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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
/X/ Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended June 27, 1997, or
/ / Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from to
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Commission File Number 1-7744
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PACIFIC SCIENTIFIC COMPANY
(Exact name of Registrant as specified in its charter)
94-0744970
(IRS Employer ID Number)
CALIFORNIA
(State or other jurisdiction of incorporation or organization)
620 Newport Center Drive, Suite 700
Newport Beach, California
(Address of principal executive offices)
92660
(Zip Code)
714/720-1714
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name, address and fiscal year,
if changed since last report)
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 / /
Shares outstanding of the Registrant's common stock
as of June 27, 1997
12,220,417
CLASS
Common Stock, $1.00 par value
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<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PACIFIC SCIENTIFIC COMPANY
CONSOLIDATED BALANCE SHEETS
(in thousands)
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JUNE 27, DECEMBER 27,
1997 1996
------------- -------------
(unaudited)
ASSETS
- ------
CURRENT ASSETS:
Cash................................... $ 3,526 $ 2,986
Trade receivables (less allowance
for doubtful accounts of $1,189
and $1,095, respectively) ........... 51,651 52,971
Inventories, lower of cost
(principally average) or market:
Finished goods .................... 8,304 7,599
Work-in-progress .................. 17,797 16,658
Raw materials and purchased parts . 28,500 25,125
Deferred income taxes ................. 9,986 7,023
Net assets held for disposition ....... 1,522 9,856
Other current assets .................. 3,053 1,081
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Total Current Assets ................ 124,339 123,299
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PROPERTY AT COST:
Land and buildings .................... 17,889 17,612
Machinery and equipment ............... 103,747 99,726
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Total Property ...................... 121,636 117,338
Less accumulated depreciation ......... 71,483 67,931
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Net Property ........................ 50,153 49,407
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RESTRICTED CASH ........................... 0 6,171
NOTES, PATENTS AND OTHER .................. 9,959 10,097
EXCESS OF COST OVER NET ASSETS ACQUIRED ... 37,467 38,354
----------- -----------
TOTAL ASSETS .......................... $221,918 $227,328
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
CURRENT LIABILITIES:
Accounts payable ...................... $ 19,559 $ 18,318
Accrued employee compensation & benefits 5,344 5,406
Reserve for discontinued Solium operation 8,639 0
Other current liabilities ............. 7,064 8,061
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Total Current Liabilities ........... 40,606 31,785
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BANK BORROWING ............................ 59,648 60,509
CONVERTIBLE SUBORDINATED DEBENTURES ....... 16,974 16,974
INDUSTRIAL DEVELOPMENT BONDS .............. 0 5,625
OTHER LONG-TERM LIABILITIES ............... 5,767 5,625
----------- -----------
STOCKHOLDERS' EQUITY:
Common stock, $1 par value ............ 12,220 12,195
Additional paid-in-capital ............ 4,560 4,394
Currency translation adjustment ....... 130 (282)
Retained earnings ..................... 82,013 90,503
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Total Stockholders' Equity .......... 98,923 106,810
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TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY .................. $221,918 $227,328
=========== ===========
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The accompanying notes to consolidated financial statements are an
integral part of this statement.
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PART I (Continued)
ITEM 1. FINANCIAL STATEMENTS
PACIFIC SCIENTIFIC COMPANY
CONSOLIDATED STATEMENTS OF INCOME (unaudited)
(in thousands, except per share amounts)
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QUARTER ENDED SIX MONTHS ENDED
-------------------- --------------------
JUNE 27, JUNE 28, JUNE 27, JUNE 28,
1997 1996 1997 1996
--------- --------- --------- ---------
SALES:
Electrical Equipment ...... $61,067 $55,411 $117,615 $110,537
Safety Equipment........... 17,536 16,763 33,452 35,679
--------- --------- --------- ---------
Total Sales ............. 78,603 72,174 151,067 146,216
COST OF SALES ............... 52,838 48,202 102,124 98,126
--------- --------- --------- ---------
Gross Profit .............. 25,765 23,972 48,943 48,090
--------- --------- --------- ---------
EXPENSES:
Selling and administration 16,411 15,642 31,673 30,437
Research and development .. 3,628 3,748 6,885 7,265
--------- --------- --------- ---------
Total Expenses .......... 20,039 19,390 38,558 37,702
--------- --------- --------- ---------
OPERATING INCOME ............ 5,726 4,582 10,385 10,388
INTEREST AND OTHER (Net) .... (663) (654) (1,202) (1,468)
--------- --------- --------- ---------
INCOME BEFORE INCOME TAXES .. 5,063 3,928 9,183 8,920
INCOME TAXES ................ (1,975) (1,522) (3,377) (3,419)
--------- --------- --------- ---------
INCOME FROM
CONTINUING OPERATIONS ..... 3,088 2,406 5,806 5,501
LOSS FROM
DISCONTINUED OPERATION ...... 0 (6,144) (13,563) (7,348)
NET INCOME (LOSS) ......... $ 3,088 ($3,738) ($7,757) ($1,847)
========= ========= ========= =========
EARNINGS (LOSS) PER SHARE
Continued Operations .... $0.25 $0.19 $0.47 $0.44
Discontinued Operations . 0 (0.49) (1.09) (0.59)
--------- --------- --------- ---------
Total ................. $0.25 ($0.30) ($0.62) ($0.15)
========= ========= ========= =========
CASH DIVIDENDS
PER COMMON SHARE ............ $0.03 $0.03 $0.06 $0.06
========= ========= ========= =========
COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING 12,428 12,527 12,407 12,558
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The accompanying notes to consolidated financial statements are an
integral part of this statement.
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PART I (Continued)
ITEM 1. FINANCIAL STATEMENTS
PACIFIC SCIENTIFIC COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
(in thousands)
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SIX MONTHS ENDED
--------------------------------
JUNE 27, JUNE 28,
1997 1996
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) ........................ ($7,757) ($1,847)
Adjustments to reconcile net income
to net cash provided (used) by
continuing operations:
Depreciation and amortization ... 6,021 5,328
Gain on disposal of equipment ... 0 157
Deferred income taxes ............. (2,963) 0
Changes in assets and liabilities:
Receivables ..................... 1,320 3,789
Inventories ..................... (5,219) 344
Net assets held for disposition . 8,334 (482)
Other assets .................... (947) 370
Accounts payable and
accrued liabilities ........... 1,179 (3,344)
Reserve for disposal of
discontinued operations ....... 8,639 1,002
Other liabilities ............... (997) (4,770)
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Net cash provided (used)
by operating activities ........... 7,610 547
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Net cash provided (used)
by continuing operations .......... 10,139 3,210
Net cash provided (used)
by discontinued operations ........ (2,529) (2,663)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of plant and equipment .. (6,767) (10,545)
Decrease (increase)
in restricted cash .............. 6,171 (29)
------------- -------------
Net cash provided (used)
from investing activities ....... (596) (10,574)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of bank borrowings ...... (861) (14,873)
Repayment of other borrowings ..... (5,483) 22,744
Cash dividends on common stock .... (733) (729)
Issuances of common stock ......... 191 1,233
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Net cash provided (used)
from financing activities ....... (6,886) 8,375
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EFFECT OF EXCHANGE RATE CHANGES ....... 412 (124)
NET INCREASE (DECREASE) IN CASH ....... 540 (1,776)
CASH, Beginning of Period ............. 2,986 6,123
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CASH, End of Period ................... $ 3,526 $ 4,347
============= =============
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The accompanying notes to consolidated financial statements are an
integral part of this statement.
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PART I (Continued)
ITEM 1. FINANCIAL STATEMENTS (Continued)
PACIFIC SCIENTIFIC COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1) INTERIM ACCOUNTING POLICY
The unaudited interim condensed consolidated financial
statements presented herein have been prepared in accordance
with the instructions to Form 10-Q and do not include all of the
information and note disclosures required by generally accepted
accounting principles. In the opinion of management, the
unaudited consolidated financial statements, included herein,
contain all adjustments necessary to present fairly the
Company's and its consolidated subsidiaries' financial condition
at June 27, 1997, and the results of operations and cash flows
for the six-month periods ended June 27, 1997 and June 28, 1996.
Certain costs and expenses are assigned to the periods presented
so that the interim periods bear a reasonable portion of the
anticipated annual amount. Included among these are estimated
amounts for inventory adjustments, performance bonuses, employee
fringe benefits and income taxes. The results of operations for
interim periods are not necessarily indicative of the results to
be expected for the full year. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations" for
additional information. These interim financial statements
should be read in conjunction with the Company's audited
financial statements and notes thereto incorporated by reference
to the Company's Annual Report on Form 10-K for the year ended
December 27, 1996.
2) DISCONTINUED OPERATION
On April 9, 1997, the Company announced that it would seek a
strategic buyer for its Solium technology and equipment, and
phase-out of the Solium subsidiary. The Solium subsidiary has
been accounted for in the financial statements presented herein
as a discontinued operation in accordance with APB 30, which
among other provisions, expects the plan of disposal to be
carried out within one year. The details concerning the
discontinuance are provided in the Company's Form 8-K Report
filed with the Securities and Exchange Commission on April 21,
1997, and incorporated herein by reference.
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PART I (Continued)
ITEM 1. FINANCIAL STATEMENTS (Continued)
PACIFIC SCIENTIFIC COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3) EARNINGS PER SHARE
Earnings per common and common equivalent shares were computed
by dividing net income (loss) by the weighted average number of
common and common equivalent shares outstanding during each
period. Common equivalent shares consist of the estimated
number of shares issuable upon exercise of dilutive stock
options reduced by the number of common shares assumed to have
been reacquired with the proceeds from exercise of the options.
FOR THE THREE MONTHS ENDED FOR THE SIX MONTHS ENDED
-------------------------- ------------------------
JUNE 27, JUNE 28, JUNE 27, JUNE 28,
1997 1996 1997 1996
---------- ---------- ---------- ----------
PRIMARY
- -------
ACTUAL NUMBER OF
SHARES OUTSTANDING 12,220,417 12,160,018 12,212,655 12,134,850
AVERAGE NUMBER
OF SHARES ASSUMING
EXERCISE OF
DILUTIVE EMPLOYEE
STOCK OPTIONS 207,716 366,574 194,682 422,759
COMMON AND COMMON
EQUIVALENT SHARES 12,428,133 12,526,592 12,407,337 12,557,609
========== ========== ========== ==========
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FULLY DILUTED
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ACTUAL NUMBER OF
SHARES OUTSTANDING 12,220,417 12,160,018 12,212,655 12,134,850
AVERAGE NUMBER
OF SHARES ASSUMING
EXERCISE OF
DILUTIVE EMPLOYEE
STOCK OPTIONS 221,539 366,612 201,655 364,899
COMMON AND COMMON
EQUIVALENT SHARES 12,441,956 12,526,630 12,414,310 12,499,749
========== ========== ========== ==========
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1) The Company has outstanding convertible subordinated
debentures issued April 26, 1983. Inclusion of these
debentures would be antidilutive and, accordingly, they
have been excluded from the above totals for the periods.
2) The Company will adopt FASB 128, Earnings Per Share, as
required, after December 15, 1997. Had the Company
adopted FASB 128 during the second quarter of 1997, there
would have been no material change in earnings per share.
4) RECLASSIFICATIONS
The 1996 financial statements have been reclassified to reflect
the decision to discontinue the Solium subsidiary and to conform
to the 1997 financial statement presentation.
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<PAGE>
PART I (Continued)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
SECOND QUARTER 1997 vs. SECOND QUARTER 1996
This report contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Act of 1934, as
amended. The Company intends that such statements shall be
protected by the safe harbors provided for in such sections.
Such statements are subject to risks and uncertainties that
could cause actual results to vary materially from those
projected in the forward-looking statements. The Company may
experience significant fluctuations in future operating results
due to a number of economic, competitive and other factors,
including, among other things, the size and timing of customer
orders, changes in laws, new or increased competition, delays in
new products, changes in market demand, market acceptance of new
products, seasonally in product purchasers, changes in foreign
exchange rates and others.
These factors and others, including the outcome of certain legal
proceedings pending against the Company, could cause operating
results to vary significantly from those in prior periods, and
those projected in forward-looking statements. Additional
information with respect to these and other factors that could
materially affect the Company and its operations are included in
the Company's filings with the Securities and Exchange
Commission and are incorporated herein.
Net sales from continuing operations were $78.6 million in the
second quarter of 1997, a 9% increase over the same period in
the prior year. Second quarter sales in the Electrical
Equipment segment increased by 10% due primarily to a 20%
increase in sales for commercial electric motors and controls.
The sales from the Safety Equipment segment increased by 5%
resulting from a strong demand for equipment used in commercial
aircraft, which offset a decline in sales to the defense
industry. In 1996, sales from U.S. defense contracts were 10%
of total Company sales, and this percentage is expected to
continue to decline during the remainder of 1997.
Gross margin on sales was 32.8% in the second quarter of 1997
compared to 33.2% in the prior year. This decline resulted
primarily from a recently completed fixed price contract for an
automation system.
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<PAGE>
PART I (Continued)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
SECOND QUARTER 1997 vs. SECOND QUARTER 1996 (Continued)
Selling, general and administrative expenses were 20.9% of sales
in the second quarter of 1997, compared to 21.7% of sales in the
prior year. The decline in selling and administrative expense,
as a percentage of sales, reflects the effect of the increase in
sales. Actual SD&A expenses increased from $15.6 million to
$16.4 million.
Research and development expenses represented 4.6% of sales
compared to 5.2% in the prior year. The decline in R&D expense,
as a percentage of total sales, was due to economies resulting
from the consolidation of certain engineering functions within
the Electrical Equipment segment.
Net interest and other expenses were nearly unchanged between
the second quarter of 1997 and the same period in the prior
year. Interest expenses in 1996 have been reallocated between
continuing and discontinued operations to be consistent with the
method being used in 1997.
Income before taxes increased in the second quarter of 1997 by
29%. This increase is primarily a result of the 9% increase in
sales and a reduction of operating expenses as a percentage of
sales. Income before tax equaled 6.4% of sales in the just
completed quarter as compared to 5.4% in the same period of the
prior year.
The effective tax rate for the second quarter of 1997 is 39.0%
of pretax income from continuing operations as compared to 38.7%
in the same quarter of the prior year. The expected annual
blended tax rate for the year of 1997 is 39.0%.
Earnings per share from continuing operations in the second
quarter of 1997 were 25 cents as compared to 19 cents of income
in the prior year. The adjusted weighted-average shares for the
second quarter of 1997 were 12,428,000 as compared to 12,527,000
in the same period of the prior year. The difference in
incremental shares resulted mainly from a decrease in the number
of stock options that were "in the money's" in 1997, due to the
lower average stock price during the second quarter of 1997 as
compared to 1996 and additional stock options that were issued
in the first six months of 1997 which were dilutive. The
increase in shares outstanding, from 12,171,000 as of June 28,
1996 to 12,221,000 as of June 27, 1997, is the result of the
exercise of stock options.
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<PAGE>
PART I (Continued)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
SECOND QUARTER 1997 vs. SECOND QUARTER 1996 (Continued)
Total orders received for continuing operations in the second
quarter of 1997 were $77.3 million, up from $74.5 million in the
prior year, and the backlog at the end of the quarter was $104.1
million compared to $104.8 million in the prior year. Orders
for the Electrical Equipment segment during the second quarter
totaled $59.7 million, while orders for the Safety Equipment
segment totaled $17.6 million.
FIRST HALF OF 1997 vs. FIRST HALF OF 1996
Continuing Operations
- ---------------------
Net sales from continuing operations were $151.1 million in the
first half of 1997, a 3% increase in sales over the same period
in the prior year. First half 1997 sales in the Electrical
Equipment segment were $117.6 million up 6% and sales in the
Safety Equipment segment were $33.5 million, a decrease of 6%.
The decrease in Safety Equipment is accounted for mainly by
reduced sales under U.S. defense contracts.
Gross margin on sales decreased to 32.4% of sales in the first
half of 1997 from 32.9% in the prior year. The lower gross
margin is explained by lower first quarter sales, product mix
and a recently completed fixed price contract for an automation
system.
Selling, general and administrative expenses were 21.0% of sales
in the first half of 1997, compared to 20.8% of sales in the
prior year. Included in the first quarter of 1997 expenses was
a charge of $264,000 to retire $5.6 million of industrial
revenue bonds, representing a write-off of the remaining
unamortized expenses involved in the issuance of the bonds.
Excluding this one-time expense, selling, general and
administrative expense in the first half of 1997 would have been
20.8% of sales, the same as in the prior year.
Research and development expenses were 4.6% of sales in the
first half of 1997 as compared to 5.0% in the same period in the
prior year. The decline in R&D expense was due to economies
resulting from the consolidation of certain engineering
functions within the Electrical Equipment segment. R&D expenses
equal 5.2% of sales in the Electrical Equipment segment and 2.4%
of sales in the Safety Equipment segment.
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<PAGE>
PART I (Continued)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FIRST HALF OF 1997 vs. FIRST HALF OF 1996 (Continued)
Continuing Operations (Continued)
- ---------------------------------
Net interest and other expenses decreased $266,000 in the first
half of 1997 compared to the same period in 1996. The amount of
total Company borrowing was slightly lower in 1997 as compared
to 1996 and the combined interest rate was slightly higher in
1997 than in the prior year. More interest expense was
allocated to discontinued operations in 1997 as compared to the
prior year due to the continued investment in Solium, which
occurred in the second half of 1996.
Income before taxes from continuing operations remained at 6.1%
of sales in the first half of 1996 and 1997. In the first
quarter of 1997 income before tax was 5.7% of sales and was 6.4%
in the just completed second quarter.
The estimated annual blended tax rate for 1997 is 39.0% as
compared to the effective tax rate of 38.3% used in the first
half of 1996.
Net income per share from continuing operations for the first
half of 1997 was 47 cents as compared to 44 cents in the prior
year. The adjusted weighted-average shares for the first half
of 1997 were 12,407,000 as compared to 12,558,000 in the same
prior year period. The difference is incremental shares
resulted mainly from a decrease in the number of stock options
that were "in the money's" in 1997, due to the lower average
stock price during the first half of 1997 as compared to 1996
and additional stock options that were issued in the first half
of 1997 which were dilutive.
Total orders received for continuing operations in the first
half of 1997 were $158.3 million as compared to $154.1 million
in the same period of the proceeding year. Orders for the
Electrical Equipment segment during the first half totaled
$118.9 million, while orders for the Safety Equipment segment
totaled $39.4 million.
