<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
FOR THE FISCAL YEAR ENDED OCTOBER 31, 1997
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
(NO FEE REQUIRED)
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 1-12273
ROPER INDUSTRIES, INC.
(Exact name of Registrant as specified in its charter)
----------------
DELAWARE 51-0263969
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
----------------
160 BEN BURTON ROAD
BOGART, GEORGIA 30622
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (706) 369-7170
----------------
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- ---------------------
<S> <C>
Common Stock, $.01 Par Value New York Stock Exchange
Preferred Stock Purchase Rights
with respect to Common Stock, $.01 Par Value New York Stock Exchange
</TABLE>
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE
----------------
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. [X] Yes [_] No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K ((S) 229.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K. [_]
Aggregate market value of the voting stock held by non-affiliates of the
registrant, computed by reference to the closing price of such stock, as of
December 31, 1997: $875,541,911
Number of shares of Registrant's Common Stock as of December 31, 1997:
30,992,634
----------------
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Proxy Statement to be furnished to Shareholders
in connection with its Annual Meeting of Shareholders to be held on February
20, 1998, are incorporated by reference into Part III
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART I
ITEM 1. BUSINESS
Roper Industries, Inc. ("Roper" or the "Company") designs, manufactures and
distributes specialty industrial controls, fluid handling and analytical
instrumentation products worldwide, serving selected segments of a broad range
of markets such as the oil and gas, agricultural irrigation, chemical and
petrochemical processing, large diesel engine and turbine/compressor control
applications, bulk-liquid trucking, power generation, semiconductor, medical
diagnostics, microscopy and scientific research industries.
The Industrial Controls segment's products are manufactured and distributed
by Amot Controls Corporation, Richmond, California ("Amot U.S.") and its U.K.
affiliate, Amot Controls Ltd., Bury St. Edmunds, England ("Amot U.K.") (Amot
U.S. and Amot U.K. are collectively referred to as "Amot"), Compressor Controls
Corporation, Des Moines, Iowa ("CCC"), Metrix Instrument Co., L.P., Houston,
Texas ("Metrix"), and Petrotech, Inc., New Orleans, Louisiana ("Petrotech").
The Fluid Handling segment's products are manufactured and distributed by
Cornell Pump Manufacturing Corporation, Portland, Oregon ("Cornell Pump"), Fluid
Metering, Inc., Syosset, New York ("FMI"), FTI Flow Technology, Inc., Phoenix,
Arizona ("Flow Technology"), Integrated Designs L.P., Dallas, Texas ("Integrated
Designs"), and Roper Pump Company, Commerce, Georgia ("Roper Pump").
The Analytical Instrumentation segment's products are manufactured and
distributed by Gatan, Inc., Pleasanton, California ("Gatan"), Instrumentation
Scientifique de Laboratoire-ISL, S.A., Verson, France ("ISL"), Princeton
Instruments, Inc., Trenton, New Jersey ("Princeton"), Uson L.P., Houston, Texas
("Uson") and its affiliate Industrial Data Systems, Inc., Salt Lake City, Utah
("IDS").
Roper pursues consistent and sustainable growth in sales and earnings by
operating and acquiring businesses which manufacture and sell high value-added,
highly engineered industrial products and which are capable of achieving and
maintaining high margins. This strategy continually emphasizes (i) increasing
market share and market expansion, (ii) new product development, (iii) improving
productivity and reducing costs, and (iv) acquiring similar businesses. All
operating companies achieved year-over-year increases in both sales and
operating profits in fiscal 1997, except CCC, whose business in the Commonwealth
of Independent States ("CIS")/Eastern Europe region lagged, and Integrated
Designs, which continued to confront a cyclical downturn in the semiconductor
capital equipment industry. See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Year Ended October 31, 1997
Compared to Year Ended October 31, 1996."
MARKET SHARE, MARKET EXPANSION AND PRODUCT DEVELOPMENT. The Company
competes in many narrowly defined niche markets. Its position in these markets
is typically as the market leader or as a highly competitive alternate to the
market leader. In those markets where the Company is regionally dominant it
seeks to sustain growth through geographic expansion of its marketing efforts
and the development of new products for associated markets.
<PAGE>
The Company expanded its markets in fiscal 1997 principally by new business
acquisitions. The May 1997 acquisition of Princeton complemented Gatan's digital
imaging product line and established the Company as a leading supplier of
scientific-grade digital camera and imaging products for a variety of market
segments. Petrotech, also acquired in May, is a significant turbomachinery
controls supplier and complements the business of CCC as well as provides the
Company with a new engineering/procurement business. Uson achieved a major
expansion of its leak-tester business into the medical products market with its
October acquisition of IDS.
The Company's sales of turbomachinery control systems to its principal
customer in the CIS, RAO Gazprom, reduced by 19% in fiscal 1997 from the prior
year due to difficulties encountered by Gazprom in securing dedicated financing
for its purchases. While Gazprom has reconfirmed its commitment to its business
with the Company for several more years, the Company will insist that it finance
and increase its control system purchases to more acceptable levels in fiscal
1998 and beyond, and if it fails to do so the Company will adjust its supporting
infrastructure and reduce, restructure, or, perhaps, abandon this business. See
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS - Outlook".
INTERNATIONAL SALES. Sales outside the United States continue to play an
important part in the Company's overall operating results, particularly for the
U.S.-based businesses. In fiscal 1997, 1996 and 1995, the Company's net sales
outside the U.S. were 46%, 48% and 43% respectively, of total net sales.
International sales declined as a percentage of total sales in fiscal 1997,
primarily as a result of the impact of Petrotech which made only 31% of its
sales internationally during the five months it was owned by the Company. All
of the U.S.-based subsidiaries reported increased levels of international sales
reflecting continued penetration of international markets. CCC's international
sales accounted for 33% of 1997 international sales, compared to 43% in 1996 and
43% in 1995, reflecting the impact of the Company's acquisition program.
Information regarding international operations is set forth in Note 13 of the
Notes to Consolidated Financial Statements included in this Annual Report on
Form 10-K.
GROWTH THROUGH ACQUISITIONS. Continuing its disciplined acquisition
strategy, the May 1997 purchases of Princeton and Petrotech, and the October
purchase of Uson's IDS unit, represent the Company's largest incremental growth
in sales through acquisitions in a single year and a combined investment of $64
million in cash and restricted common stock. With the acquisition of Flow
Technology shortly after fiscal year-end, the Company completed its most recent
six acquisitions within an eighteen-month period. These acquisitions have been
financed principally from borrowings. The Company, whose debt under a revolving
line of credit was $98 million at October 31, 1997 (36% of total
capitalization), believes it is well positioned for additional acquisitions.
INDUSTRIAL CONTROLS SEGMENT
The Industrial Controls segment's net sales, operating profit (before
allocation of corporate administrative costs) and identifiable assets for each
of the three most recent fiscal years are set forth in Note 13 of the Notes to
Consolidated Financial Statements included in this Annual Report on Form 10-K.
ROTATING MACHINERY CONTROL SYSTEMS AND PANELS. The Company manufactures
control
<PAGE>
systems and panels engineered for applications involving compressors, turbines,
and engines in the oil, gas, pipeline, power and marine industries.
INDUSTRIAL VALVE, CONTROL AND MEASUREMENT PRODUCTS. The Company
manufactures a variety of valve, sensor, switch and control products used on
engines, compressors, turbines and other powered equipment for the oil, gas,
pipeline, power, marine and general industrial markets. Most of these products
are designed for use in hazardous, explosive environments.
VIBRATION INSTRUMENTATION. The Company manufactures industrial vibration
sensors, switches and transmitters for use in the broad industrial controls
market. Their applications typically involve turbomachinery, engines,
compressors, fans and/or pumps.
DESIGN, BUILD, CONSTRUCT AND INSTALL SERVICES. The Company provides
specialized technical services to the product market based defined above and
thus offers turnkey solution capability to the customer. Services offered
include engineering design, procurement, packaging and site installation.
Those classes of products within the Industrial Controls segment which
accounted for least 10% of the Company's consolidated net sales in any of the
last three fiscal years are as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
-------------------------
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Rotating machinery control systems and panels $59,078 $46,402 $38,553
Industrial valve, control and measurement products 34,827 33,689 29,300
</TABLE>
The following chart shows the breakdown of sales by market for fiscal 1997
for the Industrial Controls segment:
Industrial Controls Segment
"The pie chart which appears here shows the breakdown of sales by market
for fiscal 1997 for the Industrial Controls segment as follows:'
Oil & Gas - Exploration 13%
Marine 3%
Power Generation 10%
Oil & Gas - Pipeline 34%
Oil & Gas - Production 23%
Petrotechemical 6%
General Industrial & Other 11%
<PAGE>
BACKLOG. The bulk of this segment's business consists of large engineered
oil and/or gas development and transmission projects with lead times of three-
to-nine months. Standard products generally ship within two weeks of receipt of
order, while shipment of orders for specialty products varies according to the
complexity of the product and availability of the required components. The
Company enters into blanket purchase orders for the manufacture of products for
certain OEMs and end-users over periods of time specified by such customers.
The segment's backlog of firm unfilled orders, including blanket purchase
orders, totaled $43.6 million as of October 31, 1997, compared to $19.0 million
as of October 31, 1996. The largest component of this increase is due to the
backlog in 1997 of Petrotech which was acquired in May 1997.
DISTRIBUTION AND SALES. Distribution and sales occurs through direct sales
offices, manufacturer's representatives and industrial machinery distributors.
CUSTOMERS. Each of the companies sells to a variety of customers
worldwide. 1997 was the fifth consecutive year during which a substantial
portion of CCC's control system sales were to Gazprom for pipeline system
retrofit and new equipment projects. Gazprom was the largest single customer in
this segment for the year, contributing approximately 12% of segment sales and
has indicated its desire to continue purchases of control systems for several
more years. However, the Company's continuation of its business with Gazprom as
presently planned will depend on Gazprom's demonstration of its financial
ability to sustain an acceptable, even level of business over that period. See
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS - Outlook". Even then, this business will continue to be subject to
numerous commercial and political uncertainties beyond the Company's control and
cannot be assured.
FLUID HANDLING SEGMENT
The Fluid Handling segment's net sales, operating profit (before allocation
of corporate administrative costs) and identifiable assets for each of the three
most recent fiscal years are set forth in Note 13 of the Notes to Consolidated
Financial Statements included in this Annual Report on Form 10-K.
GENERAL INDUSTRIAL PUMPS. The Company manufactures a variety of general
industrial pumps including (i) rotary gear pumps which operate on the principle
of two gears intermeshing and are primarily used for pumping particle-free
viscous liquids such as oil and certain fluid products, and specialty rotary
gear pumps such as lubricating oil pumps for diesel engines and fuel
distribution devices, (ii) progressing cavity pumps whose pumping elements
consist of a steel rotor within an elastomeric stator and which are used
primarily for handling viscous liquids with suspended solids and abrasive
material and is the basis for the Company's "mud motor" used in the oil & gas
industry for horizontal drilling, (iii) centrifugal pumps which are primarily
non-submersible end suction, single stage pumps used for pumping water and other
low-viscosity liquids in agricultural, industrial and municipal applications,
and (iv) piston-type metering pumps able to handle most types of chemicals and
fluids within low-flow applications and used principally in the medical
diagnostics, chemical processing, food processing and agricultural industries.
INTEGRATED DISPENSE SYSTEMS. The Company's microprocessor-based Integrated
Dispense
<PAGE>
System is used principally in the semiconductor industry to dispense chemicals
in precise and repeatable amounts from a single point, to up to three points, in
the wafer fabrication process. These highly reliable dispense units incorporate
no mechanical displacement, but utilize the application of electronically
regulated vacuum pressure.
FLOW METERING PRODUCTS. The Company manufactures turbine flow meters,
calibrators and emissions measurement equipment for the space, automotive and
other industrial markets.
Those classes of products within the Fluid Handling segment which accounted
for at least 10% of the Company's consolidated net sales in any of the last
three fiscal years are as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
----------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
General industrial pumps $71,918 $58,451 $50,615
Integrated Dispense Systems 22,257 27,643 23,358
</TABLE>
The following chart shows the breakdown of Fluid Handling segment sales by
market for fiscal 1997:
"The pie chart which appears here shows the breakdown of sales by market
for fiscal 1997 for the Fluid Handling segment as follows:"
Medical 9%
Agricultural/Irrigation 9%
Municipal Waste Water
Treatment 4%
Power Generation 9%
Oil & Gas 5%
Semiconductor 24%
Transportation 4%
General Industrial & Other 36%
BACKLOG. The Fluid Handling companies also make a combination of standard
product sales and sales of specifically engineered, application-specific
products. Standard products are typically shipped within two weeks of receipt
or order, although shipment of FMI blanket order standard products may have a
lead time of up to twelve months. Application-specific products typically occur
within six-to-twelve weeks following receipt of order, except for certain
blanket purchase orders for certain OEMs and other end-users which may extend
for more significant periods. This
<PAGE>
segment's backlog of firm unfilled orders, including blanket purchase orders,
totaled $15.9 million as of October 31, 1997, compared to $19.6 million as of
October 31, 1996.
DISTRIBUTION AND SALES. While Integrated Designs sells directly to
customers through regional representatives, most other sales are made through
stocking and non-stocking distributors, as well as directly to OEMs. Certain
products, such as centrifugal pumps, are sold to non-stocking distributors on a
"build-to-order" basis.
CUSTOMERS. Roper Pump and Cornell Pump products are widely distributed to
customers in both domestic and international markets. Historically, most of
Integrated Designs' sales have been to U.S.-based semiconductor manufacturers,
with a majority of sales concentrated among a few customers. Approximately 50%
of Integrated Designs' 1997 sales were attributable to three customers who were
the only customers representing over 5% of its annual sales. FMI has one OEM
customer which was responsible for 42% of its fiscal 1997 net sales. This OEM
customer's contribution to FMI's sales is customary and it is expected to
continue as FMI's dominant customer.
ANALYTICAL INSTRUMENTATION SEGMENT
The Analytical Instrumentation segment's net sales, operating profit
(before allocation of corporate administrative costs) and associated
identifiable assets for each of the three most recent fiscal years are set forth
in Note 13 of the Notes to Consolidated Financial Statements included in this
Annual Report on Form 10-K.
INDUSTRIAL TESTING AND ANALYSIS PRODUCTS. The Company manufactures and
sells (i) automated and manual test equipment to determine certain
characteristics of petroleum products, such as flashpoint, viscosity and
distillation, and (ii) products and systems to determine leaks and completeness
of assemblies and sub-assemblies in the automotive, medical and consumer
products industries.
DIGITAL IMAGING PRODUCTS. The Company manufactures and sells extremely
sensitive, high-performance charge-coupled device ("CCD") cameras and detectors
for a variety of scientific uses, which include transmission electron
microscopy, and spectroscopy applications. These products are principally sold
for use within academic, government research, semiconductor and material science
end-user markets. They are frequently incorporated into OEM equipment.
MICROSCOPY SPECIMEN PREPARATION/HANDLING PRODUCTS. The Company
manufactures and sells specimen preparation and handling equipment for use on
electron microscopes. These products are incorporated into OEM equipment and
also sold as a retrofit for microscopes currently in use within the academic,
government research, electronics, and material sciences end-user markets.
Those classes of products within the Analytical Instrumentation segment
which accounted for at least 10% of the Company's consolidated net sales in any
of the last three fiscal years are as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
----------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Digital imaging products $37,181 $7,410 $ -
</TABLE>
<PAGE>
The following chart shows the breakdown of Analytical Instrumentation
segment sales by market for fiscal 1997:
"The pie chart which appears here shows the breakdown of sales by market
for fiscal 1997 for the Analytical Instrumentation segment as follows:"
Research 43%
Semiconductor 9%
Oil & Gas 13%
Petrochemical 4%
Automotive 19%
General Industrial & Other 12%
BACKLOG. The Analytical Instrumentation companies have lead times of up to
16 weeks on many of their product sales, although standard products are often
shipped within four weeks of receipt of their order. Blanket purchase orders
are placed by certain OEMs and end-users with continuing requirements, for
fulfillment over specified periods of time. The segment's backlog of firm
unfilled orders, including blanket purchase orders, totaled $23.1 million as of
October 31, 1997, compared to $17.2 million as of October 31, 1996. This year-
over-year increase is attributable to the backlog in 1997 of Princeton, acquired
in May 1997.
DISTRIBUTION AND SALES. Distribution and sales is achieved through a
combination of manufacturer's representatives, agents, distributors and direct
sales offices in both the U.S. and various leading industrial nations.
CUSTOMERS. Each of the companies in the Analytical Instrumentation segment
sells to a
<PAGE>
variety of customers worldwide, with certain major OEMs in the automotive and
microscopy industries having operations globally.
MATERIALS AND SUPPLIERS
Most materials and supplies used by the Company are readily available from
numerous sources and suppliers throughout the world which are believed adequate
for the Company's needs. Some high-performance components for digital imaging
products have been in short supply. The Company believes that this condition
equally affects its competitors. Thus far, it has not had a significant adverse
effect on sales.
ENVIRONMENTAL MATTERS AND OTHER GOVERNMENTAL REGULATION
The Company is subject to environmental laws and regulations concerning
emissions to the air, discharges to waterways and the generation, handling,
storage, transportation, treatment and disposal of waste materials. These laws
and regulations are constantly changing and it is impossible to predict with
accuracy the effect they may have on the Company in the future. It is the
Company's policy to comply with all applicable environmental, health and safety
laws and regulations.
The Company is subject to various U.S. federal, state and local laws and
foreign laws affecting its businesses, as well as a variety of regulations
relating to such matters as working conditions and product safety. A variety of
state laws regulate the Company's contractual relationships with its
distributors and manufacturer's representatives, some of which impose
substantive standards on these relationships.
COMPETITION
The Company has significant competition from a limited number of companies
in each of its markets. No single competitor competes with the Company over a
significant number of product lines. The Company's products compete primarily
on the basis of price, performance and innovation.
PATENTS AND TRADEMARKS
The Company owns the rights under a number of patents and trademarks
relating to its products and businesses. While it believes that none of its
companies is dependent on intellectual property rights, the product development
and market activities of CCC, Integrated Designs, Gatan, and FMI have been
planned and conducted in conjunction with continuing patent strategies to a
greater extent than the other companies. CCC has been granted a series of
U.S. and associated foreign patents and a significant portion of 1997 sales of
CCC-manufactured products was of equipment which incorporated innovations that
are the subject of two patents expiring in 2004 and 2007, respectively.
Integrated Designs was granted a U.S. patent in 1994 related to methods and
apparatus claims embodied in its Integrated Dispense System which accounted for
virtually all of 1997 sales. The U.S. patent will expire in 2011.
While the Company considers patents, trademarks and tradenames important to
operations,
<PAGE>
the Company does not believe it is dependent on any single patent or trademark
or group of patents or trademarks.
RESEARCH AND DEVELOPMENT
The Company conducts applied research and development to improve the
quality and performance of its products to develop new products and enter new
markets. Research and development performed by the Company often includes
extensive field testing of the Company's products. The Company expended
approximately $14.2 million, $8.7 million, and $5.9 million in 1997, 1996, and
1995, respectively, on research and development activities.
EMPLOYEES
As of December 31, 1997, the Company had approximately 2,000 employees in
total, of whom approximately 1,600 were located in the U. S.
Amot's U.S. shop employees are represented by the International Association
of Machinists. Their collective bargaining agreements have been traditionally
negotiated for three-year periods, although the current agreement completed in
November 1995 runs until November 1999. Some Amot U.K. employees subscribe to
membership in two unions, the Manufacturing, Science and Finance Union and the
Transport and General Workers Union. All other Company employees are non-union.
Total union membership is less than 100 employees.
Management believes that relations between its employees and the Company
are excellent and is not aware of any circumstance which is likely to result in
a work stoppage.
ITEM 2. PROPERTIES
Roper's corporate offices, consisting of 9,500 square feet of leased space,
are located in Bogart, Georgia, which is adjacent to Athens, Georgia. Each
operating company is based at and conducts its principal operations from a
single location, which may comprise one or more buildings, with the exception of
Pleasanton, California-based Gatan, whose manufacturing facility is in
Pittsburgh, Pennsylvania. Several of the Company's subsidiaries have relatively
minor sales and service locations, primarily in Europe, Asia and the Far East.
The principal operating company properties are as follows:
<PAGE>
<TABLE>
<CAPTION>
Type of Owned Leased
Location Property (sq.ft.) (sq.ft.) Industry Segment
-------- -------- -------- -------- ----------------
<S> <C> <C> <C> <C>
Phoenix, AZ Office/Mfg 32,100 Fluid Handling
Pleasanton, CA Office 19,400 Analytical Instrumentation
Richmond, CA Office/Mfg 70,000 Industrial Controls
Verson, France Office/Mfg 23,000 Analytical Instrumentation
Commerce, GA Office/Mfg 150,000 Fluid Handling
Des Moines, IA Office/Mfg 62,600 Industrial Controls
Belle Chasse, LA Office/Mfg 71,600 Industrial Controls
Trenton, NJ Office/Mfg 38,000 Analytical Instrumentation
Syosset, NY Office 27,500 Fluid Handling
Portland, OR Office/Mfg 55,000 Fluid Handling
Warrendale, PA Mfg. 24,500 Analytical Instrumentation
Carrollton, TX Office/Mfg 22,000 Fluid Handling
Houston, TX Office/Mfg 16,000 Industrial Controls
Houston, TX Office/Mfg 16,800 Analytical Instrumentation
Bury St. Edmunds, U.K. Office/Mfg 77,000 Industrial Controls
------- -------
Totals 422,600 282,900
======= =======
</TABLE>
The Company considers each facility to be in good operating condition and
adequate for its present use and believes that it has sufficient plant capacity
to meet its current and anticipated manufacturing requirements.
ITEM 3. LEGAL PROCEEDINGS
The Company is a defendant in various lawsuits involving product liability
and other matters, none of which, the Company believes, if adversely determined,
would have a material adverse effect on its consolidated financial position or
results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS.
No matter was submitted to a vote of the Company's security-holders during
the fourth quarter of fiscal 1997.
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The Company's single class of common stock issued and outstanding traded
under the symbol "ROPR" on the NASDAQ National Market System (the "NASDAQ") from
February 1992 through October 31, 1996. On November 1, 1996, trading of the
common stock on the NASDAQ ceased and trading on the New York Stock Exchange
("NYSE") commenced under the symbol "ROP". Following is the range of high and
low sales prices for the Company's common stock as reported by NASDAQ and the
NYSE, respectively, during each of the Company's fiscal 1997 and 1996 quarters,
as adjusted for the August 1, 1997 2-for-1 stock split. The last sales price
reported by the NYSE on December 31, 1997, was $28.250.
<TABLE>
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C> <C>
1997 1/st/ QUARTER $21.938 $18.563
2/nd/ QUARTER 23.063 19.750
3/rd/ QUARTER 28.750 20.188
4/th/ QUARTER 34.875 25.500
1996 1/st/ Quarter 20.500 17.375
2/nd/ Quarter 26.375 19.500
3/rd/ Quarter 24.625 18.000
4/th/ Quarter 24.750 17.500
</TABLE>
Based on information available to the Company and its transfer agent, the
Company believes that as of December 31, 1997 there were approximately 306
record holders of its common stock.
DIVIDEND POLICY. The Company has declared a cash dividend in each fiscal
quarter since its February 1992 initial public offering. Giving effect to a
September 1993 and August 1997 2-for-1 stock splits, its initial quarterly
dividend rate was $.01 per share. The quarterly rate was increased to $.015 per
share contemporaneously with the 1993 stock split, to $.025 per share in the
1994 fourth quarter, to $.0375 per share in the 1995 fourth quarter, to $.045
per share in the 1996 fourth quarter and to $.06 per share in the fourth quarter
ended October 31, 1997. However, the timing, declaration and payment of future
dividends will be at the sole discretion of the Board of Directors and will
depend upon the Company's profitability, financial condition, capital needs,
future prospects and other factors deemed relevant by the Board of Directors.
Therefore, there can be no assurance as to the amount, if any, that will be
available for the declaration of cash dividends in the future.
RECENT SALES OF UNREGISTERED SECURITIES. During fiscal 1997 the Company
completed three negotiated acquisitions of new businesses or product lines; the
May acquisitions of all of the operating assets of Princeton and, by merger, all
of the outstanding capital stock of Petrotech, and the October acquisition
(through Uson L.P.) of all of the operating assets of IDS. A portion of the
purchase price for each of these acquisitions was paid in unregistered shares of
<PAGE>
the Company's common stock. These shares were not registered with the
Securities and Exchange Commission in reliance upon the exemption from such
registration afforded under Section 4(2) of the Securities Act of 1933, as
amended, principally because of the limited number of persons to whom the shares
were issued. The acquisition agreements provided that the value of the
restricted shares paid at closing was to be determined by the average of the
closing prices of the Company's common stock reported by the NYSE for each of
several days before and/or after the closing date.
The following table sets forth information as to the Company's issuance of
unregistered shares of its common stock (adjusted to reflect the August 1997
2-for-1stock split) in connection with new business acquisitions completed
during fiscal 1997:
<TABLE>
<CAPTION>
Date Acquisition Shares Issued Agreed Value
---- ----------- ------------- ------------
<S> <C> <C> <C>
5/16/97 Princeton 138,188 $2,640,054
5/30/97 Petrotech 262,296 5,720,000
10/31/97 IDS 14,473 352,000
</TABLE>
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
The consolidated selected financial data presented below has been derived
from the Company's audited consolidated financial statements and should be read
in conjunction with "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS" and with the Company's consolidated financial
statements and related notes thereto included elsewhere in this Annual Report on
Form 10-K. All share data have been restated to reflect 2-for-1 stock splits in
August 1997 and September 1993.
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
---------------------------------------------------------------------------
1997/(1)/ 1996/(2)/ 1995/(3)/ 1994/(4)/ 1993/(5)/
-------------- ------------- ------------- ------------ -------------
(Dollars in thousands except per share data)
<S> <C> <C> <C> <C> <C>
OPERATIONS DATA:
Net sales $ 298,236 $ 225,651 $ 175,421 $ 147,683 $ 132,530
Gross profit 153,389 115,924 93,803 78,384 68,425
Income from operations 60,870 47,272 37,411 32,930 30,320
Earnings before accounting changes 36,350 28,857 23,271 20,862 19,058
Accounting Changes/6/ - - - (720) -
Net earnings applicable to common shares $ 36,350 $ 28,857 $ 23,271 $ 20,142 $ 19,058
============== ============= ============= ============ =============
PER SHARE DATA:
Net earnings applicable to common shares $ 1.16 $ 0.93 $ 0.77 $ 0.67 $ 0.64
============== ============= ============= ============ =============
Dividends $ 0.195 $ 0.158 $ 0.113 $ 0.070 $ 0.045
============== ============= ============= ============ =============
BALANCE SHEET DATA:
Working capital $ 86,954 $ 45,007 $ 38,077 $ 32,406 $ 13,973
Long-term debt, less current portion 99,638 63,373 20,150 16,683 9,909
Stockholders' equity 177,869 137,396 105,595 82,864 62,408
Total assets 329,320 242,953 155,381 121,982 94,210
</TABLE>
(1) Reflects inclusion of Gatan and FMI for the full year as compared to five
months in the prior year; and inclusion of Princeton (5 months), Petrotech
(5 months) and IDS (balance sheet only) in 1997.
(2) Reflects inclusion of Uson for the full year as compared to eight months in
the prior year; inclusion of Metrix for full year as compared to one month
in the prior year; and inclusion of Gatan and FMI for five months in 1996.
(3) Reflects inclusion of ISL for the full year as compared to two months in
the prior year; and inclusion of Uson and Metrix for eight months and one
month, respectively, in 1995.
(4) Reflects inclusion of Integrated Designs for the full year as compared to
one month in the prior year.
(5) Reflects inclusion of Integrated Designs for one month.
(6) Cumulative effect of adopting SFAS No. 106 and No. 109.
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the Company's
consolidated financial statements and selected financial data included elsewhere
in this Annual Report on Form 10-K.
RESULTS OF OPERATIONS
GENERAL
The following tables set forth selected information for the years
indicated. Amounts are dollars in thousands and percentages are of net sales.
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
------------------------------
1997 1996 1995
------- ------ -------
<S> <C> <C> <C>
Net sales 100.0% 100.0% 100.0%
Cost of sales 48.6 48.6 46.5
------ ----- -----
Gross profit 51.4 51.4 53.5
Selling, general and administrative expenses 31.0 30.5 32.2
------ ----- -----
Income from operations 20.4 20.9 21.3
Interest expense 2.0 1.4 1.1
Other income 0.1 0.1 0.3
------ ----- -----
Earnings before income taxes 18.5 19.6 20.5
Income taxes 6.3 6.8 7.3
------ ----- -----
Net earnings 12.2% 12.8% 13.2%
======= ===== =====
YEAR ENDED OCTOBER 31,
---------------------------------------------------
1997 1996 1995
-------------- --------------- -----------
$ % $ % $ %
------ ------- ------ ------- ----- ------
INDUSTRIAL CONTROLS: /(1)(2)/
Net sales 123,129 98,197 75,032
Gross profit 61,756 50.2 52,468 53.4 43,170 57.5
Operating profit /(3)/ 22,402 18.2 21,075 21.5 14,110 18.8
FLUID HANDLING: /(4)/
Net sales 94,175 86,094 73,973
Gross profit 43,213 45.9 38,686 44.9 35,665 48.2
Operating profit /(3)/ 25,853 27.5 24,026 27.9 23,132 31.3
ANALYTICAL INSTRUMENTATION: /(5)(6)(7)/
Net sales 80,932 41,360 26,416
Gross profit 48,420 59.8 24,770 59.9 14,968 56.7
Operating profit /(3)/ 18,292 22.6 6,377 15.4 3,819 14.5
</TABLE>
_________________
/(1)/ Includes results of Metrix from September 29, 1995.
/(2)/ Includes results of Petrotech from May 30, 1997.
/(3)/ Excludes any allocation of corporate administrative costs. Such costs
were $5,677 in 1997, $4,206 in 1996 and $3,650 in 1995.
/(4)/ Includes results of FMI from May 23, 1996.
/(5)/ Includes results of Uson from February 28, 1995.
/(6)/ Includes results of Gatan from June 1, 1996.
/(7)/ Includes results of Princeton from May 17, 1997.
<PAGE>
YEAR ENDED OCTOBER 31, 1997 COMPARED TO YEAR ENDED OCTOBER 31, 1996
Net sales for 1997 of $298.2 million represents the fifth consecutive year
that the Company has established a record high. Sales were $225.7 million in
1996. The increased sales during 1997 were due mostly to the inclusion of the
results of Gatan and FMI for the entire year (each of these companies was
acquired during May 1996 and combined, contributed $30.8 million of additional
revenues) and the inclusion of Princeton and Petrotech for part of 1997 (each of
these companies was acquired during May 1997 and combined, contributed $42.6
million of sales in 1997). Excluding these four companies, net sales for 1997
was approximately the same as 1996.
Metrix and Uson each had very strong sales growth in 1997 (in excess of
20%) primarily due to increased volume. Integrated Designs reported decreased
sales of about 20% due to continued adverse conditions affecting the cyclical
semiconductor equipment industry. Integrated Design's sales continue to
significantly trail the level reported during the first two quarters of 1996.
ISL reported sales about 16% lower in 1997 compared to 1996. The largest reason
for ISL's decreased sales was the strengthened U.S. Dollar during 1997 relative
to the French Franc (about 10%), the functional currency for most of ISL's
sales. Another factor contributing to ISL's lower sales was its restructuring
which resulted in the disposal of small sales subsidiaries in the U.K. and
Brazil. CCC also reported lower sales (about 4%) in 1997 compared to 1996. CCC
had significant sales to its primary customers in the CIS, RAO Gazprom, and
Ukraine Gazprom during 1996 ($23.3 million) that exceeded comparable 1997 sales
($14.9 million). Both of these customers were unable to finalize their
respective financing programs to make purchases at similar levels in 1997.
Net sales for the Industrial Controls segment (up $24.9 million, or 25%)
increased mostly due to the inclusion of Petrotech for the last five months of
1997. The increased sales at Metrix was largely offset by a sales decline at
CCC, where 18% gains in the core business were more than offset by declines in
the CIS business as noted above. Net sales for the Fluid Handling segment (up
$8.1 million, or 9%) increased mostly due to the inclusion of FMI for all of
1997 compared to only five months in 1996. The decrease in Integrated Designs
sales was partially offset by higher sales at Roper Pump. Net sales for the
Analytical Instrumentation segment (up $39.6 million, or 96%) increased mostly
due to the inclusion of Gatan for all of 1997 compared to the last five months
of 1996 and the inclusion of Princeton since its acquisition in May 1997. The
increased sales reported by Uson were largely offset by decreased sales by ISL.
The increase in gross profit in 1997 ($153.4 million in 1997 compared to
$115.9 million in 1996) is also due mostly to Gatan, FMI, Princeton and
Petrotech which were acquired over the past two years. Excluding these
companies, gross profit increased $3.4 million in 1997 even though sales were
relatively flat. Gross profit increased in each of the operating companies
except for Integrated Designs and ISL, whose decreases were directly related to
decreased sales. Despite the drop in sales, CCC's gross profit improved due to
a favorable product mix and certain cost reduction efforts.
Industrial Controls gross profit increased (up $9.3 million, or 18%) mostly
due to the inclusion of Petrotech ($5.8 million) for the last five months of
1997. Gross profit also increased at CCC ($2.6 million) as discussed
previously. Fluid Handling gross profit increased (up $4.5 million, or 12%)
mostly due to including FMI for a full year compared to only part of 1996.
Analytical Instrumentation gross profit increased (up $23.6 million, or 95%)
mostly due to the inclusion of
<PAGE>
Gatan for all of 1997 compared to only part of 1996 ($14.1 million) and the
inclusion of Princeton for the latter part of 1997 ($9.4 million).
The overall gross profit percentage in 1997 equals that of 1996 (51.4%),
despite the increased profitability mentioned earlier. This is due to the
acquisition of Petrotech, whose typical gross profit percentage is significantly
less than that of the Company's other operating units. Excluding Petrotech, the
Company would have reported consolidated gross profit of 54.0%, or an increase
of 2.6% compared to 1996. This increase is mostly due to the product mix and
cost improvements at CCC, whose gross margin percentage is up almost 8% compared
to 1996 and the high margins on increased sales at Gatan (full year vs. partial
year). Excluding Petrotech, Industrial Controls would have reported gross
profit of 57.1% compared to 53.4% in 1996 due to the improvements at CCC. Gross
profit percentages in 1997 for the Fluid Handling and Analytical Instrumentation
segments are each within about 1% of the amounts reported in 1996. Other than
CCC, the gross profit percentages reported by each of the Company's operating
units are considered relatively comparable between 1997 and 1996 (within 5%).
Selling, general and administrative expenses ("SG&A") increased $23.9
million, or 34.8%, during 1997 compared to 1996. Most of the increase ($18.4
million) is due to the additional costs associated with those companies acquired
during the past two years. CCC also reported additional costs of $5.5 million,
mostly due to efforts over the past eighteen months to increase the
infrastructure supporting the anticipated increased business with RAO Gazprom
and other opportunities in the area.
SG&A expenses for Industrial Controls increased (up $8.0 million, or 25%)
mostly due to the additional costs reported at CCC and the inclusion of
Petrotech ($2.9 million). SG&A expenses for Fluid Handling increased (up $2.7
million, or 18%) mostly due to the full year vs. partial year effects of FMI
($2.0 million). SG&A expenses for Analytical Instrumentation increased (up
$11.7 million, or 64%) mostly due to the full year vs. partial year effects of
Gatan ($7.7 million) and the inclusion of Princeton in 1997 ($5.8 million).
