UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 6, 2007
ESCO TECHNOLOGIES INC.
(Exact name of registrant as specified in its charter)
Missouri 1-10596 43-1554045
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
9900A Clayton Road
St. Louis, MO 63124-1186
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (314) 213-7200
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17
CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Item 1.01 Entry into a Material Definitive Agreement.
As of November 6, 2007, the Registrant and ESCO Technologies Holding, Inc.,
a wholly-owned subsidiary of the Registrant ("ESCO Holding"), entered into a
Stock Purchase and Sale Agreement (the "Agreement") with Doble Engineering
Company ("Doble") and each of Doble's stockholders (the "Selling Stockholders")
pursuant to which ESCO Holding agreed to purchase Doble (the "Transaction"). In
connection with the Transaction, Doble entered into a new employment agreement
with Robert A. Smith, Doble's chief executive officer. Doble offers diagnostic
instruments, services, and a library of statistically significant apparatus test
results for the electric utility industry and industrial power users worldwide
(the "Business").
The Transaction is structured as a sale of all issued and outstanding
capital stock of Doble. The total consideration to be paid by ESCO Holding to
Selling Stockholders is $319,000,000 (the "Cash Amount"), net of Doble
indebtedness and Transaction expenses, and subject to adjustment for certain tax
benefits realized by the Registrant or Doble post closing and for changes in net
working capital (the "Cash Consideration"). ESCO Holding plans to finance the
Transaction with existing cash and borrowings under a new credit facility it
intends to enter into with a group led by National City Bank, N.A. The
Registrant has agreed to guarantee the obligations of ESCO Holding under the
Agreement.
A portion of the Cash Consideration will be placed into escrow to pay (i)
amounts due pursuant to the indemnification obligations of the Selling
Stockholders up to the Maximum (as defined below) and (ii) certain change of
control payments payable in connection with the Transaction. Additionally,
$500,000 of the Cash Consideration will be used as a fund for the payment of the
fees and expenses incurred by the Selling Stockholders' representative.
Representations and Warranties
The Agreement provides for typical representations and warranties among the
parties that must be accurate on both the execution date and the closing date.
The representations and warranties generally survive for fourteen months after
closing, subject to certain exceptions for representations and warranties with
longer survival periods, including those relating to (i) tax matters, employee
benefits, foreign operations and export control, intellectual property and
environmental matters, which survive for twenty-four months after closing, and
(ii) Doble's authorization, capitalization and brokers' fees, and the Selling
Stockholders' ownership of Doble shares and authority, which survive until the
expiration of the statute of limitations applicable to claims thereunder.
Pre-Closing Covenants
Prior to the closing, Doble, the Selling Stockholders and ESCO Holding are
required to comply with certain pre-closing covenants, which include:
o for Doble to operate the Business in the ordinary course;
o for Doble to provide ESCO Holding access to the Business and its employees;
o for the parties to make any filings necessary or advisable under any
antitrust or competition laws;
o for the parties to maintain the confidentiality of certain information;
o for the parties to give all notices and to obtain all permits and consents
as may be required or appropriate in connection with the Transaction;
o for Doble to terminate discussions with all third parties regarding the
potential sale of the Business and refrain from soliciting or facilitating
any competing proposal to acquire the Business;
o for Doble to continue to indemnify Doble's officers and directors for six
years from the closing to the extent provided in Doble's current bylaws and
to obtain certain levels of insurance coverage for Doble's officers and
directors; and
o for each Selling Stockholder to release each other Stockholder, Doble and
certain other parties for any occurrence prior to and including the date of
the Agreement.
Closing Conditions
The obligation of each of ESCO Holding and the Selling Stockholders to
consummate the Transaction is subject to a number of customary closing
conditions. These include that the representations and warranties are true and
correct in all material respects, that the covenants have been performed, that
no litigation threatens the Transaction and that the waiting periods under
applicable antitrust laws have expired. In addition, ESCO Holding's obligation
to consummate the Transaction is subject to there being no facts or
circumstances that have had, or would reasonably be expected to have, a material
adverse effect on the financial condition or business of Doble, and to the
receipt of certain title insurance coverage for real property owned by Doble.
