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<SEC-DOCUMENT>0000931763-02-000111.txt : 20020413
<SEC-HEADER>0000931763-02-000111.hdr.sgml : 20020413
ACCESSION NUMBER: 0000931763-02-000111
CONFORMED SUBMISSION TYPE: 10-K
PUBLIC DOCUMENT COUNT: 7
CONFORMED PERIOD OF REPORT: 20011031
FILED AS OF DATE: 20020122
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: ROPER INDUSTRIES INC /DE/
CENTRAL INDEX KEY: 0000882835
STANDARD INDUSTRIAL CLASSIFICATION: INDUSTRIAL INSTRUMENTS FOR MEASUREMENT, DISPLAY, AND CONTROL [3823]
IRS NUMBER: 510263969
STATE OF INCORPORATION: DE
FISCAL YEAR END: 1031
FILING VALUES:
FORM TYPE: 10-K
SEC ACT: 1934 Act
SEC FILE NUMBER: 001-12273
FILM NUMBER: 02513961
BUSINESS ADDRESS:
STREET 1: 160 BEN BURTON RD
CITY: BOGART
STATE: GA
ZIP: 30622
BUSINESS PHONE: 7063697170
MAIL ADDRESS:
STREET 1: 160 BEN BURTON ROAD
CITY: BOGART
STATE: GA
ZIP: 30622
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-K
<SEQUENCE>1
<FILENAME>d10k.txt
<DESCRIPTION>ANNUAL REPORT
<TEXT>
<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
For the fiscal year ended October 31, 2001
or
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File 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:
Name of Each Exchange
Title of Each Class On Which Registered
------------------- -------------------
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
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, 2001: $1,537,903,274.
Number of shares of Registrant's Common Stock outstanding as of December
31, 2001: 31,068,753.
----------------
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
March 15, 2002, are incorporated by reference into Part III of this Form 10-K.
<PAGE>
PART I
ITEM 1. BUSINESS
Roper Industries, Inc. ("Roper") designs, manufactures and distributes specialty
industrial controls, fluid handling and analytical instrumentation products
worldwide, serving selected segments of a broad range of markets. The principal
markets include oil & gas, research, medical, semiconductor, refrigeration,
automotive, water and wastewater, power generation, agricultural irrigation
industries and general industrial.
Roper pursues consistent and sustainable growth in sales and earnings by
operating and acquiring businesses that manufacture and sell high value-added,
highly engineered industrial products that 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) acquisition of similar businesses. See
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS - - (i) Year Ended October 31, 2001 Compared to Year Ended October
31, 2000 and (ii) - - Year Ended October 31, 2000 Compared to Year Ended October
31, 1999."
Market Share, Market Expansion and Product Development. Roper competes in many
narrowly defined niche markets. Its position in these markets is typically as
the market leader or as a competitive alternate to the market leader. In those
markets where Roper is regionally dominant it seeks to sustain growth through
geographic expansion of its marketing efforts and the development of new
products for associated markets.
Roper continued its growth in fiscal 2001 principally through internal growth of
many of its core businesses and by new business acquisitions. In the Industrial
Controls segment, Dynamco was acquired in May 2001. Roper acquired three new
Analytical Instrumentation companies during the year. Media Cybernetics was
acquired in July 2001. Struers and Logitech were acquired in September 2001.
These new business acquisitions were financed principally from borrowings and
represented a combined investment of approximately $170.2 million. Roper's debt
under its primary credit facilities was $323.5 million at October 31, 2001 and
$232.6 million at October 31, 2000. Total debt was 50% and 47% of total
capitalization at October 31, 2001 and 2000, respectively. Total debt at
year-end was 2.5x and 2.2x the preceding year's EBITDA (earnings before
interest, taxes, depreciation and amortization) for fiscal 2001 and 2000,
respectively. Roper believes it is well positioned for additional new business
and other business acquisitions.
International Sales. Sales outside the United States continue to play an
important part in Roper's overall operating results, including such sales of
U.S.-based businesses. In fiscal 2001, 2000 and 1999, Roper's net sales outside
the U.S. were 52%, 51% and 51%, respectively, of total net sales.
1
<PAGE>
Information regarding international operations is set forth in Note 12 of the
Notes to Consolidated Financial Statements included elsewhere in this Annual
Report on Form 10-K ("Annual Report").
Research and Development. Roper conducts applied research and development to
improve the quality and performance of its products, to develop new products and
to enter new markets. Research and development performed by Roper often includes
extensive field testing of its products. Roper expensed $26.3 million (4.5% of
net sales), $22.6 million (4.5% of net sales), and $16.7 million (4.1% of net
sales) in the years ended October 31, 2001, 2000 and 1999, respectively, on
research and development activities.
ANALYTICAL INSTRUMENTATION
The Analytical Instrumentation segment offers several lines of digital imaging,
fluid properties test, industrial leak test, materials analysis, microscopy
preparation and handling, and spectroscopy products that are manufactured and
distributed by nine U.S.-based, and four European-based, operating companies.
Selected financial information for the Analytical Instrumentation segment is set
forth in Note 12 of the Notes to Consolidated Financial Statements included
elsewhere in this Annual Report. This segment's principal product groups consist
of (i) digital imaging products, (ii) industrial leak test products, (iii) fluid
properties test products and (iv) materials analysis products, (v) microscopy
specimen preparation/handling products and (vi) spectroscopy products.
Digital Imaging Products. Roper manufactures and sells extremely sensitive,
high-performance charge-coupled device camera, detectors and related software
for a variety of scientific and industrial uses, which use high resolution
and/or high speed digital video, including transmission electron microscopy and
spectroscopy applications. These products are principally sold for use within
academic, government research, semiconductor, automotive, ballistic and
biological and material science end-user markets. They are frequently
incorporated into OEM products.
Roper manufactures and sells specimen preparation and handling equipment for use
with electron and other microscopes. The handling products are incorporated into
OEM equipment and also sold as a retrofit for microscopes currently in use
within the academic, government research, electronics, biological and material
science end-user markets.
Roper manufactures and sells spectrometers, monochrometers and optical
components and coatings for various high-end analytical applications. These
products are often incorporated into OEM equipment for use within the research
and material science end-user markets.
Industrial Leak Test Products. Roper manufactures and sells products and systems
to determine leaks and completeness of assemblies and sub-assemblies in the
automotive, medical and consumer products industries.
Fluid Properties Test Products. Roper manufactures and sells automated and
manual test equipment to determine certain physical properties, such as sulfur
and nitrogen content, flash point, viscosity, freeze point and distillation of
liquids and gasses for the petroleum and other fluid product industries.
2
<PAGE>
Materials Analysis Products. Roper manufactures and sells the various equipment
necessary to extract and shape certain materials for production and to extract,
shape and prepare materials samples for testing.
The class of products within the Analytical Instrumentation segment that
accounted for at least 10% of Roper's consolidated net sales in any of the
periods presented below were as follows (in thousands):
Year ended October 31,
-------------------------------------
2001 2000 1999
----------- ----------- ----------
Digital imaging products $ 134,294 $ 135,406 $ 89,739
Fluid properties test products 63,022 51,499 27,300
The following chart shows the breakdown of Analytical Instrumentation segment
sales by market for fiscal 2001:
[GRAPHIC]
General Industrial 6%
Semiconductor 6%
Research 41%
Automotive 13%
Oil & Gas 21%
Medical 4%
Other 9%
Backlog. The Analytical Instrumentation companies have lead times of up to
several months on many of their product sales, although standard products are
often shipped within four weeks of receipt of 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 $62.6 million at
October 31, 2001 compared to $54.6 million as of October 31, 2000. The increase
was attributed to the fiscal 2001 acquisitions offset by an approximate 16%
reduction in digital imaging product backlog as lead times were worked down.
Distribution and Sales. Distribution and sales are achieved through a
combination of manufacturer's representatives, agents, distributors and direct
sales offices in both the U.S. and various leading industrial nations.
3
<PAGE>
Customers. Each of the companies in the Analytical Instrumentation segment sells
to a variety of customers worldwide, with certain major OEMs in the automotive,
medical diagnostics and microscopy industries having operations globally. None
of its customers accounted for as much as 10% of its sales.
INDUSTRIAL CONTROLS
The Industrial Controls segment's products include a wide variety of machinery
and other industrial valves, controls, control systems and measurement and
monitoring instruments which are manufactured and distributed by six U.S.-based,
and one European-based, operating companies. Selected financial information for
the Industrial Controls segment is set forth in Note 12 of the Notes to the
Consolidated Financial Statements included elsewhere in this Annual Report. This
segment's principal sales and services consist of: (i) rotating machinery
control systems (ii) industrial valves and controls and (iii) vibration
instrumentation.
Rotating Machinery Control Systems. Roper manufactures control systems and
panels, and provides related engineering and commissioning services, for
applications involving compressors, turbines, and engines in the oil & gas,
pipeline, power generation and marine engine markets.
Industrial Valves and Controls. Roper manufactures a variety of valves, sensors,
switches and control products used on engines, compressors, turbines and other
powered equipment for the oil & gas, pipeline, power generation, refrigeration,
marine engine and general industrial markets. Most of these products are
designed for use in hazardous environments.
Vibration Instrumentation. Roper 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.
Those classes of products within the Industrial Controls segment that accounted
for at least 10% of Roper's consolidated net sales in any of the periods
presented below were as follows (in thousands):
Year ended October 31,
---------------------------------------
2001 2000 1999
---------- ---------- -----------
Rotating machinery control systems $ 109,325 $ 91,409 $ 78,979
Industrial valves and controls 63,235 27,996 25,123
4
<PAGE>
The following chart shows the breakdown of sales by market for fiscal 2001 for
the Industrial Controls segment:
[GRAPHIC]
Oil & Gas - Pipeline 38%
Power Generation 10%
Marine 3%
Refrigeration 14%
General Industrial 6%
Oil & Gas - Other 24%
Other 5%
Backlog. The majority of this segment's business consists of large engineered
oil & 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. Roper
enters into blanket purchase orders for the manufacture of products for certain
original equipment manufacturers ("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 $31.2 million at October 31, 2001
compared to $29.2 million as of October 31, 2000. The increase in backlog is
primarily attributed to the balance of a special $20 million order received from
RAO Gazprom ("Gazprom"), a large Russian natural gas company, in the fourth
quarter of fiscal 2001.
Distribution and Sales. Distribution and sales occur through direct sales
offices, manufacturer's representatives and industrial machinery distributors.
Customers. Each of the Industrial Controls business units sells to a variety of
customers worldwide. Gazprom was the biggest single customer in this segment for
the year, contributing approximately 25% of its sales in fiscal 2001. Gazprom
has previously indicated its interest to continue purchases of control systems
through 2007. However, continuation of this business at expected levels will
continue to be subject to numerous commercial and political risks beyond Roper's
control and cannot be assured. See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Forward Looking Information".
5
<PAGE>
FLUID HANDLING
The Fluid Handling segment's products include general and specialty pumps and a
range of flow measurement and metering products which are manufactured and
distributed by five U.S.-based, and one European-based, operating units.
Selected financial information for the Fluid Handling segment is set forth in
Note 12 of the Notes to Consolidated Financial Statements included elsewhere in
this Annual Report. This segment's principal products consist of (i) industrial
pumps, (ii) integrated dispense systems used primarily in the semiconductor
industry and (iii) flow measurement and metering products.
Industrial Pumps. Roper 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 materials, such as Roper's "mud motor" used
in the oil & gas industry for directional drilling, (iii) centrifugal pumps
which are used for pumping water and other low-viscosity liquids in
agricultural, industrial and municipal applications, (iv) membrane and piston
pumps which transport high solids content slurries used in a variety of
industries including municipal, mining, ceramics, and food, (v) high-pressure
piston pumps used in marine, food, and municipal applications, and (vi)
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. Roper's microprocessor-based integrated dispense
systems are used principally in the semiconductor industry to dispense chemicals
in a precise and repeatable fashion during the wafer fabrication process. These
highly reliable dispense units either incorporate no mechanical displacement,
utilizing the application of electronically regulated pressure, or utilize
positive displacement technology. Cabinet based systems manage the distributions
of bulk chemicals used in wafer fabrication to equipment such as the dispense
systems mentioned above.
Flow Measurement and Metering Products. Roper manufactures turbine and positive
displacement flow meters, emissions measurement equipment and flow meter
calibration products for the aerospace, automotive, power generation and other
industrial applications.
Those classes of products within the Fluid Handling segment that accounted for
at least 10% of Roper's consolidated net sales in any of the periods presented
below were as follows (in thousands):
Year ended October 31,
-----------------------------------------
2001 2000 1999
------------ ----------- ------------
Industrial pumps $ 84,398 $ 78,955 $ 76,193
6
<PAGE>
The following chart shows the breakdown of Fluid Handling segment sales by
market for fiscal 2001:
[GRAPHIC]
General Industrial 21%
Other 9%
Semiconductor 17%
Medical 6%
Power Generation 6%
Oil & Gas 7%
Refrigeration 7%
Irrigation 6%
Aerospace 3%
Transportation 4%
Water and Wastewater 14%
Backlog. The Fluid Handling companies' sales also reflect a combination of
standard products and specifically engineered, application-specific products.
Standard products are typically shipped within two weeks of receipt of order.
Application-specific products typically ship within six-to-twelve weeks
following receipt of order, although larger project orders and blanket purchase
orders for certain OEMs may extend for longer periods. This segment's backlog of
firm unfilled orders, including blanket purchase orders, totaled $21.7 million
at October 31, 2001 compared to $26.1 million as of October 31, 2000. The
decrease was attributed primarily to significantly reduced demand for
semiconductor equipment products as that market contracted severely during
fiscal 2001.
Distribution and Sales. Distribution and sales occur through direct sales
personnel, manufacturer's representatives and stocking and non-stocking
distributors.
Customers. Some of the Fluid Handling segment's companies have sales to one or a
few customers that represent a significant portion of that company's sales and
the relative importance of such a concentrated customer base for these companies
is expected to continue. However, no customer was responsible for as much as 10%
of the segment's fiscal 2001 net sales.
MATERIALS AND SUPPLIERS
Most materials and supplies used by Roper are believed to be readily available
from numerous sources and suppliers throughout the world which are believed
adequate for their needs. Some high-performance components for digital imaging
products can be in short supply and Roper continuously investigates and
identifies alternative sources where possible. Roper believes this condition
equally affects its competitors and, thus far, it has not had a significant
adverse effect on sales.
7
<PAGE>
ENVIRONMENTAL MATTERS AND OTHER GOVERNMENTAL REGULATION
Roper 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 Roper in the future. It is Roper's policy
to comply with all applicable environmental, health and safety laws and
regulations.
Roper is subject to various U.S. and foreign federal, state and local 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 Roper's contractual relationships with its distributors and
manufacturers' representatives, some of which impose substantive standards on
these relationships.
COMPETITION
Roper has significant competition from a limited number of companies in each of
its markets. No single competitor competes with Roper over a significant number
of product lines. Roper's products compete primarily on the basis of
performance, innovation, price, and established customer service capabilities
with existing customers.
PATENTS AND TRADEMARKS
Roper owns the rights under a number of patents and trademarks relating to
certain of its products and businesses. While it believes that none of its
companies is substantially dependent on any single, or group, of patents,
trademarks or other items of intellectual property rights, the product
development and market activities of Compressor Controls, Gatan, Integrated
Designs, Redlake MASD and Roper Scientific, in particular, have been planned and
conducted in conjunction with important and continuing patent strategies.
Compressor Controls has been granted a series of U.S. and associated foreign
patents and a significant portion of its fiscal 2001 sales was of equipment that
incorporated innovations that are the subject of several such patents that will
not begin to expire until 2004. Integrated Designs was granted a U.S. patent in
1994 related to methods and apparatus claims embodied in its integrated dispense
systems that accounted for the majority of its fiscal 2001 sales. The U.S.
patent will expire in 2011.
EMPLOYEES
As of October 31, 2001, Roper had approximately 2,950 total employees, of whom
approximately 2,000 were located in the United States.
8
<PAGE>
ITEM 2. PROPERTIES
Roper's corporate offices, consisting of 9,500 square feet of leased space, are
located near Athens, Georgia. Roper has established sales and service locations
around the world to support its operating units. The principal operating company
properties are on the table that follows.
<TABLE>
<CAPTION>
Square footage
---------------------
Location Property Owned Leased Industry segment
- ---------------------- ------------ ------- --------- --------------------------
<S> <C> <C> <C> <C>
Phoenix, AZ Office / Mfg. - 45,900 Fluid Handling
Tucson, AZ Office / Mfg. - 37,300 Analytical Instrumentation
Pleasanton, CA Office - 19,400 Analytical Instrumentation
Richmond, CA Office / Mfg. 67,400 - Industrial Controls
San Diego, CA Office / Mfg. - 43,000 Analytical Instrumentation
Rodovre, Denmark Office / Mfg. - 114,000 Analytical Instrumentation
Verson, France Office / Mfg. - 22,500 Industrial Controls
Commerce, GA Office / Mfg. 203,800 - Fluid Handling
Buchen, Germany Office / Mfg. 191,500 - Fluid Handling
Lauda, Germany Office / Mfg. 37,900 - Analytical Instrumentation
Des Moines, IA Office / Mfg. - 88,000 Industrial Controls
Belle Chasse, LA Office / Mfg. - 33,200 Industrial Controls
Burr Ridge, IL Office / Mfg. 55,000 - Industrial Controls
Acton, MA Office / Mfg. - 32,700 Analytical Instrumentation
Silver Spring, MD Office - 11,800 Analytical Instrumentation
Trenton, NJ Office / Mfg. 40,000 - Analytical Instrumentation
Syosset, NY Office / Mfg. - 27,500 Fluid Handling
Portland, OR Office / Mfg. - 128,000 Fluid Handling
Warrendale, PA Mfg. - 76,300 Analytical Instrumentation
Carrollton, TX Office / Mfg. - 22,000 Fluid Handling
Houston, TX Office / Mfg. 12,600 - Industrial Controls
Houston, TX Office / Mfg. - 35,000 Analytical Instrumentation
Houston, TX Office / Mfg. - 27,500 Analytical Instrumentation
Marble Falls, TX Office / Mfg 10,000 - Analytical Instrumentation
McKinney, TX Office / Mfg. - 25,000 Industrial Controls
San Antonio, TX Office / Mfg. - 42,200 Analytical Instrumentation
Bury St. Edmunds, U.K. Office / Mfg. 90,000 - Industrial Controls
Glasgow, U.K. Office / Mfg. 27,700 - Analytical Instrumentation
</TABLE>
Roper considers each of the above facilities 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 operating requirements.
9
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
Roper is a defendant in various lawsuits involving product liability, employment
practices and other matters, none of which Roper believes, if adversely
determined, would have a material adverse effect on its consolidated financial
position or results of operations. The majority of such claims are subject to
insurance coverage.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
No matter was submitted to a vote of Roper's security-holders during the fourth
quarter of fiscal 2001.
10
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Roper's single class of common stock issued and outstanding trades on the New
York Stock Exchange ("NYSE") under the symbol "ROP". Following is the range of
high and low sales prices for Roper's common stock as reported by the NYSE
during each of its fiscal 2001 and 2000 quarters. The last sales price reported
by the NYSE on December 31, 2001, was $49.50.
High Low
----------- -----------
2001 4th Quarter $ 45.00 $ 31.00
3rd Quarter 45.80 34.99
2nd Quarter 43.00 33.65
1st Quarter 38.50 29.94
2000 4th Quarter 35.75 26.19
3rd Quarter 36.19 24.00
2nd Quarter 37.38 25.81
1st Quarter 38.56 30.00
Based on information available to Roper and its transfer agent, Roper believes
that as of December 31, 2001 there were 215 record holders of its common stock.
Dividends. Roper has declared a cash dividend in each fiscal quarter since its
February 1992 initial public offering and has also increased its dividend rate
annually since the initial public offering. In November 2001, Roper's Board of
Directors increased the quarterly dividend rate to $0.0825 per share, an
increase of 10% from the prior rate. However, the timing, declaration and
payment of future dividends will be at the sole discretion of Roper's Board of
Directors and will depend upon Roper'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, of
cash dividends that will be declared in the future.
Recent Sales of Unregistered Securities. None
11
<PAGE>
ITEM 6. SELECTED FINANCIAL INFORMATION
The consolidated selected financial data presented below has been derived from
Roper'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 Roper's Consolidated Financial Statements
and related notes thereto included elsewhere in this Annual Report.
<TABLE>
<CAPTION>
Year ended October 31,
------------------------------------------------------------------
2001/(1)/ 2000/(2)/ 1999/(3)/ 1998/(4)/ 1997/(5)/
----------- -------------------------- --------------------------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Operations data:
Net sales $ 586,506 $ 503,813 $ 407,256 $ 389,170 $ 298,236
Gross profit 308,970 258,824 210,503 190,953 153,389
Income from operations 98,428 88,196 77,955 66,092 60,870
Net earnings applicable to common shares 55,839 49,278 47,346 39,316 36,350
Per share data:
Net earnings applicable to common shares:
Basic $ 1.82 $ 1.62 $ 1.56 $ 1.27 $ 1.19
Diluted 1.77 1.58 1.53 1.24 1.16
Dividends 0.30 0.28 0.26 0.24 0.20
Balance sheet data:
Working capital $ 129,173 $ 129,463 $ 89,576 $ 82,274 $ 86,954
Total assets 762,122 596,902 420,163 381,533 329,320
Long-term debt, less current portion 323,830 234,603 109,659 120,307 99,638
Stockholders' equity 323,506 270,191 231,968 197,033 177,869
</TABLE>
(1) Includes results of Struers and Logitech from September 2001 and several
smaller businesses acquired throughout fiscal 2001.
(2) Includes results of MASD from November 1999, Abel Pump from May 2000, Antek
Instruments from August 2000, Hansen Technologies from September 2000 and
several smaller businesses acquired throughout fiscal 2000.
(3) Includes results of Petroleum Analyzer companies acquired in June 1999.
(4) Includes results of Photometrics from April 1998 and several smaller
businesses acquired throughout fiscal 1998.
(5) Includes results of Princeton Instruments and Petrotech from May 1997.
12
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion should be read in conjunction with Roper's Consolidated
Financial Statements and selected financial data included elsewhere in this
Annual Report.
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.
Year ended October 31,
-----------------------
2001 2000 1999
----- ----- -----
Net sales 100.0% 100.0% 100.0%
Cost of sales 47.3 48.6 48.3
----- ----- -----
Gross profit 52.7 51.4 51.7
Selling, general and administrative expenses 35.9 33.9 32.6
----- ----- -----
Income from operations 16.8 17.5 19.1
Interest expense 2.7 2.7 1.8
Other income 0.6 0.3 0.4
----- ----- -----
Earnings before income taxes 14.7 15.1 17.7
Income taxes 5.2 5.3 6.1
----- ----- -----
Net earnings 9.5% 9.8% 11.6%
===== ===== =====
<TABLE>
<CAPTION>
Year ended October 31,
-------------------------------------------------
2001 2000 1999
--------------- --------------- ---------------
$ % $ % $ %
------- ------ ------- ------ ------- ------
<S> <C> <C> <C> <C> <C> <C>
Industrial Controls:/(1)/
Net sales 196,738 159,262 160,090
Gross profit 100,574 51.1 78,523 49.3 78,957 49.3
Operating profit/(2)/ 40,066 20.4 28,460 17.9 29,973 18.7
Fluid Handling:/(3)/
Net sales 125,399 121,387 98,298
Gross profit 60,709 48.4 58,899 48.5 47,662 48.5
Operating profit/(2)/ 27,402 21.9 29,600 24.4 27,386 27.9
Analytical Instrumentation:/(4)/
Net sales 264,369 223,164 148,868
Gross profit 147,687 55.9 121,402 54.4 83,884 56.3
Operating profit/(2)/ 43,207 16.3 36,509 16.4 27,713 18.6
</TABLE>
/(1)/ Includes results of Hansen Technologies from September 2000 and
several smaller businesses acquired during the years presented.
/(2)/ Operating profit excludes restructuring charges and unallocated
corporate administrative costs. Restructuring charges were incurred
only in fiscal 2001 and were $2,230, $279 and $50 in Industrial
Controls, Fluid Handling and Analytical Instrumentation,
respectively. Unallocated corporate administrative costs were $9,688,
$6,373 and $7,117 for the years ended October 31, 2001, 2000 and
1999, respectively.
/(3)/ Includes results of Abel Pump from May 2000 and several smaller
businesses acquired during the years presented.
/(4)/ Includes results of Photometrics from April 1998, the fiscal 1999
Petroleum Analyzer acquisitions from June 1999, MASD from November
1999, Antek Instruments from August 2000, Struers and Logitech from
September 2001 and several smaller businesses acquired during the
years presented.
13
<PAGE>
Year Ended October 31, 2001 Compared to Year Ended October 31, 2000
Net sales for fiscal 2001 were $586.5 million, a 16% increase compared to fiscal
2000. Excluding sales to RAO Gazprom ("Gazprom", a large Russian natural gas
company), net sales increased 14% in fiscal 2001 compared to fiscal 2000. Fiscal
2001 pro forma net sales (adjusted to remove exited operations) increased 5%
compared to pro forma net sales during fiscal 2000 (also adjusted to include the
results of companies acquired during fiscal 2001 for the same length of time as
included in fiscal 2001's results).
In the Analytical Instrumentation segment, actual net sales increased 18% and
pro forma net sales increased 5%. The increase in actual net sales resulted
mostly from the contribution of companies acquired during fiscal 2001 and 2000.
The increase in pro forma net sales resulted mostly from strong digital imaging
demand from research markets. Weakness in the automobile industry adversely
affected sales of Roper's high-speed digital camera products and its industrial
leak test products.
In the Fluid Handling segment, actual net sales increased 3% and pro forma net
sales decreased 7%. Actual net sales increased primarily as the result of
companies acquired over the past two years. Pro forma net sales decreased
primarily as the result of depressed business conditions in the semiconductor
industry. This segment's pro forma net sales to this industry decreased 33% in
fiscal 2001 compared to fiscal 2000. Roper expects these sales to be lower still
in fiscal 2002. Net sales in fiscal 2001 for this segment's businesses not
serving the semiconductor industry increased 2% compared to pro forma net sales
in fiscal 2000.
In the Industrial Controls segment, actual net sales increased 24% and pro forma
net sales increased 13%. Actual net sales increased primarily as a result of
companies acquired since the beginning of fiscal 2000, increased shipments to
Gazprom and higher revenues from customers in energy markets. These increases
were partially offset by lower revenues at Petrotech that resulted from
restructuring activities that occurred during fiscal 2001. Pro forma net sales
increased primarily as a result of additional sales to Gazprom. Sales to Gazprom
were $49.3 million during fiscal 2001, or an increase of 45% compared to fiscal
2000.
Roper's overall gross profit percentage increased to 52.7% in fiscal 2001
compared to 51.4% in fiscal 2000. Several factors were the largest contributors
to the change. The largest factor was the growth in the Analytical
Instrumentation segment, Roper's highest gross margin segment. Other large
factors contributing to increased margins were improved leverage on the
additional sales to Gazprom and the benefits from exiting certain low margin
businesses at Petrotech during 2001. Adversely affecting margins were the
increased sales from Roper's lower margin refrigeration valves business that was
acquired in September 2000.
Analytical Instrumentation's gross margin increased to 55.9% in fiscal 2001
compared to 54.4% in fiscal 2000. Most of this improvement resulted from
favorable leverage related to increased digital imaging sales and the
incremental sales at Struers and Logitech that were at relatively high margins.
Fluid Handling's gross margin decreased to 48.4% in fiscal 2001 compared to
48.5% in fiscal 2000. This decrease was caused mostly by lower sales of its high
margin semiconductor-related products. Industrial Controls' gross margin
increased to 51.1% in fiscal 2001 compared to 49.3% in fiscal
14
<PAGE>
2000. This increase was caused primarily by the favorable effects of increased
sales to Gazprom and lower sales from exited businesses, and was partially
offset by increased sales of lower-margin refrigeration valve products.
Selling, general and administrative ("SG&A") expenses as a percentage of net
sales in fiscal 2001 and fiscal 2000 are presented in the following table.
2001 2000
------------------ ------------------
Total Adjusted* Total Adjusted*
------- -------- ------- ---------
Analytical Instrumentation 39.5% 36.2% 38.0% 34.5%
Fluid Handling 26.8 24.5 24.1 22.3
Industrial Controls 31.9 28.5 31.4 29.8
Corporate 1.7 1.7 1.3 1.3
------ ------ ------ ------
Total 35.9% 32.8% 33.9% 31.3%
* Excludes goodwill amortization (2001 and 2000) and restructuring
charges (2001).
The increase in SG&A costs as a percentage of net sales in fiscal 2001 compared
to fiscal 2000 for the Fluid Handling segment was caused by the adverse leverage
that resulted from the quick and deep cyclical decline in the segment's
semiconductor-related business. Other changes in the relationships between SG&A
costs and net sales were not considered significant.
Interest expense was $15.9 million in fiscal 2001 compared to $13.5 million in
fiscal 2000. Interest expense was higher in fiscal 2001 mostly due to the
borrowings associated with the acquisitions that occurred since the beginning of
fiscal 2000. All of these acquisitions, representing total costs of over $330
million during these two fiscal years, were paid for with cash provided by
Roper's then-existing credit facilities. Short-term interest rates started to
decline dramatically early in calendar 2001. Roper's effective interest rate was
approximately 6.5% during fiscal 2001 compared to approximately 6.9% during
fiscal 2000.
The provision for income taxes was 35.4% of pretax earnings in fiscal 2001
compared to 35.1% in fiscal 2000. This change was not considered significant.
Roper's other components of comprehensive earnings in fiscal 2001 were currency
translation adjustments resulting from net assets denominated in currencies
other than the U.S. dollar. These net assets were primarily denominated in euros
(or euro-equivalent currencies), British pounds, Danish krone or Japanese yen.
During fiscal 2001, the U.S. dollar weakened against the euro, was relatively
stable against the pound and strengthened against the yen and krone (after the
acquisition of Danish assets in September). During fiscal 2001, Roper's
consolidated net assets increased $1.2 million due to foreign currency
translation adjustments.
15
<PAGE>
<TABLE>
<CAPTION>
Net sales orders
Year ended October 31,
--------------------------------------------------
2001 2000 Pro forma
------------------------ ------------------------
Pro forma Actual Pro forma Actual change
---------- ----------- ------------- ----------- -----------
(in thousands)
<S> <C> <C> <C> <C> <C>
Analytical Instrumentation $ 260,927 $ 260,927 $ 273,105 $ 239,903 -4 %
Fluid Handling 121,231 121,231 142,858 128,925 -15
Industrial Controls 195,073 200,681 170,267 160,136 +15
----------- ----------- ------------- ----------- -----------
$ 577,231 $ 582,839 $ 586,230 $ 528,964 -2 %
=========== =========== ============= =========== ===========
</TABLE>
The decrease in Analytical Instrumentation's pro forma net sales orders in
fiscal 2001 compared to fiscal 2000 was broad-based. Net sales orders for each
major product group declined from 2% - 9%. This segment's businesses were
adversely affected by poor market conditions in the automotive and semiconductor
industries. The decrease in pro forma net sales orders for the Fluid Handling
segment was caused largely by a decline in semiconductor-related orders. The
increase in pro forma net sales orders for the Industrial Controls segment was
caused primarily by additional orders from Gazprom.
<TABLE>
<CAPTION>
Sales order backlog
October 31,
--------------------------------------------------
2001 2000 Pro forma
------------------------ ------------------------
Pro forma Actual Pro forma Actual Change
---------- ----------- ------------- ----------- -----------
(in thousands)
<S> <C> <C> <C> <C> <C>
Analytical Instrumentation $ 62,609 $ 62,609 $ 68,092 $ 54,550 -8 %
Fluid Handling 21,678 21,678 26,073 26,073 -17
Industrial Controls 31,217 31,217 25,166 29,246 +24
----------- ----------- ------------- ----------- -----------
$ 115,504 $ 115,504 $ 119,331 $ 109,869 -3 %
=========== =========== ============= =========== ===========
</TABLE>
Changes in sales order backlog were consistent with changes in net sales orders.
Year Ended October 31, 2000 Compared to Year Ended October 31, 1999
Net sales for fiscal 2000 of $503.8 million were up 24% compared to the prior
year. Excluding net sales to Gazprom, net sales increased 26% in fiscal 2000
compared to fiscal 1999. Net sales for fiscal 2000 were 1% less than pro forma
net sales for fiscal 1999.
Net sales for the Analytical Instrumentation segment increased 50%, mostly the
result of business acquisitions (Petroleum Analyzer, MASD, Antek Instruments and
other smaller businesses). This segment's net sales were 2% less than the prior
year's pro forma net sales largely from lower comparative sales in fluid
properties test equipment markets.
