SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) May 23, 1996
PRODUCTIVITY TECHNOLOGIES CORP.
(Formerly named Production Systems Acquisition Corporation)
(Exact name of Registrant as specified in its charter)
Delaware 0-21894
(State or other jurisdiction of incorporation) (Commission File No.)
520 Madison Avenue 10022
New York, New York (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (212) 843-1480
<PAGE>
Item 2. Acquisition or Disposition of Assets.
On May 23, 1996, the Registrant consummated its acquisition of
Atlas Technologies, Inc. ("Atlas"), a Michigan corporation, pursuant to the
Merger Agreement dated December 18, 1995, among the Registrant, Ronald M. Prime
and Michael D. Austin, doing business as AMS Holding Company ("AMS"), a Michigan
partnership, and Atlas. The acquisition was effected by the merger of PSAC
Merger Corporation, a wholly owned subsidiary of the Registrant formed for the
purpose, into Atlas, with Atlas being the surviving company and becoming a
wholly owned subsidiary of the Registrant.
The total merger consideration paid by the Registrant to the
shareholders of Atlas was $7,120,000. Such merger consideration, and the fees
and expenses of the transaction, was paid from the liquid assets of the
Registrant and the proceeds of a special interest-bearing account established
with certain proceeds of the initial public offering of securities of the
Registrant consummated July 5, 1994. The shareholders of Atlas to whom the
merger consideration was paid were AMS, of whom Messrs. Prime and Austin,
principal executive officers of Atlas, are the partners, and the Atlas
Technologies, Inc. Employee Stock Ownership Trust.
Atlas designs and manufactures automation equipment for the
sheet metal forming industry. At the conclusion of the merger, the Board of
Directors of Atlas was increased to five members, consisting of Messrs. Prime,
Austin, Samuel N. Seidman, director and President of the Registrant, and Joseph
K. Linman and John S. Strance, directors and Vice Presidents of the Registrant.
For further information regarding the transaction and Atlas,
please refer to Item 5 of the Registrant's Report of Form 8-K dated December 18,
1995, which is incorporated by reference as an exhibit to this Report.
Item 5. Other Events.
On May 21, 1996, the stockholders of the Registrant approved
an amendment to the Registrant's Certificate of Incorporation to (a) change the
name of the Registrant to Productivity Technologies Corp. and (b) classify the
Board of Directors of the Registrant into three classes. Such amendment was
filed and became effective on May 28, 1996. Pursuant to the classification of
the Board of Directors, the stockholders elected Jesse A. Levine and Alan I.
Goldman as Class I Directors to serve for terms expiring at the annual meeting
of stockholders to be held during the 1997 fiscal year, Ray J. Friant, Jr. and
John S. Strance as Class II Directors to serve for terms expiring at the annual
meeting of stockholders to be held during the 1998 fiscal year, and Samuel N.
Seidman, Joseph K. Linman and Alan H. Foster as Class III Directors to serve for
terms expiring at the annual meeting of stockholders to be held during the 1999
fiscal year.
1
<PAGE>
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial Statements of Business Acquired.
Atlas Technologies, Inc.
Balance sheet as of March 31, 1996 (unaudited)
Statements of Income for nine months ended March 31, 1996 (unaudited) and March
31, 1995 (unaudited)
Statement of Stockholders' Equity for period ended March 31, 1996 (unaudited)
Statements of Cash Flows for nine months ended March 31, 1996 (unaudited) and
March 31, 1995 (unaudited)
Selected Information
(b) Pro Forma Financial Information.
Production Systems Acquisition Corporation and Atlas Technologies, Inc.
UnauditedPro Forma Consolidated Statement of Operations for nine months ended
March 31, 1996
Unaudited Pro Forma Consolidated Statement of Operations for year ended
June 30, 1995
Notes to Unaudited Pro Forma Consolidated Statements of Operations
Unaudited Pro Forma Consolidated Balance Sheet as of March 31, 1996
Notes to Unaudited Pro Forma Consolidated Balance Sheet
(c) Exhibits
2.1 Registrant's Report on Form 8-K dated December 18,
1995 (Item 5).
4.1 Certificate of Amendment to Registrant's Certificate
of Incorporation filed May 28, 1996.
2
<PAGE>
Item 8. Change in Fiscal Year.
On May 17, 1996, the Board of Directors of the Registrant
approved a change in the Registrant's fiscal year. The new fiscal year end will
be June 30. A Report on Form 10-K will be filed covering the transition period
from April 1, 1996 to June 30, 1996.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this Report to be signed on its behalf by
the undersigned hereunto duly authorized.
PRODUCTIVITY TECHNOLOGIES CORP.
