylvania 15219
August 15, 1995
<PAGE>
<TABLE>
<CAPTION>
-20-
CONSOLIDATED STATEMENT OF INCOME
For the Fiscal Years Ended May 31, 1995, 1994 and 1993
(amounts in thousands, except share data)
<S> <C> <C> <C>
1995 1994 1993
Net sales $48,256 $33,141 $23,965
Operating costs and expenses:
Cost of goods sold 31,011 21,565 16,295
Selling and administration 13,317 9,983 9,278
Restructuring costs 1,230 -- --
Research and development 1,874 1,067 762
------- ------- -------
Operating income(loss) 824 526 (2,370)
Interest income 230 66 152
Interest expense (339) (448) (385)
Other income, net 222 70 563
------- ------- -------
Income(loss) from continuing
operations before income taxes,
and cumulative effect of
accounting change 937 214 (2,040)
Provision for(benefit from)
income taxes 232 426 (430)
------- ------- -------
Income(loss) from continuing
operations before cumulative
effect of accounting change 705 (212) (1,610)
Discontinued operations:
Income, net of income tax provision 1,334 1,186 1,715
of $1,119, $684 and $1,004 in 1995,
1994 and 1993, respectively
Gain on disposal, including tax 963 -- --
benefit of $171
Cumulative effect to June 1, 1993
of change in accounting for
certain overhead costs, net of
income tax provision of $125 -- 224 --
------- ------- -------
Net income (loss) $ 3,002 $ 1,198 $ 105
======= ======= =======
Per common share:
Income(loss) from continuing
operations before acct'g. change $ 0.16 $ (0.05) $ (0.38)
Discontinued operations:
Income 0.31 0.28 0.40
Gain on disposal 0.22 -- --
Cumulative effect of
accounting change -- 0.05 --
------- ------- -------
Net income(loss) $ 0.69 $ 0.28 $ 0.02
======= ======= =======
Average shares used in computing
earnings per share 4,340,384 4,267,533 4,233,489
======= ======= =======
The accompanying notes are an integral part of the consolidated financial
statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
-21-
CONSOLIDATED BALANCE SHEET
May 31, 1995 and 1994
(amounts in thousands, except share data)
<S> <C> <C>
Assets 1995 1994
------- -------
Current assets:
Cash and cash equivalents $ 4,465 $ 5,719
Short-term investments, at cost 4,919 17
Accounts and notes receivable 9,543 18,320
Inventories 8,440 14,318
Prepaid expenses and other 1,569 3,195
Net assets of discontinued operations held
for sale 11,072 --
------- -------
Total current assets 40,008 41,569
------- -------
Property, plant and equipment, at cost:
Land and improvements -- 266
Buildings and improvements 2,346 6,167
Machinery and equipment 9,338 19,648
------- -------
11,684 26,081
Accumulated depreciation and amortization 5,740 16,815
------- -------
5,944 9,266
Construction-in-progress 880 --
------- -------
6,824 9,266
------- -------
Property held for sale, net of accumulated
depreciation of $1,166 -- 996
Investment in equity interests -- 739
Goodwill, net of accumulated amortization
of $1,571, 1995; $1,417, 1994 4,490 4,643
Other assets 580 1,037
------- -------
$51,902 $58,250
======= =======
The accompanying notes are an integral part of the consolidated financial
statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
-22-
CONSOLIDATED BALANCE SHEET
May 31, 1995 and 1994
(amounts in thousands, except share data)
<S> <C> <C>
1995 1994
------- -------
Liabilities and Shareholders' Equity
Current liabilities:
Short-term borrowings - banks $ -- $ 1,500
Accounts and notes payable - trade 3,139 6,627
Accrued compensation and benefits 1,560 3,504
Income taxes 672 888
Current installments on term debt 3,156 703
Other current liabilities 3,908 3,219
------- -------
Total current liabilities 12,435 16,441
Term debt 453 952
Deferred income taxes 77 216
Other long-term liabilities and deferred credits 459 1,278
------- -------
13,424 18,887
------- -------
Excess of net assets acquired over cost -- 1,642
------- -------
Commitments and contingencies (Note 12)
Shareholders' equity:
Common stock, $.15 par value; authorized shares
12,000,000; issued: 4,416,193 shares 662 662
Additional paid-in capital 20,413 20,083
Retained earnings 18,171 16,183
Foreign currency translation adjustment (252) 1,369
------- -------
38,994 38,297
Less treasury stock, at cost: 173,888 shares,
1995; 201,573 shares, 1994 (516) (576)
------- -------
Total shareholders' equity 38,478 37,721
------- -------
$51,902 $58,250
======= =======
The accompanying notes are an integral part of the consolidated financial
statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
-23-
CONSOLIDATED STATEMENT OF CASH FLOW
For the Fiscal Years Ended May 31, 1995, 1994 and 1993
(amounts in thousands)
<S> <C> <C> <C>
1995 1994 1993
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 3,002 $ 1,198 $ 105
Adjustments to reconcile net income
to net cash provided from operating
activities:
Cumulative effect of accounting change, net -- (224) --
Depreciation and amortization 2,850 2,906 3,240
Deferred income taxes (828) (96) (158)
Equity interests (758) 103 71
Changes in assets and liabilities, net
of effect of business sold:
Accounts receivable (1,634) (2,050) 5,287
Inventories (2,817) (478) 2
Prepaids and other assets 312 (626) (303)
Accounts payable and accrued liabilities 4,232 2,188 (1,543)
Income taxes 283 (113) 427
Other current liabilities (34) (50) (55)
Loss on disposal of property,
plant and equipment 15 73 91
Gain on sale of business (963) -- (263)
Other 188 63 (281)
Net cash provided from operating activities 3,848 2,894 6,620
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (4,548) (2,363) (3,118)
Proceeds from sale of property, plant
and equipment 256 99 11
Proceeds from sale of business, net of cash 4,456 -- 1,596
Change in short-term investments (4,998) 6,611 (6,268)
Other 89 (210) (248)
Net cash provided from (used in)
investing activities (4,745) 4,137 (8,027)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on long-term debt (459) (431) (435)
Proceeds from issuance of long-term debt -- -- 483
Change in short-term borrowings, net 556 (3,467) 3,946
Cash dividends paid (1,014) (1,011) (1,007)
Other 141 7 212
Net cash provided from (used in)
financing activities (776) (4,902) 3,199
Effect of exchange rate changes on
cash and cash equivalents: 419 (317) (68)
Net increase(decrease) in cash and
cash equivalents (1,254) 1,812 1,724
Cash and cash equivalents at beginning of year 5,719 3,907 2,183
Cash and cash equivalents at end of year $ 4,465 $ 5,719 $ 3,907
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid $ 339 $ 269 $ 495
Income taxes paid $ 2,168 $ 1,441 $ 296
The accompanying notes are an integral part of the consolidated financial
statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
-24-
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
For the Fiscal Years Ended May 31, 1995, 1994 and 1993
(amounts in thousands, except share data)
<S> <C> <C> <C> <C> <C> <C>
Foreign
Currency
Addi- Trans-
Common tional lation
Stock Paid-In Retained Adjust- Treasury
Issued Capital Earnings ment Stock Total
------ -------- -------- -------- -------- -------
Balance at
May 31, 1992 $662 $19,956 $16,898 $2,047 $(669) $38,894
Transactions
during the
fiscal year
ended 5/31/93:
Net income 105 105
Dividends, $.24
per share (1,007) (1,007)
Issuance of
31,818 shares of
common stock
upon exercise of
stock options 123 90 213
Foreign currency
translation
adjustment (118) (118)
---- ------- ------- ------- ------ -------
Balance at
May 31, 1993 $662 $20,079 $15,996 $1,929 $ (579) $38,087
The accompanying notes are an integral part of the consolidated financial
statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
-25-
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
For the Fiscal Years Ended May 31, 1995, 1994 and 1993
(amounts in thousands, except share data)
<S> <C> <C> <C> <C> <C> <C>
Foreign
Currency
Addi- Trans-
Common tional lation
Stock Paid-In Retained Adjust- Treasury
Issued Capital Earnings ment Stock Total
------ ------- -------- --------- -------- -------
Balance at
May 31, 1993 $662 $20,079 $15,996 $1,929 $(579) $38,087
Transactions
during the
fiscal year
ended
May 31, 1994:
Net income 1,198 1,198
Dividends, $.24
per share (1,011) (1,011)
Issuance of
1,000 shares of
common stock
upon exercise of
stock options 3 3 6
Tax benefit from
compensation
arising from
exercise of
stock options 1 1
Foreign currency
translation
adjustment (560) (560)
---- ------ ------- ------- ------ --------
Balance at
May 31, 1994 $662 $20,083 $16,183 $1,369 $(576) $37,721
==== ======= ======= ====== ====== =======
The accompanying notes are an integral part of the consolidated financial
statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
-26-
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
For the Fiscal Years Ended May 31, 1995, 1994 and 1993
(amounts in thousands, except share data)
<S> <C> <C> <C> <C> <C> <C>
Foreign
Currency
Addi- Trans-
Common tional lation
Stock Paid-In Retained Adjust- Treasury
Issued Capital Earnings ment Stock Total
------ -------- -------- -------- -------- -------
Balance at
May 31, 1994 $662 $20,083 $16,183 $1,369 $(576) $37,721
Transactions
during the
fiscal year
ended 5/31/94:
Net income 3,002 3,002
Dividends, $.24
per share (1,014) (1,014)
Issuance of
31,815 shares of
common stock
upon exercise of
stock options 100 94 194
Purchase of 3,630
shares of common
stock for treasury (34) (34)
Tax benefit from
compensation arising
from exercise of
stock options 55 55
Issuance of 100,000,
4 year,warrants for
common stock at an
exercise price of
$8.925 to a financial
advisory firm 175 175
Relief of translation
adjustment balance
applicable to
discontinued
operations (1,626) (1,626)
Current year
translation activity 5 5
---- ------- ------- ------ ------ -------
Balance at
May 31, 1995 $662 $20,413 $18,171 $ (252) $ (516) $38,478
==== ======= ======= ====== ======= =======
The accompanying notes are an integral part of the consolidated financial
statements.
</TABLE>
<PAGE>
-27-
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except share data)
1. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of the significant accounting
policies followed by the Company in the preparation of the
accompanying consolidated financial statements.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts
of Autoclave Engineers, Inc. and its subsidiaries (the Company).
The fiscal year for the Company is a twelve-month year ending on
May 31.
The Company sold its Burton Corblin operations in January
1995 and has developed a plan to sell the Autoclave Engineers
Group (AEG). Both of these operations have been accounted for as
discontinued operations in the accompanying financial statements.
The Consolidated Statement of Income reflects the results from
the continuing operations of Unit Instruments, Inc. and its
subsidiaries and corporate activities while the results of the
discontinued operations have been segregated and shown separately
for all years presented. The net assets of AEG including related
deferred taxes have been classified as a single line item on the
Balance Sheet at May 31, 1995. Prior years' information for
discontinued operations on the Consolidated Balance Sheet and
Consolidated Statement of Cash Flow has not been reclassified or
restated.
The Company has a 50% interest in ABB Pressure Systems AB
and had a one third interest in a corporate joint venture in
Germany, both accounted for on the equity method. The interest
in the German joint venture was terminated as of June 30, 1994,
with an immaterial effect.
All material intercompany accounts and transactions are
eliminated in consolidation.
CASH AND CASH EQUIVALENTS
The Company's policy is to include cash and all time
deposits and marketable securities with an initial maturity of
three months or less in cash and cash equivalents.
INVENTORY VALUATION
Inventories are carried at the lower of cost or market with
cost being determined on the first-in, first-out method.
<PAGE>
-28-
1. SIGNIFICANT ACCOUNTING POLICIES (continued)
PROPERTY, PLANT AND EQUIPMENT
The Company computes depreciation for financial statement
purposes principally on the straight-line method.
Repairs and maintenance are charged to expense as incurred.
Major renewals and betterments are capitalized. The cost of
property, plant or equipment replaced, retired, or otherwise
disposed of and the related accumulated depreciation are
eliminated from the accounts. Any resulting gain or loss, after
giving effect to salvage and removal costs, is added to or
deducted from income.
GOODWILL
Goodwill relates to continuing operations and is amortized
on a straght line basis over a period of forty years from the
date of the related business combination.
REVENUE RECOGNITION
The Company recognizes income principally on the completed
contract basis.
EARNINGS PER SHARE
Earnings per share is computed using the average number of
shares outstanding during each period plus common share
equivalents which would arise from the exercise of stock options
and stock warrants
.
PRODUCT WARRANTY COSTS
The Company expenses product warranty costs principally when
incurred; however, prospective product warranty costs on
significant contracts are provided for at the time management
determines that such costs are likely to be incurred and can be
reasonably estimated.
2. DISCONTINUED OPERATIONS
On January 19, 1995, the Company sold its Burton Corblin
compressor operations in the United States and France to James
Howden & Godfrey Overseas Limited (Howden) for a cash sales price
of $9,064 and the forgiveness of $2,584 in debt owed by Autoclave
Engineers, Inc. to Burton Corblin, S.A. (BCSA). Howden did not
acquire control of Autoclave Engineers Europe (AEE) which was
owned by BCSA and operated out of the BCSA facility in France;
however, interdivisional debt of $3,122, owed by AEE to BCSA was
forgiven. The transaction resulted in an after tax gain of $963
after provision for certain estimated costs.
<PAGE>
-29-
2. DISCONTINUED OPERATIONS (continued)
In May 1995, the Board of Directors of the Company developed
a plan to dispose of the Autoclave Engineers Group (AEG) or
Autoclave Products business segment. This segment also has been
treated as a discontinued operation at May 31, 1995. Based on
the terms of a definitive agreement subsequently reached with a
prospective buyer of AEG, a net gain is expected to be realized
on this transaction and recognized in the second quarter of
fiscal 1996.
The net assets of AEG and related deferred taxes have been
classified as a single line on the May 31, 1995 Consolidated
Balance Sheet as "Assets of Discontinued Operations Held for
Sale". The composition of these net assets was:
Current assets $ 9,970
Property, plant & equipment, net 3,588
Other assets 1,710
Current liabilities ( 3,534)
Other liabilities ( 74)
Deferred taxes ( 588)
--------
$11,072
=======
The results of operations of Burton Corblin and AEG have
been reported as discontinued operations in the accompanying
Consolidated Statement of Income for all three years presented
theron. The net sales and net income for the discontinued
operations for the years ended May 31, 1995 is presented below:
1995 1994 1993
______ ______ ______
Net sales:
AEG $28,683 $26,887 $31,308
Burton Corblin 19,792 19,878 21,995
Net income:
AEG 753 88 444
Burton Corblin 581 1,098 1,271
With the disposition of Burton Corblin and AEG, the
continuing operations of the Company represent a single business
segment for Mass Flow Control Equipment. The identifiable assets
of the discontinued segments at May 31, 1994 and 1993 were:
1994 1993
______ ______
Autoclave Products (primarily US) $24,328 $23,784
Compressors (primarily France) 23,978 28,175
As the administrative and management support of AEE was
previously provided by BCSA, the Company determined that the
continued operation of AEE without this support was not feasible
and began a plan to restructure AEE for ultimate sale. Included
in the net income of AEG presented above was an after tax charge
of $494 for the estimated cost of this restructuring effort.
<PAGE>
-30-
2. DISCONTINUED OPERATIONS (continued)
Related to the above divesting activity, the Company
established a plan to restructure the Corporate office function
currently located in Erie, Pennsylvania and relocate it within
Unit in Yorba Linda, California. Virtually all of the $1,230
fourth quarter 1995 restructuring costs relate to severance
benefits for six corporate officers and staff. Payment of these
benefits is anticipated to occur in fiscal 1996.
3. SHORT-TERM INVESTMENTS
Short-term investments at May 31, 1995 and 1994 consisted of
the following:
May 31, 1995 May 31, 1994
Face Market Face Market
Value Cost Value Value Cost Value
Municipal bonds $1,600 $1,600 $1,600 $-- $-- $--
Commercial paper 3,000 2,906 2,967 -- -- --
Corporate stocks 0 0 0 -- 17 17
Money market acc't. 413 413 413 -- -- --
------ ------ ------ --- --- ---
$5,013 $4,919 $4,980 -- $17 $17
====== ====== ====== === === ===
The municipal bonds and money market account are interest
bearing at various rates of interest. Commercial paper is
acquired at a discount with rates averaging 6.25%.
4. INVENTORIES
Inventories at May 31, 1995 and 1994 consisted of the
following:
1995 1994
Raw materials $ 5,326 $ 3,142
Work in process 1,896 2,056
Finished goods 1,218 1,276
Inventory of discontinued
operations -- 7,844
------- -------
$ 8,440 $14,318
======= =======
In the fourth quarter of 1994, the Company changed the
method of accounting for overhead costs in certain inventories.
These costs related to material processing and handling
activities which, prior to 1994, were applied to production as a
function of direct labor incurred. The Company believes that the
more appropriate method of applying the costs of these material-
support activities is based on their relationship to material
costs incurred.
<PAGE>
-31-
4. INVENTORIES (continued)
The cumulative effect of adopting this change as of June 1,
1993 is shown in the Consolidated Statement of Income for the
year ended May 31, 1994. Prior years' financial statements have
not been restated. The Company has determined that the pro forma
effect of restating the consolidated results of operations for
the fiscal year ended May 31, 1993 would have increased net
income by $90 and net income per share by $0.02.
5. BANK LINES OF CREDIT
At May 31, 1995, the Company had arrangements at two
domestic banks for unsecured lines of credit totalling $8,450, of
which $250 is specifically in support of any foreign exchange
contracts entered into by the Company with one of the bank's
affiliates. The lines provide for interest at the banks' prime
rates. The unused portion of these lines of credit, after
deducting letters of credit supported by the lines, was $5,690 at
May 31, 1995.
6. TERM DEBT
As of May 31, 1995 and 1994, term debt consisted of the
following:
1995 1994
Capital lease obligations at interest
rates approximating 7.25% at May 31,
1995, due from 1995 through 1999 (a) $ 100 $ 141
Term loan (b) 812 1,201
Other bank notes payable (c) 2,697 313
------ ------
Total term debt 3,609 1,655
Less current installments (3,156) (703)
------- -------
$ 453 $ 952
====== =======
(a) The Company has capitalized the leases of its manufacturing
facilities which were acquired with the proceeds from industrial
revenue bonds.
The assets recorded under these capital leases are
depreciated as company-owned facilities and are included in
property, plant and equipment at May 31, 1995 and 1994 as
follows:
1995 1994
Land and land improvements $ -- $ 115
Building and improvements -- 402
Machinery and equipment 416 416
------- -------
416 933
Less accumulated depreciation (330) (653)
------- -------
$ 86 $ 280
======= =======
<PAGE>
-32-
6. TERM DEBT (continued)
(b) The Company has a Loan Agreement (the Agreement) with PNC
Bank N.A. under which the Company borrowed two unsecured loans
with interest rate options for five and seven years. At the end
of the initial term of a loan, the interest rate can be
reestablished for another fixed period. The initial term plus
the renewal period cannot exceed ten years. Various interest
alternatives are available under the agreement. The Company has
the option of prepaying a loan at the end of any fixed term. At
May 31, 1995, the loans bear interest at 8.5% and 9.5%. Payments
are due in monthly installments of $40, including interest,
through 1997.
The Company is required to comply with certain restrictive
covenants under the Agreement. The most significant of these
covenants are: to maintain consolidated net worth as defined in
the Agreement of not less than $15,000; to maintain a ratio of
total liabilities to consolidated tangible net worth not to
exceed 1.5 to 1; to maintain working capital of at least $3,000;
to not pay dividends in excess of $1,100 in any year (subject to
renegotiation in the event of additional issuance of stock); to
not incur additional term indebtedness in excess of $1,000 in any
one year; and to not incur capital expenditures in excess of
$7,000 in any one year. The above restrictive covenants can be
waived by the bank at any time if deemed appropriate by the bank.
(c) The Company has two loans with foreign banks to provide
working capital to its subsidiary in Japan. The loans have
annual maturities and bear interest at 3 1/2%. Both loans are
secured by letters of credit drawn against one of the Company's
domestic bank lines of credit.
The following is a schedule by year of principal payments,
excluding interest, as of May 31, 1995:
Capital Other Term
Year Ending Leases Debt Total
1996 $ 39 $3,117 $3,156
1997 29 390 419
1998 28 2 30
1999 4 -- 4
---- ------ ------
$100 $3,509 $3,609
==== ====== ======
<PAGE>
-33-
7. INCOME TAXES
The composition of the provision for income taxes included in the
consolidated statement of income was as follows:
1995 1994 1993
Current provision (benefit):
Federal $1,550 $ 799 $ 103
State 406 118 (116)
Foreign 300 306 737
------ ------ ------
2,256 1,223 724
Deferred
Federal (865) 12 (146)
State (211) -- (4)
------ ------ ------
$1,180 $1,235 $ 574
====== ====== ======
A reconciliation of the federal statutory tax rate to the
effective tax rate on income from continuing operations follows:
1995 1994 1993
--------------- --------------- ---------------
Percent Percent Percent
of of of
Pre-Tax Pre-Tax Pre-Tax
Amount Income Amount Income Amount Income
Normal federal
statutory tax
rate $ 319 34.0% $ 73 34.0% $(694) (34.0)%
Add (deduct)
the tax effect
of:
State income
taxes, net of
federal income
tax benefit 26 2.8 (24) (11.2) (61) (3.0)
Amortization of
good will 52 5.5 52 24.3 52 2.5
Tax on foreign
source income
in excess of
(less than)
US tax rate (19) (2.0) 64 29.9 448 22.0
Adjustments of
prior accruals (276) (29.4) 120 56.1 (182) (8.9)
Change in
valuation
allowance 105 11.2 -- -- -- --
SFAS No. 109
adjustment -- -- 162 75.7 -- --
Other 25 2.7 (21) (9.8) 7 0.3
------ ----- ------- ----- ----- ------
Provision for
income taxes $ 232 24.8% $ 426 199.0% $(430) (21.1)%
====== ===== ====== ====== ====== =======
<PAGE>
-34-
7. INCOME TAXES (continued)
Temporary differences, arising from continuing operations,
between the financial bases and tax bases of assets and
liabilities result in deferred income taxes. The types of
temporary differences that gave rise to a significant portion of
the deferred tax assets and liabilities in the Corporation's
balance sheet at May 31, 1995 and 1994 were:
1995 1994
Property, plant and equipment net $ (344) $ (569)
Inventory adjustments 317 (177)
Prepaid pension costs -- (435)
Deferred compensation 202 255
Accruals for losses 153 220
Operating losses and credit carryforwards -- 136
Accrued benefits 55 321
Other deferred tax assets 156 165
Other deferred tax liabilities (59) (61)
Restructuring accruals 631 --
----- -----
Deferred income tax, net asset (liability) $1,111 $ (145)
===== =====
A valuation allowance of $450 has been continued against deferred
tax assets related to the utilization of foreign tax credits; a
valuation allowance of $105 has been established for state
operating loss carryforwards unusable after AEG is discontinued.
At May 31, 1995, the Company had foreign tax credit carryforwards
available for federal income tax purposes, operating loss
carryforwards attributable to certain of its foreign subsidiaries
and state loss carryforwards. The amount of these carryforwards
and the year in which they expire are:
Foreign State
Fiscal Year In Which Foreign Operating Operating
Carryforward Expires Tax Credits Losses Losses
1996 $144 $ 322 $ 367
1997 4 231 --
1998 302 114 1,133
1999 -- 270 --
2000 -- 139 --
Indefinite -- 171 --
---- ------ ------
$450 $1,247 $1,500
==== ====== ======
<PAGE>
-35-
7. INCOME TAXES (continued)
Income from continuing operations before income taxes (and before
allocation of general corporate expenses) derived from foreign
subsidiaries was $277, $33 and $41 for the years ended May 31,
1995, 1994 and 1993, respectively.
The cumulative amount of unrepatriated earnings, of continuing
foreign subsidiaries and entities owned 20% or more, for which no
deferred taxes have been provided is $1,361 at May 31, 1995. It
is the Company's intention to reinvest undistributed earnings of
certain of its foreign subsidiaries and thereby indefinitely
postpone their remittance.
Effective June 1, 1993, the Company adopted prospectively
Statement of Financial Accounting Standards (SFAS) No. 109,
"Accounting for Income Taxes". This Statement required the
Company to change its method of accounting for income taxes from
the deferred method to the liability method which requires the
recognition of deferred tax assets and liabilities for the
estimated future taxes payable or recoverable, arising from
temporary differences between the tax bases of assets and
liabilities and their financial statement bases. Prior to fiscal
1994, accounting for income taxes was determined under the
provisions of Accounting Principles Board Opinion No. 11.
The effect of adopting SFAS No. 109 increased the provision for
income tax for continuing operations in fiscal 1994 by
approximately $162 and reduced the provision for income tax for
discontinued operations by $25. The consolidated financial
statements for the periods prior to fiscal 1994 have not been
restated. This accounting change would not have had a material
effect on the Company's net income for fiscal 1993.
8. RETIREMENT AND PROFIT SHARING PLANS
The Company has maintained a contributory, defined benefit plan
covering substantially all employees of AEG and corporate
employees, who meet certain age and length of service
requirements. As a condition of participation, employees have
been required to contribute 3% of their salaries to the plan for
a maximum of thirty years. The Company's funding policy has been
to make annual contributions to the plan in amounts determined by
enrolled actuaries which, when combined with employees'
contributions, will provide the defined level of benefits at
retirement. These benefits are based on the average of total
compensation for certain specified months of service prior to
retirement.
