UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended November 28, 1993. [ ] 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 1-8770 M E A S U R E X C O R P O R A T I O N (Exact name of Registrant as specified in its charter) Delaware 94-1658697 (State or other jurisdiction of (I.R.S. Employer incorporation or Organization) Identification No.) One Results Way, Cupertino, California 95014 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (408) 255-1500 Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered ------------------- ----------------------------------------- Common Stock, $0.01 par value New York Stock Exchange Pacific Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K 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. [X] Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Aggregate market value of voting stocks held by non-affiliates as of January 28, 1994 $339,740,539 Number of shares of common stock outstanding as of January 28, 1994 17,881,081 --------------------------------- DOCUMENTS INCORPORATED BY REFERENCE Portions of the Annual Report to Shareholders for the fiscal year ended November 28, 1993, are incorporated by reference into Parts I, II and IV. Portions of the Proxy Statement for registrant's 1994 Annual Meeting of Shareholders to be held April 19, 1994, are incorporated into Part III.

MEASUREX CORPORATION INDEX TO ANNUAL REPORT ON FORM 10-K FOR YEAR ENDED NOVEMBER 28, 1993 <TABLE> <CAPTION> PART I Page <S> <C> <C> Item 1 Business 3 Item 2 Properties 9 Item 3 Legal Proceedings 9 Item 4 Submission of Matters to a Vote of Security Holders 9 Executive Officers of the Registrant 10-11 PART II Item 5 Market for the Registrant's Common Equity and Related Shareholder Matters 12 Item 6 Selected Financial Data 12 Item 7 Management's Discussion and Analysis of Financial Condition and Results of Operations 12 Item 8 Financial Statements and Supplementary Data 12 Item 9 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 12 PART III Item 10 Directors and Executive Officers of the Registrant 13 Item 11 Executive Compensation 13 Item 12 Security Ownership of Certain Beneficial Owners and Management 13 Item 13 Certain Relationships and Related Transactions 13 PART IV Item 14 Exhibits, Financial Statement Schedules and Reports on Form 8-K 14 Signatures 15 </TABLE> 2

PART I ITEM 1. BUSINESS General Measurex Corporation provides its customers computer-integrated manufacturing through design, production, marketing and servicing of sensor- based information and control systems. The Company's broad, integrated product line ensures economic results for customers by increasing productivity, reducing raw material usage and energy consumption, and improving product quality and uniformity. Measurex's primary marketplace is within the manufacturing industries that produce products by continuous or batch processes. The principal industries served by the Company are: pulp and paper, plastics, metals, rubber and chemicals. Measurex supports its installed systems with a worldwide field service organization of approximately 1,100 employees. Service technicians work directly with customers, in their plants and mills, providing an important and stable source of revenue. The service teams provide quality installations, training and continuing service support to ensure results for the Company's customers. Measurex was originally incorporated in California in 1968. The Company's state of incorporation was changed from California to Delaware in 1984. Measurex's principal executive offices are located at One Results Way, Cupertino, California, 95014-5991; its telephone number is (408) 255-1500. Unless the context otherwise indicates, the terms "Measurex" and "the Company" include Measurex Corporation, the predecessor California corporation, and its subsidiaries. Current Year's Development On April 7, 1993, the Company acquired Roibox Oy for approximately $1.7 million, net of cash acquired. Located in Kuopio, Finland, Roibox is a worldwide supplier of web-inspection products for the paper industry. The acquisition was accounted for using the purchase method. Product Information The following table shows the annual shipment revenues (in millions of dollars) and the percentages of annual shipment revenues during the last three fiscal years, attributable to the delivery of systems used in the pulp and paper and industrial systems industries. "Industrial Systems" includes systems for plastics, metals, rubber, and other products. <TABLE> <CAPTION> Fiscal Year ----------------------------------------- 1993 1992 1991 ------------- ------------ ------------ <S> <C> <C> <C> <C> <C> <C> Systems used in: Pulp and Paper $128.6 84% $116.7 79% $117.9 80% Industrial Systems 24.2 16% 31.7 21% 30.3 20% ------ ---- ------ --- ------ --- $152.8 100% $148.4 100% $148.2 100% ====== ==== ====== === ====== === </TABLE> For information regarding sales by geographic location see the section "Business Segments" under Notes to Consolidated Financial Statements in the Company's 1993 Annual Report to Shareholders. 3

MXOpen In March 1992 the MXOpen(TM) product line was introduced at the Technical Association of the Pulp and Paper Institute (TAPPI) trade show in Atlanta, Georgia. MXOpen is an integrated information and control system that uses industry-standard computer and communication protocols. The product line was developed over a three-year period and represents a substantial investment in research and development, manufacturing and marketing expenses. In January 1993, at the Canadian Pulp and Paper Association (CPPA) trade show in Montreal, Quebec, Canada, the Company launched the MXOpen PrecisionPLUS(TM) intelligent measurement system. PrecisionPLUS features new distributed sensor intelligence, advanced sensor technology and faster scanning capabilities. The InfrandPlus moisture sensor uses principles of optical physics to ensure accurate moisture measurement consistently on every grade. The MXOpen Integrated Control System provides end-users with a combination of integration and open architecture. MXOpen features: [] Modular systems with capability for total machine optimization; [] Open systems architecture based on international industry standards for flexibility and expandability; and [] Integrated information and control with real-time millwide visibility for management decision-making. The MXOpen millwide product line includes: [] Intelligent Sensors and Scanners [] Distributed Control System [] Profile Actuation [] Web Inspection [] Millwide Information [] Integrated Machine Monitoring [] Complete Integrated Control System The MXOpen Measurement Control System (MCS) was introduced to industrial system customers in October 1992. For plastics, non-wovens and makers of coated materials such as flooring and building products, the MCS is an affordable solution for process improvement - all in a competitive, technologically advanced control system. Measurex 2002 ET Systems Measurex 2002 ET(TM) supervisory systems feature consolidated electronics, operator stations designed for ease of use with a broad range of graphic displays, fiber optic communications and proprietary software. A number of proprietary sensors are offered with these systems to address specific needs of the individual industries. This system provides specific solutions for the aluminum foil and sheet producers and tire manufacturers. The CMU (Computer Management Unit) 2002 ET Configuration is a pre-packaged set of features that offers a low cost option for small paper machines. Proprietary Sensors Measurex provides sensor technology for the process industries, currently offering more than 70 sensors. Its sensors include those that monitor the basis weight, moisture, caliper, ash content, coating, smoothness, gloss, formation, opacity, strength and color of processed paper, as well as the physical properties of other processed products, such as the wire spacing faults on steel belted tires. These sensors use a variety of proprietary applications involving technologies which include microwave, infrared, visible light, ultraviolet, beta, X-ray and gamma radiation. 4

Cross-Direction Controls Measurex is a leader in the complex technology of cross-direction (CD) profile control. The center of this business is in the Measurex Devron Division, based in Vancouver, British Columbia, Canada. CD control, as used for example in the pulp and paper industry, allows precise control of paper characteristics in small segments across the entire width of the paper sheet. Cross-direction controls are complementary to the average profile taken along the paper's direction of travel, referred to as machine direction. The combined control strategy significantly enhances a customer's ability to achieve optimum quality levels, thus reducing raw material and energy usage, lowering scrappage rates and enhancing the customer's competitive position. Measurex has a variety of CD control products including AutoSlice(TM), ThermaTrol(TM), AquaTrol(R), Devronizer(TM), InfraTrol(TM), CalTrol(TM), Calcoil(TM), Calendizer(TM), and GlossTrol(TM) actuators. CD controls can be ordered with new systems or can be integrated into existing installed systems. The CDOpen(TM) System allows Measurex's cross- direction control products to be integrated with non-Measurex measurement systems. Millwide Information Measurex's Management Systems Division (MSD), provides plant level computing expertise for production processes. The Division's OptiVISION(TM) Full Spectrum Production and Quality Management System (PQMS) gives Measurex the ability to offer a system that manages processes from long-term planning and order entry through scheduling, product tracking, shipping and invoicing the product. The OptiVISION system provides users with a modular design that reduces development and installation time. Integrated Machine Monitoring The Integrated Monitoring System (IMS), marketed as a part of the MXOpen product line, consists of digital systems for on-line process and machine monitoring and analysis of the papermaking process and production machinery. IMS products provide process and machine-condition diagnosis and trending, giving papermakers tools to address maintenance problems before failure. Web Inspection Systems The Roibox-developed web inspection system analyzes the moving paper web by measuring the intensity variations of light transmitted through the sheet or reflected from the sheet. The system uses Charge Coupled Device (CCD) camera technology to continuously detect - on line - visual defects in paper or other web-produced material. Like other MXOpen Systems, this web-inspection product helps customers to produce superior quality products at lower cost, adding significantly to the basic value of an Integrated Control System. Strategic Alliances Beloit Corporation In 1990, Measurex and Beloit Corporation, agreed to expand and strengthen their 1987 strategic alliance. This cooperative agreement includes provisions for integrated marketing and sales of all Measurex paper industry products with Beloit's full line of pulp and paper machinery. Simultaneously executed was a seven-year "standstill" agreement between Measurex and Harnischfeger Industries, Inc., Beloit's parent company. Harnischfeger purchased 20 percent of Measurex's stock on the open market, the maximum allowed under the agreement. 5

Mitsubishi Heavy Industries, Ltd. In 1988, Measurex and Mitsubishi Heavy Industries, Ltd. (MHI) entered into an agreement whereby the two companies offered certain products and services to the pulp and papermaking industry of Asia. In 1991, MHI became a signatory to the Measurex/Beloit strategic alliance, and a full participant in that agreement. All Measurex products for the pulp and paper industry are now made available to MHI on the same basis as they are made to Beloit. Siemens AG In June 1993, Siemens AG, pulp and paper division, selected Measurex as its Original Equipment Manufacturer (OEM) for certain MXOpen products. Siemens will integrate these products with other Siemens products for their total turnkey pulp and paper automation projects. Sales and Service Measurex offers its systems, related products and services principally through its own worldwide marketing and service organization. This organization offers customers a broad range of on-site and on-call services including 24- hour-a-day, 365-days-a-year service contracts. To support the Company's product line, Measurex has 47 regional sales offices and service centers which are located in 30 countries throughout the world. The Company has sold over 4,000 systems in 45 countries, primarily located in North America, Latin America, Europe and the Pacific Rim. The sales and service organization consists of regional and area managers who are responsible for selling Measurex's products and supervising service at customer sites. Under their supervision are software control and application engineers who assist customers in making the most efficient use of their systems, technical service engineers and supervisory personnel who are responsible for the installation, start-up and routine preventive maintenance of the systems, as well as any emergency services that may be required. Customers may acquire Measurex systems either by direct purchase or through Measurex lease plans. For additional information, see the Notes to Consolidated Financial Statements in the Company's 1993 Annual Report to Shareholders. Research and Product Development Measurex's systems are the result of the integration of a number of complex technologies including electronics, physics, mechanical design and software. Central to the Company's strategic goals is a commitment to research and development. The Company strongly believes the continued investment in new product development is key to its long-term success. Product development costs were $22.9 million in 1993, 9% of total reveneues and 15% of system revenue. Product development costs were $25.2 million in 1992 and $25.3 million in 1991. Of this total, Measurex capitalized $1.7 million, $4.6 million, and $2.3 million of software development costs in fiscal 1993, 1992 and 1991, respectively. Measurex amortized $3.4 million, $1.7 million and $2.8 million of capitalized software to systems costs in 1993, 1992 and 1991, respectively. The decrease in capitalized software and increase in amortization in 1993 were attributable to the general release of MXOpen software in late 1992. 6

Backlog System backlog at November 28, 1993, was $91 million, 4% lower than the backlog of $95 million at the end of 1992. Approximately 80% of the $91 million year-end 1993 backlog is scheduled to be shipped during fiscal 1994. Patents Measurex follows a policy of filing appropriate patent applications on inventions it considers significant. As of November 28, 1993, the Company had 121 United States patents and 270 foreign patents in effect. Although important to the business, Measurex believes that the invalidity or expiration of any single such patent would not have a material adverse effect on its operations. Supply of Materials and Purchased Components Measurex produces most of the software, sensors, scanners, digital logic circuits, peripheral devices and various terminals used in its systems. Many components, such as integrated circuits, video monitors, printers, disks, and microcomputers are purchased from other manufacturers and integrated into the systems. Measurex currently purchases certain components from single sources of supply. In each instance, components performing similar functions are available from alternative sources, except for radioactive source material which is available from only two suppliers. Use of these alternative components might require a change in the design of certain portions of the system which could result in production delays, additional expenses and contract cancellations while changing vendors. The Company has contracts with certain vendors which entitle, but do not require, Measurex to purchase specific quantities of components. Manufacturing Systems are manufactured at Measurex's facilities in Cupertino, California; Waterford, Republic of Ireland; and Vancouver, British Columbia, Canada. Measurex Management Systems Division products are configured and tested at facilities in Cincinnati, Ohio. The facility in Ireland is primarily used to produce systems for customers in Europe. Web-inspection products are manufactured by Measurex's Roibox subsidiary in Kuopio, Finland. Certain subassemblies are manufactured in Cupertino and shipped to Ireland for incorporation in the final systems. The systems are generally installed at the customer's site under the supervision of Measurex personnel. Competition The market for process measurement and control is highly competitive and is subject to technological change in both hardware and software development. The principal competitive factors in this market are product quality and reliability, product features, customer support, corporate reputation and relative price/performance. Measurex's competitive strategy is to provide customers with greater economic results than available from competitors by focusing on the quality and performance characteristics of systems. However, any inability of the Company to match or exceed the price/performance or other features of the systems offered by its competitors could adversely affect future operating results. The Company's principal competition is from distributed control systems suppliers and packaged system suppliers, as well as factory automation system suppliers. In the supervisory measurement and process control business area, competition includes ABB Asea Brown Boveri Process Automation Inc.; Lippke, a wholly owned subsidiary of Honeywell; the Valmet Automation Group, a division of Valmet Oy; and Yokogawa-YEW in Japan. The distributed control system business area competition includes Honeywell, Fisher, Foxboro (a subsidiary of Siebe, Inc.), Siemens, and many other companies. In the web-inspection products area, the Company faces 7

competition from ABB and other smaller companies. Competition for production management and process analysis and quality management is very fragmented. Employees As of November 28, 1993, Measurex had 2,250 full-time employees, of whom 1,120 were located outside of the United States. Measurex has various employee benefit plans, including a stock purchase plan for all United States and Canadian employees, stock option plans for key employees, a Savings and Deferred Profit Sharing Plan, management incentive programs, pension plans in certain foreign countries, and health, dental, life and disability plans. Nuclear Regulatory Licenses In the United States, Measurex and its customers are subject to licensing and regulation by the United States Nuclear Regulatory Commission (NRC) under the Atomic Energy Act of 1954 (the Act) with respect of those parts of its products and systems which utilize nuclear radiation. The NRC has transferred a portion of its licensing and regulatory functions to several state governments, including California, pursuant to Section 274 of the Act. Measurex holds all such licenses necessary for its current operations. Licenses are renewed periodically as required. Measurex also holds all necessary foreign licenses regarding nuclear radiation for the applicable countries in which it operates. United States customers possessing Measurex systems containing radioactive sources hold the radioactive material under a General or Specific License issued by their state or federal regulatory authority. Similarly, foreign customers hold licenses issued by their local authorities for radioactive material in Measurex systems. Licenses to Export from the United States Measurex is subject to licensing and regulation by the United States Department of Commerce under the Export Administration Act of 1969, as amended and extended, with respect to Measurex systems or parts thereof, exported from the United States or by any of its subsidiaries. Industry Segments Measurex operates within the computer-integrated control and information systems industry. All necessary disclosures regarding revenues, earnings from operations and identifiable assets are included in "Business Segments" under Notes to Consolidated Financial Statements in the Company's 1993 Annual Report to Shareholders. Geographic Segments For information regarding geographic operations in 1993, 1992, and 1991, see "Business Segments" included in the Notes to Consolidated Financial Statements in the Company's 1993 Annual Report to Shareholders. Measurex is subject to the normal risks of foreign currency fluctuations; however, to the extent practical, Measurex attempts to minimize the exposure from losses associated with such risks with foreign exchange contracts and other hedging activities. See Summary of Significant Accounting Policies (Foreign Currency Translation and Foreign Exchange Contracts) and Interest Income and Other in the Notes to the Consolidated Financial Statements in the Company's 1993 Annual Report to Shareholders. 8

