<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998
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 1-5641
INSTRON CORPORATION
(Exact name of registrant as specified in its Charter)
MASSACHUSETTS 04-2057203
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
100 ROYALL STREET
CANTON, MASSACHUSETTS 02021
(Address of Principal (Zip Code)
executive offices)
(781) 828-2500
(Registrant's telephone number, including area code)
PORTIONS AMENDED
Part I, Item 7 of the registrant's Annual Report on Form 10-K is amended by
deleting Item 7 in its entirety and replacing with Item 7 set forth herein.
Part I, Item 8 of the registrant's Annual Report on Form 10-K is amended by
deleting Item 8 in its entirety and replacing it with Item 8 set forth herein.
Part IV, Item 14 of the registrant's Annual Report on Form 10-K is amended by
deleting Item 14 in its entirety and replacing it with Item 14 set forth herein
and the inclusion of Exhibit No. 3(a) and Exhibit No. 10(1) filed herewith.
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<PAGE> 2
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
The consolidated results for 1998 reflect, from the dates of
acquisition, the inclusion of Satec which was acquired in August 1998 and the
buyout of the remaining 49% of the IST joint venture in September 1998.
During August 1998, the Company acquired Satec Systems, a materials testing
company supplying electromechanical and servohydraulic products primarily to the
metals industry. The business was acquired for $12.6 million in cash and the
consolidated results of Instron reflect Satec's activity for the last five
months of 1998. Satec's reported sales were $8,757,000 and net income was
$356,000 for the last five months of 1998. For information purposes, Satec's
annual sales for 1998 and 1997 were $18,642,000 and $17,064,000, respectively.
IST was a joint venture company that Instron entered into in November 1996
with Carl Schenck AG in the area of structural testing. Both companies
contributed their structural testing business and signed contracts to provide
manufacturing, R&D and support services to the joint venture. During 1997 and
the first nine months of 1998, Instron owned 51% of IST and accounted for the
joint venture using the equity method of accounting. Instron's revenue from IST
was $11,395,000, $6,858,000 and $519,000 for the first nine months of 1998, the
total year of 1997, and the last two months of 1996, respectively. This revenue
reflects the shipment of systems from Instron to IST under the terms of a
manufacturing and supply agreement at substantially reduced gross margins
compared to normal customer margins, and commission income earned by Instron for
selling IST products. During the time that Instron owned 51% of the entity, IST
had operating losses, due in part to low margin orders contributed into the
joint venture, and the time and effort necessary to consolidate the operations
and technology of the two contributing partners. For 1998, 1997 and 1996,
Instron recorded net losses related to its 51% share of the joint venture
results of $902,000, $876,000 and $69,000, respectively.
Instron exercised its option to purchase the remaining 49% of IST for $2.7
million in cash on September 27, 1998. Upon the completion of the acquisition,
the full results of operations from the IST business were included in
consolidated results of Instron, representing three months of activity in 1998.
IST broke even in the fourth quarter and is anticipated to make a contribution
to earnings in 1999. IST's customer revenue of $18,441,000 for the fourth
quarter of 1998 was included in Instron's reported results. For information
purposes, IST's annual revenues were $56,619,000 and $39,777,000 in 1998 and
1997, respectively.
Financial comparisons of the results of fiscal 1997 and 1996 are impacted
by Instron's sale of its Laboratory MicroSystems division ("LMS") to Axiom
Systems in April 1997. LMS's revenues were $1,237,000 in the first quarter of
1997 and $5,625,000 in 1996. LMS had no significant impact on net income in
either year.
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<PAGE> 3
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS (continued)
Total revenue of $183,029,000 in fiscal 1998 increased by 17.6% from
revenue of $155,660,000 in fiscal 1997 due primarily to the acquisitions of
Satec and IST. Total revenue in fiscal 1997 increased by 1.7% from revenue of
$153,113,000 in fiscal 1996. If revenues attributable to IST, Satec and LMS were
excluded from both 1998 and 1997, total revenues for 1998 would have been
$144,497,000 compared to $147,565,000 in 1997, a decrease of 2.1%. This decrease
is largely due to the impact of the economic downturn in the Asian markets.
Bookings of new orders were $166,515,000 in fiscal 1998. Bookings on a pro
forma basis, including the annual bookings of IST and Satec, would have been
$212.7 million in 1998 compared to $220.1 million in 1997, a decrease of 3.4%.
This decrease is due largely to the impact of the economic downturn in the Asian
markets.
The Company's backlog of orders was $74,477,000 at December 31, 1998, an
increase of 159.1% from 1997 due primarily to the inclusion of the IST and Satec
backlogs. The year end 1997 backlog decreased by 16.3% from 1996.
The gross profit margins for the three years ended December 31, 1998 were
39.3%, 41.2% and 42.1%, respectively. The trend of decreasing margins is due
principally to the impact of supplying IST with structures systems at lower than
normal profit margins. Gross margins excluding LMS, IST and Satec were 44.3%,
42.7% and 42.8% in 1998, 1997 and 1996, respectively. This improvement in 1998
is due in part to improved service margins and the benefit of actions previously
taken to reduce manufacturing costs.
The 1998 selling and administrative expenses of $48,869,000 increased by
9.5% from 1997 due principally to the inclusion of expenses relating to Satec
and IST. As a percentage of revenue, selling and administrative expenses
decreased to 26.7% in 1998, compared to 28.7% in 1997 and 29.3% in 1996.
Research and development expenses increased by 21.9% in 1998 and decreased
by 19.2% in 1997. The increase in 1998 is due primarily to the inclusion of the
development efforts of Satec and IST. The decrease in 1997 compared to 1996
resulted from certain Instron engineering resources ($2 million in 1997) being
utilized to develop new products for IST in accordance with the joint venture
agreement, which were reimbursed by IST. During the three years ended December
31, 1998, the Company has capitalized certain software development costs. (See
Note 1 of Notes to Consolidated Financial Statements). If research and
development expenses were restated, for comparison purposes, by including
capitalized software development costs as period expenses, by adjusting
engineering expenses for the effect of Satec and IST and the disposition of LMS
as previously discussed, research and development expenses of the ongoing
business would have increased by 7.5% in 1998. As a percentage of total revenue,
research and development expenditures, on a comparable basis, represented 7.0%,
6.4% and 6.4% in 1998, 1997 and 1996 respectively.
14
<PAGE> 4
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS (continued)
Operating income decreased by 23.3% to $9,646,000 in 1998, compared to
$12,571,000 in 1997 and $9,145,000 in 1996. As a percentage of total revenue,
operating income represented 5.3%, 8.1% and 6.8% in 1998, 1997 and 1996
respectively. Operating income for 1998 includes a special items charge of
$4,975,000 for the cost of consolidating European operations and to write down
the value of non-performing assets. The Company has closed down a manufacturing
plant in Germany, relocated sales and service personnel to another Instron
location in Germany, and moved the manufacturing operation to the United
Kingdom. The majority of these actions were completed in the fourth quarter and
substantially all cash disbursements are expected to be made by the end of the
first quarter of 1999. Before the effect of the special items charge, operating
income in 1998 was $14,621,000 or 8.0% of total revenue and increased by 16.3%
compared to 1997 due primarily to certain improved product and service margins
and the positive contribution of Satec and IST in the fourth quarter.
A non-operating pre-tax gain of $11,076,000 was recorded in the first
quarter of 1998 on the sale of excess land in Canton, Massachusetts. Net
interest expense decreased by 72% in 1998 and by 22% in 1997. The net decrease
in both 1998 and 1997 was due to reduced interest expense resulting from lower
average borrowings and was further reduced by interest income received on notes
receivable and temporary bank deposits. Foreign exchange losses of $157,000 in
1998 resulted from the strengthening of the British pound against certain
European currencies. Foreign exchange losses of $185,000 in 1997 resulted from
the strengthening of the U.S. dollar against certain Asian currencies.
Income before taxes was 11.1% of total revenue in 1998, compared to 7.4% in
1997 and 4.8% in 1996. Excluding the special items charge and the non-operating
gain on the sale of the land in 1998, as well as the special items charge in
1996, income before taxes as a percentage of total revenue was 7.8%, 7.4% and
6.0% in 1998, 1997 and 1996, respectively. The consolidated effective tax rate
was 43.6% compared to 38% in 1997 and 1996. This higher tax rate is due to
certain non-deductible expenses relating to the special items charge. A detailed
reconciliation of the Company's effective tax rate and the United States
statutory tax rate appears in Note 6 of Notes to Consolidated Financial
Statements.
Instron reported net income of $11,459,000, or $1.62 per diluted share of
common stock, for the year ended December 31, 1998, compared with $7,164,000 or
$1.05 per diluted share in 1997. Net income in 1998 included a special items
charge to operations of $4,975,000 ($4,232,000 net of taxes) and a non-operating
gain on the sale of land of $11,076,000 ($6,867,000 net of taxes). If these
special items are excluded, net income in 1998 was $8,824,000, or $1.25 per
diluted share, an increase of 23.2% from 1997, due primarily to improved product
and service margins, the positive contribution of Satec and IST in the fourth
quarter, and a decline in net interest expense.
15
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS (continued)
Net income in 1996 included a special items charge to operations of
$1.8 million ($1.1 million net of taxes). Excluding the effect of the special
items charge in 1996, net income increased by 25.6% in 1997 due primarily to
increased revenues of the on-going business, a decline in interest expense and
lower foreign exchange losses.
FINANCIAL CONDITION
The Company's operating activities generated cash of $5.3 million and $17.0
million in 1998 and 1997, respectively. Investing activities used $6.8 million
in 1998 and $6.2 million in 1997, while financing activities provided $6.1
million in 1998 and used $10.6 million in 1997. The Company's primary source of
funds in 1998 and 1997 was net cash generated by operations, supplemented in
1998 by the net proceeds of the sale of excess land in Canton, Massachusetts.
The net cash generated by operations in 1998 consisted primarily of net income,
as adjusted for the non-cash effect of depreciation and amortization expense,
which was partially offset by an increase in accounts receivable.
At December 31, 1998, accounts receivable were $65.8 million compared to
$48.2 million at year end 1997 which reflects higher fourth quarter revenue in
1998, and the consolidation of Satec and IST balance sheets. Inventories of
$36.1 million increased by $12.1 million due to the consolidation of Satec and
IST. The inventory turnover ratio increased to 2.97 from 2.87 at the end of
1997.
The Company's principal investment activities during 1998 included the
purchase of Satec for $12.6 million, the buyout of the remaining 49% of IST for
$2.7 million, capital expenditures of $5.8 million, and the development of
software products for $1.5 million. The Company plans to make capital
expenditures of approximately $6.2 million in fiscal 1999, principally for
manufacturing equipment and information systems. In addition, the Company plans
to continue to develop and enhance its software products and pursue its strategy
of acquisitions.
The Company's total debt outstanding at year-end 1998 was $19.6 million
compared to $13.7 million at the end of 1997. The ratio of total debt to debt
plus equity, at year-end 1998 increased to 19.8% from 17.1% in 1997. The
increase in debt was primarily due to funding acquisitions in 1998.
The Company maintains a multi-currency revolving credit and term loan
facility that provides for borrowings of up to $35.0 million. At December 31,
1998 the Company had outstanding domestic and international borrowings of $13.2
million and at December 31, 1997 had outstanding domestic borrowings of $7.6
million under this facility which were classified as long-term. The Company has
16
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
FINANCIAL CONDITION (continued)
additional overdraft and borrowing facilities for allowing advances of
approximately $32.0 million of which $6.4 million and $6.1 million were
outstanding and classified as short-term borrowings at December 31, 1998 and
1997, respectively.
The Company believes its present capital resources and anticipated
operating cash flows are sufficient to meet its current and future cash
requirements to finance operations, capital expenditures and acquisitions.
On March 27, 1998, the Company sold 42 acres of excess land in Canton,
Massachusetts, for $13.5 million in cash.
Approximately 22% of the Company's total orders came from Asian markets in
1997. Bookings from this region declined by 30% in 1998 compared to 1997. At the
same time, however, IST doubled new order bookings in this part of the world.
The current strength in North America and Europe is expected to continue in
1999, though the Company is not expecting any significant recovery in bookings
from the Asian markets in 1999.
Earnings are anticipated to maintain their upward momentum in 1999,
reflecting benefits from manufacturing cost improvement programs and the
increased earnings of our recent acquisitions, Satec and IST.
EURO CURRENCY ISSUE. On January 1, 1999, eleven of the fifteen member
countries of the European Union established fixed conversion rates between their
existing currencies ("legacy currencies") and one common currency - the euro.
The euro now trades on currency exchanges and may be used in business
transactions. Beginning in January 2002, new euro-denominated bills and coins
will be issued, and legacy currencies will be withdrawn from circulation. The
Company's operating subsidiaries affected by the euro conversion have
established plans to address the systems and business issues raised by the euro
currency conversion.
These issues include, among others, (i) the need to adapt computer and
other business systems and equipment to accommodate euro-denominated
transactions; and (ii) the competitive impact of cross-border price
transparency, which may make it more difficult for businesses to charge
different prices for the same products on a country-by-country basis,
particularly once the euro currency is issued in 2002. The Company anticipates
that the euro conversion will not have a material adverse impact on its
financial condition or results of operations.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
FINANCIAL CONDITION (continued)
YEAR 2000 INFORMATION AND READINESS DISCLOSURE ACT. Instron supports the
exchange of information relating to the Year 2000 issue and designates the
information following below as the Year 2000 Readiness Disclosure within the
meaning of the Year 2000 Information and Readiness Disclosure Act. Information
set forth herein regarding the Year 2000 compliance of non-Instron products and
services are "republications" under the Year 2000 Information and Readiness
Disclosure Act and are based on information supplied by other companies about
the products and services they offer. Instron has not independently verified the
contents of these republications and takes no responsibility for the accuracy or
completeness of information contained in such republications.
YEAR 2000 ISSUE READINESS DISCLOSURE. The term "Year 2000 issue" is a
general term used to describe various business-related problems that may result
from the improper processing by computer systems of dates after 1999. The Year
2000 issue affects virtually all companies and all organizations. The Company
has identified its Year 2000 non-compliance risks in four categories: (i)
internal business systems, (ii) internal electronic equipment and embedded chip
technology; (iii) external non-compliance by the Company's suppliers, and (iv)
software systems products supplied by the Company to its customers.
INTERNAL BUSINESS SYSTEMS:- The Company has an active, ongoing program to
insure that its business systems will be Year 2000 compliant. Instron began this
program to identify and correct Year 2000 issues in 1996. In accordance with
this program, the Company is following a four step process to address the Year
2000 Issue. The first stage consisted of auditing the major business systems and
telecommunication switches. This stage identified a couple of minor issues but
due to the installation of a new ERP system in 1996 at our two primary
manufacturing sites, the exposure is minimal and is expected to be corrected by
June 1999. The second stage, begun in September 1997, is an audit of all
departmental systems and network operating systems. This audit is nearing
completion and has formed the basis for the third stage which identifies the
corrective actions required, and outlines the necessary plan of action. The
final stage, which has started, will include the implementation and testing of
all required modifications.
Accordingly, the Company is confident that its internal business systems
will be made Year 2000 compliant in a timely manner and in any event, no later
than July 1999. The Company anticipates making capital expenditures of
approximately $500,000 in 1999 to upgrade computing, networking and
telecommunications systems as part of the plan to address the Year 2000 issue.
Although the costs associated with identifying and implementing the necessary
plan of action are not expected to be material to the Company's financial
position, there can be no assurance to this effect.
The Company has initiated an audit of the business systems of the two
recent acquisitions, Satec and IST. So far, there has been no indication of any
major Year 2000 issue that cannot be resolved in a timely manner.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
FINANCIAL CONDITION (continued)
INTERNAL ELECTRONIC EQUIPMENT AND EMBEDDED CHIP TECHNOLOGY:- The audit
process has identified certain telecommunication equipment that needs to be
upgraded to address the Year 2000 issue. The Company plans to replace this
equipment by June 1999, and is currently reviewing such office and facilities
equipment as machine tools, photocopiers, security systems and other systems
which may be impacted by the Year 2000 issue. The Company estimates that the
total cost of completing any modifications, upgrades or replacements of this
equipment will not have a material adverse effect on the Company's business or
results of operations. This estimate is being monitored and will be revised as
additional information becomes available.
SUPPLIERS:- The Company has started a communication program with key
suppliers of computers, equipment, parts and material used, operated and
maintained by the Company. This program is intended to identify and, to the
extent possible, resolve issues with suppliers involving the Year 2000 problem.
However, the Company has limited or no control over the actions of these third
party suppliers. Any failure of these suppliers to resolve Year 2000 issues with
their systems in a timely manner could have a material adverse effect upon the
Company's business, financial condition and results of operation.
COMPANY SUPPLIED SYSTEMS AND SOFTWARE TO CUSTOMERS:- The Company believes
that it has substantially identified and resolved all potential Year 2000 Issues
with all of the software products that it is currently developing and marketing.
Existing software on installed machines may not be Year 2000 compliant and
communication programs have been initiated to advise customers on how to upgrade
or replace their existing systems. Management believes that it is not possible
to determine with complete certainty that all Year 2000 issues affecting the
Company's products have been identified due to the complexity of these systems
and the fact that these products interact with other third party vendor products
and operate on computer systems which are not under the Company's control. Any
such failures to identify or remediate Year 2000 problems affecting the
Company's systems and software products could have a material adverse effect
upon the Company's business, financial conditions and results of operations.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
FINANCIAL CONDITION (continued)
The information presented above sets forth the key steps taken by the
Company to address the Year 2000 Issue. There can be no absolute assurance that
the Company has identified all the issues, can resolve them in a timely manner,
and that there will be no failures or disruptions to operations which could
result in a material adverse effect upon the company's business, financial
condition, results of operations, and business prospects.
CONTINGENCY PLANS:- The Company intends to develop contingency plans for
significant business risks identified by the Company that might result from
Year-2000 related events. Because the Company has not yet identified any
specific business function that will be materially at risk of significant
Year-2000 related disruptions, and because a full assessment of the Company's
risk from potential Year 2000 failures is still in process, the Company has not
yet developed detailed contingency plans specific to Year 2000 problems. In the
event that the Company concludes that one or more contingency plans are
required, development of such contingency plans is currently scheduled to occur
no later than September, 1999 or as otherwise appropriate.
QUANTITATIVE AND QUALITATIVE INFORMATION ABOUT MARKET RISK.
The Company is exposed to market risk related to changes in foreign
currency exchange rates. The Company enters into foreign exchange contracts to
manage and reduce the impact of changes in foreign currency exchange rates. The
Company does not enter into derivatives or other financial instruments for
trading or speculative purposes. The exposures are associated with certain
accounts receivable denominated in local currencies and certain foreign
revenue transactions.
At December 31, 1998, the face amount of outstanding forward currency
contracts to buy and sell U.S. dollars, Japanese yen and certain European
currencies was $6.3 million. A 10% fluctuation in exchange rates for these
currencies would change the fair value by approximately $0.3 million. However,
any change in the fair value of the contracts would be offset by changes in the
underlying value of the transactions being hedged.
The hypothetical movement disclosed above was estimated by calculating the
fair value of the forward currency contracts at December 31, 1998, and comparing
that with those calculated using hypothetical forward currency exchange rates.
NEW ACCOUNTING PRONOUNCEMENTS.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 requires that all derivative
instruments be recorded on the balance sheet at their fair value. Changes in the
fair value of derivatives are recorded each period in current earnings or other
comprehensive income, depending on whether a derivative is designated as part of
a hedge transaction and, if it is, the type of hedge transaction. The statement
is effective for fiscal years beginning after June 15, 1999. Management is
currently evaluating the effects of this change on its recording of derivatives
and hedging activities. The Company will adopt SFAS No. 133 for its fiscal year
ending December 31, 2000.