The employees of Burton Corblin, S.A. particpated in an unfunded,
retirement indemnity plan as required by French law.
<PAGE>
-36-
8. RETIREMENT AND PROFIT SHARING PLANS (continued)
The following table sets forth, for discontinued operations, the
estimated funding status of the defined benefit and retirement
indemnity plans as of the end of fiscal 1994:
1994
Defined Retirement
Benefit Indemnity
Plan
Actuarial present value
of pension benefits:
Accumulated benefit obligation,
primarily vested $10,919 $ 278
Additional amount related
to projected compensation
increases 1,432 67
Actuarial present value of
projected benefit obligation
for service rendered to date 12,351 345
Plan assets at fair value 13,924 --
Plan assets in excess of (less
than) projected benefit obligation 1,573 (345)
Unrecognized net assets at
beginning of year (964) --
Unrecognized net loss 477 --
Prepaid(Accrued) pension cost at
at end of year $ 1,086 $(345)
The plan assets in the preceding table include listed corporate
stocks and bonds, immediate participation contracts and 50,000
shares of the common stock of the Company at May 31, 1994.
Unit maintains a qualified profit sharing (401K) plan for
substantially all of its employees who meet certain age and
length of service requirements. Contributions equal to 50% of
the participants' contributions are made by Unit to the plan.
Additional contributions may be made by Unit at the discretion of
Unit's Board of Directors. Contributions to the plan were
$564,000 in 1995, $327,000 in 1994, and $260,000 in 1993.
9. STOCK OPTION PLANS
The Company maintains a 1987 Stock Plan, under which employees
may be awarded incentive stock options, non-qualified stock
options, stock awards or opportunities to make direct purchases
of stock in the Company. These awards, in the aggregate, are not
to exceed 1,600,000 shares.
During fiscal 1995, 1994 and 1993, options were exercised for
31,815, 1,000 and 31,818 shares, respectively.
<PAGE>
-37-
9. STOCK OPTION PLANS (continued)
The Company also maintains a 1990 Non-Employee Director Stock
Option Plan (the 1990 Plan). Under the 1990 Plan, each director
who is not an employee nor an officer of the Company (an "outside
director") receives an automatic grant of 1,000 non-qualified
stock options on September 1 of each year, provided that person
has served as a director since at least December 31 of the
preceding year. Each outside director also receives stock
options as part of the director's compensation under a formula
approved by the shareholders. The aggregate options available
under this plan shall not exceed 250,000 shares.
1987 Stock Plan 1990 Plan
----------------------- -----------------------
No. of No. of
Shares Shares
Under Option Price Under Option Price
Option Per Share Option Per Share
------ ------------ ------ ------------
May 31, 1995 402,532 $4.95-$11.25 68,643 $7.00-$8.75
May 31, 1994 391,122 $4.95-$11.02 45,000 $7.00-$8.75
May 31, 1993 393,827 $4.95-$11.02 21,000 $7.00-$8.75
All options outstanding at May 31, 1995 are exercisable, except
for 12,500 options granted under the 1987 Stock Plan which become
exercisable effective August 11, 1995.
10. EXPORT SALES AND MAJOR CUSTOMERS
Included in net sales for 1995, 1994 and 1993 are shipments
exported from the United States by the continuing Company. These
export sales are summarized below by major geographic
destinations:
1995 1994 1993
United Kingdom and Ireland $ 1,473 $ 958 $1,008
Canada 74 56 39
Western Europe 185 141 153
Far East 2,806 1,890 1,717
Middle East 33 12 14
------- ------- ------
4,571 3,057 2,931
Less sales to consolidated
subsidiaries 2,432 1,605 1,375
------- ------- ------
$ 2,139 $ 1,452 $1,556
======= ======= ======
During 1995, 1994 and 1993, one customer purchased $16,672,
$9,769 and $5,640, respectively of product and services from the
Company, while a second customer purchased $8,194, $4,808 and
$3,509, respectively.
<PAGE>
-38-
11. INDUSTRY SEGMENT INFORMATION
A. The continuing operations of the Company consist of one
business segment which designs, develops, manufactures, markets
and services mass flow controllers, which are precision
instruments sold principally to the semiconductor industry to
control and measure the mass flow rate of gases.
The geographic distribution of sales, operating income and
identifiable assets is as follows:
United
States France Other (a) Eliminations Total
------- ------- ------- ------------ ------
Net Sales from continuing operations
1995 $44,799 $ -- $5,889 $ (2,432) $48,256
1994 29,306 -- 5,403 (1,568) 33,141
1993 20,620 -- 4,720 (1,375) 23,965
Operating Income(Loss) from continuing operations, before general
corporate expenses
1995 $ 4,275 $ -- $ 174 $ (107) $ 4,342
1994 2,050 -- 151 2 2,203
1993 (284) -- (283) (68) (635)
Identifiable Assets(b)
1995 $49,750 $ -- $6,239 $(4,087) $51,902
1994 37,813 22,268 6,257 (8,088) 58,250
1993 35,871 27,269 6,107 (7,424) 61,823
(a) Includes Federal Republic of Germany, United Kingdom,
Ireland and Japan.
(b) Included in identifiable assets for the United States
and France are amounts attributable to discontinued
operations.
12. COMMITMENTS AND CONTINGENCIES
A. The Company is a 50% guarantor on line of credit borrowings
of its unconsolidated joint venture, ABB Pressure Systems
AB. No borrowings were outstanding at May 31, 1995 on the
$3,000 available line of credit.
<PAGE>
-39-
12. COMMITMENTS AND CONTINGENCIES (continued)
B. Litigation
(1) As previously disclosed, Autoclave Engineers, Inc.
(Autoclave) had been named as a codefendant, with
numerous other companies, in a number of lawsuits filed
in state and federal courts in which the plaintiffs
alleged personal injury from exposure to asbestos-
related products. To date, Autoclave was named in a
total of 17 lawsuits, all of which were filed by
approximately 8,900 employees and former employees of
one shipbuilding facility.
Autoclave was dismissed from 16 of the lawsuits and is
seeking dismissal from the 17th. The dismissals were
all obtained after counsel for Autoclave met with the
lead attorney for each of the plaintiff groups and
discussed the specific Autoclave product allegedly
involved in the lawsuits. The form of dismissal was
merely dependent upon which plaintiff attorney led the
plaintiff group.
Four of the dismissals were "with prejudice" which
means that Autoclave cannot be renamed in the lawsuits.
These four lawsuits involved over 5,800 of the
plaintiffs. The other 12 dismissals were "without
prejudice" which means that Autoclave could be renamed
in the lawsuits by the plaintiffs. Management of the
Company believes that the possibility of Autoclave
being renamed in any of the lawsuits is remote.
The Company no longer sells asbestos-containing
products.
(2) The Company is involved in a number of other claims and
legal proceedings of a nature considered normal to its
business, principally product liability matters.
Certain of these cases seek damages which, if awarded,
would require sizable payments. While it is not
feasible to predict the outcome of these actions with
certainty, management of the Company, based upon
available information, believes that any liability that
may arise from these proceedings is not expected to
have a material adverse effect on the consolidated
financial condition or projected results of operations
of the Company.
C. The Company leases facilities for Unit's headquarters and
manufacturing operations and all of the Company's outside
sales offices and service centers. These leases are
operating leases, having terms ranging from three to ten
years, with options to renew for an additional one to five
years.
<PAGE>
-40-
12. COMMITMENTS AND CONTINGENCIES (continued)
Additionally, the Company leases various office equipment
and vehicles under operating leases expiring during the next
four years.
Included in the Consolidated Statement of Income for the
fiscal years ended May 31, 1995, 1994 and 1993 was rent
expense, under all operating leases for continuing
operations, of $1,294, $1,210 and $1,134, respectively.
The following is a schedule by year of future minimum rental
payments required for continuing operations under operating
leases that have initial or remaining noncancelable lease
terms in excess of one year as of May 31, 1995:
Year Ending May 31,
1996 $ 1,041
1997 1,007
1998 906
1999 868
2000 851
Subsequent to 2000 5,458
-------
$10,131
=======
D. The Company has identified potential ground water
contamination at its Erie, PA operating location.
Consultations on this matter indicate that further analysis
and monitoring, but not the need to remediate, is probable
at this time. As of May 31, 1995, the Company has accrued
$100,000 for the probable and estimable costs of further
analysis and related legal and other costs. There is
potential for additional costs such as remediation, further
monitoring, and legal services, but such costs cannot be
estimated until the need is established through further site
analysis expected to take place in the second and third
quarters of fiscal 1996.
E. On June 22, 1995, the Company entered into a Share
Repurchase Agreement (the Agreement) with its largest
shareholder, the J & L Levinson Partnership (the
Partnership). Under the Agreement, the terms of which are
contingent upon the closing of the sale of the assets of the
Autoclave Engineers Group, the Company will repurchase
220,000 shares of the common stock of the Company from the
Partnership at a price of $11.75 per share. The
Partnership, and its general partners, have agreed not to
sell, assign, pledge, transfer, or otherwise dispose of
additional shares of common stock of the Company for a
period of 18 months following the closing of this repurchase
of shares. This Agreement would automatically terminate if
<PAGE>
-41-
12. COMMITMENTS AND CONTINGENCIES (continued)
the Company would sell substantially all of its remaining
assets. This Agreement may be terminated by the Partnership
if the sale of AEG is not consumated by December 19, 1995;
or, by the Company if the sale is not consumated by June 21,
1996.
=================================================================
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure.
None.
<PAGE>
-42-
PART III
Item 10. Directors and Executive Officers of the Company.
DIRECTORS
The Board of Directors is divided into three classes.
Directors are generally elected for terms of three years and
until their successors are elected and have qualified. The terms
of each class expire in successive years at the Annual Meeting of
Shareholders. The terms of three directors expire at the 1995
Annual Meeting of Shareholders.
The following table sets forth the names of all directors of
the Company, their ages, their positions with the Company and the
respective years in which their terms of office expire.
Positions with Term
Name Age the Company Expires
---- --- --------------- -------
James C. Levinson(1) 67 Chairman of the Board 1995
of Directors
William F. Schilling 53 President and Chief 1997
Executive Officer
A. Wade Blackman, Jr.(3) 67 Director 1995
Michael J. Doyle 42 Director 1996
Edward P. Junker, III(1)(2) 58 Director 1997
W. Gregg Kerr(3) 67 Director 1997
Marilyn G. Levinson 65 Director 1997
Carl J. Schlemmer(1)(2) 69 Director 1995
George H. Schofield(1)(2) 65 Director 1996
Donald M. Spero(3) 55 Director 1996
------------------
(1) Member of the Executive Committee of the Board of Directors.
(2) Member of the Compensation Committee of the Board of
Directors.
(3) Member of the Audit Committee of the Board of Directors.
<PAGE>
-43-
Mr. Levinson, currently Chairman and formerly President and
Chief Executive Officer of the Company, has served as a director
of the Company since 1961. Mr. Levinson is a general partner of
J&L Levinson Partnership.
Dr. Schilling was elected President and Chief Executive
Officer of the Company and has served as a director of the
Company since 1992. He has been President of the Autoclave
Engineers Group ("AEG"), an operating group of the Company, since
1991. For 16 years prior to that time, Dr. Schilling was with
the General Electric Company, having served as Manager-
Manufacturing, Engineering and Technology for the firm's Gas and
Turbine Division.
Mr. Blackman has served as a director of the Company since
1984. He is President of Farmington Capital Management Company,
a private investment company, and a former Managing General
Partner of American Research & Development Inc., a venture
capital firm.
Mr. Doyle has served as a director of the Company since 1984.
He has been President and Chief Executive Officer of Unit
Instruments, Inc. ("Unit"), a subsidiary of the Company which
manufactures mass-flow controllers for use in the semiconductor
industry, since 1980.
Mr. Junker has served as a director of the Company since
1990. He is Vice Chairman of PNC Bank, N.A. and PNC Bank Corp.
and Chairman and Chief Executive Officer of Marine Bank. He also
serves as a director of PNC Bank, N.A.
Mr. Kerr has served as a director of the Company since 1969.
Until December 31, 1994, he was a partner in the firm of Eckert
Seamans Cherin & Mellott, a law firm in Pittsburgh, Pennsylvania,
which serves as counsel to the Company. Mr. Kerr has continued
his association with Eckert Seamans Cherin & Mellott as Special
Counsel beginning in January 1995.
Mrs. Levinson was appointed a director of the Company in
April 1994. She is the wife of Mr. James C. Levinson and
daughter of the late founder of the Company, Mr. Fred Gasche.
She has served as a general partner of the J & L Levinson
Partnership since 1993.
Mr. Schlemmer has served as a director of the Company since
1989. He was Vice President of the General Electric Company and
General Manager of Transportation Systems Business Operations
from 1975 until his retirement in 1989. He also serves as a
director to Collins & Aikman Corp.
<PAGE>
-44-
Mr. Schofield has served as a director of the Company since
1990. He had held various senior management positions since 1985
at Zurn Industries Inc., a diversified provider of products,
equipment and services to the waste-to-energy and water control
markets. Mr. Schofield retired as Chairman of the Board of Zurn
Industries, Inc. in 1995. Mr. Schofield is also a director of
National Fuel Gas Company and The Goodyear Tire & Rubber Co.
Mr. Spero has served as a director of the Company since 1987.
He is a founder and former President of Fusion Systems Company in
Rockville, Maryland, a supplier of ultraviolet curing systems
used on industrial production lines for drying photo-sensitive
inks, coatings and adhesives. He is currently President of Spero
Quality Strategies, a management consulting company.
See also the section entitled Executive Officers of the
Company appearing in Part I hereof.
<PAGE>
<TABLE>
<CAPTION>
-45-
Item 11. Executive Compensation.
The following table sets forth the annual and long-term compensation
for services in all capacities with the Company and its subsidiaries for
the fiscal years ended May 31, 1995, 1994 and 1993, of those persons who
were at May 31, 1995 (i) the chief executive officer; (ii) the other four
most highly compensated executive officers; and (iii) any executive
officers, up to a maximum of two, who departed during the year but who
would have been among the four most highly compensated officers of the
Company:
SUMMARY COMPENSATION TABLE
<S> <C> <C> <C>
Annual Compensation(1)
---------------------------
Name and Principal Position Year Salary($) Bonus($)(3)
--------------------------- ---- --------- -----------
William F. Schilling 1995 $191,796 $145,725
Chief Executive Officer 1994 $181,908 $ 55,500
President & Director 1993 $171,600 0
James C. Levinson 1995 $127,795 0
Chairman & Director 1994 $135,384 0
1993 $220,000 0
Michael J. Doyle 1995 $160,937 $ 97,125
President of Unit & 1994 $135,608 $ 62,613
Director 1993 $131,886 0
Thomas C. Guelcher 1995 $131,000 $ 68,775
Vice President of Corporate 1994 $127,930 $ 27,510
Development & Chief 1993 $114,615 0
Financial Officer
John G. Sontag 1995 $110,532 $ 44,620
Corporate Treasurer, 1994 $107,692 $ 13,248
Secretary and Controller 1993 $102,307 0
Jean-Claude Pineau 1995 $134,295 $217,152
President of 1994 $149,365 $ 31,270
Burton Corblin, S.A. 1993 $139,136 0
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
-46-
SUMMARY COMPENSATION TABLE (continued)
<S> <C> <C> <C> <C>
Long-Term Compensation(2)
-------------------------
Awards Payouts
------------ --------
Securities
Name and Principal Underlying LTIP All Other
Position Year Options/SARs(#) Payout($) Compensation($)
------------------ ---- --------------- --------- ------------------
William F. Schilling 1995 0 0 $742,422(5)(6)
Chief Executive 1994 0 0 0
Officer, President 1993 0 0 0
& Director
James C. Levinson 1995 0 0 0
Chairman & Director 1994 0 0 0
1993 0 0 0
Michael J. Doyle 1995 0 0 $ 11,250(4)
President of Unit 1994 0 0 $ 8,820(4)
& Director 1993 0 0 $ 8,400(4)
Thomas C. Guelcher 1995 0 0 $403,776(5)
V. P. of Corporate 1994 0 0 0
Development & Chief 1993 0 0 0
Financial Officer
John G. Sontag 1995 0 0 $324,775(5)
Corporate Treasurer 1994 0 0 0
Secretary and 1993 0 0 0
Controller
Jean-Claude Pineau 1995 0 0 0
President of 1994 0 0 0
Burton Corblin, S.A. 1993 0 0 0
(1) Excludes perquisites and other personal benefits, the aggregate annual
amount of which for each officer was less than the lesser of $50,000
or 10% of the total salary and bonus reported.
(2) The Company did not grant any restricted stock awards or stock
appreciation rights (SARs) during the fiscal years ended May 31,
1995, 1994 and 1993.
(3) Includes bonus payments earned by the Named Officers in the year
indicated, for services rendered in such year, which were paid in the
next subsequent year.
(4) Consists of contribution of $11,250 in 1995, $8,820 in 1994 and $8,400
in 1993 by Unit for account by Mr. Doyle pursuant to Unit's 401(k)
plan.
(5) Represents severance costs accrued in 1995 which will be payable in
the next fiscal year as part of the Company's restructuring and
transferring of all corporate activities from Erie, PA to Yorba
Linda, CA.
(6) Includes $225,000 special incentive payment.
</TABLE>
<PAGE>
-47-
Compensation of Directors
Directors of the Company, other than those who are employees
of the Company, currently receive $1,000 for each attended
meeting of the Board. Directors also receive $1,000 for each
committee meeting attended unless such meeting is held within one
day of a meeting of the Board of Directors, in which case
compensation is at the rate of $500 for each committee meeting.
Directors are also reimbursed for out-of-pocket expenses incurred
in connection with attendance at meetings and other services as a
director.
Beginning September 1, 1993, each director who is neither an
employee nor an officer of the Company or its subsidiaries is
automatically granted as additional compensation an option to
purchase a number of shares of the Company's Common Stock as
further described herein under "1990 Non-Employee Director Stock
Option Plan."
Stock Options
The 1987 Stock Plan (the "1987 Plan") was adopted by the
Board of Directors of the Company on June 18, 1987 and approved
by the shareholders on September 30, 1987. Prior to the 1990
Annual Meeting of Shareholders, a total of 605,000 shares of the
Company's Common Stock (subject to adjustment in certain events)
was authorized for issuance under the 1987 Plan (after giving
effect to two 10% stock dividends which occurred subsequent to
adoption of the 1987 Plan). At the 1990 Annual Meeting of
Shareholders, an amendment to the 1987 Plan was approved which
increased the number of shares of Common Stock authorized for
issuance thereunder to 1,600,000 shares. Under the 1987 Plan,
employees may be awarded incentive stock options ("ISO" or
"ISOs"), as defined in Section 422(b) (formerly Section 422A(b))
of the Internal Revenue Code of 1986, as amended (the "Code"),
and directors, officers, employees and consultants of the Company
may be granted (i) options which do not qualify as ISOs ("Non-
qualified Option" or "Non-qualified Options"), (ii) awards of
stock in the Company and (iii) opportunities to make direct
purchases of stock in the Company. ISOs and Non-qualified
Options are sometimes collectively referred to as "Options." As
of August 11, 1995, under the 1987 Plan, stock options have been
granted to the following officers in the following aggregate
amounts: Mr. Levinson, 34,007 shares; Dr. Schilling, 37,050
shares; Mr. Doyle, 33,712 shares; Mr. Guelcher, 12,550 shares;
Mr. Sontag, 22,691 shares; Mr. Pineau, 0 shares; and all
executive officers as a group, 140,010 shares. The exercise
prices of such Options range from $5.89 to $9.09 per share.
Option Grants in the Last Fiscal Year
During the fiscal year ended May 31, 1995, there were no
grants of stock options pursuant to the 1987 Plan to the Named
Officers reflected in the Summary Compensation Table above.
<PAGE>
<TABLE>
<CAPTION>
-48-
Option Exercises and Fiscal Year-End Values
The following table sets forth information with respect to options to
purchase the Company's Common Stock granted under the 1987 Stock Option
Plan including (i) the number of shares purchased upon exercise of options
in 1995, (ii) the net value realized upon such exercise, (iii) the number
of unexercised options outstanding at May 31, 1995, and (iv) the value of
such unexercised options at May 31, 1995:
AGGREGATED OPTION/SAR EXERCISES
IN LAST FISCAL YEAR AND MAY 31, 1995 OPTION VALUES
<S> <C> <C> <C> <C>
Value of
Number of In-the-money
Shares Unexercised Options at
Acquired on Value Options at 5/31/95($)
Name Exercise (#) Realized($) 5/31/95 Exercisable
(2) (1) (2)
---- ----------- ----------- ----------- -------------
W. F. Schilling 0 0 37,050 $198,485
J. C. Levinson 0 0 34,007 $206,359
M. J. Doyle 0 0 33,712 $205,350
T. C. Guelcher 0 0 12,550 $ 56,475
J. G. Sontag 0 0 22,691 $142,656
J-C Pineau 4,355 $19,754 0 0
(1) Value is based on the difference between option exercise price and the
fair market value at 1995 fiscal year-end ($12.50 per share as quoted
on the NASDAQ National Market System) multiplied by the number of
shares underlying the option.
(2) All options are exercisable at May 31, 1995.
Options under the 1987 Plan to purchase an aggregate of 37,000 shares
of Common Stock were granted by the Board of Directors to all employees as
a group during the three fiscal years ended May 31, 1995, at an average per
share exercise price of $6.66. Options to purchase 50,000 shares of Common
Stock were granted by the Board of Directors under the 1987 Plan to one
director for being Chairman of a Special Study Committee of the Board of
Directors which performed oversight of a strategic planning advisory
project during the fiscal year ended May 31, 1995. At August 11, 1995,
options to purchase 1,046,545 shares remained available for grant under the
1987 Plan.
</TABLE>
<PAGE>
-49-
1990 Non-Employee Director Stock Option Plan
In August 1990, the Board of Directors adopted a stock option
plan (the "1990 Director Plan") for directors authorizing the
grant of options for up to 100,000 shares of Common Stock. The
1990 Director Plan was approved by the shareholders of the
Company in September 1990. Options are granted pursuant to the
1990 Director Plan only to members of the Board of Directors of
the Company who are not employees or officers of the Company or
its subsidiaries ("outside directors"). Each outside director is
automatically granted on September 1 of each year, without
further action by the Board of Directors, an option to purchase
one thousand (1,000) shares of the Company's Common Stock,
provided that such director shall have served as a director since
at least December 31 of the preceding year. The exercise price
per share of options granted under the 1990 Director Plan is 100%
of the fair market value of the Company's Common Stock on the
date the option is granted. The 1990 Director Plan requires that
options granted thereunder will expire on the date which is ten
(10) years from the date of grant.
In September 1992, the Shareholders approved two amendments
to the 1990 Director Plan. The authorized number of options was
increased to 250,000. The second amendment provided for each
outside director to be automatically granted, on September 1 of
each year beginning in 1993, an additional option to purchase a
number of shares of the Company's Common Stock equal to a
fraction, the numerator of which is $1,500 times the number of
full fiscal quarters during which such person served as a
director during the preceding 12 months, and the denominator of
which is 25% of the fair market value of the Common Stock on the
date the option is granted.
As of August 11, 1995, 68,643 options have been granted to
ten present or former directors of the Company under the 1990
Director Plan at per-share exercise prices that range from $7.00
to $8.75. Of the total, 23,643 options were granted at the
exercise price of $8.50 per share to seven directors during the
year ended May 31, 1995. One former director exercised 2,000
options in June 1995 at an exercise price of $7.25 per share.
The aggregate number of shares of Common Stock subject to
options under the 1990 Director Plan, as of August 11, 1995, is
66,643 shares.
<PAGE>
-50-
Deferred Compensation Agreements
The Company has deferred compensation agreements with certain
key employees, including Messrs. Levinson, Schilling, Doyle and
Guelcher. Under the agreements, the Company will make fixed
monthly post-retirement payments to such employees until their
death, in amounts based upon the employees' annual salaries at
the time of retirement. Pursuant to such agreements, the
employees have agreed to refrain from competing with the Company,
to maintain the confidentiality of the Company's trade secrets
and to renounce all personal interest in patents, know-how and
other intellectual property developed by them during their
employment by the Company.
Involuntary Severance Agreements
In May 1994, the Company entered into agreements with
thirteen officers of the Company and its subsidiaries, including
the Chief Executive Officer and each of the Named Officers,
(except for Messrs. Levinson and Pineau) providing severance
benefits in the event they are terminated within two years
following a change in control of the Company. Pursuant to such
agreements, a change in control occurs (i) when any person
becomes the beneficial owner of securities of the Company
representing more than 20% of the combined voting power of the
Company's then outstanding securities; (ii) if, during any period
of two consecutive years, individuals who constitute the Board of
Directors cease to constitute a majority of the Board of
Directors; (iii) if all or substantially all of the Company's
assets, or the assets of the operating group in which the officer
is employed, are sold or transferred to a third party; (iv) if
the Company consolidates or merges with another corporation and
the Company is not the survivor; or (v) if the Company no longer
has a class of securities registered pursuant to Section 12 of
the Exchange Act. The agreements provide that if the officer is
terminated following a change in control of the Company, the
Company shall pay such officer a sum equal to two times his or
her annual salary and bonus paid during the twelve-month period
immediately preceding the termination, vest the officer in any
unvested benefits under any retirement or deferred compensation
plan in which the officer participates, and pay for a two year
continuation of such officer's health, life, disability and
accident insurance. However, the agreement provides that to the
extent such benefits would constitute an Excess Parachute Payment
under Section 280G of the Internal Revenue Code of 1986, the
severance payments payable thereunder shall be reduced.
