<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 30, 1994
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)
CALIFORNIA 94-0744970
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
620 Newport Center Drive, Suite 700
Newport Beach, California 92660
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: 714/720-1714
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<CAPTION>
Name of Each Exchange
Title of Each Class on Which Registered
------------------- ---------------------
<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 $19.625 per share, which was the last sale
price on the New York Stock Exchange on March 3, 1995, was $215,528,736.
As of the latest practicable date, there were 10,982,356 shares of registrant's
common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Annual Report to Stockholders for the fiscal year ended December 30, 1994 (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 1995 Annual Meeting of Stockholders (incorporated by reference in Part
III).
The Exhibit Index begins on Page 16.
<PAGE> 2
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 manufacturing and selling the products of its two segments,
Electrical Equipment and Safety Equipment.
The various operating divisions and wholly-owned subsidiaries of
Registrant are organized (under the two segments) as eight main operating
units. The divisions and wholly-owned subsidiaries that make up the operating
units are as follows:
PACIFIC SCIENTIFIC COMPANY
<TABLE>
<CAPTION>
Electrical Equipment Segment Safety Equipment Segment
- ---------------------------- ------------------------
<S> <C>
Electro-Kinetics Division Energy Dynamics Division
Fisher Pierce Division HTL/Kin-Tech Division
Royce Thompson Ltd.(1) Pacific Scientific, Ltd.
Instruments Division
HIAC/ROYCO Division
High Yield Technology, Inc.
Pacific Scientific, GmbH
Pacific Scientific, Ltd.
Pacific Scientific, SARL
Motion Technology Division(2)
Automation Intelligence, Inc.
Motor & Control Division
Eduard Bautz, GmbH(3)
Powertec Industrial Corporation
Bobinas del Sur, S.A. de C.V.
Solium Inc.(4)
- --------------------------------------------------
</TABLE>
(1) Acquired in April 1994. Additional information regarding this
acquisition is presented in Note 6 on Page 35 of Registrant's Annual
Report to Stockholders for the fiscal year ended December 30, 1994,
a copy of which has been delivered to the Securities and Exchange
Commission (the "Commission") pursuant to Rule 14a-3 of the
Commission, (the "Annual Report") and such Note 6 is incorporated
herein by reference in accordance with the provisions of Rule 12b-23
of the Commission ("Rule 12b-23").
(2) Operating division created during 1994. Additional information
regarding this division is included in the letter to stockholders
beginning on Page 2 of the Annual Report and is incorporated herein
by reference in accordance with the provisions of Rule 12b-23.
(3) Acquired December 31, 1994 (the first day of fiscal 1995).
Additional information regarding this acquisition is presented in
Note 10 on Page 36 of the Annual Report and is incorporated herein
by reference in accordance with the provisions of Rule 12b-23.
(4) Wholly-owned subsidiary created during 1994. Additional information
regarding this operation is included in the letter to stockholders
beginning on Page 2 of the Annual Report and is incorporated herein
by reference in accordance with the provisions of Rule 12b-23.
Further discussion regarding the Company's general business
development for the fiscal year ended December 30, 1994 is included in the
letter to stockholders beginning on Page 2 of the Annual Report and is
incorporated herein by reference in accordance with the provisions of Rule
12b-23.
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(b) and (c)(1)(i) DESCRIPTION OF BUSINESS SEGMENTS
The Electrical Equipment segment produces: 1) electric motors and
generators and related motion control devices such as controllers and drivers,
2) electro-mechanical and electronic controls for use mainly by electric
utilities including the controls for street and highway lighting, 3) electronic
instruments and 4) electronic ballasts for fluorescent lights. The products
are predominately proprietary and once designed, tend to be produced in
quantity and sold based on unique specifications. After receipt of an order,
deliveries are usually made within a relatively short period of time, 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. Fabrication processes include cutting, stamping, machining,
winding, molding, soldering, welding, annealing and painting. Products are
sold both to end-users and to original equipment manufacturers.
The Safety Equipment segment produces: 1) fire detection and
suppression equipment, 2) personnel safety restraints, 3) mechanical and
electro-mechanical flight control components, 4) pyrotechnics, and 5) provides
service for products already delivered to customers. These products are used
mainly in commercial and military aircraft and vehicles, but are also used in a
variety of other commercial and industrial applications. In most cases, the
Company's products are reconfigured to meet specific customer needs. The
Company generally receives long-term purchase orders but also responds to spot
buyers, particularly for spare parts. Manufacturing typically involves
processes such as cutting, machining, welding, mixing, blending and sewing,
with some assembly of components produced by other suppliers. Products in this
segment are sold to end-users and original equipment manufacturers.
Financial information about industry segments is presented on Page
29 of the Annual Report 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 5 through 17 of the Annual Report 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 1994, 1993 and 1992 were as follows:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Electrical Equipment
- --------------------
Electric Motors and Generators 33% 36% 35%
Motion Controls 14 8 7
Products for Electrical Utilities 13 12 14
Particle Monitoring Instruments 11 10 11
Safety Equipment
- ----------------
Fire Detection/Suppression & Restraints 21 25 28
Pyrotechnics 8 9 5
--- --- ---
100% 100% 100%
</TABLE>
(c)(1)(ii) MATERIAL NEW PRODUCTS OR SEGMENTS
In October 1994, Registrant announced the development of its SoliumTM
technology. This technology provides an improved means of dimming compact
fluorescent lights (CFLs). Registrant has applied for various patents relating
to the new technology. On December 21, 1994, Solium Inc. was formed as a
totally-owned subsidiary of Registrant. It is expected that this new
subsidiary will require an investment of more than $20 million over the next
three years in the areas of manufacturing facilities, machinery, equipment and
various other costs incidental to the start-up of a new business. Further
information regarding Solium is presented in the letter to stockholders on
Pages 2 and 3, and on Page 15 of the Annual Report and is incorporated herein
by reference in accordance with the provisions of Rule 12b-23.
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<PAGE> 4
During 1994, the Company introduced TriodideTM, a drop-in replacement
for existing Halon-based suppression agents. The Company has obtained a
license (with regard to the pending patent) to the exclusive right to use and
sell Triodide as a fire suppression agent. Triodide does not contain
chlorofluorocarbons and has virtually no impact on the earth's ozone layer.
(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. In anticipation of the
discontinuance of Halon 1301 production, the Company introduced Triodide,
discussed at item 1(c)(1)(ii) above, and developed a system capable of
recovering and recycling Halon 1301 while also increasing its storage capacity
for this material. The Company has been able to maintain a level of supply for
this agent that management believes is adequate to meet near-term demands. It
is expected that long-term demands will be satisfied by Triodide.
(c)(1)(iv) EFFECT OF PATENTS, TRADEMARKS, LICENSES, ETC.
Registrant owns numerous United States and foreign patents expiring
at various dates to 2011. Registrant also owns a number of trademarks.
Although, in the opinion of the Registrant, these patents and trademarks have
been and are expected to be of value, the loss of any single such item or group
of related items would not have a material effect on the conduct of the
existing business. However, the granting of patents applied for concerning
Solium technology could have a significant positive impact on the future growth
rate of the Company.
(c)(1)(v)&(vi) SEASONAL AND WORKING CAPITAL REQUIREMENTS
Not applicable.
(c)(1)(vii) MAJOR CUSTOMERS
For the fiscal year ended December 30, 1994, approximately 16% of
Registrant's sales were attributable to United States defense contracts, of
which 3% were awarded directly by the United States government and 13% 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 either 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 in Note 9 on Page 36 of the Annual Report and is incorporated herein
by reference in accordance with the provisions of Rule 12b-23.
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<PAGE> 5
(c)(1)(viii) BACKLOG
Registrant's backlog of unfilled purchase orders, believed by
Registrant to be firm, amounted to $83,555,000 on December 30, 1994, compared
with a backlog of $91,774,000 and $77,740,000 at fiscal year-end 1993 and 1992,
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 in Management's
Discussion and Analysis on Page 20 of the Annual Report and is incorporated
herein by reference in accordance with the provisions of Rule 12b-23.
(c)(1)(ix) GOVERNMENT CONTRACTS
The Company's net sales under prime contracts to defense agencies of
the U.S. Government were $8,096,000 in fiscal 1994, $9,471,000 in fiscal 1993
and $12,367,000 in fiscal 1992. Further information with regard to government
contracts is contained in section (c)(1)(vii) above.
(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
Electric Motors and Generators
The Registrant's five industrial and commercial motor 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, Baldor
Electric Co., Magnetek, Inc. and Leeson Electric Corporation, has a dominant
market share. The emerging market for brushless DC servo motors, drives and
controls has many competitors vying for market share in industrial markets,
although Registrant believes it has the highest share of the U.S. market
(excluding the machine tool area, in which it does not compete). Major
competitors in the brushless DC motor market area include Reliance Electric
Co., Kollmorgen Corporation and Yasakawa Electric America, Inc. The Registrant
knows of no competitor that offers a product similar to its Powertec line of
high-horsepower variable-speed brushless DC motors and drives. In stepper
drives and motors, there are many competitors, with the three largest being
Superior Electric Co., a division of Dana Corporation, Oriental Motors USA
Corporation and Compumotor, a division of Parker-Hannifin Corporation. The
Registrant has a major share of the market for low inertia motors used in
applications requiring very fast starting and stopping. The generator product
line, for use mainly in aircraft and missiles, has several significant domestic
competitors making air cooled generators with output of up to 50kw.
Motion Controls
Motion technology products (control products and drives) are mainly
sold in conjunction with Registrant's brushless servo and stepper motor
products and they, therefore, have similar competitors. The major competitor
in multi-axis system control is Allen-Bradley Company, Inc., a subsidiary of
Rockwell International Corporation.
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 and highway lighting. A major share of the market for capacitor
controls is also held by the Registrant. Lesser shares are held in the markets
for fault indicators and the Registrant's line of metering devices. No single
competitor has a product line offering similar to Registrant's.
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<PAGE> 6
Particle Monitoring Instruments
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.
Among the major competitors are PMS, Inc. and Met One, Inc. Registrant is the
only supplier of the Optical Production Profiler, a non-destructive quality
assurance system that images defects within silicon wafers.
Solium Ballast
The Registrant has applied for a patent on its Solium dimming
technology (a two-wire system) and, therefore, there are no competitors with
this specific technology. Using other technology, (generally, a four-wire
system) there are manufacturers of dimming ballast for conventional fluorescent
lighting, including Motorola, Inc. and Advanced Transformer Co., a subsidiary
of Philips Electronics N.V. and Lutron Electronics Co., Inc. In addition to
the dimming capability, the Solium technology offers other important
advantages, on which the Registrant has applied for patents. The Registrant
has also applied for a patent on the integral dimming of screw-in compact
fluorescent lamps.
SAFETY EQUIPMENT
Fire Detection, Suppression and Restraints
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, Walter Kidde, Inc., 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 with the leader being Santa Barbara Research, a
division of Hughes Aircraft Co. Registrant's ballistic and inertia reels,
which are used mainly in aircraft for the safety restraint of the crews, has,
at minimum, two major competitors in the United States and two in Europe.
However, Registrant has maintained a significant share of this market. For
passenger lap belts, the Registrant's major competitor is Am-Safe Inc. There
are two principal competitors for the cable tension regulator, the Registrant's
principal flight control component.
Pyrotechnics
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. Among its largest competitors are
OEA, Inc. and Special Devices, Inc.
(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
$10,521,000, $8,584,000 and $8,235,000 in 1994, 1993 and 1992, respectively.
Additional information regarding Research and Development is included in
Management's Discussion and Analysis - Research and development expense
beginning on Page 21 of the Annual Report and incorporated herein by reference
in accordance with Rule 12b-23.
(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.
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(c)(1)(xiii) EMPLOYEES
Registrant and its subsidiaries employ 1,848 persons as of December
30, 1994.
(d)(1) EXPORT SALES
Export sales by United States operations to customers in foreign
countries represented approximately 21% ($49,321,000) in 1994, 18%
($34,483,000) in 1993 and 17% ($29,317,000) in 1992 of Registrant's sales.
Starting in 1994, the Registrant manufactured outdoor lighting controls in
England for the local market and did some manufacturing in Mexico for shipment
to the U.S.
(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:
<TABLE>
<CAPTION>
Location and Function Building Area Segment
- --------------------- ------------- -------
<S> <C> <C>
OWNED
- -----
Oxnard, CA
To replace leased facility 5.7 Acres
in Santa Barbara (Undeveloped) Electrical Equipment
Anaheim, CA
Land and 9.25 Acres Corporate
Office Building 17,000 sq.ft.
(Held for Sale)
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
Broomfield, CO
Offices and Manufacturing 15,000 sq.ft. Electrical Equipment
</TABLE>
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<PAGE> 8
<TABLE>
<S> <C> <C>
Charlestown, MA
Offices and Manufacturing 26,000 sq.ft. Electrical Equipment
Birmingham England
Offices and Manufacturing 26,600 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
Juarez Mexico
Offices and Manufacturing 38,000 sq.ft. Electrical Equipment
Santa Barbara, CA
Offices and Manufacturing 56,000 sq.ft. Electrical Equipment
Randolph, MA
Offices and Manufacturing 60,000 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 - Willis Dr.
Manufacturing 34,000 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>
Management believes all manufacturing facilities and manufacturing equipment
are adequate, with minor changes and additions, for conducting operations as
presently contemplated, except for the manufacturing equipment necessary for
the new Solium product discussed at 1(c)(1)(ii) above. 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 1994.
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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
"Dividend and Quarterly Information" beginning on Page 36 of the Annual Report
are incorporated herein by reference in accordance with the provisions of Rule
12b-23. At the end of fiscal 1994, there were 1,630 stockholders of record.
The total number of beneficial holders of Registrant's common stock is
estimated at approximately 4,500. 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 19 of the Annual Report 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 under the caption "Management's Discussion and Analysis"
appearing on Pages 20 through 24 of the Annual Report 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
30, 1994, December 31, 1993 and December 25, 1992 appearing on Pages 25 through
28; the Independent Auditors' Report appearing on Page 24; and Management's
Report appearing on Page 18 of the Annual Report 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
30, 1994.
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Information regarding the Company's executive officers appears below:
<TABLE>
<CAPTION>
Name and Age Positions with Registrant
- ------------ -------------------------
<S> <C>
Edgar S. Brower (64) Chairman of the Board of Directors (since 1990), President,
Chief Executive Officer and Director (since 1985)
Richard V. Plat (65) Executive Vice President (since 1994) and Secretary
(since 1977)
Steven L. Breitzka (37) Corporate Vice President and President, Fisher Pierce Division
(since 1994)
Robert L. Day (63) Corporate Vice President and President, Energy Dynamics Division
(since 1993)
William T. Fejes, Jr. (38) Corporate Vice President and President, Motion Technology
Division (since 1994)
Richard G. Knoblock (54) Corporate Vice President (since 1989), President, Electro-Kinetics
Division (since 1988) and President, HTL/Kin-Tech
Division (since 1994)
Joseph R. Monkowski (40) Corporate Vice President and President, Instruments Division
(since 1994)
Ronald B. Nelson (55) Corporate Vice President and President, Motor & Control Division
(since 1990)
John M. Ossenmacher (35) Corporate Vice President and President, Solium Inc.
(since 1994)
William L. Nothwang (57) Controller and Assistant Secretary (since 1978)
Peer A. Swan (50) 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 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 and
Executive Vice President in 1994.
Mr. Breitzka joined Pacific Scientific Company in 1982. He was
promoted in 1992 to Corporate Vice President and President of the HTL/Kin-Tech
Division and, in 1994, he was appointed President of the Fisher Pierce
Division.
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. 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. Fejes was promoted in 1994 to Corporate Vice President and
President of the newly formed Motion Technology Division. He has held various
management positions with the Company since 1981, except for a brief period in
1985 when he was Product Development Manager for EG&G Torque Systems.
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<PAGE> 11
Mr. Knoblock joined the Company in 1988 as President of the
Electro-Kinetics Division and promoted in 1989 to Corporate Vice President. In
1994, Mr. Knoblock was appointed President of the HTL/Kin-Tech Division and
will also continue as President of the Electro-Kinetics Division.
Dr. Monkowski was hired in 1994 as Corporate Vice President and
President of the Instruments Division. From 1985 to 1994, he was associated
with Photon Dynamics, Inc., Lam Research Corporation, Monkowski-Rhine Inc. and
Schumacher Company. In these companies, he held various management positions
including Division President, Executive Vice President, Chief Technical Officer
and Vice President of Research and Development.
Mr. Nelson was hired in 1990 as Corporate Vice President and
President of the Motor & Control Division. He was General Manager of the Motor
Division of Barber Colman Co. from 1982 to 1990.
Mr. Ossenmacher joined the Company in 1992 as Product Line Director
for the HTL/Kin-Tech Division. In 1993, he was promoted to Corporate Vice
President and President of the Fisher Pierce Division. In 1994, Mr.
Ossenmacher was named President of the newly established subsidiary, Solium
Inc. Previously, he was with Parker-Hannifin Corporation where he held various
management positions since 1981.
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.
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 30,
1994.
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 30, 1994.
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 during the fiscal year ended December 30, 1994 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.
-11-
<PAGE> 12
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 30, 1994, December 31, 1993 and December 25, 1992 appearing
on Pages 25 through 28; the Independent Auditors' Report appearing
on Page 24 and Management's Report appearing on Page 18 of the
Annual Report 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 Annual
Report is not to be deemed filed as part of this report.
(a) 2 Included in 14(a)1 above.
(a) 3 Exhibits
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
Statement 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 2642 Eje Juan Gabriel St., Ciudad
Juarez, Chihuahua, Mexico.
10.2 Lease on facilities at 41 Pacella Park Dr., Randolph,
Massachusetts.
10.3 Judgement of Foreclosure and Order of Sale
of property at 1350 South State College Blvd., Anaheim,
California.
10.4 Registrant's 1992 Key Employee Stock Option Plan. (8)
10.5 Directors' Retirement Plan. (4)
10.6 First Amendment to Directors' Retirement Plan, dated
December 8, 1994.
10.7 Severance Agreement by and between Registrant and Edgar S.
Brower, effective December 27, 1985. (2)
10.8 Severance Agreement by and between Registrant and Richard V.
Plat, effective May 24, 1983. (1)
10.9 Restricted Stock Agreement by and between Registrant and
Edgar S. Brower, effective April 23, 1986. (3)
10.10 Registrant's Shareholders Protection Agreement. (9)
10.11 Amendment to Registrant's Shareholders Protection Agreement
dated August 22, 1990. (7)
-12-
<PAGE> 13
10.12 Agreement for the acquisition of certain assets of Royce
Thompson Electric Limited, pursuant to an asset purchase
agreement dated April 29, 1994.
10.13 Agreement for the acquisition of certain assets of Eduard
Bautz GmbH, pursuant to an asset purchase agreement dated
December 31, 1994.
12.1 Statement regarding computation of ratios. The current and
long-term debt-to-capitalization ratios appearing in
"Management's Discussion and Analysis" incorporated by
reference in Items 1(b) and (c)(1)(i) and the "Five Year
Financial Summary", incorporated by reference in Item 6 of
this Form 10-K are calculated as follows:
Total Current Assets
Current Ratio --------------------
Total Current Liabilities
Long-Term Debt
Long-Term Debt to --------------
Capitalization Long-Term Debt +
Total Stockholders' Equity
13.0 Annual Report to Stockholders for the fiscal year ended
December 30, 1994 (parts not incorporated by reference are
furnished for information purposes only and are not filed
herewith).
21.0 Subsidiaries of the Registrant, incorporated by reference to
"Divisions and Subsidiaries" appearing on Page 38 of the
Annual Report.
23.0 Independent Auditors' Consent
27.0 Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed by Registrant during the fourth
quarter of the fiscal year ended December 30, 1994.
(c) Included in 14(a) 3 above.
(d) Included in 14(a) 2 above.
-13-
<PAGE> 14
_________________________________________
(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.
-14-
<PAGE> 15
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 17, 1995 By /s/ Richard V. Plat
-----------------------------------
Richard V. Plat
Executive Vice President
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>
<S> <C> <C>
SIGNATURE CAPACITY DATE
--------- -------- ----
Principal Executive
/s/ Edgar S. Brower Officer and Director March 17, 1995
- ----------------------------------------
Edgar S. Brower
Principal Financial
/s/ Richard V. Plat Officer March 17, 1995
- ------------------------------------------
Richard V. Plat
/s/ William L. Nothwang Controller March 17, 1995
- ---------------------------------------
William L. Nothwang
/s/ Walter F. Beran Director March 17, 1995
- -----------------------------------------
Walter F. Beran
/s/ Ralph O. Briscoe Director March 17, 1995
- ----------------------------------------
Ralph O. Briscoe
/s/ Ralph D. Ketchum Director March 17, 1995
- ----------------------------------------
Ralph D. Ketchum
/s/ William A. Preston Director March 17, 1995
- -----------------------------------------
William A. Preston
/s/ Millard H. Pryor, Jr. Director March 17, 1995
- -----------------------------------------
Millard H. Pryor, Jr.
/s/ Thomas P. Stafford Director March 17, 1995
- ---------------------------------------
Thomas P. Stafford
/s/ Harry W. Todd Director March 17, 1995
- ----------------------------------------
Harry W. Todd
</TABLE>
-15-
<PAGE> 16
INDEX TO EXHIBITS
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 Statement 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 2642 Eje Juan Gabriel St., Ciudad Juarez,
Chihuahua, Mexico.
10.2 Lease on facilities at 41 Pacella Park Dr., Randolph, Massachusetts.
10.3 Judgement of Foreclosure and Order of Sale of property at 1350 South
State College Blvd., Anaheim, California.
10.4 Registrant's 1992 Key Employee Stock Option Plan. (8)
10.5 Directors' Retirement Plan. (4)
10.6 First Amendment to Directors' Retirement Plan, dated December 8,
1994.
10.7 Severance Agreement by and between Registrant and Edgar S. Brower,
effective December 27, 1985. (2)
10.8 Severance Agreement by and between Registrant and Richard V. Plat,
effective May 24, 1983. (1)
10.9 Restricted Stock Agreement by and between Registrant and Edgar S.
Brower, effective April 23, 1986. (3)
10.10 Registrant's Shareholders Protection Agreement. (9)
10.11 Amendment to Registrant's Shareholders Protection Agreement dated
August 22, 1990. (7)
10.12 Agreement for the acquisition of certain assets of Royce Thompson
Electric Limited, pursuant to an asset purchase agreement dated
April 29, 1994.
10.13 Agreement for the acquisition of certain assets of Eduard Bautz
GmbH, pursuant to an asset purchase agreement dated December 31,
1994.
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).
21.0 Subsidiaries of the Registrant, incorporated by reference to
"Divisions and Subsidiaries" appearing on Page 38 of Registrant's
1994 Annual Report to Stockholders.
23.0 Independent Auditors' Consent
27.0 Financial Data Schedule
-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.
-17-
<PAGE> 1
EXHIBIT 10.1
LEASE AGREEMENT
THIS LEASE AGREEMENT ("Lease") IS ENTERED INTO BY AND BETWEEN BOBINAS DEL
SUR, A MEXICO CORPORATION, REPRESENTED HEREIN BY MR. MARTIN HERNANDEZ IN HIS
CAPACITY AS GENERAL MANAGER OF SAID CORPORATION, HEREINAFTER REFERRED TO AS
"THE LESSEE", AND ON THE OTHER PART BY CONSTRUCTORA LINTEL, S.A. DE C.V.,
REPRESENTED BY MR. FEDERICO BARRIO IN HIS CAPACITY AS CHAIRMAN OF THE BOARD
OF SAID CORPORATION, HEREINAFTER REFERRED TO AS "THE LESSOR."
R E C I T A L S:
1. The LESSEE hereby declares that:
1.1 It is a company organized and existing under the General
Corporation Law.
1.2 Mr. Richard Plat is its Attorney-in-fact.
1.3 The address at which it has its principal place of business is
1141 Larry Mahan Drive, Suite B, El Paso, Texas 79925.
2. The LESSOR hereby declares that:
2.1 It is a Company organized and existing under the General
Corporation Law.
2.2 Mr. Federico Barrio is its Attorney-in-fact.
2.3 The address at which it has its principal place of business is
Ave. Ejercito Nacional 6513, Ciudad Juarez, Chihuahua, Mexico.
3. The LESSEE and the LESSOR hereby declare that they desire to enter
into a lease contract for an industrial building located thereon,
identified with No, 2642 at Eje Juan Gabriel street, in Ciudad Juarez,
Chihuahua, Mexico.
<PAGE> 2
C L A U S E S:
FIRST: THE LEASED PROPERTY:
Under the terms of this Lease, the LESSOR hereby delivers in lease to
the LESSEE the temporary use and possession of a plot of land and all buildings
and other improvements constructed thereon, located at 2642 Eje Juan Gabriel
street in Ciudad Juarez, Chihuahua, Mexico, consisting of an industrial type
building and office section with a total constructed surface area of 3,468
square meters (37,316 square feet) shown on the blueprint attached hereto as
Exhibit "All" ("Leased Property").
SECOND: OWNERSHIP OF THE LEASED PROPERTY:
LESSOR has ownership of the Leased Property and the LESSEE shall have
the quiet enjoyment of same. Similarly, LESSOR and LESSEE agree that as
provided by article 7308 of the Civil Code of the State of Chihuahua, this
Lease agreement shall survive any foreclosure of any lien or mortgage and that
any default in payment of any such lien or mortgage shall in no way prejudice
the terms of this Lease or any extension thereof; and that any amendments to
such mortgages or any new mortgages on the Leased Property shall contain a
provision acknowledging the existence and duration of this Lease. LESSOR
represents and warrants to LESSEE that there are presently no foreclosure
proceedings in effect against the Leased Property. LESSOR agrees that it will
provide LESSEE, within ninety (90) days after the execution of this Lease, with
nondisturbance agreements in favor of LESSEE from any mortgagees in existence
as of the date of the execution and delivery of this Lease. Each
nondisturbance agreement shall be in a form satisfactory to LESSEE, in LESSEE's
reasonable discretion, and shall provide, among other things, that in the event
of a foreclosure of the applicable mortgage or any other action or proceeding
for the enforcement thereof, or of any sale thereunder, this Lease will not be
terminated or extinguished, nor will the rights and possession of LESSEE
hereunder be disturbed, if LESSEE is not then in default under this Lease. If
LESSOR fails to obtain nondisturbance agreements in favor of LESSEE from each
mortgagee in existence as of the date of the execution and delivery of this
Lease within the ninety (90) day period set forth above, then LESSOR shall
indemnify and hold LESSEE harmless from any damages (including, without
limitation, attorneys'
-2-
<PAGE> 3
fees) which LESSEE may suffer as a result of LESSOR's failure to obtain any
such nondisturbance agreement, and LESSEE shall have the right to terminate
this Lease.
THIRD: DELIVERY OF THE LEASED PROPERTY:
The LESSOR shall deliver the Leased Property to LESSEE, in order for
LESSEE to begin installation of its equipment and machinery, precisely on the
date stipulated for initiation of the term as hereunder agreed on,
FOURTH: USE OF THE LEASED PROPERTY:
The LESSEE shall use the Leased Property only for light and clean
industrial operations or warehousing; under no conditions whatsoever will the
LESSEE use the Leased Property for chemical or heavy industrial operations.
In all of the work to be performed by the LESSEE in or about the Leased
Property, the LESSEE shall comply with all applicable environmental laws,
rules and regulations. The LESSEE shall indemnify, defend and keep the LESSOR
harmless from any liability whatsoever resulting from environmental
consequences of LESSEE's use of the Leased Property, or from any penalty or
penalties imposed by any competent environmental protection authority on the
Leased Property during the term of this Lease, or after the expiration of the
Lease, if the penalty or penalties refer to actions or lack of actions
occurred during the time that the LESSEE has the use of the Leased Property,
including but not limited to hazardous or toxic waste disposal, soil and
effluent contamination, and air and water pollution. LESSOR represents and
warrants to LESSEE that to the best of LESSOR's knowledge the Leased Property
is in compliance with all applicable environmental laws, rules and
regulations. The LESSOR shall indemnify, defend and keep the LESSEE harmless
from any liability whatsoever resulting from the breach of the foregoing
warranty and from any liability whatsoever occurring as a result of the Leased
Property not being in compliance with all applicable environmental laws, rules
and regulations. LESSEE shall have no responsibility for any penalties imposed
by any competent environmental protection authority on the Leased Property
unless such penalties are imposed based on the actions or lack of actions of
the LESSEE during the term of the Lease.
-3-
<PAGE> 4
FIFTH: ASSIGNMENT AND SUBLETTING:
Subject to the LESSOR's consent, which shall not be unreasonably
withheld, the LESSEE shall have the right to sublease or assign its interest on
this Lease, in whole or in part, provided that the LESSEE and its guarantor
("Guarantor") remain fully liable and responsible in conformity with the terms
of this Lease. The LESSOR'S consent shall not be required in the event of (i)
the assignment or subletting to any affiliate of the LESSEE or the Guarantor,
(ii) a merger involving the LESSEE or the Guarantor whereby the surviving
entity is other than the LESSEE, or (iii) the sale of all or substantially all
of the assets of the LESSEE or the Guarantor in connection with either party's
sale of its business or a substantial portion of its business. In the event
that the entirety of the Leased Property is to be subleased, at the LESSOR's
option, this Lease may be terminated and a direct lease entered into between
the LESSOR and the proposed sublessee, in which case the LESSEE shall have no
further obligations under this Lease. However, if the rent to be received
under this Lease, and the guarantee of Guarantor are assigned by the LESSOR to
a banking institution for the purpose of securing a loan to LESSOR, then, in
that event, the entering into a direct lease between LESSOR and a new lessee,
and the release of the LESSEE and its Guarantor from their obligations under
this Lease, shall be subject to the previous approval of the bank holding
LESSOR's loan.
SIXTH: LEASE PRICE:
During the Initial Term (as defined below) of this Lease, the LESSEE
shall pay as rent for the Leased Property the amount of $16,325 per month.
Throughout the entire term of this Lease, the lease price shall be paid in
currency of the United States of America, per month, in advance monthly
payments. For the first five (5) year option period, the lease price shall be
determined by multiplying the lease price for the Initial Term of this Lease by
a fraction, the numerator of which is the U.S. Department of Labor, Bureau of
Labor Statistics, Consumer Price Index, All Urban Consumers, All Items
(1982-84=100) U.S. City Average (the "Index") most recently published prior to
the first day of the first option period and the denominator of which is the
Index most recently published prior to the Commencement Date (as defined
below). For the second five (5) year option period, the lease price shall be
determined by multiplying the lease price for the first option period by a
fraction,
-4-
<PAGE> 5
the numerator of which is the Index most recently published prior to the first
day of the second option period and the denominator of which is the Index most
recently published prior to the first day of the first option period.
The lease price shall be paid by LESSEE to LESSOR or its assignees at
the LESSOR's domicile or to whoever and at whatever place the LESSOR notifies
in writing to the LESSEE,
The payment of any rent due under this Lease shall not be withheld or
reduced by the LESSEE for any reason whatsoever, and the LESSEE agrees to
assert any claim, demand or other right against the LESSOR only by an
independent proceeding.
SEVENTH: TAXES AND UTILITIES:
The LESSEE shall be liable for all taxes caused by the Leased Property,
including the Value Added Tax on the rent or its similar replacement, with the
only exception of Income Tax and the Asset Tax assessed by the Federal
Government upon the LESSOR. The LESSEE or the LESSOR may bring appropriate
judicial proceedings in the name of the LESSOR, the LESSEE or both, for
contesting the validity of any assessment on the Leased Property or amount of
the taxes imposed thereon, or to recover payment therefore. Each party shall
cooperate with the other with respect to the judicial proceedings so far as is
reasonably necessary. The net amount of any taxes recovered, after the payment
of all expenses in connection therewith, shall revert to the LESSEE.
The LESSEE shall also directly contract and pay for all utilities that
it may require, such as water, sewage, natural gas, electricity and telephone,
which the LESSOR represents are available at the Leased Property serve the
Leased Property exclusively and are separately metered, but the LESSEE shall be
responsible for the hookup and/or hiring of all such utilities.
EIGHTH: MAINTENANCE:
Responsibility for maintenance, repair and replacement shall be
governed by the following stipulations:
-5-
<PAGE> 6
1. The LESSOR shall at all times during the lease term maintain
and repair, at its own cost and expense, the building
foundation, structure of the floors and walls and structure of
the roof (including supporting members but excluding roof
insulation, standing seam roof, heating and air conditioning
systems).
2. The LESSEE shall maintain and repair, at its own cost and
expense, the interior of the building including interior and
exterior paint, all roof cover and flashing as well as
insulation, the air conditioning and/or air cooling, heating
and fire prevention systems and such landscaping as may be
presently on the land. LESSOR represents and warrants to
LESSEE that the plumbing, air conditioning and/or air cooling,
heating and fire prevention systems are all operational as of
the Commencement Date.
NINTH: ALTERATIONS:
The LESSEE may not change the basic structure, the external appearance
or basic utility services of the building which is part of the Leased Property,
nor make any structural alterations without the express written authorization
of the LESSOR, which authorization shall not be unreasonably withheld.
The LESSEE is hereby authorized to make minor, non-structural
alterations or modifications to the Leased Property, not exceeding U.S,
$50,000.00 dollars in cost, at its own risk and expense, so long as they do not
alter or impair the structure of the building which is part of the Leased
Property, or the basic nature of said Leased Property, and LESSEE gives LESSOR
written notice of the alterations or modifications prior to the commencement of
construction of the alterations or modifications.
All fixtures and/or equipment of whatsoever nature as shall have been
installed in the Leased Property by the LESSEE, whether permanently affixed
thereto or otherwise, shall continue to be the property of the LESSEE, and
shall be removed by the LESSEE at the expiration or termination of this Lease,
unless the LESSEE receives the written confirmation of the LESSOR, in advance,
in each specific case, that the improvements to be made on the property may
remain on said property upon expiration of the lease, provided, how-
-6-
<PAGE> 7
ever, that the LESSEE shall at its own cost and expense repair any injury to
the Leased Property resulting from the removal of said equipment and/or
accessories and shall deliver the Leased Property to the LESSOR in adequate
conditions of order, presentation and cleanliness. Notwithstanding the above,
the LESSEE shall furnish the LESSOR, at all times, with drawings and
specifications of all fixtures installed in the Leased Property,
TENTH: LIABILITIES OF THE PARTIES:
In conformance with the applicable law, the LESSOR guarantees to the
LESSEE the use and peaceful enjoyment of the Leased Property during the full
term of the Lease and any extensions thereto, and the LESSEE covenants and
agrees to use the Leased Property only for the purposes herein stipulated and
in accordance with the nature and intended usage of the Leased Property.
Liabilities of the LESSOR and of the LESSEE in each case, shall be ruled by the
following stipulations:
1. The LESSOR or the LESSEE respectively, shall be liable for
damages to the Leased Property caused by their own fault or
negligence, or that of their agents, employees or visitors,
except for losses commonly insurable by fire insurance with the
extended coverage endorsement.
2. In the event that the LESSEE shall be prevented by any cause
attributable to the LESSOR, whether partially or completely from
the use of the building or any part of the Leased Property, the
rent shall be reduced proportionally to the part which use is
prevented. But if the LESSEE is prevented from using the
building which is part of the Leased Property in its entirety,
or to such an extent that the LESSEE may not use it for the
purposes hereby stated, then no rent shall be paid during the
time that the building is not usable. In the event that LESSEE
shall be prevented from using more than fifty percent (50%) of
the building space by any cause not attributable to LESSEE, then
LESSEE shall have the right to terminate this Lease without any
cost or responsibility upon written notice to LESSOR. If the
building is damaged or destroyed by any cause not attributable
to LESSEE upon LESSEE's written request, LESSOR agrees to
restore it and put it in proper
-7-
<PAGE> 8
condition within four (4) months after (i) LESSEE's receipt
of any insurance adjustment paid as a result of the damage or
destruction and (ii) the removal of any debris that must be
removed prior to LESSOR's commencement of the restoration.
Notwithstanding the foregoing, LESSOR agrees that the
restoration described in the preceding sentence shall, in any
event, be completed within nine (9) months after the date of
the damage or destruction, If in the judgment of LESSEE,
LESSOR is not acting reasonably to restore the building, LESSEE
shall give written notice to LESSOR to correct the delay, and
if LESSOR is not acting accordingly within a period of ten
(10) days as of the date of said notice, LESSEE may restore
the building, upon written notice to LESSOR, and deduct the
cost of restoration from the lease price. This remedy is in
addition to any other available to LESSEE for the breach of
this Lease. LESSEE may terminate this Lease if LESSOR does
not finish the restoration of the building within nine (9)
months after the date of the damage or destruction. If such
destruction is total or exceeds seventy-five percent (75%) of
the full insurable value of the building and it is caused by
acts of God or force majeure, LESSOR shall have the right to
elect not to re-build and in such case this Lease shall
terminate without any further responsibility to the parties,
unless said damages are covered by insurance, and the
insurance company makes payment of the amounts corresponding
to the damage. The percentage of the insurable values
hereinabove referred to, shall be determined by the insurance
claim adjuster of the insurance company with which the
insurance provided for in Clause Eleventh, is contracted. If
such destruction is total or exceeds seventy-five percent
(75%) of the full insurable value of the building and it is
caused by acts of God or force majeure, or if the total
impediment cannot be reasonably expected to be corrected
within six (6) months after (i) LESSEE's receipt of any
insurance adjustment paid as a result of the damage or
destruction and (ii) the removal of any debris that must be
removed prior to LESSOR's commencement of the restoration,
then in either event the LESSEE shall have the right to have
this Lease terminated without any cost or responsibility.
-8-
<PAGE> 9
3. If the impediment is imputable to the LESSEE, or its agents,
employees or visitors, the LESSEE shall continue to pay the
rent as if it were using said building, unless this loss is
covered by rent insurance or any other insurance. However, in
the event that a dispute exists related to the liability of
the LESSEE therefor, LESSEE shall pay the rent during a period
of one month of the Lease Term while the dispute is being
decided by any means. If it is determined that LESSEE does not
have any responsibility therefor, LESSOR shall reimburse
LESSEE for the payment of one month rental unless such rental
is covered by rent insurance or any other insurance.
4. In the event of partial impediment of use in accordance with
Paragraph 2 of this Clause, the parties shall agree on the
proportion that the rent shall be reduced and if they should
not agree, each party shall designate an expert to make the
determination, and if both experts disagree, the experts will
designate a third expert. This process shall not exceed a
term of thirty (30) days as of the date of the impediment.
The resolution of the majority of the experts shall be final
and binding on the parties or if the parties agree on
designating only one expert, his or her decision shall be
final and binding on the parties.
5. The responsibilities of the parties referred to in the
paragraphs of this Clause, shall be subject to the provisions
of Clause Eleventh of this Lease.
ELEVENTH: INSURANCE:
The parties herein shall obtain insurance, in the type and amounts
adequate to protect their respective interest in this Lease against any and all
losses and/or risks. Specifically, it is agreed that:
1. The LESSEE shall pay, during the term of the lease, the
premiums on insurance policies as required to cover the
building. Such insurance shall be contracted by the LESSEE
and shall designate the LESSEE as beneficiary and the LESSOR
as an additional insured. The required insurance during the
term of this Lease shall be against any
-9-
<PAGE> 10
loss or damage by fire and against any loss or damage by
lightning, explosion, hurricane and hail, airplanes,
vehicles and smoke, earthquake, strikes, and vandalism and
any other risks now or hereafter embraced by the so called
"Extended Coverage" (including glass insurance) in amounts
sufficient to prevent the LESSOR or the LESSEE from
becoming co-insurers under the terms of the applicable
policies, but in any event in an amount not less than 100%
of the then "full insurable value" (replacement value),
which for the purpose of this clause shall be deemed to be
the cost of replacing the building, less the cost of
excavations, foundations and footings and without any
deductions for physical depreciation of the building.
Such "full insurable value" shall be determined from time
to time, but not more frequently than once in any six (6)
calendar months by means of an appraisal to be performed
by the LESSOR, at the LESSOR's expense.
LESSEE shall not at any time be obligated to pay for
insurance in an amount greater than the most recent
full insurable value so determined.
2. As per the provisions of the preceding paragraph, the
LESSEE shall also contract and pay for the following
insurance coverage:
a. General public liability insurance, covering
claims for injury, death or property damage
occurring on or about the Leased Property in an
amount of not less than $100,000.00 dollars,
currency of the United States of America, for
personal injury or death and of not less than
$50,000.00 dollars, currency of the United States
of America, for property damage.
b. Insurance against loss or damage by boiler
(compressor) malfunctions or by internal
explosion of boiler (compressor), for any high
pressure boiler (compressor) installed in the
building which is part of the Leased Property,
in such amounts as the LESSOR, from time to time,
reasonably requires and
c. Rental value insurance, covering risk of loss of
rents due to occurrence of any hazard set
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<PAGE> 11
forth in this clause, in the amount of the rent, taxes and
insurance premiums required hereunder, for a twelve (12)
month period.
3. All insurance provided for in this clause shall be
effected under valid and enforceable policies issued by
insurers authorized to do business in Mexico.
4. All policies of insurance herein provided for shall name the
LESSEE as the insured and the LESSOR as an additional insured,
as their respective interest may appear in this Lease and, to
the extent that the LESSOR shall request, shall contain
standard mortgage clauses in favor of the holders of mortgages
on the Leased Property. The LESSEE will deliver to the LESSOR
a copy of all insurance policies herein provided for, within
fifteen (15) days after they are contracted for.
5. Each such policy or certificate herefor issued by the
insurer shall contain an agreement by the insurer that such
policy shall not be cancelled without at least ten (10) days
prior notice to the LESSOR and to the LESSEE, and that any
loss which shall be payable to the LESSOR shall be so payable,
notwithstanding any act or negligence of the LESSEE which
might otherwise result in a forfeiture of all or part of such
insurance.
6. In case of casualty to the Leased Property resulting in
damage or destruction to the building, the LESSEE shall
promptly give written notice thereof to the LESSOR.
Adjustment proceedings shall be started immediately by the
LESSOR.
