<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(X) Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Fiscal Year Ended December 31, 1993
OR
( ) Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the transition period from.............to.............
Commission File No. 1-7744
PACIFIC SCIENTIFIC COMPANY
(Exact name of registrant as specified in its charter)
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<S> <C>
CALIFORNIA 94-0744970
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
620 Newport Center Drive, Suite 700
Newport Beach, California 92660
(Address of Principal Executive Offices) (Zip Code)
</TABLE>
Registrant's Telephone Number, Including Area Code: 714/720-1714
Securities registered pursuant to Section 12(b) of the Act:
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<CAPTION>
Name of Each Exchange
Title of Each Class on Which Registered
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<S> <C>
Common Stock, par value $1.00 per share New York Stock Exchange
7-3/4% Convertible Subordinated Debentures New York Stock Exchange
due June 15, 2003
</TABLE>
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. (X)
The aggregate market value of the voting stock held by nonaffiliates of the
registrant, computed on the basis of $24.75 per share, which was the last sale
price on the New York Stock Exchange on March 4, 1994, was $134,080,279.
As of the latest practicable date, there were 5,417,385 shares of registrant's
common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Annual Report to Stockholders for the fiscal year ended December 31, 1993 (only
specific portions of which are incorporated by reference in Parts I and II);
definitive Proxy Statement to be filed pursuant to Regulation 14A relating to
the 1994 Annual Meeting of Stockholders (incorporated by reference in Part
III).
The Exhibit Index begins on Page 16.
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PART I
ITEM 1. BUSINESS
(a) GENERAL DESCRIPTION OF BUSINESS
Pacific Scientific Company ("Registrant" or the "Company") was
incorporated in California in 1937 as successor to a company in business since
1919; it has used the name Pacific Scientific Company since 1923. Registrant's
business is making and selling electrical equipment and safety equipment. In
addition to six main United States operating divisions, the Registrant has
wholly-owned sales subsidiaries in Germany, France, England and the U. S.
Virgin Islands. In July and August of 1993, the Company purchased all the
outstanding shares of common stock of Powertec Industrial Corporation and
Automation Intelligence, Inc., respectively. In April 1993, the Company
purchased certain operating assets of Unidynamics/Phoenix, Inc., a subsidiary
of Crane Co. Additional information regarding these acquisitions is presented
in Note 6 on Page 25 of Registrant's Annual Report to Stockholders for the
fiscal year ended December 31, 1993, a copy of which has been delivered to the
Securities and Exchange Commission (the "Commission") pursuant to Rule 14a-3 of
the Commission, and such Note 6 is incorporated herein by reference in
accordance with the provisions of Rule 12b-23 of the Commission ("Rule
12b-23"). The Unidynamics/Phoenix, Inc. acquisition necessitated the expansion
of the manufacturing facilities of the Energy Dynamics Division in Chandler,
AZ. Currently, the Registrant has 25,000 square feet of manufacturing space
under construction. The estimated cost of construction is $3 million.
(b) and (c)(1)(i) DESCRIPTION OF BUSINESS SEGMENTS
Information regarding business segments is presented in Note 11
beginning on Page 27 of Registrant's Annual Report to Stockholders for the
fiscal year ended December 31, 1993 and is incorporated herein by reference in
accordance with the provisions of Rule 12b-23.
Each of Registrant's divisions is responsible for marketing its own
products, generally selling through a combination of its own sales personnel,
sales representatives and distributors, both in the United States and foreign
countries. Additional information regarding the Company's products and markets
is presented on Pages 4 through 9 in the Registrant's Annual Report to
Stockholders for the fiscal year ended December 31, 1993 and is incorporated
herein by reference in accordance with the provisions of Rule 12b-23.
The percentages of the Company's consolidated net sales represented by
its major markets for the fiscal years 1993, 1992 and 1991, respectively, were
as follows:
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<CAPTION>
1993 1992 1991
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<S> <C> <C> <C>
Electrical Equipment
- --------------------
Motors and Controls 44% 42% 39%
Electrical Utilities 12 14 14
Particle Monitoring Instruments 10 11 10
Safety Equipment
- ----------------
Fire Detection and Suppression 15 17 19
Restraints 10 11 11
Pyrotechnics 9 5 3
Discontinued Product Line - - 4
--- --- ---
100% 100% 100%
</TABLE>
(c)(1)(ii) MATERIAL NEW PRODUCTS OR SEGMENTS
There has been no public announcement of, nor has the Registrant made
public, information about a new product or industry segment that would require
the investment of a material amount of assets of the Registrant or that
otherwise is material.
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(c)(1)(iii) SOURCES OF RAW MATERIAL
Registrant's manufacturing operations consist primarily of fabricating
and assembling parts, components and units into finished products and then
testing the products. Raw materials, parts, components and assemblies are
obtained from independent suppliers. Except as described in the following
paragraph, the Registrant generally has not experienced any serious difficulty
in obtaining adequate supplies of required materials and services, and
continues to seek secondary sources of supply in the few cases where it relies
upon a single supplier.
Within the Safety Equipment segment, Halon 1301, the fire suppression
agent used in all aircraft fire suppression systems, contains
chlorofluorocarbon an ozone depleting chemical. By international agreement,
the production of Halon 1301 was discontinued in 1993. During 1992, the
Company developed a system capable of recovering and reprocessing Halon 1301
and also increased its storage capacity for this material.
During 1993, the Company was able to increase its supply of this agent
to a level that management believes is adequate to meet future demands. The
Company was able to accomplish this by recycling Halon 1301 from suppression
systems used in applications less critical than aircraft (i.e. systems that
protect equipment rather than human life). The Company is also investigating
the viability of various non- chlorofluorocarbon suppression agents.
(c)(1)(iv) EFFECT OF PATENTS, TRADEMARKS, LICENSES, ETC.
Registrant owns numerous United States and foreign patents expiring at
various dates to 2008. Registrant also owns a number of trademarks. Although
these patents and trademarks have been and are expected to be of value in the
opinion of the Registrant, the loss of any single such item or group of related
items would not have a material effect on the conduct of the business.
(c)(1)(v)&(vi) SEASONAL AND WORKING CAPITAL REQUIREMENTS
Not applicable.
(c)(1)(vii) MAJOR CUSTOMERS
For the year ended December 31, 1993, approximately 19% of
Registrant's sales were attributable to United States defense contracts, of
which 5% were awarded directly by the United States government and 14% through
subcontracting procedures. Virtually all defense programs are subject to
curtailment or cancellation due to the annual nature of the government
appropriations and allocations process. A material reduction in United States
government appropriations for defense programs may have an adverse effect on
the Registrant's business, depending on the specific defense programs affected
by any such reduction. Currently, the Registrant is not aware of the
curtailment or cancellation of any United States defense program under which
Registrant is performing as a prime contractor or subcontractor, that would
have a material adverse effect on the Registrant's business. Government
contracts are subject to termination by the government without cause, but in
the event of such termination, Registrant would ordinarily be entitled to
reasonable compensation for work completed prior to termination.
Additional information regarding sales to military customers is
included on Page 10 in the Registrant's Annual Report to Stockholders for the
fiscal year ended December 31, 1993 and is incorporated herein by reference in
accordance with the provisions of Rule 12b-23.
(c)(1)(viii) BACKLOG
Registrant's backlog of unfilled purchase orders believed by
Registrant to be firm, amounted to $91,774,000 on December 31, 1993, compared
with a backlog of $77,740,000 and $78,749,000 at year end 1992 and 1991,
respectively. Registrant considers an unfilled purchase order to be firm when
a specific delivery date has been established by the parties. Of the backlog,
approximately 80% is expected to be shipped in the current fiscal year.
Additional information concerning backlog is included on Page 10 in the
Registrant's Annual Report to Stockholders for the fiscal year ended December
31, 1993 and is incorporated herein by reference in accordance with the
provisions of Rule 12b- 23.
(c)(1)(ix) GOVERNMENT CONTRACTS
See (c)(1)(vii) above.
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(c)(1)(x) COMPETITION
A number of companies, some of which are significantly larger than
Registrant, manufacture products which compete directly with those Registrant
produces. No single company competes with Registrant across its entire product
line. The Registrant's competitive strategy is to achieve cost and quality
advantages, offer excellent customer service, and broaden the markets in which
its core competence can be applied. Competition by major product line is as
follows:
ELECTRICAL EQUIPMENT
Motors and Control
The Company's five motor and control product lines are primarily sold
for industrial applications with some motors being used in consumer products.
The market for permanent magnet brush type DC motors is extremely fragmented
and none of the three main domestic competitors has a dominant market share.
The emerging market for brushless DC motors, drives and controls has many
competitors vying for market share in industrial markets, although Registrant
believes it has the highest market share of any domestic supplier. The
alternator and regulator product line used in aircraft and missiles has several
significant domestic competitors with numerous foreign companies that would be
classified as indirect competition.
Products for Electrical Utilities
The Registrant and at least four major competitors account for
virtually all of the United States market for outdoor lighting controls.
However, Registrant has a major share of the United States market for controls
used in street lighting. The local and remote control market segment within
the electric utilities market is highly fragmented and niche application
oriented. Each product has competition from different companies with no single
competitor having a product line offering similar to Registrant's.
Particle Monitoring Instrument
In particle monitoring, Registrant has a leading market position for
sensing particulate contamination in liquid, air and vacuum environments.
There are at least six direct global competitors for particle monitoring.
SAFETY EQUIPMENT
Fire Detection and Suppression
Registrant has a leading position in the aircraft market for its
aircraft fire suppression product line. There is one significant domestic
competitor in the fire suppression product line with three other competitors
sharing a smaller portion of the market. There are at least five other
competitors for fire detection equipment sold to the aerospace and military
vehicle markets.
Restraints
There are at least two major competitors in the United States and two
in Europe for Registrant's ballistic and inertia reels which are used, mainly
in aircraft, for the safety restraint of the crews. However, Registrant has
maintained a significant share of this market. There are two principal
competitors for the cable tension regulator, the Registrant's principal flight
control component.
Pyrotechnic
The pyrotechnic product line addresses multiple niches within the
domestic aerospace and commercial oil well marketplace and the Registrant has
at least two competitors in each segment.
(c)(1)(xi) RESEARCH AND DEVELOPMENT
Research and development is conducted by the Registrant at its various
United States divisions for its own account and at some locations for customers
on a contract basis. For its own account, Registrant spent $8,584,000,
$8,235,000 and $8,446,000 in 1993, 1992 and 1991, respectively.
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(c)(1)(xii) ENVIRONMENTAL COMPLIANCE
In the opinion of Registrant, compliance with existing Federal, state
and local provisions regulating the discharge of materials into the
environment, or otherwise relating to the protection of the environment, will
not have a material effect on the capital expenditures, earnings or competitive
position of Registrant and its subsidiaries. The Company is continuing
environmental remediation at one of its former plant sites and has been
designated as a potentially responsible party, along with other companies, for
certain waste disposal sites. The Company establishes reserves for such costs
which are probable and reasonably estimable and believes that any possible
liability incurred will not have a material adverse effect on the financial
position of the Company.
(c)(1)(xiii) EMPLOYEES
Registrant and its subsidiaries employ 1,597 persons, as of December
31, 1993.
(d)(1) EXPORT SALES
During the years of 1993, 1992 and 1991, Registrant did not engage in
material manufacturing operations in foreign countries. Export sales by United
States operations to customers in foreign countries represented approximately
18% in 1993, 17% in 1992 and 14% in 1991 of Registrant's sales.
(d)(1)(i)&(ii) RESTATEMENTS
Not applicable.
(d)(2) RISK TO FOREIGN OPERATIONS
In the opinion of Registrant, there is no significant risk attendant
to its foreign operations or any dependence of its industry segments on its
foreign operations.
(d)(3) INTERIM FINANCIAL STATEMENTS
Not applicable.
ITEM 2. PROPERTIES
Registrant's properties are summarized in the following table:
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Location and Function Building Area Segment
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<S> <C> <C>
OWNED
- -----
Oxnard, CA
To replace leased facility 5.7 Acres
in Santa Barbara (Undeveloped) Electrical Equipment
LEASED
- ------
Newport Beach, CA
Offices 14,000 sq.ft. Corporate
Santa Ana, CA
Offices and Manufacturing 53,000 sq.ft. Subleased to Others
Menlo Park, CA
Offices and Manufacturing 60,000 sq.ft. Subleased to Others
Sunnyvale, CA
Offices and Manufacturing 7,800 sq.ft. Electrical Equipment
Juarez Mexico
Offices and Manufacturing 9,000 sq.ft. Electrical Equipment
</TABLE>
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<TABLE>
<S> <C> <C>
Broomfield, CO
Offices and Manufacturing 15,000 sq.ft. Electrical Equipment
Charlestown, MA
Offices and Manufacturing 26,000 sq.ft. Electrical Equipment
Duluth, GA
Offices and Manufacturing 27,000 sq.ft. Electrical Equipment
Silver Spring, MD
Offices and Manufacturing 35,000 sq.ft. Electrical Equipment
Rock Hill, SC
Offices and Manufacturing 37,000 sq.ft. Electrical Equipment
Santa Barbara, CA
Offices and Manufacturing 56,000 sq.ft. Electrical Equipment
Weymouth, MA
Offices and Manufacturing 80,000 sq.ft. Electrical Equipment
Rockford, IL
Offices and Manufacturing 120,000 sq.ft. Electrical Equipment
Chandler, AZ - Boston St.
Offices 10,600 sq.ft. Safety Equipment
Chandler, AZ
Manufacturing - Under Construction 25,000 sq.ft. Safety Equipment
Chandler, AZ - Willis Dr.
Manufacturing 34,000 sq.ft. Safety Equipment
Goodyear, AZ
Manufacturing 46,000 sq.ft. Safety Equipment
Yorba Linda, CA
Offices and Manufacturing 60,000 sq.ft. Safety Equipment
Duarte, CA
Offices and Manufacturing 85,000 sq.ft. Safety Equipment
U.S., Europe and Mexico
Service and Sales Offices All Products
</TABLE>
As noted in Part I, Item 1 of this Annual Report on Form 10-K, the acquisition
of Unidynamics/Phoenix, Inc. has necessitated the addition of approximately
25,000 square feet of manufacturing facilities in Chandler, Arizona. Upon
completion of these facilities (estimated to occur in the second quarter of
1994) the lease on the facilities in Goodyear, Arizona will expire and it will
not be renewed. All other manufacturing facilities and manufacturing equipment
are adequate, with minor changes and additions, for conducting operations as
presently contemplated. To the extent the above referenced leases expire and
are not renewed, Registrant believes it has the ability to acquire adequate
space for conducting its operations.
ITEM 3. LEGAL PROCEEDINGS
There are no material legal, administrative or judicial proceedings to
which the Registrant or any of its subsidiaries is a party or of which any of
their property is the subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders during the
fourth quarter of 1993.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The text and tabular presentations appearing under the captions
"Dividends" and "Price Range of Common Stock" on Page 28 of the Registrant's
Annual Report to Stockholders for the fiscal year ended December 31, 1993 are
incorporated herein by reference in accordance with the provisions of Rule
12b-23. At the end of 1993, there were 1,630 stockholders of record. The
total number of beneficial holders of Registrant's common stock is estimated at
approximately 4,200. Registrant's common stock is traded on the New York,
Midwest and Pacific Stock Exchanges.
ITEM 6. SELECTED FINANCIAL DATA
The material appearing under the caption "Five Year Financial Summary"
on Page 15 of the Registrant's Annual Report to Stockholders for the fiscal
year ended December 31, 1993 is incorporated herein by reference in accordance
with the provisions of Rule 12b-23.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The text appearing under the caption "Management's Discussion and
Analysis" appearing on Pages 10, 11, 12 and 13 of the Registrant's Annual
Report to Stockholders for the fiscal year ended December 31, 1993 is
incorporated herein by reference in accordance with the provisions of Rule
12b-23.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Consolidated Financial Statements for the fiscal years ended December
31, 1993, December 25, 1992 and December 27, 1991 appearing on Pages 17 through
27; the Independent Auditors' Report appearing on Page 16; and Management's
Report appearing on Page 14 of the Annual Report to Stockholders for the fiscal
year ended December 31, 1993 are incorporated herein by reference in accordance
with the provisions of Rule 12b- 23.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
The Registrant has not had disagreements with, nor has the Registrant
changed independent accountants during the past two years.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information regarding the Company's directors and all persons
nominated or chosen to become directors, as well as information regarding
compliance with Section 16(a) of the Securities Exchange Act of 1934 (the
"Exchange Act") by the directors, officers and beneficial owners of more than
10% of any class of equity securities of the Registrant, is incorporated by
reference from Registrant's definitive proxy statement to be filed by
Registrant with the Commission pursuant to Regulation 14A of the Exchange Act
no later than 120 days after the end of Registrant's fiscal year ended December
31, 1993.
Information regarding the Company's executive officers appears below:
<TABLE>
<CAPTION>
Name and Age Positions with Registrant
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<S> <C>
Edgar S. Brower (63) Chairman of the Board of Directors (since 1990),
President, Chief Executive Officer and Director (since 1985)
Richard V. Plat (64) Senior Vice President, Finance and Administration and
Secretary (since 1977)
Steven L. Breitzka (36) Corporate Vice President and President, HTL/Kin-Tech Division
(since 1992)
</TABLE>
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<TABLE>
<S> <C>
Robert L. Day (62) Corporate Vice President and President,
Energy Dynamics Division(since 1993)
Richard G. Knoblock (53) Corporate Vice President (since 1989) and
President, Electro-Kinetics Division (since 1988)
Ronald B. Nelson (54) Corporate Vice President (since 1990) and President,
Motor & Control Division (since 1990)
Robert L. Olsen (49) Corporate Vice President (since 1989) and President,
HIAC/ROYCO (since 1988)
John M. Ossenmacher (34) Corporate Vice President and President,
Fisher Pierce Division (since 1993)
William L. Nothwang (56) Controller and Assistant Secretary (since 1978)
Peer A. Swan (49) Treasurer (since 1982)
</TABLE>
No executive officer of the Registrant is related to any other
executive officer of the Registrant. All executive officers of the Registrant
serve at the discretion of the Board of Directors. No understanding or
arrangement exists between any executive officer and any other person pursuant
to which he was chosen as an officer.
Mr. Brower was elected Chairman of the Board of Directors of the
Registrant in 1990. He was hired as President and Chief Operating Officer in
1985 and was named Chief Executive Officer later in that year.
Mr. Plat was hired as Vice President of Finance and Administration and
Secretary in 1977 and was promoted to Senior Vice President in 1983.
Mr. Breitzka was promoted to Corporate Vice President and President of
the HTL/Kin-Tech Division in 1992. He had been a Product Line Vice President
of that division since 1988.
Mr. Day was promoted in 1993 to Corporate Vice President and President
of the newly formed Energy Dynamics Division. Previously, Mr. Day was General
Manager of the Company's Energy Systems Division which was a part of and
manufactured a product line for the HTL/Kin-Tech Division. With the
acquisition of Unidynamics/Phoenix, Inc. and its subsequent merger into the
Energy Systems product lines, the Energy Dynamics Division was formed. Mr. Day
has held various management positions within Pacific Scientific Company since
1981.
Mr. Knoblock was hired as President of the Electro-Kinetics Division
in 1988 and was promoted to Corporate Vice President in 1989.
Mr. Nelson was hired as President of the Motor & Control Division and
appointed Corporate Vice President in early 1990. He was General Manager of
the Motor Division of Barber Colman Co. from 1982 to 1990.
Mr. Olsen was hired as President of the Instrument Division, now known
as HIAC/ROYCO, in 1988. He was promoted to Corporate Vice President in 1989.
Mr. Ossenmacher joined Pacific Scientific in 1992 as Product Line
Director for the HTL/Kin-Tech Division. He was promoted to Corporate Vice
President and President of the Fisher Pierce Division in 1993. Previously, Mr.
Ossenmacher was with the Parker-Hannefin Corporation where he held various
management positions since 1981, the most recent being Director of Worldwide
Commercial Transport Business.
Mr. Nothwang was hired as Corporate Controller in 1978 and later
appointed Assistant Secretary.
Mr. Swan was hired in 1977 as Assistant Treasurer and promoted to
Treasurer in 1982.
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ITEM 11. EXECUTIVE COMPENSATION
The information with respect to executive compensation is incorporated
by reference from Registrant's definitive proxy statement to be filed by
Registrant with the Commission pursuant to Regulation 14A no later than 120
days after the end of Registrant's fiscal year ended December 31, 1993.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information with respect to security ownership of certain
beneficial owners and management is incorporated by reference from Registrant's
definitive proxy statement to be filed by Registrant with the Commission
pursuant to Regulation 14A no later than 120 days after the end of Registrant's
fiscal year ended December 31, 1993.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Registrant and its subsidiaries have not had any transaction or
series of similar transactions nor is there any currently proposed transaction
or series of transactions that would exceed $60,000 and in which any director,
executive officer, security holder of more than 5% of the Company's voting
securities or the immediate family of any of the foregoing persons, would have
a direct or indirect material interest as defined by Item 404(a) of Regulation
S-K.
There have been no business relationships, as defined by Item 404(b)
of Regulation S-K, with regard to any of the Registrant's directors or nominees
for director.
No director, executive officer or nominee for election as director nor
any member of their immediate family has been indebted to the Registrant or its
subsidiaries at any time since December 26, 1993 in an amount in excess of
$60,000, as defined by Item 404(c) of Regulation S-K.
Item 404(d) of Regulation S-K does not apply to the Registrant.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1 List of Documents filed as a part of the Report:
Financial Statements:
Consolidated Financial Statements for the fiscal years ended December
31, 1993, December 25, 1992 and December 27, 1991 appearing on Pages
17 through 27; the Independent Auditors' Report appearing on Page 16;
and Management's Report appearing on Page 14 of the Annual Report to
Stockholders for the fiscal year ended December 31, 1993 are
incorporated herein by reference in accordance with the provisions of
Rule 12b-23. With the exception of the pages referred to in the
preceding sentence and other information specifically incorporated by
reference in this Form 10-K, the Registrant's Annual Report to
Stockholders for the fiscal year ended December 31, 1993 is not to be
deemed filed as part of this report.
(a) 2 Included herein:
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Page No.
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Independent Auditors' Report 13
Financial Statement Schedules:
Schedule IX, Short-Term Borrowings 14
Schedule X, Supplementary Income Statement Information 15
Other consolidated supplemental schedules are omitted because of the
absence of conditions under which they are required or because the
information required by such omitted schedules is set forth in the
consolidated financial statements or notes thereto.
</TABLE>
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(a) 3 Exhibits
<TABLE>
<CAPTION>
<S> <C>
3.1 Restated Articles of Incorporation, as amended (6)
3.2 Bylaws, as amended (5)
4.0 Indenture, dated as of April 25, 1983, for Registrant's
7-3/4% Convertible Subordinated Debentures, due 2003,
incorporated by reference to Form S-3 (Registration No.
2-82947) filed April 8, 1983.
4.1 Indenture, dated as of October 1, 1989, for Registrant's
California Statewide Communities Development Authority
Industrial Development Revenue Bonds, due 2019. (6)
10.1 Lease on facilities at 11801 Tech Road, Silver Spring,
MD 20904. (8)
10.2 Agreement for sale of facilities and property at 1350 S.
State College Blvd., Anaheim, CA pursuant to Sale Escrow
Instructions dated April 5, 1989 and subsequent amendments.
(6)
10.3 Registrant's 1992 Key Employee Stock Option Plan. (8)
10.4 Directors' Retirement Plan. (4)
10.5 Severance Agreement by and between Registrant and Edgar S.
Brower, effective December 27, 1985. (2)
10.6 Severance Agreement by and between Registrant and Richard
V. Plat, effective May 24, 1983. (1)
10.7 Restricted Stock Agreement by and between Registrant and
Edgar S. Brower, Effective April 23, 1986. (3)
10.8 Registrant's Shareholders Protection Agreement. (9)
10.9 Amendment to Registrant's Shareholders Protection Agreement
dated August 22, 1990. (7)
10.10 Agreement for the acquisition of certain assets of
Unidynamics/Phoenix, Inc., formerly a subsidiary of Crane
Co., pursuant to an asset purchase agreement dated August 6,
1993.
10.11 Agreement for the acquisition of Automation Intelligence,
Inc. pursuant to a stock purchase agreement dated July 30,
1993.
10.12 Agreement for the acquisition of Powertec Industrial
Corporation pursuant to a stock purchase agreement dated
March 31, 1993. (10)
13.0 Annual Report to Stockholders for the fiscal year ended
December 31, 1993 (parts not incorporated by reference are
furnished for information purposes only and are not filed
herewith).
22.0 Subsidiaries of the Registrant, incorporated by reference
to "Divisions and Subsidiaries" appearing on Page 29 of
Registrant's 1993 Annual Report to Stockholders.
24.0 Independent Auditors' Consent
</TABLE>
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(b) Reports on Form 8-K
A Form 8-K Current Report was filed by the Registrant on August 13,
1993 and the related Form 8-K/A Amendment No. 1 was filed October 13,
1993 pursuant to the requirements of the Securities Exchange Act of
1934. Information was provided with regards to Items 2 and 7,
"Acquisition of Assets" and "Financial Statements of Businesses
Acquired", respectively, for the Registrant's acquisition of Powertec
Industrial Corporation on July 30, 1993. The following financial
statements were included in the filings:
Form 8-K:
Item 7(a) Financial Statements and Financial Information
(a) Independent Auditors' Report
(b) Consolidated Balance Sheets as of December 31, 1991
and 1992
(c) Consolidated Statements of Income for the years ended
December 31, 1991 and 1992
(d) Consolidated Statements of Stockholders' Equity for
the years ended December 31, 1991 and 1992.
(e) Consolidated Statements of Cash Flows for the years
ended December 31, 1991 and 1992
(f) Notes to Consolidated Financial Statements
(g) Independent Auditors' Report on Supplementary
Information
(h) Selling Expenses
(i) General and Administrative Expenses for the years
ended December 31, 1991 and 1992
Form 8-K/A:
Item 7(b) Proforma Financial Information
(a) Historical and Proforma Condensed Consolidated
Statements of Income for the six months ended June
25, 1993 (unaudited)
(b) Historical and Proforma Condensed Consolidated
Statements of Income for the year ended December 25,
1992 (unaudited)
(c) Historical and Proforma Condensed Consolidated
Balance Sheets as of June 25, 1993 (unaudited)
(d) Notes to Historical and Proforma Condensed
Consolidated Financial Statements
Additional information regarding this acquisition is contained
in Items 1(a) appearing on Page 2 of this Form 10-K.
(c) Included in 14(a) 3 above.
(d) Included in 14(a) 2 above.
___________________________________________
(1) Incorporated by reference to Registrant's Annual Report on Form 10-K
filed March 28, 1984.
(2) Incorporated by reference to Registrant's Annual Report on Form 10-K
filed March 26, 1986.
(3) Incorporated by reference to Registrant's Annual Report on Form 10-K
filed March 24, 1987.
(4) Incorporated by reference to Registrant's Annual Report on Form 10-K
filed March 24, 1988.
(5) Incorporated by reference to Registrant's Annual Report on Form 10-K
filed March 30, 1989.
(6) Incorporated by reference to Registrant's Annual Report on Form 10-K
filed March 28, 1990.
(7) Incorporated by reference to Registrant's Annual Report on Form 10-K
filed March 28, 1991.
(8) Incorporated by reference to Registrant's Annual Report on Form 10-K
filed March 19, 1993.
(9) Incorporated by reference to Registrant's Form 8-K filed November 22,
1988.
(10) Incorporated by reference to Registrant's Form 8-K filed August 13,
1993.
-11-
<PAGE> 12
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.
PACIFIC SCIENTIFIC COMPANY
March 28, 1994 By /s/ Richard V. Plat
-------------------------
Richard V. Plat Senior Vice
President, Finance &
Administration and Secretary
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
--------- -------- ----
<S> <C> <C>
Principal Executive
/s/ Edgar S. Brower Officer and Director March 28, 1994
- ------------------------------------------
Edgar S. Brower
Principal Financial
/s/ Richard V. Plat Officer March 28, 1994
- ------------------------------------------
Richard V. Plat
/s/ William L. Nothwang Controller March 28, 1994
- ------------------------------------------
William L. Nothwang
/s/ Walter F. Beran Director March 28, 1994
- ------------------------------------------
Walter F. Beran
/s/ Ralph O. Briscoe Director March 28, 1994
- ------------------------------------------
Ralph O. Briscoe
/s/ William A. Preston Director March 28, 1994
- ------------------------------------------
William A. Preston
/s/ Millard H. Pryor, Jr. Director March 28, 1994
- ------------------------------------------
Millard H. Pryor, Jr.
/s/ Thomas P. Stafford Director March 28, 1994
- ------------------------------------------
Thomas P. Stafford
/s/ Harry W. Todd Director March 28, 1994
- ------------------------------------------
Harry W. Todd
</TABLE>
-12-
<PAGE> 13
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of Pacific Scientific Company:
We have audited the consolidated financial statements of Pacific Scientific
Company and subsidiaries as of December 31, 1993, December 25, 1992 and
December 27, 1991 and for each of the three years in the period ended December
31, 1993, and have issued our report thereon dated February 3, 1994; such
financial statements and report are included in your 1993 Annual Report to
Stockholders and are incorporated herein by reference. Our audits also
included the financial statement schedules of Pacific Scientific Company,
listed in Item 14(a)2. These financial statement schedules are the
responsibility of the Company's management. Our responsibility is to express
an opinion based on our audits. In our opinion, such financial statement
schedules, when considered in relation to the basic consolidated financial
statements taken as a whole, present fairly in all material respects the
information set forth therein.
DELOITTE & TOUCHE
Costa Mesa, California
February 3, 1994
-13-
<PAGE> 14
PACIFIC SCIENTIFIC COMPANY AND SUBSIDIARIES
Schedule IX - Short-Term Borrowings
Years Ended December 31, 1993, December 25, 1992 and December 27, 1991
<TABLE>
<CAPTION>
Maximum
Amount
Outstanding Average Weighted
Weighted At Any Amount Average
Balance at Average Month-End Outstanding Interest Rate
End of Interest During the During the During the
Period Rate Period Period Period
------------ ---------- -------------- -------------- --------------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
Notes Payable:
1993 $ 5,250 4.283% $18,500 $ 9,200 4.33%
1992 $ 3,100 4.710% $10,900 $ 8,500 5.11%
1991 $ 8,000 6.766% $18,000 $13,069 7.47%
</TABLE>
Notes payable represent obligations payable under several credit agreements to
various banks and financial institutions.
The average amount outstanding was computed by averaging the weekly balances
during the year. The weighted average interest rate was computed by dividing
the interest expense by the average amount outstanding.
-14-
<PAGE> 15
PACIFIC SCIENTIFIC COMPANY AND SUBSIDIARIES
Schedule X - Supplementary Income Statement Information
Years Ended December 31, 1993, December 25, 1992 and December 27, 1991
<TABLE>
<CAPTION>
Charged to Costs and
Expenses in Fiscal Year
----------------------------------------------------
ITEM 1993 1992 1991
---- ----------- ----------- -----------
<S> <C> <C> <C>
Building Rental $3,884,000 $3,421,000 $3,480,000
Commissions 3,869,000 3,785,000 3,896,000
Travel Expense 3,314,000 2,949,000 3,150,000
Shop Supplies 3,097,000 2,695,000 2,685,000
Utilities & Other Building Expenses 2,895,000 2,496,000 2,713,000
Advertising 2,263,000 2,284,000 2,330,000
Professional Fees 2,074,000 2,327,000 2,063,000
</TABLE>
-15-
<PAGE> 16
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
<S> <C>
3.1 Restated Articles of Incorporation, as amended (6)
3.2 Bylaws, as amended (5)
4.0 Indenture, dated as of April 25, 1983, for Registrant's 7-3/4%
Convertible Subordinated Debentures, due 2003, incorporated by
reference to Form S-3 (Registration No. 2-82947) filed April 8,
1983.
4.1 Indenture, dated as of October 1, 1989, for Registrant's California
Statewide Communities Development Authority Industrial Development
Revenue Bonds, due 2019. (6)
10.1 Lease on facilities at 11801 Tech Road, Silver Spring, MD 20904. (8)
10.2 Agreement for sale of facilities and property at 1350 S. State
College Blvd., Anaheim, CA pursuant to Sale Escrow
Instructions dated April 5, 1989 and subsequent amendments. (6)
10.3 Registrant's 1992 Key Employee Stock Option Plan. (8)
10.4 Directors' Retirement Plan. (4)
10.5 Severance Agreement by and between Registrant and Edgar S. Brower,
effective December 27, 1985. (2)
10.6 Severance Agreement by and between Registrant and Richard V. Plat,
effective May 24, 1983. (1)
10.7 Restricted Stock Agreement by and between Registrant and Edgar S.
Brower, Effective April 23, 1986. (3)
10.8 Registrant's Shareholders Protection Agreement. (9)
10.9 Amendment to Registrant's Shareholders Protection Agreement dated
August 22, 1990. (7)
10.10 Agreement for the acquisition of certain assets of
Unidynamics/Phoenix, Inc., formerly a subsidiary of Crane Co.,
pursuant to an asset purchase agreement dated August 6, 1993.
10.11 Agreement for the acquisition of Automation Intelligence, Inc.
pursuant to a stock purchase agreement dated July 30, 1993.
10.12 Agreement for the acquisition of Powertec Industrial Corporation
pursuant to a stock purchase agreement dated March 31, 1993. (10)
13.0 Annual Report to Stockholders for the fiscal year ended December 31,
1993 (parts not incorporated by reference are furnished for
information purposes only and are not filed herewith).
22.0 Subsidiaries of the Registrant, incorporated by reference to
"Divisions and Subsidiaries" appearing on Page 29 of Registrant's
1993 Annual Report to Stockholders.
24.0 Independent Auditors' Consent
</TABLE>
-16-
<PAGE> 17
__________________________________________________________________
(1) Incorporated by reference to Registrant's Annual Report on Form 10-K
filed March 28, 1984.
(2) Incorporated by reference to Registrant's Annual Report on Form 10-K
filed March 26, 1986.
(3) Incorporated by reference to Registrant's Annual Report on Form 10-K
filed March 24, 1987.
(4) Incorporated by reference to Registrant's Annual Report on Form 10-K
filed March 24, 1988.
(5) Incorporated by reference to Registrant's Annual Report on Form 10-K
filed March 30, 1989.
(6) Incorporated by reference to Registrant's Annual Report on Form 10-K
filed March 28, 1990.
(7) Incorporated by reference to Registrant's Annual Report on Form 10-K
filed March 28, 1991.
(8) Incorporated by reference to Registrant's Annual Report on Form 10-K
filed March 19, 1993.
(9) Incorporated by reference to Registrant's Form 8-K filed November
22, 1988.
(10) Incorporated by reference to Registrant's Form 8-K filed August 13,
1993.