Partially offsetting these increases were decreased costs at ISL due to the
benefits of the restructuring program executed early in 1997 and exchange rate
fluctuations.
As a percentage of sales, consolidated SG&A expenses was 31.0% in 1997
compared to 30.4% in 1996. Most of the increase is due to higher research and
development ("R&D") spending ($14.2 million in 1997, 4.8% of sales, compared to
$8.7 million in 1996, 3.9% of sales) associated with the higher technology
products at Gatan and Princeton. These two companies account for $4.2 million
of the increase. Other R&D spending increases reflect a continuing commitment
to new product development at all companies. Selling expenses and
administrative expenses decreased slightly as a percentage of sales (less than
1%) as a result of volume leverage and cost containment programs.
Interest expense increased $2.8 million during 1997 compared to 1996. This
increase is due to the full-year effect of the additional borrowings used to
finance most of the acquisition costs of Gatan and FMI (each acquired in May
1996) and the partial-year effect of the 1997 acquisitions of Princeton and
Petrotech.
The Company's effective tax rate was 34.0% in 1997 compared to 34.8% in
1996. The lower effective tax rate in 1997 results from greater utilization of
Foreign Sales Corporation ("FSC")
<PAGE>
benefits. Utilization of the Company's FSC essentially results in income taxes
on U.S. export sales being at about one-third of the U.S. statutory rate. The
recently acquired Gatan, Princeton and Petrotech all have significant export
sales.
Reflecting the foregoing, net earnings were $36.4 million, or $1.16 per
common share, in 1997 compared to $28.9 million, or $0.93 per common share, in
1996. All per share amounts have been adjusted to reflect the 2-for-1 stock
split (in the form of a 100% stock dividend) that was paid on August 1, 1997.
Bookings during 1997 ($297.6 million) increased 29% compared to 1996
($230.4 million). Most of this increase is due to the impact of the companies
acquired over the past two years ($61.2 million). Excluding these companies,
bookings during 1997 increased 3% compared to 1996. This increase is due to
strength in the Industrial Controls segment (up 8%, mostly due to Amot and
Metrix). Fluid Handling and Analytical Instrumentation each reported slightly
lower bookings in 1997 for those companies included in all of both 1997 and 1996
(no individual company changed greater than 10%). On a pro forma basis to
include Gatan and FMI bookings since November 1, 1995 and Princeton and
Petrotech bookings since the comparable date in 1996 as their acquisition date
in 1997, bookings are up 4% in 1997 compared to 1996.
Sales order backlog was $82.6 million and $56.2 million at October 31, 1997
and 1996, respectively. Most of the increase ($21.0 million) represents the
backlog at Princeton and Petrotech, which were acquired during 1997. On a pro
forma basis to include these companies backlog at October 31, 1996, the 1997
backlog is 5% greater than 1996.
YEAR ENDED OCTOBER 31, 1996 COMPARED TO YEAR ENDED OCTOBER 31, 1995
Net sales for 1996 of $225.7 million were at record levels for the fourth
consecutive year, reflecting an increase of 29% over 1995. Each of the
Company's business segments achieved double-digit sales growth. For the
Industrial Controls segment net sales increased by $23.2 million, or 30%. A
31% increase in net sales from CCC, despite a modest 9% increase in its business
with RAO Gazprom, and the inclusion of Metrix for a full year, were the primary
contributors to the increase. The CCC sales gains included the first
significant orders shipped to customers other than RAO Gazprom in the CIS
following establishment of a significant local infrastructure. Also, CCC made
significant gains in other international markets for processing plant compressor
controls. Other contributors to sales gains within the Industrial Controls
segment included favorable market conditions in certain of the core markets and
incremental sales on new products. The Fluid Handling segment experienced net
sales gains of $12.1 million, or 16%, with the inclusion of FMI for five months
and the continued growth from Cornell Pump and Integrated Designs. This offset
a 4% decline in Roper Pump's net sales resulting from weak demand in the early
quarters for rotary gear and progressive cavity pumps. Record first half sales
at Integrated Designs were eroded by lower third and fourth quarter sales as a
result of a cyclical decline in the semiconductor industry, but still showed a
full year growth of 18% from continued international market gains, particularly
in Asia. The Analytical Instrumentation segment reported net sales increases of
$14.9 million, or 57%, with the inclusion of Gatan for five months and net sales
gains at the other two businesses. These sales gains were principally
attributable to incremental sales on new products, expansion into the medical
supplies testing market and international market expansion.
In 1996, net sales to customers outside the United States represented 48%
of the total as
<PAGE>
compared to 43% in 1995. The leading reasons for international sales growth were
the acquisition of Gatan which made 64% of its sales outside the United States
and increasing penetration of European and Pacific Rim markets through the
existing Roper infrastructure. Results of foreign operations were not
significantly impacted by fluctuations in foreign currency exchange rates in
1996.
Gross profit of $115.9 million in 1996 increased by $22.1 million over the
same period in 1995, while the gross margin decreased to 51.4% from 53.5% for
1995. This margin reduction was contributed to by similar margin impacts from
both Industrial Controls and Fluid Handling segments as offset by improved
margins in the Analytical Instrumentation segment. The gross margin for the
Industrial Controls segment declined to 53.4% from 57.5%. This was largely
attributable to more low margin, buy-out products sold to RAO Gazprom and
increased engineering and infrastructure costs supporting CCC's operations in
the CIS. The gross margin for the Fluid Handling segment declined to 44.9% from
48.2% in 1995, primarily due to lower margins at Integrated Designs caused by
increased discounted sales to OEM's and vendor price increases. The margins at
Integrated Designs returned close to historical levels for the last month of the
fiscal year. Gross margins for the Analytical Instrumentation segment increased
to 59.9% from 56.7% in 1995 reflecting the higher margin rates from the
acquisition of Gatan and margin improvements at ISL and Uson, both of which
benefited from the leverage of additional volume, cost reduction efforts and
price increases on products sold.
SG&A expenses increased by $12.3 million to $68.7 million, an increase of
21.8%. SG&A expenses as a percentage of net sales reduced to 30.5% from 32.2% in
1995. This reduction is attributable to the Industrial Controls segment where
SG&A expenses reduced to 31.9% of sales in 1996, from 37.5% in 1995, and was
principally the result of lower R&D costs at CCC where the Series 4 design was
stabilized and from reduced bonus compensation in 1996. R&D expenses were $8.7
million in 1996, an increase of $2.8 million, reflecting the increased
investment required in higher technology products throughout the Company.
Income from operations increased by $9.9 million to $47.3 million. The
operating margin declined to 20.9% versus 21.3% in 1995. In the Industrial
Controls segment, operating profit (before allocation of corporate
administrative expenses) increased by $7.0 million to $21.1 million; 21.5% of
sales, principally due to increased sales at CCC and the full year inclusion of
Metrix results. Operating profits (before allocation of corporate administrative
expenses) of the Fluid Handling segment increased by $0.9 million to $24.0
million; 27.9% of sales, with the inclusion of FMI offsetting margin-related
declines at Integrated Designs and volume-related declines at Roper Pump. The
Analytical Instrumentation segment increased operating profits by 67% to $6.4
million; 15.4% of sales, largely as a result of the acquisition of Gatan.
Interest expense increased by $1.3 million, or 68%, due to the additional
borrowings for the 1996 acquisitions. The decrease in other income results from
lower royalties collected under a license fee agreement.
The Company's effective tax rate was 34.8% in 1996 as compared to 35.4% in
1995. The effective tax rate was reduced from the statutory rate largely because
of the favorable tax treatment afforded export sales attributed to its FSC and a
lower state tax burden.
Reflecting the foregoing, net earnings were $28.9 million or $0.93 per
common share, in
<PAGE>
1996 as compared to $23.3 million or $0.77 per common share, for 1995.
Bookings for 1996 increased by 7% to $230.4 million (pro forma to include
Gatan, FMI, Metrix and Uson for 1995). Sales order backlog was $56.2 million
and $36.2 million at October 31, 1996 and 1995, respectively, reflecting a 23%
increase in pro forma bookings in the fourth quarter. This increase in bookings
included a number of orders which totaled $7 million from Ukrainian Gazprom.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
Cash flow from operations and credit available under its NationsBank credit
agreement are the Company's primary sources of short-term liquidity. In 1997,
the Company generated $35.4 million of cash from operations, compared to $33.1
million and $26.2 million in 1996 and 1995, respectively. The increased
operating cash flow in 1997 principally resulted from higher earnings which were
partially offset by additional investments in working capital.
Working capital increased significantly ($42 million) during 1997 to a
total of $87 million at October 31, 1997. Most of the increase ($26 million) is
due to the working capital at October 31, 1997 of Princeton, Petrotech and IDS,
which were acquired during the year. The major components of the increased
working capital are accounts receivable ($28 million, $21 million due to the
1997 acquisitions), inventories ($19 million, $16 million due to the 1997
acquisitions), less current liability increases in accounts payable ($5 million,
$4 million due the 1997 acquisitions) and accrued liabilities ($7 million, $6
million due to the 1997 acquisitions).
An additional $6 million of working capital at October 31, 1997 is invested
in CCC accounts receivable and inventories compared to last year. CCC has not
collected certain receivables, primarily from RAO Gazprom, as anticipated and
inventories were built up at October 31, 1997 in anticipation of sales to RAO
Gazprom that have been delayed due to continuing financing issues. The Company
anticipates that all receivables from RAO Gazprom will be collected and that RAO
Gazprom will resolve its financing issues in fiscal 1998. Further shipments to
RAO Gazprom may also be affected by RAO Gazprom's ability to secure financing
arrangements acceptable to the Company and are subject to uncertainty as
described below in "Outlook".
The 1997 acquisitions were financed primarily with long-term debt and
equity. At October 31, 1996, approximately $6 million of borrowings under the
Company's NationsBank credit facility was classified as current in accordance
with the terms of the agreement. During 1997, this agreement was amended and
restated such that there are no longer any interim pay-down requirements.
Capital expenditures in 1997 were $5.0 million, compared to $5.0 million
and $3.2 million in 1996 and 1995, respectively. Inclusion of Gatan and FMI for
a full year in 1997 and Princeton and Petrotech since their acquisition added
approximately $1.3 million of capital expenditures in 1997 compared to 1996.
Offsetting this increase was decreased spending at other companies. The Company
believes that it can absorb anticipated sales growth without any significant
expansion in manufacturing facilities, that capital requirements will generally
be confined to ongoing replacement and upgrading of current machinery and
facilities. Capital expenditures have historically not been very significant
(never greater than 3% of sales in recent years) and this trend is expected to
continue in 1998. The approximate doubling of the Company's cost for buildings
is
<PAGE>
attributable to two buildings acquired pursuant to the 1997 acquisitions.
The increase in intangible assets reflects approximately $35 million of
additions for the excess of acquisition costs over the fair value of net assets
acquired for the three companies that were acquired during 1997 (Princeton -
$20.7 million, Petrotech - $8.9 million and IDS - $3.7 million).
The increase in other noncurrent assets and other noncurrent liabilities is
primarily a reclassification within the balance sheet to separately reflect
liabilities arising from insurable losses and the associated amounts receivable
from the insurance companies. The estimated total of insurable settlements and
payments by insurance companies is approximately $3 million.
In May 1997 the Company amended and restated its NationsBank then-existing
credit agreement raising the borrowing capacity to $200 million, up from $100
million. Total borrowings under this agreement were approximately $98 million at
October 31, 1997 compared to approximately $67 million at October 31, 1996.
This increase in debt during 1997 resulted primarily from financing the
acquisitions of Princeton, Petrotech and IDS. Total cash acquisition costs were
approximately $55 million.
Total debt to total capitalization was 36.5% and 33.8% at October 31, 1997
and 1996, respectively, indicating (in management's opinion) a relatively modest
level of financial leverage. The slight increase in leverage is due to higher
debt levels largely offset by the Company's record earnings and the value of the
Company's common stock used to partially fund the acquisitions completed during
the year. At October 31, 1997 the Company had $102 million of additional
borrowing capacity under its NationsBank credit agreement, the material terms
and conditions of which are set out in Note 8 of the Company's consolidated
financial statements included elsewhere in this report. Most of the Company's
borrowings are LIBOR-based with maturities generally within 30 days. Over
longer terms, the Company's interest expense is influenced by the volatility of
financial markets. Interest costs are therefore subject to significant changes
depending upon the movement of short-term interest rates and other factors. The
Company is exploring transactions that would reduce exposure to interest rate
fluctuations. No such transactions have currently been entered into.
Total stockholders' equity increased by $40 million to $178 million, an
increase of 29%. Major components of this increase include current year net
earnings of $36 million and $11 million of the Company's common stock issued
pursuant to acquisitions, and stock option exercises. Dividends paid on common
stock were $6 million in 1997, an increase of 26% compared to 1996. Increased
dividend payments are primarily the result of higher dividend rates per share in
1997 compared to 1996. Quarterly rates in 1997 ranged from 20% to 33% higher
than the comparable quarters in 1996. Although the Company has a history of
paying dividends each quarter since its IPO in February 1992 and it has
increased the dividend rate per share annually since 1993, future dividends and
rate changes are at the discretion of the Company's board of directors and
cannot be assured.
The Company believes that internally generated cash flow and available
unused credit facilities will continue to be adequate to fund normal operating
requirements, capital expenditures, debt service costs and dividends. However,
the rate at which the Company can reduce its debt in 1998 (and the avoidance of
associated interest expense) will be significantly affected by the timing
<PAGE>
and magnitude of any financing requirements of any new acquisitions.
The Company has generally been able to hold manufacturing and operating
cost increases to levels which are at or below inflation levels. It will
continue its aggressive efforts to minimize increases in the prices it pays for
materials and services and to implement cost reduction programs to offset the
effects of inflation. The Company expects to continue to be successful in
passing along any net cost increases to its customers.
OUTLOOK
With incoming orders of about $80 million for each of the last two quarters
of 1997 (fourth quarter bookings were about 9% higher than the comparable
quarter last year) and a backlog of $82.7 million, the Company expects its three
business segments to continue their growth in sales and earnings absent any
material adverse change in the market and business conditions.
As previously announced, the Company acquired IDS on October 31, 1997.
IDS will be included in the Company's Analytical Instrumentation segment.
Effective December 1, 1997 the Company acquired Flow Technology, formerly EG&G
Flow Technology, Inc., which will be included in the Company's Fluid Handling
segment. The annual sales of these two businesses prior to acquisition was
approximately $15 million in total and the Company anticipates these
acquisitions will have immediate favorable contributions to earnings. The
Company also continues working to close another acquisition of a company that
would become a part of its Analytical Instrumentation segment, as previously
announced. This transaction is currently undergoing review by the Federal Trade
Commission, which has delayed the earliest-case timetable described in the
Company's third quarter Form 10-Q. It is also subject to final negotiation and
execution of a purchase agreement. Pending satisfactory resolution of these
contingencies, the Company expects that it will be able to complete this
transaction during the early part of calendar 1998.
The Company has been informed by RAO Gazprom that it will discontinue its
efforts to obtain U.S. Export-Import Bank guaranteed financing to fund equipment
purchases under an existing turbomachinery controls equipment supply contract
with CCC. RAO Gazprom has expressed its continuing commitment to this supply
contract and has indicated that funds will be made available in 1998 out of
their general credit facilities. However, in light of RAO Gazprom's past
difficulties in carrying out its financing intentions, the Company will proceed
cautiously until it is reasonably assured that RAO Gazprom can fully fund its
business with CCC at the levels and on the schedule provided for in the supply
contract.
In the event that RAO Gazprom is unable to provide this assurance by mid-
year, the Company may walk away from much or all of this opportunity because of
the prohibitive cost of maintaining the infrastructure needed to support such
sales. Additionally, such a circumstance may place collection of existing
accounts receivable at risk. See Note 10 and Note 13 of the Company's
consolidated financial statements in this regard.
The Company believes that most "Year 2000" issues associated with its
business systems and products have already been resolved and that there are no
further significant costs associated with addressing any remaining matters.
The Company expects to continue an active acquisition program. However,
completion of
<PAGE>
future acquisitions will be dependent on numerous factors and, unless otherwise
indicated, it is not feasible to reasonably estimate when any such acquisitions
will occur, what the financing requirements will be or what the impact will be
on the Company's activities, financial condition and results of operations.
The Financial Accounting Standards Board has issued several new accounting
and reporting standards that are applicable to the Company and will become
effective at the Company over the next several years. The issues most
applicable to the Company include disclosures related to earnings per share
reporting, comprehensive income reporting and business segment reporting. Once
adopted, the information to be presented in accordance with these new standards
is not expected to significantly affect the Company's disclosures. See Note 1
to the Company's consolidated financial statements for further discussion of the
specific new pronouncements.
FORWARD LOOKING INFORMATION
The information provided elsewhere in this report, in other Company filings
with the Securities and Exchange Commission and in other press releases or
public disclosures contains forward-looking statements about the Company's
businesses and prospects as to which there are numerous risks and uncertainties
which generally are beyond the Company's control. Some of these risks include
the level and timing of future business with RAO Gazprom, the integration and
performance of IDS and Flow Technology, the completion of any additional
acquisitions and the impact money market volatility can have on the Company's
leveraged capital structure. There is no assurance that these and other risks
and uncertainties will not have an adverse impact on the Company's future
operations, financial condition or financial results.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and supplementary data required by this item begin
at page F-1 hereof.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not applicable.
<PAGE>
CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX
<TABLE>
<CAPTION>
PAGE
<S> <C>
Consolidated Financial Statements:
Independent Auditors' Report.................................. F-2
Consolidated Balance Sheets as of October 31, 1997 and 1996... F-3
Consolidated Statements of Earnings for the Years ended
October 31, 1997, 1996 and 1995............................. F-4
Consolidated Statements of Stockholders' Equity for the
Years ended October 31, 1997, 1996 and 1995................. F-5
Consolidated Statements of Cash Flows for the Years ended
October 31, 1997, 1996 and 1995............................. F-6
Notes to Consolidated Financial Statements.................... F-7
Supplementary Data:
Schedule II - Consolidated Valuation and Qualifying Accounts
for the Years ended October 31, 1997, 1996 and 1995......... S-1
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Roper Industries, Inc.:
We have audited the consolidated financial statements of Roper Industries, Inc.
as listed in the accompanying index. In connection with our audits of the
consolidated financial statements, we also have audited the financial statement
schedule listed in the accompanying index. These consolidated financial
statements and financial statement schedule are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements and financial statement schedule based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Roper Industries,
Inc. and subsidiaries as of October 31, 1997 and 1996, and the results of their
operations and their cash flows for each of the years in the three-year period
ended October 31, 1997, in conformity with generally accepted accounting
principles. Also, in our opinion, the related financial statement schedule,
when considered in relation to the basic consolidated financial statements taken
as a whole, presents fairly, in all material respects, the information set forth
therein.
/s/ KPMG Peat Marwick LLP
Atlanta, Georgia
December 5, 1997
F-2
<PAGE>
ROPER INDUSTRIES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
October 31, 1997 and 1996
(Dollars in thousands, except share data)
<TABLE>
<CAPTION>
Assets 1997 1996
------ --------- --------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 649 $ 423
Accounts receivable, net 78,752 50,659
Inventories 50,199 31,133
Other current assets 2,290 2,298
-------- --------
Total current assets 131,890 84,513
Property, plant and equipment, net 31,395 23,959
Intangible assets, net 154,255 127,670
Other assets 11,780 6,811
-------- --------
Total assets $329,320 $242,953
======== ========
Liabilities and Stockholders' Equity
------------------------------------
Current liabilities:
Accounts payable $ 15,654 $ 11,004
Accrued liabilities 25,231 17,965
Income taxes payable 1,564 3,723
Current portion of long-term debt 2,487 6,814
-------- --------
Total current liabilities 44,936 39,506
Long-term debt 99,638 63,373
Other liabilities 6,877 2,678
-------- --------
Total liabilities 151,451 105,557
-------- --------
Stockholders' equity:
Preferred stock, $.01 par value; 1,000,000 shares authorized;
none outstanding - -
Common stock, $.01 par value; 80,000,000 shares authorized;
30,919,637 and 30,322,972 issued and outstanding at
October 31, 1997 and 1996, respectively 309 303
Additional paid-in capital 61,950 50,742
Cumulative translation adjustments (937) 177
Retained earnings 116,547 86,174
-------- --------
Total stockholders' equity 177,869 137,396
-------- --------
Total liabilities and stockholders' equity $329,320 $242,953
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
ROPER INDUSTRIES, INC. AND SUBSIDIARIES
Consolidated Statements of Earnings
Years ended October 31, 1997, 1996 and 1995
(Dollars in thousands, except share data)
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Net sales $298,236 $225,651 $175,421
Cost of sales 144,847 109,727 81,618
-------- -------- --------
Gross profit 153,389 115,924 93,803
Selling, general and administrative expenses 92,519 68,652 56,392
-------- -------- --------
Income from operations 60,870 47,272 37,411
Interest expense 6,048 3,282 1,952
Other income 278 250 542
-------- -------- --------
Earnings before income taxes 55,100 44,240 36,001
Income taxes 18,750 15,383 12,730
-------- -------- --------
Net earnings $ 36,350 $ 28,857 $ 23,271
======== ======== ========
Net earnings per common and common equivalent share $1.16 $0.93 $0.77
======== ======== ========
Weighted average common and common equivalent
shares outstanding 31,458 30,882 30,260
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
ROPER INDUSTRIES, INC. AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
Years ended October 31, 1997, 1996 and 1995
(Dollars in thousands, except share data)
<TABLE>
<CAPTION>
Additional Currency
Common stock paid-in translation Retained
-------------------
Shares* Amount* capital* adjustments earnings Total
---------- ------- ---------- ------------ --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Balances at October 31, 1994 29,603,966 $296 $40,049 $ 374 $ 42,145 $ 82,864
Net earnings - - - - 23,271 23,271
Common stock issued for an
acquisition 145,132 2 1,812 - - 1,814
Exercise of stock options 126,336 1 733 - - 734
Currency translation adjustments - - - 261 - 261
Cash dividends ($0.1125 per share) - - - - (3,349) (3,349)
---------- ---- ------- ----------- -------- --------
Balances at October 31, 1995 29,875,434 299 42,594 635 62,067 105,595
Net earnings - - - - 28,857 28,857
Common stock issued for an
acquisition 248,052 2 5,698 - - 5,700
Common stock issued under
incentive bonus plan 75,106 1 1,351 - - 1,352
Exercise of stock options 124,380 1 1,099 - - 1,100
Currency translation adjustments - - - (458) - (458)
Cash dividends ($0.1575 per share) - - - - (4,750) (4,750)
---------- ---- ------- ----------- -------- --------
Balances at October 31, 1996 30,322,972 303 50,742 177 86,174 137,396
Net earnings - - - - 36,350 36,350
Common shares issued for
acquisitions 415,407 4 8,708 - - 8,712
Common stock issued under
incentive bonus plan 10,000 - 245 - - 245
Exercise of stock options
(inclusove of tax benefit of $500) 171,258 2 2,255 - - 2,257
Currency translation adjustments - - - (1,114) - (1,114)
Cash dividends ($0.1950 per share) - - - - (5,977) (5,977)
---------- ---- ------- ----------- -------- --------
Balances at October 31, 1997 30,919,637 $309 $61,950 $ (937) $116,547 $177,869
========== ==== ======= =========== ======== ========
</TABLE>
* Amounts prior to August 1, 1997 have been restated to reflect the 2-for-1
stock split (in the form of a 100% stock dividend) that was paid on August 1,
1997.
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
ROPER INDUSTRIES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended October 31, 1997, 1996 and 1995
(Dollars in thousands)
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Cash flows from operating
activities:
Net earnings $ 36,350 $ 28,857 $ 23,271
Adjustments to reconcile net
earnings to net cash
provided by operating
activities:
Depreciation and amortization
of property, plant
and equipment 5,367 4,140 3,251
Amortization of intangible
assets 6,033 3,711 2,737
Changes in operating assets
and liabilities:
Accounts receivable (10,876) (7,470) (5,553)
Inventories 2,303 (469) (2,833)
Accounts payable and accrued
liabilities (2,357) 4,817 3,687
Income taxes payable (1,585) (1,909) 1,496
Other, net 168 1,409 163
-------- -------- --------
Net cash provided by
operating activities 35,403 33,086 26,219
-------- -------- --------
Cash flows from investing
activities:
Acquisitions of businesses, net
of cash acquired (55,311) (74,878) (24,187)
Capital expenditures (4,984) (5,010) (3,194)
Other, net (163) 5 19
-------- -------- --------
Net cash used in investing
activities (60,458) (79,883) (27,362)
-------- -------- --------
Cash flows from financing
activities:
Proceeds from long-term debt 94,845 101,456 38,732
Principal payments on long-term
debt (65,180) (51,979) (35,203)
Cash dividends to stockholders (5,977) (4,750) (3,349)
Proceeds from stock option
exercises 1,762 1,100 734
Other, net (116) (866) 525
-------- -------- --------
Net cash provided by
financing activities 25,334 44,961 1,439
-------- -------- --------
Effect of exchange rate changes on
cash (53) (63) 3
-------- -------- --------
Net increase (decrease) in
cash and cash equivalents 226 (1,899) 299
Cash and cash equivalents,
beginning of year 423 2,322 2,023
-------- -------- --------
Cash and cash equivalents, end of
year $ 649 $ 423 $ 2,322
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
ROPER INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
October 31, 1997, 1996, and 1995
(Dollars in thousands, except share data)
(1) Summary of Accounting Policies
------------------------------
Basis of Presentation - The consolidated financial statements include the
---------------------
accounts of Roper Industries, Inc. ("the Company") and its subsidiaries. All
significant intercompany accounts and transactions have been eliminated. On
August 1, 1997, the Company paid a 2-for-1 stock split on its common stock
in the form of a 100% stock dividend. All amounts related to common stock
prior to August 1, 1997 have been restated to reflect the stock split.
Cash and Cash Equivalents - The Company considers highly liquid financial
-------------------------
instruments with original maturities of three months or less to be cash
equivalents.
Accounts Receivable - Accounts receivable are stated net of the allowance
-------------------
for doubtful accounts of $1,866 and $992 at October 31, 1997 and 1996,
respectively.
Inventories - Inventories are valued at the lower of cost or market.
-----------
Subsidiaries of the Company use either the first-in, first-out cost method
("FIFO") or the last-in, first-out cost method ("LIFO"). Inventories valued
at LIFO cost comprised approximately 17% and 24% of consolidated inventories
at October 31, 1997 and 1996, respectively.
One of the Companies subsidiaries had a decrement in its LIFO reserve during
1997. The impact of this decrement on the Company's consolidated results of
operations was immaterial.
Property, Plant, and Equipment and Depreciation - Property, plant, and
-----------------------------------------------
equipment are stated at cost less accumulated depreciation and amortization.
Depreciation and amortization are provided for using the straight-line
method over the estimated useful lives of the assets as follows:
Buildings 20-30 years
Machinery 8-12 years
Tooling 3 years
Other equipment 3-5 years
Revenue Recognition - Revenues under certain long-term contracts are
-------------------
recognized under the percentage-of-completion method using the ratio of
costs incurred to total estimated costs as the measure of performance.
Estimated losses on such contracts are recognized immediately. All other
revenue is recognized as products are shipped or services are rendered.
Fair Value of Financial Instruments - The Company's carrying value of long-
-----------------------------------
term debt approximates fair value since the rates are tied to floating
rates. The carrying value of all other financial instruments equals or
approximates fair value due to their short-term nature.
(Continued)
F-7
<PAGE>
ROPER INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Dollars in thousands, except share data)
Intangible Assets - Intangible assets consist principally of goodwill, which
-----------------
is amortized on a straight-line basis over periods ranging from 15 to 40
years. The accumulated amortization for intangible assets was $14,402 and
$8,593 at October 31, 1997 and 1996, respectively. The Company accounts for
goodwill in a business combination as the excess of the purchase cost over
the fair value of the net assets acquired. Other intangible assets are
recorded at cost. On an ongoing basis, management reviews the valuation and
amortization periods of intangible assets. The Company assesses the
recoverability of its intangible assets by determining whether the
amortization of the goodwill balance over its remaining life can be
recovered through undiscounted future operating cash flows of the acquired
enterprise. Based upon such reviews as of October 31, 1997 and 1996,
management considers the unamortized balances of goodwill or other
intangible assets to be recoverable.
Income Taxes - The Company has not provided deferred taxes on the
------------
accumulated undistributed earnings of its foreign subsidiaries, as
substantially all such earnings are intended to be permanently reinvested.
At October 31, 1997, the accumulated undistributed earnings totaled
approximately $8,000. The amount of U.S. tax due if such earnings were
repatriated approximates $3,000 and would be substantially offset by
allowable foreign tax credits. The Company also has not provided for any
foreign withholding taxes due on the repatriation of such earnings.
Research and Development - Research and development costs include salaries
------------------------
and benefits, rents, supplies, and other costs related to various products
under development. Research and development costs are expensed in the period
incurred and totaled approximately $14,200, $8,700 and $5,900 for the years
ended October 31, 1997, 1996, and 1995, respectively.
Foreign Currency Translation - Assets and liabilities of foreign
----------------------------
subsidiaries are translated at the exchange rate in effect at the balance
sheet date and revenues and expenses are translated at average exchange
rates for the year. Translation adjustments are reflected as a separate
component of stockholders' equity.
Use of Estimates - Management of the Company has made a number of estimates
----------------
and assumptions relating to the reporting of assets and liabilities and the
disclosure of contingent assets and liabilities to prepare these financial
statements in conformity with generally accepted accounting principles.
Actual results could differ from those estimates.
Reclassifications - Certain reclassifications were made to prior year
-----------------
amounts to conform to the presentation adopted in fiscal 1997.
(Continued)
F-8
<PAGE>
ROPER INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Dollars in thousands, except share data)
Earnings Per Common and Common Equivalent Share - Earnings per common and
-----------------------------------------------
common equivalent share are calculated based on the weighted average number
of restated shares of common stock and common stock equivalents outstanding
during the respective periods. The dilutive effect of common stock
equivalents is determined using the treasury stock method. Common stock
equivalents consist of stock options and deferred stock grants. The fully-
diluted results have not been presented since they are not significantly
different than the primary results.
A reconciliation between the weighted average actual outstanding shares and
the weighted average common and common share equivalents outstanding used
for earnings per share calculations is presented below for the years ended
October 31:
<TABLE>
<CAPTION>
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
Average actual common shares outstanding 30,580 30,112 29,752
Average common stock equivalents outstanding 878 770 508
------ ------ ------
Primary shares outstanding 31,458 30,882 30,260
Incremental fully-dilutive equivalents outstanding 84 10 152
------ ------ ------
Fully-diluted shares outstanding 31,542 30,892 30,412
====== ====== ======
</TABLE>
Recently Released Accounting and Reporting Pronouncements - Statement of
---------------------------------------------------------
Financial Standards ("SFAS") 128 - Earnings Per Share ("EPS") establishes
standards for computing and presenting EPS. It replaces the presentation of
primary EPS with a presentation of basic EPS. Basic EPS will be calculated
using income available to common stockholders divided by average shares
outstanding (it excludes common stock equivalents that are used in
calculating primary EPS). Diluted EPS per SFAS 128 is computed similarly to
fully-diluted EPS pursuant to the to-be superceded accounting rules. SFAS
128 is applicable to the Company beginning with its first fiscal 1998
quarter ending January 31, 1998. Early adoption is not permitted. Once
adopted, prior period data will be restated. For the Company, basic EPS is
expected to be slightly higher than primary EPS.
SFAS No. 130 - Reporting Comprehensive Income establishes standards for
reporting comprehensive income and its components. This statement addresses
certain items that affect a company's net assets without affecting its
income statement. For the Company, the only such item is expected to be
foreign currency translation adjustments resulting from its non-U.S.
subsidiaries. SFAS 130 is applicable to the Company beginning with fiscal
1998. The impact on the Company's financial statements compared to
information presently available is not expected to be significant.
SFAS No. 131 - Disclosures about Segments of an Enterprise and Related
Information redefines the way that public companies report information about
their business segments. The statement intends to align reportable segments
and certain disclosures with how the operations are managed internally. It
also modifies certain geographic disclosures to be identified by country
instead of geographic region. SFAS 131 is applicable to the Company
beginning with its year-end reporting in fiscal 1999. The impact of this
statement on the Company's disclosures is not expected to be significant.
(Continued)
F-9
<PAGE>
ROPER INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Dollars in thousands, except share data)
(2) Business Acquisitions
---------------------
On October 31, 1997, a wholly-owned subsidiary of the Company acquired the
operating assets of Industrial Data Systems, Inc. ("IDS") for total
consideration of approximately $4,800, consisting of $4,400 cash and
approximately 14,000 shares of Company common stock. Acquisition costs
include approximately $100 of transaction costs incurred by the Company.
Goodwill of approximately $3,700 will be amortized over 15 years.
IDS, based in Salt Lake City, Utah, is a leading manufacturer of leak
testing instrumentation primarily for the medical and industrial supplies
industry.
On May 30, 1997, a wholly-owned subsidiary of the Company completed the
acquisition of all of the capital stock of Petrotech, Inc., a Louisiana
corporation ("Petrotech"). The purchase price consisted of approximately
$6,500 of cash (net of cash acquired) and approximately 263,000 shares of
Company common stock. In addition, approximately $8,100 of Petrotech debt
was assumed. Other direct costs of the acquisition total approximately $300.
The excess of the acquisition costs over the fair value of the net assets
acquired (approximately $8,900) is being amortized straight-line over 15
years.
Petrotech provides system integration of control products and systems for
turbines and compressors within the oil & gas, pipeline, process control and
power generation markets. Petrotech is a recognized market leader and
derives a considerable portion of its revenues from manufacturing advanced
turbine and compressor control products.
On May 16, 1997, a wholly-owned subsidiary of the Company completed the
acquisition of the operating assets of Princeton Instruments, Inc., a New
Jersey corporation ("PI"), the real estate occupied by PI at its principal
facility in Trenton, New Jersey, and all of the stock of PI's foreign sales
affiliates (PI and its foreign affiliates are collectively referred to as
"Princeton").
The purchase price consisted of approximately $35,700 of cash (net of cash
acquired) and approximately 138,000 shares of Company common stock.
Transaction costs and other direct costs of the acquisition total
approximately $400. A total of 92,124 shares of Roper common stock was
placed in an escrow account to secure certain of the seller's
indemnification obligations associated with the acquisition of Princeton.
Goodwill of approximately $20,700 is being amortized straight-line over 30
years.
Princeton designs, manufactures and markets spectral and digital imaging
cameras and is a technological and market leader worldwide in most of its
market segments. Princeton supplies a diverse end-user base that includes
the scientific research market, industrial research markets and various
industrial process markets.
(Continued)
F-10
<PAGE>
ROPER INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Dollars in thousands, except share data)
On May 31, 1996, the Company acquired the stock of Gatan International, Inc.
(collectively, with its subsidiaries referred to as "Gatan") for
approximately $48,600, net of cash acquired. Costs associated with the
acquisition totaled approximately $1,500. Of the total consideration paid,
approximately $34,500 represents goodwill and is being amortized over 30
years. Gatan is engaged in the business of manufacturing analytical systems
and products used in the operation of transmission and scanning electron
microscopes.
On May 22, 1996, the Company acquired the assets of Fluid Metering, Inc.
("FMI") for approximately $30,200, consisting of (i) $23,000 in cash; (ii)
248,052 shares of the Company's common stock; (iii) $1,124 cash paid to FMI
June 21, 1996 to fund the redemption of its outstanding debentures; and (iv)
$400 in cash to be paid in equal installments on May 22, 1997 and 1998. The
cash portion of the purchase price paid at closing was financed under the
Company's then-existing credit agreement. Costs associated with the
acquisition totaled approximately $509. Of the total consideration paid,
$27,200 represents goodwill and is being amortized over 30 years. FMI is
engaged in the business of manufacturing low-flow, precision dispense pumps.