In March 1998, the American Institute of Certified Public Accountants
issued Statement of Position (SOP) 98-1, "Internal Use Software," which provides
guidance on the accounting for the costs of software developed or obtained for
internal use. SOP 98-1 is effective for fiscal years beginning after December
15, 1998. Management does not expect the statement to have a material impact on
its financial position or results of operations.
FORWARD LOOKING STATEMENTS.
Certain statements contained in this Annual Report are "forward-looking"
statements within the meaning of the federal securities laws and are made in
reliance upon the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. No assurances can be given that actual results will not
differ materially from those projected in the forward-looking statements
contained in this Annual Report. Certain factors that might cause such a
difference include: the level of bookings worldwide for Instron, Satec and IST,
particularly in Asia; the success of the automobile industry which is the major
purchaser of IST products; the operating results of Satec and IST; the impact of
fluctuations in exchange rates and the uncertainties of operating in a global
economy, including fluctuations in the economic conditions of the foreign and
domestic markets served by the Company which can affect the demand for its
products and services; the Company's ability to successfully integrate the
products and operations of Satec; the impact of Year 2000 issues; and the
Company's ability to identify and successfully consummate strategic
acquisitions.
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INSTRON CORPORATION
ANNUAL REPORT ON FORM 10-K
YEAR ENDED DECEMBER 31, 1998
ITEM 8
FINANCIAL STATEMENTS AND SUPPLEMENTARY FINANCIAL INFORMATION
21
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INSTRON CORPORATION
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Consolidated Financial Statements included in Item 8: PAGE
----
<S> <C>
Report of Independent Accountants.............................................. 23
Consolidated Statements of Income for the years ended
December 31, 1998, 1997 and 1996.............................................. 24
Consolidated Balance Sheets as of December 31, 1998 and 1997................... 25
Consolidated Statements of Cash Flows for the years ended December 31,
1998, 1997 and 1996............................................................ 26
Consolidated Statements of Stockholders' Equity for the years ended
December 31, 1998, 1997 and 1996.............................................. 27
Notes to Consolidated Financial Statements..................................... 28-37
Supplementary Financial Information
(Quarterly Financial Information/1998 and 1997 - (Unaudited).................. 38
</TABLE>
22
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REPORT OF INDEPENDENT ACCOUNTANTS
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF INSTRON CORPORATION:
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of income, stockholders' equity and cash flows present
fairly, in all material respects, the financial position of Instron Corporation
and its subsidiaries (the "Company") at December 31, 1998 and 1997, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1998, 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.
/s/ PricewaterhouseCoopers LLP
------------------------------
Boston, Massachusetts PricewaterhouseCoopers LLP
February 18, 1999
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INSTRON CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
In thousands, except share and per share data (Years Ended December 31) 1998 1997 1996
- ----------------------------------------------------------------------- ----------- ----------- -----------
<S> <C> <C> <C>
Revenue:
Sales $ 152,879 $ 129,679 $ 128,804
Service 30,150 25,981 24,309
----------- ----------- -----------
Total revenue 183,029 155,660 153,113
----------- ----------- -----------
Cost of revenue:
Sales 91,410 74,126 72,556
Service 19,644 17,363 16,086
----------- ----------- -----------
Total cost of revenue 111,054 91,489 88,642
----------- ----------- -----------
Gross profit 71,975 64,171 64,471
----------- ----------- -----------
Operating expenses:
Selling and administrative 48,869 44,641 44,898
Research and development 8,485 6,959 8,616
Special items charge 4,975 0 1,812
----------- ----------- -----------
Total operating expenses 62,329 51,600 55,326
Income from operations 9,646 12,571 9,145
----------- ----------- -----------
Other (income) expense:
Gain on sale of land (11,076) 0 0
Interest expense 1,175 1,465 1,548
Interest income (943) (634) (477)
Foreign exchange losses 157 185 689
----------- ----------- -----------
Total other expenses (10,687) 1,016 1,760
----------- ----------- -----------
Income before income taxes 20,333 11,555 7,385
Provision for income taxes 8,874 4,391 2,803
----------- ----------- -----------
Net income $ 11,459 $ 7,164 $ 4,582
=========== =========== ===========
Weighted average number of 6,667,914 6,455,527 6,396,202
basic common shares
Earnings per share - basic $ 1.72 $ 1.11 $ .72
=========== =========== ===========
Weighted average number of 7,066,257 6,791,801 6,524,467
diluted common shares
Earnings per share - diluted $ 1.62 $ 1.05 $ .70
=========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements
24
<PAGE> 14
INSTRON CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
In thousands, except share data (December 31) 1998 1997
- --------------------------------------------- -------- -------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 7,209 $ 2,566
Accounts receivable, net of allowance for doubtful
accounts of $800 in 1998 and $1,071 in 1997 65,766 48,226
Inventories 36,121 24,024
Deferred income taxes 3,060 3,314
Prepaid expenses and other current assets 2,223 3,767
-------- --------
Total current assets 114,379 81,897
Property, plant and equipment:
Land and buildings 21,254 21,796
Machinery and equipment 45,217 39,627
Accumulated depreciation (42,470) (40,216)
-------- --------
Property, plant and equipment, net 24,001 21,207
Goodwill 12,384 6,423
Deferred income taxes 904 806
Other assets 6,586 8,652
-------- --------
Total assets $158,254 $118,985
======== ========
Liabilities and Stockholders' Equity
Current liabilities:
Short-term borrowings $ 6,416 $ 6,059
Accounts payable 15,807 11,095
Accrued liabilities 22,958 14,083
Accrued employee compensation and benefits 6,798 6,220
Accrued income taxes 93 957
Advance payments received on contracts 7,066 1,541
-------- --------
Total current liabilities 59,138 39,955
Long-term debt 13,216 7,600
Pension and other long-term liabilities 6,316 5,176
-------- --------
Total liabilities 78,670 52,731
-------- --------
Commitments and contingencies (Note 5)
Stockholders' equity:
Preferred stock, $1 par value; 1,000,000 shares authorized;
none issued
Common stock, $1 par value; 10,000,000 shares authorized;
7,051,968 and 6,823,698 shares issued, respectively 7,052 6,824
Additional paid in capital 8,727 6,972
Deferred compensation (2,662) (3,235)
Retained earnings 72,496 62,097
Accumulated other comprehensive income (loss) (4,699) (5,690)
-------- --------
80,914 66,968
Less: Treasury stock at cost; 108,262 and 74,952 shares,
respectively 1,330 714
-------- --------
Total stockholders' equity 79,584 66,254
-------- --------
Total liabilities and stockholders' equity $158,254 $118,985
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
25
<PAGE> 15
INSTRON CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
In thousands (Years Ended December 31) 1998 1997 1996
- ----------------------------------------------------------------------------------------------------------
Cash Flows From Operating Activities
- ------------------------------------
<S> <C> <C> <C>
Net income $ 11,459 $ 7,164 $ 4,582
Adjustments to reconcile net income to net cash
provided by operating activities:
Gain on the sale of property, plant and equipment, net (11,076) (88) (5)
Depreciation and amortization 7,106 6,494 6,873
Provision for losses on accounts receivable 73 27 358
Deferred income taxes (580) 306 299
Changes in assets and liabilities, excluding
the effects from purchase of businesses:
(Increase) decrease in accounts receivable (6,312) (1,335) 1,297
(Increase) decrease in inventories 165 2,563 (521)
(Increase) decrease in prepaid expenses and
other current assets 2,055 (2,028) 151
Increase (decrease) in accounts payable and
accrued expenses 3,097 3,477 (3,894)
Other (711) 409 684
-------- -------- --------
Net cash provided by operating activities 5,276 16,989 9,824
-------- -------- --------
Cash Flows From Investing Activities
- ------------------------------------
Capital expenditures (5,841) (4,176) (4,473)
Joint venture investment 0 0 (6,926)
Purchase of businesses, net of cash acquired (13,086) (2,010) 0
Proceeds from the sale of property, plant and equipment 13,684 376 224
Capitalized software costs (1,490) (637) (1,144)
Other (31) 220 156
-------- -------- --------
Net cash used by investing activities (6,764) (6,227) (12,163)
-------- -------- --------
Cash Flows From Financing Activities
- ------------------------------------
Net borrowings under revolving credit and term
loan facility 5,609 (9,730) 6,068
Net short-term borrowings 199 (173) (2,785)
Cash dividends paid (1,060) (1,064) (1,024)
Proceeds from stock option exercises 1,983 348 861
Treasury stock purchases (616) 0 0
-------- -------- --------
Net cash provided (used) by financing activities 6,115 (10,619) 3,120
-------- -------- --------
Effect of exchange rate changes on cash 16 (118) 116
-------- -------- --------
Net increase in cash and cash equivalents 4,643 25 897
Cash and cash equivalents at beginning of year 2,566 2,541 1,644
-------- -------- --------
Cash and cash equivalents at end of year $ 7,209 $ 2,566 $ 2,541
======== ======== ========
Supplemental Disclosures of Cash Flow Information
- -------------------------------------------------
Cash paid during the year for:
Interest $ 1,430 $ 1,671 $ 1,730
Income taxes 9,145 3,041 2,286
Supplemental Disclosures of Noncash Investing and Financing Activities
- ----------------------------------------------------------------------
Fair value of assets acquired $ 28,229 $ 2,649 $ 0
Cash paid 15,312 2,010 0
-------- -------- --------
Liabilities incurred or assumed in
business acquisitions $ 12,917 $ 639 $ 0
======== ======== ========
Note receivable on sale of business $ 0 $ 3,000 $ 0
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
26
<PAGE> 16
INSTRON CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Accumulated Total
Additional other stock-
Common paid in Deferred Retained comprehensive Treasury holders'
In thousands, except share data stock capital Compensation earnings income (loss) stock equity
- ------------------------------------ ------ ---------- ------------ -------- ------------ -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1995 $6,415 $2,538 $ 0 $52,439 $(4,576) $ (714) $56,102
Net income 4,582 4,582
Other comprehensive income (loss) 1,660 1,660
------
Comprehensive income 6,242
Cash dividends declared
($.16 per share) (1,024) (1,024)
104,366 shares issued under
employee stock option plans 105 976 1,081
- ------------------------------------ ------ ------ ------- ------- ------- ------ ------
Balance at December 31, 1996 6,520 3,514 0 55,997 (2,916) (714) 62,401
Net income 7,164 7,164
Other comprehensive income (loss) (2,774) (2,774)
------
Comprehensive income 4,390
Cash dividends declared
($.16 per share) (1,064) (1,064)
33,511 shares issued under
employee stock option plans 34 314 348
Restricted stock grants issued
during the year 270 3,144 (3,414) 0
Compensation expense recognized
under the 1992 Stock Incentive Plan 179 179
- ------------------------------------ ------ ------ ------- ------- ------- ------ ------
Balance at December 31, 1997 6,824 6,972 (3,235) 62,097 (5,690) (714) 66,254
Net income 11,459 11,459
Other comprehensive income (loss) 991 991
------
Comprehensive income 12,450
Cash dividends declared
($.16 per share) (1,060) (1,060)
228,270 shares issued, net, under
employee stock option plans 228 1,755 1,983
Purchase of 33,310 treasury shares (616) (616)
Compensation expense recognized
under the 1992 Stock Incentive Plan 573 573
- ------------------------------------ ------ ------ ------- ------- ------- ------ ------
Balance at December 31, 1998 $7,052 $8,727 $(2,662) $72,496 $(4,699) $(1,330) $79,584
====== ====== ======= ======= ======= ======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
27
<PAGE> 17
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the
accounts of all domestic and foreign subsidiaries. Significant intercompany
transactions and balances are eliminated. Certain reclassifications were made to
prior years' amounts to conform with the 1998 presentation.
USE OF ESTIMATES The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make certain
estimates and assumptions that effect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reported periods. Actual results could differ
from those estimates.
FOREIGN CURRENCY TRANSLATION Assets and liabilities of the Company's principal
foreign operations are translated at exchange rates prevailing at the end of the
period. Income statement items are translated using average quarterly exchange
rates. Translation gains or losses are included in accumulated other
comprehensive income (loss) and are reported in income only if the underlying
foreign investment is sold or liquidated.
FOREIGN EXCHANGE RISK MANAGEMENT The Company regularly enters into forward
contracts primarily denominated in Japanese yen and certain European currencies
to hedge firm sales and purchase commitments. Forward currency contracts have
maturities of less than one year. These contracts are used to reduce the
Company's risk associated with exchange rate movements, as gains and losses on
these contracts are intended to offset exchange losses and gains on underlying
exposures. The Company does not engage in currency speculation. The Company's
policy is to defer gains and losses on these contracts until the corresponding
losses and gains are recognized on the items being hedged. Both the contract
gains and losses and the gains and losses on the items being hedged are
included in selling and administrative expenses. The unrealized losses were not
material in 1998 and 1997 as the fair value of these contracts were
approximately equal to the fair value of the underlying exposures.
At December 31, 1998, the face amount of outstanding forward currency contracts
to sell U.S. dollars for non U.S. currencies was $3.2 million, Japanese yen for
German deutschemarks was $1.9 million and French francs for British pounds was
$0.7 million. At December 31, 1998, the face amount of outstanding forward
currency contracts to buy German deutschemarks for U.S. dollars was $2.4
million, German deutschemarks for Japanese yen $1.9 million, British pounds for
U.S. dollars was $0.9 million, British pounds for French francs was $0.7 million
and British pounds for German deutschemarks was $0.4 million.
28
<PAGE> 18
CASH AND CASH EQUIVALENTS The Company considers all highly liquid investments
purchased with an original maturity of three months or less to be cash
equivalents.
CONCENTRATION OF CREDIT RISK Financial instruments which potentially subject the
Company to a concentration of credit risk principally consist of cash, cash
equivalents and trade receivables. The Company places its temporary cash
investments with major banks throughout the world, in high quality, liquid
instruments. The Company sells to a broad range of customers throughout the
world and performs ongoing credit evaluations to minimize the risk of loss. The
Company makes use of various devices such as letters of credit to protect its
interests, principally on sales to foreign customers. In addition, the Company
has certain receivables, payables, borrowings and other assets and liabilities
denominated in foreign currencies, which are not hedged and therefore are
subject to exchange rate fluctuations.
INVENTORIES Inventories are valued at the lower of cost or market (net
realizable value). The last-in, first-out (LIFO) method of determining cost is
used for certain inventories in the United States and Asian branches. The
Company uses the first-in, first-out (FIFO) method for all other locations.
GOODWILL AND INTANGIBLE ASSETS. Intangible assets are stated at cost and
amortized using the straight-line method over the assets estimated useful lives
which range from 4 to 10 years. The Company evaluates the possible impairment of
long-lived assets, including intangible assets, whenever events or circumstances
indicate the carrying value of the assets may not be recoverable. Impairment of
purchased technology amounts and goodwill are measured as the amount by which
the carrying amount of the asset exceeds the fair value of the asset. The
estimate of fair value shall consider prices for similar assets and the results
of valuation techniques to the extent available in the circumstances. At
December 31, 1998, no amounts have been determined impaired. Amortization of
goodwill and other intangibles was $2,295,000, $1,974,000 and $2,254,000 in
1998, 1997 and 1996, respectively.
PROPERTY, PLANT AND EQUIPMENT Depreciation is computed principally using the
straight-line method over the estimated useful lives of 10 to 25 years for land
improvements, 10 to 40 years for buildings and improvements and 3 to 15 years
for machinery and equipment. Maintenance and repairs are expensed as incurred.
Depreciation expense was $4,239,000, $4,341,000 and $4,619,000 for the years
ended December 31, 1998, 1997 and 1996, respectively. Upon retirement or
disposition, the cost and related accumulated depreciation of the assets
disposed of are removed from the accounts, with any resulting gain or loss
included in operations. On March 27, 1998, the Company sold 42 acres of excess
land in Canton, Massachusetts for $13.5 million.
SOFTWARE DEVELOPMENT COSTS Certain software development costs are capitalized
and then amortized over future periods. Amortization of capitalized software
costs is computed on a product-by-product basis over the estimated economic life
of the product, generally three years. Unamortized software costs included in
other assets were $2,272,000, $1,574,000 and $2,473,000 at December 31, 1998,
1997 and 1996, respectively.
29
<PAGE> 19
Software development costs of $1,490,000, $637,000 and $1,144,000 were
capitalized during 1998, 1997 and 1996, respectively. The amounts amortized and
charged to expense in 1998, 1997 and 1996 were $792,000, $725,000, and
$1,350,000, respectively.
REVENUE RECOGNITION Revenue from product sales are recognized at time of
shipment. Revenue from services are recognized as services are performed and
ratably over the contract period for service maintenance contracts.
INCOME TAXES Deferred income taxes are provided using the liability method,
which estimates future tax effects of differences between financial statement
carrying amounts and the tax basis of existing assets and liabilities. Tax
credits are recorded as a reduction in income taxes.
Provisions are made for the U.S. income tax liability on earnings of foreign
subsidiaries, except for locations where the Company has designated earnings to
be permanently invested. Such earnings amounted to approximately $22,803,000 at
year-end 1998.
EARNINGS PER SHARE. Basic earnings per share is computed by dividing net income
by the weighted average number of common shares outstanding during the period.
Diluted earnings per share is computed by dividing net income by the weighted
average number of common shares plus the dilutive effect of common share
equivalents outstanding using the "treasury stock method."
The following is a reconciliation of the basic and diluted EPS calculations:
<TABLE>
<CAPTION>
In thousands, except per share data 1998 1997 1996
- ----------------------------------- -------- ------- -------
<S> <C> <C> <C>
Net Income $11,459 $ 7,164 $ 4,582
======= ======= =======
Weighted average number of common
shares outstanding - basic 6,668 6,456 6,396
Dilutive effect of stock options
outstanding 398 336 128
------- ------- -------
Weighted average of common and dilutive
shares - diluted 7,066 6,792 6,524
======= ======= =======
BASIC EARNINGS PER SHARE $ 1.72 $ 1.11 $ 0.72
======= ======= =======
DILUTED EARNINGS PER SHARE $ 1.62 $ 1.05 0.70
======= ======= =======
</TABLE>
At December 1998, 4,500 Options were not included in the calculation of diluted
earnings per share as they were antidilutive.
FAIR VALUE. The Company's financial instruments consist primarily of cash and
cash equivalents, trade receivables, trade payables and debt. The carrying
amounts of these instruments approximates fair value.
COMPREHENSIVE INCOME (LOSS). In June 1997, the Financial Accounting Standards
Board issued SFAS 130, "Reporting Comprehensive Income," which is effective for
periods beginning after December 15, 1997. The statement establishes standards
for reporting and displaying comprehensive income and its components (revenues,
expenses, gains, and losses) in a full set of general-purpose financial
statements. The statement requires that all components of comprehensive income
be reported in a financial statement that is displayed with the same prominence
as other financial statements. The Company has adopted SFAS 130 in the
accompanying financial statements.
PENSION PLAN. In February 1998, the Financial Accounting Standards Board issued
SFAS 132, "Employers' Disclosures about Pensions and Other Postretirement
Benefits" which is effective for periods beginning after December 15, 1997. The
statement standardizes employer disclosure requirements about pension and other
postretirement benefit plans by requiring additional information on changes in
the benefit obligations and fair values of plan assets and eliminating certain
disclosures that are no longer useful. It does not change the measurement of
recognition of those plans. The Company has adopted SFAS 132 in the accompanying
financial statements.