(Formerly named Production Systems
Acquisition Corporation)
/s/ Samuel N. Seidman
Name: Samuel N. Seidman
Title: President
Date: June 6, 1996
3
<PAGE>
ATLAS TECHNOLOGIES, INC
BALANCE SHEETS
March 31, 1996
-------------------
ASSETS (Unaudited)
Current assets:
Cash $ 155,316
Contract receivables 5,776,993
Notes receivable 516,192
Officer note receivable 15,600
Costs and estimated earnings
in excess of billings
on uncompleted contracts 6,327,745
Inventories 991,988
Prepaid expenses 28,310
Deferred taxes - current 269,000
-------------------
14,081,144
-------------------
Property, plant, and equipment:
Land 77,200
Buildings and improvements 1,945,123
Machinery and equipment 4,973,586
Transportation equipment 99,117
Accumulated depreciation (4,501,160)
-------------------
2,593,866
-------------------
Other assets:
Deferred taxes - noncurrent 187,000
Noncompetition agreement, net of accumulated
amortization 232,333
Officer notes receivable, net of current portion 123,362
Other assets 40,000
-------------------
582,695
-------------------
$17,257,705
===================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Account payable $2,531,168
Line of credit 4,990,852
Accrued expenses and other 1,606,934
Accrued taxes 99,851
Billings in excess of costs and estimated
earnings on uncompleted contracts 905,435
Stock redemption payable 700,000
Current portion of long-term debt 1,808,846
-------------------
12,643,086
-------------------
Long-term debt, net of current portion 1,063,806
-------------------
Commitments
-
Stockholders' equity:
Common stock ($1 par value, authorized 50,000 shares,
25,683 issued and outstanding) 25,683
Paid in capital 73,465
Retained earnings 3,451,665
-------------------
3,550,813
-------------------
$17,257,705
===================
See selected information.
F-1
<PAGE>
ATLAS TECHNOLOGIES, INC
STATEMENTS OF INCOME
<TABLE>
Nine months ended March 31,
1996 1995
(Unaudited) (Unaudited)
<S> <C> <C>
Net sales
$25,841,050 $21,027,428
------------------ ------------------
Cost of sales 17,862,970 15,374,582
Selling, general, and administrative
expenses 4,935,291 3,800,913
Management bonuses 1,602,530 -
------------------ ------------------
24,400,791 19,175,495
------------------ ------------------
1,440,259 1,851,933
------------------ ------------------
Other income (expense):
Interest income 32,036 2,232
Interest expense (410,910) (462,352)
Gain on disposal of assets 35,474 308,565
Miscellaneous 20,273 68,812
------------------ ------------------
(323,127) (82,743)
------------------ ------------------
Net income before income taxes 1,117,132 1,769,190
Income taxes 379,200 370,630
------------------ ------------------
Net income $737,932 $1,398,560
================== ==================
Net income per share of common stock $28.73 $45.36
================== ==================
Weighted average common shares 25,683 30,830
================== ==================
</TABLE>
See selected information.
F-2
<PAGE>
ATLAS TECHNOLOGIES, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
Common Stock Total
Number of Paid-in Retained Stockholders'
Shares Amount Capital Earnings Equity
------- --------- -------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance at June 30, 1995 ........................................... 25,683 25,683 73,465 3,413,733 3,512,881
Stock redemption ................................................... -- -- -- (700,000) (700,000)
Net income for the period .......................................... -- -- -- 737,932 737,932
------- --------- -------------- ----------- -----------
Balance at March 31, 1996 (Unaudited) .............................. 25,683 $ 25,683 $ 73,465 $ 3,451,665 $ 3,550,813
======= ========= ============== =========== ===========
</TABLE>
See selected information.
F-3
<PAGE>
ATLAS TECHNOLOGIES, INC
STATEMENTS OF CASH FLOWS
<TABLE>
Nine months ended March 31,
1996 1995
<S> <C> <C>
(Unaudited) (Unaudited)
Cash flows from operating activities:
Net income $737,932 $1,398,560
Adjustments to reconcile net income to
net cash provided by operating activities
Depreciation and amortization 293,715 264,587
Gain on sale of property & equipment - (28,565)
Increase in contract receivables, inventories, prepaids and other (1,822,274) (2,136,456)
Increase in accounts payable, accrued
expenses, and other 424,599 418,009
Costs and estimated earnings in excess of billings
on uncompleted contracts; and billings in excess of
costs and estimated earnings on uncompleted contracts (1,036,333) (1,311,040)
-------------------- ----------------------
Net cash used in operating activities (1,402,361) (1,394,905)
-------------------- ----------------------
Cash flows from investing activities:
Proceeds from sale of property, plant and equipment - 132,142
Expenditures for property, plant, and equipment (357,612) (348,680)
Issuance of notes receivable (47,793) (88,326)
-------------------- ----------------------
Net cash used in investing activities (405,405) (304,864)
-------------------- ----------------------
Cash flow from financing activities:
Proceeds from issuance of long-term debt - 110,000
Net borrowing on line of credit 2,381,914 2,278,970
Purchase of common stock - (196,000)
Payment of debt (436,085) (569,188)
-------------------- ----------------------
Net cash provided by financing activities 1,945,829 1,623,782
-------------------- ----------------------
Net increase (decrease) in cash 138,063 (75,987)
Cash, Beginning of period 17,253 93,084
-------------------- ----------------------
Cash, End of period $155,316 $17,097
==================== ======================
</TABLE>
See selected information.
F-4
<PAGE>
ATLAS TECHNOLOGIES, INC.
SELECTED INFORMATION - Substantially all Disclosures
Required by Generally Accepted Accounting Principles Are Not Included
MARCH 31, 1996
1. General
On December 18, 1995, the majority stockholders of Atlas Technologies,
Inc. (Atlas) entered into a definitive Merger agreement with Production Systems
Acquisition Corporation (PSAC). PSAC is a Specified Purpose Acquisition
Company(R) (SPAC(R)) formed to acquire or merge with an operating business in
the production systems industry. Under the merger agreement, a newly formed
wholly owned subsidiary of PSAC will be merged with and into Atlas , so that
Atlas will become a wholly owned subsidiary of PSAC. Each share of the
outstanding stock of Atlas at the date of the merger will be entitled to receive
its prorata portion of the $7,000,000 merger consideration to be paid by PSAC.