On September 29, 1995, the Company acquired the assets of Metrix Instrument
Co. ("Metrix") for approximately $11,600 in cash, plus approximately $437 in
acquisition costs. Of the total consideration paid, $9,200 represents
goodwill and is being amortized over a 20 years. In conjunction with the
acquisition of Metrix, the Company also purchased the building in which
Metrix operates for $451. Metrix is engaged in the business of manufacturing
vibration monitoring equipment for rotating machinery such as engines,
turbines, fans, and pumps.
On March 6, 1995, the Company acquired the assets of Uson Corporation
("Uson") for approximately $11,900 in cash and also acquired the stock of
Prex Corporation (an affiliate) for 145,132 shares of the Company's stock.
Costs associated with these acquisitions totaled approximately $498. Of the
total consideration paid, $9,500 represents goodwill and is being amortized
over 15 years. Both Uson and its affiliate manufacture microprocessor based
control products used for leak testing in the automotive, machine tool, and
medical industries.
All of the preceding acquisitions were accounted for using the purchase
method of accounting and, accordingly, the assets and liabilities assumed
were recorded at their fair values based upon appraisals and other analyses.
The results of operations of the acquired companies subsequent to their
acquisition by the Company have been included in the consolidated results of
operations of the Company.
(Continued)
F-11
<PAGE>
ROPER INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Dollars in thousands, except share data)
The following unaudited pro forma summary presents the Company's
consolidated results of operations as if the acquisitions during fiscal 1997
and 1996 had occurred at the beginning of fiscal 1996.
<TABLE>
<CAPTION>
Year ended October 31,
----------------------
1997 1996
-------- ---------
<S> <C> <C>
Net sales $333,061 $312,088
======== ========
Net earnings 37,990 33,532
======== ========
Net earnings per share 1.20 1.07
======== ========
</TABLE>
(3) Supplemental Cash Flow Information
----------------------------------
A summary of annual supplemental cash flow information for the years ended
October 31 is as follows:
<TABLE>
<CAPTION>
1997 1996 1995
-------- ------- -------
<S> <C> <C> <C>
Cash paid during the year for:
Interest $ 7,409 $ 2,048 $ 1,739
======== ======= =======
Income taxes, net of refunds received $ 20,207 $16,203 $11,378
======== ======= =======
Noncash investing activities:
Net assets of businesses acquired:
Fair value of assets, including goodwill $ 81,431 $82,311 $27,468
Liabilities assumed (17,408) (757) (1,034)
Common stock issued (8,712) (5,700) (1,814)
-------- ------- -------
Cash paid, net of cash acquired $ 55,311 $75,854 $24,620
======== ======= =======
</TABLE>
(4) Inventories
-----------
The components of inventories at October 31 are as follows:
<TABLE>
<CAPTION>
1997 1996
----- -----
<S> <C> <C>
Raw materials and supplies $25,729 $19,226
Work in process 13,715 5,905
Finished products 12,398 7,548
Less LIFO reserve (1,643) (1,546)
------- -------
$50,199 $31,133
======= =======
</TABLE>
(Continued)
F-12
<PAGE>
ROPER INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Dollars in thousands, except share data)
(5) Property, Plant and Equipment
-----------------------------
The components of property, plant, and equipment at October 31 are as
follows:
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Land $ 1,151 $ 1,171
Buildings 14,034 7,894
Machinery, tooling and other equipment 47,817 41,581
------- -------
63,002 50,646
Less accumulated depreciation and amortization 31,607 26,687
------- -------
$31,395 $23,959
======= =======
</TABLE>
(6) Accrued Liabilities
-------------------
Accrued liabilities at October 31 consist of:
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Wages and other compensation $12,137 $ 8,546
Commissions 4,339 3,326
Other 8,755 6,093
------- -------
$25,231 $17,965
======= =======
</TABLE>
(7) Income Taxes
------------
Earnings before income taxes for the years ended October 31 consist of the
following components:
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Domestic $47,704 $36,930 $30,007
Foreign 7,396 7,310 5,994
------- ------- -------
$55,100 $44,240 $36,001
======= ======= =======
</TABLE>
Components of the income tax expense for the years ended October 31 are as
follows:
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Current:
Federal $15,414 $11,492 $ 9,832
State 993 845 1,131
Foreign 2,574 2,630 2,063
Deferred expense (benefit) (231) 416 (296)
------- ------- -------
$18,750 $15,383 $12,730
======= ======= =======
</TABLE>
(Continued)
F-13
<PAGE>
ROPER INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Dollars in thousands, except share data)
A reconciliation between the statutory federal income tax rate and the
effective income tax rate for the years ended October 31 is as follows:
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Federal statutory rate 35.0% 35.0% 35.0%
State income taxes, net of federal benefit 1.2 1.3 2.0
Exempt income of Foreign Sales Corporation (4.0) (1.7) (1.2)
Goodwill amortization 1.5 1.6 1.0
Other 0.3 (1.4) (1.4)
------ ------ ------
34.0% 34.8% 35.4%
====== ====== ======
</TABLE>
Components of the deferred tax assets and liabilities at October 31 are as
follows:
<TABLE>
<CAPTION>
1997 1996
------ ------
<S> <C> <C>
Deferred tax assets:
Postretirement medical benefits $ 496 $ 446
Reserves and accrued expenses 2,380 1,286
Net operating loss carryforward 805 -
Amortizable intangible assets 4,311 4,738
------ ------
Total deferred tax assets 7,992 6,470
------ ------
Deferred tax liabilities:
Inventories 31 486
Domestic International Sales Corporation 1,072 -
Other 507 634
------ ------
Total deferred tax liabilities 1,610 1,120
------ ------
Net deferred tax asset $6,382 $5,350
====== ======
</TABLE>
The Company has not recognized a valuation allowance as all deferred tax
assets are deemed to be realizable against future taxable income.
(8) Long-Term Debt
--------------
Long-term debt at October 31 consists of the following:
<TABLE>
<CAPTION>
1997 1996
-------- -------
<S> <C> <C>
NationsBank credit facility $ 97,914 $67,175
Industrial revenue bonds 1,120 1,445
Other 3,091 1,567
-------- -------
102,125 70,187
Less current portion 2,487 6,814
-------- -------
$ 99,638 $63,373
======== =======
</TABLE>
(Continued)
F-14
<PAGE>
ROPER INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Dollars in thousands, except share data)
Future maturities of long-term debt for each of the next five yearsending
October 31 and thereafter are as follows:
<TABLE>
<CAPTION>
Year ending October 31, Amount
----------------------- ------
<S> <C>
1998 $ 2,487
1999 475
2000 555
2001 101
2002 98,134
Thereafter 373
--------
$102,125
========
</TABLE>
NationsBank credit facility
---------------------------
On May 15, 1997, the Company secured a new $200 million revolving credit
facility by the amendment and restatement of its principal credit agreement
which theretofore had provided for a $100 million facility. Financing under
the new agreement continues to be provided by a syndication of financial
institutions whose agent is NationsBank, N.A. (South). The agreement
requires annual commitment fees ranging from 0.15% to 0.30% on the unused
portion of the total credit commitment, payable quarterly.
Borrowings under the NationsBank agreement accrue interest at the Company's
option at either a function of the prime rate or LIBOR and are secured only
by a pledge of the capital stock of the Company's subsidiaries to the
lenders. The interest rate is also influenced by certain financial ratios
of the Company. There is a $10,000 sublimit for letters of credit under
this agreement. The weighted average interest rate on the outstanding
borrowings under this facility was 6.21% at October 31, 1997.
At October 31, 1997, the Company had $102,086 in availability under the
NationsBank facility.
The NationsBank credit agreement generally provides for, among other
things, restrictions on future acquisitions and maintenance of certain
minimum consolidated tangible net worth and other financial ratios. As of
October 31, 1997, the Company was in compliance with all such covenants. At
October 31, 1997, the Company had approximately $24,000 available for
common stock dividends under the most restrictive covenant of this
agreement. This agreement is effective through May 31, 2002.
(9) Retirement and Other Benefit Plans
----------------------------------
The Company maintains defined contribution retirement plans under the
provisions of Section 401 of the Internal Revenue Code covering
substantially all domestic employees not subject to collective bargaining
agreements. The Company partially matches employee contributions, and its
costs related to the plans were $2,530, $2,065 and $1,609 in fiscal 1997,
1996 and 1995, respectively.
(Continued)
F-15
<PAGE>
ROPER INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Dollars in thousands, except share data)
The Company also maintains a defined benefit retirement plan covering
employees of a foreign subsidiary. The costs associated with this plan are
not material.
The Company also provides postretirement medical benefits for employees at
several of its domestic subsidiaries. The costs associated with this plan
and accumulated benefit obligations are not material.
(10) Contingencies
-------------
The Company, in the ordinary course of business, is the subject of, or a
party to, various pending or threatened legal actions, including those
pertaining to product liability. The Company is vigorously contesting all
product liability lawsuits which, in general, are based upon claims of the
kind which have been customary over the past several years. Based upon the
Company's past experience with resolution of its product liability claims
and the limits of the primary, excess, and umbrella liability insurance
coverages that are available with respect to pending claims, management
believes that adequate provision has been made to cover any potential
liability not covered by insurance, and that the ultimate liability, if
any, arising from these actions should not have a material adverse effect
on the consolidated financial position or results of operations of the
Company. Included in other noncurrent assets at October 31, 1997 are
estimated insurable settlements receivable from insurance companies of
approximately $3,000.
Over the past four years, one of the Company's subsidiaries, Compressor
Controls, has made sales of approximately $127 million to large natural gas
distribution companies in the CIS ("Commonwealth of Independent States").
Certain of this business has been on an open account basis. Included in
accounts receivable at October 31, 1997 are amounts due from and
acknowledged by such customers totaling $14,062, of which $10,234 is due
from RAO Gazprom (a Russian energy company). The collection period of these
open accounts receivable has been significantly longer than experienced in
the Company's core business. Furthermore, the economic and political
climate for these companies may be subject to change such that recovery may
become uncertain. Management has closely reviewed the continuing pattern of
debt collection and considers all amounts to be recoverable at this time.
(11) Common Stock Transactions
-------------------------
The Company's restated Certificate of Incorporation provides that each
outstanding share of the Company's common stock entitles the holder thereof
to five votes per share, except that holders of outstanding shares with
respect to which there has been a change in beneficial ownership during the
four years immediately preceding the applicable record date will be
entitled to one vote per share.
The Company had an incentive stock bonus plan with an executive of one of
its subsidiary companies that provided for the issuance of up to 10,000
shares of the Company's common stock based on the financial performance of
the subsidiary company for a 12 month period ended during fiscal 1997. All
10,000 shares were earned and distributed during 1997.
(Continued)
F-16
<PAGE>
ROPER INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Dollars in thousands, except share data)
The Company had another incentive stock bonus plan for certain key
executives at one of its other subsidiary companies. This plan provided for
the issuance of up to a maximum of 124,000 common shares per year if the
agreed-upon financial performance objectives were achieved and covered the
four-year period ended October 31, 1996. Under the plan, participants could
elect to apply a portion of the shares earned, based on market value at the
date of issuance, to fund the withholding tax requirement. In 1995, the
maximum number of shares was earned; the actual number of shares issued was
less because certain recipients opted to apply a portion of their award to
tax withholdings. No shares were earned in 1996.
In July 1996, the Company entered into an incentive stock bonus agreement
with one of its corporate executives. This agreement provides for the
issuance of 20,000 common shares if agreed-upon stock performance
objectives are achieved. The agreement is without a time limit.
On January 8, 1996, the Company's Board of Directors (the "Board") adopted
a Shareholder Rights Plan and declared a dividend of one Preferred Stock
Purchase Right (a "Right") for each outstanding share of common stock. Such
Rights only become exercisable, or transferable apart from the common
stock, ten business days after a person or group acquires various specified
levels of beneficial ownership, with or without the Board's consent. Two
Rights may be exercised to acquire one one-thousandth of a newly issued
share of the Company's Series A Preferred Stock, at an exercise price of
$170, subject to adjustment. Alternatively, upon the occurrence of certain
specified events, the Rights allow holders to purchase the Company's common
stock having a market value at such time of twice the Right's exercise
price. The Rights may be redeemed by the Company at a redemption price of
$.01 per Right at any time until the tenth business day following public
announcement that a 20% position has been acquired or ten business days
after commencement of a tender or exchange offer. The Rights will expire on
January 8, 2006.
(12) Stock Options
-------------
The Company has a Stock Option Plan (the "Plan"), as amended, which
authorizes the issuance of up to 3,500,000 shares of common stock to
certain directors, key employees, and consultants of the Company and its
subsidiaries as incentive and/or nonqualified options. Options under the
Plan may be granted through December 17, 2001 at prices not less than 100%
of market value of the underlying stock at the date of grant. These options
vest ratably over a five-year period from the date of the grant. Options
expire ten years from the date of grant. Payment of the option price may be
made in cash, extension of loans by the Company, or by tendering shares of
the Company's common stock having a fair market value equal to the
aggregate option price.
(Continued)
F-17
<PAGE>
ROPER INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Dollars in thousands, except per share data)
The Company also has a stock option plan for non-employee directors (the
"Non-employee Director Plan"). The Non-employee Director Plan provides for
each Non-employee director appointed or elected to the Board initial options
to purchase 20,000 shares of the Company's common stock and thereafter
options to purchase an additional 4,000 shares per annum under terms and
conditions similar to the Plan, except that following their grant, all
options will become fully vested at the time of the Annual Meeting of
Shareholders in the next fiscal year and will be exercisable ratably over
five years from the date of grant.
SFAS No. 123 - Accounting for Stock-Based Compensation modifies the
accounting and reporting standards for the Company's stock-based compensation
plans. SFAS 123 provides that stock-based awards be measured at their fair
value at the grant date in accordance with a valuation model. This
measurement may either be recorded in the Company's basic financial
statements or the pro forma effect on earnings may be disclosed in its
financial statements. The Company has elected to provide the pro forma
disclosures.
A summary of stock option transactions under these plans is shown below:
<TABLE>
<CAPTION>
Outstanding options Exercisable options
------------------------ --------------------
Average Average
exercise exercise
Number price Number price
------------ -------- --------- ---------
<S> <C> <C> <C> <C>
October 31, 1994 1,693,200 $10.65 167,400 $ 6.00
Fiscal 1995 activity:
Granted 257,200 13.01
Exercised (126,336) 6.57
Canceled (41,674) 12.46
---------
October 31, 1995 1,782,390 11.27 410,870 9.61
Fiscal 1996 activity:
Granted 543,600 19.89
Exercised (124,380) 8.76
Canceled (23,320) 15.15
---------
October 31, 1996 2,178,290 13.51 676,650 10.43
Fiscal 1997 activity:
Granted 204,900 22.18
Exercised (171,258) 10.29
Canceled (79,740) 16.06
---------
October 31, 1997 2,132,192 $14.51 995,413 $11.58
=========
</TABLE>
(Continued)
F-18
<PAGE>
ROPER INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Dollars in thousands, except share data)
Options outstanding and exercisable at October 31, 1997 are summarized below.
<TABLE>
<CAPTION>
Outstanding options Exercisable options
----------------------------------------------- -----------------------
Exercise # Weighted avg. Weighted avg. # Weighted avg.
Price Options exercise price remaining life Options exercise price
-------- --------- --------------- ------------------- ------- --------------
<S> <C> <C> <C> <C> <C>
$ 3.75 - $10.00 510,036 $ 6.00 5.0 years 416,614 $ 5.82
10.01 - 15.00 396,970 12.10 6.9 years 184,148 12.17
15.01 - 20.00 867,586 17.22 7.0 years 360,771 16.84
20.01 - 24.50 357,600 22.74 9.0 years 33,880 23.03
--------- ------ ---------- ------- ------
$ 3.75 - $24.50 2,132,192 $14.51 6.9 years 995,413 $11.58
========= ====== ========== ======= ======
</TABLE>
For pro forma disclosure purposes, the weighted-average grant-date fair value
of options granted during the year ended October 31, 1997 and 1996 were $8.66
per share and $7.76 per share, respectively. All options granted during each
of the years ended October 31, 1997, 1996 and 1995 were at exercise prices
equal to the market price of the Company's common stock when granted.
Grant date fair values were determined using the Black-Scholes option-pricing
model. Factors used in the model include (a) a risk-free interest rate of
6.25%; (b) an average expected option life of 7 years; (c) an expected
volatility of 20%-27%; and (d) an expected dividend yield of 0.75%.
Had the Company recognized compensation expense for the fair value of options
granted during fiscal 1997 and 1996 in accordance with the provisions of SFAS
123, pro forma earnings and pro forma earnings per share would have been as
presented below. The pro forma effects on earnings for fiscal 1997 and 1996
do not include the effects of options granted prior to fiscal 1996 since the
provisions of SFAS 123 are not applicable to these options for this purpose.
The pro forma effects of applying SFAS 123 to fiscal 1997 and 1996 may not be
representative of the pro forma effects in future years. Based on the
historical vesting schedule of the Company's option grants, the pro forma
effects on earnings are most pronounced in the early years following each
grant. The timing and magnitude of any future option grants is at the
discretion of the Company's Board and cannot be assured.
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Net earnings, as reported $36,350 $28,857
Net earnings, pro forma 35,110 27,917
Net earnings per share, as reported $ 1.16 $ 0.93
Net earnings per share, pro forma 1.12 0.90
</TABLE>
(Continued)
F-19
<PAGE>
ROPER INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Dollars in thousands, except share data)
(13) Segment and Geographic Area Information
---------------------------------------
The Company's operations are grouped into three business segments: the
Industrial Controls ("IC") segment, the Fluid Handling ("FH") segment and
the Analytical Instrumentation ("AI") segment. The Industrial Controls
segment's products include thermostatic valves, pneumatic panel components,
pressure and temperature sensors, microprocessor-based turbomachinery
control systems and associated engineering services, and vibration
monitoring instruments. Products included within the Fluid Handling segment
are rotary gear, progressing cavity, positive displacement, and centrifugal
pumps and precision chemical dispensing products for the semiconductor
industry. The Analytical Instrumentation segment's products include
petroleum product analysis/test equipment, microprocessor-based leak
testers, cooled CCD cameras and detectors and analytical products used in
the operation of transmission and scanning electron microscopes.
Sales between geographic areas are primarily of finished products and are
accounted for at cost plus a profit margin. Operating profit by business
segment and by geographic area is defined as sales less operating costs and
expenses. Income and expenses not allocated to business segments or
geographic areas include investment income, interest expense, and corporate
administrative costs.
Identifiable assets are those assets used exclusively in the operations of
each business segment or geographic area, or which are allocated when used
jointly. Corporate assets are principally comprised of recoverable
insurance claims, cash, deferred compensation assets and property and
equipment.
(Continued)
F-20
<PAGE>
ROPER INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Dollars in thousands, except share data)
The following table shows net sales, income from operations, and other
financial information by industry segment for the years ended October 31:
<TABLE>
<CAPTION>
IC FH AI Corporate Total
-------- ------- -------- ---------- --------
<S> <C> <C> <C> <C> <C>
1997
----
Net sales $123,129 $94,175 $ 80,932 $ - $298,236
Operating profit 22,402 25,853 18,292 (5,677) 60,870
Identifiable assets 118,386 69,117 134,970 6,847 329,320
Depreciation and amortization 3,712 2,844 4,347 497 11,400
Capital expenditures 1,817 1,693 1,347 127 4,984
1996
----
Net sales $ 98,197 $86,094 $ 41,360 $ - $225,651
Operating profit 21,075 24,026 6,377 (4,206) 47,272
Identifiable assets 84,845 71,405 84,048 2,655 242,953
Depreciation and amortization 2,909 2,184 2,538 220 7,851
Capital expenditures 1,991 2,300 446 273 5,010
1995
----
Net sales $ 75,032 $73,973 $ 26,416 $ - $175,421
Operating profit 14,110 23,132 3,819 (3,650) 37,411
Identifiable assets 81,972 39,045 30,590 3,774 155,381
Depreciation and amortization 2,901 1,664 1,225 198 5,988
Capital expenditures 1,066 1,596 432 100 3,194
</TABLE>
The Company's Industrial Controls segment has significant business and
credit concentrations in the oil and gas related industries. The Company
performs ongoing credit evaluations of customers, and allowances are
maintained for potential credit losses. Net sales to the Industrial
Controls segment's largest customer, RAO Gazprom, were $14,742, $18,311 and
$16,831 for the years ended October 31, 1997, 1996, and 1995, respectively.
(Continued)
F-21
<PAGE>
ROPER INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Dollars in thousands, except share data)
Summarized data for the Company's U.S. and foreign operations (principally
in Europe) for the years ended October 31 are as follows:
<TABLE>
<CAPTION>
Corporate
adjustments
United and elimi-
States Foreign nations Total
--------- -------- ---------- ----------
<S> <C> <C> <C> <C>
1997
----
Sales to unaffiliated customers $259,583 $38,653 $ - $298,236
Sales between geographic areas 7,326 3,795 (11,121) -
-------- ------- -------- --------
Net sales $266,909 $42,448 $(11,121) $298,236
======== ======= ======== ========
Operating profit $ 59,286 $ 7,267 $ - $ 66,547
General corporate expenses - - (5,677) (5,677)
-------- ------- -------- --------
Income from operations $ 59,286 $ 7,267 $ (5,677) $ 60,870
======== ======= ======== ========
Identifiable assets $292,936 $29,537 $ 6,847 $329,320
======== ======= ======== ========
1996
----
Sales to unaffiliated customers $195,048 $30,603 $ - $225,651
Sales between geographic areas 2,334 740 (3,074) -
-------- ------- -------- --------
Net sales $197,382 $31,343 $ (3,074) $225,651
======== ======= ======== ========
Operating profit $ 44,497 $ 6,981 $ - $ 51,478
General corporate expenses - - (4,206) (4,206)
-------- ------- -------- --------
Income from operations $ 44,497 $ 6,981 $ (4,206) $ 47,272
======== ======= ======== ========
Identifiable assets $214,751 $25,547 $ 2,655 $242,953
======== ======= ======== ========
1995
----
Sales to unaffiliated customers $144,141 $31,280 $ - $175,421
Sales between geographic areas 860 770 (1,630) -
-------- ------- -------- --------
Net sales $145,001 $32,050 $ (1,630) $175,421
======== ======= ======== ========
Operating profit $ 34,789 $ 6,272 $ - $ 41,061
General corporate expenses - - (3,650) (3,650)
-------- ------- -------- --------
Income from operations $ 34,789 $ 6,272 $ (3,650) $ 37,411
======== ======= ======== ========
Identifiable assets $125,970 $25,637 $ 3,774 $155,381
======== ======= ======== ========
</TABLE>
Export sales from the United States during the year ended October 31, 1997
were approximately $111,000. These exports were shipped primarily to Asia
and the Far East (29%), Europe (23%), Russia (14%) and Canada (10%).
(Continued)
F-22
<PAGE>
ROPER INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Dollars in thousands, except share data)
Sales outside the United States account for a significant portion of the
Company's revenues and are summarized by business segment and by geographic
area as follows:
<TABLE>
<CAPTION>
IC FH AI Total
------- -------- ------ ------
1997
----
<S> <C> <C> <C> <C>
Canada $ 5,347 $ 4,908 $ 1,069 $ 11,324
Europe 22,125 3,439 18,741 44,305
CIS 15,805 4 734 16,543
Japan 122 2,944 12,959 16,025
Asia and Far East 9,215 2,818 4,453 16,486
South & Central America 7,410 1,264 2,409 11,083
Other 17,407 1,490 3,447 22,344
------- ------- ------- --------
Total $77,431 $16,867 $43,812 $138,110
======= ======= ======= ========
1996
----
Canada $ 3,671 $ 3,861 $ 832 $ 8,364
Europe 23,806 1,994 8,937 34,737
CIS 25,440 - 800 26,240
Japan 77 4,355 3,422 7,854
Asia and Far East 5,347 3,215 2,952 11,514
South & Central America 3,956 1,079 1,738 6,773
Other 8,114 587 3,459 12,160
------- ------- ------- --------
Total $70,411 $15,091 $22,140 $107,642
======= ======= ======= ========
1995
----
Canada $ 3,565 $ 3,482 $ 182 $ 7,229
Europe 20,061 1,846 5,753 27,660
CIS 17,411 - 1,294 18,705
Japan 59 850 261 1,170
Asia and Far East 4,028 1,944 2,069 8,041
South & Central America 1,926 810 1,640 4,384
Other 5,096 360 2,249 7,697
------- ------- ------- --------
Total $52,146 $ 9,292 $13,448 $ 74,886
======= ======= ======= ========
</TABLE>
(Continued)
F-23
<PAGE>
ROPER INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Dollars in thousands, except share data)
(14) Quarterly Financial Data (Unaudited)
------------------------------------
<TABLE>
<CAPTION>
Fiscal 1997 quarters
----------------------------------
First Second Third Fourth
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net sales $55,108 $67,019 $88,523 $87,586
Gross profit 29,436 36,970 44,783 42,200
Net earnings 5,830 10,146 11,630 8,744
Earnings per common share $ 0.19 $ 0.33 $ 0.37 $ 0.27
======= ======= ======= =======
Fiscal 1996 quarters
----------------------------------
First Second Third Fourth
------- ------- ------- -------
Net sales $52,896 $47,105 $59,947 $65,703
Gross profit 29,000 22,500 29,688 34,736
Net earnings 8,809 5,653 6,989 7,406
Earnings per common share $ 0.29 $ 0.18 $ 0.23 $ 0.23
======= ======= ======= =======
</TABLE>
F-24
<PAGE>
ROPER INDUSTRIES, INC. AND SUBSIDIARIES
Schedule II - Consolidated Valuation and Qualifying Accounts
for the Years ended October 31, 1997, 1996 and 1995
(In thousands of dollars)
<TABLE>
<CAPTION>
Additions
(deductions)
charged
Balance at (credited) Balance
beginning to costs and at end
Description of year expenses Deductions Other of year
----------- --------- ------------- ---------- ----- -------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts:
Year ended October 31, 1997 992 1,053 (714) 535 1,866
Year ended October 31, 1996 990 19 (160) 143 992
Year ended October 31, 1995 552 616 (348) 170 990
Reserve for inventory obsolescence:
Year ended October 31, 1997 1,310 1,037 (516) 222 2,053
Year ended October 31, 1996 605 892 (621) 434 1,310
Year ended October 31, 1995 487 541 (436) 13 605
</TABLE>
Deductions from the allowance for doubtful accounts represent the net write-
off of uncollectible accounts receivable. Deductions from the inventory
obsolescence reserve represent the disposal of obsolete inventory items.
Other is principally the allowance for doubtful accounts and reserve for
inventory obsolescence of acquired businesses at the dates of acquisition.
S-1
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Reference is made to the information included under the captions "BOARD OF
DIRECTORS AND EXECUTIVE OFFICERS -- Proposal 1: Election Of Four (4) Directors"
and " -- Executive Officers", and "VOTING SECURITIES -- Compliance with
Section 16 (a) of the Securities Exchange Act of 1934" contained in the
Company's definitive Proxy Statement which relates to the 1998 Annual Meeting of
Stockholders of the Company to be held on February 20, 1998 (the "Proxy
Statement"), to be filed within 120 days after the close of the Company's 1997
fiscal year, which information is incorporated herein by this reference.
ITEM 11. EXECUTIVE COMPENSATION.
Reference is made to the information included under the captions "BOARD OF
DIRECTORS AND EXECUTIVE OFFICERS -- Meetings of the Board and Board Committees;
Compensation of Directors", "--Related Transactions", and " -- Compensation
Committee Interlocks and Insider Participation in Compensation Decisions", and "
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION" contained in the Proxy
Statement, which information is incorporated herein by this reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Reference is made to the information included under the caption "VOTING
SECURITIES" contained in the Proxy Statement, which information is incorporated
herein by this reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Reference is made to the information included under the caption "BOARD OF
DIRECTORS AND EXECUTIVE OFFICERS -- Related Transactions" contained in the Proxy
Statement, which information is incorporated herein by this reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a)(1) Consolidated Financial Statements
---------------------------------
The Consolidated Financial Statements listed in Item 8 of Part II are
filed as a part of this Report.
(a)(2) Consolidated Financial Statement Schedules
------------------------------------------
The following consolidated financial statement schedule on Page S-1 is
filed in response
<PAGE>
to this Item. All other schedules are omitted or the required
information is either inapplicable or is presented in the consolidated
financial statements or related notes:
II. Consolidated Valuation and Qualifying Accounts for the Years
Ended October 31, 1997, 1996 and 1995.
(b). Reports on Form 8-K
-------------------
None
(c). Exhibits
--------
The following exhibits are separately filed with this Annual Report on
Form 10-K.
Exhibit No. Description of Exhibit
----------- -----------------------
*2.1 Asset Purchase Agreement (Princeton Instruments, Inc.)
2.2 Agreement and Plan of Merger (Petrotech, Inc.)
3.1 Amended and Restated Certificate of Incorporation,
including Form of Certificate of Designation,
Preferences and Rights of Series A Preferred Stock
*3.2 Amended and Restated By-Laws
**4.01 Rights Agreement between Roper Industries, Inc. and
SunTrust Bank, Atlanta, Inc. as Rights Agent, dated as
of January 8, 1996, including Certificate of
Designation, Preferences and Rights of Series A
Preferred Stock (Exhibit A), Form of Rights Certificate
(Exhibit B) and Summary of Rights (Exhibit C)
*4.02 Third Amended and Restated Credit Agreement dated May
15, 1997 by and between Roper Industries, Inc. and
NationsBank, N.A. (South) and the lender parties
thereto.
***10.01 Lease of Milwaukee, Oregon Facility
10.02 1991 Stock Option Plan, as amended +
****10.03 Non-employee Director Stock Option Plan +
***10.04 Form of Indemnification Agreement +
10.05 Consulting Agreement (G.L. Ohrstrom & Co.) +
10.06 Consulting Agreement (E.D. Kenna) +
<PAGE>
*****10.11 Labor Agreement
21 List of Subsidiaries
23 Consent of Independent Auditors-KPMG Peat Marwick LLP
27 Financial Data Schedule
___________________________
* Incorporated herein by reference to Exhibits 2, 3 and 4 to
the Roper Industries, Inc. Current Report on Form 8-K filed
June 2, 1997.
** Incorporated herein by reference to Exhibit 4.02 to the
Roper Industries, Inc. Current Report on Form 8-K filed on
January 18, 1996.
*** Incorporated herein by reference to Exhibits 10.8 and 10.10 to
the Roper Industries, Inc. Registration Statement (No. 33-44665)
on Form S-1 filed December 20, 1991.
**** Incorporated herein by reference to Exhibit 10.3 to the Roper
Industries, Inc. Annual Report on Form 10-K filed on January 28,
1994.
***** Incorporated herein by reference to Exhibit 10.3 to the Roper
Industries, Inc. Annual Report on 10-K filed on January 25, 1996
+ Management contract or compensatory plan or arrangement
<PAGE>
ROPER INDUSTRIES, INC.
(COMPANY)
By /S/ DERRICK N. KEY January 16, 1998
- ---------------------------------
Derrick N. Key
Chairman of the Board, President
and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
has been signed below by the following persons on behalf of the Company and in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/S/ DERRICK N. KEY Chairman of the Board, President January 16, 1998
- --------------------------------
Derrick N. Key and Chief Executive Officer
/S/ MARTIN S. HEADLEY Vice President and January 16, 1998
- --------------------------------
Martin S. Headley Chief Financial Officer
/S/ KEVIN G. McHUGH Controller January 16, 1998
- --------------------------------
Kevin G. McHugh
/S/ W. LAWRENCE BANKS Director January 16, 1998
- --------------------------------
W. Lawrence Banks
/S/ LUITPOLD VON BRAUN Director January 16, 1998
- --------------------------------
Luitpold von Braun
/S/ DONALD G. CALDER Director January 16, 1998
- --------------------------------
Donald G. Calder
/S/ JOHN F. FORT, III Director January 16, 1998
- --------------------------------
John F. Fort, III
/S/ E. DOUGLAS KENNA Director January 16, 1998
- --------------------------------
E. Douglas Kenna
/S/ GEORGE L. OHRSTROM Director January 16, 1998
- --------------------------------
George L. Ohrstrom
/S/ WILBUR J. PREZZANO Director January 16, 1998
- --------------------------------
Wilbur J. Prezzano
/S/ GEORG GRAF SCHALL-RIAUCOUR Director January 16, 1998
- --------------------------------
Georg Graf Schall-Riaucour
/S/ ERIBERTO R. SCOCIMARA Director January 16, 1998
- --------------------------------
Eriberto R. Scocimara
/S/ CHRISTOPHER WRIGHT Director January 16, 1998
- --------------------------------
Christopher Wright
</TABLE>
<PAGE>
EXHIBIT INDEX
-------------
Number Exhibit
- ------ -------
2.1 Asset Purchase Agreement (Princeton Instruments, Inc.)
incorporated herein by reference to Exhibit 2 to the Roper
Industries, Inc. Current Report on Form 8-K filed June 2, 1997
*2.2 Agreement and Plan of Merger (Petrotech, Inc.) entered into on
May 14, 1997 by and among Petrotech Acquisition, Inc., Roper
Industries, Inc., Petrotech, Inc. and the shareholders of
Petrotech, Inc.
3.1 Amended and Restated Certificate of Incorporation, including
Form of Certificate of Designation, Preferences and Rights of
Series A Preferred Stock
3.2 Amended and Restated By-Laws incorporated herein by reference to
Exhibit 3 to the Roper Industries, Inc. Current Report on Form 8-
K filed June 2, 1997
4.01 Rights Agreement between Roper Industries, Inc. and SunTrust
Bank, Atlanta, Inc. as Rights Agent, dated as of January 8, 1996,
including Certificate of Designation, Preferences and Rights of
Series A Preferred Stock (Exhibit A), Form of Rights Certificate
(Exhibit B) and Summary of Rights (Exhibit C), incorporated by
reference to Exhibit 4.02 to the Roper Industries, Inc. Current
Report on Form 8-K on January 18, 1996
4.02 Third Amended and Restated Credit Agreement dated May 15, 1997 by
and between Roper Industries, Inc. and NationsBank, N.A. (South)
and the lender parties thereto, incorporated herein by reference
to Exhibit 4 to the Roper Industries, Inc. Current Report on Form
8-K filed June 2, 1997
10.01 Lease of Milwaukee, Oregon Facility incorporated herein by
reference to Exhibit 10.8 to the Roper Industries, Inc.
Registration Statement (No. 33-44665 on Form S-1 filed December
20, 1991
10.02 1991 Stock Option Plan, as amended
10.03 Non-employee Director Stock Option Plan, incorporated herein by
<PAGE>
reference to Exhibit 10.3 to the Roper Industries, Inc. Annual
Report on Form 10-K field on January 28, 1994
10.04 Form of Indemnification Agreement, incorporated herein by
reference to Exhibit 10.10 to the Roper Industries, Inc.
Registration Statement (No. 33-44665 on Form S-1 filed December
20, 1991
10.05 Consulting Agreement
10.06 Consulting Agreement
10.11 Labor Agreement, incorporated herein by reference to Exhibit 10.3
to the Roper Industries, Inc. Annual Report on 10-K filed January
25, 1996
21 List of Subsidiaries
22 Consent of Independent Auditors-KPMG Peat Marwick LLP
27 Financial Data Schedule
- -------------------------------------------------------------------------------
* The following schedules or similar attachments to the above Exhibit have been
omitted and will be furnished supplementally to the Commission upon request.