-17-
<PAGE> 1
EXHIBIT 10.10
ASSET PURCHASE AGREEMENT
AMONG UNIDYNAMICS/PHOENIX, INC.,
UNIDYNAMICS CORPORATION
AND
PACSCI ACQUISITION, INC.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I DEFINITIONS . . . . . . . . . . . . . . . . . . . . 1
1.1 Accounting Terms . . . . . . . . . . . . . . . . . . . 1
1.2 Accounts Receivable . . . . . . . . . . . . . . . . . . 1
1.3 Acquisition Agreements . . . . . . . . . . . . . . . . 2
1.4 Agreement . . . . . . . . . . . . . . . . . . . . . . . 2
1.5 Archives . . . . . . . . . . . . . . . . . . . . . . . 2
1.6 Assets . . . . . . . . . . . . . . . . . . . . . . . . 2
1.7 Omitted . . . . . . . . . . . . . . . . . . . . . . . . 2
1.8 Assumed Liabilities . . . . . . . . . . . . . . . . . . 2
1.9 Assumption Agreement . . . . . . . . . . . . . . . . . 2
1.10 Books and Records . . . . . . . . . . . . . . . . . . . 2
1.11 Classified Contracts . . . . . . . . . . . . . . . . . 2
1.12 Closing . . . . . . . . . . . . . . . . . . . . . . . . 2
1.13 Closing Date . . . . . . . . . . . . . . . . . . . . . 2
1.14 Omitted . . . . . . . . . . . . . . . . . . . . . . . . 2
1.15 Consent(s) . . . . . . . . . . . . . . . . . . . . . . 3
1.16 Contract Rights . . . . . . . . . . . . . . . . . . . . 3
1.17 Contracts . . . . . . . . . . . . . . . . . . . . . . . 3
1.18 Customer Furnished Material . . . . . . . . . . . . . . 3
1.19 Customer Owned Equipment . . . . . . . . . . . . . . . 3
1.20 Employee Benefit Plans . . . . . . . . . . . . . . . . 3
1.21 Employee Pension Plans . . . . . . . . . . . . . . . . 3
</TABLE>
-i-
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
1.22 Environmental Law(s) . . . . . . . . . . . . . . . . . 4
1.23 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.24 Environmental Liability of Seller . . . . . . . . . . . 4
1.25 Environmental Liability of Purchaser . . . . . . . . . 4
1.25(a) Excluded Assets . . . . . . . . . . . . . . . . . . . 5
1.26 Excluded Accounts Receivable . . . . . . . . . . . . . 5
1.27 Excluded Liabilities . . . . . . . . . . . . . . . . . 5
1.28 Exhibits . . . . . . . . . . . . . . . . . . . . . . . 5
1.29 February Balance Sheet . . . . . . . . . . . . . . . . 5
1.29(a) Final Closing Date Balance Sheet . . . . . . . . . . . 5
1.29(b) Financial Statements . . . . . . . . . . . . . . . . . 5
1.29(c) GAAP . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.30 Hazardous Materials . . . . . . . . . . . . . . . . . . 5
1.31 Intangible Property . . . . . . . . . . . . . . . . . . 5
1.32 Interim Financial Statements . . . . . . . . . . . . . 5
1.33 Inventories . . . . . . . . . . . . . . . . . . . . . . 6
1.34 Lease . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.35 Leased Real Estate . . . . . . . . . . . . . . . . . . 6
1.36 Net Book Value . . . . . . . . . . . . . . . . . . . . 6
1.36(a) Northrop Arbitration . . . . . . . . . . . . . . . . . 6
1.37 Notice . . . . . . . . . . . . . . . . . . . . . . . . 6
1.38 Notice of Disagreement . . . . . . . . . . . . . . . . 6
1.38(a) Other Transfer Taxes . . . . . . . . . . . . . . . . . 6
1.39 Permits . . . . . . . . . . . . . . . . . . . . . . . . 6
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
1.40 Permitted Exceptions . . . . . . . . . . . . . . . . . 6
1.41 Personal Property . . . . . . . . . . . . . . . . . . . 6
1.42 Post-Closing Adjustment . . . . . . . . . . . . . . . . 7
1.43 Preliminary Closing Date Balance Sheet . . . . . . . . 7
1.44 Preliminary Purchase Price . . . . . . . . . . . . . . 7
1.45 Prepaid Expenses . . . . . . . . . . . . . . . . . . . 7
1.46 Product Warranties . . . . . . . . . . . . . . . . . . 7
1.47 Proprietary Information . . . . . . . . . . . . . . . . 7
1.48 Proprietary Rights . . . . . . . . . . . . . . . . . . 7
1.49 Purchase Price . . . . . . . . . . . . . . . . . . . . 7
1.50 Purchaser's Accountants . . . . . . . . . . . . . . . . 7
1.51 Purchaser's Counsel . . . . . . . . . . . . . . . . . . 7
1.52 Purchaser's Knowledge . . . . . . . . . . . . . . . . . 8
1.53 Purchaser's Losses . . . . . . . . . . . . . . . . . . 8
1.54 Real Estate . . . . . . . . . . . . . . . . . . . . . . 8
1.55 Required Consent Contracts . . . . . . . . . . . . . . 8
1.56 Restricted Party . . . . . . . . . . . . . . . . . . . 8
1.56(a) Sales Taxes . . . . . . . . . . . . . . . . . . . . . 8
1.57 Schedules . . . . . . . . . . . . . . . . . . . . . . . 8
1.58 Security Clearance . . . . . . . . . . . . . . . . . . 8
1.59 Seller's Accountants . . . . . . . . . . . . . . . . . 8
1.60 Seller's Counsel . . . . . . . . . . . . . . . . . . . 8
1.61 Seller's Knowledge . . . . . . . . . . . . . . . . . . 8
1.62 Seller's Losses . . . . . . . . . . . . . . . . . . . . 8
</TABLE>
-iii-
<PAGE> 5
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
1.63 Sublease . . . . . . . . . . . . . . . . . . . . . . . 9
1.64 Employees . . . . . . . . . . . . . . . . . . . . . . . 9
1.65 Terminated Contract Inventory . . . . . . . . . . . . . 9
1.66 Unbilled Accounts Receivable . . . . . . . . . . . . . 9
1.67 Vendors' Warranties . . . . . . . . . . . . . . . . . . 9
1.68 Year-end Financial Statements . . . . . . . . . . . . . 9
ARTICLE II SALE OF ASSETS . . . . . . . . . . . . . . . . . . . 9
2.1 Purchase and Sale of Assets . . . . . . . . . . . . . . 9
2.2 Definition of Assets . . . . . . . . . . . . . . . . . 10
2.3 Excluded Assets . . . . . . . . . . . . . . . . . . . . 10
ARTICLE III PURCHASE PRICE . . . . . . . . . . . . . . . . . . . 10
3.1 Consideration for Assets . . . . . . . . . . . . . . . 10
3.2 Payment of Consideration . . . . . . . . . . . . . . . 11
3.3 Assumption of Certain Liabilities . . . . . . . . . . . 11
3.4 Liabilities Not Assumed . . . . . . . . . . . . . . . . 11
3.5 Allocation of Purchase Price . . . . . . . . . . . . . 12
3.6 Payment of Sales and Related Taxes . . . . . . . . . . 13
ARTICLE IV REPRESENTATIONS AND WARRANTIES
OF SELLER AND SHAREHOLDER . . . . . . . . . . . . . 14
4.1 Corporate Status . . . . . . . . . . . . . . . . . . . 14
4.2 Due Authorization . . . . . . . . . . . . . . . . . . . 14
4.3 Authority of Seller . . . . . . . . . . . . . . . . . . 14
4.4 Consent . . . . . . . . . . . . . . . . . . . . . . . . 15
4.5 Enforceability . . . . . . . . . . . . . . . . . . . . 15
</TABLE>
-iv-
<PAGE> 6
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
4.6 Governmental Orders; Compliance with Laws . . . . . . . 15
4.7 Ownership of Assets . . . . . . . . . . . . . . . . . . 16
4.8 Contracts . . . . . . . . . . . . . . . . . . . . . . . 16
4.9 Pending Litigation . . . . . . . . . . . . . . . . . . 17
4.10 Pending Product Claims . . . . . . . . . . . . . . . . 17
4.11 Inventories . . . . . . . . . . . . . . . . . . . . . . 17
4.12 Accounts Receivable. . . . . . . . . . . . . . . . . . 17
4.13 Proprietary Rights and Information . . . . . . . . . . 18
4.14 Personal Property . . . . . . . . . . . . . . . . . . . 18
4.15 Real Property . . . . . . . . . . . . . . . . . . . . . 18
4.16 Permits . . . . . . . . . . . . . . . . . . . . . . . . 19
4.17 Employees . . . . . . . . . . . . . . . . . . . . . . . 19
4.18 Employee Benefits . . . . . . . . . . . . . . . . . . . 19
4.19 Occupational Safety and Health . . . . . . . . . . . . 19
4.20 Environmental Protection . . . . . . . . . . . . . . . 20
4.21 Financial Statements . . . . . . . . . . . . . . . . . 21
4.22 Commissions and Fees . . . . . . . . . . . . . . . . . 21
4.23 Operations in the Ordinary Course
of Business; No Material Adverse Chances . . . . . . . 22
4.24 Supplies and Customers . . . . . . . . . . . . . . . . 22
4.25 Insurance . . . . . . . . . . . . . . . . . . . . . . . 22
4.26 Exclusion of Implied Warranties . . . . . . . . . . . . 22
</TABLE>
-v-
<PAGE> 7
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE V REPRESENTATIONS AND WARRANTIES
OF PURCHASER . . . . . . . . . . . . . . . . . . . 23
5.1 Corporate Status . . . . . . . . . . . . . . . . . . . 23
5.2 Due Authorization . . . . . . . . . . . . . . . . . . 23
5.3 Authority of Purchaser . . . . . . . . . . . . . . . . 23
5.4 Enforceability . . . . . . . . . . . . . . . . . . . . 23
5.5 Consents . . . . . . . . . . . . . . . . . . . . . . . 24
5.6 Commissions and Fees . . . . . . . . . . . . . . . . . 24
5.7 Governmental Orders . . . . . . . . . . . . . . . . . 24
5.8 Pending Litigation . . . . . . . . . . . . . . . . . . 24
ARTICLE V(a) COVENANTS OF PURCHASER . . . . . . . . . . . . . . 24
5.9 Security Clearances . . . . . . . . . . . . . . . . . 24
5.10 Best Efforts . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE VI CONDUCT OF BUSINESS PRIOR TO CLOSING . . . . . . . 25
6.1 Conduct of Business . . . . . . . . . . . . . . . . . 25
6.2 Material Changes . . . . . . . . . . . . . . . . . . . 25
6.3 Best Efforts . . . . . . . . . . . . . . . . . . . . . 26
6.4 Maintenance of Personal Property
and Real Estate . . . . . . . . . . . . . . . . . . . 26
6.5 Right of Inspection: Access to Books . . . . . . . . 26
6.6 Notification of Material Adverse Events . . . . . . . 26
6.7 Amendment of Schedules . . . . . . . . . . . . . . . . 27
6.8 Insurance . . . . . . . . . . . . . . . . . . . . . . 27
</TABLE>
-vi-
<PAGE> 8
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE VII CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATIONS . . 27
7.1 Obligations to be Satisfied on or
Prior to Closing Date . . . . . . . . . . . . . . . . 27
7.2 Procedure Upon Failure to Satisfy
Conditions Prior to Closing Date . . . . . . . . . . . 28
ARTICLE VIII CONDITIONS PRECEDENT TO
SELLER'S OBLIGATIONS . . . . . . . . . . . . . . . 28
8.1 Obligations to be Satisfied on or
Prior to Closing Date . . . . . . . . . . . . . . . . 28
8.2 Procedure Upon Failure to Satisfy
Conditions Prior to Closing Date . . . . . . . . . . . 29
ARTICLE IX CLOSING . . . . . . . . . . . . . . . . . . . . . . 30
9.1 Time and Place . . . . . . . . . . . . . . . . . . . . 30
9.2 Closing Transactions . . . . . . . . . . . . . . . . . 30
9.3 Deliveries by Seller to Purchaser . . . . . . . . . . 30
9.4 Deliveries by Purchaser to Seller . . . . . . . . . . 31
ARTICLE X POST-CLOSING OBLIGATIONS . . . . . . . . . . . . . 32
10.1 Post-Closing Adjustment . . . . . . . . . . . . . . . 32
10.2 Covenant Not to Compete . . . . . . . . . . . . . . . 34
10.3 Further Assurance and Assistance . . . . . . . . . . . 34
10.4 Confidentiality . . . . . . . . . . . . . . . . . . . 34
10.5 Assignment and Assumption of Required
Consent Contracts . . . . . . . . . . . . . . . . . . 34
10.6 Transfer and Return of Customer
Owned Equipment . . . . . . . . . . . . . . . . . . . 35
10.7 Transfer of Leased Real Estate . . . . . . . . . . . . 36
10.8 License to Use Seller's Name . . . . . . . . . . . . . 38
</TABLE>
-vii-
<PAGE> 9
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
10.9 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
10.10 Books and Records and Information . . . . . . . . . . . . . . . . . . . 39
10.11 Employment of Employees. . . . . . . . . . . . . . . . . . . . . . . . 39
10.12 Assistance to Seller in Collecting Excluded Accounts Receivable . . . . 41
10.13 Access to Real Estate . . . . . . . . . . . . . . . . . . . . . . . . . 42
ARTICLE XI INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . 42
11.1 Indemnification by Purchaser . . . . . . . . . . . . . . . . . . . . . 42
11.2 Indemnification by Seller and Shareholder . . . . . . . . . . . . . . . 43
11.3 Procedure for Indemnification . . . . . . . . . . . . . . . . . . . . . 44
11.4 Period of Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . 46
11.5 Limitation of Liability . . . . . . . . . . . . . . . . . . . . . . . . 47
11.6 Exclusive Remedy: Survival . . . . . . . . . . . . . . . . . . . . . . 47
ARTICLE XII MISCELLANEOUS PROVISIONS . . . . . . . . . . . . . . . . . . . . . . 47
12.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
12.2 Liability on Termination . . . . . . . . . . . . . . . . . . . . . . . 48
12.3 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
12.4 Bulk Sales Compliance . . . . . . . . . . . . . . . . . . . . . . . . . 48
12.5 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
12.6 Public Announcements . . . . . . . . . . . . . . . . . . . . . . . . . 49
12.7 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
12.8 Benefit of the Agreement . . . . . . . . . . . . . . . . . . . . . . . 50
12.9 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
12.10 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
</TABLE>
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<TABLE>
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<S> <C> <C>
12.11 Number . . . . . . . . . . . . . . . . . . . . . . . . 51
12.12 Modifications and Waivers . . . . . . . . . . . . . . 51
12.13 Assignment . . . . . . . . . . . . . . . . . . . . . . 51
12.14 Separable Provisions . . . . . . . . . . . . . . . . . 51
12.15 Counterparts . . . . . . . . . . . . . . . . . . . . . 51
12.16 Governing Law . . . . . . . . . . . . . . . . . . . . 51
12.17 Recitals, Schedules and Exhibits . . . . . . . . . . . 51
12.18 No Third Party Beneficiaries . . . . . . . . . . . . . 52
</TABLE>
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<PAGE> 11
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT is made and entered into
as of the 31st day of March, 1993, by and among UNIDYNAMICS/PHOENIX, INC., a
Delaware corporation ("Seller"), UniDynamics Corporation, a Delaware
corporation ("Shareholder"), and Pacsci Acquisition, Inc., a California
corporation ("Purchaser").
RECITALS
A. Seller is engaged in the business of
manufacturing and selling precision ordnance systems and material at its plant
in Goodyear, Arizona (the "Business").
B. Shareholder owns all of the capital stock of
Seller.
C. Seller desires to sell and assign to Purchaser,
and Purchaser desires to acquire from Seller, the assets of Seller relating to
or used in connection with the Business which are described herein, on the
terms and subject to the conditions set forth in this Agreement.
THEREFORE, in consideration of the foregoing and of the
covenants and agreements hereinafter set forth, Seller, Shareholder and
Purchaser agree as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement, the following terms shall
have the meanings ascribed to them in Article I:
1.1 Accounting Terms. Unless expressly stated
otherwise herein, any accounting term used in the Acquisition Agreements shall
have the meaning such term has pursuant to GAAP.
1.2 Accounts Receivable means all of Seller's
accounts receivable relating to the Business except Excluded Accounts
Receivable and Unbilled Accounts Receivable. The Accounts Receivable as of
February 28, 1993 are listed on Schedule 1.2.
<PAGE> 12
1.3 Acquisition Agreements means this Agreement and
all other documents and agreements required to be executed or delivered by
Purchaser or Seller or Shareholder pursuant to the provisions of this Agreement
or any other Acquisition Agreement.
1.4 Agreement means this Asset Purchase Agreement,
together with all Exhibits and Schedules referred to herein.
1.5 Archives means the Books and Records not needed
for the current operation of the Business and located as of the Closing Date in
Building 24 on the Real Estate.
1.6 Assets. See Section 2.2.
1.7 Omitted
1.8 Assumed Liabilities. See Section 3.3.
1.9 Assumption Agreement means the Assignment and
Assumption Agreement whereby Purchaser assumes the Assumed Liabilities, in the
form attached hereto as Exhibit A.
1.10 Books and Records means all files, papers,
literature, personnel records of Employees, catalogues, manuals, drawings and
designs, sales and purchase order records, business plans, books of account,
books and records, and, to the extent transferrable to Purchaser, copies of
computer programs and software including copies of the "source code" and
"object code" thereof and all manuals and documentation therefor related to the
Business or Assets and not contained as of the Closing Date in the Archives.
1.11 Classified Contracts means contracts, access to
or performance of which, requires a Security Clearance.
1.12 Closing means the occurrence of the events
contemplated by Article IX of this Agreement.
1.13 Closing Date means 10 a.m., March 31, 1993, or
such other date as the parties may agree in writing, upon which the Closing
shall occur.
1.14 Omitted
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1.15 Consent(s) means the consents, approvals or
novations of all individuals, corporations, partnerships, governmental agencies
and other entities whose consent or approval is required for the execution,
delivery or performance of any Acquisition Agreements or for the transfer to
Purchaser of the rights and obligations of Seller under the Required Consent
Contracts.
1.16 Contract Rights means all rights of Seller under
the Contracts.
1.17 Contracts means all oral or written contracts,
purchase orders and customer orders, leases, operating leases, capital leases,
license agreements and other agreements relating to or used in connection with
the Business to which the Seller is, or on the Closing Date will be, a party
and which are to be performed, satisfied or discharged on or after the Closing
except those related directly to the Excluded Accounts Receivable listed on
Schedule 1.26 and the Terminated Contract Inventory.
1.18 Customer Furnished Material means all material
located on the Real Estate or Leased Real Estate which is the property of
customers of the Business and identified on Schedule 1.18.
1.19 Customer Owned Equipment means the equipment
located on the Real Estate or Leased Real Estate which is the property of
customers of the Business, listed on Schedule 1.19.
1.20 Employee Benefit Plans means all employment
contracts, and employee benefit plans and arrangements, whether oral or
written, qualified or non-qualified including without limitation, pension and
welfare plans, withdrawal, termination, severance or lay-off plans or
arrangements, bonus plans, stock option plans, health and life insurance
policies and benefits, vacation and sick leave policies and all other
agreements or arrangements providing for remuneration or benefits to employees
or former employees of Seller or for which Seller has responsibility, listed on
Schedule 1.20.
1.21 Employee Pension Plans means all employee pension
benefit plans, as defined in Section 3(2) of ERISA, sponsored by Seller, or to
which Seller made or makes (or is required to make) contributions or which
provides benefits to employees of Seller ("Pension Plans") listed on Schedule
1.20.
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<PAGE> 14
1.22 Environmental Law(s) means all federal, state and
local environmental laws, statutes, rules, regulations, orders and ordinances,
as amended, including but not limited to those regulating the emission or
discharge of pollutants under the Clean Air Act, 42 U.S.C. Section 7401 et
seq., or the Clean Water Act, 33 U.S.C. Section 1251 et seq., those pertaining
to the storage of petroleum or other regulated substances in underground
storage tanks and to the generation, use, handling, treatment, storage,
sampling, transport, cleanup, decontamination or disposal of any Hazardous
Materials, and those regarding releases or threatened releases or Hazardous
Materials into the environment.
1.23 ERISA means the Employee Retirement Income
Security Act of 1974, as amended.
1.24 Environmental Liability of Seller means any
liability or obligation of the Business or of Seller under any Environmental
Law or under any common law with respect to the environment which is not an
Environmental Liability of Purchaser (collectively, the "Environmental
Liabilities of Seller"), which shall include, without limitation, (i) any
liability or obligation for the disposal, removal, clean up or containment by
Seller or any of its agents or affiliates of Hazardous Materials on or under
the Real Estate or the Leased Real Estate, and (ii) any liability or obligation
arising from the discharge, seepage or other release of any Hazardous Material
on or under the Real Estate or the Leased Real Estate which occurs naturally or
is caused by Seller or any of its agents or affiliates.
1.25 Environmental Liability of Purchaser means only a
liability or obligation of the Business or of Purchaser under any Environmental
Law or under any common law with respect to the environment which arises from
the discharge, release or abandonment by Purchaser of Hazardous Materials on or
under the Real Estate or Leased Real Estate and for the disposal, removal,
cleanup or containment thereof (collectively, the Environmental Liabilities of
the Purchaser"); it being acknowledged and agreed that any change or increase
after the Closing Date in the types or quantities of any Hazardous Material
present, on, or under the Real Estate or the Leased Real Estate shall not by
itself demonstrate or establish that a discharge, release or abandonment by
Purchaser of Hazardous Materials on, or under the Real Estate or Leased Real
Estate has occurred.
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<PAGE> 15
1.25(a) Excluded Assets means those assets not being
sold to and acquired by Purchaser, as set forth in Section 2.3.
1.26 Excluded Accounts Receivable means the Accounts
Receivable listed on Schedule 1.26.
1.27 Excluded Liabilities means all liabilities not
specifically assumed by Purchaser under Section 3.4.
1.28 Exhibits mean Exhibits A through G hereto and
made a part hereof.
1.29 February Balance Sheet means the Seller's
Statement of Certain Net Assets as of February 28, 1993 as attested by Seller's
Accountants and attached hereto as Schedule 1.29.
1.29(a) Final Closing Date Balance Sheet. See
Section 10.1.
1.29(b) Financial Statements means the Year-end
Financial Statements and the Interim Financial Statements.
1.29(c) GAAP means generally accepted accounting
principles.
1.30 Hazardous Materials means any hazardous
substances, hazardous materials, hazardous wastes, toxic substances, and
petroleum or petroleum derivatives as those terms are defined in the
Comprehensive Environmental Response, Compensation and Liability Act, as
amended, 42 U.S.C. Section 9601 et seq. ("CERCLA"), the Resource Conservation
and Recovery Act, as amended, 42 U.S.C. Section 6900 et seq. ("RCRA"), the
Toxic Substances Control Act, as amended, 15 U.S.C. Section 2601 et seq.
("TSCA") and all regulations promulgated pursuant to such statutes, and any
other applicable Environmental Law or regulation.
1.31 Intangible Property means all items of intangible
personal property (other than Proprietary Rights) relating to or used by Seller
in connection with the Business, including but not limited to goodwill.
1.32 Interim Financial Statements means the unaudited
statement of income and statement of cash flows of Seller for the two month
period ended February 28, 1993 attached hereto as Schedule 1.32.
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1.33 Inventories means the items of tangible personal
property used by Seller in connection with the Business, whether on or off site
or in transit, that are (a) held for sale in the ordinary course of business
("finished goods"), (b) are in process of production for such sale ("work in
process"), or (c) are to be currently consumed either directly or indirectly in
the production of goods or services to be available for sale ("raw materials").
The term "Inventories" does not include Terminated Contract Inventory.
1.34 Lease means the lease by Seller to Purchaser of
the Real Estate attached hereto as Exhibit B.
1.35 Leased Real Estate means the real property and
leasehold improvements located thereon in White Tank Mountain, Arizona, leased
by Seller from the State of Arizona in connection with the Business.
1.36 Net Book Value means the Certain Net Assets as
reflected on Final Closing Date Balance Sheet.
1.36(a) Northrop Arbitration. See Section 3.3(d).
1.37 Notice. See Section 4.19.
1.38 Notice of Disagreement. See Section 10.1(c).
1.38(a) Other Transfer Taxes. See Section 3.6.
1.39 Permits means all governmental and regulatory
licenses, permits and approvals material to the conduct of the Business or the
use of the Assets.
1.40 Permitted Exceptions means those liens, claims,
security interests or other encumbrances, if any, identified on Schedule 1.40.
1.41 Personal Property means all items of tangible
personal property of whatever kind or nature relating to or used by Seller in
connection with the Business, wherever located, including but not limited to
all machinery, equipment, demos, tools, dies, jigs, patterns, molds, trade
fixtures, spare parts, vehicles, leased or owned, brochures and sales and
marketing literature, furniture and furnishings, supplies (other than Accounts
Receivable, Books and Records, Intangible Property,
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<PAGE> 17
Inventories, Contract Rights, leasehold improvements and fixtures, Customer
Owned Equipment and Customer Furnished Material) owned or leased by Seller
including, without limitation that listed on Schedule 1.41.
1.42 Post-Closing Adjustment means the adjustment in
the Preliminary Purchase Price to be made pursuant to Section 10.1.
1.43 Preliminary Closing Date Balance Sheet means the
balance sheet of the Business as of the Closing Date to be prepared following
the Closing pursuant to Section 10.1.
1.44 Preliminary Purchase Price means the amount paid
by Purchaser to Seller at Closing in consideration of the Assets.
1.45 Prepaid Expenses means all prepaid expenses,
lease and utility deposits and contractual rights listed on Schedule 1.45.
1.46 Product Warranties means all warranties given by
Seller to its customers with respect to products manufactured and sold by
Seller in connection with the Business prior to the Closing Date.
1.47 Proprietary Information means all know how, trade
secrets, customer lists, supplier lists, sales techniques, formulae, processes,
and other confidential information developed or used by Seller in connection
with the Business.
1.48 Proprietary Rights means all patents, copyrights,
trademarks, trade names, service marks, licenses and logos of Seller and
applications therefor owned, acquired or used by Seller in connection with the
Business including, but not limited to those listed on Schedule 1.48 and all
goodwill associated therewith.
1.49 Purchase Price means the Preliminary Purchase
Price plus or minus (as the case may be) the Post-Closing Adjustment.
1.50 Purchaser's Accountants means Deloitte & Touche,
Costa Mesa, California.
1.51 Purchaser's Counsel means Paul, Hastings,
Janofsky & Walker, Los Angeles, California.
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1.52 Purchaser's Knowledge means the actual knowledge
of Richard V. Plat, Vice President of Purchaser, after conducting a reasonable
and due inquiry of the employees and agents of Purchaser with respect to the
matters as to which such knowledge relates.
1.53 Purchaser's Losses. See Section 11.2.
1.54 Real Estate means the real property of Seller
(including buildings and improvements thereon) located in Goodyear, Arizona,
used in connection with the Business.
1.55 Required Consent Contracts means those Contracts
listed on Schedule 1.55 which require a consent to the assignment or transfer
thereof, and all Contracts relating to Customer Owned Equipment currently being
used in the operation of the Business.
1.56 Restricted Party. See Section 10.9.
1.56(a) Sales Taxes. See Section 3.6.
1.57 Schedules means the schedules attached hereto,
and any schedules added to this Agreement pursuant to Section 6.7. Information
disclosed in any schedule shall be deemed disclosed in any other schedule to
which it may be applicable, whether or not expressly set forth in such other
schedule.
1.58 Security Clearance means authorization granted by
the U.S. government for access to classified information, materials, or
programs in the possession or control of Seller.
1.59 Seller's Accountants means Deloitte & Touche,
Phoenix, Arizona.
1.60 Seller's Counsel means Paul R. Hundt, Esq.
General Counsel of Crane Co., Stamford, Ct.
1.61 Seller's Knowledge means the actual knowledge of
the following officers of Seller: Joseph Cabaret, President and James
Potthast, Controller, after conducting a reasonable and due inquiry of the
employees and agents of Seller and Shareholder with respect to the matters as
to which such knowledge relates.
1.62 Seller's Losses. See Section 11.1.
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1.63 Sublease means the document transferring or
otherwise giving to Purchaser, Seller's rights as a Lessee under the lease from
the State of Arizona with respect to the Leased Real Estate.
1.64 Employees means all employees of Seller who
become employees of Purchaser after the Closing who are identified on Schedule
4.17.
1.65 Terminated Contract Inventory means inventory and
related Customer Furnished Material and Customer Owned Equipment which is
directly and exclusively related to Excluded Accounts Receivable, which is
required to be delivered by Seller to customers in connection with Seller's
collection of said Excluded Accounts Receivable, and which is identified on
Schedule 1.65.
1.66 Unbilled Accounts Receivable means those amounts
recorded in the Financial Statements with respect to those contracts accounted
for by Seller using the percentage of completion method of accounting and are
referred to in footnote 2 to February Balance Sheet as "Costs and estimated
earnings in excess of billings." Under this method unbilled receivables are
accrued in proportion to the percentage of the contract that is deemed to be
complete by management.
1.67 Vendors' Warranties means all rights under or
pursuant to all warranties, representations and guarantees made by suppliers in
connection with the products or services furnished to Seller.
1.68 Year-end Financial Statements means the unaudited
financial statements of Seller as of and for the years ended December 31, 1990,
December 31, 1991 and December 31, 1992, attached hereto as Schedule 1.68 which
include a balance sheet, a statement of operations, and a statement of cash
flows.
ARTICLE II
SALE OF ASSETS
2.1 Purchase and Sale of Assets. Subject to the
terms and conditions set forth in this Agreement, on the Closing Date, Seller
shall sell, transfer, assign, convey, and deliver to Purchaser, and Purchaser
shall purchase and acquire from Seller, free and clear of any and all liens,
claims, security interests and encumbrances of any kind,
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good, valid and marketable title in and to all of the Assets (as defined in
Section 2.2).
2.2 Definition of Assets. The Assets means all
assets and properties of Seller in connection with the Business except the
Excluded Assets, including without limitation the following:
(a) Personal Property
(b) Inventories
(c) Accounts Receivable
(d) Prepaid Expenses
(e) Proprietary Rights
(f) Proprietary Information
(g) Vendors Warranties (to the extent transferable to
Purchaser without cost to Seller)
(h) Permits (to the extent transferrable to Purchaser)
(i) Books and Records
(j) Intangible Property
(k) Unbilled Accounts Receivable
(l) Contract Rights
(m) Petty Cash
2.3 Excluded Assets. Notwithstanding the provisions
of Sections 2.1 and 2.2, Seller shall retain and shall not transfer to
Purchaser (i) the Archives, (ii) the books and records of Seller related to the
financial reporting between Seller and its affiliated and parent companies or
related to the Environmental Liabilities of Seller, (iii) the Excluded Accounts
Receivable, the Terminated Contract Inventory and the Real Estate (other than
pursuant to the Lease) and books and records related to same and (iv) those
other assets listed in Schedule 2.3.
ARTICLE III
PURCHASE PRICE
3.1 Consideration for Assets. In consideration for
its purchase of the Assets, Purchaser shall (i) pay to Seller the Purchase
Price and (ii) assume the Assumed Liabilities in accordance with Section 3.3.
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3.2 Payment of Consideration.
(a) On the Closing Date, Purchaser shall
cause to be transferred by a bank wire transfer to an account designated by
Seller the Preliminary Purchase Price of Five Million Seven Hundred Sixteen
Thousand Five Hundred Forty-Nine U.S. Dollars (U.S. $5,716,549.00) in
immediately available funds.
(b) When and as provided in Section 10.1,
below, the payment of the Post-Closing Adjustment shall be made by Seller or
Purchaser as the case may be.
3.3 Assumption of Certain Liabilities. On the
Closing Date and effective as of the Closing Date, Purchaser shall assume, pay,
perform, defend and discharge, if and when due, to the extent not paid,
performed, defended or discharged prior to the Closing Date, only the following
liabilities and obligations of Seller (collectively, the "Assumed
Liabilities"):
(a) All current liabilities of the Business
incurred prior to the Closing Date and reflected on the Preliminary Closing
Date Balance Sheet;
(b) All liabilities and obligations of Seller
under the Product Warranties described on Schedule 4.10(b) including those
listed on Schedule 4.10(a) and given by Seller in connection with products
manufactured and sold by Seller in the Business before the Closing Date other
than as provided in Section 3.4(h);
(c) All liabilities and obligations of Seller
under or arising from all Contracts; provided, however, with respect to any
Required Consent Contract the assumption herein shall be effective only upon
receipt of the related Consent; and
(d) The liability, if any, directly related
to the arbitration of the responsibility for the directed and agreed to scope
of work described in Schedule 4.10(a) with respect to Northrop's assertion that
Seller's Part Number 51-6385-5 wing actuator does not meet the specification
requirements of the related Contract ("Northrop Arbitration"), up to an
aggregate amount of $250,000.
3.4 Liabilities Not Assumed. Except for the
obligations and liabilities specifically described in
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Section 3.3, Purchaser does not assume or agree to pay, perform or discharge
any obligations or liabilities of Seller or relating to the Assets or the
Business, whether fixed, unliquidated, absolute, contingent or otherwise, and
whether due or to become due, known or unknown, including without limitation
(a) any other liabilities of Seller incurred in respect of or relating to the
Assets or the operation of the Business prior to the Closing, (b) any
obligations for taxes incurred prior to or relating to any period through the
Closing Date, including transaction privilege (sales) taxes, county excise
taxes, and use taxes (other than Sales Taxes), unemployment tax and personal
property tax, (c) any personal injury or property damage arising out of or in
connection with the Assets or the Business incurred prior to the Closing Date,
(d) any liabilities related to, or arising from, the employees of the Business
prior to the Closing including without limitation employee discrimination or
the Employee Benefit Plans and Employee Pension Plans and other employee
benefits, (e) any product liability with respect to products manufactured and
sold by Seller prior to the Closing Date, (f) any liabilities related to or
arising from severance of any employees of the Business on the Closing Date,
(g) any liability related to or arising from the Excluded Accounts Receivable
and the Terminated Contract Inventory, (h) the liability, if any, for the
Northrop Arbitration in excess of $250,000 and all other liabilities arising
from claims, disputes or suits of Northrop with respect to the operation of the
Business prior to the Closing Date, and (i) any Environmental Liabilities of
Seller; all of which are collectively referred to herein as the "Excluded
Liabilities." Seller shall retain, pay, perform, and discharge all such
liabilities and obligations. The parties acknowledge and agree that
Purchaser's only obligation with respect to the employees of the Business shall
be those obligations incurred after the Closing.
3.5 Allocation of Purchase Price. Purchaser and
Seller acknowledge and consent to (a) the payments described in this Article
III and the Assumed Liabilities being allocated among the Assets as set forth
in Schedule 3.5, and (b) the preparation and submission to the IRS of Form 8594
in accordance with Section 1060 of the Internal Revenue Code of 1986, as
amended, reflecting the allocation of the payments described in this Article
III and the Assumed Liabilities among the Assets as set forth on Schedule 3.5.
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3.6 Payment of Sales and Related Taxes.
(a) Purchaser shall be liable for all sales
and use taxes ("Sales Taxes") imposed as a result of the transfer of the Assets
and the Business hereunder; provided, however, that Seller shall take such
actions as are reasonably requested by Purchaser to avoid or minimize Sales
Taxes.
(b) Seller shall be liable for all transfer,
conveyance, stamp, duty, registration, recording, or other similar fees and
taxes (other than Sales Taxes) imposed as a result of the transfer of the
Assets and the Business hereunder ("Other Transfer Taxes"); provided, however,
that Purchaser shall take such actions as are reasonably requested by Seller to
avoid or minimize such Other Transfer Taxes.
(c) Taxes described in paragraphs (a) and (b)
shall be remitted as provided by applicable law, and where the paying party is
entitled to reimbursement by the non-paying party, such reimbursement will be
made by the non-paying party in immediately available funds in United States
dollars not later than five business days after the payment of such taxes. It
is agreed by Purchaser and Seller that payment under this Section 3.6 will be
treated as a reimbursement of a payment made by such payee on behalf of such
payor.