7. All insurance money paid on account of such damage or
destruction, less the actual costs, fees and expenses, if any,
incurred in connection with adjustment of the loss, shall be
made available to the LESSOR or the LESSEE, as their
respective interests appear under this Lease, for the purpose
of restoring, replacing, rebuilding, or altering the building
as nearly as possible to its value, condition and
character immediately prior to such damage or destruction.
8. The parties shall use in the first place the funds paid by
the insurance company to repair or rebuild
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<PAGE> 12
the building which is part of the Leased Property. However, if
such funds are not sufficient to fully cover such repair or
reconstruction, each of the parties, as per the stipulations
of Clause Tenth, shall be liable for paying the remaining
balance.
TWELFTH: TERM:
The initial term ("Initial Term") of this Lease shall be for a period
of seven (7) years, beginning on September 1, 1994 ("Commencement Date") and
terminating on August 31, 2001. LESSEE shall have two (2) five (5) year options
to extend the term of this Lease. LESSEE may exercise each such option by
giving LESSOR written notice of the exercise of such option not less than three
(3) months prior to the date this Lease would terminate if such option were not
exercised. Notwithstanding the foregoing, in all events LESSEE shall have ten
(10) days from the date LESSOR notifies LESSEE that the time for exercising the
option has passed and no notice exercising the option was received. if LESSOR
exercises any such option in accordance with this Clause, the term of this
Lease will be extended for the applicable five (5) year period, upon all the
same terms, conditions and covenants herein except as to lease price, which
will be determined in accordance with the Clause Sixth.
THIRTEENTH: SURRENDER:
LESSEE shall, on the last day of the term of this Lease as same may be
extended or upon earlier termination, surrender and deliver the Leased Property
into the possession and use of the LESSOR without delay, in good order,
condition and repair, except for normal wear and tear due to normal use and the
passage of time and except for damage by fire or other casualty. All signs,
inscriptions, canopies and installations installed by the LESSEE shall be
removed prior to delivery of the property back to the LESSOR and the LESSEE
shall correct all defects or modifications caused by their installation or
removal thereof.
Any personal property which shall remain in the Leased Property after
the termination of the Lease may, at the option of the LESSOR, be deemed
abandoned and either be retained by the LESSOR as its property or be disposed
of, without accountability, in such manner as the LESSOR may see fit.
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<PAGE> 13
FOURTEENTH: HOLDOVER:
In the event this Lease is not duly extended prior to the termination
date, the LESSEE shall at the termination of the Lease by lapse of time or
otherwise, yield up immediate possession to the LESSOR, and failing to do so
will pay as liquidated damages to the LESSOR (not including other damages which
the LESSOR may deem recoverable) for the whole time such possession is
withheld, an amount equal to 250% of the then applicable rent, but the
provisions of this clause shall not be held as a waiver by the LESSOR of any
right of reentry as herein set forth; nor shall the receipt of said payment or
any part thereof, or any act in apparent affirmation of tenancy, operate as
waiver of the right of the LESSOR to recover the Leased Property.
FIFTEENTH: PARTIES' RIGHT TO PERFORM EACH OTHER'S
COVENANTS:
If the LESSEE shall at any time fail to perform any one or more of its
agreements made in this Lease, the LESSOR, after thirty (30) days written
notice to the LESSEE (or without notice in the case of an emergency) and
without waiving or releasing the LESSEE from any obligation of the LESSEE
contained in this lease, may, but shall be under no obligation to, perform any
act on the LESSEE's part to be performed as provided in this Lease, and may
enter upon the Leased Property for that purpose and take all such actions
thereon as may be necessary therefrom. All sums paid by the LESSOR and all
costs and expenses incurred by the LESSOR in connection with the performance of
any such obligation of the LESSEE, shall be payable by the LESSEE to the LESSOR
on demand. The same shall apply to the LESSEE if the LESSOR fails to perform
any one or more of its agreements.
SIXTEENTH: ENTRY ON LEASED PROPERTY BY LESSOR:
The LESSEE shall permit the LESSOR and its authorized representatives
to enter the Leased Property at all reasonable times and upon reasonable notice
for the purpose of inspecting the same and performing any work therein that may
be required of it that may be necessary by reason of the LESSEE's failure to
make repairs or perform such work or to commence the same after thirty (30)
days written notice from the LESSOR. Nothing herein shall imply any duty upon
the part of the LESSOR to do any such work; and performance
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<PAGE> 14
thereof by the LESSOR shall not constitute a waiver of the LESSEE's default
in failing to perform the same.
The LESSOR shall have the right upon prior notice to the LESSEE to
enter the Leased Property at all reasonable times during usual business hours
for the purpose of showing the same to prospective purchasers of the Leased
Property and within six (6) months prior to the expiration of this Lease, for
the purpose of showing the same to prospective lessees.
SEVENTEENTH: GUARANTOR:
The LESSEE shall obtain and deliver to the LESSOR a guaranty by the
LESSEE's parent company, Pacific Scientific Company, in the form attached
hereto as Exhibit B.
EIGHTEENTH: SUBROGATION:
The LESSEE agrees, at the request of the LESSOR, to subordinate this
Lease (including any extensions) to any mortgage placed upon the Leased
Property, provided that the holder agrees not to disturb the possession and
other rights of the LESSEE under this Lease so long as the LESSEE continues to
perform its obligations hereunder; and in the event of acquisition of title by
said holder through foreclosure proceedings or otherwise, to accept the LESSEE
as tenant of Lease and to perform the LESSOR's obligation hereunder (but only
while owner of the Leased Property); and the LESSEE agrees to recognize such
holder or any other person acquiring title to the Leased Property.
The LESSEE and the LESSOR agree to execute and deliver any appropriate
instruments necessary to carry out the agreements contained herein.
NINETEENTH: MODIFICATIONS TO CONTRACTUAL DOCUMENT:
No modification, release or discharge of this Lease, or waiver of any
of the provisions thereof, shall be of any force or effect except by an
agreement in writing signed by the LESSOR and the LESSEE.
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<PAGE> 15
TWENTIETH: APPLICABLE LAW AND JURISDICTION:
This Lease shall be bound by and subject to the provisions of the
Civil Code of the State of Chihuahua and both parties hereto expressly submit
to the jurisdiction of the courts of the City of Juarez, State of Chihuahua,
Mexico.
TWENTY-FIRST: NOTICES:
All notices, demands and requests required under this Lease shall be in
writing. All such notices, demands and requests shall be deemed to have been
properly given if served personally or by registered or certified mail, return
receipt requested, addressed to the LESSOR or the LESSEE as the case may be, at
its respective address last designated by notice to the other party for that
purpose.
Until the LESSOR and the LESSEE shall designate other addresses, their
addresses shall be as follows:
LESSOR: CONSTRUCTORA LINTEL, S.A. de C.V.
Attn.: Federico Barrio
Av. Ejercito Nacional 6513
Ciudad Juarez, Chihuahua, Mexico
LESSEE: BOBINAS DEL SUR
Attn.: Martin Hernandez
1141 Larry Mahan Drive
Suite B
El Paso, Texas 79925
with a copy
to: Paul, Hastings, Janofsky & Walker
Attn.: Janet T. Davidson, Esq.
695 Town Center Drive, 17th Floor
Costa Mesa, California 92626
TWENTY-SECOND: TRANSLATION:
The LESSOR and the LESSEE agree that this is an English translation of
the lease contract which they executed in Spanish on the same date. In the
event of discrepancy, the Spanish version shall prevail.
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<PAGE> 16
The parties hereto execute this Lease on the 1st day of the month of
August, 1994.
THE LESSEE: THE LESSOR:
BOBINAS DEL SUR, CONSTRUCTORA LINTEL
a Mexico corporation S.A. DE C.V.
/s/ RICHARD V. PLAT /s/ FEDERICO BARRIO
- ----------------------- --------------------------
RICHARD V. PLAT FEDERICO BARRIO
WITNESS: WITNESS:
- ----------------------- --------------------------
-16-
<PAGE> 17
EXHIBIT A
BLUEPRINT OF LEASED PROPERTY
<PAGE> 18
EXHIBIT B
GUARANTY
WHEREAS, PACIFIC SCIENTIFIC COMPANY (hereinafter "Guarantor"), is a
corporation organized under the laws of the State of California, of the United
States of America; and
WHEREAS, Guarantor hereby guarantees the full and complete performance
by Bobinas Del Sur (hereinafter the "Lessee"), a Mexican corporation and
affiliate of Guarantor, of each and all of Lessee's obligations and duties
under and pursuant to the terms of a certain Lease Agreement entered into on
August 1, 1994 (hereinafter the "Lease"), with Constructora Lintel (hereinafter
the "Lessor"), covering premises at 2642 Eje Juan Gabriel Street in Ciudad
Juarez, State of Chihuahua, Mexico, consisting of an industrial type building
with a total constructed surface area of approximately 3,468 square meters,
equivalent to 37,316 square feet (hereinafter the "Premises").
WHEREAS, Lessor entered into the Lease provided that Guarantor
guarantees the performance of Lessee under the Lease; and
WHEREAS, Guarantor, in order to induce Lessor to lease the Premises to
Lessee, has agreed to guarantee Lessee's obligation and performance under the
Lease, all as more particularly described below;
NOW, THEREFORE, in consideration of the promises, obligations and
liabilities mutually exchanged and created herein and in the Lease, and for
other good and valuable consideration, receipt of which is hereby acknowledged,
Guarantor hereby agrees as follows:
1. Guaranty. Guarantor hereby unconditionally guarantees to Lessor,
its successors and assigns that Lessee shall perform all the covenants,
conditions, duties and obligations required of Lessee under the Lease, and
agrees to indemnify Lessor, its successors and assigns against any and all
losses and/or liabilities Lessor may sustain and expenses Lessor may incur as a
result of any default or breach by Lessee under the Lease, and/or as a result
of the successful enforcement by Lessor of any of Lessor's rights against
Guarantor hereunder.
2. Waiver of Defenses. Guarantor hereby expressly waives all defenses
which might constitute a legal
<PAGE> 19
or equitable discharge of a surety of Guarantor, and agrees that this
Guaranty shall be valid and unconditionally binding upon Guarantor regardless
of (i) the reorganization, merger or consolidation of Lessee, or the sale or
other disposition of all or substantially all of the capital stock, business or
assets of Lessee to any other person or party, or (ii) the voluntary or
involuntary bankruptcy (including a reorganization in bankruptcy) of the
Lessee, or (iii) the granting by Lessor of any indulgences to Lessee, or (iv)
the assertion by Lessor against Lessee of any of Lessor's rights and remedies
provided for under the Lease or existing in its favor in law, equity or
bankruptcy, or (v) the release of Lessee from any of its obligations under the
Lease by Lessor or by operation of law or otherwise. Guarantor further agrees
that Guarantor's liability under this Guaranty shall be absolute, primary and
direct, and that Lessor shall not be required to pursue any right or remedy it
may have against Lessee under the Lease or otherwise (and shall not be required
to first commence any action or obtain any judgment against Lessee) before
enforcing this Guaranty against Guarantor, and that Guarantor shall upon
demand, perform all obligations of Lessee, the performance (or non-performance)
of which is in default by Lessee under the Lease.
3. No Waiver of Rights. Guarantor hereby agrees that the failure of
Lessor to insist in any one or more instances upon a strict performance or
observance of any of the terms, any of its rights hereunder, shall not be
construed or deemed to be a waiver or relinquishment for the future of any such
terms, provisions, covenants or rights, but such terms, provisions, covenants
or rights shall continue and remain in full force and effect.
4. Applicable Law; Jurisdiction. (a) This Guaranty shall be governed
by the laws of the State of Texas. In any action prosecuted by Lessor for the
interpretation and performance of this Guaranty, Guarantor shall only be
required to submit itself to the jurisdiction of the Federal or State District
Courts, in the County of El Paso, State of Texas, United States of America.
The parties expressly waive the right to any other jurisdiction that they may
have as a result of their present and future domiciles, or due to any other
causes whatsoever.
(b) Guarantor hereby irrevocably consents and appoints as its agent
for service of process for all actions against it and all matters arising out
of or related to this Guaranty:
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<PAGE> 20
Mr. Richard V. Plat
Pacific scientific Company
620 Newport Center Drive, Suite 700
Newport Beach, California 92660
5. Notice. (a) Lessor agrees to give Guarantor written notice of
default by Lessee in the payments required under the Lease and notice of
Lessee's failure to fully perform and observe all covenants required under the
Lease.
(b) Guarantor will be given seven (7) calendar days after receipt of
written notice to cure any such default(s) by Lessee under the Lease.
(c) All notices and demands required under this Guaranty shall be in
writing, and deemed provided to Guarantor upon the earlier of actual receipt or
the fifth (5th) day following dispatch by United States certified mail, return
receipt requested, postage prepaid, addressed to the address set forth in 4(b)
above. Guarantor may by written notice to Lessor, change the address to which
notices or demands shall be directed.
6. Successors and Assigns. It is further agreed that all of the terms
and provisions hereof shall inure to the benefit of the successors and assigns
of Lessor, and shall be binding upon the heirs, executors, administrators,
successors and assigns of Guarantor.
IN WITNESS WHEREOF, the undersigned Guarantor has caused this Guaranty
to be executed this the 1st day of August, 1994.
GUARANTOR:
PACIFIC SCIENTIFIC COMPANY
By: RICHARD V. PLAT
------------------------------
Name: Richard V. Plat
------------------------------
Title: Executive V.P.
------------------------------
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<PAGE> 21
STATE OF CALIFORNIA )
) ss.
COUNTY OF ORANGE )
On August 2, 1994, before me, AILEN YOUNANPOUR, personally appeared
RICHARD V. PLAT, personally known to me (or proved to me on the basis of
satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to
the within instrument and acknowledged to me that he/she/they executed the same
in his/her/their authorized capacity(ies), and that by his/her/their signatures
on the instrument the person(s), or the entity upon behalf of which the
person(s) acted, executed the instrument.
WITNESS my hand and official seal.
Signature AILEN YOUNANPOUR
------------------------
<PAGE> 1
EXHIBIT 10.2
Lease
by and between
NORTH AMERICA INVESTORS, INC.
Landlord
and
PACIFIC SCIENTIFIC COMPANY
Tenant
Dated
December 16, 1994
Premises at
41 Pacella Park Drive
Randolph, Massachusetts
<PAGE> 2
Table of Contents
ARTICLE I - Reference Data
1.1 Reference Information ....................................... 1
1.2 Exhibits .................................................... 2
ARTICLE II - Premises and Term
2.1 Premises .................................................... 2
2.2 Term ........................................................ 2
2.3 Option to Terminate Lease ................................... 3
2.4 Option to Extend Term ....................................... 3
ARTICLE III - Condition of Premises
3.1 Condition of Premises ....................................... 3
ARTICLE IV - Fixed Rent
4.1 The Fixed Rent .............................................. 4
4.2 Adjustment of Fixed Rent .................................... 4
ARTICLE V - Real Estate and Other Taxes
5.1 Real Estate Taxes ........................................... 5
ARTICLE VI - Insurance
6.1 Tenant's Insurance .......................................... 6
6.2 Requirements Applicable to Insurance Policies ............... 7
6.3 Waiver of Subrogation ....................................... 7
ARTICLE VII - Utilities
7.1 Utilities ................................................... 7
<PAGE> 3
ARTICLE VIII
Intentionally Deleted.
ARTICLE IX - Tenant's Covenants
9.1 Use ......................................................... 8
9.2 Repair and Maintenance ...................................... 8
9.3 Compliance and Law and Insurance Requirements ............... 8
9.4 Alteration; Tenant's Work ................................... 9
9.5 Indemnity ................................................... 10
9.6 Landlord's Right to Enter ................................... 10
9.7 Personal Property at Tenant's Risk .......................... 11
9.8 Payment of Landlord's Cost of Enforcement ................... 11
9.9 Yield Up .................................................... 11
9.10 Estoppel Certificate ........................................ 11
9.11 Intentionally Deleted ....................................... 12
9.12 Rules and Regulations ....................................... 12
9.13 Holding Over ................................................ 12
9.14 Assignment and Subletting ................................... 12
9.15 Overloading and Nuisance .................................... 13
ARTICLE X - Casualty or Taking
10.1 Termination ................................................. 13
10.2 Restoration ................................................. 13
10.3 Award ....................................................... 14
<PAGE> 4
ARTICLE XI - Default
11.1 Events of Default ......................................... 14
11.2 Remedies .................................................. 15
11.3 Remedies Cumulative ....................................... 16
11.4 Landlord's Right to Cure Defaults ......................... 16
11.5 Effect of Waivers of Default .............................. 16
11.6 No Accord and Satisfaction ................................ 17
11.7 Late Charges .............................................. 17
ARTICLE XII - Mortgages
12.1 Rights of Mortgage Holders ................................ 17
12.2 Superiority of Lease; Option to Subordinate ............... 18
ARTICLE XIII - Miscellaneous Provisions
13.1 Notices from One Party to the Other ......................... 18
13.2 Quiet Enjoyment ............................................. 18
13.3 Lease Not to be Recorded; Notice of Lease ................... 19
13.4 Bind and Inure; Limitation of Landlord's Liability .......... 19
13.5 Acts of God ................................................. 19
13.6 Landlord's Default .......................................... 19
13.7 Miscellaneous ............................................... 20
<PAGE> 5
LEASE
SECTION 1
Section 1.1. Reference Information. Reference in this Lease to any
of the following shall have the meaning set forth below:
Date of this Lease: December 16, 1994
Premises: The building (the "Building") and the lot (the "Lot") shown
on Exhibit A, situated at 41 Pacella Park Drive, Randolph, Massachusetts.
Landlord: North America Investors, Inc., a California corporation
Address of Landlord: Suite 2800
1999 Avenue of the Stars
Los Angeles, CA 90067
Tenant: Pacific Scientific Company, a California corporation
Address of Tenant: Suite 700
620 Newport Center Drive
Newport Beach, CA 92660
Term Commencement Date: February 1, 1995
Building Square Footage: Approximately 80,000 square feet.
Annual Fixed Rental Rate: $720,000 per annual subject to
adjustment as provided in Section 4.2
Permitted Uses: Office, warehouse and light manufacturing
Commercial General Liability Insurance Limit:
Bodily Injury Combined single limit of $3,000,000,
and Property or greater amount as reasonably
Damage: required by Landlord from time to time
and which shall be customary with respect
to similar buildings located in the
vicinity of the Premises.
<PAGE> 6
Signs: Tenant shall be permitted to install signs on the Premises,
provided that any signs installed by Tenant shall be in compliance with all
laws, rules, regulations and ordinances applicable to the Premises and with
the Randolph Industrial Park Restrictions.
Section 1.2. Exhibits. The following Exhibits are attached to and
incorporated in this Lease:
Exhibit A: Plan of Premises
Exhibit B: Randolph Industrial Park Restrictions
SECTION 2
Premises and Term
Section 2.1. Premises. Landlord hereby leases and demises the
Premises to Tenant and Tenant hereby leases the Premises from Landlord, subject
to any and all existing encumbrances and other matters of record and subject to
the terms and provisions of this Lease.
Section 2.2. Term. TO HAVE AND TO HOLD for an original term beginning
on the Term Commencement Date and continuing until the last day of the month in
which the fifteenth (15th) anniversary of the Term Commencement Date shall
occur, subject to Sections 2.3 and 2.4, unless sooner terminated as hereinafter
provided.
Beginning January 2, 1995 to the Term Commencement Date, Tenant shall
be entitled to (a) use five offices and five office cubicles in the area so
designated on Exhibit A and (b) have access to the balance of the Premises for
the purpose of planning construction of its improvements, including, without
limitation, taking measurements and making inspections to facilitate the
preparation of construction drawings and obtaining permits.
Tenant agrees to sublet to Johnson & Johnson Professional, Inc.
("J&J") the areas designated on Exhibit A (the "Subleased Premises"), and
Landlord hereby consents to Tenant's subletting the Subleased Premises to J&J.
As a condition precedent in the effectiveness of the Lease, Tenant and J&J
shall enter into a separate sublease which shall be subject to and incorporate
all of the terms of this Lease, to the extent applicable, and include the
following basic terms: The term of such sublease shall commence on the Term
Commencement Date and shall expire (a) with respect to the approximately 10,000
square feet of open space shown on Exhibit A, on April 15, 1995 or such earlier
date as J&J shall determine, (b) with respect to the balance of the portion of
the Premises to be subleased to J&J (excluding the approximately 4,000 square
foot clean room), on May 15, 1995 or such earlier date as J&J shall determine
and (c) with respect to
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<PAGE> 7
such 4,000 square foot clean room, on July 15, 1995 or such earlier date as J&J
shall determine. J&J shall pay rent at the rate of $1.50 per square foot per
annum for the office and the open space and at the rate of $2.00 per square
foot for the clean room. Such rent shall include all utilities, taxes and
insurance. J&J shall provide commercial general liability insurance in the form
required under this Lease, naming Landlord and Tenant as additional insureds,
with limits of at least $1,000,000.
Section 2.3. Option to Terminate Lease. Tenant may terminate this
Lease effective as of the last day of the month in which the tenth (10th)
anniversary of the Term Commencement Date shall occur provided (a) no default
in the obligations of Tenant under this Lease shall exist at the time Tenant
shall give notice of its election to so terminate this Lease, (b) Tenant shall
not have exercised its option to extend the term pursuant to Section 2.4 and
(c) Tenant shall give notice to Landlord of its election to so terminate this
Lease prior to the ninth (9th) anniversary of the Term Commencement Date.
Section 2.4. Option to Extend Term. In the event Tenant shall
construct improvements in the Premises after the fifth (5th) anniversary of the
Term Commencement Date having an aggregate cost (for all such improvements
constructed at substantially the same time) in excess of $500,000, Tenant shall
have a single option to extend the term of this Lease so that the term of this
Lease shall expire on the last day of the month in which the tenth (10th)
anniversary of the date of substantial completion of such improvements shall
occur ("Extension Term"), provided (a) no default in the obligations of Tenant
under this Lease shall exist at the time such option is exercised and (b)
Tenant shall give notice to Landlord of its exercise of such option not later
than one (1) month after the date of substantial completion of such
improvements (which date shall be specified in such notice) and in any event
not less than one (1) year prior to expiration of the original term. All of
the terms and provisions of this Lease shall be applicable during the Extension
Term except that Tenant shall have no further option to extend the term of this
Lease.
SECTION 3
Condition of Premises
Section 3.1. Condition of Premises. Tenant agrees to accept the
Premises in its present "as is" condition. Landlord shall have no obligation
to perform any work or construction. If Tenant shall desire to perform any
work or construction, the same shall be done only in accordance with this
Lease.
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<PAGE> 8
Landlord shall provide Tenant with a report from Dacon Construction
Company with respect to the physical condition of the Premises. If such report
shall indicate any material defect in the Premises, Tenant may terminate this
Lease by notice to Landlord within five (5) business days after delivery of
such report to Tenant.
SECTION 4
Fixed Rent
Section 4.1. The Fixed Rent. Tenant shall pay rent to Landlord at the
Address of Landlord or at such other place or to such other person or entity as
Landlord may by notice to Tenant from time to time direct, at the Annual Fixed
Rental Rate set forth in Section 1, in equal installments equal to 1/12th of
the Annual Fixed Rental Rate in advance on the first day of each calendar month
included in the term, and for any portion of a calendar month at the beginning
or end of the term, at that rate payable in advance for such portion.
Section 4,2. Adjustment of Fixed Rent. The Annual Fixed Rent shall be
adjusted (hereinafter referred to as the "Adjustment") as of the fifth (5th)
anniversary of the Term Commencement Date and thereafter annually effective as
of each anniversary of the Term Commencement Date (each, an "Adjustment Date"),
to reflect any increase in the cost of living based upon the Consumer Price
Index for Urban Wage Earners and Clerical Workers, Boston, Massachusetts, all
items - Series A (1982-84 equals 100) (hereinafter referred to as the "Index")
published by the Bureau of Labor Statistics of the United States Department of
Labor. The Adjustment shall be calculated by multiplying the Annual Fixed Rent
in effect on the Term Commencement Date by a fraction, the numerator of which
shall be the Index number last published prior to such Adjustment Date and the
denominator which shall be the corresponding Index number last published prior
to the Term Commencement Date. If the Adjustment would result in the Annual
Fixed Rent in any year being less than the prior year, the Adjustment shall not
be made, and in no event shall the Adjustment result in the Annual Fixed Rent
exceeding the original Annual Fixed Rent increased 5% per year, compounded
annually, from the Term Commencement Date to the applicable Adjustment Date. In
the event the publication of the Index shall be discontinued for the City of
Boston, there shall be made in the method of calculation herein provided such
revisions as the circumstances may require to carry out the intent of this
paragraph, and any dispute between the parties as to the making of such
revisions shall be determined by arbitration.
-4-
<PAGE> 9
SECTION 5
Real Estate and Other Taxes
Section 5.1. Real Estate Taxes. As Additional Rent, Tenant shall pay
to Landlord (or directly to the taxing authority, as Landlord shall direct from
time to time) Tenant's Proportionate Fraction of all taxes, assessments
(special, betterment or otherwise), levies, fees, water and sewer rents and
charges, and all other government levies and charges, general and special,
ordinary and extraordinary, foreseen and unforeseen, which are allocable to the
term hereof, imposed or levied upon or assessed against the Lot or Building or
any rent (collectively "taxes and assessments" or if singular "tax or
assessment").
If Landlord shall elect to pay betterment assessments over any period
permitted by law, only the installments thereof (and interest thereon) becoming
due during the term shall be payable by Tenant hereunder.
All payments shall be made by Tenant within ten (10) days prior to the
due date after receipt of Landlord's invoice therefor or prior to the due date
if taxes and assessments are to be paid by Tenant directly to the taxing
authority.
Nothing herein shall, however, require Tenant to pay any income taxes,
excess profits taxes, excise taxes, franchise taxes, estate, succession,
inheritance or transfer taxes, provided, however, that if at any time during
the term the present system of ad valorem taxation of real property shall be
changed so that in lieu of the whole or any part of the ad valorem tax on real
property, or in lieu of increases therein, there shall be assessed on Landlord
a capital levy or other tax on the gross rents received with respect to the
Building or Lot or a federal, state, county, municipal, or other local income,
franchise, excise or similar tax, assessment, levy or charge (distinct from any
now in effect) measured by or based, in whole or in part, upon gross rents,
then any and all of such taxes, assessments, levies or charges, to the extent
so measured or based ("Substitute Taxes"), shall be payable by Tenant,
provided, however, Tenant's obligation with respect to the aforesaid Substitute
Taxes shall be limited to the amount thereof as computed at the rates that
would be payable if the Building and Lot were the only property of Landlord.
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SECTION 6
Insurance.
Section 6.1. Tenant's Insurance. Tenant shall, as Additional Rent,
commencing with its first entry into the Premises and thereafter until the end
of the Term, maintain the following insurance:
(a) Commercial general liability insurance for any injury
to person or property occurring on the Premises, naming as additional insureds
Tenant, Landlord and such persons, including, without limitation, Landlord's
managing agent, as Landlord shall designate from time to time, in amounts which
shall, at the beginning of the Term, be at least equal to the limits set forth
in Section 1, and, from time to time during the term, shall be for such higher
limits as are reasonably required by Landlord; and are customary with respect
to similar buildings located in the vicinity of the Premises;
(b) Worker's compensation insurance with statutory limits
covering all of Tenant's employees working at the Premises;
(c) All risk property insurance, and builders risk
insurance during periods of construction, an a replacement value, agreed
amount basis, with an increased cost of construction endorsement, together
with rental loss coverage insuring Landlord in the amount of one year's
Annual Fixed Rental and additional rent, and, if Landlord so elects, flood
coverage to the extent the same is available, insuring the Building and its
rental value; and
(d) Insurance against loss or damage from sprinklers and from
leakage or explosions or cracking of boilers, pipes carrying steam or water, or
both, pressure vessels or similar apparatus, in the so-called "broad form", in
such amounts as Landlord shall specify and are customary with respect to
similar buildings located in the vicinity of the Premises and insurance against
such other hazards and in such amounts as may from time to time be required by
Landlord or any bank, insurance company or other lending institution holding a
mortgage on the Building.
The insurance provided pursuant to clauses (c) and (d) above shall name
Landlord and Landlord's mortgagees as loss payees as their respective interests
may appear, and, if requested by any of Landlord's mortgagees, shall include a
mortgagee loss payable endorsement in form satisfactory to such mortgagee.
Tenant shall have no right to the proceeds of any such insurance or to
participate in the settlement of any claims thereunder. Without limiting the
foregoing, Tenant shall promptly comply with all requests of Landlord in
connection with the negotiation and
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settlement of any claim under the insurance provided pursuant to clauses (c)
and (d) above, and Tenant shall endorse to Landlord any check representing
proceeds of such insurance promptly upon Landlord's request.
Section 6.2. Requirements Applicable to Insurance Policies. All
policies of insurance required under the provisions of Section 6.1 shall be
reasonably acceptable to Landlord and obtained from responsible companies
qualified to do business in the Commonwealth of Massachusetts and in good
standing therein, which companies and the amount of insurance allocated thereto
shall be subject to Landlord's reasonable approval. Tenant agrees to furnish
Landlord with insurance company certificates of all such insurance prior to the
earlier of the time it shall first enter the Premises or the beginning of the
Term hereof and of each renewal policy at least fifteen (15) days prior to the
expiration of the policy it renews. Each such policy shall be noncancelable
with respect to the interest of Landlord and such mortgagee without at least
thirty (30) days' prior written notice thereto. On Landlord's request from
time to time, Tenant shall also provide Landlord with copies of each such
policy.
Section 6.3. Waiver of Subrogation. All insurance which is carried by
either party with respect to the Premises or to furniture, furnishings,
fixtures or equipment therein or alterations or improvements thereto, whether
or not required, shall include provisions which either designate the other
party as one of the insured or deny to the insurer acquisition by subrogation
of rights of recovery against the other party to the extent such rights have
been waived by the insured party prior to occurrence of loss or injury, insofar
as, and to the extent that such provisions may be effective without making it
impossible to obtain insurance coverage from responsible companies qualified to
do business in the Commonwealth of Massachusetts (even though extra premium may
result therefrom) and without voiding the insurance coverage in force between
the insurer and the insured party. On reasonable request, each party shall be
entitled to have duplicates or certificates of policies containing such
provisions. Each party hereby waives all rights of recovery against the other
for loss or injury against which the waiving party is protected by insurance
containing said provisions, reserving, however, any rights with respect to any
excess of loss or injury over the amount recovered by such insurance.
SECTION 7
Utilities
Section 7.1. Utilities. Tenant shall promptly pay all charges for
water, sewer, gas, electricity and other utilities or
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services used or consumed in the Building, whether called charge, tax,
assessment, fee or otherwise, including, without limitation, water and sewer
use charges and taxes, if any. Landlord shall not be liable for any
interruption or failure in the supply of any such utilities to the Premises,
unless such interruption or failure is the result of Landlord's negligence or
misconduct.
SECTION 8
Intentionally deleted,
SECTION 9
Tenant's Covenants
Section 9.1. Use, Tenant shall use the Premises only for the Permitted
Uses and shall from time to time procure all licenses and permits necessary
therefor at Tenant's sole expense.
Section 9.2. Repair and Maintenance. Except as otherwise provided in
Section 10, Tenant shall keep all structural and non-structural portions of the
Premises, including all plumbing, electrical, heating, air conditioning and
other systems (collectively, the "Systems") therein, in good order, condition
and repair and in at least as good order, condition and repair as they are in
on the Term Commencement Date or may be put in during the term, reasonable use
and wear only excepted. Tenant shall make all repairs and replacements and do
all other work necessary for the foregoing purposes whether the same may be
ordinary or extraordinary, foreseen or unforeseen. Tenant shall keep in a
safe, secure and sanitary condition all trash and rubbish temporarily stored at
the Premises and shall arrange for and be responsible for all of the costs of a
trash and rubbish removal service in connection with Tenant's use of the
Premises.
Section 9.3. Compliance with Law and Insurance Requirements. Tenant
shall make all repairs, alterations, additions or replacements to the Premises
required by any law or ordinance or any order or regulation of any public
authority and shall keep the Premises equipped with all safety appliances so
required. Tenant shall not dump, flush, or in any way introduce any hazardous
substances or any other toxic substances into the septic, sewage or other waste
disposal system serving the Premises. Tenant shall not generate, store or
dispose of hazardous substances (as defined below) in or on the Premises or
dispose of hazardous substances from the Premises to any other location without
prior written notice to Landlord and in any event only in compliance with the
Resource Conservation and Recovery Act of 1976, as amended, 42 U.S.C. Section
6901 et seq., the Massachusetts Hazardous Waste Management Act, M.G.L, c.21C,
as amended, the Massachusetts Oil and Hazardous Material Release
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Prevention and Response Act, M.G.L. c. 21E, as amended, and all other
applicable codes, regulations, ordinances and laws. Tenant shall notify
Landlord of any incident which would require the filing of a notice under
Chapter 232 of the Acts of 1982 and shall comply with the orders and
regulations of all governmental authorities with respect to zoning, building,
fire, health and other codes, regulations, ordinances or laws applicable to the
Premises. "Hazardous substances" as used in this Section shall mean "hazardous
substances" as defined in the Comprehensive Environmental Response Compensation
and Liability Act of 1980, as amended, 42 U.S.C. Section 9601 and regulations
adopted pursuant to said Act.
Tenant will provide Landlord, from time to time upon Landlord's request,
with all records and information regarding any hazardous substance maintained
on the Premises by Tenant.
Landlord shall have the right, at Tenant's expense, to make such
inspections as Landlord shall reasonably elect from time to time to determine
if Tenant is complying with this Section.
Tenant shall comply promptly with the recommendations of any insurer,
foreseen or unforeseen, ordinary as well as extraordinary, which may be
applicable to the Premises, by reason of Tenant's use thereof. In no event
shall any activity be conducted by Tenant on the Premises which may give rise
to any cancellation of any insurance policy or make any insurance unobtainable.
Section 9,4. Alterations: Tenant's Work. (a) Tenant shall not make any
installations, alterations, additions or improvements in or to the Premises,
including, without limitation, any apertures in the walls, partitions, ceilings
or floors, the cost of which shall exceed $50,000 in the aggregate in any
calendar year without on each occasion obtaining the prior written consent of
Landlord, which consent shall not be unreasonably withheld or delayed.
(b) Landlord acknowledges that Tenant may desire to expand
the Premises during the term of this Lease. Tenant shall obtain Landlord's
prior consent to any expansion of the Premises, which consent will not be
unreasonably withheld or delayed, provided that if Landlord shall fail
to respond to any requested consent within twenty (20) business days after a
request therefor, Landlord's consent shall be deemed given with respect to the
request.
(c) The expansion referred to in clause (b) above and any
work requiring Landlord's approval under clause (a) above shall be performed
only in accordance with plans and specifications therefor approved by Landlord,
which approval shall not be unreasonably withheld or delayed. Tenant shall
procure at
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Tenant's sole expense all necessary permits and licenses before undertaking any
work (whether or not requiring Landlord's approval) on the Premises and shall
perform all such work in a good and workmanlike manner employing materials of
good quality and so as to conform with all applicable zoning, building, fire,
health and other codes, regulations, ordinances and laws and with all
applicable insurance requirements. Tenant shall keep the Premises at all times
free of liens for labor and materials. Tenant shall employ for such work
requiring Landlord's approval only contractors approved by Landlord, which
approval shall not be unreasonably withheld or delayed, and, whether or not
such work shall require Landlord's approval, shall require all contractors
employed by Tenant to carry worker's compensation insurance in accordance with
statutory requirements and comprehensive public liability insurance covering
such contractors on or about the Premises in amounts that at least equal the
limits set forth in Section 1 and to submit certificates evidencing such
coverage to Landlord prior to the commencement of such work. Tenant shall save
Landlord harmless and indemnified from all injury, loss, claims or damage to
any person or property occasioned by or growing out of such work (whether or
not requiring Landlord's approval). Landlord may inspect the work (whether or
not requiring Landlord's approval) of Tenant at reasonable times and upon
reasonable notice and give notice of observed defects.
Section 9.5. Indemnity. Tenant shall defend, with counsel approved by
Landlord, all actions against Landlord, any partner, trustee, stockholder,
officer, director, employee or beneficiary of Landlord, holders of mortgages
secured by the Building and any other party having an interest in the Premises
("Indemnified Parties") with respect to, and shall pay, protect, indemnify and
save harmless, to the extent permitted by law, all Indemnified Parties from and
against, any and all liabilities, losses, damages, costs, expenses (including
reasonable attorneys' fees and expenses), causes of action, suits, claims,
demands or judgments of any nature arising from (a) injury to or death of any
person, or damage to or loss of property, occurring in the Premises or
connected with the use, condition or occupancy of any thereof unless caused by
the negligence of Landlord or its servants or agents, (b) violation of this
Lease by Tenant, or (c) any act, fault, omission, or other misconduct of Tenant
or its agents, contractors, licensees, sublessees or invitees.
Section 9.6. Landlord's Right to Enter. Tenant shall permit Landlord
and its agents to enter into the Premises at reasonable times and upon
reasonable notice to examine the Premises, make such repairs and replacements
as Landlord may be required to make under the terms of this Lease or may elect,
without however, any obligation to do so, and show the Premises to prospective
purchasers and lenders, and, during the last year of the term, to show the
Premises to prospective tenants and to
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keep affixed in suitable places notices of availability of the Premises.
Section 9.7. Personal Property at Tenant's Risk. All furnishings,
fixtures, equipment, effects and property of every kind of Tenant and of all
persons claiming by, through or under Tenant which may be on the Premises,
shall be at the sole risk and hazard of Tenant and if the whole or any part
thereof shall be destroyed or damaged by fire, water or otherwise, or by the
leakage or bursting of water pipes, steam pipes, or other pipes, by theft or
from any other cause, no part of said loss or damage shall be charged to or to
be borne by Landlord, except that Landlord shall in no event be indemnified or
held harmless or exonerated from any liability to Tenant for any injury, loss,
damage or liability not covered by Tenant's insurance to the extent prohibited
by law. Tenant shall insure Tenant's personal property.
Section 9.8. Payment of Landlord's Cost of Enforcement. Tenant shall
pay, on demand, Landlord's expenses, including reasonable attorney's fees,
incurred in enforcing any obligation of Tenant under this Lease or in curing
any default by Tenant under this Lease as provided in Section 11.4.
Section 9.9. Yield Up. At the expiration of the term or earlier
termination of this Lease, Tenant shall surrender all keys to the Premises,
remove all of its trade fixtures and personal property in the Premises, remove
such installations and improvements made by Tenant which required Landlord's
approval but which have not been approved by Landlord as Landlord may request
and all Tenant's signs wherever located, repair all damage caused by such
removal and yield up the Premises (including all installations and improvements
made by Tenant except for trade fixtures and such installations or improvements
made by Tenant as Landlord shall so request Tenant to remove) broom-clean and
in the same good order and repair in which Tenant is obliged to keep and
maintain the Premises under this Lease, ordinary wear and tear excepted. Any
property not so removed shall be deemed abandoned and may be removed and
disposed of by Landlord in such manner as Landlord shall determine and Tenant
shall pay Landlord the entire cost and expense incurred by it in effecting such
removal and disposition and in making any incidental repairs and replacements
to the Premises and for use and occupancy during the period after the
expiration of the term and prior to Tenant's performance of its obligations
under this Section 9.9.
Section 9.10. Estoppel Certificate. Upon not less than fifteen (15)
business days' prior notice by Landlord, Tenant shall execute, acknowledge and
deliver to Landlord a statement in writing certifying that this Lease is
unmodified and in full force and effect and that, except as stated therein,
Tenant has
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no knowledge of any defenses, offsets or counterclaims against its obligations
to pay the Fixed Rental and Additional Rent and any other charges and to
perform its other covenants under this Lease (or, if there have been any
modifications that the same is in full force and effect as modified and stating
the modifications and, if there are any defenses, offsets or counterclaims,
setting them forth in reasonable detail), the dates to which the Fixed Rental
and Additional Rent and other charges have been paid and a statement that
Landlord is not in default hereunder (or if in default, the nature of such
default, in reasonable detail). Any such statement delivered pursuant to this
Section 9.10 may be relied upon by any prospective purchaser or mortgagee of
the Building.
Section 9.11 Intentionally deleted.
Section 9.12 Rules and Regulations; Park Restrictions. Tenant shall
comply with the Randolph Industrial Park Restrictions attached as Exhibit B and
with such reasonable Rules and Regulations as may be adopted from time to time
by Landlord to provide for the beneficial operation of the Lot and Building.
Section 9.13 Holding Over. Tenant shall vacate the Premises immediately
upon the expiration or sooner termination of this Lease. If Tenant retains
possession of the Premises or any part thereof after the termination of the
term without Landlord's express consent, Tenant shall pay Landlord Annual Fixed
Rent at 125% the monthly rate specified in Section 1 for the time Tenant thus
remains in possession and, in addition thereto, shall pay Landlord for all
damages, consequential as well as direct, sustained by reason of Tenant's
retention of possession. The provisions of this Section do not exclude
Landlord's rights of re-entry or any other right hereunder, including without
limitation, the right to increase the monthly rent as described in this
Section, and instead to remove Tenant through summary proceedings for holding
over beyond the expiration of the term of this Lease.
Section 9.14 Assignment and Subletting. Except as provided in Section
2.2 of this Lease, Tenant shall not assign, transfer, mortgage or pledge this
Lease or grant a security interest in Tenant's rights hereunder or sublease all
or any part of the Premises or suffer or permit this Lease or the leasehold
estate hereby created or any other rights arising under this Lease to be
assigned, transferred or encumbered, in whole or in part, whether voluntarily,
involuntarily or by operation of law, or permit the occupancy of the Premises
by anyone other than Tenant without Landlord's prior written approval, which
approval shall not be unreasonably withheld. Any attempted assignment,
transfer, mortgage, pledge, grant of security interest, sublease or other
encumbrance, except with prior written approval thereof from Landlord, shall be
void. No assignment, transfer, mortgage,
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grant of security interest, sublease or other encumbrance, whether or not
approved, and no indulgence granted by Landlord to any assignee or sublessee,
shall in any way impair the continuing primary liability (which after an
assignment shall be joint and several with the assignee) of Tenant hereunder,
and no approval in a particular instance shall be deemed to be a waiver of the
obligation to obtain Landlord's approval in any other case.