The accompanying financial statements are unaudited. However, in the
opinion of management, all adjustments necessary for a fair statement of
financial position and results for the stated periods have been included. A
commitment to the former stockholders has been recorded in the period ended
March 31, 1996. This commitment is discussed in Note 5. The remaining
adjustments are of a normal recurring nature. Selected information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted. It
is suggested that these condensed financial statements be read in conjunction
with the audited financial statements and notes thereto as of and for the year
ended June 30, 1995. Results for interim periods are not necessarily indicative
of the results to be expected for an entire fiscal year.
2. Officer note receivable
At the effective date of the merger, this note will become due and will be paid
to the corporation in full.
3. Inventories
Inventories at June 30, 1995, and March 31, 1996, are stated at lower
of cost (first-in, first-out) or market and include primarily raw materials and
parts.
4. Line of credit and long-term debt
At the effective date of the merger, certain items included in current
portion of long-term debt that are secured by company stock will be paid in full
or refinanced with new debt at the Company's lending institution.
5. Commitments and Stock Redemption
As discussed in Note 1, terms of the merger require the stockholders of
Atlas to receive from PSAC $7,000,000 in consideration for their shares of the
outstanding stock of Atlas prior to the date of the merger, with additional
consideration to be paid in the amount of $10,000 per week for each week the
closing date is beyond March 1, 1996. The agreement also requires an equity
adjustment of the merged subsidiary (Atlas). Upon approval of the merger, a
contingent liability of $700,000 has been defined and will be paid to a former
stockholder as part of the stockholder's redemption agreement. Other payments
and contributions will be made to current executives of the company and the
Employee Stock Ownership Plan. The effect of these payments is to reduce the net
income of the company reported in these financial statements for the period
ended December 31, 1995. In the event the equity of Atlas at the effective date
is below $3,196,064, the merger consideration of $7,000,000 will be reduced.
F-5
<PAGE>
ATLAS TECHNOLOGIES, INC.
SELECTED INFORMATION - Substantially all Disclosures
Required by Generally Accepted Accounting Principles Are Not Included
MARCH 31, 1996
5. Commitments and Stock Redemption - (continued)
PSAC has also agreed to retain the two majority stockholders, Ronald M.
Prime and Michael D. Austin, under employment agreements pursuant to which they
will serve as Chief Executive Officer and President of Atlas, respectively.
These agreements will be identical except that the term of Mr. Prime's agreement
will terminate on December 31, 1998, and that of Mr. Austin will terminate on
December 31, 2001. Each agreement requires the executive to devote substantially
all of his business time and attention to the affairs of Atlas. The agreements
require a bonus payment to be made to the shareholders in the amount of $100,000
each upon signing of the agreement. Annual compensation (salary) will be
$190,000, subject to cost of living increases after December 31, 1996. The
agreements also require additional annual bonuses to the executives if certain
operating results are achieved.
6. Subsequent event
On May 23, 1996, PSAC acquired all the shares of Atlas under the merger
agreement discussed in Note 1 above.
F-6
<PAGE>
PRODUCTION SYSTEMS ACQUISITION CORPORATION ("PSAC")
AND ATLAS TECHNOLOGIES, INC. ("ATLAS")
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The unaudited pro forma consolidated balance sheet as of March 31, 1996
and the unaudited pro forma consolidated statements of operations for the year
ended June 30, 1995 and nine months ended March 31, 1996 include the accounts of
PSAC and Atlas for the respective periods. The unaudited pro forma financial
statements have been prepared to illustrate the estimated effects of the merger
of PSAC and Atlas ("Merger"). The Merger is accounted for as an acquisition of
the common stock by PSAC under the purchase method of accounting. The pro forma
financial statements were derived by adjusting the historical financial
statements of PSAC and Atlas for certain transactions pursuant to the Merger
described in the notes to the unaudited pro forma consolidated financial
statements.
The unaudited pro forma consolidated balance sheet was prepared as if
the Merger had occurred on March 31, 1996. The unaudited pro forma consolidated
statements of operations for the year ended June 30, 1995 and nine months ended
March 31, 1996 were prepared as if the Merger had occurred on July 1, 1994. The
pro forma financial data does not purport to be indicative of the results which
actually could have been obtained had such transactions been completed as of the
assumed dates or which may be obtained in the future. The pro forma statements
of operations conform to Atlas' fiscal year since the operations of the combined
companies will primarily be those of Atlas. This presentation, considered a more
accurate reflection of results, would not be materially different if PSAC's
fiscal year end of March 31 were the basis of presentation.