(d) Seller shall, within fifteen (15) days
after the Closing, file with the Arizona Department of Revenue and the
applicable municipal taxing authorities a final tax return and make appropriate
payment for transaction privilege (sales) taxes, county excise taxes, use and
other taxes (excluding estate and income taxes), if any, as may be required by
A.R.S. Section 42-119(A) and Model City Tax Code Section 595, for tax
liabilities arising from the operation of this Business prior to the Closing.
Seller shall furnish Purchaser with copies of such final returns and proof of
such payment.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER
AND SHAREHOLDER
As an inducement to Purchaser to enter into this
Agreement and to consummate the transactions contemplated hereby, Seller and
Shareholder hereby jointly and severally make the following representations and
warranties to Purchaser, each of which shall be true and correct on and as of
the date hereof and as of the Closing Date:
4.1 Corporate Status. Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, with full power and authority, corporate and other, to own, lease and
operate its properties and the Assets and conduct the Business as it now is
being conducted. Seller is duly qualified to transact business as a
corporation in good standing in the State of Arizona and in each other
jurisdiction in which any of the Assets are located or the nature of the
Business makes such qualification necessary, except where Seller's failure to
be so qualified would not have a material adverse effect on the Business.
Shareholder owns of record and beneficially all of the issued and outstanding
capital stock of Seller. Shareholder is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware.
4.2 Due Authorization. The execution, delivery and
performance by Seller and Shareholder of the Acquisition Agreements and the
transactions contemplated hereby and thereby have been duly and validly
authorized and approved by all necessary corporate action on the part of Seller
and Shareholder.
4.3 Authority of Seller. Seller and Shareholder have
the corporate power and authority to enter into and perform their respective
obligations under the Acquisition Agreements to which they are a party.
Neither the execution and delivery nor the performance by Seller or Shareholder
of any of their respective obligations under any Acquisition Agreement will
conflict with or result in a breach of any of the terms or provisions of, or
constitute a default under, any statute, indenture, mortgage, deed of trust,
note, or other agreement or instrument to which Seller or Shareholder is a
party, Seller's or Shareholder's Certificate of Incorporation or bylaws, any
order, judgment,
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decree, rule or regulation of any court or governmental agency or body having
jurisdiction over Seller or Shareholder of any of their respective properties
or the Assets, or any provision of law, except for any conflict, breach or
default which is not material and adverse to the Business or the Assets.
Neither the execution or delivery nor the performance by Seller or Shareholder
of any of their respective obligations under any Acquisition Agreement has
resulted or will result in the creation of any lien, encumbrance or charge on
any of the Assets.
4.4 Consent. Except as set forth in Schedule 4.4 or
with respect to Required Consent Contracts, no Consent or filing or
registration is required of or with any person or entity in order to permit the
execution, delivery and performance by Seller and Shareholder of any
Acquisition Agreement to which either of them is a party and the consummation
of the transactions contemplated hereby and thereby.
4.5 Enforceability. This Agreement is, and as of the
Closing Date each of the other Acquisition Agreements to which either Seller or
Shareholder is a party will be, valid and binding obligations of Seller and
Shareholder, enforceable against them in accordance with their respective
terms, subject, as to enforcement, to bankruptcy, insolvency, reorganization,
fraudulent conveyance and other laws of general applicability relating to or
affecting creditors' rights and to general equity principles.
4.6 Governmental Orders; Compliance with Laws.
Neither Shareholder nor Seller is a party or subject to or bound by any law,
judgment, order, writ, injunction, ruling, or decree of any jurisdiction, court
or governmental body that will or is likely to affect adversely in any material
respect the performance by Seller or Shareholder of any Acquisition Agreement.
Seller is not in violation of (a) any judgement, order, injunction, award or
decree relating to the Assets or the Business or (b) any law, ordinance, rule
or regulation or any other requirement of any governmental body, court or
arbitrator relating to the Assets or the Business, except for any such
violation which does not materially and adversely affect the Business or the
Assets, and except for matters relating to the environment disclosed in
Schedule 4.20 as to which no admission is made by Seller herein.
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4.7 Ownership of Assets. Except for Permitted
Exceptions, Seller has good and marketable title to all of the Assets, free and
clear of any liens, claims, debts, security interests, judgements, mortgages or
other encumbrances of any kind. The Assets constitute all of the property and
assets necessary to continue to operate the Business as it is being operated by
Seller, except for Customer Furnished Material, Customer Owned Equipment, the
Real Estate and the Leased Real Estate, which are dealt with separately in this
Agreement. Schedule 1.19 contains a true and complete list of all Customer
Owned Equipment and Seller has tagged or otherwise marked all Customer Owned
Equipment. Schedule 1.18 contains in all material respects a true and complete
list of all Customer Furnished Material. Seller has segregated all Terminated
Contract Inventory, and has located all such Terminated Contract Inventory in
Building 24 and Bunker 17 on the Real Estate.
4.8 Contracts. Seller is not a party to any material
oral contract relating to the Business. Schedule 4.8 and Schedule 1.55,
respectively, contain a true, correct and complete list of the Contracts and
Required Consent Contracts to which Seller is a party or the Assets are subject
or bound, and Seller has provided Purchaser with true and complete copies of
all such written contracts and a true and complete summary of any such oral
contracts.
Schedule 4.8 lists all Contracts which individually
involve consideration in excess of $10,000 and which are not unilaterally
cancelable by Seller without penalty or premium on no more than thirty (30)
days' notice. With respect to each Contract listed in Schedule 4.8 and Required
Consent Contract listed in Schedule 1.55 (i) each such Contract is valid,
binding and in full force and effect, (ii) Seller is not in default under such
Contact nor does there exist any condition or event which after notice, lapse
of time or both would constitute a default by Seller to any such Contract,
(iii) to Seller's Knowledge, no other party to any such Contract is in default,
or alleged to be in default, under such Contract, (iv) to Seller's Knowledge,
there does not exist any condition or event which, after notice, lapse of time
or both would constitute a default by any other party to any such Contact, (v)
Seller has received no notice of the election of any party to any such Contract
to cancel, terminate or not to renew such Contract whether in accordance with
the terms of such Contract or otherwise and (vi) except for Required Consent
Contracts, each such Contract is assignable pursuant to this Agreement without
the consent of any other party thereto.
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4.9 Pending Litigation. Except as set forth in
Schedule 4.9, there is no claim, action, suit, litigation or proceeding of any
nature pending or, to Seller's Knowledge, threatened which could materially
affect the Assets or the Business in any court or before any federal, state,
county or municipal department, commission, board, bureau, agency or other
governmental instrumentality, nor before any private or public arbitration
tribunal, nor is there any governmental, administrative or other investigation
or proceeding underway or, to Seller's Knowledge, threatened against or
involving, in any material respect, the Business, the Assets or Seller's
ownership thereof. Neither Seller nor Shareholder is aware of any fact which
might result in or form a realistic basis for any such action, suit,
litigation, arbitration, investigation or other proceeding.
4.10 Pending Product Claims.
(a) Schedule 4.10(a) lists all material
product liability and Product Warranty claims pending or, to Seller's
Knowledge, threatened as to any products manufactured by Seller in connection
with the Business.
(b) Except as disclosed in Schedule 4.10(b),
there are no Product Warranties or guarantees applicable to products
manufactured or sold in connection with the Business except warranties imposed
by applicable laws, including the Uniform Commercial Code, and Seller furnishes
no other warranties or guarantees in connection with the products manufactured
or sold with respect to the Business. Except for matters disclosed in Section
4.10(a), the accrual for warranty expense reflected in the Seller's books of
account, which as of February 28, 1993 is zero, is adequate.
4.11 Inventories. Except as set forth in Schedule
4.11, Seller has not disposed of any Inventories since February 28, 1993 except
in the ordinary course of business. The Inventories are good and usable in the
ordinary course of business and the reserves for obsolete, slow-moving or
damaged items reflected in the February Balance Sheet are adequate. All
Terminated Contract Inventory is directly and exclusively related to the
Excluded Accounts Receivable and has been located in Building 24 and Bunker 17.
4.12 Accounts Receivable. The Accounts Receivable
have been duly earned or accrued, are not subject to any claim, set-off or
deduction, represent valid,
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uncontested and unconditional, obligations owing to Seller and are collectible
within one hundred twenty (120) days from the invoice date in the ordinary
course of business in the full book amounts thereof. Schedule 1.2 contains a
true and complete list of all Accounts Receivable as of February 28, 1993.
Reserves for uncollectible accounts reflected in the February Balance Sheet are
adequate. Schedule 1.26 contains a true and complete list of all Excluded
Accounts Receivable.
4.13 Proprietary Rights and Information. Seller has
good and valid title to or, valid licenses for, all Proprietary Information,
Proprietary Rights and Intangible Property, free and clear of all liens,
claims, encumbrances and security interests. Seller has acquired or maintains
all patents, copyrights, trademarks, trade names, service marks, logos,
licenses and all rights with respect to the foregoing necessary to the conduct
of the Business. Except as set forth in Schedule 4.13, Seller has received no
notice that Seller is, and Seller has no reason to believe that it is,
infringing upon any such intangible rights owned by others. Seller has no
reason to believe that the Proprietary Information, Proprietary Rights or
Intangible Property is being infringed upon by others. To the extent any of
Seller's rights in, to, and under any Proprietary Information, Proprietary
Rights and Intangible Property may not be fully transferrable to Purchaser
pursuant to this Agreement, it will not have a material effect on the Business.
Schedule 1.48 is a true and complete list of all patents, copyrights,
trademarks, trade names, service marks, licenses, and logos of Seller and
applications therefor owned, acquired or used by Seller in connection with the
Business.
4.14 Personal Property. Except as set forth on
Schedule 4.14, all Personal Property owned, leased or used by Seller in
connection with the Business is located on the Real Estate or the Leased Real
Estate. The items of Personal Property and the Customer Owned Equipment
necessary for the operation of the Business at present are, in the aggregate,
in good repair and operating condition, ordinary wear and tear excepted. Each
item of Customer Owned Equipment to be returned to customers pursuant to
Section 10.6 is in such state of repair and operating condition that the
customer will accept it without demanding repair or other back charge for the
condition thereof.
4.15 Real Property. The only real properties owned or
leased by Seller relating to or used in connection
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with the Business are the Real Estate, and the Leased Real Estate. There are
no leases, tenancies or occupancy agreements relating to the Real Estate.
4.16 Permits. Seller possesses all Permits, and all
of such Permits are set forth in Schedule 4.16 and are in full force and
effect. The Permits which are transferable to Purchaser at the Closing are
identified on Schedule 4.16. Seller has received no notice of and there are no
material violations by Seller of any such Permits or any material claims or
proceedings, pending or to Seller's Knowledge threatened, challenging the
compliance with, validity of or seeking to discontinue any such Permits.
4.17 Employees. Schedule 4.17 contains a complete and
correct list of the name and title of each Employee and the compensation and
bonuses paid to each such employee from January 1, 1992 to December 31, 1992.
Since December 31, 1992, no compensation and bonuses in excess of that
reflected in Schedule 4.17 have been paid or raises given to any Employee other
than in the ordinary course of business and in amounts consistent with Seller's
past practice. To Seller's knowledge, no Employee or eligible dependent
thereof has any material medical problems or condition.
4.18 Employee Benefits. Schedule 1.20 is the true and
complete list of all Employee Benefit Plans and Employee Pension Plans relating
to employees of Seller. None of the plans constitutes a multi-employer plan as
defined in Section 4001(a)(3) of ERISA. Seller has provided Purchaser with
copies of plan documents or plan summaries as to each such plan listed on
Schedule 1.20.
4.19 Occupational Safety and Health. Except as
disclosed in Schedule 4.19, Seller has not received any notice, citation,
claim, assessment or proposed assessment (collectively, "Notice"), nor to
Seller's Knowledge does any Notice exist, as to or alleging that any of the
activities of the Business are in violation of any federal, state or local
occupational safety or health laws and no such violation presently exists which
would materially and adversely affect the Business or the Assets. Seller is
not a party to any pending dispute with respect to its compliance with any
federal, state or local occupational safety and health laws as such laws apply
to the activities of the Business or the Assets.
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4.20 Environmental Protection. (i) Seller is
currently subject to one or more orders and investigations under the
Environmental Laws requiring the remediation of Hazardous Materials on the Real
Estate and the Leased Real Estate and contiguous property thereto which are
generally described in Schedule 4.20(a). Except as so disclosed in Schedule
4.20(a) and in Schedule 4.20(b), and with respect to the Real Estate and Leased
Real Estate and only with respect thereto:
(a) No Hazardous Material (i) has been
released, treated, deposited, spilled, discharged, or disposed of on or under
the Real Estate (or, to Seller's Knowledge, the Leased Real Estate or any
property adjoining the Real Estate or the Leased Real Estate), (ii) is
presently maintained, used, generated, or permitted to remain in place by
Seller in violation of any Environmental Law or common law, (iii) is required
by any Environmental Law to be eliminated, removed, treated or mitigated by
Seller, given the nature of its present condition, location, nature, material
or maintenance, or (iv) is of a type, location, material, nature or condition
which requires special notification to third parties by Seller under
Environmental Law or common law.
(b) No notice, citation, summons or order has
been received by Seller or Shareholder, no notice has been given by Seller and
no complaint has been filed, no penalty has been assessed and no investigation
or review is pending or threatened by any governmental entity, with respect to
(i) any alleged violation by Seller of any Environmental Law or (ii) any
alleged failure by Seller to have any environmental permit, certificate,
license, approval, registration or authorization required in connection with
the Business or the Assets, or (iii) any use, possession, generation,
treatment, storage, recycling, transportation, release or disposal by or on
behalf of Seller of any Hazardous Material.
(c) Seller has not received any request for
information, notice of claim, demand or notification that it is or that
indicates that it may be a "potentially responsible party" with respect to any
investigation or remediation of any threatened or actual release of any
Hazardous Material.
(d) No above-ground or underground storage
tanks for Hazardous Materials or underground sumps, clarifiers or basins, are
required for the operation of the
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Business or are located on the Real Estate or Leased Real Estate.
(e) No notice has been received by Seller or
Shareholder with respect to the listing or proposed listing of the Real Estate
or Leased Real Estate on the National Priorities List promulgated pursuant to
CERCLA, CERCLIS or any similar state list of sites requiring investigation or
cleanup.
4.21 Financial Statements. Seller has furnished to
Purchaser true and correct copies of the Year-end Financial Statements and
Interim Financial Statements. The Year-end Financial Statements and Interim
Financial Statements may not have been prepared in all respects in conformity
with GAAP. However, Seller believes they fairly present in all material
respects the financial condition of Seller as of the respective dates thereof
and for the respective periods covered thereby to the extent necessary for
Seller to understand and to conduct the Business. The Year-end Financial
Statements and Interim Financial Statements have not themselves been audited
for purposes of separate certification. The Year-end Financial Statements are
included in the audited financial statements of the Seller's ultimate parent
company, Crane Co. Seller has furnished to Purchaser true and complete copies
of the February Balance Sheet, the supporting notes and the opinion of the
Seller's Accountants with respect thereto. Seller has not failed to file
reports or returns which are required to be filed by any federal, state or
local law, or regulation. Seller has duly paid or accrued on Seller's books of
account all taxes, duties and charges pursuant to such reports and returns or
assessed against Seller as of the Closing Date, and the assessment of any
additional taxes, that by law should have been paid or accrued in accordance
with GAAP, as of the Closing Date, is not expected.
4.22 Commissions and Fees. Seller has retained Roger
D. Williams & Company as financial advisor in connection with the transactions
contemplated by this Agreement and is responsible for its fees. Neither Seller
nor Shareholder has incurred any other obligation or liability, contingent or
otherwise, for brokers' commissions, finder's fees or other like payments in
connection with the transactions contemplated by the Acquisition Agreements.
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4.23 Operations in the Ordinary Course of Business; No
Material Adverse Chances. Since February 28, 1993, Seller has conducted the
Business in the ordinary course of business and Seller has not: (a)
experienced any material adverse change in the Business, its operations or
condition or the Assets; (b) suffered any damage, destruction or casualty loss
whether covered by insurance or not, materially and adversely affecting the
Business, its operations or the Assets; (c) entered into any material
agreement, commitment or transaction, including without limitation any
expenditure or pledging of accounts receivable; (d) made any change in its
accounting methods, principles or practices; (e) increased the compensation,
including bonuses, due or paid to any Employees other than increases made in
accordance with past practices of the Business; (f) canceled or compromised any
material debt or claim or waived or released any material right; (g)
encountered any labor difficulties; (h) sold, transferred or leased any of its
assets except in the ordinary course of business; or (i) committed to do any of
the foregoing.
4.24 Supplies and Customers. Schedule 4.24 contains a
true and complete list of the 10 largest suppliers and customers measured by
dollar volume of sales of the Business which supply or have supplied materials
to or purchased products from the Business in 1991 and in 1992. Neither Seller
nor Shareholder has received any notice that any customer, supplier or
independent contractor of Seller or the Business intends to terminate its
business relationship with Seller or the Business.
4.25 Insurance. Schedule 4.25 lists all risks insured
against by Seller.
4.26 Exclusion of Implied Warranties. EXCEPT AS
EXPRESSLY SET FORTH IN THIS AGREEMENT AND THE OTHER ACQUISITION AGREEMENTS AND
WITHOUT IN ANY WAY LIMITING THE REPRESENTATIONS AND WARRANTIES MADE HEREIN AND
THEREIN, SELLER EXCLUDES AND DISCLAIMS ANY AND ALL IMPLIED WARRANTIES,
INCLUDING, WITHOUT LIMITATION, WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE, WITH RESPECT TO THE ASSETS AND EACH OF THEM. SELLER MAKES
NO WARRANTIES OTHER THAN THOSE EXPRESSLY SET FORTH IN THIS AGREEMENT AND THE
OTHER ACQUISITION AGREEMENTS.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PURCHASER
As an inducement to Seller and Shareholder to enter into
this Agreement and to consummate the transactions contemplated hereby,
Purchaser hereby makes the following representations and warranties, each of
which shall be true and correct on and as of the date hereof and as of the
Closing Date:
5.1 Corporate Status. Purchaser is a corporation
duly organized, validly existing and in good standing under the laws of the
State of California with full power and authority (corporate and other) to own,
lease and operate its properties and the Assets to be acquired hereunder.
5.2 Due Authorization. The execution, delivery and
performance by Purchaser of the Acquisition Agreements, and the consummation of
the transactions contemplated thereby, have been duly and validly authorized
and approved by all necessary corporate action on the part of the Purchaser.
5.3 Authority of Purchaser. Purchaser has the
corporate power and authority to enter into and perform its obligations under
the Acquisition Agreements. Neither the execution and delivery nor the
performance by Purchaser of its obligations under the Acquisition Agreements to
which it is a party will conflict with or result in a breach of any of the
terms or provisions of, or constitute a default under, in any material respect,
any statute, or any indenture, mortgage, deed of trust, note agreement or other
agreement or instrument to which Purchaser is a party, Purchaser's Articles of
Incorporation or Bylaws or any order, rule or regulation of any court or
governmental agency or body having jurisdiction over Purchaser or any of its
properties.
5.4 Enforceability. This Agreement is, and as of the
Closing Date the other Acquisition Agreements to which Purchaser is a party
will be, valid and binding agreements of Purchaser, enforceable against
Purchaser in accordance with their respective terms, subject, as to
enforcement, to bankruptcy, insolvency, reorganization, fraudulent conveyance
and other laws of general applicability related to or affecting creditors'
rights and to general equity principles.
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5.5 Consents. Except as set forth in Schedule 5.5,
no Consent is required of any person or entity in order to permit the
execution, delivery and performance by Purchaser of the Acquisition Agreements
to which it is a party and the consummation of the transactions contemplated
hereby and thereby.
5.6 Commissions and Fees. Purchaser has not incurred
any obligation or liability, contingent or otherwise, for brokers' commissions,
finders' fees or other like payments in connection with the transactions
contemplated by the Acquisition Agreements.
5.7 Governmental Orders. Purchaser is not a party or
subject to or bound by any law, judgment, order, writ, injunction, ruling, or
decree of any jurisdiction, court or governmental body that will or is likely
to affect adversely in any material manner the performance by Purchaser of the
Acquisition Agreements.
5.8 Pending Litigation. Except as set forth in
Schedule 5.8, there is no claim, action, suit, litigation or proceeding of any
nature or any governmental, administrative or other investigation pending or,
to Purchaser's Knowledge, threatened against or affecting the Purchaser in any
material respect in any court or before any federal, state, county or municipal
department, commission, board, bureau, agency or other governmental
instrumentality, or before any private or public arbitration tribunal, which
would materially adversely affect Purchaser's acquisition of the Business or
the Assets.
ARTICLE V(A)
COVENANTS OF PURCHASER
5.9 Security Clearances. Purchaser and its employees
have, or will have obtained prior to Closing, Security Clearances listed on
Schedule 5.9.
5.10 Best Efforts. Purchaser agrees to use its best
efforts and take all reasonable actions to bring about its timely performance
of this Agreement and all other agreements contemplated hereby.
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ARTICLE VI
CONDUCT OF BUSINESS PRIOR TO CLOSING
From and after the date hereof, through and including
the Closing Date, Seller and Shareholder covenant and agree with Purchaser as
follows:
6.1 Conduct of Business. Seller shall operate the
Business in the usual, ordinary and normal course, and shall maintain the Books
and Records in the same manner as prior to the date hereof. Seller shall
maintain and preserve the good will of the customers, suppliers and others
having business relations with the Business.
6.2 Material Changes. Except for purchase orders or
sales orders entered into in the ordinary course of the Business, without the
prior written consent of Purchaser, Seller shall not, with respect to the
Business (a) enter into any material contracts or materially modify or cancel
any existing Contracts, (b) become indebted to any person or entity or become
obligated to guaranty any indebtedness of any person or entity, (c) make any
change in any management or supervisory personnel, (d) enter into any contract
of employment with, or increase the compensation paid or payable to, or enter
into any new arrangements with any Employees or agents or pay or become
committed to pay any of the foregoing any bonuses or other special compensation
other than in the ordinary course of business, (e) make any single capital
expenditure in an amount exceeding $10,000, or any capital expenditures which
in the aggregate exceed $50,000; (f) sell, transfer, assign or encumber, or
agree to sell, transfer, assign or encumber, any of the Business or the Assets,
except for sales of Inventories in the ordinary course of business, (g) suffer
any material adverse change in the Business, its operations or condition or the
Assets, (h) cancel or compromise any material debt or claim or waive or release
any material right, (i) make any change in its accounting methods, principles
or practices, (j) suffer any damage, destruction or casualty loss whether
covered by insurance or not, materially and adversely affecting the Business,
operations or the Assets, or (k) commit to do any of the foregoing. Neither
Seller nor Shareholder shall take any action that would adversely affect
Seller's or Shareholder's ability to execute, deliver or perform any of the
Acquisition Agreements or that would cause any document delivered by Seller or
Shareholder to Purchaser pursuant to the terms of any Acquisition Agreement, or
any representation or warranty
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made by Seller or Shareholder herein or in any other Acquisition Agreements, to
not be true in all material respects at the Closing.
6.3 Best Efforts. Seller shall use its best efforts
to obtain all Consents and to cause the Permits which are legally transferable
to Purchaser to be transferred to Purchaser at the Closing (and Purchaser shall
cooperate with Seller in such manner as Seller reasonably may request). Seller
shall use its best efforts to retain intact the employee complement of the
Business. Seller and Shareholder each agree to use its best efforts and take
all reasonable actions to bring about its timely performance of its obligations
under the Acquisition Agreements and all other agreements contemplated hereby
and thereby.
6.4 Maintenance of Personal Property and Real Estate.
Seller shall maintain the Personal Property, the Real Estate, and the Leased
Real Estate, the Customer Owned Equipment and the Customer Furnished Material
in their present respective conditions, ordinary wear and tear excepted, and
Seller shall perform or cause to be performed all ordinary and regular
maintenance and repairs with respect thereto.
6.5 Right of Inspection: Access to Books. Seller
shall afford to Purchaser and its authorized representatives, Purchaser's
Counsel and Purchaser's Accountants the right at any time during normal
business hours following the date hereof, upon reasonable notice to Seller, to
inspect the Assets including, without limitation, the Books and Records, and
shall afford them reasonable access to Seller's offices, employees and Seller's
Accountants as Purchaser reasonably shall deem necessary or desirable, and
Seller shall cooperate with Purchaser (in such manner as Purchaser may
reasonably request) in its investigation of the Assets and the Business.
Seller also shall afford to Purchaser and its authorized representatives such
access to all books, records, permits, files and reports maintained by all
governmental authorities relating to the Real Estate, the Leased Real Estate or
any other real or personal property leased or owned by Seller in connection
with the Business, as Purchaser shall reasonably request.
6.6 Notification of Material Adverse Events. Seller
shall promptly notify Purchaser in writing of any event following the date
hereof of which Seller is or becomes aware that will or is likely to have a
material adverse effect on the financial condition or prospects of
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the Business, the Assets or the performance by Seller or Shareholder of the
Acquisition Agreements.
6.7 Amendment of Schedules. Not less than five (5)
days prior to Closing, Seller shall notify Purchaser of any changes requiring
an amendment to any of the Schedules or the addition of any Schedule.
Thereupon, Seller shall amend the Schedules or add such Schedules as may be
necessary to keep the information set forth in this Agreement and in the
Schedules true and complete in all material respects.
6.8 Insurance. Seller shall cause to be continued in
full force and effect all insurance listed on Schedule 4.25 through the
Closing.
ARTICLE VII
CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATIONS
7.1 Obligations to be Satisfied on or Prior to
Closing Date. The obligations of Purchaser under this Agreement shall be
subject to the satisfaction, on or prior to the Closing Date, of the following
conditions, any of which may be waived in writing by Purchaser at its option:
(a) Accuracy of Representations and
Warranties. Each of the representations and warranties made by Seller and
Shareholder in the Acquisition Agreements shall be true, correct and complete
in all material respects on the Closing Date as though such representations and
warranties had been made on such date unless expressly made as of some other
date, in which case such representation and warranty shall continue to be true
as of such other date.
(b) Compliance with Agreement. Seller and
Shareholder shall have performed and complied in all material respects with all
of the terms, covenants, conditions and obligations under this Agreement and
the other Acquisition Agreements which are to be performed or complied with by
Seller or Shareholder, as the case may be, on or before the Closing Date.
(c) Schedules. All amendments or supplements
to the Schedules pursuant to Section 6.7, above, shall be acceptable to
Purchaser.
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(d) Transfer of Permits. As of the Closing,
all of the Permits, identified in Schedule 4.16 as transferable to Purchaser,
shall have been transferred to Purchaser or applications for transfer, in form
reasonably acceptable to Purchaser, shall have been filed.
(e) No Adverse Proceedings. No suit or
proceeding shall have been instituted or threatened against Seller or
Shareholder or Purchaser which, in the reasonable opinion of Purchaser, could
(i) restrict or prohibit the consummation of the transactions contemplated
hereby or (ii) have a material adverse effect on the Assets or the activities
of the Business.
(f) Closing Document. Seller shall have
delivered to Purchaser all certificates, agreements, opinions and other
documents required to be delivered by Seller at the Closing pursuant to Article
IX hereof, in the form attached to the Agreement as Exhibits or such
certificates, agreements, opinions and other documents delivered to Purchaser
on the Closing Date shall be reasonably satisfactory to Purchaser and
Purchaser's Counsel.
(g) Lease Agreement. Seller shall have
executed and delivered to Purchaser the Lease.
7.2 Procedure Upon Failure to Satisfy Conditions
Prior to Closing Date. In the event that, at Purchaser's opinion, any of the
conditions precedent set forth in Section 7.1, above, have not been satisfied
as of the Closing Date, Purchaser shall notify Seller in writing indicating its
election to (a) waive such condition precedent, or (b) terminate this Agreement
pursuant to Section 12.1.
ARTICLE VIII
CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS
8.1 Obligations to be Satisfied on or Prior to
Closing Date. The obligations of Seller under this Agreement shall be subject
to the satisfaction, on or prior to the Closing Date, of the following
conditions, any of which may be waived in writing by Seller at its option:
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(a) Accuracy of Representations and
Warranties. Each of the representations and warranties made by Purchaser in
the Acquisition Agreements shall be true, correct and complete in all material
respects on the Closing Date as though such representations and warranties had
been made on such date, unless expressly made as of some other date, in which
case such representation and warranty shall continue to be true as of such
other date.
(b) Compliance with Agreement. Purchaser
shall have performed and complied in all material respects with all of the
terms, covenants, conditions and obligations under the Acquisition Agreements
which are to be performed or complied with by Purchaser on or before the
Closing Date.
(c) No Adverse Proceedings. No suit or
proceeding shall have been instituted or threatened against Seller or Purchaser
which in the reasonable opinion of Seller could restrict, prohibit or rescind
the consummation of the transactions contemplated hereby.
(d) Closing Documents. Purchaser shall have
delivered all certificates, agreements, opinions and other documents required
to be delivered by Purchaser at the Closing pursuant to Article IX hereof, and
the form and substance of all such certificates, agreements, opinions and other
documents delivered to Seller on the Closing Date shall be reasonably
satisfactory to Seller and Seller's Counsel.
(e) Requisite Security Clearances. Purchaser
shall have delivered evidence satisfactory to the Security Officer of Seller
that Purchaser and it employees have the Security Clearances listed in Schedule
5.9.
8.2 Procedure Upon Failure to Satisfy Conditions
Prior to Closing Date. In the event that, in Seller's opinion, any of the
conditions precedent set forth in Section 8.1, above, have not been satisfied
as of the Closing Date, Seller shall notify Purchaser in writing indicating its
election to (a) waive such condition precedent, or (b) terminate this Agreement
pursuant to Section 12.1, below. In lieu of the foregoing, Purchaser and
Seller may agree to consummate the transactions contemplated by this Agreement
on such additional or modified terms as are agreed to in writing by Purchaser
and Seller.
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ARTICLE IX
CLOSING
9.1 Time and Place. The Closing shall take place on
the Closing Date at the offices of Seller in Phoenix, Arizona, or at such other
place as the parties may agree in writing.
9.2 Closing Transactions. All documents and other
instruments required to be delivered at the Closing shall be regarded as having
been delivered simultaneously, and no document or other instrument shall be
regarded as having been delivered until all have been delivered.
9.3 Deliveries by Seller to Purchaser. At the
Closing, Seller shall deliver or cause to be delivered to Purchaser:
(a) A bill of sale and instrument of
assignment in substantially the form and substance as set forth in Exhibit C;
(b) The legal opinion of Seller's Counsel in
substantially the form attached hereto as Exhibit D;
(c) Certificates of good standing for Seller
issued by the Secretary of the state of the state of Delaware and Arizona; and
a certificate of good standing for Shareholder issued by the Secretary of State
of the State of Delaware;
(d) A certificate of Seller and Shareholder
executed by the President of Seller and an officer of Shareholder dated the
Closing Date, certifying that all representations and warranties of Seller and
Shareholder contained in any Acquisition Agreement, including the information
contained in the Schedules, as amended, are true and correct in all material
respects on and as of the Closing Date, unless expressly made as of some other
date, in which case such representation and warranty shall continue to be true
as of such other date, and that the conditions specified in Section 7.1(b) have
been satisfied as of the Closing Date;
(e) A certificate of the Secretary of Seller
and Shareholder, dated as of the Closing Date, certifying the accuracy of and
setting forth such documents as necessary to establish to the reasonable
satisfaction of
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Purchaser that the execution and delivery of the Acquisition Agreements and the
consummation of the transactions contemplated thereby, were duly authorized by
Seller and shareholder;
(f) Executed copies prepared for mailing to
each party to a Required Consent Contract where such party's Consent is
necessary to turnover to Purchaser all of the Seller's rights and obligations
under such Contract, of a written request that such party provide such Consent
to Seller as soon as possible;
(g) All transferrable Permits;
(h) The Lease;
(i) UCC termination statements, releases or
such other documents satisfactory to Purchaser and its counsel as shall enable
Seller to convey the Assets to Purchaser, free and clear of any and all liens,
claims, security interests and encumbrances of any kind on the Closing Date;
and
(j) A guarantee of Shareholder's performance
by its parent, Crane Co., in the form attached hereto as Exhibit E; and
(k) Such other instruments and documents as
are (i) required by any other provisions of this Agreement or (ii) reasonably
necessary in the opinion of Purchaser to effect the performance of the
Acquisition Agreements by Seller or Shareholder.
9.4 Deliveries by Purchaser to Seller. At the
Closing, Purchaser shall deliver or cause to be
delivered to Seller:
(a) The Preliminary Purchase Price specified
in Section 3.2(a);
(b) The Assumption Agreement;
(c) The legal opinion of Purchaser's Counsel
in substantially the form attached hereto as Exhibit F;
(d) Certificates of good standing for
Purchaser issued by the Secretary of State of the jurisdiction in which the
Purchaser is incorporated;
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(e) A certificate of Purchaser executed by an
executive officer of Purchaser, dated the Closing Date, certifying that all
representations and warranties of Purchaser contained in any Acquisition
Agreement are true and correct in all material respects on and as of the
Closing Date, unless expressly made as of some other date, in which case such
representation and warranty shall continue to be true as of such other date,
and that the conditions required by Section 8.1(b) to be complied with or
performed by Purchaser have been complied with or performed in all material
respects;
(f) A copy of all resolutions duly adopted by
the Board of Directors of Purchaser authorizing the execution and delivery of
the Acquisition Agreements and the consummation of the transactions
contemplated thereby, duly certified as of the Closing Date by the Secretary of
Purchaser;
(g) A guarantee of Purchaser's performance by
its parent Pacific Scientific Company in the form attached hereto as Exhibit G;
and
(h) Such other instruments and documents as
are (i) required by any other provisions of this Agreement or (ii) reasonably
necessary in the opinion of Seller to effect the performance of the Acquisition
Agreements by Purchaser.
ARTICLE X
POST-CLOSING OBLIGATIONS
10.1 Post-Closing Adjustment.
(a) Seller shall prepare the Preliminary
Closing Date Balance Sheet. The Preliminary Closing Date Balance Sheet shall
be prepared under the direct supervision of Seller's employee(s) and shall be
prepared on a basis consistent with Seller's accounting principles and
consistent with contract estimating procedures and assumptions of Seller's
management used in the preparation of the February Balance Sheet. During the
time provided in this Section 10.1(a) to prepare the Preliminary Closing Date
Balance Sheet, the Purchaser agrees during regular business
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hours and at Seller's reasonable request to provide the staff and afford access
to all records and any other Employees required to prepare the Preliminary
Closing Date Balance Sheet. A copy thereof shall be delivered to Purchaser and
Purchaser's Accountants as soon as practicable but in no event later than 15
days following the Closing.
(b) If Purchaser does not notify Seller in
writing of any objection to the Preliminary Closing Date Balance Sheet within
fifteen (15) days of receipt thereof, such balance sheet will be deemed the
Final Closing Date Balance Sheet.
(c) If Purchaser notifies Seller of a
disagreement ("Notice of Disagreement"), such notification shall be in writing
and in sufficient detail to permit Seller and Seller's Accountants to evaluate
Purchaser's objections. If the parties and their respective accountants are
unable to reach agreement on the Preliminary Closing Date Balance Sheet within
fifteen (15) days from the Notice of Disagreement, the disputed points shall be
submitted to final and binding arbitration by Coopers & Lybrand as such
arbitrator. Any such arbitration shall be conducted in accordance with the
Commercial Arbitration Rules of the American Arbitration Association and shall
be conducted in Phoenix, Arizona.