30
<PAGE> 20
2. INDUSTRY SEGMENT AND FOREIGN OPERATIONS
SFAS 131 establishes standards for reporting information about operating
segments in annual financial statements of public business enterprises. It also
establishes standards for related disclosures about products and service,
geographic areas, and major customers. The Company evaluated its business
activities that are regularly reviewed by the Chief Executive Officer for which
discrete financial information is available. As a result of this evaluation, the
Company determined that is has two operating segments: Materials Testing and
Structural Testing.
Instron's Materials Testing business manufactures and markets material testing
instruments (electromechanical, sevohydraulic, hardness and impact), software
and accessories. The structural testing business manufactures and markets
systems for simulating real-life testing of components and products. The
economic characteristics, production processes, core technology, types and
classes of customers, method of distribution and regulatory environments are
similar for both of these operating segments which operate within the material
testing industry. As a result of these similarities, both segments have been
aggregated into one reporting segment for financial statement purposes.
The following table summarizes the Company's operations by significant
geographic location for the years ended December 31:
<TABLE>
<CAPTION>
In thousands 1998 1997 1996
- ---------------------------------- --------- --------- ---------
<S> <C> <C> <C>
REVENUE, INCLUDING INTERAREA SALES
United States $ 102,860 $ 76,314 $ 70,924
Germany 26,293 14,484 15,619
Other Europe 54,395 52,393 49,294
Asia/Latin America 31,335 40,004 39,077
Other international 3,552 3,868 3,404
Eliminations (35,406) (31,403) (25,205)
--------- --------- ---------
Total revenue $ 183,029 $ 155,660 $ 153,113
========= ========= =========
IDENTIFIABLE ASSETS AT YEAR-END
United States $ 64,903 $ 38,384 $ 38,654
Germany 22,983 6,771 8,180
Other Europe 38,546 35,903 37,091
Asia/Latin America 18,232 18,645 19,149
Other international 1,965 2,072 2,499
Corporate 13,335 18,066 16,938
Eliminations (1,710) (856) (678)
--------- --------- ---------
Total assets $ 158,254 $ 118,985 $ 121,833
========= ========= =========
</TABLE>
Total assets in the United Kingdom in 1998, 1997 and 1996 were $24,227,000,
$24,883,000 and $24,475,000, respectively.
Sales between geographic areas in 1998, 1997 and 1996, respectively, consisted
primarily of $20,023,000, $13,091,000 and $11,337,000 from the United States and
$15,204,000, $18,168,000 and $13,706,000 from European operations. Transfers
between geographic areas are at manufacturing cost plus a markup factor.
31
<PAGE> 21
3. INVENTORIES
Inventories at December 31 were as follows:
<TABLE>
<CAPTION>
In thousands 1998 1997
- ----------------- ------- -------
<S> <C> <C>
Raw materials $13,257 $12,742
Work in process 16,560 5,156
Finished goods 6,304 6,126
------- -------
Total inventory $36,121 $24,024
======= =======
</TABLE>
Inventories valued at LIFO amounted to $9,056,000 and $9,395,000 at December 31,
1998 and 1997, respectively. The excess of current cost over stated LIFO value
was $5,205,000 at December 31, 1998 and $5,247,000 at December 31, 1997.
4. BORROWING ARRANGEMENTS
The Company maintains a multicurrency revolving credit and term loan facility
that provides for borrowings of up to $35,000,000 through April 2000. Borrowings
outstanding as of April 2000 convert to a term loan payable in sixteen equal
quarterly installments. Interest on borrowings under the agreement is based upon
either base rates, money market rates, or other short-term borrowing rates.
Facility fees under this agreement are 1/4 of 1% per annum. The Company has met
the various covenants in the agreement, the most restrictive of which requires a
minimum level of tangible net worth. At December 31, 1998 and 1997,
respectively, outstanding domestic borrowings of $8,375,000 and $7,600,000 with
a weighted average interest rate of 6.10% and 6.61%, and outstanding European
borrowings of $4,841,000 in 1998 with a weighted average interest rate of 4.75%,
were classified as long-term debt. Long-term debt maturing under the credit
agreement in each of the five years subsequent to December 31, 1998, assuming
outstanding borrowings at December 31, 1998 are unchanged at April 2000, is
$2,478,000 in 2000, $3,304,000 in 2001, 2002 and 2003.
The Company's subsidiaries have other overdraft and borrowing facilities
allowing advances up to approximately $32,000,000. At December 31, 1998, the
outstanding portion of these facilities was $6,416,000, due currently. Bank
guarantees outstanding at December 31, 1998, for which the Company is
contingently liable, amounted to $10,976,000 and relate principally to
performance contracts.
5. OPERATING LEASE COMMITMENTS
Rental expense amounted to $3,998,000, $3,697,000 and $3,348,000 for the years
ended December 31, 1998, 1997 and 1996, respectively. As of December 31, 1998,
minimum annual commitments under noncancellable operating leases with terms of
more than one year are:
<TABLE>
<CAPTION>
Later
In thousands 1999 2000 2001 2002 2003 Years
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$3,842 $3,094 $2,483 $1,245 $601 $1,033
</TABLE>
32
<PAGE> 22
6. INCOME TAXES
The significant components of the Company's deferred tax assets and liabilities
at December 31, are as follows:
<TABLE>
<CAPTION>
In thousands 1998 1997
- -------------------------------------------------------------
<S> <C> <C>
Employee benefits $ 4,634 $ 3,986
Inventories 3,280 2,734
Accrued expenses 1,305 632
------- -------
Total deferred assets 9,219 7,352
------- -------
Accrued expenses (246) (360)
Fixed assets (1,517) (1,400)
Capitalized software costs
and intangibles (3,002) (982)
------- -------
Total deferred liabilities (4,765) (2,742)
------- -------
Valuation reserve (490) (490)
------- -------
Total net deferred assets $ 3,964 $ 4,120
======= =======
</TABLE>
A valuation reserve has been established where, based upon available evidence,
it is more likely than not that some or all of the deferred tax assets will not
be realized. The valuation allowance relates primarily to foreign tax benefits.
The components of income before income taxes consisted of the following:
<TABLE>
<CAPTION>
In thousands 1998 1997 1996
- --------------------------------------------------------------------------
<S> <C> <C> <C>
Domestic $17,775 $ 5,664 $2,996
Foreign 2,558 5,891 4,389
------- ------- ------
Total $20,333 $11,555 $7,385
======= ======= ======
Income tax provisions (credits) were as follows:
<CAPTION>
In thousands 1998 1997 1996
- --------------------------------------------------------------------------
<S> <C> <C> <C>
Currently payable:
Federal $6,441 $1,701 $ 609
Foreign 1,896 2,090 1,486
State 381 172 314
------ ------ ------
8,718 3,963 2,409
------ ------ ------
Deferred, net:
Federal & State 139 518 215
Foreign 17 (90) 179
------ ------ ------
156 428 394
------ ------ ------
Total provision for income taxes $8,874 $4,391 $2,803
====== ====== ======
The provisions for income taxes varied from the United States statutory rate of
35% for 1998 and 34% for 1997 and 1996 principally because of the tax effect of
the following:
<CAPTION>
In thousands 1998 1997 1996
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Tax provision at United States
statutory rate $7,117 $3,929 $2,511
Effect of earnings of foreign operations
subject to different tax rates 1,019 (2) 199
State taxes, net of federal
income tax benefit 247 114 208
Benefit of Foreign Sales Corporation (76) (68) (195)
Goodwill amortization -- 356 97
All other, net 567 62 (17)
------ ------ ------
Total tax provision $8,874 $4,391 $2,803
====== ====== ======
</TABLE>
33
<PAGE> 23
7. EMPLOYEE PENSION AND RETIREMENT PLANS
The Company maintains qualified noncontributory defined benefit pension plans
covering United States employees and employees of Instron's United Kingdom
subsidiary. The benefits are based on years of service and final average
compensation at the date of retirement. The Company's general policy is to fund
the pension plans to the extent such contributions are deductible under
standards established by the Internal Revenue Service in the U.S. and the Inland
Revenue in the U.K. Plan assets in the U.S. consist of mutual funds which invest
primarily in common stocks, corporate bonds, U.S. government notes and temporary
cash investments. In the U.K., plan assets are invested in funds whose assets
consist primarily of common stocks, bonds and other securities. Employees of the
Japan subsidiary receive lump sum payments as a multiple of annual salary at
retirement or termination, based on years of service. These Japanese benefits
are unfunded.
Net periodic pension costs include the following components:
<TABLE>
<CAPTION>
1998 1997 1996
------------------------ ------------------------ ------------------------
In thousands U.S. U.K. Japan U.S. U.K. Japan U.S. U.K. Japan
- ---------------------------------- ------- ------- ------ ------- ------- ------ ------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Service cost $ 1,122 $ 1,749 $ 222 961 $ 1,357 $ 231 $ 936 $ 1,158 $ 257
Interest cost 1,911 2,278 171 1,799 1,990 201 1,648 1,690 206
Expected return on plan assets (2,077) (2,971) 0 (1,914) (2,742) 0 (1,682) (2,576) 0
Amortization of transition asset
(liability) (9) (76) 18 (9) (75) 19 (9) ( 72) 21
Amortization of prior service cost 44 (73) 0 44 (89) 0 44 (91) 0
Amortization of unrecognized
(gain) loss 2 0 0 1 (59) 0 1 130 0
Settlement gain 0 0 (118) 0 0 0 0 0 0
------- ------- ------ ------- ------- ------ ------- ------- ------
Net periodic pension cost $ 993 $ 907 $ 293 $ 882 $ 382 $ 451 $ 938 $ 239 $ 484
======= ======= ====== ======= ======= ====== ======= ======= ======
Assumptions used in the accounting for the Company's U.S., U.K., and Japan plans at December 31 were:
<CAPTION>
1998 1997 1996
------------------------ ---------------------- -----------------------
U.S. U.K. Japan U.S. U.K. Japan U.S. U.K. Japan
- ------------------------------ ---- ---- ----- ---- ---- ----- ---- ---- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Weighted average discount rate 6.75% 5.5% 4.0% 7.0% 6.5% 5.0% 7.5% 8.0% 6.0%
Rates of increase in
compensation levels 4.25 4.0 3.0 4.5 4.75 4.0 5.0 5.5 5.0
Expected long-term rate of
return on assets 9.0 7.25 0.0 9.0 8.75 0.0 9.0 9.5 0.0
The following is a reconciliation of the Projected Benefit Obligation as of December 31:
<CAPTION>
1998 1997 1996
------------------------------ ------------------------------ ---------------------------
In thousands U.S. U.K. Japan U.S. U.K. Japan U.S. U.K. Japan
- ---------------------------- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Projected benefit obligation
at prior year end $ 26,209 $ 33,222 $ 3,221 $ 23,246 $ 24,681 $3,404 $ 21,134 $ 20,167 $3,327
Service cost 1,122 1,749 222 961 1,357 231 936 1,159 257
Interest cost 1,911 2,278 171 1,799 1,990 201 1,648 1,690 206
Actuarial (gain) loss 1,170 1,160 (102) 989 7,019 (205) 201 287 4
Benefits paid (871) (1,437) 0 (786) (1,288) (10) (673) (1,246) (4)
Plan amendments 0 262 0 0 287 0 0 94 0
Settlement 0 0 (872) 0 0 0 0 244 0
Foreign currency gain (loss) 0 180 400 0 (824) (400) 0 2,286 (386)
-------- -------- -------- -------- -------- ------ -------- -------- ------
Projected Benefit Obligation
at year end $ 29,541 $ 37,414 $ 3,040 $ 26,209 $ 33,222 $3,221 $ 23,246 $ 24,681 $3,404
======== ======== ======== ======== ======== ====== ======== ======== ======
The following is a reconciliation of the beginning and ending balances of the fair value of Plan assets at December 31:
<CAPTION>
1998 1997 1996
------------------------------- ---------------------------- ---------------------------
In thousands U.S. U.K. Japan U.S. U.K. Japan U.S. U.K. Japan
- ---------------------------- -------- -------- -------- -------- -------- ----- -------- -------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Fair value of plan assets
at prior year end $ 26,650 $ 33,522 $ 0 $ 24,865 $ 29,748 $ 0 $ 21,556 $ 24,466 $ 0
Actual return on plan assets 3,667 5,475 0 2,546 4,812 0 2,655 2,576 0
Employer contributions 24 1,334 551 25 1,288 10 1,327 1,195 4
Benefits paid (871) (1,437) (551) (786) (1,288) (10) (673) (1,246) (4)
Foreign currency gain (loss) 0 184 0 0 (1,038) 0 0 2,757 0
-------- -------- -------- -------- -------- ---- -------- -------- ---
Fair value of plan assets
at year end $ 29,470 $ 39,078 $ 0 $ 26,650 $ 33,522 $ 0 $ 24,865 $ 29,748 $ 0
======== ======== ======== ======== ======== ==== ======== ======== ===
</TABLE>
The funded status of the Company's U.S., U.K. and Japan plans and amounts
recognized in the consolidated Balance Sheet at December 31 were:
<TABLE>
<CAPTION>
1998 1997 1996
------------------------- -------------------------- --------------------------
In thousands U.S. U.K. Japan U.S. U.K. Japan U.S. U.K. Japan
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Projected benefit obligation
in excess of (less than)
plan assets $ 71 $(1,664) $3,040 $ (441) $ (300) $ 3,221 $(1,619) $(5,067) $3,404
Unrecognized asset (liability)
at transition 48 465 (243) 57 538 (229) 66 637 (278)
Unrecognized prior service cost (461) 737 (505) 1,066 0 (549) 1,498 0
Unrecognized gain (loss) 4,104 163 648 3,683 (1,177) 259 4,038 4,011 77
------ ------- ------ ------ ------- ------- ------- ------- ------
Pension liability included assets
in Consolidated Balance Sheet $3,762 $ (299) $3,445 $2,794 $ 127 $ 3,251 $ 1,936 $ 1,079 $3,203
====== ======= ====== ====== ======= ======= ======= ======= ======
</TABLE>
The expense of all pension plans for 1998, 1997 and 1996 was $2,193,000,
$1,715,000, and $1,661,000, respectively. The Company also sponsors a Savings
and Security Plan for all U.S. employees. The plan (in accordance with section
401(k) of the Internal Revenue Code) offers participating employees a program of
regular savings and investment, funded by their own contributions and those of
the Company. The amount charged to operating expense for this plan was $582,000,
$530,000 and $523,000 in 1998, 1997 and 1996, respectively.
34
<PAGE> 24
8. STOCK OPTION PLANS
The Company accounts for stock-based compensation using the intrinsic value
method. Accordingly, compensation cost for stock options is measured as the
excess, if any, of the quoted market price of the Company's stock at the date of
the grant over the amount an employee must pay to acquire the stock.
The Company has two stock options plans currently in effect under which future
grants may be issued: the 1992 Stock Incentive Plan and the 1979 Non-Qualified
Plan. A total of 1,391,500 shares has been authorized by the Company for grants
of options or shares. Stock Options granted during 1998, 1997 and 1996 generally
have a maximum term of eight years and vest equally over four years.
A summary of the Company's stock option activity for the years ended December 31
follows:
<TABLE>
<CAPTION>
Weighted
Number Average
of Options Exercise Prices
- ---------------------------------------------------------------------
<S> <C> <C>
Outstanding at
December 31, 1995 881,450 $10.80
Granted, 1996 225,750 13.51
Exercised, 1996 (112,726) 9.91
Terminated, 1996 (15,750) 12.59
--------
Outstanding at
December 31, 1996 978,724 11.49
Granted, 1997 5,000 12.25
Exercised, 1997 (37,385) 11.02
Terminated, 1997 (13,000) 12.43
--------
</TABLE>
35
<PAGE> 25
Outstanding at
December 31, 1997 933,339 11.51
Granted, 1998 77,250 16.71
Exercised, 1998 (260,848) 9.92
Terminated, 1998 (24,937) 13.90
--------
Outstanding at
December 31, 1998 724,804 $12.55
========
At December 31, 1998, 1997 and 1996, respectively, there were 502,735, 656,902
and 526,045 options exercisable with a weighted average exercise price of
$11.84, $10.94 and $10.58. Exercise prices for options outstanding as of
December 31, 1998, ranged from $10.00 to $19.625. The weighted average remaining
contractual life of those options is 4.3 years.
The weighted average fair value at date of grant for options granted during
1998, 1997 and 1996 was $7.39, $5.04 and $5.79 per option, respectively. The
fair value of these options at date of grant was estimated using the
Black-Scholes model with the following weighted average assumptions for 1998,
1997 and 1996, respectively: risk-free interest rates of 5.07%, 5.70% and 6.50%;
dividend yields of 0.97%, 1.31% and 1.19%; volatility factors of the expected
market price of the Company's common stock of .35, .31 and .30; and a weighted
average expected life of the options of 7.9, 8.0 and 7.8 years.
Had compensation cost for the Company's stock option plans been determined based
on the fair value at the grant date for awards in 1998, 1997 and 1996, the
Company's net income and earnings per share would have been reduced to the pro
forma amounts indicated below:
1998 1997 1996
------- ------ ------
Net income - pro forma $10,871 $6,691 $4,105
Earnings per share - basic $ 1.63 $ 1.04 $ .64
Earnings per share - diluted $ 1.54 $ .99 $ .63
The pro forma effect on net income for 1997 and 1996 is not representative of
the pro forma effect on net income in future years because it does not take into
consideration pro forma compensation expense related to grants made prior to
1995.
On May 14, 1997 and October 29, 1997, respectively, the Company issued 250,000
and 20,500 shares of restricted stock to key employees, which resulted in
$3,414,000 of non-cash deferred compensation to be recognized as operating
expense over a seven year period. Vesting is accelerated upon change in control
or if certain performance criteria are met.
9. ACQUISITIONS
On August 4, 1998, the Company acquired substantially all the assets of Satec
Systems, Inc. of Grove City, Pennsylvania, for approximately $12.6 million in
cash. Satec is a manufacturer of a range of materials testing equipment sold
primarily in the United States with annual sales of approximately $18.0 million.
This acquisition has been accounted for under the purchase method of accounting
and, accordingly, the acquired assets and liabilities have been recorded at
their estimated fair values at the date of acquisition. In conjunction with this
acquisition the Company recorded $7.2 million of goodwill which is being
amortized over ten years. The operating results of Satec have been included in
the Company's consolidated results of operations from the date of acquisition.
36
<PAGE> 26
On September 27, 1998, the Company acquired the remaining 49% interest in IST
from Carl Schenck A.G. of Darmstadt, Germany for $2.7 million in cash. The book
value of net assets acquired were equal to the consideration paid. IST has
become a world-class structures testing business with sales of more than $55
million in 1998. This additional investment has been accounted for under the
purchase method of accounting and, accordingly, the acquired assets and
liabilities have been recorded at their estimated fair values at the date of
acquisition. The operations of IST for the fourth quarter of 1998 have been
consolidated into the Company's results of operations from the date of
acquisition. Prior to this acquisition the Company accounted for its 51%
interest in IST under the equity method of accounting.
10. NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 requires that all derivative
instruments be recorded on the balance sheet at their fair value. Changes in the
fair value of derivatives are recorded each period in current earnings or other
comprehensive income, depending on whether a derivative is designated as part of
a hedge transaction and, if it is, the type of hedge transaction. The statement
is effective for fiscal years beginning after June 15, 1999. Management is
currently evaluating the effects of this change on its recording of derivatives
and hedging activities. The Company will adopt SFAS No. 133 for its fiscal year
ending December 31, 2000.