Net sales for the Fluid Handling segment increased 23%, mostly the result of
business acquisitions (Abel Pump and other smaller businesses) and a very strong
fiscal 2000 for this segment's
16
<PAGE>
semiconductor-related business. This segment's net sales were 6% higher than pro
forma net sales for fiscal 1999. Fluid Handling's historical semiconductor
business increased its net sales in fiscal 2000 by 81% (partly from favorable
comparisons to reported net sales in the first half of fiscal 1999) and its
acquired business increased its net sales by 51% compared to the same period in
the prior year. Fiscal 2000 net sales for this segment's centrifugal pump
business decreased 19% compared to the prior year due to weak agricultural and
water/wastewater markets. Agricultural markets were adversely impacted by
widespread drought conditions and low commodity prices in the United States.
Roper believes the municipal water and wastewater markets were adversely
affected by resources diverted to minimize Y2K exposures early in fiscal 2000,
and its centrifugal pump business had increased exposure to these markets as it
developed larger pumps to pursue more lucrative projects. Fluid Handling's
piston metering pumps business' net sales were also down 15% compared to fiscal
1999 as this company's largest customer reduced its purchases until it resolves
an FDA compliance problem unrelated to this company's products.
Net sales for the Industrial Controls segment decreased less than 1% in fiscal
2000 compared to fiscal 1999 and fiscal 2000 net sales were 3% less than pro
forma fiscal 1999 net sales. The timing of this segment's primary fiscal 2000
acquisition (Hansen Technologies in September 2000) was such that it did not
significantly affect fiscal 2000 results. This segment was significantly
influenced by conditions in the exploration and production sectors of the oil &
gas industry. Roper believes several large oil & gas business combinations early
in the year delayed capital spending programs, and spending had yet to recover
from the effects of relatively low oil and natural gas prices throughout much of
fiscal 1999. Throughout fiscal 2000, net sales each quarter (excluding sales to
Gazprom) improved in comparison to the same quarter of fiscal 1999. Whereas
these first quarter net sales were down 22% compared to the prior year, fourth
quarter net sales (also excluding Hansen Technologies) were up 13%. Net sales to
Gazprom of $33.9 million in fiscal 2000 were comparable to fiscal 1999 net sales
of $35.0 million.
The gross profit percentage for the Analytical Instrumentation segment decreased
to 54.4% in fiscal 2000 compared to 56.3% in fiscal 1999. This decrease arose
mostly from the inclusion of MASD for most of fiscal 2000. If MASD's results
were excluded from the segment's results in fiscal 2000, the segment's gross
profit percentage was 55.9%.
SG&A expenses as a percentage of net sales in fiscal 2000 and fiscal 1999 are
presented in the following table.
<TABLE>
<CAPTION>
2000 1999
--------------------------- --------------------------
Total Adjusted* Total Adjusted*
----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Analytical Instrumentation 38.0 % 34.5 % 37.7 % 34.1 %
Fluid Handling 24.1 22.3 20.6 19.0
Industrial Controls 31.4 29.8 30.6 29.3
Corporate 1.3 1.3 1.7 1.7
----------- ----------- ----------- -----------
Total 33.9 % 31.3 % 32.5 % 30.3 %
=========== =========== =========== ===========
</TABLE>
* Excludes goodwill amortization.
SG&A expenses increased as a percentage of net sales for Roper as a whole
because of the increased costs in the Fluid Handling segment and the increased
size of the Analytical
17
<PAGE>
Instrumentation segment with its relatively high level of SG&A expenses compared
to Roper's other business segments.
SG&A expenses for the Fluid Handling segment increased as a percentage of net
sales mostly due to relatively high cost structures of recent acquisitions,
particularly Abel Pump and Flowdata. Another significant reason for this
segment's increased SG&A expenses as a percentage of net sales was the adverse
leverage associated with the decline in the segment's centrifugal pump business
combined with the added costs of this business moving into a larger facility
early in fiscal 2000. Other changes in the relationships between SG&A costs and
net sales were not considered significant.
Interest expense was $13.5 million in fiscal 2000 compared to $7.3 million in
fiscal 1999. Interest expense was higher in fiscal 2000 due primarily to the
borrowings associated with the numerous acquisitions that occurred during fiscal
1999 and especially during fiscal 2000. All of these acquisitions, representing
total costs of approximately $200 million during these two fiscal years, were
paid for with cash provided by Roper's then-existing credit facilities.
The provision for income taxes was 35.1% of pretax earnings in fiscal 2000
compared to 34.5% in fiscal 1999. The increase in the effective income tax rate
was due to several of the recent acquisitions located in relatively high income
tax rate jurisdictions and the amortization of some goodwill associated with
these acquisitions was not deductible for income tax purposes.
Roper's other components of comprehensive earnings in fiscal 2000 were currency
translation adjustments resulting from net assets denominated in currencies
other than the U.S. dollar. These net assets were primarily denominated in
euros, British pounds or Japanese yen. The U.S. dollar strengthened against each
of these currencies during fiscal 2000, but especially against the euro and
particularly during Roper's fourth quarter of fiscal 2000. During fiscal 2000,
Roper's consolidated net assets decreased $6.7 million ($4.1 million in the
fourth quarter) due to foreign currency translation adjustments. Roper's
goodwill denominated in non-U.S. currencies also decreased by $6.7 million due
to currency translation adjustments.
18
<PAGE>
The following table summarizes Roper's net sales orders and sales order backlog
information (in thousands). The pro forma amounts include comparable time
periods for those companies acquired during fiscal 2000.
<TABLE>
<CAPTION>
Net sales orders Sales order backlog
Year ended October 31, October 31,
------------------------------------- --------------------------------------
2000 1999 2000 1999
----------- ------------------------ ----------- -------------------------
Actual Pro forma Actual Actual Pro forma Actual
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Analytical Instrumentation $ 239,903 $ 228,000 $ 148,478 $ 54,550 $ 41,693 $ 30,000
Fluid Handling 128,925 117,125 100,600 26,073 19,103 14,375
Industrial Controls 160,136 157,596 150,604 29,246 30,405 29,286
----------- ----------- ----------- ----------- ----------- -----------
$ 528,964 $ 502,721 $ 399,682 $ 109,869 $ 91,201 $ 73,661
=========== =========== =========== =========== =========== ===========
</TABLE>
The increase in Analytical Instrumentation's net sales orders in fiscal 2000
compared to fiscal 1999 pro forma net sales orders was mostly due to an 8%
increase in the segment's digital imaging businesses and a 20% increase in its
spectroscopy business (which was influenced by the strong semiconductor
industry).
The increase in Fluid Handling's net sales orders in fiscal 2000 compared to
fiscal 1999 pro forma net sales orders was mostly due to continued strength in
the segment's semiconductor-related businesses, whose net sales orders increased
68%.
Financial Condition, Liquidity and Capital Resources
Total current assets exceeded total current liabilities by $129.2 million at
October 31, 2001 compared to $129.5 million at October 31, 2000. Total debt was
$326.8 million at October 31, 2001 (50% of total capital) compared to $241.3
million at October 31, 2000 (47% of total capital). Roper's increased debt and
increased financial leverage at October 31, 2001 compared to that a year ago was
due to the additional borrowings incurred to fund fiscal 2001 business
acquisitions.
Roper's principal $275 million credit facility with a group of banks provides
most of its daily external financing requirements, consisting of revolving
loans, swing line loans and letters of credit. At October 31, 2001, utilization
of this facility included $86.5 million of U.S. denominated borrowings, the
equivalent of $91.6 million of non-U.S. denominated borrowings and $2.9 million
of outstanding letters of credit. Total unused availability under this facility
was $94.0 million at October 31, 2001. This facility matures May 2005. Roper
also has a number of smaller facilities in various non-U.S. locations to support
the businesses in these locations.
Roper's outstanding indebtedness at October 31, 2001 also included $125 million
of term notes. One set of notes totaling $40 million matures May 2007. The other
set of notes totaling $85 million matures May 2010. Neither set of notes
requires sinking fund payments. Roper may prepay either set of notes by paying
the holders thereof the discounted present value of all remaining scheduled
payments using a discount rate equal to a risk-free rate plus a margin.
19
<PAGE>
Although the excess of current assets over current liabilities at October 31,
2001 and 2000 were similar, Roper acquired approximately $30 million of net
current assets through business acquisitions during fiscal 2001. Reductions in
net current assets were attributed to improved management of accounts
receivable, inventories and payables.
Capital expenditures were $7.5 million during fiscal 2001 compared to the $15.2
million incurred during fiscal 2000.
In November 2001, Roper's Board of Directors increased the quarterly cash
dividend paid on its outstanding common stock to $0.0825 per share from $0.075
per share, an increase of 10%. This represents the ninth consecutive year in
which the quarterly dividend has been increased since Roper's 1992 initial
public offering. Roper's Board of Directors has declared a dividend payable on
January 31, 2002. Payment of any additional dividends requires further action by
the Board of Directors.
Roper believes that internally generated cash flows and the remaining
availability under its various credit facilities will be adequate to finance
normal operating requirements and further acquisition activities. Although Roper
maintains an active acquisition program, any further acquisitions will be
dependent on numerous factors and it is not feasible to reasonably estimate if
or when any such acquisitions will occur and what the impact will be on Roper's
activities, financial condition and results of operations. Roper may also
explore alternatives to increase its access to additional capital resources.
Roper anticipates that its recently acquired companies as well as its other
companies will generate positive cash flows from operating activities, and that
these cash flows will permit the reduction of currently outstanding debt at a
pace consistent with that which Roper historically has experienced. However, the
rate at which Roper can reduce its debt during fiscal 2002 (and reduce the
associated interest expense) will be affected by, among other things, the
financing and operating requirements of any new acquisitions and the financial
performance of its existing companies and cannot be predicted with certainty.
Recently Issued Accounting Standards
The Financial Accounting Standards Board ("FASB") issued Statement of Financial
Accounting Standards ("SFAS") 141 - "Business Combinations" that applies to all
business combinations completed subsequent to June 30, 2001. SFAS 141 requires
use of the purchase method for accounting for a business combination. Other
provisions of SFAS 141 must be adopted concurrently with the adoption of SFAS
142. Roper does not expect the full adoption of SFAS 141 to significantly affect
its accounting for any business combinations completed prior to June 30, 2001.
The FASB issued SFAS 142 - "Goodwill and Other Intangible Assets" that Roper
intends to adopt effective November 1, 2001 (otherwise, adoption would be
required on November 1, 2002). Once adopted, this standard provides that
goodwill will no longer be subject to amortization. Instead,
20
<PAGE>
goodwill will be subjected to a periodic analysis to evaluate possible
impairment. Any such impairment would be recognized as an expense immediately.
The FASB issued SFAS 143 - "Accounting for Asset Retirement Obligations" that
Roper is required to adopt by November 1, 2002. Roper does not currently have,
nor is it expected to have, any material asset retirement obligations subject to
this new standard.
The FASB issued SFAS 144 - "Accounting for the Impairment or Disposal of
Long-Lived Assets" that Roper is required to adopt by November 1, 2002. This new
standard does not apply to goodwill. Roper does not expect the adoption of this
standard to result in an impairment charge.
Outlook
Fiscal 2002 is expected to be another record year for sales and earnings. Fiscal
2002 is expected to benefit from the full-year contributions from the businesses
acquired during fiscal 2001, especially Struers and Logitech. Fiscal 2002
earnings would also benefit from the adoption of SFAS 142. Goodwill amortization
was $15.7 million during fiscal 2001. The conditions in the semiconductor
industry are currently poor and Roper expects its product sales into this
industry to be lower in fiscal 2002 than they were in 2001 on a pro forma basis.
Roper does not expect this industry to show any significant signs of improvement
before at least the second half of 2002. The terrorist attacks in the United
States on September 11, 2001 and the aftereffects related thereto still cast a
significant cloud of uncertainty over the near-term health of the economy in the
United States and elsewhere. The U.S. economy was also showing signs of
weakening prior to the September 11 attacks. It is impossible to isolate each of
these factor's effects on current economic conditions. It is also impossible to
predict with any reasonable degree of certainty what or when any additional
events may occur that also will similarly disrupt the economy.
Roper expects to continue an active acquisition program. However, completion of
future acquisitions and their impact on Roper's results or financial condition
cannot be accurately predicted.
Forward Looking Information
The information provided elsewhere in this Annual Report, in Roper's filings
with the Securities and Exchange Commission, in press releases and in other
public disclosures contains forward-looking statements about Roper's businesses
and prospects. These forward-looking statements generally can be identified by
use of statements that include phrases such as "believe," "expect,"
"anticipate," "intend," "plan," "foresee," "likely," "will" or other similar
words or phrases. Similarly, statements that describe Roper's objectives, plans
or goals are or may be forward-looking statements. These forward-looking
statements involve known and unknown risks, uncertainties and other factors
which generally are beyond Roper's control and which may cause Roper's actual
results, performance or achievements to be different from any future results,
performance and achievements expressed or implied by these statements. Some of
these risks include the level and the timing of future business with Gazprom and
other Eastern European
21
<PAGE>
customers and their ability to obtain financing, changes in interest and
currency exchange rates, market conditions including the duration and
extent of the current economic recession, the continued success of Roper's
cost reduction efforts, the future operating results of newly-acquired
companies and consequences stemming from the September 11 terrorist
activities. There is no assurance that these and other risks and
uncertainties will not have an adverse impact on Roper's future operations,
financial condition, or financial results. Roper does not undertake any
obligation to update any forward-looking statements.
22
<PAGE>
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK
Roper is exposed to interest rate risks on its outstanding borrowings. It is
exposed to foreign currency exchange risks on its transactions denominated in
currencies other than the U.S. dollar. It is also exposed to equity market risks
pertaining to the traded price of its common stock.
At October 31, 2001, Roper had a combination of fixed-rate borrowings (primarily
$125 million of term notes) and relatively variable-rate borrowings (primarily
borrowings under the $275 million credit facility). Although each borrowing
under the $275 million credit facility has a fixed rate, the terms of these
individual borrowings are generally only 1-3 months.
At October 31, 2001, interest rates were lower than the fixed rates on the term
notes. This resulted in the estimated fair values of the term notes being
greater than the face amounts of the notes. Roper estimated this difference to
be $11.7 million and it represented an unrecorded decrease in Roper's net assets
at October 31, 2001. If interest rates had been 0.1% higher, the difference
between the fair values of the term notes and their face values would have
decreased to $10.9 million.
At October 31, 2001, Roper's outstanding variable-rate borrowings under the $275
million credit facility were $178.1 million. An increase in interest rates of
0.1% would increase Roper's annualized interest costs by $178,000.
Several Roper companies have transactions and balances denominated in currencies
other than the U.S. dollar. Most of these transactions or balances are
denominated in euros (or equivalent currencies), British pounds, Danish krone or
Japanese yen.
Sales by companies whose functional currency was not the U.S. dollar were 23% of
Roper's total sales. The U.S. dollar was mixed against these currencies during
fiscal 2001. Comparing currency exchange rates at October 31, 2001 to October
31, 2000, the dollar weakened 7% against the euro, was flat against the pound
and strengthened 11% against yen. The dollar strengthened 1% against the krone
over the last two months of fiscal 2001. These exchange rate changes had an
immaterial impact on sales and earnings during fiscal 2001. Excluding the
effects of any future acquisitions, the percentage of non-U.S. dollar
denominated sales is expected to be higher in fiscal in 2002.
The changes of these currencies relative to the U.S. dollar during fiscal 2001
also resulted in an increase in net assets of $1.2 million that was reported as
a component of comprehensive earnings. This change is believed to have a minimal
impact on expected future cash flows.
The traded price of Roper's common stock influences the valuation of stock
option grants and the effects these grants have on pro forma earnings disclosed
in Roper's financial statements. The stock prices also influence the computation
of the dilutive effect of outstanding stock options to determine diluted
earnings per share. Certain cash compensation arrangements are also directly
related to Roper's stock price. The stock price also affects Roper's employees'
perceptions of various Roper programs that involve its common stock.
23
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and supplementary data required by this item begin at
page F-1 hereof.
24
<PAGE>
CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index
<TABLE>
<CAPTION>
Page
<S> <C>
Consolidated Financial Statements:
Report of Independent Public Accountants ................................................................. F-2
Consolidated Balance Sheets as of October 31, 2001 and 2000 .............................................. F-3
Consolidated Statements of Earnings for the Years ended October 31, 2001, 2000 and 1999 .................. F-4
Consolidated Statements of Stockholders' Equity and Comprehensive Earnings for the
Years ended October 31, 2001, 2000 and 1999 ............................................................ F-5
Consolidated Statements of Cash Flows for the Years ended October 31, 2001, 2000 and 1999 ................ F-6
Notes to Consolidated Financial Statements ............................................................... F-7
Supplementary Data:
Schedule II - Consolidated Valuation and Qualifying Accounts for the Years ended
October 31, 2001, 2000 and 1999 ........................................................................ S-1
</TABLE>
F-1
<PAGE>
Report of Independent Public Accountants
To the Shareholders of Roper Industries, Inc.:
We have audited the accompanying consolidated balance sheets of Roper
Industries, Inc. (a Delaware corporation) and subsidiaries as of October 31,
2001 and 2000, and the related consolidated statements of earnings,
stockholders' equity and comprehensive earnings and cash flows for the years
then ended. These consolidated financial statements and the schedule referred to
below are the responsibility of the Company's management. Our responsibility is
to express an opinion on these consolidated financial statements and the
schedule based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. 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, 2001 and 2000, and the results of its
operations and cash flows for the years then ended in conformity with accounting
principles generally accepted in the United States.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The financial statement schedule listed
in Item 14 (II) of this Annual Report on Form 10-K is presented for the purpose
of complying with the Securities and Exchange Commission's rules and is not part
of the basic financial statements. This schedule has been subjected to the
auditing procedures applied in the audits of the basic financial statements and,
in our opinion, fairly states in all material respects the financial data
required to be set forth therein in relation to the basic financial statements
taken as a whole.
Arthur Andersen LLP
Atlanta, Georgia
December 6, 2001
F-2
<PAGE>
ROPER INDUSTRIES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
October 31, 2001 and 2000
(in thousands, except per share data)
<TABLE>
<CAPTION>
2001 2000
------------- -------------
<S> <C> <C>
Assets
Cash and cash equivalents $ 16,190 $ 11,372
Accounts receivable, net 121,271 115,191
Inventories 90,347 83,627
Other current assets 5,245 3,765
------------- -------------
Total current assets 233,053 213,955
Property, plant and equipment, net 51,887 48,907
Intangible assets, net 453,017 323,195
Other noncurrent assets 24,165 10,845
------------- -------------
Total assets $ 762,122 $ 596,902
============= =============
Liabilities and Stockholders' Equity
Accounts payable $ 34,233 $ 26,486
Accrued liabilities 61,020 48,299
Income taxes payable 5,617 3,001
Current portion of long-term debt 3,010 6,706
------------- -------------
Total current liabilities 103,880 84,492
Long-term debt 323,830 234,603
Other noncurrent liabilities 10,906 7,616
------------- -------------
Total liabilities 438,616 326,711
------------- -------------
Stockholders' equity:
Preferred stock, $0.01 par value per share; 1,000 shares authorized;
none outstanding - -
Common stock, $0.01 par value per share; 80,000 shares authorized;
32,131 shares issued and 30,879 outstanding at October 31, 2001 and
31,859 shares issued and 30,599 outstanding at October 31, 2000 321 319
Additional paid-in capital 80,510 75,117
Retained earnings 275,259 228,652
Accumulated other comprehensive earnings (7,757) (8,913)
Treasury stock, 1,252 shares October 31, 2001 and 1,260 shares at
October 31, 2000 (24,827) (24,984)
------------- -------------
Total stockholders' equity 323,506 270,191
------------- -------------
Total liabilities and stockholders' equity $ 762,122 $ 596,902
============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
ROPER INDUSTRIES, INC. AND SUBSIDIARIES
Consolidated Statements of Earnings
Years ended October 31, 2001, 2000 and 1999
(in thousands, except per share data)
<TABLE>
<CAPTION>
2001 2000 1999
----------- ----------- -----------
<S> <C> <C> <C>
Net sales $ 586,506 $ 503,813 $ 407,256
Cost of sales 277,536 244,989 196,753
----------- ----------- -----------
Gross profit 308,970 258,824 210,503
Selling, general and administrative expenses 210,542 170,628 132,548
----------- ----------- -----------
Income from operations 98,428 88,196 77,955
Interest expense 15,917 13,483 7,254
Other income, net 3,928 1,218 1,583
----------- ----------- -----------
Earnings before income taxes 86,439 75,931 72,284
Income taxes 30,600 26,653 24,938
----------- ----------- -----------
Net earnings $ 55,839 $ 49,278 $ 47,346
=========== =========== ===========
Net earnings per share:
Basic $ 1.82 $ 1.62 $ 1.56
=========== =========== ===========
Diluted $ 1.77 $ 1.58 $ 1.53
=========== =========== ===========
Weighted average common shares outstanding:
Basic 30,758 30,457 30,268
=========== =========== ===========
Diluted 31,493 31,182 30,992
=========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
ROPER INDUSTRIES, INC. AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity and Comprehensive Earnings
Years ended October 31, 2001, 2000 and 1999
(in thousands, except per share data)
<TABLE>
<CAPTION>
Accumulated
Additional other Total
Common stock paid-in Retained comprehensive Treasury stockholders'
-----------------------
Shares Amount capital earnings earnings stock equity
----------- ----------- ----------- ---------- --------------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances at October 31, 1998 30,343 $ 313 $ 67,145 $ 148,435 $ (906) $ (17,954) $ 197,033
Net earnings - - - 47,346 - - 47,346
Common shares issued for acquisitions (45) - - - - (1,667) (1,667)
Exercise of stock options, net 244 3 3,939 - - - 3,942
Currency translation adjustments - - - - (1,266) - (1,266)
Cash dividends ($0.26 per share) - - - (7,870) - - (7,870)
Treasury stock purchases (260) - - - - (5,550) (5,550)
----------- --------- --------- --------- --------------- ---------- -------------
Balances at October 31, 1999 30,282 316 71,084 187,911 (2,172) (25,171) 231,968
Net earnings - - - 49,278 - - 49,278
Exercise of stock options, net 308 3 3,949 - - - 3,952
Currency translation adjustments - - - - (6,741) - (6,741)
Cash dividends ($0.28 per share) - - - (8,537) - - (8,537)
Treasury stock sold 9 - 84 - - 187 271
----------- --------- --------- --------- --------------- ---------- -------------
Balances at October 31, 2000 30,599 319 75,117 228,652 (8,913) (24,984) 270,191
Net earnings - - - 55,839 - - 55,839
Exercise of stock options, net 272 2 5,293 - - - 5,295
Currency translation adjustments - - - - 1,156 - 1,156
Cash dividends ($0.30 per share) - - - (9,232) - - (9,232)
Treasury stock sold 8 - 100 - - 157 257
----------- --------- --------- --------- --------------- ---------- -------------
Balances at October 31, 2001 30,879 $ 321 $ 80,510 $ 275,259 $ (7,757) $ (24,827) $ 323,506
=========== ========= ========= ========= =============== ========== =============
<CAPTION>
Compre-
hensive
earnings
------------
<S> <C>
Balances at October 31, 1998
Net earnings $ 47,346
Common shares issued for acquisitions -
Exercise of stock options, net -
Currency translation adjustments (1,266)
Cash dividends ($0.26 per share) -
Treasury stock purchases -
------------
Balances at October 31, 1999 $ 46,080
============
Net earnings $ 49,278
Exercise of stock options, net -
Currency translation adjustments (6,741)
Cash dividends ($0.28 per share) -
Treasury stock sold -
------------
Balances at October 31, 2000 $ 42,537
============
Net earnings $ 55,839
Exercise of stock options, net -
Currency translation adjustments 1,156
Cash dividends ($0.30 per share) -
Treasury stock sold -
------------
Balances at October 31, 2001 $ 56,995
============
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
ROPER INDUSTRIES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended October 31, 2001, 2000 and 1999
(in thousands)
<TABLE>
<CAPTION>
2001 2000 1999
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings $ 55,839 $ 49,278 $ 47,346
Adjustments to reconcile net earnings to net cash flows
from operating activities:
Depreciation and amortization of property, plant
and equipment 9,993 8,623 6,620
Amortization of intangible assets 17,462 13,675 9,346
Changes in operating assets and liabilities, net of
acquired businesses:
Accounts receivable 10,412 (13,863) (10,621)
Inventories 7,418 (4,357) 3,778
Accounts payable and accrued liabilities 5,790 14,001 (7,557)
Income taxes payable 1,725 786 4,112
Long-term financing (8,451) - -
Other, net 2,254 (504) (198)
----------- ------------ -----------
Net cash provided by operating activities 102,442 67,639 52,826
----------- ----------- -----------
Cash flows from investing activities:
Acquisitions of businesses, net of cash acquired (170,180) (161,546) (36,343)
Capital expenditures (7,455) (15,150) (5,148)
Other, net 906 (1,531) 167
----------- ------------ -----------
Net cash used in investing activities (176,729) (178,227) (41,324)
----------- ----------- -----------
Cash flows from financing activities:
Proceeds from notes payable and long-term debt 146,125 321,941 45,926
Principal payments on notes payable and long-term debt (62,815) (208,012) (41,867)
Cash dividends to stockholders (9,232) (8,537) (7,870)
Treasury stock sales (purchases) 257 271 (5,550)
Proceeds from stock option exercises, net 4,531 3,952 3,942
Other, net - - (1,667)
----------- ----------- -----------
Net cash provided by (used in) financing activities 78,866 109,615 (7,086)
----------- ----------- ------------
Effect of exchange rate changes on cash 239 (1,145) (276)
----------- ------------ -----------
Net increase (decrease) in cash and cash equivalents 4,818 (2,118) 4,140
Cash and cash equivalents, beginning of year 11,372 13,490 9,350
----------- ----------- -----------
Cash and cash equivalents, end of year $ 16,190 $ 11,372 $ 13,490
=========== =========== ===========
Supplemental disclosures:
Cash paid for:
Interest $ 16,102 $ 9,018 $ 7,471
=========== =========== ===========
Income taxes, net of refunds received $ 28,875 $ 25,867 $ 20,826
=========== =========== ===========
Noncash investing activities:
Net assets of businesses acquired:
Fair value of assets, including goodwill $ 184,158 $ 177,230 $ 42,770
Liabilities assumed (13,978) (15,684) (6,427)
----------- ----------- -----------
Cash paid, net of cash acquired $ 170,180 $ 161,546 $ 36,343
=========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
ROPER INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
October 31, 2001, 2000 and 1999
(1) Summary of Accounting Policies
------------------------------
Basis of Presentation - These financial statements present consolidated
---------------------
information for Roper Industries, Inc. and its subsidiaries ("Roper").
All significant intercompany accounts and transactions have been
eliminated.
Nature of the Business - Roper designs, manufactures and distributes
----------------------
specialty industrial controls, fluid handling and analytical
instrumentation products worldwide, serving selected segments of a broad
range of industrial markets.
Accounts Receivable - Accounts receivable were stated net of an allowance
-------------------
for doubtful accounts of $4,344,000 and $4,294,000 at October 31, 2001
and 2000, respectively. Outstanding accounts receivable balances are
reviewed periodically, and allowances are provided at such time that
management believes reasonable doubt exists that such balances will be
collected within a reasonable period of time.
Cash and Cash Equivalents - Roper considers highly liquid financial
-------------------------
instruments with remaining maturities at acquisition of three months or
less to be cash equivalents. At October 31, 2001 and 2000, Roper had no
cash equivalents.
Earnings per Share - Basic earnings per share were calculated using net
------------------
earnings and the weighted average number of shares of common stock
outstanding during the respective period. Diluted earnings per share were
calculated using net earnings and the weighted average number of shares
of common stock and dilutive common stock equivalents outstanding during
the respective period. Common stock equivalents consisted of stock
options, and the effects of common stock equivalents were determined
using the treasury stock method.
For the years ended October 31, 2001, 2000 and 1999, there were 107,000,
9,000 and zero stock options outstanding at October 31, 2001, 2000 and
1999, respectively, that were not included in the determination of
diluted earnings per share because doing so would have been antidilutive.
Estimates - The preparation of financial statements in conformity with
---------
accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and the disclosure of contingent assets
and liabilities. Actual results could differ from those estimates.
Fair Value of Financial Instruments - Roper's long-term debt at October
-----------------------------------
31, 2001 included $125 million of fixed-rate term notes. Roper has
determined that current comparable interest rates at October 31, 2001
were lower than the stated rates of the term notes by approximately 1 1/2
- 2 percentage points. A discounted cash flow analysis of anticipated
cash flows using October 31, 2001 interest rates indicated that the fair
values of the term notes were greater than the face amounts of the term
notes by $11.7 million at October 31, 2001. This liability is not
reflected in Roper's basic financial statements. At October 31, 2000,
Roper had a similar unrecorded asset of $2.4 million. The change compared
to October 31, 2000 was caused primarily from lower interest rates at
October 31, 2001 compared to October 31, 2000.
Most of Roper's other borrowings at October 31, 2001 were at various
interest rates that adjust relatively frequently under its $275 million
credit facility. The fair value for each of these borrowings at October
31, 2001 was estimated to be the face value of these borrowings.
In May 2000, Roper entered into a 3-year interest rate swap agreement for
a notional amount of $25 million. Under this agreement, Roper received a
fixed interest rate of 7.68% and paid a variable rate of 3-month LIBOR
plus a margin. In November 2000, Roper entered into another agreement
that effectively terminated this swap agreement for an insignificant
gain.
In February 1998 and April 1998, Roper entered into five-year interest
rate swap agreements for notional amounts of $50 million and $25 million,
respectively. In both agreements, Roper paid a fixed interest rate,
F-7
<PAGE>
ROPER INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
October 31, 2001, 2000 and 1999
and the other party paid a variable interest rate. In May 2000, Roper
effectively terminated these agreements and received $1.8 million. This
gain is being amortized over the original term of the agreements.
The fair values for all of Roper's other financial instruments at October
31, 2001 approximated their carrying values.
Foreign Currency Translation - Assets and liabilities of subsidiaries whose
----------------------------
functional currency was not the U.S. dollar were translated at the exchange
rate in effect at the balance sheet date, and revenues and expenses were
translated at average exchange rates for the period in which those entities
were included in Roper's financial results. Translation adjustments are
reflected as a component of other comprehensive earnings.
Impairment of Long-Lived Assets - Roper periodically reviews its long-lived
-------------------------------
assets (mostly property, plant and equipment, identified intangible assets
and goodwill) for events or changes in circumstances that may indicate that
the carrying amount of these assets has been impaired. Impairment,
especially with respect to goodwill, is evaluated by comparing the
estimated undiscounted future cash flows of the related business to the
carrying amount of the goodwill. Roper's review did not warrant recognition
of any impairment during any of the three years ended October 31, 2001.
Income Taxes - Roper is a U.S.-based multinational company and the
------------
calculation of its worldwide provision for income taxes requires analysis
of many factors, including income tax structures that vary from country to
country and the United States' treatment of non-U.S. earnings. United
States income taxes, net of foreign taxes, have been provided on the
undistributed earnings of non-U.S. subsidiaries, except in those instances
where such earnings are currently expected to be permanently reinvested. If
such permanently reinvested earnings were to be distributed or otherwise
subject to U.S. income taxes, foreign tax credits would reduce the amount
of income taxes otherwise due in the United States. Determination of the
amount of unrecognized deferred income taxes related to these permanently
reinvested earnings is not practical.
Certain assets and liabilities have different bases for financial reporting
and income tax purposes. Deferred income taxes have been provided for these
differences.
Intangible Assets - Intangible assets consisted principally of goodwill,
-----------------
which is amortized on a straight-line basis over periods ranging from 5 to
40 years for acquisitions completed prior to June 30, 2001. Goodwill
associated with subsequent acquisitions is not subject to amortization. The
accumulated amortization for intangible assets was $63.1 million and $45.5
million at October 31, 2001 and 2000, respectively. Roper accounts for
goodwill in a purchase business combination as the excess of the cost over
the fair value of net assets acquired. Identified intangible assets, other
than goodwill, acquired through a business acquisition completed subsequent
to June 30, 2001 may also not be subject to amortization. Other intangible
assets not arising from acquisitions are recorded at cost and amortized
over their expected useful lives.
Inventories - Inventories are valued at the lower of cost or market. Cost
-----------
is determined using either the first-in, first-out method or the last-in,
first-out method ("LIFO"). Inventories valued at LIFO cost comprised 10%
and 11% of consolidated inventories at October 31, 2001 and 2000,
respectively.
Any LIFO decrements recorded during any of the three years ended October
31, 2001 were immaterial to Roper's consolidated financial statements for
that year.
Other Comprehensive Earnings - Comprehensive earnings includes net earnings
----------------------------
and all other non-owner sources of changes in a company's net assets. The
differences between net earnings and comprehensive earnings for Roper
during fiscal 2001, 2000 and 1999 were currency translation adjustments.
Income taxes have not been provided on currency translation adjustments.