(d) The determination of the arbitrator shall
be final and shall determine the Final Closing Date Balance Sheet.
(e) The fees and expenses of the arbitrator
shall be divided equally by Seller and Purchaser.
(f) If the Net Book Value of the Business
reflected on the Final Closing Date Balance Sheet is more than reflected on the
February Balance Sheet, then the Purchaser shall remit the difference to Seller
within five (5) days of the date that the Preliminary Closing Date Balance
Sheet is deemed the Final Closing Date Balance Sheet pursuant to Section
10.1(b) or the date that the parties resolve their disagreement with respect to
the Preliminary Closing Date Balance Sheet by amicable resolution or
arbitration, together with simple interest thereon at the rate of eight per
cent per annum from the Closing Date on the actual days elapsed based on a
365-day year. If the Net Book Value of the Business reflected on the Final
Closing Date Balance Sheet is less than reflected on the February
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Balance Sheet, then Seller shall refund the difference to Purchaser within five
(5) days of the date that the Preliminary Closing Date Balance Sheet is deemed
the Final Closing Date Balance Sheet pursuant to Section 10.1(b) or the date
that the parties resolve their disagreement with respect to the Preliminary
Closing Date Balance Sheet by amicable resolution or arbitration, together with
simple interest at the rate of eight per cent per annum from the Closing Date
on the actual days elapsed based on a 365-day year.
10.2 Covenant Not to Compete. For a period of five
(5) years from the Closing Date, neither Seller nor Shareholder will directly
or indirectly, engage anywhere in North America in any activity whether as an
employer, proprietor, partner, investor, stockholder, director, consultant or
agent, which activities are in competition with the Business as it exists on
the Closing Date and they will not solicit any of the Employees to serve as
officers or directors or to be engaged as employees of Seller or Shareholder.
10.3 Further Assurance and Assistance. After the
Closing Date, Seller and Purchaser shall, from time to time, upon the
reasonable request of the other party and without further consideration
thereof, execute, acknowledge and deliver in proper form any instrument
necessary or reasonably desirable to consummate the transactions contemplated
by the Acquisition Agreements.
10.4 Confidentiality. Other than in connection with
any governmental audit or investigation or as required by law, Seller and
Shareholder shall, and shall cause their agents and representatives to, hold in
confidence and not disclose to any third party or use any confidential
information set forth in the Books and Records, any proprietary information
Seller or Shareholder possesses with respect to the Business, the Assets or any
of Purchaser's proprietary information, without the prior written consent of
Purchaser, which consent may be withheld by Purchaser in its sole discretion.
10.5 Assignment and Assumption of Required Consent
Contracts. With respect to the Required Consent Contracts, Seller shall use
its reasonable best efforts to obtain a Consent from the other party thereto
and until such a Consent has been obtained, Seller shall not assign, and
Purchaser shall not assume such Contract. After the Closing, Purchaser shall
fully perform to the extent
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permitted by law each such Required Consent Contract on Seller's behalf and
Seller shall provide to Purchaser the full benefit thereof until the Consent is
received. In the event a Consent cannot be obtained, Seller and Purchaser
shall cooperate in any reasonable lawful commercial arrangement to obtain for
Purchaser the full benefits of the Contract and to enable Seller to fully
perform and discharge Seller's liabilities and obligations thereunder,
including but not limited to subcontracting or tolling arrangements, joint
ventures or partnerships (if mutually agreeable to the parties) and
arrangements for the temporary assignment of Employees and the provision of
facilities of Purchaser whereby Seller would be able to continue to perform
such Required Consent Contracts as if it continued to be the owner of the
Business. In the event that no such reasonable lawful commercial arrangement
can be established for such purposes, Seller shall repurchase from Purchaser
all Inventory and Unbilled Accounts Receivables allocated to such Contract at
the book value thereof on the Closing Date with such increases thereto as may
be appropriate for work performed after the Closing Date, and Purchaser shall
deliver to Seller all Customer Furnished Material and Customer Owned Equipment
allocated thereto pursuant to this Agreement and Purchaser shall make available
on a reasonable commercial basis the tooling and equipment necessary to perform
such Contract. At the time of such assignment, Seller shall be deemed to have
represented that it is not then in violation of the terms of such Contract.
Upon obtaining a Consent to the assignment or transfer of any Required Consent
Contract following the Closing Date, Seller shall promptly take all action
necessary to assign and transfer to Purchaser such Required Consent Contract.
With respect to Customer Owned Equipment, see Section 10.6.
10.6 Transfer and Return of Customer Owned Equipment.
(1) Seller has tagged or marked each item of Customer
Owned Equipment located throughout the Real Estate and the Leased Real Estate
and listed each piece of such equipment on Schedule 1.19. Seller has also
identified on that Schedule those items which Seller considers necessary for
the operation of the Business at present. It is understood that, based on the
operation of the Business following the Closing Date, the views of Purchaser as
to what items are necessary and unnecessary may differ from those of Seller and
may switch items from the necessary to the unnecessary category and vice versa.
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(2) Seller's rights to the possession of the Customer
Owned Equipment and the procedure for the return thereof are governed by
Contracts between Seller and customers of the Business. In order to transfer
the necessary items to Purchaser and to return the unnecessary items, Purchaser
and Seller shall cooperate as follows:
(a) At the Closing, Seller shall mail to each
customer a request that it consent to the novation,
assignment or other transfer to Purchaser of the relevant
Contract and to the return of the unnecessary items.
(b) Upon receipt of each Consent, Seller
shall execute, without additional consideration therefor,
such documents as may be required to transfer such Contract
to Purchaser. If a Consent to a Contract is not obtained,
Seller shall retain all liability and responsibility with
respect to such Contract including without limitation all
Customer Owned Equipment directly related to such Contract.
(c) Purchaser shall be responsible to return
to the customers the unnecessary items of Customer Owned
Equipment promptly after permission to do so is received
from the customer. The expenses of Purchaser in packing
and shipping the unnecessary items to the extent not paid
by the customer will be reimbursed by Seller within 30 days
of receipt of invoice therefor.
(d) When Purchaser moves the Business from
the Real Estate, Purchaser shall, to the extent it may
legally do so, move all the necessary items of Customer
Owned Equipment to its facility in Chandler, Arizona.
Purchaser shall segregate, pack, assemble to the extent
feasible and leave all unnecessary items on the Real Estate
at that time. Purchaser shall continue to be responsible
for the return of such equipment to the customers and shall
have such access to the Real Estate as it may reasonably
require for such purposes.
10.7 Transfer of Leased Real Estate.
(i) Seller has filed with the Arizona State
Land Department an Amendment Application to amend Seller's
Lease No. 03-00827-00 for the Leased Real Estate for an
additional 5 or 6 years and an Application to Assign said
Lease to Purchaser. True
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and complete copies of both applications and the
transmittal letter have been provided to Purchaser. Seller
shall use its best efforts to obtain the approval of the
assignment of the Leased Real Estate from Seller to
Purchaser as contemplated by the Amendment Applications and
the Assignment Application.
(ii) After the Closing and prior to implementing
the assignment of the Lease for the Leased Real Estate
contemplated above, Seller shall perform the Environmental
Audit and Remediation described in (iii) of this Section
10.7 and shall permit Purchaser under Seller's supervision
and control to use the bunkers on the Leased Real Estate to
store materials of the type and in the quantities presently
stored therein by Seller and in connection therewith shall
grant to Purchaser access to such facilities as Purchaser
may request. Purchaser shall pay to Seller an amount equal
to the rent paid by Seller to the Lessor during the term of
the Lease and as it exists on the date hereof and the
amendment applied for if granted and such other reasonable
costs as Seller may incur in providing the access described
herein; provided, however, that Seller and Purchaser shall
cooperate to establish a commercial arrangement so as to
minimize such costs.
(iii) Seller has conducted a Phase I
environmental audit with respect to the Leased Real
Estate. A true and complete copy of the report with
respect thereto is attached as Schedule 10.7. Seller shall
be responsible for accomplishing whatever cleanup, removal,
treatment or remediation and satisfying such other
responsibilities and obligations (such as recordkeeping or
notification requirements) with respect to Hazardous
Materials on or under the Leased Real Estate which may be
required. Purchaser shall in no way assume any liability
or responsibility with respect to such cleanup, removal,
treatment or remediation or other responsibilities or
obligations.
(iv) Upon receipt of approval of the Assignment
Application and upon completion of the cleanup contemplated
in Section 10.7(iii), Seller shall take such actions and
execute such documents without additional consideration
therefor as may be necessary to implement the assignment to
Purchaser of the Lease for the Leased Real Estate. In the
event that Seller cannot represent at the time of the
assignment that it is not in violation of its Lease of
Leased Real Estate,
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Purchaser shall at its sole election either (i) accept the assignment or (ii)
reject the assignment, in which event Seller shall continue to permit Purchaser
to use and have access to the Leased Real Estate as provided in Section
10.7(ii) for the balance of the term of the Lease as it exists on the date
hereof and the amendment applied for if granted. In the latter event,
Purchaser shall reimburse Seller for the rent that it pays under its lease on
the Leased Real Estate plus all reasonable costs incurred by Seller in
providing such access; provided, however, that Seller and Purchaser shall
cooperate to establish a commercial arrangement so as to minimize such costs.
10.8 License to Use Seller's Name. For a period of
one year after the Closing Date (1) Purchaser shall have full right and power
to use without additional consideration therefor the trade name
Unidynamics/Phoenix with respect to the Business provided, however, the use of
the Unidynamics/Phoenix name shall be used in conjunction with Purchaser's own
trade name or trademarks and shall not be more prominently emphasized or
displayed except for Required Consent Contract invoices prior to the assignment
thereof and (2) Purchaser shall concurrently indicate that it is the successor
to the Business of Unidynamics/Phoenix, Inc. At the termination of such
period, Purchaser shall completely cease using the trade name
Unidynamics/Phoenix or any similar name.
10.9 Confidentiality. Purchaser agrees that if the
transactions contemplated by this Agreement are not consummated, Purchaser
shall not and shall cause Purchaser's Accountants, Purchaser's Counsel and
Purchaser's employees and agents (collectively with Purchaser the "Restricted
Parties") not to disclose to any third parties nor use for its or their own
benefit any information received from Seller with respect to any business
information of Seller, including, but not limited to, information concerning
Seller's trade secrets, customers, manufacturing processes or pricing, and
shall return to Seller the originals and all copies of any documents,
materials, summaries and other information received or derived by Purchaser
hereunder or pursuant hereto; provided, however that nothing herein shall be
deemed to prevent use by any Restricted Party of information (a) which is
demonstrated to have been known by such Restricted Party independently from the
disclosure of such information by Seller, or (b) which thereafter becomes
publicly known or available without disclosure by such Restricted Party, or
which is rightfully received by such
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party from a third party or independently developed, or (c) which is reasonably
required in connection with any litigation relating to the Business or Assets.
10.10 Books and Records and Information.
(a) Inspection. Purchaser and Seller agree
that all Books and Records delivered to Purchaser by Seller pursuant to this
Agreement or retained by Seller in the Archives shall be open for inspection by
representatives of Purchaser and Seller at the inspecting party's expense at
any time during regular business hours until the audits of the federal income
tax returns of Seller or the consolidated groups of which it is or was a member
covering the period ending through the Closing Date have been completed and any
proposed adjustments have become final or until such time as they are no longer
required to be maintained under any Environmental Law or to assist Seller in
defending against any Environmental Liability, whichever is later and that the
inspecting party may during such period, at its expense, make such copies
thereof as it may reasonably request; provided, however, that any such
investigation or copying shall be done in such a manner so as not to interfere
with the normal conduct of the noninspecting party's operations.
(b) Access to Employees. Purchaser shall use
reasonable efforts to afford Seller access to Employees in the employ of the
Purchaser or its affiliates, as Seller shall reasonably request for its proper
business purposes relating to the Business, including, without limitation, the
defense of legal proceedings. Such access may include interviews or attendance
at depositions or legal proceedings; provided, however, that in any event all
expenses incurred by Purchaser in connection with this Section 10.10(b) shall
be paid or promptly reimbursed by Seller.
10.11 Employment of Employees.
(i) It is the intention of the parties that
the individuals listed on Schedule 4.17 will become
employees of Purchaser on the Closing and except as
provided for in this Section 10.11, will be subject to
Purchaser's employment policies thereafter. Both parties
agree to use their best efforts to accomplish this
objective.
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(ii) The parties acknowledge and agree that
Purchaser shall provide the accrued vacation benefits of
Employees reflected in the February Balance Sheet and that
none of such benefits shall be paid in cash at the Closing.
(iii) Seller agrees to cooperate fully with
Purchaser to avoid double withholding of taxes and Social
Security on Employee's income for 1993 in accordance with
federal, state or local regulations.
(iv) Purchaser contemplates that the employment
with Purchaser of the Employees, who are identified on
Schedule 4.17 with an asterisk, may be less than one year.
In the event Purchaser terminates such Employee without
cause during the first year after the Closing, Purchaser
and Seller agree that such Employees will receive severance
benefits equal to those provided pursuant to Section E1 of
Crane Co.'s Salaried Work Force Reduction Policy in
Schedule 1.20(H) and Seller shall either pay the severance
to the Employees directly as they are terminated by
Purchaser or shall reimburse Purchaser for such payments.
(v) Purchaser contemplates that the
remainder of the Employees will continue as employees of
the Business with Purchaser for at least one year. In the
event any of these Employees are terminated without cause
within one year after the Closing, Purchaser will provide
them severance benefits equal to those provided pursuant to
Section E1 of Crane Co.'s Salaried Work Force Reduction
Policy in Schedule 1.20(H). If Purchaser fails to provide
such severance benefits, Seller will be free to pay the
severance to the Employee directly, and Purchaser shall
reimburse Seller for such payments. Any Employees not
terminated as employees of the Business within one year
will have their severance benefits, if any, determined
under Purchaser's severance plan, if any, in effect at the
time of termination.
(vi) Any Employees who have not yet vested
under Seller's Employee Benefit Plans will be given credit
under those plans, for vesting purposes only, for the
service with Purchaser after the Closing.
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(vii) Purchaser shall give all Employees credit,
for vesting purposes only, in Purchaser's Employee Benefit
Plans for service with Seller.
(viii) After the Closing, Employees shall
continue as participants in Seller's Health Plans through
December 1, 1993, provided, however, Purchaser shall
reimburse Seller for all the employer's costs under such
Plans allocable to such Employees as provided in the letter
dated March 25, 1993 from R.A. Dubois to R.V. Plat attached
hereto as Schedule 10.11.
(viii) The covenants and agreements of Purchaser
and Seller set forth in this Section 10.11 shall not be
deemed to create for any Employee employment with Purchaser
or Seller on any basis other than an "at will" basis.
10.12 Assistance to Seller in Collecting Excluded
Accounts Receivable. Seller and Purchaser agree that Purchaser shall have no
liability or responsibility with respect to the Excluded Accounts Receivable or
the Terminated Contract Inventory except as specifically provided herein. To
enable Seller to collect the Excluded Accounts Receivable and to return
Terminated Contract Inventory Purchaser shall (a) grant Seller, its agents and
employees access at Seller's expense during regular business hours to the
contract files, books, records of the Business and the information
electronically recorded in the computers of the Business on which the Excluded
Accounts Receivable and Terminated Contract Inventory are based or to which
they relate; (b) provide to the Seller up to 50 man-hours per month of the
services of knowledgeable Employees who remain in the employ of Purchaser or
its affiliates as Seller shall reasonably request to assist Seller in
collecting the Excluded Accounts Receivable and disposing of the Terminated
Contract Inventory. If Seller requires more than 50 man-hours per month of
assistance in collecting the Excluded Accounts Receivable and delivering the
Terminated Contract Inventory to Seller's customers, then Purchaser shall make
available to Seller the services of knowledgeable Employees who remain in the
employ of Purchaser to assist Seller in collecting the Excluded Accounts
Receivable, and delivering the Terminated Contract Inventory to Seller's
customers, at a rate of $25 per man-hour of service. All out-of-pocket
expenses incurred by Purchaser in connection with this Section 10.12 shall be
paid or promptly reimbursed by Seller. Amounts payable to Purchaser hereunder
shall be paid promptly by Seller, not later than thirty (30) days
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following the rendering of the services with respect to which such payment
relates. Purchaser's Employees shall render workmanlike service in this
project and Purchaser shall otherwise have no liability or responsibility with
respect to any action or inaction of any Employee with respect to any Excluded
Accounts Receivable or Terminated Contract Inventory.
10.13 Access to Real Estate. Following the Closing
Date, regardless of the form of Purchaser's interest therein, Seller shall
retain the right at all times to enter on the Real Estate and Leased Real
Estate to perform Seller's obligations with respect to the cleanup or
remediation of the Real Estate and Leased Real Estate and with respect to
Seller's performance of its rights and obligations with respect to Terminated
Contract Inventory. Seller and Shareholder jointly and severally shall be
liable and responsible for all costs, damages and expenses incurred by
Purchaser with respect to or arising from any activity of Seller or any of its
representatives on or with respect to the Real Estate or Leased Real Estate.
Seller and Shareholder shall maintain at their cost and expense comprehensive
general liability insurance and workers' compensation and any other insurance
with such limits as are customary in the industry, and Seller and Shareholder
shall designate Purchaser as an additional insured on all such insurance;
provided, however, neither Shareholder nor Seller may be required to purchase
insurance to the extent it is a participant in the self-insurance program of
its ultimate parent, Crane Co. The proceeds of such insurance or
self-insurance program shall be used, among other sources if necessary, to
satisfy any liability of Seller or Shareholder under this indemnity.
ARTICLE XI
INDEMNIFICATION
11.1 Indemnification by Purchaser. Purchaser agrees
to indemnify and hold harmless Seller and all of its officers, partners,
employees and agents from and against all liability, obligation, claim, loss,
cost, damage and expense, including reasonable attorneys' fees and accountants'
fees incurred in prosecuting or defending any claim for any such liability,
loss or damage (collectively, "Seller's Losses"), arising out of or resulting
from:
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(a) The untruth or inaccuracy of any
representation or breach of warranty by Purchaser contained in any Acquisition
Agreement (but excluding any such misrepresentation or breach of warranty which
Seller expressly waived in writing under Section 8.1(a) of this Agreement on or
before the Closing Date);
(b) Any Assumed Liabilities;
(c) Any loss, damage, claim or liability
incurred by Seller arising from the operation of the Business after the Closing
Date;
(d) Any liability arising out of any acts or
omissions of Purchaser or any fiduciaries or trustees of any employee benefit
plan of Purchaser as defined in Section 3.3 of ERISA occurring after the
Closing Date in connection with the operation or administration of any such
employee benefit plan of Purchaser, and Purchaser's obligations and liabilities
arising out of the continued participation by Employees after the Closing Date
in health and medical plans of Seller pursuant to Section 10.11(viii).
(e) Any tax with respect to the Business or
Assets arising from taxable periods or portions thereof beginning after the
Closing Date and all Sales Taxes;
(f) The nonfulfillment of any covenant or
agreement by Purchaser contained in any Acquisition Agreement; and
(g) Any Environmental Liabilities of
Purchaser.
11.2 Indemnification by Seller and Shareholder.
Seller and Shareholder shall jointly and severally indemnify Purchaser and hold
harmless Purchaser and all of its officers, directors, employees, shareholders
and agents from and against all liabilities, obligations, claims, losses,
costs, damages and expenses, including reasonable attorneys' fees and
accountants' fees incurred in prosecuting or defending any claim for any such
liability, loss or damage (collectively, "Purchaser's Losses") arising out of
or resulting from:
(a) The untruth or inaccuracy of any
representation or breach of warranty by Seller or Shareholder contained in any
Acquisition Agreement (but excluding any such misrepresentation or breach of
warranty
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which Purchaser expressly waived in writing under Section 7.1(b) of this
Agreement on or before the Closing Date or with respect to Required Consent
Contracts which are dealt with in Section 11.2(j));
(b) Any Excluded Liabilities;
(c) Any failure to comply with any applicable
transfer or bulk sales law;
(d) Any income, franchise or any other tax
imposed on income or gain realized by Seller or Shareholder as a result of the
transactions contemplated hereby and Other Transfer Taxes;
(e) Any tax with respect to the Assets or the
Business for taxable years or portions thereof ending on or before the Closing
Date;
(f) Any liability resulting from the failure
of Seller to provide (i) all notices required by the WARN Act and COBRA and
(ii) continuation coverage as required by COBRA;
(g) Any liability arising out of any acts or
omissions of Seller or any fiduciaries or trustees of any Employee Benefits
Plan of Seller as defined in Section 3(3) of ERISA in connection with the
operation or administration of any such employee benefit plan of Seller;
(h) The nonfulfillment of any covenant or
agreement by Seller or Shareholder contained in any Acquisition Agreement;
(i) Any Environmental Liabilities of Seller;
and
(j) The untruth or inaccuracy of any
representation or warranty with respect to any Required Consent Contract.
11.3 Procedure for Indemnification.
(a) If any party hereto shall claim
indemnification hereunder arising from any claim or demand of a third party,
the party seeking indemnification (the "indemnitee") shall promptly notify the
party from whom indemnification is sought (the "indemnitor") in writing of the
basis for such claim or demand, setting forth the nature
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of the claim or demand in reasonable detail. The indemnitor shall have the
right to compromise or, if appropriate, defend at its own cost and through
counsel of its own choosing, any claim for indemnification. The failure of the
indemnitee to so notify the indemnitor shall not relieve the indemnitor of any
indemnification obligation hereunder unless the indemnitor shall have been
materially prejudiced thereby. In the event the indemnitor undertakes to
compromise or defend any such claim or demand, it shall promptly notify the
indemnitee in writing of its intention to do so and shall give the indemnitee
such security in that regard as the indemnitee reasonably may request. The
indemnitee shall fully cooperate with the indemnitor and its counsel in the
defense or compromise of such claim or demand, provided that all reasonable
out-of-pocket expenses incurred by indemnitee shall be paid by indemnitor.
After the assumption of the defense by the indemnitor, the indemnitor shall not
be liable for any legal or other expenses subsequently incurred by the
indemnitee, in connection with such defense, other than reasonable costs of
investigation, but the indemnitee may participate in such defense at its own
expense. If the indemnitor fails or refuses to undertake such defense within
thirty (30) days after receiving notice that a claim has been made, the
indemnitee shall have the right to assume and control the defense of such claim
in such manner as it deems appropriate, at the sole cost and expense of the
indemnitor, which shall not be unreasonably withheld. No settlement of a third
party claim or demand defended by the indemnitee shall be made without the
written consent of the indemnitor. The indemnitor shall not, except with the
written consent of the indemnitee, consent to the entry of a judgment or
settlement which does not include as an unconditional term thereof, the giving
by the claimant or plaintiff to the indemnitee of an unconditional release from
all liability in respect of such third party claim or demand.
(b) If either party shall claim
indemnification hereunder for any claim other than third party claims, the
indemnitee shall promptly notify the indemnitor in writing of the basis for
such claim, setting forth the nature and amount of the claim in reasonable
detail; and after determination of the validity therefor payment shall be made
by the indemnitor.
(c) Interest shall accrue on the unpaid
amount of all indemnification obligations hereunder at the rate of 8% per annum
based on the actual number of days elapsed from the date each indemnification
obligation
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becomes due and owing until paid in full and based on a 365 day year, provided
that such indemnification obligation is not being contested in good faith.
11.4 Period of Indemnity. The indemnities contained
in this Article XI shall expire as follows:
(a) Purchaser's indemnification obligations,
(i) under Section 11.1(a) shall expire
on the first anniversary of the Closing Date;
(ii) under Section 11.1(f) shall expire
on the second anniversary of the date Seller knew or should
have known that Purchaser had not fulfilled the covenant or
agreement;
(iii) there shall be no limitation period
with respect to Purchaser's indemnification obligations
under Section 11.1(b), (c), (d), (e) and (g) which shall
survive the Closing Date indefinitely, and
(b) Seller's and Shareholder's
indemnification obligations,
(i) under Section 11.2(a) shall expire
on the first anniversary of the Closing Date;
(ii) under Section 11.2(j) shall expire
on the first anniversary of the date of the assignment,
or other transfer of the applicable Required Consent
Contract to Purchaser;
(iii) under Section 11.2(h) shall expire
on the second anniversary of the date Purchaser knew or
should have known that Seller had not fulfilled the
covenant or agreement;
(iv) There shall be no limitation period
with respect to Seller's and Shareholder's indemnification
obligations under Sections 11.2(b), (c), (d), (e), (f), (g)
and (i) which shall survive the Closing Date indefinitely.
(c) Notwithstanding the foregoing, with
respect to Seller's or Shareholder's Losses or Purchaser's Losses, as the case
may be, as to which notice has been
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given pursuant to Section 11.3, the indemnification period shall be extended
until the final resolution of such loss.
11.5 Limitation of Liability. The obligations and
liabilities of Purchaser and Seller and Shareholder for indemnification
hereunder shall be subject to the following limitations; provided, however,
that no such limitation shall apply to Seller's and Shareholders'
indemnification obligations under Sections 11.2(b), (c), (d), (e), (f), (g),
(h), (i), and (j) or to Purchaser's indemnification obligations under Sections
11.1(b), (c), (d), (e), (f) and (g).
(a) No claim for indemnification shall be
asserted by any party hereto unless the amount of the losses, cost, damages or
expenses with respect to such claim exceeds $10,000 and no indemnification
shall be required to be made by any indemnifying party with respect to any Loss
of an indemnitee under this Article XI until the aggregate amount of the
indemnitee's Losses exceeds an amount equal to $100,000, and then only to the
extent of the excess of such aggregate amount.
11.6 Exclusive Remedy: Survival. The parties hereto
agree that the remedies provided by this Article shall be exclusive with
respect to the claims brought under Sections 11.1 and 11.2; provided, however,
that the remedies provided in this Article shall not preclude any party from
pursuing any other remedy not for a breach of contract such as relating to a
cause of action in tort. The parties hereto agree that the representations and
warranties of Purchaser and Seller shall survive only to the extent provided in
Section 11.4.
ARTICLE XII
MISCELLANEOUS PROVISIONS
12.1 Termination. This Agreement may be terminated at
any time prior to the Closing:
(a) by mutual written consent of Purchaser
and Seller;
(b) by written notice by either Purchaser, on
the one hand, or Seller or Shareholder on the other hand, if there has been a
material misrepresentation or breach of warranty or breach of covenant on the
part of the other
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party in the representations and warranties or covenants set forth in this
Agreement; or
(c) by written notice by either Purchaser or
Seller if the Material Changes identified in 6.2(g) or (j) have occurred, or if
the Closing has not occurred by March 31, 1993, provided that neither Purchaser
nor Seller will be entitled to terminate this Agreement pursuant to this
subsection if its willful breach of this Agreement has prevented the
consummation of the transactions contemplated hereby. A decision not to
terminate the Agreement after notice of a material misrepresentation or breach
of warranty or covenant prior to Closing, receipt of which notice is
acknowledged in writing by Purchaser or Seller, as the case may be, shall
constitute a waiver thereof as provided in Sections 7.2 and 8.2.
12.2 Liability on Termination. In the event of
termination of this Agreement as provided in Section 12.1, above, neither party
hereto shall have any liability hereunder of any nature whatsoever to the
other, except for expenses as provided in Section 12.3, including any liability
for damages.
12.3 Expenses. Except as otherwise specifically
provided herein, each party shall pay its own expenses, including fees of
counsel and accountants incurred in connection with the Acquisition Agreements
and the transactions contemplated hereby and thereby.
12.4 Bulk Sales Compliance. Purchaser, Seller and
Shareholder waive compliance with the provisions of the applicable statutes
relating to bulk transfers and bulk sales. Seller and Shareholder jointly and
severally shall indemnify and hold harmless Purchaser from and against any and
all losses, costs, damages, claims and expenses (including reasonable
attorneys' fees), which Purchaser may sustain by reason of Seller's or
Shareholder's failure to comply with any bulk transfer or bulk sales laws.
Nothing in this Section shall estop or prevent Purchaser from asserting, as a
bar or defense to any action or proceeding brought under any bulk transfer or
bulk sales law, that such law is not applicable to the sale contemplated by
this Agreement.
12.5 Survival. All representations, warranties,
covenants and agreements made in this Agreement and any other Acquisition
Agreement or in any statement, deed, certificate, instrument or other document
delivered pursuant
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hereto or thereto or otherwise in connection herewith or therewith -- each of
which representations, warranties, covenants and agreements is strictly relied
upon -- shall survive the Closing in accordance with the provision with respect
thereto of Section 11.4.
12.6 Public Announcements. From and after the date
hereof, except as Purchaser and Seller may otherwise agree, neither Purchaser
nor Seller or Shareholder shall make any release of information regarding
matters relating to the transactions contemplated hereby except (i) Purchaser
and Seller may each continue such communications with their respective
employees, customers, licensees, suppliers, lenders and lessors as may be
necessary or appropriate and not inconsistent with the best interests of the
other party for the prompt consummation of the transactions contemplated by
this Agreement or (ii) as required by law; provided, however, that Purchaser
and Seller shall use their best efforts to consult with each other prior to
making a public announcement regarding matters relating to the transactions
contemplated by this Agreement.
12.7 Notices. All notices or other communications
required or permitted by this Agreement shall be in writing and shall be deemed
to have been duly given (i) upon receipt if delivered in person or by facsimile
transmission if confirmed by return facsimile transmission, (ii) one business
day after notice is sent by Federal Express or some other reputable overnight
courier, or (iii) three days after such notice is mailed by certified or
registered mail, return receipt requested, postage pre-paid, and addressed as
follows:
(i) if to Purchaser:
Pacific Scientific Company
620 Newport Center Drive,
Suite 700
Newport Beach, CA 92658
Attention: Mr. Richard V. Plat,
Executive Vice President
Telephone No. (714) 720-1714
FAX No. (714) 720-1083
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<PAGE> 60
with a copy to:
Siobhan McBreen Burke, Esq.
Paul, Hastings, Janofsky & Walker
555 South Flower Street, 23rd fl
Los Angeles, CA 90071
Telephone No. (213) 683-6282
FAX No. (213) 627-0705
and
(ii) if to Seller:
UniDynamics/Phoenix, Inc.
c/o Crane Co.
100 First Stamford Place
Stamford, CT 06902
Attention: Secretary
Telephone No. (203) 363-7300
FAX No. (203) 363-7350
with copy to:
Paul R. Hundt, Esq.
General Counsel
Crane Co.
100 First Stamford Place
Stamford, CT 06902
Telephone No. (203) 363-7220
FAX No. (203) 363-7350
or such other addresses as may be specified by either party hereto pursuant to
notice given by such party in accordance with the provisions of this Section
12.7.
12.8 Benefit of the Agreement. This Agreement shall
be binding upon the parties hereto and their respective successors and assigns
and shall inure to the benefit of the parties hereto and their permitted
successors and assigns.
12.9 Headings. The headings used in this Agreement
are for convenience only, shall not be deemed to constitute a part hereof, and
shall not be deemed to limit, characterize or in any way affect the provisions
of this Agreement.
12.10 Entire Agreement. The Acquisition Agreements
contain the entire agreement and understanding of
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the parties with respect to the subject matter hereof, supersede all prior
agreements of the parties relating to the subject matter hereof, including
without limitation that certain letter of intent dated November 5, 1992 among
the parties, as amended, and no other representations, promises, agreement or
understandings regarding the subject matter hereof shall be of any force or
effect unless in writing, executed by the party to be bound and dated on or
subsequent to the date hereof.
12.11 Number. Wherever from the context it appears
appropriate, each item stated in either the singular or plural herein shall be
deemed to include the other without otherwise changing the meaning thereof.
12.12 Modifications and Waivers. No change,
modification or waiver of any provision of this Agreement shall be valid or
binding unless it is in writing dated subsequent to the date hereof and signed
by the parties intended to be bound. No waiver of any breach, term or
condition of this Agreement by either party shall constitute a subsequent
waiver of the same or any other breach, term or condition.
12.13 Assignment. This Agreement may not be assigned
by any party without prior written consent of the other parties.
12.14 Separable Provisions. If any provision of this
Agreement shall be held invalid or unenforceable, the remainder nevertheless
shall remain in full force and effect.
12.15 Counterparts. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
12.16 Governing Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of Arizona.
12.17 Recitals, Schedules and Exhibits. The recitals,
schedules and exhibits to this Agreement are incorporated herein and, by this
reference, made a part hereof as if fully set forth at length herein.
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12.18 No Third Party Beneficiaries. Nothing herein
expressed or implied is intended or shall be construed to confer upon or give
to any person, firm or corporation, other than the parties hereto and their
respective permitted successors and assigns or personal representatives, any
interest in, or any rights or remedies under or by reason of, this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective duly authorized representatives as
of the date first above written.
SELLER:
UNIDYNAMICS/PHOENIX, INC.
By: _____________________________
PRESIDENT
SHAREHOLDER:
UNIDYNAMICS CORPORATION
By:_____________________________
VICE PRESIDENT
BUYER:
PACSCI ACQUISITION, INC.
By:_____________________________
VICE PRESIDENT
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<PAGE> 63
LIST OF SCHEDULES & EXHIBITS
SCHEDULES:
<TABLE>
<S> <C>
1.2 Accounts Receivable as of 2/28/93
1.18 Customer Furnished Material (identified to Exclude A/Rs)
1.19 Customer Owned Equipment-Listed
1.20 Employee Benefit Plans - included Pension Plans (have to have provided copies of plans or summaries)
1.26 Excluded Accounts Receivable
1.29 February Balance Sheet
1.32 Interim Financial Statements
1.40 Permitted Exceptions
1.41 Personal Property List
1.45 Prepaid Expense
1.48 Proprietary Rights
1.55 Required Consent Contracts
1.65 Terminated Contract Inventory
1.68 Year-End Financial Statements
2.3 Other Excluded Assets
3.5 Allocation of Purchase Price
4.4 Required Consents of Seller
4.8 Contracts in excess of $10,000
4.9 Pending Litigation
4.10(a) Product Liability and Warranty Claims
4.10(b) Express Warranties
4.11 Inventories Sold Since February 28, 1993
4.13 Infringements upon Third Party Intellectual Property Rights
4.14 Off-site Personal Property
4.16 Permits & Licenses
4.17 Employees
4.19 OSHA Citations
4.20 Environmental Problems on Real Estate and Leased Real Estate
4.24 Ten Largest Customers & Suppliers (1991 and 1992)
4.25 List of Insured Risks
5.5 Required Consents of Purchase
5.8 Purchaser's Pending Litigation
5.9 Purchaser's Security Clearances
10.7 Environmental Report on Leased Real Estate
10.11 Dubois Letter
</TABLE>
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<PAGE> 64
EXHIBITS
<TABLE>
<S> <C>
A. Assumption of Liabilities Agreement
B. Lease
C. Bill of Sale and General Assignment
D. Opinion of Seller's Counsel
E. Guaranty of Crane Co.
F. Opinion of Purchaser's Counsel
G. Guaranty of Pacific Scientific Company
</TABLE>
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<PAGE> 1
EXHIBIT 10.11
_______________________________________________________________________________
STOCK PURCHASE AGREEMENT
By and Among
PACIFIC SCIENTIFIC COMPANY
and
E. JAMES GRETHE,
W. HAL GURLEY,
ANN K. HAMIL,
BENTON L. BEAGHAN,
GREGORY K. EDWARDS,
ROMANO K. GULISAO,
JACK W. MCDANIEL, JR.,
MARION R. STONE, JR.
and
KELLY L. TRUMPOUR,
Shareholders of
AUTOMATION INTELLIGENCE, INC.