Section 9.15 Overloading and Nuisance. Tenant shall not injure,
overload, deface or otherwise harm the Premises, commit any nuisance, permit
the emission of any objectionable noise, vibration or odor, make, allow or
suffer any waste or make any use of the Premises which is improper, offensive
or contrary to any law or ordinance.
SECTION 10
Casualty or Taking
Section 10.1 Termination. In the event that greater than twenty-five
(25) percent of the Building or the Lot shall be taken by any public authority
or for any public use or destroyed by the action of any public authority (a
"Taking") then this Lease may be terminated by either Landlord or Tenant
effective on the effective date of the Taking. In the event that the Premises
shall be totally or partially destroyed or damaged by fire or casualty (a
"Casualty") and if Landlord's architect, engineer or contractor shall determine
that it will require in excess of 180 days from the date of the Casualty to
restore the Premises, this Lease may be terminated by either Landlord or Tenant
by notice to the other within thirty days after the Casualty or receipt of the
written estimate of the time required to restore the Premises. In the case of
a Taking, such election, which may be made notwithstanding the fact that
Landlord's entire interest may have been divested, shall be made by the giving
of notice by Landlord or Tenant to the other within thirty (30) days after
Landlord or Tenant, as the case may be, shall receive notice of the Taking.
Section 10.2 Restoration. In the event of a Taking or a Casualty, if
neither Landlord nor Tenant exercises the election to terminate provided in
Section 10.1, this Lease shall continue in force and a just proportion of the
Fixed Rent and other charges hereunder, according to the nature and extent of
the damages sustained by the Premises, shall be abated until the Premises, or
what may remain thereof, shall be put by Landlord in proper condition for use
subject to zoning and building laws or ordinances then in existence, which,
unless Landlord or Tenant has exercised its option to terminate pursuant to
Section 10.1, Landlord covenants to do with reasonable diligence at Landlord's
expense, Landlord's obligations with respect to restoration
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shall not require Landlord to expend more than the net proceeds of insurance
recovered or damages awarded for such Casualty or Taking and made available for
restoration by Landlord's mortgagees. "Net proceeds of insurance recovered or
damages awarded" refers to the gross amount of such insurance or damages less
the reasonable expenses of Landlord in connection with the collection of the
same, including without limitation, fees and expenses for legal and appraisal
services.
Section 10.3 Award. Irrespective of the form in which recovery may be
had by law, all rights to damages or compensation shall belong to Landlord in
all cases. Tenant hereby grants to Landlord all of Tenant's rights to such
damages and compensation and covenants to deliver such further assignments
thereof as Landlord may from time to time request. Nothing contained in this
Section 10.3 shall be deemed to give Landlord any interest in, or prevent
Tenant from seeking, any separate award from the condemning authority for the
taking of personal property or fixtures of Tenant or for relocation or business
interruption expenses recoverable by Tenant from the condemning authority,
provided the same shall not reduce Landlord's award.
Section 11.1 Events of Default. If:
(a) Tenant shall default in the performance of any of its
obligations to pay the Fixed Rental, Additional Rent or any other
sum payable hereunder and if such default shall continue for five (5)
days after notice from Landlord designating such default;
(b) if within thirty (30) days after notice from Landlord to
Tenant specifying any other default or defaults Tenant has not
commenced diligently to correct the default or defaults so specified
or, if such default can not be cured within such thirty (30) day
period, Tenant thereafter shall fail to diligently pursue such
correction to completion;
(c) if any assignment for the benefit of creditors shall be made by
Tenant;
(d) if Tenant's leasehold interest shall be taken on execution or
other process of law in any action against Tenant;
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(e) if a lien or other involuntary encumbrance is filed against
Tenant's leasehold interest, and is not discharged within ten (10)
days thereafter;
(f) if a petition is filed by Tenant for liquidation, or for
reorganization or an arrangement or any other relief under any
provision of the Bankruptcy Code as then in force and effect; or
(g) if an involuntary petition under any of the provisions of said
Bankruptcy Code is filed against Tenant and such involuntary petition
is not dismissed within thirty (30) days thereafter,
then, and in any of such cases, Landlord and the agents and servants of
Landlord lawfully may, in addition to and not in derogation of any remedies for
any preceding breach of covenant, immediately or at any time thereafter and
without demand or notice and with or without process of law (forcibly, if
necessary) enter into and upon the Premises or any part thereof in the name of
the whole, or mail a notice of termination addressed to Tenant, and repossess
the same as of Landlord's former estate and expel Tenant and those claiming
through or under Tenant and remove its and their effects without being deemed
guilty of any manner of trespass and without prejudice to any remedies which
might otherwise be used for arrears of rent or prior breach of covenant, and
upon such entry or mailing as aforesaid this Lease shall terminate, Tenant
hereby waiving all statutory rights (including, without limitation, rights of
redemption, if any) to the extent such rights may be lawfully waived.
Landlord, without notice to Tenant, may store Tenant's effects, and those of
any person claiming through or under Tenant at the expense and risk of Tenant,
and, if Landlord so elects, may sell such effects at public auction or private
sale and apply the net proceeds to the payment of all sums due to Landlord from
Tenant, if any, and pay over the balance, if any, to Tenant.
Section 11.2 Remedies. In the event that this Lease is terminated
under any of the provisions contained in Section 11.1, Tenant shall pay
forthwith to Landlord, as compensation, the excess of the total rent reserved
for the residue of the Term over the fair market rental value of the Premises
for the residue of the term, such excess to be discounted to present value at
the then current Federal Reserve Bank discount rate. In calculating the rent
reserved there shall be included, in addition to the Fixed Rental and
Additional Rent, the cost of performing all obligations which Tenant has agreed
to perform under this Lease during the residue. As additional and cumulative
obligations after any such termination, Tenant shall also pay punctually to
Landlord all the sums and shall perform all the obligations which Tenant
covenants in this Lease to pay and to perform in the same manner and to the
same extent and at the same time as if this
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Lease had not been terminated. In calculating the amounts to be paid by Tenant
pursuant to the preceding sentence, Tenant shall be credited with any amount
paid to Landlord pursuant to the first sentence of this Section 11.2 and also
with the net proceeds of any rent obtained by Landlord by reletting the
Premises, after deducting all Landlord's reasonable expenses in connection with
such reletting, including, without limitation, all repossession costs,
brokerage commissions, fees for legal services and expenses of preparing the
Premises for such reletting, it being agreed by Tenant that Landlord may (i)
relet the Premises or any part or parts thereof for a term or terms which may
at Landlord's option be equal to or less than or exceed the period which would
otherwise have constituted the balance of the term hereof and may grant such
concessions and free rent as Landlord in its reasonable judgment considers
advisable or necessary to relet the same and (ii) make such alterations,
repairs and decorations in the Premises as Landlord in its reasonable judgment
considers advisable or necessary to relet the same, and no action of Landlord
in accordance with the foregoing or failure to relet or to collect rent under
reletting shall operate or be construed to release or reduce Tenant's liability
as aforesaid.
Section 11.3 Remedies Cumulative. Except as otherwise expressly
provided herein, any and all rights and remedies which Landlord may have under
this Lease and at law and equity shall be cumulative and shall not be deemed
inconsistent with each other, and any two or more of all such rights and
remedies may be exercised at the same time to the greatest extent permitted by
law.
Section 11.4 Landlord's Right to Cure Defaults. At any time following
ten (10) days' prior notice to Tenant (except in cases of emergency when no
notice shall be required), Landlord may (but shall not be obligated to) cure
any default by Tenant under this Lease, and whenever Landlord so elects, all
costs and expenses incurred by Landlord, including reasonable attorneys' fees,
in curing a default shall be paid by Tenant to Landlord as Additional Rent on
demand, together with interest thereon at the rate provided in Section 11.7
from the date of payment by Landlord to the date of payment by Tenant.
Section 11.5 Effect of Waivers of Default. Any consent or permission
by Landlord to any act or omission which otherwise would be a breach of any
covenant or condition herein, or any waiver by Landlord of the breach of any
covenant or condition herein, shall not in any way be held or construed (unless
expressly so declared) to operate so as to impair the continuing obligation of
any covenant or condition herein, or otherwise operate to permit the same or
similar acts or omissions except as to the specific instance, The failure of
Landlord to seek redress for violation of, or to insist upon the strict
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performance of, any covenant or condition of this Lease shall not be deemed a
waiver of such violation nor prevent a subsequent act, which would have
originally constituted a violation, from having all the force and effect of an
original violation. The receipt by Landlord of rent with knowledge of the
breach of any covenant of this Lease shall not be deemed to have been a waiver
of such breach by Landlord or of any of Landlord's remedies on account thereof,
including its right of termination for such default.
Section 11.6 No Accord and Satisfaction. No acceptance by Landlord of
a lesser sum than the Fixed Rental, Additional Rent or any other charge then
due shall be deemed to be other than on account of the earliest installment of
such rent or charge due, unless Landlord elects by notice to Tenant to credit
such sum against the most recent installment due. Any endorsement or statement
on any check or any letter accompanying any check or payment as rent or other
charge shall not be deemed an accord and satisfaction, and Landlord may accept
such check or payment without prejudice to Landlord's right to recover the
balance of such installment or pursue any other remedy under this Lease or
otherwise.
Section 11.7 Late Charge. If Tenant fails to pay Fixed Rental,
Additional Rent or any other sum payable by Tenant to Landlord within seven (7)
days after Landlord shall give Tenant notice of non-payment thereof, Tenant
shall, on demand, pay a late charge equal to five percent (5%) of the overdue
amount.
SECTION 12
Mortgages
Section 12.1 Rights of Mortgage Holders. No Fixed Rental, Additional
Rent or any other charge shall be paid more than one (1) month prior to the due
date thereof and payments made in violation of this provision shall (except to
the extent that such payments are actually received by a mortgagee in
possession or in the process of foreclosing its mortgage) be a nullity as
against such mortgagee and Tenant shall be liable for the amount of such
payments to such mortgagee.
In the event of any act or omission by Landlord which would give
Tenant the right to terminate this Lease or to claim a partial or total
eviction, Tenant shall not exercise any such right until it shall have given
notice, in the manner provided in Section 13.1, of such act or omission to the
holder of any mortgage encumbering the Premises whose name and address shall
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have been furnished to Tenant in writing, at the last address so furnished.
In the event any proceedings are brought for the foreclosure of, or in
the event of exercise of the power of sale under, any mortgage now or hereafter
encumbering the Premises, Tenant shall attorn to the purchaser upon such
foreclosure or sale or upon any grant of a deed in lieu of foreclosure and
recognize such purchaser as Landlord under this Lease.
Section 12.2 Superiority of Lease; Option to Subordinate. Unless
Landlord exercises the option set forth below in this Section 12.2, this Lease
shall be superior to and shall not be subordinate to any mortgage on the
Premises. Landlord shall have the option to subordinate this Lease to any
mortgage of the Premises provided that the holder of record thereof enters into
an agreement with Tenant, in form reasonably acceptable to Tenant by the terms
of which such holder will agree to (a) recognize the rights of Tenant under
this Lease, (b) perform Landlord's obligations hereunder arising after the date
of such holder's acquisition of title and (c) accept Tenant as tenant of the
Premises under the terms and conditions of this Lease in the event of
acquisition of title by such holder through foreclosure proceedings or
otherwise and Tenant will agree to recognize the holder of such mortgage as
Landlord in such event, which agreement shall be made expressly to bind and
inure to the benefit of the successors and assigns of Tenant and of the holder
and upon anyone purchasing the Premises at any foreclosure sale, Tenant agrees
to execute and deliver any appropriate instruments necessary to carry out the
agreements contained in this Section 12.2.
SECTION 13
Miscellaneous Provisions
Section 13.1 Notices from One Party to the Other. All notices required
or permitted hereunder shall be in writing and addressed, if to Tenant, at the
Original Address of Tenant or such other address as Tenant shall have last
designated by notice in writing to Landlord and, if to Landlord, at the
Original Address of Landlord or such other address as Landlord shall have last
designated by notice in writing to Tenant. Any notice shall be deemed duly
given when delivered or tendered for delivery at such address by personal
service, or as an alternate to personal service, by mailing the same by
registered or certified mail, postage prepaid.
Section 13.2 Quiet Enjoyment. Landlord agrees that upon Tenant's paying
the rent and performing and observing the terms, covenants, conditions and
provisions on its part to be performed
-18-
<PAGE> 23
and observed, Tenant shall and may peaceably and quietly have, hold and
enjoy the Premises during the term without any manner of hindrance or
molestation from Landlord or anyone claiming under Landlord, subject, however,
to the terms of this Lease.
Section 13.3 Lease Not to be Recorded: Notice of Lease. Tenant agrees
that it will not record this Lease. If the Term of this Lease, including
options, exceeds seven years, Landlord and Tenant agree that, on the request of
either, they will enter and record a notice of lease in form reasonably
acceptable to Landlord.
Section 13.4 Bind and Inure; Limitation of Landlord's Liability. The
obligations of this Lease shall run with the land, and this Lease shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns. No owner of the Premises shall be liable
under this Lease except for breaches of Landlord's obligations occurring while
owner of the Premises. The obligations of Landlord shall be binding upon the
assets of Landlord which comprise the Premises but not upon other assets of
Landlord. No individual partner, trustee, stockholder, officer, director,
employee or beneficiary of Landlord shall be personally liable under this Lease
and Tenant shall look solely to Landlord's interest in the Premises in pursuit
of its remedies upon an event of default hereunder, and the general assets of
Landlord and its partners, trustees, stockholders, officers, employees or
beneficiaries of Landlord shall not be subject to levy, execution or other
enforcement procedure for the satisfaction of the remedies of Tenant.
Section 13.5 Acts of God. In any case where either party hereto is
required to do any act, delays caused by or resulting from acts of God, war,
civil commotion, fire, flood or other casualty, labor difficulties, shortages
of labor, materials or equipment, government regulations, unusually severe
weather, or other causes beyond such party's reasonable control shall not be
counted in determining the time during which work shall be completed, whether
such time be designated by a fixed date, a fixed time or a "reasonable time",
and such time shall be deemed to be extended by the period of such delay.
Section 13.6 Landlord's Default. Landlord shall not be deemed to be
in default in the performance of any of its obligations hereunder unless it
shall fail to perform such obligations and unless within thirty (30) days after
notice from Tenant to Landlord specifying such default Landlord has not
commenced diligently to correct the default so specified or has not thereafter
diligently pursued such correction to completion. Tenant shall have no right,
for any default by Landlord, to offset or counterclaim against any rent due
hereunder.
-19-
<PAGE> 24
Section 13.7 Miscellaneous. This Lease shall be governed by and
construed in accordance with the laws of the Commonwealth of Massachusetts.
There are no prior oral or written agreements between Landlord and Tenant
affecting this Lease.
WITNESS the execution hereof under seal as of the day and year first
above written.
Tenant:
PACIFIC SCIENTIFIC COMPANY
By: /s/ John M. Ossenmacher
------------------------------------
Its: Vice President
/s/ Jody A. MacKerron 12/22/94
------------------------------------
Landlord:
NORTH AMERICA INVESTORS, INC.
By: /s/ JS
------------------------------------
Its: President
-20-
<PAGE> 25
TRANSFER CERTIFICATE OF TITLE
Doc # 272135
No. 79697
Book 399 Page 97
From Original Certificate No. 79672, Originally Registered March 2, 1966, in
Registration Book 399 Page 72 for the Registry District of Norfolk County.
THIS IS TO CERTIFY that Codman & Shurtleff, Inc., a corporation duly organized
and existing under the laws of the Commonwealth of Massachusetts and having an
usual place of business in Boston in the County of Suffolk and said
Commonwealth, is the owner in fee simple of that certain parcel of land situate
in RANDOLPH in the County of Norfolk and said Commonwealth, bounded and
described as follows:
Easterly by the Westerly line of Pacella Park Drive, seven hundred (700) feet;
Southerly by land now or formerly of Pacella Concrete Pipe Corporation, six
hundred forty nine and 29/100 (649.29) feet;
Westerly by lands now or formerly of said Pacella Concrete Pipe Corporation and
of the Town of Randolph, five hundred forty eight (548) feet; and
Northerly by land now or formerly of said Pacella Concrete Pipe Corporation,
seven hundred twenty one and 36/100 (721.36) feet.
Said parcel is shown as lot numbered 7 on a plan drawn by Gale
Engineering Company, Inc., Surveyors, dated February 14, 1966, as approved by
the Land Court, filed in the Land Registration Office as No. 34183B, a copy of
a portion of which is filed in Norfolk Registry District with Certificate
No. 79697, Book 399.
The above described land is subject to the restrictions as set forth in
a grant made by Pacella Brothers Corporation to Henri R. Salaun et al, dated
June 28, 1965, duly recorded in Book 4270, Page 617.
The above described land is subject also to the terms of a Stipulation
made by the Petitioners, William J. Brady and Ward Steel Company, filed with
the papers in this case on December 9, 1965, a copy of which is filed with
Decree No. 4864.
The above described land is subject also to the restrictions as set
forth in Document No. 272135, expiring on March 4, 1996.
And it is further certified that said land is under the operation and
provisions of Chapter 185 of the General Laws, and that the title of said
Codman & Shurtleff, Inc. to said land is registered under said chapter,
subject, however, to any of the encumbrances mentioned in Section forty-six of
said Chapter, which may be subsisting, and subject also to as aforesaid.
Witness, ELWOOD H. HETTRICK, Esquire, Judge of the Land Court, at
Dedham, in said County of Norfolk, the fourth day of March in the year nineteen
hundred and sixty-six, at 3 o'clock and 50 minutes in the afternoon.
Attest, with the Seal of said Court,
-----------------------------
Assistant Recorder
EXHIBIT A
<PAGE> 26
EXHIBIT B
RANDOLPH INDUSTRIAL PARK RESTRICTIONS
1. No building or structure shall be erected or maintained on said lot, or
lots, contained herein, unless the elevation, plan and specifications,
especially exterior material thereof, shall be approved in writing by Pacella
Bros. Inc., or its successor or assigns, to said Randolph Industrial Park,
which approval shall not be unreasonably withheld.
2. The front side at least of all buildings or structures shall be brick
faced, or faced with other materials of equal attractiveness, such other
materials to be approved in writing by Pacella Bros. Inc., or its successor or
assigns, which approval shall not be unreasonably withheld.
3. Not more than fifty (50) per cent of the area of any lot shall be built
upon and no building shall be erected within fifty (50) feet of street lines or
within fifteen (15) feet of side or rear lot lines. For these purposes the
term "buiding" shall not include open loading platforms, outside stairs, or
other projections.
4. After substantial completion of any building or structure, or within a
reasonable time thereafter, parking areas shall be properly and adequately
paved, land frontage area of all buildings and structures shall be properly and
adequately landscaped. The entire land area shall be properly and adequately
drained to avoid adverse drainage or run-off on adjoining land and such
drainage shall be properly tied in so as to become an integral part of the
Industrial Park drainage. All such paving and landscaping and drainage shall
be subject to approval by Pacella Bros. Inc., its successor or assigns, which
approval shall not be unreasonably withheld.
5. All areas which have not been paved, and all areas other than frontage
shall be attractively graded and seeded and maintained so as to be consistent
with a garden type industrial park.
6. Reasonable care shall be used to maintain the appearance of buildings and
grounds.
7. Each lot shall have facilities for loading, unloading and parking
reasonably sufficient to service the building constructed thereon without using
the adjacent streets for such activity.
8. Pacella Bros. Inc. reserves the right at any time to make other
restrictions on other parcels which it deems reasonable and necessary for the
proper development and/or maintenance of said Industrial Park.
9. No excavated material shall be removed from this Park by the purchaser or
tenant of any parcel of this Park. The area in which such excavated material
may be disposed of will be designated from time to time at the discretion of
Pacella Bros. Inc., its successor or assigns.
10. There shall be no open storage of material by any owner or tenant unless
suitably screened from public view by green fencing.
"B"
<PAGE> 27
SUBLEASE
This Sublease is made this 3rd day of January, 1995 by and among
Salvatore Osio, Trustee of 41 PACELLA PARK DRIVE TRUST, u/d/t dated January 30,
1995, NAI INVESTORS LIMITED PARTNERSHIP, a Massachusetts limited partnership
(herein, collectively "Master Landlord"), PACIFIC SCIENTIFIC COMPANY, a
California corporation ("Sublandlord") and JOHNSON & JOHNSON PROFESSIONAL,
INC., a New Jersey corporation ("Subtenant").
WITNESSETH:
1. This Sublease is made with reference to the following facts:
1.1. North America Investors, Inc., a California Corporation and
Sublandlord entered into a written lease dated December 16, 1994, which lease
has been assigned to Master Landlord, a copy of which is attached hereto as
Exhibit A ("Master Lease") covering premises described in Section 1.1 of the
Master Lease.
1.2. Subtenant desires to sublet a portion of the premises described
in Section 1.1 of the Master Lease (the "Premises") from Sublandlord on the
terms and conditions contained in this Sublease.
1.3. Master Landlord desires to insure that Subtenant shall have the
right to use and occupy the Premises during the term of this Sublease as
described herein and under the terms and conditions of this Sublease,
notwithstanding any future default by Sublandlord under the Master Lease.
2. Basic Sublease Provisions.
2.1. Building Address: 41 Pacella Park Drive
Randolph, Massachusetts
The Premises are more fully described on Exhibit B attached hereto.
2.2. Rentable Area of Premises: Approximately 55,000 square feet,
which include an approximately 4,000 square foot clean room (the "Clean Room")
and approximately 51,000 square feet of office and laboratory space
(collectively, the "Office Space"). Included in the Office Space is an open
space area of approximately 10,000 square feet as reflected on Exhibit B (the
"Open Space").
2.3. Commencement Date: January 31, 1995.
2.4. Expiration Date: With respect to the Open Space,
April 15, 1995, or such earlier date as Subtenant may determine.
<PAGE> 28
With respect to the remaining portion of the Premises, excluding the
Clean Room, June 1, 1995, or such earlier date as Subtenant may
determine, With respect to the Clean Room, July 15, 1995, or such
earlier date as Subtenant may determine.
Notwithstanding the foregoing expiration dates, to the extent mutually
acceptable to Sublandlord and Subtenant, prior to an expiration date
Sublandlord shall have the right to occupy a portion of the Premises to the
extent Subtenant has previously vacated such portion of the Premises,
2.5. Basic Monthly Rent: With respect to the Office Space, $84,000
($1,50 per square foot per month. With respect to the Clean Room,
$8,000.00 ($2.00 per square foot per month). All rent shall include utilities,
insurance of the Premises, property taxes and maintenance of the structure of
the Premises and shall be paid without demand, deduction, set-off or counter
claim, in advance, on the first day of each calendar month during the term of
this Sublease, and in the event of a partial rental month, rent shall be
prorated on the basis of a thirty (30) day month. Subtenant shall pay for
janitorial and telephone expenses for the area occupied by Subtenant and shall
pay one-half of security and snow plowing expenses during the term of this
Sublease.
2.6. Permitted Use: Office, clean room manufacturing and laboratory.
2.7. Acceptance of Premises: Subtenant acknowledges that immediately
prior to the Commencement Date Subtenant occupied the Premises for the same use
permitted herein, Subtenant has inspected the Premises and is thoroughly
acquainted with their condition. Subtenant agrees to accept the Premises in an
"as is" condition. Without limiting the foregoing, Subtenant's rights in the
Premises are subject to all local, state and federal laws, regulations and
ordinances governing and regulating the use and occupancy of the Premises and
subject to all matters now or hereafter of record. Subtenant acknowledges that
neither Sublandlord nor Sublandlord's agent has made any representation or
warranty as to: (i) the present or future suitability of the Premises for the
conduct of Subtenant's business; (ii) the physical condition of the Premises;
(iii) the expenses of operation of the Premises; (iv) the safety of the
Premises, whether for the Use of Subtenant or any other person, including
Subtenant's employees, agents, invitees or customers; (v) the compliance of the
Premises with any applicable laws, regulations or ordinances; or (vi) any other
matter or thing affecting or related to the Premises.
Subtenant acknowledges that no rights, easements or licenses are
acquired by Subtenant by implication or otherwise except as expressly set forth
herein. Subtenant shall comply with all laws
-2-
<PAGE> 29
and regulations relating to the Subtenant's use or occupancy of the Premises
and to the common areas. Subtenant further agrees that all telephone and other
communication installation and use requirements shall be compatible with the
Building and that Subtenant shall be solely responsible for all of its
telephone and communication installation and usage costs.
2.8. Address for payment of rent and notices:
Sublandlord: Subtenant:
Pacific Scientific Company Johnson & Johnson,
41 Pacella Park Drive Professional, Inc.
Randolph, MA 02368 325 Paramount Drive
Raynham, MA 02767-0350
Attn: Mr, John Ossenmacher Attn: Mr. Joseph Cherry,
President Vice President
617-986-3364 Operations
617-880-8070
3. Incorporation By Reference, Assumption.
Sections 9.3, 9.12, 9.15, 11.1, 11.2, 11.3, 11.4, 11.5, 11.6 and 13.3
of the Master Lease are incorporated into this Sublease as if fully set forth
in this Sublease. Where applicable, references in the Master Lease to Landlord
shall mean Sublandlord and to Tenant shall mean Subtenant. If any provisions
of this Sublease conflict with any portion of the Master Lease as incorporated
herein, the terms of this Sublease shall govern.
4. Master Lease.
4.1. Neither Sublandlord nor Subtenant shall do or permit to be done
anything which would constitute a violation or breach of any of the terms,
conditions or provisions of the Master Lease or which would cause the Master
Lease to be terminated or forfeited by virtue of any rights of termination or
forfeiture reserved by or vested in Master Landlord,
4.2. If the Master Lease terminates, this Sublease shall terminate as
between Sublandlord and Subtenant, Sublandlord shall be relieved from all
liabilities and obligations under this Sublease, this Sublease shall continue
as a direct lease between Master Landlord and Subtenant and the Master Landlord
shall continue to allow Subtenant to use and occupy the Premises under the
terms and conditions of this Sublease. In addition, if there is a default of
one of the parties under this Sublease or the Master Lease, the defaulting
party shall be liable to the non-defaulting party for all damage suffered by the
non-defaulting party as a result thereof.
-3-
<PAGE> 30
4.3. Nothing in this Sublease shall be deemed to amend or modify any
term or provision of the Master Lease.
5. Indemnity.
Sublandlord and Subtenant will indemnify, defend (by counsel
reasonably acceptable to the other party), protect and hold the other party
harmless from and against any and all liabilities, claims, demands, losses,
damages, costs and expenses (including attorneys' fees and the allocated costs
of the other party's in-house attorneys) arising out of or relating to (i) the
death of or injury to any person, or damage to any property whatsoever, on or
about the Premises to the extent caused by the negligence or other fault of the
indemnifying party, its agents or employees; or (ii) the indemnifying party's
breach or default under this Sublease,
6. Attorneys' Fees.
If there is any legal action or proceeding between Sublandlord and
Subtenant to enforce any provision of this Sublease or to protect or establish
any right or remedy of either Sublandlord or Subtenant hereunder, the
unsuccessful party to such action or proceeding will pay to the prevailing
party all costs and expenses, including reasonable attorneys' fees incurred by
such prevailing party in such action or proceeding and in any appearance in
connection therewith, and if such prevailing party recovers a judgment in any
such action, proceeding or appeal, such costs, expenses and attorneys' fees
will be determined by the court or arbitration panel handling the proceeding
and will be included in and as a part of such judgment.
7. Assignment and Subletting.
Subtenant shall not voluntarily, involuntarily or by operation of law
assign this Sublease or any interest therein and shall not sublet the Premises
or any part thereof, or any right or privilege appurtenant thereto. Any
attempted assignment or subletting shall be null and void and of no effect.
8. Alterations.
8.1. Alterations and Improvements by Subtenant. Subtenant shall not
make any alterations, additions or improvements to the Premises ("Alterations")
without obtaining the prior written consent of Sublandlord thereto, which
Sublandlord shall not unreasonably withhold or delay if the same are permitted
under the Master Lease. All Alterations shall be constructed in a good and
workmanlike manner using materials of a quality comparable to those on the
Premises, and shall conform to all relevant codes, regulations and ordinances
and shall otherwise comply with the
-4-
<PAGE> 31
Master Lease. All such Alterations shall be made at Subtenant's sole cost and
expense and shall be diligently prosecuted to completion. Upon the expiration
or earlier termination of this Sublease, Sublandlord may elect to have
Subtenant either (i) surrender with the Premises any or all of such Alterations
as Sublandlord shall determine, in which case, such Alterations shall become
the property of Sublandlord, or (ii) promptly remove any or all of such
Alterations designated by Sublandlord to be removed, in which case Subtenant
shall, at its sole cost and expense, repair and restore the Premises to its
original condition as of the Commencement Date, reasonable wear and tear
excepted. Subtenant shall permit no mechanics or other liens to be recorded
against the Premises.
8.2. Removal of Personal Property. All articles of personal property,
and all business and trade fixtures, movable machinery and equipment, furniture
and movable partitions, if any, owned by Subtenant in the Premises shall be and
remain the property of Subtenant and may be removed by Subtenant at any time,
provided that Subtenant, at its expense, shall repair any damage to the
Premises caused by such removal or by the original installation. Sublandlord
may elect to require Subtenant to remove all or any part of such property owned
by Subtenant at the expiration or sooner termination of this Sublease, in which
event such removal shall be done at Subtenant's expense, and Subtenant shall at
its own expense repair any damage to the Premises caused by such removal prior
to the termination of this Sublease.
9. Holding Over.
If Subtenant holds over after the expiration or earlier termination of
this Sublease, with or without the express or implied consent of Sublandlord,
then at the option of Sublandlord, Subtenant shall become and be only a
month-to-month tenant at a rent equal to One Hundred Fifty Percent (150%) of
the rent payable by Subtenant immediately prior to such expiration or
termination, and otherwise upon the terms, covenants and conditions herein
specified. Notwithstanding any provision to the contrary contained herein, (i)
Sublandlord expressly reserves the right to require Subtenant to surrender
possession of the Premises upon the expiration of the term hereof or upon the
earlier termination hereof and the right to assert any remedy at law or in
equity to evict Subtenant and/or collect damages in connection with any such
holding over, and (ii) Subtenant shall indemnify, defend and hold Sublandlord
harmless from and against any and all liabilities, claims, demands, actions,
losses, damages, obligations, costs and expenses, including, without
limitation, attorneys' fees incurred or suffered by Sublandlord by reason of
Subtenant's failure to surrender the Premises on the expiration or earlier
termination of this Sublease in accordance with the provisions of this
sublease.
-5-
<PAGE> 32
10. Maintenance and Repairs.
Subtenant acknowledges that the Premises are being rented in their "as
is" condition. At all times during the term of this Sublease, Subtenant, at its
sole cost and expense, subject to Sublandlord's obligations herein, will
maintain the Premises and every part thereof and all equipment, fixtures and
improvements therein in their current condition and repair. At the end of the
term of this Sublease, Subtenant will surrender the Premises in as good
condition as received, normal wear and tear excepted.
11. Insurance.
At all times during the term of this Sublease, Subtenant shall, at its
sole expense, procure and maintain commercial general liability insurance
against any and all damages and liability, including attorneys' fees on account
or arising out of injuries to or the death of any person or damage to property,
however occasioned, in, on or about the Premises with at least a single
combined liability and property damage limit of $1,000,000. All such insurance
shall be in a form satisfactory to Sublandlord. Subtenant shall provide
Sublandlord and Master Landlord with a certificate of insurance showing
Sublandlord and Master Landlord as additional insured. The certificate shall
provide for a thirty-day written notice to Sublandlord in the event of
cancellation or material change of coverage.
12. Notices.
All notices or other communications required or permitted hereunder
must be in writing, and be personally delivered (including by means of
professional messenger service) or sent by registered or certified mail,
postage prepaid, return receipt requested to the addresses set forth in
Paragraph 2.8. All notices will be deemed received on the date sent.
13. Master Landlord.
Master Landlord hereby agrees that Subtenant shall have the right to
use and occupy that portion of the Premises which is described above and in
Exhibit D to the Purchase and Sale Agreement dated December 23, 1994 between
North America Investors, Inc. as Buyer and Subtenant as Seller under the terms
and conditions of this Sublease notwithstanding the default or earlier
termination of the Master Lease.
-6-
<PAGE> 33
IN WITNESS WHEREOF, Master Landlord, Sublandlord and Subtenant have
executed this Sublease as of the date first above written.
"MASTER LANDLORD"
Salvatore Osio, as Trustee of
41 PACELLA PARK DRIVE TRUST,
u/d/t dated January 30, 1995
By: /s/ JS
-------------------------------------
Title: [TITLE UNREADABLE]
----------------------------------
NAI INVESTORS LIMITED PARTNERSHIP,
a Massachusetts Limited
Partnership
By: /s/ JS
-------------------------------------
Title: NAI Properties - G.P. President
----------------------------------
"SUBLANDLORD"
PACIFIC SCIENTIFIC COMPANY,
a California corporation
By: /s/ JOHN M. OSSENMACHER
-------------------------------------
Title: Vice President
----------------------------------
"SUBTENANT"
JOHNSON & JOHNSON PROFESSIONAL,
INC,, a New Jersey corporation
By: /s/ JOSEPH CHERRY
-------------------------------------
Title: VP of Operations
----------------------------------
JJPI
-7-
<PAGE> 34
EXHIBIT A
MASTER LEASE
With Sublease Rate Corrected
to Read Per Month
and $'s corrected
-8-
<PAGE> 35
EXHIBIT B
DRAWING OF SUBLEASED PREMISES
-9-
<PAGE> 36
The statements contained herein are made for the purpose of inducing
Heller to make the Loan and may be relied upon for such purpose by Heller and
its successors and assigns.
Yours very truly,
PACIFIC SCIENTIFIC COMPANY,
a California corporation.
By: /s/ JOHN M. OSSENMACHER
-----------------------
Its: Vice President
-----------------------
ATTEST:
By: JODY A. MacKERRON
------------------------
Its:
------------------------
<PAGE> 1
EXHIBIT 10.3
FILED Judgment on complaint and on
DEC 21, 1993 cross-complaint (see p. 4
GARY L. GRANVILLE, County Clerk ln. 10.)
By /s/ JS DEPUTY
---------- Judgment contains only those
portions of special verdict
answered by jury. (NOTE: the
directions to the next
question are included.) See
*** on page 2.
SUPERIOR COURT OF THE STATE OF CALIFORNIA
FOR THE COUNTY OF ORANGE
_______________________________
) CASE NO. 667105
SHAW/CROOKALL, a California )
general partnership, ) JUDGMENT ON COMPLAINT AND
) CROSS-COMPLAINT, INCLUDING
Plaintiff, ) JUDGMENT OF FORECLOSURE
) AND ORDER OF SALE
v. )
)
PACIFIC SCIENTIFIC COMPANY, )
a California corporation; )
STRATA TECHNOLOGIES, INC., )
a California corporation; )
FIRST AMERICAN TITLE )
INSURANCE COMPANY, )
a California corporation; )
and DOES 1 through 200, )
inclusive, )
)
Defendants. )
_______________________________)
)
PACIFIC SCIENTIFIC COMPANY, )
)
Cross-Complainant, )
)
v. )
)
SHAW/CROOKALL, a California )
partnership, )
DONALD W. SHAW, CHARLES E. )
CROOKALL, and DOES 1 )
through 100, inclusive, )
)
Cross-Defendants. )
_______________________________)
<PAGE> 2
This action came on regularly for trial on October 15, 1993, in
Department 31 of the above entitled Court, the Honorable William F.
Rylaarsdam, Judge, presiding. The plaintiff and cross-defendant Shaw/Crookall,
and cross-defendants Donald W. Shaw and Charles E. Crookall, appeared by
attorney Thomas Kallay of the Law offices of David M. Harney. The defendant and
cross-complainant Pacific Scientific Company (hereinafter "Pacific Scientific")
appeared by attorneys Jeffrey S. Davidson, Alexander F. MacKinnon, and Susan M.
O'Sullivan, of the firm of Kirkland & Ellis. The defendant Strata Technologies,
Inc. appeared by attorney Abbie P. Maliniak, of the firm of Selman, Breitman &
Burgess.
A jury of 12 persons was regularly impaneled and sworn.
Witnesses on the part of the plaintiff and the defendants were sworn and
examined, After hearing the evidence, the arguments of counsel, and
instructions of the Court, the Fifth and Eleventh Causes of Action of
Shaw/Crookall's complaint and the Second Cause of Action of Pacific
Scientific's cross-complaint were submitted to the jury with directions to
return a verdict on special issues. The jury deliberated and thereafter
returned into Court with its verdict consisting of the special issues submitted
to the jury and the answers given thereto by the jury, which said verdict was
as follows:
We, the jury in the above entitled action, find the following special
verdict on the following questions submitted to us:
<PAGE> 3
SHAW/CROOKALL'S CLAIMS
A) NEGLIGENCE
Question No. 1: Was Pacific Scientific negligent?
Answer "yes" or "no".
Answer: No
------
If you answer Question No. 1 "yes", then answer Question
No. 2, If you answer Question No. 1 "no", then proceed to Question No. 6.
* * * * * * * * * *
B) RESCISSION
Question No. 6: Is plaintiff entitled to rescind the contract for any
of the following reasons? (You should answer "yes" or "no" for each of these
grounds):
Yes No
Failure of Consideration x
------ ------
Negligent Misrepresentation x
------ ------
Mutual Mistake X
------ ------
Unilateral Mistake x
------ ------
If you answered "yes" for failure of consideration in Question No. 6,
Then answer Question No. 7. Otherwise, proceed directly to Question No. 8.
* * * * * * * * * *
PACIFIC SCIENTIFIC'S CLAIM
A) WASTE
Question No. 8: Is Pacific Scientific entitled to recover
on its claim against cross-defendants Shaw/Crookall, Donald Shaw
and Charles Crookall for waste?
- 2 -
<PAGE> 4
Answer "yes" or "no".
Answer: Yes
-----------
If you answer Question No. 8 "no", then sign and return this verdict. If
you answer Question No. 8 "yes", then answer Question No. 9.
Question No. 9: Did cross-defendants recklessly or intentionally cause
waste on the property?
Answer "yes" or "no".
Answer: Yes
-----------
Dated: November 12, 1993 /s/ Laura Bright
----------------- ----------------
Foreperson
It appearing that by reason of said special verdict that
Pacific Scientific is entitled to a judgment that Shaw/Crookall take nothing on
the Fifth and Eleventh Causes of Action in Shaw/Crookall' s complaint submitted
to the jury, AND,
It appearing that by reason of said special verdict, and a
further Order of the Court, that Pacific Scientific is entitled to a judgment
on its cross-claim for waste against Shaw/Crookall only, AND,
Shaw/Crookall having voluntarily dismissed the First, Second,
Third, Fourth, and Ninth Causes of Action of its complaint, Pacific Scientific
having voluntarily dismissed the Third and Fourth Causes of Action of its
cross-complaint, and the Court having dismissed the Sixth--and Twelfth Causes
of Action of Shaw/Crookall's complaint, AND,
- 3 -
<PAGE> 5
Having ordered a directed verdict in favor of defendant Strata
Technologies, Inc., on Shaw/Crookall's claims against it, AND,
Having considered Shaw/Crookall's claims for public and
private nuisance, Pacific Scientific's cross-claim for foreclosure
based on monetary default, and the amount of damages for waste, all of which
were submitted to the Court for decision, and for which an oral statement of
decision was rendered on November 22, 1993,
NOW, THEREFORE, IT IS ORDERED, ADJUDGED AND DECREED:
1. That Pacific Scientific Company (hereinafter "Pacific
Scientific"), Strata Technologies, Inc., and First American Title Insurance
Company have judgment that Shaw/Crookall recover nothing by reason of
Shaw/Crookall's complaint,
2. That Pacific Scientific have judgment against Shaw/Crookall
on Pacific Scientific's cross-claim for foreclosure based on monetary default
on the Promissory Note Secured By Deed of Trust (hereinafter "Note") executed
by Shaw/Crookall in favor of Pacific Scientific, on the terms set forth in
paragraphs 3 through 10 below,
3. Shaw/Crookall is indebted to Pacific Scientific in the
following amount:
(a) Principal and interest in the amount of
$6,392,177,00 as of October 31, 1993, plus $1,732.00
accruing each day thereafter;
(b) Trustee's fees and expenses in the amount of $10,822.00;
and
(c) Actual costs of foreclosure and sale.
- 4 -
<PAGE> 6
This amount is secured by the Deed of Trust set forth in Pacific Scientific's
cross-complaint.
4. The real property described in paragraph 10 below, or as
much as may be necessary, will be sold in the manner prescribed by
law, and the writ of sale will issue to the Sheriff of Orange County, ordering
and directing the Sheriff to conduct such sale. Any party to this action may
purchase at the sale.
5. From the proceeds of the sale the Sheriff will pay to
Pacific Scientific, after deducting costs of Court and the expenses of the levy
and sale, the amount of the indebtedness described in paragraph 3 above.
6. If any surplus remains after the payments specified in
paragraph 5 are made, the surplus will be paid to Shaw/Crookall.
7. Cross-defendant Shaw/Crookall is personally liable for
payment of the amount of indebtedness secured by the Deed of Trust
described in paragraph 3 above, and is an entity against which a deficiency
judgment may be ordered. The Court retains jurisdiction to determine the
amount of the deficiency, if any.
8. After the time allowed by law for redemption has expired,
Shaw/Crookall will be forever barred from any right of redemption. At that
time, the Sheriff will execute a deed of sale to the purchasers, who may then
take possession of the property, if necessary with the assistance of the
Sheriff of Orange County.
9. Shaw/Crookall, all persons claiming from or under
Shaw/Crookall, all persons and their personal representatives having liens
subsequent to the Deed of Trust by judgment or
-5-
<PAGE> 7
decree on the described real property, all persons and their heirs or personal
representatives having any lien or claim by or under such subsequent judgment
or decree, all persons claiming under them, and all persons claiming to have
acquired any estate or interest in the premises after the recording of notice
of the pendency of this action with the County Recorder are forever barred and
foreclosed from all equity of redemption in and claim to the property, from and
after delivery of the deed by the Sheriff.