F-8
<PAGE>
ROPER INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
October 31, 2001, 2000 and 1999
Property, Plant and Equipment and Depreciation and Amortization - Property,
---------------------------------------------------------------
plant and equipment is stated at cost less accumulated depreciation and
amortization. Depreciation and amortization are provided for using
principally the straight-line method over the estimated useful lives of the
assets as follows:
Buildings 20-30 years
Machinery 8-12 years
Other equipment 3-5 years
Recently Released Accounting Pronouncements - The Financial Accounting
-------------------------------------------
Standards Board ("FASB") issued Statement of Financial Accounting Standards
("SFAS") 141 - "Business Combinations" that applies to all business
combinations completed subsequent to June 30, 2001. SFAS 141 requires use
of the purchase method for accounting for a business combination. Other
provisions of SFAS 141 must be adopted concurrently with the adoption of
SFAS 142. Roper does not expect the full adoption of SFAS 141 to
significantly affect its accounting for any business combinations completed
prior to June 30, 2001.
The FASB issued SFAS 142 - "Goodwill and Other Intangible Assets" that
Roper intends to adopt effective November 1, 2001 (otherwise, adoption
would be required on November 1, 2002). Once adopted, this standard
provides that goodwill will no longer be subject to amortization. Instead,
goodwill will be subjected to a periodic analysis to evaluate possible
impairment. Any such impairment would be recognized as an expense
immediately.
The FASB issued SFAS 143 - "Accounting for Asset Retirement Obligations"
that Roper is required to adopt by November 1, 2002. Roper does not
currently have, nor is it expected to have, any material asset retirement
obligations subject to this new standard.
The FASB issued SFAS 144 - "Accounting for the Impairment or Disposal of
Long-Lived Assets" that Roper is required to adopt by November 1, 2002.
This new standard does not apply to goodwill. Roper does not expect the
adoption of this standard to result in an impairment charge.
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 $26.3 million, $22.6 million and $16.7 million
for the years ended October 31, 2001, 2000 and 1999, respectively.
Revenue Recognition - Revenue is generally recognized as products are
-------------------
shipped or services are rendered. Some sales contracts contain customer
acceptance provisions. When the customer's specifications are known and
Roper can demonstrate compliance with these requirements, it recognizes
revenue upon delivery of the product, which may precede formal acceptance
by the customer. In isolated cases whereby relevant criteria have been
satisfied, Roper may recognize revenue even though delivery has not
occurred. Revenues under certain relatively long-term and relatively
large-value construction projects 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 any
projects are recognized as soon as such losses become known.
Stock Options - Roper accounts for stock-based compensation under the
-------------
provisions of Accounting Principles Board Opinion 25 - "Accounting for
Stock Issued to Employees." Stock-based compensation is measured at its
fair value at the grant date in accordance with an option-pricing model.
SFAS 123 - "Accounting for Stock-Based Compensation," provides that the
related expense may be recorded in the basic financial statements or the
pro forma effect on earnings may be disclosed in the financial statements.
Roper provides the pro forma disclosures.
Non-employee directors of Roper are eligible to receive stock options for
its common stock. These stock options are accounted for the same as stock
options granted to employees. Roper has never issued stock options other
than those issued to employees or its non-employee directors.
F-9
<PAGE>
ROPER INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
October 31, 2001, 2000 and 1999
(2) Business Acquisitions
---------------------
Roper has acquired various businesses as part of its on-going acquisition
program. The acquisition program pursues opportunities within Roper's
existing business segments that Roper management believes will enhance the
value of Roper common stock to its shareholders.
Over the past three years, Roper completed three business acquisitions in
fiscal 2001, nine during fiscal 2000 and one in fiscal 1999. The purchase
price for each of these acquisitions was negotiated with unaffiliated third
parties, Roper acquired 100% of the ownership interests of the acquired
business, and each of these acquisitions was accounted for using the
purchase method of accounting. The assets and liabilities of the acquired
businesses were recorded at their estimated fair values, and the results of
operations were included in Roper's results of operations beginning from
the date acquired. Some allocations of fair value associated with recent
acquisitions included estimates and were preliminary as of October 31,
2001. Subsequent to October 31, 2001, Roper and the sellers of the Struers
and Logitech businesses agreed on a purchase price adjustment related to
the level of working capital on hand at the closing date requiring Roper to
pay an additional DKK 55.7 million (approximately $7 million). This amount
is not reflected in the table that follows and will be reported as an
acquisition cost during fiscal 2002. It is customary that Roper and sellers
of businesses acquired by Roper have unresolved issues regarding the final
determination of the purchase price at the closing date of an acquisition.
Acquisition costs include amounts paid to sellers, amounts incurred for due
diligence and other direct external costs associated with the acquisition.
Acquisitions whose costs were greater than 5% of Roper's total assets at
the beginning of the fiscal year during which the acquisition occurred are
listed in the table that follows (acquisition costs in thousands). All
acquisitions listed in the following table were paid for with cash.
<TABLE>
<CAPTION>
Date Acquisition Goodwill
acquired costs Business segment period
----------- ----------- ---------------------------- ---------
<S> <C> <C> <C> <C>
Struers and Logitech Sept. 2001 $143,268 Analytical Instrumentation NA
Hansen Technologies Sept. 2000 36,395 Industrial Controls 25 years
Antek Instruments Aug. 2000 22,017 Analytical Instrumentation 30 years
Abel Pump May 2000 22,948 Fluid Handling 30 years
MASD Nov. 1999 49,332 Analytical Instrumentation 25 years
Petroleum Analyzer June 1999 36,439 Analytical Instrumentation 25 years
</TABLE>
Struers develops, manufactures and markets materials analysis preparation
equipment and consumables used in quality inspection, failure analysis and
research of solid materials. Logitech develops, manufactures and markets
high-precision material-shaping equipment used primarily in the production
of advanced materials for the semiconductor and opto-electronics markets.
Struers is headquartered near Copenhagen, Denmark and Logitech is
headquartered near Glasgow, Scotland. Both companies also share sales and
service locations in the U.S., France, Germany and Japan.
F-10
<PAGE>
ROPER INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
October 31, 2001, 2000 and 1999
The following information summarizes the allocation of fair values assigned
to the assets and liabilities of Struers and Logitech at the acquisition
date (in thousands).
Current assets, excluding cash $ 30,482
Property and equipment 3,839
Intangible assets, including goodwill 120,062
Other noncurrent assets 840
Current liabilities (10,953)
Noncurrent liabilities (1,002)
---------
Total acqusition costs, excluding cash acquired $ 143,268
=========
None of the goodwill allocated to Struers and Logitech ($99.4 million) is
expected to be deductible for income tax purposes. Other intangible assets,
subject to amortization, included its existing customer base ($13.5 million
amortized over 10 years), unpatented technology ($1.6 million amortized
over 10 years) and sales order backlog ($0.4 million amortized over 4
months). Other intangible assets, not subject to amortization, were trade
names ($5.2 million).
Hansen Technologies distributes manufactured and outsourced shut-off and
control valves, auto-purgers and hermetic pumps for the commercial
refrigeration industry. Hansen Technologies' principal facility is located
near Chicago, Illinois.
Antek Instruments manufactures and supplies spectrometers primarily used to
detect sulfur, nitrogen and other chemical compounds in petroleum, food and
beverage processing and other industries. Antek Instruments' principal
facilities are located in Houston and near Austin, Texas.
Abel Pump manufactures and supplies specialty positive displacement pumps
for a variety of industrial applications, primarily involving abrasive or
corrosive fluids or those with high solids content. Abel Pump's principal
facility is located near Hamburg, Germany.
MASD designs, manufactures and markets high-speed digital cameras used in
automotive, industrial, military and research markets. MASD also
manufactures and markets high-resolution digital cameras for the machine
vision and image conversion markets. MASD's principal facility is located
in San Diego, California. This business was subsequently merged with a
complementary business and currently operates as Redlake MASD.
Petroleum Analyzer manufactures, markets and distributes instrumentation
products for petroleum analysis in the laboratory and process markets. The
acquired business has principal facilities in San Antonio, Texas and near
Frankfurt, Germany. This business was merged into a pre-existing
complementary business.
Using applicable rules, the following unaudited pro forma summary presents
Roper's consolidated results of operations as if the Struers and Logitech
and total acquisitions during fiscal 2001 and 2000 had occurred at the
beginning of fiscal 1999 (in thousands, except per share data). Goodwill
associated with acquisitions completed subsequent to June 30, 2001 has not
been amortized for purposes of this pro forma presentation to be consistent
with current practice. Also, actual results may have been different had the
acquisitions occurred at an earlier date and this pro forma information
provides no assurance as to future results.
F-11
<PAGE>
ROPER INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
October 31, 2001, 2000 and 1999
<TABLE>
<CAPTION>
Year ended October 31,
-------------------------------------------------------------------
2001 2000
------------------------------- ---------------------------------
Struers and Struers and
Logitech Total Logitech Total
------------ ------------ ------------ -----------
<S> <C> <C> <C> <C>
Net sales $ 653,753 $ 662,515 $ 578,276 $ 646,193
============ ============ ============ ===========
Net earnings $ 60,952 $ 61,681 $ 50,980 $ 51,982
============ ============ ============ ===========
Net earnings per share:
Basic $ 1.98 $ 2.01 $ 1.67 $ 1.71
============ ============ ============ ===========
Diluted $ 1.94 $ 1.96 $ 1.63 $ 1.67
============ ============ ============ ===========
</TABLE>
(3) Inventories
-----------
The components of inventories at October 31 were as follows (in thousands):
<TABLE>
<CAPTION>
2001 2000
-------- --------
<S> <C> <C>
Raw materials and supplies $ 47,339 $ 44,493
Work in process 13,047 16,704
Finished products 31,284 24,187
LIFO reserve (1,323) (1,757)
-------- --------
$ 90,347 $ 83,627
======== ========
</TABLE>
(4) Property, Plant and Equipment
-----------------------------
The components of property, plant and equipment at October 31 were as
follows (in thousands):
<TABLE>
<CAPTION>
2001 2000
--------- ---------
<S> <C> <C>
Land $ 2,944 $ 2,277
Buildings 24,996 21,263
Machinery, tooling and other equipment 83,541 78,289
--------- ---------
111,481 101,829
Accumulated depreciation and amortization (59,594) (52,922)
--------- ---------
$ 51,887 $ 48,907
========= =========
</TABLE>
(5) Accrued Liabilities
-------------------
Accrued liabilities at October 31 were as follows (in thousands):
<TABLE>
<CAPTION>
2001 2000
--------- ---------
<S> <C> <C>
Wages and other compensation $ 27,152 $ 17,929
Commissions 8,376 6,889
Interest 5,704 6,074
Other 19,788 17,407
--------- ---------
$ 61,020 $ 48,299
========= =========
</TABLE>
F-12
<PAGE>
ROPER INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
October 31, 2001, 2000 and 1999
(6) Income Taxes
------------
Earnings before income taxes for the years ended October 31 consisted of
the following components (in thousands):
<TABLE>
<CAPTION>
2001 2000 1999
----------- ----------- -----------
<S> <C> <C> <C>
United States $ 64,879 $ 61,074 $ 59,972
Other 21,560 14,857 12,312
----------- ----------- -----------
$ 86,439 $ 75,931 $ 72,284
=========== =========== ===========
</TABLE>
Components of income tax expense for the years ended October 31 were as
follows (in thousands):
<TABLE>
<CAPTION>
2001 2000 1999
----------- ----------- -----------
<S> <C> <C> <C>
Current:
Federal $ 21,709 $ 19,587 $ 16,317
State 1,189 945 1,102
Foreign 6,909 5,559 5,449
Deferred expense (benefit) 793 562 2,070
----------- ----------- -----------
$ 30,600 $ 26,653 $ 24,938
=========== =========== ===========
</TABLE>
Reconciliations between the federal statutory income tax rate and the
effective income tax rate for the years ended October 31 were as follows:
<TABLE>
<CAPTION>
2001 2000 1999
----------- ----------- -----------
<S> <C> <C> <C>
Federal statutory rate 35.0% 35.0% 35.0%
Exempt income of Foreign Sales Corporation (4.3) (3.7) (3.7)
Goodwill amortization 2.6 2.3 2.3
Other, net 2.1 1.5 0.9
----------- ----------- -----------
35.4% 35.1% 34.5%
=========== =========== ===========
</TABLE>
Components of deferred tax assets and liabilities at October 31 were as
follows (in thousands):
<TABLE>
<CAPTION>
2001 2000
----------- -----------
<S> <C> <C>
Deferred tax assets:
Reserves and accrued expenses $ 7,735 $ 4,964
Inventories 3,617 1,315
Postretirement medical benefits 631 545
Foreign taxes 575 -
Research and development - 800
----------- -----------
Total deferred tax assets 12,558 7,624
----------- -----------
Deferred tax liabilities:
Amortizable intangible assets 2,629 365
Plant and equipment 1,599 1,738
Former IC-DISC recapture 577 724
----------- -----------
Total deferred tax liabilities 4,805 2,827
----------- -----------
Net deferred tax asset $ 7,753 $ 4,797
=========== ===========
</TABLE>
Roper has not recognized a valuation allowance since management has
determined that it is more likely than not that the results of future
operations will generate sufficient taxable income to realize all
deferred tax assets.
F-13
<PAGE>
ROPER INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
October 31, 2001, 2000 and 1999
(7) Long-Term Debt
---------------
Total debt at October 31 consisted of the following (table amounts in
thousands):
<TABLE>
<CAPTION>
2001 2000
----------- -----------
<S> <C> <C>
$275 million credit facility $ 178,114 $ 107,581
7.58% Senior Guaranteed Secured Notes 40,000 40,000
7.68% Senior Guaranteed Secured Notes 85,000 85,000
Supplier financing agreement 20,307 -
Other 3,419 8,728
----------- -----------
Total debt 326,840 241,309
Less current portion 3,010 6,706
----------- -----------
Long-term debt $ 323,830 $ 234,603
=========== ===========
</TABLE>
In May 2000, Roper entered into two new credit agreements and
simultaneously canceled its then-existing $200 million U.S. revolving
credit facility and its $30 million German revolving credit facility.
One of the new agreements was with a group of banks and provided for a
$275 million credit facility consisting primarily of revolving loans,
swing line loans and letters of credit. Interest on outstanding
borrowings is influenced by the type and currency of the borrowings.
Interest on outstanding borrowings under this facility is a base rate
plus a margin. The margin is influenced by certain financial ratios of
Roper and can range from 0.625% to 1.125%. This facility also provides
that Roper will maintain certain financial ratios addressing, among other
things, coverage of fixed charges, total debt under other agreements,
consolidated net worth and capital expenditures. Other costs and
provisions of this facility are believed to be customary. Repayment of
Roper's obligations under this facility is guaranteed by its domestic
subsidiaries and the pledge of some of the stock of some of Roper's
foreign subsidiaries. This agreement matures on May 18, 2005.
At October 31, 2001, utilization of the $275 million facility included
$86.5 million of U.S. denominated borrowings, $91.6 million of borrowings
denominated in euros and $2.9 million of outstanding letters of credit.
The weighted average interest rate on outstanding borrowings at October
31, 2001 under this facility was 4.2%.
The other new May 2000 agreement was with a group of insurance companies
that provided for $40 million of term notes due May 18, 2007 and $85
million of term notes due May 18, 2010. The guarantees, pledges and
financial covenants associated with this agreement were similar, but
slightly less restrictive, than those in the $275 million credit
facility.
In September 2001, Roper entered into an unsecured financing agreement
with a non-U.S. bank to facilitate Roper's supply agreement with RAO
Gezprom, a large Russian natural gas company. This agreement matures
during 2003 and bears interest that approximates a market rate.
Future maturities of long-term debt during each of the next five years
ending October 31 and thereafter were as follows (in thousands):
2002 $ 3,010
2003 20,517
2004 109
2005 178,204
2006 -
Thereafter 125,000
-----------
$ 326,840
===========
F-14
<PAGE>
ROPER INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
October 31, 2001, 2000 and 1999
(8) Retirement and Other Benefit Plans
----------------------------------
Roper maintains two defined contribution retirement plans under the
provisions of Section 401(k) of the Internal Revenue Code covering
substantially all domestic employees not subject to collective bargaining
agreements. Roper partially matches employee contributions. Its costs
related to these two plans were $4,126,000, $3,956,000 and $3,269,000 in
fiscal 2001, 2000 and 1999, respectively.
Roper also maintains various defined benefit retirement plans covering
employees of non-U.S. subsidiaries and a plan that supplements certain
employees for the contribution ceiling applicable to the Section 401(k)
plans. The costs and accumulated benefit obligations associated with each
of these plans were not material.
Pursuant to the fiscal 1999 Petroleum Analyzer acquisition, Roper agreed
to assume a defined benefit pension plan covering certain U.S. employees
subject to a collective bargaining agreement. Upon obtaining necessary
regulatory approvals, Roper intends to terminate this plan. Total plan
assets at October 31, 2001 were not material and the anticipated costs
associated with terminating this plan were not expected to be material.
In November 1999, Roper's Board of Directors (the "Board") approved an
employee stock purchase plan covering eligible employees whereby they may
designate up to 10% of eligible earnings to purchase Roper's common stock
at a 10% discount to the average closing price of its common stock at the
beginning and end of a quarterly period. The common stock sold to the
employees may be either treasury stock, stock purchased on the open
market, or newly issued shares authorized by the Board on a periodic
basis. During the years ended October 31, 2001 and 2000, participants of
the employee stock purchase plan purchased 8,000 and 9,000 shares,
respectively, of Roper's common stock for total consideration of $257,000
and $271,000, respectively. All of these shares were purchased from
Roper's treasury shares.
(9) Common Stock Transactions
-------------------------
Roper's restated Certificate of Incorporation provides that each
outstanding share of Roper'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.
Roper has a Shareholder Rights Plan whereby one Preferred Stock Purchase
Right (a "Right") accompanies 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. Each Right may be exercised to acquire one one-thousandth of a
newly issued share of Roper'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 Roper's
common stock having a market value at such time of twice the Right's
exercise price. The Rights may be redeemed by Roper at a redemption price
of $0.01 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 expire
on January 8, 2006.
Roper periodically enters into agreements with the management of
newly-acquired companies for the issuance of Roper's common stock based
on the achievement of specified goals. A similar agreement was made with
a corporate executive. At October 31, 2001, 20,000 shares of common stock
were reserved for future issuance under such agreements.
F-15
<PAGE>
ROPER INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
October 31, 2001, 2000 and 1999
(10) Stock Options
-------------
Roper has two stock incentive plans (the "1991 Plan" and the "2000 Plan")
which authorize the issuance of up to 4,500,000 shares of common stock to
certain directors, key employees, and consultants of Roper as incentive
and/or nonqualified stock options, stock appreciation rights or
equivalent instruments. Stock options under both plans may be granted at
prices not less than 100% of market value of the underlying stock at the
date of grant. All stock options granted under these plans generally vest
annually and ratably over a five-year period from the date of the grant.
Stock options expire ten years from the date of grant. The 1991 Plan
provided that options must be granted by December 17, 2001. The 2000 Plan
has no expiration date.
Roper 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 4,000 shares of Roper's common stock and thereafter
options to purchase an additional 4,000 shares each year under terms and
conditions similar to the above-mentioned stock option plans, except that
following their grant, all options become fully vested at the time of the
Annual Meeting of Shareholders following the grant date and are
exercisable ratably over five years following the date of grant.
A summary of stock option transactions under these plans and information
about stock options outstanding at October 31, 2001 are shown below:
<TABLE>
<CAPTION>
Outstanding options Exercisable options
--------------------------- --------------------------
Average Average
exercise exercise
Number price Number price
---------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
October 31, 1998 2,087,000 $ 17.24 1,109,000 $ 13.08
Granted 350,000 18.71
Exercised (251,000) 13.66
Canceled (69,000) 22.22
-----------
October 31, 1999 2,117,000 17.67 1,226,000 14.67
Granted 365,000 33.18
Exercised (320,000) 13.68
Canceled (79,000) 25.76
-----------
October 31, 2000 2,083,000 20.69 1,199,000 16.45
Granted 515,000 34.85
Exercised (292,000) 18.34
Canceled (75,000) 25.39
-----------
October 31, 2001 2,231,000 $ 24.11 1,171,000 $ 17.91
===========
</TABLE>
F-16
<PAGE>
ROPER INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
October 31, 2001, 2000 and 1999
<TABLE>
<CAPTION>
Outstanding options Exercisable options
---------------------------------------- ------------------------
Average Average Average
exercise remaining exercise
Exercise price Number price life (yrs) Number price
---------------- ----------- --------- ----------- ----------- --------
<S> <C> <C> <C> <C> <C>
$ 3.75- 10.00 165,000 $ 6.75 1.1 165,000 $ 6.75
10.01- 15.00 165,000 11.81 3.0 165,000 11.81
15.01- 20.00 606,000 17.39 4.4 461,000 17.25
20.01- 25.00 220,000 22.74 5.1 186,000 22.75
25.01- 30.00 232,000 27.35 6.1 121,000 27.45
30.01- 35.00 653,000 32.82 8.5 69,000 33.00
35.01- 41.82 190,000 39.09 9.5 4,000 35.84
----------- -------- -------- --------- --------
$ 3.75- 41.82 2,231,000 $ 24.11 5.9 1,171,000 $ 17.91
=========== ======== ======== ========= ========
</TABLE>
For pro forma disclosure purposes, the following fair values and the
primary assumptions used to determine these fair values were used. All
stock options granted during each of the years ended October 31, 2001,
2000 and 1999 were at exercise prices equal to the market price of
Roper's common stock when granted. Fair values were determined using the
Black-Scholes model.
<TABLE>
<CAPTION>
2001 2000 1999
----------- ----------- -----------
<S> <C> <C> <C>
Weighted average fair value per share ($) 16.86 15.37 8.95
Risk-free interest rate (%) 5.00 - 6.00 6.75 5.75
Average expected option life (years) 7.00 7.00 7.00
Expected volatility (%) 31 - 45 35 - 49 35 - 41
Expected dividend yield (%) 0.75 1.00 0.75
</TABLE>
Had Roper recognized compensation expense during fiscal 2001, 2000 and
1999 for the fair value of stock options granted in accordance with the
provisions of SFAS 123, pro forma earnings and pro forma earnings per
share would have been as presented below.
<TABLE>
<CAPTION>
2001 2000 1999
----------- ----------- -----------
<S> <C> <C> <C>
Net earnings, as reported (in thousands) $ 55,839 $ 49,278 $ 47,346
Net earnings, pro forma (in thousands) 50,859 45,385 44,177
Net earnings per share, as reported:
Basic 1.82 1.62 1.56
Diluted 1.77 1.58 1.53
Net earnings per share, pro forma:
Basic 1.65 1.49 1.46
Diluted 1.61 1.46 1.43
</TABLE>
The disclosed pro forma effects on earnings do not include the effects of
stock options granted prior to fiscal 1996 (affecting fiscal 2000 and
fiscal 1999) since the provisions of SFAS 123 are not applicable to stock
options for this purpose. The pro forma effects of applying SFAS 123 to
fiscal 2001, 2000 and 1999 may not be representative of the pro forma
effects in future years. Based on the vesting schedule of Roper's stock
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 grants is at the discretion of Roper's Board and cannot be
assured.
F-17
<PAGE>
ROPER INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
October 31, 2001,2000, and 1999
(11) Contingencies
-------------
Roper, 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 and employment practices. It is vigorously contesting
all lawsuits that, in general, are based upon claims of the kind that have
been customary over the past several years. Based upon Roper's past
experience with resolution of its product liability and employment
practices 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 Roper. Included in other noncurrent assets at October 31,
2001 are estimated insurable settlements receivable from insurance
companies of $1.7 million.
Roper's future minimum lease commitments total $37.1 million at October 31,
2001. These commitments include $9.5 million in fiscal 2002, $6.7 million
in fiscal 2003, $4.8 million in fiscal 2004, $3.2 million in fiscal 2005
and $2.6 million in fiscal 2006.
(12) Segment and Geographic Area Information
---------------------------------------
Roper's operations are grouped into three business segments based on
similarities between products and services: Industrial Controls, Fluid
Handling and Analytical Instrumentation. The Industrial Controls segment's
products include industrial valve, control and measurement products;
microprocessor-based rotating machinery control systems, panels and
associated technical services; and vibration monitoring instruments.
Products included within the Fluid Handling segment are rotary gear,
progressing cavity, membrane, positive displacement, centrifugal and
piston-type metering pumps; flow measurement and metering products; and
precision integrated chemical dispensing systems. The Analytical
Instrumentation segment's products include fluid properties test products,
materials analysis products, industrial leak test products, digital imaging
products, spectroscopy products and specimen preparation and handling
equipment used in the operation of transmission electron and other
microscopes. Roper's management structure and internal reporting are also
aligned consistent with these three segments.
There were no material transactions between Roper's business segments
during any of the three years ended October 31, 2001. Sales between
geographic areas are primarily of finished products and are accounted for
at prices intended to represent third-party prices. Operating profit by
business segment and by geographic area is defined as sales less operating
costs and expenses. These costs and expenses do not include unallocated
corporate administrative expenses. Items below income from operations on
Roper's statement of earnings are not allocated to business segments.
Assets were allocated to that segment or geographic area where the assets
were primarily used. Corporate assets were principally comprised of cash,
recoverable insurance claims, deferred compensation assets, unamortized
deferred financing costs and property and equipment.
F-18
<PAGE>
ROPER INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
October 31, 2001,2000, and 1999
Selected financial information by business segment for the years ended October
31 follows (in thousands):
<TABLE>
<CAPTION>
Industrial Fluid Analytical
Controls Handling Inst. Corporate Total
----------- ----------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C>
2001
Net sales $ 196,738 $ 125,399 $ 264,369 $ - $ 586,506
Operating profit 37,836 27,123 43,157 (9,688) 98,428
Total assets:
Operating assets 78,807 50,714 148,389 - 277,910
Intangible assets, net 74,085 65,887 311,924 1,121 453,017
Other 5,135 (1,262) 15,111 12,211 31,195
-----------
Total 762,122
Capital expenditures 2,233 1,804 3,307 111 7,455
Goodwill amortization 4,347 2,616 8,745 - 15,708
Depreciation and other amortization 2,663 3,248 5,467 369 11,747
2000
Net sales $ 159,262 $ 121,387 $ 223,164 $ - $ 503,813
Operating profit 28,460 29,600 36,509 (6,373) 88,196
Total assets:
Operating assets 77,772 57,590 117,174 - 252,536
Intangible assets, net 70,965 66,884 184,065 1,281 323,195
Other 3,695 (2,090) 7,312 12,254 21,171
-----------
Total 596,902
Capital expenditures 3,936 6,380 4,773 61 15,150
Goodwill amortization 2,672 2,209 7,969 - 12,850
Depreciation and other amortization 2,423 2,712 4,019 294 9,448
1999
Net sales $ 160,090 $ 98,298 $ 148,868 $ - $ 407,256
Operating profit 29,973 27,386 27,713 (7,117) 77,955
Total assets:
Operating assets 55,704 37,245 88,405 - 181,354
Intangible assets, net 44,314 41,055 129,612 39 215,020
Other 3,411 (1,981) 6,408 15,951 23,789
-----------
Total 420,163
Capital expenditures 1,935 1,702 1,425 86 5,148
Goodwill amortization 2,021 1,595 5,338 - 8,954
Depreciation and other amortization 2,377 1,879 2,457 299 7,012
</TABLE>
F-19
<PAGE>
ROPER INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
October 31, 2001, 2000 and 1999
Summarized data for Roper's U.S. and foreign operations (principally in
Europe and Japan) for the years ended October 31 were as follows (in
thousands):
Corporate
adjustments
United and elimi-
States Non-U.S. nations Total
--------- ----------- ----------- --------
2001
Sales to unaffiliated customers $ 451,189 $ 135,317 $ - $586,506
Sales between geographic areas 41,752 9,394 (51,146) -
--------- ----------- ----------- --------
Net sales $ 492,941 $ 144,711 $ (51,146) $586,506
========= =========== =========== ========
Long-lived assets $ 367,537 $ 154,230 $ 7,302 $529,069
========= =========== =========== ========
2000
Sales to unaffiliated customers $ 370,351 $ 133,462 $ - $503,813
Sales between geographic areas 29,435 6,958 (36,393) -
--------- ----------- ----------- --------
Net sales $ 399,786 $ 140,420 $ (36,393) $503,813
========= =========== =========== ========
Long-lived assets $ 327,311 $ 49,251 $ 6,385 $382,947
========= =========== =========== ========
1999
Sales to unaffiliated customers $ 345,376 $ 61,880 $ - $407,256
Sales between geographic areas 20,282 4,760 (25,042) -
--------- ----------- ----------- --------
Net sales $ 365,658 $ 66,640 $ (25,042) $407,256
========= =========== =========== ========
Long-lived assets $ 229,898 $ 27,795 $ 651 $258,344
========= =========== =========== ========
Export sales from the United States during the years ended October 31,
2001, 2000 and 1999 were $238 million, $195 million and $163 million,
respectively. In the year ended October 31, 2001 these exports were
shipped primarily to Europe, excluding Russia (33%), Russia (25%), Japan
(14%), elsewhere in Asia and the Far East (11%), Latin America (7%) and
other (10%).
F-20
<PAGE>
ROPER INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
October 31, 2001, 2000 and 1999
Sales to customers outside the United States accounted for a significant
portion of Roper's revenues. Sales are attributed to geographic areas
based upon the location where the product is ultimately shipped. Foreign
countries that accounted for at least 10% of Roper's net sales in any of
the past three years have been individually identified in the following
table (in thousands). Other countries have been grouped by region.
<TABLE>
<CAPTION>
Industrial Fluid Analytical
Controls Handling Inst. Total
---------- -------- ---------- --------
<S> <C> <C> <C> <C>
2001
Europe, excluding Russia $ 34,233 $ 18,444 $ 71,920 $124,597
Japan 910 4,044 32,299 37,253
Asia and Far East, excluding Japan 7,372 2,890 28,131 38,393
Russia 58,389 - 1,389 59,778
Latin America 6,923 1,361 10,419 18,703
Rest of the world 11,222 6,993 10,364 28,579
---------- -------- ---------- --------
Total $ 119,049 $ 33,732 $ 154,522 $307,303
========== ======== ========== ========
2000
Europe, excluding Russia $ 31,506 $ 10,811 $ 56,187 $ 98,504
Japan 822 7,767 27,783 36,372
Asia and Far East, excluding Japan 8,304 2,686 19,204 30,194
Russia 39,980 - 992 40,972
Latin America 8,436 881 9,085 18,402
Rest of the world 16,382 8,064 10,361 34,807
---------- -------- ---------- --------
Total $ 105,430 $ 30,209 $ 123,612 $259,251
========== ======== ========== ========
1999
Europe, excluding Russia $ 26,219 $ 5,009 $ 39,586 $ 70,814
Japan 298 1,617 22,621 24,536
Asia and Far East, excluding Japan 9,044 1,663 7,122 17,829
Russia 36,715 16 232 36,963
Latin America 16,959 2,875 4,974 24,808
Rest of the world 20,113 7,461 4,178 31,752
---------- -------- ---------- --------
Total $ 109,348 $ 18,641 $ 78,713 $206,702
========== ======== ========== ========
</TABLE>
(13) Restructuring Activities
------------------------
During the three months ended April 30, 2001, Roper recorded $2,559,000
of expenses, reported as part of selling, general and administrative
expenses, related to activities to close certain activities at its
Petrotech unit and to consolidate certain other facilities. These
expenses included approximately $950,000 of personnel costs and
$1,100,000 of asset impairment. All significant restructuring activities
were completed by October 31, 2001. The exited Petrotech activities
represented 1% of Roper's total net sales during fiscal 2001 and 4% of
net sales during fiscal 2000. The operating profit of these activities
was immaterial to Roper during each of fiscal 2001 and fiscal 2000. The
total workforce reduction pursuant to these restructuring activities was
approximately 150 people, or about 6% of Roper's total workforce at that
time.
F-21
<PAGE>
ROPER INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
October 31, 2001, 2000, and 1999
(14) Quarterly Financial Data (unaudited)
------------------------------------
<TABLE>
<CAPTION>
First Second Third Fourth
quarter quarter quarter quarter
----------- ----------- ----------- -----------
(in thousands, except per share data)
<S> <C> <C> <C> <C>
2001
Net sales $ 137,664 $ 146,830 $ 137,969 $ 164,043
Gross profit 69,741 75,658 73,819 89,752
Income from operations 21,864 24,125 23,304 29,135
Net earnings 11,760 13,862 13,133 17,084
Earnings per common share:
Basic* 0.38 0.45 0.43 0.55
Diluted 0.38 0.44 0.41 0.54
2000
Net sales $ 109,453 $ 122,775 $ 124,583 $ 147,002
Gross profit 57,332 64,896 63,974 72,622
Income from operations 17,240 23,476 20,769 26,711
Net earnings 9,680 13,626 11,102 14,870
Earnings per common share:
Basic 0.32 0.45 0.36 0.49
Diluted* 0.31 0.44 0.36 0.48
</TABLE>
* The sum of the four quarters does not agree with the total for the year due to
rounding.