Exhibits
Exhibit A-1 - A-3 - Lease Agreements with respect to Leased Real Property
Exhibit B - Unaudited Balance Sheet and Income Statement
Exhibit C - Aged Receivables
Exhibit D - Consolidated Balance Sheets
Exhibit E-1 - Employment Agreement of Douglas W. Moore
Exhibit E-2 - Employment Agreement of Terry E. Irwin
Exhibit E-3 - Employment Agreement of William A. Dyar
Exhibit E-4 - Non-Competition Agreement of Douglas W. Moore
Exhibit E-5 - Non-Competition Agreement of Terry E. Irwin
Exhibit E-6 - Non-Competition Agreement of William A. Dyar
Exhibit F - Opinion of Counsel to Acquired Company
Exhibit G - Estoppel Letters
Exhibit H - Opinion of Counsel to Buyer
Exhibit I - Resolutions of Board of Directors
Exhibit J - Escrow Agreement
Petrotech Disclosure Schedule
<PAGE>
EXHIBIT 2.2
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger ("Agreement") is entered into on May 14,
1997, by and among PETROTECH ACQUISITION, INC., a Delaware corporation (the
"Buyer"), ROPER INDUSTRIES, INC., a Delaware corporation and parent of Buyer
("Parent"), PETROTECH, INC., a Louisiana corporation and its wholly-owned
subsidiary, PETROTECH INTERNATIONAL, INC., a Louisiana corporation
(collectively, "Petrotech") and DOUGLAS W. MOORE, TERRY E IRWIN, WILLIAM A.
DYAR, each individual residents of the state of Louisiana and the WILLIAM A.
DYAR AND MARGUERITE S. DYAR CHARITABLE REMAINDER TRUST, a trust established
under the laws of the state of Louisiana and represented herein by its
independent special trustee Timothy Murphy (each of the latter individuals, as
well as said trust, a "Shareholder"). The Buyer, Parent, Petrotech and the
Shareholders are referred to collectively herein as the "Parties."
This Agreement contemplates a transaction in which Buyer shall merge with
Petrotech, with Buyer being the surviving corporation and in connection
therewith, the Shareholders will receive certain consideration in the form of
cash and shares of capital stock of Parent.
Now, therefore, in consideration of the premises and the mutual promises
herein made, and in consideration of the representations, warranties, and
covenants herein contained, the Parties agree as follows.
1. DEFINITIONS.
"Accredited Investor" has the meaning set forth in Regulation D
promulgated under the Securities Act.
"Acquired Company" means Petrotech and Petrotech's interests in
Petrotech Europa BV., a Netherlands corporation ("Petrotech Europa").
"Adverse Consequences" means all actions, suits, proceedings, hearings,
investigations, charges, complaints, claims, demands, injunctions, judgments,
orders, decrees, rulings, damages, penalties, fines, costs, amounts paid in
settlement, Liabilities, obligations, Taxes, liens, losses, expenses, and fees,
including court costs and reasonable attorneys' fees and expenses; provided,
however, that an Indemnified Party shall be obligated to take steps which are
reasonable under the circumstances to mitigate any Adverse Consequences.
"Affiliated Group" means any affiliated group within the meaning of Code
Sec. 1504(a) (or any similar group defined under a similar provision of state,
local, or foreign law).
"Affiliate Leased Real Property" means the leasehold interests in and to
the real property and improvements used by Petrotech, which is located at (i)
108 Jarrell Drive, Belle
<PAGE>
Chasse, Louisiana, (ii) the annex to the 108 Jarrell Drive property, including,
without limitation, the adjacent warehouse, parking lot and other items located
therein, and (iii) 150 Keating Drive, Belle Chasse, Louisiana and more
particularly described in (S) 3(l)(ii) of the Petrotech Disclosure Schedule.
"Agreed Value" means that price per share of the Parent Shares which is
the average of the closing sales prices of the common stock of the Parent on
each of the three (3) trading days immediately preceding, on and immediately
following (each a "Trading Day") the Closing Date as reported by the New York
Stock Exchange ("NYSE").
"Applicable Rate" means the corporate base rate of interest announced
from time to time by NationsBank.
"Bank Loan" means that certain loan agreement, dated as of July 20,
1990, by and between Petrotech and Whitney National Bank, with a revolving line
of credit in the original amount of $3,050,000, as amended to date with a line
of credit of $7,000,000.
"Basis" means any past or present fact, situation, circumstance, status,
condition, activity, practice, occurrence, event, incident, action, failure to
act, or transaction that forms or would probably form the basis for any
specified consequence.
"Business" means the business conducted by the Acquired Company,
including without limitation, gas pipeline systems and services, turbo machinery
controls, production and wellhead safety controls and related engineering,
construction, and training services.
"Buyer" has the meaning set forth in the preface above.
"Buyer Disclosure Schedule" has the meaning set forth in (S) 4 below.
"Cash Consideration" shall have the meaning set forth in (S) 2(c) below.
"Closing" has the meaning set forth in (S) 2(e) below.
"Closing Balance Sheet" has the meaning set forth in (S) 2(f)(i) below.
"Closing Date" has the meaning set forth in (S) 2(g) below.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company Loans" means any and all loans of Petrotech for borrowed money
including, without limitation, the Bank Loan, the Shareholder Loan and the
Sellers Loan.
-2-
<PAGE>
"Confidential Information" means: (a) confidential data and confidential
information relating to the business of any Party (the "Protected Party") which
is or has been disclosed to another Party (the "Recipient") or of which the
Recipient became aware as a consequence of or through its relationship with the
Protected Party and which has value to the Protected Party and is not generally
known to its competitors and which is designated by the Protected Party as
confidential or otherwise restricted; and (b) information of the Protected
Party, without regard to form, including, but not limited to, Intellectual
Property, technical or nontechnical data, algorithms, formulas, patents,
compilations, programs, devices, methods, techniques, drawings, processes,
financial data, financial plans, product or service plans or lists of customers
or suppliers which is not commonly known or available to the public and which
information (i) derives economic value from not being generally known to, and
not being readily ascertainable by proper means by, other Persons who can obtain
economic value from its disclosure or use, and (ii) is the subject of efforts
that are reasonable under the circumstances to maintain its secrecy.
Notwithstanding anything to the contrary contained herein, Confidential
Information shall not include any data or information that (a) has been
voluntarily disclosed to the public by the Protected Party, (b) has been
independently developed and disclosed to the public by others, (c) otherwise
enters the public domain through lawful means, (d) was already known by
Recipient prior to such disclosure or was lawfully and rightfully disclosed to
Recipient by another Person, or (e) that is required to be disclosed by law or
order.
"Controlled Group of Corporations" has the meaning set forth in Code
Sec. 1563.
"Delaware Act" shall mean the General Corporation Law of the State of
Delaware, as amended.
"Employee Benefit Plan" means any (a) nonqualified deferred compensation
or retirement plan or arrangement which is an Employee Pension Benefit Plan (as
defined in ERISA Sec. 3(2)), (b) qualified defined contribution retirement plan
or arrangement which is an Employee Pension Benefit Plan, (c) qualified defined
benefit retirement plan or arrangement which is an Employee Pension Benefit Plan
(including any Multiemployer Plan), or (d) Employee Welfare Benefit Plan (as
defined in ERISA Sec. 3(1)) or material fringe benefit plan or program.
"Environmental, Health, and Safety Laws" means the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, the Resource
Conservation and Recovery Act of 1976, and the Occupational Safety and Health
Act of 1970, each as amended, together with all other laws (including rules,
regulations, state law rulings, codes, plans, permits, injunctions, judgments,
orders, decrees, rulings, and charges thereunder) of federal, state, local and
foreign governments (and all agencies thereof) concerning pollution or
protection of the environment, natural resources, public health and safety, or
employee health and safety, including, but not limited to, laws relating to
emissions, discharges, releases, or threatened releases of Hazardous Substances
in ambient air, surface water, drinking water, wetlands, ground water, or lands
or otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, recycling, transport, or handling of pollutants,
contaminants, or chemical, industrial, hazardous, or toxic materials or wastes.
-3-
<PAGE>
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Escrow Agreement" means the Escrow Agreement dated the Closing Date,
entered into among the Parties with respect to the indemnification obligations
of the Shareholders under (S) 7 of this Agreement, the form of which is set
forth as Exhibit J.
"Escrow Funds" shall have the meaning set forth in (S) 7(b)(v).
"Extremely Hazardous Substance" has the meaning set forth in Sec. 302 of
the Emergency Planning and Community Right-to-Know Act of 1986, as amended.
"Fiduciary" has the meaning set forth in ERISA Sec. 3(21).
"Financial Statements" shall have the meaning set forth in (S) 3(g).
"GAAP" means United States generally accepted accounting principles as
in effect as of the date hereof.
"Hart-Scott-Rodino Act" means the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.
"Hazardous Substance" means any substance regulated under or defined by
Environmental, Health, and Safety Laws, including, but not limited to, any
pollutant, contaminant, hazardous substance, hazardous constituent, hazardous
waste, special waste, solid waste, industrial waste, petroleum derived substance
or waste, or toxic substance.
"Indemnified Party" has the meaning set forth in (S) 7(d) below.
"Indemnifying Party" has the meaning set forth in (S) 7(d) below.
"Intellectual Property" means with respect to the Business:
(a) all inventions (whether patentable or unpatentable and whether or
not reduced to practice), all improvements thereto, and all patents, patent
applications, and patent disclosures, together with all reissuances,
continuations, continuations-in-part, revisions, extensions, and
reexaminations thereof;
(b) all trademarks, service marks, trade dress, logos, trade names and
corporate names, together with all translations, adaptations, derivations,
and combinations thereof and including all goodwill associated therewith,
and all applications, registrations, and renewals in connection therewith;
-4-
<PAGE>
(c) all copyrightable works, all copyrights, and all applications,
registrations, and renewals in connection therewith;
(d) all mask works and all applications, registrations, and renewals in
connection therewith;
(e) all trade secrets and confidential business information (including
ideas, research and development, know-how, formulas, compositions,
manufacturing and production processes and techniques, technical data,
designs, drawings, specifications, customer and supplier lists, pricing and
cost information, and business and marketing plans and proposals);
(f) all computer software (including data and related documentation);
(g) all other proprietary rights; and
(h) all copies and tangible embodiments thereof (in whatever form or
medium).
"Knowledge" means knowledge of the Shareholders, after due inquiry of
Petrotech employees with management responsibility in the area of Petrotech
operations with respect to which the applicable representation or warranty
applies.
"Leased Real Property" means the Affiliate Leased Real Property and the
leasehold interests in and to the real property and improvements used by
Petrotech, which is located at (i) 7121 North Loop East, Houston, Texas, (ii)
3520 General DeGaulle Drive, Timbers Office Park, New Orleans, Louisiana and
(iii) Northway 10, Executive Park, Ballston Lake, New York, and more
particularly described in (S) 3(l)(ii) of the Petrotech Disclosure Schedule.
"Louisiana Corporation Act" shall mean the Louisiana Business
Corporation Law, LA.R.S. 12:1, et seq., as amended.
"Liability" means any liability (whether known or unknown, whether
asserted or unasserted, whether absolute or contingent, whether accrued or
unaccrued, whether liquidated or unliquidated, and whether due or to become
due), including any liability for Taxes.
"Merger" shall have the meaning set forth in (S) 2 below.
"Merger Consideration" shall have the meaning set forth in Section 2
hereof.
"Multiemployer Plan" has the meaning set forth in ERISA Sec. 3(37).
-5-
<PAGE>
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"Parent Financial Statements" shall have the meaning set forth in (S)
4(f).
"Parent Shares" means the shares of common stock, par value $.01, of
Parent which shares shall be delivered to Petrotech as provided in (S) 2(c)
below without registration under, and subject to the restrictions imposed by,
the Securities Act.
"Party" has the meaning set forth in the preface above.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Person" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization, or a governmental entity (or any department, agency, or political
subdivision thereof).
"Petrotech" has the meaning set forth in the preface above.
"Petrotech Disclosure Schedule" has the meaning set forth in (S) 3
below.
"Petrotech Plans" has the meaning set forth in (S) 3 below.
"Petrotech Shares" means share(s) of the Common Stock, no par value, of
Petrotech.
"Process Agent" has the meaning set forth in (S) 8 below.
"Product Warranty Claims" means claims of Petrotech customers and/or
users made at any time following Closing in the Ordinary Course of Business with
respect to products sold, manufactured, leased or delivered by Petrotech on or
prior to the Closing Date which are based on the written terms and conditions
set forth in the documentation regarding each project in which Petrotech is
engaged.
"Prohibited Transaction" has the meaning set forth in ERISA Sec. 406 and
Code Sec. 4975.
"Public Information" means all Forms 10-K, 10-Q, 8-K, and proxy
statement of Buyer since December 31, 1996.
"Reportable Event" has the meaning set forth in ERISA Sec. 4043.
"Securities Act" means the Securities Act of 1933, as amended.
-6-
<PAGE>
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Security Interest" means any mortgage, pledge, lien, encumbrance,
charge, or other security interest, other than (a) mechanic's, materialmen's,
and similar liens, (b) liens for Taxes not yet due and payable or for Taxes that
the taxpayer is contesting in good faith through appropriate proceedings, (c)
purchase money liens and liens securing rental payments under capital lease
arrangements, and (d) other liens arising in the Ordinary Course of Business and
not incurred in connection with the borrowing of money.
"Sellers Loan" means those certain four (4) promissory notes executed by
Petrotech in favor of Celia Sellers, in the aggregate principal amounts of
$200,000; the current principal balance of which is $120,000. The four (4)
promissory notes executed by Petrotech in favor of Celia Sellers are as follows:
(i) promissory note in the amount of $100,000 executed on December 25, 1995;
(ii) promissory note in the amount of $25,000 executed on February 26, 1996;
(iii) promissory note in the amount of $50,000 executed on March 6, 1996; and
(iv) promissory note in the amount of $25,000 executed on October 21, 1996.
"Shareholder(s)" means Douglas W. Moore, Terry E Irwin, William A. Dyar,
and Timothy Murphy, as independent special trustee of the William A. Dyar and
Marguerite S. Dyar Charitable Remainder Trust, who are the only shareholders of
Petrotech.
"Shareholder Family Trusts" means the Moore Children Trust (Jennifer Lee
Moore, beneficiary of one trust and Benjamin Alexander Moore, beneficiary of the
second trust) established by act dated December 21, 1993; the Dyar Children
Trust (Marie Suzanne Dyar Waldrop, beneficiary of one trust and Debra Lynn Dyar
Loga, beneficiary of the second trust) established by act dated December 21,
1993; and the Irwin Children Trust (Terry E Irwin, II, beneficiary of one trust
and Tonya Dawn Irwin Rourke, beneficiary of the second trust) established by act
dated December 21, 1993.
"Shareholder Loan" means that certain loan, made as of June 7, 1994 in
the principal sum of Five Million and no/100 Dollars ($5,000,000.00) or the
aggregate unpaid principal amount owed thereon, whichever is less, as evidenced
by the internal records of the lenders with interest thereon at the rate of
Whitney National Bank Prime plus 1% per annum from date until paid in full, by
Douglas W. Moore, Terry E Irwin and William A. Dyar to Petrotech.
"Subsidiary" means any corporation with respect to which a specified
Person (or a Subsidiary thereof) owns a majority of the common stock or has the
power to vote or direct the voting of sufficient securities to elect a majority
of the directors.
"Tax" means any federal, state, local, or foreign income, gross
receipts, license payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Code Sec. 59A),
customs duties, capital stock, franchise profits, withholding, social security
-7-
<PAGE>
(or similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever, including any interest, penalty,
or addition thereto, whether disputed or not.
"Tax Return" means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
2. MERGER.
(a) At the Effective Time (as hereinafter defined) and subject to the
terms and conditions of this Agreement, Buyer shall be merged with
Petrotech, in accordance with the relevant provisions of the Louisiana
Corporation Act and the Delaware Act, the separate corporate existence of
Petrotech shall cease and the Buyer shall continue as the surviving
corporation (the "Merger"). The Buyer is the surviving corporation after
the Merger and is hereinafter sometimes referred to as the "Surviving
Corporation." The Merger shall otherwise have the effect set forth in the
Delaware Act.
(b) At the Closing, the parties hereto shall cause the Merger to be
consummated by delivering articles of merger to the Secretary of State of
Louisiana and the Secretary of State of Delaware executed in accordance
with relevant provisions of the Louisiana Corporation Act and the Delaware
Act for filing thereby (the time of such filing being the "Effective
Time"). The Articles of Incorporation and Bylaws, respectively, of the
Buyer as in effect immediately prior to the Effective Time, shall be the
Articles of Incorporation and Bylaws of the Surviving Corporation. The
officers and directors of Buyer immediately prior to the Effective Time
shall be the officers and directors of the Surviving Corporation, in each
case, until their respective successors are duly elected and qualified. The
corporate name of the Surviving Corporation shall be Petrotech, Inc.
(c) At the Effective Time, by virtue of the Merger and without any
action on the part of the holders thereof:
(i) all of the Petrotech Shares shall be converted into, and
represent the right to receive in the manner provided in Sections 2(d)
and 2(e) below, the sum of (A) that number of shares of Parent Common
Stock equal to Six Million Five Hundred Thousand Dollars
($6,500,000.00) divided by the Agreed Value (the "Stock
Consideration") plus (B) cash in the amount of Six Million Five
Hundred Thousand Dollars ($6,500,000.00) (the "Cash Consideration" and
the Stock Consideration collectively, the "Merger Consideration");
-8-
<PAGE>
(ii) each share of capital stock of Petrotech that is held in
the treasury of Petrotech, if any, shall be cancelled and retired and
cease to exist and no consideration shall be issued in exchange
therefor; and
(iii) each issued and outstanding share of capital stock of
Buyer shall be converted into and become one fully paid and non-
assessable share of common stock of the Surviving Corporation.
(d) At the Closing Date, the Cash Consideration shall be paid as
follows:
(i) $1,324,000 shall be paid to the escrow agent pursuant to the
Escrow Agreement to be held and disbursed as provided in Section 7 of
the Agreement and the Escrow Agreement; and
(ii) the balance of the Cash Consideration shall be paid as
follows: 37.5% thereof to Douglas W. Moore, 37.5% thereof to the
William A. Dyar and Marguerite S. Dyar Charitable Remainder Trust and
the remaining 25% thereof to Terry E Irwin.
(e) Five (5) days following the Closing Date, Parent shall transmit to
Douglas W. Moore, William A. Dyar and Terry E Irwin certificates
representing the aggregate Merger Consideration issuable pursuant to
Section 2(c) above. Douglas W. Moore and William A. Dyar each shall be
entitled to receive 37.5% of the total Stock Consideration and Terry E
Irwin shall be entitled to receive the remaining 25% of the total Stock
Consideration. At the Closing, each Shareholder shall execute and deliver a
letter of transmittal, in a form reasonably satisfactory to Parent and
deliver such letter of transmittal to Parent, together with a
certificate(s) that immediately prior to the Effective Time represented the
Petrotech Shares held by such Shareholder (the "Certificates"). Upon
surrender of Certificates to Parent, together with such letter of
transmittal, the holder of such Certificates shall be entitled to receive
in exchange therefore the Merger Consideration as set forth above and the
Certificates so surrendered shall be forthwith cancelled. No fraction of
the Parent Shares shall be issued and each Shareholder who would otherwise
be entitled to receive a fractional share of Parent Shares (after taking
into account all shares then held by such Shareholder) shall receive, in
lieu thereof and as a part of the Merger Consideration, one fully-paid and
non-assessable share of Parent Shares.
(f) The Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Powell,
Goldstein, Frazer & Murphy LLP, on May 16, 1997 or such other date as the
Parties may agree (the "Closing Date").
-9-
<PAGE>
(g) Deliveries at the Closing. (i) At the Closing, Petrotech will
deliver to the Buyer the various certificates, instruments, and documents
referred to in (S) 5(a) below; (ii) the Buyer will deliver to Petrotech the
various certificates, instruments, and documents referred to in (S) 5(b)
below; (iii) Petrotech and the appropriate Shareholders and the trustees of
the Shareholder Family Trusts will execute, acknowledge (if appropriate),
and deliver to the Buyer (A) the original lease agreements with respect to
the Leased Real Property in the forms attached hereto as Exhibits A-1
through A-3 together with fully executed original amendments thereto in the
form attached to said Exhibits and (B) such other documents as the Buyer
and its counsel may reasonably request; (iv) the Buyer will execute,
acknowledge (if appropriate), and deliver to Petrotech (A) such documents
as Petrotech and the Shareholders and their counsel reasonably may request;
and (v) the Buyer will deliver to Petrotech the Cash Consideration.
3. REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS. The Shareholders
jointly and severally represent and warrant to the Buyer and Parent that the
statements contained in this (S) 3 are correct and complete as of the date
hereof and will be as of the Closing Date, except as specified to the contrary
in the disclosure schedule prepared by Petrotech accompanying this Agreement and
initialed by Petrotech and the Buyer and as amended or supplemented as of the
Closing Date (the "Petrotech Disclosure Schedule"). The Petrotech Disclosure
Schedule will be arranged in paragraphs corresponding to the lettered and
numbered paragraphs contained in this (S) 3.
(a) Organization of the Acquired Company; Investment Interest.
(i) Petrotech, Inc. is a corporation duly organized, validly
existing, and in good standing under the laws of the jurisdiction of
its incorporation; and is duly qualified to conduct business and in
good standing in each of the jurisdictions set forth in Schedule
3(a)(i) hereto, which constitute the jurisdictions in which the
character of Petrotech, Inc.'s properties or the nature of its
Business requires such qualification, except for those jurisdictions
where the failure to be so qualified would not have a material adverse
effect on the Business of Petrotech, Inc.
(ii) Petrotech International, Inc. is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation; and is duly qualified to conduct
business and in good standing in each of the jurisdictions set forth
in Schedule 3(a)(ii) hereto, which constitute the jurisdictions in
which the character of Petrotech International Inc.'s properties or
the nature of its Business requires such qualification, except for
those jurisdictions where the failure to be so qualified would not
have a material adverse effect on the Business of Petrotech
International, Inc.
-10-
<PAGE>
(iii) Petrotech Europa is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of
its incorporation; and is duly qualified to conduct business and in
good standing in each of the jurisdictions set forth in Schedule
3(a)(iii) hereto, which constitute the jurisdictions in which the
character of Petrotech Europa's properties or the nature of its
Business requires such qualification, except for those jurisdictions
where the failure to be so qualified would not have a material adverse
effect on the Business of Petrotech Europa.
(iv) The Petrotech Shares are held of record and beneficially by
the Shareholders as described in (S) 3(a)of the Petrotech Disclosure
Schedule. All issued and outstanding shares of capital stock of
Petrotech International, Inc. are held of record and beneficially by
Petrotech, Inc. and fifty-one percent (51%) of the issued and
outstanding shares of capital stock of Petrotech Europa are held of
record and beneficially by Petrotech, Inc. as described in (S) 3(a) of
the Petrotech Disclosure Schedule.
(v) Douglas W. Moore, Terry E Irwin and William A. Dyar, are
each Accredited Investors. Each said Shareholder understands that the
Parent Shares being acquired by him have not been, and are not
proposed to be, registered under the Securities Act or any state
securities laws, and are being offered and sold in reliance upon
United States federal and state exemptions for transactions not
involving any public offering. Each said Shareholder acknowledges that
he is acquiring the Parent Shares for investment purposes and not with
a view to, or intention to effect, the distribution thereof in
violation of the Securities Act or any applicable state securities
laws, and that such Parent Shares may not be disposed of in
contravention of the Securities Act or any applicable state securities
laws. Each said Shareholder represents that he is a sophisticated
investor with knowledge and experience in business and financial
matters, is able to evaluate the risks and benefits of the investment
in Parent Shares, has received the Public Information concerning the
Parent and has had the opportunity to obtain additional information as
desired in order to evaluate the merits of and the risks inherent in
acquiring such Parent Shares.
(b) Authorization of Transaction. Petrotech and each Shareholder has
full power and authority (including full corporate power and authority) to
execute and deliver this Agreement and to perform its, his or their
obligations hereunder. Without limiting the generality of the foregoing,
the board of directors of Petrotech and the Shareholders of Petrotech have
duly authorized the execution, delivery, and performance of this Agreement
by Petrotech. This Agreement constitutes the valid and legally binding
obligation of Petrotech, enforceable in accordance with its terms and
conditions. Petrotech and the Shareholders do not need to give any notice
-11-
<PAGE>
to, make any filing with, or obtain any authorization, consent, or approval
of any governmental agency in order for the Parties to consummate the
transactions contemplated by this Agreement other than the notification and
approval under the Hart-Scott-Rodino Act.
(c) Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby,
will (i) violate any constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge, or other restriction of any
government, governmental agency, or court to which the Acquired Company or
any Shareholder is subject or any provision of the charter or bylaws of the
Acquired Company, or (ii) conflict with, result in a breach of, constitute
a default under, result in the acceleration of, create in any party the
right to accelerate, terminate, modify, or cancel, or require any notice
under any agreement, contract, lease, license, instrument, or other
arrangement to which the Acquired Company or any Shareholder is a party or
by which it is bound or to which any of its assets is subject (or result in
the imposition of any Security Interest upon any of its assets).
(d) Brokers' Fees. Neither the Acquired Company nor any Shareholder has
any Liability or obligation to pay any fees or commissions to any broker,
finder, or agent with respect to the transactions contemplated by this
Agreement.
(e) Title to Assets. The assets of the Acquired Company and the Leased
Real Property constitute all of the property and assets necessary to
conduct the Business as presently conducted. Each Shareholder has the right
to convey, and upon the transfer of the Petrotech Shares to the Buyer, each
Shareholder will have conveyed good title and interest in and to the
Petrotech Shares free and clear of all Security Interests. Petrotech has
good title to all of the assets of the Acquired Company free and clear of
any Security Interest, except the Company Loans and except as listed on
Schedule 3(p)(iv), or restriction on transfer.
(f) Petrotech Shares. The Petrotech Shares constitute all of the issued
and outstanding capital stock of Petrotech and are validly issued, fully
paid and non-assessable and owned, beneficially and of record, by the
Shareholders and no Petrotech Shares are subject to, nor have any been
issued in violation of, preemptive or similar rights. All issuances, sales
and repurchases of equity interests by the Acquired Company have been
effected in compliance with all applicable laws, including, without
limitation, applicable federal and state securities laws. The Shareholders
have good title to the Petrotech Shares, free and clear of any Security
Interest or restriction on transfer, except for the restrictions on
transfer set forth in Article VI of the articles of incorporation of
Petrotech, which the Shareholders individually and on behalf of Petrotech
hereby waive. The stock ledger and other corporate records of the Acquired
Company contain a complete and correct record of all issuance and transfer
of equity interests of the Acquired Company. There are no preemptive or
similar rights on the part of any holder of any Petrotech Shares. No
-12-
<PAGE>
options, warrants, conversion or other rights, agreements, commitments,
arrangements or understandings of any kind obligating Petrotech,
contingently or otherwise, to issue or sell any shares of its common stock
or any securities convertible into or exchangeable for any such shares or
any other securities, are outstanding, and no authorization therefor has
been given.
(g) Financial Statements. Attached hereto as Exhibit B is an unaudited
balance sheet and income statement of the Acquired Company as of March 31,
1997 (the "Financial Statements"). The Financial Statements present fairly
the assets and liabilities of Petrotech as of such date, are prepared in
accordance with the historical accounting practices of Petrotech, are
correct and complete, and are consistent with the books and records of
Petrotech subject to normal year-end audit adjustments.
As of the Closing Date, the total amount owed by Petrotech under
the Sellers Loan shall not exceed the principal sum of $120,000; under the
Shareholder Loan shall not exceed the principal sum of $1,906,326; and
under the Bank Loan shall not exceed the principal sum of $7,000,000.
(h) Events Subsequent to March 31, 1997. Since March 31, 1997, there has
not been any material adverse change in the business, financial condition,
operations, or results of operations of the Acquired Company. Without
limiting the generality of the foregoing, since that date, the Acquired
Company:
(i) has not sold, leased, transferred, or assigned any of its
assets, tangible or intangible outside the Ordinary Course of
Business;
(ii) has not entered into any agreement, contract, lease, or
license (or series of related agreements, contracts, leases, and
licenses) either involving more than $150,000 (exclusive of customer
orders) or outside the Ordinary Course of Business, except as listed
on Schedule 3(h)(ii);
(iii) has not and to the Knowledge of the Acquired Company or
any Shareholder no party has, accelerated, terminated, modified, or
canceled any agreement, contract, lease, or license (or series of
related agreements, contracts, leases, and licenses) involving more
than $150,000 to which the Acquired Company is a party or by which it
is bound, except as listed on Schedule 3(h)(iii);
(iv) has not imposed or permitted any Security Interest upon any
of its assets, tangible or intangible, except the continuing Security
Interest granted on July 20, 1990 in favor of Whitney National Bank to
secure the Bank Loan, and the continuing Security Interest granted on
July 7, 1994 in favor of Douglas W. Moore, William A. Dyar and Terry E
Irwin to secure the Shareholder Loan;
-13-
<PAGE>
(v) has not made any capital expenditure (or series of related
capital expenditures) either involving more than $150,000 or outside
the Ordinary Course of Business, except as listed on Schedule 3(h)(v);
(vi) has not made any capital investment in, any loan to, or any
acquisition of the securities or assets of, any other Person, except
as listed on Schedule 3(h)(vi);
(vii) has not issued any note, bond, or other debt security or
created, incurred, assumed, or guaranteed any indebtedness for
borrowed money or capitalized lease obligation other than performance
bonds issued in the Ordinary Course of Business, and except as listed
on Schedule 3(h)(vii);
(viii) has not delayed or postponed the payment of accounts
payable or other Liabilities outside of the Ordinary Course of
Business, except as listed on Schedule 3(h)(viii);
(ix) has not canceled, compromised, waived, or released any
right or claim (or series of related rights and claims) outside the
Ordinary Course of Business, except as listed on Schedule 3(h)(ix);
(x) has not granted any license or sublicense of any rights
under or with respect to any Intellectual Property, except as listed
on Schedule 3(h)(x);
(xi) has not changed or authorized any change in its charter or
bylaws;
(xii) has not experienced any material damage, destruction, or
loss (whether or not covered by insurance) to its property, except as
listed on Schedule 3(h)(xii);
(xiii) has not made any loan to, or entered into any other
transaction with, any of its directors, officers, and employees, other
than normal advances to employees (excluding the Shareholders) in the
Ordinary Course of Business, and except as listed on Schedule
3(h)(xiii);
(xiv) has not entered into any employment contract or collective
bargaining agreement, written or oral, or modified the terms of any
existing such contract or agreement, except as listed on Schedule
3(h)(xiv);
(xv) has not granted any increase in the base compensation of
any of its directors, officers, and employees, except as listed on
Schedule 3(h)(xv);
-14-
<PAGE>
(xvi) has not adopted, amended, modified or terminated any
bonus, profit-sharing incentive, severance, or other plan, contract,
or commitment for the benefit of any of its directors, officers, and
employees (or taken any such action with respect to any other Employee
Benefit Plan), except as listed on Schedule 3(h)(xvi);
(xvii) has not made any other change in employment terms for any
of its directors, officers, and employees, except as listed on
Schedule 3(h)(xvii);
(xviii) has not made or pledged to make any charitable or other
capital contribution;
(xix) has not suffered or experienced any other occurrence,
event, incident, action, failure to act, or transaction outside the
Ordinary Course of Business;
(xx) has not declared or paid any dividend or other equity
distribution, whether in cash or other property; and
(xxi) has not committed to any of the foregoing.
(i) Undisclosed Liabilities. The Acquired Company has no Liability (and
there is no Basis for any present or future action, suit, proceeding,
hearing, investigation, charge, complaint, claim or demand against the
Acquired Companies giving rise to any Liability), except for (i)
Liabilities set forth on the face of the Financial Statements, (ii)
Liabilities which have arisen after the date of the Financial Statements in
the Ordinary Course of Business (none of which results from, arises out of,
or was caused by any breach of contract, breach of warranty claims, product
liability, tort, infringement, or violation of law), (iii) Liabilities
which will arise from and after the Closing Date under contracts,
instruments and similar obligations of the Acquired Company to be performed
following the Closing Date and (iv) Liabilities set forth on Schedule 3(i).
(j) Legal Compliance. The Acquired Company has complied with all
applicable laws (including rules, regulations, codes, injunctions,
judgments, orders, decrees, rulings, and charges thereunder) of federal,
state, local, and foreign governments (and all agencies thereof), the
failure to comply with which will result in Adverse Consequences the costs
of which will exceed $25,000, and no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, demand, or notice has been filed
or commenced against the Acquired Company alleging any failure so to
comply.
-15-
<PAGE>
(k) Tax Matters.
Except as set forth on Schedule 3(k):
(i) The Acquired Company has filed all Tax Returns that they
were required to file and were due. All such Tax Returns were correct
and complete in all material respects. All Taxes owed by the Acquired
Company (whether or not shown on any Tax Return) have been paid. The
Acquired Company currently is not the beneficiary of any extension of
time within which to file any Tax Return. No claim is presently being
made by an authority in a jurisdiction where the Acquired Company does
not file Tax Returns that such Acquired Company is or may be subject
to taxation by that jurisdiction. There are no Security Interests on
any of the assets of any of the Acquired Company that arose in
connection with any failure (or alleged failure) to pay any Tax. The
Acquired Company has not been a member of an Affiliated Group that has
filed a "consolidated return" within the meaning of Code Sec. 1501, or
has filed a combined or consolidated return with another corporation
with any other taxing authority.
(ii) The Acquired Company has made all withholdings of Taxes
required to be made in connection with amounts paid or owing to any
employee, independent contractor, creditor, shareholder, or other
third party and such withholdings have either been paid to the
appropriate governmental agency or set aside in appropriate accounts
for such purpose.
(iii) The Acquired Company has not received any notice or other
indication that any authority is considering assessing any additional
Taxes for any period for which Tax Returns have been filed. There is
no dispute or claim concerning any Tax Liability of the Acquired
Company either (A) claimed or raised by any authority in writing or
(B) as to which the Acquired Company or any Shareholder has knowledge
based upon personal contact with any agent or representative of such
authority. (S) 3(k) of the Petrotech Disclosure Schedule lists all
federal, state, local, and foreign income Tax returns filed with
respect to the Acquired Company for taxable periods ended on or after
July 31, 1993, indicates those Tax Returns that have been audited, and
indicates those Tax Returns that currently are the subject of audit.
The Acquired Company has delivered to the Buyer correct and complete
copies of all federal and foreign income Tax Returns, examination
reports, and statements of deficiencies assessed against or agreed to
by the Acquired Company since July 31, 1993.
(iv) The Acquired Company has not waived any statute of
limitations in respect of Taxes or agreed to any extension of time
with respect to a Tax assessment or deficiency.
-16-
<PAGE>
(v) The Acquired Company has not made any payments, is not
obligated to make any payments, or is not a party to any agreement
that under certain circumstances could obligate it to make any
payments that will not be deductible under Code Sec. 280G. The
Acquired Company is not a party to any Tax allocation or sharing
agreement. The Acquired Company (A) has not been a member of an
Affiliated Group filing a consolidated federal income Tax Return
(other than a group the common parent of which was Petrotech) or (B)
has no Liability for the Taxes of any Person (other than the Acquired
Company) under Treas. Reg. (S) 1.1502-6 (or any similar provision of
state, local, or foreign law), as a transferee or successor, by
contract, or otherwise.
(l) Real Property.
(i) The Acquired Company owns no real property.