<TABLE>
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
Pro forma Pro forma
PSAC Atlas adjustments consolidated(1)
----------------------------------
Debit Credit
(in thousands, except per share and share amounts)
<S> <C> <C> <C> <C> <C>
Nine months ended March 31, 1996
Net sales.................................... $ -- $ 25,841 $ -- $ -- $ 25,841
Operating expenses:
Cost of sales............................. -- 17,863 -- -- 17,863
Selling, general and 149(2) --
administrative expenses............. 210 4,935 144(3) 279(5) 5,159
Management bonuses........................... -- 1,602 813(4) 1,602(5) 813
- ----------------------------------------------------------------------------------------------------------------------------------
Operating income (loss)...................... (210) 1,441 1,106 1,881 2,006
Other income (expense):
Interest income........................... 372 32 329(6) -- 75
Interest expense.......................... -- (411) -- -- (411)
Gain on disposal of assets................ -- 35 -- -- 35
Miscellaneous income...................... -- 20 -- -- 20
- -----------------------------------------------------------------------------------------------------------------------------------
Income before income tax
provision................................. 162 1,117 1,435 1,881 1,725
Income tax provision......................... 96 379 252(7) -- 727
- -----------------------------------------------------------------------------------------------------------------------------------
Net income................................... $ 66 $ 738 $ 1,687 1,881 $ 998
- -----------------------------------------------------------------------------------------------------------------------------------
Per share of common stock:
Income.................................... $ 0.03 $ 0.47
- -----------------------------------------------------------------------------------------------------------------------------------
Weighted average number of
shares of common stock.................... 2,125,000 2,125,000
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
F-7
<PAGE>
<TABLE>
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
Pro forma Pro forma
PSAC Atlas adjustments consolidated(1)
---------------------------
Debit Credit
(in thousands, except per share and share amounts)
<S> <C> <C> <C> <C> <C> <C>
Year ended June 30, 1995
Net sales.................................... $ -- $ 29,078 $ -- $ -- $ 29,078
Operating expenses:
Cost of sales............................. -- 21,034 -- -- 21,034
Selling, general and administrative 198(2)
expenses............................... 277 5,119 192(3) -- 5,786
Management bonuses........................... -- -- 566(4) -- 566
- ----------------------------------------------------------------------------------------------------------------------------------
Operating income (loss)...................... (277) 2,925 956 -- 1,692
Other income (expense):
Interest income........................... 474 33 407(6) -- 100
Interest expense.......................... -- (645) -- -- (645)
Gain on disposal of assets................ -- 308 -- -- 308
Miscellaneous income...................... -- 64 -- -- 64
- ----------------------------------------------------------------------------------------------------------------------------------
Income before income tax
provision................................. 197 2,685 1,363 -- 1,519
Income tax provision......................... 67 465 125(7) -- 657
- ----------------------------------------------------------------------------------------------------------------------------------
Net income................................... $ 130 $ 2,220 $1,488 -- $ 862
- ---------------------------------------------------------------------------------------------------------------------------------
Per share of common stock:
Income.................................... $ 0.06 $ 0.41
- -----------------------------------------------------------------------------------------------------------------------------------
Weighted average number of
shares of common stock.................... 2,125,000 2,125,000
- ----------------------------------------------------------------------------------------------------------------------------------
<FN>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
(1) The unaudited pro forma consolidated statements of operations are
presented assuming that no PSAC stockholders will request conversion of
their shares. No such requests were made.
(2) The purchase price, which includes cash paid for the Atlas shares
($7,120,000), and certain transaction expenses (approximately
$400,000), will exceed the book value of Atlas' stockholders equity by
approximately $4,567,000 against which a $598,000 deferred tax
liability will be provided. This excess is allocated $1,496,000 to
property, plant and equipment (based on a recent appraisal) and
$3,071,000 to goodwill. Additional depreciation on property, plant and
equipment based on a 20-year life, and amortization of goodwill based
on a 25-year life aggregating $198,000 has been charged to operations
for the year ended June 30, 1995 and $149,000 for the nine months ended
March 31, 1996.
(3) Represents annual salaries to officers and directors of PSAC ($252,000)
net of annual savings of $60,000 on PSAC occupancy expense. Such
payments would have been incurred had the transaction been consummated
on July 1, 1994.
(4) Represents pro forma amounts payable to Atlas senior management under
new employment agreements after the Merger (based on Atlas operating
income, as adjusted) in the amounts of $813,000 and $566,000 for the
nine months ended March 31, 1996 and year ended June 30, 1995,
respectively. Such payments would have been incurred had the
transaction been consummated on July 1, 1994.
F-8
<PAGE>
(5) Represents elimination of management bonuses ($1,602,000) and
professional fees ($279,000) incurred by Atlas aggregating $1,881,000.
These amounts would not have been incurred in the normal course of
business had it not been stated that the Merger Agreement contemplates
that the net worth of Atlas equal $3,196,084 at the date of
consummation of the Merger.
(6) Represents the elimination of interest income on the portion of
PSAC's investment in a U.S. government security deposited in the Trust
Fund, which will be liquidated upon consummation of the Merger.
(7) Represents consolidated income tax provision at an effective rate of
40% on taxable income after adding back non-deductible amortization of
goodwill of $92,000 and $123,000 for the nine months ended March 31,
1996 and year ended June 30, 1995, respectively.