In March 1998, the American Institute of Certified Public Accountants issued
Statement of Position (SOP) 98-1, "Internal Use Software," which provides
guidance on the accounting for the costs of software developed or obtained for
internal use. SOP 98-1 is effective for fiscal years beginning after December
15, 1998. This statement does not have a material impact on the Company's
financial position or results of operations.
11. SPECIAL ITEMS CHARGES
During the first quarter of 1998, the Company recorded a special items charge to
operations to undertake a consolidation of its European operations and
write-down the value of certain non-performing assets. A pre-tax charge of
$4,975,000 was taken in the quarter ended March 28, 1998 to cover these actions.
The special items charge includes termination benefits, the costs to exit a
manufacturing facility, other asset impairments and other related costs. The
Company has closed down a manufacturing plant in Germany, relocated sales and
service support personnel to another Instron location in Germany and has moved
the manufacturing operation to the United Kingdom. During 1998 the Company paid
$1.4 million for termination benefits and related costs and $1.6 million for the
costs to shutdown and exit a manufacturing facility in Germany. In addition, the
Company wrote-off $1.0 million of non-performing assets in 1998, primarily
relating to its interest in Lightspeed Simulation Systems. The balance of the
Special Items reserve relates primarily to the Company's obligation under a
long-term lease agreement in Germany, partially offset by estimated income under
a sub-lease arrangement.
In March 1996, the Company recognized a $1,812,000 special items charge to
implement a work force reduction and consolidate certain manufacturing
operations.
37
<PAGE> 27
SUPPLEMENTARY FINANCIAL INFORMATION
QUARTERLY FINANCIAL DATA
(quarterly data unaudited)
<TABLE>
<CAPTION>
Quarter Quarter Quarter Quarter
In thousands, except per share data 1 2 3 4 Year
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1998:
Total revenue $33,869 $37,761 $43,331 $68,068 $183,029
Gross profit 13,742 15,734 16,718 25,781 71,975
Income before income taxes 8,159 2,914 3,403 5,857 20,333
Net income 3,911 1,807 2,110 3,631 11,459
Earnings per share - basic* 0.60 0.27 0.32 0.54 1.72
Earnings per share - diluted 0.55 0.25 0.30 0.52 1.62
-------------------------------------------------------------------------------------------------
1997:
Total revenue $36,023 $37,124 $35,996 $46,517 $155,660
Gross profit 14,706 15,127 15,008 19,330 64,171
Income before income taxes 1,482 2,376 2,966 4,731 11,555
Net income 919 1,470 1,842 2,933 7,164
Earnings per share - basic 0.14 0.23 0.29 0.45 1.11
Earnings per share - diluted* 0.14 0.22 0.26 0.42 1.05
-------------------------------------------------------------------------------------------------
</TABLE>
* The sum of the quarterly earnings per share does not equal the amount
reported for the year, as per share amounts are calculated independently and are
based on the weighted average common shares outstanding for each period.
38
<PAGE> 28
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K
(a)1. FINANCIAL STATEMENTS
The following consolidated financial statements are included in
Item 8:
Consolidated statements of income for the
years ended December 31, 1998, 1997 and 1996
Consolidated balance sheets at
December 31, 1998 and 1997
Consolidated statements of cash flows for the
years ended December 31, 1998 1997 and 1996
Consolidated statements of stockholders' equity
for the years ended December 31, 1998, 1997 and 1996
Notes to consolidated financial statements
(a)2. FINANCIAL STATEMENT SCHEDULE
Schedule
Page Number
---- --------
Report of Independent Accountants on
financial statement schedule 44
Consolidated valuation accounts 45 II
All other schedules have been omitted since the required information is not
present or not present in amounts sufficient to require submission of the
schedule, or because the information required is included in the consolidated
financial statements, including the accompanying notes.
(a)3. EXHIBITS
Exhibit No. Description of Exhibits
- ----------- -----------------------
*3(a) Restated Articles of Organization of the Registrant and all
amendments thereto.
3(b) By-Laws of the Registrant, as amended, incorporated by
reference to the Current Report on Form 8-K, filed with the
Securities and Exchange Commission on October 5, 1990.
40
<PAGE> 29
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K
(CONTINUED)
10(a) 1979 Non-Qualified Stock Option and Stock Appreciation Rights Plan, as
amended, incorporated by reference to Exhibit 10(a) of Form 10-K for
the year ended December 31, 1991.
10(b) 1982 Incentive Stock Option Plan, as amended, incorporated by reference
to Exhibit 10(b) of Form 10-K for the year ended December 31, 1987 and
to Exhibit 19(b) of Form 10-Q for the quarter ended September 29, 1990.
10(c) 1984 United Kingdom Share Option Scheme, as amended, incorporated by
reference to Exhibit 10(c) of Form 10-K for the year ended December 31,
1991.
10(d) 1992 Stock Incentive Plan, incorporated by reference to Exhibit 10(b)
of Form 10-K for the year ended December 31, 1991.
10(e) Form of Executive Severance Agreement, dated as of December 8, 1993,
between the Company and one key employee, incorporated by reference to
Exhibit 10(f) on Form 10-K for the year ended December 31, 1993.
10(f) Form of Executive Severance Agreement, dated as of December 8, 1993,
between Instron Limited, the Company and two key employees,
incorporated by reference to Exhibit 10(h) on Form 10-K for the year
ended December 31, 1993.
41
<PAGE> 30
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K
(CONTINUED)
10(g) Form of Executive Severance Agreement entered into between the Company
and one key employee, incorporated by reference to exhibit 10(l) on
Form 10-K for the year ended December 31, 1997.
10(h) Form of Executive Severance Agreement entered into among Instron
Limited, the Company and one key employee, incorporated by
reference to exhibit 10(m) on Form 10-K for the year ended December
31, 1997.
10(i) Executive Severance Agreement entered into by the Company and James M.
McConnell, dated May 14, 1998.
10(j) Form of Executive Severance Agreement entered into by the Company and
each of Linton A Moulding, Joseph E. Amaral, William J. Milliken,
Yahya Gharagozlou and five other executive officers, in each case
dated May 14, 1998.
10(k) Lease Agreement, dated as of March 31, 1998, by and between Schenck
Immobilien & Services GmbH and Instron Schenck Testing Systems GmbH.
*10(l) Strategic Alliance Agreement between Instron Corporation, Instron
Partners, Instron GmbH, Instron Schenck Testing Systems GmbH, Instron
Schenck Testing Systems, and Carl Schenck AG, Schenck Atis GmbH,
Schenck Pegasus Testing Inc., Schenck Fertigungs GmbH, executed
September 24, 1998 and effective as of September 27, 1998.
21 Subsidiaries of the Registrant
*23 Consent of Independent Accountants
27 Financial Data Schedule
(b) Report on Form 8-K
None.
* Filed herewith.
42
<PAGE> 31
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.
INSTRON CORPORATION
(Registrant)
Date: July 22, 1999 By: /s/ LINTON A. MOULDING
-----------------------
Linton A. Moulding
Chief Financial Officer
43
<PAGE> 32
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENTS SCHEDULE
To the Board of Directors and Stockholders
of Instron Corporation:
Our audits of the consolidated financial statements referred to in our report
dated February 18, 1999 included in this Annual Report on Form 10-K also
included an audit of the financial statement schedule noted in Item 14(a)(2) of
this Form 10-K. In our opinion, this financial statement schedule presents
fairly, in all material respects, the information set forth therein when read
in conjunction with the related consolidated financial statements.
/s/ PricewaterhouseCoopers LLP
------------------------------------
PricewaterhouseCoopers LLP
Boston, Massachusetts
February 18, 1999
44
<PAGE> 1
EXHIBIT 3(a)
Federal Identification
No. 04-2057203
Fee: $250.00
THE COMMONWEALTH OF MASSACHUSETTS
WILLIAM FRANCIS GALVIN
Secretary of the Commonwealth
One Ashburton Place, Boston, MA 02108-1512
ARTICLES OF MERGER OF PARENT AND SUBSIDIARY CORPORATIONS
(General Laws, Chapter 156B, Section 82)
We, James M. McConnell, President, and Jill E. Peebles, Clerk, of
Instron Corporation, organized under the laws of Massachusetts and herein called
the parent corporation, certify as follows:
1. That the subsidiary corporation(s) to be merged into the
parent corporation is/are:
NAME STATE OF ORGANIZATION DATE OF ORGANIZATION
Laboratory Microsystems, Inc. Massachusetts March 20, 1990
2. The parent corporation, at the date of the vote, owned not
less than ninety percent (90%) of the outstanding shares of each class of stock
of the subsidiary corporation or corporations with which it has voted to merge.
Item 3 below may be deleted if all the corporations are organized under
the laws of Massachusetts and if General Laws, Chapter 156B is applicable to
them.
4. That at a meeting of the directors of the parent corporation,
the following vote, pursuant to General Laws, Chapter 156B, Section 82,
Subsection (a) was duly adopted:
At a meeting of the Board of Directors of Instron Corporation on
November 19, 1996, the following vote was duly adopted:
VOTED: To approve the merger of Laboratory Microsystems, Inc., a wholly owned
subsidiary of Instron Corporation, into Instron Corporation pursuant to
Massachusetts General Laws, Chapter 156B, Section 82, a transaction
intended to qualify as a Section 332 liquidation under the U.S.
Internal Revenue Code as discussed at the meeting; and to authorize the
President, Chief Financial Officer and/or Treasurer to take whatever
actions necessary to effectuate this proposal.
* Delete the inapplicable words. In case the parent corporation is organized
under the laws of a state other than Massachusetts, these articles are to be
signed by officers having corresponding powers and duties.
<PAGE> 2
5. The effective date of the merger shall be the date approved
and filed by the Secretary of the Commonwealth. If a later effective date is
desired, specify such date, which shall not be more than thirty days after the
date of filing:
The merger should be effective as of the close of business on December
31, 1996.
Section 5 below may be deleted if the parent corporation is organized
under the laws of Massachusetts.
SIGNED UNDER THE PENALTIES OF PERJURY, this 11th day of December, 1996.
/s/ James M. McConnell
------------------------------------
James M. McConnell
President
/s/ Jill E. Peebles
------------------------------------
Jill E. Peebles
Clerk
Note: Notes for which the space provided above is not sufficient, should be
listed on additional sheets to be numbered 4A, 4B, etc. Additional sheets must
be 8 1/2" x 11" and have a left hand margin of 1 inch. Only one side should be
used.
2
<PAGE> 3
THE COMMONWEALTH OF MASSACHUSETTS
ARTICLES OF MERGER OF PARENT AND SUBSIDIARY CORPORATIONS
(General Laws, Chapter 156B, Section 82)
I hereby approve the within Articles of Merger of Parent and Subsidiary
Corporations and, the filing fee in the amount of $250.00 having been paid, said
articles are deemed to have been filed with me this 16th day of December, 1996.
Effective date: 12/31/96
/s/ William Francis Galvin
------------------------------------
WILLIAM FRANCIS GALVIN
Secretary of the Commonwealth
TO BE FILLED IN BY CORPORATION
Photocopy of document to be sent to:
Bradley A. Jacobson, Esq.
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, MA 02109
Telephone: (617) 570-1019
3
<PAGE> 4
Federal Identification:
No. 04-2057203
THE COMMONWEALTH OF MASSACHUSETTS
OFFICE OF THE MASSACHUSETTS SECRETARY OF STATE
MICHAEL JOSEPH CONNOLLY, Secretary
ONE ASHBURTON PLACE, BOSTON, MASS. 02108
CERTIFICATE OF VOTE OF DIRECTORS ESTABLISHING
A SERIES OF A CLASS OF STOCK
General Laws, Chapter 156B, Section 26
---------------
We, Salvatore J. Vinciguerra, President, and Paul R. Rugo, Clerk, of
Instron Corporation, located at 100 Royall Street, Canton, Massachusetts 02021
do hereby certify that at a meeting of the directors of the corporation held on
November 2, 1998, the following vote establishing and designating a series of a
class of stock and determining the relative rights and preferences thereof was
duly adopted:
See Continuation Sheets attached.
NOTE: Votes for which the space provided above is not sufficient should be
set out on continuation sheets to be numbered 2A, 2B, etc. Continuation
sheets must have a left-hand margin 1 inch wide for binding and shall
be 8 1/2" x 11". Only one side should be used.
<PAGE> 5
VOTED: That pursuant to the authority vested in the Board of Directors of this
Corporation in accordance with the provisions of its Articles of
Organization, a series of Preferred Stock of the Corporation is hereby
created and that the designation and amount thereof and the voting
powers, preferences and relative, participating, optional and other
special rights of the shares of such series, and the qualifications,
limitations or restrictions thereof are as follows:
Section 1. DESIGNATION AND AMOUNT. The shares of such series shall be
designated as "Series A Junior Participating Cumulative Preferred Stock" (the
"Series A Preferred Stock"), and the number of shares constituting such series
shall be 100,000.
Section 2. DIVIDENDS AND DISTRIBUTIONS.
(A) (i) The holders of shares of Series A Preferred
Stock shall be entitled to receive, when, as and if declared by the Board of
Directors out of funds legally available for the purpose, quarterly dividends
payable in cash on the first day of March, June, September and December in each
year (each such date being referred to herein as a "Quarterly Dividend Payment
Date"), commencing on the first Quarterly Dividend Payment Date after the first
issuance of a share or fraction of a share of Series A Preferred Stock, in an
amount per share (rounded to the nearest cent) equal to the greater of (a)
$12.00 or (b) subject to the provision for adjustment hereinafter set forth, 100
times the aggregate per share amount of all cash dividends, and 100 times the
aggregate per share amount (payable in kind) of all non-cash dividends or other
distributions other than a dividend payable in shares of Common Stock or a
subdivision of the outstanding shares of Common Stock (by reclassification or
otherwise), declared on the Common Stock, par value $1.00 per share, of the
Corporation (the "Common Stock") since the immediately preceding Quarterly
Dividend Payment Date, or, with respect to the first Quarterly Dividend Payment
Date, since the first issuance of any share or fraction of a share of Series A
Preferred Stock. The multiple of cash and non-cash dividends declared on the
Common Stock to which holders of the Series A Preferred Stock are entitled,
which shall be 100 initially but which shall be adjusted from time to time as
hereinafter provided, is hereinafter referred to as the "Dividend Multiple". In
the event the Corporation shall at any time after November 2, 1988 (the "Rights
Declaration Date") declare or pay any dividend on Common Stock payable in shares
of Common Stock, or effect a subdivision or combination or consolidation of the
outstanding shares of Common Stock (by reclassification
2
<PAGE> 6
or otherwise than by payment of a dividend in shares of Common Stock) into a
greater or lesser number of shares of Common Stock, then in each such case the
Dividend Multiple thereafter applicable to the determination of the amount of
dividends which holders of shares of Series A Preferred Stock shall be entitled
to receive shall be the Dividend Multiple applicable immediately prior to such
event multiplied by a fraction, the numerator of which is the number of shares
of Common Stock outstanding immediately after such event and the denominator of
which is the number of shares of Common Stock that were outstanding immediately
prior to such event.
(ii) Notwithstanding anything else contained in
this paragraph (A), the Corporation shall, out of funds legally available for
that purpose, declare a dividend or distribution on the Series A Preferred Stock
as provided in this paragraph (A) immediately after it declares a dividend or
distribution on the Common Stock (other than a dividend payable in shares of
Common Stock); provided that, in the event no dividend or distribution shall
have been declared on the Common Stock during the period between any Quarterly
Dividend Payment Date and the next subsequent Quarterly Dividend Payment Date, a
dividend of $12.00 per share on the Series A Preferred Stock shall nevertheless
be paid on such subsequent Quarterly Dividend Payment Date.
(B) Dividends shall begin to accrue and be cumulative on
outstanding shares of Series A Preferred Stock from the Quarterly Dividend
Payment Date next preceding the date of issue of such shares of Series A
Preferred Stock, unless the date of issue of such shares is prior to the record
date for the first Quarterly Dividend Payment Date, in which case dividends on
such shares shall begin to accrue from the date of issue of such shares, or
unless the date of issue is a Quarterly Dividend Payment Date or is a date after
the record date for the determination of holders of shares of Series A Preferred
Stock entitled to receive a quarterly dividend and before such Quarterly
Dividend Payment Date, in either of which events such dividends shall begin to
accrue and be cumulative from such Quarterly Dividend Payment Date. Accrued but
unpaid dividends shall not bear interest, Dividends paid on the shares of Series
A Preferred Stock in an amount less than the total amount of such dividends at
the time accrued and payable on such shares shall be allocated pro rata on a
share-by-share basis among all such shares at the time outstanding. The Board of
Directors may fix a record date for the determination of holders of shares of
Series A Preferred Stock entitled to receive payment of a dividend or
distribution declared thereon, which record date shall be no more than 60 days
prior to the date fixed for the payment thereof.
Section 3. VOTING RIGHTS. In addition to any other voting rights
required by law, the holders of shares of Series A Preferred Stock shall have
the following voting rights:
(A) Subject to the provision for adjustment hereinafter
set forth, each share of Series A Preferred Stock shall entitle the holder
thereof to 100 votes on all matters submitted to a vote of the stockholders of
the Corporation. The number of votes which a holder of a share of Series A
Preferred Stock is entitled to cast, as the same may be adjusted from time to
time as hereinafter provided, is hereinafter referred to as the "Vote Multiple".
3
<PAGE> 7
In the event the Corporation shall at any time after the Rights Declaration Date
(i) declare any dividend on Common Stock payable in shares of Common Stock, (ii)
subdivide the outstanding Common Stock, or (iii) combine the outstanding Common
Stock into a smaller number of shares, then in each such case the Vote Multiple
thereafter applicable to the determination of the number of votes per share to
which holders of shares of Series A Preferred Stock shall be entitled shall be
the Vote Multiple immediately prior to such event multiplied by a fraction the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
(B) Except as otherwise provided herein or by law, the
holders of shares of Series A Preferred Stock and the holders of shares of
Common Stock shall vote together as one class on all matters submitted to a vote
of stockholders of the Corporation.
(C) (i) if at any time dividends on any Series A
Preferred Stock shall be in arrears in an amount equal to six (6) quarterly
dividends thereon, the occurrence of such contingency shall mark the beginning
of a period (herein called a "default period") which shall extend until such
time when all accrued and unpaid dividends for all previous quarterly dividend
periods and for the current quarterly dividend period on all shares of Series A
Preferred Stock then outstanding shall have been declared and paid or set apart
for payment. During each default period, the holders of Preferred Stock
(including holders of the Series A Preferred Stock) with dividends in arrears in
an amount equal to six (6) quarterly dividends thereon, voting as a class,
irrespective of series, shall have the right to elect two (2) Directors.
(ii) During any default period, such voting right
of the holders of Series A Preferred stock may be exercised initially at a
special meeting called pursuant to subparagraph (iii) of this Section 3(C) or at
any annual meeting of stockholders, and thereafter at annual meetings of
stockholders, provided that neither such voting right nor the right of the
holders of any other series of Preferred Stock, if any, to increase, in certain
cases, the authorized number of Directors shall be exercised unless the holders
of ten percent (10%) in number of shares of Preferred Stock outstanding shall be
present in person or by proxy. The absence of a quorum of the holders of Common
Stock shall not affect the exercise by the holders of Preferred Stock of such
voting right. At any meeting at which the holders of Preferred Stock shall
exercise such voting right initially during an existing default period, they
shall have the right, voting as a class, to elect Directors to fill such
vacancies, if any, in the Board of Directors as may then exist up to two (2)
Directors or, if such right is exercised at an annual meeting, to elect two (2)
Directors. If the number which may be so elected at any special meeting does not
amount to the required number, the holders of the Preferred Stock shall have the
right to make such increase in the number of Directors as shall be necessary to
permit the election by them of the required number. After the holders of the
Preferred Stock shall have exercised their right to elect Directors in any
default period and during the continuance of such period, the number of
Directors shall not be increased or decreased except by vote of the holders of
Preferred Stock as herein provided or pursuant to the rights of any equity
securities ranking senior to or PARI PASSU with the Series A Preferred Stock.