Discontinued Operations
- -----------------------
On April 9, 1997, the Company announced that it would seek a
strategic buyer for its Solium technology and equipment, and
phase out the Solium subsidiary. As a result, the Company has
reported a charge of $12,040,000, net of taxes, on the disposal
of Solium and Solium has been reclassified as a discontinued
operation. The decision was made after the Company concluded
that it did not have the market and industry position to achieve
sufficient success in the near term.
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<PAGE>
PART I (Continued)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FIRST HALF OF 1997 vs. FIRST HALF OF 1996 (Continued)
Discontinued Operations (Continued)
- -----------------------------------
In light of the reclassification, the first quarter of 1997 and
the first half of 1996 have been restated to separately present
Solium's past operations, restructuring expense in June of 1996
and the discontinuance charge in March of 1997.
The Solium subsidiary has been accounted for as a discontinued
operation in accordance with APB 30, which among other
provisions, expects the plan of disposal to be carried out
within one year. The outcome of any negotiations concerning the
disposition of Solium and the specific date for such disposition
cannot be determined at this time.
The loss from discontinued operations of $13.6 million in the
first quarter of 1997 is composed of $12.1 million of estimated
loss on disposal of assets and a loss of $1.5 million from
operations in the first quarter of 1997. No further operational
losses from Solium are anticipated.
The ultimate financial impact of the disposal of the Solium
subsidiary could differ from management's estimate.
Net Loss
- --------
The net loss for the first half of 1997 of $7.8 million is
composed of $5.8 million of income from continuing operations
and a loss of $13.6 million from discontinued operations.
FINANCIAL POSITION AND LIQUIDITY
The Company's current ratio on June 27, 1997 was 3:1 and working
capital was $83.7 million.
Net income from continuing operations plus depreciation and
amortization was $11.8 million in the first six half of 1997 as
compared to $10.8 million for the same period in the prior year.
Trade receivables were 57 days at the end of the second quarter
of 1997 as compared to 55 days in the prior year. Inventory
turns were 4.2 times per year as of June 27,1997 as compared
with 3.9 times at the same point in the prior year.
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<PAGE>
PART I (Continued)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FINANCIAL POSITION AND LIQUIDITY (Continued)
Restricted cash of $6.2 million as of the end of the first
quarter of 1997 was used to retire $5.6 million of Industrial
Revenue Bonds, which reduced the Company's long-term debt.
Accounts payable increased as a result of increased purchasing
to support a higher level of sales activity.
Cash used for the purchase of plant and equipment decreased to
$6.8 million in the first half of 1997 as compared to the
purchase of $10.5 million in the same period of the proceeding
year. The principal difference is the $3.1 million of new
software and hardware purchased in the first half of 1996 to
update the Company's management information systems and $1.7
million of capital equipment for the Solium operation purchased
during the same period.
Debt less cash was $73.1 million on June 27, 1997, a $0.9
million decrease since the beginning of the year. At the end of
the first half of 1997, the Company had unused credit lines of
$9.8 million and outstanding borrowings under its credit
facility of $59.6 million. The average rate of interest on bank
borrowing during the first half of both 1997 and 1996 was 6.0%
As of June 27, 1997, the Company had approximately $4.2 million
of outstanding foreign exchange contracts in which foreign
currencies could be sold. These contracts serve to hedge
foreign currency exposures.
The cash to be expended in the discontinuance of the Solium
subsidiary is not expected to adversely affect the Company's
ability to finance operations and fund planned capital
expenditures. Additionally, the Company believes that
internally generated funds plus the existing lines of credit
will meet all cash requirements foreseeable at this time.
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
As previously reported by the Company in its 1996 Form 10-K and
its Form 10-Q for the quarter ended March 28, 1997, the Company
is a co-defendant, with certain of its past and present
officers, in actions filed in October 1996 in the United States
District Court for the Central District of California by certain
shareholders of the Company's common stock and an individual who
purchased the Company's 7-3/4% convertible subordinated
debentures, due 2003. A motion for class certification has been
granted in both complaints and the cases have been consolidated.
- 12 -
<PAGE>
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS (Continued)
The Company and its past and present officers are also co-
defendants in an action filed in December 1996 in Orange County
Superior Court by prior shareholders of Met One, Inc. All the
complaints allege that the Company made false and misleading
statements regarding the Company and its Solium subsidiary. In
addition, the Superior Court action includes allegations
concerning the Company's HYT subsidiary.
These actions, in aggregate, seek compensatory damages of
approximately $98 million plus legal fees. The Superior Court
action also seeks punitive damages plus rescission of the sale
of Met One as remedies. The Company believes the allegations
made are without merit and, in any event, the purported damages
are greatly overstated. The Company intends to vigorously
pursue its defense, and it has submitted claims to its insurers
in connection with the defense of these lawsuits. The
management, at this time, is not able to determine the eventual
disposition of these matters. However, in all matters of
litigation, an unfavorable outcome could have an adverse effect
on the Company's consolidated results of operations in the
period in which that matter is resolved.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3.1 Bylaws, as amended
10.1 Employment Agreement with David L. Schlotterbeck
10.2 Nonstatutory Stock Option Agreement with
David L. Schlotterbeck
10.3 Employment Agreement with Winston E. Hickman
10.4 Nonstatutory Stock Option Agreement with
Winston E. Hickman
27.0 Financial Data Schedule
(b) Reports on Form 8-K
A report on Form 8-K, dated April 9, 1997, disclosing the
Company's announcement regarding Solium was filed with the
Securities and Exchange Commission on April 21, 1997.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
PACIFIC SCIENTIFIC COMPANY, Registrant
By: /s/ Winston E. Hickman Date: August 11, 1997
---------------------- ---------------
Winston E. Hickman
Senior Vice President
EXHIBITS
- --------
3.1 Bylaws, as amended
10.1 Employment Agreement with David L. Schlotterbeck
10.2 Nonstatutory Stock Option Agreement with
David L. Schlotterbeck
10.3 Employment Agreement with Winston E. Hickman
10.4 Nonstatutory Stock Option Agreement with
Winston E. Hickman
27.0 Financial Data Schedule
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BYLAWS
PACIFIC SCIENTIFIC COMPANYEX EHIBIT 3.1
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ARTICLE I
OFFICES
Section 1 - PRINCIPAL OFFICES
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The board of directors shall fix the location of the principal
executive office of the corporation at any place within or
outside the State of California. If the principal executive
office is located outside this state, and the corporation has
one or more business offices in this state, the board of
directors shall fix and designate a principal business office in
the State of California.
Section 2 - OTHER OFFICES
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The board of directors may at any time establish, or may
designate an officer of the corporation to establish branch or
subordinate offices at any place or places where the corporation
is qualified to do business.
ARTICLE II
MEETING OF SHAREHOLDERS
Section 1 - PLACE OF MEETINGS
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Meetings of shareholders shall be held at any place within or
outside the State of California designated by the board of
directors. In the absence of any such designation,
shareholders' meetings shall be held at the principal executive
office of the corporation.
Section 2 - ANNUAL MEETING
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The annual meeting of shareholders shall be held each year on a
date and at a time designated by the board of directors. At
each annual meeting, directors shall be elected, and any other
proper business may be transacted.
Section 3 - SPECIAL MEETING
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A special meeting of the shareholders may be called at any time
by the board of directors, or by the chairman of the board, or
by the president, or by one or more shareholders holding shares
in the aggregate entitled to cast not less than 10% of the votes
at that meeting.
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If a special meeting is called by any person or persons other
than the board of directors, the request shall be in writing,
specifying the time of such meeting and the general nature of
the business proposed to be transacted, and shall be delivered
personally or sent by registered mail or by telegraphic or other
facsimile transmission to the chairman of the board, the
president, any vice president, or the secretary of the
corporation. The officer receiving the request shall cause
notice to be promptly given to the shareholders entitled to
vote, in accordance with the provisions of Sections 4 and 5 of
this Article II, that a meeting will be held at the time
requested by the person or persons calling the meeting, not less
than thirty-five (35) nor more than sixty (60) days after the
receipt of the request. If the notice is not given within
twenty (20) days after receipt of the request, the person or
persons requesting the meeting may give the notice. Nothing
contained in this paragraph of this Section 3 shall be construed
as limiting, fixing or affecting the time when a meeting of
shareholders called by action of the board of directors may be
held.
Section 4 - NOTICE OF SHAREHOLDERS' MEETINGS
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All notices of meeting of shareholders shall be sent or
otherwise given in accordance with Section 5 of this Article II
not less than ten (10) nor more than sixty (60) days before the
date of the meeting. The notice shall specify the place, date
and hour of the meeting and (i) in the case of a special
meeting, the general nature of the business to be transacted or
(ii) in the case of the annual meeting, those matters which the
board of directors, at the time of giving the notice, intends to
present for action by the shareholders. The notice of any
meeting at which directors are to be elected shall include the
name of any nominee or nominees whom, at the time of the notice,
management intends to present for election.
If action is proposed to be taken at any meeting for approval of
(i) a contract or transaction in which a director has a direct
or indirect financial interest, pursuant to Section 310 of the
Corporations Code of California, (ii) an amendment of the
Articles of Incorporation, pursuant to Section 902 of that Code,
(iii) a reorganization of the corporation, pursuant to Section
1201 of that Code, (iv) a voluntary dissolution of the
corporation, pursuant to Section 1900 of that Code, or (v) a
distribution in dissolution other than in accordance with the
rights of outstanding preferred shares, pursuant to Section 2007
of that Code, the notice shall also state the general nature of
that proposal.
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Section 5 - MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE
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Notice of any meeting of shareholders shall be given either
personally or by first-class mail or telegraphic or other
written communication, charges prepaid, addressed to the
shareholder at the address of that shareholder appearing on the
books of the corporation or given by the shareholder to the
corporation for the purpose of notice. If no such address
appears on the corporation's books or is given, notice shall be
deemed to have been given if sent to that shareholder by first-
class mail or telegraphic or other written communication to the
corporation's principal executive office, or if published at
least once in a newspaper of general circulation in the county
where that office is located. Notice shall be deemed to have
been given at the time when delivered personally or deposited in
the mail or sent by telegram or other means of written
communication.
If any notice addressed to a shareholder at the address of that
shareholder appearing on the books of the corporation is
returned to the corporation by the United States Postal Service
marked to indicate that the United States Postal Service is
unable to deliver the notice to the shareholder at that address,
all future notices or report shall be deemed to have been duly
given without further mailing if these shall be available to the
shareholder on written demand of the shareholder at the
principal executive office of the corporation for a period of
one year from the date of the giving of the notice.
An affidavit of the mailing or other means of giving any notice
of any shareholders' meeting shall be executed by the secretary,
assistant secretary, or any transfer agent of the corporation
giving the notice, and shall be filed and maintained in the
minute book of the corporation.
Section 6 - QUORUM
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The presence in person or by proxy of the holders of a majority
of the shares entitled to vote at any meeting of shareholders
shall constitute a quorum for the transaction of business. The
shareholders present at a duly called or held meeting at which a
quorum is present may continue to do business until adjournment,
notwithstanding the withdrawal of enough shareholders to leave
less than a quorum, if any action taken (other than adjournment)
is approved by at least a majority of the shares required to
constitute a quorum.
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Section 7 - ADJOURNED MEETING; NOTICE
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Any shareholders' meeting, annual or special, whether or not a
quorum is present, may be adjourned from time to time by the
vote of the majority of the shares represented at that meeting,
either in person or by proxy, but in the absence of a quorum, no
other business may be transacted at that meeting, except as
provided in Section 6 of this Article II.
When any meeting of shareholders, either annual or special, is
adjourned to another time or place, notice need not be given of
the adjourned meeting if the time and place are announced at a
meeting at which the adjournment is taken, unless a new record
date for the adjourned meeting is fixed, or unless the
adjournment is for more than forty-five (45) days from the date
set for the original meeting, in which case the board of
directors shall set a new record date. Notice of any such
adjourned meeting shall be given to each shareholder of record
entitled to vote at the adjourned meeting in accordance with the
provisions of Sections 4 and 5 of this Article II. At any
adjourned meeting the corporation may transact any business
which might have been transacted at the original meeting.
Section 8 - VOTING
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The shareholders entitled to vote at any meeting of shareholders
shall be determined in accordance with the provisions of Section
11 of this Article II, subject to the provisions of Sections 702
to 704, inclusive, of the Corporations Code of California
(relating to voting shares held by a fiduciary, in the name of a
corporation, or in joint ownership). The shareholders' vote may
be by voice vote or by ballot; provided, however, that any
election for directors must be by ballot if demanded by any
shareholder before the voting has begun. On any matter other
than elections of directors, any shareholder may vote part of
the shares in favor of the proposal and refrain from voting the
remaining shares or vote them against the proposal, but, if the
shareholder fails to specify the number of shares which the
shareholder is voting affirmatively, it will be conclusively
presumed that the shareholder's approving vote is with respect
to all shares that the shareholder is entitled to vote. If a
quorum is present, the affirmative vote of the majority of the
shares represented at the meeting and entitled to vote on any
matter (other than the election of directors) shall be the act
of the shareholders, unless the vote of a greater number or
voting by classes is required by California General Corporation
Law or by the Articles of Incorporation.
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At a shareholders' meeting at which directors are to be elected,
no shareholder shall be entitled to cumulate votes (i.e., cast
for any one or more candidates a number of votes greater than
the number of the shareholder's shares) unless the candidates'
names have been placed in nomination prior to commencement of
the voting and a shareholder has given notice prior to
commencement of the voting of the shareholder's intention to
cumulate votes. If any shareholder has given such a notice,
then every shareholder entitled to vote may cumulate votes for
candidates in nomination and give one candidate a number of
votes equal to the number of directors to be elected multiplied
by the number of votes to which that shareholder's shares are
entitled, or distribute the shareholder's votes on the same
principle among any or all of the candidates, as shareholder
thinks fit. The candidates receiving the highest number of
votes, up to the number of directors to be elected, shall be
elected.
Section 9 - WAIVER OF NOTICE OR CONSENT BY ABSENT SHAREHOLDERS
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The transactions of any meeting of shareholders, either annual
or special, however called and notice, and wherever held, shall
be as valid as though had at a meeting duly held after regular
call and notice, if a quorum, be present either in person or by
proxy, and if, either before or after the meeting, each person
entitled to vote, who was not present in person or by proxy,
signs a written waiver of notice or a consent to a holding of
the meeting, or an approval of the minutes. The waiver of
notice or consent need not specify either the business to be
transacted for the purpose of any annual or special meeting of
shareholders, except that, if action is taken or proposed to be
taken for approval of any of those matters specified in the
second paragraph of Section 4 of this Article II, the waiver of
notice or consent shall state the general nature of the
proposal. All such waivers, consents or approvals shall be
filed with the corporate records or made a part of the minutes
of the meeting.
Attendance by a person at a meeting shall also constitute a
waiver of notice of that meeting, except when the person
objects, at the beginning of the meeting, to the transaction of
any business because the meeting is not lawfully called or
convened, and except that attendance at a meeting is not a
waiver of any right to object to the consideration of matters
not included in the notice of the meeting if that objection is
expressly made at the meeting.
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Section 10 - SHAREHOLDER ACTION BY WRITTEN
CONSENT WITHOUT A MEETING
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Any action which may be taken at any annual or special meeting
of shareholders may be taken without a meeting and without prior
notice, if a consent in writing, setting forth the action so
taken, is signed by the holders of outstanding shares having not
less than the minimum number of votes that would be necessary to
authorize or take that action at a meeting at which all shares
entitled to vote thereon were present and voted. In the case of
election of directors, such a consent shall be effective only if
signed by the holders of all outstanding shares entitled to vote
for the election of directors; provided, however, that a
director may be elected at any time to fill a vacancy on the
board of directors that has not been filled by directors, by the
written consent of the holders of a majority of the outstanding
shares entitled to vote for the election of directors. All such
consents shall be filed with the secretary of the corporation
and shall be maintained in the corporate records. Any
shareholder giving a written consent, or the shareholder's proxy
holders, or a transferee of the shares or a personal
representative of the shareholder or their respective proxy
holders, may revoke the consent by a writing received by the
secretary of the corporation before written consents of the
number of shares required to authorize the proposed action have
been filed with the secretary.
If the consents of all shareholders entitled to vote have not
been solicited in writing, and if the unanimous written consent
of all such shareholders shall not have been received, the
secretary shall give prompt notice of the corporate action
approved by the shareholders without a meeting. This notice
shall be given in the manner specified in Section 5 of this
Article II. In the case of approval of (i) contracts or
transactions in which a director has a direct or indirect
financial interest, pursuant to Section 310 of the Corporations
Code of California, (ii) indemnification of agents of the
corporation, pursuant to Section 317 of that Code, (iii) a
reorganization of the corporation, pursuant to Section 1201 of
that Code, and (iv) a distribution in dissolution other than in
accordance with the rights of outstanding preferred shares,
pursuant to Section 2007 of that Code, the notice shall be given
at least ten (10) days before the consummation of any action
authorized by that approval.
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Section 11 - RECORD DATE FOR SHAREHOLDER
NOTICE, VOTING, AND GIVING CONSENTS
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For purposes of determining the shareholders entitled to notice
of any meeting or to vote or entitled to give consent to
corporate action without a meeting, the board of directors may
fix, in advance, a record date which shall not be more than
sixty (60) days nor less than ten (10) days before the date of
any such meeting nor more than sixty (60) days before any such
action without a meeting, and in this event only shareholders of
record on the date so fixed are entitled to notice and to vote
or to give consents, as the case may be, notwithstanding any
transfer of any shares on the books of the corporation after the
record date, except as otherwise provided in the California
General Corporation Law.
If the board of directors does not so fix a record date:
(a) The record date for determining shareholders entitled to
notice of or to vote at a meeting of shareholders shall be at
the close of business on the business day next preceding the day
on which notice is given or, if notice is waived, at the close
of business on the business day next preceding the day on which
the meeting is held.
(b) The record date for determining shareholders entitled to
give consent to corporate action in writing without a meeting,
(i) when no prior action by the board has been taken, shall be
the day on which the first written consent is given or (ii) when
prior action of the board has been taken, shall be at the close
of business on the day on which the board adopts the resolution
relating to that action, or the sixtieth (60th) day before the
date of such other action, whichever is later.