</FN>
</TABLE>
F-9
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 1996
(in thousands)
<TABLE>
Pro forma Pro forma
PSAC Atlas adjustments consolidated (1)
---- ----- -----------------
------------------------------------
Debit Credit
<S> <C> <C> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents.................. $ 4 $ 155 $9,071(2) $ 337(3) $2,168
395(7) 7,120(4)
Short term investments and accrued
interest thereon........................... 80 -- -- -- 80
U.S. Government security deposited in
Trust Fund and accrued interest
thereon.................................... 9,071 -- -- 9,071(2) --
Contracts and notes receivable............. -- 6,309 -- 272(7) 6,037
Costs and estimated earnings in excess
of billings on uncompleted contracts....... -- 6,328 -- -- 6,328
Inventories -- 992 -- -- 992
Prepaid expenses........................... 13 28 -- -- 41
Deferred acquisition costs................. 213 -- -- 213(3) --
Deferred taxes............................. -- 269 -- -- 269
- ----------------------------------------------------------------------------------------------------------------------------------
Total current assets................ 9,381 14,081 9,466 17,013 15,915
- ----------------------------------------------------------------------------------------------------------------------------------
Property, plant and equipment, net.. -- 2,594 400(3) -- 4,090
1,096(4) --
Goodwill..................................... -- -- 3,071(4) -- 3,071
Deferred taxes............................... -- 187 -- -- 187
Other assets................................. 34 396 -- 123(7) 307
- ----------------------------------------------------------------------------------------------------------------------------------
Total assets........................ $9,415 $17,258 $14,033 $17,136 $23,570
==================================================================================================================================
Liabilities and stockholders' equity:
Current liabilities:
Accounts payable, accrued expenses
and income taxes payable................... $245 $4,238 150(3) -- $4,333
Line of credit............................. -- 4,991 -- 2,148(6) 7,139
Billings in excess of costs and
estimated earnings on uncompleted
contracts.................................. -- 905 -- -- 905
Stock redemption payable................... -- 700 700(6) -- --
Current maturities of long-term debt....... -- 1,809 1,448(6) -- 361
- ---------------------------------------------------------------------------------------------------------------------------------
Total current liabilities........... 245 12,643 2,298 2,148 12,738
- ---------------------------------------------------------------------------------------------------------------------------------
Long-term debt, net of current portion -- 1,064 -- -- 1,064
Deferred income taxes............... -- -- -- 598(4) 598
- ----------------------------------------------------------------------------------------------------------------------------------
Total liabilities................... 245 13,707 2,298 2,746 14,400
==================================================================================================================================
Common stock subject to possible
conversion................................... 1,813 -- 1,813(5) -- --
- ----------------------------------------------------------------------------------------------------------------------------------
Stockholders' equity:
Common Stock............................... 2 26 26(4) -- 2
Additional paid-in capital................. 7,352 73 73(4) 1,813(5) 9,165
Retained earnings.......................... 3 3,452 3,452(4) -- 3
- -----------------------------------------------------------------------------------------------------------------------------------
Total stockholders' equity.......... 7,357 3,551 3,551 1,813 9,170
- -----------------------------------------------------------------------------------------------------------------------------------
Total liabilities and 41 58
stockholders' equity................ $9, 5 $17,2 $7,662 $4,55 $23,570
==================================================================================================================================
</TABLE>
F-10
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
(1) The unaudited pro forma consolidated balance sheet is presented
assuming that no PSAC stockholders request conversion of their shares.
No such requests were made.
(2) Represents the release of restricted cash from the Trust Fund as a
result of the Merger.
(3) Represents PSAC's estimated expenses ($400,000) to be incurred in
connection with the Merger: brokers' fee ($180,000) and other
professional fees ($220,000), allocated to plant, property and
equipment.
(4) Represents the payment for the Atlas shares ($7,120,000), elimination
of Atlas' capital accounts, allocation of the excess of the purchase
price over Atlas' stockholders' equity at December 31, 1995 to
property, plant and equipment based on a recent appraisal of fixed
assets ($1,096,000) and goodwill ($3,071,000) and accounting for the
deferred tax liabilities ($598,000) at an assumed 40% tax rate on the
temporary differences arising from the excess purchase price allocated
to property, plant and equipment. The carrying value of the remaining
assets and liabilities of Atlas approximate fair value.
(5) Represents the reclassification of common stock subject to possible
conversion since the unaudited pro forma consolidated balance sheet
contemplates that no PSAC stockholders will request conversion of their
shares.
(6) Represents payment of debts due to a former stockholder of Atlas upon
consummation of the Merger ($1,448,000) and stock redemption due to
such former stockholder ($700,000).
(7) Receipt of notes receivable ($395,000) repaid at closing.
F-11
<PAGE>
EXHIBIT 2.1
Item 5 of Registrant's Report on Form 8-K dated December 18, 1995
Item 5. Other Events
As of December 18, 1995, Production Systems Acquisition Corporation
("PSAC"), Ronald M. Prime and Michael D. Austin, doing business as AMS Holdings
Company, a Michigan partnership ("AMS"), and Atlas Technologies, Inc. ("Atlas")
entered into a definitive merger agreement ("Merger Agreement") pursuant to
which a wholly-owned merger subsidiary of PSAC will merge with and into Atlas,
with Atlas becoming a wholly-owned subsidiary of PSAC upon consummation of the
merger ("Merger"). Messrs. Prime and Austin are partners of AMS, which is the
principal shareholder of Atlas. The consummation of the Merger is subject to the
terms and conditions of the Merger Agreement which will be submitted to the
stockholders of PSAC for their approval at a Special Meeting to be called for
the purpose of obtaining such approval, among other things ("Special Meeting").