10. The property that is the subject of this Judgment and
order is commonly described as 1350 South State College Boulevard, Anaheim,
California, and is legally described as:
ALL THAT CERTAIN LAND SITUATED IN THE STATE OF CALIFORNIA,
COUNTY OF ORANGE, CITY OF ANAHEIM, DESCRIBED AS FOLLOWS:
THE NORTHWEST QUARTER OF THE SOUTHWEST QUARTER OF THE
NORTHWEST QUARTER OF SECTION 24, TOWNSHIP 4 SOUTH, RANGE 10
WEST, IN THE RANCHO SAN JUAN CAJON DE SANTA ANA, AS SHOWN ON
A MAP RECORDED IN BOOK 51, PAGE 10 OF MISCELLANEOUS MAPS,
RECORDS OF ORANGE COUNTY, CALIFORNIA.
Excepting therefrom the east 10.00 feet thereof.
IT IS FURTHER ORDERED, ADJUDGED, AND DECREED:
11. That Pacific Scientific have judgment against
Shaw/Crookall on Pacific Scientific's cross-claim for waste, in
an amount determined as follows:
(a) $ 300,000.00 for diminution in market value; plus
(b) $ 303,343.00 for unpaid real property taxes, an amount
which increases by $3,315.00 on the first day of each
month, commencing December 1, 1993.
-6-
<PAGE> 8
Shaw/Crookall is liable for the amounts in (a) and (b) above to the extent that
the amount Shaw/Crookall is indebted to Pacific Scientific on the Note, as
described in paragraph 3 above, is not satisfied by application
of the proceeds from the foreclosure sale ordered by the Court.
12. That Pacific Scientific recover postjudgment
interest on the amounts in subparagraphs (a) and (b) of paragraph 11 above from
the date of the foreclosure sale ordered by the Court, at an annual rate of
10%.
13. That Pacific Scientific shall take nothing on its
cross-claim from Donald W. Shaw or Charles E. Crookall. Nothing in this
judgment shall prejudice any rights of Pacific Scientific under California
partnership law to recover from Donald W. Shaw, as Trustee of the Donald W.
Shaw Revocable Trust/ or Charles E. Crookall, the general partners of
Shaw/Crookall, for any unsatisfied obligations or liabilities of the
partnership.
14. That defendants recover their costs of suits.
DATED: 12/21/93
-----------
WILLIAM F. RYLAARSDAM
---------------------------
JUDGE OF THE SUPERIOR COURT
----------------------------
<PAGE> 9
<TABLE>
<CAPTION>
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------
ATTORNEY OR PARTY WITHOUT ATTORNEY (Name and Address) TELEPHONE NO. LEVYING OFFICER (Name and Address)
KIRKLAND AND ELLIS, ATTORNEYS AT LAW (213) SOLD TO 8-25-94
300 S. GRAND AVE. SUITE 3000 680-8400 PEER ALDEN SWAN
LOS ANGELES, CA 90071 $2,800,000.00
AGAINST JUDGEMENT
ATTORNEY FOR (Name):
- -------------------------------------------------------------------------------
NAME OF COURT, JUDICIAL DISTRICT OR BRANCH COURT, IF ANY
ORANGE COUNTY SUPERIOR COURT
- -------------------------------------------------------------------------------
PLAINTIFF: SHAW/CROOKALL
DEFENDANT: PACIFIC SCIENTIFIC COMPANY
- ---------------------------------------------------------------------------------------------------------------------------
LEVYING OFFICER FILE NO. COURT CASE NO.
NOTICE OF MARSHAL'S SALE NOCS667105-A 66 71 05
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
By virtue of a writ issued on 1-6-94 , 19___ in the above designated
----------
Court, upon a judgment entered 12-21-93 in favor of judgment creditor(s),
---------------
(DATE)
PACIFIC SCIENTIFIC COMPANY
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
and against judgment debtor(s) SHAW/CROOKALL
--------------------------------------------------
- -------------------------------------------------------------------------------
showing a net balance of $ 6,506,926,00 actually due on said judgment on
---------------
the date of the issuance of said writ, I have levied upon all right, title and
interest of said judgment debtor(s) in the property in the County of Orange,
State of California, described as follows:
REAL PROPERTY COMMONLY KNOWN AS 1350 S. STATE COLLEGE BLVD./ANAHEIM/CA.
Legal Description as follows: The northwest quarter of the southwest quarter of
the northwest quarter of Section 24, Township 4 South, Range 10 West, in the
Rancho San Juan Cajon de Santa Ana, as shown on a map recorded in Book 51, Page
10 of Miscellaneous Maps, records of Orange County, California.
Excepting therefrom the east 10.00 feet thereof.
If the subject of this sale is real property and it has no street address or
other common designation, directions to its location may be obtained from the
Marshal's Office upon request.
Prospective bidders should refer to Sections 701.510 to 701.680, inclusive, of
the Code of Civil Procedure for provisions governing the terms, conditions, and
effect of the sale and the liability of defaulting bidders.
NOTICE IS HEREBY GIVEN that on AUGUST 25 , 19 94, at 10 o'clock A. M.
------------ --- ----- -------
at (COURTHOUSE STEPS) 1275 N. BERKELEY - NORTH MUNICIPAL COURT
--------------------------------------------------------------------------
City of FULLERTON , County of Orange, State of California I will
-------------
sell at public auction to the highest bidder, for cash in lawful money of the
Untied States, all the right, title and interest of said judgment debtor(s) in
the above described property, or so much thereof as may be necessary to satisfy
said execution, with accrued interest and costs.
PROPERTY WILL BE SOLD
APPROXIMATE MINIMUM BID $ N/A . SUBJECT TO THE RIGHT
----- OF REDEMPTION
Dated JULY 26 , 19 94.
----------- ---
Division: NORTH
MARSHAL OF ORANGE COUNTY MICHAEL S. CARONA
NORTH DIVISION Marshal, Orange County
1275 N. BERKELEY AVE. RM 360
FULLERTON, CALIFORNIA 92632
By /s/ E. NORLEEN N52 , Deputy
--------------------
NOTE: Do not take down or deface a posted notice before the sale or
satisfaction of judgment. Penal Code Section 616 (misdemeanor).
<PAGE> 1
EXHIBIT 10.6
FIRST AMENDMENT TO THE PACIFIC SCIENTIFIC COMPANY
DIRECTORS' RETIREMENT PLAN
DECEMBER 8, 1994
I. RECITALS
Whereas the Board of Directors of Pacific Scientific Company
voted to revise the directors compensation on December 8, 1994, and
whereas the benefit received under the Pacific Scientific Company
Directors' Retirement Plan (the "Plan") is based upon directors
compensation, Pacific Scientific Company (the "Company") wishes to
amend the Plan as hereinafter provided.
II. AMENDMENT
Section V "Retirement Benefit" of the Plan is hereby deleted
and replaced in its entirety by the following:
"V. Retirement Benefit
The annual retirement benefit payable to a Retiree
will be equal to $12,000 for all Directors that retired on or
before December 30, 1994, and $16,000 for all Directors that
retire subsequent to December 30, 1994. The payment will be
made quarterly.
The benefit will commence any time after age
sixty-five (65) provided the Director is no longer serving as
a Director of the Company.
Directors who leave the Board before age sixty-five
(65) after completing five (5) years of Board service will
be eligible to receive a benefit upon attaining age
sixty-five (65)."
III. MISCELLANEOUS
Nothing contained in this First Amendment to the Pacific
Scientific Directors' Retirement Plan ("First Amendment") shall alter
any portion of the Plan or the rights, restrictions or covenants
thereto except as herein stated in Section II of this First Amendment.
IV. EFFECTIVE DATE
This First Amendment to the Plan will be effective as of
December 8, 1994.
In witness whereof, the Company hereto has caused this First
Amendment to be executed by its Secretary, thereunto duly authorized
as of the date first above written.
PACIFIC SCIENTIFIC COMPANY
By:
-----------------------------------
Richard V. Plat, Secretary
<PAGE> 1
EXHIBIT 10.12
ASSETS PURCHASE AGREEMENT
THIS ASSETS PURCHASE AGREEMENT is made and entered into on the 29th day of
April, 1994 between (1) Royce Thompson Electric Limited (Company No. 603622)
("RTE"), (2) Grebe Plastics Limited (Company No. 1172956) ("Grebe") and (3)
Pacific Scientific Hiac-Royco Limited (Company No. 1943245) ("Purchaser").
RECITALS
A. RTE and Grebe (each a "Seller" and together "Sellers") are engaged in
the business of manufacturing and selling electrical equipment for the control
of street lighting and other lighting which is carried on at RTE's plant in
Birmingham, England (the "Business").
B. The Guarantors own the majority of the issued shares in the capital
of RTE and at the request of the Purchaser have agreed to guarantee certain
obligations of each Seller under certain of the Acquisition Agreements.
Pacific Scientific Company ("Pacific Scientific") is the Purchaser's ultimate
holding company and at the request of the Sellers has agreed to guarantee the
obligations of the Purchaser under the Acquisition Agreements.
C. Each Seller desires to sell and assign to the Purchaser, and the
Purchaser desires to acquire from it, its assets relating to or used in
connection with the Business which are described herein with a view to
maintaining the Business as a going concern on the terms and subject to the
conditions set forth in this Agreement.
<PAGE> 2
THEREFORE, in consideration of the foregoing and of the covenants and
agreements hereinafter set forth, each Seller and the Purchaser agree as
follows:
ARTICLE I
DEFINITION
As used in this Agreement, the following terms shall have the meanings
ascribed to them in, or otherwise be interpreted in accordance with, this
Article 1:
1.1 Accounting Terms. Unless expressly stated otherwise herein,
any accounting term used in this Acquisition Agreement shall have the meaning
such term has pursuant to GAAP.
1.2 Accounting Policies means the accounting practices, principles
and policies used and applied in the preparation of the January Balance Sheet
and which are set out on Schedule 1.36.
1.3 Acquisition Agreements means this Agreement and all other
documents and agreements required to be executed or delivered by the Purchaser
or either Seller or Pacific Scientific or the Guarantors pursuant to the
provisions of this Agreement or any other Acquisition Agreement (including to
avoid doubt the Lease, the Pacific Scientific Guarantee and the Guarantors'
Guarantee).
1.4 Agreement means this Assets Purchase Agreement, together with
all Exhibits and Schedules referred to herein.
2
<PAGE> 3
1.5 Assets. See Section 2.2.
1.6 Assumed liabilities. See Section 3.3.
1.7 Bank Debt means the sum of L144,882.34 being the total amount
due or owing to Griffin Factors Limited by either of the Sellers as at the
Closing Date and as certified by Griffin Factors Limited pursuant to Section
5.1(k).
1.8 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 (other than books and records relating to directors' and shareholders'
meetings and statutory books) and, to the extent transferable to the 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.
1.9 Cash means all cash belonging to each of the Sellers which is
in hand or at bank as at the Closing Date (and shall include for the avoidance
of doubt amounts represented by cheques or other remittances the receipt of
which has been entered in the books of either of the Sellers but which are
unbanked or which have not been cleared through either of the Sellers' bank
accounts as at the Closing Date).
1.10 Closing means the occurrence of the events contemplated by
Article VII of this Agreement.
3
<PAGE> 4
1.11 Closing Date means 10am April 29, 1994, or such other time
and/or date as the parties may (prior thereto) agree in writing, upon which the
Closing shall occur.
1.12 Consent(s) means the consents, licences, approvals or novations
of all individuals, corporations, partnerships, govermmental agencies and other
entities whose consent, licence or approval is required for the execution,
delivery or performance of any Acquisition Agreement or for the transfer to the
Purchaser of the rights and obligations of either Seller under the Required
Consent Contracts or for the Purchaser to carry on the Business after the
Closing Date substantially in the same manner as it is now being carried on.
1.13 Consultancy Agreement means the consultancy agreement between
Purchaser and Chester Royce Balch as set forth on Exhibit B.
1.14 Contract Rights means all rights of either Seller under the
Contracts.
1.15 Contracts means all oral or written contracts, purchase orders
and customer orders, leases, operating leases, capital leases, licence
agreements and other agreements, orders and engagements (whether with
customers or suppliers) relating to or used in connection with the Business to
which either 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 (including, to
avoid doubt, the Required Consent Contracts).
1.16 Debtors means all the book and other debts owed to either Seller
relating to the Business at the Closing Date including (but not limited to) the
invoice value of goods delivered but not invoiced and trade and other bills all
such book and
4
<PAGE> 5
other debts outstanding as of March 31, 1994 being listed on Schedule 1.16)
but excluding any amounts owing to RTE by Grebe on any account and vice versa.
1.17 Determination means in relation to any claim for indemnification
pursuant to Section 9, (a) a judgment by a court where no appeal has been made
therefrom within the time allotted for so appealing or (as the case may be) any
final written judgement of any appeal court or (b) the unconditional agreement
in writing between the indemnitee and the indemnitor for the settlement of any
such claim or (c) where the claim arises in respect of Net Book Value under
Section 8.1, the determination of Net Book Value in accordance with that
Section.
1.18 Employee Benefits means all employment contracts, whether oral
or written, and all other agreements or arrangements providing for remuneration
or benefits (including but not limited to pension and life assurance benefits)
to employees or former employees of either Seller or for which either Seller
has responsibility, listed on Schedule 1.18.
1.19 Employees means the persons employed by either Seller
particulars of whom are set forth on Schedule 1.19.
1.20 Employment Agreements means the agreements to be entered into by
the Purchaser and Lawrence Willetts and Timothy Martin Surman respectively on
Closing in the form attached as Exhibit C.
1.21 Environmental law(s) means all environmental laws, statutes,
rules, regulations, orders and ordinances, as amended, including but not
limited to those regulating the emission or discharge of pollutants or
those pertaining to the storage
5
<PAGE> 6
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 of Hazardous Materials into the
environment.
1.22 Environmental Liability of the Sellers means any liability or
obligation of the Business or either of the Sellers or of any other person
under any Environmental Law or under any common law with respect to the
environment (other than an Environmental Liability of the Purchaser) which
shall include, without limitation, (i) any liability or obligation for the
disposal, removal, cleanup or containment by either of the Sellers or any of
their respective agents or affiliates or of any other person of Hazardous
Materials on or under the Property which arises from any acts, omissions or
defaults which occurred on or before the Closing Date and (ii) any liability or
obligation arising from the discharge, see page or other release of any
Hazardous Material on or under the Property which occurs naturally or is caused
by either of the Sellers or any of their respective agents or affiliates or any
other person on or before the Closing Date.
1.23 Environmental liability of the Purchaser means any liability or
obligation of the Business or of the Purchaser under any Environmental Law or
under any common law with respect to the environment which arise from the
discharge, release or abandonment by the Purchaser after the Closing Date
of Hazardous Materials on or under the Property and for the disposal, removal,
cleanup or containment thereof (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 Property shall not by itself
demonstrate or establish that a discharge,
6
<PAGE> 7
release or abandonment by the Purchaser of Hazardous Materials on or under the
Property has occurred).
1.24 Excluded Assets means those assets not being sold to and
acquired by Purchaser, as set forth in Section 2.3.
1.25 Excluded Liabilities means all debts, obligations and
liabilities not specifically assumed by the Purchaser hereunder and which are
referred to in Section 3.4.
1.26 Exhibits means Exhibits A to P (inclusive), each being a part
of this Agreement.
1.27 Final Closing Date Balance Sheet means the final unaudited
consolidated balance sheet of the Sellers as at the Closing Date referred to
in Section 8.1.
1.28 Financial Statements means the Year-end Financial Statements,
the January Management Accounts and the February Management Accounts.
1.29 GAAP means generally accepted accounting policies and
principles in the United Kingdom.
1.30 Guarantors means Chester Royce Balch and Nellie Balch.
1.31 Guarantors' Guarantee means a guarantee by the Guarantors in
the form set forth on Part II of Exhibit A.
7
<PAGE> 8
1.32 Hazardous Materials means any hazardous substances, hazardous
materials, hazardous wastes, toxic substances, gases and petroleum or petroleum
derivatives which are the subject of any Environmental Laws.
1.33 Intangible Property means all items of intangible personal
property (other than Proprietary Rights) relating to or used by either of the
Sellers in connection with the Business, including but not limited to goodwill
and the exclusive right for the Purchaser or its assignee to represent itself as
carrying on the Business in succession to the Sellers.
1.34 Inventories means the items of tangible personal property used
by either of the Sellers 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,
(b) in process of production for such sale or (c) to be currently consumed
either directly or indirectly in the production of goods or services to be
available for sale.
1.35 January Management Accounts means the unaudited profit and loss
accounts of each of the Sellers for the ten month period ended on 31st January
1994 and the unaudited balance sheets of each of the Sellers as at that date
together with the notes, adjustments and memoranda attached or relating thereto
as set out on Schedule 1.35.
1.36 January Balance Sheet means the unaudited consolidated balance
sheet of the Sellers as at 31st January 1994 as set out on Schedule 1.36
prepared by the Purchaser's Accountants.
1.37 Joint Account. See Section 3.2(a)(ii).
8
<PAGE> 9
1.38 Lease means the lease by RTE to the Purchaser of the Property
in the form set out on Exhibit M.
1.39 March Management Accounts means the unaudited profit and loss
accounts of each of the Sellers for the year ended on 31st March 1994 and the
unaudited balance sheets of each of the Sellers as at that date together with
the notes, adjustments and memoranda attached or relating thereto as set out on
Schedule 1.39.
1.40 Material Contract means any Contract involving expenditure or
income in excess of L3,000 and which is not unilaterally cancellable by either
of the Sellers without penalty or premium on no more than 30 days' notice.
1.41 Net Book Value means the aggregate of the values of the Assets
minus the aggregate of (a) the values of the Assumed Liabilities and (b) the
Bank Debt all as reflected on the Final Closing Date Balance Sheet.
1.42 Notice. See Section 4.19.
1.43 Notice of Disagreement. See Section 8.1(c).
1.44 Pacific Scientific Guarantee means a guarantee in the form
set forth on Exhibit D.
1.45 Patent Application means the United Kingdom patent application
numbered 9125728.7 and dated November 30, 1991 made by RTE and published as no.
2261945A on June 2, 1993 details of which are (inter alia) set out in Schedule
1.45.
9
<PAGE> 10
1.46 Permits means all governmental and regulatory licences,
permits and approvals material to the conduct of the Business or the use of
the Assets.
1.47 Permitted Exceptions means those liens, claims, security
interests or other encumbrances, if any, identified on Schedule 1.47.
1.48 Personal Property means all items of tangible personal
property of whatever kind or nature relating to or used by either of the
Sellers in connection with the Business, wherever located and whether fixed
or moveable, including but not limited to all machinery, equipment, demos,
tools, dies, jigs, patterns, moulds, trade fixtures, spare parts, vehicles,
brochures and sales and marketing literature, furniture and furnishings and
supplies (other than Debtors, Books and Records, Intangible Property,
Inventories and Contract Rights) owned or leased by either of the Sellers
including, without limitation, those listed on Schedule 1.48 but excluding any
Excluded Assets.
1.49 Post-Closing Adjustment means the adjustment in the Purchase
Price to be made pursuant to Section 8.1.
1.50 Preliminary Closing Date Balance Sheet means the preliminary,
unaudited consolidated balance sheet of the Sellers to be prepared as at the
Closing Date pursuant to Section 8.1.
1.51 Prepayments means all prepaid expenses, payments in advance to
suppliers, prepaid lease and utility deposits and contractual rights as at the
Closing Date (those outstanding as at 31st March 1994 being listed on Schedule
1.51).
10
<PAGE> 11
1.52 Product Liability means all liability of the Sellers (or either
of them) to third parties in respect of loss or damage to property or death or
personal injury caused by defoctive products sold or supplied by either of the
Sellers on or prior to the Closing Date except any such liability in respect
of (a) claims made against or notified to either of the Sellers on or before
the Closing Date and (b) claims arising or being made after the Closing Date in
respect of events or circumstances which of occurred before the Closing Date of
which either of the Sellers was aware or of which they ought to have been aware
had due and diligent enquiry been made of the officers and employees of each of
the Sellers prior to Closing (all such product liability referred to in (a) and
(b) above being hereinafter referred to as "Excluded Product Liability").
1.53 Product Warranties means all warranties given by either of the
Sellers to its customers with respect to products manufactured and sold by
either of the Sellers in connection with the Business on or prior to the
Closing Date.
1.54 Property means the freehold property of RTE located at 198 Kings
Road, Tyseley, Birmingham, England, and known as "Chester Works", being
delineated on the plan attached to the Lease.
1.55 Property Repairs means the repair and maintenance works to be
carried out at the Property specified in Schedule 1.55.
1.56 Proprietary Information means all know how, trade secrets,
customer lists, supplier lists, sales techniques, formulae, processes and other
confidential information developed or used by either of the Sellers in
connection with the Business.
11
<PAGE> 12
1.57 Propietary Rights means the names "Royce Thompson Electric
Limited" and "Grebe Plastics Limited" and each and every other name and title
used by the Sellers (or either of them) in the Business and all patents,
copyrights, trademarks, trade names, service marks, design rights, registered
designs, standard plans, prototypes and utility models, licences and logos and
applications therefor (and the copyright in all drawings, plans and designs)
owned, acquired or used by the Sellers (or either of them) in connection with
the Business, including, but not limited to, those listed on Schedule 1.45 and
all goodwill associated therewith.
1.58 Purchase Price means a sum equal to the aggregate of the Net Book
Value and L107,000.
1.59 Purchaser's Accountants means Touche Ross & Co., Birmingham,
England.
1.60 Purchaser's Counsel means together Paul, Hastings, Janofsky &
Walker, Los Angeles, California and Wragge & Co, Birmingham, England (Wragge &
Co being referred to herein as "Purchaser's Solicitors").
1.61 Purchaser's Losses. See Section 9.2.
1.62 Regulations means the Transfer of Undertakings (Protection of
Employment) Regulations 1981 as amended from time to time.
1.63 Required Consent Contracts means those Contracts listed on
Schedule 1.63 which either specifically prohibit any assignment thereof or
provide therein for consent to be required to the assignment or transfer
thereof.
12
<PAGE> 13
1.64 Retention Fund. See Section 3.2(a)(ii).
1.65 Schedules means the schedules attached hereto. Information
disclosed in any schedule shall be deemed disclosed only in and for the purpose
of that schedule and no other.
1.66 Scheme means the Life Assurance and Staff Pension Plan of RTE
which is governed by the relevant documents listed in appendix A of Exhibit N.
1.67 Sellers' Accountants means John W. Hinks & Co. of 5-14 South
Road, Smethwick, Warley, West Midlands B67 7BH.
1.68 Sellers' GrouD means each Seller, its subsidiaries and holding
company from time to time and any subsidiary of such holding company and any
other associated company of either Seller, which shall include any company the
equity share capital of which (as defined by Section 744 of the Companies Act
1985) is owned as to 50% or less but more than 25% by the holding company of
a Seller or by any of its subsidiaries or by a Seller or any of its
subsidiaries as the case may be (and shall include any subsidiary of an
associated company).
1.69 Sellers' Losses. See Section 9.1.
1.70 Sellers' Solicitors means Silks of Barclays Bank Chambers, 27
Birmingham Street, Oldbury, Warley, West Midlands B69 4EZ.
1.71 Shareholders means the persons whose names and addresses appear
in Part I of Exhibit A.
13
<PAGE> 14
1.72 Solicitors. See Section 3.2(a)(ii).
1.73 Suppliers' 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 either of the Sellers in connection with
or for the purposes of the Business.
1.74 Taxation means all forms of taxation, charges, duties, imposts,
rates and levies (whether national or local) in the nature of taxation whether
of the United Kingdom or elsewhere (together with all fines, penalties and
interests in connection therewith).
1.75 Year-end Financial Statements means the audited financial
statements of each of the Sellers as of and for the years ended March 31, 1991,
March 31, 1992 and March 31, 1993, attached hereto as Schedule 1.75.
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, each Seller shall (as
beneficial owner) sell, transfer, assign, convey, and deliver to the Purchaser,
and the Purchaser shall (in reliance on the Sellers' representations,
warranties and covenants contained in the Acquisition Agreements) purchase and
acquire from that Seller, free and clear of any
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and all liens, claims, security interests and encumbrances of any kind, good,
valid and marketable title in and to all of its Assets.
2.2 Definition of Assets. The Assets means all assets and properties
owned or used by each of the Sellers in connection with the Business (except
the Excluded Assets), including without limitation the following:
(a) Personal Property;
(b) Inventories;
(c) Debtors;
(d) Prepayments;
(e) Proprietary Rights;
(f) Proprietary Information;
(g) Suppliers' Warranties (to the extent transferable to the
Purchaser);
(h) Permits (to the extent transferable to the Purchaser);
(i) Books and Records;
(j) Intangible Property;
(k) Contract Rights; and
(l) Cash.
References in this Agreement to the Business and/or the Assets and/or
any similar reference shall in relation to RTE be a reference to that part of
the Business conducted by it and to those of the Assets owned or used by it in
connection with the Business and shall in relation to Grebe be a reference to
that part of the Business conducted by it and to those of the Assets owned or
used by it in connection with the
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Business. References to a Seller's liabilities in connection with the Business
and its employees and/or any similar reference shall be construed
accordingly.
2.3 Excluded Assets. Notwithstanding the provisions of Sections 2.1
and 2.2, the Sellers shall retain and shall not transfer to the Purchaser:
(a) The Property (otherwise than pursuant to the Lease);
(b) The two motor vehicles used by the Guarantors, namely,
the Saab 9000 L86 DOM and the Metro G475 BAC;
(c) Any amounts recoverable in respect of Taxation
attributable to periods ended on or before the Closing Date and all
books and records related to the same;
(d) The landlords' fixtures and fittings identified in the
Second Schedule to the Lease;
(e) Any shares or other securities of any company owned or
held by either of the Sellers (including but not limited to shares or
other securities in Grebe, Cheston Electronics Limited and Freemile
Viglite Limited); and
(f) inter-company debtors owing by RTE to Grebe and vice versa.
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ARTICLE III
PURCHASE PRICE
3.1 Consideration for Assets. In consideration for its purchase of
the Assets, the Purchaser shall (i) pay to the Sellers the Purchase Price and
(ii), in accordance with Section 3.3, assume the Assumed Liabilitics.
3.2 Payment of Consideration.
(a) On the Closing Date, the Purchaser shall:
(i) cause to be transferred by telegraphic transfer to
RTE's No. 2 Account at Midland Bank plc No. 41873539 (sort code
40-11-18) L450,000 (four hundred and fifty thousand pounds sterling) in
immediately available funds on account of the Purchase Price;
(ii) cause to be transferred into a joint deposit
account ("Joint Account") in the names of the Purchaser's Solicitors and the
Sellers' Solicitors (together, "Solicitors") L250,000 (two hundred and fifty
thousand pounds sterling) also on account of the Purchase Price, the sums for
the time being standing to the credit of the Joint Account (including interest
accrued thereon) being herein referred to as the "Retention Fund". No payment
shall be made out of the Joint Account otherwise than in accordance with
Section 9; and
(iii) cause to be transferred to Griffin Factors Limited
on behalf of RTE by telegraphic transfer to its account at Midland Bank plc No
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91273523 sort code 40-11-18 a sum equal to the Bank Debt in immediately
available funds.
(b) The Purchaser shall not be concerned as to the
allocation of the Purchase Price (or of any other payments by it hereunder)
between RTE and Grebe which are made in accordance with the provisions of this
Agreement.
3.3 Assumption of Certain liabilities. On the Closing Date and
effective as at the Closing Date, the 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, the following liabilities and
obligations of each of the Sellers (collectively, the "Assumed Liabilities"):
(a) AR trade and other creditors and accrued charges and
expenses of the Business (other than any Excluded Liabilities) incurred on or
prior to the Closing Date to the extent made the subject of a specific
provision or reserve (or otherwise taken into account) in the Preliminary
Closing Date Balance Sheet and (from the date it exists) the Final Closing Date
Balance Sheet;
(b) All liabilities and obligations of either of the
Sellers in respect of Product Warranties and Product Liability (and the
Purchaser agrees to consult with Mr. Balch with regard to any material
complaint received by RTE prior to the date hereof from a customer or any
material complaint which is received by the Purchaser from a customer within
the period of twelve months from the date of this Agreement in respect of any
product manufactured and sold by RTE to that customer on or prior to the
Closing Date and which is or is likely to be the subject of a Product Warranty
claim, "material complaint" in this context involving a single complaint or
series
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related complaints which result (or are likely to result) in a charge to the
Purchaser in terms of direct labour and cost of materials in excess of L.2000.
In so consulting, the Purchaser shall have regard to the reasonable wishes of
RTE with regard to the manner of dealing with any such complaint and the extent
of the costs involved); and
(c) All liabilities and obligations of either of the
Sellers under or arising from all Contracts in respect of the performance
thereof after the Closing Date.
3.4 Liabilities Not Assumed. Except for the obligations and
and liabilities specifically described in Section 3.3, the Purchaser does
not assume or agree to pay, perform, defend or discharge any debts, obligations
or liabilities of either of the Sellers of 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, and for the avoidance of doubt
the obligations and liabilities not assumed by the Purchaser hereunder include,
without limitation, (a) any liability for Taxation incurred prior to or
relating to any period up to and including the Closing Date, (b) any liability
for personal injury, disease or property damage arising out of or in connection
with the Assets or the Business incurred (or resulting from events or
circumstances occurring) on or prior to the Closing Date, (c) any liabilities
related to, or arising from, the employees of the Business on or prior to the
Closing Date, (d) any Excluded Product Liability, (e) any liabilities related
to or arising from severance of any employees of the Business on or prior to
the Closing Date, (f) any Environmental Liabilities of the Sellers, (g) all
sums (whether of principal or interest or in respect of bank charges) due or
owing by either of the Sellers to its bankers (including but not limited to
Midland Bank plc and Griffin Factors Limited) as at the Closing Date, (h)
auditors' remuneration, (i) accrued advertising expenditure, (j)
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deferred tax, (k) any obligation or liability arising out of or in connection
with the Scheme and (l) any amounts due or owing on loan or current account to
directors or shareholders of either of the Sellers and (m) any amounts
owing by RTE to Grebe and vice versa. The Sellers shall retain, pay, perform,
and discharge all such debts, liabilities and obligations.
3.5 Allocation of Purchase Price. The Purchaser and the Sellers
acknowledge and consent to the payments described in this Section 3 and the
Assumed Liabilities being allocated among the Assets as set forth as Exhibit E.
3.6 Payment of VAT
(a) The parties shall use all reasonable endeavours to
procure that the purchase of the Business and the Assets is deemed to be a
transfer of a business or part of a business as a going concern for the
purposes of Article 5 of the Value Added Tax (Special Provisions) Order 1992
and, so far as applicable, section 33(1) Value Added Tax Act 1983, and is
treated neither as a supply of goods nor a supply of services.
(b) The Sellers shall at the Closing deliver to the
Purchaser all the records of the Business for value added tax purposes which
are required to be preserved by the Purchaser by the Value Added Tax Act 1983
Section 33(1)(b).
(c) The Purchaser shall for a period of not less than six
years from the Closing Date preserve the records referred to in Section 3.6(b)
delivered to it by the Sellers and, on reasonable notice during normal
business hours, make them available to the Sellers or their respective agents.
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(d) In the event that H.M. Customs and Excise determines that value
added tax is chargeable on the sale of the Assets or on any part of the Assets,
the Purchaser agrees that such value added tax shall be in addition to the
Purchase Price and that (against production of proper tax invoices in respect
of such sum) it shall pay the amount of any such value added tax within 14
days of such tax invoices being issued and delivered together with any
penalties and interest payable by reason of late payment by virtue of it being
assumed by the parties that the Article referred to in Section 3.6(a) applied
to the sale hereunder.
(e) Each of the Sellers shall indemnify the Purchaser against any
value added tax payable in relation to goods delivered or services rendered by
it in relation to the Business on or prior to the Closing (and in respect of
which it has neglected to raise VAT invoices) and against all penalties and
interest relating thereto.
ARTICLE IV
REPRESENTATIONS AND WARRANTEES OF SELLERS
The Sellers hereby jointly and severally (notwithstanding the last
paragraph of Section 2.2) make the following representations and warranties to
the Purchaser, each of which shall be true and correct on and as of the date
hereof and as of the Closing Date. Where any such representations and
warranties in this Article IV are qualified by the expression "so far as the
Sellers are aware" or "to the best of the Sellers' knowledge" or any similar
expression, such representation is deemed to be made and such warranty is
deemed to be given to the best of the knowledge, information and belief of the
Sellers after conducting due and diligent enquiry of their
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respective members, officers and employees or of others about the relevant
fact, matter or circumstance and the existence or otherwise thereof.
4.1 Corporate Status. Each Seller is a company duly incorporated
and existing in and under the laws of the United Kingdom. The Shareholders own
legally and beneficially all of the issued shares in the capital of RTE, and
RTE owns legally and beneficially all of the issued shares in Grebe.
4.2 Due Authorisation. The execution, delivery and performance by
the Sellers of the Acquisition Agreements and the transactions contemplated
hereby and thereby have been duly and validly authorised and approved by all
necessary corporate action on the part of each of the Sellers.
4.3 Authority of the Sellers. Each of the Sellers has the
corporate power and authority to enter into and perform its obligations
under the Acquisition Agreements to which it is a party. Neither the
execution and delivery nor the performance by either of the Sellers or the
Shareholders of its 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 indenture, mortgage, deed of trust, note, or other
agreement or instrument to which either of the Sellers or any Shareholder is a
party. Compliance with the terms of the Acquisition Agreements does not and
will not conflict with or result in a breach of either of the Sellers
memorandum or articles of association or any order, judgment or decree of any
court or body having jurisdiction over either of the Sellers or any of their
respective properties or the Assets. Neither the execution or delivery nor the
performance by either of the Sellers of any of its obligations under any
Acquisition Agreement has resulted or will result in the creation of any lien,
encumbrance or charge on any of the Assets.
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4.4 Consents. So far as each Seller is aware (and save 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 (a) permit the execution, delivery and performance by either of
the Sellers of any Acquisition Agreement to which it is a party and the
consummation of the transactions contemplated hereby and thereby or (b) enable
the Purchaser to carry on the Business after the Closing Date substantially as
the Business is now being carried on.
4.5 Enforceability. This Agreement is, and as of the Closing Date
each of the other Acquisition Agreements to which either Seller or any
Shareholder is a party will be, valid and binding obligations of that Seller
and that Shareholder, enforceable against them in accordance with their
respective terms.
4.6 Governmental Orders: Compliance with Laws. Neither any
Shareholder nor either of the Sellers 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 that Seller or that Shareholder of any
Acquisition Agreement. So far as each Seller is aware, it is not in violation
of (a) any judgment, 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.
4.7 Ownership of Assets. Except for Permitted Exceptions, (a) each
Seller is the absolute legal and beneficial owner of its Assets, free and clear
of any liens, claims, debts, security interests, judgments, mortgages or other
encumbrances
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of any kind; (b) there are no agreements or arrangements restricting the
freedom of either of the Sellers to transfer its Assets to the Purchaser or
otherwise to use or dispose of the same as it thinks fit; (c) no Asset has been
acquired on terms that property therein does not pass until full payment is
made; (d) the Assets comprise all the assets and property owned or used by the
Sellers for the purposes of operating the Business; and (e) none of the Assets
is unsuitable for the purpose for which it was acquired or for which it is
being used.
4.8 Contracts. Schedule 4.8 and Schedule 1.63 respectively contain
a true, correct and complete list of the Material Contracts to which either of
the Sellers is a party or to which any of their respective Assets are subject
or bound. Save as specified in Schedule 4.8, all of the Material Contracts are
in writing and the Sellers have provided the Purchaser with true and complete
copies of all such Material Contracts.
With respect to each Contract (and save as disclosed in Schedule 4.8): (i) each
such Contract is valid, binding and in full force and effect; (ii) so far as
each Seller is aware, it is not in default under such Contract 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) so far as each
Seller is aware, no other party to any such Contract is in default, or alleged
to be in default, under such Contract, (iv) so far as each Seller is aware,
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 Contract; and
(v) neither of the Sellers has received 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.
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Except as disclosed in Schedules 4.8 and 1.63, none of the Contracts
(i) is unlikely to have been fully performed in accordance with its terms more
than six months after the date on which it was entered into or undertaken; (ii)
is incapable of termination by either of the Sellers in accordance with its
terms without payment of compensation or damages by three months' notice or
less; (iii) is at the date hereof likely to result in a loss to either of the
Sellers upon completion of performance or fulfillment of Sellers' obligations
thereunder; (iv) is incapable of being performed or fulfilled by either of the
Sellers in accordance with its terms without undue or unusual expenditure of
money, effort or personnel; (v) involves the supply to or by either of the
Sellers of goods at fixed prices more than three months from the date of order;
(vi) involves payment by either of the Sellers by reference to fluctuations in
the index of retail prices or any other index; (vii) is for the servicing,
maintenance or repair of goods supplied by either Seller (except pursuant to
any Product Warranty given by either of the Sellers in respect of such goods)
or any third party; (viii) is dependant upon the guarantee or security of any
person; (ix) is with any person connected with (within the meaning of section
839 of the Income and Corporation Taxes Act 1988) either of the Sellers or any
other member of the Sellers' Group or any director of either of the Sellers or
any such other member or any Shareholder or person so connected with a
Shareholder; (x) involves any commitment to obtain or supply goods or services
exclusively from or to any person or otherwise restricts the manner or
geographical area in which the Business may be operated; (xi) involves or is
likely to involve the purchase or supply of goods or services the aggregate
cost or sales value of which will represent in excess of 10% of the turnover
for the preceding financial year of the Business; or (xii) is outside the
ordinary course of the Business or entered into otherwise than at arm's length
or involves the supply by or to either of the Sellers of goods or services
other than at full market value.
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Except as stated in Schedule 4.8 or in respect of quotations in the ordinary
and normal course of business, no offer, tender or the like relating to the
Business which is capable of being converted into an obligation of either of
the Sellers by an acceptance or other act of some other person is outstanding.
4.9 Pending Litigation. Except as set forth in Schedule 4.9, there
is no claim, action, suit, litigation or proceeding of any nature which is
either current or pending or, so far as each Seller is aware, threatened which
could materially affect the Assets or the Business.
No injunction has been granted against either Seller in connection with
the Business and neither Seller has given any undertaking to any court or to
any third party arising out of any legal proceedings relating to the Business
or the Assets.
No order has been made or petition served or resolution passed for the
winding-up of either of the Sellers nor has any person threatened to present
such a petition or convened or threatened to convene a meeting of that Seller
to consider a resolution to wind up that Seller or any other resolution; no
distress, execution or other process has been levied on any of the Assets nor
has any person threatened any such distress, execution or other process; no
person has appointed or threatened to appoint a receiver of either of the
Sellers, the Business or the Assets or any part thereof; there is no
unfulfilled or unsatisfied judgment or court order outstanding against either
of the Sellers.
So far as each Seller is aware, there has been no violation of any law,
order, ruling or regulation of the United Kingdom, the European Community or
any local
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laws in consequence of which an unfavourable judgment, decision, ruling or
finding would or might materially and adversely affect the Business.
4.10 Pending Product Claims.
(a) Schedule 4.10(a) lists details of all Excluded Product
Liability and Product Warranty claims which are current, or pending or, so far
as each Seller is aware, threatened as to any products manufactured, sold or
supplied by the Sellers in connection with the Business. So far as each Seller
is aware, there are no circumstances likely to give rise to any Excluded
Product Liability or Product Warranty claims in the future which are not
disclosed in Schedule 4.10(a).
(b) Except as disclosed in Schedule 4.10(b), there are no
Product Warranties or guarantees applicable to products manufactured, sold or
supplied in connection with the Business except warranties imposed by
applicable laws, and neither Seller furnishes any other warranties or
guarantees in connection with the products manufactured, sold or supplied with
respect to the Business.
4.11 Inventories. Except as set forth in Schedule 4.11, neither of
the Sellers has disposed of any Inventories since March 31, 1993 except in the
ordinary and normal course of business.
4.12 Debtors. The Debtors have been duly earned or accrued, are not
subject to any claim, set-off or deduction, represent valid, uncontested and
unconditional obligations owing to the relevant Seller and are collectable
within one hundred and twenty (120) days from the invoice date in the ordinary
course of business in the full book amounts thereof less any provision or
reserve for bad and
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doubtful debts contained in or applied in respect of the Final Closing Date
Balance Sheet. Schedules 1.16 and 1.51 contain true and complete lists of all
book and other debts and prepayments as of February 28, 1994. The provisions
or reserves for bad and doubtful debts contained in or applied in respect of
the February Management Accounts are adequate.
4.13 Proprietary Rights and Information. Save as disclosed in
Schedule 4.13, each Seller has good and valid title to, or valid licences for,
all its Proprietary Information, Proprietary Rights and Intangible Property,
free and clear of all liens, claims, encumbrances and security interests. Save
as disclosed in Schedule 4.13, each Seller has acquired or maintains all
patents, copyrights, trademarks, trade names, service marks, design rights,
registered designs, logos, licences and all rights with respect to the
foregoing necessary to the conduct of the Business. Except as set forth in
Schedule 4.13, neither of the Sellers has received any notice that it is, and
there is no reason to believe that it is, infringing any such intangible rights
owned by others. Neither of the Sellers has any reason to believe that its
Proprietary Information, Proprietary Rights or Intangible Property is being
infringed by others. To the extent that any of the rights of either of the
Sellers in, to, and under any Proprietary Information, Proprietary Rights and
Intangible Property may not be fully transferable to the Purchaser pursuant to
this Agreement, it will not have a material effect on the Business. Schedule
1.45 is a true and complete list of all patents, trademarks, trade names,
service marks, registered designs, licenses and logos of each Seller and
applications therefor owned, acquired or used by it in connection with the
Business. All renewal or other fees required to be paid to maintain such rights
have been paid on their respective due dates for payment. No details of the
same have been disclosed to any person other than the Purchaser (or any other
prospective
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purchaser of the Business in confidence) and there are no third party rights
over the same.