F-22
<PAGE>
ROPER INDUSTRIES, INC. AND SUBSIDIARIES
Schedule II - Consolidated Valuation and Qualifying Accounts
for the Years ended October 31, 2000, 1999 and 1998
<TABLE>
<CAPTION>
Additions
Balance at charged to Balance at
beginning costs and end
of year expenses Deductions Other of year
----------- ----------- ------------- ------- ----------
(in thousands)
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts:
Year ended October 31, 2001 $ 4,294 $ 822 $ (1,513) $ 741 $ 4,344
Year ended October 31, 2000 3,760 1,805 (1,543) 272 4,294
Year ended October 31, 1999 6,915 1,618 (5,072) 299 3,760
Reserve for inventory obsolescence:
Year ended October 31, 2001 10,704 5,103 (4,044) 3,723 15,486
Year ended October 31, 2000 6,769 2,636 (1,644) 2,943 10,704
Year ended October 31, 1999 4,081 2,257 (1,519) 1,950 6,769
</TABLE>
Deductions from the allowance for doubtful accounts represented the net
write-off of uncollectible accounts receivable. Deductions from the inventory
obsolescence reserve represented the disposal of obsolete items.
Other included the allowance for doubtful accounts and reserve for inventory
obsolescence of acquired businesses at the dates of acquisition, the effects of
foreign currency translation adjustments for those companies whose functional
currency was not the U.S. dollar, reclassifications and other.
During the fourth quarter of fiscal 1998, economic uncertainties in Russia and
the region deteriorated and a severe devaluation of the region's currencies
occurred. This created additional doubt concerning the collectibility of certain
accounts receivable from customers in this region. In response to these events,
Roper provided $3.8 million to fully reserve these receivables, except those
from RAO Gazprom, a large Russian natural gas company. These fully-reserved
accounts were written off during fiscal 1999.
S-1
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
NOT APPLICABLE
25
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Reference is made to the information to be included under the captions "BOARD OF
DIRECTORS AND EXECUTIVE OFFICERS -- Proposal 1: Election of Three (3) Directors"
and "-- Executive Officers", and "VOTING SECURITIES -- Compliance with Section
16 (a) of the Securities and Exchange Act of 1934" in Roper's definitive Proxy
Statement which relates to the 2002 Annual Meeting of Shareholders of Roper to
be held on March 15, 2002 (the "Proxy Statement"), to be filed within 120 days
after the close of Roper's 2001 fiscal year, which information is incorporated
herein by this reference.
ITEM 11. EXECUTIVE COMPENSATION
Reference is made to the information to be included under the captions "BOARD OF
DIRECTORS AND EXECUTIVE OFFICERS -- Meetings of the Board and Board Committees;
Compensation of Directors", "-- Compensation Committee Interlocks and Insider
Participation in Compensation Decisions" and "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 captions "VOTING
SECURITIES" in the Proxy Statement, which information is incorporated herein by
this reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Not Applicable
26
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)(1) The Consolidated Financial Statements listed in Item 8 of Part II
are filed as a part of this Annual Report.
(a)(2) The following consolidated financial statement schedule on page
S-1 is filed in response 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, 2001, 2000 and 1999.
(b) Reports on Form 8-K
-------------------
Roper did not file any Current Reports on Form 8-K during the fourth
quarter of fiscal 2001.
(c) Exhibits
--------
The following exhibits are separately filed with this Annual Report.
Exhibit No. Description of Exhibit
- ---------- ----------------------
2.1 Asset Purchase Agreement (Media Cybernetics LP)
/(a)/2.2 Share Sale and Purchase Agreement (Struers A/S & Logitech
Limited)
/(b)/3.1 Amended and Restated Certificate of Incorporation,
including Form of Certificate of Designation, Preferences
and Rights of Series A Preferred Stock
/(c)/3.2 Amended and Restated By-Laws
/(d)/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)
/(c)/4.02 Credit Agreement Dated as of May 18, 2000
/(c)/4.03 Note Purchase Agreement Dated as of May 18, 2000
/(b)/10.01 1991 Stock Option Plan, as amended +
/(e)/10.02 Non-employee Director Stock Option Plan, as amended +
27
<PAGE>
/(f)/10.03 Form of Amended and Restated Indemnification Agreement +
/(g)/10.04 Employee Stock Purchase Plan +
/(g)/10.05 2000 Stock Incentive Plan +
/(c)/10.06 Roper Industries, Inc. Non-Qualified Retirement Plan +
10.07 Brian D. Jellison Employment Agreement dated as of
November 6, 2001 +
10.08 Hadj A. Amari offer letter dated September 11, 2000 +
10.09 C. Thomas O'Grady offer letter dated February 19, 2001 +
21 List of Subsidiaries
23.1 Consent of Independent Public Accountants
___________________________
/(a)/Incorporated herein by reference to Exhibits 99.1 to the Roper
Industries, Inc. Current Report on Form 8-K filed December 13, 2001
(File No. 1-12273).
/(b)/Incorporated herein by reference to Exhibits 3.1 and 10.2 to the Roper
Industries, Inc. Annual Report on Form 10-K filed January 21, 1998
(File No. 1-12273).
/(c)/Incorporated herein by reference to Exhibits 3.2, 4.02, 4.03 and 10.06
to the Roper Industries, Inc. Form 10-Q filed September 13, 2000
(File No. 1-12273).
/(d)/Incorporated herein by reference to Exhibit 4.02 to the Roper
Industries, Inc. Current Report on Form 8-K filed January 18, 1996
(File No. 0-19818).
/(e)/Incorporated herein by reference to Exhibit 10.03 to the Roper
Industries, Inc. Annual Report on Form 10-K filed January 20, 1999
(File No. 1-12273).
/(f)/Incorporated herein by reference to Exhibit 10.04 to the Roper
Industries, Inc. Quarterly Report on Form 10-Q filed August 31,
1999 (File No. 1-12273).
/(g)/Incorporated herein by reference to Exhibits 10.04 and 10.05 to the
Roper Industries, Inc. Quarterly Report on Form 10-Q filed June 12,
2000 (File No. 1-12273).
+ Management contract or compensatory plan or arrangement.
28
<PAGE>
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, Roper has duly caused this Report to be signed on its behalf by the
undersigned, therewith duly authorized.
ROPER INDUSTRIES, INC.
(Registrant)
By /S/ DERRICK N. KEY January 18, 2002
---------------------------------------
Derrick N. Key, Chairman of the Board
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
has been signed below by the following persons on behalf of Roper and in the
capacities and on the dates indicated.
<TABLE>
<S> <C> <C>
/s/ DERRICK N. KEY Chairman of the Board January 18, 2002
- ------------------------------------------
Derrick N. Key
/s/ BRIAN D. JELLISON President and Chief Executive January 18, 2002
- ------------------------------------------ Officer
Brian D. Jellison
/s/ MARTIN S. HEADLEY Vice President and Chief January 18, 2002
- ------------------------------------------ Financial Officer
Martin S. Headley
/s/ KEVIN G. McHUGH Controller January 18, 2002
- ------------------------------------------
Kevin G. McHugh
/s/ W. LAWRENCE BANKS Director January 18, 2002
- ------------------------------------------
W. Lawrence Banks
/s/ LUITPOLD VON BRAUN Director January 18, 2002
- ------------------------------------------
Luitpold von Braun
/s/ DONALD G. CALDER Director January 18, 2002
- ------------------------------------------
Donald G. Calder
/s/ JOHN F. FORT, III Director January 18, 2002
- ------------------------------------------
John F. Fort, III
/s/ WILBUR J. PREZZANO Director January 18, 2002
- ------------------------------------------
Wilbur J. Prezzano
/s/ GEORG GRAF SCHALL-RIAUCOUR Director January 18, 2002
- ------------------------------------------
Georg Graf Schall-Riaucour
/s/ ERIBERTO R. SCOCIMARA Director January 18, 2002
- ------------------------------------------
Eriberto R. Scocimara
/s/ CHRISTOPHER WRIGHT Director January 18, 2002
- ------------------------------------------
Christopher Wright
</TABLE>
29
<PAGE>
EXHIBIT INDEX
Number Exhibit
(a)2.1 Asset Purchase Agreement (Media Cybernetics LP)
2.2 Share Sale and Purchase Agreement (Struers A/S & Logitech Limited)
incorporated herein by reference to Exhibits 99.1 to the Roper
Industries, Inc. Current Report on Form 8-K filed December 13, 2001
(File No. 1-12273).
3.1 Amended and Restated Certificate of Incorporation, including Form of
Certificate of Designation, Preferences and Rights of Series A
Preferred Stock incorporated herein by reference to Exhibit 3.1 to the
Roper Industries, Inc. Annual Report on Form 10-K filed January 21,
1998 (File No. 1-12273).
3.2 Amended and Restated By-Laws incorporated herein by reference to
Exhibit 3.2 to the Roper Industries, Inc. Form 10-Q filed September
13, 2000 (File No. 1-12273).
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 herein by reference to
Exhibit 4.02 to the Roper Industries, Inc. Current Report on Form 8-K
filed January 18, 1996 (File No. 0-19818).
4.02 Credit Agreement Dated as of May 18, 2000, incorporated herein by
reference to Exhibit 4.02 to the Roper Industries, Inc. Form 10-Q
filed September 13, 2000 (File No. 1-12273).
4.03 Note Purchase Agreement Dated as of May 18, 2000, incorporated herein
by reference to Exhibit 4.03 to the Roper Industries, Inc. Form 10-Q
filed September 13, 2000 (File No. 1-12273).
10.01 1991 Stock Option Plan, as amended incorporated herein by reference to
Exhibit 10.2 to the Roper Industries, Inc. Annual Report on Form 10-K
filed January 21, 1998 (File No. 1-12273).
10.02 Non-employee Director Stock Option Plan, as amended incorporated
herein by reference to Exhibit 10.03 to the Roper Industries, Inc.
Annual Report on Form 10-K filed January 20, 1999 (File No. 1-12273).
10.03 Form of Amended and Restated Indemnification Agreement incorporated
herein by reference to Exhibit 10.04 to the Roper Industries, Inc.
Quarterly Report on Form 10-Q filed August 31, 1999 (File No.
1-12273).
10.04 Employee Stock Purchase Plan incorporated herein by reference to
Exhibits 10.04 and 10.05 to the Roper Industries, Inc. Quarterly
Report on Form 10-Q filed June 12, 2000 (File No. 1-12273).
10.05 2000 Stock Incentive Plan herein by reference to Exhibits 10.04 and
10.05 to the Roper Industries, Inc. Quarterly Report on Form 10-Q
filed June 12, 2000 (File No. 1-12273).
<PAGE>
10.06 Roper Industries, Inc. Non-Qualified Retirement Plan incorporated
herein by reference to Exhibit 10.06 to the Roper Industries, Inc.
Form 10-Q filed September 13, 2000 (File No. 1-12273).
10.07 Brian D. Jellison Employment Agreement dated as of November 6, 2001.
10.08 Hadj A. Amari offer letter dated September 11, 2000.
10.09 C. Thomas O'Grady offer letter dated February 19, 2001.
21 List of Subsidiaries
23.1 Consent of Independent Public Accountants
_____________________
(a) The following schedules or similar attachments to this exhibit has been
omitted and will be furnished supplementally upon request.
Disclosure Schedules
Section 3(a) - Organization of the Company
Section 3(c) - Noncontravention
Section 3(f) - Financial Statements
Section 3(g) - Events Subsequent to December 31, 2000
Section 3(h) - Undisclosed Liabilities
Section 3(i) - Legal Compliance
Section 3(j) - Tax Matters
Section 3(k) - Real Property
Section 3(l) - Intellectual Property
Section 3(m) - Software
Section 3(q) - Contracts
Section 3(s) - Powers of Attorney
Section 3(t) - Insurance
Section 3(v) - Product Warranty
Section 3(x) - Employees
Section 3(y) - Employee Benefits
Section 3(cc) - Disclosure
Exhibits:
Exhibit A - Allocation of Asset Purchase Consideration
Exhibit B - Escrow Agreement
Exhibit C - Third Party Consents
Exhibit D - Noncompetition and Assignment of Inventions Agreement
Exhibit E - Release Agreement
Exhibit F - Employment Agreement
Exhibit G - Form of Opinion of Counsel to Company and General Partner
Exhibit H - Form of Opinion of Counsel to Parent and Buyer
Exhibit I - Employee Profit Sharing Agreement
Exhibit J - Estimated Adjustment Schedule
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-2.1
<SEQUENCE>3
<FILENAME>dex21.txt
<DESCRIPTION>ASSET PURCHASE AGREEMENT
<TEXT>
<PAGE>
EXHIBIT 2.1
ASSET PURCHASE AGREEMENT
BY AND AMONG
MCB ACQUISITION SUBSIDIARY, INC.,
ROPER INDUSTRIES, INC.,
MEDIA CYBERNETICS, L.P.
AND
MEDIA CYBERNETICS, INC.
Dated as of June 7, 2001
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. DEFINITIONS......................................................................................... 1
2. PURCHASE AND SALE OF THE ACQUIRED ASSETS AND ASSUMPTION OF ASSUMED LIABILITIES...................... 11
(a) Calculation of Estimated Net Working Capital of the Company................................ 11
(b) Purchase and Sale of Acquired Assets; Assumption of Liabilities............................ 11
(c) Consideration.............................................................................. 12
(d) [Intentionally Deleted].................................................................... 12
(e) Payment of Closing Consideration........................................................... 12
(f) The Closing................................................................................ 13
(g) Deliveries at the Closing.................................................................. 13
(h) Minimum Net Working Capital Adjustment..................................................... 13
(i) Allocation of Asset Purchase Consideration................................................. 14
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE GENERAL PARTNER............................... 14
(a) Organization of the Company................................................................ 15
(b) Authorization of Transaction............................................................... 15
(c) Noncontravention........................................................................... 15
(d) Brokers' Fees.............................................................................. 16
(e) Title to Acquired Assets................................................................... 16
(f) Financial Statements....................................................................... 16
(g) Events Subsequent to December 31, 2000..................................................... 17
(h) Undisclosed Liabilities.................................................................... 19
(i) Legal Compliance........................................................................... 19
(j) Tax Matters................................................................................ 20
(k) Real Property.............................................................................. 21
(l) Intellectual Property...................................................................... 21
(m) Software................................................................................... 24
(n) No Infringement............................................................................ 26
(o) Tangible Assets............................................................................ 27
(p) Inventory.................................................................................. 27
(q) Contracts.................................................................................. 27
(r) Notes and Accounts Receivable.............................................................. 29
(s) Powers of Attorney......................................................................... 29
(t) Insurance.................................................................................. 29
(u) Litigation................................................................................. 29
(v) Product Warranty........................................................................... 30
(w) Product Liability.......................................................................... 30
(x) Employees.................................................................................. 30
(y) Employee Benefits.......................................................................... 31
(z) Guaranties................................................................................. 32
</TABLE>
<PAGE>
<TABLE>
<S> <C>
(aa) Environment, Health, and Safety............................................................ 32
(bb) Certain Business Relationships with the Company............................................ 33
(cc) Disclosure................................................................................. 33
4. REPRESENTATIONS AND WARRANTIES OF THE PARENT AND THE BUYER.......................................... 33
(a) Organization of the Parent and the Buyer................................................... 33
(b) Authorization of Transaction............................................................... 33
(c) Noncontravention........................................................................... 33
(d) Broker's Fees.............................................................................. 33
(e) Disclosure................................................................................. 34
(f) Financial Ability.......................................................................... 34
5. CONDITIONS TO OBLIGATION TO CLOSE................................................................... 34
(a) Conditions to Obligation of Parent and Buyer............................................... 34
(b) Conditions to Obligation of the Company and the General Partner............................ 36
6. PRE-CLOSING COVENANTS............................................................................... 37
(a) Access and Investigation................................................................... 37
(b) Operation of the Business of the Company................................................... 37
(c) Negative Covenant.......................................................................... 38
(d) No Merger or Solicitation.................................................................. 40
(e) Satisfaction of Obligations to Creditors................................................... 40
(f) Assignment of Company Assets Held by the General Partner................................... 40
7. POST-CLOSING COVENANTS.............................................................................. 41
(a) General.................................................................................... 41
(b) Litigation Support......................................................................... 41
(c) Transition................................................................................. 41
(d) Confidentiality............................................................................ 41
(e) Tax Matters................................................................................ 42
(f) Assignment of Interests in Acquired Assets................................................. 42
(g) Use of Company Name........................................................................ 43
(h) Employee Matters........................................................................... 43
(i) Transition Incentive Bonus Program......................................................... 44
(j) Domain Name Transfer....................................................................... 44
(k) Insurance Coverage......................................................................... 45
8. REMEDIES FOR BREACHES OF THIS AGREEMENT............................................................. 45
(a) Survival of Representations and Warranties................................................. 45
(b) Indemnification Provisions for Benefit of the Parent and the Buyer......................... 46
(c) Indemnification Provisions for Benefit of the Company...................................... 48
(d) Matters Involving Third Parties............................................................ 48
(e) Determination of Adverse Consequences...................................................... 49
(f) Post-Closing............................................................................... 49
</TABLE>
- ii -
<PAGE>
<TABLE>
<S> <C>
9. MISCELLANEOUS....................................................................................... 50
(a) Press Releases and Public Announcements.................................................... 50
(b) Waiver of Bulk Sales Law................................................................... 50
(c) No Third-Party Beneficiaries............................................................... 50
(d) Entire Agreement........................................................................... 50
(e) Succession and Assignment.................................................................. 50
(f) Counterparts............................................................................... 50
(g) Headings................................................................................... 50
(h) Notices.................................................................................... 51
(i) Governing Law.............................................................................. 51
(j) Amendments and Waivers..................................................................... 52
(k) Severability............................................................................... 52
(l) Expenses................................................................................... 52
(m) Construction............................................................................... 52
(n) Incorporation of Exhibits and Schedules.................................................... 52
(o) Specific Performance....................................................................... 52
(p) Submission to Jurisdiction................................................................. 52
(q) Arbitration................................................................................ 53
</TABLE>
- iii -
<PAGE>
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (this "Agreement") is dated as of June 7,
2001, by and among MCB ACQUISITION SUBSIDIARY, INC., a Delaware corporation
("Buyer"), ROPER INDUSTRIES, INC., a Delaware corporation and parent of Buyer
("Parent"), MEDIA CYBERNETICS, L.P., a Delaware limited partnership (the
"Company"), and MEDIA CYBERNETICS, INC., a Delaware corporation and general
partner of the Company (the "General Partner"). The Buyer, the Parent, the
Company, and the General Partner are referred to collectively herein as the
"Parties".
The Company designs, sells, and licenses software used in the analysis of
microscopic images.
This Agreement contemplates a transaction in which the Company shall sell,
transfer, assign, and deliver to the Buyer substantially all of the assets owned
or used by, and certain of the liabilities of, the Company, and the Buyer shall
purchase and accept such assets, and assume such liabilities, and in connection
therewith, the Company will receive consideration in the form of cash.
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.
"Acquired Assets" means all right, title, and interest in and to all of the
assets of the Company used or usable in the conduct of the Business as of the
Closing Date (except for those assets described below as Excluded Assets),
including, without limitation, all of the Company's right, title and interest in
and to:
(a) all leases with respect to the Leased Real Property, and all
improvements, fixtures, and fittings thereon, and easements, rights-of-way,
and other appurtenants with respect thereto (such as appurtenant rights in
and to public streets);
(b) all tangible personal property (such as machinery, equipment,
inventories of raw materials and supplies, manufactured and purchased
parts, goods in process and finished goods, furniture, and automobiles;
(c) all Intellectual Property, goodwill associated therewith, licenses
and sublicenses granted and obtained with respect thereto, and rights
thereunder, remedies against infringements thereof, and rights to
protection of interests therein under the laws of all jurisdictions;
(d) all assets and property, tangible or intangible, used in the
conduct of the Business, and which are owned by the General Partner, or
licensed by the General Partner to the Company;
-1-
<PAGE>
(e) all agreements (including but not limited to employment
agreements, confidentiality agreements, and noncompetition agreements),
contracts, leases (other than the real property leases), personal property
leases, subleases, and rights thereunder (the "Assumed Contracts");
(f) any current asset of the Company relating to the operation of the
Company prior to the Closing Date, including but not limited to Cash (but
excluding Cash in the Company's payroll account as of the Closing Date
necessary to satisfy the Company's payroll obligations to its employees up
to and through the Closing Date), accounts receivables, inventories,
prepaid expenses, and other current assets;
(g) all claims, deposits, prepayments, refunds, causes of action,
choses in action, rights of recovery, rights of set off, and rights of
recoupment;
(h) to the extent transferable, all franchises, approvals, permits,
licenses, orders, registrations, certificates, variances, and similar
rights obtained from governments and governmental agencies;
(i) all books, records, ledgers, files, documents, correspondence,
lists, plats, architectural plans, drawings, and specifications, creative
materials, advertising and promotional materials, studies, reports, and
other printed or written materials relating to the Business, except those
excluded below as Excluded Assets; and
(j) all goodwill and similar intangible property of the Company.
PROVIDED, HOWEVER, that notwithstanding the foregoing, the Acquired Assets shall
not include (the following shall be referred to as the "Excluded Assets"):
(i) except as provided in Section 7(h)(iii) below, any rights or
interests in and with respect to any Company Plan;
(ii) (A) any rights and interests in and to that certain
contribution agreement by and among the Company and certain of its
Partners, and any other agreement, written or oral, by and between the
Company and any of its Partners, (B) any rights or interests in any
indentures, mortgages, lines of credit, instruments, security
interests, guaranties, or other similar arrangements constituting
Indebtedness, and rights thereunder, of the Company, and (C) any
rights or interests in any oral or written consulting or other
arrangement or agreement of any kind between the Company and the
General Partner, Michael P. Galvin, the Michael P. Galvin 1994 Trust,
Sam Steppel, Step-L Ventures, or any of their Affiliates (the
"Excluded Contracts");
(iii) the corporate charter, qualifications to conduct business as
a foreign corporation, arrangements with registered agents relating to
foreign qualifications, taxpayer and other identification numbers,
seals, minute books, stock transfer books, blank stock certificates,
original Tax Returns and other
-2-
<PAGE>
documents relating to the organization, maintenance, and existence of
the Company as a limited partnership;
(iv) any and all of the rights of the Company under this Agreement
or any other agreement, document, certificate, or instrument executed
in connection herewith; or
(v) any right, title, or interest in and to the Company's payroll
account.
"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.
"Affiliate" is used to indicate a relationship to a specified person, firm,
corporation, partnership, limited liability company, association or entity, and
means any person, firm, corporation, partnership, limited liability company,
association or entity that, directly or indirectly or through one or more
intermediaries, controls, is controlled by or is under common control with such
person, firm, corporation, partnership, limited liability company, association
or entity.
"Affiliated Group" means any affiliated group within the meaning of Code
Section 1504(a) (or any similar group defined under a similar provision of
state, local, or foreign law).
"Allocation" has the meaning set forth in Section 2(i) below.
"Applicable Rate" means the corporate base rate of interest announced from
time to time by Bank One, NA.
"Arbitrator" has the meaning set forth in Section 2(h)(iii) below.
"Asset Purchase Consideration" has the meaning set forth in Section 2(c)
below.
"Assumed Liabilities" means (except to the extent such liabilities are
expressly excluded as Excluded Liabilities described below):
(a) those current Liabilities of the Company which are reflected as
current liabilities on the Financial Statements, as follows: accounts
payable; accrued benefits; accrued liabilities; deferred income; and
deferred rent expense;
(b) Liabilities of the Company for Product Warranty Claims;
(c) Liabilities of the Company as tenant arising under the leases for
the Leased Real Property;
(d) all Liabilities of the Company arising under the Assumed
Contracts;
-3-
<PAGE>
(e) those Liabilities of the Company arising on or prior to the
Closing Date with respect to the employee profit-sharing arrangement of the
Company (a copy of which is attached hereto as Exhibit I) to the extent
---------
such Liabilities have been accrued on the Closing Date Balance Sheet; and
(f) other than the Excluded Liabilities, any other Liability of the
Company arising by law or by contract or otherwise, on or prior to June 30,
2001, or thereafter, whether absolute, contingent or otherwise, known or
unknown, accrued or unaccrued, asserted or unasserted, or otherwise.
PROVIDED, HOWEVER, that notwithstanding the foregoing, the Assumed Liabilities
shall not include (the following shall be referred to herein as the "Excluded
Liabilities"):
(A) those current Liabilities of the Company which are reflected
as current liabilities on the Financial Statements, as
follows: current portion of partner loan; and capital lease
obligation, current portion;
(B) any Liabilities of the General Partner;
(C) Liabilities arising under the Excluded Contracts;
(D) any Liabilities of the Company for Indebtedness of any kind;
(E) except as provided in Section 7(h)(iii) below, Liabilities
of the Company with respect to any of the Company Plans;
(F) Liabilities of the Company arising under or with respect to
any Equity Rights of the Company, Liabilities arising from
any preemptive or similar rights on the part of any holder
of any equity securities of the Company, and Liabilities
arising from any options, warrants, conversion or other
rights, agreements, commitments, arrangements or
understandings of any kind obligating the Company,
contingently or otherwise, to issue or sell any equity
securities or any securities convertible into or
exchangeable for any such equity securities;
(G) Liabilities of the Company arising under this Agreement (or
under any side agreement between the Company and/or any
Partner on the one hand and the Buyer and/or Parent on the
other hand entered into on or after the date of this
Agreement) for failure to perform its obligations hereunder;
(H) Liabilities arising as a result of the failure of the
Company to be in good standing under the laws of its
jurisdiction of organization;
(I) Liabilities arising as a result of the failure of the
Company to comply with the partnership, or other laws,
rules, or regulations of
-4-
<PAGE>
any federal, state, local or foreign government relating to
the existence of the Company as an entity;
(J) Liabilities of the Company to its Partners arising by law,
pursuant to the charter documents (including but not limited
to the certificate of limited partnership and the agreement
of limited partnership) of the Company, or as a result of
the consummation of the transactions contemplated by this
Agreement;
(K) Liabilities of the Company or the Partners arising as a
result of the failure to pay any federal or state income
Taxes;
(L) Liabilities of the Company arising as a result of claims
based on or arising from any injunction, judgment, order,
decree, ruling, or charge filed against the Company as a
result of any 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 against the
Company commenced on or prior to the Closing Date;
(M) Except for those Liabilities of the Company arising on or
prior to the Closing Date with respect to the employee
profit-sharing arrangement of the Company (a copy of which
is attached hereto as Exhibit I) to the extent such
---------
Liabilities have been accrued on the Closing Date Balance
Sheet, Liabilities of the Company arising under entitlements
due to any employees, whether by contractual obligation or
normal business expectation, or pursuant to any stock
appreciation or phantom stock plan or program, including but
not limited to those Liabilities of the Company to its
employees arising under that certain Transition Incentive
Bonus Program of the Company, a copy of which is attached
hereto as Section 1(a) of the Company Disclosure Schedule
(the "Transition Incentive Bonus Program"); and
(N) Liabilities of the Company for costs and expenses incurred
in connection with this Agreement and the transactions
contemplated hereby, including but not limited to the costs
and expenses of Updata Capital, Inc.
"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 could reasonably be expected to form the basis
for any specified consequence.
"Business" means the business conducted by the Company prior to and as of
the Closing Date.
"Buyer" has the meaning set forth in the preface above.
-5-
<PAGE>
"Buyer's Advisors" has the meaning set forth in Section 6(a)(i) below.
"Cash" means cash and cash equivalents (including marketable securities and
short term investments) calculated in accordance with GAAP applied on a basis
consistent with the preparation of the Financial Statements, inclusive of
deposits-in-transit and after deduction for outstanding checks.
"Closing" has the meaning set forth in Section 2(f) below.
"Closing Consideration" has the meaning set forth in Section 2(c).
"Closing Date" has the meaning set forth in Section 2(f) below.
"Closing Date Balance Sheet" has the meaning set forth in Section 2(h)(ii)
below.
"COBRA" has the meaning set forth in Section 3(y)(vi) below.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" has the meaning set forth in the preface above.
"Company Disclosure Schedule" has the meaning set forth in Section 3 below.
"Company Plans" has the meaning set forth in Section 3(y) below.
"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 is not generally known to its competitors; and (b)
information of the Protected Party, without regard to form, including, but not
limited to, Intellectual Property, Software, 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. Notwithstanding anything to the contrary contained
herein, Confidential Information shall not include any data or information that
(v) has been voluntarily disclosed to the public by the Protected Party, (w) has
been independently developed and disclosed to the public by others, (x)
otherwise enters the public domain through lawful means, (y) was already known
by Recipient prior to such disclosure through no wrongful act or omission of, or
violation of the terms hereof by, Recipient (as evidenced by written
documentation) or was lawfully and rightfully disclosed to Recipient by another
Person, or (z) is required to be disclosed by law or order without the
availability of applicable protective orders or treatment.
"Employee Benefit Plan" means any (i) nonqualified deferred compensation or
retirement plan or arrangement, including any Employee Pension Benefit Plan (as
defined in ERISA Section 3(2)), (ii) qualified defined contribution retirement
plan or arrangement, including any Employee Pension Benefit Plan, (iii)
qualified defined benefit retirement plan or arrangement, including any Employee
Pension Benefit Plan (including any Multiemployer Plan), (iv) employee welfare
benefit plan, including any Employee Welfare Benefit Plan (as defined in
-6-
<PAGE>
ERISA Section 3(1)), (v) fringe benefit plan or program, and (vi) each
employment, severance, salary continuation or other contract, incentive plan,
insurance plan arrangement, bonus plan and any equity plan or arrangement
without regard to whether such plan, arrangement, program or contract exists
under US or any similar non-US law, rule or regulation.
"Employees" has the meaning set forth in Section 7(h)(i) below.
"Employment Agreement" has the meaning set forth in Section 5(a)(vii)
below.
"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 US and non-US 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 (which foreign governments shall
include, but not be limited to, Germany, The Netherlands, the European Union,
and Singapore) (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.
"Equity Rights" means any and all plans permitting the issuance of the
partnership interests of the Company, options to acquire partnership interests
of the Company; and/or other rights to acquire partnership interests of the
Company that are valued in whole or in part by reference to the partnership
interests of the Company or that may be settled in partnership interests of the
Company.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Escrow Agent" means SunTrust Bank, N.A.
"Escrow Agreement" means the Escrow Agreement dated as of the Closing Date,
entered into among the Parent, the Buyer, the Company, the General Partner, and
the Escrow Agent with respect to the indemnification obligations of the Company
and the General Partner under Section 8 of this Agreement, the form of which is
set forth as Exhibit B.
---------
"Estimated Adjustment Schedule" has the meaning set forth in Section 2(a)
below.
"Estimated Net Working Capital" has the meaning set forth in Section 2(a)
below.
"Extremely Hazardous Substance" has the meaning set forth in Section 302 of
the Emergency Planning and Community Right-to-Know Act of 1986, as amended, and
any counterpart or similar non-US law.
"Fiduciary" has the meaning set forth in ERISA Section 3(21).
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"Final Adjustment Schedule" has the meaning set forth in Section 2(h)(ii)
below.
"Financial Statements" has the meaning set forth in Section 3(f) below.
"First Escrow Period" has the meaning set forth in Section 8(b)(v) below.
"Foreign Plans" has the meaning set forth in Section 3(y)(ii) below.
"Four-Digit Dates" has the meaning set forth in Section 3(m)(iv) below.
"GAAP" means United States generally accepted accounting principles as in
effect as of the date hereof.
"General Partner" has the meaning set forth in the preface above.
"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.
"Indebtedness" means (i) all indebtedness for borrowed money or for the
deferred purchase price of property or services (including, without limitation,
reimbursement and all other obligations with respect to surety bonds, letters of
credit and bankers' acceptances, whether or not matured), including the current
portion of such indebtedness, (ii) all obligations evidenced by notes, bonds,
debentures or similar instruments, and (iii) all capital lease obligations.
"Indemnified Party" has the meaning set forth in Section 8(d) below.
"Indemnifying Party" has the meaning set forth in Section 8(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 US and non-US
patents, patent applications, and patent disclosures, together with all
reissuances, continuations, divisionals, continuations-in-part, revisions,
extensions, and reexaminations thereof;
(b) all US and non-US 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;
(c) all copyrightable works, all US and non-US copyrights, and all
applications, registrations, and renewals in connection therewith;
(d) all mask works and all applications, registrations, and renewals
in connection therewith;
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<PAGE>
(e) all trade secrets and confidential business information
(including without limitation 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 other proprietary rights;
(g) all Owned Software and all Licensed Software;
(h) all right, title, and interest in and to the name "Media
Cybernetics"; and
(i) all right, title, and interest in and to the world wide web
internet domain names "www.imageproshop.com", "www.solutions-zone.com",
"www.mediacy.com", "www.optimas.com", "www.drill-down.com",
"www.mediacybernetics.com", "www.image-pro.com", and each other world wide
web internet domain name owned by the Company, and each other world wide
web internet domain name used in the Business.