Dated as of August 6, 1993
_______________________________________________________________________________
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I SALE AND PURCHASE OF SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.01 Sale of Shares at the Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.02 Payment of Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.03 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.04 Securities Act of 1933 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . 3
2.01 Good Standing of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.02 Authority Relative to this Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.03 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.04 Status of the Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.05 Title to Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.06 Subsidiaries of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.07 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.08 Title to and Condition of Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.09 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.10 Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.11 Accounts Receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.12 Liabilities and Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.13 Patents, Trademarks, Trade Names and Copyrights . . . . . . . . . . . . . . . . . . . . . 7
2.14 Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.15 Employee Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.16 Labor Unions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.17 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.18 Purchase and Sales Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.19 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.20 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.21 Environmental Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . 11
2.22 Absence of Certain Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.23 Interest in the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
2.24 Brokers or Finders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
2.25 Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
2.26 Articles of Incorporation, Bylaws, Minute Books . . . . . . . . . . . . . . . . . . . . . 16
2.27 Officers and Directors, Employees, Powers of Attorney and Certain Authorized Persons . . . 16
2.28 Product Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
2.29 Product Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
2.30 Full Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
</TABLE>
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<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PS CO . . . . . . . . . . . . 18
3.01 Legal Status . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.02 Corporate Acts and Proceedings . . . . . . . . . . . . . . . . . 18
3.03 Compliance with Other Instruments . . . . . . . . . . . . . . . 18
3.04 Consents and Approvals . . . . . . . . . . . . . . . . . . . . . 18
3.05 No Brokers or Finders . . . . . . . . . . . . . . . . . . . . . 19
3.06 Employment of Company Employees . . . . . . . . . . . . . . . . 19
3.07 Full Disclosure . . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE IV CONDITIONS TO THE OBLIGATIONS OF PS CO . . . . . . . . . . . . . 19
4.01 Compliance with Terms . . . . . . . . . . . . . . . . . . . . . 20
4.02 Representations and Warranties . . . . . . . . . . . . . . . . . 20
4.03 Absence of Litigation . . . . . . . . . . . . . . . . . . . . . 20
4.04 Letters from Auditors . . . . . . . . . . . . . . . . . . . . . 20
4.05 Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . . 20
4.06 Resignation of Officers and Directors . . . . . . . . . . . . . 20
4.07 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.08 Key Man Insurance . . . . . . . . . . . . . . . . . . . . . . . 21
4.09 Investment Intent Letters . . . . . . . . . . . . . . . . . . . 21
4.10 Employment and Consulting Agreements . . . . . . . . . . . . . . 21
4.11 Proprietary Information and Inventions Agreements . . . . . . . 21
4.12 Non-Compete Agreements . . . . . . . . . . . . . . . . . . . . . 21
4.13 Renegotiation of Lease . . . . . . . . . . . . . . . . . . . . . 21
4.14 Consents and Approvals . . . . . . . . . . . . . . . . . . . . . 21
4.15 Approval of Documentation . . . . . . . . . . . . . . . . . . . 22
4.16 Due Diligence Review . . . . . . . . . . . . . . . . . . . . . . 22
4.17 No Adverse Change . . . . . . . . . . . . . . . . . . . . . . . 22
4.18 Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.19 Final Board Approval . . . . . . . . . . . . . . . . . . . . . . 22
4.20 Release of Bank Guaranty . . . . . . . . . . . . . . . . . . . . 22
4.21 Release of Company Guaranty . . . . . . . . . . . . . . . . . . 22
ARTICLE V CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE SHAREHOLDERS . . . . . . . . 22
5.01 Compliance with Terms . . . . . . . . . . . . . . . . . . . . . 22
5.02 Representations and Warranties . . . . . . . . . . . . . . . . . 23
5.03 Absence of Litigation . . . . . . . . . . . . . . . . . . . . . 23
5.04 Opinion of Counsel of PS Co 23
5.05 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.06 Approval of Documentation . . . . . . . . . . . . . . . . . . . 23
5.07 Employment and Consulting Agreements . . . . . . . . . . . . . . 23
5.08 Non-Compete Agreements . . . . . . . . . . . . . . . . . . . . . 23
5.09 Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . 24
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<Captions>
Page
----
<S> <C> <C>
ARTICLE VI COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
6.01 Inspection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
6.02 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
6.03 Conduct of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
6.04 Publicity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
6.05 Collection of Accounts Receivable; Assignment of Uncollected Accounts . . . . . . . 25
ARTICLE VII INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
7.01 The Shareholders' Indemnification of PS Co . . . . . . . . . . . . . . . . . . . . . 25
7.02 PS Co's Indemnification of the Shareholders . . . . . . . . . . . . . . . . . . . . 26
7.03 Survival of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . 27
7.04 Notice and Opportunity to Defend . . . . . . . . . . . . . . . . . . . . . . . . . . 27
ARTICLE VIII MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
8.01 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
8.02 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
8.03 Payment of Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
8.04 Execution in Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
8.05 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
8.06 Headings, Gender and Number . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
8.07 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
8.08 Shareholders' Acknowledgement . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
8.09 Applicable Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
</TABLE>
EXHIBITS
Exhibit A Shareholder Distribution Percentage
Exhibit B Shareholder Note Agreement
Exhibit C Form of Purchase Note
Exhibit D Investment Intent Letter
Exhibit E Form of Opinion of Gambrell & Stolz
Exhibit F Form of Employment Agreement
Exhibit G Form of Consulting Agreement
Exhibit H Form of Proprietary Information and Inventions Agreement
Exhibit I Form of Non-Compete Agreement
Exhibit J Lease
Exhibit K Form of Opinion of Paul, Hastings, Janofsky & Walker
-iii-
<PAGE> 5
SCHEDULES
<TABLE>
<S> <C>
Schedule 2.01 List of Jurisdictions
Schedule 2.02 Authority Relative to this Agreement
Schedule 2.07 Financial Statements
Schedule 2.07A Exceptions to GAAP
Schedule 2.08 Exceptions to Title to Properties
Schedule 2.12 Liabilities and Obligations
Schedule 2.13 Patents, Trademarks, Trade Names and Copyrights
Schedule 2.13A Security Measures
Schedule 2.14 Material Contracts
Schedule 2.17 Insurance
Schedule 2.18 Purchase and Sales Commitments
Schedule 2.21 Environmental Representations and Warranties
Schedule 2.23 Interests in the Company
Schedule 2.25 Permits
Schedule 2.27 Officers and Directors, Employees, Powers of Attorney and Certain Authorized Persons
Schedule 2.28 Product Liability Claims
Schedule 2.29 Product Warranty
</TABLE>
-iv-
<PAGE> 6
THIS PAGE MUST BE KEPT AS THE LAST PAGE OF THE DOCUMENT.
<PAGE> 7
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is
made and entered into as of August 6, 1993, by and among PACIFIC SCIENTIFIC
COMPANY, a California corporation ("PS Co"), and E. James Grethe, W. Hal
Gurley, Ann K. Hamil, Benton L. Beaghan, Gregory K. Edwards, Romano K.
Gulisao, Jack W. McDaniel, Jr., Marion R. Stone, Jr. and Kelly L. Trumpour
(each a "Shareholder" and collectively, the "Shareholders").
RECITALS
WHEREAS, the Shareholders are the owners of all of
the issued and outstanding shares of capital stock (the "Shares") of Automation
Intelligence, Inc., a Georgia corporation (the "Company"); and
WHEREAS, the Company is engaged in the business of
manufacture, sale and distribution of machine motion control systems for
industrial factory automation (the "Business"); and
WHEREAS, the Shareholders desire to sell the Shares
and PS Co desires to purchase the Shares, all pursuant to the terms and
conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual
agreements and covenants hereinafter set forth, the parties hereto agree as
follows:
ARTICLE I
SALE AND PURCHASE OF SHARES
1.01 Sale of Shares at the Closing. Subject to the
terms and conditions set forth in this Agreement and on the basis of and in
reliance upon the representations, warranties, obligations and agreements set
forth in this Agreement, the Shareholders hereby agree to sell, assign,
transfer, convey and deliver to PS Co at the Closing (as defined in Section
1.03), and PS Co hereby agrees to purchase and receive from the Shareholders,
free and clear of all liens, charges and encumbrances, all of the Shares.
1.02 Payment of Consideration. The consideration to
be paid by PS Co for the Shares (the "Consideration") shall be paid as follows:
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(a) At the Closing, PS Co shall deliver by
certified or bank cashier's checks to the Shareholder Note Representative (as
such term is defined in Section 1.02(b)) the aggregate sum of Three Million
Three Hundred Thousand Dollars ($3,300,000), which amount shall be distributed
to the Shareholders as set forth on Exhibit A hereto; and
(b) At the Closing, PS Co shall cause the
Company to deliver to Gambrell & Stolz (the "Shareholder Note Representative"),
acting for the benefit of W. Hal Gurley, Ann K. Hamil, Benton L. Beaghan,
Gregory K. Edwards, Romano K. Gulisao, Jack W. McDaniel, Jr., Marion R. Stone,
Jr. and Kelly L. Trumpour (the "Shareholder Note Beneficiaries") under the
Shareholder Note Agreement in the form of Exhibit B hereto among the
Shareholder Note Representative and the Shareholder Note Beneficiaries, three
non-negotiable, non-interest bearing promissory notes substantially in the form
of Exhibit C hereto (the "Purchase Notes"), payable on March 31, 1995, March
31, 1996 and March 31, 1997, respectively, in amounts calculated pursuant to
the formula specified therein, which amounts shall be distributed by the
Shareholder Note Representative as provided in the Shareholder Note Agreement
and shall be subject to PS Co's right to setoff amounts payable under the
Purchase Notes pursuant to Section 6.04 hereof and the indemnification
provisions of Article VII hereof.
1.03 Closing. Subject to the fulfillment of the
conditions precedent specified in Articles V and VI of this Agreement, the
purchase and sale of the Shares shall be consummated at a closing (the
"Closing") to be held at 10 a.m. local time at the offices of Paul, Hastings,
Janofsky & Walker in Atlanta, Georgia on August 6, 1993 or on such other date
or at such other time as PS Co and the Shareholders shall mutually agree (such
date and time being hereinafter referred to as the "Closing Date").
1.04 Securities Act of 1933.
(a) The Purchase Notes will not be
registered under the Securities Act of 1933, as amended (the "Securities Act"),
nor will any Shareholder be entitled to cause PS Co to effect any registration
under the Securities Act or any state securities law of the Purchase Notes.
Each Shareholder receiving an interest in the Purchase Notes will be required
to bear the economic risk of his or her investment in the Purchase Notes for
the term of the Purchase Notes.
(b) PS Co's obligation to deliver the
Purchase Notes is conditioned on the completion by the Company and the
Shareholder Note Representative of all
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actions reasonably requested by PS Co to assure PS Co that the issuance of the
Purchase Notes is exempt from the registration and prospectus delivery
requirements of the Securities Act. Without limiting the generality of the
preceding sentence, prior to delivery of the Purchase Notes as provided in
Section 1.02(b), PS Co shall have received from each Shareholder receiving an
interest in the Purchase Notes at the Closing a letter agreement (an
"Investment Intent Letter") substantially in the form of Exhibit D hereto.
(c) The Purchase Notes shall be endorsed
with the following restrictive legend (and with such other legend or legends as
may be required by applicable state law or state authorities):
"THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED OR ANY STATE SECURITIES LAWS. THIS NOTE HAS BEEN
ACQUIRED FOR INVESTMENT PURPOSES ONLY AND NOT WITH A VIEW TO DISTRIBUTION.
NEITHER THIS NOTE NOR ANY INTEREST THEREIN MAY BE OFFERED FOR SALE, SOLD,
PLEDGED OR OTHERWISE TRANSFERRED."
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS
The Shareholders make the following representations and
warranties to PS Co, each of which shall be true and correct on and as of the
date hereof and as of the Closing Date:
2.01 Good Standing of the Company. The Company is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Georgia and is duly qualified to transact business as a
foreign corporation in, and is in good standing under the laws of, each other
jurisdiction in which the failure to so qualify would have a material adverse
effect on the business or financial condition of the Company, all of which
jurisdictions are listed on Schedule 2.01 attached hereto. The Company has
full corporate power and authority to own, lease and operate its properties and
conduct the business currently being conducted by it.
2.02 Authority Relative to this Agreement. The
Company and each Shareholder have full power and authority to do and perform
all acts and things required to be done by each of them, respectively, under
this Agreement. Neither the execution or the delivery of this Agreement, nor
the consummation of the transactions contemplated hereby, nor
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<PAGE> 10
compliance with or fulfillment of the terms and provisions of this Agreement,
will (i) conflict with or result in a breach of the terms and provisions of, or
constitute a default, which would have a material adverse effect on the
business or financial condition of the Company, under (a) the Company's
Articles of Incorporation or Bylaws, (b) any note of which the Company, or any
of the Shareholders is the maker or guarantor, (c) any law or administrative
regulation applicable to the Company or any of the Shareholders or any of their
respective properties, or (d) any indenture, agreement, mortgage, deed to
secure debt or security instrument, any judgment, order, award or decree of any
court or governmental agency or any other instrument or restriction to which
the Company or any of the Shareholders is a party or by which the Company or
any of the Shareholders is bound; (ii) except as set forth on Schedule 2.02
attached hereto, give any party with rights under any such indenture,
agreement, mortgage, deed to secure debt, security instrument, judgment, order,
award, decree or other instrument or restriction the right to terminate, modify
or otherwise change the rights or obligations of the Company or any of the
Shareholders under such indenture, agreement, mortgage, deed to secure debt,
security instrument, judgment, order, award, decree or other instrument or
restriction; and, (iii) result in the creation or imposition of any lien,
charge or encumbrance of any nature whatsoever upon any of the properties,
assets or outstanding securities of the Company. Except as set forth on
Schedule 2.02 attached hereto, no authorization, approval or consent of, or
notice to or filing with any federal or state governmental department,
commission, bureau or agency or other public body or authority is or will be
required for the execution, delivery or performance of this Agreement by each
of the Shareholders or for the consummation by the Company or any of the
Shareholders of the transactions contemplated hereby. This Agreement
constitutes, and such other agreements and instruments when duly executed and
delivered by any of the Shareholders, will constitute, legal, valid and binding
obligations of such Shareholder and will be enforceable against such
Shareholder in accordance with their respective terms.
2.03 Capitalization. The authorized capital stock of
the Company consists solely of One Million (1,000,000) authorized shares of
common stock, of which Two Hundred Thirty-Seven Thousand Five Hundred (237,500)
shares are issued and outstanding. There are no options, warrants, calls,
commitments or other rights outstanding of any nature whatsoever for the
issuance or purchase of common stock, securities convertible into or
exchangeable for common stock or any other securities of the Company by any
person or entity.
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2.04 Status of the Shares. All of the Shares have
been duly and validly issued, are fully paid and nonassessable, and have been
offered and sold in compliance with all applicable federal and state securities
laws. None of the Shares has been issued in violation of the pre-emptive
rights of any present or former shareholder of the Company under the laws of
the State of Georgia or of the Articles of Incorporation of the Company or of
the terms of any agreement by which the Company is bound.
2.05 Title to Shares. Each of the Shareholders has
good, valid and marketable title to all Shares owned by him or her,
respectively, free and clear of all restrictions, claims, liens, charges and
encumbrances whatsoever. Each of the Shareholders has full right, power and
authority to sell, transfer and deliver such Shares to PS Co, and, upon
delivery of the certificate or certificates therefor, and PS Co's acceptance
thereof, will transfer to PS Co good, valid and marketable title thereto free
and clear of any restriction, claims, lien, charge or encumbrance whatsoever.
2.06 Subsidiaries of the Company. The Company has no
subsidiaries or investments in any other corporation, partnership or other
entity.
2.07 Financial Statements. Schedule 2.07 sets forth
(i) the financial statements of the Company as of and for the fiscal years
ended September 30, 1990, September 30, 1991 and September 30, 1992, which
financial statements have been audited by Thompson & Reed, certified public
accountants, and (ii) the unaudited balance sheet of the Company at March 31,
1993, the balance sheet of the Company at June 30, 1993, audited by Reed, Quinn
& McClure, certified public accountants (the "Balance Sheet"), and unaudited
related statements of income, cost and expense for the quarterly periods ending
March 31 and June 30, 1993 (all of such financial statements, balance sheets
and statements of income, cost and expense being hereinafter referred to
collectively as the "Financial Statements"). The Financial Statements (i) are
in accordance with the books and records of the Company, (ii) are true, correct
and complete and present fairly and accurately the financial condition and
results of operations of the Company in all material respects as of the dates
and for the periods indicated, and (iii) except as disclosed on Schedule 2.07A,
have been prepared in accordance with generally accepted accounting principles
consistently applied.
2.08 Title to and Condition of Properties. Except as
set forth on Schedule 2.08 attached hereto, the Company has good, valid and
indefeasible title to, or in the
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case of leases, valid and existing leasehold interests in, all of its
properties, real and personal, including but not limited to the assets
reflected on the Balance Sheet, free and clear of all liens, claims and
encumbrances of any nature whatsoever. With exceptions which are not in the
aggregate material, all properties and assets actively used in the conduct of
the business of the Company are in good condition and repair, usable in the
ordinary course of business, free of inherent defects, and adequate for the
conduct of the Company's business. All leases pursuant to which the Company
leases as lessee real or personal property are valid and enforceable in
accordance with their terms and are in full force and effect, and the Company
has not received any notice of cancellation or termination under any option or
right reserved to the lessor under any such lease or any notice of default
under any such lease and there is no event which, with notice or lapse of time
or both, would constitute a default under any such lease.
2.09 Tax Matters. Within the times and in the manner
prescribed by laws, the Company has filed all federal, state, county, city and
other tax returns required by law and has paid all taxes, assessments, and
penalties due and payable. The amounts booked as provisions for taxes on the
Financial Statements are sufficient for payment of all unpaid taxes of the
Company through June 30, 1993. Copies of the Company's federal income tax
returns for the past five years and all correspondence with the Internal
Revenue Service during the past five years have been provided to PS Co. The
Shareholders hereby acknowledge that PS Co is not responsible for any taxes
imposed on the Consideration paid by PS Co under this Agreement.
2.10 Inventory. All of the inventories shown in the
Balance Sheet and all inventories on hand as of the Closing Date will consist
of items of a quality and quantity usable and salable in the ordinary course of
business by the Company, except for obsolete and slow-moving items and items
below standard quality, all of which have been written down on the books of the
Company to net realizable market value or for which adequate reserves have been
established and given effect to on the Balance Sheet.
2.11 Accounts Receivable. All accounts, notes and
other receivables shown on the Balance Sheet are valid, existing and fully
enforceable accounts which have arisen out of sale or other transactions in the
ordinary course of business, and all such accounts are fully collectable within
90 days of the Closing Date.
2.12 Liabilities and Obligations. The Company does
not have any liabilities or obligations (direct or
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indirect, contingent or absolute, matured or unmatured) of any nature
whatsoever, whether arising out of contract, tort, statute or otherwise,
including federal or state income tax liabilities, except:
(a) liabilities and obligations in the
amounts and categories reflected, reserved against, disclosed or given effect
to in the Balance Sheet;
(b) liabilities and obligations incurred
since June 30, 1993 which are in the ordinary course of business and consistent
with past practices;
(c) liabilities and obligations under the
Material Contracts (as defined below) and contracts entered into in the
ordinary course of business to which the Company is a party existing on the
Closing Date; and
(d) liabilities and obligations not
reflected, reserved against, disclosed or given effect to in the Balance Sheet
which are disclosed on Schedule 2.12.
There is no basis for assertion against the Company of any liabilities or
obligations, which are in the aggregate material to the financial position of
the Company, which are not adequately reflected, reserved against, disclosed or
given effect to in the Financial Statements except for liabilities and
obligations enumerated in clauses (b), (c) and (d) of this Section 2.12.
2.13 Patents, Trademarks, Trade Names and Copyrights.
Schedule 2.13 contains a list and brief description of (i) all patents,
trademarks, trade names and copyrights, and all applications therefor, which
are used or useful in the business of the Company and which are owned by or
registered in the name of the Company or in which the Company has any rights as
licensee or otherwise. Except as set forth on Schedule 2.13 attached hereto,
the Company is not a party to any license, royalty or similar agreements. The
Company owns or possesses adequate licenses or other rights to use all patents,
trademarks, trade names and copyrights necessary to carry on its business as
now conducted and as proposed to be conducted, and there are no infringements
or conflicts, or bases therefor, with the rights of any third party in respect
thereof. To the knowledge of the Shareholders, no third party has a right
prior to that of the Company to use the name "Automation Intelligence, Inc."
Except as disclosed on Schedule 2.13 attached hereto, to the knowledge of the
Shareholders the Company owns and has the unrestricted right to use every trade
secret, know-how, process, formula, improvement, discovery, development,
design, technique, blueprint,
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specification, invention, process, computer program, data and information
(collectively herein "Proprietary Information") required for or incident to the
design, development, manufacture, operation, sale and use of all products and
services sold or proposed to be sold or rendered by the Company free and clear
of any right, lien, encumbrance or claim of others. All security measures
taken by or on behalf of the Company to protect the secrecy, confidentiality
and value of the Proprietary Information are described on Schedule 2.13A. The
Company has provided PS Co with copies of all the agreements listed on Schedule
2.13.
2.14 Contracts and Other Agreements. Schedule 2.14
contains a list of all written or oral (i) contracts or understandings for
employment of any director, officer or employee; (ii) contracts with any labor
union; (iii) contracts not terminable by the Company without penalty on 30 days
(or less) notice; (iv) distributor, sales agency, manufacturer's representative
or similar contracts, or advertising contracts; (v) contracts involving the
payment by or to the Company of, in the aggregate, more than $5,000.00; (vi)
agreements relating to the borrowing of money including, without limitation,
loan or credit agreements, notes, mortgages, deeds to secure debt, security
agreements and guarantees of the obligations of others for borrowed money;
(vii) bonus, pension, savings, profit-sharing, retirement, stock purchase,
stock option, stock appreciation, hospitalization, medical insurance or similar
fringe or employee benefits plans or agreements in effect with respect to its
employees or former employees or the employees of others and any related
insurance contracts and trusts and custodial agreements (collectively, the
"Employee Plans"); (viii) outstanding powers of attorney; (ix) contracts made
outside the ordinary course of business; or (x) other contracts material to the
business and operations of the Company, other than such contracts or agreements
disclosed on Schedule 2.13. All such contracts or agreements disclosed on
Schedules 2.13 and 2.14 are hereinafter referred to collectively as the
"Material Contracts". All of the Material Contracts are legal, valid and
binding and are in full force and effect and enforceable in accordance with
their terms, except as such enforceability is limited by bankruptcy, insolvency
and other similar laws affecting the enforcement of creditors' rights and by
equitable principles. Except as set forth on Schedules 2.13 and 2.14, the
Company has in all material respects performed all obligations to be performed
by it to date under, and is not in default or breach of, any of the Material
Contracts, the Company has not received any notice, claim or allegation of
default or material breach thereof by the Company (or an event of default which
with notice or lapse of time or both would constitute a default or an event
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of default thereunder), and to the Shareholders' knowledge, there is no default
or breach under any of the Material Contracts by any other party thereto.
2.15 Employee Plans.
(a) Each Employee Plan is in substantial
compliance with the requirements prescribed by any and all statutes, orders, or
governmental rules or regulations currently in effect, including, but not
limited to, the Internal Revenue Code of 1986, as amended (the "Code") and the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"). The
Company has in all respects performed all material obligations (whether of a
contractual or fiduciary nature or otherwise) required to be performed by it
under, is not in material violation of, and has no knowledge of any existing
default or violation by any other party to, any of the Employee Plans. The
Financial Statements reflect adequate reserves for the Company's obligations
under all Employee Plans.
(b) With respect to any contract,
agreement, plan or arrangement which is an "employee benefit plan", as defined
in Section 3(3) of ERISA, maintained by the Company covering its employees or
to which the Company is obligated to contribute:
(i) as to each such employee
benefit plan which is a "pension plan" within the meaning of ERISA
Section 3(2) (but not including pension plans within the meaning
of 3(37) of ERISA): each such pension plan is qualified under
Section 401(a) of the Code and complies in all material respects
with ERISA; no such pension plan has an "accumulated funding
deficiency" whether or not waived, as defined in Section 302(a)(2)
of ERISA; as of June 30, 1993 each such pension plan had
sufficient assets to fully fund all benefits accrued under each
such pension as of that date; no "reportable event", within the
meaning of Section 4043(b) of ERISA, has occurred with respect to
any such pension plan; no notice of intent to terminate any such
pension plan has been filed with the Pension Benefit Guaranty
Corporation (the "PBGC") under Section 4041 of ERISA, nor has the
PBGC instituted any proceeding under Section 4042 of ERISA to
terminate any such pension plan; there has been no termination or
partial termination of any such pension plan within the meaning of
Section 411(d)(3) of the Code; no such plan is presently engaged
in any non-exempt "prohibited transaction" within the meaning of
Section 4975 of the Code; and all contributions required to be
made to each
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such pension plan have been made in the amounts recommended by
the enrolled actuary for each such plan, or pursuant to any other
contract or agreement requiring contributions on any other basis;
and
(ii) as to each such employee
benefit plan, all disclosures and all filings respecting each such
plan required under ERISA or the Code to have been timely provided
or filed, as the case may be, have been so provided or filed and
each such plan has been administered in accordance with its
governing documents.
(c) With respect to all employee benefit
plans described in Subsection (b) above, there are no unfunded liabilities,
determined on the basis of actuarial assumptions which in the aggregate are not
less conservative than the assumptions currently prescribed for valuing
benefits by the PBGC.
(d) The Company is not, and never has been,
obligated to make contributions to and is not, and never has been, otherwise
subject to any "multi-employer pension plan", as defined in Section 3(37) of
ERISA and Section 414(f) of the Code.
2.16 Labor Unions. The Company knows of no
activities or proceedings of any labor union (or representatives thereof) to
organize any unorganized employee of the Company, or of any strikes,
slow-downs, work stoppages, lock outs, or threats thereof, by or with respect
to any of the employees of the Company.
2.17 Insurance. Schedule 2.17 contains a list and
brief description of the policies of fire, liability (including, without
limitation, products liability), life and other forms of insurance held by the
Company covering any of its directors, officers, employees, agents, real or
personal property or operations. Copies of all such policies have been
delivered to PS Co. There is no default with respect to any provision
contained in such policies nor has there been any failure to give any notice or
present any claim under any such policies in due and timely fashion. No notice
of cancellation or nonrenewal of any such policy has been received. Such
policies are in amounts determined to be adequate by the management of the
Company, and policies in such amounts shall be outstanding and in full force
and effect on the Closing Date.
2.18 Purchase and Sales Commitments. The Company has
performed all of the obligations required to be performed by it to date under
all its purchase agreements
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and open purchase orders as conditions precedent to the delivery of the items
or services called for therein. No such purchase agreement is in excess of the
ordinary, common and usual requirements of the business of the Company. Except
as set forth on Schedule 2.18, to the knowledge of the Shareholders, no
supplier or vendor of proprietary material or products not readily available
from other sources is unable or unwilling to perform in accordance with the
terms of any purchase agreement or open purchase order entered into between the
Company and such supplier or vendor. The Company has performed in all material
respects all of the obligations required to be performed by it to date under
all sales agreements and other sales commitments to its customers. Except as
set forth on Schedule 2.18, to the knowledge of the Shareholders, no customer
of the Company is unable or unwilling to perform under the terms of any sales
agreement entered into between the Company and such customer.
2.19 Litigation. There are no legal actions, suits,
claims, proceedings or investigations pending or to the knowledge of the
Shareholders, threatened against or affecting the Company, its business or its
assets, nor to the knowledge of the Shareholders is there any basis for any
such action, suit, claim, proceeding or investigation arising out of action or
inaction by the Company prior to the Closing Date. The Company is not in
default with respect to any order, writ, injunction or decree of any court or
governmental department, commission, board, bureau, agency or instrumentality.
2.20 Compliance with Laws. The Company is in
compliance in all material respects with all laws, orders, decrees, ordinances
and published regulations of any governmental authority applicable to its
business and operations. Without limiting the generality of the foregoing, the
Company has complied in all material respects with all applicable federal,
state and local laws, regulations, orders or decrees relating to wages, hours,
hiring, promotion, retirement, working conditions, non-discrimination, health,
safety, pension benefits and trade regulation, the noncompliance with which
could affect materially and adversely the assets, business, property, financial
condition, prospects or results of operations of the Company.
2.21 Environmental Representations and Warranties.
(a) Except as specifically set forth in
Schedule 2.21:
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(i) The Company is conducting and
has at all times conducted its business and operations in
compliance with all applicable statutes, laws, rules, regulations,
ordinances, permits, orders, decrees or other obligations lawfully
imposed by governmental authority in effect at the relevant times
pertaining to protection of the environment, the treatment,
emission and discharge of gaseous, particulate and effluent
pollutants and the generation, manufacture, production,
refinement, processing, use, handling, storage, treatment,
removal, transport, transloading, cleanup, decontamination,
discharge and disposal of Hazardous Substances (as hereinafter
defined), including, without limitation, those statutes, laws,
rules and regulations set forth in Section 2.21(b) below
(collectively, "Environmental Laws"), and no proceedings are
pending or, to the knowledge of the Shareholders, threatened
against the Company with respect to the foregoing matters;
(ii) The Company has not received
any notice that it is considered to be a potentially responsible
party with respect to any site listed or proposed to be listed on
the National Priorities List pursuant to the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as
amended, 42 U.S.C. Sections 9601, et seq. ("CERCLA"), or any
registry or inventory of hazardous waste or similar sites
maintained by any state of the United States of America or under
any similar Environmental Law;
(iii) There are no conditions
(including, without limitation, the presence of any Hazardous
Substance in, on or about any such property or the migration of
any Hazardous Substance from or across any such property) existing
on any of the properties currently or formerly owned, leased, or
occupied by the Company that require remedial action, removal or
closure by the Company under any Environmental Laws;
(iv) No claim, demand, or action
has been made or threatened against or upon the Company, or, to
the knowledge of the Shareholders, any person or entity from whom
or to whom the Company has at any time leased any real property,
based upon or relating to alleged damage to health caused by any
Hazardous Substance;
(v) The Company has not been
charged with improperly generating, manufacturing, producing,
refining, processing, using, handling, storing,
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treating, removing, transporting, discharging or disposing of any
Hazardous Substance;
(vi) There have been no
environmental inspections, investigations, studies, tests, reviews
or other analyses conducted in relation to any property currently
owned or leased by the Company during the time that the Company
has owned or leased such property, except as may have been
performed by or on behalf of the Company, or by any federal, state
or local environmental agency or authority, as part of routine
monitoring of environmental compliance and copies of reports or
written documentation of all such inspections, investigations,
studies, tests, reviews or other analyses have been provided to PS
Co;
(vii) There is no condition that may
require under any Environmental Laws remediation or closure of, or
any other corrective action concerning, any site or facility to
which the Company has sent any Hazardous Substance for disposal or
treatment; and
(viii) The Shareholders acknowledge
and agree that any change or increase after the Closing Date in
the types or quantities of any Hazardous Substance on, under or
from any of the properties currently or formerly owned, leased or
occupied by the Company shall not by itself demonstrate or
establish or create any presumption that a discharge, release,
disposal or abandonment by the Company of Hazardous Substances on,
under or from such properties has occurred after the Closing Date.
(b) For purposes of this Agreement,
"Hazardous Substance" shall mean (x) any flammable, ignitable, corrosive,
reactive, radioactive or explosive substance or material, hazardous waste,
toxic substance or related material, (y) any other substance or material
defined or designated as a hazardous or toxic substance, material or waste by
applicable federal, state or local laws or regulations (including, without
limitation, any Environmental Laws) currently in effect or as amended or
promulgated in the future, and (z) such other substances, materials and wastes
that are or become regulated under applicable federal, state or local laws or
regulations, and shall include, without limitation:
(i) those substances included
within the definitions of "hazardous substances", "hazardous
materials", "toxic substances" or "solid waste" in CERCLA, the
Resource Conservation and Recovery Act, 42 U.S.C. Sections 6901 et
seq., and the Hazardous
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Materials Transportation Act, 49 U.S.C. Section 1801 et seq.,
and in the regulations promulgated pursuant to said Environmental
Laws;
(ii) those substances listed in
the United States Department of Transportation Table (49 CFR
172,101 and amendments thereto) or by the Environmental Protection
Agency (or any successor agency) as hazardous substances (40 CFR
Part 302 and amendments thereto); and
(iii) any material, waste or
substance that is, in whole or in part, (w) petroleum, (x)
asbestos, (y) polychlorinated biphenyls or (z) designated as a
"hazardous substance" pursuant to Section 311 of the Clean Water
Act (33 U.S.C. Section 1321) or listed pursuant to Section 307 of
the Clean Water Act (33 U.S.C. Section 1317), or Section 112 or
other Section of the Clean Air Act, as amended.
2.22 Absence of Certain Changes. Since June 30,
1993, there has not been:
(a) any change which had or may have,
either singly or in the aggregate, a material adverse effect on the business or
assets of the Company;
(b) any declaration, setting aside or
payment by the Company of dividends or any other distribution by the Company of
assets or liabilities of any kind or any other payments or distributions of any
kind in respect of the capital stock of the Company, or any direct or indirect
redemption, purchase or other acquisition of such capital stock;
(c) any debt, liability or obligation
incurred by the Company except current liabilities incurred, and liabilities
under contracts entered into, in the ordinary course of business, none of which
would have a material adverse effect on the business or assets of the Company;
(d) any mortgage, pledge or subjection to
lien of any kind of any assets, tangible or intangible, of the Company other
than pursuant to purchase money liens on property and assets acquired in the
ordinary course of business;
(e) any purchase, sale, pledge, lease,
transfer or other disposition of any material contract, lease or asset of the
Company, or any cancellation, discharge or satisfaction of any obligations,
debts or
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claims, or waiver or release of any material rights, of the Company, except in
the ordinary course of business;
(f) any sale, assignment, pledge, lease,
transfer or other disposition by the Company of any interest in any franchise,
patent, trademark, trade name, copyright or license, except in the ordinary
course of business;
(g) any transaction by the Company except
in the ordinary course of business or as contemplated by this Agreement, none
of which would have a material adverse effect on the business or assets of the
Company;
(h) any damage, destruction or loss
(whether or not covered by insurance) materially and adversely affecting the
business or assets of the Company, with materiality for purposes of this
covenant being agreed to mean damage, destruction or loss in excess of $10,000;
(i) any labor dispute materially and
adversely affecting the business or assets of the Company;
(j) any increase in the compensation
payable or to become payable or in the benefits available to any officer or
employee of the Company under any employment, bonus or pension plan or other
contract or commitment other than normal merit increases under established
policies;
(k) any change in the authorized, issued or
outstanding capital stock of the Company, any pledge, hypothecation or other
encumbrance of any shares of such capital stock, or any issuance of any option,
warrant or other right to acquire, or security convertible into, shares of such
capital stock;
(l) any actual or, to the knowledge of the
Shareholders, threatened cancellations by customers or suppliers of the Company
of any material contracts for the purchase or sale of goods or services;
(m) any material increase in workers'
compensation claims;
(n) any material change in any accounting
principle or method or election for federal or state income tax purposes used
by the Company; or
(o) any entering into or renewal of any
agreement, or otherwise any obligation incurred, to do any of the foregoing.