ITEM 2. PROPERTIES Located in Cupertino, California, the Company's headquarters, offices, research and manufacturing plant total 360,000 square feet. The offices, research and manufacturing operations of Measurex Management Systems Division are located in a 43,000 square-foot facility in Cincinnati, Ohio. The U.S. Sales and Service Headquarters are located in a 32,000 square-foot facility in Atlanta, Georgia. All of these facilities are owned by the Company. Measurex leases office space for sales and service operations throughout the United States and various other countries. The Measurex Devron Division owns two facilities for its offices, research and manufacturing operations, totaling 94,000 square feet in Vancouver, British Columbia, Canada. In Waterford, Ireland, the Company owns a 60,000 square-foot manufacturing facility and leases 20,000 square feet for manufacturing and storage facilities. Roibox Oy leases an 11,000 square-foot facility in Kuopio, Finland for manufacturing, engineering, and sales support. During 1993, the Company was productively utilizing the space in its facilities, while disposing of space determined to be under-utilized. The Company believes current facilities provide adequate production capacity to meet the Company's planned business activities. ITEM 3. LEGAL PROCEEDINGS There are no material pending legal proceedings to which the Company or any of its subsidiaries are a party or of which any of their property is the subject, other than ordinary routine litigation incidental to the business. Management believes that the final outcome of such matters will not have a material adverse effect on the Company's consolidated financial position and results of operations. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The Company has not submitted any matters to a vote of security holders during the fourth quarter of the fiscal year ended November 28, 1993. 9

EXECUTIVE OFFICERS OF REGISTRANT The following table shows the executive officers of Measurex Corporation as of January 28, 1994, (ages are as of November 28, 1993), their positions with Measurex, their business experience for the last five years, and the number of years during which they have been executive officers of the Company. <TABLE> <CAPTION> Number of Years as Name Age Title and Business Experience Officer - --------------------------- --- ----------------------------------- -------- <S> <C> <C> <C> David A. Bossen 67 Chairman and Chief Executive Officer and Director since December 1993, President and Chief Executive Officer and Director 1968 to December 1993. 25 John C. Gingerich 57 President and Chief Operating Officer and Director since December 1993, Executive Vice President, Worldwide Sales and Service and President, Measurex International Corporation December 1992 to December 1993; President, Americas and Pacific March 1991 to December 1992 and Executive Vice President since 1990; Executive Vice President-U.S. Operations 1989 to 1990; Executive Vice President-Operations 1987 to 1989; Executive Vice President 1982 to 1987; Senior Vice President-U.S. Sales and Service 1981 to 1982; Vice President-Sales and Service 1980 to 1981. 13 Glenn R. Wienkoop 46 Executive Vice President, Engineering and Mar- keting since March 1991; President-Measurex Automation Systems 1985 to 1991; Vice Presiden U.S. Sales and Service 1982 to 1984, Vice President, Pulp, Paper and Industrial Systems 1980 to 1982. 13 Robert McAdams, Jr. 54 Senior Vice President, Operations and Information Services since December 1992; Senior Vice President-Finance and Administration and Chief Financial Officer 1985 to December 1992; Senior Vice President, Finance 1983 to 1985. 10 Carl A. Thomsen 48 Senior Vice President and Chief Financial Officer since December 1993, Vice President, Finance and Chief Financial Officer December 1992 to December 1993; Vice President, Finance October 1991 to December 1992; Vice President and Corporate Controller 1986 to 1991; Corporate Controller 1983 to 1986. 10 </TABLE> 10

<TABLE> <CAPTION> Number of Years as Name Age Title and Business Experience Officer - --------------------------- --- ----------------------------------- --------- <S> <C> <C> <C> Lance M. Lissner 43 Vice President, Corporate Planning and Development since March 1991; Vice President, Engineering and Marketing,Industry Groups 1989 to 1991; Vice President and General Manager, Pacific Division 1981 to 1989. 4 Robert W. Hirt 50 Treasurer since October, 1990; Assistant Corporate Controller, Taxes 1988 to 1990; Director of Taxes 1985 to 1988. 3 Charles Van Orden 39 General Counsel and Secretary since 1988. 5 </TABLE> Officers are elected annually but may be removed at any time at the discretion of the Board of Directors. There are no family relationships among any of the above officers. 11

PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS The information under the heading "Market for the Registrant's Common Stock and Related Security Holder Matters," which appears on page 31 of Registrant's 1993 Annual Report to Shareholders, is incorporated by reference in this Form 10-K Annual Report. The Company paid quarterly dividends of $0.11 per quarter in 1993 and 1992. While the Company intends to pay regular quarterly dividends, the payment of any future dividends is within the discretion of the Board of Directors of the Company. ITEM 6. SELECTED FINANCIAL DATA The information under the heading "Selected Financial Data," which appears on page 32 of Registrant's 1993 Annual Report to Shareholders, is incorporated by reference in this Form 10-K Annual Report. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The information under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations," which appears on pages 15 to 17 of Registrant's 1993 Annual Report to Shareholders, is incorporated by reference in this Form 10-K Annual Report. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The information under the heading "Financial Statements and Supplementary Data," which appears on pages 18 to 31 of Registrant's 1993 Annual Report to Shareholders, is incorporated by reference in this Form 10-K Annual Report. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Not applicable. 12

PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Information concerning the directors of the Company appears in Registrant's definitive Proxy Statement for the annual meeting of shareholders to be held April 19, 1994, under the caption "Election of Directors" and is incorporated herein by reference. Information concerning the executive officers of the Company appears at the end of Part I, pages 10 and 11, of this Form 10-K Annual Report. ITEM 11. EXECUTIVE COMPENSATION Incorporated by reference to Registrant's definitive Proxy Statement for its annual meeting of shareholders to be held April 19, 1994. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Incorporated by reference to Registrant's definitive Proxy Statement for its annual meeting of shareholders to be held April 19, 1994. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Incorporated by reference to Registrant's definitive Proxy Statement for its annual meeting of shareholders to be held April 19, 1994. 13

PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a.) 1. The consolidated financial statements of Measurex Corporation included herein are set forth in the Index to Financial Statements and Schedules submitted as a separate section of this Report. 2. The Financial Statement Schedules are contained in the accompanying Index to Financial Statements and Schedules submitted as a separate section of this Report. 3. Exhibits See Index to Exhibits, page 20 and 21 (b.) Reports on Form 8-K. No report on Form 8-K was filed in the fourth quarter of fiscal year 1993 and through the date of this filing. 14

SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. MEASUREX CORPORATION (Registrant) Date February 24, 1994 By /S/ DAVID A. BOSSEN ------------------- --------------------------- David A. Bossen Chairman Know all persons by these presents, that each person whose signature appears below constitutes and appoints David A. Bossen and Carl A. Thomsen jointly and severally, his attorneys-in-fact, each with the power of substitution, for him in any and all capacities, to sign any amendments to this Report on Form 10-K, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact, or his substitute or substitutes, may do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. <TABLE> <CAPTION> Signature Title Date --------- ----- ---- <S> <C> <C> /S/ DAVID A. BOSSEN Chairman, Chief Executive February 24, 1994 - --------------------------- Officer and Director (David A. Bossen) (Principal Executive Officer) /S/ JOHN C. GINGERICH President, Chief Operating February 24, 1994 - --------------------------- Officer and Director (John C. Gingerich) /S/ CARL A. THOMSEN Senior Vice President February 24, 1994 - --------------------------- (Principal Financial and (Carl A. Thomsen) Accounting Officer) Director February 24, 1994 - --------------------------- (Paul Bancroft, III) /S/ DWIGHT C. BAUM Director February 24, 1994 - --------------------------- (Dwight C. Baum) /S/ JEFFERY T. GRADE Director February 24, 1994 - --------------------------- (Jeffery T. Grade) /S/ ORION L. HOCH Director February 24, 1994 - --------------------------- (Orion L. Hoch) /S/ JOHN W. LARSON Director February 24, 1994 - --------------------------- (John W. Larson) /S/ J.W. MCKITTRICK Director February 24, 1994 - --------------------------- (J.W. McKittrick) /S/ GRAHAM TYSON Director February 24, 1994 - --------------------------- (Graham Tyson) </TABLE> 15

MEASUREX CORPORATION INDEX TO FINANCIAL STATEMENTS AND SCHEDULES Fiscal Year 1993 ------------------ <TABLE> <CAPTION> Form 10-K Page ---- <S> <C> (1) Consolidated Financial Statements Management's Discussion and Analysis of Financial Condition and Results of Operations 64-66 Consolidated Statements of Income Three years ended November 28, 1993 67 Consolidated Balance Sheets November 28, 1993 and November 29, 1992 68 Consolidated Statements of Shareholders' Equity Three years ended November 28, 1993 69 Consolidated Statements of Cash Flows Three years ended November 28, 1993 70 Notes to Consolidated Financial Statements 71-80 Report of Independent Accountants 81 Supplemental Financial Data 82 Selected Financial Data 83 </TABLE> With the exception of the aforementioned information, the 1993 Annual Report to Shareholders is not to be deemed filed as part of this report unless otherwise noted. <TABLE> <CAPTION> Form 10-K Page ---- <S> <C> (2) Financial Statement Schedules for fiscal years 1993, 1992 and 1991 Report of Independent Accountants on Financial Statement Schedules 17 VIII Valuation and Qualifying Accounts 18 X Supplementary Income Statement Information 19 </TABLE> Other schedules have not been filed because the conditions requiring the filing do not exist or the required information is given in the financial statements or notes thereto. 16

REPORT OF INDEPENDENT ACCOUNTANTS To the Shareholders Measurex Corporation Our report on the consolidated financial statements of Measurex Corporation and Subsidiaries as of November 28, 1993 and November 29, 1992 and for each of the three fiscal years in the period ended November 28, 1993, has been incorporated by reference in this Form 10-K from page 30 of Measurex Corporation's 1993 Annual Report to Shareholders. In connection with our audits of such financial statements, we have also audited the related financial statement schedules listed in the index on page 16 of this Form 10-K. In our opinion, the financial statement schedules referred to above, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information required to be included therein. /S/ COOPERS & LYBRAND ------------------------- COOPERS & LYBRAND San Jose, California December 15, 1993 17

SCHEDULE VIII MEASUREX CORPORATION VALUATION AND QUALIFYING ACCOUNTS (1) Fiscal years 1993, 1992 and 1991 (Amounts in thousands) <TABLE> <CAPTION> Balance Additions at Charged Write-offs Balance Beginning to and at End Description of Year Expenses Deductions(2) Other of Year ----------- --------- --------- ---------- ----- ------- <S> <C> <C> <C> <C> <C> 1993 - -------------------- Allowance for noncollection and system returns $7,250 $2,051 $(2,154)(3) - $7,147 (6) ====== ====== ======= ========= Inventory reserves $6,999 $3,473 $(1,576)(4) $ 8,896 ====== ====== ======= ========= 1992 - -------------------- Allowance for noncollection and system returns $4,952 $4,649 $(2,351)(3) - $7,250 (6) ====== ====== ======= ========= Inventory reserves $6,795 $2,954 $(2,750)(4) $ 6,999 ====== ====== ======= ========= 1991 - -------------------- Allowance for noncollection and system returns $5,002 $1,882 $(1,932)(3) - $4,952 (6) ====== ====== ======= ========= Inventory reserves $4,680 $2,001 $(1,748)(4) $1,862(5) $ 6,795 ====== ====== ======= ======== ========= </TABLE> Notes: (1) See the Notes to Consolidated Financial Statements. (2) Represents write-offs and deductions, net of recoveries. (3) Deductions for returns of systems or parts of systems and for write-off of noncollectible amounts. (4) Deductions for write-offs of obsolete and scrapped parts and translation adjustments. (5) Represents the reclassification of reserves from non-current to current inventories. (6) Includes allowance on contracts receivable. 18

SCHEDULE X MEASUREX CORPORATION SUPPLEMENTARY INCOME STATEMENT INFORMATION Fiscal Years 1993, 1992, and 1991 (Amounts in thousands) <TABLE> <CAPTION> 1993 1992 1991 ------- ------- ------- <S> <C> <C> <C> Charged to costs and expenses: (2) Maintenance and repairs $2,379 $2,454 $2,607 ====== ====== ====== Amortization of intangible assets (1) $4,380 $3,267 $3,487 ====== ====== ====== </TABLE> Notes: (1) Intangible assets include goodwill, patents and capitalized software. (2) Items omitted are less than 1% of net sales. 19

MEASUREX CORPORATION INDEX TO EXHIBITS Fiscal Year 1993 <TABLE> <CAPTION> Exhibits - -------- <S> <C> <C> 3.1 Certificate of Incorporation of Registrant, (incorporated by reference from Exhibit 3.1 on page 30 of Report on Form 10-K for the fiscal Year ended November 29, 1987). 3.2 Bylaws of Registrant, restated and amended as of December 14, 1993. 22-44 4.1 Copy of Registrant's Rights Agreement dated as of December 14, 1988, as amended by Amendment No. 1 thereto dated May 30, 1990, (incorporated by reference from Exhibit 4.1 on page 47 of Report on Form 10-K for the fiscal year ended December 2, 1990). 10.1 Copy of Registrant's Employee's Stock Option Plan (1981) (incorporated by reference from Exhibit 28.1 to Post Effective Amendment No. 2 to Registration Statement No. 33-22589, filed with the SEC on June 25, 1990). 10.2 Copy of Registrant's Employee's Stock Option Plan (1993) (incorporated by reference from Form S-8 Registration Statement No. 33-65762 filed with the SEC on July 8, 1993). 10.3 Copy of Registrant's Management Incentive Plan. (incorporated by reference from Exhibit 10.8 on page 24 of Report on Form 10-K for the fiscal year ended November 30, 1986). 10.4 Copy of Registrant's Employee Stock Purchase Plan, as amended (incorporated by reference from Exhibit 28.1 to Post Effective Amendment No. 4 to Registration Statement No. 2-67736 filed with the SEC on May 3, 1990). 10.5 Copy of Registrant's Affiliation Agreement dated as of May 30, 1990, between Measurex Corporation and Harnischfeger Industries, Inc. (incorporated by reference from Exhibit 4.1 to Form 8K filed with the SEC on June 12, 1990). 10.6 Copy of Registrant's Joint Marketing, Sales and Development Agreement dated May 30, 1990 between Measurex Corporation and Beloit Corporation (incorporated by reference from Exhibit 10.1 to Form 8K filed with the SEC on June 12, 1990). 10.7 Copy of Registrant's Joint Marketing, Sales and Development Agreement dated February 12, 1991 between Measurex Corporation and Enertec, (incorporated by reference from Exhibit 10.8 on page 33 of Report on Form 10-K for the fiscal year ended December 1, 1991). 10.8 Copy of Registrant's Joint Marketing, Sales and Development Agreement dated February 28, 1991 between Measurex Corporation and Mitsubishi Heavy Industries, Ltd., (incorporated by reference from Exhibit 10.9 on page 34 of Report on Form 10-K for the fiscal year ended December 1, 1991). 10.9 Copy of Term Loan Agreement dated as of May 21, 1993, between Measurex Corporation and the Bank of New York (incorporated by reference from Exhibit 10 on Form 10-Q for the period ended May 30, 1993). </TABLE> 20

MEASUREX CORPORATION INDEX TO EXHIBITS Fiscal Year 1993 <TABLE> <CAPTION> <S> <C> <C> 10.10 Copy of Registrant's Stock Option Agreement (Special Acceleration Grant) dated as of December 14, 1993. 45-62 11.0 Computation of Net Income per Share of Common Stock of the Registrant. 63 13.0 Registrant's Annual Report to Shareholders. (In accordance with item 601(B)(13) of Regulation S-K, such Annual Report is not filed as part of this Form 10-K, except to the extent incorporated by reference). 64-83 21.0 Subsidiaries of Registrant. 84-85 23.0 Consent of Independent Accountants. 86 24.0 Power of Attorney (included on page 15). </TABLE> Other exhibits have not been filed because conditions requiring the filing do not exist. 21

Exhibit 3.2 RESTATED BYLAWS OF MEASUREX CORPORATION ARTICLE I OFFICERS Section 1. The registered office shall be in the City of Wilmington, County of New Castle, State of Delaware. Section 2. The corporation may also have offices at such other places both within and without the State of Delaware as the Board of Directors may from time to time determine or the business of the corporation may require. ARTICLE II MEETINGS OF STOCKHOLDERS Section 1. All meetings of the stockholders for the election of directors shall be held in the City of Cupertino, State of California, at such place as may be fixed from time to time by the Board of Directors, or at such other place either within or without the State of Delaware as shall be designated from time to time by the Board of Directors and stated in the notice of the meeting. Meetings of stockholders for any other purpose may be held at such time and place, within or without the State of Delaware, as shall be stated in the notice of the meeting or in a duly executed waiver of notice thereof. Section 2. Annual meetings of stockholders shall be held on the third Thursday of April of each year if not a legal 22

holiday and, if a legal holiday, then on the next secular day following, at 10:00 A.M. or such other date and time as shall be designated from time to time by the Board of Directors and stated in the notice of the meeting, at which they shall elect by a plurality vote a Board of Directors, and transact such other business as may properly be brought before the meeting. Section 3. Written notice of the annual meeting stating the place, date and hour of the meeting shall be given to each stockholder entitled to vote at such meeting not less than ten (10) nor more than sixty (60) days before the date of the meeting. Section 4. The officer who has charge of the stock ledger of the corporation shall prepare and make, at least ten days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. 23