Indemnification
The Selling Stockholders have agreed to severally, in accordance with their
ownership percentage of Doble, indemnify ESCO Holding, Doble and their
respective officers and directors (together, "Indemnified Parties") for damages
arising out of certain claims, including breaches of representations and
warranties or covenants. The Selling Stockholders' obligation to indemnify the
Indemnified Parties for breaches of representations and warranties shall not
arise until all losses claimed by the Indemnified Parties exceed $1,500,000 (the
"Deductible Amount"), and then will only apply to the amount in excess of the
Deductible Amount up to the maximum amount of $22,500,000 held in escrow (the
"Maximum"). Fourteen months after the closing, $12,500,000 of the Maximum shall
be paid to the Selling Stockholders out of the escrow, subject to reduction for
amounts previously paid to Indemnified Parties, outstanding claims and other
deductions. The remainder of the Maximum will be paid to the Selling
Stockholders out of the escrow twenty-four months after the closing, subject to
reduction for outstanding claims and other deductions.
Losses for certain claims of the Indemnified Parties are not subject to the
Deductible Amount or the Maximum, including losses incurred by the Indemnified
Parties relating to breaches of the covenants or fraud by Doble or the Selling
Stockholders.
Termination
The Agreement is subject to termination:
o upon the written consent of the parties;
o by any party if (i) a government authority enacts a statute, rule or
regulation or a court issues a judgment or order precluding the
consummation of the Transaction, (ii) the Transaction has not been
consummated by January 6, 2007, or (iii) the uncured breach by the other
party of a representation, warranty or covenant would result in any of the
conditions to closing not being satisfied; or
o by the Selling Stockholders if ESCO Holding lacks sufficient funds to
consummate the Transaction. In certain circumstances, one of the parties
may be required to pay a fee of $10.0 million upon termination.
The foregoing description of the Agreement does not purport to be complete
and is qualified in its entirety by reference to the complete text of the
Agreement, which is attached hereto as Exhibit 2.1 and incorporated herein by
reference.
Cautionary Statements
The Agreement has been included to provide investors with information regarding
its terms. Except for its status as the contractual document that establishes
and governs the legal relations among the parties thereto with respect to the
Transaction, the Agreement is not intended to be a source of factual, business
or operational information about the parties.
The representations, warranties and covenants contained in the Agreement were
made only for purposes of the Agreement and as of specific dates, were solely
for the benefit of the parties to the Agreement, and may be subject to
limitations agreed by the contracting parties, including being qualified by
disclosures exchanged among the parties in connection with the execution of the
Agreement. The representations and warranties may have been made for the
purposes of allocating contractual risk among the parties to the Agreement
instead of establishing these matters as facts, and may be subject to standards
of materiality applicable to the contracting parties that differ from those
applicable to investors. Investors are not third-party beneficiaries under the
Agreement, and should not rely on the representations, warranties and covenants
or any descriptions thereof as characterizations of the actual state of facts or
condition of the Registrant or any of its subsidiaries.
Item 9.01 Financial Statements and Exhibits
d) Exhibits.
Exhibit
Number Description of Exhibit
2.1* Stock Purchase and Sale Agreement, dated as of November 6, 2007, by and
among ESCO Technologies Holding, Inc., ESCO Technologies Inc., Doble
Engineering Company and the Stockholders of Doble Engineering Company.
* The Registrant agrees to furnish supplementally a copy of any omitted schedule
to the Commission upon request.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
ESCO Technologies Inc.
Date: November 8, 2007
By: /s/ G.E. Muenster
G.E. Muenster
Senior Vice President and
Chief Financial Officer
EXHIBIT INDEX
Exhibit
Number Description of Exhibit
2.1 Stock Purchase and Sale Agreement, dated as of November 6, 2007, by and
among ESCO Technologies Holding, Inc., ESCO Technologies Inc., Doble
Engineering Company and the Stockholders of Doble Engineering Company.