(ii) (S) 3(l)(ii) of the Petrotech Disclosure Schedule lists
briefly the Leased Real Property. Petrotech has delivered to the Buyer
correct and complete copies of the leases listed in (S) 3(l)(ii) of
the Petrotech Disclosure Schedule (as amended to date). With respect
to each lease listed in (S) 3(l)(ii) of the Petrotech Disclosure
Schedule:
(A) the lease or sublease is legal, valid, binding, enforceable,
and in full force and effect;
(B) the Acquired Company is not, and to the Knowledge of the
Acquired Company, no party to the lease or sublease is, in breach
or default, and no event has occurred which, with notice or lapse
of time, would constitute a breach or default or permit
termination, modification, or acceleration thereunder, except as
set forth on Schedule 3(l)(ii)(B);
(C) the Acquired Company has not, and to the Knowledge of the
Acquired Company, no party to the lease or sublease has,
repudiated any provision thereof;
(D) to the Knowledge of the Acquired Company, there are no
disputes, oral agreements, or forbearance programs in effect as
to the lease;
(E) the Acquired Company has not assigned, transferred,
conveyed, mortgaged, deeded in trust, or encumbered any interest
in the leasehold; or
-17-
<PAGE>
(F) to the Knowledge of the Acquired Company, all facilities
leased thereunder have received all approvals of governmental
authorities (including licenses and permits) required in
connection with the operation thereof and have been operated and
maintained in all material respects in accordance with applicable
laws, rules, and regulations.
(m) Intellectual Property.
(i) The Acquired Company owns or has the right to use pursuant
to license, sublicense, agreement, or permission of all Intellectual
Property necessary or desirable for the operation of the Business as
presently conducted or as proposed to be conducted. Each item of
Intellectual Property included among the Assets or owned or used by
the Acquired Company or any Shareholder immediately prior to the
Closing hereunder will be owned or available for use by the Buyer on
identical terms and conditions immediately subsequent to the Closing
hereunder.
(ii) Except as set forth in Schedule 3(m)(ii), the Acquired
Company or any Shareholder has not interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any Intellectual
Property rights of third parties, and the Acquired Company or any
Shareholder has not ever received any charge, complaint, claim,
demand, or notice alleging any such interference, infringement,
misappropriation, or violation (including any claim that any of the
Acquired Company or any Shareholder must license or refrain from using
any Intellectual Property rights of any third party). To the Knowledge
of the Acquired Company or any Shareholder, no third party has
interfered with, infringed upon, misappropriated, or otherwise come
into conflict with any Intellectual Property rights of the Acquired
Company.
(iii) (S) 3(m)(iii) of the Petrotech Disclosure Schedule
identifies each patent or registration which has been issued or
transferred to the Acquired Company or any Shareholder with respect to
any of its Intellectual Property, identifies each pending patent
application for registration which the Acquired Company or any
Shareholder has made with respect to any of its Intellectual Property,
and identifies each license, agreement, or other permission which the
Acquired Company or any Shareholder has granted to any third party
with respect to any of its Intellectual Property. The Acquired Company
has delivered to the Buyer correct and complete copies of all such
patents, registrations, applications, licenses, agreements, and
permissions (as amended to date) and has made available to the Buyer
correct and complete copies of all other written documentation
evidencing ownership and prosecution (if applicable) of each such
item. (S) 3(m)(iii) of the Petrotech Disclosure Schedule also
identifies each trade name or unregistered trademark used by the
Acquired Company in connection with the Business. With respect to each
item of Intellectual Property required to be identified in (S)
3(m)(iii) of the Petrotech Disclosure Schedule:
-18-
<PAGE>
(A) the Acquired Company possess all right, title, and interest
in and to the item, free and clear of any Security Interest,
license, or other restriction;
(B) the item is not subject to any outstanding injunction,
judgment, order, decree, ruling, or charge;
(C) no action, suit, proceeding, hearing, investigation, charge,
complaint, claim, or demand is pending or, to the Knowledge of
the Acquired Company threatened, which challenges the legality,
validity, enforceability, use, or ownership of the item; and
(D) Neither the Acquired Company nor any Shareholder has ever
agreed to indemnify any Person for or against any interference,
infringement, misappropriation, or other conflict with respect to
the item.
(iv) (S) 3(m)(iv) of the Petrotech Disclosure Schedule identifies
each item of Intellectual Property that any third party owns and that
the Acquired Company uses pursuant to license, sublicense, agreement, or
permission other than licenses for commercially available software
involving standard license fees, which need not be listed. Petrotech has
delivered to the Buyer correct and complete copies of all such licenses,
sublicenses, agreements, and permissions (as amended to date). With
respect to each item of Intellectual Property required to be identified
in (S) 3(m)(iv) of the Petrotech Disclosure Schedule;
(A) the license, sublicense, agreement, or permission covering
the item is legal, valid, binding, enforceable, and in full force
and effect;
(B) the license, sublicense, agreement, or permission will
continue to be legal, valid, binding, enforceable, and in full
force and effect on identical terms following the consummation of
the transactions contemplated hereby (including the Merger
referred to in (S) 2 above);
(C) The Acquired Company, and to the Knowledge of the Acquired
Company, no other party to the license, sublicense, agreement, or
permission, is in breach or default, and no event has occurred
which with notice of lapse of time would constitute a breach or
default or permit termination, modification, or acceleration
thereunder;
-19-
<PAGE>
(D) The Acquired Company has not, and to the Knowledge of the
Acquired Company, no other party to the license, sublicense,
agreement, or permission has repudiated any provision thereof;
(E) with respect to each sublicense, the representations and
warranties set forth in subsections (A) through (D) above are
true and correct with respect to the underlying license;
(F) the underlying item of Intellectual Property is not subject
to any outstanding injunction, judgment, order, decree, ruling,
or charge;
(G) no action, suit, proceeding, hearing, investigation, charge,
complaint, claim or demand is pending or, to the Knowledge of the
Acquired Company, threatened, which challenges the legality,
validity, or enforceability of the underlying item of
Intellectual Property; and
(H) The Acquired Company has not granted any sublicense or
similar right with respect to the license, sublicense, agreement,
or permission.
(n) Tangible Assets. The Acquired Company owns or leases all buildings,
machinery, equipment, and other tangible assets necessary for the conduct
of the Business as presently conducted, except for those items thereof
which need to be acquired in the ordinary course of the normal day-to-day
operations of the Business of the Acquired Company consistent with past
practice. Each such tangible asset owned or leased by the Acquired Company
is free from any known material defects, has been maintained in accordance
with normal industry practice, is in good operating condition and repair
(subject to normal wear and tear), and is suitable for the purposes for
which it presently is used.
(o) Inventory. The inventory of the Acquired Company consists of raw
materials and supplies, manufactured and purchased parts, construction work
in progress, goods in process, and finished goods, all of which is
merchantable and fit for the purpose for which it was procured or
manufactured, except for those items which have no value and none of which
is slow-moving (except for parts and components on hand for servicing
products already sold), obsolete, damaged, or defective.
(p) Contracts. (S) 3(p) of the Petrotech Disclosure Schedule lists the
following contracts and other agreements, written or oral, to which the
Acquired Company is a party, exclusive of contracts with customers and
related project documentation entered into in the Ordinary Course of
Business, which need not be listed hereunder;
-20-
<PAGE>
(i) any agreement (or group of related agreements) for the lease
of personal property to or from any Person providing for lease
payments in excess of $15,000 per annum;
(ii) any agreement (or group of related agreements) for the
purchase or sale of raw materials, commodities, supplies, products, or
other personal property, or for the furnishing or receipt of services,
the performance of which will extend over a period of more than one
year, or which to the Knowledge of the Acquired Company, will result
in a loss to the Acquired Company, or which involves consideration, in
excess of $50,000;
(iii) any agreement concerning a partnership or joint venture;
(iv) any agreement (or group of related agreements) under which
it has created, incurred, assumed, or guaranteed any indebtedness for
borrowed money, or any capitalized lease obligation, under which it
has imposed a Security Interest on any of its assets, tangible or
intangible (other than the Company Loans) except as listed on Schedule
3(p)(iv);
(v) any agreement concerning confidentiality or noncompetition,
other than with Parent;
(vi) any agreement involving any Shareholder to which the
Acquired Company is a party;
(vii) any profit sharing, stock option, stock purchase, stock
appreciation, deferred compensation, severance, or other plan or
arrangement for the benefit of its current or former directors,
officers, and employees;
(viii) any agreement for the employment of any individual on a
full-time, part-time, consulting, or other basis providing annual
compensation in excess of $75,000 or providing severance benefits
(other than accounting and legal consultants, which have no fixed
annual compensation);
(ix) any agreement under which it has advanced or loaned any
amount to any of its directors, officers, and employees;
-21-
<PAGE>
(x) any agreement not already listed herein or on the Petrotech
Disclosure Schedule under which the consequences of a default or
termination would have an adverse effect in the amount of $50,000 or
more on the business, financial condition, operations or results of
operations of the Acquired Company; or
(xi) any other agreement (or group of related agreements) the
performance of which involves consideration in excess of $50,000.
The Acquired Company has delivered to the Buyer a correct and complete copy of
each written agreement listed in (S) 3(p) of the Petrotech Disclosure Schedule
(as amended to date) and the listing in (S) 3(p) of the Petrotech Disclosure
Schedule is a written summary setting forth the terms and conditions of each
oral agreement referred to in (S) 3(p) of the Petrotech Disclosure Schedule.
With respect to each such agreement: (A) the agreement is legal, valid, binding,
enforceable, and in full force and effect, subject to applicable bankruptcy,
insolvency, fraudulent conveyance or transfer, reorganization, arrangement,
moratorium or other similar laws from time to time affecting creditor's rights
generally; (B) to the Knowledge of the Acquired Company, the agreement will
continue to be legal, valid, binding, enforceable, and in full force and effect
on identical terms following the consummation of the transactions contemplated
hereby (including the assignments and assumptions referred to in (S) 2 above),
subject to applicable bankruptcy, insolvency, fraudulent conveyance or transfer,
reorganization, arrangement, moratorium or other similar laws from time to time
affecting creditor's rights generally; (C) the Acquired Company is not, and to
the Knowledge of the Acquired Company, no other party, is in material breach or
default, and no event has occurred which with notice or lapse of time would
constitute a material breach or default, or permit termination, modification, or
acceleration, under the agreements; and (D) no party has repudiated any
provision of the agreement.
(q) Notes and Accounts Receivable. Notes and accounts receivable of the
Acquired Company included among the assets are at least an aggregate face amount
as of the Closing Date as set forth on the list of aged receivables to be
delivered at Closing and set forth on Exhibit C and all such notes and accounts
receivable are reflected properly on their books and records, are valid
receivables subject to no setoffs or counterclaims, are current and collectible,
subject only to the reserve for bad debts set forth on the face of the Financial
Statements, except that no representation shall be made with respect to accounts
receivable outstanding longer than 90 days from invoice date, which will be
treated as described in (S) 7.
(r) Powers of Attorney. There are no outstanding powers of attorney
executed on behalf of the Acquired Company, except as set forth on Schedule
3(r).
-22-
<PAGE>
(s) Insurance. The Acquired Company has provided the Buyer with each
insurance policy (including policies providing property, casualty, liability,
and workers' compensation coverage and bond and surety arrangements) to which
the Acquired Company has been a party, a named insured, or otherwise the
beneficiary of coverage at any time within the past seven 7 years.
Except as described on Schedule 3(s), with respect to each such insurance
policy: (A) all policy premiums due to date have been paid in full, and to the
Knowledge of the Acquired Company, the policy is legal, valid, binding,
enforceable, and in full force and effect with respect to the periods for which
it purports to provide coverage subject to applicable bankruptcy, insolvency,
fraudulent conveyance or transfer, reorganization, arrangement or moratorium or
other similar laws from time to time affecting creditor's rights generally; (B)
the Acquired Company or, to the Knowledge of the Acquired Company, any other
party to the policy is not in breach or default (including with respect to the
payment of premiums or the giving of notices), and no event has occurred which,
with notice or the lapse of time, would constitute such a breach or default, or
permit termination, modification, or acceleration, under the policy; and (C) no
party to the policy has repudiated any provision thereof. Section 3(s) of the
Petrotech Disclosure Schedule describes any self-insurance arrangements
affecting the Acquired Company.
(t) Litigation. The Acquired Company (i) is not subject to any
outstanding injunction, judgment, order, decree, ruling, or charge and (ii) is
not a party nor, to the Knowledge of the Acquired Company, is threatened to be
made a party to any action, suit, proceeding, hearing, or investigation of, in,
or before any court or quasi-judicial or administrative agency of any federal,
state, local, or foreign jurisdiction or before any arbitrator, other than as
set forth herein, and except as set forth in Schedule 3(t).
(u) Warranty. Each product manufactured, sold, leased, or delivered by
the Acquired Company or service provided by the Acquired Company has been in
conformity with all applicable contractual commitments and all express and
implied warranties, and, except as set forth in the documentation with respect
to ongoing projects of the Acquired Company, the Acquired Company has no
Liability (and there is no Basis for any present or future action, suit,
proceeding, hearing, investigation, charge, complaint, claim, or demand against
it giving rise to any Liability) for replacement or repair thereof or other
damages in connection therewith. Except as otherwise may be provided by
applicable law, no product manufactured, sold, leased, or delivered by the
Acquired Company is subject to any guaranty, warranty, or other indemnity beyond
the applicable written terms and conditions of sale or lease set forth in the
Acquired Company's documentation with respect to such projects.
(v) Product Liability. Except as set forth in Schedule 3(v), there are
no existing or, to the Knowledge of the Acquired Company, threatened, claims
against the Acquired Company arising out of any injury to individuals or
-23-
<PAGE>
property as a result of the ownership, possession, or use of any product
manufactured, sold, leased, or delivered by the Acquired Company which could
result in Liability to the Acquired Company and neither Petrotech nor the
Shareholders have any knowledge of a reasonable basis for any such claim.
(w) Employees. Except as set forth in Schedule 3(w), to the Knowledge of
the Acquired Company, no executive, key employee, or group of employees has any
plans to terminate employment with the Acquired Company. The Acquired Company is
not a party to or bound by any collective bargaining agreement, nor has it
experienced any strikes, grievances, claims of unfair labor practice. The
Acquired Company has no Knowledge of any organizational effort presently being
made or threatened by or on behalf of any labor union with respect to its
employees. There is no claim outstanding or, to the Knowledge of the Acquired
Company, threatened or any Basis for a claim respecting employment of any past
or present employee of the Acquired Company including, without limitation,
claims of personal injury (unless fully covered by worker's compensation,
liability or indemnity insurance) discrimination, wage, hours or similar laws or
regulations.
(x) Employee Benefits.
(i) No other corporation, trade, business, or other entity,
would, together with the Acquired Company, now or in the past 5 years,
constitute a single employer within the meaning of Code (S) 414.
(ii) Section 3(x) of the Petrotech Disclosure Schedule contains
a true and complete list of all of the Employee Benefit Plans which
are presently in effect or which have previously been in effect in the
last 5 years for the benefit of current or former employees, officers,
directors or consultants of the Acquired Company (the
"Petrotech Plans").
(iii) Except as set forth in (S) 3(x) of the Petrotech
Disclosure Schedule, the Acquired Company does not maintain and has
never maintained an "employee benefit pension plan," within the
meaning of ERISA (S) 3(2), that is or was subject to Title IV of
ERISA.
(iv) There is no lien outstanding upon any Assets pursuant to
Code (S) 412(n) in favor of any of the Petrotech Plans. No Assets or
assets of any Affiliate have been provided as security to any of the
Petrotech Plans pursuant to Code (S) 401(a)(29).
(v) Except as set forth in (S) 3(x) of the Petrotech Disclosure
Schedule, Petrotech has no past, present or future obligation or
liability to contribute to any multiemployer plan as defined in ERISA
(S) 3(37).
-24-
<PAGE>
(vi) Petrotech has complied in all material respects with the
continuation health coverage requirements of Code (S) 4980B and ERISA
(S)(S) 601 through 608.
(vii) Petrotech is not obligated, contingently or otherwise,
under any agreement to pay any amount which would be treated as a
"parachute payment," as defined in Code (S) 280G(b) (determined
without regard to Code (S) 280G(b)(2)(A)(ii)).
(viii) With respect to each of the Petrotech Plans, except as
set forth in (S) 3(x) of the Petrotech Disclosure Schedule:
(A) each of the Petrotech Plans has been established,
maintained, funded and administered in all material respects in
accordance with its governing documents, and any applicable
provisions of ERISA, the Internal Revenue Code of 1986 (the
"IRC"), other applicable law, and all regulations promulgated
thereunder;
(B) none of the Petrotech Plans nor any fiduciary has
engaged in a prohibited transaction as defined in ERISA (S) 406
or IRC (S) 4975 (for which no individual or class exemption exist
under ERISA (S) 408 or IRC (S) 4975, respectively);
(C) all filings and reports as to each of the Petrotech
Plans required to have been made on or before the Closing Date to
the Internal Revenue Service, or to the United States Department
of Labor or to the Pension Benefit Guaranty Corporation, have
been or will be duly made by that date;
(D) each of the Petrotech Plans which is intended to
qualify as a tax-qualified retirement plan under IRC (S) 401(a)
has received a favorable determination letter(s) from the
Internal Revenue Service as to qualification of such Petrotech
Plan for the period from its adoption through the Closing Date;
nothing has occurred, whether by action or failure to act, which
has resulted in or would cause the loss of such qualification;
and each trust thereunder is exempt from tax pursuant to IRC (S)
501(a);
(E) each of the Petrotech Plans which is required to
satisfy IRC (S)(S) 401(k)(3) or 401(m)(2) has been tested for
compliance with, and has satisfied the requirements of, IRC
(S)(S) 401(k)(3) and 401(m)(2) for each plan year ending prior to
the Closing Date;
-25-
<PAGE>
(F) no event has occurred and no condition exists
relating to any of the Petrotech Plans that would subject the
Acquired Company to any tax or Liability under IRS (S)(S) 4971,
4972 or 4979, or to any Liability under ERISA (S)(S) 502 or 4071;
and
(G) to the extent applicable, each of the Petrotech
Plans has been funded in accordance with its governing documents,
ERISA and the IRC, has not experienced any accumulated funding
deficiency (whether or not waived) and has not exceeded its full
funding limitation (within the meaning of IRC (S) 412) at any
time.
(ix) With respect to the Petrotech Plans which provide group
health benefits to employees of the Acquired Company and are subject
to the requirements of IRC (S) 4980B and ERISA Title I Part 6
("COBRA"), such group health plan has been administered in every
material respect in accordance with its governing documents and COBRA.
(x) With respect to employee benefit matters generally:
(A) the Acquired Company (nor any person, firm or
corporation which is or has been under common control within the
meaning of Section 4001(b) of ERISA of the Acquired Company) does
not maintain or contribute to or has ever maintained or
contributed to any Petrotech Plan subject to Title IV of ERISA;
(B) except as set forth on (S) 3(x) of the Petrotech
Disclosure Schedule, the consummation of the transactions
contemplated hereby will not accelerate or increase any Liability
under any of the Petrotech Plans because of an acceleration or
increase of any of the rights or benefits to which Petrotech Plan
participants or beneficiaries may be entitled thereunder;
(C) except as set forth on (S) 3(x) of the Petrotech
Disclosure Schedule, the Acquired Company has no obligation to
any retired or former employee or any current employee of the
Company upon retirement or termination of employment under any
Petrotech Plans, other than such obligations imposed by COBRA;
and
(D) except as set forth on (S) 3(x) of the Petrotech
Disclosure Schedule, any of the Petrotech Plans which is an
"employee welfare benefit plan," within the meaning of ERISA (S)
3(1), may be terminated prospectively without Liability to the
Acquired Company or Parent or Buyer, including, without
limitation, Liability for unreported (e.g., run-off) benefit
claims, premium adjustments or termination charges of any kind.
-26-
<PAGE>
(y) Guaranties. The Acquired Company is not a guarantor or otherwise
liable for any Liability or obligation (including indebtedness) of any other
Person (except for indemnities under project documentation of the Acquired
Company).
(z) Environment, Health, and Safety.
(i) The Acquired Company has complied with all Environmental,
Health, and Safety Laws, the failure to comply with which could result
in Adverse Consequences in an amount in excess of $25,000 individually
or in the aggregate, and no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, demand, or notice has been
filed or commenced against the Acquired Company alleging such failure.
(ii) The Acquired Company has no Liability (and the Acquired
Company, to its Knowledge, has not handled used, stored, treated,
recycled, or disposed of any Hazardous Substance, arranged for the
disposal of any Hazardous Substance, exposed any employee or other
individual to any Hazardous Substance or owned or operated any
property or facility in any manner that could form the Basis for any
present or future action, suit, proceeding, hearing, investigations,
charge, complaint, claim or demand giving rise to any Liability) for
penalties, investigations of or damage to any site, location, body of
water (surface or subsurface), or other natural resource, for any
illness of or personal injury to any employee or other individual, or
for any reason under any Environmental, Health, and Safety Laws.
(iii) Except as set forth in (S) 3(z) of the Petrotech
Disclosure Schedule, all properties and equipment used in the Business
are and in the past have been free of any amounts of Hazardous
Substances, the presence of which could result in Adverse
Consequences.
(iv) Except as set forth in (S) 3(z) of the Petrotech Disclosure
Schedule, there are no in-service or out-of-service underground or
above ground storage tanks.
(aa) Certain Business Relationships With the Acquired Company. Except as
set forth in (S) 3(aa) of the Petrotech Disclosure Schedule, none of the
Shareholders or their relatives has been involved directly or indirectly in any
business arrangement or relationship with Petrotech within the past 36 months,
and, except for the Leased Real Property and automobile leases of the
Shareholders, none of the Shareholders owns any asset, tangible or intangible,
which is used in the Business.
-27-
<PAGE>
(ab) Disclosure. To the Knowledge of the Acquired Company, the
representations and warranties contained in this (S) 3 (including the
Petrotech Disclosure Schedule) do not as of the Closing Date contain any
untrue statement of a material fact or omit to state any material fact
necessary in order to make the statement and information contained in this
(S) 3 not misleading.
4. REPRESENTATIONS AND WARRANTIES OF THE BUYER. Parent and Buyer, jointly
and severally, represent and warrant to the Shareholders that the statements
contained in this (S) 4 are correct and complete as of Closing Date, except as
set forth in the disclosure schedule prepared by Buyer accompanying this
Agreement and initialed by the Parties (the "Buyer Disclosure Schedule"). The
Buyer Disclosure Schedule will be arranged in paragraphs corresponding to the
lettered and numbered paragraphs contained in this (S) 4.
(a) Organization of the Buyer. Each of Parent and Buyer is a corporation
duly organized, validly existing, and in good standing under the laws of
the jurisdiction of its incorporation and is duly qualified as a foreign
corporation to do business in every jurisdiction where such qualification
is required.
(b) Authorization of Transaction. Each of Parent and Buyer has full
power and authority (including full corporate power and authority) to
execute and deliver this Agreement and to perform its obligations
hereunder. This Agreement constitutes the valid and legally binding
obligation of Parent and Buyer, enforceable in accordance with its terms
and conditions. Parent and Buyer need not give any notice to, make any
filing with, or obtain any authorization, consent, or approval of any
government or governmental agencies in order for the Parties to consummate
the transactions contemplated by this Agreement (including the assignment
and assumption referred to in (S) 2 above) other than the notification and
approval under the Hart-Scott-Rodino Act.
(c) Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby
(including the assignments and assumptions referred to in (S) 2 above) will
(i) violate any constitution, state, regulation, rule, injunction,
judgment, order, decree, ruling, charge, or other restriction of any
government, governmental agency, or court to which Parent or Buyer is
subject, or any provision of its charter or bylaws or (ii) conflict with,
result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate,
modify, or cancel, or require any notice under any agreement, contract,
lease, license, instrument, or other arrangement to which Parent or Buyer
is a party or by which they are bound or to which any of their assets are
subject.
(d) Broker's Fees. Neither Parent nor Buyer has Liability or obligation
to pay any fees or commissions to any broker, finder, or agent with respect
to the transactions contemplated by this Agreement for which the
Shareholders could become liable or obligated.
-28-
<PAGE>
(e) Disclosure. To the Knowledge of Parent and Buyer, (i) the
representations and warranties contained in this (S) 4 (including the Buyer
Disclosure Schedule) do not contain any untrue statements of a material
fact or omit to state any material fact necessary in order to make the
statements contained in this (S) 4 not misleading and (ii) the Public
Information did not, as of the date of its release, contain any untrue
statement of a material fact or omit to state a material fact necessary in
order to make the statements contained therein not misleading.
(f) Financial Statements. Attached hereto as Exhibit D are the following
financial statements of the Parent (collectively the "Parent Financial
Statements"):
(i) audited balance sheets, statements of income, changes in
shareholders' equity, and cash flow as of and for the fiscal year
ended October 31, 1996; and
(ii) unaudited balance sheet and statement of income, change in
shareholders' equity, and cash flow as of and for the quarter ended
January 31, 1997.
The Parent Financial Statements (including the notes thereto) have been
prepared in accordance with GAAP applied on a consistent basis throughout
the periods covered thereby, present fairly the financial condition of
Parent as of such dates and the results of operations of Parent for such
periods (subject in the case of interim statements only to normal year-end
adjustments which in the aggregate are not material), are correct and
complete, and are consistent with the books and records of Parent (which
books and records are correct and complete).
(g) Events Subsequent to Most Recent Fiscal Quarter End. Since January
31, 1997, there has not been any material adverse change in the business,
financial condition, operations, or results of operations of Parent.
5. CONDITIONS TO OBLIGATION TO CLOSE.
(a) Conditions to Obligation of Parent and Buyer. The obligation of
Parent and Buyer to consummate the transactions to be performed by it in
connection with the Closing is subject to satisfaction of the following
conditions:
(i) the representations and warranties set forth in (S) 3 above shall be
true and correct in all material respects at and as of the Closing Date;
(ii) Petrotech and the Shareholders shall have performed and complied
with all of their covenants hereunder in all material respects through the
Closing;
-29-
<PAGE>
(iii) no action, suit, or proceeding shall be pending or threatened before
any court or quasi-judicial or administrative agency of any federal, state,
local, or foreign jurisdiction or before any arbitrator wherein an unfavorable
injunction, judgment, order, decree, ruling, or charge would (A) prevent
consummation of any of the transactions contemplated by this Agreement (B)
cause any of the transactions contemplated by this Agreement to be rescinded
following consummation, or (C) affect adversely the right of the Buyer to own
the assets of the Acquired Company or to operate the Business (and no such
injunction, judgment, order, decree, ruling, or charge shall be in effect);
(iv) Petrotech shall have delivered to the Buyer a certificate to the
effect that each of the conditions specified above in (S) 5(a)(i)-(iii) is
satisfied in all respects;
(v) all applicable waiting periods (and any extensions thereof) under the
Hart-Scott-Rodino Act shall have expired or otherwise been terminated;
(vi) Douglas W. Moore, Terry E Irwin and William A. Dyar shall each have
entered into an Employment Agreement and a Noncompetition Agreement in form
and substance as set forth in Exhibits E-1 through E-6 attached hereto and the
same shall be in full force and effect;
(vii) the Buyer shall have received from counsel to the Acquired Company
an opinion in form and substance as set forth in Exhibit F attached hereto,
addressed to the Buyer, and dated as of the Closing Date;
(viii) the certificates of merger with respect to the Merger shall have
been filed in accordance with the Louisiana Corporation Act and the Delaware
Act; and
(ix) the amount necessary to pay and satisfy in full the Company Loans
shall not exceed $9,026,326, exclusive of interest;
(x) all actions to be taken by the Acquired Company in connection with
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to effect the transactions
contemplated hereby will be reasonably satisfactory in form and substance to
the Buyer;
(xi) Petrotech shall provide Buyer and Parent with a true and complete
copy of the written consent from Chevron with respect to the 3520 General
DeGaulle Drive property, from the landlord of the 7121 North Loop East,
Houston, Texas property and from the landlord of the Northway 10, Executive
Park, Ballston Lake, New York property;
-30-
<PAGE>
(xii) with respect to the Leased Real Property, the Buyer shall receive
estoppel letters from each landlord in the form attached as Exhibit G; and
(xiii) with respect to the Affiliate Leased Real Property, each lease shall
be amended in the form attached hereto as Exhibit A-1 through A-3.
(xiv) the spouse of any Shareholder shall have executed an appropriate
consent or joinder with respect to the obligations of the Shareholders under
this Agreement.
The Buyer may waive any condition specified in this (S) 5(a) if it executes a
writing so stating at or prior to the Closing.
(b) Conditions to Obligation of Sellers. The obligation of Shareholders to
consummate the transactions to be performed by it in connection with the Closing
is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in (S) 4 above shall be
true and correct in all material respects at and as of the Closing Date;
(ii) Parent and Buyer shall have performed and complied with all of its
covenants hereunder in all material respects through the Closing;
(iii) no action, suit, or proceeding shall be pending or threatened before
any court or quasi-judicial or administrative agency of any federal, state,
local, or foreign jurisdiction or before any arbitrator wherein an unfavorable
injunction, judgment, order, decree, ruling, or charge would (A) prevent
consummation of any of the transactions contemplated by this Agreement or (B)
cause any of the transactions contemplated by this Agreement to be rescinded
following consummation (and no such injunction, judgment, order, decree,
ruling, or charge shall be in effect);
(iv) the Buyer shall have delivered to Petrotech a certificate to the
effect that each of the conditions specified above in (S) 5(b)(i)-(iii) is
satisfied in all respects;
(v) all applicable waiting periods (and any extensions thereof) under the
Hart-Scott-Rodino Act shall have expired or otherwise been terminated;
-31-
<PAGE>
(vi) Petrotech shall have received from counsel to the Buyer an
opinion form and substance as set forth in Exhibit H attached hereto,
addressed to Petrotech, and dated as of the Closing Date;
(vii) Buyer shall have caused the Company Loans (except the Sellers
Loan) to be paid and satisfied in full;
(viii) all actions to be taken by the Buyer in connection with
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to effect the
transactions contemplated hereby will be reasonably satisfactory in form
and substance to Petrotech; and
(ix) Parent shall have delivered to Petrotech and the Shareholders
resolutions from its Board of Directors (or Compensation Committee)
granting options under Parent's 1991 Stock Option Plan to individuals as
set forth on Exhibit I.
The Shareholders may waive any condition specified in this (S) 5(b) if it
executes a writing so stating at a prior to the Closing.
6. POST-CLOSING COVENANTS. The Parties agree as follows with respect to the
period following the Closing.
(a) General. In case at any time after the Closing any further action is
necessary to carry out the purposes of this Agreement, each of the
Shareholders and Buyer will take such further action (including the
execution and delivery of such further instruments and documents) as any
other Party reasonably may request, at the sole cost and expense of the
requesting Party (unless the requesting Party is entitled to indemnification
therefor hereunder). The Shareholders acknowledge and agree that from and
after the Closing the Buyer will have the right to possession of all
documents, books, records (including Tax records), agreements, and financial
data of any sort relating to the Acquired Company in this Agreement;
provided, however, that the Shareholders shall have the right to obtain
access to such documents, books, records (including Tax records),
agreements, and financial data and make photocopies thereof for a proper
purpose, such as in connection with the preparation of their tax returns.
(b) Litigation Support. In the event and for so long as any Party
actively is contesting or defending against any action, suit, proceeding,
hearing, investigation, charge, complaint, claim or demand in connection
with (i) any transaction contemplated under this Agreement or (ii) any fact,
situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act, or transaction on or
prior to the Closing Date involving the Surviving Corporation or any
Shareholder, each of the other Parties will reasonably cooperate with the
contesting or defending Party and his or its
-32-
<PAGE>
counsel in the contest or defense, make available his or its personnel, and
provide such testimony and access to his or its books and records as shall
be necessary in connection with the contest or defense, all at the sole cost
and expense of the contesting or defending Party (unless the contesting or
defending Party is entitled to indemnification therefor under (S) 7 below).
(c) Transition. Each of the Shareholders will use his best efforts not to
take any action that is designed or intended to have the effect of
discouraging any lessor, licensor, customer, supplier, or other business
associate of the Acquired Company from maintaining the same business
relationships with the Surviving Corporation after the Closing as it
maintained with the Acquired Company prior to the Closing.
(d) Confidentiality. Each Shareholder will treat and hold as confidential
all of the Confidential Information, refrain from using any of the
Confidential Information and deliver promptly to the Surviving Corporation
or destroy, at the request and option of the Surviving Corporation, all
tangible embodiments (and all copies) of the Confidential Information which
are in his or its possession. In the event that a Shareholder is requested
or required (by oral question or request for information or documents in
any legal proceeding, interrogatory, subpoena, civil investigative demand,
or similar process) to disclose any Confidential Information, that Party
will notify the Surviving Corporation promptly of the request or
requirement so that the Surviving Corporation may seek an appropriate
protective order or waive compliance with the provisions of this (S) 6(d).
If, in the absence of a protective order or the receipt of a waiver
hereunder, a Shareholder is, on the advice of counsel, compelled to
disclose any Confidential Information to any tribunal or else stand liable
for contempt, that Party may disclose the Confidential Information to the
tribunal; provided, however, that a Shareholder shall use its reasonable
efforts to obtain, at the reasonable request of the Surviving Corporation
and at the Surviving Corporation's sole expense, an order or other
assurance that confidential treatment will be accorded to such portion of
the Confidential Information required to be disclosed as the Surviving
Corporation shall designate.
(e) Parent Shares. The Shareholders covenant and agree that they
shall hold Parent Shares for a period of not less than one (1) year
following the Closing Date and they shall not sell, transfer or otherwise
dispose of such Parent Shares during such period except for donations to
relatives of Shareholders or their wives, and then only as permitted by Rule
144 of the Securities Act and subject to the holding requirements hereof.
The Parent Shares shall contain an appropriate legend reflecting the
understanding of the Parties as to the holding period of the Parent Shares
set forth herein.
-33-
<PAGE>
7. REMEDIES FOR BREACHES OF THIS AGREEMENT.
(a) Survival of Representations and Warranties. All of the
representations and warranties contained in (S) 3(g)--(ab), except (S) 3(k)
and 3(x), of this Agreement and of Buyer contained in (S) 4(d)-(g) of this
Agreement shall survive the Closing and continue in full force and effect
for a period of 1 year thereafter; the representations and warranties
contained in (S) 3(k) and (S) 3(x) shall survive the Closing and continue in
full force and effect for a period of 30 days following the applicable
statute of limitations with respect to such matters; all of the other
representations, warranties, covenants, indemnities, and other agreements of
the Buyer and the Shareholders contained in this Agreement (including the
representations and warranties contained in (S) 3(a)-(f) and (S) 4(a)-(c))
shall survive the Closing and continue in full force and effect forever
thereafter, subject to any applicable statues of limitations. No action,
claim, or proceeding may be brought by any Party hereto against any other
Party resulting from, arising out of, or caused by a breach of a
representation or warranty contained herein, or the failure to perform any
covenant or other obligations hereunder, after the time such representation,
warranty or covenant ceases to survive pursuant to the preceding sentence,
unless written notice of such claim setting forth with specificity the basis
for such claim is delivered to the applicable Party prior to such time.
(b) Indemnification Provisions for Benefit of the Parent and the Buyer.