Section 5. Special meetings of the stockholders, for any purpose or purposes, unless otherwise prescribed by statute may only be called in the manner set forth in the certificate of incorporation. Section 6. Written notice of a special meeting stating the place, date and hour of the meeting and the purpose or purposes for which the meeting is called, shall be given not less than ten (10) nor more than sixty (60) days before the date of the meeting, to each stockholder entitled to vote at such meeting. Section 7. Business transacted at any special meeting of stockholders shall be limited to the purposes stated in the notice. Section 8. The holders of a majority of the stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business except as otherwise provided by statute or by the certificate of incorporation. If, however, such quorum shall not be present or represented at any meeting of the stockholders, the stockholders entitled to vote thereat, present in person or represented by proxy, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented. At such adjourned meeting at which a quorum shall be present or represented any business may be transacted which might have been transacted at the meeting as originally notified. If the adjournment is for 24

more than thirty days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. Section 9. When a quorum is present at any meeting, the vote of the holders of a majority of the stock having voting power present in person or represented by proxy shall decide any question brought before such meeting, unless the question is one upon which by express provision of the statutes or of the certificate of incorporation, a different vote is required, in which case such express provision shall govern and control the decision of such question. Section 10. Unless otherwise provided in the certificate of incorporation each stockholder shall at every meeting of the stockholders be entitled to one vote in person or by proxy for each share of the capital stock having voting power held by such stockholder, but no proxy shall be voted on after three years from its date, unless the proxy provides for a longer period. At all elections of directors of the corporation each stockholder having voting power shall be entitled to exercise the right of cumulative voting as provided in the certificate of incorporation. Section 11. Unless otherwise provided in the certificate of incorporation, any action required to be taken at any annual or special meeting of stockholders of the corporation, or any action which may be taken at any annual or special meeting 25

of such stockholders, may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing. Section 12. Nominations for election to the Board of Directors must be made by the Board of Directors or by any stockholder of any outstanding class of capital stock of the corporation entitled to vote for the election of directors. Nominations, other than those made by the Board of Directors of the corporation, must be preceded by notification in writing in fact received by the Secretary of the corporation not less than ten days prior to any meeting of stockholders called for the election of directors. Such notification shall contain the written consent of each proposed nominee to serve as a director if so elected and the following information as to each proposed nominee and as to each person, acting alone or in conjunction with one or more other persons as a partnership, limited partnership, syndicate or other group, who participates or is expected to participate in making such nomination or in organizing, directing or financing such nomination or solicitation of proxies to vote for the nominee: 26

(a) the name, age, residence, address, and business address of each proposed nominee and of each such person; (b) the principal occupation or employment, the name, type of business and address of the corporation or other organization in which such employment is carried on of each proposed nominee and of each such person; (c) the amount of stock of the corporation owned beneficially, either directly or indirectly, by each proposed nominee and each such person; and (d) a description of any arrangement or understanding of each proposed nominee and of each such person with each other or any other person regarding future employment or any future transaction to which the corporation will or may be a party. The presiding officer of the meeting shall have the authority to determine and declare to the meeting that a nomination not preceded by notification made in accordance with the foregoing procedure shall be disregarded. ARTICLE III DIRECTORS Section 1. The number of directors which shall constitute the whole board shall be (9) nine until changed as provided in the certificate of incorporation. The directors shall be elected at the annual meeting of the stockholders, except as provided in Section 1 of this Article, and each director elected shall hold office until his successor is elected and qualified. Directors need not be stockholders. 27

Section 1. Vacancies and new created directorships resulting from any increase in the authorized number of directors may be filled by a majority of the directors then in office or by a sole remaining director, and a director so chosen shall hold office until the next election of the class for which such director shall have been chosen and until his successor shall have been duly elected and qualified, or until his earlier resignation, removal from office, death or incapacity. Section 2. The business of the corporation shall be managed by or under the direction of its board of directors which may exercise all such powers of the corporation and do all such lawful acts and things as are not by statute or by the certificate of incorporation or by these bylaws directed or required to be exercised or done by the stockholders. MEETINGS OF THE BOARD OF DIRECTORS Section 3. The Board of Directors of the corporation may hold meetings, both regular and special, either within or without the State of Delaware. Section 4. The first meeting of each newly elected Board of Directors shall be held at such time and place as shall be fixed by the vote of the stockholders at the annual meeting and no notice of such meeting shall be necessary to the newly elected directors in order legally to constitute the meeting, provided a quorum shall be present. In the event of the failure of the stockholders to fix the time or place of such first meeting of the newly elected Board of Directors, or in the event such meeting is not held at the time and place so fixed by the 28

stockholders, the meeting may be held at such time and place as shall be specified in a notice given as hereinafter provided for special meetings of the Board of Directors, or as shall be specified in a written waiver signed by all of the directors. Section 5. Regular meetings of the Board of Directors may be held without notice at such time and at such place as shall from time to time be determined by the Board of Directors. Section 6. Special meetings of the Board of Directors may be called by the president on five (5) days' notice to each director by mail or forty- eight (48) hours notice to each director either personally or by telegram; special meetings shall be called by the president or secretary in like manner and on like notice on the written request of a majority of the Directors unless the Board of Directors consists of only one director, in which case special meetings shall be called by the president or secretary in like manner and on like notice on the written request of the sole director. Section 7. At all meetings of the Board of Directors a majority of the directors shall constitute a quorum for the transaction of business and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the Board of Directors, except as may be otherwise specifically provided by statute or by the certificate of incor-poration. If a quorum shall not be present at any meeting of the Board of Directors, the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present. 29

Section 8. Unless otherwise restricted by the certificate of incorporation or these bylaws, any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting, if all members of the Board of Directors or committee thereof, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board of Directors or committee. Section 9. Unless otherwise restricted by the certificate of incorporation or these bylaws, members of the Board of Directors, or any committee designated by the Board of Directors, may participate in a meeting of the Board of Directors, or any committee, by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at the meeting. COMMITTEES OF DIRECTORS Section 10. The Board of Directors may, by resolution passed by a majority of the whole board, designate one or more committees, each committee to consist of one or more of the directors of the corporation. The Board of Directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. Any such committee, to the extent provided in the resolution of the Board of Directors, shall have and may exercise 30

all the powers and authority of the Board of Directors in the management of the business and affairs of the corporation, and may authorize the seal of the corporation to be affixed to all papers which may require it; but no such committee shall have the power or authority in reference to amending the certificate of incorporation, adopting an agreement of merger or consolidation, recommending to the stockholders the sale, lease or exchange of all or substantially all of the corporation's property and assets, recommending to the stockholders a dissolution of the corporation or a revocation of a dissolution, or amending the bylaws of the corporation; and, unless the resolution or the certificate of incorporation expressly so provide, no such committee shall have the power or authority to declare a dividend or to authorize the issuance of stock. Such committee or commit-tees shall have such name or names as may be determined from time to time by resolution adopted by the Board of Directors. Section 11. Each committee shall keep regular minutes of its meetings and report the same to the Board of Directors when required. COMPENSATION OF DIRECTORS Section 12. Unless otherwise restricted by the certificate of incorporation or these bylaws, the Board of Directors shall have the authority to fix the compensation of directors. The directors may be paid their expenses, if any, of attendance at each meeting of the Board of Directors and may be paid a fixed sum for attendance at each meeting of the Board of Directors or a stated salary as director. No such payment shall 31

preclude any director from serving the corporation in any other capacity and receiving compensation therefor. Members of special or standing committees may be allowed like compensation for attending committee meetings. REMOVAL OF DIRECTORS Section 13. Unless otherwise restricted by the certificate of incorporation or these bylaws, a director may be removed only for good cause shown by a majority of shares entitled to vote at an election of directors. ARTICLE IV NOTICES Section 1. Whenever, under the provisions of the statutes or of the certificate of incorporation or of these bylaws, notice is required to be given to any director or stockholder, it shall not be construed to mean personal notice, but such notice may be given in writing, by mail, addressed to such director or stockholder, at his address as it appears on the records of the corporation, with postage thereon prepaid, and such notice shall be deemed to be given at the time when the same shall be deposited in the United States mail. Notice to directors may also be given by telegram. Section 2. Whenever any notice is required to be given under the provisions of the statutes or of the certificate of incorporation or of these bylaws, a waiver thereof in writing, signed by the person or persons entitled to said notice, whether 32

before or after the time stated therein, shall be deemed equivalent thereto. ARTICLE V OFFICERS Section 1. The officers of the corporation shall be chosen by the Board of Directors and shall be a president and a secretary. The Board of Directors may elect from among its members a Chairman of the Board and a Vice Chairman of the Board. The Board of Directors may also choose one or more vice- presidents, assistant secretaries, treasurers and assistant treasurers. Any number of offices may be held by the same person, unless the certificate of incorporation or these bylaws otherwise provide. Section 2. The Board of Directors at its first meeting after each annual meeting of stockholders shall choose a president and a secretary and may choose a vice-president and a treasurer. Section 3. The Board of Directors may appoint such other officers and agents as it shall deem necessary who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the Board of Directors. Section 4. The salaries of all officers and agents of the corporation shall be fixed by the Board of Directors. Section 5. The officers of the corporation shall hold office until their successors are duly elected and qualified. 33

Any officer elected or appointed by the Board of Directors may be removed at any time by the affirmative vote of a majority of the Board of Directors. Any vacancy occurring in any office of the corporation may only be filled by the Board of Directors. THE CHAIRMAN OF THE BOARD Section 6. The Chairman of the Board, if any, shall preside at all meetings of the Board of Directors and of the stockholders at which he shall be present. He shall have and may exercise such powers as are, from time to time, assigned by the Board of Directors and as may be provided by law. Section 7. In the absence of the Chairman of the Board of Directors, the Vice Chairman, if any, shall preside at all meetings of the Board of Directors and of the stockholders at which he shall be present. The Vice Chairman shall have and may exercise such powers as are, from time to time, assigned to him by the Board of Directors and as may be provided by law. THE PRESIDENT AND VICE-PRESIDENT Section 8. The president shall be the chief executive officer of the corporation; and in the absence of the Chairman and Vice Chairman of the Board of Directors shall preside at all meetings of the stockholders and the Board of Directors; the president shall have general and active management of the business of the corporation and shall see that all orders and resolutions of the Board of Directors are carried into effect. Section 9. The president shall execute bonds, mortgages and other contracts requiring a seal, under the seal of the corporation, except where required or permitted by law to be 34

otherwise signed and executed and except where the signing and execution thereof shall be expressly delegated by the Board of Directors to some other officer or agent of the corporation. Section 10. In the absence of the president or in the event of his inability or refusal to act, the vice-president, if any, (or in the event there be more than one vice-president, the vice-presidents in the order designated by the directors, or in the absence of any designation, then in the order of their election) shall perform the duties of the president, and when so acting, shall have all the powers of and be subject to all the restrictions upon the president. The vice-presidents shall perform such other duties and have such other powers as the Board of Directors may from time to time prescribe. THE SECRETARY AND ASSISTANT SECRETARY Section 11. The secretary shall attend all meetings of the Board of Directors and all meetings of the stockholders and record all the proceedings of the meetings of the corporation and of the Board of Directors in a book to be kept for that purpose and shall perform like duties for the standing committees when required. The secretary shall give, or cause to be given, notice of all meetings of the stockholders and special meetings of the Board of Directors, and shall perform such other duties as may be prescribed by the Board of Directors or president, under whose supervision he shall be. The secretary shall have custody of the corporate seal of the corporation and the secretary, or an assistant secretary, shall have authority to affix the same to any instrument requiring it and when so affixed, it may be 35

attested by his signature or by the signature of such assistant secretary. The Board of Directors may give general authority to any other officer to affix the seal of the corporation and to attest the affixing by his signature. Section 12. The assistant secretary, or if there be more than one, the assistant secretaries in the order determined by the Board of Directors (or if there be no such determination, then in the order of their election) shall, in the absence of the secretary or in the event of his or her inability or refusal to act, perform the duties and exercise the powers of the secretary and shall perform such other duties and have such other powers as the Board of Directors may from time to time prescribe. THE TREASURER AND ASSISTANT TREASURERS Section 13. The treasurer shall have the custody of the corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the corporation in such depositories as may be designated by the Board of Directors. Section 14. The treasurer shall disburse the funds of the corporation as may be ordered by the Board of Directors, taking proper vouchers for such disbursements, and shall render to the president and the Board of Directors, at its regular meetings, or when the Board of Directors so requires, an account of all his transactions as treasurer and of the financial condition of the corporation. 36

Section 15. If required by the Board of Directors, the treasurer shall give the corporation a bond (which shall be renewed every six years) in such sum and with such surety or sureties as shall be satisfactory to the Board of Directors for the faithful performance of the duties of his office and for the restoration to the corporation, in case of his death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in his possession or under his control belonging to the corporation. Section 16. The assistant treasurer, or if there shall be more than one, the assistant treasurers in the order determined by the Board of Directors (or if there be no such determination, then in the order of their election) shall, in the absence of the treasurer or in the event of his inability or refusal to act, perform the duties and exercise the powers of the treasurer and shall perform such other duties and have such other powers as the Board of Directors may from time to time prescribe. ARTICLE VI CERTIFICATE OF STOCK Section 1. Every holder of stock in the corporation shall be entitled to have a certificate, signed by, or in the name of the corporation by, the chairman or vice-chairman of the Board of Directors, or the president or a vice- president and the treasurer or an assistant treasurer, or the secretary or an assistant secretary of the corporation, certifying the number of shares owned by the shareholder in the corporation. 37

Certificates may be issued for partly paid shares and in such case upon the face or back of the certificates issued to represent any such partly paid shares, the total amount of the consideration to be paid therefor, and the amount paid thereon shall be specified. If the corporation shall be authorized to issue more than one class of stock or more than one series of any class, the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualification, limitations or restrictions of such preferences and/or rights shall be set forth in full or summarized on the face or back of the certificate which the corporation shall issue to represent such class or series of stock, provided that, except as otherwise provided in section 202 of the General Corporation Law of Delaware, in lieu of the foregoing requirements, there may be set forth on the face or back of the certificate which the corporation shall issue to represent such class or series of stock, a statement that the corporation will furnish without charge to each stockholder who so requests the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights. Section 2. Any or all of the signatures on the certificate may be facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such 38

officer, transfer agent or registrar before such certificate is issued, it may be issued by the corporation with the same effect as if he were such officer, transfer agent or registrar at the date of issue. LOST CERTIFICATES Section 3. The Board of Directors may direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the corporation alleged to have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost, stolen or destroyed. When authorizing such issue of a new certificate or certificates, the Board of Directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificate or certificates, or his legal representative, to advertise the same in such manner as it shall require and/or to give the corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the corporation with respect to the certificate alleged to have been lost, stolen or destroyed. TRANSFER OF STOCK Section 4. Upon surrender to the corporation or the transfer agent of the corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignation or authority to transfer, it shall be the duty of the corporation to issue a new certificate to the person entitled 39

thereto, cancel the old certificate and record the transaction upon its books. FIXING RECORD DATE Section 5. In order that the corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholder or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than sixty (60) nor less than ten (10) days before the date of such meeting, nor more than sixty (60) days prior to any other action. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. REGISTERED STOCKHOLDERS Section 6. The corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and to hold liable for calls and assessments a person registered on its books as the owner of shares, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or 40

not it shall have express or other notice thereof, except as otherwise provided by the laws of Delaware. ARTICLE VII GENERAL PROVISIONS DIVIDENDS Section 1. Dividends upon the capital stock of the corporation, subject to the provisions of the certificate of incorporation, if any, may be declared by the Board of Directors at any regular or special meeting, pursuant to law. Dividends may be paid in cash, in property, or in shares of the capital stock. Section 2. Before payment of any dividend, there may be set aside out of any funds of the corporation available for dividends such sum or sums as the directors from time to time, in their absolute discretion, think proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the corporation, or for such other purpose as the directors shall think conducive to the interest of the corporation, and the directors may modify or abolish any such reserve in the manner in which it was created. CHECKS Section 3. All checks or demands for money and notes of the corporation shall be signed by such officer or officers or such other person or persons as the Board of Directors may from time to time designate. 41

FISCAL YEAR Section 4. The fiscal year of the corporation shall be fixed by resolution of the Board of Directors. SEAL Section 5. The Board of Directors may adopt a corporate seal having inscribed thereon the name of the corporation, the year of its organization. The seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise. INDEMNIFICATION Section 6. The corporation shall indemnify its officers, directors, employees and agents to the full extent permitted by the General Corporation Law of Delaware. Expenses incurred by a director or member of the Executive Committee of the corporation in defending a civil or criminal action, suit or proceeding by reason of the fact that he is or was a director or member of the Executive Committee of the corporation (or was serving at the corporation's request as a director or officer of another corporation) shall be paid by the corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such director or member of the Executive Committee to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the corporation as authorized by relevant sections of the General Corporation Law of Delaware. 42