Section 12 - PROXIES
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Every person entitled to vote for directors or on any other
matter shall have the right to do so either in person or by one
or more agents authorized by a written proxy signed by the
person and filed with the secretary of the corporation. A proxy
shall be deemed signed if the shareholder's name is placed on
the proxy (whether by manual signature, typewriting, telegraphic
transmission, or otherwise) by the shareholder or the
shareholder's attorney in fact. A validly executed proxy which
does not state that it is irrevocable shall continue in full
force and effect unless (i) revoked by the person executing it,
before the vote pursuant to that proxy, by a writing delivered
to the corporation stating that the proxy is revoked, or by a
subsequent proxy executed by, or attendance at the meeting and
voting in person by, the person executing the proxy;
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or (ii) written notice of the death or incapacity of the maker
of that proxy is received by the corporation before the vote
pursuant to that proxy is counted; provided, however, that no
proxy shall be valid after the expiration of eleven (11) months
from the date of the proxy, unless otherwise provided in the
proxy. The revocability of a proxy that states on its face that
it is irrevocable shall be governed by the provisions of
Sections 705(e) and 705(f) of the Corporations Code of
California.
Section 13 - INSPECTORS OF ELECTION
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Before any meeting of shareholders, the board of directors may
appoint any persons other than nominees for office to act as
inspectors of election at the meeting or its adjournment. If no
inspectors of election are so appointed, the chairman of the
meeting may, and on the request of any shareholder or a
shareholder's proxy shall, appoint inspectors of election at the
meeting. The number of inspectors shall be either one (1) or
three (3). If inspectors are appointed at a meeting on the
request of one or more shareholders or proxies, the holders of a
majority of shares or their proxies present at the meeting shall
determine whether one (1) or three (3) inspectors are to be
appointed. If any person appointed as inspector fails to appear
or fails or refuses to act, the chairman of the meeting may, and
upon the request of any shareholder or a shareholder's proxy
shall, appoint a person to fill that vacancy.
These inspectors shall:
(a) Determine the number of shares outstanding and the voting
power of each, the shares represented at the meeting, the
existence of a quorum, and the authenticity, validity, and
effect of proxies;
(b) Receive votes, ballots, or consents;
(c) Hear and determine all challenges and questions in any way
arising in connection with the right to vote;
(d) Count and tabulate all votes or consents;
(e) Determine when the polls shall close;
(f) Determine the result; and
(g) Do any other acts that may be proper to conduct the
election or vote with fairness to all shareholders.
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ARTICLE III
DIRECTORS
Section 1 - POWERS
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Subject to the provisions of the California General Corporation
Law and any limitations in the Articles of Incorporation and
these Bylaws relating to action required to be approved by the
shareholders or by the outstanding shares, the business and
affairs of the corporation shall be managed and all corporate
powers shall be exercised by or under the direction of the board
of directors.
Without prejudice to these general powers, and subject to the
same limitations, the directors shall have the power to:
(a) Select and remove all officers, agents, and employees of
the corporation; prescribe any powers and duties for them that
are consistent with law, with the Articles of Incorporation, and
with these Bylaws; fix their compensation; and require from them
security for faithful service.
(b) Change the principal executive office or the principal
business office in the State of California from one location to
another; cause the corporation to be qualified to do business in
any other state, territory, dependency, or country and conduct
business within or without the State of California; and
designate any place within or without the State of California
for the holding of any shareholders' meeting, or meetings,
including annual meetings.
(c) Adopt, make, and use a corporate seal; prescribe the forms
of certificates of stock; and alter the form of the seal and
certificates.
(d) Authorize the issuance of shares of stock of the
corporation on any lawful terms, in consideration of money paid,
labor done, services actually rendered, debts or securities
canceled, or tangible or intangible property actually received.
(e) Borrow money and incur indebtedness on behalf of the
corporation, and cause to be executed and delivered for the
corporation's purposes, in the corporate name, promissory notes,
bonds, debentures, deeds of trust, mortgages, pledges,
hypothecations, and other evidences of debt and securities.
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(f) Designate a director to be chairman of the board if that
office is not filled by an officer of the Company, said chairman
to exercise and perform those powers and duties as are set forth
in Article V Section 6 of these Bylaws.
Section 2 - NUMBER AND QUALIFICATION OF DIRECTORS
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The number of directors of the corporation shall not be less
than five (5) nor more than eight (8). The exact number of
directors shall be six (6) until changed, within the limits
specified above by a bylaw amending this Section 2, duly adopted
by the board of directors or by the shareholders. The
indefinite number of directors may be changed, or a definite
number fixed without provision for an indefinite number, by a
duly adopted amendment to the Articles of Incorporation or by an
amendment to this Bylaw duly adopted by a vote or written
consent of holders of a majority of the outstanding shares
entitled to vote; provided, however, that any such amendment
reducing the fixed number or the minimum number of directors to
a number less than five (5) cannot be adopted if the votes cast
against its adoption at a meeting of the shareholders, or the
shares not consenting in the case of action by written consent,
are equal to more than 16-2/3 percent of the outstanding shares
entitled to vote. No amendment may change the stated maximum
number of authorized directors to a number greater than two
times the stated minimum number of directors minus one.
Section 3 - ELECTION AND TERM OF OFFICE OF DIRECTORS
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Directors shall be elected at each annual meeting of the
shareholders to hold office until the next annual meeting. Each
director, including a director elected to fill a vacancy, shall
hold office until the expiration of the term for which elected
and until a successor has been elected and qualified.
Section 4 - VACANCIES
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Vacancies in the board of directors may be filled by a majority
of the remaining directors, though less than a quorum, or by a
sole remaining director, except that a vacancy created by the
removal of a director by the vote or written consent of the
shareholders or by court order may be filled only by the vote of
a majority of the shares entitled to vote represented at a duly
held meeting at which a quorum is present, or by the written
consent of holders of a majority of the outstanding shares
entitled to vote. Each director so elected shall hold office
until the next annual meeting of the shareholders and until a
successor has been elected and qualified.
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A vacancy or vacancies in the board of directors shall be deemed
to exist in the event of the death, resignation, or removal of
any director, or if the board of directors by resolution
declares vacant the office of a director who has been declared
of unsound mind by an order of court or convicted of a felony,
or if the authorized number of directors is increased, or if the
shareholders fail, at any meeting of shareholders at which any
director or directors are elected, to elect the number of
directors to be voted for at that meeting.
The shareholders may elect a director or directors at any time
to fill any vacancy or vacancies not filled by the directors,
but any such election by written consent shall require the
consent of a majority of the outstanding shares entitled to
vote.
Any director may resign effective on giving written notice to
the chairman of the board, the president, the secretary, or the
board of directors, unless the notice specifies later time for
that resignation to become effective. If the resignation of a
director is effective at a future time, the board of directors
may elect a successor to take office when the resignation
becomes effective.
No reduction of the authorized number of directors shall have
the effect of removing any director before that director's term
of office expires.
Section 5 - PLACE OF MEETINGS AND MEETINGS BY TELEPHONE
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Regular meetings of the board of directors may be held at any
place within or outside the State of California that has been
designated from time to time by resolution of the board. In the
absence of such a designation, regular meetings shall be held at
the principal executive office of the corporation. Special
meetings of the board shall be held at any place within or
outside the State of California that has been designated in the
notice of the meeting or, if not stated in the notice or there
is no notice, at the principal executive office of the
corporation. Any meeting, regular or special, may be held by
conference telephone or similar communication equipment, so long
as all directors participating in the meeting can hear one
another, and all such directors shall be deemed to be present in
person at the meeting.
Section 6 - ANNUAL MEETING
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Immediately following each annual meeting of shareholders, the
board of directors shall hold a regular meeting for the purpose
of organization, any desired election of officers, and the
transaction of other business. Notice of this meeting shall not
be required.
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Section 7 - OTHER REGULAR MEETINGS
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Other regular meetings of the board of directors shall be held
without call at such time as shall from time to time be fixed by
the board of directors. Such regular meetings may be held
without notice.
Section 8 - SPECIAL MEETINGS
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Special meetings of the board of directors for any purpose or
purposes may be called at any time by the chairman of the board
or the president or any vice president or the secretary or any
two directors.
Notice of the time and place of special meetings shall be
delivered personally or by telephone to each director or sent by
first-class mail or telegram, charges prepaid, addressed to each
director at that director's address as it is shown on the
records of the corporation. In case the notice is mailed, it
shall be deposited in the United States mail at least four (4)
days before the time of the holding of the meeting. In case the
notice is delivered personally, or by telephone or telegram, it
shall be delivered personally or by telephone or to the
telegraph company at least forty-eight (48) hours before the
time of the holding of the meeting. Any oral notice given
personally or by telephone may be communicated either to the
director or to a person at the office of the director who the
person giving the notice has reason to believe will promptly
communicate it to the director. The notice need not specify the
purpose of the meeting nor the place if the meeting is to be
held at the principal executive office of the corporation.
Section 9 - QUORUM
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A majority of the authorized number of directors shall
constitute a quorum for the transaction of business, except to
adjourn as provided in Section 11 of this Article III. Every
act or decision done or made by a majority of the directors
present at a meeting duly held at which a quorum is present
shall be regarded as the act of the board of directors, subject
to the provisions of Section 310 of the Corporations Code of
California (as to approval of contracts or transactions in which
a director has a direct or indirect material financial
interest), Section 311 of that Code (as to appointment of
committees), and Section 317(e) of that Code (as to
indemnification of directors). A meeting at which a quorum is
initially present may continue to transact business
notwithstanding the withdrawal of directors, if any action taken
is approved by at least a majority of the required quorum for
that meeting.
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Section 10 - WAIVER OF NOTICE
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The transactions of any meeting of the board of directors,
however called and noticed or wherever held, shall be as valid
as though had at a meeting duly held after regular call and
notice if a quorum is present and if, either before or after the
meeting, each of the directors not present signs a written
waiver of notice, a consent to holding the meeting or an
approval of the minutes. The waiver of notice or consent need
not specify the purpose of the meeting. All such waivers,
consents, and approvals shall be filed with the corporate
records or made a part of the minutes of the meeting. Notice of
a meeting shall also be deemed given to any director who attends
the meeting without protesting before or at its commencement,
the lack of notice to that director.
Section 11 - ADJOURNMENT
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A majority of the directors present, whether or not constituting
a quorum, may adjourn any meeting to another time and place.
Section 12 - NOTICE OF ADJOURNMENT
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Notice of the time and place of holding an adjourned meeting
need not be given, unless the meeting is adjourned for more than
twenty-four (24) hours, in which case notice of the time and
place shall be given before the time of the adjourned meeting,
in the manner specified in Section 8 of this Article III, to the
directors who were not present at the time of the adjournment.
Section 13 - ACTION WITHOUT MEETING
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Any action required or permitted to be taken by the board of
directors may be taken without a meeting, if all members of the
board shall individually or collectively consent in writing to
that action. Such action by written consent shall have the same
force and effect as a unanimous vote of the board of directors.
Such written consent or consents shall be filed with the minutes
of the proceedings of the board.
Section 14 - FEES AND COMPENSATION OF DIRECTORS
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Directors and members of committees may receive such
compensation, if any, for their services, and such reimbursement
of expenses, as may be fixed or determined by resolution of the
board of directors. This Section 14 shall not be construed to
preclude any director from serving the corporation in any other
capacity as an officer, agent, employee, or otherwise, and
receiving compensation for those services.
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ARTICLE IV
COMMITTEES
Section 1 - COMMITTEES OF DIRECTORS
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The board of directors may, by resolution adopted by a majority
of the authorized number of directors, designate one or more
committees, each consisting of two or more directors, to serve
at the pleasure of the board. The board may designate one or
more directors as alternate members of any committee, who may
replace any absent member at any meeting of the committee. Any
committee, to the extent provided in the resolution of the
board, shall have all the authority of the board, except with
respect to:
(a) the approval of any action which, under the General
Corporation Law of California, also requires shareholders'
approval or approval of the outstanding shares;
(b) the filling of vacancies on the board of directors or in
any committee;
(c) the fixing of compensation of the directors for serving on
the board or on any committee;
(d) the amendment or repeal of bylaws or the adoption of new
bylaws;
(e) the amendment or repeal of any resolution of the board of
directors which by its express terms is not so amendable or
repealable;
(f) a distribution to the shareholders of the corporation,
except at a rate or in a periodic amount or within a price range
determined by the board of directors; or
(g) the appointment of any other committees of the board of
directors or the members of these committees.
Section 2 - MEETINGS AND ACTION OF COMMITTEES
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Meetings and action of committees shall be governed by, and
held and taken in accordance with, the provisions of Article III
of these Bylaws, Sections 5 (Place of Meetings), 7 (Regular
Meetings), 8 (Special Meetings and Notice), 9 (Quorum), 10
(Waiver of Notice), 11 (Adjournment), 12 (Notice of
Adjournment), and 13 (Action Without
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Meeting), with such changes in the context of those bylaws as
are necessary to substitute the committee and its members for
the board of directors and its members, except that the time of
regular meetings of committees may be determined either by
resolution of the board of directors or by resolution of the
committee; special meetings of committees may also be called by
resolution of the board of directors; and notice of special
meetings of committees shall also be given to all alternate
members, who shall have the right to attend all meetings of the
committee. The board of directors may adopt rules for the
government of any committee not inconsistent with the provisions
of these Bylaws.
ARTICLE V
OFFICERS
Section 1 - OFFICERS
- --------------------
The officers of the corporation shall be a president, a
secretary and a chief financial officer. The corporation may
also have, at the discretion of the board of directors, a
chairman of the board, a chief executive officer, chief
operating officer, one or more vice presidents, one or more
assistant secretaries, one or more assistant treasurers and such
other officers as may be appointed in accordance with the provi-
sions of Section 3 of this Article V. Any number of offices may
be held by the same person.
Section 2 - ELECTION OF OFFICERS
- --------------------------------
The officers of the corporation, except such officers as may be
appointed in accordance with the provisions of Section 3 or
Section 5 of this Article V, shall be chosen by the board of
directors, and each shall serve at the pleasure of the board,
subject to the rights, if any, of an officer under any contract
of employment.
Section 3 - SUBORDINATE OFFICERS
- --------------------------------
The board of directors may appoint, and may empower the
president, or chief executive officer, if any, to appoint such
other officers as the business of the corporation may require,
each of whom shall hold office for such period, have such
authority and perform such duties as are provided in the Bylaws
or as the board of directors may from time to time determine.
<PAGE>
Page 16
Section 4 - REMOVAL AND RESIGNATION OF OFFICERS
- -----------------------------------------------
Subject to the rights, if any, of an officer under any contract
of employment, any officer may be removed, either with or
without cause, by the board of directors, at any regular or
special meeting of the board, or, except in case of an officer
chosen by the board of directors, by any officer upon whom such
power of removal may be conferred by the board of directors.
Any officer may resign at any time by giving written notice to
the corporation. Any resignation shall take effect at the date
of the receipt of that notice or at any later time specified in
that notice; and, unless otherwise specified in that notice, the
acceptance of the resignation shall not be necessary to make it
effective. Any resignation is without prejudice to the rights,
if any, of the corporation under any contract to which the
officer is a party.
Section 5 - VACANCIES IN OFFICES
- --------------------------------
A vacancy in any office because of death, resignation, removal,
disqualification or any other cause shall be filled in the
manner prescribed in these Bylaws for regular appointments to
that office.
Section 6 - CHAIRMAN OF THE BOARD
- ---------------------------------
The chairman of the board, if such an officer be elected, shall,
if present, preside at meetings of the board of directors and
exercise and perform such other powers and duties as may be from
time to time assigned to him by the board of directors or
prescribed by the Bylaws. If there is no chief executive
officer or president, the chairman of the board shall, in addi-
tion, be the chief executive officer of the corporation and
shall have the powers and duties prescribed in Section 7 of this
Article V.
Section 7 - CHIEF EXECUTIVE OFFICER
- -----------------------------------
The chief executive officer, if such an officer be elected,
shall, subject to the control of the Board, have general
supervision, direction and control of the business and affairs
of the corporation. In the absence or disability of the
chairman of the board, or if no such officer is elected, the
chief executive officer shall preside at all meetings of
shareholders and the board of directors. He shall have the
general powers and duties of management usually vested in the
chief executive officer of a corporation, and shall have such
other powers and duties with respect to the administration of
the business and affairs of the corporation as may from time to
time be assigned to him by the board of directors or as
prescribed by the Bylaws.
<PAGE>
Page 17
Section 8 - PRESIDENT
- ---------------------
Subject to such supervisory powers, if any, as may be given by
the board of directors to the chairman of the board or the chief
executive officer, if there are such officers, the president
shall have the general powers and duties of management usually
vested in the office of president of a corporation and shall
have such other powers and duties as may from time to time be
prescribed by the board of directors or chief executive officer,
if any, or as prescribed by the Bylaws. If there is no chief
executive officer, the president shall be the chief executive
officer of the corporation and shall have the powers and duties
prescribed in Section 7 of this Article V.
Section 9 - CHIEF OPERATING OFFICER
- -----------------------------------
The chief operating officer shall have the general powers and
duties of management usually vested in the office of chief
operating officer of a corporation and shall have such other
powers and duties as may from time to time be prescribed by the
board of directors or chief executive officer, if any, or as
prescribed by the Bylaws. In the absence or disability of the
chairman of the board, chief executive officer and the
president, the chief operating officer shall perform all the
duties of the president.
Section 10 - VICE PRESIDENTS
- ----------------------------
In the absence or disability of the chief executive officer,
president and the chief operating officer, the vice presidents,
if any, in order of their rank as fixed by the board of
directors or, if not ranked, a vice president designated by the
board of directors, shall perform all the duties of the
president and when so acting shall have all the powers of, and
be subject to all the restrictions upon, the president. The
vice presidents shall have such other powers and perform such
other duties as from time to time may be prescribed for them
respectively by the board of directors or the Bylaws, and the
president, or the chairman of the board, if any, or the chief
executive officer, if any.
Section 11 - SECRETARY
- ----------------------
The secretary shall keep or cause to be kept, at the principal
executive office or such other place as the board of directors
may direct, a book of minutes of all meetings and actions of
directors, committees of directors, and shareholders, with the
time and place of holding, whether regular or special, and, if
special, how authorized, the notice given, the names of those
present at directors' meetings or committee meetings, the number
of shares present or represented at shareholders' meetings, and
the proceedings.
<PAGE>
Page 18
The secretary shall keep, or cause to be kept, at the principal
executive office or at the office of the corporation's transfer
agent or registrar, as determined by resolution of the board of
directors, a share register, or a duplicate share register,
showing the names of all shareholders and their addresses, the
number and classes of shares held by each, the number and date
of certificates issued for the same, and the number and date of
cancellation of every certificate surrendered for cancellation.
The secretary shall give, or cause to be given, notice of all
meetings of the shareholders and of the board of directors
required by the Bylaws or by law to be given, and he shall keep
the seal of the corporation if one be adopted, in safe custody,
and shall have such other powers and perform such other duties
as may be prescribed by the board of directors or by the Bylaws.