(i) In the event a Shareholder breaches (or in the event any third party
alleges facts that, if true, would mean Shareholder has breached) any of its
representations, warranties, and covenants contained in this Agreement, and,
if there is an applicable survival period pursuant to (S) 7(a) above,
provided that the Buyer makes a written claim for indemnification setting
forth the basis for such claim against the Shareholders pursuant to (S) 8(g)
below within such survival period, then each of the Shareholders jointly and
severally agrees to indemnify Parent, Buyer and the Surviving Corporation,
subject to the limitations set forth herein, from and against the entirety
of any Adverse Consequences the Parent, the Buyer or the Surviving
Corporation may suffer through and after the date of the claim for
indemnification (including any Adverse Consequences the Parent, the Buyer or
the Surviving Corporation may suffer after the end of any applicable
survival period) resulting from, arising out of, or caused by the breach (or
the alleged breach); provided, however, that
(w) The Shareholders shall not have any obligation to indemnify the
Buyer from and against any Adverse Consequences resulting from, arising
out of, or caused by the breach (or alleged breach) of any
representation, warranty or covenant contained in (S) 3(g)-(ab) of the
Agreement which exceed the funds escrowed pursuant to the Escrow
Agreement; and
-34-
<PAGE>
(x) The Shareholders shall have no such indemnification obligation
with respect to such (S) 3(g)-(ab) (excluding (S) 3(q)) breaches (or
alleged breaches) until the Buyer has suffered Adverse Consequences by
reason thereof in excess of One Hundred Seventy-Five Thousand Dollars
($175,000). No such restriction shall be applicable to the
representations and warranties contained in (S) 3(a)-(f) and (S) 3(q).
(ii) Each of the Shareholders jointly and severally agrees to indemnify
Parent, Buyer and the Surviving Corporation for any foreign or domestic
worker's compensation claims incurred by any employee, consultant,
independent contractor, agent, affiliate or other individual of the Acquired
Company prior to Closing, including, without limitation any claims for
personal injuries, property damages and lost wages, except to the extent
coverage is provided for such claims under the Acquired Company's applicable
insurance policy. Such indemnification shall not be limited in time or
amount or subject to any deductible or cap.
(iii) Each of the Shareholders jointly and severally, agrees to
indemnify Parent, Buyer and the Surviving Corporation for any damages
(including costs of cleanup, containment, or other remediation) arising,
directly or indirectly from or in connection with any Environmental, Health,
and Safety Laws arising out of or relating to: (A) the ownership, operation,
or condition at any time on or prior to the Closing Date of any facilities
or any other properties and assets (whether real, personal, or mixed and
whether tangible or intangible) in which Petrotech has or had an interest,
(B) any Hazardous Substances that were present on the facilities or such
other properties and assets at any time on or prior to the Closing Date, or
(C) any Hazardous Substances, wherever located, that were, or were
allegedly, used, generated, recycled, disposed, transported, stored,
treated, released, or otherwise handled by Petrotech or by any other person
for whose conduct they are or may be held responsible at any time on or
prior to the Closing Date.
(iv) Each of the Shareholders jointly and severally agrees to indemnify
and reimburse the Surviving Corporation upon demand for the full amount of
any accounts receivable of Petrotech which were (A) invoiced more than
ninety (90) days prior to the Closing Date and (B) remain uncollected by the
Surviving Corporation one hundred eighty (180) days following the Closing
Date. Within a reasonable time following such 180 day period, Parent or the
Surviving Corporation shall provide the Shareholders with a reconciliation
of such accounts receivable and certify to the Shareholders that such
receivables remain unpaid. The Shareholders shall pay to the Surviving
Corporation or Parent such uncollected amount within ten (10) days following
receipt of such reconciliation and certification.
-35-
<PAGE>
(v) As security for the indemnification obligations of Shareholders
under this Agreement, the Parties shall enter into the Escrow Agreement as
of the Closing Date in the form and substance as set forth in Exhibit J,
which shall be funded with $1,324,000 of the Cash Consideration otherwise
payable to the Shareholders (the "Escrow Funds") The amount of $300,000
shall be exclusively allocated from the Escrow Funds for the indemnification
obligations of Shareholders under (S) 7(b)(iv) of this Agreement (the
"Receivables Funds"). In the event indemnification obligations under (S)
7(b)(iv) are less than or equal to $300,000, Parent or the Surviving
Corporation shall be paid from the Receivables Funds the amount owed at the
time specified under (S) 7(b)(iv), and Shareholders shall receive from the
Escrow Funds the balance of the Receivables Funds remaining at that time.
The Receivables Funds shall be the exclusive remedy of Parent or the
Surviving Corporation in the event Shareholders indemnification obligations
under (S) 7(b)(iv) are $300,000 or less. In the event indemnification
obligations under (S) 7(b)(iv) are greater than $300,000, Parent or the
Surviving Corporation shall have the option of (i) receiving payment of all
of the Receivables Funds and the amount owed in excess of $300,000 from the
Escrow Funds, or (ii) receiving payment of all of the Receivables Funds and
the amount owed in excess of $300,000 directly from the Shareholders. The
amount of the Escrow Funds shall be reduced at the first anniversary of the
Closing Date to $75,000 (except with respect to claims then outstanding)
and, solely with respect to claims under (S) 3(k) and (S) 3(x), shall
continue until the third anniversary of the Closing Date.
(vi) Notwithstanding the foregoing, the Liability of any Shareholder
under this (S) 7 shall not exceed the percentage of the Merger Consideration
set opposite such Shareholder's name below:
Shareholder Percentage of Merger Consideration
----------- ----------------------------------
Douglas W. Moore 37.5%
William A. Dyar, individually
and William A. Dyar and 37.5%
Marguerite S. Dyar Charitable
Remainder Trust
Terry E Irwin 25%
(vii) In addition to the foregoing, each of the Shareholders jointly and
severally agrees to indemnify the Parent, Buyer and the Surviving
Corporation from and against any Adverse Consequences arising out of the
nonpayment of employee loans referenced in Petrotech Disclosure Schedule (S)
3(p)(ix).
(c) Indemnification Provisions for Benefit of the Shareholders.
-36-
<PAGE>
In the event Parent or Buyer breaches (or in the event any third party
alleges facts that, if true, would mean Parent or Buyer has breached) any of
their representations, warranties, and covenants contained in this
Agreement, and, if there is an applicable survival period pursuant to (S)
7(a) above, provided that the Shareholders makes a written claim for
indemnification setting forth with specificity the basis for such claim
against Parent or Buyer pursuant to (S) 8(g) below within such survival
period, then Parent and Buyer jointly and severally agree to indemnify the
Shareholders from and against the entirety of any Adverse Consequences (up
to but not in excess of the Merger Consideration) the Shareholders may
suffer through and after the date of the claim for indemnification
(including any Adverse Consequences the Shareholders may suffer after the
end of any applicable survival period) resulting from, arising out of, or
caused by the breach (or the alleged breach).
(d) Matters Involving Third Parties.
(i) If any third party shall notify any Party (the "Indemnified Party")
with respect to any matter ( a "Third Party Claim") which may give rise to a
claim for indemnification against any other Party (the "Indemnifying Party")
under this (S) 7, then the Indemnified Party shall promptly notify each
Indemnifying Party thereof in writing; provided, however, that no delay on
the part of the Indemnified Party in notifying any Indemnifying Party shall
relieve the Indemnifying Party from any obligation hereunder unless (and
then solely to the extent) the Indemnifying Party thereby is prejudiced.
(ii) Any Indemnifying Party will have the right to defend the
Indemnified Party against the Third Party Claim with counsel of its choice
satisfactory to the Indemnified Party so long as (A) the Indemnifying Party
notifies the Indemnified Party in writing within 15 days after the
Indemnified Party has given notice of the Third Party Claim that the
Indemnifying Party will indemnify the Indemnified Party from and against the
entirety of any Adverse Consequences the Indemnified Party may suffer
resulting from, arising out of, relating to, in the nature of, or caused by
the Third Party Claim, (B) the Indemnifying Party provides the Indemnified
Party with evidence reasonably acceptable to the Indemnified Party that the
Indemnifying Party will have the financial resources to defend against the
Third Party Claim and fulfill its indemnification obligations hereunder, (C)
the Third Party Claim involves only money damages and does not seek an
injunction or other equitable relief, (D) settlement of, or an adverse
judgment with respect to, the Third Party Claim is not, in the good faith
judgment of the Indemnified Party, likely to establish a precedential custom
or practice materially adverse to the continuing business interest of the
Indemnified Party, and (E) the Indemnifying Party conducts the defense of
the Third Party Claim actively and diligently.
-37-
<PAGE>
(iii) So long as the Indemnifying Party is conducting the defense of
the Third Party Claim in accordance with (S) 7(d)(ii) above, (A) the
Indemnified Party may retain separate co-counsel at its sole cost and
expense and participate in the defense of the Third Party Claim, (B) the
Indemnified Party will not consent to the entry of any judgment or enter
into any settlement with respect to the Third Party Claim without the
prior written consent of the Indemnifying Party (not to be withheld
unreasonably).
(iv) In the event any of the conditions in 7(d)(ii) above is or
becomes unsatisfied, however, (A) the Indemnified Party may defend
against, and consent to the entry of any judgment or enter into any
settlement with respect to, the Third Party Claim in any manner it may
deem appropriate (and the Indemnified Party need not consult with, or
obtain any consent from, any Indemnifying Party in connection therewith),
(B) the Indemnifying Parties will reimburse the Indemnified Party promptly
and periodically for the costs of defending against the Third Party Claim
(including reasonable attorneys' fees and expenses), and (C) the
Indemnifying Parties will remain responsible for any Adverse Consequences
the Indemnified Party may suffer resulting, arising out of, relating to,
in the nature of, or caused by the Third Party Claim to the fullest extent
provided in this (S) 7.
(e) Determination of Adverse Consequences. The Parties shall take into
account the time cost of money (using the Applicable Rate as the discount
rate) in determining Adverse Consequences for purposes of this (S) 7. All
indemnification payments under this (S) 7 shall be deemed adjustments to the
Merger Consideration.
(f) Post-Closing. Following the Closing, the remedy of the
Shareholders, on the one hand, and Parent and the Buyer on the other hand,
with respect to any breach or threatened breach of a representation,
warranty or covenant contained herein or with respect to any event,
circumstance or condition occurring on or before the Closing shall be
limited to the enforcement of the indemnification obligations set forth in
(S) 7; provided, however, that nothing provided in this (S) 7(f) shall limit
the right of any Party to seek any equitable remedy available to enforce his
or its rights hereunder in accordance with (S) 8 (n).
8. MISCELLANEOUS.
(a) Press Releases and Public Announcements. Neither Petrotech nor any
Shareholder shall issue any press release or make any public announcement
relating to the subject matter of this Agreement without the prior written
approval of the Parent. Parent, upon prior notice to Petrotech, may make any
public disclosure it believes in good faith is required or permitted by
applicable law or any listing or trading agreement concerning its publicly-
traded securities.
-38-
<PAGE>
(b) No Third-Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any Person other than the Parties and their
respective successors and permitted assigns.
(c) Entire Agreement. This Agreement (including the documents referred to
herein) constitutes the entire agreement between the Parties and supersedes
any prior understandings, agreements, or representations by or between the
Parties, written or oral, to the extent they related in any way to the
subject matter hereof.
(d) Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement
or any of its rights, interests, or obligations hereunder without the prior
written approval of the other Party; provided, however, that the Buyer may
(i) assign any or all of its rights and interests hereunder to one or more
of its affiliates and (ii) designate one or more of its affiliates to
perform its obligations hereunder (in any or all of which cases the Buyer
nonetheless shall remain responsible for the performance of all of its
obligations hereunder).
(e) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(f) Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(g) Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given if (and
then two business days after) it is sent by registered or certified mail,
return receipt requested, postage prepaid, and addressed to the intended
recipient as set forth below:
If to Petrotech and the Shareholders:
<TABLE>
<CAPTION>
<S> <C> <C>
Petrotech, Inc. Copy to: Charles N. Miller, Jr., Esq.
Mr. Douglas W. Moore, President 210 Baronne Street, Suite 605
108 Jarrell Drive New Orleans, LA 70112
Belle Chasse, LA 70037
and
Mr. Douglas W. Moore Mr. William A. Dyar
113 Noble Drive 132 Willow Drive
Belle Chasse, LA 70037 Gretna, LA 70053
</TABLE>
-39-
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Mr. Terry E Irwin William A. Dyar and Marguerite S. Dyar
62 Asphodel Drive Charitable Remainder Trust
Marrero, LA 70072 132 Willow Drive
Gretna, LA 70053
If to Buyer or Parent:
Derrick N. Key Copy to: Shanler D. Cronk, Esq.
Roper Industries, Inc. Roper Industries, Inc.
160 Ben Burton Road 160 Ben Burton Road
Bogart, Georgia 30622 Bogart, Georgia 30622
(706) 369-7170 (706) 369-7170
</TABLE>
Any Party may send any notice, request, demand, claim, or other
communication hereunder to the intended recipient at the address set forth
above using any other means (including personal delivery, expedited courier,
messenger service, telecopy, telex, ordinary mail, or electronic mail), but
no such notice, request, demand, claim, or other communication shall be
deemed to have been duly given unless and until it actually is received by
the intended recipient. Any Party may change the address to which notices,
requests, demands, claims, and other communications hereunder are to be
delivered by giving the other Party notice in the manner herein set forth.
(h) Governing Law. This Agreement shall be governed by and construed in
accordance with the domestic laws of the State of Delaware without giving
effect to any choice or conflict of law provision or rule (whether of the
State of Delaware or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the State of
Delaware.
(i) Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by
each of the Parent, Buyer, Petrotech and the Shareholders. No waiver by any
Party of any default, misrepresentation, or breach of warranty or covenant
hereunder, whether intentional or not, shall be deemed to extend to any
prior or subsequent default, misrepresentation, or breach of warranty or
covenant hereunder or affect in any way any rights arising by virtue of any
prior or subsequent such occurrence.
(j) Severability. Any term or provision of this Agreement that is invalid
or unenforceable in any situation in any jurisdiction shall not affect the
validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any
other situation or in any other jurisdiction.
-40-
<PAGE>
(k) Expenses. Buyer and each Shareholder will bear its (his) own costs
and expenses (including legal fees and expenses) incurred in connection with
this Agreement and the transactions contemplated hereby. The Shareholders shall
bear all such expenses incurred by Petrotech.
(l) Construction. Any reference to any federal, state, local, or foreign
statute or law shall be deemed also to refer to all rules and regulations
promulgated thereunder, unless the context requires otherwise. The word
"including" shall mean including without limitation. Items set forth in the
Petrotech Disclosure Schedule or the Buyer Disclosure Schedule shall be deemed
an exception only to the representations and warranties for which they are
identified and any other representations and warranties to which the Petrotech
Disclosure Schedule or Buyer Disclosure Schedule with respect to such
representations and warranties contains an appropriate cross-reference.
(m) Incorporation of Exhibits and Schedules. The Exhibits and Schedules
identified in this Agreement are incorporated herein by reference and made a
part hereof.
(n) Specific Performance. Each of the Parties acknowledges and agrees
that the other Party would be damaged irreparably in the event any of the
provisions of this Agreement are not performed in accordance with their specific
terms or otherwise are breached. Accordingly, each of the Parties agrees that
the other Party shall be entitled to an injunction or injunctions to prevent
breaches of the provisions of this Agreement and to enforce specifically this
Agreement and the terms and provisions hereof in any action instituted in any
court of the United States or any state thereof having, in accordance with the
terms of this Agreement, jurisdiction over the Parties and the matter, in
addition to any other remedy to which it may be entitled, at law or in equity.
(o) Submission to Jurisdiction. Each of the Parties submits to the
jurisdiction of any state or federal court sitting in Delaware in any action or
proceeding arising out of or relating to this Agreement and agrees that all
claims in respect of the action or proceeding may be heard and determined in any
such court. Each Party also agrees not to bring any action or proceeding arising
out of or relating to this Agreement in any other court. Each of the Parties
waives any defense of inconvenient forum to the maintenance of any action or
proceeding so brought and waives any bond, surety, or other security that might
be required of any other Party with respect thereto. Parent and Buyer appoints
The Prentice-Hall Corporation System, Inc. (the "Process Agent") as his or its
agent to receive on is or its behalf service of copies of the summons and
complaint and any other process that might be served in the action or
proceeding. Shareholders shall have service of process personally served to the
address listed in (S) 8(g) above. Any Party may make service on any other Party
by sending or delivering a copy of the process (i) to the Party to be served at
the address and in the manner provided for the giving of notices in (S) 8(g)
above or (ii) to the Party to be served in care of the Process Agent at the
address and in the manner provided for the giving of notices in (S) 8(g) above.
Each Party agrees that a final judgment in any
-41-
<PAGE>
action or proceeding so brought shall be conclusive and may be enforced by
suit on the judgment or in any other manner provided by law or in equity.
(p) Dyar Guaranty. William A. Dyar, in addition to his individual
obligations as a Shareholder under this Agreement, shall fully and completely
guarantee any and all obligations of the William A. Dyar and Marguerite S. Dyar
Charitable Remainder Trust which may arise and exist under this Agreement.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on
the date first above written.
BUYER
Petrotech Acquisition, Inc.
By: /S/ MARTIN S. HEADLEY
---------------------
Name: Martin S. Headley
-----------------
Title: Vice President
--------------
PARENT
Roper Industries, Inc.
By: /S/ DERRICK N. KEY
------------------
Derrick N. Key,
President and Chief Executive Officer
PETROTECH
PetroTech, Inc.
By: /S/DOUGLAS W. MOORE
-------------------
Douglas W. Moore
President
[SIGNATURES CONTINUED ON NEXT PAGE]
-42-
<PAGE>
PETROTECH INTERNATIONAL, INC.
BY: /S/ DOUGLAS W. MOORE
--------------------
NAME: DOUGLAS W. MOORE
----------------
TITLE: PRESIDENT
---------
SHAREHOLDERS
/S/ DOUGLAS W. MOORE
--------------------
DOUGLAS W. MOORE
/S/ TERRY E. IRWIN
------------------
TERRY E IRWIN
/S/ WILLIAM. A. DYAR
--------------------
WILLIAM A. DYAR
THE WILLIAM A. DYAR AND MARGUERITE
S. DYAR CHARITABLE REMAINDER TRUST
BY: /S/ TIMOTHY MURPHY
------------------
TIMOTHY MURPHY
INDEPENDENT SPECIAL TRUSTEE
-43-
<PAGE>
CONSENT TO BE BOUND BY THE ABOVE AND FOREGOING AGREEMENT
We, MARY DIMBERG MOORE, MARGUERITE SUE PIPKIN DYAR AND JO HELEN
McMORRIES IRWIN, declare and state that each of us is a spouse of a shareholder
in the above and foregoing Agreement and Plan of Merger; and we further declare
and state that we have read said Agreement and Plan of Merger and understand it
and approve it, including, without limitation, specifically approving and
authorizing the Plan of Merger and the sale thereunder of all of the issues and
outstanding shares of capital stock of Petrotech, Inc., which are in the names
of our respective husbands; and we hereby further agree to be bound by all of
the terms, conditions and provisions contained in said Agreement and Plan of
Merger, and hereby ratify and approve all actions which our husbands have taken
and will take in connection with consummating the transactions contemplated by
the Agreement and Plan of Merger.
Thus done and signed by each of us on the 14th day of May, 1997.
/S/ MARY DIMBERG MOORE
----------------------
MARY DIMBERG MOORE
/S/ MARGUERITE SUE PIPKIN DYAR
------------------------------
MARGUERITE SUE PIPKIN DYAR
/S/ JO HELEN McMORRIES IRWIN
----------------------------
JO HELEN McMORRIES IRWIN
<PAGE>
EXHIBIT 3.1
RESTATED CERTIFICATE OF INCORPORATION
OF
ROPER INDUSTRIES, INC.
ADOPTED APRIL 1996
This Restated Certificate of Incorporation was duly adopted by unanimous
written consent of the Board of Directors of Roper Industries, Inc. in
accordance with the provisions of Section 245 of the General Corporation Law of
the State of Delaware. The Corporation was originally formed under the name
Dexter Holdings, Inc. pursuant to an original Certificate of Incorporation filed
with the Secretary of State of the State of Delaware on December 17, 1981. The
following Restated Certificate of Incorporation restates and integrates the
original Certificate of Incorporation and all amendments filed with the
Secretary of State of Delaware prior to April 11, 1996.
1. The name of the corporation is:
ROPER INDUSTRIES, INC.
2. The address of the corporation's registered office in the State of
Delaware is 1013 Centre Road in the City of Wilmington, County of New Castle,
and the name of the registered agent thereat is The Prentice-Hall Corporation
System, Inc.
3. The nature of the business of the corporation and the purposes to be
conducted or promoted by it are as follows:
(a) To design, manufacture, purchase, lease, distribute, install, repair,
service, sell, import, export and otherwise deal in or with any and all kinds of
positive displacement rotary and centrifugal pumps and industrial machinery, and
all related supplies, components, equipment and products;
(b) To acquire all or any part of the stock or other securities, goodwill,
rights, property or assets of any kind and to undertake or assume all or any
part of the obligations or liabilities of any corporation, association,
partnership, syndicate, entity, or person located in or
<PAGE>
organized under the laws of any state, territory or possession of the United
States of America or any foreign country, and to pay for the same in cash,
stock, bonds, debentures, notes, or other securities, secured or unsecured, of
this or any other corporation or otherwise in any manner permitted by law, and
to conduct in any lawful manner all or any part of any business so acquired; and
(c) To engage in any lawful act or activity for which corporations may be
organized under the General Corporation Law of the State of Delaware.
In addition to the general powers conferred by the laws of the State of
Delaware and the purposes hereinbefore set forth, the corporation shall also
have the following powers:
(d) To issue any of the shares of its capital stock of any class or series
thereof now or hereafter authorized for such consideration as may be permitted
by law and upon such terms and conditions as the Board of Directors may deem
proper in its absolute discretion, and the stock so issued shall be fully paid
and not liable to any further call or payment thereof; in the absence of actual
fraud in the transaction, the judgment of the Board of Directors as to the value
of the property or other consideration received for the shares of capital stock
shall be conclusive; and
(e) To borrow money, make, issue and sell, pledge, or otherwise dispose of
checks, drafts, bills of exchange, documents of title, bonds, debentures, notes
and other evidence of indebtedness of all kinds, whether unsecured or secured by
-2-
<PAGE>
mortgage, pledge or otherwise of any or all of the assets of the corporation,
and without limit as to amount; and generally to mortgage, pledge or sell any
stock or other securities or other property held by it, all on such terms and
conditions as the Board of Directors;
4. A. The total number of shares of stock which the corporation shall
have authority to issue is eighty-one million (81,000,000) shares, divided into
two (2) classes as follows:
(i) eighty million (80,000,000) shares, each to be of the par
value of one cent ($.01), and to be designated as Common Stock; and
(ii) one million (1,000,000) shares, each to be of the par value
of one cent ($.01), and to be designated as Preferred Stock.
B. (i) Each outstanding share of Common Stock shall entitle
the holder thereof to five (5) votes on each matter properly submitted to
the stockholders of the corporation for their vote, waiver, release or
other action; except that no holder of outstanding shares of Common Stock
shall be entitled to exercise more than one (1) vote on any such matter in
respect of any share of Common Stock with respect to which there has been
change in beneficial ownership during the four (4) years immediately
preceding the date on which a determination is made of the stockholders of
the corporation who are entitled to vote or to take any other action.
(ii) A change in beneficial ownership of an outstanding share of
Common Stock shall be deemed to have occurred whenever a change occurs in
any person or persons who, directly or indirectly, through any contract,
-3-
<PAGE>
agreement, arrangement, understanding, relationship or otherwise has or
shares any of the following:
(a) voting power, which includes, without limitation, the
power to vote or to direct the voting power of such share of Common
Stock;
(b) investment power, which includes, without limitation,
the power to direct the sale or other disposition of such shares of
Common Stock;
(c) the right to receive or to retain the proceeds of any
sale or other disposition of such share of Common Stock; or
(d) the right to receive or to retain any distributions,
including, without limitation, cash dividends, in respect of such
share of Common Stock.
(iii) Without limiting the generality of the foregoing
section (ii) of this subparagraph B, the following events or
conditions shall be deemed to involve a change in beneficial ownership
of a share of Common Stock:
(a) in the absence of proof to the contrary provided in
accordance with the procedures set forth in section (v) of this
subparagraph B, a change in beneficial ownership shall be deemed to
have occurred (1) whenever an outstanding share of Common Stock is
transferred of record into the name of any other person and (2) upon
the issuance of shares in a public offering;
-4-
<PAGE>
(b) in the case of an outstanding share of Common Stock held
of record in the name of a corporation, general partnership, limited
partnership, voting trustee, bank, trust company, broker, nominee or
clearing agency, if it has not been established pursuant to the
procedures set forth in section (v) of this subparagraph B that there
has been no change in the person or persons who or that direct the
exercise of the rights referred to in clauses (ii)(a) through (ii)(d),
inclusive, of this subparagraph B with respect to such outstanding
share of Common Stock during the period of four (4) years immediately
preceding the date on which a determination is made of the
stockholders of the corporation entitled to vote or to take any other
action (or since February 12, 1992 for any period ending on or before
February 12, 1992), then a change in beneficial ownership of such
share of Common Stock shall be deemed to have occurred during such
period;
(c) in the case of an outstanding share of Common Stock held
of record in the name of any person as a trustee, agent, guardian or
custodian under the Uniform Gifts to Minors Act as in effect in any
jurisdiction, a change in beneficial ownership shall be deemed to have
occurred whenever there is a change in the beneficiary of such trust,
the principal of such agent, the ward of such guardian, the minor for
whom such custodian is acting or in such trustee, agent, guardian or
custodian; or
-5-
<PAGE>
(d) in the case of outstanding shares of Common Stock
beneficially owned by a person or group of persons who, after
acquiring, directly or indirectly, the beneficial ownership of five
percent (5%) of the outstanding shares of Common Stock, fails to
notify the corporation of such ownership within ten (10) days after
such acquisition, a change in beneficial ownership of such shares of
Common Stock shall be deemed to occur on each day while such failure
continues.
(iv) Notwithstanding any other provision in this subparagraph B
to the contrary, no change in beneficial ownership of an outstanding share
of Common Stock shall be deemed to have occurred solely as a result of:
(a) any event that occurred prior to February 12, 1992 or
pursuant to the terms of any contract (other than a contract for the
purchase and sale of shares of Common Stock contemplating prompt
settlement), including contracts providing for options, rights of
first refusal and similar arrangements, in existence on February 12,
1992 and to which any holder of shares of Common Stock is a party;
provided, however, that any exercise by an officer or employee of the
-------- -------
corporation or any subsidiary of the corporation of an option to
purchase Common Stock after February 12, 1992 shall, notwithstanding
the foregoing and clause (iv)(f) hereof, be deemed a change in
-6-
<PAGE>
beneficial ownership irrespective of when that option was granted to
said officer or employee;
(b) any transfer of any interest in an outstanding share of
Common Stock pursuant to a bequest or inheritance, by operation of law
upon the death of any individual, or by any other transfer without
valuable consideration, including, without limitation, a gift that is
made in good faith and not for the purpose of circumventing the
provisions of this Article Fourth;
(c) any changes in the beneficiary of any trust, or any
distribution of an outstanding share of Common Stock from trust, by
reason of the birth, death, marriage or divorce of any natural person,
the adoption of any natural person prior to age eighteen (18) or the
passage of a given period of time or the attainment by any natural
person of a specific age, or the creation or termination of any
guardianship or custodial arrangement;
(d) any appointment of a successor trustee, agent, guardian
or custodian with respect to an outstanding share of Common Stock if
neither such successor has nor its predecessor had the power to vote
or to dispose of such share of Common Stock without further
instructions from others;
(e) any change in the person to whom dividends or other
distributions in respect of an outstanding share of Common Stock are
to be paid pursuant to the issuance or modification of a revocable
dividend payment order;
-7-
<PAGE>
(f) any issuance of a share of Common Stock by the
corporation or any transfer by the corporation of a share of Common
Stock held in treasury other than in a public offering thereof, unless
otherwise determined by the Board of Directors at the time of
authorizing such issuance or transfer;
(g) any giving of a proxy in connection with a solicitation
of proxies subject to the provisions of Section 14 of the Securities
Exchange Act of 1934, as amended, and the rules and regulations
thereunder promulgated;
(h) any transfer, whether or not with consideration, among
individuals related or formerly related by blood, marriage or adoption
("relatives") or between a relative and any person controlled by one
or more relatives where the principal purpose for the transfer is to
further the estate tax planning objectives of the transferor or of
relatives of the transferor:
(i) any appointment of a successor trustee as a result of
the death of the predecessor trustee (which predecessor trustee shall
have been a natural person);
(j) any appointment of a successor trustee who or which was
specifically named in a trust instrument prior to February 12, 1992;
or
-8-
<PAGE>
(k) any appointment of a successor trustee as a result of
the resignation, removal or failure to qualify of a predecessor
trustee or as a result of mandatory retirement pursuant to the express
terms of a trust instrument; provided, that less than fifty percent
--------
(50%) of the trustees administering any single trust will have changed
(including in such percentage the appointment of the successor
trustee) during the four (4) year period preceding the appointment of
such successor trustee.
(v) For purposes of this subparagraph B, all determinations
concerning changes in beneficial ownership, or the absence of any such
change, shall be made by the Board of Directors of the corporation or, at
any time when the corporation employs a transfer agent with respect to the
shares of Common Stock, at the corporation's request, by such transfer
agent on the corporation's behalf. Written procedures designed to
facilitate such determinations shall be established and may be amended,
from time to time, by the Board of Directors. Such procedures shall
provide, among other things, the manner of proof of facts that will be
accepted and the frequency with which such proof may be required to be
renewed. The corporation and any transfer agent shall be entitled to rely
on any and all information concerning beneficial ownership of the
outstanding shares of Common Stock coming to their attention from any
source and in any manner reasonably deemed by them to be reliable, but
neither the corporation nor any transfer agent shall be charged with any
other knowledge concerning the beneficial ownership of outstanding shares
of Common Stock.
-9-
<PAGE>
(vi) In the event of any stock split or stock dividend with
respect to the outstanding shares of Common Stock, each share of Common
Stock acquired by reason of such split or dividend shall be deemed to have
been beneficially owned by the same person from the same date as that on
which beneficial ownership of the outstanding share or shares of Common
Stock, with respect to which such share of Common Stock was distributed,
was acquired.
(vii) Each outstanding share of Common Stock, whether at any
particular time the holder thereof is entitled to exercise five (5) votes
or one (1) vote, shall be identical to all other shares of Common Stock in
all respects, and together the outstanding shares of Common Stock shall
constitute a single class of shares of the corporation.
C. Authority is hereby granted to the Board of Directors of the
corporation to adopt, from time to time, a resolution or resolutions
providing for the issuance of shares of Preferred Stock in one or more
series; and the Board of Directors is hereby expressly granted and vested
with the authority to determine and to fix with respect to each series of
Preferred Stock any or all of the designations and the powers, preferences
and rights, and the qualifications, limitations or restrictions of such
Preferred Stock, including, but not limited to, the determination of the
following:
(i) the distinctive designation of such series of Preferred
Stock and the number of shares which shall constitute such series,
which number may be increased (except where otherwise provided by the
Board of Directors) or decreased (but not below the number of shares
thereof then outstanding) from time to time by the Board of Directors;
-10-
<PAGE>
(ii) the rate of dividends, if any, payable on the shares of
such series of Preferred Stock, the conditions upon which and the
dates when such dividends shall be payable, whether such dividends
shall be cumulative (and, if so, from which date or dates), and
whether payable in preference to dividends payable on any other class
or classes of stock or on any other series of Preferred Stock;
(iii) whether or not the shares or such series of Preferred
Stock shall have voting powers, and, if voting powers are granted, the
extent of such voting powers;
(iv) whether or not the shares of such series of Preferred
Stock shall be redeemable and, if so, the terms and conditions of such
redemption, including, but not limited to, the date or dates upon or
after which they shall be redeemable and the amount per share payable
in case of redemption, which amount may vary under different
conditions and at different redemption dates;
(v) whether or not the shares of such series of Preferred
Stock shall be entitled to the benefit of a retirement fund or sinking
fund, and, if so, the terms and conditions of such fund;
(vi) whether or not the shares of such series of Preferred
Stock shall be convertible into or exchangeable for shares of any
other class or classes of stock of the corporation or of any other
series of Preferred Stock and, if made so convertible or exchangeable,
the time or times, the conversion price or prices, or the rate or
-11-
<PAGE>
rates of exchange, and the adjustments thereof, it any, at which such
conversion or exchange may be made, and any other terms and conditions
of such conversion or exchange;
(vii) the rights of the holders of the shares of such
series of Preferred Stock upon the voluntary or involuntary
liquidation, dissolution or winding-up, or merger, consolidation or
distribution or sales of assets of the corporation;
(viii) the conditions and restrictions, if any, on the
payment of dividends or on the making of other distributions on, or
the purchase, redemption or other acquisition by the corporation of
the Roper Industries, Inc. Common Stock or of any other class of stock
or other series of Preferred Stock of the corporation ranking junior
to the shares of such series of Preferred Stock as to dividends or on
liquidation;
(ix) the conditions and restrictions, if any, on the
creation of indebtedness of the corporation or any subsidiary or on
the authorization or issue of any additional stock of the corporation
ranking on a parity with or prior to the shares of such series of
Preferred Stock as to dividends or on liquidation; and,
(x) any other preferences and relative, participating,
optional or other special rights, and qualifications, limitations or
restrictions thereof.
D. Subject to the foregoing, the authorized shares of stock of
any class of the corporation may be issued by the corporation from time to time
-12-
<PAGE>
and for such consideration, not less than the par value thereof, and upon such
terms as may be fixed from time to time by the Board of Directors, and any and
all shares so issued, the full consideration for which shall have been paid or
delivered, shall be deemed fully-paid and non-assessable stock and shall not be
liable to any further call or assessment thereon.
E. The holders of stock, as such, of any class of the
corporation shall have no preemptive or preferential right to purchase or
subscribe for any part of the unissued capital stock of the corporation of any
class or for any new issue of stock of any class, whether now or hereafter
authorized or issued, or to purchase or subscribe for any bonds or other
obligations, whether or not convertible into stock of any class of the
corporation, now or hereafter authorized or issued other than such, if any, as
the Board of Directors of the corporation from time to time may fix pursuant to
the authority hereby conferred by the Certificate of Incorporation of the
corporation; and the Board of Directors may issue stock of the corporation, or
securities or obligations convertible into stock, without offering such issue of
stock or such securities or obligations, either in whole or in part, to the
stockholders of the corporation.
F. Subject to any limitations contained in the resolution or
resolutions providing for the issue of any series of Preferred Stock, the
holders of Common Stock shall be entitled to receive, when and as declared by
the Board of Directors out of the assets of the corporation which are by law
available therefor, dividends payable in cash, in property or in shares of
Common Stock. No dividends, other than dividends payable only in shares of
Common Stock of the corporation, shall be paid on Common Stock if cash dividends
in full to which all outstanding shares of Preferred Stock of all series shall
then be entitled for the then current dividend period and (where such dividends
are cumulative) for all past dividend periods shall not have been paid or
declared and set apart in full.
-13-
<PAGE>
G. In the event of any voluntary or involuntary liquidation,
dissolution or winding-up of the corporation, the holders of Common Stock shall
be entitled, after payment or provision for payment of the debts and other
liabilities of the corporation and of the amounts to which the holders of the
Preferred Stock shall be entitled, to share ratably in the remaining net assets
of the corporation. Neither a consolidation nor a merger of the corporation
with or into any other corporation; nor a merger of any other corporation with
or into the corporation; nor a reorganization of the corporation; nor the
purchase or redemption of all or part of the outstanding shares of stock of any
class or classes of the corporation; nor the sale or transfer of the property
and business of the corporation as, or substantially as, an entity shall be
considered a liquidation, dissolution or winding-up of the corporation for
purposes of the preceding sentence.
Pursuant to the authority conferred upon the Board of Directors by this
Article 4, the Certificate of Designation, Preferences and Rights of Series A
Preferred Stock set forth as Exhibit A hereto was duly adopted by said Board of
Directors on January 8, 1996 and filed with the Secretary of State of the State
of Delaware on January 10, 1996.