BOOKS AND RECORDS Section 7. Any stockholder or any director shall have the right to inspect the books and records of the corporation to the full extent permitted by, and subject to the terms and conditions of, the General Corporation Law of Delaware. ARTICLE VIII AMENDMENTS Section 1. These bylaws may be altered, amended or repealed or new bylaws may be adopted by the stockholders or by the Board of Directors only in the manner set forth in the certificate of incorporation. 43

SECRETARY'S CERTIFICATE ----------------------- I, Charles Van Orden, Secretary of Measurex Corporation, a Delaware corporation (the "Corporation"), do hereby certify that the attached document, consisting of 22 pages, is a true and complete copy of the Bylaws of the Corporation as in effect on the date hereof. Dated: /S/ CHARLES VAN ORDEN ------------------------------ Charles Van Orden, Secretary 44

SPECIAL ACCELERATION GRANT -------------------------- MEASUREX CORPORATION STOCK OPTION AGREEMENT ---------------------- WITNESSETH: ---------- RECITALS - -------- A. The Corporation's Board of Directors (the "Board") has adopted the Corporation's 1993 Stock Option Plan (the "Plan") for the purpose of attracting and retaining the services of key employees (including officers and directors), non-employee Board members and consultants and other independent advisors. B. Optionee is an individual who is to render valuable services to the Corporation or one or more parent or subsidiary corporations, and this Agreement is executed pursuant to, and is intended to carry out the purposes of, the Plan in connection with the Corporation's grant of a stock option to Optionee. NOW, THEREFORE, it is hereby agreed as follows: 1. Grant of Option. Subject to and upon the terms and conditions set --------------- forth in this Agreement, the Corporation hereby grants to Optionee, as of the grant date (the "Grant Date") specified in the accompanying Notice of Grant of Stock Option (the "Grant Notice"), a stock option to purchase up to that number of shares of the Corporation's Common Stock (the "Option Shares") as is specified in the Grant Notice. Such Option Shares shall be purchasable from time to time during the option term at the option price (the "Option Price") specified in the Grant Notice. 2. Option Term. This option shall expire at the close of business on ----------- the expiration date (the "Expiration Date") specified in the Grant Notice, unless sooner terminated in accordance with Paragraph 5 or 6. 3. Limited Transferability. This option shall be exercisable only by ----------------------- Optionee during Optionee's lifetime and shall not be transferable or assignable by Optionee other than by will or by the laws of descent and distribution following Optionee's death. 4. Dates of Exercise. This option shall become exercisable for the ----------------- Option Shares in a series of successive annual installments as specified in the Grant Notice. As the option becomes exercisable for one or more installments, those installments shall accumulate, and the option shall remain 45

exercisable for the accumulated installments until the Expiration Date or sooner termination of the option term under Paragraph 5 or Paragraph 6 of this Agreement. In the event Optionee should cease to be an Employee of the Corporation by reason of retirement at or after age 65, this option shall thereupon become immediately exercisable for all of the Optioned Shares provided such cessation of Employee status occurs more than one year after the Grant Date. The option as so accelerated shall remain exercisable until the earlier of (i) the sooner termination of option term under Paragraph 5 or 6. Except as noted herein above, in no event shall this option become exercisable for any additional Option Shares following Optionee's cessation of Service. 5. Cessation of Service. The option term specified in Paragraph 2 -------------------- shall terminate (and this option shall cease to be outstanding) prior to the Expiration Date in accordance with the following provisions: (i) This option shall immediately terminate and cease to be outstanding for any Option Shares for which it is not exercisable at the time of Optionee's cessation of Service. (ii) Should Optionee cease Service for any reason other than death or permanent disability while this option remains outstanding, then Optionee shall have a three (3)-month period measured from the date of such cessation of Service in which to exercise this option for any or all of the Option Shares for which this option is exercisable at the time of such cessation of Service. In no event, however, may this option be exercised at any time after the specified Expiration Date of the option term. Upon the expiration of such three (3)-month period or (if earlier) upon the specified Expiration Date of the option term, this option shall terminate and cease to be outstanding. (iii) Should Optionee die while in Service or within the three (3)- month period following his or her cessation of Service, then the personal representative of Optionee's estate or the person or persons to whom this option is transferred pursuant to Optionee's will or in accordance with the laws of descent and distribution shall have the right to exercise the option for any or all of the Option Shares for which this option is exercisable at the time of Optionee's cessation of Service, less any Option Shares subsequently purchased by Optionee prior to death. Such right shall lapse, and this option shall terminate and cease to remain 46

outstanding, upon the earlier of (A) the expiration of the twelve (12)- ------- month period measured from the date of Optionee's death or (B) the Expiration Date. (iv) Should Optionee become permanently disabled and cease by reason thereof to remain in Service at any time during the option term, then Optionee shall have a twelve (12) month period commencing with the date of such cessation of Service in which to exercise this option for any or all of the Option Shares for which this option is exercisable at the time of such cessation of Service. In no event, however, may this option be exercised at any time after the specified Expiration Date of the option term. Upon the expiration of such limited period of exercisability or (if earlier) upon the Expiration Date, this option shall terminate and cease to be outstanding. (v) Should (A) Optionee's Service be terminated for misconduct (including, but not limited to, any act of dishonesty, willful misconduct, fraud or embezzlement) or (B) Optionee make any unauthorized use or disclosure of confidential information or trade secrets of the Corporation or any parent or subsidiary, then in any such event this option shall terminate immediately and cease to be outstanding. (vi) During the limited post-Service period of exercisability determined pursuant to subparagraphs (ii) through (iv) above, this option may not be exercised in the aggregate for more than the number of Option Shares (if any) for which this option is, at the time of the Optionee's cessation of Service, exercisable in accordance with either the normal exercise provisions specified in the Grant Notice or the special acceleration provisions of Paragraph 6 of this Agreement. (vii) For purposes of this Agreement, the following definitional provisions shall be in effect: A. Optionee shall be deemed to remain in Service for so long as such individual renders services on a periodic basis to the Corporation (or any parent or subsidiary) in the capacity of an Employee, a nonemployee member of the board of directors or an independent consultant or advisor. B. Optionee shall be considered to be an Employee for so long as such individual remains in the 47

employ of the Corporation or any parent or subsidiary, subject to the control and direction of the employer entity not only as to the work to be performed but also as to the manner and method of performance. C. Optionee shall be deemed to be permanently disabled and to have incurred a permanent disability if Optionee is unable to engage in any substantial gainful activity by reason of any medically-determinable physical or mental impairment expected to result in death or to be of continuous duration of not less than twelve (12) months, D. A corporation shall be considered to be a subsidiary of the Corporation if it is a member of an unbroken chain of corporations beginning with the Corporation, provided each such corporation in the chain (other than the last corporation) owns, at the time of determination, stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. E. A corporation shall be considered to be a parent of the Corporation if it is a member of an unbroken chain ending with the Corporation, provided each such corporation in the chain (other than the Corporation) owns, at the time of determination, stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. 6. Corporate Transaction. --------------------- A. In the event of any of the following stockholder-approved transactions to which the Corporation is a party (a "Corporate Transaction"): (i) a merger or consolidation in which the Corporation is not the surviving entity, except for a transaction the principal purpose of which is to change the State in which the Corporation is incorporated, (ii) the sale, transfer or other disposition of all or substantially all of the assets of the Corporation in complete liquidation or dissolution of the Corporation, or (iii) any reverse merger in which the Corporation is the surviving entity but in which 48

securities possessing more than fifty percent (50%) of the total combined voting power of the Corporation's outstanding securities are transferred to a person or persons different from those who held such securities immediately prior to such merger, this option, to the extent outstanding at such time but not otherwise fully exercisable, shall automatically accelerate so that such option shall, immediately prior to the specified effective date for the Corporate Transaction, become fully exercisable for all the Option Shares at the time subject to such option and may be exercised for all or any portion of such shares. No such acceleration of this option, however, shall occur if and to the extent: (i) this option is, in connection with the Corporate Transaction, either to be assumed by the successor corporation or parent thereof or replaced with a comparable option (as determined in the sole discretion of the Plan Administrator) to purchase shares of the capital stock of the successor corporation or parent thereof or (ii) such option is to be replaced with a cash incentive program of the successor corporation which preserves the option spread existing at the time of the Corporate Transaction (the excess of the fair market value of the Option Shares at the time subject to this option over the aggregate Option Price payable for such shares) and provides for subsequent pay-out in accordance with the same vesting schedule in effect for the option pursuant to the option exercise schedule set forth in the Grant Notice or (iii) the acceleration of this option would, when added to the present value of certain other payments in the nature of compensation which become due and payable to Optionee in connection with the Corporate Transaction, result in the payment to Optionee of an excess parachute payment under Section 280G(b) of the Internal Revenue Code of 1986, as amended. The determination of any such excess parachute payment under clause (iii) shall be made by the Plan Administrator in accordance with the guidelines set forth in Attachment A, and such determination shall be final, binding and conclusive. B. The exercisability of this option as an incentive stock option under the Federal tax laws (if designated as such in the Grant Notice) shall, in connection with any such Corporate Transaction, be subject to the applicable dollar limitation of Paragraph 17. C. This option, to the extent not previously exercised, shall terminate upon the consummation of such Corporate Transaction and cease to be outstanding, unless it is expressly assumed by the successor corporation or parent thereof. 49

D. This Agreement shall not in any way affect the right of the Corporation to adjust, reclassify, reorganize or otherwise make changes in its capital or business structure or to merge, consolidate, dissolve, liquidate or sell or transfer all or any part of its business or assets. 7. Adjustment in Option Shares. --------------------------- A. In the event any change is made to the Common Stock issuable under the Plan by reason of any stock split, stock dividend, recapitalization, combination of shares, exchange of shares or other change affecting the outstanding Common Stock as a class effected without the Corporation's receipt of consideration, the Plan Administrator shall make appropriate adjustments to (i) the number and/or class of securities subject to this option and (ii) the Option Price payable per share in order to prevent any dilution or enlargement of benefits hereunder. Such adjustments shall be final, binding and conclusive. B. If this option is to be assumed in connection with any Corporate Transaction under Paragraph 6 or is otherwise to continue outstanding, then this option shall, immediately after such Corporate Transaction, be appropriately adjusted to apply and pertain to the number and class of securities which would have been issued to Optionee in the consummation of such Corporate Trans-action had the option been exercised immediately prior to such Corporate Transaction. Appropriate adjustments shall also be made to the Option Price payable per share, provided the aggregate Option Price payable hereunder -------- shall remain the same. 8. Privilege of Stock Ownership. The holder of this option shall ---------------------------- not have any of the rights of a stockholder with respect to the Option Shares until such individual shall have exercised the option and paid the Option Price for the purchased Option Shares. 9. Manner of Exercising Option. --------------------------- A. In order to exercise this option with respect to all or any part of the Option Shares for which this option is at the time exercisable, Optionee (or in the case of exercise after Optionee's death, Optionee's executor, administrator, heir or legatee, as the case may be) must take the following actions: (i) Deliver to the Chief Financial Officer of the Corporation an executed notice of exercise (the "Exercise Notice") in a form satisfactory to the Corpor-ation, in which there is specified the number of Option 50

Shares which are to be purchased under the exercised option. (ii) Pay the aggregate Option Price for the purchased shares through one or more of the following alternatives: - full payment in cash or by check payable to the Corporation's order; - full payment in shares of Common Stock held for the requisite period necessary to avoid a charge to the Corporation's earnings for financial reporting purposes and valued at Fair Market Value on the Exercise Date (as such term is defined below); - full payment in a combination of shares of Common Stock held for the requisite period necessary to avoid a charge to the Corporation's reported earnings and valued at Fair Market Value on the Exercise Date and cash or check payable to the Corporation's order; or - full payment effected through a broker-dealer sale and remittance procedure pursuant to which Optionee (I) shall provide irrevocable written instructions to a designated brokerage firm to effect the immediate sale of the purchased shares and remit to the Corporation, out of the sale proceeds available on the settlement date, sufficient funds to cover the aggregate Option Price payable for the purchased shares plus all applicable Federal, State and local income taxes and employment taxes required to be withheld in connection with such purchase and (II) shall provide written directives to the Corporation to deliver the certificates for the purchased shares directly to such brokerage firm in order to complete the sale transaction. (iii) Furnish to the Corporation appropriate documentation that the person or persons exercising the option (if other than Optionee) have the right to exercise this option. B. For purposes of this Agreement, the Exercise Date shall be the date on which the executed Exercise Notice shall have been delivered to the Corporation. Except to the extent the sale and remittance procedure specified above is utilized in connection with the option exercise, payment of the Option Price for the purchased shares must accompany such Exercise Notice. For all valuation purposes under this Agreement, the Fair Market Value per 51

share of Common Stock on any relevant date shall be the closing selling price per share of Common Stock on the date in question on the New York Stock Exchange, as such price is officially quoted in the composite tape of transactions on such exchange. If there is no such reported price on the date in question, then the Fair Market Value shall be the closing selling price on such exchange on the last preceding date for which such quotation exists. C. As soon as practical after receipt of the Exercise Notice, the Corporation shall mail or deliver to or on behalf of Optionee (or any other person or persons exercising this option in accordance herewith) a certificate or certificates representing the purchased Option Shares. D. In no event may this option be exercised for any fractional shares. 10. Governing Law. The interpretation, performance, and ------------- enforcement of this Agreement shall be governed by the laws of the State of California without resort to that State's conflict-of-laws rules. 11. Compliance with Laws and Regulations. The exercise of this ------------------------------------ option and the issuance of Option Shares upon such exercise shall be subject to compliance by the Corporation and Optionee with all applicable requirements of law relating thereto and with all applicable regulations of any stock exchange on which shares of the Corporation's Common Stock may be listed at the time of such exercise and issuance. 12. Successors and Assigns. Except to the extent otherwise ---------------------- provided in Paragraph 3 or 6, the provisions of this Agreement shall inure to the benefit of, and be binding upon, the successors, administrators, heirs and legal representatives of Optionee and the successors and assigns of the Corporation. 13. Liability of Corporation. ------------------------ A. If the Option Shares covered by this Agreement exceed, as of the Grant Date, the number of shares which may without stockholder approval be issued under the Plan, then this option shall be void with respect to such excess shares unless stockholder approval of an amendment sufficiently increasing the number of shares issuable under the Plan is obtained in accordance with the provisions of Section II of Article Five of the Plan. B. The inability of the Corporation to obtain approval from any regulatory body having authority deemed by the Corporation to be necessary to the lawful issuance and sale of any Common Stock 52

pursuant to this option shall relieve the Corporation of any liability with respect to the non-issuance or sale of the Common Stock as to which such approval shall not have been obtained. The Corporation however, shall use its best efforts to obtain all such approvals. 14. No Employment/Service Contract. Nothing in this Agreement or ------------------------------ in the Plan shall confer upon Optionee any right to continue in the Service of the Corporation (or any parent or subsidiary employing or retaining Optionee) for any period of specific duration or interfere with or otherwise restrict in any way the rights of the Corporation (or any such parent or subsidiary) or Optionee, which rights are hereby expressly reserved by each party, to terminate Optionee's Service at any time for any reason whatsoever, with or without cause. 15. Notices. Any notice required to be given or delivered to the ------- Corporation under the terms of this Agreement shall be in writing and addressed to the Corporation in care of its Chief Financial Officer at the corporate offices at One Results Way, Cupertino, California 95014. Any notice required to be given or delivered to Optionee shall be in writing and addressed to Optionee at the address indicated on the Grant Notice. All notices shall be deemed to have been given or delivered upon personal delivery or upon deposit in the U.S. mail, by registered or certified mail, postage prepaid and properly addressed to the party to be notified. 16. Construction. This Agreement and the option evidenced hereby ------------ are made and granted pursuant to the Plan and are in all respects limited by and subject to the express terms and provisions of the Plan. All decisions of the Plan Administrator with respect to any question or issue arising under the Plan or this Agreement shall be conclusive and binding on all persons having an interest in this option. 17. Additional Terms Applicable to an Incentive Stock Option. In --------------------------------------------------------- the event this option is designated an incentive stock option in the Grant Notice, the following terms and conditions shall also apply to the grant: A. This option shall cease to qualify for favorable tax treatment as an incentive stock option under the Federal tax laws if (and to the extent) this option is exercised for one or more Option Shares: (i) more than three (3) months after the date Optionee ceases to be an Employee for any reason other than death or permanent disability (as defined in Paragraph 5) or (ii) more than one (1) year after the date Optionee ceases to be an Employee by reason of permanent disability. 53