4
<PAGE> 8
(iii) unless the holders of Preferred Stock shall,
during an existing default period, have previously exercised their right to
elect Directors, the Board of Directors may order, or any stockholder or
stockholders owning in the aggregate not less than ten percent (10%) of the
total number of shares of Preferred Stock outstanding, irrespective of series,
may request, the calling of a special meeting of the holders of Preferred Stock,
which meeting shall thereupon be called by the President, a Vice President or
the Clerk of the Corporation. Notice of such meeting and of any annual meeting
at which holders of Preferred Stock are entitled to vote pursuant to this
paragraph (C)(iii) shall be given to each holder of record of Preferred Stock by
mailing a copy of such notice to him at his last address as the same appears on
the books of the Corporation. Such meeting shall be called for a time not
earlier than 20 days and not later than 60 days after such order or request or,
in default of the calling of such meeting within 60 days after such order or
request, such meeting may be called on similar notice by any stockholder or
stockholders owning in the aggregate not less than ten percent (10%) of the
total number of shares of Preferred Stock outstanding. Notwithstanding the
provisions cf this paragraph (C)(iii), no such special meeting shall be called
during the period within 60 days immediately preceding the date fixed for the
next annual meeting of the stockholders.
(iv) In any default period, the holders of Common
Stock, and other classes of stock of the Corporation if applicable, shall
continue to be entitled to elect the whole number of Directors until the holders
of Preferred Stock hall have exercised their right to elect two (2) Directors
voting as a class, after the exercise of which right (x) the Directors so
elected by the holders of Preferred Stock shall continue in office until their
successors shall have been elected by such holders or until the expiration of
the default period, and (y) any vacancy in the Board of Directors may (except as
provided in paragraph (C)(ii) of this Section 3) be filled by vote of a majority
of the remaining Directors theretofore elected by the holders of the class of
stock which elected the Director whose office shall have become vacant.
References in this paragraph (C) to Directors elected by the holders of a
particular class of stock shall include Directors elected by such Directors to
fill vacancies as provided in clause (y) of the foregoing sentence.
(v) Immediately upon the expiration of a default
period (x) the right of the holders of Preferred Stock as a class to elect
Directors shall cease, (y) the term of any Directors elected by the holders of
Preferred Stock as a class shall terminate, and (z) the number of Directors
shall be such number as may be provided for in the Articles of Organization or
by-laws irrespective of any increase made pursuant to the provisions of
paragraph (C)(ii) of this Section 3 (such number being subject, however, to
change thereafter in any manner provided by law or in the Articles of
Organization or by-laws). Any vacancies in the Board of Directors effected by
the provisions of clauses (y) and (z) in the preceding sentence may be filled by
a majority of the remaining Directors.
(D) Except as otherwise required by applicable law or as
set forth herein, holders of Series A Preferred Stock shall have no special
voting rights and their consent shall
5
<PAGE> 9
not be required (except to the extent they are entitled to vote with holders of
Common Stock as set forth herein) for taking any corporate action.
Section 4. CERTAIN RESTRICTIONS.
(A) Whenever quarterly dividends or other dividends or
distributions payable on the Series A Preferred Stock as provided in Section 2
are in arrears, thereafter and until all accrued and unpaid dividends and
distributions, whether or not declared, on shares of Series A Preferred Stock
outstanding shall have been paid in full, the Corporation shall not:
(i) declare or pay dividends on, make any other
distributions on, or redeem or purchase or
otherwise acquire for consideration any
shares of stock ranking junior (either as to
dividends or upon liquidation, dissolution
or winding up) to the Series A Preferred
Stock;
(ii) declare or pay dividends on or make any
other distributions on any shares of stock
ranking on a parity (either as to dividends
or upon liquidation, dissolution or winding
up) with the Series A Preferred Stock,
except dividends paid ratably on the Series
A Preferred Stock and all such parity stock
on which dividends are payable or in arrears
in proportion to the total amounts to which
the holders of all such shares are then
entitled;
(iii) redeem or purchase or otherwise acquire for
consideration shares of any stock ranking on
a parity (either as to dividends or upon
liquidation, dissolution or winding up) with
the Series A Preferred Stock, provided that
the Corporation may at any time redeem,
purchase or otherwise acquire shares of any
such parity stock in exchange for shares of
any stock of the Corporation ranking junior
(either as to dividends or upon dissolution,
liquidation or winding up) to the Series A
Preferred Stock; or
(iv) purchase or otherwise acquire for
consideration any shares of Series A
Preferred Stock, or any shares of stock
ranking on a parity with the Series A
Preferred Stock, except in accordance with a
purchase offer made in writing or by
publication (as determined by the Board of
Directors) to all holders of such shares
upon such terms as the Board of Directors,
after consideration of the respective annual
dividend rates and other relative rights and
preferences of the respective series and
classes, shall determine in good faith will
result in fair and equitable treatment among
the respective series or classes.
6
<PAGE> 10
(B) The Corporation shall not permit any subsidiary of
the Corporation to purchase or otherwise acquire for consideration any shares of
stock of the Corporation unless the Corporation could, under paragraph (A) of
this Section 4, purchase or otherwise acquire such shares at such time and in
such manner.
Section 5. REACQUIRED SHARES. Any shares of Series A Preferred Stock
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and cancelled promptly after the acquisition thereof. All such
shares shall upon their cancellation become authorized but unissued shares of
Preferred Stock and may be reissued as part of a new series of Preferred Stock
to be created by resolution or resolutions of the Board of Directors, subject to
the conditions and restrictions on issuance set forth herein.
Section 6. LIQUIDATION, DISSOLUTION OR WINDING UP. Upon any voluntary
liquidation, dissolution or winding up of the Corporation, no distribution shall
be made (x) to the holders of shares of stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the Series A
Preferred Stock unless, prior thereto, the holders of shares of Series A
Preferred Stock shall have received an amount equal to accrued and unpaid
dividends and distributions thereon, whether or not declared, to the date of
such payment, plus an amount equal to the greater of (1) $4,000 per share or (2)
an aggregate amount per share, subject to the provision for adjustment
hereinafter set forth, equal to 100 times the aggregate amount to be distributed
per share to holders of Common Stock, or (y) to the holders of stock ranking on
a parity (either as to dividends or upon liquidation, dissolution or winding up)
with the Series A Preferred Stock, except distributions made ratably on the
Series A Preferred Stock and all other such parity stock in proportion to the
total amounts to which the holders of all such shares are entitled upon such
liquidation, dissolution or winding up. In the event the Corporation shall at
any time declare or pay any dividend on Common Stock payable in shares of Common
Stock, or effect a subdivision or combination or consolidation of the
outstanding shares of Common Stock (by reclassification or otherwise than by
payment of a dividend in shares of Common Stock) into a greater or lesser number
of shares of Common Stock, then in each such case the aggregate amount to which
holders of shares of Series A Preferred Stock were entitled immediately prior to
such event under the proviso in clause (x) of the preceding sentence shall be
adjusted by multiplying such amount by a fraction the numerator of which is the
number of shares of Common Stock outstanding immediately after such event and
the denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
Neither the consolidation of nor merging of the Corporation with or
into any other corporation or corporations, nor the sale or other transfer of
all or substantially all of the assets of the Corporation, shall be deemed to be
a liquidation, dissolution or winding up of the Corporation within the meaning
of this Section 6.
Section 7. CONSOLIDATION, MERGER, ETC. In case the Corporation shall
enter into any consolidation, merger, combination or other transaction in which
the shares of Common Stock are exchanged for or changed into other stock or
securities, cash or any other property, then in
7
<PAGE> 11
any such case the shares of Series A Preferred Stock shall at the same time be
similarly exchanged or changed in an amount per share (subject to the provision
for adjustment hereinafter set forth) equal to 100 times the aggregate amount of
stock, securities, cash or any other property (payable in kind), as the case may
be, into which or for which each share of Common Stock is changed or exchanged,
plus accrued and unpaid dividends, if any, payable with respect to the Series A
Preferred Stock. In the event the Corporation shall at any time declare or pay
any dividend on Common Stock payable in shares of Common Stock, or effect a
subdivision or combination or consolidation of the outstanding shares of Common
Stock (by reclassification or otherwise than by payment of a dividend in shares
of Common Stock) into a greater or lesser number of shares of Common Stock, then
in each such case the amount set forth in the preceding sentence with respect to
the exchange or change of shares of Series A Preferred Stock shall be adjusted
by multiplying such amount by a fraction the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
Section 8. REDEMPTION.
(A) For purposes of this Section 8, the following terms
have the meanings indicated:
(i) "Acquiring Person" shall mean any Person (as
such term is hereinafter defined) who or which, together with all Affiliates (as
such term is hereinafter defined) and Associates (as such term is hereinafter
defined) of such Person, shall be the Beneficial Owner (as such term is
hereinafter defined) of 20% or more of the shares of Common Stock then
outstanding, but shal1 not include the Corporation, any subsidiary of the
Corporation, any employee benefit plan of the Corporation or any subsidiary
thereof or any entity holding shares of Common Stock organized, appointed or
established by the Corporation or any subsidiary thereof for or pursuant to the
terms of any such plan.
(ii) "Affiliate" and "Associate" shall have the
respective meanings ascribed to such terms in Rule 12b-2 of the General Rules
and Regulations under the Securities Exchange Act of 1934, as amended (the
"Exchange Act").
(iii) A Person shall be deemed the "Beneficial
Owner" of, and shall be deemed to "beneficially own," any securities:
(a) which such Person or any of such
Person's Affiliates or Associates beneficially owns, directly or
indirectly (as determined pursuant to Rule 13d-3 of the General Rules
and Regulations under the Exchange Act) or has the right to dispose of;
(b) which such Person or any of such
Person's Affiliates or Associates has (A) the right to acquire (whether
such right is exercisable immediately
8
<PAGE> 12
or after the passage of time) pursuant to any agreement, arrangement or
understanding (whether or not in writing) or upon the exercise of
conversion rights, exchange rights, rights (other than rights initially
exercisable for Series A Preferred Stock), warrants or options, or
otherwise; PROVIDED, HOWEVER, that a Person shall not be deemed the
"Beneficial Owner" of, or to "beneficially own," securities tendered
pursuant to a tender or exchange offer made by such Person or any of
such Person's Affiliates or Associates until such tendered securities
are accepted for purchase or exchange; or (B) the right to vote
pursuant to any agreement, arrangement or understanding (whether or not
in writing); PROVIDED, HOWEVER, that a Person shall not be deemed the
"Beneficial Owner" of, or to "beneficially own," any security under
this clause (B) if the agreement, arrangement or understanding to vote
such security (1) arises solely from a revocable proxy given in
response to a public proxy or consent solicitation made pursuant to,
and in accordance with the applicable rules and regulations of the
Exchange Act and (2) is not also then reportable by such person on
Schedule 13D under the Exchange Act (or any comparable or successor
report); or
(c) which are beneficially owned,
directly or indirectly, by any other Person (or any Affiliate or
Associate thereof) with which such Person or any of such Person's
Affiliates or Associates has any agreement, arrangement or
understanding (whether or not in writing), for the purpose of
acquiring, holding, voting (except pursuant to a revocable proxy as
described in clause (B) of subparagraph (b) of this paragraph (iii)) or
disposing of any securities of the Corporation.
(iv) "Disinterested Director" shall mean any
member of the Corporation's Board of Directors who is not an officer or
employee of the Corporation or any of its subsidiaries and who is not
an Acquiring Person or an Affiliate or an Associate of an Acquiring
Person or nominee of an Acquiring Person or any such Affiliate or
Associate and was a member of the Corporation's Board of Directors
prior to the Rights Declaration Date, and any Person who subsequently
becomes a member of the Company's Board of Directors who is not an
Acquiring Person or an Affiliate or an Associate of an Acquiring Person
or nominee of an Acquiring Person or any such Affiliate or Associate,
if such Person's nomination is recommended or approved by a majority of
the Disinterested Directors.
(v) "Person" shall, mean any individual, firm,
corporation, partnership or other entity.
(B) Subject to Section 4 hereof, the Corporation may, at
any time (unless otherwise prevented by law) by the affirmative vote of a
majority of the directors then in office, including, if at the time of such vote
there is an Acquiring Person, a majority of the Disinterested Directors, redeem
all or any portion of the Series A Preferred Stock then outstanding. The amount
per share of Series A Preferred Stock to be redeemed to be paid upon any such
redemption shall be equal to $4,000 plus accrued and unpaid dividends, if any,
payable with respect thereto. The total sum payable per share of Series A
Preferred Stock on
9
<PAGE> 13
the date on which the Corporation redeems any shares of Series A Preferred Stock
(the "Redemption Date") is hereinafter referred to as the "Redemption Price."
(C) Notice of redemption pursuant to this Section 8 shall
be sent by first-class mail, postage prepaid, to the holders of record of the
shares of Series A Preferred Stock to be redeemed at their respective addresses
as the same shall appear on the books of the Corporation. Such notice shall be
mailed not less than 30 nor more than 60 days in advance of the applicable
Redemption Date and shall specify the Redemption Date, the Redemption Price and
the place at which payment may be obtained as to such shares. At any time on or
after the Redemption Date applicable thereto, the holders of record of shares of
Series A Preferred Stock to be redeemed on such Redemption Date shall be
entitled to receive the Redemption Price therefor upon actual delivery to the
Corporation or its agent of the certificates representing the shares to be
redeemed.
If such notice of redemption shall have been duly given, and if on or
before any Redemption Date the funds necessary for such redemption (taking into
account, any conversions) shall have been deposited by the Corporation with a
bank or trust company designated by the Board of Directors and having capital
and surplus of at least $50,000,000 in trust for the pro rata benefit of the
holders of the shares of Series A Preferred Stock so called for redemption,
then, notwithstanding that any certificate for shares of Series A Preferred
Stock so called for redemption shall not have been surrendered for cancellation,
from and after such Redemption Date (unless there shall have been a default in
payment of the Redemption Price) all shares of Series A Preferred Stock so
called for redemption shall no longer be deemed to be outstanding and all rights
with respect to such shares shall forthwith cease and terminate, except only the
right of the holders thereof to receive from such bank or trust company upon
surrender of their certificate or certificates at any time after the time of
such deposit the funds so deposited, without interest. The balance of any funds
so deposited and unclaimed at the end of one year from such Redemption Date
shall be released or repaid to the Corporation, after which the holders of the
shares so called for redemption shall look only to the Corporation for payment
thereof, without interest.
Section 9. RANKING. Unless otherwise provided in the Articles of
Organization of the Corporation or a Certificate of Vote of Directors
Establishing a Class of Stock relating to a subsequently-designated series of
Preferred Stock of the Corporation, the Series A Preferred Stock shall rank
junior to any other series of the Corporation's Preferred Stock subsequently
issued, as to the payment of dividends and the distribution of assets on
liquidation, dissolution or winding up and shall rank senior to the Common
Stock.
Section 10. AMENDMENT. The Articles of Organization of the Corporation
and this Certificate of Vote shall not be amended in any manner which would
materially alter or change the powers, preferences or special rights of the
Series A Preferred Stock so as to affect them adversely (within the meaning of
Section 77 of Chapter 156B of the Massachusetts General Laws) without the
affirmative vote of the holders of a majority or more of the outstanding shares
of Series A Preferred Stock, voting separate1y as a class.
10
<PAGE> 14
Section 11. FRACTIONAL SHARES. Series A Preferred Stock may be issued
in fractions of a share which shall entitle the holder, in proportion to such
holder's fractional shares, to exercise voting rights, receive dividends,
participate in distributions and to have the benefit of all other rights of
holders of Series A Preferred Stock.
IN WITNESS WHEREOF AND UNDER THE PENALTIES OF PERJURY, we have hereto
signed our names this 2nd day of November, in the year 1988.
/s/ Salvatore J. Vinciguerra
------------------------------------
Salvatore J. Vinciguerra
President
/s/ Paul R. Rugo
------------------------------------
Paul R. Rugo
Clerk
11
<PAGE> 15
THE COMMONWEALTH OF MASSACHUSETTS
CERTIFICATE OF VOTE OF DIRECTORS ESTABLISHING
A SERIES OF A CLASS OF STOCK
(General Laws, Chapter 156B, Section 26)
I hereby approve the within certificate and, the filing fee in the
amount of $75.00 having been paid, said certificate is hereby filed this 3rd day
of November, 1988.
/s/ Michael J. Connolly
------------------------------------
Michael Joseph Connolly
Secretary of State
TO BE FILLED IN BY CORPORATION
Photocopy of certificate to be sent to:
Grant Goodman, Esq.
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, MA 02109
Telephone: (617) 570-1000
12
<PAGE> 16
Federal Identification
No. 04-2057203
THE COMMONWEALTH OF MASSACHUSETTS
OFFICE OF THE MASSACHUSETTS SECRETARY OF STATE
MICHAEL JOSEPH CONNOLLY, Secretary
ONE ASHBURTON PLACE, BOSTON, MASS. 02108
ARTICLES OF AMENDMENT
General Laws, Chapter 156B, Section 72
This certificate must be submitted to the Secretary of the Commonwealth
within sixty days after the date of the vote of stockholders adopting the
amendment. The fee for filing this certificate is prescribed by General Laws,
Chapter 156B, Section 114. Make check payable to the Commonwealth of
Massachusetts.
------------------
We, Salvatore J. Vinciguerra, President, and Paul R. Rugo, Clerk, of
Instron Corporation located at 100 Royall Street, Canton, Massachusetts 02021 do
hereby certify that the following amendment to the articles of organization of
the corporation was duly adopted at a meeting held on May 21, 1987, by vote of
4,967,943 shares of Common Stock out of 6,020,574 shares outstanding, being at
least two-thirds of each class outstanding and entitled to vote thereon and of
each class or series of stock whose rights are adversely affected thereby:1
To amend the Corporation's Restated Articles of Organization by adding
the following as Article 6H thereto:
Article 6H. LIMITATION OF LIABILITY OF DIRECTORS. No director
of this Corporation shall be personally liable to the Corporation of
its stockholders for monetary damages for breach of fiduciary duty as a
director notwithstanding any provision of law imposing such liability;
provided, however, that this Article shall not eliminate or limit any
liability of a director (i) for any breach of the director's duty of
loyalty to the Corporation or its stockholders, (ii) for acts or
omission not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Sections 61 or 62 of the
Massachusetts Business Corporation Law, or (iv) with respect to any
transaction from which the director derived an improper personal
benefit.
- --------
1 For amendments adopted pursuant to Chapter 156B, Section 71.
Note: If the space provided under any Amendment or item on this form is
insufficient, additions shall be set forth on separate 8 1/2" x 11" sheets of
paper leaving a left hand margin of at least 1 inch for binding. Additions to
more than one Amendment may be continued on a single sheet so long as each
Amendment requiring each such addition is clearly indicated.
<PAGE> 17
The provisions of this Article shall not eliminate or limit
the liability of a director of this Corporation for any act or omission
occurring prior to the date on which this Article became effective. No
amendment or repeal of this Articles shall adversely affect the rights
and protection afforded to a director of this Corporation under this
Article for acts or omissions occurring while this Article is in
effect.
The foregoing amendment will become effective when these articles of
amendment are filed in accordance with Chapter 156B, Section 6 of The General
Laws unless these articles specify, in accordance with the vote adopting the
amendment, a later effective date not more than thirty days after such filing,
in which event the amendment will become effective on such later date.