5. The Board of Directors shall have the power (i) to make, alter or
amend the By-laws, subject only to such limitations, if any, as the By-laws of
the corporation may from time to time impose; (ii) from time to time to fix and
determine and to vary the amount to be reserved as working capital of the
corporation, and, before the payment of any dividends or making any distribution
or profits, to set aside out of the surplus or net profits of the corporation
such sum or sums as the Board may from time to time in its absolute discretion
think proper either as additional working capital or as a reserve fund to meet
contingencies, or for the repairing or maintaining of any property of the
corporation, or for such other corporate purposes as the Board of Directors
shall think conducive to the interests of the corporation, subject only to such
-14-
<PAGE>
limitations, if any, as the By-laws of the corporation may from time to time
impose; (iii) from time to time, to the extent now or hereafter permitted by the
laws of Delaware, to sell, lease, exchange or otherwise dispose of any part of
the property and assets of the corporation which the Board of Directors deems it
expedient and for the best interests of the corporation to dispose of, or
disadvantageous to continue to own, without assent of the stockholders by vote
or otherwise; (iv) to issue or cause to be issued from time to time all or any
part of the authorized capital stock of the corporation on such terms and for
such consideration as the Board of Directors may determine in its discretion
without obtaining the approval of the holders of any of the then outstanding
capital stock; (v) pursuant to the affirmative vote of the holders of a majority
of the shares of stock issued and outstanding having voting power given at a
stockholders' meeting duly called for that purpose, to sell, lease, exchange, or
otherwise dispose of all or substantially all of the property and assets of the
corporation, including its goodwill and its corporate franchises, upon such
terms and conditions as the Board of Directors deems expedient and for the best
interest of the corporation; (vi) from time to time to authorize the corporation
to borrow money or to pledge the credit of the corporation by guaranty or
otherwise, and to issue, sell, pledge, or otherwise deliver or dispose of stock
of this or any other corporation, bonds, debentures, notes or other evidences of
indebtedness, whether unsecured or secured by mortgage, pledge or other lien of
any or all of the assets of the corporation, all on such terms and conditions as
the Board of Directors may determine or authorize in its discretion without
obtaining the approval of any of the holders of any of the then outstanding
capital stock of the corporation and; (vii) to exercise any and all other powers
conferred by law or by this certificate or which may be
conferred upon the Board of Directors by the corporation through appropriate By-
law provisions or otherwise.
6. The Board of Directors, by resolution or resolutions duly adopted
by it, may designate one or more committees, each committee to consist of one or
more directors of the corporation, which, to the extent provided in the
-15-
<PAGE>
resolution or resolutions or in the By-laws of the corporation, but subject to
any limitations specifically imposed by the laws of Delaware, shall have and may
exercise all the powers and authority of the Board of Directors in the
management of the business and affairs of the corporation and may authorize the
seal of the corporation to be affixed to all papers which may require it.
7. No contract, act or transaction of the corporation with any
person, firm or corporation shall be affected or invalidated by reason of the
fact that any director or officer of the corporation is a party to or is
interested in such contract, act or transaction, or in any way connected with
such person, firm or corporation, provided that such interest or connection
shall have been disclosed or known to the corporation. Any director of the
corporation having any such interest or connection may, nevertheless, be counted
in determining the existence of a quorum at any meeting of the Board of
Directors or a committee which shall authorize any such contract, act or
transaction and may vote thereon with full force and effect. No such officer or
director nor any such person, firm or corporation in or with which such director
or officer is connected shall be liable to account to the corporation for any
profit realized from or through any such contract, act or transaction.
8. (i) Except as otherwise provided in this Certificate of
Incorporation or the General Corporation law of the State of Delaware, the
business and affairs of the corporation shall be managed by or under the
direction of a Board of Directors consisting of such number of members as may be
fixed, subject to the rights of the holders of any series of preferred stock
then outstanding, from time to time, by the affirmative vote of the majority of
the members of the Board of Directors of the corporation, but not less than the
minimum number authorized by the State of Delaware. The directors shall be
divided into three classes, as nearly equal in number as possible. The
directors serving at such time shall designate individual directors as the
initial members of such classes, with the term of office of the first class to
expire at the 1997 Annual Meeting of Stockholders, the term of office of the
second class to expire at the 1998 Annual Meeting of Stockholders and the
-16-
<PAGE>
term of office of the third class to expire at the 1999 Annual Meeting of
Stockholders. At each Annual Meeting of Stockholders following the initial
classification and election, directors elected to succeed those directors whose
terms expire shall be elected for a term of office to expire at the third
succeeding Annual Meeting of Stockholders after their election.
(ii) Subject to the rights of the holders of any series of preferred
stock then outstanding, any director, or the entire Board of Directors, may be
removed from office at any time, but only for cause and only by the affirmative
vote of the holders of at least a majority of the voting power of all of the
shares of the corporation entitled to vote for the election of directors. For
purposes of this Article 8, cause for removal shall be construed to exist only
if the director whose removal is proposed has been convicted of a felony by a
court of competent jurisdiction or has been adjudged by a court of competent
jurisdiction to be liable for negligence or misconduct in the performance of his
duty to the corporation in a matter of substantial importance to the
corporation.
(iii) Subject to the rights of the holders of any series of preferred
stock then outstanding, newly created directorships resulting from any increase
in the authorized number of directors or any vacancies in the Board of Directors
resulting from death, resignation, retirement, disqualification, removal from
office or other cause shall be filled by a majority vote of the directors then
in office, and directors so chosen shall hold office for a term expiring at the
Annual Meeting of Stockholders at which the term of the class to which they have
been elected expires.
9. The corporation reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of Incorporation or any
-17-
<PAGE>
amendment thereto in the manner now or hereafter prescribed by the laws of the
State of Delaware, and all rights conferred on the stockholders hereunder are
granted subject to that reservation.
10. The duration of the corporation shall be perpetual.
11. A director of the corporation shall not be personally liable to
the corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the Delaware General Corporation
Law as the same exists or hereafter may be amended or (iv) for any transaction
from which the director derived an improper personal benefit. If the Delaware
General Corporation Law hereafter is amended to authorize the further
elimination or limitation of the liability of directors, then, in addition to
the limitation on personal liability provided herein, the liability of a
director of the corporation shall be limited to the fullest extent permitted by
the amended Delaware General Corporation Law. Any repeal or modification of this
paragraph by the stockholders of the corporation shall be prospective only, and
shall not adversely affect any limitation on the personal liability of a
director of the corporation existing at the time of such repeal or modification.
12. No action required to be taken or which may be taken at any
annual or special meeting of stockholders of the corporation may be taken
without a meeting, and the power of stockholders of the corporation to take any
such action by means of a consent or consents in writing, without a meeting, is
specifically denied.
-18-
<PAGE>
IN WITNESS WHEREOF, Roper Industries, Inc. has caused this Restated
Certificate of Incorporation to be signed by Derrick N. Key, its President, and
Shanler D. Cronk, its Secretary, this 10th day of March 1997.
/s/ Derrick N. Key
-------------------------
Derrick N. Key,
President
/s/ Shanler D. Cronk
- -------------------------
Shanler D.Cronk, Secretary
-19-
<PAGE>
EXHIBIT A
CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS
OF SERIES A PREFERRED STOCK
of
ROPER INDUSTRIES, INC.
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
We, Derrick N. Key, President, and John N. Marden, Secretary, of Roper
Industries, Inc., a corporation organized and existing under the General
Corporation Law of the State of Delaware, in accordance with the provisions of
Section 103 thereof, DO HEREBY CERTIFY:
That pursuant to the authority conferred upon the Board of Directors
by the Certificate of Incorporation of the said Corporation, the said Board of
Directors on January 8, 1996, adopted the following resolution creating a series
of twenty five thousand (25,000) shares of Preferred Stock designated as Series
A Preferred Stock:
RESOLVED, that pursuant to the authority vested in the Board of
Directors of the Corporation by the Certificate of Incorporation, the
Board of Directors does hereby provide for the issue of a series of
Preferred Stock, $.01 par value, of the Corporation, to be designated
"Series A Preferred Stock" (hereinafter referred to as the "Series A
Preferred Stock"), and does hereby fix and herein state and express
the designations, powers, preferences and relative and other special
-20-
<PAGE>
rights and the qualifications, limitations and restrictions thereof,
as follows:
Section 1. Designation and Amount. The shares of such series shall
----------------------
be designated as "Series A Preferred Stock" and the number of shares initially
constituting such series shall be twenty five thousand (25,000); provided,
however, that, if more than a total of twenty five thousand (25,000) shares of
Series A Preferred Stock shall be issuable upon the exercise of the Rights (the
"Rights") issued pursuant to the Rights Agreement dated as of January
8, 1996 between the Corporation and SunTrust Bank, Atlanta, as Rights Agent, the
Board of Directors of the Corporation, pursuant to Section 151(g) of the General
Corporation Law of the State of Delaware, shall direct by resolution or
resolutions that a certificate be properly executed, acknowledged, filed and
recorded, in accordance with the provisions of Section 103 thereof, providing
for the total number of shares of Series A Preferred Stock authorized to be
issued to be increased (to the extent the Certificate of Incorporation then
permits) to the largest number of whole shares (rounded up to the nearest whole
number) issuable upon exercise of the Rights.
Section 2. Dividends and Distributions.
---------------------------
(A) Subject to the prior and superior rights of the holders of any
shares of any series of Preferred Stock ranking prior and superior to the shares
of Series A Preferred Stock with respect to dividends, the holders of shares of
Series A Preferred Stock shall be entitled to receive, when, as and if declared
by the Board of Directors out of funds legally available for the purpose,
quarterly dividends payable in cash on the last day of each fiscal quarter in
each year or on such dates as the Board of Directors shall approve (each such
date being referred to herein as a "Quarterly Dividend Payment Date"),
commencing on the first Quarterly Dividend Payment Date after the first issuance
of a share or fraction of a share of Series A Preferred Stock, in an amount per
share of Series A Preferred Stock (rounded to the nearest cent) equal to the
-21-
<PAGE>
greater of (i) $.01 or (ii) subject to the provision for adjustment hereinafter
set forth, one thousand (1,000) times the aggregate per share amount of all cash
dividends, and one thousand (1,000) times the aggregate per share amount
(payable in kind) of all non-cash dividends or other distributions other than a
dividend payable in shares of Common Stock or a subdivision of the outstanding
shares of Common Stock (by reclassification or otherwise), declared on the
Common Stock, par value $.01 per share, of the Corporation (the "Common Stock")
since the immediately preceding Quarterly Dividend Payment Date, or, with
respect to the first Quarterly Dividend Payment Date, since the first issuance
of any share or fraction of a share of Series A Preferred Stock. If the
Corporation shall at any time after January 8, 1996 (the "Rights Dividend
Declaration Date") (i) declare any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock into a larger number
of shares, or (iii) combine the outstanding Common Stock into a smaller number
of shares, then in each such case the amount to which holders of shares of
Series A Preferred Stock were entitled immediately prior to such event under
clause (b) of the preceding sentence shall be adjusted by multiplying such
amount by a fraction, the numerator of which is the number of shares of Common
Stock outstanding immediately after such event and the denominator of which is
the number of shares of Common Stock that were outstanding immediately prior to
such event.
(B) The Corporation shall declare a dividend or distribution on the
Series A Preferred Stock as provided in paragraph (A) above immediately after it
declares a dividend or distribution on the Common Stock (other than a dividend
payable in shares of Common Stock); provided that, if no dividend or
distribution shall have been declared on the Common Stock during the period
between any Quarterly Dividend Payment Date and the next subsequent Quarterly
Dividend Payment Date, a dividend of $.01 per share on the Series A Preferred
Stock shall nevertheless be payable on such subsequent Quarterly Dividend
Payment Date.
-22-
<PAGE>
(C) Dividends shall begin to accrue and be cumulative on outstanding
shares of Series A Preferred Stock from the Quarterly Dividend Payment Date next
preceding the date of issue of such shares of Series A Preferred Stock, unless
the date of issue of such shares is prior to the record date for the first
Quarterly Dividend Payment Date, in which case dividends on such shares shall
begin to accrue from the date of issue of such shares, or unless the date of
issue is a Quarterly Dividend Payment Date or is a date after the record date
for the determination of holders of shares of Series A Preferred Stock entitled
to receive a quarterly dividend and before such Quarterly Dividend Payment Date,
in either of which events such dividends shall begin to accrue and be cumulative
from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall
not bear interest. Dividends paid on the shares of Series A Preferred Stock in
an amount less than the total amount of such dividends at the time accrued and
payable on such shares shall be allocated pro rata on a share-by-share basis
among all such shares at the time outstanding. The Board of Directors may fix a
record date for the determination of holders of shares of Series A Preferred
Stock entitled to receive payment of a dividend or distribution declared
thereon, which record date shall be no more than 30 days prior to the date fixed
for the payment thereof.
Section 3. Voting Rights. The holders of shares of Series A
-------------
Preferred Stock shall have the following voting rights:
(A) Subject to the provision for adjustment hereinafter set forth,
each share of Series A Preferred Stock shall entitle the holder thereof to one
thousand (1000) votes on all matters submitted to a vote of the shareholders of
the Corporation. If the Corporation shall at any time after the Rights Dividend
Declaration Date (i) declare any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock into a larger number
of shares, or (iii) combine the outstanding Common Stock into a smaller number
of shares, then in each such case the number of votes per share to which holders
of shares of Series A Preferred Stock were entitled immediately prior to such
-23-
<PAGE>
event shall be adjusted by multiplying such number by a fraction the numerator
of which is the number of shares of Common Stock outstanding immediately after
such event and the denominator of which is the number of shares of Common Stock
that were outstanding immediately prior to such event.
(B) Except as otherwise provided herein or by law, the holders of
shares of Series A Preferred Stock and the holders of shares of Common Stock
shall vote together as one class on all matters submitted to a vote of
shareholders of the Corporation.
(C) (i) If at any time dividends on any Series A Preferred
Stock shall be in arrears in an amount equal to six (6) quarterly dividends
thereon, the occurrence of such contingency shall mark the beginning of a period
(herein called a "default period") which shall extend until such time when all
accrued and unpaid dividends for all previous quarterly dividend periods and for
the current quarterly dividend period on all shares of Series A Preferred Stock
then outstanding shall have been declared and paid or set apart for payment.
During each default period, all holders of Preferred Stock (including holders of
the Series A Preferred Stock) with dividends in arrears in an amount equal to
six (6) quarterly dividends thereon, voting as a class, irrespective of series,
shall have the right to elect two (2) Directors.
(ii) During any default period, such voting right of the holders of
Series A Preferred Stock may be exercised initially at a special meeting called
pursuant to subparagraph (iii) of this Section 3(C) or at any annual meeting of
shareholders, and thereafter at annual meetings of shareholders, provided that
neither such voting right nor the right of the holders of any other series of
Preferred Stock, if any, to increase, in certain cases, the authorized number of
Directors shall be exercised unless the holders of ten percent (10%) in number
of shares of Preferred Stock
-24-
<PAGE>
outstanding shall be present in person or by proxy. The absence of a quorum of
the holders of Common Stock shall not affect the exercise by the holders of
Preferred Stock of such voting right. At any meeting at which the holders of
Preferred Stock shall exercise such voting right initially during an existing
default period, they shall have the right, voting as a class, to elect Directors
to fill such vacancies, if any, in the Board of Directors as may then exist up
to two (2) Directors or, if such right is exercised at an annual meeting, to
elect two (2) Directors. If the number which may be so elected at any special
meeting does not amount to two (2) Directors, the holders of the Preferred Stock
shall have the right to make such increase in the number of Directors as shall
be necessary to permit the election by them of the two (2) Directors. After the
holders of the Preferred Stock shall have exercised their right to elect
Directors in any default period and during the continuance of such period, the
number of Directors shall not be increased or decreased except by vote of the
holders of Preferred Stock as herein provided or pursuant to the rights of any
equity securities ranking senior to or pari passu with the Series A Preferred
---- -----
Stock.
(iii) Unless the holders of Preferred Stock shall, during an existing
default period, have previously exercised their right to elect Directors, the
Board of Directors may order, or any shareholder or shareholders owning in the
aggregate not less than ten percent (10%) of the total number of shares of
Preferred Stock outstanding, irrespective of series, may request, the calling of
special meeting of the holders of Preferred Stock, which meeting shall thereupon
be called by the President, a Vice-President or the Secretary of the
Corporation. Notice of such meeting and of any annual meeting at which holders
of Preferred Stock are entitled to vote pursuant to this paragraph (C)(iii)
shall be given to each holder of record of Preferred Stock by mailing a copy of
such notice to him at his last address as the same appears on the books of the
Corporation. Such meeting shall be called for a time not earlier than twenty
(20) days and not later than sixty (60) days after such order or request or in
default of the calling of such meeting within sixty (60) days after such order
-25-
<PAGE>
or request, such meeting may be called on similar notice by any shareholder or
shareholders owning in the aggregate not less than ten percent (10%) of the
total number of shares of Preferred Stock outstanding. Notwithstanding the
provisions of this paragraph (C)(iii), no such special meeting shall be called
during the period within sixty (60) days immediately preceding the date fixed
for the next annual meeting of the shareholders.
(iv) In any default period, the holders of Common Stock, and other
classes of stock of the Corporation if applicable, shall continue to be entitled
to elect the whole number of Directors until the holders of Preferred Stock
shall have exercised their right to elect two (2) Directors voting as a class,
after the exercise of which right (x) the Directors so elected by the holders of
Preferred Stock shall continue in office until their successors shall have been
elected by such holders or until the expiration of the default period, and (y)
any vacancy in the Board of Directors may (except as provided in paragraph
(C)(ii) of this Section 3) be filled by vote of a majority of the remaining
Directors theretofore elected by the holders of the class of stock which elected
the Director whose office shall have become vacant. References in this
paragraph (C) to Directors elected by the holders of a particular class of stock
shall include Directors elected by such Directors to fill vacancies as provided
in clause (y) of the foregoing sentence.
(v) Immediately upon the expiration of a default period, (x) the right
of the holders of Preferred Stock as a class to elect Directors shall cease, (y)
the term of any Directors elected by the holders of Preferred Stock as a class
shall terminate, and (z) the number of Directors shall be such number as may be
provided for in the Certificate of Incorporation or By-laws irrespective of any
increase made pursuant to the provisions of paragraph (C)(ii) of this Section 3
(such number being subject, however, to change thereafter in any manner provided
by law or in the Certificate of Incorporation or By-laws). Any vacancies in the
Board of Directors effected by the provisions of clauses (y) and (z) in the
-26-
<PAGE>
preceding sentence may be filled by a majority of the remaining Directors, even
though less than a quorum.
(D) Except as set forth herein, holders of Series A Preferred Stock
shall have no special voting rights and their consent shall not be required
(except to the extent they are entitled to vote with holders of Common Stock as
set forth herein) for taking any corporate action.
Section 4. Certain Restrictions.
--------------------
(A) Whenever quarterly dividends or other dividends or distributions
payable on the Series A Preferred Stock as provided in Section 2 are in arrears,
thereafter and until all accrued and unpaid dividends and distributions, whether
or not declared, on shares of Series A Preferred Stock outstanding shall have
been paid in full, the Corporation shall not
(i) declare or pay dividends on, make any other
distributions on, or redeem or purchase or otherwise acquire for
consideration any shares of stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the
Series A Preferred Stock;
(ii) declare or pay dividends on or make any other
distributions on any shares of stock ranking on a parity (either
as to dividends or upon liquidation, dissolution or winding up)
with the Series A Preferred Stock, except dividends paid ratably
on the Series A Preferred Stock and all such parity stock on
which dividends are payable or in arrears in proportion to the
total amounts to which the holders of all such shares are then
entitled;
-27-
<PAGE>
(iii) redeem or purchase or otherwise acquire for
consideration shares of any stock ranking on a parity (either as
to dividends or upon liquidation, dissolution or winding up) with
the Series A Preferred Stock, provided that the corporation may
at any time redeem, purchase or otherwise acquire shares of any
such parity stock in exchange for shares of any stock of the
Corporation ranking junior (either as to dividends or upon
dissolution, liquidation or winding up) to the Series A Preferred
Stock; or
(iv) purchase or otherwise acquire for consideration any
shares of Series A Preferred Stock, or any shares of stock
ranking on a parity with the Series A Preferred Stock, except in
accordance with a purchase offer made in writing or by
publication (as determined by the Board of Directors) to all
holders of such shares upon such terms as the Board of Directors,
after consideration of the respective annual dividend rates and
other relative rights and preferences of the respective series
and classes, shall determine in good faith will result in fair
and equitable treatment among the respective series or classes.
-28-
<PAGE>
(B) The Corporation shall not permit any subsidiary of the Corporation
to purchase or otherwise acquire for consideration any shares of stock of the
Corporation unless the Corporation could, under paragraph (A) of this Section 4,
purchase or otherwise acquire such shares at such time and in such manner.
Section 5. Reacquired Shares. Any shares of Series A Preferred Stock
-----------------
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and cancelled promptly after the acquisition thereof. All such
shares shall upon their cancellation become authorized but unissued shares of
Preferred Stock and may be reissued as part of a new series of Preferred Stock
to be created by resolution or resolutions of the Board of Directors, subject to
the conditions and restrictions on issuance set forth herein.
Section 6. Liquidation, Dissolution or Winding Up.
--------------------------------------
(A) Upon any liquidation (voluntary or otherwise), dissolution or
winding up of the Corporation, no distribution shall be made to the holders of
shares of stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A Preferred Stock unless, prior
thereto, the holders of shares of Series A Preferred Stock shall have received
$10 per share, plus an amount equal to accrued and unpaid dividends and
distributions thereon, whether or not declared, to the date of such payment (the
"Series A Liquidation Preference"). Following the payment of the full amount of
the Series A Liquidation Preference, no additional distributions shall be made
to the holders of shares of Series A Preferred Stock unless, prior thereto, the
holders of shares of Common Stock shall have received an amount per share (the
"Common Adjustment") equal to the quotient obtained by dividing (i) the Series A
Liquidation Preference by (ii) one thousand (1000) (as appropriately adjusted as
set forth in subparagraph C below to reflect such events as stock splits, stock
dividends and recapitalizations with respect to the
-29-
<PAGE>
Common Stock) (such number in clause (ii), the "Adjustment Number"). Following
the payment of the full amount of the Series A Liquidation Preference and the
Common Adjustment in respect of all outstanding shares of Series A Preferred
Stock and Common Stock, respectively, holders of Series A Preferred Stock and
holders of shares of Common Stock shall receive their ratable and proportionate
share of the remaining assets to be distributed in the ratio of the Adjustment
Number to 1 with respect to such Preferred Stock and Common Stock, on a per
share basis, respectively.
(B) In the event, however, that there are not sufficient assets
available to permit payment in full of the Series A Liquidation Preference and
the liquidation preferences of all other series of preferred stock, if any,
which rank on a parity with the Series A Preferred Stock, then such remaining
assets shall be distributed ratably to the holders of such parity shares in
proportion to their respective liquidation preferences. In the event, however,
that there are not sufficient assets available to permit payment in full of the
Common Adjustment, then such remaining assets shall be distributed ratably to
the holders of Common Stock.
(C) If the Corporation shall at any time after the Rights Dividend
Declaration Date (i) declare any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock into a larger number
of shares, or (iii) combine the outstanding Common Stock into a smaller number
of shares, then in each such case the Adjustment Number in effect immediately
prior to such event shall be adjusted by multiplying such Adjustment Number by a
fraction the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to such
event.
Section 7. Consolidation, Merger, etc. If the Corporation shall
---------------------------
enter into any consolidation, merger, combination or other transaction in which
the shares of Common Stock are exchanged for or changed into other stock or
-30-
<PAGE>
securities, cash and/or any other property, then in any such case the shares of
Series A Preferred Stock shall at the same time be similarly exchanged or
changed in an amount per share (subject to the provision for adjustment
hereinafter set forth) equal to one thousand (1000) times the aggregate amount
of stock, securities, cash and/or any other property (payable in kind), as the
case may be, into which or for which each share of Common Stock is changed or
exchanged. In the event the Corporation shall at any time
-31-
<PAGE>
after the Rights Dividend Declaration Date (i) declare any dividend on Common
Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common
Stock into a larger number of shares, or (iii) combine the outstanding Common
Stock into a smaller number of shares, then in each such case the amount set
forth in the preceding sentence with respect to the exchange or change of shares
of Series A Preferred Stock shall be adjusted by multiplying such amount by a
fraction the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to such
event.
Section 8. No Redemption. The shares of Series A Preferred Stock
-------------
shall not be redeemable.
Section 9. Ranking. The Series A Preferred Stock shall rank junior
-------
to all other series of the Corporation's Preferred Stock as to the payment of
dividends and the distribution of assets, unless the terms of any such series
shall provide otherwise.
Section 10. Amendment. The Certificate of Incorporation of the
---------
Corporation shall not be further amended in any manner which would materially
alter or change the powers, preferences or special rights of the Series A
Preferred Stock so as to affect them adversely without the affirmative vote of
the holders of a majority or more of the outstanding shares of Series A
Preferred Stock, voting separately as a class.
-32-
<PAGE>
Section 11. Fractional Shares. Series A Preferred Stock may be
-----------------
issued in fractions of a share which shall entitle the holder, in proportion to
such holder's fractional shares, to exercise voting rights, receive dividends,
participate in distributions and to have the benefit of all other rights of
holders of Series A Preferred Stock.
IN WITNESS WHEREOF, we have executed and subscribed this Certificate
and do affirm the foregoing as true under the penalties of perjury as of the 8th
day of January.
/s/ Derrick N. Key
------------------------------
Derrick N. Key,
President
Attest:
/s/ John N. Marden
- -------------------------
John N. Marden, Secretary
-33-
<PAGE>
EXHIBIT 10.02
ROPER INDUSTRIES, INC.
1991 STOCK OPTION PLAN
(AS AMENDED)
I. PURPOSES
--------
Roper Industries, Inc. (the "Company") desires to afford certain
directors, key employees, consultants and other employees of the Company and its
subsidiaries who are responsible for the continued growth of the Company an
opportunity to acquire a proprietary interest in the Company, and thus to create
in such persons interest in and a greater concern for the welfare of the
Company.
The stock options offered pursuant to this 1991 Stock Option Plan (the
"Plan") are a matter of separate inducement and are not in lieu of any salary or
other compensation for services.
The Company, by means of the Plan, seeks to retain the services of
persons now holding employment positions and to secure the services of persons
capable of filling such positions.
The options granted under the Plan may be designated as either
incentive stock options ("Incentive Options") within the meaning of Section 422
of the Internal Revenue Code of 1986, as amended (the "Code"), or options that
do not meet the requirements for Incentive Options ("Non-Qualified Options") but
the Company makes no warranty as to the qualification of any option as an
Incentive Option.
During any fiscal year while the Plan remains in effect, no more than
100,000 shares in the aggregate may be subject to options granted to any single
employee of the Company or its subsidiaries.
II. AMOUNT OF STOCK SUBJECT TO THE PLAN
-----------------------------------
The total number of shares of common stock of the Company which may be
purchased pursuant to the exercise of Options granted under the Plan shall not
exceed, in the aggregate, 3,500,000 shares of the authorized common stock, $.01
par value per share, of the Company (the "Shares").
Shares which may be acquired under the Plan may be either authorized
but unissued Shares or Shares of issued stock held in the Company's treasury, or
both, at the discretion of the Company. If and to the extent that options
granted under the Plan expire or terminate without having been exercised, new
options may be granted with respect to the Shares covered by such expired or
terminated Options, provided that the grant and the terms of such new options
shall in all respects comply with the provisions of the Plan.
Except as provided in Article XX, the Company may, from time to time
during
<PAGE>
the period beginning December 18, 1991 (the "Effective Date"), and ending
December 17, 2001 (the "Termination Date"), grant options to certain directors,
key employees, consultants and employees under the terms hereinafter set forth.
III. ADMINISTRATION
--------------
The Board of Directors of the Company (the "Board of Directors") shall
designate from among its members an option committee (the "Committee") to
administer the Plan. The Committee shall be comprised of at least two (2)
members of the Board of Directors. The Board of Directors shall consider the
advisability with the disinterested standards contained, respectively, in Code
Section 162(m) and applicable Treasury regulations promulgated thereunder and in
Rule 12b-3 when appointing members to the Committee. A majority of the members
of the Committee shall constitute a quorum, and the act of a majority of the
members of the Committee shall be the act of the Committee. Any member of the
Committee may be removed at any time, either with or without cause, by
resolution adopted by a majority of the Board of Directors, and any vacancy on
the Committee may at any time be filled by resolution adopted by a majority of
the Board of Directors.
Subject to the express provisions of the Plan, the Board of Directors
or the Committee, as the case may be, shall have authority, in its discretion,
to determine the persons to whom options shall be granted, the time when such
options shall be granted, the number of Shares which shall be subject to each
option, the purchase price of each share which shall be subject to each option,
the period(s) during which such options shall be exercisable (whether in whole
or in part) and the other terms and provisions thereof. In determining the
employees to whom options shall be granted and the number of Shares for which
options shall be granted to each person, the Board of Directors or the
Committee, as the case may be, shall consider the length of service, the amount
of earnings, and the responsibilities and duties of such person.
Subject to the express provisions of the Plan, the Board of Directors
or the Committee, as the case may be, also shall have authority to construe the
Plan and options granted thereunder, to amend the Plan and options granted
thereunder, to prescribe, amend and rescind rules and regulations relating to
the Plan, to determine the terms and provisions of the respective options (which
need not be identical) and to make all other determinations necessary or
advisable for administering the Plan. The Board of Directors or the Committee,
as the case may be, also shall have the authority to require, in its discretion,
as a condition of the granting of any such option, that the optionee agree (i)
not to sell or otherwise dispose of Shares acquired pursuant to the option for a
period of six (6) months following the date of acquisition of such Shares and
(ii) that in the event of termination of service of the optionee with the
Company or any subsidiary of the Company, other than as a result of dismissal
without cause, such optionee will not, for a period to be fixed at the time of
the grant of the option, enter into any other employment or participate directly
or indirectly in any other business or enterprise which is competitive with the
business of the Company or any subsidiary of the company, or enter into any
employment in which such optionee will be called upon to utilize special
knowledge obtained through service with the Company or any subsidiary of the
Company.
The determination of the Board of Directors or the Committee as the
case may be, on matters referred to in this Article III shall be conclusive.
<PAGE>
The Board of Directors or the Committee, as the case may be, may
employ such legal counsel, consultants and agents as it may deem desirable for
the administration of the Plan and may rely upon any opinion received from any
such counsel or consultant and any computation received from any such consultant
or agent. Expenses incurred by the Board of Directors or the Committee in the
engagement of such counsel, consultant or agent shall be paid by the Company.
No member or former member of the Committee or of the Board of Directors shall
be liable for any action or determination made in good faith with respect to the
Plan or any option granted hereunder.
IV. ELIGIBILITY
-----------
Options may be granted only to directors, key employees, consultants
and employees of the Company and its subsidiaries who are not members of the
Committee.
An Incentive Option shall not be granted to any person who, at the
time the option is granted, owns stock of the Company or any subsidiary or
parent of the Company possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company or of any
subsidiary or parent of the Company unless (i) the option price is at least one
hundred ten percent (110%) of the fair market value per share (as defined in
Article VI) of the stock subject to the option and (ii) the option is not
exercisable after the fifth anniversary of the date of grant of the option. In
determining stock ownership of an employee, the rules of Section 424(d) of the
Code shall be applied, and the Board of Directors or the Committee, as the case
may be, may rely on representations of fact made to it by the employee and
believed by it to be true.
V. MAXIMUM ALLOTMENT OF INCENTIVE OPTIONS
--------------------------------------
If the aggregate fair market value of stock with respect to which
Incentive Options are exercisable for the first time by an employee during any
calendar year (under all stock option plans of the Company and any parent or any
subsidiary of the Company) exceeds $ 1 00,000, any options which otherwise
qualify as Incentive Options, to the extent of the excess, will be treated as
Non-Qualified Options.
VI. OPTION PRICE AND PAYMENT
------------------------
The price per Share under any option granted hereunder shall be such
amount as the Board of Directors or the Committee, as the case may be, shall
determine but, in the case of an Incentive Option, such price shall not be less
than one hundred percent (100%) of the fair market value of the Shares subject
to such option, as determined in good faith by the Board of Directors or the
Committee, as the case may be, at the date the option is granted.
If the Shares are listed on a national securities exchange in the
United States on the date any option is granted, the fair market value per Share
shall be deemed to be the average of the high and low quotations at which such
Shares are sold on such national securities
<PAGE>
exchange in the United States on the date next preceding the date upon which the
option is granted, but if the Shares are not traded on such date, or such
national securities exchange is not open for business on such date, the fair
market value per Share shall be determined as of the closest preceding date on
which such exchange shall have been open for business and the Shares were
traded. If the Shares are listed on more than one national securities exchange
in the United States on the date any such option is granted, the Committee shall
determine which national securities exchange shall be used for the purpose of
determining the fair market value per Share. If the Shares are not listed on a
national securities exchange, but are reported on the National Association of
Securities Dealers Automated Quotation System ("NASDAQ"), the fair market value
per share shall be deemed to be the average of the high bid and low asked prices
on the date next preceding the date upon which the option is granted as reported
by NASDAQ.
For purposes of this Plan, the determination by the Board of Directors
or the Committee, as the case may be, of the fair market value of a Share shall
be conclusive.
Upon the exercise of an option granted hereunder, the Company shall
cause the purchased Shares to be issued only when it shall have received the
full purchase price for the Shares in cash; provided, however, that in lieu of
cash, the holder of an option may, if and to the extent the terms of such option
so provide and to the extent permitted by applicable law, exercise an option in
whole or in part, by delivering to the Company shares of common stock of the
Company (in proper form for transfer and accompanied by all requisite stock
transfer tax stamps or cash in lieu thereof) owned by such holder having a fair
market value equal to the cash exercise price applicable to that portion of the
option being exercised by the delivery of such Shares. The fair market value of
the stock so delivered shall be determined as of the date immediately preceding
the date on which the option is exercised, or as may be required in order to
comply with or to conform to the requirements of any applicable laws or
regulations.
VII. USE OF PROCEEDS
---------------
The cash proceeds of the sale of Shares subject to the options granted
hereunder are to be added to the general funds of the Company and used for its
general corporate purposes as the Board of Directors shall determine,
VIII. LOANS, LOAN GUARANTEES AND INSTALLMENT PAYMENTS
-----------------------------------------------
In order to assist an optionee (including an optionee who is an
officer or director of the Company or any subsidiary of the Company) in the
acquisition of shares of Common Stock pursuant to options granted under the
Plan, the Board of Directors or the Committee, as the case may be, may
authorize, at either the time of the grant of an option or the time of the
acquisition of Common Stock pursuant to the option; (i) the extension of a loan
to the optionee by the Company, (ii) the payment by the optionee of the purchase
price, if any, for the Common Stock in installments, or (iii) the guarantee by
the Company or a subsidiary of the Company of a loan obtained by the optionee
from a third party. The terms of any loans, guarantees or installment payments,
including the interest rate and terms of repayment, will be subject to the
discretion of the Board of Directors or the Committee, as the case may be.
Loans, installment payments and guarantees may be granted without security, the
maximum credit available being
<PAGE>
the purchase price, if any, of the Common Stock acquired plus the maximum
federal and state income and employment tax liability which may be incurred in
connection with the acquisition. In no event, however, may the amount of any
loan exceed the amounts allowable to the loan to such individual for the
purposes stated hereunder as provided by any regulation of the United States
Treasury or other State or Federal statute.