4.14 Personal Property. Except as set forth on Schedule 4.14, all
Personal Property owned, leased or used by each Seller in connection with the
Business is located on the Property. The items of Personal Property and any
customer owned equipment necessary for the operation of the Business are, in
the aggregate, in reasonable repair and operating condition, ordinary wear and
tear excepted.
4.15 Real Property.
(a) The only real property owned or leased by either of the
Sellers relating to or used in connection with the Business is the Property
which is legally and beneficially owned by RTE. There are no leases, tenancies
or occupancy agreements relating to the Property except that Grebe occupies a
part of the Property.
(b) The Sellers are in possession of the whole of the
Property none of which is vacant and no other person is in or entitled to
occupation of the Property or any part of it.
(c) The Property is not subject to the payment of any
outgoings other than the usual rates and taxes.
(d) The Property is currently used for the purpose of the
Business which is the permitted use under town and country planning legislation
intended to control or regulate the construction of buildings.
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(e) In relation to any enquiries made of the Sellers in respect of
the Property:
(i) the written replies to any written enquiries are and
remain complete and correct and are not misleading;
(ii) any Statement in the written replies to written
enquiries in respect of the Property qualfied by the expression "to the best of
the Sellers' knowledge" or "so far as the Sellers are aware" or any similar
expression shall be interpreted in accordance with the first paragraph of this
Article IV;
(iii) no transaction has been entered into, nor has any
encumbrance been created, affecting the Property since 1st January 1994.
4.16 Permits. Each 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 the Purchaser at the Closing are identified
on Schedule 4.16. Neither of the Sellers has received any notice of, and there
have been no, material violations by either of the Sellers of any such Permits
or any material claims or proceedings, pending or so far as each Seller is
aware threatened, challenging the compliance with, validity of or seeking to
discontinue any such Permits. Neither Seller knows of any reason why any of
the same may be revoked or not renewed in the ordinary course or should not be
capable of being transferred to or obtained by the Purchaser without the
necessity for any special arrangements or expense.
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4.17 Employees.
(a) All of the Employees are employed by the relevant
Seller in connection with the Business and, except for ten employees made
redundant in November 1993 (none of whom has any outstanding claim in that
regard), no person other than the Employees is now or has been within the six
months preceding the Closing employed in connection with the Business.
(b) The details of the Employees set forth on Schedule 1.19
are true, complete and accurate and disclose full and accurate particulars of
all material terms and conditions of employment of, and all remuneration
payable and other benefits provided to, the Employees or their defendants or to
which they are entitled (whether now or in the future and whether legally
enforceable or not) including (without limitation) details of all
profit-sharing, incentive, bonus, commission or other similar arrangements
which relate to the Employees.
(c) There is no actual commitment (whether legally binding
or not) to increase the remuneration payable or other benefits provided to any
of the Employees and (save as indicated in Schedule 1.19) no negotiations for
any such increase are current or likely within a period of six months from the
Closing Date.
(d) Save as indicated in Schedule 1.19, the employment or
engagement of each Employee may be terminated by not more than one month's
notice given at any time without liability for payment of compensation or
damages (other than compensation payable by statute) and none of the Employees
has given or received notice terminating his employment.
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(e) Save as indicated in Schedule 1.19, none of the
Employees are members of a trade union or any similar Organisation and there is
no recognised trade union, closed shop or collective agreement of any kind
relating to the Employees.
(f) No dispute is subsisting between either of the Sellers
and any Employee or former employee of that Seller and so far as each Seller is
aware there are no present circumstances which are likely to give rise to such
a dispute. There have been no strikes, work-to-rules, go-slows or other
industrial action by any of the Employees or former employees of either of the
Sellers during the period of two years immediately preceding the Closing Date.
(g) So far as each Seller is aware it has in relation to
each of the Employees complied with:
(i) all obligations imposed on it by all statutes,
regulations and codes of conduct and practice relevant to the relations between
it and the Employees or any trade union and has maintained current, adequate
and suitable records regarding the service and terms and conditions of
employment of each of the Employees;
(ii) all collective agreements, recognition
agreements and customs and practices for the time being dealing with such
relations or the conditions of service of the Employees; and
(iii) all relevant orders and awards made under any
relevant statute, regulation or code of conduct and practice affecting the
conditions of service of the Employees.
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(h) There have been no recommendations made by the
Advisory Conciliation and Arbitration Service nor any awards or declarations
made by the Central Arbitration Committee which relate to or concern the
Employees.
(i) So far as each Seller is aware (but without
making any special enquiry of any of the Employees) no Employee or eligible
dependent thereof has any material medical problems or condition.
4.18 Employee Benefits.
(a) Save as stated in Schedule 1.18, there are no
employment or union contracts, employee benefit arrangements, whether oral or
written, qualified or non-qualified, approved or unapproved by the
Commissioners of the Inland Revenue (including, without limitation, pension and
welfare plans, withdrawal, termination, severance or lay-off plans or
arrangements, bonus plans, share option plans, health and life assurance
policies and benefits, vacation and sick leave policies) or other agreements or
arrangements providing for remuneration or benefits to the Employees or to
former employees of either of the Sellers or for which either of the Sellers
has responsibility.
(b) Save for the Scheme, there are no employee pension
benefit plans, sponsored by either of the Sellers, or to which either Seller
makes (or is required to make) contributions or which provides benefits to the
Employees.
(c) The Sellers have provided the Purchaser with copies of
plan documents or plan summaries as to each such plan listed on Schedule 1.18
and
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without limitation to the foregoing (including in relation to the Scheme) full
details of the benefits provided for or in respect of the Employees in the form
of:
(i) copies of all trust deeds and rules governing
or relating to the Scheme;
(ii) Copies of all explanatory booklets and
announcements issued to those Employees who are members of the Scheme; and
(iii) a copy of the last actuarial valuation of the
Scheme (being the valuation as at April 1 1991 prepared by Clerical Medical and
General Life Assurance Society and dated July 2 1991 ("the Valuation")).
(d) No discretion or power has been or will before Closing
be exercised under the Scheme to:
(i) augment benefits thereunder in respect of the
Employees;
(ii) admit to membership an Employee who would not
otherwise have been eligible for admission to membership thereof;
(iii) provide in respect of a member who is an
Employee a benefit which would not otherwise be provided in respect of such
member; or
(iv) pay a contribution thereto in respect of an
Employee which would not otherwise have been paid.
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(e) All benefits (other than refunds of contributions)
payable under the Scheme on the death of a member who is an Employee or during
periods of sickness or disability of such a member are at the date hereof fully
insured under a policy effected with an insurance company of good repute and
each such member has been covered for such insurance by such insurance company
at its normal rates and on its normal terms for persons in good health and all
insurance premiums payable have been paid.
(f) No payment or repayment of any of the assets of the
Scheme has been made to any employer participating in the Scheme.
(g) So far as the Sellers are aware, there has been no
breach of the trusts of the Scheme and there are no actions, suits or claims
(other than routine claims for benefits) outstanding, pending or threatened
against the trustees or administrator of the Scheme or against either of the
Sellers or any other employer which participates in the Scheme in respect of
any act, event, omission or other matter arising out of or in connection with
the Scheme.
(h) In relation to the Scheme there are not at the date
hereof any contributions thereto from or in respect of Employees or other
payments which have fallen due but are unpaid and since the report of the
Valuation contributions thereto in respect of Employees have been made at the
rate or rates not less than those recommended in the Valuation.
(i) The Scheme is approved by the Commissioners of Inland
Revenue as an exempt approved scheme for the purposes of Chapter I of Part XIV
of the Income and Corporation Taxes Act 1988 and neither of the Sellers is
aware of
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any circumstances which might give the Inland Revenue reason to withdraw such
approval.
(j) the Scheme is not a contracted-out scheme for the
purposes of the Pension Schemes Act 1993.
(k) the Scheme has been administered in accordance with:
(i) the preservation requirements within the
meaning of Section 69 of the Pension Schemes Act 1993;
(ii) the equal access requirements of Section 118 of
the Pension Schemes Act 1993; and
(iii) the provisions of Article 119 of the Treaty of
Rome and all subordinate legislation and legal rulings made pursuant thereto;
and subject thereto in accordance with the trusts, powers and provisions of the
Scheme and overriding legislation.
4.19 Occupational Safety and Health. Except as disclosed in
Schedule 4.19, neither of the Sellers has received any notice, citation, claim,
assessment or proposed assessment (collectively, "Notice"), nor so far as each
Seller is aware does any Notice exist, as to or alleging that any of the
activities of the Business are in violation of any safety or health laws and so
far as each Seller is aware no such violation presently exists which would
materially and adversely affect the Business or the Assets.
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4.20 Environmental Protection. Except as so disclosed in Schedule
4.20:
(a) so far as the Sellers are aware (but without having
commissioned or carried out a specific environmental survey or investigation)
no Hazardous Material (i) has been released, treated, deposited, spilled,
discharged, or disposed of on or under the Property, (ii) is presently
maintained, used, generated, or permitted to remain in place by either of the
Sellers in violation of any Environmental Law or common law, (iii) is required
by any Environmental law to be eliminated, removed, treated or mitigated by
either of the Sellers, 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
either of the Sellers under any Environmental Law or common law;
(b) No notice, citation, summons or order has been received
by either of the Sellers, no notice has been given by either of the Sellers, 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 either of the Sellers of any Environmental law or
(ii) any alleged failure by either of the Sellers to have any environmental
permit, certificate, license, approval, registration or authorisation 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 either of the Sellers of any Hazardous Material;
(c) Neither of the Sellers has 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; and
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(d) No above-ground or underground storage tanks for
Hazardous Materials or underground sumps, clarifiers or basins, are required
for the operation of the Business or are located on the Property.
4.21 Financial Statements. The Sellers have furnished to the
Purchaser true and correct copies of the Financial Statements which have been
prepared in all respects in conformity with GAAP consistently applied. To the
extent that they are required to do so, the Financial Statements comply with
the accounting requirements of the Companies Act 1985 and all other relevant
legislation.
To the extent that they are audited, the Financial Statements give a
true and fair view of the assets, liabilities (including contingent,
unquantified and disputed liabilities), capital commitments and state of
affairs of each of the Sellers as at the dates to which they were respectively
made up and of the profits and losses of that Seller for the financial period
to which they relate, and in particular (but without limitation) each Seller
had no liabilities at any such date which were not included in the Financial
Statements by way of full provision or reserve therefor or (in the case of any
contingent, unquantified or disputed liabilities) by way of notes stating the
maximum amount which has been or could be claimed in respect thereof and the
best estimate of the directors of each of the Sellers (after taking all relevant
professional advice) of the likelihood of such a claim materialising or being
successful.
To the extent that they are unaudited, the Seller believe that they
fairly present in all material respects the financial condition of each of the
Sellers as of the respective dates thereof and for the respective periods
covered thereby to the extent necessary for the Sellers to understand and to
conduct the Business. Neither of the Sellers has failed to file reports or
returns which are required to be filed by any law
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or regulation. Each Seller has duly paid or accrued on its books of account
all taxes, duties and charges pursuant to such reports and returns or assessed
against it as at the Closing Date, and the assessment of any additional taxes,
that by law should have been paid or accrued in accordance with GAAP, as at the
Closing Date, is not expected.
Notwithstanding Section 3.3(b), the accruals, provisions or reserves
which will be made in the Final Closing Date Balance Sheet for Product
Warranties will be adequate (applying the relevant Accounting Policy) to meet
all actual, known or anticipated liability for Product Warranties arising on or
at any time prior to the first anniversary of the Closing Date.
4.22 Commissions and Fees. Neither of the Sellers nor any
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.
4.23 Operations in the Ordinary Course of Business: No Material
Adverse Changes. Since March 31, 1993 and save as stated in Schedule 4.23, the
Sellers have conducted the Business in the ordinary and normal course of
business and neither of the Sellers has: (a) experienced any material adverse
change in the Business, its operations or condition of the Assets; (b) suffered
any damage, destruction, casualty or 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 debtors or other accounts
receivable (other than for the purchase and sale of Inventories in the ordinary
and normal course of carrying on the Business); (d) made
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any change in its accounting methods, principles or practices; (e) increased
the emoluments, including bonuses, due or paid to any Employees; (f) cancelled
or compromised any material debt or claim or waived or released any material
right; (g) encountered any labour difficulties; (h) sold, transferred or leased
any of its assets except in the ordinary and normal course of business; or
(i) committed to do any of the foregoing.
4.24 Suppliers and Customers. Schedule 4.24 contains a true and
complete list of the 10 largest suppliers and customers measured by volume of
sales and purchases of Business taken as a whole which supply or have supplied
materials to or purchased products from the Business in the eleven months
ending 28th February 1994. Neither of the Sellers has received any notice that
(or knows of any reason why) any of its customers or suppliers intends to
terminate its business relationship with it.
4.25 Insurance. Schedule 4.25 lists all risks insured against by
the Sellers.
4.26 Sellers' interests. Neither of the Sellers nor any other
member of the Sellers' Group nor any person connected with either of the
Sellers or any other such member (within the meaning of Section 839 of the
Income and Corporation Taxes Act 1988) nor any Shareholder nor any person so
connected with any Shareholder has any interest directly or indirectly in any
business (other than the Business) which is or is likely to be or become
competitive with the Business (except as the holder for investment only of
securities dealt in on a recognised stock exchange and not exceeding 5% in
nominal value of the securities of that class).
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4.27 Books and records. All the books of account, ledgers and
financial and other records of whatsoever kind which are to be delivered to
the Purchaser in accordance with this Agreement (i) are held or stored under
the exclusive ownership and control of the Sellers, and so far as each Seller
is aware (ii) have at all times been fully properly and accurately made up,
kept and completed in all respects; (iii) record all matters required to be
entered therein; (iv) do not contain or reflect any material inaccuracies or
discrepancies; (v) accurately reflect and represent as at the Closing Date the
assets and liabilities (including contingent liabilities) of, and all
transactions entered into by, each Seller in relation to the Business in
accordance with generally accepted practices.
4.28 Special Arrangements. (i) So far as each Seller is aware, it
is not nor has it ever been a party to or in any way connected with any
agreement, arrangement or practice in connection with the Business which in any
way infringes or requires notification or registration under the Restrictive
Trade Practices Acts 1956 to 1977, the Fair Trading Act 1973, the Consumer
Credit Act 1974, the Resale Prices Act 1976, the Competition Act 1980 or
Articles 85 and 86 of the Treaty of Rome. (ii) None of the Assets has been
acquired by either of the Sellers other than by way of an arm's length
transaction for full market value. (iii) Neither of the Sellers has given in
relation to the Business any guarantee, indemnity, warranty or bond or incurred
any other similar obligation or created any security for or in respect of
liabilities (actual or contingent) of any other person otherwise than in the
ordinary and normal course of trading. (iv) Neither of the Sellers is, nor has
it ever been in connection with the Business, party to any joint venture,
consortium or partnership arrangement or agreement or a member of any
unincorporated association.
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4.29 VAT and PAYE. (i) Each Seller is a registered and taxable
person for value added tax purposes, has complied in all respects with all
statutes and regulations with regard to value added tax, has maintained
complete, accurate and up-to-date records, invoices and other documents
appropriate or requisite for the purposes of such statutes and regulations, is
not in arrears with any returns or payments thereunder or liable to any
abnormal payment or any forfeiture or penalty or to the operation of any penal
provision and it has not been required by H.M. Commissioners of Customs and
Excise to give any security. (ii) All income tax under the PAYE system and
payments due in respect of national insurance contributions have (where
applicable) been deducted from salaries, wages and bonuses paid by each Seller
and all liabilities therefor (including the employer's contributions) have been
duly paid and all appropriate returns have been made within the requisite time
limits by each Seller and full, complete and accurate records have been
maintained in respect thereof.
4.30 Accuracy of information. All written information which has
been supplied by either of the Sellers or any of its advisers to the Purchaser
or any of the Purchaser's advisers concerning the Business or the Assets
(including without limitation all information contained or referred to in this
Agreement) was when given (and if contained in this Agreement remains) true,
accurate and comprehensive in all respects and so far as each Seller is aware
there is no fact or circumstance which renders any such information untrue,
inaccurate or misleading in any material respect.
The Sellers further jointly and severally agree in relation to the said
warranties and representations that:
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(a) No letter, document or other communication shall be
deemed to constitute a disclosure against or qualification of them unless the
same is expressly set out in this Agreement;
(b) They are given for the benefit of the Purchaser and its
successors and permitted assigns and are separate and independent save as is
expressly provided herein and shall not be limited by reference to anything
in any Acquisition Agreement or any Schedules hereto; and
(c) Subject to the provisions of Article IX, and as
hereinafter provided, the rights and remedies of the Purchaser in respect
of any breach of such warranties and representations shall not be
affected by (i) any matter of which the Purchaser has knowledge (whether
actual, implied or constructive) except to the extent that such matter is
disclosed in this Agreement; or (ii) by the Purchaser failing to exercise or
delaying the exercise of any of its rights or remedies; or (iii) by any other
event or matter except a specific and duly authorised written waiver or release
Provided that the Purchaser shall not be entitled to exercise such rights and
remedies in respect of any such breach if the Sellers can prove not only that
the Purchaser was aware of the facts or circumstances giving rise to that
breach but also that such facts or circumstances actually constituted such a
breach and of the likely amount of the loss or damage arising therefrom.
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ARTICLE V
CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATIONS
5.1 Obligations to be Satisfied on or Prior to Closing Date. The
obligations of the 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 the Purchaser at its option:
(a) Accuracy of Representations and Warranties. Each of
the representations and warranties made by the Sellers in the Acquisition
Agreements shall be true, correct and complete in all 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. The Sellers and the
Guarantors 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
each of the Sellers or the Guarantors, as the case may be, on or before the
Closing Date.
(c) Transfer of Permits. As at the Closing Date, any
Permits identified in Schedule 4.16 as transferable to the Purchaser shall
have been transferred to the Purchaser or applications for transfer, in form
reasonably acceptable to the Purchaser, shall have been filed and accepted by
the other parties thereto.
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(d) No Adverse Proceedings. No suit or proceeding shall
have been instituted or threatened against either of the Sellers or the
Shareholders which, in the reasonable opinion of the 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.
(e) Closing Documents. Seller shall have delivered to
Purchaser the documents listed in Section 7.3.
(f) Lease. Seller shall have executed and delivered to
Purchaser the Lease.
(g) Approvals. The Shareholders in the case of RTE and
RTE and Mr. Balch in the case of Grebe shall have duly passed special
resolutions in the form set out in Exhibit F approving the sale of the
Business and Assets and changing the names of RTE and Grebe respectively
(conditionally upon Closing).
(h) Release of Charges. The Sellers shall deliver to the
Purchaser for filing at Companies House Companies forms M403(a) in respect of
all mortgages, charges and other security registered against them.
(i) Bank Instructions. The Sellers shall have issued to
their respective bankers irrevocable new mandate instructions in the form set
out in Exhibit 0.
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(j) Pension Instructions. The Sellers shall have issued
to their consulting actuaries irrevocable instructions in the form set out in
Exhibit P to implement the arrangements specified in Exhibit N.
(k) Bank Statements. The Sellers shall have delivered to
the Purchaser a certificate issued by Griffin Factors Limited showing the
reconciled balance owing to Griffin Factors Limited as at close of business
on the day immediately preceding the Closing Date together with a
reconciliation of all other bank account balances of the Sellers as at that
date.
5.2 Procedure Upon Failure to Satisfy Conditions Prior to Closing
Date. In the event that, in the Purchaser's opinion, any of the conditions
precedent set forth in Section 5.1 have not been satisfied on or before the
Closing Date, the Purchaser shall notify the Sellers in writing indicating its
election to (a) waive such condition precedent or (b) terminate this Agreement
pursuant to Section 10.1(b) or (c) extend the Closing Date by such period as
the parties may, in writing, agree.
ARTICLE VI
CONDITIONS PRECEDENT TO SELLERS' OBLIGATIONS
6.1 Obligations to be Satisfied on or Prior to Closing Date. The
obligations of each 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 the Sellers at their option:
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(a) Compliance with Agreement. The 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 the Purchaser on or before the Closing
Date.
(b) No Adverse Proceedings. No suit or proceeding shall
have been instituted or threatened against the Purchaser which in the
reasonable opinion of the Sellers could restrict, prohibit or rescind the
consummation of the transactions contemplated hereby.
(c) Closing Documents. The Purchaser shall have delivered
all certificates, agreements, opinions and other documents required to be
delivered by the Purchaser at the Closing pursuant to Article VII hereof, and
the form and substance of all such certificates, agreements, opinions and
other documents delivered to the Sellers on the Closing Date shall be
reasonably satisfactory to the Sellers and the Sellers' Solicitors.
ARTICLE VII
CLOSING
7.1 Time and Place. The Closing shall take place on the Closing
Date at the offices of the Purchaser's Solicitors or at such other place as
the parties may (prior thereto) agree in writing.
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7.2 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.
7.3 Deliveries by Seller to Purchaser. At the Closing, the Sellers
shall deliver or cause to be delivered to the Purchaser:
(a) A copy of resolutions duly passed by the board of
directors of each Seller and of the special resolutions passed by the
Shareholders to change the name of the Sellers and to authorise the execution
and delivery of the Acquisition Agreements and the consummation of the
transactions contemplated thereby, duly certified as at the Closing Date by a
director or the secretary of the relevant Seller;
(b) (If the Purchaser so requests and in such reasonable
form it then provides) executed copies prepared for mailing to each party to a
Required Consent Contract where such party's Consent is necessary to turn over
to the Purchaser all of the Sellers' rights and obligations under such
Contract, or a written request that such party provide such Consent as soon as
possible;
(c) Any transferable Permits;
(d) The Lease executed by RTE;
(e) The counterpart of the Consultancy Agreement executed
by Chester Royce Balch;
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(f) The counterparts of the Employment Agreements executed
by Mr. L. Willetts and Mr. T. Surman;
(g) An agreement in the form set out in Exhibit G duly
executed by the parties thereto;
(h) A deed of assignment of the Patent Application in the
form set out in Exhibit H duly executed by RTE;
(i) Notices to the Employees in the form set out in
Exhibit I duly signed on behalf of each of the Sellers;
(j) A deed of assignment of the Debtors and Prepayments
in the form set out in Exhibit J duly executed by each of the Sellers;
(k) A deed of assignment of goodwill in the form set out
in Exhibit K duly executed by each of the Sellers;
(l) At the Property, all records of National Insurance
contributions and PAYE relating to each of the Employees, duly completed and
up-to-date;
(m) At the Property, the value added tax records referred
to in Section 3.6(b);
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(n) At the Property (or elsewhere as appropriate), all of
the Assets title to which is capable of passing by delivery (whereupon title to
such assets shall pass to Purchaser);
(o) An employment agreement in respect of Roy Powers in
the form set out in Exhibit L duly executed by Mr. Powers;
(p) The Guarantors' Guarantee duly executed by the
Guarantors; and
(q) Such other instruments and documents as are (i)
required by any other provisions of this Agreement or (ii) reasonably necessary
to effect the performance of the Acquisition Agreements by the Sellers.
7.4 Deliveries by the Purchaser to the Sellers. At the Closing
(and subject to compliance by the Sellers with their respective obligations
under Section 7.3 to the reasonable satisfaction of the Purchaser) the
Purchaser shall deliver or cause to be delivered to the Sellers (or as they
shall direct):
(a) The payments on account of the Purchase Price in the
manner specified in Section 3.2(a)(i) and (ii);
(b) A copy of all resolutions duly passed by the board of
directors of the Purchaser authorising the execution and delivery of the
Acquisition Agreements and the consummation of the transactions contemplated
thereby, duly certified as of the Closing Date by any director or the secretary
of the Purchaser;
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(c) The counterpart of the Lease executed by the
Purchaser and Pacific Scientific;
(d) The Consultancy Agreement executed by the Purchaser;
(e) The counterparts of the deeds referred to in Sections
7.3(h), (j) and (k) duly executed by the Purchaser;
(f) The Pacific Scientific Guarantee duly executed by
Pacific Scientific; and
(g) Such other instruments and documents as are (i)
required by any other provisions of this Agreement or (ii) reasonably necessary
in the opinion of the Sellers to effect the performance of the Acquisition
Agreements by the Purchaser.
7.5 Discharge of Bank Debt. At the Closing (and subject as
aforesaid) the Purchaser shall or shall procure that the Bank Debt is
discharged in the manner specified in Section 3.2(a)(iii).
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ARTICLE VIII
POST-CLOSING OBLIGATIONS
8.1 Post-Closing Adjustment.
(a) The Purchaser shall as soon as practicable after the
Closing (and in any event within twenty (20) days thereafter) prepare the
Preliminary Closing Date Balance Sheet in accordance with the Accounting
Policies and a copy of the Preliminary Closing Date Balance Sheet together
with a draft certificate of the Net Book Value shall be delivered to the
Sellers and to the Sellers' Accountants as soon as they have been prepared.
(b) If either of the Sellers does not issue a Notice of
Disagreement to the Purchaser within twenty (20) days of receipt of the said
balance sheet and certificate, such balance sheet will be deemed the Final
Closing Date Balance Sheet and the Net Book Value shall be deemed to be as
stated in the said certificate.
(c) If either of the Sellers notifies the Purchaser of a
disagreement to the Preliminary Closing Date Balance Sheet ("Notice of
Disagreement") within such twenty day period, such notification shall be in
writing and contain sufficient detail of the nature of such disagreement to
permit the Purchaser and the Purchaser's Accountants to evaluate the Sellers'
objections. If the parties and their respective accountants are unable to
reach agreement on the Preliminary Closing Date Balance Sheet and the Net Book
Value within fifteen (15) days from the date of service on the Purchaser of
the Notice of Disagreement, the disputed matters may be referred to a partner
of at least 10 years standing of an independent firm of chartered accountants
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in the United Kingdom ("the Expert") to be nominated by agreement between the
parties, or, in default of agreement within fourteen (14) days, by the
President for the time being of the Institute of Chartered Accountants in
England and Wales on the application of any of the parties. The Expert shall
determine such dispute acting as an expert and not as an arbitrator and his
decision as to the Final Closing Date Balance Sheet and Net Book Value shall, in
the absence of manifest error, be final and binding on the parties hereto.
(d) The Expert shall be instructed, as part of his terms
of reference, to invite and consider representations by or on behalf of the
parties and to have regard to and be guided by the terms and conditions of this
Agreement.
(e) The fees and expenses of the Expert shall be divided
as to one half to the Sellers and one half to the Purchaser.
(f) Within five (5) days of the date that the Preliminary
Closing Date Balance Sheet is deemed or is determined by the Expert to be the
Final Closing Date Balance Sheet pursuant to Section 8.1(b) or the date that
the parties resolve their disagreement with respect to the Preliminary Closing
Date Balance Sheet and Net Book Value by amicable resolution:
(i) the Sellers shall pay to the Purchaser (by
way of repayment of the Purchase Price) an amount equal to the amount by which
the Net Book Value is less than L593,000; and
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(ii) the Purchaser shall pay to RTE (in the manner
specified in Section 3.2(a)(i)) (by way of the balance of the Purchase Price)
an amount equal to the amount by which the Net Book Value exceeds L593,000
together in each case with simple interest thereon at the rate of eight percent
(8%) per annum from the Closing Date to the date of actual payment on the
basis of the actual days elapsed and a 365 day year.
All of the payments to be made in accordance with this clause
8.1(f) are to be made without any deduction, set off or counterclaim
whatsoever and either by bank wire transfer to the designated account of the
recipient or at the option of the recipient by banker's draft drawn on a United
Kingdom clearing bank in favour of the recipient or as it may direct in
writing.
8.2 Further Assurance and Assistance. After the Closing Date, the
Sellers and the Purchaser shall, from time to time, upon the reasonable request
of the other party and without further consideration therefor, execute,
acknowledge and deliver in proper form any instrument necessary or reasonably
desirable to consummate the transactions contemplated by the Acquisition
Agreements.
8.3 Confidentiality. Other than in connection with any
governmental audit or investigation or as required by law, the Sellers shall,
and shall cause their agents and representatives and the Shareholders to, hold
in confidence and not disclose to any third party or use any confidential
information set forth in the Books and Records or any proprietary information
they possess with respect to the Business, the Assets or any of the Purchaser's
proprietary information without the prior written
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consent of the Purchaser, which consent may be withheld by the Purchaser in its
sole discretion.
The Purchaser agrees that, if the transactions contemplated by this
Agreement are not consummated, the Purchaser shall not and shall cause the
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 the Sellers with respect to any business information of either of
the Sellers, including, but not limited to, information concerning that
Sellers' trade secrets, customers, manufacturing processes or pricing, and
shall return to the Sellers the originals and all copies of any documents,
materials, summaries and other information received or derived by the Purchaser
hereunder or pursuant hereto provided that nothing herein shall be deemed to
prevent the use or disclosure 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 or on behalf of either of the Sellers,
or (b) which thereafter becomes publicly known or available without disclosure
by such Restricted Party, or which is rightfully received by such 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 or to comply
with any government regulation, court order or the disclosure requirements of
any stock exchange or other regulatory authority applicable to any Restricted
Party.
8.4 Books and Records and Information.
(a) Inspection. The Purchaser and the Sellers agree that
all Books and Records delivered to the Purchaser by the Sellers pursuant
to this Agreement or
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retained by either of the Sellers shall be open for inspection by
representatives of the Purchaser and the Sellers at the inspecting party's
expense at any time during regular business hours for a period of six years
(unless otherwise provided herein) from the Closing Date and that the
inspecting party may during that period, at its expense, make such copies
thereof as it may reasonably require.
(b) Access to Employees. The Purchaser shall use
reasonable efforts to afford the Sellers such access to the Employees as the
Sellers shall reasonably request for their proper business purposes relating to
the Business, including, without limitation, the defence 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 the
Purchaser or the Employees in connection with this Section 8.4(b) shall be paid
or promptly reimbursed by the Sellers.
8.5 Employment of Employees.
(a) The parties hereby acknowledge that the transaction
effected by this Agreement is a transfer of an undertaking or undertakings to
which the Regulations apply.
(b) The contract of employment of each of the Employees
shall be transferred to the Purchaser in accordance with the Regulations with
effect from the Closing Date.
(c) The Sellers shall be jointly and severally liable for
and shall indemnify the Purchaser in respect of all or any redundancy
payments, unfair
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dismissal or other compensation (whether statutory or contractual), salaries,
wages, pensions, commissions, remuneration, national insurance contributions,
damages, costs, claims, PAYE, tax deductions or expenses which may be incurred
by the Purchaser as a result of:
(i) anything done or omitted to be done on or
before the Closing Date by or in relation to either of the Sellers in respect
of the Employees or any of their contracts of employment;
(ii) any persons other than the Employees being
employees of either of the Sellers engaged in the Business in such a way that
their employments transfer to the Purchaser pursuant to or by virtue of the
Regulations;
(iii) the particulars of employment of the Employees
set forth on Schedule 1.19 being in any material respect inaccurate or
incorrect; and
(iv) the termination by the Purchaser after the
Closing Date of any contract of employment or contract for services between the
Purchaser and Roy Powers (other than contractual damages for breach thereof or
any redundancy or equipment payment which may become payable by the Purchaser
upon such termination).
8.6 Name-exchange. The Sellers shall at Closing procure:
(a) That a resolution be passed by each Seller changing
its name from Royce Thompson Electric Limited or as the case may be Grebe
Plastics Limited to a new name which is not likely to cause confusion with
either such name and is not
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phonetically similar thereto, and that such resolutions shall forthwith be
submitted to the Registrar of Companies together with the appropriate fees; and
(b) That such names or any similar phrases shall no longer
be used by either of the Sellers or any other member of the Sellers' Group or
the Shareholders or any person connected with them (within the meaning of
Section 839 of the Income and Corporation Taxes Act 1988) as corporate,
business or trading names.
8.7 Restrictions.
None of the provisions of this Agreement or of any document referred to
in this Agreement or of any arrangement of which this Agreement forms part
which are relevant restrictions as defined by the Restrictive Trade Practices
Act 1976 shall come into effect until the day following the day on which full
particulars of this Agreement and such other documents or arrangements have
been furnished to the Office of Fair Trading in accordance with the said Act.
8.8 Contracts.
The Contracts shall be dealt with as follows:
(a) All Contracts which can be assigned by either of the
Sellers without the consent of any third party shall be assigned to the
Purchaser with effect from the Closing Date;
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(b) Each Seller will at the Purchaser's request and cost
give to the Purchaser all reasonable assistance to enable the Purchaser to
enforce the Contracts;
(c) The Sellers and the Purchaser shall each use their
reasonable endeavours to obtain all necessary consents for the assignment or
novation of each of the Contracts; and
(d) As from the Closing Date in any case where such consent
is refused or otherwise not obtained and until such consent is obtained (or
where any of the Contracts are incapable of transfer by assignment or by other
means to the Purchaser):
(i) each of the Sellers shall hold the Contracts
and any monies, goods or other benefits received or receivable thereunder as
agent of and trustee for the Purchaser and shall forthwith upon receipt of any
such monies, goods or other benefits account for and pay or deliver the same to
the Purchaser without any deduction, set off or withholding whatsoever (the
profits and losses arising from such Contracts belonging to and being borne by
the Purchaser as from the Closing Date); and
(ii) the Purchaser shall perform such Contracts in
accordance with their terms and conditions as sub-contractor to the Sellers
provided that sub-contracting is permissible under the terms of the Contract in
question and, where sub-contracting is not permissible, the Purchaser shall
perform the Contracts in accordance with their terms and conditions as agent
for the Sellers.
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8.9 Property Repairs.
Immediately after the Closing Date, the Purchaser will arrange for the
Property Repairs to be carried out by a reputable firm of property repairers or
builders selected by the Purchaser. The Purchaser shall also instruct Messrs.
James & Lister Lea, Chartered Surveyors, to oversee and manage the repair work
and shall ensure that such works are carried out to such a standard as shall be
reasonably acceptable to the Purchaser and the Sellers. If the cost of the
Property Repairs (which shall include all costs and expenses of supervision)
shall be less than L50,000 the balance of the said sum of L50,000 shall be paid
forthwith to RTE by way of addition to the Purchase Price.
8.10 The Scheme.
The provisions of Exhibits N and P shall apply in relation to the
Scheme.
ARTICLE IX
INDEMNIFICATION
9.1 Indemnification by Purchaser. The Purchaser agrees to
indemnify and hold harmless each Seller from and against all liability,
obligation, claim, loss, cost, damage and expense, including reasonable
solicitors' and attorneys' fees and accountants' fees incurred in prosecuting
or defending any claim for any such liability, obligation, claim, loss, cost,
damage or expense (collectively, "Sellers' Losses") arising out of or resulting
from:
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(a) Any Assumed Liabilities;
(b) Any loss, damage, claim or liability incurred by either
of the Sellers arising from the operation of the Business after the Closing
Date; or
(c) Any Environmental Liability of the Purchaser.
9.2 Indemnification by the Sellers. The Sellers shall jointly and
severally indemnify and hold harmless the Purchaser (and in the case of Section
9.2(e) for itself and as agent and trustee for the trustee(s) of the Scheme)
from and against all liabilities, obligations, claims, losses, costs, damages
and expenses, including reasonable solicitors' and attorneys' fees and
accountants' fees incurred in prosecuting or defending any claim for any such
liabilities, obligations, claims, losses, costs, damages or expenses
(collectively, "Purchaser's Losses") arising out of or resulting from:
(a) The untruth or inaccuracy of any representation or
breach of warranty by either of the Sellers contained in any Acquisition
Agreement (but excluding any such misrepresentation or breach of warranty which
the Purchaser expressly waived in writing under Section 5.1 on or before the
Closing Date);
(b) Any Excluded Liabilities, the nonfulfillment of any
covenant or agreement relating to an Excluded Liability, Section 9.2(d) or
Section 8.5;
(c) The nonfulfillment of any covenant or agreement by
either of the Sellers contained in any Acquisition Agreement (other than one of
the type described in sub-paragraph 9.2(b) above);
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(d) (i) The Scheme being required as a consequence of
any legal ruling or legislation to provide benefits in respect of part of
pensionable service on or prior to the Closing Date on an equalised basis such
that members of one sex have the right to retire and receive benefits on the
same terms as members of the other sex;
(ii) The Scheme being required as a consequence of
any current legislation to provide increases in pensions in payment in respect
of the whole or a part of pensionable service on or prior to the Closing Date;
or
(iii) Either of the Sellers being liable for any
deficiency under the Scheme pursuant to section 144 Pension Schemes Act 1993,
and if there is any difference or disagreement in relation to this Section
9.2(e) the matter shall be referred to an independent actuary to be nominated
jointly by the Sellers and the Purchaser or, failing such nomination, to be
nominated by the President for the time being of the Institute of Actuaries
at the instance of the party first applying to him. Any independent actuary
so appointed shall act as an expert and not as an arbitrator, his decision
shall be final and binding and his costs shall be borne equally between the
Sellers and the Purchaser.
9.3 Procedure for Indemnification.
(a) If either of the Sellers or the Purchaser shall claim
indemnification hereunder arising from any claim or demand of a third party ("a
Third Party Claim"), the party seeking indemnification (the "indemnitee") shall
promptly notify the party from whom indemnification is sought (the
"indemnitor") in
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writing of the basis for such claim or demand, setting forth the nature and
amount of such 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 or solicitors of its own choosing, any Third Party Claim. Subject only
to Section 9.4(a), the failure of the indemnitee to so notify the indemnitor
promptly 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 settle, compromise or defend any Third
Party Claim, it shall promptly notify the indemnitee in writing of its
intention to do so and shall give the indemnitee such security for its costs
and expenses in that regard as the indemnitee reasonably may request. The
indemnitee shall fully cooperate with the indemnitor and its counsel and
solicitors in the defence, settlement or compromise of such Third Party Claim,
provided that all reasonable out-of-pocket expenses incurred by the indemnitee
shall be paid by the indemnitor. After the assumption of the defence by the
indemnitor, the indemnitor shall not, save as aforesaid, be liable for any
legal or other expenses subsequently incurred by the indemnitee in connection
with such defence, other than reasonable costs of investigation, but the
indemnitee may participate in such defence at its own expense. If the
indemnitor fails or refuses to undertake such defence within thirty (30) days
after receiving notice that a Third Party Claim has been made, or if the
indemnitor abandons or fails to prosecute such defence such that the indemnitee
reasonably believes that its interests are being adversely affected thereby,
the indemnitee shall have the right to assume and control the defence of such
Third Party Claim in such manner as it deems appropriate, at the sole cost and
expense of the indemnitor. No settlement of a Third Party Claim defended by
the indemnitee shall be made without the written consent of the indemnitor
(which shall not be unreasonably withheld or delayed). The indemnitor shall
not, except with the written consent of the indemnitee, consent to the entry of
a judgment or settlement of any
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Third Party Claim 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.
(b) If either of the Sellers or the Purchaser shall claim
indemnification hereunder for any claim other than a Third Party Claim, 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 that claim, payment shall be made by the
indemnitor.
(c) In place of any statutory or other interest otherwise
payable, interest shall accrue on the unpaid amount of all indemnification
obligations hereunder at the rate of eight (8)% per annum (based on the
actual number of days elapsed and a 365 day year) from the date the claim for
indemnification was first made until paid in full.
9.4 Limitation of Liability. Except where there has been fraud or
wilful non-disclosure on the part of either of the Sellers, the following
limitations shall apply to claims in respect of loss (in this Section 9.4
called individually "Loss" and collectively "Losses") arising out of or
resulting from the provisions of Sections 9.2(a) and (c) (but not further or
otherwise):
(a) Subject as hereinafter provided, no claim for
indemnification in respect of Losses shall be capable of being made by the
Purchaser unless written particulars giving the basis of such claim and
details of the specific matters in respect of which such claim is made shall
have been given to either of the Sellers not later than the first anniversary
of the Closing Date Provided that this Section shall not
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apply to any claim arising from breach of the representations and warranties
set out in Section 4.29 (VAT and PAYE);
(b) No single claim for indemnification in respect of
Losses shall be capable of being made by the Purchaser unless the amount of the
Losses with respect to such claim exceeds L1,000;
(c) No indemnification shall be required to be made in
respect of any Loss by the Purchaser until the aggregate amount of its Losses
exceeds an amount equal to L10,000 and then only to the extent of the excess of
such aggregate amount Provided always that this Section shall not apply to any
claim arising from breach of the representations and warranties contained in
Section 4.29 (VAT and PAYE);
(d) The maximum aggregate liability of the Sellers to the
Purchaser for indemnification in respect of Losses (including interest and
costs) shall not exceed L475,000 Provided always that:
(i) this Section shall not apply to any claim
arising from breach of the representation and warranties contained in Section
4.29 (VAT and PAYE); and
(ii) the Sellers' liability for Losses shall be
paid first from the Retention Fund pursuant to section 9.5;
(e) The liability of the Sellers to the Purchaser for
indemnification in respect of Losses shall be reduced to the extent that the
matters complained of have been adequately compensated for by a third party at
no cost to the Purchaser;
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(f) The Sellers shall not be liable for any claim for
indemnification in respect of Losses to the extent that the claim would not
have arisen but for a voluntary act or omission (which could have been avoided)
entered into by the Purchaser after Closing otherwise than in the ordinary
course of business and which the Purchaser ought reasonably to have been aware
could give rise to a claim for indemnification;
(g) Neither of the Sellers shall have any liability to
the Purchaser in respect of any breach of the representations and warranties
contained in Section 4.20; and
(h) If after either of the Sellers shall have made a
payment to the Purchaser pursuant to a claim for indemnification, the Purchaser
shall recover from a third party all or any of the sum paid, the amount so
recovered (less all costs, charges and expenses incurred by the Purchaser in
obtaining that recovery) not exceeding the sum paid by the Seller (or either of
them) to the Purchaser, shall forthwith be repaid to the Sellers.
9.5 Retention Fund.
(a) The Retention Fund shall be retained in the Joint
Account until the first anniversary of the Closing Date ("the Release Date")
and unless there have been made by the Purchaser and served on either of the
Sellers on or before the Release Date any claim or claims for indemnification
pursuant to the foregoing provisions of this Section 9, the Retention Fund
shall within 5 working days after the Release Date be paid to the Sellers in
the same manner as is provided in Section 8.1(h).