IN WITNESS WHEREOF AND UNDER THE PENALTIES OF PERJURY, we have hereto
signed our names this 21st day of May, in the year 1987.
/s/ Salvatore J. Vinciguerra
------------------------------------
Salvatore J. Vinciguerra
President
/s/ Paul R. Rugo
------------------------------------
Paul R. Rugo
Clerk
2
<PAGE> 18
THE COMMONWEALTH OF MASSACHUSETTS
ARTICLES OF AMENDMENT
(General Laws, Chapter 156B, Section 72)
I hereby approve the within articles of amendment and, the filing fee
in the amount of $75.00 having been paid, said articles are deemed to have been
filed with me this 28th day of May, 1987.
/s/ Michael Joseph Connolly
------------------------------------
Michael Joseph Connolly
Secretary of State
TO BE FILLED IN BY CORPORATION
Photocopy of amendment to be sent to:
Raymond C. Zemlin, Esquire
Goodwin, Procter & Hoar LLP
Exchange Place, 25th Floor
Boston, MA 02109
Telephone: (617) 570-1000
3
<PAGE> 19
Federal Identification
No. 04-2057203
THE COMMONWEALTH OF MASSACHUSETTS
OFFICE OF THE MASSACHUSETTS SECRETARY OF STATE
MICHAEL JOSEPH CONNOLLY, Secretary
ONE ASHBURTON PLACE, BOSTON, MA 02108
ARTICLES OF AMENDMENT
General Laws, Chapter 156B, Section 72
This certificate must be submitted to the Secretary of the Commonwealth
within sixty days after the date of the vote of stockholders adopting the
amendment. The fee for filing this certificate is prescribed by General Laws,
Chapter 156B, Section 114. Make check payable to the Commonwealth of
Massachusetts.
We, Salvatore J. Vinciguerra, President, and Paul R. Rugo, Clerk, of
Instron Corporation located at 100 Royall Street, Canton, Massachusetts 02021,
do hereby certify that the following amendment to the articles of organization
of the corporation was duly adopted at a meeting held on May 7, 1986, by vote of
2,201,221 shares of Common Stock out of 3,008,187 shares outstanding, being at
least a majority of each class outstanding and entitled to vote thereon: 1
TO CHANGE the number of shares and the par value, if any, of each class of stock
within the corporation fill in the following:(1)
The total presently authorized is:
<TABLE>
<CAPTION>
NO PAR VALUE WITH PAR VALUE PAR
KIND OF STOCK NUMBER OF SHARES NUMBER OF SHARES VALUE
- ------------- ---------------- ---------------- -----
<S> <C> <C> <C>
Common None 6,000,000 $1.00
Preferred None 1,000,000 $1.00
</TABLE>
- --------
1 For amendments adopted pursuant to Chapter 156B, Section 70.
Note: If the space provided under any Amendment or item on this form is
insufficient, additions shall be set forth on separate 8 1/2" x 11" sheets of
paper leaving a left hand margin of at least 1 inch for binding. Additions to
more than one Amendment may be continued on a single sheet so long as each
Amendment requiring each such addition is clearly indicated.
<PAGE> 20
CHANGE the total to:
<TABLE>
<CAPTION>
NO PAR VALUE WITH PAR VALUE PAR
KIND OF STOCK NUMBER OF SHARES NUMBER OF SHARES VALUE
- ------------- ---------------- ---------------- -----
<S> <C> <C> <C>
Common None 10,000,000 $1.00
Preferred None 1,000,000 $1.00
</TABLE>
The foregoing amendment will become effective when these articles of
amendment are filed in accordance with Chapter 156B, Section 6 of The General
Laws unless these articles specify, in accordance with the vote adopting the
amendment, a later effective date not more than thirty days after such filing,
in which event the amendment will become effective on such later date.
IN WITNESS WHEREOF AND UNDER THE PENALTIES OF PERJURY, we have hereto
signed our names this seventh day of May, in the year 1986.
/s/ Salvatore J. Vinciguerra
--------------------------------------
Salvatore J. Vinciguerra
President
/s/ Paul R. Rugo
--------------------------------------
Paul R. Rugo
Clerk
2
<PAGE> 21
THE COMMONWEALTH OF MASSACHUSETTS
ARTICLES OF AMENDMENT
(General Laws, Chapter 156B, Section 72)
I hereby approve the within articles of amendment and, the filing fee
in the amount of $2,000.00 having been paid, said articles are deemed to have
been filed with me this 20th day of May, 1986.
/s/ Michael Joseph Connolly
--------------------------------------
Michael Joseph Connolly
Secretary of State
TO BE FILLED IN BY CORPORATION
Photocopy of amendment to be sent to:
Raymond C. Zemlin, Esq.
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, MA 02109
Telephone: (617) 570-1512
3
<PAGE> 22
Federal Identification
No. 04-2057203
THE COMMONWEALTH OF MASSACHUSETTS
OFFICE OF THE MASSACHUSETTS SECRETARY OF STATE
MICHAEL JOSEPH CONNOLLY, Secretary
ONE ASHBURTON PLACE, BOSTON, MASS. 02108
ARTICLES OF AMENDMENT
General Laws, Chapter 156B, Section 72
This certificate must be submitted to the Secretary of the Commonwealth
within sixty days after the date of the vote of stockholders adopting the
amendment. The fee for filing this certificate is prescribed by General Laws,
Chapter 156B, Section 114. Make check payable to the Commonwealth of
Massachusetts.
------------------
We, Harold Hindman, President, and Paul R. Rugo, Clerk, of Instron
Corporation located at 100 Royall Street, Canton, Massachusetts 02021 do hereby
certify that the following amendment to the articles of organization of the
corporation was duly adopted at a meeting held on May 2, 1984, by vote of
1,432,554 shares of Common Stock out of 1,984,834 shares outstanding, with
respect to the amendment to increase the number of authorized shares of Common
Stock, and 1,337,759 shares of Common Stock out of 1,984,834 shares outstanding
with respect to the amendment to increase the number of authorized shares of
Preferred Stock, being at least a majority of each class outstanding and
entitled to vote thereon:1
TO CHANGE the number of shares and the par value, if any, of each class
of stock within the corporation fill in the following:
The total presently authorized is:
<TABLE>
<CAPTION>
NO PAR VALUE WITH PAR VALUE PAR
KIND OF STOCK NUMBER OF SHARES NUMBER OF SHARES VALUE
- ------------- ---------------- ---------------- -----
<S> <C> <C> <C>
Common None 3,000,000 $1.00
Preferred None 300,000 $1.00
</TABLE>
- --------
1 For amendments adopted pursuant to Chapter 156B, Section 70.
Note: If the space provided under any Amendment or item on this form is
insufficient, additions shall be set forth on separate 8 1/2" x 11" sheets of
paper leaving a left hand margin of at least 1 inch for binding. Additions to
more than one Amendment may be continued on a single sheet so long as each
Amendment requiring each such addition is clearly indicated.
<PAGE> 23
CHANGE the total to:
<TABLE>
<CAPTION>
NO PAR VALUE WITH PAR VALUE PAR
KIND OF STOCK NUMBER OF SHARES NUMBER OF SHARES VALUE
- ------------- ---------------- ---------------- -----
<S> <C> <C> <C>
Common None 6,000,000 $1.00
Preferred None 1,000,000 $1.00
</TABLE>
The foregoing amendment will become effective when these articles of
amendment are filed in accordance with Chapter 156B, Section 6 of The General
Laws unless these articles specify, in accordance with the vote adopting the
amendment, a later effective date not more than thirty days after such filing,
in which event the amendment will become effective on such later date.
IN WITNESS WHEREOF AND UNDER THE PENALTIES OF PERJURY, we have hereto
signed our names this third day of May, in the year 1984.
/s/ Harold Hindman
---------------------------------
Harold Hindman
President
/s/ Paul R. Rugo
---------------------------------
Paul R. Rugo
Clerk
2
<PAGE> 24
THE COMMONWEALTH OF MASSACHUSETTS
ARTICLES OF AMENDMENT
(General Laws, Chapter 156B, Section 72)
I hereby approve the within articles of amendment and, the filing fee
in the amount of $1,850.00 having been paid, said articles are deemed to have
been filed with me this 9th day of May, 1984.
/s/ Michael Joseph Connolly
---------------------------------
Michael Joseph Connolly
Secretary of State
TO BE FILLED IN BY CORPORATION
Photocopy of amendment to be sent to:
Raymond C. Zemlin, Esq.
Goodwin, Procter & Hoar LLP
28 State Street
Boston, MA 02109
Telephone: (617) 523-5700
3
<PAGE> 25
Federal Identification
No. 04-2057203
THE COMMONWEALTH OF MASSACHUSETTS
MICHAEL JOSEPH CONNOLLY
Secretary of State
ONE ASHBURTON PLACE, BOSTON, MA 02108
ARTICLES OF AMENDMENT
General Laws, Chapter 156B, Section 72
This certificate must be submitted to the Secretary of the Commonwealth
within sixty days after the date of the vote of stockholders adopting the
amendment. The fee for filing this certificate is prescribed by General Laws,
Chapter 156B, Section 114. Make check payable to the Commonwealth of
Massachusetts.
We, Harold Hindman, President, and Paul R. Rugo, Clerk, of Instron
Corporation located at 100 Royall Street, Canton, Massachusetts, do hereby
certify that the following amendment to the articles of organization of the
corporation was duly adopted at a meeting held on May 6, 1981, by vote of
703,933 shares of Common Stock out of 978,646 shares outstanding, being at least
two-thirds of each class outstanding and entitled to vote thereon and of each
class or series of stock whose rights are adversely affected thereby:1
VOTED: To amend the Corporation's Restated Articles of Organization by
inserting therein the following:
Article 6G. Provisions Relative to Establishment of Classes of
Directors.
Commencing with the 1981 Annual Meeting of Stockholders, the Board of
Directors of the Corporation shall be divided into three classes, each
class to consist as nearly as possible of one-third of the Directors.
The terms of office of the Directors elected at the 1981 Annual Meeting
shall be as follows: the term of the first class shall expire at the
1982 Annual Meeting of Stockholders; the term of the second class shall
expire at the 1983 Annual Meeting of Stockholders; and the term of the
third class shall expire at the 1984 Annual Meeting of Stockholders.
Commencing with the 1982 Annual Meeting of Stockholders, the Directors
of only one class will be elected at each Annual
- --------
1 For amendments adopted pursuant to Chapter 156B, Section 71.
Note: If the space provided under any Amendment or item on this form is
insufficient, additions shall be set forth on separate 8 1/2" x 11" sheets of
paper leaving a left hand margin of at least 1 inch for binding. Additions to
more than one Amendment may be continued on a single sheet so long as each
Amendment requiring each such addition is clearly indicated.
<PAGE> 26
Meeting and the Directors of the class so elected will be elected for a
three-year term. The term of office of one class of Directors shall
expire each year.
The foregoing amendment will become effective when these articles of
amendment are filed in accordance with Chapter 156B, Section 6 of The General
Laws unless these articles specify, in accordance with the vote adopting the
amendment, a later effective date not more than thirty days after such filing,
in which event the amendment will become effective on such later date.
IN WITNESS WHEREOF AND UNDER THE PENALTIES OF PERJURY, we have hereto
signed our names this sixth day of May, in the year 1981.
/S/ HAROLD HINDMAN
---------------------------------
Harold Hindman
President
/s/ Paul R. Rugo
---------------------------------
Paul R. Rugo
Clerk
2
<PAGE> 27
THE COMMONWEALTH OF MASSACHUSETTS
ARTICLES OF AMENDMENT
(General Laws, Chapter 156B, Section 72)
I hereby approve the within articles of amendment and, the filing fee
in the amount of $50.00 having been paid, said articles are deemed to have been
filed with me this 6th day of May, 1981.
/s/ Michael Joseph Connolly
---------------------------------
Michael Joseph Connolly
Secretary of State
TO BE FILLED IN BY CORPORATION
Photocopy of amendment to be sent to:
Paul R. Rugo, Esq.
Goodwin, Procter & Hoar LLP
28 State Street
Boston, MA 02109
Telephone: (617) 523-5700
3
<PAGE> 28
Federal Identification
No. 04-2057203
THE COMMONWEALTH OF MASSACHUSETTS
MICHAEL JOSEPH CONNOLLY
Secretary of the Commonwealth STATE
HOUSE, BOSTON, MASS.
02133
ARTICLES OF AMENDMENT
GENERAL LAWS, CHAPTER 156B, SECTION 72
This certificate must be submitted to the Secretary of the Commonwealth
within sixty days after the date of the vote of stockholders adopting the
amendment. The fee for filing this certificate is prescribed by General Laws,
Chapter 156B, Section 114. Make check payable to the Commonwealth of
Massachusetts.
----------
We, Harold Hindman, President, and Paul R. Rugo, Clerk, of Instron
Corporation, located at 100 Royall Street, Canton, Massachusetts do hereby
certify that the following amendment to the articles of organization of the
corporation was duly adopted at a meeting held on May 7, 1980, by vote of
808,596 shares of Common Stock out of 962,228 shares outstanding, being at least
a majority of each class outstanding and entitled to vote thereon1.
VOTED: That the Corporation's Articles of Organization, as amended,
be further amended to increase the authorized Common Stock of
the Corporation from 1,500,000 shares of Common Stock, par
value $1 per share, to 3,000,000 shares of Common Stock, par
value $1 per share.
- --------
1 For amendments adopted pursuant to Chapter 156B, Section 70.
Note: Amendment for which the space provided above is not sufficient should
be set out on continuation sheets to be numbered 2A, 2B, etc. Continuation
sheets shall be on 8 1/2" wide x 11" high paper and must have a left hand margin
1 inch wide for binding. Only one side should be used.
<PAGE> 29
FOR INCREASE IN CAPITAL FILL IN THE FOLLOWING:
The total amount of capital stock already authorized is:
300,000 shares preferred with par value
1,500,000 shares common with par value
The amount of additional capital stock authorized is:
1,500,000 shares common with par value
The foregoing amendment will become effective when these articles of
amendment are filed in accordance with Chapter 156B, Section 6 of The General
Laws unless these articles specify, in accordance with the vote adopting the
amendment, a later effect date not more than thirty days after such filing, in
which event the amendment will become effective on such later date.
IN WITNESS WHEREOF AND UNDER THE PENALTIES OF PERJURY, we have hereto
signed our names this seventh day of May, in the year 1980.
/s/ Harold Hindman
---------------------------------
Harold Hindman
President
/s/ Paul R. Rugo
---------------------------------
Paul R. Rugo
Clerk
2
<PAGE> 30
THE COMMONWEALTH OF MASSACHUSETTS
ARTICLES OF AMENDMENT
(General Laws, Chapter 156B, Section 72)
I hereby approve the within articles of amendment and, the filing fee
in the amount of $750.00 having been paid, said articles are deemed to have been
filed with me this 9th day of May, 1980.
/s/ Michael Joseph Connolly
---------------------------------
Michael Joseph Connolly
Secretary of the Commonwealth
State House, Boston, Mass
.
TO BE FILLED IN BY THE CORPORATION
Photocopy of amendment to be sent to:
Paul R. Rugo, Esquire
Goodwin, Procter & Hoar LLP
28 State Street
Boston, MA 02109
Telephone: (617) 523-5700
3
<PAGE> 31
Federal Identification
No. 04-2057203
THE COMMONWEALTH OF MASSACHUSETTS
PAUL GUZZI
Secretary of the Commonwealth
One Asburton Place, Boston, MA 02108
ARTICLES OF AMENDMENT
GENERAL LAWS, CHAPTER 156B, SECTION 72
This certificate must be submitted to the Secretary of the Commonwealth
within sixty days after the date of the vote of stockholders adopting the
amendment. The fee for filing this certificate is prescribed by General Laws,
Chapter 156B, Section 114. Make check payable to the Commonwealth of
Massachusetts.
----------------
We, Harold Hindman, President, and Paul R. Rugo, Clerk, of Instron
Corporation located at 2500 Washington Street, Canton, Massachusetts do hereby
certify that the following amendment to the articles of organization of the
corporation was duly adopted at a meeting held on April 25, 1978, by vote of
638,329 shares of Common Stock out of 924,046 shares outstanding, being at least
two-thirds of each class of stock outstanding and entitled to vote and of each
class or series of stock whose rights are adversely effected thereby:1
VOTED: To amend the Corporation's Restated Articles of Organization by
inserting therein the following:
Article 6F. Voting Requirements for Consolidations and Mergers
The vote of two-thirds of each class of stock of the Corporation
outstanding and entitled to vote on any proposed agreement of
consolidation or merger shall be necessary for the approval of such
agreement, except for any consolidation or merger for which no
stockholder vote is required by statute. If such agreement would
adversely affect the rights of any class of stock of the Corporation,
the vote of two-thirds of such class, voting separately, shall also be
necessary for the approval of such agreement.
- --------
1 For amendments adopted pursuant to Chapter 156B, Section 71.
NOTE: Amendments for which the space provided above is not sufficient should
be set out on continuation sheets to be numbered 2A, 2B, etc.
Continuation sheets shall be on 8 1/2" x 11" paper and must have a
left-hand margin 1 inch wide for binding. Only one side should be used.
<PAGE> 32
The foregoing amendment will become effective when these articles of
amendment are filed in accordance with Chapter 156B, Section 6 of The General
Laws unless these articles specify, in accordance with the vote adopting the
amendment, a later effective date not more than thirty days after such filing,
in which event the amendment will become effective on such later date.
IN WITNESS WHEREOF AND UNDER THE PENALTIES OF PERJURY, we have hereto
signed our names this twenty-fifth day of April in the year 1978.
/s/ Harold Hindman
---------------------------------
Harold Hindman
President
/s/ Paul R. Rugo
---------------------------------
Paul R. Rugo
Clerk
2
<PAGE> 33
THE COMMONWEALTH OF MASSACHUSETTS
ARTICLES OF AMENDMENT
(General Laws, Chapter 156B, Section 72)
I hereby approve the within articles of amendment and, the filing fee
in the amount of $50.00 having been paid, said articles are deemed to have been
filed with me this 26th day of April, 1978.
/s/ Paul Guzzi
---------------------------------
Paul Guzzi
Secretary of the Commonwealth
State House, Boston, Massachusetts
TO BE FILLED IN BY CORPORATION
Photocopy of amendment to be sent to:
Paul W. Sandman, Esq.
Goodwin, Procter & Hoar LLP
28 State Street
Boston, MA 02109
Telephone: (617) 523-5700
3
<PAGE> 34
Federal Identification
No. 04-2057203
THE COMMONWEALTH OF MASSACHUSETTS
PAUL GUZZI
Secretary of the Commonwealth
STATE HOUSE, BOSTON, MASSACHUSETTS
RESTATED ARTICLES OF ORGANIZATION
GENERAL LAWS, CHAPTER 156B, SECTION 74
This certificate must be submitted to the Secretary of the Commonwealth
within sixty days after the date of the vote of stockholders adopting the
restated articles of organization. The fee for filing this certificate is
prescribed by General Laws, Chapter 156B, Section 114. Make check payable to the
Commonwealth of Massachusetts.
----------------
We, Harold Hindman, President, and Paul R. Rugo, Clerk, of Instron
Corporation located at 2500 Washington Street, Canton, Massachusetts do hereby
certify that the following restatement of the articles of organization of the
corporation was duly adopted at a meeting held on April 27, 1976, by vote of
796,831 shares of Common Stock out of 959,082 shares outstanding, being at least
two-thirds of each class of stock outstanding and entitled to vote and of each
class or series of stock adversely effected thereby:
1. The name by which the corporation shall be known is: Instron
Corporation
2. The purposes for which the corporation is formed are as follows:
To carry on a manufacturing, contracting, merchandising, and
research business, and in general, to carry on any business or other
activity which may be lawfully carried on by a corporation organized
under Chapter 156B of the Massachusetts General Laws.