B. If this option is to become exercisable in a series of installments as indicated in the Grant Notice, no such installment shall qualify for favorable tax treatment as an incentive stock option under the Federal tax laws if (and to the extent) the aggregate Fair Market Value (determined at the Grant Date) of the Corporation's Common Stock for which such installment first becomes exercisable hereunder will, when added to the aggregate fair market value (determined as of the respective date or dates of grant) of the Common Stock or other securities for which this option or one or more other incentive stock options granted to Optionee prior to the Grant Date (whether under the Plan or any other option plan of the Corporation or any parent or subsidiary) first become exercisable during the same calendar year, exceed One Hundred Thousand Dollars ($100,000) in the aggregate. Should the number of shares of Common Stock for which this option first becomes exercisable in any calendar year exceed the applicable One Hundred Thousand Dollar ($100,000) limitation, the option may nevertheless be exercised for those excess shares in such calendar year as a non-statutory option. C. Should the exercisability of this option be accelerated upon a Corporate Transaction in accordance with Paragraph 6, then this option shall qualify for favorable tax treatment as an incentive stock option under the Federal tax laws only to the extent the aggregate Fair Market Value (determined at the Grant Date) of the Corporation's Common Stock for which this option first becomes exercisable in the calendar year in which the Corporate Transaction occurs does not, when added to the aggregate fair market value (determined as of the respective date or dates of grant) of the Common Stock or other securities for which this option or one or more other incentive stock options granted to Optionee prior to the Grant Date (whether under the Plan or any other option plan of the Corporation or any parent or subsidiary) first become exercisable during the same calendar year, exceed One Hundred Thousand Dollars ($100,000) in the aggregate. Should the number of shares of Common Stock for which this option first becomes exercisable in the calendar year of such Corporate Transaction exceed the applicable One Hundred Thousand Dollar ($100,000) limitation, the option may nevertheless be exercised for the excess shares in such calendar year as a non-statutory option. D. Should the Optionee hold, in addition to this option, one or more other options to purchase Common Stock which become exercisable for the first time in the same calendar year as this option, then the foregoing limitations on the exercisability of such options as incentive stock options under the Federal tax laws shall be applied on the basis of the order in which such options are granted. 54

E. To the extent this option should fail to qualify as an incentive stock option under the Federal tax laws, Optionee will recognize compensation income in connection with the acquisition of one or more Option Shares hereunder, and Optionee must make appropriate arrangements for the satisfaction of all Federal, State or local income and employment tax withholding requirements applicable to such compensation income. 18. Additional Terms Applicable to a Non-Statutory Stock Option. ----------------------------------------------------------- In the event this option is designated a non-statutory stock option in the Grant Notice, Optionee shall make appropriate arrangements with the Corporation or any parent or subsidiary employing Optionee for the satisfaction of all Federal, State or local income tax and employment tax withholding requirements applicable to the exercise of this option. 55

ATTACHMENT A TO STOCK OPTION AGREEMENT ---------------------- For purposes of determining whether the acceleration of this option pursuant to Paragraph 6.A will result in an excess parachute payment under Section 280G of the Internal Revenue Code of 1986, as amended (the "Code"), the procedures specified below shall be utilized by the Plan Administrator: 1. Definitions. ----------- The following definitional provisions are to be utilized in making all determinations and calculations with respect to any parachute payments to which Optionee may be entitled in connection with a Corporate Transaction: Actual Average Compensation means Optionee's average W-2 wages from --------------------------- the Corporation for the five (5) calendar years (or such fewer number of actual calendar years of Employee status) completed immediately prior to the calendar year in which the Corporate Transaction is effected. Any W-2 wages for a partial year of Employee status will be annualized, in accordance with the frequency with which such wages are paid during such partial year, before inclusion within Actual Average Compensation. Should Optionee commence Employee status in the calendar year in which the Corporate Transaction is effected, then his or her Actual Average Compensation will be equal in amount to the rate of base salary in effect for Optionee for that year plus all other items of compensation received from the Corporation and includible in his or her W-2 wages for such year. If any of Optionee's compensation from the Corporation during such five (5)-year or shorter period was not included in his or her W-2 wages for U.S. income tax purposes, either because Optionee was not a U.S. citizen or resident or because such compensation was excludible from income as foreign earned income under Section 911 of the Code, then such compensation shall nevertheless be included in the Actual Average Compensation of such Optionee to the same extent as if it were part of his or her W-2 wages. Ascertainable Option Value means, with respect to any Option (or -------------------------- installment thereof) which is to accelerate upon the Corporate Transaction, the ascertainable fair market value of such Option at the time of acceleration. The following factors are to be taken into account in determining such Ascertainable Option Value: 56

(i) the excess of (A) the Fair Market Value of the Corporation's Common Stock subject to such Option on the date of acceleration over (B) the exercise price per share of Common Stock payable under the accelerated Option (or installment), (ii) the probability of the value of the shares of Common Stock increasing or decreasing, and (iii) the period of time for which the accelerated Option is to remain exercisable. Fair Market Value means, with respect to any shares of Common Stock ----------------- subject to any accelerated Option, the closing selling price per share of Common Stock on the date in question on the New York Stock Exchange, as such price is officially quoted in the composite tape of transactions on such exchange. If there is no such reported price on the date in question, then the Fair Market Value shall be the closing selling price on such exchange on the last preceding date for which such quotation exists. Option means any option held by Optionee under the Corporation's 1993 ------ Stock Option Plan (the "1993 Plan") or the Corporation's predecessor 1981 Stock Option Plan (the "1981 Plan") and outstanding at the time of the Corporate Transaction. Such Options are to be divided into two separate categories as follows: (i) Restricted Options: the Option evidenced by this Stock ------------------ Option Agreement and any other Option the acceleration of which is limited, pursuant to the express provisions of the instrument evidencing the grant, to an amount which will not result in an excess parachute payment under Section 280G of the Code and the Treasury Regulations issued thereunder. (ii) Unrestricted Options: any Option the acceleration of which -------------------- is not subject to any limitations under the instrument of grant which are designed to avoid an excess parachute payment under Section 280G and the Treasury Regulations issued thereunder. Option Parachute Payment means, with respect to each Option (or ------------------------ installment thereof) which is accelerated under either the 1993 Plan or the 1981 Plan upon the Corporate Transaction, that portion of the Ascertainable Option Value thereof which is deemed to be a parachute payment under Section 280G of the Code and the Treasury Regulations issued thereunder. Such portion shall be equal to the sum of (I) the excess of the Ascertainable Option Value (as of the date of such acceleration) of each accelerated 57

installment over the Present Value of that same dollar amount were payment deferred until the time such installment would have otherwise vested in the absence of such acceleration plus (II) an appropriate dollar adjustment to reflect the lapse of Optionee's obligation to remain in Employee status as a condition to the vesting of the accelerated installment. In no event, however, shall the Option Parachute Payment attributable to any accelerated Option (or installment thereof) exceed the Ascertainable Option Value thereof at the time of acceleration. Other Parachute Payments means any payments in the nature of ------------------------ compensation (other than the acceleration of the Options under the Plan) to which Optionee may become entitled in connection with the Corporate Transaction, whether payable at that time or upon Optionee's subsequent termination of Employee status, and which accordingly qualify as parachute payments within the meaning of Section 280G(b)(2) of the Code and the Treasury Regulations issued thereunder. Present Value means the value, determined as of the effective date of ------------- the Corporate Transaction, of any payment in the nature of compensation which Optionee becomes entitled to receive from the Corporation in connection therewith, including (without limitation) the Option Parachute Payment attributable to the Option evidenced by this Stock Option Agreement and the aggregate Option Parachute Payment attributable to all other Options of Optionee which accelerate upon the Corporate Transaction. The Present Value of any such payment which is not otherwise due and payable at the time of the Corporate Transaction shall be determined in accordance with the provisions of Section 280G(d)(4) of the Code, utilizing a discount rate equal to one hundred twenty percent (120%) of the applicable Federal rate in effect at the time of such determination, compounded semi-annually to the effective date of the Corporate Transaction. Severance Payment means the lump-sum cash payment to which Optionee ----------------- may become entitled, pursuant to separate letter agreement with the Corporation, upon the involuntary termination of his or her Employee status within eighteen (18) months following certain changes in control of the Corporation effected without the approval of the Corporation's Board of Directors. 2. Limitation on Option Acceleration. --------------------------------- (a) The extent to which the Option evidenced by this Stock Option Agreement and all other Restricted Options are to accelerate upon the Corporate Transaction shall be determined as follows: 58

First, there is to be determined the Option Parachute Payment ----- attributable to each Unrestricted Option (or installment thereof) which accelerates upon the Corporate Transaction, Then, there is to be determined the Option Parachute Payment ---- attributable to each Restricted Option (or installment thereof) which is subject to acceleration upon the Corporate Transaction. To the extent the aggregate Option Parachute Payment calculated for the Unrestricted Options does not exceed 2.99 times Optionee's Actual Average Compensation, then the Restricted Options shall be accelerated until the Option Parachute Payments attributable to such Restricted Options, when added to the aggregate Option Parachute Payment attributable to the Unrestricted Options, equal 2.99 times Optionee's Actual Average Compensation. (b) If the aggregate Option Parachute Payment attributable to the Restricted Options which would otherwise accelerate upon the Corporate Transaction would, when added to the aggregate Option Parachute Payment attributable to the accelerated Unrestricted Options, exceed 2.99 times Optionee's Actual Average Compensation, then the Restricted Options will be accelerated in the order of Ascertainable Option Value, with the Restricted Options with the highest Ascertainable Option Value to be the first to be accelerated, until the aggregate Option Parachute Payment attributable to the Restricted Options (or installments thereof) so accelerated equals the difference between (i) 2.99 times Optionee's Actual Average Compensation and (ii) the aggregate Option Parachute Payment attributable to the Unrestricted Options. (c) Accordingly, except as otherwise provided under subparagraph (e) below, neither the Option evidenced by this Stock Option Agreement nor any other Restricted Option is to accelerate upon the Corporate Transaction if and to the extent the Option Parachute Payments attributable to the installments thereof which would otherwise accelerate upon such Corporate Transaction would, when added to the Option Parachute Payments attributable to the Unrestricted Options which accelerate upon such Corporate Transaction, exceed in amount 2.99 times Optionee's Actual Average Compensation. (d) In the event there is any dispute with Optionee as to whether one or more payments to which Optionee may become entitled in connection with the Corporate Transaction constitute Option Parachute Payments or Other Parachute Payments, such dispute shall be resolved as follows: 59

(i) In the event temporary, proposed or final Treasury Regulations in effect at the time under Section 280G of the Code (or applicable judicial decisions) specifically address the status of any such payment or the method of valuation therefor, the characterization afforded to such payment by the Regulations (or such decisions) shall, together with the applicable valuation methodology, be controlling. (ii) In the event the Regulations (or applicable judicial decisions) do not address the status of any payment in dispute, the matter shall be submitted for resolution to independent counsel mutually acceptable to the Corporation and Optionee ("Independent Counsel"). The resolution reached by Independent Counsel shall be final and controlling; provided, however, that if in the judgment of Independent Counsel the -------- status of the payment in dispute can be resolved through the obtainment of a private letter ruling from the Internal Revenue Service, a formal and proper request for such ruling shall be prepared and submitted by Independent Counsel, and the determination made by the Internal Revenue Service in the issued ruling shall be controlling. All expenses incurred in connection with the retention of Independent Counsel and (if applicable) the preparation and submission of the ruling request shall be shared equally by the Corporation and Optionee. (iii) In the event the Regulations (or applicable judicial decisions) do not address the appropriate valuation methodology for any payment in dispute, the value thereof shall, at the Independent Counsel's election, be determined through an independent third-party appraisal, and the expenses incurred in obtaining such appraisal shall be shared equally by the Corporation and Optionee. (e) Notwithstanding any provision to the contrary set forth in the preceding subparagraphs, the aggregate Option Parachute Payment attributable to the Options accelerated upon the Corporate Transaction shall not be reduced below that amount (if any) which, when added to the Present Value of all the Other Parachute Payments to which Optionee becomes entitled in connection with such Corporate Transaction, would nevertheless qualify as reasonable compensation within the standards established under Section 280G(b)(4) of the Code. 60

(f) Optionee shall not be entitled to any Severance Payment in the event that the aggregate Option Parachute Payment attributable to all Restricted and Unrestricted Options which accelerate upon the Corporate Transaction equals or exceeds 2.99 times Optionee's Actual Average Compensation. (g) These guidelines shall in all events be interpreted in such manner as shall avoid the imposition of excise taxes under Section 4999 of the Code and the disallowance of deductions under Section 280G(a) of the Code with respect to the acceleration of Optionee's Restricted Options in connection with the Corporate Transaction. 3. Conditional Exercises. --------------------- (a) Notwithstanding the existence of one or more payments in dispute under Paragraph 2(d) above, Optionee shall be permitted to exercise the Restricted Option evidenced by this Stock Option Agreement or any other Restricted Option at any time prior to the expiration or sooner termination of the option term; provided any and all shares of the Common Stock purchased under -------- such Restricted Options shall, together with the exercise price paid for such shares, be held in escrow by the Corporation. To the extent such purchased shares are held in escrow, Optionee shall have the right to (i) direct the sale of such shares, provided the sale proceeds are immediately deposited in escrow, (ii) exercise all voting rights with respect to such shares and (iii) receive dividends declared on such shares, provided such dividends are immediately deposited in escrow. (b) Once the requisite determinations under Paragraph 2(d) have been made, then to the extent the aggregate Option Parachute Payment attributable to the Restricted Options which would otherwise accelerate upon the Corporate Transaction would, when added to the aggregate Option Parachute Payment attributable to the accelerated Unrestricted Options, exceed 2.99 times Optionee's Actual Average Compensation or other applicable limitation under Paragraph 2(e) above, such acceleration shall be precluded through the disposition of one or more Restricted Options as follows: First, any outstanding Restricted Options shall immediately ----- terminate and cease to be exercisable. If there is more than one such Option outstanding, then the termination of such Options shall occur in the following order: the Restricted Options with the lowest Ascertainable Option Value shall be the first to terminate. 61

Then, to the extent one or more of the Restricted Options (or ---- installments thereof) shall have been exercised pursuant to the provisions of subparagraph (a) above, such exercises shall be rescinded (with the Restricted Options with the lowest Ascertainable Option Value to be the first to be rescinded) by refunding to Optionee the exercise price paid for the purchased shares and returning those shares (plus any cash dividends paid thereon) to the Corporation. To the extent the shares purchased under such Options (or accelerated installments thereof) shall have been sold while held in escrow, the sale proceeds attributable to those shares shall be allocated as follows: first an amount not to exceed the exercise price paid for such shares shall be refunded to Optionee, and then the balance of the proceeds (together with any cash dividends paid on those shares) shall be returned to the Corporation. (c) To the extent any shares or cash proceeds remain in the escrow account under subparagraph (a) above after the reductions specified in subparagraph (b) have been made, those shares or proceeds shall be promptly distributed to Optionee. 62

EXHIBIT 11 MEASUREX CORPORATION COMPUTATION OF NET INCOME PER SHARE Fiscal years 1993, 1992 and 1991 (Amounts in thousands except per share data) ---------- <TABLE> <CAPTION> 1993 1992 1991 ------ ------ ------ <S> <C> <C> <C> Primary: Average shares outstanding 17,913 18,111 18,010 Net effect of dilutive stock options and warrants based on treasury stock method using average market price 138 185 203 ------- ------- ------- Average common and common equivalent shares outstanding 18,051 18,296 18,213 ======= ======= ======= Income before extraordinary credit $ 8,215 $ 714 $ 389 ======= ======= ======= Net income $ 8,215 $ 1,625 $ 389 ======= ======= ======= Income per share before extraordinary credit $ 0.46 $ 0.04 $ 0.02 ======= ======= ======= Net income per share $ 0.46 $ 0.09 $ 0.02 ======= ======= ======= Fully diluted: Average shares outstanding 17,913 18,111 18,010 Net effect of dilutive stock options and warrants based on treasury stock method using quarter-end market price or average market price when greater than quarter-end market price 184 236 203 ------- ------- ------- Average common and common equivalent shares outstanding 18,097 18,347 18,213 ======= ======= ======= Income before extraordinary credit $ 8,215 $ 714 $ 389 ======= ======= ======= Net income $ 8,215 $ 1,625 $ 389 ======= ======= ======= Income per share before extraordinary credit $ 0.45 $ 0.04 $ 0.02 ======= ======= ======= Net income per share $ 0.45 $ 0.09 $ 0.02 ======= ======= ======= </TABLE> Note A: Fully diluted earnings per share have been calculated in accordance with Accounting Principles Board Opinion No. 15, "Earnings Per Share". 63