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(b) If a Determination is made or occurs before the
Release Date in respect of any claim by the Purchaser for indemnification
pursuant to this Section 9, the amount of that claim as so determined shall,
within 5 working days after the date of that Determination, be deducted from
the Retention Fund and paid to the Purchaser in or towards settlement of that
claim.
(c) If any claim or claims for indemnification under
Section 9 have been made by the Purchaser and have been served on either of
the Sellers but have not been the subject of a Determination on or before the
Release Date, the balance of the Retention Fund remaining in the Joint Account
at that time shall be retained in that Account and shall be applied in or
toward the settlement of those claims in the manner referred to in Section
9.5(b) (mutatis mutandis). Within 5 working days after the last of such
Determinations, any balance of the Retention Fund remaining after such payments
have been made to the Purchaser, shall be paid to the Sellers and the Joint
Account shall thereupon be closed (all such payments being made in the same
manner as provided in Section 8.1(b)).
(d) The Solicitors are hereby irrevocably instructed to
arrange and make all such payments as are required to be made from the
Retention Fund pursuant to this Section 9 and when arranging for the investment
from time to time of the Retention Fund to do so in accordance with the
parties' stated wishes.
(e) Interest comprised within the Retention Fund shall in
any event accrue to the Sellers and not to the Purchaser, and shall be
distributed to them or any one of them as they direct at three-monthly
intervals or otherwise as they or any one of them may direct.
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ARTICLE X
MISCELLANEOUS PROVISIONS
10.1 Termination. This Agreement may be terminated at any time
prior to the Closing by:
(a) mutual written consent of the Purchaser and the
Sellers; or
(b) written notice by the Purchaser if there has been a
material misrepresentation or breach on the part of either of the Sellers of
any of the representations and warranties, covenants or obligations set forth
in this Agreement.
10.2 Liability on Termination. In the event of termination of this
Agreement as provided in Section 10.1, none of the parties hereto shall have
any liability hereunder of any nature whatsoever to the other (save for
antecedent breach).
10.3 Expenses. Except as otherwise specifically provided herein,
each party shall pay its own expenses, including fees of solicitors, counsel
and accountants incurred in connection with the Acquisition Agreements and the
transactions contemplated hereby and thereby.
10.4 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
hereto or thereto or otherwise in connection herewith or therewith shall
survive the Closing.
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10.5 Public Announcements. From and after the date hereof, except
as the Purchaser and the Sellers may otherwise agree, neither the Purchaser nor
the Sellers nor any Shareholder shall make any release of information regarding
matters relating to the transactions contemplated by the Acquisition Agreements
except (i) that the Purchaser and the Sellers may each continue such
communications with their respective employees, customers, licensed, suppliers,
lenders and lessors as may be necessary or appropriate and not inconsistent
with the best interests of the other parties for the prompt consummation of the
transactions contemplated by this Agreement or (ii) as required by law, or by
the disclosure requirements of any stock exchange or other regulatory authority
applicable to any of the parties provided that the Purchaser and the Sellers
shall use their best efforts to consult with each other prior to making a
public announcement regarding matters relating to the transactions contemplated
by the Acquisition Agreements.
10.6 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 a satisfactory facsimile transmission report, or
(ii) one business day after notice is sent by 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:
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(i) if to the Purchaser:
Pacific Scientific Hiac-Royco Limited/Royce Thompson Limited
Seven Centre
Bourne End
Buckinghamshire SL8 5YS
Telephone No. 0628 810252
Facsimile No. 0628 810124
with copies to:
Pacific Scientific Company
620 Newport Centre Drive,
Suite 700
Newport Beach, California 92658
Attention: Mr. Richard V. Plat,
Executive Vice President
Telephone No. (714) 720-1714
Facsimile No. (714) 720-1083
and
Stephen J. Braithwaite Esq.
Wragge & Co
55 Colmore Row
Birmingham B3 2AS, England
Telephone No. 021-233-1000
Facsimile No. 021-214-1099
(ii) if to a Seller: to its registered office from time to time
or to
C.R. Balch
24 Temple Road
Dorridge
Solihull
West Midlands B93 8LF
Telephone No. 0564 773031
Facsimile No. OS64 773031
or to:
John G. Silk Esq.
Silks
Barclays Bank Chamber's
27 Birmingham Street Oldbury
Warley
West Midlands B19 4BZ
Telephone No. 021 511 2233
Facsimile No. 021 552 6322
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(each of whom are hereby authorised to receive and accept service of any such
notice or communication on behalf of each of the Sellers)
or such other addresses or telephone or facsimile numbers as may be specified
by a party hereto pursuant to notice given by such party in accordance with the
provisions of this Section 10.6.
10.7 Benefit of the Agreement. This Agreement shall be binding upon
the parties hereto and their respective personal representatives, successors
and permitted assigns and shall ensure to the benefit of the parties hereto and
their personal representatives, permitted successors and permitted assigns.
10.8 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, characterise or in any way affect the provisions of this
Agreement.
10.9 Entire Agreement. The Acquisition Agreements contain the
entire agreement and understanding of the parties with respect to the subject
matter thereof, supersede all prior agreements of the parties relating to the
subject matter thereof, including without limitation that certain letter of
intent dated January 18, 1994 among the parties, as amended, and no other
representations, promises, agreements or understandings regarding the subject
matter thereof 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. To avoid
doubt, the Purchaser acknowledges that no representations or warranties
(express or implied) are given by the Sellers in relation to the Assets or the
Business other than those expressly set out in this Agreement.
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10.10 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 and references to any
gender shall include all genders.
10.11 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
any of the parties shall constitute a subsequent waiver of the same or any
other breach, term or condition.
10.12 Assignment. This Agreement may not be assigned by any party
without the prior written consent of the other parties.
10.13 Separable Provisions. If any provision of this Agreement shall
be held invalid or unenforceable, the remainder nevertheless shall remain in
full force and effect.
10.14 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.
10.15 Recitals, Schedules and Exhibits. The recitals to this
Agreement, the Schedules and Exhibits are incorporated herein and, by this
reference, made a part hereof as if fully set forth at length herein.
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10.16 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
successors and permitted assigns or personal representatives, any interest in,
or any rights or remedies under or by reason of, this Agreement.
10.17 References to Statutes. Any references to any provision of any
Act of Parliament or of any subordinate legislation made pursuant to any Act of
Parliament shall be deemed to be references to such Act of Parliament or
subordinate legislation as amended, modified or re-enacted (whether before or
after the date hereof) and any references to any provision of any such Act or
legislation shall also include any provision of which it is a re-enactment
(whether with or without modification) and any provision in repealed
enactments.
10.18 Parties' rights. The rights and remedies of the parties under
this Agreement shall be in addition to any rights and remedies they may have in
general law and (subject always to the provisions of Section 9.4(a)) shall not
be diminished or extinguished by the granting of any indulgence, forbearance or
extension of time by them nor by the failure of or delay by them in asserting
any such rights or remedies.
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10.19 Interpretation. References in this Agreement to an English
term, concept or thing shall, in reference to a jurisdiction other than
England, be deemed to include a reference to the nearest equivalent term,
concept or thing existing in that jurisdiction.
10.20 Governing law. This Agreement shall be governed by and
construed in all respects in accordance with English law and the parties hereby
irrevocably submit to the non-exclusive jurisdiction of the High Court of
Justice in England.
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IN WITNESS WHEREOF the parties hereto have caused this Agreement to be
executed as a deed by their respective duly authorised representatives on the
date first above written.
EXECUTED as a Deed by
ROYCE THOMPSON ELECTRIC LIMITED
acting by
/s/ C. R. BALCH
Director Director/Secretary
EXECUTED as a Deed by
GREBE PLASTICS LIMITED
acting by
/s/ C. R. BALCH
Director Director/Secretary
EXECUTED as a Deed by
PACIFIC SCIENTIFIC HIAC-ROYCO LIMITED
acting by
/s/ RICHARD V. PLAT
Director Director/Secretary
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EXHIBIT 10.13
Attachment A o to
Deed o / o of
Notary o in o
SHARE PURCHASE AGREEMENT
between
a) Dipl.-Ing. Harald Fischer, Dachsbergweg 11, 64287 Darmstadt,
(hereinafter being referred to as the "Seller 1");
b) Dipl.-Ing. Walter Bautz, Mangoldweg 5, 64287 Darmstadt,
(hereinafter being referred to as the "Seller 2");
c) Dipl.-Soz. Ursula Fischer-Bautz, Dachsbergweg 11, 64287
Darmstadt, (hereinafter being referred to as the "Seller 3");
d) Dipl.-Phys. Peter Bautz, Schulgasse 28, 64380 RoBdorf,
(hereinafter being referred to as the "Seller 4"); and
e) Dipl.-Kfm. Hans-Joachim Jakob, Helene-Christaller-Weg 4, 64342
Seeheim-Jugenheim, (hereinafter being referred to as the
"Seller 5").
(the above persons hereinafter collectively being referred to
as the "Sellers")
and
Pacific Scientific GmbH
MollenbachstraBe 14
D-71229 Leonberg
(hereinafter being referred to as the "Purchaser")
<PAGE> 2
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WHEREAS
A. The Seller 1 is a shareholder of Eduard Bautz Gesellschaft mit
beschrankter Haftung which is registered in department B of the
Commercial Register of the Lower Court Darmstadt, registration number
1045, and has its main business establishment at Robert-Bosch-Str.
10, 64331 Weiterstadt (hereinafter being referred to as the
"Company").
The Seller 1 holds 35 % of the shares in the Company, as follows:
one share in the nominal amount of DM 875,000;
(the above share hereinafter being referred to as the "Share 1").
B. The Seller 2 is a shareholder of the Company.
The Seller 2 holds 35 % of the shares of the Company as follows:
one share in the nominal amount of DM 875,000;
(the above share hereinafter being referred to as the "Share 2")
C. The Seller 3 is a shareholder of the Company.
The Seller 3 holds 10 % of the shares of the Company as follows:
one share in the nominal amount of DM 250,000;
<PAGE> 3
- 8 -
(the above share hereinafter being referred to as the "Share 3")
D. The Seller 4 is a shareholder of the Company.
The Seller 4 holds 10 % of the shares of the Company as follows:
one share in the nominal amount of DM 250,000;
(the above share hereinafter being referred to as the "Share 4")
E. The Seller 5 is a shareholder of the Company.
The Seller 5 holds 10 % of the shares of the Company as follows:
one share in the nominal amount of DM 250,000;
(the above share hereinafter being referred to as the "Share 5")
F. The total stated capital of the Company (hereinafter referred to as
the "Stated Capital") is DM 2,500,000 and is fully paid up. It
consists of the above-mentioned shares (the Share 1 to Share 5
hereinafter collectively being referred to as the "Shares").
The Sellers are interested to divest themselves of the Shares. The Purchaser
is interested to purchase the Shares.
The parties therefore agree as follows:
<PAGE> 4
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ARTICLE 1
Sale and Assignment of Shares, Right to Profits, Effective Date
1. The Sellers sell the Shares held by them, respectively, as follows:
a) Upon the terms and conditions of this Agreement the Seller 1
herewith sells to the Purchaser the Share 1 including all
ancillary rights and assigns them to the Purchaser. The
Purchaser accepts such sale and assignment.
b) Upon the terms and conditions of this Agreement the Seller 2
herewith sells to the Purchaser the Share 2 including all
ancillary rights and assigns them to the Purchaser. The
Purchaser accepts such sale and assignment.
c) Upon the terms and conditions of this Agreement the Seller 3
herewith sells to the Purchaser the Share 3 including all
ancillary rights and assigns them to the Purchaser. The
Purchaser accepts such sale and assignment.
d) Upon the terms and conditions of this Agreement the Seller 4
herewith sells to the Purchaser the Share 4 including all
ancillary rights and assigns them to the Purchaser. The
Purchaser accepts such sale and assignment.
e) Upon the terms and conditions of this Agreement the Seller 5
herewith sells to the Purchaser the Share 5 including all
ancillary rights and assigns them to the Purchaser. The
Purchaser accepts such sale and assignment.
2. The assignment of the Shares is subject to the occurrence of the
following condition precedent:
The payment by the Purchaser of the First Installment of the Purchase
Price (as defined below) into the joint account of
<PAGE> 5
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the Sellers in accordance with Sec. 2.2 below, and payment by the
Purchaser of the Second Installment of the Purchase Price (as defined
below) into the Trustee Account set forth in Sec. 2.3 below.
3. Upon receipt of the First Installment of the Purchase Price the
Sellers shall make available to the notary recording this Agreement a
legally binding payment confirmation of the Sellers substantially in
the form of Attachment 1.3.1 to this Agreement. The parties hereby
instruct the notary to attach such payment confirmation to the deed by
which this Agreement is recorded. Should the notary for any reason
not receive such payment confirmation within seven days after payment
of the First Installment of the Purchase Price, then the notary shall
be irrevocably authorized and instructed by the parties to verify
claims by the Purchaser that the First Installment has been paid to
the bank account of the Sellers in accordance with this Agreement.
For that purpose, the notary shall be irrevocably authorized and
instructed to enquire with the Sellers' bank (Sec. 2.2) the
whereabouts of the First Installment. The relevant bank privilege
(Bankgeheimnis) is hereby waived by the Sellers.
Likewise, the parties shall instruct their attorneys, Messrs. Rainer
Wolfgang Schneider, Darmstadt and Dr. Markus Fisseler, Frankfurt am
Main, to certify with legally binding effect the receipt of the Second
Installment by the bank where the Trustee Account is maintained (Sec.
2.3 below), substantially in the form of Attachment 1.3.2. The parties
hereby instruct the attorneys to make available to the notary such
payment confirmation, and instruct the notary to attach such payment
confirmation to the deed by which this Agreement is recorded. Should
the notary for any reason not receive such payment confirmation within
7 days after payment of the Second Installment of the Purchase Price,
then the notary shall be irrevocably authorized and instructed by the
parties to verify claims by the Purchaser that the Second Installment
has been
<PAGE> 6
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paid to the Trustee Account. For that purpose, the notary shall be
irrevocably authorized and instructed to enquire with the bank where
the Trustee Account is maintained the whereabouts of the Second
Installment. The relevant bank privilege (Bankgeheimnis) is hereby
waived by the Sellers and the Purchasers who shall instruct the
attorneys accordingly.
The parties hereby instruct the notary to certify his findings with
respect to the whereabouts of the First Installment and the Second
Installment, and to attach, in the event that the First Installment
and the Second Installment have in fact been properly paid, such
certificates as legally binding payment confirmations to this deed.
Such confirmations shall constitute irrebuttable evidence that the
Sellers have received the First Installment and the Second Installment
of the Purchase Price.
4. Notwithstanding when the assignment of the Shares herewith agreed
becomes effective ad rem (dinglich) "Effective Date" within the
meaning of this Agreement shall be the 31st of December, 1994, 24.00
o'clock (am 31. Dezember 1994, 24.00 Uhr).
5. The profits of the current fiscal year as well as the profits of
previous fiscal years which have not been distributed to shareholders
(i.e. profits carried forward and profits of previous fiscal years
with respect to which no resolution on the appropriation of results
(Ergebnisverwendung) has been passed) shall be exclusively for the
account of the Purchaser. The Company has distributed to its
shareholders a gross dividend (Bruttodividende mit Kapitalertragsteuer
ohne anrechenbares KSt-Guthaben) of DM 2,000,000 in June 1994. The
Sellers confirm and warrant (bestatigen und sichern zu) that no other
profit distributions to the Sellers, openly or concealed, have been
made or resolved after March 31, 1994.
<PAGE> 7
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6. In their capacity as sole shareholders of the Company the Sellers
hereby declare their consent pursuant to Sec. 7 of the Articles of
Association of the Company to the assignment of the Shares to the
Purchaser pursuant to this Agreement.
ARTICLE 2
Purchase Price; Payment
1. The aggregate purchase price for the Shares (hereinafter referred to
as the "Purchase Price") is DM 20,384,094.56 (in words: Deutsche Mark
twenty million threehundred eighty-four thousand ninety-four and
fifty-six Pfennig) adjusted in accordance with Article 3. It shall be
paid in accordance with the following provisions.
2. A first installment of the Purchase Price in an amount of DM
15,884,094.56 (in words: Deutsche Mark fifteen million eighthundred
eighty-four thousand ninety-four and fifty-six Pfennig) (hereinafter
being referred to as the "First Installment") shall be paid by the
Purchaser within 5 banking days after signing of this Agreement into
the joint account no. 2550236845 of the Sellers with Bayerische
Hypotheken- und Wechsel-Bank, Frankfurt am Main.
3. A second installment of the Purchase Price in an amount of DM
1,500,000 (in words: Deutsche Mark one million five hundred thousand)
(hereinafter being referred to as the "Second Installment") shall be
paid by the Purchaser within 5 banking days after signing of this
Agreement into the trustee account no. 4270335778 of attorney-at-law
Dr. Markus Fisseler, Frankfurt am Main, with Bayerische Hypotheken-
und Wechsel-Bank, Frankfurt am Main (hereinafter being referred to as
the "Trustee Account").
The Second Installment shall be kept in safe custody so as to provide
security for claims, if any, of the Purchaser pur-
<PAGE> 8
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suant to Article 6 of this Agreement up and until a final assessment
("bestandskraftiger Bescheid") of taxes and other public dues will be
rendered covering the time period through December 31, 1994. In
particular, the below mentioned attorneys shall be instructed to act
in accordance with the Trustee Agreement set out in Attachment 2.3.
The parties to this Agreement shall have only joint access to the
Trustee Account through their lawyers, Messrs. Rainer Wolfgang
Schneider, Darmstadt (for the Sellers) and Dr. Markus Fisseler,
Frankfurt am Main (for the Purchaser). The two attorneys shall not be
liable to any party to this Agreement as long as they act in
accordance with the instructions of their relevant principals; rather,
their actions shall be imputed upon their principals.
4. A third installment of the Purchase Price in an amount of DM 3,000,000
(in words: Deutsche Mark three million) (hereinafter being referred to
as the "Third Installment") shall be paid by the Purchaser, subject to
any counter claim the Purchaser may have pursuant to this Agreement,
on December 31, 1995.
The Third Installment shall carry interest as from the Effective Date,
of 6 % p.a. (subject only to any counterclaim the Purchaser may have
pursuant to this Agreement).
5. The from time to time outstanding portion of the Purchase Price shall,
from the relevant due date until payment, bear interest on the due
amount (but not on top of ordinary interest) at a rate which equals
FIBOR for 3-months-deposits quoted on the Effective Date plus 25 basis
points. For the avoidance of doubt, it is agreed that such default
interest shall only be payable in the event of default (Verzug).
6. If the payment of the First Installment or the Second Installment of
the Purchase Price according to Sec. 2.2 and
<PAGE> 9
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Sec. 2.3 hereof has not occurred within 10 banking days of the signing
of this Agreement, then the Sellers have the right to withdraw from
this Agreement (zurucktreten) (such withdrawal to be declared jointly
not later than 20 days after signing of this Agreement).
ARTICLE 3
Adjustment of the Purchase Price
1. The preliminary Purchase Price agreed in Sec. 2.1 of this Agreement
shall be, Mark for Mark, increased or reduced, as the case may be, by
the amount by which at the Effective Date the shareholders' equity
(Eigenkapital) (Section 266 para. (3) A. German Commercial Code)
including the registered capital (gezeichnetes Kapital), the capital
reserve (Kapitalrucklage), the profit reserve (Gewinnrucklagen), the
pro rata profit/loss carry forward (Gewinnvortrag/Verlustvortrag) and
the pro rata annual surplus/loss (JahresuberschuB/Jahresfehlbetrag)
which is attributable to the motion division and to the machine tool
division of the Company (as further adjusted in accordance with Sec.
3.4 below, hereinafter referred to as the "Effective Equity") exceeds
or falls short of the shareholders' equity shown in the unaudited
interim statement of the Company as of October 31, 1994 (hereinafter
referred to as the "Interim Statement").
2. Financial statements of the Company including a consolidating balance
sheet at the Effective Date - duly distinguishing between the motion
division and the machine tool division - a profit-and-loss-statement
for the period from March 31, 1994 through the Effective Date,
accompanying notes and the management statement shall be prepared
(hereinafter referred to as the "Effective Statement"). As a format
for the balance sheet, the balance sheet from the Interim Statement is
attached hereto as Attachment 3.2. The Sellers hereby declare that
they accept the Interim Statement as being correct. The
<PAGE> 10
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Effective Statement has to be prepared in accordance with German
generally accepted accounting principles (Grundsatze
ordnungsmaBiger Buchfuhrung) ("GAAP") and observing continuity in
the accounting and evaluation principles with the annual statement
as of March 31, 1994.
Notwithstanding the above requirements for observing continuity in the
accounting and evaluation principles, in the preparation of the
Effective Statement, the following provisions shall be taken into
account in evaluating inventory: Inventory of any part number
exceeding DM 25,000 shall be valued according to FIFO. Inventory of
any part number which is of equal or of less value than DM 25,000
shall be valued at the last purchase price at which it was acquired.
Products first entering the inventory within the past 12 months will
require no reserve provided they do not exceed projected two years
requirements. Products with quantities in excess of two years
requirements will be reserved at 50 % of the book value of such excess
quantities. Products with quantities in excess of three years
requirements will be fully reserved for the book value of such excess
quantities. "Two year requirements" for a product will be determined
based on actual sales for such product over the past 24 months. If
the product has first entered the inventory more than 12 months but
less than 24 months prior to the Effective Date, the "two year
requirements" for such product will be determined by multiplying the
actual requirements for such product since the product first entered
the inventory by 24 and then dividing by the number of months since
such product first entered the inventory. Exempt from these rules
will be products supplied by MAE which will require no reserves,
provided the inventory does not exceed three years of requirements,
and any excess of three years requirements will be reserved for the
book value of such excess quantities. Requirements for MAE products
will be calculated on sales experience over the past 24 months.
Excess inventory shall not be reserved, however, to the
<PAGE> 11
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extent the Sellers can show that sufficient additional extraordinary
purchase orders are on hand to sell the excess in the ordinary course
of business over the next 24 months.
The Effective Statement will include accounts for the DM 300,000
settlement with Seller 5 (cf. Sec. 9.9) and the pension for Seller 1 in
connection with the Pension Agreement (cf. Sec. 9.4.3) in the amount
of DM 1,991,221 as of the Effective Date. Financial assets (nur
Wertpapiere) will be valued at fair market value. Pension
obligations for all employees other than Seller 1 will be properly
accrued for as of the Effective Date.
The Effective Statement shall be prepared by the Company. The
Purchaser shall endeavour to cause the Company to prepare the
Effective Statement on or prior to February 28, 1995.
Seller 1 and Seller 5, and professional advisers of Seller 1 and
Seller 5 who are bound by professional secrecy obligations shall be
permitted to participate in the preparation of the Effective
Statement, namely the stocktaking and the evaluation process regarding
stocks, debtors, creditors, reserves/accruals and other balance sheet
items. The Purchaser shall instruct the management to fully consider
the advice and recommendations rendered and given by Seller 1 and
Seller 5 in accordance with GAAP.
The Purchaser shall have the Effective Statement audited in accordance
with the provisions of this Agreement by Deloitte & Touche GmbH,
Frankfurt am Main ("Purchaser's Accountants"); the Purchaser shall
endeavour to cause Purchaser's Accountants to finalize the audit
(excluding the auditor's report) on or prior to March 31, 1995.
If Purchaser's Accountants shall fail to finalize the audit, and/or
the Company shall fail to present the results to the Sellers' lawyer,
on or prior to March 31, 1995, the
<PAGE> 12
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preliminary Purchase Price pursuant to Sec. 2.1 shall be deemed agreed
between the parties as the minimum Purchase Price, subject only to an
increase, but not a reduction, pursuant to Sec. 3.1, and possible
counter claims of the Purchaser in accordance with the other terms of
this Agreement.
3. The parties agree that a corporation income tax refund
(Korperschaftssteuerminderungsguthaben) (as of the Effective Date) may
be mobilized upon the distribution of the retained earnings in the
Company and the previously converted reserves into share capital which
amounts to 20/50 of the equity 50 ("EK 50") and 15/45 of the equity 45
("EK 45"); the Sellers represent that a potential corporation income
tax refund was available as of the date of the Interim Statement at DM
2,527,530 (i.e. 20/50 of the EK 50 of DM 6,318,826) and DM 647,853
(i.e. 15/45 of the EK 45 of DM 1,943,559). Purchaser's Auditors shall
verify and correct if required the calculation of the tax refund
which as verified or corrected will be the "Tax Refund" used in
determining the Effective Equity below.
4. The Effective Equity used to determine the adjusted Purchase Price
will be the sum of the shareholders' equity shown on the Effective
Statement plus the Tax Refund plus the DM 300,000 Seller 5 settlement
amount plus DM 212,725 of the pension accrual amount for Seller 1.
The adjustments pursuant to this Article 3 may lead to an obligation
of the Sellers to refund, in whole or in part, the Purchase Price
received from the Purchaser.
The determination of the Effective Equity becomes binding as between
the parties if not within twenty business days after receipt of the
Effective Statement and determination of the Effective Equity the
Sellers provide the Purchaser with (i) a written opinion of an auditor
instructed by them that the
<PAGE> 13
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Effective Statement or the determination of the Effective Equity is
not in accordance with the provisions of this Agreement and (ii) a
revised Effective Statement and/or a revised Effective Equity
(hereinafter referred to as the "Revised Effective Statement and
Effective Equity") which reflects the amendments to be made in the
Sellers' opinion. If within ten business days the Purchaser does not
react to the Revised Effective Statement and Effective Equity, then
such Revised Effective Statement and Effective Equity shall become
binding as between the parties. If the Purchaser within ten
business days provides the Sellers with a written opinion of an
auditor of its choice that the Revised Effective Statement and
Effective Equity is not in accordance with the provisions of this
Agreement, then the disagreement between the parties and the auditors
instructed by them shall be resolved by a third auditor, namely
Westdeutsche Industrie Treuhand GmbH, Mulheim/Ruhr, an affiliate of
KPMG Peat Marwick.
If the determination of the Effective Equity by such third auditor
lies between the differing view points of the parties and the auditors
instructed by them, then such determination shall be final and
binding; if it is outside, then the determination of such auditor
instructed by one of the parties shall control which is closest to the
determination of the third auditor. Each party shall bear the costs
of the auditor instructed by it. The cost of the possible third
auditor is evenly borne by the parties. The Purchaser shall assure
that representatives of the auditors appointed in accordance with this
Agreement shall have access to the offices of the Company and to its
books and records for the purpose of auditing the Effective
Statement, and that suitable personnel shall be available for the
support of such representatives with respect to the audit of the
Effective Statement. The Parties shall endeavour that the auditors
appointed in accordance with this Agreement grant each other access to
their working papers.
<PAGE> 14
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5. If the Purchase Price agreed in Sec. 2.1 of this Agreement is
increased or reduced in accordance with the provisions set forth in
this Article 3, the respective difference shall bear 5 % interest p.a.
from the Effective Date until payment. Increases shall be paid without
undue delay by the Purchaser to the joint account of the Sellers (Sec.
2.2). Reductions shall be paid without undue delay by the Sellers by
way of a cash payment to the account of the Purchaser no. 0.210713.018
with CitiBank Aktiengesellschaft, Frankfurt am Main.
ARTICLE 4
Sellers' Warranties
The Sellers hereby guarantee (garantieren) that the following statements as of
the recording of this Agreement and the Effective Date are true and accurate:
1. The statements in the whereas-clause of this Agreament with respect to
the Sellers and the Company are complete and correct.
2. The Company is a company with limited liability (Gesellschaft mit
beschrankter Haftung) duly organized under the laws of the Federal
Republic of Germany and validly existing in accordance with the
excerpt of the Commercial Register dated 22. November 1994 and the
Articles of Association showing the status as of January 11, 1990, the
date of the capital increase to DM 2,500,000. There are no
shareholder resolutions amending the Articles of Association which
have not yet been registered in the Commercial Register nor are there
any side agreements relating to the constitution and organisation of
the Company.
3. The Company has no participations in other businesses and is under no
obligation to acquire such participations.
<PAGE> 15
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4. The Company has not entered with the Sellers nor with any third
parties into any enterprise contracts (Unternehmensvertrage) within
the meaning of Sec. 291 et sequ. of the Stock Corporation Act
(Aktiengesetz) nor any agreement relating to the establishment of a
silent partnership.
5. The Sellers are the legal and beneficial owners of the Shares which
are free of any encumbrances or any other rights for the benefit of
third parties. Sellers have the right and the power to freely dispose
of the Shares without the consent of any third party would be required
for such disposal or that such disposal would violate the right of any
third party. The Shares do not constitute all or substantially all of
the assets of the relevant Sellers.
6. The Shares are fully paid up and no repayment of capital contributions
has been made, neither openly nor concealed. There are no
shareholders of the Company other than the Sellers.
7. Attachment 4.7 to this Agreement sets forth a complete and correct
description of the development of the Stated Capital and a composition
of the shareholders of the Company since its establishment as a GmbH,
indicating all notarial deeds with which the Company has
been established, the Stated Capital of the Company has to date been
increased or reduced as well as all notarial deeds with which to date
shares of the Company have been subscribed to, transferred or
otherwise affected.
8. Neither against the Sellers nor the Company any bankruptcy or
composition proceedings have been initiated nor are there any
circumstances which would justify the initiation of such proceedings
in the future.
9. Save as expressly stated in Attachment 4.9.1:
<PAGE> 16
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The annual statements (including balance sheet, profit and loss
account and notes) (JahresabschluB) and management reports
(Geschaftsbucher) of the Company for the fiscal year ending March 31,
1994 (the "Balance Sheet Date") (the annual statements as of the
Balance Sheet Date hereinafter being referred to as the "Annual
Statements") have been prepared in accordance with generally accepted
accounting principles (Grundsatze ordnungsmaBiger Buchfuhrung),
observing continuity in the accounting and evaluation principles and
present a view of the assets, finance and results situation of the
Company which is in accordance with the actual circumstances. To the
extent that there are capitalization options (Aktivierungswahlrechte)
no capitalization has taken place. To the extent that there are
options to include items in the liabilities (Passivierungswahlrechte)
such items have been included. All statutorily permitted
depreciations have been taken. All statutorily permitted accruals
have been taken. At the Balance Sheet Date the Company had with
exception of liabilities resulting from pending contractual
relationships which are not required to be shown on a balance sheet no
liabilities (whether actual or contingent) other than those shown in
the Annual Statements or covered by accruals. To the extent that
contingent liabilities have not to be included in liabilities they
have been reflected as below-the-line items on the balance sheet
(including liabilities resulting from the issue of comfort letters).
Since the Balance Sheet Date the Company has been managed only in the
ordinary course of business, and no events have occurred, and
circumstances exist, which would have a lasting extraordinary effect
on the assets, the financial and the results situation of the Company.
The only exceptions to the aforementioned statement are:
a) Bautz Produktionstechnik und Vertrieb GmbH, Weiterstadt, has
been sold at book value (DM 51,000) to individuals which
largely consist of the Sellers;
<PAGE> 17
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b) The machine tool division of the Company has been sold at book
value (the vehicles: at appraisal value) to Bautz
Produktionstechnik und Vertrieb GmbH;
c) The participation in Jenaer Antriebstechnik GmbH has been sold
at fair market value (DM 132,600) to the son and the wife of
Seller 1, and the Company loan to Mr. Pendorf of DM 60,000 has
been repaid;
d) A non-exclusive distribution agreement has been concluded
between the Company and Jenaer Antriebstechnik GmbH, a copy of
which is attached as Attachment 4.9.2.
The liabilities (whether actual or contingent) of the Company will not
exceed DM 2,000,000 as per the Effective Date.
10. The receivables reflected in the Annual Statements and still
outstanding at the date hereof will be fully collected upon their due
date without any special collection measures required, less any
specific or lumpsum value adjustment reflected in the Annual
Statements. All of the present receivables of the Company will be
collectable upon their due date, or, at the latest, 360 days
thereafter (failing which the Sellers shall buy the relevant
receivables from the Company at book value). From this obligation of
the Sellers to purchase the receivables there shall be deducted the
amount of the reserve for doubtful debtors as shown in the Effective
Balance Sheet.
11. The inventories shown in the Annual Statements were with respect to
quantity and quality (1) in the case of raw materials, supplied goods
and semi-finished goods usable in the ordinary course of business and
(2) in the case of finished products and merchandise goods sellable in
the usual course of business at then prevailing market prices or
manufacturing cost or acquisition cost, whatever is higher.
<PAGE> 18
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To the best of the knowledge of the Sellers, no circumstances exist
which as of today would necessitate special write-offs of inventory,
or otherwise negatively affect the quantity, quality or usability and
sellability of inventory.
12. The pension accrual shown in the Annual Statements duly reflects the
cash value of the Company's liabilities from commitments for company
pension plans (both direct and indirect commitments) on the basis of a
calculation interest rate of 6 per cent and the application of the
orientation schedules of Dr. Karl Heubeck in their 1982 version.
Since the Balance Sheet Date, no circumstances other than provided for
in this Agreement have occurred which would increase the liabilities
from commitments for company pension plans which are not covered by
insurance.
13. The Company has in the past not distributed any constructive dividends
(verdeckte Gewinnausschuttungen).
14. The Company has entered into the Lease Agreement set out in Attachment
4.14 as amended in accordance with Sec. 9.7. The Lease Agreement (as
amended) is in full force and effect and no default has occurred, and
no event has occurred that with notice or the passage of time, or
both, would constitute a default, under the Lease Agreement.
15. All assets necessary for, or used in, the present business operations
are reflected in the asset list attached as Attachment 4.15. The
Company is the legal and beneficial owner of all fixed
assets (Gegenstanden des Anlagevermogens) used in its business
operations. Such assets are free of any encumbrances or any other
rights for the benefit of third parties. Such assets are in a good
operating and conservation condition. The same applies to the
condition of
<PAGE> 19
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the leased building. The Company is the legal and beneficial owner of
all current assets (Gegenstande des Umlaufvermogens) used in its
business operations. Such assets are free of any encumbrances and any
other rights for the benefits of third parties with the exception of
statutory pledges or retention of title rights entered into the
ordinary course of business for liabilities of the Company but not of
any third party.
16. Attachment 4.16 to this Agreement is a complete and correct list of
all industrial property rights and copyrights (patents, utility
models, trademarks, design patents, copyrights, topographic rights)
(Gewerbliche Schutzrechte) which are owned by the Company or with
respect to which the Company has been granted a license for use. With
the exception of the industrial property rights and copyrights set
forth in this list the Company in its business operations does not use
any further industrial property rights or copyrights nor is it
dependent thereon. To the best knowledge of the Sellers no industrial
property or copyrights used by the Company have been challenged by any
third parties.
17. Between the Company on the one side and the Sellers, their relatives
as well as enterprises affiliated with the Sellers within the meaning
of Sect. 15 of the Stock Corporation Act (Aktiengesetz) on the other
side there are no contractual relationships with the exception of
those listed in Attachment 4.17 to this Agreement. Save for the
service agreements expressly provided for in this Agreement all such
contractual relationships will be terminated on or prior to the
Effective Date. At the Effective Date there are no more liabilities
or obligations resulting from such relationships.
18. Attachment 4.18 to this Agreement is a complete and correct list of
the 20 largest customers and 10 largest suppliers of the Company as
well as of all suppliers of the Company which, for goods and services
of any kind, are the sole source of supply, i.e. for which there is no
alternative source at com-
<PAGE> 20
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parable conditions (except for energy supply agreements, mail and
telecommunication services), listing in each case the business volume
for the fiscal year 1993/94 and up to November 24, 1994. To the best
knowledge of Sellers there is no reason to believe that any of such
customers or suppliers of the Company will reduce the extent of its
previous dealings with the Company to any material degree except as
for the general development of the economy or market. Exempted from
the above statement are two suppliers and one customer which have been
named by the Sellers.
19. Attachment 4.19 to this Agreement is a complete and correct list of
all bank accounts of the Company as well as the respective
signatories, stating correctly the balances valid 3 business days
prior to the signing of this Agreement.
20. Attachment 4.20 to this Agreement is a complete and correct list of
all insurance taken out by, or for the benefit of, the Company or its
business operations with the exception of any insurance of the motor
vehicles used in the Company's business operations. The Company is in
good standing with respect to its obligations under the insurance
contracts. Insurances which lapse upon the acquisition of the Company
by the Purchaser are marked.
21. Attachment 4.21 to this Agreement is a complete and correct list of
certain important (written or orally concluded) agreements and
obligations of the Company (hereinafter referred to as the "Material
Contracts", i.e. all agreements and commitments which relate to one of
the following items or have been concluded with, or granted to, one of
the following parties:
21.1 All agreements and obligations relating to the acquisition,
divestiture, encumbrance or other disposal of real estate or
real-estate-like rights;
<PAGE> 21
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21.2 All agreements relating to the acquisition or the divestiture
of fixed assets (Gegenstande des Anlagevermogens) including
intangible assets, physical fixed assets (with the exception
of real estate and real-estate-like rights) and financial
assets whose value exceeds DM 25,000 per item or collectively
DM 100,000;
21.3 All usufructuary lease agreements (Pachtvertrage), rental
agreements (Mietvertrage) or leasing arrangements to the extent
that they trigger annual payments of DM 36,000 per item or
collectively of DM 100,000;
21.4 All license agreements into which the Company as licensor or
licensee has entered;
21.5 All credit agreements into which the Company, as lender or
borrower, has entered, with the exception of customary
extensions of the due date of receivables or payables agreed
to in the ordinary course of business, as well as all
factoring arrangements;
21.6 All agreements with domestic or foreign authorized dealers
(Vertragshandler), commercial agents (Handelsvertreter) or
agents as well as all similar distribution agreements which
either in case of their termination trigger compensation
claims against the Company or whose notice period for
termination exceeds three (3) months;
21.7 All employment agreements with management (leitende
Angestellte) as well as all agreements with advisers;
21.8 All agreements and obligations relating to pensions, other
social benefits, profit participations, turnover
participations or other success bonuses as well as
<PAGE> 22
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similar agreements with the exception of those already
mentioned under Section 4.21.7;
21.9 All collective bargaining agreements and shop agreements into
which the Company has entered or to which the Company is
subject (with the exception of multi-facility, regional or
multi-regional collective bargaining arrangements);
21.10 All cooperation and similar agreements with third parties as
well as any agreement or obligation having a restrictive
impact on competition;
21.11 All agreements or obligations which have been entered into or
assumed outside the ordinary course of business of the Company;
21.12 Other agreements and obligations which trigger annual payments
exceeding DM 36,000 per item;
The validity or enforceability of none of the Material Contracts has
been legally contested or questioned. No Material Contract is
terminated nor to the best knowledge of the Sellers about to be
terminated. Neither the Company nor to the best knowledge of the
Sellers its respective contractual partner have breached, or are in
default with respect to, any Material Contract. To the best knowledge
of the Sellers the transaction contemplated in this Agreement will not
give any party an express right to termination or amendment of a
Material Contract.
22. Attachment 4.22 to this Agreement is a complete and correct list of
all employees of the Company (with correct birth date, hire date and
total annual compensation). No employee listed therein has declared
an intention to terminate the employment relationship with the
Company. There are no labour
<PAGE> 23
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disputes with the exception of those listed in Attachment 4.22.
23. Attachment 4.23 to this Agreement is a complete and correct list of
all powers of attorney issued by the Company and presently in force
which are not registered in the commercial register.
24. The Company has applied for, received and used all public grants only
in accordance with applicable law and in compliance with all
regulatory orders, conditions and impositions. No such grants will
have to be repaid as a result of the consummation of the transactions
reflected in this Agreement nor due to other circumstances already
known.
25. As of today, there are no legal disputes and regulatory proceedings to
which the Company or employees of the Company (to the extent that such
disputes or proceedings could result in a liability of the Company)
are party or subject. No disputes or proceedings are impending nor
are there any circumstances which are likely to give rise to such
disputes or proceedings.
26. The business facilities of the Company have been erected in compliance
with all applicable law and regulatory orders (especially in the area
of construction law, environmental law and trade law). Neither their
operation nor the other present business operations of the Company nor
any of its products or services violate applicable law or regulatory
orders. The Company has at its disposal all regulatory permits and
licenses which are required for the conduct and continuation of its
present business operations. To the best knowledge of the Sellers
neither a revocation nor any restrictions of such permits is
impending.
27. The real estate used by the Company as well as the other operational
facilities are free of any pollution of soil, ground
<PAGE> 24
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water, air or any other environmental pollution for whose curing and
cleaning up the Company could be held liable. The business operations
of the Company do not result in any pollution of soil, water, air or
any other environmental pollution with respect to whose omission the
Company could be held liable. The Company has always observed all
applicable environmental and zoning laws and other provisions. The
fresh water supply, the disposal of waste water as well as of gases
and solid emissions and effluent is fully assured for the present
business operations.
28. There are no claims raised against the Company for product liability
(Produkthaftung) or product warranty (Gewahrleistung), and to the best
of the Sellers' knowledge, there are no circumstances which might give
rise to such claims.
Save as disclosed in Attachment 4.28 the Company has not granted any
guaranties/warranties in connection with the products sold by it which
would exceed the statutory representations/warranties (gesetzliche
Gewahrleistung). The Company has protected itself through its sales
conditions ("Allgemeine Lieferbedingungen fur Erzeugnisse und
Leistungen der Elektroindustrie") adequately against claims by
customers for consequential damages (Mangelfolgeschaden; indirekte
Schaden).
29. Neither the Sellers nor the Company have incurred any obligation for
brokers' commissions, finders' fees or the like.
30. To the best knowledge of the Sellers all information supplied to the
Purchaser and its advisers by the Sellers prior to the recording of
this Agreement is complete, correct and accurate in every respect. It
is not misleading and does not omit anything relating to the Shares,
the Company and its business operations which would be important for
the individual information or which the Purchaser at the time of the
recording of this Agreement for the evaluation of such information
should know. To the best knowledge of the Sellers there are no mate-
<PAGE> 25
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rial facts or circumstances which in future could have a materially
adverse impact on the Company and its business operations with the
exception of general developments of the economy or the market.