Section 12 - CHIEF FINANCIAL OFFICER
- ------------------------------------
The chief financial officer shall keep and maintain, or cause to
be kept and maintained, adequate and correct books and records
of accounts of the properties and business transactions of the
corporation, including accounts of its assets, liabilities,
receipts, disbursements, gains, losses, capital, retained
earning, and shares. The books of account shall at all reason-
able times be open to inspection by any director.
The chief financial officer shall deposit all moneys and other
valuables in the name and to the credit of the corporation with
such depositaries as may be designated by the board of
directors. He shall disburse the funds of the corporation as
may be ordered by the board of directors, shall render to the
president and directors, whenever they request it, an account of
all of his transactions as chief financial officer and of the
financial condition of the corporation, and shall have other
powers and perform such other duties as may be prescribed by the
board of directors or the Bylaws.
ARTICLE VI
INDEMNIFICATION OF DIRECTORS,
OFFICERS EMPLOYEES AND OTHER AGENTS
Section 1 - DIRECTORS
- ---------------------
The corporation shall, to the maximum extent permitted by
California law, indemnify each of its directors against
expenses, judgments, fines, settlements and other amounts
actually and reasonably incurred in connection with any
proceeding arising by reason of the fact that any such person is
or was a director of the corporation.
<PAGE>
Page 19
Expenses incurred by any director in defending any proceedings
shall be advanced by the corporation to the maximum extent
permitted by California law.
Section 2 - AGENTS
- ------------------
The corporation shall have the authority to the maximum extent
authorized by the Articles of Incorporation and not expressly
prohibited by the California General Corporations Code, to
indemnify each of its agents (as defined below) against
expenses, judgments, fines, settlements, and other amounts
actually and reasonably incurred in connection with any
proceeding arising by reason of the fact that any such person is
or was an agent of the corporation. The corporation shall also
have the authority, to the maximum extent permitted by
California law, to enter into indemnity agreements with its
agents and to advance expenses incurred by any agent of the
corporation in defending any proceeding.
Section 3 - OTHER RIGHTS
- ------------------------
The indemnification provided by this Article shall not be deemed
exclusive of any other rights to which those seeking
indemnification may be entitled under California law, any bylaw,
agreement, vote of shareholders or disinterested directors or
otherwise, both as to action in an official capacity and as to
action in another capacity while holding such office, and shall
continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to be a benefit of
the heirs, executors and administrators of the person.
Section 4 - INSURANCE
- ---------------------
The corporation shall have the authority to purchase and
maintain insurance on behalf of agents of the corporation
against any liability asserted against or incurred by any agent
in such capacity or arising out of the agent's status as agent.
Section 5 - DEFINITIONS
- -----------------------
For the purposes of this Article, an "agent" of the corporation
includes any person who is or was a director, officer, employee,
or other agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee, or
agent of another foreign or domestic corporation, partnership,
joint venture, trust, or other enterprise; or was a director,
officer, employee or agent of a corporation which was a
predecessor corporation of the corporation or of another
enterprise at the request of such predecessor corporation.
<PAGE>
Page 20
For purposes of this Article, "proceeding" means any threatened,
pending or completed action or proceeding, whether civil,
criminal, administrative or investigative. For purposes of this
Article, "expenses" includes, without limitation, attorneys'
fees and any expenses of establishing a right to
indemnification.
ARTICLE VII
RECORDS AND REPORTS
Section 1 - MAINTENANCE AND INSPECTION OF SHARE REGISTER
- --------------------------------------------------------
The corporation shall keep at its principal executive office, or
at the office of its transfer agent or registrar, if either be
appointed and as determined by resolution of the board of
directors, a record of its shareholders, giving and names and
addresses of all shareholders and the number of class of shares
held by each shareholder.
A shareholder or shareholders of the corporation holding at
least five percent (5%) in the aggregate of the outstanding
voting shares of the corporation may (i) inspect and copy the
records of shareholders' names and addresses and shareholdings
during usual business hours on five days prior written demand on
the corporation, and (ii)) obtain from the transfer agent of the
corporation, on written demand and on the tender of such
transfer agent's usual charges for such list, a list of the
shareholders' names and addresses, who are entitled to vote for
the election of directors, and their shareholdings, as of the
most recent record date for which that list has been compiled or
as of a date specified by the shareholder after the date of
demand. This list shall be made available to any such
shareholder by the transfer agent on or before the later of five
(5) days after the demand is received or the date specified in
the demand as the date as of which the list is to be compiled.
The record of shareholders shall also be open to inspection on
the written demand of any shareholder or holder of a voting
trust certificate, at any time during usual business hours, for
a purpose reasonably related to the holder's interests as a
shareholder or as the holder of a voting trust certificate. Any
inspection and copying under this Section 1 may be made in
person or by an agent or attorney of the shareholder or holder
of a voting trust certificate making the demand.
<PAGE>
Page 21
Section 2 - MAINTENANCE AND INSPECTION OF BYLAWS
- ------------------------------------------------
The corporation shall keep at its principal executive office, or
if its principal executive office is not in the State of
California, at its principal business office in this state, the
original or a copy of the Bylaws as amended to date, which shall
be open to inspection by the shareholders at all reasonable
times during office hours. If the principal executive office of
the corporation is outside the State of California and the
corporation has no principal business office in this state, the
Secretary shall, upon the written request of any shareholder,
furnish to that shareholder a copy of the Bylaws as amended to
date.
Section 3 - MAINTENANCE AND INSPECTION OF OTHER CORPORATE RECORDS
- -----------------------------------------------------------------
The accounting books and records and minutes of proceedings of
the shareholders and the board of directors and any committee or
committees of the board of directors shall be kept at such place
or places designated by the board of directors, or, in the
absence of such designation, at the principal executive office
of the corporation. The minutes shall be kept either in written
form or any other form capable of being converted into written
form. The minutes and accounting books and records shall be
open to inspection upon the written demand of any shareholder or
holder of a voting trust certificate, at any reasonable time
during usual business hours, for a purpose reasonably related to
the holder's interests as a shareholder or as the holder of a
voting trust certificate. The inspection may be made in person
or by an agent or attorney, and shall include the right to copy
and make extracts. These rights of inspection shall extend to
the records of each subsidiary corporation of the corporation.
Section 4 - INSPECTION BY DIRECTORS
- -----------------------------------
Every director shall have the absolute right at any reasonable
time to inspect all books, records, and documents of every kind
and the physical properties of the corporation and each of its
subsidiary corporations. This inspection by a director may be
made in person or by an agent or attorney and the right of
inspection includes the right to copy and make extracts of
documents.
Section 5 - ANNUAL REPORT TO SHAREHOLDERS
- -----------------------------------------
The board of directors shall cause an annual report to be sent
to the shareholders not later than one hundred twenty (120) days
after the close of the fiscal year adopted by the corporation.
<PAGE>
Page 22
This report shall be sent at least fifteen (15) days before the
annual meeting of shareholders to be held during the next fiscal
year and in the manner specified in Section 5 of Article II of
these Bylaws for giving notice to shareholders of the
corporation. The annual report shall contain a balance sheet as
of the end of the fiscal year and an income statement and
statement of changes in financial position for the fiscal year,
accompanied by any report of independent accountants or, if
there is no such report, the certificate of an authorized
officer of the corporation that the statements were prepared
without audit from the books and records of the corporation.
Section 6 - FINANCIAL STATEMENTS
- --------------------------------
A copy of any annual financial statement and any income
statement of the corporation for each quarterly period of each
fiscal year, and any accompanying balance sheet of the
corporation as of the end of each such period, that has been
prepared by the corporation shall be kept on file in the
principal executive office of the corporation for twelve (12)
months and each such statement shall be exhibited at all
reasonable times to any shareholder demanding an examination of
any such statement or a copy shall be mailed to any such
shareholder. If a shareholder or shareholders holding at least
five percent (5%) of the outstanding shares of any class of
stock of the corporation makes a written request to the
corporation for an income statement of the corporation for the
three-month, six-month or nine-month period of the then current
fiscal year ended more than thirty (30) days before the date of
the request, and a balance sheet of the corporation as of the
end of that period, the chief financial officer shall cause that
statement to be prepared, if not already prepared, and shall
deliver personally or mail that statement or statements to the
person making the request within thirty (30) days after the
receipt of the request. If the corporation has not sent to the
shareholders its annual report for the last fiscal year, this
report shall likewise be delivered or mailed to the shareholder
or shareholders within thirty (30) days after the request.
The corporation shall also, on the written request of any
shareholder, mail to the shareholder a copy of the last annual,
semi-annual, or quarterly income statement which it has
prepared, and a balance sheet as of the end of that period.
The quarterly income statement and balance sheets referred to in
this section shall be accompanied by the report, if any, of any
independent accountants engaged by the corporation or the
certificate of an authorized officer of the corporation that the
financial statements were prepared without audit from the books
and records of the corporation.
<PAGE>
Page 23
Section 7 - ANNUAL STATEMENT OF GENERAL INFORMATION
- ---------------------------------------------------
The corporation shall, during the period commencing on January 1
and ending on June 30 of each year, file with the Secretary of
State of the State of California, on the prescribed form, a
statement setting forth the authorized number of directors, the
names and complete business or residence addresses of all
incumbent directors, the names and complete business or
residence addresses of the chief executive officer, secretary,
and chief financial officer, the street address of its principal
executive office or principal business office in this state, and
the general type of business constituting the principal business
activity of the corporation, together with a designation of the
agent of the corporation for the purpose of service of process,
all in compliance with Section 1502 of the Corporations Code of
California.
ARTICLE VIII
GENERAL CORPORATE MATTERS
Section 1 - RECORD DATE FOR PURPOSES OTHER THAN NOTICE AND
VOTING
- ----------------------------------------------------------------
- -
For purposes of determining the shareholders entitled to receive
payment of any dividend or other distribution or allotment of
any rights or entitled to exercise any rights in respect of any
other lawful action (other than action by shareholders by
written consent without a meeting), the board of directors may
fix, in advance, a record date, which shall not be more than
sixty (60) days before any such action, and in that case only
shareholders of record on the date so fixed are entitled to
receive the dividend, distribution or allotment of rights or to
exercise the rights, as the case may be, notwithstanding any
transfer of any shares on the books of the corporation after the
record date so fixed, except as otherwise provided in the
California General Corporation Law.
If the board of directors does not so fix a record date, the
record date for determining shareholders for any such purpose
shall be at the close of business on the day on which the board
adopts the applicable resolution or the sixtieth (60th) day
before the date of that action, whichever is later.
<PAGE>
Page 24
Section 2 - CHECKS, DRAFTS, EVIDENCES OF INDEBTEDNESS
- -----------------------------------------------------
All checks, drafts, or other orders for payment of money, notes,
or other evidences of indebtedness, issued in the name of or
payable to the corporation, shall be signed or endorsed by such
person or persons and in such manner as, from time to time,
shall be determined by resolution of the board of directors.
Section 3 - CORPORATE CONTRACTS AND INSTRUMENTS: HOW EXECUTED
- -------------------------------------------------------------
The board of directors, except as otherwise provided in these
Bylaws, may authorize an officer or officers, agent or agents,
to enter into any contract or execute any instrument in the name
of and on behalf of the corporation, and this authority may be
general or confined to specific instances; and, unless so
authorized or ratified by the board of directors or within the
agency power of an officer, no officer, agent, or employee shall
have any power or authority to bind the corporation by any
contract or engagement or to pledge its credit or to render it
liable for any purpose or for any amount.
Section 4 - CERTIFICATES FOR SHARES
- -----------------------------------
A certificate or certificates for shares of the capital stock of
the corporation shall be issued to each shareholder when any of
these shares are fully paid, and the board of directors may
authorize the issuance of certificates or shares as partly paid
provided that these certificates shall state the amount of the
consideration to be paid for them and the amount paid. All
certificates shall be signed in the name of the corporation by
the chairman of the board or vice chairman of the board or the
president or vice president and by the chief financial officer
or the treasurer or any assistant treasurer or the secretary or
any assistant secretary, certifying the number of shares and the
class or series of shares owned by the shareholder. Any or all
of the signatures on the certificate may be facsimile. In case
any officer, transfer agent, or registrar who has signed or
whose facsimile signature has been placed on a certificate shall
have ceased to be that officer, transfer agent, or registrar
before that certificate is issued, it may be issued by the
corporation with the same effect as if that person were an
officer, transfer agent, or registrar at the date of issue.
<PAGE>
Page 25
Section 5 - LOST CERTIFICATES
- -----------------------------
Except as provided in this Section 5, no new certificates for
shares shall be issued to replace an old certificate unless the
latter is surrendered to the corporation and canceled at the
same time. The board of directors may, in case any share
certificate or certificate for any other security is lost,
stolen, or destroyed, authorize the issuance of a replacement
certificate on such terms and conditions as the board may
require, including provision for indemnification of the
corporation secured by a bond or other adequate security
sufficient to protect the corporation against any claim that may
be made against it, including any expense or liability, on
account of the alleged loss, theft, or destruction of the
certificate or the issuance of the replacement certificate.
Section 6 - REPRESENTATION OF SHARES OF OTHER CORPORATIONS
- ----------------------------------------------------------
The chairman of the board, the president, or any vice president,
or any other person authorized by resolution of the board of
directors or by any of the foregoing designated officers, is
authorized to vote on behalf of the corporation any and all
shares of any other corporation or corporations, foreign or
domestic, standing in the name of the corporation. The
authority granted to these officers to vote or represent on
behalf of the corporation any and all shares held by the
corporation in any other corporation or corporations may be
exercised by any of these officers in person or by any person
authorized to do so by a proxy duly executed by these officers.
Section 7 - CONSTRUCTION AND DEFINITIONS
- ----------------------------------------
Unless the context requires otherwise, the general provisions,
rules of construction, and definitions in the California General
Corporation Law shall govern the construction of these Bylaws.
Without limiting the generality of this provision, the singular
number includes the plural, the plural number includes the
singular, and the term "person" includes both a corporation and
a natural person.
<PAGE>
Page 26
ARTICLE IX
AMENDMENTS
Section 1 - AMENDMENT BY SHAREHOLDERS
- -------------------------------------
New bylaws may be adopted or these Bylaws may be amended or
repealed by the vote or written consent of holders of a majority
of the outstanding shares entitled to vote; provided, however,
that if the Articles of Incorporation of the corporation set
forth the number of authorized directors of the corporation, the
authorized number of directors may be changed only by an
amendment of the Articles of Incorporation.
Section 2 - AMENDMENT BY DIRECTORS
- ----------------------------------
Subject to the rights of the shareholders as provided in Section
1 of this Article IX, to adopt, amend, or repeal bylaws, bylaws
may be adopted, amended or repealed by the board of directors
provided, however, that the board of directors may adopt a bylaw
or amendment of a bylaw changing the authorized number of
directors only for the purpose of fixing the exact number of
directors within the limits specified in the Articles of
Incorporation or in Section 2 of Article III of these Bylaws.
<PAGE>
<PAGE>
EXHIBIT 10.1
- ------------
Page 1
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is effective as of
the 7th day of July, 1997, between PACIFIC SCIENTIFIC COMPANY, a
California corporation (the "Company"), and DAVID L.
SCHLOTTERBECK (the "Executive").
In consideration of the promises and covenants set forth below,
the parties hereto agree as follows:
1. EMPLOYMENT
The Company hereby agrees to employ Executive, and Executive
hereby agrees to accept such employment with the Company, on the
terms and conditions set forth herein.
2. TERM
The employment of Executive by the Company as provided in this
Agreement will commence on July 7, 1997 (the "Start Date"), and
end on December 31, 2000, unless further extended or sooner
terminated as hereinafter provided. On October 1, 2000, and on
October 1 of each year thereafter (each an "Extension Date"),
the term of Executive's employment hereunder shall automatically
be extended for one additional year unless, prior to such
Extension Date, either party delivers written notice to the
other party that the term of Executive's employment hereunder
will not be extended or that Executive's employment is otherwise
terminated pursuant to the terms of this Agreement.
3. POSITION AND DUTIES
Executive shall serve as President and Chief Operating Officer
of the Company, or such other position or positions as may be
agreed upon by Executive and the Company. Executive shall at
all times perform his duties and obligations faithfully and
diligently and shall devote all his business time, attention and
efforts exclusively to the business of the Company. Executive
shall industriously perform his duties under the supervision of
and report to the Chief Executive Officer of the Company and
shall accept and comply with all directions from and all
policies established from time to time by the Chief Executive
Officer and the Board of Directors of the Company. Executive's
primary duties shall include, without limitation, responsibility
for day to day management of the Company in concert and
cooperation with the Chief Executive Officer and such other
duties as may from time to time be prescribed by the Chief
Executive Officer of the Company. Executive shall promote the
trade and business of the Company to the best of his ability and
shall adhere to the Company's policies and procedures applicable
to the Company's employees generally.
<PAGE>
Page 2
Executive shall not directly or indirectly render any services
of a business, commercial or professional nature to any other
person, entity or organization, whether for compensation or
otherwise, without the prior consent of the Company's Chief
Executive Officer; provided, however, that the foregoing shall
not preclude Executive from (i) serving on boards of trade
associations and/or charitable organizations (subject to
reasonable approval of the Chief Executive Officer of the
Company) and (ii) engaging in charitable activities and
community affairs, provided that such activities and
directorships do not interfere with the proper performance of
Executive's duties and responsibilities hereunder.
4. PLACE OF PERFORMANCE
In connection with Executive's employment by the Company and
except for required travel on Company business, Executive shall
be based at the principal executive offices of the Company.
5. COMPENSATION AND RELATED MATTERS
(a) Salary. During the term of Executive's employment
hereunder, the Company shall pay to Executive a salary of
$260,000 per annum, subject to increase (but not decrease) in
the sole discretion of Board of Directors based on performance
and salary reviews of Executive in accordance with Company
policy. Such salary shall be paid in equal semi-monthly
installments (or such shorter intervals as the Company may
elect) and shall accrue from day to day. Executive's salary
shall be subject to annual review by the Company's Board of
Directors or its Compensation Committee.
(b) Performance Bonus. During the term of Executive's
employment hereunder, Executive shall be eligible for an annual
bonus (which bonus may be pursuant to the Company's Management
Incentive Plan) based on Executive's performance, which bonus
shall be payable within ninety days after the end of each
Company fiscal year. The amount of such bonus, if any, shall be
determined by the Chief Executive Officer by evaluating
Executive's performance against certain goals and objectives
(whether quantifiable, subjective or both) established by the
Chief Executive Officer after consultation with Executive prior
to the end of the first quarter of each fiscal year, except that
for the 1997 fiscal year, the goals and objectives are to be
established prior to the end of the third quarter of 1997. The
full "target" amount of such bonus for accomplishing the goals
and objectives shall be 50% of Executive's then current base
salary as set forth in Section 5(a). In the case of the 1997
fiscal year, Executive's bonus shall be prorated for the actual
number of days worked by Executive in 1997.