EXHIBIT 13 Management's Discussion and Analysis of Financial Condition and Results of Operations LIQUIDITY AND CAPITAL RESOURCES Measurex continues to maintain a strong financial position with cash and cash equivalents, marketable securities and short-term investments of $111 million as of the fiscal 1993 year-end. The Company believes that its existing cash balances and lines of credit, together with cash provided by operations, will provide adequate flexibility to fund financial requirements, including capital expenditures, and cash dividends through fiscal year 1994. Net cash generated by operations during 1993 totaled $2.3 million. Net income adjusted for noncash items was $23.9 million, up from $10.7 million in 1992. Offsetting the cash generated, accounts and contracts receivable increased by $7.4 million, and accounts payable and accrued expenses decreased $12.3 million from year-end 1992. Increased levels of accounts and contracts receivables were largely attributable to higher leasing activity. Contracts receivable from two major customers amounted to approximately $11.3 million at year-end 1993. Inventories, net of reserves, increased from fiscal year-end 1992 due to the acquisition of Roibox Oy. Service parts decreased due to a reduction of field inventory resulting from improved cycle times. Accrued expenses decreased significantly due in part to payments made for severance costs and other expenses related to a worldwide reduction of the Company's work force, which were accrued in 1992. In the fourth quarter of 1992, the Company took a pretax charge of $9 million to cover restructuring costs. Excluding marketable securities and short-term investments, net cash used for investing activities totaled $11.8 million in 1993 compared to $6.5 million in 1992. In April 1993, the Company acquired Roibox Oy for approximately $1.7 million, net of cash acquired. Located in Kuopio, Finland, Roibox is a worldwide supplier of web-inspection and other quality inspection products for the paper industry. Roibox operates as a separate subsidiary of Measurex, with manufacturing, engineering, product marketing and sales support. In August 1991, the Company acquired Devron-Hercules, Inc. for a cash payment of $21.9 million. Capitalized software decreased $2.9 million from 1992 as a result of the general release of MXOpen software to customers. 1992 cash receipts included proceeds from the sale of all rights to the PlantWorks software package and other assets of its subsidiary, Measurex Automation Systems, as well as the proceeds received in connection with the sale of the Cork facility in Ireland. No major facilities expansions are planned for 1994. Cash provided by financing activities during 1993 was $8.7 million. In May 1993, the Company borrowed $20.0 million pursuant to a five-year fixed-rate term loan agreement with a bank. Proceeds from the loan were used principally to support the Company's United States equipment lease portfolio and provide a hedge against interest rate fluctuations. Borrowings under the loan agreement are unsecured. The loan agreement contains certain restrictive covenants which include the maintenance of minimum tangible net worth and certain financial ratios. The Company was in compliance with all the covenants at year-end 1993. In 1993, the Company paid dividends of $7.9 million and repurchased common stock for $5.2 million. The repurchased shares will be used for issuance under the Company's employee stock purchase and stock option plans. As a result of the above operating, investing and financing activities and giving effect to exchange rate fluctuations, the Company's cash and cash equivalents increased slightly from $74.4 million in 1992 to $76.0 million in 1993 while marketable securities and short-term investments decreased $4.8 million to $35.4 million. The Company's 64

current ratio (current assets divided by current liabilities) was 2.8 at the end of 1993 compared to 2.6 at the end of the prior year. Total debt increased to 10% of shareholders' equity at the end of 1993, compared to less than 1% a year ago, due to the $20.0 million loan described above. As of November 28, 1993, the Company's principal sources of liquidity included cash, cash equivalents, marketable securities and short-term investments of $111 million and unsecured bank lines of credit of $25.0 million, expiring in 1994, of which $8.3 million was committed to letters of credit. RESULTS OF OPERATIONS The Company's 1993 system revenue increased slightly from 1992 and 1991. During this past year, the Company has closely controlled expenses and reduced the total number of employees by approximately 3%. At the same time, the Company invested 15% of system revenue in product development to ensure it continues to have a strong product offering. System orders for 1993 were $151 million, a decrease of $5 million (3%) from $156 million in 1992, and an increase of $24 million (19%) from $127 million in 1991. In 1993, orders in Canada and Japan increased while Southern Hemisphere and European orders were lower than the prior year. In 1992, orders increased in the United States, Asia and Latin America while in Europe orders decreased. Worldwide Pulp and Paper orders were $127 million in 1993, a decrease of $2 million (2%) from orders in 1992 and an increase of $31 million (32%) from 1991. In 1993, pulp and paper orders in the United States increased 2% to $44 million from $43 million in 1992 and 67% from $26 million in 1991, reflecting a strong market share and paper companies' focus on upgrade and replacement of existing systems. Industrial Systems orders were $24 million, a decrease of $3 million (11%) from 1992 and a decline of $7 million (23%) from 1991. The Company believes that its market share and competitive position continue to be strong. System backlog at the end of fiscal 1993 was $91 million, down 4% from the backlog of $95 million at the end of 1992. Approximately 80% of the $91 million year-end 1993 backlog is scheduled to be shipped during fiscal 1994. The reduction in European and Latin American backlog in 1993 was offset by higher Asian backlog. System revenue was $152.8 million in 1993, a $4.4 million (3%) increase from $148.4 million in 1992, and a $4.6 million (3%) increase from $148.2 million in 1991. Increased shipment of cross-direction control systems from the Measurex Devron Division has been the principal factor in revenue growth. Operating results from this Division are included in the Company's 1991 fourth quarter and the full years in 1992 and 1993. However, overall sales growth continued to be restrained by a depressed market in the paper industry and ongoing price competition. Service and other revenues of $101.2 million declined $3 million (3%) from $104.2 million in 1992, and decreased $4.5 million (4%) from $105.7 million in 1991. The decline in service revenue is due to changes in foreign currency exchange rates. Margins on systems revenue were 35% in fiscal 1993 compared to 33% and 37% in 1992 and 1991, respectively. The system margin improvement in 1993 was related to lower spending at the Company's Irish manufacturing facility and more efficient use of existing capacity at Measurex's Devron Division. However, the Company has been experiencing project overruns on systems produced by its Management Systems Division, which negatively impacted system margins. Compared to 1991, gross margins in 1992 declined as a result of high sales discount levels, low margins on custom integration services, and to a lesser extent, higher receivable reserves. 65

Service and other margins were 36% in 1993 compared to 35% in 1992, and 32% in 1991. The improvement in service margins in 1993 reflected ongoing cost controls. The increase in margins in 1992 compared to 1991 was due to reduced costs as a result of restructuring actions at the end of 1991. Product development costs were $22.9 million in 1993, down from $25.2 million in 1992 and $25.3 million in 1991. Of this total, Measurex capitalized $1.7 million, $4.6 million, and $2.3 million of software development costs in fiscal 1993, 1992 and 1991, respectively. Measurex amortized $3.4 million, $1.7 million and $2.8 million of capitalized software to systems costs in 1993, 1992 and 1991, respectively. The decrease in capitalized software and increase in amortization in 1993 were attributable to the general release of MXOpen software discussed previously. To maintain its competitive position in the industry, the Company expects to continue to invest a significant amount of its resources in new product development, enhancements to existing products and software development. The Company strongly believes the continued investment in new product development is critical to its long-term success. Selling and administrative expenses were $61.1 million in 1993, a $2.6 million (4%) decrease from $63.7 million in 1992 and a $0.5 million (1%) decrease from $61.6 million in 1991. This decrease reflects the Company's continued progress in its ongoing efforts to manage expense growth relative to revenue growth. The lower selling and administrative expenses in 1993 compared to 1992 were in part due to reduced spending and a $0.8 million insurance claim settlement received. The increase in expenditures in 1992 over 1991 was attributable to the inclusion of Devron operations, amortization of goodwill as a result of the Devron acquisition, as well as the marketing costs incurred to successfully launch the new MXOpen product line. To reduce annual spending and improve efficiency, the Company provided restructuring reserves of $9.0 million and $11.7 million, in 1992 and 1991, respectively, for personnel reductions and plant consolidations. Interest income decreased $1.6 million (20%) to $6.5 million in 1993 from 1992 and $4.4 million (40%) from 1991. Both lower average cash balances and lower interest rates, especially in Europe, contributed to the decline in interest income. Interest income in 1994 is dependent upon interest rates and cash flow from operations. The Company's effective tax rate in 1993 was 35% compared with 57% and 25% in 1992 and 1991, respectively. This decrease reflects changes in the geographic mix of earnings in countries in which the Company operates. The increase in the effective tax rate from 1991 to 1992 was in part due to losses incurred by several subsidiaries which could not be benefitted for tax purposes. Comparing 1993 to 1991, the Company experienced high tax rates in its Canadian operations, while the profits in the Company's Irish manufacturing facility, which has a low tax rate, decreased. In February 1992, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes." The Statement will be effective for the Company's fiscal year 1994. The estimated cumulative effect of implementing the Statement will be to reduce the deferred tax liability by approximately $0.5 million in the first quarter of 1994. Net income for 1993 was $8.2 million, an increase of $6.6 million from $1.6 million in 1992 and a increase of $7.8 million from $0.4 million in 1991. Net income was $0.46 per share compared to $0.09 and $0.02 per share in 1992 and 1991, respectively. 66

CONSOLIDATED STATEMENTS OF INCOME Three years ended November 28, 1993 (Dollar amounts in thousands except per share data) <TABLE> <CAPTION> 1993 1992 1991 - --------------------------------------------------------------------------- <S> <C> <C> <C> REVENUES: Systems $152,839 $148,367 $148,249 Service and other 101,158 104,220 105,730 -------- -------- -------- Total revenues 253,997 252,587 253,979 -------- -------- -------- OPERATING COSTS AND EXPENSES: Systems 99,728 99,244 93,715 Service and other 64,501 67,814 72,418 Product development 21,146 20,612 22,999 Selling and administrative 61,122 63,695 61,600 Restructuring charges - 8,974 11,695 -------- -------- -------- Total operating costs and expenses 246,497 260,339 262,427 -------- -------- -------- Earnings (loss) from operations 7,500 (7,752) (8,448) OTHER INCOME (EXPENSE): Interest expense (948) (810) (834) Interest income and other 6,127 7,831 9,801 Gain on sale of technology and assets - 2,409 - -------- -------- -------- Total other income, net 5,179 9,430 8,967 -------- -------- -------- Income before income taxes and extraordinary credit 12,679 1,678 519 Provision for income taxes 4,464 964 130 -------- -------- -------- Income before extraordinary credit 8,215 714 389 Extraordinary credit from utilization of tax loss carryforwards - 911 - -------- -------- -------- Net income $ 8,215 $ 1,625 $ 389 -------- -------- -------- Net income per share: Income before extraordinary credit $.46 $ .04 $.02 Extraordinary credit - .05 - -------- -------- -------- Net income per share $.46 $ .09 $.02 -------- -------- -------- Dividends per share $.44 $ .44 $.44 -------- -------- -------- Average number of common and common equivalent shares (thousands) 18,051 18,296 18,213 -------- -------- -------- </TABLE> The accompanying notes are an integral part of the financial statements. 67

<TABLE> <CAPTION> CONSOLIDATED BALANCE SHEETS November 28, 1993 and November 29, 1992 (Dollar amounts in thousands except per share data) 1993 1992 - -------------------------------------------------------------------------- <S> <C> <C> ASSETS Current assets: Cash and cash equivalents $ 76,040 $ 74,368 Marketable securities and short-term investments 35,371 40,237 Accounts receivable 55,126 53,886 Inventories 35,697 34,790 Prepaid and other 11,473 14,809 -------- -------- Total current assets 213,707 218,090 -------- -------- Contracts receivable 26,651 21,793 Service parts, net 3,178 5,699 Property, plant and equipment, net 53,161 55,493 Other assets 21,619 21,809 -------- -------- Total assets $318,316 $322,884 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Current portion of long-term debt $ 4,516 $ 49 Accounts payable 6,732 5,816 Accrued expenses 62,594 77,189 Income taxes payable 2,145 1,731 -------- -------- Total current liabilities 75,987 84,785 -------- -------- Long-term debt 16,783 842 Deferred income taxes 13,682 18,804 Commitments and contingencies Shareholders' equity: Preferred stock, $.01 par value; authorized: 10,000,000 shares; issued and outstanding: none Common stock, $.01 par value; authorized: 50,000,000 shares; outstanding 1993 - 19,036,948 shares, 1992 - 19,036,948 shares 190 190 Additional capital 75,202 75,181 Retained earnings 167,211 168,098 Cumulative translation adjustments (5,707) (2,019) Less: Treasury stock at cost: 1993 - 1,192,726 shares, 1992 - 1,009,229 shares (25,032) (22,997) -------- -------- Total shareholders' equity 211,864 218,453 -------- -------- Total liabilities and shareholders' equity $318,316 $322,884 ======== ======== </TABLE> The accompanying notes are an integral part of the financial statements. 68

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY Three years ended November 28, 1993 (Dollar amount in thousands except per share data) <TABLE> <CAPTION> Cumulative Common Additional Retained Translation Treasury Stock Capital Earnings Adjustments Stock Total --------- ---------- -------- ----------- -------- ----- <S> <C> <C> <C> <C> <C> <C> Balance December 2, 1990 $ 191 $ 74,762 $ 186,363 $ 6,654 $(29,330) $ 238,640 Proceeds from treasury stock issued under employee stock purchase and stock option plans (203,899 shares) including related tax benefits (1) 312 - - 5,764 6,075 Excess of cost of treasury shares issued over proceeds received - - (3,053) - (3,053) Foreign currency translation - - - (2,417) - (2,417) Net income - - 389 - - 389 Dividends ($.44 per share) - - (7,916) - (7,916) --------- ---------- ----------- ----------- -------- -------- Balance December 1, 1991 190 75,074 175,783 4,237 (23,566) 231,718 ========= ========== =========== =========== ======== ======== Proceeds from treasury stock issued under employee stock purchase and stock option plans (104,539 shares) including related tax benefits - 107 - - 2,953 3,060 Excess of cost of treasury shares issued over proceeds received - - (1,334) - - (1,334) Foreign currency translation - - - (6,256) - (6,256) Net income - - 1,625 - - 1,625 Dividends ($.44 per share) - - (7,976) - (7,976) Treasury stock acquired (152,500 shares) - - - - (2,384) (2,384) --------- ---------- ----------- ----------- --------- -------- Balance November 29, 1992 190 75,181 168,098 (2,019) (22,997) 218,453 ========= ========== =========== =========== ========= ======== Proceeds from treasury stock issued under employee stock purchase and stock option plans (115,103 shares) including related tax benefits - 21 - - 3,125 3,146 Excess of cost of treasury shares issued over proceeds received - - (1,216) - - (1,216) Foreign currency translation - - - (3,688) - (3,688) Net income - - 8,215 - - 8,215 Dividends ($.44 per share) - - (7,886) - - (7,886) Treasury stock acquired (298,600 shares) - - - - (5,160) (5,160) -------- ---------- ---------- ---------- --------- -------- Balance November 28, 1993 $ 190 $ 75,202 $ 167,211 $ (5,707) $ (25,032) $211,864 ======== ========== ========== ========== ========== ======== </TABLE> The accompanying notes are an integral part of the financial statements. 69

<TABLE> <CAPTION> CONSOLIDATED STATEMENTS OF CASH FLOWS Three years ended November 28, 1993 (Dollar amounts in thousands) 1993 1992 1991 - ------------------------------------------------------------------------------- <S> <C> <C> <C> CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 8,215 $ 1,625 $ 389 Non-cash items included in net income: Depreciation and amortization: Service parts 1,055 1,331 1,988 Property, plant and equipment 9,997 9,933 10,130 Capitalized software and goodwill 3,935 2,318 3,325 Deferred income taxes (2,307) (5,875) (5,826) Translation (gain) loss (506) 775 2,876 Inventory reserves 3,473 2,954 2,001 Gain on sale of technology - (2,409) - Net (increase) decrease in: Accounts and contracts receivable (7,420) (4,998) 4,313 Inventories and service parts (3,912) (3,687) (5,409) Prepaid and other 792 2,533 1,010 Net increase (decrease) in: Accounts payable and accrued expenses (12,333) 8,068 8,805 Income taxes payable 468 (674) (1,166) Other, net 822 (351) 1,177 --------- -------- -------- Net cash provided by operating activities 2,279 11,543 23,613 --------- -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of marketable securities and short-term investments (100,255) (98,144) (36,309) Sale of marketable securities and short-term investments 59,945 29,797 36,164 Maturities of short-term investments 45,176 42,535 - Acquisition of property, plant and equipment (8,329) (7,781) (8,211) Acquisition of subsidiary, net of cash acquired (1,668) - (21,422) Proceeds from sale of facility and other assets - 5,955 - Capitalized software (1,725) (4,636) (2,332) --------- -------- -------- Net cash used in investing activities (6,856) (32,274) (32,110) --------- -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Additions to long-term debt 21,971 - - Reductions of long-term debt (2,191) (3,967) (370) Dividends (7,886) (7,976) (7,916) Stock issued under employee stock purchase and stock option plans 1,930 1,726 3,022 Payment for treasury stock (5,160) (2,384) - --------- -------- -------- Net cash provided by (used in) financing activities 8,664 (12,601) (5,264) --------- -------- -------- Effect of exchange rate fluctuations on cash and cash equivalents (2,415) (5,008) (2,387) --------- -------- -------- Net increase (decrease) in cash and cash equivalents 1,672 (38,340) (16,148) Cash and cash equivalents at beginning of year 74,368 112,708 128,856 --------- -------- -------- Cash and cash equivalents at end of year $ 76,040 $ 74,368 $112,708 ========= ======== ======== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the year for: Interest $ 948 $ 810 $ 834 Income taxes 5,509 8,172 7,408 </TABLE> The accompanying notes are an integral part of the financial statements. 70