IX. TERM OF OPTIONS AND LIMITATIONS ON THE RIGHT OF EXERCISE
--------------------------------------------------------
Unless the Board of Directors or the Committee, as the case may be,
shall determine otherwise (in which event the instrument evidencing the option
granted hereunder shall so specify), any option granted hereunder shall be
exercisable during a period of not more than ten (10) years from the date of
grant of such option.
The Board of Directors or the Committee, as the case may be, shall
have the right to accelerate, in whole or in part, from time to time,
conditionally or unconditionally, rights to exercise any option granted
hereunder.
To the extent that an option is not exercised within the period of
exercisability specified herein, it shall expire as to the then unexercised
part.
X. EXERCISE OF OPTIONS
-------------------
Options granted under the Plan shall be exercised by the optionee as
to all or part of the Shares covered thereby by the giving of written notice of
the exercise thereof to the Corporate Secretary of the Company and the stock
transfer agent for the Company at the principal business office of the Company,
specifying the number of Shares to be purchased and specifying a business day
not more than fifteen (I 5) days from the date such notice is given, for the
payment of the purchase price against delivery of the Shares being purchased.
Subject to the terms of Articles XV, XVI, XVII and XVIII or any other terms or
conditions of any options grant deemed advisable in the administration of the
grant by the Board of Directors or the Committee, as the case may be, the
Company shall cause certificates for the Shares so purchased to be delivered to
the optionee, against payment of the full purchase price, on the date specified
in the notice of exercise.
<PAGE>
XI. NONTRANSFERABILITY OF OPTIONS
-----------------------------
An option granted hereunder shall not be transferable, whether by
operation of law or otherwise, other than by will or the laws of descent and
distribution, and any option granted hereunder shall be exercisable, during the
lifetime of the holder, only by such holder.
XII. TERMINATION OF EMPLOYMENT
-------------------------
Upon termination of employment of any employee with the Company or any
subsidiary of the Company any option previously granted to such employee, unless
otherwise specified by the Board of Directors or the Committee, as the case may
be, shall, to the extent not theretofore exercised, terminate and become null
and void, provided that:
(a) if the employee shall die while in the employ of the Company or
any subsidiary of the Company or during either the three (3) month or one
(1) year period, whichever is applicable, specified in clause (b) below at
a time when such employee was entitled to exercise an option as herein
provided, the legal representative of such employee, or such person who
acquired such option by bequest or inheritance or by reason of the death of
the employee, may, not later than one (1) year from the date of death,
exercise such option, to the extent not theretofore exercised, in respect
of any or all of such number of Shares as specified by the Board of
Directors or the Committee, as the case may be, in such option grant; and
(b) if the employment of any employee to whom such option shall have
been granted shall terminate by reason of the employee's retirement (at
such age or upon such conditions as shall be specified by the Board of
Directors or the Committee, as the case may be), disability (as described
in Section 22(e)(3) of the Code) or dismissal by the employer other than
for cause (as defined below), and while such employee is entitled to
exercise such option as herein provided, such employee shall have the right
to exercise such option so granted, to the extent not theretofore
exercised, in respect of any or all of such number of Shares as specified
by the Board of Directors or the Committee, as the case may be, in such
option at any time up to and including (i) three (3) months after the date
of such termination of employment in the case of termination by reason of
retirement or dismissal other than for cause and (ii) one (1) year after
the date of termination of employment in the case of termination by reason
of disability.
In no event, however, shall any person be entitled to exercise any option
after the expiration of the period of exercisability of such option as specified
therein.
If an employee voluntarily terminates his or her employment, or is
discharged for cause, any options granted hereunder and any interest of the
employee in such option shall, unless otherwise specified by the Board of
Directors or the Committee, as the case may be, in the option, forthwith
terminate with respect to any unexercised portion thereof.
Notwithstanding any other provision of this Article XII, if the employment
of any employee with the Company or any subsidiary of the Company is terminated,
whether voluntarily or involuntarily, within a one-year period following a
change in the ownership or
<PAGE>
effective control of the Company (within the meaning of Section 28OG(b)(2)(A)(i)
and while such employee is entitled to exercise an option as herein provided,
other than a termination of such employment by the Company or any subsidiary of
the Company for cause, such employee shall have the right to exercise all or any
portion of such option at any time up to and including three (3) months after
the date of such termination of employment, at which time such option shall
cease to be exercisable.
If an option granted hereunder shall be exercised by the legal
representative of a deceased employee or former employee, or by a person who
acquired an option granted hereunder by bequest or inheritance or by reason of
the death of any employee or former employee, written notice of such exercise
shall be accompanied by a certified copy of letters testamentary or equivalent
proof of the right of such legal representative or other person to exercise such
option.
For the purposes of the Plan, the term "for cause" shall mean (i) with
respect to an employee who is a party to a written agreement with, or,
alternatively, participates in a compensation or benefit plan of the Company or
any subsidiary of the Company, which agreement or plan contains a definition of
"for cause or cause" (or words of like import) for purposes of termination of
employment thereunder by the Company or such subsidiary of the Company, "for
cause" or "cause" as defined in the most recent of such agreements or plans, or
(ii) in all other cases, as determined by the Committee or the Board of
Directors, as the case may be, in its sole discretion, (a) the willful
commission by an employee of a criminal or other act that causes or will
probably cause substantial economic damage to the Company or a substantial
injury to the business reputation of the Company; (b) the commission by an
employee of an act of fraud in the performance of such employee's duties on
behalf of the Company or any subsidiary of the Company; or (c) the continuing
willful failure of an employee to perform the duties of such employee to the
Company or any subsidiary of the Company (other than such failure resulting from
the employee's incapacity due to physical or mental illness) after written
notice thereof (specifying the particulars thereof in reasonable detail) and a
reasonable opportunity to be heard and cure such failure are given to the
employee by the Board of Directors or the Committee, as the case may be. For
purposes of the Plan, no act, or failure to act, on the employee's part shall be
considered "willful" unless done or omitted to be done by the employee not in
good faith and without reasonable belief that the employee's action or omission
was in the best interest of the Company or a subsidiary of the Company.
For the purposes of the Plan, an employment relationship shall be deemed to
exist between an individual and a corporation if, at the time of the
deter mination, the individual was an employees or such corporation for purposes
of Section 422(a) of the Code. If an individual is on military, sick leave or
other bona fide leave of absence such individual shall be considered an
"employee" for purposes of the exercise of an option and shall be entitled to
exercise such option during such leave if the period of such leave does not
exceed 90 days, or, if longer, so long as the individual's right to reemployment
with the Company is guaranteed either by statute or by contract. If the period
of leave exceeds ninety (90) days, the employment relationship shall be deemed
to have terminated on the ninety-first (91st) day of such leave, unless the
individual's right to re-employment is guaranteed by statute or contract.
A termination of employment shall not be deemed to occur by reason of (i)
the transfer of an employee from employment by the Company to employment by a
subsidiary of the Company
<PAGE>
or (ii) the transfer of an employee from employment by a subsidiary of the
Company to employment by the Company or by another subsidiary of the Company.
XIII. ADJUSTMENT OF SHARES, EFFECT OF CERTAIN TRANSACTIONS
----------------------------------------------------
In the event of any change in the outstanding Shares through merger,
consolidation, reorganization, recapitalization, stock dividend, stock split,
split-up, split-off, spin-off, combination of shares, exchange of shares, or
other like change in capital structure of the Company, an adjustment shall be
made to each outstanding option such that each such option shall thereafter be
exercisable for such securities, cash and/or other property as would have been
received in respect of the Shares subject to such option had such option been
exercised in full immediately prior to such change, and such an adjustment shall
be made successively each time any such change shall occur. The term "Shares"
shall after any such change refer to the securities, cash and/or property then
receivable upon exercise of an option. In addition, in the event of any such
change, the Board of Directors or the Committee, as the case may be, shall make
any further adjustment as may be appropriate to the maximum number of Shares
subject to the Plan, the maximum number of Shares for which options may be
granted to any one employee, and the number of Shares and price per Share
subject to outstanding options as shall be equitable to prevent dilution or
enlargement of rights under such options, and the determination of the Board of
Directors or the Committee, as the case may be, as to these matters shall be
conclusive. Notwithstanding the foregoing, (i) each such adjustment with
respect to an Incentive Option shall comply with the rules of Section 424(a) of
the Code, and (ii) in no event shall any adjustment be made which would render
any Incentive Option granted hereunder other than an incentive stock option for
purposes of Section 422 of the Code without the consent of the grantee.
XIV. RIGHT TO TERMINATE EMPLOYMENT
-----------------------------
The Plan shall not impose any obligation on the Company or any
subsidiary of the Company to continue the employment of any holder of an option
and it shall not impose any obligation on the part of any holder of an option to
remain in the employ of the Company or of any subsidiary thereof.
XV. PURCHASE FOR INVESTMENT
-----------------------
Except as hereafter provided, the holder of an option granted
hereunder shall, upon any exercise thereof, execute and deliver to the Company a
written statement, in form satisfactory to the Company, in which such holder
represents and warrants that such holder is purchasing or acquiring the Shares
acquired thereunder for such holder's own account, for investment only and not
with a view to the resale or distribution thereof, and agrees that any
subsequent offer for sale or sale or distribution of any such Shares shall be
made only pursuant to either (a) a Registration Statement on an appropriate form
under the Securities Act of 1933, as amended (the "Securities Act"), which
Registration Statement has become effective and is current with regard to the
Shares being offered or sold, or (b) a specific exemption from the registration
requirements of
<PAGE>
the Securities Act, but in claiming such exemption the holder shall, prior to
any offer for cash or sale of such Shares, obtain a prior favorable written
opinion, in form and substance satisfactory to the Company, from counsel for or
approved by the Company, as to the applicability of such exemption thereto. The
foregoing restriction shall not apply to (i) issuances by the Company so long as
the Shares being issued are registered under the Securities Act and a prospectus
in respect thereof is current or (ii) reofferings of Shares by affiliates of the
Company (as defined in Rule 405 or any successor rule or regulation promulgated
under the Securities Act) if the Shares being reoffered are registered under the
Securities Act and a prospectus in respect thereof is current.
XVI. ISSUANCE OF CERTIFICATES. LEGENDS: PAYMENT OF EXPENSES
-------------------------------------------------------
Upon any exercise of an option which may be granted hereunder and
payment of the purchase price, a certificate or certificates for the Shares as
to which the option has been exercised shall be issued by the Company in the
name of the person exercising the option and shall be delivered to or upon the
order of such person or persons.
The Company may endorse such legend or legends upon the certificates
for Shares issued upon exercise of an option granted hereunder and may issue
such "stop transfer" instructions to its transfer agent in respect of such
Shares as, in its discretion, it determines to be necessary or appropriate to
(i) prevent a violation of, or to perfect an exemption from, the registration
requirements of the Securities Act, (ii) implement the provisions of the Plan
and any agreement between the Company and the optionee or grantee with respect
to such Shares, or (iii) permit the Company to determine the occurrence of a
disqualifying disposition, as described in Section 421(b) of the Code, of Shares
transferred upon exercise of an Incentive Option granted under the Plan.
The Company shall pay all issue or transfer taxes with respect to the
issuance or transfer of Shares upon exercise of an option, as well as all fees
and expenses necessarily incurred by the Company in connection with such
issuance or transfer, except fees and expenses which may be necessitated by the
filing or amending of a Registration Statement under the Securities Act, which
fees and expenses shall be borne by the recipient of the Shares unless such
Registration Statement has been filed by the Company for its own corporate
purposes (and the Company so states) in which event the recipient of the Shares
shall bear only such fees and expenses as are attributable solely to the
inclusion of the Shares he or she receives in the Registration Statement,
provided that the Company shall have no obligation to include any shares in any
Registration Statement.
All Shares issued as provided herein shall be fully paid and non-
assessable to the extent permitted by law.
XVII. WITHHOLDING TAX
---------------
The Company may require an employee exercising a Non-Qualified Option
or disposing of Shares acquired pursuant to the exercise of an Incentive Option
in a disqualifying disposition
<PAGE>
(within the meaning of Section 421(b) of the Code) to reimburse the corporation
that employs such employee for any taxes required by any government to be
withheld or otherwise deducted and paid by such corporation in respect of the
issuance or disposition of Shares. In lieu thereof, the corporation that employs
such employee shall have the right to withhold the amount of such taxes from any
other sums due or to become due from such corporation to the employee upon such
terms and conditions as the Board of Directors or the Committee, as the case may
be, shall prescribe.
XVIII. LISTING OF SHARES AND RELATED MATTERS
-------------------------------------
If at any time the Board of Directors shall determine in its
discretion that the listing, registration or qualification of the Shares covered
by the Plan upon any national securities exchange or any state or federal law or
the consent or approval of any governmental regulatory body, is necessary or
desirable as a condition of, or in connection with, the sale or purchase of
Shares under the Plan, no Shares shall be issued unless and until such listing,
registration, qualification, consent or approval shall have been effected or
obtained, or otherwise provided for, free of any conditions not acceptable to
the Board of Directors.
XIX. AMENDMENT OF THE PLAN
---------------------
The Board of Directors may, from to time, amend the Plan, provided
that no amendment shall be made, without the approval of the shareholders of the
Company, that will (i) increase the total number of Shares reserved for options
under the Plan (other than an increase resulting from an adjustment provided for
in Article XIII), (ii) reduce the exercise price of any Incentive Option granted
hereunder below the price required by Article VI, (iii) modify the provisions of
the Plan relating to eligibility, or (iv) materially increase the benefits
accruing to participants under the Plan. The Board of Directors or the
Committee, as the case may be, shall be authorized to amend the Plan and the
options granted hereunder to permit the Incentive Options granted hereunder to
qualify as incentive stock options within the meaning of Section 422 of the
Code. The rights and obligations under any option granted before amendment of
the Plan or any unexercised portion of such option shall not be adversely
affected by amendment of the Plan or the option without the consent of the
holder of the option.
XX. TERMINATION OR SUSPENSION OF THE PLAN
-------------------------------------
The Board of Directors may at any time suspend or terminate the Plan.
The Plan, unless sooner terminated by action of the Board of Directors, shall
terminate at the close of business on the Termination Date. An option may not be
granted while the Plan is suspended or after it is terminated. Rights and
obligations under any option granted while the Plan is in effect shall not be
altered or impaired by suspension or termination of the Plan, except upon the
consent of the person to whom the option was granted. The power of the Board of
Directors or the Committee, as the case may be, to construe and administer any
options granted prior to the termination or suspension of the Plan under Article
III nevertheless shall continue after such termination or during such
suspension.
<PAGE>
XXI. GOVERNING LAW
-------------
The Plan, such options as may be granted thereunder and all related
matters shall be governed by, and construed and enforced in accordance with, the
laws of the State of Delaware.
XXII. PARTIAL INVALIDITY
------------------
The invalidity or illegality of any provision herein shall not be
deemed to affect the validity of any other provision.
XXIII. EFFECTIVE DATE
--------------
The Plan shall become effective at 5:00 P.M., New York City time, on
the Effective Date; provided, however, that if the Plan is not approved by a
vote of the shareholders of the Company at an annual meeting or any special
meeting or by unanimous written consent within twelve (12) months before or
after the Effective Date, the Plan and any options granted thereunder shall
terminate.
<PAGE>
EXHIBIT 10.05
THIS CONSULTING AGREEMENT entered into this lst day of June, 1996
between Roper Industries, Inc., a Delaware corporation ("Roper") with an address
at 160 Ben Burton Road, Bogart, Georgia and G.L. Ohrstrom & Co., a New York
partnership ("Consultant") with an address at 540 Madison Avenue, New York, New
York.
WITNESSETH:
-----------
WHEREAS, Roper desires to avail itself of the knowledge and experience
of Consultant in financial affairs and acquisition matters in furtherance of the
business of Roper and has offered to engage Consultant to render financial
consulting and acquisition advisory services to Roper; and
WHEREAS, Consultant desires to accept such engagement, upon the terms
and conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing premises, the mutual
covenants contained herein and for good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
SECTION 1. ENGAGEMENT OF CONSULTANT. Roper hereby engages Consultant
------------------------
to act as a financial and acquisitions advisor to Roper and to render services
to Roper, subject to and upon the terms and conditions set forth in this
Consulting Agreement. Consultant hereby accepts such engagement as described
herein. It is agreed by the parties hereto that Consultant is, and will at all
times be considered, an independent contractor and not an employee of Roper.
SECTION 2. TERM. Unless otherwise terminated as provided herein, the
----
respective duties and obligations of the parties hereto shall commence on June
1, 1996, and shall continue in full force and effect through June 1, 1999. This
agreement shall be automatically renewed for one (1) year periods unless one
party gives notice to the other party thirty (30) days prior to the expiration
hereof of its intent to terminate this Consulting Agreement.
SECTION 3. DUTIES OF CONSULTANT.
--------------------
3.1. Covered Activities. Consultant shall report to the chief
------------------
executive officer of Roper and shall advise and consult with such chief
executive officer of Roper, subject at all times to the policies and control of
the chief executive officer of Roper. The consulting services provided by
Consultant shall be to act as a finder for Roper with respect to potential
acquisitions for Roper and to provide general acquisition related and financial
advice (which shall also include the availability of meeting space and/or
secretarial and technological assistance which has been customary at
Consultant's New York office, if requested), subject to the following
conditions:
a. In the event Consultant locates an acquisition candidate which would
be compatible with, or is related to, the existing business segments
of Roper at such time, Consultant shall have an obligation to offer
such acquisition to Roper prior
<PAGE>
to any other person or entity.
b. In the event Consultant locates an acquisition candidate which is
unrelated to Roper's existing business segments at such time,
Consultant shall be under no obligation to offer, but may offer, such
acquisition to Roper. There is no requirement under this Section 3.b.
that Consultant make any such offer, if at all, prior to any other
person or entity.
3.2 Additional Services. Roper may call upon Consultant to provide
-------------------
additional financial or advisory services within Consultant's expertise not
covered by Section 3.1 and in such event Roper shall compensate Consultant on a
per service basis; such fee to be negotiated by Roper and Consultant. Except as
set forth in this Section 3.2, all other terms and conditions contained in this
Consulting Agreement shall govern the provision of such additional services.
3.3 Availability. At the request of the chief executive officer of
------------
Roper, Consultant (through one or more of its partners or employees) shall make
itself available to consult with and advise the chief financial officer and the
chief executive officer of Roper, at reasonable times, concerning acquisition
and financial matters of Roper and its subsidiaries and affiliates.
Notwithstanding anything to the contrary contained in this Consulting Agreement,
Consultant (through one or more of its partners or employees) shall be required
to devote that amount of time providing services to Roper hereunder that is
reasonably necessary for Consultant to meet its obligations hereunder.
SECTION 4. CONSULTANT'S CONFIDENTIALITY AND DISCLOSURE. Both during
-------------------------------------------
the term of this Consulting Agreement and at any time thereafter, Consultant
will:
a. regard and preserve as confidential all knowledge and information
pertaining to the business of Roper, its subsidiaries and affiliates, including,
but not limited to, purchasing, marketing, systems, accounting, directors,
officers, employees and other personnel of Roper, its subsidiaries and
affiliates obtained by Consultant from any source whatsoever and which is not a
matter of public knowledge or which is treated by Roper as confidential; and
b. except on behalf of Roper, its subsidiaries or affiliates, not
communicate or divulge to any other person or entity or make use, for itself or
any other person or entity, of any of the records, documents, contracts,
writings, data or other information of Roper, its subsidiaries or affiliates,
whether or not the same is in written or recorded form, unless the same is a
matter of public knowledge.
Any document or other material prepared by the Consultant, alone or in
conjunction with others, in the course of providing services hereunder will be
deemed 'work for hire' and shall be the exclusive property of Roper. Without
limiting the generality of the foregoing, it is hereby agreed that the
prohibitions contained above shall be operative, whether inside or outside of
the United States, with respect to information or knowledge which may now or
hereafter be treated by Roper, its subsidiaries or affiliates as confidential.
Consultant's
<PAGE>
obligation under this Section 4 shall survive the termination of this Consulting
Agreement.
SECTION 5. COMPENSATION.
------------
a. As full and complete compensation for all services provided
hereunder, other than those additional services provided pursuant to Section
3.2, Roper shall pay to Consultant compensation at a rate of Three Hundred
Thirty-Three Thousand Forty-Eight Dollars ($333,048) per annum, payable in
twelve (12) equal monthly payments of Twenty-Seven Thousand Seven Hundred Fifty-
Four Dollars ($27,754) on the fifteenth (15th) day of each month. Any other
payment due and owing to Consultant pursuant to Section 3.2 shall be paid as
agreed between Roper and Consultant.
b. Cost of Living Adjustment. The compensation payable to
-------------------------
Consultant hereunder shall be subject to adjustment, upward or downward, based
on the increase or decrease in the Consumer Price Index from year to year. For
purposes of this calculation, 1996 shall be deemed to be the base year and the
annual compensation set forth in Section 5a. shall be deemed to be the base
amount. The adjustment shall be calculated on the anniversary of this
Consulting Agreement.
SECTION 6. NO PROHIBITION ON CONSULTANT. Notwithstanding anything to
----------------------------
the contrary contained herein, subject to Section 4, Consultant shall not in any
manner be prevented, prohibited or bound to refrain from engaging in any
business or businesses of any kind or nature, or owning or dealing in stocks of
any corporation or making any investments of any kind. Notwithstanding the
foregoing, during the term of this Consulting Agreement, Consultant shall not
engage in any business activity which materially interferes with the performance
of Consultant's duties hereunder. This Agreement shall in no way affect the
services provided by, or compensation paid to, any of the partners or employees
of Consultant as directors of Roper.
SECTION 7. NON-SOLICITATION OF EMPLOYEES. During the term of this
-----------------------------
Consulting Agreement and for a period of one (1) year thereafter, Consultant
shall not, directly or indirectly, solicit or encourage any employee of Roper,
its subsidiaries or affiliates to leave such employment.
SECTION 8. TERMINATION. During the initial term of this Consulting
-----------
Agreement, either party may terminate this agreement upon one (1) year's prior
written notice to the other party of its intent to terminate. At all other
times, this Consulting Agreement may be terminated only upon the written
agreement of Roper and Consultant, or during renewal terms, upon thirty (30)
days' notice prior to the end of such renewal term that such party does not want
to renew the terms and conditions of this Consulting Agreement. Upon the
termination or expiration of this Consulting Agreement, Consultant shall return
to Roper any and all files, reports, analyses, charts, documents, and other
records or materials of any kind concerning or pertaining to Roper, its
subsidiaries or affiliates. Consultant shall not be required to return any such
materials its partners have received in their capacity as directors of Roper.
<PAGE>
SECTION 9. NOTICES. Any and all notices required or permitted to be
-------
given hereunder shall be in writing and shall be given by certified or
registered mail or by personal delivery, but shall be deemed to have been given
when hand-delivered or when deposited in the United States mail, registered or
certified, return receipt requested, postage prepaid, addressed to the party to
whom notice is being given at the address of such party listed in the preamble
to this Consulting Agreement, or to such other address as may be furnished in
writing by such party to the other party to this Consulting Agreement.
SECTION 10. CONTENTS OF AGREEMENT, PARTIES IN INTEREST, ASSIGNMENT
------------------------------------------------------
ETC. This Consulting Agreement sets forth the entire understanding of the
- ---
parties with respect to the matters contemplated hereby and any previous
agreements or understandings between the parties regarding the subject matter
hereof are merged into and superseded by this Consulting Agreement. This
Consulting Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective permitted successors and assigns. Neither
party may assign this Consulting Agreement without the prior written consent of
the other party.
SECTION 11. WAIVER. A waiver by either party of any of the terms and
------
conditions of this Consulting Agreement in any instance shall not be deemed or
construed to be a waiver of such term or condition for the future, or of any
subsequent breach thereof.
SECTION 12. AMENDMENT OF CONSULTING AGREEMENT. Notwithstanding
---------------------------------
anything to the contrary contained in this Consulting Agreement, this Consulting
Agreement may be amended at any time only by written instrument duly executed by
each of the parties hereto.
SECTION 13. COUNTERPARTS. This Consulting Agreement may be executed
------------
in any number of counterparts, each of which when so executed, shall constitute
an original copy hereof, but all of which together shall constitute one and the
same document.
SECTION 14. GOVERNING LAWS AND ENFORCEMENT. This Consulting Agreement
------------------------------
shall be construed and enforced in accordance with the laws of the State of New
York, without giving effect to principles of conflicts of law thereof. Should
any clause, sentence or Section of this Consulting Agreement be judicially or
administratively determined to be invalid, unenforceable or void by the laws of
the State of New York or United States of America or any agency or subdivision
thereof, such decision shall not have the effect of invalidating or voiding the
remainder of this Consulting Agreement and the parties hereto agree that the
part or parts of this Consulting Agreement so held to be invalid, unenforceable
or void, shall be deemed to have been deleted herefrom and the remainder shall
have the same force and effectiveness as if such part or parts had never been
included herein.
IN WITNESS WHEREOF, the parties have executed this Consulting
Agreement as of the date first above written.
<PAGE>
ROPER INDUSTRIES, INC.,
A DELAWARE CORPORATION
By: /s/ Derrick N. Key
-----------------------------
Name:
Title: President & CEO
G.L. OHRSTROM & CO.,
A NEW YORK PARTNERSHIP
By: /s/ Donald G. Calder
-----------------------------
Name:
Title: Partner
<PAGE>
EXHIBIT 10.06
CONSULTING AGREEMENT
This Consulting Agreement ("Agreement") is entered into as of the 1st day of
November, 1994 by Roper Industries, Inc. ("Roper") and E. Douglas Kenna and Jean
C. Kenna (individually "Consultant", and collectively "Consultants").
RECITALS
--------
A. Roper designs, manufactures and distributes highly engineered fluid
handling and industrial controls products worldwide in a wide range of
industrial markets. Its corporate headquarters are located in Bogart, Georgia.
B. E. D. Kenna is a former Chairman of Roper's Board of Directors and has
been affiliated with Roper businesses for many years, during all of which time
Jean C. Kenna has been his spouse, and both of E. D. and Jean C. Kenna have
established investor, lender, and business contacts and relationships which have
benefited Roper for many years.
C. Roper desires to retain Consultants as consultants, and not as
employees, and Consultants desires to be in the service of Roper, and to refrain
from competing with Roper or otherwise using Roper's trade secrets, proprietary
and confidential information, except in the furtherance of their consulting
service with Roper.
NOW THEREFORE, in consideration for the covenants and promises set forth
below, Roper and Consultants agree upon the following terms and conditions:
CONSULTANT SERVICES AND FEE
---------------------------
1. Consultant Services. Roper retains Consultants and Consultants agree
-------------------
to provide services to Roper, at Roper's sole discretion and otherwise upon the
terms and conditions set forth in this Agreement.
2. Consultant Term. Retention of Consultants shall commence on November
---------------
1, 1994.
3. Consultant Fee. As the fee for the performance of services to Roper,
--------------
Consultants shall be paid jointly a retainer of $4,166.67 per month (the
"Consultant Fee"). Roper shall also reimburse Consultants for their reasonable
expenses of travel, out of town lodging and meals and other related expenses of
providing consulting services to Roper.
4. Duties and Term. Consultants agree to serve Roper faithfully,
---------------
diligently and to the best of their ability and shall be responsible for the
development and support of projects assigned to either of them by Roper. At all
times Consultants will be subject to the policies, procedures, directions and
restrictions as the Chairman of the Board of Roper may reasonably adopt from
time to time. The Consultants' contributions to Roper will include advice in
such areas as general corporate planning and strategies, corporate finance and
marketing, business development, executive compensation and providing
introductions and liaison to and with investors, lenders and business leaders
and contacts known to Consultants that might be beneficial to Roper.
Consultants agree to serve, and the Consultant Fee will be paid, until the
<PAGE>
earlier to occur of October 31, 2004 or the death of the last surviving
Consultant, at which time all Consultant Fee payments will cease. Upon the
death of either one of the Consultants prior to October 31, 2004, the Consulting
Fee will continue to be paid to the other Consultant.
COVENANT NOT TO COMPETE AND CONFIDENTIALITY
-------------------------------------------
5. Covenant Not To Compete. From the date of this Agreement to the date
-----------------------
services of the Consultants to Roper are terminated for any reason, neither
Consultant will, directly or indirectly, engage in, assist, disclose any
information (except where expressly authorized in the performance of his or
duties as a consultant made under confidentiality nondisclosure agreements with
third parties), solicit the customers of Roper or have any ownership interest
in, any person, firm, corporation, partnership, association, agency or business
(whether as principal, agent, holder of any equity security, except either
Consultant may be the holder of less than I% of the equity securities of public
companies whose equity securities are traded on nationally recognized securities
markets, or other instruments convertible into an equity security) or as an
employee, consultant or otherwise engage in marketing, leasing or otherwise
distributing products of the type designed, purchased for resale or distribution
or manufactured, sold, distributed or leased by or engage in any other activity
of a nature which is competitive with that of the business of Roper.
6. Confidentiality. Consultants acknowledge and agree that all
----------------
information, documents and records, practices and procedures utilized by Roper
in the conduct of its business, of or to which Consultants have or may gain
knowledge, are confidential and constitute valuable trade secrets of Roper, and
that any disclosure or unauthorized use of Confidential Information would cause
irreparable harm and loss to Roper. Consultants shall not disclose or use any
Confidential Information outside the intended purposes of this Agreement and
shall hold all Confidential Information as strictly confidential.
INDEPENDENT CONTRACTOR
----------------------
7. Independent Contractor. Consultants are independent contractors and
----------------------
are not and shall make no claim that they are employees, agents, servants or
representatives of Roper. Consultants shall have no authority to transact
business, enter into agreements or otherwise make commitments on behalf of Roper
unless expressly authorized to do so in writing by Roper.
MISCELLANEOUS PROVISIONS
------------------------
8. Equitable Remedies. In the event of a Consultant's breach or
------------------
violation of his or her obligations set out in paragraph 5 and/or 6 hereof, such
Consultant agrees hereby that Roper would not have an adequate remedy at law and
that Roper shall be entitled, without posting a bond, to an injunction
restraining any breach and to other appropriate equitable relief. Each
Consultant hereby waives the right to use as a defense to any equitable action
against the allegation that Roper has an adequate remedy of law. The equitable
remedy provided Roper shall be in addition to any other remedies it may have and
nothing in this provision shall be construed as prohibiting Roper from pursuing
any other remedy available to it, including without limitation withholding of
payments otherwise due the Consultant and the refund of past payments made to
Consultant.
9. Consultant's Non-Assignment. Consultants may not alienate,
---------------------------
hypothecate, pledge, encumber, assign or otherwise transfer any rights under
this Agreement.
<PAGE>
10. Severability. If any provision of this Agreement shall be determined
------------
to be invalid or unenforceable, either in whole or in part, this Agreement shall
be deemed amended to delete or modify, as necessary, if any provisions and to
alter the balance of this Agreement in order to render the provision valid and
enforceable.
11. Choice of Law. This Agreement shall be construed and interpreted in
-------------
accordance with the laws of the State of Georgia. Each party consents to
service of process at their respective addresses listed in this Agreement and to
jurisdiction and venue in the federal district court or state courts of Clarke
County, Georgia.
12. Notice. All notices, requests, demands and other communications
------
shall be in writing and shall be deemed to have been duly given upon the date of
service if served personally upon the party for whom intended, or if mailed
postage pre-paid by registered or certified first class mail, return receipt
requested, or by express or telephone facsimile, to such party at its address
shown below, or as otherwise designated by such party or addressee in writing,
it shall be deemed to have been given when mailed.
If to Roper: Roper Industries, Inc.
160 Ben Burton Road
Bogart, Georgia 30622
706-369-7170 phone
706-353-6496 fax
Attn: Derrick N. Key
President and Chief Executive Officer
If to Consultants: E. Douglas Kenna
Jean C. Kenna
11070 Turtle Beach Road
Apartment B- 1 04
N. Palm Beach, FL 33408
407-624-0264 phone
407-624-2243 fax
/S/ Derrick N. Key /S/ E. Douglas Kenna
- ------------------ ----------------------------
Roper Industries, Inc. E. Douglas Kenna
By: Derrick N. Key
Chief Executive Officer /S/ Jean C. Kenna
----------------------------
Jean C. Kenna
<PAGE>
EXHIBIT 21 - SUBSIDIARIES OF ROPER INDUSTRIES, INC.
- ----------
STATE OF JURISDICTION
---------------------
NAME OF SUBSIDIARY OF INCORPORATION
- ------------------ ----------------
Amot Controls Corporation Delaware
Amot Controls Ltd. United Kingdom
Amot Controls, S.A. Switzerland
Amot Investments Ltd. United Kingdom
Amot/Metrix Investment Company Delaware
Amot Sales Corporation Delaware
Compressor Controls Corporation (an Iowa Corporation) Iowa
Compressor Controls Corporation (a Delaware Corporation
d/b/a Compressor Controls Corporation - CIS/EE in Iowa) Delaware
Cornell Pump Company Delaware
Cornell Pump Manufacturing Corporation Delaware
Fluid Metering, Inc. Delaware
FTI Flow Technology, Inc. Arizona
Gatan International, Inc. Pennsylvania
Gatan, Inc. Pennsylvania
Gatan Service Corporation Pennsylvania
Gatan Limited United Kingdom
Gatan GmbH Germany
Integrated Designs, Inc. Delaware
Integrated Designs, L.P. Delaware
ISL Holdings, S.A. France
ISL International, Inc. Delaware
ISL North America, Inc. Delaware
ISL Scientifique de Laboratoire - ISL, S.A. France
Metrix Instrument Co., L.P. Delaware
Molecular Imaging Corporation Arizona
Nippon Roper K.K. Japan
Petrotech, Inc. Delaware
Prex Corporation Delaware
Prex L.P. Delaware
Princeton Instruments, Inc. Delaware
Princeton Instruments Limited United Kingdom
Princeton Instruments SARL France
Roper Holdings, Inc. Delaware
Roper Industrial Products Investment Co. Iowa
Roper Industries Europe Ltd. United Kingdom
Roper International, Inc. Delaware
Roper International Products Ltd. Virgin Islands
Roper Pump Company Delaware
Uson Corporation Delaware
Uson L.P. Delaware
<PAGE>
EXHIBIT 22
INDEPENDENT AUDITOR'S CONSENT
The Board of Directors
Roper Industries, Inc.
We consent to incorporation by reference in the registration statements No.'s
333-36897, 33-71094, 33-77770 and 33-78026 on Form S-8 of Roper Industries, Inc.
of our report dated December 5, 1997 relating to the consolidated balance sheets
of Roper Industries, Inc. and subsidiaries as of October 31, 1997 and 1996, and
the related consolidated statements of earnings, stockholders' equity, and cash
flows for each of the years in the three-year period ended October 31, 1997, and
the related schedule, which report appears in the October 31, 1997 annual report
on Form 10-K of Roper Industries, Inc.
Atlanta, Georgia
January 20, 1998
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-01-1996
<PERIOD-END> OCT-31-1997
<CASH> 649
<SECURITIES> 0
<RECEIVABLES> 78,752
<ALLOWANCES> 0
<INVENTORY> 50,199
<CURRENT-ASSETS> 131,890
<PP&E> 63,002
<DEPRECIATION> 31,607
<TOTAL-ASSETS> 329,320
<CURRENT-LIABILITIES> 44,936
<BONDS> 0
0
0
<COMMON> 309
<OTHER-SE> 177,560
<TOTAL-LIABILITY-AND-EQUITY> 329,320
<SALES> 298,236
<TOTAL-REVENUES> 298,514
<CGS> 144,847
<TOTAL-COSTS> 144,847
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,048
<INCOME-PRETAX> 55,100
<INCOME-TAX> 18,750
<INCOME-CONTINUING> 36,350
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 36,350
<EPS-PRIMARY> 1.16
<EPS-DILUTED> 1.16<F1>
<FN>
<F1>SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
</FN>
</TABLE>