(j) with respect to each of the foregoing, all copies and tangible
embodiments thereof (in whatever form or medium).
"Knowledge" means, with respect to the Company, or the General Partner, the
knowledge of Doug Paxson, Michael P. Galvin, Scott Ireland, Dean Sequera, John
Schmitz, Bill Shotts, David Neubrech, or Joyce Mooney.
"Leased Real Property" has the meaning set forth in Section 3(k) below.
"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),
obligation or commitment, including any liability for Taxes.
"Licensed Software" has the meaning set forth in Section 3(m)(i) below.
"Multiemployer Plan" has the meaning set forth in ERISA Section 3(37).
"Net Working Capital" means the excess of total current assets, including
without limitation cash, accounts receivable, net inventories (calculated in a
first-in, first-out basis), prepaid expenses, and other current assets, in each
case to the extent such are Acquired Assets, less total current liabilities,
including without limitation accounts payable, accrued benefits (including but
not limited to accrued employee bonus payments and accrued profit sharing
payments), accrued liabilities, and deferred rent expense (but excluding
liabilities for accrued interest, deferred employee compensation, accrued Tax
liability, deferred income, and any Indebtedness) to the extent such are Assumed
Liabilities, in each case determined in accordance with GAAP, and to the extent
consistent with GAAP, applied on a basis consistent with the preparation of the
Financial Statements. All accounting entries will be made regardless of their
amount and all detected errors and omissions will be corrected regardless of
their materiality.
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<PAGE>
"Noncompetition and Assignment of Inventions Agreement" has the meaning set
forth in Section 5(a)(v) below.
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"Owned Software" has the meaning set forth in Section 3(m)(i) below.
"Partners" means the General Partner, and each of the limited partners of
the Company.
"Party" has the meaning set forth in the preface above.
"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).
"Process Agent" has the meaning set forth in Section 9(p) below.
"Product Warranty Claims" means claims of the customers of the Company
and/or users made at any time with respect to products sold, manufactured,
leased or delivered by the Company.
"Prohibited Transaction" has the meaning set forth in Section 3(y)(vii)(B)
below.
"Purchase Price Adjustment" has the meaning set forth in Section 2(h)(i)
below.
"Second Escrow Period" has the meaning set forth in Section 8(b)(v) below.
"Security Interest" means any mortgage, pledge, lien, encumbrance, charge,
conditional sale or title retention agreement, hypothecation, collateral
assignment, security interest, easement or other encumbrance of any kind or
nature whatsoever, other than (a) mechanic's, materialmen's, and similar liens
incurred in the Ordinary Course of Business not yet due and payable, (b) liens
for Taxes not yet due and payable or for Taxes that the taxpayer is contesting
in good faith through appropriate proceedings, and (c) purchase money liens and
liens securing rental payments under capital lease arrangements.
"Software" has the meaning set forth in Section 3(m)(i) below.
"Subsidiary" means any corporation, limited partnership, limited liability
company, or other entity with respect to which a specified Person (or a
Subsidiary thereof) owns a majority of the common stock, units or other equity
interests or has the power to vote or direct the voting of sufficient securities
to elect a majority of the directors or general partners, as the case may be.
"Takeover Proposal" means any written inquiry, proposal or offer from any
Person relating to (A) any direct or indirect acquisition or purchase of (i) the
assets of the Company outside of the Ordinary Course of Business (other than the
transactions contemplated by this Agreement), or (ii) any securities of the
Company, or (B) any merger, consolidation, business
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<PAGE>
combination, recapitalization, liquidation, dissolution or similar transaction
involving the Company.
"Tax" means any federal, state, local, or foreign (including, but not
limited to, Germany, The Netherlands, the European Union, and Singapore) income,
built-in gains (within the meaning of Code Section 1374 or any comparable
foreign, state or local provisions), gross receipts, excess net passive income
(within the meaning of Code Section 1375 or any comparable foreign, state or
local provisions), license, payroll, employment, excise, severance, stamp,
occupation, premium, supplementary taxes, windfall profits, environmental
(including taxes under Code Section 59A), customs duties, capital stock (or
other equity security), franchise, profits, withholding, social security (or
similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum,
retailer's occupation taxes and other taxes commonly understood to be sales or
use taxes, estimated, or other tax of any kind whatsoever, including any
interest, penalty, or addition thereto (including without limitation any
additions to tax or additional amounts with respect 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.
"Third Party Claim" has the meaning set forth in Section 8(d)(i) below.
"Undisclosed Liabilities" has the meaning set forth in Section 3(h) below.
"US Plans" has the meaning set forth in Section 3(y)(ii) below.
2. Purchase and Sale of the Acquired Assets and Assumption of Assumed
Liabilities.
(a) Calculation of Estimated Net Working Capital of the Company. The
Company has calculated the estimated Net Working Capital of the Company as
of the commencement of business on May 31, 2001 (the "Estimated Net Working
Capital"), and has presented such calculation to the Parent and the Buyer
(such calculation of the Estimated Net Working Capital, as provided to the
Parent and the Buyer, shall be referred to herein as the "Estimated
Adjustment Schedule"), a copy of which Estimated Adjustment Schedule is
attached hereto as Exhibit J.
---------
(b) Purchase and Sale of Acquired Assets; Assumption of Liabilities.
(i) The Buyer agrees to purchase from the Company, and the
Company agrees to sell, transfer, convey, assign and deliver to the
Buyer, all of the Acquired Assets effective as of the close of
business on June 30, 2001, for the consideration specified in Section
2(c) below.
(ii) On and subject to the terms and conditions of this
Agreement, the Buyer agrees to assume and become responsible for the
Assumed Liabilities effective as of the close of business on June 30,
2001, for the consideration
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<PAGE>
specified in Section 2(c) below. The Buyer shall pay and
discharge when due, or contest in good faith, all of those
Liabilities which are Assumed Liabilities. The Buyer will not
assume or have any responsibility, however, with respect to any
Liability or obligation of the Company or the General Partner
which is an Excluded Liability.
(iii) In the event of any claim against the Buyer with
respect to any of the Assumed Liabilities, without limiting
Buyer's remedies or defenses, the Buyer shall have, and the
Company hereby assigns to the Buyer, to the extent it may
lawfully do so, any defense, counterclaim, or right of setoff
which would have been available to the Company if such claim had
been asserted against the Company.
(iv) The assumption by the Buyer of the Assumed
Liabilities, and the transfer thereof by the Company, shall in
no way expand the rights or remedies of any third party against
the Buyer or its officers, directors, employees, stockholders,
and advisors as compared to the rights and remedies which such
third party would have had against the Company had the Buyer not
assumed such Assumed Liabilities. The Company shall pay and
discharge when due, or contest in good faith, all of those
Liabilities which are Excluded Liabilities.
(c) Consideration. At Closing, in consideration for the
sale, transfer, conveyance, assignment, and delivery of the Acquired
Assets by the Company to the Buyer and the assumption by the Buyer of
the Assumed Liabilities from the Company, the Company shall be entitled
to receive, in the manner described in Section 2(e) below, Seventeen
Million Three Hundred Seventy Five Thousand Dollars ($17,375,000.00)
(the "Closing Consideration"), subject to those post-Closing adjustments
as provided in Section 2(h) below (the net amount is referred to as the
"Asset Purchase Consideration").
(d) [Intentionally Deleted] Payment of Closing
Consideration. At the Closing, the Closing Consideration shall be paid
as follows:
(i) that amount, if any, of the Closing Consideration
necessary to be paid to applicable lenders and other creditors
of the Company to pay off Indebtedness or obtain clear title to
the Acquired Assets, shall be paid to such lenders and other
creditors in accordance with the payoff letters provided by such
creditors;
(ii) Three Million Three Hundred Thousand Dollars
($3,300,000.00) of the Closing Consideration shall be paid to
the Escrow Agent, to be held and disbursed as provided in
Section 8 below and the Escrow Agreement; and
(iii) the balance of the Closing Consideration shall be
paid to a bank or other account designated in writing to the
Buyer by the Company at least two business days prior to the
Closing Date by wire transfer of immediately available federal
funds, which amount shall be paid to the Company.
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<PAGE>
(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, 1001 Pennsylvania
Avenue, N.W., Suite 600 South, Washington, D.C. 20004-2505, at 10:00
a.m., on Monday July 2, 2001, or such other date and time, or in such
other manner, as the Parties may agree (the "Closing Date").
(g) Deliveries at the Closing. At the Closing, (i) the
Company and the General Partner will deliver to the Parent and the Buyer
the various certificates, instruments, and documents referred to in
Section 5(a) below; (ii) the Parent and the Buyer will deliver to the
Company the various certificates, instruments, and documents referred to
in Section 5(b) below; (iii) the Company and the General Partner will
execute, acknowledge (if appropriate), and deliver to the Parent and the
Buyer such documents as the Parent, the Buyer, and their counsel may
reasonably request; (iv) the Buyer will execute, acknowledge (if
appropriate), and deliver to the Company such documents as the Company
and its counsel reasonably may request; and (v) the Buyer will deliver
to the Company, and others specified in Section 2(e), the Closing
Consideration.
(h) Minimum Net Working Capital Adjustment.
(i) The Closing Consideration shall be (i) reduced on
a dollar-for-dollar basis to the extent that the Net Working
Capital of the Company as of the close of business on June 30,
2001, is less than $900,000, or (ii) increased on a
dollar-for-dollar basis to the extent that the Net Working
Capital of the Company as of the close of business on June 30,
2001, is greater than $900,000. Any decrease or increase in the
Closing Consideration pursuant to this Section 2(h) shall be
referred to as a "Purchase Price Adjustment".
(ii) No later than forty five (45) days after the
Closing Date, the Parent shall deliver to the Company (i) a
balance sheet and a statement of operations of the Company for
the period ended as of the close of business on June 30, 2001
(the "Closing Date Balance Sheet"), and (ii) a separate
statement calculating Net Working Capital of the Company as of
the close of business on June 30, 2001, based on the Closing
Date Balance Sheet, showing any calculations with respect to any
necessary Purchase Price Adjustment, including any necessary
adjustments to the Estimated Adjustment Schedule (the "Final
Adjustment Schedule"). The Company shall have the right to
examine and make copies of the work papers and such other
documents that are generated or reviewed by the Parent in
connection with the preparation of the Closing Date Balance
Sheet and the Final Adjustment Schedule.
(iii) The Company shall, within forty-five (45) days
following its receipt of the Closing Date Balance Sheet and the
Final Adjustment Schedule, accept or reject the Purchase Price
Adjustment submitted by the Parent. If the Company disagrees
with such calculation, it shall give written notice to the
Parent of such disagreement and any reason therefor within such
forty-five (45) day period. Should the Company fail to notify
the Parent of a disagreement within such forty-five (45) day
period, the Company shall be deemed to agree with the
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<PAGE>
Parent's calculation. Any disagreement with respect to the
determination of any Purchase Price Adjustment shall be referred
to the Washington, D.C. office of Ernst & Young LLP (the
"Arbitrator"). The Arbitrator shall act as an arbitrator and
shall issue its report as to the Net Working Capital as of the
close of business on June 30, 2001, and the determination of the
Purchase Price Adjustment reflected in the Final Adjustment
Schedule within sixty (60) days after such dispute is referred
to the Arbitrator. The Company on the one hand, and the Parent
on the other hand, shall bear all costs and expenses incurred by
it in connection with such arbitration, except that the fees and
expenses of the Arbitrator hereunder shall be borne by the
Company and the Parent in such proportion as the Arbitrator
shall determine based on the relative merit of the position of
the parties. This provision for arbitration shall be
specifically enforceable by the Parties and the decision of the
Arbitrator in accordance with the provisions hereof shall be
final and binding with respect to the matters so arbitrated and
there shall be no right of appeal therefrom.
(iv) If, based on the Final Adjustment Schedule as
finally determined pursuant to this Section 2(h), (i) the Net
Working Capital of the Company as of the close of business on
June 30, 2001, is less than the Estimated Net Working Capital,
the Company (or in the event the Company does not have adequate
financial resources, the General Partner) shall pay to the Buyer
an amount equal to such deficit, or (ii) the Net Working Capital
of the Company as of the close of business on June 30, 2001, is
greater than the Estimated Net Working Capital, the Buyer shall
pay to the Company an amount equal to such excess. Final amounts
due hereunder shall be paid no later than five (5) business days
following the Company's agreement with the Parent's calculation
of the Purchase Price Adjustment, or in the event of a
disagreement, following the resolution of such disagreement by
written agreement of the Parent and the Company, or the
determination of the Arbitrator pursuant to Section 2(h)(iii)
above.
(i) Allocation of Asset Purchase Consideration. The Asset
Purchase Consideration and the Assumed Liabilities shall be allocated to
the Acquired Assets as set forth on Exhibit A attached hereto (the
---------
"Allocation"). The Parties shall report the sale and purchase of the
Acquired Assets on all tax returns and tax forms (including, without
limitation, Form 8594 of the Internal Revenue Service) in a manner
consistent with such Allocation and shall not, in connection with the
filing of such returns or forms, make any Allocation of the Asset
Purchase Consideration and the Assumed Liabilities which is inconsistent
with the Allocation. The Parties agree to consult with one another with
respect to any tax audit, controversy or litigation relating to the
Allocation.
3. Representations and Warranties of the Company and the General
Partner.
The Company and the General Partner, jointly and severally, represent
and warrant to the Parent and the Buyer that the statements contained in this
Section 3 are true, correct and complete as of the date hereof, except as
specified to the contrary in the corresponding paragraph
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<PAGE>
of the disclosure schedule prepared by the Company accompanying this Agreement
and initialed by the Company and the Buyer (the "Company Disclosure Schedule").
The Company Disclosure Schedule will be arranged in paragraphs corresponding to
the lettered and numbered paragraphs contained in this Section 3.
(a) Organization of the Company. The Company is a limited
partnership duly organized, validly existing, and in good standing
under the laws of the State of Delaware and is duly qualified to
conduct business in Maryland and every other jurisdiction where such
qualification is required, which jurisdictions are set forth on
Section 3(a) of the Company Disclosure Schedule. The Partners listed
on Section 3(a) of the Company Disclosure Schedule are the sole record
and beneficial owners of the partnership interests of the Company. The
Company does not have any Subsidiaries.
(b) Authorization of Transaction. The Company and the General
Partner have full power and authority (including, with respect to the
Company, full partnership power and authority, and with respect to the
General Partner, full corporate power and authority) to execute and
deliver this Agreement and to perform its obligations hereunder. The
General Partner has the full power and authority to authorize, and the
General Partner has duly authorized, the execution, delivery and
performance of this Agreement by the Company. This Agreement
constitutes the valid and legally binding obligation of the Company
and the General Partner, and (assuming the due authorization and valid
execution and delivery hereof by the Buyer and the Parent) is
enforceable against the Company and the General Partner in accordance
with its terms, subject to the effect of any applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting
creditors' rights and remedies generally, and subject, as to
enforceability, to the effect of general principles of equity
(regardless of whether enforcement is considered in a proceeding at
law or in equity). Neither the Company nor the General Partner need to
give any notice to, make any filing with, or obtain any authorization,
consent, or approval of any United States, Germany, The Netherlands,
European Union, Singapore, or other governmental agency in order for
the Parties to consummate the transactions contemplated by this
Agreement.
(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 Company or the Partners are subject or any provision of the
certificate of limited partnership or the agreement of limited
partnership of the Company, or (ii) except as otherwise set forth on
Section 3(c) of the Company Disclosure Schedule, 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 Company or the
Partners are a party or by which the Company or the Partners are bound
or to which any of the assets of the Company are subject (or result in
the imposition of any Security Interest upon any of the Acquired
Assets or the Assumed Liabilities).
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<PAGE>
(d) Brokers' Fees. Neither the Company nor any of the
Partners has incurred 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, except the fees and
expenses of Updata Capital, Inc., which shall be paid by the Company (or
in the event the Company does not have adequate financial resources, the
General Partner).
(e) Title to Acquired Assets. The Company has good title to
all of the Acquired Assets free and clear of any Security Interest, or
in the case of Acquired Assets which are leased by the Company, the
Company has a valid leasehold interest in such Acquired Assets, free and
clear of any Security Interest. The General Partner has conveyed,
assigned, and delivered to the Company any asset used by the Company in
the Business which constitutes an Acquired Asset, and any liability of
the Company which constitutes an Assumed Liability, which prior to the
Closing was owned by the General Partner, or licensed by the General
Partner to the Company. The Company has the right to convey, and upon
the transfer of the Acquired Assets to the Buyer, the Company will have
conveyed, good title and interest in and to the Acquired Assets, free
and clear of all Security Interests.
(f) Financial Statements. Attached hereto as Section 3(f) of
the Company Disclosure Schedule are unaudited consolidated balance
sheets and related consolidated statements of income and retained
earnings, comprehensive income and cash flow of the Company for the
period ending as of December 31, 2000, audited consolidated balance
sheets and related consolidated statements of income and retained
earnings, comprehensive income and cash flow of the Company for the
period ending as of December 31, 1999, and unaudited interim
consolidated balance sheets and related consolidated statements of
income and retained earnings, comprehensive income and cash flow of the
Company through March 31, 2001 (the "Financial Statements").
(i) Each of the Financial Statements is true, correct,
complete and consistent with the books and records of the
Company. Each of the Financial Statements has been prepared in
accordance with GAAP, and presents fairly the financial
condition and results of operations and cash flows of the
Company at the dates and for the periods specified, subject, in
the case of unaudited financial statements, to the absence of
notes and the absence of normal recurring year-end adjustments
and procedures (none of which require material adjustment or are
inconsistent with past practice).
(ii) Accounts payable reflected in the Financial
Statements have arisen from bona fide transactions. All debts,
liabilities and obligations of the Company incurred after the
date of the Financial Statements were incurred in the Ordinary
Course of Business, arose from bona fide transactions, and are
usual and normal in amount both individually and in the
aggregate. The Company is not directly or indirectly liable to
or obligated to provide funds in respect of or to guaranty or
assume any obligation of any person except to the extent
reflected and fully reserved against in the Financial
Statements. Except as set forth in the Financial Statements, all
liabilities of the Company can be prepaid without penalty at any
time.
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<PAGE>
(iii) The loans, notes and accounts receivable reflected
in the Financial Statements and all such loans, notes and
accounts receivable arising after the applicable dates of the
Financial Statements arose, and have arisen, from bona fide
transactions, and the bad debt reserves established in
connection with such loans, notes, and accounts receivable are
in conformity with GAAP.
(g) Events Subsequent to December 31, 2000. Since December
31, 2000, except with respect to changes in the general economic
condition of the industry in which the Company conducts its Business,
there has not been any material adverse change in the business,
financial condition, operations, or results of operations of the
Company. Without limiting the generality of the foregoing, except as set
forth on Section 3(g) of the Company Disclosure Schedule, since that
date, the Company:
(i) has not sold, leased, transferred, or assigned any
of its assets, tangible or intangible, except for sales of
inventory in 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) involving more than $15,000 and outside
the Ordinary Course of Business;
(iii) has not, and to the Knowledge of the Company 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
$15,000 to which the Company is a party or by which it is bound;
(iv) has not imposed or permitted any Security Interest
upon any of its assets, tangible or intangible;
(v) has not made any distribution (including but not
limited to any distribution to any Partner) or any capital
expenditure (or series of related capital expenditures) either
involving more than $15,000 or outside the Ordinary Course of
Business, and with respect to the period from February 22, 2001,
through the date hereof, has not made any distribution or any
capital expenditure (or series of related capital expenditures)
either involving more than $50,000 or outside the Ordinary
Course of Business, except with the prior written consent of the
Parent or the Buyer;
(vi) has not made any capital investment in, any loan
to, or any acquisition of the securities of, any other Person,
and has not made any acquisition of the assets of any other
Person outside of the Ordinary Course of Business;
(vii) has not issued any note, bond, or other debt
security or created, incurred, assumed, or guaranteed any
Indebtedness, and with respect to the period from February 22,
2001, through the date hereof, has not issued any note, bond, or
other debt security or created, incurred, assumed, or guaranteed
any Indebtedness, except with the prior written consent of the
Parent or the Buyer;
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<PAGE>
(viii) has not delayed or postponed the payment of accounts
payable or other Liabilities outside of the Ordinary Course of
Business;
(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;
(x) except in the Ordinary Course of Business to customers of
the Company, has not granted any license or sublicense of any rights
under or with respect to any Intellectual Property;
(xi) has not changed or authorized any change in its
certificate of limited partnership, agreement of limited partnership
or similar charter documents;
(xii) has not experienced any material damage, destruction, or
loss (whether or not covered by insurance) to its property;
(xiii) has not made any loan to, or entered into any other
transaction with, any of its partners, officers, and employees;
(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, and with respect to the period
from February 22, 2001, through the date hereof, 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 with the prior written consent of the Parent or the
Buyer;
(xv) has not granted any increase in the compensation of any of
its partners, officers, and employees, and with respect to the period
from February 22, 2001, through the date hereof, has not granted any
increase in the compensation of any of its partners, officers, and
employees, except with the prior written consent of the Parent or the
Buyer;
(xvi) has not, except as required to comply with applicable law,
adopted, amended, modified or terminated any bonus, profit-sharing
incentive, severance, or other plan, contract, or commitment for the
benefit of any of its partners, officers, and employees (or taken any
such action with respect to any other Employee Benefit Plan), to the
extent such amendment, modification or termination had the effect of
enhancing any benefits thereunder or increasing the cost thereof to
the Company, and with respect to the period from February 22, 2001,
through the date hereof, 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 partners,
officers, and employees (or taken any such action with respect to any
other Employee Benefit Plan), except with the prior written consent of
the Parent or the Buyer;
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(xvii) has not made any other change in employment terms for any
of its partners, officers, and employees;
(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
distribution, whether in cash or other property, and with respect to
the period from February 22, 2001, through the date hereof, has not
declared or paid any dividend or other distribution, whether in cash
or other property, except with the prior written consent of the Parent
or the Buyer; and
(xxi) has not entered into a commitment to do any of the
foregoing.
(h) Undisclosed Liabilities. The Company does not have any Liability
(and there is no Basis for any present or future action, suit, proceeding,
hearing, investigation, charge, complaint, claim or demand against the
Company 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 date hereof in the Ordinary Course of Business under the
Assumed Contracts, (iv) the Excluded Liabilities, and (v) Liabilities which
are disclosed on Section 3(h) of the Company Disclosure Schedule
("Undisclosed Liabilities").
(i) Legal Compliance. The 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 (including but not limited to Germany, The Netherlands, the
European Union, and Singapore) governments (and all agencies thereof),
which the failure to comply with which, individually or in the aggregate,
will result in Adverse Consequences the costs of which will exceed $15,000,
and no action, suit, proceeding, hearing, investigation, charge, complaint,
claim, demand, or notice has been filed or commenced against the Company
alleging any failure so to comply. The Company has duly filed all reports
and returns required to be filed by it with governmental authorities and
obtained all governmental permits and licenses and other governmental
consents which are required in connection with the businesses and
operations of the Company; all of such permits, licenses and consents are
in full force and effect, and no proceedings for the suspension or
cancellation of any of them are pending or threatened, except where any of
the above would not have a material adverse effect on the Acquired Assets,
the Assumed Liabilities, the Business or the Company. Notwithstanding the
foregoing, the representations under Section 3(i) are not made with respect
to any Taxes, labor matters, Company Plans or Environmental Laws and that
the
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representations and warranties with respect to compliance regarding
Taxes, labor matters, Company Plans and Environmental Laws are made
only in Sections 3(j), 3(x), 3(y), and 3(aa), respectively.
(j) Tax Matters.
(i) The Company has filed all Tax Returns that it was
required to file. All such Tax Returns were true, correct and
complete in all material respects. All Taxes owed by the Company
and with respect to the Business, the Partners (whether or not
shown on any Tax Return) have been paid. The Company is not the
beneficiary of any extension of time within which to file any Tax
Return. No claim has ever been made by an authority in a
jurisdiction where the Company does not file Tax Returns that the
Company is or may be subject to taxation by that jurisdiction.
There are no Security Interests on any of the assets of the
Company that arose in connection with any failure (or alleged
failure) to pay any Tax. The Company has not been a member of an
Affiliated Group that has filed a "consolidated return" within
the meaning of Code Section 1501, or has filed a combined or
consolidated return with another entity with any other taxing
authority.
(ii) The 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 Company is not currently under audit with respect
to Taxes by any authority, and 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 Company either (A) claimed or raised by any authority in
writing or (B) as to which the Company has Knowledge based upon
personal contact with any agent or representative of such
authority. Section 3(j) of the Company Disclosure Schedule lists
all federal, state, local, and foreign (including but not limited
to Germany, The Netherlands, the European Union, and Singapore)
income Tax returns filed with respect to the Company for taxable
periods ended on or after December 31, 1997, indicates those Tax
Returns that have been audited, and indicates those Tax Returns
that currently are the subject of audit. The Company has
delivered to the Buyer true, correct and complete copies of all
federal, state, and foreign income Tax Returns, examination
reports, and statements of deficiencies assessed against or
agreed to by the Company since December 31, 1997.
(iv) The 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.
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(v) The Company has not made any payments, is not obligated to
make any payments, and is not a party to any agreement that could
obligate it to make any payments that will not be deductible under
Code Section 280G. The Company is not a party to any Tax allocation or
sharing agreement. The Company (A) has not been a member of an
Affiliated Group filing a consolidated federal income Tax Return or
(B) has no Liability for the Taxes of any Person (other than the
Company) under Treas. Reg. Section 1.1502-6 (or any similar provision
of state, local, or foreign law), as a transferee or successor, by
contract, or otherwise.
(k) Real Property. The Company does not own any real property.
Section 3(k) of the Company Disclosure Schedule lists and describes briefly
all real property leased to the Company (the "Leased Real Property"). The
Company has delivered to the Buyer true, correct and complete copies of the
leases for the Leased Real Property (as amended to date). With respect to
each lease for Leased Real Property:
(i) the lease or sublease is legal, valid, binding,
enforceable, and in full force and effect;
(ii) the Company is not, and to the Knowledge of the 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;
(iii) the Company has not, and to the Knowledge of the Company,
no party to the lease or sublease has, repudiated any provision
thereof;
(iv) there are no disputes, oral agreements, or forbearance
programs in effect as to the lease;
(v) the Company has not assigned, transferred, conveyed,
mortgaged, deeded in trust, or encumbered any interest in the
leasehold; or
(vi) 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.
(l) Intellectual Property.
(i) The Company owns, or has the right to use pursuant to
written license, sublicense, agreement, or permission, all of the
Intellectual Property necessary or used in the operation of the
Business as presently conducted or as proposed to be conducted, and is
not a party to any unwritten or implied licenses. The Partners and
each officer, employee, or independent contractor of the Company has
heretofore transferred to the Company all right, title and interest of
such person in and to any Intellectual Property used or necessary for
the operation
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of the Business as presently conducted or as proposed to be conducted.
Each item of Intellectual Property included among the Acquired Assets
or owned or used by the Company or the Partners 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. Except with respect to those Liabilities arising
under those licenses, sublicenses, agreements, or permissions for
Intellectual Property to which the Company is a party and which
Intellectual Property is owned by a third party, as set forth on
Section 3(l)(iv) of the Company Disclosure Schedule, the Company has
no Liability to any Person with respect to the Intellectual Property,
or with respect to the license, distribution, use, creation,
development, design, implementation, or adaptation of the Intellectual
Property to the Business.
(ii) Neither the Company nor with respect to the Business, the
Partners, have interfered with, infringed upon, misappropriated, or
otherwise come into conflict with any Intellectual Property rights of
third parties, and neither the Company nor, with respect to the
Business, the Partners, have ever received any charge, complaint,
claim, demand, or notice alleging any such interference, infringement,
misappropriation, or violation (including any claim that the Company
or, with respect to the Business, the Partners, must license or
refrain from using any Intellectual Property rights of any third
party). To the Knowledge of the Company, no third party has interfered
with, infringed upon, misappropriated, or otherwise come into conflict
with any Intellectual Property rights of the Company.
(iii) Section 3(l)(iii) of the Company Disclosure Schedule
identifies each patent or registration which has been issued or
transferred to the Company or the Partners with respect to any of the
Intellectual Property, identifies each pending patent application or
registration which the Company or the Partners has made with respect
to any of the Intellectual Property, and identifies each license,
agreement, or other permission which the Company or the Partners has
granted to any third party with respect to any of the Intellectual
Property. The Company has delivered to the Buyer true, correct and
complete copies of all such patent, trademark and copyright
registrations, applications, licenses, agreements, and permissions (as
amended to date) and has made available to the Buyer true, correct and
complete copies of all other written documentation evidencing
ownership and prosecution (if applicable) of each such item. Section
3(l)(iii) of the Company Disclosure Schedule also identifies each
trade name or unregistered trademark used by the Company in connection
with the Business. With respect to each item of Intellectual Property
required to be identified in Section 3(l)(iii) of the Company
Disclosure Schedule:
(A) the Company possesses all right, title, and interest in
and to the item, free and clear of any Security Interest,
license, or other restriction;
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(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 Company, threatened, which challenges the
legality, validity, enforceability, use, or ownership of the
item; and
(D) except in the Ordinary Course of Business with respect
to customers of the Company pursuant to those agreements set
forth on the Company Disclosure Schedule, neither the Company
nor, with respect to the Business, the Partners have ever agreed
to indemnify any Person for or against any interference,
infringement, misappropriation, or other conflict with respect to
the item.
(iv) Section 3(l)(iv) of the Company Disclosure Schedule
identifies each item of Intellectual Property that any third party
owns and that the Company uses or distributes pursuant to license,
sublicense, agreement, or permission (but specifically excluding any
off-the-shelf computer program that is validly and properly licensed
under a shrink-wrap license). The Company has delivered to the Buyer
true, correct and complete copies of all such licenses, sublicenses,
agreements, and permissions (as amended to date). With respect to each
item of Intellectual Property that any third party owns and that the
Company uses pursuant to license, sublicense, agreement, or permission
(specifically including, but not limited to, any off-the-shelf
computer program that is validly and properly licensed under a
shrink-wrap license):
(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;
(C) neither the Company nor, to the Knowledge of the
Company, any other party to the license, sublicense, agreement,
or permission, is in breach or default thereunder, 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;
(D) the Company has not, and to the Knowledge of the
Company, no other party to the license, sublicense, agreement, or
permission has, repudiated any provision thereof;
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<PAGE>
(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 Company, threatened, which challenges the
legality, validity, or enforceability of the underlying item of
Intellectual Property; and
(H) the Company has not granted any sublicense or similar
right with respect to the license, sublicense, agreement, or
permission.
(m) Software.
(i) Section 3(m)(i) of the Company Disclosure Schedule sets
forth under the caption "Owned Software" a true, correct and complete
list of all computer programs (source code or object code) which were
developed for or on behalf of, or have been purchased by, the Company
and which are currently used internally by the Company or which have
been distributed by the Company and all computer programs under
development by the Company but not currently distributed
(collectively, the "Owned Software"), and Section 3(m)(i) of the
Company Disclosure Schedule sets forth under the caption "Licensed
Software" a true, correct and complete list of all computer programs
(source code or object code) licensed to the Company by another person
which are currently used internally by the Company or which have been
distributed by the Company, whether as integrated or bundled with any
Owned Software or as a separate stand-alone product (specifically
excluding any off-the-shelf computer program that is validly and
properly licensed under a shrink-wrap license) (collectively, the
"Licensed Software" and, together with the Owned Software, the
"Software").
(ii) The Company has good, marketable and exclusive title to, and
the valid and enforceable power and unqualified right to sell,
license, lease, transfer, use, create derivative works of, or
otherwise exploit, all versions and releases of the Owned Software and
all copyrights thereof, free and clear of all Security Interests. The
Company is in actual possession of the source code and object code for
each computer program included in the Owned Software, and the Company
is in possession of all other documentation, including without
limitation all related engineering specifications, program flow
charts, installation and user manuals, and know-how necessary for the
effective use of the Software as currently used in, or in development
in, the Company's business or as offered or represented to the
Company's customers or potential customers. The Company is in actual
possession of the object code and user manuals for each computer
program included in the Licensed Software. The Software constitutes
all of the computer programs necessary to conduct the Business as now
conducted, and includes all of
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the computer programs licensed or offered for license to the Company's
customers and potential customers or otherwise under development, or
used in the development, marketing, licensing, sale or support of the
products and the services presently offered by the Company. Except
pursuant to licenses or sublicenses granted by the Company to its
customers in the Ordinary Course of Business, no person other than the
Company has any right or interest of any kind or nature in or with
respect to the Owned Software or any portion thereof or any rights to
sell, license, lease, transfer, use or otherwise exploit the Owned
Software or any portion thereof. Except with respect to those
Liabilities arising under those licenses, sublicenses, agreements, or
permissions for Licensed Software to which the Company is a party, as
set forth on Section 3(m)(i) of the Company Disclosure Schedule, the
Company has no Liability to any Person with respect to the Software,
or with respect to the license, distribution, use, creation,
development, design, implementation, or adaptation of the Software to
the Business.