<PAGE>
-51-
Pension Plan
The Company maintains a defined benefit pension plan (the
"Pension Plan") covering all employees (other than employees of
Unit) who meet general eligibility requirements and who agree to
contribute 3% of their salary to the plan. To be eligible, an
employee must be 21 years old and complete 1,000 hours of
service. The benefits are computed by a formula which takes into
account an employee's years of service and a percentage of his or
her average monthly compensation. The average monthly
compensation is determined by averaging the compensation for the
employee's highest five calendar years of earnings. Compensation
covered by the Pension Plan includes salaries and annual bonuses.
An employee may retire after reaching the age of 55 and
completing ten years service; however, benefits are reduced if
such retirement precedes age 65.
The following table sets forth the estimated annual benefits
payable on normal retirement at age 65 under the Pension Plan:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Annual Average
of Highest
Five Calendar
Years of Annual Pension
Compensation Covered Years of Service at Age 65
-------------- ---------------------------------------------------
15 20 25 30 (Maximum)
-- -- -- ------------
$ 75,000 $15,187 $20,250 $25,312 $30,375
100,000 20,250 27,000 33,750 40,500
125,000 25,312 33,750 42,187 50,625
150,000 30,375 40,500 50,625 60,750
175,000 35,437 47,250 59,062 70,875
200,000 40,500 54,000 67,500 81,000
225,000 45,562 60,750 75,937 91,125
* Pensions shown in the table are straight-life annuity amounts notwith-
standing the availability of joint-and-survivorship pensions at a reduced
rate.
</TABLE>
As of May 31, 1995, Mr. Levinson had 27 credited years of
service under the Pension Plan, Dr. Schilling had five credited
years of service, Mr. Guelcher had six credited years of service
and Mr. Sontag had 12 credited years of service. The
compensation covered by the Pension Plan for each of these
persons in fiscal 1995 was approximately equal to the applicable
amount set forth in the preceding Summary Compensation Table.
<PAGE>
-52-
Bonus Plan
Management employees of the Company participate in the
Company's Annual Incentive Compensation Plan (the "Incentive
Compensation Plan"). Under the Incentive Compensation Plan,
management employees are eligible to receive cash payments
according to a weighted average formula based upon corporate,
group and individual performance. Such amounts are generally to
be paid within two and one-half months after the end of the
fiscal year in which they are earned. Annual administration of
the Incentive Compensation Plan, including establishment of
corporate objectives, participants, awards and payments, is based
upon recommendations made by the Company's President for approval
by the Compensation Committee and the Board of Directors. The
Summary Compensation Table set forth above includes amounts
earned under the Incentive Compensation Plan for performance
during fiscal 1995.
The Company has also from time to time paid discretionary
bonuses as deemed appropriate by the Board of Directors.
Unit Profit Sharing Plan
Unit has a qualified profit sharing 401(k) plan for
substantially all of its employees who meet certain age and
length of service requirements. Contributions equal to 50% of
the participants' contributions are made by Unit to the plan.
Such contributions by Unit shall not exceed 3% of a participant's
compensation. Additional contributions may be made by Unit at
the discretion of Unit's Board of Directors. Contributions to
the plan in fiscal 1995 were $564,000. The Summary Compensation
Table set forth above includes amounts accrued under the Unit
Profit Sharing Plan during fiscal 1995.
Incentive Plan
Key management employees of the Company are eligible to
participate in the Company's Long-Term Incentive Plan (the
"Plan") which is administered by the Compensation Committee of
the Board of Directors. Under the Plan, management employees are
eligible to receive awards in the form of cash and restricted
stock awarded pursuant to the 1987 Plan. Award levels are
determined by comparing actual economic value created (defined as
cash flow return in excess of cost of capital multiplied by
investment) to goals approved by the Compensation Committee.
Participation of key management employees in the Plan and the
proportions of cash and restricted stock to be included in awards
are subject to the discretion of the Compensation Committee. The
cash component of any award under the Plan cannot exceed one-half
of the award amount. Awards under the Plan are generally to be
paid within two and one-half months after the end of the last
fiscal year of the three-year performance period to which the
award related.
In January 1995, the Company entered into an incentive
agreement with Mr. Pineau providing for aggregate payments of
$217,152 upon consummation of the sale of Burton Corblin, S.A.
provided he was an employee on the closing date.
<PAGE>
<TABLE>
<CAPTION>
-53-
Item 12. Security Ownership of Certain Beneficial Owners and
Management.
The following table sets forth, as of August 11, 1995, certain
information with respect to the beneficial ownership of the Company's
Common Stock by each person known to the Company to be the beneficial owner
of more than 5% of the outstanding shares of its Common Stock, by each
director, by each executive officer named below, and by all directors and
executive officers as a group:
<S> <C> <C>
Number of Shares Percent of
Beneficially Company's
Name Owned (1) Common Stock
---- ----------------- --------------
J&L Levinson Partnership 725,907 (2) 17.04%
700 Louisiana Street
Houston, TX 77002
The TCW Group, Inc. 358,500 8.42%
865 Figueroa Street
Los Angeles, CA 90017
The Pioneer Group 334,500 7.85%
60 State Street
Boston, MA 02109
U.S. Bancorp 288,540 6.8%
1118 West Fifth Avenue
Portland, OR 97202
Dimensional Fund Advisors, Inc. 224,526 5.27%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
James C. Levinson 176,760 (3) 4.12%
William F. Schilling 38,050 (4) *
A. Wade Blackman, Jr. 60,823 (5) 1.41%
Michael J. Doyle 121,789 (6) 2.84%
Edward P. Junker, III 9,823 (7) *
W. Gregg Kerr 16,847 (8) *
Marilyn G. Levinson 583,859 (9) 13.70%
Carl J. Schlemmer 11,923 (8) *
George H. Schofield 13,823 (8) *
Donald M. Spero 10,823 (8) *
Thomas C. Guelcher 15,650 (10) *
John G. Sontag 27,691 (11) *
Jean-Claude Pineau 5,565 *
All directors and officers as a group 1,093,426 (12) 24.22%
* Less than 1%
</TABLE>
(1) Unless otherwise indicated, each named person has sole
voting and investment power over the shares beneficially owned by
such person.
(2) J & L Levinson Partnership is a general partnership of which
James C. Levinson and Marilyn G. Levinson are the sole general
partners.
<PAGE>
-54-
(3) Includes 34,007 shares which Mr. Levinson has the present
right to acquire by exercise of stock options, and 142,753 shares
which Mr. Levinson may be deemed to beneficially own through his
partnership interest in the J & L Levinson Partnership. Does not
include 583,154 shares owned by Mr. Levinson's wife, Marilyn G.
Levinson, through her partnership interest in the J & L Levinson
Partnership, as to which Mr. Levinson disclaims beneficial
ownership.
(4) Includes 37,050 shares which Dr. Schilling has the right to
acquire by the exercise of stock options.
(5) Includes 60,823 shares which Mr.Blackman has the right to
acquire by the exercise of stock options.
(6) Includes 33,712 shares which Mr. Doyle has the right to
acquire by the exercise of stock options.
(7) Includes 9,823 shares which Mr. Junker has the right to
acquire by the exercise of stock options.
(8) Includes 10,823 shares which the individual has the right to
acquire by the exercise of stock options.
(9) Includes 705 shares which Mrs. Levinson has the right to
acquire by the exercise of stock options.
(10) Includes 12,550 shares which Mr. Guelcher has the right to
acquire by the exercise of stock options.
(11) Includes 22,691 shares which Mr. Sontag has the right to
acquire by the exercise of stock options.
(12) Includes 254,653 shares which the executive officers and
directors of the Company have the right to acquire by the
exercise of stock options.
<PAGE>
-55-
Item 13. Certain Relationships and Related Transactions.
During fiscal 1995, the law firm of Eckert Seamans Cherin &
Mellot, of which Mr. Kerr, a director, was a partner until
December 31, 1994 and is currently special counsel, rendered
professional services to the Company.
The Company has loan agreements with PNC Bank, N.A. Mr.
Junker, a director of the Company, is Vice Chairman of PNC Bank.
As of May 31, 1995, the total amount outstanding on these loans
is $903,144 with maturities through 1998. At May 31, 1995, these
loans bear interest from 7.25% to 9.50% per annum. Payments are
due in monthly installments of approximately $40,000, including
interest.
During fiscal 1995, Mr. Blackman, a director of the Company,
received 50,000 stock options under the 1987 Stock Plan for
acting as Chairman of a Special Study Committee of the Board of
Directors which performed oversight of a strategic planning
advisory project.
<PAGE>
-56-
PART IV.
Item 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K.
(a) The following documents are filed as part of this
report:
Page No.
--------
(1) Financial Statements:
Report of Independent Accountants 19
Consolidated Statement of Income for
each of the three years ended
May 31, 1995, 1994 and 1993 20
Consolidated Balance Sheet at
May 31, 1995 and 1994 21-22
Consolidated Statement of Cash Flows
for each of the three years ended
May 31, 1995, 1994 and 1993 23
Consolidated Statement of Shareholders'
Equity for each of the three years
ended May 31, 1995, 1994 and 1993 24-26
Notes to Consolidated Financial
Statements 27-41
(2) Financial Statement Schedules:
Page Schedule
---- --------
S-1 II - Valuation and Qualifying
Accounts
All other schedules are omitted since they are not required,
not applicable or the information is included in the consolidated
financial statements or the notes thereto.
<PAGE>
-57-
(3) Exhibits:
Exhibit
Number Description of Exhibit
3(a) - Articles of Incorporation, as amended (Filed
as Exhibit 3(a) to the Company's Quarterly
Report on Form 10-Q for the fiscal quarter
ended August 31, 1982, and incorporated
herein by reference).
3(b) - By-Laws, as amended (Filed herewith)
4 - See Exhibits 10(b) through 10(g).
10(a)-1* - Form of Unfunded Deferred Compensation
Agreement, as amended (Filed as Exhibit 10(a)
to the Company's Quarterly Report on Form
10-Q for the fiscal quarter ended August 31,
1983 and incorporated herein by reference).
10(b) - Agreement among the Erie County Industrial
Development Authority, Marine Bank and the
Company dated December 29, 1976, as amended,
and Supplemental Agreement, dated October 17,
1979 (Filed as Exhibit 10(b)(3)-2 to the
Company's Registration Statement No. 2-70447
and incorporated herein by reference).
10(c) - Agreement among the Erie County Industrial
Development Authority, Marine Bank and the
Company, dated as of April 14, 1980 (Filed as
Exhibit 10(b)(3)-3 to the Company's
Registration Statement No. 2-70447 and
incorporated herein by reference).
10(d) - Loan Agreement (Revolving Credit into Term
Loan) between Marine Bank, N.A. and the
Company, dated January 14, 1985 (Filed as
Exhibit 4 to the Company's Quarterly Report
on Form 10-Q for the fiscal quarter ended
November 30, 1984 and incorporated herein by
reference).
10(e) - Amendment, dated as of May 29, 1987, to Loan
Agreement between the Company and Marine Bank
referred to in Exhibit 10(e) hereof (Filed as
Exhibit 10(k) to the Company's Annual Report
on Form 10-K for the fiscal year ended May
31, 1987 and incorporated herein by
reference).
<PAGE>
-58-
10(f) - Lease between the Erie County Industrial
Development Authority and the Company, dated
April 14, 1980 (Filed as Exhibit 10(b)(4)-4
to the Company's Registration Statement No.
2-70447 and incorporated herein by refer-
ence).
10(g) - Lease between the Erie County Industrial
Development Authority and the Company, dated
June 18, 1981 (Filed as Exhibit 10(b)(4)-7 to
the Company's Quarterly Report on Form 10-Q
for the fiscal quarter ended May 16, 1981 and
incorporated herein by reference).
10(h)* - 1987 Stock Plan, as amended (Filed as Exhibit
4.1 to the Company's Registration Statement
on Form S-8 No. 33-37292 - filed on October
15, 1990 and incorporated herein by refer-
ence).
10(i)* - 1990 Non-Employee Director Stock Option Plan,
as amended (Filed as Exhibit 4.1 to the
Company's Registration Statement on Form S-8
No. 33-58550 - filed on February 17, 1993 and
incorporated herein by reference).
10(j) - Purchase Agreement between Louis Feuillebois
and the Company relating to the Company's
investment in Societe Burton Corblin (Filed
as Exhibit 10(v) to the Company's Annual
Report on Form 10-K for the fiscal year ended
May 31, 1984 and incorporated herein by
reference).
10(k) - Amendment Agreement to Purchase Agreement
between Louis Feuillebois and the Company
referred to in Exhibit 10(j) hereof (Filed as
Exhibit 10(v) to the Company's Annual Report
on Form 10-K for the fiscal year ended May
31, 1986 and incorporated herein by
reference).
10(l) - Second Amendment Agreement, dated September
19, 1986, to Purchase Agreement between Louis
Feuillebois and the Company referred to in
Exhibit 10(j) hereof (Filed as Exhibit 10(x)
to the Company's Annual Report on Form 10-K
for the fiscal year ended May 31, 1987 and
incorporated herein by reference).
10(m) - Joint Venture Agreement, dated September 30,
1986, among ASEA Inc., ASEA Pressure Systems,
Inc., and the Company (Filed as Exhibit 10(y)
to the Company's Annual Report on Form 10-K
for the fiscal year ended May 31, 1987 and
incorporated herein by reference).
<PAGE>
-59-
10(n)* - Form of Involuntary Severance Agreement with
certain officers of the Company or its
subsidiaries (Filed as Exhibit 10(n) to the
Company's Annual Report on Form 10-K for the
fiscal year ended May 31, 1994 and incorporated
herein by reference).
10(o) - Stock Purchase Agreement dated as of January 19,
1995 by the Company and James Howden & Godfrey
Overseas Limited (Filed as Exhibit 2.1 to the
Company's Report on Form 8-K dated January 1995
and incorporated herein by reference).
10(p) - Asset Purchase Agreement dated as of August 14,
1995 between Snap-tite, Inc. and the Company
(Filed herewith).
10(q) - Share Repurchase Agreement dated as of June 22,
1995 by and among James C. Levinson, Marilyn
Gasche Levinson, the J and L Levinson Partnership
and the Company (Filed herewith).
11.1 - Computation of Average Shares Used in Computing
Earnings Per Share (Filed herewith).
22 - Subsidiaries of the Company (Filed herewith).
24 - Consent of Independent Accountants (Filed
herewith).
The Company has omitted certain agreements and
instruments defining the rights of holders of long-term debt
which does not exceed 10 percent of the total assets of the
Company and its subsidiaries on a consolidated basis. The
Company agrees to furnish those documents to the Securities
and Exchange Commission upon request.
(b) Reports on Form 8-K: No reports on Form 8-K were filed
by the Company during the fourth quarter of the fiscal year ended
May 31, 1995.
(c) Exhibits: The Company hereby files as exhibits to this
Form 10-K those exhibits listed in Item 14(a)(3) above.
(d) Executive Compensation Plans and Arrangements:
Included under this caption are the exhibits marked by an
asterisk (*) in Item 14(a)(3) above.
(e) Financial Statement Schedules: The Company hereby
files as financial statement schedules to this Form 10-K those
financial statement schedules listed in Item 14(a)(2), above,
which are attached hereto.
<PAGE>
-60-
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.
AUTOCLAVE ENGINEERS, INC.
(Registrant)
By /S/William F. Schilling
-------------------------
William F. Schilling, President
Date: August 28, 1995
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.
Signature Title Date
/S/ William F. Schilling President and Chief August 28, 1995
------------------------ Executive Officer
William F. Schilling (Principal Executive
Officer) and Director
/S/ Thomas C. Guelcher Chief Financial August 28, 1995
------------------------ Officer (Principal)
Thomas C. Guelcher Financial Officer)
/S/ John G. Sontag Corporate Controller August 28, 1995
------------------------ (Principal Accounting
John G. Sontag Officer)
/S/ James C. Levinson Chairman of the August 28, 1995
------------------------ Board
James C. Levinson
/S/ A. Wade Blackman Director August 28, 1995
------------------------
A. Wade Blackman
<PAGE>
-61-
/S/ Michael J. Doyle Director August 28, 1995
------------------------
Michael J. Doyle
/S/ Edward P. Junker III Director August 28, 1995
-------------------------
Edward P. Junker, III
/S/ W. Gregg Kerr Director August 28, 1995
-------------------------
W. Gregg Kerr
/S/ Marilyn G. Levinson Director August 28, 1995
-------------------------
Marilyn G. Levinson
/S/ Carl J. Schlemmer Director August 28, 1995
-------------------------
Carl J. Schlemmer
/S/ George H. Schofield Director August 28, 1995
-------------------------
George H. Schofield
/S/ Donald M. Spero Director August 28, 1995
-------------------------
Donald M. Spero
<PAGE>
<TABLE>
<CAPTION>
-62-
AUTOCLAVE ENGINEERS, INC. AND SUBSIDIARIES
SCHEDULE II. VALUATION AND QUALIFYING ACCOUNTS
for the fiscal years ended 1995, 1994 and 1993
<S> <C> <C> <C> <C> <C>
Additions
---------------------
Balance at Charged to Charged to Balance at
Beginning Costs and Other End of
Description of Period Expenses Accounts Deductions Period
----------- ---------- ---------- ---------- ---------- ----------
Reserve for slow moving inventory
1995 $ 287,000 $1,279,000 $ -- $1,133,000 $ 433,000
1994 114,000 451,000 -- 278,000 287,000
1993 48,000 66,000 -- -- 114,000
S-1
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT 11.1
COMPUTATION OF EARNINGS PER SHARE
<S> <C> <C> <C>
Fiscal Years Ended May 31
----------------------------------------
1995 1994 1993
---------- ---------- ------------
INCOME(LOSS) FROM
CONTINUING OPERATIONS $ 705,000 $ (212,000) $(1,610,000)
========== ========== ============
NET INCOME(LOSS) $3,002,000 $1,198,000 $ 105,000
========== ========== ===========
Earnings Per Share - Primary:
----------------------------
Weighted average
number of shares
outstanding 4,218,340 4,214,136 4,197,667
Common share equivalents
assuming exercise of
stock options and warrants 122,044 53,397 35,822
---------- ---------- -----------
Average shares used in
computing earnings
per share 4,340,384 4,267,533 4,233,489
========== ========== ===========
Income(Loss) from
continuing operations
per share $0.16 $(0.05) $(0.38)
===== ====== =======
Net income per share $0.69 $ 0.28 $ 0.02
===== ====== ======
Earnings Per Share - Fully Diluted:
----------------------------------
Weighted average number of
shares outstanding 4,218,340 4,214,136 4,197,667
Common share equivalent
assuming exercise of
stock options and warrants 138,051 66,890 35,822
---------- ---------- -----------
Average shares used in
computing earnings
per share 4,356,391 4,281,026 4,233,489
========== =========== ===========
Income(Loss) from
continuing operations
per share $0.16 $(0.05) $(0.38)
===== ======= =======
Net income per share $0.69 $0.28 $0.02
===== ===== =====
</TABLE>
<PAGE>
EXHIBIT 22
SUBSIDIARIES OF THE COMPANY
---------------------------
The following is a list of the subsidiaries of Autoclave
Engineers, Inc. The Company owns, directly or indirectly, 100%
of the voting securities of each subsidiary.
State of Jurisdiction
Name or Incorporation
---- ---------------------
AE Autoclave of Canada, Ltd. Canada
Autoclave Engineers, Ltd. United Kingdom
Autoclave Investments, Inc. Delaware
Autoclave International Sales
Corporation Virgin Islands
AE Acquisition Corporation Delaware
Autoclave International Corporation Delaware
Unit Instruments, Inc. California
Unit Instruments Ireland Limited Ireland
Unit Instruments Japan, Inc. Japan
Unit Instruments UK Limited United Kingdom
Unit Instruments, GmbH Germany
<PAGE>
EXHIBIT 24
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We hereby consent to the incorporation by reference in the
registration statements on Form S-8 (File Nos. 33-37292 and 33-
58550) of Autoclave Engineers, Inc., of our report dated August
15, 1995, appearing on Page 19 of this Form 10-K.
Price Waterhouse LLP
600 Grant Street
Pittsburgh, Pennsylvania 15219
August 28, 1995
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-31-1995
<PERIOD-END> MAY-31-1995
<CASH> 4465
<SECURITIES> 4919
<RECEIVABLES> 9543
<ALLOWANCES> 0
<INVENTORY> 8440
<CURRENT-ASSETS> 40008
<PP&E> 11684
<DEPRECIATION> 5740
<TOTAL-ASSETS> 51902
<CURRENT-LIABILITIES> 12435
<BONDS> 0
<COMMON> 662
0
0
<OTHER-SE> 37816
<TOTAL-LIABILITY-AND-EQUITY> 51902
<SALES> 48256
<TOTAL-REVENUES> 48256
<CGS> 31011
<TOTAL-COSTS> 31011
<OTHER-EXPENSES> 3104
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 339
<INCOME-PRETAX> 937
<INCOME-TAX> 232
<INCOME-CONTINUING> 705
<DISCONTINUED> 2297
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3002
<EPS-PRIMARY> .69
<EPS-DILUTED> .69
</TABLE>
EXHIBIT 10(Q)
SHARE REPURCHASE AGREEMENT
This Share Repurchase Agreement is made as of June 22, 1995
by and among James C. Levinson and Marilyn Gasche Levinson
(collectively, the Levinsons ); the J. and L. Levinson
Partnership, a Texas general partnership (the "Seller"); and
Autoclave Engineers, Inc., a Pennsylvania corporation (the
Company").
FACTS:
The Seller is the owner of shares of Common Stock, $.15 par
value, of the Company (the "Common Stock"). The Levinsons are the
sole partners of the Seller.
The Seller desires to sell, and the Company desires to buy,
shares of Common Stock owned by the Seller on the terms and
conditions set forth in this Agreement, in such amount as is set
forth on Exhibit A hereto (the "Seller Shares").
The Seller and the Levinsons are willing to agree to refrain
from making certain transfers of shares of Common Stock.
The Company is willing to register the shares of Common
Stock owned by the Seller under the Securities Act of 1933
(together with the rules and regulations thereunder, the
Securities Act ) under certain circumstances.
The Company has received a favorable opinion from its
investment banker, Needham & Co. Inc., with respect to the
fairness to the Company from a financial point of view of the
transactions contemplated by this Agreement.
In consideration of the covenants and conditions set forth
in this Agreement, each of the parties agrees as follows:
1. Sale of Seller Shares. The Seller agrees to sell,
transfer and assign to the Company and, subject to and in
reliance upon the representations, warranties, terms and
conditions of this Agreement, the Company agrees to purchase, the
Seller Shares at the purchase price set forth on Exhibit A
hereto.
2. Closing. The closing of the purchase and sale of the
Seller Shares (the "Closing") shall be held concurrently with,
and is contingent upon, the closing of the sale of the assets of
the Company s AEG Division as a separate business (the AEG
Sale ); provided, however, that (i) if the sale of the AEG
Division occurs in connection with the sale of substantially all
of the assets of the Company to or merger of the Company with one
or more unaffiliated third parties, or (ii) if at the time of the
closing of the AEG Sale, the Company has entered into a letter of
intent, agreement in principle or agreement for the sale of
substantially all of the remaining assets of the Company or the
sale of the business of the Company through a merger with an
<PAGE>
-2-
unaffiliated party, then, in either case, this Agreement shall
terminate immediately prior to the sale of the AEG Division and
no party hereto shall have any obligation to the others with
respect to the Seller Shares. At the Closing, the Seller will
deliver to the Company a duly executed stock power and a
certificate representing the Seller Shares against payment of the
purchase price therefor by delivery of a certified check to the
Seller. It shall be a condition of the Company s obligation to
close the purchase of the Seller Shares that the AEG Sale shall
have been completed for gross cash proceeds to the Company of at
least $10,500,000.00 and that no litigation with respect to the
transactions contemplated by this Agreement shall have been
commenced or threatened in writing against the Company or members
of the Company s Board of Directors. This Agreement may be
terminated by the Seller and the Levinsons by written notice to
the Company if the AEG Sale is not consummated within 180 days
after the date hereof. This Agreement may be terminated by the
Company by giving written notice to the Levinsons if the AEG Sale
is not consummated within 365 days after the date hereof.
3. Representations and Warranties of the Levinsons and the
Seller. The Levinsons and the Seller represent and warrant as
follows:
(a) Ownership of Stock. The Seller is the sole record
and beneficial owner of, and has good and marketable title to,
the Seller Shares indicated on Exhibit A, free and clear of any
liens, encumbrances, claims, charges, options, voting agreements
and restrictions of any nature, other than restrictions generally
imposed under state and federal securities laws (collectively,
"Encumbrances"). Upon the delivery of the Seller Shares to the
Company as provided in Section 2 above, the Company will receive
good and marketable title to the Seller Shares free and clear of
any and all Encumbrances.