<PAGE>
Page 3
(c) Vacations. During the term of Executive's employment
hereunder, Executive shall be entitled to four weeks of vacation
in each calendar year, and to compensation with respect to
earned but unused vacation days determined in accordance with
the Company's vacation policy.
(d) Expenses. During the term of Executive's employment
hereunder, Executive shall be entitled to receive reimbursement
for all reasonable out-of-pocket travel and other expenses
(excluding ordinary commuting expenses) incurred by Executive in
performing Executive's services hereunder, provided that:
(i) Each such expenditure is of a nature qualifying it as a
proper business expenditure of the Company and is approved by
the Company; and
(ii) Executive furnishes to the Company adequate documentary
evidence for the substantiation of such expenditures and
Executive otherwise complies with Company policies with respect
to expense reimbursement.
(e) Stock Option. Executive acknowledges that, as additional
compensation for Executive's employment hereunder, Executive
will be granted a nonstatutory stock option (the "Stock Option")
to acquire 150,000 of the Company's common stock pursuant to the
Nonstatutory Stock Option Agreement attached hereto as Exhibit
A. Executive's right to exercise the Stock Option shall be
governed by the terms of the Nonstatutory Stock Option
Agreement.
The Company agrees to (i) file with the Securities and Exchange
Commission a Registration Statement on Form S-8 for the purpose
of registering under the Securities Act in 1933 the shares of
common stock underlying the Stock Option, and (b) file with the
New York Stock Exchange, Inc. a Supplemental Listing Application
for the purpose of listing the shares of common stock subject to
the Stock Option on the New York Stock Exchange.
Executive may, from time to time, be eligible to receive
additional options as determined in the sole discretion of the
Company's Board of Directors and the Compensation Committee of
the Board of Directors.
(f) Medical Insurance and Other Benefits. During the term of
Executive's employment hereunder, Executive will be entitled to
participate in any medical, dental and disability insurance
plans, life insurance plans, retirement plans and other employee
welfare and benefit plans or programs made available to the
Company's senior-level executives or its employees generally, as
such plans and programs may be in effect from time to time.
<PAGE>
Page 4
6. TERMINATION
(a) Agreement Terminable at Will. Notwithstanding anything
herein to the contrary, this Agreement and Executive's
employment with the Company are terminable at will by the
Company for any reason, with or without prior notice or cause;
provided that Executive's entitlement to payments and benefits
following such termination will depend on the type of
termination and shall be governed by the other provisions of
this Section 6.
(b) Termination for Cause
(1) The Company may at any time upon notice to Executive
terminate this Agreement and Executive's employment hereunder
for "Cause" pursuant to the provisions of this Section 6(b).
Executive shall be given notice by the Chief Executive Officer
of his intention to terminate Executive for Cause, and the
Company shall give Executive an opportunity to address, at the
Company's option, the Board of Directors or a committee of one
or more directors regarding the grounds on which the proposed
termination for Cause is based.
For purposes of this Agreement, the Company shall have "Cause"
to terminate Executive's employment hereunder upon:
(A) The breach by Executive of any material provision or
covenant of this Agreement; or
(B) Executive's failure to perform or the gross negligence in
the performance of Executive's material duties hereunder (and if
such failure or gross negligence is susceptible to cure by
Executive, the failure to effect such cure by Executive within
thirty (30) days after written notice of such failure or gross
negligence is given to Executive); or
(C) Executive's engagement in an act of dishonesty or
falsification or any transaction involving a material conflict
of interest which was not disclosed to and approved by the
Company's Board of Directors; or
(D) Except as permitted hereunder, Executive's unexplained
absences from the Company; or
(E) Executive's use of alcohol, which use interferes with the
performance of Executive's duties hereunder, or Executive's use
of illegal narcotics; or
(F) Executive's indictment for a crime of theft, embezzlement,
fraud, misappropriation of funds or other alleged act of
dishonesty by Executive, or Executive's indictment for any other
felony or other crime involving moral turpitude; or
<PAGE>
Page 5
(G) Executive's engagement in discrimination or harassment on
any statutorily prohibited basis; or
(H) Executive's engagement in any violation of law relating to
Executive's employment by the Company or violation by Executive
of Executive's duty of loyalty to the Company.
(2) If this Agreement is terminated by the Company for Cause
pursuant to this Section 6(b), the Company shall have no further
obligation or liability to Executive, except that Executive
shall be entitled to receive only (i) the portion of Executive's
salary as set forth in Section 5(a) which has been earned up to
the Date of Termination, (ii) compensation for any accrued and
unused vacation up to the Date of Termination, and (iii) reim-
bursement, pursuant to Section 5(d) for business expenses
incurred up to the Date of Termination (collectively, the
"Minimum Payments").
(c) Death
(1) This Agreement and Executive's employment hereunder shall
terminate automatically upon Executive's death.
(2) If this Agreement is terminated because of Executive's
death pursuant to this Section 6(c), the Company shall have no
further obligation or liability to Executive, except that
Executive shall be entitled to receive only (i) the Minimum
Payments, and (ii) any life insurance proceeds Executive is
otherwise entitled to under any applicable life insurance in
effect on the Date of Termination.
(d) Disability
(1) If Executive becomes disabled during Executive's
employment hereunder, this Agreement and Executive's employment
hereunder shall terminate on the date of determination by the
Company of such disability. As used herein, "disability" shall
mean any condition that qualifies as a disability under the
Company's long-term disability plan as in effect on the date of
determination or which renders Executive incapable of performing
substantially all of his managerial and executive services
hereunder for ninety (90) days or more in the aggregate during
any calendar year, and which at any time after such ninety (90)
days the Company shall determine continues to render Executive
incapable of performing his managerial and executive services
hereunder.
<PAGE>
Page 6
(2) If this Agreement is terminated because of Executive's
disability pursuant to this Section 6(d), the Company shall have
no further obligation or liability to Executive, except that
Executive shall be entitled to receive only (i) the Minimum
Payments, and (ii) any benefits to which Executive is entitled
under the Company's long-term disability plan as in effect on
the Date of Termination.
(e) Termination Other Than for Cause, Death or Disability
(1) The Company shall, for any reason, be entitled to
terminate this Agreement and Executive's employment hereunder at
any time without Cause and other than on account of Executive's
death or disability pursuant to this Section 6(e).
(2) If this Agreement is terminated by the Company pursuant to
this Section 6(e), the Company shall have no further obligation
or liability to Executive, except that Executive shall be
entitled to receive only (i) the Minimum Payments, and (ii) a
severance payment of, at the option of Executive, either (A)
eighteen (18) months of Executive's then current salary as set
forth in Section 5(a) payable in a lump sum within thirty (30)
days after the Date of Termination or as otherwise mutually
agreed to by the parties, or (B) eighteen (18) months of
Executive's then current salary as set forth in Section 5(a)
payable in semi-monthly installments over an eighteen (18)
months period after the Date of Termination.
(f) Resignation for Good Reason
(1) Executive shall be entitled to terminate this Agreement
and Executive's employment hereunder at any time for Good Reason
pursuant to the provisions of this Section 6(f).
For purposes of this Agreement, Executive shall have "Good
Reason" to terminate Executive's employment hereunder if,
without Executive's express consent, the Company substantially
reduces Executive's duties and responsibilities such that it
results in a material adverse reduction in Executive's position,
authority or responsibilities, and the Company fails to cure
such reduction in duties and responsibilities within twenty (20)
days after written notice specifying the particular acts
objected to and the specific cure requested is given to the
Company by Executive.
<PAGE>
Page 7
(2) If this Agreement is terminated by Executive for Good
Reason pursuant to this Section 6(f), the Company shall have no
further obligation or liability to Executive, except that
Executive shall be entitled to receive only (i) the Minimum
Payments, and (ii) a severance of, at the option of Executive,
either (A) eighteen (18) months of Executive's then current
salary as set forth in Section 5(a) payable in a lump sum within
thirty (30) days after the Date of Termination or as otherwise
mutually agreed to by the parties, or (B) eighteen (18) months
of Executive's then current salary as set forth in Section 5(a)
payable in semi-monthly installments over an eighteen (18)
months period after the Date of Termination.
(g) Resignation without Good Reason
(1) Executive shall be entitled to terminate this Agreement
and Executive's employment hereunder without Good Reason at any
time on thirty (30) days prior written notice delivered by
Executive to the Company.
(2) If this Agreement is terminated by Executive pursuant to
this Section 6(g), the Company shall have no further obligation
or liability to Executive, except that Executive shall be
entitled to receive only the Minimum Payments.
(h) Termination of Employment Following a Change of Control.
Notwithstanding anything else in this Agreement and in addition
to the other provisions, if within one year following a "Change
of Control of the Company" (i) Executive terminates his
employment for Good Reason, (ii) the Company terminates
Executive's employment other than for Cause, death or
disability, or (iii) the Company delivers notice to Executive
that it is not extending the term of Executive's employment
pursuant to Section 2 of this Agreement for one year, then the
Company shall be obligated to pay to Executive or Executive's
estate the payments and benefits provided in Subsection 6(f)(2)
above.
For purposes of this Agreement, a "Change of Control of the
Company" shall be deemed to have occurred if:
A. the shareholders of the Company approve a definitive
agreement to sell, transfer, or otherwise dispose of all or
substantially all of the Company's assets and properties; or
<PAGE>
Page 8
B. any "person" (as such term is used in Section 13(d) and
14(d) of the Securities Exchange Act of 1934) is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the
Securities Exchange Act of 1934), directly or indirectly, of
securities of the Company representing fifty percent (50%) or
more of the combined voting power of the Company's then
outstanding securities; provided, however, that the following
shall not constitute a "Change in Control" of the Company:
(1) any acquisition directly from the Company (excluding any
acquisition resulting from the exercise of a conversion or
exchange privilege in respect of outstanding convertible or
exchangeable securities); or
(2) any acquisition by an employee benefit plan (or related
trust) sponsored or maintained by the Company or any corporation
controlled by the Company; or
C. the shareholders of the Company approve the dissolution or
liquidation of the Company; or
D. the shareholders of the Company approve a definitive
agreement to merge or consolidate the Company with or into
another entity or entities, the result of which merger or
consolidation is that less than 50% of the outstanding voting
securities of the surviving or resulting entity are, or are to
be, owned by holders of the Company's common stock immediately
prior to the merger.
(i) Notice of Termination. Any termination of Executive's
employment by the Company or by Executive (other than
termination pursuant to Section 6(c) above) shall be
communicated by a written Notice of Termination to the other
party hereto. For purposes of this Agreement, a "Notice of
Termination" means a notice which (i) indicates the specific
termination provision in this Agreement relied upon, (ii) sets
forth the circumstances which provide a basis for termination of
Executive's employment under the provisions so indicated, and
(iii) if the termination date is other than the date of receipt
of such notice, specifies the termination date of this Agreement
(which date shall not be more than thirty (30) days after the
giving of such notice).
(j) Date of Termination. "Date of Termination" shall mean the
date of death, the date of the determination of a disability,
the date of receipt of the Notice of Termination or the date
specified therein (which date shall not be earlier than receipt
of the Notice of Termination), as the case may be.
<PAGE>
Page 9
7. EXCLUSIVITY OF PAYMENTS
Upon termination of Executive's employment hereunder, Executive
shall not be entitled to any severance payments or severance
benefits from the Company or any payments by the Company on
account of any claim for wrongful termination, including but not
limited to claims under any federal, state or local human and
civil rights or labor laws, other than the payments and benefits
provided in Section 6, except for any benefits which may be due
to Executive in the normal course under any employee benefit
plan or program of the Company which provides for benefits after
termination of employment. Executive's right to receive
payments or benefits under this Agreement upon termination of
employment will cease if Executive breaches any provision of
Sections 8 or 9 below.
8. PROPRIETARY INFORMATION
(a) Definition. Executive hereby acknowledges that Executive
possesses and may make use of, acquire, create, develop or add
to certain confidential and/or proprietary information regarding
the Company and its business (whether in existence prior to, as
of or after the date hereof, collectively, "Proprietary
Information"), which Proprietary Information shall include,
without limitation, all of the following materials and
information (whether or not reduced to writing and whether or
not patentable or protected by copyright): trade secrets,
inventions, processes, formulae, programs, technical data,
"know-how," procedures, manuals, confidential reports and
communications, marketing methods, product sales or cost
information, new product ideas or improvements, new packaging
ideas or improvements, research and development programs,
identities or lists of suppliers, vendors or customers,
financial information and financial projections of the Company,
or any other confidential or proprietary information relating to
the Company and/or its business. The term "Proprietary
Information" does not include any information that (i) at the
time of disclosure is generally available to and known by the
public (other than as a result of its disclosure by Executive),
(ii) was available to Executive prior to disclosure by the
Company, provided that the person who was the source of such
information was not known by Executive to be subject to an
obligation of confidentiality to the Company, or (iii) becomes
available to Executive on a non-confidential basis from a person
other than the Company or its representatives, provided that the
source of such information was not known by Executive to be
subject to an obligation of confidentiality to the Company.
(b) Nondisclosure. During the term of this Agreement and
thereafter, Executive will not, without the prior express
written consent of the Board of Directors, disclose or make any
use of any Proprietary Information except as may be required in
the course of the performance of Executive's services under this
Agreement.
<PAGE>
Page 10
(c) Agreement Not to Solicit Employees and Customers. To
protect the Proprietary Information and trade secrets of the
Company, Executive agrees, during the term of this Agreement and
for a period of two (2) years after termination of this
Agreement, not to, directly or indirectly, either on Executive's
own behalf or on behalf of any other person or entity, solicit
or employ any person who is an employee of the Company or any
Company subsidiary or attempt to persuade any customer of the
Company or any Company subsidiary to cease to do business or to
reduce the amount of business which any customer of the Company
or any Company subsidiary has customarily done or contemplates
doing with the Company or the subsidiary. Executive agrees that
the covenants contained in this paragraph are reasonable and
desirable.
(d) Consulting Services. During the term of Executive's
employment by the Company and, in the event of termination of
Executive's employment by the Company pursuant to Section 6(e),
for a period of twenty-four (24) months thereafter, Executive
will not, directly or indirectly, whether as an officer,
director, stockholder, partner, employee, representative or
otherwise, become or be interested in, or be associated in
business with, any person, corporation, firm, partnership or
other entity which engages in any business or activity which is
a competitor of the Company or any of the Company's
subsidiaries. In the event Executive's employment is terminated
by the Company pursuant to Section 6(e) above, Executive agrees,
for a period of twenty-four (24) months after Executive's
termination of employment by the Company, to be available to
provide reasonable consulting services to the Company at such
reasonable times as the Company and Executive may mutually
agree. Notwithstanding the foregoing, nothing contained in this
paragraph shall prevent Executive from holding or acquiring
common stock in any company which is publicly traded on any
national recognized stock exchange or The NASDAQ Stock Market
provided that such holdings are less than one percent (1%) of
the outstanding capital stock of such publicly-traded company.
Executive agrees that the covenants contained in this paragraph
are reasonable and desirable.
9. PROTECTION OF PROPERTY
All records, files, manuals, documents, specifications, lists of
customers, forms, materials, supplies, computer programs and
other materials furnished to the Executive by the Company, used
on its behalf or generated or obtained during the course of the
performance of the Executive's services hereunder, shall be the
property of the Company. Upon termination of Executive's
employment with the Company, Executive shall immediately deliver
to the Company, or its authorized representative, all such
property, including all copies, remaining in Executive's
possession or control.
<PAGE>
Page 11
10. SPECIFIC PERFORMANCE
In the event of the breach by Executive of any of the provisions
of Sections 8 or 9, the Company, in addition to all other rights
and remedies existing in its favor and notwithstanding the
provisions of Section 11 hereof, may apply to any court of law
or equity of competent jurisdiction for specific performance
and/or injunctive or other relief in order to enforce or prevent
any violations of the provisions thereof.
11. ARBITRATION
The parties hereto acknowledge that it is in their best
interests to facilitate the informal resolution of any disputes
arising out of this Agreement or otherwise by mutual cooperation
and without resorting to litigation. As a result, if any party
has a dispute arising hereunder or otherwise, including but not
limited to any claim for breach of any contract or covenant
(express or implied), any dispute regarding Executive's
termination of employment from the Company, tort claims, claims
for harassment or discrimination (including, but not limited to,
race, sex, religion, national origin, age, handicap or
disability), claims for compensation or benefits (except where a
benefit plan or pension plan or insurance policy specifies a
different claims procedure) and claims for violation of public
policy or, any federal, state or other governmental law,
statute, regulation or ordinance (except for claims involving
workers' compensation benefits), and the parties are unable to
reach agreement among themselves, then a settlement conference
must be held within thirty (30) days upon receipt of a notice by
the complaining party describing in detail the complaint and
setting forth a proposed solution to the complaint. The
settlement conference will be held in any Orange County,
California, office of the Judicial Arbitration and Mediation
Services/Endispute ("JAMS"). The complaining party must contact
JAMS to schedule the conference and the parties must agree on a
retired judge from the JAMS panel. If the parties are unable to
agree upon such a retired judge, JAMS shall provide a list of
three available judges and each party may strike one judge. The
remaining judge will serve as the mediator at the settlement
conference.
If the dispute is not settled by the above-described format, the
parties agree to submit the dispute to JAMS for binding
arbitration. A three-judge panel will be selected to arbitrate
the dispute. JAMS will provide the names of five potential
arbitrators, giving each party the opportunity to strike one
name. The remaining three arbitrators will serve as the
arbitration panel. The parties agree that the arbitration must
be initiated within the time period of the statute of
limitations applicable to the claim(s) if the claim(s) had been
filed in Court.
<PAGE>
Page 12
Arbitration may be initiated by the aggrieved party by sending
written notice of an intent to arbitrate by registered certified
mail to all parties and to JAMS. The notice must contain a
description of the dispute, the amount involved and the remedies
sought. All fees and expenses of the arbitration, including a
transcript if either request, will be borne by the Company.
Each party will pay for the fees and expenses of its own
attorneys, experts, witnesses, and preparation and presentation
of proofs and post-hearing briefs unless the party prevails on a
claim for which attorneys' fees are recoverable by statute, in
which case the arbitrators may award attorneys' fees and costs
to the prevailing party.
12. REPRESENTATION BY COUNSEL
Executive acknowledges that he has been represented by legal
counsel in connection with this Agreement and has consulted with
such legal counsel.