ARTICLE 5
Legal Consequences
1. If one or several of the statements for which the Sellers pursuant to
Article 4 of this Agreement have assumed a guarantee turns out not to
be accurate, then the Purchaser and, at the discretion of the
Purchaser, the Company shall have the right to demand that the Sellers
within an appropriate period of time but in any case not later than 30
days after receipt of such demand establish a situation which would
exist if such statements were correct. If within such period of time
Sellers will fail to establish a situation which is in accordance with
this Agreement or if this is not possible, then the Purchaser and the
Company have the right to demand monetary damages from the Sellers.
2. The Purchaser and the Company have the right to claim damages because
of the non-fulfillment of guarantees assumed by the Sellers pursuant
to Article 4 of this Agreement only to the extent that the aggregate
amount of such claims exceeds an amount of DM 200,000; Sellers'
liability pursuant to Sect. 5.1 hereof is in any case limited to DM
3,000,000 (in words: DM three million). These limitations do not
apply with respect to liability for legal defects (Rechtsmangel) of
the Shares sold.
3. Expressly excluded are any rights of the Purchaser to exchange
(Wandlung) or reduction of Purchase Price (Minderung), damages for
incorrect representation (Schadensersatz wegen unrichtiger
Zusicherung), voidance of this Agreement because of the lack of
substantial qualities
<PAGE> 26
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(Anfechtung wegen des Fehlens einer wesentlichen Eigenschaft) or
recission or adjustment of this Agreement because of the lack of
substantial elements (Wegfall der Geschaftsgrundlage), unless the
Purchaser can show that the Sellers acted intentionally when making
wrong representations in connection with the warranties.
4. All warranty rights of Purchaser pursuant to this Article 5 are
subject to a limitation period of one year from the Effective Date.
The guarantee under Sec. 4.26 and 4.27 will be subject to a limitation
period of two years. This limitation does not apply to legal defects
of the Shares sold with respect to which the statutory limitation
period applies. The limitation period shall start to run with the
Effective Date.
5. In the event there should be tax refunds, or refunds for other public
dues received by the Company (other than refunds which are to be
recognized pursuant to Sec. 3.3 above) which relate to, and are not
provided for in the Effective Statement, the Sellers shall have the
right to deduct from their payment obligations under this Article 5,
if any, the amount of the refund.
ARTICLE 6
Tax etc. covenant (Steuerfreistellung, Freistellung von offentlichen Abgaben)
1. The Sellers shall compensate, Mark for Mark, the Purchaser or, at the
discretion of the Purchaser, the Company for all taxes, penalties and
interest and other public dues (Steuern und andere offentliche
Abgaben) payable by the Company, and not accrued for properly, which
relate to the time period up to the Effective Date.
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2. The obligations pursuant to Sect. 6.1 shall expire 6 months after the
final assessment of the relevant tax or other public dues. Should the
final assessment result in an addition to or reduction of the retained
earnings assumed in the calculations of the Tax Refund in Sec. 3.3.,
the Tax Refund will be recalculated in the same manner. If the
recalculation results in a tax refund greater or less than the Tax
Refund determined pursuant to Sec. 3.3. and used in determining the
Effective Equity in Sec. 3.4., the difference will be added to or
subtracted from the Trustee Account.
3. The Purchaser shall cause the Company to permit the Sellers or its
advisers who are bound by professional secrecy obligations to get
involved in all field audits of the Company regarding taxes and other
public dues for the time period up to the Effective Date. The
Purchaser shall procure that the Company informs the Sellers about the
announcement or commencement of such field audits without any undue
delay. If no agreement can be reached about the results of any such
field audit, then the Purchaser shall upon request of the Sellers
cause the Company to initiate legal proceedings against the respective
assessment (Steuer- bzw. Abgabenbescheid) and, if necessary, conduct
a legal action in accordance with the Sellers' instructions. All
costs of any such legal actions shall be borne by the Sellers.
4. In the event there should be tax refunds, or refunds for other public
dues received by the Company (other than the Tax Refund and other tax
benefits received by the Company upon the distribution of retained
earnings referred to in Sec. 3.3 above) which relate to, and are not
provided for in the Effective Statement, the Sellers shall have the
right to deduct from their payment obligations under this Article 6,
if any, the amount of the refund.
<PAGE> 28
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ARTICLE 7
Covenant not to compete
1. The Sellers undertake for a period of 5 years from the Effective Date
within the territory of Europe (EC, EFTA, Eastern Europe) and North
America not to conduct any activity with which it would directly or
indirectly compete with the present business operations of the Company
or which would directly or indirectly result in such competition.
Sellers shall especially not establish or acquire any business which
would, directly or indirectly, compete with the business operations of
the Company, or acquire a participation in such business or advise
such business.
The Seller 1 shall be permitted, however, to own, together with
related persons, shares in Vues BRNO a.s., Mostecka 26, 65765 Brno,
Czech Republic (hereinafter being referred to as "Vues") up to a ratio
of 15 %, and in Jenaer Antriebstechnik GmbH, Buchaer StraBe 1, 07745
Jena (hereinafter being referred to as "Jenaer Antriebstechnik") up to
a ratio of 50
The Seller 1 hereby grants to the Company (as a contract for the
benefit of third parties) a preemption right (Vorkaufsrecht) with
respect to the shares in Vues (Secs. 504 pp German Civil Code). The
time period of Sec. 510 para. 2 German Civil Code (time period for
exercising the preemption right following a proper notice) shall be
extended to two months.
The preemption right shall expire if by December 31, 1998 no sale by
the Seller 1 of the shares in Vues shall have occurred (whether
contingent or otherwise). Thereafter, the Company shall have the
right to acquire from the Seller 1 at any time the shares in Vues at
fair market value (as determined by an expert opinion of a reputed
auditor), provided, however, that as a minimum purchase price the
original
<PAGE> 29
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acquisition costs (plus 6% interest p.a.) of Seller 1 shall be offered.
2. The relevant exception to the covenant not to compete is made on the
assumption and the condition that the shareholdings of the Seller 1
shall not impair, but only further, the legitimate interests of the
Company. In particular, the Seller 1 shall exercise his influence in
the two companies so as to provide strict compliance with the
distributorship agreements set out in Attachment 4.21.6 (Vues) and
4.9.
3. If a Seller violates the covenant not to compete set forth in Section
7.1 and continues such violation despite of warnings by the Purchaser
or the Company, then the relevant Seller shall be liable to pay a
contractual penalty in the amount of DM 100,000 (in words: Deutsche
Mark one hundred thousand) to the Purchaser. In case of a continuing
violation the relevant Seller has for each further month that the
violation continues to pay a further contract penalty in the amount of
DM 50,000 (in words: Deutsche Mark fifty thousand). Any rights of the
Purchaser to demand further damages and discontinuance of the
prohibited conduct shall remain unaffected.
ARTICLE 8
Confidentiality and Press Releases
1. The Sellers shall keep secret for a period of 5 years from the
Effective Date their knowledge about the Company and its business
operations if the respective facts are not publicly known and to the
extent that no legal disclosure requirements exist and shall further
not use such confidential information for themselves or for others.
The Sellers undertake for the period of 5 years from the Effective
Date not to cause any employees of the Company to assume employment
with the Sellers or an affiliated company of the Sellers, or any third
party.
<PAGE> 30
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2. The parties to this Agreement agree to keep strictly confidential any
information obtained by them in connection with the negotiation and
conclusion of this Agreement with respect to the respective other
party and its affiliated companies.
3. Prior to the Effective Date neither party shall make any press release
or similar public announcements with respect to the transactions
contemplated in this Agreement without the prior written agreement of
the respective other party.
ARTICLE 9
Special Arrangements
1. As of December 30, 1994 the Company has sold Bautz Produktionstechnik
und Vertrieb GmbH, Weiterstadt, at book value to a group of
individuals which largely consist of the Sellers. The Sellers hereby
guarantee that all obligations of the Company in connection with its
investment in Bautz Produktionstechnik und Vertrieb GmbH (for
instance, without limitation, obligations to make capital
contributions, to pay premiums, or other commitments) have finally
been settled and fall no longer upon the Company; that all claims of
the Company against Bautz Produktionstechnik und Vertrieb GmbH have
either been settled by Bautz Produktionstechnik und Vertrieb GmbH, or
assumed by the Sellers against payment of the book value to the
Company.
As of December 30, 1994 the Company has sold its interest in Jenaer
Antriebstechnik GmbH, Jena, at fair market value to the son and the
wife of Seller 1, and obtained a repayment of a loan of the Company to
Mr. Pendorf. The Seller 1 hereby guarantees that all obligations of the
Company in connection with its investment in Jenaer Antriebstechnik
GmbH (for instance, without limitation, obligations to make capital
contributions, to pay premiums, or other commitments) have
<PAGE> 31
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finally been settled and fall no longer upon the Company; that all
claims of the Company against Jenaer Antriebstechnik GmbH have either
been settled by Jenaer Antriebstechnik GmbH, or assumed by the Seller
1 or his son/his wife against payment of the book value to the
Company. The Purchaser acknowledges, though, the non-exclusive
distributorship agreement between the Company and Jenaer
Antriebstechnik GmbH dated 23 December, 1994, a copy of which is
attached hereto as Attachment 4.9.2.
Seller 1 declares that the bank guarantee of Bayerische Hypotheken-
und Wechsel-Bank Aktiengesellschaft, Munchen, which was issued upon
the order of the Company in favour of Jenaer Antriebstechnik GmbH and
which covers liabilities of the latter of up to DM 400,000 has been
cancelled.
2. As of December 31, 1994 the Company has arranged for the complete sale
of its machine tool division to Bautz Produktionstechnik und Vertrieb
GmbH, including a transfer of all assets and liabilities of the
machine tool division (hereinafter being referred to as the "Machine
Tool Business") for a purchase price equal to the book value of the
assets of the Machine Tool Business (in the case of cars: fair market
value) less the liabilities assumed based on the Effective Statement.
The Sellers hereby guarantee that no other assets than those belonging
to the Machine Tool Business have been sold or transferred by the
Company; the Sellers further guarantee that all liabilities (whether
actual or contingent) appertaining to the Machine Tool Business, for
instance, without limitation, claims of customers, suppliers and other
third parties have been transferred out of the Company with no
recourse against the latter. Most of all, all obligations under the
lease agreement which relates to the space used by the Machine Tool
Business and all obligations in connection with the Meerane office
space and all obligations in connection with the employees who belong
to the Machine Tool Business and who are set out in Attachment 9.2.1
have been transfer-
<PAGE> 32
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red, and none of those obligations fall any longer upon the Company.
All employees belonging to the Machine Tool Business have waived any
rights they may have against the Company. The Sellers hereby
guarantee the obligations of the purchaser of the Machine Tool
Business up to the agreed purchase price for the Machine Tool
Business.
Bautz Produktionstechnik und Vertrieb GmbH has provided a bank
guarantee of up to DM 500,000 to the Company which has been issued by
Bayerische Hypotheken- und Wechsel-Bank, Darmstadt branch, covering
all obligations of Bautz Produktionstechnik und Vertrieb GmbH vis-
a-vis the Company in connection with the sale of the Machine Tool
Business. A copy of the relevant bank guarantee which is valid until
June 30, 1995 is set out in Attachment 9.2.2. The Seller 2 will
resign as a managing director (Geschaftsfuhrer) of the Company and
will issue the resignation letter set out in Attachment 9.2.3. He
declares (as a declaration for the benefit of third parties) that he
has no claims whatsoever against the Company (save for his annual
bonus 1994 which will be properly accrued for in the Effective
Statement).
3. The Company (represented by the managing director Mr. Harald Fischer
who is released from the restrictions set forth in Sec. 181 German
Civil Code) hereby concludes the license agreement regarding the name
"Bautz" set out in Attachment 9.3. As an amendment to the License
Agreement included as Attachment 9.3. in No. 136 of the Roll of Deeds
for 1994 of the Notary Public Dr. Burkhardt Meister, Frankfurt am
Main, dated 30. December 1994, the phrase in brackets under No. 5a
shall be deleted.
4. The Company (represented by its managing director Mr. Harald Fischer)
and Seller 1 hereby conclude the Consulting Agreement set forth in
Attachment 9.4.1. The same is approved by the Sellers as shareholders
of the Company. Seller 1 shall hand over the resignation letter as
managing director set
<PAGE> 33
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forth in Attachment 9.4.2. Seller 1 and the Company have concluded the
Pension Agreement set forth in Attachment 9.4.3. Seller 1 hereby
declares (as a declaration for the benefit of third parties) that he
has no further claims against the Company other than those set out in
the afore-mentioned Consulting Agreement and the Pension Agreement.
As an amendment to the Pension Agreement included as Attachment 9.4.3.
in No. 136 of the Roll of Deeds for 1994 of the Notary Public Dr.
Burkhardt Meister, Frankfurt Am Main, dated 30. December 1994, number
I.l. shall read as follows:
1. Upon reaching the age of 63, Fischer shall receive a pension
payment ("old age pension") which is composed of the following
elements:
a) A pension of DM 10,000.-- gross per month ("base
pension"). For the base pension claims of 10,000.--
DM and the adjustment for inflation, Fischer shall
have a secured interest in the employee's pension
liability insurance concluded on his life (the
"Policy") exercisable only upon the failure of the
Company to pay the pension under the terms of this
Agreement. The Company shall have the right at any
time prior to the maturity of the Policy and must
upon maturity of the Policy substitute alternative
security reasonably satisfactory to Fischer for the
Policy.
b) Further to the base pension, Fischer shall receive an
additional pension of DM 5,436.-- gross per month
("additional pension").
The amount of the old age pension is adjusted for
inflation as follows:
The amounts of the pensions under a) and b) shall be
put in relation to the amount of a monthly salary of
a technical employee of over 30 years of age of the
activity group T6 of the Salary Bargaining Agreement
for the Iron, Metal and Electrical Products Industry
in Hessia, Region S (Monatsgehalt eines technischen
Angestellten nach vollendetem 30. Lebensjahr der
Tatigkeitsgruppe T6 der Gehaltsabkommen fur die
Eisen-, Metall- und Elektroindustrie in Hessen,
Ortsklasse S), as applicable on January 1, 1995
("comparison amount"). An adjustment of the pensions
shall be made only if and after the comparison amount
has increased by more than 10 % with respect to the
amount as of January 1, 1995, or with respect to the
amount at
<PAGE> 34
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the time of the last adjustment. The adjustment
shall reflect the relation of the difference between
the comparison amount and the respective pensions or
the last adjusted pension, respectively.
The effect of the adjustment of the base pension (as
under a) above) shall not result in an increase
greater than 4.2 % per annum, to be calculated as
from January 1, 1995.
All claims for old age pension expire in the event of death
of Fischer. Such pensions (as set forth in a) and b)) shall
not be paid, as long as Fischer still receives a salary or a
consulting fee from the Company for services rendered to the
Company to the extent the salary or consulting fee plus the
old age pension exceeds DM 28,700 gross per month.
5. The Purchaser hereby acknowledges that prior to the signing of this
Agreement the Sellers, acting on behalf of the Company, have concluded
the Service Agreement with the new managing director, Mr. Norbert
Witsch, a copy of which is attached hereto as Attachment 9.5. The
relevant Service Agreement has been made conditioned upon the
conclusion of this Agreement.
6. The Purchaser acknowledges that prior to the signing of this Agreement
the Company has entered into a Consulting Agreement set forth in
Attachment 9.6 with an Effective Date of the first day following the
month in which Mr. Helmut Butzer's employment contract terminates.
The relevant contract has been made conditioned upon the conclusion of
this Agreement.
7. The Purchaser acknowledges the present lease agreement between the
Company and Grundstucksgemeinschaft Bautz-Fischer-Jakob, Seeheim-
Jugenheim of March 30, 1992 (as amended by letter of September 28,
1992 and by letter of December 1, 1994, a copy of which is attached
hereto as Attachment 4.14).
<PAGE> 35
- 40 -
8. The Company and Bautz Produktionstechnik und Vertrieb GmbH have
concluded the Service Agreement set out in Attachment 9.8.
9. Seller 5 and the Purchaser (who shall procure that the Company's
management shall be instructed accordingly) hereby agree that Seller 5
will receive a lump-sum payment from the Company amounting to DM
300,000 payable on January 15, 1995, in order to finally settle
(endgultig erledigen) all claims of Seller 5 against the Company in
connection with his employment as an independent tax advisor to the
Company. Upon receipt of the aforementioned amount, Seller 5 will
have no further claims against the Company whatsoever (contract for the
benefit of third parties). Seller 5 will (for a reasonable amount of
time) be available for up to three months at no charge at the request
of the Company in order to facilitate an uninterrupted transition to
the new management. The aforementioned agreement is also an agreement
in favour of the Company.
10. Sellers 1, 2 and 5 hereby waive, effective December 31, 1994, the
bank powers listed in Attachment 4.23.
ARTICLE 10
Miscellaneous
1. Each party to this Agreement bears the cost of its advisers. The cost
of the notarial recording of this Agreement as well as other
transaction costs triggered by the conclusion or consummation of this
Agreement shall, as between the parties, be borne by the Purchaser.
2. This Agreement, including this provision, may only be amended by
written or, if necessary, notarial instrument.
<PAGE> 36
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3. The Sellers shall be jointly and severally liable with respect to
claims of the Purchaser up to an amount equivalent to the Third
Installment. The Purchaser shall satisfy such claims first of all by
offsetting them against the Third Installment. In all other respect,
the Sellers shall only be severally liable. The knowledge of one
Seller shall be imputed upon the other Sellers. Declarations or acts
of one Seller, or several Sellers, shall be disregarded, unless a
majority of the Sellers makes the declaration, or acts. Such majority
shall irrevocably bind the remaining Sellers.
4. Should any provision of this Agreement be held wholly or in part
invalid or unenforceable, the validity or enforceability of the other
parts shall not be affected thereby. The invalid or unenforceable
provision shall be deemed replaced by such valid and enforceable
provision which serves best the economic interest of the contract
parties originally pursued by the invalid or unenforceable provision.
5. Any agreements made heretofore between the parties to this Agreement
are superseded by the conclusion of this Agreement.
6. Notices pursuant to or in connection with this Agreement shall only be
made in writing and be delivered, if to the Purchaser, to the address
stated in this Agreement with a copy to Pacific Scientific Company,
att. Richard V. Plat, 620 Newport Center Dr., 7th Floor, Newport
Beach, California 92660, USA, and if to the Sellers, to attorney at
law Rainer Wolfgang Schneider, Niebergallweg 10, D-64285 Darmstadt,
unless otherwise notified by the parties in accordance with this
Agreement.
7. This Agreement shall be governed by the laws of the Federal Republic
of Germany. In the event of any dispute between the parties arising
out of this Agreement the parties agree on Frankfurt am Main as
non-exclusive venue. This venue shall apply only if the Sellers have
moved their domicile or habi-
<PAGE> 37
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tual place of residence after the conclusion of this Agreement to a
place outside the Federal Republic of Germany or if their domicile or
habitual place of residence is not known at the time of the initiation
of such legal action.
<PAGE> 1
ELECTRICAL EQUIPMENT
MOTION TECHNOLOGY
The Motion Technology Division is a leader in motion-control systems. These
systems utilize both brushless and stepper motor technologies. The division
also provides PC-based motion-control solutions for multi-axis applications in
factory automation. Motion technology continues to be a fast-growing business
with sales growth above 20 percent per year and superior earnings.
The Company has become one of the top suppliers to manufacturers of packaging
machinery, semiconductor equipment, electronic assembly equipment and postal
equipment. All of these businesses are going through a period of aggressive
automation, which provides unique opportunities for Pacific Scientific.
As an additional service to our customers, Pacific Scientific will assemble
complete motion-control systems in which controllers, drives, motors, cabinets
and cables are integrated with the mechanical parts of the system. These
systems-integration jobs can run as high as $1 million or more in price. Recent
jobs have involved the application of Pacific Scientific motion technology for
the very high speed packaging of cookies and candy.
Starting in early 1995, the Company will be delivering new lines of brushless
and stepper motor drives. The new brushless drive is all-digital. Both drives
use application-specific integrated circuits to achieve lower costs and higher
levels of performance and reliability.
Pacific Scientific has become the U.S. leader adopting SERCOS (SErialReal-time
COmmunication Systems). This is a European standard which uses fiber optics for
error-free, digital communication between controllers and motor drives; it
replaces bulky, expensive and interference-prone bundles of copper wire. The
new brushless and stepping motor drives and controllers that the Company is
introducing will be SERCOS-compatible.
During 1994, the division's Charlestown, Massachusetts facility received ISO
9001 certification. This certification is expected to assist the sale of our
products within the European Community. ISO certification has become even more
important with the recent acquisition of Bautz, which directly serves the
German market.
1. [PHOTO]
1. In 1995, Pacific Scientific will start to deliver this new
indexer-drive combination for stepper motors. This drive offers lower
cost, smaller size and higher performance than was previously available.
2. [PHOTO]
2. This motion controller based on an industrial PC allows users maximum
flexibility in designing multi-axis, cost-effective motion control solutions.
[PHOTO]
William T. Fejes, President,
Motion Technology Division
8
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[FULL PAGE PHOTO]
9
<PAGE> 3
ELECTRICAL EQUIPMENT
[FULL PAGE PHOTO]
10
<PAGE> 4
FISHER PIERCE
Last year saw notable achievements at Fisher Pierce, a leading manufacturer of
outdoor lighting controls (OLC) and power-distribution controls for the
electric utility industry. Sales shot up by 30 percent, and Fisher Pierce
returned to profitability in the second half of 1994 after reporting sizable
losses for several consecutive quarters.
Fisher Pierce commands more than half of the U.S. market for rugged, highly
reliable photoelectric street and roadway OLCs. In addition, Fisher Pierce has
established itself in the market for lighting controls aimed at consumer,
commercial and industrial customers. Marketed under the Minuteman(TM) brand
name, these products are now displayed on the shelves of hardware and building
supply stores, and can also be found installed in parking lot lights, yard
lights and security lighting systems.
Early in 1994, we increased our share of the international OLC market by
acquiring Royce Thompson, Ltd., the leading supplier of OLCs in the United
Kingdom. This move reflects our business philosophy of extending our core
technologies to international markets.
Fisher Pierce manufactures its OLCs on a 60-station, automated production line
that can turn out several different models of OLCs concurrently. Production is
now running at more than 1,000 units per hour.
Fisher Pierce also manufactures a range of products that enable utility
companies to distribute electricity more efficiently, thereby reducing the need
for costly new power generation plants.
Patented fault indicators "learn" normal power line conditions and transmit a
signal when a short circuit or over-current condition occurs, enabling power
companies to locate problem sites more rapidly.
In addition, Fisher Pierce is producing a line of metering instruments that let
utility companies determine if their electric meters have been properly
installed, thereby guarding against underbilling for power usage.
1. [PHOTO]
1. A new patented fault indicator will also now be equipped with
a radio transmitter, allowing service personnel to detect
any overload conditions by driving by.
2. [PHOTO]
2. This new electronic OLC consumes less power. It allows street lights
to go ON earlier in the evening when there is heavy traffic,
and OFF earlier in the morning when there is a minimum amount of traffic.
A patented feature also allows street lights to go OFF during
low-traffic hours in the middle of the night and turn ON again before dawn.
[PHOTO]
Steven L. Breitzka, President,
Fisher Pierce Division
11
<PAGE> 5
ELECTRICAL EQUIPMENT
INSTRUMENTS
The Instruments Division, composed of HIAC/ROYCO and High Yield Technology
(HYT), had an excellent year. Sales were up 28 percent and operating profit was
the best ever.
Pacific Scientific is a worldwide leader in particle-detection and
particle-measurement technology. Over 43 percent of the sales in the
Instruments Division are made to customers outside the U.S.
The HIAC/ROYCO product line of liquid particle monitors continues to produce
very favorable returns. This line is sold for use in the semiconductor market
as well as for hydraulic and pharmaceutical applications. The testing of
drinking water has become an important market for the Company's liquid particle
monitors.
During the past few months, HIAC/ROYCO has introduced several new air particle
counters. These products are used in clean rooms to test air filters and in
some food-processing plants.
The area of greatest growth for this division has been in HYT's in situ vacuum
particle-monitoring systems for the semiconductor industry. The Company clearly
has technological leadership in this area, and it has a very large share of the
market. To maintain this leadership, the Company is currently developing
several new products.
Another product exclusive to Pacific Scientific is the Optical Production
Profiler (OPP). The OPP's unique technology nondestructively images defects
located within the silicon wafers. This allows integrated circuit (IC)
manufacturers to detect defects before expensive wafer processing is completed.
IC manufacturers are increasingly using the OPP in new applications. The
increasing number of applications means increased market opportunities for the
OPP as a production tool.
1. [PHOTO]
1. This represents a new generation of external, modular particle sensors,
which significantly expand the market. The sensor's protected optical
elements allow real-time particle monitoring in the harsh environments
found in many semiconductor manufacturing processes.
2. [PHOTO]
2. This vacuum particle sensor monitors particle levels in equipment
used in semiconductor manufacturing. The sensor indicates changes
in process conditions which can reduce manufacturing yield.
[PHOTO]
Joseph R. Monkowski, Ph.D.,
President, Instruments Division
12
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[FULL PAGE PHOTO]
13
<PAGE> 7
ELECTRICAL EQUIPMENT
[FULL PAGE PHOTO]
14
<PAGE> 8
SOLIUM
At the end of 1994, the Company formed a new subsidiary, Solium Inc., to market
a revolutionary family of electronic lighting controls and fully featured,
low-cost electronic ballasts. This technology, called Solium(TM), is the latest
in an evolving line of products that have made Pacific Scientific the world
leader in outdoor lighting controls. Patents are pending.
The mission of Solium Inc. is to:
o Be the first to provide the industry with low-cost electronic ballasts and
controls that optimize compact fluorescent lighting performance.
o Develop its advanced technologies for a wide variety of lighting
applications.
o Develop strategic alliances that will facilitate the rapid worldwide
distribution of proprietary Solium products.
The first products to be delivered in 1995 will be compact fluorescent wire-in
ballast/controls. These products will be incorporated into standard lighting
fixtures and directly marketed by Pacific Scientific. They can be easily dimmed
from a conventional wall dimmer. They can also be automatically dimmed based on
the level of natural light. No additional control wires are required.
In 1995, Solium Inc. will also produce its screw-in line of compact fluorescent
light systems. These products will be able to directly replace incandescent
bulbs. They feature a built-in dimming device, will provide energy savings in
the range of 80 percent, and will last as much as 13 times longer than an
incandescent light bulb. We believe that over half of the 2.4 billion
incandescent and fluorescent bulbs and lamps sold in the U.S. could eventually
be replaced by CFL units. Because this market is so large, we intend to market
the screw-in product line to consumers through strategic partners who have
major established shares of the world lighting market.
Previously, compact fluorescent lamps could not be dimmed in a conventional
light socket due to the risk of overheating and the potential for fire. The
only commercially available way to safely dim compact fluorescent lamps has
been with costly external systems that require expensive alterations to the
electric wiring of buildings.
The market for Solium Inc.'s current products and evolving technologies is
immense, since Solium technology is leading the way towards significant energy,
environmental and consumer savings.
1. [PHOTO]
1. A screw-in Solium system with a built-in reflector could replace
some now-popular PAR-type lamps and provide energy efficiency.
2. [PHOTO]
2. Solium wire-in full-feature ballasts will be sold to manufacturers
of new lighting fixtures and to energy-saving contractors
who upgrade less-efficient fluorescent systems.
[PHOTO]
John M. Ossenmacher, President,
Solium Inc.
15
<PAGE> 9
SAFETY EQUIPMENT
Our Safety Equipment divisions (HTL/Kin-Tech and Energy Dynamics) currently
develop and manufacture products mainly for the aerospace and defense markets.
We are extending the core technologies of these divisions, however, to a
variety of nonaerospace applications in areas such as mass transit and oil
drilling. The core products include fire-suppression and fire-detection
devices, aircraft personnel restraints and pyrotechnics. Other products
include flight-control devices, such as cable tension regulators, rudder pedal
adjusters and cable disconnects.
Our crew restraints have an excellent market position in all three segments of
the aviation industry (commercial, general aviation and military aircraft).
Fire-suppression systems are a traditional strength for our Safety Equipment
operations. Our market share in aircraft and military-vehicle fire-suppression
is approximately 50 percent. For this market, Triodide(TM) is our ozone-friendly
replacement for the fire-suppression agent Halon, which has been banned as an
ozone-depleting chemical. We are actively marketing Triodide for aircraft and
other fire-suppression applications.
We have been expanding our fire-detection and fire-suppression markets to
include other modes of transportation. Our patented thermocouple wire is in use
on aircraft and in military fighting vehicles, as well as trains and passenger
service vehicles.
Design engineers choose our pyrotechnic devices when system specifications
call for small, lightweight components that can perform mechanical functions
reliably and rapidly.
1. [PHOTO]
1. Titanium pressure vessel developed to minimize on-board weight
of fire-suppression for the new Boeing 777.
2. [PHOTO]
2. The Company's patented thermocouple wire, other detectors,
controllers and fire-suppression systems supplied to buses
using clean-burning alternative fuels.
[PHOTO]
Left, Robert L. Day, President,
Energy Dynamics Division
[PHOTO]
Right, Richard G. Knoblock, President,
HTL/Kin-Tech Division
16
<PAGE> 10
[FULL PAGE PHOTO]
17
<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
judgements 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 quarterly 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 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.
[PHOTO] [SIGNATURE]
Edgar S. Brower
Chairman, President and
Chief Executive Officer
[SIGNATURE]
Richard V. Plat
Executive Vice President
Chief Financial Officer
18
<PAGE> 12
FIVE-YEAR FINANCIAL SUMMARY
Pacific Scientific Company and Subsidiaries
<TABLE>
<CAPTION>
For the Fiscal Years Ended
December 30, 1994, December 31, 1993, (in thousands except ratios, per share and employee data)
December 25, 1992, December 27, 1991 --------------------------------------------------------------
and December 28, 1990 1994 1993 1992 1991 1990
================================================================================================================
<S> <C> <C> <C> <C> <C>
OPERATIONS DATA
- ----------------------------------------------------------------------------------------------------------------
Sales:
Electrical Equipment $167,302 $128,830 $114,795 $108,519 $111,197
Safety Equipment 67,435 66,723 57,854 64,451 72,709
- ----------------------------------------------------------------------------------------------------------------
Total sales 234,737 195,553 172,649 172,970 183,906
Operating income from:
Electrical Equipment 16,948 8,924 8,480 5,662 (1,734)
Safety Equipment 6,568 8,305 5,302 4,229 9,287
Sale of product lines/division - - - 9,225 1,293
- ----------------------------------------------------------------------------------------------------------------
Total 23,516 17,229 13,782 19,116 8,846
Less:
Interest Expense 2,666 1,912 1,929 2,966 3,258
Corporate Expense (net of other income) 5,176 4,111 3,766 4,090 3,812
- ----------------------------------------------------------------------------------------------------------------
Income before taxes 15,674 11,206 8,087 12,060 1,776
Taxes on income 6,152 2,911 2,690 4,017 312
- ----------------------------------------------------------------------------------------------------------------
Net income 9,522 8,295 5,397 8,043 1,464
- ----------------------------------------------------------------------------------------------------------------
Depreciation and amortization 11,819 10,535 8,881 8,912 7,821
Average number of common
or common equivalent
shares outstanding* 11,233 10,815 10,690 10,668 11,016
- ----------------------------------------------------------------------------------------------------------------
PER COMMON SHARE*
Net sales $20.90 $18.08 $16.15 $16.21 $16.70
Income before accounting change (primary) .85 .67 .50 .73 .10
Income before accounting change (fully diluted) .83 .66 .50 .73 .10
Accounting change - .10 - - -
- ----------------------------------------------------------------------------------------------------------------
Net income (fully diluted) .83 .76 .50 .73 .10
Dividends .07 .06 .06 .02 -
- ----------------------------------------------------------------------------------------------------------------
BALANCE SHEET DATA
Total assets $172,669 $161,257 $134,567 $135,944 $143,364
Net property 31,168 31,450 28,578 28,920 31,302
Long-term debt 42,311 44,106 27,981 32,856 39,031
Stockholders' equity 91,138 80,956 72,359 69,475 63,111
- ----------------------------------------------------------------------------------------------------------------
OTHER DATA
Working capital ratio 2.6 2.6 2.5 2.5 2.2
Long-term debt-to-capitalization 32% 35% 28% 32% 38%
Employees at year-end 1,848 1,597 1,362 1,382 1,588
Net sales per employee $129,000 $126,500 $125,800 $112,600 $101,000
Sales backlog at year-end 83,555 91,774 77,740 78,749 91,608
Capital expenditures 9,495 7,607 7,777 7,509 8,534
================================================================================================================
</TABLE>
(The above summary should be read in conjunction with the consolidated financial
statements)
*Amounts adjusted to reflect a two-for-one stock split in the form of a 100%
stock dividend effective December 16, 1994.
19
<PAGE> 13
MANAGEMENT'S DISCUSSION & ANALYSIS
RESULTS OF OPERATIONS
The financial results for 1994 improved substantially over those for 1993, 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 sales over the last five years for each
of these segments, as well as for businesses divested by the Company.
Sales in 1994 totaled $234.7 million, a 20 percent increase from the prior
year. This amount includes $21.6 million from acquisitions occurring during
1993 and 1994. Without the acquisitions, sales would have been up nine percent.
Sales in the Electrical Equipment segment were up 30 percent in 1994, and sales
in the Safety Equipment segment were up one percent. Without acquisitions,
Electrical Equipment sales would have risen 14 percent, and Safety Equipment
sales would have fallen by 3 percent, due primarily to reductions in the
delivery of new commercial aircraft and in U.S. defense spending. A slight
reduction in Safety Equipment sales is anticipated during the coming year. The
Company is continuing its efforts to diversify the markets served by its Safety
Equipment segment from primarily aerospace and defense to mass transportation,
oil drilling and other areas. The Company also intends to increase the
maintenance parts, service and repair portions of the business.
The Company has realized its near-term objective of achieving 20 percent of
sales outside the U.S. In 1994, 21 percent of total sales were made outside the
U.S., compared to 18 percent in 1993 and 17 percent in 1992. Sales under U.S.
defense contracts (as either a prime contractor or a subcontractor), continue
to decline as a percentage of total sales. Such sales fell to 16 percent in
1994 from 19 percent and 22 percent in 1993 and 1992, respectively.
The order backlog at the end of 1994 was $84 million as compared to $92
million and $78 million at the end of 1993 and 1992, respectively. The backlog
of orders for Electrical Equipment increased between 1993 and 1994 and
decreased for Safety Equipment. The Company continues to obtain large orders in
competitive situations -- the result 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>
1994 1993 1992
===============================================================================
<S> <C> <C> <C>
Gross profit margin 32.1% 30.7% 30.7%
- -------------------------------------------------------------------------------
</TABLE>
The improvement in gross profit margin in 1994 is attributable to continuing
gains in productivity, reductions in manufacturing costs and a "right-sizing"
of each operation within the Company. Average gross margin at Fisher Pierce for
1994 was below the Company's average, but reached the Company average at
year-end. The long-range outlook for Fisher Pierce is excellent, as its market
share continues to rise owing both to new products and improved quality.
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.
[SALES OF CONTINUING BUSINESSES CHART]
[SALES BY MARKET AREA CHART]
20
<PAGE> 14
As a result, the delivery of certain inertia reels to the U.S. Air Force has
been suspended since mid-1991. Similar products, however, are being purchased
by the U.S. Navy under a procure-ment waiver. Although the testing and
recertification program has taken much more time than originally expected, the
Company still believes the product will be requalified. The suspension of
inertia reel deliveries has reduced sales by $0.5 million to $1.0 million per
year over the past three years. 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.
Selling and marketing expenses, as a percentage of sales, are as follows for
the past three years:
<TABLE>
<CAPTION>
1994 1993 1992
===============================================================================
<S> <C> <C> <C>
Selling and marketing expense 10.3% 9.9% 10.2%
- -------------------------------------------------------------------------------
</TABLE>
Selling and marketing expenses, as a percentage of sales, increased in 1994,
owing to rapid growth in the sale of instruments. Such growth normally requires
a high level of application assistance, which is recognized as a selling and
marketing expense. 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
salespeople, licensed representatives and distributors to sell its products.
Some products are "private branded" for distribution by others. Direct
salespeople 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>
1994 1993 1992
===============================================================================
<S> <C> <C> <C>
General and administrative expense 9.8% 10.6% 10.6%
- -------------------------------------------------------------------------------
</TABLE>
General and administrative expenses, as a percentage of sales, decreased in
1994. Included in these expenses is the amortization of assets such as patents;
of trademarks and other intangibles; and of the excess of cost over net assets
of acquired businesses. Such amortization amounted to $1.9 million, $1.7
million and $1.3 million in 1994, 1993 and 1992, respectively. Excluding these
noncash amortization expenses, general and administrative expenses, as
percentage of sales, would have been 9.0 percent, 9.7 percent and 9.9 percent
for 1994, 1993 and 1992, 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.
The 1994 percentages have not been adjusted for a $1.3 million nonrecurring
general and administrative pretax expense arising from the settlement of
litigation and related legal costs. Excluding this expense and the
above-mentioned amortization expense, general and administrative expenses for
1994 would have been reduced to 8.4 percent of sales.
Research and development expenses, as a percentage of sales, are as follows
for the past three years:
<TABLE>
<CAPTION>
1994 1993 1992
===============================================================================
<S> <C> <C> <C>
Research and development expense 4.5% 4.4% 4.8%
- -------------------------------------------------------------------------------
</TABLE>
[ALLOCATION OF SALES DOLLAR CHART]
[OPERATING INCOME BEFORE GAINS ON SALE OF PRODUCT LINES CHART]
21
<PAGE> 15
MANAGEMENT'S DISCUSSION & ANALYSIS
Total spending on research and development was higher in 1994 than in 1993.
Spending for research and development rose during 1994 in the Electrical
Equipment segment, but it declined in the Safety Equipment segment. Research
and development expense amounted to 5.3 percent of sales in Electrical
Equipment and 2.4 percent of sales in Safety Equipment. The ratio of R&D
expense 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 percent and 50 percent 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.
Net interest expense for the past three years is as follows:
<TABLE>
<CAPTION>
(In millions) 1994 1993 1992
===============================================================================
<S> <C> <C> <C>
Net interest expense $2.7 $1.9 $1.9
- -------------------------------------------------------------------------------
</TABLE>
The increase in net interest expense in 1994 was due to higher levels of
average net borrowing in 1994 and higher effective interest rates. Average
rates on short-term borrowings at the end of 1994, 1993 and 1992 were 5.3
percent, 4.3 percent and 4.7 percent, respectively.
Income before income taxes and the cumulative effect of a change in
accounting principle in 1993 has been as follows for the past three years:
<TABLE>
<CAPTION>
(In millions) 1994 1993 1992
===============================================================================
<S> <C> <C> <C>
Pretax income from operations $15.7 $11.2 $8.1
- -------------------------------------------------------------------------------
</TABLE>
Although the Company has been an active acquirer of businesses, it is
important to note that only $0.8 million and $1.5 million of the increase in
pretax income in 1994 and 1993, respectively, originated from acquired
operations. In 1994, there was also a $1.3 million nonrecurring expense for
settlement of litigation and related legal costs. Excluding these amounts,
"same store" pretax income before the effect of a change in accounting
principle increased 44 percent and 21 percent in 1994 and 1993, respectively.
The effective income tax rate, as a percentage of pretax income, is as
follows for the past three years:
<TABLE>
<CAPTION>
1994 1993 1992
===============================================================================
<S> <C> <C> <C>
Effective income tax rate 39% 35% 33%
- -------------------------------------------------------------------------------
</TABLE>
The effective tax rates were favorably impacted in both 1993 and 1992 by the
recognition of tax loss carryovers. The 1993 rate also benefitted from a
favorable settlement 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
[RESEARCH AND DEVELOPMENT EXPENSE CHART]
[INVENTORY AS PERCENTAGE OF SALES CHART]
22
<PAGE> 16
which changed the Company's previous method of accounting for income taxes.
This change resulted in a nonrecurring benefit equal to $1.1 million. The
Company estimates that its effective tax rate in 1995 will be approximately 37
percent.
Net income, before the cumulative effect of a change in account-ing principle
in 1993, as a percentage of sales, is as follows for the past three years:
<TABLE>
<CAPTION>
1994 1993 1992
===============================================================================
<S> <C> <C> <C>
Net income before cumulative effect
of change in accounting principle 4.0% 3.7% 3.1%
- -------------------------------------------------------------------------------
</TABLE>
It is the Company's near-term objective to achieve a 5.0 percent net return
on sales. The Company continued to progress toward this goal in 1994,
increasing the return on sales to 4.9 percent in the fourth quarter from 4.1
percent in the same quarter of 1993.
After consideration of the two-for-one stock split effected in the form of a
dividend effective December 16, 1994, common and common-equivalent shares used
in computing primary earnings per share increased by 3.9 percent in 1994. This
increase was due to the exercise of stock options and the dilutive effect of
stock options granted but not exercised, based on the average price of the
Company's common stock traded on the New York Stock Exchange throughout 1994.
The fully diluted earnings per share reflect the maximum extent of dilution
resulting from outstanding stock options based on the closing price of the
Company's common stock traded on the New York Stock Exchange on December 30,
1994. The Company's outstanding convertible debentures were anti-dilutive and
were not considered in the calculation of earnings per share.
Pacific Scientific had 1,848 employees at the end of 1994. 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>
1994 1993 1992
===============================================================================
<S> <C> <C> <C>
Sales per employee $129,000 $126,500 $125,800
- -------------------------------------------------------------------------------
</TABLE>
Sales per employee in 1994 increased only slightly because this statistic now
includes a full year of operations of the Company's labor-intensive
motor-winding operation in Mexico. Previously, the Company had subcontracted
the winding of motors. With the Mexican operation excluded, 1994 sales per
employee increased to $143,300 per year.
LIQUIDITY AND CAPITAL RESOURCES
The balance sheet of the Company remained strong at the end of 1994. The
current ratio of the Company has improved, as shown in the following table:
<TABLE>
<CAPTION>
(In millions) 1994 1993 1992
===============================================================================
<S> <C> <C> <C>
Current Assets $90.4 $79.7 $69.4
Current Liabilities $35.1 $31.1 $27.7
Working Capital $55.3 $48.6 $41.7
Current Ratio 2.6 2.6 2.5
- -------------------------------------------------------------------------------
</TABLE>
The Company's experience in collecting receivables from customers has
improved. At the end of 1994, average collections of accounts receivable took
57 days compared to 59 days in 1993.