Notes to Consolidated Financial Statements (Dollar amounts in thousands unless otherwise noted) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Fiscal Year - The Company uses a 52-53 week fiscal year. References to 1993, 1992, and 1991 are for fiscal years ended November 28, 1993, November 29, 1992, and December 1, 1991, respectively. Fiscal years 1993, 1992 and 1991 were 52 week years. Consolidation - The consolidated financial statements include the accounts of all subsidiaries after elimination of intercompany balances and transactions. The Company has reclassified the presentation of certain prior year information to conform with the current year presentation format. Foreign Currency Translation - Gains and losses resulting from foreign currency translation of the Company's foreign operations (except certain manufacturing operations and operations in hyperinflationary countries) were recorded directly to a separate component of shareholders' equity. For certain manufacturing operations and sales operations in hyperinflationary countries, the functional currency is deemed to be U.S. dollars, and translation gains or losses are reflected in interest income and other. Foreign Exchange Contracts - The Company hedges certain international system orders using foreign exchange forward contracts to reduce the risk of loss due to foreign currency fluctuations. In addition, the Company hedges the U.S. dollar value of net asset or liability positions denominated in currencies other than the functional currency of its foreign subsidiaries and records any resulting gains or losses in interest income and other. At November 28, 1993, the Company had foreign exchange forward contracts valued at $29.8 million maturing from December 1993 through July 1994, of which 50% were denominated in European currencies and 35% denominated in Yen. The carrying amount of the foreign exchange contracts approximates fair value, which has been estimated based on the amount the Company would have had to pay to terminate these agreements at year-end. At year-end 1992 and 1991, the Company had forward contracts valued at $29.5 million and $65.3 million, respectively. Approximately 70% of these contracts are with one financial institution. Revenue Recognition - The Company generally recognizes revenue from system sales at the time of shipment provided any remaining obligations are insignificant and collection is probable. Revenue on certain software contracts are recognized on a percentage-of-completion basis. Service and other revenues are recognized as the services are provided or ratably over the life of the contracts. Product Development Expenses - The Company is actively engaged in basic technology and applied research and development programs which are designed to develop new or improved products and process applications. The cost of these programs is charged to expense as incurred except for certain software development costs which are capitalized as described below (see Capitalized Software). Capitalized Software - Costs related to the conceptual formulation and design of software products are expensed as product development. Costs incurred subsequent to establishing the technological feasibility of software products are capitalized. Amortization of capitalized software costs, which begins when products are available for general release to customers, is computed on a straight-line basis over the expected product lives, generally estimated to be three years. Income Taxes - Taxes are provided for items included in the consolidated statements of income regardless of the period when such items may be reported for tax purposes. 71

The Company provides U.S. and foreign income taxes on the portion of the accumulated earnings of the Company's foreign subsidiaries which are intended to be remitted to the parent Company within the foreseeable future. Cash and Cash Equivalents - Cash equivalents generally consist of certificates of deposit, time deposits, treasury notes and municipal bonds. The Company considers all highly liquid debt instruments with an original maturity of 90 days or less to be a cash equivalent. A substantial portion of the Company's cash and cash equivalents are held by foreign subsidiaries and are generally held in U.S. dollar denominated holdings. Amounts held by foreign subsidiaries would be subject to U.S. income taxation, net of available foreign tax credits, upon repatriation to the U.S. Marketable Securities and Short-term Investments - Marketable securities and short-term investments are stated at cost, which approximates market based on quoted market prices. Short-term investments are comprised primarily of time deposits with original maturities between three and twelve months. Marketable securities are comprised of a managed portfolio of preferred stocks and futures contracts. The Company enters into futures contracts to hedge the risk associated with the impact of interest rate fluctuations on its current marketable securities portfolio. Gains and losses on such contracts are recognized in income when changes in the value of the marketable securities are realized. Inventory Valuation - Inventories are stated at the lower of standard cost (which approximates actual cost determined on a first-in, first-out basis) or market. Inventory costs include raw materials, direct labor and manufacturing overhead. Depreciation - Property, plant and equipment are depreciated on a straight-line basis over estimated useful lives which range as follows: buildings and improvements - 3 to 40 years; machinery and equipment - 3 to 20 years. Service parts are depreciated on a 7-year declining balance basis. When assets are sold or retired, the cost and related accumulated depreciation are removed from the accounts and the resulting gains or losses are included in income. Net Income Per Share - Net income per share is computed based on the weighted average number of common shares outstanding during the year adjusted to reflect the assumed exercise of outstanding employee stock options to the extent these items had a dilutive effect on the computation. ACCOUNTS RECEIVABLE Accounts receivable consist of the following: <TABLE> <CAPTION> 1993 1992 ------- ------- <S> <C> <C> Accounts receivable $52,037 $53,340 Contracts receivable, current portion 8,579 6,606 Less: Allowances for noncollection and system returns (5,490) (6,060) ------- ------- $55,126 $53,886 ======= ======= </TABLE> 72

CONTRACTS RECEIVABLE Contracts receivable consist of the following: <TABLE> <CAPTION> 1993 1992 -------- ------- <S> <C> <C> Contracts receivable $43,362 $34,628 Less: Unearned financing income (6,475) (5,039) Allowance for noncollection and system returns (1,657) (1,190) -------- ------- 35,230 28,399 Current portion (8,579) (6,606) -------- ------- $26,651 $21,793 ======== ======= </TABLE> The aggregate amount of payments receivable by the Company in fiscal years subsequent to 1993 is set forth below: 1994 - $11,021 1997 - $6,014 1995 - $10,457 1998 - $4,311 1996 - $8,037 Thereafter - $3,522 Customer financing for systems is collaterialized by security in the related asset. The Company maintains reserves for potential credit losses and such losses have been within management's expectations. Contracts receivable from two major customers amounted to approximately $11.3 million at year-end 1993. INVENTORIES Inventories consist of the following: <TABLE> <CAPTION> 1993 1992 -------- -------- <S> <C> <C> Purchased parts and components $ 18,217 $ 16,549 Work in process 10,733 11,895 Finished subassemblies and systems 6,747 6,346 -------- -------- $ 35,697 $ 34,790 ======== ======== </TABLE> PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are recorded at cost and consist of the following: <TABLE> <CAPTION> 1993 1992 -------- -------- <S> <C> <C> Land $ 5,592 $ 5,646 Buildings and improvements 39,463 39,989 Machinery and equipment 64,950 63,327 -------- -------- 110,005 108,962 Less: Accumulated depreciation (56,844) (53,469) -------- -------- $ 53,161 $ 55,493 ======== ======== </TABLE> OTHER ASSETS Other assets consist of the following: <TABLE> <CAPTION> 1993 1992 -------- -------- <S> <C> <C> Capitalized software, net $ 7,246 $ 8,886 Goodwill and other 14,373 12,923 -------- -------- $ 21,619 $ 21,809 ======== ======== </TABLE> 73

The decrease in capitalized software in 1993 reflects the amortization of the new MXOpen software released during late 1992. Amortization expense of capitalized software was $3.4 million, $1.7 million and $2.8 million in 1993, 1992 and 1991, respectively. The increase in goodwill and other is mainly attributable to the acquisition of Roibox Oy in April 1993. Goodwill is amortized on a straight-line basis over 15 to 40 years. ACQUISITION On April 7, 1993, the Company acquired Roibox Oy for approximately 1.7 million, net of cash acquired. Located in Kuopio, Finland, Roibox Oy is a worldwide supplier of web-inspection and other quality inspection products for the paper industry. The acquisition was accounted for using the purchase method. Accordingly, the cost of the acquisition was allocated to assets acquired and liabilities assumed based on their estimated fair values. The net assets and results of operations of Roibox Oy are included in the consolidated financial statements from the date of acquisition. The results of operations of Roibox Oy in 1993 and 1992 were not material to the Company's consolidated results of operations. Roibox operates as a separate subsidiary of Measurex, with manufacturing, engineering, product marketing and sales support continuing in Finland. On August 30, 1991, Measurex Inc. (Canadian subsidiary of Measurex Corporation) acquired Devron-Hercules, Inc. for $21.9 million in cash. The acquisition was accounted for using the purchase method. ACCRUED EXPENSES Accrued expenses consist of the following: <TABLE> <CAPTION> 1993 1992 ------- ------- <S> <C> <C> Accrued payroll and related items $22,333 $22,282 Accrued initial service 7,059 6,881 Customer deposits 12,078 17,280 Restructuring charges 4,779 11,742 Other 16,345 19,004 ------- ------- $62,594 $77,189 ======= ======= </TABLE> LINES OF CREDIT AND LONG-TERM DEBT As of November 28, 1993, the Company had unsecured bank line of credit agreements of $25.0 million, which provide for domestic and foreign currency borrowings, advances and guarantees, Bankers' Acceptances, and letters of credit. There was $16.7 million available in connection with these agreements at November 28, 1993. The agreements, which expire during fiscal year 1994, require the Company to adhere to certain covenants regarding working capital, indebtedness, and minimum shareholders' equity. A revolving credit agreement ($20 million) provides for variable interest rates based on the London Interbank Offer Rate (LIBOR). Under a multicurrency credit agreement ($5 million), the Company may obtain loans at the lending bank's base rate plus 3/8%. Long-term debt consists of the following: <TABLE> <CAPTION> 1993 1992 ------- ----- <S> <C> <C> Term loan $19,000 $ - Other borrowings 2,299 891 ------- ----- 21,299 891 Less amounts due within one year (4,516) (49) -------- ----- $16,783 $ 842 ======== ===== </TABLE> 74

In May 1993, the Company borrowed $20 million under a 5.35% five-year term loan agreement with a bank. Proceeds from the loan are used principally to support the Company's United States equipment lease portfolio. Borrowings under the loan agreement are unsecured. Interest is payable quarterly, with principal payable in equal quarterly installments of $1.0 million through June 1998. The loan agreement contains certain restrictive covenants which include the maintenance of minimum consolidated cash balances of $40 million, minimum tangible net worth, and certain financial ratios. The Company was in compliance with all covenants at year-end 1993. The Company believes that as of November 28, 1993, the fair value of its long- term debt approximates the carrying value of those obligations. The fair value of the Company's long-term debt is estimated based on interest rates currently available to the Company for debt with similar terms and maturities. COMMITMENTS AND CONTINGENCIES The Company leases various facilities and equipment under noncancellable lease agreements. Rent expense under all operating leases was approximately $4.4 million, $3.9 million, and $3.6 million in 1993, 1992 and 1991, respectively. Future minimum lease payments under these noncancellable operating leases as of November 28, 1993 are approximately $4.1 million, $2.6 million, $1.4 million, $1.2 million, and $1.1 million for fiscal years 1994, 1995, 1996, 1997 and 1998, respectively, and approximately $3.2 million in total for years following 1998. At November 28, 1993, the Company was contingently liable for approximately $8.3 million relating principally to letters of credit issued to support European collections as well as $0.6 million relating to lease guarantees and other contingent liabilities. The Company is subject to legal proceedings and claims that arise in the normal course of its business. In the opinion of management, these proceedings will not have a material adverse effect on the financial position and results of operations of the Company. RESTRUCTURING CHARGES In 1992 the Company recorded a $9.0 million pretax charge for restructuring operations to reduce costs and improve efficiency. Provision was made for severance costs and other expenses related to a worldwide reduction in work force. In 1991 the Company recorded an $11.7 million pretax charge for cost-reduction actions which included consolidating the plants in Ireland to a single site in Waterford, as well as closing the Jyvaskyla, Finland, Safecontrol facility and transferring these activities to Cupertino. In addition, provision was made for severance payments to terminated employees and employee relocation expenses. INTEREST INCOME AND OTHER Interest income and other consist of the following: <TABLE> <CAPTION> 1993 1992 1991 ------- ------- ------- <S> <C> <C> <C> Interest income $6,523 $8,117 $10,962 Foreign exchange loss (396) (286) (1,161) ------- ------- ------- $6,127 $7,831 $ 9,801 ======= ======= ======= </TABLE> STOCK OPTION AND STOCK PURCHASE PLANS Under the Company's stock option plan, 5,110,240 shares of common stock have been reserved for issuance to officers and key employees. Options may be granted at prices not lower than the fair market value of the Company's common stock at the date of grant. Options generally become exercisable in four equal annual 75

installments commencing one year from the date of grant. Options generally expire, if not exercised, within five years from the date of grant. The stock option plan includes an automatic option grant program for the Company's non- employee directors. Such options expire 10 years from the date of grant. The stock option program also allows selected employees to elect to have a portion of their base salary reduced in return for options to purchase common stock. The option price represents the difference between the fair market value of the Company's common stock at the date of grant and the salary reduction. In 1991 and 1990, options were granted for 13,000 and 6,600 shares at option prices of $5.63 and $7.02 per share, respectively, under this program. Options under this plan are fully vested one year from date of grant and expire if not exercised within 10 years. A summary of transactions relating to options during fiscal years 1991, 1992 and 1993 is set forth below: <TABLE> <CAPTION> Options Outstanding - ------------------------ (Amounts in thousands except per share data) Shares Price Per Share Amount -------- --------------- -------- <S> <C> <C> <C> December 2, 1990 1,850.0 $ 7.02-$33.75 $ 41,920 Granted 1,788.9 5.63- 23.63 31,543 Terminated (1,491.8) 5.63- 33.75 (33,759) Exercised (121.4) 14.00- 17.41 ( 1,831) -------- --------------- -------- December 1, 1991 2,025.7 $ 5.63-$32.44 $ 37,873 Granted 535.5 15.63- 22.75 9,814 Terminated (129.6) 16.25- 31.88 (2,561) Exercised (31.3) 16.25- 16.88 (528) -------- --------------- -------- November 29, 1992 2,400.3 $ 5.63-$32.44 $ 44,598 Granted 594.7 16.31- 19.69 11,099 Terminated (290.5) 5.63- 32.44 (5,791) Exercised (44.5) 15.63- 17.00 (749) -------- --------------- -------- November 28, 1993 2,660.0 $ 5.63-$31.13 $ 49,157 ======== =============== ======== </TABLE> Included in the 1991 activity is the cancellation and regrant of 1,327,190 options at $16.87 per share. Regranted options vest over a four-year period irrespective of vested status of cancelled options. At year end 1993 and 1992, options to purchase 1,003,416 shares and 591,556 shares, respectively, were exercisable at prices ranging from $5.63 to $31.13 and from $5.63 and $32.44, respectively. Shares available for option grants at year end 1993 and 1992 were 2,407,345 and 711,515, respectively. The Company has a remaining reserve of approximately 98,000 shares of its authorized but unissued common stock for issuance under an employee stock purchase plan. The stock purchase plan covers substantially all employees of the parent company and its domestic subsidiaries. Common stock purchases are paid through periodic payroll deductions of up to 10% of eligible compensation. The participant's purchase price is 85% of the lower of the closing market price on the first trading day or the last trading day of the quarter 76

in which the stock is purchased by the employee. The Company has issued 901,179 shares of its stock (including 345,339 treasury shares) under this plan as of November 28, 1993. EMPLOYEE BENEFIT PLANS The Company has a Savings and Deferred Profit Sharing Plan qualified under section 401(k) and 401(a) of the Internal Revenue Code. This Plan is designed to enable eligible U.S. employees to share in the profits of the Company and supplement their retirement income. The Company contributes to the Plan up to 10% of consolidated pretax income before contributions under the Plan. Profit sharing expenses under this plan were $0.7 million, $0.6 million and $0.5 million in fiscal years 1993, 1992 and 1991, respectively. The Company matches up to $1,000 of each employee's contributions to the Plan, depending on length of service. Measurex's matching contributions to the Plan were $0.8 million, $0.9 million and $0.8 million in 1993, 1992 and 1991, respectively. Certain foreign employees are eligible to participate in similar profit sharing programs or local pension plans. With respect to these plans, the pension benefit obligations and plan assets were not material. Total pension expense under these foreign pension plans was $1.2 million, $1.5 million and $1.5 million for 1993, 1992 and 1991, respectively. 77