13. SUCCESSORS
This Agreement is personal to the Executive and is not
assignable by the Executive otherwise than by will or the laws
of descent and distribution without the prior written consent of
the Company's Board of Directors. This Agreement shall inure to
the benefit of and be enforceable by Executive's legal
representatives. This Agreement shall inure to the benefit of
and be binding upon the Company and its successors and assigns.
14. NOTICE
For purposes of this Agreement, notices, demands and all other
communications provided for in the Agreement shall be in writing
and shall be deemed to have been duly given when delivered or
(unless otherwise specified) mailed by United States registered
mail, return receipt requested, postage prepaid, addressed as
follows:
If to Executive:
Executive's address as on file with the Company
If to Company:
Pacific Scientific Company
620 Newport Beach Drive
Newport Beach, California 92660
Attention: Secretary
or to such other address as any party may have furnished to the
others in writing in accordance herewith, except that notices of
change of address shall be effective only upon receipt thereof.
<PAGE>
Page 13
15. SECTION 280G
Anything in this Agreement to the contrary notwithstanding,
Executive's payments under this Agreement (excluding the effect
of stock options or any other benefits or payments which are not
provided for in this Agreement) shall not, in the aggregate,
exceed the maximum amount that may be paid to Executive without
triggering golden parachute penalties under Section 280G and
related provisions of the Internal Revenue Code, as amended, as
determined in good faith by the Company's independent auditors.
16. ENTIRE AGREEMENT
This Agreement, together with the documents referenced herein,
contains the entire agreement of the parties hereto with respect
to the subject matter hereof. It supersedes any and all other
agreements, either oral or in writing, between the parties
hereto with respect to the employment of Employee by the
Company. Each party to this Agreement acknowledges that no
representations, inducements, promises or agreements, written,
oral or otherwise, have been made by any party, or anyone acting
on behalf of any party, which are not embodied herein, and that
no other agreement, statement or promise not contained in this
Agreement shall be valid or binding.
17. AMENDMENT; WAIVER; GOVERNING LAW
No provisions of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is
agreed to in a writing signed by Executive and by such officer
of the Company as may be specifically designated by the
Company's Board of Directors. No waiver by either party hereto
at any time of any breach by the other party hereto of, or
compliance with, any condition or provision of this Agreement to
be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at
any prior or subsequent time. The validity, interpretation,
construction and performance of this Agreement shall be governed
by the laws of the State of California.
18. VALIDITY
The invalidity or unenforceability of any provision or
provisions of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement, which
shall remain in full force and effect.
<PAGE>
Page 14
19. COUNTERPARTS
This Agreement may be executed in one or more counterparts, each
of which shall be deemed to be an original, but all of which
together will constitute one and the same instrument.
20. SURVIVABILITY
The provisions in Sections 8, 9, 10, 11 and 16 of this Agreement
shall survive any termination of this Agreement.
21. WITHHOLDING OF TAXES; TAX REPORTING
The Company may withhold from any amounts payable under this
Agreement all such Federal, state, city and other taxes, and may
file with appropriate governmental authorities all such
information, returns or other reports with respect to the tax
consequences of any amounts payable under this Agreement, as
may, in its reasonable judgment, be required by law.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
PACIFIC SCIENTIFIC COMPANY
a California corporation
By: /s/ Lester Hill
-------------------------
Name: Lester Hill
Title: Chairman of the Board and Chief Executive Officer
EXECUTIVE:
/s/ David L. Schlotterbeck
- --------------------------------
David L. Schlotterbeck
<PAGE>
<PAGE>
EXHIBIT 10.2
- ------------
Page 1
EXHIBIT A
PACIFIC SCIENTIFIC COMPANY
NONSTATUTORY STOCK OPTION AGREEMENT
- -----------------------------------
THIS NONSTATUTORY STOCK OPTION AGREEMENT (the "Agreement")
between PACIFIC SCIENTIFIC COMPANY, a California corporation
(the "Company"), and DAVID L. SCHLOTTERBECK ("Employee") is
entered into as of the 7th day of July, 1997.
RECITALS
- --------
A. Pursuant to an Employment Agreement dated as of July 7,
1997, between the Company and Employee (the "Employment
Agreement"), the Company has agreed to grant to Employee an
option to purchase shares of the Company's common stock.
B. The Company and Employee desire to enter into this
Agreement to memorialize the grant of the option to Employee.
NOW, THEREFORE, the parties hereto agree as follows:
1. GRANT. The Company hereby grants to Employee the right to
purchase up to 150,000 shares of common stock of the Company at
a price of $13.94 per share (which price equals the closing
price of the Company's common stock on the New York Stock
Exchange as of the date of this Agreement), on the terms and
conditions set forth herein. This option is not intended to
qualify as an incentive stock option under Section 422 of the
Internal Revenue Code, as amended, and is not made pursuant to
any Company stock option plan. Employee agrees that Employee
and any other person who may be entitled hereunder to exercise
this option shall be bound by all terms and conditions of this
Agreement.
2. EXERCISABILITY. Subject to the terms of this Agreement,
the option granted herein shall become exercisable at the
following times and in the following amounts:
The option shall become exercisable in cumulative increments of
37,500 shares on each of July 7, 1998, July 7, 1999, July 7,
2000, and July 7, 2001. The option granted hereunder shall
lapse and expire on the tenth (10th) anniversary of the date
hereof.
<PAGE>
Page 2
If Employee does not purchase the full number of shares he is
entitled to purchase in any one year, the right to purchase such
shares carries over to the subsequent years during the term of
this option.
Notwithstanding the foregoing, this option shall automatically
become fully exercisable upon a "Change of Control of the
Company," as such term is defined below.
For purposes of this Agreement, a "Change of Control of the
Company" shall be deemed to have occurred if:
(a) the shareholders of the Company approve a definitive
agreement to sell, transfer, or otherwise dispose of all or
substantially all of the Company's assets and properties; or
(b) any "person" (as such term is used in Section 13(d) and
14(d) of the Securities Exchange Act of 1934) is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the
Securities Exchange Act of 1934), directly or indirectly, of
securities of the Company representing fifty percent (50%) or
more of the combined voting power of the Company's then
outstanding securities; provided, however, that the following
shall not constitute a "Change in Control" of the Company:
(i) any acquisition directly from the Company (excluding any
acquisition resulting from the exercise of a conversion or
exchange privilege in respect of outstanding convertible or
exchangeable securities); or
(ii) any acquisition by an employee benefit plan (or related
trust) sponsored or maintained by the Company or any corporation
controlled by the Company;
(c) the shareholders of the Company approve the dissolution or
liquidation of the Company; or
(d) the shareholders of the Company approve a definitive
agreement to merge or consolidate the Company with or into
another entity or entities, the result of which merger or
consolidation less than 50% of the outstanding voting securities
of the surviving or resulting entity are, or are to be, owned by
holders of the Company's common stock immediately prior to the
merger.
<PAGE>
Page 3
3. EXERCISE. This option may be exercised on the terms and
conditions contained herein by giving one (1) day's prior
written notice of exercise to the Company, specifying the number
of shares to be purchased and the price to be paid therefor and
by delivering a check in the amount of the purchase price
payable to the Company. The purchase price may also be paid, in
whole or in part, by delivery to the Company of outstanding
shares of the Company's common stock previously held by the
Employee valued at "Fair Market Value".
For the purposes of this Agreement, "Fair Market Value" as of a
certain date (the "Determination Date") means: (a) the closing
price of a share of the Company's common stock on the principal
exchange on which shares of the Company's common stock are then
trading, if any, on the Determination Date, or, if shares were
not traded on the Determination Date, then on the nearest
preceding trading day during which a sale occurred; or (b) if
such stock is not traded on an exchange but is quoted on NASDAQ
or a successor quotation system, (i) the last sales price (if
the stock is then listed as a National Market Issue under The
Nasdaq National Market System) or (ii) the mean between the
closing representative bid and asked prices (in all other cases)
for the stock on the Determination Date as reported by NASDAQ or
such successor quotation system; or (c) if such stock is not
publicly traded on an exchange and not quoted on NASDAQ or a
successor quotation system, the mean between the closing bid and
asked prices for the stock, on the Determination Date, as
determined in good faith by the Board; or (d) if the Company's
stock is not publicly traded, the fair market value established
in good faith by the Board.
Provided that a public market in the Company's common stock
exists, Employee will be entitled to exercise this option
through a "same day sale" commitment from Employee and a broker-
dealer that is a member of the National Association of
Securities Dealers (an "NASD Dealer") whereby the Employee
irrevocably elects to exercise the option and to sell a portion
of the shares so purchased to pay the exercise price and any
applicable tax withholding and whereby the NASD Dealer
irrevocably commits upon receipt of such shares to forward the
exercise price and the payment of all required taxes directly to
the Company.
4. TERMINATION OF EMPLOYMENT
(a) Termination by Employee. If Employee's employment is
terminated by Employee, Employee shall have ninety (90) days
following the "Date of Termination" (as defined in Section 6(j)
of the Employment Agreement) to exercise this option, but only
to the extent that this option was exercisable on such Date of
Termination.
<PAGE>
Page 4
(b) Termination for Cause. If Employee's employment is
terminated by the Company for "Cause" (as defined in Section
6(b) of the Employment Agreement) the Employee shall have ninety
(90) days following the Date of Termination to exercise this
option, but only to the extent that this option was exercisable
on such Date of Termination.
(c) Death. If Employee's employment is terminated for death,
or having ceasing to be an employee, but during the period
during which Employee could have exercised this option in
accordance with the terms of this Agreement, Employee should
die, Employee's executor or administrator of Employee's estate
shall have the right for twelve (12) months following such death
to exercise this option, but only to the extent that this option
was exercisable on the date of Employee's death.
(d) Disability. If Employee's employment is terminated for
"disability" (as defined in Section 6(d) of the Employment
Agreement), Employee or his administrator or legal guardian,
shall have the right for six (6) months following such Date of
Termination to exercise this option, but only to the extent that
this option was exercisable on such Date of Termination.
(e) Other. If Employee's employment is terminated for any
reason other than as set forth in Sections 4(a), (b), (c) and
(d) above, Employee shall have ninety (90) days following such
Date of Termination to exercise this option, but only to the
extent that this option was exercisable on such Date of
Termination.
5. TRANSFERABILITY. This option shall be transferable only by
will or by the laws of descent and distribution to the estate
(or other personal representative) of Employee and shall be
exercisable during Employee's lifetime only by him. Except as
otherwise provided herein, any attempt at alienation,
assignment, pledge, hypothecation, transfer, sale, attachment,
execution or similar process, whether voluntary or involuntary,
with respect to all or any part of this option or any right
under this Agreement, shall be null and void and, at the
Company's option, shall cause Employee's rights under this
Agreement to terminate.
6. WITHHOLDING REQUIREMENTS. In the event the Company
determines that it is required to withhold state or Federal
income taxes as a result of the exercise of this option,
Employee shall be required, as a condition to the exercise
hereof, to make arrangements satisfactory to the Company to
enable it to satisfy such withholding requirements.
<PAGE>
Page 5
7. RIGHTS AS A STOCKHOLDER. Employee, or any permitted
transferee of Employee, shall have no rights as a stockholder
with respect to any shares covered by this option until the date
of the issuance of a stock certificate for such shares. No
adjustment shall be made for dividends (ordinary or
extraordinary, whether in cash, securities or other property),
distributions or other rights for which the record date is prior
to the date such stock certificate is issued, except as provided
in Section 8 of this Agreement. This Agreement shall not confer
upon Employee any right of continued employment by the Company
or interfere in any way in the Company's right to terminate
Employee.
8. RECAPITALIZATION. The number of shares of Common Stock
covered by this option and the exercise price thereof shall be
proportionately adjusted for any increase or decrease in the
number of issued shares of common stock resulting from a
subdivision or consolidation of such shares or the payment of a
stock dividend (but only of common stock) or any other increase
or decrease in the number of issued shares of common stock
effected without receipt of consideration by the Company.
Subject to any required action by stockholders, if the Company
is the surviving corporation in any merger or consolidation,
this option shall pertain and apply to the securities to which a
holder of the number of shares of common stock subject to the
option would have been entitled.
The foregoing adjustments shall be made by the Company's Board
of Directors, whose determination shall be conclusive and
binding on the Company and Employee.
Except as expressly provided in this Section 8, Employee shall
have no rights by reason of any subdivision or consolidation of
shares of stock of any class, the payment of any stock dividend
or any other increase or decrease in the number of shares of
stock of any class, or by reason of any dissolution,
liquidation, merger, consolidation or spin-off of assets or
stock of another corporation, and any issue by the Company of
shares of stock of any class, or securities convertible into
shares of stock of any class, shall not affect, and no
adjustment by reason thereof shall be made with respect to, the
number of shares subject to this option or the exercise price
thereof.
This option shall not affect in any way the right or power of
the Company to make adjustments, reclassifications,
reorganizations or changes of its capital or business structure,
to merge or consolidate or to dissolve, liquidate, sell or
transfer all or any part of its business or assets.
<PAGE>
Page 6
9. SECURITIES ACT AND OTHER REGULATORY REQUIREMENTS. If
through any act or omission of Employee the exercise of this
option or the sale of the underlying shares of stock would, in
the opinion of counsel for the Company, violate the Securities
Act of 1933 (or any other federal or state statutes having
similar requirements) as it may be in effect at that time, then
this option shall not be exercisable and the Company shall not
be obligated to sell any shares subject to this option.
Further, the Board of Directors of the Company may require as a
condition of issuance of any shares under this option that
Employee furnish a written representation that he is acquiring
the shares for investment and not with a view to distribution to
the public. The certificate evidencing any shares issued
pursuant to this option shall bear such restrictive legends as
required by federal or state law.
The Company agrees to (a) file with the Securities and Exchange
Commission a Registration Statement on Form S-8 for the purpose
of registering the shares of common stock subject to this option
under the Securities Act of 1933, and (b) file with New York
Stock Exchange, Inc. a Supplemental Listing Application for the
purpose of listing the shares of common stock subject to this
option on the New York Stock Exchange.
10. EFFECT OF EXERCISE. Upon the exercise of all or any part
of this option, the number of shares of common stock subject to
the option under this Agreement shall be reduced by the number
of shares with respect to which such exercise is made.
11. NOTICES. Any notice or other communication required or
permitted hereunder or by law shall be validly given or made
only if in writing and delivered in person to an officer or duly
authorized representative of the other party, or deposited in
the United States mail, duly certified or registered, return
receipt requested, postage prepaid, and addressed to the party
to whom intended. If sent to the Company, it shall be addressed
in care of the Secretary, Pacific Scientific Company, 620
Newport Beach Drive, Newport Beach, California 92660, and if
sent to Employee, it shall be addressed to Employee's address on
file with the Company on the date of such notice. If sent by
mail, notice shall be deemed given two days after deposit of
such notice in the mail and in accordance with this section.
Any party may from time to time, by written notice to the other,
designate a different address for notice which shall be
substituted for that specified above.
12. CHOICE OF LAW; COUNTERPARTS. This Agreement, and all
rights and obligations hereunder, shall be governed by the laws
of the State of California. This Agreement may be executed in
one or more counterparts, each of which when so executed and
delivered shall be deemed an original, but all such counterparts
together shall constitute but one and the same instrument.
<PAGE>
Page 7
13. SUCCESSOR. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective
successors, heirs, beneficiaries, executors and administrators.
14. PARAGRAPH HEADINGS; EMPLOYMENT. Paragraph headings are
for convenience only and are not part of the context. In
exchange for this Agreement, Employee agrees to remain in the
employ of the Company for a period of at least one year after
the date hereof. This Agreement, however, shall not obligate
the Company or any affiliate to employ Employee for any period
of time nor does this Agreement constitute a contract or
agreement for employment.
IN WITNESS WHEREOF, this Agreement is executed as of the date
first written above.
PACIFIC SCIENTIFIC COMPANY
a California corporation
By: /s/ Lester Hill
-------------------------
Name: Lester Hill
Title: Chairman of the Board
and Chief Executive Officer
EMPLOYEE:
/s/ David L. Shclotterbeck
- -------------------------------------
David L. Schlotterbeck
<PAGE>
<PAGE>
EXHIBIT 10.3
- -------------
Page 1
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is effective as of
the 7th day of July, 1997, between PACIFIC SCIENTIFIC COMPANY, a
California corporation (the "Company"), and WINSTON E. HICKMAN
(the "Executive").
In consideration of the promises and covenants set forth below,
the parties hereto agree as follows:
1. EMPLOYMENT
The Company hereby agrees to employ Executive, and Executive
hereby agrees to accept such employment with the Company, on the
terms and conditions set forth herein.
2. TERM
The employment of Executive by the Company as provided in this
Agreement will commence on July 7, 1997 (the "Start Date"), and
end on December 31, 2000, unless further extended or sooner
terminated as hereinafter provided. On October 1, 2000, and on
October 1 of each year thereafter (each an "Extension Date"),
the term of Executive's employment hereunder shall automatically
be extended for one additional year unless, prior to such
Extension Date, either party delivers written notice to the
other party that the term of Executive's employment hereunder
will not be extended or that Executive's employment is otherwise
terminated pursuant to the terms of this Agreement.
3. POSITION AND DUTIES
Executive shall serve as Senior Vice President and Chief
Financial Officer of the Company, or such other position or
positions as may be agreed upon by Executive and the Company.
Executive shall at all times perform his duties and obligations
faithfully and diligently and shall devote all his business
time, attention and efforts exclusively to the business of the
Company. Executive shall industriously perform his duties under
the supervision of and report to the Chief Executive Officer of
the Company and shall accept and comply with all directions from
and all policies established from time to time by the Chief
Executive Officer and the Board of Directors of the Company.
Executive's primary duties shall include, without limitation,
responsibility for the financial reporting and affairs of the
Company and such other duties as may from time to time be
prescribed by the Chief Executive Officer of the Company.
Executive shall promote the trade and business of the Company to
the best of his ability and shall adhere to the Company's
policies and procedures applicable to the Company's employees
generally.
<PAGE>
Page 2
Executive shall not directly or indirectly render any services
of a business, commercial or professional nature to any other
person, entity or organization, whether for compensation or
otherwise, without the prior consent of the Company's Chief
Executive Officer; provided, however, that the foregoing shall
not preclude Executive from (i) serving on boards of trade
associations and/or charitable organizations (subject to
reasonable approval of the Chief Executive Officer of the
Company) and (ii) engaging in charitable activities and
community affairs, provided that such activities and
directorships do not interfere with the proper performance of
Executive's duties and responsibilities hereunder.
4. PLACE OF PERFORMANCE
In connection with Executive's employment by the Company and
except for required travel on Company business, Executive shall
be based at the principal executive offices of the Company.