(b) Enforceability of Agreement. This Agreement has
been duly executed and delivered by each of the Levinsons and the
Seller and is enforceable against them in accordance with its
terms.
(c) No Brokers or Finders. No person has or will
have, as a result of the transactions contemplated by this
Agreement, any right, interest or valid claim against or upon the
Seller for any commission, fee or other compensation as a finder
or broker because of any act or omission by the Seller or the
Levinsons; and the Levinsons and the Seller agree to indemnify
and hold the Company harmless against any such commissions, fees
or other compensation arising from any such acts or omissions.
(d) Legends. Certificates representing all shares of
Common Stock owned by the Levinsons and the Seller after the date
hereof and until the expiration of the Standstill Period (as
defined below) shall bear the legends set forth on Exhibit B
hereto. The Company will promptly remove such legends upon
request after the expiration of the Standstill Period.
<PAGE>
-3-
4. Representations and Warranties of the Company. The
Company represents and warrants as follows:
(a) Power and Authority. The Company has full power
and authority to execute, deliver and perform this Agreement and
to make this Agreement its valid and enforceable obligation.
(b) Enforceability of Agreement. The execution,
delivery and performance of this Agreement have been duly
authorized by all necessary corporate action of the Company.
This Agreement has been duly executed and delivered by the
Company and is enforceable against it in accordance with its
terms.
(c) No Conflict. The execution, delivery and
performance of this Agreement by the Company in accordance with
its terms does not and will not conflict with or result in a
breach of any terms and provisions of, or constitute a default
under, the articles of incorporation or bylaws of the Company,
any law or regulation applicable to the Company, or any agreement
or instrument to which the Company is a party or by which the
Company or its assets are bound.
(d) No Brokers or Finders. No person has or will
have, as a result of the transactions contemplated by this
Agreement, any right, interest or valid claim against or upon it
for any commission, fee, or other compensation as a finder or
broker because of any act or omission by the Company (except for
the fees owing to Needham & Company, Inc., which shall be solely
the responsibility of the Company); and the Company agrees to
indemnify and hold the other parties hereto harmless against any
such commissions, fees or other compensation arising from the
Company's acts or omissions.
5. Standstill. The Levinsons and the Seller each agree
not to sell, assign, pledge, transfer (by gift or otherwise) or
otherwise dispose of, directly or indirectly, any shares of
Common Stock whatsoever (whether now held or hereafter acquired)
and agree not to engage in any hedging transactions with respect
to the Common Stock owned by them that may directly or indirectly
have an impact on the market price of the Common Stock, in each
case during the period commencing with and including the date
hereof and ending on the close of business on the date which is
eighteen (18) months after the Closing (the "Standstill Period");
provided, however, that the prohibition contained in this
Section 5 shall not apply to:
(i) gifts in any amount in which (A) each donee agrees
with the Company in writing to be bound by the restrictions
contained in this Section 5; and (B) certificates representing
the shares received by the donee bear the legends set forth on
Exhibit B hereto;
(ii) sales made pursuant to an effective registration
statement under the Securities Act; or
<PAGE>
-4-
(iii) lawful "private" sales in which (A) no such
shares of Common Stock are sold publicly, or pursuant to Rule 144
under the Securities Act; and (B) such sales are made solely as a
private sale pursuant to an exemption under the Securities Act
other than Rule 144; (C) the certificates representing the
shares of Common Stock acquired by the purchaser bear the legends
set forth on Exhibit B hereto; and (D) each purchaser agrees with
the Company in writing to be bound by the restrictions contained
in this Section 5.
6. Registration of the Shares; Compliance with the
Securities Act.
(a) Registration Requirements.
(1) Subject to the limitations set forth in the
remainder of this Section 6(a), the Seller may at any time
following the Standstill Period give to the Company a written
request for the registration by the Company under the Securities
Act of all or any part of the shares of Common Stock owned by it.
After the receipt of such a request, the Company shall use its
best efforts in good faith to effect promptly the registration
under the Securities Act of all such shares as to which a request
for registration has been received.
(2) The Company shall not be required to effect
more than one registration pursuant to the provisions of Section
6(a)(1). The Company shall not be required to effect any
registration pursuant to the provisions of Section 6(a)(1) if
the Seller shall have sold at least 150,000 shares of Common
Stock pursuant to an effective registration statement of the
Company filed with the Securities and Exchange Commission (the
Commission ) under the Securities Act.
(3) If the Seller requests the Company to
withdraw a registration statement requested by it and filed by
the Company under the Securities Act, the Company shall have no
further obligations under Section 6(a)(1).
(4) The Company shall not be obligated to effect
any registration pursuant to the provisions of Section 6(a)(1)
during the period commencing on the date falling 60 days prior to
the Company s estimated date of filing of, and ending 90 days
following the effective date of, any registration statement
pertaining to any registration initiated by the Company (other
than with respect to securities registered in connection with
employee benefit plans).
(5) The Company shall not be required to effect
any registration pursuant to the provisions of Section 6(a)(1)
for any 60-day period following receipt of any written request
for registration, if in the good faith judgment of the Board of
Directors of the Company, the filing of any registration
statement during such 60-day period would adversely affect a
material proposed or pending acquisition, merger or other
material corporate event to which the Company reasonably expects
to conclude.
<PAGE>
-5-
(6) The Company shall not be required to effect
any registration pursuant to the provisions of Section 6(a)(1)
with respect to any shares of Common Stock that may be sold
pursuant to the provisions of Rule 144(k), or any rule of similar
effect, of the Commission
(7) The Seller shall not effect sales of any
securities pursuant to any registration pursuant to the
provisions of Section 6(a)(1) after receipt of notice from the
Company to suspend sales to permit the Company to correct or
update such registration statement, which the Company shall
undertake to do as soon as practicable; in such event, the period
of time described in Section 6(b)(1) shall be extended by a
period of days equal to the period such suspension is in effect.
(b) Registration Procedures.
(1) With respect to any registration statement
filed by the Company pursuant to Section 6(a)(1) (the
Registration Statement ), the Company will prepare and file with
the Commission such amendments and supplements thereto and to
the prospectus used in connection therewith as may be necessary
to comply with the Securities Act for a period of sixty (60)
days after the effective date of such Registration Statement.
After the conclusion of such 60-day period, the Seller shall not
make any sales of Common Stock pursuant to such Registration
Statement, and such Registration Statement may be withdrawn by
the Company.
(2) The Company will furnish to the Seller with
respect to the securities registered under the Registration
Statement (and to each underwriter, if any, of such securities)
such number of copies of prospectuses and preliminary
prospectuses in conformity with the requirements of the
Securities Act and such other documents as the Seller may
reasonably request, in order to facilitate the public sale or
other disposition of all or any of such securities by the Seller;
provided, however, that the obligation of the Company to deliver
copies of prospectuses or preliminary prospectuses to the Seller
shall be subject to the receipt by the Company of reasonable
assurances from the Seller that the Seller will comply with the
applicable provisions of the Securities Act and of such other
securities or blue sky laws as may be applicable in connection
with any use of such prospectuses or preliminary prospectuses;
(3) The Company will file documents required of
the Company for blue sky clearance in states specified in writing
by the Seller and will use its reasonable best efforts to obtain
all such clearances; provided, however, that the Company shall
not be required to qualify to do business or consent to service
of process in any jurisdiction in which it is not now so
qualified or has not so consented; and
<PAGE>
-6-
(4) The Company will bear all expenses in
connection with each Registration Statement and with the
procedures specified in this Section 6(b) and the registration of
the shares pursuant to the Registration Statement, other than
fees and expenses, if any, of underwriters and of counsel or
other advisers to the Seller.
(5) In the event that any registration pursuant
to Section 6(a) involves an underwritten public offering, the
Company will execute an underwriting agreement containing
customary terms.
(6) The Company will give the Sellers, any
underwriters and their respective representatives reasonable and
customary access to the books, records and properties of the
Company and will make available its officers and representatives
to discuss the business and affairs of the Company in order to
permit the Seller and underwriter to conduct a reasonable due
diligence investigation of the Company within the meaning of the
Securities Act.
(7) The Company will use its best efforts to
furnish to the Seller and underwriter, if any, an opinion of
counsel for the Company and a cold comfort letter of its
auditors, in each case, covering matters customarily covered in
such documents in underwritten public offerings.
(8) While any Registration Statement is
effective, the Company will immediately notify the Seller of
(i) any event which could cause the Registration Statement to
contain an untrue statement, or (ii) any communication from the
Commission with respect to the Registration Statement.
(c) Indemnification. For the purpose of this
Section 6(c):
(1) The term "Selling Shareholder" shall mean the
Seller if it has sold shares of Common Stock pursuant to the
Registration Statement, and any affiliate of the Seller,
including the Levinsons;
(2) The term "Registration Statement" shall
include any preliminary prospectus, final prospectus, exhibit,
supplement or amendment included in or relating to the
Registration Statement; and
(3) The term "untrue statement" shall mean any
untrue statement or alleged untrue statement of a material fact
in the Registration Statement, or any omission or alleged
omission to state in the Registration Statement a material fact
required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were
made, not misleading.
<PAGE>
-7-
The Company agrees to indemnify and hold harmless each
Selling Shareholder from and against any losses, claims, damages
or liabilities to which such Selling Shareholder may become
subject (under the Securities Act or otherwise) insofar as such
losses, claims, damages or liabilities (or actions or proceedings
in respect thereof) arise out of, or are based upon, any untrue
statement contained in the Registration Statement, and the
Company will reimburse such Selling Shareholder for any legal or
other expenses reasonably incurred in investigating, defending or
preparing to defend any such action, proceeding or claim;
provided, however, that the Company shall not be liable in any
such case to the extent that such loss, claim, damage or
liability arises out of, or is based upon, an untrue statement
made in such Registration Statement in reliance upon and in
conformity with written information furnished to the Company by
or on behalf of such Selling Shareholder specifically for use in
preparation of the Registration Statement, or the failure of such
Selling Shareholder to comply with the covenants and agreements
contained herein respecting sale of its securities.
The Seller and the Levinsons agrees to indemnify and
hold harmless the Company and (and each person, if any, who
controls the Company within the meaning of Section 15 of the
Securities Act, each officer of the Company who signs the
Registration Statement and each director of the Company) from
and against any losses, claims, damages or liabilities to which
the Company (or any such officer, director or controlling
person) may become subject (under the Securities Act or
otherwise), insofar as such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) arise
out of, or are based upon, any failure of the Seller to comply
with the covenants and agreements contained herein, or any untrue
statement contained in the Registration Statement if such untrue
statement was made in reliance upon and in conformity with
written information furnished by or on behalf of the Seller
specifically for use in preparation of the Registration
Statement, and the Seller will reimburse the Company (or such
officer, director or controlling person), as the case may be, for
any legal or other expenses reasonably incurred in investigating,
defending or preparing to defend any such action, proceeding or
claim.
Promptly after receipt by any indemnified person of a
notice of a claim or the beginning of any action in respect of
which indemnity is to be sought against an indemnifying person
pursuant to this Section 6(c), such indemnified person shall
notify the indemnifying person in writing of such claim or of the
commencement of such action, and, subject to the provisions
hereinafter stated, in case any such action shall be brought
against an indemnified person and such indemnifying person shall
have been notified thereof, such indemnifying person shall be
entitled to participate therein, and, to the extent it shall
wish, to assume the defense thereof, with counsel reasonably
satisfactory to such indemnified person. After notice from the
indemnifying person to such indemnified person of its election to
<PAGE>
-8-
assume the defense thereof, such indemnifying person shall not be
liable to such indemnified person for any legal expenses
subsequently incurred by such indemnified person in connection
with the defense thereof, provided, however, that if there exists
or shall exist a conflict of interest that would make it
inappropriate, in the opinion of counsel to the indemnified
person, for the same counsel to represent both the indemnified
person and such indemnifying person or any affiliate or associate
thereof, the indemnified person shall be entitled to retain its
own counsel at the expense of such indemnifying person; provided,
however, that no indemnifying person shall be responsible for the
fees and expenses of more than one separate counsel for all
indemnified parties.
If the indemnification provided for in this Section 6(d) is
for any reason unavailable, then each indemnifying party shall
contribute to the amount paid or payable by the indemnified party
(including legal fees and other expenses) in proportion to their
relative fault with respect to the untrue statement or other fact
giving rise to the amount so paid or payable, determined by
reference to who supplied the information giving rise to the
untrue statement and who had the opportunity to correct the
untrue statement or to remedy any other defect, as well as other
equitable considerations, but not by reference to the indemnified
party s stock ownership in the Company.
8. Counterparts. This Agreement may be executed in
counterparts, each of which will be deemed an original but all of
which will be deemed one instrument.
9. Survival of Representations and Warranties. All
representations and warranties made in this Agreement or any
other instrument or document delivered in connection herewith,
shall survive the execution and delivery hereof.
10. Prior Agreements. This Agreement constitutes the
entire agreement between the parties with respect to its subject
matter and supersedes any prior understandings or agreements
concerning such subject matter.
11. Severability. The invalidity or unenforceability of
any provision hereof shall in no way affect the validity or
enforceability of any other provision.
12. Governing Law. This Agreement shall be governed by,
and construed in accordance with, Pennsylvania law.
13. Headings. Section headings in this Agreement are
included herein for convenience of reference only and shall not
constitute a part of the Agreement for any other purpose.
14. Amendments and Waivers. Changes in or additions to
this Agreement may be made, and compliance with any covenant or
other provision herein set forth may be omitted or waived, only
by an instrument in writing executed by all of the parties
hereto.
<PAGE>
-9-
15. Non-Assignability. The provisions of this Agreement
are non-assignable, except that the estate of the survivor of
James C. Levinson and Marilyn Gasche Levinson shall be entitled
to the benefits of, and shall be subject to the provisions of,
this Agreement.
16. Joint and Several Obligations. The Levinsons jointly
and severally agree to cause the Seller to perform all of its
obligations hereunder, and all obligations of the Levinsons
and/or of the Seller shall be joint and several, whether so
expressed or not. The term Seller shall be deemed to include
the Levinsons if the Seller shall be dissolved or if any of the
shares of Common Stock owned by the Seller shall be distributed
to the Levinsons, but the provisions of this sentence shall not
create any duplicative obligations on the part of the Company.
17. Further Assurances. Subject to the specific terms of
this Agreement, each of the parties hereto shall make, execute,
acknowledge and deliver, such other instruments and documents,
and take all such other actions, as may be seasonably necessary
in order to effectuate the purpose of this Agreement and to
consummate the transactions contemplated hereby.
<PAGE>
-10-
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
AUTOCLAVE ENGINEERS, INC.
By:___________________________
Title:
THE J. AND L. LEVINSON PARTNERSHIP
By:__________________________
James C. Levinson
By:__________________________
Marilyn Gasche Levinson
_______________________________
James C. Levinson, individually
_______________________________
Marilyn Gasche Levinson, individually
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
EXHIBIT A
Purchase Price Total Pur-
Seller Seller Shares Per Share chase Price
------ ------------- -------------- -----------
The J. and L. Levinson 220,000 $11.75 $2,585,000
Partnership
</TABLE>
<PAGE>
EXHIBIT B
The shares represented by this certificate have not been
registered under the Securities Act of 1933. These shares have
been acquired for investment and not with a view to distribution
or resale, and may not be sold, mortgaged, pledged, hypothecated
or otherwise transferred without an effective registration
statement for such shares under the Securities Act of 1933, or an
opinion of Counsel for the Corporation that registration is not
required under such act.
The shares represented by this certificate are subject to
restriction on transfer contained in a Share Repurchase
Agreement, dated June 22, 1995. A copy of such agreement may be
obtained, without charge, from the Secretary of the Corporation.
<PAGE>
EXHIBIT 10(P)
ASSET PURCHASE AGREEMENT
dated as of
August 14, 1995
between
SNAP-TITE, INC.
and
AUTOCLAVE ENGINEERS, INC.
<PAGE>
ASSET PURCHASE AGREEMENT
AGREEMENT dated as of August 14, 1995 between SNAP-TITE,
INC., a Pennsylvania corporation ("Buyer"), and AUTOCLAVE
ENGINEERS, INC., a Pennsylvania corporation ("ACLV").
W I T N E S S E T H :
WHEREAS, ACLV conducts a business (the "Business") through
its AEG Division (the Division ) that designs, manufactures and
markets autoclaves, compressors, valves, fittings, tubing,
instrumentation, controllers and related systems, sub-systems,
components and accessories, principally for elevated temperature
and/or pressure applications;
WHEREAS, Buyer desires to purchase substantially all of the
assets of the Business from ACLV, and ACLV desires to sell
substantially all of the assets of the Business to Buyer, upon
the terms and subject to the conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the foregoing and the
representations, warranties, covenants and agreements herein
contained, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01. Definitions. (a) The following terms, as used
herein, have the following meanings:
ACLV s Proprietary Rights means all Proprietary Rights relating
to the Business that are owned or licensed by ACLV or an
Affiliate.
"Affiliate" means, with respect to any Person, any Person
directly or indirectly controlling, controlled by, or under
common control with such other Person.
"Balance Sheet" means the unaudited balance sheet of the Business
as of May 31, 1995 found in Schedule 3.06.
Balance Sheet Date" means May 31, 1995.
Closing Date means the date of the Closing, as hereinafter
defined.
HSR Act means the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended.
"Lien" means, with respect to any asset, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in
respect of such asset.
-1-
<PAGE>
"Material Adverse Change" means a material adverse change in the
business, assets, condition (financial or otherwise) or results
of operations of the Business taken as a whole.
"Material Adverse Effect" means a material adverse effect on
the business, assets, condition (financial or otherwise) or
results of operations of the Business taken as a whole.
"Person" means an individual, corporation, partnership,
association, trust or other entity or organization, including a
government or political subdivision or an agency or
instrumentality thereof.
"Proprietary Rights" means all (A) patents, patent
applications, patent disclosures and all related continuation,
continuation-in-part, divisional, reissue, re-examination,
utility, model, certificate of invention and design patents,
patent applications, registrations and applications for
registrations, (B) trademarks, service marks, trade dress, logos,
tradenames, service names and corporate names and registrations
and applications for registration thereof, (C) copyrights and
registrations and applications for registration thereof, (D) mask
works and registrations and applications for registration
thereof, (E) computer software, data and documentation, (F) trade
secrets and confidential business information, whether patentable
or nonpatentable and whether or not reduced to practice, know-
how, manufacturing and product processes and techniques, research
and development information, copyrightable works, financial,
marketing and business data, pricing and cost information,
business and marketing plans and customer and supplier lists and
information, (G) other proprietary rights relating to any of the
foregoing (including without limitation associated goodwill and
remedies against infringements thereof and rights of protection
of an interest therein under the laws of all jurisdictions) and
(H) copies and tangible embodiments thereof.
-2-
<PAGE>
(b) Each of the following terms is defined in the Section
set forth opposite such term:
Term Section
Designated Customer 8.03
Designated Agreement 2.01
Designated Products 8.03
Designated Project 8.03
Apportioned Obligations 5.03
Assumed Liabilities 2.03
Benefit Arrangement 6.01
CERCLA 3.22
Closing 2.07
Code 5.01
Contracts 2.01
Conveyance Documents 2.07
Cost of Goods Sold 8.03
Employee Pension Benefit Plan 6.01
Employee Plan 6.01
Environmental Laws 3.22
Environmental Liabilities 3.22
ERISA 6.01
ERISA Affiliate 6.01
Excluded Assets 2.02
Excluded Liabilities 2.04
Fee 8.03
Financial Statements 3.06
Gross Margin 8.03
Hazardous Substance 3.22
HPWPS 8.03
Indemnified Party 11.03
Indemnifying Party 11.03
Loss 11.02
Multiemployer Plan 6.01
Net Sales 8.03
Other Consent 3.05
Permit 3.14
Permitted Lien 3.08
Petty Cash 2.01
Phase I 7.07
Post-Closing Tax Period 5.01
Pre-Closing Tax Period 5.01
Purchased Assets 2.01
Purchase Price 2.06
Real Property 3.08
Release 3.22
Required Consent 3.05
Tax 5.01
Transferred Employee 6.03
Transferred Subsidiaries 2.01
Transferred Subsidiary Securities 3.02
-3-
<PAGE>
ARTICLE II
PURCHASE AND SALE OF ASSETS
2.01. Purchase and Sale. Upon the terms and subject to the
conditions of this Agreement, Buyer agrees to purchase from ACLV
and ACLV agrees to sell, transfer, assign and deliver, or cause
to be transferred, assigned and delivered, to Buyer, at the
Closing, free and clear of all Liens other than Permitted Liens,
all of the assets, properties and business, other than the
Excluded Assets, of every kind and description, wherever located,
real, personal or mixed, tangible or intangible, owned, held or
used primarily in the conduct of the Business by ACLV or any
subsidiary of ACLV, as of the Closing Date, including all assets
shown under the column, Pro Forma Balance , on the Balance Sheet
and not disposed of in the ordinary course of business, and all
assets of the Business thereafter acquired by ACLV (the
"Purchased Assets"), and including, without limitation, all
right, title and interest of ACLV and its subsidiaries in, to and
under such of the foregoing as are more specifically described
below:
(i) all real property and leases of, and other
interests in, real property, in each case together with all
buildings, fixtures, and improvements erected thereon, including
without limitation the items listed on Schedule 3.08(a);
(ii) all personal property and interests therein,
including machinery, equipment, furniture, office equipment,
communications equipment, vehicles, storage tanks, spare and
replacement parts, fuel and other tangible property, including
without limitation the items listed on Schedule 3.08(b);
(iii) all raw materials, work-in-process, finished
goods, supplies and other inventories, wherever situated, a
listing of which as of a recent date is set forth on Schedule
3.17;
(iv) all rights under all contracts, agreements,
leases, licenses, commitments, sales and purchase orders and
other instruments, including without limitation the items listed
on Schedule 3.13 (collectively, the "Contracts");
(v) all accounts, notes and other receivables of the
Business, a listing of which as of a recent date is set forth on
Schedule 3.18;
(vi) all prepaid expenses and deposits, including
without limitation ad valorem taxes, leases and rentals;
(vii) all petty cash located at operating
facilities of the Business ("Petty Cash");
-4-
<PAGE>
(viii) all of ACLV's rights, claims, credits, causes
of action or rights of set-off against third parties relating to
the Purchased Assets, including, without limitation, unliquidated
rights under manufacturers' and vendors' warranties;
(ix) all of ACLV s Proprietary Rights, including
without limitation the items listed on Schedule 3.19;
(x) all licenses, permits or other governmental
authorizations affecting, or relating in any way to, the
Business, including without limitation the items listed on
Schedule 3.14, but only to the extent transferable;
(xi) all books, records, files and papers, whether in
hard copy or computer format, including, without limitation,
engineering information, sales and promotional literature,
manuals and data, sales and purchase correspondence, lists of
present and former suppliers, lists of present and former
customers, personnel and employment records of Division
personnel, and any information relating to Tax imposed on the
Purchased Assets;
(xii) all of the outstanding capital stock of the
following subsidiaries of ACLV: A.E. Autoclave of Canada Limited,
Autoclave Engineers Ltd. and AEF (France) (the Transferred
Subsidiaries ); and ACLV s interest in the following joint
ventures or minority equity interests relating to the Business:
ABB Autoclave Systems, Inc.;
(xiii) all goodwill associated with the Division or
the Business or the Purchased Assets, together with the right to
represent to third parties that Buyer is the successor to the
Division and the Business; and
(xiv) all rights under the Agreement dated
January 17, 1995 between ACLV and the Designated Customer as set
forth in a side letter of even date herewith (the Designated
Agreement as set forth in a side letter of even date herewith),
subject to Section 8.03 hereof.
2.02. Excluded Assets. Buyer expressly understands and
agrees that the following assets and properties of ACLV and its
subsidiaries (the "Excluded Assets") shall be excluded from the
Purchased Assets:
(i) all of ACLV's cash, cash equivalents and short-
term investments on hand and in banks, except for Petty Cash and
except as provided in Section 3.24;
(ii) all inter-company accounts with ACLV or any of its
divisions or subsidiaries, except as set forth under the column,
Pro Forma Balance , on the Balance Sheet;
-5-
<PAGE>
(iii) any Purchased Assets sold or otherwise
disposed of in the ordinary course of the operation of the
Business and not in violation of any provisions of this Agreement
through the Closing; and
(iv) investment in the following subsidiaries: Unit
Instruments, Inc. and its subsidiaries, Autoclave Investments,
Inc., AE Acquisition Corporation, and Autoclave International
Sales Corporation.