INCOME TAXES The provision (credit) for income taxes consists of the following: <TABLE> <CAPTION> 1993 1992 1991 ------- ------- ------- <S> <C> <C> <C> Current income taxes: United States $ 386 $ 1,695 $ 1,923 Foreign 6,059 3,838 3,718 State 326 395 315 ------- ------- ------- 6,771 5,928 5,956 ------- ------- ------- Deferred income taxes: United States (3,862) (2,986) (4,716) Foreign 1,555 (2,889) (1,110) ------- ------- ------- (2,307) (5,875) (5,826) ------- ------- ------- Extraordinary credit from utilization of foreign tax loss carryforwards - 911 - ------- ------- ------- Provision for income taxes $ 4,464 $ 964 $ 130 ======= ======= ======= </TABLE> The foreign provision for income taxes is based on foreign pretax earnings of approximately $19.3 million, $4.6 million and $8.1 million in 1993, 1992 and 1991, respectively. In February 1992, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes." This Statement is effective for the Company's fiscal year 1994. The estimated cumulative effect of implementing the Statement will be to reduce the deferred tax liability by approximately $0.5 million in the first quarter of 1994. The major components of the provision not currently payable result from: <TABLE> <CAPTION> 1993 1992 1991 -------- -------- -------- <S> <C> <C> <C> Taxes provided on undistributed earnings of foreign subsidiaries $ 1,472 $ - $ 510 Tax accounting for: Finance leases 927 749 642 Depreciation (537) (898) (187) Inventory reserves (930) (700) (703) Noncollection and system return reserves (638) (73) (25) Deferred compensation 376 137 (220) Capitalized software (557) 818 (140) Installment sales 857 (427) (116) Restructuring costs 1,510 (1,702) (1,424) Other accrued expenses 1,358 (854) (259) Repatriation of earnings from foreign subsidiaries paid out of previously provided taxes (5,277) (2,471) (3,388) Unrealized foreign exchange gain (loss) (225) 118 272 Other (643) (572) (788) ------- ------- ------- $(2,307) $(5,875) $(5,826) ======= ======= ======= </TABLE> The Company has not provided for United States income taxes on the earnings of certain foreign subsidiaries that are considered invested indefinitely outside the United States. The cumulative earnings of the foreign subsidiaries that are considered permanently invested outside the United States amounted to $64.0 million at November 28, 1993. 78

The manufacturing profits from the Company's subsidiary in the Republic of Ireland are subject to a 10% tax until the year 2010. At November 28, 1993, the Company has in various foreign subsidiaries net operating loss carryforwards of approximately $13.7 million and tax credit carryforwards of approximately $1.8 million at current exchange rates. $8.9 million of the net operating loss carryforwards and $0.9 million of the tax credit carryforwards will expire in varying amounts between 1994 and 2000. These carryforwards will reduce net tax expense for financial report purposes if utilized. The principal items accounting for the difference between income taxes computed at the United States statutory rate and the provision for income taxes are as follows: <TABLE> <CAPTION> 1993 1992 1991 -------- ------ ------- <S> <C> <C> <C> United States statutory tax $4,310 $ 571 $ 176 Effect of: Undistributed earnings of foreign subsidiaries deemed permanently reinvested (77) (479) (1,243) Tax credits 35 33 (310) Foreign sales corporation (322) (879) - Income of foreign subsidiaries taxed at differing statutory rates 35 637 364 Losses of foreign subsidiaries not providing tax benefit 634 2,029 1,767 Tax exempt investment income (288) (268) (606) State income taxes 215 230 158 Reduction in taxes due to favorable settlement and closing of prior tax years - (864) - Other items (78) (46) (176) ------ ------ ------- Provision for income taxes $4,464 $ 964 $ 130 Extraordinary credit from utilization of foreign tax loss carryforwards - (911) - ------ ------ ------- Net tax expense $4,464 $ 53 $ 130 ====== ====== ======= </TABLE> GAIN ON SALE OF TECHNOLOGY AND ASSETS In January 1992, Measurex sold all rights to the PlantWorks(TM): Application Automation Edition(TM) software package and certain other assets of its subsidiary, Measurex Automation Systems, to International Business Machines Corporation (IBM), which resulted in a pretax gain of $2.4 million. TRANSACTIONS WITH AFFILIATED COMPANY In the second quarter of 1990, the Company entered into a cooperative arrangement with Beloit Corporation for integrated marketing and sales of all Measurex controls with Beloit's full line of pulp and paper machinery. Simultaneously executed, was a seven-year "standstill" agreement between Measurex and Harnischfeger Industries Inc., Beloit's parent company, whereby Harnischfeger purchased 20% of Measurex's common stock on the open market. Revenues and ending accounts receivable with Beloit for the year ending November 28, 1993 were immaterial. 79

BUSINESS SEGMENTS The Company operates in one principal industry segment: the design, development, manufacture, sales and service of computer-integrated manufacturing systems. The Company sells these products to the pulp and paper, plastics, metals, rubber and chemical industries. Approximately 80% of the Company's system revenue is from the pulp and paper industry in 1993, 1992 and 1991. No single customer accounted for 10% or more of revenues during 1993, 1992 or 1991. The Company's products are principally distributed and serviced through its own marketing and service organizations. Operations are conducted worldwide and are grouped into three geographic areas: United States, Europe, and Other International (primarily Canada, the Pacific Rim, and the Southern Hemisphere countries). The following table summarizes the geographic operations of the Company: <TABLE> <CAPTION> (Dollar amounts in millions) 1993 1992 1991 - ------------------------------ ------- ------- ------- <S> <C> <C> <C> Revenues from unaffiliated customers: United States $ 94.5 $ 88.6 $ 80.4 Europe 79.5 93.4 111.2 Other International 80.0 70.6 62.4 ------ ------ ------ Consolidated $254.0 $252.6 $254.0 ------ ------ ------ Earnings (loss) from operations: United States $ (3.4) $ (4.0) $ (3.8) Europe 4.7 (2.4) 3.5 Other International 11.5 4.8 (1.9) Corporate (5.3) (6.2) (6.2) ------ ------ ------ Consolidated $ 7.5 $ (7.8) $ (8.4) ------ ------ ------ Identifiable assets: United States $116.6 $117.1 $ 92.9 Europe 48.5 56.9 77.6 Other International 55.1 45.9 54.7 Corporate 98.1 103.0 114.3 ------ ------ ------ Consolidated $318.3 $322.9 $339.5 ------ ------ ------ </TABLE> The Company's manufacturing operations sell systems to its sales and service operations. Sales to non-U.S. subsidiaries from U.S. manufacturing operations were $43.7 million in 1993, $46.6 million in 1992 and $50.4 million in 1991. Sales to United States and European affiliates from the Canadian manufacturing operations acquired in 1991 were $21.4 million and $16.9 million in 1993 and 1992, respectively. Sales to affiliates from other geographic areas were not significant. Internal selling prices are designed to allocate manufacturing profits to manufacturing entities and sales and service profits to sales and service entities. The United States revenues from unaffiliated overseas customers in 1993, 1992 and 1991, were not significant. Corporate identifiable assets include short-term cash investments and marketable securities. 80

Report of Independent Accountants TO THE SHAREHOLDERS, MEASUREX CORPORATION We have audited the accompanying consolidated balance sheets of Measurex Corporation as of November 28, 1993 and November 29, 1992 and the related consolidated statements of income, shareholders' equity and cash flows for each of the three fiscal years in the period ended November 28, 1993. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audits 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 aforementioned financial statements present fairly, in all material respects, the consolidated financial position of Measurex Corporation as of November 28, 1993 and November 29, 1992, and the consolidated results of their operations and their cash flows for each of the three fiscal years in the period ended November 28, 1993, in conformity with generally accepted accounting principles. /s/ COOPERS & LYBRAND San Jose, California December 15, 1993 81

SUPPLEMENTAL FINANCIAL DATA Interim Financial Information (Unaudited) <TABLE> <CAPTION> (Dollar amounts in thousands 1993 Quarter Ended ------------------------------------ except per share data) Feb. 28 May 30 Aug. 29 Nov. 28 - ------------------------------- ------- ------- -------- -------- <S> <C> <C> <C> <C> Revenues $61,839 $66,141 $64,268 $61,749 Gross margin 20,009 23,678 23,607 22,474 Income before income taxes 2,713 3,344 3,604 3,018 Net income 1,736 2,174 2,343 1,962 Net income per share .10 .12 .13 .11 Dividends per share .11 .11 .11 .11 <CAPTION> (Dollar amounts in thousands 1992 Quarter Ended ------------------------------------ except per share data) Mar. 1 May 31 Aug. 30 Nov. 29 - ------------------------------- ------- ------- -------- ------- <S> <C> <C> <C> <C> Revenues $62,105 $62,869 $61,823 $65,790 Gross margin 22,190 21,839 22,158 19,342 Income (loss) before income taxes and extraordinary credit 5,179 3,092 2,470 (9,063) Income (loss) before extraordinary credit 3,625 2,103 1,581 (6,595) Extraordinary credit - - - 911 Net income (loss) 3,625 2,103 1,581 (5,684) Income (loss) per share before extraordinary credit .20 .11 .09 (.36) Extraordinary credit per share - - - .05 Net income (loss) per share .20 .11 .09 (.31) Dividends per share .11 .11 .11 .11 </TABLE> In the fourth quarter of 1992, the Company recorded pretax provisions of $9.0 million for worldwide restructuring programs. Market For The Registrant's Common Stock and Related Security Holder Matters The Company's common shares are listed on the New York and Pacific Stock Exchanges. As of November 28, 1993, there were 1,486 shareholders of record. Dividends of $.44 per share were paid in 1993 and 1992. <TABLE> <CAPTION> 1993 Price 1992 Price ---------------- ---------------- High Low High Low ---------------- ---------------- <S> <C> <C> <C> <C> 1st Quarter $20 $17 3/8 $23 $15 3/8 2nd Quarter 18 7/8 16 1/8 24 3/4 18 7/8 3rd Quarter 19 7/8 17 1/8 19 5/8 18 1/4 4th Quarter 20 3/4 18 18 3/4 15 3/8 </TABLE> 82

<TABLE> <CAPTION> Selected Financial Data Six years ended November 28, 1993 (Dollar amounts in thousands except per share data) 1993 1992 1991 1990 1989 1988 - ------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> <C> <C> Revenues: Systems $152,839 $148,367 $148,249 $170,619 $195,508 $184,220 Service and other 101,158 104,220 105,730 95,579 89,839 81,020 Total revenues 253,997 252,587 253,979 266,198 285,347 265,240 - ------------------------------------------------------------------------------------------------------- Gross Margin: Systems $ 53,111 $ 49,123 $ 54,534 $ 71,712 $ 95,201 $ 94,075 Service and other 36,657 36,406 33,312 33,400 33,206 27,338 - ------------------------------------------------------------------------------------------------------- Total gross margin 89,768 85,529 87,846 105,112 128,407 121,413 - ------------------------------------------------------------------------------------------------------- Earnings (loss) from operations $ 7,500 $ (7,752) $ (8,448) $ 19,460 $ 37,915 $ 39,855 Income before income taxes and extraordinary credit 12,679 1,678 519 30,374 50,923 48,747 Income before extraordinary credit 8,215 714 389 22,522 40,682 37,066 Net income 8,215 1,625 389 22,522 40,682 37,066 Income per share before extraordinary credit .46 .04 .02 1.26 2.17 1.95 Net income per share .46 .09 .02 1.26 2.17 1.95 Dividends per share .44 .44 .44 .43 .37 .27 System orders 151,000 156,000 127,000 168,000 189,000 203,000 System backlog 91,000 95,000 91,000 109,000 109,000 120,000 - ------------------------------------------------------------------------------------------------------- Gross margin: Systems 34.7% 33.1% 36.8% 42.0% 48.7% 51.1% Service and other 36.2% 34.9% 31.5% 34.9% 37.0% 33.7% Total gross margin 35.3% 33.9% 34.6% 39.5% 45.0% 45.8% Earnings (loss) from operations 3.0% (3.1%) (3.3%) 7.3% 13.3% 15.0% Net income 3.2% 0.6% 0.2% 8.5% 14.3% 14.0% Income tax rate 35.2% 57.4% 25.0% 25.9% 20.1% 24.0% - ------------------------------------------------------------------------------------------------------- Working capital $137,720 $133,305 $154,744 $185,237 $186,798 $176,429 Total assets 318,316 322,884 339,539 337,477 333,010 303,875 Total debt 21,299 891 5,033 5,196 5,257 6,721 Shareholders' equity 211,864 218,453 231,718 238,640 230,074 204,487 - ------------------------------------------------------------------------------------------------------- Current ratio 2.8:1 2.6:1 2.9:1 3.7:1 3.5:1 3.4:1 Return on beginning equity 3.8% .7% .2% 9.8% 19.9% 21.8% Return on beginning assets 2.5% .5% .1% 6.8% 13.4% 14.2% Book value per share $ 11.87 $ 12.12 $ 12.82 $ 13.33 $ 12.51 $ 11.02 - ------------------------------------------------------------------------------------------------------- Total product development costs $ 22,871 $ 25,292 $ 26,258 $ 28,226 $ 29,970 $ 26,177 Reimbursement from co-development programs - (44) (927) (3,451) (5,105) (3,965) Capitalized software costs (a) (1,725) (4,636) (2,332) (4,535) (3,180) (3,027) - ------------------------------------------------------------------------------------------------------- Product development expense $ 21,146 $ 20,612 $ 22,999 $ 20,240 $ 21,685 $ 19,185 - ------------------------------------------------------------------------------------------------------- Capital expenditures $ 8,329 $ 7,781 $ 8,211 $ 15,484 $ 25,010 $ 10,265 Number of employees 2,250 2,310 2,530 2,580 2,770 2,620 Shares outstanding (thousands) 17,844 18,028 18,077 17,897 18,394 18,561 ======================================================================================================= </TABLE> (a) Computer software costs capitalized in accordance with Statement of Financial Accounting Standards No. 86. 83

EXHIBIT 21 MEASUREX CORPORATION LISTING OF SUBSIDIARIES The following table sets forth the name and jurisdiction of incorporation of each subsidiary of the Registrant as of November 28, 1993. Each subsidiary is wholly owned by the Registrant or a subsidiary of the Registrant (except in certain instances for directors' qualifying shares) and is included in the Registrant's Consolidated Financial Statements. <TABLE> <CAPTION> Subsidiary Name Incorporated in ---------------------------------- ----------------- <C> <S> <C> (2) Measurex Pty. Limited Australia (2) Measurex International GmbH Austria (1) Measurex Foreign Sales Corporation Barbados (2) Measurex do Brasil Controles de Processamento Ltda. Brazil (1) Measurex Systems, Inc. California (1) Measurex International Corporation California (2) Measurex Latin America California (1) Measurex Automation Systems, Inc. California (2) Measurex Asia, Inc. California (2) Measurex Korea, Inc. California (2) Measurex Taiwan, Inc. California (5) Measurex Devron Inc. Canada (2) Measurex Inc. Canada (6) BCF Holding Oy Finland (2) Measurex Oy Finland (6) Measurex Safecontrol Oy Finland (9) Roibox Oy Finland (8) Devron-Hercules France S.A.R.L. France (2) Measurex S.A.R.L. France (2) Measurex GmbH Germany (2) Measurex Italia S.R.L. Italy (1) Measurex Japan Limited Japan (7) Measurex S.A. de C.V. Mexico (2) Measurex B.V. The Netherlands (2) Measurex Systems N.Z. Limited New Zealand (2) Measurex Norway A.S. Norway (1) Measurex Management Systems, Inc. Ohio (2) Measurex International Financial, Inc. Panama (2) Measurex (Portugal) Sistemas De Controle, Lda Portugal (2) Measurex (Ireland) Limited Republic of Ireland (2) Measurex Service Company Limited Republic of Ireland (3) Measurex Ireland Finance Republic of Ireland (4) Measurex Africa (Propriety) Limited South Africa (2) Measurex Sweden A.B. Sweden (2) Measurex, A.G. (Switzerland) Switzerland (8) Devron-Hercules UK Limited United Kingdom (2) Measurex International Systems Limited United Kingdom (4) Measurex Credit (U.K.) Limited United Kingdom </TABLE> 84

EXHIBIT 21 MEASUREX CORPORATION LISTING OF SUBSIDIARIES (CONTINUED) Notes: (1) Subsidiary of Measurex Corporation (2) Subsidiary of Measurex International Corporation (3) Subsidiary of Measurex (Ireland) Limited (4) Subsidiary of Measurex International Systems Limited (5) Subsidiary of Measurex Inc. (6) Subsidiary of Measurex Oy (7) 99.5% owned by Measurex Latin America, 0.5% owned by Measurex International Corporation (8) Subsidiary of Measurex Devron, Inc. (9) 98.5% owned by Measurex Oy and BCF Holding Oy, 1.5% owned by unrelated parties 85

EXHIBIT 23 CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the incorporation by reference in the registration statements of Measurex Corporation and Subsidiaries on Form S-8 (File Nos. 33-65762, 33-22589, 2-76707 and 2-67736) of our report dated December 15, 1993, on our audits of the consolidated financial statements of Measurex Corporation and Subsidiaries as of November 28, 1993 and November 29, 1992 and for each of the three fiscal years in the period ended November 28, 1993 appearing on page 30 of Measurex Corporation's 1993 Annual Report to Shareholders and incorporated by reference in this Annual Report on Form 10-K and our report dated December 15, 1993 on the financial statement schedules of Measurex Corporation and Subsidiaries as of November 28, 1993 and November 29, 1992 and for each of the three fiscal years in the period ended November 28, 1993, which report is included in this Annual Report on Form 10-K. /S/ COOPERS & LYBRAND ------------------------- COOPERS & LYBRAND San Jose, California February 24, 1994 86