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2.23 Interest in the Company. Except as set forth on
Schedule 2.23, no officer, director or employee of the Company is presently a
party to any transaction with the Company, including without limitation any
obligation to pay money or otherwise, or any contract, agreement or other
arrangement providing for the employment of, furnishing of services by, rental
of real or personal property from or otherwise requiring payments to any such
officer, director or employee, any member of the family of such officer,
director or employee, or any corporation, partnership, trust or other entity in
which any such officer, director or employee or any member of the family of any
such officer, director or employee has a substantial interest or in which he or
she is an officer, director, trustee or partner.
2.24 Brokers or Finders. No person, firm,
corporation or other entity is entitled by reason of any act or omission of any
of the Company or the Shareholders to any broker's or finder's fee, commission,
or other similar compensation with respect to the execution and delivery of
this Agreement or any related agreement, or with respect to the consummation of
the transactions contemplated hereby.
2.25 Permits. Schedule 2.25 lists all material
approvals, permits and licenses (including all export and re-export licenses,
if any) (collectively, "Permits") granted to the Company from any federal,
state, or local governmental authority and relating to the business and
operations of the Company, and applications for any of the foregoing. All
Permits necessary in the conduct of the Company's business have been obtained
and are in full force and effect, and the Company is not in material violation
of any Permit, and no proceeding is pending or threatened to revoke or limit
any Permit.
2.26 Articles of Incorporation, Bylaws, Minute Books.
The copies of the Articles of Incorporation and Bylaws, and all amendments
thereto, of the Company which have been made available to PS Co are true,
correct and complete copies thereof. The minute books of the Company which
have been made available to PS Co contain accurate records of all meetings and
consents in lieu of meetings of the Board of Directors (and any committee
thereof) and voting shareholders of the Company since the time of incorporation
and accurately reflect all transactions referred to in such minutes and
consents in lieu of meetings.
2.27 Officers and Directors, Employees, Powers of
Attorney and Certain Authorized Persons. Schedule 2.27 sets forth a complete
and accurate list of:
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(a) the names of all directors and the
names of all officers and their offices of the Company;
(b) the names of all persons holding powers
of attorney from the Company and a summary statement of the terms thereof;
(c) the names of all persons authorized to
borrow money or incur or guarantee indebtedness on behalf of the Company;
(d) all safes, vaults and safe deposit
boxes maintained by or on behalf of the Company or in which any of its property
is held and the names of all persons authorized to have access thereto; and
(e) all bank accounts of the Company and
the names of all persons who are authorized signatories with respect to such
accounts, the capacities in which they are authorized and the terms of their
authorizations.
A list of the name and current annual rate of compensation
paid by the Company to each of its officers, directors and employees whose
annual rate of compensation exceeds Twenty-Five Thousand Dollars ($25,000.00)
has been provided to PS Co.
2.28 Product Liability. No product liability claims
are currently pending or, to the knowledge of the Shareholders, threatened
against the Company, and except as set forth on Schedule 2.28 attached hereto,
no product liability claims have been made against the Company prior to the
date hereof. Insurance policies maintained by the Company covering products
liability are in amounts deemed by management of the Company to be adequate.
2.29 Product Warranties. Schedule 2.29 sets forth a
complete and accurate description of (i) any and all product warranties given
by the Company in connection with the business of the Company, and any of such
warranties in written form are attached thereto, and (ii) all material warranty
problems experienced by the Company within the three year period prior to the
date hereof. The Financial Statements reflect adequate reserves for all such
warranties.
2.30 Full Disclosure. Neither this Agreement, nor
the Schedules or Exhibits hereto, nor any other certificate, statement or
document furnished or to be furnished to PS Co by or on behalf of the Company
or any of the Shareholders pursuant to or in connection with the transactions
contemplated by this Agreement contains or will
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contain any misstatement of a material fact or omits or will omit to state a
material fact necessary to make the statements contained herein or therein not
misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PS CO
PS Co makes the following representations and warranties to
the Shareholders, each of which shall be true and correct on and as of the date
hereof and as of the Closing Date:
3.01 Legal Status. PS Co is a corporation duly
organized, validly existing and in good standing under the laws of the State of
California, and has the corporate power and authority to enter into this
Agreement, to consummate the transactions contemplated hereby and to perform
its obligations hereunder.
3.02 Corporate Acts and Proceedings. The execution
and delivery of this Agreement and all other corporate acts and proceedings of
PS Co required for the due and valid authorization, execution and delivery of
this Agreement have been validly and appropriately taken. Subject to final
approval by PS Co's board of directors, this Agreement constitutes, and upon
the execution and delivery by PS Co of the other agreements between the parties
referred to herein and each instrument and certificate executed and delivered
by PS Co pursuant to this Agreement, such agreements and instruments shall
constitute, the legal, valid and binding obligation of PS Co, and is and will
be enforceable against PS Co in accordance with its terms, except as such
obligations and enforceability are limited by bankruptcy, insolvency and other
similar laws of general application affecting the enforcement of creditors'
rights and by equitable principles.
3.03 Compliance with Other Instruments. The
execution, delivery and performance by PS Co of this Agreement and the
consummation by PS Co of the transactions contemplated by this Agreement will
not violate or be in conflict with, result in a breach of or constitute (with
or without notice or lapse of time or both) a default under any material
agreement to which PS Co is a party or by which it is bound.
3.04 Consents and Approvals. No consent, approval,
authorization, license, permit or other action by, or filing with, any
governmental or regulatory authority is required by or with respect to PS Co in
connection with the
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execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby, except for such consents, actions or filings
as have or will have been obtained, taken or filed prior to the Closing Date.
3.05 No Brokers or Finders. No person, firm,
corporation or other entity is entitled by reason of any act or omission of PS
Co to any broker's or finder's fee, commission, or other similar compensation
with respect to the execution and delivery of this Agreement or any related
agreement, or with respect to the consummation of the transactions contemplated
hereby.
3.06 Employment of Company Employees. Except with
respect to E. James Grethe, from and after the Closing Date, the employment by
the Company of all persons employed by the Company on the date hereof shall
continue on terms no less favorable considered as a whole than those existing
on the date hereof. All such employees will receive retirement and other
employee benefits pursuant to Company plans in effect on the date hereof or
similar to those provided to employees of PS Co. If changes are made in the
retirement or benefit plans in effect on the date hereof with respect to such
employees, such employees will receive credit for employment with the Company
prior to the date hereof, except with respect to retirement plans, for which
credit for past service will be for vesting purposes only. The covenants and
agreements of PS Co set forth in this Section 3.06 shall not be deemed to
create for any employee of the Company employment with the Company on any basis
other than an "at will" basis.
3.07 Full Disclosure. Neither this Agreement, nor
the Schedules or Exhibits hereto, nor any other certificate, statement or
document furnished or to be furnished to the Shareholders by or on behalf of PS
Co, pursuant to or in connection with the transactions contemplated by this
Agreement contains or will contain any misstatement of material fact necessary
to make the statements contained herein or therein not misleading.
ARTICLE IV
CONDITIONS TO THE OBLIGATIONS OF PS CO
The obligations of PS Co hereunder are subject to the
fulfillment of the following express conditions precedent prior to or on the
Closing Date, unless waived in writing by PS Co:
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4.01 Compliance with Terms. All the terms,
agreements, covenants and conditions of this Agreement to be complied with and
performed by or on behalf of the Company and the Shareholders on or before the
date hereof shall have been fully complied with and performed in all material
respects by each of them.
4.02 Representations and Warranties. All of the
representations and warranties made by the Shareholders in this Agreement,
including the Schedules hereto, and all certificates, instruments and other
documents delivered in connection herewith shall be true, accurate and complete
at and as of the Closing Date as though such representations and warranties
were made at and as of the Closing Date.
4.03 Absence of Litigation. No action or proceeding
shall have been instituted and remain pending before a court or other
governmental body by any applicable government or agency thereof or any person
to restrain or prohibit the consummation of the transactions contemplated by
this Agreement.
4.04 Letters from Auditors. PS Co shall have
received a letter from Reed, Quinn & McClure, certified public accountants,
dated within five (5) days of the Closing Date, confirming that since the date
of their or their predecessor's review of the financial statements of the
Company for the fiscal year ended September 30, 1992, and the Balance Sheet,
nothing has come to their attention which would cause them to withdraw or
qualify the statements made in their letters accompanying such financial
statements.
4.05 Opinion of Counsel. PS Co shall have received
the opinion of Gambrell & Stolz, dated the date hereof, substantially in the
form of Exhibit E hereto.
4.06 Resignation of Officers and Directors. The
officers and directors of the Company whose resignation PS Co shall have
requested shall have delivered written resignations, effective as of the
Closing Date, to the Company.
4.07 Insurance. The Company shall have provided and
shall have caused its health insurance carrier to provide PS Co with all
available information regarding the status of the Company's claims history
under its medical insurance policies and to the best knowledge of the
Shareholders, no employee has a material medical problem or condition.
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4.08 Key Man Insurance. PS Co shall have obtained
key man insurance on the lives of W. Hal Gurley and Ann K. Hamil providing for
death benefits of $2,000,000 each.
4.09 Investment Intent Letters. Each of the
Shareholders shall have executed and delivered to PS Co and the Company an
Investment Intent Letter substantially in the form of Exhibit D hereto.
4.10 Employment and Consulting Agreements. W. Hal
Gurley, Ann K. Hamil, Romano K. Gulisao, Marion R. Stone, Jr. and Kelly L.
Trumpour shall have executed and delivered to PS Co employment agreements dated
as of the Closing Date, each for a term of three years and substantially in the
form of Exhibit F hereto (the "Employment Agreements"). E. James Grethe shall
have executed and delivered to PS Co a consulting agreement, dated as of the
Closing Date, substantially in the form of Exhibit G hereto (the "Consulting
Agreement").
4.11 Proprietary Information and Inventions
Agreements. Each of the Shareholders and such employees of the Company as
required by PS Co shall have entered into a Proprietary Information and
Inventions Agreement substantially in the form of Exhibit H hereto.
4.12 Non-Compete Agreements. Each of E. James
Grethe, W. Hal Gurley, Ann K. Hamil, Romano K. Gulisao, Marion R. Stone, Jr.
and Kelly L. Trumpour shall have entered into a Confidentiality and
Non-Competition Agreement substantially in the form of Exhibit I hereto (the
"Non-Compete Agreements").
4.13 Renegotiation of Lease. The Company and Tutter,
L.P. shall have executed the First Amendment to the Lease substantially in the
form of Exhibit J hereto.
4.14 Consents and Approvals. All authorizations,
consents, waivers, approvals of all governmental agencies or authorities or
other persons, or other actions or proceedings required to be obtained or taken
by or on behalf of the Company or the Shareholders under the laws of any
jurisdiction or under this Agreement in connection with the execution, delivery
and performance of this Agreement and the consummation of the transactions
contemplated hereby, or required to prevent a breach or default by the Company
under any Permit, lease, contract, note, or other agreement, document or
instrument by virtue of the transactions contemplated hereby shall have been
duly obtained and shall be in form and substance satisfactory to PS Co.
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4.15 Approval of Documentation. The form and
substance of all certificates, instruments, opinions and other documents
requested by and delivered to PS Co under this Agreement shall be satisfactory
in all reasonable respects to PS Co and its counsel.
4.16 Due Diligence Review. PS Co shall be satisfied
in its sole discretion with its due diligence review of information pertaining
to the Company and its operations, including without limitation, information
set forth on the Schedules to this Agreement.
4.17 No Adverse Change. There shall not have
occurred since June 30, 1993 any material adverse change in the condition
(financial or otherwise) or results of operations of the Company.
4.18 Certificates. PS Co shall have received a
certificate executed by E. James Grethe, W. Hal Gurley and Ann K. Hamil, dated
the Closing Date, certifying in such detail as PS Co may require that the
conditions set forth in Sections 4.01 and 4.02 hereof have been fulfilled.
4.19 Final Board Approval. The Board of Directors of
PS Co shall have approved the consummation of the transactions contemplated by
this Agreement.
4.20 Release of Bank Guaranty. Each of James Grethe
and W. Hal Gurley shall have been released from their guaranty obligation of
the Company's indebtedness to Nationsbank and Bank South.
4.21 Release of Company Guaranty. The Company shall
have been released from its guaranty obligation to Bank South, N.A. for the
financing of the real estate which is the subject of the Lease.
ARTICLE V
CONDITIONS PRECEDENT TO THE OBLIGATIONS
OF THE SHAREHOLDERS
The obligations of the Shareholders hereunder are subject
to the fulfillment of the following express conditions precedent prior to or on
the Closing Date, unless waived in writing by the Shareholders:
5.01 Compliance with Terms. All the terms,
agreements, covenants and conditions of this Agreement to be complied with and
performed by PS Co on or before the date
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hereof shall have been fully complied with and performed in all material
respects.
5.02 Representations and Warranties. All of the
representations and warranties made by PS Co in this Agreement, including the
Schedules hereto, and all certificates, instruments and other documents
delivered in connection herewith shall be true, accurate and complete at and as
of the Closing Date as though such representations and warranties were made at
and as of the Closing Date.
5.03 Absence of Litigation. No action or proceeding
shall have been instituted and remain pending before a court or other
governmental body by any applicable government or agency thereof or any person
to restrain or prohibit the consummation of the transactions contemplated by
this Agreement.
5.04 Opinion of Counsel of PS Co. The Shareholders
shall have received the opinion of Paul, Hastings, Janofsky & Walker, counsel
to PS Co, dated the date hereof, substantially in the form of Exhibit K hereto.
5.05 Consents. All authorizations, consents,
waivers, approvals of all governmental agencies or authorities or other
persons, or other actions or proceedings required to be obtained or taken by PS
Co, under the laws of any jurisdiction or under this Agreement in connection
with the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby.
5.06 Approval of Documentation. The form and
substance of all certificates, instruments, opinions and other documents,
delivered to the Company under this Agreement shall be satisfactory in all
respects to the Shareholders and their counsel.
5.07 Employment and Consulting Agreements. The
Company shall have executed and delivered to each of W. Hal Gurley, Ann K.
Hamil, Romano K. Gulisao, Marion R. Stone, Jr. and Kelly Trumpour the
Employment Agreements and shall have executed and delivered to E. James
Grethe, the Consulting Agreement.
5.08 Non-Compete Agreements. The Company shall have
executed and delivered the Non-Compete Agreements to each of the Shareholders
with whom an Employment Agreement or Consulting Agreement will be executed and
delivered pursuant to Section 5.07 above.
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5.09 Certificates. The Shareholders shall have
received a certificate executed by the President of PS Co, dated the Closing
Date, certifying in such detail as the Shareholders may require that the
conditions set forth in Section 5.01 and 5.02 hereof have been fulfilled.
ARTICLE VI
COVENANTS
6.01 Inspection. During the period prior to the
Closing, the officers, employees, counsel, accountants and other
representatives of PS Co shall have reasonable access, during normal business
hours and upon reasonable notice, to the assets, personnel, properties, books,
records, accounts, agreements and commitments of the Company and the Company
and the Shareholders shall furnish PS Co during such period with all such
information relating to the Company as PS Co may reasonably request; provided,
however, that such access does not disrupt the normal business operations of
the Company.
6.02 Insurance. Shareholders shall cooperate with PS
Co in obtaining key man insurance and disability insurance for the benefit of
PS Co.
6.03 Conduct of Business. During the period prior to
the Closing, (i) the business of the Company shall be conducted only in, and
the Company shall not take any action except in, the ordinary course of
business and substantially consistent with its past practices; (ii) no change
shall be made in the Company's Articles of Incorporation or Bylaws; (iii) the
Company shall not issue any of its authorized capital stock or securities
convertible into such shares or sell or give any option or right to purchase,
hypothecate, pledge or otherwise encumber or dispose of any such shares or
purchase, redeem, retire or otherwise acquire any such shares; and (iv) the
Company's business organization, assets, employees and advantageous business
relationships shall be preserved.
6.04 Publicity. During the period prior to the
Closing, no public release or announcement concerning the transactions
contemplated hereby shall be issued by any party hereto, and the Shareholders
shall cause the Company not to issue any such release, without the advance
consent of PS Co, W. Hal Gurley, Ann K. Hamil and E. James Grethe, except as
such release or announcement may be required by law in the reasonable opinion
of counsel for any party hereto, in which case the party making the release or
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announcement shall show such release or announcement as soon in advance as is
possible to the other parties hereto.
6.05 Collection of Accounts Receivable; Assignment of
Uncollected Accounts. From and after the Closing Date, PS Co shall use its
best efforts to collect all accounts, notes and other receivables shown on the
Balance Sheet. Any such receivables not collected within 90 days of the
Closing Date may be presented to the Shareholders for redemption in cash, not
later than 180 days after the date of each such receivable or PS Co may redeem
such receivables by setting off the amount of such receivables against amounts
to be paid under any Purchase Note; provided, however, that the amount of any
such set off shall be in the same percentage amount of such receivables as the
percentage of the total Consideration received by the Holder of such Purchase
Note pursuant to Section 1.02(a) hereof, and the remaining amount of such
receivables shall be immediately paid to PS Co by E. James Grethe. Upon any
such redemption of any such receivables, PS Co shall assign such receivables to
the Shareholders who contributed to such redemption, and thereafter such
Shareholders shall be responsible for collection of such redeemed receivables.
PS Co shall cooperate with such Shareholders in the collection of such
receivables and shall deliver promptly to such Shareholders any cash payment
received by PS Co from any customer with respect to any such redeemed
receivables.
ARTICLE VII
INDEMNIFICATION
7.01 The Shareholders' Indemnification of PS Co.
Subject to the conditions and provisions of this Article VII, the Shareholders
covenant that from and after the execution and delivery of this Agreement, they
shall indemnify and hold harmless PS Co from and against any loss, cost,
reasonable expense (including penalties, attorneys' fees and interest from the
date of any such loss at the rate of 12% per annum), liability or judgment
incurred or suffered by any of them resulting from or arising out of:
(a) Any failure by the Company or the
Shareholders to perform or observe any term, provision, covenant, agreement,
undertaking or condition to be performed or observed by any of them pursuant to
this Agreement prior to the Closing, which failure was not expressly waived by
PS Co under the terms of this Agreement;
(b) Any inaccuracy or error in any
representation or breach of warranty by the Shareholders
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made or contained in this Agreement and the Schedules or in any certificate or
document executed and delivered by any of the Shareholders to PS Co in
connection with this Agreement; and
(c) Any product liability claim with
respect to any product manufactured or sold on or before the Closing Date which
is not covered by insurance,
provided, however, that with respect to each of paragraphs (a), (b) and (c)
above (i) the obligations of the Shareholders to so indemnify PS Co shall be
several, and not joint, (ii) except with respect to any losses, costs,
expenses, liabilities, damages or deficiencies suffered, sustained or incurred
by PS Co with respect to any inaccuracy or error in any representation or
breach of warranties contained in Sections 2.09, 2.15, 2.21 and 2.28, for which
the Shareholders' liability to indemnify PS Co is unlimited, PS Co's right to
recover amounts in respect of any losses, costs, expenses, liabilities, damages
or deficiencies suffered, sustained or incurred by it pursuant to the terms of
this Article VII from any Shareholder shall be limited, in the aggregate, to
the full amount of Consideration to be received by such Shareholder, including,
without limitation, amounts payable to such Shareholder pursuant to the
Purchase Notes; and (iii) PS Co shall have the right but not the obligation to
recover such amounts by setting-off such amounts against any amounts payable by
PS Co pursuant to the Purchase Notes (provided, however, that the amount of
such setoff with respect to any such Purchase Note shall not exceed that
percentage of such indemnification amount as the percentage of the total
Consideration received by the Holder of such Purchase Note pursuant to Section
1.02(a) hereof), but PS Co's right to recover such amounts shall not be limited
in any way by such right of setoff (should such right of set off be exercised
and later such amounts are determined not to have been payable pursuant to this
indemnity, PS Co shall promptly pay such amounts to Shareholders together with
interest on such amounts from the date of such set off to the date of such
payment at the rate of 12% per annum) .
7.02 PS Co's Indemnification of the Shareholders.
Subject to the conditions and provisions of this Article VIII, from and after
the Effective Time, PS Co shall indemnify and hold harmless the Shareholders
from and against any loss, cost, reasonable expense (including interest from
the date of any such loss at the rate of 12% per annum, penalties and
attorneys' fees), liability or judgment incurred or suffered by them (or any of
them) resulting from or arising out of:
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(a) Any failure of PS Co to perform or
observe any term, provision, covenant, agreement, undertaking or condition to
be performed or observed by it pursuant to this Agreement, which failure was
not expressly waived by the Shareholders under the terms of this Agreement;
(b) Any failure of the Company to perform
or observe any term, provision, covenant, agreement, undertaking or condition
to be performed or observed by it pursuant to the Purchase Notes, which failure
was not expressly waived by the Shareholders under the terms of the Purchase
Notes; and
(c) Any inaccuracy or error in any
representation or breach of warranty by PS Co made or contained in this
Agreement, the Schedules and the Exhibits hereto, or in any certificate or
document executed and delivered by PS Co to the Shareholders in connection with
this Agreement or the transactions contemplated hereby.
7.03 Survival of Representations and Warranties. The
several terms, provisions, covenants, agreements, warranties and
representations of the parties contained in this Agreement or in any instrument
delivered pursuant hereto shall survive the Closing Date and shall remain in
full force and effect thereafter until the third anniversary of the Closing
Date and shall be effective with respect to any inaccuracy therein or breach
thereof, notice of which shall have been duly given within such three year
period in accordance with Section 8.02 hereof, for any matter other than (a)
the terms, provisions, covenants, agreements, warranties and representations
contained in Sections 2.01, 2.06, 2.08, 2.10, 2.11, 2.16, 2.18, 2.22, 2.23,
2.24, 2.25, 2.26 and 2.27 of this Agreement, which shall survive the Closing
Date and shall remain in full force and effect thereafter until the first
anniversary of the Closing Date and shall be effective with respect to any
inaccuracy therein or breach thereof, notice of which shall have been duly
given within such one year period in accordance with Section 8.02 hereof; (b)
the covenants and obligations of PS Co under the Purchase Notes, which
covenants and obligations shall survive until the payment, termination or
cancellation of the Purchase Notes in accordance with their respective terms
and (c) the terms, provisions, covenants, agreements, warranties and
representations contained in Sections 2.09, 2.15, 2.21, 2.28, Article VII and
Article VIII of this Agreement, which shall survive the Closing Date
indefinitely.
7.04 Notice and Opportunity to Defend. If there
occurs an event which any party asserts is an indemnifiable
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event pursuant to Section 7.01 or 7.02 above, the party seeking indemnification
shall notify the other party (the "Indemnifying Party") promptly (it being
understood that, in all cases, notification to the Shareholder Note
Representative constitutes notice to each Shareholder. If such event involves
(i) any claim or (ii) the commencement of any action or proceeding by a third
person, the party seeking indemnification will give such Indemnifying Party
written notice of such claim or the commencement of such action or proceeding.
Such notice shall be a condition precedent to any liability of the Indemnifying
Party hereunder; however, failure to provide notice will not negate the
Indemnifying Party's obligation to indemnify unless its rights are prejudiced
thereby. The Indemnifying Party shall have a period of ten (10) days within
which to respond thereto.
If the Indemnifying Party notifies the party seeking
indemnification in writing that it will undertake, conduct and control the
compromise or defense of such matter, the Indemnifying Party shall be obligated
to compromise or defend such matter, at its own expense and by counsel chosen
by the Indemnifying Party and reasonably satisfactory to the party seeking
indemnification, and the Indemnifying Party shall provide the party seeking
indemnification with such assurances as may be reasonably required by the
latter to assure that the Indemnifying Party will assume, be responsible for
and be financially capable of paying the entire liability at issue. The party
seeking indemnification agrees to cooperate fully with the Indemnifying Party
and its counsel in the defense against any such asserted liability. In any
event, the party seeking indemnification shall have the right to participate at
its own expense in the defense of such asserted liability. The exercise by the
Indemnifying Party of such right to undertake, conduct and control the
compromise or defense of any such matter pursuant to this Section 7.04 shall
not constitute acceptance by the Indemnifying Party of responsibility to
indemnify the party seeking indemnification with respect to such matter.
Any compromise of such asserted liability by the
Indemnifying Party shall require the prior written consent of the party seeking
indemnification. If, however, the party seeking indemnification refuses its
consent to a bona fide offer of settlement which the Indemnifying Party wishes
to accept, the party seeking indemnification may continue to pursue such
matter, free of any participation by the Indemnifying Party, at the sole
expense of the party seeking indemnification. In such event, the obligation of
the Indemnifying Party to the party seeking indemnification shall be equal to
the lesser of (i) the amount of the offer
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<PAGE> 35
of settlement which the party seeking indemnification refused to accept plus
the costs and expenses of such party prior to the date the Indemnifying Party
notifies the party seeking indemnification of the offer of settlement and (ii)
the actual out-of-pocket amount the party seeking indemnification is obligated
to pay as a result of such party's continuing to pursue such matter. An
Indemnifying Party shall be entitled to recover from the party seeking
indemnification any additional expenses incurred by such Indemnifying Party as
a result of the decision of the party seeking indemnification to pursue such
matter.
If the Indemnifying Party does not undertake the defense
of or compromise such matter, the party seeking indemnification shall be free
to pursue, without prejudice to any of its rights hereunder, such remedies as
may be available to such party under applicable law. The party seeking
indemnification, however, shall notify the Indemnifying Party of any compromise
or settlement of any such claim.
ARTICLE VIII
MISCELLANEOUS
8.01 Successors and Assigns. The respective rights
and obligations of the parties hereto shall not be assignable without the
written consent of the other parties hereto, except that PS Co may assign its
rights and obligations hereunder to any corporate successor or any corporation
controlling, controlled by or under common control with PS Co. Any assignment
in contravention of the foregoing shall be void and of no force and effect
whatsoever.
8.02 Notices. All notices, claims, certificates,
requests, demands and other communications under this Agreement shall be made
in writing and shall be delivered by hand or sent by prepaid telex, cable or
telecopy, or sent, postage prepaid, by registered, certified or express mail,
or reputable overnight courier service, and shall be deemed given when so
delivered by hand, telex, cable, telecopy, or overnight courier service or if
mailed, when received or refused by the parties at the following addresses (or
at such other address for a party as shall be specified by like notice):
If to PS Co: Pacific Scientific Company
620 Newport Center Drive
Suite 700
Newport Beach, CA 92658
Attention: Richard V. Plat,
-29-
<PAGE> 36
Senior Vice President
Telephone: (714) 720-1714
Telecopy: (714) 720-1083
with a copy to: Paul, Hastings, Janofsky & Walker
399 Park Avenue, 31st Floor
New York, New York 10022
Attention: Thomas R. Lamia, Esq.
Telephone: (212) 318 6015
Telecopy: (212) 319-4090
If to any Shareholder
through June 30, 1997:
Shareholder Note Representative
Gambrell & Stolz
One Peachtree Center,Suite 4300
303 Peachtree Street, NE
Atlanta, Georgia 30308
Attention: Gary A. Barnes, Esq.
and Henry Levi, Esq.
Telephone: (404) 577-6000
Telecopy: (404) 221-6501
If to any Shareholder after June 30, 1997, to him or her at the
addresses supplied to PS Co by the Shareholder Note Representative
With a copy to: Gambrell & Stolz
One Peachtree Center
Suite 4300
303 Peachtree Street, NE
Atlanta, Georgia 30308
Attention: Gary A. Barnes, Esq.
Telephone: (404) 577-6000
Telecopy: (404) 221-6501
8.03 Payment of Expenses. PS Co, the Company and the
Shareholders shall each pay their own expenses incurred in connection with the
preparation, execution and delivery of this Agreement and the transactions
contemplated hereby, including attorneys' fees and any other fees or expenses
specifically assumed by a party hereunder.
8.04 Execution in Counterparts. This Agreement may be
executed in separate counterparts, each of which shall be deemed an original,
but all of which taken together shall constitute one and the same agreement.
8.05 Entire Agreement. This Agreement, together with
the Exhibits and Schedules hereto, contains the entire agreement among the
parties hereto with respect to the
-30-
<PAGE> 37
transactions contemplated hereby, supersedes all prior agreements or
understandings among the parties hereto relating to the subject matter hereof,
and may not be changed, modified or amended except in writing signed by the
parties hereto or their authorized agents or attorneys-in-fact.
8.06 Headings, Gender and Number. Captions and
section headings used herein are for convenience only, and are not a part of
this Agreement, and shall not be used in construing it. The masculine,
feminine or neuter gender and the singular or plural number shall be deemed to
include the others whenever the context so indicates or requires.
8.07 Severability. If any provision of this
Agreement, or any covenant, obligation or agreement contained herein is
determined by a court to be invalid or unenforceable, such determination shall
not affect any other provision, covenant, obligation or agreement, each of
which shall be construed and enforced as if such invalid or unenforceable
provision were not contained herein. Such invalidity or unenforceability shall
not affect any valid and enforceable application thereof, and each such
provision, covenant, obligation or agreement, shall be deemed to be effective,
operative, made, entered into or taken in the matter and to the full extent
permitted by law.
8.08 Shareholders' Acknowledgement. BY INITIALLING IN
THE SPACE PROVIDED BELOW, EACH SHAREHOLDER HEREBY STATES THE FOLLOWING:
I ACKNOWLEDGE THAT I HAVE RECEIVED, READ, UNDERSTAND AND AM
FAMILIAR WITH THIS AGREEMENT AND THE EXHIBITS AND SCHEDULES
HERETO. I ACKNOWLEDGE THAT NO REPRESENTATIONS HAVE BEEN MADE TO
ME OR TO MY ADVISORS BY PS CO OR BY ANY PERSON ACTING ON BEHALF OF
PS CO WITH RESPECT TO THE CONSIDERATION TO BE RECEIVED BY ME UNDER
THE PURCHASE NOTES OR MY DECISION TO SELL MY SHARES OR ANY OTHER
ASPECTS OR CONSEQUENCES OF SELLING MY SHARES PURSUANT TO THIS
AGREEMENT. I HAVE CONSULTED WITH SUCH LEGAL COUNSEL, TAX COUNSEL,
TAX ADVISORS, ACCOUNTANTS AND OTHERS, EACH OF WHOM HAVE BEEN
PERSONALLY SELECTED BY ME, AS I HAVE FOUND NECESSARY TO CONSULT
CONCERNING THIS TRANSACTION. BY REASON OF MY OWN BUSINESS AND
FINANCIAL EXPERIENCE AND/OR BUSINESS AND FINANCIAL EXPERIENCE WITH
PERSONS WITH WHOM I HAVE FOUND IT NECESSARY TO CONSULT WITH
RESPECT TO THIS TRANSACTION, I HAVE THE CAPACITY TO PROTECT MY OWN
INTEREST IN THIS TRANSACTION. I HAVE HAD THE OPPORTUNITY TO
INQUIRE OF REPRESENTATIVES OF PS CO AND THE COMPANY REGARDING THIS
TRANSACTION AND HAVE BEEN PROVIDED WITH SUCH ADDITIONAL
INFORMATION AS I HAVE
-31-
<PAGE> 38
DETERMINED TO BE NECESSARY IN CONNECTION WITH MY DECISION TO
SELL THE SHARES OWNED BY ME AND TO UNDERTAKE THE OBLIGATIONS CREATED
UNDER THIS AGREEMENT. MY DECISION TO SELL THE SHARES OWNED BY ME AND
TO UNDERTAKE THE OBLIGATIONS CREATED UNDER THIS AGREEMENT IS MADE
FREELY AND WITHOUT COERCION OR UNDUE INFLUENCE BY ANY OTHER PERSON.
E. James Grethe: _____ Romano K. Gulisao: _____
W. Hal Gurley: _____ Jack W. McDaniel, Jr.: _____
Ann K. Hamil: _____ Marion A. Stone: _____
Benton L. Beaghan: ____ Kelly L. Trumpour: _____
Gregory K. Edwards:____
8.09 Applicable Law. This Agreement shall be
construed and enforced in accordance with the internal laws, and not the law of
conflicts, of the State of Georgia.
IN WITNESS WHEREOF, the parties have executed and
delivered this Agreement on the day and year first above written.
PS CO:
PACIFIC SCIENTIFIC COMPANY,
a California corporation
By____________________________
Title:______________________
SHAREHOLDERS:
_______________________________
E. James Grethe
________________________________
W. Hal Gurley
________________________________
Ann K. Hamil
_________________________________
Benton L. Beaghan
_________________________________
Gregory K. Edwards
-32-
<PAGE> 39
(SIGNATURES CONTINUED)
-33-
<PAGE> 40
_________________________________
Romano K. Gulisao
_________________________________
Jack W. McDaniel, Jr.
_________________________________
Marion R. Stone, Jr.
_________________________________
Kelly L. Trumpour
-34-
<PAGE> 1
ELECTRICAL EQUIPMENT Exhibit 13
MOTORS AND CONTROLS
Nearly every machine needs a motor. [graph]
The powerful combination of silicon "brains" and machine "brawn" is enabling
society, business and government to assign to machines more and more tasks of
ever-increasing sophistication and precision.
Variable speed motors are supplied to
[PHOTO 1] the leading manufacturers of
Photo courtesy of Unisen Inc. treadmills that require
consistent quiet performance,
stable speed with varying loads
and low maintenance.
[PHOTO 2]
Multiple brushless DC servo motors and
stepping motors are precisely
controlled to provide feeding,
cutting, folding, sealing and
cartoning in food and other packaging
equipment.
Most machines, and all automated machines, are motor-driven. Pacific
Scientific motors and controls are used to make or move products as little as
bite-sized pieces of chocolate and as large as rotating cement kilns. They are
used in manufacturing, packaging, shipping, sorting and vending.
Pacific Scientific motors are made for single-motor applications like
soft-drink machines, and for multiple-motor applications such as high-speed
packaging machines, where the motion of many motors is precisely controlled
with a tiny fiber-optic strand. Some motors are pocket-sized and some weigh in
at nearly two tons. They are made for precision in tiny fractional horsepowers,
and for maximum muscle up to 600 horsepower.
But you seldom see one. When you use a treadmill at
4
<PAGE> 2
your health club to work up a sweat for aerobic health, you don't see the
Pacific Scientific motor. Nor do workers at the post office see the Pacific
Scientific motors that drive the automated letter-sorting machines the U.S.
Postal Service has installed to get your mail to you faster.
[PHOTO 1] STEPPING MOTORS HIGH-TORQUE
CHARACTERISTICS ALLOW THE REDUCTION OF
MECHANICAL COMPONENTS NEEDED TO CONTROL
THE SELECTION AND DELIVERY OF PRODUCTS
IN MODERN VENDING MACHINES.
[PHOTO 2] BRUSHLESS DC SERVOMOTORS ARE PROGRAMMED
Photo courtesy of TO METER THE PAINT DELIVERED AND PROVIDE
Saturn Corporation PRECISE VERTICAL, HORIZONTAL AND PIVOT
MOVEMENT TO CONTROL SPRAY GUNS USED IN THE
PAINTING OF NEW AUTOMOBILES.
When you buy a new car, you may admire the paint job, but you won't see
"painted by Pacific Scientific motors" printed on the sticker. When you turn on
the tap, water may be flowing through plastic pipe made by machines that are
powered by our motors. For thousands of wire products -- from paper clips and
coat hangers to the wire which carries your electricity and cable TV -- we make
the motors that go on the wire-making machines. Our motors provide the power
that wrap your candy, crackers, cookies, frozen food and many other items. They
power the machines that print the ubiquitous bar code labels. They drive
floor-cleaning equipment and the printers and plotters connected to your
computers. You may be using efficient and reliable Pacific Scientific motors
every day, but because you can't see them, you may never know they're there.
PRODUCTS FOR ELECTRIC UTILITIES
Conserving power and reducing expenses.