[TOTAL ASSETS CHART]
[SALES PER EMPLOYEE CHART]
23
<PAGE> 17
MANAGEMENT'S DISCUSSION & ANALYSIS
Inventories were $37.3 million at the end of 1994 compared to $33.5 million
at the end of 1993, an increase of 11.3 percent compared to a sales increase of
20 percent. Inventory turns were 4.7 times per year at the end of 1994 compared
to 4.5 at the end of 1993.
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 remediation of certain waste disposal sites. The Company
establishes reserves for such costs as are probable and reasonably able to be
estimated, 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 1994, the Company had cash and short-term investments of $3.4
million, plus $6.1 million of restricted cash representing the proceeds of
Industrial Revenue Bonds that the Company issued in 1989 in anticipation of
building a new manufacturing facility. Total debt at the end of 1994 --
including both short- and long-term bank debt, convertible subordinated
debt and Industrial Revenue Bonds -- totaled $46.0 million, for a
debt-less-cash balance of $36.5 million. The ratio of long-term debt to
capitalization decreased to 32 percent at the end of 1994 as compared to 35
percent and 28 percent at the end of 1993 and 1992, respectively.
The Company continued to invest in plant and equipment in 1994 as part of its
drive to improve productivity and make its products more competitive. During
1994, 1993 and 1992, the Company invested $9.5 million, $7.6 million and $7.8
million, respectively. Total depreciation and amortization was $11.8 million in
1994 and $10.5 million and $8.9 million in 1993 and 1992, respectively.
At the end of 1994, the Company had unused lines of credit of $36.9 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.
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 30, 1994, December 31, 1993
and December 25, 1992 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 30, 1994, December 31, 1993 and December 25, 1992,
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, 1995
24
<PAGE> 18
CONSOLIDATED STATEMENTS OF OPERATIONS
Pacific Scientific Company and Subsidiaries
<TABLE>
<CAPTION>
For the Fiscal Years Ended
December 30, 1994, December 31,
1993, and December 25, 1992 1994 1993 1992
===============================================================================
<S> <C> <C>
NET SALES $234,737,000 $195,553,000 $172,649,000
- -------------------------------------------------------------------------------
COSTS AND EXPENSES
Cost of sales 159,409,000 135,487,000 119,702,000
Selling and marketing 24,205,000 19,314,000 17,662,000
General and administrative 23,051,000 20,765,000 18,353,000
Research and development 10,521,000 8,584,000 8,235,000
- -------------------------------------------------------------------------------
Total costs and expenses 217,186,000 184,150,000 163,952,000
- -------------------------------------------------------------------------------
Operating income 17,551,000 11,403,000 8,697,000
- -------------------------------------------------------------------------------
OTHER EXPENSE
Interest expense - net (2,666,000) (1,912,000) (1,929,000)
Other income 789,000 1,715,000 1,319,000
- -------------------------------------------------------------------------------
Net other expense (1,877,000) (197,000) (610,000)
- -------------------------------------------------------------------------------
Income before income taxes and
cumulative effect of change
in accounting principle 15,674,000 11,206,000 8,087,000
Income taxes (6,152,000) (3,971,000) (2,690,000)
- -------------------------------------------------------------------------------
Income before cumulative
effect of change in
accounting principle 9,522,000 7,235,000 5,397,000
Cumulative effect of change
in accounting principle - 1,060,000 -
- -------------------------------------------------------------------------------
Net income $ 9,522,000 $ 8,295,000 $ 5,397,000
===============================================================================
EARNINGS PER SHARE
Primary
Before accounting change $0.85 $0.67 $0.50
Change in method of accounting
for income taxes - 0.10 -
- -------------------------------------------------------------------------------
Primary earnings per share $0.85 $0.77 $0.50
- -------------------------------------------------------------------------------
Fully Diluted
Before accounting change $0.83 $0.66 $0.50
Change in method of accounting
for income taxes - 0.10 -
- -------------------------------------------------------------------------------
Fully diluted earnings per share $0.83 $0.76 $0.50
===============================================================================
</TABLE>
(See accompanying notes to consolidated financial statements)
25
<PAGE> 19
CONSOLIDATED BALANCE SHEETS
Pacific Scientific Company and Subsidiaries
<TABLE>
<CAPTION>
As of December 30, 1994, December 31, 1993 and December 25, 1992 1994 1993 1992
========================================================================================================================
<S> <C> <C> <C>
ASSETS
Current Assets
Cash $ 1,655,000 $ 2,081,000 $ 4,567,000
Short-term investments 1,758,000 1,962,000 1,466,000
Trade receivables -- net 43,435,000 36,666,000 33,448,000
Inventories 37,280,000 33,493,000 26,298,000
Deferred income taxes 4,205,000 3,733,000 2,560,000
Other current assets 2,100,000 1,797,000 1,063,000
- ------------------------------------------------------------------------------------------------------------------------
Total current assets 90,433,000 79,732,000 69,402,000
Net property 31,168,000 31,450,000 28,578,000
Restricted cash 6,071,000 6,092,000 6,099,000
Note receivable 711,000 4,468,000 4,468,000
Property held for sale 3,300,000 -- --
Other assets -- net 40,986,000 39,515,000 26,020,000
- ------------------------------------------------------------------------------------------------------------------------
Total assets $172,669,000 $161,257,000 $134,567,000
========================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Short-term borrowings $ 3,700,000 $ 5,250,000 $ 3,100,000
Accounts payable 15,826,000 14,426,000 12,985,000
Accrued employee compensation and benefits 5,717,000 4,859,000 3,909,000
Other current liabilities 9,904,000 6,580,000 7,683,000
- ------------------------------------------------------------------------------------------------------------------------
Total current liabilities 35,147,000 31,115,000 27,677,000
- ------------------------------------------------------------------------------------------------------------------------
Bank borrowings 19,400,000 21,000,000 4,500,000
7-3/4% convertible subordinated debentures 17,286,000 17,481,000 17,481,000
Industrial development bonds 5,625,000 5,625,000 6,000,000
Other long term liabilities 4,073,000 5,080,000 6,550,000
- ------------------------------------------------------------------------------------------------------------------------
Stockholders' equity
Common stock, $1 par value 10,939,000 5,398,000 5,340,000
Additional paid-in capital 727,000 4,791,000 3,904,000
Retained earnings 79,472,000 70,767,000 63,115,000
- ------------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 91,138,000 80,956,000 72,359,000
- ------------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $172,669,000 $161,257,000 $134,567,000
========================================================================================================================
</TABLE>
(See accompanying notes to consolidated financial statements)
26
<PAGE> 20
CONSOLIDATED STATEMENTS OF CASH FLOWS
Pacific Scientific Company and Subsidiaries
For the Fiscal Years Ended December 30, 1994,
December 31, 1993 and December 25, 1992
<TABLE>
<CAPTION>
1994 1993 1992
=======================================================================================================================
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 9,522,000 $ 8,295,000 $ 5,397,000
Depreciation and amortization 11,819,000 10,535,000 8,881,000
Deferred income taxes (170,000) (457,000) (237,000)
Decrease in accrued employee benefit plan liabilities (1,309,000) (546,000) (752,000)
Loss on disposal of property 51,000 531,000 159,000
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 (5,849,000) 175,000 (5,006,000)
Inventories (3,178,000) (2,147,000) 3,463,000
Other current assets (242,000) (672,000) 1,465,000
Accounts payable 294,000 92,000 3,130,000
Accrued employee compensation and benefits 859,000 530,000 53,000
Other current liabilities 3,358,000 (5,009,000) 1,473,000
- ------------------------------------------------------------------------------------------------------------------------
Net cash flows from operating activities 15,155,000 10,267,000 18,026,000
- ------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property (9,495,000) (7,607,000) (7,777,000)
Payments for business acquisitions, net of cash acquired (3,961,000) (23,687,000) --
Proceeds from disposition of property 227,000 212,000 378,000
Decrease (increase) in short-term investments 204,000 (496,000) 3,617,000
Decrease in restricted cash and other assets 129,000 248,000 96,000
- ------------------------------------------------------------------------------------------------------------------------
Net cash flows from investing activities (12,896,000) (31,330,000) (3,686,000)
- ------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Repayments of long-term debt (1,795,000) (375,000) (4,875,000)
Repayments of short-term debt (1,550,000) -- (4,900,000)
Issuances of common stock 1,477,000 945,000 152,000
Cash dividends on common stock (817,000) (643,000) (640,000)
Debt proceeds -- 18,650,000 --
Repurchases of stock -- -- (1,679,000)
Cash dividends on preferred stock -- -- (124,000)
- ------------------------------------------------------------------------------------------------------------------------
Net cash flows from financing activities (2,685,000) 18,577,000 (12,066,000)
- ------------------------------------------------------------------------------------------------------------------------
Net (decrease) increase in Cash (426,000) (2,486,000) 2,274,000
Cash, Beginning of Year 2,081,000 4,567,000 2,293,000
- ------------------------------------------------------------------------------------------------------------------------
Cash, End of Year $ 1,655,000 $ 2,081,000 $ 4,567,000
- ------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL INFORMATION
Interest payments $ 3,210,000 $ 2,603,000 $ 2,817,000
Income tax payments 5,190,000 6,192,000 1,932,000
Assets acquired 5,103,000 29,364,000 --
Liabilities assumed 1,142,000 5,677,000 --
========================================================================================================================
</TABLE>
(See accompanying notes to consolidated financial statements)
27
<PAGE> 21
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Pacific Scientific Company and Subsidiaries
<TABLE>
<CAPTION>
Additional
For the Fiscal Years Ended December 30, 1994, Preferred Common Paid-In Retained
December 31, 1993 and December 25, 1992 Stock Stock Capital Earnings Total
===================================================================================================================================
<S> <C> <C> <C> <C> <C>
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
Two-for-One Stock Split -- 5,469,000 (5,469,000) -- --
Net Income for the Year -- -- -- 9,522,000 9,522,000
Common Stock Dividends -- -- -- (817,000)
Exercise of Employee Options -- 67,000 1,120,000 -- 1,187,000
Conversion of Debentures -- 5,000 190,000 -- 195,000
Amortization of Restricted Stock Award -- -- 95,000 -- 95,000
- -----------------------------------------------------------------------------------------------------------------------------------
Stockholders' Equity, December 30, 1994 -- $10,939,000 $ 727,000 $79,472,000 $91,138,000
===================================================================================================================================
</TABLE>
(See accompanying notes to consolidated financial statements)
28
<PAGE> 22
FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
Pacific Scientific Company and Subsidiaries
<TABLE>
<CAPTION>
Corporate
Expense
Electrical Safety Net of Net
Consolidated Equipment Equipment Other Income Interest
================================================================================================================
<S> <C> <C> <C> <C> <C>
Year Ended December 30, 1994
Net Sales $234,737,000 $167,302,000 $67,435,000 -- --
Pretax Income 15,674,000 16,948,000 6,568,000 (5,176,000) (2,666,000)
Depreciation and Amortization 11,819,000 7,939,000 3,751,000 129,000 --
Capital Spending(2) 9,495,000 6,127,000 3,348,000 20,000 --
Identifiable Assets(1) 172,669,000 110,252,000 46,645,000 15,772,000 --
- ----------------------------------------------------------------------------------------------------------------
Year Ended December 31, 1993
Net Sales 195,553,000 128,830,000 66,723,000 -- --
Pretax Income 11,206,000 8,924,000 8,305,000 (4,111,000) (1,912,000)
Depreciation and Amortization 10,535,000 7,212,000 3,188,000 135,000 --
Capital Spending 7,607,000 4,565,000 3,035,000 7,000 --
Identifiable Assets 161,257,000 98,494,000 50,203,000 12,560,000 --
- ----------------------------------------------------------------------------------------------------------------
Year Ended December 25, 1992
Net Sales 172,649,000 114,795,000 57,854,000 -- --
Pretax Income 8,087,000 8,480,000 5,302,000 (3,766,000) (1,929,000)
Depreciation and Amortization 8,881,000 6,355,000 2,376,000 150,000 --
Capital Spending 7,777,000 6,584,000 1,179,000 14,000 --
Identifiable Assets 134,567,000 78,659,000 44,797,000 11,111,000 --
================================================================================================================
</TABLE>
(1) 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.
(2) Capital spending is shown exclusive of property purchased in conjunction
with the acquisition of businesses (Note 7).
29
<PAGE> 23
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Pacific Scientific Company and Subsidiaries
For the Fiscal Years Ended December 30, 1994, December 31, 1993 and
December25, 1992
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
1994, 1993 and 1992 in these financial statements refer to the fiscal years
ended December 30, 1994, December 31, 1993 and December 25, 1992, 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 $856,000, $2,346,000 and
$1,803,000 at the end of 1994, 1993 and 1992, 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, trade receivables, accounts payable and short-
and long-term borrowings approximate their fair values.
At December 30, 1994, all of the Company's investments represent short-term
available-for-sale securities and have been recorded at fair value which
approximates historical cost of the investments. These investments are
primarily composed of debt securities of municipalities of the Commonwealth of
Puerto Rico with contractual maturities beginning in 1998 or later.
Fair values are estimated using quoted market prices and other appropriate
valuation techniques based on information available as of December 30, 1994.
Trade Receivables
Trade receivables are presented net of the related allowance for doubtful
accounts, which at year-end totaled $929,000, $668,000 and $629,000 in 1994,
1993 and 1992, 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) 1994 1993 1992
===============================================================================
<S> <C> <C> <C>
Finished goods $ 4,263 $ 3,914 $ 3,281
Work-in-process 11,866 13,244 11,237
Raw material and purchased parts 21,151 16,335 11,780
- -------------------------------------------------------------------------------
Total inventories $37,280 $33,493 $26,298
- -------------------------------------------------------------------------------
</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) 1994 1993 1992
===============================================================================
<S> <C> <C> <C>
Land, building and improvements $13,187 $ 9,160 $ 8,762
Machinery and equipment 70,630 65,967 54,944
- -------------------------------------------------------------------------------
Total 83,817 75,127 63,706
Less accumulated depreciation 52,649 43,677 35,128
- -------------------------------------------------------------------------------
Net property $31,168 $31,450 $28,578
- -------------------------------------------------------------------------------
</TABLE>
30
<PAGE> 24
Other Assets
Other assets at year-end consist of the following, net of accumulated
amortization:
<TABLE>
<CAPTION>
(In thousands) 1994 1993 1992
===============================================================================
<S> <C> <C> <C>
Excess of cost over net assets of
acquired businesses $35,143 $32,936 $20,237
Patents, trademarks, purchased
technology and other intangibles 4,130 4,952 4,253
Notes receivable and other assets 1,713 1,627 1,530
- -------------------------------------------------------------------------------
Total other assets - net $40,986 $39,515 $26,020
- -------------------------------------------------------------------------------
</TABLE>
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. The Company
periodically reviews goodwill to assess recoverability, and impairments would
be recognized in operating results if a permanent diminution in value were to
occur. Accumulated amortization of other assets at year-end totaled
$11,815,000, $9,874,000 and $8,126,000 in 1994, 1993 and 1992, respectively.
Earnings per Share
Net income per common and common equivalent share is computed by dividing net
income, adjusted in 1992 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 11,233,000 in 1994, 10,815,000 in 1993
and 10,690,000 in 1992. Fully diluted net income per share for 1994 reflects
the maximum dilution, based on the closing price of the Company's common stock
as traded on the New York Stock Exchange on December 30, 1994, and is computed
based on 11,436,000 shares. Shares used for calculating fully diluted earnings
in 1993 and 1992 totaled 11,010,000 and 10,761,000, respectively. The
computation of primary and fully diluted earnings per share 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 and were anti-dilutive in the computation of fully diluted earnings
per share.
Other
On December 8, 1994, the Company declared a two-for-one stock split of the
Company's common stock, in the form of a 100% stock dividend, payable on
January 9, 1995 to stockholders of record on December 16, 1994. All share and
per share amounts included in the accompanying consolidated financial
statements and notes have been retroactively adjusted to reflect the
two-for-one stock split.
Reclassifications
Certain amounts previously reported for 1992 and 1993 have been reclassified to
conform to the 1994 financial statement presentation.
2. BORROWINGS
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. As a result of the two-for-one
stock split, more fully described in Note 1, this conversion price was reduced
to $19 per share. The Company is required to commence annual sinking fund
payments in 2001, sufficient to retire $2,286,000 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 restrictions on
the aggregate amount of common stock dividends payable and the repurchase of
the Company's common stock. At December 30, 1994, over $60,000,000 of retained
earnings were unrestricted under these provisions.
The Company maintains $60,000,000 of unsecured lines of credit, of which
$23,100,000 was outstanding and an additional $2,500,000 was committed to back
standby letters of credit on December 30, 1994. All $60,000,000 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 1994 was 5.3%. Of the unsecured lines of credit at December
30, 1994, $20,000,000 was classified as a short-term working capital line, of
which $3,700,000 is outstanding; and $40,000,000 was a long-term committed
credit line, of which $19,400,000 was outstanding. The long-term credit lines
expire on July 31, 1996.
31
<PAGE> 25
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Pacific Scientific Company and Subsidiaries
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 (interest rate at December 30, 1994
was 5.95%). The Company is obligated 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
$6,071,000 in the accompanying consolidated balance sheet at December 30, 1994.
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 30, 1994.
Debt, including the short-term portion at December 30, 1994, matures as
follows: 1995, $3,700,000; 1996, $19,400,000; 1997, 1998 and 1999, none; later
years, $22,911,000.
3. EMPLOYEE RETIREMENT BENEFIT PLANS
The Company has noncontributory defined benefit pension plans covering
substantially all of its U.S. employees. Non-U.S. subsidiaries have separate
plans. Benefits are generally determined by a formula based on years of
service, final average salary and estimated social security benefits. In
addition, the Company has a non-qualified supplemental defined benefit plan
applicable to certain senior executives and a directors retirement plan, both
of which provide unfunded benefits. Pension expense for the qualified plan
totaled $1,116,000, $728,000 and $549,000 in 1994, 1993 and 1992, respectively.
Pension expense consists of the following components:
<TABLE>
<CAPTION>
(In thousands) 1994 1993 1992 / N
===============================================================================
<S> <C> <C> <C>
Benefits earned during the year $ 1,792 $ 1,486 $ 1,522
Interest on projected benefit obligation 3,555 3,468 3,372
Gain on plan assets (4,132) (4,189) (4,292)
Net amortization and deferral (99) (37) (53)
- -------------------------------------------------------------------------------
Net pension expense $ 1,116 $ 728 $ 549
- -------------------------------------------------------------------------------
</TABLE>
The following is a reconciliation of the funded status of the qualified
plans, including the amount included in current and non-current employee
benefit plan liabilities in the accompanying consolidated balance sheets.
Pension plan assets consist of corporate equity and debt securities,
unallocated insurance contracts, real estate and short-term investments. The
amounts shown for 1994 are estimates made by the plans' actuary, while the
amounts for 1993 and 1992 have been adjusted to amounts based on final
calculations performed by the plans' actuary.
<TABLE>
<CAPTION>
(In thousands) 1994 1993 1992
=========================================================================================
<S> <C> <C> <C>
Actuarial present value of accumulated plan benefits:
Vested $ 42,759 $ 42,720 $ 36,629
Non-vested 1,407 1,549 1,206
- -----------------------------------------------------------------------------------------
Total 44,166 44,269 37,835
Effect of estimated future salary increase 4,584 4,586 4,365
- -----------------------------------------------------------------------------------------
Projected benefit obligation 48,750 48,855 42,200
Plan assets at fair market value (48,486) (45,094) (42,060)
- -----------------------------------------------------------------------------------------
Projected benefit obligation over plan assets 264 3,761 140
Unrecognized transition asset 757 1,072 1,387
Unrecognized net actuarial experience gain (loss) 584 (2,319) 1,637
- -----------------------------------------------------------------------------------------
Recorded pension liabilities $ 1,605 $ 2,514 $ 3,164
- -----------------------------------------------------------------------------------------
</TABLE>
Significant assumptions used in the determination of pension expense at the
beginning of each fiscal year consist of the following:
<TABLE>
<CAPTION>
1994 1993 1992
===============================================================================
<S> <C> <C> <C>
Discount rate on projected benefit obligation 7.5% 8.5% 8.5%
- -------------------------------------------------------------------------------
Long-term rate of return on plan assets 8.75% 9.25% 10.0%
- -------------------------------------------------------------------------------
Rate of future salary increases 4.5% 5.0% 5.0%
- -------------------------------------------------------------------------------
</TABLE>
32
<PAGE> 26
During 1994, the Company changed the expected rate of return on pension
assets from 9.25% to 8.75%. The effect of this change was an increase in 1994
pension expense of $225,000. At the end of 1994, the Company changed the
assumed discount rate from 7.5% to 8.5%, and revised its demographic
assumptions. These changes caused a net decrease in the projected bene-fit
obligation of $2,600,000.
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 in total 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.
The Company also has a defined contribution employee savings plan available
to substantially all of its U.S. employees. For participating employees, the
Company makes a matching contribution up to a percentage of employee
contributions, as defined. Matching contribution expense for the plan totaled
$906,000, $718,000 and $639,000 in 1994, 1993 and 1992, respectively.
4. INCOME TAXES
The income tax provision consists of the following:
<TABLE>
<CAPTION>
(In thousands) 1994 1993 1992
===============================================================================
<S> <C> <C> <C>
Current
Federal income taxes $4,840 $3,416 $2,341
State and foreign income taxes 1,482 1,012 586
- -------------------------------------------------------------------------------
Total current tax provision 6,322 4,428 2,927
Deferred (170) (457) (237)
- -------------------------------------------------------------------------------
Total income tax provision $6,152 $3,971 $2,690
- -------------------------------------------------------------------------------
</TABLE>
The differences between the income tax provision and income taxes computed
using the U.S. Federal statutory income tax rates (35% in 1994 and 1993 and 34%
in 1992) consist of the following:
<TABLE>
<CAPTION>
(In thousands) 1994 1993 1992
===============================================================================
<S> <C> <C> <C>
Tax at U.S. Federal rate $5,486 $3,922 $2,748
State income taxes, net of Federal tax benefit 709 571 380
Amortization of certain other assets 330 253 202
Tax benefit of foreign sales corporation (200) (220) (166)
Effect of foreign operations 187 193 273
Tax benefit of research and development credits (100) (465) (222)
Tax benefit of IRS examination settlement - (264) -
Tax benefit of loss and credit carryforwards - - (674)
- -------------------------------------------------------------------------------
Other (260) (19) 149
- -------------------------------------------------------------------------------
Income tax provision $6,152 $3,971 $2,690
- -------------------------------------------------------------------------------
</TABLE>
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 expenses in 1994 and 1993.
The Company has available tax net operating losses, subject to certain
limitations, of approximately $2,500,000 which expire at various dates through
2009.
33
<PAGE> 27
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Pacific Scientific Company and Subsidiaries
Net deferred taxes of $2,370,000 at December 30, 1994 and $2,200,000 at
December 31, 1993 were related to:
<TABLE>
<CAPTION>
(In thousands) 1994 1993
- -------------------------------------------------------------------------------
Current Long-Term Current Long-Term
===============================================================================
<S> <C> <C> <C> <C>
ASSETS
Inventory $2,007 - $2,027 -
Employee Benefits - $ 877 - $1,156
Accrued Liabilities 1,138 - 820 -
Net Operating Losses 347 585 - 800
Warranty Liabilities 502 - 523 -
Environmental Liabilities - 301 - 403
Receivables 337 - 242 -
Other 101 - 203 84
Valuation Allowance (227) (332) - (272)
LIABILITIES
Property - (2,615) - (2,897)
Patents/Trademarks - (633) - (807)
Other - (18) (82) -
- -------------------------------------------------------------------------------
Net Deferred Tax Asset
(Liability) $4,205 ($1,835) $3,733 ($1,533)
- -------------------------------------------------------------------------------
</TABLE>
The valuation allowance was increased by $287,000 during 1994.
5. STOCKHOLDERS' EQUITY
The Company has authorized 2,000,000 shares of preferred stock and 15,000,000
shares of common stock, of which 10,939,000 shares of common stock were
outstanding at December 30, 1994.
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 637,574 shares of common stock and
additionally provides for options canceled to become available for future
grants. Stock option activity during 1994, 1993 and 1992 consists of the
following:
<TABLE>
<CAPTION>
1994 1993 1992
===============================================================================
<S> <C> <C> <C>
Stock options outstanding,
beginning of year 832,312 657,002 789,602
Options granted
(per share: $5.125 to $17.50) 324,800 345,960 5,000
Options canceled
(per share: $4.375 to $8.00) (30,750) (54,650) (127,600)
Options exercised
(per share: $4.375 to $8.00) (133,590) (116,000) (10,000)
- -------------------------------------------------------------------------------
Stock options outstanding, end of year 992,772 832,312 657,002
- -------------------------------------------------------------------------------
Stock options exercisable, end of year 385,058 449,252 545,252
- -------------------------------------------------------------------------------
Options available for grant, end of year 6,214 300,264 637,574
- -------------------------------------------------------------------------------
</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.
34
<PAGE> 28
6. BUSINESS ACQUISITIONS
In April 1994, the Company purchased the business and assets of Royce Thompson
Electric Limited for $1,500,000. The acquisition extends the Company's
participation into the outdoor lighting control market in the United Kingdom.
The purchase price exceeded the fair market value of the net tangible assets
acquired by approximately $400,000. Had the acquisition occurred at the
beginning of 1993, there would have been no material impact upon the Company's
results of operations in either 1993 or 1994.
In August 1993, the Company purchased all the outstanding shares of capital
stock of Automation Intelligence, Inc. for $3,400,000 plus contingent
considerations dependent on the sales growth of the acquired company over a
three-year period. Contingent consideration for the year ended December 30,
1994 amounted to $255,000 and was accounted for as an addition to the excess of
costs over net assets acquired. This acquisition was made to acquire the
capability to develop automation software and systems using the Company's
motors. The purchase price exceeded the fair market value of the net tangible
assets acquired by approximately $3,600,000. Had the acquisition occurred at
the beginning of 1992, there would have been no material impact upon the
Company's results of operation in either 1992 or 1993.
In July 1993, the Company purchased all the outstanding shares of capital
stock of Powertec Industrial Corporation (Powertec) for $14,100,000. The
Company also paid $600,000 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 exceeded the fair market value of the net tangible assets
acquired by approximately $10,800,000.
In April 1993, the Company purchased certain operating assets, excluding real
estate, of Unidynamics/Phoenix, Inc. for approximately $6,000,000 which
approximated the fair value of the assets acquired.
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 $208,400 $199,619
Income from operations before taxes and cumulative
effect of a change in accounting principle 11,395 7,763
Net income 7,348 5,204
Net income per common and common equivalent share
before accounting change 0.67 0.48
- --------------------------------------------------------------------------------
</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.
In October 1990, the Company acquired all of the outstanding stock of High
Yield Technology, Inc. (HYT) 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 is computed as a percentage of
net sales, as defined, of fiscal year 1994. Amounts accrued for this payment
are approximately $2,500,000 and are accounted for as an addition to the
excess of cost over net assets acquired.
35
<PAGE> 29
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Pacific Scientific Company and Subsidiaries
7. SALE OF REAL ESTATE
In December 1989, the Company sold real property in Anaheim, California for
$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 as a defendant.
In November 1993, the California Superior Court, as a result of a jury
decision, found in favor of the Company and ordered a judicial foreclosure on
the property in satisfaction of the unpaid principal and interest on the note.
The court also awarded damages to the Company.
In August 1994, the Company acquired the property at an auction in exchange
for a reduction in the note receivable of $2,800,000, and paid approximately
$500,000 in delinquent property taxes and related expenses. The real estate is
now recorded as a "property held for sale" at $3,300,000, which approximates
fair value based on current appraisals. The unpaid interest and principal on
the note was reduced by the value of the reacquired property.
The Company is seeking full recovery of the amounts awarded by the Court.
8. OPERATING LEASES
The Company leases certain facilities and equipment under non-cancelable
operating leases which require the following minimum future rental payments:
1995, $4,584,000; 1996, $3,823,000; 1997, $3,436,000; 1998, $2,576,000; 1999,
$1,769,000; later years, $1,868,000. Rental expense was $5,719,000, $5,061,000
and $4,612,000 in 1994, 1993 and 1992, respectively.
9. INFORMATION BY INDUSTRY SEGMENT
Financial information by industry segment for fiscal years 1994, 1993 and 1992
is summarized on page 29 of this report.
Export sales of $49,321,000 in 1994, $34,483,000 in 1993 and $29,317,000 in
1992 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 $8,096,000 in 1994, $9,471,000 in 1993 and $12,367,000 in 1992.
10. SUBSEQUENT EVENT
On December 31, 1994, the first day of the 1995 fiscal year, the Company
purchased all the outstanding common shares of Eduard Bautz GmbH, a German
manufacturer of high performance motors and controls, for approximately
$15,000,000. The acquisition was made to increase the participation of the
Company in the market for electric motors and related products in Germany. The
acquisition, which will be accounted for using the purchase method of
accounting, is expected to result in approximately $7,500,000 in excess of cost
over net tangible assets acquired.
11. DIVIDEND AND QUARTERLY INFORMATION (Unaudited )
In October 1991, the Company resumed its policy of paying regular quarterly
cash dividends on its outstanding common stock. The first dividend of $0.015
per share was paid January 6, 1992 to shareholders of record as of December 20,
1991. Cash dividends of $0.015 per share continued to be paid each quarter
until December 1994 when, concurrent with the two-for-one stock split, the
dividend was raised to $0.03 per share payable January 2, 1995.
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 in 1992. In 1992, the Company redeemed all the remaining shares of this
issue of Preferred Stock.
Selected quarterly information for fiscal years 1994, 1993 and 1992 follows
on page 37.
36
<PAGE> 30
Dividend and Quarterly Information (Unaudited)
<TABLE>
<CAPTION>
(Dollars in thousands, except per share data) Q-1 Q-2 Q-3 Q-4 Year
=====================================================================================================
<S> <C> <C> <C> <C> <C>
1994
Net sales $51,585 $57,188 $59,840 $66,124 $234,737
Gross profit 15,945 18,504 19,807 21,072 75,328
Net income 1,674 2,243 2,282 3,323 9,522
Net income per common share (fully diluted) 0.15 0.20 0.21 0.29 0.83
- -----------------------------------------------------------------------------------------------------
Stock Price
High $ 13.32 $ 14.25 $ 13.94 $ 23.75 $ 23.75
Low 10.69 10.88 11.19 14.00 10.69
Close 11.19 12.50 13.82 20.25 20.25
- -----------------------------------------------------------------------------------------------------
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 .11 .15 .20 .21 .66
Accounting change .10 -- -- -- .10
- -----------------------------------------------------------------------------------------------------
Total net income per common share (fully diluted) .21 .15 .20 .21 .76
- -----------------------------------------------------------------------------------------------------
Stock Price
High $ 8.00 $ 7.75 $ 8.82 $ 11.94 $ 11.94
Low 7.00 6.07 7.32 8.44 6.07
Close 7.63 7.44 8.82 11.07 11.07
- -----------------------------------------------------------------------------------------------------
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 (fully diluted) .10 .12 .14 .15 .50
- -----------------------------------------------------------------------------------------------------
Stock Price
High $ 5.94 $ 6.69 $ 6.88 $ 7.81 $ 7.81
Low 4.63 5.69 6.13 6.00 4.63
Close 5.75 6.19 6.50 7.81 7.81
- -----------------------------------------------------------------------------------------------------
</TABLE>
37
<PAGE> 31
CORPORATE INFORMATION
BOARD OF DIRECTORS
(Listed in order of election)
William A. Preston (1979)
Chairman
APM, Inc.
Harry W. Todd (1983)
Managing Partner
Carlisle Enterprises L.P.
Ralph O. Briscoe (1985)
Business Consultant
Edgar S. Brower (1985)
Chairman of the Board
Thomas S. Stafford (1987)
Chairman
Omega Watch Corporation of America
Walter F. Beran (1987)
Chairman
Pacific Alliance Group
Millard H. Pryor, Jr. (1992)
Managing Director
Pryor & Clark Company
Ralph D. Ketchum (1994)
President
RDK Capital, Inc.
OFFICERS
Edgar S. Brower
President and Chief Executive Officer
Richard V. Plat
Executive Vice President
Chief Financial Officer and Secretary
William L. Nothwang
Controller
Peer A. Swan
Treasurer
Steven L. Breitzka
Vice President
Robert L. Day
Vice President
William T. Fejes
Vice President
Richard G. Knoblock
Vice President
Joseph R. Monkowski
Vice President
Ronald B. Nelson
Vice President
John M. Ossenmacher
Vice President
DIVISIONS AND SUBSIDIARIES
Divisions
Electro Kinetics
Santa Barbara, California
Energy Dynamics
Chandler, Arizona
Fisher Pierce
Weymouth, Massachusetts
HTL/Kin-Tech
Duarte, California
Yorba Linda, California
HIAC/ROYCO
Silver Spring, Maryland
Motion Technology
Charlestown, Massachusetts
Motor & Control
Rockford, Illinois
Broomfield, Colorado
Subsidiaries
Automation Intelligence, Inc.
Duluth, Georgia
Eduard Bautz GmbH
Weiterstadt, Germany
High Yield Technology, Inc.
Sunnyvale, California
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
Powertec Industrial Corporation
Rock Hill, South Carolina
Royce Thompson Ltd.
Birmingham, England
Solium Inc.
Randolph, Massachusetts
38
<PAGE> 32
STOCKHOLDER INFORMATION
Form 10-K Report
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 stockholder any
exhibit not contained in the Form 10-K upon payment of a fee. All written
requests should be directed to:
Investor Relations Department
Pacific Scientific Company
620 Newport Center Drive, Suite 700
Newport Beach, California 92660
Transfer Agent and Registrar
Chemical Trust Company of California
Los Angeles, California
(800) 356-2017
Annual Meeting
Wednesday, April 26, 1995, 10:00 AM
Newport Center Conference Center
610 Newport Center Drive, Suite 130
Newport Beach, California 92660
Market
New York Stock Exchange
Stock Symbol
PSX
Dividend Payment
Dividends on the Company's common stock are expected to be paid on or about:
April 3, July 3, October 2, 1995 and January 2, 1996.
Legal Counsel
Paul, Hastings, Janofsky & Walker
Los Angeles, California
Independent Accountants
Deloitte & Touche LLP
Costa Mesa, California
Corporate Headquarters
Pacific Scientific Company
620 Newport Center Drive, Suite 700
Newport Beach, California 92660
Telephone (714) 720-1714
Telefax (714) 720-1083
Design and production: BLOCH+COULTER Santa Monica, California
Entire annual report is printed on recycled paper
<PAGE> 33
[PACIFIC SCIENTIFIC LOGO]
620 NEWPORT CENTER DRIVE
NEWPORT BEACH, CALIFORNIA 92660
<PAGE> 34
PACIFIC SCIENTIFIC COMPANY
APPENDIX
FORM 10-K
FISCAL HIGHLIGHTS
PAGE 1
Graph 1 Bar Chart showing Sales (Dollars in Millions) for the years
1992 through 1994.
<TABLE>
<S> <C>
1992 172.7
1993 195.6
1994 234.7
</TABLE>
Graph 2 Bar Chart showing Earnings per Share (Fully Diluted - Cents
per Share) for the years 1992 through 1994.
<TABLE>
<S> <C> <C> <C>
1992 1993 1994
---- ---- ----
Operations .50 .66 .83
Cumulative effect of
Accounting Change - .10 -
</TABLE>
Graph 3 Bar Chart showing Year End Closing Price of Stock (Dollars per
Share) for years 1992 through 1994.
<TABLE>
<S> <C>
1992 7.82
1993 11.07
1994 20.25
</TABLE>
LETTER TO THE STOCKHOLDERS
PAGE 2
Photo Photo of Edgar S. Brower, Chairman, President and CEO.
ELECTRICAL EQUIPMENT
PAGE 4
Photo Full page photo showing various types and sizes of motors and
controls manufactured by the Motor & Control Division.
PAGE 5
Photo 1 Photo of a low-cost brushless DC motor.
Photo 2 Photo of a 2-inch stepper motor.
Photo 3 Photo of Ronald B. Nelson, President, Motor & Control Division
<PAGE> 35
PAGE 6
Photo Full page photo of various types of motors and controls
manufactured by Motor & Control Division.
PAGE 7
Photo 1 Photo of a "The Millennium(TM) Drive", a brushless DC motor
drive.
Photo 2 Photo of a 35kw high-speed starter-generator.
PAGE 8
Photo 1 Photo of an Indexer-Drive Combination.
Photo 2 Photo of a motion controller.
Photo 3 Photo of William T. Fejes, President, Motion Technology
Division
PAGE 9
Photo Full page photo of drives and controls manufactured by the
Motion Technology Division.
PAGE 10
Photo Full page photo showing various types of outdoor lighting
controls and power-distribution controls.
PAGE 11
Photo 1 Photo of a fault indicator equipped with a radio transmitter.
Photo 2 Photo of an outdoor lighting control.
Photo 3 Photo of Steven L. Breitzka, President, Fisher Pierce Division
PAGE 12
Photo 1 Photo of an external modular particle sensor.
Photo 2 Photo of a vacuum particle sensor.
Photo 3 Photo of Joseph R. Monkowski, Ph.D., President, Instruments
Division
PAGE 13
Photo Full page photo showing various particle monitors and sensors.
PAGE 14
Photo Full page photo showing various SoliumTM products.
-2-
<PAGE> 36
PAGE 15
Photo 1 Photo of a Solium dimmable fluorescent light bulb
Photo 2 Photo of a Solium wire-in ballast.
Photo 3 Photo of John M. Ossenmacher, President, Solium Inc.
SAFETY EQUIPMENT
PAGE 16
Photo 1 Photo of a titanium pressure vessel.
Photo 2 Photo showing a thermocouple wire, detectors, controllers, and
a fire suppression system.
Photo 3 Photo of Robert L. Day, President, Energy Dynamics Division
and Richard G. Knoblock, President, HTL/Kin-Tech Division.
PAGE 17
Photo Full page photo showing various fire suppression and detection
devices, personnel restraints and flight control devices.
MANAGEMENT'S REPORT
PAGE 18
Photo Photo of Edgar S. Brower, Chairman, President & CEO and
Richard V. Plat, Executive Vice President and Chief Financial
Officer.
MANAGEMENT'S DISCUSSION & ANALYSIS
PAGE 20
Graph 1 Bar Chart showing Sales of Continuing Businesses (Dollars in
Millions) for years 1990 through 1994.
<TABLE>
<CAPTION>
1990 1991 1992 1993 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Electrical Equipment: 111.2 108.5 114.8 128.8 167.3
Safety Equipment: 72.7 64.5 57.9 66.7 67.4
Divested Businesses: 11.0 7.6 -- -- --
</TABLE>
Graph 2 Pie Chart showing Sales by Market Area (By Percentage)
<TABLE>
<S> <C>
Export 21%
U.S. and Canada 63%
Defense Trades 16%
</TABLE>
-3-
<PAGE> 37
PAGE 21
Graph 1 Pie Chart showing Allocation of Sales Dollars (in cents).
<TABLE>
<S> <C>
Material .33
Net Income .04
Taxes .03
Depreciation
& Amortization .05
Services & Supplies .23
Wages & Salaries .32
</TABLE>
Graph 2 Bar Chart showing Operating Income before Gains on Sale of
Product Lines (Dollars in Millions) for years 1990 through
1994.
<TABLE>
<S> <C>
1990 2.994
1991 5.042
1992 8.697
1993 11.403
1994 17.551
</TABLE>
PAGE 22
Graph 1 Bar Chart showing Research and Development Expense (Dollars in
Millions) for years 1990 through 1994.
<TABLE>
<S> <C>
1990 6.9
1991 8.4
1992 8.2
1993 8.6
1994 10.5
</TABLE>
Graph 2 Bar Chart showing Inventory as Percentage of Sales for years
1990 through 1994.
<TABLE>
<S> <C>
1990 15.2%
1991 15.9%
1992 17.1%
1993 17.2%
1994 19.2%
</TABLE>
PAGE 23
Graph 1 Bar Chart showing Total Assets (Dollars in Millions) for the
years 1990 through 1994.
<TABLE>
<S> <C>
1990 143.4
1991 135.9
1992 134.6
1993 161.3
1994 172.7
</TABLE>
Graph 2 Bar Chart showing Sales per Employee (Dollars in Thousands)
for the years 1990 through 1994.
<TABLE>
<S> <C>
1990 101.0
1991 112.6
1992 125.8
1993 126.5
1994 129.0
</TABLE>
-4-
<PAGE> 1
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 report dated February 3, 1995,
incorporated by reference in this Annual Report on Form 10-K of Pacific
Scientific Company for the year ended December 30, 1994.
DELOITTE & TOUCHE LLP
Costa Mesa, California
March 17, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A) THE
CONSOLIDATED FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED DECEMBER 30, 1994
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH (B) FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-30-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> DEC-30-1994
<EXCHANGE-RATE> 1
<CASH> 1,655
<SECURITIES> 1,758
<RECEIVABLES> 44,364
<ALLOWANCES> 929
<INVENTORY> 37,280
<CURRENT-ASSETS> 90,433
<PP&E> 83,817
<DEPRECIATION> 52,649
<TOTAL-ASSETS> 172,669
<CURRENT-LIABILITIES> 35,147
<BONDS> 42,311
<COMMON> 10,939
0
0
<OTHER-SE> 80,199
<TOTAL-LIABILITY-AND-EQUITY> 172,669
<SALES> 234,737
<TOTAL-REVENUES> 234,737
<CGS> 159,409
<TOTAL-COSTS> 217,186
<OTHER-EXPENSES> 1,877
<LOSS-PROVISION> 328
<INTEREST-EXPENSE> 3,210
<INCOME-PRETAX> 15,674
<INCOME-TAX> 6,152
<INCOME-CONTINUING> 9,522
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,522
<EPS-PRIMARY> 0.85
<EPS-DILUTED> 0.83
</TABLE>