2.03. Assumption of Liabilities. Upon the terms, subject
to the conditions and in reliance upon the representation and
warranties contained in this Agreement, Buyer agrees, effective
at the time of Closing, to assume all debts, obligations,
contracts and liabilities of ACLV arising out of the conduct of
the Business (the Assumed Liabilities ) as follows:
(i) all liabilities accrued on the Balance Sheet under
the column, Pro Forma Balance , or described in any Notes
thereto;
(ii) all liabilities arising out of or relating
primarily to the Business, and incurred in the ordinary course of
Business since the Balance Sheet Date;
(iii) all liabilities and obligations of ACLV
arising under the Contracts and the Designated Agreement (other
than liabilities or obligations attributable to any failure by
ACLV to comply with the terms thereof);
(iv) all claims and related expenses for product
warranty in respect of products sold or services rendered by the
Business through the Closing Date;
(v) all claims and expenses for deductibles and excess
awards attributable to products sold or services rendered by the
Business through the Closing Date for which ACLV has insurance
coverage and as to which an occurrence has taken place on or
prior to the Closing Date giving rise to a claim, including,
without limitation, the matters disclosed on Schedule 3.12
(except as otherwise expressly noted thereon);
(vi) all liabilities and obligations relating to any
products manufactured or sold by the Business on or prior to the
Closing Date, including without limitation warranty obligations
and product liability claims for which there has not yet been an
occurrence;
(vii) all payroll, sales, use and property taxes of
ACLV incurred in the conduct of the Business on or prior to the
Closing Date and as reflected on the Balance Sheet or incurred in
the ordinary course of business since the Balance Sheet Date;
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(viii) liabilities and obligations relating to Taxes
and those employee benefits as set forth in Articles V and VI of
this Agreement, not excluded in Section 2.04 hereof, and as
reflected on the Balance Sheet or incurred in the ordinary course
of business since the Balance Sheet Date; and
(ix) all other debts, obligations, contracts and
liabilities of ACLV arising out of the Business, whether fixed or
contingent, known or unknown, not specifically excluded or
limited under this Section 2.03, other than the Excluded
Liabilities .
2.04. Excluded Liabilities.
(a) Notwithstanding any provision in this Agreement,
the Schedules hereto or any other writing to the contrary, Buyer
is assuming only the Assumed Liabilities and is not assuming any
other liability or obligation of ACLV or any Affiliate of ACLV
(or any predecessor owner of all or part of its business and
assets) of whatever nature whether presently in existence or
arising or asserted hereafter (the Excluded Liabilities ). All
such other liabilities and obligations shall be retained by and
remain obligations and liabilities of ACLV or its Affiliate.
(b) Without limiting Section 2.04, the following
liabilities are excluded as liabilities of Buyer:
(i) Any claim whatsoever arising out of the use
of asbestos in products of the Business on or prior to the
Closing Date.
(ii) any claim or liability arising under any
employment agreement with James C. Levinson.
(iii) any claim or liability arising under
ACLV s 1987 Stock Plan, ACLV s Long-Term Incentive Plan or ACLV s
Special Incentive Plan for Certain Executive Employees.
(iv) any claim or liability relating to ACLV s
management or operation of the following employee benefit plans
prior to the Closing Date (as opposed, for example, to
liabilities for employee benefits which accrue or become vested
with respect to periods of employment prior to the Closing Date):
A. ACLV s Salary Reduction Plan.
B. ACLV s Deferred Compensation Plan.
(vi) any claim or liability under ACLV s Unfunded
Deferred Compensation Agreement except for liabilities for
supplemental retirement benefits for Messrs. Darr, Osmanski,
Bowser and Walker.
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2.05. Assignment of Contracts and Rights. Anything in this
Agreement to the contrary notwithstanding, this Agreement shall
not constitute an agreement to assign any Purchased Asset or any
claim or right or any benefit arising thereunder or resulting
therefrom if an attempted assignment thereof, without consent of
a third party thereto, would constitute a breach or other
contravention thereof or in any way adversely affect the rights
of Buyer or ACLV thereunder. ACLV and Buyer will use their best
efforts (but without any payment of money by ACLV or Buyer) to
obtain the consent of the other parties to any such Purchased
Asset or claim or right or any benefit arising thereunder for the
assignment thereof to Buyer as Buyer may request. If such
consent is not obtained, or if an attempted assignment thereof
would be ineffective or would adversely affect the rights of ACLV
thereunder so that Buyer would not in fact receive all such
rights, ACLV and Buyer will cooperate in a mutually agreeable
arrangement under which Buyer would obtain the benefits and
assume the obligations thereunder in accordance with this
Agreement, including subcontracting, sub-licensing, or subleasing
to Buyer, or under which ACLV would enforce for the benefit of
Buyer, with Buyer assuming ACLV's obligations, any and all rights
of ACLV against a third party thereto. ACLV will promptly pay to
Buyer when received all monies received by ACLV under any
Purchased Asset or any claim or right or any benefit arising
thereunder, except to the extent the same represents an Excluded
Asset.
2.06. Purchase Price. (a) The purchase price for the
Purchased Assets (the "Purchase Price") is (i) Fifteen Million
Five Hundred Thousand Dollars ($15,500,000.00) in cash,
(ii) Seven Hundred and Fifty Thousand Dollars ($750,000) by
Buyer s promissory note in the form and on the terms set forth as
Exhibit B, (iii) the assumption of the Assumed Liabilities and
(iv) the Margin Sharing Fee described in Section 8.03 below.
The cash portion of the Purchase Price shall be paid as provided
in Section 2.07 below.
(b) On or prior to the Closing, the parties shall
agree on an Allocation Statement setting forth the value of the
Purchased Assets and of the Covenant Not to Compete described in
Section 7.04 hereof, which shall be the allocation of the
Purchase Price (together with the Assumed Liabilities) among the
Purchased Assets and the Covenant Not to Compete.
2.07. Closing. The closing (the "Closing") of the purchase
and sale of the Purchased Assets and the assumption of the
Assumed Liabilities hereunder shall take place at the offices of
ACLV as soon as possible, but in no event later than five
Business Days after satisfaction of the conditions set forth in
Article X, or at such other time or place as Buyer and ACLV may
agree. At the Closing,
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(a) Buyer shall deliver to ACLV a certified or
official bank check payable to the order of ACLV, or make a wire
transfer to an account designated by ACLV, in the amount of
$15,500,000.00.
(b) ACLV and Buyer shall enter into an Assignment and
Assumption Agreement substantially in the form attached hereto as
Exhibit A, and ACLV shall deliver to Buyer such deeds, bills of
sale, endorsements, consents, assignments and other good and
sufficient instruments of conveyance and assignment (the
"Conveyance Documents") as are necessary or appropriate to vest
in Buyer all right, title and interest in, to and under the
Purchased Assets. ACLV and Buyer shall also execute and deliver
all such instruments, documents and certificates as may be
reasonably requested by the other party that are necessary,
appropriate or desirable for the consummation at the Closing of
the transactions contemplated by this Agreement.
(c) Buyer shall execute and deliver to ACLV the
Subordinated Note in the form of Exhibit B.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF ACLV
ACLV hereby represents and warrants to Buyer that:
3.01. Corporate Existence and Power. ACLV is a corporation
duly incorporated, validly existing and in good standing under
the laws of its jurisdiction of incorporation, and has all
corporate powers and all material governmental licenses,
authorizations, consents and approvals required to carry on its
business as now conducted.
3.02. Corporate Authorization; Transferred Subsidiaries.
(a) The execution, delivery and performance by ACLV of this
Agreement, and the consummation by ACLV of the transactions
contemplated hereby are within ACLV's corporate powers and have
been duly authorized by all necessary corporate action on the
part of ACLV. This Agreement constitutes a valid and binding
agreement of ACLV.
(b) Each Transferred Subsidiary is a corporation duly
incorporated, validly existing in good standing under the laws of
its jurisdiction of incorporation, has all corporate powers and
all material governmental licenses, authorizations, consents and
approvals required to carry on its business as now conducted.
All of the outstanding capital stock of, or other ownership
interests in, each Transferred Subsidiary, is owned by ACLV,
directly or indirectly, free and clear of any Lien and free of
any other limitation or restriction (including any restriction on
the right to vote, sell or otherwise dispose of such capital
stock or other ownership interests). There are no outstanding
(i) securities of ACLV or any Transferred Subsidiary convertible
into or exchangeable for shares of capital stock or other voting
securities or ownership interests in any Transferred Subsidiary
or (ii) options or other rights to acquire from ACLV, or any
obligation of any Transferred Subsidiary to issue, any capital
stock, voting securities or other ownership interests in, or any
securities convertible into or exchangeable for any capital
stock, voting securities or ownership interests in, any
Transferred Subsidiary (the items in clauses (i) and (ii) being
referred to collectively as the "Transferred Subsidiary
Securities"). There are no outstanding obligations of ACLV or
any Transferred Subsidiary to repurchase, redeem or otherwise
acquire any outstanding Transferred Subsidiary Securities.
3.03. Governmental Authorizations. The execution delivery
and performance by ACLV of this Agreement do not require any
action by or in respect of, or filing with, any governmental
body, agency, official or authority other than compliance with
any applicable requirements of the HSR Act.
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<PAGE>
3.04. Non-Contravention. The execution, delivery and
performance by ACLV of this Agreement do not and will not
(i) contravene or conflict with the corporate charter or bylaws
of ACLV, (ii) contravene or conflict with or constitute a
violation of any provision of any law, regulation, judgment,
injunction, order or decree binding upon or applicable to ACLV or
the Business; (iii) assuming the receipt of all Required Consents
and Other Consents (as defined in Section 3.05 below), constitute
a default under or give rise to any right of termination,
cancellation or acceleration of any right or obligation of ACLV
or to a loss of any benefit relating to the Business to which
ACLV is entitled under any provision of any material agreement,
contract or other instrument binding upon ACLV or by which any of
the Purchased Assets is or may be bound or any Permit or (iv)
result in the creation or imposition of any Lien on any Purchased
Asset, other than Permitted Liens.
3.05. Required and Other Consents. (a) Schedule 3.05(a)
sets forth each agreement, contract or other instrument binding
upon ACLV or any Permit requiring a consent as a result of the
execution, delivery and performance of this Agreement or the
consummation of the transactions contemplated hereby, except such
consents as would not, individually or in the aggregate, have a
Material Adverse Effect if not received by the Closing Date (each
such consent, a "Required Consent").
(b) Schedule 3.05(b) sets forth every other consent
(each such consent, an "Other Consent") under such agreements,
contracts or other instruments or such Permits that is necessary
with respect to the execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated
hereby.
3.06. Financial Statements. The Balance Sheet and the
unaudited statements of operations and cash flows for the
Business for the years ended May 31, 1993, 1994 and 1995,
(collectively, the "Financial Statements") fairly present, on a
consistent basis, the financial position of the Business as of
the date thereof and its results of operations and cash flows for
the periods indicated. The Financial Statements are attached
hereto as Schedule 3.06.
3.07. Absence of Certain Changes. Except as set forth on
Schedule 3.07, since the Balance Sheet Date, ACLV has conducted
the Business in the ordinary course consistent with past
practices, and there has not been:
(a) Any Material Adverse Change;
(b) any incurrence, assumption or guarantee by ACLV of
any indebtedness for borrowed money with respect to the Business
other than in the ordinary course of business and in amounts and
on terms consistent with past practices;
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(c) any creation or other incurrence of any Lien on
any Purchased Asset other than in the ordinary course of business
consistent with past practices;
(d) any damage, destruction or other casualty loss
(whether or not covered by insurance) affecting the Business or
any Purchased Asset which, individually or in the aggregate, has
had or could reasonably be expected to have a Material Adverse
Effect;
(e) any transaction, contract, agreement or other
instrument entered into, or commitment made, by ACLV relating to
the Business or any Purchased Asset (including the acquisition or
disposition of any assets) or any relinquishment by ACLV of any
contract or other right, in either case, material to the Business
taken as a whole, other than transactions and commitments in the
ordinary course of business consistent with past practices and
those contemplated by this Agreement;
(f) any change in any method of accounting or
accounting practice by ACLV with respect to the Business;
(g) except as disclosed on Schedule 3.20, any
(i) grant of any severance or termination pay to any employee of
the Business, (ii) entering into of any employment, deferred
compensation or other similar agreement (or any amendment to any
such existing agreement) with any employee of the Business,
(iii) increase in benefits payable under an existing severance or
termination pay policies or employment agreements or
(iv) increase in compensation, bonus or other benefits payable to
employees of the Business, other than in the ordinary course of
business consistent with past practice;
(h) any labor dispute, other than routine individual
grievances, or any activity or proceeding by a labor union or
representative thereof to organize any employees of the Business,
which employees were not subject to a collective bargaining
agreement at the Balance Sheet Date, or any lockouts, strikes,
slowdowns, work stoppages or threats thereof by or with respect
to such employees;
(i) any material capital expenditure, or commitment
for a material capital expenditure, for additions or improvements
to property, plant and equipment; or
(j) any declaration, setting aside or payment of
any dividend or other distribution with respect to any shares of
capital stock of any Transferred Subsidiary, or any repurchase,
redemption or other acquisition by ACLV or any Transferred
Subsidiary of any outstanding Transferred Subsidiary Securities.
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<PAGE>
3.08. Properties. (a) ACLV owns, leases or subleases all
real property used in the Business. Schedule 3.08(a) describes
all real property used primarily in the Business included in the
Purchased Assets (the "Real Property"), any title insurance
policies and surveys with respect thereto, and any Liens thereon,
specifying in the case of leases or subleases, the name of the
lessor or sublessor, the lease term and basic annual rent.
(b) Schedule 3.08(b) describes all personal property
used primarily in the Business included in the Purchased Assets,
including but not limited to machinery, equipment, furniture,
vehicles, storage tanks, spare and replacement parts, fuel and
other trade fixtures and fixed assets, and any Liens thereon,
specifying in the case of leases or subleases, the name of the
lessor or sublessor, the lease term and basic annual rent.
(c) (i) ACLV has good and marketable, indefeasible,
fee simple title to, or in the case of leased Real Property has
valid leasehold interests in, all Purchased Assets (whether real,
personal, tangible or intangible) reflected on the Balance Sheet
or acquired after the Balance Sheet Date, except for properties
and assets sold since the Balance Sheet Date in the ordinary
course of business consistent with past practices.
(ii) The Real Property includes all real property,
and only such real property, as is used or held for use primarily
in connection with the conduct of the business and operations of
the Business as heretofore conducted.
(iii) All leases of Real Property or personal
property are in good standing and are valid, binding and
enforceable in accordance with their respective terms, and there
does not exist under any such lease of real property or personal
property any material default or any event that, with notice or
lapse of time or both, would constitute a material default.
(iv) Except as set forth on Schedule 3.08(c)(iv),
the plants, buildings, structures and equipment included in the
Purchased Assets have no material defects, are in good operating
condition and repair and have been reasonably maintained
consistent with standards generally followed in the industry
(giving due account to the age and length of use of same,
ordinary wear and tear excepted), are suitable for their present
uses and, in the case of plants, buildings and other structures
(including without limitation, the roofs thereof), are
structurally sound.
(v) None of the material structures on the Real
Property encroaches upon real property of another Person, and no
structure of any other person substantially encroaches upon any
Real Property.
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(d) No Purchased Asset is subject to any Lien, except:
(i) Liens disclosed in the Financial Statements
or the Schedules attached hereto;
(ii) Liens for taxes not yet due or being
contested in good faith (and for which adequate accruals or
reserves have been established on the Balance Sheet); or
(iii) Liens that do not materially detract
from the value of such Purchased Asset as now used, or materially
interfere with any present or intended use of such Purchased
Asset (clauses (ii) and (iii) are, collectively, the "Permitted
Liens").
(e) No violation of any law, regulation or ordinance
(including, without limitation, laws, regulations or ordinances
relating to zoning, environmental, city planning or similar
matters) relating to the Business or any Purchased Asset
currently exists or has existed at any time since May 31, 1992,
except for violations that have not had and would not reasonably
be expected to have, individually or in the aggregate, a Material
Adverse Effect. There are no developments affecting any of the
Purchased Assets pending or, to the knowledge of ACLV threatened,
which might materially detract from the value of such Purchased
Assets, materially interfere with any present or intended use of
any such Purchased Assets or materially adversely affect the
marketability of such Purchased Assets.
3.09. Sufficiency of Purchased Assets. The Purchased
Assets plus certain of the Excluded Assets constitute, and on the
Closing Date will constitute, all of the assets or property used
or held for use primarily in the Business.
3.10. Title to Purchased Assets. Upon consummation of the
transactions contemplated hereby, Buyer will have acquired good
and marketable title in and to, or a valid leasehold interest in,
each of the Purchased Assets, free and clear of all Liens, except
for Permitted Liens.
3.11. No Undisclosed Material Liabilities. To the
knowledge of ACLV, there are no material liabilities of the
Business of any kind whatsoever, whether accrued, contingent,
absolute, determined, determinable or otherwise, and there is no
existing condition, situation or set of circumstances which could
reasonably be expected to result in such a material liability,
other than:
(i) liabilities disclosed or provided for in the
Balance Sheet or in the notes thereto or disclosed in the
Schedules to this Agreement; and
(ii) liabilities incurred in the ordinary course of
business consistent with past practice since the Balance Sheet
Date.
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3.12. Litigation. Except as disclosed in Schedule 3.12,
there is no action, suit, investigation or proceeding pending
against or affecting, or to the knowledge of ACLV, any action,
suit, investigation or proceeding that would reasonably be
expected to have a Material Adverse Effect that has been
threatened against or affecting, the Business or any Purchased
Asset before any court or arbitrator or any governmental body,
agency or official or that in any manner challenges or seeks to
prevent, enjoin, alter or materially delay the transactions
contemplated hereby.
3.13. Material Contracts. (a) Except for the Contracts
disclosed in Schedule 3.13 or any other Schedule to this
Agreement, with respect to the Business, ACLV is not a party to
or subject to:
(i) any lease providing for an annual rental of
$50,000 or more;
(ii) any contract for the purchase of materials,
supplies, goods, services, equipment or other assets providing
for annual payments by ACLV of $50,000 or more, other than
outstanding purchase orders issued in the ordinary course of
business and not pursuant to a recurring obligation;
(iii) any sales, distribution or other similar
agreement providing for the sale by ACLV of materials, supplies,
goods, services, equipment or other assets that provides for
annual payments to ACLV of, or pursuant to which in the last year
ACLV received in the aggregate, $50,000 or more;
(iv) any partnership, joint venture or other similar
contract arrangement or agreement;
(v) any contract relating to indebtedness for borrowed
money or the deferred purchase price of property (whether
incurred, assumed, guaranteed or secured by an asset), except
contracts relating to indebtedness incurred in the ordinary
course of business in an amount not exceeding $50,000;
(vi) any license agreement, franchise agreement or
agreement in respect of similar rights granted to or held by
ACLV;
(vii) any agency, dealer, sales representative or
other similar agreement;
(viii) any agreement, contract or commitment that
substantially limits the freedom of ACLV to compete in any line
of business or with any Person or in any area or to own, operate,
sell, transfer, pledge or otherwise dispose of or encumber any
Purchased Asset or that would so limit the freedom of the Buyer
after the Closing Date;
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<PAGE>
(ix) any agreement, contract or commitment which is or
relates to an agreement with or for the benefit of any subsidiary
of ACLV; or
(x) any other agreement, contract or commitment not
made in the ordinary course of business which is material to the
Business taken as a whole.
(b) Each Contract disclosed in any Schedule to this
Agreement or required to be disclosed pursuant to Section 3.13(a)
is valid and binding agreement of ACLV and is in full force and
effect, and neither ACLV nor, to the knowledge of ACLV, any other
party thereto is in default in any material respect under the
terms of any such Contract, nor, to the knowledge of ACLV, has
any event or circumstance occurred that, with notice or lapse of
time or both, would constitute any material event of default
thereunder.
3.14. Licenses and Permits. Schedule 3.14 correctly
described each material license, franchise, permit or other
similar authorization affecting, or relating in any way to, the
Business, together with the name of the government agency or
entity issuing such license or permit (the "Permits"). Except as
set forth on the Schedule 3.14, such Permits are valid and in
full force and effect and, assuming the related Required Consents
and Other Consents have been obtained prior to the Closing Date,
are transferable by ACLV and will not be terminated or impaired
or become terminable as a result of the transactions contemplated
hereby. Upon consummation of such transactions, Buyer will,
assuming the related Required Consents and Other Consents have
been obtained prior to the Closing Date, have all of the right,
title and interest in all the Permits.
3.15. Insurance Coverage. Schedule 3.15 sets forth a list
of all insurance policies and fidelity bonds covering the
Purchased Assets, the business and operations of the Business and
its employees. There is no claim by ACLV pending under any of
such policies or bonds as to which coverage has been questioned,
denied or disputed by the underwriters of such policies or bonds.
All premiums payable under all such policies and bonds have been
paid and ACLV is otherwise in full compliance with the terms and
conditions of all such policies and bonds. Such policies of
insurance and bonds (or other policies and bonds providing
substantially similar insurance coverage) have been in effect
since before May 31, 1992 and remain in full force and effect.
3.16. Compliance with Laws. ACLV is not in violation of,
has not since May 31, 1992 violated, and to ACLV's knowledge is
not under investigation with respect to and has not been
threatened to be charged with or given notice of any violation
of, any law, rule, ordinance or regulation, or judgment, order or
decree entered by any court, arbitrator or governmental
authority, domestic or foreign, applicable to the Purchased
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Assets or the conduct of the Business, except for violations that
have not had and could not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect.
3.17. Inventories. The inventories set forth in the
Balance Sheet were properly stated therein at the lesser of cost
or fair market value determined in accordance with generally
accepted accounting principles consistently maintained and
applied by ACLV. Since the Balance Sheet Date, the inventories
related to the Business have been maintained in the ordinary
course of business. All such inventory is owned free and clear
of all Liens. All of the inventory recorded on the Balance Sheet
consists of, and all inventory related to the Business on the
Closing Date will consist of, items usable or saleable in the
normal course of Business consistent with past practices and are
and will be in a quantity sufficient for the normal operation of
the Business in accordance with past practice.
3.18. Receivables. All accounts, notes receivable and
other receivables (other than receivables collected since the
Balance Sheet Date) reflected on the Balance Sheet are, and all
accounts and notes receivable arising from or otherwise relating
to the Business at the Closing Date will be, valid and genuine.
3.19. Intellectual Property. (a) Schedule 3.19 sets forth a
list of all Proprietary Rights used in the Business by ACLV and
described in clauses (A) through (C) of the definition of such
term in Section 1.01, specifying as to each, as applicable:
(i) the nature of such Proprietary Right; (ii) the owner of such
Proprietary Right; (iii) the jurisdictions in which such
Proprietary Right has been issued or registered or in which an
application for such issuance or registration has been filed,
including the respective registration or application numbers; and
(iv) material licenses, sublicenses and other agreements as to
which ACLV or any of its subsidiaries is a party and pursuant to
which any Person is authorized to use such Proprietary Right,
including the identity of all parties thereto, a description of
the nature and subject matter thereof, the applicable royalty and
the term thereof.
(b) Except as disclosed in Schedule 3.19, (i) ACLV has
not during the three years preceding the date of this Agreement
been sued or charged in writing with or been a defendant in any
claim, suit, action or proceeding relating to the Business that
has not been finally terminated prior to the date hereof and that
involves a claim of infringement of any of ACLV s Proprietary
Rights and (ii) ACLV has no knowledge of any other claim or
infringement by ACLV, and no knowledge of any continuing
infringement by any other Person of any of ACLV s Proprietary
Rights. None of ACLV s Proprietary Rights is subject to any
outstanding order, judgment, decree, stipulation or agreement
restricting the use thereof by ACLV with respect to the Business
or restricting the licensing thereof by ACLV to any Person. ACLV
has not entered into any agreement to indemnify any other Person
against any charge of infringement of any of ACLV s Proprietary
Rights.
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(c) None of the processes and formulae, research and
development results and other know-how relating to the Business,
the value of which to ACLV is contingent upon maintenance of the
confidentiality thereof, has been disclosed by ACLV or any
Affiliate thereof to any Person other than employees,
representatives and agents of ACLV.
3.20. Employees. Schedule 3.20 sets forth a true and
complete list of (a) the names, titles, annual salaries and other
compensation of all employees of the Business whose annual base
salary exceeds $25,000 and (b) the wage rates for non-salaried
employees of the Business (by classification).
3.21. Products. Each of the products produced or sold by
ACLV in connection with the Business (i) is, and at all times has
been, in compliance in all material respects with all applicable
federal, state, local and foreign laws and regulations and
(ii) is, and at all relevant times has been, fit for the ordinary
purposes for which it is intended to be used and conforms in all
material respects to any promises or affirmation of fact made on
the container or label for such products or in connection with
its sale.
3.22. Environmental Compliance.
(a) Environmental Definitions. The following terms,
as used herein, have the following meanings:
"CERCLA" means the Comprehensive Environmental
Responses, Compensation and Liability Act of 1980, as amended.
"Environmental Laws" means any and all federal, state,
local and foreign statutes, laws (including common or case law),
regulations, ordinances, rules, judgments, judicial decisions,
orders, decrees, codes, plans, injunctions, permits, concessions,
grants, franchises, licenses, agreements, or governmental
restrictions, relating to the environment or to emissions,
discharges or releases of pollutants, contaminants, petroleum or
petroleum products, chemicals or industrial, toxic, radioactive
or hazardous substances or wastes into the environment including,
without limitation, ambient air, surface water, ground water, or
land, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or
handling of pollutants, contaminants, petroleum or petroleum
products, chemicals or industrial, toxic, radioactive or
hazardous substances or wastes or the clean-up or other
remediation thereof.
"Environmental Liabilities" means all liabilities
arising in connection with or in any way relating to the
Purchased Assets or ACLV's or its Affiliates' use or ownership
thereof, whether vested or unvested, contingent or fixed, actual
or potential, which (i) arise under or relate to Environmental
Laws or arise in connection with or relate to any matter
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disclosed or required to be disclosed in Schedule 3.22 and (ii)
arise from or relate in any way to actions occurring or
conditions existing before the Closing Date.