[PHOTO 3]
Photo courtesy of Cincinnati Milacron Inc.
VARIABLE SPEED BRUSHLESS DC MOTORS AND
DRIVES ON EXTRUSION AND INJECTION
EQUIPMENT RESULT IN UP TO 75% ENERGY
SAVINGS AND MORE PRECISE PROCESS CONTROL.
Have you ever experienced a power outage? If power was restored quickly,
chances are that a power line fault indicator helped identify the fault
location. Pacific Scientific designs and manufacturers a broad line of fault
indicators as well as distribution automation
5
<PAGE> 3
sensors, load-management devices and metering equipment -- all products that
help get power where it is most needed, when it is most needed. Our products
are found high on a pole, in underground vaults, or in a bank of other
electrical equipment. They're generally out of sight. Pacific Scientific's
distribution products mean greater efficiency of power distribution for
utilities worldwide, the results of which we see in benefits to our environment
and to our pocketbooks in reduced monthly electric bills.
Did you ever wonder how your streetlights turn on at dusk? The probability
is better than ever that any streetlight you see in North America is being
controlled by a Pacific Scientific photocontrol (on at dusk -- off at dawn).
These controls can frequently be spotted on the tops of streetlights.
Applying utility technology to consumer uses was a focus of our product
"re-engineering" program last year. These efforts have produced a new line of
consumer and commercial lighting controls called "Minuteman"(TM), which have
begun to appear in parking lots, on security lights, and on the shelves of
local hardware and building supply stores. This adaptation of our lighting
control products is proving to be a source of rapid growth within our
electrical equipment business.
BRUSHLESS DC SERVOMOTORS AND MULTI-AXIS
[PHOTO 1] CONTROLS PROVIDE FOOD MANUFACTURING COMPANIES
WITH FLEXIBLE PACKAGING LINES THAT INCORPORATE
ELECTRONIC CHANGEOVER CAPABILITY. PREVIOUS
SYSTEMS REQUIRED TIME-CONSUMING MECHANICAL
RETOOLING.
[PHOTO 2]
Photo courtesy of Caterpillar Inc.
EQUIPMENT MANUFACTURERS, USING
HYDRAULIC SYSTEMS, SAMPLE THE OIL TO
DETECT PARTICLES WHICH COULD SIGNAL
THE REQUIREMENT FOR MAINTENANCE WHICH
WILL PREVENT LATER PROBLEMS IN THE
FIELD.
PARTICLE MONITORING
FROM WAFER TO WATER.
Customers buy Pacific Scientific particle-counting instruments for three
reasons: to improve manufacturing processes, to avoid interruptions and to
comply with regulations.
Process improvement increases yield and productivity of semiconductor
manufacturing, where particle detectors are placed into vacuum chambers in
which silicon wafers are fabricated. The detector indicates the presence of
very tiny contaminants that can destroy some or all of the final products.
Particle-monitoring instruments also reveal contaminants in clean-room air and
in
6
<PAGE> 4
various liquids, solids and gases used in semiconductor manufacturing.
Avoidance of interruptions is important to the users of expensive
equipment. Pacific Scientific instruments detect particles in hydraulic and
lubricating fluids used in heavy equipment such as earthmoving and mining
machinery, aircraft and ships, automated factory equipment and electric
generators. By analyzing the contamination data provided by the particle
counter, the equipment user can decide when to perform necessary maintenance
and thereby avoid mechanical breakdown. Pacific Scientific instruments are
often found in quality control laboratories, in production and repair areas,
and now, with a new line of portable instruments, in the field.
QUALITY OUTDOOR LIGHTING CONTROLS, PREVIOUSLY
SOLD ONLY TO ELECTRIC UTILITIES FOR
[PHOTO 1] STREETLIGHTING, HAVE BEEN ADAPTED TO THE
BROADER MARKET INCLUDING INDUSTRIAL,
COMMERCIAL AND RESIDENTIAL APPLICATIONS.
REGULATIONS REQUIRE SAFE DRINKING WATER.
PARTICLE MONITORS MEASURE THE EFFICIENCY OF
[PHOTO 2] FILTERING SYSTEMS THAT REMOVE PARTICLES TO
WHICH BACTERIA CAN ATTACH AND EFFECT PUBLIC
HEALTH.
MANUFACTURING OF INTEGRATED CIRCUITS
REQUIRES AN ULTRA CLEAN PROCESS. THE COMPANY'S
[PHOTO 3] INSTRUMENTS DETECT PARTICLES WITHIN THE SILICON
SUBSTRATE, THE VACUUM PRODUCTION EQUIPMENT,
PROCESS FLUIDS AND GASES AND CLEAN-ROOM AIR.
Helping customers comply with regulations is another important area for
Pacific Scientific particle instruments. Pharmaceutical companies must adhere
to strict government standards of purity in manufacturing their products,
especially intravenous fluids. Municipal water facilities must test drinking
water
7
<PAGE> 5
to make sure it meets regulatory requirements. In these and other growing
markets, Pacific Scientific instruments provide both on-line and laboratory
testing for contaminants that are too small to be seen but can cause great
harm.
[graph]
FIRE DETECTION AND SUPPRESSION
New market opportunities.
Pacific Scientific is a recognized leader in fire-suppression systems used in
aircraft engines and cargo compartments. Hidden within the body of almost every
aircraft you board is a Pacific Scientific fire-suppression system. A new
lightweight titanium version, recently developed for the Boeing 777 aircraft,
will begin to generate revenue in 1995. Airline operators depend on Pacific
Scientific for routine maintenance and recertification of the fire-suppression
components in their planes. This recertification improves the reliability of
these systems and consequently the safety of passengers.
CITY BUSES ARE CONVERTING TO CLEAN-BURNING
ALTERNATIVE FUELS TO HELP KEEP AIR CLEAN IN
[photo 1] METROPOLITAN AREAS. SAFETY OF PASSENGERS IS
PROTECTED WITH THE COMPANY'S GAS-DETECTION,
FIRE-DETECTION AND FIRE-SUPPRESSION SYSTEMS.
Many lives have been saved in military combat vehicles as a result of the
fire-detection and -suppression equipment developed and manufactured by Pacific
Scientific. These systems proved to be highly effective during the Gulf War.
Many countries are currently producing and upgrading military vehicles, and we
are actively selling them these safety systems.
OIL RECOVERY IS AIDED BY PROVIDING ADDITIONAL
[photo 2] INLETS IN EXISTING WELL CASINGS. THE COMPANY'S
HIGHLY RELIABLE PYROTECHNIC DEVICES HELP TO SAFELY
ACCOMPLISH THIS TASK.
Mass transit vehicles are another market for this unique technology. Buses
that run on new clean-burning alternative fuels are being ordered to promote
cleaner air in our cities. Many of these buses will be equipped with Pacific
Scientific gas-detection, fire-detection and fire-suppression systems to
protect you from potential injury caused by the use of these new, more volatile
fuels.
High-speed trains with experimental magnetic
8
<PAGE> 6
levitation technology, which are being developed in Japan and elsewhere,
incorporate Pacific Scientific patented thermocouple wire. This wire is used to
detect excessive temperatures in critical areas, protecting the passengers and
the vehicles.
[PHOTO 1]
Photo courtesy of Boeing Commercial Airplanes
THE 777 WILL USE THE COMPANY'S FIRE EXTINGUISHING SYSTEM FOR ITS ENGINES AND
AUXILIARY POWER UNITS. ALSO INCORPORATED IS A PNEUMATIC POWER SUPPLY FOR
EMERGENCY DOOR OPERATION. MANY AIRLINES SPECIFY THE USE OF THE COMPANY'S
CREW AND PASSENGER RESTRAINTS. FOR OTHER AIRCRAFT, THE COMPANY SUPPLIES
ELECTRIC GENERATORS, REGULATORS AND ELECTRICAL ANTI-ICING EQUIPMENT.
RESTRAINTS
A special capability.
Although you are only beginning to see our lap belts in the passenger
compartments of aircraft, Pacific Scientific has always been the major supplier
of sophisticated restraints to the crews of both commercial and military
aircraft. Now these highly reliable products are entering the entertainment
market, for use in such settings as virtual-reality theaters and amusement park
rides.
PYROTECHNICS
Mechanical work from chemical energy.
When system requirements demand that mechanical functions be performed rapidly
by small, lightweight components, then Pacific Scientific pyrotechnic products
are the answer. These products, which utilize stored chemical energy, provide
high reliability to our customers in the space, electric utility, oil well and
aircraft industries.
Electric utility companies rely on the fast reaction times of our products
to open switches in their high-voltage circuit breakers. In its oil recovery
operations, the oil well industry depends on our detonators to function with
exceptionally high reliability when exposed to the extremely high temperatures
and pressures found miles beneath the earth.
NASA and satellite manufacturers demand that Pacific Scientific's safety
and release mechanisms function precisely -- on the ground and in the
inhospitable environment of deep space -- to burn off excessive hydrogen on the
launchpad and to release cargo or deploy solar arrays once orbit has been
achieved.
Commercial and military aerospace customers rely upon our pyrotechnic
products to activate their aircraft safety systems, actuate their missile
flight controls and initiate their motor sequencing.
[PHOTO 2]
Photo courtesy of
Railway Technical Research Institute, Tokyo, Japan
THERMOCOUPLE WIRE, PATENTED BY THE COMPANY,
DETECTS FIRE AND OVERHEATING TO PROTECT
PASSENGERS ON JAPAN RAILWAY'S EXPERIMENTAL
MAGLEV HIGH SPEED TRAIN.
[PHOTO 3]
Photo courtesy of Iwerks Entertainment
HIGHLY RELIABLE AIRCRAFT SAFETY TECHNOLOGY IS BEING APPLIED IN
AMUSEMENT PARK ATTRACTIONS, FEATURING SIMULATOR RIDES.
THESE RIDES PROVIDE BOTH A VISUAL AND PHYSICAL SENSATION
TO ENHANCE THE OVERALL EXPERIENCE.
9
<PAGE> 7
MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
The financial results for 1993 improved substantially over those for 1992, as
the Company continued to focus on quality, customer service, competitiveness
and cost efficiency in both its segments -- Electrical Equipment and Safety
Equipment. The accompanying graph shows a five-year history of the Company's
sales for each of these segments, adjusted to eliminate product lines or
businesses sold.
Sales in 1993 ($195.6 million) increased 13% from the prior year. This
amount includes $18.9 million from acquisitions occurring during the year.
Without acquisitions, sales would have been up 2%. Sales in the Electrical
Equipment segment were up 12% in 1993, and sales in the Safety Equipment
segment were up 15%. Without acquisitions, Electrical Equipment sales would
have risen 6%, and Safety Equipment sales would have fallen 4%. Although
reductions are expected in the delivery of new commercial aircraft and in U.S.
defense spending during the coming year, the Company expects sales of its
Safety Equipment segment to remain steady in 1994. The Company is continuing
its efforts to expand the markets served and to increase the maintenance parts,
service and repair portions of the Safety Equipment business. Total sales of
the Company in 1993, 1992 and 1991 are not directly comparable as a consequence
of acquisitions in 1993 and the sale of a division in 1991. The revenue of the
divested division was $7.6 million in 1991. Sales made outside the U.S. were
18% of total sales in 1993, compared with 17% and 14% in 1992 and 1991,
respectively. It is the Company's objective to realize more than 20% of its
sales outside the U.S. Sales under U.S. defense contracts, either as a prime
contractor or subcontractor, decreased to 19% of total sales in 1993 from 22%
and 25% in 1992 and 1991, respectively.
The order backlog at the end of 1993 was $92 million as compared to $78
million and $79 million at the end of 1992 and 1991, respectively. The Company
continues to obtain large orders in competitive situations, because of its
demonstrated ability to rapidly produce and deliver quality products at low
prices.
Gross profit margins, as a percentage of sales, are as follows for the past
three years:
<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Gross profit margin 30.7% 30.7% 29.1%
</TABLE>
Excluding the Fisher Pierce Division, which is part of the Electrical Equipment
segment, the Company's gross margins would have been 32.2% in 1993 and 31.6% in
1992. Improvements in gross profit margin, excluding Fisher Pierce, are
attributable to continuing improvements in productivity, reduction in
manufacturing costs and a "right-sizing" of each operation within the Company.
The underperformance by Fisher Pierce in 1993 resulted in that division's
losing $0.30 per share. The Company anticipates that Fisher Pierce can break
even or make a small profit in 1994. The automated manufacturing equipment
installed in 1992 and 1993 is beginning to produce at expected levels and the
division's management has been stabilized. The long-range outlook for Fisher
Pierce is excellent, as market share is again on the rise, owing to a new
product line and lower prices achieved by low-cost manufacturing techniques.
As reported in previous years, the Company learned in 1991 that it did not
comply with all U.S. military testing and certification requirements for
certain of its inertia reels used in military aircraft since the 1950s. This
occurred because the Company had believed that it was supplying a completely
proprietary product and, therefore, was not subject to such certification
requirements. As a result, the delivery of certain inertia reels for the U.S.
Air Force has been suspended since mid-1991. Similar products, however, are
being purchased by the U.S. Navy under a waiver. Although the testing and
recertification program has taken
[Two Graphs located at the left side of the page]
10
<PAGE> 8
much more time than originally expected, the Company believes the product will
be requalified. The suspension of inertia reel deliveries reduced 1993 and 1992
sales by $0.5 million to $1.0 million per year. Since 1991, the Safety
Equipment segment has incurred annual expenses of approximately $0.5 million
for testing and related procedures associated with obtaining recertification
and meeting other requirements of the U.S. military authorities.
Selling and marketing expenses, as a percentage of sales, are as follows
for the past three years:
<TABLE>
<CAPTION>
1993 1992 1991
---- ----- -----
<S> <C> <C> <C>
Selling and marketing expenses 9.9% 10.2% 10.2%
</TABLE>
Selling and marketing expenses, as percentage of sales, declined in 1993, owing
to more efficient use of the Company's resources. It is the Company's objective
to fully understand the customer's needs and to meet those needs with a
high-quality product, a competitive price and a rapid and on-schedule delivery.
The Company uses direct salesmen, licensed representatives and distributors to
sell its products. Some products are "private branded" for distribution by
others. Direct salesmen are employed in both the U.S. and Europe; the trend is
toward direct selling where this practice can be economically justified.
General and administrative expenses, as a percentage of sales, are as
follows for the past three years:
<TABLE>
<CAPTION>
1993 1992 1991
----- ----- -----
<S> <C> <C> <C>
General and administrative expenses 10.6% 10.6% 11.1%
</TABLE>
General and administrative expenses, as a percentage of sales, were the same in
1993 as in the preceding year. Included in these expenses is the amortization
of assets such as patents, excess of cost over net assets of acquired
businesses, trademarks and other intangibles, in the amount of $1.7 million,
$1.3 million and $1.2 million in 1993, 1992 and 1991, respectively. Excluding
these noncash amortization expenses, general and administrative expenses, as
percentage of sales, would have been 9.7%, 9.9% and 10.4% for 1993, 1992 and
1991, respectively. The decline in the percentage is due to effective expense
control and economies of scale which spread corporate expense over a larger
sales base.
Research and development expenses, as a percentage of sales, are as follows
for the past three years:
<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Research and development expenses 4.4% 4.8% 4.9%
</TABLE>
Total spending on research and development was higher in 1993 than in 1992.
However, the percentage of R&D expenses declined because sales increased faster
than R&D expenditures. Spending for research and development rose during 1993
in the Electrical Equipment segment, but it declined in the Safety Equipment
segment. Research and development expenses amounted to 5.2% of sales in
Electrical Equipment and 2.9% of sales in Safety Equipment. The ratio of
research and development expenses to sales is believed to be at the high end of
the range for this expense at similar companies for similar product lines. The
Company invests heavily in R&D because it intends to remain a leader in the
technologies in which it competes. An estimated 25% and 50% of current annual
sales are from products developed in the past three and five years,
respectively. Revenues from R&D efforts funded by others are included in net
sales in the accompanying financial statements, and the related expenses are
included in cost of sales.
[Two Graphs located at the
right side of the page]
11
<PAGE> 9
In 1991, the Company had a pre-tax gain of $9.2 million on the sale of its
smallest division (Belfab). The Company sold the division as a strategic
divestiture. This division did not produce proprietary products, as do all
other operations of the Company. No product lines were sold in 1993 or 1992.
Net interest expense for the past three years is as follows:
<TABLE>
<CAPTION>
(In millions) 1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Net interest expense $1.9 $1.9 $3.0
</TABLE>
The decline in net interest expense over these years is due to lower levels of
average net borrowings in 1992 and 1991 and lower effective interest rates in
all years. Average rates on short-term borrowings at the end of 1993, 1992 and
1991 were 4.3%, 4.7% and 6.8%, respectively.
The effective income tax rate, as a percentage of pretax income, is as
follows for the past three years:
<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Effective income tax rate 35% 33% 33%
</TABLE>
The effective tax rates were favorably impacted by the recognition of tax loss
carryovers and from a favorable settlement in 1993 and 1991 of certain items
questioned by the Internal Revenue Service in connection with a now-completed
examination of the Company's federal tax returns for 1986, 1987 and 1988.
As further described in Note 4 to the financial statements, in 1993 the
Company adopted a newly issued accounting standard which changed the Company's
previous method of accounting for income taxes. This change resulted in a
nonrecurring benefit of $1.1 million. The Company estimates that its effective
tax rate in 1994 will be approximately 39% -- the result of the adoption of
this standard, an increase in the federal tax rate from 34% to 35%, and the
exhaustion of tax credits and certain loss carryforwards used by the Company in
1993 and prior years.
Pacific Scientific had 1,597 employees at the end of 1993. Over the past
three years, sales per employee (based on the average number of employees,
including part time employees) have been as follows:
<TABLE>
<CAPTION>
1993 1992 1991
-------- -------- --------
<S> <C> <C> <C>
Sales per employee $126,500 $125,800 $112,600
</TABLE>
Sales per employee in 1993 increased only slightly because of the acquisition
of a labor-intensive motor-winding operation in Mexico. Previously, the
Company had subcontracted the winding of motors. With the Mexican operation
excluded, sales per employee increased to $130,900 per year.
[Two Graphs located on the
left side of the page]
12
<PAGE> 10
LIQUIDITY AND CAPITAL RESOURCES
The balance sheet of the Company remained strong at the end of 1993. The
current ratio of the Company has improved, as shown in the following table:
<TABLE>
<CAPTION>
(In millions) 1993 1992 1991
------ ------ -----
<S> <C> <C> <C>
Current Assets $79.7 $69.4 $69.0
Current Liabilities $31.1 $27.7 $27.7
Working Capital $48.6 $41.7 $41.3
Current Ratio 2.6 2.5 2.5
</TABLE>
The Company's experience in collecting bills from customers has improved. At
the end of 1993, average collections of accounts receivable were 59 days,
compared to 63 days in 1992.
Inventories were $33.5 million at the end of 1993, compared to $26.3
million at the end of 1992. Of this $7.2 million increase, $4.4 million
represented inventory at the three companies acquired in 1993. Inventory turns
were 4.5 times per year at the end of 1993, compared to 4.8 at the end of 1992.
Part of the decline in inventory turns stems from the Company's decision to
stockpile Halon, a gas used in the Company's fire-suppression systems.
The Company is continuing environmental remediation at one of its former
plant sites and has been designated as potentially responsible, along with
other companies, for certain other waste disposal sites. The Company
establishes reserves for such costs as are probable and reasonably estimatable,
and believes that the ultimate liability incurred will not have a material
adverse effect on the financial position of the Company.
At the end of 1993, the Company had cash and short-term investments of $4.0
million, plus $6.1 million of restricted cash representing the proceeds of
Industrial Revenue Bonds that the Company had issued in 1989 in anticipation of
building a new manufacturing facility. Total debt at the end of 1993 --
including both short- and long-term bank debt, convertible subordinated debt
and Industrial Revenue Bonds --totaled $49.7 million, for a debt-less-cash
balance of $39.6 million. The ratio of long-term debt to capitalization
increased to 35% at the end of 1993, as compared to 28% and 32% at the end of
1992 and 1991, respectively, as a result of the acquisitions during 1993.
The Company continued to invest in plant and equipment in 1993 as part of
its drive to improve productivity and make its products more competitive.
During 1993, 1992 and 1991, the Company invested $7.6 million, $7.8 million and
$7.5 million, respectively. Total depreciation of property and equipment and
amortization of other assets was $10.5 million in 1993 and $8.9 million in both
1992 and 1991.
In 1992, the Company called all the remaining outstanding shares of its
preferred stock at $10 per share. During 1991, the Company repurchased, in the
market, 151,000 shares of its outstanding preferred shares at an average price
of $9.41 per share.
At the end of 1993, the Company had unused lines of credit of $21.4
million. The Company believes that internally generated funds will be
sufficient to finance operations, fund planned capital expenditures, pay
interest and dividends, and further reduce debt.
[Two graphs located on the
right side of the page]
13
<PAGE> 11
MANAGEMENT'S REPORT
The responsibility for the integrity and objectivity of the financial data
contained in this annual report rests with the Company's management. The
accompanying financial statements have been prepared in conformity with
generally accepted accounting principles, and reflect management's best
judgments and estimates.
The Company maintains a system of internal accounting controls designed to
provide reasonable assurance that assets are safeguarded against loss or
unauthorized use, and that the financial records are adequate and can be relied
upon to produce financial statements in accordance with generally accepted
accounting principles. The system of internal controls consists, in part, of
organizational arrangements with clearly defined lines of responsibility and
delegation of authority to well trained and qualified people. We believe this
structure provides reasonable assurance that transactions are executed in
accordance with management's authorization. An important element of the control
environment is an ongoing internal audit program.
To assure the effective administration of a system of internal accounting
controls, we disseminate written policies and procedures and develop an
environment conducive to the effective functioning of internal controls. These
policies and procedures are structured in such a manner as to foster the
highest ethical standards in the conduct of the Company's business affairs, and
to comply with all laws.
The annual audit by the independent auditors provides an objective,
independent review of management's discharge of its responsibilities as they
relate to the fairness of reported operating results and financial condition.
The auditors obtain and maintain an understanding of the Company's accounting
and financial controls and conduct such tests and related procedures as they
deem necessary.
The Company has an Audit Committee of the Board of Directors, which is
composed solely of outside directors. The Audit Committee meets periodically
and privately with the independent accountants, the internal auditors and the
Company management to review accounting and financial reporting practices, the
work of the independent and internal auditors and the structure and
effectiveness of the system of internal accounting controls.
Edgar S. Brower Richard V. Plat
Chairman, President Senior Vice President
and Chief Executive Officer and Chief Financial Officer
14
<PAGE> 12
FIVE-YEAR FINANCIAL SUMMARY
(In thousands except ratios, per share and employee data)
PACIFIC SCIENTIFIC COMPANY AND SUBSIDIARIES
<TABLE>
<CAPTION>
For the Fiscal Years Ended December 31, 1993,
December 25, 1992, December 27, 1991,
December 28, 1990 and December 29, 1989 1993 1992 1991 1990 1989
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
OPERATIONS DATA
Net sales $195,553 $172,649 $172,970 $183,906 $169,599
Depreciation and amortization 10,535 8,881 8,912 7,821 7,622
Operating income:
Before sale of product lines/division 11,403 8,697 5,042 2,994 5,254
From sale of product lines/division -- -- 9,225 1,293 1,906
-------- -------- -------- -------- --------
Total 11,403 8,697 14,267 4,287 7,160
Net income 8,295 5,397 8,043 1,464 4,367
PER COMMON SHARE
Net sales $ 36.23 $ 32.33 $ 32.42 $ 33.40 $ 30.42
Income before extraordinary gain 1.33 1.00 1.46 .20 .56
Accounting Change/Extraordinary gain .20 -- -- -- .18
-------- -------- -------- -------- --------
Net income 1.53 1.00 1.46 .20 .74
Dividends .12 .12 .03 -- --
Book value 15.00 13.55 12.65 11.19 10.91
BALANCE SHEET DATA
Total assets $161,257 $134,567 $135,944 $143,364 $149,167
-------- -------- -------- -------- --------
Net property 31,450 28,578 28,920 31,302 29,916
Long-term debt 44,106 27,981 32,856 39,031 37,606
Stockholders' equity 80,956 72,359 69,475 63,111 64,150
OTHER DATA
Working capital ratio 2.6 2.5 2.5 2.2 2.1
Long-term debt-to-capitalization 35% 28% 32% 38% 37%
Employees at year-end 1,597 1,362 1,382 1,588 1,810
Net sales per employee $126,500 $125,800 $112,600 $101,000 $ 92,000
Sales backlog at year-end 91,774 77,740 78,749 91,608 97,973
Capital expenditures 7,607 7,777 7,509 8,534 11,713
COMMON STOCK PRICE (NYSE)
High $23.88 $15.63 $12.50 $16.38 $18.50
Low 12.13 9.25 7.25 7.38 9.75
Close at year-end 22.13 15.63 9.38 8.00 15.13
</TABLE>
(The above summary should be read in conjunction with the consolidated
financial statements)
15
<PAGE> 13
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of Pacific Scientific Company:
We have audited the accompanying consolidated balance sheets of Pacific
Scientific Company and subsidiaries as of December 31, 1993, December 25, 1992
and December 27, 1991, and the related consolidated statements of operations,
cash flows and stockholders' equity for each of the fiscal years then ended.
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 in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Pacific Scientific Company and
subsidiaries as of December 31, 1993, December 25, 1992 and December 27, 1991,
and the results of their operations and their cash flows for each of the fiscal
years then ended in conformity with generally accepted accounting principles.
Costa Mesa, California
February 3, 1994
16
<PAGE> 14
CONSOLIDATED STATEMENTS OF OPERATIONS
PACIFIC SCIENTIFIC COMPANY AND SUBSIDIARIES
<TABLE>
<CAPTION>
For the Fiscal Years Ended December 31, 1993,
December 25, 1992 and December 27, 1991 1993 1992 1991
------------ ------------ ------------
<S> <C> <C> <C>
NET SALES $195,553,000 $172,649,000 $172,970,000
COSTS AND EXPENSES
Cost of sales 135,487,000 119,702,000 122,704,000
Selling and marketing 19,314,000 17,662,000 17,623,000
General and administrative 20,765,000 18,353,000 19,155,000
Research and development 8,584,000 8,235,000 8,446,000
Gain on sale of division -- -- (9,225,000)
------------ ------------ ------------
Total costs and expenses 184,150,000 163,952,000 158,703,000
------------ ------------ ------------
OPERATING INCOME 11,403,000 8,697,000 14,267,000
------------ ------------ ------------
OTHER EXPENSE
Interest expense - net (1,912,000) (1,929,000) (2,966,000)
Other income 1,715,000 1,319,000 759,000
------------ ------------ ------------
Net other expense (197,000) (610,000) (2,207,000)
------------ ------------ ------------
INCOME BEFORE INCOME TAXES AND CUMULATIVE
EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE 11,206,000 8,087,000 12,060,000
INCOME TAXES (3,971,000) (2,690,000) (4,017,000)
------------ ------------ ------------
INCOME BEFORE CUMULATIVE EFFECT
OF CHANGE IN ACCOUNTING PRINCIPLE 7,235,000 5,397,000 8,043,000
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE 1,060,000 -- --
------------ ------------ ------------
NET INCOME $ 8,295,000 $ 5,397,000 $ 8,043,000
------------ ------------ ------------
NET INCOME PER COMMON AND COMMON EQUIVALENT SHARE:
BEFORE ACCOUNTING CHANGE $1.33 $1.00 $1.46
ACCOUNTING CHANGE 0.20 -- --
------------ ------------ ------------
TOTAL NET INCOME PER COMMON AND COMMON
EQUIVALENT SHARE 1.53 1.00 1.46
============ ============ ============
</TABLE>
(See accompanying notes to consolidated financial statements)
17
<PAGE> 15
CONSOLIDATED BALANCE SHEETS
PACIFIC SCIENTIFIC COMPANY AND SUBSIDIARIES
<TABLE>
<CAPTION>
As of December 31, 1993,
December 25, 1992 and December 27, 1991 1993 1992 1991
------------ ------------ ------------
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 2,081,000 $ 4,567,000 $ 2,293,000
Short-term investments 1,962,000 1,466,000 5,083,000
Trade receivables -- net 36,666,000 33,448,000 28,442,000
Inventories 33,493,000 26,298,000 29,761,000
Deferred income taxes 3,733,000 2,560,000 935,000
Other current assets 1,797,000 1,063,000 2,528,000
------------ ------------ ------------
Total current assets 79,732,000 69,402,000 69,042,000
NET PROPERTY 31,450,000 28,578,000 28,920,000
RESTRICTED CASH 6,092,000 6,099,000 6,106,000
NOTE RECEIVABLE 4,468,000 4,468,000 4,468,000
OTHER ASSETS -- NET 39,515,000 26,020,000 27,408,000
------------ ------------ ------------
Total assets $161,257,000 $134,567,000 $135,944,000
============ ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term borrowings $ 5,250,000 $ 3,100,000 $ 8,000,000
Accounts payable 14,426,000 12,985,000 9,855,000
Accrued employee compensation
and benefits 4,859,000 3,909,000 3,856,000
Other current liabilities 6,580,000 7,683,000 5,988,000
------------ ------------ ------------
Total current liabilities 31,115,000 27,677,000 27,699,000
------------ ------------ ------------
LONG-TERM DEBT 44,106,000 27,981,000 32,856,000
------------ ------------ ------------
Accrued employee benefit plan liabilities 3,547,000 4,093,000 4,845,000
Deferred income taxes 1,533,000 2,457,000 1,069,000
------------ ------------ ------------
STOCKHOLDERS' EQUITY
Preferred stock, $10 liquidation value -- -- 1,990,000
Common stock, $1 par value 5,398,000 5,340,000 5,335,000
Additional paid-in capital 4,791,000 3,904,000 3,749,000
Retained earnings 70,767,000 63,115,000 58,401,000
------------ ------------ ------------
Total stockholders' equity 80,956,000 72,359,000 69,475,000
------------ ------------ ------------
Total liabilities and stockholders' equity $161,257,000 $134,567,000 $135,944,000
============ ============ ============
</TABLE>
(See accompanying notes to consolidated financial statements)
18
<PAGE> 16
CONSOLIDATED STATEMENTS OF CASH FLOWS
PACIFIC SCIENTIFIC COMPANY AND SUBSIDIARIES
<TABLE>
<CAPTION>
For the Fiscal Years Ended December 31, 1993,
December 25, 1992 and December 27, 1991 1993 1992 1991
------------ ------------ ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 8,295,000 $ 5,397,000 $ 8,043,000
Depreciation and amortization 10,535,000 8,881,000 8,912,000
Deferred income taxes (457,000) (237,000) 134,000
Decrease in accrued employee benefit plan liabilities (546,000) (752,000) (591,000)
Loss on disposal of property 531,000 159,000 263,000
Gain on sale of division -- -- (9,225,000)
Cumulative effect of change in accounting principle (1,060,000) -- --
Effect on cash of changes in operating assets and liabilities,
net of the effects of business acquisitions and dispositions:
Trade receivables 175,000 (5,006,000) 980,000
Inventories (2,147,000) 3,463,000 4,739,000
Other current assets (672,000) 1,465,000 (650,000)
Accounts payable 92,000 3,130,000 (1,495,000)
Accrued employee compensation and benefits 530,000 53,000 (685,000)
Other current liabilities (5,009,000) 1,473,000 117,000
------------ ------------ ------------
Net cash flows from operating activities 10,267,000 18,026,000 10,542,000
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property (7,607,000) (7,777,000) (7,509,000)
(Increase) decrease in short-term investments (496,000) 3,617,000 25,000
Proceeds from disposition of property 212,000 378,000 --
Decrease (increase) in restricted cash and other assets 248,000 96,000 (3,112,000)
Payments for business acquisitions, net of cash acquired (23,687,000) -- --
Proceeds from the sale of division -- -- 14,059,000
------------ ------------ ------------
Net cash flows from investing activities (31,330,000) (3,686,000) 3,463,000
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Debt proceeds 18,650,000 -- --
Repayments of short-term debt -- (4,900,000) (6,100,000)
Repayments of long-term debt (375,000) (4,875,000) (6,175,000)
Cash dividends on common stock (643,000) (640,000) --
Cash dividends on preferred stock -- (124,000) (618,000)
Issuances of common stock 945,000 152,000 182,000
Repurchases of stock -- (1,679,000) (1,441,000)
------------ ------------ ------------
Net cash flows from financing activities 18,577,000 (12,066,000) (14,152,000)
------------ ------------ ------------
NET (DECREASE) INCREASE IN CASH (2,486,000) 2,274,000 (147,000)
------------ ------------ ------------
CASH, BEGINNING OF YEAR 4,567,000 2,293,000 2,440,000
------------ ------------ ------------
CASH, END OF YEAR $ 2,081,000 $ 4,567,000 $ 2,293,000
------------ ------------ ------------
SUPPLEMENTAL INFORMATION
Interest payments $ 2,603,000 $ 2,817,000 $ 3,679,000
Income tax payments 6,192,000 1,932,000 $ 4,391,000
Assets acquired 29,364,000 -- --
Liabilities assumed 5,677,000 -- --
============ ============ ============
</TABLE>
(See accompanying notes to consolidated financial statements)
19
<PAGE> 17
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
PACIFIC SCIENTIFIC COMPANY AND SUBSIDIARIES
Additional
<TABLE>
<CAPTION>
Additional
For the Fiscal Years Ended December 31, 1993, Preferred Common Paid-in Retained
December 25, 1992 and December 27, 1991 Stock Stock Capital Earnings Total
---------- ---------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
STOCKHOLDERS' EQUITY, DECEMBER 28, 1990 $3,500,000 $5,327,000 $3,506,000 $50,778,000 $63,111,000
Net Income for the Year -- -- -- 8,043,000 8,043,000
Preferred Stock Dividends -- -- -- (260,000) (260,000)
Common Stock Dividends -- -- -- (160,000) (160,000)
Issuance of Common Stock -- 11,000 77,000 -- 88,000
Repurchase of Common Stock -- (3,000) (17,000) -- (20,000)
Repurchase of Preferred Stock (1,510,000) -- 89,000 -- (1,421,000)
Amortization of Restricted Stock Award -- -- 94,000 -- 94,000
---------- ---------- ---------- ----------- -----------
STOCKHOLDERS' EQUITY, DECEMBER 27, 1991 1,990,000 5,335,000 3,749,000 58,401,000 69,475,000
Net Income for the Year -- -- -- 5,397,000 5,397,000
Preferred Stock Dividends -- -- -- (43,000) (43,000)
Common Stock Dividends -- -- -- (640,000) (640,000)
Exercise of Employee Options -- 5,000 52,000 -- 57,000
Repurchase of Preferred Stock (1,990,000) -- 8,000 -- (1,982,000)
Amortization of Restricted Stock Award -- -- 95,000 -- 95,000
---------- ---------- ---------- ----------- -----------
STOCKHOLDERS' EQUITY, DECEMBER 25, 1992 -- 5,340,000 3,904,000 63,115,000 72,359,000
NET INCOME FOR THE YEAR -- -- -- 8,295,000 8,295,000
COMMON STOCK DIVIDENDS -- -- -- (643,000) (643,000)
EXERCISE OF EMPLOYEE OPTIONS -- 58,000 793,000 -- 851,000
AMORTIZATION OF RESTRICTED STOCK AWARD -- -- 94,000 -- 94,000
---------- ---------- ---------- ----------- -----------
STOCKHOLDERS' EQUITY, DECEMBER 31, 1993 -- $5,398,000 $4,791,000 $70,767,000 $80,956,000
========== ========== ========== =========== ===========
</TABLE>
(See accompanying notes to consolidated financial statements)
20
<PAGE> 18
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PACIFIC SCIENTIFIC COMPANY AND SUBSIDIARIES
For the Fiscal Years Ended December 31, 1993,
December 25, 1992, and December 27, 1991
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Accounting policies of Pacific Scientific Company and its subsidiaries (the
Company) conform to generally accepted accounting principles and are summarized
below for the convenience of financial statement readers.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the
Company and all its subsidiaries. All material intercompany balances and
transactions have been eliminated. Most foreign subsidiary accounts are stated
as of November 30 of each year.