(iii) Section 3(m)(iii) of the Company Disclosure Schedule sets
forth a true, correct and complete list, by computer program, of (A)
all persons other than the Company and its current and former
employees that have been provided with the source code or have a right
to be provided with the source code (including any such right that may
arise after the occurrence of any specified event or circumstance,
either with or without the giving of notice or passage of time or
both) for any of the Owned Software, and (B) all source code escrow
agreements relating to any of the Owned Software (setting forth as to
any such escrow agreement the source code subject thereto and the
names of the escrow agent and all other persons who are actual or
potential beneficiaries of such escrow agreement), and identifies with
specificity all agreements and arrangements pursuant to which the
execution, delivery and performance of this Agreement or the
consummation of the transactions contemplated hereby would entitle any
third party or parties to receive possession of the source code for
any of the Owned Software or any related technical documentation.
Except as set forth on Section 3(m)(iii) of the Company Disclosure
Schedule, no Person (other than the Company and its current and former
employees) is in possession of, or has or has had access to, any
source code for any computer program included in the Owned Software.
(iv) Except as set forth on Section 3(m)(iv) of the Company
Disclosure Schedule, there are no defects in any computer program
included in the Software, which Software is (i) currently used
internally by the Company, (ii) currently being distributed by the
Company, or (iii) under development by the Company but not currently
distributed, that could reasonably be expected to adversely affect, in
any material way, the functioning thereof in accordance with any
published specifications therefor or in accordance with any warranties
given with respect thereto. Without limiting the generality of the
foregoing, all of the Software has the following properties and
capabilities: (A) the capability to correctly recognize and accurately
process dates expressed as a four-digit number (or the binary
equivalent or other machine-readable iteration thereof) (collectively,
"Four-Digit
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Dates"); (B) the capability to accurately execute calculations using
Four-Digit Dates; (C) the functionality (both on-line and batch),
including entry, inquiry, maintenance and update, to support
processing involving Four-Digit Dates; (D) the capability to generate
interfaces and reports that support processing involving Four-Digit
Dates; (E) the capability to provide correct results in forward and
backward data calculations spanning century boundaries, including the
conversion of pre-2000 dates currently stored as two-digit dates; and
(F) the capability to correctly recognize leap years, including the
year 2000, and to properly process date calculations involving or
spanning leap years. Each computer program included in the Software is
in machine readable form and contains all current revisions. Section
3(m)(iv) of the Company Disclosure Schedule sets forth a true, correct
and complete list of current claims of defects by customers of the
Company under warranties or support and maintenance agreements.
Section 3(m)(iv) of the Company Disclosure Schedule sets forth a true,
correct and complete list of and brief description of the status of,
any current developments or efforts with respect to the Owned
Software, including without limitation, the development of new
computer programs or enhancements or revisions to existing computer
programs included in the Owned Software and software fixes in progress
for any person to whom or which the Company has sold, licensed,
leased, transferred, or otherwise furnished Software or related
products or services.
(v) Except as set forth on the Company Disclosure Schedule,
none of the sale, license, lease, transfer, use, reproduction,
distribution, modification or other exploitation by the Company of any
version or release of any computer program included in the Software
obligates or will obligate the Company to pay any royalty, fee, or
other compensation to any other person.
(vi) Except as set forth on Section 3(m)(vi), the Company does
not market, nor has the Company marketed, and the Company has not
supported or is obligated to support, any Licensed Software
independent of the Owned Software.
(vii) Except as specified in Section 3(m)(vii) of the Company
Disclosure Schedule: (A) no agreement, license or other arrangement
pertaining to any of the Software (including, without limitation, any
development, distribution, marketing, use or maintenance agreement,
license or arrangement) to which the Company is a party will terminate
or become terminable by any party thereto as a result of the
execution, delivery or performance of this Agreement or the
consummation of the transactions contemplated hereby; and (B) all
licenses covering Licensed Software are of perpetual duration (subject
to provisions allowing the Company to terminate and provisions
allowing the respective licensors to terminate in the event of a
breach by the Company).
(n) No Infringement. Neither the existence nor the sale, license,
lease, transfer, use, reproduction, distribution, modification or other
exploitation by the Company or any of its successors or assigns of any
Intellectual Property (and, to the Knowledge of the Company, the Licensed
Software), as such Intellectual Property, as the case may be, is or was, or
is currently contemplated to be sold, licensed, leased,
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transferred, used or otherwise exploited by such persons, does, did or will
(A) infringe on any patent, trademark, copyright or other intellectual
property right of any other third party, (B) constitute a misuse or
misappropriation of any trade secret, know-how, process, proprietary
information or other right of any other person or a violation of any
relevant agreement governing the license of the Licensed Software to the
Company, or (C) entitle any other person to any interest therein, or right
to compensation from the Company or any of its successors or assigns, by
reason thereof. The Company has not received any complaint, assertion,
threat or allegation or otherwise has notice of any lawsuit, claim, demand,
proceeding, or investigation involving matters of the type contemplated by
the immediately preceding sentence or has Knowledge of any facts or
circumstances that could reasonably be expected to give rise to any such
lawsuit, claim, demand, proceeding or investigation. Except with respect to
Intellectual Property which is licensed by the Company from third parties,
there are no restrictions on the ability of the Company or any of its
successors or assigns to sell, license, lease, transfer, use, reproduce,
distribute, modify or otherwise exploit any Intellectual Property.
(o) Tangible Assets. The Company owns or leases all of the tangible
assets which are Acquired Assets, including but not limited to all such
buildings, machinery, equipment, and other tangible assets, used in the
conduct of the Business as presently conducted. Each such Acquired Asset 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. The Acquired Assets constitute all of the
tangible assets used in the conduct of the Business as presently conducted.
(p) Inventory. The inventory of the Company consists of raw materials
and supplies, manufactured and purchased parts, goods in process, and
finished goods, all of which is merchantable and fit for the purpose for
which it was procured or manufactured, subject to any reserves therefor in
the Financial Statements and none of which is slow moving (except for parts
and components on hand for servicing products already sold), obsolete,
damaged, or defective in excess of any reserves therefor on the Financial
Statements.
(q) Contracts. Section 3(q) of the Company Disclosure Schedule lists
the following contracts and other agreements, written or oral, to which the
Company is a party:
(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 Company will result in a loss
to the Company, or which involves consideration, in excess of $15,000;
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(iii) any agreement concerning a partnership or joint venture;
(iv) any agreement (or group of related agreements) under which
the Company has created, incurred, assumed, or guaranteed any
Indebtedness, under which the Company has imposed a Security Interest
on any of its respective assets, tangible or intangible;
(v) any agreement concerning confidentiality or
noncompetition;
(vi) any agreement pursuant to which the Company licenses other
persons to use any of the Software or has agreed to support, maintain,
upgrade, enhance, modify, port, or consult with respect to any of the
Software, or pursuant to which other persons license the Company to
use the Licensed Software;
(vii) any agreement by which the Company has agreed to design,
develop, author or create any new custom, or customized software for
any third party;
(viii) any agreement involving the Partners to which the Company
is a party;
(ix) any profit sharing, stock option, stock purchase, stock
appreciation, deferred compensation, severance, or other plan or
arrangement for the benefit of the Company's current or former
partners, officers, and employees;
(x) any agreement (A) for the employment of any individual on
a full-time, part-time, consulting, or other basis providing annual
compensation in excess of $15,000 or (B) providing severance benefits;
(xi) any agreement under which the Company has advanced or
loaned any amount to any of its partners, officers, and employees; or
(xii) any other agreement (or group of related agreements) the
performance of which involves consideration in excess of $15,000.
The Company has delivered to the Buyer a true, correct and complete copy of
each written agreement listed in Section 3(q) of the Company Disclosure
Schedule (as amended to date) and a written summary setting forth the terms
and conditions of each oral agreement referred to in Section 3(q) of the
Company Disclosure Schedule. With respect to each such agreement: (A)
assuming the due authorization, valid execution and delivery thereof by the
other Persons thereto, 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 Company, and except as set forth on
Section 3(c) of the Company Disclosure Schedule, 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
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contemplated hereby, 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 Company is not, and to the Knowledge of the 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; (D) no party has repudiated any provision of the agreement; and
(E) such agreement does not prohibit or require consent in the event of a
change of control of the Company. With respect to each customer order
listed in Section 3(q) of the Company Disclosure Schedule, the Company does
not have any Knowledge of any basis for cancellation thereof.
(r) Notes and Accounts Receivable. The notes and accounts receivable
of the Company included among the Acquired Assets are reflected properly on
the books and records of the Company and are valid receivables subject to
no setoffs or counterclaims; and all of such notes and accounts receivable
will be collectable when due, subject only to the reserve for bad debts set
forth on the face of the Financial Statements dated as of March 31, 2001.
(s) Powers of Attorney. Except as set forth on Section 3(s) of the
Company Disclosure Schedule, there are no outstanding powers of attorney
executed on behalf of the Company.
(t) Insurance. Section 3(t) of the Company Disclosure Schedule sets
forth the following information with respect to each insurance policy
(including policies providing property, casualty, liability, and workers'
compensation coverage and bond and surety arrangements) to which the
Company has been a party, a named insured, or otherwise the beneficiary of
coverage at any time within the past three (3) years:
(i) the name, address, and telephone number of the agent;
(ii) the name of the insurer, the name of the policyholder, and
the name of each covered insured;
(iii) the policy number and the period of coverage;
(iv) the scope (including an indication of whether the coverage
was on a claims made, occurrence, or other basis) and amount
(including a description of how deductibles and ceilings are
calculated and operate) of coverage; and
(v) a description of any retroactive premium adjustments or
other loss-sharing arrangements.
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 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
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conveyance or transfer, reorganization, arrangement or moratorium or other
similar laws from time to time affecting creditor's rights generally; (B)
the Company is not and, to the Knowledge of the Company, no other party to
the policy, is 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(t) of the Company Disclosure Schedule describes any
self-insurance arrangements affecting the Company.
(u) Litigation. The 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 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.
(v) Product Warranty. Each product manufactured, sold, leased, or
delivered by the Company or service provided by the Company has been in
conformity with all of their applicable contractual commitments and express
and implied warranties, and the Company does not have any Liability with
respect to such products manufactured, sold, leased, or delivered (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), except for Product Warranty Claims for which
adequate reserves are set forth on the Financial Statements. Except as
otherwise may be provided by applicable law, no product manufactured, sold,
leased, or delivered by the Company is subject to any guaranty, warranty,
or other indemnity beyond the applicable standard terms and conditions of
sale or lease. Section 3(v) of the Company Disclosure Schedule includes
copies of the standard terms and conditions of sale or lease for the
Company (containing applicable guaranty, warranty, and indemnity
provisions).
(w) Product Liability. There are no existing or, to the Knowledge of
the Company, threatened, claims against the Company arising out of any
injury to individuals or property as a result of the ownership, possession,
or use of any product manufactured, sold, leased, or delivered by the
Company which could result in Liability to the Company, and the Company
does not have any Knowledge of a Basis for any such claim.
(x) Employees. Section 3(x) of the Company Disclosure Schedule sets
forth (A) the name, and (B) the current annual salary (or hourly wage),
including any bonus or commitment to pay any other amount or benefit in
connection with a termination of employment, if applicable, of all present
employees, consultants, and independent contractors employed by the
Company. To the Knowledge of the Company, no executive, key employee, or
group of employees has any plans to terminate employment with the Company.
The Company is not a party to or bound by any collective bargaining
agreement, nor has the Company experienced any strikes, grievances, claims
of unfair labor practice. The Company does not have any 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 Company,
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threatened, or any Basis for a claim respecting employment of any past or
present employee of the 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. There are no written employment or similar agreements for a
fixed term between any employee of the Company and the Company; each
employee of the Company is an at-will employee.
(y) Employee Benefits.
(i) No other corporation, trade, business, or other entity,
would, together with the Company, constitute a single employer within
the meaning of Code Section 414.
(ii) Section 3(y) of the Company Disclosure Schedule contains a
true and complete list of all of the Employee Benefit Plans which are
presently in effect at any time within the preceding three (3) years,
or which have previously been in effect for the benefit of current or
former employees, officers, partners or consultants of the Company
(the "Company Plans"). All Company Plans established or maintained
outside of the United States primarily for the benefit of persons
substantially all of whom are nonresident aliens are referred to
herein as "Foreign Plans" and all other Company Plans are referred to
herein as "US Plans".
(iii) Each US Plan has been established, maintained, funded, and
administered in all material respects in accordance with its terms and
any applicable provisions of law, and is in compliance in all material
respects with the applicable provisions of United States law. The
Company does not have any Foreign Plans.
(iv) No actions, suits or claims (other than routine claims for
benefits in the ordinary course) are pending or, to the Knowledge of
the Company, threatened, with respect to any Company Plan and no event
or condition exists or may be reasonably expected to occur which would
result in the Company having any liability in respect of any Company
Plan not reflected on the Financial Statements.
(v) The Company has no past, present or future obligation or
liability to contribute to any multiemployer plan as defined in ERISA
Section 3(37).
(vi) With respect to the Company Plans which provide group
health benefits to employees of the Company and are subject to the
requirements of Code Section 4980B and Part 6, Subtitle B of Title I
of ERISA ("COBRA"), such group health plan has been administered in
every material respect in accordance with its governing documents and
COBRA and with the group health plan requirements of Subtitle K,
Chapter 100 of the Code and ERISA Sections 701 et. seq.
(vii) With respect to employee benefit matters generally:
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(A) neither the Company nor any person, firm or corporation
which is or has been under common control of the Company within
the meaning of Section 4001(b) of ERISA, maintains or contributes
to or has ever maintained or contributed to any Employee Benefit
Plan subject to Title IV of ERISA or Code Section 412;
(B) the consummation of the transactions contemplated
hereby will not accelerate or increase any Liability under any of
the Company Plans because of an acceleration or increase of any
of the rights or benefits to which Company Plan participants or
beneficiaries may be entitled thereunder; and
(C) the Company does not have any obligation to any retired
or former employee or any current employee of the Company upon
retirement or termination of employment under any Company Plans,
other than such obligations imposed by COBRA.
(z) Guaranties. The Company is not a guarantor or otherwise liable
for any Liability or obligation (including Indebtedness) of any other
Person.
(aa) Environment, Health, and Safety.
(i) The 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 $15,000 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 Company alleging such failure.
(ii) The Company does not have any Liability (and the Company
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 condition, 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 resources, 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) All properties and equipment used in the Business are and
in the past have been free of any amounts of asbestos, PCB's,
methylene chloride, trichlorethylene, 1,2-trans-dichloroethylene,
dioxins, dibenzofurans, and Extremely Hazardous Substances, the
presence of which could result in Adverse Consequences.
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(bb) Certain Business Relationships with the Company. Except as
set forth on Section 3(bb) of the Company Disclosure Schedule, none of
the Partners or their current or former spouses, children, parents,
grandparents, cousins, or other relatives, has been involved directly
or indirectly in any business arrangement or relationship with the
Company within the past thirty-six (36) months, and no Partner owns
any Acquired Asset or any other asset, tangible or intangible, which
is used in the Business.
(cc) Disclosure. The representations and warranties contained in
this Section 3 (including the Company Disclosure Schedule) do not
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 Section 3 not misleading. In connection with the
Buyer's investigation of the Acquired Assets and the Business, the
Buyer has received from the Company and the General Partner certain
estimates, projections and other forecasts, plans and budgets for the
Business. The Company and the General Partner make no representation
or warranty with respect to any estimates, projections, forecasts,
plans or budgets referred to in this Section 3(cc).
4. Representations and Warranties of the Parent and the Buyer.
Parent and Buyer, jointly and severally, represent and warrant to the
Company that the statements contained in this Section 4 are true, correct and
complete as of the date hereof, and will be true, correct and complete as of the
Closing Date.
(a) Organization of the Parent and the Buyer. Each of the Parent and
the 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
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.
(c) Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby
will 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 any of their articles or certificate of
incorporation or bylaws, as the case may be.
(d) Broker's Fees. Neither Parent nor Buyer has incurred 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 for which the Company or the Partners could become liable or
obligated.
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(e) Disclosure. To the Knowledge of Parent and Buyer, the
representations and warranties contained in this Section 4 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 Section 4 not
misleading.
(f) Financial Ability. At the Closing on the Closing Date, the Buyer
shall have the funds necessary to purchase the Acquired Assets and
consummate the transactions contemplated hereby.
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 Company and the General Partner shall have performed
and complied with all of their covenants under Section 6 hereof in all
material respects through the date hereof;
(ii) the Company shall have procured all of the third party
consents specified on Exhibit C hereto;
---------
(iii) no action, suit, or proceeding shall be pending as of the
date hereof or, to the Knowledge of the Company, threatened as of the
date hereof, before any court or quasi-judicial or administrative
agency of any federal, state, local, or foreign (including but not
limited to Germany, The Netherlands, the European Union, and
Singapore) 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 Company and the General Partner shall have delivered to
the Parent and the Buyer a certificate, executed by the Company and
the General Partner, to the effect that the conditions specified above
in Section 5(a)(i)-5(a)(iii) have been satisfied in all respects as of
the date hereof;
(v) each of the Company, the General Partner, Michael P.
Galvin, the Michael P. Galvin 1994 Trust, Sam Steppel, Step-L
Ventures, and Doug Paxson shall have each entered into a
Noncompetition and Assignment of Inventions Agreement with a term
equal to two (2) years, and each of Scott Ireland, Dean Sequera, John
Schmitz, and Bill Shotts shall have each entered into a Noncompetition
and Assignment of Inventions Agreement with a term equal to eighteen
(18) months (each a "Noncompetition and Assignment of Inventions
Agreement"), in form and substance as set forth in Exhibit D attached
---------
hereto, and the same shall be in full force and effect;
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(vi) each of the Company, the General Partner, Michael P.
Galvin, the Michael P. Galvin 1994 Trust, Sam Steppel, Step-L
Ventures, Doug Paxson, Scott Ireland, Dean Sequera, John Schmitz, and
Bill Shotts shall have executed and delivered to the Parent and the
Buyer a release agreement (each, a "Release Agreement") in form and
substance as set forth on Exhibit E hereto;
---------
(vii) each of Doug Paxson, Scott Ireland, Dean Sequera, John
Schmitz, and Bill Shotts shall have entered into an Employment
Agreement with the Buyer (each, an "Employment Agreement") in form and
substance as set forth on Exhibit F hereto, and the same shall be in
---------
full force and effect;
(viii) each of the Company, the General Partner, the Parent, the
Buyer, and the Escrow Agent shall have entered into the Escrow
Agreement;
(ix) the General Partner shall have caused the Company and the
General Partner to prepare and deliver to Buyer all documents and
instruments necessary to amend the Certificate of Limited Partnership
of the Company, and the Articles of Incorporation of the General
Partner, or such other similar governing documents, to change their
respective names to a name which does not contain the words "Media
Cybernetics" or any substantially similar words;
(x) The Company shall have satisfied all obligations owed to
its creditors necessary to permit the Buyer to obtain clear title to
the Acquired Assets or, in the alternative, shall have obtained payoff
letters from such creditors, in form and substance satisfactory to the
Parent and the Buyer, which contain payoff information with respect to
the satisfaction of such obligations, and provided such payoff letters
to the Buyer;
(xi) the Company and the General Partner shall have executed
and delivered to the Buyer such instruments and documents as may be
requested by Buyer or Parent in order to complete the transfer of the
Acquired Assets and the Assumed Liabilities to the Buyer, including
without limitation, a bill of sale and assignment and assumption
agreement, a copyright assignment, a trademark assignment, and a
patent assignment, each in form and substance satisfactory to the
Parent and the Buyer;
(xii) the Parent and the Buyer shall have received from counsel
to the Company and the General Partner opinions with respect to the
Company, the General Partner, and the transactions contemplated hereby
in form and substance as set forth in Exhibit G attached hereto,
---------
addressed to the Parent and the Buyer, and dated as of the Closing
Date;
(xiii) each of the Buyer and the Company shall have received the
consent and estoppel of 8484 Georgia Avenue, L.L.C., in form and
substance satisfactory to the Parent and the Buyer, with respect to
the Leased Real Property located at 8484 Georgia Avenue, Silver
Spring, Maryland;
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(xiv) the General Partner shall have conveyed, assigned,
and delivered to the Company any asset used by the Company in
the Business which constitutes an Acquired Asset, and any
liability of the Company which constitutes an Assumed Liability,
owned by the General Partner, or licensed by the General Partner
to the Company;
(xv) the Company shall have delivered to Parent and
Buyer a certificate of the Secretary of the General Partner of
the Company as to the incumbency of its officers, a copy of a
certificates evidencing the good standing of the Company in each
of Delaware, Maryland, and California, each dated no more than
fifteen (15) days prior to the date hereof, a copy of the
certificate of limited partnership and the agreement of limited
partnership of the Company, and a copy of the resolutions
adopted by the General Partner of the Company with respect to
the transactions contemplated by this Agreement; and
(xvi) the Company and the General Partner shall have
executed and delivered a funds flow and settlement statement
reflecting the transactions contemplated by this Agreement.
Either the Parent or the Buyer may waive any condition specified in
this Section 5(a) if it executes a writing so stating at or prior to the
Closing.
(b) Conditions to Obligation of the Company and the General
Partner. The obligation of the Company and the General Partner to
consummate the transactions to be performed by them in connection with
the Closing is subject to satisfaction of the following conditions:
(i) Parent and Buyer shall have performed and complied
with all of their covenants under Section 6 hereof in all
material respects through the date hereof;
(ii) no action, suit, or proceeding shall be pending as
of the date hereof or, to the knowledge of the Parent or the
Buyer, threatened as of the date hereof, before any court or
quasi-judicial or administrative agency of any federal, state,
local, or foreign (including but not limited to Germany, The
Netherlands, the European Union, and Singapore) 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);
(iii) the Parent and the Buyer shall have delivered to
the Company a certificate to the effect that the conditions
specified above in Section 5(b)(i)-5(b)(ii) have been satisfied
in all respects as of the date hereof;
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<PAGE>
(iv) the Company shall have received from counsel to
the Parent and the Buyer an opinion in form and substance as set
forth in Exhibit H attached hereto, addressed to the Company,
---------
and dated as of the Closing Date; and
(v) each of the Parent and the Buyer shall have
delivered to the Company a certificate of the Secretary of the
Parent and the Buyer, respectively, as to the incumbency of each
of their officers, a copy of the certificates evidencing the
incorporation and good standing of the Parent and the Buyer, a
copy of the certificate of incorporation and bylaws of the
Parent and the Buyer, respectively, and a copy of the
resolutions adopted by the board of directors of the Parent and
the Buyer, respectively, with respect to the transactions
contemplated by this Agreement.
The Company may waive any condition specified in this Section 5(b) if
it executes a writing so stating at or prior to the Closing.
6. Pre-Closing Covenants.
The Parties agree as follows with respect to the period prior to the
Closing:
(a) Access and Investigation. Between the date hereof and
the Closing Date, the Company and the General Partner will, and will
cause their representatives to:
(i) afford the Buyer and its representatives
(collectively, "Buyer's Advisors") reasonable access to the
Company and its personnel, properties (including for purposes of
environmental testing), contracts, books and records, and other
documents and data so as to not unreasonably interfere with the
conduct of the Business;
(ii) furnish the Buyer with copies of all such
contracts, books and records, and other existing documents and
data as the Buyer may reasonably request; and
(iii) furnish the Buyer and Buyer's Advisors with such
additional financial, operating and other data and information
as the Buyer may reasonably request.
(b) Operation of the Business of the Company. Between the
date hereof and the Closing Date, the Company and the General Partner
will, and the Company will cause its representatives to:
(i) conduct the Business only in the Ordinary Course
of Business, or otherwise with the written consent of the Buyer;
(ii) use their commercially reasonable efforts to
preserve intact the current business organization of the
Company, keep available the services of the current officers,
employees, and agents of the Company, maintain the relations
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and good will with suppliers, customers, landlords, creditors,
employees, agents, and others having business relationships with
the Company, and maintain such amount of working capital
necessary for the Company to conduct the Business in the
Ordinary Course of Business; and
(iii) confer with the Buyer concerning operational
matters of a material nature and, as reasonably requested by the
Parent or the Buyer, the status, of business operations and
finances.
(c) Negative Covenant. Except as otherwise expressly
permitted by this Agreement, between the date of this Agreement and the
Closing Date, the Company and the General Partner will not, without the
prior consent of the Buyer, take any affirmative action, or fail to take
any reasonable action within their or its control, which would cause or
result in an inaccuracy or breach as of the date hereof of any of the
representations and warranties of the Company set forth in this
Agreement as of the date hereof, or which would cause or result in a
breach of any covenants of the Company and the General Partner set forth
in this Agreement, including, without limitation, any action specified
in Section 3(g) of this Agreement.
(i) Without limiting the generality of the foregoing,
the Company and the General Partner agree that, between the date
of this Agreement and the Closing Date, the Company shall not,
and the General Partner shall cause the Company not to, take any
of the following actions without the prior written consent of
the Buyer or the Parent:
(A) amend the certificate of limited partnership
or agreement of limited partnership of the Company,
except such amendments filed, or to be filed, and
actions taken, or to be taken, in connection with the
change of name of the Company as contemplated by this
Agreement; except with respect to employees of the
Company in the Ordinary Course of Business, make any
change in their authorized, issued or outstanding
partnership interests or any other equity security of
the Company; except with respect to employees of the
Company in the Ordinary Course of Business, issue, sell,
pledge, assign or otherwise encumber or dispose of, or
purchase, redeem or otherwise acquire, any of the
partnership interests or other equity securities of the
Company or enter into any agreement, call or commitment
of any character so to do; grant or issue any option or
warrant relating to, right to acquire, or security
convertible into, partnership interests or other equity
security of the Company; except with respect to
employees of the Company in the Ordinary Course of
Business, purchase, redeem, retire or otherwise acquire
any shares of, or any security convertible into,
partnership interests or other equity security of the
Company, or agree to do any of the foregoing set forth
in this Section 6(c)(i)(A);
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(B) acquire, directly or indirectly,
substantially all of the assets of, or a controlling
equity interest in, any corporation or other entity, or
enter into any commitment to do the same;
(C) enter into any agreement, commitment or
similar transaction with the Partners;
(D) enter into any employment contract or
collective bargaining agreement, written or oral, or
modify the terms of any existing such contract or
agreement, except in the Ordinary Course of Business;
(E) grant any increase in the base compensation
of any of their partners, officers, and employees,
except in the Ordinary Course of Business;
(F) adopt, amend, modify, or terminate any
bonus, profit-sharing, incentive, severance, or other
plan, contract, or commitment for the benefit of any of
their partners, officers, and employees (or take any
such action with respect to any other Company Plan); and
(G) make any other change in employment terms
for any of their partners, officers, and employees,
except in the Ordinary Course of Business.
(ii) Without limiting the generality of the foregoing,
the Company and the General Partner agree that, between the date
hereof and the Closing Date, the Company shall not, and the
General Partner shall cause the Company not to, take any of the
following actions without the prior written consent of the Buyer
or the Parent:
(A) Except with respect to a dividend or other
distribution which shall not exceed that amount of net
income (as defined in accordance with GAAP) of the
Company from June 1, 2001, through the close of business
on June 30, 2001, propose, declare, set aside or pay any
dividend or other distribution in respect of any of its
partnership interests (including, without limitation,
any sort of dividend or distribution, or any payment of
Indebtedness of the Company owed to the Partners);
(B) incur any Indebtedness, other than normal,
Ordinary Course of Business trade payables and accruals;
(C) enter into any agreement (or group of
related agreements) outside of the Ordinary Course of
Business, or which by its (or their) terms contemplate
performance over more than one (1) year, or which
involve the payment of more than $50,000; and
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(D) commit to or expend funds for any capital
expenditure in excess of $50,000.
(d) No Merger or Solicitation.
(i) The Company shall not, nor authorize or permit any
of its officers, partners or employees or any investment banker,
financial advisor, attorney, accountant or other representative
or agent retained by them, to, directly or indirectly, solicit,
initiate, or encourage (including by way of furnishing nonpublic
information), or take any other action to facilitate, any
inquiries or the making of any proposal which constitutes, or
may reasonably be expected to lead to, any Takeover Proposal, or
agree to or endorse any Takeover Proposal, or participate in any
discussions or negotiations, or provide third parties with any
nonpublic information, relating to any such inquiry or proposal.
Without limiting the foregoing, it is understood that any
violation of the restrictions set forth in the preceding
sentence by the Partners, any executive officer of the Company,
or any investment banker, attorney or other advisor or
representative of the Company, whether or not such Person is
purporting to act on behalf of the Company or otherwise, shall
be deemed to be a breach of this Section 6(d) by the Company and
the General Partner.
(ii) Neither the General Partner of the Company nor any
committee thereof shall (i) withdraw or modify, or propose to
withdraw or modify, in a manner adverse to the Buyer, the
approval or recommendation by the General Partner or any such
committee of this Agreement or the transactions contemplated
hereby, (ii) approve or recommend, or propose to approve or
recommend, any Takeover Proposal, or (iii) enter into any
agreement with respect to any Takeover Proposal.
(iii) In addition to the obligation of the Company set
forth in paragraph (ii) above, the Company promptly shall advise
the Parent and the Buyer orally and in writing of any request
for information or of any Takeover Proposal, or any inquiry with
respect to or which could lead to any Takeover Proposal, the
material terms and conditions of such request, Takeover Proposal
or inquiry and the identity of the Person making any such
request, Takeover Proposal or inquiry.
(e) Satisfaction of Obligations to Creditors. At or prior to
the Closing Date, the Company shall satisfy any and all obligations of
the Company owed to its creditors necessary to permit Buyer to obtain
clear title to the Acquired Assets, and evidence of the same shall be
delivered by the Company to the Parent and the Buyer.
(f) Assignment of Company Assets Held by the General
Partner. Prior to the Closing, the General Partner shall convey, assign,
and deliver to the Company any asset used by the Company in the Business
which constitutes an Acquired Asset, and any liability of the Company
which constitutes an Assumed Liability, which prior to the Closing was
owned by the General Partner, or licensed by the General Partner to the
Company.
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7. 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, the Company,
the General Partner, the Parent, and the 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 Company and the General Partner acknowledge and agree
that from and after the Closing, except as specifically set forth in this
Agreement, 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 Assets and the Assumed Liabilities; provided, however,
that the General Partner shall have the right to obtain access to such
documents, books, records (including Tax records), agreements, and financial
data to the extent related to the period prior to the Closing and make
photocopies thereof for a proper purpose, such as in connection with the
preparation of its 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 Business, the Buyer, the Company or the
General Partner, each of the other Parties will reasonably cooperate with the
contesting or defending Party and his or its 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 reasonably 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 Section 8 below).
(c) Transition. The Company and the General Partner will use its
commercially reasonable 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 Company from maintaining the same
business relationships with the Parent and the Buyer after the Closing as it
maintained with the Company prior to the Closing.
(d) Confidentiality. The Company and the General Partner will, and
will cause the Partners to, treat and hold as confidential all of the
Confidential Information, refrain from using any of the Confidential Information
and deliver promptly to the Buyer or destroy, at the request and option of the
Buyer, all tangible embodiments (and all copies) of the Confidential Information
which are in his, her, or its possession. In the event that the Company or any
Partner 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,
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the Company or the General Partner will notify the Buyer promptly of the request
or requirement so that the Buyer may seek an appropriate protective order or
waive compliance with the provisions of this Section 7(d). If, in the absence of
a protective order or the receipt of a waiver hereunder, the Company or such
Partner is, on the advice of counsel, compelled to disclose any Confidential
Information to any tribunal or else stand liable for contempt, the Company or
such Partner may disclose the Confidential Information to the tribunal;
provided, however, that the Company or the General Partner shall, and shall
cause the Partners to, use its commercially reasonable efforts to obtain, at the
reasonable request of the Buyer and at the Buyer'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 Buyer shall
designate.
(e) Tax Matters. With respect to the transactions contemplated by this
Agreement, Parent, Buyer, the Company, and the General Partner will provide each
other with such cooperation and information as either of them may reasonably
require of the other in connection with the filing of any Tax Return, including
Tax Returns relating to the application of the successor employer rules for
payroll Tax purposes contained in Code Sections 3121(a)(1) and 3306(b)(1), the
determination of a liability for Taxes or a right to a refund for Taxes, or the
preparation for litigation or investigation of any claim for Taxes or a right to
a refund for Taxes. Such cooperation shall include, but not be limited to, the
provision of information including all relevant Tax Returns, and other documents
and records, or portions thereof relating to or necessary in connection with the
preparation of records, or portions thereof relating to or necessary in
connection with the preparation of such Tax Returns or other determination of
Tax Liability. Each Party shall retain all Tax Returns, schedules, workpapers,
and all other materials, records or documents until the expiration of the
statute of limitations for the taxable years to which such Tax Returns and other
documents relate. Any information obtained under this provision shall be kept
confidential by the Parties, except as may be necessary in connection with the
filing of such Tax Returns.