5. COMPENSATION AND RELATED MATTERS
(a) Salary. During the term of Executive's employment
hereunder, the Company shall pay to Executive a salary of
$186,000 per annum, subject to increase (but not decrease) in
the sole discretion of Board of Directors based on performance
and salary reviews of Executive in accordance with Company
policy. Such salary shall be paid in equal semi-monthly
installments (or such shorter intervals as the Company may
elect) and shall accrue from day to day. Executive's salary
shall be subject to annual review by the Company's Board of
Directors or its Compensation Committee.
(b) Performance Bonus. During the term of Executive's
employment hereunder, Executive shall be eligible for an annual
bonus (which bonus may be pursuant to the Company's Management
Incentive Plan) based on Executive's performance, which bonus
shall be payable within ninety days after the end of each
Company fiscal year. The amount of such bonus, if any, shall be
determined by the Chief Executive Officer by evaluating
Executive's performance against certain goals and objectives
(whether quantifiable, subjective or both) established by the
Chief Executive Officer after consultation with Executive prior
to the end of the first quarter of each fiscal year, except that
for the 1997 fiscal year, the goals and objectives are to be
established prior to the end of the third quarter of 1997. The
full "target" amount of such bonus for accomplishing the goals
and objectives shall be 35% of Executive's then current base
salary as set forth in Section 5(a). In the case of the 1997
fiscal year, Executive's bonus shall be prorated for the actual
number of days worked by Executive in 1997.
<PAGE>
Page 3
(c) Vacations. During the term of Executive's employment
hereunder, Executive shall be entitled to four weeks of vacation
in each calendar year, and to compensation with respect to
earned but unused vacation days determined in accordance with
the Company's vacation policy.
(d) Expenses. During the term of Executive's employment
hereunder, Executive shall be entitled to receive reimbursement
for all reasonable out-of-pocket travel and other expenses
(excluding ordinary commuting expenses) incurred by Executive in
performing Executive's services hereunder, provided that:
(i) Each such expenditure is of a nature qualifying it as a
proper business expenditure of the Company and is approved by
the Company; and
(ii) Executive furnishes to the Company adequate documentary
evidence for the substantiation of such expenditures and
Executive otherwise complies with Company policies with respect
to expense reimbursement.
(e) Stock Option. Executive acknowledges that, as additional
compensation for Executive's employment hereunder, Executive
will be granted a nonstatutory stock option (the "Stock Option")
to acquire 50,000 of the Company's common stock pursuant to the
Nonstatutory Stock Option Agreement attached hereto as Exhibit
A. Executive's right to exercise the Stock Option shall be
governed by the terms of the Nonstatutory Stock Option
Agreement.
The Company agrees to (i) file with the Securities and Exchange
Commission a Registration Statement on Form S-8 for the purpose
of registering under the Securities Act in 1933 the shares of
common stock underlying the Stock Option, and (b) file with the
New York Stock Exchange, Inc. a Supplemental Listing Application
for the purpose of listing the shares of common stock subject to
the Stock Option on the New York Stock Exchange.
Executive may, from time to time, be eligible to receive
additional options as determined in the sole discretion of the
Company's Board of Directors and the Compensation Committee of
the Board of Directors.
(f) Medical Insurance and Other Benefits. During the term of
Executive's employment hereunder, Executive will be entitled to
participate in any medical, dental and disability insurance
plans, life insurance plans, retirement plans and other employee
welfare and benefit plans or programs made available to the
Company's senior-level executives or its employees generally, as
such plans and programs may be in effect from time to time.
<PAGE>
Page 4
6. TERMINATION
(a) Agreement Terminable at Will. Notwithstanding anything
herein to the contrary, this Agreement and Executive's
employment with the Company are terminable at will by the
Company for any reason, with or without prior notice or cause;
provided that Executive's entitlement to payments and benefits
following such termination will depend on the type of
termination and shall be governed by the other provisions of
this Section 6.
(b) Termination for Cause
(1) The Company may at any time upon notice to Executive
terminate this Agreement and Executive's employment hereunder
for "Cause" pursuant to the provisions of this Section 6(b).
Executive shall be given notice by the Chief Executive Officer
of his intention to terminate Executive for Cause, and the
Company shall give Executive an opportunity to address, at the
Company's option, the Board of Directors or a committee of one
or more directors regarding the grounds on which the proposed
termination for Cause is based.
For purposes of this Agreement, the Company shall have "Cause"
to terminate Executive's employment hereunder upon:
(A) The breach by Executive of any material provision or
covenant of this Agreement; or
(B) Executive's failure to perform or the gross negligence in
the performance of Executive's material duties hereunder (and if
such failure or gross negligence is susceptible to cure by
Executive, the failure to effect such cure by Executive within
thirty (30) days after written notice of such failure or gross
negligence is given to Executive); or
(C) Executive's engagement in an act of dishonesty or
falsification or any transaction involving a material conflict
of interest which was not disclosed to and approved by the
Company's Board of Directors; or
(D) Except as permitted hereunder, Executive's unexplained
absences from the Company; or
(E) Executive's use of alcohol, which use interferes with the
performance of Executive's duties hereunder, or Executive's use
of illegal narcotics; or
(F) Executive's indictment for a crime of theft, embezzlement,
fraud, misappropriation of funds or other alleged act of
dishonesty by Executive, or Executive's indictment for any other
felony or other crime involving moral turpitude; or
<PAGE>
Page 5
(G) Executive's engagement in discrimination or harassment on
any statutorily prohibited basis; or
(H) Executive's engagement in any violation of law relating to
Executive's employment by the Company or violation by Executive
of Executive's duty of loyalty to the Company.
(2) If this Agreement is terminated by the Company for Cause
pursuant to this Section 6(b), the Company shall have no further
obligation or liability to Executive, except that Executive
shall be entitled to receive only (i) the portion of Executive's
salary as set forth in Section 5(a) which has been earned up to
the Date of Termination, (ii) compensation for any accrued and
unused vacation up to the Date of Termination, and (iii) reim-
bursement, pursuant to Section 5(d) for business expenses
incurred up to the Date of Termination (collectively, the
"Minimum Payments").
(c) Death
(1) This Agreement and Executive's employment hereunder shall
terminate automatically upon Executive's death.
(2) If this Agreement is terminated because of Executive's
death pursuant to this Section 6(c), the Company shall have no
further obligation or liability to Executive, except that
Executive shall be entitled to receive only (i) the Minimum
Payments, and (ii) any life insurance proceeds Executive is
otherwise entitled to under any applicable life insurance in
effect on the Date of Termination.
(d) Disability
(1) If Executive becomes disabled during Executive's
employment hereunder, this Agreement and Executive's employment
hereunder shall terminate on the date of determination by the
Company of such disability. As used herein, "disability" shall
mean any condition that qualifies as a disability under the
Company's long-term disability plan as in effect on the date of
determination or which renders Executive incapable of performing
substantially all of his managerial and executive services
hereunder for ninety (90) days or more in the aggregate during
any calendar year, and which at any time after such ninety (90)
days the Company shall determine continues to render Executive
incapable of performing his managerial and executive services
hereunder.
<PAGE>
Page 6
(2) If this Agreement is terminated because of Executive's
disability pursuant to this Section 6(d), the Company shall have
no further obligation or liability to Executive, except that
Executive shall be entitled to receive only (i) the Minimum
Payments, and (ii) any benefits to which Executive is entitled
under the Company's long-term disability plan as in effect on
the Date of Termination.
(e) Termination Other Than for Cause, Death or Disability
(1) The Company shall, for any reason, be entitled to
terminate this Agreement and Executive's employment hereunder at
any time without Cause and other than on account of Executive's
death or disability pursuant to this Section 6(e).
(2) If this Agreement is terminated by the Company pursuant to
this Section 6(e), the Company shall have no further obligation
or liability to Executive, except that Executive shall be
entitled to receive only (i) the Minimum Payments, and (ii) a
severance payment of, at the option of Executive, either (A)
twelve (12) months of Executive's then current salary as set
forth in Section 5(a) payable in a lump sum within thirty (30)
days after the Date of Termination or as otherwise mutually
agreed to by the parties, or (B) twelve months of Executive's
then current salary as set forth in Section 5(a) payable in
semi-monthly installments over a twelve month period after the
Date of Termination.
(f) Resignation for Good Reason
(1) Executive shall be entitled to terminate this Agreement
and Executive's employment hereunder at any time for Good Reason
pursuant to the provisions of this Section 6(f).
For purposes of this Agreement, Executive shall have "Good
Reason" to terminate Executive's employment hereunder if,
without Executive's express consent, the Company substantially
reduces Executive's duties and responsibilities such that it
results in a material adverse reduction in Executive's position,
authority or responsibilities, and the Company fails to cure
such reduction in duties and responsibilities within twenty (20)
days after written notice specifying the particular acts
objected to and the specific cure requested is given to the
Company by Executive.
(2) If this Agreement is terminated by Executive for Good
Reason pursuant to this Section 6(f), the Company shall have no
further obligation or liability to Executive, except that
Executive shall be entitled to receive only (i) the Minimum
Payments, and (ii) a severance of, at the option of Executive,
either (A) twelve (12) months of Executive's then current salary
as set forth in Section 5(a) payable in a lump sum within thirty
<PAGE>
Page 7
(30) days after the Date of Termination or as otherwise mutually
agreed to by the parties, or (B) twelve months of Executive's
then current salary as set forth in Section 5(a) payable in
semi-monthly installments over a twelve month period after the
Date of Termination.
(g) Resignation without Good Reason
(1) Executive shall be entitled to terminate this Agreement
and Executive's employment hereunder without Good Reason at any
time on thirty (30) days prior written notice delivered by
Executive to the Company.
(2) If this Agreement is terminated by Executive pursuant to
this Section 6(g), the Company shall have no further obligation
or liability to Executive, except that Executive shall be
entitled to receive only the Minimum Payments.
(h) Termination of Employment Following a Change of Control.
Notwithstanding anything else contained in this Agreement and in
addition to the other provisions herein, if within one year
following a "Change of Control of the Company" (i) Executive
terminates his employment for Good Reason, (ii) the Company
terminates Executive's employment other than for Cause, death or
disability, or (iii) the Company delivers notice to Executive
that it is not extending the term of Executive's employment
pursuant to Section 2 of this Agreement for one year, then the
Company shall be obligated to pay to Executive or Executive's
estate the payments and benefits provided in Subsection 6(f)(2)
above.
For purposes of this Agreement, a "Change of Control of the
Company" shall be deemed to have occurred if:
A. the shareholders of the Company approve a definitive
agreement to sell, transfer, or otherwise dispose of all or
substantially all of the Company's assets and properties; or
B. any "person" (as such term is used in Section 13(d) and
14(d) of the Securities Exchange Act of 1934) is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the
Securities Exchange Act of 1934), directly or indirectly, of
securities of the Company representing fifty percent (50%) or
more of the combined voting power of the Company's then
outstanding securities; provided, however, that the following
shall not constitute a "Change in Control" of the Company:
(1) any acquisition directly from the Company (excluding any
acquisition resulting from the exercise of a conversion or
exchange privilege in respect of outstanding convertible or
exchangeable securities); or
<PAGE>
Page 8
(2) any acquisition by an employee benefit plan (or related
trust) sponsored or maintained by the Company or any corporation
controlled by the Company; or
C. the shareholders of the Company approve the dissolution or
liquidation of the Company; or
D. the shareholders of the Company approve a definitive
agreement to merge or consolidate the Company with or into
another entity or entities, the result of which merger or
consolidation is that less than 50% of the outstanding voting
securities of the surviving or resulting entity are, or are to
be, owned by holders of the Company's common stock immediately
prior to the merger.
(i) Notice of Termination. Any termination of Executive's
employment by the Company or by Executive (other than
termination pursuant to Section 6(c) above) shall be
communicated by a written Notice of Termination to the other
party hereto. For purposes of this Agreement, a "Notice of
Termination" means a notice which (i) indicates the specific
termination provision in this Agreement relied upon, (ii) sets
forth the circumstances which provide a basis for termination of
Executive's employment under the provisions so indicated, and
(iii) if the termination date is other than the date of receipt
of such notice, specifies the termination date of this Agreement
(which date shall not be more than thirty (30) days after the
giving of such notice).
(j) Date of Termination. "Date of Termination" shall mean the
date of death, the date of the determination of a disability,
the date of receipt of the Notice of Termination or the date
specified therein (which date shall not be earlier than receipt
of the Notice of Termination), as the case may be.
7. EXCLUSIVITY OF PAYMENTS
Upon termination of Executive's employment hereunder, Executive
shall not be entitled to any severance payments or severance
benefits from the Company or any payments by the Company on
account of any claim for wrongful termination, including but not
limited to claims under any federal, state or local human and
civil rights or labor laws, other than the payments and benefits
provided in Section 6, except for any benefits which may be due
to Executive in the normal course under any employee benefit
plan or program of the Company which provides for benefits after
termination of employment. Executive's right to receive
payments or benefits under this Agreement upon termination of
employment will cease if Executive breaches any provision of
Sections 8 or 9 below.
<PAGE>
Page 9
8. PROPRIETARY INFORMATION
(a) Definition. Executive hereby acknowledges that Executive
possesses and may make use of, acquire, create, develop or add
to certain confidential and/or proprietary information regarding
the Company and its business (whether in existence prior to, as
of or after the date hereof, collectively, "Proprietary
Information"), which Proprietary Information shall include,
without limitation, all of the following materials and
information (whether or not reduced to writing and whether or
not patentable or protected by copyright): trade secrets,
inventions, processes, formulae, programs, technical data,
"know-how," procedures, manuals, confidential reports and
communications, marketing methods, product sales or cost
information, new product ideas or improvements, new packaging
ideas or improvements, research and development programs,
identities or lists of suppliers, vendors or customers,
financial information and financial projections of the Company,
or any other confidential or proprietary information relating to
the Company and/or its business. The term "Proprietary
Information" does not include any information that (i) at the
time of disclosure is generally available to and known by the
public (other than as a result of its disclosure by Executive),
(ii) was available to Executive prior to disclosure by the
Company, provided that the person who was the source of such
information was not known by Executive to be subject to an
obligation of confidentiality to the Company, or (iii) becomes
available to Executive on a non-confidential basis from a person
other than the Company or its representatives, provided that the
source of such information was not known by Executive to be
subject to an obligation of confidentiality to the Company.
(b) Nondisclosure. During the term of this Agreement and
thereafter, Executive will not, without the prior express
written consent of the Board of Directors, disclose or make any
use of any Proprietary Information except as may be required in
the course of the performance of Executive's services under this
Agreement.
(c) Agreement Not to Solicit Employees and Customers. To
protect the Proprietary Information and trade secrets of the
Company, Executive agrees, during the term of this Agreement and
for a period of two (2) years after termination of this
Agreement, not to, directly or indirectly, either on Executive's
own behalf or on behalf of any other person or entity, solicit
or employ any person who is an employee of the Company or any
Company subsidiary or attempt to persuade any customer of the
Company or any Company subsidiary to cease to do business or to
reduce the amount of business which any customer of the Company
or any Company subsidiary has customarily done or contemplates
doing with the Company or the subsidiary. Executive agrees that
the covenants contained in this paragraph are reasonable and
desirable.
<PAGE>
Page 10
(d) Consulting Services. During the term of Executive's
employment by the Company and, in the event of termination of
Executive's employment by the Company pursuant to Section 6(e),
for a period of twenty-four (24) months thereafter, Executive
will not, directly or indirectly, whether as an officer,
director, stockholder, partner, employee, representative or
otherwise, become or be interested in, or be associated in
business with, any person, corporation, firm, partnership or
other entity which engages in any business or activity which is
a competitor of the Company or any of the Company's
subsidiaries. In the event Executive's employment is terminated
by the Company pursuant to Section 6(e) above, Executive agrees,
for a period of twenty-four (24) months after Executive's
termination of employment by the Company, to be available to
provide reasonable consulting services to the Company at such
reasonable times as the Company and Executive may mutually
agree. Notwithstanding the foregoing, nothing contained in this
paragraph shall prevent Executive from holding or acquiring
common stock in any company which is publicly traded on any
national recognized stock exchange or The NASDAQ Stock Market
provided that such holdings are less than one percent (1%) of
the outstanding capital stock of such publicly-traded company.
Executive agrees that the covenants contained in this paragraph
are reasonable and desirable.
9. PROTECTION OF PROPERTY
All records, files, manuals, documents, specifications, lists of
customers, forms, materials, supplies, computer programs and
other materials furnished to the Executive by the Company, used
on its behalf or generated or obtained during the course of the
performance of the Executive's services hereunder, shall be the
property of the Company. Upon termination of Executive's
employment with the Company, Executive shall immediately deliver
to the Company, or its authorized representative, all such
property, including all copies, remaining in Executive's
possession or control.
10. SPECIFIC PERFORMANCE
In the event of the breach by Executive of any of the provisions
of Sections 8 or 9, the Company, in addition to all other rights
and remedies existing in its favor and notwithstanding the
provisions of Section 11 hereof, may apply to any court of law
or equity of competent jurisdiction for specific performance
and/or injunctive or other relief in order to enforce or prevent
any violations of the provisions thereof.
<PAGE>
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11. ARBITRATION
The parties hereto acknowledge that it is in their best
interests to facilitate the informal resolution of any disputes
arising out of this Agreement or otherwise by mutual cooperation
and without resorting to litigation. As a result, if any party
has a dispute arising hereunder or otherwise, including but not
limited to any claim for breach of any contract or covenant
(express or implied), any dispute regarding Executive's
termination of employment from the Company, tort claims, claims
for harassment or discrimination (including, but not limited to,
race, sex, religion, national origin, age, handicap or
disability), claims for compensation or benefits (except where a
benefit plan or pension plan or insurance policy specifies a
different claims procedure) and claims for violation of public
policy or, any federal, state or other governmental law,
statute, regulation or ordinance (except for claims involving
workers' compensation benefits), and the parties are unable to
reach agreement among themselves, then a settlement conference
must be held within thirty (30) days upon receipt of a notice by
the complaining party describing in detail the complaint and
setting forth a proposed solution to the complaint. The
settlement conference will be held in any Orange County,
California, office of the Judicial Arbitration and Mediation
Services/Endispute ("JAMS"). The complaining party must contact
JAMS to schedule the conference and the parties must agree on a
retired judge from the JAMS panel. If the parties are unable to
agree upon such a retired judge, JAMS shall provide a list of
three available judges and each party may strike one judge. The
remaining judge will serve as the mediator at the settlement
conference.