Fiscal Year
The Company's fiscal year ends on the last Friday in
December. References to 1993, 1992 and 1991 in these financial statements refer
to the fiscal years ended December 31, 1993, December 25, 1992 and December 27,
1991, respectively.
Long-Term Contracts
The Company enters into some long-term fixed price contracts for the production
of products. For financial statement purposes, sales are generally recorded as
deliveries are made on the percentage-of-completion basis of accounting.
Unbilled costs on these contracts are included in inventory balances in the
accompanying consolidated financial statements. Progress payments are netted
against work-in-process inventory balances and were $2,346,000, $1,803,000 and
$1,554,000 at the end of 1993, 1992 and 1991, respectively. Provisions for
estimated losses on uncompleted contracts are made in the period in which such
losses are determined.
Fair Value of Financial Instruments
The recorded amounts of cash, short-term investments, trade receivables,
accounts payable and short- and long-term borrowings approximate their fair
values. The note receivable is recorded at the appraised value of the
underlying collateral.
Fair values are estimated using quoted market prices and other appropriate
valuation techniques based on information available as of December 31, 1993.
Trade Receivables
Trade receivables are presented net of the related allowance for doubtful
accounts, which at year-end totaled $668,000, $629,000 and $429,000 in 1993,
1992 and 1991, respectively. Allowances are determined principally on the basis
of past collection experience.
Inventories
Inventories are stated at the lower of average cost or market and at year-end
consist of the following:
<TABLE>
<CAPTION>
(In thousands) 1993 1992 1991
------- ------- -------
<S> <C> <C> <C>
Finished goods $ 3,914 $ 3,281 $ 3,662
Work-in-process 13,244 11,237 12,498
Raw material and purchased parts 16,335 11,780 13,601
------- ------- -------
Total inventories $33,493 $26,298 $29,761
======= ======= =======
</TABLE>
Property and Depreciation
Property is recorded at cost. Additions, major renewals and improvements which
extend the useful life of the property are capitalized. Maintenance, repairs
and minor renewals are expensed.
Depreciation of property is computed generally by the straight-line method
over the useful lives of the various classes of assets. Such lives range from 5
to 20 years for buildings and improvements, and from 3 to 10 years for
machinery and equipment. When property is retired or otherwise disposed of, the
cost and accumulated depreciation are removed from the appropriate accounts and
any gain or loss is included in the results of current operations.
Net property at year-end consists of the following:
<TABLE>
<CAPTION>
(In thousands) 1993 1992 1991
------- ------- -------
<S> <C> <C> <C>
Land, building and improvements $ 9,160 $ 8,762 $ 9,169
Machinery and equipment 65,967 54,944 54,474
------- ------- -------
Total 75,127 63,706 63,643
Less accumulated depreciation 43,677 35,128 34,723
------- ------- -------
Net property $31,450 $28,578 $28,920
======= ======= =======
</TABLE>
Other Assets
Other assets at year-end consist of the following, net of accumulated
amortization:
<TABLE>
<CAPTION>
(In thousands) 1993 1992 1991
------- ------- -------
<S> <C> <C> <C>
Excess of cost over net assets of
acquired businesses $32,936 $20,237 $20,819
Patents, trademarks, purchased
technology and other intangibles 4,952 4,253 4,958
Notes receivable and other assets 1,627 1,530 1,631
------- ------- -------
Other assets - net $39,515 $26,020 $27,408
======= ======= =======
</TABLE>
21
<PAGE> 19
The excess of cost over net assets of acquired businesses is amortized, using
the straight-line method, over periods not exceeding 40 years. Patents,
trademarks, purchased technology and other intangibles are amortized, using the
straight-line method, over estimated useful lives of 5 to 17 years. Accumulated
amortization of other assets at year-end totaled $9,874,000, $8,126,000 and
$6,862,000 in 1993, 1992 and 1991, respectively.
Earnings per Share
Net income per common and common equivalent share is computed by dividing net
income, adjusted in 1992 and 1991 for dividends on preferred stock, by the
average number of shares of common stock and dilutive common stock equivalents
(stock options) outstanding each year, totaling 5,407,000 in 1993, 5,345,000 in
1992 and 5,334,000 in 1991. The computation does not include the effect of the
potential conversion of the Company's convertible subordinated debentures, as
these securities are not considered common stock equivalents. Fully diluted
earnings per share were not significantly different from the amounts presented.
Reclassifications
Certain amounts previously reported for 1991 and 1992 have been reclassified to
conform to the 1993 financial statement presentation.
2. BORROWINGS
Long-term debt at year-end, excluding the current portion, consists of the
following:
<TABLE>
<CAPTION>
(In thousands) 1993 1992 1991
------- ------- -------
<S> <C> <C> <C>
Bank borrowings $21,000 $ 4,500 $ 9,000
Convertible
subordinated debentures 17,481 17,481 17,481
Industrial development bonds 5,625 6,000 6,375
------- ------- -------
Total long-term debt $44,106 $27,981 $32,856
======= ======= =======
</TABLE>
In 1983, the Company issued $30,000,000 of 7 3/4% convertible subordinated
debentures, which are convertible into common stock at any time prior to
maturity at a conversion price of $38 per share. The Company is required to
commence annual sinking fund payments in 2001, sufficient to retire $2,481,000
of the debentures by 2002, with all remaining debentures becoming due on June
15, 2003. Interest is payable semiannually on June 15 and December 15. The
debentures can be redeemed by the Company at par. The debentures are
subordinated to all of the Company's existing and future senior debt. The
indenture agreement places certain restrictions on the aggregate amount of
common stock dividends payable and the repurchase of the Company's common
stock. At December 31, 1993, over $60,000,000 of retained earnings were
unrestricted under these provisions.
The Company maintains $50,000,000 of unsecured lines of credit, of which
$26,250,000 was outstanding and an additional $2,353,000 was committed to back
standby letters of credit on December 31, 1993. All $50,000,000 can be borrowed
at rates that do not exceed one percent (1%) over the London Interbank Offered
Rate (LIBOR) or at the bank's prime rate. The average interest rate on borrowed
funds at the end of 1993 was 4.3%. Of the unsecured lines of credit at December
31, 1993, $20,000,000 is classified as a short-term working capital line, of
which $5,250,000 is outstanding; and $30,000,000 is classified as a long-term
credit line, of which $23,353,000 was either outstanding or committed. The
long-term credit lines expire on July 31, 1995.
In October 1989, the Company issued $7,500,000 of 30-year industrial
development revenue bonds to finance the construction of an industrial facility
in the city of Oxnard, California, for use by the Company's Electro Kinetics
Division. These bonds have a floating interest rate, adjusted weekly, based on
current market rates for tax-exempt bonds. The Company is obligated to make a
principal payment of $375,000 in 1994, and to pay the remaining principal
balance of $5,625,000 in 2019. The portion of the bond proceeds not yet
expended for construction costs is held in trust and classified as restricted
cash of $6,092,000 in the accompanying consolidated balance sheet at December
31, 1993.
The bank agreement and industrial development bonds have loan covenants
which require the Company to maintain certain financial statement ratios. The
Company is in compliance with all required ratios at December 31, 1993.
Debt, including the short-term portion at December 31, 1993, matures as
follows: 1994, $5,625,000; 1995, $21,000,000; 1996, 1997 and 1998, none; later
years, $23,106,000. The 1994 principal payment of $375,000 due
22
<PAGE> 20
on the industrial development bonds is included in other current liabilities in
the accompanying consolidated balance sheets at December 31, 1993.
3. EMPLOYEE BENEFIT PLANS
The Company has noncontributory defined benefit pension plans covering
substantially all of its U.S. employees. Benefits are generally determined by a
formula based on years of service, final average salary and estimated social
security benefits. Pension expense totaled $728,000, $549,000 and $743,000 in
1993, 1992 and 1991, respectively.
Pension expense consists of the following components:
<TABLE>
<CAPTION>
(In thousands) 1993 1992 1991
------- ------- -------
<S> <C> <C> <C>
Benefits earned during the year $ 1,486 $ 1,522 $ 1,566
Interest on projected benefit
obligation 3,468 3,372 3,322
Gain on plan assets (4,189) (4,292) (4,575)
Net amortization and deferral (37) (53) 430
------ ------ ------
Net pension expense $728 $549 $743
====== ====== ======
</TABLE>
The following is a reconciliation of the funded status of the plans, including
the amount included in current and non-current employee benefit plan
liabilities in the accompanying consolidated balance sheets. The amounts shown
for 1993 are estimates made by the plans' actuary, while the amounts for 1992
and 1991 have been adjusted to actuals based on final calculations performed by
the plans' actuary.
<TABLE>
<CAPTION>
(In thousands) 1993 1992 1991
-------- -------- --------
<S> <C> <C> <C>
Actuarial present value of
accumulated plan benefits:
Vested $ 42,538 $ 36,629 $ 35,207
Non-vested 1,400 1,206 1,358
-------- -------- --------
Total 43,938 37,835 36,565
-------- -------- --------
Effect of estimated future
salary increase 4,560 4,365 4,385
-------- -------- --------
Projected benefit obligation 48,498 42,200 40,950
Plan assets at fair market value (45,094) (42,060) (38,937)
-------- -------- --------
Projected benefit obligation
over plan assets 3,404 140 2,013
Unrecognized transition asset 1,072 1,387 1,702
Unrecognized net actuarial
experience gain (loss) (1,962) 1,637 582
-------- -------- --------
Recorded pension liabilities $ 2,514 $ 3,164 $ 4,297
======== ======== ========
</TABLE>
Significant assumptions used in the determination of pension expense consist of
the following:
<TABLE>
<CAPTION>
1993 1992 1991
----- ----- -----
<S> <C> <C> <C>
Discount rate on projected
benefit obligation 8.5% 8.5% 8.5%
---- ---- ----
Long-term rate of return
on plan assets 9.25% 10.0% 10.0%
---- ---- ----
Rate of future salary increases 5.0% 5.0% 5.0%
==== ==== ====
</TABLE>
During 1993, the Company changed the expected rate of return on pension assets
from 10% to 9.25%. The effect of this change was an increase in 1993 pension
expense of $320,000. At the end of 1993, the Company changed the assumed
discount rate on the projected benefit obligation from 8.5% to 7.5%, and its
assumed rate of future salary increases from 5.0% to 4.5%. These changes caused
a net increase in the projected benefit obligation of $4.2 million.
During 1991, the Company changed its assumed discount rate on the projected
benefit obligation from 9.0% to 8.5% and its assumed rate of future salary
increases from 6.0% to 5.0%. The net effect of these changes was not material.
The Company uses the projected unit credit method for determining both
pension expense and the annual contribution to the plans. The Company's funding
policy is to contribute an amount subject to the minimum and maximum
contributions allowed for federal income tax purposes. Cumulative
contributions to the plans have been less than recorded pension expense, due to
Internal Revenue Service limitations on contributions to plans which have been
defined by income tax regulations as being overfunded. The difference between
cumulative pension expense and contributions has been classified in current and
non-current liabilities in the accompanying consolidated balance sheets, based
on expected contribution funding dates.
Pension plan assets consist of corporate equity and debt securities,
unallocated insurance contracts, real estate and short-term investments.
Also included in accrued employee benefit plan liabilities in the
accompanying consolidated balance sheets are amounts related to a non-
qualified retirement plan for an executive and the directors of the Company.
23
<PAGE> 21
4. INCOME TAXES
The income tax provision consists of the following:
<TABLE>
<CAPTION>
(In thousands) 1993 1992 1991
------ ------ ------
<S> <C> <C> <C>
Current
Federal income taxes $3,416 $2,341 $2,844
State and foreign income taxes 1,012 586 1,039
------ ------ ------
Total current tax provision 4,428 2,927 3,883
Deferred (457) (237) 134
------ ------ ------
Total income tax provision $3,971 $2,690 $4,017
====== ====== ======
</TABLE>
The differences between the income tax provision and income taxes computed
using the U.S. Federal statutory income tax rates (35% in 1993 and 34% in 1992
and 1991) consist of the following:
<TABLE>
<CAPTION>
(In thousands) 1993 1992 1991
------ ------ ------
<S> <C> <C> <C>
Tax at U.S. Federal rate $3,922 $2,748 $4,100
State income taxes, net of Federal
tax benefit 571 380 593
Tax benefit of research and
development credits (465) (222) --
Tax benefit of IRS examination
settlement (264) -- (799)
Amortization of certain other
assets 253 202 225
Tax benefit of foreign sales
corporation (220) (166) (77)
Effect of foreign operations 193 273 (74)
Tax benefit of loss and credit
carryforwards -- (674) (189)
Other (19) 149 238
------ ------ ------
Income tax provision $3,971 $2,690 $4,017
====== ====== ======
</TABLE>
During 1993, the Internal Revenue Service completed its examination of the
Company's 1986, 1987 and 1988 Federal income tax returns. In connection with
those examinations, the Internal Revenue Service has agreed with the Company
regarding the deductibility of certain items. As a result, the Company has
recognized a reduction in the current year's tax provision relating to such
items.
Effective as of the beginning of fiscal year 1993, the Company adopted
Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for
Income Taxes." The adoption of this standard allowed the Company to recognize
income tax benefits from loss carryforwards and certain temporary differences
(primarily accrued employee benefit plan liabilities) for which tax benefits
had not previously been recorded. The Company's adoption of SFAS 109, recorded
as the cumulative effect of a change in accounting principle, increased the net
deferred tax asset at December 26, 1992 by approximately $1,060,000 with a
corresponding increase to net income.
Additionally, in connection with the adoption of SFAS 109, the Company's
net deferred tax asset was increased by approximately $580,000 to record the
benefit of net operating losses related to the acquisition of High Yield
Technology, Inc. with a corresponding decrease to previously recognized
intangible assets. The decrease resulted in an immaterial reduction of
amortization expense during the current year.
The Company has available tax net operating losses, subject to certain
limitations, of approximately $2.0 million which expire at various dates through
2009.
Net deferred taxes of $2,200,000 at December 31, 1993 were related to:
<TABLE>
<CAPTION>
(In thousands) Current Long-Term
------- ---------
<S> <C> <C>
ASSETS:
Inventory $2,027 --
Employee Benefits -- $ 1,156
Accrued Liabilities 820 --
Net Operating Losses 272 528
Warranty Liabilities 523 --
Environmental Liabilities -- 403
Receivables 242 --
Other 203 84
Valuation Allowance (272) --
LIABILITIES:
Property -- (2,897)
Patents/Trademarks -- (807)
Other (82) --
------ -------
Net Deferred Tax Asset (Liability) $3,733 $(1,533)
====== =======
</TABLE>
The valuation allowance was increased by $163,000 during 1993.
5. STOCKHOLDERS' EQUITY
The Company has authorized 2,000,000 shares of preferred stock and 15,000,000
shares of common stock, of which 5,398,000 shares of common stock were
outstanding at December 31, 1993.
24
<PAGE> 22
The Company maintains a stock option plan which provides for the granting
of options for the purchase of common stock to the officers and certain other
key employees. No compensation expense has been recorded, since the options
have exercise prices which are equal to the fair market value of the stock on
the respective dates of grant. Stock options outstanding represent cumulative
grants of options from the 1992 plan and two predecessor plans. The 1992 plan
limits options available for grant to 318,787 shares of common stock and
additionally provides for options canceled to become available for future
grants. Stock option activity during 1993, 1992 and 1991 consists of the
following:
<TABLE>
<CAPTION>
1993 1992 1991
------- ------- -------
<S> <C> <C> <C>
Stock options outstanding,
beginning of year 328,501 394,801 439,101
Options granted
(per share: $10.25 to $18.13) 172,980 2,500 --
Options canceled
(per share: $8.75 to $16.00) (27,325) (63,800) (44,300)
Options exercised
(per share: $8.75 to $14.88) (58,000) (5,000) --
------- ------- -------
Stock options outstanding,
end of year 416,156 328,501 394,801
Stock options exercisable,
end of year 224,626 272,626 265,426
Options available for grant,
end of year 150,132 318,787 321,287
======= ======= =======
</TABLE>
In November 1988, the Company adopted a Stockholder Protection Plan and
declared a dividend distribution of one Right for each outstanding share of
common stock. Under certain conditions, each Right may be exercised to purchase
one one-hundredth of a share of Series A Junior Participating Preferred Stock
at a purchase price of $45, subject to adjustment. The Rights will become
exercisable 20 days after a person or group has acquired, or obtained the right
to acquire, 20% or more of the outstanding shares of common stock, or following
the commencement of a tender or exchange offer for 35% or more of such
outstanding shares of common stock (except pursuant to an offer which the
independent members of the Company's Board of Directors determine to be fair
and otherwise in the best interests of the Company and its stockholders).
Prior to becoming exercisable, the Rights are attached to and trade
together with the common stock. Each share of Series A junior participating
preferred stock issued under this Plan will entitle its holder to receive
dividends equal to the greater of $4 or 100 times the dividend on common stock,
a liquidation preference of $100, and voting rights approximately 100 times
greater than the voting rights of one share of common stock. The Company will
be entitled to redeem the Rights at $0.01 per Right at any time prior to the
earlier of the expiration of the Rights in November 1998, or the time that the
Rights become exercisable. The Rights do not have voting, liquidation or
dividend rights and, until they become exercisable, have no dilutive effect on
the earnings per share of the Company.
6. BUSINESS ACQUISITIONS
In August 1993, the Company purchased all the outstanding shares of common
stock of Automation Intelligence, Inc. for $3.4 million plus contingent
considerations dependent on the sales growth of the acquired company over a
three-year period. This acquisition was made to acquire the capability to
develop automation software and systems using the Company's motors. The
purchase price is in excess of the fair market value of the net tangible assets
acquired by approximately $3.6 million. Had the acquisition occurred at the
beginning of 1992, there would have been no material impact upon the Company's
results of operations in either 1992 or 1993.
In July 1993, the Company purchased all the outstanding shares of common
stock of Powertec Industrial Corporation for $14.1 million. The Company also
paid $0.6 million to the founder of Powertec in exchange for a five-year
non-competition agreement. The acquisition was made to extend the power range
of the Company's product line of brushless motors and controls. The purchase
price is approximately $10.8 million in excess of the fair market value of the
net tangible assets acquired.
In April 1993, the Company purchased certain operating assets, excluding
the real estate, of Unidynamics/Phoenix, Inc., a subsidiary of the John Crane
Corporation for approximately $6.0 million which approximated the fair market
value of the tangible assets acquired. This acquisition was made as a strategic
expansion of the Company's pyrotechnic business. During early 1994, the
acquired business will be consolidated into the Company's expanded facility in
Chandler, Arizona.
25
<PAGE> 23
Had the acquisitions of Powertec and Unidynamics/Phoenix occurred as of the
beginning of fiscal year 1992, unaudited pro forma net sales, income from
operations before taxes and cumulative effect of a change in accounting
principle, net income and net income per common and common equivalent share
would have been as follows:
<TABLE>
<CAPTION>
(In thousands, except per share amounts) 1993 1992
-------- --------
<S> <C> <C>
Net sales $209,597 $202,392
Income from operations before
taxes and cumulative effect of
a change in accounting principle 12,156 9,986
Net income 8,995 6,397
Net income per common and
common equivalent share 1.67 1.20
======== ========
</TABLE>
The pro forma operating results include the results of operations of the
acquired companies for fiscal years 1993 and 1992 with estimated increased
depreciation and amortization of property and excess cost over net assets
acquired along with other relevant adjustments to reflect the fair value of the
acquired assets and pro forma interest expense on the assumed acquisition
borrowings.
The results of operations reflected in the pro forma information above are
not necessarily indicative of the results which would have been reported if the
acquisitions had been effected at the beginning of fiscal 1992.
During 1991, the Company acquired a patent for thermocouple wire and
distribution rights to a line of pressure gauges. The purchase price for both
products was approximately $1,125,000.
The Company acquired IMEC Corporation in 1986 for a cash price of $200,000
plus a contingency payment. The contingency payment, which amounted to
$2,080,000, was based on operating results of IMEC through mid-1991. Such
additional payment was recorded in 1991 as an addition to the excess of cost
over net assets acquired.
In October 1990, the Company acquired all of the outstanding stock of High
Yield Technology, Inc. for $2,900,000 plus contingent considerations dependent
on HYT's sales growth over the following five years. During 1993, the first of
the two contingency payments was made. This payment of $193,000 was accounted
for as an addition to the excess of cost over net assets acquired. The final
contingent payment is due in 1995 and will be computed as a percentage of net
sales, as defined, of fiscal year 1994. Any such payment will be accounted for
as an addition to the excess of cost over net assets acquired.
7. SALE OF DIVISION
In 1991, the Company sold its Belfab Division for approximately $14 million,
which resulted in a pre-tax gain of $9,225,000. Revenues of Belfab were
$7,551,000 in the first nine months of 1991.
8. SALE OF REAL ESTATE
In December 1989, the Company sold real property in Anaheim, California. The
sale price was $6,375,000, of which $2,000,000 was received in cash and
$4,375,000 was received in the form of a note secured by a first trust deed
covering the property.
In September 1991, the maker of the note, a real estate developer, alleged
various matters and filed an action in the Superior Court of the State of
California naming the Company and certain other parties as defendants.
In November 1993, the California Superior Court, as a result of a jury
decision, found in favor of the company and ordered the judicial foreclosure on
the property in satisfaction of the unpaid principal and interest on the note.
The court also awarded damages to the Company.
26
<PAGE> 24
9. UNAUDITED QUARTERLY INFORMATION
<TABLE>
<CAPTION>
($ in thousands, First Second Third Fourth
except per share data) Quarter Quarter Quarter Quarter Total
------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
1993
- ----
Net sales $41,379 $49,927 $47,931 $56,316 $195,553
Gross profit 12,610 14,831 15,171 17,454 60,066
Income before
accounting change 1,128 1,633 2,167 2,307 7,235
Accounting change 1,060 -- -- -- 1,060
------- ------- ------- ------- --------
Net income 2,188 1,633 2,167 2,307 8,295
Net income per common share:
Before accounting change .21 .30 .40 .42 1.33
Accounting change .20 -- -- -- .20
------- ------- ------- ------- --------
Total net income
per common share .41 .30 .40 .42 1.53
======= ======= ======= ======= ========
1992
- ----
Net sales $40,983 $43,362 $42,062 $46,242 $172,649
Gross profit 12,874 13,468 12,873 13,732 52,947
Net income 1,111 1,219 1,457 1,610 5,397
Net income per common share .20 .23 .27 .30 1.00
======= ======= ======= ======= ========
1991
- ----
Net sales $43,986 $44,663 $42,971 $41,350 $172,970
Gross profit 13,092 12,772 12,035 12,367 50,266
Net income 766 416 5,79(1) 1,068(2) 8,043
Net income per common share .13 .06 1.07 .20 1.46
======= ======= ======= ======= ========
</TABLE>
(1) In the third quarter of 1991, the Company recorded $8,875,000 of pre-tax
income in connection with the sale of the Belfab Division (Note 7). In the
fourth quarter, this pre-tax gain was adjusted to $9,225,000.
(2) In the fourth quarter of 1991, net income was increased by $600,000 due to
a favorable year-end partial settlement of an IRS examination.
10. OPERATING LEASES
The Company leases certain facilities and equipment under non-cancelable
operating leases which require the following minimum future rental payments:
1994, $4,634,000; 1995, $3,787,000; 1996, $3,132,000; 1997, $2,975,000; 1998,
$2,110,000; later years, $2,275,000. Rental expense was $5,061,000, $4,612,000
and $4,506,000 in 1993, 1992 and 1991, respectively.
11. BUSINESS SEGMENT INFORMATION
The Electrical Equipment segment produces products such as electric motors and
generators, electro-mechanical and electronic controls for electric energy and
electronic instruments. The products are predominately proprietary and, once
designed, tend to be produced in quantity and sold based on unique
specifications. Deliveries are usually made in a relatively short period after
receipt of an order, ranging from one day to several weeks. The production
process typically involves fabrication of special components and the assembly
of components produced by other suppliers. Products are sold both to end-users
and to original equipment manufacturers.
The Safety Equipment segment produces fire detection and suppression
equipment, personnel safety restraints, mechanical and electro- mechanical
flight control components and similar products used mainly in commercial and
military aircraft, vehicles and a variety of other commercial and industrial
applications. In most cases, the Company's products are reconfigured to meet
specific customer needs. The Company receives long-term purchase orders and
also responds to spot buyers, particularly for spare parts. The manufacturing
process generally involves processes such as machining, welding and sewing,
with some assembly of electronic components produced by other suppliers.
Products in this segment are sold to end-users and original equipment
manufacturers.
Export sales of $34,483,000 in 1993, $29,317,000 in 1992 and $24,428,000 in
1991 were primarily to customers in Europe and Asia.
The Company's net sales under prime contracts to defense agencies of the
U.S. Government were $9,471,000 in 1993, $12,367,000 in 1992 and $13,197,000 in
1991.
27
<PAGE> 25
INFORMATION REGARDING THE COMPANY'S OPERATIONS BY SEGMENT
<TABLE>
<CAPTION>
Depreciation
Pre-Tax and
(In thousands) Fiscal Net Income Capital Amortization Identifiable
Segment Year Sales Expenses(1) Spending(2) Expense Assets(3)
- ------------- ----- -------- ---------- --------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Electrical Equipment 1993 $128,830 $ 8,924 $4,565 $7,212 $ 98,494
1992 114,795 8,480 6,584 6,355 78,659
1991 108,519 5,662 5,304 6,037 81,587
Safety Equipment 1993 66,723 8,305 3,035 3,188 50,203
1992 57,854 5,302 1,179 2,376 44,797
1991 64,451 13,454(4) 2,195 2,689 43,754
Corporate 1993 -- (4,111) 7 135 12,560
1992 -- (3,766) 14 150 11,111
1991 -- (4,090) 10 186 10,603
Net Interest 1993 -- (1,912) -- -- --
1992 -- (1,929) -- -- --
1991 -- (2,966) -- -- --
Consolidated 1993 195,553 11,206 7,607 10,535 161,257
1992 172,649 8,087 7,777 8,881 134,567
1991 172,970 12,060 7,509 8,912 135,944
</TABLE>
(1) Pre-tax income (expenses) represents net sales less operating expenses,
which include all costs and expenses related to the Company's operations in
each segment and excludes the effect, in 1993, of a cumulative effect of a
change in accounting principle..
(2) Capital spending is shown exclusive of property purchased in conjunction
with the acquisition of businesses (Note 6).
(3) Identifiable assets are those used by the industry segment involved, or
an allocated portion of assets used jointly by two or more segments.
Intangibles and other assets arising from acquisitions of businesses are
allocated to the related segment. General corporate assets primarily
consist of cash and certain other property.
(4) In 1991, the Safety Equipment segment includes $9,225,000 of pre-tax income
related to the sale of a division.
Dividends (Unaudited)
In October 1991, the Company resumed its policy of paying regular quarterly
cash dividends on its outstanding common stock. The first dividend of 3 cents
per share was paid January 6, 1992 to shareholders of record as of December 20,
1991. Cash dividends of 12 cents per share were declared in 1993 and 1992.
The annual dividend rate on the Company's previously outstanding Series B,
10% Non-Convertible Preferred Stock was $1.00 per share. Dividends earned were
$43,000 and $260,000 in 1992 and 1991, respectively. In 1992, the Company
redeemed all the remaining shares of this issue of Preferred Stock.
Price Range of Common Stock (Unaudited)
The table below shows the high and low sales prices of the Company's common
stock on the New York Stock Exchange for the periods indicated:
<TABLE>
<CAPTION>
High Low
------ ------
<S> <C> <C>
1993
- ----
First Quarter $16.00 $14.00
Second Quarter 15.50 12.13
Third Quarter 17.63 14.63
Fourth Quarter 23.88 16.88
====== ======
1992
- ----
First Quarter $11.88 $ 9.25
Second Quarter 13.38 11.38
Third Quarter 13.75 12.25
Fourth Quarter 15.63 12.00
====== ======
1991
- ----
First Quarter $10.25 $7.25
Second Quarter 12.50 8.00
Third Quarter 10.25 8.38
Fourth Quarter 9.88 8.50
====== ======
</TABLE>
28
<PAGE> 26
COMPANY LOCATIONS, DIRECTORS AND OFFICERS
Corporate Office
620 Newport Center Drive
Newport Beach, CA 92660
(714) 720-1714
Divisions
Electro Kinetics
Santa Barbara, California
Energy Dynamics
Chandler, Arizona
Goodyear, Arizona
Fisher Pierce
Weymouth, Massachusetts
HIAC/ROYCO
Silver Spring, Maryland
High Yield Technology
Sunnyvale, California
HTL/Kin-Tech
Duarte, California
Yorba Linda, California
Motor & Control
Rockford, Illinois
Charlestown, Massachusetts
Automation Intelligence
Duluth, Georgia
Powertec Industrial
Rock Hill, South Carolina
Juarez, Mexico
Subsidiaries
Pacific Scientific International Sales Corporation
St. Thomas, U.S. Virgin Islands
Pacific Scientific, GmbH
Leonberg, Germany
Pacific Scientific LTD.
Buckinghamshire, England
Pacific Scientific, S.A.R.L.
Palaiseau, France
Board of Directors
Edgar S. Brower
Chairman of the Board
Walter F. Beran
Chairman of the Board,
Pacific Alliance Group
Ralph O. Briscoe
Consultant
William A. Preston
Chairman,
APM, Inc.
Millard H. Pryor, Jr.
Managing Director,
Pryor & Clark Company
Thomas P. Stafford
Lt. General USAF (Ret.)
Chairman,
Stafford, Burke and
Hecker, Inc.
Harry W. Todd
Managing Director,
Carlisle Enterprises L.P.
Corporate Officers
Edgar S. Brower
President and
Chief Executive Officer
Richard V. Plat
Senior Vice President
Finance and Administration
and Secretary
Steven L. Breitzka
Robert L. Day
Richard G. Knoblock
Ronald B. Nelson
Robert L. Olsen
John M. Ossenmacher
Vice Presidents
William L. Nothwang
Controller
Peer A. Swan
Treasurer
Transfer Agent and
Registrar
Chemical Trust Company
of California
Los Angeles, California
Legal Counsel
Paul, Hastings, Janofsky & Walker
Los Angeles, California
Independent Accountants
Deloitte & Touche
Costa Mesa, California
Form 10-K
The Company, on written request, will provide free of charge to each
stockholder, a copy of the Form 10-K as filed with the Securities and Exchange
Commission. In addition, the Company will furnish a requesting shareholder any
exhibit not contained in the Form 10-K upon payment of a fee. All written
requests should be directed to:
Richard V. Plat
Senior Vice President
Pacific Scientific Company
620 Newport Center Drive
Newport Beach, CA 92660
Stockholders' Meeting
The Annual Meeting of
Stockholders will be held at
10:00 AM, April 27, 1994.
<PAGE> 27
APPENDIX
PAGE 4
Graph Electrical Equipment - A pie chart showing the percentage
that each major product line contributes to the segment's
net revenues, as follows:
<TABLE>
<S> <C>
Motors and Controls 67%
Electrical Utilities 18
Particle Monitoring Instruments 15
----
100%
</TABLE>
Photo 1 Photo of a woman using a treadmill, courtesy of Unisen Inc.
Photo 2 Photo of an automated packaging production line.
PAGE 5
Photo 1 Photo of a youth standing in front of a soft drink vending machine
and drinking a canned soft drink.
Photo 2 Photo of a Saturn car, courtesy of Saturn Corporation.
Photo 3 Photo of an injection molding machine, courtesy of Cincinnati
Milacron Inc.
PAGE 6
Photo 1 Photo of various types and sizes of candy bars.
Photo 2 Photo of earthmoving equipment, courtesy of Caterpillar Inc.
PAGE 7
Photo 1 Photo of the various outdoor lighting controls manufactured by
Pacific Scientific for sale to industrial, commercial and
residential customers.
Photo 2 Photo of a faucet and a glass of water.
Photo 3 Photo of silicon wafers and integrated circuits.
PAGE 8
Graph Safety Equipment - A pie chart showing the percentage
contributed by each major product line to the segment's net
revenues, as follows:
<TABLE>
<S> <C>
Fire Detection and Suppression 45%
Pyrotechnics 30
Restraints 25
----
100%
</TABLE>
Photo 1 Photo of alternative fuel municipal buses.
Photo 2 Photo of oil pumping rig.
PAGE 9
Photo 1 Photo of a Boeing 777 aircraft, courtesy of Boeing Commercial
Airplanes.
Photo 2 Photo of Japan Railway's experimental MAGLEV high-speed train,
courtesy of Railway Technical Research Institute, Tokyo, Japan.
Photo 3 Photo of seats used in amusement park attractions, featuring
simulator rides, courtesy Iwerks Entertainment.
<PAGE> 28
PAGE 10
Graph 1 Sales of Continuing Businesses (Dollars in Millions)
<TABLE>
<CAPTION>
1989 1990 1991 1992 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Divested Businesses 14.3 11.0 7.6 - -
Electrical Equipment 107.6 109.9 108.5 114.8 128.8
Safety Equipment 47.7 63.0 56.9 57.9 66.7
</TABLE>
Graph 2 Sales by Market Area (In Percent)
<TABLE>
<S> <C>
U.S. and Canada 63%
Defense Trades 19%
Export 18%
</TABLE>
PAGE 11
Graph 1 1993 Allocation of Sales Dollar (In Cents)
<TABLE>
<S> <C>
Material $ .33
Wages and Salaries .32
Services and Supplies .22
Depreciation and Amortization .05
Taxes .04
Net Income .04
-----
$1.00
</TABLE>
Graph 2 Operating Income before Gains on Sale of Product Line (Dollars in
Millions)
<TABLE>
<CAPTION>
1989 1990 1991 1992 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C>
5.254 2.994 5.042 8.697 11.403
</TABLE>
PAGE 12
Graph 1 Research and Development Expenses (Dollars in Millions)
<TABLE>
<CAPTION>
1989 1990 1991 1992 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C>
5.5 6.9 8.4 8.2 8.5
</TABLE>
Graph 2 Inventory as Percent of Sales (By Percent)
<TABLE>
<CAPTION>
1989 1990 1991 1992 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C>
23.7 19.2 17.2 15.2 17.1
</TABLE>
PAGE 13
Graph 1 Total Assets (Dollars in Millions)
<TABLE>
<CAPTION>
1989 1990 1991 1992 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C>
149.2 143.4 135.9 134.6 161.3
</TABLE>
Graph 2 Sales per Employee (Dollars in Thousands)
<TABLE>
<CAPTION>
1989 1990 1991 1992 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C>
92.0 101.0 112.6 125.8 126.5
</TABLE>
<PAGE> 1
EXHIBIT 24.0
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statements No.
2-61247, No. 2-59224, No. 2-98688, No. 2-83138, No. 2-98687 and No. 33-21836
of Pacific Scientific Company on Form S-8 of our reports dated February 3,
1994, appearing in and incorporated by reference in this Annual Report on Form
10-K of Pacific Scientific Company for the year ended December 31, 1993.
DELOITTE & TOUCHE
Costa Mesa, California
March 28, 1994