3. The total number of shares and the par value, if any, of each class of
stock which the corporation is authorized to issue is as follows:
<TABLE>
<CAPTION>
NO PAR VALUE WITH PAR VALUE PAR
KIND OF STOCK NUMBER OF SHARES NUMBER OF SHARES VALUE
- ------------- ---------------- ---------------- -----
<S> <C> <C> <C>
Common None 1,500,000 $1.00
Preferred None 300,000 $1.00
</TABLE>
NOTE: Provisions for which the space provided under articles 2, 4, 5 and 6 is
not sufficient should be set out on continuation sheets to be numbered
2A, 2B, etc. Indicate under each article where the provision is set
out. Continuation sheets shall be on 8 1/2" wide x 11" high paper and
must have a left-hand margin 1 inch wide for binding. Only one side
should be used.
<PAGE> 35
4. If more than one class is authorized, a description of each of the
different classes of stock with, if any, the preferences, voting
powers, qualifications, special or relative rights or privileges as to
each class thereof and any series now established.
The Common Stock and Preferred Stock of the corporation are
described as follows and have the following preferences, voting powers,
qualifications, special or relative rights or privileges:
(1) The Preferred Stock may from time to time be divided
into and issued in one or more series. The different series shall be
established and designated, and the variations in the relative rights
and preferences as between the different series shall be fixed and
determined, by the Board of Directors as provided in Section (2)
hereof. In all other respects all shares of Preferred Stock shall be
identical.
The Preferred Stock may be issued from time to time by
authority of the Board of Directors for such consideration as from time
to time may be fixed by vote of the Board of Directors providing for
the issue of such stock.
(2) The Board of Directors is hereby expressly
authorized, subject to the provisions of these Articles, to establish
one or more series of Preferred Stock and, with respect to each series,
to fix and determine by vote providing for the issue of such series:
(a) the number of shares to constitute such
series and the distinctive designation thereof;
(b) the dividend rate on the shares of such
series and the dividend payment dates;
(c) whether or not the shares of such series
shall be redeemable, and, if redeemable, the redemption prices which
the shares of such series shall be entitled to receive and the terms
and manner of redemption;
(d) the preferences, if any, and the amounts
which the shares of such series shall be entitled to receive and all
other special or relative rights of the shares of such series, upon the
voluntary and involuntary dissolution of, or upon any distribution of
the assets of, the corporation;
(e) whether or not the shares of such series
shall be subject to the operation of retirement or sinking funds to be
applied for redemption of such shares and, if such retirement or
sinking fund or funds be established, the annual amount thereof and the
terms and provisions relative to the operation thereof;
2
<PAGE> 36
(f) whether or not the shares of such series
shall be convertible into, or exchangeable for, shares of any other
class or classes or of any other series of the same or any other class
or classes of stock of the corporation and the conversion price or
prices or ratio or ratios or the rate or rates at which such exchange
may be made, with such adjustments, if any, as shall be stated in such
vote;
(g) whether or not the shares of such series
shall have voting rights, and, if so, the conditions under which the
shares of such series shall vote as a separate class; and
(h) such other designations, preferences and
relative, participating, optional or other special rights and
qualifications, limitations or restrictions of such series to the full
extent now or hereafter permitted by the laws of the Commonwealth of
Massachusetts.
Notwithstanding the fixing of the number of shares
constituting a particular series, the Board of Directors may at any
time thereafter authorize the issuance of additional shares of the same
series.
(3) Holders of Preferred Stock shall be entitled to
receive, when and as declared by the Board of Directors but only out of
funds legally available for the payment of dividends, cumulative cash
dividends at the annual rates fixed by the Board of Directors for the
respective series and no more, payable on such dates in each year as
the Board of Directors shall fix for the respective series as provided
in subsection (2)(b) (hereinafter referred to as "dividend dates").
Until all accrued dividends on all series of Preferred Stock shall have
been declared and set apart for payment through the last preceding
dividend date set for all such series, no cash payment or distribution
shall be made to holders of any other class of Stock of the
corporation. Dividends on shares of Preferred Stock of any series shall
accumulate from and after the day on which such shares are issued, but
arrearages in the payment thereof shall net bear interest. No dividend
shall be declared and set apart for payment on any series of Preferred
Stock in respect of any dividend period unless there shall likewise be
declared and set apart for payment on all shares of Preferred Stock of
each series at the time outstanding such dividends as would be payable
on the said shares through the last preceding dividend date if all
dividends were declared and paid in full. Nothing herein contained
shall be deemed to limit the right of the corporation to purchase or
otherwise acquire at any time any shares of its capital stock; provided
that no shares of capital stock shall be repurchased at any time when
accrued dividends on any series of Preferred Stock remain unpaid for
any period to and including the last preceding dividend date.
For purposes of these Articles, and of any vote fixing the
terms of any series of Preferred Stock, the amount of dividends
"accrued" on any share of Preferred Stock of any series as at any
dividend date shall be deemed to be the amount of any unpaid dividends
accumulated thereon to and including such dividend date, whether or not
3
<PAGE> 37
earned or declared, and the amount of dividends "accrued" on any share
of Preference Stock of any series as at any date other than a dividend
date shall be calculated as the amount of any unpaid dividends
accumulated thereon to and including the last preceding dividend date,
whether or not earned or declared, plus an amount computed, on the
basis of 360 days per annum, for the period after such last preceding
dividend date to and including the date as of which the calculation is
made at the annual dividend rate fixed for the share of such series.
(4) Upon the dissolution of, or upon any distribution of
the assets of the corporation before any payment or distribution of the
assets of the corporation (whether capital or surplus) shall be made to
or set apart for any other class of stock, the holders of Preferred
Stock shall be entitled to payment of the amount of the preference
payable upon such dissolution of, or distribution of the assets of, the
corporation fixed by the Board of Directors for the respective series
as provided in subsection (2)(d), and shall be entitled to no further
payment. If upon any such dissolution or distribution the assets of the
corporation shall be insufficient to pay in full to the holders of the
Preferred Stock the preferential amount aforesaid, then such assets, or
the proceeds thereof, shall be distributed among the holders of each
series of Preferred Stock ratably in accordance with the sums which
would be payable on such distribution if all sums payable were
discharged in full. The voluntary sale, conveyance, exchange or
transfer (for cash, shares of stock, securities or other consideration)
of all or substantially all of the property and assets of the
corporation, the merger or consolidation of the corporation into or
with any other corporation, or the merger of any other corporation into
it, shall not be deemed to be a dissolution of, or a distribution of
the assets of, the corporation, for the purpose of this Section (4).
(5) In the event that and during the period in which, the
Preferred Stock of any series shall be redeemable, then, at the option
of the Board of Directors, the corporation from time to time may redeem
all or any part of the outstanding shares of such series at the
redemption price and upon the terms and conditions fixed by the Board
of Directors as provided in subsection (2)(c) (the sum so payable upon
any redemption of Preferred Stock being herein referred to as the
"redemption price"); provided, that not less than 30 days previous to
the date fixed for redemption notice of the time and place thereof
shall be mailed to each holder of record of the shares so to be
redeemed at his address as shown by the records of the corporation; and
provided further, that in case of redemption of less, then all of the
outstanding shares of any series of Preferred Stock the shares to be
redeemed shall be chosen by lot or in such equitable manner as may be
prescribed by the Board of Directors. At any time after notice of
redemption shall have been mailed as above provided but before the
redemption date, the corporation may deposit the aggregate redemption
price in trust with a bank or trust company in New York, New York,
Boston, Massachusetts, or any other city in which the corporation shall
at that time maintain a transfer agency with respect to any class of
its stock, having capital surplus and undivided profits of at least
$5,000,000, and named in such notice. Upon the making of such deposit,
or if no such
4
<PAGE> 38
deposit is made then upon such redemption date (unless the corporation
shall default in making payment of the redemption price), holders of
the shares of Preferred Stock called for redemption shall cease to be
stockholders with respect to such shares notwithstanding that any
certificate for such shares shall not have been surrendered; and
thereafter such shares shall no longer be transferable on the books of
the corporation and such holders shall have no interest in or claim
against the corporation with respect to said shares, except the right
(a) to receive payment of the redemption price upon surrender of their
certificates, or (b) to exercise on or before the date fixed for
redemption the rights, if any, not theretofore expiring, to convert the
shares so called for redemption into, or to exchange such shares for
shares of stock of any other class or classes or of any other series of
the same class or any other class or classes of stock of the
corporation. Any funds deposited in trust as aforesaid which shall be
required for such redemption, because of the exercise of any right of
conversion subsequent to the date of such deposit or otherwise shall be
returned to the corporation forthwith. The corporation shall be
entitled to receive from any such bank or trust company the interest,
if any, allowed on any monies deposited pursuant to this Section, and
the holders of any shares so redeemed shall have no claim to any such
interest. Any funds so deposited by the corporation and unclaimed at
the end of five years from the date fixed for such redemption shall be
repaid to the corporation upon its request, after which repayment the
holders of such shares who shall not have made claim against such
monies prior to such repayment shall be deemed to be unsecured
creditors of the corporation, but only for a period of two years from
the date of such repayment (after which all rights of the holders of
such shares as unsecured creditors or otherwise shall cease), for an
amount equivalent to the amount deposited as above stated for the
redemption of such shares and so repaid to the corporation, but shall
in no event be entitled to any interest.
In order to facilitate the redemption of any shares of
Preferred Stock, the Board of Directors is authorized to cause the
transfer books of the corporation to be closed as to the shares to be
redeemed.
(6) Any shares of Preferred Stock which shall at any time
have been redeemed, or which shall at any time have been surrendered
for conversion or exchange or for cancellation pursuant to any
retirement or sinking fund provisions with respect to any series of
Preferred Stock, shall be retired and shall thereafter have the status
of authorized and unissued shares of Preferred Stock undesignated as to
series.
(7) The Common Stock shall have exclusive voting power
except as required by law and except to the extent the Board of
Directors shall, at the time any series of Preferred Stock is
established, determine that the shares of such series shall vote (i)
together as a single class with shares of Common Stock and/or with
shares of Preferred Stock (or one or more other series thereof) on all
or certain matters presented to the stockholders and/or upon the
occurrence of any specified event or condition, and/or (ii) exclusively
on certain matters, or, upon the occurrence of any specified event or
5
<PAGE> 39
condition, on all or certain matters. The Board of Directors, in
establishing a series of Preferred Stock and fixing the voting rights
thereof, may determine that the voting power of each share of such
series may be greater or less than the voting power of each share of
the Common Stock or of other series of Preferred Stock notwithstanding
that the shares of such series of Preferred Stock may vote as a single
class with the shares of other series of Preferred Stock and/or with
the shares of Common Stock.
5. The restrictions, if any, imposed by the articles of organization upon
the transfer of shares of stock of any class are as follows:
None
6. Other lawful provision, if any, for the conduct and regulation of the
business and affairs of the corporation, for its voluntary dissolution,
or for limiting, defining, or regulating the powers of the corporation,
or of its directors or stockholders, or of any class of stockholders:
None
6A. Indemnification
(1) Except as limited by law or as provided in Sections
(2) and (3), each Officer of this corporation (and his heirs and
personal representatives) shall be indemnified by this corporation
against all expenses incurred by him in connection with any Proceeding
in which he is involved as a result of his serving or having served as
an Officer of this corporation or, at the request of this corporation,
as a director, officer, employee or other agent of any other
organization.
(2) No indemnification shall be provided to an Officer
with respect to a matter as to which it shall have been adjudicated in
any Proceeding that he did not act in good faith in the reasonable
belief that his action was in the best interests of this corporation.
(3) In the event that a Proceeding is compromised or
settled so as to impose any liability or obligation upon an Officer or
upon this corporation, no indemnification shall be provided to said
Officer with respect to a matter if this corporation has obtained an
opinion of counsel that with respect to said matter said Officer did
not act in good faith in the reasonable belief that his action was in
the best interests of this corporation.
(4) To the extent authorized by the Board of Directors or
the stockholders, this corporation may pay indemnification in advance
of final disposition of a Proceeding, upon receipt of an undertaking by
the person indemnified to repay such indemnification if it shall be
established that he is not entitled to indemnification by an
adjudication under Section (2) or by an opinion of counsel under
Section (3) hereof.
6
<PAGE> 40
(5) For the purposes of this Article:
(a) "Officer" means any person who serves or has
served as a director or in any other office filled by election
or appointment by the stockholders or the Board of Directors;
(b) "Proceeding" means any action, suit or
proceeding, civil or criminal, brought or threatened in or
before any court, tribunal, administrative or legislative body
or agency; and
(c) "Expense" means any liability fixed by a
judgment, order, decree, or award in a Proceeding, any amount
reasonably paid in settlement of a Proceeding and any
professional fees and other disbursements reasonably incurred
in a Proceeding.
(6) Nothing in this Article shall limit any lawful rights
to indemnification existing independently of this Article.
6B. Transactions with Interested Persons
(1) Unless entered into in bad faith, no contract or
transaction by this corporation shall be void, voidable or in any way
affected by reason of the fact that it is with an Interested Person.
(2) For the purposes of this Article, "Interested Person"
means any person or organization in any way interested in this
corporation whether as an officer, director, stockholder, employee or
otherwise, and any other entity in which any such person or
organization or this corporation is in any way interested.
(3) Unless such contract or transaction was entered into
bad faith, no Interested Person, because of such interest, shall be
liable to this corporation or to any person or organization for any
loss or expense incurred by reason of such contract or transaction or
shall be accountable for any gain or profit realized from such contract
or transaction.
(4) The provisions of this Article shall be operative
notwithstanding the fact that the presence of an Interested Person was
necessary to constitute a quorum at a meeting of directors or
stockholders of this corporation at which such contract or transaction
was authorized or that the vote of an Interested Person was necessary
for the authorization of such contract or transaction.
7
<PAGE> 41
6C. Stockholders' Meetings
Meetings of stockholders of this corporation may be held anywhere in
the United States.
6D. Amendment of By-Laws
The By-laws of the corporation may provide that the Board of Directors,
as well as the stockholders, may make, amend or repeal the By-laws in whole or
in part to the extent permitted by law, subject to the limitations contained in
the By-laws.
6E. Acting as a Partner
This corporation may be a partner in any business enterprise which it
would have the power to conduct by itself.
We further certify that the foregoing restated articles of organization
effect no amendments to the articles of organization of the corporation as
heretofore amended, except amendments to the following articles 2, 6A, 6B, 6C,
and 6E. (*If there are not such amendments, state "None".)
2-Change of Purpose
6-Other Lawful Provisions Added
IN WITNESS WHEREOF AND UNDER THE PENALTIES OF PERJURY, we have hereto
signed our names this 3rd day of May in the year 1976.
/s/ Harold Hindman
---------------------------------
Harold Hindman
President
/s/ Paul R. Rugo
---------------------------------
Paul R. Rugo
Clerk
8
<PAGE> 42
THE COMMONWEALTH OF MASSACHUSETTS
RESTATED ARTICLES OF ORGANIZATION
(General Laws, Chapter 156B, Section 74)
I hereby approve the within restated articles of organization and, the
filing fee in the amount of $225 having been paid, said articles are deemed to
have been filed with me this 5th day of May, 1976.
/s/ Paul Guzzi
---------------------------------
Paul Guzzi
Secretary of the Commonwealth
State House, Boston, Massachusetts
TO BE FILED IN BY CORPORATION
Photocopy of articles to be sent to:
R.P. Boulanger, Esq.
Goodwin, Procter & Hoar LLP
28 State Street
Boston, MA 02109
Telephone: (617) 523-5700
9
<PAGE> 1
EXHIBIT 10(l)
STRATEGIC ALLIANCE AGREEMENT
BETWEEN
1. Instron Corporation, 100 Royall Street, Canton, Massachusetts 02021,
- hereinafter called "Instron Corp." -
2. Instron Partners, 100 Royall Street, Canton, Massachusetts 02021,
- hereinafter called "IP" -
3. Instron GmbH, Industriestrasse 19, 67063 Ludwigshafen am Rhein,
- hereinafter called "Instron GmbH" -
4. Instron Schenck Testing Systems GmbH, LandwehrstraBe 55, 65273 Darmstadt,
- hereinafter called "GmbH"
5. Instron Schenck Testing Systems, a Delaware general Partnership,
- hereinafter called "Partnership"
- - Instron Corp., IP and Instron GmbH are also jointly referred to as
"Instron" -
AND
6. Carl Schenck AG, Landwehrstrasse 55, Darmstadt,
- hereinafter called "Schenck AG" -
7. Schenck Atis GmbH, Landwehrstrasse 55, Darmstadt,
- hereinafter called "Schenck Atis" -
8. Schenck Pegasus Testing Inc., 535 Acorm Street, Deer Park, N. Y.
11729-3 69 8, USA,
- hereinafter called "SPT" -
9. Schenck Fertigungs GmbH, Landwehrstrasse 55, Darmstadt,
- hereinafter called "Schenck Fertigung" -
- - Schenck AG, Schenck Atis and SPT are also jointly referred to as "Schenck" -
<PAGE> 2
1. CURRENT STATUS
1.1 By notarial deed dated November 14, 1996 of the notary public Dr. P.
Schmidt zur Nedden in Frankfurt/Main (A.Prot. 1996/574) (the "Deed
1"), Instron Corporation ("Instron Corp."), Carl Schenck AG ("Schenck
AG") and other parties have entered into a Joint Venture Agreement
("JVA") on the formation of a Joint Venture reflected in joint
ownership of a German GmbH with the name Instron Schenck Testing
Systems GmbH and a US partnership with the name Instron Schenck
Testing Systems.
1.2 By notarial deed dated November 14, 1996 of the notary public Dr. P.
Schmidt zur Nedden in Frankfart/Main (A. Prot. 1996/573) Instron
Corp., Schenck AG and other parties have entered into an Asset
Purchase Agreement on the Sale of the Servohydraulic Machine Business
from Schenck Atis to Instron Limited, a subsidiary of Instron Corp.
1.3 Instron GmbH and IP desire to purchase the shares and interests of
Schenck Atis and SPT in the GmbH and the Partnership irrespective of
the terms of the JVA but subject to the terms and conditions contained
herein. Simultaneously, the parties intend to terminate the JVA.
2. SALE AND TRANSFER OF QUOTAS AND INTERESTS
Instron GmbH and EP on the one hand and Schenck Atis and SPT on the other
hand hereby enter into the Sale Agreement attached hereto as EXHIBIT 2,
pursuant to which Schenck Atis and SPT sell to Instron GmbH and IP as of
the date hereof and transfer to the Instron GmbH and IP, as of the
Effective Date; all its interests in the GmbH and the Partnership, subject
to the terms contained herein.
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<PAGE> 3
3. NAME LICENSE
3.1 For a transition period of 3 years from the Effective Date Schenck AG,
Schenck Atis and SPT hereby grant the GmbH and the Partnership the
right to use the name and mark "Schenck" in accordance with past
practice, whether as part of their corporate or trade name or for use
as a logo or otherwise in connection with the company's business and
products of structural testing, including in brochures, leaflets and
otherwise as usual in the Business in accordance with past practices.