The Merger
Subject to the terms and conditions of the Merger Agreement, PSAC will
become the holder of all the outstanding common stock of Atlas at the
consummation of the Merger. The consideration to be paid by PSAC to the
shareholders of Atlas ("Merger Consideration"), which will be paid in cash at
the consummation of the Merger, is equal to $7,000,000, less adjustments for
environmental conditions, if any ("Environmental Adjustment"). The Environmental
Adjustment is equal to the lesser of $25,000 or one-half of the amount estimated
by a consultant to be engaged by PSAC to perform an environmental assessment of
Atlas to be necessary to remediate environmental conditions that the consultant
recommends be corrected. The Merger Consideration will be increased at the rate
of $10,000 per week for each week that the consummation of the Merger occurs
after March 1, 1996. The portion of the Merger Consideration payable to AMS is
subject to decrease by the amount the net worth of Atlas at December 31, 1995 is
less than $3,196,084. The Merger Consideration and fees and expenses of the
transaction attributable to PSAC will be paid from the liquid assets of PSAC and
the proceeds of a special interest bearing account at IBJ Schroder Bank and
Trust Company ("Trust Fund") established with certain proceeds of the initial
public offering consummated July 5, 1994 ("IPO"). As of December 31, 1995, the
Trust Fund held $8,962,111.
The consummation of the Merger is conditioned upon various matters. The
obligations of PSAC, Atlas and the principal shareholders of Atlas to consummate
the Merger are subject to various conditions, including (i) that representations
and warranties of PSAC and Atlas be true and correct in all material respects,
(ii) performance of and compliance with covenants, agreements and conditions,
(iii) absence of any pending claim, action, suit, investigation or governmental
proceeding or law which would render the Merger unlawful, and (iv) receipt of
all necessary consents, approvals or waivers. The obligation of PSAC to
consummate the Merger is also subject to various conditions, including (i)
absence of any material adverse change since June 30, 1995 in Atlas' properties,
business, results of operations, financial condition and prospects, (ii) absence
of any environmental exposure in excess of $250,000 and (iii) approval of the
Merger Agreement and Merger by PSAC stockholders.
The Merger Agreement can be terminated by (i) mutual consent of PSAC
and AMS, (ii) if the amount of remediation expenses for environmental matters
recommended by a consultant hired by PSAC is in excess of $250,000 or a proposed
remediation requires the suspension of operations for more than thirty days,
(iii) if the Merger is not consummated before June 15, 1996, (iv) if there is a
breach of any of the covenants, representations or warranties as of the
consummation of the Merger that have not been waived, or (v) the failure of the
stockholders of PSAC to approve the transaction or the PSAC stockholders who are
eligible to do so exercise their right to convert 20% or more of the outstanding
<PAGE>
PSAC Common Stock into cash. The stockholders of PSAC who own on the record date
for the Special Meeting common stock offered in the IPO ("Public Stockholders")
who vote such common stock against the Merger Agreement have the right to demand
conversion of such shares of common stock of PSAC into cash upon consummation of
the Merger. The conversion price per share of common stock of PSAC will be equal
to the amount in the Trust Fund on the record date for the Special Meeting
divided by the shares of common stock of PSAC eligible to participate in the
distribution from the Trust Fund as set forth in the Certificate of
Incorporation of PSAC. To exercise the right of conversion, the Public
Stockholders must follow certain procedures. Based upon the amount in the Trust
Fund as of November 9, 1995, which was $8,962,111, the conversion price would be
approximately $5.27 per share. On January 15, 1996, the closing price of a share
of common stock of PSAC as reported by The Nasdaq Stock Market was approximately
$4.81.
Holders of common stock of PSAC at the close of business on the record
date for the Special Meeting ("Record Date") will be entitled to notice of and
vote at the Special Meeting. Each holder of record of common stock of PSAC is
entitled to cast one vote for each share held. With respect to the approval of
the Merger Agreement, the directors and officers of PSAC who hold an aggregate
of 427,000 shares of Common Stock have agreed to vote all their shares in
accordance with the vote of the majority in interest of all other PSAC
stockholders.
The Parties
PSAC
PSAC is a Specified Purpose Acquisition Company(R) ("SPAC"(R))* the
objective of which is to acquire an operating business ("Target Business") in
the productions systems industry. PSAC consummated its IPO on July 5, 1994, and
received net proceeds of approximately $8,980,100 after payment of offering
expenses. A substantial portion of the net proceeds ($8,262,000) was placed in
the Trust Fund, until the earlier of (i) the consummation of a business
combination or (ii) liquidation of PSAC. The remaining net proceeds of the IPO
have been and are being used to pay for business, legal and accounting, due
diligence on prospective acquisitions, and for the general and administrative
expenses of PSAC. PSAC has not engaged in any substantive commercial business
and the sole activities of PSAC have been to evaluate and select an appropriate
Target Business and to structure and negotiate the Merger Agreement. PSAC's
initial business combination must be with a Target Business whose fair market
value is at least 80% of the net assets of PSAC at the time of the business
combination. PSAC believes the proposed Merger satisfies this requirement.
If PSAC does not consummate any business combination, including the
Merger, by July 5, 1996, PSAC will be dissolved and will distribute to all
Public Stockholders in proportion to their respective equity interests in PSAC,
an aggregate sum equal to the amount in the Trust Fund on such date, inclusive
of any after tax interest thereon, plus any remaining net assets of PSAC.
- --------
* Specified Purpose Acquisition Corporation(R) and "SPAC(R)" are
registered service marks of GKN Securities Corp.
2
<PAGE>
Atlas
Atlas designs and manufactures automation equipment for the sheet metal
forming industry. The companies that generally use the products of Atlas are
those in the automobile and automotive parts, heating and air conditioning
("HVAC"), appliance and lawn and garden industries. These industries, together,
account for the greatest percentage of sheet metal stamping applications.