Hazardous Substance means any toxic, caustic or
otherwise hazardous substance including but not limited to
petroleum products, radioactive materials, pesticides, asbestos
and asbestos containing materials, polychlorinated byphenels,
hydrocarbons, lead and products containing lead and any materials
or substances defined as or included in the definition of
hazardous materials, hazardous waste , hazardous substance ,
toxic substance , contaminants , solid waste or regulated
substances under any applicable Environmental Law.
Release means any spilling, leaking, pumping,
pouring, emitting, emptying, discharging, injecting, leaching,
dumping or disposing, as well as the definitions of release in
42 U.S.C. 9601 (22) of any Hazardous Substance into the
environment.
(b) Environmental Representations. Except as
disclosed on Schedule 3.22:
(i) No notice, notification, demand, request for
information, citation, summons or order has been issued, no
complaint has been filed, no penalty has been assessed and no
investigation or review is pending or threatened by any
governmental or other entity (A) with respect to any alleged
violation by ACLV of any Environmental Law in connection with the
conduct of the Business, (B) with respect to any alleged failure
by ACLV to have any environmental permit, certificate, license,
approval, registration or authorization required in connection
with the conduct of the Business or (C) with respect to any
generation, treatment, storage, recycling, transportation or
disposal or Release of any hazardous substance generated by the
Business or the Purchased Assets.
(ii) In connection with the operation of the
Business, (A) ACLV has not handled any Hazardous Substance, other
than as a generator, on any property now or previously owned or
leased by ACLV; (B) no polychlorinated biphenyls or urea
formaldehyde is or has been present at any property now or
previously owned or leased by ACLV; (C) no asbestos is or has
been present at any property now or previously owned or leased by
ACLV; (D) there are no underground storage tanks for Hazardous
Substances, active or abandoned, at any property now or
previously owned or leased by ACLV; (E) no Hazardous Substance
has been Released at, or under any property now or previously
owned or leased by ACLV and (F) no Hazardous Substance has been
released or is present, in a reportable or threshold planning
quantity, where such a quantity has been established by statute,
ordinance, rule, regulation or order, at, on or under any
property now or previously owned by ACLV.
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(iii) In connection with the operation of the
Business, ACLV has not transported or arranged for the
transportation (directly or indirectly) of any Hazardous
Substance to any location which is listed or proposed for listing
under CERCLA, or on any similar state list or which is the
subject of Federal, state or local enforcement actions or other
investigations which may lead to claims against Buyer for clean-
up costs, remedial work, damages to natural resources or for
personal injury claims, including, but not limited to, claims
under CERCLA.
(iv) No oral or written notification of a Release
of a Hazardous Substance has been filed by or on behalf of ACLV
with respect to the Business and no property now or previously
owned or leased by ACLV with respect to the Business is listed or
proposed for listing on the National Priorities List promulgated
pursuant to CERCLA or on any similar state list of sites
requiring investigation or clean-up.
(v) There are no environmental Liens on any of
the Purchased Assets, and no governmental actions have been taken
or are in process that could subject any of such Purchased Assets
to such Liens. ACLV would not be required to place any notice or
restriction relating to the presence of Hazardous Substances at
any property used in connection with the operation of the
Business in any deed to such property.
(vi) There have been no environmental
investigations, studies, audits, tests, reviews or other analyses
conducted by or which are in the possession of ACLV in relation
to any property or facility now or previously owned or leased by
ACLV in connection with the operation of the Business which have
not been delivered to Buyer prior to the date hereof.
3.23. Finders' Fees. Except for Needham & Company, Inc.,
whose fees will be paid by ACLV, there is no investment banker,
broker, finder or other intermediary that has been retained by or
is authorized to act on behalf of ACLV who might be entitled to
any fee or commission from ACLV or any of its Affiliates upon
consummation of the transactions contemplated by this Agreement.
3.24. Minimum Net Worth; Minimum Working Capital. On the
Closing Date, (i) the book value of the Purchased Assets shall
exceed the Assumed Liabilities by at least $11,620,796.00, and
(ii) net operating assets, defined as accounts receivable-trade
and inventories, less accounts payable and accrued compensation
and benefits, on a basis consistent with the pro-forma balance
sheet, shall be at least $5,200,000.00; provided, however, that
if there is a shortfall in either (or both) of such amounts, ACLV
may add cash to the Purchased Assets in an amount sufficient to
cure such shortfall, in which case such amount of cash shall
become a Purchased Asset .
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REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warranties to ACLV that:
4.01. Organization and Existence. Buyer is a corporation
duly incorporated, validly existing and in good standing under
the laws of Pennsylvania and has all corporate powers and all
material governmental licenses, authorizations, consents and
approvals required to carry on its business as now conducted.
4.02. Corporate Authorization. The execution, delivery and
performance by Buyer of this Agreement and the consummation by
Buyer of the transactions contemplated hereby are within the
corporate powers of Buyer and have been duly authorized by all
necessary corporate action on the part of Buyer. This Agreement
constitutes the valid and binding agreement of Buyer.
4.03. Governmental Authorization. The execution, delivery
and performance by Buyer of this Agreement requires no action by
or in respect of, or filing with, any governmental body, agency,
official or authority other than compliance with any applicable
requirements of the HSR Act.
4.04. Non-Contravention. The execution, delivery and
performance by Buyer of this Agreement does not and will not
(i) contravene or conflict with the corporate charter or bylaws
of Buyer or (ii) assuming compliance with the matters referred to
in Section 4.03, contravene or conflict with any provision of any
law, regulation, judgment, injunction, order or decree binding
upon Buyer.
4.05. Finders' Fees. Except for Advest, Inc., whose fees
will be paid by Buyer, there is no investment banker, broker,
finder or other intermediary that has been retained by or is
authorized to act on behalf of Buyer who might be entitled to any
fee or commission from ACLV or any of its Affiliates upon
consummation of the transactions contemplated by this Agreement.
4.06. Financing. Buyer has sufficient funds available to
purchase the Purchased Assets.
4.07. Litigation. There is no action, suit, investigation
or proceeding pending against, or to the knowledge of Buyer
threatened against or affecting, Buyer before any court or
arbitrator or any governmental body, agency or official which in
any manner challenges or seeks to prevent, enjoin, alter or
materially delay the transactions contemplated by this Agreement.
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ARTICLE V
TAX MATTERS
5.01. Tax Definitions. The following terms, as used
herein, have the following meanings:
"Code" means the Internal Revenue Code of 1986, as amended.
"Post-Closing Tax Period" means any Tax period (or portion
thereof) ending on or after the Closing Date.
"Pre-Closing Tax Period" means any Tax period (or portion
thereof) ending on or before the close of business on the date
preceding the Closing Date.
"Tax or Taxes means any net income, alternative or add-
on minimum tax, gross income, gross receipts, sales, use, ad
valorem, franchise, capital, paid-up capital, profits, greenmail,
license, withholding, payroll, employment, excise, severance,
stamp, occupation, premium, property, environmental or windfall
profit tax, custom, duty or other tax, governmental fee or other
like assessment or charge of any kind whatsoever, together with
any interest or any penalty, addition to tax or additional amount
imposed by any governmental authority (domestic or foreign)
responsible for the imposition of any such tax.
5.02. Tax Matters. ACLV hereby represents and warrants to
Buyer that:
(a) ACLV has timely paid all Taxes, and all interest
and penalties due thereon and payable by it, for the Pre-Closing
Tax Period which will have been required to be paid on or prior
to the Closing Date, the non-payment of which would result in a
Lien on any Purchased Asset, would otherwise adversely affect the
Business or would result in Buyer becoming liable or responsible
therefor.
(b) ACLV has established, in accordance with generally
accepted accounting principles applied on a basis consistent with
that of preceding periods, adequate reserves for the payment of,
and will timely pay all Tax liabilities, assessments, interest
and penalties which arise from or with respect to the Purchased
Assets or the operation of the Business and are incurred in or
attributable to the Pre-Closing Tax Period, the non-payment of
which would result in a Lien on any Purchased Asset, would
otherwise adversely affect the Business or would result in Buyer
becoming liable therefor.
5.03. Tax Cooperation; Allocation of Taxes. (a) Buyer and
ACLV agree to furnish or cause to be furnished to each other,
upon request, as promptly as practicable, such information and
assistance relating to the Purchased Assets and the Business as
is reasonably necessary for the filing of all Tax returns, and
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making of any election related to Taxes, the preparation for any
audit by any taxing authority, and the prosecution or defense of
any claim, suit or proceeding relating to any Tax return. ACLV
and Buyer shall cooperate with each other in the conduct of any
audit or other proceeding related to Taxes involving the Business
and each shall execute and deliver such powers of attorney and
other documents as are necessary to carry out the intent of this
paragraph (a) of Section 5.03.
(b) All real property taxes, personal property taxes
and similar ad valorem obligations levied with respect to the
Purchased Assets for a taxable period which includes (but does
not end on) the Closing Date (collectively, the "Apportioned
Obligations") shall be apportioned between ACLV and Buyer as of
the Closing Date based on the number of days of such taxable
period included in the Pre-Closing Tax Period and the number of
days of such taxable period included in the Post-Closing Tax
Period. ACLV shall be liable for the proportionate amount of
such taxes that is attributable to the Pre-Closing Tax Period.
Within 90 days after the Closing, ACLV and Buyer shall present a
statement to the other setting forth the amount of reimbursement
to which each is entitled under this Section 5.03(b) together
with such supporting evidence as is reasonably necessary to
calculate the proration amount. The proration amount shall be
paid by the party owing it to the other within 10 days after
delivery of such statement. Thereafter, ACLV shall notify Buyer
upon receipt of any bill for real or personal property taxes
relating to the Purchased Assets, part or all of which are
attributable to the Post-Closing Tax Period, and shall promptly
deliver such bill to Buyer who shall pay the same to the
appropriate taxing authority, provided that if such bill covers
the Pre-Closing Tax Period, ACLV shall also remit prior to the
due date of assessment to Buyer payment for the proportionate
amount of such bill that is attributable to the Pre-Closing Tax
Period. If either ACLV or Buyer shall thereafter make a payment
for which it is entitled to reimbursement under this
Section 5.03(b), the other party shall make such reimbursement
promptly but in no event later than 30 days after the
presentation of a statement setting forth the amount of
reimbursement to which the presenting party is entitled along
with such supporting evidence as is reasonably necessary to
calculate the amount of reimbursement. Any payment required
under this Section and not made within 10 days of delivery of the
statement shall bear interest at the rate per annum determined,
from time to time, under the provisions of Section 6621(a)(2) of
the Code for each day until paid.
(c) Any transfer, documentary, sales, use or other
Taxes assessed upon or with respect to the transfer of the
Purchased Assets to Buyer and any recording or filing fees with
respect thereto shall be the responsibility of ACLV.
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ARTICLE VI
EMPLOYEE BENEFITS
6.01. Employee Benefits Definitions. The following terms,
as used herein, shall have the following meanings:
"Benefit Arrangement" means an employment, severance or
similar contract, arrangement or policy and each plan or
arrangement providing for severance, insurance coverage
(including any self-insured arrangements), workers' compensation,
disability benefits, supplemental unemployment benefits, vacation
benefits, pension or retirement benefits or for deferred
compensation, profit-sharing, bonuses, stock options, stock
appreciation rights or other forms of incentive compensation or
post-retirement insurance, compensation or benefits that (i) is
not an Employee Plan and (ii) is maintained or contributed to by
ACLV or any of its ERISA Affiliates, but excluding any Benefit
Arrangement which is maintained exclusively for the benefit of
employees of Unit Instruments, Inc.
"Employee Pension Benefit Plan" means each "employee pension
benefit plan" as that term is defined in Section 3(2) of ERISA,
that is an Employee Plan, as defined below.
"Employee Plan" means each "employee benefit plan", as such
term is defined in Section 3(3) of ERISA, that (i) is subject to
any provision of ERISA and (ii) is maintained or contributed to
by ACLV or any of its ERISA Affiliates, as the case may be, but
excluding any Employee Plan which is maintained exclusively for
the benefit of employees of Unit Instruments, Inc.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"ERISA Affiliate" of any entity means any other entity that,
together with such entity, would be treated as a single employer
under Section 414 of the Code.
"Multiemployer Plan" means each Employee Plan that is a
multiemployer plan, as defined in Section 3(37) of ERISA.
6.02. ERISA Representations. ACLV hereby represents and
warrants to Buyer that:
(a) Schedule 6.02 lists each Employee Plan and each Benefit
Arrangement that covers any current employee of the
Business.
(b) Neither ACLV nor any ERISA Affiliate maintains or has
ever maintained or contributed to any Multiemployer
Plan.
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(c) No "prohibited transaction", as defined in Section 406
of ERISA or Section 4975 of the Code, has occurred with
respect to any Employee Plan.
(d) Each Employee Plan and Benefit Arrangement has been
maintained in compliance with its terms and with the
requirements prescribed by any and all statutes,
orders, rules and regulations, including but not
limited to ERISA and the Code, which are applicable to
such Employee Plan or Benefit Arrangement.
(e) All contributions and payments accrued under each
Employee Plan and Benefit Arrangement, determined in
accordance with prior funding and accrual practices, as
adjusted to include proportional accruals for the
period ending on the Closing Date, will be discharged
and paid on or prior to the Closing Date except to the
extent reflected on the Balance Sheet. Except as
disclosed in writing to Buyer prior to the date hereof,
there has been no amendment to, written interpretation
of or announcement (whether or not written) by ACLV or
any of its ERISA Affiliates relating to, or change in
employee participation or coverage under, any Employee
Plan or Benefit Arrangement that would increase
materially the expense of maintaining such Employee
Plan or Benefit Arrangement above the level of the
expense incurred in respect thereof for the fiscal year
ended May 31, 1995.
(f) No tax under Section 4980B of the Code has been
incurred in respect of any Employee Plan that is a
group health plan, as defined in Section 5000(b)(1) of
the Code.
(g) Except as disclosed in Schedule 6.02, with respect to
the employees and former employees of the Business,
there are no employee post-retirement medical or health
plans in effect, except as required by Section 4980B of
the Code.
(h) Except as disclosed in Schedule 6.02, no employee of
the Business will become entitled to any bonus,
retirement, severance or similar benefit or enhanced
benefit solely as a result of the transactions
contemplated hereby.
6.03. Employees and Offers of Employment. On or prior to
the Closing Date, Buyer shall offer employment to all active
employees of the Business, except for those employees listed on
Schedule 6.03, and shall also offer employment to B. Balogh;
provided that Buyer may terminate at any time after the Closing
Date the employment of any employee who accepts such offer. For
purposes of this Article VI, the term "active employee" shall
mean any Person who, on the Closing Date, is actively employed by
ACLV in the Business or who is on short-term disability leave,
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authorized leave of absence, military service or lay-off with
recall rights as of the Closing Date (such inactive employees
shall be offered employment by Buyer as of the date they return
to active employment), but shall exclude any other inactive or
former employee including any Person who has been on long-term
disability leave or unauthorized leave of absence or who has
terminated his or her employment, retired or died on or before
the Closing Date. Any such offers shall be at such salary or
wage and benefit levels and on such other terms and conditions as
are comparable to those currently in effect. The employees who
accept and commence employment with Buyer are hereinafter
collectively referred to as the "Transferred Employees". Buyer
shall not assume responsibility for any Transferred Employee
until such employee commences employment with Buyer.
6.04. ACLV's Employee Benefit Plans and Arrangements.
(a) Buyer shall assume all obligations and liabilities
under the Employee Plans and Benefit Arrangements in
respect of each employee or former employee of the
Business, each Transferred Employee and, solely with
respect to the Salary Reduction Plan and the Defined
Benefit Pension Plan, Messrs. Levinson, Schilling,
Guelcher and Sontag, and any of their respective
beneficiaries, except that Buyer shall have no
liability for severance arrangements for any Person who
is not a Transferred Employee. Buyer shall assume the
role of sponsor for each of ACLV s Employee Plans and
Benefit Arrangements and all assets of such Employee
Plans or Benefit Arrangements shall be transferred to
Buyer, in its capacity as plan sponsor; provided,
however, that the following Employee Plans and Benefit
Arrangements shall not be transferred to Buyer and
Buyer shall assume no responsibility therefor:
(i) ACLV s 1987 Stock Plan;
(ii) ACLV Long-Term Incentive Plan;
(iii) ACLV s Special Incentive Plan for
Certain Executive Employees;.
(b) Without limiting the foregoing paragraph (a), ACLV
shall assign to Buyer and Buyer shall assume each of
ACLV s (i) group life, accident, medical, dental or
disability plan or similar arrangement (whether or not
insured) and all policies, assets, obligations, and
liabilities related thereto; and (ii) all worker s
compensation arrangements (whether or not insured) and
all policies, assets, obligations and liabilities,
including liability for any retroactive worker s
compensation premiums.
(c) Without limiting the foregoing paragraph (a), Buyer
shall assume ACLV s Unfunded Deferred Compensation Plan
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in its entirety, but shall assume only those
liabilities under the Unfunded Deferred Compensation
Plan which relate to supplemental retirement benefits
and only with respect to the following Plan
participants: Messrs. Darr, Osmanski, Bowser and
Walker.
(d) Without limiting the foregoing paragraph (a), but
subject to Section 2.04(b)(iv), Buyer shall assume
ACLV s Salary Reduction Plan and Defined Benefit
Pension Plan in its entirety, including all liabilities
and obligations in respect of benefits accrued by all
former and current employees (including any beneficiary
thereof) of ACLV under such Salary Reduction Plan and
Defined Benefit Pension Plan. All Salary Reduction
Plan and Defined Benefit Pension Plan assets shall be
transferred to Buyer (in its capacity of new sponsor of
the Plans) upon Buyer s assumption of the Plans.
(e) Without limiting the foregoing paragraph (a), Buyer
shall assume all of ACLV s obligations under ACLV s
involuntary severance agreements with, but only with,
Messrs. Darr, Osmanski, Bowser and Walker.
(f) Without limiting the foregoing paragraph (a), and
subject to Section 2.04(b)(iv), Buyer shall assume all
of ACLV s Deferred Compensation Plan and ACLV s
Officers Whole Life Insurance Carve Out Plan.
(g) All liabilities and obligations assumed by Buyer
pursuant to this Article VI shall be Assumed
Liabilities for all purposes of this Agreement except
for purposes of Section 3.24.
6.05. Buyer Benefit Plans. Buyer or one of its Affiliates
will recognize all service with ACLV of the Transferred Employees
for all purposes with respect to those employee benefit plans,
within the meaning of Section 3(3) of ERISA, in which the
Transferred Employees are enrolled by Buyer or one of its
Affiliates.
6.06. No Third Party Beneficiaries. No provision of this
Article shall create any third party beneficiary or other rights
in any employee or former employee (including any beneficiary or
dependent thereof) of ACLV or of any of its subsidiaries in
respect of continued employment (or resumed employment) with
either Buyer or ACLV or any of their Affiliates and no provision
of this Article VI shall create any such rights in any such
Persons in respect of any benefits that may be provided, directly
or indirectly, under any Employee Plan or Benefit Arrangement or
any plan or arrangement that may be established by Buyer or any
of its Affiliates. No provision of this Agreement shall
constitute a limitation on rights to amend, modify or terminate
after the Closing Date any such plans or arrangements of Buyer or
any of its Affiliates.
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ARTICLE VII
COVENANTS OF ACLV
ACLV agrees that:
7.01. Conduct of the Business. From the date hereof until the
Closing Date, ACLV shall conduct the Business in the ordinary
course consistent with past practice, use its best efforts to
preserve intact the business organization and relationships with
third parties of the Business, and to keep available the services
of the present employees of the Business. Without limiting the
generality of the foregoing, from the date hereof until the
Closing Date, ACLV will not:
(a)with respect to the Business, acquire a material amount of
assets from any other Person;
(b)sell, lease, license or otherwise dispose of any Purchased
Assets except (i) pursuant to existing contracts or commitments
and (ii) in the ordinary course consistent with past practice; or
(c)agree or commit to do any of the foregoing.
ACLV will not (i) take or agree or commit to take any action that
would make any representation and warranty of ACLV hereunder
inaccurate in any respect at, or as of any time prior to, the
Closing Date or (ii) omit or agree or commit to omit to take any
action necessary to prevent any such representation or warranty
from being inaccurate in any respect at any such time.
7.02. Access to Information. From the date hereof until the
Closing Date, ACLV (a) will give Buyer, its counsel, financial
advisors, financing sources, auditors and other authorized
representatives full access to the offices, properties, books and
records of ACLV related to the Business, (b) will furnish to
Buyer, its counsel, financial advisors, financing sources,
auditors and other authorized representatives such financial and
operating data and other information relating to the Business as
such Persons may reasonably request and (c) will instruct the
employees, counsel and financial advisors of ACLV to cooperate
with Buyer in its investigation of the Business; provided that no
investigation pursuant to this Section shall affect any
representation or warranty given by ACLV hereunder; and provided
further that any investigation pursuant to this Section shall be
conducted in such manner as not to interfere unreasonably with
the conduct of the business of ACLV. Notwithstanding the
foregoing, Buyer shall not have access to personnel records of
ACLV relating to individual performance or evaluation records,
medical histories or other information that in ACLV's good faith
opinion is sensitive or the disclosure of which could subject
ACLV to risk of liability.
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7.03. Notices of Certain Events. ACLV shall promptly notify
Buyer of:
(i)any notice or other communication from any Person alleging
that the consent of such Person is or may be required in
connection with the transactions contemplated by this Agreement;
(ii)any notice or other communication from any governmental or
regulatory agency or authority in connection with the
transactions contemplated by this Agreement; and
(iii)any actions, suits, claims, investigations or proceedings
commenced or, to the best of its knowledge threatened against,
relating to or involving or otherwise affecting ACLV or the
Business that, if pending on the date of this Agreement, would
have been required to have been disclosed pursuant to
Section 3.12 or that relate to the consummation of the
transactions contemplated by this Agreement.
7.04. Noncompetition. (a) ACLV agrees that for a period of
three full years from the Closing Date, it will not:
(i)engage, either directly or indirectly, as a principal or for
its own account, solely or jointly with others, or through any
form of ownership in another Person, or otherwise, in any
business that competes with the Business as it exists on the
Closing Date in any countries or regions in which the Business is
currently conducted; provided that nothing herein shall prohibit
the acquisition by ACLV or any of its Affiliates of a diversified
company having not more than 10% of its sales (based on its
latest published annual audited financial statements)
attributable to any business that competes with the Business; or
(ii)employ or solicit, or receive or accept the performance of
services by, any Transferred Employee; or
(iii) advise any customer or supplier of the Business with
respect to its business relationship with the Business.
(b)If any provision contained in this Section shall for any
reason be held invalid, illegal or unenforceable in any respect,
such invalidity, illegality or unenforceability shall not affect
any other provisions of this Section, but this Section shall be
construed as if such invalid, illegal or unenforceable provision
had never been contained herein. It is the intention of the
parties that if any of the restrictions or covenants contained
herein is held to cover a geographic area or to be for a length
of time which is not permitted by applicable law, or in any way
construed to be too broad or to any extent invalid, such
provision shall not be construed to be null, void and of no
effect, but to the extent such provision would be valid or
enforceable under applicable law, a court of competent
jurisdiction shall construe and interpret or reform this Section
to provide for a covenant having the maximum enforceable
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geographic area, time period and other provisions (not greater
than those contained herein) as shall be valid and enforceable
under such applicable law. ACLV acknowledges that Buyer would be
irreparably harmed by any breach of this Section and that there
would be no adequate remedy at law or in damages to compensate
Buyer for any such breach. ACLV agrees that Buyer shall be
entitled to injunctive relief requiring specific performance by
ACLV of this Section, and ACLV consents to the entry thereof.
7.05 Trademarks; Tradenames. As soon as practicable after the
Closing Date, ACLV shall eliminate the use of all of the
trademarks, tradenames, service marks and service names used in
the Business, in any of their forms or spellings, on all
advertising, stationery, business cards, checks, purchase orders
and acknowledgments, customer agreements and other contracts and
business documents, and shall change the corporate name of ACLV
so as to bear no resemblance to the current name of ACLV;
provided that ACLV shall not be required to call a special
stockholders meeting to change its corporate name, but shall in
the interim do business under a name that bears no resemblance to
its current name.
7.06. No Negotiation with Third Parties. From the date hereof
until the earlier of the Closing Date or the date on which this
Agreement is terminated, ACLV agrees that neither ACLV, nor any
of its Affiliates, agents or representatives shall, directly or
indirectly, encourage, solicit or engage in any discussions or
negotiations with, or provide any information to, any Person
concerning the possible acquisition by such third party of all or
any part of the Business or the Purchased Assets other than as
contemplated or permitted by this Agreement. ACLV agrees
promptly to notify Buyer of any contact by any Person with
respect to any such possible acquisition.
7.07.Environmental Remediation. ACLV will deliver to Buyer,
within ninety (90) days of the Closing Date, the results of a
Phase I environmental assessment (the Phase I ). If the results
of the Phase I establish any environmental condition which ACLV
is required by applicable law to remediate, ACLV will undertake
to remediate that environmental condition as soon as practicable.