The Parties agree that the Buyer shall pay the sales Tax and the transfer
Tax on the transfer of the Acquired Assets, and the Parent and the Buyer shall
indemnify, defend and hold the Company and the General Partner harmless with
respect to such Taxes. Each Party shall file, or cooperate with the other
Parties in filing, all necessary documentation and Tax Returns with respect to
such sales Taxes and transfer Taxes with respect to the Acquired Assets.
(f) Assignment of Interests in Acquired Assets. Nothing in this Agreement
shall be deemed to constitute or require an assignment or an attempt to assign
any of the Acquired Assets if the attempted assignment without the consent of a
third party would adversely affect in any way the rights of either the Company
or Buyer. If any such consent shall not have been obtained at or prior to the
Closing, or the attempted transfer or assignment of any of the Acquired Assets
would have an adverse effect on Buyer or the Company, the Company will cooperate
with Buyer in any reasonable arrangement designed to provide for Buyer the
rights and benefits of such Acquired Assets, including, enforcing for the
benefit of Buyer any or all rights of the Company under any agreements
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against any other party arising out of the breach or cancellation by such other
party, while permitting Buyer the possession and use of such Acquired Assets for
Buyer's account as if such Acquired Assets had been so transferred, assigned and
delivered, or otherwise. Pending the obtaining of such consents, approvals or
novations, Buyer will continue performance of any remaining unfulfilled
obligations of the Company under any of the agreements in the same manner as
though the same were subcontracted to Buyer on the same terms and conditions as
contained in the agreements. Notwithstanding the foregoing, the Company shall
not be required to commence any litigation or offer or grant any accommodation
(financial or otherwise) to any Person or incur any obligation therefor in order
to obtain a consent.
(g) Use of Company Name. The Company and the General Partner acknowledge
and agree that all of their rights, and all of the rights of the Partners, in
and to, and ownership of, the name of the Company and any names related or
substantially similar thereto shall be transferred hereunder to the Buyer. From
and after the Closing, the Company and the Partners shall be prohibited from
using such names, except as necessary to effect the change of its corporate name
or to evidence that such change has occurred. No later than three (3) days
following the Closing Date, the Company and the General Partner shall have filed
all documents with the appropriate governmental authorities in the State of
Delaware, and such other states as the Company is so qualified and registered,
to change the name of the Company to a name which does not contain the words
"Media Cybernetics" or any other substantially similar words.
(h) Employee Matters.
(i) On the Closing Date, except with respect to those employees which
are parties to the Employment Agreements, the Parent shall cause the Buyer
to offer employment in a similar position with similar base compensation to
each employee of the Company, who on the Closing Date is actively at work
(the "Employees"). Buyer agrees to give each Employee credit for all
service credited by the Company under all employee benefit plans, programs,
policies and arrangements of Buyer in which such Employees become
participants for purposes of eligibility, vesting and benefit accrual.
Buyer further agrees that from the Closing Date through the remainder of
the Parent's current fiscal year to provide such Employees the opportunity
to participate in that certain employee profit sharing arrangement of the
Company (a copy of which is attached hereto as Exhibit I). Except as
---------
otherwise set forth in the Employment Agreements, each of the Employees
shall be offered employment pursuant to this Section 7(h) on an at-will
basis.
(ii) The Company shall be responsible for those actions which are
necessary and desirable to be taken from and after the Closing to terminate
the Company Plans.
(iii) Notwithstanding anything contained in this Section 7(h), neither
Parent nor Buyer is assuming any Liability or obligation under any Company
Plan, and the Company will retain all Liability under each such Company
Plan;
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provided, however, that Buyer shall assume the Liability for vacation
and sick leave accruals on the books of the Company in favor of the
Employees as of the Closing Date and shall credit Employees with such
vacation and sick leave accruals under Buyer's leave policies as are
in effect from time to time.
(iv) Neither the Company nor any Affiliate of the Company shall
continue to maintain a group health plan, within the meaning of Code
Section 5000(b)(1) following the Closing. The Company and its
Affiliates shall have taken the steps reasonably necessary to effect a
termination of each of their group health plans and each third-party
contract thereunder, all effective as of the Closing Date. From and
after the Closing, Buyer shall be responsible for any obligations with
respect to group health continuation coverage under COBRA for (i)
former employees of the Company and their eligible dependents based on
coverage under the Buyer's group health plans, which persons have
elected participation in health continuation coverage under COBRA and
whose COBRA health continuation coverage period has not expired as of
the Closing Date, or are eligible to elect participation in health
continuation coverage under COBRA under the Company's group health
plan as of the Closing Date, and (ii) Employees offered employment by
the Buyer on the Closing Date pursuant to Section 7(h)(i) above and
who voluntarily decline such offer of employment, and resign their
employment with the Company effective as of the Closing Date, and
their eligible dependents.
(i) Transition Incentive Bonus Program. Following the Closing, the
Company and the General Partner covenant and agree, jointly and severally, that
it shall satisfy all obligations to the employees of the Company arising under
the Transition Incentive Bonus Program. The Buyer agrees to reasonably cooperate
with the Company and the General Partner to provide the Company and the General
Partner such information which is necessary for the Company and the General
Partner to satisfy each of their obligations arising under the Transition
Incentive Bonus Program.
(j) Domain Name Transfer.
At Closing, the Company shall promptly discontinue all use of the
world wide web internet domain names "www.imageproshop.com",
"www.solutions-zone.com", "www.mediacy.com", "www.optimas.com", and each other
world wide web internet domain name owned by the Company, and each other world
wide web internet domain name used in the Business. As soon as practicable
following the Closing, but in no event later than thirty (30) days after the
Closing, the Company shall take any and all actions as required to effectuate
and record such transfer in the records of any and all pertinent domain name
registries, so that the Buyer becomes recognized by such registry as the
exclusive owner of each such Internet domain name. In any event the Company
shall promptly execute and file any forms required by any and all pertinent
domain name registries to ensure the full transfer of the exclusive right to the
domain names "www.imageproshop.com", "www.solutions-zone.com",
"www.mediacy.com", "www.optimas.com", "www.drill-down.com",
"www.mediacybernetics.com", "www.image-pro.com", and each other world wide web
internet domain name owned by
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the Company, and each other world wide web internet domain name used in the
Business, to the Buyer, and shall cooperate with the Buyer as it reasonably
requests to ensure the full effectiveness of such transfer.
(k) Insurance Coverage.
As soon as is practicable following the Closing, unless otherwise
unfeasible to obtain, the Company shall arrange to provide completed operations
insurance coverage with respect to each of its general liability, commercial
general liability, electronic errors & omissions, executive protection, products
liability, and employment practices, policies, which insurance coverage, (i)
shall be in effect from the Closing Date for a period of at least two (2) years
following the Closing (except with respect to the electronic errors & omissions
insurance policy, which shall be in effect indefinitely), (ii) shall provide
amounts of coverage and deductibles which are no less favorable than as
contained in each such respective policy which was maintained by the Company
prior to Closing, and (iii) shall name the Parent and the Buyer as additional
named insureds. The Company and the General Partner shall be responsible for
fifty percent (50%), and the Parent and the Buyer shall be responsible for fifty
percent (50%), of the premiums and other Liabilities incurred in connection with
the maintenance of such completed operations insurance policies.
8. Remedies for Breaches of this Agreement.
(a) Survival of Representations and Warranties. All of the representations
and warranties of the Company and the General Partner contained in Sections
3(f)-3(cc), except Sections 3(j) and 3(y), of this Agreement and all of the
representations and warranties of the Parent and the Buyer contained in Sections
4(d)-4(e) of this Agreement, shall survive the Closing and continue in full
force and effect for a period of one (1) year thereafter; all of the
representations and warranties of the Company and the General Partner contained
in Sections 3(a)-3(e), Section 3(j), and Section 3(y) of this Agreement, and all
of the representations and warranties of the Parent and the Buyer contained in
Sections 4(a)-4(c) of this Agreement, shall survive the Closing and continue in
full force and effect for a period of two (2) years thereafter; and all of the
covenants, indemnities, and other agreements of the Parent, the Buyer, the
Company, and the General Partner contained in this Agreement shall survive the
Closing and continue in full force and effect forever thereafter, subject to any
applicable statutes 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.
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(b) Indemnification Provisions for Benefit of the Parent and the Buyer.
(i) In the event the Company or the General Partner breaches (or in the
event any third party alleges facts that, if true, would mean the Company or
the General Partner has breached) any of its representations, warranties,
and covenants contained in this Agreement, and, if there is an applicable
survival period pursuant to Section 8(a) above, provided that either the
Parent or the Buyer makes a written claim for indemnification setting forth
the basis for such claim against the Company or the General Partner pursuant
to Section 9(h) below within such survival period, then the Company and the
General Partner, jointly and severally, agree to defend, indemnify and hold
harmless the Parent and the Buyer, subject to the limitations set forth
herein, from and against the entirety of any Adverse Consequences the Parent
or the Buyer may suffer through and after the date of the claim for
indemnification (including any Adverse Consequences the Parent or the Buyer
may suffer after the end of any applicable survival period) resulting from,
arising out of, or caused by the breach; provided, however, that:
(A) Neither the Company nor the General Partner shall have any
obligation to indemnify the Parent or the Buyer from and against any
Adverse Consequences resulting from, arising out of, or caused by the
breach of any representation or warranty contained in Sections 3(f)-(cc)
of the Agreement, except Section 3(j), and Section 3(y), which exceed in
the aggregate Three Million Three Hundred Thousand Dollars
($3,300,000.00); and
(B) Neither the Company nor the General Partner shall have any
obligation to indemnify the Parent or the Buyer from and against any
Adverse Consequences resulting from, arising out of, or caused by the
breach of any representation or warranty contained in Sections
3(a)-3(e), Section 3(j), and Section 3(y), of this Agreement, or caused
by the breach of any covenants, indemnities, and other agreements
contained in this Agreement, which exceeds the Asset Purchase
Consideration;
(C) Neither the Company nor the General Partner shall have any
obligation to indemnify the Parent or the Buyer from and against any
Adverse Consequences resulting from, arising out of, or caused by the
breach of any representation or warranty contained in Section 3 of this
Agreement, or caused by the breach of any covenants, indemnities, and
other agreements contained in this Agreement, which, inclusive of all
amounts paid in accordance with Section 8(b)(i)(A) and 8(b)(i)(B) above,
exceeds the Asset Purchase Consideration, and
(D) Neither the Company nor the General Partner shall have any such
indemnification obligation with respect to such breaches contained in
Sections 3(f)-(cc) of the Agreement, except Section 3(j), and Section
3(y), until the Parent or the Buyer has suffered Adverse Consequences by
reason thereof in excess of Two Hundred Thousand
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Dollars ($200,000.00). No such restriction shall be applicable to
the representations and warranties as contained in Sections
3(a)-3(e), Section 3(j), and Section 3(y) of the Agreement, or
applicable to any covenants, indemnities, and other agreements
contained in this Agreement.
(ii) Notwithstanding anything to the contrary herein contained in
Section 8(b)(i) above, (x) the Company and the General Partner, jointly
and severally, will indemnify, defend and hold harmless Parent and the
Buyer from and against any Adverse Consequences as a result of any
claims based on or arising from (A) any Liability of the Company which
is an Excluded Liability, or (B) any of the Excluded Assets, and (y)
such indemnification shall not be limited in time or amount or subject
to any deductible or cap.
(iii) Notwithstanding anything to the contrary herein contained in
Section 8(b)(i) above, (x) the Company and the General Partner, jointly
and severally, will indemnify, defend and hold harmless Parent and the
Buyer from and against any Adverse Consequences as a result of the
failure of the Company to make any appropriate Tax filing in any
jurisdiction or the failure of the Company to pay any Tax, and (y) such
indemnification shall not be limited in time or amount or subject to any
deductible or cap.
(iv) For the purposes of this Section 8, in computing the
individual or aggregate amounts of claims, the amount of each claim
shall be deemed to be an amount net of any insurance proceeds
recoverable by Buyer, the Parent or any Affiliate of Buyer or Parent
with respect thereto.
(v) As security for the indemnification obligations of the Company
and the General Partner under this Agreement, the Parent, Buyer, the
Company, and the General Partner shall enter into the Escrow Agreement
as of the Closing Date with respect to the indemnification obligations
arising under the representations, warranties, and covenants contained
in this Agreement, which shall be funded with Three Million Three
Hundred Thousand Dollars ($3,300,000.00) of the Closing Consideration
otherwise payable to the Company. The amounts held in the Escrow
Agreement shall be held for a period of one (1) year (the "First Escrow
Period"), provided that One Million Six Hundred Fifty Thousand Dollars
($1,650,000.00) (plus any pending claims under this Section 8) shall be
retained in escrow for an additional one (1) year period following the
First Escrow Period (the "Second Escrow Period") to secure the
obligations of the Company and the General Partner under the
indemnification obligations arising under this Agreement. Amounts held
under the Escrow Agreement shall be a nonexclusive source of
indemnification for any representations, warranties, or covenants under
this Agreement, and shall not otherwise limit the liability of the
Company and the General Partner with respect to indemnification under
this Agreement; provided, however, that, subject to the provisions
contained in the remainder of this Section 8(b)(v), with respect to
claims for indemnification asserted against the Company or the General
Partner by the Parent or the Buyer prior to the second (2/nd/)
anniversary of the Closing Date, Parent and Buyer shall seek to recover
such
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claims for indemnification first from that amount held pursuant to the
Escrow Agreement. To the extent that the aggregate of all claims for
indemnification asserted against the Company and the General Partner
exceed Three Million Three Hundred Thousand Dollars ($3,300,000.00),
Parent and Buyer shall seek first to recover such claims for
indemnification which may be satisfied pursuant to the Escrow
Agreement, based upon the amount of funds remaining in the Escrow
Agreement (but excluding funds which are remaining in the Escrow
Agreement that are otherwise subject to other outstanding claims for
indemnification), provided that in so doing neither Parent nor Buyer
shall be required to take any action which may prejudice its rights
arising under law or in equity with respect to such claim for
indemnification.
(c) Indemnification Provisions for Benefit of the Company. 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 Section 8(a)
above, provided that the Company or the General Partner make a written
claim for indemnification setting forth with specificity the basis for such
claim against Parent or the Buyer pursuant to Section 9(h) below within
such survival period, then Parent and the Buyer, jointly and severally,
agree to defend, indemnify and hold harmless the Company and the General
Partner from and against the entirety of any Adverse Consequences (up to
but not in excess of the Asset Purchase Consideration) the Company or the
General Partner may suffer through and after the date of the claim for
indemnification (including any Adverse Consequences the Company or the
General Partner may suffer after the end of any applicable survival period)
resulting from, arising out of, or caused by the breach (or the alleged
breach). Notwithstanding anything to the contrary herein contained in
Section 8(c), (x) Parent and the Buyer, jointly and severally, will
indemnify, defend and hold harmless the Company and the General Partner
from and against any Adverse Consequences as a result of any claims based
on or arising from (A) any Liability of the Company which is an Assumed
Liability, or (B) any of the Acquired Assets, and (y) such indemnification
shall not be limited in time or amount or subject to any deductible or cap.
(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 Section 8, 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 reasonably satisfactory to the Indemnified Party so long as (A)
the Indemnifying
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Party notifies the Indemnified Party in writing within fifteen (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, if any,
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 reasonable 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.
(iii) So long as the Indemnifying Party is conducting the defense
of the Third Party Claim in accordance with Section 8(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
(which consent shall not be unreasonably withheld).
(iv) In the event any of the conditions in 8(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 (provided that the Indemnified Party obtain consent
from, any Indemnifying Party in connection therewith, which consent
shall not be unreasonably withheld), (B) the Indemnifying Party 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 Party 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 Section 8.
(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
Section 8. All indemnification payments under this Section 8 shall be
deemed adjustments to the Asset Purchase Consideration.
(f) Post-Closing. Following the Closing, the sole and exclusive
remedy of the Company and the General Partner, 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, covenant, or other agreement
contained herein or with respect to any event, circumstance
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or condition occurring on or before the Closing shall be limited to the
enforcement of the indemnification obligations set forth in Section 8; provided,
however, that nothing provided in this Section 8(f) shall limit the right of any
Party to seek any equitable remedy available to enforce his or its rights
hereunder in accordance with Section 9(o).
9. Miscellaneous.
(a) Press Releases and Public Announcements. Neither the Company nor the
General Partner shall, and the Company and the General Partner shall cause the
Partners not to, 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 the Company, 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.
(b) Waiver of Bulk Sales Law. The Parties hereto acknowledge and agree that
no filings with respect to any bulk sales or similar laws have been made, nor
are they intended to be made, nor are such filings a condition precedent to the
Closing.
(c) 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.
(d) 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.
(e) 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 each other Party; provided, however, that either the Parent or 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 assigning Party
nonetheless shall remain responsible for the performance of all of its
obligations hereunder).
(f) 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.
(g) 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.
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(h) 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 the Buyer: Copy to:
N. Will Crocker Thomas R. McNeill
MCB Acquisition Subsidiary, Inc. Powell, Goldstein, Frazer &
c/o Roper Industries, Inc. Murphy LLP
160 Ben Burton Road 191 Peachtree Street, NE,
Bogart, Georgia 30622 16/th/ Floor
Facsimile: (706) 353-6496 Atlanta, GA 30303
Facsimile: (404) 572-6999
If to the Company or the General Partner: Copy to:
Michael P. Galvin 1994 Trust Robert F. Wall
1133 Connecticut Ave., N.W., Suite 800 Winston & Strawn
Washington, DC 20036 35 West Wacker Drive
Facsimile: (202) 452-4801 Chicago, IL 60601
Facsimile: (312) 558-5700
If to the Parent: Copy to:
N. Will Crocker Shanler D. Cronk, Esq.
Roper Industries, Inc. Roper Industries, Inc.
160 Ben Burton Road 160 Ben Burton Road
Bogart, Georgia 30622 Bogart, Georgia 30622
Facsimile: (706) 353-6496 Facsimile: (706) 353-6496
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.
(i) 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.
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(j) 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
Parties. 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.
(k) 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.
(l) Expenses. Parent and Buyer will bear their own costs and expenses
(including but not limited to financial, advisory, accounting, legal, and
environmental fees and expenses) incurred in connection with this Agreement and
the transactions contemplated hereby. The Company and the General Partner each
shall bear (i) its own costs and expenses (including but not limited to
financial, advisory, accounting, legal, and environmental fees and expenses, and
the fees and expenses of Updata Capital, Inc.) and (ii) the costs and expenses
(including but not limited to financial, advisory, accounting, legal, and
environmental fees and expenses, and the fees and expenses of Updata Capital,
Inc.) of the Partners incurred in connection with this Agreement and the
transactions contemplated hereby.
(m) 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
Company Disclosure Schedule shall be deemed an exception only to the
representations and warranties for which they are identified and any other
representations or warranties to which the Company Disclosure Schedule with
respect to representations and warranties contain in appropriate
cross-reference.
(n) Incorporation of Exhibits and Schedules. The Exhibits and Schedules
identified in this Agreement are incorporated herein by reference and made a
part hereof.
(o) 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.
(p) Submission to Jurisdiction. Each of the Parties submits to the
jurisdiction of any state or federal court sitting in the State of Maryland in
any action or proceeding
-52-
<PAGE>
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, Buyer, the Company, and the
General Partner appoint The Prentice-Hall Corporation System, Inc. (the "Process
Agent") as their 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. 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 Section 9(h) 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 Section 9(h) above. Each
Party agrees that a final judgment in any 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.
(q) Arbitration. Except as otherwise set forth in this Agreement, all
disputes arising out of or under this Agreement shall be settled by arbitration
in a location in Washington, D.C., mutually acceptable to the Parties before a
single arbitrator pursuant to the rules of the American Arbitration Association.
Arbitration may be commenced at any time by any of the Parties by giving written
notice to each other than such dispute has been referred to arbitration under
this Section 9(q). The arbitrator shall be selected by the joint agreement of
the Parties, but if they do not so agree within twenty (20) days after the date
of receipt of the notice referred to above, the selection shall be made pursuant
to the rules from the panels of arbitrators maintained by the American
Arbitration Association. Any award rendered by the arbitrator shall be
conclusive and binding upon the Parties hereto; provided, however, that any such
award shall be accompanied by a written opinion of the arbitrator giving the
reason for the award. This provision for arbitration shall be specifically
enforceable by the Parties and the decision of the arbitrator in accordance
herewith shall be final and binding and there shall be no right of appeal
therefrom. The arbitrator shall assess, as part of his award to the prevailing
Party, all or such part as the arbitrator deems proper of the arbitration
expenses of the prevailing Party (including reasonable attorneys' fees) and of
the arbitrator against the Party that is unsuccessful in such claim, defense or
objection.
[THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK]
-53-
<PAGE>
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on
the date first above written.
BUYER:
MCB Acquisition Subsidiary, Inc.
By:_____________________________________________
Name:___________________________________________
Title:__________________________________________
PARENT:
Roper Industries, Inc.
By:_____________________________________________
Name:___________________________________________
Title:__________________________________________
THE COMPANY:
Media Cybernetics, L.P.
By: Media Cybernetics, Inc., its General Partner
By:_____________________________________________
Name:___________________________________________
Title:__________________________________________
GENERAL PARTNER:
Media Cybernetics, Inc.
By:_____________________________________________
Name:___________________________________________
Title:__________________________________________
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.07
<SEQUENCE>4
<FILENAME>dex1007.txt
<DESCRIPTION>BRIAN D. JELLISON EMPLOYMENT AGREEMENT
<TEXT>
<PAGE>
Exhibit 10.07
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") dated as of November 6,
2001, between Brian Jellison (the "Executive") and Roper Industries, Inc., a
Delaware corporation (the "Company").
W I T N E S S E T H:
WHEREAS, the Company desires to employ the Executive as its President
and Chief Executive Officer and wishes to define the terms of the Executive's
employment with the Company and the Executive desires to accept such employment,
for the term and upon the other conditions hereinafter set forth; and
WHEREAS, the parties desire to enter into this Agreement setting forth
the terms and conditions of the employment relationship of the Executive with
the Company;
NOW, THEREFORE, the parties agree as follows:
1. Employment. The Company hereby employs the Executive, and the
----------
Executive hereby accepts employment with the Company, upon the terms and subject
to the conditions set forth herein.
2. Term. This Agreement shall commence on the date hereof (the
----
"Effective Date") and shall continue during the period in which the Executive
remains employed by the Company (the "Term"). The Executive shall be considered
an at-will employee and his employment may be terminated by either party subject
to the obligations of the parties upon such termination as may be set forth
hereinafter.
3. Position. During the Term, the Executive shall serve as President
--------
and Chief Executive Officer of the Company.
4. Duties and Reporting Relationship. The Executive shall have
---------------------------------
duties and responsibilities commensurate with his title and status as President
and Chief Executive Officer. He shall at all times be the highest-ranking
officer of the Company, reporting to the Board of Directors of the Company (the
"Board"). During the Term, the Executive shall, on a full time basis, use the
Executive's skills and render services to the best of the Executive's abilities
in supervising and conducting the operations of the Company and, except for his
continuing to serve as a member of the Board of Directors of Champion
Enterprises, Inc and on any committees thereof and as a member of the Board of
Directors of Tavant, Inc., the Executive shall not engage in any other business
activities except with the prior written approval of the Board or its duly
authorized designee. The Executive agrees to be employed by the Company in such
capacity for the Term, subject to all the covenants and conditions hereinafter
set forth.
<PAGE>
5. Place of Performance. The Executive shall perform his duties and
--------------------
conduct his business at the principal executive offices of the Company, except
for required travel on the Company's business. Executive agrees to relocate his
family to the Athens or Atlanta, Georgia area as soon as practicable after the
Effective Date, but in no event later than six (6) months following the
Effective Date.
6. Salary and Annual Bonus.
-----------------------
(a) Base Salary. The Executive's base salary hereunder shall
be $575,000 a year, payable no less frequently than monthly and
prorated for any partial year of employment. The Board shall review
such base salary at least annually and may increase, but not decrease,
such base salary as it may deem advisable.
(b) Annual Bonus. The Company shall provide the Executive with
an opportunity to earn upon achievement of target performance goals
established by the Compensation Committee of the Board, an annual bonus
of up to one hundred percent (100%) of the Executive's base salary (the
"Target Bonus").
7. Vacation, Holidays and Sick Leave. During the Term, the Executive
---------------------------------
shall be entitled to paid vacation, paid holidays and sick leave in accordance
with the Company's standard policies for its senior executive officers; provided
however, that in no event shall the Executive be entitled to less than four (4)
weeks of vacation per year.
8. Business Expenses. The Executive shall be reimbursed for all
-----------------
ordinary and necessary business expenses incurred by the Executive in connection
with the Executive's employment upon timely submission by the Executive of
receipts and other documentation as required by the Internal Revenue Code and in
conformance with the Company's normal procedures.
9. Pension and Welfare Benefits. During the Term, the Executive
----------------------------
shall be eligible to participate fully in all health benefits, insurance
programs, pension and retirement plans and other employee benefit and
compensation arrangements available to senior executive officers of the Company
generally. In addition, the Executive shall be entitled to use a new Company
paid automobile (Buick Park Avenue or equivalent) and the Company will pay
initiation and monthly dues for the Executive at the Athens Country Club or
another country club of his choice which is reasonably acceptable to the Board
of Directors of the Company.
10. Relocation Benefits. The Executive shall be entitled to
-------------------
relocation benefits in accordance with the Company's relocation policy. In
addition and notwithstanding the relocation policy:
(a) The Company shall gross-up any portion of such relocation
benefits which are taxable to the Executive for all state,
federal and local income taxes based on the Executive's
highest marginal income tax rates, which amount shall be
considered additional relocation benefits;
2
<PAGE>
(b) The Company will pay for the Executive's temporary living
expenses for up to six months; and
(c) The Executive will not be obligated to return all relocation
benefits unless prior to the first anniversary of the
Effective Date, the Executive voluntarily terminates his
employment with the Company without Good Reason (as defined
below) or is terminated by the Company for Cause (as defined
below).
11. Stock Options On the Effective Date, the Company shall grant to
-------------
the Executive, pursuant to the terms of the Company's 2000 Stock Incentive Plan
(the "Stock Incentive Plan") and the Company's 1991 Stock Option Plan (the
"Stock Option Plan"), options to purchase in the aggregate 200,000 shares of
common stock of the Company having an exercise price equal to the fair market
value of the Company's common stock as of the Effective Date and which shall
have such other terms and be subject to such conditions as are set forth in the
form of Stock Option Agreement typically used by the Company under the Stock
Incentive Plan and the Stock Option Plan, respectively; provided, however, that
of the aggregate 200,000 shares subject to the options, 50,000 shall be vested
on the Effective Date, 50,000 shares shall vest in equal one-third increments on
each of the first three anniversaries of the Effective Date, provided that the
Executive is employed by the Company as of the dates of vesting, and the balance
of the shares shall vest in equal one-fifth increments on each of the first five
anniversaries of the Effective Date, provided that the Executive is employed by
the Company as of the dates of vesting. In the event the Executive's employment
is terminated by the Company without Cause (as defined below) or the Executive
resigns with Good Reason (as defined below), then that portion of any option
(including any additional options that may be granted to the Executive after the
Effective Date) that would have vested at the next anniversary of the Effective
Date following the Date of Termination shall be and become fully vested on the
Date of Termination and, notwithstanding any provision to the contrary in the
applicable Stock Option Agreement, any option held by the Executive to the
extent then vested, may be exercised and shall not expire until the earlier of
(A) the expiration of the option term as set forth in the Stock Option Agreement
or (B) the expiration of the severance period set forth in Section 13(e)(ii). In
addition to the grant set forth in this Section, the Board or the Compensation
Committee thereof may grant to the Executive such other and additional awards
under the Stock Incentive Plan (or any successor plan) as may from time to time
be deemed appropriate.
12. Termination of Employment.
-------------------------
(a) General. The Executive's employment hereunder may be
-------
terminated only under the circumstances described in this Section 12.
3
<PAGE>
(b) Death or Disability.
-------------------
(i) The Executive's employment hereunder shall
automatically terminate upon the death of the Executive.
(ii) If, as a result of the Executive's incapacity due to
physical or mental illness, the Executive is unable to perform
the essential functions of his job for one hundred eighty (180)
days (whether or not consecutive) during any period of eighteen
(18) consecutive months, and no reasonable accommodation can be
made that will allow Executive to perform his essential
functions, the Company may terminate the Executive's employment
hereunder for any such incapacity (a "Disability").
(c) Termination by the Company. The Company may terminate the
--------------------------
Executive's employment hereunder at any time, whether or not for Cause.
For purposes of this Agreement, "Cause" shall mean (i) the continuous
and willful failure or refusal by the Executive to perform the
Executive's duties hereunder (other than any such failure resulting
from the Executive's incapacity due to physical or mental illness),
which has not ceased within ten (10) days after a written demand for
substantial performance is delivered to the Executive by the Company,
which demand identifies with particularity the manner in which the
Company believes that the Executive has not performed such duties, (ii)
the engaging by the Executive in willful misconduct which is materially
injurious to the Company, monetarily or otherwise (including, but not
limited to, conduct which violates Section 16 hereof) or an act of
moral turpitude which is materially injurious to the Company,
monetarily or otherwise (including, but not limited to, conduct which
violates Section 16 hereof) or (iii) the conviction of the Executive
of, or the entering of a plea of nolo contendere by, the Executive with
respect to a felony.
For purposes of this provision, no act or failure to act, on the
part of Executive shall be considered "willful" unless it is done, or
omitted to be done, by Executive in bad faith or without reasonable
belief that the Executive's action or omission was in the best
interests of the Company. Any act, or failure to act, based upon
authority given pursuant to a resolution duly adopted by the Board of
Directors or based upon the advice of counsel for the Company shall be
conclusively presumed to be done, or omitted to be done, by the
Executive in good faith and in the best interests of the Company. The
cessation of employment of the Executive shall not be deemed to be for
Cause unless prior to such termination there shall have been delivered
to the Executive a copy of a resolution duly adopted by the affirmative
vote of not less than a majority of the disinterested membership of the
Board of Directors at a meeting of such Board of Directors called and
held for such purpose (after reasonable notice is provided to the
Executive and the Executive is given an opportunity to be heard before
such Board of Directors), finding, that, in the good faith opinion of
the Board of Directors, the Executive is guilty of the conduct
described in clause (i), (ii) or (iii) above.
(d) Termination by the Executive for Good Reason. The
--------------------------------------------
Executive shall be entitled to terminate his employment hereunder for
Good Reason. For purposes of this
4
<PAGE>
Agreement, "Good Reason" shall mean any one of the following acts by
the Company, or failures by the Company to act, unless, in the case of
any act or failure to act described below, such act or failure to act
is corrected prior to the Date of Termination specified in the Notice
of Termination given in respect thereof or unless Executive has
otherwise consented thereto in writing:
(i) any material diminution in the Executive's authorities
or responsibilities (including reporting responsibilities) or
from his status, title, position or responsibilities (including
reporting responsibilities) without the Executive's express
written consent to accept any such change; the assignment to him
of any duties or work responsibilities which are inconsistent
with such status, title, position or work responsibilities; or
any removal of the Executive from, or failure to reappoint or
reelect him to any of such positions, except if any such changes
are because of Disability, retirement, death or Cause;
(ii) a reduction by the Company in the Executive's base
salary or Target Bonus as in effect on the date hereof or as the
same may be increased from time to time;
(iii) the relocation of the Executive's office at which the
Executive is to perform the Executive's duties, to a location
more than fifty (50) miles from the location at which the
Executive previously performed the Executive's duties hereunder,
except for required travel on the Company's business;
(iv) the failure by the Company to comply with any material
provision of this Agreement, which failure has not been cured
within ten (10) days after notice of such noncompliance has been
given by the Executive to the Company; or
(v) any purported termination of the Executive's
employment by the Company which is not effected pursuant to a
Notice of Termination satisfying the requirements of Section
12(f) below.
The Executive's continued employment for 6 months following any act or
failure to act constituting Good Reason hereunder without the delivery
of a Notice of Termination shall constitute consent to, and a waiver of
rights with respect to, such act or failure to act.
(e) Voluntary Resignation. Should the Executive wish to resign
---------------------
from his position with the Company or terminate his employment for
other than Good Reason during the Term, the Executive shall give sixty
(60) days written notice to the Company ("Notice Period"), specifying
the date as of which his resignation is to become effective. During the
Notice Period, the Executive shall cooperate fully with the Company in
an effort to achieve a smooth transition of the Executive's duties and
responsibilities to such person(s) as may be designated by the Company.