A high percentage of consumer durable and capital goods such as
automobile and light truck bodies and parts, appliance cabinets, HVAC housings,
lawn mower housings and equipment control cabinets use components formed from
sheet metal. Such components are made using methods of metal stamping. Metal
stamping involves holding unformed sheet metal over a shaped die, set in a
press, and lowering a shaped die mate onto the sheet metal to form it. The
combined weight of the top and bottom die may approach up to 80 tons for large
panels such as a car roof but can be as little as a few hundred pounds. Parts
typically pass through several presses in a line, each press performing a
different shaping operation on the part.
Modern production volumes and quality requirements have dictated the
need for substantially new sheet metal stamping equipment. Such equipment must
now be designed to accommodate rapid changes in production schedules, produce
profitable batch runs of varying sizes, have the capability of changing metal
press dies quickly and remain in use for up to 24 hours each day. In addition,
the equipment must be more precise and permit sheet metal to move more quickly
through the metal presses.
The core business of Atlas is the design and manufacture of three types
of metal press components: quick die changing ("QDC") equipment; sheet metal
destacking equipment; and flexible transfer equipment. Atlas manufactures QDC
systems which are comprised of custom designed carts that roll simultaneously
into spaces between sheet metal presses on a line and at the end of the line.
Each cart, which can be as large as 12 feet by 12 feet with a capacity to carry
80 tons, carries a paired die set into the space between presses, then all carts
on the line simultaneously push the carried die sets into the presses in one
direction and receive the die sets being displaced. Changing dies in a press
line with QDC requires about fifteen minutes compared with about eight hours
using cranes and forklifts and reduces the attendant risks of injury to
personnel and damage to dies. Atlas believes that a high percentage of the
several thousand press lines throughout the world can benefit from installation
of these systems. At this time, Atlas has manufacturing capacity to convert
about 35 lines annually.
Processing of most sheet metal parts begins with a stack of flat sheet
metal "blanks" which must be cleaned, lubricated and positioned for insertion
into a press line. Atlas produces the destacking equipment and auxiliary
equipment that facilitates the processing of many sheet metal parts, by
positioning them for the cleaning, lubrication and insertion into the first
press of a stamping line. The Atlas flexible transfer machinery automates the
movement of stamped parts from one die set to the next, facilitating
improvements in stamping productivity, quality and safety.
Atlas sells its equipment either on a component basis or as a fully
integrated system of QDC, destacking and flexible transfer equipment. In
addition, Atlas designs and manufactures these components and systems on a
custom basis. In large part, the Company's products increase stamping equipment
productivity.
3
<PAGE>
Sales generally are made as a result of the marketing efforts of Atlas.
For this purpose, in addition to its headquarters in Fenton, Michigan, Atlas
maintains two sales offices in Atlanta and Chicago. Atlas also uses
manufacturers representatives and OEMs specializing in metal press and related
equipment. Atlas' sales are predominantly in North America; however, Atlas has
recently targeted Europe and Asia and its sales in these regions have increased
as a percentage of all sales. The principal customers of Atlas include major
automotive and appliance manufacturers, such as General Motors Corporation, Ford
Motor Corporation, Chrysler Corporation, Whirlpool Corporation and The Carrier
Corporation. The backlog orders as of December 31, 1994 and 1995 were
approximately $16,500,000 and $19,000,000, respectively.
Atlas was formed in 1965 as Atlas Automation Inc. and in 1984 merged
with Fluid and Electric Control Co. Atlas is incorporated under the laws of the
State of Michigan. Atlas operates its manufacturing facilities in Fenton and
Linden, Michigan and employs approximately 200 persons. The principal executive
office of Atlas in located at 201 South Alloy Drive, Fenton, Michigan 48430, and
its telephone number is (810) 629-6663.
Operations after the Merger
After the consummation of the Merger, Atlas will be a wholly-owned
subsidiary of PSAC and Messrs. Prime and Austin will enter into employment
agreements with Atlas under which they will serve as the Chief Executive Officer
and President of Atlas, respectively.
The employment agreements with Messrs. Prime and Austin will be
identical except that the term of Mr. Prime's agreement will terminate on
December 31, 1998 and that of Mr. Austin will terminate on December 31, 2001.
Each agreement requires the executive to devote substantially all of his
business time and attention to the affairs of Atlas. The agreements provide for
base salaries of $190,000 per year subject to cost-of-living increases after
December 31, 1996, for six weeks vacation per year, reimbursement of expenses,
use of an automobile and mobile telephone, medical, disability and life
insurance benefits and other benefits generally made available to other
employees.
The agreements also provide for two bonuses based on the earnings of
Atlas before interest and taxes, adjusted in the manner set forth in the
agreements ("Adjusted Earnings"). Under one bonus arrangement, Messrs. Prime and
Austin will each be paid $208,333 for each of the six years beginning January 1,
1996, in which Atlas' Adjusted Earnings exceed $2,000,000 and, if the Adjusted
Earnings average at least $2,000,000 during such six-year period, they will each
be paid, at the end of the six-year period, the sum of $1,250,000 less the
aggregate of the amounts paid to them under such bonus arrangement for the prior
five years.
Under the second bonus arrangement, if during the five years beginning
January 1, 1996, the Adjusted Earnings average at least $2,626,000, they will
each be paid an amount equal to the amount by which such average Adjusted
Earnings exceed $2,626,000. Both bonus arrangements are subject to liquidation
of amount and acceleration of payment in the event of a sale by PSAC of the
capital stock of Atlas or a sale by Atlas of all or a substantial part of its
assets or issuance of capital stock of Atlas such that a person or group of
related persons becomes the owner of 51% or more of the outstanding stock of
Atlas. The bonuses are also subject to reduction to the extent of life insurance
benefits paid to an executive's estate pursuant to life insurance maintained on
the life of the executive pursuant to this employment agreement.