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ARTICLE VIII
COVENANTS OF BUYER
Buyer agrees that:
8.01. Confidentiality. Prior to the Closing Date and after any
termination of this Agreement, Buyer and its Affiliates will
hold, and will use their best efforts to cause their respective
officers, directors, employees, accountants, counsel,
consultants, advisors and agents to hold, in confidence, unless
compelled to disclose by judicial or administrative process or by
other requirements of law, all confidential documents and
information concerning the Business or ACLV furnished to Buyer or
its Affiliates in connection with the transactions contemplated
by this Agreement, except to the extent that such information can
be shown to have been (i) previously known on a nonconfidential
basis by Buyer, (ii) in the public domain through no fault of
Buyer or (iii) later lawfully acquired by Buyer from sources
other than ACLV; provided that Buyer may disclose such
information to its officers, directors, employees, accountants,
counsel, consultants, advisors and agents in connection with the
transactions contemplated by this Agreement and to its financing
sources in connection with obtaining the financing for the
transactions contemplated by this Agreement so long as such
Persons are informed by Buyer of the confidential nature of such
information and are directed by Buyer to treat such information
confidentially. The obligation of Buyer and its Affiliates to
hold any such information in confidence shall be satisfied if
they exercise the same care with respect to such information as
they would to preserve the confidentiality of their own similar
information. If this Agreement is terminated, Buyer and its
Affiliates will, and will use their best efforts to cause their
respective officers, directors, employees, accountants, counsel,
consultants, advisors and agents to, destroy or deliver to ACLV,
upon request, all documents and other materials, and all copies
thereof, obtained by Buyer or its Affiliates or on their behalf
from ACLV in connection with this Agreement that are subject to
such confidence.
8.02. Access. On and after the Closing Date, Buyer will afford
promptly to ACLV and its agents reasonable access to its
properties, books, records, employees and auditors to the extent
necessary to permit ACLV to determine any matter relating to its
rights and obligations hereunder or to any period ending on or
before the Closing Date; provided that any such access by ACLV
shall not unreasonably interfere with the conduct of the business
of Buyer.
8.03.Margin Sharing Fee. The Buyer shall pay to ACLV a margin
sharing fee (the Fee ) based on the annual Gross Margin (as
defined below) of the Net Sales (as defined below) by Buyer of
the Designated Products (as defined below). The term of the Fee
shall continue until August 30, 2006. The Fee shall be 25% of
the Gross Margin for Designated Products sold during the period
commencing September 1, 1996.
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Gross Margin shall be defined as Net Sales, less the Cost of
Goods Sold of the Designated Products. Net Sales and Cost of
Goods Sold shall be determined on the same basis as is presently
utilized by ACLV on the date hereof.
Designated Products shall have the meaning set forth in a side
letter agreement of even date herewith.
Components of Designated Products (such as valves, pumps,
compressors, vessels and closures, etc.) specifically developed
under the Designated Project, as set forth in a side letter
agreement of even date herewith, will become the property of the
Buyer, and sales of such components other than as part of the
Designated Products will not be subject to the Fee.
The business or technology developed under the Designated Project
may not be sold or licensed by the Buyer without the consent of
ACLV (which consent shall not be unreasonably withheld) unless
transferred as part of a sale of all or substantially all of the
business of the Buyer. If the Designated Customer terminates the
Designated Agreement, the Fee shall also simultaneously
terminate. If the Buyer substantially abandons the Designated
Project, then rights to this business or technology shall revert
to ACLV for no consideration.
Payment of the Fee shall be due and payable on a quarterly basis
within forty-five (45) days of the end of each fiscal quarter of
the Buyer based on Buyer invoices paid in the prior quarter by
the purchaser of the Designated Products. ACLV shall have the
right at its expense to conduct an audit of the sales of
Designated Products and Gross Margin through an independent
auditor.
In addition to the foregoing, Buyer shall pay to ACLV a one-time
fee of One Million Dollars ($1,000,000) in cash within thirty
(30) days of Buyer achieving $30 million of gross sales of
Designated Products on a cumulative basis commencing with the
Closing Date.
8.04. Liability Sharing Payment.Upon final resolution (whether
by settlement, dismissal, judgment without further appeal, or
resolution of appeal) of the lawsuit captioned Leroy Andrews v.
Autoclave Engineers, Inc. et al. as disclosed on Schedule 3.12,
Buyer shall pay to ACLV, in cash, the amount (if any) by which
$250,000 exceeds Buyer s expenses and liabilities actually
incurred and paid out-of-pocket and not reimbursed to Buyer by
any applicable insurance or other recovery in connection with
such lawsuits.
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8.05. Claims Release.Buyer hereby unconditionally and fully
releases ACLV and its Affiliates, and their respective officers,
directors, agents and representatives from any and all claims and
demands of any nature whatsoever, whether made at law or in
equity, relating to the process by which the Business was offered
and sold to Buyer, including, without limitation, any claim of
unfair dealing or breach of any purported duty to conduct a fair
auction.
8.06. Guarantee Release.Buyer and ACLV shall use their best
efforts to obtain as soon as practicable a release, in form and
substance satisfactory to ACLV, of ACLV s guarantee disclosed on
Schedule 3.13(a)(ix).03. Buyer shall indemnify and hold harmless
ACLV and its Affiliates for any Loss arising or resulting from
the above-described guarantee from and after the Closing Date.
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ARTICLE IX
COVENANTS OF BOTH PARTIES
The parties hereto agree that:
9.01. Best Efforts; Further Assurances. (a) Subject to the
terms and conditions of this Agreement, each party will use its
best efforts to take, or cause to be taken, all actions and to
do, or cause to be done, all things necessary or desirable under
applicable laws and regulations to consummate the transactions
contemplated by this Agreement. ACLV and Buyer each agree to
execute and deliver such other documents, certificates,
agreements and other writings and to take such other actions as
may be necessary or desirable in order to consummate or implement
expeditiously the transactions contemplated by this Agreement and
to vest in Buyer good and marketable title to the Purchased
Assets.
(b) ACLV hereby constitutes and appoints, effective as
of the Closing Date, Buyer and its successors and assigns as the
true and lawful attorney of ACLV with full power of substitution
in the name of Buyer or in the name of ACLV, but for the benefit
of Buyer (i) to collect for the account of Buyer any items of
Purchased Assets and (ii) to institute and prosecute all
proceedings which Buyer may in its sole discretion deem proper in
order to assert or enforce any right, title or interest in, to or
under the Purchased Assets, and to defend or compromise any and
all actions, suits or proceedings in respect of the Purchased
Assets. Buyer shall be entitled to retain for its account any
amounts collected pursuant to the foregoing powers, including any
amounts payable as interest in respect thereof.
9.02. Certain Filings. ACLV and Buyer shall cooperate with
one another (a) in determining whether any action by or in
respect of, or filing with, any governmental body, agency,
official or authority is required, or any actions, consents,
approvals or waivers are required to be obtained from parties to
any material contracts, in connection with the consummation of
the transactions contemplated by this Agreement and (b) in taking
such actions or making any such filings, furnishing information
required in connection therewith and seeking timely to obtain any
such actions, consents, approvals or waivers.
9.03. Public Announcements. The parties agree to consult
with each other before issuing any press release or making any
public statement with respect to this Agreement or the
transactions contemplated hereby and, except as may be required
by applicable law or any listing agreement with any national
securities exchange or trading market, will not issue any such
press release or make any such public statement prior to such
consultation.
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ARTICLE X
CONDITIONS TO CLOSING
10.01. Conditions to the Obligations of Each Party. The
obligations of Buyer and ACLV to consummate the Closing are
subject to the satisfaction of the following conditions:
(a) Any applicable waiting period under the HSR Act
relating to the transactions contemplated hereby shall have
expired or been terminated.
(b) No provision of any applicable law or regulation
and no judgment, injunction, order or decree shall prohibit the
consummation of the Closing.
(c) No proceeding challenging this Agreement or the
transactions contemplated hereby or seeking to prohibit, alter,
prevent or materially delay the Closing shall have been
instituted by any Person before any court, arbitrator or
governmental body, agency or official and be pending.
(d) Each of Buyer and ACLV shall have executed and
delivered to the other each of the instruments, documents and
certificates required to be so executed and delivered pursuant to
Section 2.07.
(e) All actions by or in respect of or filings with
any governmental body, agency, official or authority required to
permit the consummation of the Closing shall have been obtained.
10.02. Conditions to Obligation of Buyer. The obligation of
Buyer to consummate the Closing is subject to the satisfaction of
the following further conditions:
(a) (i) ACLV shall have performed in all material
respects all of its obligations hereunder required to be
performed by it at or prior to the Closing Date, (ii) the
representations and warranties of ACLV contained in this
Agreement as of the date hereof shall be true and correct in all
material respects at and as of the Closing Date as if made at and
as of such date and (iii) Buyer shall have received a certificate
signed by an executive officer of ACLV to the foregoing effect.
(b) No provision of any applicable law or regulation
and no judgment, injunction, order or decree shall restrain,
prohibit or otherwise interfere with the effective operation or
enjoyment by Buyer of all or any material portion of the
Purchased Assets.
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(c) Buyer shall have received an opinion of Testa,
Hurwitz & Thibeault, counsel to ACLV, dated the Closing Date to
the effect specified in Sections 3.01 through 3.04 and 3.12. In
rendering such opinion, such counsel may rely upon certificates
of public officers, as to matters governed by Pennsylvania law
upon opinions of counsel reasonably satisfactory to Buyer, copies
of which shall be contemporaneously delivered to Buyer, and as to
matters of fact, upon certificates of officers of ACLV.
(d) ACLV shall have received all consents,
authorizations or approvals from governmental agencies referred
to in Section 3.03, in each case in form and substance reasonably
satisfactory to Buyer, and no such consent, authorization or
approval shall have been revoked or withdrawn.
10.03. Conditions to Obligations of ACLV. The obligation
of ACLV to consummate the Closing is subject to the satisfaction
of the following further conditions:
(a) (i) Buyer shall have performed in all material
respects all of its obligations hereunder required to be
performed by it at or prior to the Closing Date, (ii) the
representations and warranties of Buyer contained in this
Agreement as of the date hereof and in any certificate or other
writing delivered by ACLV pursuant hereto, shall be true and
correct in all material respects at and as of the Closing Date,
as if made at and as of such date and (iii) ACLV shall have
received a certificate signed by an executive officer of Buyer to
the foregoing effect.
(b) ACLV shall have received an opinion of Elderkin,
Martin, Kelly & Messina, counsel to Buyer, dated the Closing Date
to the effect specified in Sections 4.01 through 4.04 and 4.07.
(c) Buyer shall have received all consents,
authorizations or approvals from governmental agencies referred
to in Section 4.03, in each case in form and substance reasonably
satisfactory to ACLV, and no such consent, authorization or
approval shall have been revoked or withdrawn.
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ARTICLE XI
SURVIVAL; INDEMNIFICATION
11.01. Survival. The covenants, agreements,
representations and warranties of the parties hereto contained in
this Agreement or in any certificate or other writing delivered
pursuant hereto or in connection herewith shall survive the
Closing until the first anniversary of the Closing Date or:
(i) in the case of Section 7.04, Section 8.03 and Section 8.04,
for the respective periods set forth therein; (ii) in the case of
Sections 8.01 and 8.06, indefinitely; and (iii) in the case of
the covenants, agreements, representations and warranties
contained in Articles V or VI, until expiration of the applicable
statutory period of limitations (giving effect to any waiver,
mitigation or extension thereof), if later. Notwithstanding the
preceding sentence, any covenant, agreement, representation or
warranty in respect of which indemnity may be sought under
Sections 11.02 or 11.03 shall survive the time at which it would
otherwise terminate pursuant to the preceding sentence, if notice
with specificity of the inaccuracy or breach thereof giving rise
to such right to indemnity shall have been given to the party
against whom such indemnity may be sought prior to such time.
Notwithstanding the foregoing, the covenants, agreements,
representations and warranties of the parties hereto contained in
Section 3.22 and Section 7.07 shall survive the Closing.
11.02. Indemnification. (a) ACLV hereby indemnifies Buyer
and its Affiliates against and agrees to hold each of them
harmless from any and all damage, loss, liability and expense
(including, without limitation, reasonable expenses of
investigation and reasonable attorneys' fees and expenses in
connection with any action, suit or proceeding but excluding lost
profits and incidental, special and consequential damages), net
of any Tax benefit actually realized or insurance proceeds
received (collectively, "Loss"), incurred or suffered by Buyer or
any of its Affiliates arising out of any misrepresentation or
breach of warranty, covenant or agreement made or to be performed
by ACLV pursuant to this Agreement that was unknown to Buyer at
the Closing, provided that (i) ACLV shall not be liable for any
individual Loss of less than $10,000 under this Section 11.02(a)
unless the aggregate amount of all such Losses exceeds $100,000
and then only to the extent of such excess and (ii) ACLV's
maximum liability under this Section 11.02(a) shall not exceed
$1,000,000. The limitations in the provisos at (i) and (ii) of
this Section 11.02(a) shall not apply to losses arising under
Section 3.22 and Section 7.07.
(b) Buyer hereby indemnifies ACLV and its Affiliates
against and agrees to hold each of them harmless from any and all
Loss incurred or suffered by ACLV or any of its Affiliates
arising out of any misrepresentation or breach of warranty,
covenant or agreement made or to be performed by the Buyer
pursuant to this Agreement.
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11.03. Procedures; No Waiver; Exclusivity. (a) The party
seeking indemnification under Section 11.02 (the "Indemnified
Party") agrees to give prompt notice to the party against whom
indemnity is sought (the "Indemnifying Party") of the assertion
of any claim, or the commencement of any suit, action or
proceeding in respect of which indemnity may be sought under such
Section. The Indemnifying Party may, and at the request of the
Indemnified Party shall, participate in and control the defense
of any such third party suit, action or proceeding at its own
expense. The Indemnifying Party shall not be liable under
Section 11.02 for any settlement effected without its consent of
any claim, litigation or proceeding in respect of which indemnity
may be sought hereunder.
(b) After the Closing, Section 11.02 will provide the
exclusive remedy for any misrepresentation, breach of warranty,
covenant or other agreement (other than those contained in
Sections 7.04, 8.01, 7.07, 8.03 and 8.04) or other claim arising
out of this Agreement or the transactions contemplated hereby.
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ARTICLE XII
TERMINATION
12.01. Grounds for Termination. This Agreement may be
terminated at any time prior to the Closing:
(i) by mutual written agreement of ACLV and Buyer;
(ii) by either ACLV or Buyer if the Closing shall not
have been consummated on or before September 30, 1995; or
(iii) by either ACLV or Buyer if consummation of
the transactions contemplated hereby would violate any
nonappealable final order, decree or judgment of any court or
governmental body having competent jurisdiction.
The party desiring to terminate this Agreement pursuant to
clauses (ii) or (iii) shall give notice of such termination to
the other party.
12.02. Effect of Termination. If this Agreement is
terminated as permitted by Section 12.01, such termination shall
be without liability of either party (or any shareholder,
director, officer, employee, agent, consultant or representative
of such party) to the other party to this Agreement; provided
that if such termination shall result from the willful failure of
either party to fulfill a condition to the performance of the
obligations of the other party or to perform a covenant of this
Agreement or from a willful breach by either party to this
Agreement, such party shall be fully liable for any and all Loss
incurred or suffered by the other party as a result of such
failure or breach. The provisions of Sections 8.01 and 13.03
shall survive any termination hereof pursuant to Section 12.01.
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ARTICLE XIII
MISCELLANEOUS
13.01. Notices. All notices, requests and other
communications to either party hereunder shall be in writing
(including telex, telecopy or similar writing) and shall be
given,
if to Buyer, to:
Snap-Tite, Inc.
3250 West Lake Road
Erie, PA 16505-3657
Attention: President
Telecopy: (814) 838-6382
with a copy to:
Harry D. Martin, Esq.
Elderkin, Martin, Kelly & Messina
150 East 8th Street
P.O. Box 1819
Erie, PA 16507
Telecopy: (814) 454-7411
if to ACLV, to:
Autoclave Engineers, Inc.
2930 West 22nd Street
Erie, PA 16506
Attention: President
Telecopy: (814) 838-5820
with a copy to:
Edwin L. Miller, Jr., Esq.
Testa, Hurwitz & Thibeault
53 State Street, 17th Floor
Boston, MA 02109
Telecopy: (617) 248-7100
13.02. Amendments; No Waivers. (a) Any provisions of this
Agreement may be amended or waived prior to the Closing Date if,
and only if, such amendment or waiver is in writing and signed,
in the case of an amendment, by the Buyer and ACLV, or in the
case of a waiver, by the party against whom the waiver is to be
effective.
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(b) No failure or delay by either party in exercising
any right, power or privilege hereunder shall operate as a waiver
thereof nor shall any single or partial exercise thereof preclude
any other or further exercise thereof or the exercise of any
other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or
remedies provided by law.
13.03. Expenses. Except as otherwise provided herein, all
costs and expenses incurred in connection with this Agreement
shall be paid by the party incurring such cost or expense.
13.04. Successors and Assigns. The provisions of this
Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns;
provided that neither party may assign, delegate or otherwise
transfer any of its rights or obligations under this Agreement
without the consent of the other party hereto except that Buyer
may transfer or assign to an Affiliate the right to purchase the
Purchased Assets, but no such transfer or assignment will relieve
Buyer of its obligations hereunder.
13.05. Governing Law. This Agreement shall be construed in
accordance with and governed by the laws of the Commonwealth of
Pennsylvania.
13.06. Counterparts; Effectiveness. This Agreement may be
signed in any number of counterparts, each of which shall be an
original, with the same effect as if the signatures thereto and
hereto were upon the same instrument. This Agreement shall
become effective when each party hereto shall have received a
counterpart hereof signed by the other party hereto.
13.07. Entire Agreement. This Agreement constitutes the
entire agreement between the parties with respect to the subject
matter hereof and supersedes all prior agreements, understandings
and negotiations, both written and oral, between the parties with
respect to the subject matter of this Agreement. No
representation, inducement, promise, understanding, condition or
warranty not set forth herein has been made or relied upon by
either party hereto.
13.08. Bulk Sales Laws. Buyer and ACLV each hereby waive
compliance by ACLV with the provisions of the "bulk sales", "bulk
transfer" or similar laws of any state. ACLV agrees to indemnify
and hold Buyer harmless against any and all claims, losses,
damages, liabilities, costs and expenses incurred by Buyer or any
of its Affiliates as a result of any failure to comply with any
such "bulk sales", "bulk transfer" or similar laws.
13.09. Captions. The captions herein are included for
convenience of reference only and shall be ignored in the
construction hereof.
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IN WITNESS WHEREOF, the parties hereto here caused this
Agreement to be duly executed by their respective authorized
officers as of the day and year first above written.
SNAP-TITE, INC.
By:
-------------------------------
Name:
Title:
AUTOCLAVE ENGINEERS, INC.
By:
-------------------------------
Name:
Title:
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<PAGE>
Exhibit A
ASSIGNMENT AND ASSUMPTION AGREEMENT
ASSIGNMENT AND ASSUMPTION AGREEMENT, dated as of
---------------, 1995, between AUTOCLAVE ENGINEERS, INC., a
Pennsylvania corporation ("ACLV"), and SNAP-TITE, INC., a
Pennsylvania corporation ("Buyer").
W I T N E S S E T H
WHEREAS, Buyer and ACLV have concurrently herewith
consummated the purchase by Buyer of the Purchased Assets
pursuant to the terms and conditions of the Asset Purchase
Agreement dated August --, 1995 between Buyer and ACLV (the
"Asset Purchase Agreement"; terms defined in the Asset Purchase
Agreement and not otherwise defined herein being used herein as
therein defined);
WHEREAS, pursuant to the Asset Purchase Agreement, Buyer has
agreed to assume certain liabilities and obligations of ACLV with
respect to the Purchased Assets and the Business;
NOW, THEREFORE, in consideration of the sale of the
Purchased Assets and in accordance with the terms of the Asset
Purchase Agreement, Buyer and ACLV agree as follows:
1. (a) ACLV does hereby sell, transfer, assign and
deliver to Buyer all of the right, title and interest of ACLV in,
to and under the Purchased Assets; provided that no sale,
transfer, assignment or delivery shall be made of any material
portion of any of the Contracts or Permits if an attempted sale,
assignment, transfer or delivery, without the consent of a third
party, would constitute a breach or other contravention thereof
or in any way adversely affect the rights of Buyer or ACLV
thereunder.
(b) Buyer does hereby accept all the right, title and
interest of ACLV in, to and under all of the Purchased Assets
(except as aforesaid) and Buyer assumes and agrees to pay,
perform and discharge promptly and fully when due all of the
Assumed Liabilities and to perform all of the obligations of ACLV
to be performed under the Contracts and the Designated Agreement.
2. This Agreement shall be construed in accordance with
and governed by the laws of the Commonwealth of Pennsylvania.
3. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original,
but all of which together shall constitute one and the same
instrument.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed as of the day and year first above written.
AUTOCLAVE ENGINEERS, INC.
By:_________________________________
Name:
Title:
SNAP-TITE, INC.
By:_________________________________
Name:
Title:
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<PAGE>
LIST OF EXHIBITS AND SCHEDULES
Exhibits
Exhibit A -- Form of Assignment and Assumption Agreement
Exhibit B -- Form of Subordinated Note
Schedules
Schedule 3.05(a) Required Consents
Schedule 3.05(b) Other Consents
Schedule 3.06 Financial Statements of the Business
Schedule 3.07 Certain Changes
Schedule 3.08(a) Real Property and Leases
Schedule 3.08(b) Personal Property
Schedule 3.08(c)(iv) Property Repairs
Schedule 3.12 Litigation
Schedule 3.13 Contracts
Schedule 3.14 Licenses and Permits
Schedule 3.15 Insurance
Schedule 3.17 Inventories
Schedule 3.18 Receivables
Schedule 3.19 Intellectual Property
Schedule 3.20 Employees
Schedule 3.22 Environmental Matters
Schedule 6.02 Benefit Plans and Arrangements
Schedule 6.03 Excluded Employees
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<PAGE>
EXHIBIT 3(B)
ADOPTED March 4, 1981
As amended through
August 16, 1995
INDEX
OF
BY-LAWS
OF
AUTOCLAVE ENGINEERS, INC.
Further Amended
December 6, 1990
Page
ARTICLE I
General
Section 1 Name.......................................... 1
Section 2 Office........................................ 1
Section 3 Seal.......................................... 1
Section 4 Fiscal Year................................... 1
ARTICLE II
Shareholders
Section 1 Place of Meetings............................. 1
Section 2 Annual Meeting................................ 2
Section 3 Special Meetings.............................. 2
Section 4 Notice of Meetings............................ 2
Section 5 Closing of Transfer Books, Fixing of Record Date 2
Section 6 Waiver of Notice.............................. 3
Section 7 Quorum........................................ 3
Section 8 Adjournments of Meeting....................... 3
Section 9 Notice of Adjourned Meetings.................. 4
Section 10 Telephonic Meetings........................... 4
Section 11 Voting Power.................................. 4
Section 12 Cumulative Voting............................. 4
Section 13 Proxies....................................... 4
Section 14 Voting Lists.................................. 5
Section 15 Presiding Officer and Order of Business....... 5
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ARTICLE III
Directors
Section 1 Number...................................... 6
Section 2 Terms....................................... 6
Section 3 Failure to Object........................... 6
Section 4 Compensation of Directors................... 6
Section 5 Vacancies................................... 6
Section 6 Regular Meetings............................ 7
Section 7 Special Meetings............................ 7
Section 8 Notice of Meeting........................... 7
Section 9 Informal Action by the Directors............ 7
Section 10 Committees of Directors..................... 7
Section 11 Telephonic Meetings......................... 8
Section 12 Quorum...................................... 8
Section 13 Reports to Shareholders..................... 8
Section 14 Presiding Officer........................... 8
Section 15 Contracts................................... 9
Section 16 Applicability of Amendment to Section 910 of the
Pennsylvania Business Corporation Law...... 9
Section 17 Applicability of Section 911 of the
Pennsylvania Business Corporation Law...... 9
ARTICLE IV
Officers
Section 1 Number and Election......................... l0
Section 2 Qualifications.............................. 10
Section 3 Term of Office.............................. 10
Section 4 Chairman.................................... 10
Section 5 President................................... 10
Section 6 Executive Vice Presidents................... 10
Section 7 Vice Presidents............................. 11
Section 8 Secretary................................... 11
Section 9 Treasurer................................... 11
Section 10 Assistant Officers.......................... 11
ARTICLE V
Execution of Documents
Section 1 Checks, Notes, Etc.......................... 12
Section 2 Other Documents............................. 12
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<PAGE>
ARTICLE VI
Share Certificates and Transfers
Section 1 Share Certificates.......................... 12
Section 2 Loss or Destruction of Share Certificate.... 12
Section 3 Transfer Agent.............................. 12
ARTICLE VII
Indemnification of Directors, Officers and Employees
Section 1 Right to Indemnification.................... 13
Section 2 Right to Advancement of Expenses............ 13
Section 3 Right of Indemnitee to Initiate Action...... 14
Section 4 Insurance and Funding....................... 14
Section 5 Non-Exclusivity; Nature and Extent of Rights 15
Section 6 Effective Date.............................. 15
ARTICLE VIII
Amendments
Section 1 Amendments to By-laws....................... 15
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<PAGE>
ADOPTED March 4, 1981
As amended through
August 16, 1995
BY-LAWS
OF
AUTOCLAVE ENGINEERS, INC.
ARTICLE I
General
Section 1 Name
The name of the Company shall be Autoclave Engineers,
Inc.