The Company reserves the right to accelerate the Date of Termination by
giving the Executive notice, but the Company shall
5
<PAGE>
in that case pay and provide the Executive with all payments and benefits
he would otherwise have been entitled to (other than disability benefits)
had he remained employed through the end of the Notice Period, including
payment of amounts due to the Executive under Section 6(a) and, to the
extent applicable, Section 6(b) for the balance of the Notice Period. The
Company's obligation to continue to employ the Executive or to continue
payment of the amounts described in the preceding sentence shall cease
immediately if: (1) the Executive has not satisfied his obligations to
cooperate fully with a smooth transition or (2) the Company has grounds to
terminate the Executive's employment immediately for Cause. Conversely, if
during the Notice Period the Executive comes to have grounds to resign with
Good Reason (other than the grounds described in Section 12(d)(i) or, only
to the extent related to the matters covered in Section 12(d)(i), Section
12(d)(iv)), then Executive may, by notice, deem the resignation to be with
Good Reason, in which case the rights and obligations set forth herein for
a Good Reason termination shall govern.
(f) Notice of Termination. Any purported termination of the
---------------------
Executive's employment by the Company or by the Executive shall be
communicated by written Notice of Termination to the other party hereto in
accordance with Section 19. "Notice of Termination" shall mean a notice
that shall indicate the specific termination provision in this Agreement
relied upon and shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the Executive's
employment under the provision so indicated.
(g) Date of Termination. "Date of Termination" shall mean (i) if the
-------------------
Executive's employment is terminated because of death, the date of the
Executive's death, (ii) if the Executive's employment is terminated for
Disability, the date Notice of Termination is given, (iii) if the
Executive's employment is terminated pursuant to Subsection (c) or (e)
hereof or for any other reason (other than death or Disability, Good Reason
or Cause), the date specified in the Notice of Termination which shall not
be less than sixty (60) days from the date such Notice of Termination is
given (iv) if the Executive's employment is terminated pursuant to
Subsection (c) for reasons of Cause, immediately upon delivery the Notice
of Termination and (v) if the Executive's employment is terminated pursuant
to Subsection (d) hereof, the date specified in the Notice of Termination
which shall not be less than thirty (30) days from the date such Notice of
Termination is given.
(h) Change in Control. For purposes of this Agreement, a Change in
-----------------
Control of the Company shall have occurred if:
(i) any "Person" (as defined in Section 3(a)(9) of the
Securities Exchange Act of 1934 (the "Exchange Act") as modified and
used in Sections 13(d) and 14(d) of the Exchange Act) other than (1)
the Company or any of its subsidiaries, (2) any trustee or other
fiduciary holding securities under an employee benefit plan of the
Company or any of its subsidiaries, (3) an underwriter temporarily
holding securities pursuant to an offering of such securities, (4) any
creditor of the Company (but not any transferee of such creditor
6
<PAGE>
even if such transferee shall also be a creditor) who is issued shares
of the Company's common stock in connection with the implementation of
the Company's plan of reorganization which shall be effective as of
the Effective Date, or (5) any corporation owned, directly or
indirectly, by the stockholders of the Company in substantially the
same proportions as their ownership of the Company's common stock), is
or becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company
representing more than 40% of the combined voting power of the
Company's then outstanding voting securities;
(ii) during any period of not more than two (2) consecutive
years, not including any period prior to the Effective Date,
individuals who at the beginning of such period constitute the Board,
and any new director (other than a director designated by a person who
has entered into an agreement with the Company to effect a transaction
described in clause (i), (iii), or (iv) of this Section 12(h)) whose
election by the Board or nomination for election by the Company's
stockholders was approved by a vote of at least two-thirds (2/3) of
the directors then still in office who either were directors at the
beginning of the period or whose election or nomination for election
was previously so approved, cease for any reason to constitute at
least a majority thereof;
(iii) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than
(A) a merger or consolidation which would result in the voting
securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving or parent entity)
50% or more of the combined voting power of the voting securities of
the Company or such surviving or parent entity outstanding immediately
after such merger or consolidation or (B) a merger or consolidation in
which no person acquires 40% or more of the combined voting power of
the Company's or such surviving or parent entity's then outstanding
securities; or
(iv) the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition
by the Company of all or substantially all of the Company's assets or
all or substantially all of its and its subsidiaries' assets, taken as
a whole, (or any transaction having a similar effect).
(i) Return of Property. When the Executive ceases to be employed by
------------------
the Company, the Executive will promptly surrender to the Company all
Company property, including without limitation, all records and other
documents belonging to the Company that were obtained by him or entrusted
to him during the course of his employment with the Company provided,
however, that the Executive may retain copies of such documents as
necessary for the Executive's personal records for federal income tax
purposes.
13. Compensation During Disability, Death or Upon Termination.
---------------------------------------------------------
7
<PAGE>
(a) During any period that the Executive fails to perform his duties
hereunder as a result of incapacity due to a Disability ("Disability
Period"), the Executive shall continue to receive his base salary at the
rate then in effect for such period until his employment is terminated
pursuant to Section 12(b)(ii) hereof, provided that payments so made to the
Executive during the Disability Period shall be reduced by the sum of the
amounts, if any, payable to the Executive with respect to such period under
disability benefit plans of the Company or under the Social Security
disability insurance program, and which amounts were not previously applied
to reduce any such payment.
(b) If the Executive's employment is terminated by his death or
Disability, the Company shall pay (i) any base salary due to the Executive
under Section 6(a) through the date of such termination (ii) any earned but
unpaid bonus from any prior fiscal year of the Company (iii) all other
unpaid amounts, if any, to which the Executive is entitled as of the Date
of Termination under any compensation plan or program of the Company, at
the time such payments are due, and (iv) an amount equal to the Target
Bonus he would have received for the fiscal year that ends on or
immediately after the Date of Termination, assuming the Company achieved
the target level for which a bonus is paid under the plan described in
Section 6(b), prorated for the period beginning on the first day of the
fiscal year in which occurs the Date of Termination through the Date of
Termination.
(c) If the Executive's employment is terminated by the Company for
Cause or by the Executive for other than Good Reason, the Company shall pay
the Executive (i) his base salary through the Date of Termination at the
rate in effect at the time Notice of Termination is given, (ii) any earned
but unpaid bonus from any prior fiscal year of the Company and (iii) all
other unpaid amounts, if any, to which the ExeuctiveExecutive is entitled
as of the Date of Termination under any compensation plan or program of the
Company, at the time such payments are due, and the Company shall have no
further obligations to the Executive under this Agreement.
(d) If within one (1) year following a Change in Control, either the
Company terminates the Executive's employment without Cause or the
Executive terminates his employment for Good Reason, then
(i) the Company shall pay the Executive (I) his base salary
through the Date of Termination at the rate in effect at the time
Notice of Termination is given, (II) any earned but unpaid bonus from
any prior fiscal year of the Company, and (III) all other unpaid
amounts, if any, to which the Executive is entitled as of the Date of
Termination under any compensation plan or program of the Company, at
the time such payments are due;
(ii) in lieu of any further salary or other payments to the
Executive for periods subsequent to the Date of Termination, the
Company shall pay as liquidated damages to the Executive an aggregate
amount equal to the product of (A) the sum of (1) the Executive's base
salary at the rate in effect of the Date of
8
<PAGE>
Termination and (2) the greater of (I) the average of the annual
bonuses actually paid to the Executive by the Company with respect to
the two (2) fiscal years which immediately precede the year in which
the Date of Termination occurs (provided if there was a bonus paid to
the Executive with respect only to one fiscal year that immediately
precedes the year in which the Date of Termination occurs, then such
single year's bonus shall be utilized in the calculation pursuant to
this subclause (I)) and (II) the bonus the Executive would earn based
on the Target Bonus applicable for the year of termination and (B) the
number two (2.0);
(iii) the Company shall pay the Executive an amount equal to the
prorated Target Bonus (prorated in the same manner set forth in
Section 13(b) hereof) that would have been paid for the period
beginning on the first day of the fiscal year in which the Date of
Termination occurs;
(iv) the Company shall continue coverage for the Executive, on
the same terms and conditions as would be applicable if the Executive
were an active Employee, under the Company's life insurance, medical,
health and similar welfare benefit plans (other then group disability
benefits) for a period of twenty-four (24) months; provided, however,
that if the Company is unable under the terms of any such plan to
provide such benefits, then in lieu of such continued coverage, the
Company shall pay to the Executive the economic equivalent of such
benefit (based on premium costs to the Company). Benefits otherwise
receivable by the Executive pursuant to this Section 13(d)(iv) shall
be reduced to the extent comparable benefits are actually received by
the Executive from a subsequent employer during the period during
which the Company is required to provide such benefits, and the
Executive shall report to the Company any such benefits actually
received by him;
(v) all options, shares of restricted stock, performance shares
and any other equity based awards shall be and become fully vested as
of the Date of Termination and, notwithstanding any provision to the
contrary in the applicable Stock Option Agreement, any such options
may be exercised and shall not exprie until the earlier of (I) the
expiration of the option term as set forth in the Stock Option
Agreement or (II) the second anniversary of the Date of Termination;
and
(vi) the payments provided for in this Section 13(d) (other than
Section 13(d)(iv)) shall be made not later than the thirtieth (30th)
day following the Date of Termination.
(e) If either following the first anniversary of or prior to a Change
of Control, the Executive terminates his employment for Good Reason or the
Company terminates the Executive's employment without Cause, then
(i) the Company shall pay the Executive (I) his base salary
through the Date of Termination at the rate in effect at the time
Notice of Termination is
9
<PAGE>
given, (II) any earned but unpaid bonus from any prior fiscal year of
the Company, and (III) all other unpaid amounts, if any, to which the
Executive is entitled as of the Date of Termination under any
compensation plan or program of the Company, at the time such payments
are due;
(ii) the Company shall pay to the Executive the Executive's base
salary in effect as of the date the Notice of Termination is given for
a period of twenty-four (24) months from the Date of Termination;
(iii) the Company shall pay the Executive his Target Bonus
prorated (in the manner set forth in Section 13(b) hereof) for the
period beginning on the first day of the fiscal year in which occurs
the Date of Termination through the Date of Termination;
(iv) the Company shall continue coverage for the Executive, on
the same terms and conditions as would be applicable if the Executive
were an active employee, under the Company's life insurance, medical,
health, and similar welfare benefit plans (other then group
disability) for a period not to exceed the number of months the
Executive will be paid under Section 13(e)(ii) beginning on the Date
of Termination; provided, however, that if the Company is unable under
the terms of any such plan to provide such benefits, then in lieu of
such continued coverage, the Company shall pay to the Executive the
economic equivalent of such benefit (based on premium costs to the
Company);
(v) benefits otherwise receivable by the Executive pursuant to
clause (iv) of this Section 13(e) shall be reduced to the extent
comparable benefits are actually received by the Executive from a
subsequent employer during the period which the Company is required to
provide such benefits, and the Executive shall report to the Company
any such benefits actually received by him.
(f) The Executive shall not be required to mitigate the amount of any
payment or benefit provided for in this Section 13 by seeking other
employment or otherwise, and, except as provided in Sections 13(d)(iv) and
13(e)(iv) and (v) hereof, the amount of any payment or benefit provided for
in this Section 13 shall not be reduced by any compensation or benefits
earned by the Executive as the result of employment by another employer or
by retirement benefits or from any other source.
(g) Release. Prior to making any payment pursuant to Sections
-------
13(e)(ii) and 13(e)(iii), the Company shall have the right to require the
Executive to sign, and the Executive hereby agrees to sign, an agreement to
be bound by the terms of Section 16 of this Agreement and a waiver, in the
form attached hereto as Exhibit A, of all claims the Executive may have
(including any claims under the Age Discrimination in Employment Act), and
the Company may withhold payment of such amount until the period during
which the Executive may revoke such waiver (normally seven days) has
elapsed.
10
<PAGE>
14. Representations and Covenants.
-----------------------------
(a) The Company represents and warrants that this Agreement has been
authorized by all necessary corporate action of the Company and is a valid
and binding agreement of the Company enforceable against it in accordance
with its terms.
(b) The Executive represents and warrants that he is not a party to
any agreement or instrument that would prevent him from entering into or
performing his duties in any way under this Agreement. The Executive agrees
and covenants that he will obtain, and submit to, such physical
examinations as may be necessary to facilitate the Company obtaining an
insurance policy for its benefit insuring the life of the Executive.
15. Successors; Binding Agreement.
-----------------------------
(a) This Agreement is not assignable by the Company except to a
successor (whether direct or indirect, by purchase, merger, consolidation
or otherwise) to all or substantially all of the business and/or assets of
the Company, provided that such successor expressly assumes and agrees to
perform this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had taken
place.
(b) This Agreement is a personal contract and the rights and interests
of the Executive hereunder may not be sold, transferred, assigned, pledged,
encumbered, or hypothecated by him, except as otherwise expressly permitted
by the provisions of this Agreement. This Agreement shall inure to the
benefit of and be enforceable by the Executive and his personal or legal
representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. If the Executive should die while any
amount would still be payable to him hereunder had the Executive continued
to live, all such amounts, unless otherwise provided herein, shall be paid
in accordance with the terms of this Agreement to his devisee, legatee or
other designee or, if there is no such designee, to his estate.
16. Confidentiality and Non-Competition Covenants.
---------------------------------------------
(a) The Executive covenants and agrees that he will not at any time
during or at any time after the end of the Term, directly or indirectly,
use for his own account, or disclose to any person, firm or corporation,
other than authorized officers, directors and employees of the Company or
its subsidiaries, Confidential Information (as hereinafter defined) that is
treated as trade secrets by the Company and will not at any time during or
for five years following the Date of Termination, directly or indirectly,
use for his own account, or disclose to any person, firm or corporation,
other than authorized officers, directors and employees of the Company or
its subsidiaries, any other Confidential Information. As used herein,
"Confidential Information" of the Company means information of any kind,
nature or description which is disclosed to or otherwise known to the
Executive as a direct or indirect consequence of his association with the
Company, which information is not generally known to the public or in the
business in which the
11
<PAGE>
Company is engaged or which information relates to specific opportunities
within the scope of the Company's business which were considered by the
Executive or the Company during the term of this Agreement. Confidential
Information that is treated as confidential trade secrets by the Company
shall include, but not be limited to, strategic operating plans and
budgets, policy and procedure manuals, computer programs, financial forms
and information, patient or resident lists and accounts, supplier
information, accounting forms and procedures, personnel policies,
information pertaining to the salaries, positions and performance reviews
of the Company's employees, information on the methods of the Company's
operations, research and data developed by or for the benefit of the
Company and information relating to revenues, costs, profits and the
financial condition of the Company. Confidential Information does not
include any information that (i) is generally known to the public or the
buinsessbusiness in which the Company engages other than as a result of
unauthorized disclosure by the Executive, (ii) can be discovered, compiled
or ascertained by a third party without substantial burden or expense, or
(iii) was known to the Executive prior to accepting employment with the
Company. During the Term and for a period of two (2) years following the
termination of the Executive's employment, the Executive shall not,
directly or indirectly, solicit or induce any person who is then an
employee of the Company or its subsidiaries to terminate his or her
employment by the Company or its subsidiaries in order to obtain employment
by any person, firm or corporation affiliated with the Executive and the
Executive shall not or cause any other person, firm or corporation
affiliated with the Executive to hire any employee of the Company or its
subsidiaries or any other person who was an employee of the Company or its
subsidiaries within the twelve (12) month period prior to the Executive's
Date of Termination.
(b) The Executive covenants and agrees that any information,
materials, ideas, discoveries, techniques or programs developed or
discovered by the Executive in connection with the performance of his
duties hereunder shall remain the sole and exclusive property of the
Company and, to the extent it constitutes Confidential Information, shall
be subject to the covenants contained in the preceding paragraph.
(c) The Executive covenants and agrees that during the Term and for a
period of one (1) years following the termination of the Executive's
employment, the Executive shall not, directly or indirectly, own an
interest in, operate, join, control, or participate as a partner, director,
principal, officer, or agent of, enter into the employment of, or act as a
consultant to, in any case in which he has control or supervision over a
significant portion of any entity which competes with the Company and whose
principal business is designing, manufacturing and distributing specialty
industrial controls, fluid handling and analytical instrumentation
products. Notwithstanding anything herein to the contrary, the foregoing
provisions of this Section 16(c) shall not prevent the Executive from
acquiring securities representing not more than 5% of the outstanding
voting securities of any publicly held corporation.
(d) Without limiting the right of the Company to pursue all other
legal and equitable remedies available for violation by the Executive of
the covenants contained in this Section 16, it is expressly agreed by the
Executive and the Company that such other
12
<PAGE>
remedies cannot fully compensate the Company for any such violation and
that the Company shall be entitled to injunctive relief, without the
necessity of proving actual monetary loss, to prevent any such violation or
any continuing violation thereof. Each party intends and agrees that if in
any action before any court or agency legally empowered to enforce the
covenants contained in this Section 16, any term, restriction, covenant or
promise contained herein is found to be unreasonable and accordingly
unenforceable, then such term, restriction, covenant or promise shall be
deemed modified to the extent necessary to make it enforceable by such
court or agency. The covenants contained in Section 16 shall survive the
conclusion of the Executive's employment by the Company.
17. Entire Agreement. This Agreement contains all the understandings
----------------
between the parties hereto pertaining to the matters referred to herein, and on
the Effective Date shall supersede all undertakings and agreements, whether oral
or in writing, previously entered into by them with respect thereto. The
Executive represents that, in executing this Agreement, he does not rely and has
not relied upon any representation or statement not set forth herein made by the
Company with regard to the subject matter, bases or effect of this Agreement or
otherwise.
18. Amendment or Modification. Waiver. No provision of this Agreement may
---------------------------------
be amended or waived unless such amendment or waiver is agreed to in writing,
signed by the Executive and by a duly authorized officer of the Company. No
waiver by any party hereto of any breach by another party hereto of any
condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of a similar or dissimilar condition or provision at
the same time, any prior time or any subsequent time.
19. Notices. Any notice to be given hereunder shall be in writing and shall
-------
be deemed given when delivered personally, sent by courier or telecopy or
registered or certified mail, postage prepaid, return receipt requested,
addressed to the party concerned at the address indicated below or to such other
address as such party may subsequently give notice of hereunder in writing:
To Executive at: Brian Jellison
8044 Heyward Drive,
Indianapolis, IN 46250
With a copy to: Peter Weidman, Esq.
600 West Germantown Pike, Suite 400
Plymouth Meeting, PA 19462
To the Company at: Roper Industries, Inc.
160 Ben Burton Road
Bogart, Georgia 30622
Attn: Chairman of the Board of Directors
13
<PAGE>
With a copy to: Thomas R. McNeill, Esq.
Powell, Goldstein, Frazer & Murphy
16/th/ Floor
191 Peachtree Street
Atlanta, Georgia 30303
Any notice delivered personally or by courier under this Section 19 shall
be deemed given on the date delivered and any notice sent by telecopy or
registered or certified mail, postage prepaid, return receipt requested, shall
be deemed given on the date telecopied or mailed.
20. Severability. If any provision of this Agreement or the application of
------------
any such provision to any party or circumstances shall be determined by any
court of competent jurisdiction to be invalid and unenforceable to any extent,
the remainder of this Agreement or the application of such provision to such
person or circumstances other than those to which it is so determined to be
invalid and unenforceable, shall not be affected thereby, and each provision
hereof shall be validated and shall be enforced to the fullest extent permitted
by law.
21. Survivorship. The respective rights and obligations of the parties
------------
hereunder shall survive any termination of this Agreement to the extent
necessary to the intended preservation of such rights and obligations.
22. Governing Law: Attorney's Fees.
------------------------------
(a) This Agreement will be governed by and construed in accordance
with the laws of the State of Georgia, without regard to its conflicts of
laws principles.
(b) The prevailing party in any dispute arising out of this Agreement
shall be entitled to be paid its reasonable attorney's fees and litigation
expenses incurred in connection with such dispute from the other party to
such dispute.
23. Dispute Resolution. The Executive and the Company shall not initiate
------------------
legal proceedings relating in any way to this Agreement or to the Executive's
employment or termination from employment with the Company until thirty (30)
days after the party against whom the claim is made ("respondent") receives
written notice from the claiming party of the specific nature of any purported
claims and the amount of any purported damages attributable to each such claim.
The Executive and the Company further agree that if respondent submits the
claiming party's claim to the CPR Institute for Dispute Resolution,
JAMS/Endispute, or other local dispute resolution service for nonbinding
mediation prior to the expiration of such thirty (30) day period, the claiming
party may not institute legal proceedings against respondent until the earlier
of: (a) the completion of good-faith mediation efforts or (b) 90 days after the
date on which the respondent received written notice of the claimant's claim(s);
provided, however, that nothing in this Section 23 shall prohibit either party
from pursuing injunctive or other equitable relief against the other party in
circumstances in which such relief is appropriate, prior to, contemporaneous
with, or subsequent to invoking or participating in these dispute resolution
14
<PAGE>
processes. In all events, the Company shall pay the cost of the mediator,
regardless of whether the dispute was or was not resolved or settled through
mediation.
24. Headings. All descriptive headings of sections and paragraphs in this
--------
Agreement are intended solely for convenience, and no provision of this
Agreement is to be construed by reference to the heading of any section or
paragraph.
25. Withholdings. All payments to the Executive under this Agreement shall
------------
be reduced by all applicable withholding required by federal, state or local tax
laws.
26. Counterparts. This Agreement may be executed in counterparts, each of
------------
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
ROPER INDUSTRIES, INC.
BY:_________________________________________
NAME:_______________________________________
TITLE:______________________________________
EXECUTIVE
____________________________________________
Brian Jellison
15
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.08
<SEQUENCE>5
<FILENAME>dex1008.txt
<DESCRIPTION>HADJ A. AMARI OFFER LETTER
<TEXT>
<PAGE>
Exhibit: 10.08
September 11, 2000
Mr. Hadj Amari
4 Ladue Circle
Pittsford, NY 14534
Dear Hadj:
I am very pleased to offer you the position of Group Vice President, Industrial
Controls at Roper Industries. Roper's entire management team was impressed with
your experience and, more importantly, with your personality and management
style. I know you will fit in well at our company and I am sure you will enjoy
working with us.
Salary and Benefits
- -------------------
The following statements summarize the proposed financial terms of your
employment:
1. Your commencing salary will be $240,000 to be reviewed January 1, 2002
and thereafter on an annual basis.
2. You will be paid a bonus of $103,000 in January 2001.
3. You will be included in the Roper Industries Discretionary Annual Bonus
Program. Bonuses in this program are paid in the first week of January
for results achieved in the preceding fiscal year. If goals are fully
met, you will be entitled to a bonus that represents 100% of your annual
salary.
4. You will be eligible to participate in Roper's Stock Option Program. On
commencing employment, you will be granted 20,000 Roper Stock Options at
the prevailing stock price and normal vesting period. Additional options
could be made available on an annual basis as Roper continues to grow and
your success contributes to Roper's performance.
5. A company car will be provided similar to a Buick Park Avenue with all
expenses for business and private use covered, subject to IRS rules.
6. You will be included in the corporation's benefits package, a summary of
which is provided as a supplement to this letter.
7. Relocation reimbursement will be provided under the ABB guidelines with
which you are already familiar with the exception that we are unable to
provide the service to either purchase or market your existing home for
sale.
8. You will be eligible to participate in Roper's Deferred Compensation
Program, if so desired. This program will be immediately available to you
and has no limits to amounts of compensation deferred.
9. You will also be eligible, after a waiting period of six months to
participate in Roper's Employee Stock Purchase Plan. This discounted
program limits participation to 10% of salary and is capped at stock
purchase of $25,000 per annum.
10. You will be eligible for initiation fees, monthly dues and business
expenses to the Athens Country Club, assuming membership is available.
<PAGE>
Hadj, a couple of points of clarification:
(a) You and your family will be immediately eligible for the
company's health insurance package.
(b) There is a six-month waiting period before eligibility into the
company's 401(k) plan.
Severance Agreement
- -------------------
We mutually agreed that in the event of a Change in Control of the company, a
layoff from your position as Group Vice President, or termination for reasons
other than for cause, you will be provided a severance package for a period of
six months.
Starting Date
- -------------
Hadj, I hope that the employment package extended in this letter is satisfactory
and you will commence employment on November 1, 2000. If you have any questions
regarding your employment package, please do not hesitate to call me.
As you are aware, this is a terribly important position we are endeavoring to
fill and time is of the essence. I would therefore like to finalize our
discussions by September 18, 2000. I, therefore, hope to receive a favorable
response in the next few days.
Kind Regards,
Derrick N. Key
President, CEO and
Chairman of the Board
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.09
<SEQUENCE>6
<FILENAME>dex1009.txt
<DESCRIPTION>C. THOMAS O'GRADY OFFER LETTER
<TEXT>
<PAGE>
Exhibit 10.09
February 19, 2001
Mr. C. Tom O'Grady
30 Southgate Drive
The Woodlands, TX 77380
Dear Tom:
I am very pleased to offer you the position of Vice President, Mergers and
Acquisitions, at Roper Industries, Inc. Roper's entire management team was
impressed with your experience and, more importantly, with your personality and
management style. I know you will fit in well at our company and I am sure you
will enjoy working with us.
This offer is, of course, subject to favorable responses to prior work
references and academic accreditation.
Salary and Benefits
- -------------------
The following statements summarize the proposed financial terms of your
employment:
1. Your commencing annual salary will be $210,000 to be reviewed January 1,
2002 and thereafter on an annual basis without consideration being given
to the sign-on bonus and guaranteed minimum bonus as stipulated below.
2. Sign-on bonus of $100,000: $50,000 to be paid on the start date; $25,000
on the first anniversary of the start date and $25,000 on the second
anniversary of the start date. If you resign, there will be a claw back
of the amount paid within the past 12-month period.
3. You will be included in the Roper Industries Discretionary Annual Bonus
Program. Bonuses in this program are paid in the first week of January
for results achieved in the preceding fiscal year. If goals are fully
met, you will be entitled to a bonus that represents 100% of your annual
salary. For the first three years, you will be guaranteed a minimum
bonus of $100,000 per year. If, however, the actual bonus amount earned
in a particular year is greater than the guaranteed amount, the greater
amount will be paid.
4. All unpaid sign-on bonus and unpaid guaranteed bonus amounts will vest
immediately, and are payable, in the event of your termination or in the
event of a Roper Industries change of control.
5. You will receive one year's salary and bonus as a severance payment if
Roper terminates you other than for gross misconduct. Gross misconduct
will be defined as a civil or criminal act or ethical misconduct
committed against Roper Industries, Inc., it's employees, customers or
suppliers.
6. You will be eligible to participate in Roper's Stock Option Program. On
commencing employment, you will be granted 20,000 Roper Stock Options at
the prevailing stock price and normal vesting period. Additional options
could be made available on an annual basis as Roper continues to grow
and your success contributes to Roper's performance.
<PAGE>
7. A company car will be provided similar to a Buick Park Avenue with all
expenses for business and private use covered, subject to IRS rules.
8. You will be included in the corporation's benefits package, a summary of
which is provided as a supplement to this letter. You will be eligible
to participate in all benefits as of your start date with the exception
of the 401(k) plan and the Employee Stock Purchase Plan as their
eligibility rules do not allow for immediate participation and mandate
the six-month waiting periods.
9. You will be eligible to participate from your start date in the Roper
Industries, Inc. NonQualified Plan which allows unlimited compensation
deferral on a pre-tax basis. After you become eligible for the 401(k)
plan and begin participating in it, the NonQual Plan also becomes a
vehicle for a continuation of the company match to the max allowed by
the plan.
10. You will also be eligible for inclusion in our Executive Reimbursement
Insurance Plan in which any out-of-pocket health, dental or vision
expenses not covered by our normal plans are reimbursed.
11. Relocation reimbursement will be provided under our normal policy which
includes all reasonable moving expenses through the mover with whom
Roper has contracted to handle moves and relocations and including such
out-of-pocket costs as utility deposits, closing costs, etc. We will
also cover the costs of temporary living expenses for up to six months.
These reimbursable expenses will also include the following:
a) selling costs, selling commission and brokerage fees
associated with the buying of new residence and selling of
current residence;
b) all escrow fees, miscellaneous transaction costs and other
fees associated with the buying of new residence and
selling of old residence;
c) house hunting trips as necessary;
d) movement and storage, if necessary, of household goods and
automobiles (5); and
e) income tax gross up for total value of relocation.
12. You will be eligible for initiation fees, monthly dues and business
expenses to the Athens Country Club, assuming membership is available.
13. You will be eligible for four weeks of vacation per year.
Starting Date
- -------------
Tom, I hope that the employment package extended in this letter is satisfactory
and you will commence employment on April 1, 2001. If you have any questions
regarding your employment package, please do not hesitate to call me.
As you are aware this is an important position we are endeavoring to fill and
hope you can accept this offer and return the signed page no later than February
23, 2001.
Kind Regards,
Derrick N. Key Accepted
President, CEO and
Chairman of the Board
______________________
C.Tom O' Grady
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-21
<SEQUENCE>7
<FILENAME>dex211.txt
<DESCRIPTION>LIST OF SUBSIDIARIES
<TEXT>
<PAGE>
EXHIBIT 21
JURISDICTION OF
NAME OF SUBSIDIARY INCORPORATION/ORGANIZATION
- ------------------ --------------------------
Abel Equipos, S.A. Spain
Abel Pumps, L.P. Delaware
Abel Pumpen GmbH Germany
Abel GmbH & Co KG Germany
Acton Research Corporation Delaware
Amot Controls Corporation Delaware
Amot Controls Ltd. United Kingdom
Amot Controls, S.A. Switzerland
Amot/Metrix Investment Company Delaware
Amot Sales Corporation Delaware
Amot Controls GmbH Germany
Antek Instruments, L.P. Delaware
Antek GmbH Germany
Compressor Controls B.V. Netherlands
Compressor Controls Corporation S.r.l. Italy
Compressor Controls Corporation (an Iowa Corp) Iowa
Compressor Controls Corporation (a Delaware
Corporation) d/b/a in Iowa as Compressor
Controls - CIS/EE) Delaware
Cornell Pump Company Delaware
Cornell Pump Manufacturing Corporation Delaware
Cybor Corporation California
Cybor International Corp. Barbados
Dynamco L.P. Delaware
Fluid Metering, Inc. Delaware
FTI Flow Technology, Inc. Delaware
Gatan International, Inc. Pennsylvania
Gatan, Inc. Pennsylvania
Gatan Service Corporation Pennsylvania
Gatan Limited United Kingdom
Gatan GmbH Germany
Hansen Technologies Corporation Illinois
Hansen Technologies Ltd. United Kingdom
Integrated Designs L.P. Delaware
ISL Holdings, S.A. France
ISL Investissement SARL France
ISL Scientifique de Laboratoire - ISL, S.A. France
K/S Roper Finance Denmark
Logitech Limited United Kingdom
Marumoto Struers KK Japan
Media Cybernetics Inc. Delaware
Metrix Instrument Co., L.P. Delaware
Molecular Imaging Corporation Arizona
<PAGE>
Nippon Roper K.K. Japan
PAC Denmark ApS Denmark
PAC GmbH Germany
Petrotech, Inc. Delaware
Petrotech International, Inc. Louisiana
Petroleum Analyzer Company LP Delaware
Princeton Instruments Limited United Kingdom
Roper Scientific SARL France
Roper Capital Deutschland GmbH Germany
Roper Fundings KG Germany
Roper Industries Deutschland GmbH Germany
Roper Holdings, Inc. Delaware
Roper Holdings, Limited United Kingdom
Roper Industrial Products Investment Company Iowa
Roper Industries B.V. Netherlands
Roper Industries Denmark ApS Denmark
Roper Industries (Europe) Limited United Kingdom
Roper Industries Limited United Kingdom
Roper Industries Southeast Asia Company Delaware
Roper International, Inc. Delaware
Roper International Products, LTD Virgin Islands
Roper Pump Company Delaware
Roper Scientific B.V. Netherlands
Redlake MASD, Inc. Delaware
Roper Scientific, Inc. Delaware
Roper Scientific GmbH Germany
Struers A/S Denmark
Struers GmbH Germany
Struers Holdings A/S Denmark
Struers Inc. Delaware
Struers Limited United Kingdom
Struers S.A.S. France
Turbocontroles de Venezuela Venezuela
Uson L.P. Delaware
Walter Herzog GmbH Germany
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23.1
<SEQUENCE>8
<FILENAME>dex231.txt
<DESCRIPTION>CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
<TEXT>
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors
Roper Industries, Inc.:
As independent public accountants, we hereby consent to the incorporation of our
reports included (or incorporated by reference) in this Form 10-K, into the
Company's previously filed Registration Statement File No. 33-71094, 33-77770,
33-78026, 333-36897, 333-73139, 333-35672, 333-35666 and 333-35648.
Arthur Andersen LLP
Atlanta, Georgia
January 18, 2002
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
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