4
<PAGE>
Each employment agreement also contains provisions restricting the
disclosure of confidential information and incorporating the non-competition
provisions of the Merger Agreement. The Merger Agreement provides that, subject
to certain exceptions, Messrs. Prime and Austin will not make any investment in
any entity or be employed by any entity which competes directly or indirectly
with Atlas or employ any employee of Atlas or solicit customers or employees of
Atlas for a period following consummation of the Merger and ending on the later
of five years from the consummation of the Merger or two years after all
relationships between Messrs. Prime and Austin and Atlas have been terminated.
Management of PSAC
In connection with seeking stockholder approval of the Merger
Agreement, the stockholders will be asked to elect those persons currently
serving as the directors of PSAC as the Board of Directors after the
consummation of the Merger. As of the date hereof, the persons that PSAC
believes will be nominated to be elected as the directors of PSAC are as
follows:
<TABLE>
Director Current
Nominee Age Since Position with PSAC
- ------- --- ------- ------------------
<S> <C> <C> <C>
Ray J. Friant, Jr................................ 65 1993 Chairman of the Board
Samuel N. Seidman................................ 62 1993 President and Director
Joseph K. Linman................................. 57 1993 Director and Vice President
John S. Strance.................................. 71 1993 Director and Vice President
Jesse A. Levine.................................. 29 1993 Director, Chief Financial
Officer, Secretary and
Treasurer
Alan H. Foster................................... 70 1993 Director
Alan I. Goldman.................................. 58 1993 Director
</TABLE>
The Board of Directors of Atlas, after consummation of the Merger,
will include. Messrs. Prime and Austin and at least three of the directors
of PSAC.
5
<PAGE>
EXHIBIT 4.1
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
PRODUCTION SYSTEMS ACQUISITION CORPORATION
Pursuant to the General Corporation Law of the State of Delaware
("GCL"), it is hereby certified that:
1. The present name of the corporation (hereinafter called the
"corporation") is Production Systems Acquisition Corporation, which is the name
under which the corporation was incorporated. The date of filing the original
certificate of incorporation of the corporation with the Secretary of State of
the State of Delaware was June 25, 1993. The Certificate of Incorporation was
amended on March 24, 1994.
2. The amended certificate of incorporation of the corporation is
hereby further amended by deleting Article FIRST and in its stead substituting
the following:
"FIRST: The name of the corporation is Productivity Technologies
Corp."
3. The amended certificate of incorporation of the corporation is
hereby further amended by adding the following:
"TENTH: The Board of Directors shall be and is divided into three
classes: Class I, Class II and Class III. The number of directors in
each class shall be the whole number contained in the quotient
arrived at by dividing the authorized number of directors by three.
If a fraction is also contained in such quotient and if such fraction
is one-third (1/3), the extra director shall be a member of Class
III, If the fraction is two-thirds (2/3), one of the extra directors
shall be a member of Class III and the other shall be a member of
Class II. Each director shall serve for a term ending on the date of
the third annual meeting following the annual meeting at which such
director was elected: provided however, those directors elected to be
the initial directors of Class I shall serve for a term ending on the
date of the annual meeting in 1997 and those directors elected to be
the initial directors of Class II shall serve for a term ending on
the date of the annual meeting in 1998.
In the event of any increase or decrease in the authorized number
of directors, (i) each director then serving as such shall
nevertheless continue as a director in the class of which he or she
is a member until the expiration of his or her current term, or his
or her prior death, retirement, resignation or removal, and (ii) the
newly created or eliminated directorships resulting from such
increase or decrease shall be apportioned by the Board of Directors
to such class or classes as shall, so far as possible bring the
number of directors in the respective classes into conformity with
the formula in this ARTICLE TENTH, as applied to the new authorized
number of directors.
<PAGE>
Notwithstanding any of the foregoing provisions of this ARTICLE
TENTH, each director shall serve until his or her successor is
elected and has qualified or until his or her death, retirement,
resignation or removal. No director may be removed during his or her
term except for cause. Should a vacancy occur or be created, the
remaining directors (even though less than a quorum) may fill the
vacancy for the full term of the class in which the vacancy occurs or
is created."
4. Except as otherwise amended hereby, the provisions of the
amended certificate of incorporation of the corporation are in full force
and effect.
5. The amendment to the amended certificate of incorporation herein
certified has been duly adopted by the directors and stockholders of the
corporation by the vote prescribed by Section 242 of the GCL and shall become
effective on the date of the filing of this certificate.
Signed on May 21, 1996 /s/ Samuel N. Seidman
Samuel N. Seidman, President
ATTEST:
/s/ Jesse A. Levine
Jesse A. Levine, Secretary
STATE OF NEW YORK )
)ss:
COUNTY OF NEW YORK )
BE IT REMEMBERED that, on May 21, 1996, before me, a Notary Public
duly authorized by law to take acknowledgment of deeds, personally came Samuel
N. Seidman, President, and Jesse A. Levine, Secretary of Production Systems
Acquisition Corporation, who duly signed the foregoing instrument before me and
acknowledged that such signing is their act and deed, that such instrument as
executed is the act and deed of said corporation, and that the facts stated
herein are true.
Given under my hand on May 21, 1996.
/s/ Noah Scooler
Notary Public