If the dispute is not settled by the above-described format, the
parties agree to submit the dispute to JAMS for binding
arbitration. A three-judge panel will be selected to arbitrate
the dispute. JAMS will provide the names of five potential
arbitrators, giving each party the opportunity to strike one
name. The remaining three arbitrators will serve as the
arbitration panel. The parties agree that the arbitration must
be initiated within the time period of the statute of
limitations applicable to the claim(s) if the claim(s) had been
filed in Court. Arbitration may be initiated by the aggrieved
party by sending written notice of an intent to arbitrate by
registered certified mail to all parties and to JAMS. The
notice must contain a description of the dispute, the amount
involved and the remedies sought. All fees and expenses of the
arbitration, including a transcript if either request, will be
borne by the Company. Each party will pay for the fees and
expenses of its own attorneys, experts, witnesses, and
preparation and presentation of proofs and post-hearing briefs
unless the party prevails on a claim for which attorneys' fees
are recoverable by statute, in which case the arbitrators may
award attorneys' fees and costs to the prevailing party.
<PAGE>
Page 12
12. REPRESENTATION BY COUNSEL
Executive acknowledges that he has been represented by legal
counsel in connection with this Agreement and has consulted with
such legal counsel.
13. SUCCESSORS
This Agreement is personal to the Executive and is not
assignable by the Executive otherwise than by will or the laws
of descent and distribution without the prior written consent of
the Company's Board of Directors. This Agreement shall inure to
the benefit of and be enforceable by Executive's legal
representatives. This Agreement shall inure to the benefit of
and be binding upon the Company and its successors and assigns.
14. NOTICE
For purposes of this Agreement, notices, demands and all other
communications provided for in the Agreement shall be in writing
and shall be deemed to have been duly given when delivered or
(unless otherwise specified) mailed by United States registered
mail, return receipt requested, postage prepaid, addressed as
follows:
If to Executive:
Executive's address as on file with the Company
If to Company:
Pacific Scientific Company
620 Newport Beach Drive
Newport Beach, California 92660
Attention: Secretary
or to such other address as any party may have furnished to the
others in writing in accordance herewith, except that notices of
change of address shall be effective only upon receipt thereof.
15. SECTION 280G
Anything in this Agreement to the contrary notwithstanding,
Executive's payments under this Agreement (excluding the effect
of stock options or any other benefits or payments which are not
provided for in this Agreement) shall not, in the aggregate,
exceed the maximum amount that may be paid to Executive without
triggering golden parachute penalties under Section 280G and
related provisions of the Internal Revenue Code, as amended, as
determined in good faith by the Company's independent auditors.
<PAGE>
Page 13
16. ENTIRE AGREEMENT
This Agreement, together with the documents referenced herein,
contains the entire agreement of the parties hereto with respect
to the subject matter hereof. It supersedes any and all other
agreements, either oral or in writing, between the parties
hereto with respect to the employment of Employee by the
Company. Each party to this Agreement acknowledges that no
representations, inducements, promises or agreements, written,
oral or otherwise, have been made by any party, or anyone acting
on behalf of any party, which are not embodied herein, and that
no other agreement, statement or promise not contained in this
Agreement shall be valid or binding.
17. AMENDMENT; WAIVER; GOVERNING LAW
No provisions of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is
agreed to in a writing signed by Executive and by such officer
of the Company as may be specifically designated by the
Company's Board of Directors. No waiver by either party hereto
at any time of any breach by the other party hereto of, or
compliance with, any condition or provision of this Agreement to
be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at
any prior or subsequent time. The validity, interpretation,
construction and performance of this Agreement shall be governed
by the laws of the State of California.
18. VALIDITY
The invalidity or unenforceability of any provision or
provisions of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement, which
shall remain in full force and effect.
19. COUNTERPARTS
This Agreement may be executed in one or more counterparts, each
of which shall be deemed to be an original, but all of which
together will constitute one and the same instrument.
20. SURVIVABILITY
The provisions in Sections 8, 9, 10, 11 and 16 of this Agreement
shall survive any termination of this Agreement.
<PAGE>
Page 14
21. WITHHOLDING OF TAXES; TAX REPORTING
The Company may withhold from any amounts payable under this
Agreement all such Federal, state, city and other taxes, and may
file with appropriate governmental authorities all such
information, returns or other reports with respect to the tax
consequences of any amounts payable under this Agreement, as
may, in its reasonable judgment, be required by law.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
PACIFIC SCIENTIFIC COMPANY
a California corporation
By: /s/ Lester Hill
-------------------------
Name: Lester Hill
Title: President and Chief Executive Officer
EXECUTIVE:
/s/ Winston E. Hickman
- -----------------------------
Winston E. Hickman
<PAGE>
<PAGE>
EXHIBIT 10.4
- ------------
Page 1
EXHIBIT A
PACIFIC SCIENTIFIC COMPANY
NONSTATUTORY STOCK OPTION AGREEMENT
- -----------------------------------
THIS NONSTATUTORY STOCK OPTION AGREEMENT (the "Agreement")
between PACIFIC SCIENTIFIC COMPANY, a California corporation
(the "Company"), and WINSTON E. HICKMAN ("Employee") is entered
into as of the 7th day of July, 1997.
RECITALS
- --------
A. Pursuant to an Employment Agreement dated as of July 7,
1997, between the Company and Employee (the "Employment
Agreement"), the Company has agreed to grant to Employee an
option to purchase shares of the Company's common stock.
B. The Company and Employee desire to enter into this
Agreement to memorialize the grant of the option to Employee.
NOW, THEREFORE, the parties hereto agree as follows:
1. GRANT. The Company hereby grants to Employee the right to
purchase up to 50,000 shares of common stock of the Company at a
price of $13.94 per share (which price equals the closing price
of the Company's common stock on the New York Stock Exchange as
of the date of this Agreement), on the terms and conditions set
forth herein. This option is not intended to qualify as an
incentive stock option under Section 422 of the Internal Revenue
Code, as amended, and is not made pursuant to any Company stock
option plan. Employee agrees that Employee and any other person
who may be entitled hereunder to exercise this option shall be
bound by all terms and conditions of this Agreement.
2. EXERCISABILITY. Subject to the terms of this Agreement,
the option granted herein shall become exercisable at the
following times and in the following amounts:
The option shall become exercisable in cumulative increments of
12,500 shares on each of July 7, 1998, July 7, 1999, July 7,
2000, and July 7, 2001. The option granted hereunder shall
lapse and expire on the tenth (10th) anniversary of the date
hereof.
<PAGE>
Page 2
If Employee does not purchase the full number of shares he is
entitled to purchase in any one year, the right to purchase such
shares carries over to the subsequent years during the term of
this option.
Notwithstanding the foregoing, this option shall automatically
become fully exercisable upon a "Change of Control of the
Company," as such term is defined below.
For purposes of this Agreement, a "Change of Control of the
Company" shall be deemed to have occurred if:
(a) the shareholders of the Company approve a definitive
agreement to sell, transfer, or otherwise dispose of all or
substantially all of the Company's assets and properties; or
(b) any "person" (as such term is used in Section 13(d) and
14(d) of the Securities Exchange Act of 1934) is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the
Securities Exchange Act of 1934), directly or indirectly, of
securities of the Company representing fifty percent (50%) or
more of the combined voting power of the Company's then
outstanding securities; provided, however, that the following
shall not constitute a "Change in Control" of the Company:
(i) any acquisition directly from the Company (excluding any
acquisition resulting from the exercise of a conversion or
exchange privilege in respect of outstanding convertible or
exchangeable securities); or
(ii) any acquisition by an employee benefit plan (or related
trust) sponsored or maintained by the Company or any corporation
controlled by the Company;
(c) the shareholders of the Company approve the dissolution or
liquidation of the Company; or
(d) the shareholders of the Company approve a definitive
agreement to merge or consolidate the Company with or into
another entity or entities, the result of which merger or
consolidation less than 50% of the outstanding voting securities
of the surviving or resulting entity are, or are to be, owned by
holders of the Company's common stock immediately prior to the
merger.
<PAGE>
Page 3
3. EXERCISE. This option may be exercised on the terms and
conditions contained herein by giving one (1) day's prior
written notice of exercise to the Company, specifying the number
of shares to be purchased and the price to be paid therefor and
by delivering a check in the amount of the purchase price
payable to the Company. The purchase price may also be paid, in
whole or in part, by delivery to the Company of outstanding
shares of the Company's common stock previously held by the
Employee valued at "Fair Market Value".
For the purposes of this Agreement, "Fair Market Value" as of a
certain date (the "Determination Date") means: (a) the closing
price of a share of the Company's common stock on the principal
exchange on which shares of the Company's common stock are then
trading, if any, on the Determination Date, or, if shares were
not traded on the Determination Date, then on the nearest
preceding trading day during which a sale occurred; or (b) if
such stock is not traded on an exchange but is quoted on NASDAQ
or a successor quotation system, (i) the last sales price (if
the stock is then listed as a National Market Issue under The
Nasdaq National Market System) or (ii) the mean between the
closing representative bid and asked prices (in all other cases)
for the stock on the Determination Date as reported by NASDAQ or
such successor quotation system; or (c) if such stock is not
publicly traded on an exchange and not quoted on NASDAQ or a
successor quotation system, the mean between the closing bid and
asked prices for the stock, on the Determination Date, as
determined in good faith by the Board; or (d) if the Company's
stock is not publicly traded, the fair market value established
in good faith by the Board.
Provided that a public market in the Company's common stock
exists, Employee will be entitled to exercise this option
through a "same day sale" commitment from Employee and a broker-
dealer that is a member of the National Association of
Securities Dealers (an "NASD Dealer") whereby the Employee
irrevocably elects to exercise the option and to sell a portion
of the shares so purchased to pay the exercise price and any
applicable tax withholding and whereby the NASD Dealer
irrevocably commits upon receipt of such shares to forward the
exercise price and the payment of all required taxes directly to
the Company.
4. TERMINATION OF EMPLOYMENT
(a) Termination by Employee. If Employee's employment is
terminated by Employee, Employee shall have ninety (90) days
following the "Date of Termination" (as defined in Section 6(j)
of the Employment Agreement) to exercise this option, but only
to the extent that this option was exercisable on such Date of
Termination.
<PAGE>
Page 4
(b) Termination for Cause. If Employee's employment is
terminated by the Company for "Cause" (as defined in Section
6(b) of the Employment Agreement) the Employee shall have ninety
(90) days following the Date of Termination to exercise this
option, but only to the extent that this option was exercisable
on such Date of Termination.
(c) Death. If Employee's employment is terminated for death,
or having ceasing to be an employee, but during the period
during which Employee could have exercised this option in
accordance with the terms of this Agreement, Employee should
die, Employee's executor or administrator of Employee's estate
shall have the right for twelve (12) months following such death
to exercise this option, but only to the extent that this option
was exercisable on the date of Employee's death.
(d) Disability. If Employee's employment is terminated for
"disability" (as defined in Section 6(d) of the Employment
Agreement), Employee or his administrator or legal guardian,
shall have the right for six (6) months following such Date of
Termination to exercise this option, but only to the extent that
this option was exercisable on such Date of Termination.
(e) Other. If Employee's employment is terminated for any
reason other than as set forth in Sections 4(a), (b), (c) and
(d) above, Employee shall have ninety (90) days following such
Date of Termination to exercise this option, but only to the
extent that this option was exercisable on such Date of
Termination.
5. TRANSFERABILITY. This option shall be transferable only by
will or by the laws of descent and distribution to the estate
(or other personal representative) of Employee and shall be
exercisable during Employee's lifetime only by him. Except as
otherwise provided herein, any attempt at alienation,
assignment, pledge, hypothecation, transfer, sale, attachment,
execution or similar process, whether voluntary or involuntary,
with respect to all or any part of this option or any right
under this Agreement, shall be null and void and, at the
Company's option, shall cause Employee's rights under this
Agreement to terminate.
6. WITHHOLDING REQUIREMENTS. In the event the Company
determines that it is required to withhold state or Federal
income taxes as a result of the exercise of this option,
Employee shall be required, as a condition to the exercise
hereof, to make arrangements satisfactory to the Company to
enable it to satisfy such withholding requirements.
<PAGE>
Page 5
7. RIGHTS AS A STOCKHOLDER. Employee, or any permitted
transferee of Employee, shall have no rights as a stockholder
with respect to any shares covered by this option until the date
of the issuance of a stock certificate for such shares. No
adjustment shall be made for dividends (ordinary or
extraordinary, whether in cash, securities or other property),
distributions or other rights for which the record date is prior
to the date such stock certificate is issued, except as provided
in Section 8 of this Agreement. This Agreement shall not confer
upon Employee any right of continued employment by the Company
or interfere in any way in the Company's right to terminate
Employee.
8. RECAPITALIZATION. The number of shares of Common Stock
covered by this option and the exercise price thereof shall be
proportionately adjusted for any increase or decrease in the
number of issued shares of common stock resulting from a
subdivision or consolidation of such shares or the payment of a
stock dividend (but only of common stock) or any other increase
or decrease in the number of issued shares of common stock
effected without receipt of consideration by the Company.
Subject to any required action by stockholders, if the Company
is the surviving corporation in any merger or consolidation,
this option shall pertain and apply to the securities to which a
holder of the number of shares of common stock subject to the
option would have been entitled.
The foregoing adjustments shall be made by the Company's Board
of Directors, whose determination shall be conclusive and
binding on the Company and Employee.
Except as expressly provided in this Section 8, Employee shall
have no rights by reason of any subdivision or consolidation of
shares of stock of any class, the payment of any stock dividend
or any other increase or decrease in the number of shares of
stock of any class, or by reason of any dissolution,
liquidation, merger, consolidation or spin-off of assets or
stock of another corporation, and any issue by the Company of
shares of stock of any class, or securities convertible into
shares of stock of any class, shall not affect, and no
adjustment by reason thereof shall be made with respect to, the
number of shares subject to this option or the exercise price
thereof.
This option shall not affect in any way the right or power of
the Company to make adjustments, reclassifications,
reorganizations or changes of its capital or business structure,
to merge or consolidate or to dissolve, liquidate, sell or
transfer all or any part of its business or assets.
<PAGE>
Page 6
9. SECURITIES ACT AND OTHER REGULATORY REQUIREMENTS. If
through any act or omission of Employee the exercise of this
option or the sale of any of the underlying shares of stock
would, in the opinion of counsel for the Company, violate the
Securities Act of 1933 (or any other federal or state statutes
having similar requirements) as it may be in effect at that
time, then this option shall not be exercisable and the Company
shall not be obligated to sell any shares subject to this
option.
Further, the Board of Directors of the Company may require as a
condition of issuance of any shares under this option that
Employee furnish a written representation that he is acquiring
the shares for investment and not with a view to distribution to
the public. The certificate evidencing any shares issued
pursuant to this option shall bear such restrictive legends as
required by federal or state law.
The Company agrees to (a) file with the Securities and Exchange
Commission a Registration Statement on Form S-8 for the purpose
of registering the shares of common stock subject to this option
under the Securities Act of 1933, and (b) file with New York
Stock Exchange, Inc. a Supplemental Listing Application for the
purpose of listing the shares of common stock subject to this
option on the New York Stock Exchange.
10. EFFECT OF EXERCISE. Upon the exercise of all or any part
of this option, the number of shares of common stock subject to
the option under this Agreement shall be reduced by the number
of shares with respect to which such exercise is made.
11. NOTICES. Any notice or other communication required or
permitted hereunder or by law shall be validly given or made
only if in writing and delivered in person to an officer or duly
authorized representative of the other party, or deposited in
the United States mail, duly certified or registered, return
receipt requested, postage prepaid, and addressed to the party
to whom intended. If sent to the Company, it shall be addressed
in care of the Secretary, Pacific Scientific Company, 620
Newport Beach Drive, Newport Beach, California 92660, and if
sent to Employee, it shall be addressed to Employee's address on
file with the Company on the date of such notice. If sent by
mail, notice shall be deemed given two days after deposit of
such notice in the mail and in accordance with this section.
Any party may from time to time, by written notice to the other,
designate a different address for notice which shall be
substituted for that specified above.
<PAGE>
Page 7
12. CHOICE OF LAW; COUNTERPARTS. This Agreement, and all
rights and obligations hereunder, shall be governed by the laws
of the State of California. This Agreement may be executed in
one or more counterparts, each of which when so executed and
delivered shall be deemed an original, but all such counterparts
together shall constitute but one and the same instrument.
13. SUCCESSOR. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective
successors, heirs, beneficiaries, executors and administrators.
14. PARAGRAPH HEADINGS; EMPLOYMENT. Paragraph headings are
for convenience only and are not part of the context. In
exchange for this Agreement, Employee agrees to remain in the
employ of the Company for a period of at least one year after
the date hereof. This Agreement, however, shall not obligate
the Company or any affiliate to employ Employee for any period
of time nor does this Agreement constitute a contract or
agreement for employment.
IN WITNESS WHEREOF, this Agreement is executed as of the date
first written above.
PACIFIC SCIENTIFIC COMPANY
a California corporation
By: /s/ Lester Hill
-------------------------
Name: Lester Hill
Title: President and Chief Executive Officer
EMPLOYEE:
/s/ Winston E. Hickman
- -------------------------------------
Winston E. Hickman
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS FOR THE FIRST SIX MONTHS OF 1997 ENDED
JUNE 27, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000075608
<NAME> PACIFIC SCIENTIFIC COMPANY
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-27-1996
<PERIOD-START> DEC-28-1996
<PERIOD-END> JUN-27-1997
<EXCHANGE-RATE> 1.00
<CASH> 3,526,000
<SECURITIES> 0
<RECEIVABLES> 51,651,000
<ALLOWANCES> 1,189,000
<INVENTORY> 54,601,000
<CURRENT-ASSETS> 124,339,000
<PP&E> 121,636,000
<DEPRECIATION> 71,483,000
<TOTAL-ASSETS> 221,918,000
<CURRENT-LIABILITIES> 40,606,000
<BONDS> 76,622,000
0
0
<COMMON> 12,220,000
<OTHER-SE> 86,703,000
<TOTAL-LIABILITY-AND-EQUITY> 221,918,000
<SALES> 151,067,000
<TOTAL-REVENUES> 151,067,000
<CGS> 102,124,000
<TOTAL-COSTS> 38,558,000
<OTHER-EXPENSES> 1,202,000
<LOSS-PROVISION> 267,000
<INTEREST-EXPENSE> 1,649,000
<INCOME-PRETAX> 9,183,000
<INCOME-TAX> (3,377,000)
<INCOME-CONTINUING> 5,806,000
<DISCONTINUED> (13,563,000)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (7,757,000)
<EPS-PRIMARY> (0.62)
<EPS-DILUTED> (0.62)
</TABLE>