Section 2 Office
The principal office of the Company shall be at such
place or places as the Board of Directors may from time to time
determine.
Section 3 Seal
The Company shall have a seal which shall be circular
in form and which shall bear such inscription as the Board of
Directors from time to time may determine.
Section 4 Fiscal Year
The fiscal year of the Company shall be fixed from
time to time by resolution of the Board of Directors.
ARTICLE II
Shareholders
Section 1 Place of Meetings
Each meeting of the shareholders shall be held at the
principal office of the Company or at such other place, within or
without the Commonwealth of Pennsylvania, as shall be designated
in the notice of the meeting.
<PAGE>
Section 2 Annual Meeting AMENDED AUGUST 16, 1995
The annual meeting of the shareholders shall be held
each year on such date and at such time and place as shall be
determined by a resolution of the Board of Directors.
Section 3 Special Meetings AMENDED AUGUST 13, 1992
Special meetings of the shareholders may be called at
any time by the Chairman, or a majority of the Board of
Directors, or the holders of not less than one-fifth of all the
shares outstanding and entitled to vote at such special meeting.
At any time, upon written request of any person entitled to call
a special meeting, it shall be the duty of the Secretary to call
a special meeting of the shareholders, to be held at such time as
the Secretary may fix, not less than ten (10) or more than sixty
(60) days after the receipt of the request. If the Secretary
shall neglect or refuse to issue such call, the person or persons
making the request may do so.
Section 4 Notice of Meetings
Written notice of every meeting of the shareholders
shall be given by, or at the direction of, the person or persons
authorized to call the meeting, to each shareholder of record
entitled to vote at the meeting, at least ten (10) days prior to
the day named for the meeting. Such notice shall be given either
personally or by sending a copy thereof through the mail or by
telegram, charges prepaid, to each shareholder at his address
appearing on the books of the Company or supplied by him to the
Company for the purpose of notice. Such notice shall specify the
place, day and hour of the meeting, and, in the case of a special
meeting, the purpose of the meeting and the general nature of the
business to be transacted. If mailed, such notice shall be
deemed to have been delivered when deposited in the United States
mail in a sealed envelope addressed to the shareholder at his
address as it appears on the records of the Company, with postage
thereon prepaid.
Section 5 Closing of Transfer Books, Fixing of Record Date
The Board of Directors of the Company may close its
stock transfer books for a period not exceeding fifty (50) but
not less than ten (10) days prior to the date of any meeting of
shareholders, or the date for the payment of any dividend or for
the allotment of any rights or the date when any exchange or any
reclassification of shares shall be effective; or in lieu
thereof, may fix in advance, a date, not exceeding fifty (50) but
not less than ten (10) days prior to the date of any meeting of
shareholders or to the date for the payment of any dividend or
for the allotment of rights, or to the date when any exchange or
reclassification of shares shall be effective, as the record date
for the determination of shareholders entitled to notice of, or
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<PAGE>
to vote at, such meeting, or shareholders entitled to receive
payment of any such dividend or to receive any such allotment of
rights, or to exercise rights in respect of any exchange or
reclassification of shares; and the shareholders of record on
such date shall be the shareholders entitled to notice of and to
vote at, such meeting, or to receive payment of such dividend or
to receive such allotment of rights, or to exercise such rights
in the event of an exchange or reclassification of shares, as the
case may be. If the transfer books are not closed and no record
date is fixed by the Board of Directors, the date on which notice
of the meeting is mailed shall be deemed to be the record date
for the determination of shareholders entitled to vote at such
meeting. Transferees of shares which are transferred after the
record date shall not be entitled to notice or to vote at such
meeting.
Section 6 Waiver of Notice
A waiver of notice in writing signed by the person or
persons entitled to such notice, whether before or after the time
stated therein, shall be deemed equivalent to the giving of such
notice. Attendance of a person either in person or by proxy at
any meeting shall constitute a waiver of notice of such meeting,
except where such person attends a meeting for the express
purpose of objecting to the transaction of any business because
the meeting was not lawfully called or convened.
Section 7 Quorum
The presence in person or by proxy of the holders of a
majority of the outstanding shares entitled to vote at the
shareholders' meeting shall constitute a quorum. The
shareholders present at a duly organized meeting can continue to
do business until adjournment, notwithstanding the withdrawal of
the holders of enough shares to leave less than a quorum. If a
meeting cannot be organized because a quorum has not attended,
those present may adjourn the meeting to such time and place as
they may determine, but, in the case of any meeting called for
the election of directors, those who attend the second of such
adjourned meetings, although less than a quorum, shall
nevertheless constitute a quorum for the purpose of electing
directors.
Section 8 Adjournments of Meetings
Adjournment or adjournments of any annual or special
meeting of the shareholders may be taken, but any meeting at
which directors are to be elected shall be adjourned only from
day to day until such directors have been elected.
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Section 9 Notice of Adjourned Meeting
No notice of any adjourned meeting or the business to
be transacted at any adjourned meeting need be given other than
by announcement at the meeting at which such adjournment is
taken.
Section 10 Telephonic Meetings
One or more shareholders may participate in any
regular or special meeting of the shareholders by means of
conference telephone or similar communications equipment by means
of which all persons participating in the meeting can hear and
speak to each other.
Section 11 Voting Power
Except as herein provided in Section 12 of this
Article II, every shareholder of record of capital stock with
voting rights shall have the right to one vote for every such
share standing in his name on the books of the Company. All
questions shall be decided by the vote of the majority of the
capital stock represented and entitled to vote at any meeting
unless otherwise specifically provided by law or by the Articles
of Incorporation of the Company.
Section 12 Cumulative Voting
In all elections for Directors, every shareholder
shall have the right to vote, in person or by proxy, the number
of shares owned by him which are entitled to vote, for as many
persons as there are Directors to be elected, or to cumulate said
shares and give one candidate as many votes as the number of
Directors to be elected multiplied by the number of his shares
shall equal, or to distribute them on the same principle as
aforesaid among as many candidates as he shall see fit.
Section 13 Proxies
Every shareholder may vote either in person or by
proxy. Every proxy shall be executed in writing by the
shareholder or by his duly authorized attorney-in-fact and filed
with the Secretary of the Company. A proxy, unless coupled with
an interest, shall be revocable at will, notwithstanding any
other agreement or any provision in the proxy to the contrary,
but the revocation of a proxy shall not be effective until notice
thereof has been received by the Secretary of the Company. No
unrevoked proxy shall be valid after eleven months from the date
of its execution unless a longer time is expressly provided
therein, but in no event shall a proxy, unless coupled with an
interest, be voted on after three years from the date of its
execution. A proxy shall not be revoked by the death or
incapacity of the maker unless before the vote is counted or the
authority is exercised written notice of such death or incapacity
is received by the Secretary of the Company.
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Section 14 Voting Lists
The officer or agent having charge of the transfer
books for shares of the Company shall make, at least five (5)
days before each meeting of shareholders, a complete list of
shareholders entitled to vote at such meeting, arranged in
alphabetical order, the address of and the number of shares held
by each, which list shall be kept on file at the registered
office of the Company and shall be subject to inspection by any
shareholder at any time during usual business hours Such list
shall also be produced and kept open at the time and place of the
meeting and shall be subject to inspection of any shareholder
during the time thereof. The original share ledger or transfer
book, or a duplicate thereof kept at the Company's offices, shall
be prima facie evidence as to the identity of the shareholders
entitled to examine such list, share ledger or transfer book or
to vote at any meeting of shareholders.
Section 15 Presiding Officer and Order of Business
AMENDED AUGUST 13, 1992
All meetings of the shareholders shall be called to
order and presided over by the Chairman, or in his absence by the
President, or in his absence by a Vice President, or in the
absence of all of them by the Treasurer, or if none of these be
present by a chairman elected by the shareholders.
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ARTICLE III
Directors
Section 1 Number AMENDED APRIL 30, 1992
The business and affairs of the Company shall be
managed by the Board of Directors, who need not be residents of
the Commonwealth of Pennsylvania or shareholders of the Company.
The number of Directors shall be fixed from time to time by the
Board of Directors provided that the number so determined shall
not be less than five nor more than eleven.
Section 2 Terms AMENDED AUGUST 12, 1982
The Board of Directors shall be classified in respect
to the time at which they shall severally hold office into three
(3) classes of Directors, each such class to contain, as nearly
as possible, an equal number of Directors. One such class shall
be elected at each annual meeting of the shareholders for a term
of three (3) years. If at any annual meeting of the shareholders
Directors of more than one class are to be elected, each class of
Directors to be elected at the meeting shall be elected in a
separate election. Each Director or his successor, if elected by
the Board of Directors, shall hold office for the term for which
he is elected (or in the event that he is a successor, the
unexpired portion of the term of the Director which he has
succeeded), and thereafter until his successor is duly elected
and qualified.
Section 3 Failure to Object
A Director of the Company who is present at a meeting
of the Board of Directors at which action on any corporate matter
is taken shall be presumed to have assented to the action taken
unless his dissent shall be entered in the minutes of the meeting
or unless he shall file his written dissent to such action with
the person acting as the Secretary of the meeting before the
adjournment of the meeting. Such right to dissent shall not
apply to a Director who has voted in favor of such action.
Section 4 Compensation of Directors
The amount of compensation of Directors for their
services, if any, shall be determined from time to time by
resolution of the Board of Directors. Such compensation may
include, but need not be limited to, a fixed sum and expenses of
attendance, if any, for attendance at each regular or special
meeting of the Board of Directors and any committee thereof.
Section 5 Vacancies AMENDED DECEMBER 2, 1983
Vacancies in the Board of Directors, including
vacancies resulting from an increase in the number of Directors,
shall be filled by a majority of the remaining members of the
Board though less than a quorum.
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Section 6 Regular Meetings AMENDED AUGUST 13, 1992
The Board of Directors shall hold regular meetings at
such times and places as it may be determined by resolution.
Section 7 Special Meetings AMENDED AUGUST 13, 1992
The Board of Directors shall hold such special
meetings as shall be called by the Chairman or any two Directors.
Each such meeting shall be held at such time and place as shall
be designated in the notice of the meeting.
Section 8 Notice of Meeting
Written notice of all meetings except the annual
meeting of the Board of Directors shall be given by, or at the
direction of, the person or persons calling the meeting at least
three (3) days prior to the date named for the meeting. Except
in the case of a special meeting, neither the business to be
transacted nor the purpose of the meeting need be specified in
the notice of such meeting. The attendance of a Director at any
meeting shall constitute a waiver of notice of such meeting,
except where a Director attends a meeting for the express purpose
of objecting to the transaction of any business because the
meeting is not lawfully called or convened. A waiver of notice,
in writing, signed by the person or persons entitled to such
notice, whether before or after the date stated therein, shall be
deemed equivalent to the giving of such notice.
Section 9 Informal Action by the Directors
Any action which may be taken at a meeting of the
Directors may be taken without a meeting, if a consent or
consents in writing, setting forth the action so taken, shall be
signed by all of the Directors who would be entitled to vote at a
meeting for such purpose and shall be filed with the Secretary of
the Company.
Section 10 Committees of Directors
The Board of Directors may, by resolution or
resolutions passed by a majority of the whole Board, designate
one or more committees, each committee to consist of two or more
of the Directors of the Company, which, to the extent provided in
said resolution or resolutions, shall have and may exercise the
powers of the Board of Directors in the management of the
business and affairs of the Company, and may have power to
authorize the seal of the Company to be affixed to all papers
which may require it. Such committee or committees shall have
such name or names as may be determined from time to time by
resolution adopted by the Board of Directors. The committees
shall keep regular minutes of their proceedings and report the
same to the Board when required.
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Section 11 Telephonic Meetings
One or more Directors, or members of a committee of
the Board, may participate in meetings of the Board or a
committee thereof by means of conference telephone or similar
communications equipment by means of which all persons
participating in the meeting can hear and speak to each other.
Section 12 Quorum
A majority of the Directors in office shall be
necessary to constitute a quorum for the transaction of business
and the acts of a majority of the Directors present at a meeting
at which a quorum is present shall, unless otherwise specifically
provided by law or by the articles of the Company, be the acts of
the Board of Directors.
Section 13 Reports to Shareholders
The Board of Directors shall have complete and
unqualified discretion in determining whether it shall cause to
be sent to the shareholders any reports in addition to those
presented at the annual meeting and, if so, the extent and type
thereof and whether the same shall be prepared and verified by
certified public accountants, and it is expressly provided that
the Board of Directors shall be under no obligation to send any
such additional reports to the shareholders, or if the same are
sent, to render the same in any particular form or have them
verified in any particular manner. The provisions of Section 318
of the Pennsylvania Business Corporation Law are hereby waived.
Section 14 Presiding Officer AMENDED AUGUST 13, 1992
All meetings of the Board of Directors shall be called
to order and presided over by the Chairman, and in his absence,
by the President.
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Section 15 Contracts
In the absence of fraud, no contract or other
transaction between this Company and any other company shall be
affected by the fact that Directors of this Company are directors
of such other companies, if such contract or transaction shall be
approved or ratified by the affirmative vote of a majority of the
Directors present at a meeting of the Board of Directors or of
the committee of this Company having authority in the premises,
who are not so interested. Any Director individually, or any
firm of which any Director is a partner, may be a party to or may
be interested in any contract or transaction of this Company
provided that such contract or transaction shall be approved or
ratified by the affirmative vote of at least a majority of the
Directors present at a meeting of the Board of Directors or of
the committee of this Company having authority in the premises,
who are not so interested. No Director shall be liable to
account to this Company for any profit realized by him from or
through any such transaction or contract of this Company,
ratified or approved as aforesaid, by reason of his interest in
such transaction or contract. Directors so interested may be
counted when present at meetings of the Board of Directors or of
such committee for the purpose of determining the existence of
the quorum.
The Board of Directors, in its discretion, may submit
any contract or act for approval or ratification at any annual
meeting of the shareholders, or at any meeting of the
shareholders called for the purpose of considering any act or
contract; and any contract or act that shall be approved or
ratified by the vote of the holders of a majority of the capital
stock of the Company which is represented, in person or by proxy,
at such meeting, provided that a lawful quorum of shareholders be
there represented in person or by proxy, shall be as valid and as
binding upon the Company and upon all the shareholders as though
it had been approved and ratified by every shareholder of the
Company.
Section 16 AMENDED JUNE 16, 1988
Applicability of Amendment to
Section 910 of the Pennsylvania
Business Corporation Law
Section 910 of the Pennsylvania Business Corporation
Law, as amended by the Pennsylvania legislature on March 23,
1988, shall not be applicable to the Company.
Section 17 ADDED JUNE 16, 1988
Applicability of Section 911 of
Pennsylvania Business Corporation Law
Section 911 of the Pennsylvania Business Corporation
Law added to the Law by amendment adopted March 23, 1988, shall
not be applicable to the Company.
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ARTICLE IV
Officers
Section 1 Number and Election AMENDED AUGUST 13, 1992
The Board of Directors at its annual meeting shall
elect a Chairman, a President, a Secretary and a Treasurer, one
or more Executive Vice Presidents, one or more Vice Presidents,
and such other officers, assistant officers and agents as the
Board may deem appropriate.
Section 2 Qualifications AMENDED AUGUST 13, 1992
The Chairman and the President shall be members of the
Board of Directors but the other officers need not be Directors.
Section 3 Term of Office
Each officer and assistant officer shall hold office
until his successor shall have been elected. Any officer or
agent elected or appointed by the Board may be removed by the
Board at any time.
Section 4 Chairman ADDED AUGUST 13, 1992
The Chairman shall, with the Board, establish overall
corporate strategies and objectives. He shall preside at
meetings of the Shareholders and the Board of Directors.
Section 5 President AMENDED AUGUST 13, 1992
The President shall be Chief Executive Officer of the
Company. The President shall, in general, perform all duties
incident to the office of the President. In the absence of the
Chairman, he shall preside at meetings of the Shareholders and
the Board of Directors.
Section 6 Executive Vice Presidents
Each Executive Vice President shall have such powers
and perform such duties as the President may from time to time
delegate to him. At the request of the President, any Executive
Vice President may, in the case of the absence or inability to
act of the President, temporarily act in his place. In the case
of the death of the President, or in the case of his absence or
inability to act without having designated an Executive Vice
President to act temporarily in his place, the Executive Vice
President longest in service as Executive Vice President shall
perform the duties of the President except as shall be otherwise
designated by the Board of Directors. An Executive Vice
President who is not a Director shall not preside at any meeting
of the Board of Directors.
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Section 7 Vice Presidents
Each Vice President shall have such powers and perform
such duties as the President may from time to time delegate to
him. At the request of the President, any Vice President may, in
the case of the absence or inability to act of the President,
temporarily act in his place. In the case of the death of the
President, or in the case of his absence or inability to act
without having designated an Executive Vice President or Vice
President to act temporarily in his place, and in the absence or
inability to act of all Executive Vice Presidents, the Vice
President longest in service as Vice President shall perform the
duties of the President except as shall be otherwise designated
by the Board of Directors. A Vice President who is not a
Director shall not preside at any meeting of the Board of
Directors. The Board of Directors may designate one or more Vice
Presidents as Senior Vice Presidents.
Section 8 Secretary
The Secretary shall attend meetings of the
shareholders, the Board of Directors and the Executive Committee,
shall keep minutes thereof in suitable books, and shall send out
all notices of meetings as required by law of these By-laws. He
shall be ex officio an Assistant Treasurer. He shall, in
general, perform all duties incident to the office of Secretary.
Section 9 Treasurer
The Treasurer shall receive all money paid to the
Company and keep or cause to be kept accurate accounts of all
money received or payments made in books kept for that purpose.
He shall deposit all money received by him in the name and to the
credit of the Company in banks or other places of deposit. He
shall disburse the money of the Company by checks or vouchers.
He shall be ex officio an Assistant Secretary. He shall, in
general, perform all duties incident to the office of Treasurer.
Section 10 Assistant Officers
Each assistant officer shall perform such duties as
may be delegated to him by the officer to whom he is an
assistant, and in the absence or disability of such officer may
perform the duties of his office.
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ARTICLE V
Execution of Documents
Section 1 Checks, Notes, Etc.
The Board of Directors shall from time to time
designate the officers or agents of the Company who shall have
power, in its name, to sign and endorse checks and other
negotiable instruments and to borrow money for the Company, and
in its name, to make notes or other evidences of indebtedness.
Section 2 Other Documents AMENDED AUGUST 13, 1992
Unless otherwise authorized by the Board of Directors,
all contracts, leases, deeds, deeds of trust, mortgages, powers
of attorney to transfer stock and for other purposes, and all
other documents requiring the seal of the Company shall be
executed for and on behalf of the Company by the Chairman or the
President, or a Vice President or an Assistant Vice President,
and the corporate seal shall be affixed by such person or at his
discretion, all of which shall be attested by the Secretary, or
an Assistant Secretary, or the Treasurer, or an Assistant
Treasurer or an Assistant Vice President.
ARTICLE VI
Share Certificates and Transfers
Section 1 Share Certificates AMENDED AUGUST 13, 1992
Share certificates of the Company shall be in such
form as the Board of Directors may from time to time determine.
Every share certificate shall be signed by the Chairman, or the
President, or a Vice President, or by any other officer
designated by the Board of Directors, and shall be countersigned
by the Secretary or an Assistant Secretary and sealed with the
corporate seal.
Section 2 Loss or Destruction of Share Certificate
In case of loss or destruction of a certificate of
stock no new certificate shall be issued in lieu thereof except
upon satisfactory proof to the Board of Directors of such loss or
destruction, and upon the giving of satisfactory security by bond
or otherwise against loss to the Company. Any such new
certificate shall be plainly marked "Duplicate" upon its face.
Section 3 Transfer Agent
The Board of Directors may appoint a transfer agent
and a registrar of transfers, and may require all stock
certificates to bear the signature of such transfer agent and of
such registrar of transfers.
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AMENDED SEPTEMBER 30, 1987
ARTICLE VII
Indemnification of Directors, Officers and Employees
Section 1 Right to Indemnification
Except as prohibited by law, every director and
officer of the Company shall be entitled as of right to be
indemnified by the Company against all expenses, liability and
loss (including without limitation, attorney's fees, judgments,
fines, taxes, penalties and amounts paid in settlement) paid or
incurred by such person in connection with any actual or
threatened claim, action, suit or proceeding, civil, criminal,
administrative, investigative or other, whether brought by or in
the right of the Company or otherwise, in which he or she may be
involved, as a party or otherwise, by reason of such person being
or having been a director or officer of the Company or by reason
of the fact such person is or was serving at the request of the
Company as a director, officer, employee, fiduciary or other
representative of another corporation, partnership, joint
venture, trust, employee benefit plan or other entity (such
claim, action, suit or proceeding hereinafter being referred to
as an "Action"); provided, that no such right of indemnification
shall exist with respect to an Action brought by an Indemnitee
(as hereinafter defined) against the Company except as provided
in the last sentence of this Section 1. Persons who are not
directors or officers of the Company may be similarly indemnified
in respect of service to the Company or to another such entity at
the request of the Company to the extent the Board of Directors
at any time denominates any of such persons as entitled to the
benefits of this Article. As used in this Article, "Indemnitee"
shall include each director and officer of the Company and each
other person denominated by the Board of Directors as entitled to
the benefits of this Article. An Indemnitee shall be entitled to
be indemnified pursuant to this Section 1 for expenses incurred
in connection with any Action brought by such Indemnitee against
the Company only if the Action is a claim for indemnity or
expenses under Section 3 of this Article or otherwise and either
(i) the Indemnitee is successful in whole or in part in the
Action for which expenses are claimed or (ii) the indemnification
for expenses is included in a settlement of the Action or is
awarded by a court.
Section 2 Right to Advancement of Expenses
Every Indemnitee shall be entitled as of right to have
his or her expenses in any Action (other than an Action brought
by such Indemnitee against the Company) paid in advance by the
Company prior to final disposition of such Action, subject to any
obligation which may be imposed by law or by provision in the
Articles or By-laws of the Company, agreement or otherwise to
reimburse the Company in certain events.
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Section 3 Right of Indemnitee to Initiate Action
If a written claim under Section 1 or Section 2 of
this Article is not paid in full by the Company within thirty
days after such claim has been received by the Company, the
Indemnitee may at any time thereafter initiate an Action against
the Company to recover the unpaid amount of the claim and, if
successful in whole or in part, the Indemnitee shall also be
entitled to be paid the expenses of prosecuting such Action. It
shall be a defense to any Action to recover a claim under Section
1 of this Article that the Indemnitee's conduct was such that
under Pennsylvania law the Corporation is prohibited from
indemnifying the Indemnitee for the amount claimed, but the
burden of proving such defense shall be on the Company. Neither
the failure of the Company (including its Board of Directors,
independent legal counsel and its shareholders) to have made a
determination prior to the commencement of such Action that
indemnification of the Indemnitee is proper in the circumstances,
nor an actual determination by the Company (including its Board
of Directors, independent legal counsel or its shareholders) that
the Indemnitee's conduct was such that indemnification is
prohibited by law, shall be a defense to such Action or create a
presumption that the Indemnitee's conduct was such that
indemnification is prohibited by law. The only defense to any
such Action to receive payment of expenses in advance under
Section 2 of this Article shall be failure to make an undertaking
to reimburse if such an undertaking is required by law or by
provision in the Articles or By-laws of the Company, agreement or
otherwise.
Section 4 Insurance and Funding
The Company may purchase and maintain insurance to
protect itself and any person eligible to be indemnified
hereunder against any expense, liability or loss asserted or
incurred by such person in connection with any Action, whether or
not the Company would have the power to indemnify such person
against such expense, liability or loss by law or under the
provisions of this Article. The Company may create a trust fund,
grant a security interest, cause a letter of credit to be issued
or use other means (whether or not similar to the foregoing) to
ensure the payment of such sums as may become necessary to effect
indemnification as provided herein.
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Section 5 Non-Exclusivity; Nature and Extent of Rights
The rights of indemnification and advancement of
expenses provided for this Article (i) shall not be deemed
exclusive of any other rights, either now existing or hereafter
created, to which any Indemnitee may be entitled under the
Articles or By-laws of the Company, any agreement, any vote of
shareholders or directors or otherwise, (ii) shall be deemed to
create contractual rights in favor of each Indemnitee, (iii)
shall continue as to each person who has ceased to have the
status pursuant to which he or she was entitled or was
denominated as entitled to indemnification hereunder and shall
inure to the benefit of the heirs and legal representatives of
each Indemnitee and (iv) shall be applicable to Actions commenced
after the adoption hereof, whether arising from acts or omissions
occurring before or after the adoption hereof. The rights of
indemnification provided in this Article may not be amended or
repealed so as to limit in any way the indemnification or the
right to advancement of expenses provided for herein with respect
to any acts or omissions occurring prior to the adoption of such
amendment or repeal.
Section 6 Effective Date
This Article shall apply to every Action other than an
Action filed prior to January 27, 1987, except that it shall not
apply to the extent that Pennsylvania law prohibits its
application to any breach of performance of duty or any failure
of performance of duty by an Indemnitee occurring prior to
January 27, 1987.
ARTICLE VIII
Amendments
Section 1 Amendments to By-Laws
These By-laws may be altered or amended by a vote of a
majority of the members of the Board of Directors at any regular
or special meeting duly convened after notice of that purpose;
subject, however, to the power of the shareholders to change or
repeal the By-laws at any annual or special meeting duly convened
after notice for that purpose.
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