The license shall be royalty-free, non-exclusive and shall not be
transferable. The GmbH and Partnership shall not have a right to
sublicense the license. Upon terminate of such license, GmbH and the
Partnership shall cease using the licensed name and mark as part of
its corporate names and in any newly printed brochures, leaflets or
other materials; existing brochures, leaflets or other materials may
be used for a period of 18 months from termination of the license set
out herein.
3.2 The GmbH and the Partnership shall have an option to renew the license
by written notice to Schenck AG for two additional one year periods,
in each case in consideration of a lump sum license fee of 100.000,-
per year of extension. Such license fee shall be payable not later
than three business days from beginning of the extension period for
which such fee becomes due. The option must be exercised not less than
two months before the expiration of the relevant license period.
3.3 Prior to the date referred to in Sections 3.1 and 3.2, Schenck shall
only be entitled to terminate the license for cause (aus wichtigem
Grund) subject to a two months notice period, and not to the extent
that the licensees have taken appropriate action to remedy the reason
for termination, and only if the continuation of the license can not
be reasonably requested from Schenck (die Fortsetzung der Lizenz ist
nicht mehr zumutbar).
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<PAGE> 4
3.4 The GmbH and Partnership shall promptly notify Schenck in the event
that it becomes aware of any third party infringements of Schencles
name rights with respect to the term "Schenck".
4. OTHER AGREEMENTS
4.1 The Contract Manufacturing and Supply Agreement between Schenck
Fertigung and GmbH dated as of November 17, 1996 attached to the JVA
as EXHIBIT 11.2.1 (the CMSA 1") and the Contract Manufacturing and
Supply Agreement dated as of November 17, 1996 between Schenck Pegasus
and the Partnership attached to the JVA as EXHIBIT 11.2.2 (the CMSA
2") will be continued. Effective as of the Effective Date, Section
4.1.2 of the CMSA 1 and Sec. 4.1 of the CMSA 2 will be amended to read
as follows:
"The price to be paid for Components delivered hereunder on or after
September 27, 1998 shall be the price quoted by the supplying party
which price shall be the price quoted by the supplying party, but
which price shall not exceed 110% of the sum of the Manufacturing Cost
plus the Other Cost of the Components."
Sec. 4.1.2 of the CMSA I shall further be amended by the following
language:
"Capitalized terms used herein and not defined herein shall have the
meaning ascribed to them in the Contract Manufacturing and Supply
Agreement of November 17, 1996 between Schenck Pegasus Corporation and
Instron Schenck Testing Systems."
4.2 The lease agreement between Schenck. Immobilien & Service GmbH
(formerly: Schenck GmbH + Co. Immobilien & Service KG and GmbH)
attached to the JVA as EXHIBIT 10.1, as amended on March 31, 1998,
shall be further amended as follows:
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<PAGE> 5
(i) Instron Wolpert GmbH ("Wolpert") will become a party to the lease
agreement.
(ii) Wolpert will lease the space at the Schenck premises in
Darmstadt, Landwehrstrasse 55, marked in EXHIBIT 4.2 (1) hereto.
(iii) The lease payment for such space will be as set out in EXHIBIT
4.2(2) hereto.
Instron Corp and Schenck AG will cause QmbH, Wolpert and Schenck
Immobilien & Service GmbH to amend the lease agreement accordingly
effective as of October 1, 1998.
4.3 The Support Services Agreement between Schenck AG and GmbH of November
14, 1996 attached to the JVA as EXHIBIT 11.1.1 shall be continued.
4.4 The License Agreement between the Partnership, Schenck Pegasus, and
Schenck AG dated as of November 17, 1996 attached to the JVA as
EXHIBIT 15 shall be continued.
4.5 Effective as of the Effective Date all other Agreements attached to
the JVA shall be terminated. These are the following agreements:
(i) Research and Development Agreement between Schenck AG and GmbH
and the Partnership dated as of November 14, 1996
(ii) After Sales Service Agreement between Schenck AG and GmbH and the
Partnership dated as of November 17, 1996
(iii) Finder's Fee and Commission Sales Agreement between Schenck AG
and GmbH and the Partnership dated as of November 17, 1996
5
<PAGE> 6
(iv) Preferred Supplier and Joint Sales Agreement between GmbH and the
Partnership and Schenck AG dated as of November 17, 1996
(v) Support Services Agreement between Schenck Pegasus and the
Partnership dated as of November 14, 1996
(vi) Finder's Fee Agreement between Instron Limited and Schenck AG
dated as of November 17, 1996
4.6 The parties agree that Schenck and its affiliates, GmbH, the
Partnership and Instron Corp. and its affiliates are hereby released
from any and all obligations and liabilities arising under, out of or
in connection with the agreements terminated pursuant to Section 4.5.
5. TERMINATION OF JVA AND RELEASE
5.1 The parties agree that the JVA is terminated and that both Schenck and
its affiliates and Instron Corp. and its affiliates are hereby
released from any and all obligations and liabilities arising under,
out of or in connection with the JVA, except for (i) obligations and
liabilities under those agreements which will be continued pursuant to
Section 4 hereof and (ii) obligations and liabilities under Section 32
and 34 of the JVA.
5.2 Schenck AG will ensure, and will cause its affiliates to ensure, that
any board members of GmbH, the Partnership or any of their
subsidiaries appointed by Schenck AG or any of its affiliates, or
elected upon their proposal for election by Schenck AG or any of its
affiliates, will resign on or immediately after the Effective Date.
Instron Corp. will cause these board members to be discharged
(entlastet) by appropriate corporate action without undue delay
thereafter.
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<PAGE> 7
5.3 Instron Corp. will, and will cause its affiliates to, grant
Schenck AG and its affiliates reasonable access to the books
and records of GmbH and the Partnership to the extent
reasonably required by the Schenck AG and its affiliates (i)
in order to be able to comply with reporting obligations
imposed by applicable law or (ii) in connection with tax or
similar audits of the party requesting access. Schenck AG
will, and will cause its affiliates to, grant GmbH, the
Partnership, Instron. Corp. and its affiliates reasonable
access to the books and records of Schenck AG and its
affiliates to the extent reasonably required by GmbH, the
Partnership, Instron Corp. and its affiliates (i) in order to
be able to comply with reporting obligations imposed by
applicable law or (ii) in connection with tax or similar
audits of the party requesting access.
5.4 Any claims relating to legal defects (Rechtsmangel) which GmbH
and the Partnership may have against Schenck AG or any of its
affiliates under Sections 7.3 and 7.4 of the German Schenck
Contribution Agreement and the U.S. Schenck Contribution
Agreement (as defined in the JVA) and any mutual claims under
Section 3.2 of the German Schenck Contribution Agreement and
under Section 3.3 of the U.S. Schenck Contribution Agreement
shall remain unaffected.
6. EFFECTIVE DATE
The Effective Date within the meaning of this Agreement shall be September
27, 1998.
7. COSTS AND FEES
7.1 The fees for the notarization of this Agreement shall be born equally
by Schenck AG and Instron Corporation.
7.2 Each party shall bear its own professional advisers' fees and other
costs.
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<PAGE> 8
8. MISCELLANEOUS
8.1 Amendments and modifications of this Agreement (including this clause)
must be made in written or in notarial form, if such form is required.
8.2 All notices and other notifications pursuant to or in connection with
this Agreement must be made in writing and must be hand delivered or
sent by registered mail or by telecopy (with a confirmation copy to
follow by mail) to the following address(es) or to the addresses which
the respective party shall notify to the other in writing:
to any Instron party:
Instron Corporation
100 Royall Street
Canton, MA 02021
U.S.A.
Attn.: John Barrett
Fax No.: (001) 781-821-2487
To any Schenck party:
Carl Schenck AG
Landwehrstrasse 55
D-64293 Darmstadt
Federal Republic of Germany
Attn.: Legal Department
Fax No.: 06151-32 39 05
With copy to:
Schenck Corporation
535 Acorn Street
Deer Park, NY 11729-3698
Attn.: Blaise Sarcone
Fax No.: (001) 516-242-4308
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<PAGE> 9
8.3 The partial or total invalidity of, or the impossibility to perform,
individual provisions of this Agreement shall not impair the validity
of the other provisions of the Agreement. The parties undertake to
replace a provision that is or has become invalid in whole or in part
by a valid provision, the economic result of which comes as close as
possible to that, of the invalid provision. In the event that the
Agreement does not deal with certain issues or certain provisions are
impossible to be performed, the same procedure shall apply.
8.4 The parties undertake to take all actions and make declarations that
are necessary and suitable to achieve the consummation of this
Agreement. This shall apply in, particular to declarations to the
Commercial Registers and the financial authorities.
8.5 Headings are inserted for convenience only, are not part of this
Agreement and shall not modify the content of any provisions of this
Agreement.
8.6 Rights and obligations arising from this Agreement shall not be
assignable by any party without prior written consent of the other
party.
8.7 As from the date on which the CMSA 1 terminates this Agreement shall
no longer be referred to as the "Strategic Alliance Agreement" but
only as the "Umbrella Agreement".
8.8 This Agreement shall be governed by the laws of the Federal Republic
of Germany (with the exception of the provisions relating to the
conflict of laws).
8.9 The courts of Frankfurt am Main shall have exclusive jurisdiction with
respect to all disputes arising out of or in connection with this
Agreement.
9
<PAGE> 10
INSTRON CORPORATION
By: /s/ John Barrett
---------------------------------
John Barrett, Treasurer
INSTRON PARTNERS
By: /s/ John Barrett
---------------------------------
John Barrett, Treasurer
INSTRON GMBH
By: /s/ John Barrett
---------------------------------
John Barrett, Treasurer
INSTRON SCHENCK TESTING SYSTEMS GMBH
By: /s/ John Barrett
---------------------------------
John Barrett, Treasurer
INSTRON SCHENCK TESTING SYSTEMS
By: /s/ John Barrett
---------------------------------
John Barrett, Treasurer
CARL SCHENCK AG
By: /s/ Jan Wittstock By: /s/ Andreas Birk
--------------------------------- -----------------------------
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<PAGE> 11
Jan Wittstock, Financial Director Legal Counsel to Schenck
SCHENCK ATIS GMBH
By: /s/ Jan Wittstock By: /s/ Andreas Birk
--------------------------------- -----------------------------
Jan Wittstock, Financial Director Legal Counsel to Schenck
SCHENCK PEGASUS TESTING INC.
By: /s/ Jan Wittstock By: /s/ Andreas Birk
--------------------------------- -----------------------------
Jan Wittstock, Financial Director Legal Counsel to Schenck
SCHENCK FERTIGUNGS GMBH
By: /s/ Jan Wittstock By: /s/ Andreas Birk
--------------------------------- -----------------------------
Jan Wittstock, Financial Director Legal Counsel to Schenck
11
<PAGE> 12
EXHIBIT 2
SALE AGREEMENT
BETWEEN
1. Instron GmbH, IndustriestraBe 19, 67063 Ludwigshafen am Rhein
- hereinafter called "Buyer 1"-
2. Instron Partners, 100 Royall Street, Canton, Massachusetts 02021
- hereinafter called "Buyer 2"-
- Buyer 1 and Buyer 2 are hereinafter each also called "Buyer"
and are jointly called "Buyers"-
and
3. Schenck Atis GmbH, LandwehrstraBe 55, Darmstadt
- hereinafter called "Seller 1"-
4. Schenck Pegasus Testing Inc., 535 Acorn Street, Deer Park, N. Y. 11729-
3698, USA
- hereinafter called "Seller 2"-
- Seller 1 and Seller 2 are hereinafter jointly called "Sellers or
Seller" -
CONCERNING
INSTRON SCHENCK TESTING SYSTEMS GMBH, A GERMAN GMBH
AND
INSTRON SCHENCK TESTING SYSTEMS, A DELAWARE PARTNERSHIP
<PAGE> 13
1. Current Status
1.1 The Seller 1 holds fully paid up shares in the nominal values
of DM 24.500,-- and DM 465.500,- in Instron Schenck Testing
Systems GmbH, Darmstadt, Germany, registered under HRB 6497
with the Commercial Register of the Local Court at Darmstadt
(hereinafter called "GmbH") which has a total stated capital
of DM 1,000,000.
1.2 The Seller 2 holds a partnership interest in Instron Schenck
Testing Systems, a Delaware partnership (hereinafter called
the "Partnership").
1.3 GmbH and the Partnership are also collectively referred to as
the "Companies".
2. SALE AND TRANSFER OF SHARES AND INTERESTS
2.1 The Seller 1 hereby sells to the Buyer 1 as of the date hereof
and transfers to the Buyer 1, which accepts this sale and
transfer, free of all liens and encumbrances of whatever
nature all of its shares in GmbH, i.e. shares in the nominal
values of DM 24.500,-- and DM 465.500,-with all rights and
obligations appurtenant thereto, in particular all rights to
dividends not yet distributed.
2.2 The Seller 2 hereby sells to the Buyer 2 as of the date hereof
and transfers to the Buyer, which accepts this sale and
transfer, free of all liens and encumbrances of whatever
nature all of its partnership interest in the Partnership,
including the fixed and variable capital accounts, the reserve
accounts, the loss carry forward accounts, its balance on the
loan accounts, and any other accounts with the Partnership,
together with all rights and obligations appurtenant thereto.
3. EFFECTIVE DATE
The Effective Date within the meaning of this Agreement shall be
September 27, 1998.
4. PURCHASE PRICE
4.1 The aggregate purchase price for the shares, interest and
rights sold pursuant to Sec. 2 shall be $2,684,000.
4.2 This purchase price shall be due for payment on the next
business day following the Effective Date. It shall be paid by
wire transfer as follows:
<PAGE> 14
Bank: BHF-Bank AG, New York Branch
Account No.: 00331
Account-holder: Carl Schenck AG
or to such other bank account of which the Seller may notify the Buyer
in writing.
4.3 The Seller shall not opt for value added tax.
5. REPRESENTATION AND WARRANTIES
The Sellers represent and warrant to the Buyers as of the date hereof
and as of the Effective Date that:
5.1 Legal Status - Ownership and Free Transferability
- The information contained in Section I regarding GmbH and the
Partnership is correct; the Sellers are the sole and
unrestricted owners of the interest, share and rights sold;
- the contribution for the partners' interest in the Partnership
has been fully made, and the shares in the GmbH have been
fully paid; no repayments of the stated capital have been
made;
- the shares, interest and rights sold are not encumbered by any
third party rights;
- there are no silent partnerships or sub-participations;
5.2 Information
The Sellers have given to Buyer correct and complete information in
respect of all circumstances of which it acquired knowledge until the
signing of this Agreement known or recognizable to him and which could
be of interest for a purchaser of the share and interest.
6. REMEDIES
If and to the extent that representations and warranties of the Sellers
are untrue, the Sellers shall put the Buyers in a position as if such
representations and warranties were true.
<PAGE> 15
7. STATUTE OF LIMITATION
Claims of the Buyer resulting from the breach of representations and
warranties shall be made in writing by the respective Buyer to the
Sellers and shall be time-barred 2 years after the Effective Date.
Claims based on legal defects shall be time-barred in accordance with
statutory provisions. Claims resulting from claims of third parties
shall be time-barred six months after final assessment or adjudication
of the respective liability, but in no event prior to the date referred
to in the first sentence of this Subsection.
8. COSTS AND FEES
8.1 The fees for the notarization of this Agreement, the
registrations in the Commercial Registers, if any, and costs
of any cartel authorities shall be born equally by the Seller
on the one hand and the Buyer on the other hand.
8.2 Each party shall bear its own professional advisers' fees and
other costs.
8.3 The Seller shall bear all personal taxes resulting from the
sale of the share, interest and rights.
9. MISCELLANEOUS
9.1 Amendments and modifications of this Agreement (including this
clause) must be made in writing or in notarial form, if such
form is required.
9.2 All notices and other notifications pursuant to or in
connection with this Agreement must be made in writing and
hand delivered or sent by registered mail or by telecopy (with
a confirmation copy to follow by mail) to the following
address(es) or to the addresses which the respective party
shall notify to the other in writing:
If to any of the Buyers:
Instron GmbH
c/o Instron Corporation
100 Royall Street
Canton, MA 02021
U.S.A.
Attn.: John Barrett
Fax No.: (00 1) 781-821-2487
<PAGE> 16
If to any of the Sellers:
Schenck Atis GmbH
c/o Carl Schenck AG
LandwehrstraBe 55
D-64293 Darmstadt
Federal Republic of Germany
Attn.: Legal Department
Fax No.: 06151-32 39 05
With copy to:
Schenck Corporation
535 Acorn Street
Deer Park, NY 11729-3698
Attn.: Blaise Sarcone
Fax No.: (001) 516-242-43 08
9.3 The partial or total invalidity of, or the impossibility to
perform, individual provisions of this Agreement shall not
impair the validity of the other provisions of this Agreement.
The parties undertake to replace a provision that is or has
become invalid, or impossible to be performed, in whole or in
part by a valid provision, the economic result of which comes
as close as possible to that of the invalid provision. The
same procedure shall apply in case of gaps.
9.4 The parties undertake to perform all actions and make all
declarations that are necessary and suitable to achieve the
consummation of this Agreement. This shall apply in particular
to declarations to the Commercial Registers and the financial
authorities.
9.5 Headings are inserted for convenience only, are not part of
this Agreement, and shall not modify the content of any
provision of this Agreement.
9.6 Rights and obligations arising from this Agreement shall not
be assignable.
9.7 This Agreement and its Exhibits constitute the entire
agreement between the Parties related to the subject matter
hereof and supersedes all other prior written or oral
agreements and understandings between the Parties or their
affiliates related to the subject matter hereof.
<PAGE> 17
10 GOVERNING LAW AND PLACE OF JURISDICTION
10.1 This Agreement shall be governed by the laws of the Federal
Republic of Germany (with the exception of the provisions
relating to conflict of laws).
10.2 The courts of Frankfurt am Main shall have exclusive
jurisdiction with respect to any disputes arising out of or in
connection with this Agreement.
<PAGE> 18
EXHIBIT 4.2 (1)
The Schenck premises located at Darmstadt, Landwehrstrasse 55, as specified by
architectural diagrams relating thereto.
<PAGE> 19
EXHIBIT 4.2 (2)
PLAN-/ANGEBOTSDATEN Seite 1
m_dr30.prg 08.09.98
KALTMIETE UND NEBENKOSTEN (o. MWST.) IST Wolpert
(Mietvertrag Anlage 2)
<TABLE>
<CAPTION>
BAU BEREICH BEWERTUNGS- HAUPT- BRUTTO- MIETE KALT- NEBEN-
KLASSE NUTZ-FLCHE MIET-FLCHE BRUTTO MIETE KOSTEN
FAKTOR m*m m*m DM/m*m DM/Mon DM/Mon
<C> <C> <C> <C> <C> <C> <C>
1 OG1 B3 1.00 141.80 184.55 14.53 2,681.51 1,256.81
2 OG1 B3 1.00 128.14 137.92 14.53 2,003.97 916.07
8 OG1 B3 1.00 468.15 620.00 14.53 9,008.00 4,968.99
SFS-KST 2130 738.09 942.47 13,683.98 7,141.87
MIETER IST/W 738.09 942.47 13,683,98 7,141.87
</TABLE>
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statements on
Form S-3 (File No. 2-77062), and Forms S-8 (File Nos. 2-77060, 2-91694, 33-43955
and 33-48287) of our reports dated February 18, 1999, on our audits of the
consolidated financial statements and related financial statement schedule of
Instron Corporation as of December 31, 1998, and 1997, and for each of the three
years in the period ended December 31, 1998, which reports are included in this
Annual Report on Form 10-K.
/s/ PRICEWATERHOUSECOOPERS LLP
---------------------------------
PricewaterhouseCoopers LLP
Boston, Massachusetts
July 22, 1999
